[Federal Register Volume 79, Number 215 (Thursday, November 6, 2014)]
[Rules and Regulations]
[Pages 66120-66265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26182]



[[Page 66119]]

Vol. 79

Thursday,

No. 215

November 6, 2014

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 411, 413, and 414





 Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Quality Incentive Program, and Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies; Final Rule

Federal Register / Vol. 79 , No. 215 / Thursday, November 6, 2014 / 
Rules and Regulations

[[Page 66120]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 411, 413, and 414

[CMS-1614-F]
RIN 0938-AS13


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, Quality Incentive Program, and Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies

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

ACTION: Final rule.

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SUMMARY: This final rule will update and make revisions to the End-
Stage Renal Disease (ESRD) prospective payment system (PPS) for 
calendar year (CY) 2015. This rule also finalizes requirements for the 
ESRD quality incentive program (QIP), including for payment years (PYs) 
2017 and 2018. This rule will also make a technical correction to 
remove outdated terms and definitions. In addition, this final rule 
sets forth the methodology for adjusting Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule payment 
amounts using information from the Medicare DMEPOS Competitive Bidding 
Program (CBP); makes alternative payment rules for certain DME under 
the Medicare DMEPOS CBP; clarifies the statutory Medicare hearing aid 
coverage exclusion and specifies devices not subject to the hearing aid 
exclusion; will not update the definition of minimal self-adjustment; 
clarifies the Change of Ownership (CHOW) and provides for an exception 
to the current requirements; revises the appeal provisions for 
termination of a CBP contract, including the beneficiary notification 
requirement under the Medicare DMEPOS CBP, and makes a technical change 
to the regulation related to the conditions for awarding contracts for 
furnishing infusion drugs under the Medicare DMEPOS CBP.

DATES: Effective on January 1, 2015.

FOR FURTHER INFORMATION CONTACT: Stephanie Frilling, (410) 786-4507, 
for issues related to the ESRD PPS, the ESRD PPS CY 2015 Base Rate, 
Wage Indices, Drugs Used for the Treatment of ESRD, and Payment for 
Frequent Hemodialysis.
    Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS, 
the Low Volume Payment Adjustment, and the Wage Index.
    Wendy Tucker, (410) 786-3004, for issues related to the Low Volume 
Payment Adjustment and the Wage Index.
    Heidi Oumarou, (410) 786-7342, for issues related to the ESRD PPS 
Market Basket Update.
    James Poyer, (410) 786-2261, for issues related to the ESRD QIP.
    Christopher Molling (410) 786-6399 and Hafsa Vahora (410) 786-7899 
for issues related to the methodology for making national price 
adjustments based upon information gathered from the DMEPOS CBP.
    Sandhya Gilkerson, (410) 786-4085, for issues related to the 
alternative payment methodologies under the CBP.
    Sandhya Gilkerson, (410) 786-4085 and Michelle Peterman, 410-786-
2581 for issues related to the clarification of the statutory Medicare 
hearing aid coverage exclusion.
    Michelle Peterman, (410) 786-2591 for issues related to the 
definition of minimal self-adjustment at 414.402.
    Janae James (410) 786-0801 for issues related to CHOW and breach of 
contract appeals.

SUPPLEMENTARY INFORMATION: 

Electronic Access

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

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

    In the past, a majority of the Addenda referred to throughout the 
preamble of our proposed and final rules were available in the Federal 
Register. However, the Addenda of the annual proposed and final rules 
will no longer be available in the Federal Register. Instead, these 
Addenda to the annual proposed and final rules will be available only 
through the Internet on the CMS Web site. The Addenda to the End-Stage 
Renal Disease (ESRD) Prospective Payment System (PPS) rules are 
available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. Readers who 
experience any problems accessing any of the Addenda to the proposed 
and final rules of the ESRD PPS that are posted on the CMS Web site 
identified above should contact Stephanie Frilling at 410-786-4507.

Table of Contents

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

I. Executive Summary
    A. Purpose
    1. End-Stage Renal Disease (ESRD) Prospective Payment System 
(PPS)
    2. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    3. Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS)
    B. Summary of the Major Provisions
    1. ESRD PPS
    2. ESRD QIP
    3. DMEPOS
    C. Summary of Costs and Benefits
    1. Impacts of the Final ESRD PPS
    2. Impacts for ESRD QIP
    3. Impacts for DMEPOS
II. Calendar Year (CY) 2015 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background on the End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the CY 2015 ESRD PPS Proposed Rule
    C. Routine Updates and Policy Changes to the CY 2015 ESRD PPS
    1. ESRD PPS Base Rate
    a. Changes to the Drug Utilization Adjustment
    i. The Drug Utilization Adjustment Finalized in CY 2014 ESRD PPS 
Final Rule
    ii. PAMA Changes to the Drug Utilization Adjustment
    b. Payment Rate Update for CY 2015
    c. CY 2015 ESRD PPS Wage Index Budget-Neutrality Adjustment
    d. Labor-Related Share
    2. ESRD Bundled Market Basket and Labor-Related Share
    a. Rebasing and Revision the ESRD Bundled Market Basket
    i. Cost Category Weights
    ii. Price Proxies for the CY 2012 ESRDB Market Basket
    iii. 2012-Based ESRDB Market Basket Updates Compared to 2008-
Based ESRDB Market Basket Updates
    b. Proposed ESRDB Market Basket Update, Adjusted for Multifactor 
Productivity for CY 2015
    c. Labor-Related Share
    d. Responses to Comments on Proposed Market Basket Rebasing & 
Revision
    e. Final ESRDB Market Basket and Labor-Related Share
    3. The CY 2015 ESRD PPS Wage Indices
    a. Background
    b. Implementation of New Labor Market Delineations
    c. Transition Period
    4. CY 2015 Update to the Outlier Policy
    a.CY 2015 Update to the Outlier Services MAP Amounts and Fixed-
Dollar Loss Amounts
    b. Outlier Policy Percentage
    D. Restatement of Policy Regarding Reporting and Payment for 
More than Three Dialysis Treatments per Week
    1. Reporting More than Three Dialysis Treatments per Week on 
Claims

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    2. Medical Necessity for More Than Three Treatments per Week
    E. Delay of Payment for Oral-Only Drugs under the ESRD PPS
    F. ESRD Drug Categories Included in the ESRD PPS Base Rate
    G. Low-Volume Payment Adjustment (LVPA)
    1. Background
    2. The United States Government Accountability Office Study on 
the LVPA
    a. The GAO's Main Findings
    b. The GAO's Recommendations
    3. Clarification of the LVPA Policy
    a. Hospital-Based ESRD Facilities
    b. Cost Reporting Periods Used for Eligibility
    H. Continued Use of ICD-9-CM Codes and Corrections to the ICD-
10-CM Codes Eligible for the Co-morbidity Payment Adjustment
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    A. Background
    B. Considerations in Updating and Expanding Quality Measures 
under the ESRD QIP
    C. Web sites for Measure Specifications
    D. Updating the NHSN Bloodstream Infection in Hemodialysis 
Outpatients Clinical Measure for the PY 2016 ESRD QIP and Future 
Payment Years
    E. Oral-Only Drug Measures in the ESRD QIP
    F. Requirements for the PY 2017 ESRD QIP
    1. Revision to the Expanded ICH CAHPS Reporting Measure
    2. Measures for the PY 2017 ESRD QIP
    a. PY 2016 Measures Continuing in PY 2017 and Future Payment 
Years
    b. Policy for Determining when a Measure is ``Topped-Out'' in 
the ESRD QIP, and the Removal of a Topped-Out Measure from the ESRD 
QIP, Beginning with PY 2017
    c. New Measures Proposed for PY 2017 and Future Payment Years
    i. Standardized Readmission Ratio (SRR) Clinical Measure
    3. Performance Period for the PY 2017 ESRD QIP
    4. Performance Standards, Achievement Thresholds, and Benchmarks 
for the PY 2017 ESRD QIP
    a. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures in the PY 2017 ESRD QIP
    b. Finalized Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2017 ESRD 
QIP
    c. Performance Standards for the PY 2017 Reporting Measures
    5. Scoring the PY 2017 ESRD QIP Measures
    a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    6. Weighting the Total Performance Score
    7. Minimum Data for Scoring Measures for the PY 2017 ESRD QIP 
and Changing the Attestation Process for Patient Minimums
    8. Payment Reductions for the PY 2017 ESRD QIP
    9. Data Validation
    10. Monitoring Access to Dialysis Facilities
    11. Extraordinary Circumstances Exception
    F. Requirements for the PY 2018 ESRD QIP
    1. Modification of the Mineral Metabolism Reporting Measure 
Beginning in PY 2018
    2. New Measures for the PY 2018 ESRD QIP and Future Payment 
Years
    a. Standardized Transfusion Ratio (STrR) Clinical Measure
    b. Adoption of the Pediatric Peritoneal Dialysis Adequacy 
Clinical Measure in the Dialysis Adequacy Measure Topic
    c. ICH CAHPS Clinical Measure
    d. Screening for Clinical Depression and Follow-Up Reporting 
Measure
    e. Pain Assessment and Follow-Up Reporting Measure
    f. NHSN Healthcare Personnel Influenza Vaccination Reporting 
Measure
    2. Performance Period for the PY 2018 ESRD QIP
    3. Performance Standards, Achievement Thresholds, and Benchmarks 
for the PY 2018 ESRD QIP
    a. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures in the PY 2018 ESRD QIP
    b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2018 ESRD 
QIP
    c. Performance Standards for the PY 2018 Reporting Measures
    4. Scoring the PY 2018 ESRD QIP Measures
    a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    c. Scoring the ICH CAHPS Clinical Measure
    d. Calculating Facility Performance on Reporting Measures
    5. Minimum Data for Scoring Measures for the PY 2018 ESRD QIP
    6. Calculating the Clinical Measure Domain Score
    7. Calculating the Reporting Measure Domain Score and the TPS 
for the PY 2018 ESRD QIP
    8. Example of the PY 2018 ESRD QIP Scoring Methodology
    9. Payment Reductions for the PY 2018 ESRD QIP
    H. Future Considerations for Stratifying ESRD QIP Measures for 
Dual-Eligible Beneficiaries
IV. Technical Corrections for 42 Part 405
    A. Background
    B. Summary of the Proposed Provisions and Responses to Comments 
on the CY 2015 ESRD PPS
V. Methodology for Adjusting DMEPOS Payment Amounts using 
Information from Competitive Bidding Programs
    A. Background
    1. Fee Schedule Payment Basis for Certain DMEPOS
    2. DMEPOS Competitive Bidding Programs Payment Rules
    3. Adjusting Payment Amounts using Information from the DMEPOS 
Competitive Bidding Program
    B. Summary of the Proposed Provisions and Responses to Comments 
on the Methodology for Adjusting DMEPOS Payment Amounts using 
Information from Competitive Bidding Programs
    1. Proposed Regional Adjustments Limited by National Parameters
    2. Methodology for Items and Services Included in Limited Number 
of Competitive Bidding Programs
    3. Adjusted Payment Amounts for Accessories used with Different 
Types of Base Equipment
    4. Adjustments to Single Payment Amounts that Result from 
Unbalanced Bidding
    5. National Mail Order Program--Northern Mariana Islands
    6. Updating Adjusted Payment Amounts
VI. Final Payment Methodologies and Payment Rules for Durable 
Medical Equipment and Enteral Nutrition Furnished under the 
Competitive Bidding Program
    A. Background
    B. Summary of the Proposed Provisions and Responses to Comments 
on the Payment Methodologies and Payment Rules for Durable Medical 
Equipment and Enteral Nutrition Furnished under the Competitive 
Bidding Program
    1. Payment on a continuous rental basis for select items
    2. Responsibility for repair of beneficiary-owned power 
wheelchairs furnished under CBPs
VII. Scope of Hearing Aid Coverage Exclusion
    A. Background
    B. Current Issues
    C. Proposed Provisions
VIII. Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding
    A. Background
    B. Current Issues
    C. Summary of the Proposed Provisions and Responses to Comments 
on the Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding
IX. Revision to Change of Ownership Rules to Allow Contract 
Suppliers to Sell Specific Lines of Business
    A. Background
    B. Summary of the Proposed Provisions and Responses to Comments 
on the Revision to Change of Ownership Rules to Allow Contract 
Suppliers to Sell Specific Lines of Business
X. Changes to the Appeals Process for Termination of Competitive 
Bidding Contract
XI. Technical Change Related to Submitting Bids for Infusion Drugs 
under the DMEPOS Competitive Bidding Program
XII. Accelerating Health Information Exchange
XIII. Collection of Information Requirements
XIV. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2015 End-Stage Renal Disease Prospective Payment System
    a. Effects on ESRD Facilities
    b. Effects on Other Providers
    c. Effects on the Medicare Program

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    d. Effects on Medicare Beneficiaries
    e. Alternatives Considered
    2. End-Stage Renal Disease Quality Incentive Program
    a. Effects of the PY 2017 ESRD QIP
    b. Effects of the PY 2018 ESRD QIP
    3. DMEPOS Provisions
    a. Effects of the Final Methodology for Adjusting DMEPOS Payment 
Amounts using Information from Competitive Bidding Programs
    b. Effects of the Final Special Payment Methodologies under the 
Competitive Bidding Program
    c. Effects of the Final Clarification of the Scope of the 
Medicare Hearing Aid Coverage Exclusion
    d. Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding
    e. Effects of the Final Revision to Change of Ownership Rules to 
Allow Contract Suppliers to Sell Specific Lines of Business
    C. Accounting Statement
XV. Regulatory Flexibility Act Analysis
XVI. Unfunded Mandates Reform Act Analysis
XVII. Federalism Analysis
XVIII. Congressional Review Act
XIX. Files Available to the Public via the Internet
    Regulations Text

Acronyms

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

ACO--Affordable Care Organization
AHRQ--Agency for Healthcare Research and Quality
ANOVA--Analysis of Variance
ARM--Adjusted Ranking Metric
ASP--Average Sales Price
ATRA--The American Taxpayer Relief Act of 2012
AV--Arterial Venous
BEA--Bureau of Economic Analysis
BLS--Bureau of Labor Statistics
BMI--Body Mass Index
CBA--Competitive Bidding Area
CBP--Competitive Bidding Program
CBSA--Core based statistical area
CCN--CMS Certification Number
CDC--Centers for Disease Control and Prevention
CfC--Conditions for Coverage
CHOW--Change of Ownership
CKD--Chronic Kidney Disease
CMSQS--CMS Quality Strategy
CPAP--Continuous positive airway pressure
CY--Calendar Year
DFC--Dialysis Facility Compare
DME--Durable Medical Equipment
DMEPOS--Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies
ESA--Erythropoiesis stimulating agent
ESRD--End-Stage Renal Disease
ESRDB--End-Stage Renal Disease bundled
ESRD PPS--End-Stage Renal Disease Prospective Payment System
FDA--Food and Drug Administration
GEM--General Equivalence Mappings
HCP--Healthcare Personnel
Health IT--Health Information Technology
HD--Hemodialysis
HAIs--Healthcare-Acquired Infections
HCPCS--Healthcare Common Procedure Coding System
HCFA--Health Care Financing Administration
HLM--Hierarchical Logistic Modeling
HHS--Department of Health and Human Services
ICD--International Classification of Diseases
ICD-9-CM--International Classification of Disease, 9th Revision, 
Clinical Modification
ICD-10-CM--International Classification of Disease, 10th Revision, 
Clinical Modification
ICH CAHPS--In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems
IGI--IHS Global Insight
IIC--Inflation-indexed charge
IOLs--Intraocular Lenses
IPPS--Inpatient Prospective Payment System
ICH CAHPS--In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Services
IUR--Inter-unit reliability
MAC--Medicare Administrative Contractor
MAP--Medicare Allowable Payment
MFP--Multifactor Productivity
MIPPA--Medicare Improvements for Patients and Providers Act of 2008
MLR--Minimum Lifetime Requirement
MSA--Metropolitan statistical areas
NAMES--National Association of Medical Equipment Suppliers
NHSN--National Health Safety Network
NQF--National Quality Forum
NQS--National Quality Strategy
OBRA--Omnibus Budget Reconciliation Act
OMB--Office of Management and Budget
P&O--Prosthetics and orthotics
PAMA--Protecting Access to Medicare Act of 2014
PC--Product category
PD--Peritoneal Dialysis
PEN--Parenteral and enteral nutrition
PFS--Physician Fee Schedule
QIP--Quality Incentive Program
RMA--Reporting Measure Adjuster
RSPA--Regional single payment amounts
RUL--Reasonable useful lifetime
SAF--Standard Analysis File
SHR--Standardized Hospitalization Ratio Admissions
SMR--Standardized Mortality Ratio
SPA--Single payment amount
SRR--Standardized Readmissions Ratio
STrR--Standardized Transfusion Ratio
TENS--Transcutaneous electrical nerve stimulation
TEP--Technical Expert Panel
TPS--Total Performance Score
VBP--Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted bundled prospective payment system for renal dialysis services 
furnished by ESRD facilities. This rule updates and makes revisions to 
the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for 
calendar year (CY) 2015. Section 1881(b)(14) of the Social Security Act 
(the Act), as added by section 153(b) of the Medicare Improvements for 
Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), and 
section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA 
and amended by section 3401(h) of the Affordable Care Act Public Law 
111-148), established that beginning CY 2012, and each subsequent year, 
the Secretary shall annually increase payment amounts by an ESRD market 
basket increase factor, reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act.
    Section 632 of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L 112-240) included several provisions that apply to the ESRD 
PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act, 
which required the Secretary, by comparing per patient utilization data 
from 2007 with such data from 2011, to reduce the single payment amount 
to reflect the Secretary's estimate of the change in utilization of 
ESRD-related drugs and biologicals. We finalized the amount of the drug 
utilization adjustment pursuant to this section in the CY 2014 ESRD PPS 
final rule with a 3- to 4-year transition (78 FR 72161 through 72170). 
Section 632(b) of ATRA prohibited the Secretary from paying for oral-
only ESRD-related drugs and biologicals under the ESRD PPS before 
January 1, 2016. And finally, section 632(c) of ATRA requires the 
Secretary, by no later than January 1, 2016, to analyze the case-mix 
payment adjustments under section 1881(b)(14)(D)(i) of the Act and make 
appropriate revisions to those adjustments.
    On April 1, 2014, the Congress enacted the Protecting Access to 
Medicare Act of 2014 (PAMA) (Pub. L. 113-93). Section 217 of PAMA 
included several provisions that apply to the ESRD PPS. Specifically, 
sections 217(b)(1) and (2) of PAMA amend sections 1881(b)(14)(F) and 
(I) of the Act. We interpret the amendments to sections 1881(b)(14)(F) 
and (I) as replacing the drug utilization adjustment that was finalized 
in the CY 2014 ESRD PPS final rule (78 FR 72161 through 72170) with 
specific provisions that dictate what the market basket update will be 
for CY 2015 (0.0 percent) and how it will be reduced in CYs 2016 
through 2018. Section 217(a)(1) of PAMA amends section 632(b)(1) of 
ATRA, which now provides that the Secretary may not pay for oral-only

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drugs and biologicals used for the treatment of ESRD under the ESRD PPS 
prior to January 1, 2024. Section 217(a)(2) further amends section 
632(b)(1) of ATRA by adding a sentence that provides: ``Notwithstanding 
section 1881(b)(14)(A)(ii) of the Social Security Act (42 U.S.C. 
1395rr(b)(14)(A)(ii)), implementation of the policy described in the 
previous sentence shall be based on data from the most recent year 
available.'' Finally, PAMA section 217(c) provides that, as part of the 
CY 2016 ESRD PPS rulemaking, the Secretary shall establish a process 
for (1) determining when a product is no longer an oral-only drug; and 
(2) including new injectable and intravenous products into the ESRD PPS 
bundled payment. As discussed further below, section 212 of PAMA 
provides that the Secretary may not adopt ICD-10-CM prior to October 1, 
2015. Accordingly, HHS published a final rule on August 4, 2014 that 
established October 1, 2015 as the new ICD-10 compliance date, and 
required the use of ICD-9 through September 30, 2015.
2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This final rule also sets forth requirements for the ESRD Quality 
Incentive Program (QIP), including for payment years (PYs) 2017 and 
2018. The program is authorized under section 1881(h) of the Social 
Security Act (the Act). The ESRD QIP is the most recent step in 
fostering improved patient outcomes by establishing incentives for 
dialysis facilities to meet or exceed performance standards established 
by CMS.
3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
    This final rule finalizes a methodology for making national price 
adjustments to payments for Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) paid under fee schedules based upon 
information gathered from the DMEPOS competitive bidding programs 
(CBPs) and finalizes the phase-in of special payment rules in a limited 
number of competitive bidding areas (CBAs) under the CBP for certain 
specified DME at 42 CFR 414.408 and 414.409. This final rule clarifies 
the statutory Medicare hearing aid coverage exclusion under section 
1862(a)(7) of the Act and the regulation at Sec.  411.15(d) to further 
specify the scope of this exclusion. In addition, this final rule will 
not finalize the definition of minimal self-adjustment at Sec.  414.402 
to identify certain individuals with specialized training with regard 
to off-the-shelf (OTS) orthotics under the CBP. This final rule revises 
the Change of Ownership (CHOW) policy in the current regulations to 
allow a product category to be severed from a competitive bidding 
contract and transferred to a new contract when a contract supplier 
sells a distinct line of business to a new qualified owner. This rule 
amends Sec.  414.423 to clarify the effective date for terminations of 
competitive bidding contracts, and the deadline for contract suppliers 
notifying its beneficiaries of its contract termination. Finally, this 
rule includes a technical change related to submitting bids for 
infusion drugs under the CBP.

B. Summary of the Major Provisions

1. ESRD PPS
     CY 2015 ESRD PPS base rate: For CY 2015, the ESRD PPS base 
rate is $239.43. This amount reflects a 0.0 percent update to the 
payment rate as required by section 1881(b)(14)(F)(i) of the Act, as 
amended by section 217(b)(2) of PAMA, and the application of the wage 
index budget-neutrality adjustment factor of 1.001729 to the CY 2014 
ESRD PPS base rate of $239.02.
     Rebasing and revision of the ESRD bundled (ESRDB) market 
basket: For CY 2015, we are rebasing and revising the ESRDB market 
basket; which entails an update to the base year of the ESRDB market 
basket from 2008 to 2012. The base year update results in a shift in 
relative costs from prescription drugs to compensation; mainly driven 
by the decreased utilization of drugs in furnishing ESRD treatments 
experienced from 2008 to 2012. Additionally, while we proposed to use 
PPI--Vitamin, Nutrient, and Hematinic Preparations as the 
pharmaceutical price proxy (instead of the current PPI--Pharmaceuticals 
for Human Use, Prescription), we are finalizing, based on comments, a 
blend of PPI--Biological Products for Human Use (78 percent) and PPI--
Vitamin, Nutrient, and Hematinic Preparations (22 percent). The 
resulting CY 2015 market basket less MFP adjustment would have been 1.6 
percent (2.1 percent ESRDB market basket update less 0.5 percent MFP 
adjustment); however, section 1881(b)(14)(F)(i) of the Act, as amended 
by section 217(b)(2) of PAMA requires the market basket less MFP 
adjustment to be 0.0 percent for CY 2015.
     CY 2015 ESRD PPS labor-related share: As a result of the 
ESRDB market basket rebasing and revision, outlined above, the CY 2015 
labor-related share is 50.673 percent compared to the current labor-
related share of 41.737 percent. This change to the labor-related share 
will have a significant impact on payments for certain ESRD facilities, 
specifically those ESRD facilities that have low wage index values. 
Therefore, for CY 2015 we are implementing the labor-related share of 
50.673 with a 2-year transition.
     CY 2015 wage indices and wage index floor: We adjust wage 
indices on an annual basis using the most current hospital wage data to 
account for differing wage levels in areas in which ESRD facilities are 
located. In CY 2015, the application of the wage index budget-
neutrality adjustment factor will continue to apply to the base rate 
when computing payments under the ESRD PPS. In addition, we will 
continue our policy for the gradual phase-out of the wage index floor 
and reduce the wage index floor values to 0.40 for CY 2015, as 
finalized in the CY 2014 ESRD PPS final rule (78 FR 72173 through 
72174).
     Update to wage index core-based statistical areas (CBSA): 
Beginning January 1, 2015, we will implement the new CBSA delineations 
as described in the February 28, 2013 OMB Bulletin No. 13-01, for all 
ESRD facilities, with a 2-year transition. Facilities will receive 50 
percent of their CY 2015 wage index based on the CBSA delineations for 
CY 2014 and 50 percent of their CY 2015 wage index based on the new 
CBSA delineations. In CY 2016, facilities' wage index values will be 
based 100 percent on the new CBSA delineations.
     CY 2015 ESRD PPS outlier payment adjustment: We have 
updated the outlier services fixed-dollar loss and Medicare Allowable 
Payments (MAPs) amounts for adult and pediatric patients for CY 2015 
using 2013 claims data. Based on the use of more current data, the 
fixed-dollar loss amount for pediatric beneficiaries will increase from 
$54.01 to $54.35 and the MAP amount will increase from $40.49 to 
$43.57, as compared to CY 2014 values. For adult beneficiaries, the 
fixed-dollar loss amount will decrease from $98.67 to $86.19 and the 
MAP amount will increase from $50.25 to $51.29.
     Clarification for the low-volume payment adjustment 
(LVPA): We clarified two policies regarding Medicare Administration 
Contractor (MAC) verification for LVPA eligibility requirements and are 
implementing conforming changes to the LVPA regulation text at 42 CFR 
413.232. The first clarification explains that MACs can consider 
supporting data from hospital-based ESRD facilities to verify the 
facility's total treatment count. The second clarification explains 
that MACs can add or prorate treatment counts from non-standard cost 
reporting

[[Page 66124]]

periods (those that are not 12-month periods) where there is a change 
in ownership that does not result in a new Provider Transaction Access 
Number.
     ICD-10-CM codes eligible for the ESRD PPS co-morbidity 
payment adjustment: Section 212 of PAMA provides that the Secretary may 
not adopt ICD-10-CM prior to October 1, 2015. An August 4, 2014 HHS 
final rule delayed the transition from ICD-9-CM to ICD-10-CM until 
October 1, 2015 and required the continued use of ICD-9 through 
September 30, 2015.Therefore, the ESRD PPS will continue to use ICD-9-
CM through September 30, 2015, and will require the use of ICD-10-CM 
beginning October 1, 2015 for purposes of the co-morbidity payment 
adjustments. For CY 2015, we are correcting several typographical 
errors and omissions in the ICD-9-CM to ICD-10-CM crosswalk tables that 
appeared in the CY 2014 ESRD PPS final rule.
     Delay of payment for oral-only drugs under the ESRD PPS:
    Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA, which 
now provides that the Secretary ``may not implement the policy under 
section 413.174(f)(6) of title 42, Code of Federal Regulations 
(relating to oral-only ESRD-related drugs in the ESRD prospective 
payment system), prior to January 1, 2024.'' Accordingly, we are 
finalizing our proposal to amend the date in 42 CFR 413.174(f)(6) from 
January 1, 2016 to January 1, 2024, and to amend the date in Sec.  
413.237(a)(1)(iv) regarding outlier payments for oral-only ESRD-related 
drugs made under the ESRD PPS to January 1, 2024.
2. ESRD QIP
    This final rule implements requirements for the ESRD QIP, including 
measure sets for PYs 2017 and 2018.
     PY 2017 Measure Set: For PY 2017, we are removing one 
measure from the ESRD QIP, the Hemoglobin Greater than 12 g/dL clinical 
measure, on the basis that it is ``topped out''. We are also adopting 
the Standardized Readmission Ratio (SRR) clinical measure, which 
assesses care coordination.
     PY 2018 Measure Set: For PY 2018, we are adopting two new 
clinical measures--the Standardized Transfusion Ratio (STrR) and 
Pediatric Peritoneal Dialysis Adequacy--and three new reporting 
measures: (1) Pain Assessment and Follow-Up; (2) Clinical Depression 
Screening and Follow-Up; and (3) National Healthcare Safety Network 
(NHSN) Healthcare Personnel Influenza Vaccination. We are also 
converting the In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems (ICH CAHPS) survey reporting measure to a 
clinical measure.
     Revision to the ICH CAHPS Reporting Measure: Beginning 
with the PY 2017 program year, we are revising the ICH CAHPS reporting 
measure to determine facility eligibility for the measure based on the 
number of survey-eligible patients treated during the ``eligibility 
period'', which we define as the Calendar Year (CY) that immediately 
precedes the performance period. Survey-eligible patients are defined 
in the ICH CAHPS measure specifications available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html and https://ichcahps.org.
     Revision to the Mineral Metabolism Reporting Measure: 
Beginning with the PY 2018 program year, we are revising the Mineral 
Metabolism reporting measure to allow facilities to submit both serum 
phosphorus and plasma phosphorus measurements.
     Extraordinary Circumstances Exemption: Beginning with the 
PY 2017 ESRD QIP, we are exempting dialysis facilities from all 
requirements of the ESRD QIP clinical and reporting measures during the 
months in which they are forced to close due to a natural disaster or 
other extraordinary circumstances.
     New Scoring Methodology for PY 2018: Beginning with PY 
2018, we are using a new scoring methodology for the ESRD QIP. This 
scoring methodology creates the Clinical Measure Domain, within which 
facility scores on clinical measures will be divided into subdomains 
that align with National Quality Strategy (NQS) domains and weighted 
according to the number of measures in a subdomain, facility experience 
with the measure, and the measure's alignment with CMS priorities for 
quality improvement. These weighted scores will be summed to produce a 
facility's Clinical Measure Domain score. A facility's Clinical Measure 
Domain score will be weighted to comprise 90 percent of the facility's 
TPS, and the facility's scores on the reporting measures will be 
weighted equally to comprise the remaining 10 percent of the facility's 
TPS.
3. DMEPOS
     The methodology for making national price adjustments 
based upon information gathered from the DMEPOS CBPs: As required by 
the MIPPA, this rule finalizes methodologies for using information from 
the DMEPOS CBP to adjust the fee schedule amounts for DME in areas 
where CBPs are not implemented. The rule finalizes the same 
methodologies to adjust the fee schedule amounts for enteral nutrition 
and off-the shelf (OTS) orthotics in areas where CBPs are not 
implemented.
     Phase-in of special payment rules in a limited number of 
CBAs under the CBP for certain, specified DME: This rule finalizes a 
phase-in of special payment rules for certain DME at 42 CFR 414.408 and 
414.409 under the DMEPOS CBP in a limited number of CBAs.
     Medicare hearing aid coverage exclusion under section 
1862(a)(7) of the Act: This rule modifies the regulation at Sec.  
411.15 to address the scope of the statutory hearing aid exclusion and 
note the types of devices that are not subject to the hearing aid 
exclusion.
     Definition of minimal self-adjustment at Sec.  414.402: 
This rule will not finalize changes to the ``minimal self-adjustment'' 
definition to specify certain ``individuals with specialized training'' 
with regard to the definition of OTS orthotics under the CBP.
     Change of Ownership Rules to Allow Contract Suppliers to 
Sell Specific Lines of Business: This rule establishes an exception 
under the CHOW rules to allow CMS to sever a product category from a 
contract, incorporate the product category into a new contract, and 
transfer the new contract to a qualified new owner under certain 
specific circumstances.
     Appeals Process for Termination of a Competitive Bidding 
Contract: This rule amends Sec.  414.423 to clarify the effective date 
for terminations of competitive bidding contracts, and the deadline for 
contract suppliers notifying its beneficiaries of its contract 
termination.

C. Summary of Costs and Benefits

    In section XIV of this final rule, we set forth a detailed analysis 
of the impacts of the finalized changes for affected entities and 
beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
    The impact chart in section XIV.B.1 of this final rule displays the 
estimated change in payments to ESRD facilities in CY 2015 compared to 
estimated payments in CY 2014. The overall impact of the CY 2015 
changes is projected to be a 0.3 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 0.5 percent increase 
in payments compared with freestanding facilities with an estimated 0.3 
percent increase.

[[Page 66125]]

    We estimate that the aggregate ESRD PPS expenditures will increase 
by approximately $30 million from CY 2014 to CY 2015. This reflects a 
$0 change from the payment rate update and a $30 million increase due 
to the updates to the outlier threshold amounts. As a result of the 
projected 0.3 percent overall payment increase, we estimate that there 
will be an increase in beneficiary co-insurance payments of 0.3 percent 
in CY 2015, which translates to approximately $10 million.
2. Impacts for ESRD QIP
    The overall economic impact of the ESRD QIP is an estimated $12 
million in PY 2017 and $11.8 million in PY 2018. In PY 2017, we expect 
the total payment reductions to be approximately $11.9 million, and the 
costs associated with the collection of information requirements for 
the validation of NHSN data feasibility study to be approximately $27 
thousand for all ESRD facilities. In PY 2018, we expect the total 
payment reductions to be approximately $11.6 million, and the costs 
associated with the collection of information requirements for the NHSN 
Healthcare Personnel Influenza Vaccination reporting measure to be 
approximately $248 thousand for all ESRD facilities.
    The ESRD QIP will continue to incentivize facilities to provide 
high-quality care to beneficiaries.
3. Impacts for DMEPOS
a. Final Methodology for Making National Price Adjustments to DMEPOS 
Fee Schedule Amounts Based Upon Information Gathered From the CBPs
    The final regulation adjusts Medicare fee schedule amounts for 
items subject to DMEPOS CBPs beginning January 1, 2016, using 
information from the DMEPOS CBPs to be applied to items in non-
competitive bidding areas. It is estimated that these adjustments would 
save over $4.4 billion in gross payments for the 5-year period 
beginning January 1, 2016, and ending December 30, 2020. The estimated 
gross savings are primarily derived from price reductions for items. It 
is expected that most of the economic impact would result from reduced 
payment amounts. The ability of suppliers to furnish items is not 
expected to be impacted.
b. Phase-In of Special Payment Rules Under the CBP for Certain DME and 
Enteral Nutrition in Certain CBAs
    We believe that the special payment rules we are finalizing for 
certain DME under the DMEPOS CBPs would not have a significant impact 
on beneficiaries and suppliers. Contract suppliers are responsible for 
furnishing items and services needed by the beneficiary, and the cost 
to suppliers for furnishing these items and services does not change 
based on whether or not the equipment and related items and services 
are paid for separately under a capped rental payment method. Because 
the supplier's bids would reflect the cost of furnishing items in 
accordance with the new payment rules, we expect the overall savings to 
generally be the same as they are under the current payment rules.
    Furthermore, the final special payment rules would be phased in 
under a limited number of areas first to evaluate their impact on the 
program, beneficiaries, and suppliers, including costs, quality, and 
access. Expanded use of the special payment rules in other areas or for 
other items would be addressed in future rulemaking.
c. Clarification of the Statutory Medicare Hearing Aid Coverage 
Exclusion Under Section 1862(a)(7) of the Act
    This final rule clarifies the scope of the Medicare coverage 
exclusion for hearing aids. This rule will not have a fiscal impact on 
the Medicare program because there will be no change in the devices 
that are currently covered for Medicare payment purposes. This rule 
provides further guidance about coverage of DME with regard to the 
statutory hearing aid exclusion.
d. Definition of Minimal Self-Adjustment at 42 CFR 414.402
    This final rule will not finalize the definition of minimal self-
adjustment at this time.
e. Change of Ownership Rules To Allow Contract Suppliers To Sell 
Specific Lines of Business
    This rule finalizes changes to the CHOW rules in order to limit 
disruption to the normal course of business for DME suppliers. This 
final rule establishes an exception under the current CHOW rules to 
allow CMS to sever a product category from a contract, incorporate the 
product category into a new contract, and transfer the new contract to 
a qualified new owner under certain specific circumstances. This change 
would impact businesses in a positive way by allowing them to conduct 
everyday transactions with less disruption from our rules and 
regulations.

II. Calendar Year (CY) 2015 End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)

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

    On August 12, 2010, we published in the Federal Register a final 
rule (75 FR 49030 through 49214) in which we implemented a case-mix 
adjusted bundled PPS for Medicare outpatient ESRD dialysis services 
beginning January 1, 2011, in accordance with section 1881(b)(14) of 
the Act, as added by section 153(b) of MIPPA. On November 10, 2011, we 
published in the Federal Register a final rule (76 FR 70228 through 
70316) in which we made a number of routine updates for CY 2012, 
implemented the second year of the transition to the ESRD PPS, made 
several policy changes and clarifications, and made technical changes. 
On November 9, 2012, we published in the Federal Register a final rule 
(77 FR 67450 through 67531) in which we made a number of routine 
updates for CY 2013, implemented the third year of the transition to 
the ESRD PPS, and made several policy changes and reiterations.
    On December 2, 2013, we published in the Federal Register a final 
rule (78 FR 72156 through 72253) in which we made a number of routine 
updates for CY 2014, implemented the fourth and final year of the 
transition to the ESRD PPS, implemented sections 632(a) and (b)(1) of 
ATRA, and made several policy changes and clarifications. Specifically, 
we updated the ESRD PPS base rate to $239.02 per treatment to reflect 
the CY 2014 ESRD bundled (ESRDB) market basket update of 3.2 percent 
minus a multifactor productivity adjustment of 0.4 percent, that is, a 
2.8 percent increase. This amount also reflected the application of the 
wage index budget-neutrality adjustment of 1.000454, the home dialysis 
training add-on budget-neutrality adjustment factor of 0.999912, and 
the portion of the drug utilization adjustment for CY 2014, or $8.16, 
and delayed the payment for oral-only ESRD-related drugs and 
biologicals until January 1, 2016. In addition, this rule also extends 
the gradual reduction of the wage index floor, delays application of 
ICD-10-CM diagnosis codes to the comorbidity payment adjustment and 
updates the fixed-dollar loss and MAP amounts for the outlier policy.

[[Page 66126]]

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the CY 2015 ESRD PPS Proposed Rule

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' (79 
FR 40208 through 40315), (hereinafter referred to as the CY 2015 ESRD 
PPS proposed rule), was published in the Federal Register on July 11, 
2014, with a comment period that ended on September 2, 2014. In that 
proposed rule, for the ESRD PPS, we proposed routine updates to the 
payment system; proposed to implement the statutory provisions set 
forth in PAMA, and clarified policies for billing and payment of short 
frequent hemodialysis services and facility eligibility requirements 
for the low-volume payment adjustment (LVPA) available under the ESRD 
PPS. We received approximately 400 public comments on our proposals, 
including comments from: ESRD facilities; national renal groups, 
nephrologists and patient organizations; patients and care partners; 
manufacturers; health care systems; and nurses. In addition, we 
received a several thousand signature petition requesting that CMS 
include ``full coverage ``of the cost of home hemodialysis patient 
training under Medicare. We note that we made no proposals in our CY 
2015 ESRD PPS proposed rule regarding these issues, and therefore we 
are not finalizing a modification to them in this final rule. We will, 
however, consider the comments set forth in the petition and in other 
public comments in the future.
    In addition, we received other comments regarding policies for the 
ESRD PPS for which we made no proposals. For example, a few comments 
from industry stakeholders and medical associations encouraged CMS to 
consider race and ethnicity when assessing the cost of care. One 
commenter contended that African American dialysis patients require 
significantly more ESA utilization per treatment. Another commenter 
encouraged CMS to monitor race and ethnicity for the purpose of 
establishing a race adjustment factor in the future. We will consider 
these comments as we refine the payment system in CY 2016. Other 
comments requested that CMS clarify inconsistent manual language in 
Internet Only Manual Pub. 100-02 Medicare Benefit Policy, chapter 11 
End-Stage Renal Disease. We appreciate these suggestions and will 
clarify our manual language through sub-regulatory guidance.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the CY 2015 ESRD PPS. 
Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.

C. Routine Updates and Policy Changes to the CY 2015 ESRD PPS

1. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the development of the ESRD PPS per treatment base rate that 
is codified in the Medicare regulations at Sec. Sec.  413.220 and 
413.230. The CY 2011 ESRD PPS final rule also provides a detailed 
discussion of the methodology used to calculate the ESRD PPS base rate 
and the computation of factors used to adjust the ESRD PPS base rate 
for projected outlier payments and budget neutrality in accordance with 
sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, 
respectively. Specifically, the ESRD PPS base rate was developed from 
CY 2007 claims (that is, the lowest per patient utilization year as 
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, 
and represented the average per treatment Medicare Allowable Payment 
(MAP) for composite rate and separately billable services. In 
accordance with section 1881(b)(14)(D) of the Act and regulations at 
Sec.  413.230, the ESRD PPS base rate is adjusted for the patient-
specific case-mix adjustments, applicable facility adjustments, 
geographic differences in area wage levels using an area wage index, as 
well as applicable outlier payments or training payments.
a. Changes to the Drug Utilization Adjustment
i. The Drug Utilization Adjustment Finalized in the CY 2014 ESRD PPS 
Final Rule
    Section 1881(b)(14)(I) of the Act, as added by section 632(a) of 
the American Taxpayer Relief Act of 2012 (ATRA), required that, for 
services furnished on or after January 1, 2014, the Secretary shall 
make reductions to the single payment for renal dialysis services to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals (excluding oral-only ESRD-related 
drugs) by comparing per patient utilization data from 2007 with such 
data from 2012. Section 1881(b)(14)(I) further required that in making 
the reductions, the Secretary take into account the most recently 
available data on Average Sales Prices (ASP) and changes in prices for 
drugs and biologicals reflected in the ESRD market basket percentage 
increase factor under section 1881(b)(14)(F). Consistent with these 
requirements, in CY 2014, we finalized a payment adjustment to the CY 
2014 ESRD PPS base rate that reflected the change in utilization of 
ESRD-related drugs and biologicals from CY 2007 to CY 2012.
    Specifically, we finalized the drug utilization adjustment amount 
of $29.93 per treatment, and finalized a policy to implement this 
amount over a 3- to 4-year transition period. For CYs 2014 and 2015, we 
stated that we would implement the transition by offsetting the payment 
update by a portion of the reduction amount necessary to create an 
overall impact of zero percent for facilities from the previous year's 
payments. For example, in CY 2014 we finalized a per treatment drug 
utilization adjustment amount for the first transition year of $8.16 or 
3.3 percent, which represented the CY 2014 ESRDB market basket update 
minus productivity and other impacts to create an overall impact of 
zero percent. For a complete discussion of the methodology for 
computing the drug utilization adjustment, please see the CY 2014 ESRD 
PPS final rule (78 FR 72161 through 72170).
ii. PAMA Changes to the Drug Utilization Adjustment
    On April 1, 2014, Congress enacted PAMA. Section 217(b), titled 
``Mitigation of the Application of Adjustment to ESRD Bundled Payment 
Rate to Account for Changes in the Utilization of Certain Drugs and 
Biologicals,'' amends section 1881(b)(14)(I) of the Act by inserting 
``and before January 1, 2015'' after January 1, 2014. This amendment 
effectively eliminates the remaining years of the drug utilization 
adjustment transition. In its place, the PAMA amendments to section 
1881(b)(14)(F)(i) dictate what the market basket increase factor will 
be for 2015 and how it will be reduced in 2016 through 2018. In 
particular, PAMA section 217(b)(2)(C) amended section 1881(b)(14)(F)(i) 
by adding subclause (III), which provides that ``[n]otwithstanding 
subclauses (I) and (II), in order to accomplish the purposes of 
subparagraph (I) with respect to 2015, the increase factor described in 
subclause (I) for 2015 shall be 0.0 percent.'' We interpret subclause

[[Page 66127]]

(III) to mean that the market basket increase factor less the 
productivity adjustment for 2015 is 0.0 percent.
    The PAMA amendments also provide for a payment reduction in lieu of 
the drug utilization adjustment in 2016 through 2018. In particular, 
PAMA section 217(b)(2)(ii) further amends section 1881(b)(14)(i)(I) by 
adding at the end the following new sentence, ``In order to accomplish 
the purpose of subparagraph (I) with respect to 2016, 2017, and 2018, 
after determining the increase factor described in the preceding 
sentence for each of 2016, 2017, and 2018, the Secretary shall reduce 
such increase factor by 1.25 percentage points for each of 2016 and 
2017 and by 1 percentage point for 2018.'' We interpret this provision 
as requiring us to reduce the market basket increase factor for 2016 
through 2018 by the percentages prescribed in the statute.
    Comment: All commenters were supportive of CMS's interpretation of 
section 217 of PAMA and agreed that PAMA required a 0.0 percent market 
basket update in CY 2015. A few commenters expressed concern that the 
cumulative economic effect of ATRA's drug reduction, sequestration, and 
now PAMA's 0.0 percent update may be jeopardizing care and access for 
Medicare beneficiaries. Some commenters noted an unstainable Medicare 
payment trajectory and cited an independent analysis that estimates a 
mean gross margin of negative 7.4 percent for CY 2018.
    Response: We thank the commenters for their support of our 
interpretation of section 217 of PAMA as requiring a 0.0 percent market 
basket update for CY 2015. We acknowledge the commenters' concern for 
the collective effects of reduced Medicare margins on care quality and 
patient access. However, PAMA, ATRA, and sequestration were 
congressionally mandated payment reductions and CMS must implement 
them. CMS has finalized policies that would mitigate the negative 
impacts of statutorily mandated reductions on facility margins. For 
example, we proposed and finalized a transition not to exceed four 
years for the ATRA drug utilization adjustment, thus reducing the CY 
2014 payment reduction from $29.93 to $8.16. We adopted this transition 
policy to mitigate the negative economic impact for facilities (78 FR 
72161 through 72170), and to ensure our beneficiaries' access to 
quality care.
    Comment: A few commenters requested greater transparency in the 
data used to establish the annual update and other Medicare payment 
updates included in the ESRD PPS. One commenter noted that transparency 
in rate setting data gives the industry confidence in a predictable and 
fair payment methodology, and that facilities can only then make 
operational and investment decisions for the future. Other commenters 
provided a specific list of data files they need in order to replicate 
CMS's update calculations, and provided additional analysis to CMS: 
annual claims level rate setting files for the ESRD PPS; Medicare Part 
D Standard Analytic File (SAF); 100 percent SAF for physician services; 
and Medicare Part C SAF.
    Response: We agree with commenters that transparency in rate 
setting is desirable. We posted the provider-level impact file with the 
proposed rule because we believe that furnishing an impact file, sorted 
by facility, is the most transparent method and enables facilities to 
assess the economic impact of policy changes at the facility level. In 
addition, beginning in CY 2015, we have made a Limited Data Set (LDS) 
of ESRD PPS facility claims used for CY 2015 rate settings available 
for purchase. A link to the LDS file was included in our proposed rule 
in section XIX titled Files Available to the Public via the Internet 
(79 FR 40311). Likewise, we included an updated LDS file with this 
final rule that is discussed in section XIX of this rule. The LDS files 
are available for purchase at http://www.cms.gov/research-statistics-data-and=systems/files-for-order/limiteddatasets/endstagerenaldiseasesystemfile.html. We note that interested parties 
may request Part D data from CMS at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/GuidePartD, and we will consider furnishing encounter data under 
Medicare Part C, and other Medicare claims files in the future.
b. Payment Rate Update for CY 2015
    As discussed in section II.A of this final rule, section 
1881(b)(14)(F)(i) of the Act, as added by section 153(b) of MIPPA and 
amended by section 3401(h) of the Affordable Care Act, provides that, 
beginning in 2012, the ESRD PPS payment amounts are required to be 
annually increased by the rate of increase in the ESRD market basket, 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. In accordance with section 
1881(b)(14)(F)(i)(III) of the Act, as added by PAMA section 
217(b)(2)(C), we are finalizing a 0.0 percent update to the CY 2014 
ESRD PPS base rate of $239.02 for CY 2015.
    Comment: Generally, commenters were supportive of the CY 2015 
proposed base rate. Some commenters cautioned that CMS ``maintain 
financial integrity'' of the ESRD PPS by addressing crucial components 
of the payment system that inappropriately reduce the base rate. A few 
commenters identified the ESRD PPS payment components of case-mix and 
the outlier policy as examples of payment adjustments that they believe 
are structurally broken. The commenters contend that these adjustments 
result in lowering overall payments to facilities, making it difficult 
for facilities to furnish high quality care to patients.
    Response: We thank the commenters for their support of the proposed 
CY 2015 ESRD PPS base rate. While we do not agree with the commenters 
who contend that the case-mix and outlier adjustments are structurally 
broken, we believe that these adjustments have been underutilized in 
the payment system. We note that section 632 of ATRA requires CMS to 
review the case-mix payment adjustments and make appropriate 
modifications by CY 2016. We will consider these comments as part of 
that larger ESRD PPS refinement that will take place for CY 2016.
    Comment: Other commenters cautioned CMS to correct what they term 
``flaws in standardization,'' calling upon CMS to use the most current 
data available in re-calculating the standardization factor in this 
final rule in order to mitigate losses facilities may have in CY 2015. 
As an alternative, commenters suggest that CMS make an interim 
reduction to the adjustor values that would take into account the 
decrease in drug utilization. With these values, CMS could reduce the 
dollars in the standardization factor for CY 2015. They estimated that 
the standardization factor discrepancy accounts for a loss of one to 
two percent in the base rate.
    They also suggested that for 2015, CMS: (1) Eliminate the co-
morbidity case-mix adjustments because the facilities are unable to 
obtain the necessary documentation to substantiate a co-morbid 
diagnosis and thus, are unable to claim the adjustment; and (2) reduce 
the outlier percentage so that it reflects the percentage of cases paid 
as outlier cases (0.5 percent) and so that it is paid out annually in 
its entirety, or else provide for a zero percent outlier policy.
    Response: We thank the commenters for their suggestions for 
protecting the integrity of the base rate and questioning the necessity 
for some payment adjustments available under the ESRD PPS. However, as 
we stated in the CY 2011 ESRD PPS final rule (75 FR

[[Page 66128]]

49081), to account for the overall effects of the proposed ESRD PPS 
patient- and facility-level adjustment factors and wage indexes, we had 
to standardize payments in order to ensure that total projected PPS 
payments were equal to what would otherwise have been paid had the ESRD 
PPS not been implemented, prior to application of the 98 percent 
budget-neutrality adjustment. The standardization factor was calculated 
by dividing total estimated payments in 2011 under the basic case-mix 
adjusted composite rate payment system by estimated payments under the 
final ESRD PPS in 2011.
    We wish to remind commenters that we used the best data available 
for the development of the standardization factor and made a good faith 
effort to simulate payments under the ESRD PPS beginning in CY 2011. In 
addition, CMS plans to conduct a regression analysis for the CY 2016 
ESRD PPS rulemaking cycle to reassess the appropriateness of the 
patient- and facility-level payment adjustments applied under the ESRD 
PPS. This analysis will include a thoughtful assessment of utilization 
and economic impact of the various payment adjustments under the PPS to 
determine whether they should continue to apply, or if the magnitude of 
the adjustments is over or understated in the ESRD PPS.
    We plan to consider all of the improvements suggested as part of 
the ESRD PPS refinement for CY 2016. We do not think it would be 
appropriate to eliminate any co-morbidity adjustments in isolation from 
a broader refinement that assesses all current and potentially 
significant adjustments.
c. CY 2015 ESRD PPS Wage Index Budget-Neutrality Adjustment
    As discussed in section II.C of this final rule, for CY 2015 we 
apply the wage index budget-neutrality adjustment factor of 1.001729 to 
the CY 2014 ESRD PPS base rate (that is, $239.02), yielding a CY 2015 
ESRD PPS wage index budget-neutrality adjusted base rate of $239.43 
($239.02 x 1.001729 = $239.43).
    Comment: Commenters were supportive of the CY 2015 proposed wage 
index budget-neutrality adjustment. A few commenters noted the small 
payment increase for CY 2015, and thanked CMS for continuing to apply 
an updated wage index budget-neutrality adjustment in a year where a 
0.0 percent market basket update was congressionally mandated.
    Response: We thank the commenters for their support of our 
finalized wage index budget-neutrality factor, and note that the wage 
index budget-neutrality update is computed separately from the annual 
market basket update. Therefore, the wage index budget-neutrality 
update continues to apply even in years when a 0.0 market basket update 
is statutorily required.
d. Labor-Related Share
    As discussed in section II.C.2 of this final rule, as part of the 
ESRDB market basket rebase and revision, we are updating the labor-
related share from 41.737 percent to 50.673 percent. We noted that some 
ESRD facilities are adversely affected by this update. For example, 
rural facilities and facilities located in core-based statistical areas 
(CBSA) with wage indexes below 1.0 will experience reduced payments due 
to an increase in the labor-related share, while other facilities 
located in CBSAs where wage indices are above 1.0 will experience 
increased payments. While we are finalizing the new labor-related share 
of 50.673 percent, we shall implement this value using a 2-year 
transition.
    Therefore, for CY 2015 we will apply 50 percent of the value of the 
current labor-related share under the ESRD PPS (41.737 percent) and 50 
percent of the value of the new labor-related share (50.673 percent), 
add the percentages together and divide by two, for a CY 2015 labor-
related share of 46.205 percent ((41.737 + 50.673)/2 = 46.205). 
Beginning in CY 2016, we will apply 100 percent of the total labor-
related share of 50.673 percent. We shall continue to apply a labor-
related share of 50.673 percent in computing a wage index-adjusted base 
rate for ESRD facilities until such time in the future the ESRDB market 
basket is again rebased or revised. This approach is similar to the 
transition finalized for the CY 2015 wage indexes and discussed in 
section II.3 of this final rule, and is intended to allow ESRD 
facilities time to adjust to the new labor-related share.
    Comment: While the majority of commenters supported the updated 
labor-related share, some commenters expressed concern regarding the 
negative impact for rural facilities and any facility with a wage index 
value of less than 1.0, and noted that they will experience reduced 
ESRD PPS payments in CY 2015 as a result of the updated labor-related 
share. A few commenters contended that this update would be better 
received during a larger payment system refinement and encouraged CMS 
to delay the ESRDB market basket update, with the new labor-related 
share, until CY 2016 where negative impacts could be offset with other 
payment system refinements. Another commenter noted that if the ESRDB 
market basket update was delayed until CY 2016, 2012 audited cost 
reports would be available to ensure better accuracy. The commenter 
noted that the PAMA legislation mandated the audits and provided $18 
million to fund the effort.
    Response: We thank the commenters for their support of our updated 
labor-related share. We share stakeholders' concern for negatively 
impacted facilities. Moreover, we agree with commenters that delaying 
the ESRDB market basket update until CY 2016 may have the advantage of 
offsetting some of the negative impact indicated in section XIV of this 
final rule. However, we believe the labor-related share has been 
undervalued in the payment system, especially after the ATRA drug 
utilization reduction finalized in the ESRD PPS CY 2014 final rule (78 
FR 72161 through 72170). Therefore, we are finalizing a labor-related 
share of 46.205 percent for CY 2015 and a labor-related share of 50.673 
percent for CY 2016 and until such time in the future the labor-related 
share is updated.
    Lastly, we wish to clarify for commenters that the audits of 
Medicare cost reports beginning during 2012 will not be available for 
CY 2016 rulemaking. Any cost report findings resulting from the 
statutorily-mandated audits of Medicare cost reports beginning during 
2012 will be available for future ESRDB market basket updates.
    Comment: Many commenters supported the update to the labor-related 
share and the 2-year transition to dampen the immediate impact of the 
change. A few commenters thanked CMS for appropriately recognizing 
shifting costs in furnishing dialysis services from drugs to labor.
    Response: We thank the commenters for their support and note that 
we considered implementing the full amount of the revised labor-related 
share percentage of 50.673 for CY 2015, but that would have increased 
the CY 2015 proposed wage index budget-neutrality factor. Such an 
increase would have resulted in a further decrease in CY 2015 Medicare 
payments to rural facilities, and an additional increase to urban 
facilities. When we apply the transition labor-related share of 46.205 
percent the disparity in impacts for rural and urban facilities is 
reduced, resulting in a more stable economic environment for all 
facilities in general. We believe that offsetting the negative economic 
impact for rural facilities with the 2-year transition for the labor-
share will enhance access to quality care for Medicare beneficiaries 
living in rural communities. (For more information of the CY 2015 
Impact of

[[Page 66129]]

Changes in Payments to ESRD Facilities for CY 2015 ESRD final rule, see 
section XIV of this final rule). Therefore, we believe a 2-year 
transition strikes an appropriate balance between ensuring that ESRD 
PPS payments are as accurate and stable as possible, while giving rural 
and urban facilities in low wage index areas time to adjust to the new 
labor-related share.
    Comment: A few commenters requested that CMS consider a longer 
transition to further mitigate the financial pressures on rural 
providers. One commenter encouraged CMS to provide a longer transition 
period, ``such as 3 or 4 years.'' Another commenter encouraged CMS to 
extend the transition to 3 years to give rural facilities more time to 
adjust to the lower reimbursement and ``get them closer to the end of 
the PAMA cuts.''
    Response: We thank the commenters for their concern for the 
economic impacts on rural and urban facilities located in areas with 
low wage indices. In addition, we acknowledge the commenter's 
suggestion to extend the transition period to 3 or 4 years to allow 
disadvantaged facilities time to adjust to the new labor-related share 
percentage. However, we continue to believe a 2-year transition strikes 
an appropriate balance between allowing ESRD facilities time to adjust 
to the new labor-related share while appropriately accounting for 
facility costs associated with labor in furnishing renal dialysis 
services.
    In summary, we are finalizing a CY 2015 ESRD PPS base rate of 
$239.43. This reflects, updated claims data used for rate setting, a 
0.0 percent payment update consistent with section 
1881(b)(14)(F)(i)(III) of the Act, as added by section 217(b)(2) of 
PAMA, a 2-year transition for the labor related share(46.205 percent 
for CY 2015 and 50.673 for CY 2016), and the CY 2015 wage index budget-
neutrality adjustment factor of 1.001729.
2. ESRD Bundled Market Basket and Labor-Related Share
a. Rebasing and Revision of the ESRD Bundled Market Basket
    In July, we proposed to rebase and revise the ESRD Bundled (ESRDB) 
market basket for CY 2015. In accordance with section 1881(b)(14)(F)(i) 
of the Act, beginning in 2012, the ESRD payment amounts are required to 
be annually increased by an ESRD market basket increase factor that is 
reduced by the productivity adjustment in section 1886(b)(3)(B)(xi)(II) 
of the Act. The application of the productivity adjustment may result 
in the increase factor being less than 0.0 for a year and may result in 
payment rates for a year being less than the payment rates for the 
preceding year. The statute also provides that the market basket 
increase factor should reflect the changes over time in the prices of 
an appropriate mix of goods and services used to furnish renal dialysis 
services.
    In the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162), we 
established an ESRDB market basket using CY 2008 as the base year. This 
market basket was used to annually update the ESRD base rate payments 
for CY 2012, CY 2013, and CY 2014.
    In the CY 2015 ESRD proposed rule, we proposed to rebase and revise 
the ESRDB market basket for CY 2015, in accordance with, section 
1881(b)(14)(F)(i) of the Act, which provides that the market basket 
increase factor should reflect the changes over time in the prices of 
an appropriate mix of goods and services used to furnish renal dialysis 
services. The multi-factor productivity adjustment is applied to the 
ESRDB market basket update under the requirements of sections 
1881(b)(14)(F)(i)(II) and 1886(b)(3)(B)(xi)(II) of the Act.
    The CY 2012-based ESRDB market basket represents the costs of 
operating and capital-related costs. The percentage change in the ESRDB 
market basket reflects the average change in the price of a fixed set 
of goods (both operating and capital) and services purchased by ESRD 
facilities necessary for providing renal dialysis services. For further 
background information, see the CY 2011 final rule with comment period 
(75 FR 49151 through 49162).
    The ESRDB market basket is a fixed-weight (Laspeyres-type) price 
index. A Laspeyres-type index compares the cost of purchasing a 
specified mix of goods and services in a selected base period to the 
cost of purchasing that same group of goods and services at current 
prices. The effects on total expenditures resulting from changes in the 
quantity or mix of goods and services purchased subsequent or prior to 
the base period are, by design, not considered.
    The market basket is constructed in three main steps: the first 
step is to select a base period and estimate total base period 
expenditure shares for mutually exclusive and exhaustive spending 
categories. We use total costs for operating and capital expenses. 
These shares are called ``cost'' or ``expenditure'' weights. The second 
step is to match each expenditure category to a price/wage variable, 
called a price proxy. We draw these price proxy variables from publicly 
available statistical series published on a consistent schedule, 
preferably at least quarterly. The final step involves multiplying the 
price proxy index level for each spending category by the cost weight 
for that category. The sum of these products (that is, cost weights 
multiplied by proxy index levels) for all cost categories yields the 
composite index level of the market basket for a given quarter or year. 
Repeating the third step for other quarters and years produces a time 
series of market basket index levels, from which we can calculate rates 
of growth.
    We proposed to use CY 2012 as the base year for the rebased and 
revised ESRDB market basket cost weights. The cost weights are based on 
the cost report data for independent ESRD facilities. We refer to the 
market basket as a CY market basket because the base period for all 
price proxies and weights are set to CY 2012 = 100. Source data 
included CY 2012 Medicare cost reports (Form CMS-265-11), supplemented 
with 2012 data from the U.S. Census Bureau's Services Annual Survey 
(SAS) for Kidney Dialysis Centers (NAICS 621492). Medicare cost reports 
from hospital-based ESRD providers were not used to construct the 
proposed ESRDB market basket because data from independent ESRD 
facilities tend to better reflect the actual cost structure faced by 
the ESRD facility itself, and are not influenced by the allocation of 
overhead over the entire institution, as can be the case with hospital-
based providers. This approach is consistent with our standard 
methodology used in the development of other market baskets.
b. Rebasing and Revision of the ESRD Bundled Market Basket
    The terms ``rebasing'' and ``revising'', while often used 
interchangeably, actually denote different activities. Rebasing means 
shifting the base year for the structure of costs of the input price 
index (for example, we proposed to shift the base year cost structure 
from CY 2008 to CY 2012). Revising means changing data sources, cost 
categories, price proxies, and/or methodology used in developing the 
input price index. We proposed both to rebase and revise the ESRDB 
market basket.
    We selected CY 2012 as the new base year because 2012 is the most 
recent year for which relatively complete Medicare cost report (MCR) 
data are available. In developing the market basket, we reviewed ESRD 
expenditure data from ESRD MCRs (CMS Form 265-11) for CY 2012 for each 
freestanding ESRD facility that reported expenses and payments. The CY 
2012 cost reports

[[Page 66130]]

are those with cost reporting periods beginning on or after January 1, 
2012 and before December 31, 2012.
    We developed cost category weights for the proposed CY 2012-based 
ESRDB market basket in two stages. First, we derived base weights for 
nine major categories (Wages and Salaries, Employee Benefits, Medical 
Supplies, Lab Services, Housekeeping & Operations, Pharmaceuticals, 
Administrative and General, Capital-Related Building & Fixed Equipment, 
and Capital-Related Machinery) from the ESRD MCRs. Second, we proposed 
to divide the Administrative & General cost category into further 
detail using 2012 U.S. Census Bureau Services Annual Survey (SAS) Data 
for the industry Kidney Dialysis Centers (NAICS 621492). We applied the 
2012 distributions from the SAS data to the 2012 ``Administrative & 
General'' cost weight to yield the more detailed 2012 cost weights. 
This is similar to the methodology we used to break the 2008-based 
Administrative & General Costs into more detail for the ESRDB market 
basket as detailed in the CY 2011 ESRD final rule (75 FR 49154 through 
49159). For more information on the SAS data, see http://www.census.gov/services/sas/about_the_surveys.html.
    We proposed to include a total of 20 detailed cost categories in 
the CY 2012-based ESRDB market basket, which is four more cost 
categories than the CY 2008-based ESRDB market basket. In addition, we 
proposed to further decompose both the Wages and Salaries and Employee 
Benefits cost categories into four more detailed cost categories 
reflecting the occupational mix of full time equivalents (FTEs) at ESRD 
facilities. The four detailed occupational categories are: (1) Health-
related workers; (2) Management workers; (3) Administrative workers; 
and (4) Service workers. Having more detailed cost categories for these 
compensation costs enables them to be proxied more precisely. We also 
proposed to collapse the Professional Fees and All Other Services cost 
categories into single categories rather than splitting those 
categories into Labor-Related and Non-Labor-Related Services. In 
addition, we proposed to revise our labels for All Other Materials to 
Medical Materials and Supplies, Laboratories to Lab Services, and All 
Other Labor-Related/Non Labor-Related to All Other Goods and Services.
i. Cost Category Weights
    Using Worksheets A and B from the CY 2012 Medicare cost reports, we 
computed cost shares for nine major expenditure categories: Wages and 
Salaries, Employee Benefits, Pharmaceuticals, Supplies, Lab Services, 
Administrative and General (A&G), Housekeeping and Operations, Capital-
Related Building & Equipment, and Capital-Related Machinery. Edits were 
applied to include only cost reports that had total costs greater than 
zero. In order to reduce potential distortions from outliers in the 
calculation of the cost weights for the major expenditure categories, 
cost values for each category less than the 5th percentile or greater 
than the 95th percentile were excluded from the computations. The 
resulting data set included information from approximately 4,700 
independent ESRD facilities' cost reports from an available pool of 
5,333 cost reports. Expenditures for the nine cost categories as a 
proportion of total expenditures can be found in the CY 2015 Proposed 
Rule (79 FR 40217).
    Some costs are reported on the Medicare cost report but are not 
included in the ESRD bundled payment. For example, we removed the 
expenses related to vaccine costs from total expenditures since these 
are excluded from the ESRD bundled payment, but reported on the 
Medicare cost report.
    We also proposed to expand the expenditure categories developed 
from the Medicare cost reports to allow for more detailed expenditure 
decomposition. To expand these cost categories, SAS data were used 
because the Medicare Cost Reports do not collect detailed information 
on the items of interest. Those categories include: Benefits for all 
employees, professional fees, telephone, utilities, and all other goods 
and services. We chose to separately break out these categories to more 
accurately reflect ESRD facility costs. For a detailed description of 
how the costs were further refined to yield the proposed 2012-based 
ESRDB cost weights please see (79 FR 40217 through 40221).
    Table 1 lists all of the cost categories and cost weights in the CY 
2012-based ESRDB market basket compared to the cost categories and cost 
weights in the CY 2008-based ESRDB market basket.

  Table 1--Comparison of the CY 2012-Based ESRDB Market Basket Cost Categories & Weights and the CY 2008-Based
                                  ESRDB Market Basket Cost Catagories & Weights
----------------------------------------------------------------------------------------------------------------
                                                    2008 Cost     2012 Cost
               2008 Cost category                    weight        weight             2012 Cost category
                                                    (percent)     (percent)
----------------------------------------------------------------------------------------------------------------
Total...........................................       100.000       100.000  Total.
Compensation....................................        33.509        42.497  Compensation.
    Wages and Salaries..........................        26.755        33.650  Wages and Salaries.
    Employee Benefits...........................         6.754         8.847  Employee Benefits.
Utilities.......................................         1.264         1.839  Utilities.
    Electricity.................................         0.621         0.973  Electricity.
    Natural Gas.................................         0.127         0.101  Natural Gas.
    Water and Sewerage..........................         0.516         0.765  Water and Sewerage.
All Other Materials.............................        39.765        28.139  Medical Materials and Supplies.
    Pharmaceuticals.............................        25.052        16.510  Pharmaceuticals.
    Supplies....................................         9.216        10.097  Supplies.
    Lab Services................................         5.497         1.532  Lab Services.
All Other Services..............................        15.929        15.277  All Other Goods and Services.
    Telephone...................................         0.597         0.468  Telephone Service.
    Housekeeping and Operations.................         2.029         3.785  Housekeeping and Operations.
    Labor-Related Services......................         2.768  ............  ..................................
    Prof. Fees: Labor-related...................         1.549         0.617  Professional Fees (Labor-related
                                                                               and NonLabor-related services).
    All Other Labor-related.....................         1.219  ............  ..................................
    NonLabor-Related Services...................        10.535        10.407  All Other Goods and Services
    Prof. Fees: Nonlabor-related................         0.224  ............  ..................................
    All Other Nonlabor-related..................        10.311  ............  ..................................

[[Page 66131]]

 
Capital Costs...................................         9.533        12.248  Capital Costs.
    Capital Related-Building and Equipment......         7.459         8.378  Capital Related-Building and
                                                                               Equipment.
    Capital Related-Machinery...................         2.074         3.870  Capital Related-Machinery.
----------------------------------------------------------------------------------------------------------------
Note: Totals may not sum to 100.000 percent due to rounding

ii. Price Proxies for the CY 2012 ESRDB Market Basket
    For each cost category in the CY 2012-based ESRDB market basket, we 
selected the most appropriate wage and price proxies that measure the 
rate of price change for each expenditure category. An explanation of 
our rationale for the proposed price proxies used for each cost 
category can be found in the proposed rule (79 FR 40221 through 40224). 
With the exception of the pharmaceuticals cost category, all of the 
price proxies we proposed to use for each cost category weight are the 
same in this final rule. We based the price proxies on Bureau of Labor 
Statistics (BLS) data and grouped them into one of the following BLS 
categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour.
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPIs were available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population.
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. We believe that using 
proxies that are published regularly (at least quarterly, whenever 
possible) helps to ensure that we are using the most recent data 
available to update the market basket.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this ensures that the market basket updates are as transparent 
to the public as possible.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.

Pharmaceuticals

    In the CY 2015 proposed rule, we proposed to change the price proxy 
used for the pharmaceuticals cost category from the one used for the 
2008-based ESRDB market basket--the PPI: Pharmaceuticals for Human Use, 
Prescription (79 FR 40223). We referenced a recent Health and Human 
Services Office of the Inspector General (OIG) report titled ``Update: 
Medicare Payment for End Stage Renal Disease Drugs'' which recommended 
that CMS consider updating the ESRD payment bundle using a factor that 
takes into account drug acquisition costs. CMS had responded to this 
recommendation by stating that we would consider these findings in the 
continual evaluation of the ESRD market basket, particularly during the 
next rebasing and revising of the market basket index.\1\
---------------------------------------------------------------------------

    \1\ http://oig.hhs.gov/oei/reports/oei-03-12-00550.asp
---------------------------------------------------------------------------

    Drug acquisition cost data is not publicly available, nor are the 
methods used to determine it transparent, and, therefore, wouldn't meet 
our price proxy criteria of relevance, reliability, transparency, and 
public availability. However, after considering several viable options 
that do meet the criteria we proposed to use the PPI: Vitamin, 
Nutrient, and Hematinic Preparations (BLS series code #WPU063807).
    Based on public comments and, for the reasons articulated below in 
comments and responses, we have decided to finalize a price proxy blend 
as the price proxy for the pharmaceutical cost category. The blend we 
are using is 22 percent PPI: Vitamin, Nutrient, and Hematinic 
Preparations (BLS series code #WPU063807) and 78 percent PPI: 
Biological Products, Human Use (BLS series code #WPU063719). Table 2 
lists all price proxies for the revised and rebased ESRDB market 
basket.

    Table 2--Price Proxies for the CY 2012-Based ESRDB Market Basket
------------------------------------------------------------------------
                                                            Cost weight
         Cost category                 Price proxy           (percent)
------------------------------------------------------------------------
Compensation...................  .......................          42.497
    Wages and Salaries.........  .......................          33.650
        Health-related Wages     ECI--Wages & Salaries--          26.920
                                  Hospital (Civilian).
        Management Wages         ECI--Wages & Salaries--           2.356
                                  Management, Business,
                                  and Financial
                                  (Private).
        Administrative Wages     ECI--Wages & Salaries--           2.356
                                  Office and
                                  Administrative Support
                                  (Private).
        Service Wages..........  ECI--Wages & Salaries--           2.019
                                  Service Occupations
                                  (Private)
    Employee Benefits..........  .......................           8.847
        Health-related Benefits  ECI--Benefits--Hospital           7.078
                                  (Civilian).

[[Page 66132]]

 
        Management Benefits      ECI--Benefits--Manageme           0.619
                                  nt, Business, and
                                  Financial (Private)
        Administrative Benefits  ECI--Benefits--Office             0.619
                                  and Administrative
                                  Support (Private)
        Service Benefits.......  ECI--Benefits--Service            0.531
                                  Occupations (Private).
    Utilities..................  .......................           1.839
        Electricity............  PPI--Commercial                   0.973
                                  Electric Power.
        Natural Gas............  PPI--Commercial Natural           0.101
                                  Gas.
        Water and Sewerage       CPI--Water and Sewerage           0.765
                                  Maintenance.
    Medical Materials and        .......................          28.139
     Supplies
        Pharmaceuticals........  Blend of PPI Biological          16.510
                                  Products for Human Use
                                  and PPI--Vitamin,
                                  Nutrient, and
                                  Hematinic Preparations
        Supplies...............  PPI--Surgical and                10.097
                                  Medical Instruments.
        Lab Services...........  PPI--Medical                      1.532
                                  Laboratories.
    All Other Goods and          .......................          15.277
     Services
        Telephone Service        CPI--Telephone Services           0.468
        Housekeeping and         PPI--Cleaning and                 3.785
         Operations               Building Maintenance
                                  Services
        Professional Fees        ECI--Compensation--Prof           0.617
                                  essional and Related
                                  Occupations (Private)
        All Other Goods and      PPI--Finished Goods              10.407
         Services                 less Foods and Energy.
    Capital Costs..............  .......................          12.248
        Capital Related          PPI--Lessors of                   8.378
         Building and Equipment   Nonresidential
                                  Buildings.
        Capital Related          PPI--Electrical                   3.870
         Machinery                Machinery and
                                  Equipment.
                                                         ---------------
            Total..............  .......................         100.000
------------------------------------------------------------------------
Note: Totals may not sum to 100.000 percent due to rounding.

iii. 2012-Based ESRDB Market Basket Updates Compared to 2008-Based 
ESRDB Market Basket Updates
    Beginning with the CY 2015 ESRD PPS update, we proposed to adopt 
the CY 2012-based ESRDB market basket as the appropriate market basket 
of goods and services for the ESRD PPS.
    Based on the IHS Global Insight, Inc. (IGI) first quarter 2014 
forecast with history through the fourth quarter of 2013, the proposed 
CY 2012-based ESRDB market basket for CY 2015 was 2.0 percent while the 
proposed CY 2008-based ESRDB market basket for CY 2015 was 2.7 percent.
    Table 3 compares the proposed CY 2012-based ESRDB market basket and 
the CY 2008-based ESRDB market basket percent changes. For the 
historical period between CY 2011 and CY 2013, the average difference 
between the two market baskets was -1.8 percentage points. This is 
primarily the result of the proposed lower pharmaceutical cost share 
weight combined with the proposed revised price proxy for the 
pharmaceutical cost category. For the CY 2014 and CY 2015 forecasts, 
the differences in the market basket forecasts are mainly driven by the 
same factors as in the historical period.

  Table 3--Proposed CY 2012-Based ESRDB Market Basket and CY 2008 Based
             ESRDB Market Basket, Percent Changes: 2011-2015
------------------------------------------------------------------------
                                      Proposed CY 2012-   CY 2008-based
         Calendar year (CY)              based ESRDB      ESRDB market
                                        market basket        basket
------------------------------------------------------------------------
Historical data:
    CY 2011.........................               1.2               2.8
    CY 2012.........................               1.4               3.4
    CY 2013.........................               1.1               3.0
    Average CY 2011-2013............               1.3               3.1
Forecast:
    CY 2014.........................               1.8               2.3
    CY 2015.........................               2.0               2.7
------------------------------------------------------------------------
Source: IHS Global Insight, Inc. 1st quarter 2014 forecast with
  historical data through 4th quarter 2013.

b. Proposed ESRDB Market Basket Update, Adjusted for Multifactor 
Productivity for CY 2015
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by the productivity 
adjustment. For CY 2015, section 1881(b)(14)(F)(i)(III) of the Act, as 
added by section 217(b)(2) of PAMA, requires the Secretary to implement 
a 0.0 percent ESRDB market basket increase to the ESRD PPS base rate. 
In addition, we interpret the reference to ``[n]otwithstanding 
subclause (III)'' that was added to amended section 
1881(b)(14)(F)(i)(III) of the Act as precluding the application of the 
multi-factor productivity (MFP) adjustment in 2015. As a result of 
these provisions, the proposed CY 2015 ESRD market basket increase was 
0.0 percent. We note that the proposed 2012-based ESRDB market basket 
update less the productivity adjustment for CY 2015 would have been 1.6 
percent, or 2.0 percent less 0.4 percentage point, based

[[Page 66133]]

on IGI's 1st quarter 2014 forecast of the ESRDB market basket and MFP.
c. Labor-Related Share
    We define the labor-related share (LRS) as those expenses that are 
labor-intensive and vary with, or are influenced by, the local labor 
market. The labor-related share of a market basket is determined by 
identifying the national average proportion of operating costs that are 
related to, influenced by, or vary with the local labor market. The 
labor-related share is typically the sum of Wages and Salaries, 
Benefits, Professional Fees, Labor-related Services, and a portion of 
the Capital share from a given market basket.
    We proposed to use the 2012-based ESRDB market basket cost weights 
to determine the labor-related share for ESRD facilities of 50.673 
percent, as shown in Table 4 below. These figures represent the sum of 
Wages and Salaries, Benefits, Housekeeping and Operations, 87 percent 
of the weight for Professional Fees (details discussed below), and 46 
percent of the weight for Capital-related Building and Equipment 
expenses (details discussed below). We note that this is a similar 
methodology used to compute the labor-related share used from CY 2011 
through CY 2014.

  Table 4--CY 2015 Labor-Related Share and CY 2014 ESRDB Labor-Related
                                  Share
------------------------------------------------------------------------
                                      Proposed CY 2015
                                        ESRDB labor-      CY 2014 ESRDB
            Cost category               related share    labor- related
                                          (percent)      share (percent)
------------------------------------------------------------------------
Wages...............................            33.650            26.755
Benefits............................             8.847             6.754
Housekeeping and operations.........             3.785             2.029
Professional fees (labor-related)...             0.537             2.768
Capital labor-related...............             3.854             3.431
                                     -----------------------------------
    Total...........................            50.673            41.737
------------------------------------------------------------------------

    The labor-related share for Professional Fees (87 percent) reflects 
the proportion of ESRD facilities' professional fees expenses that we 
believe vary with local labor market. We conducted a survey of ESRD 
facilities in 2008 to better understand the proportion of contracted 
professional services that ESRD facilities typically purchase outside 
of their local labor market. These purchased professional services 
include functions such as accounting and auditing, management 
consulting, engineering, and legal services. Based on the survey 
results, we determined that, on average, 87 percent of professional 
services are purchased from local firms and 13 percent are purchased 
from businesses located outside of the ESRD facility's local labor 
market. Thus, we proposed to include 87 percent of the cost weight for 
Professional Fees in the labor-related share, the same percentage as 
used in prior years.
    The labor-related share for capital-related expenses (46 percent of 
ESRD facilities' adjusted Capital-related Building and Equipment 
expenses) reflects the proportion of ESRD facilities' capital-related 
expenses that we believe varies with local labor market wages. Capital-
related expenses are affected in some proportion by variations in local 
labor market costs (such as construction worker wages) that are 
reflected in the price of the capital asset. However, many other inputs 
that determine capital costs are not related to local labor market 
costs, such as interest rates. The 46-percent figure is based on 
regressions run for the inpatient hospital capital PPS in 1991 (56 FR 
43375). We use a similar methodology to calculate capital-related 
expenses for the labor-related shares for rehabilitation facilities (70 
FR 30233), psychiatric facilities, long-term care facilities, and 
skilled nursing facilities (66 FR 39585).
d. Responses to Comments on Proposed Market Basket Rebasing & Revision
    Comment: Many commenters support rebasing the ESRDB market basket 
using the most current and accurate data that are available. Most 
commenters stated that an updated base year allows the market basket to 
better reflect the relative costs of running an ESRD facility under the 
PPS and accurately captures the decline in dialysis drug use that has 
occurred since 2008 (the base year of the current market basket).
    Response: We thank the commenters who supported the rebasing of the 
ESRDB market basket to reflect cost data for 2012. The 2012 MCR data is 
the first year of data available under the bundled PPS system and 
reflects the changes to the relative costs associated with furnishing 
ESRD treatments. We agree that the decline in dialysis drug use since 
2008 and its subsequent impact on the relative costs of other goods and 
services is an important update to consider when estimating price 
pressures faced by providers.
    Comment: Several commenters requested that CMS delay the market 
basket rebasing until CY2016 so that the rebasing weights could be 
based on 2012 audited cost report data instead of the proposed 
unaudited reports. One commenter claimed that audits have historically 
shown that facilities' cost reports have included unallowable costs 
that either overstate or understate provider costs. They believe these 
errors could change the results of the cost share weights derived from 
the market basket data.
    Response: We disagree with the commenters that the market basket 
rebasing should be delayed until CY 2016 in order to use audited cost 
report data rather than the unaudited reports. First, the audits will 
begin in fiscal year 2015 and the processing and analysis of the 
audited data could take several years to complete and therefore would 
not be available to use for the CY 2016 updates. Additionally, although 
the audits might lead to different cost levels reported by some 
providers, we don't believe that different levels would result in 
substantial variation in the relative cost share weights derived from 
the unaudited data since the cost weights are based on shares of the 
total rather than on levels. Additionally the weights are derived from 
all providers and therefore for a change to appear in the market basket 
cost shares the misreporting would have to be prevalent across a 
significant percentage of providers. Therefore, we do not agree the 
upcoming audits are a reason to delay the update to the market basket 
weights for CY 2015. We believe the use of the 2012 Medicare Cost 
Report data to be a technical improvement to the use of the 2008 ESRD 
relative cost shares.

[[Page 66134]]

    Comment: One commenter believes that rebasing the market basket 
goes against the intent of PAMA since the rebasing will result in 
decreased payments to some providers and increased payments to others. 
They believe that PAMA was passed to mitigate the adjustment to ESRD 
bundled payments for all dialysis facilities by dictating a market 
basket update for CY 2015 through 2018.
    Response: The CY 2015 ESRD PPS update will be 0.0 percent as 
mandated by PAMA. For CY 2016 through CY 2018, PAMA mandates a 
reduction to the market basket increase to the ESRD PPS payment 
updates. PAMA did not specify what the annual updates would be for 
those years. It is critical that CMS estimate an appropriate market 
basket increase that reflects the inputs used to furnish ESRD 
treatments in order for the legislatively required reductions to be 
applied in CYs 2016 through 2018.
    Comment: One commenter believes that the difference in the market 
basket rate using the 2008 data versus the 2012 data is significant. 
They compared rules where market basket rebasings have been proposed 
and finalized for other providers such as hospital and home health and 
found that the rebasings did not result in significant changes in 
current or historical market basket updates.
    Response: We agree with the commenter that the rebasing of other 
market baskets has not, historically, resulted in significant changes 
to the market basket update rate. However, between 2008 and 2012 the 
dialysis market experienced considerable changes. Most notable was the 
change in the relative cost of pharmaceuticals; specifically, the cost 
category weight dropped from 25.052 percent to 16.510 percent, due 
largely to decreases in drug utilization. In addition, we updated the 
price proxy associated with the pharmaceutical cost category based in 
part on the recommendation of a Health and Human Services Office of the 
Inspector General (OIG) report titled ``Update: Medicare Payment for 
End Stage Renal Disease Drugs.'' The combined changes to the 
pharmaceutical cost weight and the update of the pharmaceutical price 
proxy are the primary drivers of the changes to the market basket 
updates. For CY 2015, we note that the changes to the cost share 
weights from 2008 to 2012 account for about 50 percent of the 
difference while the change to the price proxy, as finalized, accounts 
for the other 50 percent of the difference.
    Comment: One commenter requested clarification on several of the 
cost category calculations based on MCR data. First, the commenter 
requested we review the ``Administrative and General'' (A&G) and 
``Wages & Salaries'' cost categories. The commenter specifically 
requested that CMS clarify the source of the percentage of non-direct 
wages associated with A&G that are obtained from Sheet A of the MCR as 
well as verify the method used on worksheet B to estimate total costs 
for each cost center. Second, the commenter requested that CMS clarify 
whether estimated salary costs for capital-related machinery were 
reallocated to salaries or if they were not.
    Response: Below we clarify the calculation of the Wages & Salaries 
cost share methodology as well as the method for inclusion of the 
Capital-Related Machinery cost center into the moveable capital cost 
share weight.
    To capture the salary costs associated with non-direct patient care 
cost centers, we calculated salary percentages for non-direct patient 
care from worksheet A of the MCR. The estimated ratios were calculated 
as the ratio of salary costs (worksheet A, columns 1 & 2) to total 
costs (worksheet A, column 4). The ratios were calculated for seven 
distinct cost centers: `Operations & Maintenance' combined with 
`Machinery & Rental & Maintenance' (line 3 & 6), Housekeeping (line 4), 
EH&W Benefits for Direct Pt. Care (line 8), Supplies (line 9), 
Laboratory (line 10), Administrative & General (line 11), and Drugs 
(line 12). Each of the ratios for the seven cost centers was applied to 
the corresponding reimbursable costs center totals as reported on 
worksheet B. The worksheet B totals were based on the sum of 
reimbursable costs reported on lines 8-17. We did not use line 18, the 
subtotal line, as the commenter presumes. For example, the salary 
percentage for supplies (as measured by line 9 on worksheet A) was 
applied to the total expenses for the supply cost center (the sum of 
costs reported on worksheet B, column 7, lines 8-17).
    Regarding the calculation of costs associated with `Machinery & 
Rental & Maintenance', the estimated salary ratio for this category was 
calculated jointly with the ratio for `Operations & Maintenance' 
expenses. Therefore the same ratio was applied to `Operations & 
Maintenance' and `Machinery & Rental & Maintenance'. This ratio was 
applied to the total of worksheet B, column 4, lines 8-17. The salaries 
associated with the `Machinery & Rental & Maintenance' costs were added 
to `Total Salaries'. The remaining costs reported in worksheet B column 
4, line 8-17 were considered moveable capital-related expenses 
(excluding salaries). We believe, the commenter's confusion was the 
result of the estimated salary share for the capital `Machinery & 
Rental & Maintenance' costs being combined with the operation and 
maintenance costs before being added to salaries rather than being 
added separately. We hope this clarifies that the salary portion of 
`Machinery & Rental & Maintenance' costs follows the same method as all 
other cost centers.
    Comment: One commenter requested CMS revisit the allocation of 
laboratory costs from A&G once some of the providers have re-filed 
their cost reports. The commenter recommends that CMS not allocate A&G 
to the laboratory cost center and apply the lab price proxy only to 
directly reported lab costs. They note that allocating A&G to 
laboratory costs would overstate the proportion of lab costs based upon 
their understanding as to how some providers will allocate these costs 
once they re-file the cost reports.
    Response: The lab costs included in the lab category in the rebased 
and revised ESRDB market basket do not include any allocation of 
administrative and general (A&G) costs. The costs are calculated based 
on lab expenses reported on Medicare Cost Report, worksheet B, lines 8-
17, and column 8. We did not allocate any A&G costs to the lab category 
for the 2012 cost shares.
    Comment: One commenter noted that what goes into each of the 
provided categories is not standardized. They believe that CMS should 
use consistent information from all providers to ensure the accuracy of 
the data. They note that smaller dialysis facilities, especially those 
in rural areas, will likely struggle to collect the information 
required to be reported on the MCR.
    Response: We are sensitive to all reasonable cost report data being 
included in the calculation of the market basket cost share weights. We 
perform various trimming techniques to estimate the variability in the 
cost share weight results. Trimming the data removes providers that may 
have misreported costs or are extreme outliers. We analyze the results 
of the cost share weights for various samples of providers to ensure 
reasonability of the overall cost share weights. We also compare the 
results to other publicly available data sources for reasonableness of 
results. Our trimming methods rely on relative share outliers rather 
than dollar level outliers. Therefore, smaller dialysis facilities are 
subject to similar criteria as larger facilities to be included or 
excluded based on trimming methods. For example, we would exclude a 
provider in a 5 percent trim if the cost weight for

[[Page 66135]]

the wages and salaries was plus or minus 2 standard deviations from the 
mean cost weight of all providers for wages and salaries. If costs are 
significantly misreported we are unable to use the data, as submitted. 
It is the facility's responsibility to work with the MACs to ensure 
proper reporting.
    Comment: One commenter is concerned with CMS re-apportioning 
certain costs and increasing the labor-related share of the ESRD PPS 
base rate. The commenter notes that they have one of the lowest CBSA 
wage indexes in the continental United States and are therefore 
impacted adversely when the labor-related share increases. Their 
concern is based on CMS's reliance upon assumptions to re-apportion 
certain costs. The commenter believes these cost assumptions may not 
accurately reflect the percentage of the ESRD PPS base rate impacted by 
the wage rate. The commenter recommends that CMS determine how it may 
best collect specific data on the labor-related cost categories where 
CMS currently relies on assumptions.
    Response: We believe the assumptions that we have made in 
determining the labor-related share are reasonable and follow a similar 
methodology and assumptions used in other CMS PPS payment systems. The 
commenter's recommendation to review how we may gather detailed 
information on the ESRD PPS's labor-related cost categories is helpful 
in identifying future research opportunities. As part of CMS's ongoing 
efforts to update and refine the Medicare Cost Reports we can explore 
the opportunities for collecting more specific information. Beyond the 
Medicare Cost Reports, we can explore conducting new surveys that would 
help determine the costs that are influenced or vary with the local 
labor market, although these are subject to resource availability and 
approval through OMB's standard survey and auditing process (see 
``Standards and Guidelines for Statistical Surveys'' http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/statpolicy/standards_stat_surveys.pdf and ``Guidance on Agency Survey 
and Statistical Information Collections'' http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/pmc_survey_guidance_2006.pdf).
    Comment: Many commenters disagreed with the proposed price proxy 
for the drug cost category in the ESRDB market basket. They requested 
we reconsider the proposed proxy and use either a more appropriate 
index: The PPI Biological Products, Human Use (PPI-BPHU), or a 
composite proxy that would better reflect the costs of drugs and 
biologicals that are included in the ESRD bundle. Some commenters noted 
that ESAs account for over 80 percent of drug expenses and noted they 
are supplied by a sole source manufacturer that routinely imposes 
product price increases on facilities. Some commenters further point 
out that since ESAs are fully represented in, the PPI-BPHU, it is more 
relevant than the PPI Vitamin, Nutrient, & Hematinic Preparations (PPI-
VNHP). Some commenters agreed that the PPI-Pharmaceutical for Human 
Use, Prescription (PPI-RX) is likely not the most appropriate proxy 
since it does not track well with the acquisition costs for ESRD drugs, 
as documented by the OIG study. Another commenter notes that the drugs 
in the PPI-VHNP include non-prescription (over-the-counter) medicines.
    Response: Given concerns raised by commenters and further analysis 
into the appropriateness of the proposed price proxy, we agree with the 
commenters that the proposed PPI-VNHP suffers some shortcomings that 
can be mitigated if we were to use the PPI -BPHU. Most importantly, the 
PPI-BPHU measures the price change of drugs that are prescriptions, and 
ESAs would be captured within this index if they are included in the 
PPI sample (although, because the PPI relies on confidentiality with 
respect to the companies and drugs/biologicals included in the sample, 
we do not know if these drugs are indeed reflected in this price 
index). However, we believe the PPI-BPHU is an appropriate proxy to use 
because although ESAs may be a small part of the fuller category of 
biological products, we can examine whether the price increases for the 
ESA drugs are similar to the drugs included in the PPI-BPHU. We did 
this by comparing the historical price changes in the PPI-BPHU and the 
ASP for ESAs and found the cumulative growth to be consistent over 
several years. We will continue to monitor the trends in the prices for 
ESA drugs as measured by other price data sources to ensure that the 
PPI-BPHU is still an appropriate price proxy.
    On the other hand, since the non-ESA drugs used in the treatment of 
ESRD are mainly vitamins and nutrients, we believe that the PPI-VNHP is 
the best available proxy for these types of drugs. While this index 
does include over-the-counter drugs as well as prescription drugs, a 
comparison of trends in the prices for non-ESA drugs shows growth to 
the proposed PPI-VNHP.
    Therefore we think it is appropriate to use both the PPI-VNHP and 
the PPI-BPHU, and we will proxy the price change for drugs included in 
the ESRD bundle by a blended drug price proxy with 78 percent of the 
index measured by the PPI-BPHU and 22 percent of the index measured by 
the PPI-VNHP. The shares within the blend are based on the 2012 ESRD 
Part B spending for ESA and non-ESA drugs included in the bundle. ESA 
drugs are those considered as a form of epoeitin alpha while the non-
ESA drugs are the remaining drugs specified in the ESRD bundle.
    Comment: One commenter claims that the OIG criticism of the current 
index as the drug price proxy--the PPI Pharmaceuticals for Human Use, 
Prescription--was based on a retrospective analysis of drugs price 
trends during a narrow 3-year window at a significant time of 
transition in the ESRD marketplace. They claim that if the OIG looked 
at a broader window of time (for example, 2003-2012), it would likely 
show that the PPI for prescription drugs has more closely tracked to 
cost changes for most drugs within the ESRD PPS. They note the OIG 
raised concerns with the use of the PPI-RX prior to the implementation 
of the ESRD PPS and CMS did not concur with the recommendation at that 
time and they noted that the OIGs figures were not suitable for 
inferring future price trends. The commenter recommends that CMS 
continue to use the PPI-RX as the proxy.
    Response: At the time of the implementation of the ESRD market 
basket, we proposed and finalized the use of the PPI-RX since it is the 
proxy used in other CMS market baskets to proxy drug price growth and 
it would be representative of the average prescription drug price 
increase for the overall prescription drug market. However, analysis of 
the pricing trends of the drugs used in furnishing ESRD care (either 
the acquisition costs collected by OIG or by ASP data as collected by 
CMS) show relatively flat price growth over the 2008-2014 period (when 
taken on average) while the PPI RX has grown at a much faster rate. 
Additionally, there are a limited number of drugs included in the ESRD 
bundle and those drugs are mainly defined as biological products which 
are not captured in the PPI-RX. Therefore, as explained in the proposed 
rule, we do not believe that the PPI-RX should continue to be used in 
the ESRDB market basket.
    Comment: One commenter recommended that the pharmaceutical price 
proxy changes be suspended and CMS follow the OIG recommendation to 
determine how drug acquisition costs may be taken into consideration 
when updating the ESRD PPS base rate.

[[Page 66136]]

    Response: The direct use of drug acquisition costs in the ESRD 
market basket is not possible, as noted in our response to the OIG 
recommendation: ``We will consider these findings in our continual 
evaluation of the ESRD market basket, particularly during the next 
rebasing and revising of the index. As we have done for all of the 
market baskets developed by CMS, we will base the decision on which 
price proxy is used on four criteria: reliability, timeliness, 
availability, and relevance. We will be evaluating alternative data 
sources and methods to determine if we can improve the relevance of the 
ESRD drug price proxy while not sacrificing on the other three 
requirements. For instance, the data used in the OIG analysis is based 
on acquisition cost data, which is not data that is readily available 
in a public or timely manner. Additionally, the ESRD annual market 
basket updates are based on a projection and any price proxy ultimately 
will need to be forecasted. The more restrictive or specific a price 
series, the more difficult it can be to accurately forecast future 
price movements. Finally, the price proxy should also reflect price 
trends associated with an efficient market; therefore, to the extent 
market inefficiencies exist, there would be concerns with using direct 
cost or price data.'' \2\
---------------------------------------------------------------------------

    \2\ https://oig.hhs.gov/oei/reports/oei-03-12-00550.pdf, 
Appendix D.
---------------------------------------------------------------------------

    Comment: Several commenters relayed the concern that CMS is making 
changes to the market basket that exacerbate the payment problems 
particularly for rural and low volume facilities while not 
contemporaneously addressing other changes to the ESRD payment. Other 
commenters support the proposed revised labor-related share as it 
reflects the proportionate decline over the past three years in EPO 
utilization. They recognize the impact on nonprofit and small providers 
with wage adjustors less than 1.0, and therefore support a 2-year 
transition for labor changes and updated CBSAs.
    Response: We believe that the proposed 2012-based ESRDB market 
basket is a technical improvement to the 2008-based ESRDB market basket 
and therefore should be implemented in CY 2015. A transition policy, 
for the revised labor-related share, was proposed and finalized that 
will help to mitigate the impact to providers for any given year.
e. Final ESRDB Market Basket and Labor-Related Share
    In summary, we are finalizing the rebasing and revision of the 
ESRDB market basket effective for CY 2015. The cost share weights will 
be based on the 2012 cost shares detailed in the proposed rule (79 FR 
40217 through 40221) and presented in this final rule. We are also 
finalizing a labor-related share of 50.673 percent as detailed in the 
proposed rule (79 FR 40225 through 40226) and presented in this final 
rule.
    We are finalizing all price proxies, as proposed, with the 
exception of the price proxy for the pharmaceutical cost category. As 
detailed in our response to comments, we believe that the PPI-VNHP 
suffers some shortcomings that can be mitigated with the use of the 
PPI-BPHU, particularly for the ESA drugs. We will, however, continue to 
monitor the trends in the prices for ESA drugs as measured by other 
price data sources to ensure that the PPI-BPHU is still an appropriate 
price proxy given the unique market conditions related to the 
manufacturing and production of these types of drugs. On the other hand 
we will use the PPI-VNHP for the remaining drugs included in the ESRDB 
market basket. While this index does include over-the-counter drugs as 
well as prescription drugs, a comparison of trends in the prices for 
non-ESA drugs shows growth similar to the PPI-VNHP. Therefore, we are 
finalizing a blend of the PPI Biological Products, Human Use (PPI-BPHU) 
and the PPI Vitamin, Nutrient, & Hematinic Preparations (PPI-VNHP). The 
weights within the blend are based on 2012 estimated ESRD Part B 
spending for the drugs used in the bundle, which results in a split of 
78 percent for ESAs (proxied by the PPI-BPHU) and 22 percent for non-
ESAs (proxied by the PPI-VNHP).
    Section 1881(b)(14)(F)(i)(III) of the Act, as added by section 
217(b)(2) of PAMA requires a 0.0 percent market basket less 
productivity update for CY 2015. We are therefore finalizing 0.0 
percent as the ESRDB market basket update less productivity adjustment 
for CY 2015. In the absence of PAMA, the CY2015 ESRDB market basket 
update less productivity would be 1.6 percent (2.1 percent market 
basket update less 0.5 percent MFP adjustment), based on the IHS Global 
Insight, Inc. (IGI) third quarter 2014 forecast with historical data 
through the second quarter of 2014. Table 5 compares the update of the 
proposed market basket to the final market basket; the only difference 
between the two arises from the change to the pharmaceutical price 
proxy.

  Table 5--Final CY 2012-Based ESRDB and Proposed CY 2012-Based ESRDB Market Basket, Percent Changes: 2011-2015
----------------------------------------------------------------------------------------------------------------
                                                       Final CY 2012- based ESRDB    Final CY 2012- based ESRDB
                 Calendar Year (CY)                           market basket                 market basket
----------------------------------------------------------------------------------------------------------------
Historical data:
    2011............................................                           1.2                           1.7
    2012............................................                           1.4                           1.5
    2013............................................                           1.1                           1.4
    Average CY 2011-2013............................                           1.2                           1.5
Forecast:
    2014............................................                           1.4                           1.6
    2015............................................                           2.0                           2.1
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc. 3rd quarter 2014 forecast with historical data through 2nd quarter 2014.

