[Federal Register Volume 80, Number 215 (Friday, November 6, 2015)]
[Rules and Regulations]
[Pages 68968-69077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27928]



[[Page 68967]]

Vol. 80

Friday,

No. 215

November 6, 2015

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 413





Medicare Program; End-Stage Renal Disease Prospective Payment System, 
and Quality Incentive Program; Final Rule

  Federal Register / Vol. 80 , No. 215 / Friday, November 6, 2015 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413

[CMS-1628-F]
RIN 0938-AS48


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, and Quality Incentive Program

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

ACTION: Final rule.

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SUMMARY: This rule updates and makes revisions to the End-Stage Renal 
Disease (ESRD) Prospective Payment System (PPS) for calendar year (CY) 
2016. This rule is necessary to ensure that ESRD facilities receive 
accurate Medicare payment amounts for furnishing outpatient maintenance 
dialysis treatments during calendar year 2016. This rule will also set 
forth requirements for the ESRD Quality Incentive Program (QIP), 
including for PYs 2017 through 2019.

DATES: Effective Date: These regulations are effective on January 1, 
2016.

FOR FURTHER INFORMATION CONTACT: CMS ESRD [email protected], for 
issues related to the ESRD PPS payment provisions. Heidi Oumarou, (410) 
786-7342, for issues related to the ESRD PPS Market Basket Update. 
Tamyra Garcia, (410) 786-0856, for issues related to the ESRD QIP.

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/.

Table of Contents

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

I. Executive Summary
    A. Purpose
    1. End-Stage Renal Disease (ESRD) Prospective Payment System 
(PPS)
    2. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    B. Summary of the Major Provisions
    1. ESRD PPS
    2. ESRD QIP
    C. Summary of Cost and Benefits
    1. Impacts of the Final ESRD PPS
    2. Impacts of the Final ESRD QIP
II. Calendar Year (CY) 2016 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background on the End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)
    1. System for Payment of Renal Dialysis Services
    2. Updates to the ESRD PPS
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the CY 2016 ESRD PPS Proposed Rule
    1. Analysis and Revision of the Payment Adjustments Under the 
ESRD PPS
    a. Development and Implementation of the ESRD PPS Payment 
Adjustments
    b. Regression Model Used To Develop Payment Adjustment Factors
    i. Regression Analysis
    ii. Dependent Variables
    (1) Average Cost per Treatment for Composite Rate Services
    (2) Average Medicare Allowable Payment (MAP) for Previously 
Separately Billable Services
    iii. Independent Variables
    iv. Control Variables
    c. Analysis and Revision of the Payment Adjustments
    i. Adult Case-Mix Payment Adjustments
    (1) Patient Age
    (2) Body Surface Area (BSA) and Body Mass Index (BMI)
    (3) Comorbidities
    (4) Onset of Dialysis
    d. Refinement of Facility-Level Adjustments
    i. Low-Volume Payment Adjustment
    ii. CY 2016 Proposals for the Low-Volume Payment Adjustment 
(LVPA)
    (1) Background
    (2) The United States Government Accountability Office Study on 
the LVPA
    (3) Addressing GAO's Recommendations
    (4) Elimination of the Grandfathering Provision
    (5) Geographic Proximity Mileage Criterion
    iii. Geographic Payment Adjustment for ESRD Facilities Located 
in Rural Areas
    (1) Background
    (2) Determining a Facility-Level Payment Adjustment for ESRD 
Facilities Located in Rural Areas Beginning in CY 2016
    (3) Further Investigation Into Targeting High-Cost Rural ESRD 
Facilities
    e. Refinement of the Case-Mix Adjustments for Pediatric Patients
    f. The Home and Self-Dialysis Training Add-on Payment Adjustment
    2. Final CY 2016 ESRD PPS Update
    a. ESRD Bundled Market Basket
    i. Overview and Background
    ii. Market Basket Update Increase Factor and Labor-Related Share 
for ESRD Facilities for CY 2016
    iii. Productivity Adjustment
    iv. Calculation of the ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2016
    b. The Final CY 2016 ESRD PPS Wage Indices
    i. Annual Update of the Wage Index
    ii. Implementation of New Labor Market Delineations
    c. CY 2016 Update to the Outlier Policy
    i. CY 2016 Update to the Outlier Services MAP Amounts and Fixed-
Dollar Loss Amounts
    ii. Outlier Policy Percentage
    d. Annual Updates and Policy Changes to the CY 2016 ESRD PPS
    i. ESRD PPS Base Rate
    ii. Annual Payment Rate Update for CY 2016
    3. Section 217(c) of PAMA and the ESRD PPS Drug Designation 
Process
    a. Background
    b. Final Drug Designation Process
    i. Inclusion of New Injectable and Intravenous Products in the 
ESRD PPS Bundled Payment
    ii. Transitional Drug Add-On Payment Adjustment
    iii. Determination of When an Oral-Only Renal Dialysis Service 
Drug Is No Longer Oral-Only
    4. Delay of Payment for Oral-Only Renal Dialysis Services
    5. Reporting Medical Director Fees on ESRD Facility Cost Reports
    C. Clarifications Regarding the ESRD PPS
    1. Laboratory Renal Dialysis Services
    2. Renal Dialysis Service Drugs and Biologicals
    a. 2014 Part D Call Letter Follow-up
    b. Oral or Other Forms of Renal Dialysis Injectable Drugs and 
Biologicals
    c. Reporting of Composite Rate Drugs
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) 
for Payment Year (PY) 2019
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the End-Stage Renal Disease (ESRD) Quality 
Incentive Program (QIP) for Payment Year (PY) 2019 Proposed Rule
    C. Clarification of ESRD QIP Terminology: ``CMS Certification 
Number (CCN) Open Date''
    D. Use of the Hypercalcemia Measure as a Measure Specific to the 
Conditions Treated With Oral-Only Drugs
    E. Sub-Regulatory Measure Maintenance in the ESRD QIP
    F. Revision to the Requirements for the PY 2017 ESRD QIP
    1. Modifying the Small Facility Adjuster (SFA) Calculation for 
All Clinical Measures Beginning with the PY 2017 ESRD QIP
    2. Reinstating Qualifying Patient Attestations for the ICH CAHPS 
Clinical Measure
    G. Requirements for the PY 2018 ESRD QIP
    1. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures Finalized for the PY 2018 ESRD QIP
    2. Modification to Scoring Facility Performance on the Pain 
Assessment and Follow-Up Reporting Measure
    3. Payment Reductions for the PY 2018 ESRD QIP
    4. Data Validation
    H. Requirements for the PY 2019 ESRD QIP

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    1. Replacement of the Four Measures Currently in the Dialysis 
Adequacy Clinical Measure Topic Beginning With the PY 2019 Program 
Year
    2. Measures for the PY 2019 ESRD QIP
    a. PY 2018 Measures Continuing for PY 2019 and Future Payment 
Years
    b. New Dialysis Adequacy Clinical Measure Beginning With the PY 
2019 ESRD QIP
    c. New Reporting Measures Beginning With the PY 2019 ESRD QIP
    i. Ultrafiltration Rate Reporting Measure
    ii. Full-Season Influenza Vaccination Reporting Measure
    3. Performance Period for the PY 2019 ESRD QIP
    4. Performance Standards, Achievement Thresholds, and Benchmarks 
for the PY 2019 ESRD QIP
    a. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures in the PY 2019 ESRD QIP
    b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2019 ESRD 
QIP
    c. Performance Standards for the PY 2019 Reporting Measures
    5. Scoring the PY 2019 ESRD QIP
    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
    6. Weighting the Clinical Measure Domain and Total Performance 
Score
    i. Weighting the Clinical Measure Domain for PY 2019
    ii. Weighting the Total Performance Score
    7. Minimum Data for Scoring Measures for the PY 2019 ESRD QIP
    8. Payment Reductions for the PY 2019 ESRD QIP
    I. Future Achievement Threshold Policy Under Consideration
    J. Monitoring Access to Dialysis Facilities
IV. Advancing Health Information Exchange
V. Collection of Information Requirements
VI. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2016 End-Stage Renal Disease Prospective Payment System
    a. Effects on ESRD Facilities
    b. Effects on Other Providers
    c. Effects on the Medicare Program
    d. Effects on Medicare Beneficiaries
    e. Alternatives Considered
    1. CY 2016 End-Stage Renal Disease
    2. CY End-Stage Renal Disease Quality Incentive Program
    C. Accounting Statement
VII. Regulatory Flexibility Act Analysis
VIII. Unfunded Mandates Reform Act Analysis
IX. Federalism Analysis
X. Congressional Review Act
XI. Files Available to the Public via the Internet

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:

ABLE The Achieving a Better Life Experience Act of 2014
AHRQ Agency for Healthcare Research and Quality
AMCC Automated Multi-Channel Chemistry
ANOVA Analysis of Variance
ARM Adjusted Ranking Metric
ASP Average Sales Price
ATRA The American Taxpayer Relief Act of 2012
BCMA Basic Case-Mix Adjustment
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
BMI Body Mass Index
BSA Body Surface Area
BSI Bloodstream Infection
CB Consolidated Billing
CBSA Core based statistical area
CCN CMS Certification Number
CDC Centers for Disease Control and Prevention
CKD Chronic Kidney Disease
CLABSI Central Line Access Bloodstream Infections
CFR Code of Federal Regulations
CIP Core Indicators Project
CMS Centers for Medicare & Medicaid Services
CPM Clinical Performance Measure
CPT Current Procedural Terminology
CROWNWeb Consolidated Renal Operations in a Web-Enabled Network
CY Calendar Year
DFC Dialysis Facility Compare
DFR Dialysis Facility Report
ESA Erythropoiesis stimulating agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease bundled
ESRD PPS End-Stage Renal Disease Prospective Payment System
ESRD QIP End-Stage Renal Disease Quality Incentive Program
FDA Food and Drug Administration
HCP Healthcare Personnel
HD Hemodialysis
HHD Home Hemodialysis
HAIs Healthcare-Acquired Infections
HCPCS Healthcare Common Procedure Coding System
HCFA Health Care Financing Administration
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
IPPS Inpatient Prospective Payment System
IUR Inter-unit reliability
KDIGO Kidney Disease: Improving Global Outcomes
KDOQI Kidney Disease Outcome Quality Initiative
Kt/V A measure of dialysis adequacy where K is dialyzer clearance, t 
is dialysis time, and V is total body water volume
LDO Large Dialysis Organization
MAC Medicare Administrative Contractor
MAP Medicare Allowable Payment
MCP Monthly Capitation Payment
MDO Medium Dialysis Organization
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement and Modernization Act of 
2003
MMEA Medicare and Medicaid Extenders Act of 2010 Pub. L. 111-309
MSA Metropolitan statistical areas
NAMES National Association of Medical Equipment Suppliers
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
OBRA Omnibus Budget Reconciliation Act
OMB Office of Management and Budget
PAMA Protecting Access to Medicare Act of 2014
PC Product category
PD Peritoneal Dialysis
PEN Parenteral and Enteral nutrition
PFS Physician Fee Schedule
PPI Producer Price Index
PPS Prospective Payment System
PSR Performance Score Report
PY Payment Year
QIP Quality Incentive Program
RCE Reasonable Compensation Equivalent
REMIS Renal Management Information System
RFA Regulatory Flexibility Act
SBA Small Business Administration
SFA Small Facility Adjuster
SIMS Standard Information Management System
SRR Standardized Readmission Ratio
SSA Social Security Administration
STrR Standardized Transfusion Ratio
The Act Social Security Act
The Affordable Care Act The Patient Protection and Affordable Care 
Act
The Secretary Secretary of the Department of Health and Human 
Services
TPS Total Performance Score
URR Urea reduction ratio
VAT Vascular Access Type
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 End-Stage Renal Disease 
(ESRD) Prospective Payment System (PPS), a case-mix adjusted, bundled 
prospective payment system for renal dialysis services furnished by 
ESRD facilities.

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This final rule will update and revise the ESRD PPS for calendar year 
(CY) 2016. 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) (Public Law 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 of the Department of Health and Human Services (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 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. 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 
includes 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 interpreted 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 with specific 
provisions that dictate the market basket update for CY 2015 (0.0 
percent) and how it will be reduced in CYs 2016 through 2018. Section 
217(a)(1) of PAMA amended section 632(b)(1) of ATRA to provide that the 
Secretary may not pay for oral-only drugs and biologicals used for the 
treatment of ESRD under the ESRD PPS prior to January 1, 2024. Section 
217(c) of PAMA 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.
    On December 19, 2014, the President signed the Stephen Beck, Jr., 
Achieving a Better Life Experience Act of 2014 (ABLE) (Pub. L. 113-
295). Section 204 of ABLE amended section 632(b)(1) of ATRA, as amended 
by section 217(a)(1) of PAMA, to provide that payment for oral-only 
renal dialysis services cannot be made under the ESRD PPS bundled 
payment prior to January 1, 2025.
2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This rule also finalizes to set forth requirements for the ESRD 
QIP, including for payment years (PYs) 2017, 2018, and 2019. 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.

B. Summary of the Major Provisions

1. ESRD PPS
     ESRD PPS refinement: In accordance with section 632(c) of 
ATRA, we analyzed the case-mix payment adjustments under the ESRD PPS 
using more recent data. For this final rule, we have revised the 
adjustments by changing the adjustment payment amounts based on our 
updated regression analysis using CYs 2012 and 2013 ESRD claims and 
cost report data. In addition, we will remove two comorbidity category 
payment adjustments (bacterial pneumonia and monoclonal gammopathy). 
Because we conducted an updated regression analysis to enable us to 
analyze and revise the case-mix payment adjustments, this final rule 
also revises the low-volume payment adjustment (LVPA) and implements a 
new rural adjustment based on that regression analysis. We are 
finalizing new patient and facility-level adjustment factors. This 
final rule also revises the geographic proximity eligibility criterion 
for the LVPA and removes grandfathering from the criteria for the 
adjustment.
     Drug designation process: In accordance with section 
217(c) of PAMA, this final rule will implement a drug designation 
process for: (1) Determining when a product is no longer an oral-only 
drug and (2) including new injectable and intravenous renal dialysis 
service drugs and biologicals into the bundled payment under the ESRD 
PPS.
     Update to the ESRD PPS base rate for CY 2016: The final CY 
2016 ESRD PPS base rate is $230.39. This amount reflects a reduced 
market basket increase as required by section 1881(b)(14)(F)(i)(I) 
(0.15 percent), application of the wage index budget-neutrality 
adjustment factor (1.000495), and a refinement budget-neutrality 
adjustment factor (0.960319). The final CY 2016 ESRD PPS base rate is 
$230.39 ($239.43 x 1.000495 x 1.0015 x 0.960319 = $230.39).
     Annual update to the wage index and wage index floor: We 
adjust wage indices on an annual basis using the most current hospital 
wage data and the latest core-based statistical area (CBSA) 
delineations to account for differing wage levels in areas in which 
ESRD facilities are located. For CY 2016, we will complete our 2-year 
transition to both the updated CBSA delineations and the labor-related 
share to which the wage index is applied (50.673 percent). In addition, 
we computed a wage index budget-neutrality adjustment factor of 
1.000495 which is applied to the ESRD PPS base rate. We are finalizing 
the continuation of the application of the current wage index floor 
(0.4000) to areas with wage index values below the floor.
     Update to the outlier policy: We are updating the outlier 
policy using the most current data. Specifically, we are updating the 
outlier services fixed dollar loss amounts for adult and pediatric 
patients and Medicare Allowable Payments (MAPs) for adult patients for 
CY 2016 using 2014 claims data. Based on the use of more current data, 
the fixed-dollar loss amount for pediatric beneficiaries increases from 
$54.35 to $62.19 and the MAP amount decreases from $43.57 to $39.20, as 
compared to CY 2015 values. For adult beneficiaries, the fixed-dollar 
loss amount increases from $86.19 to $86.97 and the MAP amount 
decreases from $51.29 to $50.81. The 1.0 percent target for outlier 
payments was not achieved in CY 2014 (0.8 percent rather than 1.0 
percent). We believe using CY 2014 claims data to update the outlier 
MAP and fixed dollar loss amounts for CY 2016 will increase payments 
for ESRD beneficiaries requiring higher resource utilization in 
accordance with a 1.0 percent outlier percentage.

[[Page 68971]]

2. ESRD QIP
    This rule sets forth requirements for the ESRD QIP, including for 
payment years (PYs) 2017, 2018 and 2019.
     PY 2019 Measure Set: For PY 2019 and future payment years, 
we are removing four clinical measures--(1) Hemodialysis Adequacy: 
Minimum delivered hemodialysis dose; (2) Peritoneal Dialysis Adequacy: 
Delivered dose above minimum; (3) Pediatric Hemodialysis Adequacy: 
Minimum spKt/V; and (4) Pediatric Peritoneal Dialysis Adequacy--because 
a more broadly applicable measure for the topic has become available. 
We are replacing these measures with a single comprehensive Dialysis 
Adequacy clinical measure.
     Reinstating the In-Center Hemodialysis Consumer Assessment 
of Healthcare Providers (ICH CAHPS) Attestation: Beginning with PY 
2017, we are reinstating the ICH CAHPS attestation in Consolidated 
Renal Operations in a Web-Enabled Network (CROWNWeb) previously adopted 
in the CY 2014 ESRD PPS final rule (78 FR 72220 through 72222) using 
the eligibility criteria finalized in the CY 2015 ESRD PPS final rule 
(79 FR 66169). This will allow facilities to attest in CROWNWeb that 
they did not treat enough eligible patients during the eligibility 
period to receive a score on the ICH CAHPS measure and thereby avoid 
receiving a score for this measure.
     Revising the Small Facility Adjuster: Beginning with the 
PY 2017 ESRD QIP, we are revising the Small Facility Adjuster (SFA) 
such that it does not rely upon a pooled within-facility standard 
error. The revised SFA preserves the intent of the adjuster to include 
as many facilities in the ESRD QIP as possible while ensuring that the 
measure scores are reliable.

C. Summary of Costs and Benefits

    In section VI of this final rule, we set forth a detailed analysis 
of the impacts that the changes will have on affected entities and 
beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
    The impact chart in section VI of this final rule displays the 
estimated change in payments to ESRD facilities in CY 2016 compared to 
estimated payments in CY 2015. The overall impact of the CY 2016 
changes is projected to be a 0.2 percent increase in payments. 
Hospital-based ESRD facilities and freestanding facilities both have an 
estimated 0.2 percent increase in payments.
    We estimate that the aggregate ESRD PPS expenditures will increase 
by approximately $10 million from CY 2015 to CY 2016 which reflects the 
payment rate update. As a result of the projected 0.2 percent overall 
payment increase, we estimate that there will be an increase in 
beneficiary co-insurance payments of 0.2 percent in CY 2016, which 
translates to approximately $0 million due to rounding.
2. Impacts of the Final ESRD QIP
    The overall economic impact of the ESRD QIP is an estimated $11.8 
million in PY 2018 and $15.5 million in PY 2019. In PY 2018, we expect 
the costs associated with the collection of information requirements 
for the data validation studies to be approximately $21 thousand for 
all ESRD facilities, totaling an overall impact of approximately $11.8 
million as a result of the PY 2018 ESRD QIP.\1\ In PY 2019, we expect 
the overall impact to be approximately $15.5 million.
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    \1\ We note that the aggregate impact of the PY 2018 ESRD QIP 
was included in the CY 2015 ESRD PPS final rule (79 FR 66256 through 
66258). The previously finalized aggregate impact of $11.8 million 
reflects the PY 2018 estimated payment reductions and the collection 
of information requirements for the NHSN Healthcare Personnel 
Influenza Vaccination reporting measure.
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    The ESRD QIP will continue to incentivize facilities to provide 
high-quality care to beneficiaries.

II. Calendar Year (CY) 2016 End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)

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

    On January 1, 2011, we implemented the end-stage renal disease 
(ESRD) prospective payment system (PPS), a case-mix adjusted bundled 
PPS for renal dialysis services furnished by ESRD facilities based on 
the requirements of 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). Section 
1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and 
amended by section 3401(h) of the Patient Protection and Affordable 
Care Act (the Affordable Care Act) (Pub. L. 111-148), established that 
beginning calendar year (CY) 2012, and each subsequent year, the 
Secretary of the Department of Health and Human Services (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 2012, to reduce the single payment for 
renal dialysis services furnished on or after January 1, 2014 to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals (excluding oral-only ESRD-related 
drugs). Consistent with this requirement, in the CY 2014 ESRD PPS final 
rule we finalized $29.93 as the total drug utilization reduction and 
finalized a policy to implement the amount over a 3- to 4-year 
transition period (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 prior 
to January 1, 2016. And 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 amended sections 1881(b)(14)(F) and 
(I) of the Act and replaced the drug utilization adjustment that was 
finalized in the CY 2014 ESRD PPS final rule (78 FR 72161 through 
72170) with specific provisions that dictated the market basket update 
for CY 2015 (0.0 percent) and how the market basket should be reduced 
in CYs 2016 through CY 2018.
    Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA to 
provide that the Secretary may not pay for oral-only ESRD-related drugs 
under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) further 
amended section 632(b)(1) of ATRA by requiring that in establishing 
payment for oral-only drugs under the ESRD PPS, we must use data from 
the most recent year available. Section 217(c) of PAMA provided 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.
    Finally, section 212 of PAMA provided that the Secretary may not

[[Page 68972]]

adopt the International Classification of Disease 10th Revision, 
Clinical Modification (ICD-10-CM) code sets prior to October 1, 2015. 
HHS published a final rule on August 4, 2014 that adopted October 1, 
2015 as the new ICD-10-CM compliance date, and required the use of 
International Classification of Disease, 9th Revision, Clinical 
Modification (ICD-9-CM) through September 30, 2015 (79 FR 45128).
    On December 19, 2014, the President signed the Stephen Beck, Jr., 
Achieving a Better Life Experience Act of 2014 (ABLE) (Pub. L. 113-
295). Section 204 of ABLE amended section 632(b)(1) of ATRA, as amended 
by section 217(a)(1) of PAMA, to provide that payment for oral-only 
renal dialysis services cannot be made under the ESRD PPS bundled 
payment prior to January 1, 2025.
1. System for Payment of Renal Dialysis Services
    Under the ESRD PPS, a single, per-treatment payment is made to an 
ESRD facility for all of the renal dialysis services defined in section 
1881(b)(14)(B) of the Act and furnished to individuals for the 
treatment of ESRD in the ESRD facility or in a patient's home. We have 
codified our definitions of renal dialysis services at 42 CFR 413.171 
and other payment policies are included in regulations at subpart H of 
42 CFR part 413. The ESRD PPS base rate is adjusted for characteristics 
of both adult and pediatric patients and account for patient case-mix 
variability. The adult case-mix adjusters include five categories of 
age, body surface area (BSA), low body mass index (BMI), onset of 
dialysis, six co-morbidity categories, and pediatric patient-level 
adjusters consisting of two age categories and dialysis modalities (42 
CFR 413.235(a) and(b)).
    In addition, the ESRD PPS provides for two facility-level 
adjustments. The first payment adjustment accounts for ESRD facilities 
furnishing a low volume of dialysis treatments (42 CFR 413.232). The 
second adjustment reflects differences in area wage levels developed 
from Core Based Statistical Areas (CBSAs) (42 CFR 413.231).
    The ESRD PPS allows for a training add-on payment adjustment for 
home dialysis modalities (42 CFR 413.235(c)). Lastly, the ESRD PPS 
provides additional payment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care when 
applicable (42 CFR 413.237).
2. Updates to the ESRD PPS
    Updates and policy changes to the ESRD PPS are proposed and 
finalized annually in the Federal Register. The CY 2011 ESRD PPS final 
rule was published on August 12, 2010 in the Federal Register (75 FR 
49030 through 49214). That rule implemented the ESRD PPS beginning on 
January 1, 2011 in accordance with section 1881(b)(14) of the Act, as 
added by section 153(b) of MIPPA, over a 4-year transition period. 
Since the implementation of the ESRD PPS we have published annual rules 
to make routine updates, policy changes, and clarifications.
    On November 6, 2014, we published in the Federal Register a final 
rule (79 FR 66120 through 66265) titled, ``End-Stage Renal Disease 
Prospective Payment System, Quality Incentive Program, and Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies'' (hereinafter 
referred to as the CY 2015 ESRD PPS final rule). In that final rule, we 
made a number of routine updates to the ESRD PPS for CY 2015, completed 
a rebasing and revision of the ESRD bundled market basket, implemented 
a 2-year of transition for the revised labor-related share and a 2-year 
transition of the new Core-Based Statistical Area (CBSA) delineations, 
and made policy changes and clarifications. For a summary of the 
provisions in that final rule, we refer readers to the CY 2016 ESRD PPS 
proposed rule at 80 FR 37813 (July 1, 2015).

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the CY 2016 ESRD PPS Proposed Rule

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, and Quality Incentive Program'' (80 
FR 37807 through 37860), (hereinafter referred to as the CY 2016 ESRD 
PPS proposed rule), was published in the Federal Register on July 1, 
2015, with a comment period that ended on August 25, 2015. In that 
proposed rule, for the ESRD PPS, we proposed to (1) make a number of 
routine updates for CY 2016, (2) implement the statutory provisions set 
forth in ATRA and PAMA, and (3) clarified policies for reporting renal 
dialysis services on the ESRD facility claim. We received 233 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. Of those comments, 67 were related to the provisions in the 
proposed rule. As part of the comments received, there was a write-in 
campaign from 200 individuals that addressed home dialysis training. We 
also received comments that pertained to topics that were outside of 
the scope of this rule, for example, network fees and Part D payment 
determinations.
    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 2016 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.
1. Analysis and Revision of the Payment Adjustments Under the ESRD PPS
a. Development and Implementation of the ESRD PPS Payment Adjustments
    Section 153(b) of MIPPA amended section 1881(b) of the Act to 
require the Secretary to implement the ESRD PPS effective January 1, 
2011. Section 1881(b)(14)(D)(i) requires the ESRD PPS to include a 
payment adjustment based on case-mix that may take into account patient 
weight, body mass index (BMI), comorbidities, length of time on 
dialysis, age, race, ethnicity, and other appropriate factors. Section 
1881(b)(14)(D)(ii) through (iv) provide that the ESRD PPS must also 
include an outlier payment adjustment and a low-volume payment 
adjustment, and may include such other payment adjustments as the 
Secretary determines appropriate.
    In response to the MIPPA amendments to section 1881(b) requiring 
the new bundled ESRD PPS, we published the proposed ESRD PPS design and 
implementation strategy in the Federal Register on September 29, 2009 
(74 FR 49922).
    In that rule (75 FR 49033) we noted that section 623(f)(1) The 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA), Public Law 108-173, required the Secretary to submit to the 
Congress a report detailing the elements and features for the design 
and the implementation of the ESRD PPS. To meet this mandate we worked 
with the University of Michigan--Kidney Epidemiology and Cost Center 
(UM-KECC) in developing the ESRD PPS and used their report that 
provided their findings and recommendations submitted to CMS in 
February 2008, titled, End-Stage Renal Disease Payment System: Results 
of Research on Case-Mix Adjustment for an Expanded Bundle (herein 
referred to as Technical Report) as the basis for the Secretary's

[[Page 68973]]

February 2008 Report to Congress, A Design for a Bundled End Stage 
Renal Disease Prospective Payment System. These reports can be found on 
the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/educational_resources.html.
    We received over 1400 comments from dialysis facilities, Medicare 
beneficiaries, physician groups, and other stakeholders in response to 
the proposed rule. In consideration of these comments, we finalized the 
case-mix and facility-level adjustments for the ESRD PPS in the CY 2011 
ESRD PPS final rule (75 FR 49030). For a complete discussion of public 
comments and the finalized payment policies for the ESRD PPS, we refer 
the reader to the CY 2011 ESRD PPS final rule (75 FR 49030 through 
49214).
b. Regression Model Used To Develop Payment Adjustment Factors
i. Regression Analysis
    In the CY 2011 ESRD PPS final rule (75 FR 49083), we discuss the 
two-equation methodology used to develop the adjustment factors that 
would be applied to the base rate to calculate each patient's case-mix 
adjusted payment per treatment. The two-equation approach used to 
develop the ESRD PPS included a facility-based regression model for 
services historically paid for under the composite rate as indicated in 
ESRD facility cost reports, and a patient-month-level regression model 
for services historically billed separately. The models used for the 
2011 final rule were based on 3 years of data (CYs 2006 through 2008).
    Section 632(c) of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 11-240) requires the Secretary, by no later than January 1, 
2016, to conduct an analysis of the case-mix payment adjustments being 
used under section 1881(b)(14)(D)(i) of the Act and to make appropriate 
revisions to such case-mix payment adjustments. In the proposed rule 
(80 FR 37814) we explained that while section 632(c) of ATRA only 
requires us to analyze and make appropriate revisions to the case-mix 
payment adjustments, we performed a regression analysis that updated 
all of the payment multipliers including the low-volume payment 
adjustment. Also, as discussed in more detail in section II B.d.iii of 
this final rule, we analyzed rural areas as a payment variable in our 
regression analysis and proposed to implement a new adjustment for this 
facility characteristic.
    For purposes of analyzing and proposing revisions to the payment 
adjusters included in the proposed rule, we updated the two-equation 
methodology using CY 2012 and 2013 Medicare cost report and claims 
data. Data from CYs 2012 and 2013 is the most recently available 
information that we had to implement the refinement of the ESRD PPS in 
CY 2016 as required by section 632(c) of ATRA. Generally, we would have 
used 3 years of data as we did when we established the existing case-
mix adjusters. However, 2011 was the first year under the new bundled 
payment system. The revised FDA black box warning for erythropoiesis-
stimulating agents (ESAs) was also issued during 2011. These two 
factors may have been associated with changing practice patterns during 
2011. Updating the regression analysis using the most recent claims and 
cost report data allows the case-mix adjustment model to reflect 
practice patterns that have prevailed under the incentives of the 
expanded bundled payment system. Therefore, we used CYs 2012 and 2013 
data for the refinements to the case-mix systems.
    In the proposed rule (80 FR 37817 through 37818 and 37821 through 
37823, respectively), we proposed to reduce the number of comorbidity 
categories to which payment adjusters apply and implement an adjustment 
for rural facilities. Our rationale for proposing to eliminate two of 
the comorbidity categories for which we will make payment adjustments 
is discussed in section II B.1.c.i of this final rule. The measures of 
resource use, specified as the dependent variables for developing the 
payment model in each of the two equations are explained below.
ii. Dependent Variables
(1) Average Cost per Treatment for Composite Rate Services
    For purposes of the proposed rule, we measured resource use, for 
example, time on a dialysis machine for the maintenance dialysis 
services included in the bundle of composite rate services, using only 
ESRD facility data obtained from the Medicare cost reports for 
freestanding ESRD facilities and hospital-based ESRD facilities. We 
used facility level data because no data are available at the patient-
level that reflect variation in resources costs for providing composite 
rate services. In addition, cost report data is the only data that we 
have available that reports facility costs and is certified by the 
facility as being accurate. The average composite rate cost per 
treatment for each ESRD facility was calculated by dividing the total 
reported allowable costs for composite rate services for cost reporting 
periods ending in CYs 2012 and 2013 (Worksheet B, column 11A, lines 8-
17 on CMS-265-11; Worksheet I-2, column 11, lines 2-11 on CMS-2552-10) 
by the total number of dialysis treatments (Worksheet C, column 1, 
lines 8-17 on CMS 265-11; Worksheet I-4, column 1, lines 1-10 on CMS-
2552-10). CAPD and CCPD patient weeks were multiplied by 3 to obtain 
the number of HD-equivalent treatments. We note that our computation of 
the total composite rate costs included in this per treatment 
calculation includes costs incurred for training expenses, as well as 
all costs incurred by ESRD facilities for home dialysis patients.
    The resulting cost per treatment was adjusted to eliminate the 
effects of varying wage levels among the areas in which ESRD facilities 
are located using the ESRD PPS CY 2015 wage indices and the new CBSA 
delineations which were discussed in the CY 2015 ESRD PPS final rule, 
as well as the estimated labor-related share of costs from the 
composite rate market basket. This was done so that the relationship of 
the studied variables on dialysis facility costs would not be 
confounded by differences in wage levels.
    The proportion of composite rate costs determined to be labor-
related (53.711 percent of each ESRD facility's composite rate cost per 
treatment) was divided by the ESRD wage index to control for area wage 
differences. No floor or ceiling was imposed on the wage index values 
used to deflate the composite rate costs per treatment in order to give 
the full effect to the removal of actual differences in area wage 
levels from the data. We applied a natural log transformation to the 
wage-deflated composite rate costs per treatment to better satisfy the 
statistical assumptions of the regression model, and to maintain 
consistency with existing case-mix adjustment methods, in which a 
multiplicative payment adjuster is applied for each case-mix variable.
    As with other health care cost data, the cost distribution for 
resource/dialyzing composite rate services was skewed (due to a 
relatively small fraction of observations accounting for a 
disproportionate fraction of costs). Cost per treatment values which 
were determined to be unusually high or low in accordance with 
predetermined statistical criteria were excluded from further analysis. 
(For an explanation of the statistical outer fence methodology used to 
identify unusually high and low

[[Page 68974]]

composite rate costs per treatment, see pages 45 through 48 of the 
Secretary's February 2008 Report to Congress, A Design for a Bundled 
End Stage Renal Disease Prospective Payment System. This document is 
available on the CMS Web site at the following link: http://www.cms.gov/Medicare/End-Stage-Renal-Disease/ESRDGeneralInformation/downloads/ESRDReportToCongress.pdf.
(2) Average Medicare Allowable Payment (MAP) for Previously Separately 
Billable Services
    For purposes of the proposed rule, resource use for separately 
billable items and services used for the treatment of ESRD was measured 
at the patient-level using the utilization data on the Medicare claims 
by quarter for CYs 2012 and 2013 and average sales prices plus 6 
percent of the drug or biological, if applicable, for each quarter. 
This time period corresponded to the most recent 2 years of Medicare 
cost report data that were available to measure resource use for 
composite rate services, such as time dialyzing. Measures of resource 
use included the following separately billable services: injectable 
drugs billed by ESRD facilities, including ESAs; laboratory services 
provided to ESRD patients, billed by freestanding laboratory suppliers 
and ordered by physicians who receive monthly capitation payments for 
treating ESRD patients, or billed by ESRD facilities; and other 
services billed by ESRD facilities.
iii. Independent Variables
    Two types of independent or predictor variables were included in 
the composite rate and separately billable regression equations--case-
mix payment variables and control variables. Case-mix payment variables 
were included as factors that may be used to adjust payments in either 
the composite rate or in the separately billable equation. Control 
variables, which generally represent characteristics of ESRD facilities 
such as size, type of ownership, facility type (whether hospital-based 
or freestanding), were specifically included to obtain accurate 
estimates of the payment impact of the potential payment variables in 
each equation. In the absence of using control variables in each 
regression equation, the relationship between the payment variables and 
measures of resource use may be biased because of correlations between 
facility and patient characteristics.
iv. Control Variables
    Several control variables were included in the regression analysis. 
They were: (1) renal dialysis facility type (hospital-based versus 
freestanding facility); (2) facility size (4,000 dialysis treatments or 
fewer, but not eligible for the low-volume payment adjustment, 4,000 to 
4,999, 5,000 to 9999, and 10,000 or more dialysis treatments); (3) type 
of ownership (independent, large dialysis organization, regional chain, 
unknown); (4) calendar year (2012 and 2013); and (5) home dialysis 
training treatments, in which the proportion of training treatments 
furnished by each dialysis facility is specified. The use of training 
treatments as a control was done in order to remove any confounding 
cost effects of training on other independent variables included in the 
payment model, particularly the onset of dialysis within 4-months 
variable.
    The comments we received on the refinement regression methodology 
and our responses are set forth below:
    Comment: We received several comments from dialysis associations 
and MedPAC questioning the validity and the stability of the current 
ESRD PPS payment model, that is, the two-equation regression analysis 
and the proposed refinements, pointing to concerns with the underlying 
data and statistical methodology. Some commenters made suggestions for 
future improvements. For example, commenters suggested that we use a 
one-equation model while others requested that we update the two-
equation model, but retain certain multipliers from the 2011 payment 
model.
    Response: We thoroughly reviewed these comments in consultation 
with our research team and other internal experts. We examined the 
outcomes of the current ESRD PPS specifically looking at access and 
quality of the PPS. Based on our comprehensive monitoring of health 
outcomes and access under the ESRD PPS, we believe the current payment 
model has been successful in allocating payments across facilities and 
patients while supporting access and quality. While we recognize there 
can be theoretically optimal approaches to addressing payment model 
design, the availability of data is often an important factor in the 
approach ultimately undertaken. This is true with the ESRD PPS and the 
use of a two-equation model that relies on both claims and cost report 
data, as other payment systems do under Medicare.
    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. Given the incentives inherent with moving to a 
bundled PPS and resulting changes in facility cost structure, it is 
appropriate to review the payment model and consider changes to support 
accurate payments and continued access for Medicare beneficiaries.
    Both at the time the CY 2016 ESRD PPS proposed rule was published 
and after consideration of the public comments, we believed and 
continue to believe that our two-equation regression analysis is the 
most appropriate methodology that uses the most recently available data 
to develop the most accurate patient- and facility-level payment 
adjustments that reflect cost variation for ESRD facilities. We note 
that the analytical results underlying the proposed refinements are 
similar to past payment analyses associated with the development and 
implementation of the ESRD PPS and have thus been stable over time.
    For example, no variables were determined to be no longer 
statistically significant and overall there were minimal variations in 
adjustment factors that resulted from the refinement. Therefore, we 
believe the current model, including the proposed refinements, is 
reliable. The only modifications to the list of payment adjusters were 
the addition of a rural adjustment and the elimination of two 
comorbidities based on administrative burden.
    Throughout the comments and responses within this section, we 
provide details regarding the model in response to the criticisms 
submitted by stakeholders to illustrate our position that this 
refinement was best accomplished by updating the two-equation 
regression analysis finalized in the CY 2011 ESRD PPS final rule. We 
believe that moving forward with an updated model aligns with our goals 
for the ESRD PPS in establishing accurate payments and safeguarding 
access for Medicare beneficiaries. As noted above, we modeled the ESRD 
PPS using methodologies that have been tested since the Basic Case-Mix 
Adjusted (BCMA) composite rate payment system and in using the most 
recently available data, we made our best estimate for predicting the 
payment variables that best reflect cost variation among ESRD 
facilities for furnishing renal dialysis services to a vulnerable 
population of patients. As we noted above, this refinement uses data 
that illustrates a fully bundled prospective payment system and 
reflects the practice patterns

[[Page 68975]]

under such environment. We believe that it would not be appropriate to 
both perpetuate certain payment adjusters into the future that were 
developed using pre-PPS data and update the other adjusters using ESRD 
claims data and cost reports from 2012 and 2013. By using the proposed 
two-equation model we will better target payments to those patient- and 
facility-level characteristics that are necessary for patients to 
receive access to quality care.
    We appreciate the suggestions of the commenters for improvements in 
the model and will continue to examine this critical area of the 
Medicare program.
    Comment: Commenters contended that the proposed rule did not 
include the entire specification of the two-equation regression 
analysis. The commenters requested that CMS release the data reports 
that support the proposed changes for both the facility- and patient-
based regressions, including those for the control variables. In 
addition, commenters said CMS should explain the calculation of the 
weights used to combine factors from each regression. Several 
organizations commented that without data, descriptions, and 
explanations with regard to the proposed modifications to the ESRD PPS, 
it is difficult to provide a complete analysis and offer the most 
constructive comments possible. They explained that if this information 
was made available, then it would be possible for others in the 
community to replicate our model.
    Response: As we stated above, section 632(c) of ATRA directed us to 
analyze and make appropriate revisions to the case-mix payment 
adjustments being used under section 1881(b)(14)(D)(i) of the Act. 
Because these adjustments were calculated using the two-equation 
payment model that was finalized in the CY 2011 ESRD PPS final rule, we 
believe it was appropriate to revise the adjustments using the same 
methodology. We accomplished this task through analysis of the model 
with updated claims and cost report data from 2012 and 2013. These 
comments pertain more to the initial design of the system for the 2011 
implementation. Therefore, because the details of the elements and 
features for the design and the implementation of the ESRD PPS were 
made available at that time and are still available to this day, we 
referenced the CY 2011 ESRD PPS final rule for all the information and 
on the design.
    As we stated above, in the CY 2011 ESRD PPS final rule (75 FR 
49033) we noted that we worked with UM-KECC in developing the ESRD PPS 
and used their report that provided their findings and recommendations 
submitted to CMS in February 2008, titled, End-Stage Renal Disease 
Payment System: Results of Research on Case-Mix Adjustment for an 
Expanded Bundle (herein referred to as Technical Report) as the basis 
for the Secretary's February 2008 Report to Congress, A Design for a 
Bundled End Stage Renal Disease Prospective Payment System. Since both 
of these reports and the CY 2011 ESRD PPS preamble language for the 
proposed and final rules are readily available and extensively detail 
the methodology for the two-equation regression analysis that applies 
to the current model, we believe that this information when combined 
with the information in the proposed rule and the claims and cost 
reports for 2012 through 2013 would allow an accurate replication. As 
stated above, both reports were available on the web at the time the CY 
2016 ESRD PPS proposed rule was published at the following hyperlink: 
https://www.cms.gov/Medicare/End-Stage-Renal-Disease/ESRDGeneralInformation/downloads/ESRDReportToCongress.pdf for the 
Secretary's February 2008 Report to Congress along with UM-KECC's 
Technical Report located at http://www.kecc.sph.umich.edu/sites/default/files/attachments/publications/UM_KECC_ESRD_Bundle_Report.pdf. 
We note that while UM-KECC's link to the Technical Report has changed 
since the issuance of the CY 2011 ESRD PPS final rule, their Web site 
provides assistance for locating the file. These reports and other 
resource materials regarding the ESRD PPS can be found on the CMS Web 
site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/educational_resources.html.We also note that we are 
developing an updated Technical Report that will reflect the CY 2016 
refinements and will notify stakeholders when it is available.
    Comment: MedPAC expressed concern about continuing to use a two-
equation model to estimate the ESRD PPS adjustment factors. They 
indicated that the costs associated with separately billable services 
may be included in the cost centers that are used to derive the 
dependent variable (composite rate cost per treatment) for the facility 
level regression. They specifically noted that renal dialysis supplies 
could be double counted in this way. They noted that the dependent 
variable for the patient-level regression is the payment per treatment 
for separately billable services. MedPAC further explained that to 
combine facility- and patient-based estimates for a given variable, CMS 
weights each estimate by the proportion of cost or payment represented 
by the dependent variable in each regression, and then multiplies the 
two weighted estimates together to produce a final adjustment factor. 
They stated that if separately billable services are included in the 
dependent variable for both regressions, the weights will not 
distinguish the relative cost or payment addressed by each regression.
    In addition, MedPAC expressed concern that multiplying factors from 
the facility-level and patient-level regressions may diminish the 
accuracy of the combined factors. MedPAC indicated that the 
distribution of average treatment cost across facilities is quite 
likely different than the distribution of payments for separately 
billable services across patients, and combining the two factors 
estimated based on unrelated distributions may not accurately reflect 
cost variation for the payment unit, a dialysis treatment. Another 
commenter similarly stated that the combination of coefficients from 
the two regressions into a single adjuster is problematic. This 
commenter noted that the weighting CMS used to calculate the adjuster 
values is not described, but that it would be incorrect to assume that 
the distributions for the two regressions are the same. MedPAC 
contended that if the distributions are not the same, then the accuracy 
of the resulting adjuster will be compromised.
    MedPAC suggests that CMS develop payment adjustment factors using a 
one-equation methodology that accounts for variation in the cost of 
providing the full PPS payment bundle as a solution to the issues they 
have identified. They indicate that it may not be feasible to develop 
such a methodology for CY 2016, but expect to see such a change in a 
future revision.
    Response: MedPAC has recognized the necessity of multi-equation 
models in other Medicare payment systems. Specifically, Medicare's home 
health PPS uses a 4-equation model in order to appropriately reflect 
resource use and align this use with payment. However, we understand 
the appeal of the one- equation model in terms of simplicity. For 
example, the Inpatient Prospective Payment System (IPPS) relies on 
patient-level cost information using facility-level charges reported on 
claims adjusted by a cost-to-charge ratio derived from the cost report. 
The ESRD PPS is not currently able to utilize a one-equation method 
because ESRD facilities do not report charges associated with the 
components of dialysis treatment costs that vary across patients, such 
as time on machine. In other words, patient-level claims provide line 
item detail on the use of the formerly separately billable (SB)

[[Page 68976]]

services, but do not provide any information regarding variation across 
patients in the use of the formerly composite rate (CR) services. In 
addition, we believe that capturing the resource cost for furnishing 
renal dialysis services is complex since Medicare has historically paid 
a base rate (that is, composite rate payment) to account for those 
costs which were never itemized on a claim but were reported through 
the cost report. We believe that the current ESRD PPS model captures 
this complexity through the analysis of data on case-mix and control 
variables gleaned from both cost reports and claims.
    We note that in the analyses completed for the CY 2011 ESRD PPS 
proposed rule, we tested various one-equation approaches to estimate 
accurate adjusters and found that such facility-level estimates did not 
yield reliable and precise estimates for the relationships of uncommon 
patient characteristics (such as comorbidities) or uncommon treatment 
types (such as home dialysis training treatments) and CR costs. The 
one-equation model had low statistical power, that is, minimal ability 
to effectively explain variation in cost, especially for uncommon 
conditions as noted above. Adjusters for factors such as uncommon 
comorbidities could be reliably developed in the patient-level SB 
model, but not in the facility-level CR model. case-mix Ultimately, 
having charges or line item utilization data that vary meaningfully 
with resource use at the patient level would allow for the estimation 
of a valid, one-equation model. The only feasible one-equation option 
using currently available data would be at the facility level, which 
would make no use of available information from claims on the patient-
level variation in SB costs and sacrifice the ability to derive any 
reliable adjustment for comorbidities, and commenters from the SDOs 
have supported the retention of the comorbid payment adjustments. 
Therefore, we believe developing a charge structure that could enable 
us to utilize a one-equation model may be worth exploring in the 
future, but for the data that currently exists, the two-equation model 
is valid, stable and retains its predictive value.
    In summary, we appreciate the commenters' suggestions and will 
consider various options for a one-equation model in the future. For 
the reasons given above, and based on the data we currently have 
available to us, we believe the two-equation model is valid and is an 
appropriate method to revise the values of the adjusters.
    We appreciate the recommendations and suggestions of the commenters 
and will consider soliciting ideas from our stakeholders to assist us 
in gathering the necessary data to consider a valid one-equation model 
as a valid ESRD PPS payment option in the future.
    In regards to MedPAC's concerns about how the costs of separately 
billable services may be included in the cost centers that are used to 
derive the dependent variable for composite rate cost per treatment, we 
believe that the potential magnitude of double-counting certain costs 
such as dialysis supplies in both equations is minimal. We provide 
instructions to the ESRD facilities not to report items and services on 
their claims that are considered in the composite rate. Since we 
analyze claims data each year for rulemaking, we are aware of what ESRD 
facilities are reporting on claims with respect to utilization of renal 
dialysis services. Over the years, we have found that those costs 
associated with composite rate services was near zero. ESRD facilities 
have historically not reported supplies on their claims. We only allow 
two supplies to count toward the outlier payment: A4657 syringe, with 
or without needle, each of which covers the injection administration-
supply charge (includes the cost of alcohol swab, syringe, and gloves) 
and A4913 miscellaneous dialysis supplies, not otherwise specified, 
which covers the intravenous administration-supply charge (includes the 
cost of intravenous solution administration set, alcohol swab, syringe, 
and gloves). Therefore, we only expect to see these two supplies 
reported on the claim because prior to the implementation of the PPS 
they were separately payable when they were used in the administration 
of intravenous drugs during dialysis and it would be appropriate for 
their inclusion in both models. Also, the costs associated with these 
items are minimal. Approximately $17,000 of supply costs were reported 
in 2014 claims based on the June 2015 claims file, which included 
approximately 4 million claims with a total Medicare payment of 
approximately $9 billion. Therefore, even if 100 percent of these costs 
were also reported as CR costs on the cost reports, the consequent 
double-counting would have a negligible impact on estimated cost per 
treatment, and will not have the effect with which MedPAC is concerned, 
namely, accurately distinguishing the relative cost or payment 
addressed by each regression.
    In regards to MedPAC's and other commenters' concerns about how 
multiplying factors from the two equations could diminish the accuracy 
of the combined factors, we believe the impact of this concern is also 
minimal. The method of combination, weighting the CR or SB equation's 
multiplier by the share of total per treatment costs, is unchanged from 
when the ESRD PPS was first implemented in 2011. The only change is 
that the weight assigned to the SB equation has declined due to changes 
in practice patterns following the implementation of the ESRD PPS 
(primarily reductions in use of previously separately-billed drugs); 
the share of per treatment costs attributed to SB services declined 
from 32.1 percent in the 2011 payment model to 19.2 percent in the 2016 
payment model. Therefore, the CR analysis estimates the facility-level 
relationship between case-mix measures aggregated across patients and 
average cost per treatment for composite rate services. The facility-
level model has been successfully used to estimate statistically 
significant relationships between a number of case-mix characteristics 
measured at the facility level and average cost per treatment at the 
facility level since the BCMA composite rate payment system was 
implemented in 2004. As noted above, the facility-level model has not 
allowed us to estimate accurate payment adjustments for uncommon 
conditions such as the comorbidities that are included in the patient 
level SB model or the effects of uncommon treatment types such as home 
dialysis training. Therefore, we have refrained from estimating such 
payment adjusters from a facility-level model.
    Comment: MedPAC also noted that through the various revisions of 
the two-equation model the reference group for the age adjustment 
shifted from ages 45-59 in the CY 2011 ESRD PPS proposed rule to ages 
60-69 in the CY 2011 ESRD PPS final rule, and to ages 70-79 for the CY 
2016 ESRD PPS proposed rule. MedPAC indicated that they would expect 
that the relative cost of dialysis across age categories to remain 
relatively stable over time and expressed concern that such shifts 
could indicate that the estimated factors are highly sensitive to the 
model's specification and that the model lacks robustness. They further 
stated that the two-equation approach might contribute to the shifting 
in reference groups through the various revisions to the model.
    Response: We do not believe the change is as significant as MedPAC 
has expressed as there was very little variation in the age 
coefficients between the 2011 model and the 2016 model. Furthermore, in 
the 2011 model, the 70-79 age category only had costs 1.1 percent 
higher than the reference group

[[Page 68977]]

of 60-69. Historically, we have had narrowly defined age categories. In 
the analyses for both payment year 2011 and payment year 2016, the 
highest costs were observed for the youngest adult age group (ages 18-
44), and there were relatively smaller differences in cost across the 
middle age categories. We expected some variation in the 2016 
multipliers as a result of updated claims and cost report data since 
they were first derived in 2011. The final 2011 regression analysis 
used 2006, 2007 and 2008 claims and cost report information while the 
2016 regression analysis used 2012 and 2013 claims and cost report 
information. Considering the significant changes that have occurred in 
the practice patterns of ESRD facilities, such as the significant 
reduction in the use of ESAs and other renal dialysis services, the 
minimal overall change in the coefficients appears to indicate that the 
model is stable. We believe this result confirms the ability of the 
two-equation methodology to appropriately recognize the costs for 
providing renal dialysis services in an ESRD facility. For these 
reasons, we do not believe the change in the age reference group over 
time indicates a problem with the regression model.
    Comment: MedPAC expressed concern that using unaudited cost reports 
could pose a threat to the validity of the payment adjustment factors 
since historically facilities' cost reports have included costs that 
Medicare does not allow. They noted that PAMA funded CMS to audit a 
representative sample of ESRD facility cost reports beginning in 2014. 
They indicated that they knew the audits have not been completed at the 
time of this final rule but would be interested in learning if there 
are any differences in the payment adjustment factors that are derived 
from pre- versus post- audited data.
    With respect to the use of hospital-based cost reports to derive 
the payment adjustment factors, MedPAC expressed that there is no 
guarantee of consistency in the methods used to allocate hospital costs 
to dialysis departments and to dialysis cost categories. They noted 
that CMS has said that expense data for hospital-based cost reports 
reflect the allocation of overhead over the entire institution, and 
that the expenses of each hospital-based component may be skewed. 
MedPAC further noted that for these reasons, the inclusion of hospital-
based cost reports likely increases statistical noise in the two-
equation regression methodology.
    Response: As for the use of unaudited cost report data, we used the 
best available data for this refinement. We do not expect to have 
results from audits of ESRD cost reports required by section 217(e) of 
PAMA for some time. We believe this refinement is necessary because it 
reflects costs and practice patterns under the ESRD PPS. In addition, 
section 632(c) of ATRA requires us to analyze and make appropriate 
revisions to the case-mix payment adjustments by not later than January 
1, 2016, and therefore, we cannot wait until after cost reports have 
been audited to revise the case-mix adjustments. After analyzing the 
adjustments, we believe the revisions we are adopting are appropriate 
and necessary to reflect the drop in the use of ESAs and other renal 
dialysis drugs.
    With regard to the use of hospital-based cost reports, we agree 
that the issue of allocation of costs to the dialysis unit is unique to 
hospital-based cost reports. As part of the cost reporting process, 
hospitals can allocate costs to hospital-based dialysis facilities. 
There may be variation among hospitals regarding the methodology of 
cost allocation, with some hospitals under-allocating and others over-
allocating costs to hospital-based dialysis facilities. The model does 
include an indicator of hospital-based status as a control variable. 
This will capture differences between hospital-based and freestanding 
facilities on average. Our preference is to include hospital-based 
facilities, while acknowledging concerns about the data, in order to 
represent the cost experience of all providers. We believe the concerns 
about the data would be more salient if the data were being used to set 
the base rate rather than being used only to determine the relative 
costliness of different case-mix factors. Also, we note that the 
freestanding cost reports were available before the hospital-based cost 
reports, so preliminary analyses did not include hospital-based cost 
reports. When the hospital-based cost reports were added, the payment 
multipliers did not change substantially, suggesting that the decision 
to include or exclude hospital-based reports will not have a 
significant impact. Including them reflects our preference that the 
data used to determine payment adjusters is as broadly reflective of 
the patients and facilities being paid under the ESRD PPS as possible.
    Comment: MedPAC expressed concern that data from 2012 may not 
reflect current practice patterns particularly with the use of renal 
dialysis drugs and biologicals because drug use has continued to 
decline in recent years. MedPAC suggested that we use data from 2013 
and beyond to update the payment adjusters since they believe that 
using only 2013 data would ensure better accuracy of the payment 
adjusters.
    Response: The 2011 model was based on 3 years of data and we wanted 
to maintain that approach for the refinement. However, for the 2016 
payment year, we did not use 1 year (2011) of data due to concerns 
similar to those raised by MedPAC. However eliminating an additional 
year, 2012, of data would decrease the accuracy of the CR model due to 
the decrease in the amount of data available to estimate the 
statistical relationships between case-mix and cost. Specifically, the 
sample size would be halved. For this reason, we did not adopt this 
suggestion and retained CY 2012 data in the regression analyses.
    As we stated above, we brought the commenter's criticisms to our 
experts in order to ensure commenter's concerns were addressed. Their 
opinion was that dropping 2012 for the SB model only would still result 
in an accurate SB model due to the large sample size since this is a 
patient-level model, but then would be inconsistent with the timing of 
the data used in the CR model. As a result of these discussions, we 
continue to believe that the refinement for CY 2016 is appropriate 
because (1) we used year as a control variable in the regression model; 
therefore, any differences in average cost across the 2 years is 
accounted for, and (2) we are using the model to estimate the 
multiplicative adjusters, not the base rate. MedPAC's main concern 
appears to be with changes in average treatment patterns between 2012 
and 2013, not with changes in the relative costs associated with 
different patient characteristics, and the multiplicative adjusters 
reflect relative costs.
    Comment: Several dialysis organizations pointed out that variation 
in the average facility cost per treatment derived from cost reports is 
not directly associated with variation in patient characteristics and 
because of this, the variable concepts for the payment adjustments 
cannot be measured by the cost report data. One large dialysis 
organization (LDO) stated they are very concerned that CMS believes it 
is appropriate to use ``total facility cost'' derived from the ESRD 
cost reports for the development of patient-level adjuster values. The 
LDO stated that the overall cost report data cannot be directly linked 
to any specific patient characteristic and that these data only provide 
information on total costs to operate a facility, which are generally a 
reflection of the number of patients the facility serves, management 
capabilities, and geographic location, not specific

[[Page 68978]]

patient characteristics. The commenters believe analysis of facility 
cost reports does not yield conclusive observations regarding 
individual patient characteristics. They recommend that CMS refrain 
from using cost report data to develop patient-level adjusters because 
they believe cost reports are only reliable for determining facility 
characteristics for use in developing the facility-level adjusters, 
such as the low-volume adjuster.
    Response: We believe that the two-equation regression methodology 
is appropriate and has successfully estimated statistically significant 
patient- and facility-level payment adjusters. Below we provide an 
explanation as to how the two equations work together to derive the 
payment adjusters.
    Within the cost report, we start with using the worksheet level 
detailed data and the total cost per treatment that is reported. Then 
we construct the average cost per treatment for each ESRD facility. At 
this point, we recognize that corporate costs may not be allocated to 
facilities in a uniform fashion across dialysis organizations. This 
variation in cost accounting creates unwanted variation in the cost 
report data. The control variables discussed below help account for 
these cost variations.
    Next, we attach the distribution of patient characteristics at the 
facility-level to the cost at the facility-level. For example, for age, 
we would take the percentage of patients in each of the age categories 
at the facility level and attach that to the facility's average cost. 
There is one observation per facility, not one per patient. Stated 
differently, it is not the facility characteristic that is being 
attached to the patient, but rather the average case-mix characteristic 
being attached to the facility. Specifically, the observation is a 
facility year. The dependent variable is the average cost per treatment 
across all the treatments provided by that facility in that year. The 
case-mix factors that are being used to develop multipliers are also 
aggregated at the facility level from claims. For example, for BSA, it 
is the average BSA for all the patients treated at the facility during 
the year. The model evaluates whether facilities that have a 
disproportionate share of a certain characteristic (for example, high 
BSA) have higher/lower costs than facilities that have a smaller share 
of patients with those characteristics. For several of these 
characteristics, variations across facilities in the average values 
across all of their patients do predict CR costs.
    We believe that this method along with the control variables 
described below allows us to distinguish variation in cost per 
treatment in the cost reports from variation arising from treatment 
volume and corporate policies. We note that differences in cost related 
to certain facility-level (aggregate) case-mix factors (patient age and 
body size) have been statistically estimated in the models that 
underlie the BCMA composite rate payment system implemented in 2004, 
the ESRD PPS implemented in 2011, and the CY 2016 ESRD PPS proposed 
rule. All of these models use the same basic methodology and have not 
come under this level of scrutiny in the past, which could indicate 
that it was accepted by the dialysis industry as an appropriate method 
for estimating cost variation.
    The facility control variables of volume and ownership-related 
differences serve as proxies for the factors raised by the commenters. 
As proxies, they serve to not only adjust out their correlation with 
reported cost per treatment, but also ensure that the multipliers for 
the patient characteristics are not biased. The goal is to eliminate 
bias occurring by any existing correlations between patient 
characteristics and the control variables. For example, it is expected, 
due to sheer volume, that the LDOs have greater buying and negotiating 
power for drugs and supplies than a SDO or independent dialysis 
organization, but we do not have access to that information for our 
analysis in the model. For precisely this reason, we use control 
variables such as ownership because we do not have access to 
proprietary measures for factors such as purchasing policies raised by 
the commenter.
    Comment: Several LDOs and a national association of ESRD 
stakeholders expressed concern that CMS and its contractor used 
statistical methodologies and identified adjuster variables in a manner 
that cannot produce valid or reliable adjuster values. One commenter 
stated that statistical methods are only valid if the data to which 
they are applied are a fit to the methods. The commenter further 
explained that statistical methods applied to data that do not meet the 
requirements for reliability and validity will produce results that are 
not accurate, may not be meaningful, and can be volatile from year to 
year. This commenter claimed that the fundamental requirements of a 
regression model were not met in the analyses used to design the ESRD 
PPS payment adjusters. The commenter further stated that to produce 
valid and reliable results, a regression analysis must be based on a 
sound research design and must adequately address the assumptions made 
by the mathematical properties of the regression analysis. They then 
provided the major assumptions that they claim underlie regression 
methods and noted that these assumptions are not valid for the CY 2016 
proposed rule adjusters.
    We address each core assumption that the commenter referred to in 
the next four comments and responses. Our general response is below.
    Response: We acknowledge that the concerns raised about the 
regression model are reasonable concerns to have about any regression 
model. However, we disagree with the notion that the existence of these 
concerns implies that the analyses ``violate the core assumptions for a 
valid analysis.'' No regression model using real data conforms 
perfectly to the textbook ideals of a model that includes every 
potentially relevant variable, each of which is measured perfectly and 
perfectly represents the concept it is trying to measure, and is 
uncorrelated with any other variable of interest. We acknowledge that 
our regression analysis has limitations with regard to issues such as 
data availability, as does every regression model. We have provided 
responses to the wide variety of criticisms regarding the regression 
approach, data, etc., and we believe these responses support a model 
that is valid and stable. We believe we have selected an approach that 
mitigates such concerns as much as is feasible, and yields valid 
results, and that the model we are using most accurately aligns payment 
with resource use and accounts for both case-mix and facility 
adjustments in the most accurate way possible for a real-life scenario.
    Comment: Commenters stated that the two-equation regression 
analysis used to produce the adjustor values is not correctly specified 
and stated that correct specification requires that all variables be 
statistically significant or theoretically related to the dependent 
variable in the regression model. Commenters further explained that 
correct specification requires that all variables that could predict 
change in the dependent variable (that is, the cost per treatment in 
the first equation, cost of separately billed items in the second 
equation) were included in the model. The commenters also stated that 
correct specifications require that the coefficients of the independent 
variables (the value assigned to the adjuster as a result of the 
regression) are assumed to not change during the period of analysis. 
They contend that if a regression model is not correctly specified, the 
results will be biased and

[[Page 68979]]

will not reflect an accurate impact of the independent variables on the 
dependent variable.
    The commenter noted that the process for selecting variables and 
evaluating them for inclusion in the two-equation regression analysis 
was not comprehensive and there is reason to believe that the variables 
selected were not those that drive cost variation. The commenters 
indicated that the methods that CMS and its contractor used appear to 
produce results that cannot be directly linked to costs of providing 
dialysis care and are not directly linked to analysis of underlying 
patient clinical characteristics. Specifically, the commenters have 
indicated to us that our model is not capturing those characteristics 
that they see as having an effect on their cost, namely the ambulatory 
status and cognitive abilities of the very young and the elderly; 
cardiovascular instability or diabetes-related limb amputations; and, 
the extra time, supplies, and infection risk of central venous 
catheters. One dialysis organization provided the following list of 
drivers of variation in patient treatment costs, some of which overlap 
with the other commenter's list: use of central venous catheters, 
frailty, obesity, ambulatory status, cognitive capabilities, 
characteristics, conditions, and illness or race or ethnicity that are 
associated with an increased need for ESAs or vitamin D, chronic 
inflammation (difficult to define by specific disease), infection, 
chronic gastrointestinal bleeding, and myelodysplasias. They also claim 
that no independent research is referenced to support the use of those 
variables that are included.
    Response: We believe that the commenter is referring to the 
reasoning and testing of different variables that were or were not 
included in the two-equation regression analysis used for the CY 2011 
ESRD PPS final rule. The basic modeling approach for the ESRD PPS has 
been subjected to extensive development and testing for over a decade. 
Using cost report data, the composite rate equation development dates 
back to the work supporting the BCMA composite rate payment system 
implemented in 2004. In the development of the final rule for the 2011 
implementation of the ESRD PPS, the two-equation approach was 
extensively tested and documented (in the Technical Report), along with 
testing many variables. We agree that many of the suggested payment 
variables may have an impact on treatment costs; however, adopting 
these suggestions would require additional reporting by ESRD facilities 
as to patient diagnoses or conditions. With regard to the cost drivers 
associated with race and ethnicity, which are related to an increased 
need for ESAs, we note that renal dialysis service drugs and 
biologicals are eligible outlier services, and as such, the outlier 
policy could pick up part of the cost of increased use of ESA and 
Vitamin D. We discuss race and ethnicity in the CY 2011 ESRD PPS final 
rule (75 FR 49108 through 49115) and provide detail on why we did not 
finalize those characteristics as payment adjustments.
    The refinements focused on using more recent data, which reflect 
changes in practices and incentives under the ESRD PPS. We believe that 
the information that the commenter is referring to with respect to 
testing variables is available in the Technical Report developed by UM-
KECC. In addition, we have provided theoretical reasons why the chosen 
variables could influence patients' care requirements throughout the CY 
2011 and 2016 ESRD PPS final rule's preamble language where we discuss 
the analytical work behind each adjustment factor, which is also 
available in the Technical Report. We note that all of the adjusters 
have demonstrated statistical relationships to the dependent variables 
(average cost per treatment for composite rate services and the average 
Medicare Allowable Payment (MAP) for previously separately billable 
services) as evidenced by the results of the model. All patient-level 
variables (age, comorbidities, body surface area/body mass index, onset 
of dialysis) have been reviewed by expert clinicians and all facility-
level variables (low-volume payment adjustment and rural adjustment) 
have been reviewed by health economists. These subject matter experts 
have opined that the two-equation model is statistically sound and 
appropriate for estimating cost variation for ESRD facilities. We 
appreciate the examples commenters provided that communicated to us the 
characteristics they consider to be related to increase in cost in 
furnishing dialysis. In order to capture most of the characteristics 
that were provided by commenters (for example, ambulatory status or 
cognitive function), we would need to develop ways for the information 
to be submitted. We will keep these comments in mind for future 
refinements.
    As we discuss above, the primary purpose of the refinement was to 
test the assumption that the values had not changed since 2006 through 
2008, and to refine the payment model to account for any changes that 
had occurred. Therefore, we developed adjusters using more recent data 
that were derived under the current payment system rather than 
continuing to use payment adjusters derived in the past. In addition, 
we analyzed rural areas and are finalizing a rural payment adjustment 
which is discussed in section II.B.1.d.iii.
    Because we used updated data, we would expect the coefficients to 
have changed between 2006 through 2008 (the time period over which the 
current model was estimated) and 2012 through 2013 (the time period 
over which the proposed model was estimated). In fact, while the exact 
multipliers have changed overall slightly, the basic relationships (for 
example, U-shaped effect of age, higher costs soon after ESRD 
incidence) have been quite stable. With respect to referencing 
independent research to support the use of the variables in the model, 
the 2008 Report to Congress or Technical Report cite what was available 
in the literature at the time.
    We do not have any reason to expect that the coefficients changed 
between 2012 and 2013. As noted by MedPAC, practices were still 
changing somewhat, but it is not clear that this would necessarily 
create any meaningful bias in the coefficients. As noted in response to 
MedPAC's comment above, the model controlled for year (that is, 
adjusted for the mean difference between the 2 years) therefore any 
difference in average costs across the 2 years is accounted for. 
Notably, when the model is estimated on a single year of data, the 
multipliers do not change appreciably. However, the preference is for 
using 2 years of data because doing so stabilizes the estimates for the 
facility-level composite rate model.
    Comment: The next core assumption that the commenter expressed 
concern about was regarding the independence of observations. 
Specifically, the commenter stated that in a correctly specified 
regression model, the observations are uncorrelated with each other, 
which means that all treatments are assumed to be independent of each 
other. The commenter stated that in the ESRD context, treatments occur 
in a sequence linked to an individual patient such that treatment cost 
for one treatment may be related to prior treatment, the duration 
between treatments, events that interrupt treatments, such as 
hospitalization, and the patient's health status at the time of 
treatment. Therefore, treatments are not independent of each other and 
thus the assumption is not valid under the ESRD PPS model. The 
commenter specifically indicated that if CMS and their contractors used 
the ordinary least

[[Page 68980]]

squares test, the results of treatments not being independent of each 
other will be that it is no longer possible to trust significant tests. 
In addition, the commenter stated that if observations are, in fact, 
related as is the case with dialysis treatments, then this correlation 
between observations should be modeled in the regression using 
generalized least squares (another test used during the development of 
a model). The commenter claimed that they found no documentation to 
suggest that this method was used.
    Response: It is our understanding from the comment that the 
commenter believed the unit of analysis (or observation as they labeled 
the term) in the model was a dialysis treatment. However, the unit of 
analysis for the two-equation regression analysis is not observed 
treatments (for example, a full year patient on thrice weekly dialysis 
could contribute up to 156 observations to the model each year), 
rather, it is each patient-month level. Specifically, the SB models are 
estimated at the patient-month level, not the treatment level. 
Therefore, there is a separate observation for each patient month, 
rather than for each treatment. In prior analyses, using 3 years of 
patient-month level data from 2006 through 2008, the effect of the 
correlation within patients was tested and it did not impact results. 
In addition, the primary concern from correlated (or clustered) 
observations is that the standard errors would be underestimated, not 
that the coefficients would be biased. The SB models have a very large 
number of observations and consequently almost all payment variables 
(and all that have large multipliers) are not of marginal statistical 
significance. Therefore, we believe that our unit of analysis, the 
patient-month, does not violate a core assumption of a valid analysis. 
A more detailed discussion on the unit of analysis, that is, patient-
month, for the ESRD PPS model is available in the Technical Report 
beginning on page 39.
    Comment: The next core assumption that commenters expressed concern 
about was regarding random error. Specifically, the commenter stated 
that a correctly specified regression assumes that there is not random 
error built into the independent variables. The commenters claimed that 
there is considerable error in the cost report data used and, as a 
result, the payment adjustments are biased and do not reflect the 
effect of the independent variable on the dependent variable. The 
commenter further explained that there are large amounts of missing 
data in the fields that are rolled up into the total cost field used in 
the analysis. In addition, the commenter stated that CMS has not 
disclosed how it handled trimming data for unbelievable values and 
other types of error. Lastly, the commenter indicated that hospital 
cost reports are frequently highly inconsistent with freestanding 
facility cost reports and are often missing, or have large amounts of 
missing data. The commenter stated that without addressing the known 
level of error in the data source, the assumption that the data are 
error free is violated. However, the commenter noted that the claims 
data used may meet the condition for this assumption.
    Response: Our understanding of the comment is that the commenter 
believes that the independent variables are derived from the cost 
report. While we link patient characteristics to the cost at the 
facility level using cost report data (as we discuss above), the 
independent variables that are used as payment adjusters are derived 
primarily from claims for patient characteristics and other CMS data 
sources for facility characteristics (for example, size, low-volume 
status, rural status, organizational characteristics). We believe that 
the commenter's concern about accuracy is about the cost per treatment 
measure derived from the cost reports for use in the composite rate 
equation. That is, the error to which they refer is on the dependent 
variable (average cost per treatment for composite rate services), not 
on the independent (or predictor) variables (case-mix and control 
variables) as they state.
    We note that classical measurement error (that is, when a variable 
of interest--either an explanatory or dependent variable--has some 
measurement error independent of its value) on independent variables 
can bias coefficients (typically downward, implying that estimates of 
the effect would be conservative). For example, classical measurement 
error on a low BMI could bias the coefficient downward, resulting in an 
underestimation of the additional resource use needed by the thin, 
frail patient. On the other hand, classical measurement error on the 
dependent variable affects the precision of the estimates of the 
coefficients on the independent variables due to the extra ``noise'' in 
the data, but does not bias the coefficients. Further, one reason for 
including a number of facility-level control variables in the model is 
to control for some of the facility or organizational factors that 
might contribute to variation in cost per treatment that arises for 
factors other than variation in patient characteristics.
    The commenters assert that they have data that demonstrate the 
factors, such as profit status and dialysis organization affiliation 
have no impact on composite rate cost per treatment on the cost report. 
This evidence was not presented in the comment and we would find it 
helpful to have this data shared with us. While they assert that 
factors such as financial policies and negotiated medication prices do 
matter, these are precisely the factors that would vary across 
organizations. We use the differences such as affiliation and hospital-
based status between large, medium, and small dialysis organizations as 
proxies to capture these differences. Unless a mechanism is developed 
to require that all dialysis organizations share information such as 
their acquisition costs for dialyzers and negotiated medication prices 
with CMS, which they may consider proprietary, it would not be possible 
to adjust directly for those items in the model.
    Comment: The last core assumption that commenters expressed concern 
about was correlation of variables. Specifically, commenters stated 
that the independent variables should not be correlated with each 
other. The commenters find that there is considerable correlation among 
the independent variables which reduces the accuracy of the adjustment 
factor. A medium dialysis organization (MDO) commented that use of the 
BMI and BSA is a concern as they are both variables for the same 
patient characteristic and essentially cancel each other out. They 
stated that preferably, these variables should not be used as the 
independent variables for the case-mix adjusters.
    Response: It is correct that correlation between variables makes it 
more difficult to statistically distinguish their independent effects 
on the dependent variable, but only very high correlations necessarily 
render it impossible. As long as the variables have some independence 
from each other (one does not precisely predict the other), it may 
still be possible to estimate their separate associations with 
outcomes.
    With respect to BSA and low BMI, these variables represent 
different characteristics that have individual effects on cost. In 
particular, BSA (which is a continuous variable that increases as the 
patient's body size rises) is empirically associated with higher 
composite rate costs. The fact that larger patients on average generate 
higher composite rate costs may reflect the longer dialysis time which 
is required to effectively dialyze larger patients. In contrast, the 
low BMI categorical variable identifies