3. The CY 2015 ESRD PPS Wage Indices
a. Background
    Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD 
PPS may include a geographic wage index payment adjustment, such as the 
index referred to in section 1881(b)(12)(D) of the Act. In the CY 2011 
ESRD PPS final rule (75 FR 49117), we finalized for the ESRD PPS the 
use of the Office of Management and Budget's (OMB) Core-Based 
Statistical Areas (CBSAs)-based geographic area designations described 
in OMB bulletin 03-04, issued June 6,

[[Page 66137]]

2003 as the basis for revising the urban and rural areas and their 
corresponding wage index values. This bulletin, as well as subsequent 
bulletins, is available online at http://www.whitehouse.gov/omb/bulletins_index2003-2005.
    We also finalized that we would use the urban and rural definitions 
used for the Medicare IPPS but without regard to geographic 
reclassification authorized under sections 1886(d)(8) and (d)(10) of 
the Act. In the CY 2012 ESRD PPS final rule (76 FR 70239), we finalized 
that, under the ESRD PPS, we will continue to utilize the ESRD PPS wage 
index methodology, first established under the basic case-mix adjusted 
composite rate payment system, for updating the wage index values using 
the OMB's CBSA-based geographic area designations to define urban and 
rural areas.
b. Implementation of New Labor Market Delineations
    OMB publishes bulletins regarding CBSA changes, including changes 
to CBSA numbers and titles. In accordance with our established 
methodology, we have historically adopted via rulemaking CBSA changes 
that are published in the latest OMB bulletin. On February 28, 2013, 
OMB issued OMB Bulletin No. 13-01, which established revised 
delineations for Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas, and provided 
guidance on the use of the delineations of these statistical areas. A 
copy of this bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-;01.pdf. According to OMB, 
``[t]his bulletin provides the delineations of all Metropolitan 
Statistical Areas, Metropolitan Divisions, Micropolitan Statistical 
Areas, Combined Statistical Areas, and New England City and Town Areas 
in the United States and Puerto Rico based on the standards published 
on June 28, 2010, in the Federal Register (75 FR 37246 through 37252) 
and Census Bureau data.'' In this CY 2015 ESRD PPS final rule, when 
referencing the new OMB geographic boundaries of statistical areas, we 
are using the term ``delineations'' rather than the term 
``definitions'' that we have used in the past, consistent with OMB's 
use of the terms (75 FR 37249). Because the bulletin was not issued 
until February 28, 2013, with supporting data not available until 
later, and because the changes made by the bulletin and their 
ramifications needed to be extensively reviewed and verified, we were 
unable to undertake such a lengthy process before publication of the FY 
2014 IPPS/LTCH PPS proposed rule and, thus, did not implement changes 
to the hospital wage index for FY 2014 based on these new CBSA 
delineations. Likewise, for the same reasons, the CY 2014 ESRD PPS wage 
index (based upon the pre-floor, pre-reclassified hospital wage data, 
which is unadjusted for occupational mix) also did not reflect the new 
CBSA delineations. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963), we finalized the implementation of the new CBSA 
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, beginning with the FY 2015 IPPS wage index. Similarly, in this CY 
2015 ESRD PPS final rule, we are finalizing the new CBSA delineations 
as described in the February 28, 2013 OMB Bulletin No. 13-01, beginning 
with the CY 2015 ESRD PPS wage index. We believe that the most current 
CBSA delineations accurately reflect the local economies and wage 
levels of the areas where facilities are located, and we believe that 
it is important for the ESRD PPS to use the latest CBSA delineations 
available in order to maintain an up-to-date payment system that 
accurately reflects the reality of populations shifts and labor market 
conditions. We have reviewed our findings and impacts relating to the 
new CBSA delineations using the most recent data available at the time 
of this final rule, and have concluded that there is no compelling 
reason to further delay the implementation of the CBSA delineations as 
set forth in OMB Bulletin 13-01.
    In order to implement these changes for the ESRD PPS, it is 
necessary to identify the new labor market area delineation for each 
county and facility in the country. For example, there would be new 
CBSAs, urban counties that would become rural, rural counties that 
would become urban, and existing CBSAs that would be split apart. 
Because the wage index of urban areas is typically higher than that of 
rural areas, ESRD facilities currently located in rural counties that 
will become urban, beginning January 1, 2015, will generally experience 
an increase in their wage index values. We identified approximately 100 
counties and 110 facilities that will move from rural to urban status 
when we adopt the new CBSA delineations beginning in CY 2015. Table 6: 
(CY 2015 Rural to Urban CBSA Crosswalk) shows the CBSA delineations for 
CY 2014 and the rural wage index values for CY 2015 based on those 
delineations, compared to the final CBSA delineations for CY 2015 and 
the urban wage index values for CY 2015 based on the new delineations, 
and the percentage change in these values for those counties that will 
change from rural to urban when we adopt the new CBSA delineations. 
Approximately 100 facilities will experience an increase in their wage 
index values.

                                                     Table 6--CY 2015 Rural to Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           ESRD PPS CY 2014 CBSA delineations       Final ESRD PPS CY 2015 CBSA delineations
                                                      ---------------------------------------------------------------------------------------  Change in
            County name                    State                                           Wage                                       Wage       value
                                                         CBSA          Urban/Rural         Index     CBSA         Urban/Rural         Index    (percent)
                                                                                           Value                                      Value
--------------------------------------------------------------------------------------------------------------------------------------------------------
BALDWIN............................  AL                      01  RURAL.................    0.6963     19300  URBAN................    0.7248       4.09%
PICKENS............................  AL                      01  RURAL.................    0.6963     46220  URBAN................    0.8337       19.73
COCHISE............................  AZ                      03  RURAL.................    0.9125     43420  URBAN................    0.8937       -2.06
LITTLE RIVER.......................  AR                      04  RURAL.................    0.7311     45500  URBAN................    0.7362        0.70
WINDHAM............................  CT                      07  RURAL.................    1.1251     49340  URBAN................    1.1493        2.15
SUSSEX.............................  DE                      08  RURAL.................    1.0261     41540  URBAN................    0.9289       -9.47
CITRUS.............................  FL                      10  RURAL.................    0.8006     26140  URBAN................    0.7625       -4.76
GULF...............................  FL                      10  RURAL.................    0.8006     37460  URBAN................    0.7906       -1.25
HIGHLANDS..........................  FL                      10  RURAL.................    0.8006     42700  URBAN................    0.7982       -0.30
SUMTER.............................  FL                      10  RURAL.................    0.8006     45540  URBAN................    0.8095        1.11
WALTON.............................  FL                      10  RURAL.................    0.8006     18880  URBAN................    0.8156        1.87
LINCOLN............................  GA                      11  RURAL.................    0.7425     12260  URBAN................    0.9225       24.24

[[Page 66138]]

 
MORGAN.............................  GA                      11  RURAL.................    0.7425     12060  URBAN................    0.9369       26.18
PEACH..............................  GA                      11  RURAL.................    0.7425     47580  URBAN................    0.7542        1.58
PULASKI............................  GA                      11  RURAL.................    0.7425     47580  URBAN................    0.7542        1.58
KALAWAO............................  HI                      12  RURAL.................    1.0741     27980  URBAN................    1.0561       -1.68
MAUI...............................  HI                      12  RURAL.................    1.0741     27980  URBAN................    1.0561       -1.68
BUTTE..............................  ID                      13  RURAL.................    0.7398     26820  URBAN................    0.8933       20.75
DE WITT............................  IL                      14  RURAL.................    0.8362     14010  URBAN................    0.9165        9.60
JACKSON............................  IL                      14  RURAL.................    0.8362     16060  URBAN................    0.8324       -0.45
WILLIAMSON.........................  IL                      14  RURAL.................    0.8362     16060  URBAN................    0.8324       -0.45
SCOTT..............................  IN                      15  RURAL.................    0.8416     31140  URBAN................    0.8605        2.25
UNION..............................  IN                      15  RURAL.................    0.8416     17140  URBAN................    0.9473       12.56
PLYMOUTH...........................  IA                      16  RURAL.................    0.8451     43580  URBAN................    0.8915        5.49
KINGMAN............................  KS                      17  RURAL.................    0.7806     48620  URBAN................    0.8472        8.53
ALLEN..............................  KY                      18  RURAL.................    0.7744     14540  URBAN................    0.8410        8.60
BUTLER.............................  KY                      18  RURAL.................    0.7744     14540  URBAN................    0.8410        8.60
ACADIA.............................  LA                      19  RURAL.................    0.7580     29180  URBAN................    0.7869        3.81
IBERIA.............................  LA                      19  RURAL.................    0.7580     29180  URBAN................    0.7869        3.81
ST. JAMES..........................  LA                      19  RURAL.................    0.7580     35380  URBAN................    0.8821       16.37
TANGIPAHOA.........................  LA                      19  RURAL.................    0.7580     25220  URBAN................    0.9452       24.70
VERMILION..........................  LA                      19  RURAL.................    0.7580     29180  URBAN................    0.7869        3.81
WEBSTER............................  LA                      19  RURAL.................    0.7580     43340  URBAN................    0.8325        9.83
ST. MARYS..........................  MD                      21  RURAL.................    0.8554     15680  URBAN................    0.8593        0.46
WORCESTER..........................  MD                      21  RURAL.................    0.8554     41540  URBAN................    0.9289        8.59
MIDLAND............................  MI                      23  RURAL.................    0.8207     33220  URBAN................    0.7935       -3.31
MONTCALM...........................  MI                      23  RURAL.................    0.8207     24340  URBAN................    0.8799        7.21
FILLMORE...........................  MN                      24  RURAL.................    0.9124     40340  URBAN................    1.1398       24.92
LE SUEUR...........................  MN                      24  RURAL.................    0.9124     33460  URBAN................    1.1196       22.71
MILLE LACS.........................  MN                      24  RURAL.................    0.9124     33460  URBAN................    1.1196       22.71
SIBLEY.............................  MN                      24  RURAL.................    0.9124     33460  URBAN................    1.1196       22.71
BENTON.............................  MS                      25  RURAL.................    0.7589     32820  URBAN................    0.8991       18.47
YAZOO..............................  MS                      25  RURAL.................    0.7589     27140  URBAN................    0.7891        3.98
GOLDEN VALLEY......................  MT                      27  RURAL.................    0.9024     13740  URBAN................    0.8686       -3.75
HALL...............................  NE                      28  RURAL.................    0.8924     24260  URBAN................    0.9219        3.31
HAMILTON...........................  NE                      28  RURAL.................    0.8924     24260  URBAN................    0.9219        3.31
HOWARD.............................  NE                      28  RURAL.................    0.8924     24260  URBAN................    0.9219        3.31
MERRICK............................  NE                      28  RURAL.................    0.8924     24260  URBAN................    0.9219        3.31
JEFFERSON..........................  NY                      33  RURAL.................    0.8208     48060  URBAN................    0.8386        2.17
YATES..............................  NY                      33  RURAL.................    0.8208     40380  URBAN................    0.8750        6.60
CRAVEN.............................  NC                      34  RURAL.................    0.7995     35100  URBAN................    0.8994       12.50
DAVIDSON...........................  NC                      34  RURAL.................    0.7995     49180  URBAN................    0.8679        8.56
GATES..............................  NC                      34  RURAL.................    0.7995     47260  URBAN................    0.9223       15.36
IREDELL............................  NC                      34  RURAL.................    0.7995     16740  URBAN................    0.9073       13.48
JONES..............................  NC                      34  RURAL.................    0.7995     35100  URBAN................    0.8994       12.50
LINCOLN............................  NC                      34  RURAL.................    0.7995     16740  URBAN................    0.9073       13.48
PAMLICO............................  NC                      34  RURAL.................    0.7995     35100  URBAN................    0.8994       12.50
ROWAN..............................  NC                      34  RURAL.................    0.7995     16740  URBAN................    0.9073       13.48
OLIVER.............................  ND                      35  RURAL.................    0.7099     13900  URBAN................    0.7216        1.65
SIOUX..............................  ND                      35  RURAL.................    0.7099     13900  URBAN................    0.7216        1.65
HOCKING............................  OH                      36  RURAL.................    0.8329     18140  URBAN................    0.9539       14.53
PERRY..............................  OH                      36  RURAL.................    0.8329     18140  URBAN................    0.9539       14.53
COTTON.............................  OK                      37  RURAL.................    0.7799     30020  URBAN................    0.7918        1.53
JOSEPHINE..........................  OR                      38  RURAL.................    1.0083     24420  URBAN................    1.0086        0.03
LINN...............................  OR                      38  RURAL.................    1.0083     10540  URBAN................    1.0879        7.89
ADAMS..............................  PA                      39  RURAL.................    0.8719     23900  URBAN................    1.0104       15.88
COLUMBIA...........................  PA                      39  RURAL.................    0.8719     14100  URBAN................    0.9347        7.20
FRANKLIN...........................  PA                      39  RURAL.................    0.8719     16540  URBAN................    1.0957       25.67
MONROE.............................  PA                      39  RURAL.................    0.8719     20700  URBAN................    0.9372        7.49
MONTOUR............................  PA                      39  RURAL.................    0.8719     14100  URBAN................    0.9347        7.20
UTUADO.............................  PR                      40  RURAL.................    0.4000     10380  URBAN................    0.4000        0.00
BEAUFORT...........................  SC                      42  RURAL.................    0.8374     25940  URBAN................    0.8708        3.99
CHESTER............................  SC                      42  RURAL.................    0.8374     16740  URBAN................    0.9073        8.35
JASPER.............................  SC                      42  RURAL.................    0.8374     25940  URBAN................    0.8708        3.99
LANCASTER..........................  SC                      42  RURAL.................    0.8374     16740  URBAN................    0.9073        8.35
UNION..............................  SC                      42  RURAL.................    0.8374     43900  URBAN................    0.8277       -1.16
CUSTER.............................  SD                      43  RURAL.................    0.8312     39660  URBAN................    0.8989        8.14
CAMPBELL...........................  TN                      44  RURAL.................    0.7365     28940  URBAN................    0.7015       -4.75
CROCKETT...........................  TN                      44  RURAL.................    0.7365     27180  URBAN................    0.7747        5.19
MAURY..............................  TN                      44  RURAL.................    0.7365     34980  URBAN................    0.8969       21.78

[[Page 66139]]

 
MORGAN.............................  TN                      44  RURAL.................    0.7365     28940  URBAN................    0.7015       -4.75
ROANE..............................  TN                      44  RURAL.................    0.7365     28940  URBAN................    0.7015       -4.75
FALLS..............................  TX                      45  RURAL.................    0.7855     47380  URBAN................    0.8137        3.59
HOOD...............................  TX                      45  RURAL.................    0.7855     23104  URBAN................    0.9386       19.49
HUDSPETH...........................  TX                      45  RURAL.................    0.7855     21340  URBAN................    0.8139        3.62
LYNN...............................  TX                      45  RURAL.................    0.7855     31180  URBAN................    0.8830       12.41
MARTIN.............................  TX                      45  RURAL.................    0.7855     33260  URBAN................    0.8940       13.81
NEWTON.............................  TX                      45  RURAL.................    0.7855     13140  URBAN................    0.8508        8.31
OLDHAM.............................  TX                      45  RURAL.................    0.7855     11100  URBAN................    0.8277        5.37
SOMERVELL..........................  TX                      45  RURAL.................    0.7855     23104  URBAN................    0.9386       19.49
BOX ELDER..........................  UT                      46  RURAL.................    0.8891     36260  URBAN................    0.9225        3.76
AUGUSTA............................  VA                      49  RURAL.................    0.7674     44420  URBAN................    0.8326        8.50
BUCKINGHAM.........................  VA                      49  RURAL.................    0.7674     16820  URBAN................    0.9053       17.97
CULPEPER...........................  VA                      49  RURAL.................    0.7674     47894  URBAN................    1.0403       35.56
FLOYD..............................  VA                      49  RURAL.................    0.7674     13980  URBAN................    0.8473       10.41
RAPPAHANNOCK.......................  VA                      49  RURAL.................    0.7674     47894  URBAN................    1.0403       35.56
STAUNTON CITY......................  VA                      49  RURAL.................    0.7674     44420  URBAN................    0.8326        8.50
WAYNESBORO CITY....................  VA                      49  RURAL.................    0.7674     44420  URBAN................    0.8326        8.50
COLUMBIA...........................  WA                      50  RURAL.................    1.0892     47460  URBAN................    1.0934        0.39
PEND OREILLE.......................  WA                      50  RURAL.................    1.0892     44060  URBAN................    1.1425        4.89
STEVENS............................  WA                      50  RURAL.................    1.0892     44060  URBAN................    1.1425        4.89
WALLA WALLA........................  WA                      50  RURAL.................    1.0892     47460  URBAN................    1.0934        0.39
FAYETTE............................  WV                      51  RURAL.................    0.7410     13220  URBAN................    0.8024        8.29
RALEIGH............................  WV                      51  RURAL.................    0.7410     13220  URBAN................    0.8024        8.29
GREEN..............................  WI                      52  RURAL.................    0.9041     31540  URBAN................    1.1130       23.11
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The wage index values of rural areas are typically lower than that 
of urban areas. Therefore, ESRD facilities located in a county that is 
currently designated as urban under the ESRD PPS wage index that will 
become rural when we adopt the new CBSA delineations may experience a 
decrease in their wage index values. We identified approximately 35 
counties and 30 ESRD facilities that will move from urban to rural 
status when we adopt the new CBSA delineations beginning in CY 2015. 
Table 7: (CY 2015 Urban to Rural CBSA Crosswalk) shows the CBSA 
delineations for CY 2014 and the urban wage index values for CY 2015 
based on those delineations, compared with the CBSA delineations and 
wage index values for CY 2015 based on those delineations, and the 
percentage change in these values for those counties that would change 
from urban to rural, beginning in CY 2015, when we adopt the new CBSA 
delineations. We expect that when we adopt the new CBSA delineations 
illustrated in Table 7 below, approximately 30 facilities will 
experience a decrease in their wage index values.

                                                     Table 7--CY 2015 Urban to Rural CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          ESRD PPS CY 2014 CBSA delineations       Final ESRD PPS CY 2015 CBSA delineations
                                                     ----------------------------------------------------------------------------------------  Change in
             County name                   State                                          Wage                                        Wage       value
                                                        CBSA          Urban/Rural         Index     CBSA          Urban/Rural         Index    (percent)
                                                                                          Value                                       Value
--------------------------------------------------------------------------------------------------------------------------------------------------------
FRANKLIN............................  AR                 22900  URBAN.................    0.7593        04  RURAL.................    0.7311       -3.71
POWER...............................  ID                 38540  URBAN.................    0.9672        13  RURAL.................    0.7398      -23.51
FRANKLIN............................  IN                 17140  URBAN.................    0.9473        15  RURAL.................    0.8416      -11.16
GIBSON..............................  IN                 21780  URBAN.................    0.8537        15  RURAL.................    0.8416       -1.42
GREENE..............................  IN                 14020  URBAN.................    0.9062        15  RURAL.................    0.8416       -7.13
TIPTON..............................  IN                 29020  URBAN.................    0.8990        15  RURAL.................    0.8416       -6.38
FRANKLIN............................  KS                 28140  URBAN.................    0.9419        17  RURAL.................    0.7779      -17.41
GEARY...............................  KS                 31740  URBAN.................    0.8406        17  RURAL.................    0.7779       -7.46
NELSON..............................  KY                 31140  URBAN.................    0.8593        18  RURAL.................    0.7748       -9.83
WEBSTER.............................  KY                 21780  URBAN.................    0.8537        18  RURAL.................    0.7748       -9.24
FRANKLIN............................  MA                 44140  URBAN.................    1.0271        22  RURAL.................    1.1553       12.48
IONIA...............................  MI                 24340  URBAN.................    0.8965        23  RURAL.................    0.8288       -7.55
NEWAYGO.............................  MI                 24340  URBAN.................    0.8965        23  RURAL.................    0.8288       -7.55
GEORGE..............................  MS                 37700  URBAN.................    0.7396        25  RURAL.................    0.7570        2.35
STONE...............................  MS                 25060  URBAN.................    0.8179        25  RURAL.................    0.7570       -7.45
CRAWFORD............................  MO                 41180  URBAN.................    0.9366        26  RURAL.................    0.7725      -17.52
HOWARD..............................  MO                 17860  URBAN.................    0.8319        26  RURAL.................    0.7725       -7.14
WASHINGTON..........................  MO                 41180  URBAN.................    0.9366        26  RURAL.................    0.7725      -17.52
ANSON...............................  NC                 16740  URBAN.................    0.9230        34  RURAL.................    0.7899      -14.42

[[Page 66140]]

 
GREENE..............................  NC                 24780  URBAN.................    0.9371        34  RURAL.................    0.7899      -15.71
ERIE................................  OH                 41780  URBAN.................    0.7784        36  RURAL.................    0.8348        7.25
OTTAWA..............................  OH                 45780  URBAN.................    0.9129        36  RURAL.................    0.8348       -8.56
PREBLE..............................  OH                 19380  URBAN.................    0.8938        36  RURAL.................    0.8348       -6.60
WASHINGTON..........................  OH                 37620  URBAN.................    0.8186        36  RURAL.................    0.8348        1.98
STEWART.............................  TN                 17300  URBAN.................    0.7526        44  RURAL.................    0.7277       -3.31
CALHOUN.............................  TX                 47020  URBAN.................    0.8473        45  RURAL.................    0.7847       -7.39
DELTA...............................  TX                 19124  URBAN.................    0.9703        45  RURAL.................    0.7847      -19.13
SAN JACINTO.........................  TX                 26420  URBAN.................    0.9734        45  RURAL.................    0.7847      -19.39
SUMMIT..............................  UT                 41620  URBAN.................    0.9512        46  RURAL.................    0.9005       -5.33
CUMBERLAND..........................  VA                 40060  URBAN.................    0.9625        49  RURAL.................    0.7554      -21.52
DANVILLE CITY.......................  VA                 19260  URBAN.................    0.7963        49  RURAL.................    0.7554       -5.14
KING AND QUEEN......................  VA                 40060  URBAN.................    0.9625        49  RURAL.................    0.7554      -21.52
LOUISA..............................  VA                 40060  URBAN.................    0.9625        49  RURAL.................    0.7554      -21.52
PITTSYLVANIA........................  VA                 19260  URBAN.................    0.7963        49  RURAL.................    0.7554       -5.14
SURRY...............................  VA                 47260  URBAN.................    0.9223        49  RURAL.................    0.7554      -18.10
MORGAN..............................  WV                 25180  URBAN.................    0.9080        51  RURAL.................    0.7274      -19.89
PLEASANTS...........................  WV                 37620  URBAN.................    0.8186        51  RURAL.................    0.7274      -11.14
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We note that facilities in some urban CBSAs will experience a 
change in their wage index values even though they remain urban because 
an urban CBSA's boundaries and/or the counties included in that CBSA 
could change. Table 8 (CY 2015 Urban to a Different Urban CBSA 
Crosswalk) shows those counties that experienced a change in their wage 
index value when the CBSA delineations for CY 2014 and urban wage index 
values for CY 2015 based on those delineations, compared with the CBSA 
delineations and urban wage index values for CY 2015 based on those 
delineations, and the percentage change in these values for counties 
that will remain urban even though the CBSA boundaries and/or counties 
included in that CBSA will change.

                                               Table 8--CY 2015 Urban to a Different Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          ESRD PPS CY 2014 CBSA delineations       Final ESRD PPS CY 2015 CBSA delineations
                                                     ----------------------------------------------------------------------------------------  Change in
             County name                   State                                          Wage                                        Wage       value
                                                        CBSA          Urban/Rural         Index     CBSA          Urban/Rural         Index    (percent)
                                                                                          Value                                       Value
--------------------------------------------------------------------------------------------------------------------------------------------------------
FLAGLER.............................  FL                 37380  URBAN.................    0.8462     19660  URBAN.................    0.8376       -1.02
DE KALB.............................  IL                 16974  URBAN.................    1.0412     20994  URBAN.................    1.0299       -1.09
KANE................................  IL                 16974  URBAN.................    1.0412     20994  URBAN.................    1.0299       -1.09
MADISON.............................  IN                 11300  URBAN.................    1.0078     26900  URBAN.................    1.0133        0.55
MEADE...............................  KY                 31140  URBAN.................    0.8593     21060  URBAN.................    0.7701      -10.38
ESSEX...............................  MA                 37764  URBAN.................    1.0769     15764  URBAN.................    1.1159        3.62
OTTAWA..............................  MI                 26100  URBAN.................    0.8136     24340  URBAN.................    0.8799        8.15
JACKSON.............................  MS                 37700  URBAN.................    0.7396     25060  URBAN.................    0.7896        6.76
BERGEN..............................  NJ                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
HUDSON..............................  NJ                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
MIDDLESEX...........................  NJ                 20764  URBAN.................    1.0989     35614  URBAN.................    1.2837       16.82
MONMOUTH............................  NJ                 20764  URBAN.................    1.0989     35614  URBAN.................    1.2837       16.82
OCEAN...............................  NJ                 20764  URBAN.................    1.0989     35614  URBAN.................    1.2837       16.82
PASSAIC.............................  NJ                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
SOMERSET............................  NJ                 20764  URBAN.................    1.0989     35084  URBAN.................    1.1233        2.22
BRONX...............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
DUTCHESS............................  NY                 39100  URBAN.................    1.1533     20524  URBAN.................    1.1345       -1.63
KINGS...............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
NEW YORK............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
ORANGE..............................  NY                 39100  URBAN.................    1.1533     35614  URBAN.................    1.2837       11.31
PUTNAM..............................  NY                 35644  URBAN.................    1.3110     20524  URBAN.................    1.1345      -13.46
QUEENS..............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
RICHMOND............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
ROCKLAND............................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
WESTCHESTER.........................  NY                 35644  URBAN.................    1.3110     35614  URBAN.................    1.2837       -2.08
BRUNSWICK...........................  NC                 48900  URBAN.................    0.8867     34820  URBAN.................    0.8620       -2.79
BUCKS...............................  PA                 37964  URBAN.................    1.0837     33874  URBAN.................    1.0157       -6.27
CHESTER.............................  PA                 37964  URBAN.................    1.0837     33874  URBAN.................    1.0157       -6.27
MONTGOMERY..........................  PA                 37964  URBAN.................    1.0837     33874  URBAN.................    1.0157       -6.27

[[Page 66141]]

 
ARECIBO.............................  PR                 41980  URBAN.................    0.4449     11640  URBAN.................    0.4213       -5.30
CAMUY...............................  PR                 41980  URBAN.................    0.4449     11640  URBAN.................    0.4213       -5.30
CEIBA...............................  PR                 21940  URBAN.................    0.4000     41980  URBAN.................    0.4438       10.95
FAJARDO.............................  PR                 21940  URBAN.................    0.4000     41980  URBAN.................    0.4438       10.95
GUANICA.............................  PR                 49500  URBAN.................    0.4000     38660  URBAN.................    0.4154        3.85
GUAYANILLA..........................  PR                 49500  URBAN.................    0.4000     38660  URBAN.................    0.4154        3.85
HATILLO.............................  PR                 41980  URBAN.................    0.4449     11640  URBAN.................    0.4213       -5.30
LUQUILLO............................  PR                 21940  URBAN.................    0.4000     41980  URBAN.................    0.4438       10.95
PENUELAS............................  PR                 49500  URBAN.................    0.4000     38660  URBAN.................    0.4154        3.85
QUEBRADILLAS........................  PR                 41980  URBAN.................    0.4449     11640  URBAN.................    0.4213       -5.30
YAUCO...............................  PR                 49500  URBAN.................    0.4000     38660  URBAN.................    0.4154        3.85
ANDERSON............................  SC                 11340  URBAN.................    0.8744     24860  URBAN.................    0.9161        4.77
GRAINGER............................  TN                 34100  URBAN.................    0.6983     28940  URBAN.................    0.7015        0.46
LINCOLN.............................  WV                 16620  URBAN.................    0.7988     26580  URBAN.................    0.8846       10.74
PUTNAM..............................  WV                 16620  URBAN.................    0.7988     26580  URBAN.................    0.8846       10.74
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Likewise, ESRD facilities currently located in a rural area may 
remain rural under the new CBSA delineations but experience a change in 
their rural wage index value due to implementation of the new CBSA 
delineations. Table 9 (CY 2015 Changes to the Statewide Rural Wage 
Index Crosswalk) shows the CBSA delineations for CY 2014 and the rural 
statewide wage index values for CY 2015, compared with the rural 
statewide wage index values for CY 2015, and the percentage change in 
these values.

                                          Table 9--CY 2015 Changes to the Statewide Rural Wage Index CrosswaLK
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  ESRD PPS CY 2014 CBSA delineations             Final ESRD PPS CY 2015 CBSA delineations
                                          ---------------------------------------------------------------------------------------------------- Change in
                  State                                                              Wage                                              Wage      value
                                             CBSA             Urban/Rural            index     CBSA             Urban/Rural            index   (percent)
                                                                                     value                                             value
--------------------------------------------------------------------------------------------------------------------------------------------------------
AL.......................................        39  RURAL.......................    0.8719        39  RURAL.......................    0.8083       -7.3
AZ.......................................        19  RURAL.......................    0.7580        19  RURAL.......................    0.7108       -6.2
CT.......................................        51  RURAL.......................    0.7410        51  RURAL.......................    0.7274       -1.8
FL.......................................        49  RURAL.......................    0.7674        10  RURAL.......................    0.8371        9.1
GA.......................................        38  RURAL.......................    1.0083        38  RURAL.......................    0.9949       -1.3
HI.......................................        34  RURAL.......................    0.7995        34  RURAL.......................    0.7899       -1.2
IL.......................................        44  RURAL.......................    0.7365        44  RURAL.......................    0.7277       -1.2
KS.......................................        01  RURAL.......................    0.6963        01  RURAL.......................    0.6914       -0.7
KY.......................................        28  RURAL.......................    0.8924        28  RURAL.......................    0.8877       -0.5
LA.......................................        17  RURAL.......................    0.7806        17  RURAL.......................    0.7779       -0.3
MD.......................................        25  RURAL.......................    0.7589        25  RURAL.......................    0.7570       -0.3
MI.......................................        33  RURAL.......................    0.8208        33  RURAL.......................    0.8192       -0.2
MS.......................................        50  RURAL.......................    1.0892        50  RURAL.......................    1.0877       -0.1
NC.......................................        45  RURAL.......................    0.7855        45  RURAL.......................    0.7847       -0.1
NE.......................................        18  RURAL.......................    0.7744        18  RURAL.......................    0.7748        0.1
NY.......................................        14  RURAL.......................    0.8362        14  RURAL.......................    0.8369        0.1
OH.......................................        11  RURAL.......................    0.7425        11  RURAL.......................    0.7439        0.2
OR.......................................        36  RURAL.......................    0.8329        36  RURAL.......................    0.8348        0.2
PA.......................................        07  RURAL.......................    1.1251        07  RURAL.......................    1.1295        0.4
TN.......................................        52  RURAL.......................    0.9041        52  RURAL.......................    0.9087        0.5
TX.......................................        23  RURAL.......................    0.8207        23  RURAL.......................    0.8288        1.0
UT.......................................        03  RURAL.......................    0.9125        03  RURAL.......................    0.9219        1.0
VA.......................................        12  RURAL.......................    1.0741        12  RURAL.......................    1.0872        1.2
WA.......................................        46  RURAL.......................    0.8891        46  RURAL.......................    0.9005        1.3
WI.......................................        21  RURAL.......................    0.8554        21  RURAL.......................    0.8746        2.2
WV.......................................        10  RURAL.......................    0.8006        10  RURAL.......................    0.8371        4.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    While we believe that the new CBSA delineations will result in wage 
index values that are more representative of the actual costs of labor 
in a given area, we also recognize that use of the new CBSA 
delineations will result in reduced payments to some facilities. In 
particular, approximately 30 facilities would experience reduced 
payments when we adopt the new CBSA delineations. At the same time, use 
of the new CBSA delineations will result in increased payments for 
approximately 100 facilities, while the majority of facilities would 
experience

[[Page 66142]]

no change in payments due to the implementation of the new CBSA 
delineations. We are finalizing the implementation the new CBSA 
delineations, as proposed, using a 2-year transition with a 50/50 
blended wage index value for all facilities in CY 2015 and 100 percent 
of the wage index based on the new CBSA delineations in CY 2016.
    Comment: Commenters largely agreed with the implementation of the 
new CBSAs and thanked CMS for offsetting any negative impacts with a 2-
year transition. A few commenters expressed concerns for low wage areas 
and for areas where hospital wage data is not available, and where 
proxies are used to establish an areas wage index. Another commenter 
requested reclassification to address the Wheeling WV-OH wage index, as 
well as, other areas with very low wage indices. The commenter also 
suggested that we apply the rural floor policy that applies in the IPPS 
under which an urban area with a wage index below the statewide rural 
average would be paid the statewide rural average wage index value.
    Response: We thank the commenters for their support and are 
finalizing the CY 2015 ESRD PPS wage indexes as proposed. We agree that 
some areas of the country will continue to have low wage values, 
despite the annual updated hospital wage data and the finalized new 
CBSA delineations. However, the purpose of updating the ESRD PPS wage 
indexes as part of our annual update is based upon the premise that our 
wage index value should reflect the costs of furnishing renal dialysis 
services in the area where those services are provided
    In addition, the ESRD PPS uses ``pre-floor'' and ``pre re-
classified'' hospital wage data in computing the wage indexes used in 
the ESRD PPS. That is, the ESRD PPS uses IPPS wage data that has not 
been adjusted based on hospital reclassifications or application of the 
IPPS rural floor policy. Because we do not collect ESRD facility wage 
data, we rely upon IPPS hospital wage data as the best wage proxy for 
ESRD facilities. We believe the IPPS hospital wage data most closely 
reflects the costs of furnishing renal dialysis services in an area and 
it is the most accurate and up-to-date wage data. We understand that 
many rural areas generally have lower wage values than urban areas, and 
that in some cases rural facilities may have to compete with urban 
areas for staffing. In addition, a few areas do not have a hospital 
upon which to base a wage index and we apply a proxy wage index value 
as described in the CY 2014 ESRD PPS final rule (78 FR 72172). For 
these reasons, we plan to evaluate the effect of the IPPS rural floor 
policy, the wage index floor, and other wage index-related policies 
under the ESRD PPS.
c. Transition Period
    We considered having no transition period and fully implementing 
the new CBSA delineations beginning in CY 2015, which would mean that 
all facilities would have payments based on the new delineations 
starting on January 1, 2015. However, because more facilities would 
have increased rather than decreased payments beginning in CY 2015, and 
because the overall amount of ESRD payments would increase slightly due 
to the new CBSA delineations, the wage index budget-neutrality factor 
would be higher. This higher factor would reduce the ESRD PPS per 
treatment base rate for all facilities paid under the ESRD PPS, despite 
the fact that the majority of ESRD facilities are unaffected by the new 
CBSA delineations. We believe that it would be appropriate to provide 
for a transition period to mitigate any resulting short-term 
instability of a lower ESRD PPS base rate as well as any negative 
impacts to facilities that experience reduced payments.
    Comment: Generally, commenters were supportive of our proposed 
transition to implement the new CBSA delineations and our CY 2015 wage 
indices. Many commenters agreed that the transition approach allowed 
all facilities the ability to adjust to their new status, without 
lowering the overall base rate for all providers. A few commenters 
noted that a longer transition period would be helpful for rural 
providers.
    Response: We thank the commenters for their support and agree that 
the transition period allows all facilities to adjust to their new CBSA 
status. We continue to believe that the transition period is sufficient 
to mitigate the economic impact for ESRD facilities as the impact 
analysis demonstrates an impact of less than 1 percent.
    Therefore, we are finalizing a 2-year transition blended wage index 
for all facilities. Facilities would receive 50 percent of their CY 
2015 wage index value based on the CBSA delineations for CY 2014 and 50 
percent of their CY 2015 wage index value based on the new CBSA 
delineations. This results in an average of the two values. A 
facility's CY 2016 wage index values will be based 100 percent on the 
new CBSA delineations. We believe a 2-year transition strikes an 
appropriate balance between ensuring that ESRD PPS payments are as 
accurate and stable as possible while giving facilities time to adjust 
to the new CBSA delineations.
    In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a 
policy to use the labor-related share of 41.737 percent for the ESRD 
PPS. For the CY 2015 ESRD PPS, we are finalizing a labor-related share 
of 50.673 percent, which we are implementing with a 2-year transition 
of 46.205 percent for CY 2015 and 50.673 percent for CY 2016. For a 
complete discussion of the changes in the CY 2015 ESRD PPS market 
basket and labor-related share, as well as the transition of the labor-
related share. See section II.C of this final rule.
    Comment: One commenter encouraged CMS to explore alternative 
payment mechanisms for small rural providers. Whereas a standard 
payment rate that is adjusted based on the national labor-related share 
may work for providers with moderate to high patient volumes, the same 
does not hold true for small rural providers. Small providers have a 
different cost structure than larger counterparts. Specifically, small 
rural providers incur a higher share of non-labor costs than the 
national average. For example, a small facility with 20 patients may 
only need part-time employees. The small rural town may not have 
potential employees with the appropriate skill set who are willing to 
work part time. As a result, the ESRD facility will pay significant 
amounts for mileage and lodging for employees to travel from other 
sites, or the facility may hire contracted labor. The commenter 
encouraged CMS to evaluate the labor versus non-labor costs for small 
rural facilities compared to the national average and propose payment 
adjustments to address inequalities.
    Response: We thank the commenters for their concern for rural 
facilities and appreciate the suggestions for alternative payment 
mechanisms for small rural ESRD facilities. We plan to consider these 
comments as part of the ESRD PPS refinement in CY 2016.
4. CY 2015 Update to the Outlier Policy
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Our regulations at 42 CFR 
413.237(a)(1) provide that ESRD outlier services are the following 
items and services that are included in the ESRD PPS bundle: (i) ESRD-
related drugs and biologicals that were or would have been, prior to 
January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-
related laboratory tests that were or would have been, prior to

[[Page 66143]]

January 1, 2011, separately billable under Medicare Part B; (iii) 
medical/surgical supplies, including syringes, used to administer ESRD-
related drugs, that were or would have been, prior to January 1, 2011, 
separately billable under Medicare Part B; and (iv) renal dialysis 
service drugs that were or would have been, prior to January 1, 2011, 
covered under Medicare Part D, excluding ESRD-related oral-only drugs.
    In the CY 2011 ESRD PPS final rule (75 FR 49142), we stated that 
for purposes of determining whether an ESRD facility would be eligible 
for an outlier payment, it would be necessary for the facility to 
identify the actual ESRD outlier services furnished to the patient by 
line item on the monthly claim. Renal dialysis drugs, laboratory tests, 
and medical/surgical supplies that we would recognize as outlier 
services were specified in Attachment 3 of Change Request 7064, 
Transmittal 2033 issued August 20, 2010, rescinded and replaced by 
Transmittal 2094, dated November 17, 2010. With respect to the outlier 
policy, Transmittal 2094 identified additional drugs and laboratory 
tests that may be eligible for ESRD outlier payment. Transmittal 2094 
was rescinded and replaced by Transmittal 2134, dated January 14, 2011, 
which was issued to correct the subject on the Transmittal page and 
made no other changes.
    In the CY 2012 ESRD PPS final rule (76 FR 70246), we eliminated the 
issuance of a specific list of eligible outlier service drugs which 
were or would have been separately billable under Medicare Part B prior 
to January 1, 2011. However, we use separate guidance to continue to 
identify renal dialysis service drugs which were or would have been 
covered under Part D for outlier eligibility purposes in order to 
provide unit prices for calculating imputed outlier services. We also 
can identify, through our monitoring efforts, items and services that 
are incorrectly being identified as eligible outlier services in the 
claims data. Information about these items and services and any updates 
to the list of renal dialysis items and services that qualify as 
outlier services are made through administrative issuances, if 
necessary.
    Our regulations at Sec.  413.237 specify the methodology used to 
calculate outlier payments. An ESRD facility is eligible for an outlier 
payment if its actual or imputed Medicare Allowable Payment (MAP) 
amount per treatment for ESRD outlier services exceeds a threshold. The 
MAP amount represents the average incurred amount per treatment for 
services that were or would have been considered separately billable 
services prior to January 1, 2011. The threshold is equal to the ESRD 
facility's predicted ESRD outlier services MAP amount per treatment 
(which is case-mix adjusted) plus the fixed-dollar loss amount. In 
accordance with Sec.  413.237(c) of the regulations, facilities are 
paid 80 percent of the per treatment amount by which the imputed MAP 
amount for outlier services (that is, the actual incurred amount) 
exceeds this threshold. ESRD facilities are eligible to receive outlier 
payments for treating both adult and pediatric dialysis patients.
    In the CY 2011 ESRD PPS final rule, using 2007 data, we established 
the outlier percentage at 1.0 percent of total payments (75 FR 49142 
through 49143). We also established the fixed-dollar loss amounts that 
are added to the predicted outlier services MAP amounts. The outlier 
services MAP amounts and fixed-dollar loss amounts are different for 
adult and pediatric patients due to differences in the utilization of 
separately billable services among adult and pediatric patients (75 FR 
49140).
    As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 
through 49139), the predicted outlier services MAP amounts for a 
patient are determined by multiplying the adjusted average outlier 
services MAP amount by the product of the patient-specific case-mix 
adjusters applicable using the outlier services payment multipliers 
developed from the regression analysis to compute the payment 
adjustments. For CY 2014, the outlier services MAP amounts and fixed-
dollar loss amounts were based on 2012 data (78 FR 72180). Therefore, 
the outlier thresholds for CY 2014 were based on utilization of renal 
dialysis items and services furnished under the ESRD PPS. Because of 
the utilization of ESAs and other outlier services have continued to 
decline under the ESRD PPS, we lowered the MAP amounts and fixed-dollar 
loss amounts for CYs 2013 and 2014 to allow for an increase in payments 
for ESRD beneficiaries requiring higher resources.
a. CY 2015 Update to the Outlier Services MAP Amounts and Fixed-Dollar 
Loss Amounts
    For CY 2015, we did not propose any changes to the methodology used 
to compute the MAP or fixed-dollar loss amounts. Rather, the proposed 
rule updated the outlier services MAP amounts and fixed-dollar loss 
amounts to reflect the utilization of outlier services reported on 2013 
claims using the December 2013 claims file. For this final rule, the 
outlier services MAP amounts and fixed dollar loss amounts were updated 
using the 2013 claims from the June 2014 claims file. The impact of 
this update is shown in Table 10, which compares the outlier services 
MAP amounts and fixed-dollar loss amounts used for the outlier policy 
in CY 2014 with the updated estimates finalized in this rule. The 
estimates for the final CY 2015 outlier policy, which are included in 
Column II of Table 10, were inflation adjusted to reflect projected 
2015 prices for outlier services.

               Table 10--Outlier Policy: Impact of Using Updated Data to Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                             Column I                        Column II
                                                 ---------------------------------------------------------------
                                                    Final outlier policy for CY   Proposed outlier policy for CY
                                                  2014 (based on 2012 data price  2015 (based on 2013 data price
                                                        inflated to 2014) *             inflated to 2015) *
                                                 ---------------------------------------------------------------
                                                     Age < 18       Age > = 18       Age < 18       Age > = 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $37.29          $51.97          $39.89          $52.98
 treatment \1\..................................
Adjustments:
    Standardization for outlier services \2\....          1.1079          0.9866          1.1145          0.9878
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $40.49          $50.25          $43.57          $51.29
     \3\........................................
Fixed-dollar loss amount that is added to the             $54.01          $98.67          $54.35          $86.19
 predicted MAP to determine the outlier
 threshold \4\..................................

[[Page 66144]]

 
Patient months qualifying for outlier payment...            6.7%            5.3%            6.3%            6.3%
----------------------------------------------------------------------------------------------------------------
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated
  prices for outlier services (that is, 2014 prices in Column I and projected 2015 prices in Column II).
\1\ Excludes patients for whom not all data were available to calculate projected payments. The outlier services
  MAP amounts are based on 2013 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg
  for Aranesp that are in placeunder the ESA claims monitoring policy were applied.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing
  case mix adjusters for adult and pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the
  predicted outlier services MAP for each patient.
\4\ The fixed dollar loss amounts were calculated using 2013 data to yield total outlier payments that represent
  1 percent of total projected payments for the ESRD PPS.

    As demonstrated in Table 10, the estimated fixed-dollar loss amount 
that determines the CY 2015 outlier threshold amount for adults (Column 
II) is lower than that used for the CY 2014 outlier policy (Column I). 
The threshold is lower in spite of the fact that the average outlier 
services MAP per treatment has increased. Between 2012 and 2013, the 
variation in outlier services across patients declined among adults. 
The net result is an increase in the percentage of patient-months 
qualifying for outlier payment (6.3 percent based on 2013 data versus 
5.3 percent based on 2012 data) but a decrease in the average outlier 
payment per case. The estimated fixed-dollar loss amount that 
determines the CY 2015 outlier threshold amount for pediatric patients 
(Column II) is slightly higher than that used for the CY 2014 outlier 
policy (Column I).
    For pediatric patients, there was an increase in the overall 
average outlier service MAP amount between 2012 ($37.29 per treatment 
as shown in Column I) and 2013 ($40.05 per treatment, as shown in 
Column II). In addition, there was a continuing tendency in 2013 for a 
relatively small percentage of pediatric patients to account for a 
disproportionate share of the total outlier service MAP amounts. The 1 
percent target for outlier payments is therefore expected to be 
achieved based on a smaller percentage of pediatric outlier cases using 
2013 data compared to 2012 data (6.3 percent of pediatric patient 
months are expected to qualify for outlier payments rather than 6.7 
percent). These patterns led to the estimated fixed-dollar loss amount 
for pediatric patients being slightly higher for the outlier policy for 
CY 2015 compared to the outlier policy for CY 2014.
    The updated fixed-dollar loss amounts are added to the predicted 
MAP amounts per treatment, yielding the outlier thresholds for CY 2015 
from $98.67 to $86.19 for adult patients and from $54.01 to $54.35 for 
pediatric patients compared with CY 2014 amounts. We estimate that the 
percentage of patient months qualifying for outlier payments under the 
current policy will be 6.3 percent for both adult and pediatric 
patients, based on the 2013 data. The pediatric outlier MAP and fixed-
dollar loss amounts continue to be lower for pediatric patients than 
adults due to the continued lower use of outlier services (primarily 
reflecting lower use of ESAs and other injectable drugs).
b. Outlier Policy Percentage
    42 CFR 413.220(b)(4) stipulates that the per treatment base rate is 
reduced by 1 percent to account for the proportion of the estimated 
total payments under the ESRD PPS that are outlier payments. Based on 
the 2013 claims, outlier payments represented approximately 0.5 percent 
of total payments, again falling short of the 1 percent target due to 
further declines in the use of outlier services. Recalibration of the 
thresholds, which use 2013 data, reflects the reduced variation in 
outlier services among adults, is expected to result in aggregate 
outlier payments close to the 1 percent target in CY 2015. We believe 
the update to the outlier MAP and fixed-dollar loss amounts for CY 2015 
will increase payments for ESRD beneficiaries requiring higher resource 
utilization and move us closer to meeting our 1 percent outlier policy.
    We note that recalibration of the fixed-dollar loss amounts in this 
final rule for CY 2015 outlier payments results in no change in 
payments to ESRD facilities for beneficiaries with renal dialysis items 
and services that are not eligible for outlier payments, but increases 
payments to ESRD facilities for beneficiaries with renal dialysis items 
and services that are eligible for outlier payments. Therefore, 
beneficiary co-insurance obligations would also increase for renal 
dialysis services eligible for outlier payments.
    Comment: All commenters expressed disappointment that the outlier 
target percentage has not been achieved under the ESRD PPS. Some 
commenters encouraged CMS to revise the target so that the adjustment 
would be more attainable for facilities. Other commenters requested 
that CMS eliminate the adjustment from the payment system altogether 
and return the 1 percent back to the base rate for CY 2015. One 
commenter suggested that CMS could annually update the amount withheld 
in the outlier pool based on actual use in the two prior years. Still 
other commenters encouraged CMS to return the outlier ``pool'' to 
facilities, as the adjustment erroneously lowered the base rate in 
prior years.
    Response: We thank the commenters for their suggestions in 
improving the ESRD PPS outlier policy. With regard to the comment that 
we eliminate the outlier adjustment altogether, we note that, under 
section 1881(b)(14)(D)(ii) of the Act, the ESRD PPS must ``include a 
payment adjustment for high cost outliers due to unusual variations in 
the type or amount of medically necessary care, including variations in 
the amount of erythropoiesis stimulating agents necessary for anemia 
management.'' Therefore, we would be unable to do so and comply with 
section 1881(b)(14)(D)(ii) of the Act. In addition, it is important to 
note that the ESRD PPS base rate captures the cost for the

[[Page 66145]]

average patient. To the extent data analysis continues to show that 
certain patients, including certain racial and ethnic groups, receive 
more ESAs than average, we believe an outlier policy, even a small one, 
is an important payment adjustment to provide under the ESRD PPS. 
Concerning comments that we modify the outlier payment adjustment, we 
did not propose to do so, therefore, we will not finalize such an 
adjustment. However, we will consider the commenters' suggestions as 
part of the refinement process that we will undertake in the CY 2016 
ESRD PPS proposed and final rules.
    We share the industry's frustration that payments under the outlier 
policy have not reached 1 percent of total ESRD PPS payments. However, 
the outlier policy is a target percentage rather than a ``pool.'' As we 
explained in the CY 2014 ESRD PPS final rule (78 FR 72165), each year 
we simulate payments under the ESRD PPS in order to set the outlier 
fixed-dollar loss and MAP amounts for adult and pediatric patients to 
try to achieve the 1 percent outlier policy. We do not increase the 
base rate to account for years where outlier payments were less than 1 
percent of total ESRD PPS payments, nor would we reduce the base rate 
if the outlier payments exceed 1 percent of total ESRD PPS payments. 
Rather, we would simulate payments in the following year and adjust the 
fixed-dollar loss and MAP amounts to try to achieve outlier payments 
that meet the 1 percent outlier percentage. This approach to updating 
the outlier policy is consistent with how we update outlier policies in 
other Medicare prospective payment systems, for example, the 
prospective payment system for inpatient psychiatric facilities.
    We believe the 1 percent outlier percentage has not been reached 
under the payment system due to the significant drop, over 20 percent, 
in the utilization of high cost drugs such as Epogen. In fact, we 
believe the drop in utilization of ESAs and the QIP measures, have made 
it less likely that a patient's treatment costs would meet the outlier 
threshold, despite the fact we have lowered the MAP amounts as part of 
our annual update to the payment system since 2011. We believe that the 
2013 data used to update the CY 2015 outlier policy are representative 
of stable drug utilization, and we believe that in the future the 
outlier policy will be an important payment adjustment compensating 
facilities for high cost services as the adjustment was intended.

D. Restatement of Policy Regarding Reporting and Payment for More Than 
Three Dialysis Treatments per Week

1. Reporting More Than Three Dialysis Treatments per Week on Claims
    Since the composite payment system was implemented in the 1980s, 
CMS has reimbursed ESRD facilities based upon three hemodialysis 
treatments per week and allowed for the payment of additional weekly 
dialysis treatments with medical justification. When a dialysis 
modality regimen requires more than three weekly dialysis treatments, 
such as with short, frequent hemodialysis (HD) and peritoneal dialysis 
(PD) modalities, we apply payment edits to ensure that Medicare payment 
on the monthly claim is consistent with the three times-weekly dialysis 
treatment payment limit, which translates to payment for 13 treatments 
for a 30-day month and 14 treatments for a 31-day month.
    Under section 1881(b)(14)(C) of the Act, the ESRD PPS may provide 
for payment on the basis of renal dialysis services furnished during a 
week, or month, or such other appropriate unit of payment as the 
Secretary specifies. In the CY 2011 ESRD PPS final rule (75 FR 49064), 
CMS finalized the per treatment basis of payment in which ESRD 
facilities are paid for up to three treatments per week, unless there 
is medical justification for more than three treatments per week. We 
codified the per-treatment unit of payment under the ESRD PPS at 42 CFR 
413.215(a). Also in the CY 2011 ESRD PPS final rule (75 FR 49078), we 
explained how we converted patient weeks to HD-equivalent sessions for 
PD patients. Specifically, we noted that one week of PD was considered 
equivalent to three HD treatments. For example, a patient on PD for 21 
days would have (21/7) x 3 or 9 HD-equivalent sessions. Our policy is 
that ESRD facilities treating patients on PD or home HD will be paid 
for up to three HD-equivalent sessions for each week of dialysis, 
unless there is medical justification for furnishing additional 
treatments.
    Increasingly, some ESRD facilities have begun to offer dialysis 
modalities where the standard treatment regimen is more than three 
treatments per week. Also, we have observed a payment variation among 
Medicare Administrative Contractors (MACs) in processing claims for 
dialysis treatments for modalities that require more frequent dialysis, 
resulting in payment of more than 14 treatments per month without 
medical justification. Lastly, CMS has received several requests for 
clarification regarding Medicare payment and billing policies for 
dialysis treatments for modalities requiring more than three treatments 
per week that are furnished in-facility or in the patient's home. 
Specifically, ESRD facilities, renal physician groups, and MACs have 
requested billing guidance regarding whether all of the dialysis 
treatments furnished to the patient during the billing month should be 
reported on the claim form, even though the Medicare benefit only 
provides for payment of three dialysis treatments per week.
    For these reasons, we are reiterating our policy with respect to 
payment for more than three dialysis treatments per week. We note that 
we are not changing our policy for reporting extra dialysis sessions. 
ESRD facility claims should continue to include all dialysis treatments 
furnished during the month on claims, but payment is limited to three 
dialysis treatments per week through the payment edits of 13 treatments 
for a 30-day month or 14 treatments for a 31-day month. For example, an 
ESRD facility that furnishes dialysis services to patients who dialyze 
using modalities requiring shorter, more frequent dialysis (for 
example, a dialysis regimen of 4, 5, 6 or 7 days a week in-facility or 
at home), should report all of the patient's dialysis treatments on the 
monthly claim. However, payment for these services will reflect 
existing claims processing system edits, and the monthly Medicare 
payment would mirror the Medicare ESRD benefit of three dialysis 
treatments per week.
2. Medical Necessity for More Than Three Treatments per Week
    Under the ESRD benefit, we have always recognized that some patient 
conditions benefit from more than three dialysis sessions per week and 
as such, the Medicare policy for medically necessary additional 
dialysis treatments was developed. Under this policy, the MACs 
determine whether additional treatments furnished during a month are 
medically necessary. While Medicare does not define specific patient 
conditions that meet the requirements of medical necessity, we do 
furnish instructions to MACs to consider appropriate patient conditions 
that would result in a patient's medical need for additional dialysis 
treatments (for example, excess fluid of five or more pounds). When 
such patient conditions are indicated with the claim requesting 
payment, we instruct MACs to consider medical justification and the 
appropriateness of payment for the additional sessions.
    In section 50.A of the Medicare Benefit Policy Manual (Pub. 100-
02), we explained our policy regarding

[[Page 66146]]

payment for hemodialysis-equivalent PD and payment for more than three 
dialysis treatments per week under the ESRD PPS. We restated that ESRD 
facilities are paid for a maximum of 13 treatments during a 30-day 
month and 14 treatments during a 31-day month unless there is medical 
justification for additional treatments. The only time facilities 
should seek payment for additional dialysis sessions, is when the 
patient has a medical need for additional dialysis and the facility has 
furnished supporting medical justification of the patient's condition 
for the extra treatments. Modality choice does not constitute medical 
justification.
    Comment: Commenters were generally supportive of our policy 
clarification for reporting short frequent hemodialysis treatments. 
Many commenters noted the importance of allowing Medicare payment for 
additional medically necessary weekly treatments. One commenter 
requested that CMS clarify that medical justification is subject to 
approval by the MAC's medical officer, as opposed to the MAC's local 
policy decisions.
    Response: We thank the commenters for their support of our policy 
clarification and agree with commenters that when medically necessary 
additional dialysis treatments are warranted based upon the patients' 
medical conditions, Medicare should pay for those treatments. In 
addition, CMS has no national policy for medical justification for 
additional dialysis treatments, and we rely upon either a MAC's local 
coverage determination (LCD) policy or medical review by a physician 
working under the direction of the MAC's medical director.
    Comment: One commenter expressed concern that the language in the 
proposed rule gives more authority to the MACs to determine medical 
necessity. The commenter cited to the proposed rule that states, ``the 
MACs determine whether additional treatments furnished during a month 
are medically necessary,'' and encouraged CMS to communicate to the 
MACs that physicians are ultimately responsible for determining the 
medical justification of ESRD services after considering the patient's 
health status and relevant evidence-based medicine. The MAC's 
responsibility is to review the documentation provided by the physician 
to ensure the medical justification meets the guidelines set forth by 
CMS.
    Another commenter indicated that longer or more frequent schedules 
are purposefully prescribed by the physician to meet individual patient 
medical and lifestyle needs and because the patient would medically 
benefit based upon the ever-expanding base of clinical literature 
finding clinical benefit to these schedules compared to conventional 
dialysis schedules. The commenter believes that if such a regimen is 
prescribed based upon sound medical justification, it should be 
eligible for payment of the additional treatments under CMS's long-
standing policy. The commenter believes this approach has worked 
effectively for many years during the modest growth of home 
hemodialysis (HHD) and there is no evidence of overutilization. The 
commenter believes this is the policy described in the proposed rule.
    Other commenters pointed out that, while a growing body of research 
shows that more frequent dialysis improves patient outcomes overall, 
the payment policy for dialysis is limited based on three times per 
week HD treatments. The flexibility in permitting extra payments for HD 
treatments, when medical justification is provided, is a reasonable 
approach to ensuring those patients who need the extra treatments the 
most are able to get them.
    Response: We agree with the commenter that, while we refer to MACs' 
approval for the payment of medically necessary additional weekly 
treatments, we do not mean that the MACs make these decisions 
unilaterally. Rather, necessity for these extra treatments is reviewed, 
and ultimately paid or unpaid, based upon the policy and payment 
guidance furnished by Medicare, the local policies and guidance of the 
MAC, and the information submitted by the patient's physician. It was 
not our intent to imply a change in our requirements for medical 
justification for additional treatments, nor were we dismissing the 
importance of the assessment of the patient's physician. We will 
continue to follow research assessing the clinical benefits of more 
frequent dialysis schedules and monitoring the number of treatments 
furnished and paid per month.
    In circumstances where a nephrologist has ``prescribed'' shorter, 
more frequent hemodialysis for their patient there should be no 
expectation of payment beyond three treatments per week. For prescribed 
dialysis regimes beyond three sessions per week, furnished in the home 
or in center, such as four, five, six or even seven times per week, 
payment for the additional weekly treatments is based on patient 
conditions, supported by medical documentation, that require additional 
dialysis.
    Comment: One commenter believes that it is inconsistent for CMS to 
require that all dialysis treatments be reported, while limiting 
payment to three times per week.
    Response: We thank the commenter for their comment; however, 
dialysis services furnished by a facility are reported to Medicare, for 
purposes of payment, on a monthly claim form. During a given month, 
weekly dialysis services may differ in terms of number of treatments, 
drug dosing, acute case-mix or other payment adjustments, laboratory 
services. Therefore, we require that all dialysis services be reported 
on the Medicare 72x type of bill so that all of the services furnished 
to the beneficiary will be identifiable on the claim form. More 
importantly, reporting all treatments furnished allows CMS to keep up 
with changes in dialysis schedules over time.
    Comment: One commenter believes a reference we made in the proposed 
rule to ``dialysis modalities that require more frequent dialysis'' 
could be misconstrued or misunderstood. The commenter believes the 
reference implies a comparison of more frequent home HD to PD, where 
daily exchanges are required in order to deliver a minimally adequate 
dose. The commenter pointed out that home HD, and the equipment that 
delivers this home therapy, may be prescribed with adequate dose 
delivery under a variety of treatment schedules, from the conventional 
thrice-weekly to longer or more frequent schedules. The commenter 
suggests that correlating short more frequent HD with PD should be 
avoided.
    Response: We thank the commenter for this clarification and we will 
avoid such references in the future.
    Comment: One commenter disagreed with CMS's policy and stated that 
it should not preclude modality choice as a medical justification for 
more frequent HD treatments, as precluding modality choice would likely 
have a significant adverse impact on the physical and emotional well-
being of patients undergoing home hemodialysis currently, and would 
significantly limit Medicare beneficiaries' access to home HD. The 
commenter contends that this policy is counter to CMS and Congress's 
stated goal of promoting the use of home dialysis in lieu of continued 
growth of patients undergoing in-center hemodialysis. A few commenters 
encouraged CMS to continue to be flexible in providing beneficiaries 
with more than three treatments per week when medically necessary. 
Other commenters noted that they support our objectives in removing 
barriers for home

[[Page 66147]]

dialysis modalities, including home hemodialysis, but only if our 
policies do not shift resources from in-center patients.
    Response: Payments provided by MACs for additional hemodialysis 
weekly dialysis treatments that are furnished in-facility or in the 
home, have been audited by CMS. We recognize that some MACs were not 
requiring documented patient conditions for medical justification for 
additional weekly treatments and were inappropriately authorizing 
Medicare payment for additional dialysis services where no medical 
justification was included in the claim. Thus, our intent in clarifying 
our policy was to remind facilities and MACs of the Medicare ESRD 
benefit, which only allows for the payment of three weekly dialysis 
treatments, and that additional weekly dialysis treatments may be paid 
for if there's documented medical justification. We believe that our 
policy clarification will result in a consistent Medicare benefit for 
all beneficiaries and eliminate the regional payment differences for 
HD.
    Lastly, we thank the commenters who suggest that Medicare should 
remove the barriers to home modalities while not jeopardizing the 
Medicare base rate for in-facility services. We agree with these 
commenters and believe our ESRD PPS payment policies have contributed 
to the increase in utilization of home dialysis modalities as indicated 
in Table 11 below.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR06NO14.012

BILLING CODE 4120-01-C

E. Delay of Payment for Oral-Only Drugs Under the ESRD PPS

    As we discussed in the CY 2014 ESRD PPS final rule (78 FR 72185 
through 72186), section 1881(b)(14)(A)(i) of the Act, as added by 
section 153(b) of the Medicare Improvements for Patients and Providers 
Act of 2008 (MIPPA), requires the Secretary to implement a payment 
system under which a single payment is made to a provider of services 
or a renal dialysis facility for ``renal dialysis services'' in lieu of 
any other payment. Section 1881(b)(14)(B) of the Act defines renal 
dialysis services, and subclause (iii) of that section states that 
these services include ``other drugs and biologicals that are furnished 
to individuals for the treatment of ESRD and for which payment was 
(before the application of this paragraph) made separately under this 
title, and any oral equivalent form of such drug or biological[.]''
    We interpreted this provision as including not only injectable 
drugs and biologicals used for the treatment of ESRD (other than ESAs, 
which are included under clause (ii) of section 1881(b)(14)(B)), but 
also all non-injectable oral drugs used for the treatment of ESRD 
furnished under title XVIII of the Act. We also concluded that, to the 
extent ESRD-related oral-only drugs do not fall within clause (iii) of 
the statutory definition of renal dialysis services, such drugs would 
fall under clause (iv), and constitute other items and services used 
for the treatment of ESRD that are not described in clause (i) of 
section 1881(b)(14)(B). As such, CMS finalized and promulgated the 
payment policies for oral-only drugs used for the treatment of ESRD in 
the CY 2011 ESRD PPS final rule (75 FR 49038 through 49053), and we 
defined ``renal dialysis services'' at 42 CFR 413.171(3) as including, 
among other things ``other drugs and biologicals that are furnished to 
individuals for the treatment of ESRD and for which payment was (prior 
to January 1, 2011) made separately under Title XVIII of the Act 
(including drugs and biologicals with only an oral form).''
    Although ESRD-related oral-only drugs are included in the 
definition of

[[Page 66148]]

renal dialysis services, in the CY 2011 ESRD PPS final rule (75 FR 
49044), we also finalized a policy to delay payment for these drugs 
under the PPS until January 1, 2014. We stated that there were certain 
advantages to delaying the implementation of payment for oral-only 
drugs, including allowing ESRD facilities additional time to make 
operational changes and logistical arrangements in order to furnish 
oral-only ESRD-related drugs and biologicals to their patients. 
Accordingly, 42 CFR 413.174(f)(6) provides that payment to an ESRD 
facility for renal dialysis service drugs and biologicals with only an 
oral form is incorporated into the PPS payment rates effective January 
1, 2014.
    On January 3, 2013, the Congress enacted ATRA. Section 632(b) of 
ATRA states that the Secretary ``may not implement the policy under 
section 413.176(f)(6) of title 42, Code of Federal Regulations 
(relating to oral-only ESRD-related drugs in the ESRD prospective 
payment system), prior to January 1, 2016.'' Accordingly, in the CY 
2014 ESRD PPS final rule (78 FR 72185 through 72186), we delayed 
payment for ESRD-related oral-only drugs under the ESRD PPS until 
January 1, 2016, instead of on January 1, 2014, which is the original 
date we finalized for payment of ESRD-related oral-only drugs under the 
ESRD PPS. We implemented this delay by revising the effective date for 
providing payment for oral-only ESRD-related drugs under the ESRD PPS 
at 42 CFR 413.174(f)(6) from January 1, 2014 to January 1, 2016. In 
addition, we also changed the date when oral-only drugs would be 
eligible for outlier services under the outlier policy described in 42 
CFR 413.237(a)(1)(iv) from January 1, 2014 to January 1, 2016.
    On April 1, 2014, PAMA was enacted. Section 217(a)(1) of PAMA 
amended section 632(b)(1) of ATRA, which now provides that the 
Secretary ``may not implement the policy under section 413.174(f)(6) of 
title 42, Code of Federal Regulations (relating to oral-only ESRD drugs 
in the ESRD prospective payment system), prior to January 1, 2024.'' 
Accordingly, payment for ESRD-related oral-only drugs will not be made 
under the ESRD PPS prior to January 1, 2024 instead of on January 1, 
2016, which is the date we finalized for payment of ESRD-related oral-
only drugs under the ESRD PPS in the CY 2014 ESRD PPS final rule (78 FR 
72186).
    We shall implement this delay by modifying the effective date for 
providing payment for renal dialysis oral-only drugs and biologicals 
under the ESRD PPS at 42 CFR 413.174(f)(6) from January 1, 2016 to 
January 1, 2024. We also shall change the date in 42 CFR 
413.237(a)(1)(iv) regarding outlier payments for oral-only ESRD-related 
drugs made under the ESRD PPS from January 1, 2016 to January 1, 2024. 
We continue to believe that oral-only drugs used for the treatment of 
ESRD are an essential part of the ESRD PPS payment bundle and should be 
paid for under the ESRD PPS as soon as possible, or beginning January 
1, 2024. We received no public comments on these proposals and 
therefore will finalize our regulatory changes to 42 CFR Part 413 as 
proposed.
    In addition to the delay of payment for renal dialysis oral-only 
drugs, section 217(a)(2) of PAMA further amended section 632(b)(1) of 
ATRA by adding a new sentence that provides, ``[n]otwithstanding 
section 1881(b)(14)(A)(ii) of the Social Security Act (42 U.S.C. 
1395rr(b)(14)(A)(ii)), implementation of the policy described in the 
previous sentence shall be based on data from the most recent year 
available.'' We interpret this provision to mean that we are not to use 
per patient utilization data from 2007, 2008, or 2009 (whichever has 
the lowest per patient utilization) as we were required to do for the 
original ESRD PPS in implementing payment for renal dialysis oral-only 
drugs under the ESRD PPS. We will make proposals consistent with 
section 632(b)(1) of ATRA, as amended by section 217(a)(2) of PAMA, in 
future rulemaking.
    Section 217(c) of PAMA requires the Secretary, as part of the CY 
2016 ESRD PPS rulemaking, to establish a process for ``(1) determining 
when a product is no longer an oral-only drug; and (2) including new 
injectable and intravenous products into the bundled payment under such 
system.'' Consistent with this statutory requirement, we plan to 
propose a drug designation process in our CY 2016 rulemaking cycle.
    Comment: We received many comments from industry stakeholders 
questioning CMS's authority to incorporate additional renal dialysis 
services into the payment bundle. A few commenters were encouraged by 
CMS's request for comments and outlined a comprehensive 7 principle 
drug designation process. Other commenters urged CMS to be cautious 
when adding renal dialysis services to the bundle and noted that 
separate payment for new services would be important until utilization 
and practice patterns have been established. Another commenter urged 
that the process should be transparent, predictable, and result in 
increases to the payment rate to reflect the cost of these therapies 
and to promote adoption of innovations with a demonstrated impact on 
patient outcomes.
    One commenter recommends a collaborative process to determine when 
a product is no longer an oral-only drug, noting that MIPPA is unclear 
on this point for non-ESA medications. The commenter suggests that 
reasonable criteria for inclusion of previously oral-only agents in the 
bundle may be when a parenteral formulation has been adequately shown 
to be clinically superior in terms of efficacy and safety with 
acceptable cost and cost-effectiveness compared to already available 
oral medications. The commenter also believes it would be appropriate 
to include new products in the bundle if they are intended to be used 
in practice as substitutes for already bundled products or if their 
primary use reflects management of conditions specifically related to 
ESRD and its complications as evidenced by current use of bundled 
medications or oral but not bundled medications.
    Response: We thank the commenters for the thoughtful comments 
regarding a drug designation process. We will take these comments into 
consideration when we propose the drug designation process in the CY 
2016 ESRD PPS proposed rule. In response to commenters who questioned 
CMS's authority, we believe CMS does have the authority to add services 
to the bundle. Our definition of renal dialysis services, which was 
adopted in our CY 2011 ESRD PPS final rule (75 FR 49036), is consistent 
with section 1881(b)(14)(B)(iii) of the Act that includes as renal 
dialysis services, ``Other drugs and biologicals that are furnished to 
individuals for the treatment of end stage renal disease and for which 
payment was (before application of this [new ESRD PPS]) made separately 
under this title, and any oral equivalent form of such drug or 
biological.'' We continue to believe that we have the authority to add 
drugs and biologicals that are furnished to individuals for the 
treatment of ESRD to the payment bundle. We have done this in the case 
when new ESAs have been made available.
    Lastly, we thank the commenters for the very thoughtful 7 principle 
drug designation process outlined in comments. Specifically, we are 
encouraged by recommendations regarding processes for coverage and 
payment, data collection, and protections for providers and 
beneficiaries so that facilities ``are not forced to absorb the drug's 
new costs themselves.''

[[Page 66149]]

F. ESRD Drug Categories Included in the ESRD PPS Base Rate

    In the CY 2011 ESRD PPS final rule (75 FR 49050), we finalized 
Table 4, (Renal Dialysis Service ESRD Drug Categories Included in the 
Final ESRD PPS Base Rate), and have included Table 12 below for the 
purpose of this discussion. In that rule, we noted that the categories 
of drugs and biologicals used for access management, anemia management, 
anti-infectives, bone and mineral metabolism, and cellular management 
would always be considered renal dialysis drugs when furnished to an 
ESRD patient, and that payment for such drugs would be included in the 
ESRD PPS payment bundle. As such, beginning January 1, 2011, Medicare 
no longer makes a separate payment when a drug or biological (except 
for renal dialysis oral-only drugs for which we are delaying payment 
under the ESRD PPS until January 1, 2024) identified in the categories 
listed in the following table is furnished to a Medicare ESRD 
beneficiary.

  Table 12--Renal Dialysis Service ESRD Drug Categories Included in the
                        Final ESRD PPS Base Rate
------------------------------------------------------------------------
           Drug category                   Rationale for inclusion
------------------------------------------------------------------------
Access Management.................  Drugs used to ensure access by
                                     removing clots from grafts, reverse
                                     anticoagulation if too much
                                     medication is given, and provide
                                     anesthetic for access placement.
Anemia Management.................  Drugs used to stimulate red blood
                                     cell production and/or treat or
                                     prevent anemia. This category
                                     includes ESAs as well as iron.
Anti-infectives...................  Vancomycin and daptomycin used to
                                     treat access site infections.
Bone and Mineral Metabolism.......  Drugs used to prevent/treat bone
                                     disease secondary to dialysis. This
                                     category includes phosphate binders
                                     and calcimimetics.
Cellular Management...............  Drugs used for deficiencies of
                                     naturally occurring substances
                                     needed for cellular management.
                                     This category includes
                                     levocarnitine.
------------------------------------------------------------------------

    In the CY 2011 ESRD PPS final rule (75 FR 49050), we noted that we 
included the anti-infective drugs of vancomycin and daptomycin because 
these drugs were routinely furnished for the renal dialysis conditions, 
such as, access site infections and peritonitis. However, in the CY 
2012 ESRD PPS final rule (76 FR 70242 through 70243), we responded to 
public comments that noted that vancomycin is a common anti-infective 
drug appropriate for treating infections that are both ESRD- and non-
ESRD-related by modifying our policy to eliminate the payment 
restriction for vancomycin when it is furnished for reasons other than 
for the treatment of ESRD. In addition, we finalized the use of CMS 
payment modifier AY (Item or service furnished to an End-Stage Renal 
Disease (ESRD) patient that is not for the treatment of ESRD) and 
instructed facilities to append the modifier to the claim line 
reporting vancomycin to indicate that the drug was furnished for 
reasons other than for the treatment of ESRD. The presence of the AY 
modifier on the claim line allows the MAC to make a separate payment 
for the drug when it is furnished by the facility to a Medicare 
beneficiary for reasons other than for the treatment of ESRD.
    In the CY 2013 ESRD PPS final rule (77 FR 67461), we further 
amended this policy to allow ESRD facilities to bill separately for 
daptomycin when it is furnished to ESRD beneficiaries for reasons other 
than for the treatment of ESRD. Once again, we instructed facilities to 
append claim lines reporting daptomycin furnished for reasons other 
than for the treatment of ESRD with the AY modifier so that MACs would 
be able to make a separate payment.
    Because we have removed the payment limitation for both vancomycin 
and daptomycin, and because we believe that anti-infectives are a drug 
category that may be furnished for both ESRD- and non-ESRD-related 
reasons, we updated the list of drug categories that are always 
considered renal dialysis drugs under the ESRD PPS by removing the drug 
category for anti-infectives. We included Table 13 (Renal Dialysis 
Service ESRD Drug Categories Included in the ESRD PPS Base Rate and Not 
Separately Payable) below to appropriately recognize the drug 
categories that are always considered to be renal dialysis services and 
we confirm that the revised table reflects policy changes made in the 
CY 2012 and CY 2013 ESRD PPS rulemaking cycles and does not constitute 
new policy.
    Over the past few years, we have received payment and billing 
inquiries requesting clarification for the payment for drugs 
represented by one of the drug categories included in the ESRD PPS, but 
not furnished for the treatment of ESRD. Therefore, we clarify that any 
drug included in the drug categories of access management, anemia 
management, bone and mineral metabolism, and cellular management is not 
separately paid by Medicare regardless of why the drug is being 
furnished. In addition, the facility may not furnish a prescription for 
such drugs with the expectation that a Medicare Part D payment would be 
made, as the payment for the drug is included in the ESRD PPS payment 
bundle. Beginning in CY 2011 when the ESRD PPS was implemented, Part D 
plan sponsors were encouraged to implement prior authorization 
requirements for drugs in the categories below in Table 13. In 
addition, the drug categories presented below are covered by the ESRD 
PPS payment regardless of whether the drug is expected to be taken at 
home or on non-dialysis days.

  Table 13--Renal Dialysis Service ESRD Drug Categories Included in the
              ESRD PPS Base Rate and Not Separately Payable
------------------------------------------------------------------------
           Drug category                   Rationale for inclusion
------------------------------------------------------------------------
Access Management.................  Drugs used to ensure access by
                                     removing clots from grafts, reverse
                                     anticoagulation if too much
                                     medication is given, and provide
                                     anesthetic for access placement.
Anemia Management.................  Drugs used to stimulate red blood
                                     cell production and/or treat or
                                     prevent anemia. This category
                                     includes ESAs as well as iron.

[[Page 66150]]

 
Bone and Mineral Metabolism.......  Drugs used to prevent/treat bone
                                     disease secondary to dialysis. This
                                     category includes phosphate binders
                                     and calcimimetics.
Cellular Management...............  Drugs used for deficiencies of
                                     naturally occurring substances
                                     needed for cellular management.
                                     This category includes
                                     levocarnitine.
------------------------------------------------------------------------

    The drug categories that may be separately paid by Medicare when 
furnished for reasons other than for the treatment of ESRD were 
included in Table 5 (ESRD Drug Categories Included in the ESRD PPS Base 
Rate But May be Used for Dialysis and non-Dialysis Purposes) (75 FR 
49051). Table 14 is included below for the purpose of this discussion. 
When any drug identified in the drug categories listed in Table 14 
(antiemetics, anti-infectives, antipruritic, anxiolytic, excess fluid 
management, fluid and electrolyte management, or pain management), is 
furnished for the treatment of ESRD, payment for the drug is included 
in the ESRD PPS payment and may not be paid separately. When these 
drugs are used for the treatment of ESRD, the facility may not furnish 
a prescription for such drugs with the expectation that a Medicare Part 
D payment would be made, as the payments for the injectable drugs, 
which are generally more expensive than oral substitutes, in those 
categories were included in computing the ESRD PPS base rate. 
Therefore, drugs in these categories furnished for the treatment of 
ESRD are covered by the ESRD PPS payment regardless of whether the drug 
is expected to be taken at home or on non-dialysis days.
    If a drug represented by a drug category in Table 14 is furnished 
by ESRD facilities for reasons other than for the treatment of ESRD, a 
separate Medicare payment is permitted when the AY modifier is 
indicated on the claim line reporting the drug for payment. 
Prescriptions for oral versions of drugs used for non-ESRD conditions 
are appropriately billed to Part D.

Table 14--ESRD Drug Categories Included in the ESRD Base Rate but May be
               Used for Dialysis and Non-Dialysis Purposes
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Antiemetic........................  Used to prevent or treat nausea and
                                     vomiting secondary to dialysis.
                                     Excludes antiemetics used in
                                     conjunction with chemotherapy as
                                     these are covered under a separate
                                     benefit category.
Anti-infectives...................  Used to treat infections. May
                                     include antibacterial and
                                     antifungal drugs.
Antipruritic......................  Drugs in this classification have
                                     multiple clinical indications and
                                     are included for their action to
                                     treat itching secondary to
                                     dialysis.
Anxiolytic........................  Drugs in this classification have
                                     multiple actions but are included
                                     for the treatment of restless leg
                                     syndrome secondary to dialysis.
Excess Fluid Management...........  Drug/fluids used to treat fluid
                                     excess/overload.
Fluid and Electrolyte Management    Intravenous drugs/fluids used to
 Including Volume Expanders.         treat fluid and electrolyte needs.
Pain Management...................  Drugs used to treat graft site pain
                                     and to treat pain medication
                                     overdose.
------------------------------------------------------------------------

    Comment: A few commenters, including national industry 
organizations, expressed appreciation for our efforts to clarify what 
drugs and biologicals are included in the ESRD PPS payment bundle. 
However, they expressed concern that current guidance has resulted in 
Part D plan sponsors' inappropriately refusing to cover oral drugs that 
are not renal dialysis services nor essential to the delivery of such 
services. Specifically, they noted that beneficiaries have had 
difficulties obtaining necessary medications such as oral antibiotics 
prescribed for pneumonia and pain medications prescribed for back pain.
    A commenter believes that, prior to January 1, 2014, there appeared 
to be a clear understanding as to what drugs and biologicals should be 
reimbursed through the ESRD PPS and those that should appropriately be 
covered under Part D. The commenter noted that guidance issued by CMS 
in 2011 to all Part D plans correctly recognized that drugs used as 
substitutes for any of the drugs listed in Table C of the CY 2011 ESRD 
PPS final rule, or used to accomplish the same effect, would also be 
covered under the ESRD bundled payment and were, therefore, ineligible 
for separate payment.
    However, implementation of the CY 2014 Part D Call Letter provision 
for prior authorization for drug categories that may be renal dialysis 
services but may also prescribed for other conditions has resulted in 
confusion for Part D plan sponsors and delays in beneficiaries 
obtaining essential medications at the pharmacy. Another commenter 
pointed out that patients should not be put in the middle of benefit 
determinations, and that they should receive their medications when 
they arrive at the pharmacy and payment disputes should be settled 
after the fact.
    Response: There has been no change in CMS policy with respect to 
the drugs considered to be renal dialysis services and covered under 
the ESRD PPS since CY 2013 when we removed daptomycin from the list of 
drug categories that are always considered to be renal dialysis 
services as discussed above. However, in response to increases in 
billing under Part D for drugs that may be for renal dialysis services 
but may also be prescribed for other conditions, we issued guidance in 
the CY 2014 Part D Call Letter to strongly encourage Part D sponsors to 
place beneficiary-level prior authorization edits on all drugs in the 
seven categories identified in the CY 2011 ESRD PPS final rule as drugs 
that ``may be'' ESRD-related for beneficiaries on dialysis (75 FR 
49051). These include: Antiemetics, anti-infectives, antipruritics, 
anxiolytics, excess fluid management, fluid and electrolyte management 
including volume

[[Page 66151]]

expanders, and pain management (analgesics).
    Since our new guidance took effect January 1, 2014, various 
stakeholders have raised concerns regarding the policy's impact on 
beneficiary access. We are considering various alternatives for dealing 
with this issue, as it has always been our intention to eliminate or 
minimize disruptions or delays for ESRD beneficiaries' receiving 
essential medications. We plan to issue guidance in the near future to 
address this issue.
    Comment: A national industry organization commented that, prior to 
implementation of the ESRD PPS, most of the drugs that were listed as 
``may be related to the treatment of ESRD were also prescribed for 
patients to take, at home, on non-dialysis treatment days. The 
commenter pointed out that CMS did not reflect Medicare payments for 
those oral drugs in calculating the ESRD PPS base rate. Therefore, CMS 
should continue to allow payment under Part D for those drug 
categories, that may be for the treatment of ESRD, but that are 
prescribed for non-dialysis days. The commenter requested that we 
revise the regulation text to provide that prescription drugs and 
biologicals that may be within the bundle are covered under the Part B 
bundle only when they are directly related to the provision of renal 
dialysis services.
    Another commenter pointed out that a reasonable criterion regarding 
which medications are covered under the bundled payment should be if 
the medication is essential to perform dialysis or whether the dialysis 
treatment could be altered or intensified in some way that it would 
make the medication unnecessary. For instance, lidocaine cream for 
access site pain with cannulation would be included in the bundle, 
while an anti-pruritic agent taken twice daily for chronic pruritus 
that persists despite adequate dialysis would not be included in the 
bundle.
    Response: In order to maintain the integrity of the ESRD PPS base 
rate and the payment bundle implemented in CY 2011, the drugs and 
biologicals that we consider to be renal dialysis services are those 
that are routinely given to patients ``for the treatment of ESRD'' and 
were billed separately to Part B prior to implementation of the ESRD 
PPS and where the payments for the injectable versions was included in 
the base rate. Therefore, if a facility would have furnished an 
injectable drug and received separate payment for that drug under Part 
B prior to the ESRD PPS, it would not be appropriate today to unbundle 
the oral versions of those injectable drugs by providing a prescription 
for a substitute drug to be taken on non-dialysis days and expect that 
drug to be covered under Part D. For more information regarding the 
injectable drugs included in the ESRD PPS base rate, please refer to 
Table C of the CY 2011 ESRD PPS Final Rule (75 FR 49205).

G. Low-Volume Payment Adjustment (LVPA)

1. Background
    Section 1881(b)(14)(D)(iii) of the Act requires a payment 
adjustment that ``reflects the extent to which costs incurred by low-
volume facilities (as defined by the Secretary) in furnishing renal 
dialysis services exceed the costs incurred by other facilities in 
furnishing such services, and for payment for renal dialysis services 
furnished on or after January 1, 2011, and before January 1, 2014, such 
payment adjustment shall not be less than 10 percent.'' As a result of 
this provision and the regression analysis conducted for the ESRD PPS, 
effective January 1, 2011, the ESRD PPS provides a facility-level 
payment adjustment of 18.9 percent to ESRD facilities that meet the 
definition of a low-volume facility.
    Under 42 CFR 413.232(b), a low-volume facility is an ESRD facility 
that: (1) Furnished less than 4,000 treatments in each of the 3 cost 
reporting years (based on as-filed or final settled 12-consecutive 
month cost reports, whichever is most recent) preceding the payment 
year; and (2) Has not opened, closed, or received a new provider number 
due to a change in ownership in the 3 cost reporting years (based on 
as-filed or final settled 12-consecutive month cost reports, whichever 
is most recent) preceding the payment year. Under Sec.  413.232(c), for 
purposes of determining the number of treatments furnished by the ESRD 
facility, the number of treatments equals the aggregate number of 
treatments furnished by other ESRD facilities that are both under 
common ownership and 25 road miles or less from the ESRD facility in 
question. This geographic proximity criterion is only applicable to 
ESRD facilities that were Medicare certified on or after January 1, 
2011.
    For purposes of determining eligibility for the low-volume payment 
adjustment (LVPA), ``treatments'' means total hemodialysis (HD) 
equivalent treatments (Medicare and non-Medicare). For peritoneal 
dialysis (PD) patients, one week of PD is considered equivalent to 3 HD 
treatments. In the CY 2012 ESRD PPS final rule (76 FR 70236), we 
clarified that we base eligibility on the three years preceding the 
payment year and those years are based on cost reporting periods. We 
further clarified that the ESRD facility's cost reports for the cost 
reporting periods ending in the three years preceding the payment year 
must report costs for 12-consecutive months.
    In order to receive the LVPA under the ESRD PPS, an ESRD facility 
must submit a written attestation statement to its Medicare 
Administrative Contractor (MAC) that it qualifies as a low-volume ESRD 
facility and that it meets all of the requirements specified at 42 CFR 
413.232. In the CY 2012 ESRD PPS final rule (76 FR 70236), we finalized 
a yearly November 1 deadline for attestation submission and we revised 
the regulation at Sec.  413.232(f) to reflect this date. We noted that 
this timeframe provides 60 days for a MAC to verify that an ESRD 
facility meets the LVPA eligibility criteria. Further information 
regarding the administration of the LVPA is provided in CMS Pub. 100-
02, Medicare Benefit Policy Manual, chapter 11, section 60.B.1.
2. The United States Government Accountability Office Study on the LVPA
    The Medicare Improvements for Patients and Providers Act of 2008 
(MIPPA) required the United States Government Accountability Office 
(the GAO) to study the LVPA. The GAO examined (1) the extent to which 
the LVPA targeted low-volume, high-cost facilities that appeared 
necessary for ensuring access to care; and (2) CMS's implementation of 
the LVPA, including the extent to which CMS paid the 2011 LVPA to 
facilities eligible to receive the adjustment. To do this work, the GAO 
reviewed Medicare claims, facilities' annual cost reports, and data on 
dialysis facilities' locations to identify and compare facilities that 
were eligible for the LVPA with those that received the adjustment. The 
GAO published a report 13-287 on March 1, 2013, entitled, ``End-Stage 
Renal Disease: CMS Should Improve Design and Strengthen Monitoring of 
Low-Volume Adjustment''. The report found multiple discrepancies in the 
identification of low-volume facilities which are summarized below.
a. The GAO's Main Findings
    The GAO found that many of the facilities eligible for the LVPA 
were located near other facilities, indicating that they might not have 
been necessary for ensuring access to care. They also identified 
certain facilities with relatively low-volume that were not eligible 
for the LVPA but had above-average costs and appeared to be necessary 
for ensuring access to care.

[[Page 66152]]

Lastly, they stated the design of the LVPA provides facilities with an 
adverse incentive to restrict their service provision to avoid reaching 
the 4,000 treatment threshold. The GAO calculated that Medicare 
overpaid an estimated $5.3 million for the LVPA to dialysis facilities 
that did not meet the eligibility requirements established by CMS. They 
indicated in their report that the guidance that CMS issued for 
implementation of the regulatory requirements was sometimes unclear and 
not always available when needed, and the misunderstanding of LVPA 
eligibility likely was exacerbated because CMS conducted limited 
monitoring of the Medicare contractors' administration of LVPA 
payments.
b. The GAO's Recommendations
    In the conclusion of their study, the GAO provided Congress with 
the following recommendations: (1) To more effectively target 
facilities necessary for ensuring access to care, the Administrator of 
CMS should consider restricting the LVPA to low-volume facilities that 
are isolated; (2) To reduce the incentive for facilities to restrict 
their service provision to avoid reaching the LVPA treatment threshold, 
the Administrator of CMS should consider revisions such as changing the 
LVPA to a tiered adjustment; (3) To ensure that future LVPA payments 
are made only to eligible facilities and to rectify past overpayments, 
the Administrator of CMS should take the following four actions: 
require Medicare contractors to promptly recoup 2011 LVPA payments that 
were made in error; investigate any errors that contributed to eligible 
facilities not consistently receiving the 2011 LVPA and ensure that 
such errors are corrected; take steps to ensure that CMS regulations 
and guidance regarding the LVPA are clear, timely, and effectively 
disseminated to both dialysis facilities and Medicare contractors; and 
improve the timeliness and efficacy of CMS's monitoring regarding the 
extent to which Medicare contractors are determining LVPA eligibility 
correctly and promptly re-determining eligibility when all necessary 
data become available.
    In response to the GAO's recommendations, we concurred with the 
need to ensure that the LVPA is targeted effectively at low-volume 
high-cost facilities in areas where beneficiaries may lack other 
dialysis care options. We also agreed to take action to ensure 
appropriate payment is made in the following ways: (1) Evaluating our 
policy guidance and contractor instructions to ensure appropriate 
application of the LVPA; (2) using multiple methods of communication to 
MACs and ESRD facilities to deliver clear and timely guidance; and (3) 
improving our monitoring of MACs and considering measures that provide 
specific expectations.
3. Clarification of the LVPA Policy
    For CY 2015, we are not making changes to the adjustment or to the 
magnitude of the adjustment value. In accordance with section 632(c) of 
ATRA, for CY 2016 we will assess and address other necessary LVPA 
policy changes when we use updated data and reevaluate all of the 
patient- and facility-level adjustments together in a regression 
analysis similar to the analysis that is discussed in the CY 2011 ESRD 
PPS final rule (75 FR 49083). At this time, we are not changing the 
criteria in such a way that the number of low-volume facilities would 
deviate substantially from the number of facilities originally modeled 
to receive the adjustment in the first year of implementation. This is 
because of the interaction of the LVPA with other payment adjustments 
under the ESRD PPS. As discussed in the CY 2011 ESRD PPS final rule (75 
FR 49081), we standardized the ESRD PPS base rate to account for the 
payment variables and it would not be appropriate to make changes to 
one variable in the regression when it could potentially affect the 
other adjustments or the standardization factor. However, there are two 
clarifications under the LVPA policy (discussed below) that we can 
address in this year's rulemaking that we believe are responsive to 
stakeholder's concerns and GAO's concern that the LVPA should 
effectively target low-volume, high cost-facilities.
a. Hospital-Based ESRD Facilities
    As stated above, for purposes of determining eligibility for the 
LVPA, ``treatments'' means total hemodialysis (HD) equivalent 
treatments (Medicare and non-Medicare) and for peritoneal dialysis (PD) 
patients, one week of PD is considered equivalent to 3 HD treatments. 
Once a MAC receives an attestation from an ESRD facility, it reviews 
the ESRD facility's cost reports to verify that the facility meets the 
low-volume criteria specified at 42 CFR 413.232(b). Specifically, the 
ESRD facility cost report is used to verify the total treatment count 
that an ESRD facility furnishes in its fiscal year, which includes 
Medicare and non-Medicare treatments. For independent ESRD facilities, 
this information is provided on Worksheet C of the Form CMS-265-11 form 
(previously Form CMS-265-94) and for hospital-based ESRD facilities, 
this information is on Worksheet I-4 of the Form CMS-2552-10.
    After the LVPA was implemented, we began hearing concerns from 
multiple stakeholders, including members of Congress and rural 
hospital-based ESRD facilities, about the MACs' LVPA eligibility 
determinations. The stakeholders indicated that because hospital-based 
ESRD facilities are financially integrated with a hospital, their costs 
and treatment data are aggregated in the I-series of the hospital's 
cost report. This means that if there is more than one ESRD facility 
that is affiliated with a hospital, the cost and treatment data for all 
facilities are aggregated on Worksheet I-4, typically causing the 
facilities' treatment counts to exceed the 4,000-treatment criterion.
    We have learned that some MACs accepted treatment counts from 
hospital-based ESRD facilities other than those provided on the 
hospital's cost report and, as a result, certain hospital-based ESRD 
facilities received the LVPA. Other MACs solely used the aggregated 
treatment counts from the hospital's cost report to verify LVPA 
eligibility, which resulted in denials for many hospital-based 
facilities that would have qualified for the adjustment if the MACs had 
considered other supporting documentation.
    We agree with stakeholders that limiting the MAC review to the 
hospital cost reports for verification of LVPA eligibility for 
hospital-based ESRD facilities places these facilities at a 
disadvantage and does not comport with the intent of our policy. We 
believe it can be necessary for MACs to use other supporting data to 
verify the treatment counts for individual hospital-based facilities 
that would meet the eligibility criteria for the LVPA if their 
treatment counts had not been aggregated with one or more other 
facilities on their hospitals' cost reports. Because LVPA eligibility 
is based on cost report information and the individual hospital-based 
facility treatment counts is the source of the aggregated treatment 
counts reported in the cost report, however, we continue to believe 
that cost report data is an integral part of the process of verifying 
whether a hospital-based facility meets the LVPA eligibility criteria.
    For these reasons, we are clarifying that MACs may consider other 
supporting data, such as a hospital-based facility's total treatment 
count, along with the facility's cost reports and attestation, to 
verify it meets the low-volume eligibility criteria provided at 42

[[Page 66153]]

CFR 413.232(b). The attestation should continue to be configured around 
the parent hospital's cost reports, that is, it should be for the same 
fiscal periods. The MAC can consider other supporting data in addition 
to the total treatments reported in each of the 12-consecutive month 
cost reports, such as the individual facility's total treatment counts, 
rather than the hospital's cost report alone, to verify the number of 
treatments that were furnished by the individual hospital-based 
facility that is seeking the adjustment. Consistent with this policy 
clarification, hospital-based ESRD facilities' eligibility for the LVPA 
should be determined at an individual facility level and their total 
treatment counts should not be aggregated with other ESRD facilities 
that are affiliated with the hospital unless the affiliated facilities 
are commonly owned and within 25 miles.
    MACs have discretion as to the format of the attestation and any 
supporting data, however, the facility must provide the total number of 
Medicare and non-Medicare treatments for the three cost reporting years 
preceding the payment year for all of the hospital-based facilities for 
which treatment counts appear on the hospital's cost report. This will 
allow MACs to determine which treatments on the cost report were 
furnished by the individual hospital-based facility that is seeking the 
LVPA and which treatments were furnished by other affiliated 
facilities. Finally, we shall amend the regulation text by adding a new 
paragraph (h)(1) to Sec.  413.232 to reflect this clarification of 
current policy under which MACs can verify hospital-based ESRD 
facilities' eligibility for the LVPA using supporting data in addition 
to hospital cost reports.
b. Cost Reporting Periods Used for Eligibility
    In the CY 2012 ESRD PPS final rule (76 FR 70236), we clarified that 
for purposes of eligibility under 42 CFR 413.232(b), we base 
eligibility on the three years preceding the payment year and those 
years are based on cost reporting periods. We further clarified that 
the ESRD facility's cost reports for the cost reporting periods ending 
in the three years preceding the payment year must report costs for 12-
consecutive months.
    After the LVPA was implemented, we began hearing concerns from the 
industry that there is a conflict within our policy. Currently, our 
policy allows an ESRD facility to remain eligible for the LVPA when 
they have a change of ownership (CHOW) that does not result in a new 
Provider Transaction Access Number (PTAN). However, our regulations at 
Sec.  413.232(b) suggest that MACs must verify treatment counts using 
cost reports for 12-consecutive month cost periods even though CHOWs 
often result in costs reports that are nonstandard, that is, longer or 
shorter than 12 months. In particular, the previous owner's final cost 
report may not coincide with the ESRD facility's cost report fiscal 
year end under its new ownership, resulting in two costs reports that 
are not 12-consecutive month cost reports. For example, where a CHOW 
occurs in the middle of the cost reporting period and the new owner 
wishes to retain the established cost report fiscal year end, the 
previous owner submits a final cost report covering their period of 
ownership and the new owner submits a cost report covering the 
remainder of the cost reporting period. Alternatively, a new owner 
could also choose not to retain the previous owner's established cost 
reporting fiscal year end, in which case the CHOW could result in a 
cost reports that exceed twelve months when combined. Further details 
regarding the policies for filing cost reports during a CHOW are 
available in the Provider Reimbursement Manual--Part 1, chapter 15, 
``Change of Ownership.''
    We are clarifying the policies governing LVPA that may prevent an 
otherwise qualified ESRD facility from receiving the adjustment. We 
have always intended that if an ESRD facility has a CHOW where the new 
owner accepts the previous owner's assets and liabilities by retaining 
the facility's PTAN, they should continue to be eligible for the LVPA. 
However, some MACs used a strict reading of the regulatory language and 
denied these ESRD facilities the LVPA. Other MACs added short cost 
reports together or prorated treatment counts for cost reporting 
periods spanning greater than 12 months.
    In order to ensure consistent verification of LVPA eligibility, we 
are restating our intention that when there is a CHOW that does not 
result in a new PTAN but creates two non-standard cost reporting 
periods (that is, periods that are shorter or longer than 12 months) 
the MAC is either to add the two non-standard cost reporting periods 
together where combined they would equal 12-consecutive months or 
prorate the data when they would exceed 12-consecutive months to 
determine the total treatments furnished for a full cost reporting 
period as if there had not been a CHOW.
    For example, prior to a CHOW, Facility A had a cost reporting 
period that spanned January 1 through December 31. Facility A had a 
CHOW mid-year that did not result in a new PTAN but caused a break in 
the cost reporting period. Consistent with the clarification of our 
policy, the MAC would add Facility A's cost report that spanned January 
1 through May 31 to its cost report that spanned June 1 through 
December 31 to verify the total treatment count.
    The other situation that could occur is when a CHOW results in a 
change of the original fiscal period. For example, prior to a CHOW, 
Facility B had a cost reporting period that spanned January 1 through 
December 31 and, based on its cost reports for 2012 and 2013; it met 
the LVPA eligibility criteria. Then, Facility B had a CHOW in the 
beginning of 2014 that did not result in a new PTAN, but changed its 
cost reporting period to that of its new owner, October 1, 2014 through 
September 30, 2015. This scenario would create a short and a long cost 
report that would not total 12 months that the MAC would need to review 
for verification. That is, Facility B would have a cost report that 
spanned January 1, 2014 through July 31, 2014 (7 months) and a cost 
report that spanned August 1, 2014 through September 30, 2015 (14 
months).
    In this situation, the MAC should combine the two non-standard cost 
reporting periods that in combination may exceed 12-consecutive months 
and prorate the data to equal a full 12-consecutive month period. 
Finally, we shall amend the regulation text by adding a new paragraph 
(h)(2) to Sec.  413.232 to clarify the verification process for ESRD 
facilities that experience a CHOW with no change in the PTAN.
    Section 413.232(f) requires ESRD facilities to submit LVPA 
attestations by November 1 of each year. However, the changes we are 
finalizing to the LVPA regulation text would not be finalized in enough 
time to give the ESRD facilities the opportunity to learn about the 
policy clarifications and provide an attestation to their MAC by 
November 1, 2014. For these reasons, we are amending Sec.  413.232(f) 
to extend the deadline for CY 2015 LVPA attestations until December 31, 
2014. This timeframe would allow ESRD facilities to reassess their 
eligibility and apply for the LVPA for CY 2015. It would also give MACs 
an opportunity to verify any new attestations and reassess LVPA 
eligibility verifications made since 2011. We will issue guidance with 
additional detail regarding this policy clarification, which will 
include details about the process ESRD facilities should follow to seek 
the LVPA for past years.