[[Page 68981]]

particularly frail patients, that is, those with BMI less than 18.5. 
This measure of frailty is empirically associated with higher 
separately billable costs. These very frail patients require more 
expensive drug therapies.
    While BSA is negatively correlated with low BMI, the correlation is 
not perfect. BSA and the low-BMI indicator variables measure related, 
but different concepts and complement each other (that is, small and 
frail are not the same). The low-BMI multiplier helps avoid the 
potential of payments not reflecting the higher costs of caring for 
frail patients. Therefore, elimination of the low-BMI adjuster could 
reduce frail patients' access to care by encouraging perverse 
incentives in facilities, who may try to avoid such patients if their 
costs are not reflected in the payment system. If there was only a BSA 
adjustment, then the heavier beneficiaries requiring more dialysis time 
would be accounted for by the facilities receiving the additional 
payment, with the lighter weight beneficiaries not receiving as much, 
to the detriment of those at the lowest end of the scale, the thin and 
frail. In other words, having the low-BMI adjustment in opposite 
direction of the BSA adjustment for small, frail patients is the 
intended effect. Dropping the low-BMI adjuster could place frail 
patients at increased risk of being denied access to care if there is 
only a downward adjustment for small BSA.
    Further, we note that even if BSA and BMI are strongly correlated 
when measured as continuous variables (a variable that can take any 
value between two numbers), this is not how they appear in the model. 
Only BSA is entered continuously. BMI is entered as a discrete 
indicator variable for being below the accepted cutoff indicating 
potential undernourishment/frailty, which is at the extreme of the 
distribution. The correlation between that discrete indicator of an 
extreme value for BMI and the entire continuous range of BSA is not 
exceptionally high. In short, these two variables complement one 
another in the payment model since low-BMI is a proxy for frail and 
malnourished patients and BSA is a proxy for time on machine and other 
high resource use. Similarly, while there is some correlation between 
rural status and low-volume status, the other specific instance of co-
linearity raised by the commenters, those are both dichotomous 
indicators and there are substantial numbers of facilities having each 
of the four possible combinations of the two variables. If there were 
no low-volume, non-rural facilities, and no non-low-volume rural 
facilities, it would be impossible to statistically distinguish the 
low-volume effect from a rural effect, but in fact many such facilities 
exist. We discuss BSA and low BMI and facility-level adjustments in 
greater depth in section II.B.1.c.2 of this final rule.
    Comment: Commenters stated that because the adjuster variables 
explain less than 10 percent of the variation in cost, the model should 
have been reevaluated before being proposed. They explained that the R-
squared results for the proposed adjusters were not provided, despite 
being requested.
    Response: Because the model is estimated as two equations at 
different units of analysis (facility and patient-year), there is not a 
single, accepted method of calculating a combined R-squared. R-squared 
values have been provided for each equation. The coefficient of 
determination, denoted R\2\ or r\2\, is a number that indicates how 
well data fit a statistical model--sometimes simply a line or a curve. 
An R\2\ of 1 indicates that the regression line perfectly fits the 
data, while an R\2\ of 0 indicates that the line does not fit the data 
at all. This latter can be because the data is utterly non-linear, or 
because it is random. It is a statistic used in the context of 
statistical models whose main purpose is either the prediction of 
future outcomes or the testing of hypotheses, on the basis of other 
related information. It provides a measure of how well observed 
outcomes are replicated by the model, as the proportion of total 
variation of outcomes explained by the model. Obviously, higher R-
squared values are preferred, as this would reflect greater ability to 
predict cost. However, many case-mix adjustment models do not achieve 
high R-squared values because medical costs inherently have a large 
random component. We disagree with the commenter's suggestion that a 
model must explain 10 percent of the variation, and have had our 
experts concur with the validity of the two-equation model. There was 
no concurrence among the experts regarding a 10 percent statistical 
cutoff rule for variance explanation in a model.
    What is more significant is that the payment adjusters have a 
statistically significant effect on costs, and that that effect is 
meaningful in magnitude (that is, large enough that failure to account 
for it would results in payments substantially below costs). If the 
model demonstrates that there are characteristics of individual 
patients that are systematically and meaningfully related to costs, 
adjusting payments for those characteristics can be important 
independent of the model's overall R-squared, regardless of whether the 
overall R-squared is high, medium or low. It is important that 
adjustments be made for the organizations that care for a 
disproportionate share of resource-intensive patients, particularly if 
those organizations do not have many dialysis units across which they 
can diversify that risk to receive payment that reflects the 
characteristics of their patients that are related to cost of care. 
Equally important is the prevention of access to care problems for 
patients with those characteristics. Failure to provide adjustments 
could result in access problems, such as incentives for cherry-picking, 
and these issues could occur regardless of the size of the dialysis 
organization.
    Comment: Commenters had specific concerns about how variables were 
chosen for the two-equation regression analysis and expressed concern 
that exaggerated statistical significance of variables based on a 
universe, not a sample, has resulted in adjusters with questionable 
statistical or clinical significance. The commenter expressed concern 
that the large number of facilities and treatments used in the two 
regressions has resulted in exaggerated statistical significance of 
coefficients. They further explained that this is because coefficients 
become more statistically significant as the size of a sample increases 
and statistical significance is most useful to evaluate selection of 
variables when actual samples are being used. The commenter claimed 
that CMS uses as much of the universe as it can, rather than having 
statistically sampled the universe. They stated that the result of this 
is statistical significance as used by CMS no longer has the meaning it 
does with actual samples. The commenter pointed to the 2008 Report to 
Congress and stated that the age categories 45 to 59 and 70 to 79 were 
not significant at the .05 level. They indicated that given the large 
sample size, if age were an independent driver of cost, they would 
expect a greater level of significance. The commenter noted that none 
of these specifications were disclosed for the updated regressions used 
to estimate the proposed 2016 payment adjusters.
    Response: In the work leading to the CY 2011 ESRD PPS payment rule, 
this issue was addressed. One variable selection criterion was that a 
comorbidity would be considered for a payment adjustment if its 
relationship to cost was both statistically and economically 
significant. As noted by the commenter, even a very small multiplier 
could be statistically significant due to the large sample. All of the 
proposed comorbidity adjusters

[[Page 68982]]

have economically meaningful multipliers.
    As noted by the commenter, the interpretation of statistical 
significance changes when the data include a universe rather than a 
random sample. Essentially, when the universe is used, the coefficients 
can be interpreted as being perfectly accurate (they perfectly reflect 
the universe, because they are derived from the universe). However, 
statistical significance remains relevant for two reasons. First, it is 
a tool to assess the closeness of the relationship between the 
predictors and outcomes. Second, and more importantly, even a near 
universe of claims from a given time period represents a sample of time 
periods (for example, 2012 and 2013 claims are being used to project 
relationships in 2016). The commenter's solution, to use less data than 
are available in order to estimate the relationships, sacrifices 
precision in the estimates. As noted at the beginning of this response, 
we prefer to use all the data and assess whether the relationships have 
sufficient economic size to potentially warrant adjustment. For 
example, a comorbidity could be associated with a trivial 0.1 percent 
increase in costs that could nonetheless be statistically significant 
due to the very large sample size. Such a comorbidity would not have 
been chosen for inclusion in the payment model.
    Comment: Commenters stated that because of the poor fit of the 
model to appropriate data, the high level of correlation among the 
adjuster variables, and the many violations of assumptions required for 
valid regression, they do not believe that this regression model can be 
fixed. Due to these concerns about the methodology and based upon their 
clinical experience, they recommend that we retain the current (CY 
2015) age adjuster and payment multipliers rather than adopt the 
proposed modifications; retain the CY 2015 low-BMI adjuster to address 
underweight patients and establish a high BMI adjuster to address 
overweight patients tied to the NIH guidelines for defining overweight 
patients using BMI rather than applying the BSA adjustment; retain and 
recalculate the onset of dialysis adjustment; remove all comorbidities 
adjustments; and retain the LVPA modifications and develop a two-tiered 
LVPA in place of the rural adjustment. Several commenters proposed 
estimating new multipliers for some factors (for example, onset of 
dialysis, obesity, two-tiered rural adjustment) while retaining some 
current adjusters.
    One LDO's overall concern is that any adjuster must be clinically 
relevant and serve the purpose of ensuring that the ESRD PPS does not 
discriminate against high-cost patients. They believe that several of 
the adjusters as currently structured do not meet this end goal. They 
requested that we eliminate a number of adjusters for CY 2016 
(comorbidities, age, and body mass index (BMI)/body surface area (BSA)) 
in their current constructs because they are not based on clinical 
data, are executed ineffectively or inaccurately, or they do not 
represent actual incremental facility costs. They believe that absent 
the ability to put needed changes in place for CY 2016, elimination of 
these adjustments during the upcoming year will provide CMS the time 
needed for re-analysis of the true impact. The LDO states that a 1-year 
hiatus for all adjustments with the exception of the onset of dialysis 
and low-volume adjusters (as defined in 2015), true drivers of 
incremental costs, will allow the Agency to take the necessary time to 
implement improvements that reflect the current dialysis unit cost 
reality.
    Response: We continue to believe that moving forward with an 
updated model aligns with our goals for the prospective payment system 
in establishing accurate payments and safeguarding access for Medicare 
beneficiaries. As noted above, we modeled the ESRD PPS using 
methodologies that have been tested since the Basic Case-Mix Adjusted 
(BCMA) composite rate payment system and in using the most recently 
available data, we made our best estimate for predicting the payment 
variables that best reflect cost variation among ESRD facilities for 
furnishing renal dialysis services to a vulnerable population of 
patients. This refinement uses data that illustrates a fully bundled 
prospective payment system and reflects the practice patterns under 
such environment. We believe that it would not be appropriate to both 
perpetuate certain payment adjusters into the future that were 
developed using pre-PPS data and update the other adjusters using ESRD 
claims data and cost reports from 2012 and 2013.
    While we appreciate the suggestions from commenters, we are unsure 
how the new adjusters would be estimated using the commenter's 
proposals. They did not specify whether we would force the retained CY 
2015 multipliers to take on their old values when estimating the new 
model or allow the retained variables to take on the new values they 
have using the updated model, but only use new values for the other 
factors. We believe the proposed approach of blending in some 
unspecified way multipliers derived from different time periods and 
different statistical models into a single payment system would not 
provide a meaningful empirical basis for the payment model.
    Comment: A national association of kidney patients expressed 
concern that because of the data sources such as unaudited cost reports 
and the two-equation methodology used (as discussed throughout the 
comments and responses above), the payment for the patient-level 
adjusters are not serving the policy intention of protecting access to 
care for beneficiaries who are perceived to be more costly. The 
association's health professional membership, which includes 
nephrologists, nurses, advanced practitioners, dietitians, and social 
workers have stated that while age is not always a predictor of costs, 
it is a legitimate proxy for higher costs associated with older 
patients. Similarly, underweight patients and overweight patents also 
contribute to increased costs to the dialysis facility. However, the 
rationale for these higher costs is not necessarily always reflected in 
claims data and dialysis facility cost reports because patients, that 
is, the overweight, the frail and the aged, are not distinct categories 
in the cost reports or the claims, and typically require more staff 
time devoted to them.
    Response: We agree with the commenter that there are relationships 
of cost to age and body size. The age, BSA, and low-BMI adjustments in 
the CY 2016 ESRD PPS proposed rule incorporate those adjustments based 
on what can be statistically estimated from facility-level data on 
dialysis costs and patient-level data on costs of formerly separately 
billable items. These obviously and necessarily represent average 
relationships, while, as the commenter notes, for example, age is 
associated with cost but not necessarily for every patient. We believe 
that the age adjustments may serve to capture cost variation that is 
not captured by the other adjustments. As mentioned in a previous 
response, we would ideally like to have cost data at the patient-level 
rather than the facility-level, but data limitations preclude us from 
estimating that relationship at the patient-level. Rather, the 
estimated relationship is between average patient characteristics (for 
example, percentage in each age group, average BSA, percentage at onset 
of ESRD) and average cost at the facility. Failure to adjust for these 
empirically derived relationships between case-mix and costs provides 
facilities with an incentive to cherry pick patients with low cost 
characteristics and avoid patients with high cost characteristics.

[[Page 68983]]

    Comment: A patient group noted that in proposing the new age 
adjusters, CMS engaged in data dredging, the practice of analyzing 
large volumes of data to seek statistically significant relationships, 
without being guided by any hypothesis or explicit theory about 
behavior.
    Response: The original modeling effort to establish the 2011 
payment adjusters for the bundled ESRD PPS examined a large number of 
comorbidities and patient characteristics that could be related to 
costs. The examination was broad as the impact on cost could 
theoretically occur through several channels, both direct (for example, 
more staff effort in the dialysis unit) and indirect (for example, 
patients with certain conditions are more likely to be hospitalized or 
otherwise skip treatments, which could increase costs per treatment 
delivered due to greater unanticipated holes in facilities' schedules, 
as well as other research published by the contractor in conjunction 
with this project that identified that hospitalized patients used more 
injectables per treatment on an outpatient basis, presumably making up 
for smaller or missed doses away from the facility). As described in 
the 2008 Report to Congress and Technical Report, other criteria were 
applied to guard against data dredging. Notably, comorbidities with a 
very small relationship to cost could still be statistically 
significant in the SB model due to high degree of statistical precision 
allowed by the very large sample size; such variables were excluded as 
payment adjusters. They were deliberately excluded to avoid data 
dredging.
    Comment: A patient group commented that the methodology has taken 
the characteristics of groups of patients at the facility-level to make 
inferences about individual patients. They indicate that it appears 
this was done solely by reason of the convenience of having cost data 
available at the facility-level, but not at the patient-level.
    Response: This is an inherent limitation of the currently available 
data, not a choice made for convenience. If we had access to cost 
information at the patient-level for formerly CR services, we would 
have estimated that model at the patient level rather than at the 
facility level. As we discuss above, such information is unavailable, 
primarily because ESRD facilities do not report their actual charges or 
resource costs for various renal dialysis services formerly paid under 
the composite rate on their claims, and facilities do not report 
charges for cost-relevant elements of the dialysis treatment, such as 
their charges for the dialysis filter which would reflect their 
policies regarding reuse of dialysis filters and other supplies. If the 
ESRD facilities reported charges in a way that was sensitive to 
variations in actual resource used across their individual patients, we 
could use reported charges adjusted by the cost-to-charge ratio 
developed from cost reports to estimate their cost for the ESRD PPS 
bundle of services. Such an analysis would infer the effect of patient 
characteristics on costs based on how facility average cost per 
treatment varies with the average characteristics of patients within 
the facility. This is an acknowledged limitation, but it arises by 
necessity given the nature of the available data.
    Comment: A professional organization commented with the hypothesis 
that in the current time of decreased ESA use, the original set of 
conditions, such as age, comorbidities, BSA/BMI and onset of dialysis, 
likely has less influence on overall dialysis facility expenses. They 
commented similarly that it is possible that certain high risk 
patients, who previously made relatively minor contributions to overall 
costs, now have a larger cost impact and provided the example of 
patients with mental illness, lower socioeconomic status, and fewer 
resources available at home, which may contribute in different ways to 
higher resource consumption and expenditures for delivery of dialysis 
care. Additionally, patients initiating dialysis in the hospital with 
multiple medical comorbidities and complex disease states also can 
require more resources in order to coordinate care. The complex 
interactions among multiple comorbidities and social circumstances are 
not captured through current risk assessment tools.
    Additionally, the organization points out that the focus of the 
current case-mix regression models ignores several other important 
dialysis facility costs and could limit access to care. The 
organization stated that when patients (either due to non-adherence, 
mental illness, social stress, frequent hospitalization due to severity 
of their illness or other identifiable but unadjusted-for causes) are 
either unable to or refuse to attend outpatient dialysis treatments, 
facilities do not receive payment. The fixed costs borne by the 
facility for a patient missing dialysis treatment as well as the 
opportunity costs associated with the lost revenues that could have 
been collected by a facility if a different patient who would not have 
missed dialysis had instead been dialyzed are not captured in the case-
mix adjustments.
    To maximize access to care for high risk patients, the organization 
urged CMS to explore methods of case-mix adjustment that further refine 
characterizing high risk patients. They also suggest that the costs 
associated with meeting more recent QIP goals in high-risk patients as 
well as the cost of potential QIP penalties in patients for whom 
facilities are unable to improve QIP-related metrics despite 
appropriate efforts to do so are currently not reflected in the case-
mix adjustments. They urged consideration of these costs in order to 
ensure access to care among high-risk patients and urged CMS to 
actively monitor whether dialysis facilities decline to care for higher 
risk patients.
    Response: While it may be true to some extent that in the current 
time of decreased ESA use, the original set of conditions has less 
influence on overall dialysis facility expenses, all of the ESRD PPS 
payment adjusters continue to be predictive of higher costs. However, 
the overall multipliers reflect the decreased use of injectable 
medications through the weighting of the separately billable equation. 
While we are unsure about what risk assessment tools the commenter is 
referring to, we agree that the current model does not capture the 
conditions suggested by the commenter primarily because conditions that 
may lead to missed treatments are not captured on ESRD facility claims 
or in cost report information, the two sources of data currently 
available for use in the regression analysis. In addition, ESRD 
facilities have reported significant problems in obtaining diagnostic 
information for the comorbidity adjustments as discussed in section II 
of this final rule, and would likely have similar problems in obtaining 
the information suggested. However, some of the adjusters in the model 
(for example, onset, age) are likely related to missed treatments, and 
their multipliers will partially reflect the effect of missed 
treatments on costs.
    For future refinement, we are willing to explore what information 
would have to be reported by ESRD facilities in their claims in order 
to assess the impact of commenters' suggested factors on the 
regression. With respect to the comment regarding consideration of 
costs that are associated with meeting QIP goals in high-risk patients, 
it would not be appropriate to include the cost of QIP penalties in the 
case-mix adjustments. However, as we stated above, we would be 
interested in obtaining more information from ESRD facilities on

[[Page 68984]]

those specific characteristics mentioned in the comment so that we 
could analyze the information for future refinements.
    Comment: One commenter requested that CMS only provide adjusters 
that protect patient access.
    Response: The most recent regression analysis confirms that the 
payment adjusters implemented in 2011 continue to be indicators of high 
cost patients. For this reason, we continue to believe that the case-
mix and facility adjustments are necessary to protect access to renal 
dialysis services for high cost patients. All of our adjusters were 
developed to serve as patient protectors. The patient adjusters (case-
mix) recognize the higher costs associated with dialyzing/treating 
patients with co-morbid conditions that facilities may not be willing 
to otherwise treat because of the monetary loss. The facility-level 
adjusters protect patient access by providing additional monies to 
facilities in more economically or geographically restricted areas that 
encourage their opening and operating to serve those beneficiaries who 
may not otherwise have access.
    For the reasons described above, we continue to believe that the 
two-equation regression methodology is sound and that it confirms the 
continued relevance and significance of the case-mix and other 
adjustments. More importantly, finalizing the regression methodology is 
appropriate so that future payments reflect the bundled environment 
under the ESRD PPS with the associated drop in the utilization of ESAs, 
other renal dialysis service drugs and laboratory testing. Accordingly, 
we are finalizing the use of the two-equation regression methodology to 
update the payment adjustments as proposed.
c. Analysis and Revision of the Payment Adjustments
    As required by section 632(c) of ATRA, we have analyzed and are 
finalizing revisions to the case-mix payment adjustments below. We are 
also finalizing revisions to the facility-level adjustments for 
uniformity as described below.
i. Adult Case-Mix Payment Adjustments
1) Patient Age
    Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS 
include a payment adjustment based on case-mix that may take into 
account a patient's age. In the CY 2011 ESRD PPS final rule (75 FR 
49088), we noted that the basic case-mix adjusted composite rate 
payment system in effect from CYs 2005 through 2010 included payment 
adjustments for age based on five age groups. Our analysis for the CY 
2011 ESRD PPS final rule demonstrated a significant relationship 
between composite rate and separately billable costs and patient age, 
with a U-shaped relationship between age and cost where the youngest 
and oldest age groups showed the highest costs. As a result of this 
analysis, we established five age groups and identified the payment 
multipliers through regression analysis. We established age group 60 to 
69 as the reference group (the group with the lowest cost per 
treatment) and the payment multipliers reflect the increase in facility 
costs for each age group compared to the reference age group. We 
established the group with the lowest cost per treatment as the 
reference group in order to avoid age adjustments with negative 
multipliers. We proposed and finalized payment adjustment multipliers 
for five age groups; ages 18 to 44; 45 to 59; 60 to 69; 70 to 79; and 
80 and older. We also finalized pediatric payment adjustments for age, 
which are discussed in section II.B.1.e. of this final rule.
    Commenters and stakeholders were largely supportive of a case-mix 
adjustment for age when the ESRD PPS was implemented. We noted in our 
CY 2011 ESRD PPS final rule (75 FR 49088) that several commenters 
stated that age is an objective and easily collected variable, 
demonstrably related to cost, and that continuing to collect age data 
would not be burdensome or require systems changes. In addition, a few 
commenters requested that CMS consider an additional adjustment for 
patient frailty and/or advanced age (75 FR 49089). In the CY 2011 ESRD 
PPS final rule, we responded to these comments by noting that we 
included an age adjustment for patients 80 years of age or older, but 
that advanced age and frailty did not result in the identification of 
additional age groups for the application of case-mix adjustments based 
on age. In addition, we noted that the analysis did not identify a 
separate variable for patient frailty, as this would be very difficult 
to quantify.
    As we discuss in the CY 2016 ESRD PPS proposed rule (80 FR 37815), 
the analysis we conducted to determine whether to revise the case-mix 
payment variable of patient age demonstrates the same U-shaped 
relationship between facility costs and patient age as the analysis we 
conducted when the ESRD PPS was implemented, however, the reference 
group has changed to age group 70 to 79, and we note significantly 
higher costs for older patients. For this final rule, we continue to 
believe that the regression analysis performed on CY 2012 through 2013 
Medicare cost reports and claims has appropriately recognized increased 
facility costs when caring for patients 80 years old or older, and that 
this adjustment accounts for increased frailty in the aged. Age may 
serve as a proxy for several characteristics that cannot be easily 
measured and entered directly into the model. For example, younger 
patients may be more costly due to greater likelihood of skipped 
treatments, HIV infection, or drug dependence, while older patients 
might be more expensive due to greater likelihood of cognitive 
impairment or functional/mobility limitations.
    The public comments we received on the proposed age adjustments and 
our responses are presented below.
    Comment: MedPAC commented that through various revisions to the 
model, the empirically-determined lowest-cost reference group shifted 
from ages 45-59 in the CY 2011 ESRD PPS proposed rule, to ages 60 to 69 
in the CY 2011 ESRD PPS final rule, and to 70-79 in the CY 2016 ESRD 
PPS proposed rule. They would expect that the relative cost of dialysis 
treatment across age categories would remain relatively stable over 
time. They expressed concern that such shifts indicate that the 
estimated factors are highly sensitive to the model's specification and 
that the model lacks robustness. They indicated that the two-equation 
approach might contribute to these results.
    Response: As we explained previously, we do not agree with MedPAC. 
In both models using 5 age groups, costs followed a U-shaped pattern 
with age, with highest costs occurring in the 18 to 44 group, the 
second highest costs occurring in the 80+ group, and the lowest costs 
in the three middle groups. The only qualitative changes are that the 
U-shape is now a bit more pronounced (higher multipliers for the 
youngest and oldest group), and among the three middle groups, the 
lowest cost group shifted from 60 to 69 to 70 to 79. Notably, the cost 
difference between the three middle age groups in the original 2006 
through 2008 model was very small, so the shift from one of those 
categories being singled out as the lowest cost (reference) group 
rather than another is not very meaningful. In other words, the middle 
groups were so close to each other in cost in the 2006 through 2008 
model that having a different one of the middle groups being the lowest 
cost group in the 2012 through 2013 data is not surprising and does not 
indicate flaws in the model. Only small changes

[[Page 68985]]

in the data and the relationships between age and cost would be needed 
to cause such a change.
    Comment: Two national dialysis organizations noted that the 
proposed change in the age adjustments is $7.47 per treatment to $19.36 
per treatment, but that they are unable to identify any correlation 
that justifies a 159 percent increase for the age adjustments. They 
stated that the age adjuster randomizes payment, rather than targeting 
payments to patients with specific characteristics associated with 
higher costs. They recommended that we defer the change in the age 
adjustment and retain CY 2015 weights and values. An LDO, in analyzing 
its facility data, cannot validate a direct relationship between 
patient's age and cost of care. They do not believe it is appropriate 
to move forward with what they contend are arbitrary adjustments that 
they believe are not based upon analysis of specific clinical patient 
characteristics.
    Response: As we explained previously, the current CY 2015 age 
values were derived from the same methodology applied to the refinement 
analysis but are based on pre-PPS data. Using updated data confirmed 
that age correlates with differences in resource use and that the age 
adjustments are not arbitrary. Rather, we believe the age adjustments 
reflect differences in health status that are not otherwise reflected 
in the ESRD PPS payment adjustments and support facilities treating 
patients in the youngest and oldest age categories who have higher per 
treatment costs on average. We believe retaining the current age values 
would not be appropriate because we have updated data available for 
analysis that reflects the changes in practice patterns that have 
occurred under the ESRD PPS. Additionally, we continue to believe the 
age adjustments are appropriate and do not believe they randomize 
payment. Rather they target payments primarily to the two highest cost 
categories: ages 18 to 44 and age 80 or older.
    While we are uncertain as to how the commenter calculated an 
increase in the age adjustments of $7.47 per treatment to $19.36 per 
treatment, as we mentioned in the previous section, the payment 
multipliers were derived using an analysis that attached the 
distribution of patient characteristics at the facility-level to the 
cost at the facility-level. For example, for age, we would take the 
percentage of patients in each of the age categories at the facility-
level and attach that to the facilities' average cost. Therefore, the 
payment multipliers represent empirical relationships derived from the 
national ESRD facility data, and target payment for patients in the 
various age groups according to their resource use and cost. Thus, we 
believe the multipliers are appropriate and not arbitrary.
    Comment: An organization of home dialysis patients, a nonprofit 
dialysis organization, and an organization representing small and 
medium dialysis facilities expressed concern that the 11 percent age 
adjuster increase of $24.58 for patients 80 years and older may have 
the unintended effect of reducing the use of medical management of 
their kidney disease instead of dialysis. They are concerned that there 
will be an incentive to dialyze elderly people and not fully explore 
all options for treating their kidney disease. Commenters also noted 
that medical management of care may be the best option for the end of 
life care. They requested that CMS return the dollars withheld for this 
age category to the base rate to help provide the best care to all 
patients. An organization of nonprofit SDOs agreed and suggested that 
the increased cost of care for this age group may be due to patients 
who are not good candidates for dialysis who would benefit from medical 
management instead of dialysis to treat their kidney disease.
    Response: We believe it vitally important for all chronic kidney 
disease patients to receive kidney disease education services as 
described in section 1861(ggg)(1) of the Act to discuss all treatment 
options, including medical management of their kidney disease with 
their nephrologist so that the patients have complete information about 
their treatment options. Decisions about whether to continue medical 
management of patients' kidney disease or to begin dialysis once the 
patients' condition has reached Stage V (ESRD) are made by the patient 
and their nephrologist. We do not believe that the best approach to 
accomplish the goal of ensuring appropriate management of elderly 
patients' kidney disease is to remove the age adjustments and to 
increase the base payment paid for all dialysis treatments. We are 
concerned that this approach, which would not recognize the full cost 
of caring for patients 80 years and older, could create access problems 
for those patients for whom dialysis is the best treatment option.
    Comment: A national kidney association commented that their health 
professional membership, which includes nephrologists, nurses, advanced 
practitioners, dietitians, and social workers, have stated that while 
age is not always a predictor of costs, it is a legitimate proxy for 
higher costs associated with older patients. They pointed out that 
older patients are more susceptible to falls, requiring greater 
facility staff assistance to obtain their weights and assist them in 
and out of the dialysis chair. Commenters explained that elderly 
patients are also more likely to have a catheter, which increases the 
risk of bloodstream infections requiring antibiotics, blood cultures, 
and more frequent hospitalizations. They also tend to have more 
comorbid conditions, which could require frequent adjustments in the 
dialysis prescription and closer surveillance of the multitude of 
medication they may be on. Given this, it does not make sense that the 
age group of 70 to 79 would not have a payment adjustment while the 60 
to 69 year old population would have a 7 percent payment adjustment.
    Another organization commented that there should be an adjustment 
for patients aged 70 to 79 and that failure to adjust payments for 
patients in this age group implies that these patients require fewer 
services than those in the other age groups. They recommended that CMS 
provide more information about this counter-intuitive effect. An SDO 
questioned what has changed since implementation of the ESRD PPS in 
2011 that would have resulted in such a shift in the reference group. 
An organization of nonprofit SDOs agreed and indicated that, as MedPAC 
suggests, it may be the result of the two-equation regression 
methodology or other factors in the model. The organization stated that 
the better course at this time is to leave the reference group 
unchanged pending further analysis and urged CMS to do so. Two nursing 
associations urged CMS to maintain the current reference group (ages 60 
to 69) because in their experience, patients in the 70 to 79 age group 
often have greater needs and suffer more complications than younger 
adults.
    Response: We agree with the comment that age is a legitimate proxy 
for higher costs associated with older patients that are not otherwise 
reflected in the model. As stated previously, we established a 
reference group that reflects the age group with the lowest cost per 
treatment and compared the cost per treatment for all other age groups 
to the reference group so that all the other adjustments for age would 
be increases in payment. In the regression analysis, we determined that 
the age group 70 to 79 is the group with the lowest cost per treatment 
on average, despite the fact that some patients in the group may have 
greater needs and high cost per treatment. With regard to the question 
about what changed since implementation of the ESRD PPS that would 
explain the shift in the age

[[Page 68986]]

reference group, we reiterate that, over time, there has been limited 
cost variation across the middle age categories and the change in the 
reference group does not indicate a flaw in the methodology.
    Comment: An MDO questioned the payment multipliers for age for the 
outlier adjustment, which they believe were different from the payment 
multipliers when the original bundle was finalized. They indicated the 
multipliers were not listed in the CY 2016 ESRD PPS proposed rule, 
asked if the multipliers changed due to the regression, asked when the 
multipliers would be available, and questioned whether they would have 
an opportunity to comment before they are finalized.
    Response: We believe that the commenter is referring to the 
coefficients that are derived from the separately billable model, which 
are used in determining outlier eligibility. Specifically, as discussed 
in the Medicare Benefit Policy Manual (Pub. 100-02, Chapter 11, section 
60.D), the outlier payment computations use the case-mix adjusters for 
separately billable services to predict the per treatment MAP amount 
for outlier services. We provided the separately billable multipliers 
in the CY 2016 ESRD PPS proposed rule in Table 4 titled, CY 2016 
PROPOSED ADULT CASE-MIX AND FACILITY-LEVEL PAYMENT ADJUSTMENTS (80 FR 
37823) for the adults and in Table 5, titled, CY 2016 PROPOSED 
PEDIATRIC CASE-MIX PAYMENT ADJUSTMENTS (80 FR 37824) for pediatric 
patients. These multipliers have not changed and are reprinted in this 
final rule in Table 4 titled, CY 2016 ADULT CASE-MIX AND FACILITY-LEVEL 
PAYMENT ADJUSTMENTS for the adults and in Table 5 titled, CY 2016 
PEDIATRIC CASE-MIX PAYMENT ADJUSTMENTS. The outlier policy is described 
in detail in section II.B.2.c. of this final rule.
    After consideration of the comments, effective January 1, 2016, we 
are adopting the proposed age payment multipliers provided in Table 1 
of the CY ESRD PPS proposed rule (80 FR 37815) and reproduced below in 
Table 1.

           Table 1--CY 2016 Final Payment Multipliers for age
------------------------------------------------------------------------
                                                           Final payment
                           Age                              multipliers
------------------------------------------------------------------------
18-44...................................................           1.257
45-59...................................................           1.068
60-69...................................................           1.070
70-79...................................................           1.000
80 +....................................................           1.109
------------------------------------------------------------------------

2) Body Surface Area (BSA) and Body Mass Index (BMI)
    Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS 
include a payment adjustment based on case-mix that may take into 
account patient weight, body mass index (BMI), and other appropriate 
factors. Through the use of claims data, we evaluated the patient 
characteristics of height and weight and established two measurements 
for body size when the ESRD PPS was implemented: Body surface area 
(BSA) and BMI. In our analysis for the CY 2011 ESRD PPS final rule, we 
found that the BSA of larger patients and low BMI (< 18.5 kg/m\2\) for 
malnourished patients were independent variables in the regression 
analysis that predicted variations in payments for renal dialysis 
services. As such, we finalized two separate payment adjustments for 
body size in our CY 2011 ESRD PPS final rule (75 FR 49089 through 
49090).
    Commenters were supportive of BSA and BMI payment adjustments in 
2011, noting that body size was a payment adjustment under the 
composite rate payment system, and that ESRD facilities would be able 
to capture this information on the claim form without any additional 
burden. A few commenters expressed concern regarding pre- versus post-
dialysis weight. In response to these comments we clarified that a 
patient's weight should be taken after the last dialysis treatment of 
the month, as directed in the Medicare Claims Processing Manual, Pub. 
100-04, Chapter 8, Section 50.3.
    For the CY 2016 ESRD PPS proposed rule, we analyzed both BSA and 
low BMI (<18.5kg/m\2\) individually as part of the regression analysis 
and found that both body size measures are strong predictors of 
variation in payments for ESRD patients.
Body Surface Area (BSA)
    Since CY 2005, Medicare payment for renal dialysis services has 
included a payment adjustment for BSA. The current payment adjustment 
under the ESRD PPS is l.020, which implies a 2.0 percent elevated cost 
for every 0.1 m\2\ increase in BSA compared to the national average BSA 
of ESRD patients. The increased costs suggest that there are longer 
treatment times and additional resources for larger patients. Including 
the BSA variable improved the model's ability to predict ESRD facility 
costs compared to using BMI or weight alone.
    In the CY 2011 ESRD PPS proposed rule (74 FR 49951), we discussed 
how we adopted the DuBois and DuBois formula to establish an ESRD 
patient's BSA because this formula was the most widely known and 
accepted. That is, a patient's BSA equals their Weight 
0.425* Height 0.725* 0.007184, where weight is in 
kilograms and height is in centimeters. (DuBois D. and DuBois, EF. ``A 
Formula to Estimate the Approximate Surface Area if Height and Weight 
be Known'': Arch. Int. Med. 1916 17:863-71.) Once the patient's BSA is 
determined, the payment methodology compares the patient's BSA with the 
national average BSA of ESRD beneficiaries and computes the patient-
level payment adjustment using the average cost increase for changes in 
BSA (per 0.1 m \2\).
    In developing the BSA payment adjustment under the ESRD PPS, we 
explored several options for setting the reference values for the BSA 
(74 FR 49951). We examined the distributions for both the midpoint of 
the BSA and the count of dialysis patients by age, body surface and low 
BMI. Based on that analysis, in our CY 2012 ESRD PPS final rule (76 FR 
70244) we set the reference point at a BSA of 1.87 which is the 
Medicare ESRD patient national average BSA. Setting the reference point 
at the average BSA reflects the relationship of a specific patient's 
BSA to the average BSA of all ESRD patients. As a result, some payment 
adjusters would be greater than 1.0 and some would be less than 1.0. In 
this way, we were able to minimize the magnitude of the budget-
neutrality offset to the ESRD PPS base rate. (For more information on 
this discussion, we refer readers to the CY 2005 Physician Fee Schedule 
final rule (69 FR 66239, 66328 through 66329) and the CY 2011 ESRD PPS 
proposed rule (74 FR 49951)). The BSA factor is defined as an exponent 
equal to the value of the patient's BSA minus the reference BSA of 1.87 
divided by 0.1.
    In the CY 2012 ESRD PPS final rule (76 FR 70245) and the CY 2013 
ESRD PPS proposed rule (77 FR 40957), we stated our intent to review 
claims data from CY 2012 and every 5 years thereafter to determine if 
any adjustment to the national average BSA of Medicare ESRD 
beneficiaries is required. Although the CY 2012 claims showed an 
increase in the national average BSA, we did not implement an update in 
the CY 2013 ESRD PPS rule. Rather, in light of the requirement in

[[Page 68987]]

section 632(c) of ATRA that we analyze and make appropriate revisions 
to the ESRD PPS case-mix adjustments for CY 2016, we decided to 
incorporate the new national average BSA into the overall refinement of 
our payment adjustments that we are making as a result of that 
requirement.
    In accordance with our commitment to update the Medicare national 
average BSA and because of the statutory requirement to analyze and 
make appropriate revisions to the case-mix payment adjustments for CY 
2016, in the CY 2016 ESRD PPS proposed rule (80 FR 37816) we proposed 
to update the BSA Medicare national average from 1.87 m\2\ to 1.90 m\2\ 
for CY 2016 to reflect the new Medicare ESRD national average BSA. The 
average is based on an analysis of the patient height and weight 
information reported on ESRD facility claims in CY 2013. We note that 
this average is an increase of 1.6 percent over the Medicare ESRD 
national average BSA of 1.87 m\2\ used to compute the payment 
adjustment when the ESRD PPS was implemented in CY 2011.
    Based upon the regression analysis for CY 2016 using the DuBois and 
DuBois formula for computing a patient's BSA and the updated Medicare 
national average BSA of 1.90 m\2\, we proposed that the BSA payment 
adjustment would be 1.032 and the BSA payment adjustment would be based 
on the following formula:

1.032((Patient\'\s BSA -1.90)/0.1).
Low-Body Mass Index (BMI)
    The basic case-mix adjusted composite rate payment system in effect 
from CYs 2005 through 2010 and the current ESRD PPS include a payment 
adjustment for low BMI. In order to be consistent with other Department 
of Health and Human Services components (that is, Centers for Disease 
Control and Prevention and National Institutes for Health), we defined 
low BMI as less than 18.5 kg/m\2\. The regression indicated that 
patients who are underweight consume more resources than other 
patients. The current payment adjustment for low BMI under the ESRD PPS 
is 1.025.
    Based on the regression analysis conducted for the proposed rule, 
we continue to find low BMI to be a strong predictor of cost variation 
among ESRD patients. We proposed a payment adjustment of 1.017, 
reflective of the regression analysis based upon CY 2012 and 2013 
Medicare cost report and claims data.
    The comments we received and our responses are presented below.
    Comment: MedPAC pointed out that in considering both body size 
adjustments, for patients with low BMI, the ESRD PPS applies an 
adjustment factor that increases payment by 2.5 percent; however, those 
patients tend to have BSA values less than the average, for which the 
ESRD applies an adjustment factor that decreases payment. They 
expressed concern that CMS has not stated exactly how each variable is 
incorporated in the regression models and that the proposed adjustment 
factors do not accurately account for the inherent correlation between 
patient BMI and BSA. They point out that the BSA is empirically 
estimated only in the facility-based regression, while the low-BMI 
adjustment factor is estimated only in the patient-based regression. 
MedPAC contends that this specification does not address the joint 
effect of patient BSA and BMI in each regression.
    MedPAC conducted a regression in which they defined the dependent 
variable as the average cost per treatment (for services included in 
the PPS payment bundle), included the same independent and control 
variables as the CMS model and specified a set of BSA variables to take 
into account the distribution of BSA values at each facility. This 
approach allowed them to assess the joint effect of low BMI and BSA. 
With this specification, they found that the low BMI factor is 
statistically significant and increases payment by enough to offset 
reductions in payment resulting from low BSA. To account for this 
correlation, MedPAC recommended that CMS refine the low BMI and BSA 
adjustment to reflect the factors' joint effect on facility costs. One 
method they suggested could be to continue applying the same adjustment 
for BSA when patient BMI values are 18.5 kg/m\2\ or greater, but for 
BMI values less than 18.5 kg/m\2\, apply a single adjustment factor 
that takes into account the joint effect of patient BSA and low BMI. 
Their analysis suggests that a joint BSA and low BMI adjustment factor 
would be about 1.02 to 1.03.
    Response: As we explained in the previous section, the BSA and low-
BMI variables represent different characteristics that have individual 
effects on cost. In particular, BSA (which is a continuous variable 
that increases as the patient's body size rises) is empirically 
associated with higher composite rate costs. The low BMI categorical 
variable identifies particularly frail patients, that is, those with 
BMI less than 18.5 kg/m\2\ and is empirically associated with higher 
separately billable costs because these very frail patients require 
more expensive drug therapies. Because of the continued importance of 
both body size adjustments to account for the costs associated with 
overweight and underweight patients, we appreciate the modeling that 
MedPAC conducted, which retains both body size adjusters.
    The proposed example from MedPAC is not substantially different 
from the current model. The payment multipliers take account the joint 
effect of BSA and BMI: One effect for those with low BMI (BSA effect * 
1.017) and one effect for those without a low BMI (BSA effect). Their 
proposal is essentially two continuous effects which start at differing 
cost averages (as indicated by the presence or absence of low BMI which 
moves the average costs up by 1.017). The ultimate effect is very 
similar to our model. We will, however, consider this approach for 
future refinement.
    Comment: National dialysis organizations and two nursing 
associations also pointed out that a patient with a low BMI frequently 
has a negative BSA, eliminating the benefit of the low BMI adjustment 
for that patient. A national association of kidney patients and a 
nonprofit dialysis organization agreed and referred to an analysis that 
concluded that the BSA adjuster is canceling out the BMI adjuster in 
most cases for underweight patients. The commenters' healthcare 
professionals attest that both underweight and overweight patients 
require additional staff time devoted to their care and overweight 
patients may require the facility to provide additional equipment. To 
ensure that the patient level adjusters are achieving the intended 
policy purpose of protecting these seemingly more costly patients from 
adverse selection, the commenters recommend maintaining the current 
(2015) age adjuster, eliminating the BSA adjuster, and applying a BMI 
adjuster only for underweight patients, adding a BMI adjuster for 
overweight patients (using the National Institutes of Health 
definition) for 2016, and working with the kidney community to develop 
new data sources for patient characteristics from which appropriate age 
and weight adjusters could be calculated in future years.
    Response: We agree with the commenters that both underweight and 
overweight patients require additional resources devoted to their care. 
Also, the commenters are correct that the BSA adjustment would be 
negative for frail patients and the low-BMI adjustment counteracts this 
effect. While BSA is negatively correlated with low BMI, the 
correlation is not perfect. The low BMI adjustment does not just 
counteract the negative BSA adjustment. Rather, where a patient's BMI 
is under the threshold

[[Page 68988]]

of 18.5 kg/m\2\, the combined effect of the low BMI and the BSA 
adjustment is an increase in payment for frail patients. We discuss the 
interaction between the BSA and low BMI variable in section II.B.1.
    The suggestion that we retain elements from the current model, such 
as the current (2015) age adjusters, and adopt new measures based on 
the updated regression using ESRD PPS data, would not be appropriate. 
We must either retain the current case-mix adjustments in their 
entirety or adopt the proposed adjustment multipliers derived from the 
updated regression analysis; adopting a mixture of adjustments from 
different regression analyses would remove the empirical basis of the 
payment system. We are unable to consider a new BMI-based adjustor for 
overweight patients for implementation in CY 2016. We would first need 
to consider the various options suggested, decide on a methodology, run 
the regression analysis using the new adjustor, and obtain public 
comments. We will consider this approach for future refinement of the 
ESRD PPS.
    Comment: A large dialysis organization suggested that CMS eliminate 
the BSA adjuster for 2016 and beyond. They recommend that CMS retain 
the BMI adjuster, but only with modifications so that it addresses both 
underweight and overweight patients. This could be achieved by 
establishing a threshold for overweight patients and using the existing 
dollars from the BSA adjuster pool to fund this new category. 
Alternatively, the organization provides a proposal on how to possibly 
combine the two adjusters into one based on BMI and ensure differential 
reimbursement for overweight and underweight patients. The alternative 
BMI adjuster would be based on the number of cubed deviations 
(deviation equal to two points in BMI) from the average dialysis 
patient BMI (~28.9 kg/m\2\). The LDO's proposed formula for a patient's 
BMI adjuster would be as follows:

BMI adjustor = 1.00007 ([Patient BMI-Average BMI]/2) 3
    Using this method, the LDO stated that the new BMI adjuster would 
maintain budget neutrality and, most importantly from its point of 
view, align more closely with the policy objectives than using the 
proposed threshold methodology. The commenter indicated that applying a 
BMI threshold is somewhat arbitrary and would result in drastically 
different reimbursement for patients who have very similar BMI (that 
is, a patient with BMI of 25 kg/m\2\ would receive incremental 
reimbursement but a patient with BMI of 24.9 kg/m\2\ would not). The 
commenter noted that presumably, costs and reimbursement should be 
quite similar for patients with numerically close BMI scores.
    Response: We selected BSA and low BMI because they improve the 
model's ability to predict costs compared to using BMI or weight alone. 
We provided the BSA adjustment as a proxy for time on the dialysis 
machine and additional staff or supply resources for overweight 
patients. As noted in the previous response, we are unable to implement 
a high-BMI adjustment in CY 2016. With regard to the suggestion that we 
fund this new BMI-based adjustment and achieve budget neutrality by 
using the payments currently paid through the BSA adjustment, we would 
instead need to estimate a regression model with the new specification 
and determine the budget-neutrality factor needed to fund the adjuster.
    In the current model, the BSA adjustment is unique as it is 
standardized to the mean, and therefore does not contribute to the 
overall budget-neutrality factor (that is, the multiplier is 1.0 on 
average, with larger patients adjusted upward and smaller patients 
adjusted downward. For all other case-mix adjusters, the value of 1.0 
is assigned to the lowest cost group, and all adjustments are upward, 
which is what necessitates the budget-neutrality factor. Alternative 
approaches to accounting for body size might be explored for future 
payment years. If such an alternative retained the property of the BSA 
adjustment in which the average multiplier is standardized to 1.0, it 
would not require a budget-neutrality adjustment.
    We do not understand the example provided to illustrate the 
commenter's view that applying a BMI threshold is somewhat arbitrary 
and would result in drastically different reimbursement for patients 
who have very similar BMI. In the example, a patient with a BMI of 24.9 
kg/m\2\ is compared to a patient with a BMI of 25 kg/m\2\. As the BMI 
adjuster is not applied unless the patient has a BMI of 18.5 kg/m\2\, 
we note that neither of the patients in the example would receive the 
low-BMI adjustment.
    Comment: An organization of nonprofit SDOs asked CMS to address the 
potential interaction of the two related but separate adjustment 
factors addressing body size. They suggested that we create a floor 
below which a negative BSA adjustment would not apply to avoid 
interaction with the BMI adjustment. Specifically, they recommended 
that the BSA adjustor not be applied to a patient with a BMI of less 
than 18.5 kg/m.
    Response: The regression model assumes that the low-BMI adjuster is 
tempered by the BSA adjustment. As a result, if we were to adopt the 
commenter's suggestion to remove the interaction between the two 
variables by creating a floor for the BSA at the low-BMI level, the 
proposed low-BMI adjuster would be too high and would need to be 
recalculated.
    Comment: An MDO noted that the payment multiplier for low-BMI 
dropped from 1.025 to 1.017 and asked why we feel the adjustment 
warrants a decrease and what the regression showed that prompted us to 
propose this change. They pointed out that patients with a low BMI need 
more care, so they should continue to receive the higher adjustment 
amount.
    Response: The updated regression analysis is based on ESRD PPS data 
and reflects reduced utilization of ESAs and other renal dialysis 
service drugs, biologicals, and laboratory testing. The decrease in 
separately billable services resulted in a decrease in the weight 
applied to the separately billable multipliers in the calculation of 
the payment multipliers. The actual multiplier for low BMI rose 
slightly from 1.078 in the analysis for CY 2011 to 1.090 in the 
analysis for the CY 2016. Therefore, the decline in the overall payment 
multiplier for low BMI noted by the commenter arose entirely from the 
lower overall weight attached to SB services given their substantial 
decline following the implementation of the expanded bundled payment 
system.
    Comment: A professional association requested that CMS clearly 
define the methodology for calculating BMI and BSA. For example, for PD 
patients, they asked whether the weight measured when the patient has 
an empty peritoneal cavity or a full peritoneal cavity. The association 
notes this is particularly relevant for those patients who have high 
volume dwells at all times, as the full volume could theoretically be 
subtracted from the weight to derive a value that more closely 
approximates body weight. Similarly, for hemodialysis, the association 
requests that CMS define when weight is assessed in regard to dialysis 
schedule.
    Response: The Medicare Claims Processing Manual (Pub. 100-4, 
Chapter 8, section 50.3) states that the weight of the patient should 
be measured after the last dialysis session of the month and is 
reported in kilograms. Additionally, the Medicare Benefit Policy Manual 
(Pub. 100-02, Chapter 11, section 60.A.3) states that although height 
and weight

[[Page 68989]]

are taken at intervals throughout any given month of dialysis 
treatment, the measurements for the purpose of payment must be taken as 
follows: The dry weight of the patient is measured and recorded in 
kilograms immediately following the last dialysis session of the month. 
For PD patients, dry weight occurs when the patient has an empty 
peritoneal cavity, which can be obtained by subtracting the remaining 
volume from the patient's weight. We will consider the commenter's 
suggestion in future revisions to those manuals.
    After consideration of the public comments, effective January 1, 
2016, we are adopting the proposed payment multipliers for the BSA 
(1.032) and low-BMI (1.017) payment adjustments which are included in 
Table 4 of this final rule. We are also updating the average Medicare 
ESRD patient national average weight used in the BSA formula to 1.90 
m\2\.
(3) Comorbidities
    Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS 
include a payment adjustment based on case-mix that may take into 
account patient comorbidities. In our CY 2011 ESRD PPS proposed and 
final rules (74 FR 49952 through 49961 and 75 FR 49094 through 49108, 
respectively), we described the proposed and finalized comorbidity 
payment adjustors under the ESRD PPS. Our analysis found that certain 
comorbidity categories are predictors of variation in costs for ESRD 
patients and, as such, we proposed the following comorbidity categories 
as payment adjustors: Cardiac arrest; pericarditis; alcohol or drug 
dependence; positive HIV status or AIDS; gastrointestinal tract 
bleeding; cancer (excluding non-melanoma skin cancer); septicemia/
shock; bacterial pneumonia and other pneumonias/opportunistic 
infections; monoclonal gammopathy; myelodysplastic syndrome; hereditary 
hemolytic or sickle cell anemias; and hepatitis B (74 FR 49954).
    While all of the proposed comorbidity categories demonstrated a 
statistically significant relationship with additional cost in the 
payment model, the various issues and concerns raised in the public 
comments regarding the proposed categories caused us to do further 
evaluations. Specifically, we created exclusion criteria that assisted 
in deciding which categories would be recognized for the payment 
adjustment. As discussed in the CY 2011 ESRD PPS final rule (75 FR 
49095) we further evaluated the comorbidity categories with regard to--
(1) inability to create accurate clinical definitions; (2) potential 
for adverse incentives regarding care; and (3) potential for ESRD 
facilities to directly influence the prevalence of the comorbidity 
either by altering dialysis care or diagnostic testing patterns, or 
liberalizing the diagnostic criteria. As a result of this evaluation, 
we finalized 6 comorbid patient conditions eligible for additional 
payment under the ESRD PPS (75 FR 49099 through 49100): pericarditis, 
bacterial pneumonia, gastrointestinal tract bleeding with hemorrhage, 
hereditary hemolytic or sickle cell anemias, myelodysplastic syndrome, 
and monoclonal gammopathy.
    Many stakeholders have criticized the comorbidity payment 
adjustments available under the ESRD PPS. Through industry public 
comments and stakeholder meetings we have become aware of the perceived 
documentation burden placed upon facilities in their effort to obtain 
discharge information from hospitals or other providers or diagnostic 
information from physicians and other practitioners necessary to 
substantiate the comorbidity on the facility claim form. Public 
comments have suggested that we remove all comorbidity payment 
adjustments from the payment system and return any allocated monies to 
the base rate. Other commenters have indicated that patient privacy 
laws have also limited the ability of facilities to obtain the 
diagnosis documentation necessary in order to append the appropriate 
International Classification of Diseases code on the claim form.
Acute Comorbidity Categories
    There are three acute comorbidity categories (pericarditis, 
bacterial pneumonia, and gastrointestinal tract bleeding with 
hemorrhage) finalized in the CY 2011 ESRD PPS final rule (75 FR 49100) 
due to predicted short term increased facility costs when furnishing 
dialysis services. Specifically, the costs were identified with 
increased utilization of ESAs and other services. The payment 
adjustments are applied to the ESRD PPS base rate for 4 months 
following an appropriate diagnosis reported on the facility monthly 
claim. In the CY 2011 ESRD PPS final rule, we finalized payment 
variables as indicated in Table 2 below.

     Table 2--Acute Comorbidity Categories Recognized for a Payment
                      Adjustment Under the ESRD PPS
------------------------------------------------------------------------
                                              CY 2011         CY 2016
       Acute comorbidity category             Payment         Payment
                                            multiplier      multiplier
------------------------------------------------------------------------
Pericarditis............................           1.114           1.040
Bacterial Pneumonia.....................           1.135
Gastrointestinal Tract Bleeding w/                 1.183           1.082
 Hemorrhage.............................
------------------------------------------------------------------------

    In the CY 2016 ESRD PPS proposed rule (80 FR 37817), we explain 
that analysis of CYs 2012 and 2013 claims data for the regression 
analysis continues to demonstrate significant facility resources when 
furnishing dialysis services to ESRD patients with these acute 
comorbidities. However, in accordance with section 632(c) of ATRA and 
in response to stakeholders' public comments and requests for the 
elimination of all of the comorbid payment adjustments, we have 
compared the frequency of how often these conditions were indicated on 
the facility monthly bill type with how often a corroborating claim in 
another Medicare setting is identified in a 4-month look back period. 
We were unable to corroborate the diagnoses of bacterial pneumonia on 
ESRD facility claims with the presence of a diagnosis on claims from 
other Medicare settings, leading us to the conclusion that this 
comorbidity is significantly under-reported by ESRD facilities.
    In order for the bacterial pneumonia comorbid payment adjustment to 
apply, we require three specific sources of documentation: an X-ray, a 
sputum culture, and a provider assessment. Since 2011, facilities have 
expressed concern regarding these documentation requirements. 
Specifically, facilities cite a documentation burden in that they are 
unable to obtain hospital or other discharge information for the 
patients in their care, and are therefore unable to submit the 
diagnosis on the claim form necessary to receive a payment adjustment. 
In addition, stakeholders have indicated that our requirements are

[[Page 68990]]

out of step with the assessments used by many physicians and Medicare 
providers to make the diagnosis. For example, many providers will 
diagnose bacterial pneumonia simply by patient assessment and would not 
consider the X-ray or the sputum culture necessary to their diagnosis.
    Because in the opinion of stakeholders, the ESRD PPS comorbidity 
payment adjustments often go unpaid, facilities have encouraged CMS to 
eliminate these adjustments through the authority granted in section 
632(c) of ATRA. However, we find that all of the acute comorbid payment 
adjustors continue to be strong predictors of cost variation among ESRD 
patients based on the updated regression analysis. Accordingly, we 
continue to believe it is appropriate to apply a comorbidity payment 
adjustment for the acute comorbidities of pericarditis and 
gastrointestinal tract bleeding with hemorrhage. However, in 
consideration of stakeholder concerns about the burden associated with 
meeting the documentation requirements for bacterial pneumonia, we 
proposed to eliminate the case-mix payment adjustment for the 
comorbidity category of bacterial pneumonia beginning in CY 2016. Based 
upon the regression analysis of CY 2012 through 2013 Medicare claims 
and cost report data, where comorbidities are measured only on ESRD 
facility claims, the proposed payment adjustment for pericarditis would 
be 1.040 and the adjustment for gastrointestinal tract bleeding with 
hemorrhage would be 1.082.
Chronic Comorbidity Categories
    There are three chronic comorbidity categories (hereditary 
hemolytic and sickle cell anemias, myelodysplastic syndrome, and 
monoclonal gammopathy), which were finalized as payment adjustors in 
the CY 2011 ESRD PPS final rule (75 FR 49100) due to a demonstrated 
prediction of increased facility costs when furnishing dialysis 
services. In addition, these conditions have demonstrated a persistent 
effect on costs over time; that is, once the condition is diagnosed for 
a patient, the condition is likely to persist. For this reason, the 
payment adjustments are paid continuously when an appropriate diagnosis 
code is reported on the facility's monthly claim. In the CY 2011 ESRD 
PPS final rule, we finalized payment variables as indicated in Table 3 
below for chronic comorbidities, effective January 1, 2011.

    Table 3--Chronic Comorbidity Categories Recognized for a Payment
                      Adjustment Under the ESRD PPS
------------------------------------------------------------------------
                                              CY 2011         CY 2016
      Chronic comorbidity category            payment         payment
                                            multiplier      multiplier
------------------------------------------------------------------------
Hereditary Hemolytic or Sickle Cell                1.072           1.192
 Anemias................................
Myelodysplastic Syndrome................           1.099           1.095
Monoclonal Gammopathy...................           1.024
------------------------------------------------------------------------

    In the CY 2016 ESRD PPS proposed rule (80 FR 37818), we explain 
that analysis of CY 2012 through 2013 claims and cost report data for 
the purposes of regression analysis has continued to demonstrate that 
significant facility resources are used when furnishing dialysis 
services to ESRD patients with these chronic comorbidities. However, in 
accordance with section 632(c) of ATRA and in response to stakeholders' 
public comments and requests for the elimination of all of the comorbid 
payment adjustments, we compared the frequency of how often these 
conditions were reported on the facility monthly bills with how often a 
corroborating claim is reported in another Medicare setting in a 12-
month look back period. This analysis demonstrated significant 
differences in the reporting of monoclonal gammopathy by ESRD 
facilities and in other treatment settings.
    In order for the monoclonal gammopathy comorbidity payment 
adjustment to apply, Medicare requires a positive serum test and a bone 
marrow biopsy test. We believe that billing inconsistency may result 
from the variation in diagnostic assessment for the condition. We 
believe that some facilities may report the diagnosis based upon only 
the positive serum test, and forgo the bone marrow biopsy, while other 
facilities may view the bone marrow biopsy as excessive for what is 
often an asymptomatic condition and forgo the payment adjustment 
altogether.
    CMS has historically required the bone marrow biopsy for 
confirmation of a diagnosis of monoclonal gammopathy because often it 
is a laboratory-defined disorder, where the disease has no symptoms but 
where the patient is identified to be at considerable risk for the 
development of multiple myeloma. Because many ESRD patients suffer from 
anemic conditions due to their dialysis, they can test false positive 
for monoclonal gammopathy. We considered modifying our documentation 
policies for requiring the bone marrow biopsy when making the payment 
adjustment. However, we are concerned that we will be unable to confirm 
the diagnosis without a bone marrow test.
    Based on the regression analysis conducted using CY 2012 and 2013 
ESRD PPS claims and cost report data, we find that all of the chronic 
comorbid payment adjustors continue to be strong predictors of cost 
variation among ESRD patients and accordingly, we proposed to continue 
to make a payment adjustment for the chronic comorbid conditions of 
hereditary hemolytic and sickle cell anemias and myelodysplastic 
syndrome. However, in consideration of stakeholders' concerns about the 
excessive burden of meeting the documentation requirements for 
monoclonal gammopathy, due to variation in patient assessment, we 
proposed to eliminate the case-mix payment adjustment for the comorbid 
condition of monoclonal gammopathy beginning in CY 2016. Based upon the 
regression analysis of CY 2012 through 2013 ESRD facility claims and 
cost report data, the updated payment adjustment for hereditary 
hemolytic and sickle cell anemias would be 1.192 and for 
myelodysplastic syndrome the payment adjustment would be 1.095.
    The comments we received and our responses are set forth below:
    Comment: MedPAC expressed support for the proposal to eliminate 
bacterial pneumonia and monoclonal gammopathy as payment adjustments 
under the ESRD PPS. In addition, they recommend that CMS consider 
removing all comorbidity payment adjustments because they may result in 
undue burden on patients required to undergo additional diagnostic 
procedures, are poorly identified on dialysis claims, and reflect only 
differences in the cost of separately

[[Page 68991]]

billable services. They note that to the extent that these conditions 
result in high costs, these costs are addressed through the outlier 
policy.
    Many national dialysis organizations representing small, medium and 
large dialysis organizations, nursing associations, and a professional 
association also supported our proposal to eliminate two of the 
comorbidity category adjustments. Several organizations pointed out 
that comorbidities such as these are not generally diagnosed in the 
ESRD facility or by physicians associated with the facility. Regardless 
of the fact that comorbid conditions may be indicative of higher 
patient ESA utilization and thus higher ESRD treatment costs, the 
commenters claim that the policy rationale of these adjusters is not 
being met. Due to the burdensome requirements related to documentation 
and diagnosis coding requirements needed for clinical comorbidity 
adjustments, dialysis providers are not able to receive this adjustment 
for many patients' comorbidities because of incomplete patient medical 
histories, as well as a lack of availability of specialty and primary 
care health records.
    The national dialysis organizations agreed with MedPAC's assertion 
that the outlier payment policy is sufficient for the purpose of 
reimbursing dialysis providers for treating patients with pericarditis, 
gastrointestinal bleeding, hereditary, hemolytic, or sickle cell 
anemia, and myelodysplastic syndrome. For these reasons, they 
recommended that we eliminate all of the remaining comorbidity 
adjustments and rely upon the outlier policy to fine-tune the payment 
to facilities caring for the small number of beneficiaries who may 
incur higher costs due to comorbidities.
    Several other organizations representing mostly SDOs and 
independent ESRD facilities commented that the frequency of reporting 
of codes for the comorbidity adjustments remains significantly below 
CMS's estimates because dialysis facilities continue to face challenges 
in getting the required documentation in order to report specific 
diagnosis codes and obtain the comorbidity payment adjustments. The 
organization states that there are many dialysis patients who have GI 
bleeding and are even hospitalized multiple times without there ever 
being a confirmed diagnosis by their GI specialist. Yet, the dialysis 
unit bears the burden of the higher costs associated with this 
condition. An MDO commented that a more fair and reasonable change to 
the comorbid condition payment multipliers would be to either change or 
decrease the documentation requirements for bacterial pneumonia and 
monoclonal gammopathy so more providers qualify for the adjustments. 
Another organization of SDOs agreed, noting similar problems with 
obtaining the required documentation for the GI bleeding with 
hemorrhage comorbidity and suggested that CMS exercise its discretion 
to further limit, if not withdraw completely, the comorbidities 
included in the current case-mix adjustments.
    Response: In response to the suggestion that we change or decrease 
the documentation requirements for bacterial pneumonia and monoclonal 
gammopathy rather than remove the comorbidity categories, we believe 
removing these comorbidities is more appropriate. As we stated in the 
CY 2016 ESRD PPS proposed rule (80 FR 37817), in order for the 
bacterial pneumonia comorbid payment adjustment to apply, we require 
three specific sources of documentation: An x-ray, a sputum culture, 
and a provider assessment. Due to the variation in diagnostic 
assessment, we find that the condition is underreported on facility 
claims and that we are unable to confirm a positive diagnosis without 
the additional burden of documenting an X-ray or sputum culture.
    For monoclonal gammopathy, in the CY 2016 ESRD PPS proposed rule 
(80 FR 37818), we stated that CMS has historically required 
documentation of a bone marrow biopsy to confirm a diagnosis of 
monoclonal gammopathy because often it is a laboratory-defined 
disorder, where the disease has no symptoms but where the patient is 
identified to be at considerable risk for the development of multiple 
myeloma. Because many ESRD patients suffer from anemic conditions due 
to their dialysis, they can test false positive for monoclonal 
gammopathy. We considered modifying our documentation policies for 
requiring the bone marrow biopsy when making the payment adjustment. 
However, we are concerned that we will be unable to confirm the 
diagnosis without a bone marrow test. Based on our concern regarding 
the variation in diagnostic testing, we proposed to delete monoclonal 
gammopathy as a payment adjustment. Because of the patient and facility 
burden associated with these conditions, we continue to believe it is 
appropriate to delete bacterial pneumonia and monoclonal gammopathy as 
payment adjustments under the ESRD PPS.
    With regard to the problems organizations described in obtaining 
the documentation needed to report a comorbidity, we did not intend 
that ESRD facilities would actually order additional tests or 
procedures in order to document a comorbidity. Rather, our assumption 
was that the patient's nephrologist or primary care physician would be 
aware if their patient had any of the two chronic conditions and would 
provide the documentation. If there is nothing in the medical record, 
then the facility would be unable to claim a comorbidity adjustment for 
that patient and would have to seek payment through the outlier 
mechanism.
    With regard to the acute comorbidity categories, we do not 
understand how ESRD facilities are unable to obtain confirmatory 
documentation for most ESRD patients with gastrointestinal tract 
bleeding with hemorrhage and pericarditis. Considering the ICD-10-CM 
codes that are available for reporting these conditions under the ESRD 
PPS, we believe in most cases these patients would be evaluated and 
treated in an acute care setting such as an emergency room or hospital 
and, as a result, it should not be burdensome or difficult for ESRD 
facilities to obtain the documentation. We believe that if a patient 
has one of the comorbidities, a physician must have done a clinical 
work up to make the diagnosis. Diagnoses are based on clinical signs 
and symptoms as well as diagnostic tests and these findings are 
included in the medical record.
    Obtaining the medical documentation necessary to obtain payments 
for the comorbidities we proposed to retain should not be complicated 
or burdensome; and is important for care coordination purposes. Once 
the patient signs a medical release form (which could be done while the 
patient is in the dialysis facility) and it is faxed to either the 
hospital or the physician office, the records should be released. In 
situations where the patient's medical record is incomplete so the ESRD 
facility is unable to obtain the documentation needed to report the 
comorbidity diagnosis, we would expect the facility to include the cost 
for all outlier-eligible services on the claim and qualify for an 
outlier payment when the cost exceeds the outlier fixed dollar loss 
threshold. This approach supports access to dialysis for high cost 
patients. We will continue to monitor the extent to which the 
comorbidities are reported for future refinement.
    MedPAC also made a comment regarding the comorbidity payment 
adjustment reflecting only differences in the cost of separately 
billable services. We note that accurate multipliers for uncommon 
conditions could not be derived from the facility-level model. If

[[Page 68992]]

we were to use the facility-level model and link those comorbidities 
with composite rate costs in addition to drugs, we would not have been 
able to detect that with any reasonable level of statistical precision. 
Therefore, we believe that it is appropriate to derive the comorbidity 
payment adjustments from the separately billable model.
    With regard to the comments concerning the comorbidity payment 
adjustment not being paid out as we had anticipated in CY 2011, we note 
that prior to the implementation of the expanded bundle in 2011, 
comorbidities were rarely reported on dialysis claims. Therefore, the 
2011 model predicted the prevalence of comorbidity adjusters using 
Medicare claims from other settings (except for laboratory claims). 
That predicted prevalence was used in the calculation of the case-mix 
adjustment budget-neutrality factor. Actual reporting on dialysis 
claims during the first year of the expanded bundle fell short of the 
levels expected based on diagnoses reported on claims from other care 
settings. It was not known at that time whether such underreporting 
would become persistent or if reporting would rise as providers became 
more familiar with the requirements of the new payment system. Since 
there are now several years of data that have demonstrated continued 
reporting below expected levels, we have come to agree with the comment 
that the comorbidities are less frequently documented on ESRD facility 
claims compared to the reporting on claims in other care settings. 
However, rather than eliminate the comorbidities as several commenters 
suggest, we have revised the predicted prevalence of comorbidity 
adjusters in our calculation of the refinement budget-neutrality 
adjustment factor to be based on actual reporting in the dialysis 
setting. Specifically, the 2016 model refinement is based on 
comorbidities identified for payment on dialysis claims only, that is, 
for this final rule we have reset our assumptions to reflect the actual 
prevalence of the comorbidity adjusters in the ESRD population. The 
budget-neutrality adjustment accounts for the elimination of monoclonal 
gammopathy and bacterial pneumonia as well as the actual prevalence of 
reported comorbidities on dialysis claims.
    We anticipate going forward, the reduction in the base rate to fund 
comorbidity adjusters will be in balance with actual payments made for 
those adjusters. This is demonstrated by comparing the amount of the 
estimate of the direct reduction in the base rate due to the 
comorbidities provided in column 3 of Table 4, which shows the value 
for the CY 2011 model, with that in column 7 of Table 4, which shows 
the value for the CY 2016 model. Specifically, if all other variables 
are held constant, in the CY 2011 model 0.8 percent of the base rate 
was held to fund the comorbidity payment adjustments, whereas in the CY 
2016 model 0.1 percent of the base rate will be held to fund the 
comorbidity payment adjustments.
    We agree with MedPAC and other commenters that in the absence of 
case-mix adjusters for comorbidities, it would be more likely that 
facilities would receive outlier payments. However, this would only 
partially compensate facilities for the higher costs associated with 
the comorbidity. If the costs for these patients are higher but do not 
reach the outlier fixed dollar loss threshold, facilities would not 
receive outlier compensation. Even if the outlier threshold is met, 
facilities would only receive compensation for costs above the 
threshold. Therefore, we believe it is appropriate to retain four of 
the comorbidity payment adjusters in order to ensure that ESRD 
facilities receive additional payment for these costly patients and 
preserve access to care for patients with these conditions.
    Comment: A large health plan requested that we reconsider our 
proposal to delete the comorbidity category of bacterial pneumonia. 
They pointed out that when a patient has bacterial pneumonia, 
additional costs are incurred by ESRD facilities for antibiotic 
treatment, pulmonary destabilization secondary to pneumonia, and tests 
such as X-rays for fluid buildup. The plan encouraged us to provide 
adequate reimbursement for this condition.
    Response: Under the ESRD PPS, ESRD facilities are responsible only 
for furnishing renal dialysis services, which are defined in 42 CFR 
413.171. Payment adjustments are made to ESRD facilities for 
comorbidities to reflect the increased utilization and cost of ESAs and 
other renal dialysis services drugs and laboratory testing furnished to 
patients with these comorbidities. The ESRD facilities are not 
responsible for the costs related to treatment of the comorbidity, such 
as antibiotic treatment and x-rays in the case of bacterial pneumonia, 
but rather only for the cost of the renal dialysis services they are 
required to furnish.
    Comment: An MDO disagreed with the decrease in the payment 
multipliers for pericarditis (from 1.114 to 1.040) and gastrointestinal 
bleeding (from 1.183 to 1.082) and stated that removing an entire 
payment multiplier for a comorbid condition and also decreasing the 
others will be detrimental to providers. They noted that the other 
comorbidity payment multipliers for hereditary hemolytic or sickle cell 
anemia (from 1.072 to 1.192) and mylodysplastic syndrome (from 1.099 to 
1.095) appear to be acceptable.
    Response: The reduction in the payment multipliers for many of the 
adjustments under the ESRD PPS is due to the decrease in utilization of 
renal dialysis service drugs and biologicals, especially ESAs reflected 
in the updated regression analysis. In light of the reduction in 
utilization and facility costs for renal dialysis service drugs and 
biologicals, the new payment multipliers reflect facility cost on 
average and therefore should not be detrimental to ESRD facilities.
    After consideration of public comments, effective January 1, 2016, 
we are adopting the proposed comorbidity category payment multipliers 
provided in Table 2 for the acute comorbidity categories of 
pericarditis and gastrointestinal tract bleeding with hemorrhage and 
Table 3 for the chronic comorbidity categories of hereditary hemolytic 
or sickle cell anemias and myelodysplastic syndrome of the CY 2016 ESRD 
PPS proposed rule (80 FR 37817 and 80 FR 37818, respectively) as final. 
The multipliersare presented below in Table 4. We are also finalizing 
removal of monoclonal gammopathy and bacterial pneumonia from the 
comorbidities eligible for payment adjustments.
(4) Onset of Dialysis
    Section 1881(b)(14)(D)(i) of the Act required the ESRD PPS to 
include a payment adjustment based on case-mix that may take into 
account a patient's length of time on dialysis. For the CY 2011 ESRD 
PPS final rule (75 FR 49090), we analyzed the length of time 
beneficiaries have been receiving dialysis and found that patients who 
are in their first 4 months of dialysis have higher costs and noted 
that there was a drop in the separately billable payment amounts after 
the first 4 months of dialysis. Based upon this analysis, we proposed 
and finalized the definition of onset of dialysis as beginning on the 
first date of reported dialysis on CMS Form 2728 through the first 4 
months a patient is receiving dialysis. We finalized a 1.510 onset of 
dialysis payment adjustment for both home and in-facility patients (75 
FR 49092). In addition, we acknowledged that there may be patients 
whose first 4 months of dialysis occur when they are in the 
coordination of benefits period and not yet eligible for the Medicare 
ESRD benefit. We explained that in these circumstances, no onset of 
dialysis

[[Page 68993]]

adjustment would be made (75 FR 49090).
    Most commenters supported inclusion of an onset of dialysis 
patient-level adjustment and noted that the higher costs for new 
patients are due to the stabilization of the health status of the 
patient and dialysis training. Because the Medicare onset of dialysis 
payment adjustment reflects the costs associated with all of the renal 
dialysis services furnished to a Medicare beneficiary in the first 4 
months of dialysis, additional payment adjustments are not made for 
comorbidities or training during the months in which the onset of 
dialysis payment adjustment is made. We discussed and finalized this 
payment adjustment in the CY 2011 ESRD PPS final rule (75 FR 49092 
through 49094).
    Based on the regression analysis conducted for the refinement, we 
found that the onset of dialysis continues to be a strong predictor of 
cost variation among ESRD patients and proposed an updated payment 
adjustment of 1.327.
    The comments we received and our responses are set forth below:
    Comment: One large health plan expressed concern about the drop in 
the onset of dialysis payment multiplier. They stated that new patients 
require a significant amount of resources as many have been 
hospitalized, and require frequent medication adjustments, higher 
dosing regimens of ESAs and more frequent lab testing. They recommend 
we review the analysis to ensure adequate payment is made for new 
patients. Another organization noted that CMS did not offer a rationale 
for the reduction of the multiplier for onset of dialysis. They are 
concerned that the practical effect of the proposal to lower the 
multiplier would be lower payments for the treatment of patients in 
this critical stage. They requested that we reevaluate this proposal 
and make its policy rationales for any changes available to the 
dialysis community.
    Response: The proposed onset of dialysis payment adjustment was 
derived from a regression analysis of CY 2012 and 2013 claims and cost 
report data and reflects decreased use of renal dialysis service drugs 
and laboratory testing, particularly ESAs. We believe it is important 
for Medicare payment to reflect the changes in practice that have 
occurred with implementation of the bundled payment system in 2011 and 
believe that the proposed revised adjuster value captures the cost of 
the onset of dialysis under the ESRD PPS.
    Comment: A dialysis supply manufacturer was also concerned about 
the reduction in the onset of dialysis payment adjustment and the 
unintended effect it could have on training for home hemodialysis 
(HHD). This is because when an ESRD facility is receiving the onset of 
dialysis adjustment for a patient, training add-on payments are not 
made. Thus, the commenter is concerned that a reduced onset of dialysis 
adjustment factor may lead to less HHD training.
    Response: For HHD, most of the reported training treatments occur 
after the first four months when the onset of dialysis adjustment no 
longer applies; 83 percent of Medicare HHD training treatments occur 
after the first four months (based on 2014 claims). Data in the June 
2014 claims indicates 492 patient months where the patient qualified 
for the onset of dialysis adjustment and was in HHD training. That 
number would equate to approximately 50 to 100 patients in a year and 
represents 0.24 percent of all patients months qualifying for the onset 
of dialysis adjustment (that total is 202,687).
    It appears to be common for patients do in-facility hemodialysis 
first (with the facility receiving the onset of dialysis adjustment), 
and then the patient receives HHD training (with the facility receiving 
the training adjustment). The reasons for this could be legitimate, 
such as a patient not receiving modality education before starting, so 
the decision to do HHD is made after starting in-facility. Sometimes 
patients decide to do HHD before needing dialysis, but when they start, 
they are too uremic to do training, and so a period of in-facility 
hemodialysis to attain stability comes first, and then training 
follows. Less legitimate would be if facilities are focused on the 
payments rather than the patient. Then they simply have the patient do 
in-center HD first, collect the onset adjustment, and then train them 
on HHD. They get both payments. In the scenario where a patient both 
identifies that they want to do HHD, and are well enough to start off 
right away with training, we believe they have had better than average 
pre-ESRD care and/or are healthier than the average patient starting 
HHD, and so may not have the same costs during the four-month onset of 
dialysis period as the average onset patient (for example, starting 
with an AVF, better anemia management, etc).
    After consideration of the public comments, effective January 1, 
2016, we are adopting the proposed payment multiplier of 1.327 for the 
onset of dialysis adjustment. The finalized payment adjustment is in 
Table 4 below.
    In summary, we are finalizing the adult case-mix payment 
adjustments as provided in Table 4 below. In addition, this table also 
reflects the facility-level payment adjustments addressed in the next 
section.

                                         Table 4--CY 2016 Adult Case-Mix and Facility-Level Payment Adjustments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Estimate of                                                     Estimate of
                                                                            the direct                                                      the direct
                                                                           reduction in                                                    reduction in
                        Variable                          EB multipliers   base rate due  CR multipliers  SB multipliers  EB multipliers   base rate due
                                                            for CY2011        to this       for CY2016      for CY2016      for CY2016        to this
                                                                            factor, for                                                     factor, for
                                                                            CY2011  (%)                                                     CY2016  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age:
    18-44...............................................           1.171  ..............           1.308           1.044           1.257  ..............
    45-59...............................................           1.013  ..............           1.084           1.000           1.068
    60-69...............................................           1.000             3.1           1.086           1.005           1.070           8.400
    70-79...............................................           1.011  ..............           1.000           1.000           1.000  ..............
    80+.................................................           1.016  ..............           1.145           0.961           1.109
Body surface area (per 0.1 m\2\)........................           1.020             0.0           1.039           1.000           1.032           0.000
Underweight (BMI <18.5).................................           1.025             0.1           1.000           1.090           1.017           0.058
Time since onset of renal dialysis <4 months............           1.510             2.5           1.307           1.409           1.327           1.307
Facility low volume status..............................           1.189             0.3           1.368           0.955           1.239           0.410
Comorbidities:
    Pericarditis (acute)................................           1.114             0.0           1.000           1.209           1.040           0.005

[[Page 68994]]

 
    Gastro-intestinal tract bleeding (acute)............           1.183             0.2           1.000           1.426           1.082           0.040
    Bacterial pneumonia (acute).........................           1.135             0.3
    Hereditary hemolytic or sickle cell anemia (chronic)           1.072             0.1           1.000           1.999           1.192           0.022
    Myelodysplastic syndrome (chronic)..................           1.099             0.2           1.000           1.494           1.095           0.028
    Monoclonal gammopathy (chronic).....................           1.024             0.0
Rural...................................................  ..............  ..............           1.015           0.978           1.008           0.118
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. Refinement of Facility-Level Adjustments
i. Low-Volume Payment Adjustment
    Section 1881(b)(14)(D)(iii) of the Act requires a payment 
adjustment that reflects the extent to which costs incurred by low-
volume facilities (as defined by the Secretary) in furnishing renal 
dialysis services exceed the costs incurred by other facilities in 
furnishing such services, and for payment for renal dialysis services 
furnished on or after January 1, 2011, and before January 1, 2014, such 
payment adjustment shall not be less than 10 percent. As required by 
this provision, the ESRD PPS provides a facility-level payment 
adjustment to ESRD facilities that meet the definition of a low-volume 
facility. A background discussion on the low-volume payment adjustment 
(LVPA) and a proposal regarding the LVPA eligibility criteria is 
provided below.
    The current amount of the LVPA is 18.9 percent. In the CY 2011 ESRD 
PPS final rule (75 FR 49125), we indicated that this increase to the 
base rate is an appropriate adjustment that will encourage small 
facilities to continue to provide access to care. With regard to the 
magnitude of the payment adjustment for low-volume facilities, we 
stated that it is more appropriate to use the regression-driven 
adjustment rather than the 10 percent minimum adjustment mentioned in 
the statute because it is based on empirical evidence and allows us to 
implement a payment adjustment that is a more accurate depiction of 
higher costs.
    For the CY 2016 ESRD PPS proposed rule (80 FR 37819), we analyzed 
those ESRD facilities that met the definition of a low-volume facility 
as specified in 42 CFR 413.232(b) as part of the updated regression 
analysis. We found that the cost per treatment for these facilities is 
still high compared to other facilities. With regard to the magnitude 
of the payment adjustment for low-volume facilities, we continue to 
believe that it is appropriate to use the regression-driven adjustment 
because it is based on empirical evidence and allows us to implement a 
payment adjustment that is a more accurate depiction of higher costs. 
In the proposed rule, we stated that the regression analysis of CY 2012 
and 2013 low-volume facility claims and cost report data indicated a 
payment multiplier of 1.239 percent. Accordingly, we proposed an 
updated LVPA adjustment factor of 23.9 percent for CY 2016 and future 
years.
ii. CY 2016 Proposals for the Low-Volume Payment Adjustment (LVPA)
(1) Background
    As required by section 1881(b)(14)(D)(iii) of the Act, 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, based 
on the documentation submitted pursuant to 42 CFR 413.232(h): (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 42 CFR 413.232(c), for 
purposes of determining the number of treatments furnished by the ESRD 
facility, the number of treatments considered furnished by the ESRD 
facility equals the aggregate number of treatments furnished by the 
ESRD facility and the 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. Our regulation at 42 CFR 
413.232(d) exempts facilities that were in existence and Medicare-
certified prior to January 1, 2011 from the 25-mile geographic 
proximity criterion, thereby grandfathering them into the LVPA.
    For purposes of determining eligibility for the 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 periods ending in the three 
years preceding the payment year must report costs for 12-consecutive 
months (76 FR 70237).
    In the CY 2015 ESRD PPS final rule (79 FR 66152 through 66153), we 
clarified that 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 of each other. Therefore, 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, to verify the 
number of treatments that were furnished by the individual hospital-
based facility that is seeking the adjustment.
    In the CY 2015 ESRD PPS final rule (79 FR 66153), with regards to 
the cost reporting periods used for eligibility, we clarified that when 
there is a change of

[[Page 68995]]

ownership that does not result in a new Medicare Provider Transaction 
Access Number 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 12-month cost reporting period as 
if there had not been a CHOW.
    In order to receive the LVPA under the ESRD PPS, an ESRD facility 
must submit a written attestation statement to its MAC confirming that 
it meets all of the requirements specified at 42 CFR 413.232 and 
qualifies as a low-volume ESRD facility. 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. In the CY 2015 ESRD PPS final rule (79 FR 66153 
through 66154), we amended Sec.  413.232(f) to accommodate the timing 
of the policy clarifications finalized for that rule. Specifically, we 
extended the deadline for the CY 2015 LVPA attestations until December 
31, 2014 to allow ESRD facilities time to assess their eligibility 
based on the policy clarifications for prior years under the ESRD PPS 
and apply for the LVPA for CY 2015. Further information regarding the 
administration of the LVPA is provided in the Medicare Benefit Policy 
Manual, CMS Pub. 100-02, Chapter 11, section 60.B.1.
2) The United States Government Accountability Office Study on the LVPA
    In the CY 2015 ESRD PPS final rule (79 FR 66151 through 66152), we 
discussed the study that the United States Government Accountability 
Office (the GAO) conducted on the LVPA. We also provided a summary of 
the GAO's main findings and recommendations. We stated that the GAO 
found that many of the facilities eligible for the LVPA were located 
near other facilities, indicating that they may not have been necessary 
to ensure sufficient access to dialysis 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. Lastly, the GAO 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.
    In the conclusion of their study, the GAO provided the 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: (i) 
require Medicare contractors to promptly recoup 2011 LVPA payments that 
were made in error; (ii) investigate any errors that contributed to 
eligible facilities not consistently receiving the 2011 LVPA and ensure 
that such errors are corrected; (iii) 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 (iv) 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.
    As we explained in the CY 2015 ESRD PPS final rule (79 FR 66152), 
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 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 can provide specific expectations.
3) Addressing GAO's Recommendations
    As discussed above, in the CY 2015 ESRD PPS final rule (79 FR 
66152), we made two clarifications of the LVPA eligibility criteria 
that were responsive to stakeholder concerns and GAO's concern that the 
LVPA should effectively target low-volume, high-cost facilities. 
However, we explained that we did not make changes to the adjustment 
factor or significant changes to the eligibility criteria because of 
the interaction of the LVPA with other payment adjustments under the 
ESRD PPS. Instead, we stated that in accordance with section 632(c) of 
ATRA, for CY 2016 we would assess facility-level adjustments and 
address necessary LVPA policy changes when we would use updated data in 
a regression analysis similar to the analysis that is discussed in the 
CY 2011 ESRD PPS final rule (75 FR 49083).
    For CY 2016, because we are refining the ESRD PPS, we reviewed the 
LVPA eligibility criteria and proposed changes that we believe address 
the GAO recommendation to effectively target the LVPA to ESRD 
facilities necessary for ensuring access to care.
4) Elimination of the Grandfathering Provision
    In the CY 2011 ESRD PPS final rule (75 FR 49118 through 49119), we 
expressed concern about potential misuse of the LVPA. Specifically, our 
concern was that the LVPA could incentivize dialysis companies to 
establish small ESRD facilities in close geographic proximity to other 
ESRD facilities in order to obtain the LVPA, thereby leading to 
unnecessary inefficiencies. To address this concern, we finalized that 
for the purposes of determining the number of treatments under the 
definition of a low-volume facility, the number of treatments 
considered furnished by the ESRD facility would be equal to the 
aggregate number of treatments furnished by the ESRD facility and other 
ESRD facilities that are both: (i) Under common ownership with; and 
(ii) 25 road miles or less from the ESRD facility in question. However, 
we finalized the grandfathering of those commonly owned ESRD facilities 
that were certified for Medicare participation on or before December 
31, 2010, thereby exempting them from the geographic proximity 
restriction.
    We established the grandfathering policy in 2011 in an effort to 
support low-volume facilities and avoid disruptions in access to 
essential renal dialysis services while the ESRD PPS was being 
implemented. However, now that the ESRD PPS transition is over and 
facilities have adjusted to the ESRD PPS payments and incentives, we 
believe it is appropriate to eliminate the grandfathering provision. 
Because we are doing a refinement of the payment adjustments under the 
ESRD PPS for CY 2016, the timing is appropriate for eliminating the 
grandfathering policy so that this change can be assessed along

[[Page 68996]]

with other proposed changes to the ESRD PPS resulting from the 
regression analysis.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37820), we proposed 
that for the purposes of determining the number of treatments under the 
definition of a low-volume facility, beginning in CY 2016, the number 
of treatments considered furnished by any ESRD facility regardless of 
when it came into existence and was Medicare certified would be equal 
to the aggregate number of treatments actually furnished by the ESRD 
facility and the number of treatments furnished by other ESRD 
facilities that are both: (i) Under common ownership with; and (ii) 5 
road miles or less from the ESRD facility in question. The proposed 5 
road mile geographic proximity mileage criterion is discussed below. We 
proposed to amend the regulation text by removing paragraph (d) in 42 
CFR 413.232 to reflect that the geographic proximity provision 
described in paragraph (c) and discussed below is applicable to any 
ESRD facility that is Medicare certified to furnish outpatient 
maintenance dialysis. We solicited comment on the proposed change to 
remove the grandfathering provision by deleting paragraph (d) from our 
regulation at 42 CFR 413.232.
5) Geographic Proximity Mileage Criterion
    In GAO's report, they stated that the LVPA did not effectively 
target low-volume facilities that had high costs and appeared necessary 
for ensuring access to care. The GAO stated that nearly 30 percent of 
LVPA-eligible facilities were located within 1 mile of another facility 
in 2011, and about 54 percent were within 5 miles, which indicated to 
them that these facilities might not have been necessary for ensuring 
access to care. Furthermore, the GAO indicated that in many cases, the 
LVPA-eligible facilities were located near high-volume facilities. The 
GAO explained in the report that providers that furnish a low volume of 
services may incur higher costs of care because they cannot achieve the 
economies of scale that are possible for larger providers. They also 
stated that low-volume providers in areas where other care options are 
limited may warrant higher payments because, if Medicare's payment 
methods did not account for these providers' higher cost of care, 
beneficiary access to care could be reduced if these providers were 
unable to continue operating. They further explained that in contrast, 
low-volume providers that are in close proximity to other providers may 
not warrant an adjustment because beneficiaries have other care options 
nearby.
    We agree with the GAO's assertion that it may not be appropriate to 
provide additional payment to an ESRD facility that is located in close 
proximity to another ESRD facility when the facilities are commonly 
owned. The purpose of the LVPA is to recognize high cost, low-volume 
facilities that are unable to achieve the economies of scale that are 
possible for larger providers such as large dialysis organizations 
(LDO) and medium dialysis organizations (MDO). In addition, we note 
that under the current LVPA eligibility criteria, approximately half of 
low-volume facilities are LDO and MDO facilities that have the support 
of their parent companies in controlling their cost of care.
    In the proposed rule (80 FR 37821), we explained that we analyzed 
the ESRD facilities receiving payment under Medicare for furnishing 
renal dialysis services in CY 2013 for purposes of simulating different 
eligibility scenarios for the LVPA. The CY 2013 claims and cost report 
data was the best data available. We stated in the proposed rule that 
the CY 2014 cost reports would be available later in the year. For this 
final rule we still do not have complete cost report data for CY 2014 
and therefore could not update our analysis.
    For the analysis we simulated the MAC's verification process in 
order to determine LVPA eligibility. Our analysis considered the 
treatment counts on cost reporting periods ending in 2010 through 2012, 
the corresponding CY 2013 LVPA eligibility criteria defined at 42 CFR 
413.232, and the location of low-volume facilities to assess the impact 
of various potential geographic proximity criteria. Because we used the 
CY 2013 claims and attestations, our analysis did not match the 
facilities currently receiving the LVPA because we were unable to 
analyze 2014 cost reports of LVPA facilities at that time. However, 
this analysis allowed us to test various geographic proximity mileage 
amounts to determine whether facilities eligible for the LVPA in 2013 
would continue to be eligible for the LVPA as well as allowing us to 
determine the existence of any other ESRD facilities in those areas.
    Initially, we applied the low-volume eligibility criteria (without 
grandfathering) and the current 25 road mile criterion and categorized 
facilities by urban/rural location, type of ownership, and other 
factors, and determined that out of the total of 434 low-volume 
facilities, 38 percent of LVPA facilities would lose low-volume status, 
including 19 percent in rural areas. For those determined to meet the 
LVPA criteria, we also assessed the extent to which there were other 
ESRD facilities (in the same chain or other chain), located within 5 
road miles and 10 road miles from the LVPA facilities. Based on our 
concern that too many rural and independent facilities would lose low-
volume status if we used the 25 road mile geographic proximity 
criterion, we then analyzed 1 road mile, 5 road miles, 10 road miles, 
15 road miles, and 20 road miles in order to determine a mileage 
criterion that protected rural facilities while supporting access to 
renal dialysis services in rural areas. We believe that ESRD facilities 
located in rural areas are necessary for access to care and we would 
not want to limit LVPA eligibility for rural providers.
    Based on this analysis, we proposed to reduce the geographic 
proximity criterion from 25 road miles to 5 road miles because our 
analysis showed that no rural facilities would lose LVPA eligibility 
due to the proposed 5 road mile geographic proximity criterion. This 
policy would discourage ESRD organizations from inefficiently operating 
two ESRD facilities within close proximity of each other. This policy 
would also allow ESRD facilities that are commonly owned to be 
considered individually when they are more than 5 miles from another 
facility that is under common ownership. We proposed to amend the 
regulation text by revising paragraph (c)(2) in 42 CFR 413.232 to 
reflect the change in the mileage for the geographic proximity 
provision. We solicited comments on the proposed change to 42 CFR 
413.232(c)(2). We note that our analysis indicated that approximately 
30 facilities that are part of LDOs and MDOs would lose the LVPA due to 
the 5 mile proximity change and the elimination of grandfathering, 
which caused many facilities to exceed 4000 treatments. For this 
reason, we stated that we considered whether a transition would be 
appropriate and requested public comments.
iii. Geographic Payment Adjustment for ESRD Facilities Located in Rural 
Areas
1) Background
    Section 1881(b)(14)(D)(iv)(III) of the Act provides that the ESRD 
PPS may include such payment adjustments as the Secretary determines 
appropriate, such as a payment adjustment for ESRD facilities located 
in rural areas. Accordingly, in the CY 2011 ESRD PPS proposed rule we 
analyzed rural status as part of the regression analysis used to

[[Page 68997]]

develop the payment adjustments under the ESRD PPS. In the CY 2011 ESRD 
PPS proposed rule (74 FR 49978), we discuss our analysis of rural 
status as part of the regression analysis and explained that to 
decrease distortion among independent variables, rural facilities were 
considered control variables rather than payment variables. We 
indicated that based on our impact analysis, rural facilities would be 
adequately reimbursed under the proposed ESRD PPS. Therefore, we did 
not propose a facility-level adjustment based on rural location and we 
invited public comments on our proposal.
    In the CY 2011 ESRD PPS final rule (75 FR 49125 through 49126), we 
addressed commenters' concerns regarding not having a facility-level 
adjustment based on rural location. Some of the commenters provided an 
explanation of the unique situations that exist for rural areas and the 
associated costs. Specifically, the commenters identified several 
factors that contribute to higher costs including higher recruitment 
costs to secure qualified staff; a limited ability to offset costs 
through economies of scale; and decreased negotiating power in 
contractual arrangements for medications, laboratory services, and 
equipment maintenance. The commenters were concerned about a negative 
impact on beneficiary access to care that may result from insufficient 
payment to cover these costs. In addition, the commenters further noted 
that rural ESRD facilities have lower revenues because they serve a 
smaller volume of patients of which a larger proportion are indigent 
and lack insurance, and a smaller proportion have higher paying private 
insurance.
    In response to the comments discussed above, we indicated that 
according to our impact analysis for the CY 2011 ESRD PPS final rule, 
rural facilities, as a group, were projected to receive less of a 
reduction in payments as a result of implementation of the ESRD PPS 
than urban facilities and many other subgroups of ESRD facilities and, 
therefore, we did not implement a facility-level payment adjustment 
that is based on rural location. However, we stated our intention to 
monitor how rural ESRD facilities fared under the ESRD PPS and consider 
other options if access to renal dialysis services in rural areas is 
compromised under the ESRD PPS.
2) Determining a Facility-Level Payment Adjustment for ESRD Facilities 
Located in Rural Areas Beginning in CY 2016
    Since implementing the ESRD PPS, we have heard from industry 
stakeholders that rural facilities continue to have the unique 
difficulties described above when furnishing renal dialysis services 
that cause low to negative Medicare margins. Because we are committed 
to promoting beneficiary access to renal dialysis services, especially 
in rural areas, we analyzed rural location as a payment variable in the 
regression analysis conducted for the CY 2016 ESRD PPS proposed rule.
    Including rural areas as a payment variable in the regression 
analysis showed that this facility characteristic was a significant 
predictor of higher costs among ESRD facilities and we proposed a 
payment multiplier of 1.008. The adjustment would be applied to the 
ESRD PPS base rate for all ESRD facilities that are located in a rural 
area. In the CY 2011 ESRD PPS final rule (75 FR 49126), we finalized 
the definition of rural areas in 42 CFR 413.231(b)(2) as any area 
outside an urban area. We defined urban area in 42 CFR 413.231(b)(1) as 
a Metropolitan Statistical Area or a Metropolitan division (in the case 
where Metropolitan Statistical Area is divided into Metropolitan 
Divisions). We proposed to add a new section to our regulations at 
Sec.  413.233 to provide that the base rate will be adjusted for 
facilities that are located in rural areas, as defined in Sec.  
413.231(b)(2).
    The rural facility adjustment would also apply in situations where 
a facility is eligible to receive the low-volume payment adjustment. In 
other words, a facility could be eligible to receive both the rural and 
low-volume payment adjustments. Low-volume and rural areas are two 
independent variables in the regression analysis. The low-volume 
variable measures costs facilities incur as a result of furnishing a 
small number of treatments whereas the rural area variable measures the 
costs associated with locality. The regression analysis indicated that 
being in a rural area--regardless of treatments furnished--explains an 
increase in costs for furnishing dialysis compared to urban areas. 
Since low-volume and rural areas are independent variables in the 
regression, we believe that a low-volume facility located in a rural 
area would be eligible for both adjustments. We believe that while the 
magnitude of the payment multiplier is small, rural facilities would 
still benefit from the adjustment. Therefore, we proposed a 1.008 
facility-level payment multiplier under the ESRD PPS for rural areas 
and solicited comment on this proposal.
(3) Further Investigation Into Targeting High-Cost Rural ESRD 
Facilities
    Section 3127 of the Patient Protection and Affordable Care Act of 
2010 (the Affordable Care Act) required that the Medicare Payment 
Advisory Commission (MedPAC) study and report to Congress on: (1) 
Adjustments in payments to providers of services and suppliers that 
furnish items and services in rural areas; (2) access by Medicare 
beneficiaries' to items and services in rural areas; (3) the adequacy 
of payments to providers of services and suppliers that furnish items 
and services in rural areas; and (4) the quality of care furnished in 
rural areas. The report required by section 3127(b) of the Affordable 
Care Act was published in the MedPAC June 2012 Report to Congress: 
Medicare and the Health Care Delivery System (hereinafter referred to 
as June 2012 Report to Congress), which is available at http://www.medpac.gov/documents/reports/jun12_entirereport.pdf. In addition to 
the findings presented on each of the four topics, this report 
presented a set of principles designed to guide expectations and 
policies with respect to rural access, quality, and payments for all 
sectors, which can be used to guide Medicare payment policy. For 
purposes of the proposed rule, we were most interested in the 
principles of payment adequacy and special payments to rural providers.
    In the June 2012 Report to Congress, MedPAC explained that 
providers in rural areas often have a low volume of patients and in 
some cases, this lack of scale increases costs and puts the provider at 
risk of closure. MedPAC stated that to maintain access in these cases, 
Medicare may need to make higher payments to low-volume providers that 
cannot achieve the economies of scale available to urban providers. 
However, they explained that low volume alone is not a sufficient 
measure to assess whether higher payments are warranted and that 
Medicare should not pay higher rates to two competing low-volume 
providers in close proximity. They stated that these payments may deter 
small neighboring providers from consolidating care in one facility, 
which results in poorly targeted payments and can contribute to poorer 
outcomes for the types of care where there is a volume-outcome 
relationship. MedPAC further explained that to target special payments 
when warranted, Medicare should direct these payments to providers that 
are uniquely essential for maintaining access to care in a given 
community. The payments need to be

[[Page 68998]]

structured in a way that encourages efficient delivery of healthcare 
services.
    MedPAC presented three principles guiding special payments that 
will allow beneficiaries' needs to be met efficiently: (1) Payments 
should be targeted toward low-volume isolated providers--that is, 
providers that have low patient volume and are at a distance from other 
providers. Distance is required because supporting two neighboring 
providers who both struggle with low-volume can discourage mergers that 
could lead to lower cost and higher quality care; (2) the magnitude of 
special rural payment adjustments should be empirically justified, that 
is, the payments should increase to the extent that factors beyond the 
providers' control increase their costs; and (3) rural payment 
adjustments should be designed in ways that encourage cost control on 
the part of providers.
    We were interested in the information that MedPAC provided in their 
report regarding services furnished to Medicare beneficiaries in rural 
areas. We believe that the adjustment that we proposed, which we 
arrived at through a regression analysis, is consistent with principle 
two above, which states that the magnitude of special rural payment 
adjustments should be empirically justified. We considered alternatives 
to deriving the adjustment from the regression analysis in an effort to 
increase the value of the adjustment. For example, we could establish a 
larger adjustment independent of the regression and offset it by a 
reduction to the base rate. We also considered analyzing different 
subsets of rural areas and designating those areas as the payment 
variable in our model. Because we were able to determine through the 
regression analysis that rural location is a predictor of cost 
variation among ESRD facilities, we are planning to analyze the 
facilities that are located in rural areas to see if there are subsets 
of rural providers that experience higher costs. We are also planning 
to explore potential policies to target areas that are isolated or 
identify where there is a need for health care services, such as, for 
example, the frontier counties (that is, counties with a population 
density of six or fewer people per square mile) and we would also 
consider the use of Health Professional Shortage Area (HPSA) 
designations managed by the Health Resources and Services 
Administration (HRSA). Information regarding HPSAs can be found on the 
HRSA Web site: http://bhpr.hrsa.gov/shortage/hpsas/designationcriteria/.
    We believe that this type of analysis would be consistent with the 
June 2012 Report to Congress's principle that special payments should 
target the low-volume facilities that are isolated. We solicited 
comments on establishing a larger payment adjustment outside of the 
regression analysis. We noted that such an adjustment would need to be 
offset by a further reduction to the base rate. For example, we could 
compare the average cost per treatment reported on the cost report of 
ESRD facilities located in rural areas with ESRD facilities located in 
urban areas and develop a methodology to derive the magnitude of the 
adjustment. In addition, we solicited comments on targeting subsets of 
rural areas for purposes of using those facilities located in those 
areas for analysis as payment variables in the regression analysis used 
to develop the payment multipliers for the refinement for CY 2016.
    As most of the commenters combined their views on the low-volume 
and rural adjustments, we present these comments and responses followed 
by specific comments and responses on each adjustment.
    Comment: MedPAC expressed concern that neither the low-volume 
adjustment nor the rural adjustment targets facilities that are 
critical to beneficiary access. They recommend a single adjustment that 
targets low-volume isolated providers in place of the two separate 
adjustments we proposed. In addition, MedPAC expressed support for the 
GAO recommendation that we avoid giving facilities an incentive to 
limit services to avoid reaching the low volume treatment threshold 
(the so-called cliff effect). They suggest that a payment approach that 
decreases the payment adjustment as facility volume increases might 
reduce this incentive.
    Several dialysis organizations and a national patient organization 
recommended that we rely upon a two-tiered low-volume adjuster policy 
with the current LVPA (as modified by CMS in the proposed rule) as tier 
1. Rather than adopting a rural adjuster and using the dollars 
allocated for the rural adjuster, CMS could create a second low-volume 
adjustment. The tier-2 adjustment would apply to rural facilities that 
furnish between 4001-6000 treatments per year. Other professional 
associations expressed support for this tiered approach.
    One organization suggested that CMS consider using a tiered LVPA 
that would pay higher for rural facilities that are also low-volume, 
while still applying an adjustment (although of a lesser amount) to 
low-volume facilities that may be in closer proximity to other commonly 
owned dialysis facilities. Since rural status for facilities may be 
associated with higher costs independent of the number of treatments 
they provide, CMS should consider adding a tier of the LVPA that would 
provide a payment adjustment for a higher range of treatments delivered 
for facilities with a rural designation. A simplified example of this 
tiered approach may look like the following:

1. Rural + <4,000 treatments 75 percent of the LVPA adjuster value
2. Rural + 4,001-6,000 treatments 50 percent of the LVPA adjuster value
3. <4,000 treatments 25 percent of the LVPA adjuster value

They noted that the geographic proximity rules may still be necessary 
with this approach, which could serve as an interim solution until such 
a time that CMS is able to conduct further analysis to better identify 
facilities that are geographically isolated.
    Another organization suggested that CMS expand the low-volume 
adjuster to include a second tier for facility volume rather than 
applying a rural adjuster that is less representative of real facility 
costs. Their proposed second tier, medium volume classification would 
include those facilities administering between 4,001 and 7,000 
treatments annually. They indicated that these facilities, in 
aggregate, have lower margins than rural facilities. Combining the 
dollars from the proposed rural adjuster and the increase in the 
current low-volume adjuster would result in a new adjuster of 
approximately 1.025 for all treatments at medium volume facilities. 
They indicate that reimbursement based on volume is superior to 
reimbursement based on geography due to proper alignment with the costs 
of care.
    Response: We appreciate the useful suggestions for refining the 
LVPA from the commenters. However, significant changes to the 
eligibility criteria would need to be proposed to provide the 
opportunity for public input. We believe that the proposed policy 
changes represent improvement in the targeting of the payment 
adjustment. We will certainly consider these suggestions for future 
refinement as our analyses of low-volume and rural ESRD facilities 
continue.
    Comment: An LDO organization commented that, in their experience, 
the primary challenge facing rural facilities is access to more 
patients and that most LVPA facilities are rural. However, rural 
facilities with a high volume of patients may be financially viable. In 
their view, rural and low-volume are not necessarily independent 
variables.

[[Page 68999]]

Another LDO commented that the proposed rural adjustment is 
inappropriate because it would be applied to all facilities at the same 
rate regardless of need. In their experience operating numerous rural 
facilities, they note that size is the driving factor in total facility 
cost rather than geographic location of the facility. Their analysis 
showed that high-volume rural facilities performed similarly to urban 
facilities with comparable data.
    Response: As we explained above, low volume and rural areas are two 
independent variables in the regression analysis. The low-volume 
variable measures costs facilities incur as a result of furnishing a 
small number of treatments whereas the rural area variable measures the 
costs associated with locality. Consistent with the comment from the 
LDO, CMS' analysis found that low volume is associated with higher cost 
for both urban and rural facilities. CMS analysis also found that being 
in a rural area, regardless of the number of treatments furnished, 
explains an increase in costs for furnishing dialysis compared to urban 
areas. With regard to the commenter's impression that LVPA facilities 
are mostly rural, we note that in our analysis of CY 2014 claims data 
for the 419 facilities receiving the LVPA, the distribution is 227 
urban and 192 rural.
    Comment: An organization representing small and medium dialysis 
facilities and a large health plan expressed support for the update to 
the LVPA adjustment and appreciated our efforts to address the 
inherently high cost of low volume and rural facilities. They noted 
that while some facilities would lose the adjustment under the proposed 
changes, many of the facilities gaining the adjustment are independent, 
hospital-based, or part of a small dialysis organization. They believe 
this is an appropriate targeting of the LVPA and agree with the 
proposed changes.
    A patient group also expressed support for the proposed changes to 
the LVPA and the proposed rural adjustment because they believe these 
adjustments will maintain payment levels at roughly their current 
levels. They also described the current lack of access to dialysis 
services in International Falls, Minnesota. While they indicate that 
resources have been found to fund startup costs, the commenter was 
disheartened that the Medicare payment apparently does not suffice to 
attract a for-profit LDO, as those organizations have greater access to 
capital and economy of scale in purchasing and other overhead costs. 
The commenters stated that CMS must remain vigilant to ensure that 
Medicare payments are sufficient to support the nationwide kidney care 
infrastructure that Congress intended Medicare coverage of ESRD to 
foster.
    An organization representing small and medium dialysis facilities 
applauds CMS for proposing a rural adjustment. Although they agree with 
MedPAC that low-volume ESRD facilities that are necessary to maintain 
beneficiary access to care should receive enhanced payment, they 
disagree with MedPAC's recommendation to remove the rural adjustment. 
They noted several issues that create special circumstances for rural 
facilities, including increased salary and benefit costs and the costs 
associated with water quality issues and serving the needs of patients 
in remote areas.
    Response: We thank these commenters for their support of the LVPA 
changes and the rural adjustment. With regard to the point that CMS 
must ensure that Medicare payments are sufficient to support the 
nationwide kidney care infrastructure, we believe the ESRD PPS is based 
on a sound and stable methodology, that the base rate covers dialysis 
treatment costs on average and that the outlier policy provides 
additional payment and ensures access for high-cost patients.
    Comment: An organization representing small and medium dialysis 
facilities recommended that we make the rural adjustment an add-on 
payment rather than a multiplier of the base rate to allow rural 
facilities to realize the true value of the adjuster, and not subject 
them to a lower adjustment due to the effects of the rural wage index 
on the base rate.
    Response: The model we have developed and implemented for the ESRD 
PPS in 2011 is multiplicative and as a result, an additive adjuster 
cannot be directly estimated from the model. That is, the regression 
was set up to produce multiplicative factors and as a result cannot 
produce an additive adjustment for one variable. However, if the extra 
resources required by patients receiving a case-mix adjustment 
partially involve labor, it is not clear why a multiplicative 
adjustment would not be appropriate because the added labor effort 
incurred by facilities in lower wage areas would also be paid at the 
lower wage. The rationale for the additive training adjuster in 2011 
was that training treatments are such a small share of the total that a 
reliable adjuster could not be estimated from the model and, therefore, 
external assumptions about training costs were used to derive the 
additive adjustment. However, the rural multiplier can and should be 
estimated from the model, and serves to account for factors increasing 
costs in rural areas, after accounting for the wage index.
    Comment: An organization urged CMS to establish a process for 
facilities to find resolution when their MACs have incorrect data. For 
example, some facilities may be eligible for the rural adjuster, but 
may not be receiving it due to incorrect data at the MAC. In these 
circumstances, the organization believes facilities should be able to 
appeal directly to CMS to ensure the MAC's data is correct and the 
facility is receiving the payment it is entitled to.
    Response: We agree facilities should receive the low volume and the 
rural adjustments if they are eligible. The commenter did not provide 
specific examples of the types of data issues they were experiencing, 
however, we note that in order to receive the LVPA, MACs verify that 
the facilities' total treatments reported on their cost reports are 
under 4,000 and that the other LVPA criteria are met. Rural status is 
more straightforward to establish, but in both cases the MAC has to 
enter correct information in the Outpatient Provider Specific File 
(OPSF) so that the payment adjustments are applied to the claim. For 
this reason, we are planning to send out sub-regulatory guidance about 
the importance of keeping the information in the OPSF up-to-date and to 
address issues regarding incorrect data for the LVPA and rural 
adjustments.
    Comment: A national patient organization also expressed concern 
that even with the proposed changes to the LVPA, the incentive still 
remains for facilities that have common ownership to maintain low-
volume status while having two or more facilities serving in close 
proximity to a facility that has different ownership. For example, two 
facilities under common ownership could sit 10 miles from one another, 
but on either side of a facility that has different ownership causing 
all three facilities to potentially be low-volume facilities.
    Response: The proposed LVPA adjustment is the first step toward 
improving the eligibility for payment. Our goal with this proposal was 
to minimize the impact on rural facilities. We have and are continuing 
to perform additional analysis in order to better target benefit 
distribution to those facilities serving the access needs of those in 
remote locations.
    Comment: An SDO expressed support for the GAO's finding that too 
many closely located facilities are receiving the LVPA, stating that 
the focus needs to be placed on ensuring access to care. Consequently, 
they fully support the elimination of the grandfathering

[[Page 69000]]

provision. However, they recommend that we maintain the current 
geographic mileage proximity criterion of 25 road miles. Other 
organizations indicated that the rural payment adjustment should only 
be available to a clinic if there is not any outpatient dialysis clinic 
within five miles of the clinic.
    Response: We appreciate the commenter's support of the removal of 
the grandfathering provision. The five mile geographic mileage 
proximity criterion was chosen for two reasons: (1) It eliminated the 
LVPA adjustment for those commonly-owned facilities with several 
facilities within a five mile radius with treatment counts just under 
4000, and (2) it spared the impact on the rural facilities with 
geographic and topographical challenges. We plan on examining the 
impact of a future geographic facility adjustment applicable to all 
facilities, not just those that are commonly-owned.
    Comment: An MDO also pointed out that under provider enrollment 
instructions a change of ownership (CHOW) typically occurs when a 
Medicare provider has been purchased or leased by another organization. 
The CHOW results in the transfer of the old owner's Medicare 
Identification Number and provider agreement (including any outstanding 
Medicare debt of the old owner) to the new owner. The regulatory 
citation for CHOWs can be found at 42 CFR 489.18. If the purchaser (or 
lessee) elects not to accept a transfer of the provider agreement, then 
the old agreement should be terminated and the purchaser or lessee is 
considered a new applicant. The commenter points out that the 
instructions fail to account for the rare instances when a provider 
does accept the agreement but ownership changed from hospital-based to 
independent, requiring a new provider number in the independent ESRD 
facility range of provider numbers. The commenter asked that CMS 
consider providers in these situations eligible for the LVPA for CY 
2016 and future years and perhaps retroactively as well.
    Response: We appreciate the commenter pointing out this scenario 
and we will examine options for addressing this concern.
    Comment: An organization of nonprofit SDOs expressed support for 
the proposed change to the geographic proximity criterion and for the 
increase in the LVPA multiplier in recognition of the higher costs 
borne by low-volume facilities. However, they noted CMS could improve 
its proposal by providing that continuation of LVPA status be based on 
a three year rolling average, rather than the current one-year 
eligibility period, reducing the incentive to hold down the number of 
patients served in any given year for fear of exceeding the cap.
    Response: We appreciate the commenter's support of the proposed 
change for the LVPA adjustment. We will consider the suggestion of a 
three-year rolling average for eligibility for the LVPA for future 
rulemaking.
    Comment: Two nonprofit dialysis organizations expressed support for 
the rural adjustment and recommend the following conditions: (1) The 
rural adjustment should only be available for clinics that are not 
receiving the LVPA, that is, once a facility that benefits from the 
rural adjustment satisfies the LVPA criteria, it should have to choose 
which to forego; and (2) The rural adjustment should not be available 
to a clinic that provided more than 6000 treatments or 7000 treatments 
in the prior calendar year. An SDO also expressed support for the rural 
adjustment, but suggested that we consider limiting the rural 
adjustment to only those facilities located in a medically underserved 
area.
    Response: As we explained above, the low-volume variable measures 
costs facilities incur as a result of furnishing a small number of 
treatments, whereas the rural area variable measures the costs 
associated with locality. The regression analysis indicated that being 
in a rural area, regardless of the number of treatments furnished, 
explains an increase in costs for furnishing dialysis compared to urban 
areas. Because low-volume and rural areas are independent variables in 
the regression, we believe that a low-volume facility located in a 
rural area would be eligible for both adjustments due to their high 
costs associated with both their location and their low patient volume.
    Comment: A professional association also supports the rural 
adjustment, but notes that the proposed multiplier of 1.008 seems to be 
based on limited data. They expressed concern about the lack of 
accounting for SRR and other QIP measures. An SDO disagreed with our 
proposal to increase the LVPA multiplier from 18.9 percent to 23.9 
percent and urged CMS to allocate the additional funds to the rural 
facility adjustment. They believe that based on the GAO study, it would 
appear that some LVPA funds could be allocated to funding the rural 
adjustment rather than further decreasing the base rate to fund the 
increase.
    Response: The rural adjuster was based on the same data as the 
other adjusters. We are not aware of additional, national data that 
could be used to establish an adjuster. It is not clear why and how SRR 
and other QIP measures should be used as payment adjusters.
    With respect to the commenters concern regarding the increase in 
the magnitude of the LVPA, CMS analyses found that both low volume 
facilities and rural facilities have higher costs than average, with 
the magnitudes reflected in the payment adjusters. A targeted 
reallocation of funds from facilities that could be eligible for the 
LVPA to rural facilities would not reflect estimates of the separate 
effect of rural location and low-volume on the cost of providing 
dialysis care.
    Comment: In response to CMS requests for comments regarding 
developing a subset of rural providers to potentially establish a high 
payment adjustment, a professional association recommends that CMS 
postpone this measure until additional data can be generated. Another 
industry stakeholder recommended that we focus the rural adjuster on a 
smaller subset of rural facilities and provide them with a higher 
adjustment. They suggested we consider an approach based on population 
density that is similar to how CMS defines super rural.
    Response: As we explain above, we are very interested in analyzing 
subsets of rural providers, such as facilities located in HPSA and 
frontier areas in order to better target facilities necessary to ensure 
access to care.
    Comment: An MDO questioned how rural status is defined for the 
purpose of obtaining the rural adjustment. They asked if a facility 
would be considered rural where it is assigned a rural CBSA code--one 
with a 2 digit State CBSA--as opposed to the 5-digit urban CBSA code. 
An LDO indicated that the definition of rural, ``not in an urban 
area,'' is not suitable for use in a payment adjuster as it is too 
broad and does not address the specific issue.
    Response: The rural adjustment would be paid to facilities that are 
not in a CBSA, that is, facilities that are assigned a two-digit State 
code. As we continue our analysis of subsets of rural providers, we 
will update the definition in 42 CFR 413.231.
    Comment: Several professional associations recommended a transition 
period prior to implementation of the new geographic proximity 
criterion for the 30 facilities that will lose the LVPA. One 
association strongly recommends that CMS work closely with the parent 
networks to evaluate the impact of any closures on patient access to 
care.
    Response: We do not anticipate that facilities will close because 
the LVPA will target facilities with truly high costs because of low 
patient volume. Analysis of the 2013 return code data shows that

[[Page 69001]]

3 facilities would be expected to receive the LVPA that were not 
previously grandfathered, and of these 3, none are expected to lose 
their LVPA adjustment. Of the 392 facilities that were grandfathered in 
2013, 121(78 urban and 43 rural) are expected to lose the LVPA 
adjustment using the new LVPA eligibility criteria. Of the 43 rural 
facilities, all of them are expected to lose their LVPA eligibility 
because their treatment counts exceeded the 4000 treatment limit. None 
are expected to lose it due to the 5-mile geographic eligibility 
criterion. Of the 78 urban facilities that are expected to lose their 
LVPA adjustment, 45 have treatment counts that exceed the 4000 
treatment limit, and 33 do not meet the 5-mile radius criterion.
    Of note, there is at least one other dialysis facility within 5 
miles for each one of the 33 dialysis facilities expected to lose their 
LVPA eligibility due to the 5-mile radius. Of the 33 facilities, 30 are 
LDOs and 27 out of the 33 facilities have multiple facilities within 
the 5 mile radius (two or more alternative facilities). Based on this 
analysis, we are not implementing a transition for facilities that will 
lose LVPA status at this time.
    The LVPA adjustment was implemented to ensure facility availability 
for ESRD patients. Those facilities that are providing lower levels of 
treatments in a given year are supplemented with this adjustment to 
ensure their business survival and the continued availability of their 
services to the patients they serve. We believe we have made 
significant progress in targeting this population of dialysis 
facilities.
    In summary, with respect to the LVPA, we are finalizing the 
proposed revisions to the eligibility criteria, that is, the removal of 
grandfathering and change in the geographic proximity criterion. 
Specifically, for the purposes of determining the number of treatments 
under the definition of a low-volume facility, beginning CY2016, the 
number of treatments considered furnished by any ESRD facility 
regardless of when it came into existence and was Medicare certified 
will be equal to the aggregate number of treatments actually furnished 
by the ESRD facility and the number of treatments furnished by other 
ESRD facilities that are both: (i) Under common ownership with; and 
(ii) 5 road miles or less from the ESRD facility in question. We are 
finalizing this provision by amending the regulation text by removing 
paragraph (d) in Sec.  413.232, and revising the geographic proximity 
provision described in paragraph (c). ESRD facilities that meet the 
LVPA eligibility criteria at Sec.  413.232 are eligible for the 23.9 
percent increase to their ESRD PPS base rate as illustrated on Table 4.
    We would like to note that we inadvertently failed to propose 
changes to the regulation text that pertains to the attestation 
deadline, in order to accommodate the timing of the policy changes 
finalized in this rule. Specifically, we are finalizing the extension 
of the attestation deadline for the CY 2016 LVPA attestations until 
December 31, 2015 to allow ESRD facilities time to assess their 
eligibility based on the policy changes to the LVPA for CY 2016 and, if 
appropriate, submit an attestation. Therefore, we are finalizing a 
revision to the newly redesignated Sec.  413.232(e) to reflect this 
date.
    In addition, we are finalizing the implementation of a rural 
payment adjustment of 0.8 percent. Specifically, this payment 
adjustment would be applied to the ESRD PPS base rate for all ESRD 
facilities that are located in a rural area. We are also finalizing the 
addition of Sec.  413.233 to the regulation text to reflect this new 
adjustment.
e. Refinement of the Case-Mix Adjustments for Pediatric Patients
    Section 1881(b)(14)(A)(i) of the Act requires the Secretary to 
implement a payment system under which a single payment is made for 
renal dialysis services. This provision does not distinguish between 
services furnished to adult and pediatric patients. Therefore, we 
developed a methodology that used the ESRD PPS base rate for pediatric 
patients and finalized pediatric payment adjusters in our CY 2011 ESRD 
PPS final rule at 75 FR 49131 through 49134. Specifically, the 
methodology for calculating the pediatric payment adjusters reflects 
case-mix adjustments for age and modality. We noted in our CY 2011 ESRD 
PPS final rule that the payment adjustments applicable to composite 
rate services for pediatric patients were obtained from the facility 
level model of composite rate costs for patients less than 18 years of 
age and yielded a regression-based multiplier of 1.199. However, based 
upon public comments received expressing concern that the payment 
multiplier was inadequate for pediatric care, we revised our 
methodology and we finalized pediatric payment adjusters that reflected 
the overall difference in average payments per treatment between 
pediatric and adult dialysis patients for composite rate (CR) services 
and separately billable (SB) items in CY 2007 based on the 872 
pediatric dialysis patients reflected in the data.
    We indicated in the CY 2011 ESRD PPS final rule (75 FR 49131 
through 49134), that the average CY 2007 Medicare Allowable Payment 
(MAP) for composite rate services for pediatric dialysis patients was 
$216.46, compared to $156.12 for adult patients. The difference in 
composite rate payment is reflected in the overall adjustment for 
pediatric patients as calculated using the variables of (1) age less 
than 13 years, or 13 through 17 years; (2) dialysis modality, that is, 
peritoneal dialysis (PD) or hemodialysis (HD). While the composite rate 
MAP for pediatric patients was higher than that for adult patients 
($216.46 versus $156.12), the separately billable MAP was lower for 
pediatric patients ($48.09 versus $83.27), in CY 2007. There are fewer 
separately billable items in the pediatric model, largely because of 
the predominance of the PD modality for younger patients and the 
smaller body size of pediatric patients. The overall difference in the 
CY 2007 MAP between adult and pediatric dialysis patients was computed 
at 10.5 percent or $216.46 + $48.09 = $264.55 and $156.12 + $83.27 = 
$239.39. $264.55/$239.39 = 1.105.
    For CY 2016, we explained in the CY 2016 ESRD PPS proposed rule (80 
FR 37823), that for purposes of regression analysis, we did not propose 
any changes to the formula used to establish the pediatric payment 
multipliers and will continue to apply the computations of MultEB = P * 
C * (WCR + WSB * MultSB),where P is the ratio of the average MAP per 
session for pediatric patients to the average MAP per session for adult 
patients as shown below, C is the average payment multiplier for adult 
patients (1.1151), WCR (0.798) and WSB (0.202) are the proportion of 
MAP for CR and SB services, respectively, among pediatric patients, and 
MultSB represents the SB model multipliers. We are using updated values 
for P, C, WCR, and WSB along with the updated SB multipliers to 
calculate the updated EB multipliers. The overall difference in the CY 
2013 MAP between adult and pediatric dialysis patients was computed at 
8.2 percent (P = $283.42/$ 261.91 = 1.082).
    The regression analysis for a new pediatric payment model for 
Medicare pediatric ESRD patients for CY 2016 will use the same 
methodology that was used for the CY2011 ESRD PPS final rule, except 
for the use of more recent data years (2012 through 2013) and in the 
method of obtaining payment data. Specifically, we used the projected 
total expanded bundle MAP based on 2013 claims to calculate the ratio 
of pediatric

[[Page 69002]]

total MAP per session to adult total MAP per session. The projected MAP 
was calculated by pricing out utilization of SBs based on line items in 
the claims, rather than using actual payments from the claims as in the 
pre-2011 data. These adjustment factors reflected a proposed 8.21 
percent increase to account for the overall difference in average 
payments per treatment for pediatric patients. For this final rule, we 
did not make changes to the pediatric model and are therefore 
finalizing the updated pediatric SB and EB multipliers as shown below 
in Table 5.

                             Table 5--CY 2016 Pediatric Case-Mix Payment Adjustments
----------------------------------------------------------------------------------------------------------------
                                    Patient characteristics         CY 2016 final rule (based on 2012 and 2013
                              -----------------------------------                      data)
                                                                 -----------------------------------------------
             Cell                                                                                    Expanded
                                      Age            Modality                       Separately        bundle
                                                                  Population (%)     billable         payment
                                                                                    multiplier      multiplier
----------------------------------------------------------------------------------------------------------------
1............................  <13.............  PD.............           27.62           0.410           1.063
2............................  <13.............  HD.............           19.23           1.406           1.306
3............................  13-17...........  PD.............           20.19           0.569           1.102
4............................  13-17...........  HD.............           32.96           1.494           1.327
----------------------------------------------------------------------------------------------------------------

    The comments we received and our responses are set forth below.
    Comment: Two professional associations support the 8 percent 
increase in the pediatric case-mix adjusters, however, they expressed 
concern that it is inadequate to cover the actual cost of dialyzing 
children. They suggested that ongoing updates to the pediatric case-mix 
adjusters are warranted because without adequate reimbursement, it 
becomes difficult for facilities to maintain the specially trained 
staff to deliver quality care to pediatric patients. They state that 
our mutual goal should be to ensure that reimbursement is commensurate 
with actual cost so that pediatric facilities can continue to provide 
high quality care. They requested that CMS allow pediatric facilities 
to apply for an exception to the ESRD composite rate as it has in the 
past when a facility`s cost reports showed that the actual cost per 
treatment was higher than the composite rate.
    Response: We agree with the commenters that the ESRD pediatric 
patient population is unique because it represents a very small 
percentage of the overall dialysis population but has high utilization 
of renal dialysis services that are not as prevalent in the adult 
population. While our goal is to align reimbursement with costs, we 
continue to believe that our methodology described above will provide 
sufficient payment to ESRD facilities that treat pediatric ESRD 
patients as we discuss in the CY 2011 ESRD PPS final rule (75 FR 49128 
through 49134). In addition, we have an existing outlier policy that 
can be utilized in the event the cost of a pediatric patient is 
excessive.
    With regard to the request that we provide an exceptions process 
such as the one we provided under the composite rate payment system, 
under which Medicare paid a composite rate based on an individual 
facility's cost per treatment, we do not have the statutory authority 
to pay a different base rate from that applied to other ESRD 
facilities. Section 1881(b)(14)(A)(i) requires the Secretary to 
implement a payment system under which a single payment is made to a 
provider of services or renal dialysis facility for renal dialysis 
services in lieu of any other payment. We do not believe the statute 
gives us authority to utilize an exceptions process under the ESRD PPS.
    As we indicated in the CY 2011 ESRD PPS final rule (75 FR 49178), 
pursuant to section 1881(b)(14) of the Act, we created an ESRD 
prospective payment system in lieu of payments under previous ESRD 
payment systems. Given that these payment exceptions pertained to the 
prior composite rate payment systems under sections 1881(b)(7) 
and(b)(12) of the Act, we do not believe that such exceptions would 
carry forward or be appropriate under the ESRD PPS. Because the ESRD 
PPS transition has concluded, no portion of the ESRD PPS payments are 
based on the composite rate, and as a result, it is not appropriate to 
resume composite rate exception payments.
    Comment: One organization urged CMS to continue to reevaluate and 
regularly update the pediatric payment adjuster by utilizing the most 
recent data from Medicare cost reports and CROWNWeb.
    Response: We agree it is important that the ESRD PPS payment 
adjustments are updated and refined so that the system reflects current 
clinical practice. Although we do not reevaluate and update the payment 
multipliers each year, we assess the impact of the changes we make to 
the ESRD PPS by simulating payments using the most recent year of ESRD 
facility claims and estimating the impact on facilities. For ESRD 
facilities that treat pediatric patients, we estimate the impact 
separately for facilities that treat less than 2 percent, between 2 and 
19 percent, between 20 and 49 percent, and over 50 percent and publish 
the impacts in the annual ESRD PPS proposed and final rules.
f. The Home and Self-Dialysis Training Add-On Payment Adjustment
    We received many comments from patients, patient advocacy groups, a 
dialysis supply manufacturer, national dialysis associations, and ESRD 
facilities concerning the adequacy of the home and self-dialysis 
training add-on payment adjustment. Although we did not make any 
proposals regarding the training add-on payment, we are addressing the 
commenters' concerns here.
    Comment: Many commenters expressed concern about the adequacy of 
payment to ESRD facilities for training home and self-dialysis 
patients. Specifically, commenters expressed concern that the 
combination of inadequate payment and increasing costs to provide 
education for home therapies, especially home hemodialysis (HHD), could 
prevent patients from choosing home dialysis. Commenters asked us to 
consider changes to the training add-on payment adjustment, explaining 
that nursing time and quality training are essential to ensure patients 
are successful in taking care of themselves at home. The commenter 
asked CMS to ensure that the training add-on payment adjustment 
accurately reflects costs and sufficient staff time to thoroughly train 
patients and families, limiting the number of patients who return to 
receiving in-facility dialysis.
    Two other patient advocacy organizations reiterated their support 
for

[[Page 69003]]

expanded patient access to home dialysis, pointing out that the 
percentage of patients using HHD remains low at just under 2 percent. 
The organizations noted that the upfront costs of beginning a home 
program may be one barrier to growth. They encouraged CMS to monitor 
patient access to home dialysis and ensure that the payment for home 
training covers the costs of the nursing time involved. They also 
expressed concern that any necessary increases to the training add-on 
payment adjustment should not come at the expense of funds from the 
ESRD PPS base rate, which those organizations believe are necessary to 
care for patients who chose to receive dialysis in-center.
    A dialysis supply manufacturer provided an analysis indicating that 
adequate reimbursement of HHD training costs would require an 
additional $240 per treatment for each of the 25 training treatments 
allowed. They explained that 5 hours of one-on-one nursing time per HHD 
training treatment was necessary, rather than the 1.5 hours per 
treatment paid for by the current home dialysis training add-on payment 
adjustment. The $240 per treatment for each of the 25 training 
treatments allowed would compensate ESRD facilities for 5 hours of one-
on-one nursing time per HHD training treatment.
    A national dialysis association noted that their respective ESRD 
facilities do not observe an access barrier to HHD and indicated that 
they are not turning eligible patients or beneficiaries away from this 
modality. They stated that the ESRD PPS provides modality choice for 
beneficiaries that meet the clinical and practical requirements to 
dialyze at home. They noted that for many beneficiaries home dialysis 
is not a feasible option. The commenter noted that the beneficiary's 
home needs to be large enough to accommodate the equipment and supplies 
and be sufficiently sanitary to deliver dialysis that would otherwise 
be furnished under highly regulated conditions (that is, in-facility). 
In addition, while noting the unique challenges for both beneficiaries 
and providers, the commenter stated that some HHD machines are designed 
in such a way that the patient must dialyze more frequently than the 
three time per week schedule that has been the standard for achieving 
adequate therapy results. The commenter urged CMS and those in the 
kidney community to view home dialysis holistically and in the context 
of the broader ESRD PPS. The commenter suggested that if CMS wished to 
support home dialysis beneficiaries, then CMS should look at ways to 
restore funds to the ESRD PPS base rate for the care of all patients.
    Response: We appreciate the commenters' suggestions regarding the 
evaluation of the home and self-dialysis training add-on payment 
adjustment. Access to care and the well-being of Medicare beneficiaries 
has always been our primary concern, and we agree that HHD is an 
important treatment option for patients that can appropriately use this 
modality. Additionally, we recognize the point raised by commenters 
that home dialysis is not a feasible option for all patients.
    Home and self-dialysis training are programs that educate ESRD 
patients and/or other individuals to assist the patient in performing 
self-dialysis or home dialysis with little or no professional 
assistance. In the context of this response, since the commenters are 
specifically discussing training for hemodialysis to be completed by a 
patient and/or caregiver in the home, we refer to the add-on as the 
home dialysis training add-on adjustment. Under our current policy, 
ESRD facilities are entitled to bill a maximum of 25 training sessions 
per patient for HHD training. This provides ESRD facilities with 
payment for 37.5 total hours of training (that is, $1,881.00) for this 
dialysis modality through the home dialysis training add-on payment 
adjustment in addition to the training costs that are included in the 
ESRD PPS bundled payment rate. We believe this provides an adequate 
opportunity for training of ESRD beneficiaries. In fact, as we note 
below, the use of home dialysis has increased in the ESRD population 
since the implementation of the ESRD PPS.
    While we have heard from the commenters that we should increase the 
home dialysis training add-on payment adjustment so that more ESRD 
patients can receive the benefit of HHD, we have also heard from LDOs 
that the current training add-on is sufficient. In addition to these 
differing viewpoints, we've also received information in public 
comments that indicate a wide variance in training times and the 
duration of training sessions. While we have heard different things 
from stakeholders about whether or not the home dialysis training add-
on payment adjustment is adequate, we are not in a position this year 
to address the commenters' concerns. We are, however, committed to 
conducting further analysis of the home dialysis training add-on 
payment adjustment and will consider making appropriate changes to the 
adjustment in future rulemaking.
    As described below, the regulatory history of the training add-on 
payment adjustment demonstrates recognition of the importance of 
preserving access to all modalities of dialysis treatment and a 
commitment to adequate payment for home hemodialysis. Beginning in the 
mid-1980s, we paid for home or self-dialysis training through a 
training add-on payment of $20 per treatment for 25 HHD treatments, $20 
per treatment for 15 CCPD treatments, and $12 per treatment for 15 CAPD 
treatments. In the CY 2011 ESRD PPS proposed rule, we proposed that the 
cost for all home dialysis services would be included in the bundled 
payment (74 FR 49930). We noted that because we were proposing that 
training costs under the ESRD PPS would be treated no differently than 
any other overhead expense, an explicit adjustment to the bundled 
payment amount for HD and PD training expenditures would not be 
necessary (74 FR 49931). We also explained in the proposed rule that we 
were proposing modality neutral payments, because PD, the predominant 
modality for home dialysis at that time, is less costly than HD, and we 
believed that estimating a prospective rate that is higher for PD than 
it would otherwise be would encourage home dialysis for PD patients (74 
FR 49967).
    In the CY 2011 ESRD PPS final rule, we explained that we received 
comments encouraging us to consider utilizing an add-on payment 
adjustment to pay for the costs of home dialysis training. In response 
to those comments, we explained that although we were continuing to 
include training payments in computing the ESRD PPS base rate, we 
agreed with commenters that we should treat training as an adjustment 
under the ESRD PPS. Thus, we finalized the home dialysis training add-
on payment adjustment of $33.44 per treatment as an additional payment 
made under the ESRD PPS when one-on-one home dialysis training is 
furnished by a nurse for either hemodialysis or peritoneal dialysis 
training and retraining (75 FR 49063). We chose to calculate a home 
dialysis training add-on payment adjustment based on one hour of 
nursing time because it was similar to the existing training add-on 
payments under the basic case-mix payment system (75 FR 49062). The 
amount we finalized for the adjustment--$33.44 per training treatment--
was updated from the previous adjustment amount of $20 per hour and was 
based on the national average hourly wage for nurses from Bureau of 
Labor Statistics data updated to 2011 (75 FR 49063). We noted that

[[Page 69004]]

because nursing salaries differ greatly based on geographic location, 
we would adjust the training add-on payment by the geographic area wage 
index applicable to the ESRD facility. Based on the amount of the home 
dialysis training add-on payment adjustment that was finalized in 2011, 
facilities that furnished 25 HHD training treatments would receive 
around $500 in the form of home dialysis training add-on adjustment 
payments in addition to the dollars included in the base rate to 
account for training costs.
    We clarified our policy on payment for home dialysis training again 
in the CY 2013 ESRD PPS final rule in which we stated that training 
costs are included in the ESRD PPS base rate, however, we also provide 
an add-on adjustment for each training treatment furnished by a 
Medicare-certified home dialysis training facility (77 FR 67468). As 
such, we explained that it is not the intent of the add-on treatment to 
reimburse a facility for all of the training costs furnished during 
training treatments. Rather, the single ESRD PPS base rate, all 
applicable case-mix and facility-level adjustments, as well as the add-
on payment should be considered the Medicare payment for each training 
treatment and not the training add-on payment alone. We noted that the 
fact that the add-on payment for training accounts for one hour of 
training time per treatment is not intended to imply that it only takes 
one hour per training session to properly educate a beneficiary to 
perform home dialysis.
    Then in the CY 2014 ESRD PPS final rule (78 FR 72183), we concluded 
in response to public comments that the training add-on, which 
represented 1 hour of nursing time, did not adequately represent the 
staff time required to ensure that a patient is able to perform home 
dialysis safely. We had received numerous comments on the home dialysis 
training add-on payment adjustment raising concerns about access to 
home dialysis and identifying training elements that were not 
contemplated in 2011, such as self-cannulation and certain aspects of 
operating an HHD machine. As a result, we recomputed the add-on based 
upon 1.5 hours of nursing time per training treatment, which amounted 
to a 50 percent payment increase of $16.72 per training treatment in 
addition to the training treatment costs included in the base rate. 
Therefore, the add-on payment rose from $33.44 to $50.16. We noted that 
the finalized per training treatment add-on payment amount of $50.16 
was in line with the costs reported on the 2010 ESRD facility cost 
reports, which indicated an average facility training cost of $53.00 
per training treatment.
    Thus, as stated above, current policies allows ESRD facilities to 
bill a maximum of 25 training sessions per patient for HHD training. 
This provides ESRD facilities with payment for 37.5 total hours of 
training (that is, $1,881.00) for this dialysis modality through the 
home dialysis training add-on payment adjustment in addition to the 
training costs that are included in the ESRD PPS bundled payment rate. 
We believe this provides an adequate opportunity for training of ESRD 
beneficiaries.
    While we have heard from the commenters that we should increase the 
add-on so that more ESRD patients can receive the benefit of HHD, we 
have also heard from LDOs that the current training add-on is 
sufficient. In addition to these differing viewpoints, we've also 
received information in public comments that indicate a wide variance 
in training times and the duration of training sessions. In the CY 2014 
ESRD PPS final rule, we noted that patient and caregiver commenters 
indicated a training time for home dialysis training of 2 to 6 weeks in 
length, with face-to-face nursing time of 2 to 6 hours per training day 
(78 FR 72184). Commenters also acknowledged that many of the training 
days took place in the training facility, in a group setting, and not 
in the patient's home. In addition, some commenters reported that 
nursing staff were not present for the final week of training, as the 
patient had achieved total independent self-care (78 FR 72185). We 
explained that while we believed that an increase in the amount of the 
home dialysis training add-on payment was appropriate, we were 
concerned that training services furnished to Medicare beneficiaries 
appeared inconsistent across training facilities.
    Access to care and the well-being of Medicare beneficiaries has 
always been our primary concern, and we agree that HHD is an important 
treatment option for patients that can appropriately use this modality. 
As reflected through the past policies of continuing increased 
reimbursement through the base rate and the add-on adjustments, we 
believe we have enhanced, not prevented, access to HHD. In fact, 
patient use of this treatment modality has increased since the 
introduction of the ESRD PPS in 2011, according to our monitoring data. 
We monitor the utilization of home dialysis and provide a quarterly 
public use file with this information, which is available on the CMS 
Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Spotlight.html. Given the widely varying 
information we've received about utilization of home dialysis services 
as well as the differing perspectives on the adequacy of the home 
dialysis training adjustment, we are committed to conducting further 
analysis of the this adjustment and will consider making appropriate 
changes to the adjustment in future rulemaking.
2. Final CY 2016 ESRD PPS Update
a. ESRD Bundled Market Basket
i. Overview and Background
    In accordance with section 1881(b)(14)(F)(i) of the Act, as added 
by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, beginning in 2012, the ESRD payment amounts are 
required to be annually increased by an ESRD market basket increase 
factor that is reduced by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. The application of the 
productivity adjustment 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.
    Section 1881(b)(14)(F)(i)(I) of the Act, as added by section 
217(b)(2)(A) of PAMA, provides that in order to accomplish the purposes 
of subparagraph (I) with respect to 2016, 2017, and 2018, after 
determining the market basket percentage increase factor 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. Accordingly, for CY 2016, we will reduce the final 
amount of the market basket percentage increase factor by 1.25 percent 
as required by section 1881(b)(14)(F)(i)(I) of the Act, and will 
further reduce it by the productivity adjustment.
ii. Market Basket Update Increase Factor and Labor-Related Share for 
ESRD Facilities for CY 2016
    As required under section 1881(b)(14)(F)(i) of the Act, CMS 
developed an all-inclusive ESRDB input price index (75 FR 49151 through 
49162) and subsequently revised and rebased the ESRDB input price index 
in the CY 2015 ESRD final rule (79 FR 66129 through 66136). Although 
``market basket'' technically describes the mix of goods and services 
used for ESRD treatment, this term is also

[[Page 69005]]

commonly used to denote the input price index (that is, cost 
categories, their respective weights, and price proxies combined) 
derived from a market basket. Accordingly, the term ``ESRDB market 
basket,'' as used in this document, refers to the ESRDB input price 
index.
    We proposed to use the CY 2012-based ESRDB market basket to compute 
the CY 2016 ESRDB market basket increase factor and labor-related 
share. We proposed an ESRDB market basket update of 2.0 percent, based 
on the IHS Global Insight 1st quarter 2015 forecast (with historical 
data through the 4th quarter of 2014). Also, as required by section 
1881(b)(14)(F)(I)(i) of the Act as amended by section 217(b)(2)(A) of 
PAMA, we proposed to reduce the amount of the market basket increase 
factor by 1.25 percent, resulting in a proposed CY 2016 ESRDB market 
basket percentage increase factor of 0.75 percent.
    For the CY 2016 ESRD payment update, we proposed to continue using 
a labor-related share of 50.673 percent for the ESRD PPS payment, which 
was finalized in the CY 2015 ESRD final rule (79 FR 66136). We 
implemented the new labor-related share using a 2-year transition of 
46.205 percent for CY 2015 and 50.673 percent for CY 2016 (79 FR 
66142).
    We did not receive any comments on our proposed market basket 
update. Therefore, based on the most recent forecast available, we are 
finalizing a CY 2016 ESRDB market basket update of 1.8 percent, based 
on the IHS Global Insight 3rd quarter 2015 forecast (with historical 
data through the 2nd quarter 2015). We are also further reducing the 
1.8 percent ESRDB market basket update by 1.25 percent as required by 
section 217(b)(2)(A) of PAMA. Therefore the CY 2016 market basket 
percentage increase factor is 0.55 percent.
iii. Productivity Adjustment
    The productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 
equal to the 10-year moving average of changes in annual economy-wide 
private nonfarm business MFP (as projected by the Secretary for the 10-
year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period) (the ``MFP adjustment'').
    The Bureau of Labor Statistics (BLS) is the agency that publishes 
the official measure of private nonfarm business MFP. Please see http://www.bls.gov/mfp to obtain the BLS historical published MFP data. MFP 
is derived by subtracting the contribution of labor and capital input 
growth from output growth. The projections of the components of MFP are 
currently produced by IGI. As described in the CY 2012 ESRD PPS final 
rule (76 FR 40503 through 40504), to generate a forecast of MFP, IGI 
replicates the MFP measure calculated by the BLS using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. In the CY 
2012 ESRD PPS final rule, we identified each of the major MFP component 
series employed by the BLS to measure MFP as well as provided the 
corresponding concepts determined to be the best available proxies for 
the BLS series.
    We proposed that beginning in CY 2016, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs (for details see 80 FR 37825). To summarize 
the proposed change, IGI has replaced the Real Effective Capital Stock 
used for Full Employment GDP with a forecast of BLS aggregate capital 
inputs recently developed by IGI using a regression model. This series 
provides a better fit to the BLS capital inputs, as measured by the 
differences between the actual BLS capital input growth rates and the 
estimated model growth rates over the historical time period. 
Therefore, we proposed to use IGI's most recent forecast of the BLS 
capital inputs series in the MFP calculations beginning with the CY 
2016 rulemaking cycle. A complete description of the MFP projection 
methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. We also proposed 
that in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
    The proposed CY 2016 MFP adjustment was 0.6 percent based on IGI's 
1st quarter 2015 forecast (with historical data through the 4th quarter 
2014). We invited comments on the MFP proposal.
    Comment: One commenter stated that, using IGI's first quarter 2015 
forecast, the MFP adjustment for CY 2016 (the 10 year moving average of 
MFP for the period ending CY 2016) is projected to be 0.6 percent. The 
commenter asked what other firms suggest for projected MFP and why are 
we basing the MFP solely on a single quarter's forecast.
    Response: IHS Global Insight (IGI), Inc. is a nationally recognized 
economic and financial forecasting firm that contracts with CMS to 
forecast the components of the market baskets and multifactor 
productivity (MFP). We do not purchase additional forecasts of MFP or 
other economic series from separate consulting firms.
    The MFP adjustment is based on the 40 quarter (or 10-year) moving 
average of changes in economy-wide private non-farm MFP. Section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment to 
be aligned with the 10-year period ending with the applicable FY, year, 
cost reporting period, or other annual period). Therefore, the 
commenter is incorrect that the MFP is based solely on a single 
quarter's forecast because, in actuality, the MFP adjustment reflects 
40 quarters worth of data through the 4th quarter of 2016.
    We did not receive any comments related to our proposal to change 
the capital input series in the MFP formula. Therefore, based on the 
most recent forecast available, we are finalizing a CY 2016 MFP 
adjustment of 0.4 percent, based on the IHS Global Insight 3rd quarter 
2015 forecast (this reflects historical MFP data through 2014).
iv. Calculation of the ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2016
    As required by section 1881(b)(14)(F) of the Act, which requires 
the ESRD PPS to be updated by the market basket reduced by the MFP 
adjustment, as well as section 1881(b)(14)(F)(i)(I) of the Act, as 
amended by section 217(b)(2)(A)(ii) of PAMA, which requires a 1.25 
percentage point reduction to the ESRDB market basket increase factor, 
the proposed CY 2016 ESRD market basket increase was 0.15 percent (2.0 
percent market basket update less 1.25 percent PAMA reduction, less 0.6 
percentage point MFP update). We also noted that if more recent data is 
subsequently available we would use such data to determine the final CY 
2016 market basket update and MFP adjustment in the ESRD PPS final 
rule.
    Therefore, using the most recent data available, the final CY 2016 
ESRDB market basket less MFP update is 0.15 percent. This is based on a 
1.8 percent market basket update, less a 1.25 percent adjustment as 
required by section 1881(b)(14)(F)(i)(I) of the Act, as amended by 
section 217(b)(2)(A)(ii) of PAMA, and further reduced by a 0.4 percent 
MFP update. The CY 2016 ESRDB market basket update and MFP adjustment 
are based on the IHS Global Insight 3rd quarter 2015 forecast with 
historical data through the 2nd quarter 2015.