[[Page 66154]]

    Comment: Commenters were largely supportive of our policy 
clarification and proposed regulation changes regarding the facility 
eligibility requirements for the LVPA available under the ESRD PPS. A 
few commenter encouraged CMS to ``redesign'' the LVPA adjustment during 
the CY 2016 rulemaking, which will include refinements of the payment 
system. One commenter encouraged CMS to consider a facility's distance 
to the nearest facility and develop and rural adjustment factor as part 
of the adjustment. Other commenters urged CMS to implement the GAO 
recommendations. Some commenters encouraged CMS to consider travel time 
as well as distance in their consideration of the aggregate number of 
treatments furnished by ESRD facilities within 25 miles of each other 
under common ownership, and other commenters suggested that CMS 
identify critical access facilities and consider changes to the LVPA to 
protect access to isolated essential facilities. Another commenter 
asked that CMS consider a larger adjustment for those facilities that 
are more than 50 miles from the closest dialysis facilities, as closure 
of these facilities would create particular hardship for patients.
    Response: We thank the commenters for their support of our policy 
clarification and supporting regulation changes. We will finalize these 
provisions as proposed. In addition, we thank the commenters for their 
suggestions in computing a low-volume payment adjustment in the future, 
and we will consider these comments for purposes of refinement in CY 
2016.
    Comment: A few commenters thanked CMS for extending the attestation 
filing deadline to December 31 so that affected facilities would have 
enough time to gather any supporting documentation necessary for 
determining a facility's total treatment count. Another commenter 
suggested that CMS further clarify what years a facility is able to re-
attest for LVPA eligibility. One commenter cited an independent study 
claiming that over 1,000 facilities with treatment counts of less than 
3,200 were not identified as low-volume facilities under the ESRD PPS.
    Response: We thank the commenters for their support and agree that 
extending the deadline by 60 days will allow facilitates to gather any 
documentation that supports a facility's treatment count. In addition, 
we clarify that facilities that believe they have been denied the LVPA 
payment adjustment under the ESRD PPS may attest to any of the payment 
years since CY 2011. We thank the commenter who furnished independent 
data and plan to consider treatment count thresholds as part of our 
policy refinement in CY 2016.
    Comment: One commenter recommended that CMS specify which years 
MACs will be required to reassess for incorrect determinations. In 
addition, as some MACs have advised ESRD facilities not to submit an 
application due to perceived ineligibility, they recommend CMS allow 
these facilities that did not file attestations to do so for prior 
years and receive a determination from the MAC.
    Response: ESRD facilities that did not submit an attestation for CY 
2011 through CY 2014 due to perceived ineligibility, but which now 
believe they qualify for the LVPA based upon our policy clarifications, 
should submit an attestation to their MAC for a determination. 
Likewise, facilities that submitted attestations and were denied, but 
now believe they qualify based upon the policy clarifications, should 
submit an attestation to their MAC for a redetermination.
    Comment: One commenter supports allowing the submission of 
additional data for all types of facilities, not only those that are 
hospital-based, because the commenter indicated such data could help 
the contractors more effectively identify facilities that qualify for 
the LVPA. The commenter indicated that more can and should be done to 
make sure that MACs are appropriately evaluating facilities to ensure 
accurate determinations.
    Response: We will consider this suggestion as part of the ESRD PPS 
refinement. In the meantime, we are planning to issue additional sub-
regulatory guidance to MACs in an effort to ensure accurate LVPA 
determinations. We thank the commenter for their support and are 
finalizing the revision to Sec.  413.232(f) to extend the deadline for 
CY 2015 LVPA attestations until December 31, 2014.

H. Continued Use of ICD-9-CM Codes and Corrections to the ICD-10-CM 
Codes Eligible for the Co-morbidity Payment Adjustment

    Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS 
include a payment adjustment based upon case-mix that may take into 
account, among other things, patient co-morbidities. Co-morbidities are 
specific patient conditions that coexist with the patient's principal 
diagnosis that necessitates dialysis. The co-morbidity payment 
adjustments recognize the increased costs associated with co-
morbidities and provide additional payment for certain conditions that 
occur concurrently with the need for dialysis. For a detailed 
discussion of our approach to developing the co-morbidity payment 
adjustment, see the CY 2011 ESRD PPS final rule (75 FR 49094 through 
49108).
    In the CY 2011 ESRD PPS final rule, we finalized six co-morbidity 
categories that are eligible for a co-morbidity payment adjustment, 
each with associated International Classification of Diseases, 9th 
Revision, Clinical Modification (ICD-9-CM) diagnosis codes (75 FR 
49100). These categories include three acute, short-term diagnostic 
categories (pericarditis, bacterial pneumonia, and gastrointestinal 
tract bleeding with hemorrhage) and three chronic diagnostic categories 
(hereditary hemolytic sickle cell anemia, myelodysplastic syndrome, and 
monoclonal gammopathy). The co-morbidity categories eligible for an 
adjustment and their associated ICD-9-CM codes were published in the 
Appendix of the CY 2011 ESRD PPS final rule as Table E: ICD-9-CM-Codes 
Recognized for the Comorbidity Payment Adjustment (75 FR 49211).
    In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that 
the ICD-9-CM codes eligible for the co-morbidity payment adjustment are 
subject to the annual ICD-9-CM coding updates that occur in the 
hospital IPPS final rule and are effective October 1st every year. We 
explained that any updates to the ICD-9-CM codes that affect the 
categories of co-morbidities and the diagnoses within the co-morbidity 
categories that are eligible for a co-morbidity payment adjustment 
would be communicated to ESRD facilities through sub-regulatory 
guidance. Together with the rest of the healthcare industry, CMS was 
scheduled to implement the 10th revision of the ICD coding scheme, that 
is, ICD-10-CM, on October 1, 2014. Hence, in the CY 2014 ESRD PPS (78 
FR 72175 through 72179), we finalized a policy that ICD-10-CM codes 
will be eligible for a co-morbidity payment adjustment where they 
crosswalk from ICD-9-CM codes that are eligible for a co-morbidity 
payment adjustment, with two exceptions.
    On April 1, 2014, PAMA was enacted. Section 212 of PAMA, titled 
``Delay in Transition from ICD-9-CM to ICD-10-CM Code Sets,'' provides 
that ``[t]he Secretary of Health and Human Services may not, prior to 
October 1, 2015, adopt ICD-10-CM code sets as the standard for code 
sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-
2(c)) and Sec.  162.1002 of title 45, Code of Federal Regulations.'' On 
May

[[Page 66155]]

1, 2014, the Secretary announced that HHS expected to issue an interim 
final rule that would require use of ICD-10-CM beginning October 1, 
2015 and continue to require use of ICD-9-CM through September 30, 
2015. This announcement is available on the CMS Web site at http://cms.gov/Medicare/Coding/ICD10/index.html.
    Since the publication of the CY 2015 ESRD PPS proposed rule on July 
11, 2014, HHS finalized the new compliance date of October 1, 2015 for 
ICD-10-CM and ICD-10-PCS in an August 4, 2014 final rule titled 
``Administrative Simplification: Change to the Compliance Date for the 
International Classification of Diseases, 10th Revision (ICD-10-CM and 
ICD-10-PCS).'' The rule also requires HIPAA covered entities to 
continue to use ICD-9 through September 30, 2015.
    Before the passage of PAMA, our policy required facilities to 
utilize ICD-10-CM codes to identify co-morbidities eligible for the co-
morbidity payment adjustment beginning October 1, 2014. However, in 
light of section 212 of PAMA and the Secretary's announcement of the 
new compliance date for ICD-10, we proposed to require use of ICD-10-CM 
to identify co-morbidities beginning on October 1, 2015, and, until 
that time, we would continue to require use of the ICD-9-CM codes to 
identify co-morbidities eligible for the co-morbidity payment 
adjustment. The ICD-9-CM codes that are eligible for the co-morbidity 
payment adjustment are listed in the crosswalk tables below.
    Because facilities will begin using ICD-10-CM during the calendar 
year to which this rule applies, we are correcting several 
typographical errors and omissions in the Tables that appeared in the 
CY 2015 ESRD PPS final rule. First, we are correcting one ICD-9-CM 
diagnosis code that was incorrectly identified due to a typographical 
error in Table 1--ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE 
(78 FR 72176). In Table 2--ONE ICD-9-CM CODE CROSSWALKS TO MULTIPLE 
ICD-10-CM CODES (78 FR 72177), we are correcting two ICD-10-CM codes 
because of typographical errors and finalizing two additional ICD-10-CM 
codes that were inadvertently omitted from the crosswalk. Lastly, in 
Table 3--MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE (78 FR 
72178), we are including 9 additional ICD-10-CM crosswalk codes for 
eligibility for the comorbidity payment adjustment. These codes were 
omitted in error from the CY 2014 ESRD PPS final rule, and we have 
furnished an updated Table 15 below reflecting the additional codes.
    We note that the ICD-10-CM codes that facilities will be required 
to use to identify eligible co-morbidities when ICD-10-CM becomes the 
required medical data code set on October 1, 2015 are those that were 
finalized in the CY 2014 ESRD PPS final rule at 78 FR 72175 to 78 FR 
72179 with the corrections and proposed additions included below.
Table 15--ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE (78 FR 
72175 Through 78 FR 72176)
    Table 15 lists all the instances in which one ICD-9-CM code 
crosswalks to one ICD-10-CM code. We finalized a policy in last year's 
rule that all identified ICD-10-CM codes would receive a co-morbidity 
adjustment with the exception of K52.81 Eosinophilic gastritis or 
gastroenteritis. We have since discovered that under the section titled 
Myelodysplastic Syndrome, ICD-9-CM code 238.7 Essential thrombocythemia 
was in accurately identified. The table below has been amended to 
accurately identify ICD-9-CM diagnostic code 238.71 Essential 
thrombocythemia.

      Table 15--One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
530.21 Descriptor Ulcer of esophagus     K22.11 Descriptor Ulcer of
 with bleeding.                           esophagus with bleeding.
535.71 Eosinophilic gastritis, with      K52.81 Eosinophilic gastritis
 hemorrhage.                              or gastroenteritis.
537.83 Angiodysplasia of stomach and     K31.811 Angiodysplasia of
 duodenum with hemorrhage.                stomach and duodenum with
                                          bleeding.
569.85 Angiodysplasia of intestine with  K55.21 Angiodysplasia of colon
 hemorrhage.                              with hemorrhage.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
003.22 Salmonella pneumonia............  A02.22 Salmonella pneumonia.
482.0 Pneumonia due to Klebsiella        J15.0 Pneumonia due to
 pneumonia.                               Klebsiella pneumoniae.
482.1 Pneumonia due to Pseudomonas.....  J15.1 Pneumonia due to
                                          Pseudomonas.
482.2 Pneumonia due to Hemophilus        J14 Pneumonia due to Hemophilus
 influenzae [H. influenzae].              influenzae.
482.32 Pneumonia due to Streptococcus,   J15.3 Pneumonia due to
 group B.                                 streptococcus, group B.
482.40 Pneumonia due to Staphylococcus,  J15.20 Pneumonia due to
 unspecified.                             staphylococcus, unspecified.
482.41 Methicillin susceptible           J15.211 Pneumonia due to
 pneumonia due to Staphylococcus aureus.  Methicillin susceptible
                                          Staphylococcus aureus.
482.42 Methicillin resistant pneumonia   J15.212 Pneumonia due to
 due to Staphylococcus aureus.            Methicillin resistant
                                          Staphylococcus aureus.
482.49 Other Staphylococcus pneumonia..  J15.29 Pneumonia due to other
                                          staphylococcus.
482.82 Pneumonia due to escherichia      J15.5 Pneumonia due to
 coli [E. coli].                          Escherichia coli.
482.83 Pneumonia due to other gram-      J15.6 Pneumonia due to other
 negative bacteria.                       aerobic Gram-negative
                                          bacteria.
482.84 Pneumonia due to Legionnaires'    A48.1 Legionnaires' disease.
 disease.
507.0 Pneumonitis due to inhalation of   J69.0 Pneumonitis due to
 food or vomitus.                         inhalation of food and vomit.
507.8 Pneumonitis due to other solids    J69.8 Pneumonitis due to
 and liquids.                             inhalation of other solids and
                                          liquids.
510.0 Empyema with fistula.............  J86.0 Pyothorax with fistula.
510.9 Empyema without mention of         J86.9 Pyothorax without
 fistula.                                 fistula.
------------------------------------------------------------------------
                              Pericarditis
------------------------------------------------------------------------
420.91 Acute idiopathic pericarditis...  I30.0 Acute nonspecific
                                          idiopathic pericarditis.
------------------------------------------------------------------------

[[Page 66156]]

 
               Hereditary Hemolytic and Sickle Cell Anemia
------------------------------------------------------------------------
282.0 Hereditary spherocytosis.........  D58.0 Hereditary spherocytosis.
282.1 Hereditary elliptocytosis........  D58.1 Hereditary
                                          elliptocytosis.
282.41 Sickle-cell thalassemia without   D57.40 Sickle-cell thalassemia
 crisis.                                  without crisis.
282.43 Alpha thalassemia...............  D56.0 Alpha thalassemia.
282.44 Beta thalassemia................  D56.1 Beta thalassemia.
282.45 Delta-beta thalassemia..........  D56.2 Delta-beta thalassemia.
282.46 Thalassemia minor...............  D56.3 Thalassemia minor.
282.47 Hemoglobin E-beta thalassemia...  D56.5 Hemoglobin E-beta
                                          thalassemia.
282.49 Other thalassemia...............  D56.8 Other thalassemias.
282.61 Hb-SS disease without crisis....  D57.1 Sickle-cell disease
                                          without crisis.
282.63 Sickle-cell/Hb-C disease without  D57.20 Sickle-cell/Hb-C disease
 crisis.                                  without crisis.
282.68 Other sickle-cell disease         D57.80 Other sickle-cell
 without crisis.                          disorders without crisis.
------------------------------------------------------------------------
                        Myelodysplastic Syndrome
------------------------------------------------------------------------
238.71 Essential thrombocythemia.......  D47.3 Essential (hemorrhagic)
                                          thrombocythemia.
238.73 High grade myelodysplastic        D46.22 Refractory anemia with
 syndrome lesions.                        excess of blasts 2.
238.74 Myelodysplastic syndrome with 5q  D46.C Myelodysplastic syndrome
 deletion.                                with isolated del(5q)
                                          chromosomal abnormality.
238.76 Myelofibrosis with myeloid        D47.1 Chronic
 metaplasia.                              myeloproliferative disease.
------------------------------------------------------------------------

Table 16--ONE ICD-9-CM CODE CROSSWALKS TO MULTIPLE ICD-10-CM CODES (78 
FR 72177 Through 78 FR 72178)
    Table 16 lists all of the instances in which one ICD-9-CM code 
crosswalks to multiple ICD-10-CM codes. We finalized a policy in last 
year's rule that all identified ICD-10-CM codes would receive a co-
morbidity adjustment with the exception of D89.2 
Hypergammaglobulinemia, unspecified. Under the section titled 
Gastrointestinal Bleeding, ICD-9-CM code 562 Diverticulosis of small 
intestine with hemorrhage was in accurately identified, as the complete 
code number is 562.02. The table below has been amended to accurately 
identify ICD-9-CM diagnostic code 562.02 Diverticulosis of small 
intestine with hemorrhage.
    Also under the section titled Gastrointestinal Bleeding, ICD-9-CM 
diagnostic code 562.13 Diverticulitis of colon with hemorrhage did not 
include a complete crosswalk to ICD-10-CM diagnostic codes. Therefore, 
we are including ICD-10-CM diagnostic codes K57.81 Diverticulitis of 
intestine, part unspecified, with perforation and abscess with bleeding 
and K57.93 Diverticulitis of intestine, part unspecified, without 
perforation or abscess with bleeding, in addition to the ICD-10-CM 
diagnostic codes K57.21, K57.33, K57.41, and K57.53, as eligible for 
the co-morbidity payment adjustment when the use of ICD-10-CM is 
required, on October 1, 2015.
    Under the section titled Pericarditis, ICD-10-CM code 130.1 
Infective pericarditis was inaccurately identified. The table below has 
been amended to accurately identify the ICD-10-CM diagnostic code I30.1 
Infective pericarditis as eligible for a co-morbidity payment 
adjustment when the use of ICD-10-CM is required, on October 1, 2015.

   Table 16--One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
562.02 Diverticulosis of small           K57.11 Diverticulosis of small
 intestine with hemorrhage.               intestine without perforation
                                          or abscess with bleeding.
                                         K57.51 Diverticulosis of both
                                          small and large intestine
                                          without perforation or abscess
                                          with bleeding.
562.03 Diverticulitis of small           K57.01 Diverticulitis of small
 intestine with hemorrhage.               intestine with perforation and
                                          abscess with bleeding.
                                         K57.13 Diverticulitis of small
                                          intestine without perforation
                                          or abscess with bleeding.
                                         K57.41 Diverticulitis of both
                                          small and large intestine with
                                          perforation and abscess with
                                          bleeding.
                                         K57.53 Diverticulitis of both
                                          small and large intestine
                                          without perforation or abscess
                                          with bleeding.
562.12 Diverticulosis of colon with      K57.31 Diverticulosis of large
 hemorrhage.                              intestine without perforation
                                          or abscess with bleeding.
                                         K57.91 Diverticulosis of
                                          intestine, part unspecified,
                                          without perforation or abscess
                                          with bleeding.
                                         K57.51 Diverticulosis of both
                                          small and large intestine
                                          without perforation or abscess
                                          with bleeding.

[[Page 66157]]

 
562.13 Diverticulitis of colon with      K57.21 Diverticulitis of large
 hemorrhage.                              intestine with perforation and
                                          abscess with bleeding.
                                         K57.33 Diverticulitis of large
                                          intestine without perforation
                                          or abscess with bleeding.
                                         K57.41 Diverticulitis of both
                                          small and large intestine with
                                          perforation and abscess with
                                          bleeding.
                                         K57.53 Diverticulitis of both
                                          small and large intestine
                                          without perforation or abscess
                                          with bleeding.
                                         K57.81 Diverticulitis of
                                          intestine, part unspecified,
                                          with perforation and abscess
                                          with bleeding.
                                         K57.93 Diverticulitis of
                                          intestine, part unspecified,
                                          without perforation or abscess
                                          with bleeding.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
513.0 Abscess of lung..................  J85.0 Gangrene and necrosis of
                                          lung.
                                         J85.1 Abscess of lung with
                                          pneumonia.
                                         J85.2 Abscess of lung without
                                          pneumonia.
------------------------------------------------------------------------
                              Pericarditis
------------------------------------------------------------------------
420.0 Acute pericarditis in diseases     A18.84 Tuberculosis of heart.
 classified elsewhere.                   I32 Pericarditis in diseases
                                          classified elsewhere.
                                         M32.12 Pericarditis in systemic
                                          lupus erythematosus.
420.90 Acute pericarditis, unspecified.  I30.1 Infective pericarditis.
                                         I30.9 Acute pericarditis,
                                          unspecified.
420.99 Other acute pericarditis........  I30.8 Other forms of acute
                                          pericarditis.
                                         I30.9 Acute pericarditis,
                                          unspecified.
------------------------------------------------------------------------
               Hereditary Hemolytic and Sickle Cell Anemia
------------------------------------------------------------------------
282.2 Anemias due to disorders of        D55.0 Anemia due to glucose-6-
 glutathione metabolism.                  phosphate dehydrogenase [G6PD]
                                          deficiency.
                                         D55.1 Anemia due to other
                                          disorders of glutathione
                                          metabolism.
282.3 Other hemolytic anemias due to     D55.2 Anemia due to disorders
 enzyme deficiency.                       of glycolytic enzymes.
                                         D55.3 Anemia due to disorders
                                          of nucleotide metabolism.
                                         D55.8 Other anemias due to
                                          enzyme disorders.
                                         D55.9 Anemia due to enzyme
                                          disorder, unspecified.
282.42 Sickle-cell thalassemia with      D57.411 Sickle-cell thalassemia
 crisis.                                  with acute chest syndrome.
                                         D57.412 Sickle-cell thalassemia
                                          with splenic sequestration.
                                         D57.419 Sickle-cell thalassemia
                                          with crisis, unspecified.
282.62 Hb-SS disease with crisis.......  D57.00 Hb-SS disease with
                                          crisis, unspecified.
                                         D57.01 Hb-SS disease with acute
                                          chest syndrome.
                                         D57.02 Hb-SS disease with
                                          splenic sequestration.
282.64 Sickle-cell/Hb-C disease with     D57.211 Sickle-cell/Hb-C
 crisis.                                  disease with acute chest
                                          syndrome.
                                         D57.212 Sickle-cell/Hb-C
                                          disease with splenic
                                          sequestration.
                                         D57.219 Sickle-cell/Hb-C
                                          disease with crisis,
                                          unspecified.
282.69 Other sickle-cell disease with    D57.811 Other sickle-cell
 crisis.                                  disorders with acute chest
                                          syndrome.
                                         D57.812 Other sickle-cell
                                          disorders with splenic
                                          sequestration.
                                         D57.819 Other sickle-cell
                                          disorders with crisis,
                                          unspecified.
------------------------------------------------------------------------
                          Monoclonal Gammopathy
------------------------------------------------------------------------
273.1 Monoclonal paraproteinemia.......  D47.2 Monoclonal gammopathy.
                                         D89.2 Hypergammaglobulinemia,
                                          unspecified.
------------------------------------------------------------------------
                        Myelodysplastic Syndrome
------------------------------------------------------------------------
238.72 Low grade myelodysplastic         D46.0 Refractory anemia without
 syndrome lesions.                        ring sideroblasts, so stated.
                                         D46.1 Refractory anemia with
                                          ring sideroblasts.
                                         D46.20 Refractory anemia with
                                          excess of blasts, unspecified.
                                         D46.21 Refractory anemia with
                                          excess of blasts 1.
                                         D46.4 Refractory anemia,
                                          unspecified.
                                         D46.A Refractory cytopenia with
                                          multilineage dysplasia.
                                         D46.B Refractory cytopenia with
                                          multilineage dysplasia and
                                          ring sideroblasts.
238.75 Myelodysplastic syndrome,         D46.9 Myelodysplastic syndrome,
 unspecified.                             unspecified.
                                         D46.Z Other myelodysplastic
                                          syndromes.
------------------------------------------------------------------------


[[Page 66158]]

Table 17--MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE (78 
FR 72178)
    Table 17 displays the crosswalk where multiple ICD-9-CM codes 
crosswalk to one ICD-10-CM code. We finalized a policy in last year's 
rule that all of the ICD-10-CM codes listed in Table 3 would be 
eligible for the co-morbidity payment adjustment. Under the section 
titled Gastrointestinal Bleeding, nine ICD-10-CM codes (K25.0 Acute 
gastric ulcer with hemorrhage, K25.2 Acute gastric ulcer with both 
hemorrhage and perforation, K25.4 Chronic or unspecified gastric ulcer 
with hemorrhage, K25.6 Chronic or unspecified gastric ulcer with both 
hemorrhage and perforation, K26.0 Acute duodenal ulcer with hemorrhage, 
K26.2 Acute duodenal ulcer with both hemorrhage and perforation, K26.4 
Chronic or unspecified duodenal ulcer with hemorrhage, K26.6 Chronic or 
unspecified duodenal ulcer with both hemorrhage and perforation, and 
K27.0 Acute peptic ulcer, site unspecified, with hemorrhage) and the 
corresponding ICD-9-CM codes were inadvertently omitted from the 
crosswalk. Therefore, we are finalizing ICD-10-CM diagnostic codes--
K25.0, K25.2, K25.4, K25.6, K26.0, K26.2, K26.4, K26.6, K27.0--will be 
eligible for the comorbidity payment adjustment beginning October 1, 
2015. We also finalize that the corresponding ICD-9-CM codes will be 
eligible for the comorbidity adjustment through September 30, 2015.

    Table 17--Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
531.00 Acute gastric ulcer with          K25.0 Acute gastric ulcer with
 hemorrhage, without mention of           hemorrhage.
 obstruction.
531.01 Acute gastric ulcer with
 hemorrhage, with obstruction.
531.20 Acute gastric ulcer with          K25.2 Acute gastric ulcer with
 hemorrhage and perforation, without      both hemorrhage and
 mention of obstruction.                  perforation.
531.21 Acute gastric ulcer with
 hemorrhage and perforation, with
 obstruction.
531.40 Chronic or unspecified gastric    K25.4 Chronic or unspecified
 ulcer with hemorrhage, without mention   gastric ulcer with hemorrhage.
 of obstruction.
531.41 Chronic or unspecified gastric
 ulcer with hemorrhage, with
 obstruction.
531.60 Chronic or unspecified gastric    K25.6 Chronic or unspecified
 ulcer with hemorrhage and perforation,   gastric ulcer with both
 without mention of obstruction.          hemorrhage and perforation.
531.61 Chronic or unspecified gastric
 ulcer with hemorrhage and perforation,
 with obstruction.
532.00 Acute duodenal ulcer with         K26.0 Acute duodenal ulcer with
 hemorrhage, without mention of           hemorrhage.
 obstruction.
532.01 Acute duodenal ulcer with
 hemorrhage, with obstruction.
532.20 Acute duodenal ulcer with         K26.2 Acute duodenal ulcer with
 hemorrhage and perforation, without      both hemorrhage and
 mention of obstruction.                  perforation.
532.21 Acute duodenal ulcer with
 hemorrhage and perforation, with
 obstruction.
532.40 Chronic or unspecified duodenal   K26.4 Chronic or unspecified
 ulcer with hemorrhage, without mention   duodenal ulcer with
 of obstruction.                          hemorrhage.
532.41 Chronic or unspecified duodenal
 ulcer with hemorrhage, with
 obstruction.
532.60 Chronic or unspecified duodenal   K26.6 Chronic or unspecified
 ulcer with hemorrhage and perforation,   duodenal ulcer with both
 without mention of obstruction.          hemorrhage and perforation.
532.61 Chronic or unspecified duodenal
 ulcer with hemorrhage and perforation,
 with obstruction.
533.00 Acute peptic ulcer of             K27.0 Acute peptic ulcer, site
 unspecified site with hemorrhage,        unspecified, with hemorrhage.
 without mention of obstruction.
533.01 Acute peptic ulcer of
 unspecified site with hemorrhage, with
 obstruction.
533.20 Acute peptic ulcer of             K27.2 Acute peptic ulcer, site
 unspecified site with hemorrhage and     unspecified, with both
 perforation, without mention of          hemorrhage and perforation.
 obstruction.
533.21 Acute peptic ulcer of
 unspecified site with hemorrhage and
 perforation, with obstruction.
533.40 Chronic or unspecified peptic     K27.4 Chronic or unspecified
 ulcer of unspecified site with           peptic ulcer, site
 hemorrhage, without mention of           unspecified, with hemorrhage.
 obstruction.
533.41 Chronic or unspecified peptic
 ulcer of unspecified site with
 hemorrhage, with obstruction.
533.60 Chronic or unspecified peptic     K27.6 Chronic or unspecified
 ulcer of unspecified site with           peptic ulcer, site
 hemorrhage and perforation, without      unspecified, with both
 mention of obstruction.                  hemorrhage and perforation.
533.61 Chronic or unspecified peptic
 ulcer of unspecified site with
 hemorrhage and perforation, with
 obstruction.
534.00 Acute gastrojejunal ulcer with    K28.0 Acute gastrojejunal ulcer
 hemorrhage, without mention of           with hemorrhage.
 obstruction.
534.01 Acute gastrojejunal ulcer, with
 hemorrhage, with obstruction.
534.20 Acute gastrojejunal ulcer with    K28.2 Acute gastrojejunal ulcer
 hemorrhage and perforation, without      with both hemorrhage and
 mention of obstruction.                  perforation.
534.21 Acute gastrojejunal ulcer with
 hemorrhage and perforation, with
 obstruction.

[[Page 66159]]

 
534.40 Chronic or unspecified            K28.4 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage,     gastrojejunal ulcer with
 without mention of obstruction.          hemorrhage.
534.41 Chronic or unspecified
 gastrojejunal ulcer, with hemorrhage,
 with obstruction.
534.60 Chronic or unspecified            K28.6 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage      gastrojejunal ulcer with both
 and perforation, without mention of      hemorrhage and perforation.
 obstruction.
534.61 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage
 and perforation, with obstruction.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
482.30 Pneumonia due to Streptococcus,   J15.4 Pneumonia due to other
 unspecified.                             streptococci.
482.31 Pneumonia due to Streptococcus,
 group A.
482.39 Pneumonia due to other
 Streptococcus.
482.81 Pneumonia due to anaerobes......  J15.8 Pneumonia due to other
                                          specified bacteria.
482.89 Pneumonia due to other specified
 bacteria.
------------------------------------------------------------------------

    We received no comments on our proposals to amend or modify our 
ICD-9-CM/ICD-10-CM crosswalk and, therefore, we are finalizing these 
changes as proposed.

III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)

A. Background

    For more than 30 years, monitoring the quality of care provided by 
dialysis facilities to patients with end-stage renal disease (ESRD) has 
been an important component of the Medicare ESRD payment system. The 
ESRD Quality Incentive Program (QIP) is the most recent step in 
fostering improved patient outcomes by establishing incentives for 
dialysis facilities to meet or exceed performance standards established 
by CMS. The ESRD QIP is authorized by section 1881(h) of the Social 
Security Act (the Act), which was added by section 153(c) of the 
Medicare Improvements for Patients and Providers Act (MIPPA).
    Specifically, section 1881(h) requires the Secretary to establish 
an ESRD QIP by (i) selecting measures; (ii) establishing the 
performance standards that apply to the individual measures; (iii) 
specifying a performance period with respect to a year; (iv) developing 
a methodology for assessing the total performance of each facility 
based on the performance standards with respect to the measures for a 
performance period; and (v) applying an appropriate payment reduction 
to facilities that do not meet or exceed the established Total 
Performance Score (TPS). The proposed rule, titled ``Medicare Program; 
End-Stage Renal Disease Prospective Payment System, Quality Incentive 
Program, and Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies'' (79 FR 40208 through 40315), (hereinafter referred to as the 
CY 2015 ESRD PPS Proposed Rule), was published in the Federal Register 
on July 11, 2014, with a comment period that ended on September 2, 
2014. In that proposed rule, we made proposals for the ESRD QIP, 
including adding new measures, revising existing measures; refining the 
scoring methodology; modifying the program's public reporting 
requirements; continuing the data validation pilot program for CROWNWeb 
and introducing a validation feasibility study for the NHSN Bloodstream 
Infection clinical measure. We received 46 public comments on the ESRD 
QIP proposals, including comments from ESRD facilities; national renal 
groups, nephrologists and patient organizations; patients; 
manufacturers; health care systems; and nurses.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the program. Comments 
related to the paperwork burden are addressed in the ``Collection of 
Information Requirements'' section of this final rule. Comments related 
to the impact analysis are addressed in the ``Economic Analyses'' 
section of this final rule.

B. Considerations in Updating and Expanding Quality Measures Under the 
ESRD QIP

    Throughout the past decade, Medicare has been transitioning from a 
program that pays for healthcare based on particular services furnished 
to a beneficiary to a program that bases payments to providers and 
suppliers on the quality of services they furnish. By paying for the 
quality of care rather than simply the quantity of care, and by 
focusing on better care and lower costs through improvement, prevention 
and population health, expanded healthcare coverage, and enterprise 
excellence, we are strengthening the healthcare system while also 
advancing the National Strategy for Quality Improvement in Health Care 
(that is, the National Quality Strategy (NQS)). We are also working to 
update a set of domains and specific quality measures for our Value 
Based Purchasing (VBP) programs, and to link the aims of the NQS with 
our payment policies on a national scale. We are working in partnership 
with beneficiaries, providers, advocacy groups, the National Quality 
Forum (NQF), the Measures Application Partnership, operating divisions 
within the Department of Health and Human Services (HHS), and other 
stakeholders to develop new measures where gaps exist, refine measures 
where necessary, and remove measures when appropriate. We are also 
collaborating with stakeholders to ensure that the ESRD QIP serves the 
needs of our beneficiaries and also advances the goals of the NQS to 
improve the overall quality of care, improve the health of the U.S. 
population, and reduce the cost of quality healthcare.\3\
---------------------------------------------------------------------------

    \3\ 2013 Annual Progress Report to Congress: National Strategy 
for Quality Improvement in Health Care, http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm.
---------------------------------------------------------------------------

    We believe that the development of an ESRD QIP that is successful 
in supporting the delivery of high-quality healthcare services in 
dialysis facilities is paramount. We seek to adopt measures for the 
ESRD QIP that promote better, safer, and more coordinated care. Our 
measure development and selection activities for the ESRD QIP take into 
account national priorities such as those established by the HHS 
Strategic Plan (http://www.hhs.gov/strategic-plan/priorities.html), the 
NQS (http://

[[Page 66160]]

www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm), and the HHS 
National Action Plan to Prevent Healthcare Associated Infections (HAIs) 
(http://www.hhs.gov/ash/initiatives/hai/esrd.html). To the extent 
feasible and practicable, we have sought to adopt measures that have 
been endorsed by a national consensus organization; recommended by 
multi-stakeholder organizations; and developed with the input of 
providers, beneficiaries, health advocacy organizations, and other 
stakeholders.
    We received a number of general comments on our proposals, which we 
summarize and respond to here.
    Comment: Some commenters were concerned about the number of 
measures used in the ESRD QIP. Commenters stated that as the number of 
measures in the ESRD QIP grows, so do the costs to providers and CMS. 
Commenters also stated that implementing too many measures dilutes the 
impact of poor performance on individual measures in the ESRD QIP. 
Commenters recommended that CMS ``strive to include measures that 
address multiple domains of CMS's VBP programs and are not 
duplicative.''
    Response: We understand that there are a number of measures we 
proposed to be added to the ESRD QIP. One of the reasons we proposed to 
adopt measures for both PY 2017 and PY 2018 in the CY 2015 ESRD PPS 
Proposed Rule this rule (and why the majority of the new measures were 
proposed for adoption in PY 2018) was to provide facilities with a 
sufficient amount of time to implement processes that would enable them 
to successfully report the measure data and achieve high scores on the 
measures. Although we recognize that adopting more measures in the ESRD 
QIP increases costs to facilities as well as CMS, we believe these 
increased costs are outweighed by the benefits to patients of 
incentivizing quality care in the domains that the measures cover. We 
further note that the new measures adopted for the ESRD QIP will not 
dilute the weight of the PY 2017 clinical measure set or the PY 2018 
clinical measure set, as compared to the weights that we assigned to 
the PY 2016 clinical measure set. The PY 2017 program contains the same 
amount of clinical measures as the PY 2016 program, and the clinical 
measure sets receive the same weight in both programs. Additionally, 
the weight of the clinical measures in the PY 2018 program will be 
increased from 75 percent of a facility's TPS (as specified in the PY 
2017 program) to 90 percent, and we believe that this added weight will 
preserve the program's strong incentives for facilities to achieve high 
scores on the clinical measures. Finally, we agree with commenters who 
recommend that, where possible, individual ESRD QIP measures should 
span multiple domains. We agree that adopting measures that span 
multiple domains, such as the SRR measure, allows us to address 
multiple aspects of quality, reduces the total number of measures in 
the ESRD QIP, and presents less burden for facilities than adopting 
multiple measures that each address a single domain. Going forward, we 
will continue to strive to ensure that the ESRD QIP measure set is as 
parsimonious as possible.
    Comment: Some commenters requested that CMS explore new methods of 
adjusting quality metrics for patient case mix, because ESRD QIP 
measures, as currently specified, place facilities treating sicker 
patients at a disadvantage. For example, dialysis patients who are 
admitted to nursing homes and long-term care hospitals (LTCHs) often 
still receive their ESRD treatment at the dialysis facility. These 
patients are ``inherently sicker and require more care than the general 
dialysis population.'' Therefore, dialysis facilities that only treat 
patients who are admitted to LTCHs or nursing homes are at a 
disadvantage under the current methodology. Commenter stated that 
comparing facilities with similar case mixes would be a fairer way to 
evaluate facility performance.
    Response: We appreciate the commenters' concerns regarding the 
exploration of new methods of adjusting for patient case mix to ensure 
facilities are not penalized for caring for sicker patients. The SRR 
and STrR clinical measures are risk-adjusted on the basis of patient 
case mix. We make an effort to adjust for case mix where clinical 
evidence and methodological rigor indicate doing so is appropriate, and 
we consider the appropriateness of risk-adjusting for case mix as part 
of our ongoing reevaluation of quality measures implemented in the ESRD 
QIP.
    Comment: A commenter was concerned that many ESRD QIP measures 
include patients who are only treated at a facility for a short period 
of time in the facility. The commenter believes that outcomes for these 
patients should be attributed to other facilities (that is, other 
dialysis facilities and hospitals), rather than a facility that had a 
limited opportunity to provide care for a patient.
    Response: We believe the measure specifications appropriately 
account for patients seen at a facility for a limited period of time by 
implementing exclusion criteria specific to quality measures as deemed 
appropriate. For example, the STrR measure excludes all patients who 
have not received treatment at a facility for 60 days. The 
Hypercalcemia measure requires 30 days of treatment in the facility. 
The Kt/V dialysis adequacy measures exclude patient-months where fewer 
than 7 treatments are billed for the patient, and the vascular access 
measures require a minimum of 4 months of claims. An analogous 
exclusion is not appropriate for the SRR, where facility attribution is 
defined by a hospital discharge, and not time in treatment at a 
facility.
    Comment: One commenter recommended that CMS include the 
Standardized Mortality Ratio (SMR) in the ESRD QIP, because the 
``medical literature has shown SMR is more indicative of the quality of 
care received at a facility than Standardized Readmissions Ratio (SRR) 
or Standardized Transfusion Ratio (STrR).''
    Response: We thank the commenter for the input. We will consider 
proposing to adopt the SMR measure for future payment years.
    Comment: One commenter recommended that CMS include a measure of 
the percent of eligible patients on the transplant wait-list in the 
ESRD QIP, because this indicator of patient status ``is under the 
immediate auspices of the dialysis team.'' Other commenters recommended 
that CMS develop one or more measures on fluid management because this 
area is a high priority concern for clinicians, patients, and 
facilities. Another commenter recommended that CMS develop a measure 
evaluating the employment rate among ESRD patients ages 18-54, because 
the ability to maintain regular employment is an indicator of both 
positive clinical and psychosocial outcomes in the ESRD population. 
Commenter stated that monitoring employment statistics among the ESRD 
population will shift facility focus toward patients' overall well-
being rather than just clinical outcomes.
    Response: We thank the commenters for their input and will take 
their recommendations into consideration as we proceed with our measure 
development work.
    Comment: One commenter recommended CMS fully test its system for 
calculating ESRD QIP scores because in the past 2 years scores on the 
National Health Safety Network (NHSN) Bloodstream Infection and 
Dialysis Adequacy measures have been miscalculated.
    Response: We agree that it is essential to calculate ESRD QIP 
measure scores correctly. The purpose of the annual

[[Page 66161]]

Preview Period process is to give facilities the opportunity to 
identify scoring issues and request score changes. We further note that 
scoring issues related to the NHSN and Dialysis Adequacy measures were 
resolved via the Preview Period processes, and we take this as an 
indication that the process is working as intended.
    Comment: One commenter supported CMS's goal of improving 
coordination of care for ESRD patients, but stated that the adoption of 
measures that may implicate providers outside of the dialysis facility 
should be delayed until renal-specific accountable care organizations 
can be established because without an incentive to cooperate, other 
healthcare providers may not share necessary information with dialysis 
facilities. Commenters also stated that many facilities lack the tools 
necessary to effectively address care coordination. Commenters 
supported the Comprehensive ESRD Care Initiative currently in 
development, and recommended that CMS delay the adoption of any care 
coordination measures until results are available from that model.
    Response: We appreciate stakeholder support of the ESRD Seamless 
Care Organization (ESCO) model. However, we do not believe that the 
ESCO's focus on coordination of care should preclude the ESRD QIP from 
implementing measures intended to improve care coordination, because 
collecting and analyzing results from the model will take a number of 
years, and it may not be possible to extrapolate results obtained from 
the small sample of facilities included in the model to all facilities 
nationwide. In addition, by including measures on coordination of care 
in the ESRD QIP before the ESCOs are in place, we will be able to 
positively impact care coordination for a large percentage of ESRD 
patients in the near future, and will be able to collect important data 
on care coordination from a wide array of facilities, which would 
better inform its future model development efforts.
    Comment: One commenter recommended that CMS develop new measures on 
anemia management because transfusions have increased as facilities' 
utilization of ESAs has declined.
    Response: We agree with the commenter than anemia management is a 
major concern among patients with ESRD, and will continue to take this 
into account in future measure development. We also note that the ESRD 
QIP currently includes a measure on anemia management and ESA dosage, 
the Anemia Management reporting measure, and that the intention of the 
STrR measure we are adopting for the PY 2018 program is to monitor and 
prevent transfusions related to underutilization of ESAs.
    Comment: Many commenters recommended modifying the Vascular Access 
Type measures such that facilities are not penalized when grafts are 
placed in certain patients (for example, diabetics with intrinsic 
vascular disease). Commenters stated that outcomes for these patients 
are comparable when grafts or fistulae are used, and that the absence 
of a graft measure in the Vascular Access Type measure topic 
disincentivizes a clinically appropriate access that is selected after 
consultation with patients. As an intermediate step, some commenters 
recommended assigning the catheter and fistula measures, respectively, 
two-thirds and one-third the weight of the Vascular Access Type measure 
topic.
    Response: The current NQF-endorsed vascular access quality measures 
adopted for use in the program (NQF #0257: Hemodialysis Vascular 
Access--Maximizing Placement of Arterial Venous Fistula (AVF) and NQF 
#0256: Hemodialysis Vascular Access--Minimizing Use of Catheters as 
Chronic Dialysis Access) consider Arterial Venous (AV) fistula use as a 
positive outcome, prolonged use of tunneled catheter as a negative 
outcome, and incorporates the clinical equipoise regarding AV grafts, 
effectively creating three categories of outcome (AV fistula = 
positive; AV graft = neutral; prolonged use of tunneled catheter = 
negative). We believe this paradigm to be generally appropriate. 
Positive incentives are provided for AV fistula creation, but dialysis 
providers must remain cognizant of the clinical impact of prolonged use 
of tunneled catheters because of the negative incentive provided for 
that outcome. This paired incentive structure reflects consensus best 
practice, and supports maintenance of the gains in vascular access 
success achieved via the Fistula First Project over the last decade. 
Furthermore, a recent large meta-analysis demonstrates poorer survival 
with AV graft compared to AV fistula, raising important questions about 
the commenter's assertion of clinical appropriateness of AV graft as an 
alternative to AV fistula.\4\ We appreciate the commenters' suggestion 
to revise the relative weights of the catheter and fistula components 
of the Vascular Access Type measure topic to increase the focus on 
``catheter last''. We will take this into consideration in as we 
continue to revise and refine the ESRD QIP measure set, and we may use 
future rulemaking to propose changes to the measures' relative weights.
---------------------------------------------------------------------------

    \4\ Ravani, J Am Soc Nephrol 24: 465-473, 2013.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS exclude patients with a 
limited life expectancy from the Vascular Access Type: Catheter >=90 
days clinical measure.
    Response: We appreciate the commenters' suggestion to exclude 
patients with a limited life expectancy from the measure denominator 
and will consider whether this type of revision is feasible and 
appropriate for this measure.
    Comment: Some commenters recommended that CMS consider making 
incentive payments to facilities meeting and/or exceeding benchmarks in 
the ESRD QIP in addition to penalizing facilities that do not meet or 
make progress toward the standards, because the current incentive 
program only withholds funding from the nation's kidney care 
infrastructure. One commenter recommended working to find ways, within 
the statutory authorities of the Act, to provide facilities with 
payment incentives for high performance in the ESRD QIP. The commenter 
stated that doing so is consistent with the principle that value-based 
purchasing programs should ``redistribute to providers all of the 
funding that was set aside in accordance with their performance on the 
quality measures.''
    Response: We do not believe that we have the statutory authority to 
provide facilities with incentive payments for high performance on ESRD 
QIP measures.
    Comment: One commenter recommended that CMS revise the nomenclature 
it uses to categorize measures in the ESRD QIP because the current 
terminology is confusing and may contribute to a lack of patient 
understanding. The commenter stated that the use of the terms 
``clinical'' and ``reporting'' do not align with the commonly accepted 
meaning of those words. The commenter recommended that CMS replace the 
term ``clinical measures'' with ``accountability measures'' and replace 
the term ``reporting measures'' with ``required data submission.''
    Response: We disagree that the terms ``clinical measure'' and 
``reporting measure'' are confusing. Specifically, the term 
``clinical'' indicates that the clinical measures pertain to clinical 
care and aspects of the clinical environment that improve patient care. 
Furthermore, the term ``reporting'' indicates that reporting measures 
pertain to how well

[[Page 66162]]

a facility meets requirements for reporting data to CMS. Accordingly, 
we do not believe it is necessary to revise the nomenclature used to 
categorize measures in the ESRD QIP.
    Comment: Some commenters were concerned that the ESRD QIP lacks a 
strategic vision and encouraged CMS to consult with the ESRD community 
to establish a clear set of principles and goals for the program. 
Commenter stated that the program currently seems to be focusing on 
adding new measures without considering whether each measure will drive 
improvements in dialysis care.
    Response: The goals of the ESRD QIP closely align with the goals of 
the CMS Quality Strategy (the CMSQS). The CMSQS is designed to guide 
the activities of various components throughout the Agency and is 
aligned with the Department of Health and Human Services' (HHS') 
National Quality Strategy (the NQS). The six goals of the CMSQS are 
organized around NQS' three broad aims and drive and orient all of 
CCSQ's quality improvement programs, including the ESRD QIP, insofar as 
these aims align with the statutory goals of the program. The following 
figure illustrates the six goals of the CMSQS, which have been informed 
by extensive consultation with stakeholders across the country:

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR06NO14.013

BILLING CODE 4120-01-C

The strategic vision of the ESRD QIP is to adopt measures that address 
each of these goals. The following table illustrates the program's 
efforts to implement this strategic vision:

     Table 18--ESRD QIP Alignment With CMSQS Quality Strategy Goals
------------------------------------------------------------------------
 
------------------------------------------------------------------------
           CMSQS Goal                             Measure
------------------------------------------------------------------------
Promote effective prevention and  Kt/V Measure Topic  Hemodialysis.
 treatment of chronic disease.                        Peritoneal
                                                       Dialysis.
                                                      Pediatric
                                                       Hemodialysis.
                                                      Pediatric
                                                       Peritoneal
                                                       Dialysis.
                                  Vascular Access     Fistula.
                                   Type Measure       Catheter for at
                                   Topic.              Least 90 Days.
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
                                  Mineral Metabolism Reporting.
                                  Anemia Management Reporting.
                                  Hypercalcemia.
                                  Standardized Transfusion Ratio.
                                  Screening for Depression and Follow Up
                                   reporting.
                                  Pain Assessment and Follow-Up
                                   reporting.
Strengthen person and family      ICH CAHPS Reporting (PY 2017) and
 engagement as partners in their   Clinical (PY 2018).
 care.
Promote effective communication   Standardized Readmissions Ratio.
 and coordination of care.
Make care safer by reducing harm  NHSN Bloodstream Infection in
 caused in the delivery of care.   Hemodialysis Outpatients.
                                  NHSN Healthcare Personnel Influenza
                                   Vaccination reporting.
Work with communities to promote  None.
 best practices of healthy
 living.
Making care affordable..........  None.
------------------------------------------------------------------------


[[Page 66163]]

As the table above illustrates, the ESRD QIP has not proposed or 
finalized measures for the following quality goals:

     Work with communities to promote the best practices of 
healthy living.
     Making care affordable.

We will evaluate these remaining goals, particularly the goal of making 
care affordable, to assess their appropriateness as policy goals for 
the ESRD QIP. In addition to evaluating the ESRD QIP measure set in 
terms of how well it addresses legislative mandates, NQS and CMSQS 
goals, we are also evaluating how well the measure set addresses policy 
priorities that stakeholders have brought to our attention. We continue 
to engage both external and internal stakeholders on a regular basis, 
to communicate the strategic vision of the program as well as to engage 
in dialogue useful to the development and implementation of policy that 
will effectively create improvements in the quality of care provided to 
ESRD beneficiaries.
    Comment: Some commenters were concerned that CMS is proposing to 
adopt a number of measures that have not been reviewed or endorsed by 
NQF. One commenter stated that the Social Security Act authorizes the 
program to adopt measures that have not been endorsed by NQF, but the 
commenter recommended that this authority should only be exercised 
rarely.
    Response: As described above, we may adopt non-NQF-endorsed 
measures under the ESRD QIP exception authority in section 
1881(h)(2)(B)(ii) of the Act. This provision provides that, in the case 
of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
Although we proposed some measures that are not currently NQF-endorsed, 
they are pending NQF endorsement, and we are actively seeking this 
endorsement. We also considered other available measures that have been 
endorsed by the NQF and found no other feasible and practical measures. 
In addition, the MAP has supported or conditionally supported all of 
the measures proposed for the PY 2017 and PY 2018 ESRD QIP.
    Comment: Some commenters were concerned about the process CMS uses 
to develop measures for ESRD. Commenters stated that the measure 
development process does not consider the day-to-day operations of a 
dialysis facility, appears to be pre-determined and closed to influence 
from the ESRD community, is insufficiently transparent, and is not 
focused on areas that are of concern to the ESRD community.
    Response: Our development process makes use of the CMS Measures 
Management System Blueprint, which is publicly available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MeasuresManagementSystemBlueprint.html. The CMS 
Blueprint guides measure development through all stages in order to 
prepare the measures for public comment, and submission to NQF. 
Development work begins with an extensive review of relevant 
literature, which is then presented to a panel of technical experts 
(members of which are selected after a public call for nominations) 
convened for the purpose of providing guidance to our quality measure 
development contractor. These panels typically include practicing 
nephrologists and nurses, ESRD researchers, and other experts who may 
meaningfully contribute to the content area under discussion. The 
results of their deliberations are posted publicly on a CMS Web site, 
and any measures developed through this process undergo a 30-day public 
comment period prior to being considered for inclusion in the ESRD QIP. 
We have additionally submitted most of our measures to NQF for 
endorsement, and as part of that process, we must submit extensive 
documentation supporting the measure specifications, and the measure is 
scrutinized extensively by a steering committee to assess measure 
importance, scientific acceptability, feasibility, and usability. 
Furthermore, we propose the measures through our annual notice and 
comment rulemaking process to allow for public comments.
    Comment: One commenter recommended CMS ensure the integrity of the 
data used to develop measures and score facilities on measures in the 
ESRD QIP. Other commenters did not support the use of multiple data 
sources in the ESRD QIP.
    Response: We are continuing to work diligently to ensure the 
validity and reliability of data that is used to calculate facility 
scores and to develop measures for the ESRD QIP. We believe that our 
efforts to solicit stakeholder feedback through the CROWNWeb Users 
Group have dramatically accelerated our efforts on this, and we looking 
forward to the continued collaboration.
    We believe that our measures are currently valid and reliable, and 
use a variety of tools to assess reliability and validity. We base our 
measure specifications on rigorous clinically peer-reviewed findings, 
convene technical expert panels of clinicians and statistical experts, 
run medical record reliability pilot tests, and submit measures to the 
Secretary's consensus-based endorsement entity and the Measures 
Application Partnership for review. We use these tools as appropriate 
and feasible to ensure validity and reliability.
    We believe that it is appropriate to use more than one data source 
to collect ESRD QIP measure data because the use of multiple data 
sources ensures that measure scores are calculated using the most 
reliable data source available, and that data from one source can be 
validated against data from another source.
    Comment: A commenter recommended that CMS align measurement 
methodologies and reporting requirements across CMS ESRD quality 
programs. Commenter stated that current misalignments are creating 
confusion and are burdening facility staff.
    Response: The ESRD QIP, Dialysis Facility Compare program, and the 
Dialysis Facility Reports program have different purposes, which in 
certain cases necessitates divergent measure specifications and scoring 
methodologies. We are currently in the process of reviewing measure 
specifications and scoring methodologies across the three programs, and 
we will continue to create alignments where appropriate.
    Comment: A number of commenters recommended applying six exclusion 
criteria to all measures in the ESRD QIP unless there is a clinical or 
operational reason not to do so: (1) Beneficiaries who die within the 
applicable month; (2) Beneficiaries who receive fewer than 7 treatments 
in a month; (3) Beneficiaries receiving home dialysis therapy who miss 
their in-center appointments when there is a documented good faith 
effort to have them participate in such a visit during the applicable 
month; (4) Transient dialysis patients; (5) Pediatric patients (unless 
the measure is specific to pediatric patients); and (6) Kidney 
transplant recipients with a functioning graft. Commenter also 
recommended that patients should only be attributed to a facility after 
being assigned to the facility for 60 days, and that the dialysis 
adequacy measures should exclude patients with fewer than four eligible 
claim months.

[[Page 66164]]

    Response: We considered applying these six global exclusion 
criteria in response to comments on the CY 2014 ESRD PPS proposed rule 
(78 FR 72192). We agree with commenters that exclusion criteria for the 
ESRD QIP measures should be consistent, where feasible. We further 
believe, however, that exclusions also need to take into account the 
population to which a measure applies and the settings for which the 
measures were developed (for example, in-center hemodialysis as opposed 
to home hemodialysis). As stated in previous rules, we will continue to 
look for ways to align exclusion criteria for measures in the ESRD QIP, 
as long as there is evidence to support such consistency.
    Comment: Commenter stated that measures in the ESRD QIP 
predominantly focus on in-center dialysis. Commenter recommended 
developing new measures, and modifying existing measures, to take 
greater account of peritoneal and home hemodialysis. Commenter further 
recommended that measure development activities should utilize data 
from patients on home dialysis, rather than extrapolating data from 
patients on in-center dialysis. Commenter stated that this is 
particularly important for measures of dialysis adequacy, because 
patients on home hemodialysis receive four to six treatments per week, 
while patients on in-center hemodialysis receive three treatments per 
week on average. Other commenters recommended that CMS increase home 
hemodialysis patients' representation in current ESRD QIP measures, 
particularly in measures directly assessing quality of care and patient 
experience, such as the ICH CAHPS survey. These commenters stated that 
home hemodialysis patients represent 10 percent of the ESRD population 
and are excluded from most measures currently used in the program.
    Response: We appreciate commenters' interest in ensuring that home 
dialysis patients are appropriately included in the ESRD QIP. Because 
home hemodialysis patients currently comprise a small percentage of the 
ESRD population, we have confronted challenges in developing quality 
measures that can meaningfully distinguish facility performance in the 
quality of care furnished to these patients, and many of our existing 
measures specifically exclude home hemodialysis patients from the 
denominator for this reason. However, we remain interested in exploring 
ways to capture these patients in the ESRD QIP, including developing 
measures that would assess their quality of care.
    Comment: Some commenters recommended that CMS reevaluate the 
Dialysis Adequacy measure topic, because the measures assess the 
quantity and sufficiency of dialysis, but do not account for the 
patient's overall health. Commenters stated that this results in a 
focus on meeting the measure standard, rather than achieving the Kt/V 
level that is best for the individual patient.
    Response: The current measure specifications are informed by the 
KDOQI clinical practice guidelines and the current body of evidence 
about respective clinical thresholds. These minimum standards do not 
specifically preclude individualization of care, but treatment should 
not fall below the minimum standards supported by evidence and 
guidelines.
    Comment: One commenter was concerned that the ESRD QIP 
overemphasizes laboratory-based measures and stated that measures that 
assess a patient's quality of life are more meaningful.
    Response: We recognize that the majority of the measures that we 
previously adopted for the ESRD QIP involve laboratory measurements 
(for example, the Hypercalcemia and Dialysis Adequacy clinical 
measures). However, we also note that we are finalizing many measures 
in this final rule that are not laboratory-based measures, such as the 
SRR, STrR, and ICH CAHPS clinical measures, as well as the Screening 
for Depression and Follow-Up and the Pain Assessment and Follow-Up 
reporting measures. These non-laboratory based measures are intended to 
address patients' quality of life by assessing patient and family 
engagement in their care, the clinical care patients receive, and 
conditions impacting patients' ability to participate in activities of 
daily living.
    Comment: One commenter recommended CMS develop a ``palliative care 
exclusion'' to avoid unfairly penalizing facilities for tailoring a 
very ill patient's care to the patient's informed preferences. Another 
commenter stated that the ESRD QIP does not meet the needs of patients 
pursuing palliative care because it does not include measures that 
assess improvements in quality of life or whether care is consistent 
with patients' treatment goals. The commenter recommended that CMS 
develop measures that prioritize patient comfort and align the care 
furnished with patient preferences and goals. Commenter also 
recommended that CMS develop measures on reducing the social and 
psychological impact of ESRD, advanced care planning, facility 
documentation of surrogate decision-makers, facility assessment of 
patients' needs on first visit after hospitalization, and medication 
reconciliation.
    Response: We recognize that some patients may seek palliative care, 
and that it is important to take this into account when developing 
robust clinical quality measures for patients with ESRD. Through our 
ongoing measure maintenance work, we will consider this and other 
potential exclusion criteria, and their role in measure specifications. 
We will also consider the commenter's recommendations as we establish 
priorities for future measure development.
    Comment: One commenter recommended that CMS reinstate the 
Hemoglobin Less than 10 g/dL clinical measure, because it protects 
patients from anemia under-treatment. Commenter stated that since the 
removal of the Hemoglobin Less than 10 g/dL clinical measure, mean 
hemoglobin levels among dialysis patients have declined and 
transfusions have increased, indicating that facilities are not 
adequately addressing anemia in this population. Commenter further 
stated that a Hemoglobin Less than 10g/dL measure is consistent with 
FDA labeling of Erythropoiesis stimulating agents (ESAs) because ESA 
treatment should be initiated when patients reach a hemoglobin level of 
10 g/dL. Commenter also states that the goal of maintaining a 
hemoglobin level of at least 10 g/dL is appropriate because the risk of 
receiving a transfusion increases four-fold when hemoglobin levels fall 
below 10 g/dL.
    Response: We appreciate commenter's recommendation to re-adopt the 
Hemoglobin < 10 g/dL clinical measure in the ESRD QIP. As discussed in 
the proposed rule, we share commenter's concerns about adequate 
maintenance of patients' hemoglobin levels. In addition, FDA guidance 
advises that treatment of anemia should minimize the occurrence of 
transfusions among ESRD dialysis patients, and we believe that the STrR 
is consistent with the guidance, and will serve to guard against 
underutilization of ESAs among patients. For this reason, we proposed 
to implement the STrR clinical measure in Payment Year 2018.
    Comment: Some commenters stated that patient-months indicating a 
Kt/V value greater than 2.5 should not be excluded from the 
Hemodialysis measures, because patients on nocturnal dialysis may 
achieve such values, and they should be included in the measure.
    Response: As stated in the CY 2013 ESRD PPS Final Rule, ``We do not 
currently have the ability to identify

[[Page 66165]]

patients who are receiving thrice weekly in-center nocturnal 
hemodialysis and do not have a measure specific to this population . . 
. Patients with HD spKt/V values greater than 2.5 are excluded from the 
measure calculation as these values are considered implausible for most 
hemodialysis patients'' (77 FR 67488). As part of our measure re-
evaluation process, we are considering alternatives to the 2.5 cut-off 
for spKt/V values, as well as avenues for identifying patients 
receiving in-center nocturnal hemodialysis. We will continue to pursue 
both avenues of inquiry in our ongoing effort to provide as 
comprehensive and accurate an assessment of dialysis adequacy in the 
QIP as is possible.
    Comment: One commenter recommended that CMS use raw data to 
independently calculate Kt/V values for the Dialysis Adequacy clinical 
measure topic, because this will improve the measures' accuracy.
    Response: As stated in the CY 2013 ESRD PPS Final Rule, ``We choose 
to collect reported Kt/V, rather than the data elements for Kt/V, due 
to the limitations of collecting data on Medicare claims and to 
minimize burden on facilities'' (77 FR 67489). This is still true 
because the measure continues to be based on data reported on Medicare 
claims. We continue to believe that Medicare claims are a reliable data 
source for this purpose because instructions for submission of Kt/V on 
Medicare Claims are very specific in the requirement to report Kt/V 
calculated from either Daugirdas II or urea kinetic modeling, the two 
most reliable methods for determining Kt/V, consistent with the most 
recent NKF KDOQI consensus recommendations and supported by a recent 
Technical Expert Panel convened in 2013.
    Comment: Commenter recommended converting the Hypercalcemia 
clinical measure to a reporting measure, because the ESRD PPS will not 
be including oral-only drugs until 2024. Commenter stated that this 
provision of the ESRD PPS will delay the economic incentives for 
facilities to underutilize oral-only drugs, so the hypercalcemia 
measure is not needed to protect patient safety.
    Response: We believe it is important to retain Hypercalcemia as a 
clinical measure in the ESRD QIP because this measure is the only 
clinical outcome measure endorsed by NQF for bone mineral metabolism, 
and issues related to bone mineral metabolism are tremendously 
important for patients with ESRD. The anticipated addition of oral 
medications in the ESRD PPS may incentivize the use of less costly 
calcium-based phosphorus binders and less use of cinacalcet, which may 
lead to increased hypercalcemia in the ESRD dialysis population. We 
further note that the measure's clinical significance has already been 
accounted for in the scoring methodology that was finalized for the PY 
2016 program and proposed for PY 2017-2018, wherein the Hypercalcemia 
measure is given less weight than other measures.
    Comment: Some commenters recommended that CMS work with the kidney 
community to develop a composite phosphorous/calcium/PTH measure, 
because a composite measure would be more likely to improve patient 
outcomes than a measure evaluating one of the individual components.
    Response: We welcome an opportunity for collaboration on this and 
other projects. We note, however, that in 2010, a Technical Expert 
Panel discussed the possibility of developing measures for phosphorus, 
and was unable to come to a consensus regarding a phosphorus measure 
that assesses appropriate levels of phosphorus due to a lack of 
evidence supporting a clinical threshold. A reporting measure was 
developed and originally endorsed by the NQF in 2007, and forms the 
basis of the Mineral Metabolism reporting measure implemented in the 
ESRD QIP. In 2011, NQF reviewed two phosphorus measures, establishing 
one with an upper limit (hyperphosphatemia) and one with a lower limit 
(hypophosphatemia). NQF did not endorse either measure. A recent 2013 
Technical Expert Panel recommended the development of a reporting 
measure for PTH, which we have specified, and are currently working to 
test prior to submitting it to NQF for endorsement. However, the panel 
concluded that there was insufficient evidence to develop a clinical 
measure. We are unaware of more recent evidence that makes it likely 
that consensus around such a clinical performance measure would be 
reached in new measure development efforts at this time, but we would 
be interested in discussing any such evidence with stakeholders.
    Comment: One commenter recommended aligning the dates used for 
calculating patient censuses under the Vascular Access Type measure 
topic and NHSN Bloodstream Infection in Hemodialysis Outpatients 
clinical measure to reduce administrative burden. Commenter stated that 
the Vascular Access Type measure topic is based on the last treatment 
of the month, while the NHSN census is based on the ESRD facility's 
first two working days of the month.
    Response: We appreciate the recommendation. Because these measures 
serve different purposes, and because the methods used to calculate the 
measures have shown to be reliable, we do not believe there is 
sufficient technical rationale to justify aligning these administrative 
tasks at this time.
    Comment: One commenter recommended that CMS consider coordinating 
occupational therapy with dialysis treatments.
    Response: We thank the commenter for the input.
    Comment: One commenter stated their concern that the ESRD QIP does 
not adequately account for the challenges faced by acute hospital-based 
programs that occasionally treat chronic patients. Commenter 
recommended that CMS reevaluate the exclusion criteria for ESRD QIP 
measures and exclude these facilities, because patients are already 
sicker when entering care at these facilities and will not remain there 
long enough for the patient's improvement to be attributed to the 
facility.
    Response: We thank commenters for the recommendation. Some of our 
proposed measures, such as the SRR and STrR, do seek to address patient 
comorbidities through risk-adjustment. Other measures, such as the 
Dialysis Adequacy and Vascular Access Type measures, identify the types 
of patients who should be excluded as determined by available evidence. 
We welcome specific recommendations regarding new exclusion criteria 
for our measures, which we can address through our ongoing measure re-
evaluation process.
    Comment: One commenter recommended that when calculating all of the 
ESRD QIP measures, CMS should identify an alternative first ESRD 
service date for individuals who resume dialysis.
    Response: We thank commenters for the recommendation. All measures 
in the ESRD QIP only include patients on dialysis, so an alternate 
first service date for those resuming dialysis would only potentially 
affect measures that exclude patients for some initial period. The 
original 90-day rule following beginning of ESRD was implemented to 
allow time for patients to stabilize and to ensure that a patient is a 
chronic dialysis patient (that is, did not receive temporary dialysis 
therapy). Currently, we use the Medical Evidence Form 2728 to capture 
the date of first dialysis in order to help determine patient 
exclusions for the Dialysis Adequacy and Hypercalcemia clinical 
measures. For future payment years, we will explore the appropriateness 
of using the date of return to regular dialysis for those individuals 
who resume dialysis after transplant for the Dialysis

[[Page 66166]]

Adequacy and hypercalcemia clinical measures.
    For the STrR measure, time at risk begins at the start of the 
facility treatment period (starting with day 91 after onset of ESRD 
after a patient has been treated at the facility for 60 days) and 
continues until the earliest occurrence of the following: a Medicare 
claim indicating a diagnosis on the exclusions list, three days prior 
to a kidney transplant, death, end of facility treatment, or December 
31 of the year. Upon discharge from a facility, the patient continues 
to be attributed to that facility for 60 days. Patients who resume 
dialysis after transplant resume time at risk once they have been back 
at a dialysis facility for 60 days. Therefore, we believe this 
recommendation may be of less concern for the STrR.
    The SRR, the vascular access measures, the NHSN Bloodstream 
Infection measure, the ICH CAHPS measure, and the reporting measures in 
the ESRD QIP measure set do not have exclusion criteria related to the 
first ESRD service date and so are unaffected by the first ESRD service 
date.
    Comment: Some commenters requested that CMS reevaluate the 
Hemodialysis Adequacy clinical measures' inclusion of patients who are 
treated at a facility at least twice in a month, because facilities 
experience difficulties in obtaining Kt/V measurements for patients 
receiving a small number of treatments during the time they are at the 
facility. Specifically, commenters recommended that instead of 
excluding patients seen at a facility two times or fewer in a month, 
the measure should exclude patients seen fewer than seven times. 
Commenter stated that it may not be possible for a facility to draw the 
blood needed to determine a Kt/V value if a patient is seen fewer than 
seven times in a month. Commenter further stated that 9.99 is reported 
on Medicare claims for patients receiving less than six treatments at a 
facility in a month, because patients receiving so few treatments may 
have changed modalities, received transplantation, or undergone long 
hospitalizations. Commenters also stated that it would be inappropriate 
for a facility to change a patient's hemodialysis prescription if the 
facility only treated the patient two times in a month. Commenter 
further stated that it is not possible to monitor patient conditions, 
modify treatment protocols, and evaluate the impact of such changes 
when patients are treated fewer than seven times in a month. Commenter 
recommended not including patient-months in the denominator if the Kt/V 
value reported on Medicare claims is 9.99, and that facilities should 
submit four months of claims for a patient before the patient is 
included in the measure.
    Response: We disagree with commenters' assertion that that 9.99 is 
reported on claims for patients receiving six or fewer treatments per 
month. We note that this is inconsistent with the instructions in the 
Claims Processing Manual, which does not direct providers to use 9.99 
for claims with fewer than seven treatments in the billing period, but 
instead provides the following guidance:

    ``Value Code D5--Result of last Kt/V reading. For in-center 
hemodialysis patients this is the last reading taken during the 
billing period. For peritoneal dialysis patients and home 
hemodialysis this may be before the current billing period but 
should be within 4 months of the claim date of service.
    Hemodialysis: For in-center and home-hemodialysis patients 
prescribed for three or fewer treatments per week, the last Kt/V 
obtained during the month must be reported. Facilities must report 
single pool Kt/V using the preferred National Quality Forum (NQF) 
endorsed methods for deriving the single pool Kt/V value: Daugirdas 
II or Urea Kinetic Modeling (UKM). The reported Kt/V should not 
include residual renal function.
    A value of 8.88 shall be entered on the claim if the situation 
exists that a patient is prescribed and receiving greater than three 
hemodialysis treatments per week for a medically justified and 
documented clinical need. The 8.88 value is not to be used for 
patients who are receiving ``extra'' treatments for a temporary 
clinical need (for example, fluid overload). A medical justification 
must be submitted for patients receiving greater than 13 treatments 
per month.
    This code (D5) is effective and required on all ESRD claims with 
dates of service on or after July 1, 2010. In the event that no Kt/V 
reading was performed providers must report the D5 with a value of 
9.99.''

    Despite the fact that Medicare claims do not require facilities to 
report a Kt/V value of 9.99 on claims with fewer than seven times, we 
agree with commenters who stated that it is difficult to alter 
patients' Kt/V values if they are seen infrequently during a month. We 
also agree with commenters who stated that it is inappropriate for a 
facility to change a patient's hemodialysis prescription if the patient 
is typically treated at a different facility. For these reasons, 
beginning with the PY 2017 program, we will change the exclusion 
criteria of the Adult and Pediatric Hemodialysis Adequacy measures, 
such that patients treated at a facility fewer than seven times in a 
month are excluded from the measures for the month. This revision will 
appear in the finalized measure specifications for the PY 2017 and PY 
2018 programs, available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We also disagree that requiring that a patient be treated at a 
facility for four months before the patient is included in the measure 
is appropriate. As noted above, we are now requiring that a patient 
receive at least seven treatments at a facility during a month before 
being included in the Hemodialysis Adequacy measures for that month. We 
believe this modification sufficiently addresses commenters' concerns 
about facilities ability to impact patients' Kt/V levels when they only 
treat the patient a limited number of times.

C. Web Sites for Measure Specifications

    In an effort to ensure that facilities and the general public are 
able to continue accessing the specifications for the measures that 
were proposed for and have been adopted in the ESRD QIP, we are now 
posting these measure specifications on a CMS Web site, instead of 
posting them on www.dialysisreports.org as we have in the past. Measure 
specifications from previous years, as well as those for the PY 2017 
and PY 2018 programs, can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We did not receive any comments on this change.

D. Updating the NHSN Bloodstream Infection in Hemodialysis Outpatients 
Clinical Measure for the PY 2016 ESRD QIP and Future Payment Years

    The NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure (that is, NHSN Bloodstream Infection clinical measure) that we 
adopted beginning with the PY 2016 ESRD QIP is based on NQF #1460. At 
the time we adopted it, the measure included a risk adjustment for 
patients' vascular access type but did not include any reliability 
adjustments to account for differences in the amount of exposure or 
opportunity for healthcare associated infections (HAIs) among patients. 
On April 4, 2014, in response to a measure update proposal submitted by 
CDC, NQF endorsed a reliability adjustment for volume of exposure and 
unmeasured variation across facilities to NQF #1460. This reliability 
adjustment is called the Reliability-Adjusted Standardized Infection 
Ratio or Adjusted Ranking Metric (ARM). As a result of this change to 
the NQF-endorsed measure specifications, a facility's performance on 
NQF #1460 can be adjusted towards the mean (that

[[Page 66167]]

is, facilities with low exposure volume can be adjusted more than 
facilities with high exposure volume, and the performance rate can be 
adjusted up or down depending on the facility estimate and mean) to 
account for the differences in the reliability of the infection 
estimates based on the number of patient-months at a facility and any 
unmeasured variation across facilities. Because the adjustment can be 
based on the volume of exposure, facility scores can be adjusted more 
if there are fewer patient-months in the denominator, and facility 
scores can be adjusted less if there are many patient-months in the 
denominator.
    We proposed to adopt the same reliability adjustment for purposes 
of calculating facility performance on the NHSN Bloodstream Infection 
clinical measure, beginning with the PY 2016 ESRD QIP. We believe that 
the inclusion of this reliability adjustment, in addition to the risk 
factor adjustment, will enable us to better differentiate among 
facility performance on this measure, because it accounts not only for 
the variation in patient risk by vascular access type, but also for 
variation in the number of patients a facility treats in a given month. 
The ARM will be incorporated into the existing risk-adjustment 
methodology, which will also continue to include a risk adjustment for 
patient vascular access type. Further information about the reliability 
adjustment, and the NHSN Bloodstream Infection measure specifications 
can be found at http://www.cdc.gov/nhsn/PDFs/dialysis/NHSN-ARM.pdf, 
http://www.cdc.gov/nhsn/dialysis/dialysis-event.html, and http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below:
    Comment: One commenter supported the proposal to calculate the NHSN 
Bloodstream Infection measure with the Adjusted Ranking Metric because 
this adjustment ``will provide a more reliable SIR, and better reflect 
the differences in opportunity for HAI prevention in ESRD facilities.'' 
The commenter also recommended monitoring and ongoing assessment of 
this ranking.
    Response: We thank the commenter for their support.
    Comment: Some commenters did not support using the Adjusted Ranking 
Metric to calculate performance rates for the NHSN Bloodstream 
Infection measure because the public has not been provided with 
sufficient details about the adjustment's methodology to offer informed 
comments on the proposal, so the proposal does not meet the 
requirements of the Administrative Procedures Act. The commenter also 
stated that although NQF #1460 (the measure upon which the NHSN 
Bloodstream Infection measure is based) remains endorsed, even with the 
revised specifications to include the ARM adjustment, an NQF Steering 
Committee still has yet to review the revised specifications, and this 
has limited public scrutiny. Another commenter did not support the use 
of the Adjusted Ranking Metric in the NHSN Bloodstream Infection 
measure, because the adjustment imposes a rank order on facilities that 
is not appropriate for quality improvement and is not mandated by the 
Act.
    Response: We have reviewed the information we made publicly 
available regarding the ARM methodology for the CY 2015 ESRD PPS 
comment period, and we agree with commenters that greater detail would 
have allowed commenters to more meaningfully analyze and comment on the 
proposed revision to the NHSN Bloodstream Infection clinical measure. 
Therefore, we are not finalizing the proposal to adopt the ARM 
reliability adjustment for purposes of calculating facility performance 
on the NHSN Bloodstream Infection clinical measure. Instead, facility 
performance on this measure will be calculated as finalized in the CY 
2014 ESRD PPS final rule, using the Standardized Infection Ratio (78 FR 
72204 through 72207).
    Comment: One commenter did not support the adoption of the NHSN 
Bloodstream Infection clinical measure in the ESRD QIP because apparent 
differences in performance are actually an artifact of reporting 
practices. Accordingly, facilities that diligently monitor and report 
infections receive lower scores than those that do not, and this 
creates a perverse incentive for facilities to not report dialysis 
events to NHSN. As an alternative to including the NHSN Bloodstream 
Infection measure as a clinical measure, another commenter recommended 
including it as a reporting measure.
    Response: We understand commenter's concern regarding differences 
in performance as an artifact of reporting practices, and agree that 
reporting rates in the NHSN Bloodstream Infection measure are subject 
to detection bias. This is one of the concerns that prompted us to 
propose the NHSN data validation study for the NHSN Bloodstream 
Infection clinical measure in CY 2015. In addition, CDC is working to 
assist facilities and groups to evaluate the quality of their submitted 
data, and we recognize that support for a more systematic means of 
assessing and ensuring data quality and completeness is needed. Because 
including a clinical measure on bloodstream infections will provide 
stronger incentives for facilities to monitor and reduce these 
infections, as compared to a reporting measure on the same topic, we 
continue to believe that it is essential to maintain the measure as a 
clinical measure.
    Comment: Some commenters did not support the continuation of the 
NHSN Bloodstream Infection measure in the ESRD QIP, because sufficient 
information about how the measure is adjusted for access type is not 
available to the public.
    Response: The specifications for the NHSN Bloodstream Infection in 
Hemodialysis Outpatients measure (NQF #1460) include the methodology 
used to stratify the NHSN Bloodstream Infection measure by vascular 
access type. These specifications include the following information 
about how the measure is adjusted for access type: ``Both the numerator 
and denominator are stratified by vascular access type since vascular 
access type is the single greatest risk factor for bloodstream 
infection in this population. The vascular access variables that are 
collected and included in this analysis are: Arteriovenous (AV) 
fistula, AV graft, other access device, tunneled central line, and 
nontunneled central line. If more than one access type is present in a 
patient, the bloodstream infection event is attributed to the access 
type with the greatest risk (that is, AV fistula < AV graft < other 
access device < tunneled central line < nontunneled central line). 
During denominator collection, the user is asked to count each patient 
as having only 1 vascular access type, following the algorithm 
described. During numerator collection, all vascular access types 
present at the time of the bloodstream infection event are reported and 
the algorithm is applied during analysis of the data.
    This information appears on the specifications, which were posted 
at http://www.cdc.gov/nhsn/nqf/ on August 12, 2014, have been available 
through the NQF Web site since the measure was endorsed in August 2011.
    Comment: One commenter recommended that CMS and CDC consider 
adjusting the patient counting methodology for the NHSN Bloodstream 
Infection clinical measure such that all patients treated in the 
facility in a month are included in the patient count for that month, 
rather than the current

[[Page 66168]]

method, which includes only counts of patients that are in the unit on 
the first two treatment days of the month.
    Response: CDC has conducted pilot validation work with a group of 
dialysis facilities and found that the census on the first two working 
days of the month was a satisfactory predictor of the entire month's 
patient treatment count. The alternative of counting denominator data 
on a daily basis has been required in inpatient settings, but was 
determined by CDC to be unacceptably burdensome for dialysis facilities 
conducting manual data collection.
    Comment: Some commenters did not support the NSHN Bloodstream 
Infection measure as a clinical measure in PY 2016, because performance 
standards were not identified prior to the measure's expansion to a 
clinical measure.
    Response: We appreciate the commenters' concerns about establishing 
values for the NHSN Bloodstream Infection clinical measure performance 
standards before the beginning of the PY 2016 performance period. 
However, we stated in the CY 2014 ESRD PPS Final Rule that we wanted to 
begin assessing facilities on the number of these events as soon as 
possible, rather than merely assessing whether facilities report these 
events, because of the abnormally large impact HAIs have upon patients 
and the healthcare industry. We believe these safety concerns justified 
the adoption of the NHSN Bloodstream Infection clinical measure before 
collecting all of the baseline data needed to apply the traditional 
achievement and improvement scoring methodologies. We also note that, 
in recognition of the fact that we would not initially be able to award 
improvement points to facilities, we set the minimum TPS low enough 
that a facility can meet it even if it receives zero achievement points 
on the NHSN Bloodstream Infection clinical measure, as long as it meets 
or exceeds the performance standard for each of the other finalized 
clinical measures.
    Comment: One commenter did not support the continuation of the NHSN 
Bloodstream Infection measure in the ESRD QIP, because determining 
whether a positive blood culture is a true bloodstream infection is a 
subjective exercise.
    Response: As stated in the CY 2015 ESRD PPS final rule, ``The NHSN 
Bloodstream Infection clinical measure is an objective measure based 
solely on the presence of a positive blood culture. Although NHSN 
collects information on access-relatedness to provide additional 
information that is of use for prevention purposes, the NHSN 
Bloodstream Infection clinical measure does not rely upon assessments 
of whether the bloodstream infection was access-related'' (78 FR 
72207).
    Comment: One commenter recommended modifying the NHSN Bloodstream 
Infection measure to focus on event-specific indicators, beginning with 
access-related bloodstream infections. Commenter stated that focusing 
on specific indicators would help facilities develop prevention plans 
and would be a more appropriate benchmark for assessing dialysis-
related infections.
    Response: We thank the commenter for their recommendation. As 
discussed in the CY 2014 ESRD PPS Final Rule (78 FR 72205), NQF 
endorsed a bloodstream infection measure (that is, NQF #1460, the 
measure upon which the NHSN Bloodstream Infection clinical measure is 
based) because positive blood cultures (the reported event under the 
bloodstream infection measure) can be objectively identified. Although 
the measure focuses on the presence of a positive blood culture, event-
specific indicators (that is, counts and rates of access related 
bloodstream infections) are available in NHSN. Both CDC and CMS 
encourage facilities to review and utilize this data, together with 
overall bloodstream infection rates, for prevention purposes. As we 
continue to further develop and refine the measure, we may consider a 
greater focus on event-specific indicators (for example, access-
relatedness) in the future.
    Comment: Commenter recommended that CMS should require facilities 
to implement CDC's core interventions for dialysis bloodstream 
infection prevention, particularly interventions 7 and 8, which the 
commenter stated should be made into a clinical measure.
    Response: We thank the commenter for their recommendation. As 
stated in the CY 2014 ESRD PPS final rule, ``We continue to encourage 
facilities to adopt all of CDC's core prevention interventions. 
However, they are not required under the ESRD QIP because we do not 
believe it is feasible at this time to design a performance measure 
that would accurately evaluate facility compliance'' (78 FR 72206).
    For these reasons, we are not finalizing the proposal to adopt the 
ARM reliability adjustment for purposes of calculating facility 
performance on the NHSN Bloodstream Infection clinical measure. 
Instead, facility performance on this measure will be calculated as 
finalized in the CY 2014 ESRD PPS final rule, using the Standardized 
Infection Ratio (78 FR 72204-72207). The technical specifications for 
this finalized measure can be found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.

E. Oral-Only Drug Measures in the ESRD QIP

    Section 217(d) of the Protecting Access to Medicare Act of 2014 
(Pub. L. 113-93), enacted on April 1, 2014, amends section 1881(h)(2) 
of the Act to require the Secretary, for PY 2016 and subsequent years, 
to adopt measures (outcome-based, to the extent feasible) in the ESRD 
QIP that are specific to the conditions treated with oral-only drugs. 
We believe that the Hypercalcemia clinical measure adopted beginning 
with the PY 2016 program (78 FR 72200 through 72203) meets this new 
statutory requirement because hypercalcemia is a condition that is 
treated with oral-only drugs. The Hypercalcemia clinical measure is not 
an outcome-based measure, and we have considered the possibility of 
adopting outcomes-based measures that pertain to conditions treated 
with oral-only drugs. However, we have determined that it is not 
feasible to propose to adopt an outcome-based measure on this topic at 
this time because we are not aware of any outcome measures developed on 
this topic.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported CMS's interpretation of the 
requirements of the Protecting Access to Medicare Act of 2014 (PAMA) to 
delay the adoption of measures (preferably outcomes-based) related to 
conditions treated by oral-only drugs.
    Response: We appreciate the commenter's support, but clarify that 
PAMA requires that for 2016 and subsequent years, the measures included 
in the ESRD QIP include measures that are specific to the conditions 
treated with oral-only drugs, and that such measures, to the extent 
feasible, be outcome-based.
    Comment: Some commenters stated that the Hypercalcemia measure does 
not meet the Protecting Access to Medicare Act of 2014 (PAMA) 
requirement for the ESRD QIP to include a measure ``specific to 
conditions treated with oral-only drugs.'' One commenter stated that it 
is not an effective measure for oral-only drugs because it is strongly 
influenced by parenteral vitamin D. Another commenter stated that 
current oral-only drugs are intended reduce elevated levels of 
parathyroid hormone and phosphorus, and that the Hypercalcemia

[[Page 66169]]

measure is not related to either condition. Commenters recommended that 
CMS adopt measures related to these conditions for adoption in the PY 
2018 program, not the PY 2016 program, in accordance with the 
requirements of PAMA.
    Response: While we do not agree with these comments, we recognize 
that we could, consistent with PAMA, adopt measures as late as for PY 
2018 that are specific to the conditions treated with oral-only drugs. 
We will take these comments into account as we evaluate what measures, 
including the Hypercalcemia clinical measure, might satisfy this new 
statutory requirement in the future.

F. Requirements for the PY 2017 ESRD QIP

1. Revision to the Expanded ICH CAHPS Reporting Measure
    For the ICH CAHPS reporting measure, we proposed one change to the 
reporting requirements finalized in the CY 2014 ESRD PPS Final Rule for 
PY 2017. In the CY 2014 ESRD PPS final rule, we finalized that 
facilities would be eligible to receive a score on the measure if they 
treated 30 or more survey-eligible patients during the performance 
period (78 FR 72220 through 72221). Subsequently, we were made aware 
that facilities may not know whether they will have enough survey-
eligible patients during the performance period to be eligible for the 
ICH CAHPS measure when they are making decisions about whether or not 
they will contract with a vendor to administer the survey. We agree 
that it would be preferable if facilities knew at the beginning of the 
performance period if they will be eligible to receive a score on the 
ICH CAHPS measure, because this would allow facilities to make informed 
decisions about whether they should contract with a vendor to 
administer the survey. For this reason, we proposed that beginning with 
the PY 2017 program, facilities will be eligible to receive a score on 
the ICH CAHPS measure if they treat 30 or more survey-eligible patients 
during the ``eligibility period,'' which we define as the CY before the 
performance period. However, even if a facility is eligible to receive 
a score on the measure because it has treated at least 30 survey-
eligible patients according to the ICH CAHPS Survey measure 
specifications during the calendar year prior to the performance 
period, we proposed that the facility will still not receive a score 
for performance during the performance period if it cannot collect 30 
survey completes during the performance period. We believe that 
facilities should be able to determine quickly the number of survey-
eligible patients that they treated during the eligibility period, and 
that reaching this determination should not impact facilities' ability 
to contract with a vender in time to meet the semiannual survey 
administration requirements. Technical specifications for the ICH CAHPS 
reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Many commenters did not support the requirement to conduct 
the ICH CAHPS survey on a semiannual basis, because it is an unfunded 
mandate and does not provide facilities with sufficient time to make 
changes to the facility environment based on survey responses. 
Commenters also requested further evidence that a semiannual survey 
administration improves patient outcomes. For these reasons, some 
commenters requested that CMS reduce the ICH CAHPS survey to one 
administration per year, until it can be determined that survey fatigue 
does not result in lower ICH CAHPS scores. Other commenters recommended 
allowing facilities to coordinate with the Networks, such that the 
facilities field the survey once during the performance period, and the 
Networks field the survey a second time.
    Response: Several options were considered for the frequency of 
administering the survey. A Technical Expert Panel that we convened 
suggested that quarterly administration was too frequent due to the low 
turnover in facilities. Annual collections might result in outdated 
information for public reporting and quality monitoring purposes as 
well as a decrease in respondent recall. By surveying twice a year, we 
capture a diverse range of patients within their care cycle, some 
fairly new patients along with others with more longevity on dialysis. 
With semiannual administration, facilities will learn first-hand about 
issues concerning the care offered and where there may be gaps in 
providing care to this vulnerable population.
    Semiannual administration of the survey improves reliability of 
results that will be useful for quality improvement interventions. 
These more reliable results will lead to quality improvement and 
improve the patient experience.
    Comment: Some commenters did not support the adoption of the ICH 
CAHPS measure in the ESRD QIP because the survey instrument consists of 
58 core questions, and this is burdensome for patients, particularly if 
facilities are required to have the survey administered on a semiannual 
basis. In order to reduce the burden on patients, these commenters 
recommended allowing venders to administer only one of the survey's 
three domains to each patient in the sample.
    Response: While we understand that the ICH CAHPS survey may be time 
consuming for some patients, we believe its value as a tool for 
assessing the patient's experience of care outweighs this concern. In-
center hemodialysis patients spend up to 12 hours a week in treatment, 
and are therefore the best source of information about the quality of 
care provided in the facility. Furthermore, the protocol for the ICH 
CAHPS survey allows patients to receive assistance on the survey from 
family members or a caregiver not associated with the dialysis 
facility. In addition, we note that a patient need only answer 29 of 
the 58 core questions for the survey to be considered complete. Looking 
at results from the recent CMS Mode Experiment, less than 1 percent of 
the sampled patients submitted incomplete surveys. Anecdotally, we 
found that patients were eager to complete the survey, as evidenced by 
calls to the ICH CAHPS hotline upon receipt of the pre-notification 
letter regarding the survey administration.
    Comment: Some commenters stated that the ICH CAHPS measure should 
not include homeless people, because vendors have trouble administering 
the survey to this population, and facilities are penalized for 
incomplete surveys.
    Response: We are aware that it might be difficult to contact 
homeless persons to perform the ICH CAHPS survey; however, we are 
interested in ensuring that all patients, regardless of housing status, 
receive high quality care from the multidisciplinary team at their 
facility. We are particularly concerned about the needs of homeless 
patients because they may have different concerns than other patients 
that need to be addressed by the facility. We further note that under 
the ICH CAHPS survey administration and ESRD QIP scoring methodology, 
facilities are not penalized if they are either (1) unable to contact a 
patient for the survey administration, or (2) receive incomplete survey 
responses, provided that the survey vendor followed the administration 
protocol.
    Comment: Some commenters stated that facilities should not be held 
accountable for low response rates when they do not have an opportunity 
to

[[Page 66170]]

review patient contact information used by survey vendors. One 
commenter also recommended increasing the minimum number of qualifying 
patients because small and rural facilities often have high non-
response rates.
    Response: As noted above, facilities with high non-response rates, 
regardless of their location or population size, are not penalized on 
the basis of their survey response rate. Instead, scores on the ICH 
CAHPS reporting measure are based on whether the facility administers 
the survey on a twice-yearly basis using a third-party, CMS-approved 
vendor and submits these survey results to CMS via that third-party 
vendor. We therefore disagree that high non-response rates for small 
and rural facilities justify increasing the minimum number of 
qualifying patients for this measure, and we note that doing so would 
effectively discount (for the purposes of the ESRD QIP) the experiences 
of a substantial number of patients. In addition, the ICH CAHPS survey 
administration specifications include methods of confirming that 
patient contact information is as up-to-date as possible. ICH CAHPS 
survey vendors are required to verify the contact information provided 
by the ICH CAHPS Coordination Team from CROWNWeb by using a commercial 
address update service. Survey vendors are permitted to ask facilities 
to provide updated addresses and telephone numbers for all patients 
they served during the sampling window. To maintain and protect the 
identity of the patients sampled, survey vendors cannot give the list 
of sample patients to the facility when they request updated patient 
addresses and contact information.
    Comment: Some commenters stated that versions of the survey used 
for patients who do not speak English as their first language are 
mistranslated, particularly the Chinese version.
    Response: We appreciate commenter's input regarding the translated 
versions of the ICH CAHPS survey. Recent corrections to the Chinese 
language versions of the ICH CAHPS survey have been made to reflect 
changes to the English version of the instrument. Our language 
specialists assure us that we are using translations which the majority 
of people speaking a given language will understand, but we are open to 
concerns and feedback about the translated versions of the ICH CAHPS 
survey. Please send any questions or comments to [email protected].
    Comment: One commenter stated that the ICH CAHPS survey should be 
expanded to include all patients with ESRD, such as those who dialyze 
at home, instead of being restricted to in-center hemodialysis 
patients.
    Response: We appreciate the commenter's recommendation that we 
develop additional questions or surveys intended to capture a larger 
proportion of the ESRD population. While the current survey is specific 
to in-center hemodialysis patients, we will look into opportunities to 
capture other patients, such as home hemodialysis and peritoneal 
dialysis patients, in the future.
    Comment: One commenter sought clarification as to how many times a 
patient must be treated at a facility before he or she becomes eligible 
for the ICH CAHPS measure.
    Response: Patient eligibility for the ICH CAHPS measure is not 
determined on the basis of a set number of treatments, but rather on 
the amount of time a patient is treated at a facility. Nevertheless, 
assuming that a typical hemodialysis patient receives three treatments 
per week, and given that a patient must be seen at a facility for three 
months to be eligible for the ICH CAHPS survey, an average survey-
eligible patient will receive 36 treatments before becoming eligible 
for the measure.
    Comment: One commenter was concerned that the ICH CAHPS survey is 
of limited use in the ESRD population, because its administration 
excludes patients who die or are too sick to complete the survey, and 
the survey does not ask patients about advance care planning. Commenter 
recommended CMS continue to work on the ICH CAHPS survey so that it 
provides more actionable information about whether the care patients 
receive is consistent with patients' goals.
    Response: We understand commenter's concerns about the ICH CAHPS 
survey excluding patients who are deceased or physically or mentally 
incapable of completing the survey. We believe that in a patient 
experience of care survey, patients are most qualified to evaluate 
their experience. While we agree that those who are capable of 
completing the survey but require assistance to do so should receive 
the necessary assistance, we do not believe that a survey administered 
to a family member or proxy on behalf of a patient is a satisfactory 
substitute for patient input. Therefore, we do not believe it is 
appropriate to include patients who are deceased or are mentally or 
physically incapable of completing the survey in the ICH CAHPS survey 
at this time. We appreciate commenter's recommendation to modify or 
include new elements in the survey aimed at providing actionable 
information about whether a patient's care is consistent with the 
patient's goals for care, and will take this into consideration in the 
future.
    For these reasons, we are finalizing the expanded ICH CAHPS 
reporting measure as proposed for the PY 2017 ESRD QIP and for future 
payment years. The technical specifications for this finalized measure 
can be found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
2. Measures for the PY 2017 ESRD QIP
a. PY 2016 Measures Continuing in PY 2017 and Future Payment Years
    We previously finalized 11 measures in the CY 2014 ESRD PPS Final 
Rule for the PY 2016 ESRD QIP, and these measures are summarized in 
Table 19 below. In accordance with our policy to continue using 
measures unless we propose to remove or replace them (77 FR 67477), we 
will continue to use 10 of these 11 measures in the PY 2017 ESRD QIP. 
As we discuss in more detail below, we proposed to remove one measure, 
Hemoglobin Greater than 12 g/dL, beginning with the PY 2017 measure set 
(see Table 20 below).

     Table 19--PY 2016 ESRD QIP Measures Being Continued in PY 2017
------------------------------------------------------------------------
            NQF #                    Measure title and description
------------------------------------------------------------------------
0249.........................  Hemodialysis Adequacy: Minimum delivered
                                hemodialysis dose.
                               Percent of hemodialysis patient-months
                                with spKt/V greater than or equal to
                                1.2.
0318.........................  Peritoneal Dialysis Adequacy: Delivered
                                dose above minimum.
                               Percent of peritoneal dialysis patient-
                                months with spKt/V greater than or equal
                                to 1.7 (dialytic + residual) during the
                                four month study period.
1423.........................  Pediatric Hemodialysis Adequacy: Minimum
                                spKt/V.
                               Percent of pediatric in-center
                                hemodialysis patient-months with spKt/V
                                greater than or equal to 1.2.

[[Page 66171]]

 
0257.........................  Vascular Access Type: AV Fistula.
                               Percentage of patient-months on
                                hemodialysis during the last
                                hemodialysis treatment of the month
                                using an autogenous AV fistula with two
                                needles.
0256.........................  Vascular Access Type: Catheter >= 90
                                days.
                               Percentage of patient-months for patients
                                on hemodialysis during the last
                                hemodialysis treatment of month with a
                                catheter continuously for 90 days or
                                longer prior to the last hemodialysis
                                session.
N/A\1\.......................  National Healthcare Safety Network (NHSN)
                                Bloodstream Infection in Hemodialysis
                                Patients.
                               Number of hemodialysis outpatients with
                                positive blood cultures per 100
                                hemodialysis patient-months.
1454.........................  Hypercalcemia.
                               Proportion of patient-months with 3-month
                                rolling average of total uncorrected
                                serum calcium greater than 10.2 mg/dL.
N/A\2\.......................  In-Center Hemodialysis Consumer
                                Assessment of Healthcare Providers and
                                Systems (ICH CAHPS) Survey
                                Administration.
                               Facility administers, using a third-party
                                CMS-approved vendor, the ICH CAHPS
                                survey in accordance with survey
                                specifications and submits survey
                                results to CMS.
N/A\3\.......................  Mineral Metabolism Reporting.
                               Number of months for which facility
                                reports serum phosphorus for each
                                Medicare patient.
N/A..........................  Anemia Management Reporting.
                               Number of months for which facility
                                reports ESA dosage (as applicable) and
                                hemoglobin/hematocrit for each Medicare
                                patient.
------------------------------------------------------------------------
\1\ We note that this measure is based on a current NQF-endorsed
  bloodstream infection measure (NQF #1460).
\2\ We note that a related measure utilizing the results of this survey
  has been NQF-endorsed (#0258). We are proposing to adopt NQF #0258 in
  the PY 2018 program.
\3\ We note that this measure is based upon a current NQF-endorsed serum
  phosphorus measure (NQF #0255).


 Table 20--Measure Proposed for Removal Beginning With the PY 2017 ESRD
                                   QIP
------------------------------------------------------------------------
            NQF #                            Measure title
------------------------------------------------------------------------
N/A..........................  Anemia Management: Hgb >12
                               Percentage of Medicare patients with a
                                mean hemoglobin value greater than 12 g/
                                dL.
------------------------------------------------------------------------

b. Policy for Determining When a Measure Is ``Topped-Out'' in the ESRD 
QIP, and the Removal of a Topped-Out Measure From the ESRD QIP, 
Beginning With PY 2017
    In the CY 2013 ESRD PPS final rule (77 FR 67475), we finalized a 
list of seven criteria we would consider when making determinations 
about whether to remove or replace a measure:

    ``(1) measure performance among the majority of ESRD facilities 
is so high and unvarying that meaningful distinctions in 
improvements or performance can no longer be made; (2) performance 
or improvement on a measure does not result in better or the 
intended patient outcomes; (3) a measure no longer aligns with 
current clinical guidelines or practice; (4) a more broadly 
applicable (across settings, populations, or conditions) measure for 
the topic becomes available; (5) a measure that is more proximal in 
time to desired patient outcomes for the particular topic becomes 
available; (6) a measure that is more strongly associated with 
desired patient outcomes for the particular topic becomes available; 
or (7) collection or public reporting of a measure leads to negative 
unintended consequences.''

    In the CY 2014 ESRD PPS final rule (78 FR 72192), we stated that we 
were in the process of evaluating all of the ESRD QIP measures against 
the criteria. Subsequent to the publication of the CY 2014 ESRD PPS 
final rule, we completed our evaluation and determined that none of the 
measures finalized in the PY 2016 ESRD QIP met criteria 2 through 7, as 
listed above. With respect to the first criterion, we proposed to more 
specifically define when performance on a clinical measure is so high 
and unvarying that the measure no longer reflects meaningful 
distinctions in improvements or performance. The statistical 
definitions that we proposed to adopt will align our methodology with 
that used by the Hospital VBP program to determine when a measure is 
topped out (76 FR 26496 through 26497). Under this methodology, a 
clinical measure is considered to be topped out if national measure 
data show (1) statistically indistinguishable performance levels at the 
75th and 90th percentiles; and (2) a truncated coefficient of variation 
(CV) of less than or equal to 0.1.
    To determine whether a clinical measure is topped out, we initially 
focused on the top distribution of facility performance on each measure 
and noted if their 75th and 90th percentiles were statistically 
indistinguishable. Then, to ensure that we properly accounted for the 
entire distribution of scores, we analyzed the truncated coefficient of 
variation (CV) for each of the clinical measures.
    The CV is a common statistic that expresses the standard deviation 
as a percentage of the sample mean in a way that is independent of the 
units of observation. Applied to this analysis, a large CV would 
indicate a broad distribution of individual facility scores, with large 
and presumably meaningful differences between hospitals in relative 
performance. A small CV would indicate that the distribution of 
individual facility scores is clustered tightly around the mean value, 
suggesting that it is not useful to draw distinctions between 
individual facility performance scores. We used a modified version of 
the CV, namely a truncated CV, for each clinical measure, in which the 
5 percent of facilities with the lowest scores, and the 5 percent of 
facilities with the highest scores were first truncated (set aside) 
before calculating the CV. This was done to avoid undue effects of the 
highest and lowest outlier facilities; if included, they would tend to 
greatly widen the dispersion of the distribution and make the clinical 
measure appear to be more reliable or discerning. For example, a 
clinical measure for which most facility scores are tightly clustered 
around the mean value (a small CV) might actually reflect a more robust 
dispersion if there were also a number of facilities with extreme 
outlier values, which would greatly increase the perceived variance in 
the measure. Accordingly, the

[[Page 66172]]

truncated CV of less than or equal to 0.10 was added as a criterion for 
determining whether a clinical measure is topped out.
    We evaluated each of the clinical measures finalized in the PY 2016 
ESRD QIP against these proposed statistical conditions. The full 
analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The results of that analysis appear 
below in Table 21.