[[Page 69006]]

b. The Final CY 2016 ESRD PPS Wage Indices
i. Annual Update of the Wage Index
    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, as the 
Secretary determines to be appropriate. In the CY 2011 ESRD PPS final 
rule (75 FR 49117), we finalized the use of the Office of Management 
and Budget's (OMB) Core-Based Statistical Areas (CBSAs)-based 
geographic area designations to define urban and rural areas and their 
corresponding wage index values.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37825), we stated that 
we would continue to use the same methodology as finalized in the CY 
2011 ESRD PPS final rule (75 FR 49117) for determining the wage indices 
for ESRD facilities. Specifically, we are updating the wage indices for 
CY 2016 to account for updated wage levels in areas in which ESRD 
facilities are located. We use the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the inpatient 
prospective payment system. The ESRD PPS wage index values are 
calculated without regard to geographic reclassifications authorized 
under section 1886(d)(8) and (d)(10) of the Act and utilize pre-floor 
hospital data that are unadjusted for occupational mix. The final CY 
2016 wage index values for urban areas are listed in Addendum A (Wage 
Indices for Urban Areas) and the final CY 2016 wage index values for 
rural areas are listed in Addendum B (Wage Indices for Rural Areas). 
Addenda A and B are located on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    In the CY 2011 and CY 2012 ESRD PPS final rules (75 FR 49116 
through 49117 and 76 FR 70239 through 70241, respectively), we also 
discussed and finalized the methodologies we use to calculate wage 
index values for ESRD facilities that are located in urban and rural 
areas where there is no hospital data. For urban areas with no hospital 
data, we compute the average wage index value of all urban areas within 
the State and use that value as the wage index. For rural areas with no 
hospital data, we compute the wage index using the average wage index 
values from all contiguous CBSAs to represent a reasonable proxy for 
that rural area.
    For CY 2016, we are applying this criteria to American Samoa and 
the Northern Mariana Islands, where we apply the wage index for Guam as 
established in the CY 2014 ESRD PPS final rule (78 FR 72172) (0.9611), 
and Hinesville-Fort Stewart, Georgia, where we apply the statewide 
urban average based on the average of all urban areas within the state 
(78 FR 72173) (0.8666). We note that if hospital data becomes available 
for these areas, we will use that data for the appropriate CBSAs 
instead of the proxy.
    A wage index floor value has been used in lieu of the calculated 
wage index values below the floor in making payment for renal dialysis 
services under the ESRD PPS. In the CY 2011 ESRD PPS final rule (75 FR 
49116 through 49117), we finalized that we would continue to reduce the 
wage index floor by 0.05 for each of the remaining years of the ESRD 
PPS transition. In the CY 2012 ESRD PPS final rule (76 FR 70241), we 
finalized the 0.05 reduction to the wage index floor for CYs 2012 and 
2013, resulting in a wage index floor of 0.5500 and 0.5000, 
respectively. We continued to apply and to reduce the wage index floor 
by 0.05 in the CY 2013 ESRD PPS final rule (77 FR 67459 through 67461). 
Although our intention initially was to provide a wage index floor only 
through the 4-year transition to 100 percent implementation of the ERSD 
PPS (75 FR 49116 through 49117; 76 FR 70240 through 70241), in the CY 
2014 ESRD PPS final rule (78 FR 72173), we continued to apply the wage 
index floor and continued to reduce the floor by 0.05 per year for CY 
2014 and for CY 2015.
    For CY 2016, we proposed to continue to apply the CY 2015 wage 
index floor, that is, 0.4000, to areas with wage index values below the 
floor but we did not propose to reduce the wage index floor for CY 
2016. Our review of the wage indices show that CBSAs in Puerto Rico 
continue to be the only areas with wage index values that would benefit 
from a wage index floor because they are so low. Therefore, we believe 
that we need more time to study the wage indices that are reported for 
Puerto Rico to assess the appropriateness of discontinuing the wage 
index floor and leave it at 0.4000. Because the wage index floor is 
only applicable to a small number of CBSAs, the impact to the base rate 
through the wage index budget-neutrality factor is insignificant. To 
the extent other geographical areas fall below the floor in CY 2016 or 
beyond, we believe they should have the benefit of the 0.4000 wage 
index floor as well. We will continue to review wage index values and 
the appropriateness of a wage index floor in the future.
ii. Implementation of New Labor Market Delineations
    As noted earlier in this section, in the CY 2011 ESRD PPS final 
rule (75 FR 49117), we finalized for the ESRD PPS the use of the CBSA-
based geographic area designations described in OMB bulletin 03-04, 
issued June 6, 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.
    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.'' When referencing the new OMB geographic 
boundaries of statistical areas, we use 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.
    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, we

[[Page 69007]]

implemented the new CBSA delineations as described in the February 28, 
2013 OMB Bulletin No. 13-01, beginning with the FY 2015 IPPS wage index 
(79 FR 49951 through 49963). Similarly, in the CY 2015 ESRD PPS final 
rule (79 FR 66137 through 66142), we implemented 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.
    In order to implement these changes for the ESRD PPS, we identified 
the new labor market area delineation for each county and facility in 
the country and determined that 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. In the CY 2015 
final rule (79 FR 66137 and 66138), we provided tables that showed the 
CBSA delineations and wage index values for CY 2014 and the CY 2015 
CBSA delineations, wage index values, and the percentage change in 
these values for those counties that changed from rural to urban, from 
urban to rural, and from one urban area to another and also showed the 
changes to the statewide rural wage index.
    While we believe that the new CBSA delineations result in wage 
index values that are more representative of the actual costs of labor 
in a given area, we recognized that use of the new CBSA delineations 
results in reduced payments to some facilities. For this reason, we 
implemented the new CBSA delineations 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. Therefore, for CY 2016, we are completing the transition and will 
apply 100 percent of the wage index based on the new CBSA delineations 
and the most recent hospital wage data.
    A facility's wage index is applied to the labor-related share of 
the ESRD PPS base rate. 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 which was based on the ESRDB market basket 
finalized in that rule. In the CY 2015 ESRD PPS final rule (79 FR 
66136), we finalized a new labor-related share of 50.673 percent, which 
was based on the rebased and revised ESRDB market basket finalized in 
that rule, and transitioned the new labor-related share over a 2-year 
period. For CY 2015, the labor-related share is based 50 percent on the 
old labor-related share and 50 percent on the new labor-related share, 
and the labor-related share in CY 2016 is based 100 percent on the new 
labor-related share.
    The comments we received on wage index issues and our responses are 
set forth below.
    Comment: A large health plan requested that we develop a wage index 
specific to ESRD facilities. They pointed out that ESRD staffing is 
inherently different than hospital staffing and that tying the ESRD 
wage index to hospital wage and staffing patterns does not reflect the 
true costs of operating an ESRD facility.
    Response: We are unable to implement a wage index based on ESRD 
wage data for CY 2016 as we did not propose to make this change and we 
do not have sufficient data on ESRD facility wages at this time. In 
future refinements to the ESRD PPS we will certainly consider the 
feasibility of this recommendation. However, we note that efforts to 
develop provider-specific wage indices for other Medicare providers 
have been unsuccessful from both CMS' and the providers' viewpoints. As 
a result, we do not intend to consider an ESRD-specific wage index 
until we can demonstrate that such an index would be more reflective of 
the wages and salaries paid, that it would significantly improve our 
ability to determine payment for ESRD facilities, and that we can 
justify the resources required to collect the data, as well as the 
increased burden on providers.
    Comment: An organization representing small and medium dialysis 
facilities urged CMS to examine the impact of the wage index on the 
case-mix adjusters and their value to dialysis facilities. For 
facilities located in areas where the wage index is below one, the 
practical effect of the wage index is a lower base rate. In addition, 
because the case-mix adjusters are calculated as multipliers to the 
base rate, facilities located in areas where the wage index is below 
one are receiving less value from the adjusters. Thus, the low wage 
area facilities are hit twice for the lower wage index. If CMS 
increases the weight of the case-mix adjusters in the payment formula, 
the disparities between high wage area and low wage area facilities is 
further exacerbated.
    Response: The case-mix adjusters are estimated controlling for the 
urban versus rural location of the facilities where labor costs play a 
significant role in the cost. The case- mix adjusters in the CR part of 
the model reflect the costs of providing basic dialysis services to 
patients. These costs, which are largely labor costs, are expected to 
be lower for facilities in areas with low wage indices. Therefore, it 
is appropriate that the incremental cost of caring for a patient in the 
young or very old age category should be proportionately smaller in 
areas with lower wages. The case-mix adjusters, other than age, apply 
mainly in the SB equation part of the model. The SB part of the model 
is not adjusted for wages.
    As to the concern that rural facilities are not receiving the full 
case-mix adjustments, we understand the commenter's concern and intend 
to continue to examine the impact of the wage index on the case-mix 
adjusters and the payments made to ESRD facilities, particularly 
facilities located in areas where the wage index is below one.
    Comment: A national dialysis organization expressed support for the 
wage index proposals and the continued application of the wage index 
floor where applicable. An organization representing small and medium 
dialysis facilities asked CMS to implement a freeze in the wage floor 
to prevent further hardship for rural facilities.
    A health plan commented that the proposed 4 percent decrease to the 
base rate due to refinement will be detrimental to ESRD facilities 
located in Puerto Rico and urged CMS to re-establish a fair and 
meaningful wage index floor to substitute for the low wage index values 
that result from hospital wage data reported in Puerto Rico.
    The commenter provided several alternative wage indexes for Puerto 
Rico for the CY 2016 ESRD PPS final rule: (1) Apply our policies for 
areas that do not have reliable hospital data, and apply the wage index 
for Guam as we did in implementing the ESRD PPS in the Northern 
Marianas and American Samoa, (2) use the U.S. Virgin Islands as a proxy 
for Puerto Rico given the geographic proximity and its ``non-mainland'' 
or ``island'' nature, or (3) re-establish the wage index floor in 
effect in 2010 when Puerto Rico became the only wage areas subject to 
the floor, that is, 0.65. Finally, the commenter requests that we delay 
the increase in the labor-related share to which to the wage index is 
applied for facilities in Puerto Rico because increases in the labor-
related share lowers payments for low wage index areas.
    Response: For CY 2016, we proposed to continue to apply the CY 2015 
wage index floor, that is, 0.4000, to areas with wage index values 
below the floor, rather than reduce the floor by 0.05 as we have done 
over the last 10 years. We stated that we need more time to study the 
wage indices that are reported for Puerto Rico to assess the 
appropriateness of discontinuing the

[[Page 69008]]

wage index floor. The commenter has provided useful suggestions that we 
plan to consider in proposing updates to the wage index policies under 
the ESRD PPS for CY 2017, so that we may review all options in the 
future rulemaking, which will allow for public comments.
    With regard to delaying implementation of the labor-related share 
for facilities in Puerto Rico, we believe it is important that we apply 
the labor-related share derived from the latest update to the ESRDB 
market basket. We do not believe it would be appropriate to delay 
implementation longer or to apply the new labor-related share in a non-
uniform manner. In addition, a change to the labor-related share does 
not address the primary issue the commenter identified, which is the 
comparatively lower wages reported by hospitals in Puerto Rico. For 
these reasons, we are not making any changes to the labor-related share 
finalized in the CY 2015 ESRD PPS final rule.
    Comment: An MDO requested that we provide them the wage index in an 
Excel format so that they have access to the county names.
    Response: We provide a file that includes the county names with 
each rule that is issued. The link to the ESRD PPS rules Web page is 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html. The file with county names was available when the CY 2016 
ESRD PPS proposed rule was published.
    After considering the public comments submitted, we are finalizing 
the CY 2016 wage index policies as proposed and implementing the CBSA 
designations based on the latest hospital wage data. In addition, we 
are maintaining a wage index floor of 0.4000 and continuing our current 
policies for wage areas with no hospital data.
c. CY 2016 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. Some examples of the patient 
conditions that may be reflective of higher facility costs when 
furnishing dialysis care would be frailty, obesity, comorbidities such 
as cancer, and possibly race and gender. The ESRD PPS recognizes high 
cost patients, and we have codified the outlier policy in our 
regulations at 42 CFR 413.237, which 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 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 oral-only drugs used 
in the treatment of ESRD.
    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 service drugs, 
laboratory tests, and medical/surgical supplies that are recognized as 
outlier services were originally specified in Attachment 3 of Change 
Request 7064, Transmittal 2033 issued August 20, 2010, rescinded and 
replaced by Transmittal 2094, dated November 17, 2010. Transmittal 2094 
identified additional drugs and laboratory tests that may also 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.
    Furthermore, we use administrative issuances and guidance to 
continually update the renal dialysis service items available for 
outlier payment via our quarterly update CMS Change Requests, when 
applicable. We use this separate guidance to identify renal dialysis 
service drugs which were or would have been covered under Part D for 
outlier eligibility purposes and in order to provide unit prices for 
calculating imputed outlier services. In addition, we also identify 
through our monitoring efforts items and services that are either 
incorrectly being identified as eligible outlier services or any new 
items and services that may require an update to the list of renal 
dialysis items and services that qualify as outlier services, which are 
made through administrative issuances.
    Our regulations at 42 CFR 413.237 specify the methodology used to 
calculate outlier payments. An ESRD facility is eligible for an outlier 
payment if its actual or imputed 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 the CY 2016 outlier policy, we proposed to use the existing 
methodology for determining outlier payments by applying outlier 
services payment multipliers that resulted from the updated regression 
analyses. The updated outlier services payment multipliers are 
represented by the updated separately billable payment multipliers 
presented in Table 7 for patients age 18 years and older. We used these 
updated outlier services payment multipliers to calculate the predicted 
outlier service MAP amounts and projected outlier payments for CY 2016.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37827), we proposed 
that the outlier services MAP amounts and fixed-dollar loss amounts 
would be derived from claims data from CY 2014. Because we believe that 
any adjustments made to the MAP amounts

[[Page 69009]]

under the ESRD PPS should be based upon the most recent data year 
available in order to best predict any future outlier payments, we 
proposed that the outlier thresholds for CY 2016 would be based on 
utilization of renal dialysis items and services furnished under the 
ESRD PPS in CY 2014. We stated that the utilization of ESAs and other 
outlier services have continued to decline under the ESRD PPS, and that 
we have lowered the MAP amounts and fixed-dollar loss amounts every 
year under the ESRD PPS. However, we believe for the first time since 
the implementation of the ESRD PPS that data for CY 2014 reflects 
relatively stable ESA use. We have included Table 6 below to 
demonstrate the leveling off of the decline in ESA utilization.

                                             Table 6--Total Medicare ESA Utilization in the ESRD Population
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2009            2010            2011            2012            2013          2014 \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total ESA Utilization:
    Epogen (x100,000)...................................       2,083,893       2,075,217       1,655,778       1,319,383       1,262,186       1,143,405
    Darbepoetin (x100,000)..............................             533             496             379             280             242             291
ESA Utilization per Session:
    Epogen..............................................           5,404           5,171           3,995           3,078           2,895           2,858
    Darbepoetin.........................................            1.38            1.24            0.91            0.65            0.55            0.73
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ 2014 based on December 2014 claims.

i. CY 2016 Update to the Outlier Services MAP Amounts and Fixed-Dollar 
Loss Amounts
    For CY 2016, 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 2014 
claims using the December 2014 claims file. For this final rule, the 
outlier services MAP amounts and fixed dollar loss amounts were updated 
using the 2014 claims from the June 2015 claims file. The impact of 
this update is shown in Table 7, which compares the outlier services 
MAP amounts and fixed-dollar loss amounts used for the outlier policy 
in CY 2015 with the updated estimates for this rule. The estimates for 
the final CY 2016 outlier policy, which are included in Column II of 
Table 7, were inflation adjusted to reflect projected 2016 prices for 
outlier services.

               Table 7--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                  Column I  Final outlier policy     Column II  Final outlier
                                                    for CY 2015  (based on 2013    policy for CY 2016  (based on
                                                   data price  inflated to 2015)   2014 data price  inflated to
                                                                 *                            2016) *
                                                 ---------------------------------------------------------------
                                                      Age <18        Age >= 18        Age <18        Age >= 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $39.89          $52.98          $40.20          $53.29
 treatment......................................
Adjustments:
    Standardization for outlier services........          1.1145          0.9878          0.9951          0.9729
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $43.57          $51.29          $39.20          $50.81
Fixed-dollar loss amount that is added to the             $54.35          $86.19          $62.19          $86.97
 predicted MAP to determine the outlier
 threshold......................................
Patient months qualifying for outlier payment...            6.3%            6.3%            5.8%            6.5%
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table 7, the estimated fixed-dollar loss amount 
per treatment that determines the CY 2016 outlier threshold amount for 
adults (Column II; $86.97) is slightly higher than that used for the CY 
2015 outlier policy (Column I; $86.19). The lower threshold is 
accompanied by a decline in the adjusted average MAP for outlier 
services from $51.29 to $50.81. For pediatric patients, the fixed 
dollar loss increased from $54.35 to $62.19. Likewise, the adjusted 
average MAP for outlier services fell from $43.57 to $39.20.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2016 will be 6.5 percent for adult patients and 
5.8 percent for pediatric patients, based on the 2014 claims data. The 
pediatric outlier MAP and fixed-dollar loss amounts continue to be 
lower for pediatric patients than adults due to the lower use of 
outlier services (ESAs and other injectable drugs) in the pediatric 
population.
ii. Outlier Policy Percentage
    In the CY 2011 ESRD PPS final rule (75 FR 49081), in accordance 
with 42 CFR 413.220(b)(4), we reduced the per treatment base rate by 1 
percent to account for the proportion of the estimated total payments 
under the ESRD PPS that are outlier payments. Based on the 2014 claims 
from the June 2015 claims file, outlier payments represent 
approximately 0.8 percent of total payments, slightly below the 1 
percent target due to small declines in the use of outlier services. 
Recalibration of the thresholds using 2014 data is expected to result 
in aggregate outlier payments close to the 1 percent target in CY 2016. 
We believe the update to the outlier MAP and fixed-dollar loss amounts 
for CY 2016 will increase payments for ESRD beneficiaries requiring 
higher resource utilization and move us closer to meeting our 1 percent 
outlier target. We note that the recalibration of the fixed-dollar loss 
amounts that are being finalized in this rule will result in no change 
in payments to ESRD facilities for beneficiaries with renal dialysis 
items and services that are not eligible for outlier payments, but will 
increase payments to ESRD facilities for beneficiaries with renal 
dialysis items

[[Page 69010]]

and services that are eligible for outlier payments. Therefore, 
beneficiary co-insurance obligations would also increase for renal 
dialysis services eligible for outlier payments.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37828), we noted that 
many industry stakeholder associations and renal facilities have 
expressed disappointment that the outlier target percentage has not 
been achieved under the ESRD PPS and have asked that CMS eliminate the 
outlier policy. We further stated that with regard to the suggestion 
that we eliminate the outlier adjustment altogether, 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 ESAs necessary for anemia management. We believe that the 
ESRD PPS is required to include an outlier adjustment in order to 
comply with section 1881(b)(14)(D)(ii) of the Act.
    In addition, we believe that the ESRD PPS base rate captures the 
cost for the average renal patient, and to the extent data analysis 
continues to show that certain patients, including certain racial and 
ethnic groups, receive more ESAs than the average ESRD patient, we 
believe an outlier policy, even a small one, is an important payment 
adjustment to provide under the ESRD PPS. We did not propose to modify 
the 1 percent outlier percentage for CY 2016 because we believe that 
the regression analysis continues to demonstrate high cost patients and 
that the elimination of the comorbidity categories of bacterial 
pneumonia and monoclonal gammopathy and other regression updates would 
assist facilities in receiving outlier payments in CY 2016 that are 1.0 
percent of total ESRD PPS payments.
    In the proposed rule (80 FR 37829), we further stated that we 
understand the industry's frustration that payments under the outlier 
policy have not reached 1.0 percent of total ESRD PPS payments since 
the implementation of the payment system. 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 1.0 
percent outlier policy. We would not increase the base rate to account 
for years where outlier payments were less than 1.0 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.
    We believe the 1.0 percent outlier percentage has not been reached 
under the payment system due to the significant drop, over 25 percent, 
in the utilization of high cost drugs such as Epogen since the 
implementation of the payment system. In other words, the shortfall in 
outlier payments is likely to arise precisely because facilities are 
incurring lower costs than they did in the historical data used to set 
the base rate. However, we have learned in our discussions with ESRD 
facilities that some facilities might not report outlier services on 
the ESRD facility monthly claim form as they do not believe that they 
will reach the outlier threshold. We issued sub-regulatory guidance for 
CY 2015 that instructs ESRD facilities to include all composite rate 
drugs and biologicals furnished to the beneficiary on the monthly claim 
form (Change Request 8978, issued December 2, 2014). In CY 2015 ESRD 
PPS final rule (79 FR 66149 through 66150), we discussed the drug 
categories that we consider to be used for the treatment of ESRD with 
the expectation that all of those drugs and biologicals would be 
reported on the claim. In addition to this guidance, we also have 
included a clarification for how facilities are to report laboratory 
services and drugs and biologicals on the monthly claim form. We 
believe these steps will lead to an increase in outlier payments in CY 
2016.
    The comments we received on the outlier policy update for CY 2016 
and our responses are set forth below.
    Comment: An organization representing small and medium dialysis 
facilities stated that if CMS is unable to distribute the entire one 
percent of the holdback, the amount of the outlier holdback should be 
lowered. An organization of nonprofit SDOs agreed, indicating that the 
outlier factor should be reduced to 0.5 percent, which is closer to the 
actual rate of outlier payments that have been made since 2011. A 
nonprofit dialysis organization would prefer that the outlier provision 
be removed from the bundled payment system, but at a minimum, the 
outlier target percentage should be reduced from 1.0 percent to 0.5 
percent. A large national dialysis organization expressed support for 
the outlier policy as an alternative to the comorbidity adjustments. A 
professional association also expressed support for the outlier policy.
    An MDO pointed out that the ESRD PPS paid 0.9 percent of the 1.0 
percent outlier target and asked what the dollar amount difference was 
and how many Medicare claims in 2014 received an outlier payment. They 
commented that this amount could be added back to the base rate for CY 
2016 because they believe the fact that the full outlier holdback was 
not paid out means ESRD facilities essentially lost out on this money. 
A professional association supports the concept of an outlier policy to 
sufficiently reimburse dialysis facilities for high-cost patients. 
However, they are concerned that the current policy is flawed based on 
the low percentage of facilities that qualify for outlier payments. 
They suggest one of two options to ensure disbursement of this 
withholding: (1) An annual adjustment of the threshold for outlier 
payments to fully expend the withholding; or (2) an annual adjustment 
of the withholding based on the running average of the expenditure from 
the prior 3 years, with the total withholding not to exceed 1.0 
percent. Another organization urged CMS to examine whether outlier 
payments are being received by the facilities that truly need them.
    Response: We appreciate the commenters' support for the outlier 
policy. As we explained in the proposed rule and above, our analysis of 
ESRD PPS claims show that outlier payments reached 0.8 percent of the 
1.0 percent outlier target in 2014. Specifically, outlier payments were 
made for 185,293 patient months, totaling $71,325,656 ($89,157,069 when 
including patient or secondary insurer obligations). For these patient 
months, outlier payments represented 16.2 percent of total Medicare 
payments. 5,992 facilities received at least one outlier payment. 
Twenty percent of outlier payments in dollars were received by 
independent facilities and another 13 percent were received by 
facilities that were part of a multi-facility organization other than 
the three largest chains. Outlier payments are particularly important 
for small dialysis organizations and independent dialysis facilities 
because they often lack the volume of patients necessary to offset the 
high cost of certain patients. With regard to the comment that the 
outlier policy is flawed based on the low percentage of facilities that 
qualify for outlier payments, we note that 94 percent of facilities 
received outlier payments. Further, the 1.0 percent outlier target is 
small compared to outlier policies in other Medicare payment systems 
and was not designed to cover a large number of claims. As indicated in 
Table 7, we estimate that the percentage of patient months qualifying 
for outlier payments in CY 2016 will be 6.5 percent for adult patients 
and 5.8 percent for pediatric patients, based on the 2014 claims data.

[[Page 69011]]

    We acknowledge that the 1.0 percent target has not been achieved 
since 2011 primarily because our annual update of the fixed-dollar loss 
amounts and MAP amounts could not keep up with the continued decline in 
the use of outlier services (primarily ESAs). That is, facilities 
incurred lower costs than anticipated, and those savings accrued to 
facilities more than offsetting the extent to which the consequent 
outlier payments fell short of the 1.0 percent target. However, as we 
stated in the proposed rule and above, we now believe that decline is 
leveling off, which will make our projections of outlier payments more 
accurate. In addition, because we are deleting two comorbidity category 
adjustments (bacterial pneumonia and monoclonal gammopathy) for CY 
2016, we believe it is important to maintain the current 1.0 percent 
outlier policy. By doing so, the ESRD PPS protects patient access by 
providing additional payment for patients whose care requires more 
outlier services than the average patient.
    With regard to the suggestion that we annually adjust the 
withholding based on the running average of the expenditure from the 
prior three years, with the total withholding not to exceed 1.0 
percent, as we explain above, 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 1.0 percent 
outlier policy. We would not increase the base rate to account for 
years where outlier payments were less than 1.0 percent of total ESRD 
PPS payments and, more importantly we would not reduce the base rate if 
the outlier payments exceed 1.0 percent of total ESRD PPS payments. 
Rather than increasing and decreasing the base rate, we re-estimate the 
fixed-dollar loss threshold and MAP amounts so that outlier payments in 
the following year are 1.0 percent of total ESRD PPS payments. This is 
the approach used in other Medicare payment systems that include an 
outlier policy, such as the Inpatient Psychiatric Facility PPS. As we 
have done since 2011, we will continue to monitor outlier payments and 
assess annually the extent to which adjustments need to be made in the 
fixed-dollar loss and MAP amounts in order to achieve outlier payments 
that are 1.0 percent of total ESRD PPS payments.
d. Annual Updates and Policy Changes to the CY 2016 ESRD PPS
i. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the implementation of the ESRD PPS per treatment base rate 
that is codified in the Medicare regulations at Sec.  413.220 and Sec.  
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, 
outlier payments, and geographic wage index 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 from the 2006 through 2008 time period, as required by 
section 1881(b)(14)(A)(ii) of the Act, updated to CY 2011, and 
represented the average per treatment MAP for renal dialysis services. 
The payment system is updated annually by the ESRDB market basket less 
the productivity adjustment which is discussed in section II.B.2.of 
this final rule.
ii. Annual Payment Rate Update for CY 2016
    We proposed an ESRD PPS base rate for CY 2016 of $230.20. This 
update reflected several factors, described in more detail below.
    Market Basket Increase: Section 1881(b)(14)(F)(i)(I) of the Act 
provides that, beginning in 2012, the ESRD PPS payment amounts are 
required to be annually increased by the ESRD market basket percentage 
increase factor. The latest CY 2016 projection for the ESRDB market 
basket was 2.0 percent. In CY 2016, this amount must be reduced by 1.25 
percentage points as required by section 1881(b)(14)(F)(i)(I), as 
amended by section 217(b)(2)(A) of PAMA, which is calculated as 2.0-
1.25 = 0.75. This amount is then further reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act as 
required by section 1881(b)(14)(F)(i)(II) of the Act. The proposed 
multi-factor productivity adjustment for the CY 2016 proposed rule was 
0.6, yielding a proposed update to the base rate of 0.15 percent for CY 
2016 (0.75-0.6 = 0.15 percent).
    Wage Index Budget-Neutrality Adjustment Factor: We compute a wage 
index budget-neutrality adjustment factor that is applied to the ESRD 
PPS base rate. For CY 2016, we did not propose any changes to the 
methodology used to calculate this factor, which is described in detail 
in CY 2014 ESRD PPS final rule (78 FR 72174). The CY 2016 proposed wage 
index budget-neutrality adjustment factor was 1.000332.
    Refinement Budget-Neutrality Adjustment Factor: In order to 
implement the refinement in a budget-neutral manner, we proposed to 
adjust the ESRD PPS base rate by a budget-neutrality adjustment factor. 
In CY 2011, we standardized the base rate to account for the overall 
effects of the ESRD PPS adjustment factors by making a 5.93 percent 
reduction to the base rate. To account for the overall effects of the 
refinement (that is, to not increase Medicare spending), we proposed a 
negative 4 percent adjustment (that is, a factor of 0.959703) to the 
ESRD PPS base rate to account for the additional dollars paid to 
facilities through the payment adjustments. While the per-treatment 
base rate would be reduced, we believe that this refinement improves 
payment accuracy and we would expect payments to be better targeted to 
those characteristics that increase costs for facilities. Notably, a 
significant portion of the downward effect on the base rate is due to 
the higher payments resulting from changes in the age adjustments. 
However other changes, such as using the prevalence of comorbidities on 
the ESRD facility claim, has an upward effect on the refinement budget-
neutrality adjustment factor.
    In summary, we proposed a CY 2016 ESRD PPS base rate of $230.20. 
This reflects a market basket increase of 0.15 percent, the CY 2016 
wage index budget-neutrality adjustment factor of 1.000332, and the 
refinement budget-neutrality adjustment of 0.959703.
    The comments and our responses are set forth below.
    Comment: Several dialysis organizations recommended that the 
standardization factor applied to the base rate be updated annually to 
reflect the actual prevalence of the payment adjustors. The 
organizations pointed out that between 2011 and 2014, the ESRD PPS 
underpaid providers by more than $844 million relative to CMS' 
projections in the ESRD PPS final rules for those years. They stated 
that the underpayments are the direct result of CMS' policies and 
methodological flaws in calculating the payment adjusters and the 
outlier pool.
    An organization representing small and medium dialysis facilities 
sponsored an analysis that found that from 2012 to 2013, providers were 
underpaid by an estimated $33 million, or $.019 per treatment because 
the actual prevalence of the case-mix adjusters did not align with CMS' 
assumptions. The organization pointed out that the estimates of the 
prevalence of comorbid conditions in the 2016 refinement is well below 
the estimate

[[Page 69012]]

made in 2011. A nonprofit dialysis organization pointed out that 
because of the burden associated with comorbidity adjustments, 
providers are not able to report comorbidities to the extent predicted 
by CMS. As a result, CMS is paying less per treatment than anticipated. 
They urged CMS to update the standardization factor. The organizations 
stated that since the original base rate was set assuming a much higher 
prevalence of these conditions, it would appear that the ESRD PPS did 
not achieve budget neutrality with the prior payment system. The 
organization believes CMS should re-estimate the original 
standardization factor to account for the lower prevalence of the 
comorbidity adjustments and use this base rate as the starting point 
for any changes in 2016. This will ensure that overall budget 
neutrality is ensured within the ESRD PPS and prevent CMS from locking 
in the underpayments from the last several years into perpetuity. Going 
forward, they urged CMS to monitor the impact of the case-mix adjusters 
to ensure that actual prevalence of the adjusters is keeping pace with 
the original estimates and that the expected levels of payment are 
being realized.
    Response: The refinement budget-neutrality adjustment supplements 
the standardization factor. This is because the value of the adjusters 
following the 2016 refinement has increased. As such, it would be 
inappropriate to recalibrate the standardization adjustment because the 
value of this adjustment together with the 4 percent refinement budget-
neutrality adjustment is equal to the updated adjuster values 
calculated using updated data. The 4 percent increase, primarily the 
result of the updated age adjusters, is expected to be paid out to ESRD 
facilities because they are based on information required to be 
included on every claim (the patients' birth date) and therefore, there 
is no documentation burden.
    With respect to the suggestion that we update the budget-neutrality 
adjustment factor annually to reflect the actual prevalence of the 
payment adjustors, we do not believe this is the best approach. We 
would not want to increase or decrease the base rate based on the 
prevalence of the payment adjusters in one year. Instead, as we have 
done since 2011, we intend to monitor the prevalence of the case-mix 
adjusters to ensure that actual prevalence of the adjusters is keeping 
pace with the original estimates.
    Comment: Several dialysis organizations commented that they are 
deeply concerned by the reduction of the base rate for CY 2016. They 
indicated that the proposed rule does not contain sufficient 
information to determine the relationship between the standardization 
factor applied to the base rate in 2011 and the refinement budget-
neutrality adjustment factor. For example, they note it is not possible 
from the preamble to determine whether the contractor used the actual 
frequency of adjusters applied to the 2013 claims to derive a 
standardization factor that is the sum of the previous standardization 
factor and the refinement budget-neutrality adjustment factor. The 
indicated that it appears that the significant reduction in the base 
rate is due to the inappropriate increase in the age adjuster. They 
request that we recompute the standardization factor and refinement 
budget-neutrality adjustment factor based on their recommended changes 
in the model and provide sufficient information in the final rule to 
allow stakeholders to understand the interaction of the two budget-
neutrality factors.
    Response: As discussed above, the refinement budget-neutrality 
adjustment accounts for the increase in the value of the adjusters 
above the value already accounted for by the standardization 
adjustment. Thus, the total value of the revised adjusters is 
represented by the standardization factor plus the refinement budget-
neutrality adjustment. In other words, the standardization adjustment 
reflected the adjuster values as calculated in 2011 and when we used 
updated data to calculate the values for 2016, we needed to determine 
the extent to which the new values diverged from the values that were 
accounted for in the standardization adjustment when the ESRD PPS was 
implemented. Because the values increased in the refinement, we needed 
a further reduction to the base rate in addition to the standardization 
adjustment, which was applied in the form of the refinement budget-
neutrality adjustment.
    In terms of the commenters' point about the age adjustment, as 
discussed above, we believe the methodology for our regression was 
sound and we do not believe the increased value of the age adjusters is 
inappropriate. Moreover, we believe the increased value of the age 
adjusters is beneficial to ESRD facilities because they will always be 
paid out. This is because patient age is already captured on ESRD 
facility claims. As long as the patient is in one of the age categories 
for which we have a payment adjustment, the ESRD facility will always 
receive the adjustment without any added burden to document the 
patient's age.
    We used the data from CY 2012 and CY 2013 to set the adjustment 
factors and then applied those factors to the CY 2014 claims to 
determine the budget-neutrality factor associated with this refinement. 
The final refinement budget-neutrality adjustment factor is not the sum 
of the standardization factor computed for the CY 2011 rule and the 
budget-neutrality factor associated with the refinement. Rather, we 
used the CY2014 claims to estimate payments under the PPS for CY2016 
both when applying the original payment adjustment factors that have 
been used since CY2011 and when applying the modified payment 
adjustment factors that were developed for this refinement. The 
refinement budget-neutrality factor was then calculated as the ratio of 
these two total estimated payment amounts. Note that neither of these 
total estimated payment amounts included the estimated outlier payments 
because they are added separately in determining the total payment for 
each claim.
    The calculation described above resulted in a factor of 0.959703 
that was applied as a reduction to the base rate amount in the proposed 
rule due to the overall larger payment adjustments to be made under the 
PPS due to the proposed refinement. The commenter is correct that this 
reduction in the base rate resulted primarily from the change in the 
age multipliers estimated using 2012 through 2013 data compared to 
those estimated for the 2011 model using 2006 through 2008 data. 
Concerns about the age multipliers are addressed in responses to other 
comments in section II.B.1.c.i of this final rule. Notably, the 
prevalence of comorbidities for this refinement was assessed based only 
on comorbidities reported on CY2014 dialysis facility claims for 
payment as case-mix adjusters. This decreased the estimated prevalence 
of those case-mix adjusters relative to the process used for the CY2011 
final rule, which based prevalence estimates on multiple claims types 
from other providers.
    Comorbidities represent less of the total value of the adjusters 
than they did before the refinement and age represents much more of the 
value of the adjusters than they did before the refinement. We believe 
this will be a positive change for facilities because the age 
adjustment should pay out in full without any added documentation 
burden. When repeating the calculation described above with updated 
CY2014 claims data, we are finalizing an updated refinement budget-
neutrality factor of 0.960319.
    With regard to the reduction to the base rate for CY 2016, the 
refinement

[[Page 69013]]

modeling which relies on ESRD facility claims and cost reports shifts 
the emphasis away from comorbidities (which proved difficult for 
facilities to obtain and now have less of an impact on the refinement 
budget-neutrality adjustment factor) to the age adjustments, which 
should be paid out. While the base rate has been further reduced by 4 
percent to account for the increased value of the payment adjusters 
following the refinement, maintaining five age categories makes it more 
likely that ESRD facilities will receive sufficient payment to offset 
the reduction to the base rate.
    Comment: An MDO stated that they do not support the refinement 
budget-neutrality adjustment factor because it is forcing the base rate 
to be less than it could be. They indicated that the base rate should 
not be decreasing on an annual basis. An organization representing 
small and medium dialysis facilities commented that it is necessary and 
appropriate for the ESRD PPS to contain case-mix adjustments, however, 
the proposal to reduce the base rate to allow for the increased value 
of some case-mix adjusters will create greater payment risk for 
dialysis facilities and add further complexity to an already 
complicated payment system. The organization suggests that rather than 
increasing the value of the case-mix adjusters, CMS should increase the 
value of the base rate. Ensuring an adequate base rate will minimize 
loss in payment to providers due to flaws in the case-mix adjustment 
formula. An SDO recommended that CMS avoid placing so much emphasis on 
payment adjusters that the ESRD PPS base rate is reduced to $230.20.
    Response: The refinement budget-neutrality adjustment factor is 
applied to pay for the increased value of the payment adjustments 
provided under the ESRD PPS following our updated regression analysis. 
In complying with the ATRA requirement to revise the case-mix 
adjustments in CY 2016, we had to apply a refinement budget-neutrality 
factor so that the refinement did not increase Medicare spending. We 
believe, however, that the adjustment values are more accurate and will 
be paid out more easily and therefore, although the base rate is 
reduced, ESRD facilities should receive additional payments through the 
payment adjustments. With regard to the comment that the base rate 
should not be decreasing on an annual basis, the reductions to the base 
rate were required by section 1881(b)(14)(F)(i)(I) of the Act, as 
amended by section 217(b)(2)(A) of PAMA) and are applied in lieu of the 
drug utilization adjustment implemented in the CY 2014 ESRD PPS final 
rule (78 FR 72161).
    In summary, for CY 2016 we are finalizing a base rate of $230.39. 
For this rule, the latest projection for the ESRDB market is 1.8 
percent. As we stated above, in accordance with section 
1881(b)(14)(F)(i)(I) of the Act, for CY 2016 this amount is reduced by 
1.25 percent, which is calculated as 1.8-1.25 = 0.55. This amount is 
further reduced by the final CY 2016 multifactor productivity 
adjustment of 0.4, thus yielding a final update to the base rate of 
0.15 percent for CY 2016 (0.55-0.4 = 0.15). Therefore, the CY 2015 ESRD 
PPS base rate of $239.43 is updated to $239.79 ($239.43 x 1.0015 = 
$239.79). Next, we applied the final wage index budget-neutrality 
adjustment factor of 1.000495 to yield a wage-adjusted base rate of 
$239.91 ($239.79 x 1.000495 = $239.91). Our last step in setting the 
base rate for CY 2016 is to apply the refinement budget-neutrality 
adjustment factor of 0.960319. The final CY 2016 ESRD PPS base rate is 
$230.39 ($239.91 x 0.960319 = $230.39).
3. Section 217(c) of PAMA and the ESRD PPS Drug Designation Process
    As part of the CY 2016 ESRD PPS rulemaking, section 217(c) of PAMA 
requires the Secretary to implement a drug designation 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.
    In accordance with section 217(c) of PAMA, we proposed a process 
that would allow us to recognize when an oral-only renal dialysis 
service drug or biological is no longer oral only and to include new 
injectable and intravenous products into the ESRD PPS bundled payment, 
and, when appropriate, to modify the ESRD PPS payment amount to reflect 
the costs of furnishing a new injectable or intravenous renal dialysis 
service drug or biological that is not bundled in the ESRD PPS payment 
amount. We believe that this process, which we refer to as the drug 
designation process under the ESRD PPS, will provide a systematic 
method for including new injectable and intravenous drugs and 
biologicals that are designated as renal dialysis services in the ESRD 
PPS bundled payment.
a. Background
    Section 1881(b)(14)(A)(i) of the Act requires the Secretary to 
implement the ESRD PPS, 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. The renal dialysis services that 
are included in the ESRD PPS bundle are described in section 
1881(b)(14)(B) of the Act and include: (i) items and services included 
in the composite rate for renal dialysis services as of December 31, 
2010; (ii) erythropoiesis stimulating agents (ESAs) and any oral form 
of such agents that are furnished to individuals for the treatment of 
ESRD; (iii) other drugs and biologicals that are furnished to 
individuals for the treatment of ESRD and for which payment was made 
separately under Title XVIII of the Act, and any oral equivalent form 
of such drug or biological; and (iv) diagnostic laboratory tests and 
other items and services not described in clause (i) that are furnished 
to individuals for the treatment of ESRD.
    We implemented the ESRD PPS in the CY 2011 ESRD PPS final rule (75 
FR 49030 through 49214) and codified the definition of renal dialysis 
services at 42 CFR 413.171. In addition to former composite rate items 
and services and ESAs, we defined renal dialysis services at 42 CFR 
413.171 as including 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). In the CY 
2011 ESRD PPS final rule (75 FR 49037 through 49053), we discussed the 
other drugs and biologicals referenced in paragraph (3) of the 
definition ``Renal dialysis services'' at 42 CFR 413.171 and finalized 
how they were included in the ESRD PPS. We explained that we 
interpreted clause (iii) as encompassing not only injectable drugs and 
biologicals (other than ESAs) used for the treatment of ESRD, but also 
all non-injectable drugs furnished under Title XVIII of the Act (75 FR 
49039). Under this interpretation, the any oral equivalent form of such 
drug or biological language pertains to the oral versions of injectable 
drugs other than ESAs. In addition, as we discussed in section II.B.4 
of the final rule (75 FR 49040), we concluded that, to the extent oral-
only drugs and biologicals that are used for the treatment of ESRD do 
not fall within clause (iii) of the statutory definition of renal 
dialysis services, such drugs would fall under clause (iv).
    In the CY 2011 ESRD PPS final rule (75 FR 49044 through 49053), we 
explained that to identify drugs and biologicals that are used for the 
treatment of ESRD and therefore meet the definition of renal dialysis 
services that would be included in the ESRD PPS base rate, we performed 
an extensive

[[Page 69014]]

analysis of Medicare payments for Part B drugs and biologicals billed 
on ESRD claims and evaluated each drug and biologicals to identify its 
category by indication or mode of action. We also explained that 
categorizing drugs and biological on the basis of drug action would 
allow us to determine which categories (and therefore, the drugs and 
biologicals within the categories) would be considered used for the 
treatment of ESRD (75 FR 49047).
    Using this approach, in our CY 2011 ESRD PPS final rule we 
established categories of drugs and biologicals that are not considered 
used for the treatment of ESRD (75 FR 49049-49051), categories of drugs 
and biologicals that are always considered used for the treatment of 
ESRD, and categories of drugs and biologicals that may be used for the 
treatment of ESRD but are also commonly used to treat other conditions. 
Those drugs and biologicals that were identified as not used for the 
treatment of ESRD were not considered renal dialysis services and were 
not included in computing the base rate. The categories of drugs and 
biologicals that were always considered used for the treatment of ESRD 
were identified as access management, anemia management, anti-
infectives (specifically vancomycin and daptomycin used to treat access 
site infections), bone and mineral metabolism, and cellular management 
(75 FR 49050). As we noted in the CY 2016 ESRD PPS proposed rule (80 FR 
37830), we removed anti-infectives from the list of categories of drugs 
and biologicals that are included in the ESRD PPS base rate and not 
separately payable in the CY 2015 ESRD PPS final rule (79 FR 66149 
through 66150). The categories of drugs that were always considered 
used for the treatment of ESRD have otherwise remained unchanged since 
we finalized them in the CY 2011 ESRD PPS final rule. The current 
categories of drugs that are included in the ESRD PPS base rate and 
that may be used for the treatment of ESRD but are also commonly used 
to treat other conditions are antiemetics, anti-infectives, 
antipruritics, anxiolytics, drugs used for excess fluid management, 
drugs used for fluid and electrolyte management including volume 
expanders, and pain management (analgesics) (79 FR 66150).
    In the CY 2011 ESRD PPS final rule (75 FR 49050), we explained that 
for those categories of drugs and biologicals that are always 
considered used for the treatment of ESRD we used the payments for the 
drugs included in the category in computing the ESRD PPS base rate, 
that is, the injectable forms (previously covered under Part B) and 
oral or other forms of administration (covered under Part D). For 
purposes of the inclusion of payments related to the oral or other 
forms of administration for those drugs that are always considered used 
for the treatment of ESRD, we stated that based on our determination at 
the time of the final rule, there were oral or other forms of 
injectable drugs only for the bone and mineral metabolism and cellular 
management categories. Therefore, we included the payments under Part D 
for oral vitamin D (calcitrol, doxercalcitrol and paracalcitrol) and 
oral levocarnitine in our computation of the base rate (75 FR 49042).
    In response to a commenter's request to provide a specific list of 
ESRD-only drugs in the CY 2011 ESRD PPS final rule, we explained that 
we chose to identify ESRD drugs and biologicals by category rather than 
in a specific list because using categories of drugs and biologicals 
allows us to respond to changes in drug therapies over time based upon 
many factors including new developments, evidence-based medicine, and 
patient outcomes (75 FR 49050). By categorizing drugs and biologicals 
based on drug action, we can account for other drugs and biologicals 
that may be used for those same actions in the future under the ESRD 
PPS. We further explained that, while we have included drugs and 
biologicals used in 2007 in the final ESRD base rate, we recognize that 
these may change. Because there are many drugs and biologicals that 
have many uses and because new drugs and biologicals are being 
developed, we stated that we did not believe that a drug-specific list 
would be beneficial (75 FR 49050).
    Rather than specifying the specific drugs and biologicals used for 
the treatment of ESRD, we identified drugs and biologicals based on the 
mechanism of action. We stated that we did not finalize a specific list 
of the drugs and biologicals because we did not want to inadvertently 
exclude drugs that may be substitutes for drugs identified and we 
wanted the ability to reflect new drugs and biologicals as they become 
available. We did, however, provide a list of the specific Part B drugs 
and biologicals that were included in the proposed and final ESRD PPS 
base rate in Table C in the Appendix to the CY 2011 ESRD PPS final rule 
(75 FR 49205 through 49209) and a list of the former Part D drugs that 
were bundled in the ESRD PPS in Table D in the Appendix to that rule 
(75 FR 49210). We emphasized that drugs or biologicals furnished for 
the purpose of access management, anemia management, vascular access or 
peritonitis, cellular management and bone and mineral metabolism will 
be considered a renal dialysis service under the ESRD PPS and will not 
be eligible for separate payment. We also noted that any ESRD drugs or 
biologicals developed in the future that are administered by a route of 
administration other than injection or oral would be considered renal 
dialysis services and would be in the ESRD PPS bundled base rate. We 
also stated that any drug or biological used as a substitute for a drug 
or biological that was included in the ESRD PPS bundled base rate would 
also be a renal dialysis service and would not be eligible for separate 
payment (75 FR 49050).
    In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49051), we 
explained that for categories of drugs and biologicals that may be used 
for the treatment of ESRD but are also commonly used to treat other 
conditions, we used the payments made under Part B in 2007 for these 
drugs in computing the ESRD PPS base rate, which only included payments 
made for the injectable forms of the drugs. We excluded the Part D 
payments for the oral (or other form of administration) substitutes for 
the drugs and biologicals described above because they were not 
furnished or billed by ESRD facilities or furnished in conjunction with 
dialysis treatments (75 FR 49051). For those reasons, we presumed that 
these drugs and biologicals that were paid under Part D were prescribed 
for reasons other than for the treatment of ESRD. However, we noted 
that if these drugs and biologicals currently paid under Part D are 
furnished by an ESRD facility for the treatment of ESRD, they would be 
considered renal dialysis services and we would not provide separate 
payment.
    In the CY 2011 ESRD PPS final rule (75 FR 49075), we included in 
Table 19 the Medicare allowable payments for all of the components of 
the ESRD PPS base rate for CY 2007 inflated to CY 2009, including 
payments for drugs and biologicals and the amount each contributed to 
the base rate, except for the oral-only renal dialysis drugs where 
payment under the ESRD PPS has been delayed. In the CY 2016 ESRD PPS 
proposed rule (80 FR 37832), we reiterated that we grouped the 
injectable and intravenous drugs and biologicals by action, or more 
specifically, into functional categories for the purpose of adding new 
drugs or biologicals with the same functions to the ESRD PPS bundled 
payment as expeditiously as possible after the drugs become 
commercially available so that beneficiaries have access to them. We

[[Page 69015]]

also stated that in past rules we referred to these categories as drug 
categories but we believe the term functional categories is more 
precise and better reflects how we have used the categories. We discuss 
the proposal and the finalized definition of this term in 42 CFR 
413.234(a) later in this discussion.
    In the proposed rule (80 FR 37833), we explained that since the 
ESRD PPS CY 2011 final rule was published, the base rate has been 
updated by the ESRDB market basket, discussed in section II.B.2. of 
this final rule, which reflects changes in the drug price indices. In 
addition, we stated that we designated several new drugs and 
biologicals as renal dialysis services because they fit within the 
functional categories captured in the base rate and no adjustment to 
the base rate has been made, consistent with the CY 2011 ESRD PPS final 
rule. We proposed that this approach of considering drugs and 
biologicals as included in the ESRD PPS base rate if they fit within 
one of our functional categories would continue as part of the drug 
designation process described below.
b. Final Drug Designation Process
i. Inclusion of New Injectable and Intravenous Products in the ESRD PPS 
Bundled Payment
    In the CY 2016 ESRD PPS proposed rule (80 FR 37831), in accordance 
with section 217(c)(2) of PAMA, we proposed to include new injectable 
and intravenous products in the ESRD PPS bundled payment by first 
determining whether the new injectable or intravenous products are 
reflected currently in the ESRD PPS. We proposed to make this 
determination by assessing whether the product can be used to treat or 
manage a condition for which there is an ESRD PPS functional category. 
We stated that under our proposed regulation at 42 CFR 413.234(b)(1), 
if the new injectable or intravenous product can be used to treat or 
manage a condition for which there is an ESRD PPS functional category, 
the new injectable or intravenous product would be considered reflected 
in the ESRD PPS bundled payment and no separate payment would be 
available. Specifically, any new drug, biosimilar, or biologic that 
fits into one of the ESRD functional categories would be considered to 
be included in the ESRD PPS. We stated that these drugs and biologicals 
would count toward the calculation of an outlier payment. In the 
calculation of the outlier payment, we price drugs using the ASP 
pricing methodology, which is generally ASP+6 percent. We believe that 
this step in our process codifies in regulation our existing policy of 
using the functional categories to add drugs to the bundled payment, 
which we finalized in the CY 2011 ESRD PPS final rule (75 FR 49047 
through 49052).
    Also, we proposed that if the new injectable or intravenous product 
is used to treat or manage a condition for which there is not an ESRD 
PPS functional category, the new injectable or intravenous product 
would not be considered included in the ESRD PPS bundled payment, and 
we proposed to take the following steps as described in our proposed 
regulation at Sec.  413.234(b)(2): (i) Revise an existing ESRD PPS 
functional category or add a new ESRD PPS functional category for the 
condition that the new injectable or intravenous product is used to 
treat or manage; (ii) pay for the new injectable or intravenous product 
using the transitional drug add-on payment adjustment discussed below; 
and (iii) add the new injectable or intravenous product to the ESRD PPS 
bundled payment following payment of the transitional drug add-on 
payment adjustment.
    For purposes of the drug designation process, we proposed to define 
a new injectable or intravenous product in our regulation at Sec.  
413.234(a) as an injectable or intravenous product that is approved by 
the Food and Drug Administration (FDA) under section 505 of the Federal 
Food, Drug, and Cosmetic Act or section 351 of the Public Health 
Service Act, commercially available, assigned a Healthcare Common 
Procedure Coding System (HCPCS) code, and designated by CMS as a renal 
dialysis service under Sec.  413.171. In the proposed rule (80 FR 
37832), we explained that following FDA approval, injectable or 
intravenous drugs then go through a process to establish a billing 
code, specifically a HCPCS code. Information regarding the HCPCS 
process is available on the CMS Web site at https://www.cms.gov/medicare/coding/MedHCPCSGenInfo/Application_Form_and_Instructions.html. 
We stated that we would designate injectable and intravenous products 
as renal dialysis services under the ESRD PPS by analyzing the 
information in the FDA-approved labeling, the HCPCS application 
information, including studies submitted as part of these two 
standardized processes. We indicated that a change request would be 
issued that will provide notice that the drug is included in the ESRD 
PPS bundle and is available for use, allowing patients to have access 
to the new drug.
    We proposed to codify the term ESRD PPS functional category at 
Sec.  413.234(a) as a distinct grouping of drugs and biologicals, as 
determined by CMS, whose end action effect is the treatment or 
management of a condition or conditions associated with ESRD. We 
explained that we would codify this definition in regulation text to 
formalize the approach we adopted in CY 2011 because the drug 
designation process is dependent on the functional categories. In the 
proposed rule (80 FR 37832), we listed the 11 functional categories 
that are used to treat or manage conditions associated with ESRD, which 
are displayed in Table 8A below.

                Table 8A--ESRD PPS Functional Categories
------------------------------------------------------------------------
             Category                     Rationale for association
------------------------------------------------------------------------
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.
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.
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.

[[Page 69016]]

 
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.
------------------------------------------------------------------------

    We proposed to determine whether a new injectable or intravenous 
product falls into one of our existing functional categories by 
assessing whether the product is used to treat or manage the condition 
for which we have created a category. We believe that this approach to 
determining whether a new drug falls into one of our existing drug 
categories is consistent with the policy we finalized in the CY 2011 
ESRD PPS final rule (75 FR 49047 through 49052).
    The comments we received and our responses are below.
    Comment: A national organization of dialysis organizations, an 
organization of kidney care providers, manufacturers, and patient 
advocates, and an LDO commented that CMS does not have the statutory 
authority to add new renal dialysis services to the ESRD PPS bundle. 
The commenters believe that section 217(c) of PAMA only permits CMS to 
develop a process for adding new drugs to the bundle, which they 
contend is fundamentally different than permitting CMS to actually add 
new drugs to the bundle. One commenter stated that, in contradicting 
the plain meaning of section 217(c)(2) of PAMA, the proposed rule 
renders it meaningless.
    One commenter asserted that section 217(c)(2) of PAMA cannot be 
read in isolation of section 1881(b)(14)(B) of the Act as the sole 
authority to add new drugs to the bundle; rather, section 217(c)(2) 
must be read in concert with section 1881(b)(14)(B), which does not 
permit new injectable or intravenous drugs to be added to the bundle. 
Other commenters stated that CMS seems to assume, incorrectly, that the 
existing statutory definition of renal dialysis services can 
accommodate new injectable or intravenous drugs. A number of commenters 
echoed this contention, asserting that the text, structure, and purpose 
of section 1881(b)(14)(B) of the Act show clear congressional intent 
not to allow CMS to add new injectable or intravenous drugs into any of 
the four articulated categories of renal dialysis services. The 
commenters explained that PAMA did not amend the definition of renal 
dialysis services in section 1881(b)(14)(B) of the Act, and therefore 
CMS is not authorized to add new ESRD drugs to the ESRD PPS bundled 
payment. Specifically, section 1881(b)(14)(B)(i) includes only items 
and services being paid for under the previous composite rate payment 
system as of December 31, 2010. They further explained that section 
1881(b)(14)(B)(ii) refers only to ESAs and any oral form of ESAs 
furnished for ESRD treatment, and the plain language of this provision 
excludes non-ESAs. With respect to section 1881(b)(14)(B)(iii), the 
commenters stated that this category excludes new injectable or 
intravenous drugs because, even if a new injectable or intravenous drug 
is being furnished to individuals for the treatment of ESRD, it would 
not have been separately paid for under the Act prior to January 1, 
2011, and therefore, for CMS to read section 1881(b)(14)(B)(iv) as 
allowing the addition of new injectable or intravenous products to the 
bundle, renders category (iii) meaningless. Some commenters stated that 
section 1881(b)(14)(B) of the Act is clear and unambiguous. Another 
commenter stated that the proposed process violates step one under 
Chevron v. NRDC, 467 U.S. 837 (1984) because the statute's language is 
clear and unambiguous.
    Response: We believe we have the authority to add new renal 
dialysis services to the bundle under both sections 1881(b)(14)(B) of 
the Act and 217(c)(2) of PAMA. First, we read section 
1881(b)(14)(B)(iii) as requiring the inclusion of a specific category 
of drugs in the bundle--that is, drugs and biologicals, including those 
with only an oral form, furnished to individuals for the treatment of 
ESRD and for which separate payment was made prior to January 1, 2011. 
We also read section 1881(b)(14)(B)(iv) as specifying a different 
category of items that must be included in the bundle--that is, items 
and services, which includes drugs and biologicals, not specified by 
sections 1881(b)(14)(B)(i), (ii), or (iii). Second, we read the 
language of section 217(c)(2) of PAMA--``the Secretary of Health and 
Human Services . . . shall establish a process for . . . including new 
injectable and intravenous products into the bundled payment system''--
as more than a directive to simply develop an inoperative scheme. We 
believe the provision requires us to both define and implement a drug 
designation process for including new injectable and intravenous 
products into the bundle.
    Comment: As several commenters noted that the Administrative 
Procedure Act (APA) precludes CMS from assuming that new injectable or 
intravenous drugs can constitute renal dialysis services because the 
application of that assumption constitutes CMS adopting a policy 
without going through notice- and -comment rulemaking. Several 
commenters further indicated that all new drugs should be added to the 
bundle only through notice-and-comment rulemaking. Specifically, when 
CMS is determining that a drug or biological (whether it is 
substantially the same as a drug or biological currently in the bundle 
or not) should be added to the bundle, all data should be presented and 
the process should be complete and transparent to allow interested 
stakeholders to evaluate the proposals before they are finalized. While 
they acknowledge that there would be a gap between launch of the new 
product and publication of a proposed and final rule, they strongly 
recommend that CMS use an interim rulemaking process or guidance to 
allow the product to be paid for separately outside the bundle until 
the rulemaking process can be completed. They do not believe such 
substantive changes in policy and payment rates should be adopted 
through sub-regulatory guidance. Other commenters pointed out that the 
proposed rule does not specify any public process for adding a new drug 
to an existing category or creating a new category, which is 
problematic given that serious APA concerns are raised if a regulated 
party is not given an opportunity to comment on a policy that affects 
settled legal rights.
    A national dialysis organization strongly urged CMS to adopt the 
same process for all new drugs and biologicals unless they are 
substantially

[[Page 69017]]

the same as drugs or biologicals currently paid for under the ESRD PPS 
payment rate. For new drugs or biologicals that are substantially the 
same as drugs or biologicals currently paid under the ESRD PPS, the 
organization supported incorporating them into the PPS on a case-by-
case basis using notice-and-comment rulemaking and foregoing the 
transition period if it can be shown that the PPS rate is adequate to 
cover the cost of the drug or biological. If the rate is inadequate to 
cover the cost of the new drug, the transitional drug add-on payment 
adjustment should apply.
    Finally, another commenter stated that the proposed rule does not 
specify any public process for adding a new drug to an existing 
category or creating a new category, which the commenter believes 
raises serious APA concerns. They urged CMS to utilize notice-and-
comment rulemaking to add new drugs to the ESRD PPS.
    Response: As stated above, the functional categories and our 
process for adding new drugs to the bundled payment when they fit into 
those functional categories was adopted in response to public comments 
in the CY 2011 ESRD PPS final rule and has been our policy since the 
inception of the ESRD PPS. We've added new drugs to the ESRD PPS 
bundled payment consistent with this policy in the years since the ESRD 
PPS was implemented and announced those additions using change 
requests. These decisions have not been controversial because the drugs 
were substantially the same as other drugs in the functional category. 
However, in response to commenters' request for the opportunity to 
provide input for determinations in the future that may be 
controversial, we will consider in future rulemaking establishing an 
informal process for obtaining public input when new injectable or 
intravenous products are added to an existing functional category.
    We do not believe it is necessary to add injectable and intravenous 
products to the bundled payment using notice-and-comment rulemaking 
because we have already included dollars in the base rate to account 
for products used to treat or manage conditions associated with ESRD 
for which we have adopted functional categories--consistent with the 
process we adopted through notice-and-comment rulemaking--and we 
believe that new drugs used to treat or manage the same conditions will 
be adequately accounted for by those categories. We also believe that 
our process of reviewing the FDA labeling data and information, 
reviewing the information presented for obtaining a HCPCS code, and CMS 
internal medical review following the announcement of the FDA and HCPCS 
decision, allows new drugs to be added to the bundled payment as 
quickly as possible, whereas subjecting these additions to notice-and-
comment rulemaking would significantly delay inclusion of new drugs in 
the PPS, even though there are already dollars in the base rate to 
account for those products and the process for adding these products to 
the bundle has been in place since 2011. For new renal dialysis service 
drugs or biologicals that do not fit within one of our existing 
categories, however, we will revise or adopt a new functional category, 
pay a transitional add-on payment adjustment for the new product, and 
make any necessary changes to the base rate to account for the new 
product, and all of those steps will be subject to notice-and-comment 
rulemaking.
    Comment: An LDO objected to the proposed definition of functional 
category as a distinct grouping of drugs and biologicals, as determined 
by CMS, whose end action effect is the treatment or management of a 
condition or conditions associated with ESRD. They believe the 
definition expands the statutory definition of renal dialysis services 
by implying that the categories now may include any drugs associated 
with ESRD, without regard to whether those drugs are actually essential 
to the delivery of maintenance dialysis. A national dialysis 
organization requested that CMS affirmatively state that the bundled 
drugs must be renal dialysis services for the treatment of ESRD and 
connected to/contemporaneous with the dialysis procedure. The 
commenters suggested changes to the descriptions of some of the 
functional categories to more precisely define the drugs that would fit 
into the categories. In particular, the commenters suggested changes to 
the anti-infective, pain management, and anxiolytic functional 
categories to better describe how each of the categories relate to the 
treatment of ESRD in accordance with the statute. The organization 
suggested that language be removed from the description of the 
antiemetic functional category to eliminate drugs used to treat nausea 
caused by the use of oral-only drugs because these drugs are paid 
outside the bundle and are covered under a separate benefit category.
    An organization of home dialysis patients also requested that CMS 
put a policy in place to ensure that the drugs included in the bundle 
relate to dialysis care only and not overall care. The commenter gave 
the example of when oral-only transplant medications would be added to 
the bundle. They noted that some patients need to stay on their 
transplant medications even when the kidney no longer functions well 
because the drugs help prevent rejection of the kidney and the increase 
of more antibodies. The commenter stated that they understand the need 
to control costs, but they believed the proposed drug designation 
process was excessive and could hinder innovation and prevent new 
treatment options from entering the marketplace.
    Response: We did not intend to expand the functional categories 
beyond the drugs and biologicals used in the treatment of ESRD, and we 
do not believe our definition of ESRD PPS functional category in the 
regulations at 42 CFR 413.234 does that. With regard to limiting renal 
dialysis services to those that are essential to the delivery of 
maintenance dialysis, we note that we believe the drugs that are and 
will be included in the ESRD PPS bundled payment are limited to those 
that are essential to the delivery of maintenance dialysis. In 
particular, we believe all drugs that fit into our existing functional 
categories (which have been revised slightly as described below) are 
essential to the delivery of maintenance dialysis because they are 
necessary to treat or manage conditions associated with the 
beneficiary's ESRD, and thus, they enable the beneficiary to remain 
sufficiently healthy to continue receiving maintenance dialysis.
    With regard to the concern about bundling oral-only transplant 
medications into the ESRD PPS, we note that immunosuppressive drugs are 
covered under Part B under a separate benefit category and those drugs 
do not fit into the functional categories under the ESRD PPS.
    Regarding the commenter's concerns about overly broad definitions 
for the anti-infective, pain management, and anxiolytic categories, we 
note that we moved the anti-infective functional group from the always 
used for the treatment of ESRD list to the may be used for the 
treatment of ESRD list for precisely the reasons given by the 
commenter. We recognize that there could be medical situations in which 
the beneficiary requires an anti-infective that has nothing to do with 
ESRD and access site infections or peritonitis. Therefore, when ESRD 
facilities furnish drugs or biologicals that are identified on Table 8B 
as those that may be used for the treatment of ESRD (for example, the 
pain management and anxiolytic functional categories) for reasons other 
than the treatment of ESRD, they can receive separate payment for the 
drug when it is reported with the AY

[[Page 69018]]

modifier on the claim. Appending the AY modifier to the line item drug 
or biological on the claim is an attestation that the item or service 
is not being furnished for the treatment of ESRD.
    We have carefully reviewed the commenters' recommendations 
regarding narrowing the functional categories to describe how the 
category relates to the treatment of ESRD. Many of the commenters' 
recommendations are consistent with how we believe the categories 
should be defined and help to ensure that the drugs that fall into them 
are those that are essential for the delivery of maintenance dialysis. 
Therefore, we are adopting several of them. The final functional 
categories as revised with suggestions from commenters are included in 
Table 8B, with the commenters' suggestions italicized.