                       Table 21--PY 2016 Clinical Measures Using CROWNWeb and Medicare Claims Data From January 2013-December 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     75th         90th                          Statistically          Truncated
              Measure                    N        percentile   percentile   Std. error        indistinguishable            CV            TCV <0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adult HD Kt/V.....................         5665         96.1         97.4         0.13  No..........................         0.04  Yes.
Adult PD Kt/V.....................         1176         92.9         94.8         0.55  No..........................         0.15  No.
Pediatric HD Kt/V.................           10         94.5         97.1         2.71  Yes.........................         0.08  Yes.
Hgb >12...........................         5521          0.0          0.0         0.02  Yes.........................        <0.01  Yes.
Fistula Use.......................         5561         72.3         77.0         0.16  No..........................         0.14  No.
Catheter Use......................         5586          5.9          2.8         0.10  No..........................       <=0.01  Yes.
Hypercalcemia.....................         5685          0.3          0.0         0.04  No..........................       <=0.01  Yes.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As the information presented in Table 21 suggests, the Hemoglobin 
Greater than 12 g/dL measure meets the proposed criteria for 
determining when a clinical measure is topped-out in the ESRD QIP. 
Accordingly, we proposed to remove the Hemoglobin Greater than 12 g/dL 
measure from the ESRD QIP, beginning with the PY 2017 program. We 
recognize that the Pediatric Hemodialysis Adequacy measure also meets 
the conditions for being a topped-out clinical measure in the ESRD QIP. 
However, we did not propose to remove the Pediatric Hemodialysis 
Adequacy measure from the ESRD QIP because we determined that removing 
the measure will not be useful for dialysis facilities. There are 
currently very few measures available that focus on the care furnished 
to pediatric patients with ESRD, and we are reticent to remove a 
measure that addresses the unique needs of this population. In 
addition, although only 10 facilities were eligible to receive a score 
on the Pediatric Hemodialysis Adequacy measure (based on CY 2013 data), 
we believe that the publicly reported performance of these facilities 
can influence the standard of care furnished by other facilities that 
treat pediatric patients, even if a facility does not treat a 
sufficient number of pediatric patients to be eligible to be scored on 
the measure.
    For these reasons, we believe that the drawbacks of removing a 
topped out clinical measure could be outweighed by the other benefits 
to retaining the measure. Accordingly, we proposed that even if we 
determine that a clinical measure is topped out according to the 
statistical criteria we apply, we would not remove or replace it if we 
determine that its continued inclusion in the ESRD QIP measure set will 
continue to set a high standard of care for dialysis facilities.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter supported removal of the Hemoglobin Greater 
than 12 g/dL clinical measure, because there is little variation in 
facilities' performance. The commenter additionally supported this 
proposal ``because under the PPS, facilities no longer have an 
incentive to overuse erythropoietin stimulating agents.'' Several 
commenters recommended continuing to publicly report facility scores to 
ensure that patients' hemoglobin levels are properly monitored.
    Response: We thank the commenters for the support. We further note 
that the Dialysis Facility Compare program will continue to publically 
report facility scores on the Hemoglobin Greater than 12 g/dL measure, 
and that this will help ensure that patients' hemoglobin levels are 
properly monitored.
    Comment: Some commenters did not support the proposal to remove the 
Hemoglobin >12 g/dL clinical measure from the ESRD QIP, because the 
measure is clinically important, and removing this measure could lead 
to a lapse in anemia monitoring in this patient population. One 
commenter recommended that CMS keep the Hemoglobin >12 g/dL clinical 
measure, but reduce its weight for QIP scoring purposes in order to 
maintain facilities' focus on anemia management while decreasing this 
measure's impact on facility scores.
    Response: We agree that maintaining patients' hemoglobin levels 
below 12 g/dL is clinically important. For this reason, the Dialysis 
Facility Compare program will continue to publically report facility 
scores on the Hemoglobin Greater than 12 g/dL measure, and we believe 
that this will help ensure that patients' hemoglobin levels are 
properly monitored. Nevertheless, based on the statistical criteria for 
determining when a measure is topped out in the ESRD QIP, we have 
determined that performance on this measure is so high and unvarying 
that meaning distinctions in facility performance cannot be made. 
Accordingly, we do not believe it is appropriate to use the measure in 
a value-based purchasing program, such as the ESRD QIP, because the 
measure is not an effective tool for incentivizing facilities to 
further improve the quality of care provided to patients with ESRD.
    Comment: One commenter recommended that CMS reevaluate the 
Hemoglobin >12 g/dL clinical measure, because it does not account for 
the differences in ``average'' hemoglobin levels among dialysis 
patients of different ages, genders, and overall health. For example, 
the commenter stated that while a hemoglobin of 12-14 g/dL is 
``normal'' for women, the range for men is 14-18 g/dL, and that male 
patients may be denied access to treatments that would raise their 
hemoglobin levels to ``normal'' because their facility is concerned 
about its score on the hemoglobin >12 g/dL clinical measure.
    Response: We appreciate the commenter's input and note that we are 
removing the Hemoglobin Greater than 12 g/dL clinical measure from the 
ESRD QIP beginning in the PY 2017 program. However, we will consider 
the commenter's recommendation as we continue to evaluate the use of 
the measure in other CMS ESRD quality programs, such as Dialysis 
Facility Compare.
    Comment: One commenter sought clarification as to whether the 
Anemia Management reporting measure is sufficient to meet CMS's 
statutory requirements regarding measures on

[[Page 66173]]

anemia management if CMS chooses to remove the Hemoglobin >12 g/dL 
clinical measure from the ESRD QIP.
    Response: Based on the FDA's evolving position on ESAs, we believe 
the Anemia Management reporting measure meets the statutory mandate to 
include such measures in the ESRD QIP. The FDA labeling for ESAs 
previously included a hemoglobin level target range of 10 to 12 g/dL 
for chronic kidney disease patients. In 2011, the FDA released a 
modified drug recommendation for the use of ESAs in chronic kidney 
disease patients, removing these hard cutoffs and replacing them with 
more generalized guidance to ``individualize dosing and use the lowest 
dose of ESA sufficient to reduce the need for red blood cell 
transfusions.'' We therefore believe the Anemia Management reporting 
measure's requirement that providers report ESA dosages, rather than 
prescribing a course of action, aligns with the current FDA labeling 
regarding ESA usage. Additionally, we note that the STrR clinical 
measure, finalized for the PY 2018 ESRD QIP, meets the statutory 
requirement for measures on anemia management.
    Comment: One commenter did not support the proposal to remove the 
Hemoglobin >12 g/dL clinical measure from the ESRD QIP, because its 
removal and the inclusion of the proposed Standardized Transfusion 
Ratio may lead facilities to revert to higher ESA doses in an effort to 
avoid transfusions.
    Response: Evidence currently suggests that ESA doses have declined 
sharply since 2011, due in large part to the FDA label change for ESAs. 
Since that time, the Hemoglobin Greater than 12 g/dL clinical measure 
has become topped out as fewer patients have hemoglobin levels that 
exceed 12 g/dL, and we believe that current payment incentives (i.e., 
the inclusion of ESAs in the ESRD PPS) will minimize the risk of 
excessive utilization of ESAs. However, we intend to continue 
monitoring hemoglobin levels through the Anemia Management reporting 
measure and the Dialysis Facility Compare program.
    Comment: Many commenters supported the proposed statistical 
criteria for determining when a measure is topped-out in the ESRD QIP. 
However, one commenter recommended modifying the criteria used to 
determine when to remove a measure from the ESRD QIP, and further 
recommended that a measure should not be removed from the program if 
the measure uniquely ``addresses the needs of a specific population 
within the ESRD program.'' Another commenter supported the statistical 
criteria, but also recommended that CMS should consider lowering the 
thresholds for determining when a measure is topped out.
    Response: We agree with commenters that a measure should not be 
removed from the ESRD QIP if it uniquely addresses the needs of a 
specific population within the ESRD population. We are finalizing the 
proposed statistical criteria for determining that a measure is topped-
out and should be removed from the ESRD QIP. However, for the reasons 
explained below, we are not finalizing our proposal to retain a 
clinical measure that is statistically topped-out if we determine that 
its continued inclusion in the ESRD QIP measure set will continue to 
set a high standard of care for dialysis facilities. Instead, based on 
comments received, we are finalizing a policy that allows us to retain 
a topped-out clinical measure if it addresses the unique needs of a 
subset of the ESRD population, because we believe that this criterion 
is clearer and more transparent than the one proposed. Additionally, we 
agree with the commenter that statistically topped out measures should 
be retained in the ESRD QIP measure set if they address the unique 
needs of a subset of the ESRD population, because we believe that the 
drawbacks associated with scoring a topped out measure are less 
significant than the benefits of including as many subsets of the ESRD 
population as possible.
    Comment: One commenter sought clarification as to why CMS is not 
proposing to remove the Pediatric Hemodialysis Adequacy measure, 
despite the fact that it meets the statistical criteria for being a 
topped-out measure in the ESRD QIP.
    Response: We originally proposed to retain the Pediatric 
Hemodialysis Adequacy clinical measure for two reasons: (1) There are 
few measures available that focus on the care furnished to pediatric 
patients; and (2) we believed that the small number of facilities that 
are eligible to receive a score on the measure should properly set a 
standard of care for all facilities treating pediatric hemodialysis 
patients, even if these other facilities are not eligible to a receive 
a score on the measure. As explained above, and based on public 
comments, we are not finalizing a policy that would allow us to retain 
a topped-out clinical measure on the basis that its continued inclusion 
in the ESRD QIP measure set will continue to set a high standard of 
care for dialysis facilities, because we agree with the commenter that 
this standard may be difficult to apply.
    Comment: Commenter did not support the use of the first statistical 
criterion for determining when a measure is topped out in the ESRD QIP, 
because in a sample size of roughly 5600 facilities, measure scores 
will appear to be statistically indistinguishable, even though the 
truncated coefficient of variation is less than 0.1.
    Response: The two proposed statistical criteria were selected to 
create alignments between the ESRD QIP and other CMS quality-reporting 
and VBP programs, such as the Hospital Inpatient Quality Reporting 
program, the Hospital VBP program, and the Hospital Outpatient Quality 
Reporting program. We recognize that using both of the statistical 
criteria instead of just the second (that is, truncated coefficient of 
variation is less than 0.1) raises the threshold a measure must reach 
before it is considered topped out. Nevertheless, we believe that this 
elevated threshold appropriately differentiates topped-out measures 
from measures that reliably distinguish facility performance, whereas 
the use of only the second criterion would inaccurately classify 
reliable measures as being topped out.
    Comment: Commenter stated that there is little room for facilities 
to improve on the dialysis adequacy measures. For this reason, 
commenter recommended that the adequacy measures should be removed from 
the ESRD QIP, and that performance on these measures should be 
monitored through other means.
    Response: As illustrated in Table 21 above, the Adult Hemodialysis 
and the Adult Peritoneal Adequacy measures do not meet the statistical 
criteria for being a topped out measure in the ESRD QIP. Although 
performance rates are high overall, there is still room for facility 
improvement on the measures, and we therefore do not think it is 
appropriate to remove the measures from the ESRD QIP. As explained 
above, even though the Pediatric Hemodialysis Adequacy measure meets 
the statistical criteria for being a topped out measure in the ESRD 
QIP, we have decided not to remove it because it addresses the unique 
needs of a specific subset of the ESRD population.
    For these reasons, we are finalizing the removal of the Hemoglobin 
Greater than 12 g/dL measure from the ESRD QIP, beginning with the PY 
2017 program. We are also finalizing as proposed the statistical 
criteria for determining when a measure is topped out in the ESRD QIP. 
We are not finalizing our proposal to retain a clinical measure that is 
statistically

[[Page 66174]]

topped-out if we determine that its continued inclusion in the ESRD QIP 
measure set will continue to set a high standard of care for dialysis 
facilities. Instead, we are finalizing that we will not remove a 
statistically topped-out measure if the measure addresses the unique 
needs of a specific subset of the ESRD population.
c. New Measures for PY 2017 and Future Payment Years
    As the program evolves, we believe it is important to continue to 
evaluate and expand the measures selected for the ESRD QIP. Therefore, 
for the PY 2017 ESRD QIP and future payment years, we proposed to adopt 
one new clinical measure that addresses care coordination (see Table 
22).

         Table 22--New Measure Proposed for the PY 2017 ESRD QIP
------------------------------------------------------------------------
            NQF #                            Measure title
------------------------------------------------------------------------
N/A \1\......................  Standardized Readmission Ratio, a
                                clinical measure.
                               Risk-adjusted standardized hospital
                                readmissions ratio.
------------------------------------------------------------------------
\1\ We note that this measure is currently under review at NQF.

i. Standardized Readmission Ratio (SRR) Clinical Measure
Background
    At the end of 2011, 615,899 patients were being dialyzed, 115,643 
of whom were new (incident) patients with ESRD.\5\ The SRR measure 
assesses the rate of unplanned readmissions of ESRD patients to an 
acute care hospital within 30 days of an index discharge from an acute 
care hospital, thereby identifying potentially poor or incomplete 
quality of care in the dialysis facility. In addition, the SRR reflects 
an aspect of ESRD care that is especially resource-intensive. In 2011, 
the total amount paid by Medicare for the ESRD program was 
approximately $34.3 billion, a 5.4 percent increase from 2010.\2\ In 
particular, Medicare paid more than $10.5 billion for costs associated 
with hospitalized ESRD patients in 2011. In 2011, ESRD dialysis 
patients were admitted to the hospital twice on average, and spent an 
average of 12 total days in the hospital over the year, accounting for 
approximately 38 percent of Medicare expenditures for patients with 
ESRD.\2\ Furthermore, a substantial percentage (30 percent) of ESRD 
patients discharged from the hospital have an unplanned readmission 
within 30 days.\2\ In the non-ESRD population, clinical studies have 
demonstrated that improved care coordination and discharge planning may 
reduce readmission rates. The literature also reports a wide range of 
estimates of the percentage of readmissions that may be preventable. 
One literature review of more than 30 studies found the median 
proportion of readmissions that may be preventable was 27%, with a 
range of 5% to 79%.\6\ Preventability varied widely across diagnoses. 
Readmissions were more likely to be preventable in patients with more 
severe conditions. Therefore, a systematic measure on unplanned 
readmissions is essential for controlling escalating medical costs; it 
can identify where readmission rates are unusually high, and help 
facilities to provide cost-effective healthcare.
---------------------------------------------------------------------------

    \5\ United States Renal Data System, USRDS 2013 Annual Data 
Report: Atlas of Chronic Kidney Disease and End-Stage Renal Disease 
in the United States, National Institutes of Health, National 
Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, 
MD, 2013.
    \6\ van Walraven C, Bennett C, Jennings A, Austin PC, Forster 
AJ. Proportion of hospital readmissions deemed avoidable: a 
systematic review. CMAJ. 2011; 183(7): E391-E402.
---------------------------------------------------------------------------

Overview of Measure
    The SRR is a one-year risk-standardized measure of a facility's 30-
day, all-cause rate of unplanned hospital readmissions among Medicare-
covered ESRD dialysis patients. The number of expected readmissions is 
determined by a risk-adjustment model that accounts for the hospital 
where the index discharge took place, certain patient characteristics 
(including age, sex, and comorbidities), and the national median 
expected performance for all dialysis facilities, given the same 
patient case mix.
    We proposed to adopt the SRR measure currently under review by NQF 
(NQF #2496). Section 1881(h)(2)(B)(i) of the Act requires that, unless 
the exception set forth in section 1881(h)(2)(B)(ii) of the Act 
applies, the measures specified for the ESRD QIP under section 
1881(h)(2)(A)(iv) of the Act must have been endorsed by the entity with 
a contract under section 1890(a) of the Act (that entity currently is 
NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of the 
Act, in the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) of the Act, the Secretary may specify a measure that is not so 
endorsed, so long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary.
    We have given due consideration to endorsed measures, as well as 
those adopted by a consensus organization, and we are proposing this 
measure under the authority of 1881(h)(2)(B)(ii) of the Act. Although 
the NQF has endorsed an all-cause hospital readmission measure (NQF 
#1789), we did not believe it was feasible to adopt this measure in the 
ESRD QIP because NQF #1789 is specified for use in hospitals, not 
dialysis facilities. In addition, NQF #1789 is intended to evaluate 
readmissions across all patient types, whereas the proposed SRR measure 
is specified for the unique population of ESRD dialysis patients, which 
have a different risk profile than the general population captured in 
NQF #1789. Because the proposed SRR measure has been developed 
specifically for the dialysis-facility setting, and because the measure 
has the potential to improve clinical practice and decrease healthcare 
costs, we believe it is appropriate to adopt the SRR in the ESRD QIP at 
this time.
    We have analyzed the measure's reliability, the results of which 
are provided below and in greater detail in the SRR Measure Methodology 
report, available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The Inter-Unit Reliability (IUR) was 
calculated for the proposed SRR using data from 2012 and a 
``bootstrap'' approach, which uses a resampling scheme to estimate the 
within-facility variation that cannot be directly estimated by the 
analysis of variance (ANOVA). The SRRs that we calculated for purposes 
of this analysis were for dialysis facilities that had at least 11 
patients who had been discharged from a hospital during 2012. A small 
IUR (near 0) reveals that most of the variation of the measures between 
facilities is driven by ``random noise,'' indicating the measure would 
not be a

[[Page 66175]]

reliable characterization of the differences among facilities, whereas 
a large IUR (near 1) indicates that most of the variation between 
facilities is due to the real differences between facilities. The IUR 
for the proposed SRR measure was found to be 0.49, indicating that 
about one-half of the variation in the SRR can be attributed to 
between-facility differences, and about half to within-facility 
variation. This value of IUR indicates that an average-size facility 
would achieve a moderate degree of reliability for this measure. This 
level of reliability is consistent with the reliability of other 
outcome measures in CMS quality-reporting and VBP programs, such as the 
30-day Risk-Standardized All-Cause Acute Myocardial Infarction, Heart 
Failure, and Pneumonia Readmission and Mortality measures used in the 
Hospital IQR and VBP Programs. We therefore believe that facilities can 
be reliably scored on the proposed SRR measure.
    We convened a technical expert panel (TEP) in May 2012 for the 
purpose of evaluating this measure, but the TEP did not reach a final 
consensus and declined to support the measure. Some members of the TEP 
were concerned that we did not risk-adjust for the nephrologist 
treating the patients, because actions taken by nephrologists can 
impact readmission rates. After reviewing the TEP's arguments, we 
determined that the suggested risk adjustment for nephrologist care 
would constitute a reversal of CMS policy not to risk adjust for 
factors related to care for which the provider is responsible. We do 
not think that it is appropriate to risk-adjust the measure for the 
nephrologist because the nephrologist is part of the facility's multi-
disciplinary team, and medical directors, as employees of the dialysis 
facilities, are responsible for ensuring that appropriate care is 
provided by a multi-disciplinary team. The Measures Application 
Partnership reviewed this measure in February 2013 and supported the 
direction of the measure, advising CMS that the measure would require 
additional development prior to implementation. Subsequently, we 
released draft specifications for the measure to the public for a 30-
day comment period and, based on comments received, finalized measure 
specifications in September 2013. We also, on a voluntary basis, 
provided individual dialysis facilities with a facility-specific report 
that calculated their SRR measure results and compared those results to 
SRR measure results at the state and national level, as well as 
discharge-level data upon request. Facilities also had an opportunity 
to submit questions to CMS regarding the measure and their reports. We 
therefore believe that the proposed SRR measure risk-adjusts 
appropriately for patient condition and comorbidities at the start of 
care for which the facility is not responsible. We also believe that 
the measure is ready for adoption because, as explained above, it 
achieves a moderate degree of reliability.
Data Sources
    The data we will use to calculate the proposed SRR measure come 
from various CMS-maintained data sources for ESRD patients including 
the CROWNWeb database, the CMS Annual Facility Survey (Form CMS-2744), 
Medicare claims, the CMS Medical Evidence Form (Form CMS-2728), 
transplant data from the Organ Procurement and Transplant Network 
(OPTN), the Death Notification Form (Form CMS-2746), the Nursing Home 
Minimum Dataset, and the Social Security Death Master File. These data 
sources include all Medicare-covered patients with ESRD. Information on 
hospitalizations is obtained from Medicare Inpatient Claims Standard 
Analysis Files (SAFs) and past-year comorbidity is obtained from 
Medicare Claims SAFs (inpatient, outpatient, physician/supplier, home 
health, hospice, and skilled nursing facility claims).
Outcome
    The outcome for this measure is 30-day all-cause, unplanned 
readmission defined as a hospital readmission for any cause beginning 
within 30 days of the discharge date of an index discharge, with the 
exclusion of planned readmissions. This 30-day readmission period is 
consistent with other publicly reported readmission measures endorsed 
by NQF and currently implemented in the Hospital Inpatient Quality 
Reporting Program and Hospital Readmission Reduction Program, and 
reflects an industry standard.
Cohort
    All discharges of Medicare ESRD dialysis patients from an acute 
care hospital in a calendar year are considered eligible for this 
measure, with the exception of the exclusions listed in the next 
section.
Inclusion and Exclusion Criteria
    The proposed SRR measure excludes from the measure cohort 
hospitalizations: (1) Where the patient died during the index 
hospitalization; (2) where the patient dies within 30 days of the index 
discharge with no readmission; (3) where the patient is discharged 
against medical advice; (4) where the patient was admitted with a 
primary diagnosis of certain conditions related to cancers, mental 
health conditions, or rehabilitation procedures (because these patients 
possess radically different risk profiles, and therefore cannot 
reasonably be compared to other patients discharged from hospitals); 
(5) where the patient is discharged from a PPS-exempt cancer hospital 
(because these hospitals care for a unique population of patients that 
cannot reasonably be compared to the patients admitted to other 
hospitals); (6) where the patient is transferred to another acute care 
hospital; and (7) where the patient has already been discharged 12 
times during the same calendar year (to respond to concerns raised by 
the TEP that patients who are hospitalized this frequently during a 
calendar year could unduly skew the measure rates for small 
facilities).
Risk Adjustment
    The measure adjusts for differences across facilities with regard 
to their patient case mix. Consistent with NQF guidelines, the model 
does not adjust for socioeconomic status or race, because risk 
adjusting for these characteristics would hold facilities with a large 
proportion of patients who are minorities and/or who have low 
socioeconomic status to a different standard of care than other 
facilities. One goal of this measure is to illuminate quality 
differences that such risk adjustment would obscure. As with the 
Hospital-Wide Readmission measure employed by the Hospital Readmissions 
Reduction program, the SRR employs a hierarchical logistic regression 
model to estimate the expected number of readmissions to an acute care 
hospital, taking into account the performance of all dialysis 
facilities, the discharging hospital, and the facility's patient case-
mix.
    Although the SRR risk-adjustment model is generally aligned with 
the Hospital-Wide Readmission measure risk-adjustment methodology, we 
proposed to modify it to account for comorbidities and patient 
characteristics relevant to the ESRD population. The proposed SRR 
measure includes the following patient characteristics as risk 
adjustors, which are obtained from the following data sources:

[[Page 66176]]



------------------------------------------------------------------------
             Risk adjustor                         Data source
------------------------------------------------------------------------
Sex....................................  CMS Form 2728.
Age....................................  REMIS database.
Years on ESRD..........................  CMS Form 2728.
Diabetes as cause of ESRD..............  CMS Form 2728.
BMI at incidence of ESRD...............  CMS Form 2728.
Days hospitalized during index           Part A Medicare Inpatient
 admission.                               Claims SAFs.
23 past-year comorbidities (for          Medicare Claims SAFs: Part A
 example, cardiorespiratory failure/      Inpatient, home health,
 shock; drug and alcohol disorders)..     hospice, and skilled nursing
                                          facility; and Part B
                                          Outpatient.
Discharged with any of 11 high-risk      Part A Medicare Inpatient
 conditions (for example, cystic          Claims SAFs.
 fibrosis, and hepatitis).
------------------------------------------------------------------------

    More details on the risk-adjustment calculations, and the rationale 
for selecting these risk adjustors and not others, can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. We proposed to 
risk adjust the proposed SRR measure based on sex, because we have 
determined that patients' sex affects the measure in ways that are 
beyond the control of dialysis facilities. We reached this 
determination by examining the effects of the risk adjusters, both 
independently and in combination, on rates of unplanned readmissions. 
This analysis yielded two conclusions. First, the analysis indicated 
that females are generally more likely than males to experience an 
unplanned readmission, even when accounting for the other risk 
adjustors. Second, the disparate effects of gender were substantially 
impacted by the effects of age: Females aged 15 to 45 were much more 
likely to experience an unplanned readmission than males of the same 
age, but this disparity was significantly reduced for men and women 
younger than 15 and older than 45. Based on these two conclusions, we 
believe that women in the 15-45 age range face a greater risk of 
experiencing an unplanned readmission, as compared to men of the same 
age with similar risk profiles. This does not appear to be a 
consequence of facility performance, however, because the disparity is 
not generally applicable to women, but only to a limited age group. We 
therefore believe it is essential to risk-adjust for sex to ensure that 
facilities with larger numbers of women aged 15 to 45 are not 
inappropriately disadvantaged, because not risk-adjusting for sex would 
potentially incentivize facilities to deny access to these individuals.
    As indicated in the table above, the measure is risk-adjusted, in 
part, based on 23 comorbidities that develop in the year prior to the 
index hospitalization, as well as 11 high-risk conditions that are 
present at the time of the index discharge. These data are taken from 
Medicare claims submitted by hospitals, dialysis facilities, and other 
types of long-term and post-acute care facilities.
    We believe that this proposed approach to risk-adjusting the SRR 
measure is consistent with NQF guidelines for measure developers. NQF 
evaluates measures on the basis of four criteria: Importance, 
scientific acceptability, feasibility, and usability. The validity and 
reliability of a measure's risk-adjustment calculations fall under the 
``scientific acceptability'' criterion, and Measure Evaluation 
Criterion 2b4 specifies NQF's preferred approach for risk-adjusting 
outcome measures (http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion states 
that patient comorbidities should only be included in risk-adjustment 
calculations if they are (1) present at the start of care and (2) not 
indicative of disparities or deficiencies in the quality of care 
provided. As indicated in the ``Inclusion and Exclusion Criteria'' 
subsection above, as well as the measure specifications that are 
currently under review at NQF, the start of care is defined as the 
index hospitalization. Accordingly, we believe that NQF Measure 
Evaluation Criterion 2b4 supports risk adjusting the proposed SRR 
measure on the basis of patient comorbidity data collected in the year 
prior to the index hospitalization, because these comorbidities are 
likely present at the start of care (that is, the date(s) that the 
patient spends in the hospital during the index hospitalization). For 
these reasons, we believe that the risk-adjustment methodology for the 
proposed SRR measure is consistent with NQF guidelines for measure 
developers and is appropriate for this measure.
    Full documentation of the SRR risk-adjustment methodology is 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Calculating the SRR Measure
    The SRR measure is calculated as the ratio of the number of 
observed unplanned readmissions to the number of expected unplanned 
readmissions. Facilities that have more unplanned readmissions than 
would be expected for an average facility with a similar case-mix would 
have a ratio greater than one. Facilities having fewer unplanned 
readmissions than would be expected for an average facility with a 
similar case mix would have a ratio less than one. This ratio 
calculation is consistent with that employed by one NQF-endorsed 
outcome measure for ESRD, the Standardized Hospitalization Ratio (NQF 
#1463).
    Hospitalizations are counted as events in the numerator if they 
meet the definition of unplanned readmission--which is that they (a) 
occurred within 30 days of the index discharge and (b) are not preceded 
by a ``planned'' readmission that also occurred within 30 days of the 
index discharge. Planned readmissions are defined as readmissions that 
do not bear on the quality of care furnished by the dialysis facility, 
that occur as a part of ongoing appropriate care of patients, or that 
involve elective care. Building on the algorithm developed for the 
Hospital-Wide Readmission measure (NQF #1789), the proposed planned 
readmission list incorporates minor changes appropriate to the ESRD 
population as suggested by technical experts. The full planned 
readmission list and algorithm are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. In general, a readmission is 
considered ``planned'' under two scenarios.
    1. The patient undergoes a procedure that is always considered 
planned (example, bone marrow transplant) or has a primary diagnosis 
that always indicates the hospitalization is planned (for example, 
maintenance chemotherapy).
    2. The patient undergoes a procedure that may be considered planned 
if it is not accompanied by an acute diagnosis. For example, a 
hospitalization involving a heart-valve procedure accompanied by

[[Page 66177]]

a primary diagnosis of acute myocardial infraction would be considered 
unplanned, whereas a hospitalization involving a heart-valve procedure 
accompanied by a primary diagnosis of diabetes would be considered 
planned (because acute myocardial infraction is a plausible alternative 
acute indication for hospitalization).
    The expected number of readmissions is calculated using 
hierarchical logistic modeling (HLM). This approach accounts for the 
hospital from which the patient was discharged and the patient case mix 
(as defined by factors such as age, sex, and patient comorbidities), as 
well as the national median performance of all dialysis facilities. The 
HLM is an appropriate statistical approach to measuring quality based 
on patient outcomes when patients are clustered within facilities (and 
therefore the patients' outcomes are not statistically independent), 
and when the number of qualifying patients for the measure varies from 
facility to facility. The HLM approach is also currently used to 
calculate readmission and mortality measures that are used in several 
quality-reporting and VBP programs by CMS, such as the Heart Failure 
and Pneumonia Mortality measures in the Hospital IQR and Hospital VBP 
Programs.
    The proposed SRR measure is a point estimate--the best estimate of 
a facility's readmission rate based on the facility's case mix. For 
more information on the proposed calculation methodology, please refer 
to our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported the proposal to adopt the 
Standardized Readmission Ratio clinical measure, because ``hospital 
readmissions may be an indicator of poor access to follow-up primary 
care or missed opportunities for inpatient and ambulatory care 
providers to better coordinate care.''
    Response: We thank the commenter for the support.
    Comment: Some commenters did not support the proposal to adopt the 
SRR measure because it could harm patients. Specifically, commenters 
stated that the measure could lead facilities to deny care to high-risk 
populations, particularly in urban settings where patients have more 
than one option for dialysis treatment. One commenter further stated 
that the measure's risk-adjustment methodology will not completely 
remove this incentive to ``cherry-pick'' patients, which would be 
detrimental to patient health and waste healthcare resources. Commenter 
was also concerned that facilities may delay needed hospital admissions 
if the SRR measure were to be adopted in the ESRD QIP.
    Response: We agree that the concern for unintended consequences is 
a serious one with outcome measures. Access to care is particularly 
important and we continue to seek ways to ensure that access is 
unabated. This is part of the reason we proposed to adopt the SRR 
measure, which incorporates a risk-adjustment methodology that levels 
the playing field for facilities with different case-mixes and counters 
the incentive for cherry-picking patients. We also have the capacity to 
monitor and evaluate for some types of unintended consequences. For 
example, we currently assess rates of mortality at the facility level 
in the Dialysis Facility Compare program. This is an approach similar 
to that used on Hospital Compare, which publicly reports both mortality 
and readmissions rates for hospitals. In general, we note that 
mortality and readmission rates are positively correlated among 
dialysis facilities and in other settings, suggesting that reducing 
readmissions does not create increased risk to patients through 
``cherry-picking''. We also note that similar measures have been 
implemented in other post-acute care settings for quality reporting and 
value-based purchasing, including long-term care hospitals, inpatient 
rehabilitation facilities, and nursing homes. The SRR risk adjustment 
is consistent with these measures. We intend to monitor whether the 
implementation of this measure leads to unintended consequences.
    Comment: Many commenters did not support the proposal to adopt the 
SRR measure because it is not a fair way to evaluate facility 
performance. Specifically, commenters stated that unplanned 
readmissions are beyond the control of dialysis facilities, and that 
cultural factors can make patients noncompliant with treatment 
protocols, leading to hospital admissions.
    Response: We disagree with assertion that unplanned readmissions 
are beyond the control of dialysis facilities. While the causes of 
readmissions are multifactorial, our analyses support that the facility 
exerts an influence on readmissions roughly equivalent to that exerted 
by the discharging acute care hospital. We believe that coordination of 
care requires interaction between multiple providers, including those 
discharging the patient, and those continuing patient care following 
discharge. While cultural factors and patient noncompliance can lead to 
hospital admissions, this is no less true for the acute care hospitals, 
long-term care hospitals, inpatient rehabilitation facilities, nursing 
homes, and home health agencies, and it does not negate the deleterious 
consequences readmissions can have for those patients.
    Comment: Some commenters stated that facilities are typically not 
notified when a patient is discharged from a hospital, that many 
patients are discharged from and readmitted to a hospital before they 
return to their dialysis facility. Commenters also stated that 
facilities cannot compel nephrologists to see patient immediately after 
the patients are discharged from a hospital. Commenters recommended 
that patients with a readmission within one to five days of an index 
discharge should be excluded from the measure, because facilities 
typically do not have a chance to see these patients before they are 
readmitted to a hospital, and 17 percent of hospitalized patients with 
ESRD are readmitted to a hospital within three days of the index 
discharge.
    Response: We recognize that a disproportionate number of 
readmissions may occur during the days immediately following discharge. 
We believe this reflects an important opportunity for quality 
improvement that may be missed if these readmissions are excluded from 
the readmission measure. While it is true that several days may pass 
between discharge and a patient's first regularly scheduled appointment 
at a dialysis facility, we submit that if this pattern of practice 
results in excessive levels of readmissions, then it represents a 
failure to successfully manage a patient's care from the acute to non-
acute setting. Additionally, under the Conditions for Coverage, a 
dialysis facility must have a medical director whose responsibilities 
include a quality assessment and improvement program (CfC Sec.  
494.150). Therefore, facilities can compel nephrologists to see a 
patient immediately after the patients are discharged from the 
hospital, because improving on quality issues, such as care 
coordination, is part of the medical director's responsibilities.
    Comment: Many commenters stated that facilities should not be 
placed in the position of managing comorbid conditions that typically 
accompany ESRD, and commenters preferred a measure that was limited to 
readmissions that are related to ESRD and dialysis. Commenters stated 
that the measure should be limited to

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readmissions associated with ESRD (as opposed to focusing on all 
readmissions, irrespective of cause), because the majority of 
readmissions for patients with ESRD are not attributable to diagnoses 
related to ESRD and dialysis, and this could penalize facilities for 
readmissions beyond their scope of control. One commenter stated it may 
be difficult to distinguish readmissions related to dialysis and ESRD 
from those that are not, so the commenter recommended addressing this 
issue with further adjustments to the measure's statistical models, and 
by adding additional adjustments for case mix.
    Response: A Technical Expert Panel (TEP) that we convened for the 
purpose of developing this measure considered the issue of whether 
dialysis facility readmission measures should be all-cause, or limited 
to a specific set of readmissions related to ESRD and dialysis. The TEP 
concluded that an all-cause measure was appropriate for the SRR because 
it could not come to a consensus of what specific causes for 
readmissions did or did not fall within the control of dialysis 
facilities or could be considered to be related to ESRD and dialysis. 
This approach is consistent with readmission measures implemented for 
other quality programs, and is augmented using a planned readmissions 
algorithm that excludes readmissions identified as having been planned, 
with the rationale that such readmissions do not reflect poor quality 
of care. This algorithm was originally developed for hospital 
readmissions measures, and has been adapted for use in the dialysis 
facility setting, as well as nursing homes, home health agencies, 
inpatient rehabilitation facilities, and long-term care hospitals.
    Comment: Many commenters expressed a number of technical concerns 
with the specifications for the SRR measure. Specifically, commenters 
stated that using the 2728 form as the data source for determining 
patient comorbidities is inappropriate because the form is not used to 
track comorbidities that develop after the initiation of ESRD; 
commenters therefore recommend obtaining a reliable data source for 
comorbidities before adopting the measure. Commenters further stated 
that the measure relies on too many data sources to be specific to 
ESRD, and that facilities do not have ready access to hospital data, 
which they could use to design quality improvement programs.
    Response: Although we do incorporate some information from the 2728 
form in the risk adjustment model, the comorbidities are identified 
using Medicare Claims data. We use many data sources to construct our 
quality measures, but the data are derived from ESRD dialysis patients, 
and are therefore relevant to the care of this patient population. We 
recognize that dialysis facilities do not have access to hospital 
claims data, and that they believe they could benefit from such access 
in developing quality improvement programs. Providing such data is 
fraught with difficulty, such as logistical delays in the availability 
of the data, concerns about patient privacy across providers, and the 
lack of an effective delivery system for such data. While we continue 
to consider how such data may be provided in a way that is meaningful 
and as actionable as possible, we believe implementing a quality 
measure based on claims data is appropriate and consistent with the 
implementation of readmission measures in other settings. Additionally, 
we have implemented measures in the LTCH, IRF, and Home Health quality 
reporting programs even though hospital and other claims data are not 
currently available to these providers. Even if we could find a 
feasible way to make the hospital data available, there would be a 
substantial delay between the time we receive it and the time we could 
make it available to facilities. It is therefore not feasible for us to 
provide facilities hospital data in a short timeframe.
    Comment: Some commenters stated that sickle cell trait, 
angiodysplasia, myelodysplasia, diverticular bleeding, asthma and 
nursing home/rehab status should be included as risk-factors in the 
measure calculations. Some commenters did not support the proposal to 
adopt the SRR measure, because it does not risk-adjust for patients' 
socioeconomic status. Commenters recommended that CMS incorporate this 
risk adjustment into the SRR measure, because otherwise facilities 
serving a high percentage of low-income patients may be subject to 
unnecessary and inappropriate payment reductions. One commenter further 
recommended that the SRR measure adjust for patient race, language, 
life circumstances, and environmental factors, because these factors 
have an impact on health outcomes and are beyond the control of the 
facility. One commenter also recommended that CMS institute a peer-
grouping system in order to compare dialysis facilities that are 
similarly situated and treat similar patient populations before 
incorporating any further outcome measures into the ESRD QIP.
    Response: The SRR already includes risk adjustment for the prior-
year comorbidities as supported by a TEP and analysis of data. The 
suggested comorbidities were not included in the risk adjustment model 
following input from the TEP and a 30-day public comment period. We are 
aware that there are differing opinions regarding our current approach 
in risk-adjusting measures in the QIP for socioeconomic status (SES). 
We note that risk-adjusted outcome measures aim to reveal differences 
related to the quality of care provided. We believe that quality of 
care received by patients of lower SES contributes at least in part to 
the observed association between SES status and the readmissions rate. 
We continue to have concerns about holding dialysis facilities to 
different standards for the outcomes of their patients of low SES--we 
do not want to mask potential disparities or minimize incentives to 
improve the outcomes of disadvantaged populations.
    Concerns that facilities treating large numbers of low 
socioeconomic status patients are disproportionately penalized by 
quality measure performance may be addressed through risk adjustment, 
but other alternatives exist that would first need to be considered, 
such as peer grouping stratification. Peer group stratification 
involves stratifying hospitals by the hospital's proportion of low-SES 
patients, as a method to correlate readmission rates and penalties with 
patient income. We may consider incorporating such a peer-grouping 
stratification or an alternate method of addressing socioeconomic 
status in the future, as we continue to revise and refine the SRR 
clinical measure.
    Comment: Some commenters stated that the measure's specifications 
are inappropriate because the denominator is defined in terms of index 
discharges, as opposed to the number of eligible patients at a 
facility. Commenters recommended using the latter method because under 
the proposed method a facility's score could be disproportionately 
reduced if one or two patients had high readmission rates, even if the 
facility had a low readmission rate overall.
    Response: The same issue was discussed by the TEP in the course of 
their evaluation of the SRR. As a consequence of those deliberations, 
we have structured the SRR measure to account for frequently 
hospitalized patients in two ways: first, it excludes all 
hospitalizations following a patient's 12th admission (note that 1 
percent of all patients are admitted more than six times in a calendar 
year) and, second, the model that defines the expectation of 
readmission adjusts for

[[Page 66179]]

hospitalizations that involve high risk diagnoses that are rare but 
very likely to result in a 30-day readmission (for example, sickle-cell 
anemia, HIV/AIDS).
    The measure is focused on the process of readmission following a 
hospital discharge, and for this purpose the denominator is 
appropriate. Each hospital discharge is an opportunity for success or 
failure in managing the transition of a patient's care from the acute 
care facility to the dialysis facility. Allowing for risk-adjustment, 
the SRR assesses the rate of success at a given dialysis facility, and 
compares it to the rate of success at other facilities. It is true that 
a facility that has relatively fewer hospitalizations will have a 
smaller denominator, but what portion of those hospitalizations are 
followed by a readmission within 30 days is still a valid indicator of 
the successful management of care transitions. If one took as the 
denominator the set of all patients at the facility, we might be led to 
conclude that this facility with relatively few hospital discharges had 
a reasonable rate of readmissions even though, for the condition of the 
patient being discharged, we would have expected significantly fewer 
readmissions.
    Furthermore, we proposed in the CY 2015 ESRD PPS Proposed Rule to 
account for variability in small facilities' SRR scores by excluding 
facilities with fewer than 11 discharges, and by applying a small 
facility adjustor (which ``gives facilities the benefit of the doubt 
when measure scores can be unduly influenced by a few outlier 
patients'') for facilities with 11 to 41 index discharges. We believe 
that this aspect of the ESRD QIP scoring methodology will mitigate the 
impact of one or two outlier patients on a small facility's SRR score.
    Comment: Some commenters sought clarification as to why the 
proposed SRR measure is not limited to patients on chronic dialysis for 
90 days, when this exclusion is included in the Standardized Mortality 
Ratio and Standardized Hospitalization Ratio measures. One commenter 
stated that this specification should align across the three measures.
    Response: The original 90-day exclusion following the start of ESRD 
dialysis was implemented to allow time for patients to stabilize; as a 
result, hospitalizations and deaths in this period did not count 
against the dialysis facility when computing the SHR and the SMR. The 
SRR diverges on this point because the readmissions function 
differently. The SRR measure addresses the question as to how well the 
patient is managed once discharged from an acute-care hospital and 
assesses the outcome of the discharge. The start of dialysis defines 
the point in time when patients begin to be at risk for hospitalization 
or death while in the care of a dialysis facility (for the purposes of 
calculating the SMR and SHR measures). By contrast, risk for 
readmission begins upon discharge from an acute care hospital when 
calculating the SRR measure. As SRR is a measure of care coordination, 
there is no expected need for a stabilization period. Applying one 
would limit the measure's efficacy at assessing coordination of care 
for the discharged patient.
    Comment: Some commenters were concerned that the proposal to 
exclude index hospitalizations that occur after a patient's 12th 
readmission in a calendar year will unduly impact small facilities, 
because these facilities' scores are disproportionately impacted by 
outliers. Commenters sought clarification as to why this criterion was 
raised from 6 readmissions to 12 readmissions.
    Response: We initially considered allowing a maximum of six 
readmissions per patient-year (95th percentile of the 2009 test 
population). We made the change since we were concerned that there 
might be seasonal exclusions--that is, that this exclusion might 
disproportionately exclude hospitalizations occurring later in the 
reporting period and that these hospitalizations might, in some way, be 
different from hospitalizations occurring earlier in the reporting 
period (that is, in the calendar year).Variants of the measure that 
include either the cap of 6 or 12 readmissions are highly correlated 
(97.8 percent). Since increasing the exclusion criteria to 12 
admissions made only a small difference, we felt comfortable applying 
this criterion in the hope of reducing the likelihood of bias.
    Comment: Some commenters stated that the Hospital-Wide All-Cause 
Unplanned 30-Day Readmission Ratio measure (NQF #1789) excludes 
patients who have an incomplete claims history from the past year. 
Commenters sought clarification as to why this criterion was not 
included in the proposed SRR measure.
    Response: We considered adopting this exclusion for the SRR measure 
but decided against doing so because it would exclude approximately 
one-third of ESRD dialysis patients who are discharged from the 
hospital during their first year of ESRD treatment. Many ESRD 
beneficiaries are not Medicare eligible at the initiation of dialysis 
but may still be likely to experience a hospitalization within the 
first year of dialysis treatment. As a consequence, the exclusion 
criterion would effectively eliminate accountability for readmissions 
within the first year of dialysis for patients who were not Medicare 
eligible prior to being diagnosed with ESRD, and we believe that the 
measure should assess all eligible unplanned readmissions of ESRD 
dialysis patients.
    Comment: Some commenters stated that risk-adjusting for the 
discharging hospital does not sufficiently account for geographic 
variability in admission and readmission rates. Commenters also 
recommended risk-adjusting for the admitting physician because 
physicians decide when to admit and re-admit patients to a hospital.
    Response: We decided not to propose a physician adjustment for 
three reasons--our general goal of encouraging the facility's 
coordination with its physicians; harmonization with readmission 
measures implemented in quality programs for other settings; and issues 
with attribution of discharges and readmissions to specific 
nephrologists or other care providers.
    Variations in practice patterns may result in undesirable practices 
that this and other ESRD measures are seeking to improve. In view of 
the concept of shared accountability, adjusting for physician practice 
also removes a potential role for the dialysis facility in modifying 
physician practice.
    Under our regulations (42 CFR 494.150(c)(2)(i)), dialysis 
facilities are responsible for overseeing the provision of care by a 
multi-disciplinary team, including the nephrologist treating the 
patient. Oversight of individual staff nephrologist care, including, 
ensuring adherence to facility policies and Medicare regulations, is 
primarily the responsibility of the site Medical Director, a paid 
employee of the dialysis facility, and, additionally, the 
responsibility of the facility governing body. Risk adjusting for 
physician would place CMS in the position of suggesting that a dialysis 
facility is not responsible for health consequences experienced by 
patients as the result of business or policy decisions by the facility 
administration.
    We designed the SRR measure to be aligned as closely as possible 
with the existing Hospital-Wide Readmission Measure (NQF# 1789). 
Adjusting for physician effects in this measure would be inconsistent 
with similar readmission measures in other care settings where we 
assume that like dialysis facilities, the physicians treating the 
patients fall under the facility's responsibility.
    Risk-adjusting for the nephrologist would also create issues with

[[Page 66180]]

attribution. First, ESRD patients are often under the care of multiple 
physicians and attribution to a particular physician would be 
difficult. Second, it is not clear whether it is more appropriate to 
hold responsible the nephrologist seeing the patient immediately before 
the index admission, or the nephrologist seeing the patient immediately 
after the discharge, or both.
    We do not adjust our readmission measures to account for regional 
hospitalization practices. We believe that regional variation in 
hospital utilization that is related to that hospital's case mix does 
not justify differences in dialysis facility readmission rates because 
this variation is modifiable by provider behavior.
    Comment: One commenter was concerned that the double random effects 
model used in stage 1 of the proposed SRR measure is biased against 
rural facilities, because these facilities are likely to be the only 
major ones available, and they are likely to be served by one major 
hospital. Commenter requested data on the measure's differential impact 
before adopting the measure. Commenter also recommended adjusting the 
measure to account for the distance patients travel from their homes to 
their dialysis facility and to the admitting hospital, because this 
could influence patient choices to utilize health care resources.
    Response: The risk adjustment methodology uses a mixed model, with 
fixed effects estimated for the dialysis facilities' contribution to 
readmissions, and random effects estimated for the hospitals' 
contribution to risk for readmissions. In the event that a rural 
facility is paired only with a single hospital, the associated (random) 
hospital effect is estimated by borrowing information from all the 
other hospitals nationwide. There is no reason to believe that rural 
facilities (or any facilities) would be penalized with this approach. 
As in the case of care coordination measures for other settings, 
responsibility for outcomes is shared between the facility and the 
hospital.
    Comment: Commenter stated that using a fixed effects model in the 
proposed SRR measure is inconsistent with the use of a random effects 
model in the NHSN Bloodstream Infection's Adjusted Ranking Metric. 
Commenter stated that the random effects model is more appropriate for 
the dialysis facility setting.
    Response: Using random effects and fixed effects requires different 
statistical assumptions when estimating the contribution of a risk 
factor to patient outcomes of care. While we recognize that using fixed 
effects, along with random effects, in the risk-adjustment methodology 
for the SRR measure is different than the model we use to risk-adjust 
the Bloodstream Infection measure, our risk-adjustment methodology for 
the SRR measure is consistent with the use of fixed effects models 
developed for the SMR and SHR. We also note that the NQF has endorsed 
both approaches to risk-adjustment. The SRR measure incorporates both 
fixed and random effects in its adjustment model for particular 
purposes. When there is only one hospital and one dialysis facility 
serving a community, the random effects approach basically assumes that 
the hospital is drawn at random from the population of hospitals, as is 
the underlying assumption in a random effects model. Thus, the 
adjustment for the hospital in that case would be essentially that of a 
randomly selected hospital. In other instances, where the same hospital 
is paired with two or more dialysis facilities, the overall rate of 
readmissions is used in the model to determine the hospital adjustment. 
In either case, the random variation due to the hospital contributes to 
the standard error of the estimated facility response. There are no 
additional assumptions in the fixed effects for facilities, as opposed 
to the additional statistical assumptions required of a random effect.
    Comment: One commenter stated that the validity of the SRR measure 
is called into question by the high number of risk-adjustments 
included. Specifically, commenter stated that risk-adjusting for BMI at 
incidence of chronic dialysis is inappropriate because the recorded 
values may have been incorrectly documented, and because a patient's 
BMI is likely to change significantly between the initiation of chronic 
dialysis and an index hospitalization.
    Response: Our risk adjustment is intended to fairly compare a given 
facility to the national level of performance after properly adjusting 
for the case-mix in that facility. Thus, the adjustments were chosen to 
reflect important comorbidities and characteristics of patients in a 
given facility, and were assessed with respect to their association 
with the readmission outcome. We have, however, avoided risk-adjusting 
for facility practices that reflect choices in care provided and that 
may result in better or worse outcomes. We did this to avoid adjusting 
away care choices made by providers that may account for important 
differences in facility outcomes. We are not aware of a particular 
standard defining the number of risk adjustors in a model that would 
call its validity into question, but we carefully consider the risk 
model's parsimony during its development, evaluating components for 
redundancy, and removing those that are either redundant or do not 
contribute to the model. We continuously re-evaluate our quality 
measures for appropriateness, and our analyses indicate that incident 
BMI is a significant and appropriate predictor of health outcomes in 
the ESRD dialysis population.
    Comment: One commenter stated that claims codes used in a non-ESRD 
population should not be used to determine planned readmissions in the 
ESRD population, as it the case for the proposed SRR measure.
    Response: The list of acute diagnoses and planned procedures--both 
of which were initially developed for the Hospital-Wide Readmission 
Measure (NQF #1789)--were reviewed by a nephrologist, by members of the 
Technical Expert Panel convened in April 2012, and by stakeholders 
during the CMS public comment period in May 2013 for the purpose of 
determining whether they were appropriate for the SRR measure. This 
process resulted in the planned readmissions algorithm as it is 
currently specified for the SRR. We believe the systematically excluded 
claims codes identify readmissions that are planned, and therefore do 
not reflect a failure in the transition of care for the ESRD 
population. These codes are applicable to the ESRD population insofar 
as they are submitted by hospitals for ESRD and non-ESRD patients 
alike, and are therefore appropriate for exclusion from the SRR.
    Comment: One commenter stated that claims data is not sufficient to 
reliably estimate actual and expected readmission rates. Commenter 
recommended that the proposed SRR measure should use data from 
facilities' electronic medical records.
    Response: A key advantage for claims-based risk-adjustment is the 
availability of standardized data elements for all Medicare 
beneficiaries. There is currently no set standard of medical record 
compatibility and no national electronic medical record system across 
dialysis provider organizations.
    Comment: Some commenters did not support the adoption of the 
proposed SRR measure, because the measure only has a ``moderate'' 
degree of reliability.
    Response: We believe that the SRR clinical measure captures 
important quality data for the purposes of the ESRD QIP program. We 
believe the SRR is sufficiently reliable for inclusion in the ESRD QIP 
because it meets the

[[Page 66181]]

NQF's moderate degree of reliability standard, and particularly in 
light of our policies to set the case minimum for this measure at 11 
index discharges and apply the small-facility adjuster to facilities 
with between 11 and 41 index discharges. We provide detailed analysis 
of the reliability of the SRR at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/AnalysisoftheReliabilityoftheProposedSRRandSTrRMeasures.pdf. From 2009 
through 2012, the SRR has an inter-unit reliability ranging from 0.49 
to 0.54, which indicates a moderate degree of reliability. For context, 
the standard of an acceptable level of reliability is 0.40 or higher.
    Comment: One commenter sought clarification as to how the proposed 
SRR measure will count hospital stays less than 24 hours, observation 
days, and same-day surgical procedures.
    Response: The SRR measure assesses the risk of readmission to an 
acute care hospital within 30 days of discharge from an acute care 
hospital. Patients who are not admitted to an acute care hospital 
within 30 days of discharge are not included in the measure. Patients 
who are admitted will be included in the measure, even in cases (such 
as same-day surgical procedures) where admission and discharge occur 
within a 24-hour period. Such instances account for 1.3 percent of 
hospitalizations eligible to serve as index discharges in the SRR in 
2012.
    Comment: One commenter sought clarification on how the proposed SRR 
measure will address unsuccessful kidney transplants in the six months 
following the transplant. Commenter recommended that the measure 
exclude these transplant failures.
    Response: As specified, the measure does not exclude patients who 
are hospitalized after a failed kidney transplant. We realize that this 
detail was not clear in the measure methodology report and we will edit 
the report to ensure clarity. As part of our ongoing quality measure 
re-evaluation process, we will examine this issue and consider how best 
to explicitly account for failed transplants in the SRR.
    Comment: One commenter sought clarification on whether ``poisoning 
by nonmedical substances'' encompasses chronic substance abuse.
    Response: We clarify that ``poisoning by non-medicinal substances'' 
does not include ICD-9 codes for ongoing alcohol or drug abuse. Please 
refer to the breakdown of this CCS group on AHRQ's Web site: http://www.hcup-us.ahrq.gov/toolssoftware/ccs/AppendixASingleDX.txt.
    Comment: Some commenters stated that adopting the SRR measure would 
penalize two facilities for the same readmission: hospitals through the 
Hospital Readmissions Reduction Program and dialysis facilities through 
the ESRD QIP. Other commenters stated that readmissions measures are 
not an effective way to increase care coordination because different 
types of facilities (for example, dialysis facilities and hospitals) 
are paid separately.
    Response: We agree that it is possible that a hospital and a 
dialysis facility could be penalized simultaneously for the same 
readmission event. We believe that both the hospital and the facility 
should be held accountable for ensuring that ESRD patients transition 
successfully from the hospital to post-acute care in the facility. 
Although different types of facilities are paid separately, we believe 
that all providers involved in the transition of care from acute to 
non-acute settings share responsibility for avoiding excessive rates of 
unplanned readmissions.
    Comment: One commenter stated that facilities will experience 
difficulty in explaining facility scores on the SRR clinical measure to 
patients, and that doing so may be ``politically challenging'' when the 
dialysis facility is affiliated with the admitting hospital system.
    Response: The CY 2015 ESRD PPS Proposed rule includes a link to a 
measure methodology report (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html) which provides an extensive 
discussion of how to interpret scores on the SRR measure. Simply put, a 
readmission ratio of greater than 1.0 reflects that a facility's 
patients are at higher risk for readmissions than they would be at an 
average facility. A score below 1.0 reflects that a facility's patients 
are at lower risk for readmissions than they would be at an average 
facility. A lower ratio is preferable because it indicates that a 
facility is doing a better job of managing patient transitions from a 
hospital back to the dialysis facility.
    Comment: Some commenters recommended that CMS should delay the 
adoption of this measure until it provides facilities with reports 
documenting their performance with patient-level data, so that 
facilities can identify root causes and implement improvement plans. 
Commenters also recommended delaying the adoption of the proposed SRR 
measure until it has been endorsed by NQF.
    Response: From March through April 2014, we conducted a dry run of 
the SRR, in which facilities were given the opportunity to view a 
quality report that provided their readmission measure results. At 
facility request, we also made patient-level data available for their 
review and entertained facility comments regarding the measure and the 
reporting process. We acknowledge the desire to delay implementation 
until after endorsement by NQF, and the reasoning behind such a 
suggestion. However, we believe that readmissions represent an 
important outcome of care for dialysis patients, given the population 
has a readmission rate of around 36 percent, which is twice that of the 
Medicare population.
    Comment: One commenter recommended that CMS continue to exclude 
pediatric patients from the proposed SRR measure and any future 
readmission measures, because the pediatric population is so small that 
a single readmission can skew the unit's results and may incentivize 
facilities to deny admission to pediatric patients.
    Response: We thank the commenter for the recommendation and will 
take it into account in future measure development work.
    Comment: One commenter stated that the SRR measure should exclude 
planned readmissions.
    Response: We appreciate the commenter's support for the SRR's 
exclusion of planned readmissions. This is an approach we have 
incorporated into measures of readmissions across multiple settings, 
and we agree that it is appropriate for this measure because planned 
readmissions do not reflect failures in care transitions and if not 
excluded, could bias SRR results for facilities that treat patients who 
receive certain kinds of in-patient hospital care.
    Comment: One commenter recommended that CMS require hospitals to 
provide facilities with data concerning a patient's dry weight, 
dialysis prescription changes, and continuing antibiotics on the day a 
patient is discharged. Commenter stated that CMS could require 
hospitals to provide this data using the hospital Conditions for 
Coverage or the Hospital Value-Based Purchasing Program, and that this 
information is crucial for facilities to identify problems that lead to 
unplanned readmissions.
    Response: We thank commenters for the suggestions, which capture an 
important issue of care coordination. We believe all providers should 
communicate and coordinate the care of patients transitioning from one 
setting of care to another. We agree that effective communication of 
clinically relevant data is an important goal. We are exploring means 
by which to

[[Page 66182]]

encourage the transfer of relevant information between providers.
    For these reasons, we are finalizing the SRR clinical measure as 
proposed for the PY 2017 ESRD QIP and for future payment years. The 
technical specifications for this finalized measure can be found at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR06NO14.014

BILLING CODE 4120-01-C
3. Performance Period for the PY 2017 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a payment year, and 
that the performance period occur prior to the beginning of such year. 
In the CY 2013 ESRD PPS Final Rule (77 FR 67500), we stated our belief 
that, for most measures, a 12-month performance period is the most 
appropriate for the program because this period accounts for any 
potential seasonal variations that might affect a facility's score on 
some of these measures, and also provides adequate incentive and 
feedback for facilities and Medicare beneficiaries. CY 2015 is the 
latest period of time during which we can collect a full 12 months of 
data and still implement the PY 2017 payment reductions. Therefore, we 
proposed to establish CY 2015 as the performance period for PY 2017 
ESRD QIP.
    We sought comments on this proposal. We did not receive any 
comments and are finalizing it as proposed.
4. Performance Standards, Achievement Thresholds, and Benchmarks for 
the PY 2017 ESRD QIP
    We proposed to adopt performance standards for the PY 2017 ESRD QIP 
measures similar to those we finalized for PY 2016 (78 FR 72211 through 
72213). Section 1881(h)(4)(A) of the Act provides that ``the Secretary 
shall establish performance standards with respect to measures selected 
. . . for a performance period with respect to a year.'' Section 
1881(h)(4)(B) of the Act further provides that the ``performance 
standards . . . shall include levels of achievement and improvement, as 
determined appropriate by the Secretary.'' We use the performance 
standards to establish the minimum score a facility must achieve to 
avoid a Medicare payment reduction. We use achievement thresholds and 
benchmarks to calculate scores on the clinical measures.
a. Performance Standards, Achievement Thresholds, and Benchmarks for 
the Clinical Measures in the PY 2017 ESRD QIP
    With the exception of the NHSN Bloodstream Infection clinical 
measure, we proposed to set the performance standards, achievement 
thresholds, and benchmarks for the PY 2017 clinical measures at the 
50th, 15th, and 90th percentile, respectively, of national performance 
in CY 2013, because this would give us enough time to calculate and 
assign numerical values to the proposed performance standards for the 
PY 2017 program prior to the beginning of the performance period. We 
continue to believe that these standards will provide an incentive for 
facilities to continuously improve their performance, while not 
reducing incentives to facilities that score at or above the national 
performance rate for the clinical measures. As stated in the CY 2014 
ESRD PPS Final Rule (78 FR 72213 through 72215), CY 2014 is the first 
year for which we will have data

[[Page 66183]]

for the NHSN Bloodstream Infection clinical measure. Accordingly, we 
proposed to set the performance standard, achievement threshold, and 
benchmark for the NHSN Bloodstream Infection clinical measure based on 
the 50th, 15th, and 90th percentiles, respectively, of national 
performance in CY 2014.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter supported CMS's use of benchmarks to drive 
quality improvement in the ESRD QIP, and the scoring methodology 
proposed for the PY 2017 program, because it aligns with the 
methodology used in the Hospital Value-Based Purchasing program.
    Response: We thank the commenter for the support.
    Comment: One commenter was concerned with the proposed benchmarks 
for PY 2017, stating that these benchmarks are ``unrealistic'' because 
the increasingly high thresholds for achievement are making it harder 
for facilities to score well, even though they may be delivering high-
quality care to patients. Commenter stated that for some measures, 
circumstances beyond a facility's control, such patient eligibility for 
a fistula and patient choice, will impact facility scores.
    Response: We disagree that the proposed benchmarks for PY 2017 are 
unrealistic or unachievable. Benchmarks for clinical measures are 
pegged to national performance rates, such that 15 percent of 
facilities met the benchmarks two years before the performance period. 
Accordingly, the benchmarks represent a high level of achievement, but 
they are not unrealistic because they have been met by 15 percent of 
facilities nationwide, and because they represent past (and typically 
lower) standards of practice.
    Comment: One commenter supported the use of benchmarks to drive 
quality improvement in the ESRD facility setting, but stated that 
pegging benchmarks to national performance rates creates a 
``continually moving target.'' The commenter further stated that 
without an adjustment for facility location, population, or 
demographics, these benchmarks may penalize a facility that is 
performing well in comparison to its peers. The commenter recommended 
that CMS determine standards for each individual measure using 
evidence-based practices and provide these standards to facilities. 
Another commenter recommended CMS carefully evaluate established 
benchmarks to ensure that the high standards established do not create 
an incentive for facilities to deny care to sicker patients.
    Response: We thank the commenter for the support. We recognize that 
pegging benchmarks to national performance rates creates a continually 
moving target for facilities, because facility performance on clinical 
quality metrics typically improves over time. We believe it is 
appropriate for benchmarks to increase, in line with improvements in 
national performance rates, because not increasing the benchmarks would 
hold facilities to a lower standard of care and would diminish 
incentives for improvement. We discussed above the possibility of using 
a peer group stratification system for dialysis facilities as a 
feasible approach to risk adjustment. We welcome input on how such a 
system might function, and will consider its utility for future years 
of the ESRD QIP.
    Comment: One commenter stated that it is inappropriate for the ESRD 
QIP to base payment reductions on retroactive performance, and 
recommended that CMS should finalize measures and performance standards 
in a timely manner, in order to ensure facilities are made aware of 
appropriate standards.
    Response: The current achievement scoring methodology generally 
compares facility performance in the performance period to national 
performance two years before the performance period, except in cases 
where there is a compelling patient safety reason to accelerate the 
adoption of a clinical measures (for example, the NHSN measure in the 
PY 2016 ESRD QIP). If facility performance during the performance 
period were to be compared to national performance during the 
performance period, this would place facilities on a ``forced curve'' 
and ensure that fifty percent of facilities fell below the performance 
standard. Additionally, we appreciate that facilities want to learn as 
soon as possible what the ESRD QIP measure set will be for a given CY. 
For this reason, we are finalizing measures the PY 2018 program in this 
final rule, 14 months before the beginning of the performance period 
for those measures. Finally we publish numerical values for performance 
standards as soon as data reflecting current national facility 
performance become available.
    Comment: Commenter stated that facilities should not be scored on a 
forced normal curve. Commenter stated that this practice is not 
mandated by the Act, that it has been dismissed as invalid in quality 
improvement initiatives used in other professions, and that this 
penalizes facilities for providing patient-centered care when it is 
inconsistent with measure goals and targets.
    Response: We appreciate commenter's concerns; however, the ESRD QIP 
does not use a normal curve to score facilities, nor have we proposed 
to adopt such a methodology in the proposed rule.
    For these reasons, we are finalizing the performance standards for 
the PY 2017 ESRD QIP as proposed.
b. Finalized Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2017 ESRD QIP
    Upon the publication of the CY 2015 ESRD PPS Proposed Rule, we did 
not have the necessary data to assign numerical values to the proposed 
performance standards, achievement thresholds, and benchmarks for the 
clinical measures, because we did not yet have complete data from CY 
2013. Since that time, we have collected the data needed to calculate 
finalized performance standards for the PY 2017 ESRD QIP. For all of 
the clinical measures, including the SRR clinical measure, this data 
comes from the period of January through December 2013. Table 23 lists 
the finalized numerical values for all of the finalized PY 2017 ESRD 
QIP clinical measures except the NHSN Bloodstream Infection clinical 
measure.

  Table 23--Numerical Values for the Performance Standards for the PY 2017 ESRD QIP Clinical Measures Using the
                                          Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
               Measure                   Performance standard    Achievement threshold          Benchmark
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    %Fistula.........................  64.46..................  52.42..................  78.56
    %Catheter........................  9.92...................  18.36..................  3.23
Kt/V:
    Adult Hemodialysis...............  96.89..................  91.08..................  99.35

[[Page 66184]]

 
    Adult Peritoneal Dialysis........  87.10..................  70.19..................  95.20
    Pediatric Hemodialysis...........  94.44..................  84.15..................  99.06
Hypercalcemia........................  1.30...................  4.78...................  0.00
NHSN Bloodstream Infection...........  50th percentile of       15th percentile of       90th percentile of
                                        eligible facilities'     eligible facilities'     eligible facilities'
                                        performance during CY    performance during CY    performance during CY
                                        2014.                    2014.                    2014
Standardized Readmission Ratio.......  0.996..................  1.325..................  0.555
----------------------------------------------------------------------------------------------------------------

    We believe that the ESRD QIP should not have lower performance 
standards than in previous years. In accordance with our statements in 
the CY 2012 ESRD PPS final rule (76 FR 70273), if the final numerical 
value for a performance standard, achievement threshold, and/or 
benchmark is worse than it was for that measure in the PY 2016 ESRD 
QIP, then we proposed to substitute the PY 2016 performance standard, 
achievement threshold, and/or benchmark for that measure.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported the proposal to use performance 
standards from the previous year if the current year's standards are 
lower.
    Response: We thank the commenter for the support. For this reason, 
we will finalize our proposal to utilize previous years' performance 
standards if they are higher than those of the next year. The 
performance standards for the measures used in previous years of the 
ESRD QIP have not declined. Therefore, for PY 2017, we will use the 
performance standards in the above table.
c. Performance Standards for the PY 2017 Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized performance 
standards for the Anemia Management, Mineral Metabolism, and ICH CAHPS 
reporting measures (78 FR 72213). We proposed to continue to use these 
performance standards for these measures in the PY 2017 ESRD QIP. We 
sought comments on this proposal. We did not receive any comments on 
this proposal.
5. Scoring the PY 2017 ESRD QIP Measures
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on achievement (78 FR 
72215). In determining a facility's achievement score for each measure 
under the PY 2017 ESRD QIP, we proposed to continue using this 
methodology for all clinical measures. Under this methodology, 
facilities receive points along an achievement range based on their 
performance during the proposed performance period for each measure, 
which we define as a scale between the achievement threshold and the 
benchmark.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on improvement (78 FR 
72215 through 72216). In determining a facility's improvement score for 
each measure under the PY 2017 ESRD QIP, we proposed to continue using 
this methodology for all clinical measures. Under this methodology, 
facilities receive points along an improvement range, defined as a 
scale running between the improvement threshold and the benchmark. We 
proposed to define the improvement threshold as the facility's 
performance on the measure during CY 2014. The facility's improvement 
score would be calculated by comparing its performance on the measure 
during CY 2015 (the proposed performance period) to its performance 
rate on the measure during CY 2014.
    We sought comments on this proposal. We did not receive any 
comments and are finalizing it as proposed.
6. Weighting the Total Performance Score
    We continue to believe that while the reporting measures are 
valuable, the clinical measures evaluate actual patient care and 
therefore justify a higher combined weight (78 FR 72217). We therefore 
did not propose to change our policy, finalized most recently in the CY 
2014 ESRD PPS (78 FR 72217), to weight clinical measures as 75 percent 
and reporting measures as 25 percent of the TPS. We did not propose any 
changes to the policy that facilities must be eligible to receive a 
score on at least one reporting measure and at least one clinical 
measure to be eligible to receive a TPS, or the policy that a 
facility's TPS will be rounded to the nearest integer, with half of an 
integer being rounded up.
7. Minimum Data for Scoring Measures for the PY 2017 ESRD QIP and 
Changing the Attestation Process for Patient Minimums
    For the same reasons described in the CY 2013 ESRD PPS final rule 
(77 FR 67510 through 67512), for PY 2017 we proposed to only score 
facilities on clinical and reporting measures for which they have a 
minimum number of qualifying patients during the performance period. 
Our current policy is that a facility must treat at least 11 qualifying 
patients during the performance period in order to be scored on a 
clinical measure (77 FR 67510 through 67511). We did not propose any 
changes to this policy.
    However, with respect to the proposed SRR measure, we proposed that 
facilities with fewer than 11 index discharges will not be eligible to 
receive a score on that measure. We considered proposing to adopt the 
11 qualifying patient minimum that we use for the other clinical 
measures. We decided, however, to base facility eligibility for the 
measure on the number of index discharges attributed to a facility, 
because the measure calculations are determined by the number of index 
discharges, adjusted for patient case-mix. We decided to set the 
minimum number of index discharges at 11 because this is consistent 
with reporting for the proposed SRR measure during the dry run 
conducted earlier this year, as well as with the implementation of 
outcome measures in the Hospital Readmission Reduction Program, which 
base case minimums on the number of index discharges attributable to 
the facility.
    Additionally, for the proposed SRR measure, we proposed to apply 
the small-facility adjuster to facilities that treat 41 or fewer index 
discharges because we determined that this was the minimum number of 
index discharges needed to achieve an IUR of 0.4 (that is,

[[Page 66185]]

moderate reliability) for the proposed SRR measure. Because the small-
facility adjuster gives facilities the benefit of the doubt when 
measure scores can be unduly influenced by a few outlier patients, we 
believe that setting the threshold at 41 index discharges will not 
unduly penalize facilities that treat small numbers of patients.
    In the CY 2014 ESRD PPS Final Rule, we finalized that the case 
minimum for the Mineral Metabolism and Anemia Management reporting 
measures is one, and that facilities that treat one qualifying patient 
could attest to this in CROWNWeb in order to avoid being scored on the 
measures (78 FR 72197 through 72199 and 72220 through 72221). In the 
process of responding to questions from facilities about the 
attestation requirements for the PY 2015 program, however, we found 
that facilities were confused by this requirement. For this reason, we 
proposed to remove the option for facilities to attest that they did 
not meet the case minimum for these measures. Accordingly, facilities 
that meet the case minimum of one qualifying patient would be scored on 
these measures, facilities with between 2 and 11 qualifying patients 
would be required to report data for all but one qualifying patient, 
and facilities with 11 or more qualifying patients would be required to 
report data for all patients. Due to facility confusion with the 
attestation process, we also proposed to remove the option for 
facilities to attest that they did not meet the case minimum for the 
ICH CAHPS survey reporting measure. As we stated above, we did not 
propose any further changes to the 30 survey-eligible case minimum for 
this measure. We proposed that the ESRD QIP program will determine 
facility eligibility for these measures based on available data 
submitted to CROWNWeb, in Medicare claims, and to other CMS 
administrative data sources.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Many commenters did not support the proposed data minimum 
requirements for the reporting measures because the commenters stated 
that the requirements unfairly penalize facilities that may not be able 
to legitimately report data for a few patients. As an alternative, the 
commenters recommended applying a consistent case minimum of 26 for all 
measures in the ESRD QIP.
    Response: We agree with commenters that requiring facilities with 
small patient populations to report data for all but one eligible 
patient may unfairly penalize small facilities, because failing to 
report data for two or more patients will have a greater impact on 
small facility than on larger facilities. However, we disagree that it 
is appropriate to set the case minimum at 26 for these reporting 
measures, because doing so would not allow CMS to collect baseline data 
for a large percentage of patients. We believe that setting the case 
minimum at 11 for the Anemia Management and Mineral Metabolism 
reporting measures strikes the appropriate balance between the need to 
maximize data collection and the need to not unduly penalize small 
facilities that are unable, for legitimate reasons, to report data on 
all but one patient. We further believe that setting the case minimum 
at 11 is appropriate, because this would align with the case minimum 
policy for the clinical measures in the ESRD QIP. Therefore, we are 
finalizing a case minimum policy of 11 for the Anemia Management and 
Mineral Metabolism reporting measures.
    Comment: One commenter did not support the proposed minimum data 
requirements for the ICH CAHPS measure, because small facilities will 
have difficulty obtaining 30 completed surveys. Commenter recommended 
CMS use actual response rates from the CY 2014 survey to determine 
eligibility criteria for this measure in PY 2017 and PY 2018.
    Response: Under the minimum data requirements proposed for the ICH 
CAHPS reporting measure for PY 2017, a facility that (1) treats fewer 
than 30 survey-eligible patients during the eligibility period (that 
is., CY 2014); or (2) receives fewer than 30 completed surveys during 
the performance period (that is., CY 2015) is not eligible to receive a 
score on the ICH CAHPS measure. We are finalizing below that these data 
minimum requirements also apply to the ICH CAHPS clinical measure for 
PY 2018. Therefore, if a small facility treats more than 30 ICH CAHPS 
eligible patients during the eligibility period but receives fewer than 
30 completed surveys total from the two survey administrations for the 
performance period, that facility will receive an ``N/A'' on the ICH 
CAHPS measure for that Payment Year. We disagree with commenter's 
recommendation to use CY 2014 response rates to determine survey 
eligibility criteria for the ICH CAHPS measure because actual response 
rates are susceptible to a number of biases, including facility case-
mix, response propensity, and the mode of survey administration. We 
believe the current minimum data requirement avoids the possibility of 
unfairly penalizing facilities based on these response biases by 
relying solely on the number of patients treated and the number of 
surveys completed to determine ICH CAHPS scoring eligibility.
    Comment: One commenter did not support calculating clinical measure 
performance rates for facilities with between 11 and 25 eligible 
patients, and then applying the small facility adjuster to these 
facilities' scores. One commenter stated that including facilities with 
small numbers of eligible patients, and compensating (via the small 
facility adjuster) for the random effects that inevitably appear, is 
not consistent with the NQS goal of applying consistent approaches to 
quality measurement.
    Response: We recognize that measures using a patient-minimum of 11 
are somewhat less reliable than measures using a patient-minimum of 26. 
Despite this modest decline in the measures' reliability, we continue 
to believe that it is essential to score facilities with between 11 to 
25 eligible patients on the clinical measures. Based on data from CY 
2013, we have determined that applying a 26-patient-minimum to all of 
the clinical measures (as compared with continuing the current 11-
patient-minimum) would result in the exclusion of an additional 562 
facilities from the ESRD QIP, or 9.2 percent of facilities overall. 
Given the inherent tradeoff between a modest decline in measure 
reliability and including these 562 facilities in the ESRD QIP, we 
believe that on balance it is more important to include these 
facilities. Additionally, we recognize that the small facility adjuster 
is an imperfect mechanism for accounting for the possibility that a 
small number of outlier patients will disproportionately diminish a 
facility's score on a clinical measure. Nevertheless, given the 
program's commitment to the 11-patient minimum, using the adjuster is 
preferable to not using any adjustment, because the adjuster gives 
small facilities the benefit of the doubt. We further believe that this 
methodology is consistent with the NQS goal of a consistent approach to 
quality measurement because it is applied to all clinical measures in 
the ESRD QIP.
    Comment: One commenter did not support the use of the small 
facility adjuster in the ESRD QIP, because adjustments are haphazardly 
applied to facilities with similar numbers of eligible patients and 
patient-months in the numerator. For example, and with respect to the 
Peritoneal Dialysis Adequacy clinical measure, a facility with 18 
eligible patients that misses the threshold for 3 patients would not

[[Page 66186]]

receive an adjustment, whereas a facility with 17 eligible patients 
that misses the threshold for 3 patients would, as would a facility 
with 19 eligible patients that misses the threshold for 3 patients. If 
the small facility adjuster remains in the ESRD QIP, commenter 
recommended rounding the measure score after applying the adjustment, 
as opposed to beforehand, which the commenter states is the current 
practice.
    Response: The small facility adjustment is applied consistently to 
facilities' performance rates (for example, 87.5 percent for the Adult 
Peritoneal Dialysis clinical measure), such that facilities with fewer 
eligible patients receive more of an adjustment than facilities with 
more eligible patients. With respect to the example provided by the 
commenter, we recognize that the impact of the small facility 
adjustment on measure scores can be different for facilities with the 
same or similar numbers of eligible patients for each facility. This 
variable impact on facility measure scores is attributable to the 
achievement and improvement scoring methodologies used in the ESRD QIP. 
Scores on the clinical measures are determined by selecting the higher 
of the facility's achievement and improvement scores. The achievement 
score is determined by comparing the adjusted performance rate to the 
achievement threshold and benchmark, and the facility's improvement 
score is determined by comparing the adjusted performance rate to the 
facility's baseline rate. Accordingly, the impact of the small facility 
adjustment on a measure score (as opposed to a performance rate) will 
depend upon whether a measure is scored on the basis of achievement or 
improvement, as well as the facility's improvement threshold. 
Therefore, the variable impact of the small facility adjustment is not 
inherent to the small facility adjuster, but rather an intentional 
artifact of the ESRD QIP scoring methodology. Finally, we note that the 
small facility adjustment is applied to the measure performance rate 
(as opposed to the measure score), with rounding performed at the 6th 
decimal place. Rounding to the nearest integer already occurs after the 
small facility adjustment is applied, and this is consistent with the 
commenters recommendation on this finalized policy. The following 
summarizes the rounding algorithm that is currently applied to the 
performance score calculation for facilities with 11-25 eligible 
patients:
     Calculate the measure performance rate (xi=(#patient-
months numerator/#patient-months denominator)*100), round to 6th 
decimal place
     Calculate the facility weight (wi=1-ni/26), round to 6th 
decimal place
     Calculate the Standard Error (SE(xi)), round to 6th 
decimal place
     Calculate adjusted measure performance rate (ti = xi +wi * 
SE(xi)), round to nearest integer.
    For these reasons, we are finalizing the minimum data policies as 
proposed, with the exception of the patient minimum policies for the 
Anemia Management and Mineral Metabolism reporting measures. We are 
finalizing that a facility must treat at least 11 qualifying patients 
to receive a score on the Anemia Management and Mineral Metabolism 
reporting measures.
    We proposed to continue our policies that govern when a newly 
opened facility would be eligible to be scored on measures as follows.
     Facilities with a CCN open date on or after July 1 of the 
performance period (for PY 2017, this would be July 1, 2015) are not 
eligible to be scored on any reporting measures except the ICH CAHPS 
reporting measure.
     Facilities with a CCN open date on or after January 1 of 
the performance period (for PY 2017, this would be January 1, 2015) are 
not eligible to receive a score on the ICH CAHPS reporting measure in 
the PY 2017 program, due to the time it takes to contract with a CMS-
approved third-party vendor to administer the survey.
     Facilities are eligible to receive a score on all of the 
clinical measures except the NHSN Bloodstream Infection clinical 
measure if they have a CCN open date at any time before the end of the 
performance period.
     Facilities with a CCN open date after January 1 of the 
performance period (for PY 2017, this would be January 1, 2015) are not 
eligible to receive a score on the NHSN Bloodstream Infection clinical 
measure, due to the need to collect 12 months of data to accurately 
score the measure.
    We also proposed to continue our policy that a facility will not 
receive a TPS unless it receives a score on at least one clinical 
measure and at least one reporting measure. We note that as a result, 
facilities will not be eligible for a payment reduction under the PY 
2017 ESRD QIP if they have a CCN open date on or after July 1, 2015.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
    Table 24 displays the finalized patient minimum requirements for 
each of the reporting measures, as well as the CCN open dates after 
which a facility will not be eligible to receive a score on a reporting 
measure.

                          Table 24--Minimum Data Requirements for the PY 2017 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                                                                              Small facility
              Measure                 Minimum data requirements        CCN open date             adjuster
----------------------------------------------------------------------------------------------------------------
Adult Hemodialysis Adequacy          11 qualifying patients.....  N/A...................  11-25 patients
 (Clinical).
Adult Peritoneal Dialysis Adequacy   11 qualifying patients.....  N/A...................  11-25 patients
 (Clinical).
Pediatric Hemodialysis Adequacy      11 qualifying patients.....  N/A...................  11-25 patients
 (Clinical).
Vascular Access Type: Catheter       11 qualifying patients.....  N/A...................  11-25 patients
 (Clinical).
Vascular Access Type: Fistula        11 qualifying patients.....  N/A...................  11-25 patients
 (Clinical).
Hypercalcemia (Clinical)...........  11 qualifying patients.....  N/A...................  11-25 patients
NHSN Bloodstream Infection           11 qualifying patients.....  On or before January    11-25 patients
 (Clinical).                                                       1, 2015.
SRR (Clinical).....................  11 index discharges........  N/A...................  11-41 index discharges
ICH CAHPS (Reporting)..............  Facilities with 30 or more   Before January 1, 2015  N/A
                                      survey-eligible patients
                                      during the calendar year
                                      preceding the performance
                                      period must submit survey
                                      results. Facilities will
                                      not receive a score if
                                      they do not obtain a total
                                      of at least 30 completed
                                      surveys during the
                                      performance period..
Anemia Management (Reporting)......  11 qualifying patients.....  Before July 1, 2015...  N/A
Mineral Metabolism (Reporting).....  11 qualifying patients.....  Before July 1, 2015...  N/A
----------------------------------------------------------------------------------------------------------------


[[Page 66187]]

8. Payment Reductions for the PY 2017 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities, such 
that facilities achieving the lowest TPSs receive the largest payment 
reductions. For PY 2017, we proposed that a facility will not receive a 
payment reduction if it achieves a minimum TPS that is equal to or 
greater than the total of the points it would have received if:
     It performed at the performance standard for each clinical 
measure;
     It received zero points for each clinical measure that 
does not have a numerical value for the performance standard 
established through the rulemaking process before the beginning of the 
PY 2017 performance period; and
     It received 10 points (which is the 50th percentile of 
facility performance on the PY 2015 reporting measures) for each 
reporting measure.
    We recognize that these conditions are more stringent than the 
conditions used to establish the minimum TPS in the PY 2016 ESRD QIP, 
because this proposal increases the number of points a facility would 
have to receive on each reporting measure from 5 to 10. The PY 2015 
program is the most recent year for which we will have calculated final 
measure scores before the beginning of the performance period for PY 
2017 (that is., CY 2015). We note that facility performance on the 
Anemia Management, Mineral Metabolism, NHSN Dialysis Event, and ICH 
CAHPS reporting measures in the PY 2015 program is so high that the 
median score on each of the measures was 10 points. We proposed to 
increase the number of points a facility would have to achieve for each 
reporting measure to the 50th percentile of facility performance on the 
PY 2015 reporting measures (that is, the average of the median scores 
for each reporting measure), because a score of 5 on each of these 
reporting measures is indicative of a below-average performance, and we 
want to incentivize facilities to provide above-average care.
    We sought comments on this proposal. We did not receive any 
comments and are finalizing it as proposed.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. In 
the CY 2014 ESRD PPS Final Rule (78 FR 72223 through 72224), we 
finalized a payment reduction scale for PY 2016 and future payment 
years, such that for every 10 points a facility falls below the minimum 
TPS, the facility would receive an additional 0.5 percent reduction on 
its ESRD PPS payments, with a maximum reduction of 2.0 percent. We did 
not propose any changes to this policy.
    Based on the finalized performance standards listed above, we have 
determined that a facility must meet or exceed a minimum TPS of 60 for 
PY 2017. For all of the clinical measures except the NHSN Bloodstream 
Infection clinical measure, these data come from CY 2013. For the NHSN 
Bloodstream Infection clinical measure, we set the performance standard 
to zero for purposes of determining this minimum TPS, because we are 
not able to establish a numerical value for the performance standard 
through the rulemaking process before the beginning of the PY 2017 
performance period. We proposed that facilities failing to meet the 
minimum TPS, as established in the CY 2015 ESRD PPS Final Rule, will 
receive payment reductions based on the estimated TPS ranges indicated 
in Table 25 below.

Table 25--Payment Reduction Scale for PY 2017 Based on the Most Recently
                       Available Data From CY 2013
------------------------------------------------------------------------
            Total performance score                   Reduction  (%)
------------------------------------------------------------------------
100-60.........................................                        0
59-50..........................................                      0.5
49-40..........................................                      1.0
39-30..........................................                      1.5
29-0...........................................                      2.0
------------------------------------------------------------------------

9. Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. We began a pilot data-validation program in CY 2013 for the 
ESRD QIP, and we have procured the services of a data-validation 
contractor that is tasked with validating a national sample of 
facilities' records as they report CY 2014 data to CROWNWeb. Our first 
priority was to develop a methodology for validating data submitted to 
CROWNWeb under the pilot data-validation program, and this continues to 
be our goal. Once this methodology has been fully developed, we will 
propose to adopt it through the rulemaking process. For the PY 2016 
ESRD QIP (78 FR 72223 through 72224), we finalized a requirement to 
sample approximately 10 records from 300 randomly selected facilities; 
these facilities will have 60 days to comply once they receive requests 
for records. We proposed to continue this pilot for the PY 2017 ESRD 
QIP. Under this continued validation study, we will sample the same 
number of records (approximately 10 per facility) from the same number 
of facilities (that is, 300) during CY 2015. If a facility is randomly 
selected to participate in the pilot validation study but does not 
provide CMS with the requisite medical records within 60 days of 
receiving a request, then we proposed to deduct 10 points from the 
facility's TPS. Once we have developed and adopted a methodology for 
validating the CROWNWeb data, we intend to consider whether payment 
reductions under the ESRD QIP should be based, in part, on whether a 
facility has met our standards for data validation.
    We also proposed a feasibility study for validating data reported 
to CDC's NHSN Dialysis Event Module for the NHSN Bloodstream Infection 
clinical measure. HAIs are relatively rare, and we proposed that the 
feasibility study would target records with a higher probability of 
including a dialysis event, because this would enrich the validation 
sample while reducing the burden on facilities. The methodology for 
this proposed feasibility study would resemble the methodology used by 
the Hospital Inpatient Quality Reporting Program to validate the 
central line-associated bloodstream infection measure, the catheter-
associated urinary tract infection measure, and the surgical site 
infection measure (77 FR 53539 through 535553).
    Specifically, we proposed to randomly select nine facilities to 
participate in the feasibility study. A CMS contractor will send these 
facilities quarterly requests for lists of all positive blood cultures 
drawn from its patients during the quarter, including any positive 
blood cultures that were collected from the facility's patients on the 
day of, or the day following, their admission to a hospital. Facilities 
will have 60 days to respond to quarterly requests for lists of 
positive blood cultures. A CMS contractor will then develop a 
methodology for determining when a positive blood culture qualifies as 
a ``candidate dialysis event,'' and is therefore appropriate for 
further validation. Once the contractor determines a methodology for 
identifying candidate dialysis events, the contractor will analyze the 
records of patients who had a positive blood culture in order to 
determine if the facility reported dialysis events for those patients 
in accordance with the NHSN Dialysis Event Protocol. If the contractor 
determines that additional medical records are needed from a facility 
to validate whether the facility

[[Page 66188]]

accurately reported the dialysis events, then the contractor will send 
a request for additional information to the facility, and the facility 
will have 60 days from the date of the letter to respond to the 
request. Overall, we estimate that, on average, quarterly lists will 
include two positive blood cultures per facility, but we recognize 
these estimates may vary considerably from facility to facility. If a 
facility is randomly selected to participate in the feasibility study 
but does not provide CMS with the requisite lists of positive blood 
cultures or the requisite medical records within 60 days of receiving a 
request, then we proposed to deduct 10 points from the facility's TPS.
    The goals of the proposed feasibility study will be five-fold: (1) 
To estimate the burden and associated costs to facilities of validating 
the NHSN Bloodstream Infection clinical measure; (2) to assess the 
costs to CMS to validate this measure; (3) to develop a methodology for 
identifying candidate dialysis events from lists of positive blood 
cultures; (4) to develop a methodology for determining whether a 
facility accurately reported dialysis events under the NHSN Bloodstream 
Infection clinical measure; and (5) to reach some preliminary 
conclusions about whether facilities are accurately reporting data 
under the NHSN Bloodstream Infection clinical measure. Based on the 
results of this study, we will consider the feasibility of proposing in 
future rulemaking to validate the NHSN Bloodstream Infection clinical 
measure for all facilities.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Some commenters supported the proposal to validate data 
submitted for the NHSN Bloodstream Infection measure, and stated that 
asking facilities to provide blood culture reports on a quarterly basis 
is appropriate. However, one commenter also recommended that the 
proposed feasibility study be more robust. In particular, the commenter 
stated that previous validation studies of NHSN data revealed that 
facilities were underreporting dialysis events, and that facilities did 
not understand when to report that an infection was a ``dialysis 
event.'' The commenter recommended that these findings should be 
incorporated into the proposed feasibility study. Commenters also 
recommended expanding the number of facilities undergoing validation 
beyond 9, because the ``proposed nine-facility feasibility study is not 
robust enough to evaluate true validation concerns.'' Commenters 
recommended auditing the NHSN data of 10 percent of facilities, because 
this would create a strong incentive for facilities to accurately 
report dialysis events. Another commenter stated that the validation 
study should be expanded to NHSN data that is used directly used to 
score the NHSN Bloodstream Infection measure.
    Response: We thank the commenters for their support. We initially 
considered expanding the scope of the feasibility study to include more 
than nine facilities. We decided not to do so because we thought it was 
important to demonstrate the study's feasibility, and to further 
develop the study's methodology, before expanding the study to include 
more facilities. Expanding the study to include more facilities before 
demonstrating its feasibility and validity could lead to a waste of 
agency resources. Furthermore, we are aware of existing studies that 
call into question the validity of data entered into the NHSN system. 
The existence of these studies is one of the reasons why we proposed to 
conduct the feasibility study, and results from previous studies will 
be taken into account when developing the methodology for the 
feasibility study. Additionally, we appreciate the recommendation to 
use a validation study of NHSN data to audit ten percent of facilities, 
and we agree that such a process could improve the validity of NHSN 
data overall. We will consider expanding the scope of the study once we 
have reviewed the results of the feasibility study.
    Comment: Some commenters stated that the CROWNWeb validation pilot 
is actually an audit of facility data, and is not focused on testing a 
new payment or delivery model. Commenters were concerned that the pilot 
places facilities at risk for incurring a 2 percent payment reduction 
and recommended ``intermediate penalties'' as an alternative. 
Commenters further recommended that CMS ensure that facilities have 
some means to dispute CMS claims that they reported invalid data.
    Response: We agree that one of the purposes of the validation pilot 
is to identify instances in which facilities reporting invalid data to 
CROWNWeb. However, we do not believe it is appropriate to designate the 
validation pilot as an ``audit'' of facility data, because the ultimate 
objective of the study is to improve the validity of data reported to 
CROWNWeb, rather than to penalize facilities for reporting invalid 
data. We further note that we did not propose to penalize facilities 
for reporting invalid data; if and when we propose to do so in future 
rulemaking, we will consider implementing an appeal process facilities 
can use to contest CMS determinations that invalid data was reported to 
CROWNWeb. Finally, we recognize that facility non-compliance with the 
requirements of the CROWNWeb validation pilot may result in payment 
reductions that would not otherwise be imposed. We believe this is 
warranted, because facility compliance is essential to the success of 
the validation pilot, and we wish to provide a strong incentive for 
facilities to transmit the requested medical records needed to validate 
CROWNWeb data.
    Comment: One commenter stated that CROWNWeb should be fully 
functional before assessing penalties for submitting invalid data.
    Response: We agree that is it essential to improve the 
functionality of CROWNWeb, and we believe that the pilot validation 
study will assist in identifying systematic issues with CROWNWeb that 
diminish the system's functionality. We did not propose to impose 
penalties on facilities for reporting invalid data, and we will 
consider the functionality of CROWNWeb if we decide to propose to 
impose such penalties in future rulemaking.
    Comment: One commenter recommended that CMS should make the 
methodology for the proposed NHSN validation feasibility study 
transparent and seek input from nephrologists and dialysis 
professionals when developing the methodology.
    Response: We agree that it is important to make the methodology of 
the feasibility study transparent. We will make the methodology 
publically available on a CMS Web site and notify the public of its 
availability via a CROWN Memo or similar mode of formal communication. 
Additionally, we confirm that the CMS contractor conducting the 
validation feasibility study will consult nephrologists and dialysis 
professionals when developing the study's methodology.
    Comment: Some commenters did not support the proposal to validate 
data used to calculate the NHSN Bloodstream Infection measure because 
the commenter stated that the measure should have been validated before 
it would adopted in the ESRD QIP.
    Response: NHSN provides detailed trainings, protocols, and guidance 
for users to follow to ensure that data are reported in a standardized 
manner and according to requirements. A small validation study was 
conducted prior to the adoption of the measure in the ESRD QIP. 
Information from this study is

[[Page 66189]]

described in the measure specifications. We recognize that continuous 
internal and external evaluation and quality checks of the reported 
data are important for accuracy and reliability. We further note that 
one of the purposes of the feasibility study is to improve the validity 
of data reported to NHSN, and we continue to believe that one of the 
outcomes of the study will be to improve the validity of the NHSN 
Bloodstream Infection measure.
    Comment: Some commenters did not support the proposal to impose a 
10-point reduction on facilities that fail to send medical records to 
CMS within the 60-day timeframe, because the 60-day time frame is too 
short, and the penalty discriminates against facilities selected to 
participate in the validation studies, particularly small facilities. 
Commenters also stated that the ESRD CfCs already require facilities to 
comply with such requests. Commenter further stated that CMS has not 
demonstrated that facilities do not comply with these requests, and 
therefore did not support a penalty for non-compliance until the 
problem has been demonstrated. One commenter also questioned whether 
the Act authorizes CMS to deduct points from a facility's TPS if it 
does not comply with the requirements of data validation studies.
    Response: We disagree that the 60-day time frame is too short for 
facilities to respond to requests to validate medical records, because 
facilities should have these records on hand, and sampled facilities 
will only be required to submit a small number of medical records the 
CROWNWeb and NHSN Bloodstream Infection studies. We recognize that the 
ESRD CfCs already require facilities to comply with these requests for 
medical records, and we are not aware of any evidence suggesting that 
they are not already doing so. Nevertheless, we continue to believe 
that assessing penalties on a facility's TPS is the surest way to 
ensure that facilities provide the medical records needed to complete 
the studies. This is because facilities are typically not surveyed for 
compliance with the ESRD CfCs on any given year, so deducting points 
from a facility's TPS provides a more certain process for penalizing 
noncompliance with the requirements of the validation studies. Our 
proposal to deduct points from a facility's TPS is consistent with 
section 1881(h)(3)(A)(i) of the Act, because it is part of our a 
methodology for assessing the total performance of each provider of 
services and renal dialysis facility based on performance standards 
with respect to the measures selected. The main purpose of these 
studies is to assess whether facilities are reporting accurate data, 
and we have determined that review of medical records is integral to 
that determination.
    For these reasons, we are finalizing, as proposed, CROWNWeb pilot 
data-validation program and the feasibility study for validating data 
reported to CDC's NHSN Dialysis Event Module for the NHSN Bloodstream 
Infection clinical measure.
10. Monitoring Access to Dialysis Facilities
    Public comments on the proposal to adopt the Standardized 
Hospitalization Ratio measure in the PY 2014 ESRD QIP (76 FR 70267) 
expressed concerns that ``the measure may lead to `cherry-picking' of 
patients based on their risk of hospitalizations, causing access to 
care issues for patients with more severe illness.'' We share 
commenters' concerns about the SHR measure, and we believe that these 
concerns equally apply to other outcome measures proposed for the ESRD 
QIP. We recognize that, in general, inadequate risk adjustment in 
outcome measure calculations can create an incentive for facilities to 
deny services to sicker patients, because these patients' illnesses 
would not be properly accounted for in the risk-adjustment 
calculations. We believe that outcome measures proposed and adopted for 
the ESRD QIP properly risk adjust for patients with severe illnesses, 
but we remain concerned that misperceptions to the contrary might 
negatively impact access to dialysis therapy.
    Because we proposed to adopt the SRR clinical measure for the PY 
2017 program, and also proposed to adopt the STrR clinical measure for 
the PY 2018 program, we proposed to initiate a monitoring program 
focused on access to dialysis therapy. This program would compare 
dialysis data before and after the adoption of an outcome measure, 
looking for changes in admission and discharge practices, as well as 
changes in rates and patterns of involuntary discharges. Specifically, 
this program would assess and analyze the characteristics of 
beneficiaries admitted to dialysis centers (stratified by location, 
size, and setting) in order to determine when and if selective 
admission and discharge practices are coupled with negative patient 
attributes and trends over time. We believe this program will enable us 
to identify patterns that are indicative of diminished access to 
dialysis therapy.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Some commenters supported the proposed access study 
because monitoring and remediating cases of cherry-picking are 
important for ensuring that patients receive high quality care.
    Response: We thank commenters for their support.
    Comment: One commenter requested more information from CMS 
regarding its proposal to monitor dialysis facility admission and 
discharge practices, because this proposal may lead to additional 
reporting (and burden) for facilities.
    Response: We are still in the process of finalizing the methodology 
for the proposed access study. Once we have developed the methodology, 
we will make it publically available on a CMS Web site and notify the 
public of its availability via a CROWN Memo or similar mode of formal 
communication. We clarify, however, that the study will make use of 
existing data and will not impose any additional burden on facilities.
    Comment: One commenter recommended that, instead of performing the 
proposed monitoring access study, CMS focus its efforts on developing a 
more comprehensive set of comorbidities for use in adjusting the 
standardized outcome measures.
    Response: We appreciate the recommendation to further develop the 
risk-adjustment methodologies associated with the SRR and STrR 
measures, and we will continue to do so as part of our ongoing measure 
re-evaluation process. However, we disagree that efforts to develop 
risk-adjustment methodologies should be pursued in lieu of the proposed 
access study. We believe both activities are important, and we intend 
to pursue them at the same time.
    For these reasons, and because we are finalizing the SRR clinical 
measure for PY 2017 (as discussed in more detail above), and the STrR 
measure for PY 2018 (as discussed in more detail below), we are 
finalizing that we will conduct a study to determine the impact of 
adopting the SRR and STrR measures on access to care. Further details 
about the study and its methodology will be made available on a CMS Web 
site, and facilities will be notified via a CROWN Memo when this 
information is available.
11. Extraordinary Circumstances Exception
    Many comments on the CY 2014 ESRD PPS proposed rule included the 
recommendation to exempt a facility from all the requirements of the 
ESRD QIP clinical and reporting measures during the time the facility 
was forced to close temporarily due to a natural

[[Page 66190]]

disaster or other extraordinary circumstances. In response to these 
comments, we agreed that ``there are times when facilities are unable 
to submit required quality data due to extraordinary circumstances that 
are not within their control, and we do not wish to penalize facilities 
for such circumstances or unduly increase their burden during these 
times'' (78 FR 72209).
    Section 1881(h)(3)(A)(i) of the Act states, ``[T]he Secretary shall 
develop a methodology for assessing the total performance of each 
provider of services and renal dialysis facility based on performance 
standards with respect to the measures selected under paragraph (2) for 
a performance period established under paragraph (4)(D).'' Given the 
possibility that facilities could be unfairly penalized for 
circumstances that are beyond their control, we believe the best way to 
implement an extraordinary circumstances exception is under the 
authority of this section. We therefore proposed to interpret section 
1881(h)(3)(A)(i) of the Act to enable us to configure the methodology 
for assessing facilities' total performance such that we will not 
require a facility to submit, nor penalize a facility for failing to 
submit, data on any ESRD QIP quality measure data from any month in 
which a facility is granted an extraordinary circumstances exception.
    Under this policy, we proposed that, in the event of extraordinary 
circumstances not within the control of the facility (such as a natural 
disaster), for the facility to receive consideration for an exception 
from all ESRD QIP requirements during the period in which the facility 
was closed, the facility would need to submit a CMS Disaster Extension/
Exception Request Form through www.qualitynet.org within 90 calendar 
days of the date of the disaster or extraordinary circumstance. We 
proposed that the facility would need to provide the following 
information on the form:
     Facility CCN;
     Facility name;
     CEO name and contact information;
     Additional contact name and contact information;
     Reason for requesting an exception;
     Dates affected;
     Date facility will start submitting data again, with 
justification for this date; and
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper, and other media 
articles.
    Incomplete forms will be returned to the facility without further 
review of their content. We will evaluate the request and provide the 
facility with a response. If we determine that the facility was, in 
fact, closed for a period of time due to extraordinary circumstances, 
then we will exempt the facility from the ESRD QIP requirements for any 
month during which the facility was closed due to the extraordinary 
circumstances. As such, a facility granted a temporary exception will 
be scored on each measure only for the months during a performance 
period not covered by the exception. For example, if a facility is 
granted an extraordinary circumstances exception for the time period 
between January 15 and February 15, 2015, then the facility will not be 
required to report, and will not be penalized for not reporting, data 
on any ESRD QIP measure data for January and February of CY 2015. The 
effect of this proposal is that if a facility, because it has been 
granted an exception, cannot meet the reporting requirements that apply 
to a measure, the facility will not receive a score on the measure. For 
example, if a facility is granted an extraordinary circumstances 
exception for February 2015, then that facility would not be scored on 
the NHSN Bloodstream Infection clinical measure for the applicable 
payment year, because this measure requires facilities to submit 12 
months of data in order to avoid receiving zero points on the measure.
    We stated that this policy would not preclude us from granting 
exceptions to facilities that have not requested them when we determine 
that an extraordinary circumstance (for example, a hurricane or other 
act of nature) affects an entire region or locale. If we made the 
determination to grant an exception to facilities in a region or 
locale, then we proposed to communicate this decision through routine 
communication channels to facilities, vendors, and Networks, including 
but not limited to issuing memoranda, emails, and notices on a CMS-
approved Web site.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Some commenters supported the proposal to add an 
Extraordinary Circumstances Exception to the ESRD QIP, because 
facilities should not be required to meet the program's requirements 
when they are forced to close.
    Response: We thank commenters for their support.
    Comment: Some commenters supported the proposal to add an 
Extraordinary Circumstance Exception but sought clarification as to 
what constitutes an ``extraordinary circumstance.'' Commenters 
recommended that events such as fires and explosions, which are not 
typically considered ``natural disasters'' should be considered 
``extraordinary circumstances.'' Commenters also recommended granting 
exceptions for facilities that temporarily close for renovation or 
relocate.
    Response: The Extraordinary Circumstances Exception is intended to 
address facility closures beyond the control of the facility, and is 
not limited to natural disasters. We note that eligibility 
determinations for this exception will be made on a case-by-case basis 
and based entirely on evidence and documentation that facilities 
present.
    Comment: One commenter recommended that camps and short-term 
dialysis units should have an opportunity to take advantage of the 
extraordinary circumstances exception, because they operate under 
unique circumstances that do not apply to most facilities.
    Response: We appreciate that camps and short-term dialysis units 
operate under unique circumstances. However, these circumstances are 
categorically different than the types of circumstances covered by the 
Extraordinary Circumstances Exception, because their closure is within 
the facility's control and is generally planned in advance. 
Accordingly, operating for a short period of time will not be grounds 
for granting an Extraordinary Circumstances Exception.
    For these reasons, we are finalizing the proposal to adopt an 
Extraordinary Circumstance Exception in the ESRD QIP, beginning with 
the PY 2017 program.