                Table 8B--ESRD PPS Functional Categories
------------------------------------------------------------------------
             Category                     Rationale for association
------------------------------------------------------------------------
         DRUGS ALWAYS CONSIDERED USED FOR THE TREATMENT OF ESRD
------------------------------------------------------------------------
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.
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.
------------------------------------------------------------------------
            DRUGS THAT MAY BE USED FOR THE TREATMENT OF ESRD
------------------------------------------------------------------------
Antiemetic........................  Used to prevent or treat nausea and
                                     vomiting related to dialysis.
                                     Excludes antiemetics used for
                                     purposes unrelated to dialysis,
                                     such as those used in conjunction
                                     with chemotherapy as these are
                                     covered under a separate benefit
                                     category.
Anti-infectives...................  Used to treat vascular access-
                                     related and peritonitis infections.
                                     May include antibacterial and
                                     antifungal drugs.
Antipruritic......................  Drugs in this classification have
                                     multiple clinical indications. Use
                                     within an ESRD functional category
                                     includes treatment for itching
                                     related to dialysis.
Anxiolytic........................  Drugs in this classification have
                                     multiple actions. Use within an
                                     ESRD functional category include
                                     treatment of restless leg syndrome
                                     related 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 vascular access
                                     site pain and to treat pain
                                     medication overdose, when the
                                     overdose is related to medication
                                     provided to treat vascular access
                                     site pain.
------------------------------------------------------------------------

    We did not incorporate the commenters' recommended language that 
would remove from the antiemetic functional category drugs used to 
treat nausea resulting from oral-only drugs that are currently paid for 
outside the bundle. The commenter's rationale was that the oral-only 
drugs are covered under a separate benefit category. We believe, 
however, that if the oral-only drugs are being given for the treatment 
of ESRD and they cause nausea, then the drug used for treatment of that 
nausea falls within the antiemetic functional group covered by the ESRD 
PPS. Specifically, if drugs are used to treat nausea caused by the 
oral-only drugs designated as renal dialysis services (calcimimetics 
and phosphate binders), then the drug used for the treatment of the 
nausea falls within the functional group covered by the ESRD PPS. 
However, when other Part D oral-only drugs are prescribed to treat non-
ESRD conditions and those drugs cause nausea, then the drugs used to 
treat the nausea would also be separately covered.
    Finally, with respect to the comment that the drug designation 
process would hinder innovation, we note that for novel drugs that are 
used to treat or manage a condition for which we do not have a 
functional category, we will revise an existing category or adopt a new 
category to cover the drug and pay a transitional drug add-on payment 
adjustment for at least 2 years. For drugs that are used to treat or 
manage a condition for which we have a functional category, we note 
that we have not encountered high cost drugs that we believe would not 
be accounted for by the existing functional categories. We do, however, 
appreciate the commenters' concerns and we anticipate addressing the 
possibility of the unique situations they have identified in future 
rulemaking.
    Comment: One national dialysis organization stated that adding new 
drugs or biologicals to existing functional categories presumes that 
CMS can exercise clinical judgment as to what drugs will be related to 
the treatment of ESRD before the majority of clinical professionals 
have had the opportunity to use them.
    Response: We define a new injectable or intravenous product in our 
regulation at Sec.  413.234(a) as an injectable or intravenous product 
that is approved by the FDA under section 505 of the Federal Food, 
Drug, and Cosmetic Act or section 351 of the Public Health Service Act, 
commercially available, assigned a Healthcare Common Procedure Coding 
System (HCPCS) code, and designated by CMS as a renal dialysis service 
under Sec.  413.171. In the proposed rule (80 FR 37832), we explained 
that following the clinical trials intended to support FDA approval, 
and after FDA approves the drugs for use in ESRD patients, injectable 
or intravenous drugs then go through a process to establish a billing 
code, that is, the HCPCS code process. The HCPCS process involves the 
input of physicians and stakeholders. Additionally, if a drug will be 
used for both the treatment of ESRD and for the treatment of non-ESRD 
conditions, it would receive two HCPCS codes. We stated that we would 
designate

[[Page 69019]]

injectable and intravenous products as renal dialysis services under 
the ESRD PPS by analyzing the information in the FDA-approved labeling, 
the HCPCS application information, and a review by CMS medical officers 
and medical personnel, in addition to reviewing clinical studies 
submitted. In all three of these steps, physicians assist in the 
determination as to whether a new drug is a renal dialysis service as 
well as whether the new drug fits into one of the functional 
categories. We believe the information provided for the FDA approval, 
HCPCS coding process, and the CMS internal review by medical 
professionals will provide sufficient information over a period of time 
for CMS to determine the following: (1) Whether a product is a new 
injectable or intravenous drug; (2) whether the drug is a renal 
dialysis service; and (3) whether the drug fits into an existing 
functional category. If a new drug is not considered to be a renal 
dialysis service, then it will not be a part of the ESRD PPS bundle.
    Comment: One professional association suggested that when new 
agents are newly introduced and have a role either similar to or 
identical to existing agents and are not associated with better 
outcomes, they should be included in the current PPS without additional 
payment.
    Response: We agree with the commenter's suggestion for adding new 
drugs whose role is either similar or identical to existing agents to 
the existing functional categories. We believe that the drug 
designation process finalized at 42 CFR 413.234 addresses the 
commenter's concern.
    Comment: A large dialysis organization commented that the proposal 
does not conform to the PAMA directive to establish a process for 
including new injectable and intravenous products into the ESRD PPS 
bundled payment, but instead established a regulatory process for 
including only new functional categories of drugs within the ESRD PPS 
bundled payment. Only if a new drug also represents a new functional 
category would the proposed transitional drug add-on payment adjustment 
apply. The organization believes the proposed rule requires an 
extremely broad notion of functional categories of drugs included in 
the ESRD PPS that expands the ESRD PPS in a manner outside of the 
statutory construct. With respect to the process for including new 
injectable or intravenous drugs into the PPS and the use of the 
functional categories of ESRD drugs and biologicals, commenters 
expressed concern about the overly broad definitions of the functional 
categories and the proposal to categorize injectable and intravenous 
drugs and biologicals as within the bundle if they seem to fit into one 
of the functional categories. The commenters stated that it is even 
more concerning that new categories will be added if the current 
broadly-defined categories do not incorporate new injectable or 
intravenous drugs or biologicals. The organization believes that these 
policy choices would result in no such drug or biological being defined 
as new, which is inconsistent with the congressional interest in 
establishing a process for including new injectable and intravenous 
products into the bundled payment.
    A dialysis organization and a professional association asked that 
CMS consider a pass-through payment for all new drugs that are 
considered truly new. They recommend a rate of 106 percent of ASP, 
minus the portion of the ESRD PPS base rate that CMS determines is 
attributable to the category of drugs that corresponds to a truly new 
drug.
    Response: In accordance with section 217(c) of PAMA, we proposed a 
process that would allow us to include new injectable and intravenous 
products into the ESRD PPS bundled payment, and, when appropriate, to 
modify the ESRD PPS payment amount to reflect the costs of furnishing a 
new injectable or intravenous renal dialysis service drug or biological 
that is not bundled in the ESRD PPS payment amount. We believe the 
proposal conforms to the PAMA directive to establish a process for 
including new injectable and intravenous products into the ESRD PPS 
bundled payment. The commenter seems to be concerned not with the 
process of adding new drugs to existing functional categories as 
described in the CY 2011 final rule, but with payment of those new 
injectable and intravenous drugs that fit into the functional 
categories. As indicated in the CY 2011 final rule, the current ESRD 
PPS has dollars built into the base rate for drugs within the 
functional categories. If a new drug is available, a determination is 
made as to whether it is a renal dialysis service drug. This is 
determined through reviewing the publicly-available data and 
information underlying the FDA approval process, approved labeling, and 
the information provided during the HCPCS review process and following 
an internal CMS medical review process. Next, a determination is made 
as to whether the drug fits into one of the functional categories. The 
proposed transitional drug add-on payment adjustment is only made for 
new injectable and intravenous drugs used for the treatment of ESRD for 
which there is no current functional category because we've included 
dollars in the base rate to account for drugs used to treat or manage 
conditions associated with ESRD for which we have a functional 
category. However, as there is nothing in the base rate to account for 
drugs in a new functional group, those drugs would be paid using the 
pricing methodologies specified under section 1847A of the Act (which 
could include ASP + 6 percent) for a minimum of 2 years. With respect 
to the commenters' concern that the functional categories are too 
broad, we note that we adopted several of the commenters' suggested 
changes to the descriptions of the functional categories above.
    Comment: An LDO and a drug manufacturer stated that the ESRD 
statute requires budget neutrality apply only in 2011; they do not 
believe the Congress intended for CMS to add new items or services to 
the bundle without increasing the overall Medicare spending for ESRD. 
In other words, the Congress has not required CMS to reduce spending on 
currently bundled items and services when it adds new items or services 
to the bundle. A national dialysis organization indicated that CMS must 
ensure that limited conceptual views of budget neutrality will not 
jeopardize good policy decisions and ensure that reimbursement 
resources are adequate to provide necessary products and services to 
beneficiaries.
    Response: We agree with the commenter with respect to new drugs 
that do not fit within one of the functional categories. Where 
appropriate, dollars will be added to the base rate to account for 
those drugs that fall within the new functional categories and this 
would increase ESRD expenditures. However, for drugs that are used to 
treat or manage conditions associated with ESRD for which we have 
existing functional categories, we do not believe it would be 
appropriate to increase Medicare expenditures by providing additional 
payment beyond the ESRD PPS base rate. We note that the ESRD bundled 
(ESRDB) market basket updates the PPS base rate annually for input 
price changes for providing renal dialysis services as specified by the 
bundle. The ESRDB market basket update accounts for price changes of 
the drugs and biologicals that are reflected in the ESRD PPS base rate. 
For example, the market basket includes price indices, published by the 
Bureau of Labor Statistics, such as the PPI Biological Products for 
Human Use and

[[Page 69020]]

the PPI Vitamin, Nutrient, and Hematinic Preparations. The ESRDB market 
basket is discussed in section II.B.2 of this final rule and the cost 
weight and price proxies are discussed in detail in the CY 2015 final 
rule 79 FR 66129 through 66133. We appreciate the commenters' concerns 
regarding the cost of new drugs that fall within the existing 
functional categories and we anticipate addressing the possibility of 
the unique situations they have identified in future rulemaking.
    Comment: For new drugs, one organization proposes a different 
process adapted largely from the hospital OPPS mechanism for 
incorporating new drugs into its ambulatory payment classification 
(APC) system, which is a reasonable and known method to incorporate new 
drugs into an existing PPS. The OPPS mechanism provides additional 
payment (pass-through payment) for a limited time period (2 to 3 years) 
to account for the cost of new drugs before the cost is able to be 
fully reflected in the applicable APC. Two drug industry groups and 
three drug manufacturers commented that the proposed eligibility 
criteria for obtaining the transitional drug add-on payment are overly 
restrictive and will prevent this policy from motivating the provision 
of high-quality, efficient, and effective care. They agree that we 
should decouple the transitional drug add-on from the functional 
categories and provide the additional payment for all new injectable 
and intravenous drugs and biologicals and oral equivalents for 2 to 3 
years, similar to the IPPS or the OPPS. A professional association 
recommends that when a new product for dialysis care becomes available, 
new money should be allocated to pay for the new product.
    One of the drug manufacturers believes that these new renal 
dialysis service drugs should meet similar newness criteria as those 
that CMS applies in the IPPS for the New Technology Add-On Payment. 
Under that program, a specific medical service or technology is 
considered new for purposes of new technology add-on payments until 
such time as Medicare data are available to fully reflect the cost of 
the technology and the system is recalibrated.
    Response: If a new drug is determined to be a renal dialysis 
service and it does not fit into a current functional category, then no 
dollars have been included in the base rate for the functional 
category. A new functional category will be proposed through notice-
and-comment rulemaking and the drug will be paid for using a 
transitional drug-add on payment adjustment for at least 2 years while 
utilization data are collected. We understand the commenters' 
recommendation that CMS should make pass-through payments for all new 
drugs, including both those that fit into current functional groups and 
those that do not in a manner similar to the OPPS pass-through payments 
process. We note that while the OPPS pass-through policy provides 
additional payment for new drugs, those payments are made in a budget-
neutral manner. If we were to provide additional payment for new drugs 
that fit into an existing functional category, we would similarly want 
to make such a policy budget-neutral because we have already accounted 
for those drugs in the PPS base rate. We believe our process is 
preferable because it would not involve reducing the base rate to fund 
additional payments for new drugs that fit into an existing functional 
category.
    Under the new technology add-on payment (NTAP) policy, additional 
payments may be made for cases that involve new technologies or medical 
services that have been approved for special add-on payments. To 
qualify, a new technology or medical service must demonstrate that it 
is a substantial clinical improvement over technologies or services 
otherwise available, and that, absent an add-on payment, it would be 
inadequately paid under the regular DRG payment. Importantly, not all 
new technologies or medical services for which an application is 
submitted to CMS are determined to be eligible for the NTAP.
    We believe the drug designation process will allow us to pay the 
transitional drug add-on payment adjustment for more new products than 
if we utilized a policy similar to the NTAP. This is because under our 
drug designation process, all new injectable and intravenous renal 
dialysis service products that do not fit into an existing functional 
category will be paid for using the transitional drug add-on payment 
adjustment for a minimum of 2 years and the products will not need to 
meet clinical improvement or cost criteria. In addition, the 
transitional drug add-on payment adjustment is calculated using the 
pricing methodologies specified in section 1847A of the Act. We believe 
payment for these drugs using those pricing methodologies will capture 
the cost of expensive new injectable or intravenous products and be 
consistent with how drugs and biologicals are paid under Part B.
    Comment: A large dialysis organization stated that defining new 
drugs requires special consideration of cost. They suggested that 
rather than comparing the cost of the new drug to the ESRD PPS base 
rate, we should compare it to the cost of the existing drugs in the 
same CMS-defined ``mode of action'' category. In such a case, a drug 
might qualify for payment of the transitional drug add-on payment 
adjustment on the basis that its cost per unit or dosage exceeds a 
specified percentage (for example 150 percent) of the average cost per 
unit or dosage of the top three most common drugs in the same category 
(based on utilization data). This comparison would demonstrate that the 
amount allocated to that category in the ESRD PPS base rate is 
insufficient to cover the cost of the new drug. An LDO stated that by 
failing to account for the costs of new drugs that enter the market, 
the proposed rule represents a severe departure from the fundamental 
cost basis of the ESRD PPS. An organization representing small and 
medium dialysis facilities and an MDO expressed concern that many drugs 
would be automatically included in the bundle without any evaluation of 
the drug's cost or whether it should be considered the standard of care 
for dialysis patients.
    A drug manufacturer believes the transitional drug add-on payment 
adjustment should apply to all new drugs and, in particular, drugs 
designated as priorities by the FDA under the Generating Antibiotics 
Incentives Now (GAIN) Act or the Qualified Infectious Disease Product 
(QIDP) Act, not just those drugs that are used to treat or manage a 
condition for which we have not adopted a functional category, in order 
to promote access to new therapies and encourage innovation in ESRD 
care. They pointed out that the functional categories are very 
comprehensive and capture every known condition related to ESRD. They 
indicated that under the proposed approach CMS would make no additional 
payment regardless of whether the drug has a novel mechanism of action, 
new FDA approval, or other distinguishing characteristics. The 
commenter believes the CMS proposal sends conflicting messages to 
manufacturers about the importance of developing new treatments for 
this underserved patient population.
    An organization of nonprofit SDOs commented that CMS should provide 
additional payment for drugs and biologicals that would fall within an 
existing functional category that represent a significant clinical 
improvement and may warrant a higher payment. The commenter noted that 
utilizing the outlier policy to address

[[Page 69021]]

these high costs ultimately comes at the expense of the bundled base 
rate and would not cover the full cost of the new drug or biologic.
    Response: We appreciate the commenters' suggestion to compare the 
cost of new drugs to the cost of existing drugs in the same functional 
categories and to utilize the transitional drug add-on payment 
adjustment for all new drugs. Our intent in adopting the functional 
categories in the CY 2011 ESRD PPS final rule was to be as 
comprehensive as possible with regard to the drugs used in the 
treatment of ESRD at the time the rule was written. We are concerned 
that comparing the cost of new drugs and biologicals to the existing 
drugs in a category would impact drug manufacturers' drug pricing 
strategy and marketing and lead to higher prices for all new drugs. 
Because our intent is to better align ESRD PPS payment with resource 
utilization, including the utilization of new drugs that would fit into 
the current functional groups and those that would fit into a new 
functional category, we will consider in future rulemaking how to 
address these unique situations. The commenters' suggestions, including 
a review of the drugs designated as priorities by the FDA under the 
Generating Antibiotics Incentives Now (GAIN) Act or the Qualified 
Infectious Disease Product (QIDP) Act, are the type of input we would 
seek from stakeholders if such a process were to be implemented. In 
future rulemaking, we plan to address these unique situations by 
considering ESRD facility resource use, supporting novel therapies for 
ESRD patients, and balancing the risk of including new drugs for both 
CMS and the dialysis facilities.
    We agree with the commenter who noted that while the outlier policy 
was included to mitigate the risk of high-cost patients, by design, it 
would not cover the full cost of a new drug or biologic because outlier 
payments are made only for costs above the fixed dollar loss ratio. In 
response to the concern that drugs would be automatically included in 
the bundle without any evaluation of whether they should be included in 
a dialysis patient's standard of care, we note that a new drug that 
would potentially be considered a renal dialysis service drug would 
only be included in a current functional category if the FDA indicated 
the drug was for treatment of ESRD patients, it obtained a HCPCS code, 
and a review performed by CMS medical officers and subject matter 
experts confirms that the new drug is a renal dialysis service and 
covered under a current functional category. This review will take into 
account reports of efficacy, adverse events and utilization patterns. 
Also, we note that the inclusion of a new drug in the ESRD PPS bundled 
payment does not require that it be prescribed to a particular 
beneficiary. Rather, the patient and their nephrologist should 
determine the patient's plan of care.
    With regard to the comment that CMS would make no additional 
payment in the future for any new drugs, we do not believe this will be 
the case. Since publication of the CY 2011 ESRD PPS final rule, CMS has 
been introduced to novel therapies and drugs that are under development 
that would require new functional categories. As a result, the drug 
designation process was designed to address potential new therapies 
that would necessitate additional payment, at least temporarily in the 
form of a transitional drug add-on payment adjustment, and perhaps 
permanently in the form of a change to the base rate.
    Comment: A national dialysis organization with the support of other 
dialysis organizations provided an example of the process they are 
recommending using with an anti-infective as the new drug in the 
example. The commenter indicated that the determinations in each step 
of the process would be made through notice-and-comment rulemaking with 
CMS providing sufficient data to allow interested stakeholders to fully 
evaluate the proposals.
    Step 1: Determine if the injectable or intravenous drug/biological 
is substantially the same as a drug/biological that is related to the 
treatment of ESRD and currently within the ESRD PPS. In the example 
provided, the anti-infective would likely be used to treat vascular 
access-related infections. If the anti-infective is substantially the 
same as drugs currently used to treat infections related to a patient's 
catheter (for example), then it would be added to the bundle. If, 
however, the ESRD PPS rate is likely insufficient to cover the cost of 
providing the drug it should be evaluated through a transition period.
    Step 2: Determine the utilization and cost of the injectable and 
intravenous drug/biological before incorporating it into the bundle. In 
the example, if the new anti-infective is not substantially the same as 
an existing drug in the bundle, CMS would establish a 2-3 year 
transition period during which facilities would be paid separately for 
the drug at ASP+6 percent under Part B and not as an ESRD service.
    Step 3: Determine if the injectable and intravenous drug/biological 
is a renal dialysis service. Based upon the information collected 
during the transition period, CMS through notice-and-comment rulemaking 
would determine whether the item is a renal dialysis service. If so, 
CMS would value the Part B and beneficiary costs of the item 
(determined at the time the item is added to the bundle) and add that 
amount to the base rate without applying the budget neutrality 
construct.
    Another drug manufacturer commented that CMS did not provide enough 
information about how the cost for new drugs would be incorporated. 
Several commenters similarly commented that when trying to determine 
whether an injectable or intravenous drug or biological should be added 
to the bundle, CMS will need to determine whether it is substantially 
the same as other drugs or biologicals currently in the bundle. 
Commenters supported incorporating new drugs or biologicals that are 
substantially the same as drugs or biologicals currently paid under the 
ESRD PPS into the bundled payment on a case-by-case basis, foregoing 
the transition period if it can be shown that the PPS base rate is 
adequate to cover the cost of the drug or biological. However, 
commenters stated that if the rate is inadequate to cover the cost of 
the new drug, the transitional drug add-on payment adjustment should 
apply to the PPS payment. Commenters noted that it would not be 
appropriate to add such drugs and biologicals to the bundle without 
first learning about their utilization patterns or costs and without 
adjusting the payment rate in a non-budget-neutral manner.
    A national dialysis patient advocacy organization explained that if 
new products are immediately added to the bundle without additional 
payment it would curtail innovation in treatments for people on 
dialysis. They believe clinicians should have the ability to evaluate 
the appropriate use of a new product and its effect on patient outcomes 
and that the proposed rule did not allow for this. The commenter 
explained that Kidney Disease Improving Global Outcomes (KDIGO) and 
Kidney Disease Outcomes Quality Initiative (KDOQI) guidelines are often 
updated when evidence of improved therapies on patient outcomes are 
made available and that this rigorous and evidence-based process is 
extremely important in guiding widespread treatment decisions in 
nephrology. The commenter expressed concern that under the proposed 
rule, reimbursement and contracting arrangements could instead dictate 
utilization of a product before real world evidence on patient outcomes 
is ever generated.

[[Page 69022]]

    Response: We appreciate the commenters' input into the process of 
determining whether a drug is a renal dialysis service, and if so, 
whether it fits into one of the current functional categories. The 
focus of the commenter's suggested three steps seems to be on payment, 
with the determination of whether a new drug warrants additional 
payment depending on a determination of whether a new drug is 
substantially the same as an existing drug. It is unclear to us, 
however, whether substantially the same means that the new drug has 
been classified as a generic for an existing drug; that it acts on the 
same biochemical pathways as a drug currently in the bundle; that there 
is the same interaction of the drug with its receptors at a molecular 
level as a drug in the category; or that the new drug does not cost 
substantially the same as another drug currently in the category. It is 
unclear what the commenter means when they use the phrase substantially 
the same to describe a new drug. Nonetheless, we believe the process we 
proposed is preferable to processes that would use any of the possible 
substantially the same scenarios described above because we already 
have dollars in the base rate for drugs in the current functional 
categories. As we stated previously, we believe that if we adopted the 
commenter's recommendation, we would encourage over-pricing of all new 
intravenous and injectable drugs. The current functional categories 
include drugs that have demonstrated efficacy as renal dialysis 
services in the treatment of ESRD. As CMS does not dictate utilization 
of a drug, the addition of new drugs and biologics to the functional 
groups is to provide choice to the dialysis suppliers and availability 
of new products to the beneficiaries. We will monitor changes in 
utilization of those new drugs by the medical community. Inclusion of a 
drug in the bundle does not require that nephrologists prescribe it.
    If the drug does not fall within one of the functional categories, 
then a determination will be made as to whether the drug is a renal 
dialysis service, and a new functional category will be proposed 
through notice-and-comment rulemaking. A transitional drug add-on 
payment will be made for a minimum of 2 years. During that time 
utilization data will be gathered. At the end of that time, the drug 
will be included within its new functional category and the base rate 
may or may not be modified to account for the cost of the drug, 
depending upon what the utilization data show.
    With respect to what seem to be commenters' specific concerns that 
certain high cost new drugs may not be adequately accounted for in the 
ESRD PPS base rate, we note that we anticipate making further proposals 
related to the drug designation process to address these unique 
situations in future rulemaking.
    Comment: A national dialysis organization stated that the market 
basket is an inflationary, not a reimbursement, mechanism. They 
expressed concern that adjustments to the market basket may have 
significant time lag between product approval and inclusion in the 
market basket. They further explained that categories of drug entrants 
may not match the current price proxies utilized in the ESRD PPS, 
requiring future revaluation.
    Response: The market basket adjusts payments for inflation on a 
yearly basis. We agree that there may be a lag between costs for items 
included in the ESRDB market basket cost weights and costs for newly 
added or excluded expenses in the ESRD treatment bundle. We note that 
any CMS PPS payment, updated by a market basket, faces the same 
potential lag. The data used to construct cost weights for the ESRD 
providers is based on Medicare Cost Reports which are only available 
with a lag. Additionally, CMS has found that the cost weights for a 
market basket do not change significantly from year to year. As we have 
in the past, we will continue to evaluate the ESRD cost share weights 
on a regular basis and propose changes to the market basket should data 
indicate a substantial shift in relative cost weights in providing ESRD 
bundled services.
    Comment: An organization of home dialysis patients commented that 
the functional categories defined for dialysis medication are too broad 
and could prevent people on dialysis from receiving needed care and be 
detrimental to innovation. The commenter stated that in the future 
there could be a new medication to help with fluid management but 
patients would be shut out of ever having the option for a new fluid 
management therapy. An LDO stated that, if implemented, the proposed 
process could jeopardize patient access to drugs that are clinically 
superior to existing drugs in the same functional category.
    An organization of home dialysis patients is hopeful that there are 
a number of therapies that will offer choice and better care to people 
who have an illness. One new area of care is in the form of biologics. 
In order to incentivize new medications to come to market, the home 
dialysis patient organization asked that CMS provide additional payment 
for new drugs that fit into the functional categories in order to 
incentivize new medications to come to market and to ensure they have 
the opportunity for better care, choices and treatment.
    Response: There seem to be two concerns expressed by the 
commenters. The first is that the broad nature of the functional 
categories will sweep new drugs into the functional categories and 
beneficiaries will not have access to the drugs because the dialysis 
organizations will choose not to use the new drugs, whether because of 
contractual obligations, affiliation with drug manufacturers, or lack 
of additional dollars in the base rate. The second concern seems to 
stem from the first in that the organizations will not use the new 
drugs because they would not be separately paid for using the new 
drugs. Therefore, ESRD patients will not have access to the new drugs.
    To address the first issue, the primary intent of the proposed 
approach is to provide timely patient access to new drugs for the 
treatment of ESRD. This includes availability of both new drugs that 
fit into an existing functional category and drugs for which there is 
no current functional category. The second issue is a matter of 
reimbursement. As indicated in the CY 2011 final rule, the current ESRD 
PPS has dollars built into the base rate for the drugs in the 
functional categories. After a new drug is approved by the FDA and 
assigned a HCPCS code, CMS makes a determination as to whether it is a 
renal dialysis drug. If we determine that the drug is a renal dialysis 
service drug, then we are not permitted to pay for the drug outside the 
ESRD PPS bundle.
    We appreciate the concerns expressed by the organization of home 
dialysis patients regarding biologics. The biologics currently included 
in the ESRD PPS bundled payment are ESAs, which are defined as renal 
dialysis services in section 1881(b)(14)(B)(ii) of the Act. When a new 
biologic other than an ESA becomes available, we will treat it as we do 
any other new drug. Specifically, we will evaluate whether it is a 
renal dialysis service and if it is, whether it fits into a current 
functional category.
    In response to stakeholder concerns regarding the availability and 
increased cost of new drugs, we recognize that newer drugs may be more 
costly; however, the new drug may replace the functional use of one or 
more drugs within one or several functional categories. Nonetheless, we 
understand commenters' concerns about the potential cost of new drugs 
that fall into

[[Page 69023]]

existing categories and we will consider these unique situations in 
future rulemaking.
    Comment: A product manufacturer pointed out that under the 
proposal, new products would qualify as outlier services, and if we 
fail to allow separate payment at launch, there would be no ASP upon 
which to base an outlier payment. They recommend that we consider how 
to avoid jeopardizing beneficiary access by implementing an outlier 
payment based on wholesale acquisition cost (WAC) or another readily 
available price.
    Response: We agree with the commenter that in the event we do not 
establish an ASP, WAC could be used. We consider WAC pricing to be a 
part of the pricing methodologies specified in section 1847A of the 
Act, and we would use the methodologies available to us under that 
authority in order to accurately determine a price for the calculation 
of outlier payments for new injectable and intravenous drugs that fit 
into one of the existing the functional categories.
ii. Transitional Drug Add-On Payment Adjustment
    In the proposed rule (80 FR 37832), we explained that we anticipate 
that there may be new drugs that do not fall within the existing ESRD 
PPS functional categories and therefore, are not reflected in the ESRD 
PPS bundled payment. Where a new injectable or intravenous product is 
used to treat or manage a condition for which there is not a functional 
category, we proposed to pay for the new injectable or intravenous 
product using a transitional drug add-on payment adjustment under the 
authority of section 1881(b)(14)(D)(iv) of the Act. We proposed that 
the transitional drug add-on payment adjustment would be based on the 
ASP pricing methodology and would be paid until we have collected 
sufficient claims data for rate setting for the new injectable or 
intravenous product, but not for less than 2 years. We explained that a 
2-year timeframe is necessary for adequate data collection, rate-
setting and regulation development. We further explained that 2 years 
is necessary for rulemaking purposes because it is a year-long process 
that involves developing policies based on data, proposing those 
policies, allowing for public comment, finalizing the proposed rule, 
and allowing for a period of time before the rule becomes effective. We 
stated that the minimum 2-year period would also allow 1 year for 
payment of the adjustment to be paid before the beginning of a 
rulemaking cycle in which we could propose to add the drug to the 
bundled payment. For these reasons, we believed that 2 years was the 
minimum amount of time necessary to pay the adjustment and we proposed 
the regulation text for the transitional drug add-on payment adjustment 
at Sec.  413.234(c).
    In the proposed rule (80 FR 37832), we explained that paying a 
transitional drug add-on payment adjustment for new injectable and 
intravenous products would allow us to analyze price and utilization 
data for both the injectable and, if applicable, any oral or other 
forms of the drug in order to pay for the drugs under the ESRD PPS. We 
proposed that when a facility furnishes the new injectable drug they 
would report the drug to Medicare on the monthly facility bill and 
would append a CMS payment modifier that would instruct our claims 
processing systems to include a payment amount that equals the Part B 
drug payment amount, which is derived using the methodologies specified 
under section 1847A of the Act, which can include ASP + 6 percent 
pricing. We further explained that this payment approach is consistent 
with the policy we finalized in the CY 2013 ESRD PPS final rule (77 FR 
67463), which states that we would use the ASP methodology, including 
any modifications finalized in the Physician Fee Schedule (PFS) final 
rules, to compute outlier MAP amounts, the drug add-on(formerly paid 
under the composite rate and no longer paid as part of the ESRD PPS), 
and any other policy that requires the use of payment amounts for drugs 
and biologicals that would be separately paid absent the ESRD PPS. We 
explained in the proposed rule that we would issue sub-regulatory 
billing and payment guidance along with the payment modifier in 
conjunction with our final rule guidance. Then, under the regulations 
at Sec.  413.234(c), following payment of the transitional drug add-on 
payment adjustment, we would modify the ESRD PPS base rate, if 
appropriate, to account for the new injectable or intravenous product.
    In the proposed rule (80 FR 37833), we noted that outlier payments 
would not be available for new injectable or intravenous products 
during the time in which these products are paid for using the new 
transitional drug add-on payment adjustment. We explained that while a 
new injectable drug or biological being paid using the transitional 
drug-add would otherwise be considered an outlier service because the 
drug or biological would have been considered separately billable prior 
to the implementation of the ESRD PPS, we do not believe that it would 
be appropriate to include the payment amount for the new drug or 
biological in the outlier calculation during this interim transition 
period. This is because during the interim period we would be making a 
payment for the specific drug in addition to the base rate, whereas 
outlier services have been incorporated into the base rate. For 
example, we have included the MAP amount for EPO in the base rate and 
it qualifies as an outlier. We noted that when the product is reflected 
in the base rate after payment of the transitional drug add-on payment 
adjustment, it would be considered eligible for outlier payments 
discussed in section II.B.2.c of this rule.
    Comment: During the time in which a drug is paid for using the 
transitional drug add-on payment adjustment (2-3 years), a commenter 
stated that CMS would need to determine how dialysis facilities report 
new drug cost data. For example, CMS would need to determine whether it 
is appropriate to create a specific data element within the dialysis 
facility cost report to capture the cost of the eligible new drugs 
during the transition period and whether such data should be reported 
without any artificial cost limitations (otherwise imposed in the cost-
reporting process) to ensure that, where appropriate, the true drug 
costs are reflected within the ESRD PPS base rate when the transition 
period ends. The commenter explained that based on the utilization data 
collected during the transition period, CMS would consider the 
prevalence of a new drug as a measure of whether it is essential for 
the delivery of dialysis (that is, an ESRD-related drug) or whether it 
should remain separately billable.
    For example, if the utilization data show that a new drug is 
furnished to a majority of ESRD patients, then it would be considered 
ESRD-related, and the ESRD PPS base rate would be adjusted accordingly; 
conversely, if the data show that less than a majority of patients 
received the drug, then it would remain separately billable following 
the transition period. For drugs to be incorporated into the ESRD PPS, 
CMS should clarify how it will analyze the cost data and track cost 
following the transition period to ensure that the calculation used was 
accurate or whether revisions are required.
    They also recommended that CMS work with stakeholders to develop a 
similar process so that transitional drug add-on payments are available 
until the ESRD bundle is appropriately recalibrated to accommodate the 
new class of products. They also recommended that we adopt a process

[[Page 69024]]

for determining when a drug is so costly that the ESRD PPS payment 
would be considered inadequate.
    Response: We appreciate the suggestions for revisions to the ESRD 
cost report and the recommendation for capturing utilization data for 
new injectable and intravenous drugs used for the treatment of ESRD, 
and we will review the possibility of operationalizing these 
suggestions in the future. We recognize the importance of making new 
therapies available to ESRD patients and because of this, we will 
include new drugs that are determined to be renal dialysis services and 
fit into current functional groups. We plan to track utilization of all 
new renal dialysis service drugs, including those currently in the 
functional categories, those newly added to the functional categories, 
and those drugs that are candidates to be included in newly-created 
functional categories. We have heard from patients that they want to 
have access to new therapies and drugs. Through section 
1881(b)(14)(A)(i) of the Act, the Congress requires the Secretary to 
implement the ESRD PPS, under which a single payment is made to a 
provider of services for renal dialysis services in lieu of any other 
payment. The renal dialysis services that are included in the ESRD PPS 
bundle are described in section 1881(b)(14)(B) of the Act and include 
other items and services furnished to individuals for the treatment of 
ESRD. The statutory definition of renal dialysis services is not 
limited to those services furnished to the majority of ESRD patients. 
Drugs that were separately billable were included in the ESRD PPS base 
rate, and the in CY 2011 final rule, those drugs were placed into 
categories. If renal dialysis service drugs fit into those functional 
categories, then they are included. This gives the patients access to 
those new drugs that fit into the functional categories. With regard to 
the recommendation that we adopt a process for determining when a drug 
is so costly that the ESRD PPS payment would be considered inadequate, 
we are concerned that establishing such a process for these drugs would 
lead to overpricing of drugs. We do, however, understand commenters' 
concerns and will consider addressing this issue in future rulemaking.
    Comment: Some dialysis organizations are most concerned that a drug 
may be added to a functional category even if there is no competition 
for the new drugs in a given functional category. When there is no 
competition for a given drug, the commenters believe facilities are 
vulnerable to increased cost.
    Response: We believe the commenter is referring to a new drug in a 
new functional category with no other drug in the category, leading to 
pricing vulnerability for the dialysis facilities. If the commenter is 
referring to what occurred with Epogen, with pricing being high due to 
a monopoly and lack of market competition, it may be that there will be 
only one drug in a new functional category for several years. All of 
the drugs in the current functional categories are populated by drugs 
that function well for the current ESRD population. The inclusion of 
the new drugs in these functional categories provides access for the 
beneficiaries to new renal dialysis services, including the drugs for 
the treatment of ESRD. When there is a new drug that does not fit into 
the current functional categories, a minimum of 2 years of utilization 
data is required before we will assess whether a functional category 
should be created through notice-and-comment rulemaking, as well as how 
to add the drug to the ESRD base rate. We believe it is in the best 
interest of the ESRD beneficiary to make these drugs available to them. 
We appreciate the commenter sharing their concern with us about 
competition within the functional categories.
    Comment: A commenter expressed support for the use of the ASP 
pricing methodology for the transitional drug add-on payment adjustment 
for new drugs and biologicals that do not fall within the existing ESRD 
PPS functional categories. However, an organization representing small 
and medium dialysis facilities and an MDO are concerned that the 
proposed transitional add-on payment is calculated based on ASP, which 
has been shown not to be truly reflective of the actual cost of the 
drug. One organization pointed out that often there is a data lag 
between ASP and the actual cost of the drugs and as a result, the 
transitional add-on payment may not reflect the actual cost of the 
drug. A drug manufacturer recommended that the transitional drug add-on 
payment adjustment be set at ASP + 6 percent and the period of 
transition be set at 3 years.
    Response: The ASP + 6 percent pricing methodology is a part of the 
pricing methodologies specified in section 1847A of the Act, which also 
include some wholesale acquisition cost (WAC) pricing during the first 
quarter of sales. We agree with the commenters that ASP + 6 percent 
pricing may not always be the most appropriate way to calculate the 
transitional drug add-on payment adjustment. Accordingly, we are 
revising the regulation text at 413.234(c)(1) to refer to the pricing 
methodologies under section 1847A of the Act, rather than ASP pricing 
methodology, because these methodologies include ASP, WAC, and Average 
Wholesale Pricing. Information regarding the pricing methodologies 
specified in 1847A of the Act can be found in Publication 100-04, 
Chapter 17--Drugs and Biologicals, section 20.1-- MMA Drug Pricing--
Average Sales Price.
    After consideration of the public comments, we are finalizing the 
drug designation process and the corresponding regulation text at 42 
CFR 413.234.
iii. Determination of When an Oral-Only Renal Dialysis Service Drug Is 
No Longer Oral-Only
    Section 217(c)(1) of PAMA requires us to adopt a process for 
determining when oral-only drugs are no longer oral-only. In our CY 
2011 ESRD PPS final rule (75 FR 49038 through 49039), we described 
oral-only drugs as those that have no injectable equivalent or other 
form of administration. In the proposed rule (80 FR 37833), we proposed 
to define the term oral-only drug as part of our drug designation 
process in our regulations at 42 CFR 413.234(a). For CY 2016, and in 
accordance with section 217(c)(1) of PAMA, we proposed that an oral-
only drug would no longer be considered oral-only if an injectable or 
other form of administration of the oral-only drug is approved by the 
FDA. We proposed to codify this process in our regulations at 42 CFR 
413.234(d). In addition, we noted that the FDA posted lists of all drug 
dosages and forms of administration that are approved for use in the 
United States. For example, one of these lists can be viewed at http://www.fda.gov/drugs/developmentapprovalprocess/formssubmissionrequirements/electronicsubmissions/datastandardsmanualmonographs/ucm071666.
    A link for the drug and biologic approval and investigational new 
drug activity reports can be found at the following link: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/DrugandBiologicApprovalReports/default.htm.
    In the CY 2011 ESRD PPS proposed and final rules (74 FR 49929 and 
75 FR 49038), we noted that the only oral-only drugs and biologicals 
that we identified were phosphate binders and calcimimetics, which fall 
into the bone and mineral metabolism category. We defined these oral-
only drugs as renal dialysis services in our regulations at Sec.  
413.171 (75 FR 49044), delayed the Medicare Part B payment for these 
oral-

[[Page 69025]]

only drugs until CY 2014 at Sec.  413.174(f)(6), and continued to pay 
for them under Medicare Part D.
    In the proposed rule (80 FR 37833), we explained that under our 
proposed drug designation process at Sec.  413.234(b)(1), if injectable 
or intravenous forms of phosphate binders or calcimimetics are approved 
by the FDA, these drugs would be considered reflected in the ESRD PPS 
bundled payment because these drugs are included in an existing 
functional category so no additional payment would be available for 
inclusion of these drugs.
    However, we recognized the uniqueness of these drugs and we 
proposed not to apply this process to injectable or intravenous forms 
of phosphate binders and calcimimetics when they are approved because 
payment for the oral forms of these drugs was delayed and dollars were 
never included in the base rate to account for these drugs. As we 
discussed above, we determined in CY 2011 that both classes of drugs 
(phosphate binders and calcimimetics) were furnished for the treatment 
of ESRD and are therefore renal dialysis services. In addition, in the 
proposed rule we explained that we had utilization data for both 
classes of drugs because the oral versions existed at that time. 
However, for reasons discussed in the CY 2011 ESRD PPS final rule (75 
FR 49043 through 49044), we chose to delay their inclusion in the ESRD 
PPS bundled payment.
    Therefore, in the proposed rule, we proposed that when a non-oral 
version of a phosphate binder or calcimimetic is approved by the FDA, 
we would include the oral and any non-oral version of the drug in the 
ESRD PPS bundled payment. Specifically, we proposed that we would 
develop a computation for the inclusion of the oral and non-oral forms 
of the phosphate binder or calcimimetic so that the drug could be 
appropriately reflected in the ESRD PPS base rate. We explained that we 
would not take this approach for any subsequent drugs that are approved 
by the FDA and fall within the bone and mineral metabolism functional 
category (or any other functional categories) because we did not delay 
payment for any other drugs or biologicals for which we had 2007 
utilization data when the ESRD PPS was implemented in CY 2011 and, 
therefore, we believe the other functional categories appropriately 
reflect renal dialysis service drugs and biologicals.
    Comment: A drug manufacturer expressed concern that the proposal 
did not address the computation or timing for adding the oral-only 
drugs into the bundled payment once an injectable or intravenous 
version is approved for use. The commenter assumes this process would 
be done through notice and comment rulemaking and urged CMS to specify 
this fact in the final rule. They pointed out the new drugs come on to 
the market throughout the year, which may or may not comport with the 
annual rulemaking cycle for the ESRD PPS.
    Response: We intend to use notice-and-comment rulemaking to include 
the oral and non-oral forms of calcimimetics and phosphate binders in 
the ESRD PPS bundled payment after the payment of the transitional drug 
add-on payment adjustment. We will pay for calcimimetics and phosphate 
binders when those drugs are no longer oral-only drugs, that is, FDA 
approved and have an HCPCS code, using a transitional drug add-on 
payment adjustment calculated based on the payment methodologies in 
section 1847A of the Act. Once the injectable version is approved and 
has an HCPCS code we will issue a change request to provide notice that 
the injectable is available. Therefore, both the injectable and oral 
form will be paid under the ESRD PPS bundled payment using that 
adjustment. However, we note, any other new injectable or intravenous 
drug or biological will be assessed as to whether it fits into one of 
the functional categories. Injectable and intravenous drugs that fit 
into a functional category will not go through notice-and-comment 
rulemaking. Rather, they will be added to the functional categories, 
and thus the ESRD PPS, using a subregulatory process.
    Comment: One of the drug manufacturers recommended that in the case 
of oral equivalents, that first in class drugs receive the full 
transitional drug add-on payment adjustment, with stepped down payments 
for new drugs in the same class entering the market during the 
transitional payment period for the first in class product.
    One commenter stated that regardless of the method CMS uses to add 
these oral-only drugs to the ESRD PPS base rate, their inclusion should 
result in an increase in the base rate. They believe that PAMA's 
requirement to update payment rates using data from the most recent 
year available applies notwithstanding the budget neutrality adjustment 
that applied when the ESRD PPS was implemented in 2011.
    Response: It is unclear whether the drug manufacturer is referring 
to the oral form of existing oral-only drugs, or oral equivalents of 
drugs for which there are other types of administration. Oral 
equivalents of drugs with another form of administration, as well as 
oral-only drugs other than calcimimetics and phosphate binders, will be 
subject to the drug designation process. However, for phosphate binders 
and calcimimetics--for which there is a functional category--but no 
money is in the base rate--we will utilize the transitional drug add-on 
payment adjustment to collect utilization data before adding this drug 
to the ESRD PPS base rate. Once money has been included in the base 
rate for an injectable or intravenous calcimimetic and phosphate binder 
in the bone and mineral metabolism functional category, any future 
injectable or intravenous drugs in this category will be added directly 
to the functional category and, thus, the bundled payment.
    Comment: With regard to the definition of when an oral-only drug is 
no longer considered oral-only, two drug manufacturers expressed 
concern that the proposed regulatory text does not include an FDA 
reference as the standard for determining whether the FDA has approved 
another form of administration for a specific drug. They note that CMS 
provided a hyperlink in the proposed rule, but unfortunately, the link 
did not work. They recommended that we clarify in 42 CFR 413.234(d) 
whether we will specifically rely on the FDA publication ``Approved 
Drug Products with Therapeutic Equivalence Evaluations'' (commonly 
known as the FDA Orange Book) for determining whether an oral drug has 
an injectable or non-oral form and is no longer in the oral-only 
category and should be included in the ESRD PPS payment. They point out 
that the FDA Orange Book identifies all drug products (including dosage 
forms, routes of administration, etc.) approved by the FDA. To help 
define terms used in these resources, they suggested we cite an up-to-
date FDA Web site or resource that includes standards for identifying 
all drug dosage forms and routes of administration that are approved 
for use. If CMS is not using the FDA Orange Book, the commenters 
indicated that CMS should be specific in how it will determine whether 
a non-oral form of the oral-only drug exists.
    A patient organization advocates that before oral-only drugs are 
incorporated into the bundle, certain measures must be in place to 
ensure that drugs are appropriate for patients and that costs for the 
drugs are accurately calculated and paid for. Two pharmaceutical 
manufacturers recommended that, to avoid confusion, CMS should clarify 
in the regulation text that CMS will exclude a drug that meets the 
definition

[[Page 69026]]

of an oral-only drug and has no injectable or other form of 
administration.
    Response: We thank the commenters for making us aware of the non-
working link and have corrected that link in this final rule. The 
publication titled ``Approved Drug Products with Therapeutic 
Equivalence Evaluations'' (commonly known as the Orange Book) 
identifies drug products approved on the basis of safety and 
effectiveness by the Food and Drug Administration (FDA) under the 
Federal Food, Drug, and Cosmetic Act (the Act). The ``Orange Book 
Search'' was added to the FDA Web site October 31, 1997. We will 
utilize the Orange Book to assist us in determining whether an 
injectable or other form of administration of an oral-only drug has 
been approved by the FDA. When an oral-only drug already determined to 
be a renal dialysis service is formulated for injectable or intravenous 
use it will no longer be considered an oral-only drug. The new 
injectable or intravenous form of the oral-only drug will be assessed 
as to whether it fits into one of the functional groups. If it does not 
fit into the current functional groups, a new functional group will be 
proposed through notice-and-comment rulemaking. Other than oral drugs 
included in the ESRD PPS bundle that were composite rate drugs, if 
there is no injectable or intravenous form of an oral-only drug used 
for the treatment of ESRD, then it is not considered a part of the ESRD 
PPS bundle, and is paid for separately. Regarding the costs for the 
drugs being accurately calculated and paid for, we appreciate the 
commenter's concerns and anticipate addressing the possibility of these 
unique situations in future rulemaking.
    Regarding the recommendation that CMS should clarify in the 
regulation text that CMS will exclude a drug that meets the definition 
of an oral-only drug and has no injectable or other form of 
administration, we note that the Congress excluded oral-only drugs from 
the ESRD PPS payment bundle. Payments for oral-only ESRD drugs are not 
included under the ESRD PPS until 2024 as required by section 632(b)(1) 
of ATRA, as amended by section 217(a) of PAMA. Section 204 of ABLE 
further amended section 632(b)(1) of ATRA to provide that payment for 
oral-only ESRD drugs cannot be made under the ESRD PPS prior to January 
1, 2025.
    Comment: A national dialysis organization, LDOs, and a professional 
association stated that when an injectable or intravenous calcimimetic 
has been approved by the FDA and becomes available, many factors will 
need to be assessed, including clinical guidelines and indications, 
which may vary between injectable or intravenous and oral products; 
utilization and costs per treatment; and range of dosing. One LDO 
believes that there is insufficient information available regarding the 
future injectable or intravenous and oral products upon which to base 
sound payment policy. They pointed out that the oral calcimimetics are 
used by one-third of their patients. That sizeable population combined 
with the significant cost of the drug makes it unlikely that the 
current outlier policy would be sufficient to address utilization 
differences in patient population among facilities. They requested that 
CMS allow the injectable or intravenous equivalent of oral Sensipar to 
remain outside of the bundle for a transition period. Data collected 
from this period can guide the formation of reimbursement policy to 
ensure that beneficiaries have proper access to the therapy, that is, 
injectable, intravenous, or oral, which is best for them according to 
the severity of their secondary hyperparathyroidism.
    A national dialysis organization recommends that at the end of a 2-
year transition period, CMS would value the cost of the injectable or 
intravenous calcimimetic under Part B, including beneficiary costs, and 
add that amount to the base rate, if utilization warrants the costs to 
be spread across all patients. Relying upon the Part D spending data 
alone would assume that oral drug spending is the same as it would be 
for an injectable or intravenous, but very little is known about how 
the drug will be used in the ESRD population. Some commenters are 
requesting a 2-year delay in incorporating payment for calcimimetics 
under the ESRD PPS. In addition, they expressed concern that spending 
for calcimimetics under Part D does not represent all the utilization 
and dollars because some ESRD patients have no drug plan or are subject 
to the Part D ``donut hole'' due to cost. The organization expects that 
migration of payment from Part D to Part B will increase utilization 
among this group. The organization pointed out that including 
calcimimetics under the ESRD PPS will increase Part B expenditures and 
that the ESRD PPS cannot absorb the cost of calcimimetics without a 
substantial increase to the base rate. Another large stakeholder 
supports a transitional payment for injectable or intravenous versions 
of phosphate binders and calcimimetics because the bundled payment 
could be improperly inflated by a higher costing injectable or 
intravenous version that is only benefitting a subset of patients, but 
all patients would be subjected to a higher coinsurance. Conversely, 
there could be superior benefit of the injectable or intravenous 
version that renders the utilization of the oral versions lower.
    A drug manufacturer asked how CMS would determine the cost 
associated with a new drug if there is no utilization data, what 
sources of data CMS would use to measure utilization of an oral drug by 
beneficiaries not enrolled in Part D and whether payment rates could be 
adjusted mid-year to provide timely payment for new drugs upon approval 
or launch. They expressed concern that not having utilization for the 
30 percent of beneficiaries without Part D coverage will likely result 
in an inappropriate payment amount. The manufacturer also expressed 
concern that payments for new injectable or intravenous versions of 
oral-only drugs will also be inaccurate if the amount is based solely 
on Part D data. The manufacturer recommended that CMS conduct analyses 
to determine the adherence rate for the oral-only products using Part D 
claims to measure the medication possession ratio (MPR) and, assuming 
2100 percent adherence under Part B, estimate the gap that needs to be 
accounted for in the payment computation. MPR has been shown to be a 
useful metric in measuring patient adherence.
    A professional association agrees with paying ASP+6percent for 
injectable or intravenous treatments for bone and mineral disorders 
until the utilization of the new product is sufficiently mature to be 
subsumed into the PPS with accurate cost and use data.
    Another commenter was also concerned about the timing of the roll-
out of the injectable or intravenous phosphate binders and 
calcimimetics with the annual rulemaking cycle for the ESRD PPS. They 
are concerned about the ability for dialysis facilities to adopt a new 
non-oral calcimimetic or phosphate binder if there is no opportunity 
for payment until the next calendar year.
    Response: We thank the commenters for their input regarding the 
process for including calcimimetics and phosphate binders in the ESRD 
PPS bundled payment. We agree with the industry that injectable or 
intravenous phosphate binders and calcimimetics that come on the market 
in the future could have different clinical indications, utilization 
patterns, and costs than the oral-only versions and we believe it is 
appropriate to pay for these drugs using the transitional drug add-on 
payment adjustment for a minimum of 2 years.

[[Page 69027]]

Once the injectable or intravenous phosphate binder or calcimimetic are 
FDA approved and have a HCPCS code, we will issue a change request (as 
stated above) to pay for all forms of the phosphate binder or 
calcimimetic using a transitional drug add-on payment based on the 
payment methodologies under section 1847A of the Act, which could 
include ASP+6 percent, for a period of at least 2 years. This will 
allow us to collect data reflecting current utilization of both the 
oral and injectable or intravenous forms of the drugs, as well as 
payment patterns and beneficiary co-pays before we add these drugs to 
the ESRD PPS bundle. During this period we will not pay outlier 
payments for these drugs. At the end of the 2 or more years, the 
methodology for including the phosphate binders and calcimimetics into 
the ESRD PPS bundled payment will be adopted through notice-and-comment 
rulemaking.
    Regarding the drug manufacturer's recommendation that CMS conduct 
analyses to determine the adherence rate for the oral-only products 
using Part D claims to measure the medication possession ratio (MPR) 
because MPR has been shown to be a useful metric in measuring patient 
adherence, we will rely on utilization data from the dialysis 
facilities, which are required to report all separately billable drugs.
    We appreciate the support of the professional association for the 
use of the ASP pricing methodology for the transitional drug add-on 
payment adjustment and the minimum 2-year timeframe for payment of the 
adjustment, which we also agree is necessary to collect utilization 
data for these drugs.
    After consideration of public comments, we are finalizing the 
definition of oral-only drug at 413.234(a), which provides that an 
oral-only drug is a drug or biological with no injectable equivalent or 
other form of administration other than an oral form. We are also 
finalizing our process at 42 CFR 413.234(d) for determining that an 
oral only drug is no longer considered oral-only when a non-oral 
version of the oral-only drug is approved by the FDA. We will include 
the oral and any non-oral version of the drug in the ESRD PPS bundled 
payment when it is no longer considered an oral-only drug under this 
regulation. For at least 2 years we will pay for the existing oral-only 
drugs--phosphate binders and calcimimetics--using the transitional drug 
add-on payment adjustment, which will be calculated based on the 
payment methodologies under section 1847A of the Act. We will add the 
oral and non-oral forms of the phosphate binders and calcimimetics to 
the ESRD PPS bundled payment through notice-and-comment rulemaking. For 
future oral-only drugs for which a non-oral form of administration 
comes on the market, we will apply our drug designation process as we 
would for all other new drugs.
4. Delay of Payment for Oral-Only Renal Dialysis Services
    As we discussed in the CY 2014 ESRD PPS final rule (78 FR 72185 
through 72186) and again in the CY 2015 ESRD PPS final rule (79 FR 
66147 through 66148), section 1881(b)(14)(A)(i) of the Act 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 such 
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 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 
and any oral form of ESAs, which are included under clause (ii) of 
section 1881(b)(14)(B) of the Act), but also all oral drugs and 
biologicals used for the treatment of ESRD and furnished under title 
XVIII of the Act. We also concluded that, to the extent oral-only drugs 
or biologicals used for the treatment of ESRD do not fall within clause 
(iii) of section 1881(b)(14)(B), such drugs or biologicals would fall 
under clause (iv) of such section, 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).
    We finalized and promulgated the payment policies for oral-only 
renal dialysis service drugs or biologicals in the CY 2011 ESRD PPS 
final rule (75 FR 49038 through 49053), where we defined renal dialysis 
services at 42 CFR 413.171 as including other drugs and biologicals 
that are furnished to individuals for the treatment of ESRD and for 
which payment was made separately prior to January 1, 2011 under Title 
XVIII of the Act, including drugs and biologicals with only an oral 
form. Although we included oral-only renal dialysis service drugs and 
biologicals in the definition of 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 and biologicals, including allowing ESRD 
facilities additional time to make operational changes and logistical 
arrangements in order to furnish oral-only renal dialysis service drugs 
and biologicals to their patients. Accordingly, we codified the delay 
in payment for oral-only renal dialysis service drugs and biologicals 
at 42 CFR 413.174(f)(6), and provided 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, ATRA was enacted. Section 632(b) of ATRA 
precluded the Secretary from implementing the policy under 42 CFR 
413.176(f)(6) relating to oral-only renal dialysis service drugs and 
biologicals prior to January 1, 2016. Accordingly, in the CY 2014 ESRD 
PPS final rule (78 FR 72185 through 72186), we delayed payment for 
oral-only renal dialysis service drugs and biologicals under the ESRD 
PPS until January 1, 2016. We implemented this delay by revising the 
effective date at Sec.  413.174(f)(6) for providing payment for oral-
only renal dialysis service drugs under the ESRD PPS from January 1, 
2014 to January 1, 2016. In addition, we changed the date when oral-
only renal dialysis service drugs and biologicals would be eligible for 
outlier services under the outlier policy described in Sec.  
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 precludes the Secretary 
from implementing the policy under 42 CFR 413.174(f)(6) relating to 
oral-only renal dialysis service drugs and biologicals prior to January 
1, 2024. We implemented this delay in the CY 2015 ESRD PPS final rule 
(79 FR 66262) by modifying the effective date for providing payment for 
oral-only renal dialysis service drugs and biologicals under the ESRD 
PPS at Sec.  413.174(f)(6) from January 1, 2016 to January 1, 2024. We 
also changed the date in Sec.  413.237(a)(1)(iv) regarding outlier 
payments for oral-only renal dialysis service drugs made under the ESRD 
PPS from January 1, 2016 to January 1, 2024.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37834) we stated that 
on December 19, 2014, section 204 of ABLE was enacted, which delays the 
inclusion of renal dialysis service oral-only drugs and biologicals 
under the ESRD PPS until 2025. It amended section 632(b)(1)

[[Page 69028]]

of ATRA, as amended by section 217(a)(1) of PAMA by striking ``2024'' 
and inserting ``2025.'' We explained that as we did in the CY 2014 ESRD 
PPS final rule (78 FR 72186) and the CY 2015 ESRD PPS final rule (79 FR 
66148) referenced above, we proposed to implement this delay by 
modifying the effective date for providing payment for oral-only renal 
dialysis service drugs and biologicals under the ESRD PPS at 42 CFR 
413.174(f)(6) from January 1, 2024 to January 1, 2025. In addition, we 
proposed to change the date in Sec.  413.237(a)(1)(iv) regarding 
outlier payments for oral-only renal dialysis service drugs made under 
the ESRD PPS from January 1, 2024 to January 1, 2025.We stated that we 
continue to believe that oral-only renal dialysis service drugs and 
biologicals are an essential part of the ESRD PPS bundle and should be 
paid for under the ESRD PPS.
    We did not receive any comments on implementing the delay by 
modifying the effective date for providing payment for oral-only renal 
dialysis service drugs and biologicals under the ESRD PPS at 42 CFR 
413.174(f)(6) from January 1, 2024 to January 1, 2025. In addition we 
did not receive comments on the change to the date in Sec.  
413.237(a)(1)(iv) regarding outlier payments for oral-only renal 
dialysis service drugs made under the ESRD PPS from January 1, 2024 to 
January 1, 2025. Therefore, we are finalizing the language at 42 CFR 
413.174(f)(6) and Sec.  413.237(a)(1)(iv) as proposed.
5. Reporting Medical Director Fees on ESRD Facility Cost Reports
    In the 1980s, following audits by the Office of the Inspector 
General and the Medicare administrative contractors (MACs) that 
revealed instances in which independent facilities compensated their 
medical directors and administrators excessively, CMS set limits for 
reasonable compensation when reporting medical director fees on ESRD 
facility cost reports. End-Stage Renal Disease Program; Prospective 
Reimbursement for Dialysis Services and Approval of Special Purpose 
Renal Dialysis Facilities, 48 FR 21254, 21261 through 21262 (May 11, 
1983); End-Stage Renal Disease Program: Composite Rates and Methodology 
for Determining the Rates, 51 FR 29404, 29407 (Aug. 15, 1986). In 
Transmittal 12, issued in July 1989, of the Provider Reimbursement 
Manual Part I, Chapter 27, titled, ``Reimbursement for ESRD and 
Transplant Services,'' CMS adopted a policy for reporting allowable 
compensation for physician owners and medical directors of ESRD 
facilities and set a limit at the Reasonable Compensation Equivalent 
(RCE) limit of the specialty of internal medicine for a metropolitan 
area of greater than one million people.
    In the Provider Reimbursement Manual Part I, Chapter 27--Outpatient 
Maintenance Dialysis Services, 2723--Responsibility of Intermediaries, 
we explain that the intermediary reviews facility cost reports to 
ensure that the compensation paid to medical directors does not exceed 
the RCE limit. The RCE limit for a board-certified physician of 
internal medicine has been updated over the interim years. The most 
recent update to the RCE limit was finalized in the FY 2015 IPPS final 
rule published on August 22, 2014 (79 FR 50157 through 50162). In that 
rule, CMS finalized an RCE limit of $197,500 per year beginning in CY 
2015 for a board-certified physician of internal medicine.
    The requirements for medical directors of ESRD facilities are 
discussed in the Conditions for Coverage for ESRD facilities, which 
were updated in 2008 to reflect advances in dialysis technology and 
standard care practices since the requirements were last revised in 
their entirety in 1976. Conditions for Coverage for ESRD Facilities, 73 
FR 20470 (April 15, 2008). With the update to the Conditions for 
Coverage, all Medicare-certified ESRD facilities are required to have a 
medical director who is responsible for the delivery of patient care 
and outcomes in the facility as codified in 42 CFR part 494, titled 
Conditions for Coverage for End-Stage Renal Disease Facilities. We 
discuss the qualifications of an ESRD facility medical director in 42 
CFR 494.140(a), titled Standard: Medical director, where we require 
that a medical director must be a board-certified physician in internal 
medicine or pediatrics by a professional board and have completed a 
board-approved training program in nephrology with at least 12 months 
of experience providing care to patients receiving dialysis, but if 
such a physician is not available, another physician may direct the 
facility, subject to the approval of the Secretary.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37834), we explained 
that the RCE limit of $197,500 per year for a board-certified physician 
of internal medicine may be less than the expense a facility incurs if 
they employ a board-certified nephrologist as their medical director.In 
that rule, we stated that we could appreciate that the reasonable 
compensation limits are generally used when determining payment for 
providers that are reimbursed on a reasonable cost basis; they 
typically are not used in prospective payment systems, like the ESRD 
PPS, that update payment rates using market basket methodologies. We 
further stated that we believe the application of the RCE limit is no 
longer relevant now that 100 percent of ESRD facilities are paid under 
the ESRD PPS beginning in CY 2014.
    Therefore, we proposed that beginning in CY 2016 we would eliminate 
the RCE limit for reporting an ESRD facility's medical director fees on 
ESRD facility cost reports. We noted that the elimination of the RCE 
limit does not supersede or alter in any way the reporting guidance 
furnished in the Provider Reimbursement Manual, Part 2, Chapter 42, 
sections 4210, 4210.1 and 4210.2. In addition, we stated that we will 
continue to apply the ESRD facility-specific policy under which the 
time spent by a physician in an ESRD facility on administrative duties 
is limited to 25 percent per facility unless documentation is furnished 
supporting the claim. In addition, if an individual provides services 
to more than one dialysis facility, the individual's time must be 
prorated among the different facilities and may not exceed 100 percent.
    The comments and our responses are set forth below.
    Comment: Several national dialysis organizations expressed support 
for the CMS proposal to eliminate limits on medical director fees 
reported on cost reports. The commenters requested that we apply this 
policy change to the 2015 cost reports.
    Response: We thank the commenters for their support of the proposal 
to eliminate the limit for medical director fees on the ESRD facility 
cost report. This policy change is effective January 1, 2016 for CY 
2016. Since the policy is effective for CY 2016, we are not able to 
apply this policy to cost reports before the effective date and 
therefore it will not be applicable to the CY 2015 cost reports.
    Comment: MedPAC urged CMS to maintain a limit for reporting an ESRD 
facility's medical director fees on ESRD facility cost reports. They 
believe the current RCE limit on the medical director compensation 
creates pressure on facilities to constrain their compensation costs 
and make better use of beneficiaries' and taxpayers' resources. In 
addition, eliminating the RCE limit may decrease some facilities' 
negotiating leverage with prospective medical directors, which in turn, 
will lead to increased compensation costs. The commenter explained that 
as providers' costs increase, all other things being equal, the 
resulting

[[Page 69029]]

Medicare margin will decrease. MedPAC suggested that, as an alternative 
to the current RCE limit or no compensation limit, that we adopt a 
limit used by other Executive branch agencies such as the Title 38 
Physician and Dentist Pay under which pay table 2 includes nephrology 
as a covered clinical specialty and the pay range for the most senior 
management level is $140,000 to $250,000.
    Response: We do not believe that perpetuating a limit for the 
medical director fee is appropriate for the reasons that we discuss 
above, including that ESRD facilities are no longer reimbursed on a 
cost basis. This policy change will not affect the ESRD PPS annual 
update or increase Medicare spending. In addition, MACs perform a 
general reasonableness evaluation of a person's compensation by 
comparing it with the compensation paid to other individuals in similar 
circumstance. We believe that the elimination of the limit will more 
accurately represent facility costs on the cost report that is used for 
margin analysis or refinements to the payment system.
    Based on the comments that we received, we are finalizing that 
beginning in CY 2016 we are eliminating the RCE limit for reporting an 
ESRD facility's medical director fees on ESRD facility cost reports.

C. Clarifications Regarding the ESRD PPS

1. Laboratory Renal Dialysis Services
    Section 1881(b)(14)(B)(iv) of the Act requires diagnostic 
laboratory tests not included under the composite payment rate (that 
is, laboratory services separately paid prior to January 1, 2011) to be 
included as part of the ESRD PPS payment bundle. In the CY 2011 ESRD 
PPS final rule (75 FR 49053), we defined renal dialysis services at 42 
CFR 413.171 to include items and services included in the composite 
payment rate for renal dialysis services as of December 31, 2010 and 
diagnostic laboratory tests and other items and services not included 
in the composite rate that are furnished to individuals for the 
treatment of ESRD. The composite payment rate covered routine items and 
services furnished to ESRD beneficiaries for outpatient maintenance 
dialysis, including some laboratory tests. We finalized a policy to 
include in the definition of laboratory tests under 42 CFR 413.171(4) 
those laboratory tests that were separately billed by ESRD facilities 
as of December 31, 2010 and laboratory tests ordered by a physician who 
receives monthly capitation payments (MCPs) for treating ESRD patients 
that were separately billed by independent laboratories (75 FR 49055). 
We determined the average Medicare Allowable Payment (MAP) amount was 
$8.40, as listed on Table 19 titled, ``Average Medicare Allowable 
Payments for composite rate and separately billable services, 2007, 
with adjustment for price inflation to 2009'' (75 FR 49075). This 
amount included the laboratory tests that were already included under 
the composite rate, as well as laboratory tests billed separately by 
ESRD facilities (that is, all laboratory services paid on the 72X claim 
furnished in CY 2007) and laboratory tests that were ordered by Monthly 
Capitation Payment (MCP) practitioners that were separately billed by 
independent labs in CY 2007.
    Through the comments we received on the CY 2011 ESRD PPS proposed 
rule, we learned that holding the ESRD facilities responsible for any 
laboratory test that is furnished in the ESRD facility or ordered by an 
MCP could have unintended consequences to patients (75 FR 49054). In 
particular, commenters noted that in many instances the MCP physician 
is the ESRD patient's primary care physician and often orders 
laboratory tests that are unrelated to the patient's ESRD. These 
commenters raised concerns that requiring ESRD facilities to pay for 
these tests would result in large numbers of tests that are unrelated 
to ESRD being included in the ESRD bundle. We agreed with commenters 
that it would be in the best interest of the beneficiaries for an ESRD 
facility to draw blood for laboratory tests that are not for the 
treatment of ESRD during the dialysis session.
    Commenters also requested that we produce a list of the ESRD-
related laboratory tests that are included in the ESRD PPS bundle (75 
FR 49054). We received several laboratory service lists from the 
commenters that they considered to be generally furnished for the 
treatment of ESRD. While there was agreement for many of the laboratory 
services, the lists were inconsistent and lacked stakeholder consensus. 
When Medicare provides a payment for a benefit that is based on a 
bundle of items and services, CMS establishes claims processing edits 
that prevent payment in other settings for items and services that are 
identified as being accounted for in the bundled payment. Therefore, we 
needed to develop a list of ESRD-related laboratory tests to implement 
claims processing edits that prevent payment in other settings for 
items and services that are identified as renal dialysis services to 
ensure that payment is not made to independent laboratories for ESRD-
related laboratory tests. Under the ESRD PPS we call these edits 
consolidated billing (CB) requirements.
    We performed a clinical review of the lists provided by the 
industry and the laboratory tests reported in the claims data to 
determine which laboratory tests are routinely furnished to ESRD 
beneficiaries for the treatment of ESRD. Our clinical review resulted 
in Table F in the Addendum of the CY 2011 ESRD PPS final rule as the 
list of laboratory tests that are subject to the ESRD PPS CB 
requirements (75 FR 49213). We acknowledged in that rule that the list 
of laboratory tests displayed in Table F is not an all-inclusive list 
and we recognized that there are other laboratory tests that may be 
furnished for the treatment of ESRD (75 FR 49169). We stated in the 
Medicare Benefit Policy Manual, Pub. 100-02, Chapter 11, section 20.2, 
that the determination of whether a laboratory test is ESRD-related is 
a clinical decision for the ESRD patient's ordering practitioner. If a 
laboratory test is ordered for the treatment of ESRD, then the 
laboratory test is not paid separately.
    Due to the commenters' concerns that ESRD beneficiaries should be 
able to have blood drawn for non-ESRD-related laboratory tests in the 
ESRD facility, we created a methodology for allowing ESRD facilities to 
receive separate payment when a laboratory service is furnished for 
reasons other than for the treatment of ESRD (75 FR 49054). We created 
CB requirements using a modifier to allow independent laboratories, 
hospital-based laboratories, or ESRD facilities (with the appropriate 
clinical laboratory certification in accordance with the Clinical 
Laboratory Improvement Amendments), to receive separate payment. This 
modifier, which is called the AY modifier, serves as an attestation 
that the item or service is medically necessary for the patient but is 
not being used for the treatment of ESRD.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37835), we explained 
that following publication of the CY 2011 ESRD PPS final rule, we had 
received numerous inquiries regarding Table F (75 FR 49213). 
Stakeholders have communicated to us that having a list of laboratory 
services that is not all-inclusive is confusing because there is no 
definitive guidance on which laboratory tests are included in, and 
excluded from, the ESRD PPS. They further stated that leaving the 
determination of when a laboratory test is ordered for the treatment of 
ESRD to the practitioner creates inconsistent billing practices and 
potential overuse

[[Page 69030]]

of the AY modifier. Stakeholders stated that practitioners can have 
different positions on when a laboratory test is being ordered for the 
treatment of ESRD. For example, some practitioners may believe that 
laboratory tests ordered commonly for diabetes could be considered as 
for the treatment of ESRD because in certain situations a patient's 
ESRD is a macrovascular complication of the diabetes. Commenters 
believe these varying perspectives among practitioners can translate 
into inconsistent billing practices.
    In the proposed rule (80 FR 37835 through 37836), we also explained 
that stakeholders have expressed concern about potential overuse of the 
AY modifier because they are aware that CMS monitors the claims data 
for trends and behaviors. The industry's position is that if there is a 
laboratory service that is subject to the CB requirements, it is 
because CMS has determined that test to be routinely furnished for the 
treatment of ESRD and if certain tests are frequently reported with the 
AY modifier, then those laboratories or ESRD facilities could appear to 
be inappropriately billing Medicare.
    In the proposed rule (80 FR 37836) we explained that while we 
recognize stakeholders' concerns, for CY 2016, we did not make a 
proposal to change the laboratory services policy and reiterated that 
any laboratory test furnished to an ESRD beneficiary for the treatment 
of ESRD is considered to be a renal dialysis service and is not payable 
outside of the ESRD PPS. We explained that we continue to believe that 
it is necessary to use a list of laboratory services that are routinely 
furnished for the treatment of ESRD for enforcing the CB requirements. 
In addition, we continue to believe it is convenient for ESRD 
beneficiaries to have their blood drawn at the time of dialysis for 
laboratory testing for reasons other than for the treatment of ESRD.
    In the proposed rule (80 FR 37836) we stated that we have included 
appropriate payments into the base rate to account for any laboratory 
test that a practitioner determines to be used for the treatment of 
ESRD. We explained that it is important that medical necessity be the 
reason for how items and services are reported to Medicare. When 
services are reported appropriately, payments are made appropriately 
out of the Trust Fund and ESRD beneficiaries are not unfairly 
inconvenienced by constraints placed upon them because a certain 
laboratory test is or is not included in the ESRD PPS. Therefore, in 
order to maintain practitioner flexibility for ordering tests believed 
to be medically necessary for the treatment of ESRD, and have those 
tests included and paid under the ESRD PPS, we did not make a proposal 
to adopt a specific list of laboratory services that are always 
considered furnished for the treatment of ESRD.
    We solicited comment on the current list of laboratory services 
that is used for the ESRD PPS CB requirements to determine if there is 
consensus among stakeholders regarding whether the list includes those 
laboratory tests that are routinely furnished for the treatment of 
ESRD. Table 9is the list of laboratory tests that is used for the CB 
requirements. We explained in the proposed rule (80 FR 37836) that we 
agree with the stakeholders that there can be different interpretations 
among practitioners as to what is considered to be furnished for the 
treatment of ESRD and that there can be some views that are more 
conservative than others. Furthermore it is the patient's ordering 
practitioner who makes the clinical determination of whether a 
laboratory test is for the treatment of ESRD.
    We did not receive comments from stakeholders indicating if the 
list of laboratory services used for CB requirements are or are not 
routinely furnished for the treatment of ESRD.
    In the proposed rule (80 FR 37836), we stated that in the context 
of the clarification, we proposed to remove the lipid panel from the CB 
list. As we stated in the CY 2013 ESRD PPS final rule (77 FR 67470), it 
was our understanding that the lipid panel was routinely used for the 
treatment of ESRD. We explained that because some forms of dialysis, 
particularly peritoneal dialysis, are associated with increased 
cholesterol and triglyceride levels, a lipid profile laboratory test to 
assess these levels would be considered furnished for the treatment of 
ESRD. In the CY 2016 proposed rule (80 FR 37836) we indicated that 
since the CY 2013 final rule was published we have learned from 
stakeholders that the lipid panel is mostly used to monitor cardiac 
conditions and is not routinely furnished for the treatment of ESRD.
    We explained that we believed that the proposal to remove the lipid 
panel was consistent with the clarification provided in that rule that 
laboratory services included in Table 9and subject to ESRD consolidated 
billing are those that are routinely furnished for the treatment of 
ESRD but that may occasionally be used to treat non-ESRD-related 
conditions. In contrast, the lipid profile laboratory test is not 
routinely used for the treatment of ESRD. We solicited comments on this 
proposal and received several comments as set forth below.
    Comment: Many stakeholders (an LDO, two national dialysis 
organizations, an organization representing small and medium dialysis 
facilities, and a nonprofit dialysis organization, and two professional 
associations)expressed support for the proposed elimination of the 
lipid panel from the consolidated billing list.
    Response: We appreciate the commenters support. We are finalizing 
the removal of the lipid panel from the ESRD PPS consolidated billing 
list and we will issue subregulatory guidance to that effect. However, 
we note that even though lipid panels are being removed from the ESRD 
PPS consolidated billing list, if an ESRD patient's ordering 
practitioner orders a lipid panel for the treatment of ESRD then it 
should not be billed separately.