F. Requirements for the PY 2018 ESRD QIP

1. Modification of the Mineral Metabolism Reporting Measure Beginning 
in PY 2018
    In the CY 2013 ESRD QIP, we adopted a reporting measure focused on 
mineral metabolism, which was based in part on NQF #0255 (77 FR 67487 
through 67487). In the CY 2014 ESRD PPS, we finalized two revisions to 
the Mineral Metabolism reporting measure: (1) To include home 
peritoneal dialysis patients in the measure; and (2) to remove serum 
calcium reporting from the measure because of its reporting under the 
Hypercalcemia clinical measure (78 FR 72197 through 72198). 
Accordingly, in order to meet the requirements for the Mineral 
Metabolism reporting measure, facilities currently must report serum 
phosphorus

[[Page 66191]]

values for each qualifying patient treated at the facility on a monthly 
basis.
    Since the publication of the CY 2014 ESRD PPS final rule, members 
of the renal community requested an ad hoc NQF review of measure #0255, 
focusing in particular on whether the measure should be updated to 
allow for the reporting of plasma phosphorus data. The NQF Consensus 
Standards Approval Committee (CSAC) reviewed the measure and 
recommended that the phosphorus reporting measure (NQF #0255) be 
modified to allow for the reporting of plasma phosphorus data as an 
alternative to serum phosphorus data. Although our TEP reviewed this 
issue and concluded that measure #0255 should remain unchanged, we 
concur with the CSAC's recommendation due to the CSAC's ad hoc review 
of lab data demonstrating the equivalency of plasma and serum 
measurements of phosphorus, as well as an additional concurrent 
internal review of the data by CMS and our measure development 
contractor. We are in agreement with the CSAC that readings of 
phosphorus using either plasma or serum are appropriate for the 
measure. As the measure developer for NQF#255, we are also in the 
process of revising the specifications for that measure and plan to 
submit the revised measure specifications to the NQF for endorsement. 
We believe the change to these specifications is non-substantive 
because plasma readings are an alternative method of reporting on 
phosphorus data and, as we state above, are roughly equivalent to serum 
phosphorus readings.
    We considered proposing to allow facilities to report plasma 
phosphorus data for the Mineral Metabolism reporting measure in the PY 
2017 program, but we have determined that it is not operationally 
feasible to configure the relevant data fields in CROWNWeb to accept 
plasma phosphorus readings prior to January 1, 2015, the beginning of 
the performance period for that program year. For this reason, we 
proposed to modify the measure specifications for the Mineral 
Metabolism reporting measure to allow facilities to report either serum 
phosphorus data or plasma phosphorus data, beginning with the PY 2018 
program. We further clarified that we were not proposing any other 
changes to the measure specifications for the Mineral Metabolism 
reporting measure.
    We sought comments on this proposal. The comments and responses are 
set forth below.
    Comment: One commenter supported the proposal to allow facilities 
to report both plasma and serum phosphorous under the Mineral 
Metabolism reporting measure, beginning in PY 2018.
    Response: We thank the commenter for the support.
    Comment: Many commenters supported the proposal to modify that 
Mineral Metabolism reporting measure, but sought clarification as to 
why it is not feasible to do so starting in PY 2017, and urged CMS to 
adopt the change for PY 2017.
    Response: We thank commenters for their support. We have already 
begun working to incorporate this modification into the CROWNWeb 
system. However, we do not expect to be able to fully implement the 
modification by January 1, 2015 (that is, the beginning of the PY 2017 
performance period), so it is not possible to collect plasma phosphorus 
data for the PY 2017 program.
    For these reasons, we are finalizing the proposed modifications to 
the Mineral Metabolism reporting measure, beginning with the PY 2018 
program. The technical specifications for this finalized measure can be 
found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
2. New Measures for the PY 2018 ESRD QIP and Future Payment Years
    For the PY 2018 ESRD QIP, we proposed to continue to use all of the 
measures proposed for the PY 2017 ESRD QIP, with the exception of the 
ICH CAHPS reporting measure, which we proposed to convert to a clinical 
measure. We also proposed to adopt five new measures. The proposed new 
measures include one new outcome measure evaluating transfusions in the 
ESRD population, one measure on pediatric peritoneal dialysis adequacy, 
one measure on pain assessment, one measure on clinical depression 
screening, and one measure on healthcare personnel influenza 
vaccination (see Table 26).

        Table 26--New Measures Proposed for the PY 2018 ESRD QIP
------------------------------------------------------------------------
             NQF#                            Measure title
------------------------------------------------------------------------
N/A..........................  Pediatric Peritoneal Dialysis Adequacy, a
                                clinical measure.
                               Percentage of pediatric peritoneal
                                dialysis patient-months with spKt/V
                                greater than or equal to 1.8 (dialytic +
                                residual).
0258.........................  In-Center Hemodialysis Consumer
                                Assessment of Providers and Systems
                                Survey,\1\ a clinical measure.
                               Proportion of responses to rating items
                                grouped into three composite measures
                                and three global ratings.
N/A..........................  Standardized Transfusion Ratio, a
                                clinical measure.
                               Risk-adjusted standardized transfusion
                                ratio for dialysis facility patients.
N/A \2\......................  Pain Assessment and Follow-Up, a
                                reporting measure.
                               Percentage of adult patients with
                                documentation of pain assessment through
                                discussion with the patient including
                                the use of a standardized tool(s) on
                                each visit and documentation of a follow-
                                up place when pain is present.
N/A \3\......................  Depression Screening and Follow-Up, a
                                reporting measure.
                               Percentage of adult patients screened for
                                clinical depression using a standardized
                                tool and follow-up plan is documented.
N/A \4\......................  NHSN Healthcare Personnel Influenza
                                Vaccination, a reporting measure.
------------------------------------------------------------------------
\1\ The proposed dimensions of the ICH CAHPS survey for use in the PY
  2018 ESRD QIP are: Nephrologists' Communication and Caring, Quality of
  Dialysis Center Care and Operations, Providing Information to
  Patients, Overall Rating of the Nephrologists, Overall Rating of the
  Dialysis Center Staff, and Overall Rating of the Dialysis Facility.
\2\ We note that the NQF has previously endorsed a pain measure (NQF
  #0420) upon which this measure is based.
\3\ We note that the NQF has previously endorsed a depression measure
  (NQF #0418) upon which this measure is based.
\4\ We note that the NQF has previously endorsed a vaccination measure
  (NQF #0431) upon which this measure is based.


[[Page 66192]]

a. Standardized Transfusion Ratio (STrR) Clinical Measure
Background
    We are concerned that the inclusion of erythropoiesis-stimulating 
agents (ESAs) in the ESRD PPS and the removal of the Hemoglobin Less 
than 10 g/dL clinical measure from the ESRD QIP measure set could 
result in the underutilization of ESAs to manage anemia in ESRD 
patients, with the result that these patients have lower achieved 
hemoglobin levels and more frequently need red-blood-cell transfusions.
    In addition, patients with ESRD who are eligible to receive a 
kidney transplant and are transfused risk becoming sensitized to the 
donor pool, thereby making it less likely that a transplant will be 
successful. Blood transfusions also carry a small risk of transmitting 
blood-borne infections to the patient, and the patient could 
additionally develop a transfusion reaction. Furthermore, using 
infusion centers or hospitals to transfuse patients is expensive, 
inconvenient, and could compromise future vascular access.
Overview of Measure
    The Standardized Transfusion Ratio (STrR) for all adult Medicare 
ESRD patients is a ratio of the number of observed eligible blood 
transfusion events occurring in patients dialyzing at a facility to the 
number of eligible transfusions that would be expected from a 
predictive model that accounts for patient characteristics within each 
facility. Eligible transfusions are those that do not have any claims 
pertaining to the comorbidities identified for exclusion in the 12 
months immediately prior to the transfusion date.
    We plan to submit the STrR measure to NQF for review at the next 
available call for measures. Section 1881(h)(2)(B)(i) of the Act 
requires that, unless the exception set forth in section 
1881(h)(2)(B)(ii) of the Act applies, the measures specified for the 
ESRD QIP under section 1881(h)(2)(A)(iv) of the Act must have been 
endorsed by the entity with a contract under section 1890(a) of the Act 
(which is currently NQF). Under the exception set forth in section 
1881(h)(2)(B)(ii) of the Act, in the case of a specified area or 
medical topic determined appropriate by the Secretary for which a 
feasible and practical measure has not been endorsed by the entity with 
a contract under section 1890(a) of the Act, the Secretary may specify 
a measure that is not so endorsed, so long as due consideration is 
given to measures that have been endorsed or adopted by a consensus 
organization identified by the Secretary.
    We have given due consideration to endorsed measures, as well as 
those adopted by a consensus organization, and we proposed this measure 
under the authority of 1881(h)(2)(B)(ii) of the Act. NQF has not 
endorsed and a consensus organization has not adopted a measure on 
transfusions. Because the proposed STrR measure has the potential to 
decrease transfusions resulting from underutilization of anemia 
medications, we believe it is appropriate to adopt the STrR in the PY 
2018 ESRD QIP. We considered proposing to adopt the measure for the PY 
2017, but we recognized that this is a new measure, and wanted to give 
facilities more time to familiarize themselves with it. The Measure 
Application Partnership, in its February 1, 2013 Pre-Rulemaking Report, 
supported the direction of the measure, stating that it ``addresses an 
important concept, but the establishment of guidelines for hemoglobin 
range is needed.'' We have received public comments and input from a 
TEP that we convened on a prototype STrR measure, and finalized 
development of the proposed STrR measure in September 2013. The 
resulting measure specifications did not include hemoglobin thresholds, 
as no input from the TEP or public comments supported moving forward 
with thresholds included in the measure. We therefore believe these 
efforts meet the requirements for further development of the STrR prior 
to implementation in the ESRD QIP.
    In the process of preparing to submit the measure for NQF review, 
we conducted analyses on the reliability of the STrR measure. The full 
analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The STrR is not a simple average; 
instead, we estimate the IUR using a bootstrap approach, which uses a 
resampling scheme to estimate the within facility variation that cannot 
be directly estimated by ANOVA. A small IUR (near 0) reveals that most 
of the variation of the measures between facilities is driven by 
``random noise,'' indicating the measure would not be a reliable 
characterization of the differences among facilities, whereas a large 
IUR (near 1) indicates that most of the variation between facilities is 
due to the real difference between facilities. We have determined that 
the average IUR for the STrR measure is 0.54, meaning that about half 
of the variation in the measure can be attributed to between-facility 
differences, and about half to within-facility variation. This value of 
IUR indicates a moderate degree of reliability and is consistent with 
the reliability of other outcome measures in CMS quality reporting and 
VBP programs. We therefore believe that facilities can be reliably 
scored on the proposed STrR measure.
Data Sources
    Data for the measure come from various CMS-maintained data sources 
for ESRD patients including Program Medical Management and Information 
System (PMMIS/REMIS), Medicare claims, the CROWNWeb database, the CMS 
Annual Facility Survey (Form CMS-2744), Medicare dialysis and hospital 
payment records, the CMS Medical Evidence Form (Form CMS-2728), 
transplant data from the OPTN, the Death Notification Form (Form CMS-
2746), the Nursing Home Minimum Dataset, and the Social Security Death 
Master File. These data sources include all Medicare patients. 
Information on transfusions is obtained from Medicare Inpatient and 
Outpatient Claims SAFs.
Outcome
    The outcome of interest for the STrR is blood transfusion events 
(defined as the transfer of one or more units of blood or blood 
products into the recipient's blood stream) among Medicare ESRD 
patients dialyzing at the facility during the inclusion time periods.
Cohort
    The cohort for the STrR includes all adult Medicare ESRD dialysis 
patients who have been documented as having had ESRD for at least 90 
days.
Inclusion and Exclusion Criteria
    Patients will not be included in the STrR during the first 90 days 
of ESRD dialysis treatment. Starting with day 91 after onset of ESRD, a 
patient is attributed to a facility once he or she has been receiving 
dialysis there for 60 days. When a patient transfers from one facility 
to another, we are proposing that the patient would continue to be 
attributed to the original facility for 60 days from the date of the 
transfer. Starting on day 61, the patient would be attributed to the 
transferee facility. Patients would be excluded from the measure for 
three days prior to the date they receive a transplant to avoid 
including transfusions associated with the transplant hospitalization.
    We also proposed to require that patients reach a certain level of 
Medicare-paid dialysis bills to be included in the STrR, or that 
patients

[[Page 66193]]

have Medicare-paid inpatient claims during the period. This requirement 
was intended to assure completeness of transfusion information for all 
patients included in the measure calculation by excluding non-Medicare 
patients and patients for whom Medicare is a secondary payer, because 
they are not expected to have complete information on transfusion 
available in the claims data. For each patient, a month is included as 
a month at risk for transfusion if that month in the period is 
considered ``eligible.'' A month is considered eligible if it is within 
two months of a month in which a patient has $900 of Medicare-paid 
claims or at least one Medicare-paid inpatient claim. The $900 amount 
represents approximately the tenth percentile of monthly dialysis 
claims per patient.
    In addition, a transfusion event is eligible for inclusion in the 
STrR measure if the patient did not present with certain comorbid 
conditions during the 12 month period immediately prior to the date of 
the transfusion event. We proposed to exclude these transfusion events 
because the identified comorbid conditions are associated with a higher 
risk of transfusion and require different anemia management practices 
that the measure is not intended to address. Specifically, we proposed 
that a transfusion event will be excluded from the measure if the 
patient, during the 12 month look back period, had a Medicare claim 
for: Hemolytic and aplastic anemia; solid organ cancer (breast, 
prostate, lung, digestive tract and others); lymphoma; carcinoma in 
situ; coagulation disorders; multiple myeloma; myelodysplastic syndrome 
and myelofibrosis; leukemia; head and neck cancer; other cancers 
(connective tissue, skin, and others); metastatic cancer; or sickle 
cell anemia. The specific diagnoses used to identify each of these 
conditions are listed in the proposed measure specifications, which are 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Risk Adjustment
    The denominator of the STrR uses expected transfusions calculated 
from a Cox model that is extended to handle repeated events. For 
computational purposes, the proposed STrR measure adopts a model with 
piecewise-constant baseline rates. A stage 1 model is fitted to the 
national data with piecewise-constant baseline rates across facilities. 
Transfusion rates are adjusted for: Patient age; diabetes as a cause of 
ESRD; duration of ESRD; nursing home status; BMI at incidence; 
comorbidity index at incidence; and calendar year. This model allows 
baseline transfusion rates to vary between facilities, and applies the 
regression coefficients for the risk-adjustment model to each facility 
identically. This approach is robust to possible differences between 
facilities in the patient mix being treated. The second stage uses the 
risk-adjustment factor from the first stage as an offset. The stage 2 
model then calculates the national baseline transfusion rate.
    The STrR measure includes the following risk adjustors, which are 
obtained from the following data sources:

------------------------------------------------------------------------
        Risk adjustor                         Data source
------------------------------------------------------------------------
Age..........................  REMIS database.
Diabetes as cause of ESRD....  CMS Form 2728.
BMI at incidence of ESRD.....  CMS Form 2728.
Comorbidity index............  CMS Form 2728.
Nursing home status..........  Nursing Home Minimum Dataset.
Duration of ESRD.............  CMS Form 2728.
------------------------------------------------------------------------

    More details on the risk-adjustment calculations, and the rationale 
for selecting these risk adjustors and not others, can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    As indicated in the table above, the proposed STrR measure risk 
adjusts predominantly on the basis of patient characteristics collected 
on CMS Form 2728, and we believe that this risk-adjustment methodology 
is reliable and valid.
    NQF evaluates measures on the basis of four criteria: Importance, 
scientific acceptability, feasibility, and usability. The validity and 
reliability of a measure's risk-adjustment calculations fall under the 
``scientific acceptability'' criterion, and Measure Evaluation 
Criterion 2b4 specifies NQF's preferred approach for risk adjusting 
outcome measures (http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion states 
that patient comorbidities should only be included in risk-adjustment 
calculations if they are (1) present at the start of care and (2) not 
indicative of disparities or deficiencies in the quality of care 
provided. As indicated in the ``Inclusion and Exclusion Criteria'' 
subsection above, the proposed STrR clinical measure includes Medicare 
patients who have been documented as having had ESRD for at least 90 
days and are not excluded for other reasons. Accordingly, we believe 
that NQF Measure Evaluation Criterion 2b4 supports risk-adjusting the 
proposed STrR measure on the basis of incident patient comorbidity data 
collected on CMS Form 2728, because these comorbidities are likely 
present at the start of care. Moreover, comorbidities that develop 
after the 90th day of chronic dialysis treatment, and are statistically 
associated with transfusions, can be reflective of the quality of care 
provided by the facility. Therefore, we do not believe that NQF Measure 
Evaluation Criterion 2b4 supports risk adjusting the proposed STrR 
measure on the basis of updated comorbidity data, because doing so may 
mask disparities or deficiencies in the quality of care provided, 
thereby obscuring assessments of facility performance. For these 
reasons, we believe that the risk-adjustment methodology for the 
proposed STrR measure is consistent with NQF guidelines for measure 
developers. Testing that we have undertaken has confirmed the validity 
and reliability of the proposed STrR measure using these data. We 
anticipate submitting the measure to the NQF for endorsement in CY 
2015.
    Full documentation of the STrR risk-adjustment methodology is 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Calculating the STrR Measure
    The STrR measure is calculated as the ratio of the number of 
observed transfusions to the number of expected transfusions. The ratio 
is greater than one for facilities that have more

[[Page 66194]]

transfusions than would be expected for an average facility with 
similar cases, and less than one if the facility has fewer transfusions 
than would be expected for an average facility with similar cases. This 
ratio is calculated in terms of patient-years at risk. ``Patient-year 
at risk'' means that the denominator of the rate calculation is 
obtained by adding exposure times of all patients until a censoring 
event (that is, death, transplant, or end of the time period) because 
each patient's time at risk varies based on these censoring events. 
Time at risk is the time period in which each patient is eligible to 
have the transfusion event occur for the purposes of the measure 
calculation, exclusive of all days that have claims pertaining to the 
exclusionary comorbidities identified within the previous 12 months.
    The predicted value from stage 1 of the model and the baseline rate 
from stage 2 of the model, as described above, are then used to 
calculate the expected number of transfusion events for each patient 
over the period during which the patient is seen to be at risk for a 
transfusion event.
    The STrR is a point estimate--the best estimate of a facility's 
transfusion rate based on the facility's case mix. For more detailed 
information on the calculation methodology, please refer to our Web 
site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal to adopt the proposed STrR 
clinical measure. The comments and our responses are set forth below.
    Comment: Some commenters supported the proposal to adopt the 
Standardized Transfusion Ratio clinical measure because the measure 
``assesses the poor outcomes related to anemia in the ESRD QIP.''
    Response: We thank commenters for their support.
    Comment: Many commenters did not support the proposal to adopt the 
STrR measure because it is not a fair way to evaluate facility 
performance. Specifically, commenters stated that transfusion events 
are beyond the control of facilities, that physicians outside of the 
facility may order a transfusion (which would unduly detriment the 
facility's score on the measure) or fail to continue a patient's ESA 
doses during the patient's hospitalization, and that hospital 
physicians' misunderstanding about hemoglobin levels is often the 
source of unnecessary transfusions. One commenter recommended 
stratifying the STrR measure according to patient comorbidities to 
capture only blood transfusions that could be prevented by the dialysis 
facility. Commenters further stated that the measure does not reliably 
differentiate facility performance because a transfusion event could be 
attributed to a chronic condition or an acute problem during 
hospitalization, as opposed to poor anemia management on the part of 
facilities.
    Response: We recognize that most transfusions occur outside the 
dialysis facility. We further recognize that blood transfusions are 
often ordered in response to acute events, such as gastrointestinal 
bleeding or other trauma, that happen during the hospitalization. 
However, peer-reviewed research identifies a strong association between 
achieved hemoglobin and subsequent transfusion events.\7\ Our analysis 
of patient and facility level risk-adjusted models supports the 
literature. These observational analyses are consistent with the 
findings of an earlier randomized controlled trial that identified 
marked differences in rates of transfusion related to targeted 
hemoglobin.\8\ Because dialysis facilities have a direct role in 
determining achieved hemoglobin as a result of their anemia management 
practices, we believe there is a shared responsibility in subsequent 
transfusion events. The attribution of responsibility to the dialysis 
facility for achieved hemoglobin outcomes (and transfusion risk related 
to achieved hemoglobin) as measured by the STrR is strengthened by 
applying an extensive list of exclusions for comorbid conditions that 
are associated with decreased ESA responsiveness, increased transfusion 
risk, and increased risk of ESA complication. These exclusion co-
morbidities are obtained from Medicare Claims, based on recommendations 
of the Anemia Technical Expert Panel convened in 2012, as well as 
recent peer reviewed publications evaluating transfusions.\9\ We 
believe that the salient quality issue is not that a clinical decision 
to order a transfusion was made, but that the management of a patient's 
anemia resulted in circumstances that necessitated such a transfusion.
---------------------------------------------------------------------------

    \7\ Collins et al., ``Effect of Facility-Level Hemoglobin 
Concentration on Dialysis Patient Risk of Transfusion'', Am J Kidney 
Dis. 2014;63(6):997-1006; Hirth RA, Turenne T, Wheeler JRC et al., 
(November 2012) ``Did the dialysis Prospective Payment System result 
in more patients receiving transfusions?'' Poster presentation at 
ASN Renal Week in San Diego, CA; Sibbel S, Bond C, Wilfehrt H et al. 
(2013 April) ``Decreased Population Hemoglobin (HB) Levels and 
Increased Transfusion (TFN) Rates Under New ESA Guidelines in 
Patients (PTS) with ESRD at a Large Dialysis Organization (LDO). 
Poster to be presented at the National Kidney Foundation (NKF) 
Spring Clinical Meeting in Orlando, FL. Abstract retrieved from 
http://ww3.aievolution.com/nkf1301/index.cfm?do=abs.pubSearchAbstracts; Hirth, et al. 2014.
    \8\ (Foley 2008).
    \9\ Ibrahim HN, Ishani A, Foley RN et al. ``Temporal Trends in 
red blood transfusion among US dialysis patients, 1992-2005''. 
American Journal of Kidney Disease. 2008; 52: 1115.
---------------------------------------------------------------------------

    We also believe that the discontinuation of a patient's ESA dose 
during an acute hospitalization is very unlikely to affect the 
patient's hemoglobin levels unless the hospitalization is of very long 
duration, given the several weeks long half-life of red blood cells in 
the patient's circulation after being release from the bone marrow. 
Therefore, ESA dosing and achieved hemoglobin present on admission, 
which are the responsibility of the dialysis facility, are much 
stronger drivers of the need for transfusion than whether or not an ESA 
is given during an average length hospitalization for any given 
admission diagnosis.
    Further, we are not aware of peer-reviewed evidence that would 
support a concern that hospital-based physicians do not understand the 
significance of hemoglobin levels and, therefore, order unnecessary 
transfusions. Although transfusion decisions are individualized based 
on a patient's clinical condition, many acute care hospitals use 
national guidelines to determine when a blood transfusion is 
appropriate. The guidelines that we are aware of do not differentiate 
between chronic dialysis patients and the general population. 
Additionally, if this type of misunderstanding does exist, we believe 
that proper communication and coordination of care between the dialysis 
facility and hospital physicians could help reduce the possibility that 
an unnecessary transfusion is ordered.
    Comment: Many commenters expressed a number of technical concerns 
with the specifications for the STrR measure. Specifically, commenters 
stated that using the 2728 form as the data source for determining 
patient comorbidities is inappropriate because the form is not used to 
track comorbidities that develop after the initiation of ESRD, the form 
is often filled out incorrectly, and the form systematically 
underestimates the number of patient comorbidities. Commenter therefore 
recommends obtaining a reliable data source (such as the Common Working 
File) for comorbidities before adopting the measure. Commenters further 
stated that facilities do not have ready access to transfusion data, 
which they could use

[[Page 66195]]

to design quality improvement programs.
    Response: The STrR uses both Form 2728-derived incident 
comorbidities and patient demographics as well as Medicare Claims 
derived prevalent comorbidities for its risk-adjustment and exclusions. 
The responsibility of the dialysis facility for achieved hemoglobin 
outcomes (and transfusion risk related to achieved hemoglobin) is 
strengthened by applying an extensive list of exclusions for comorbid 
conditions that are associated with decreased ESA responsiveness, 
increased transfusion risk, and increased risk of ESA complication, and 
may develop after initiation of dialysis. It is important, however, 
that we be circumspect in risk-adjusting for conditions that appear 
after the initiation of dialysis, to avoid adjusting for conditions 
that resulted from the care decisions made by the provider. These 
exclusion co-morbidities are obtained from Medicare Claims, based on 
recommendations of the Anemia Technical Expert Panel convened in 2012, 
as well as recent peer reviewed publications evaluating 
transfusions.\10\
---------------------------------------------------------------------------

    \10\ Ibrahim HN, Ishani A, Foley RN et al. ``Temporal Trends in 
red blood transfusion among US dialysis patients, 1992-2005''. 
American Journal of Kidney Disease. 2008; 52: 1115.
---------------------------------------------------------------------------

     Comment: Some commenters were concerned about validity of claims 
data used to identify qualifying transfusion events, because hospital 
coding for transfusions is inconsistent, and sometimes codes do not 
distinguish between preparing for a transfusion and the transfusion 
itself. Commenters also stated that the claims data used to score the 
measure is incapable of differentiating among the various reasons for a 
blood transfusion. As such, the measure does not accurately predict or 
identify when a patient actually receives a transfusion.
    Response: Prior research has supported the validity of billing 
codes for identifying red blood cell transfusions.\11\ Additionally, 
other recent articles accepted and published in peer reviewed journals 
support the review and acceptance of this method of identification of 
transfusions from administrative data.\12\ Specifically, we used 
multiple sources (procedure codes, revenue center codes, and value 
codes) to improve the ability to detect actual transfusion events 
during a hospitalization. Red blood cell transfusions are identified by 
in-patient records with revenue center codes in (0380, 0381, 0382, 
0389, 0390, 0391, 0392, 0399) or value code = 37 or procedure code in 
(9903, 9904) and with out-patient records with revenue center codes in 
(0380, 0381, 0382, 0389, 0390, 0391, 0392, 0399) and HCPCS code in 
(P9010, P9011, P9016, P9021, P9022, P9038, P9039, P9040, P9051, P9054, 
P9056, P9058, 36430). The measure does not attempt to address the 
particular reason for a transfusion event, only that one occurred. One 
``transfusion event'' is counted per inpatient claim if one or more 
transfusion-related revenue center or value codes are present. This is 
the way most inpatient transfusion events are reported on claims (that 
is, using revenue center or value codes, not procedure codes). We only 
count a single transfusion event for an inpatient claim regardless of 
the number of transfusion revenue center and value codes reported so 
that the number of discrete events counted is the same whether the 
claim indicates 1 unit of blood or multiple units of blood.
---------------------------------------------------------------------------

    \11\ Segal JB1, Ness PM, Powe NR. Validating billing data for 
RBC transfusions: A brief report. Transfusion. 2001 Apr;41(4):530-3.
    \12\ Collins et al., ``Effect of Facility-Level Hemoglobin 
Concentration on Dialysis Patient Risk of Transfusion,'' Am J Kidney 
Dis. 2014;63(6):997-1006; and Hirth et al, Blood Transfusion 
Practices in Dialysis Patients in a Dynamic Regulatory Environment, 
Am J Kidney Dis. 2014 (in-press).
---------------------------------------------------------------------------

    Comment: Some commenters did not support the proposed STrR measure 
because it has not been endorsed by NQF, and one commenter was 
concerned about the measure's validity and reliability. Commenter 
recommended delaying the adoption of the measure until it has been 
endorsed by NQF.
    Response: The STrR measure has undergone rigorous review by a TEP 
and the CMS measure development contractor, and for the reasons 
detailed in the proposed rule and this final rule, we believe that the 
measure reliably assesses facility performance. Because unexpected 
transfusions in the ESRD population are responsible for considerable 
and unnecessary morbidities and healthcare costs, and because no NQF-
endorsed measures of anemia management are currently available for use 
in the ESRD QIP, we believe that the benefits of adopting the measure 
for the PY 2018 ESRD QIP outweigh the costs of waiting to adopt the 
measure until it has been endorsed by NQF.
    Comment: One commenter recommended that CMS develop a hemoglobin-
adjusted STrR rather than the STrR proposed in the proposed rule. 
Commenter stated that facilities should only be held responsible for 
transfusions related to chronically low hemoglobin levels, and that 
this adjustment would better differentiate between patients with 
chronically and acutely low hemoglobin levels.
    Response: We thank commenters for the recommendation. We agree that 
achieved hemoglobin is a significant facility-associated component of 
transfusion risk. Since dialysis facilities do have a direct role in 
determining achieved hemoglobin as a result of their anemia management 
practices, there is a shared responsibility in subsequent transfusion 
events. The responsibility of the dialysis facility for achieved 
hemoglobin outcomes (and transfusion risk related to achieved 
hemoglobin) is strengthened by applying an extensive list of exclusions 
for comorbid conditions that are associated with decreased ESA 
responsiveness, increased transfusion risk, and increased risk of ESA 
complication. Applying a hemoglobin target would not be consistent with 
the FDA label, which does not support hemoglobin targets.
    Comment: One commenter recommended that CMS use calendar year (CY) 
2010 to set permanent performance standards for the STrR measure. 
Because transfusion rates have increased since CY 2010, commenter 
stated that the proposed performance standard would set an 
inappropriately low threshold for expected transfusion events.
    Response: We do not believe it would be appropriate to use CY 2010 
to set permanent performance standards for the STrR measure. The 
measure was designed to assess relative rates of transfusion, not to 
hold facilities accountable to a historical rate of transfusion. 
Furthermore, setting the performance standard at CY 2010 rates would 
not allow us to respond to fluctuations in transfusion rates in the 
future, and we believe it is appropriate to do so, particularly in the 
event that future national transfusion rates fall below levels achieved 
in CY 2010.
    Comment: Some commenters stated that the risk-adjustment 
methodology for the proposed STrR measure should not be based on the 
risk-adjustment methodology for the Standardized Hospitalization 
measure, because hospitalizations and transfusions involve different 
types of risk factors. Commenters stated that adjusting for risks that 
are more proximately associated with transfusions would require the use 
of claims data for determining patient comorbidities.
    Response: We agree with commenters' assertion that more proximate 
claims-based risk factors are appropriate for use in the risk 
adjustment strategy for STrR. We also believe that this has already 
been accomplished using our measure methodology. The responsibility of 
the

[[Page 66196]]

dialysis facility for achieved hemoglobin outcomes (and transfusion 
risk related to achieved hemoglobin) is strengthened by applying an 
extensive list of exclusions for comorbid conditions that are 
associated with decreased ESA responsiveness, increased transfusion 
risk, and increased risk of ESA complication. By excluding transfusions 
not associated with anemia management, we are able to assess the rate 
of transfusions most subject to influence by the quality of care 
provided by dialysis facilities. Exclusion comorbidities must have 
occurred within the last year, and have a similar, but stronger impact 
for the measure, than risk-adjustment. As a consequence, transfusions 
that are occurring are not attributable to these non-anemia management-
based causes. These exclusion co-morbidities are obtained from Medicare 
Claims, based on recommendations of the Anemia TEP convened in 2012, as 
well as recent peer reviewed publications evaluating transfusions.\13\
---------------------------------------------------------------------------

    \13\ Ibrahim HN, Ishani A, Foley RN et al. ``Temporal Trends in 
red blood transfusion among U.S. dialysis patients, 1992-2005,'' 
American Journal of Kidney Disease. 2008; 52: 1115.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS limit the number of 
transfusion events that a single patient can contribute to this 
measure, because very frequent transfusions may be required due to 
conditions that the dialysis facility cannot control, such as 
chemotherapy treatment, presence of bone marrow malignancies, or sickle 
cell anemia, which may not be captured in the past year on Medicare 
claims.
    Response: We thank commenters for the recommendation. Because of 
the way transfusion information is reported in claims, there are 
different rules for counting transfusion events depending on whether or 
not they occur in inpatient or (less commonly) in outpatient settings.
    For the STrR, transfusion events are counted differently depending 
on whether they are identified based on a procedure code, a revenue 
center code, or a value code. The transfusion procedure may only be 
billed only once per day per visit. For the STrR, unique ``transfusion 
events'' are counted for each transfusion procedure code listed on an 
inpatient claim, with one event counted for any of those codes on a 
given day. Additionally, one ``transfusion event'' is counted per 
inpatient claim if one or more transfusion-related revenue center or 
value code is present. The vast majority of inpatient claims we 
identify as having evidence of a transfusion (92 percent) do not 
include a transfusion related procedure code. Therefore, most inpatient 
transfusion events are identified based on revenue center or value 
codes. As noted above, we count a single transfusion event for the 
inpatient claim regardless of the number of transfusion revenue center 
and value codes reported on the claim, resulting in a very conservative 
estimate of blood transfusions from inpatient claims. In all cases, the 
number of events counted is the same whether the claim indicates 1 unit 
of blood or multiple units of blood, again favoring a conservative 
estimate of number of transfusion events from inpatient claims.
    Transfusion events are not common in outpatient settings, but 
similar rules apply. Multiple HCPCS codes reported for the same Revenue 
Center Date are counted as a single transfusion event regardless of the 
number of units of blood recorded. In other words, three pints of blood 
reported with the same Revenue Center Date would be counted as a single 
transfusion event.
    Therefore, the algorithm for identifying blood transfusion events 
described here results in a very conservative estimate of transfusion 
rates, limiting the impact of individual patients who receive multiple 
units of blood or multiple transfusions during any one episode of care. 
We agree that there are many conditions, including acute malignancy 
diagnoses and hereditary anemias (for example, sickle cell anemia) that 
influence transfusion risk. The STrR uses Form 2728-derived incident 
comorbidities and patient demographics as well as Medicare Claims 
derived prevalent comorbidities in the risk-adjustment strategy for 
STrR. The responsibility of the dialysis facility for achieved 
hemoglobin outcomes (and transfusion risk related to achieved 
hemoglobin) is strengthened by applying an extensive list of exclusions 
described in the technical report at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html for comorbid conditions that are 
associated with decreased ESA responsiveness, increased transfusion 
risk, and increased risk of ESA complication. These exclusion co-
morbidities are obtained from Medicare Claims, based on recommendations 
of the Anemia Technical Expert Panel convened in 2012, as well as 
recent peer reviewed publications evaluating transfusions.\14\ The list 
of comorbid exclusions includes acute cancer diagnoses and Sickle Cell 
Anemia, as well as other conditions that are associated with increased 
transfusion risk beyond the dialysis facilities' control.
---------------------------------------------------------------------------

    \14\ Ibrahim HN, Ishani A, Foley RN et al. ``Temporal Trends in 
red blood transfusion among U.S. dialysis patients, 1992-2005.'' 
American Journal of Kidney Disease. 2008; 52: 1115.
---------------------------------------------------------------------------

    Comment: Some commenters stated that transfusions related to ``non-
actionable conditions,'' such as chronic gastrointestinal bleeding, 
motor vehicle accidents, and transfusions related to surgical 
procedures, should be excluded from the measure. Accordingly, 
commenters recommended that CMS should develop a comprehensive list of 
exclusions before adopting the measure.
    Response: The STrR incorporates a list of exclusions based on 
patient conditions identified through claims data. These exclusions 
help to ensure that transfusions for which the facility may not 
reasonably be held accountable are not incorporated in the measure 
numerator. A full list of exclusions may be read at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. However, for any given admission 
diagnosis such as a motor vehicle accident, or a hospital event such as 
a surgical procedure, the achieved hemoglobin present on admission, 
which is a function of ESA dosing and the responsibility of the 
dialysis facility, is a strong predictor of a transfusion event during 
the hospitalization.
    Comment: One commenter sought clarification on how transfusions 
will be attributed to facilities, particularly when a patient receives 
a transfusion and temporarily relocates to a new facility before 
returning to their home facility.
    Response: The STrR Methodology Report, which was published 
concomitantly with the CY 2015 ESRD PPS Proposed Rule, provides the 
detailed algorithm used by the STrR measure to attribute patients to a 
facility. Briefly, if a patient undergoes a transfusion event, the 
facility to which this patient is assigned at the time is responsible 
for it irrespective of where the event takes place or whether the 
patient is temporarily receiving dialysis at another facility.
     Comment: One commenter did not support the STrR measure as 
proposed, because it is not sufficient on its own right to discourage 
under-treatment of anemia. Commenter also recommended that the measure 
should be stratified to capture only those transfusions that could have 
been prevented by the dialysis facility.

[[Page 66197]]

    Response: The STrR is intended to monitor facility-level, risk-
adjusted blood transfusion use, which is one important consequence of 
under-treatment of anemia in chronic dialysis patients, and it is the 
most appropriate measure of which we are aware that is available for 
this purpose.
    Comment: One commenter stated that facilities will experience 
difficulty in explaining facility scores on the STrR clinical measure 
to patients, and that doing so may be ``politically challenging'' when 
the dialysis facility is affiliated with the admitting hospital system.
    Response: We have produced a technical report that describes the 
measure methodology and provided a Web link in the proposed rule 
(http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html). A transfusion 
ratio of greater than 1.0 reflects that a facility's patients are at 
higher risk for transfusions than they would be at an average facility. 
A score below 1.0 reflects that a facility's patients are at lower risk 
for transfusions than they would be at an average facility. A lower 
ratio is preferable because it indicates that a facility is doing a 
better job of managing patient anemia, as assessed through the 
occurrence of transfusions.
    For these reasons, we are finalizing the STrR measure as proposed 
for the PY 2018 program and future payment years. The technical 
specifications for this finalized measure can be found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
b. Adoption of the Pediatric Peritoneal Dialysis Adequacy Clinical 
Measure in the Dialysis Adequacy Measure Topic
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate 
facilities based on measures of dialysis adequacy. Beginning with the 
PY 2018 ESRD QIP, we proposed to add a new measure of pediatric 
peritoneal dialysis adequacy to the Dialysis Adequacy measure topic. We 
stated that if this proposal is finalized, then the modified Dialysis 
Adequacy measure topic would include four clinical measures on dialysis 
adequacy--(1) Adult Hemodialysis Adequacy; (2) Adult Peritoneal 
Dialysis Adequacy; and (3) Pediatric Hemodialysis Adequacy; and (4) 
Pediatric Peritoneal Dialysis Adequacy.
    Approximately 900 pediatric patients in the United States receive 
peritoneal dialysis.\15\ Although recent studies suggest improvement in 
mortality rates among pediatric patients receiving maintenance dialysis 
over time, mortality in this patient population remains high.\16\ 
Despite a lack of long-term outcome studies on pediatric peritoneal 
dialysis patients, outcome studies performed in the adult ESRD 
population have shown an association between the dose of peritoneal 
dialysis and clinical outcomes,\17\ which could suggest that improved 
quality of dialysis care in the fragile pediatric patient population 
may further improve survival in those patients.
---------------------------------------------------------------------------

    \15\ U.S. Renal Data System, USRDS 2012 Annual Data report: 
Atlas of Chronic Kidney Disease and End-stage Renal Disease in the 
United States, National Institutes of Health, National Institute of 
Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 2012.
    \16\ U.S. Renal Data System, USRDS 2012 Annual Data report: 
Atlas of Chronic Kidney Disease and End-stage Renal Disease in the 
United States, National Institutes of Health, National Institute of 
Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 2012.
    \17\ Paniagua R, Amato D, Vonesh E, et al. ``Effects of 
increased peritoneal clearance on mortality rates in peritoneal 
dialysis: ADEMEX, a prospective, randomized, controlled trial.'' 
Journal of the American Society of Nephrology: JASN (2002) 13:1307-
1320. PMID: 11961019; See also Lo WK, Lui SL, Chan TM, et al. 
``Minimal and optimal peritoneal Kt/V targets: Results of anuric 
peritoneal dialysis patient's survival analysis.'' Kidney 
international (2005) 67:2032-2038. PMID: 15840054.
---------------------------------------------------------------------------

    Section 1881(h)(2)(A)(iv) gives the Secretary authority to adopt 
measures for the ESRD QIP that cover a wide variety of topics. Section 
1881(h)(2)(B)(ii) of the Act states that ``In the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a feasible and practical measure has not been endorsed by the entity 
with a contract under section 1890(a) of Act [in this case NQF], the 
Secretary may specify a measure that is not so endorsed so long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary.'' We have 
given due consideration to endorsed measures, as well as those adopted 
by a consensus organization. Because no NQF-endorsed measures or 
measures adopted by a consensus organization on pediatric peritoneal 
dialysis adequacy currently exist, we proposed to adopt the Pediatric 
Peritoneal Dialysis Adequacy clinical measure under the authority of 
section 1881(h)(2)(B)(ii) of the Act.
    The Measure Application Partnership expressed conditional support 
for measure XCBMM, ``Pediatric Peritoneal Dialysis Adequacy: 
Achievement of Target Kt/V'' in its January 2014 Pre-Rulemaking Report, 
noting it would ``consider this measure for inclusion in the program 
once it has been reviewed for endorsement.'' However, we believe the 
measure is ready for adoption in the ESRD QIP because it has been fully 
tested for reliability and has received consensus support from the TEP 
that was tasked with developing it. We intend to submit this measure to 
the NQF for endorsement in late 2014 or early 2015.
    For PY 2018 and future payment years, we proposed to adopt the 
Pediatric Peritoneal Dialysis Adequacy clinical measure, which assesses 
the percentage of eligible pediatric peritoneal dialysis patient-months 
in which a Kt/V of greater than or equal to 1.8 was achieved during the 
performance period. Qualifying patient-months are defined as months in 
which a peritoneal dialysis patient is under the age of 18 and has been 
receiving peritoneal dialysis treatment for 90 days or longer. 
Performance on this measure will be expressed as a proportion of 
patient-months meeting the measure threshold of 1.8, and the measure 
will be scored based on Kt/V data entered on Medicare 72x claims. The 
measure is a complement to the existing Kt/V dialysis adequacy measures 
previously adopted in the ESRD QIP. Technical specifications for the 
proposed pediatric peritoneal dialysis adequacy clinical measure can be 
found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal to adopt the Pediatric 
Peritoneal Dialysis Adequacy measure. The comments and our responses 
are set forth below.
    Comment: Many commenters supported the adoption of the Pediatric 
Peritoneal Dialysis Adequacy measure, because it is important to ensure 
that this patient population is adequately dialyzed.
    Response: We thank the commenters for their support.
    Comment: One commenter supported adoption of the Pediatric 
Peritoneal Dialysis Adequacy clinical measure, but recommended CMS 
change the Kt/V target to a range, because it is harder to reach the 
proposed threshold for a pediatric patient than it is to reach the 
threshold for adult patients.
    Response: The proposed minimum target of Kt/V-1.8 is consistent 
with clinical guidelines and also the recommendations of a TEP which we 
convened for this purpose. The TEP recommended using a target of 1.8 
while recognizing that although limited

[[Page 66198]]

evidence in the pediatric population exists, clinical practice 
guidelines and clinical opinion support the recommendation that target 
clearance in pediatric patients should meet or exceed adult standards. 
Studies of adult peritoneal dialysis patients identified better 
survival at Kt/V 1.8/week, and not 1.7 (Paniagua 2002, JASN 2002, Lo, 
KI 2005). We also believe that a target range could have the effect of 
substituting the current target with the lower boundary of any 
specified range.
    Comment: One commenter did not support the adoption of the 
Pediatric Peritoneal Dialysis Adequacy clinical measure because it 
exposes pediatric patients to unnecessary risk. Commenter stated that 
``residual'' Kt/V requires 24-hour urine collection, and that young 
children who are not toilet trained would need to be hospitalized and 
have a Foley catheter placed, which would put them at risk for 
infections and illness.
    Response: We appreciate commenters' concerns for the safety of 
pediatric patients, and for the opportunity to clarify this point. The 
commenters statement about the potential difficulties inherent in 
collecting a 24 hour urine on young children on peritoneal dialysis 
have been previously addressed in both the KDOQI recommendations as 
well as the recommendations of the TEP. Both KDOQI and the TEP members 
recommend addition of 24 hour urine if available. They acknowledge that 
the 24 hour urine is usually not available for use in the Kt/V 
calculation for very young PD patients. In that case, they recommend 
that the Kt/V collection be based solely on the dialysate collection. 
The commenter's concern that patients would have to be hospitalized to 
complete a 24 hour collection in order to perform the calculation is 
not consistent with the clinical guidelines upon which the measure was 
based.
    For these reasons, we are finalizing the Pediatric Peritoneal 
Dialysis Adequacy measure as proposed for the PY 2018 program and 
future payment years and adding this measure to the Dialysis Adequacy 
Measure Topic. The technical specifications for this finalized measure 
can be found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
c. ICH CAHPS Clinical Measure
    Section 1881(h)(2)(A)(ii) of the Act states that the Secretary 
shall specify, to the extent feasible, measures of patient 
satisfaction. Patients with ESRD are an extremely vulnerable 
population: They are completely reliant on ESRD facilities for life-
saving care, and they are often reluctant to express concerns about the 
care they receive from an array of staff, both professional and non-
professional. Patient-centered experience is an important measure of 
the quality of patient care, and it is a component of the 2013 NQS, 
which emphasizes patient-centered care by rating patient experience as 
a means for empowering patients and improving the quality of their 
care.
    Following a rigorous process, the ICH CAHPS Survey was developed to 
capture the experience of in-center hemodialysis patients. The NQF 
endorsed and the Measures Application Partnership supported this 
quality measure (NQF #0258: CAHPS In-Center Hemodialysis Survey). The 
ICH CAHPS Survey captures the experience of in-center hemodialysis 
patients on three dimensions: ``Nephrologists' communication and 
caring;'' ``quality of dialysis center care and operations;'' and 
``providing information to patients.'' Three global ratings are also 
part of the standardized ICH CAHPS Survey: Rating of the nephrologist; 
rating of the staff; and rating of the facility.
    We believe that this measure enables patients to rate their 
experience of in-center dialysis treatment without fear of retribution. 
Public reporting of results from the ICH CAHPS survey, once enough data 
are available, will satisfy requests to provide consumers (patients and 
family members alike) with desired information on viewpoints from 
patients. In addition, collecting and reporting ICH CAHPS survey 
results assists facilities with their internal quality improvement 
efforts and external benchmarking with other facilities, and it 
provides CMS with information that can be used to monitor the 
experience of patients with ESRD.
    Starting with the PY 2014 program, we have taken steps to develop 
the baseline data necessary to propose and implement NQF #0258 as a 
clinical measure in PY 2018. In the PY 2014 and PY 2015 programs, we 
adopted a reporting measure related to the ICH CAHPS survey, which 
required that facilities attest they had administered the survey 
according to the specifications set by the Agency for Healthcare 
Research and Quality (AHRQ). In the CY 2014 ESRD PPS final rule, we: 
(1) Expanded the ICH CAHPS reporting measure to require facilities to 
submit (via CMS-approved vendors) their survey results to CMS; (2) 
increased the patient minimum for the measure from 11 to 30 survey-
eligible patients; (3) required that facilities (via CMS-approved 
vendors) administer the survey according to specifications set by CMS; 
and (4) required facilities (via CMS-approved vendors) to administer 
the survey twice during each performance period, and to report both 
sets of survey results by the date specified on http://ichcahps.org, 
starting in PY 2017 (78 FR 72193 through 72196).
    By CY 2016 (the proposed performance period for the PY 2018 ESRD 
QIP), we will have worked with dialysis facilities for four years to 
help them become familiar with the ICH CAHPS survey. By that time, we 
believe that facilities will be sufficiently versed in the survey 
administration process to be reliably evaluated on the NQF-endorsed ICH 
CAHPS measure (NQF #0258). Because facilities (and CMS-approved 
vendors) will be familiar enough with the ICH CAHPS survey instrument 
to be reliably scored on the basis of their survey results, we believe 
it is reasonable to expand the ICH CAHPS reporting measure into a 
clinical measure for the PY 2018 ESRD QIP.
    For these reasons, and because a clinical measure would have a 
greater impact on clinical practice by holding facilities accountable 
for their actual performance, we proposed to replace the ICH CAHPS 
reporting measure that we adopted in the CY 2014 ESRD PPS Final Rule 
with a new clinical measure for PY 2018 and future payment years. This 
proposed ICH CAHPS clinical measure is NQF #0258: CAHPS In-Center 
Hemodialysis Survey. We did not propose to change the semiannual survey 
administration and reporting requirements. The proposed scoring 
methodology for the ICH CAHPS clinical measure is discussed below in 
section III.G.4.c. Technical specifications for the ICH CAHPS clinical 
measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Some commenters supported the proposal to convert the ICH 
CAHPS reporting measure into a clinical measure, because a clinical 
measure would hold facilities responsible for their ability to provide 
patients with a positive experience of care, adopting the clinical 
measure would strengthen the significance of patient input in the ESRD 
QIP, and facilities have had sufficient experience with the survey 
instrument for them to be reliably scored on the measure. One commenter 
stated that, in the hospital setting, scoring CAHPS survey results

[[Page 66199]]

has led to positive changes in the treatment environment.
    Response: We thank commenters for their support.
    Comment: One commenter did not support the adoption of an ICH CAHPS 
clinical measure because the measure would be based on patient 
perceptions (as opposed to clinical data). Commenter further stated 
that the ICH CAHPS clinical measure unfairly penalizes facilities, 
because providers have to contend with a number of obstacles (including 
reductions in payments under the ESRD PPS) and clinical variables, of 
which patients may not be aware. Commenter also stated that the 
``efficacy of the survey administration'' may impact results, so the 
proposed clinical measure would evaluate facilities, in part, based on 
the competencies of survey vendors.
    Response: We understand commenters' concerns about the ICH CAHPS 
measure and its patient-centered assessment of care. We further 
understand that patients may not be aware of the multiple influences on 
facilities, such as the ESRD PPS bundle and other clinical variables. 
However, we believe that patients are qualified to assess their 
perceptions of their individual care, because the quality of care 
provided to patients should not be impacted by reimbursement rates or 
the severity of a patient's illness. The ICH CAHPS survey provides 
patients with an opportunity to assess the care they receive as in-
center hemodialysis patients, and the results from this survey will 
give facilities the opportunity to develop plans for quality 
improvement on this aspect of care. All ICH CAHPS survey vendors must 
be approved by CMS to ensure that the survey is administered 
consistently across facilities, and vendors are required to undergo 
annual training sessions and submit a Quality Assurance Plan to us. 
Furthermore, the ICH CAHPS Coordination Team intends to carry out 
oversight activities, including site cities and data reviews for 
anomalies, to ensure that the survey is being administered according to 
the ICH CAHPS survey protocol. We note that, ultimately, the choice of 
survey vendor is within the control of the facility. If a facility 
believes its vendor is not properly administering the survey, then the 
facility should report to this to CMS and seek the services of another 
qualified survey vendor.
    Comment: Some commenters did not support the proposal to convert 
the ICH CAHPS reporting measure into a clinical measure, because the 
clinical measure includes questions pertaining to nephrologists' care 
in the ICH CAHPS survey. Commenters stated that most dialysis 
facilities have little to no control over the nephrologists who are 
working in facilities, as well as over physicians seen outside the 
facility, and that both types of physicians are implicated in the 
survey question used to determine facility scores on the global rating 
for Nephrologists' Communication and Caring. Commenter further stated 
that this limits the facility's opportunity improve patient experience 
in this area.
    Response: We disagree that facilities should not be held 
accountable for the quality of care provided by nephrologists treating 
patients at their facility. Dialysis facilities are required under our 
regulations (42 CFR 494.150(c)(2)(i)), to oversee the provision of care 
by a multi-disciplinary team, including the nephrologist treating the 
patient. Oversight of individual staff nephrologist care, ensuring 
adherence to facility policies and Medicare regulations, is primarily 
the responsibility of the site Medical Director, a paid employee of the 
dialysis facility, and, additionally, the responsibility of the 
facility governing body. We understand and agree that facilities should 
not make or unduly influence treatment decisions made by a patient and 
his or her nephrologist. However, the facility can ensure that the 
treatment environment is one in which patients feel empowered and 
informed enough to participate in their care by enacting policies 
regarding patient engagement, and selecting medical professionals whose 
behavior aligns with these principles. As a result, we believe 
facilities are capable of improving patients' experiences with their 
nephrologists and may share information received with physicians 
outside of the facility.
    Comment: Some commenters did not support the adoption of the 
proposed ICH CAHPS clinical measure because patients typically dialyze 
at the same facility for long periods of time, and it is difficult for 
facilities and nephrologists to always meet patients' expectations. As 
an alternative to basing measure scores on ``top-box'' responses, one 
commenter recommended that facilities should receive credit for 
responses that indicate satisfactory (as opposed to exemplary) 
experience.
    Response: While we understand commenters' concerns about being able 
to consistently meet patients' expectations regarding their care, we 
believe that patient satisfaction and involvement in their treatment is 
a key element of successful ESRD treatment. The scoring methodology 
does not require facilities to get 100 percent on a particular measure, 
but it evaluates overall how the facility does.
    Comment: Some commenters did not support the proposal to convert 
the ICH CAHPS reporting measure into a clinical measure. Commenters 
stated that the ICH CAHPS survey was originally developed for 
hospitals, and that transitioning the survey to the dialysis facility 
setting may encourage facilities to provide substandard care (for 
example, inappropriately shortening the length of dialysis sessions) in 
order to please patients. Commenters further stated that it is often 
impossible for facilities to meet patient expectations when treating a 
chronic condition such as ESRD, and that patients might inappropriately 
direct their frustrations towards facilities and their staff.
    Response: We understand that facilities are concerned about a 
potential conflict between ``pleasing patients'' and providing 
clinically adequate care. The ICH CAHPS survey was developed through 
literature reviews; focus groups of in-center hemodialysis patients and 
their families, nephrologists and facility staff; a review of existing 
surveys for ESRD patients; and a Technical Expert Panel. We therefore 
believe the survey adequately accounts for many perspectives of 
dialysis care and will allow patients to provide their opinions of the 
care they receive without fear of retribution. At this point, we lack 
any evidence to substantiate concerns that facilities will provide 
substandard care ``in order to please patients'' or that ``it is often 
impossible for facilities to meet patient expectations when treating a 
chronic condition''; should such evidence arise, we will reevaluate the 
use of the ICH CAHPS survey in the ESRD QIP for future payment years.
    Comment: One commenter stated that the ICH CAHPS survey instrument 
is unreliable, because only 53 percent of patients with ESRD are able 
to complete forms for patient-reported outcomes, and basing facility 
scores on responses from the remaining patients cannot be generalized 
to reflect the true experience of all patients at a facility.
    Response: We acknowledge commenter's concern regarding the overall 
response rate, but note that a 53 percent response rate is considered 
better than average, particularly for a vulnerable, chronically ill 
patient population. However, response rates are not a measure of 
reliability because response rates are subject to a variety of factors. 
As part of the process of submitting NQF #0258 to NQF for re-
endorsement, we conducted reliability testing for the measure. 
Specifically, we found that the item total correlations for Kidney 
Doctor Communication were all

[[Page 66200]]

above 0.40. Nineteen of the 22 item-total correlations for Dialysis 
Facility Care and Operations were above 0.40. Six of 11 item-total 
correlations for Patient Empowerment were above 0.40. Internal 
consistency reliabilities for the three scales ranged from 0.75 to 
0.93. We believe the measure is reliable because the item total 
correlations for the measure's three composite measures all exceeded 
0.40, which indicates a moderate level of reliability.
    Comment: Some commenters did not support the expansion of the ICH 
CAHPS reporting measure into a clinical measure, because published 
research demonstrates that several items on the survey are unreliable.
    Response: We are aware of some studies that have questioned the 
reliability of the ICH CAHPS survey questions. However, a recent study 
in which we have been involved found that psychometric analyses 
strongly support the internal consistency, reliability, and validity of 
the ICH CAHPS survey scales.\18\ This study further showed that these 
scales can be used to discriminate variation in quality of care among 
dialysis facilities, and that scale scores were strongly related to 
patients' global ratings of nephrologists, dialysis center, and 
dialysis center staff. We therefore believe that the survey questions 
are reliable.
---------------------------------------------------------------------------

    \18\ Weidmer BA, Cleary PD, Keller S, Evensen C, Hurtado MP, 
Kosiak B, Gallagher PM, Levine R, Hays RD (2014). Development and 
Evaluation of the CAHPS (Consumer Assessment of Healthcare Providers 
and Systems) Survey for In-Center Hemodialysis Patients. Am J Kidney 
Diseases. [Epub ahead of print].
---------------------------------------------------------------------------

    For reasons, we are finalizing the ICH CAHPS clinical measure as 
proposed for the PY 2018 program and future payment years. Technical 
specifications for the ICH CAHPS clinical measure can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
d. Screening for Clinical Depression and Follow-Up Reporting Measure
    Depression is the most common psychological disorder in patients 
with ESRD. Depression causes suffering, a decrease in quality of life, 
and impairment in social and occupational functions; it is also 
associated with increased health care costs. Current estimates put the 
depression prevalence rate as high as 20 percent to 25 percent in 
patients with ESRD.\19\ Studies have also shown that depression and 
anxiety are the most common comorbid illnesses in patients with 
ESRD.\20\ Moreover, depressive affect and decreased perception of 
social support have been associated with higher rates of mortality in 
the ESRD population, and some studies suggest that this association is 
as strong as that between medical risk factors and mortality.\21\ 
Nevertheless, depression and anxiety remain under-recognized and under-
treated, despite the availability of reliable screening 
instruments.\22\ Therefore, a measure that assesses whether facilities 
screen patients for depression, and develop follow-up plans when 
appropriate, offers an opportunity to improve the health of patients 
with ESRD.
---------------------------------------------------------------------------

    \19\ Kimmel PL, Cuckor D, Cohen SD, Peterson RA. Depression in 
end-stage renal disease patients: a critical review. Advances in 
Chronic Kidney Disease. 2007:14(4):328-34.
    \20\ Feroze, U., Martin, D., Reina-Patton, A., Kalantar-Zadeh, 
K., & Kopple, J. D. (2010). Mental health, depression, and anxiety 
in patients on maintenance dialysis. Iranian Journal of Kidney 
Diseases, 4(3), 173-80.
    \21\ Cukor, D., Cohen, S. D., Peterson, R. A., & Kimmel, P. L. 
(2007). Psychosocial aspects of chronic disease: ESRD as a 
paradigmatic illness. Journal of the American Society of Nephrology, 
18(12), 3042-3055; and Kimmel, P. L., Peterson, R. A., Weihs, K. L., 
Simmens, S. J., Alleyne, S., Cruz, I., & Veis, J. H. (2000). 
Multiple measurements of depression predict mortality in a 
longitudinal study of chronic hemodialysis outpatients. Kidney 
International, 57(5), 2093-2098.
    \22\ Preljevic, V. T., [Oslash]sthus, T. B. H., Sandvik, L., 
Opjordsmoen, S., Nordhus, I. H., Os, I., & Dammen, T. (2012). 
Screening for anxiety and depression in dialysis patients: 
Comparison of the Hospital Anxiety and Depression Scale and the Beck 
Depression Inventory. Journal of Psychosomatic Research, 73(2), 139-
144.
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    We proposed to adopt a depression measure that is based on an NQF-
endorsed measure (NQF #0418: Screening for Clinical Depression). NQF 
#0418 assesses the percentage of patients screened for clinical 
depression using an age-appropriate standardized tool and documentation 
of a follow-up plan where necessary. The Measures Application 
Partnership supported the use of NQF #0418 in the ESRD QIP in its 
January 2014 Pre-Rulemaking Report, because the measure ``addresses a 
National Quality Strategy [NQS] aim not adequately addressed in the 
program measure set'' and promotes person- and family-centered care. We 
proposed to adopt a reporting measure based on this NQF-endorsed 
measure so that we can collect data that we can use in the future to 
calculate both achievement and improvement scores, should we propose to 
adopt the clinical version of this measure in future rulemaking. 
Although we recognize that we recently adopted the NHSN Bloodstream 
Infection clinical measure despite a lack of baseline data to calculate 
achievement and improvement scores, we believe that measure warranted 
special treatment in light of the fact that it addresses patient 
safety. Because the proposed screening for clinical depression measure 
addresses quality of life and patient well-being, and not patient 
safety, we think it is appropriate to adopt it as a reporting measure 
until such time that we can collect the baseline data needed to score 
it as a clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``In the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) [in this case NQF], the 
Secretary may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary.'' Because we 
have given due consideration to endorsed measures as well as those 
adopted by a consensus organization and determined it is not practical 
or feasible to adopt NQF #0418 as a clinical measure in the ESRD QIP at 
this time, we proposed to adopt the Screening for Clinical Depression 
and Follow-Up Plan reporting measure under the authority of section 
1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we proposed that facilities 
must report one of the following conditions in CROWNWeb, at least once 
per performance period, for each qualifying patient (defined below):
    1. Screening for clinical depression is documented as being 
positive, and a follow-up plan is documented
    2. Screening for clinical depression documented as positive, and a 
follow-up plan not documented, and the facility possess documentation 
stating the patient is not eligible
    3. Screening for clinical depression documented as positive, the 
facility possesses no documentation of a follow-up plan, and no reason 
is given
    4. Screening for clinical depression is documented as negative, and 
a follow-up plan is not required
    5. Screening for clinical depression not documented, but the 
facility possesses documentation stating the patient is not eligible
    6. Clinical depression screening not documented, and no reason is 
given
    For this proposed measure, qualifying patients are defined as 
patients 12 years or older who have been treated at the facility for 90 
days or longer. This proposed measure will collect the same data 
described in NQF #0418, but we are proposing to score facilities based 
on whether they successfully report the data, and not the measure 
results. More specifically, facilities will be scored on

[[Page 66201]]

whether they report one of the above conditions for each qualifying 
patient once before February 1 of the year directly following the 
performance period. Technical specifications for the Screening for 
Clinical Depression and Follow-Up reporting measure can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Some commenters supported the Screening for Clinical 
Depression and Follow-Up reporting measure, and recommended that CMS 
either require facilities to use the same screening for depression, or 
require facilities to report the methodology used. Commenters also 
recommended that CMS require facilities to provide documentation of 
referral for treatment of depression beyond the abilities of the renal 
social worker.
    Response: We appreciate commenters' support, and will consider 
incorporating these recommendations in future rulemaking.
    Comment: Many commenters did not support adoption of the Screening 
for Clinical Depression and Follow-Up reporting measure. Commenters 
stated that the Screening for Clinical Depression and Follow-Up 
reporting measure is outside the dialysis facility's scope of practice, 
and that staff social workers are not qualified to provide treatment 
for depression. Commenters also stated that a measure on depression 
screening and follow-up is not covered within the statutory authorities 
of the ESRD QIP, since Section 1881 (h)(1)(A) of the Act limits the 
program to ``renal dialysis services.'' Commenters also stated that 
while facilities can do depression screenings, they are not equipped to 
provide psychotherapy services, and that requiring facilities to 
conduct the assessment is a disservice to patients, who would be better 
served by pyschotherapists. Comments further stated that depression 
unrelated to dialysis should not fall under the purview of the dialysis 
facility, and that conducting the annual assessment is unduly 
burdensome (particularly with respect to hiring staff to provide the 
assessment and training staff to enter data correctly). Commenters 
further stated that a future clinical version of this measure would 
require dialysis facilities to provide these services. Commenter stated 
that the measure would be more appropriate for the Comprehensive ESRD 
Care Initiative, because that initiative includes physicians as well as 
dialysis facilities.
    Response: We appreciate commenters' input on this measure. First, 
we disagree that screening patients for clinical depression is outside 
the scope of practice for dialysis facilities. Patient assessments, 
including screenings for clinical depression, are a critical aspect of 
renal dialysis services, because they enable facilities to assess 
whether a patient needs additional care. We further note that the ESRD 
CfCs requires that facilities perform a ``comprehensive assessment [for 
each patient that] must include, but is not limited to . . . [an] 
evaluation of psychosocial needs by a social worker'' (42 CFR 
494.80(a)(7)). We maintain that performing depression assessments is 
covered by this section (and, by extension, fall within the scope of 
work for dialysis facilities), because screening for clinical 
depression is an evaluation of the patient's psychosocial needs. We 
further disagree that requiring facilities to report whether they 
screen patients for clinical depression is unduly burdensome because 
depression screening is a type of a psychosocial evaluation, which, as 
stated above, facilities are already required to perform as a condition 
for coverage under the Medicare program. We also note that this measure 
does not, and will not, require facilities to provide psychotherapy 
services to patients. We believe that this measure will incentivize 
facilities to perform a clinical depression screening for each 
qualifying patient and develop a follow-up plan in order to ensure that 
the patient receives appropriate treatment. Although we agree that 
facilities are not equipped to actually treat the depression, we 
believe that the screenings can be performed by the individuals already 
in the multidisciplinary care team, such as a staff social worker. We 
appreciate that the Comprehensive ESRD Care model seeks to directly 
address coordination of care issues in the dialysis facility setting, 
but do not believe this precludes us from adopting a measure on this 
issue for the ESRD QIP, and we believe that information gained as a 
result of this measure can be used to better inform policy decisions in 
both the ESRD QIP and the CEC model.
    Comment: Some commenters did not support the proposal to adopt the 
Screening for Clinical Depression and Follow-Up reporting measure 
because facilities are already performing these screenings, and because 
screening for depression overlaps with the Medicare Conditions for 
Coverage for ESRD facilities. One commenter recommended CMS instead 
consider using a measure such as the Standardized Hospitalization Ratio 
to capture the effective management of the dialysis patient.
    Response: We appreciate that some facilities may already be 
performing these screenings. However, we do not believe that all 
facilities are doing so, and we believe that the Screening for Clinical 
Depression and Follow-Up reporting measure will incentivize all 
facilities to conduct depression screening and initiate follow-up plans 
when necessary. We also recognize that some facilities that are already 
screening patients for depression in order to meet the requirements of 
the ESRD CfCs will experience significant additional burdens associated 
with reporting data for the reporting measure. Nevertheless, depression 
is a highly prevalent condition in patients with ESRD, which impacts 
many aspects of a patient's life and is associated with higher rates of 
mortality in the ESRD population. We therefore believe the benefits of 
incentivizing facilities that are not already doing so to regularly 
screen their patients for depression outweigh the data reporting 
burdens for facilities that are already conducting these screening to 
meet the requirements of the ESRD CfCs.
    Comment: Some commenters sought clarification as to what 
characteristics a screening instrument must have to qualify as an ``age 
appropriate tool'' and what constitutes a ``follow-up plan'' in the 
context of the proposed Clinical Depression and Follow-Up reporting 
measure. The commenters also sought clarification as to whether 
facilities are required to screen all patients for depression, or 
whether only patients ``identified as potentially having a problem'' 
should be screened. Commenters sought clarification as to whether the 
facility would be required to perform the screening, or whether another 
provider would be required to do so.
    Response: The measure does not require facilities to select any 
particular screening tool because we believe that each facility should 
be able to select the tool that is most appropriate for each of their 
patients. However, examples of screening tools that we would consider 
to be age-appropriate include, but are not limited to:
    Adolescent Screening Tools (12-17 years): Patient Health 
Questionnaire for Adolescents (PHQ-A), Beck Depression Inventory-
Primary Care Version (BDI-PC), Mood Feeling Questionnaire (MFQ), Center 
for Epidemiologic Studies Depression Scale (CES-D), and PRIME MD-PHQ2
    Adult Screening Tools (18 years and older): Patient Health 
Questionnaire

[[Page 66202]]

(PHQ-9), Beck Depression Inventory (BDI or BDI-II), Center for 
Epidemiologic Studies Depression Scale (CES-D), Depression Scale 
(DEPS), Duke Anxiety-Depression Scale (DADS), Geriatric Depression 
Scale (GDS), Cornell Scale Screening, and PRIME MD-PHQ2
    We further note that we would consider an appropriate follow-up 
plan to be one that outlines a proposed course of action, including at 
least one of the following: (1) Additional evaluation for depression; 
(2) suicide risk assessment; (3) referral to a practitioner who is 
qualified to diagnose and treat depression; (4) pharmacological 
interventions; and/or (4) other interventions or follow-up for the 
diagnosis or treatment of depression.
    Under this measure, facilities are required to report whether they 
screened qualifying patients for depression, and whether they developed 
a follow-up plan.
    Comment: One commenter recommended increasing the minimum age for 
qualifying patients from 12 to 18, because pediatric patients present 
unique challenges for depression assessment.
    Response: Although we recognize that patients between the ages of 
12 and 17 present unique challenges for depression assessment, we 
believe it is critically important to include these patients because 
adolescent-onset depression is associated with multiple negative health 
outcomes, including an increased sick of death by suicide, suicide 
attempts, and recurrence of depression in young adulthood. In addition, 
the measure specifications for NQF #0418, the measure upon which this 
reporting measure is based, provides that the measure is appropriate 
for patients ages 12 to 17, and we agree with NQF's assessment because 
there are age-appropriate screening tools for this population, and 
requiring facilities to report data on whether these depression 
screenings were provided could prevent the negative outcomes listed 
above.
    Comment: Some commenters did not support the proposal to adopt the 
Depression Screening and Follow-Up reporting measure, because the 
measure upon which it is based (NQF #0418) is specified for physicians, 
not dialysis facilities. Because the follow-up component of the measure 
requires a physician referral, commenter stated that the measure is not 
appropriate for dialysis facilities.
    Response: We recognize that the NQF-endorsed version of this 
measure is specified for physicians, but we continue to believe that it 
is an appropriate measure for the dialysis facility setting. Dialysis 
facilities see patients with ESRD far more frequently than 
nephrologists and primary care physicians. Accordingly, dialysis 
facilities are in a better position to detect when their patients are 
in need of treatment for depression. Furthermore, under the ESRD CfCs, 
the nephrologist is considered part of the multidisciplinary team that 
provides dialysis treatment. As a result, we believe nephrologists 
should be capable of referring patients in need of further treatment.
    Comment: Some commenters did not support the adoption of the 
Depression Screening and Follow-Up reporting measure because it is a 
``check-box'' measure (that is, facilities receive credit on the basis 
of attestations), there is no depression screening tool specific to 
patients with ESRD, and there is limited data on the effectiveness of 
pharmacotherapies for depression in ESRD patients. One commenter was 
concerned that adopting the measure could lead to increased utilization 
of pharmacotherapies without a concomitant decline in rates of 
depression, because this effect has been seen in studies of the general 
population. One commenter also recommended that CMS develop alternative 
measures on depression that would be more valid for the dialysis 
setting.
    Response: We recognize that scores on this measure are based on 
whether the facility reported one of six conditions for each qualifying 
patient. Depression is a significant concern for patients with ESRD, 
but it remains underdiagnosed and undertreated. We believe that 
facilities will more vigilantly monitor and screen for depression 
because the measure requires facilities to report whether they 
performed the screening. Additionally, we appreciate commenters' 
concerns that this measure could lead to an overutilization of 
pharmacotherapies for depression in patients with ESRD. However, we are 
not aware of any evidence indicating pharmacotherapies are overused in 
the ESRD population; absent such evidence, we do not believe that this 
concern is sufficient to delay adoption of this measure. Finally, we 
appreciate commenters' recommendation that we develop a measure 
specific to depression in the dialysis setting. We will continue to 
evaluate the measure's specifications, and if we conclude that 
modifications are needed, we intend to propose to adopt them in the 
future.
    Comment: One commenter did not support the adoption of the 
Screening for Depression and Follow-Up reporting measure because 
patients risk being denied transplants if they are diagnosed with 
depression. Commenter was also concerned that adopting the measure may 
result in an over-reliance on pharmacotherapies without encouraging the 
types of emotional and social support that are needed to treat patients 
suffering from depression and ESRD.
    Response: We appreciate commenters' concerns regarding the impact 
of depression on transplant eligibility and the possibility that this 
measure may result in increased use of pharmacotherapies the treatment 
of depression. However, absent evidence of transplant denials resulting 
from depression treatment or overuse of pharmacotherapies to treat 
patients' depression, we do not believe these concerns are sufficient 
to support delaying adoption of the Clinical Depression Screening and 
Follow-Up reporting measure. We believe that a patient's psychosocial 
wellbeing is a critical aspect of an ESRD patient's overall health and 
quality of life.
    Comment: One commenter did not support the Depression Screening and 
Follow-Up measure because a patient's status can change considerably 
during the year, and the commenter recommended requiring more frequent 
assessments.
    Response: We agree that patients' depression status may change over 
the course of a year, and we encourage facilities to conduct more 
frequent screenings. Nevertheless, because PY 2018 will be the first 
time this measure will be included in the ESRD QIP, we think it is 
appropriate to ask facilities to report whether they performed the 
screening at least once per performance period. We may consider 
revising this requirement in future years as we learn more information, 
based on the data we receive.
    Comment: One commenter did not support the Depression Screening and 
Follow-Up measure because it does not require facilities to assess the 
underlying psychosocial causes of depression, and because the measure 
does not require facilities to ensure that patients are engaged in 
their care, including the setting of patient-centric goals for 
treatment.
    Response: This measure is intended to ensure ESRD patients who may 
be experiencing depression are identified and referred, if necessary, 
for follow-up treatment. It does not require the dialysis facility to 
diagnose the nature and causes of depression because these tasks are 
not suitable for a dialysis facility. Rather, we recognize that 
treatment for clinical depression should be furnished by appropriately 
trained

[[Page 66203]]

practitioners and other mental health professionals, and it is our hope 
that these professionals will evaluate psychosocial causes and engage 
patients in the selection of treatment goals.
    Comment: Some commenters did not support the Screening for Clinical 
Depression and Follow-Up reporting measure, because there is a lack of 
concrete information about the causes of depression and optimal 
screening methods and referral practices in the ESRD population. One 
commenter also stated that applying the principles underlying this 
measure to both adult and pediatric patients is not valid, because 
adult and pediatric present the different symptoms of depression and 
require different types of follow-up treatment.
    Response: The measure specifications for NQF #0418 (the measure 
upon which this reporting measure is based) provide guidance about what 
constitutes screening and follow-up within the context of the measure. 
Furthermore, the NQF-endorsed specifications do not include an 
exclusion for patients with ESRD, and we are not aware of any studies 
demonstrating that the particular causes of depression for patients 
with ESRD invalidate the measure's prescriptions for screening and 
follow-up. We therefore believe that the Screening for Clinical 
Depression and Follow-Up reporting measure is appropriate for patients 
with ESRD. Finally, as stated above, we note that NQF #0418 was 
specified for patients aged 12 and older, and we agree with NQF that it 
is appropriate to include pediatric patients who are 12 years or older.
    Comment: Some commenters did not support the proposal to adopt the 
Depression Screening and Follow-Up measure, because meeting the 
requirements of the measure will create costs for the facility that 
will not be covered by comparable increases in payments under the ESRD 
PPS. Another commenter stated that Medicare fee-for-service does not 
allow or reimburse facilities for taking actions to address depression.
    Response: We recognize that depression screenings are not 
specifically reimbursed under the ESRD PPS. However, psychosocial 
evaluations are included in the ESRD CfCs and are required for Medicare 
participation, and depression screening is a type of psychosocial 
evaluation. Although we understand facilities may incur additional 
costs for complying with the measure's requirements (because facilities 
cannot bill Medicare separately for these assessments and referrals), 
on balance we believe that these costs are outweighed by potential 
improvements for patients' well-being.
    For these reasons, we are finalizing the Clinical Depression 
Screening and Follow-Up reporting measure as proposed. Technical 
specifications for the measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html
e. Pain Assessment and Follow-Up Reporting Measure
    Pain is one of the most common symptoms in patients with ESRD.\23\ 
Studies have shown that pain is a significant problem for more than 50 
percent of patients with ESRD, and up to 82 percent of those patients 
report moderate to severe chronic pain.\24\ Pain is commonly associated 
with quality of life in early- and late-stage chronic kidney disease 
patients, but it is not effectively managed in the ESRD patient 
population and chronic pain often goes untreated.\25\ Observational 
studies suggest that under-managed pain has the potential to induce or 
exacerbate comorbid conditions in ESRD, which may in turn adversely 
affect dialysis treatment.\26\ Patients with ESRD frequently experience 
pain that has a debilitating impact on their daily lives, and research 
has shown a lack of effective pain management strategies currently in 
place in dialysis facilities.\27\ Therefore, a measure that assesses 
whether facilities regularly assess their patients' pain, and develop 
follow-up plans as necessary, offers the possibility of improving the 
health and well-being of patients with ESRD.
---------------------------------------------------------------------------

    \23\ Cohen, S. D., Patel, S. S., Khetpal, P., Peterson, R. A., & 
Kimmel, P. L. (2007). Pain, sleep disturbance, and quality of life 
in patients with chronic kidney disease. Clinical Journal of the 
American Society of Nephrology, 2(5), 919-925.
    \24\ Davison SN. Pain in hemodialysis patients: prevalence, 
cause, severity, and management. American Journal of Kidney Disease. 
2003; 42:1239-1247
    \25\ Davison, S. N. (2007). The prevalence and management of 
chronic pain in end-stage renal disease. Journal of Palliative 
Medicine, 10(6), 1277-1287.
    \26\ De Castro C. (2013). Pain assessment and management in 
hemodialysis patients. CANNT Journal; 23(3):29-32; Weisbord SD, 
Fried LF, Arnold RM, Fine MJ, Levenson DJ, et al. Prevalence, 
severity, and importance of physical and emotional symptoms in 
chronic hemodialysis patients. (2005) Journal of the American 
Society of Nephrology; 16(8):2487-2494.
    \27\ De Castro C. (2013). Pain assessment and management in 
hemodialysis patients. CANNT Journal; 23(3):29-32; Wyne A, Rai R, 
Cuerden M, Clark WF, Suri RS. (2011). Opioid and benzodiazepine use 
in end-stage renal disease: a systematic review. Clinical Journal of 
the American Society of Nephrology. 6(2):326-333.
---------------------------------------------------------------------------

    We proposed to adopt a pain measure that is based on an NQF-
endorsed measure (NQF #0420: Pain Assessment and Follow-Up). NQF #0420 
assesses the percentage of patients with documentation of a pain 
assessment using a standardized tool, and documentation of a follow-up 
plan when pain is present. The Measures Application Partnership 
supported the use of NQF #0420 in the ESRD QIP in its January 2014 Pre-
Rulemaking Report, because the measure ``addresses a National Quality 
Strategy [NQS] aim not adequately addressed in the program measure 
set'' and promotes person- and family-centered care. We proposed to 
adopt a reporting measure based on this NQF-endorsed measure so that we 
can collect data that we can use in the future to calculate both 
achievement and improvement scores, should we propose to adopt the 
clinical version of this measure in future rulemaking. Although we 
recognize that we recently adopted the NHSN Bloodstream Infection 
clinical measure despite a lack of baseline data to calculate 
achievement and improvement scores, we believe that measure warranted 
special treatment in light of the fact that it addresses patient 
safety. Because the proposed screening for pain measure addresses 
quality of life and patient well-being, and not patient safety, we 
think it is appropriate to adopt it as a reporting measure until such 
time that we can collect the baseline data needed to score it as a 
clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``In the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) of the Act [in this case 
NQF], the Secretary may specify a measure that is not so endorsed so 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary.'' 
Because we have given due consideration to endorsed measures, as well 
as those adopted by a consensus organization, and determined it is not 
practical or feasible to adopt those measures in the ESRD QIP, we 
proposed to adopt the Pain Assessment and Follow-Up reporting measure 
under the authority of section 1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we proposed that facilities 
must report one of the following conditions in CROWNWeb, once every six 
months per performance period, for each qualifying patient (defined 
below):
    1. Pain assessment using a standardized tool is documented as

[[Page 66204]]

positive, and a follow-up plan is documented
    2. Pain assessment documented as positive, a follow-up plan is not 
documented, and the facility possesses documentation that the patient 
is not eligible
    3. Pain assessment documented as positive using a standardized 
tool, a follow-up plan is not documented, and no reason is given
    4. Pain assessment using a standardized tool is documented as 
negative, and no follow-up plan required
    5. No documentation of pain assessment, and the facility possesses 
documentation the patient is not eligible for a pain assessment using a 
standardized tool
    6. No documentation of pain assessment, and no reason is given
    For this measure, a qualifying patient is defined as a patient age 
18 years or older who has been treated at the facility for 90 days or 
longer. This proposed measure will collect the same data described in 
NQF #0420, but we are proposing a few modifications to the NQF-endorsed 
version. First, we proposed that facilities must report data for each 
patient once every six months, whereas NQF #0420 requires facilities to 
report the data based on each visit. We proposed this modification 
because we agree with public comments reflected on the Measures 
Application Partnership's January 2014 Pre-Rulemaking Report, which 
stated that conducting a pain assessment every time a patient receives 
dialysis would be unduly burdensome for facilities. Second, we proposed 
that conditions covering the first 6 months of the performance period 
must be reported in CROWNWeb before August 1 of the performance period, 
and that conditions covering the second 6 months of the performance 
period must be reported in CROWNWeb before February 1 of the year 
directly following the performance period. We believe this reporting 
schedule will ensure regular monitoring and follow-up of patients' pain 
without imposing an undue burden on facilities. Third, we proposed to 
score facilities based on whether they successfully report the data, 
and not based on the measure results. Technical specifications for the 
Pain Assessment and Follow-Up reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported adoption of the Pain Assessment 
and Follow-Up reporting measure because the measure can help reduce the 
pain associated with dialysis needles, and also encourage facility 
staff to undergo training in pain management and cannulation 
techniques. Commenters also supported the measure because pain is an 
underdiagnosed and undertreated condition in patients with ESRD that 
can inhibit individual function and change the ability of patients to 
fulfill their desired and required roles in life.
    Response: We thank the commenters for the support.
    Comment: Some commenters supported adopting the proposed Pain 
Assessment and Follow-Up reporting measure, because pain is an 
important concern among the ESRD population. Commenters recommended 
that CMS also require facilities to use the same screening tool, or 
collect information from facilities about the validated pain assessment 
tool used.
    Response: We thank commenters for their support. We did not propose 
to collect information about the pain assessment tool used or to 
require facilities to use the same tool. However, we will take these 
recommendations into consideration as we reevaluate the measure for 
future payment years.
    Comment: Many commenters did not support adoption of the Pain 
Assessment and Follow-Up reporting measure. Commenters stated that the 
Pain Assessment and Follow-Up reporting measure is outside the dialysis 
facility's scope of practice. Commenters also noted that while 
facilities can do pain screenings, they are not equipped to provide 
pain treatment services, and that requiring facilities to conduct the 
assessment is a disservice for patients, who would be better served by 
pain centers. Comments further stated that pain unrelated to dialysis 
should not fall under the purview of the dialysis facility, and that 
conducting the semiannual assessment is unduly burdensome. Commenters 
further stated that a future clinical version of this measure would 
require dialysis facilities to provide these services. Commenter stated 
that the measure would be more appropriate for the Coordinated ESRD 
Care model, because that initiative includes physicians as well as 
dialysis facilities.
    Response: We appreciate commenters' input on this measure. First, 
we disagree that screening patients for pain is outside the scope of 
work for dialysis facilities. Patient assessments are a critical aspect 
of renal dialysis services because they enable facilities to provide 
care that is directly responsive to patient needs. The ESRD CfCs 
require that facilities perform a ``comprehensive assessment [for each 
patient that] must include, but is not limited to . . . [an] evaluation 
of current health status and medical condition, including co-morbid 
conditions'' (42 CFR 494.80(a)(7)). Because screening for pain is an 
assessment of patients' current health status, this screening falls 
within the ESRD CfCs and, by extension, the scope of work for dialysis 
facilities. We further disagree that the requirement for twice annual 
pain assessments is unduly burdensome because facilities are already 
required to perform an assessment of their patients' current health 
status, and pain assessments are an example of such as assessment. We 
also note that this measure does not, and will not, require facilities 
to provide chronic pain treatment services to patients. This measure 
requires facilities to report whether or not they performed a pain 
assessment for each qualifying patient, including whether or not they 
documented a follow-up plan. Although we agree that facilities are not 
the appropriate parties to actually treat pain, we do think the 
assessment can be performed by members of the multidisciplinary care 
team, such as a staff nurse. We recognize that the Coordinated ESRD 
Care model seeks to directly address coordination of care issues in the 
dialysis facility setting, but do not believe this precludes us from 
adopting a measure on the same issue for the ESRD QIP, and we believe 
that information collected as a result of this measure can be used to 
better inform policy decisions in the ESRD QIP and the CEC model.
    Comment: Some commenters did not support adoption of the Pain 
Assessment and Follow-Up reporting measure because facilities are 
already performing these screenings, screening for pain overlaps with 
the Medicare Conditions for Coverage for ESRD facilities, and the ICH 
CAHPS survey already asks patients about the presence of pain. One 
commenter recommended CMS instead consider using a measure such as the 
Standardized Hospitalization Ratio to capture the effective management 
of the dialysis patient. Another commenter also stated that uremia is 
typically responsible for pain in patients with ESRD, and recommended 
delaying the adoption of the measure until research identifies an 
effective way to relieve pain associated with uremia.
    Response: We appreciate that some facilities may already be 
performing these screenings. However, we do not believe that all 
facilities are doing so,

[[Page 66205]]

and we believe that the Pain Assessment and Follow-Up reporting measure 
will incentivize all facilities to conduct pain assessments and 
initiate follow-up plans when necessary. Additionally, one of the 
reasons we believe this measure is appropriate for dialysis facilities 
is that the actions required to comply with the reporting requirements 
are covered, as discussed above, by the ESRD CfCs.
    Comment: One commenter recommended increasing the number of pain 
assessments patients receive each year beyond two and notes that the 
Joint Commission recommends assessing pain on an on-going basis.
    Response: We agree that patients' pain status may change over the 
course of a year, and we encourage facilities to conduct more frequent 
assessments. Nevertheless, because PY 2018 will be the first time this 
measure is adopted in the ESRD QIP, we think it is appropriate to 
require facilities to report whether or not they performed a pain 
assessment once every six months. We may consider asking facilities to 
report more frequently in future years, after we have had an 
opportunity to evaluate the data that facilities report on this 
measure.
    Comment: One commenter sought clarification as to whether 
facilities are required to screen all patients for pain, or whether 
only patients ``identified as potentially having a problem'' should be 
screened.
    Response: Under this measure, facilities are required to report 
whether they performed pain assessments for qualifying patients, and 
whether they developed a follow-up plan based on that assessment. As 
stated in the CY 2015 ESRD PPS Proposed Rule, qualifying patients for 
this measure are patients aged 18 years or older who have been treated 
at the facility for 90 days or longer (79 FR 40261).
    Comment: Commenter did not support the proposal to adopt the Pain 
Assessment and Follow-Up reporting measure, because the measure upon 
which it is based (NQF #0420) is specified for physicians, not dialysis 
facilities. Because the follow-up component of the measure requires a 
physician referral, commenter stated that the measure is not 
appropriate for dialysis facilities.
    Response: We recognize that the NQF-endorsed version of this 
measure is specified for physicians, but we continue to believe that it 
is an appropriate measure for the dialysis facility setting. Dialysis 
facilities see patients with ESRD far more frequently than 
nephrologists and primary care physicians. Accordingly, dialysis 
facilities are in a better position to detect when their patients are 
in need of treatment for pain. Furthermore, under the ESRD CfCs, the 
nephrologist is considered part of the multidisciplinary team that 
provides dialysis treatment. We therefore believe that nephrologists 
should be capable of referring patients for follow-up care following an 
initial pain assessment, if necessary.
    Comment: One commenter did not support the adoption of the Pain 
Assessment and Follow-Up reporting measure because it focuses on 
chronic, not acute, pain, and chronic pain is best managed by 
physicians, not dialysis facilities. Commenter also stated that the 
measure is not appropriate because significant pain is not typically 
associated with dialysis, and facilities are already addressing acute 
pain associated with dialysis, when it occurs.
    Response: The purpose of this measure is to incentivize facilities 
to assess both chronic and acute pain. Although some facilities may 
already have in place robust processes to address acute pain, we 
believe there is still considerable room for improvement in the 
assessment and management of acute pain. Although chronic pain is best 
treated by a qualified physician, dialysis facilities see patients far 
more frequently than nephrologists or other physicians, so dialysis 
facilities are in the best position to conduct regular assessments and 
refer patients to appropriate practitioners as needed. We further note 
that the reporting measure does not require facilities to treat chronic 
pain, or to report whether they have done so.
    Comment: One commenter did not support adoption of the Pain 
Assessment and Follow-Up reporting measure, because it is unclear 
whether the measure seeks to assess acute or chronic pain, and the 
commenter does not understand how this measure will improve patient 
care. For example, a pain assessment performed at one point in time may 
not be relevant to the patient's experience of pain at a different 
time.
    Response: As stated above, this measure is intended to assess 
overall pain--both acute and chronic. We further believe that this 
measure will improve patients' quality of life because it will increase 
the likelihood that patients who suffer from pain will be identified 
and referred to an appropriate practitioner. Finally, as stated above, 
we agree that patients' pain status may change over the course of a 
year, and we encourage facilities to conduct more frequent assessments.
    Comment: Some commenters did not support the adoption of the Pain 
Assessment and Follow-Up reporting measure because it is a ``check-
box'' measure (that is, facilities receive credit on the basis of 
attestations), and because there is no pain assessment tool specific 
for patients with ESRD.
    Response: We recognize that scores on this measure are based on 
whether a facility reports one of six conditions for each qualifying 
patient once every six months. However, we disagree that the measure 
will not make an impact on patients' quality of life. Pain--both 
chronic and acute--is a significant concern for patients with ESRD, but 
it remains underdiagnosed and undertreated. We believe this measure 
will incentivize facilities to more vigilantly monitor and address 
patients' pain, and that as a result patients with pain issues will be 
identified more quickly and receive the follow-up care necessary to 
improve and maintain their quality of life.
    We understand that there is no firm consensus on what pain 
assessment tool is best for patients with ESRD; however, there are a 
number of standardized tools available. We believe that facilities are 
in the best position to choose an appropriate screening tool for use 
with their patients. Examples of standardized assessment tools that we 
believe would be appropriate include but are not limited to the 
following: the Brief Pain Inventory (BPI); Faces Pain Scale (FPS); 
McGill Pain Questionnaire (MPQ); Multidimensional Pain Inventory (MPI); 
Neuropathic Pain Scale (NPS); Numeric Rating Scale (NRS); Oswestry 
Disability Index (ODI); Roland Morris Disability Questionnaire (RMDQ); 
Verbal Descriptor Scale (VDS); Verbal Numeric Rating Scale (VNRS); and 
Visual Analog Scale (VAS).
    Comment: One commenter did not support the proposal to adopt the 
Pain Assessment and Follow-Up measure because the commenter is 
concerned that facilities will simply conduct a straightforward 
assessment (for example, a numerical pain scale) and prescribe 
analgesics. Commenter stated that it would be preferable to identify 
the underlying causes of chronic and acute pain, and to develop care 
plans that address these causes.
    Response: As stated above, we believe that facilities have many 
options when selecting an appropriate pain assessment tool, and we 
believe that facilities should be able to select the tool that is most 
appropriate for their patients. We further believe that decisions to 
prescribe analgesics are best left to the prescribing clinician, though 
it is our hope that clinicians will take into account the underlying 
causes of pain, as well as patients' treatment goals, when prescribing 
therapies.

[[Page 66206]]

    Comment: One commenter did not support the proposal to adopt the 
Pain Assessment and Follow-Up measure, because meeting the requirements 
of the measure will create costs for the facility that will not be 
covered by comparable increases in payments under the ESRD PPS. Another 
commenter stated that Medicare fee-for-service does not allow or 
reimburse facilities for taking actions to address pain management.
    Response: We recognize that pain assessments are not covered under 
the ESRD PPS. However, evaluations of current health status and medical 
condition are included in the ESRD CfCs and required for participation 
in the Medicare program, and pain assessment is an example of such an 
evaluation. Although we understand that facilities may incur additional 
costs for complying with the measure's requirements, on balance we 
believe that these costs are outweighed by potential improvements in 
patients' quality of life.
    Comment: One commenter did not support the proposed Pain Assessment 
and Follow-Up reporting measure, because adopting the measure may lead 
to prescription of narcotics and other pain medications, which can 
cause iatrogenic effects.
    Response: We understand the commenter's concern that a measure 
assessing pain may lead to prescription of narcotics and other pain 
medications, which can carry the risk of negative side effects when 
used or prescribed inappropriately. However, absent evidence indicating 
that pain medication utilization rates among ESRD patients are 
unnecessarily high, we do not believe this concern is sufficient to 
delay adoption of the Pain Assessment and Follow-Up reporting measure 
because of the prevalence and severity of pain-related health issues in 
the ESRD population.
    For these reasons, we are finalizing the Pain Assessment and 
Follow-Up reporting measure as proposed. Technical specifications for 
the measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html
f. NHSN Healthcare Personnel Influenza Vaccination Reporting Measure
    Infection is the second most common cause of death in patients with 
ESRD, following cardiovascular causes,\28\ and influenza accounts for 
significant morbidity and mortality in patients receiving 
hemodialysis.\29\ Healthcare personnel (HCP) can acquire influenza from 
patients and transmit influenza to patients and other HCP; decreasing 
transmission of influenza from HCP to persons at high risk likely 
reduces influenza-related deaths among persons at high risk for 
complications from influenza, including patients with ESRD.\30\ 
Vaccination is an effective preventive measure against influenza that 
can prevent many illnesses, deaths, and losses in productivity.\31\ In 
addition, HCP are considered high priorities for vaccine use. Achieving 
and sustaining high influenza vaccination coverage among HCP is 
intended to help protect HCP and their patients, and to reduce disease 
burden and healthcare costs. Results of studies in post-acute care 
settings similar to the ESRD facility setting indicate that higher 
vaccination coverage among HCP is associated with lower all-cause 
mortality.\32\ We therefore proposed to adopt an NHSN HCP Influenza 
Vaccination reporting measure for PY 2018 and future payment years.
---------------------------------------------------------------------------

    \28\ Soni R, Horowitz B, Unruh M. Immunization in end-stage 
renal disease: opportunity to improve outcomes. Semin, Dial. 2013 
Jul-Aug;26(4):416-26.
    \29\ Fiore AE, Shay DK, Haber P, et al. Prevention and control 
of influenza. Recommendations of the Advisory Committee on 
Immunization Practices (ACIP). MMWR Recomm Rep. 2007;56:1-54.
    \30\ Pearson ML, Bridges CM, Harper SA. Influenza vaccination of 
health-care personnel: Recommendations of the Healthcare Infection 
Control Practices Advisory Committee (HICPAC) and the Advisory 
Committee on Immunization Practices (ACIP). MMWR. 2006:55:1-16.
    \31\ Talbot TR, Bradley SE., Cosgrove SE., et al. Influenza 
vaccination of healthcare workers and vaccine allocation for 
healthcare workers during vaccine shortages. Infect Control Hosp 
Epidemiol. 2005;26(11):882-90.
    \32\ Carman WF, Elder AG, Wallace LA, et al. Effects of 
influenza vaccination of health-care workers on mortality of elderly 
people in long-term care: a randomized controlled trial. Lancet. 
2000;355(9198):93-7; see also Potter J, Stott DJ, Roberts MA, et al. 
Influenza vaccination of health care workers in long-term-care 
hospitals reduces the mortality of elderly patients. J infect Dis. 
1997;175(1):1-6.
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    We proposed to use a measure that is based on an NQF-endorsed 
measure (NQF #0431: Influenza Vaccination Coverage Among Healthcare 
Personnel) of the percentage of qualifying HCP who: (a) Received an 
influenza vaccination; (b) were determined to have a medical 
contraindication; (c) declined influenza vaccination; or (d) were of an 
unknown vaccination status. A ``qualifying HCP'' is defined as an 
employee, licensed independent practitioner, or adult student/trainee/
volunteer who works in a facility for at least one day between October 
1 and March 31. The Measures Application Partnership supported the use 
of NQF #0431 in the ESRD QIP in its January 2014 Pre-Rulemaking Report 
because the measure is NQF-endorsed for use in the dialysis facility 
care setting. We proposed to adopt a reporting measure based on this 
NQF-endorsed measure so that we can collect data that we can use in the 
future to calculate both achievement and improvement scores, should we 
propose to adopt the clinical version of this measure in future 
rulemaking. Although we recognize that we recently adopted the NHSN 
Bloodstream Infection clinical measure despite a lack of baseline data 
to calculate achievement and improvement scores, we believe that 
measure warranted special treatment in light of the fact that it 
addresses patient safety. Because the proposed NHSN HCP Influenza 
Vaccination reporting measure addresses population health, and not 
patient safety, we think it is appropriate to adopt it as a reporting 
measure until such time that we can collect the baseline data needed to 
score it as a clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``In the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) [in this case, NQF], the 
Secretary may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary.'' Because we 
have given due consideration to endorsed measures as well as those 
adopted by a consensus organization, and determined it is not practical 
or feasible to adopt this measure in the ESRD QIP, we proposed to adopt 
the NHSN Healthcare Personnel Influenza Vaccination reporting measure 
under the authority of section 1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we proposed that facilities 
must submit, on an annual basis, an HCP Influenza Vaccination Summary 
Form to CDC's NHSN system, according to the specifications available in 
the NHSN Healthcare Personnel Safety Component Protocol (http://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf). This proposed measure differs from NQF #0431 in that we 
are proposing to collect the same data but will score facilities on the 
basis of whether they submit this data, rather than on the percentage 
of HCP vaccinated. We proposed that the deadline for reporting this 
information to NHSN be May 15th of each year. This date is consistent 
with the reporting deadline established by CMS for other provider types 
reporting HCP vaccination data to NHSN. Because the

[[Page 66207]]

flu season typically spans from October to April, NHSN protocols 
submitted by May 15 would document vaccinations received during the 
preceding flu season. For example, NHSN HCP Influenza Vaccination 
Summary Forms submitted by May 15, 2016, would contain data from 
October 1, 2015 to March 31, 2016, and would be used for the PY 2018 
ESRD QIP; NHSN protocols submitted by May 15, 2017, would contain data 
from October 1, 2016 to March 31, 2017, and would be used for the PY 
2019 ESRD QIP, and so on. Technical specifications for this measure can 
be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Some commenters supported the proposal to adopt the NHSN 
HCP Influenza Vaccination reporting measure because HCP can expose 
patients to influenza if they have not been vaccinated, and because the 
measure will help improve patient safety.
    Response: We thank the commenters for their support.
    Comment: One commenter did not support the adoption of the NHSN HCP 
Influenza Vaccination reporting measure, because its definition of HCP 
is overly inclusive and reporting vaccination status for short-term HCP 
is overly burdensome. Commenter was concerned about facilities' ability 
to comply with the requirement to provide written documentation of each 
HCP's vaccination during the influenza season, and that if this measure 
is expanded to a clinical measure in the future it may limit access to 
temporary workers (including students and volunteers) due to the 
requirement that HCPs are included in the measure even if they only 
work at the facility for a single day.
    Response: We disagree that the definition of ``qualified healthcare 
personnel'' is overly inclusive. The NHSN HCP Influenza vaccination 
measure was pilot-tested at over 300 healthcare facilities in the 
United States; based on the results of this pilot test, CDC restricted 
the types of non-employee healthcare personnel included in the measure 
in order to balance inclusiveness and feasibility of reporting for 
healthcare facilities. It is important to measure influenza vaccination 
among non-employee healthcare personnel as many of these personnel 
provide care to or interact directly with patients and employee 
healthcare personnel, placing them at risk of acquiring or transmitting 
influenza. We therefore believe the inclusion of non-employee 
healthcare personnel in this measure is appropriate. We also note that 
this measure does not require facilities to report documentation 
regarding HCP immunization status when vaccinations are obtained within 
their own healthcare facility. Under the NHSN HCP Influenza Vaccination 
reporting measure and associated NHSN module, facilities should obtain 
written documentation of influenza vaccinations obtained outside of the 
healthcare facility, but need only report the total number of those 
vaccinations received outside of the healthcare facility.
    Comment: One commenter supported CMS's effort to ensure HCPs are 
vaccinated, but was concerned about the administrative aspects of the 
proposed NHSN HCP Influenza Vaccination reporting measure. The 
commenter specifically sought clarification as to whether written 
documentation would be required to establish an HCP's vaccination 
status, and whether vaccinations received before October 1 would 
qualify under this proposed measure.
    Response: Written documentation of an HCP's vaccination status is 
only required for HCP receiving the influenza vaccination outside of 
the healthcare facility. Acceptable forms of documentation of influenza 
vaccination received outside of the healthcare facility include a 
signed statement or form, or an electronic form or email from the 
healthcare worker indicating when and where he/she has received the 
influenza vaccine, or a note, receipt, vaccination card, or similar 
form of documentation from the outside vaccinating entity stating that 
the healthcare worker received the influenza vaccine at that location. 
Facilities should maintain this documentation for their own record; 
however, only summary count of number reported within this category 
should be reported.
    Under the NHSN HCP Influenza Vaccination reporting measure, the 
performance period for the denominator (the number of healthcare 
personnel working in a facility) is from October 1 through March 31. 
However, the numerator measurement (vaccination status) includes 
vaccines obtained ``as soon as vaccine is available.'' As a result, an 
HCP working at the facility as of October 1 who was vaccinated in 
September would be considered vaccinated for the performance period 
under this measure.
    Comment: One commenter supported the NHSN HCP Influenza reporting 
measure, but stated that the NQF-endorsed measure ``only includes 
personnel working at a facility for 30 days or more.'' Commenter 
recommended that CMS exclude HCP working at a facility for less than 30 
days from this measure.
    Response: The NHSN HCP Influenza Vaccination module's requirement 
to include only healthcare personnel working in the healthcare facility 
for 30 days or more was in place during the 2012-2013 influenza season. 
Beginning with the 2013-2014 influenza season, facilities are required 
to report healthcare personnel working in the facility for one day or 
more from October 1 through March 31, because this more accurately 
captures healthcare personnel in the facility at risk of acquiring or 
transmitting influenza virus. The National Quality Forum (NQF) accepted 
CDC's proposal to make the change to one day or more in May 2013, and 
the current NQF-endorsed measure available at http://www.qualityforum.org/QPS/0431 reflects this revised specification.
    Comment: Some commenters did not support the proposal to adopt the 
NHSN HCP Influenza Vaccination reporting measure because influenza 
vaccination is already a requirement for employment in dialysis 
facilities, and that adopting this measure will dilute the scores of 
other measures in the ESRD QIP.
    Response: Although influenza vaccinations for healthcare 
professionals may be a condition of employment for some facilities, 
this is not a condition for all facilities, and some facilities do not 
require volunteers or short-term employees to have current influenza 
vaccinations. Accordingly, we believe that potential improvements to 
patients' health warrant the adoption of the measure. We further 
clarify that adopting this measure in the ESRD QIP will not dilute the 
weights of the clinical measures in the program. The scoring 
methodology we are adopting for PY 2018 weights the reporting measure 
scores equally to comprise 10 percent of a facility's TPS. Although 
this methodology reduces the significance of the other reporting 
measures it does not impact weight of the clinical measures, and it 
allows us to collect the baseline data needed to expand the NHSN HCP 
measure into a clinical measure in the future. We therefore believe 
that the benefits of adopting this measure outweigh the drawbacks of 
diluting the weight of the other reporting measures in the ESRD QIP 
measure set.

[[Page 66208]]

    Comment: Some commenters did not support the proposal to adopt the 
NHSN HCP Influenza Vaccination measure, because meeting the 
requirements of the measure will create costs for the facility that 
will not be covered by comparable increases in payments under the ESRD 
PPS.
    Response: We understand that this measure may result in additional 
cost to dialysis facilities from having to compile and report the 
vaccination status of their health care professionals; however, we 
believe that these costs are outweighed by improvements in community 
health resulting from an immunized workforce.
    Comment: Some commenters stated that reporting data to NHSN HCP 
Influenza Module for dialysis facilities within a hospital will result 
in duplicative reporting because these entities are already included in 
the hospital's reporting. One commenter recommended that facilities 
receive full credit on the measure if they indicate their hospital 
submitted the data on their behalf.
    Response: Dialysis facility reporting will be completely separate 
from acute care reporting regardless of whether a dialysis facility is 
affiliated with acute care. It is important that all eligible 
healthcare personnel be counted by each facility where they work so 
that each facility's reporting to NHSN under this measure presents an 
accurate picture of the vaccination coverage among healthcare personnel 
at that specific facility or location. The concerns regarding 
duplicative reporting are unfounded, because reporting for the same 
individual's vaccination status will only occur in instances where that 
individual worked in both facilities during the reporting period. In 
these cases, it is appropriate to include the HCP in both facilities' 
counts because they meet the eligibility criteria for both facilities' 
reporting.
    Comment: One commenter recommended that CMS consider collecting 
data for the NHSN HCP Influenza Vaccination reporting measure as actual 
numbers of HCPs vaccinated rather than percentages, because small 
facilities may appear to be noncompliant based on a small number of HCP 
not receiving a vaccination. The commenter further recommended that 
this information be reported annually rather than monthly, because this 
is consistent with the way data is entered into CROWNWeb.
    Response: Under the proposed NHSN HCP Influenza Vaccination 
reporting measure, facilities are required to report the number of HCP 
working in the facility (denominator data) and the number of those 
individuals with a certain vaccination status (numerator data). 
Accordingly, in the process of calculating the percentage of HCPs who 
receive an influenza vaccination, the measure collects data on the 
actual number of HCPs vaccinated. We also note that for the PY 2018 
program NHSN HCP Influenza Vaccination is a reporting measure, meaning 
that facilities will receive a score on this measure based on the 
successful reporting of data, not on the values actually reported. In 
addition, monthly reporting is not required of facilities under this 
measure. Instead, facilities are required to submit a single summary 
report of final HCP influenza vaccination data for the specified 
influenza season by the annual reporting deadline.
    For these reasons, we are finalizing the NHSN HCP Influenza 
Vaccination measure as proposed. Technical specifications for the 
measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Figure 2: Summary of Finalized PY 2018 Measures
[GRAPHIC] [TIFF OMITTED] TR06NO14.015


[[Page 66209]]


BILLING CODE 4120-01-C
2. Performance Period for the PY 2018 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a year, and that the 
performance period occur prior to the beginning of such year. In 
accordance with our proposal to adopt CY 2015 as the performance period 
for the PY 2017 ESRD QIP, as well as our policy goal to collect 12 
months of data on each measure when feasible, we proposed to adopt CY 
2016 as the performance period for the PY 2018 ESRD QIP. With respect 
to the NHSN Healthcare Personnel Influenza Vaccination Reporting 
measure, we proposed that the performance period will be from October 
1, 2015 through March 31, 2016, which is consistent with the length of 
the 2015-2016 influenza season.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
3. Performance Standards, Achievement Thresholds, and Benchmarks for 
the PY 2018 ESRD QIP
a. Performance Standards, Achievement Thresholds, and Benchmarks for 
the Clinical Measures in the PY 2018 ESRD QIP
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we proposed for PY 2018 to set the performance 
standards, achievement thresholds, and benchmarks based on the 50th, 
15th, and 90th percentile, respectively, of national performance in CY 
2014 for all the clinical measures except for the proposed ICH CAHPS 
clinical measure. As finalized in the CY 2014 ESRD PPS Final Rule (78 
FR 72213), facilities are not required to administer the ICH CAHPS 
survey (via a CMS-approved third-party vendor) on a semiannual basis 
until CY 2015, the proposed performance period for the PY 2017 ESRD 
QIP. We believe that ICH CAHPS data collected during CY 2014 will not 
be reliable enough to use for the purposes of establishing performance 
standards, achievement thresholds, and benchmarks, because facilities 
are only required to administer the survey once in CY 2014. Therefore, 
we proposed to set the performance standards, achievement thresholds, 
and benchmarks based on the 50th, 15th, and 90th percentile, 
respectively, of national performance in CY 2015 for the proposed ICH 
CAHPS clinical measure.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures for the PY 2018 ESRD QIP
    At this time, we do not have the necessary data to assign numerical 
values to the performance standards for the clinical measures, because 
we do not yet have data from CY 2014 or the first portion of CY 2015. 
We will publish values for the clinical measures, using data from CY 
2014 and the first portion of CY 2015, in the CY 2016 ESRD PPS Final 
Rule.
c. Performance Standards for the PY 2018 Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized performance 
standards for the Anemia Management and Mineral Metabolism reporting 
measures (78 FR 72213). We did not propose any changes to this policy 
beyond the proposal to modify the reporting requirements for the 
Mineral Metabolism reporting measure, which appears above in Section 
III.G.1.
    For the Screening for Clinical Depression and Follow-Up reporting 
measure, we proposed to set the performance standard as successfully 
reporting one of the above-listed clinical depression and follow-up 
screening conditions for each qualifying patient in CROWNWeb before the 
February 1st directly following the performance period.
    For the Pain Assessment and Follow-Up reporting measure, we 
proposed to set the performance standard as successfully reporting one 
of the above-listed pain assessment and follow-up conditions for each 
qualifying patient in CROWNWeb twice annually: once before August 1st 
for the first 6 months of the performance period, and once before the 
February 1st directly following the performance period for the last six 
months of the performance period.
    For the NHSN Healthcare Provider Influenza Vaccination reporting 
measure, we proposed to set the performance standard as successfully 
submitting the HCP Influenza Vaccination Summary Form to CDC's NHSN 
system by May 15, 2017.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
4. Scoring the PY 2018 ESRD QIP Measures
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on achievement (78 FR 
72215). In determining a facility's achievement score for each measure 
under the PY 2018 ESRD QIP, we proposed to continue using this 
methodology for all clinical measures except the ICH CAHPS clinical 
measure. Under this methodology, facilities receive points along an 
achievement range based on their performance during the proposed 
performance period for each measure, which we define as a scale between 
the achievement threshold and the benchmark.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on improvement (78 FR 
72215 through 72216). In determining a facility's improvement score for 
each measure under the PY 2018 ESRD QIP, we proposed to continue using 
this methodology for all clinical measures except the ICH CAHPS 
clinical measure. Under this methodology, facilities receive points 
along an improvement range, defined as a scale running between the 
improvement threshold and the benchmark. We proposed to define the 
improvement threshold as the facility's performance on the measure 
during CY 2015. The facility's improvement score would be calculated by 
comparing its performance on the measure during CY 2016 (the proposed 
performance period) to its performance rate on the measure during CY 
2015.
    We sought comments on these proposals. We did not receive any 
comments and are finalizing them as proposed.
c. Scoring the ICH CAHPS Clinical Measure
    For PY 2018 and future payment years, we proposed the following 
scoring methodology for the ICH CAHPS clinical measure. We proposed to 
score the measure on the basis of three composite measures and three 
global ratings.
    Composite Measures:

[[Page 66210]]

     Nephrologists' Communication and Caring;
     Quality of Dialysis Center Care and Operations; and
     Providing Information to Patients.
    Global Ratings:
     Overall rating of the nephrologists (Question 8)
     Overall rating of the dialysis center staff (Question 32)
     Overall rating of the dialysis facility (Question 35)
    The composite measures are groupings of questions that measure the 
same dimension of healthcare. (Groupings of questions and composite 
measures can be found at https://ichcahps.org/Portals/0/ICH_Composites_English.pdf.) Global ratings questions employ a scale of 
0 to 10, worst to best; each of the questions within a composite 
measure use either ``Yes'' or ``No'' responses, or response categories 
ranging from ``Never'' to ``Always,'' to assess the patient's 
experience of care at a facility. Facility performance on each 
composite measure will be determined by the percent of patients who 
choose ``top-box'' responses (that is, most positive or ``Always'') to 
the ICH CAHPS survey questions in each domain. Examples of questions 
and top-box responses are displayed below:

    Q11: In the last 3 months, how often did the dialysis center 
staff explain things in a way that was easy for you to understand?
    Top-box response: ``Always''
    Q19: The dialysis center staff can connect you to the dialysis 
machine through a graft, fistula, or catheter.
    Do you know how to take care of your graft, fistula or catheter?
    Top-box response: ``Yes''

    We proposed that a facility will receive an achievement score and 
an improvement score for each of the composite measures and global 
ratings in the ICH CAHPS survey instrument. For purposes of calculating 
achievement scores for the ICH CAHPS clinical measure, we proposed to 
base the score on where a facility's performance rate falls relative to 
the achievement threshold and the benchmark for that measure. We 
proposed that facilities will earn between 0 to 10 points for 
achievement based on where its performance for the measure falls 
relative to the achievement threshold. If a facility's performance rate 
during the performance period is:
     Equal to or greater than the benchmark, then the facility 
would receive 10 points for achievement;
     Less than the achievement threshold, then the facility 
would receive 0 points for achievement; or
     Equal to or greater than the achievement threshold, but 
below the benchmark, then the following formula would be used to derive 
the achievement score:
    [9 * ((Facility's performance period rate-achievement threshold)/
(benchmark-achievement threshold))] + .5, with all scores rounded to 
the nearest integer, with half rounded up.
    For the purposes of calculating improvement scores for the ICH 
CAHPS clinical measure, we proposed that the improvement threshold will 
be defined as facility performance in CY 2015, and further proposed to 
base the score on where a facility's performance rate falls relative to 
the improvement threshold and the benchmark for that measure. We 
proposed that a facility can earn between 0 to 9 points based on how 
much its performance on the measure during the performance period 
improves from its performance on the measure during the baseline 
period. If a facility's performance rate during the performance period 
is:
     Less than the improvement threshold, then the facility 
would receive 0 points for improvement; or
     Equal to or greater than the improvement threshold, but 
below the benchmark, then the following formula would be used to derive 
the improvement score:
    [10 * ((Facility performance period rate-Improvement threshold)/
(Benchmark-Improvement threshold))]-.5, with all scores rounded to the 
nearest integer, with half rounded up.
    We further proposed that a facility's ICH CAHPS score will be based 
on the higher of the facility's achievement or improvement score for 
each of the composite measures and global ratings. Additionally, we 
proposed that achievement and/or improvement scores on the three 
composite measures and the three global ratings will be averaged 
together to yield an overall score on the ICH CAHPS clinical measure.
    The timing and frequency of administering the ICH CAHPS survey is 
critical to obtaining reliable results. For example, if a facility did 
not conduct two semiannual surveys during a given performance period, 
then patient experiences during the 6-month period(s) covered by the 
missed survey(s) would not be captured. Additionally, if facilities 
(via CMS-approved vendors) do not report their ICH CAHPS survey results 
to CMS, then these results cannot be taken into account when 
establishing national performance standards for the measure, thereby 
diminishing the measure's reliability. Because timely survey 
administration and data reporting is critical to reliably scoring ICH 
CAHPS as a clinical measure in the ESRD QIP, we proposed that a 
facility will receive a score of 0 on the measure if it does not meet 
the survey administration and reporting requirements finalized in the 
CY 2014 ESRD PPS Final Rule (78 FR 72193 through 72196).
    We sought comments on these proposals to score the ICH CAHPS 
clinical measure. The comment and our response are set forth below.
    Comment: One commenter sought clarification as to how multiple 
administrations of the ICH CAHPS survey in a single performance period 
will factor into facilities' ICH CAHPS clinical measure scores if the 
ICH CAHPS clinical measure proposal is finalized.
    Response: We clarify that survey responses from the two survey 
administrations will be compiled together into a single dataset, which 
will then be used to calculate facility scores on the ICH CAHPS 
clinical measure. In other words, responses to the first and second 
survey administrations will be combined to produce a facility's ICH 
CAHPS score. Each of the three composite measures consists of six or 
more questions from the survey that are reported as one composite 
score. Scores are created by first determining the proportion of 
answers to each response option for all questions in the composite. The 
final composite score averages the proportion of those responding to 
each answer choice in all questions. Only questions that are answered 
by survey respondents will be included in the calculation of composite 
scores.
    For these reasons, we are finalizing the scoring methodology for 
the ICH CAHPS clinical measure as proposed for the PY 2018 program and 
future payment years.
    d. Calculating Facility Performance on Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized policies for 
scoring performance on the Anemia Management and Mineral Metabolism 
reporting measures in the ESRD QIP (78 FR 72216). We did not propose 
any changes to these policies beyond the proposals that were made 
beginning with the PY 2017 program, which appear in section III.F.7 
above.
    With respect to the Screening for Clinical Depression and Follow-
up, Pain Assessment and Follow-Up, and NHSN Healthcare Provider 
Influenza Vaccination reporting measures, we proposed that facilities 
will receive a score of 10 on the measures if they meet

[[Page 66211]]

the proposed performance standards for the measures, and a score of 0 
on the measure if they do not. We proposed to score these reporting 
measures differently than the Anemia Management and Mineral Metabolism 
reporting measures because they require annual or semiannual reporting, 
and therefore scoring based on monthly reporting rates is not feasible.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter did not support the proposal to allocate 
zero points on the proposed Pain Assessment and Follow-Up measure if a 
facility does not report one of the six specified conditions for each 
patient. Commenter recommended using a scoring system that awards 
partial points for partial compliance.
    Response: We agree with the commenter that an all-or-nothing 
methodology will not incentivize facilities to provide pain assessments 
and follow-ups if they are unable meet the requirements of the Pain 
Assessment and Follow-Up measure for a single qualifying patient. We 
also believe that this same concern applies equally to the Screening 
for Clinical Depression and Follow-Up reporting measure, because the 
proposed scoring methodology for both reporting measures is identical. 
In order to respond to the commenter's recommendation to award partial 
points, we finalize that the two measures will be scored as follows:
[GRAPHIC] [TIFF OMITTED] TR06NO14.016

    We selected the above scoring methodology for the Screening for 
Clinical Depression and Follow-Up reporting measure because it 
evaluates the percentage of eligible patients for whom a facility 
reports the data required for the measure. In contrast to the proposed 
scoring methodology, which would have assigned zero points on the 
measure if a facility failed to report data for a single patient, this 
methodology allows facilities to receive a high score on the measure 
even if they fail to report data for a small number of patients. We 
selected the above scoring methodology for the Pain Assessment and 
Follow-Up measure for the same reasons. However, in this case we 
calculated separate percentages for first and second six months and 
averaged the two percentages together. We did this because the Pain 
Assessment and Follow-Up measure requires facilities to report data on 
a semiannual basis, and we believe that taking the average of the two 
percentages provides a fair way to evaluate facilities' overall 
performance during the performance period.
    For these reasons, we are finalizing that we will calculate 
facility performance on the Screening for Clinical Depression and 
Follow-Up, Pain Assessment and Follow-Up, and NHSN HCP Influenza 
Vaccination reporting measures as described above.
5. Minimum Data for Scoring Measures for the PY 2018 ESRD QIP
    With the following exceptions discussed below, we did not propose 
to change the minimum data policies for the PY 2018 ESRD QIP from those 
proposed above for the PY 2017 ESRD QIP. We also proposed that the 30 
survey-eligible patient minimum during the eligibility period and 30 
survey complete minimum during the performance period that we proposed 
to adopt for the ICH CAHPS reporting measure will also apply to the ICH 
CAHPS clinical measure. We have determined that the ICH CAHPS survey is 
satisfactorily reliable when a facility obtains a total of at least 30 
completed surveys during the performance period. Therefore, even if a 
facility meets the 30 survey-eligible patient minimum during the 
eligibility period and the survey administration and reporting 
requirements, if the facility is only able to obtain 29 or fewer survey 
completes during the performance period, the facility will not be 
eligible to receive a score on the ICH CAHPS clinical measure.
    We further proposed that facilities with fewer than 10 patient-
years at risk will not be eligible to receive a score on the proposed 
STrR clinical measure. We considered adopting the 11-patient minimum 
requirement that we use for the other clinical measures. We decided, 
however, to base facilities' eligibility for the measure in terms of 
the number of patient-years at risk, because facility performance rates 
are based on the number of patient-years at risk, not the number of 
patients. Additionally, we decided to set the minimum data requirements 
at 10 patient-years at risk because, based on national average event 
rates, this is the time required to achieve an average of 5 transfusion 
events. The 5 expected transfusion events requirement translates to a 
standard deviation of approximately

[[Page 66212]]

0.45 if the facility has rates exactly corresponding to the national 
average. In addition, 10 patient-years at risk is the threshold used in 
the Dialysis Facility Compare program, and we believe that public-
reporting and VBP programs for ESRD should adopt consistent measure 
specifications where feasible.
    For the proposed STrR measure, we proposed to apply the small-
facility adjuster to facilities with 21 or fewer patient-years at risk. 
We decided to base the threshold for applying the small-facility 
adjuster on the number of patient-years at risk, because facility 
performance rates are based on the number of patient-years at risk, not 
the number of patients. We proposed to set the threshold at 21 patient-
years at risk, because we determined that this was the minimum number 
of patient-years at risk needed to achieve an IUR of 0.4 (that is, 
moderate reliability) for the proposed STrR measure. Because the small-
facility adjuster gives facilities the benefit of the doubt when 
measure scores can be unduly influenced by a few outlier patients, we 
believe that setting the threshold at 21 qualifying patient-years at 
risk will not unduly penalize facilities that treat small numbers of 
patients on the proposed STrR clinical measure.
    With these exceptions, we did not propose to change the policy, 
finalized most recently in the CY 2014 ESRD PPS Final Rule (78 FR 72220 
through 72221), that facilities must have at least 11 qualifying 
patients for the entire performance period in order to be scored on a 
clinical measure.
    We currently have a policy, most recently finalized in the CY 2014 
ESRD PPS final rule (78 FR 72197 through 72198 and 72220 through 
72221), to score facilities on reporting measures only if they have a 
minimum number of qualifying patients during the performance period. As 
discussed in Section III.F.7 above, we proposed to modify the case 
minimum requirements for the Anemia Management and Mineral Metabolism 
reporting measures beginning with the PY 2017 ESRD QIP. We did not 
propose any additional changes in the patient minimum requirements for 
the Anemia Management and Mineral Metabolism reporting measures in the 
PY 2018 program.
    For the Screening for Clinical Depression and Follow-Up and the 
Pain Assessment and Follow-Up reporting measures, we proposed a case 
minimum of one qualifying patient. We believe this patient minimum 
requirement will enable us to gather a sufficient amount of data to 
calculate future performance standards, benchmarks, and achievement 
thresholds, should we propose to adopt clinical versions of these 
measures in the future.
    As discussed in Section III.G.2.f, we did not propose that a 
facility will have to meet a patient minimum in order to receive a 
score on the NHSN Healthcare Provider Influenza Vaccination reporting 
measure. We believe it is standard practice for all HCP to receive 
influenza vaccinations and, as discussed above, HCP vaccination is 
likely to reduce influenza-related deaths and complications among the 
ESRD population. Accordingly, we proposed that all facilities, 
regardless of patient population size, will be scored on the influenza 
vaccination measure.
    We sought comments on this proposal. The comments and our responses 
are set forth below:
    Comment: Some commenters supported the proposal to determine 
facility eligibility for scoring on the ICH CAHPS reporting measure 
based on the number of patients treated in the eligibility period, 
because it will allow providers to better anticipate their eligibility 
in a given year.
    Response: We thank commenters for their support.
    Comment: Many commenters did not support the proposed data minimum 
requirements for the reporting measures because the commenters stated 
that the requirements unfairly penalize facilities that may not be able 
to legitimately report data for a few patients. As an alternative, the 
commenters recommended applying a consistent case minimum of 26 for all 
measures in the ESRD QIP.
    Response: We agree with commenters that setting the patient minimum 
for the Screening for Clinical Depression and Follow-Up, and Pain 
Assessment and Follow-Up reporting measures at one qualifying patient 
may unfairly penalize small facilities, because a failing to report 
data for two or more patients will have a greater impact on small 
facility than on larger facilities. However, we disagree that it is 
appropriate to set the case minimum at 26 for these reporting measures, 
because doing so would not allow CMS to collect baseline data for a 
large percentage of patients. We believe that setting the case minimum 
at 11 for the Screening for Depression and Follow-Up and Pain 
Assessment and Follow-Up reporting measures strikes the appropriate 
balance between the need to maximize data collection and the need to 
not unduly penalize small facilities that are unable, for legitimate 
reasons, to report data on all but one patient. We further believe that 
setting the case minimum at 11 is appropriate, because this would align 
with the case minimum policy for the clinical measures in the ESRD QIP. 
Therefore, we are finalizing a case minimum policy of 11 for the 
Screening for Clinical Depression and Follow-Up and Pain Assessment and 
Follow-Up reporting measures.
    Under our current policy, we begin counting the number of months 
for which a facility is open on the first day of the month after the 
facility's CCN open date. Only facilities with a CCN open date before 
July 1, 2016, are eligible to be scored on the Anemia Management and 
Mineral Metabolism reporting measures in the PY 2018 program. We 
proposed to apply this finalized policy to the Screening for Clinical 
Depression and Follow-Up and the Pain Assessment and Follow-Up 
reporting measures. We further proposed that facilities with a CCN open 
date after January 1, 2016, will not be eligible to receive a score on 
the NHSN Healthcare Personnel Influenza Vaccination reporting measure 
in the PY 2018 program. Due to the time it takes for facilities to 
register with NHSN and become familiar with the NHSN Healthcare 
Personnel Safety Component Protocol, we do not believe it is reasonable 
to expect facilities with CCN open dates after January 1, 2016, to 
submit an HCP Influenza Vaccination Summary Form to CDC's NHSN system 
before the May 15, 2016, deadline.
    As finalized in the CY 2014 ESRD PPS Final Rule (78 FR 72220), 
facilities are generally eligible to receive a score on the clinical 
measures if their CCN open date occurs before the end of the 
performance period. However, facilities with a CCN open date after 
January 1 of the performance period are not eligible to receive a score 
on the NHSN Bloodstream Infection clinical measure, due to the need to 
collect 12 months of data to accurately score the measure. We proposed 
that facilities with a CCN open date after January 1, 2016, will also 
not be eligible to receive a score on the ICH CAHPS clinical measure in 
the PY 2018 program. Due to the additional time needed to arrange to 
contract with CMS-approved third-party vendors, and for vendors to 
administer the survey twice and report the results to CMS, we do not 
believe facilities with CCN open dates after January 1, 2016, can 
reasonably be expected to meet the requirements associated with the 
proposed ICH CAHPS clinical measure for that performance period.
    As discussed in Section III.G.7 below, we are continuing our policy 
that a facility will not receive a TPS unless it receives a score on at 
least one clinical measure and at least one reporting

[[Page 66213]]

measure. We note that finalizing the above proposals would result in 
facilities not being eligible for a payment reduction for the PY 2018 
ESRD QIP if they have a CCN open date on or after July 1, 2016.
    We sought comments on these proposals but did not receive any 
comments.
    For these reasons, we are finalizing the minimum data policies for 
the PY 2018 program as proposed, with the exception of the patient 
minimum policies for the Screening for Clinical Depression and Follow-
Up and Pain Assessment and Follow-Up reporting measures. For the 
reasons discussed above, we are finalizing the policy that a facility 
must treat at least 11 qualifying patients during the performance 
period to receive a score on the Screening for Clinical Depression and 
Follow-Up and Pain Assessment and Follow-Up reporting measures.
    Table 27 displays the finalized patient minimum requirements for 
each of the measures, as well as the CCN open dates after which a 
facility will not be eligible to receive a score on a reporting 
measure.

                          TABLE 27--Minimum Data Requirements for the PY 2018 ESRD QIP
----------------------------------------------------------------------------------------------------------------
             Measure               Minimum data requirements        CCN open date        Small facility adjuster
----------------------------------------------------------------------------------------------------------------
Adult Hemodialysis Adequacy        11 qualifying patients...  N/A.....................  11-25 patients.
 (Clinical).
Adult Peritoneal Dialysis          11 qualifying patients...  N/A.....................  11-25 patients.
 Adequacy (Clinical).
Pediatric Hemodialysis Adequacy    11 qualifying patients...  N/A.....................  11-25 patients.
 (Clinical).
Pediatric Peritoneal Dialysis      11 qualifying patients...  N/A.....................  11-25 patients.
 Adequacy (Clinical).
Vascular Access Type: Catheter     11 qualifying patients...  N/A.....................  11-25 patients.
 (Clinical).
Vascular Access Type: Fistula      11 qualifying patients...  N/A.....................  11-25 patients.
 (Clinical).
Hypercalcemia (Clinical).........  11 qualifying patients...  N/A.....................  11-25 patients.
NHSN Bloodstream Infection         11 qualifying patients...  Before January 1, 2016..  11-25 patients.
 (Clinical).
SRR (Clinical)...................  11 index discharges......  N/A.....................  11-41 index discharges.
STrR (Clinical)..................  10 patient-years at risk.  N/A.....................  10-21 patient-years at
                                                                                         risk.
ICH CAHPS (Clinical).............  Facilities with 30 or      Before January 1, 2016..  N/A.
                                    more survey-eligible
                                    patients during the
                                    calendar year preceding
                                    the performance period
                                    must submit survey
                                    results. Facilities will
                                    not receive a score if
                                    they do not obtain a
                                    total of at least 30
                                    completed surveys during
                                    the performance period..
Anemia Management (Reporting)....  11 qualifying patients...  Before July 1, 2016.....  N/A.
Mineral Metabolism (Reporting)...  11 qualifying patients...  Before July 1, 2016.....  N/A.
Depression Screening and Follow-   11 qualifying patients...  Before July 1, 2016.....  N/A.
 Up (Reporting).
Pain Assessment and Follow-Up      11 qualifying patients...  Before July 1, 2016.....  N/A.
 (Reporting).
NHSN HCP Influenza Vaccination     N/A......................  Before January 1, 2016..  N/A.
 (Reporting).
----------------------------------------------------------------------------------------------------------------

6. Calculating the Clinical Measure Domain Score
    As the ESRD QIP evolves and we continue to adopt new clinical 
measures that track the goals of the NQS, we do not believe that the 
current scoring methodology provides the program with enough 
flexibility to strengthen incentives for quality improvement in areas 
where quality gaps continue to exist. Therefore, under the authority of 
Section 1881(h)(3)(A)(i) of the Act, we proposed to revise the scoring 
methodology beginning with the PY 2018 ESRD QIP so that we assign 
measure scores on the basis of two domains: A Clinical Measure Domain 
and a Reporting Measure Domain.
    First, we proposed to establish a Clinical Measure Domain, which we 
define as an aggregated metric of facility performance on the clinical 
measures and measure topics in the ESRD QIP. Under this proposed 
approach, we would score individual clinical measures and measure 
topics using the methodology we finalize for that measure or measure 
topic. Clinical measures and measure topics would then be grouped into 
subdomains within the Clinical Measure Domain, according to quality 
categories. Within these subdomains, measure scores would be multiplied 
by a weighting coefficient, weighted measure scores would be summed 
together to determine subdomain scores, and then subdomain scores would 
be summed together to determine a facility's Clinical Measure Domain 
score. This scoring methodology provides more flexibility to focus on 
quality improvement efforts, because it makes it possible to group 
measures according to quality categories and to weight each category 
according to opportunities for quality improvement.
    We further proposed to divide the clinical measure domain into 
three subdomains for the purposes of calculating the Clinical Measure 
Domain score:
     Safety
     Patient and Family Engagement/Care Coordination
     Clinical Care
    We took several considerations into account when selecting these 
particular

[[Page 66214]]

subdomains. First, safety, patient engagement, care coordination, and 
clinical care are all NQS goals for which the ESRD QIP has proposed 
and/or finalized measures. We are attempting to align all CMS quality 
improvement efforts with the NQS because its patient-centered approach 
prioritizes measures across our quality reporting and pay-for-
performance programs to ensure that the measurement approaches in these 
programs, as a whole, can make meaningful improvements in the quality 
of care furnished in a variety of settings. We also believe that 
adopting an NQS-based subdomain structure for the clinical measures in 
the ESRD QIP is responsive to stakeholder requests that we align our 
measurement approaches across HHS programs.
    Second, we proposed to combine the NQS goals of Care Coordination 
and Patient- and Caregiver-Centered Experience of Care into one 
subdomain because we believe the two goals complement each other. 
``Care Coordination'' refers to the NQS goal of promoting effective 
communication and coordination of care. ``Patient- and Caregiver- 
Centered Experience of Care'' refers to the NQS goal of ensuring that 
each patient and family is engaged as a partner in care. In order to 
engage patients and families as partners, we believe that effective 
communication and coordination of care must coexist, and that patient 
and family engagement cannot occur independently of effective 
communication and care coordination. We therefore believe that it is 
appropriate to combine measures of care coordination with those of 
patient and family engagement for the purposes of calculating a 
facility's clinical measure domain score.
    For PY 2018 and future payment years, we proposed to include the 
following measures in the following subdomains of the proposed clinical 
measure domain (see Table 28):

      TABLE 28--Proposed Subdomains in the Clinical Measure Domain
------------------------------------------------------------------------
                Subdomain                   Measures and measure topics
------------------------------------------------------------------------
Safety Subdomain........................  NHSN Bloodstream Infection
                                           measure.
Patient and Family Engagement/Care        ICH CAHPS measure.
 Coordination Subdomain.
                                          SRR measure.
Clinical Care Subdomain.................  STrR measure.
                                          Dialysis Adequacy measure
                                           topic.
                                          Vascular Access Type measure
                                           topic.
                                          Hypercalcemia measure.
------------------------------------------------------------------------

    We sought comments on these proposals to adopt a Clinical Measure 
Domain that includes three subdomains (safety, patient and family 
engagement/care coordination, and clinical care) for the purpose of 
calculating a facility's clinical measure domain score for PY 2018.
    In deciding how to weight the proposed subdomains that comprise the 
clinical measure domain score, we took the following considerations 
into account: (1) The number of measures and measure topics in a 
proposed subdomain; (2) how much experience facilities have had with 
the measures and measure topics in a proposed subdomain; and (3) how 
well the measures align with CMS's highest priorities for quality 
improvement for patients with ESRD. Because the proposed Clinical Care 
subdomain contains the largest number of measures, and facilities have 
the most experience with the measures in this subdomain, we proposed to 
weight the Clinical Care subdomain significantly higher than the other 
subdomains. Facilities have more experience with the NHSN Bloodstream 
Infection measure in the proposed Safety subdomain than they do with 
the SRR measure in the proposed Patient and Family Engagement/Care 
Coordination subdomain, but we proposed to include a larger number of 
measures in the Patient and Family Engagement/Care Coordination 
subdomain. We proposed to give the Patient and Family Engagement/Care 
Coordination subdomain slightly more weight than the Safety subdomain, 
because it includes two measures, whereas only one measure appears in 
the proposed Safety subdomain. In future rulemaking, we will consider 
revising these weights based on facility experience with the measures 
contained within these proposed subdomains.
    For these reasons, we proposed the following weights for the three 
subdomains in the clinical measure domain score for PY 2018:

------------------------------------------------------------------------
                                                           Weight in the
                                                             clinical
                        Subdomain                         measure domain
                                                           percent score
------------------------------------------------------------------------
Safety..................................................              20
Patient and Family Engagement/Care Coordination.........              30
Clinical Care...........................................              50
------------------------------------------------------------------------

    In deciding how to weight measures and measure topics within a 
proposed subdomain, we took into account the same considerations we 
considered when deciding how to weight the proposed subdomains. Because 
the NHSN Bloodstream Infection clinical measure is the only measure in 
the proposed Safety subdomain, we proposed to assign the entire 
subdomain weight to that measure. We additionally noted that improving 
patient safety and reducing bloodstream infections in patients with 
ESRD are two of our highest priorities for quality improvement, so we 
believe it is appropriate to weight the NHSN Bloodstream Infection 
clinical measure at 20 percent of a facility's Clinical Measure Domain 
Score. Because facilities have substantially more experience with the 
ICH CAHPS clinical measure, as compared with the SRR clinical measure, 
we proposed to give the proposed ICH CAHPS measure twice as much weight 
as the proposed SRR measure. Additionally, we noted that improving 
patients' experience of care is as high a priority for CMS quality 
improvement efforts as improving patient safety, so we believe it is 
appropriate to assign the ICH CAHPS clinical measure the same weight as 
the NHSN Bloodstream Infection clinical measure. We proposed to give 
the Dialysis Adequacy and Vascular Access Type measure topics the most 
weight in the Clinical Care subdomain because facilities have 
substantially more experience with these measure topics, as compared to 
the other measures in the Clinical Care subdomain. We proposed to 
assign equal weights to the STrR and Hypercalcemia measures because PY 
2018 would be the first program year in which facilities are measured 
on the STrR measure, and because the clinical significance of the 
Hypercalcemia measure is diminished in the absence of other information 
about mineral metabolism (for example,

[[Page 66215]]

a patient's phosphorus and plasma parathyroid hormone levels), which 
would provide a more comprehensive assessment of mineral metabolism (78 
FR 72217). For these reasons, we proposed to use the following 
weighting system for calculating a facility's Clinical Measure domain 
score:

------------------------------------------------------------------------
                                                          Measure weight
                                                              in the
                                                             clinical
          Measures/measure topics by subdomain            measure domain
                                                               score
                                                             (percent)
------------------------------------------------------------------------
Safety Subdomain........................................              20
    NHSN Bloodstream Infection measure..................              20
Patient and Family Engagement/Care Coordination                       30
 Subdomain..............................................
    ICH CAHPS measure...................................              20
    SRR measure.........................................              10
Clinical Care Subdomain.................................              50
    STrR measure........................................               7
    Dialysis Adequacy measure topic.....................              18
    Vascular Access Type measure topic..................              18
Hypercalcemia measure...................................               7
------------------------------------------------------------------------

    We sought comments on this proposal for weighting individual 
measures within the Clinical Measure Domain. The comments and our 
responses are set forth below.
    Comment: One commenter supported the proposal to create a Clinical 
Measure Domain, and the weightings applied therein, because the 
proposed domain appropriately prioritizes outcome measures, and 
compared to process measures, outcome measures provide a better 
indication of quality care.
    Response: We thank the commenter for the support.
    Comment: One commenter supported ICH CAHPS clinical measure's 
proposed weight in the Clinical Measure Domain and recommended that CMS 
consider giving the measure greater weight in the future, because CAHPS 
is weighted slightly higher in other value-based purchasing programs.
    Response: We thank the commenter for the support and we will 
consider increasing the weight of the ICH CAHPS clinical measure in 
future payment years.
    Comment: Commenter supported placing the NHSN Bloodstream Infection 
measure alone in the Safety subdomain because reducing bloodstream 
infections is one of the highest priorities for patients with ESRD.
    Response: We thank the commenter for the support.
    Comment: One commenter did not support the proposed weighting for 
the subdomains within the clinical measure domain. Commenter stated 
that the proposed weighting places too much emphasis on the Patient and 
Family Engagement/Care Coordination subdomain which contains clinical 
measures over which the facility has the least control, and places too 
little emphasis on safety. Commenter recommended that CMS revise the 
weights of the subdomains to weight the Safety and Clinical Care 
subdomains equally, and assign less weight to the Patient and Family 
Engagement/Care Coordination subdomain.
    Response: We disagree with the commenter that the proposed 
subdomain weighting places too much emphasis on Patient and Family 
Engagement/Care Coordination, as compared to the Safety subdomain. As 
discussed in the CY 2015 ESRD PPS Proposed Rule (79 FR 40267), we 
proposed to assign the Patient and Family Engagement/Care Coordination 
subdomain slightly more weight than the Safety subdomain, because the 
former subdomain includes two measures and the latter subdomain only 
includes one measure. We continue to believe that these weights are 
appropriate for the PY 2018 ESRD QIP measure set, but we will 
reconsider the weighting system in its entirety, in light of the three 
criteria listed above (that is., the number of measures and measure 
topics in a proposed subdomain; how much experience facilities have had 
with the measures and measure topics in a proposed subdomain; and how 
well the measures align with CMS's highest priorities for quality 
improvement for patients with ESRD) in future rulemaking.
    Comment: One commenter recommended reducing the weight of the ICH 
CAHPS clinical measure in the Clinical Measure Domain ``to avoid 
penalizing dialysis units that provide safe, high quality care'' but do 
not score as highly on the ICH CAHPS measure.
    Response: We agree that safety is a paramount concern in dialysis 
treatment, but also believe that patient experience is a crucial 
element of the overall care provided by the dialysis facility. As 
stated in the CY 2015 ESRD PPS Proposed Rule, we based decisions about 
subdomain and measure weighting on three criteria, and we continue to 
believe that the weight of the ICH CAHPS clinical measure is consistent 
with these criteria. We further note that it is possible for a facility 
that does not perform well on the ICH CAHPS clinical measure to avoid a 
payment reduction if it performs well on the other clinical measures.
    Comment: One commenter did not support weighting the ICH CAHPS 
clinical measure at 20 percent of a facility's TPS, because small 
facilities will have trouble meeting the eligibility requirements for 
this measure, which will result in a 20 percent reduction in their TPS.
    Response: If a facility does not meet the eligibility requirements 
for the ICH CAHPS clinical measure, the facility will not be scored on 
the measure and the corresponding measure weight will be reallocated 
equally across the clinical measures for which the facility received a 
score.
    Comment: Some commenters recommended lowering the weight of the ICH 
CAHPS clinical measure, because no studies have demonstrated a positive 
association between scores on the measure and positive patient 
outcomes.
    Response: While it is premature to know for certain in this 
provider setting, measuring patient experience can lead to quality 
improvement. In other settings, better patient experience can lead to 
better outcomes. Patient experience and clinical measures may be 
related, but they are distinct measures of quality. ICH CAHPS supports 
the National Quality Forum's strategy priorities of Effective 
Communication and Care Coordination and Person and Family-centered Care 
as well as the Institute of Medicine's six specific aims for 
improvement.
    Comment: One commenter did not support the proposed weighting for 
the Safety subdomain because there is only one measure in the domain. 
Commenter recommended that CMS not include subdomains with only one 
measure, or in the alternative, reduce that subdomain's weight so that 
the one measure is weighted similar to measures in the other 
subdomains.
    Response: As stated in the proposed rule, we decided how to weight 
the Clinical Measure Domain subdomains and individual measures using 
three criteria: ``(1) The number of measures and measure topics in a 
proposed subdomain; (2) how much experience facilities have had with 
the measures and measure topics in a proposed subdomain; and (3) how 
well the measures align with CMS's highest priorities for quality 
improvement for patients with ESRD'' (79 FR 40267). We further stated 
that facilities have more experience with the NHSN Bloodstream 
Infection clinical measure than they do with the measures in the 
Patient and Family Engagement/Care Coordination subdomain, and that 
``improving patient safety and reducing bloodstream infections in 
patients with ESRD is one

[[Page 66216]]

of our highest priorities for quality improvement, so we believe it is 
appropriate to weight the NHSN Bloodstream Infection clinical measure 
at 20 percent of a facility's Clinical Measure Domain score'' (79 FR 
40268). We continue to believe that the weight assigned to the Safety 
subdomain and the NHSN Bloodstream Infection clinical measure is 
appropriate for these reasons.
    Comment: Some commenters recommended lowering the weight of the 
NHSN Bloodstream Infection measure, because facilities do not reliably 
report the data used to calculate performance rates on the measure.
    Response: NHSN provides detailed trainings, protocols, and guidance 
for users to follow to ensure that data are reported in a standardized 
manner and according to requirements. We recognize that continuous 
internal and external evaluation and quality checks of the reported 
data are important for accuracy and reliability. We further note that 
one of the purposes of the feasibility study is to improve the validity 
of data reported to NHSN, and we continue to believe that one of the 
outcomes of the study will be to improve the validity and reliability 
of the NHSN Bloodstream Infection measure. For this reason, and the 
reasons stated in the CY 2015 ESRD PPS Proposed Rule, we continue to 
believe that the NHSN Bloodstream Infection measure is weighted 
appropriately.
    Comment: Some commenters recommended increasing the weight of the 
Vascular Access Type measure topic, because high scores on the measure 
topic are strongly associated with positive patient outcomes.
    Response: We agree that the Vascular Access Type measures are 
strongly associated with positive patient outcomes. For this reason, 
and for the reasons described in the CY 2015 ESRD PPS Proposed Rule, 
the Vascular Access Type received the second highest weighting (that 
is, 18 percent) in the Clinical Measure Domain, lower only than the ICH 
CAHPS clinical measure (20 percent) and the NHSN Bloodstream Infection 
measure (20 percent). Accordingly, we believe that the Vascular Access 
Type measure topic is weighted appropriately.
    Comment: One commenter supported CMS's inclusion of a Patient and 
Family Engagement/Care Coordination subdomain, but feels the measures 
within this domain are not meaningful to patients because the ICH CAHPS 
clinical measure excludes home dialysis patients, and the Standardized 
Readmission Ratio does not assess patients' quality of life.
    Response: We disagree that the measures in the Patient and Family 
Engagement/Care Coordination subdomain are not meaningful to patients. 
We are continuing to investigate the possibility of expanding the ICH 
CAHPS survey to include a greater proportion of the ESRD population. 
Nevertheless, the measure as it is currently specified assesses the 
experience of care for the majority of patients with ESRD. In addition, 
we believe the Standardized Readmission Ratio does assess patients' 
quality of life because preventing unplanned hospital readmissions 
significantly improves patients' quality of life.
    Comment: One commenter did not think facilities' experience with a 
clinical measure should affect the weight assigned to the measure. For 
example, the proposed weight for the STrR clinical measure was reduced 
because facilities have not had a large amount of experience with this 
measure.
    Response: We consider facility experience with a clinical measure 
in how we weight that measure in order to give facilities time to 
become familiar with the reporting requirements and put into place the 
necessary tools to maximize their potential to score highly. We 
therefore believe it is appropriate to increase a measure's weight as 
facilities gain familiarity with the measure.
    Comment: Some commenters supported the proposed criteria for 
assigning weights to measures and subdomains, but commenters 
recommended adding three additional criteria when assigning weights. 
Specifically, the commenters recommended the following three criteria: 
1) Strength of evidence; 2) Opportunity for improvement; and 3) 
Clinical significance.
    Response: We agree with commenters that these criteria encompass 
important considerations for evaluating measures. We clarify that these 
are criteria that are taken into account when making decisions about 
whether to adopt a measure in the ESRD QIP, because it would be 
inappropriate to adopt a measure that did not meet these criteria. For 
this reason, we do not believe it would be appropriate to also factor 
these criteria into decisions about how much weight to give measures in 
a facility's Clinical Domain score.
    Comment: One commenter stated that the Clinical Domain scoring 
methodology does not provide more flexibility than the current scoring 
methodology because the current scoring methodology makes it possible 
to redistribute weights between clinical and reporting measures, and to 
distribute weights for individual measures within the two categories.
    Response: We recognize that under the current scoring methodology 
it is possible to assign weights to individual measures without 
grouping them in subdomains, as proposed for the new scoring 
methodology. We nevertheless believe that assigning weights to 
subdomains (as opposed to just the measures contained therein) 
simplifies the process of prioritizing quality improvement goals as the 
program evolves, and in light of the NQS. We further believe that 
assigning weights to subdomains provides for greater transparency, 
because it directly communicates CMS's priorities for measure areas. 
For these reasons, we believe that the merits of grouping measures into 
subdomains, and explicitly articulating weights for the various 
subdomains, outweighs the merits of continuing to weight measures 
individually.
    Comment: One commenter was concerned that some measures span 
multiple subdomains. For example, SRR could be attributed to Patient 
and Family Engagement/Care Coordination subdomain as well as the 
Clinical Care subdomain.
    Response: We recognize that some measures could reasonably be 
placed in multiple subdomains. In such cases, we need to make a 
judgment regarding which subdomain we think will be most appropriate. 
In the case of SRR, we believe that it is appropriate to place the 
measure in the Patient and Family Engagement/Care Coordination 
subdomain because the measure is primarily intended to evaluate care 
coordination, not the quality of clinical care provided by facilities.
    For these reasons, we are finalizing that we will calculate 
facilities' Clinical Measure Domain scores beginning in PY 2018 as 
proposed.
7. Calculating the Reporting Measure Domain Score and the TPS for the 
PY 2018 ESRD QIP
    Starting with the PY 2014 program, the ESRD QIP has used a scoring 
methodology in which the clinical measures receive substantially more 
weight than the reporting measures in the TPS, and the weighting 
coefficients for the two types of measures total 100 percent of the 
TPS. We continue to believe it is appropriate to incorporate reporting 
measure scores in the TPS calculations because ``reporting is an 
important component in quality improvement'' (76 FR 70274); we also 
continue to believe that clinical measures should carry substantially 
more weight than reporting measures

[[Page 66217]]

because clinical measures ``score providers/facilities based upon 
actual outcomes'' (76 FR 70275). These statements reflect the fact that 
clinical and reporting measures serve different functions in the ESRD 
QIP. Clinical measures provide a direct assessment of the quality of 
care a facility provides, relative to either the facility's past 
performance or standards of care nationwide. Reporting measures create 
an incentive for facilities to monitor significant indicators of health 
and illness, and they help facilities become familiar with CMS data 
systems. In addition, they allow the ESRD QIP to collect the robust 
clinical data needed to establish performance standards for clinical 
measures.
    As we continue to add reporting measures to the ESRD QIP measure 
set, it becomes increasingly challenging to not weight them so heavily 
that they dilute the significance of the clinical measures, while still 
ensuring that we do not weight the reporting measures so lightly that 
facilities are not incentivized to meet the reporting measure 
requirements.
    Although we considered the possibility of abandoning the use of 
reporting measures, we determined that this is not feasible because 
doing so would make it impossible to calculate performance standards 
for many clinical measures that promise to promote high-quality care. 
We also considered the possibility of weighting the reporting measures 
such that each reporting measure comprised a smaller percentage of the 
TPS. We believe, however, that doing so would result in the reporting 
measures not carrying enough weight to provide facilities with an 
incentive to meet the reporting requirements, particularly if 
additional reporting measures were added to the program. For example, 
if 5 reporting measures were adopted in the ESRD QIP, and the reporting 
measures collectively were weighted at 5 percent of a facility's TPS 
(in order to preserve the significance of the clinical measures), then 
each reporting measure would only comprise 1 percent of a facility's 
TPS. Under such conditions, we believe that facilities may choose not 
to meet the reporting measure requirements, because not doing so would 
have a negligible impact on their overall TPS. If enough facilities 
reached this determination, then we would not be able to establish 
reliable baselines, should we propose to adopt clinical measure 
versions of the reporting measures. For these reasons, we proposed the 
following scoring methodology for determining the impact of reporting 
measure scores on a facility's payment reductions.
    For PY 2018 and future payment years, we proposed to establish a 
new Reporting Measure Domain. We further proposed that a facility's 
reporting measure domain score will be the sum of all the reporting 
measure scores that the facility receives. We strive to expand 
reporting measures into clinical measures in the ESRD QIP as quickly as 
measure development and administrative processes permit. Therefore, 
unlike the case with clinical measures in the Clinical Domain Score, we 
do not intend to continue to use any particular reporting measure in 
the ESRD QIP for an indefinite period of time. For this reason, we 
believe that it would be unnecessarily opaque and confusing to group 
reporting measures into subdomains, as we are proposing for the 
clinical measures in the Clinical Measure Domain.
    Additionally, we proposed to establish a Reporting Measure Adjuster 
(RMA), which will provide the ESRD QIP with an index of facility 
performance on reporting measures within the Reporting Measure Domain. 
We proposed to use the following general formula to determine a 
facility's RMA, based on its reporting measure domain score:
[GRAPHIC] [TIFF OMITTED] TR06NO14.017

    This formula is constructed such that a high RMA is indicative of 
low performance on the reporting measures, and a low RMA is indicative 
of high performance. A facility's Reporting Measure Domain score (that 
is, the sum of its scores on the reporting measures) is subtracted from 
the total number of points a facility could earn on the reporting 
measures for which it was eligible. This result is then multiplied by 
``C,'' which is a coefficient used to translate reporting measure 
points into TPS points. As C increases, so too does the TPS ``value'' 
of a reporting measure point. For example, if C is set to 2, then 1 
reporting measure point is worth 2 TPS points. If C is set to 0.5, then 
1 reporting measure point is worth one-half of a TPS point. The value 
of C is in not tied to the number of reporting measures in the ESRD 
QIP; rather, it represents how much value we place on the reporting 
measures' contribution to the quality goals of the ESRD QIP. We will 
use the rulemaking process to set the value for C for each program 
year.
    For the PY 2018 ESRD QIP, we proposed to use the following formula 
to determine a facility's RMA:
[GRAPHIC] [TIFF OMITTED] TR06NO14.018

    We set coefficient C at five-sixths for the PY 2018 program because 
each reporting measure point in the PY 2016 program, and the proposed 
PY 2017 program, is equivalent to five-sixths of a TPS point (that is, 
30 points for three reporting measures comprised 25 TPS points). We 
believe it is important to maintain as much consistency as possible in 
the transition to the proposed scoring methodology. Therefore, we 
proposed that the ``value'' of a reporting measure point in the TPS, as 
finalized in the PY 2016 program and proposed for the PY 2017 program, 
will remain constant in PY 2018.
    For the reasons described above, we continue to believe that the 
clinical measures are considerably more important than the reporting 
measures in the ESRD QIP. We therefore believe that a facility's TPS 
should be predominantly determined by its Clinical Measure Domain 
score, and that

[[Page 66218]]

a facility's TPS should be downwardly adjusted in the case of 
noncompliance with the reporting measure requirements. The RMA, as 
described above, is constructed such that a high RMA value indicates 
low reporting measure scores and a low RMA value indicate high 
reporting measure scores. As a result, a facility's TPS would be 
entirely determined by its Clinical Measure Domain score if it receives 
full credit on the reporting measures; the TPS would be slightly 
decreased if the facility received high (but not perfect) scores on the 
reporting measures; and the TPS would be significantly decreased if it 
performed poorly on the reporting measures. For these reasons, we 
proposed to calculate a facility's TPS by subtracting the facility's 
RMA from its Clinical Measure Domain score. Additionally, we proposed 
to continue our policy to require a facility to be eligible for a score 
on at least one reporting and one clinical measure in order to receive 
a TPS (78 FR 72217).
    In an effort to estimate the impact of this proposed change for the 
ESRD QIP's scoring methodology, we conducted an analysis of how the 
proposed scoring methodology affected payment reduction distributions, 
based on data from CY 2012 and CY 2013. This analysis compared the 
scoring methodology proposed in this section and the previous section 
to the scoring methodology finalized for the PY 2016 program. In order 
to ensure that the analysis reliably estimated the impact on 
facilities' payment reductions, the proposed scoring methodology and 
the methodology finalized for the PY 2016 program were each applied to 
the PY 2016 measure set. The full analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The results of 
this analysis are presented below in Table 29.

   Table 29--Expected Impact of Proposed Scoring Methodology on the Distribution of Payment Reductions, Using
        Measures and Measure Weights Finalized for the PY 2016 ESRD QIP and Data From CY 2012 and CY 2013
----------------------------------------------------------------------------------------------------------------
                                                   Finalized scoring methodology   Proposed scoring methodology
                                                      for PY 2016, applied to         for PY 2018, applied to
                                                   measures and measure  weights   measures and measure weights
                                                     finalized in the  PY 2016       finalized in the PY 2016
           Payment reduction (percent)                        program                         program
                                                 ---------------------------------------------------------------
                                                     Number of                       Number of
                                                    facilities        Percent       facilities        Percent
----------------------------------------------------------------------------------------------------------------
0...............................................           4,828            79.4           4,606            75.7
0.5.............................................             884            14.5             739            12.2
1.0.............................................             242             4.0             306             5.0
1.5.............................................              69             1.1             108             1.8
2.0.............................................              59             1.0             323             5.3
----------------------------------------------------------------------------------------------------------------

    As illustrated in Table 29, we expect that 4.3 percent more 
facilities (222 overall) would receive a two percent payment reduction 
under the proposed methodology for PY 2018, as compared with the 
scoring methodology that we will use for the PY 2016 program. We 
therefore believe that adopting the scoring methodology proposed in 
this section and the previous section will not appreciably change the 
distribution of facility payment reductions, as is our intention.
    We sought comments on these proposals for calculating a facility's 
reporting measure domain score, to calculate the RMA, and to determine 
the TPS.
    Although we believe advantages are afforded by adopting the scoring 
methodology proposed in this section and the previous section, we also 
recognize that there may be advantages associated with maintaining 
consistency with previous years' scoring methodology. Accordingly, as 
an alternative to the scoring methodology proposed in this section and 
the previous section, we also sought public comments on whether we 
should continue to use the same methodology we currently use to weight 
measures in the ESRD QIP and calculate a facility's TPS, with the 
exception that the clinical and reporting measures would be weighted at 
90 percent and 10 percent, respectively, of a facility's TPS.
    We sought public comments on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter supported the proposed scoring methodology 
for PY 2018, because it appropriately balances the importance of 
reporting and clinical measures in a facility's TPS. Another commenter 
recommended that CMS consider reallocating measure weights within the 
domains if a facility does not meet minimum data requirements for a 
measure.
    Response: We thank the commenters for their support and 
recommendations.
    Comment: Some commenters did not support the proposed RMA 
methodology for the ESRD QIP, because it is too complex and likely 
difficult to explain to patients. Commenters stated that the ESRD QIP 
should maintain a consistent scoring methodology from year to year. 
Commenters also stated that using more complicated scoring formulas 
makes the ESRD QIP less transparent, and limits facilities' ability to 
participate. Commenters recommended that CMS delay finalizing any 
change in scoring methodology to allow for more time to analyze the 
proposed changes and how facilities would perform under the new scoring 
system. Commenters recommended that CMS continue to use the current 
weighting system, because it assigns greater weight to the clinical 
measures, as compared to the reporting measures. Another commenter 
stated that the weight of the clinical measures should be increased in 
the ESRD QIP, and expressed concerns that the proposed scoring 
methodology will result in less weight for the clinical measures. 
Specifically, commenters recommended adopting the alternative scoring 
methodology, in which clinical measures and reporting measures are 
weighted at 90 percent and 10 percent, respectively.
    Response: We appreciate the numerous comments we received on the 
RMA methodology. As a result of the significant concerns expressed 
about the RMA methodology, we have decided not to finalize the 
methodology at this time. We will further review the RMA methodology, 
and we may decide to propose to adopt it in future rulemaking. In its 
stead, we will retain

[[Page 66219]]

the current scoring methodology used in the ESRD QIP to weight measures 
and, as proposed, increase the weight assigned to clinical measures. 
Under this methodology, clinical measures will be weighted as finalized 
for the Clinical Domain score, and the Clinical Domain Score will 
comprise 90 percent of a facility's TPS. Reporting measures will be 
weighted equally to form 10 percent of the facility's TPS.
    For these reasons we are not finalizing the RMA scoring methodology 
as proposed. Instead, we are finalizing the alternative scoring 
methodology, under which clinical measures will we weighted as 
finalized for the Clinical Domain score, and the Clinical Domain score 
will comprise 90 percent of a facility's TPS, with the reporting 
measures weighted equally to form the remaining 10 percent of a 
facility's TPS.
8. Example of the PY 2018 ESRD QIP Scoring Methodology
    In this section, we provide an example to illustrate the scoring 
methodology for PY 2018 and future payment years. Figures 3--7 
illustrate how to calculate the clinical measure domain score, the 
reporting measure domain score, the RMA, and the TPS. Note that for 
this example, Facility A, a hypothetical facility, has performed very 
well. Figure 3 illustrates the general methodology used to calculate 
domain scores for the clinical measure domain, as well as the example 
calculations for Facility A.

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR06NO14.019


[[Page 66220]]


    Figure 4 illustrates the general methodology for weighting 
subdomains in the clinical measure domain, as well as the example 
calculations for Facility A's clinical measure domain score.
[GRAPHIC] [TIFF OMITTED] TR06NO14.020

    Figures 5 and 6 illustrate the general methodology for calculating 
a facility's reporting measure domain score and TPS, as well as the 
example calculations for Facility A.

[[Page 66221]]

[GRAPHIC] [TIFF OMITTED] TR06NO14.021

BILLING CODE 4120-01-C
9. Payment Reductions for the PY 2018 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities, such 
that facilities achieving the lowest TPSs receive the largest payment 
reductions. For the same reasons described in Section III.F.8 above, we 
proposed that a facility would not receive a payment reduction for PY 
2018 if it achieves a minimum TPS that is equal to or greater than the 
total of the points it would have received if:
     It performed at the performance standard for each clinical 
measure;
     It received the number of points for each reporting 
measure that corresponds to the 50th percentile of facility performance 
on each of the PY 2016 reporting measures.
    The PY 2016 program is the most recent year for which we will have 
calculated final measure scores before the beginning of the proposed 
performance period for PY 2018 (that is,

[[Page 66222]]

CY 2016). Because we have not yet calculated final measure scores, we 
are unable to determine the 50th percentile of facility performance on 
the PY 2016 reporting measures. We will publish that value in the CY 
2016 ESRD PPS final rule once we have calculated final measure scores 
for the PY 2016 program.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. In 
the CY 2014 ESRD PPS Final Rule (78 FR 72223 through 72224), we 
finalized a payment reduction scale for PY 2016 and future payment 
years: For every 10 points a facility falls below the minimum TPS, the 
facility would receive an additional 0.5 percent reduction on its ESRD 
PPS payments for PY 2016 and future payment years, with a maximum 
reduction of 2.0 percent. We did not propose any changes to this 
policy.
    Because we are not yet able to calculate the performance standards 
for each of the clinical measures, we are also not able to calculate a 
minimum TPS at this time. We will publish the minimum TPS, based on 
data from CY 2014 and the first part of CY 2015, in the CY 2016 ESRD 
PPS Final Rule.
    We sought comments on this proposal. We did not receive any 
comments and are finalizing it as proposed.

H. Future Considerations for Stratifying ESRD QIP Measures for Dual-
Eligible Beneficiaries

    CMS recognizes that individuals with both Medicare and Medicaid 
(also known as ``dual-eligible beneficiaries''), comprise a relatively 
large proportion of Medicare enrollees with ESRD. Because ESRD programs 
have a long history of performance measurement linked with public 
reporting, and because there are a large number of dual-eligible 
beneficiaries receiving ESRD care, we are considering stratifying ESRD 
QIP measures for Medicare-Medicaid enrollees.
    Measure reporting under the ESRD QIP does not currently allow us to 
separately review results for dual-eligible beneficiaries or compare 
those results with results achieved by other patients with ESRD, so it 
is not currently known if their experiences are better, worse, or the 
same as other patients. Even the basic demographics of dual-eligible 
beneficiaries receiving ESRD care are not well understood. After 
discussion of the pros and cons that included input from the ESRD 
provider community, the Measures Application Partnership's dual-
eligible workgroup recommended that CMS take the first step in 
exploring the feasibility of requiring facilities to separately report 
ESRD QIP measures for Medicare-Medicaid enrollees by analyzing the 
composition of the dual-eligible beneficiary population receiving ESRD 
care and determining potential ways in which stratified reporting may 
further quality improvement efforts. Furthermore, the Measures 
Application Partnership recommended, in the context of measure 
development, that CMS explore whether other risk factors unique to the 
dual-eligible population receiving ESRD care would present significant 
hurdles to measure stratification along these lines. We therefore 
sought comments on whether it would be feasible to stratify ESRD QIP 
measures based on whether the beneficiary is a dual eligible. We were 
interested in whether stakeholders recommend stratification and, if so, 
for what specific measures stakeholders would find stratification most 
compelling.
    We were particularly interested in public comments on whether 
Medicare-Medicaid stratified quality measures under the ESRD QIP should 
be reported publicly, and how we should factor those measures into our 
scoring methodology. We sought comments on the meaningfulness of 
stratifying measures, and the feasibility and burden associated with 
reporting stratified measures.
    The comments and our responses are set forth below.
    Comment: Some commenters did not support stratifying ESRD QIP 
measures based on whether the beneficiary is dually eligible for 
Medicare and Medicaid, because the commenter feels this constitutes 
risk adjusting for patients' socioeconomic status, which may obscure 
differences in facilities' risk-adjusted quality scores and mask 
potential disparities in care. One commenter recommended that CMS 
instead consider evaluating facilities in relation to their peers by 
comparing facilities serving similar shares of dual-eligible 
beneficiaries, because ``such an approach adjusts for socioeconomic 
status without masking differences in quality.'' The commenter further 
recommended that CMS compare facilities using only ESRD QIP measures 
that are claims-based, in order to minimize administrative burden to 
facilities and the agency resulting from the comparison. Another 
commenter stated that stratifying ESRD QIP scores on the basis of dual-
eligibles is an ``interesting idea,'' but one that is complex and would 
require considerable collaboration with the ESRD community. Some 
commenters did not support stratifying ESRD QIP measures based on 
whether the beneficiary is dually eligible. Commenters stated it is not 
operationally feasible for facilities to separately report ESRD QIP 
measures for dual eligible beneficiaries, because dual eligibility 
status can change on a monthly basis. Another commenter also stated its 
belief that this stratification would include dual eligible patients in 
the facility's Medicare patient population and the dual eligible 
population, raising the possibility that a facility could be penalized 
twice for the same patient. Another commenter recommended stratifying 
ESRD QIP measures solely for investigative purposes, and not using 
these scores to determine payment reductions. Another commenter 
expressed reservations about the effects of stratifying for dual 
eligible patients, but recommended that CMS place greater emphasis on 
the role of socioeconomic status and demographic factors when assessing 
facility performance under the ESRD QIP.
    Response: We appreciate commenters' input and we will take it into 
consideration as we continue to evaluate how to account for dual-
eligibles in the ESRD QIP and other CMS ESRD quality initiatives.

IV. Technical Corrections for 42 Part 405

A. Background

    In the April 15, 2008, final rule ``Conditions for Coverage for 
End-Stage Renal Disease Facilities,'' (73 FR 20370) we revised the 
health and safety standards for Medicare-participating End-Stage Renal 
Disease (ESRD) facilities. This rule made the first comprehensive 
revisions to the ESRD Conditions for Coverage (CfCs) since they were 
adopted in 1976. The original ESRD CfCs at 42 CFR Part 405 Subpart U 
were deleted and new conditions were issued at 42 CFR Part 494. Subpart 
U now only addresses certain requirements for ESRD networks.
    As a part of these revisions, we intended to delete most of the 
terms and definitions set out in Part 405 Subpart U, and create new 
definitions in Part 494. This is discussed in the 2008 final rule and 
in the corresponding proposed rule (70 FR 6184), and is laid out in the 
final rule crosswalk (comparing the old CfCs with the new ones) at 73 
FR 20451.
    While we intended to delete most of the definitions at Part 405 
Subpart U, we inadvertently omitted the regulations text that would 
have made those changes. Subpart U, at Sec.  405.2102, still has 32 
definitions, most of them unnecessary and several of them

[[Page 66223]]

obsolete. This creates confusion for ESRD stakeholders, patients, and 
suppliers.

B. Summary of the Proposed Provisions and Responses to Comments on the 
CY 2015 ESRD PPS

    In the CY 2015 ESRD PPS proposed rule, we proposed to make a 
technical correction that deletes the outdated terms and definitions at 
Sec.  405.2102. Specifically, we proposed to delete these terms and 
definitions: agreement, arrangement, dialysis, end-stage renal disease 
(ESRD), ESRD facility, renal dialysis center, renal dialysis facility, 
self-dialysis unit, special purpose renal dialysis facility, ESRD 
service, dialysis service, inpatient dialysis, outpatient dialysis, 
staff-assisted dialysis, self-dialysis, home dialysis, self-dialysis 
and home dialysis training, furnishes directly, furnishes on the 
premises, medical care criteria, medical care norms, medical care 
standards, medical care evaluation study, qualified personnel, chief 
executive officer, dietitian, medical record practitioner, nurse 
responsible for nursing service, physician-director, and social worker. 
We also proposed to delete the term and definition for ``ESRD network 
organization,'' as it is duplicated within Sec.  405.2102 as ``network 
organization.'' We would retain the terms and definitions for 
``network, ESRD,'' and ``network organization.'' These changes are also 
outlined in Table 30 below.''

           Table 30--Technical Corrections to Sec.   405.2102
------------------------------------------------------------------------
                                                             Other CFR
               Term                    Proposed action       location
------------------------------------------------------------------------
Agreement.........................  Delete..............              --
Arrangement.......................  Delete..............              --
Dialysis..........................  Delete..............              --
End-Stage Renal Disease (ESRD)....  Delete..............       406.13(b)
ESRD facility introductory text...  Delete..............              --
    Renal dialysis center.........  Delete..............              --
    Renal dialysis facility.......  Delete..............          494.10
    Self-dialysis unit............  Delete..............              --
    Special purpose renal dialysis  Delete..............         494.120
     facility.
ESRD Network organization.........  Delete..............              --
ESRD service introductory text....  Delete..............              --
    Dialysis service..............  Delete..............              --
    Inpatient dialysis............  Delete..............              --
    Outpatient dialysis...........  Delete..............              --
    Staff-assisted dialysis.......  Delete..............              --
    Self-dialysis.................  Delete..............          494.10
    Home dialysis.................  Delete..............          494.10
    Self-dialysis and home          Delete..............              --
     dialysis training.
Furnishes directly................  Delete..............          494.10
Furnishes on the premises.........  Delete..............      494.180(d)
Medical care criteria.............  Delete..............              --
Medical care norms................  Delete..............              --
Medical care standards............  Delete..............              --
Medical care evaluation study       Delete..............              --
 (MCE).
Network, ESRD.....................  Retain..............             N/A
Network organization..............  Retain..............             N/A
Qualified personnel...............  Delete..............              --
    Chief executive officer.......  Delete..............              --
    Dietitian.....................  Delete..............      494.140(c)
    Medical record practitioner...  Delete..............              --
    Nurse responsible for nursing   Delete..............      494.140(b)
     service.
    Physician-director............  Delete..............      494.140(a)
    Social worker.................  Delete..............      494.140(d)
------------------------------------------------------------------------

    We did not receive any public comments addressing this technical 
correction. Therefore, we are finalizing the deletion of obsolete 
definitions in Sec.  405.2102 as proposed.

V. Methodology for Adjusting DMEPOS Payment Amounts Using Information 
From Competitive Bidding Programs

A. Background

1. Fee Schedule Payment Basis for Certain DMEPOS
    Section 1834(a) of the Act governs payment for durable medical 
equipment (DME) covered under Part B and under Part A for a home health 
agency and provides for the implementation of a fee schedule payment 
methodology for DME furnished on or after January 1, 1989. Sections 
1834(a)(2) through (a)(7) of the Act set forth separate payment 
categories of DME and describe how the fee schedule for each of the 
following categories is established:
     Inexpensive or other routinely purchased items,
     Items requiring frequent and substantial servicing,
     Customized items,
     Oxygen and oxygen equipment,
     Other covered items (other than DME), and
     Other items of DME (capped rental items).
    Section 1834(h) of the Act governs payment for prosthetic devices, 
prosthetics, and orthotics (P&O) and sets forth fee schedule payment 
rules for P&O. Effective for items furnished on or after January 1, 
2002, payment is also made on a national fee schedule basis for 
parenteral and enteral nutrition (PEN) in accordance with the authority 
under section 1842(s) of the Act. The term ``enteral nutrition'' will 
be used throughout this document to describe enteral nutrients supplies 
and equipment covered as prosthetic devices in accordance with section 
1861(s)(8) of the Act and paid for on a fee schedule basis and enteral 
nutrients under the Medicare DMEPOS Competitive Bidding

[[Page 66224]]

Program (CBP), as authorized under section 1847(a)(2)(B) of the Act. 
Additional background discussion about DMEPOS items subject to section 
1834 of the Act, rules for calculating reasonable charges, and fee 
schedule payment methodologies for PENs and for DME prosthetic devices, 
prosthetics, orthotics, and surgical dressings, was provided in the 
proposed rule (79 FR 40275 through 40277).
2. DMEPOS Competitive Bidding Programs Payment Rules
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement CBPs in competitive bidding areas (CBAs) throughout the 
United States for contract award purposes for the furnishing of certain 
competitively priced DMEPOS items and services. The programs mandated 
by section 1847(a) of the Act are collectively referred to as the 
``Medicare DMEPOS Competitive Bidding Program.'' Section 1847(a)(2) of 
the Act provides that the items and services to which competitive 
bidding applies are:
     Off-the-shelf (OTS) orthotics for which payment would 
otherwise be made under section 1834(h) of the Act;
     Enteral nutrients, equipment and supplies described in 
section 1842(s)(2)(D) of the Act; and
     Certain DME and medical supplies, which are covered items 
(as defined in section 1834(a)(13) of the Act) for which payment would 
otherwise be made under section 1834(a) of the Act.
    The DME and medical supplies category includes items used in 
infusion and drugs (other than inhalation drugs) and supplies used in 
conjunction with DME, but excludes class III devices under the Federal 
Food, Drug, and Cosmetics Act and Group 3 or higher complex 
rehabilitative power wheelchairs and related accessories when furnished 
with such wheelchairs. Sections 1847(a) and (b) of the Act specify 
certain requirements and conditions for implementation of the Medicare 
DMEPOS CBP.
3. Adjusting Payment Amounts Using Information From the DMEPOS 
Competitive Bidding Program
    Section 1834(a)(1)(F)(ii) of the Act provides authority for using 
information from the DMEPOS CBPs to adjust the DME payment amounts for 
covered items furnished on or after January 1, 2011, in areas where 
competitive bidding is not implemented for the items. Similar authority 
exists at section 1834(h)(1)(H)(ii) of the Act for OTS orthotics, and 
at section 1842(s)(3)(B) of the Act for enteral nutrition. Section 
1834(a)(1)(F) also requires adjustments to the payment amounts for all 
DME items subject to competitive bidding furnished in areas where CBPs 
have not been implemented on or after January 1, 2016.
    For items furnished on or after January 1, 2016, section 
1834(a)(1)(F)(iii) requires us to continue to make such adjustments to 
DME payment amounts where CBPs have not been implemented, as additional 
covered items are phased in or information is updated as contracts are 
recompeted.
    Section 1834(a)(1)(G) of the Act requires that the methodology used 
to adjust payment amounts for DME and OTS orthotics using information 
from the CBPs be promulgated through notice and comment rulemaking. 
Section 1834(a)(1)(G) of the Act also requires that we consider the 
``costs of items and services in areas in which such provisions 
[sections 1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii)] would be applied 
compared to the payment rates for such items and services in 
competitive acquisition [competitive bidding] areas.''

B. Summary of the Proposed Provisions and Responses to Comments on the 
Methodology for Adjusting DMEPOS Payment Amounts Using Information From 
Competitive Bidding Programs

    The proposed rule for implementing section 1834(a)(1)(G) of the Act 
to establish a methodology for using information from CBPs to adjust 
the fee schedule amounts in accordance with sections 1834(a)(1)(F)(ii) 
and 1834(h)(1)(H)(ii) of the Act was published on July 1, 2014 (79 FR 
40208). We proposed applying the methodology proposed in this rule in 
making adjustments to the payment amounts for enteral nutrition as 
authorized by section 1842(s)(3)(B) of the Act (79 FR 40281). We 
received 89 public comments on the proposed rule, including comments 
from patient organizations, patients, manufacturers, health care 
systems, and DME suppliers. In this final rule, we provide a summary of 
each proposed provision, a summary of the public comments received, our 
responses to the comments, and the policies we are finalizing for 
DMEPOS furnished under section 1834 of the Act. Comments related to the 
paperwork burden are addressed in the ``Collection of Information 
Requirements'' section in this final rule. Comments related to the 
impact analysis are addressed in the ``Economic Analyses'' section in 
this final rule.
    We proposed establishing three methodologies for adjusting DMEPOS 
fee schedule amounts in areas where CBPs have not been established for 
these items and services based on single payment amounts SPAs 
established in accordance with the payment rules at Sec.  414.408 (79 
FR 40281). We stated that the use of SPAs that may be established in 
accordance with the payment rules proposed in section VI of the 
proposed rule to adjust DMEPOS fee schedule amounts in areas where CBPs 
have not been established for these items and services would be 
addressed in future notice and comment rulemaking. The first 
methodology we proposed is summarized in subsection V. B. 1 below and 
would utilize regional adjustments limited by national parameters for 
items bid in more than 10 CBAs throughout the country. The second 
methodology we proposed is summarized in subsection 2 below and would 
be used for lower volume items or other items that were bid in no more 
than 10 CBAs for various reasons. The third methodology we proposed is 
summarized in subsection 5 and would be used for mail order items 
furnished in the Northern Mariana Islands. We also proposed rules that 
would apply to all of these proposed methodologies, which are discussed 
in sections V.B.3, V.B.4, and V.B.6 below.
1. Proposed Regional Adjustments Limited by National Parameters
    CBPs are currently in place in 100 of the largest metropolitan 
statistical areas (MSAs) in the country for items and services that 
make up over 80 percent of the total allowed charges for items subject 
to the DMEPOS CBP. SPAs are currently used in 109 CBAs that include 
areas in every state throughout the country except for Alaska, Maine, 
Montana, North Dakota, South Dakota, Vermont, and Wyoming. The number 
of CBAs that are fully or partially located within a given state range 
from one to twelve. One CBA is for a non-contiguous area of the United 
States (Honolulu, Hawaii) and was phased in under Round 2 of the 
program. Suppliers submitting bids for furnishing items and services in 
these areas have received extensive education that they should factor 
all costs of furnishing items and services in an area as well as 
overhead and profit into their bids.
    For items and services that are subject to competitive bidding and 
have been included in more than 10 CBAs throughout the country, we 
proposed to adjust the fee schedule payment amounts for these items and 
services

[[Page 66225]]

using a methodology that is modeled closely after the regional fee 
schedule payment methodology in effect for P&O to allow for variations 
in payment based on bids for furnishing items and services in different 
parts of the country (79 FR 40281). Under the proposed methodology, 
adjusted fee schedule amounts for areas within the contiguous United 
States would be determined based on regional SPAs or regional single 
payment amounts (RSPAs) limited by a national floor and ceiling. The 
RSPA would be established using the average of the SPAs for an item 
from all CBAs that are fully or partially located in the region. The 
adjusted payment amount for the item would be equal to its RSPA but not 
less than 90 percent and not more than 110 percent of the average of 
the RSPAs established for all states. This limits the range in the 
regional fee schedule amounts from highest to lowest to no more than 20 
percent, 10 percent above the national average and 10 percent below the 
national average. By contrast, the fee schedule payment methodology for 
DME only allows for a variation in statewide fees of 15 percent below 
the median of statewide fees for all the states. The national limits to 
the fee schedule amounts for P&O and DME have not resulted in a barrier 
to access to items and services in any part of the country. We believe 
this reflects the fact that the costs of furnishing DMEPOS items and 
services do not vary significantly from one part of the country to 
another and that national limits on regional prices is warranted. We 
therefore proposed to limit the variation in the RSPAs using a national 
ceiling and floor in order to prevent unnecessarily high or low 
regional amounts that vary significantly from the national average 
prices for the items and services (79 FR 40284). The national ceiling 
and floor limits would be based on 110 percent and 90 percent, 
respectively, of the average of the RSPAs applicable to each of the 48 
contiguous states and the District of Columbia (that is, the average of 
RSPAs is weighted by the number of contiguous states including the 
District of Columbia per region). We proposed that any RSPA above the 
national ceiling would be brought down to the ceiling and any RSPA 
below the national floor would be brought up to the floor. We proposed 
that the national ceiling would exceed the average of the RSPAs by the 
same percentage that the national floor would be under the average of 
the RSPAs. This allows for a maximum variation of 20 percent from the 
lowest RSPA to the highest RSPA. We believe that a variation in payment 
amounts both above and below the national average price should be 
allowed, and we believe that allowing for the same degree of variation 
(10 percent) above and below the national average price is more 
equitable and less arbitrary than allowing a higher degree of variation 
(20 percent) above the national average price than below (10 percent), 
as in the case of the national ceiling and floor for the P&O fee 
schedule, or allowing for only 15 percent variation below the national 
average price, as in the case of the national ceiling and floor for the 
DME fee schedule.
    Under the DMEPOS CBP, the statute prohibits competitions before 
2015 in new CBAs that are rural areas or MSAs with a population of less 
than 250,000. Even if competitions were to begin in these areas in 
2015, it is very unlikely that the SPAs from these areas would be 
computed and finalized by January 1, 2016. Therefore, we proposed that 
the proposed RSPAs initially be based solely on information from 
existing programs implemented in 100 MSAs, which are generally 
comprised of more densely populated, urban areas than areas outside 
MSAs (79 FR 40284). We therefore believe that the initial RSPAs would 
not directly account for unique costs that may be associated with 
furnishing DMEPOS in states that have few MSAs and are predominantly 
rural or cover large geographic areas and are sparsely populated. 
However, in keeping with the discussion above, we do not believe that 
the cost of furnishing DMEPOS in these areas should deviate 
significantly from the national average price established based on 
supplier bids for furnishing items and services in different areas 
throughout the country.
    The DMEPOS fee schedule amounts are based primarily on supplier 
charges for furnishing items and services in urban areas and this has 
not resulted in problems associated with access to these items and 
services in rural areas or large, sparsely populated areas. 
Nonetheless, for the purpose of ensuring access to necessary items and 
services in states that are more rural or sparsely populated than 
others, we proposed that the adjusted fee schedule amounts for states 
that are more rural than urban and defined as ``rural states'' or 
states where a majority of the counties are sparsely populated and 
defined as ``frontier states'' would be no lower than the national 
ceiling amount discussed above.
    We proposed in Sec.  414.202 that a rural state be defined as a 
state where more than 50 percent of the population lives in rural areas 
within the state as determined through census data, since a majority of 
the general population of the state lives in rural areas, it is likely 
that a majority of DMEPOS items and services are furnished in rural 
settings in the state (79 FR 40284). This is in contrast to other 
states where the majority of the general population of the state lives 
in urban areas, making it more likely that a majority of DMEPOS items 
and services are furnished in urban settings or in MSAs. We believe 
that for states where a majority of the general population lives in 
rural areas, adjustments to the fee schedule amounts should be based on 
the national ceiling amount if the RSPA is lower than the national 
ceiling amount. This higher level of payment would provide more 
assurance that access to items and services in states within a region 
that are more rural than urban is preserved in the event that costs of 
furnishing DMEPOS items and services in rural areas is higher than the 
costs of furnishing DMEPOS items and services in urban areas.
    We proposed in Sec.  414.202 that a frontier state, would be 
defined as a state where at least 50 percent of counties in the state 
have a population density of 6 people or less per square mile (79 FR 
40284). In such states, the majority of counties where DMEPOS items and 
services may be needed are very sparsely populated and suppliers may 
therefore have to drive considerably longer distances in furnishing 
these items and services as opposed to other states where the 
beneficiaries live closer to one another. The designation of states as 
frontier states or frontier areas is currently used under Medicare Part 
A to make adjustments to the wage index for hospitals in these remote 
areas in order to ensure access to services in these areas. The 
definition of frontier state that we proposed for the purpose of 
implementing section 1834(a)(1)(F) and (G) of the Act is consistent 
with the current definition in section 1886(d)(3)(E)(iii)(II) and (III) 
of the Act and 42 CFR 412.64(m) of the regulations related to 
implementation of the hospital wage index adjustments and prospective 
payment system for hospitals under Part A. We believe that states 
designated as frontier states have a significant amount of area that is 
sparsely populated and are more likely to be geographically removed 
from (that is, a considerable driving distance from) areas where 
population is more concentrated. However, we solicited comments on 
alternative definitions of frontier states.
    Based on the 2010 Census data, states designated as rural would 
include

[[Page 66226]]

Vermont, Maine, West Virginia, and Mississippi. Other than one CBA that 
is fully located in Mississippi, one CBA that is partially located in 
Mississippi, and two CBAs that are partially located in West Virginia, 
the RSPAs would not include SPAs that reflect the costs of furnishing 
items and services in these states based on where the CBAs are 
currently located. Current frontier states include North Dakota, South 
Dakota, Montana, and Wyoming, and the RSPAs would not include SPAs that 
reflect the costs of furnishing items and services in any of these 
states based on where the CBAs are currently located. We proposed that 
the designation of rural and frontier states could change as the U.S. 
Census information changes. We proposed that when a state that is not 
designated as a rural state or frontier becomes a rural state or 
frontier state based on new, updated information from the U.S. Census 
Bureau, that adjustments to the fee schedule amounts in accordance with 
the proposed provision of this section would take effect as soon as 
such changes can be implemented. Likewise, we proposed that at any time 
a state that is designated as a rural state or frontier no longer meets 
the proposed definition in this section for rural state or frontier 
state based on new, updated information from the U.S. Census Bureau, 
that adjustments to the fee schedule amounts in accordance with the 
proposed provision of this section would take effect as soon as such 
changes can be implemented (79 FR 40285). We proposed that the changes 
to the state designation would occur based on the decennial Census. The 
decennial Census uses total population of the state to determine 
whether the state is predominately rural or frontier. The U.S. Census 
Bureau also uses current population estimates every 1, 3, and 5 years 
through the American Community Survey but only samples a small 
percentage of the population every year, not the total population. 
Therefore, we proposed that the designation of a rural or frontier 
state occur approximately every 10 years when the total population data 
is available. For the current proposed fee schedule adjustments, we 
proposed to use the 2010 Census Data. The next update would reflect the 
2020 Census Data and any changes in the designation of a rural or 
frontier state and corresponding fee schedule changes would be 
implemented after the 2020 Census Data becomes available. For this and 
subsequent updates, we proposed to include a listing of the qualifying 
rural and frontier States in program guidance that is issued quarterly 
and to provide at least 6 months advance notice of any adjustments.
    We indicated in the proposed rule (79 FR 40285) that some of the 
comments received on the advance notice of proposed rulemaking 
indicated that the costs of furnishing DMEPOS items and services in 
rural areas is significantly higher than the costs of furnishing DMEPOS 
items and services in urban areas. Other commenters suggested that the 
adjustments to the payment amounts based on information from CBPs be 
phased in to give suppliers time to adjust to the new payment levels. 
Although we believe that the costs of furnishing items and services in 
rural areas are different than the costs of furnishing items and 
services in urban areas, there is no evidence to support a statement 
that the difference in costs is significant. In summary, we proposed 
that adjustments to payment amounts for areas within different regions 
of the contiguous United States would be based on the un-weighted 
average of SPAs from CBAs that are fully or partially located within 
these regions. The regional amounts would be limited by a national 
ceiling and floor and the adjusted payment amounts for all states 
designated as rural or frontier states would be equal to the national 
ceiling. In addition, we solicited public comments on whether payment 
in rural areas of states that are not designated as rural or frontier 
states should be set differently. For the purpose of ensuring access to 
necessary items and services in states that are more rural or sparsely 
populated than others, we proposed that the adjusted fee schedule 
amounts for states that are more rural than urban and defined as 
``rural states'' or states where a majority of the counties are 
sparsely populated and defined as ``frontier states'' would be no lower 
than the national ceiling amount.
    In addition, we proposed that the adjustments to the fee schedule 
amounts for areas outside the contiguous United States would not be 
based on the RSPAs. Rather, we proposed that the adjustments to the fee 
schedule amounts for these areas be based on the higher of the average 
of SPAs for CBAs in areas outside the contiguous United States (for 
example, Honolulu) or the national ceiling limit applied to the payment 
adjustments for areas within the contiguous United States (79 FR 
40285). These proposals were made in consideration of the unique costs 
of furnishing DMEPOS items and services in remote, isolated areas 
outside the contiguous United States such as Alaska, Guam, Hawaii, 
Puerto Rico, the United States Virgin Islands and other areas. We 
proposed that any SPAs from programs in these areas be excluded from 
the calculation of the RSPAs in section a. In addition, we proposed 
that the adjustments to the fee schedule amounts for areas outside the 
contiguous United States would not be based on the RSPAs. Rather, we 
proposed that the adjustments to the fee schedule amounts for these 
areas be based on the higher of the average of SPAs for CBAs in areas 
outside the contiguous United States (for example, Honolulu) or the 
national ceiling limit applied to the payment adjustments for areas 
within the contiguous United States. We believe that, to the extent 
that SPAs from non-contiguous areas are available, these amounts should 
be used in making adjustments to the payment amounts for other areas 
outside the contiguous United States since the challenges and costs of 
furnishing DMEPOS items and services in all remote, isolated areas is 
similar. We also believe that the payment adjustments for these areas, 
like those for the proposed rural and frontier states, should not be 
lower than the national ceiling established for items and services 
furnished in the contiguous United States. Areas outside the contiguous 
United States generally have higher shipping fees and other costs. We 
believe the SPAs in Honolulu and other areas outside the contiguous 
United States reflect these costs and could be used to adjust the fee 
schedule amounts for these areas without limiting access to DMEPOS 
items and services. However, in the event that the national ceiling 
limit described in section b above is greater than the average of the 
SPAs for CBPs in areas outside the contiguous United States, we 
proposed that the higher national ceiling amount be used in adjusting 
the fee schedule amounts for areas outside the contiguous United States 
in order to better ensure access to DMEPOS items and services (79 FR 
40285).
    For the purpose of establishing the boundaries for the regions, we 
proposed using 8 regions developed for economic analysis purposes by 
the Bureau of Economic Analysis (BEA) within the Department of Commerce 
(79 FR 40282). Research and analysis conducted by the BEA indicated 
that the states in each region share economic ties. Further information 
can be obtained at: https://www.bea.gov/regional/definitions/nextpage.cfm?key=Regions. The information provided at this link states 
that:

    BEA Regions are a set of Geographic Areas that are aggregations 
of the states. The following eight regions are defined: Far West,

[[Page 66227]]

Great Lakes, Mideast, New England, Plains, Rocky Mountain, 
Southeast, and Southwest. The regional classifications, which were 
developed in the mid-1950s, are based on the homogeneity of the 
states in terms of economic characteristics, such as the industrial 
composition of the labor force, and in terms of demographic, social, 
and cultural characteristics. For a brief description of the 
regional classification of states used by BEA, see U.S. Department 
of Commerce, Census Bureau, Geographic Areas Reference Manual, 
Washington, DC, U.S. Government Printing Office, November 1994, pp. 
6-18; 6-19.

    Therefore, we proposed to revise the definition of region in Sec.  
414.202 to mean a region developed for economic analysis purposes by 
the BEA within the Department of Commerce for the purpose of 
calculating regional single payment amounts (RSPAs); the definition of 
region for the purposes of the P&O regional fee schedule would also 
continue to apply for those items and services not adjusted based on 
prices in competitively bid areas. According to the BEA, the regional 
classifications are based on the homogeneity of the states in terms of 
economic characteristics, such as the industrial composition of the 
labor force, and in terms of demographic, social, and cultural 
characteristics. The contiguous areas of the United States that fall 
under the 8 BEA regions under our proposal the proposed rule are listed 
in Table 31 below. Further information can be obtained at http://www.bea.gov/.