    Table 9--Laboratory Services Subject to ESRD Consolidated Billing
------------------------------------------------------------------------
                    Short description                        CPT/HCPCS
------------------------------------------------------------------------
Basic Metabolic Panel (Calcium, ionized)................           80047
Basic Metabolic Panel (Calcium, total)..................           80048
Electrolyte Panel.......................................           80051
Comprehensive Metabolic Panel...........................           80053
Lipid Panel \1\.........................................           80061
Renal Function Panel....................................           80069
Hepatic Function Panel..................................           80076
Assay of serum albumin..................................           82040
Assay of aluminum.......................................           82108
Vitamin d, 25 hydroxy...................................           82306
Assay of calcium........................................           82310
Assay of calcium, Ionized...............................           82330
Assay, blood carbon dioxide.............................           82374
Assay of carnitine......................................           82379
Assay of blood chloride.................................           82435
Assay of creatinine.....................................           82565
Assay of urine creatinine...............................           82570
Creatinine clearance test...............................           82575
Vitamin B-12............................................           82607
Vit d 1, 25-dihydroxy...................................           82652
Assay of erythropoietin.................................           82668
Assay of ferritin.......................................           82728
Blood folic acid serum..................................           82746
Assay of iron...........................................           83540
Iron binding test.......................................           83550
Assay of magnesium......................................           83735
Assay of parathormone...................................           83970
Assay alkaline phosphatase..............................           84075
Assay of phosphorus.....................................           84100
Assay of serum potassium................................           84132
Assay of prealbumin.....................................           84134
Assay of protein, serum.................................           84155
Assay of protein by other source........................           84157
Assay of serum sodium...................................           84295
Assay of transferrin....................................           84466
Assay of urea nitrogen..................................           84520
Assay of urine/urea-n...................................           84540
Urea-N clearance test...................................           84545
Hematocrit..............................................           85014
Hemoglobin..............................................           85018

[[Page 69031]]

 
Complete (cbc), automated (HgB, Hct, RBC, WBC, and                 85025
 Platelet count) and automated differential WBC count...
Complete (cbc), automated (HgB, Hct, RBC, WBC, and                 85027
 Platelet count)........................................
Automated rbc count.....................................           85041
Manual reticulocyte count...............................           85044
Automated reticulocyte count............................           85045
Reticyte/hgb concentrate................................           85046
Automated leukocyte count...............................           85048
Hep b core antibody, total..............................           86704
Hep b core antibody, igm................................           86705
Hep b surface antibody..................................           86706
Blood culture for bacteria..............................           87040
Culture, bacteria, other................................           87070
Culture bacteri aerobic othr............................           87071
Culture bacteria anaerobic..............................           87073
Cultr bacteria, except blood............................           87075
Culture anaerobe ident, each............................           87076
Culture aerobic identify................................           87077
Culture screen only.....................................           87081
Hepatitis b surface ag, eia.............................           87340
CBC/diff wbc w/o platelet...............................           G0306
CBC without platelet....................................           G0307
------------------------------------------------------------------------
\1\ Effective January 1, 2016, this laboratory service is no longer
  subject to the ESRD PPS consolidated billing requirements.

    In the proposed rule (80 FR 37836), we explained that although we 
did not propose to change our policy related to payment for ESRD-
related laboratory services under the ESRD PPS, we did clarify that to 
the extent a laboratory test is performed to monitor the levels or 
effects of any of the drugs that we have specifically excluded from the 
ESRD PPS, these tests would be separately billable. In the CY 2011 ESRD 
PPS final rule, we discuss when certain drugs and biologicals would not 
be considered for the treatment of ESRD. Specifically, Table 10, which 
appeared as Table 3--ESRD Drug Category Excluded from the Final ESRD 
PPS Base Rate in the CY 2011 ESRD PPS final rule (75 FR 49049) lists 
the drug categories that were excluded from the ESRD PPS and the 
rationale for their exclusion. In the proposed rule, we clarified that 
laboratory services furnished to monitor the medication levels or 
effects of drugs and biologicals that fall in those categories would 
not be considered to be furnished for the treatment of ESRD. We 
solicited comment on this clarification and a summary of those comments 
are set forth below.
    Comment: Several organizations expressed support for the 
clarification of linking coverage of laboratory testing under the ESRD 
PPS to the drugs and biologicals considered to be renal dialysis 
services. They indicated that they support the clarifications that a 
laboratory test that is performed to monitor the levels or effects of 
any of the drugs that CMS has specifically excluded from the ESRD PPS 
will be separately billable and not be considered to be furnished for 
the treatment of ESRD.
    Response: We appreciate the commenters support and will update our 
subregulatory guidance with this clarification.
    Comment: One health plan requested that we also remove Vitamin D/
Hydroxy lab service (CPT 82306) as this lab is not routinely or 
consistently provided to ESRD patients and not necessary for the 
treatment of ESRD. Stakeholders stated that considering any laboratory 
test furnished to an ESRD beneficiary for the treatment of ESRD to be a 
renal dialysis service and therefore not payable outside of the ESRD 
PPS is imprecise and harms all parties involved--including dialysis 
facilities, independent laboratories, and patients--by guaranteeing 
widespread inconsistent billing practices and unpredictable medical 
review outcomes, and by ignoring the fundamental principles of 
consolidated billing and the PPS methodology, which depend on 
predictability to enable efficient cost management. Instead they 
recommend that CMS adopt an objective standard, such as clearly stating 
that laboratory tests included in the consolidated billing list 
constitutes an all-inclusive list of laboratory tests included in the 
ESRD PPS.
    Response: We plan to reassess the laboratory services policies 
under the ESRD PPS, including whether to establish an all-inclusive 
list of laboratory tests, in light of the clarification of our policy 
that links laboratory tests under the ESRD PPS with renal dialysis 
service drugs. With regard to the specific suggestion that we remove 
Vitamin D/Hydroxy laboratory service, we will address this suggestion 
in future guidance once we assess the extent to which the laboratory 
test is used and whether it is related to renal dialysis service drugs.

  Table 10--ESRD Drug Categories Excluded From the Final ESRD PPS Base
                                  Rate
------------------------------------------------------------------------
             Drug category                   Rationale for exclusion
------------------------------------------------------------------------
Anticoagulant..........................  Drugs labeled for non-renal
                                          dialysis conditions and not
                                          for vascular access.
Antidiuretic...........................  Used to prevent fluid loss.
Antiepileptic..........................  Used to prevent seizures.
Anti-inflammatory......................  May be used to treat kidney
                                          disease (glomerulonephritis)
                                          and other inflammatory
                                          conditions.
Antipsychotic..........................  Used to treat psychosis.
Antiviral..............................  Used to treat viral conditions
                                          such as shingles.
Cancer management......................  Includes oral, parenteral and
                                          infusions. Cancer drugs are
                                          covered under a separate
                                          benefit category.
Cardiac management.....................  Drugs that manage blood
                                          pressure and cardiac
                                          conditions.
Cartilage..............................  Used to replace synovial fluid
                                          in a joint space.
Coagulants.............................  Drugs that cause blood to clot
                                          after anti-coagulant overdose
                                          or factor VII deficiency.
Cytoprotective agents..................  Used after chemotherapy
                                          treatment.
Endocrine/metabolic management.........  Used for endocrine/metabolic
                                          disorders such as thyroid or
                                          endocrine deficiency,
                                          hypoglycemia, and
                                          hyperglycemia.
Erectile dysfunction management........  Androgens were used prior to
                                          the development of ESAs for
                                          anemia management and
                                          currently are not recommended
                                          practice. Also used for
                                          hypogonadism and erectile
                                          dysfunction.
Gastrointestinal management............  Used to treat gastrointestinal
                                          conditions such as ulcers and
                                          gallbladder disease.
Immune system management...............  Anti-rejection drugs covered
                                          under a separate benefit
                                          category.
Migraine management....................  Used to treat migraine
                                          headaches and symptoms.
Musculoskeletal management.............  Used to treat muscular
                                          disorders such as prevent
                                          muscle spasms, relax muscles,
                                          improve muscle tone as in
                                          myasthenia gravis, relax
                                          muscles for intubation and
                                          induce uterine contractions.

[[Page 69032]]

 
Pharmacy handling for oral anti-cancer,  Not a function performed by an
 anti-emetics and immunosuppressant       ESRD facility.
 drugs.
Pulmonary system management............  Used for respiratory/lung
                                          conditions such as opening
                                          airways and newborn apnea.
Radiopharmaceutical procedures.........  Includes contrasts and
                                          procedure preparation.
Unclassified drugs.....................  Should only be used for drugs
                                          that do not have a HCPCS code
                                          and therefore cannot be
                                          identified.
Vaccines...............................  Covered under a separate
                                          benefit category.
------------------------------------------------------------------------

2. Renal Dialysis Service Drugs and Biologicals
a. 2014 Part D Call Letter Follow-Up
    In the proposed rule (80 FR 37837), we explained that last year we 
received public comments that expressed concern that the 2014 Part D 
Call Letter provision for prior authorization for drug categories that 
may be used for ESRD as well as other conditions resulted in Part D 
plan sponsors inappropriately refusing to cover oral drugs that are not 
renal dialysis services. Specifically, they noted that beneficiaries 
had difficulties obtaining necessary medications such as oral 
antibiotics prescribed for pneumonia and that the 2014 Part D Call 
Letter provision led to confusion for Part D plan sponsors and delays 
in beneficiaries obtaining essential medications at the pharmacy.
    In response to the comments, we explained that the guidance in the 
2014 Part D Call Letter was issued in response to increases in billing 
under Part D for drugs that may be prescribed for renal dialysis 
services but may also be prescribed for other conditions. The guidance 
strongly encouraged 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 used for dialysis 
and non-dialysis purposes (75 FR 49051). These include: antiemetics, 
anti-infectives, anti-pruritics, anxiolytics, drugs used for excess 
fluid management, drugs used for fluid and electrolyte management 
including volume expanders, and drugs used for pain management 
(analgesics). We indicated in the CY 2015 ESRD PPS final rule (79 FR 
66151) that we were considering various alternatives for dealing with 
this issue, as it has always been our intention to eliminate or 
minimize disruptions or delays in ESRD beneficiaries receiving 
essential medications and that we planned to issue further guidance to 
address the issue.
    In the Health Plan Management System memo issued on November 14, 
2014, we encouraged sponsors to remove the beneficiary-level prior 
authorization (PA) edits on these drugs. When claims are submitted to 
Part D for drugs in the seven categories, we expect that they are not 
being used for the treatment of ESRD and, therefore, may be coverable 
under
    Part D. We also expect that Medicare ESRD facilities will continue 
to provide all of the medications used for the treatment of ESRD, 
including drugs in the seven categories. We will continue to monitor 
the utilization of renal dialysis drugs and biologicals under Part B 
and Part D.
b. Oral or Other Forms of Renal Dialysis Injectable Drugs and 
Biologicals
    The ESRD PPS includes certain drugs and biologicals that were 
previously paid under Part D. Oral or other forms of injectable drugs 
and biologicals used for the treatment of ESRD, for example, vitamin D 
analogs, levocarnitine, antibiotics or any other oral or other form of 
a renal dialysis injectable drug or biological are also included in the 
ESRD PPS and may not be separately paid. These drugs are included in 
the ESRD PPS payment because the payments made for both the injectable 
and oral forms were included in the ESRD PPS base rate. As discussed in 
section II.B.4.of this final rule, implementation of oral-only drugs 
used in the treatment of ESRD (that is, drugs with no injectable 
equivalent) under the ESRD PPS payment has been delayed until 2025.
    In the CY 2011 ESRD PPS final rule (75 FR 49172), we stated that 
ESRD facilities are required to record the quantity of oral medications 
provided for the monthly billing period. In addition, ESRD facilities 
would submit claims for oral drugs only after having received an 
invoice of payment. We indicated that we would address recording of 
drugs on an ESRD claim in future guidance. We included this requirement 
because renal dialysis drugs and biologicals that were paid separately 
prior to the ESRD PPS, as many of these oral medications were, are 
eligible outlier items and services. If an ESRD facility were to report 
a 90-day supply of a drug on a monthly claim, the claim could receive 
an outlier payment erroneously.
    On June 7, 2013, we issued an update to the Medicare Benefits 
Policy Manual, Pub. 100-02, Chapter 11 to reflect implementation of the 
ESRD PPS in Change Request 8261.In section 20.3.C of the updated 
Medicare Benefits Policy Manual, we stated that for ESRD-related oral 
or other forms of drugs that are filled at the pharmacy for home use, 
ESRD facilities should report one line item per prescription, but only 
for the quantity of the drug expected to be taken during the claim 
billing period.

    Example:  A prescription for oral vitamin D was ordered for one 
pill to be taken 3 times daily for a period of 45 days. The patient 
began taking the medication on April 15, 2011. On the April claim, 
the ESRD facility would report the appropriate National Drug Code 
(NDC) code for the drug with the quantity 45 (15 days x 3 pills per 
day). The remaining pills which would be taken in May would appear 
on the May claim for a quantity of 90 (30 days x 3 pills per day). 
Prescriptions for a 3 month supply of the drug would never be 
reported on a single claim. Only the amount expected to be taken 
during the month would be reported on that month's claim.

    In February 2015, we were informed by one of the large dialysis 
organizations that they, and many other ESRD chain organizations, are 
out of compliance with the requirement that only the quantity of the 
drug expected to be taken during the claim billing period should be 
indicated on the ESRD monthly claim. They indicated that some 
facilities are incorrectly reporting units that reflect a 60-day or 90-
day prescription while other facilities are not reporting the oral 
drugs prescribed. The reason given for these reporting errors is the 
lack of prescription processing information. Specifically, while the 
facilities know when the pharmacy fills the prescription, they do not 
know when the patient picks up the drug from the pharmacy and begins to 
take the drug.

[[Page 69033]]

    Due to this confusion and lack of compliance, we are reiterating 
our current policy that all renal dialysis service drugs and 
biologicals prescribed for ESRD patients, including the oral forms of 
renal dialysis injectable drugs, must be reported by ESRD facilities 
and the units reported on the monthly claim must reflect the amount 
expected to be taken during that month. The facilities should use the 
best information they have in determining the amount expected to be 
taken in a given month, including fill information from the pharmacy 
and the patient's plan of care. Any billing system changes to 
effectuate this change must be made as soon as possible as this 
requirement has been in effect since the ESRD PPS began in 2011. We are 
analyzing ESRD facility claims data to determine the extent of the 
reporting error and may take additional actions in the future.
    We received the following comment on the clarification which is 
described below.
    Comment: A patient advocacy group requested that CMS change its 
requirement that the monthly claim submitted by ESRD facilities only 
report the ESRD-related oral drugs expected to be taken during the 
month. They believe it is burdensome to ESRD facilities to compute the 
amount of pills prescribed to a patient within the claim period, 
especially for smaller facilities, whose limited resources make this 
type of data manipulation more arduous. They noted that this 
requirement diverts resources away from patient care.
    Response: Unfortunately, we are unable to revise the billing 
requirements as the commenter suggests. ESRD facilities submit a 
monthly bill, which needs to include only the items and services 
utilized during the month. Under the outlier policy, we sum the MAP 
amounts for the outlier services on the claim to assess whether that 
amount exceeds the predicted outlier services MAP amount plus the fixed 
dollar loss amount. If an ESRD facility were to report a 90-day supply 
of a drug on a monthly claim, the claim could receive an outlier 
payment erroneously.
c. Reporting of Composite Rate Drugs
    As we indicate in the Medicare Claims Processing Manual, Pub. 100-
04, Chapter 8, section 50.3, as revised by Change Request 8978, issued 
December 2, 2014, in an effort to enhance the ESRD claims data for 
possible future refinements to the ESRD PPS, CMS announced that ESRD 
facilities should begin reporting composite rate drugs on their monthly 
claims. Specifically, ESRD facilities should only report the composite 
rate drugs identified on the consolidated billing drug list and 
provided below in Table 11.

             Table 11--Composite Rate Drugs and Biologicals
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Composite Rate Drugs and                  A4802  INJ PROTAMINE SULFATE
 Biologicals.
                                          J0670  INJ MEPIVACAINE
                                                  HYDROCHLORIDE
                                          J1200  INJ DIPHENHYDRAMINE HCL
                                          J1205  INJ CHLOROTHIAZIDE
                                                  SODIUM
                                          J1240  INJ DIMENHYDRINATE
                                          J1940  INJ FUROSEMIDE
                                          J2001  INJ LIDOCAINE HCL FOR
                                                  INTRAVENOUS INFUSION,
                                                  10 MG
                                          J2150  INJ MANNITOL
                                          J2720  INJ PROTAMINE SULFATE
                                          J2795  INJ ROPIVACAINE
                                                  HYDROCHLORIDE
                                          J3410  INJ HYDROXYZINE HCL
                                          J3480  INJ. POTASSIUM
                                                  CHLORIDE, PER 2 MEQ.
                                          Q0163  DIPHENHYDRAMINE
                                                  HYDROCHLORIDE
------------------------------------------------------------------------

    The ESRD PPS payment policy remains the same for composite rate 
drugs, therefore, no separate payment is made and these drugs will not 
be designated as eligible outlier services. This information will 
provide CMS with the full scope of renal dialysis services which may 
better target outlier services to the most costly patients. We did not 
receive any comments on the clarification of reporting composite rate 
drugs and biologicals.

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

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).
    Section 1881(h) of the Act requires the Secretary to establish an 
ESRD QIP by (1) selecting measures; (2) establishing the performance 
standards that apply to the individual measures; (3) specifying a 
performance period with respect to a year; (4) 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 (5) applying an appropriate payment reduction to facilities 
that do not meet or exceed the established Total Performance Score 
(TPS). This final rule discusses each of these elements and our 
policies for their application to PY 2017, PY 2018, PY 2019, and future 
years of the ESRD QIP.
    We received comments about general policies and principles of the 
ESRD QIP. The comments and our responses are set forth below.
    Comment: Two commenters argued that ESRD QIP standards often 
prevent improved patient outcomes by being a roadblock to the conduct 
of clinical trials which, commenters argued, are critically important 
in the quest for advancement of quality care for patients with ESRD. 
They added that exemption from certain performance standards and/or 
quality measures should be available for those patients who are 
involved in clinical trials, particularly when they involve evidence 
gathering to promote improved patient outcomes. One commenter 
specifically recommended that any patients entered into such a trial be 
exempted from the vascular access measure topic, which assesses the 
percentage of patients with catheters versus the percentage of patients 
with fistulas so that their providers can participate in the trial

[[Page 69034]]

without fear of being penalized under the ESRD QIP.
    Response: We thank commenters for their recommendation and will 
consider the appropriateness of the ESRD QIP requirements for 
participation and exceptions thereto for future years of the program.
    Comment: A few commenters expressed concerns with the way CMS 
releases ESRD QIP data. One commenter requested that CMS make all data 
used in developing proposed rules available at the time the proposed 
rule is published and another expressed concerns with the format and 
timing of data releases.
    Response: We seek to be as transparent as possible and have 
released all analyses that we took into consideration in the 
development of the proposed rule. In addition, we published a public 
use data file at the same time as the proposed rule for the ESRD QIP 
that contains the facility-level data used to calculate the performance 
standards, achievement thresholds, and benchmarks we proposed for the 
program. These public use files are available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/08_ReportandCert.html. Furthermore, in response to comments received 
during the notice-and-comment process, we have conducted additional 
analyses and are describing those results in this final rule and on the 
CMS Web site, as well as making the details of these additional 
analyses available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    Comment: Commenters recommended that CMS focus on stabilizing the 
existing policies and measures in the ESRD QIP before adopting any new 
measures. They expressed concern that constantly increasing the measure 
set's size and complexity gives facilities little time to implement new 
policies and procedures for data collection and reporting while also 
providing high quality care on a daily basis. One commenter argued that 
as the number of measures increases, so too do costs to providers and 
to CMS. They stated that the QIP should strive to include, to the 
extent feasible, those measures which address multiple domains of CMS's 
value-based purchasing programs and are not duplicative.
    Response: Although we recognize that adopting more measures in the 
ESRD QIP increases costs to facilities as well as to 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 
agree that adopting measures that span multiple domains, such as the 
SRR clinical 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: One commenter requested information regarding the claims 
that we used to calculate facility performance on the dialysis adequacy 
clinical measures for the PY 2016 ESRD QIP.
    Response: For PY 2016, CY 2014 Medicare outpatient dialysis claims 
(bill type 72) were used to calculate the dialysis adequacy measures. 
These claims data were extracted from CMS systems on April 24, 2015 and 
included all fully adjudicated claims submitted by facilities that were 
in final action status \2\ as of that date.
---------------------------------------------------------------------------

    \2\ A claim is considered to be in final action status when it 
reflects services billed by the facility for facility costs, has 
been processed by the Medicare Administrative Contractor, has been 
resubmitted and corrected if necessary, and has been finalized.
---------------------------------------------------------------------------

    Comment: One commenter requested clarification on how the ESRD QIP 
accounts for patients who switch modality mid-month for measures 
collected using CROWNWeb.
    Response: For PY 2016 there was no distinction made between 
hemodialysis and peritoneal dialysis patients with regard to the serum 
calcium and serum phosphorus values reported in CROWNWeb, which is 
consistent with the specifications for the Hypercalcemia clinical 
measure. All clinical values submitted under either modality were 
reviewed and the last clinical value submitted for each month was used 
for the calculation of the Hypercalcemia measure. The Mineral 
Metabolism reporting measure considers the aggregate modality during a 
month, as defined by the patient's Medicare claims, to determine 
patient eligibility for the month. If the aggregate modality is in-
center hemodialysis and the patient was not treated at least seven 
times during the month and then changes modality to peritoneal dialysis 
to home hemodialysis, the patients would be excluded. However, if the 
patient switches from in-center hemodialysis to peritoneal dialysis or 
home hemodialysis and the aggregate modality is either home 
hemodialysis or peritoneal dialysis, the patient would be included in 
the measure. Regardless of the modality listed on a patient's claims, 
any serum phosphorus value reported as either a peritoneal dialysis or 
home hemodialysis in CROWNWeb would count as an eligible serum 
phosphorus value, but if a patient switched modalities during the 
month, it could impact their eligibility for that month. The Pain 
Assessment and Follow-Up and Screening for Clinical Depression and 
Follow-Up Reporting Measures, which are also collected using CROWNWeb, 
do not account for a patient's treatment modality in their scoring 
calculations.
    Comment: One commenter requested that only Medicare-based measure 
data be used to calculate performance scores impacting Medicare 
payments.
    Response: Although payment reductions under the ESRD QIP are made 
to a facility's Medicare ESRD reimbursement amounts, in order to 
properly assess whether Medicare beneficiaries are receiving the same 
quality of care as other patients, we believe it is appropriate to 
collect, where possible, all-patient data.
    Comment: One commenter urged CMS to create more alignment among its 
quality programs. The goals of the ESRD QIP, DFC, and the Conditions 
for Coverage are all designed to ensure the best possible outcomes for 
patients but when the programs do not align, the commenter argued, 
facilities are confused and are not as well equipped to meet the 
demands of the separate programs.
    Response: We agree with the goal of creating more alignment among 
CMS's quality programs. As stated previously in the CY 2015 final rule 
with comment period (79 FR 66162), the goals of the ESRD QIP closely 
align with the goals of the CMS Quality Strategy (the CMSQS), which all 
CMS quality improvement efforts are structured around, including DFC 
and the ESRD Conditions for Coverage. 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--(1) 
Make care safer by reducing harm caused in the delivery of care; (2) 
strengthen person and family engagement as partners in their care; (3) 
promote effective communication and coordination of care; (4) promote 
effective prevention and treatment of chronic disease; (5) work with 
communities to promote best practices of healthy living; and (6) make 
care affordable--are organized around NQS's three broad aims of Better 
Care; Affordable Care; and Healthy People, Healthy Communities and 
drive and

[[Page 69035]]

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 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 12--CMSQS Goal and ESRD QIP Measure Alignment
------------------------------------------------------------------------
                CMSQS goal                            Measure
------------------------------------------------------------------------
Promote effective prevention and           Dialysis Adequacy.
 treatment of chronic disease.
                                           Vascular Access Type Measure
                                            Topic:
                                              Fistula.
                                           Catheter for at Least 90
                                            Days.
                                           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 engagement    ICH CAHPS Reporting (PY 2017)
 as partners in their care.                 and clinical (PY 2018).
Promote effective communication and        Standardized Readmissions
 coordination of care.                      Ratio.
Make care safer by reducing harm caused    NHSN Bloodstream Infection in
 in the delivery of care.                   Hemodialysis Outpatients.
                                           NHSN Healthcare Personnel
                                            Influenza Vaccination
                                            reporting.
Work with communities to promote best      None.
 practices of healthy living.
Making care affordable...................  None.
------------------------------------------------------------------------

    As the table above illustrates, the ESRD QIP has not adopted 
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: One commenter requested that CMS provide a clear 
definition of when patients are no longer considered ESRD and are 
therefore excluded from measure calculations.
    Response: For claims-based measures, if a facility submits a 
Medicare outpatient dialysis facility claim (bill type 72) for 
treatment provided to a patient, then the patient is considered to be 
on chronic dialysis. Patients are not included in a claims-based 
measure calculation for a month if a claim is not submitted for the 
patient for treatment received that month.
    For the SRR and STrR measures, details regarding the determination 
of a patient's time on dialysis and patient attribution to a facility 
can be found in the ``Report for the Standardized Readmission Ratio'' 
and ``Report for the Standardized Transfusion Ratio'', respectively 
(https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/MeasureMethodologyReportfortheProposedSRRMeasure.pdf; https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/MeasureMethodologyReportfortheProposedSTrRMeasure.pdf). Finally, for 
CROWNWeb measures, if a patient is admitted to the facility during the 
month, the patient is considered to be eligible for the measure 
calculation until the patient is discharged. Depending on the measure, 
a patient may be required to be admitted to the facility for the entire 
reporting month in order to be included in that patient-month. We 
encourage commenters to review the measure specifications available on 
the CMS Web site for more information (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html).
    Comment: Several commenters recommended that CMS work with the 
kidney community to establish a patient-centric vision for quality that 
aims to decrease mortality, decrease hospitalizations, increase patient 
satisfaction, and improve patient experience with care.
    Response: We thank the commenters for their recommendation and 
support of collaboration between CMS and the ESRD community. We note 
that the ESRD QIP maintains measures that aim to decrease 
hospitalizations (the Standardized Readmission Ratio clinical measure) 
and increase patient satisfaction and experience with care (the ICH 
CAHPS clinical measure), and Dialysis Facility Compare maintains a 
Standardized Mortality Ratio measure. As such, we continue to engage 
both internal and external 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 patients.
    Comment: One commenter recommended that CMS consider adopting the 
following major tenets: (1) Continued transparency and collaboration in 
measure development and specifications; (2) parsimony in the QIP and 
other programs that comparatively assess quality of care performance; 
(3) avoidance of incentives that may undermine the delivery of 
individualized patient care to obtain a more favorable QIP score; and 
(4) recognizing promptly when a measure is topped out, either 
clinically or statistically, to avoid unintended consequences, 
including loss of the ability to individualize care, pressure to 
provide care that may not be in the best interests of an individual 
patient and/or diverting attention from other measures that may be 
better targets for quality improvement.
    Response: We thank the commenter for its recommendations and we 
agree with the general principles expressed. We also already consider 
these tenets in

[[Page 69036]]

the development and refinement of the ESRD QIP. We seek to collaborate 
with measure developers on measures and specifications and we continue 
to seek ways to increase transparency. One example of this is the 
Measures Manual, currently in development and discussed more fully 
below, which will compile the technical measure specifications of ESRD 
QIP and Dialysis Facility Compare measures in a single resource that is 
easy to use. We are also developing a mechanism that will allow 
stakeholders to recommend refinements to ESRD QIP measures based on 
their clinical experience.
    We also seek parsimony in the QIP and other programs that 
comparatively assess quality of care. We continue to assess the 
negative unintended consequences of measures and policies maintained by 
the ESRD QIP through efforts such as the Access to Care study in an 
effort to incentivize the delivery of individualized patient care, and 
will continue to do so. Finally, in the CY 2015 ESRD PPS final rule 
with comment period (79 FR 66171 through 66174), we developed a set of 
statistical criteria for determining when a measure is ``topped out'' 
and may therefore be eligible for removal from the ESRD QIP. We look 
forward to continued collaboration with the ESRD community to achieve 
each of these goals.
    Comment: One commenter emphasized the importance of ensuring that 
all patients are educated about their treatment options and where to 
get them, and recommended that CMS require the use of a values-based, 
patient-centered dialysis decision aid for patients. The commenter 
explained that such a tool would ensure patients have the opportunity 
to match their values to the varying treatment options and choose a 
treatment that is a good fit for their lifestyles and preferences.
    Response: We agree that it is important for patients to be educated 
about their treatment options and where various treatments may be 
available. Dialysis treatment is a highly individualized process of 
care; we therefore strongly encourage nephrologists and dialysis 
facilities to discuss treatment options with their patients on an 
ongoing basis to account for changes in the patient's health and 
experience with dialysis treatment.
    Comment: One commenter urged CMS to consider adopting a bifurcated 
quality reporting and value based purchasing program for ESRD similar 
to those we have implemented for the Hospital VBP and Hospital 
Inpatient Quality Reporting Programs.
    Response: We thank commenters for their recommendation and note 
that we currently adopt some ESRD QIP measures as reporting measures 
prior to assessing performance on those measures as clinical measures.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the End-Stage Renal Disease (ESRD) Quality Incentive 
Program (QIP) for Payment Year (PY) 2019 Proposed Rule

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, and Quality Incentive Program'' (80 
FR 37807 through 37860), (hereinafter referred to as the CY 2016 ESRD 
PPS proposed rule), was published in the Federal Register on July 1, 
2015, with a comment period that ended on August 25, 2015. In that 
proposed rule, for the ESRD PPS, we proposed routine updates to the 
End-Stage Renal Disease Quality Incentive Program, proposed to adopt 
new measures the PY 2019 ESRD QIP measure set, and proposed to revise 
the small facility adjuster (SFA) used in facility scoring for the 
program. We received approximately 37 public comments on our proposals, 
including comments from: ESRD facilities, national renal groups, 
nephrologists and patient organizations, patients and care partners, 
manufactures, 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 ESRD QIP. 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. Clarification of ESRD QIP Terminology: ``CMS Certification Number 
(CCN) Open Date''

    Some stakeholders have expressed confusion about the use of the 
term ``CMS Certification Number (CCN) Open Date'' under the ESRD QIP 
(for example, see 79 FR 66186). We interpret this term to mean the 
``Medicare effective date'' under 42 CFR 489.13, which governs when the 
facility can begin to receive Medicare reimbursement for ESRD services 
under the ESRD PPS. Thus, a facility is eligible, with respect to a 
particular payment year, to receive scores on individual measures and 
participate in general in the ESRD QIP based on the facility's CCN Open 
Date (that is, Medicare effective date).
    We received comments on this clarification. The comments and our 
responses are set forth below.
    Comment: Many commenters supported our clarification of the term, 
``CMS Certification Number (CCN) Open Date,'' and appreciated this 
clarification. One commenter added that once a facility is eligible to 
receive payment under the ESRD PPS, it should also be eligible to 
participate in the ESRD QIP.
    Response: We thank the commenters for their support and are pleased 
that this clarification will reduce confusion for facilities moving 
forward. We note that facility eligibility to receive payment under the 
ESRD PPS is also keyed to a facility's CCN Open Date; therefore, 
facilities are eligible to receive payment under the ESRD PPS at the 
same time as they become eligible to participate in the ESRD QIP.

D. Use of the Hypercalcemia Measure as a Measure Specific to the 
Conditions Treated with Oral-Only Drugs

    Section 217(d) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93), enacted on April 1, 2014, amends section 
1881(h)(2) of the Act to require the Secretary to adopt measures in the 
ESRD QIP (outcomes based, to the extent feasible) that are specific to 
the conditions treated with oral-only drugs for 2016 and subsequent 
years. We stated in the CY 2015 ESRD PPS final rule (79 FR 66168-69) 
that we believed the Hypercalcemia clinical measure, which was adopted 
beginning with the PY 2016 program meets this new statutory 
requirement; nevertheless, we also recognized that, consistent with 
PAMA, we could adopt measures as late as for CY 2016, which would be 
included in the PY 2018 ESRD QIP. We also stated that we would take 
into account comments on whether the Hypercalcemia clinical measure can 
be appropriately characterized as a measure specific to the conditions 
treated with oral-only drugs.
    Although section 1881(h)(2)(E)(i) does not define the term ``oral-
only drugs,'' we have previously interpreted that term to mean ``drugs 
for which there is no injectable equivalent or other form of 
administration'' (75 FR 49038). We have also previously identified 
calcimimetics and phosphate binders as two types of ``oral-only drugs'' 
(75 FR 49044).
    We are currently aware of three conditions that are treated with 
calcimimetics and phosphate binders: Secondary Hyperparathyroidism, 
Tertiary Hyperparathyroidism, and Hypercalcemia. Hypercalcemia is a 
condition that results when the entry of calcium into the blood exceeds 
the excretion of calcium into the urine or

[[Page 69037]]

deposition in bone; the condition may be caused by a number of other 
conditions, including hyperparathyroidism. Although multiple treatment 
options are available for patients with early forms of hypercalcemia, 
calcimimetics are frequently prescribed for those patients who develop 
hypercalcemia secondary to tertiary hyperparathyroidism, in order to 
most easily control the patients' serum calcium levels. Because 
hypercalcemia is a condition that is frequently treated with 
calcimimetics, and because calcimimetics are oral-only drugs, we 
believe that the current Hypercalcemia clinical measure (NQF #1454) 
meets the requirement that the ESRD QIP measure set include for 2016 
and subsequent years measures that are specific to the conditions 
treated with oral-only drugs.
    We acknowledge that the Hypercalcemia clinical measure is not an 
outcome-based measure, and we have considered the possibility of 
adopting outcome-based measures that are specific to the conditions 
treated with oral-only drugs. However, we are currently not aware of 
any outcome-based measures that would satisfy this requirement. We 
welcomed comments on whether such outcome-based measures are either 
ready for implementation now or are being developed, and we intend to 
consider the feasibility of developing such a measure in the future.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Many commenters did not support use of the Hypercalcemia 
clinical measure to satisfy the requirements of PAMA. Some commenters 
stated that CMS's rationale for using this measure is that 
calcimimetics are oral-only agents commonly used to treat 
hypercalcemia. The commenters argued however, that only \1/3\ of ESRD 
patients are prescribed a calcimimetic, and noted that, while it is 
true that the pharmacologic mechanism of calcimimetics results in lower 
serum calcium, they are not in fact FDA-approved to treat hypercalcemia 
in patients with secondary hyperparathyroidism. The commenters 
maintained that hypercalcemia in ESRD patients is commonly due to the 
receipt of Vitamin D analogs, which are not oral-only agents. 
Commenters also noted that the treatment of hypercalcemia commonly 
includes reducing or discontinuing vitamin D analogs in addition to 
decreasing the dialysate calcium concentration. One commenter did not 
support CMS' position that the Hypercalcemia clinical measure meets the 
requirements of PAMA because the measure only assesses calcium lab 
values, which are not the most accurate indicator of care for patients 
prescribed oral-only drugs. Another commenter argued that the 
Hypercalcemia clinical measure does not satisfy the requirements of 
PAMA because hypercalcemia may be treated with drugs other than oral-
only drugs, including bisphosphonates, IV fluids and diuretics.
    Response: We thank the commenters for their comments. We note that 
the KDIGO clinical practice guidelines recommend maintenance of CKD 3-
5D patient's serum calcium in the normal range. This was recognized by 
the C-TEP members that developed the Hypercalcemia clinical measure in 
2010 and other clinical experts (NQF subcommittee and 2013 C-TEP) who 
reviewed that measure and agreed with the basic justification for the 
measure that some treatments used to treat hyperparathyroidism have 
been shown to cause hypercalcemia. Furthermore, clinical concerns about 
the use of calcium-containing phosphorus binders have been raised by 
some in the dialysis community related to risk for hypercalcemia and 
calcium-related vascular mineralization. Hypercalcemia is seen as a 
potentially dangerous consequence of such treatments, based on a 
growing laboratory experimental literature and clinical paradigm that 
points to vascular calcification as an emerging non-traditional risk 
factor for vascular disease in this population. This emerging paradigm 
and concerns about unintended consequences of use of vitamin D sterols 
to treat hyperparathyroidism are reflected in the KDIGO guideline that 
specifically recommends reduction or discontinuation of vitamin D 
therapy in patients who develop hypercalcemia.
    The alternative to use of vitamin D sterols for treatment of 
hyperparathyroidism is cinacalcet, a calcimimetic agent approved for 
treatment of secondary hyperparathyroidism. As noted in the package 
insert for cinacalcet, lower serum calcium and even hypocalcemia have 
been noted with cinacalcet use, demonstrating the complex interplay 
between alternative drugs used to treat hyperparathyroidism and 
hyperphosphatemia, and the role of these drugs in the development and 
treatment of hypercalcemia and hyperparathyroidism.
    In addition, although we agree that hypercalcemia may also be 
treated with drugs that are not oral-only drugs, including 
bisphosphonates, IV fluids and diuretics, we do not interpret section 
217(d) of PAMA as requiring the Secretary to adopt measures which are 
specific to the conditions treated only with oral-only drugs. Because 
hypercalcemia can be treated with calcimimetics, an oral-only drug, we 
continue to believe that the hypercalcemia clinical measure satisfies 
the requirements of PAMA.
    We also note that limitations in available evidence have, thus far, 
prevented us from developing measures that might address oral-only 
medications that are more broadly used in the ESRD dialysis population. 
In 2010, a Technical Expert Panel discussed the possibility of 
developing measures for phosphorous, but was unable to come to a 
consensus regarding a phosphorus measure that assesses appropriate 
levels of phosphorous due to a lack of evidence supporting a clinical 
threshold. A process measure was developed and originally endorsed by 
the NQF in 2007, and is the measure on which the current Mineral 
Metabolism reporting measure is based. However, as explained below, we 
believe that the Mineral Metabolism measure is limited because it only 
assesses the reporting of phosphorus values, rather than assessing 
performance based on the values themselves. In addition, the Mineral 
Metabolism reporting measure does not meet the requirements of PAMA 
because this measure, as adopted for the ESRD QIP, is not NQF-endorsed 
or adopted by another consensus-based entity with expertise in kidney 
disease. In 2011, NQF reviewed one measure with an upper limit 
(hyperphosphatemia) and one measure with a lower limit 
(hypophosphatemia), but did not endorse either measure. A recent 2013 
Technical Expert Panel recommended the development of a reporting 
measure for PTH. However, the panel concluded that there was 
insufficient evidence to develop a clinical intermediate outcome 
measure with a target PTH value. We are unaware of more recent evidence 
suggesting that a new measure meeting the requirements of PAMA will be 
available in the near future, but are interested in discussing any such 
evidence with stakeholders.
    As the state of clinical evidence evolves to support additional, 
more comprehensive measures of mineral bone disease, we look forward to 
continued consultation with the dialysis community.
    Comment: A number of commenters did not support the use of the 
Hypercalcemia clinical measure to satisfy the requirements of PAMA 
based

[[Page 69038]]

on belief that the measure does not provide value to the patient, 
relate to the provision of quality care, or adequately reflect the 
complexity of bone and mineral disorders. They also noted that the NQF 
Renal Steering Committee initially recommended against endorsement for 
the Hypercalcemia clinical measure during its May, 2015 meeting. 
Several commenters also encouraged CMS to work with experts in the 
kidney community to develop a composite measure evaluating phosphorus, 
calcium, and parathyroid hormone levels because such a measure would be 
more likely to improve patient outcomes than multiple individual 
measures. Specifically, they recommended that CMS convene a TEP to 
develop a measure, which can be submitted for endorsement by NQF, and 
which would satisfy the statutory and regulatory requirements. Other 
commenters recommended the adoption of individual measures on serum 
phosphorus management, hyperphosphatemia, and medication 
reconciliation.
    Response: Although the Hypercalcemia clinical measure does not 
assess all of the hormone levels mentioned by the commenters, we 
believe this measure assesses an important aspect of ESRD patients' 
care because abnormalities of bone mineral metabolism are exceedingly 
common and contribute significantly to morbidity and mortality in 
patients with advanced chronic kidney disease. We also believe that the 
measure relates to the provision of quality care furnished to patients 
by facilities because issues related to bone mineral metabolism have 
serious health consequences for patients with ESRD. As discussed above, 
we would welcome the opportunity to work with stakeholders to develop a 
more comprehensive measure that meets the requirements of PAMA.
    Comment: One commenter did not support the use of the Hypercalcemia 
clinical measure to satisfy the requirements of PAMA because they 
believe that an isolated metric to avoid hypercalcemia could have the 
unintended consequence of leading to a decrease in utilization of 
vitamin D analogs and calcium-containing phosphate binders, which might 
result in worsening the incidence of hyperparathyroidism and 
hyperphosphatemia in ESRD patients.
    Response: We agree that it would be beneficial to adopt a more 
comprehensive mineral bone disease measure, but as explained above, we 
are currently unaware of any measure on this topic.
    Comment: One commenter recommended CMS convene a Technical Expert 
Panel on oral-only drugs to spur development of a more appropriate 
measure on this topic.
    Response: We thank the commenter for its recommendation, and we 
intend to examine opportunities to convene a TEP specific to conditions 
treated using oral-only drugs.
    Comment: One commenter recommended that CMS use the current Mineral 
Metabolism reporting measure to satisfy the requirements of PAMA 
because hypercalcemia is an incomplete proxy for monitoring conditions 
currently treated with oral-only drugs. The commenter further noted 
that a larger proportion of ESRD patients are treated with oral 
phosphate binder therapy for hyperphosphatemia than with calcimimetics 
for hypercalcemia.
    Response: We note that the Mineral Metabolism reporting measure 
assesses facilities reporting phosphorous values, not the values 
themselves. Furthermore, previous attempts to develop measures for 
phosphorous in 2010 and 2011 were unsuccessful because consensus was 
not reached regarding an appropriate level of phosphorous due to lack 
of clinical evidence. We therefore believe that the Hypercalcemia 
clinical measure is a superior measure of bone mineral metabolism at 
this time. In addition, the Mineral Metabolism reporting measure does 
not meet the requirements of PAMA because this measure, as adopted for 
the ESRD QIP, is not NQF-endorsed or adopted by another consensus-based 
entity with expertise in kidney disease.

E. Sub-Regulatory Measure Maintenance in the ESRD QIP

    In the CY 2013 ESRD PPS final rule, we finalized our policy to use 
a sub-regulatory process to make non-substantive updates to measures 
(77 FR 67477). We currently make available the technical specifications 
for ESRD QIP measures at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html but are in the process of drafting a 
CMS ESRD Measures Manual which will include not only the ESRD QIP 
measure specifications, but also technical information on quality 
indicators that facilities report for other CMS ESRD programs. We 
expect to release the first version of the CMS ESRD Measures Manual in 
the near future at the following web address: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/index.html. The manual will be released before the beginning of the 
applicable performance period, preferably at least 6 months in advance. 
We believe that this update frequency will be sufficient to provide 
facilities with information needed to incorporate these updates into 
their ESRD data collection activities. We note that this policy is 
consistent with our policy for updating the CMS National Hospital 
Inpatient Quality Measures Specifications Manual, which is posted on 
the QualityNet Web site (www.qualitynet.org).
    We welcomed recommendations from the public on technical updates to 
ESRD QIP measures. We will consider the appropriateness of all 
recommendations, notify those who submit recommendations as to whether 
we accept the recommendation, and incorporate accepted recommendations 
in a future release of the CMS ESRD Measure Manual. At present, we 
intend to use JIRA, a web-based collaboration platform maintained by 
the Office of the National Coordinator for Health Information 
Technology, to receive, consider, and respond to recommendations for 
non-substantive measure changes. Further information about how to use 
the JIRA tool to make such recommendations will be published in an 
upcoming CROWN Memo and will be posted to http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/index.html.
    The comments and our responses are set forth below.
    Comment: Many commenters supported CMS's development of an ESRD 
Measures Manual as an important step in increasing transparency and 
understanding of the ESRD measures. They also supported our intended 
use of the JIRA system to accept feedback and suggestions from 
stakeholders and also recommended that CMS include contact information 
for Agency staff so that dialysis providers have a point-of-contact 
within the Agency who can answer questions regarding the interpretation 
of measures. One commenter added that the Manual should not replace 
traditional notice-and-comment rulemaking with respect to measure 
details, but should instead serve as a document for aggregating 
technical specifications and implementation rules for all ESRD quality 
measures. One commenter recommended that CMS make the measure micro-
specifications and other technical information part of the rulemaking 
process to ensure commenters fully understand measure proposals.

[[Page 69039]]

    Response: We thank commenters for their support and we agree that 
the ESRD Measures Manual is an important step in increasing 
transparency and understanding of the ESRD measures as they are 
currently specified for use in the ESRD QIP and/or DFC. Although we 
intend to use JIRA as the sole means by which stakeholders communicate 
with us regarding the measures (outside of the rulemaking process), we 
will seek to ensure this process is as transparent as possible. The 
Manual will gather in one resource all measure specifications, 
including what we refer to as micro-specifications (additional 
technical details regarding the complexities of calculating measure 
scores), that are currently made available through separate resources. 
The Measures Manual will create an additional vehicle for communication 
and discussion of measure specifications, but will not replace the 
traditional notice-and-comment rulemaking process, or our policy to use 
rulemaking to adopt substantive updates to measures. Rather, the 
Measures Manual will be used to implement technical updates to 
measures, many of which can be suggested by stakeholders through JIRA. 
Consistent with our current policy, we will also provide notice of 
technical updates through CROWN Memos and other means of communication.
    Comment: One commenter specifically requested that CMS make 
available additional detail about the STrR measure's technical 
specifications in the ESRD Measures Manual, along with detailed 
flowcharts or computer codes so that the public can replicate the 
mathematics used, and asked that these be provided prior to adopting 
any measures in future years of the QIP.
    Response: The upcoming Measures Manual will include all necessary 
information to calculate measure scores for all clinical measures, 
including the STrR clinical measure. We encourage stakeholders to 
review and submit comments on the Measures Manual in order to ensure 
its responsiveness to stakeholder needs.

F. Revision to the Requirements for the PY 2017 ESRD QIP

1. Modifying the Small Facility Adjuster (SFA) Calculation for All 
Clinical Measures Beginning With the PY 2017 ESRD QIP
    In the CY 2013 ESRD PPS final rule we adopted a scoring adjustment 
for facilities with relatively small numbers of patients, called the 
small facility adjuster, which aims to ensure that any error in measure 
rates due to a small number of cases will not adversely affect facility 
payment (77 FR 67511). Since we first implemented the methodology to 
implement the small facility adjuster, we have encountered two issues 
related to basing the adjustment on the within-facility standard error. 
First, facility scores for some of the outcome measures adopted in the 
ESRD QIP, such as the National Healthcare Safety Network (NHSN) 
Bloodstream Infection (BSI) clinical measure, do not approximate a 
normal or ``bell-shaped'' distribution. In such cases, the within-
facility standard error does not necessarily capture the spread of the 
data as it would if facility scores were normally distributed. Second, 
facilities and other stakeholders have commented that it is difficult 
for them to independently calculate pooled within-facility standard 
errors because doing so requires data for all patient-months across all 
facilities, which makes the small facility adjuster unnecessarily 
opaque. For these reasons, we have developed an equation for 
determining the small facility adjuster that does not rely upon a 
within-facility standard error, but nonetheless preserves the intent of 
the adjuster to include as many facilities in the ESRP QIP as possible 
while ensuring that the measure scores are reliable.
    Therefore, beginning with the PY 2017 ESRD QIP, we proposed to use 
the following methodology to determine the small facility adjustment:
     For the ith facility, suppose the facility's original 
measure rate is pi and the number of patients (or other unit used to 
establish data minimums for the measure. For example, index discharges 
for the Standardized Readmission Ratio clinical measure) at the ith 
facility is ni.
     Where the number of eligible patients (or other 
appropriate unit) needed to receive a score on a measure is L and the 
upper threshold for applying the small facility adjuster is C, the ith 
facility will be eligible for the adjustment when L <= ni >= C. 
Accordingly, L and C set the upper and lower thresholds of eligible 
patients (or other appropriate unit) a facility needs to have in order 
to be considered for a small facility adjustment; consistent with 
previously finalized policies, facilities with fewer than L eligible 
patients (or other appropriate unit) for a measure will not receive a 
score on that measure, and facilities with more than C eligible 
patients (or other appropriate unit) for a measure will not receive an 
adjustment for that measure.
     Assuming L <= ni < C, let wi = n, where ni is 
the number of patients (or other appropriate unit) at the ith facility 
and C is the upper thresholds of eligible patients (or other 
appropriate unit) a facility needs to have in order to be considered 
for a small facility adjustment. This calculation will produce the 
facility's weighting coefficient for a given clinical measure, 
wi, which provides a metric for assessing the uncertainty 
due to small facility sizes.
     For measures where higher scores are better (for example, 
the Vascular Access Type (VAT): Fistula clinical measure and the 
Dialysis Adequacy clinical measures), a small facility's adjusted 
performance rates (ti) will be pegged to the national mean 
performance rate (P) as follows:
    [cir] If pi < P, then ti = wi * pi + (1 - 
wi * P,
    [cir] If pi is greater than or equal to P, the facility will not 
receive an adjustment.
     For measures where lower scores are better (for example, 
VAT: Catheter, NHSN BSI, Hypercalcemia, Standardized Readmission Ratio 
(SRR), and Standardized Transfusion Ratio (STrR) clinical measures), a 
small facility's adjusted performance rates (ti) will be 
pegged to the national mean performance rate (P) as follows:
    [cir] If pi > P, then ti = wi * pi + (1 - 
wi * P
    [cir] If pi is less than or equal to P, then the facility will not 
receive an adjustment
     For the standardized ratio measures, such as the SRR and 
STrR clinical measures, the national mean measure rate (that is, P) is 
set to 1.
    We note that the equation ti = wi * pi + (1 - 
wi) * P is designed to ``shrink'' the facility mean toward 
the national mean, and that reflects the degree of confidence in the 
estimation of the facility mean, because it depends on facility size. 
Some research has shown that this type of ``shrinkage estimator'' 
equation gives a small mean squared error (that is, the combination of 
bias and variance) if the national mean truly reflects the performance 
of a small facility, which was the intention of the equation.\3\
---------------------------------------------------------------------------

    \3\ Efron B, Morris C. Empirical Bayes on vector observations: 
An extension of Stein's method. Biometrika, 59(2):335-347. Ahmed 
SE., Khan SM. Improved estimation of the Poisson parameter. 
Statistica, anno LIII n.2, 268-286, 1993. Ahmed SE. Combining 
Poisson means. Communications in Statistics: Theory and Methods, 20, 
771-789, 1991.
---------------------------------------------------------------------------

    To assess the impact of the proposed small facility adjuster, we 
conducted an impact analysis of this proposed methodology on individual 
measure scores and facility TPSs, using the final dataset used to 
calculate PY 2015 ESRD QIP scores. The full results of this analysis 
can be found at https://www.cms.gov/Medicare/Quality-

[[Page 69040]]

Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Small-
Facility-Adjustment-Proposal-for-the-ESRD-QIP.pdf. Table 13 summarizes 
these results, presenting changes in measure scores observed after 
applying the proposed small facility adjuster, as compared to measure 
scores calculated with the existing small facility adjuster. For the 
purposes of this analysis and for all of the measures, L was set to 11 
and C was set to 26.

           Table 13--Impact of Proposed Small Facility Adjuster on Individual Measure Scores, Using the Final Dataset for the PY 2015 ESRD QIP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             National mean
                                             # facilities       in the       # facilities      # facilities with score     # facilities    # facilities
                  Measure                    received SFA     performance    receiving SFA  change due to new SFA method    with higher     with lower
                                              in PY 2015      period  (CY      under new         N (% out of scored         score under     score under
                                                                 2013)          method               facilities)          new SFA method  new SFA method
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hgb  12........................           1,253            0.4%              63  32 out of 5,513 (0.6).......              32               0
Fistula...................................             938           64.1%             391  341 out of 5,547 (6.1)......              66             275
Catheter..................................             826           11.7%             352  301 out of 5,562 (5.4)......              65             236
HD Kt/V...................................             588           91.1%             173  248 out of 5,641 (4.4)......              22             226
Ped HD Kt/V...............................              11           80.1%               1  8 out of 11 (72.7)..........               0               8
PD Kt/V...................................             787           76.4%             192  400 out of 1,203 (33.3).....              62             338
                                           -------------------------------------------------------------------------------------------------------------
TPS.......................................  ..............  ..............  ..............  513 out of 5,650 (9.1)......              96             417
Reduction.................................  ..............  ..............  ..............  43 out of 5,650 (0.8).......              23              20
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As the results in Table 13 indicate, fewer facilities received an 
adjustment under the proposed small facility adjuster methodology, 
because small facilities with performance rates above the national mean 
do not receive an adjustment. However, those facilities that did 
receive an adjustment generally received a larger adjustment under the 
proposed methodology. For example, of the 43 facilities that received a 
different payment reduction under the proposed small facility adjuster, 
23 (53 percent) received a lower payment reduction.
    We also assessed the impact of the proposed small facility adjuster 
on the distribution of payment reductions, using the final dataset used 
to calculate PY 2015 ESRD QIP payment reductions. The full results of 
this analysis can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Small-Facility-Adjustment-Proposal-for-the-ESRD-QIP.pdf. Table 14 below 
compares the distribution of payment reductions using the existing 
small facility adjuster to the distribution of payment reductions using 
the proposed small facility adjuster. For the purposes of this analysis 
and for all of the measures, L was set to 11 and C was set to 26.

 Table 14--Comparison of the Distribution of Payment Reductions Determined with the Existing and Proposed Small
                       Facility Adjuster, Using the Final Dataset for the PY 2015 ESRD QIP
----------------------------------------------------------------------------------------------------------------
  Payment reduction distribution in PY 2015  using the     Estimated payment reduction distribution in PY 2015
                      existing SFA                                          using the new SFA
----------------------------------------------------------------------------------------------------------------
                       Number of          Percent of                            Number of          Percent of
Payment reduction      facilities         facilities     Payment reduction      facilities         facilities
----------------------------------------------------------------------------------------------------------------
             0.0              5,307              93.93                0.0              5,296              93.73
             0.5                242               4.28                0.5                255               4.51
             1.0                 41               0.73                1.0                 45               0.80
             1.5                 23               0.41                1.5                 26               0.46
             2.0                378               0.65                2.0                 28               0.50
----------------------------------------------------------------------------------------------------------------
Note: This table excludes 488 facilities that did not receive a score because they did not have enough data to
  receive a TPS.

    These results suggest that a similar number of facilities would 
receive a payment reduction under the proposed small facility adjuster 
methodology. A total of 343 (6.1 percent) facilities would receive a 
payment reduction with the existing small facility adjuster; under the 
proposed small facility adjuster methodology, a total of 354 (6.3 
percent) facilities would have received a payment reduction. Based on 
the results of these analyses, we believe that the proposed small 
facility adjuster does not systematically alter the distribution of 
measure scores, TPSs, and payment reductions, as compared to the 
existing small facility adjuster. Coupled with the benefits of removing 
the within-facility standard error variable from the existing adjuster 
(discussed above), this leads us to believe that the benefits of the 
proposed adjuster outweigh the benefits of the existing adjuster. We 
therefore proposed to modify the methodology for determining the small 
facility adjustment as explained above.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters supported the overall objectives of the 
proposed small facility adjuster modification, but expressed concern 
with the proposed methodology and its alignment with the intended 
purpose of the SFA. These commenters were primarily concerned that too 
few facilities would receive an adjustment under the proposed SFA and 
recommended that CMS consider an SFA formula that more closely 
approximates the current SFA's effect on measure scores. One commenter 
asserted that because small facilities with performance rates above the 
national mean will not receive an adjustment under the proposed small 
facility adjuster calculation, they will experience the SFA as a 
performance reduction, when compared to the current SFA, which goes 
against the goals of the SFA generally.
    Another commenter conducted a detailed analysis of the proposed SFA

[[Page 69041]]

using data from Dialysis Facility Compare and found that, of the 3,598 
facilities in DFC, 480 met the following two criteria: (1) A facility 
sample size between 11 and 25, and (2) their un-adjusted performance 
rate was above the national median, for at least one measure. 
Additionally, this commenter found that 266 facilities met these 
criteria for at least two measures, meaning they would have received an 
adjustment under the current SFA but would no longer receive one under 
the proposed SFA. This commenter also analyzed the average magnitude 
that the proposed SFA would have on facilities' scores and found that 
for the fistula measure, for example, the current SFA adjusts 
performance up by an average of 2.9 percent for small facilities, 
whereas the proposed SFA increases performance only by an average of 
1.1 percent. The commenter found similar results for other measures, 
and therefore urged CMS to adopt an SFA formula which more closely 
approximates the current SFA's impact on measure scores.
    One commenter offered an alternative to the proposed Small Facility 
Adjuster, which was also supported by several other commenters who 
reviewed the alternative calculation. This alternative Small Facility 
Adjuster is expressed as follows:
     For the ith facility, suppose the facility's original 
measure rate is pi and the number of patients (or other unit 
used to establish data minimums for the measure; for example, index 
discharges for the Standardized Readmission Ratio clinical measure) at 
the ith facility is ni.
     Where the number of eligible patients (or other 
appropriate unit) needed to receive a score on a measure is L and the 
upper threshold for applying the small facility adjuster is C, the ith 
facility will be eligible for the adjustment when L <= ni < 
C. Accordingly, L and C set the upper and lower thresholds of eligible 
patients (or other appropriate unit) a facility needs to have in order 
to be considered for a small facility adjustment; consistent with 
previously finalized policies, facilities with fewer than L eligible 
patients (or other appropriate unit) for a measure will not receive a 
score on that measure, and facilities with more than C eligible 
patients (or other appropriate unit) for a measure will not receive an 
adjustment for that measure.
[GRAPHIC] [TIFF OMITTED] TR06NO15.004

     For measures where higher scores are better (for example, 
the Vascular Access Type (VAT): Fistula clinical measure and the 
Dialysis Adequacy clinical measures), a small facility's adjusted 
performance rates (ti) will be pegged to the benchmark, or 
90th percentile of national facility performance on a measure (B) as 
follows:
    [cir] If pi < B, then ti = wi * pi + (1 - 
wi * B,
    [cir] If pi is greater than or equal to , the facility will not 
receive an adjustment.
     For measures where lower scores are better (for example, 
VAT: Catheter, NHSN BSI, Hypercalcemia, Standardized Readmission Ratio 
(SRR), and Standardized Transfusion Ratio (STrR) clinical measures), a 
small facility's adjusted performance rates (ti) will be 
pegged to the benchmark, or 90th percentile of national facility 
performance on a measure (B) as follows:
    [cir] If pi > B, then ti = wi * pi + (1 - 
wi * B
    [cir] If pi is less than or equal to B, then the facility will not 
receive an adjustment
     For the standardized ratio measures, such as the SRR and 
STrR clinical measures, the national mean measure rate (that is, B) is 
set to 1.
    As with the proposed SFA, the alternative SFA formula suggested by 
the commenter does not assume a bell-shaped distribution, nor does it 
require the calculation of a pooled within-facility standard error. The 
commenter asserted that only difference between its alternative SFA 
calculation and the proposed SFA is that the proposed SFA uses the 50th 
percentile of national facility performance, whereas the commenter's 
alternative SFA uses the 90th percentile (that is, the benchmark) of 
national facility performance, to determine which small facilities 
should receive an adjustment. The commenter argued that using the 90th 
percentile of facility performance to determine which facilities will 
receive an adjustment provides some positive adjustment for all small 
facilities which may have been adversely affected by one or two 
challenging patients. The adjustment would be larger for worse 
performers and for smaller facilities and the magnitude of the 
adjustment under this alternative SFA would be similar to that of the 
current SFA.
    Response: We agree that the alternative SFA suggested by a 
commenter and the proposed SFA accomplish very similar goals using 
virtually identical methodologies. Like the proposed SFA, the 
alternative SFA does not assume a bell-shaped distribution, nor does it 
require the calculation of pooled within-facility standard errors 
required in the current SFA. We therefore believe that, like the 
proposed SFA, facilities should be able to replicate this alternative 
SFA formula more easily than the current SFA, which requires the 
calculation of pooled within-facility standard errors. We also agree 
that the alternative SFA provides some positive adjustment for a 
greater number of small facilities that may be adversely affected by a 
small number of outlier patients than the proposed SFA,

[[Page 69042]]

as well as provides a greater adjustment for smaller facilities and 
those who appear to be ``worse'' performers based on their measure 
scores. We believe this particular aspect of the alternative SFA--that 
it provides adjustments across the range of facility performance, as 
opposed to only adjusting the scores of below-average performers--
addresses the primary concern raised by commenters that the application 
of the proposed SFA did not have the same magnitude of impact on 
facility scores as the current SFA.
    For these reasons, we are finalizing the SFA suggested by a 
commenter and described above for PY 2017 and future payment years of 
the ESRD QIP. Specifically, we are adopting the 90th percentile of 
facility performance as the measure score threshold for facility 
eligibility for the small facility adjuster instead of the proposed 
50th percentile of facility performance. Under this methodology, 
facilities treating between 11 and 25 patients and scoring below the 
benchmark (that is, the 90th percentile of national facility 
performance) for a measure will receive an adjustment to their measure 
scores using the calculation provided above.
    Comment: One commenter requested that CMS conduct a new analysis of 
the proposed small facility adjuster as applied to the proposed 
combined dialysis adequacy measure as the analysis provided in the 
proposed rule is based on the individual dialysis adequacy measures 
previously used in the QIP.
    Response: We have conducted the analysis as requested, but have 
substituted the alternative small facility adjuster described above, 
which we are adopting for PY 2017 and future payment years, for the 
small facility adjuster proposed in the CY 2016 ESRD PPS proposed rule. 
The results of this analysis are available below using data from CY 
2014.
    Table 15 demonstrates the impact of the small facility adjuster we 
are finalizing on the PY 2018 ESRD QIP measure set, which includes all 
four dialysis adequacy measures, and Table 16 demonstrates the impact 
of the small facility adjuster on the measure set with the single 
comprehensive Dialysis Adequacy measure.

 Table 15--Estimated Number of Facilities Receiving a Payment Reduction
 for PY 2018 Based on the Small Facility Adjuster Being Finalized (PY 17
                             Through 19 SFA)
------------------------------------------------------------------------
                                             Estimated
                                             number of        (%) of
              Reduction (%)                 facilities      facilities
                                            receiving a     receiving a
                                             reduction       reduction
------------------------------------------------------------------------
0.......................................            4889           80.98
0.5.....................................             817           13.53
1.0.....................................             263            4.36
1.5.....................................              57            0.94
2.0.....................................              11            0.18
------------------------------------------------------------------------
Note: This table excludes 296 facilities that did not receive a score
  because they did not have enough data to receive a TPS.


 Table 16--Estimated Number of Facilities Receiving a Payment Reduction
 Scale for PY 2019 Based on the Alternative Small Facility Adjuster (PY
                           17 Through 19 SFA)
------------------------------------------------------------------------
                                             Estimated
                                             number of        (%) of
              Reduction (%)                 facilities      facilities
                                            receiving a     receiving a
                                             reduction       reduction
------------------------------------------------------------------------
0.......................................            4618           76.38
0.5.....................................             976           16.14
1.0.....................................             366            6.05
1.5.....................................              69            1.14
2.0.....................................              17            0.28
------------------------------------------------------------------------
Note: This table excludes 287 facilities that did not receive a score
  because they did not have enough data to receive a TPS.

    As demonstrated in the analyses above, using the PY 2018 measure 
set and the small facility adjuster suggested by a commenter on the PY 
2018 measure set, approximately 18.1 percent of facilities would 
receive a reduction. By contrast, under the PY 2019 measure set and 
using this small facility adjuster, approximately 23.62 percent of 
facilities would receive a payment reduction. While this analysis 
reflects a small increase in the number of facilities receiving a 
reduction between PY 2018 and PY 2019, we believe this increase is 
likely the result of more facilities being eligible to receive a score 
on the single comprehensive Dialysis Adequacy clinical measure than on 
the four individual dialysis adequacy measures, as well as a decrease 
in the number of facilities qualifying for an adjustment on this 
measure for PY 2019.
    Comment: One commenter expressed concerns that the proposed SFA is 
less transparent than the current small facility adjuster. The 
commenter stated that the complicated formula makes it difficult to 
tell if the adjuster is achieving its desired outcome and may prove 
difficult for small facilities to replicate without additional 
resources. The commenter stated that it is difficult to determine 
whether small facilities are receiving lower scores because of their 
low patient volume, as opposed to their quality of care. The commenter 
stated that the SFA formula should be easy to use and its impact on 
small facilities should be easy to replicate and understand.
    Response: We believe that the proposed SFA is more transparent than 
the current SFA, because facilities are able to calculate the proposed 
SFA using data available to the facility, which facilities cannot do 
for the current SFA. However, as explained above, we are finalizing an 
alternative SFA suggested by a commenter, which we also believe will be 
easier to replicate than the current SFA.
    Comment: One commenter expressed concerns that a smaller percentage 
adjustment was applied to facilities for PY 2016 than the commenter 
believed was going to be applied based on the example calculation 
provided in the CY 2014 ESRD PPS final rule with comment period.
    Response: The SFA calculation for PY 2016 was implemented as 
finalized, and although the actual size of the adjustments was 
different than the estimated size of the adjustments that we set forth 
in the CY 2014 ESRD final rule with comment period, the estimates in 
that final rule were intended to be for illustrative purposes only.
    For these reasons, we are finalizing the alternative SFA suggested 
by a commenter and described above, under which facilities treating 
between 11 and 25 patients and scoring below the benchmark for a 
clinical measure (that is, the 90th percentile of national facility 
performance) will receive an adjustment to their measure scores using 
the calculation provided above.
2. Reinstating Qualifying Patient Attestations for the ICH CAHPS 
Clinical Measure
    In the CY 2015 ESRD PPS final rule, we finalized our proposal to 
remove the case minimum attestation for the ICH CAHPS reporting measure 
due to facility confusion regarding the attestation process (79 FR 
66185). We further finalized that we would determine facility 
eligibility for the ICH CAHPS reporting measure based on available data 
submitted via CROWNWeb, Medicare claims, and other CMS administrative 
data sources. Following the publication of that rule we have determined 
that we do not have

[[Page 69043]]

reliable data sources for determining some of the patient-level 
exclusions. For example, we have been unable to locate a reliable data 
source for determining whether a patient is receiving hospice care or 
is residing in an institution such as a prison or a jail.
    Although some facilities may be experiencing issues related to the 
attestation process (for example, during the preview period, we have 
encountered numerous instances where facilities have either attested 
inappropriately or have failed to attest in a timely fashion), we 
believe that facilities are generally able to determine whether their 
patients meet one or more of the exclusion criteria for the measure. 
For this reason, we believe that having facilities attest that they are 
ineligible for the measure will result in more accurate measure scores, 
as compared to using unreliable data sources to determine whether 
facilities treated the requisite number of eligible patients during the 
eligibility period, (defined as the calendar year immediately preceding 
the performance period). Because we have no reason to believe that 
reliable data sources for some of the patient-level exclusions for the 
ICH CAHPS clinical measure will become available in the near term, and 
because the PY 2017 ICH CAHPS reporting measure and the PY 2018 ICH 
CAHPS clinical measure employ the same exclusion criteria, we proposed 
to reinstate the attestation process we previously adopted in the CY 
2014 ESRD PPS final rule (78 FR 72220 through 72222) beginning with the 
PY 2017 program year. However, we are now proposing to have facilities 
attest on the basis of the eligibility criteria finalized in the CY 
2015 ESRD PPS final rule (79 FR 66169 through 66170). Accordingly, 
facilities seeking to avoid scoring on the ICH CAHPS measure due to 
ineligibility must attest in CROWNWeb by January 31 of the year 
immediately following the performance period (for example, January 31, 
2017, for the PY 2018 ESRD QIP) that they did not treat enough eligible 
patients during the eligibility period to receive a score on the ICH 
CAHPS measure. Facilities that submit attestations regarding the number 
of eligible patients treated at the facility during the eligibility 
period by the applicable deadline will not receive a score on the ICH 
CAHPS clinical measure for that program year. Facilities that do not 
submit such attestations will be eligible to receive a score on the 
measure. However, even if a facility is eligible to receive a score on 
the measure because it has treated at least 30 survey-eligible patients 
during the eligibility period (defined as the calendar year before the 
performance period), the facility will still not receive a score on the 
measure if it cannot collect at least 30 survey completes during the 
performance period. Facility attestations are limited to the number of 
eligible patients treated at the facility during the eligibility 
period, and are not intended to capture the number of completed surveys 
at a facility during the performance period. The ESRD QIP system will 
determine how many completed surveys a facility received during the 
performance period. We are not proposing to change any of the other 
data minimum requirements for the PY 2017 ICH CAHPS reporting measure, 
or for the ICH CAHPS clinical measure in PY 2018 and future payment 
years. To reduce confusion, we will release a CROWN Memo detailing how 
facilities are expected to attest.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Many commenters supported the proposal to reinstate 
qualifying patient attestations for the ICH CAHPS measure. One 
commenter additionally recommended that CMS establish a process for 
facilities to confirm that the attestation has been received and that 
CMS delay the measure's conversion to a clinical measure until the 
appropriate facility exclusion data is available.
    Response: We thank commenters for their support. We agree that it 
would be ideal if facilities could confirm that their attestation has 
been received, and we will consider the feasibility of implementing 
such a process in the future.
    Comment: One commenter did not support CMS' proposal to reinstate 
the qualifying patient attestations for the ICH CAHPS measure because 
the process is challenging for smaller facilities to understand. The 
commenter recommended that CMS adopt ICH CAHPS patient attestations 
forms similar to the Home Health Care CAHPS Survey Participant 
Exemption Request form.
    Response: The reinstated attestation for the ICH CAHPS measure is 
unchanged from that previously adopted in the CY 2014 ESRD PPS final 
rule with comment period (78 FR 72220 through 72222); we therefore 
believe that facilities have had sufficient experience with the 
attestation process and exclusion criteria to justify reinstating the 
attestation in order to ensure more accurate measure scores for 
facilities. In order to ease any residual confusion regarding the 
reinstated ICH CAHPS qualifying patient attestation, we will release a 
CROWN Memo detailing how facilities are expected to attest and the 
exclusion criteria for the ICH CAHPS measure prior to the attestation 
deadline for PY 2017. For future years of the ESRD QIP, we will 
consider the feasibility of adopting ICH CAHPS patient exemption 
request form similar to the Home Health Care CAHPS Survey Participant 
Exemption Request form.
    For the reasons discussed above, we are finalizing our proposal to 
reinstate the qualifying patient attestations for the ICH CAHPS measure 
beginning with the PY 2017 ESRD QIP.