              Table 31--Bureau of Economic Analysis Regions
------------------------------------------------------------------------
      Region                 Name               States/areas (count)
------------------------------------------------------------------------
1................  New England............  Connecticut, Maine,
                                             Massachusetts, New
                                             Hampshire, Rhode Island,
                                             and Vermont (6).
2................  Mideast................  Delaware, District of
                                             Columbia, Maryland, New
                                             Jersey, New York, and
                                             Pennsylvania (6).
3................  Great Lakes............  Illinois, Indiana, Michigan,
                                             Ohio, and Wisconsin (5).
4................  Plains.................  Iowa, Kansas, Minnesota,
                                             Missouri, Nebraska, North
                                             Dakota, and South Dakota
                                             (7).
5................  Southeast..............  Alabama, Arkansas, Florida,
                                             Georgia, Kentucky,
                                             Louisiana, Mississippi,
                                             North Carolina, South
                                             Carolina, Tennessee,
                                             Virginia, and West Virginia
                                             (12).
6................  Southwest..............  Arizona, New Mexico,
                                             Oklahoma, and Texas (4).
7................  Rocky Mountain.........  Colorado, Idaho, Montana,
                                             Utah, and Wyoming (5).
8................  Far West...............  California, Nevada, Oregon,
                                             and Washington (4).
------------------------------------------------------------------------

    We solicited public comments on whether different regional 
boundaries should be considered that would better reflect potential 
regional differences in the costs of furnishing items and services 
subject to the DMEPOS CBP.
    The comments on these proposals and our responses are set forth 
below.
    Comment: Many commenters stated that the DMEPOS CBP and the SPAs 
established under the program are flawed because the bids they are 
based on are not binding and therefore result in the submission of non-
bona fide bids and because the SPA is based on the median of supplier 
bids for an item rather than the maximum bid resulting in some 
suppliers being paid less than the amount they bid. The commenters 
therefore believe that the SPAs should not be used to adjust payment 
amounts for items and services furnished in other areas of the country. 
A few commenters said that no decisions should be made before future 
Office of the Inspector General (OIG) reports on competitive bidding 
are published because these reports might validate their claims that 
the SPAs are flawed.
    Response: We do not agree that the DMEPOS CBP and the SPAs 
established under the program are flawed because the bids they are 
based on are not binding and therefore result in the submission of non-
bona fide bids or because the SPA is based on the median of supplier 
bids for an item rather than the maximum bid resulting in some 
suppliers being paid less than the amount they bid. Bids are screened 
to ensure that they are bona fide. Suppliers that submit the lowest 
bids are required to provide invoices and other information to validate 
the bid and bids that are not validated are rejected. Regarding 
calculation of the SPA using the median rather than maximum bid, 
suppliers offered contracts under the program do not have to accept 
these amounts, but if they do, they are accepting the payment amounts 
in the contract and suppliers have successfully furnished items at 
these amounts with no impact on access. Over 90 percent of suppliers 
accept contracts they are offered, indicating that the SPAs are 
appropriate. We therefore do not agree with the commenters that the 
SPAs should not be used to adjust payment amounts for items and 
services furnished in other areas of the country and we do not agree 
that waiting for an OIG evaluation of this issue is necessary. Section 
1834(a)(1)(F)(ii) of the Act mandates use of information on the payment 
determined under CBPs to adjust the payment amount that would otherwise 
be made for DME for an area that is not a CBA by no later than January 
1, 2016, therefore, we believe it is appropriate to establish the 
methodology in rulemaking so that it takes effect on January 1, 2015, 
allowing time for calculation and implementation of the adjusted fee 
schedule amounts on January 1, 2016.
    Comment: Some commenters suggested that a survey of supplier costs 
in areas outside of CBAs should be conducted to determine whether the 
costs in these areas are greater than the costs in CBAs or to otherwise 
provide information on how the payment amounts in areas outside CBAs 
should be adjusted.
    Response: We disagree with this comment. The statute requires CMS 
to use CBP information (as opposed to survey data of supplier costs as 
the commenters suggest).
    Comment: Many commenters suggested that as an alternative to using 
SPAs to adjust payment amounts, the methodology should use either the 
highest bid submitted for each item under the competition or the 
highest bid submitted for the item by the suppliers in the winning 
range.
    Response: We disagree with this suggestion. We believe that the 
median bid is a better reflection of the costs of furnishing items by 
suppliers as whole as reflected in their bids than either the lowest 
bid or the highest bid. Medicare payment methods at 42 CFR 405.502 used 
in the past for DME have relied on customary charges from suppliers 
based on the median of their charges as well as fee schedule amounts 
based on average reasonable charges. In no case have the highest 
supplier charges or highest reasonable charges been used to establish 
Medicare allowed amounts for DME in the past, and in no case has use of 
median or average charges in establishing Medicare allowed payment 
amounts resulted in significant

[[Page 66228]]

problems related to obtaining access to items and services in the past.
    Comment: Some commenters stated that bids submitted by suppliers 
unable to fulfill the terms of their contract, for example, due to 
problems associated with meeting State licensure requirements, should 
be excluded and SPAs should be recalculated before they are used to 
determine the adjusted fee schedule amounts.
    Response: We disagree with this comment. We have observed no 
significant negative impacts on access to items and services under the 
CBPs since they were initially phased in on January 1, 2011. In the 
limited situations where bids used in the calculation of the SPAs were 
from suppliers that later were determined to be ineligible, these bids 
did not impact access to items and service.
    Comment: One commenter indicated that the boundaries for the 
regions based on the 8 regions developed for economic analysis purposes 
by the Bureau of Economic Analysis (BEA) within the Department of 
Commerce are too broad and are not representative of current regional 
economic characteristics.
    Response: We disagree. The BEA regional designations have been 
evaluated and have evolved over the years to continue to encompass 
socio-economic patterns.
    Comment: Many commenters stated that the proposed methodology does 
not adequately address the costs of furnishing items and services in 
areas of the country where CBPs have not been established, particularly 
for rural areas, non-contiguous areas, or remote areas where suppliers 
must incur extraordinary delivery expenses. Some commented that the 
SPA-based pricing is too low for a supplier to stay in business and for 
the beneficiaries to receive equipment. Some commenters believe that 
the quality of items and services furnished will be compromised by the 
proposed methodology for adjusting payment amounts. Many commenters did 
not agree with the proposed methodology for using the national ceiling 
or 110 percent of the average of the RSPAs as a payment floor for rural 
states and frontier states and suggested varied ways to adjust prices 
in rural areas, including raising the national ceiling to 120 or 150 
percent, or having rural and low population density areas add-on 
payments at the ZIP code or county level similar to the add-on payments 
allowed for rural areas under the ambulance fee schedule. Commenters 
believe that considerations should be made for all rural areas within 
states regardless of whether the state meets the proposed definitions 
of rural or frontier state. Some commenters stated that the SPAs do not 
account for unique costs of delivering items to extremely remote 
locations and should not be used to adjust payments in these areas.
    Response: We agree that the proposed methodology for using the 
national ceiling or 110 percent of the average of the RSPAs as a 
payment floor for rural states and frontier states should be applied to 
all rural areas and on a statewide basis depending on whether or not 
the state meets the proposed definitions for rural or frontier state. 
We believe the proposed methodology for using the national ceiling or 
110 percent of the average of the RSPAs as a payment floor should be 
applied, at least initially, in other areas within a state that are 
designated as rural areas rather than entire states in order to ensure 
access to items and services in these areas. Although we do not have 
direct evidence that cost in rural areas are higher than costs in urban 
areas or vice versa or that the SPAs do not cover costs in rural areas, 
we believe it is prudent for the sake of ensuring access to items and 
services in these areas to proceed cautiously in adjusting fee schedule 
amounts in these areas. Therefore, in response to comments that 
considerations should be made for all rural areas within states 
regardless of whether the state meets the proposed definitions of rural 
or frontier state, we are finalizing a definition for rural area at 
Sec.  414.202 to mean a geographic area represented by a postal zip 
code of at least 50 percent of the total geographic area of the area 
included in the zip code is estimated to be outside any metropolitan 
area (MSA). The definition of rural area also includes a geographic 
area represented by a postal zip code that is a low population density 
area excluded from a competitive bidding area in accordance with the 
authority provided by section 1847(a)(3)(A) of the Act at the time the 
rules at Sec.  414.210(g) are applied. As part of the methodology we 
are finalizing for adjusting fee schedule amounts using information 
from CBPs, we are finalizing a provision that the adjusted fee schedule 
amounts for any area meeting the definition of rural area will be no 
lower than the national ceiling amount. We are not finalizing the 
proposed definitions of rural state and frontier state because we have 
decided to apply provisions proposed for these areas (79 FR 40284) to 
all rural areas based on comments received and as explained in more 
detail below. Lastly, we note that Medicare program guidance at section 
60 of chapter 20 of the Medicare Claims Processing Manual (Pub. 100-04) 
allows for payment of separate charges for delivery expenses in rare 
and unusual circumstances in order to meet the needs of beneficiaries 
living remote areas that are not served by a local supplier.
    Comment: Some commenters recommended a 4 year phase-in of the 
adjusted fees by payment amounts or regions so suppliers have time to 
adjust to the change in payment amounts.
    Response: We agree that phasing in the adjustments to the payment 
amounts would allow time for suppliers to adjust to the new payment 
rates and would allow time to monitor the impact of the change in 
payment rates on access to items and services; however, we do not 
believe that a phase in period of 4 years is necessary. We believe that 
time frame is excessive. Therefore, we are finalizing a phase in of 6 
months, which we believe provides suppliers with an adequate amount of 
time to make adjustments to their businesses in light of the reduced 
payment amounts and is more than enough time to determine if the 
payment amounts are impacting access to items and services in any part 
of the country. CMS will monitor access and health outcomes using real 
time claims data and analysis. Therefore, in this final rule at Sec.  
414.210(g)(9), we finalizing the adjustments to the fee schedule 
amounts for use in paying claims with dates of service from January 1, 
2016, thru June 30, 2016, based on 50 percent of the un-adjusted fee 
schedule amount and 50 percent of the adjusted fee schedule amount. For 
example, if the fee schedule amount that would have gone into effect on 
January 1, 2016, without any adjustments would have been $100.00, and 
the amount resulting from the methodology established in this rule 
would have been $75.00, the fee schedule amount taking effect on 
January 1, 2016, will be $87.50. Beginning on July 1, 2016, the fully 
adjusted fees will apply.
    Comment: Many commenters urged CMS to monitor patient access, 
utilization, and satisfaction levels after the implementation of the 
adjusted fees. Commenters also recommended adding a methodology to 
adjust prices if access problems develop.
    Response: We concur with the recommendation to closely monitor the 
impact of the reductions in payment on access to items and services and 
health outcomes. We do not believe that the reductions in payment will 
negatively impact access to items and services, so we do not find it 
necessary to adopt an additional methodology to account for access 
problems; however, we can

[[Page 66229]]

address the matter in future rulemaking, if necessary.
    After consideration of the public comments, and for the reasons we 
discussed in the proposed rule and above, we are finalizing the 
proposed provisions summarized above and in the proposed rule (79 FR 
40208), with the exception of the proposed definitions for rural state 
and frontier state and the proposed provision to use the national 
ceiling or 110 percent of the average of the RSPAs as a payment floor 
for adjusting the fee schedule amounts for these states. We are 
finalizing a definition of rural area and revising the definition of 
``Region'' as described above at Sec.  414.02. We are finalizing the 
proposed Sec.  414.210(a) and (g), except we have amended 42 CFR 
414.210(g) to note the application of competitive bidding information 
and limitation of inherent reasonableness authority, and the payment 
adjustments for areas within and outside the contiguous United States 
using information from CBPs.
2. Methodology for Items and Services Included in Limited Number of 
Competitive Bidding Programs
    In some cases, there may not be a sufficient number of CBAs and 
SPAs available for use in computing RSPAs, and therefore, a different 
methodology for implementing section 1834(a)(1)(F)(ii) of the Act would 
be necessary. For items and services that are subject to competitive 
bidding and have been included in CBP in no more than 10 CBAs, we 
proposed that payment amounts for these items in all non-competitive 
bidding areas be adjusted based on 110 percent of the average of the 
SPAs for the areas where CBPs are implemented (79 FR 40285). Using a 
straight average of the SPAs rather than a weighted average of the SPAs 
gives SPAs for the various CBAs equal weight regardless of the size of 
the CBA. We believe this avoids giving undo weight to SPAs for more 
heavily populated areas. We proposed the additional 10 percent 
adjustment to the average of the SPAs to account for unique costs such 
as delivering items in remote, isolated locations, but would make this 
a uniform adjustment for program simplification purposes.
    Under the DMEPOS CBP, there may be items and services for which 
implementation of CBPs could generate significant savings for the 
beneficiary and/or program, but which are furnished infrequently in 
most MSAs. In some cases, such items and services could be combined 
with other items and services under larger PCs or included in mail 
order competitions, to the extent that these are feasible options. For 
example, combining infrequently used traction equipment and frequently 
used hospital beds in the same product for bidding purposes would 
ensure that any beneficiary that needs traction equipment in the CBA 
would have access to the item from the suppliers also contracted to 
furnish hospital beds in the area. This would make it feasible to 
include traction equipment in numerous MSAs throughout the country and 
would allow use of the RSPA methodology described above. However, if a 
PC was established just for traction equipment for bidding purposes, 
the volume of items furnished in certain MSAs may not be sufficient to 
generate viable competitions under the program because there may be a 
limited number of suppliers interested in competing to furnish the 
items in local areas. Nonetheless, if savings for the beneficiary and/
or program are possible for the equipment, we are mandated to phase the 
items in under the DMEPOS CBP.
    In addition, for lower volume items within large PCs, such as 
wheelchair accessories, we proposed to include these items in a limited 
number of local competitions rather than in all CBAs to reduce the 
burden for suppliers submitting bids under the programs as a whole. In 
these cases, for the purposes of implementing section 1834(a)(1)(G) of 
the Act, we proposed that payment amounts for these items in all areas 
where CBPs are not implemented be adjusted based on 110 percent of the 
average of the SPAs for the areas where CBPs are implemented. We 
proposed the additional 10 percent adjustment to the national average 
price to account for unique costs in certain areas of the country such 
as delivering items in remote, isolated locations. For example, the PC 
for standard mobility in the 9 Round 1 CBAs includes 25 HCPCS codes for 
low volume wheelchair accessories that are not included in the PC for 
standard wheelchairs, scooters, and related accessories in the 100 
Round 2 CBAs. We proposed that payment amounts for these items in areas 
where CBPs are not implemented be adjusted based on 110 percent of the 
average of the SPAs for the 9 Round 1 areas where CBPs are implemented 
(79 FR 40285). Alternatively, we could include these low volume items 
in all PCs in all 109 CBAs and suppliers would need to develop bid 
amounts and enter bids for these 25 codes for low volume items such as 
toe loop holders, shock absorbers and IV hangers. Including these 25 
Healthcare Common Procedure Coding System (HCPCS) codes for low volume 
wheelchair accessories in the PCs under the 9 Round 1CBAs means that 
suppliers submitting bids for wheelchairs have 25 bid amounts to 
develop and enter per CBA for these items, or a total of 225 bid 
amounts to develop and enter for these low volume items if bidding for 
wheelchairs in all 9 Round 1 CBAs. In contrast, including these codes 
in the PCs under all 109 CBAs means that suppliers submitting bids for 
wheelchairs have 2,725 bid amounts to develop and enter for these low 
volume items, if biding for wheelchairs in all 109 CBAs. We believe 
that adjusting fee schedule amounts based on SPAs from 10 or fewer CBAs 
achieve the savings mandated by the statute for these items while 
greatly reducing the burden on suppliers and the program in holding 
competitions for these items in all 109 CBAs across the country.
    Finally, if contracts and SPAs for low volume items included in a 
limited number of CBAs expire and the items are not included in future 
CBPs, we proposed to use the information from the past competitions to 
adjust the payment amounts for these items nationally based on 110 
percent of the average of the SPAs for the areas where CBPs were 
implemented (79 FR 40286). Even though the SPAs may no longer be in 
effect, we believe it is reasonable to use the information to reduce 
excessive payment amounts for items and services as long as the SPAs 
did not result in a negative impact on access to quality items and 
services while they were in effect and as long as the amounts are 
adjusted to account for increases in costs over time. For example, 4 
codes for adjustable wheelchair seat cushions were included in the 
Round 1 Rebid, with SPAs that were approximately 25 percent below the 
fee schedule amounts being in effect in 9 CBAs from January 2011 thru 
December 2013. These items were not bid in future rounds due to the low 
volume of use relative to other wheelchair seat cushions. During the 
course of the 3-year contract period when the SPAs were in effect in 
the 9 areas, there were no reports of access problems and there were no 
negative health outcomes as a result of including these items under 
CBPs. For the future, savings for these items could be achieved by 
including them in future competitions or by using the previous SPAs, 
updated by an economic update factor to account for increases in costs. 
If the decision is made not to include these items in future 
competitions, we believe savings can and should still be obtained based 
on information from the

[[Page 66230]]

previous competitions. The comments and our responses are set forth 
below.
    Comment: Several commenters suggested that in the instances where 
the items and services included in limited number of CBPs, the adjusted 
fee schedule amounts for rural, frontier and non-contiguous areas 
should be greater than 110 percent of the average of the SPAs because 
the commenters believe that the cost of furnishing DMEPOS items in 
these areas are more than 10 percent higher than the cost of furnishing 
DMEPOS items in the CBAs. The commenters suggested using greater than 
110 percent of the average of the SPAs to adjust the fee schedule 
amounts for rural, frontier, and non-contiguous areas.
    Response: We disagree with this comment because we do not have 
direct evidence that the cost of furnishing DMEPOS items in rural, 
frontier, or non-contiguous areas is greater than the costs of 
furnishing the items in CBAs. In some cases, the cost of furnishing 
DMEPOS items in the CBAs may be greater than the costs of furnishing 
the items in rural, frontier, or non-contiguous areas, but we have no 
direct evidence of this either. Our proposal struck a balance by using 
110 percent of the average of the SPAs rather than 100 percent of the 
average of the SPAs to account for the possibility that there may be 
slightly higher costs for furnishing items and services in certain 
areas than the cost of furnishing the items in the CBAs. Absent 
additional evidence, we believe that paying more than 110 percent of 
the average of the SPAs for the CBAs is not appropriate. However, we 
can consider making changes in the future if new information is made 
available.
    Comment: Some commenters stated that that items that were excluded 
from CBP after initially being in the program should be excluded from 
the adjustment of fees One commenter argued that the SPAs for items 
only included in CBPs during the Round 1 Rebid are no longer reflective 
of the true and current cost of the items. Also, one commenter argued 
that if CMS included items in CBPs and then decides not to include the 
items in subsequent CBPs, this is an indication that CMS believes the 
items are not well-suited for competitive bidding. Other commenters 
stated that data from less than 10 CBPs is not enough data to determine 
what the payment amounts should be for the items on a national basis.
    Response: We disagree with these comments. We believe that SPAs 
based on supplier bids from CBPs established in recent years are far 
more reflective of the true and current cost of the items than fee 
schedule amounts based on supplier charges from 1986 and/or 1987. There 
may be reasons why items are not included in subsequent CBPs, such as 
the fact that the item is a low volume item such as one of the hundreds 
of HCPCS codes for wheelchair options and accessories that is not 
included in subsequent CBPs to reduce the burden and cost of suppliers 
submitting bids for a product category (for example, wheelchairs) that 
already includes over a hundred higher volume items (HCPCS codes). It 
does not mean that CMS believes that the item is not suitable for 
competitive bidding. We believe that recent data from less than 10 CBPs 
is enough data to determine what the payment amounts should be for the 
items on a national basis, especially for those items that are 
furnished on a limited basis to a small number of beneficiaries 
throughout the United States yet are items for which implementation of 
CBPs or adjustments to payment amounts using information from CBPs is 
mandated by the statute. Using pricing from 10 or fewer CBPs allows for 
implementation of the statutory requirement to implement competitive 
bidding for the item.
    After consideration of the public comments, we are finalizing the 
rule in Sec.  414.210(g)(3) to include payment adjustments for items 
and services included in no more than ten competitive bidding programs 
reduced to 110 percent of the unweighted average of the single payment 
amounts. We added technical changes to the final regulation text from 
the proposed regulation text by adding the term ``ten or fewer'' for 
added clarification. We are also finalizing the rule in Sec.  
414.210(g)(4) for payment adjustments using data on items and services 
included in competitive bidding programs no longer in effect and 
specify that we will be updating the payment amounts prior to adjusting 
the fee schedule amounts as described above.
3. Adjusted Payment Amounts for Accessories Used With Different Types 
of Base Equipment
    There may be situations where the same accessory or supply 
identified by a HCPCS code is used with different types of base 
equipment, and the item (HCPCS code) is included in one or more PCs 
under competitive bidding for use with some, but not all of the 
different types of base equipment it is used with. For these 
situations, we proposed (79 FR 40286) to use the weighted average of 
the SPAs from CBPs and PCs where the item is included for use in 
adjusting the payment amounts for the item (HCPCS code). We believe 
that it would be unnecessarily burdensome to have different fee 
schedule amounts for the same item (HCPCS code) when it is used with 
similar, but different types of base equipment. We believe that the 
costs of furnishing the accessory or supply should not vary 
significantly based on the type of base equipment it is used with. 
Therefore, we sought public comments on addressing situations where an 
accessory or supply identified by a HCPCS code is included in one or 
more PCs under competitive bidding for use with more than one type of 
base equipment. In these situations, we proposed to calculate the SPA 
for each CBA by weighting the SPAs from each PC in that CBA by national 
allowed services. This would result in the calculation of a single SPA 
for the item for each CBA. The single SPA per code per CBA would then 
be used in applying the payment adjustment methodologies proposed 
above. For example, HCPCS code Exxx1 describes a tray used on a 
wheelchair. Exxx1 was included in a PC for manual wheelchairs in all 
CBAs and in a separate, second PC for power wheelchairs in all CBAs. 
SPAs for Exxx1 under the manual wheelchair PC are different than the 
SPAs for Exxx1 under the power wheelchair PC. Under the proposed 
methodology, national allowed services would be used to compute a 
weighted average of the SPAs for code Exxx1 in each of the CBAs. So, 
rather than having 2 different SPAs for the same HCPCS code in the same 
CBA, we would have 1 SPA for the code for the CBA. If the item is 
included in only one PC, we proposed to use the SPAs for the item from 
that PC in applying the payment adjustment methodologies proposed above 
(79 FR 40287). The comments and our responses are set forth below.
    Comment: Several commenters argued that accessories used with 
different base equipment have higher service costs. They pointed out 
cases where CMS established different SPAs for the same accessories 
when used with different base equipment included in different PCs. The 
commenters do not believe that SPAs established for a HCPCS code 
describing an accessory used with one type of base item (for example, 
standard power wheelchair) should be used to adjust the fee schedule 
amounts for the HCPCS code that would govern payment for the accessory 
when it is used with a different type of base item (for example, 
complex rehabilitative power wheelchair).
    Response: We disagree. We believe that using the weighted average 
of the SPAs established for accessories used

[[Page 66231]]

with different base equipment takes into account any difference in the 
cost of furnishing the accessories with different types of base 
equipment in setting the overall rate for the accessories. We believe 
it is administratively burdensome and unnecessary to have more than one 
fee for the same item.
    Comment: Some commenters suggested that composite bids and items 
weights make some accessories under-bid when they have a low weight 
relative to other items in the PC or relative to the same item in a 
different PC. For example, a HCPCS code describing a wheelchair 
accessory included in two different PCs, one for power wheelchairs and 
one for manual wheelchairs might be underbid in one PC if the item 
weight for the item is very low relative to the item weight for the 
item in the other PC. The commenter argued that, creating a weighted 
payment amount from the SPAs for the item from the manual and power 
wheelchair PCs distorts the true cost of the item if the item was 
under-bid in one PC because it had a low weight.
    Response: We disagree. Suppliers are required to submit a bona fide 
bid for every item in every product category and the bids are screened 
to ensure that they are all bona fide. In addition, we believe that the 
costs of the accessories described by a single HCPCS code do not vary 
depending on what type of base equipment the item is used with. To the 
extent that the costs do vary, combining the SPAs for the accessories 
from different product categories results in payment amounts that 
reflect the average costs of the accessory when used in conjunction 
with various types of base equipment. If an item was underbid due to 
its low volume, that bid would not be considered for a contract.
    After consideration of the public comments, we are finalizing the 
rule as proposed in Sec.  414.210(g)(5) for adjusted payment amounts 
for accessories used with different types of base equipment, when 
included in more than one product category in a CBA under competitive 
bidding, a weighted average of the single payment amounts for the code 
is computed for each CBA based on the total number of allowed services 
for the item on a national basis for the code from each product 
category prior to applying the payment adjustment methodologies under 
the section. We also made an additional change to the regulation from 
the proposed rule for added clarification by specifying that ``the 
total number of allowed services for the item on a national basis for 
the code from each product category'' is completed ``prior to applying 
the payment adjustment methodologies under the section.''
4. Adjustments to Single Payment Amounts That Result From Unbalanced 
Bidding
    Within the HCPCS there are instances where there are multiple codes 
for an item that are distinguished by the addition of a hierarchal 
feature(s). Under competitive bidding, the code with the higher 
utilization would receive a higher weight and the bid for this item 
would have a greater impact on the composite bid and competitiveness of 
the supplier's overall bid for the product category (PC) within the CBP 
than the bid for the less frequently used alternative. This can result 
in unbalanced bidding where the bids and SPAs for the item without the 
additional features is higher than the bids and SPAs for the item with 
the additional features due to the fact that the item with the features 
is utilized more than the item without the features and therefore 
receives a higher weight. In the proposed rule (79 FR 40287), we 
identified the case where unbalanced bidding resulted in higher SPAs 
for enteral infusion pumps without alarms than enteral infusion pumps 
with alarms, even though pumps without alarms have become virtually 
obsolete. In this case, the alarm is the hierarchal feature. Only 0.3 
percent of beneficiaries using enteral infusion pumps received a pump 
without an alarm in 2012 according to Medicare claims data. Clearly, 
separately identifying pumps with alarms and pumps without alarms is no 
longer necessary, yet the codes for both types were included in the 
CBPs, resulting in a case of unbalanced bidding that could have been 
avoided if only one code for enteral infusion pumps existed. Likewise, 
in 2006, codes were added for portable power wheelchairs and power 
wheelchairs with less functionality (Group 1) than those commonly used 
by beneficiaries (Group 2). All of the codes for standard power 
wheelchairs meet the same needs for power wheelchairs used in the 
patient's home. The features of being more expensive, sturdier non-
portable power wheelchairs or higher performing power wheelchairs are 
the hierarchal features for the standard power wheelchairs. Although 
the codes for portable power wheelchairs and Group 1 power wheelchairs 
were added in order to provide a less expensive alternative for power 
wheelchairs used in the home, beneficiaries did not take advantage of 
the lower priced, alternative equipment. Only 0.9 percent of 
beneficiaries using standard power wheelchairs received a portable or 
Group 1 power wheelchair in 2012 according to Medicare claims data. The 
goal of creating savings for beneficiaries by having codes for economy 
power wheelchairs did not materialize, yet the codes for these types of 
power wheelchairs were included in the CBPs, resulting in a case of 
unbalanced bidding that could have been avoided if the codes for the 
economy power wheelchairs did not exist. For the purpose of 
implementing section 1834(a)(1)(G) of the Act, and in making 
adjustments to payment amounts under sections 1834(a)(1)(F)(ii), 
1834(h)(1)(H)(ii), and 1842(s)(3)(B) of the Act, we proposed that the 
payment amounts for infrequently used codes that describe items and 
services with fewer features than codes with more features be adjusted 
so that they are no higher than the payment amounts for the more 
frequently used codes with more features (79 FR 40287). We sought 
public comments on this issue and our proposed provision to address 
this issue. The comments and our responses are set forth below.
    Comment: A commenter suggested that ``hierarchal feature'' be 
better defined. Another commenter suggested that weighing based on 
utilization rates ignores whether there were supply issues that 
affected the utilization rates. One commenter also suggested that 
balanced bidding does not reflect SPA cost differences based on the 
features of equipment.
    Response: We agree that hierarchal features should be clearly 
identified for the purpose of implementing the proposed rule. We will 
limit the final policy by identifying two specific scenarios where the 
hierarchal features involved are additional features or features with 
additional functionality. In the future, we will either add other 
scenarios or develop a definition of ``hierarchal features.'' 
Therefore, the final policy will only apply to the specific cases of 
unbalanced bidding that were identified in the proposed rule that 
clearly show that certain equipment has features that exceed that of 
other equipment.
    After consideration of the public comments, we will limit the final 
policy by identifying two specific scenarios where the hierarchal 
features involved are additional features or features with additional 
functionality. In the future, we will either add other scenarios or 
develop a way to define ``hierarchal features'' in general, or in a way 
that would identify various scenarios, which we expect to address in 
future rulemaking. Therefore, the final policy will only apply to the 
specific cases of unbalanced bidding that were identified

[[Page 66232]]

in the proposed rule (79 FR 40287) that clearly show that certain 
equipment has features that exceed that of other equipment. 
Specifically, we are adding Sec.  414.210(g)(6) and requiring that 
adjusted fee schedule amounts for Group 1 power wheelchairs or Group 2 
portable power wheelchairs cannot exceed the adjusted fee schedule 
amounts for Group 2, non-portable power wheelchairs in order to avoid 
situations where Medicare allowed payment amounts for power wheelchairs 
with less functionality are established that are higher than fee 
schedule amounts for power wheelchairs with more functionality. We are 
also finalizing a rule at Sec.  414.210(g)(6) that adjusted fee 
schedule amounts for enteral infusion pumps without alarm cannot exceed 
the adjusted fee schedule amounts for enteral infusion pumps with 
alarm. We believe that wheelchairs that can go farther, faster, can 
climb over higher obstacles, or are not portable and more sturdy have 
features that exceed wheelchairs that travel shorter distances, go 
slower, climb over lower obstacles, or are portable and less sturdy. 
Payment amounts for shorter distance, slower, smaller obstacle 
climbing, less sturdy, power wheelchairs should not be higher than the 
payment amounts for longer distance, faster, higher obstacle climbing, 
sturdy, power wheelchairs. An enteral feeding pump with a safety alarm 
includes additional features than a pump without such an alarm. Payment 
amounts for enteral feeding infusion pumps without an alarm should not 
be higher than the payment amounts for pumps with an alarm. We will 
consider whether to add a definition of hierarchal feature, or to apply 
the rule we proposed to other items not identified above through future 
notice and comment rulemaking.
5. National Mail Order Program--Northern Mariana Islands
    While Section 1847(a)(1)(A) of the Act provides that CPBs be 
established throughout the United States, the definition of United 
States at section 210(i) of the Act does not include the Northern 
Mariana Islands. We therefore previously determined that the Northern 
Mariana Islands are not considered an area eligible for inclusion under 
a national mail order CBP. For the purpose of implementing the 
requirements of section 1834(a)(1)(F)(ii) of the Act, we proposed that 
the payment amounts established under a national mail order CBP would 
be used to adjust the fee schedule amounts for mail order items 
furnished to beneficiaries in the Northern Mariana Islands (79 FR 
40287). We proposed that the adjusted fee schedule amounts would be 
equal to 100 percent of the amounts established under the national mail 
order CBP (79 FR 40287).
    We solicited comments on these proposals. The comments and our 
responses are set forth below.
    Comment: A few commenters recommended waiting for the second round 
of bidding for the national mail-order CBP before applying the payment 
amount in order to allow more time to determine if the competitive 
bidding payment amounts allow access to items and services and acquire 
more pricing points over an extended period of time. They further 
recommended increasing payment amounts for the national mail order SPA 
for the Northern Mariana Islands to limit any access or pricing 
complications.
    Response: We disagree with these suggestions. The national mail 
order SPAs currently apply to items shipped to various remote areas of 
the United States and have not resulted in any problems with access to 
mail order items in these areas. Therefore, we believe these amounts 
can be used to adjust the mail order fee schedule amounts for the 
Northern Mariana Islands effective January 1, 2016.
    After consideration of the public comments and for the reasons we 
previously articulated, we are finalizing the proposal regarding the 
National Mail Order Program and the Northern Mariana Islands at Sec.  
414.210(7) to provide that the fee schedule amounts for mail order 
items furnished in the Northern Mariana Islands are adjusted so that 
they are equal to 100 percent of the single payment amounts established 
under a national mail order program.
6. Updating Adjusted Payment Amounts
    In accordance with section 1834(a)(1)(F)(iii) of the Act, the 
adjusted payment amounts for DME must be updated as additional items 
are phased in or information is updated. We proposed to add regulation 
text indicating that we would revise the adjusted payment amounts for 
DME, enteral nutrients, supplies, and equipment, and OTS orthotics each 
time a SPA is updated following one or more new competitions, which may 
occur at the end of a contract period, as additional items are phased 
in, or as new programs in new areas are phased in (79 FR 40287). This 
is required by section 1834(a)(1)(F)(iii) for DME. Since we believe it 
is reasonable to assume that updated information from CBPs would better 
reflect current costs for furnishing items and services, we proposed 
regulations to require similar updates for enteral nutrients, supplies, 
and equipment, and OTS orthotics.
    As we indicated above, if the only SPAs available for an item are 
those that were established under CBP that are no longer in effect, we 
proposed to use these SPAs to adjust payment amounts using the 
methodologies described above and we proposed to do so following 
application of inflation adjustment factors. We proposed that the 
inflation adjustment factor would be based on the percentage change in 
the Consumer Price Index for all Urban Consumers (CPI-U) from the mid-
point of the last year the SPAs were in effect to the month ending 6 
months prior to the date the initial payment adjustments would go into 
effect. The adjusted payment amounts would continue to be updated every 
12 months using the percentage change in the CPI-U for the 12-month 
period ending 6 months prior to the date the updated payment 
adjustments would go into effect (79 FR 40288).
    The payment amounts that would be adjusted in accordance with 
sections 1834(a)(1)(F)(ii) and (iii) of the Act for DME, section 
1834(h)(2)(H)(ii) of the Act for orthotics, and section 1842(s)(2)(B) 
of the Act for enteral nutrients, supplies, and equipment shall be used 
to limit bids submitted under future competitions of the DMEPOS CBP in 
accordance with regulations at Sec.  414.414(f). Section 
1847(b)(2)(A)(iii) prohibits the awarding of contracts under a CBP 
unless total payments made to contract suppliers in the CBA are 
expected to be less than the payment amounts that would otherwise be 
made. In order to assure savings under a CBP, the fee schedule amount 
that would otherwise be paid is used to limit the amount a supplier may 
submit as their bid for furnishing the item in the CBA. The payment 
amounts that would be adjusted in accordance with sections 
1834(a)(1)(F)(ii) and (iii) of the Act for DME, section 
1834(h)(2)(H)(ii) of the Act for orthotics, and section 1842(s)(2)(B) 
of the Act for enteral nutrients, supplies, and equipment would be the 
payment amounts that would otherwise be made if payments for the items 
and services were not made through implementation of a CBP. Therefore, 
the adjusted fee schedule amounts would become the new bid limits (79 
FR 40288).
    We solicited comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Some commenters suggested updating adjusted fees yearly 
with CPI-U and not freeze it for 3 years until the next.

[[Page 66233]]

    Response: We disagree. Contracts and SPAs are replaced at least 
once every 3 years, following one or more new competitions and as other 
items are added to programs established under Subpart F of this part, 
and increased costs in doing business are factored into the bids with 
each new competition. In addition, suppliers submitting bids under the 
CBPs are educated that their bids will be used in establishing SPAs 
that will be in effect for the entire duration of the contract period. 
Therefore, we believe that suppliers take increased costs and prices 
into account when developing their bids. In addition, because section 
1847(b)(2)(A)(iii) of the Act prohibits the awarding of contracts under 
a CBP if the total amounts paid to contract suppliers are expected to 
be more than the total amounts that would otherwise be paid, we believe 
that the intent of competitive bidding is to product a reduction in 
payment amounts rather than an increase in payment amounts. In lieu of 
establishing a CBP in an area, the authorities under the statute for 
adjusting fee schedule amounts based on information from CBPs must be 
used; however, in no case should it result in an increase in the 
amounts that would otherwise be paid. If an inflation adjustment factor 
is applied to fee schedule amounts that are adjusted by the 
methodologies we are adopting in this final rule, it could result in an 
amount that is greater than the fee schedule amount that would 
otherwise be paid, and we believe that this is contrary to the intent 
of the statute.
    After consideration of the public comments, for the reasons we set 
forth above, we are finalizing the proposals and are adding Sec.  
414.210(g)(8) to indicate that adjusted fee schedule amounts are 
revised each time an SPA for an item or service is updated following 
one or more new competitions and as other items are added to programs 
established under Subpart F of this part.
    Table 32 provides a summary of the final methodologies intended to 
achieve savings by adjusting fee schedule amounts using information 
from CBPs. With regard to all methodologies in this final rule that are 
intended to achieve savings by adjusting fee schedule amounts using 
information from CBPs, we are adding a provision specifying that in any 
case where application of these methodologies results in an increase in 
the fee schedule amount, the adjustment to the fee schedule amount is 
not made.

 Table 32--Summary of Final Methodologies for Adjusting Payment in Non-
                                Bid Areas
------------------------------------------------------------------------
       Proposed Methodology                     Calculations
------------------------------------------------------------------------
(1) Adjustments for Items Included
 in More than 10 CBAs*:
    (a) Regional Adjustments        --Adjusted payment equal to the RSPA
     Limited by National             (calculated using the un-weighted
     Parameters for Items            average of SPAs from CBAs that are
     Furnished Within the            fully or partially located with a
     Contiguous United States.       BEA region) limited by a national
                                     floor and ceiling. The national
                                     ceiling and floor would be set at
                                     110 percent and 90 percent,
                                     respectively, of the average of the
                                     RSPAs calculated for each of the 48
                                     contiguous states and District of
                                     Columbia (national average RSPA).
    (b) Adjustments for Rural       --Adjusted payment for areas
     Areas.                          designated as rural areas based on
                                     110 percent of the national average
                                     RSPA.
    (c) Adjustments for Items       --Adjusted payment for non-
     Furnished Outside the           contiguous areas (e.g., Alaska,
     Contiguous United States.       Guam, Hawaii) based on the higher
                                     of the average of SPAs for CBAs in
                                     areas outside the contiguous U.S.
                                     or 110 percent of the national
                                     average RSPA applied to adjustments
                                     within the contiguous U.S.
(2) Adjustments for Lower Volume    --Adjusted payment based on 110
 or Other Items Included in 10 or    percent of the un-weighted average
 Fewer CBAs*.                        of the SPAs for the areas where
                                     CBPs are implemented for contiguous
                                     and non-contiguous areas of the
                                     United States.
(3) Adjustments for Items Where     --Payment based on adjusted payment
 the Only Available SPA is from a    determined under 1) or 2) above and
 CBP No Longer in Effect.            adjusted on an annual basis based
                                     on the CPI-U update factors from
                                     the mid-point of the last year the
                                     SPAs were in effect to the month
                                     ending 6 months prior to the date
                                     the initial payment adjustments
                                     would go into effect.
(4) Adjustments for Accessories
 Used with Different Types of Base
 Equipment:
    (a) Adjustments for             --SPAs for the item from that one
     Accessories Included in One     Product Category would be used in
     CBP Product Category.           determining the adjusted payment
                                     amounts under methodologies 1) or
                                     2).
    (b) Adjustments for             --A weighted average of the SPAs for
     Accessories Included in One     the item in each CBA where the item
     or More CBP Product Category.   is included in more than one
                                     Product Category would be used to
                                     determine the adjusted payment
                                     amounts under methodologies 1) or
                                     2).
(5) Payment Adjustments to          --Fee schedule amounts adjusted to
 Northern Mariana Islands Using      equal the SPAs under the national
 the National Mail Order SPAs.       mail order CBP.
------------------------------------------------------------------------

VI. Final Payment Methodologies and Payment Rules for Durable Medical 
Equipment and Enteral Nutrition Furnished Under the Competitive Bidding 
Program

A. Background

    The payment rules for DME have changed significantly over the years 
since 1965, resulting in the replacement of the original monthly rental 
payment methodology with lump sum purchase and capped rental payment 
rules, as well as separate payment for repairs, maintenance and 
servicing, and replacement of expensive accessories for beneficiary-
owned equipment. In our experience, these payment rules have been 
burdensome to administer and have added program costs associated with 
expensive wheelchair repairs and payment for loaner equipment, and have 
significantly increased costs associated with frequent replacement of 
expensive accessories at regular intervals for items such as continuous 
positive airway pressure (CPAP) devices.
    We believe that we have general authority under section 1847(a) and 
(b) of the Act to establish payment rules for DME and enteral nutrition 
equipment that are different than the rules established under section 
1834(a) of the Act for DME, section 1842(s) for enteral nutrients, 
supplies, and equipment, and, section 6112(b) of Omnibus Budget 
Reconciliation (OBRA) Act of 1989 (Pub. L. 101-239) for enteral pumps. 
We

[[Page 66234]]

believe that lump sum purchase and capping rentals for certain DME and 
enteral nutrition may no longer be necessary to achieve savings under 
the program when competitive bidding can be used to establish a 
reasonable monthly payment. We also believe that payment on a 
continuous rental basis--that is, ongoing monthly payments not subject 
to a cap--could help to ensure that medically necessary DME and enteral 
nutrition equipment is kept in good working order for the entire 
duration of medial need and would make it easier for beneficiaries to 
change from one supplier to another since the new supplier would not be 
faced with a finite number of rental payments. Currently, there is no 
requirement that a supplier take responsibility for repairing equipment 
once it is owned by a beneficiary, which may cause difficulties for the 
beneficiary to find a supplier to undertake such services. We believe 
that continuous rental payment would eliminate such issues because the 
supplier of the rented equipment would always be responsible for 
keeping the equipment in good working order. We do not believe that 
continuous monthly rental payments for DME and enteral nutrition would 
negatively impact access to items and services and could potentially be 
implemented in a manner that does not increase program expenditures 
since suppliers would be paid based on bids for furnishing the same 
general items and services they would otherwise provide. In addition, 
since Medicare payment for rental of DME and enteral nutrition 
equipment include payment for maintenance and servicing of the rented 
equipment, the suppliers would be directly responsible for meeting the 
monthly needs of the beneficiary in terms of keeping the rented 
equipment in good working order.
    As explained in more detail below, we proposed to revise the 
regulation by adding a new section at 42 CFR 414.409 with special 
payment rules to replace existing payment rules at Sec.  414.408 for 
certain items and services in no more than 12 CBPs where these rules 
are applied. We also proposed to revise Sec.  414.412 to address the 
submission of bids for furnishing items and services paid in accordance 
with these proposed special payment rules.

B. Summary of the Proposed Provisions and Responses to Comments on the 
Payment Methodologies and Payment Rules for Durable Medical Equipment 
and Enteral Nutrition Furnished Under the Competitive Bidding Program

    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the DMEPOS CBP. 
Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.
    We proposed to update the regulations to include proposed special 
payment rules for paying claims for certain DME or enteral nutrition 
under a limited number of CBPs. We proposed to revise the regulation by 
adding a new section at 42 CFR 414.409 with special payment rules to 
replace specific payment rules at Sec.  414.408 for these items and 
services in CBPs where the special rules are applied. We also proposed 
to revise Sec.  414.412 regarding submission of bids for furnishing 
items and services paid in accordance with these special payment rules.
    We believe that alternative payment models for certain DME and 
enteral nutrition may achieve savings under the program when 
competitive bidding can be used to establish a reasonable monthly 
payment. We also believe that payment on a continuous rental basis--
that is, ongoing monthly payments not subject to a cap--could help to 
ensure that medically necessary DME and enteral nutrition equipment is 
kept in good working order for the entire duration of medial need and 
would make it easier for beneficiaries to change from one supplier to 
another since the new supplier would not be faced with a finite number 
of rental payments. Currently, there is no requirement that a supplier 
take responsibility for repairing equipment once it is owned by a 
beneficiary, which may cause difficulties for the beneficiary to find a 
supplier to undertake such services. We believe that continuous rental 
payment would eliminate such issues because the supplier of the rented 
equipment would always be responsible for keeping the equipment in good 
working order. We do not believe that continuous monthly rental 
payments for DME and enteral nutrition would negatively impact access 
to items and services and could potentially be implemented in a manner 
that does not increase program expenditures since suppliers would be 
paid based on bids for furnishing the same general items and services 
they would otherwise provide. In addition, since Medicare payment for 
rental of DME and enteral nutrition equipment include payment for 
maintenance and servicing of the rented equipment, the suppliers would 
be directly responsible for meeting the monthly needs of the 
beneficiary in terms of keeping the rented equipment in good working 
order. We sought comments on these proposals.
    We proposed (79 FR 40291 through 40292) to phase-in the special 
payment rules described in sections VI.B.1 and VI.B.2 below in a 
limited number of areas for a limited number of items initially to 
determine whether it is in the best interest of the Medicare program 
and its beneficiaries to phase these rules in on a larger scale based 
on evaluation of the rules' effects on Medicare program costs, quality 
of care, and access to items and services. In order to monitor the 
impact of phasing in the special payment rules in no more than 12 CBAs, 
we proposed that, at a minimum, we would utilize evaluation criteria 
that are consistent with the current evaluation criteria for monitoring 
the impact of the CBP on utilizers of items and services in CBAs. To 
evaluate the quality of care for beneficiaries affected by the special 
payment rules, we proposed that, at a minimum, we would utilize health 
status outcomes based criteria that would measure specific indicators 
such as mortality, morbidity, hospitalizations, emergency room, and 
other applicable indicators unique to each product category. To 
evaluate beneficiary access to necessary items and services we proposed 
that, at a minimum, we would monitor utilization trends for each 
product category and track beneficiary complaints related to access 
issues. To evaluate the cost of the program, we proposed that, at a 
minimum, we would analyze the claims data for allowed services and 
allowed cost for each product category and the associated accessories, 
supplies and repair cost in the 12 CBAs and the comparator CBAs. We 
proposed to analyze the effect of the proposed payment rules on 
beneficiary cost sharing.
    We proposed that in any competition where these rules are applied, 
suppliers and beneficiaries would receive advance notice about the 
rules at the time the competitions that utilize the rules are 
announced. The combined, total number of CBAs where the proposed rules 
in either section 1 or 2 would apply would be limited to twelve. In 
other words, it would not be twelve CBAs for the rules in section 1 and 
an additional twelve CBAs for the rules in section 2, but 12 CBAs 
total. In addition, we proposed that the PCs listed below would be 
phased in to include one or more of the CBAs that would number no more 
than twelve total. In addition, if a determination is made to phase-in 
these rules on a larger scale in additional

[[Page 66235]]

areas and for additional items based on program evaluation results 
regarding cost, quality, and access, the process for phasing in the 
rules and the criteria for determining when the rules would be applied 
would be addressed in future notice and comment rulemaking. This 
rulemaking would also address how the methodology for using these SPAs 
to adjust fee schedule amounts would need to be revised.
    We proposed that separate payment for all repairs, maintenance and 
servicing, and replacement of supplies and accessories for beneficiary-
owned DME or enteral nutrition equipment would cease in the CBAs where 
the payment rules proposed under this section are in effect. We 
proposed that if the beneficiary has a medical need for the equipment, 
the contract supplier would be responsible for furnishing new equipment 
and servicing that equipment. This option would ensure that 
beneficiaries continue to receive medically necessary equipment; 
including the supplies, accessories, maintenance and servicing that may 
be needed for such equipment. Please note that this would not apply to 
items which are not paid on a bundled, continuous rental basis. We 
proposed to revise the regulations at Sec.  414.409 to specify that any 
beneficiary who owns DME or enteral nutrition equipment and continues 
to have a medical need for the items should these rules take effect in 
a CBA where they reside, would have the option to obtain new equipment, 
if medically necessary, and related servicing from a contract supplier. 
We requested comment as to whether a transitional process should be 
considered when claims are selected for review to determine whether 
they are reasonable and necessary and other safeguards are required to 
ensure timely delivery of the replacement DME so that individuals' 
mobility and ability to live independently is not adversely impacted by 
delays. While this could potentially increase beneficiary cost sharing, 
it would eliminate issues associated with repair of beneficiary-owned 
equipment.
    The Affordable Care Act (Patient Protection and Affordable Care Act 
of 2010, Pub. L. 111-148 (March 23, 2010), Sec. 3021) establishes the 
Center for Medicare and Medicaid Innovations (CMMI) which is authorized 
to test models to reduce Medicare and Medicaid expenditures while 
preserving or improving quality for beneficiaries of those two 
programs. We solicited comments on the option for testing the above 
special payment rules for DME and enteral nutrition using the CMMI 
demonstration authority in no more than 12 CBAs that would allow us to 
test and evaluate the special payment rules on a wider scale and 
determine whether the special payment rules reduce Medicare expenditure 
while preserving or improving the quality for Medicare beneficiaries. 
Regardless of the authority used to phase-in or test these special 
payment rules, we proposed to undertake rigorous evaluation to 
determine the rules' effects on program costs, quality, and access.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the DMEPOS CBP. 
Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.
    We received 28 public comments on this proposal from manufacturers, 
DMEPOS suppliers, coalitions, and beneficiaries. The comments and our 
responses are set forth below.
1. Payment on a Continuous Rental Basis for Select Items
    Under our general authority under section 1847(a) and (b) of the 
Act to establish payment rules for DME and enteral nutrition equipment, 
we proposed (79 FR 40292) to revise the regulation at 42 CFR 414.409 to 
allow for payment on a continuous monthly rental basis under future 
competitions in no more than 12 CBAs for one or more of the following 
categories of items and services: enteral nutrition, oxygen and oxygen 
equipment, standard manual wheelchairs, standard power wheelchairs, 
CPAP and respiratory assist devices (RADs), and hospital beds. We 
proposed that the SPAs established under the special payment rules 
would be based on bids submitted and accepted for furnishing rented DME 
and enteral nutrition on a monthly basis. We proposed that the SPAs 
would represent a monthly payment for each month that rented DME or 
enteral nutrition is medically necessary. The SPA for the monthly 
rental of DME would include payment for each item and service 
associated with the rental equipment including the ongoing maintenance 
and servicing of the rental equipment, and replacement of supplies and 
accessories that are necessary for the effective use of the equipment.
    Comment: Several commenters indicated that CMS does not have the 
authority to use bundled payments under the CBP.
    Response: We do not agree with this comment. The existing payment 
rules under section 1834 of the Act govern DMEPOS paid under the 
various fee schedules and do not directly apply to the CBP; therefore, 
CMS is not explicitly required to apply such rules to the CBP. Section 
1847 of the Act mandates the implementation of CBPs throughout the 
United States for the purpose of awarding contracts for furnishing 
competitively priced items and services described under section 
1847(a)(2) of the Act. As discussed in the proposed rule (79 FR 40290), 
we believe we have broad authority under section 1847 to establish 
payment rules for the CBP. In particular, consistent with section 
1847(a)(6), the general payment rules for the CBPs are governed by 
section 1847(b) which mandates payment based on bids submitted and 
accepted by Medicare for the competitively priced items and services. 
Therefore, we believe that we have discretion to establish rules on 
whether covered items are paid for on a purchase or rental basis as 
long as total payments to contract suppliers are expected to be less 
than the total amounts that would otherwise be paid.
    Comment: Several commenters felt that CMS has not demonstrated that 
a CBP that includes bundling meets the criteria for a demonstration 
under the CMMI.
    Response: We thank the commenters for their comments. If a decision 
is made to use CMMI demonstration authority to implement and evaluate 
payment on a bundled, continuous rental basis for DME and/or enteral 
nutrition, it would only be after CMMI has determined that a particular 
payment model meets the criteria established for such a demonstration.
    Comment: Many commenters expressed concerns that monthly bundled 
payments for DME and enteral nutrition would reduce quality and access 
to care. For example, they believe that if separate payments are not 
made for certain items, such as the ongoing replacement of CPAP 
accessories, contract suppliers will not have an incentive to replace 
the items when they need to be replaced. Other commenters suggested 
that specific parameters or guidelines for replacement of such items, 
such as the usual maximum number of accessories needed as provided in 
DME MAC local coverage policies, be established under the programs. 
Commenters were particularly vocal about the fact that these rules 
should not be phased in for enteral nutrition and that enteral 
nutrition is not a suitable product category for bundled monthly 
payments.

[[Page 66236]]

    Response: We do not agree. The rules are not being phased-in in 
limited areas due to concerns that suppliers contracted to provide 
items and services under these rules will not provide those items and 
services. The rules are being phased in to gauge whether rental caps 
are necessary in order to save money for items used on a longer term 
basis and whether the rules can address problems associated with repair 
of beneficiary-owned equipment. Suppliers awarded contracts under the 
programs must be in compliance with DMEPOS quality standards and 
supplier standards in order to remain a contract supplier and in order 
to continue to be an enrolled DMEPOS supplier under Medicare. As 
always, we will closely monitor contract suppliers and real time claims 
data and health outcomes data to ensure that suppliers are in 
compliance with the standards. Guidelines for the usual maximum amount 
of accessories expected to be medically necessary have already been 
established under local DME MAC policies, and suppliers will be 
educated to take the cost of replacing these accessories into account 
when establishing their bids. Suppliers submitting bids under the 
program will be educated that they cannot receive payment for 
furnishing DME without furnishing everything the patient needs each and 
every month they continue to need and use the equipment. As stated in 
the proposed rule, the impact of the rules on program expenditures, 
beneficiary cost sharing, access to items and services, and quality of 
care will be closely monitored and compared to impacts under comparator 
areas. However, in light of concerns regarding the impact of the rules 
on access to quality items and services, we are further limiting the 
scope of the phase in to CPAP devices and standard power wheelchairs, 
and we are not finalizing the remaining categories of items at this 
time. These two categories of items generate the greatest amount of 
separate payments for accessories and repair compared to enteral 
nutrition or any other category of DME described in section 1847(a)(2) 
of the Act.
    We will apply a focused and intense monitoring program to these two 
categories of items to evaluate quality of care and access to items and 
services, including specific accessories prescribed for beneficiaries 
under the programs to these two categories. Using real time claims 
analysis and health outcomes data, we will quickly identify potential 
problems and take action to ensure that contract suppliers are 
providing access to quality items and services under the programs. We 
believe these two DME categories will provide sufficient information in 
order to determine the overall effect of the special payment rules on 
program and beneficiary costs, quality, and access to items and 
services.
    Comment: Some commenters supported bundling for enteral nutrition. 
They noted that the beneficiary would not be responsible for 
maintaining the pump and temporary cessation of therapy would not occur 
while the pump is being repaired if it is not owned. Other commenters 
believed that bundled payment for enteral nutrition would be beneficial 
for short term nutritional therapy because the patient would no longer 
own a pump that is not needed. However, other commenters argued that 
CMS should exclude enteral nutrition from the bundled initiative 
because of the wide variation in cost of the enteral nutrients. Some 
commenters recommended establishing a monthly rental bundled payment 
based upon mode of delivery. Other commenters recommended establishing 
a separate bundled payment amount that would only cover the supplies 
and equipment used for each mode of delivery (syringe, gravity and 
pump) and would exclude enteral formulas from the bundle because of 
wide variation in cost and treatment.
    Response: We thank the commenters for their support and input. 
After careful consideration of the comments received on this topic, we 
will not be finalizing the proposal to phase in bundled, continuous 
monthly rental payment for enteral nutrition at this time.
    Comment: One commenter made suggestions for calculating the bundled 
payment rates for oxygen and oxygen equipment.
    Response: We thank the commenter for their input. We will not be 
finalizing the proposal to phase in bundled, continuous monthly rental 
payment for oxygen at this time.
    Comment: Many commenters opposed bundling monthly payment for all 
standard manual wheelchair bases with accessories or all standard power 
wheelchair bases with accessories or all standard and power wheelchair 
bases with accessories because they feel the different types are 
wheelchair bases are unique and should not be bundled together. Some 
recommended a bundled bid approach for standard manual or standard 
power wheelchairs and only those accessory items that are tied to the 
same medical necessity as the wheelchair. Some suggested bundling only 
3 codes or 6 accessory codes with each base code for wheelchairs based 
on utilization in order to simplify billing. Some suggested excluding 
repair and replacement items from the bundle. Commenters believed that 
bundling of multiple HCPCS codes into a single code for payment will 
further decrease access and quality of products and services and is 
complex. The commenters believes that a single bid code cannot 
accommodate the characteristics of the various technologies and varying 
manufacturing costs for standard manual or power wheelchairs. The 
commenters believe that there will be no mechanism to track utilization 
to ensure the beneficiaries still have access to the range of medically 
necessary technology. If base codes are combined then distinguishing 
coverage policies that reflect the medical and functional needs of 
beneficiaries cannot be developed. It provides a disincentive to 
suppliers to avoid high risk or complex beneficiaries and decreases 
beneficiary choices.
    Response: We will not be finalizing the proposal to phase in 
competitions for bundled, continuous monthly rental payment for 
standard manual wheelchairs at this time. The specific power wheelchair 
items and HCPCS codes included in competitions where special payment 
rules are applied will be announced to suppliers and beneficiaries in 
advance of the competitions with an explanation of why wheelchair bases 
are bundled together to the extent that they are under the competition.
    Comment: Many commenters were opposed to applying bundled monthly 
continuous rental payment rules to CPAP devices and RADs. Some 
commenters recommended enforcing the current replacement schedule for 
CPAP and RAD accessories as outlined in DME MAC local coverage policies 
under the CBPs that utilize the special payment rules. Other commenters 
stressed that the CPAP supply replacement schedules should be factored 
into the development of any bundled payment data and should be used to 
determine bundles and their respective amounts. In addition, commenters 
were concerned that bundling of CPAP removes all ability of CMS and 
providers to ensure that beneficiaries receive medically necessary 
equipment because they will not see claims for the items to know how 
often they are being replaced. For CPAP, some commenters urged CMS to 
craft policies integral to bundling such as a minimum service/contract 
level requirement for the provider to maintain with the beneficiary. 
Some commenters suggested that we require suppliers to check in on 
supply requirements with the beneficiaries.

[[Page 66237]]

    Response: After consideration of the public comments we received, 
we will not be finalizing the proposal to phase in competitions for 
bundled, continuous monthly rental payment for respiratory assist 
devices. But we will be finalizing the proposal to phase in 
competitions for bundled, continuous monthly rental payment for CPAP 
devices. We note that Medicare paid on a bundled, continuous monthly 
rental basis for CPAP devices under the fee schedules from 1989 thru 
1993 and did not encounter any problems related to access to necessary 
items and services during this time. The tables in the DME MAC local 
coverage policies listing the usual maximum amount of CPAP accessories 
expected to be reasonable and necessary are not tables that indicate 
how often these items need to be replaced. They represent how often 
claims for the accessories would be paid without the need to have 
additional medical documentation in the patient's record. They can be 
used as guidelines for the usual maximum amount that are typically 
needed, but under a bundled, continuous rental payment method for CPAP 
devices, the supplier would be expected to replace the accessories as 
often as necessary for the effective use of the CPAP device. If the 
usual number of masks needed is once every 6 months, the masks may need 
to be replaced less often in the case of some beneficiaries and more 
often than once every 6 months in the case of other beneficiaries. In 
any case where a replacement of an accessory is needed during a month, 
the contract supplier would be responsible for furnishing the necessary 
accessory, just as they would be responsible for repairing rented 
equipment whenever necessary. We will closely monitor contract 
suppliers to ensure that they are doing so.
    Comment: Two commenters opposed our proposal that the bids 
submitted for furnishing CPAP devices on a bundled, continuous monthly 
rental basis cannot exceed the 1993 fee schedule amounts for these 
items, increased by the covered item update factors provided for these 
items in section 1834(a)(14) of the Act. The commenters contended that 
equipment features developed since the establishment of the base year 
fees, such as a heated humidifier, would not be encompassed in the bid 
limits and instead suggested using a more recent base period for these 
items. Other commenters noted that the proposal to set bid limits for 
CPAP to 1993 fee schedule is inconsistent with the proposed methodology 
for the other bundled product categories which would use recent 
expenditures per beneficiary.
    Response: We do not agree with these comments. Historical bundled, 
monthly rental fee schedule amounts are available for CPAP devices and 
reflect a bundled monthly rental payment that was previously mandated 
and established for these items under the Medicare program. We believe 
that separate payment for CPAP accessories has led to overutilization 
of the accessories based on complaints received from beneficiaries over 
the years about suppliers shipping unnecessary quantities of 
accessories. Therefore, we believe that the average payment per 
beneficiary for equipment and accessories could result in a bid limit 
that is artificially high when compared to historic Medicare bundled 
monthly rental fees for CPAP devices that were in place for 5 years and 
did not result in any problems with access to necessary items and 
services. The 1993 fee schedule amounts for CPAP devices are based on 
historic reasonable charges that are representative of payment made to 
a supplier for furnishing these items on a bundled, continuous rental 
basis over a period of 5 years. The application of the covered item 
updates for DME in general, in section 1834(a)(14) of the Act, account 
for changes in the costs of furnishing covered items and services. 
Historic continuous bundled fee schedule amounts are not available to 
use to set the bid limit for the standard power wheelchair bundled 
category, therefore, current expenditure data would be used to set bid 
limits for the standard power wheelchair product category.
    Comment: Many commenters believed that continuous monthly rental 
payments for DME would increase the financial burden of the 
beneficiaries because instead of being limited to paying coinsurance 
for no more than 13 months of continuous use, they would be required to 
make coinsurance payments for as long as they use the equipment.
    Response: Our analysis strongly suggests that the benefits 
associated with paying on a continuous monthly rental basis outweigh 
the potential of increased copayments for the beneficiary. For items 
that are paid on a capped rental basis where title to the item 
transfers to the beneficiary after conclusion of the 13-month rental 
period, beneficiaries are responsible for maintaining and repairing the 
item after title transfer. Under the special payment rules that provide 
for payment on a continuous rental basis, beneficiaries will no longer 
be responsible for repair and maintenance of equipment because they 
will not own the equipment. The supplier will retain the title to the 
equipment and will be responsible for repair and maintenance. Although 
beneficiaries who use a CPAP device or power wheelchair for more than 
13 months of continuous use will pay coinsurance payments for 
additional rental months beyond 13 months of continuous use, the 
monthly payments include payment for ongoing costs such as replacement 
of accessories and repair and maintenance of equipment, which are also 
ongoing costs that exist under the current capped rental payment 
methodology. The cost of furnishing items and services is the same 
regardless of whether payment is made on a capped rental basis for 
equipment with separate payment for accessories, maintenance and 
servicing or on a bundled, continuous rental basis.
    Most importantly, the statute prohibits the awarding of contracts 
under a CBP if the total payments to contract suppliers under the CBP 
are expected to be more than what would otherwise be paid and we would 
confirm that this requirement is met prior to implementing prices 
established under these special payment rules.
    Comment: Some commenters were concerned that beneficiaries would 
not have the choice of opting out of the program although they would be 
notified about the alternative payment initiative.
    Response: We proposed to phase-in the special payment rules because 
we believe they will have a positive impact on beneficiary access to 
quality equipment that continues to remain in good working order, while 
lowering the administrative costs of the program, and eliminating the 
need for beneficiaries to locate suppliers willing to repair equipment 
they own. In order to receive payment for equipment subject to this 
program, beneficiaries do not have the option to opt out. The programs 
will be closely monitored.
    Comment: Most commenters were supportive of phasing in or testing 
the continuous rental bundled payment methodology on select products in 
limited areas. Some stakeholders suggested that bundled payment should 
be pilot tested first with a small subset of items and exclude complex 
items. Many commenters agreed that bundling will simplify complex 
administration procedures.
    Response: We agree with commenters that a phase-in limited to only 
a few select categories would be the best way to evaluate the impact of 
the special payment rules at this time. As such, we are not finalizing 
bundled, continuous payment rules for the following

[[Page 66238]]

categories of items: Enteral nutrition, oxygen and oxygen equipment, 
standard manual wheelchairs, respiratory assist devices and hospital 
beds. The special payment rules would only be phased in initially for 
the following categories of DME items: CPAP devices and standard power 
wheelchairs. We selected the category of CPAP devices because we 
believe the cost of paying separately for the expensive accessories 
used with these devices exceeds the amount of savings achieved from 
capping the rental payments for the equipment. We selected the category 
of power wheelchairs because we believe that payment on a separate, 
piecemeal basis for hundreds of various power wheelchair options and 
accessories is unnecessary and overly complex. In addition, power 
wheelchairs are the most frequently repaired DME item and we believe 
that phasing in payment on a continuous monthly rental basis would 
ensure access to power wheelchairs that are in good working order. As 
discussed in our proposal (79 FR 40291), the CBPs would be phased in as 
early as 2017, and would be closely monitored. Subsequent rulemaking 
would be necessary to adopt special payment rules for other items or in 
more than 12 CBAs.
    Comment: Some commenters recommended a bundled bid approach 
comprised of products associated with a single medical necessity or 
single coverage and payment policy. Some suggested accessories that are 
included in a bundle with the base equipment must be tied to the same 
medical necessity as the base equipment. One commenter suggested that 
beneficiaries meeting medical necessity for a support surface may also 
meet the medical necessity for a hospital bed; however, support 
surfaces and hospital beds should never be included in the same bundle.
    Response: These are issues that would be addressed in Medicare 
program guidance.
    Comment: Some commenters were concerned that CMS has not provided 
information about how the Agency will administer a bundled bid program 
so the lack of information violates the Administrative Procedure Act 
(APA). The commenter's claim the proposed rule only gives general 
outline of the bundling program but does not explain what makes up a 
bundle, how bids will be evaluated or pivotal bids will be selected to 
establish payment amounts. These commenters stated that CMS must 
publish a new proposed rule soliciting comments on the elements of the 
bidding program.
    Response: We disagree. We have issued rules concerning the general 
dictates of the CBP and this competition would be consistent with those 
rules. We would evaluate suppliers and bids consistent with those 
provisions except that the bids and the SPAs established based on those 
bids would be for the monthly rental of DME and all items and services 
necessary for the effective use of the DME (that is, all related 
supplies, accessories, maintenance and servicing, etc.). Bids would not 
be submitted for purchase of any item or for separate payment for 
accessories used with base DME items. Under the existing CBP, CMS 
specifies certain parameters, but then through the Request for Bids 
(RFB) and competitive bidding process, further addresses certain 
details. Similar to other CBPs that do not employ the special payment 
rules, we intend to conduct extensive education outreach programs prior 
to implementing competitions that apply the bundled continuous rental 
methodology so that suppliers are educated about the rules and 
understand what is required of the bidding suppliers. This includes 
advance notice of bidding and comparator areas and defining the bundled 
categories. We believe that our proposed rules were sufficiently 
detailed to enable the public to provide meaningful comments on them.
    Comment: Many commenters urged CMS to share the bundled bidding 
methodology with stakeholders and establish quality metrics before 
beginning the program. Some commenters suggested that to facilitate 
accurate bidding CMS must give suppliers per patient utilization and 
expenditures data by HCPCS codes. Some commenters argued that CMS 
states in the proposed rule that it will monitor and evaluate the 
quality and success of bundled payments but no metrics have been 
determined or shared by CMS. Some suggested that submitted claims data 
versus paid claims data must be used. Those commenters stated that bid 
limits must take into account all repairs, accessories, and rental 
payments divided by number of patients to create a monthly per patient 
allowable. Commenters stated that bids must include only patients with 
active rental periods in calculating the bid limit. Commenters also 
stated that CMS must identify the data parameters from which it will 
take data. Many commenters recommended that CMS establish quality 
metrics before implementing the bundled payment. Some commenters 
recommended providing safeguards for Medicare beneficiaries, setting 
proper expectations with providers and evaluating the feasibility of 
the bundled payment methodology by creating methods to identify 
beneficiaries not identified in claims data, establishing minimum 
standards of quality and quantity of services, tracking products 
provided to the beneficiaries furnished with equipment paid on a 
bundled continuous rental basis as compared to all other Medicare 
beneficiaries to ensure quality care is being provided and 
beneficiaries have access to most innovative products. Commenters 
suggested we conduct a long term longitudinal study to determine 
comorbidity costs and access to care with bundled payments.
    Response: We thank the commenters for their input. Consistent with 
the current CBP monitoring and oversight, CMS will employ a wide range 
of monitoring techniques before beginning any competition that applies 
the special payment rules. We will provide advance notice of the areas 
and comparator areas, defining bundles, verifying bona fide bids, and 
setting up monitoring techniques before beginning the competition. As 
we proposed in the proposed rule (79 FR 40291), in any competition 
where these final special payment rules are applied, we will provide 
advance notice of the rules at the time the competitions that utilize 
the rules are announced.
    In order to monitor the impact of phasing in the special payment 
rules in the no more than 12 CBAs we are finalizing, we will utilize 
evaluation criteria that are consistent with the current evaluation 
criteria for monitoring the impact of the CBP on utilizers of items and 
services in CBAs. To evaluate the quality of care for beneficiaries 
affected by the special payment rules, we will at a minimum, utilize 
health status outcomes based criteria that would measure specific 
indicators such as mortality, morbidity, hospitalizations, emergency 
room and other applicable indicators unique to each product category. 
To evaluate beneficiary access to necessary items and services we will 
monitor utilization trends for each product category and track 
beneficiary complaints related to access issues. To evaluate the cost 
of the program, we intend to analyze the claims data for allowed 
services and allowed cost for each product category and the associated 
accessories, supplies and repair cost in the 12 CBAs and the comparator 
CBAs. We will also analyze the effect of the proposed payment rules on 
beneficiary cost by analyzing number of monthly rental payments made 
compared to reductions in coinsurance

[[Page 66239]]

payments. Medicare has established quality standards, supplier 
standards, local medical review policies and other requirements that 
currently address furnishing medically necessary items and services, 
and CMS monitors whether these requirements have been met by suppliers, 
as applicable. Submitted charge data is not used to establish Medicare 
allowed payment amounts and therefore would not be a good bid limit or 
a limit used to ensure that payments under the programs are less than 
what would otherwise be paid.
    Comment: Some commenters argued that CMS did not provide 
information on how bids will be evaluated, what constitutes a bundle or 
how the pivotal bid will be selected to establish payment amounts. 
Commenters also indicated that CMS did not identify CBAs and comparator 
areas. Commenters also stated that there is no baseline for what 
constitutes a bundle in a product category so suppliers will not know 
what to bid. Commenters raised concerns that CMS has no way to compare 
bids because there is no consensus on what it takes to service patients 
who receive the bundle. Without an assessment tool and a baseline tool, 
those commenters believe that CMS has no way of comparing bids, or 
determining pivotal bids or verifying bona fide bids because there is 
no consensus on what is in the bundle or the intensity of the services 
patients who receive the bundle need. It would be difficult for 
suppliers to determine the appropriate amount to bid under a bundled 
payment method because there are many factors that would influence the 
cost associated with supplies, maintenance and repairs. Some expressed 
concerns about supplier challenges in determining the appropriate 
amount to bid because of factors such as case mix, variable cost of 
different types of base equipment and accessories and the variable cost 
associated with supplies, maintenance, repairs and frequency of 
replacement parts. Suppliers will have to guess the type of equipment 
and frequency of services different patients may need. Under a bundled 
bid, commenters were concerned that CMS will not be able to track 
utilization patterns that could be harmful to the beneficiaries.
    Response: We thank the commenters for their input. Although 
specific CBAs were not identified in the proposed rule, we will be 
identifying the areas and comparator areas, defining the bundles, and 
setting up monitoring techniques before beginning the competition as we 
have done during the previous rounds. As we proposed in the proposed 
rule (79 FR 40291), in any competition where these final special 
payment rules are applied, we will provide advance notice of 
implementation at the time the competitions that utilize the rules are 
announced. This notice could take the form of the competitive bidding 
request for bids or a CMS web posting or programs instructions or 
listserv messages and would define the related products and services 
included in a category's single bundled grouping. The process for 
setting the SPA and determining the pivotal bid in competitions where 
the special payment rules are applied would follow the existing process 
that is in place for a product category and outlined in sections 42 CFR 
414.414 and 414.416 of our regulations.
    Using the CPAP and standard power wheelchair bid limits, which we 
will announce in advance of the competitions and calculate, consistent 
with what we proposed in the proposed rule (79 FR 40291) and are 
finalized in this rule, as well as past CBA utilization data for these 
bundled items, we believe bidding suppliers can use their experience in 
furnishing these items to develop a monthly bundled rental bid that 
would be reflective of their costs and profit for all items identified 
in the bundle. In competitions where the single bundled bid rules 
apply, CMS would continue to employ the wide range of resources used to 
monitor the CBP including use of real-time claims analysis to monitor 
the health outcomes status of groups in CBAs. Suppliers are responsible 
for providing all items and services to beneficiaries in accordance 
with the orders of their physicians. This responsibility does not 
change depending on whether one payment is made for the monthly rental 
of DME and all related supplies, accessories, and services or whether 
piece meal payments are made for each individual item or service. For 
example, a supplier furnishes a CPAP device and accessories in 
accordance with the physician's order and replaces the accessories and 
services the rented equipment for up to 13 months of continuous use for 
individual beneficiaries.
    As stated in the proposed rule, the impact of the rules on program 
expenditures, beneficiary cost sharing, access to items and services, 
and quality of care will be closely monitored and compared to impacts 
under comparator areas. To evaluate the quality of care for 
beneficiaries affected by the special payment rules, we will at a 
minimum, utilize health status outcomes based criteria that would 
measure specific indicators such as mortality, morbidity, 
hospitalizations, emergency room and other applicable indicators unique 
to each product category. To evaluate beneficiary access to necessary 
items and services we will monitor utilization trends for each product 
category and track beneficiary complaints related to access issues. To 
evaluate the cost of the program, we intend to analyze the claims data 
for allowed services and allowed cost for each product category and the 
associated accessories, supplies and repair cost in the 12 CBAs and the 
comparator CBAs. We will also analyze the effect of the proposed 
payment rules on beneficiary cost by analyzing number of monthly rental 
payments made compared to reductions in coinsurance payments.
    Comment: Some commenters contended that payment on a continuous 
rental basis for select bundled items instead of on a capped rental 
basis would result in additional administrative burden for suppliers 
because they would have to submit more than 13 claims for rental of 
equipment to a beneficiary. Commenters reacted unfavorably to repeated 
billings for monthly rental claims for as long as the item is medically 
necessary.
    Response: While suppliers may need to submit additional claims for 
the monthly rental of CPAP devices and power wheelchairs, they would no 
longer have to submit separate claims for accessories and repairs and 
would no longer have to keep track of periods of continuous use or when 
a rental cap is approaching. In addition, suppliers would no longer 
have to transfer title to equipment after 13 months of continuous use, 
and would therefore need to replace items in their inventory less 
often.
    Comment: Numerous commenters requested a delay in the 
implementation of payment on a continuous rental basis for select 
bundled items. One commenter stated that more time is needed to educate 
practitioners, suppliers, and patients along with receipt of adequate 
program guidance. Several commenters stated CMS should convene advisory 
groups to study bundling payment methods and bidding factors. Another 
comment from a manufacturer's association requested CMS establish an 
additional HCPCS Advisory Panel to review and revise current HCPCS 
codes for improved bundling.
    Response: The final rule does not set forth an exact timeframe for 
when the special payment rules will be implemented. CMS will be 
providing additional guidance and education, if needed.
    Comment: Various commenters expressed concern that our proposal did 
not include a listing of existing HCPCS

[[Page 66240]]

base codes along with HCPCS accessory codes that may comprise a bundled 
item code. As a result, several commenters submitted recommended coding 
bundles of existing HCPCS codes for enteral nutrition, oxygen and 
oxygen equipment, standard manual wheelchairs, power wheelchairs, CPAP, 
RADs, and hospital beds.
    Response: CMS will follow the HCPCS coding process. We appreciate 
these comments and thank the commenters for their helpful suggestions 
for coding bundles. When further steps for implementing a continuous 
rental basis for select bundled items are developed, we will review the 
submitted information to ensure compliance with the Medicare coverage 
and coding guidelines. As noted in an earlier response, specific 
information on the items that comprise a bundled bid for the CPAP 
category or standard power wheelchairs category will be announced well 
in advance of a competition that would use the continuous rental 
payment methodology.
    Comment: Commenters stated that the proposed change in payment 
rules will be adopted by payers other than Medicare and therefore 
should not be adopted.
    Response: Such issues are beyond the scope of this rulemaking and 
we have not taken such things into consideration when finalizing our 
policies for the Medicare program. We appreciate that changes in 
Medicare policy may affect other insurers who choose to base their 
payments on Medicare payment rules; however, it is our obligation to 
set our policies based upon the needs of Medicare and its 
beneficiaries.
    Comment: One commenter asked for clarification on how CMS will 
establish coverage criteria for a bundle of HCPCS codes consisting of a 
base and all options and accessories including what data will be used 
to establish the coverage criteria that will identify whether or not a 
beneficiary qualifies for a bundle of equipment, services, and 
supplies.
    Response: These comments are outside the scope of the proposed 
rule, and therefore are not addressed in this final rule. The process 
for reviewing coverage for an item or bundle of items is not addressed 
in this payment rule.
    We received many additional comments that were out of the scope of 
this rule.
    In this final rule we are finalizing our proposal for only two 
items, CPAP devices and standard power wheelchairs. This rule finalizes 
the phase-in of special payment rules for CPAP and power wheelchairs as 
noted previously in the proposed rule (79 FR 40293) under the DMEPOS 
CBP in no more than 12 CBAs at 42 CFR 414.408, 414.409, and 414.412.
    Comment: Some commenters noted that making payments for DME on a 
bundled, continuous rental basis will not eliminate repair issues and 
will increase financial burden on the beneficiaries. Some commenters 
noted that the ability for a beneficiary to switch to another provider 
should he/she feel the service is not appropriate would drive 
competition for better care but bundling would not eliminate the need 
for patients to requalify for equipment when they change suppliers. 
Beneficiaries would still need to re-establish medical necessity when 
changing suppliers. Some suggested allowing beneficiaries to switch 
suppliers without restarting documentation. Some commented that 
mandating suppliers repair will not solve beneficiary's inability to 
obtain repairs for beneficiary-owned equipment.
    Response: Contract suppliers paid for furnishing DME paid for on a 
bundled, continuous rental basis would be responsible for all necessary 
repairs, maintenance and servicing needed to keep the rental equipment 
in good working order or for replacing rental equipment that no longer 
functions and cannot be repaired. The process for documenting medical 
necessity for items would be addressed outside the rulemaking process.
    We proposed to revise the regulation at 42 CFR 414.409 to the 
include supplier transition rules for enteral nutrition, oxygen and 
oxygen equipment, standard manual wheelchairs, standard power 
wheelchairs, CPAP and respiratory assist devices, and hospital beds 
that would be paid in accordance with the rules proposed in this 
section. We also proposed to revise the regulation at 42 CFR 414.408 to 
provide a cross reference to proposed Sec.  414.409. We proposed that 
changes in suppliers from a non-contract supplier to a contract 
supplier at the beginning of the CBP where the proposed payment rules 
would apply would simply result in the contract supplier taking on 
responsibility for meeting all of the beneficiary's monthly needs while 
receiving payment for each month of service. We developed these 
proposed rules based on that fact that for capped rented DME and oxygen 
and oxygen equipment, since rental caps would not apply under the 
proposed rules, there would be no need to restart or extend capped 
rental periods when a beneficiary transitions from a non-contract 
supplier to a contract supplier. We proposed that supply arrangements 
for oxygen and oxygen equipment, and rental agreements for standard 
manual wheelchairs, standard power wheelchairs, CPAP devices, 
respiratory assist devices, and hospital beds entered into before the 
start of a CBP and application of the payment rules proposed in this 
section would be allowed to continue so long as the supplier agrees to 
furnish all necessary supplies and accessories used in conjunction with 
the rented equipment and needed on a monthly basis. We proposed that 
non-contract suppliers in these cases would have the option to continue 
rental agreements; however, we proposed that as part of the process of 
allowing the rental agreements to continue, the grandfathered supplier 
would be paid based on existing rules at Sec.  414.408. We solicited 
comments on this proposed process. We did not receive any specific 
comment for this section and therefore, for the reasons we discussed 
previously, we are finalizing the proposed transition rules. This rule 
finalizes the transition rules as noted previously in the proposed rule 
(79 FR 40293, 40294) under the DMEPOS CBP at 42 CFR 414.409.
2. Responsibility for Repair of Beneficiary-Owned Power Wheelchairs 
Furnished Under CBPs
    We proposed (79 FR 40294) to revise the regulation at 42 CFR 
414.409 to add a new payment rule that would apply to future 
competitions for standard power wheelchairs in no more than 12 CBAs 
where payment is made on a capped rental basis. In these CBPs, we 
proposed that contract suppliers for power wheelchairs would be 
responsible for all necessary repairs and maintenance and servicing of 
any power wheelchairs they furnish during the contract period under the 
CBP, including repairs and maintenance and servicing of power 
wheelchairs after they have transferred title to the equipment to the 
beneficiary. We proposed that this responsibility would end when the 
reasonable useful lifetime established for the power wheelchair 
expires, medical necessity for the power wheelchair ends, the contract 
period ends, or the beneficiary relocates outside the CBA. We proposed 
that the contract supplier would not receive separate payment for these 
services and would factor the costs of these services into their bids. 
We proposed that the contract supplier would not be responsible for 
repairing power wheelchairs they did not furnish. We proposed that 
services to repair beneficiary-owned equipment furnished prior to the 
start of the contract period

[[Page 66241]]

would be paid in accordance with the standard payment rules at Sec.  
414.210(e).
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Some commenters argued that adding a requirement 
specifying that contract suppliers are responsible for repairing power 
wheelchairs they furnish will not eliminate problems beneficiaries are 
experiencing related to obtaining repairs for beneficiary-owned 
equipment.
    Response: We agree that this requirement would not address 
situations where a beneficiary owns a power wheelchair in need of 
repairs that they received prior to the start of the CBP or prior to 
moving into the CBA where the proposed rule would be in effect. It 
would also not address situations where a beneficiary owns a power 
wheelchair in need of repairs that they received prior to enrolling in 
Medicare part B. As stated in our proposal (79 FR 40294) we proposed 
that a contract supplier would not be responsible for repairing power 
wheelchairs they did not furnish. As a result, we proposed that 
services to repair beneficiary-owned equipment furnished prior to the 
start of the contract period would be paid in accordance with the 
standard payment rules at Sec.  414.210(e), which allows any Medicare 
enrolled DME supplier to perform this service and receive payment.
    We also proposed that in the event that a beneficiary relocates 
from a CBA where the rules proposed in this section apply to an area 
where rental cap rules apply, that a new period of continuous use would 
begin for the capped rental item, enteral nutrition equipment, or 
oxygen equipment as long as the item is determined to be medically 
necessary. We believe these rules are necessary to safeguard 
beneficiary access to covered items and services and plan to closely 
monitor the impact these rules have on beneficiary cost sharing before 
phasing in these rules in more than a limited number of CBAs. We sought 
comments on these proposals, did not receive any specific comment for 
these proposals, and are therefore, for the reasons we discussed 
previously, we are finalizing these proposals. This rule finalizes the 
sections Beneficiary-Owned Equipment and Responsibility for Repair of 
Beneficiary-Owned Power Wheelchairs furnished under CBPs as noted 
previously in the proposed rule (79 FR 40294) under the DMEPOS CBP at 
42 CFR 414.409
    We proposed that the CBAs where the proposed rules in (79 FR 40294) 
above would be applied would be for MSAs with a general population of 
at least 250,000 and a Medicare Part B enrollment population of at 
least 20,000 that are not already included in Round 1 or 2. Based on 
2012 population estimates from the Census Bureau and 2011 Medicare 
enrollment data, there are approximately 80 MSAs that would satisfy 
this criteria. Selecting MSAs not already included in Round 1 or 2 
would allow competitions and rules associated with these competitions 
to begin after the final rule would take effect in areas that are 
comparable to existing CBAs. We proposed that the boundaries of the 
CBAs would be established in accordance with the rules set forth at 
Sec. Sec.  414.406 and 414.410. We proposed that additional CBPs for 
the items identified in sections 1 and 2 above be established in 
``comparator'' CBAs concurrent with CBPs where the proposed rules would 
be applied. Payment for items and services in the comparator CBAs would 
be made in accordance with the existing payment rules in Sec.  414.408. 
We proposed that these additional comparator CBAs and CBPs be 
established to facilitate our analysis of the effect of the payment 
rules proposed in sections 1 and 2 above compared to the effect of the 
existing payment rules in Sec.  414.408. We proposed that for each CBP 
where either the rules in section 1 or 2 above are implemented, a 
comparator CBA and CBP would be established. We proposed that the 
comparator CBAs be selected so that they are located in the same state 
as the CBA where the special payment rules would apply and are similar 
to the CBAs in which the proposed payment rules would be implemented 
based on a combination of factors that could include geographic 
location (region of the country), general population, beneficiary 
population, patient mix, and utilization of items. We proposed to 
establish the comparator CBAs and CBPs to enable us to review the 
impact of the proposed payment rules on expenditures, quality, and 
access to items and services in order to determine whether to pursue 
future rulemaking to expand the proposed payment rules to additional 
areas and or items. We sought comments on this proposal, did not 
receive any specific comment for this proposal, and are therefore 
finalizing this proposal.
    We proposed that payment to a supplier that elects to be a 
grandfathered supplier of DME furnished in CBPs where these special 
payment rules apply is made in accordance with Sec.  414.408(a)(1). We 
sought comments on this proposal, did not receive any specific comment 
for this proposal, and are therefore finalizing this proposal.
    We are finalizing a change to add special payment rules at Sec.  
414.409 that will be phased in. In no more than 12 CBAs, payment is 
made on a bundled, continuous monthly rental basis for standard power 
wheelchairs and CPAP devices. In addition, in no more than 12 CBAs, 
payment for power wheelchairs is made on a continuous rental basis, for 
power wheelchairs furnished in conjunction with competitions that begin 
after January 1, 2015, contract suppliers that furnish power 
wheelchairs under contracts awarded based on these competitions shall 
continue to repair power wheelchairs they furnish following transfer of 
title to the equipment to the beneficiary. The responsibility of the 
contract supplier to repair, maintain and service beneficiary-owned 
power wheelchairs does not apply to power wheelchairs that the contract 
supplier did not furnish to the beneficiary. For power wheelchairs that 
the contract supplier furnishes during the contract period, the 
responsibility of the contract supplier to repair, maintain and service 
the power wheelchair once it is owned by the beneficiary continues 
until the reasonable useful lifetime of the equipment expires, coverage 
for the power wheelchair ends, or the beneficiary relocates outside the 
CBA where the item was furnished. In accordance with Sec.  414.408(c), 
the contract supplier may not charge the beneficiary or the program for 
any necessary repairs or maintenance and servicing of a beneficiary-
owned power wheelchair it furnished during the contract period.

VII. Scope of Hearing Aid Coverage Exclusion

A. Background

    Section 1862(a)(7) of the Act states notwithstanding any other 
provision of title XVIII, no payment may be made under part A or part B 
for any expenses incurred for items or services ``where such expenses 
are for . . . hearing aids or examinations therefor. . . .'' This 
policy is codified in the regulation at 42 CFR 411.15(d), which states 
that hearing aids or examination for the purpose of prescribing, 
fitting, or changing hearing aids are excluded from Medicare coverage. 
Historically, CMS has periodically addressed the scope of the Medicare 
hearing aid coverage exclusion through program instructions and 
national coverage policies or determinations. We briefly discuss the 
relevant changes that have occurred over time with regard to Medicare

[[Page 66242]]

coverage and payment of hearing devices.
    Cochlear implants (CIs) were the first device covered for Medicare 
payment for adult beneficiaries in October 1986, when no other hearing 
device was being covered under Medicare, and such coverage was 
supported by the Office of Health Technology Assessment's ``Public 
Health Service Assessment of Cochlear Implant Devices for the 
Profoundly Hearing Impaired'', dated June 30, 1986 found at https://archive.org/stream/cochlearimplantd00feig/cochlearimplantd00feig_djvu.txt. Medicare coverage was restricted to 
CIs that treated patients with post lingual, profound, bilateral, 
sensorineural deafness who are stimulable and who lack the unaided 
residual auditory ability to detect sound.
    Effective January 1, 2003, we clarified that the hearing aid 
exclusion broadly applied to all hearing aids that utilized functional 
air and/or bone conduction pathways to facilitate hearing (see section 
15903, Hearing Aid Exclusion, Medicare Carriers Manual, Part 3--Claims 
Process (HCFA-Pub. 14-3), which was later moved to section 100, Hearing 
Aids and Cochlear Implants, of Chapter 16, of the Medicare Benefit 
Policy Manual, CMS-Pub. 100-02). Any device that does not produce at 
its output an electrical signal that directly stimulates the auditory 
nerve is a hearing aid for purposes of coverage under Medicare. Devices 
that produce air conduction sound into the external auditory canal, 
devices that produce sound by mechanically vibrating bone, or devices 
that produce sound by vibrating the cochlear fluid through stimulation 
of the round window are considered hearing aids and excluded from 
Medicare coverage.
    Effective April 4, 2005, Medicare's national coverage policy for 
CIs was modified through the NCD process (see section 65-14 of the 
Medicare Coverage Issues Manual (HCFA-Pub. 6), which was later moved to 
section 50.3, Cochlear Implantation, of Chapter 1, Part 1 of the 
Medicare National Coverage Determinations Manual (CMS-Pub. 100-03)). 
Our findings under the NCD, in part, state that ``CMS has determined 
that cochlear implants fall within the benefit category of prosthetic 
devices under section 1861(s)(8) of the Social Security Act.'' Medicare 
is a defined benefit program. An item or device must not be statutorily 
excluded and fall within a benefit category as a prerequisite to 
Medicare coverage. Additional changes, regarding coverage criteria, 
have been made to section 50.3 over time, however, the NCD decision 
regarding benefit category and Medicare coverage for cochlear 
implantation has remained consistent. The NCD states that a cochlear 
implant device is an electronic instrument, part of which is implanted 
surgically to stimulate auditory nerve fibers, and part of which is 
worn or carried by the individual to capture, analyze, and code sound. 
Cochlear implant devices are available in single-channel and multi-
channel models. The purpose of implanting the device is to provide 
awareness and identification of sounds and to facilitate communication 
for persons who are moderately to profoundly hearing impaired.
    The regulation at 42 CFR 419.66 was revised to add new 
requirements, effective January 1, 2006, for transitional pass-through 
payments for medical devices. The auditory osseointegrated implant 
(AOI) device, referred to as a bone anchored hearing aid (BAHA), was 
determined to be a new device category according to the new 
requirements for transitional pass-through payment. Medicare coverage 
was also expanded to cover AOI and auditory brainstem devices payable 
as prosthetic devices. Currently, section 100 of Chapter 16 of the 
Medicare Benefit Policy Manual (CMS Pub. 100-02) reads as follows:

    Hearing aids are amplifying devices that compensate for impaired 
hearing. Hearing aids include air conduction devices that provide 
acoustic energy to the cochlea via stimulation of the tympanic 
membrane with amplified sound. They also include bone conduction 
devices that provide mechanical energy to the cochlea via 
stimulation of the scalp with amplified mechanical vibration or by 
direct contact with the tympanic membrane or middle ear ossicles.
    Certain devices that produce perception of sound by replacing 
the function of the middle ear, cochlea, or auditory nerve are 
payable by Medicare as prosthetic devices. These devices are 
indicated only when hearing aids are medically inappropriate or 
cannot be utilized due to congenital malformations, chronic disease, 
severe sensorineural hearing loss or surgery.
    The following are considered prosthetic devices:
     Cochlear implants and auditory brainstem implants, that 
is, devices that replace the function of cochlear structures or 
auditory nerve and provide electrical energy to auditory nerve 
fibers and other neural tissue via implanted electrode arrays.
     Osseointegrated implants, that is, devices implanted in 
the skull that replace the function of the middle ear and provide 
mechanical energy to the cochlea via a mechanical transducer.

B. Current Issues

    We received several benefit category determination requests in 
recent years for the consideration of non-implanted, bone conduction 
hearing aid devices for single-sided deafness (SSD), as prosthetic 
devices under the Medicare benefit. We have received similar requests 
for several other types of implanted and non-implanted devices as well. 
In response to these requests, we have re-examined the scope of the 
statutory hearing aid exclusion.