G. Requirements for the PY 2018 ESRD QIP

1. Performance Standards, Achievement Thresholds, and Benchmarks for 
the Clinical Measures Finalized for the PY 2018 ESRD QIP
    In the CY 2015 ESRD PPS final rule, we stated that we would publish 
values for the PY 2018 clinical measures, using data from CY 2014 and 
the first portion of CY 2015, in the CY 2016 ESRD PPS final rule (79 FR 
66209). Upon publication of the CY 2016 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 
2014. Since that time, we have collected the data needed to calculate 
finalized performance standards for the PY 2018 ESRD QIP. For all of 
the clinical measures, including the SRR clinical measure, this data 
comes from the period of January through December 2014. Table 17 lists 
the finalized numerical values for all of the finalized PY 2018 ESRD 
QIP clinical measures except the ICH CAHPS clinical measure.

[[Page 69044]]



  Table 17--Estimated Numerical Values for the Performance Standards for the PY 2018 ESRD QIP Clinical Measures
                                     Using the Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
               Measure                  Achievement threshold          Benchmark           Performance standard
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    %Fistula.........................  53.51%.................  79.60%.................  65.94%.
    %Catheter........................  16.79%.................  2.59%..................  8.80%.
Kt/V:
    Adult Hemodialysis...............  91.08%.................  99.35%.................  96.89%.
    Adult Peritoneal Dialysis........  75.42%.................  97.06%.................  89.47%.
    Pediatric Hemodialysis...........  84.16%.................  99.06%.................  94.44%.
    Pediatric Peritoneal Dialysis....  43.22%.................  88.39%.................  72.60%.
Hypercalcemia........................  3.92%..................  0.00%..................  1.19%
NHSN Bloodstream Infection SIR.......  1.812..................  0......................  0.861
Standardized Readmission Ratio.......  0.996..................  0.555..................  0.996
Standardized Transfusion Ratio.......  1.470..................  0.431..................  0.923
ICH CAHPS............................  50th percentile of       15th percentile of       90th percentile of
                                        eligible facilities'     eligible facilities'     eligible facilities'
                                        performance during CY    performance during CY    performance during CY
                                        2015.                    2015.                    2015.
----------------------------------------------------------------------------------------------------------------

    We believe that the ESRD QIP should not have lower performance 
standards than in previous years. Accordingly, 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 2017 ESRD 
QIP, then we proposed to substitute the PY 2017 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 estimated performance 
standard, achievement threshold, and benchmark for the ICH CAHPS 
clinical measure for the PY 2018 ESRD QIP.
    Response: We thank the commenter for its support.
    Comment: Several commenters supported CMS's proposal, for PY 2018, 
to set the Performance Standard, Achievement Threshold and Benchmark at 
the 50th, 15th, and 90th percentiles respectively, for the Clinical 
Measures finalized for the PY 2018 ESRD QIP, particularly where those 
values are higher than the current PY 2017 values.
    Response: We thank the commenters for their support. For this 
reason, we will finalize our proposal to utilize performance standards 
from the previous year if they are higher than those of the next year. 
Accordingly, we are substituting the PY 2017 performance standards, 
achievement thresholds, and benchmarks for the Adult Hemodialysis 
Adequacy, Pediatric Hemodialysis Adequacy, and SRR clinical measures 
for the PY 2018 values for these measures.
    Comment: One commenter expressed support for CMS's policy to 
maintain a previous year's benchmark if it is worse than it was for the 
measure in the previous year, but suggested that if data shows that 
performance is not as strong for a particular measure, then there may 
be an issue with the measure itself. The commenter recommended that 
rather than using prior benchmark data, CMS should consider the root 
cause of why performance isn't improving for those measures.
    Response: We continue to believe that using prior benchmark data 
helps drive quality improvement for facilities and encourages them to 
conduct their own quality improvement initiatives. When we encounter 
measures with data showing that performance is consistently poor or 
otherwise failing to improve meaningfully over time, we look into the 
root cause and the reasons performance is not improving. We have done 
this for the measures currently included in the QIP and, where 
appropriate, are using prior benchmarks. In addition, we have analyzed 
the performance gaps between CY 2013 and CY 2014 for measures where we 
are substituting the PY 2017 performance standards, and have not 
identified any underlying issues with those measures. We will continue 
to monitor measure performance data in future years of the program.
    Comment: One commenter requested that CMS reevaluate the PY 2018 
performance standards for the NHSN BSI, SRR, and STrR clinical measures 
because their estimated values are all below 1.0, meaning facility 
performance falling within the range of expected events may generate 
lower QIP scores. The commenter expressed concern that this scoring 
issue could misrepresent performance by facilities on these measures. 
Another commenter did not support the estimated performance standards 
for the SRR or STrR clinical measures because they seem unattainable 
given facilities' experience with the NHSN BSI clinical measure.
    Response: We thank the commenters for their comments. We note, 
however, that the curve for the NHSN BSI clinical measure as seen in 
the PY 2016 ESRD QIP is skewed due to an additional policy impacting 
this measure, under which facilities that fail to report a full 12 
months of data for the measure automatically receive a score of zero on 
the measure. We have not implemented a corresponding policy for the SRR 
or STrR clinical measures; therefore, we have no reason to believe 
scores on these measures will be impacted in this way. In addition, the 
performance standards for the PY 2018 ESRD QIP are only used to 
determine the minimum TPS for a given year of the ESRD QIP. The median 
performance rates for the SRR, STrR, and NHSN BSI clinical measures 
were determined to be 0.998, 0.923, and 0.862 for SRR, STrR, 
respectively, for the PY 2018 ESRD QIP. The minimum TPS was determined 
to be the same when these values were set to 1.0. Therefore, use of the 
calculated median rather than 1.0 has no impact on facility-level QIP 
scores.
    We further disagree that the estimated performance standards for 
the SRR or STrR clinical measures are unattainable. First, we note that 
the performance standards for these measures are set at the 50th 
percentile of facility performance, meaning that 50 percent of 
facilities achieve or surpass this standard. These measures are 
standardized ratios of performance, evaluating facilities' actual 
performance against their expected performance. Therefore, each 
facility's score on these measures will be reflective of the facility's 
particular patient mix and other adjustments. In addition, the 
achievement threshold, benchmark and performance standard for those 
measures are determined using the same standards as those for all of 
the other

[[Page 69045]]

clinical measure, which are intended to incentivize quality 
improvements while also accounting for individual facilities' past 
performance on the measure. We therefore believe it is appropriate to 
maintain uniform performance standard, achievement threshold, and 
benchmark policies across the ESRD QIP clinical measures.
    Comment: One commenter recommended that CMS avoid implementing 
measures without numerical values for performance standards because it 
creates a moving target for quality improvement. Specifically, the 
commenter expressed concern about the proposed performance standard, 
achievement threshold, and benchmark for the PY 2018 ICH CAHPS clinical 
measure because performance data is not available to estimate a 
numerical value for these elements, and recommended that CMS revert the 
ICH CAHPS measure to a reporting measure. The commenter asserted that 
numerical performance standards inform facility decision-making in how 
to address patient concerns and improve patient experience ratings.
    Response: We thank commenter for its recommendation and note that, 
in general, we seek to avoid implementing measures without numerical 
values for their performance standard, achievement threshold, and 
benchmark. In the CY 2016 ESRD PPS proposed rule, we used the most 
recently available data and provided numerical values for all clinical 
measures except the ICH CAHPS clinical measure (80 FR 37842). For the 
ICH CAHPS clinical measure, CY 2015 is the first year for which we will 
have data. Accordingly, we will propose numerical values for the 
performance standard, achievement threshold, and benchmark once we have 
collected the data for CY 2015 and conducted the necessary analyses.
    Comment: One commenter recommended that CMS maintain consistency in 
the ESRD QIP performance period and performance standard methodology, 
and encouraged CMS to finalize performance periods and standards in a 
timely manner.
    Response: We agree that maintaining consistency in the ESRD QIP 
performance periods and performance standards is important because it 
simplifies the administrative burden associated with participating in 
the ESRD QIP and aids facilities in understanding the requirements of 
the program. We note that the performance period for the majority of 
measures in the ESRD QIP aligns with the calendar year, and only 
deviates in the case of the NHSN HCP Influenza Vaccination reporting 
measure, for which the performance period generally aligns with the 
influenza season. Additionally, we appreciate that facilities want to 
learn as soon as possible what the ESRD QIP measure set and performance 
standards will be for a given year of the program. Numerical 
performance standards for the ESRD QIP measure set are calculated using 
the most recent data available for those measures in advance of the 
applicable performance period. We understand that this process results 
in facilities only receiving the finalized numerical performance 
standards two months before the beginning performance period; however, 
we believe this process is necessary in order to ensure that we set 
accurate performance standards for use in scoring facility performance 
on the ESRD QIP measure set for a given year.
    For the reasons discussed above, for PY 2018, we are finalizing 
that we will use the performance standards in Table 17 above.
2. Modification to Scoring Facility Performance on the Pain Assessment 
and Follow-Up Reporting Measure
    In the CY 2015 ESRD PPS final rule, we finalized the following 
calculation for scoring facility performance on the Pain Assessment and 
Follow-Up reporting measure under the PY 2018 ESRD QIP (79 FR 66211):
[GRAPHIC] [TIFF OMITTED] TR06NO15.005

We have since determined that this calculation may unduly penalize 
facilities that treat no eligible patients in one of the two six-month 
periods evaluated under this measure; under this calculation, those 
facilities would have a ``0'' for the applicable period's data, in 
effect giving the facility half of its score on the remaining 6-month 
period as a measure score. In order to avoid such an undue impact on 
facility scores, we proposed that, beginning with the PY 2018 ESRD QIP, 
if a facility treats no eligible patients in one of the two 6-month 
periods, then that facility's score will be based solely on the 
percentage of eligible patients treated in the other six-month period 
for whom the facility reports one of six conditions.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters supported the proposal to modify the 
Pain Assessment and Follow-Up reporting measure scoring methodology.
    Response: We thank the commenters for their support.
    Comment: Some commenters requested additional clarification 
regarding the reasons for the proposed modification to scoring facility 
performance on the Pain Assessment and Follow-Up reporting measure as 
well as information about how the modifications will be 
operationalized.
    Response: Under the previously finalized calculation for scoring 
facility performance on the Pain Assessment and Follow-Up reporting 
measure, facilities may have been unduly penalized for treating no 
eligible patients during one of the two 6-month periods that together 
make-up the performance period. The proposed modification is an 
alteration to the scoring methodology for the Pain Assessment and 
Follow-Up reporting measure, and therefore does not impact facilities' 
requirements under the measure.
    For example, if a facility had zero eligible patients in the first 
6-month period, then treated eligible patients in the second 6 months, 
the facility would automatically receive no greater than 5 points for 
the measure. We did not fully anticipate that such a scenario could 
arise, and it is one which we wish to avoid. Therefore, under the 
proposed calculation modification, facilities that only treat eligible 
patients in one of two the 6-month periods will be scored only on the 
percentage of eligible patients treated during that 6-month period.
    Comment: One commenter requested clarification from CMS regarding 
the proposed modification to the Pain Assessment and Follow-Up 
reporting measure because it is unclear how the six-month periods 
relate to the measure attestations. The commenter further

[[Page 69046]]

recommended implementing the same proposed modification for the 
Screening for Clinical Depression and Follow-Up reporting measure.
    Response: In order to comply with the requirements of the Pain 
Assessment & Follow-Up Measure, facilities must report one of six 
conditions in CROWNWeb once every six months per performance period for 
every qualifying patient, meaning that facilities will provide two 
separate rounds of attestations for this measure. Conditions covering 
the first six months of the performance period must be reported in 
CROWNWeb before August 1 of the performance period, and 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 (79 FR 66203 through 66204).
    We did not propose to implement a corresponding modification for 
the Screening for Clinical Depression and Follow-Up reporting measure 
because facilities are only required to report one of the six 
conditions listed in CROWNWeb once per performance period (that is, 
once per calendar year) under this measure (79 FR 66200). Because 
reporting for the Screening for Clinical Depression and Follow-Up 
reporting measure occurs once per performance period, and not twice for 
the performance period (once every 6 months), there will not be 
instances where a facility is eligible for scoring based on one part of 
the performance period but not the other. Therefore, there is no need 
to change the scoring methodology for the Screening for Clinical 
Depression and Follow-Up reporting measure.
    For the reasons discussed above, we are finalizing as proposed the 
modified methodology for scoring facility performance on the Pain 
Assessment and Follow-Up reporting measure beginning with the PY 2018 
ESRD QIP.
3. 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 ESRD QIP scoring methodology results 
in an appropriate distribution of payment reductions across facilities, 
such that facilities achieving the lowest TPSs receive the largest 
payment reductions. In the CY 2015 ESRD PPS final rule, we finalized 
our proposal for calculating the minimum TPS for PY 2018 and future 
payment years (79 FR 66221 through 66222). Under our current policy, 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: (i) It performs at the performance standard for each 
clinical measure; and (ii) it receives 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 (79 FR 66221). We 
proposed to clarify how we will account for measures in the minimum TPS 
when we lack the baseline data necessary to calculate a numerical 
performance standard before the beginning of the performance period 
(per criterion (i) above), because we inadvertently omitted this detail 
in the CY 2015 ESRD PPS final rule. Specifically, we propose, for the 
PY 2018 ESRD QIP, to add the following criterion previously adopted for 
the PY 2017 program (79 FR 66187): ``it received zero points for each 
clinical measure that does not have a numerical value for the 
performance standard established through rulemaking before the 
beginning of the PY 2018 performance period.'' Under this proposal, for 
PY 2018, 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: (i) It performs at the performance standard 
for each clinical measure; (ii) it received zero points for each 
clinical measure that does not have a numerical value for the 
performance standard established through rulemaking before the 
beginning of the PY 2018 performance period; and (iii) it receives 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.
    We were unable to calculate a minimum TPS for PY 2018 in the CY 
2015 ESRD PPS final rule because we were not yet able to calculate the 
performance standards for each of the clinical measures. We therefore 
stated that we would publish the minimum TPS for the PY 2018 ESRD QIP 
in the CY 2016 ESRD PPS final rule (79 FR 66222).
    Based on the estimated performance standards listed above, we 
estimated that a facility must meet or exceed a minimum TPS of 39 for 
PY 2018. For all of the clinical measures except the SRR, STrR, and ICH 
CAHPS clinical measures, these data come from CY 2014. The data for the 
SRR and STrR clinical measures come from CY 2013 Medicare claims. For 
the ICH CAHPS clinical measure, we set the performance standard to zero 
for the 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 2018 
performance period. We proposed that a facility failing to meet the 
minimum TPS, as established in the CY 2016 ESRD PPS final rule, will 
receive a payment reduction based on the estimated TPS ranges indicated 
in Table 18 below.

  Table 18--Estimated Payment Reduction Scale for PY 2018 Based on Data
              Available at Publication of the Proposed Rule
------------------------------------------------------------------------
                 Total performance score                  Reduction  (%)
------------------------------------------------------------------------
100--39.................................................             0.0
38--29..................................................             0.5
28--19..................................................             1.0
18--9...................................................             1.5
8--0....................................................             2.0
------------------------------------------------------------------------

    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Several commenters supported CMS' proposal to continue, 
for PY 2018, the same policy used in PY 2017 for determining payment 
reductions, including the process for setting the minimum TPS. One 
commenter urged CMS to maintain consistency in its payment reduction 
methodology for future years of the ESRD QIP, because this would allow 
beneficiaries to better compare facility performance over time.
    Response: We thank the commenters for their support.
    Comment: One commenter expressed concern about the estimated 
minimum TPS for PY 2018, and requested that CMS provide clarification 
on how the mTPS was calculated. Specifically, commenter is concerned 
that we proposed to lower the minimum TPS for PY 2018 from 60 (the mTPS 
for PY 2017) to 39. The commenter stated that this proposal was 
confusing in light of CMS's request for comments on potentially raising 
the performance threshold to the 25th percentile.
    Response: We have recalculated the minimum TPS for PY 2018 for all 
measures using updated data, including data for the NHSN BSI clinical 
measure, which we lacked at the time of the proposed rule's 
publication. Using this data, we have determined that the updated 
minimum TPS for PY 2018 is 49. Facilities failing to meet this minimum 
TPS will receive a payment reduction based on the updated TPS ranges 
indicated in Table 19, below.

[[Page 69047]]



Table 19--Payment Reduction Scale for PY 2018 Based on the Most Recently
                       Available Data From CY 2014
------------------------------------------------------------------------
                 Total performance score                  Reduction  (%)
------------------------------------------------------------------------
100-49..................................................             0.0
48-39...................................................             0.5
38-29...................................................             1.0
28-19...................................................             1.5
18-0....................................................             2.0
------------------------------------------------------------------------

    We have also provided two sets of tables below detailing how the 
minimum TPS was calculated for the PY 2018 ESRD QIP. Table 20 provides 
the measure score calculations used for the updated minimum TPS. Table 
21 provides the total performance score calculations used to determine 
the minimum TPS in the proposed rule.

         Table 20--Minimum TPS Measure Score Calculation for PY 2018 Using Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
                                                                                                   Measure topic
                                                                                                   weight score
                                                                   Median score   Measure weight     (= median
                             Measure                                for measure         (%)           score *
                                                                      topics                          measure
                                                                                                      weight)
----------------------------------------------------------------------------------------------------------------
                                                CLINICAL MEASURES
----------------------------------------------------------------------------------------------------------------
Clinical Care Subdomain.........................................  ..............              50  ..............
    Kt/V (4 combined measures)..................................               6              18            1.08
    VAT (2 combined measures)...................................               6              18            1.08
    Hypercalcemia...............................................               7               7            0.49
    STRR........................................................               5               7            0.35
Patient and Family Engagement/Care Coordination Subdomain.......  ..............              30  ..............
    SRR.........................................................               4              10             0.4
    ICH CAHPS...................................................               0              20               0
    Safety Subdomain............................................  ..............              20  ..............
    NHSN........................................................               5              20               1
                                                                 -----------------------------------------------
        Clinical Subtotal.......................................  ..............  ..............             4.4
----------------------------------------------------------------------------------------------------------------
                                               REPORTING MEASURES
----------------------------------------------------------------------------------------------------------------
Mineral Metabolism..............................................               9              20            0.18
Anemia Management...............................................              10              20            0.20
Pain............................................................              10              20            0.20
Depression......................................................              10              20            0.20
NHSN HCP........................................................              10              20            0.20
                                                                 -----------------------------------------------
    Reporting Subtotal..........................................  ..............  ..............             9.8
----------------------------------------------------------------------------------------------------------------


             Table 21--Total Performance Score Calculation Used To Determine the PY 2018 Minimum TPS
----------------------------------------------------------------------------------------------------------------
                                                                                   Clinical and
                                                   Measure topic   Clinical and   reporting sub-   Final scores
                                                   weight score      reporting       scores (=      (= clinical
                                                  (from previous      weights      measure topic  and  reporting
                                                      table)         (percent)        score *      sub-scores *
                                                                                      weight)           10)
----------------------------------------------------------------------------------------------------------------
Clinical Subtotal...............................             4.4              90            3.96            39.6
Reporting Subtotal..............................            9.75              10           0.975             9.8
TPS (Clinical + Reporting Subtotals)............  ..............  ..............            4.96            49.4
TPS (rounded)...................................  ..............  ..............  ..............              49
----------------------------------------------------------------------------------------------------------------

    We note that our minimum TPS policy is independent from the 
achievement threshold as used in the ESRD QIP scoring policy, and that 
these policies serve different the purposes in scoring facility 
performance in the ESRD QIP. The minimum TPS establishes the TPS a 
facility must achieve in order to avoid receiving a payment reduction 
for the applicable payment year of the ESRD QIP, and serves as the 
basis for the PY's payment reduction scale. The achievement threshold, 
on the other hand, is set at the 15th percentile of national 
performance and is used to score facility performance on individual 
clinical measures for a given year of the program. We therefore believe 
these separate policies provide distinct incentives for quality 
improvement among dialysis facilities. We are also continuing to look 
for ways to further incentivize quality improvement, one of which would 
be to increase the achievement threshold from the 15th to the 25th 
percentile.
    Comment: One commenter urged CMS to monitor the implementation and 
impact of the QIP scoring model on the standardized ratio measures 
because they are fundamentally different than the other QIP clinical 
measures in terms of how they are calculated and the level of control 
dialysis facilities have on the results. The commenter pointed out that 
the QIP scoring model was originally designed for ``rates of 
compliance'' measures and is concerned about how these measures will 
influence QIP results given that the results are

[[Page 69048]]

reported categorically (i.e. ``worse/better than expected'' or ``as 
expected.'')
    Response: We acknowledge that the standardized ratio measures 
differ from other ESRD QIP clinical measures. However, we lack reason 
to believe that the current ESRD QIP scoring methodology is 
insufficient or inappropriate for calculating facility performance on 
the ESRD QIP measures when the standardized ratio measures are included 
in a facility's score. In addition, we note that other value-based 
purchasing programs, such as the Hospital Value-Based Purchasing 
Program, score standardized ratio measures. We will continue to monitor 
the implementation and impact of these measures in future years of the 
ESRD QIP to determine if further modification to the ESRD QIP scoring 
methodology is necessary.
    For the reasons discussed above, we are finalizing the revised 
minimum TPS policy for PY 2018 as proposed. We are also finalizing the 
updated mTPS and payment reduction scale for PY 2018 as discussed 
above.
4. 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 procured the services of a data-validation contractor 
that was tasked with validating a national sample of facilities' 
records as reported to CROWNWeb. For validation of CY 2014 data, our 
first priority was to develop a methodology for validating data 
submitted to CROWNWeb under the pilot data-validation program. That 
methodology was fully developed and adopted 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 had 60 days to comply 
once they received requests for records. We continued this pilot for 
the PY 2017 ESRD QIP, and proposed to continue doing so for the PY 2018 
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 2016. If a facility is 
randomly selected to participate in the pilot validation study but does 
not provide us 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.
    In the CY 2015 ESRD PPS final rule, we also finalized that there 
will be a feasibility study for validating data reported to CDC's NHSN 
Dialysis Event Module for the NHSN Bloodstream Infection clinical 
measure. Healthcare-Acquired Infections (HAI) are relatively rare, and 
we finalized 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. 
For PY 2018, we proposed to use the same methodology that was discussed 
in the CY 2015 ESRD QIP final rule (79 FR 66187). This methodology 
resembles the methodology we use in 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 
53553). For the PY 2018 ESRD QIP, we proposed to randomly select nine 
facilities to participate in the feasibility study for data reported in 
CY 2016. A CMS contractor will send these facilities quarterly requests 
for lists of candidate dialysis events (for example, 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 and other candidate 
events. A CMS contractor will then determine when a positive blood 
culture or other ``candidate dialysis event'' is appropriate for 
further validation. With input from CDC, the CMS contractor will 
utilize a methodology for identifying and requesting the candidate 
dialysis events other than positive blood cultures. The contractor will 
analyze the records of patients who had candidate events in order to 
determine whether 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 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.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Several commenters requested that CMS conduct a more 
robust validation study for NHSN BSI, examining both the completeness 
of BSI data collection and the accuracy of the data collected. They 
argued that selecting such a small number of facilities to participate 
in the study may be inadequate to validate the data reported to the 
NHSN Dialysis Event Module and recommended that CMS reconsider the 
proposed sample size to include more facilities, ideally at least 5 
percent of facilities. One commenter offered specific suggestions for 
increasing the size of the validation study. Specifically, the 
commenter recommended that CMS evaluate under-reporting, access type 
errors, application of the NHSN criteria, accessibility of reports of 
positive blood cultures from inpatient facilities to outpatient 
dialysis facilities, and the accuracy of manual- vs. electronically-
submitted data. The commenter urged CMS to ensure that both small and 
large dialysis facilities, hospital-based centers and for-profit 
centers are included. Additionally, the commenter recommended that CMS 
validate data from facilities that use paper medical records and from 
facilities that use electronic medical records. Some commenters argued 
that the targeting of the validation study is too narrowly focused on 
patients with positive blood cultures and feel that the study should be 
expanded beyond those patients with positive blood cultures. They also 
argued that the validation study should look at instances where a 
facility reports no positive blood cultures, which is likely the result 
of intentional or accidental under-reporting. One commenter 
specifically recommended that CMS review the CDC-funded data validation 
project for dialysis events performed by the Tennessee Health 
Department and fund state health departments for on-site data 
validation and examination of vaccination rate reporting.
    Response: We thank commenters for their recommendations about ways 
to

[[Page 69049]]

improve the NHSN BSI validation study. As noted in the CY 2015 ESRD PPS 
final rule with comment period (79 FR 66188), we believe it is 
important to demonstrate the study's feasibility and further develop 
the study's methodology before expanding the study to include more 
facilities. For future years of the program, we will consider 
increasing the size of the validation study to include a greater number 
of facilities. However, we currently include a wide variety of types of 
facilities, both small and large, hospital-based and for-profit, etc. 
in our study. In addition, the validation study is not currently 
limited to events collected in the dialysis facility, as one commenter 
suggested; it also includes positive blood cultures collected or 
identified at hospitals. We look forward to continuing to refine this 
study to ensure that we are collecting as much reliable and useful data 
about bloodstream infections as possible.
    Comment: Numerous commenters did not support CMS's proposal to 
deduct 10 points from a facility's TPS if they are selected to 
participate in a data validation study and fail to provide CMS with the 
requested data within the allotted time because 10 points can have such 
a significant impact on selected facilities' TPSs and because the 
Conditions for Coverage already require that facilities comply with 
data validation requests. Several commenters expressed concerns that 
this 10-point deduction for non-compliance could mislead beneficiaries 
on the quality of care delivered by the facility and argued that there 
is no evidence that facilities are noncompliant with requests for this 
data. Commenters argued that failing to supply CMS with this data does 
not measure the quality of care provided by the facility. Additionally, 
commenters stated that facilities should not be penalized without 
having the opportunity to dispute the noncompliance allegations and to 
make any needed corrections as appropriate.
    Response: We appreciate commenters' concerns about the impact of a 
10-point reduction to a facility's TPS based on noncompliance with the 
data request. We also recognize that the ESRD Conditions for Coverage 
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 not typically surveyed for 
compliance with the Conditions for Coverage every year, so deducting 
points from a facility's TPS provides a more certain process for 
penalizing noncompliance with the requirements of the validation 
studies. As stated in the CY 2015 ESRD PPS final rule with comment 
period, our policy 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 
methodology for assessing the total performance of each provider of 
services and renal dialysis facility based on the performance standards 
with respect to the measures selected (79 FR 66189). 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. We will consider the feasibility of implementing 
a method for facilities to dispute the noncompliance allegations and to 
make any needed corrections for future years of the ESRD QIP.
    Comment: One commenter requested that CMS publish the results of 
the ongoing CROWNWeb validation study as well as a timeline for the 
expected release of such results.
    Response: We anticipate releasing the results of this study in the 
near future, and are aiming for publication by December 2015.
    Comment: One commenter expressed concerns with the proposed 60-day 
compliance requirement for the NHSN BSI measure, and suggested that a 
90-day period would be more appropriate.
    Response: We disagree that the 60-day timeframe 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 for 
the NHSN Bloodstream Infection study.
    Comment: A few commenters raised concerns that the data validation 
study appears to be an audit of facility data to confirm the accuracy 
of the data reported and that therefore it is important to ensure that 
there are processes in place to address disputes which may arise and to 
protect facilities so that they have the opportunity to appeal both at 
the contractor and at higher levels of review if necessary.
    Response: As stated previously in the CY 2015 final rule with 
comment period (79 FR 66188), we agree that one of the purposes of the 
validation pilot is to identify instances in which facilities are 
reporting invalid data to CROWNWeb. However, we do not believe it is 
appropriate to designate the validation study 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.
    Comment: One commenter encouraged CMS to suspend the validation 
study and the resulting payment penalties in favor of working directly 
with facilities that appear to have data submission problems to help 
them identify workable solutions which can be remedied. In this way, 
accurate data submission will be encouraged rather than penalizing 
facilities as much for not submitting data as they would be penalized 
for not providing quality patient care. Another commenter argued that, 
given that CMS is conducting a feasibility study of a validation 
methodology, those facilities chosen should not be penalized with a 
deduction in their TPS as a result of non-compliance. The commenter 
recommended that the penalty be delayed until a full validation study 
is in place.
    Response: We thank the commenter for its recommendation. However, 
before we can undertake a work-intensive and highly individualized 
remediation effort such as that described by the commenter, we must 
develop a more fulsome understanding of the issues impacting facility 
data reporting. We believe the current data validation studies are a 
first and critical step toward developing this understanding. In the 
interim, we urge facilities experiencing issues with data submission to 
contact the CROWNWeb and/or NHSN Help Desks for support. We also note 
that the current data validation studies do not penalize facilities for 
reporting incorrect or invalid data; the 10-point TPS reduction is 
keyed to non-compliance with only the submission of data needed for the 
studies themselves. We also disagree that the penalty for non-
compliance with the feasibility study of our proposed validation 
methodology should be delayed until a full validation is in place. 
Facility compliance is essential to the success of the feasibility 
study, and we wish to provide a strong incentive for facilities to 
transmit the requested medical records needed to validate the NHSN 
data. Most importantly, however, this feasibility study will provide 
the basis for a more comprehensive validation study that we hope to 
begin in the near future.

[[Page 69050]]

    Comment: One commenter expressed concerns that obtaining only 
positive blood culture data may not lead to comprehensive validation of 
data reported to NHSN and recommended that IV antimicrobial start and 
pus, redness or increased swelling at the vascular access site should 
also be considered.
    Response: We will take this recommendation into consideration as we 
continue to refine the NHSN data validation feasibility study.
    Comment: One commenter supported the quarterly collection of NHSN 
BSI data and stated that such a requirement is not a burdensome task 
for facilities, especially when the expectation is clearly articulated 
in advance.
    Response: We agree that the quarterly collection of NHSN BSI data 
is not a burdensome task for facilities.
    For these reasons, we are finalizing, as proposed, the continuation 
of the CROWNWeb pilot data validation and the feasibility study for the 
validating data reported to CDC's NHSN Dialysis Event Module for the 
NHSN Bloodstream Infection clinical measure.

H. Requirements for the PY 2019 ESRD QIP

1. Replacement of the Four Measures Currently in the Dialysis Adequacy 
Clinical Measure Topic Beginning With the PY 2019 Program Year
    We consider a quality measure for removal or replacement if: (1) 
Measure performance among the majority of ESRD facilities is so high 
and unvarying that meaningful distinctions in improvements or 
performance can no longer be made (in other words, the measure is 
topped-out); (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 or 
unintended consequences (77 FR 67475). In the CY 2015 ESRD PPS final 
rule, we adopted statistical criteria for determining whether a 
clinical measure is topped out, and also adopted a policy under which 
we could retain an otherwise topped-out measure if we determined that 
its continued inclusion in the ESRD QIP measure would address the 
unique needs of a specific subset of the ESRD population (79 FR 66172 
through 66174).
    Subsequent to the publication of the CY 2015 ESRD PPS final rule, 
we evaluated the finalized PY 2018 ESRD QIP measures against all of 
these criteria. We determined that none of these measures met criterion 
(1), (2), (3), (5), (6), or (7). As part of this evaluation for 
criterion one, we performed a statistical analysis of the PY 2018 
measures to determine whether any measures were ``topped out.'' The 
full results of this analysis can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Topped-Out-Analysis-of-ESRD-QIP-Clinical-Measures-for-PY-2018.pdf and a summary of our topped-out analysis results appears in 
Table 22 below.

                                       TABLE 22--PY 2018 Clinical Measures Using CROWNWeb and Medicare Claims Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       75th            90th                          Statistically
             Measure                     N          percentile      percentile      Std. error    indistin-guishable   Truncated CV        TCV< 0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adult HD Kt/V...................           5,822            97.0            98.3            0.09  No................            0.03  Yes.
Pediatric HD Kt/V...............               7            94.4            96.9            13.4  Yes...............            0.23  No.
Adult PD Kt/V...................           1,287            94.4            97.1            0.45  No................            0.10  No.
Pediatric PD Kt/V...............               3            88.4            88.4            13.9  Yes...............         N/A \1\  N/A. \1\
VAT: Fistula \2\................           5,763            73.3            79.7            0.15  No................            0.14  No.
VAT: Catheter \3\...............           5,744             5.4             2.7            0.10  No................           <0.01  Yes.
Hypercalcemia \2\...............           6,042            0.33             0.0            0.03  No................           <0.01  Yes.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Insufficient data.
\2\ Medicare claims data from CY 2014 were used in these calculations.
\3\ CROWNWeb data from CY 2014 was used in this calculation.

    As the information presented in Table 22 indicates, none of these 
clinical measures are currently topped-out in the ESRD QIP. We note 
that only three facilities had 11 or more qualifying patients for the 
Pediatric Peritoneal Dialysis Adequacy clinical measure, resulting in 
insufficient data available to calculate a truncated coefficient of 
variation. However, because the Pediatric Peritoneal Dialysis Adequacy 
clinical measure addresses the unique needs of the pediatric 
population, we are not proposing to remove the measure at this time. 
Accordingly, we are not proposing to remove any of these measures from 
the ESRD QIP.
    Beginning with the PY 2019 ESRD QIP, we proposed to replace the 
four measures in the Kt/V Dialysis Adequacy measure topic--(1) 
Hemodialysis Adequacy: Minimum delivered hemodialysis dose; (2) 
Peritoneal Dialysis Adequacy: Delivered dose above minimum; (3) 
Pediatric Hemodialysis Adequacy: Minimum spKt/V; and (4) Pediatric 
Peritoneal Dialysis Adequacy--with a single more broadly applicable 
measure for the topic. The new measure, Delivered Dose of Dialysis 
above Minimum--Composite Score clinical measure (``Dialysis Adequacy 
clinical measure'') (Measure Applications Partnership #X3717) \4\, is a 
single comprehensive measure of dialysis adequacy assessing the 
percentage of all patient-months, for both pediatric and adult 
patients, whose average delivered dose of dialysis (either hemodialysis 
or peritoneal dialysis) met the specified Kt/V threshold during the 
performance period. As discussed in more detail below, this measure's 
specifications allow the measure to capture a greater number of 
patients, particularly pediatric hemodialysis and peritoneal dialysis 
patients, than the four individual dialysis adequacy measures, and will 
result in a larger and broader collection of data from patients whose

[[Page 69051]]

dialysis adequacy is assessed under the ESRD QIP. The measure assesses 
the adequacy of dialysis using the same thresholds applied to those 
patients by the existing dialysis adequacy measures, as described 
below. For these reasons, we believe the new dialysis adequacy measure 
meets criterion four above. We therefore proposed to remove the four 
individual measures within the Kt/V Dialysis Adequacy Measure Topic, as 
well as the measure topic itself, and to replace those measures with a 
single Dialysis Adequacy clinical measure beginning with the PY 2019 
ESRD QIP. However, if based on public comments, we do not finalize our 
proposal to adopt the Dialysis Adequacy clinical measure, then we would 
not finalize this proposal to remove these measures and the Dialysis 
Adequacy measure topic.
---------------------------------------------------------------------------

    \4\ Although we correctly identified the name of the proposed 
measure and the specifications for that measure in the proposed 
rule, we inadvertently misidentified the MAP ID number as X3717. The 
correct MAP ID number for the proposed measure is X2051. See https://www.qualityforum.org/map/. The description of the measure can be 
found under the title ``Spreadsheet of MAP 2015 Final 
Recommendations.''
---------------------------------------------------------------------------

    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters supported CMS's continued efforts to 
examine dialysis adequacy in the ESRD QIP as well as the proposal to 
remove the four separate dialysis adequacy clinical measures and 
replace them with a single comprehensive dialysis adequacy clinical 
measure because this single measure will capture a greater number of 
patients and make it less likely for one patient at a smaller facility 
to skew the facility's results on a measure.
    Response: We thank the commenters for their support.
    Comment: Once commenter expressed concerns about the fact that CMS 
removed the dialysis adequacy measure from the PQRS because it is 
``topped out.'' The commenter fears that including the measure in one 
quality reporting program and not in another sends a mixed message. 
Furthermore, the commenter argued that there should be common goals 
among all providers, facilities and physicians alike, in order to 
deliver high quality patient outcomes.
    Response: We acknowledge that, in the CY 2016 PFS proposed rule, 
CMS proposed to remove the Adult Kidney Disease: Hemodialysis Adequacy: 
Solute measure due to this measure representing a clinical concept that 
does not add clinical value to PQRS, and because eligible professionals 
consistently meet performance on this measure with performance rates 
close to 100 percent, suggesting that there is no gap in care (80 FR 
41861). However, quality measures may be topped-out in one program and 
not in another because the goals, patient populations, and clinical 
concerns addressed in these programs are often quite different. While 
the PQRS Adult Kidney Disease measure is similar to the ESRD QIP 
measure, the PQRS measure is specified at the eligible professional 
level, assessing the care that each eligible professional is providing 
to his or her patients. In contrast, the ESRD QIP measure is specified 
for use at the facility level and therefore reflects the ESRD QIP's 
focus on ensuring that facilities, as a whole, provide quality care to 
all patients. In addition, the PQRS measure assesses only the care 
provided to adult hemodialysis patients, whereas the ESRD QIP measure 
assesses the care provided to adult and pediatric patients on either 
hemodialysis or peritoneal dialysis.
2. Measures for the PY 2019 ESRD QIP
    We received a number of comments regarding the ESRD QIP measure set 
generally and the direction of future measure development and adoption 
for the program.
    Comment: One commenter urged CMS to adopt more clinical risk-
adjusted measures that capture the effective management of dialysis 
patients, such as the Standardized Hospitalization Ratio (SHR) or the 
Standardized Mortality Ratio (SMR). The commenter added that the agency 
previously considered, but did not adopt, the SHR measure for the PY 
2014 ESRD QIP and believes that these measures should be considered for 
future payment years.
    Response: We are continuing to develop additional appropriate 
clinical risk-adjusted measures to include in the ESRD QIP's measure 
set, and invite the ESRD community to work with us to identify such 
measures for future payment years.
    Comment: Several commenters criticized the ESRD QIP's current 
measure set for several reasons: first, they believe that the measures 
focus predominantly on in-center hemodialysis patients without 
examining the unique circumstances of home hemodialysis patients; 
second, they would like CMS to implement more pediatric ESRD quality 
measures in the ESRD QIP; third, commenters would like CMS to adopt 
more evidence-based measures that promote the delivery of high-quality 
care and improved patient outcomes; and finally, commenters would like 
CMS to consider more patient-reported outcomes.
    Some of the specific measures commenters would like to see are: (1) 
Measures that account for the unique circumstances of patients on home 
hemodialysis; (2) a reporting measure assessing whether the patient 
``has a voice'' during dialysis treatment, under which a patient would 
be asked about their experience on dialysis immediately following each 
treatment (commenters stated that these conversations might help 
facilities to better understand the patient's concerns about his or her 
particular treatment and any possible need for adjustments based on 
patient preference); (3) a measure establishing a minimal standard for 
anemia management because current evidence regarding the reduction of 
ESA use does not evaluate whether this decline is consistent with good 
patient care, particularly for home hemodialysis patients who are only 
seen in the dialysis facility setting once per month; (4) a measure of 
the percent of patients at a clinic who are using a home dialysis 
option; (5) a Patient Informed Consent for Anemia Treatment clinical 
measure that includes quality of life data; (6) a measure examining the 
percentage of incident patients, those who are initially starting 
hemodialysis or peritoneal dialysis for the first time with AVF, 
arteriovenous graft, and PD catheters; (7) a measure examining the 
percentage of prevalent patients, those patients already on dialysis 
and who have working vascular or PD access excluding central venous 
catheters; (8) a measure on Cramping and Washed-Out feeling; (9) a 
measure on Healthy Days at home; (10) a measure on Advanced Directives 
in patients with ESRD. One commenter noted that the two recommended 
catheter measures listed above (#6 and 7) are important because 
catheter use continues to be very high among prevalent ESRD patients, 
despite the improved clinical outcomes associated with arteriovenous 
access, and argued that these recommended measures could decrease 
catheter use among ESRD patients.
    Response: We thank the commenters for their recommendations, and 
will take these measure topics into consideration as we continue to 
develop the ESRD QIP measure set for future years of the program. We 
note that because the home hemodialysis, peritoneal dialysis and 
pediatric dialysis patient populations remain relatively small, 
establishing facility-level measures specific to these populations 
present substantial challenges. Specifically, there is a lack of 
clinical evidence available to set performance standards because there 
are relatively few home hemodialysis, peritoneal dialysis and pediatric 
dialysis patients, compared to in-center hemodialysis patients. In 
addition, small patient populations within individual facilities may 
result in measure reliability issues, which will

[[Page 69052]]

need to be addressed before the measure can be operationalized in the 
ESRD QIP.
    Comment: One commenter requested that CMS develop a validated 
experience instrument for assessing the home dialysis population 
because home hemodialysis patients constitute 10 percent of the ESRD 
population and are currently excluded from the ICH CAHPS clinical 
measure, the only patient experience measure in the ESRD QIP.
    Response: We appreciate the commenter's interest in ensuring that 
home dialysis patients are appropriately included in the ESRD QIP. 
While we are aware of interest in an experience of care survey, such as 
the Consumer Assessment of Healthcare Providers and Systems (CAHPS) 
surveys, for home dialysis patients, we do not have immediate plans to 
extend the types of patients covered by our experience of care surveys 
in this area, due to resource constraints and questions regarding the 
feasibility of expanding the current survey to include home 
hemodialysis patients. As we continue with the initial implementation 
and public reporting for the In-Center Hemodialysis CAHPS Survey, we 
will consider ways to capture these patients in the ESRD QIP, including 
developing measures that would assess their quality of care.
    Comment: One commenter supported the adoption of measures on 
bloodstream infection levels in ESRD patients, and recommended that CMS 
be mindful of the fact that the pediatric patient population may be 
disproportionately at risk for bloodstream infections.
    Response: We will continue to take the unique needs and 
characteristics of the pediatric patient population into consideration 
in future measure development efforts.
    Comment: One commenter suggested that CMS convene a Technical 
Expert Panel to develop a measure capturing patient education. The 
commenter further recommended that a good first step would be to 
compile education-related responses to the CAHPS survey (specifically 
questions 26, 27 and 30).
    Response: We thank the commenter for the suggestion to develop a 
measure on patient education. We are considering a variety of measure 
development activities for the coming years, and will take this 
suggestion into consideration.
    Comment: One commenter supported CMS's decision not to include 
hospitalizations and mortality in the ESRD QIP's measure set because of 
a belief that such measures are inappropriate in a pay-for-performance 
program while the impact of socio-demographic status on their rates is 
still being fully debated. Additionally, the commenter added that if 
these measures are adopted in future years of the QIP, facilities 
should be compared to peers serving similar socio-demographic 
populations.
    Response: We appreciate the commenter's support and will consider 
the recommendation in the event that the SMR and SHR measures are 
considered for adoption in future years of the QIP.
    Comment: One commenter expressed concern about the number of 
measures included in the QIP that are not NQF-endorsed.
    Response: We agree that in general it is best for the ESRD QIP to 
adopt measures that are NQF-endorsed. Where it is feasible and 
practicable to adopt an NQF-endorsed measure, we do so. However, in 
instances where a measure has not been NQF-endorsed for a topic that we 
feel is of importance for the clinical care and outcomes of patients 
with ESRD, or where we feel a non-endorsed measure is superior to an 
NQF-endorsed measure on the same topic, we believe it is appropriate to 
adopt a non-endorsed measure. In proposing to adopt non-endorsed 
measures, we give due consideration to NQF-endorsed measures, as well 
as those adopted by other consensus organizations.
a. PY 2018 Measures Continuing for PY 2019 and Future Payment Years
    We previously finalized 16 measures in the CY 2015 ESRD PPS final 
rule for the PY 2018 ESRD QIP, and these measures are summarized in 
Table 23 below. In accordance with our policy to continue using 
measures unless we propose to remove or replace them, (77 FR 67477), we 
stated in the proposed rule that we would continue to use 12 of these 
measures in the PY 2019 ESRD QIP. We also proposed to remove four 
clinical measures--(1) Hemodialysis Adequacy: Minimum delivered 
hemodialysis dose; (2) Peritoneal Dialysis Adequacy: Delivered dose 
above minimum; (3) Pediatric Hemodialysis Adequacy: Minimum spKt/V; and 
(4) Pediatric Peritoneal Dialysis Adequacy--and replace them with a 
single, comprehensive clinical measure covering the patient populations 
previously captured by these four individual clinical measures.

     Table 23--PY 2018 ESRD QIP Measures Being Continued in PY 2019
------------------------------------------------------------------------
               NQF #                    Measure Title and Description
------------------------------------------------------------------------
0257..............................  Vascular Access Type: AV Fistula, a
                                     clinical measure.
                                    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, a clinical measure.
                                    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, a clinical
                                     measure.
                                    Number of hemodialysis outpatients
                                     with positive blood cultures per
                                     100 hemodialysis patient-months.
1454..............................  Hypercalcemia, a clinical measure.
                                    Proportion of patient-months with 3-
                                     month rolling average of total
                                     uncorrected serum calcium greater
                                     than 10.2 mg/dL.
2496..............................  Standardized Readmission Ratio, a
                                     clinical measure.
                                    Standardized hospital readmissions
                                     ratio of the number of observed
                                     unplanned readmissions to the
                                     number of expected unplanned
                                     readmissions.
N/A...............................  Standardized Transfusion Ratio, a
                                     clinical measure.
                                    Risk-adjusted standardized
                                     transfusion ratio for all adult
                                     Medicare patients.
0258..............................  In-Center Hemodialysis Consumer
                                     Assessment of Healthcare Providers
                                     and Systems (ICH CAHPS) Survey
                                     Administration, a clinical measure.
                                    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 \2\...........................  Mineral Metabolism Reporting, a
                                     reporting measure.
                                    Number of months for which facility
                                     reports serum phosphorus or serum
                                     plasma for each Medicare patient.

[[Page 69053]]

 
N/A...............................  Anemia Management Reporting, a
                                     reporting measure.
                                    Number of months for which facility
                                     reports ESA dosage (as applicable)
                                     and hemoglobin/hematocrit for each
                                     Medicare patient.
N/A \3\...........................  Pain Assessment and Follow-Up, a
                                     reporting measure.
                                    Facility reports in CROWNWeb one of
                                     six conditions for each qualifying
                                     patient once before August 1 of the
                                     performance period and once before
                                     February 1 of the year following
                                     the performance period.
N/A \4\...........................  Clinical Depression Screening and
                                     Follow-Up, a reporting measure.
                                    Facility reports in CROWNWeb one of
                                     six conditions for each qualifying
                                     patient once before February 1 of
                                     the year following the performance
                                     period.
N/A \5\...........................  NHSN Healthcare Personnel Influenza
                                     Vaccination, a reporting measure.
                                    Facility submits Healthcare
                                     Personnel Influenza Vaccination
                                     Summary Report to CDC's NHSN
                                     system, according to the
                                     specifications of the Healthcare
                                     Personnel Safety Component
                                     Protocol, by May 15 of the
                                     performance period.
------------------------------------------------------------------------
\1\ We note that this measure is based upon a current NQF-endorsed
  bloodstream infection measure (NQF#1460).
\2\ We note that this measure is based upon a current NQF-endorsed serum
  phosphorus measure (NQF #0255).
\3\ We note that this measure is based upon a current NQF-endorsed pain
  assessment and follow-up measure (NQF #0420).
\4\ We note that this measure is based upon a current NQF-endorsed
  clinical depression screening and follow-up measure (NQF #0418).
\5\ We note that this measure is based upon an NQF-endorsed HCP
  influenza vaccination measure (NQF #0431).

    We received comments on PY 2018 Measures Continuing for PY 2019 and 
future years. The comments and our responses are set forth below.
    Comment: A number of commenters expressed views on measures which 
were previously adopted in the ESRD QIP. Some commenters were 
supportive of previously adopted measures, and some recommended 
changing measure specifications for some measures. Other commenters 
requested that CMS consider removing previously added measures from the 
ESRD QIP, specifically, the NHSN BSI clinical measure, the SRR clinical 
measure, the STrR clinical measure, the ICH CAHPS clinical measure, the 
NHSN HCP Influenza Vaccination reporting measure, the Screening for 
Clinical Depression and Follow-Up reporting measure, and the Pain 
Assessment and Follow-Up reporting measure, because a number of these 
measures are under review at NQF, are inappropriate for facilities due 
to concerns about measure reliability or validity, or are too 
burdensome for facilities.
    Response: We thank the commenters for their suggestions. At this 
time, we are not removing or modifying any of the measures suggested by 
commenters. We did not propose to remove any measures from the ESRD QIP 
in the CY 2016 ESRD PPS proposed rule. Further, there is no evidence 
that continued use of the measures as specified raises patient safety 
concerns that would require immediate removal of the measures based on 
the process finalized in the CY 2013 ESRD PPS final rule with comment 
period (77 FR 67475). However, we will take these suggestions into 
consideration in future years using the measure removal criteria we 
finalized in the CY 2013 ESRD PPS final rule with comment period (77 FR 
67475) and further clarified in the CY 2015 ESRD PPS final rule with 
comment period (79 FR 66171 through 66174). We continue to believe 
there is value in collecting and reporting these measures at this time.
    Comment: Numerous commenters requested that CMS modify the SRR 
clinical measure's exclusion criteria to reflect the measure as 
recently modified and endorsed at NQF under the All-Cause Admissions 
and Readmissions Measures project. Specifically, commenters requested 
that CMS incorporate an exclusion for patients who are readmitted to a 
hospital within the first one-to-three days following their hospital 
discharge.
    Response: The SRR clinical measure was submitted for review as part 
of the NQF's All-Cause Admissions and Readmissions Measures project, 
during which the Steering Committee, NQF members, and the public 
discussed the appropriateness of including patients who are readmitted 
to a hospital within three days of discharge in the measure. In the CY 
2015 ESRD PPS final rule with comment period, we expressed our initial 
belief that these patients should be included in the SRR measure 
because this three-day readmission timeframe represents an opportunity 
for quality improvement (79 FR 66177). However, following detailed 
discussions at NQF, we now believe that excluding readmissions within 
the first three days of discharge is critical in order to avoid holding 
facilities accountable for events largely beyond their control. These 
readmissions are likely to occur during the period when the dialysis 
facility may not have had an opportunity to see the patient for 
treatment, and, at present, facilities do not systematically receive 
data about their patients from the hospital when they are readmitted, 
thus limiting the facilities' ability to engage in quality improvement 
for this specific subpopulation at this time. As stated in the CY 2014 
ESRD PPS final rule with comment period, we believe it is important to 
have in place a process which allows the ESRD QIP to incorporate non-
substantive updates to a measure, in order to ensure that measures 
adopted for the ESRD QIP remain up-to-date and clinically relevant (77 
FR 67476-67477). We believe that excluding readmissions within the 
first three days of discharge constitutes a non-substantive technical 
update to the measure; for these reasons, beginning with PY 2017, we 
are making this technical update to the SRR clinical measure and are 
adopting this exclusion. We will exclude readmissions within the first 
1-3 days of an initial discharge from the SRR clinical measure. The SRR 
clinical measure specifications, as well as the SRR measure methodology 
report, are both available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html and https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/MeasureMethodologyReportfortheProposedSRRMeasure.pdf, respectively.
b. Dialysis Adequacy Clinical Measure Beginning With the PY 2019 ESRD 
QIP
    Section 1881(h)(2)(A)(i) of the Act states that the ESRD QIP 
measure set must include measures on ``dialysis adequacy.'' Kt/V is a 
widely accepted measure of dialysis adequacy in the ESRD community. It 
is a measure of small solute (urea) removal from the body, is 
relatively simple to measure and report, and is associated with 
survival among dialysis patients. While

[[Page 69054]]

the current dialysis adequacy measures have allowed us to capture a 
greater proportion of the ESRD population than previously accounted for 
under the URR Hemodialysis Adequacy clinical measure, the 
specifications for these measures still result in the exclusion of some 
patients from the measures. For example, the Pediatric Hemodialysis 
Adequacy clinical measure's specifications have limited the number of 
pediatric patients included in the ESRD QIP because very few facilities 
(10 facilities, based on CY 2013 data) were eligible to receive a score 
on the measure. We are therefore proposing to adopt a single 
comprehensive Dialysis Adequacy clinical measure under the authority of 
section 1881(h)(2)(A)(i) of the Act.
    The Measure Applications Partnership conditionally supported the 
proposed Dialysis Adequacy clinical measure in its 2015 Pre-Rulemaking 
Report, noting that this measure meets critical program objectives to 
include more outcome measures and measures applicable to the pediatric 
population in the set.\5\
---------------------------------------------------------------------------

    \5\ https://www.qualityforum.org/map/. This report can be found 
at the preceding Web site under the title ``Spreadsheet of MAP 2015 
Final Recommendations.''
---------------------------------------------------------------------------

    The Dialysis Adequacy clinical measure assesses the percentage of 
all patient-months for both adult and pediatric patients whose average 
delivered dose of dialysis (either hemodialysis or peritoneal dialysis) 
met the specified threshold during the performance period. A primary 
difference between the single comprehensive Dialysis Adequacy clinical 
measure and the four previously finalized dialysis adequacy clinical 
measures is how facility eligibility for the measure is determined. 
Under the four previously finalized dialysis adequacy clinical 
measures, facility eligibility was determined based on the number of 
qualifying patients treated for each individual measure (for example, 
the number of qualifying adult hemodialysis patients for the 
Hemodialysis Adequacy: Minimum Delivered Hemodialysis Dose clinical 
measure). As a result, a facility had to treat at least 11 qualifying 
patients for each of these measures in order to receive a score on that 
measure. By contrast, a facility's eligibility to receive a score on 
the proposed Dialysis Adequacy clinical measure, which includes both 
adults and children, and both hemodialysis and peritoneal dialysis 
modalities, is determined based on the total number of qualifying 
patients treated at a facility. As a result, a facility that would not 
be eligible to receive a score on one or more of our current dialysis 
adequacy clinical measures because it did not meet the case minimum for 
one or more of those measures would be eligible to receive a score on 
the proposed dialysis adequacy measure if it had at least 11 total 
qualifying patients, defined as adults and pediatric patients receiving 
either hemodialysis or peritoneal dialysis. Therefore, we anticipate 
that adopting the single comprehensive Dialysis Adequacy clinical 
measure will allow us to evaluate the care provided to a greater 
proportion of ESRD patients, particularly pediatric ESRD patients.
    We proposed that patients' dialysis adequacy would be assessed 
based on the following Kt/V thresholds previously assessed under the 
individual dialysis adequacy clinical measures:
     For hemodialysis patients, all ages: spKt/V >= 1.2 
(calculated from the last measurement of the month)
     For pediatric (age < 18 years) peritoneal dialysis 
patients: Kt/V urea >= 1.8 (dialytic + residual, measured within the 
past six months)
     For adult (age >= 18 years) peritoneal dialysis patients: 
Kt/V urea >= 1.7 (dialytic + residual, measured within the past four 
months)
    These thresholds reflect the best evidence-based minimum threshold 
for adequate dialysis for the described patient groups and are 
consistent with dialysis adequacy measures previously implemented in 
the QIP. Patient eligibility for inclusion in the measure would be 
determined on a patient-month level, based on the patient's age, 
treatment modality type, whether a patient has been on dialysis for 90 
days or more, and the number of hemodialysis treatments the patient 
receives per week. All eligible patient-months at a facility would be 
counted toward the denominator. Eligible patient months where the 
patient met the specific dialysis adequacy threshold would be counted 
toward the numerator. Technical specifications for the 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 our proposal to adopt this measure beginning 
with the PY 2019 ESRD QIP. The comments and our responses are set forth 
below.
    Comment: A number of commenters supported the comprehensive 
Dialysis Adequacy clinical measure because adopting the single measure 
in place of the four individual measures would reduce the dilution of 
measure scores in the ESRD QIP and simplify the ESRD QIP measure set.
    Response: We thank the commenters for their support.
    Comment: One commenter expressed concerns with removing the current 
indicators for dialysis adequacy because of the possibility this will 
lead to inaccurate reporting. The commenter argued that removing the 
Pre/post dialysis urea nitrogen, Pre/post dialysis weight, and duration 
of treatment will enable the facility to report adequacy based on 
inaccurate blood draws, access recirculation, etc., thereby increasing 
the likelihood of better outcomes for the facility. Because Kt/V is a 
calculated outcome, the commenter urged CMS to consider having the 
CROWNWeb database calculate the actual Kt/V using the already available 
information, which could potentially eliminate the tweaking of data 
currently being submitted.
    Response: The proposed Dialysis Adequacy clinical measure uses the 
same data submission requirements previously used for the four 
individual dialysis adequacy clinical measures, and is therefore not 
subject to the concerns raised. Furthermore, facilities have never been 
required to report pre/post dialysis urea nitrogen, pre/post dialysis 
weight or duration of treatment in the QIP.
    Comment: One commenter urged CMS to consider patients who transfer 
from one modality to another to be new patients in that modality for 
adequacy scoring. The commenter explained that when a patient 
transitions from hemodialysis to peritoneal dialysis, the peritoneal 
dialysis scoring methodology assumes there is a peritoneal dialysis Kt/
V reading within the last 4 months, without recognition that the 
patient has recently transitioned to this modality. The commenter 
argued that, as a result of this scoring methodology, dialysis 
facilities are forced to attempt to immediately conduct a peritoneal 
dialysis adequacy test, without a sufficient stabilization period in 
the new treatment modality.
    Response: Under the single comprehensive Dialysis Adequacy clinical 
measure, if a patient changes from hemodialysis to peritoneal dialysis 
during a month, the patient would be included in both the HD and PD Kt/
V measure calculations. The 2006 KDOQI Clinical Practice Guidelines for 
peritoneal dialysis adequacy (Guideline 2.1.2) state ``the total solute 
clearance (residual kidney and peritoneal, in terms of Kt/V) should be 
measured within the first month after initiating dialysis therapy and 
at least once every 4 months thereafter.'' While this measure is 
consistent with the

[[Page 69055]]

guideline, we acknowledge that a patient may be included in the 
peritoneal dialysis Kt/V measure calculation in the same month their 
modality changed to peritoneal dialysis, and that peritoneal dialysis 
clearance is typically not measured right away or even in the same 
month as the peritoneal dialysis catheter insertion, as the peritoneal 
membrane is in a state of flux and its membrane transport 
characteristics are unstable for a few weeks. We therefore use the data 
reported in conjunction with Medicare dialysis facility claims value 
code D5: Result of last Kt/V reading and occurrence code 51: Date of 
last Kt/V reading, to determine whether the patient was on peritoneal 
dialysis or hemodialysis, and whether they switched modalities during 
the reporting month. The claims reporting instructions indicate that 
for peritoneal dialysis patients this should be within the last 4 
months of the claim date of service. All monthly claims with valid 
peritoneal dialysis Kt/V values will be used in the calculation.
    Comment: One commenter expressed concern that benchmarking all 
facilities treating any pediatric patients against those treating 
larger volumes of pediatric patients under the comprehensive Kt/V 
Dialysis Adequacy clinical measure may skew the results for ESRD 
facilities treating smaller numbers of pediatric ESRD patients because 
these facilities are less familiar with how to best manage dialysis 
treatments for pediatric patients.
    Response: Performance on the Dialysis Adequacy clinical measure is 
based on the total number of qualifying patients--adult and pediatric, 
and hemodialysis and peritoneal dialysis modalities--treated at the 
facility, and the number of those patients meeting the applicable Kt/V 
threshold. Therefore, under this measure, facilities are assessed on 
the clinical care provided to all qualifying patients, and performance 
across facilities is based on the same holistic view of clinical care. 
As a result, facilities' management of a specific subgroup will not be 
compared directly to that of other facilities. We believe this measure 
therefore properly incentivizes facilities to properly manage the care 
of all patients, including pediatric patients, seen at the facility.
    Comment: One commenter noted that when this measure was reviewed by 
the Measure Applications Partnership, it was characterized by CMS as a 
composite measure; however, the proposed measure as described appears 
to be a pooled measure with a different set of evaluation criteria.
    Response: We acknowledge that there might have been some confusion 
surrounding our use of the term ``composite'' in the title of the 
proposed measure, especially because we are now aware that the NQF uses 
a specific set of criterion to determine whether a measure is a 
composite for endorsement purposes. However, the measure specifications 
presented in the CY 2016 ESRD PPS proposed rule are identical to those 
submitted for review by the Measure Applications Partnership, and the 
calculation methodology uses a pooled approach. We have developed the 
following table comparing the specifications of the Delivered Dose of 
Dialysis above Minimum--Composite Score measure submitted to the 
Measure Applications Partnership and the Dialysis Adequacy clinical 
measure, which we have renamed in full as Delivered Dose of Dialysis 
above Minimum.

   Table 24--Comparison of Delivered Dose of Dialysis Above Minimum--
 Composite Score Measure and Proposed Dialysis Adequacy Clinical Measure
                             Specifications
------------------------------------------------------------------------
                                Delivered dose of
                                 dialysis above       Proposed dialysis
   Specification component     minimum--composite     adequacy clinical
                                    score \6\            measure \7\
------------------------------------------------------------------------
Numerator...................  Number of patient     Number of patient
                               months in the         months in the
                               denominator whose     denominator whose
                               delivered dose of     delivered dose of
                               dialysis met the      dialysis met the
                               specified             specified
                               thresholds. The       thresholds. The
                               thresholds are as     ranges are as
                               follows:              follows:
                                            
                               Hemodialysis (all     Hemodialysis (all
                               ages): Kt/V >= 1.2..  ages): Kt/V >= 1.2
                               Peritoneal    (calculated from
                               dialysis              the last
                               (pediatric): Kt/V     measurement of the
                               >= 1.8 (within past   month).
                               6 months)..           Peritoneal
                               Peritoneal    dialysis
                               dialysis (adult):     (pediatric): Kt/V
                               Kt/V >= 1.7 (within   >= 1.8 (dialytic +
                               past 4 months).       residual, measured
                                                     within the past 6
                                                     months).
                                                     Peritoneal
                                                     dialysis (adult):
                                                     Kt/V >= 1.7
                                                     (dialytic +
                                                     residual, measures
                                                     within the past 4
                                                     months).
Denominator.................  To be included in      All adult
                               the denominator for   hemodialysis
                               a particular month,   patients who
                               patients need to      received dialysis
                               meet the following    greater than two
                               requirements that     and less than four
                               month:                times a week
                               Peritoneal    (adults, >=18
                               dialysis patients:    years) and all
                               All peritoneal        pediatric in-center
                               dialysis patients     hemodialysis
                               who have been on      patients who
                               dialysis for at       received dialysis
                               least 90 days.        greater than 2 and
                                             less than five
                               Hemodialysis          times a week
                               patients: Pediatric   (pediatric, <18
                               (<18 years old) in-   years), and did not
                               center HD patients    indicate frequent
                               who have been on      dialysis.
                               dialysis for 90       All
                               days or more and      patients (both HD
                               dialyzing thrice      and PD) who are
                               weekly, adult >=18    assigned to the
                               years old) patients   facility for the
                               who have been on      entire month, and
                               dialysis for 90       have had ESRD for
                               days or more and      90 days or more.
                               dialyzing thrice
                               weekly.
------------------------------------------------------------------------

    Comment: One commenter expressed concern about the proposed 
Dialysis Adequacy measure because smaller facilities that would not 
have had 11 patients in any given dialysis adequacy category under the 
four individual measures may now be included in the combined measure. 
Additionally, the commenter recommended that CMS convene a TEP to 
discuss additional ways in which CMS can include more patients and 
facilities in the QIP generally.
---------------------------------------------------------------------------

    \6\ Specifications for the Delivered Dose of Dialysis above 
Minimum--Composite Score measure reviewed by the Measure 
Applications Partnership are available at https://www.qualityforum.org/map/under the document titled ``Spreadsheet of 
MAP 2015 Final Recommendations.''
    \7\ Specifications for the Dialysis Adequacy clinical measure 
proposed in the CY 2016 ESRD PPS proposed rule are available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Proposed-PY-2019-measure-specs_6-24-15.pdf.
---------------------------------------------------------------------------

    Response: We proposed to adopt this measure, in part, because we 
wanted to be able to assess dialysis adequacy in a greater percentage 
of ESRD patients. We will take the recommendation to convene a TEP in 
order to explore additional ways to include more ESRD patients in the 
ESRD QIP into consideration.

[[Page 69056]]

    Comment: A few commenters requested that CMS retain the seven-
treatment per month exclusion from the previous dialysis adequacy 
measures because facilities rarely collect Kt/V for transient patients. 
One commenter further requested that CMS allow facilities to submit Kt/
V collected from an outside source for these patients. Another 
commenter recommended that CMS define the minimum number of treatment 
days under the care of a facility for peritoneal dialysis patients when 
calculating the current peritoneal dialysis adequacy clinical measures, 
and recommended a threshold of approximately 14 peritoneal dialysis 
treatment days.
    Response: The measure specifications for the proposed Dialysis 
Adequacy clinical measure exclude from the denominator ``all patients 
who were not assigned to the facility for the entire month,'' which 
will have effect of excluding all peritoneal dialysis patients who are 
treated less than seven times per month and all peritoneal dialysis 
patients who are not assigned to the facility for the entire month.
    Comment: One commenter requested that CMS provide additional 
information regarding the benchmarks and achievement thresholds for the 
comprehensive Dialysis Adequacy clinical measure, citing concerns that 
these values may be difficult to determine because the Kt/V thresholds 
for the measures within the comprehensive Dialysis Adequacy clinical 
measure vary across patient age and treatment modality.
    Response: Facility performance on the measure will be evaluated in 
much the same way as facility performance on the dialysis adequacy 
measure topic that was part of the QIP for three payment years. Kt/V 
values for a particular patient month will be compared to the threshold 
for the given modality and patient age, and assigned to numerators and 
denominators as appropriate. Much like the previously finalized 
Dialysis Adequacy Measure Topic, numerators and denominators for the 
four sub-groupings of age and modality will be aggregated together and 
weighted according to the number of patient months represented.
    Comment: Some commenters requested that CMS modify the 
comprehensive Dialysis Adequacy clinical measure's hemodialysis 
threshold to account for the higher Kt/V values for nocturnal dialysis 
patients.
    Response: The previously implemented dialysis adequacy measures did 
not distinguish between types of hemodialysis patients, other than to 
identify frequency of treatment on a weekly basis, nor was this 
recommended by Technical Expert Panels convened for the purpose of 
developing the proposed comprehensive dialysis adequacy measure. As 
always, we continue an ongoing measure maintenance cycle where these 
and other recommendations may be considered within the context of 
available data and existing clinical evidence.
    Comment: Several commenters did not support the proposed 
comprehensive Dialysis Adequacy clinical measure because the measure 
pools the scores from the four dialysis populations, despite the vast 
differences between these groups, which make it difficult to accurately 
assess a facility's quality under the proposed measure. Some of these 
commenters expressed concerns that the pooled approach may obscure 
differences in quality of care for pediatric patients, peritoneal 
dialysis patients, and home hemodialysis patients. Commenters also 
stated that the effect of one or two outliers may distort the overall 
quality of care provided at facilities with a small number of patients.
    Response: The Dialysis Adequacy Clinical Measure is does not 
clinically co-mingle peritoneal dialysis and hemodialysis modalities. 
Peritoneal dialysis patients are assessed based on clinical standards 
appropriate for these patients, while hemodialysis patients are 
assessed based on clinical standards appropriate for them. We 
understand that patient groups that comprise a smaller percentage of a 
facility's total population will have less impact on the facility's 
performance score for the Dialysis Adequacy clinical measure; however, 
failure to incorporate pediatric, peritoneal, and home dialysis 
patients into the four individual dialysis adequacy measures due to 
reporting requirements significantly limits the ability to evaluate 
facility performance for those subgroups. We also note that individual-
level data remains available upon request for all QIP measures 
following calculation of measure scores for a given payment year of the 
ESRD QIP, should facilities wish to investigate their internal 
performance while reviewing their Preview Performance Score Report for 
that year. More granular detail is also available via the annually 
published Dialysis Facility Reports and the Dialysis Facility Compare 
tool. Clinically, the proposed measure assesses each patient on 
clinically appropriate standards, and the measure addresses whether 
each patient has received adequate dialysis based on that individual's 
needs. As a result, the performance rate is a description of the rate 
at which a facility is adequately meeting the dialysis needs of its 
patients, regardless of their age and modality. We therefore believe 
that any potential for the proposed measure to ``mask'' facility 
performance for smaller segments of its population is outweighed by the 
benefit of including these patients in the measure population.
    Comment: Commenters expressed concerns about the Dialysis Adequacy 
clinical measure because of the concerns raised during the NQF Renal 
Standing Committee. Specifically, the commenters do not support the 
measure because the NQF recommended against endorsement.
    Response: While the NQF Renal Standing Committee has not yet issued 
its final report, we understand that the Committee's current 
recommendation is against endorsement for this measure, because the 
Committee determined that measure failed the NQF's Importance to 
Measure and Report criterion. Specifically, the NQF Renal Standing 
Committee expressed concerns about the strength of evidence supporting 
the pediatric hemodialysis and peritoneal dialysis Kt/V thresholds 
established under this measure. However, we continue to believe that 
including pediatric patients in assessments of dialysis adequacy is 
critical, because these patients constitute a unique subpopulation of 
ESRD patients and are often excluded from other ESRD QIP quality 
measures. Very few facilities treating pediatric patients qualify to 
receive a score under the current Pediatric Hemodialysis Adequacy and 
Pediatric Peritoneal Dialysis Adequacy clinical measures, and adopting 
the single, comprehensive Dialysis Adequacy clinical measure will allow 
us to capture the quality of care provided to a greater proportion of 
pediatric patients nationally.
    Comment: One commenter did not support adoption of the 
comprehensive Dialysis Adequacy clinical measure because it includes 
pediatric patients receiving dialysis three and four times a week when 
the evidence for the measure is based on patients receiving treatments 
three times a week.
    Response: The 2010 TEP that recommended this measure originally 
specified the measure to include pediatric patients on dialysis 3 or 4 
times per week, based in part on analyses showing that 4 times per week 
hemodialysis was observed in approximately 5.6 percent of pediatric 
patient weeks, and nearly 90 percent of pediatric patient weeks 
reflected either 3 or 4 times per week hemodialysis (based on 2007 
Medicare claims data).