C. Proposed Provisions

    The proposed rule (79 FR 40297) stated that after further 
considering the statutory Medicare hearing aid exclusion under section 
1862(a)(7) of the Act, and re-examining the different types of non-
implanted and implanted devices, we proposed to interpret the term 
``hearing aid'' to include all types of air or bone conduction hearing 
aid devices, whether external, internal, or implanted, including, but 
not limited to, middle ear implants, AOI devices, dental anchored bone 
conduction devices, and other types of external or non-invasive devices 
that mechanically stimulate the cochlea.
    We believed that the hearing aid exclusion did not apply to 
brainstem implants and CIs as discussed in the proposed rule (79 FR 
40297). Therefore, we did not propose any changes to our current policy 
about brainstem implants and CIs and how such implants fall outside of 
the hearing aid statutory exclusion (that is, such devices would fall 
outside the Medicare coverage exclusion for hearing aids and remain 
covered subject to the Medicare NCD 50.3 found at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/ncd103c1_Part1.pdf). We proposed, however, to modify Sec.  411.15(d)(2) 
to specifically note that such devices do not fall within the hearing 
aid exclusion.
    We sought public comment on this proposal and received 
approximately 2,635 public comments on this provision. After 
consideration of the comments received we have decided not to finalize 
our proposal to further interpret the hearing aid statutory exclusion, 
but in response to comments, this final rule will codify the current 
program instructions found at section 100 of Chapter 16 of the Medicare 
Benefit Policy Manual (CMS Pub. 100-02) noted above. We believe AOIs 
that provide focused stimulation to the temporal bone structures, 
through an implant that is physically integrated into the bone of the 
skull, to the cochlea are outside the scope of the hearing aid 
exclusion. At the time section 1862(a)(7) of the Act was initially 
established, hearing aids consisted of non-implanted air and bone 
conduction devices. AOIs did not exist at the time the coverage

[[Page 66243]]

exclusion was drafted and there are clinical distinctions that separate 
AOIs from all non-implanted air and bone conduction hearing aids. Air 
conduction and non-osseointegrated bone conduction hearing aids have 
been in existence since 1965 and have not been covered by Medicare. In 
accordance with section 100 of Chapter 16 of the Medicare Benefit 
Policy Manual (CMS Pub. 100-02), we believe the coverage exclusion 
applies to all air conduction and non-osseointegrated bone conduction 
hearing aids or technological refinements of non-implanted air and bone 
conduction devices that are not osseointegrated. Cochlear devices, 
brainstem implants, and AOIs are invasive devices and are significantly 
different than the hearing devices in existence at the time the 
Medicare coverage exclusion for hearing aids was enacted. We therefore 
do not consider them to be the hearing aids or technological 
refinements of the hearing aids excluded from the program in 1965 and 
after 1965. We consider all types of air conduction and non-
osseointegrated bone conduction hearing devices utilized today to be 
technological refinements of the devices excluded from Medicare 
coverage; and therefore, we consider all types of air conduction and 
non-osseointegrated bone conduction hearing devices utilized today to 
be hearing aids excluded from coverage under the Medicare program. 
However, we recognize that new technology in this area continues to 
emerge that may benefit the Medicare population and we will continue to 
examine this issue as more information becomes available and new 
devices are introduced.
    The comments and responses are set forth below.
    Comment: We received many comments relating personal stories on the 
profound difference the AOI has made on themselves, friends, and 
relatives who have suffered hearing loss. Many people shared tremendous 
improvement in the quality of life the AOI has provided for them.
    Response: We appreciate these comments. We have reexamined AOIs and 
the statutory exclusion for hearing aids. We have come to the 
conclusion that AOIs are not hearing aids because of the clinical 
distinctions that separate them from hearing aids excluded from 
coverage under the Medicare program in 1965. Cochlear devices, 
brainstem implants, and AOIs are invasive devices and are significantly 
different than the hearing devices in existence at the time the 
Medicare coverage exclusion for hearing aids was enacted. We therefore 
do not consider them to be the hearing aids or technological 
refinements of the hearing aids excluded from the program in 1965 and 
after 1965. We consider all types of air conduction and non-
osseointegrated bone conduction hearing devices utilized today to be 
technological refinements of the devices excluded from Medicare 
coverage. Therefore, we have modified the regulation at Sec.  414.15 to 
reflect that AOIs are outside the scope of the hearing aid exclusion.
    Comment: Many commenters stated an AOI is a prosthetic device that 
replaces all or part of an internal organ and should remain classified 
as such. The commenters stated that the AOI is not simply a hearing aid 
but rather the device replaces the function of the ear. An AOI device 
meets the definition of a prosthetic device as it requires an 
implantable post which helps by-pass an impaired ear canal and/or 
middle ear system to directly stimulate a functional sensory nerve via 
bone conduction. One commenter stated the AOI replaces the function of 
the ossicles by (1) converting acoustic energy to mechanical energy, 
(2) magnifying that mechanical energy, and (3) transmitting that 
mechanical energy to the inner ear, functions a hearing aid cannot 
perform. Another commenter added when the implantable post is 
surgically placed by an otolaryngologist, the post must osseointegrate 
with the skull and then becomes part of the patient's skull anatomy. It 
will also compensate for the loss of the cochlea in a single sided 
deafness (SSD) due to trauma, surgery, infection, nerve injury or 
congenital defect. One commenter stated these types of hearing loss 
result from the loss of organ function. Therefore, an AOI does replace 
all or part of the internal body organ making it a prosthetic.
    Response: The hearing aid statutory exclusion under section 
1862(a)(7) of the Act does not identify a particular benefit category. 
However, we agree that the AOI is distinguishable in that it functions 
as a prosthetic device that is designed to restore hearing for a 
limited class of individuals with conductive hearing loss (CHL), mixed 
hearing loss, or SSD by replacing the function of the middle ear and 
providing mechanical energy to the cochlea via a mechanical transducer. 
Therefore, we do not believe it is a hearing aid excluded from coverage 
by section 1862(a)(7) of the Act. The AOI is functionally and 
clinically distinct from the hearing aids excluded from coverage in 
1965. In this final rule, we are modifying Sec.  411.15 to reflect that 
AOIs are outside the scope of the hearing aid exclusion.
    Comment: Many commenters stated an AOI is not a hearing aid and 
does not provide traditional aid to hearing. Those commenters believe 
that hearing aids are designed to compensate the hearing loss by 
amplifying the incoming sound to the ear. By design, hearing aids do 
not replace the function of the ear but rather restore hearing loss 
using the existing anatomical parts and organ. Several commenters 
stated air conduction hearing aids operate by amplifying sound to 
overcome damaged hair cells in the cochlea or inner ear. Other 
commenters provided the following differences of an AOI compared to a 
conventional air conduction hearing device: (1) The AOI is surgically 
implanted in the patients skull where it osseointegrates with the bone 
and becomes part of the patients anatomy, (2) The components of the AOI 
function by bypassing the ear canal and middle ear stimulating the 
hearing nerve directly through bone conduction and (3) The implant 
replaces the function of outer and middle ear. Bone conduction hearing 
aids utilize a tight band placed around the user's head to transmit 
vibrations of sound to the bones in the head. One commenter stated an 
AOI is physically and functionally distinguishable from a bone 
conduction hearing aid in that they: (1) Are never retained by a 
headband, and (2) supply focused stimulation to the temporal bone 
structures through an implant that is physically integrated into the 
bone of the skull. Further, traditional hearing aids require no 
surgery, may be purchased without a physician's prescription, and are 
removed and placed ``in the drawer'' by the hearing impaired person. In 
addition, traditional hearing aids treat presbycusis which is the 
cumulative effect of aging on hearing. One commenter stated candidates 
for the AOIs do not have a functioning ear(s) and cannot benefit even 
from the most advanced hearing aid. While an AOI does provide access to 
sound to patients that would not, in most cases, otherwise have that 
access it is not a hearing aid. Several commenters stated a hearing aid 
is just that; it ``aids'' what residual hearing an individual has, it 
does not restore hearing. An AOI restores hearing loss in a completely 
non-functioning ear.
    Response: We agree with commenters that an AOI is not a hearing aid 
excluded from coverage under the Medicare statute for some of the same 
clinical and technological reasons set forth by the commenters. 
Therefore, we are modifying Sec.  411.15 in this final rule to reflect 
that AOI's are outside the scope of the hearing aid exclusion.
    Comment: We received many comments stating that candidates for

[[Page 66244]]

AOI devices typically have no other reasonable option for hearing 
assistance or restoration and do not get benefit from hearing aids. 
Instead, an AOI is the modality of last resort for many of patients, 
CMS's current coverage position provides that AOIs are indicated only 
when hearing aids are medically inappropriate or cannot be utilized. 
Additionally, commenters were concerned that patients with congenital 
malformations and chronic diseases (Treacher Collins, Aural Atresia and 
Microtia) will be left without an effective option as they are not 
candidates for traditional hearing aids. AOI technology is for a small 
and very special group. AOIs have specific indications--for example 
unilateral anacousis (deafness), and particular patterns of severe 
conductive and mixed hearing loss. Patients with a conductive or mixed 
hearing loss with a chronic draining ear are unable to wear a 
conventional air conduction hearing device. The air conduction device 
blocks the ear canal, which exacerbates the build-up of infectious 
material in the ear canal. The AOI is remote from the ear canal. 
Therefore, chronic ear drainage is often stopped or minimized in these 
patients.
    Response: We have reexamined AOIs and the statutory exclusion 
applicability. We have come to the conclusion that AOIs are not hearing 
aids given how they are functionally and clinically distinct from the 
hearing aids excluded from coverage in 1965., as noted in section 100 
of Chapter 16 of the Medicare Benefit Policy Manual (CMS Pub. 100-02). 
An AOI is an osseointegrated device that is implanted in the skull that 
replaces the function of the middle ear and provides mechanical energy 
to the cochlea via a mechanical transducer. Therefore, we are 
finalizing changes to Sec.  414.15 to reflect that AOIs are outside the 
scope of the hearing aid exclusion.
    Comment: Some commenters stated that although there are other 
options for treatment of SSD, patients report that the sound quality of 
the AOI is far superior to these other treatment options for SSD (for 
example, CROS hearing system, TransEar hearing device). In addition the 
use of conventional non-osseointegrated bone conduction aids may be 
associated with complications including: discomfort and breakdown of 
skin at stimulation point; feedback from mechanical coupling via a 
steel headband; poor compliance for consistent wear due to discomfort, 
difficulty with fit and feedback as well as poor sound quality through 
all of the options that were attempted prior to being fit with AOI 
devices.
    Response: We understand there are other bone conduction hearing 
aids that may be used instead of the AOI devices for some individuals 
with SSD. In addition, as technology continues to evolve there will be 
other new hearing aid devices coming onto the market for the treatment 
of SSD. However, non-osseointegrated air and bone conduction hearing 
aids were in use in 1965 when the coverage exclusion for hearing aids 
was enacted and have not been covered under the program. We believe 
that given how they function, they should continue to fall under the 
hearing aid exclusion. However, osseointegrated hearing devices were 
not in use in 1965 and as commenters have pointed out, there are 
significant clinical and technological difference between 
osseointegrated hearing devices and non-osseointegrated hearing devices 
reasons.
    Comment: A few commenters stated if the fiscal impact on Medicare 
is so insignificant why would you deny thousands of men, women, 
children and infants the ability to hear?
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying the Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: We received many comments stating without Medicare 
coverage patients who use AOIs would otherwise benefit greatly in terms 
of quality of life, productivity, engagement in their community's life, 
etc. will not have the opportunity. Several commenters stated denial of 
coverage of these AOIs will affect not only hearing and communication 
ability in older adults but because CMS also provides benefits under 
Social Security Disability Insurance (SSDI) program, denial of coverage 
also will prevent the normal development of language and speech ability 
in young children. It would cost much more not having the AOI option 
than to have the relatively inexpensive surgery that would help them 
for the rest of their lives.
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying the Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: Some commenters believe most private insurers follow CMS 
policies as they design their own coverage which will inevitably lead 
to the loss of this very valuable technology for everyone. Others 
stated, not covering this procedure will mean many thousands of people 
with this condition will forego treatment. A great many people benefit 
from an AOI and otherwise will not be able to afford it if insurance no 
longer covered the device. Another commenter stated private third party 
payers would eventually eliminate coverage for AOIs, affecting both 
children and adults, as these payers' looks to Medicare for coverage 
guidelines.
    Response: Coverage by private insurers is outside the scope of this 
rulemaking. However, we have reexamined AOIs and the statutory 
exclusion applicability. We have come to the conclusion that AOIs are 
not hearing aids and therefore, have modified the final regulation to 
specify that AOIs are outside the scope of the hearing aid exclusion.
    Comment: Several commenters stated that AOIs have been in use for 
over 30 years and have been shown to provide significant, cost-
effective benefit for recipients. There is a large body of published 
literature to support the use of this technology for appropriate 
indications.
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: One commenter stated given the recent research on 
increased presence of cognitive decline in individuals with hearing 
loss, one would think that the CMS would be looking for ways to improve 
access to sound for our Medicare and Medicaid patients, thereby 
decreasing the overall costs of managing dementia, not for ways to make 
that situation even worse. Hearing allows people to stay connected to 
people; it increases their earning potential thus increasing the tax 
base of our society. In the retired population, good access to hearing 
keeps people engaged in their community, volunteering, helping to raise 
grandchildren, and in general participating in life. As we all know the 
more connected and engaged in society and life around us, the lower 
financial burden we present to society.
    Response: We appreciate the comments. However, Congress excluded 
hearing aids from the Medicare program in section 1862(a)(7) of the 
Act. We have reexamined this issue and the statutory exclusion 
applicability. We have come to the conclusion that AOIs are not hearing 
aids and therefore, have modified Sec.  414.15 to specify that AOIs

[[Page 66245]]

are outside the scope of the hearing aid exclusion.
    Comment: Other commenters stated AOIs restore a sense of safety to 
individuals who have SSD as the implant allows them to hear sounds on 
the dead ear. In the SSD application, a patient must have an unaidable 
ear (meaning the hearing loss is so great or their ability to 
understand speech is so poor that use of a hearing aid is not possible 
as a hearing aid would not correct that degree of hearing loss). In 
these cases, the AOI can be implanted on the bad ear and allow patients 
to have awareness of the sounds on the dead ear because the sound is 
delivered via bone conduction to the good ear which can process the 
speech signal. In unilateral hearing losses (such as described above), 
individuals experience difficulty localizing sounds, an inability to 
hear sounds immediately to the side with hearing loss and they also 
experience difficulty understanding in background noise. The recovery 
of sound on the dead ear can provide a sense of stability and safety as 
they no longer have to work about people sneaking up on the dead side.
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: Some commenters stated there was no rationale provided 
articulating reasoning or new evidence that a change in Medicare 
policy, after 8 years of coverage, is necessary due to law or for the 
benefit of Medicare patients was necessary. Another commenter stated 
AOIs function the same way they did in 2006 when CMS correctly 
recognized them as prosthetics. One commenter stated that the decision 
in 2005 that AOIs replace the function of the middle ear and are 
prostheses was made based on an extensive record. In contrast, the 
proposed rule fails to cite any evidence on which CMS now contends that 
its position has reversed. There are no studies or other data 
mentioned, no professional standards are cited, nor is there any 
description of the content of the benefit category determination 
requests that are mentioned. Since CMS has not disclosed the basic 
clinical or legal information underlying the proposed reversal of its 
benefit policy and its interpretation of Section 1862(a)(7), CMS should 
defer any action.
    Response: As discussed in the proposed rule, CMS has received 
several new benefit category determinations that initiated a new review 
of devices that are considered hearing aids. However, in light of the 
comments and upon further examination, we have decided not to change 
the policy in section 100 of Chapter 16 of the Medicare Benefit Policy 
Manual (CMS Pub. 100-02), that AOIs are not hearing aids and therefore, 
are modifying Sec.  414.15 to reflect that AOIs are outside the scope 
of the hearing aid exclusion.
    Comment: One commenter provided their interpretation of the 
Congressional intent and scope of the hearing aid exclusion as meant to 
exclude routine items and services, and not medical treatment for 
disability created by disease, trauma, infection, or congenital 
deformity. They provided a comparison of various Court decisions on the 
eyeglass exclusion. Another commenter stated while Medicare does not 
cover eye glasses and/or contact lenses, they do cover intraocular 
lenses because the patient's sensory organ cannot benefit from 
nonsurgical treatment-the same logic should hold for implantable 
hearing devices, for patients who are not able to benefit from 
amplification.
    Response: The eyeglass exclusion is not an appropriate comparison 
to the hearing aid exclusion. Congress amended the Social Security Act 
to make allowances for eyeglasses and intraocular lenses by amendments 
to section 1862(a)(7) of the Act. There has not been a similar 
allowance made for hearing aids. As noted above, upon consideration of 
the comments and for the reasons outlined, we are modifying the final 
regulation, as discussed above.
    Comment: Several commenters discussed the National Coverage 
Determination for CIs stating that CMS states in the NCD CIs are 
prosthetic devices primarily because a CI replaces the function of the 
cochlear by creating an electrical output that stimulates the auditory 
nerve as opposed to the mechanical output of a bone conduction device. 
There is no scientific, clinical, or legal rational for distinguishing 
the devices based on the type of energy output. Nor does the agency 
provide any medical or other justification as to why the replacement of 
the function of the cochlea meets the requirement of replacing an organ 
function, but replacing the function of the middle ear does not. 
Another commenter stated in both cases, the device in question bypasses 
an organ and replaces its function, in one case; it is part of the 
cochlea, in the other, the ossicles and/or auditory canal. Since in 
both cases a device replaces the function of a component of the ear, 
there is no basis on which to classify one as a hearing aid and the 
other as a prosthetic.
    Response: A National Coverage Determination (NCD) is provided upon 
request or internally generated, and is vetted through a thorough 
scientific and medical review. The information provided for NCD 50.3 
was provided specifically for CIs. It is important to understand that 
an item or device must not be statutorily excluded and fall within a 
benefit category as a prerequisite to Medicare coverage. We believe 
that AOIs are not ``hearing aids'' given that such devices do more than 
``aid'' in hearing and instead replace the function of an internal body 
organ (i.e., a part of the ear). Therefore, we've concluded that AOIs 
are not hearing aids and do not fall within the statutory exclusion.
    Comment: One commenter stated a policy that deems which technology 
is a Medicare benefit based on whether that technology replaces hearing 
by a particular means (electrical versus mechanical energy), or whether 
it has a surgically implanted component or not (osseointegrated versus 
a dental anchored device), or whether the deafness is bilateral or 
unilateral, are arbitrary distinctions without clinical justification. 
Medicare policy should focus on whether attributes of a device replace 
the function of all or part of the ear to restore hearing, not the 
means by which it is accomplishes this task.
    Response: We disagree that our policy creates an arbitrary 
distinction. The policy is based on whether a device qualifies as a 
hearing aid as defined in section 100 of Chapter 16 of the Medicare 
Benefit Policy Manual (CMS Pub. 100-02), or whether a device functions 
in such a way that it falls outside this definition.
    Comment: A few commenters stated withdrawing coverage of these 
devices will preclude coverage and designing new innovations that 
improve SSD treatment and are more cost effective than existing 
alternatives. One commenter explained its concern that the proposal 
will stifle innovation and advances in auditory prosthetics and will 
send a negative and damaging message to the medical technology 
development community as a whole--that Medicare coverage is 
unpredictable, even when there is long established policy in favor of 
coverage. Such unreliability makes it impossible for investors to make 
reasoned decisions about future investments and will lead to the 
freezing of meaningful innovation.
    Response: We do not agree. We believe new innovations will continue 
to be pursued without Medicare coverage as other payers would continue 
to provide AOIs. However, we

[[Page 66246]]

have reexamined AOIs and the applicability of the hearing aid statutory 
exclusion. We have come to the conclusion that AOIs are not hearing 
aids and therefore, have modified the final regulation to specify that 
AOIs are outside the scope of the hearing aid exclusion.
    Comment: Some commenters equated removing coverage of the AOI as to 
denying coverage for glasses, a prosthetic leg, and colostomy.
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: Several commenters provided their definition of a hearing 
aid. Several commenters stated the definition should include 
``wearable'' and another commenter stated it should include ``amplify 
sound'' and another stated it should be ``air conduction devices.'' 
Commenters provided additional criteria as well, such as there must be 
a medical evaluation and physician prescription. In addition several 
commenters advocated for a plain and ordinary meaning of hearing aid 
provided in the dictionary.
    Response: We disagree with the commenters' definition of a hearing 
aid; as stated in the proposed rule, in section 100 of Chapter 16 of 
the Medicare Benefit Policy Manual (CMS Pub. 100-02) Medicare defines 
hearing aids as ``amplifying devices that compensate for impaired 
hearing.'' Hearing aids include air conduction devices that provide 
acoustic energy to the cochlea via stimulation of the tympanic membrane 
with amplified sound. They also include bone conduction devices that 
provide mechanical energy to the cochlea via stimulation of the scalp 
with amplified mechanical vibration or by direct contact with the 
tympanic membrane or middle ear ossicles.'' We believe the Medicare 
definition captures the provisions we are finalizing and accurately 
defines a hearing aid. Upon re-examining the Medicare hearing aid 
exclusion provision at section 1862(a)(7) of the Act, and its 
applicability to AOIs, we have determined that AOIs are not hearing 
aids because they are functionally and clinically distinct from the 
hearing aids excluded from coverage in 1965. They are implants that 
replace the function of the middle ear and are physically integrated 
into the temporal bone structure of the skull to provide mechanical 
stimulation through the temporal bone to the cochlea. Therefore, we 
have modified the final regulation to specify that AOIs are outside the 
scope of the hearing aid exclusion.
    Comment: One commenter stated according to the Food and Drug 
Administration (FDA) definition of a hearing aid and state hearing aid 
dispensing laws, the AOI is in fact not a hearing aid because it is not 
removable, is not available to the general public for purchase and the 
primary purpose is not to amplify sound. Another commenter believed CMS 
should recognize the FDA's classification system as these devices are 
Class II whereas hearing aids are Class I devices.
    Response: Medicare does not adhere to the same definition as the 
FDA regarding hearing aids. For the reasons state above, we have come 
to the conclusion that AOIs are not hearing aids in the context of 
section 1862(a)(7) of the Act and the Medicare program and coverage 
exclusion and therefore have modified our final rule to reflect that 
AOIs are outside the scope of the hearing aid exclusion.
    Comment: A few commenters stated neither the statute nor its 
legislative authority support the broad interpretation CMS seeks in 
order to prohibit AOIs under the hearing aid exclusion. After review of 
the Congressional Record and hearings held by Congress before enactment 
of this provision clearly shows Congress' intent was to exclude 
``routine care'' from the Medicare program. The majority of the 
technologies that would be considered hearing aids under this proposed 
rule were not available in 1965. In particular, AOIs could not have 
been contemplated by Congress at the time the hearing aid exclusion was 
enacted, because they did not exist. At that time patients could self-
select available hearing aids, no physician order was required, and 
patients where accustomed to paying out of pocket for these items.
    Response: We believe we understand the Congressional intent in 1965 
regarding the hearing aid exclusion. We believe air and bone conduction 
devices were available and commonly used when the exclusion was 
established and therefore are excluded. However, since AOIs were not in 
existence and are clinically and functionally distinct from bone 
conduction hearing aids in 1965, we do not believe the exclusion 
applies. Different refinements of bone conduction hearing aid 
technologies have been introduced over the years that represent 
variations of non-implanted devices that send mechanical energy to the 
cochlea through bone without the need to surgically implant a 
transducer into the patient's skull. These implanted, osseointegrated 
devices were not part of the general technology and category of devices 
excluded from coverage from 1965 to the present. We have therefore come 
to the conclusion that AOIs are not hearing aids and have modified the 
final regulation to specify that AOIs are outside the scope of the 
hearing aid exclusion.
    Comment: One commenter stated the AOI has a record of demonstrated 
cost effectiveness in studies conducted around the world. One example 
includes a significant reduction in the number of medical visits and 
prescribed medications to address repeated infections for individuals 
with chronic suppurative otitis media following AOI surgery. Another 
commenter stated for patients that have failed previous surgical 
attempts at hearing reconstruction using conventional techniques, it 
makes better sense for Medicare to provide AOIs for these patients in 
lieu of repeated, costly traditional surgical attempts without an AOI.
    Response: CMS is bound by the statutory coverage rules and to the 
extent an items falls within a statutory exclusion, it cannot be 
covered under Medicare. Therefore, we are modifying Sec.  414.15 to 
further specify the scope of the hearing aid exclusion.
    Comment: A few commenters stated current users on Medicare who are 
benefiting from an AOI will be unable to maintain and upgrade their 
equipment. Several commenters stated discontinuing coverage for the 
numerous existing recipients of AOIs is unethical and discriminatory. 
These individuals have existing AOIs that require maintenance and fully 
functioning systems in order to hear and communicate. By discontinuing 
coverage, the medical community is forced to unjustly discontinue care 
of these individuals unless they can financially assume the cost of 
their implant. This is an unreasonable assumption, as many Medicare 
recipients are no longer working and living on a fixed income.
    Response: As we stated above, we have determined that AOIs are 
outside the scope of the hearing aid exclusion. So Medicare 
beneficiaries with existing AOIs will continue to receive upgrades and 
maintenance of these devices.
    Comment: One commenter stated that the patient's medical condition 
should be the primary consideration for providing coverage, not the 
technology. Many commenters stated there are currently very specific 
patient selection criteria for AOIs.
    Response: We disagree; while the patient's medical condition is 
important, we do not believe it should

[[Page 66247]]

be the primary consideration for providing coverage of a particular 
device. Medicare is a defined benefit program. It is important to 
understand that an item or device must not be statutorily excluded and 
fall within a benefit category as a prerequisite to Medicare coverage. 
We must analyze whether the device is a hearing aid as they are 
statutorily excluded from coverage. We have reexamined AOIs and the 
statutory exclusion applicability. We have come to the conclusion that 
AOIs are not hearing aids and therefore, have modified the final 
regulation to specify that AOIs are outside the scope of the hearing 
aid exclusion.
    Comment: One commenter stated hearing aids cost on average $1,675 
per device. AOIs including surgery cost are in the range of $12,000 and 
that cost is moderated by the significant availability of insurance 
coverage. This cost would likely double in the absence of insurance 
coverage, which would clearly make AOIs unaffordable for many people. 
Another commenter stated CMS is undermining the goals of the Medicare 
program by decreasing access and affordability to Medicare patients.
    Response: We understand, however, Medicare is a defined benefit 
program with certain coverage requirements. We have reexamined AOIs and 
the statutory exclusion applicability. We have come to the conclusion 
that AOIs are not hearing aids and therefore, have modified the final 
regulation to specify that AOIs are outside the scope of the hearing 
aid exclusion.
    Comment: Several commenters urged CMS to continue to provide 
coverage of CIs, brain stem implants, and AOIs, to extend coverage to 
dental anchored bone conduction devices since these devices also meet 
the definite of covered prosthetics and are not hearing aids, and to 
provide coverage to other clinically proven bone conduction hearing 
device technologies with restrictive principles applied.
    Response: We will continue to cover AOI devices that replace the 
function of the middle ear and provide mechanical energy directly to 
the cochlea, because we do not consider them to be hearing aids and 
excluded from coverage.
    Comment: One commenter stated over the past 8 years CMS has 
established a precedent for providing coverage of AOIs for Medicare 
beneficiaries, upon which Medicare beneficiaries who have received 
these technologies and health care providers who establish patient 
treatment plans have relied.
    Response: While CMS had established a precedent for coverage of 
AOIs, we reexamined AOIs and the statutory exclusion applicability. CMS 
received requests for informal benefit category determinations from 
manufacturers of certain non-implanted hearing devices. We elected to 
address the issue of the applicability of the Medicare coverage 
exclusion for hearing aids to all hearing devices in light of these 
requests and initially determined and proposed (79 FR 40296) that all 
external, internal, and implanted air conduction and bone conduction 
hearing devices were subject to the coverage exclusion for hearing 
aids. Based on our review and in light of comments received on the 
proposed rule, for the reasons stated above, CMS has decided that AOIs 
are not hearing aids subject to the statutory exclusion.
    Comment: One commenter opposed the classification of middle ear 
implants as a hearing aid, stating these devices do not meet the 
definition of a hearing aid and do bypass or supersede a non-
functioning organ in the auditory pathway. In addition, this commenter 
stated CMS is over-reaching its authority in including implantable bone 
conduction hearing aids in this definition. This commenter recommended 
seeking input from the medical and scientific community convening a 
public meeting to discuss the definitions at stake in this rule.
    Response: For the reasons stated above, CMS has decided to continue 
covering AOIs because we have decided they are not hearing aids subject 
to the statutory exclusion.
    Comment: One commenter felt the current proposal would reverse the 
2005 NCD.
    Response: The proposed rule (79 FR 40297) would not reverse the 
NCD. As we stated in the proposed rule, ``we continue to believe that 
the hearing aid exclusion does not apply to brain stem implants and CIs 
because these devices directly stimulate the auditory nerve, replacing 
the function of the inner ear rather than aiding the conduction of 
sound as hearing aids do.'' Therefore, we did not propose any changes 
to our current policy about brain stem implants and CIs and how such 
implants fall outside of the hearing aid statutory exclusion.
    Comment: Several commenters agreed with the decision CMS made in 
2005 by providing coverage for AOIs as prosthetics and not hearing 
aids.
    Response: We agree the decision in 2005 to provide coverage for 
AOIs was correct. We believe AOIs are not hearing aids since they are 
functionally and clinically distinct from the hearing aids excluded 
from coverage in 1965. Therefore, this final rule will codify the 
current program instructions found at section 100 of Chapter 16 of the 
Medicare Benefit Policy Manual (CMS Pub. 100-02).
    Comment: One commenter stated the statute at section1861(s)(8), 
regulations at 42 CFR 414.202, and program manuals in the Medicare 
Benefit Policy Manual, Ch. 15, 120 set out a straightforward test for 
defining a covered prosthetic device which have not been changed.
    Response: We have reexamined AOIs and the statutory exclusion 
applicability. We have come to the conclusion that AOIs are not hearing 
aids and therefore, have modified the final regulation to specify that 
AOIs are outside the scope of the hearing aid exclusion.
    After consideration of the comments received we have decided not to 
finalize Sec.  411.15, as proposed. In response to comments, this final 
rule will codify the policy in the current program instructions found 
at section 100 of Chapter 16 of the Medicare Benefit Policy Manual (CMS 
Pub. 100-02) noted above.

VIII. Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding

A. Background

    Section 1847(a)(1)(A) of the Act mandates the implementation of 
CBPs throughout the United States for awarding contracts for furnishing 
competitively priced items and services, including OTS orthotics 
described in section 1847(a)(2)(C) of the Act (leg, arm, back or neck 
braces described in section 1861(s)(9) of the Act for which payment 
would otherwise be made under section 1834(h)) which require minimal 
self-adjustment for appropriate use and do not require expertise in 
trimming, bending, molding, assembling, or customizing to fit the 
individual. The regulation at 42 CFR 414.402 currently defines 
``minimal self-adjustment'' as ``an adjustment that the beneficiary, 
caretaker for the beneficiary, or supplier of the device can perform 
and does not require the services of a certified orthotist (that is, an 
individual who is certified by either the American Board for 
Certification in Orthotics and Prosthetics, Inc., or the Board for 
Orthotist/Prosthetist Certification) or an individual who has 
specialized training.'' This current definition was proposed in the 71 
FR 25669 (May 1, 2006) proposed rule but did not include the term 
``individual with specialized training.'' The definition was finalized 
in the 72 FR 18022 (April 10, 2007) Final Rule with the term 
``individual with specialized

[[Page 66248]]

training'' added after receiving comments that disagreed with the May 
2006 definition and pointed out that occupational therapists, physical 
therapists, and physicians are licensed and trained to provide 
orthotics.

B. Current Issues

    Since adoption of the minimal self-adjustment definition there has 
been some concerns raised by industry and other stakeholders regarding 
who is considered an individual with specialized training. We have had 
many inquiries and comments that this term is too ambiguous and left 
open for interpretation. In addition, questions were raised regarding 
when it is appropriate for a supplier to bill for a prefabricated 
orthotic as having been custom fitted versus one furnished OTS. In 
order to address this specific question, the DME MACs issued a policy 
article on March 27, 2014, which details what custom fitting of an 
orthotic involves and indicating that furnishing custom fitted 
orthotics ``requires the expertise of a certified orthotist or an 
individual who has equivalent specialized training in the provision of 
orthotics such as a physician, treating practitioner, an occupational 
therapist, or physical therapist in compliance with all applicable 
Federal and State licensure and regulatory requirements.'' The DMEPOS 
quality standards have been updated to reflect this requirement and we 
decided to revise the definition of minimal self-adjustment in the 
regulation to address this issue as well.
    In order to identify OTS orthotics for the purpose of implementing 
CBPs for these items and services in accordance with the statute, we 
need a clearer distinction between OTS orthotics and those that require 
more than minimal self-adjustment and expertise in custom fitting. In 
doing so, we believed it was essential to identify the credentials and 
training a supplier needs to have in order to be considered a supplier 
with expertise in custom fitting; therefore, we believed the term 
``individual with specialized training'' must be clarified in 
regulations as well as in contractor policies and DMEPOS quality 
standards. In addition, we believed that suppliers who are not 
certified orthotists should not be allowed to furnish custom fitted 
orthotics unless they have specialized training equivalent to a 
certified orthotist for the provision of custom fitted orthotic 
devices. We believed that these suppliers must satisfy requirements 
concerning higher education, continuing education requirements, 
licensing, and certification/registration requirements so that they 
meet a minimum professional skill level in order to ensure appropriate 
care and safety for Medicare beneficiaries.

C. Summary of the Proposed Provisions and Responses to Comments on the 
Definition of Minimal Self-Adjustment of Orthotics Under Competitive 
Bidding

    For reasons discussed above, we proposed that physicians, treating 
practitioners, occupational therapists, and physical therapists are 
considered ``individuals with specialized training'' that possess 
training equivalent to a certified orthotist for the provision of 
custom fitted orthotic devices through their individual degree programs 
and continuing education requirements. We proposed these types of 
practitioners because we believe physicians, treating practitioners, 
occupational therapists, and physical therapists possess equivalent or 
higher educational degrees, continuing education requirements, 
licensing, and certification and/or registration requirements. Each of 
these professionals has undergone medical training in various courses 
such as kinesiology and anatomy.
    Specifically, we proposed to update the definition of minimal self-
adjustment in Sec.  414.402 to recognize as an individual with 
specialized training: a physician defined in section 1861(r) of the 
Act, a treating practitioner defined at section 1861(aa)(5) (physician 
assistant, nurse practitioner, or clinical nurse specialist), an 
occupational therapist defined at 42 CFR 484.4, or physical therapist 
defined at 42 CFR 484.4, who is in compliance with all applicable 
Federal and State licensure and regulatory requirements.
    At this time, we have decided not to finalize any changes to the 
definition of minimal self-adjustment in Sec.  414.402 to recognize as 
an individual with specialized training. We may address this provision 
in future rulemaking.

IX. Revision To Change of Ownership Rules To Allow Contract Suppliers 
To Sell Specific Lines of Business

A. Background

    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement competitive bidding programs (CBPs) in competitive bidding 
area (CBAs) throughout the United States for contract award purposes 
for the furnishing of certain competitively priced DMEPOS items and 
services. The programs mandated by section 1847(a) of the Act are 
collectively referred to as the ``Medicare DMEPOS Competitive Bidding 
Program.'' The 2007 DMEPOS competitive bidding final rule (Medicare 
Program; Competitive Acquisition for Certain DMEPOS and Other Issues 
published in the Federal Register on April 10, 2007 (71 FR 17992)), 
required CBPs for certain Medicare Part B covered items of DMEPOS 
throughout the United States. The CBP, which was phased in over several 
years, utilizes bids submitted by qualified suppliers to establish 
applicable payment amounts under Medicare Part B for certain DMEPOS 
items for beneficiaries receiving services in designated CBAs.
    CMS awards contracts to those suppliers who meet all of the 
competitive bidding requirements and whose composite bid amounts fall 
at or below the pivotal bid (the bid at which the capacity provided by 
qualified suppliers meets the demand for the item). These qualified 
suppliers will be offered a competitive bidding contract for that PC, 
provided there are a sufficient number of qualified suppliers (there 
must be at a minimum of 2) to serve the area. Contracts are awarded to 
multiple suppliers for each PC in each CBA and will be re-competed at 
least once every 3 years.
    CMS specifies the duration of the contracts awarded to each 
contract supplier in the Request for Bid Instructions. We also conduct 
extensive bidder education where we inform bidders of the requirements 
and obligations of contract suppliers. Each winning supplier is awarded 
a single contract that includes all winning bids for all applicable 
CBAs and PCs. A competitive bidding contract cannot be subdivided. For 
example, if a contract supplier breaches its contract, the entire 
contract is subject to termination. In the Physician Fee Schedule final 
rule published on November 29, 2010, we stated that ``once a supplier's 
contract is terminated for a particular round due to breach of contract 
under the DMEPOS CBP, the contract supplier is no longer a DMEPOS 
contract supplier for any DMEPOS CBP PC for which it was awarded under 
that contract. This termination applies to all areas and PCs because 
there is only one contract that encompasses all CBAs and PCs for which 
the supplier was awarded a contract.'' (75 FR 73578)
    A competitive bidding contract cannot be sold. However, CMS may 
permit the transfer of a contract to an entity that merges with or 
acquires a competitive bidding contract supplier if the new owner 
assumes all rights, obligations, and liabilities of the

[[Page 66249]]

competitive bidding contract pursuant to regulations at 42 CFR 
414.422(d).
    For the transfer of a contract to be considered, the Change of 
Ownership (CHOW) must include the assumption of the entire contract, 
including all CBAs and PCs awarded under the contract.

B. Summary of the Proposed Provisions and Responses to Comments on the 
Revision to Change of Ownership Rules To Allow Contract Suppliers To 
Sell Specific Lines of Business

    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the DMEPOS CBP. We 
received 1 public comment on this proposal from a manufacturer and 
supplier. Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.
    Specifically, we proposed (79 FR 40298) to revise Sec.  414.422(d) 
to permit transfer of part of a competitive bidding contract under 
specific circumstances. We believe requiring a transfer of the entire 
contract to a successor entity in all circumstances may be overly 
restrictive, and may be preventing routine merger and acquisition 
activity. To maintain integrity of the bidding process we award one 
contract that includes all the CBA/PCs combinations for which the 
supplier qualifies and accepts as a contract supplier. We proposed to 
establish an exception to the prohibition against transferring part of 
a contract by allowing a contract supplier to sell a distinct company 
(for example, an affiliate, subsidiary, sole proprietor, corporation, 
or partnership) which furnishes one or more specific PCs or serves one 
or more specific CBAs and transfer the portion of the contract 
initially serviced by the distinct company, including the PC(s), 
CBA(s), and location(s), to a new qualified successor entity who meets 
all competitive bidding requirements (that is, financial standards, 
licensing, and accreditation) (79 FR 40299). The exception would not 
apply to existing contracts but would apply to contracts issued in all 
future rounds of the program, starting with the Round 2 Recompete. As 
required in Sec.  414.422(d), we also proposed that a contract supplier 
that wants to sell a distinct company which furnishes one or more 
specific PCs or serves one or more specific CBAs would be required to 
notify CMS 60 days before the anticipated date of a change of 
ownership. If documentation is required to determine if a successor 
entity is qualified that documentation must be submitted within 30 days 
of anticipated change of ownership, pursuant to Sec.  
414.422(d)(2)(ii). We proposed that CMS would then modify the contract 
of the original contract supplier by removing the affected PC(s), 
CBA(s) and locations from the original contract. For CMS to approve the 
transfer, we proposed that several conditions would have to be met. 
First, we proposed that every CBA, PC, and location of the company 
being sold must be transferred to the new owner. Second, we proposed 
that all CBAs and PC's in the original contract that are not explicitly 
transferred by CMS must remain unchanged in that original contract for 
the duration of the contract period unless transferred by CMS pursuant 
to a subsequent CHOW. Third, we proposed that all requirements in 42 
CFR 414.422 (d)(2) must be met. Fourth, we proposed that the sale of 
the company must include all of the company's assets associated with 
the CBA and/or PC(s). Finally, we proposed that CMS must determine that 
transferring part of the original contract will not result in 
disruption of service or harm to beneficiaries. No transfer would be 
permitted for purposes of this program if we determine that the new 
supplier does not meet the competitive bidding requirements (such as 
financial requirements) and does not possess all applicable licenses 
and accreditation for the product(s). In order for the transfer to 
occur, the contract supplier and successor entity must enter into a 
novation agreement with CMS and the successor entity must accept all 
rights, responsibilities and liabilities under the competitive bidding 
contract. Part of a novation agreement requires successor entity to 
``seamlessly continue to service beneficiaries.'' We believe that these 
proposed conditions are necessary for proper administration of the 
program, to ensure that payments are made correctly and also to ensure 
continued contract accountability and viability along with continuity 
of service and access to beneficiaries. We specifically invited 
comments on whether more or different conditions would be appropriate.
    We proposed to update the current CHOW regulation at Sec.  
414.422(d) to clarify the language to make it easier to comprehend. The 
proposed changes reformat the regulation so that the requirements 
applicable to successor entities and new entities are listed 
separately. These proposed changes to the regulation are technical, and 
not substantive in nature. CMS sought comments on all changes proposed 
for Sec.  414.422. The comment and our responses are set forth below.
    Comment: One commenter recommended that CMS implement financial 
penalties for suppliers who sell their contracts along with selling 
their organizations prior to providing the product/service at the 
contracted payment rate, and/or remove an entity's bid from calculation 
of the SPA if they have failed to supply the awarded contract items for 
a period of time prior to re-sale. The commenters also believed that 
bids by suppliers who have no intention of providing services to 
Medicare beneficiaries should not be given the same weight as those of 
reputable suppliers in the community.
    Response: CMS does not agree with the suggestions raised by this 
commenter. CMS cannot require a contract supplier to furnish a certain 
amount of competitive bid items. However, contract suppliers must be 
ready, available and willing to furnish contracted competitive bid 
items starting on day one of implementation to any beneficiary within a 
CBA. A contract supplier is not permitted to sell just its competitive 
bidding contract. CMS ensures that the successor entity (1) assumes all 
rights, obligations, and liabilities of the entire competitive bidding 
contract, (2) meets all requirements applicable to a contract supplier, 
and (3) is acquiring the assets of the existing supplier. In addition, 
the competitive bidding contract specifically states that CMS does not 
guarantee a minimum amount of business. In response to the comment on 
the recalculation of the single payment amount (SPA), CMS carefully 
screens and evaluates bids to ensure that they are bona fide (rational 
and feasible) before determining the single payment amounts and 
offering contracts. Since only bona fide bids from qualified suppliers 
are included in the array of bids used to set prices, recalculating 
payment amounts based on contract rejections would not improve the 
validity of the single payment amounts. Also, the SPAs are set at the 
time of contract award and cannot be changed. It would not be possible 
for CMS to re-calculate the SPAs each time a contract supplier goes 
through a change of ownership. Contract offers include the SPAs 
applicable throughout the duration of the contract period for each 
HCPCS code in each CBA. Therefore, it is not possible for CMS to re-
compute the SPAs whenever there is a change in contract suppliers as 
this would require continued re-contracting.

[[Page 66250]]

    Therefore, for the reasons CMS stated above, CMS is finalizing the 
proposed changes to Sec.  414.422(d) of the regulation and making one 
additional technical change to replace certain terms with ``a new 
qualified entity,'' when referring to a company that is approved to 
purchases a contract supplier and assume the competitive bidding 
contract in whole or in part. We are making this technical change for 
purposes of consistency and to avoid possible confusion.

X. Changes to the Appeals Process for Termination of Competitive 
Bidding Contract

    We proposed (79 FR 40299) to modify the DMEPOS CBPs appeals process 
for termination of competitive bidding contracts under Sec.  414.423. 
First, we proposed to modify the effective date of termination in the 
termination notice CMS sends to a contract supplier found to be in 
breach of contract. Currently, the regulation at 42 CFR 
414.423(b)(2)(vi) indicates that the effective date of termination is 
45 days from the date of the notification letter unless a timely 
hearing request ``has been'' filed or corrective action plan ``has 
been'' submitted within 30 days of the effective date of the 
notification letter (emphasis added). We proposed to change these 
references to emphasize that the contract will automatically be 
terminated if the supplier does not file a hearing request or submit a 
corrective action plan.
    In 42 CFR 414.423(l), we also proposed (79 FR 40299) deleting the 
lead-in sentence, as it does not properly lead into the first 
paragraph. Additionally, we proposed inserting language from the lead-
in sentence in the second paragraph to indicate that the contract 
supplier, ``whose contract has been terminated,'' must notify 
beneficiaries of the termination of their contract. Second, we proposed 
to modify the deadline by which a supplier whose competitive bidding 
contract is being terminated must notify affected beneficiaries that it 
is no longer a contract supplier. Current regulations at 42 CFR 
414.423(l)(2)(i) require a contract supplier to provide this notice 
within 15 days of receipt of a final notice of termination. We proposed 
to change the beneficiary notification deadline to no later than 15 
days prior to the effective date of termination. This proposed change 
is intended to provide beneficiaries with the protection of advanced 
notice prior to a contract supplier being terminated from the CBP so 
they have sufficient time to plan/coordinate their current and future 
DMEPOS needs. We did not receive any comments on this proposal (79 FR 
40299). For the reasons we noted previously, we are finalizing these 
changes to Sec.  414.423, with two modifications to the regulation text 
to address errors in citation references. First, in the proposed 
regulation of the proposed rule (79 FR 40315), we incorrectly 
referenced Sec.  414.423(b)(1) instead of Sec.  414.423(b)(2), so we 
are correcting that citation in this final rule. Second, although we 
made clear in the preamble our proposal to delete the lead-in language 
in Sec.  414.423(l), we inadvertently failed to note that deletion in 
the proposed regulation text. Therefore, we are making technical 
corrections in the final rule to reflect final decision to delete the 
lead-in sentence in Sec.  414.423(l).

XI. Technical Change Related to Submitting Bids for Infusion Drugs 
Under the DMEPOS Competitive Bidding Program

    The standard payment rules for drugs administered through infusion 
pumps covered as DME are located at section 1842(o)(1)(D) of the Act, 
and mandate that payment for infusion drugs furnished through a covered 
item of DME on or after January 1, 2004, is equal to 95 percent of the 
average wholesale price for such drug in effect on October 1, 2003. The 
regulations implementing section 1842(o)(1)(D) of the Act are located 
at 42 CFR 414.707(a), under Subpart I of Part 414. Section 
1847(a)(2)(A) of the Act mandates the establishment of CBPs for covered 
DME and medical supplies. The statute specifically states that this 
category includes ``items used in infusion and drugs (other than 
inhalation drugs) and supplies used in conjunction with DME.'' 
Implementation of CBPs for infusion drugs is therefore specifically 
mandated by the statute.
    Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of 
contracts under a CBP unless the total amounts to be paid to contract 
suppliers are expected to be less than would otherwise be paid. The 
regulations implementing section 1847(b)(2)(A)(iii) of the Act with 
respect to items paid on a fee schedule basis under Subparts C and D of 
Part 414 are located at 42 CFR 414.412(b)(2), and specify that ``the 
bids submitted for each item in a PC cannot exceed the payment amount 
that would otherwise apply to the item under Subpart C or Subpart D of 
this part.'' In addition, the regulations regarding the conditions for 
awarding contracts under the DMEPOS CBP at 42 CFR 414.414(f) state that 
``a contract is not awarded under this subpart unless CMS determines 
that the amounts to be paid to contract suppliers for an item under a 
CBP are expected to be less than the amounts that would otherwise be 
paid for the same item under subpart C or subpart D.'' The regulations 
implementing of section 1847(b)(2)(A)(iii) of the Act did not address 
payments for drugs under subpart I, which was an oversight. We 
therefore proposed to revise Sec. Sec.  414.412(b)(2) and 414.414(f) to 
include a reference to drugs paid under subpart I in addition to items 
paid under subparts C or D. We proposed to revise Sec.  414.412(b)(2) 
to specify that the bid amounts submitted for each drug in a PC cannot 
exceed the payment limits that would otherwise apply to the drug under 
subpart I of part 414. Infusion drugs have payment limits equal to 95 
percent of the average wholesale price for the drug in effect on 
October 1, 2003, in accordance with Sec.  414.707(a)(3). See http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=7065f17b411e37b3788b6e7fcce21f89&rgn=div8&view=text&node=42:3.0.1.1.1.9.1.3amp;idno=42. We proposed to revise Sec.  414.414(f) 
to specify that a contract is not awarded under this subpart unless CMS 
determines that the amounts to be paid to contract suppliers for 
infusion drugs provided with respect to external infusion pumps under a 
CBP are expected to be less than the amounts that would otherwise be 
paid to suppliers for the same drug under subpart I of part 414. We 
sought comments on this proposal and received 4 comments. The comments 
and responses are set forth below.
    Comment: Some commenters stated that CMS does not have authority to 
change payment amounts for infusion drugs using competitive bidding. 
One commenter stated that home infusion therapy is one of the most 
clinically complex therapies covered under the DME benefit and involves 
more than the delivery of infusion drugs to patients. The commenter 
believed that payment amounts for infusion drugs could be improperly 
reduced if CMS sets the payment rate using bids from inexperienced 
providers who do not adequately account for the cost of the services.
    Response: Section 1847(a)(2)(A) of the Act includes infusion drugs 
in the list of items subject to the DMEPOS Competitive Bidding Program. 
Therefore, we are finalizing our proposal to modifying Sec.  414.414(f) 
of the regulations, with an additional modification to make a general 
reference to Subpart I. We note, however, that at this time there are 
no CBPs in effect that include infusion drugs. The phase-in of

[[Page 66251]]

infusion drugs would occur under a future CBP(s).

XII. Accelerating Health Information Exchange

    HHS believes all patients, their families, and their healthcare 
providers should have consistent and timely access to their health 
information in a standardized format that can be securely exchanged 
between the patient, providers, and others involved in the patient's 
care. (HHS August 2013 Statement, ``Principles and Strategies for 
Accelerating Health Information Exchange).'' The Department is 
committed to accelerating health information exchange (HIE) through the 
use of electronic health records (EHRs) and other types of health 
information technology (health IT) across the broader care continuum 
through a number of initiatives including: (1) Alignment of incentives 
and payment adjustments to encourage provider adoption and optimization 
of health IT and HIE services through Medicare and Medicaid payment 
policies, (2) adoption of common standards and certification 
requirements for interoperable health IT, (3) support for privacy and 
security of patient information across all HIE-focused initiatives, and 
(4) governance of health information networks. These initiatives are 
designed to encourage HIE among health care providers, including 
professionals and hospitals eligible for the Medicare and Medicaid EHR 
Incentive Programs and those who are not eligible for the EHR Incentive 
programs, and are designed to improve care delivery and coordination 
across the entire care continuum. For instance, to increase flexibility 
in the Office of the National Coordinator for Health Information 
Technology's (ONC) regulatory certification structure Health IT 
Certification Program, ONC expressed in the 2014 Edition Release 2 
final rule (79 FR 54472 through 54473) an intent to propose future 
changes to the program that would permit the certification of health IT 
for other health care settings, such as long-term and post-acute care 
and behavioral health settings.
    We believe that HIE and the use of certified EHRs can effectively 
and efficiently help ESRD facilities and nephrologists improve internal 
care delivery practices, support management of patient care across the 
continuum, and support the reporting of electronically specified 
clinical quality measures (eCQMs).

XIII. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

    In section II.E and section II.G of this final rule, we are 
implementing changes to regulatory text for the ESRD PPS in CY 2015. 
However, the changes that are being finalized do not impose any new 
information collection requirements.

C. Additional Information Collection Requirements

    This final rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
final rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP
    The information collection requirements associated with the ESRD 
QIP are currently approved under OMB control number 0938-0386.
a. Data Validation Requirements for the PY 2017 ESRD QIP
    Section III.F.9 in this final rule outlines our data validation 
studies for PY 2017. Specifically, we proposed to randomly sample 
records from 300 facilities as part of our continuing pilot data-
validation program. Each sampled facility would be required to produce 
approximately 10 records, and the sampled facilities will be reimbursed 
by our validation contractor for the costs associated with copying and 
mailing the requested records. The burden associated with these 
validation requirements is the time and effort necessary to submit the 
requested records to a CMS contractor. We estimated that it will take 
each facility approximately 2.5 hours to comply with this requirement. 
If 300 facilities are asked to submit records, we estimate that the 
total combined annual burden for these facilities will be 750 hours 
(300 facilities x 2.5 hours). According to the Bureau of Labor 
Statistics, the mean hourly wage of a registered nurse is $33.13/hour. 
Since we anticipate that nurses (or administrative staff who would be 
paid at a lower hourly wage) would submit this data, we estimated that 
the aggregate cost of the CROWNWeb data validation would be $24,847.50 
(750 hours x $33.13/hour) total or $82.83 ($24,847.50/300 facilities) 
per facility in the sample.
    We sought comments on these estimates but did not receive any 
comments.
    Under the feasibility study for validating data reported to the 
NHSN Dialysis Event Module, we proposed to randomly select nine 
facilities to provide CMS with a quarterly list of all positive blood 
cultures drawn from their patients during the quarter, including any 
positive blood cultures collected on the day of, or the day following, 
a facility patient's admission to a hospital. A CMS contractor will 
review the lists to determine if dialysis events for the patients in 
question were accurately reported to the NHSN Dialysis Event Module. If 
we determine that additional medical records are needed to validate 
dialysis events, facilities will be required to provide those records 
within 60 days of a request for this information. We estimated that the 
burden associated with this feasibility study will be the time and 
effort necessary for each selected facility to compile and submit to 
CMS a quarterly list of positive blood cultures drawn from its 
patients. We estimated that it will take each participating facility 
approximately two hours per quarter to comply with this submission. If 
nine facilities are asked to provide lists, we estimated the quarterly 
burden for these facilities would be 72 hours per year (9 facilities x 
2 hours/quarter x 4 quarters/year). Again, we estimated the mean hourly 
wage of a registered nurse to be $33.13/hour, and we anticipated that 
nurses (or administrative staff who would be paid at a lower hourly 
wage) would be responsible for preparing and submitting the list. 
Because we anticipated that nurses (or

[[Page 66252]]

administrative staff who would be paid at a lower hourly rate) would 
compile and submit these data, we estimated that the aggregate annual 
cost of the feasibility study to validate NHSN data would be $2,385.36 
(72 hours x $33.13/hour) total or $265.04 per facility ($2,385.36/9 
facilities).
    We sought comments on these estimates. The comment we received and 
our response is set forth below.
    Comment: One commenter stated that the cost estimate provided for 
the proposed NHSN Data Validation study is too low, because the study 
requirements will likely be completed by the facility's Nurse Manager, 
who is paid more than a Registered Nurse.
    Response: We understand the commenter's concerns; however, the 
Bureau of Labor Statistics does not separately itemize Nurse Managers. 
Based on our experience, Nurse Managers are typically Registered 
Nurses; therefore, we believe that the costs of collecting this 
information have been estimated correctly.
b. NHSN Healthcare Personnel Influenza Vaccination Reporting Measure 
for PY 2018
    We proposed to include, beginning with the PY 2018 ESRD QIP, a 
measure requiring facilities to report healthcare personnel influenza 
vaccination data to NHSN. The NHSN is a secure, Internet-based 
surveillance system which is maintained and managed by CDC. Many 
dialysis facilities already submit NHSN Bloodstream Infection clinical 
measure data to NHSN. Specifically, we proposed to require facilities 
to submit on an annual basis an HCP Influenza Vaccination Summary Form 
to NHSN, according to the specifications available in the NHSN 
Healthcare Personnel Safety Component Protocol. We estimated the burden 
associated with this measure to be the time and effort necessary for 
facilities to complete and submit the HCP Influenza Vaccination Summary 
Form on an annual basis. We estimated that approximately 5,996 
facilities will treat ESRD patients in PY 2018. We estimated it will 
take each facility approximately 75 minutes to collect and submit the 
data necessary to complete the Healthcare Personnel Influenza 
Vaccination Summary Form on an annual basis. Therefore, the estimated 
total annual burden associated with reporting this measure in PY 2018 
is 7,495 hours [(75/60) hours x 5,996 facilities]. Again, we estimated 
the mean hourly wage of a registered nurse to be $33.13, and we 
anticipated that nurses (or administrative staff who would be paid at a 
lower hourly wage) would be responsible for this reporting. In total, 
we stated that we believe the cost for all ESRD facilities to comply 
with the reporting requirements associated with the NHSN Healthcare 
Personnel Influenza Vaccination reporting measure would be 
approximately $248,309 (7,495 hours x $33.13/hour) total, or $41.37 
($248,309/5,996 facilities) per facility.
    We sought comments on these estimates but did not receive any 
comments.

XIV. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We examined the impacts of this rule as required by Executive Order 
12866 (September 30, 1993, Regulatory Planning and Review) and 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 11, 2011). Executive Orders 12866 and 13563 direct agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits of reducing costs, harmonizing rules, and promoting 
flexibility. This rule has been designated economically significant 
under section 3(f)(1) of Executive Order 12866. Accordingly, the rule 
has been reviewed by the Office of Management and Budget. We have 
prepared a Regulatory Impact Analysis that to the best of our ability 
presents the costs and benefits of the final rule.
2. Statement of Need
    This rule finalizes a number of routine updates for renal dialysis 
services in CY 2015 and implements several policy changes to the ESRD 
PPS. The routine updates include: wage index values, wage index budget-
neutrality adjustment factor, and the outlier payment threshold 
amounts. The final policy changes to the ESRD PPS include the revisions 
to the ESRDB market basket, changes in the CBSA delineations, changes 
to the labor-related share, clarifications of the low-volume payment 
adjustment and the billing of short frequent hemodialysis services, and 
additions and corrections to the ICD-10-CM codes that will be used for 
the co-morbidity payment adjustment when compliance with ICD-10-CM is 
required beginning October 1, 2015. In addition, this rule implements 
sections 1881(b)(14)(F)(i) and (I) of the Act, as amended by section 
217 (b)(1) and (2) of PAMA, under which the drug utilization adjustment 
transition is eliminated and a 0.0 percent update to the ESRD PPS base 
rate is imposed in its place. This rule also implements the delay in 
payment for oral-only drugs used for the treatment of ESRD under the 
ESRD PPS until January 1, 2024 as required by section 217(a) of PAMA. 
Failure to publish this final rule would result in ESRD facilities not 
receiving appropriate payments in CY 2015.
    This final rule implements requirements for the ESRD QIP by 
adopting measure sets for the PYs 2017 and 2018 programs, as directed 
by section 1881(h) of the Act. Failure to finalize requirements for the 
PY 2017 ESRD QIP would prevent continuation of the ESRD QIP beyond PY 
2016. In addition, finalizing requirements for the PY 2018 ESRD QIP 
provides facilities with more time to review and fully understand new 
measures before their implementation in the ESRD QIP.
    This final rule establishes a methodology for adjusting DMEPOS fee 
schedule amounts using information from the Medicare DMEPOS CBP. The 
final rule phases in special payment rules for certain DME in a limited 
number of areas under the Medicare DMEPOS CBP. This rule also clarifies 
the Medicare hearing aid coverage exclusion under section 1862(a)(7) of 
the Act. Finally, this final rule modifies the rules for a CHOW under 
the Medicare DMEPOS CBP.
3. Overall Impact
    We estimate that the proposed revisions to the ESRD PPS will result 
in an increase of approximately $30 million in payments to ESRD 
facilities in CY 2015, which includes the amount associated with 
updates to outlier threshold amounts, updates to the wage index, 
changes in CBSA delineations, and the labor-related share.
    For PY 2017, we estimate that the finalized requirements related to 
the ESRD QIP will cost approximately $27 thousand total, and the 
payment reductions will result in a total impact of approximately $12 
million across all facilities. For PY 2018, we estimate that the 
finalized requirements related to the ESRD QIP will cost approximately 
$248 thousand total, and the payment reductions will result in a total 
impact of approximately $12.7 million across all facilities, resulting 
in a total impact from the ESRD QIP of approximately $13 million.
    We estimate that the final methodology for adjusting DMEPOS payment 
amounts using information from DMEPOS CBPs would save over

[[Page 66253]]

$4.4 billion in gross payments over FYs 2016-2020. The gross savings 
would be primarily achieved from the reduced payment amounts for items 
and services.
    We estimate the special payment rules at Sec.  414.409 would not 
have a negative impact on beneficiaries and suppliers, or on the 
Medicare program. Contract suppliers are responsible for furnishing 
items and services needed by the beneficiary, and the cost to suppliers 
for furnishing these items and services generally would not change 
based on whether or not the equipment and related items and services 
are paid for separately under a capped rental payment method. Because 
the supplier's bids would reflect the cost of furnishing items in 
accordance with the new payment rules, we expect the fiscal impact 
generally would be the same as is under the current payment rules. 
Furthermore, as indicated above, the special payment rules would be 
phased in under a limited number of areas to gradually determine 
effects on the program, beneficiaries, and suppliers, including their 
effects on cost, quality, and access before expanding to other areas 
after notice and comment rulemaking, if supported by evaluation 
results. We believe that the special payment rules will give 
beneficiaries more choice and flexibility in changing suppliers. We 
estimate the clarification of the statutory Medicare hearing aid 
coverage exclusion will not have a significant fiscal impact on the 
Medicare program because we are not changing the current coverage for 
devices for Medicare payment purposes. This regulation at Sec.  
411.15(d) will provide guidance as to coverage of DME with regard to 
the statutory exclusion.
    We estimate finalizing a change to the CHOW rules under the 
Medicare DMEPOS CBP will have no significant impact to DMEPOS 
suppliers.

B. Detailed Economic Analysis

1. CY 2015 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
    To understand the impact of the changes affecting payments to 
different categories of ESRD facilities, it is necessary to compare 
estimated payments in CY 2014 to estimated payments in CY 2015. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2014 and CY 2015 
contain similar inputs. Therefore, we simulated payments only for those 
ESRD facilities for which we are able to calculate both current 
payments and new payments.
    For this final rule, we used the June 2014 update of CY 2013 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2013 claims 
to 2014 and 2015 using various updates. The updates to the ESRD PPS 
base rate are described in section II.C of this rule. Table 33 shows 
the impact of the estimated CY 2015 ESRD payments compared to estimated 
payments to ESRD facilities in CY 2014.

                                 Table 33--Impact Of Final Changes in Payments to ESRD Facilities For CY 2015 Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Effect of 2015
                                                                                                       changes in wage   Effect of 2015
                                                       Number of        Number of      Effect of 2015   indexes, CBSA      changes in    Effect of total
                   Facility type                       facilities    treatments  (in     changes in      designations     payment rate     2015 changes
                                                                        millions)      outlier policy     and labor-         update
                                                                                                        related share
                                                                 A                B                 C               D                E                F
                                                                                                 (%)              (%)              (%)              (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities....................................           6,096             43.6              0.3              0.0              0.0              0.3
Type..............................................  ...............  ...............  ...............  ...............  ...............  ...............
    Freestanding..................................           5,615             40.7              0.3              0.0              0.0              0.3
    Hospital based................................             481              2.9              0.3              0.2              0.0              0.5
Ownership Type....................................  ...............  ...............  ...............  ...............  ...............  ...............
    Large dialysis organization...................           4,209             30.5              0.3             -0.1              0.0              0.2
    Regional chain................................             890              6.6              0.2              0.2              0.0              0.5
    Independent...................................             599              4.1              0.2              0.2              0.0              0.3
    Hospital based \1\............................             398              2.4              0.3              0.1              0.0              0.4
Geographic Location...............................  ...............  ...............  ...............  ...............  ...............  ...............
    Rural.........................................           1,230              6.5              0.3             -0.8              0.0             -0.5
    Urban.........................................           4,866             37.0              0.3              0.1              0.0              0.4
Census Region.....................................  ...............  ...............  ...............  ...............  ...............  ...............
    East North Central............................           1,000              6.5              0.3             -0.1              0.0              0.2
    East South Central............................             504              3.2              0.3             -1.2              0.0             -0.9
    Middle Atlantic...............................             672              5.2              0.3              0.7              0.0              0.9
    Mountain......................................             356              2.1              0.2              0.0              0.0              0.2
    New England...................................             179              1.4              0.3              1.2              0.0              1.4
    Pacific \2\...................................             725              6.1              0.2              1.7              0.0              1.9
    Puerto Rico and Virgin Islands................              44              0.3              0.3             -3.9              0.0             -3.6
    South Atlantic................................           1,353             10.1              0.3             -0.5              0.0             -0.2
    West North Central............................             441              2.3              0.2             -0.3              0.0             -0.1
    West South Central............................             822              6.3              0.3             -0.9              0.0             -0.6
Facility Size.....................................  ...............  ...............  ...............  ...............  ...............  ...............
    Less than 4,000 treatments \3\................           1,283              3.2              0.3             -0.2              0.0              0.1
    4,000 to 9,999 treatments.....................           2,261             11.8              0.3             -0.3              0.0              0.0
    10,000 or more treatments.....................           2,536             28.6              0.3              0.1              0.0              0.4
    Unknown.......................................              16              0.0              0.3             -2.2              0.0             -1.9
Percentage of Pediatric Patients..................  ...............  ...............  ...............  ...............  ...............  ...............
    Less than 2...................................           5,978             43.1              0.3              0.0              0.0              0.3
    Between 2 and 19..............................              52              0.4              0.3             -0.2              0.0              0.1

[[Page 66254]]

 
    Between 20 and 49.............................              12              0.0              0.1              0.0              0.0              0.1
    More than 50..................................              54              0.1              0.1              0.1              0.0             0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
\2\ Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.
\3\ 1,283 ESRD facilities with less than 4,000 treatments, only 407 qualify for the low-volume adjustment. The low-volume adjustment is mandated by
  Congress, and is not applied to pediatric patients. The impact to these low-volume facilities is a 0.1 percent decrease in payments.
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the changes 
to the outlier payment policy described in section II.C.4 of this final 
rule is shown in column C. For CY 2015, the impact on all ESRD 
facilities as a result of the changes to the outlier payment policy 
will be a 0.3 percent increase in estimated payments. The estimated 
impact of the changes to outlier payment policy ranges from a 0.1 
percent to a 0.3 percent increase. Nearly all ESRD facilities are 
anticipated to experience a positive effect in their estimated CY 2015 
payments as a result of the outlier policy changes.
    Column D shows the effect of the wage index, new CBSA delineations, 
and labor-related share on ESRD facilities and reflects the CY 2015 
wage index values for the ESRD PPS payments. Facilities located in the 
census region of Puerto Rico and the Virgin Islands would receive a 3.9 
percent decrease in estimated payments in CY 2015. Since most of the 
facilities in this category are located in Puerto Rico, the decrease is 
primarily due to the change in the labor-related share. The other 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a 2.2 percent decrease to a 1.7 percent 
increase due to the update of the wage indexes, CBSA delineations and 
labor-related share.
    Column E shows the effect of the ESRD PPS payment rate update of 
0.0 percent as required by sections 1881(b)(14)(F) and (I) as amended 
by section 217 of PAMA.
    Column F reflects the overall impact (that is, the effects of the 
outlier policy changes, the wage index, the CBSA delineations, the 
labor-related share, and the effect of the payment rate update. We 
expect that overall ESRD facilities will experience a 0.3 percent 
increase in estimated payments in 2015. ESRD facilities in Puerto Rico 
and the Virgin Islands are expected to receive a 3.6 percent decrease 
in their estimated payments in CY 2015. This larger decrease is 
primarily due to the negative impact of the change in the labor-related 
share. The other categories of types of facilities in the impact table 
show impacts ranging from a decrease of 1.9 percent to increase of 1.9 
percent in their 2015 estimated payments.
b. Effects on Other Providers
    Under the ESRD PPS, ESRD facilities are paid directly for the renal 
dialysis bundle and other provider types such as laboratories, DME 
suppliers, and pharmacies, may no longer bill Medicare directly for 
renal dialysis services. Rather, effective January 1, 2011, such other 
providers can only furnish renal dialysis services under arrangements 
with ESRD facilities and must seek payment from ESRD facilities rather 
than Medicare. Under the ESRD PPS, Medicare pays ESRD facilities one 
payment for renal dialysis services, which may have been separately 
paid to suppliers by Medicare prior to the implementation of the ESRD 
PPS. Therefore, in CY 2015, we estimate that the ESRD PPS will have 
zero impact on these other providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2015 will be approximately $9.0 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 3.3 percent in 
CY 2015.
d. Effects on Medicare Beneficiaries
    Under the ESRD PPS, beneficiaries are responsible for paying 20 
percent of the ESRD PPS payment amount. As a result of the projected 
0.3 percent overall increase in ESRD PPS payment amounts in CY 2015, we 
estimate that there will be an increase in beneficiary co-insurance 
payments of 0.3 percent in CY 2015, which translates to approximately 
$10 million.
e. Alternatives Considered
    For this final rule, we will implement a 50/50 blended wage index 
for CY 2015 that will apply to all ESRD facilities, experiencing an 
impact, or not, due to the implementation of the new CBSA delineations. 
We considered implementing the new CBSA delineations without a 
transition; however we decided to mitigate the impact this change would 
have on ESRD facilities that may experience a decrease in payments due 
to the change.
    In addition, we will implement the updated labor-related share 
using a 2-year transition. Therefore, for CY 2015, we will apply 50 
percent of the value of the current labor-related share under the ESRD 
PPS (41.737) and 50 percent of the percent to the revised labor-related 
share (50.673). In CY 2016, we will apply 100 percent, or 50.673 
percent, as the labor-related share. We considered implementing the 
labor-related share without a transition; however we decided to 
mitigate the impact this change would have on ESRD facilities that may 
experience a decrease in payments due to the change.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2017 ESRD QIP
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility

[[Page 66255]]

services provided to beneficiaries as a result of payment changes under 
the ESRD PPS. The methodology that we are proposing to use to determine 
a facility's TPS for PY 2017 is described in section III.F.5 of this 
final rule. Any reductions in ESRD PPS payments as a result of a 
facility's performance under the PY 2017 ESRD QIP would affect the 
facility's reimbursement rates in CY 2017.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 19 percent or 
1,123 of the facilities would likely receive a payment reduction in PY 
2017. Facilities that do not receive a TPS are not eligible for a 
payment reduction.
    In conducting our impact assessment, we have assumed that there 
will be an initial count of 5,996 dialysis facilities paid under the 
ESRD PPS. Table 34 shows the overall estimated distribution of payment 
reductions resulting from the PY 2017 ESRD QIP.

Table 34--Estimated Distribution of PY 2017 ESRD QIP Payment Reductions.
------------------------------------------------------------------------
                                                 Number of    Percent of
              Payment  reduction                 facilities   facilities
------------------------------------------------------------------------
0.0%..........................................        4,541        80.17
0.5%..........................................          784        13.84
1.0%..........................................          282         4.98
1.5%..........................................           44         0.78
2.0%..........................................           13         0.23
------------------------------------------------------------------------
Note: This table excludes 332 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a Total Performance Score.

    To estimate whether or not a facility would receive a payment 
reduction in PY 2017, we scored each facility on achievement and 
improvement on several measures we have previously finalized and for 
which there were available data from CROWNWeb and Medicare claims. 
Measures used for the simulation are shown in Table 35.

   Table 35--Data Used To Estimate PY 2017 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                 Period of time used
                                     to calculate
                                     achievement
                                     thresholds,
            Measure                  performance      Performance period
                                      standards,
                                   benchmarks, and
                                     improvement
                                      thresholds
------------------------------------------------------------------------
Vascular Access Type
    % Fistula..................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    % Catheter.................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
Kt/V
    Adult HD...................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    Adult PD...................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    Pediatric HD...............  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
Hypercalcemia..................  May 2012-Dec 2012..  Jan 2013-Dec 2013.
SRR............................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
------------------------------------------------------------------------

    Clinical measure topic areas with less than 11 cases for a facility 
were not included in that facility's Total Performance Score. Each 
facility's Total Performance Score was compared to the estimated 
minimum Total Performance Score and the payment reduction table found 
in section III.F.8 of this final rule. Facility reporting measure 
scores were estimated using available data from CY 2013. Facilities 
were required to have a score on at least one clinical and one 
reporting measure in order to receive a Total Performance Score.
    To estimate the total payment reductions in PY 2017 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the 1-year period between 
January 2013 and December 2013 by the facility's estimated payment 
reduction percentage expected under the ESRD QIP, yielding a total 
payment reduction amount for each facility: (Total ESRD payment in 
January 2013 through December 2013 times the estimated payment 
reduction percentage). For PY 2017, the total payment reduction for the 
1,123 facilities estimated to receive a reduction is approximately 
$11.9 million ($11,927,399). Further, we estimate that the total costs 
associated with the collection of information requirements for PY 2017 
described in section III.F.9 of this final rule would be approximately 
$27 thousand for all ESRD facilities. As a result, we estimate that 
ESRD facilities will experience an aggregate impact of approximately 
$12 million ($27,232 + $11,927,399 = $11,954,631) in PY 2017, as a 
result of the PY 2017 ESRD QIP.
    Table 36 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2017. The table 
estimates the distribution of ESRD facilities by facility size (both 
among facilities considered to be small entities and by number of 
treatments per facility), geography (both urban/rural and by region), 
and by facility type (hospital based/freestanding facilities). Given 
that the time periods used for these calculations will differ from 
those we are proposing to use for the PY 2017 ESRD QIP, the actual 
impact of the PY 2017 ESRD QIP may vary significantly from the values 
provided here.

          Table 36--Estimated Impact of Finalized QIP Payment Reductions to ESRD Facilities in PY 2017
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of      treatments       Number of      expected to      (percent
                                    facilities       2013  (in      facilities       receive a       change in
                                                     millions)    with QIP score      payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,996            39.1           5,664           1,123           -0.13

[[Page 66256]]

 
         Facility Type:
    Freestanding................           5,520            36.6           5,275           1,008           -0.12
    Hospital-based..............             476             2.5             389             115           -0.21
         Ownership Type:
    Large Dialysis..............           4,150            27.5           3,987             704           -0.11
    Regional Chain..............             871             5.9             828             170           -0.14
    Independent.................             582             3.6             529             151           -0.23
    Hospital-based (non-chain)..             393             2.1             320              98           -0.22
         Facility Size:
    Large Entities..............           5,021            33.5           4,815             874           -0.11
    Small Entities \1\..........             975             5.7             849             249           -0.22
          Rural Status:
    1) Yes......................           1,212             5.9           1,156             181           -0.10
    2) No.......................           4,784            33.3           4,508             942           -0.14
         Census Region:
    Northeast...................             792             5.8             756             161           -0.15
    Midwest.....................           1,341             7.7           1,259             268           -0.14
    South.......................           2,527            17.5           2,451             487           -0.12
    West........................           1,015             7.1             964             128           -0.08
    US Territories \2\..........             321             1.0             234              79           -0.27
        Census Division:
    East North Central..........             979             5.8             897             224           -0.17
    East South Central..........             497             2.9             473              81           -0.11
    Middle Atlantic.............             661             4.8             619             135           -0.15
    Mountain....................             352             1.9             334              35           -0.07
    New England.................             177             1.3             167              33           -0.14
    Pacific.....................             710             5.4             670             104           -0.10
    South Atlantic..............           1,333             9.1           1,272             301           -0.15
    West North Central..........             438             2.0             410              59           -0.09
    West South Central..........             807             5.6             782             126           -0.10
    US Territories \3\..........              42             0.3              40              25           -0.43
Facility Size (# of total
 treatments):
    Less than 4,000 treatments..           1,086             2.7             901             163           -0.13
    4,000-9,999 treatments......           2,226            10.5           2,167             371           -0.11
    Over 10,000 treatments......           2,523            25.7           2,504             561           -0.14
    Unknown.....................             161             0.3              92              28           -0.28
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-
  reported status.
\2\ Includes Puerto Rico and Virgin Islands.
\3\ Based on claims and CROWNWeb data through December 2013.

b. Effects of the PY 2018 ESRD QIP
    The methodology that we are using to determine a facility's TPS for 
the PY 2018 ESRD QIP is described in section III.G.9 of this final 
rule. Any reductions in ESRD PPS payments as a result of a facility's 
performance under the PY 2018 ESRD QIP would apply to ESRD PPS payments 
made to the facility in CY 2018.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 21 percent or 
1,284 of the facilities would likely receive a payment reduction in PY 
2018. Facilities that do not receive a TPS are not eligible for a 
payment reduction.
    In conducting our impact assessment, we have assumed that there 
will be 5,996 dialysis facilities paid through the PPS. Table 37 shows 
the overall estimated distribution of payment reductions resulting from 
the PY 2018 ESRD QIP.

 Table 37--Estimated Distribution of PY 2018 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                 Number of    Percent of
              Payment  reduction                 facilities   facilities
------------------------------------------------------------------------
0.0%..........................................        4,338         77.2
0.5%..........................................        1,023         18.2
1.0%..........................................          225          4.0
1.5%..........................................           33          0.6
2.0%..........................................            3          0.1
------------------------------------------------------------------------
Note: This table excludes 374 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a Total Performance Score.

    To estimate whether or not a facility would receive a payment 
reduction in PY 2018, we scored each facility on achievement and 
improvement on several measures we have previously finalized and for 
which there were available data from CROWNWeb and Medicare claims. 
Measures used for the simulation are shown in Table 38.

[[Page 66257]]



   Table 38--Data Used to Estimate PY 2018 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                 Period of time used
                                     to calculate
                                     achievement
                                     thresholds,
            Measure                  performance      Performance period
                                      standards,
                                   benchmarks, and
                                     improvement
                                      thresholds
------------------------------------------------------------------------
Vascular Access Type...........  ...................  ..................
    % Fistula..................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    % Catheter.................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
Kt/V...........................  ...................  ..................
    Adult HD...................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    Adult PD...................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    Pediatric HD...............  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
    Pediatric PD...............  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
Hypercalcemia..................  May 2012-Dec 2012..  Jan 2013-Dec 2013.
SRR............................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
STrR...........................  Jan 2012-Dec 2012..  Jan 2013-Dec 2013.
------------------------------------------------------------------------

    Clinical measure topic areas with less than 11 cases for a facility 
were not included in that facility's Total Performance Score. Each 
facility's Total Performance Score was compared to a proxy minimum 
Total Performance Score developed consistent with the policies outlined 
in sections III.G.9 of this final rule. Facility reporting measure 
scores were estimated using available data from CY 2013. Facilities 
were required to have a score on at least one clinical and one 
reporting measure in order to receive a Total Performance Score.
    To estimate the total payment reductions in PY 2018 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the 1-year period between 
January 2013 and December 2013 by the facility's estimated payment 
reduction percentage expected under the ESRD QIP, yielding a total 
payment reduction amount for each facility: (Total ESRD payment in 
January 2013 through December 2013 times the estimated payment 
reduction percentage). For PY 2018, the total payment reduction for all 
of the 1,284 facilities expected to receive a reduction is 
approximately $11.6 million ($11,576,214). Further, we estimate that 
the total costs associated with the collection of information 
requirements for PY 2018 described in section III.G.2.f of this final 
rule would be approximately $248 thousand for all ESRD facilities. As a 
result, we estimate that ESRD facilities will experience an aggregate 
impact of approximately $11.8 million ($248,309 + $11,576,215 = 
$11,824,524) in PY 2018, as a result of the PY 2018 ESRD QIP.
    Table 39 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2018. The table 
details the distribution of ESRD facilities by facility size (both 
among facilities considered to be small entities and by number of 
treatments per facility), geography (both urban/rural and by region), 
and by facility type (hospital based/freestanding facilities). Given 
that the time periods used for these calculations will differ from 
those we will use for the PY 2018 ESRD QIP, the actual impact of the PY 
2018 ESRD QIP may vary significantly from the values provided here.

          Table 39--Estimated Impact of Finalized QIP Payment Reductions to ESRD Facilities for PY 2018
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of      treatments       Number of      expected to      (percent
                                    facilities       2013  (in      facilities       receive a       change in
                                                     millions)    with QIP score      payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,996            39.1           5,622           1,284           -0.14
         Facility Type:
    Freestanding................           5,520            36.6           5,251           1,150           -0.13
    Hospital-based..............             476             2.5             371             134           -0.23
         Ownership Type:
    Large Dialysis..............           4,150            27.5           3,976             789           -0.11
    Regional Chain..............             871             5.9             823             212           -0.16
    Independent.................             582             3.6             520             174           -0.22
Hospital-based (non-chain)......             393             2.1             303             109           -0.23
         Facility Size:
    Large Entities..............           5,021            33.5           4,799           1,001           -0.12
    Small Entities \1\..........             975             5.7             823             283           -0.23
          Rural Status:
    1) Yes......................           1,212             5.9           1,151             250           -0.13
    2) No.......................           4,784            33.3           4,471           1,034           -0.14
         Census Region:
    Northeast...................             792             5.8             748             175           -0.14
    Midwest.....................           1,341             7.7           1,247             317           -0.15
    South.......................           2,527            17.5           2,445             530           -0.12
    West........................           1,015             7.1             955             153           -0.10
    US Territories \2\..........             321             1.0             227             109           -0.36
        Census Division:
    East North Central..........             979             5.8             888             256           -0.17
    East South Central..........             497             2.9             472              94           -0.12

[[Page 66258]]

 
    Middle Atlantic.............             661             4.8             612             150           -0.15
    Mountain....................             352             1.9             334              46           -0.08
    New England.................             177             1.3             164              35           -0.12
    Pacific.....................             710             5.4             660             122           -0.11
    South Atlantic..............           1,333             9.1           1,268             328           -0.15
    West North Central..........             438             2.0             405              81           -0.12
    West South Central..........             807             5.6             779             146           -0.11
    US Territories \2\..........              42             0.3              40              26           -0.42
Facility Size (# of total
 treatments)....................
    Less than 4,000 treatments..           1,086             2.7             869             219           -0.16
    4,000-9,999 treatments......           2,226            10.5           2,163             429           -0.11
    Over 10,000 treatments......           2,523            25.7           2,502             587           -0.13
    Unknown.....................             161             0.3              88              49           -0.49
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-
  reported status.
\2\ Includes Puerto Rico and Virgin Islands.
\3\ Based on claims and CROWNWeb data through December 2013.

3. DMEPOS Provisions
a. Effects of the Final Methodology for Adjusting DMEPOS Payment 
Amounts Using Information From Competitive Bidding Programs
    We estimate that the final methodology for adjusting DMEPOS payment 
amounts using information from DMEPOS CBPs will save over $4.4 billion 
in gross payments over FY 2016 through 2020. The gross savings will be 
primarily achieved from price reductions for items. Therefore, most of 
the economic impact is expected from the reduced prices. We estimate 
that approximately half of the DMEPOS items and services furnished to 
Medicare beneficiaries are furnished to beneficiaries residing outside 
existing CBAs. (See Table 40.)

    Table 40--Impact of Pricing Items in Non-Competitive Areas Using
                      Competitive Bidding Pricing *
------------------------------------------------------------------------
                                                              Impact on
                                                 Impact on   beneficiary
                                                 the gross       cost
                                                 impact in    sharing in
                      FY                        dollars (to  dollars (to
                                                 the nearer   the nearer
                                                    ten          ten
                                                  million)     million)
------------------------------------------------------------------------
2016..........................................         -550         -130
2017..........................................       -1,120         -280
2018..........................................       -1,330         -330
2019..........................................       -1,430         -360
2020..........................................       -1,530         -380
------------------------------------------------------------------------
* The impacts of the final rule differ from those of the proposed rule
  due to six-month phase-in in 2016 of the adjusted fees and the
  expanded definition of rural areas.

b. Effects of the Final Special Payment Methodologies Under the 
Competitive Bidding Program
    We believe that the final special payment rules will not have a 
significant impact on beneficiaries and suppliers. Contract suppliers 
are responsible for furnishing items and services needed by the 
beneficiary, and the cost to suppliers for furnishing these items and 
services does not change based on whether or not the equipment and 
related items and services are paid for separately under a capped 
rental payment method. Because the supplier's bids will reflect the 
cost of furnishing items in accordance with the new payment rules, we 
expect the overall savings will be generally the same as they are under 
the current payment rules. Section 1847(b)(2)(A)(iii) prohibits the 
awarding of contracts under a CBP unless total payments made to 
contract suppliers in the CBA are expected to be less than the payment 
amounts that would otherwise be made. Furthermore, as indicated above, 
we are finalizing a phase-in of the special payment rules under a 
limited number of areas to gradually determine effects on the program, 
beneficiaries, and suppliers. If supported by evaluation results, a 
decision to expand the special payment rules to other areas will be 
addressed in future rulemaking.
c. Effects of the Final Clarification of the Scope of the Medicare 
Hearing Aid Coverage Exclusion
    This final rule clarifies the scope of the Medicare coverage 
exclusion for hearing aids. This rule will not have a fiscal impact on 
the Medicare program because there will be no change in the coverage of 
devices for Medicare payment purposes. This clarification will provide 
clear guidance about coverage of DME with regard to the statutory 
hearing aid exclusion.
d. Definition of Minimal Self-Adjustment of Orthotics Under Competitive 
Bidding
    The final rule will not finalize a modification to the definition 
of minimal self-adjustment.
e. Effects of the Final Revision To Change of Ownership Rules To Allow 
Contract Suppliers To Sell Specific Lines of Business
    This final rule modifies the change of ownership rules to reduce 
interference with the normal course of business for DME suppliers. This 
rule establishes an exception under the CHOW rules to allow transfer of 
part of a competitive bidding contract when a contract supplier sells a 
distinct line of business to a qualified successor entity under certain 
specific circumstances. This change impacts businesses in a positive 
way by allowing them to conduct everyday transactions without 
interference from our rules and regulations.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 41 below, we have

[[Page 66259]]

prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
proposed rule.

  Table 41--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
                          ESRD PPS for CY 2015
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $30 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Increased Beneficiary Co-insurance       $10 million.
 Payments.
From Whom to Whom......................  Beneficiaries to ESRD
                                          providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2017
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$11.9 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $27 thousand.
 Costs.
------------------------------------------------------------------------
                          ESRD QIP for PY 2018
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$11.6 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $248 thousand.
 Costs.
------------------------------------------------------------------------
Pricing Items in Non-competitive Areas Using Competitive Bidding Pricing
------------------------------------------------------------------------


                                         Category                                                                     Transfer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Annualized Monetized Transfer on Beneficiary Cost Sharing                        Estimates        Year dollar    Discount      Period
                                                                                                                                    rate       covered
                                                                                           -------------------------------------------------------------
                                                                                            -$288.0 million......         2014           7%    2016-2020
                                                                                            -$292.5 million......         2014           3%    2016-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom to Whom.........................................................................  Beneficiaries to Medicare providers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Annualized Monetized Transfer Payments                                  Estimates        Year dollar    Discount      Period
                                                                                                                                    rate       covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            -$1,160.9 million....         2014           7%    2016-2020
                                                                                            -$1,178.5 million....         2014           3%    2016-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom to Whom.........................................................................  Federal government to Medicare providers.
--------------------------------------------------------------------------------------------------------------------------------------------------------

XV. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) 
(RFA) requires agencies to analyze options for regulatory relief of 
small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Approximately 16 percent of ESRD dialysis 
facilities are considered small entities according to the Small 
Business Administration's (SBA) size standards, which classifies small 
businesses as those dialysis facilities having total revenues of less 
than $38.5 million in any 1 year. Individuals and States are not 
included in the definitions of a small entity. For more information on 
SBA's size standards, see the Small Business Administration's Web site 
at http://www.sba.gov/content/small-business-size-standards (Kidney 
Dialysis Centers are listed as 621492 with a size standard of $38.5 
million).
    We do not believe ESRD facilities are operated by small government 
entities such as counties or towns with populations of 50,000 or less, 
and therefore, they are not enumerated or included in this estimated 
RFA analysis. Individuals and States are not included in the definition 
of a small entity.
    For purposes of the RFA, we estimate that approximately 16 percent 
of ESRD facilities are small entities as that term is used in the RFA 
(which includes small businesses, nonprofit organizations, and small 
governmental jurisdictions). This amount is based on the number of ESRD 
facilities shown in the ownership category in Table 33. Using the 
definitions in this ownership category, we consider the 599 facilities 
that are independent and the 398 facilities that are shown as hospital-

[[Page 66260]]

based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more 
than $38.5 million in any year when the total revenues for all 
locations are combined for each business (individual LDO or regional 
chain), and are not, therefore, included as small entities.
    For the ESRD PPS final updates in this rule, a hospital-based ESRD 
facility (as defined by ownership type) is estimated to receive a 0.4 
percent increase in payments for CY 2015. An independent facility (as 
defined by ownership type) is also estimated to receive a 0.3 percent 
increase in payments for CY 2015.
    We estimate that of the 1,123 ESRD facilities expected to receive a 
payment reduction in the PY 2017 ESRD QIP, 249 of those facilities 
would be ESRD small entity facilities. We present these findings in in 
Table 34 (``Estimated Distribution of PY 2017 ESRD QIP Payment 
Reductions'') and Table 36 (``Estimated Impact of Finalized QIP Payment 
Reductions to ESRD Facilities for PY 2017'') above. We estimate that 
the payment reductions will average approximately $10,621 per facility 
across the 1,123 facilities receiving a payment reduction, and $10,329 
for each small entity facility. Using our estimates of facility 
performance, we also estimated the impact of payment reductions on ESRD 
small entity facilities by comparing the total payment reductions for 
the 249 small entity facilities with the aggregate ESRD payments to all 
small facilities. We estimate that there are a total of 975 small 
facilities, and that the aggregate ESRD PPS payments to these 
facilities would decrease 0.22 percent in PY 2017.
    We estimate that of the 1,284 ESRD facilities expected to receive a 
payment reduction in the PY 2018 ESRD QIP, 283 are ESRD small entity 
facilities. We present these findings in Table 37 (``Estimated 
Distribution of PY 2018 ESRD QIP Payment Reductions'') and Table 39 
(``Estimated Impact of Finalized QIP Payment Reductions to ESRD 
Facilities for PY 2018'') above. We estimate that the payment 
reductions will average approximately $9,016 per facility across the 
1,284 facilities receiving a payment reduction, and $9,009 for each 
small entity facility. Using our estimates of facility performance, we 
also estimated the impact of payment reductions on ESRD small entity 
facilities by comparing the total estimated payment reductions for 283 
small entity facilities with the aggregate ESRD payments to all small 
entity facilities. We estimate that there are a total of 975 small 
entity facilities, and that the aggregate ESRD PPS payments to these 
facilities would decrease 0.23 percent in PY 2018.
    We expect the final methodologies for adjusting DMEPOS fee schedule 
amounts using information from DMEPOS CBPs will have a significant 
impact on a substantial number of small suppliers. Although suppliers 
furnishing items and services outside CBAs do not have to compete and 
be awarded contracts in order to continue furnishing these items and 
services, the fee schedule amounts for these items and services will be 
reduced using the methodology established as a result of the final 
rule. The statute requires that the methodology for adjusting fee 
schedule amounts take into consideration the costs of furnishing items 
and services in areas where the adjustments will occur and these 
considerations are discussed in the preamble (refer to section V.A.5.). 
The final methodology for making payment adjustments will allow for 
adjustments based on bids in different geographic regions to reflect 
regional costs of furnishing items and services or the national limits 
for adjustments in areas with costs outside of MSAs and areas subject 
to section 1847(a)(3)(A) of the Act. We believe that suppliers will be 
able to continue furnishing items and services to beneficiaries in 
areas outside the CBAs after the reductions in the payment amounts are 
applied without a significant change in the rate at which they accept 
assignment of Medicare claims for these items and services. Because 
section 1834(a)(1)(F)(ii) of the Act mandates that payment amounts for 
DME subject to competitive bidding be adjusted in areas where CBPs are 
not implemented, the only alternative we can consider other than paying 
based on adjusted fee schedule amounts is to implement CBPs in all 
areas. However, this approach would have an even greater impact on 
small suppliers.
    We expect the final special payment rules for certain DME will not 
have a significant impact on small suppliers. We believe that these 
rules will benefit affected suppliers since payment for rental of 
certain DME would no longer be capped and suppliers would retain 
ownership to the equipment.
    We expect the final rule which clarifies the scope of the Medicare 
statutory exclusion for hearing aids will have no impact on small 
suppliers as we are not changing current coverage of devices for 
Medicare payment purposes.
    We expect that the final revisions to CHOW rules to allow contract 
suppliers to sell specific lines of business provision will have a 
positive impact on suppliers and no significant negative impact on 
small suppliers.
    Therefore, the Secretary has determined that this final rule will 
have a significant economic impact on a substantial number of small 
entities. We solicited comment on the RFA analysis provided. The 
comments and our responses are set forth below.
    Comment: Some commenters noted that CMS has not considered the 
economic and regulatory flexibility analysis under the proposed rule 
for applying special payment rules for certain DME in competitive 
bidding areas and the final Methodology for Adjusting DMEPOS Payment 
Amounts using Information from Competitive Bidding Programs.
    Response: We thank the commenters for their input. The continuous 
rental bundled payment methodology will be phased in for only two 
items, CPAP device and power wheelchairs in no more than 12 CBAs at 
this time. Our analysis indicates that establishing single payment 
amounts based upon bids submitted by suppliers using the continuous 
rental bundled methodology instead of capped rental methodology for 
these two items in no more than 12 CBAs will not have a significant 
impact because the bid limits for power wheelchairs will be based upon 
current utilization and expenditure in the 12 CBAs. The updated 1993 
fee schedule amounts would be the bid limits for CPAP. The 1993 fee 
schedule represents a fairly accurate bundled rental payment amount for 
the CPAP and the covered item update factor would cover for 
improvements in technology. The CPAP fees from 1993 were based on 
average reasonable charges from July 1986 through June 1987 for rental 
of the device with no separate payment for the accessories; we believe 
the historic amounts fairly reflect the utilization and payment for 
accessories used with the device. We expect that the final special 
payment rules will not have a significant impact on small suppliers 
because of the limited scope of the program. The phase-in of the 
special payment rules would be limited to only two product categories; 
Power Wheelchairs and CPAP devices in no more than 12 CBAs.
    We expect the final methodologies for adjusting DMEPOS fee schedule 
amounts using information from DMEPOS CBPs will have a significant 
impact on a substantial number of small suppliers. However, section 
1834(a)(1)(F)(ii) of the Act mandates that payment amounts for DME 
subject to competitive bidding be adjusted in areas where CBPs are not 
implemented, therefore, the only alternative we can

[[Page 66261]]

consider other than paying based on adjusted fee schedule amounts is to 
implement CBPs in all areas, however, our analysis indicates that this 
approach would have an even greater impact on small suppliers. The 
statute requires that the methodology for adjusting fee schedule 
amounts take into consideration the costs of furnishing items and 
services in areas where the adjustments will occur and we have 
considered these factors in developing the final methodology, thereby 
reducing the extent of impact on small suppliers. We believe that 
suppliers will be able to continue furnishing items and services to 
beneficiaries in areas outside the CBAs after the reductions in the 
payment amounts are applied without a significant change in the rate at 
which they accept assignment of Medicare claims for these items and 
services.

XVI. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. 104-4) also requires that agencies assess anticipated costs 
and benefits before issuing any rule whose mandates require spending in 
any 1 year $100 million in 1995 dollars, updated annually for 
inflation. In 2013, that threshold is approximately $141 million. This 
final rule does not include any mandates that would impose spending 
costs on State, local, or Tribal governments in the aggregate, or by 
the private sector, of $141 million.

XVII. Federalism Analysis

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

XVIII. Congressional Review Act

    This final rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

XIX. Files Available to the Public via the Internet

    The Addenda for the annual ESRD PPS proposed and final rulemakings 
will no longer appear in the Federal Register. Instead, the Addenda 
will be available only through the Internet and is posted on the CMS 
Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp In addition to 
the Addenda, limited data set (LDS) files are available for purchase at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/EndStageRenalDiseaseSystemFile.html. Readers who 
experience any problems accessing the Addenda or LDS files, should 
contact Stephanie Frilling at (410) 786-4507.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, and X-rays

42 CFR Part 411

    Kidney diseases, Medicare, Physician Referral, and Reporting and 
recordkeeping requirements

42 CFR Part 413

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

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, and Reporting and recordkeeping 
requirements.

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

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority for part 405 continues to read as follows:

    Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).


Sec.  405.2102  [Amended]

0
2. Section 405.2102 is amended by removing all the definitions, with 
the exception of, ``Network, ESRD'', and ``Network organization''.

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
3. The authority citation for part 411 continues to read as follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).


0
4. Section 411.15 is amended by revising paragraph (d) to read as 
follows:


Sec.  411.15  Particular services excluded from coverage.

* * * * *
    (d) Hearing aids or examinations for the purpose of prescribing, 
fitting, or changing hearing aids.
    (1) Scope. The scope of the hearing aid exclusion encompasses all 
types of air conduction hearing aids that provide acoustic energy to 
the cochlea via stimulation of the tympanic membrane with amplified 
sound and bone conduction hearing aids that provide mechanical 
stimulation of the cochlea via stimulation of the scalp with amplified 
mechanical vibration or by direct contact with the tympanic membrane or 
middle ear ossicles.
    (2) Devices not subject to the hearing aid exclusion. Paragraph 
(d)(1) of this section shall not apply to the following devices that 
produce the perception of sound by replacing the function of the middle 
ear, cochlea, or auditory nerve:
    (i) Osseointegrated implants in the skull bone that provide 
mechanical energy to the cochlea via a mechanical transducer, or
    (ii) Cochlear implants and auditory brainstem implants that replace 
the function of cochlear structures or auditory nerve and provide 
electrical energy to auditory nerve fibers and other neural tissue via 
implanted electrode arrays.
* * * * *

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

0
5. The authority citation for part 413 is revised to read as follows:

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

[[Page 66262]]

332), sec. 3201 of Pub. L. 112-96 (126 Stat. 156), sec. 632 of Pub. 
L. 112-240 (126 Stat. 2354), and sec. 217 of Pub. L. No. 113-93.


Sec.  413.174  [Amended]

0
6. Section 413.174 (f)(6) is amended by removing ``January 1, 2016'' 
and by adding in its place ``January 1, 2024''.
0
7. Section 413.232 is amended by revising paragraph (b) introductory 
text and paragraph (f) and adding paragraph (h) to read as follows:


Sec.  413.232  Low-volume adjustment.

* * * * *
    (b) Definition of low-volume facility. A low-volume facility is an 
ESRD facility that, as determined based on the documentation submitted 
pursuant to paragraph (h) of this section:
* * * * *
    (f) Except as provided in paragraph (g) of this section, to receive 
the low-volume adjustment an ESRD facility must provide an attestation 
statement, by November 1st of each year preceding the payment year, to 
its Medicare Administrative Contractor that the facility meets all the 
criteria established in this section, except that, for calendar year 
2012, the attestation must be provided by January 3, 2012, and for, 
calendar year 2015, the attestation must be provided by December 31, 
2014.
* * * * *
    (h) To receive the low-volume adjustment, an ESRD facility must 
include in their attestation provided pursuant to paragraph (f) of this 
section a statement that the ESRD facility meets the definition of a 
low-volume facility in paragraph (b) of this section. To determine 
eligibility for the low-volume adjustment, the Medicare Administrative 
Contractor (MAC) on behalf of CMS relies upon as filed or final settled 
12-consecutive month cost reports for the 3 cost reporting years 
preceding the payment year to verify the number of treatments, except 
that:
    (1) In the case of a hospital-based ESRD facility as defined in 
Sec.  413.174(c), the MAC relies upon the attestation submitted 
pursuant to paragraph (f) of this section and may consider other 
supporting data in addition to the total treatments reported in each of 
the 12-consecutive month cost reports for the 3 cost reporting years 
preceding the payment year to verify the number of treatments that were 
furnished by the individual hospital-based ESRD facility seeking the 
adjustment; and
    (2) In the case of an ESRD facility that has undergone a change of 
ownership that does not result in a new Provider Transaction Access 
Number for the ESRD facility, the MAC relies upon the attestation and 
when the change of ownership results in two non-standard cost reporting 
periods (less than or greater than 12-consecutive months), does one or 
both of the following for the 3 cost reporting years preceding the 
payment year to verify the number of treatments:
    (i) Combines the two non-standard cost reporting periods of less 
than 12 months to equal a full 12-consecutive month period; and/or
    (ii) Combines the two non-standard cost reporting periods that in 
combination may exceed 12-consecutive months and prorates the data to 
equal a full 12-consecutive month period.


Sec.  413.237  [Amended]

0
8. In Sec.  413.237, paragraph (a)(1)(iv) is amended by removing 
``January 1, 2016'' and adding in its place ``January 1, 2024''.

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

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

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


0
10. Section 414.105 is added to read as follows:


Sec.  414.105  Application of competitive bidding information.

    For enteral nutrients, equipment and supplies furnished on or after 
January 1, 2011, the fee schedule amounts may be adjusted based on 
information on the payment determined as part of implementation of the 
programs under subpart F using the methodologies set forth at Sec.  
414.210(g).

0
11. The heading of Subpart D is revised to read as follows:

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

0
12. Section 414.202 is amended by revising the definition of ``region'' 
and adding in alphabetical order a definition of ``rural area'' to read 
as follows:


Sec.  414.202  Definitions.

* * * * *
    Region means, for the purpose of implementing Sec.  414.210(g), 
geographic areas defined by the Bureau of Economic Analysis in the 
United States Department of Commerce for economic analysis purposes, 
and, for the purpose of implementing Sec.  414.228, those contractor 
service areas administered by CMS regional offices.
    Rural area means, for the purpose of implementing Sec.  414.210(g), 
a geographic area represented by a postal zip code if at least 50 
percent of the total geographic area of the area included in the zip 
code is estimated to be outside any metropolitan area (MSA). A rural 
area also includes a geographic area represented by a postal zip code 
that is a low population density area excluded from a competitive 
bidding area in accordance with the authority provided by section 
1847(a)(3)(A) of the Act at the time the rules at Sec.  414.210(g) are 
applied.

0
13. Section 414.210 is amended by revising paragraph (a) and adding 
paragraph (g) to read as follows:


Sec.  414.210  General payment rules.

    (a) General rule. For items furnished on or after January 1, 1989, 
except as provided in paragraphs (c), (d), and (g) of this section, 
Medicare pays for durable medical equipment, prosthetics and orthotics, 
including a separate payment for maintenance and servicing of the items 
as described in paragraph (e) of this section, on the basis of 80 
percent of the lesser of--
    (1) The actual charge for the item;
    (2) The fee schedule amount for the item, as determined in 
accordance with the provisions of Sec. Sec.  414.220 through 414.232
* * * * *
    (g) Application of Competitive Bidding Information and Limitation 
of Inherent Reasonableness Authority. For items furnished on or after 
January 1, 2011, the fee schedule amounts may be adjusted, and for DME 
items furnished on or after January 1, 2016, the fee schedule amounts 
shall be adjusted, based on information on the payment determined as 
part of implementation of the programs under subpart F, of this part, 
excluding information on the payment determined in accordance with the 
special payment rules at Sec.  414.409. In the case of such 
adjustments, the rules at Sec.  405.502(g) and (h) of this chapter 
shall not be applied. The methodologies for adjusting fee schedule 
amounts are provided below. In any case where application of these 
methodologies results in an increase in the fee schedule amount, the 
adjustment to the fee schedule amount is not made.
    (1) Payment adjustments for areas within the contiguous United 
States using information from competitive bidding programs. For an item 
or service subject to the programs under subpart F of this part, the 
fee schedule amounts for such item or service for areas within the 
contiguous United States shall be adjusted as follows:
    (i) CMS determines a regional price for each state in the 
contiguous United

[[Page 66263]]

States and the District of Columbia equal to the un-weighted average of 
the single payment amounts for an item or service established in 
accordance with Sec.  414.416 for competitive bidding areas that are 
fully or partially located in the same region that contains the state 
or District of Columbia.
    (ii) CMS determines a national average price equal to the un-
weighted average of the regional prices determined under paragraph 
(g)(1)(i) of this section.
    (iii) A regional price determined under paragraph (g)(1)(i) of this 
section cannot be greater than 110 percent of the national average 
price determined under paragraph (g)(1)(ii) of this section nor less 
than 90 percent of the national average price determined under 
paragraph (g)(1)(ii) of this section.
    (iv) The fee schedule amount for all areas within a state that are 
not defined as rural areas for purposes of this subpart is adjusted to 
the regional price determined under paragraphs (g)(1)(i) and (iii) of 
this section.
    (v) The fee schedule amount for all areas within a state that are 
defined as rural areas for the purposes of this subpart is adjusted to 
110 percent of the national average price determined under paragraph 
(g)(1)(ii) of this section.
    (2) Payment adjustments for areas outside the contiguous United 
States using information from competitive bidding programs. For an item 
or service subject to the programs under subpart F, the fee schedule 
amounts for areas outside the contiguous United States are reduced to 
the greater of--
    (i) The average of the single payment amounts for the item or 
service for CBAs outside the contiguous United States.
    (ii) 110 percent of the national average price for the item or 
service determined under paragraph (g)(1)(ii) of this section.
    (3) Payment adjustments for items and services included in no more 
than ten competitive bidding programs. Notwithstanding paragraph (g)(1) 
of this section, for an item or service that is included in ten or 
fewer competitive bidding programs as defined at Sec.  414.402, the fee 
schedule amounts applied for all areas within and outside the 
contiguous United States are reduced to 110 percent of the un-weighted 
average of the single payment amounts from the ten or fewer competitive 
bidding programs for the item or service in the areas where the ten or 
fewer competitive bidding programs are in place.
    (4) Payment adjustments using data on items and services included 
in competitive bidding programs no longer in effect. In the case where 
adjustments to fee schedule amounts are made using any of the 
methodologies described, if the adjustments are based solely on single 
payment amounts from competitive bidding programs that are no longer in 
effect, the single payment amounts are updated before being used to 
adjust the fee schedule amounts. The single payment amounts are updated 
based on the percentage change in the Consumer Price Index for all 
Urban Consumers (CPI-U) from the mid-point of the last year the single 
payment amounts were in effect to the month ending 6 months prior to 
the date the initial fee schedule reductions go into effect. Following 
the initial adjustments to the fee schedule amounts, if the adjustments 
continue to be based solely on single payment amounts from competitive 
bidding programs that are no longer in effect, the single payment 
amounts used to reduce the fee schedule amounts are updated every 12 
months using the percentage change in the CPI-U for the 12-month period 
ending 6 months prior to the date the updated payment adjustments would 
go into effect.
    (5) Adjusted payment amounts for accessories used with different 
types of base equipment. In situations where a HCPCS code that 
describes an item used with different types of base equipment is 
included in more than one product category in a CBA under competitive 
bidding, a weighted average of the single payment amounts for the code 
is computed for each CBA based on the total number of allowed services 
for the item on a national basis for the code from each product 
category prior to applying the payment adjustment methodologies in this 
section.
    (6) Payment adjustments for enteral infusion pumps and standard 
power wheelchairs. (i) In situations where a single payment amount in a 
CBA for an enteral infusion pump without alarm is greater than the 
single payment amount in the same CBA for an enteral infusion pump with 
alarm, the single payment amount for the enteral infusion pump without 
alarm is adjusted to be equal to the single payment amount for the 
enteral infusion pump with alarm prior to applying the payment 
adjustment methodologies in this section.
    (ii) In situations where a single payment amount in a CBA for a 
Group 1, standard, sling/solid seat and back power wheelchair is 
greater than the single payment amount in the same CBA for a Group 2, 
standard, sling/solid seat and back power wheelchair, the single 
payment amount for the Group 1, standard, sling/solid seat and back 
power wheelchair is adjusted to be equal to the single payment amount 
for the Group 2, standard, sling/solid seat and back power wheelchair 
prior to applying the payment adjustment methodologies in this section.
    (iii) In situations where a single payment amount in a CBA for a 
Group 1, standard, captains chair power wheelchair is greater than the 
single payment amount in the same CBA for a Group 2, standard, captains 
chair power wheelchair, the single payment amount for the Group 1, 
standard, captains chair power wheelchair is adjusted to be equal to 
the single payment amount for the Group 2, standard, captains chair 
power wheelchair prior to applying the payment adjustment methodologies 
in this section.
    (iv) In situations where a single payment amount in a CBA for a 
Group 2, standard, portable, sling/solid seat and back power wheelchair 
is greater than the single payment amount in the same CBA for a Group 
2, standard, sling/solid seat and back power wheelchair, the single 
payment amount for the Group 2, standard, portable, sling/solid seat 
and back power wheelchair is adjusted to be equal to the single payment 
amount for the Group 2, standard, sling/solid seat and back power 
wheelchair prior to applying the payment adjustment methodologies in 
this section.
    (v) In situations where a single payment amount in a CBA for a 
Group 2, standard, portable, captains chair power wheelchair is greater 
than the single payment amount in the same CBA for a Group 2, standard, 
captains chair power wheelchair, the single payment amount for the 
Group 2, standard, portable, captains chair power wheelchair is 
adjusted to be equal to the single payment amount for the Group 2, 
standard, captains chair power wheelchair prior to applying the payment 
adjustment methodologies in this section.
    (7) Payment adjustments for mail order items furnished in the 
Northern Mariana Islands. The fee schedule amounts for mail order items 
furnished to beneficiaries in the Northern Mariana Islands are adjusted 
so that they are equal to 100 percent of the single payment amounts 
established under a national mail order competitive bidding program.
    (8) Updating adjusted fee schedule amounts. The adjusted fee 
schedule amounts are revised each time a single payment amount for an 
item or service is updated following one or more new competitions and 
as other items are added to programs established under Subpart F of 
this part.
    (9) Transition rules. The payment adjustments described above are 
phased in as follows:

[[Page 66264]]

    (i) For applicable items and services furnished with dates of 
service from January 1, 2016, through June 30, 2016, based on the fee 
schedule amount for the area is equal to 50 percent of the adjusted 
payment amount established under this section and 50 percent of the 
unadjusted fee schedule amount.
    (ii) For items and services furnished with dates of service on or 
after July 1, 2016, the fee schedule amount for the area is equal to 
100 percent of the adjusted payment amount established under this 
section.
0
14. Section 414.408 is amended by adding paragraph (l) to read as 
follows:


Sec.  414.408  Payment rules.

* * * * *
    (l) Exceptions for certain items and services paid in accordance 
with special payment rules. The payment rules in paragraphs (f) thru 
(h), (j)(2), (j)(3), and (j)(7), and (k) of this section do not apply 
to items and services paid in accordance with the special payment rules 
at Sec.  414.409.
0
15. Section