[[Page 69057]]

Given that this was a significant proportion of patients, the TEP 
concluded that these patients should all be included in this measure. 
While the Delivered Dose of Dialysis above Minimum measure under review 
by the NQF Renal Standing Committee has revised its measure 
specifications to capture only pediatric hemodialysis patients 
dialyzing three times per week, we believe it is important to capture 
as many pediatric patients as possible in the ESRD QIP. There are 
currently very few measures that focus on the care provided to 
pediatric ESRD patients, and excluding pediatric hemodialysis patients 
dialyzing four times per week from the Dialysis Adequacy clinical 
measure would exclude those patients from all dialysis adequacy 
assessment. In addition, we believe that collecting data on the quality 
of care provided to pediatric hemodialysis patients can influence the 
standard of care provided by all facilities that treat pediatric 
patients. For these reasons, we are including pediatric hemodialysis 
patients who dialyze three or four times per week in the Dialysis 
Adequacy clinical measure.
    Comment: Several commenters recommended that CMS adopt 
modifications for the upper Kt/V threshold recommended by the NQF Renal 
Standing Committee; specifically, removing the upper Kt/V threshold 
exclusion due to insufficient evidence supporting the selected values. 
One commenter argued that the evidence-based threshold should be the 
only value in the specifications, and the handling of anomalous data 
should be addressed by measure implementation and operationalization 
guidance so that patients with spurious Kt/V values are excluded from 
the measure calculations.
    Response: The proposed Dialysis Adequacy clinical measure does not 
include upper thresholds for patients' Kt/V (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Proposed-PY-2019-measure-specs_6-24-15.pdf), and the Dialysis 
Adequacy measure under review by the NQF Renal Standing Committee was 
also revised to remove these upper thresholds.
    Comment: One commenter requested that CMS provide additional 
details about the technical specifications for the comprehensive 
Dialysis Adequacy clinical measure in the ESRD Measures Manual.
    Response: We intend to incorporate the Dialysis Adequacy clinical 
measure into the CMS ESRD Measures Manual before the beginning of the 
measure's performance period in CY 2017. The Measures Manual, will 
provide detailed measure specifications for all measures used in the 
ESRD QIP and other CMS ESRD programs, such as Dialysis Facility 
Compare, and will be updated in the future as new measures are 
implemented, such as the comprehensive Dialysis Adequacy clinical 
measure.
    Comment: One commenter recommended that CMS include residual renal 
function in dose calculations for hemodialysis patients only if the 
urine collection used to measure it was performed within the last 90 
days.
    Response: The current dialysis adequacy measures do not currently 
include residual renal function as part of the NQF endorsed 
specifications, and the proposed measure retains this form. In 
addition, the Technical Expert Panels convened for the purpose of 
developing these measures have not recommended the inclusion of 
residual renal function to date. As always, we maintain an ongoing 
measure maintenance cycle where these and other recommendations may be 
considered within the context of available data and existing clinical 
evidence.
    Comment: One commenter expressed concern about the impact of 
peritoneal dialysis patients' noncompliance with treatment protocols on 
facility performance. Specifically, the commenter recommended that 
facilities should either receive credit for their efforts to get 
peritoneal dialysis patients to visit the facility in a given month, or 
that noncompliant peritoneal dialysis patients should be excluded from 
the facilities' measure scores.
    Response: Our quality measures do not currently assess patient 
compliance directly, as currently available data sources are unable to 
capture the information. Moreover, while we recognize that some 
patients may follow a course of treatment less assiduously than others, 
we believe it remains the facility's responsibility to continue 
reaching out to these patients for the purpose improving their quality 
of care.
    For these reasons, we are finalizing the single comprehensive 
Dialysis Adequacy clinical measure as proposed, beginning in PY 2019.
c. Reporting Measures Proposed, Beginning with the PY 2019 ESRD QIP
i. Proposed Ultrafiltration Rate Reporting Measure
    The ultrafiltration rate measures the rapidity with which fluid 
(ml) is removed at dialysis per unit (kg) body weight in unit (hour) 
time. A patient's ultrafiltration rate is under the control of the 
dialysis facility and is monitored throughout a patient's hemodialysis 
session. Studies suggest that higher ultrafiltration rates are 
associated with higher mortality and higher odds of an ``unstable'' 
dialysis session,\8\ and that rapid rates of fluid removal during 
dialysis can precipitate events such as intradialytic hypotension, 
subclinical yet significantly decreased organ perfusion, and in some 
cases myocardial damage and heart failure.
---------------------------------------------------------------------------

    \8\ Flythe SE., Kimmel SE., Brunelli SM. Rapid fluid removal 
during dialysis is associated with cardiovascular morbidity and 
mortality. Kidney International (2011) Jan; 79(2):250-7. Flythe JE, 
Curhan GC, Brunelli SM. Disentangling the ultrafiltration rate--
mortality association: The respective roles of session length and 
weight gain. Clin J Am Soc Nephrol. 2013 Jul;8(7):1151-61. Movilli, 
E et al. ``Association between high ultrafiltration rates and 
mortality in uraemic patients on regular hemodialysis. A 5-year 
prospective observational multicenter study.'' Nephrology Dialysis 
Transplantation 22.12(2007): 3547-3552.
---------------------------------------------------------------------------

    Section 1881(h)(2)(A)(iv) gives the Secretary authority to adopt 
other 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 ultrafiltration 
rates currently exist, we proposed to adopt the Ultrafiltration Rate 
reporting measure under the authority of section 1881(h)(2)(B)(ii) of 
the Act.
    We proposed to adopt a measure that is based on Measure 
Applications Partnership #XAHMH, ``Ultrafiltration Rate Greater than 13 
ml/kg/hr'' (``Ultrafiltration Rate measure''). This measure assesses 
the percentage of patient-months for patients with an ultrafiltration 
rate greater than 13 ml/kg/hr. The Measure Applications Partnership 
expressed conditional support for the Ultrafiltration Rate measure, 
noting it would ``consider the measure for inclusion in the program 
once it has been reviewed for endorsement.'' The measure upon which our 
proposed measure is based is currently under review for endorsement by 
NQF; however, we believe the

[[Page 69058]]

measure is ready for adoption because it has been fully tested for 
reliability and addresses a critical aspect of patients' clinical care 
not currently addressed by the ESRD QIP measure set.
    For PY 2019 and future payment years, we proposed that facilities 
must report an ultrafiltration rate for each qualifying patient at 
least once per month in CROWNWeb. Qualifying patients for this proposed 
measure are defined as patients 18 years of age or older, on 
hemodialysis, and who are assigned to the same facility for at least 
the full calendar month (for example, if a patient is admitted to a 
facility during the middle of a month, the facility will not be 
required to report for that patient for that month). We further 
proposed that facilities will be granted a one month period following 
the calendar month to enter this data. For example, we would require a 
facility to report ultrafiltration rates for January 2017 on or before 
February 28, 2017. Facilities would be scored on whether they 
successfully report the required data within the timeframe provided, 
not on the values reported. Technical specifications for the 
Ultrafiltration Rate 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: While several commenters supported the proposal to adopt 
the Ultrafiltration Rate reporting measure or the concept of an 
ultrafiltration rate measure in the ESRD QIP, many commenters did not 
support the specific measure proposed. Some commenters stated that 
ultrafiltration rates are highly variable even within individual 
patients, and it is unclear whether the proposed measure can influence 
quality of care without impacting the clinical judgment of ESRD 
providers. Many commenters also stated that the proposed measure is 
subject to ``gaming'' concerns because it relies on a single data point 
per month, as opposed to other ultrafiltration rate measures, such as 
NQF #2701, Avoidance of Utilization of High Ultrafiltration rate 
(=13 ml/kg/hr), which uses an average across all dialysis 
treatments provided over the course of a week to determine a patient's 
average ultrafiltration rate. These commenters further argued that the 
proposed Ultrafiltration Rate reporting measure's lack of any exclusion 
criteria or data collection regarding patients with longer time on 
dialysis also hampers the proposed measure's ability to evaluate the 
quality of care provided to ESRD patients.
    Response: We appreciate the many comments we received on the 
Ultrafiltration Rate reporting measure. As a result of the significant 
concerns expressed about the measure, we have decided not to finalize 
the measure at this time. We will consider alternate approaches to 
collecting patient ultrafiltration rate data in the future.
    For these reasons, we are not finalizing the proposed 
Ultrafiltration Rate reporting measure for the ESRD QIP.
ii. Proposed Full-Season Influenza Vaccination Reporting Measure
    According to the Centers for Disease Control and Prevention (CDC), 
seasonal influenza, which occurs between October and March/April of the 
following year, is associated with approximately 20,000 deaths \9\ and 
226,000 hospitalizations annually.\10\ While overall rates of influenza 
infection are highest among children, rates of serious illness and 
mortality are highest among adults aged 65 years or older, children 
aged two or younger, and immunocompromised patients such as patients 
with ESRD. Observational data have found associations between influenza 
vaccination and reduced mortality and hospitalization in this patient 
population. Specifically, multiple studies have found that vaccinated 
patients have significantly lower odds of all-cause mortality and 
modestly lower odds of all-cause hospitalization compared to 
unvaccinated patients.\11\ However, influenza vaccination rates in the 
ESRD population have historically been lower than the Healthy People 
2020 goal of 70 percent of both pediatric and adult populations in the 
United States,\12\ with recent reports from the U.S. Renal Data System 
and Dialysis Facility Reports showing vaccination rates of 67 percent 
and 68 percent, respectively, among ESRD patients for the 2011-2012 
season.\13\ Based on these findings, we believe that encouraging closer 
evaluation of patients' influenza vaccination status in the dialysis 
facility will increase the number of patients with ESRD who receive an 
influenza vaccination and increase influenza vaccination rates in this 
population, which will in turn improve patient health and well-being.
---------------------------------------------------------------------------

    \9\ Centers for Disease Control and Prevention (CDC). Estimates 
of Deaths Associated with Seasonal Influenza--United States, 1976-
2007. MMWR (2010) 59:33. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5933a1.htm.
    \10\ Centers for Disease Control and Prevention (CDC). 
Prevention and Control of Influenza with Vaccines: Recommendations 
of the Advisory Committee on Immunization Practices (ACIP). 
MMWR2010a;59(RR-8):1-62.
    \11\ Bond TC, Spaulding AC, Krisher J, et al. Mortality of 
dialysis patients according to influenza and pneumococcal 
vaccination status. Am J Kidney Dis. 2012;60:959-65; Gilbertson DT, 
Unruh M, McBean AM, et al. Influenza vaccine delivery and 
effectiveness in end-stage renal disease. Kidney Int. 2003;63:738-
43.
    \12\ http://www.healthypeople.gov/2020/topics-objectives/topic/immunization-and-infectious-diseases/objectives (Healthy People 2020 
IID-12.11 and IID-12.12).
    \13\ US Renal Data System, USRDS 2014 Annual Data Report: An 
overview of the epidemiology of kidney disease in the United States. 
National Institutes of Health, National Institute of Diabetes and 
Digestive and Kidney Diseases, Bethesda, MD, 2014.
---------------------------------------------------------------------------

    We proposed to use a measure that is based on ``ESRD Vaccination--
Full-Season Influenza Vaccination'' (Measure Applications Partnership 
#XDEFM). This measure assesses the percentage of ESRD patients 
= 6 months of age on October 1 and on chronic dialysis 
= 30 days in a facility at any point between October 1 and 
March 31 who either: (1) Received an influenza vaccination; (2) were 
offered but declined the vaccination; or (3) were determined to have a 
medical contraindication. The Measure Applications Partnership 
conditionally supported the use of the ESRD Vaccination--Full-Season 
Influenza Vaccination measure in the ESRD QIP in its January 2014 Pre-
Rulemaking Report because ``influenza vaccination is very important for 
dialysis patients.'' Nevertheless, the Measure Applications Partnership 
declined to give the measure full support because it was not sure that 
the measure was more suitable to drive improvement than NQF #0226: 
``Influenza Immunization in the ESRD Population (Facility Level)''. We 
have reviewed the measure specifications for NQF #0226 and determined 
that it is not appropriate to use as the basis for a reporting measure 
because the denominator statement of NQF #0226 excludes all patients 
for whom data during the flu season is incomplete, potentially 
excluding patients who died from influenza, but might not have died if 
they had received an influenza vaccination. We therefore believe it is 
more appropriate to adopt a reporting measure based on the ESRD 
Vaccination--Full-Season Influenza Vaccination measure (Measure 
Applications Partnership #XDEFM) because this measure includes patients 
who died from influenza, but might not have died if they had received 
an influenza vaccination, and we believe it is important to include 
such patients in an influenza immunization clinical measure for the 
ESRD QIP, should we

[[Page 69059]]

propose to adopt such a measure in the future.
    For these reasons, we proposed to adopt a reporting measure based 
on ``ESRD Vaccination--Full-Season Influenza Vaccination'' (``Full-
Season Influenza Vaccination reporting 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 a 
clinical version of this measure in future rulemaking.
    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 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 those measures in the ESRD QIP, we 
proposed to adopt the Full-Season Influenza Vaccination reporting 
measure under the authority of section 1881(h)(2)(B)(ii) of the Act.
    For PY 2019 and future payment years, we proposed that facilities 
must report one of the following conditions in CROWNWeb once per 
performance period, for each qualifying patient (defined below):
    1. If the patient received an influenza vaccination:
    a. Influenza Vaccination Date
    b. Where Influenza Vaccination Received: (1) Documented at 
facility; (2) Documented outside facility; or (3) Patient self-reported 
outside facility
    2. If the patient did not receive an influenza vaccination:
    a. Reason:
    i. Already vaccinated this flu season
    ii. Medical Reason: Allergic or adverse reaction
    iii. Other medical reason
    iv. Declined
    v. Other reason
    We note that while facilities are expected to retain patient 
influenza immunization documentation for their own records, facilities 
are not required to supply this documentation to CMS under the Full-
Season Influenza Vaccination reporting measure.
    For this measure, a qualifying patient would be defined as a 
patient aged six months or older as of October 1 who has been on 
chronic dialysis for 30 or more days in a facility at any point between 
October 1 and March 31. This measure would include in-center 
hemodialysis, peritoneal dialysis, and home dialysis patients. This 
proposed measure would capture the same data described in ``ESRD 
Vaccination--Full-Season Influenza Vaccination'', but we would require 
that facilities report the data on or before May 15 following the 
performance period for that year. We believe this reporting deadline 
will ensure that facilities have sufficient time to collect and enter 
data for all qualifying patients following the influenza season, and 
aligns this reporting effort with that of the NHSN Healthcare Personnel 
Influenza Vaccination reporting measure finalized in the CY 2015 ESRD 
PPS final rule for PY 2018 (79 FR 66206 through 66208). Second, we 
proposed to score facilities based on whether they successfully report 
the data, and not based on the measure results. Technical 
specifications for the Full-Season Influenza Vaccination 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: While several commenters supported the proposal to adopt 
the Full-Season Influenza Vaccination reporting measure or the concept 
of a patient-level influenza vaccination measure in the ESRD QIP, many 
commenters did not support the specific measure proposed. A number of 
these commenters recommended that CMS adopt a reporting measure that 
aligns more closely with NQF #0226: Influenza Immunization in the ESRD 
Population, arguing that the NQF-endorsed measure would better 
encourage timely vaccination of patients with ESRD and avoid penalizing 
facilities for patients who die but for whom time remained to meet the 
measure specifications. Some commenters also expressed concern about 
the conditions provided for reporting in CROWNWeb because their 
apparent overlap may result in inaccurate reporting, and other 
commenters recommended alternative conditions to capture instances such 
as hospitalized patients. Many commenters also stated that the proposed 
measure's timeline does not properly account for the reality that the 
influenza vaccination often becomes available before October 1, and may 
therefore result in unintended negative consequences for facilities 
that vaccinate patients before the performance period begins. Other 
commenters strongly recommended CMS use the NHSN system instead of 
CROWNWeb to collect patient influenza immunization data because 
facilities already use NHSN for other data reporting and adding the 
proposed measure to NHSN would provide reporting consistency, as well 
as allow a larger proportion of the ESRD community to access data 
reported for the measure while simplifying the requirements for ESRD 
facilities.
    Response: We appreciate the many comments we received on the Full-
Season Influenza Vaccination reporting measure. As a result of the 
significant concerns expressed about the measure, we have decided not 
to finalize the measure at this time. We will consider alternative 
methods of collecting these important patient care data in the future.
    For these reasons, we are not finalizing the proposed Full-Season 
Influenza Vaccination reporting measure for the ESRD QIP.
3. Performance Period for the PY 2019 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. 
We proposed to establish CY 2017 as the performance period for the PY 
2019 ESRD QIP for all but the influenza vaccination measures because it 
is consistent with the performance period we have historically used for 
these measures and accounts for seasonal variations that might affect a 
facility's measure score. We proposed that the performance period for 
both the NHSN Healthcare Personnel Influenza Vaccination reporting 
measure and the proposed Full-Season Influenza Vaccination reporting 
measure will be from October 1, 2016 through March 31, 2017, because 
this period spans the length of the 2016-2017 influenza season.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Several commenters supported the proposed performance 
period for the PY 2019 ESRD QIP.
    Response: We thank the commenters for their support.
    Comment: Two commenters recommended that the performance period for 
both Influenza Vaccination measures be changed to encompass the 
earliest possible date that the influenza vaccine may be available in a 
given calendar year. They argued that operationally, facilities begin 
to vaccinate patients as soon as the vaccine

[[Page 69060]]

is available, which could be as early as August. This would be 
consistent with the CDC's NHSN Flu Vaccine Protocol which encompasses 
``the time from when the vaccine became available through March 31 of 
the following year.''
    Response: We thank the commenters for their comments, and note 
that, as discussed above, we are not finalizing the Full-Season 
Influenza Vaccination reporting measure at this time. We note, however, 
that the performance period for the NHSN Healthcare Personnel Influenza 
Vaccination reporting measure does not restrict facilities to reporting 
only vaccinations received after October 1; instead, it establishes the 
period for which the facility must report HCP vaccination status. As a 
result, we encourage facilities to report vaccination statuses for all 
HCPs working at the facility and were vaccinated both before and after 
October 1.
    Comment: One commenter expressed concerns that small providers who 
manually submit data are unduly burdened by the requirements of the 
ESRD QIP and expressed that with varied performance periods among 
quality measures, these requirements become very time consuming and 
burdensome.
    Response: For all but one measure in the ESRD QIP, we have used the 
calendar year as the performance period. The remaining measure, the 
NHSN HCP Influenza Vaccination reporting measure, uses a performance 
period of October 1 of the preceding year through March 31 of the 
following year to reflect the length and timing of the applicable 
influenza season. We believe this differing performance period is 
necessary to ensure the timely administration and monitoring of 
influenza vaccinations, and is not unduly burdensome on facilities.
    For these reasons, we are finalizing the PY 2019 performance 
periods as proposed.
4. Performance Standards, Achievement Thresholds, and Benchmarks for 
the PY 2019 ESRD QIP
    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. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2019 ESRD QIP
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we proposed for PY 2019 to set the performance 
standards, achievement thresholds, and benchmarks for the clinical 
measures at the 50th, 15th, and 90th percentile, respectively, of 
national performance in CY 2015, because this will give us enough time 
to calculate and assign numerical values to the proposed performance 
standards for the PY 2019 program prior to the beginning of the 
performance period. We continue to believe 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.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comments: Many commenters supported the proposed performance 
standards, achievement thresholds, and benchmarks for the PY 2019 ESRD 
QIP being set at the 50th, 15th and 90th percentiles respectively.
    Response: We thank the commenters for their support.
    For these reasons, we are finalizing the PY 2019 performance 
standards, achievement thresholds, and benchmarks as proposed.
b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2019 ESRD QIP
    At this time, we do not have the necessary data to assign numerical 
values to the proposed performance standards for the clinical measures, 
because we do not yet have data from CY 2015 or the first portion of CY 
2016. We will publish values for the clinical measures, using data from 
CY 2015 and the first portion of CY 2016, in the CY 2017 ESRD PPS final 
rule.
c. Performance Standards for the PY 2019 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). In the CY 2015 ESRD PPS Final Rule, we 
finalized our proposal to modify the measure specifications for the 
Mineral Metabolism reporting measure to allow facilities to report 
either serum phosphorus data or plasma phosphorus data for the Mineral 
Metabolism reporting measure (79 FR 66191). We did not propose any 
changes to these policies for the PY 2019 ESRD QIP.
    In the CY 2015 ESRD PPS Final Rule, we finalized performance 
standards for the Screening for Clinical Depression and Follow-Up, Pain 
Assessment and Follow-Up, and NHSN Healthcare Provider Influenza 
Vaccination reporting measures (79 FR 66209). We did not propose any 
changes to these policies.
    For the Ultrafiltration Rate reporting measure, we proposed to set 
the performance standard as successfully reporting an ultrafiltration 
rate for each qualifying patient in CROWNWeb on a monthly basis, for 
each month of the reporting period.
    For the Full-Season Influenza Vaccination reporting measure, we 
proposed to set the performance standard as successfully reporting one 
of the above-listed vaccination statuses for each qualifying patient in 
CROWNWeb on or before May 15th of the performance period.
    We sought comments on these proposals. We did not receive comments 
on these proposals, and are therefore finalizing them as proposed for 
all measures except the Ultrafiltration Rate reporting measure and the 
Full-Season Influenza Vaccination reporting measure, which we are not 
finalizing.
5. Scoring the PY 2019 ESRD QIP
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). Under this methodology, facilities receive points along an 
achievement range based on their performance during the performance 
period for each measure, which we define as a scale between the 
achievement threshold and the benchmark. In determining a facility's 
achievement score for each clinical measure under the PY 2019 ESRD QIP, 
we proposed to continue using this methodology for all clinical 
measures except the ICH CAHPS clinical measure. The facility's 
achievement score would be calculated by comparing its performance on 
the measure during CY 2017 (the proposed performance period) to the 
achievement threshold and benchmark (the 15th and 90th

[[Page 69061]]

percentiles of national performance on the measure in CY 2015).
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 2019 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 2016. The facility's improvement score would be calculated by 
comparing its performance on the measure during CY 2017 (the proposed 
performance period) to the improvement threshold and benchmark.
    We sought comment on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter supported the proposal for scoring the PY 
2019 ESRD QIP measures.
    Response: We thank the commenter for its support.
    Comment: Some commenters expressed concerns about the ESRD QIP 
scoring methodology. One commenter argued that the scoring methodology 
is too complex, such that facilities are not afforded the opportunity 
to make immediate adjustments to care when minimum scores are not met. 
Another commenter noted that small and medium-sized facilities with 
limited resources find the increasingly complicated formulas difficult 
to understand, and occasionally have to contract with outside firms to 
understand how proposed changes will affect them, predict how they will 
perform, and their results.
    Response: The ESRD QIP scoring methodology is designed to make 
facility measure scores and TPSs as fair as possible, given the wide 
range of facility sizes and populations across the country, and we 
believe that attempting to further simplify the methodology may result 
in unfair scoring for facilities. In an effort to help facilities 
better understand the ESRD QIP's scoring methodology, we provide 
multiple resources that further elucidate the methodology, including 
calculation examples in preamble text, National Provider Calls, and the 
Preview Performance Score Report. We encourage facilities experiencing 
difficulty in understanding the ESRD QIP's scoring methodology to 
contact the program for assistance.
    We also understand that the current scoring methodology does not 
allow facilities to calculate their current performance scores in real 
time for use in their quality improvement efforts. We are looking into 
opportunities to allow facilities this level of interaction with their 
ESRD QIP data, but are currently unable to do so due to claims 
processing timelines and system limitations.
    Comment: Commenter expressed concern that that the current ESRD QIP 
scoring methodology is unfair to smaller facilities because when a 
small facility and a large facility provide the same quality of care to 
patients, the lower census facility will lose a higher proportion of 
points in the calculation. Commenter argued that, as a result of this 
calculation and weighting issue, it is inappropriate to compare small 
facilities' performance to large facilities' performance.
    Response: We acknowledge that the current scoring methodology may 
result in a small number of outlier patients unduly impacting the 
facility's score. In order to alleviate the potential negative impact 
of a small number of patients on small facilities' scores, we have 
adopted the Small Facility Adjuster, which provides a positive 
adjustment to eligible small facilities' measure scores. We believe 
this adjustment is sufficient to counteract the negative effects of a 
small patient census on facility scores, but will continue to assess 
the appropriateness of additional measures to ensure accuracy in 
measure scoring for small facilities.
    For these reasons, we are finalizing the achievement and 
improvement scoring methodologies for clinical measures in the PY 2019 
ESRD QIP as proposed.
c. Scoring the ICH CAHPS Clinical Measure
    In the CY 2015 ESRD PPS final rule, we finalized a policy for 
scoring performance on the ICH CAHPS clinical measure based on both 
achievement and improvement (79 FR 66209 through 66210). Under this 
methodology, facilities will receive an achievement score and an 
improvement score for each of the three composite measures and three 
global ratings in the ICH CAHPS survey instrument. 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, and the resulting scores on each of the composite measures and 
global ratings will be averaged together to yield an overall score on 
the ICH CAHPS clinical measure. For PY 2019, the facility's achievement 
score would be calculated by comparing where its performance on each of 
the three composite measures and three global ratings during CY 2017 
falls relative to the achievement threshold and benchmark for that 
measure and rating based on CY 2015 data. The facility's improvement 
score would be calculated by comparing its performance on each of the 
three composite measures and three global ratings during CY 2017 to its 
performance rates on these items during CY 2016.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported the proposed methodology for 
scoring the ICH CAHPS clinical measure.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concerns about the length of time 
it is taking for the ICH CAHPS measure to become a clinical performance 
measure in the QIP.
    Response: The ICH CAHPS was first incorporated into the ESRD QIP 
measure set as a reporting measure for PY 2014; performance on this 
reporting measure has been included in facility Total Performance 
Scores for the past three years of the program, and will continue 
through PY 2017. With each year, we have continued to develop the 
baseline data and facility experience necessary to implement a clinical 
measure on ICH CAHPS performance. We agree that the ICH CAHPS clinical 
measure finalized for PY 2018 will have a greater impact on clinical 
practice by holding facilities accountable for their actual 
performance. As discussed in the CY 2015 ESRD PPS final rule with 
comment period (79 FR 66198), we believe this gradual ramp-up of the 
ICH CAHPS measure was necessary to ensure facilities are sufficiently 
versed in the survey administration process to be reliably evaluated on 
the measure beginning with performance in CY 2016.
    Comment: One commenter urged CMS to consider breaking out questions 
10 and 12 from the ICH CAHPS survey into separate measures for scoring 
and reporting. (``Did the dialysis center staff listen carefully to 
you?'' and ``Did the dialysis center staff show respect for what you 
had to say?'').
    Response: The current ICH CAHPS survey is divided into two 
categories, global ratings and composite measures. Questions 10 and 12 
are currently part of the Quality of Dialysis Center Care

[[Page 69062]]

and Operations Composite measure, which integrates answers from a total 
of 17 individual survey items, all related to the care provided by the 
dialysis center and to dialysis center operations. We believe this 
composite measure, which examines the complete ICH CAHPS survey, 
appropriately addresses a broad range of concerns, and is therefore 
more reflective of the full care experience of patients at a facility, 
than a measure would be if it looked at one single question from the 
survey. However, we encourage individual facilities to monitor 
responses to individual items as part of their efforts to identify 
opportunities for quality improvement.
    Comment: One commenter requested that CMS further clarify how the 
scores from each of the two survey administrations will be used in 
scoring the ICH CAHPS clinical measure.
    Response: Under the ICH CAHPS clinical measure, eligible facilities 
will perform two survey administrations per year, one in the spring and 
one in the fall. At the conclusion of each of these survey 
administrations, composite scores and global ratings will be calculated 
for each survey. The results will then be averaged across the two 
surveys for the year, and the resulting averages will be used in the 
calculation of both achievement and improvement scores.
    For these reasons, we are finalizing the scoring methodology for 
the ICH CAHPS clinical measure as proposed for the PY 2019 program.
d. Calculating Facility Performance on Reporting Measures
    In the CY 2013 ESRD PPS final rule, we finalized policies for 
scoring performance on the Anemia Management and Mineral Metabolism 
reporting measures in the ESRD QIP (77 FR 67506). We did not propose 
any changes to these policies for the PY 2019 ESRD QIP.
    In the CY 2015 ESRD PPS final rule, we finalized policies for 
scoring performance on the Clinical Depression Screening and Follow-Up, 
Pain Assessment and Follow-Up, and NHSN Healthcare Provider Influenza 
Vaccination reporting measures (79 FR 66210 through 66211). We did not 
propose any changes to these policies.
    With respect to the Ultrafiltration Rate reporting measure, we 
proposed to score facilities with a CCN Open Date before July 1, 2017 
using the same formula previously finalized for the Mineral Metabolism 
and Anemia Management reporting measures (77 FR 67506):
[GRAPHIC] [TIFF OMITTED] TR06NO15.002

As with the Anemia Management and Mineral Metabolism reporting 
measures, we would round the result of this formula (with half rounded 
up) to generate a measure score from 0-10.
    With respect to the Full-Season Influenza Immunization reporting 
measure, we proposed to score facilities with a CCN Open Date before 
January 1, 2017 based on the proportion of eligible patients for which 
the facility successfully submits one of the vaccination status 
indicators listed above by the May 15, 2017 deadline using the 
following formula:
[GRAPHIC] [TIFF OMITTED] TR06NO15.003

    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: One commenter expressed concern about how CMS would 
account for patients who are no longer in the facility when the 
vaccination reporting is due for the Full-Season Influenza Vaccination 
reporting measure.
    Response: We thank the commenter for its comment. However, we are 
not finalizing the Full-Season Influenza Vaccination reporting measure 
at this time.
    For these reasons, we are finalizing the scoring methodologies for 
all reporting measures except the Ultrafiltration Rate reporting 
measure and the Full-Season Influenza Vaccination reporting measure, 
which we are not finalizing.
6. Weighting the Clinical Measure Domain and Total Performance Score
i. Weighting the Clinical Measure Domain for PY 2019
    In the CY 2015 ESRD PPS final rule, we finalized policies regarding 
the criteria we would use to assign weights to measures in a facility's 
Clinical Measure Domain score (79 FR 66214 through 66216). 
Specifically, we stated that in deciding how to weight measures and 
measure topics within the Clinical Measure Domain, we would take into 
consideration: (1) The number of measures and measure topics in a 
proposed subdomain; (2) how much experience facilities have had with 
the measures; and (3) how well the measures align with CMS' highest 
priorities for quality improvement for patients with ESRD.
    In the same rule, we finalized the Dialysis Adequacy measure topic 
and Vascular Access Type measure topic's weights for PY 2018 at 18 
percent of a facility's Clinical Measure Domain score because 
facilities have substantially more experience with the Dialysis 
Adequacy measure topic as compared to the other measures in the 
Clinical Care subdomain (79 FR 66214).
    Beginning in PY 2019, we proposed to remove the Dialysis Adequacy 
measure topic and replace it with the Dialysis Adequacy clinical 
measure. Because this proposed measure is a composite of

[[Page 69063]]

the measures previously included in the Dialysis Adequacy measure 
topic, with the same Kt/V thresholds currently used for those measures, 
we believe that facilities are already familiar with the concepts 
underlying this proposed measure and that the measure should be 
weighted at 18 percent of a facility's Clinical Measure Domain score. 
We are not proposing any further changes to the weighting for the 
remaining clinical measures and measure topics within the Clinical 
Measure Domain because the previously finalized weights are aligned 
with the criteria used to establish measure and measure topic weights. 
For these reasons, we proposed to use the following weighting system in 
Table 25 below for calculating a facility's Clinical Measure Domain 
score beginning in PY 2019.

  Table 25--Proposed Clinical Measure Domain Weighting for the PY 2019
                                ESRD QIP
------------------------------------------------------------------------
                                                       Measure weight in
                                                          the clinical
         Measures/Measure topics by subdomain            measure domain
                                                             score
------------------------------------------------------------------------
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........................                18%
    Vascular Access Type measure topic...............                18%
    Hypercalcemia measure............................                 7%
------------------------------------------------------------------------

    We sought comments on this proposal for weighting a facility's 
Clinical Measure Domain score. The comments and our responses are set 
forth below.
    Comment: Two commenters supported the proposed measure weights 
within the clinical measure domain, as well as the proposal to weight 
the clinical measure domain at 90 percent of a facility's TPS.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that CMS adopt three additional 
criteria for determining appropriate weights for clinical measures 
within the clinical measure domain: (1) Strength of evidence; (2) 
opportunity for improvement; and (3) clinical significance. The 
commenter also urged CMS to consult with the dialysis community when 
determining measure weights for the ESRD QIP.
    Response: We agree with the commenter that these criteria encompass 
important considerations for evaluating measures. As stated in the CY 
2015 ESRD PPS final rule with comment period (79 FR 66216), we take 
these criteria 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. Based on this 
understanding, we developed the three criterion discussed above for 
determining subdomain weighting within the Clinical Measure Domain (80 
FR 37849). We believe these criteria account for the programmatic and 
operational concerns associated with scoring facilities on ESRD QIP 
while also reflecting our focus on improving the quality of care 
provided to ESRD patients. This analysis also implicitly includes a 
review of the strength of the clinical evidence supporting the measure, 
the opportunity for improvement among facilities, and the clinical 
significance of the measure because these issues are inextricably 
linked with an assessment of the measure's appropriateness and 
importance of measurement within the ESRD QIP. Because the additional 
criteria recommended by the commenter are used as a threshold for 
adopting ESRD QIP measures and are sub-components of the three 
previously finalized measure weighting criteria, 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.
    In addition, we currently give the industry an opportunity to 
provide input into the ESRD QIP measure and domain weights by proposing 
a weighting scheme each year and responding to comments received.
    Comment: One commenter expressed concerns with the proposed changes 
to the measure domain weights because ICH CAHPS clinical measure scores 
will be paired with a readmission penalty. The commenter stated that 
ICH CAHPS scores should stand alone in their own Patient Experience 
domain in order to avoid denigrating the importance of the patient 
feedback survey.
    Response: As discussed in the CY 2015 ESRD PPS final rule with 
comment period, we combined the NQS goals of Care Coordination and 
Patient- and Caregiver-Centered Experience of care into one subdomain 
because we believe the two goals complement one another (79 FR 66214). 
``Care Coordination'' refers to the NQS goal of promoting effective 
communication and coordination of care, while ``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 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.
    In addition, we note that the SRR clinical measure receives 
substantially less weight than the ICH CAHPS clinical measure in the 
Patient and Family Engagement/Care Coordination subdomain. The SRR 
clinical measure is weighted at 10 percent of a facility's clinical 
measure domain score, whereas the ICH CAHPS clinical measure is 
weighted at 20 percent of a facility's clinical measure domain score, 
making the ICH CAHPS clinical measure's weight one of the largest 
components of a facility's clinical measure domain score. We therefore 
believe that including both of these measures in a single subdomain 
does not denigrate the importance of the ICH CAHPS survey. We will 
continue to assess the appropriateness of this subdomain combination as 
the ICH CAHPS and SRR clinical measures are implemented in the ESRD 
QIP.
    Comment: Two commenters did not support the proposed weighting of 
the clinical measure domain, arguing that the Vascular Access Type 
measures and Dialysis Adequacy measure should be weighted higher than 
the NHSN BSI clinical measure due to issues associated with 
implementing and scoring the NHSN BSI clinical measure. Additionally, 
they argued that because Vascular Access Type is the measure that is 
most actionable for facilities, it should be weighted greater than 
other measures.
    Response: We thank the commenters for their recommendation 
regarding the weighting of the NHSN BSI clinical measure versus the 
Vascular Access Type measure topic and Dialysis Adequacy measure. 
However, we believe the technical issues associated with implementation 
of the NHSN BSI clinical measure noted by the commenters are now 
resolved and should not impact future payment years.
    We do not believe that increasing the weight of the Vascular Access 
Type

[[Page 69064]]

measure topic and Dialysis Adequacy clinical measure is appropriate at 
this time. As stated in the CY 2015 ESRD PPS final rule with comment 
period (79 FR 66215 through 66216), improving patient safety and 
reducing bloodstream infections in patients with ESRD is one of our 
highest priorities, and facilities have a good deal of experience with 
the NHSN BSI clinical measure. As a result, the NHSN BSI clinical 
measure is weighted at 20 percent of a facility's TPS, the highest 
allocation provided to measures within the clinical measure domain. 
However, we also note that the Vascular Access Type measure topic and 
Dialysis Adequacy clinical measure are also highly weighted within the 
Clinical Measure Domain at 18 percent of the Clinical Measure Domain 
each, to reflect the fact that facilities have substantially more 
experience with this measure and measure topic than the other measures 
in the Clinical Care subdomain. We therefore believe that the weight 
assigned to these measures within the Clinical Measure Domain is 
appropriate for the PY 2019 ESRD QIP. We will continue to assess the 
appropriateness of this weighting allocation for future years of the 
Program.
    Comment: Two commenters urged CMS to place more emphasis on safety 
in dialysis facilities by increasing the weight of the Safety 
Subdomain. One commenter requested that CMS assign greater weight to 
the Safety Subdomain because patient safety is more aligned with 
facility quality initiatives and can be more readily controlled by 
facility staff.
    Response: We agree that improving patient safety is of the utmost 
importance in the ESRD community; however, this is only one of the 
criteria established for determining the weight of subdomains within 
the Clinical Measure Domain. The Safety Subdomain contains only one 
measure, the NHSN BSI clinical measure, and the NHSN BSI clinical 
measure is weighted at 20 percent of the Clinical Measure Domain score, 
which is the highest weighting allocation for a single measure under 
the Clinical Measure Domain. Reallocating weight from the Patient and 
Family Engagement/Care Coordination and Clinical Care subdomains to 
further increase the Safety subdomain's prominence in the Clinical 
Measure Domain is inappropriate because doing so would diminish the 
remaining measures' importance in facility score, and would not 
accurately reflect our measure weighting prioritization criteria. We 
therefore believe the Safety subdomain's current weight is appropriate 
at this time. We will continue to assess the appropriateness of this 
weighting allocation for future years of the program.
    Comment: One commenter did not support weighting the ICH CAHPS 
clinical measure at 20 percent of the Clinical Measure Domain because 
of the burden it imposes on small facilities; the difficulty in 
implementing changes based on survey results before the next semiannual 
survey is performed; and the survey fatigue it causes patients, which 
may in turn impact patient responses.
    Response: While we understand that the ICH CAHPS survey may be 
burdensome for facilities, we believe that measuring patient experience 
can lead to quality improvement, which may in turn lead to better 
outcomes. In addition, the ICH CAHPS survey 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. Furthermore, 
we note that the case minimum for the ICH CAHPS clinical measure is 30 
qualifying patients in the year preceding the performance period. This 
case minimum is much higher than the 11 qualifying patient minimum used 
for the majority of the ESRD QIP clinical measures. We believe these 
thresholds help to decrease the burden on small facilities by exempting 
from the measure those facilities that do not regularly treat enough 
qualifying patients, and further avoids unduly impacting small 
facilities' scores by also exempting otherwise eligible small 
facilities who do not receive enough completed surveys during the 
performance period.
    Comment: One commenter supported the proposal for weighting the 
Clinical Measure Domain and the Total Performance Score.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concern that the Clinical Measure 
Domain weighting policy places smaller facilities at a disadvantage in 
scoring. The commenter noted that when a larger facility and a small 
facility provide comparable care to patients for a given measure but 
the small facility is not eligible to receive a score on that measure 
because it has too few patients, the reallocated measure weight may 
cause the small facility to lose points from its TPS. The commenter 
requested that CMS calculate facilities' TPS based on the facilities' 
performance on the ESRD QIP measures, regardless of facility size and 
avoid adjusting measure weighting when the facility is not eligible for 
some measure due to low facility volume.
    Response: We thank the commenter for sharing its concerns. However, 
we believe scoring facilities on measures for which they treat a very 
small number of patients (i.e., fewer than 11 qualifying patients) may 
raise greater concerns than reallocating measure weights, because the 
effect of a single outlier on facility measure scores increases as the 
patient census decreases. Therefore, while some small facilities may 
benefit from receiving a score based on performance for their small 
patient population, others may receive far lower measure scores that 
are not reflective of the quality of care provided to all patients at 
the facility. We therefore believe it is most appropriate to continue 
reallocating measure weights across the measures for which a facility 
is eligible to receive a score if a facility is not eligible to receive 
a score on one or more measures.
    For these reasons, we are finalizing the weighting for the Clinical 
Measure Domain as proposed for the PY 2019 ESRD QIP.
ii. 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 did not 
propose to change our policy, finalized in the CY 2015 ESRD PPS final 
rule (79 FR 66219), under which 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, with the reporting 
measures weighted equally to form the remaining 10 percent of a 
facility's TPS. We also 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.
    The comments and our responses are set forth below.
    Comment: One commenter did not support weighting the Clinical 
Measure Domain at 90 percent of a facility's TPS and having reporting 
measures comprise the remaining 10 percent because it does not 
adequately incentivize reporting for the increasing number of reporting 
measures in the ESRD QIP. The commenter recommended that CMS weight the 
clinical and reporting

[[Page 69065]]

measures at 80 percent and 20 percent of a facility's TPS, 
respectively.
    Response: We thank the commenter for its suggestion, and agree that 
reporting is an important component of quality improvement efforts. We 
also acknowledge that weighting the reporting measures to comprise 10 
percent of a facility's TPS results in each individual reporting 
measure carrying less weight in the facility's overall score; however, 
we disagree that this allocation does not adequately incentivize the 
reporting measures. We continue to believe that clinical measures 
should carry substantially more weight than reporting measures in a 
facility's TPS because clinical measures score providers and facilities 
based upon actual outcomes, providing 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, 
on the other hand, create an incentive for facilities to monitor 
significant indicators of health and illness, help facilities become 
familiar with CMS data systems, and allow the ESRD QIP to collect the 
robust clinical data needed to establish performance standards for 
clinical measures. We do not believe that facilities are failing to 
report data for the ESRD QIP reporting measures based on the fact that 
their reporting measure scores will have less of an impact on their 
TPSs than their Clinical Measure Domain scores. For example, for the 
Anemia Management and Mineral Metabolism reporting measures, the median 
of national facility performance is 10 points, meaning that the vast 
majority of facilities are reporting all required data under these 
measures. We therefore believe the current weighting scheme is 
appropriate. We will continue to evaluate the appropriateness of this 
weighting for future years of the ESRD QIP.
    For these reasons, we are finalizing the total performance score 
weighting for the PY 2019 ESRD QIP.
7. Minimum Data for Scoring Measures for the PY 2019 ESRD QIP
    Our policy is to score facilities on clinical and reporting 
measures for which they have a minimum number of qualifying patients 
during the performance period. With the exception of the Standardized 
Readmission Ratio, Standardized Transfusion Ratio, and ICH CAHPS 
clinical measures, a facility must treat at least 11 qualifying cases 
during the performance period in order to be scored on a clinical or 
reporting measure. A facility must have at least 11 index discharges to 
be eligible to receive a score on the SRR clinical measure and 10 
patient-years at risk to be eligible to receive a score on the STrR 
clinical measure. In order to receive a score on the ICH CAHPS clinical 
measure, a facility must have treated at least 30 survey-eligible 
patients during the eligibility period and receive 30 completed surveys 
during the performance period. We did not propose to change these 
minimum data policies for the measures that we proposed to continue 
including in the PY 2019 ESRD QIP measure set.
    For the proposed Dialysis Adequacy clinical measure, we proposed 
that facilities with at least 11 qualifying patients will receive a 
score on the measure. We believe that maintaining a case minimum of 11 
for this measure adequately addresses both the privacy and reliability 
concerns previously discussed in the CY 2013 ESRD PPS final rule (77 FR 
67510 through 67512), and aligns with the case minimum policy for the 
previously finalized clinical process measures.
    For the proposed Ultrafiltration Rate and Full-Season Influenza 
reporting measures, we also proposed that facilities with at least 11 
qualifying patients will receive a score on the measure. We believe 
that setting the case minimum at 11 for these reporting measures 
strikes the appropriate balance between the need to maximize data 
collection and the need to not unduly burden or penalize small 
facilities. We further believe that setting the case minimum at 11 is 
appropriate because this aligns with case minimum policy for the vast 
majority of the reporting measures in the ESRD QIP.
    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, 2017 would be eligible to be scored on the Anemia Management, 
Mineral Metabolism, Pain Assessment and Follow-Up, Clinical Depression 
Screening and Follow-Up reporting measures, and only facilities with a 
CCN Open Date before January 1, 2017 would be eligible to be scored on 
the NHSN Bloodstream Infection clinical measure, ICH CAHPS clinical 
measure, and NHSN Healthcare Personnel (HCP) Influenza Vaccination 
reporting measure. Consistent with our policy regarding the NHSN HCP 
Influenza Vaccination reporting measure, we proposed that facilities 
with a CCN Open Date after January 1, 2017 would not be eligible to 
receive a score on the Full-Season Influenza Vaccination reporting 
measure because these facilities might have difficulty reporting the 
data by the proposed reporting deadline of May 15, 2017. We further 
proposed that, consistent with our CCN Open Date policy for other 
reporting measures, facilities with a CCN Open Date after July 1, 2017, 
would not be eligible to receive a score on the Ultrafiltration Rate 
reporting measure because of the difficulties these facilities may face 
in meeting the requirements of this measure due to the short period of 
time left in the performance period. Table 26 displays the proposed 
patient minimum requirements for each of the measures, as well as the 
proposed CCN Open Dates after which a facility would not be eligible to 
receive a score on a reporting measure.

                      Table 26--Proposed Minimum Data Requirements for the PY 2019 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                             Minimum data
               Measure                       requirements            CCN open date       Small facility adjuster
----------------------------------------------------------------------------------------------------------------
Dialysis Adequacy (Clinical).........  11 qualifying patients.  N/A....................  11-25 qualifying
                                                                                          patients.
Vascular Access Type: Catheter         11 qualifying patients.  N/A....................  11-25 qualifying
 (Clinical).                                                                              patients.
Vascular Access Type: Fistula          11 qualifying patients.  N/A....................  11-25 qualifying
 (Clinical).                                                                              patients.
Hypercalcemia (Clinical).............  11 qualifying patients.  N/A....................  11-25 qualifying
                                                                                          patients.
NHSN Bloodstream Infection (Clinical)  11 qualifying patients.  Before January 1, 2017.  11-25 qualifying
                                                                                          patients.
SRR (Clinical).......................  11 index discharges....  N/A....................  11-41 index discharges.
STrR (Clinical)......................  10 patient-years at      N/A....................  10-21 patient-years at
                                        risk.                                             risk.

[[Page 69066]]

 
ICH CAHPS (Clinical).................  Facilities with 30 or    Before January 1, 2017.  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, 2017....  N/A.
Mineral Metabolism (Reporting).......  11 qualifying patients.  Before July 1, 2017....  N/A.
Depression Screening and Follow-Up     11 qualifying patients.  Before July 1, 2017....  N/A.
 (Reporting).
Pain Assessment and Follow-Up          11 qualifying patients.  Before July 1, 2017....  N/A.
 (Reporting).
NHSN HCP Influenza Vaccination         N/A....................  Before January 1, 2017.  N/A.
 (Reporting).
Ultrafiltration Rate (Reporting).....  11 qualifying patients.  Before July 1, 2017....  N/A.
Full-Season Influenza Vaccination      11 qualifying patients.  Before January 1, 2017.  N/A.
 (Reporting).
----------------------------------------------------------------------------------------------------------------

    The comments and our responses are set forth below.
    Comment: One commenter requested that CMS revert to the minimum 
data proposal for the Anemia Management and Mineral Metabolism 
reporting measure as finalized in the PY 2016 ESRD PPS final rule.
    Response: In the CY 2015 ESRD PPS final rule with comment period, 
we finalized our policy to set the case minimum for the Anemia 
Management and Mineral Metabolism reporting measures at 11 qualifying 
patients for PY 2017 and future payment years (79 FR 66185). We 
continue to believe that this case minimum 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 meet the reporting requirements previously established for 
these measures (78 FR 72197 through 72199 and 72220 through 72221).
    Comment: One commenter acknowledged that the small number of 
pediatric ESRD patients often results in facilities not being scored on 
the pediatric dialysis adequacy measures, but noted that CMS' minimum 
sample size for the measures is based on CMS' policies related to 
compliance with the HIPAA Privacy Regulations, not quality performance 
policies. Another commenter opposed the minimum data requirements for 
the proposed Dialysis Adequacy Measure because, if the individual 
measures are combined, facilities previously excluded for having too 
few patients, may now be included in the measure, potentially causing 
privacy concerns.
    Response: Given the ESRD QIP's potential to encourage quality 
improvement, our goal is to ensure the full participation of as many 
facilities as possible in the program. While patient privacy concerns 
are one of a number of considerations we take into account when 
establishing case minimums for measures, we believe that ensuring 
measure and measure score reliability is vital for quality improvement. 
As a general principle, reliability improves with increasing case size; 
that is, the reliability of a measure or score describes numerically to 
what extent that measure or score assesses the actual differences in 
performance among facilities as opposed to the random variation within 
facilities (77 FR 67510). 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). 
This case minimum of 11 patients ensures that the Dialysis Adequacy 
clinical measure scores meet our standards for measure reliability. We 
do not believe a case minimum of 11 for the Dialysis Adequacy clinical 
measure raises privacy concerns, because we do not intend to publish 
age- or modality-specific performance rates at this time. As a result, 
patients treated at a facility should not be individually identifiable 
within the facility's Dialysis Adequacy clinical measure score 
reflecting the care provided to all eligible patients at the facility.
    Comment: One commenter recommended that CMS grant facilities that 
receive a CCN during the performance period a grace period of 90 days 
following receipt of their CCN before being scored based on data 
reported to CROWNWeb because the CROWNWeb registration process is 
difficult for new users and may therefore hinder new facilities' 
ability to submit data by the deadlines established for the ESRD QIP. 
In the alternative, the commenter recommended granting new facilities 
an additional 90 days to submit their first three months' data in 
CROWNWeb in order to ensure the submitted data is correct.
    Response: We appreciate the commenter's concerns about the 
difficulties new facilities face when meeting the requirements of the 
ESRD QIP. It is because of these concerns that facilities with CCN open 
dates after July 1 of the performance period are excluded from the 
reporting measures and are therefore not eligible to receive a TPS for 
that program year. However, we disagree that new facilities should be 
given an additional ``grace period'' of 90 days for data submission to 
CROWNWeb. First, we note that facilities can gain access to CROWNWeb in 
order to submit patient data in advance of receiving their CCN, and we 
encourage new facilities to contact their ESRD Network regarding this 
process while awaiting receipt of their CCN. In addition, the CROWNWeb 
system is not configured to allow ad hoc extensions or suspensions of 
clinical months for individual facilities. We also believe that 
financial incentives provide the strongest incentive to improve the 
quality of care provided to patients with ESRD. For these reasons, we 
do not believe providing new facilities with an extension of time to 
begin submitting data to CROWNWeb is appropriate at this time.
    Comment: One commenter recommended that CMS determine facility 
eligibility for a given measure based on patient census for both 
clinical

[[Page 69067]]

and reporting measures on a monthly basis rather than for the entire 
performance period.
    Response: We believe that determining facility eligibility on a 
monthly basis rather than using the current methodology would have two 
negative impacts on the ESRD QIP and, by extension, the ESRD 
population. First, determining eligibility on a monthly basis would 
likely reduce the number of facilities eligible to receive a score on a 
measure by excluding facilities that would receive scores under the 
current methodology. For example, monthly eligibility determinations 
would systematically exclude months in which facilities do not treat 
enough eligible patients, instead of basing eligibility for the measure 
on the total number of eligible patients treated throughout the 
performance period. Monthly eligibility determinations would also 
effectively exclude all patients treated at a facility during a month 
in which the facility is not eligible to receive a score from the ESRD 
QIP, which runs contrary to the ESRD QIP's goal of ensuring quality of 
care for all ESRD patients. Second, determining facility eligibility on 
a monthly basis would require extensive and complicated modifications 
to the current measure scoring methodologies in order to ensure measure 
and measure score reliability. For example, some clinical measures 
require multiple months of claims in order to score facility 
performance on the measure; it is unclear how the commenter's 
recommended methodology would account for months during that range in 
which the facility did not treat enough qualifying cases. In addition, 
for instances where a facility would only be eligible for a number of 
months during the performance period, as opposed to the entire 
performance period, the resulting measure score may inaccurately 
reflect the quality of care provided at the facility. For these 
reasons, we believe that determining facility eligibility using the 
entire performance period is the most appropriate policy for the ESRD 
QIP.
    Comment: One commenter recommended that CMS implement a patient-
month threshold for facility eligibility for the NHSN BSI clinical 
measure.
    Response: Currently, eligibility for the NHSN BSI clinical measure 
is determined based on the number of qualifying patients treated during 
the performance period. We continue to believe this threshold is 
appropriate for the NHSN BSI clinical measure because it aligns this 
measure with the remaining clinical measures in the ESRD QIP, and 
ensures that the measure captures a larger proportion of dialysis 
patients than it may otherwise capture.
    Comment: One commenter supports the proposed minimum data for 
scoring measures.
    Response: We thank the commenter for its support.
    Comment: Two commenters recommended that CMS increase the minimum 
number of cases from 11 to 26 to avoid anomalous results and to align 
with the policies used by commercial and managed care value-based 
purchasing programs. One of the commenters noted that these plans rely 
upon a minimum of 26 cases and recommended that the ESRD QIP align its 
minimum data requirements with these plans.
    Response: We recognize that measures using a case minimum of 11 
could potentially be less reliable than measures using a case minimum 
of 26. However, we continue to believe that it is essential to score 
facilities with between 11 and 25 qualifying cases on the applicable 
ESRD QIP measures, because increasing the minimum number of cases to 26 
would result in the exclusion of hundreds of facilities from the ESRD 
QIP. Based on data from CY 2013, applying a 26-patient case minimum to 
all the PY 2017 clinical measures would result in the exclusion of 562 
facilities from the ESRD QIP, or 9.2 percent of facilities nationwide 
(79 FR 66185). Given the inherent tradeoff between a modest decline in 
measure reliability and including these facilities in the ESRD QIP, we 
believe that on balance it is more important to include these 
facilities. We also note that the ESRD QIP maintains the SFA in order 
to ensure that any error in measure rates due to a small number of 
cases will not adversely affect facility payment.
    Comment: One commenter supported CMS's decision to exclude 
facilities with a CCN Open Date after January 1, 2017 for the Full-
Season Influenza Vaccination reporting measure.
    Response: We thank the commenter for its support. We note that, 
based on comments received, we have decided not to finalize the Full-
Season Influenza Vaccination reporting measure at this time.
    Comment: One commenter supported CMS' proposal to exclude 
facilities with a CCN Open Date after July 1, 2017 from scoring for the 
Ultrafiltration Rate reporting measure.
    Response: We thank the commenter for its support. We note that, 
based on comments received, we have decided not to finalize the 
Ultrafiltration Rate reporting measure at this time.
    For these reasons, we are finalizing the minimum data policies for 
PY 2019 as proposed, with the exception of the Ultrafiltration Rate and 
Full-Season Influenza Vaccination reporting measure minimum data 
policies, which we are not finalizing at this time.
8. Payment Reductions for the PY 2019 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. We proposed that, for the PY 2019 ESRD QIP, 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; and
     It received the number of points for each reporting 
measure that corresponds to the 50th percentile of facility performance 
on each of the PY 2017 reporting measures.
We did not propose a policy regarding the inclusion of measures for 
which we are not able to establish a numerical value for the 
performance standard through the rulemaking process before the 
beginning of the performance period in the PY 2019 minimum TPS. We did 
not propose such a policy because no measures in the proposed PY 2019 
measure set meet this criterion. However, we stated that should we 
choose to adopt a clinical measure in future rulemaking without the 
baseline data required to calculate a performance standard before the 
beginning of the performance period, we will propose a criterion 
accounting for that measure in the minimum TPS for the applicable 
payment year at that time.
    The PY 2017 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 2019 (that is, CY 2017). Because we have not 
yet calculated final measure scores, we are unable to determine the 
50th percentile of facility performance on the PY 2017 reporting 
measures. We will publish that value in the CY 2017 ESRD PPS final rule 
once we have calculated final measure scores for the PY 2017 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

[[Page 69068]]

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 for the PY 2019 ESRD QIP.
    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 
proposed minimum TPS at this time. We will publish the minimum TPS, 
based on data from CY 2015 and the first part of CY 2016, in the CY 
2017 ESRD PPS final rule.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Two commenters supported the proposed payment reductions 
for the PY 2019 ESRD QIP.
    Response: We thank the commenters for their support.
    For these reasons, we are finalizing the payment reduction policies 
for the PY 2019 ESRD QIP as proposed.

I. Future Achievement Threshold Policy under Consideration

    Under our current methodology, we set performance standards, 
achievement thresholds, and benchmarks for the clinical measures at the 
50th, 15th, and 90th percentiles, respectively, of national performance 
on the measure during the baseline period (77 FR 67500 through 67502). 
As we continue to refine the ESRD QIP's policies, we are evaluating 
different methods of ensuring that facilities strive for continuous 
improvement in their delivery of care to patients with ESRD. For future 
rulemaking, we are considering increasing the achievement threshold 
from the 15th percentile to the 25th percentile of national performance 
during the baseline period. We believe this increase in the achievement 
threshold will add additional incentives for facilities to improve 
performance, thereby improving patient outcomes and quality of care. We 
have analyzed the impact of this policy change on facility payment 
reductions using the same data used to calculate the PY 2018 minimum 
TPS. The full results of this analysis can be found at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/Achievement-Threshold-Analysis-using-PY-2015-Results.pdf.
    We invited comment on this policy that we are considering for 
adoption in the ESRD QIP in the future. The comments and our responses 
are set forth below.
    Comment: Many commenters expressed significant concerns with the 
future achievement threshold policy under consideration. Specifically, 
commenters are concerned that the increasing use of measures outside 
the dialysis facility's control, combined with a higher achievement 
threshold, will result in too many facilities being penalized. 
Additionally, one commenter described a need, within the ESRD 
community, to redistribute money currently retained by CMS through the 
PPS bundle and ESRD QIP payment reductions within the ESRD community to 
ensure that the quality of patient care improves continuously. One 
commenter also pointed out that there has been consistent improvement 
in the numerical values associated with the achievement threshold, 
suggesting that lower performers have plenty of motivation for 
improvement, argued that the current achievement threshold policy is 
already driving improvement among dialysis facilities across all 
measures, and requested that CMS publish the data used in consideration 
of inviting comment on this potential future policy proposal. One 
commenter also expressed concerns that with the new standardized ratio 
measures being included in the QIP, there may be unexpected effects in 
QIP scoring. Because decisions to admit patients and transfuse them are 
generally not made by the dialysis facility, the commenter argued, 
facilities have little ability to drive improvement or to control how 
their quality efforts affect patient outcomes. The commenter therefore 
argued that CMS should wait to see how the current QIP scoring affects 
those facilities before adding additional uncertainty for them by 
increasing the achievement threshold.
    Response: We thank the commenters for sharing their concerns 
regarding a potential future policy proposal under consideration that 
would increase the achievement threshold from the 15th percentile to 
the 25th percentile of national performance during the baseline period. 
We will take these comments into consideration as we further consider 
whether to propose to adopt a higher achievement threshold in the 
future.

J. Monitoring Access to Dialysis Facilities

    In the CY 2015 ESRD PPS final rule, we finalized our commitment to 
conduct a study to determine the impact of adopting the Standardized 
Readmission Ratio (SRR) and Standardized Transfusion Ratio clinical 
measures on access to care, and stated that we would make further 
details about the study and its methodology available to the public for 
review (79 FR 66189). We stated that we intended to publish the 
methodology for this study in the second half of the year, and 
encouraged all interested parties to review this methodology and submit 
any comments using the process outlined on the Web page.
    We received comments on this issue. The comments and our responses 
are set forth below.
    Comment: Many commenters supported CMS's intent to conduct a study 
on the impact of adopting the SRR and STrR clinical measures on patient 
access to care. One commenter recommended that CMS also evaluate the 
combined effects of socioeconomic status and patient demographics to 
determine if these attributes influence facility performance on those 
two measures. Several commenters recommended that CMS exclude these 
measures from the ESRD QIP until the access to care study results have 
been thoroughly reviewed and analyzed, or at the very least that CMS 
delay implementation of the measures until the results of the study are 
available.
    Response: We thank the commenters for their support of the upcoming 
access to care study, and will take their recommendations regarding the 
structure and content of the study into account as we continue to 
develop the study methodology. We note, however, that the purpose of 
this study is to assess the impact of the SRR and STrR clinical 
measures on access to care for dialysis patients. If these measures are 
removed from the ESRD QIP or suspended during the access to care study, 
it would be very difficult for the study to accurately assess their 
impact on admission practices. Therefore, we believe it is 
inappropriate to remove or suspend the SRR and STrR clinical measures 
while the access to care study is ongoing.
    Comment: Several commenters supported CMS's efforts to evaluate the 
impact of the SRR and STrR measures on access to care. Commenters 
recommended that CMS evaluate the effectiveness of the SRR and STrR 
measures in measuring the actual care provided in dialysis facilities 
and commended CMS for allowing stakeholders to comment on the study 
methodology.
    Response: We thank the commenters for their support.
    We thank commenters for providing input regarding the Access to 
Care Study methodology, which we intend to publish prior to the end of 
CY 2015.

[[Page 69069]]

IV. Advancing Health Information Exchange

    HHS has a number of initiatives designed to improve health and 
health care quality through the adoption of health information 
technology and nationwide health information exchange. As discussed in 
the August 2013 Statement ``Principles and Strategies for Accelerating 
Health Information Exchange'' (available at http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf), HHS 
believes that all individuals, their families, their healthcare and 
social service providers, and payers should have consistent and timely 
access to electronic health information in a standardized format that 
can be securely exchanged between the patient, providers, and others 
involved in the individual's care. Health information technology 
(health IT) that facilitates the secure, efficient and effective 
sharing and use of electronic health-related information when and where 
it is needed is an important tool for settings across the continuum of 
care, including ESRD facilities.
    The Office of the National Coordinator for Health Information 
Technology (ONC) has released a document entitled ``Connecting Health 
and Care for the Nation: A Shared Nationwide Interoperability Roadmap'' 
(Roadmap)(available at https://www.healthit.gov/sites/default/files/hie-interoperability/nationwide-interoperability-roadmap-final-version-1.0.pdf). The Roadmap describes a shared strategy for achieving 
nationwide interoperability to enable a learning health system by 2024. 
In the near term, the Roadmap focuses on actions that will enable a 
majority of individuals and providers across the care continuum to 
send, receive, find and use priority data domains to improve health 
care quality and outcomes by the end of 2017. The Roadmap also 
identifies four critical pathways that health IT stakeholders should 
focus on now in order to create a foundation for long-term success: (1) 
Improve technical standards and implementation guidance for priority 
data domains and associated elements; (2) rapidly shift and align 
federal, state, and commercial payment policies from fee-for-service to 
value-based models to stimulate the demand for interoperability; (3) 
clarify and align federal and state privacy and security requirements 
that enable interoperability; and (4) align and promote the use of 
consistent policies and business practices that support 
interoperability and address those that impede interoperability, in 
coordination with stakeholders.
    In addition, ONC has released the draft version of the 2016 
Interoperability Standards Advisory (available at https://www.healthit.gov/standards-advisory/2016), which provides a list of the 
best available standards and implementation specifications to enable 
priority health information exchange functions. Providers, payers, and 
vendors are encouraged to take these ``best available standards'' into 
account as they implement interoperable health information exchange 
across the continuum of care.
    We encourage stakeholders to utilize health information exchange 
and certified health IT to effectively and efficiently help providers 
improve internal care delivery practices, support management of care 
across the continuum, enable the reporting of electronically specified 
clinical quality measures, and improve efficiencies and reduce 
unnecessary costs. As adoption of certified health IT increases and 
interoperability standards continue to mature, HHS will seek to 
reinforce standards through relevant policies and programs.

V. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

    In sections II.B.1.d.ii, II.B.1.d.iii, II.B.3, and II.B.4 of this 
final rule, we made changes to regulatory text for the ESRD PPS in CY 
2016. However, the changes that are being made 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
a. Wage Estimates
    In previous rulemaking, we used the mean hourly wage of a 
registered nurse as the basis of the wage estimates for all collection 
of information calculations in the ESRD QIP (for example, 77 FR 67521). 
However, we believe that reporting data for the ESRD QIP measures can 
be accomplished by other administrative staff within the dialysis 
facility. The Bureau of Labor Statistics (the Bureau) is ``the 
principal Federal agency responsible for measuring labor market 
activity, working conditions, and price changes in the economy.'' \14\ 
Acting as an independent agency, the Bureau provides objective 
information not only for the government, but also for the public. The 
Bureau's National Occupational Employment and Wage Estimate describes 
Medical Records and Health Information Technicians as those responsible 
for organizing and managing health information data.\15\ Therefore, we 
believe it is reasonable assume these individuals would be tasked with 
submitting measure data to CROWNWeb rather than a Registered Nurse, 
whose duties are centered on providing and coordinating care for 
patients.\16\ The mean hourly wage of a Medical Records and Health 
Information Technician is $18.68 per hour.\17\ Under OMB Circular 76-A, 
in calculating direct labor, agencies should not only include salaries 
and wages, but also ``other entitlements'' such as fringe benefits.\18\ 
This Circular provides that the civilian position full fringe benefit 
cost factor is 36.25 percent. Therefore, using these assumptions, we 
estimate an hourly labor cost of $25.45 as the basis of the wage 
estimates for all collection of

[[Page 69070]]

information calculations in the ESRD QIP.
---------------------------------------------------------------------------

    \14\ http://www.bls.gov/bls/infohome.htm.
    \15\ http://www.bls/gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
    \16\ http://www.bls.gov/ooh/healthcare/registered-nurses.htm.
    \17\ http://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.html.
    \18\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.
---------------------------------------------------------------------------

    We did not receive comments on this proposal, and are therefore 
finalizing the change in wage estimates as proposed.
b. Changes in Time Required to Submit Data Based on Proposed Reporting 
Requirements
    In previous rulemaking, we estimated that data entry associated 
with the ESRD QIP took approximately 5 minutes per data element to 
complete (for example, 77 FR 67521). However, a large number of 
facilities now submit data using the batch submission process, which 
allows facilities to submit data extracted from their internal 
Electronic Health Records (EHRs) directly to CROWNWeb. Because the 
batch submission process can be automated with very little human 
intervention, we believe the overall time required to submit measure 
data using CROWNWeb is substantially less than previously estimated. We 
are therefore revising our estimate to be 2.5 minutes per data element 
submitted, a change of -2.5 minutes, which takes into account the small 
percentage of data that is manually reported, as well as the human 
interventions required to modify batch submission files such that they 
meet CROWNWeb's internal data validation requirements.
    We received comments on this section. The comments and our 
responses are set forth below.
    Comment: One commenter expressed concern about an under-estimate in 
the proposed estimated time to complete QIP data submission because 
they feel it does not properly account for the needs of smaller 
facilities without data extraction tools. The commenter explained that 
while larger facilities are able to utilize data extraction tools that 
minimize the time needed to submit data, smaller facilities without 
these capabilities must enter this data manually on a monthly basis. 
The commenter asserted that it takes an estimated 20-30 minutes per 
patient per month to enter this data for manual entry facilities.
    Response: We thank the commenter for sharing their concerns 
regarding the proposed estimated time to complete QIP data submission. 
We understand that the amount of time required to enter data for a 
patient varies among facilities based on a number of factors, including 
the facility's size, staffing, and access to different technical 
support tools, and took these concerns into account when estimating the 
average time needed to complete data entry across all facilities. We 
also understand that, because this is an estimated time per element 
across all facilities, some facilities will require more time to 
complete the required data submission, and others will require less 
time. However, we believe an estimate of 2.5 minutes per element is 
appropriate for assessing the impact of ESRD QIP data submission 
requirements on facilities because it represents an average of the time 
required across all facilities, and therefore allows us to better 
assess burden on a national level.
    For these reasons, we are finalizing the change in estimated time 
required to submit data for the ESRD QIP as proposed.
c. Data Validation Requirements for the PY 2018 ESRD QIP
    Section III.F.4 in this final rule outlines our data validation 
proposals for PY 2018. Specifically, we proposed to randomly sample 
records from 300 facilities as part of our continuing pilot data-
validation program. Each sampled facility will 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 estimate 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). Since we anticipate that Medical Records 
and Health Information Technicians or similar administrative staff 
would submit this data, we estimate that the aggregate cost of the 
CROWNWeb data validation would be $19,088 (750 hours x $25.45/hour) 
total or $64 ($19,088/300 facilities) per facility in the sample. The 
burden associated with these requirements is captured in an information 
collection request currently available for review and comment, OMB 
control number 0938-NEW.
    Under the proposed continuation of 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 estimate fewer than ten respondents in a 12-month period; therefore, 
in accordance with the implementing regulations of the PRA at 44 U.S.C. 
3502(3)(A)(i), the burden associated with the aforementioned 
requirements is exempt.
d. Proposed Ultrafiltration Rate Reporting Measure
    We proposed to include, beginning with the PY 2019 ESRD QIP, a 
reporting measure requiring facilities to report in CROWNWeb an 
ultrafiltration rate at least once per month for each qualifying 
patient. However, as discussed in section III.H.2.c.i above, and based 
on comments received, we decided not to finalize the Ultrafiltration 
Rate reporting measure at this time. Therefore, facilities will not be 
subject to additional collection of information requirements for this 
measure.
e. Proposed Full-Season Influenza Vaccination Reporting Measure
    In the CY 2016 ESRD PPS proposed rule, we proposed to include, 
beginning with the PY 2019 ESRD QIP, a measure requiring facilities to 
report patient influenza vaccination status annually using the CROWNWeb 
system. However, as discussed in section III.H.2.c.ii above, based on 
comments received, we decided not to finalize the Full-Season Influenza 
Vaccination reporting measure at this time. Therefore, facilities will 
not be subject to additional collection of information requirements for 
this measure.

VI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory

[[Page 69071]]

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). Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule: (1) Having an annual effect on the economy of $100 million 
or more in any 1 year, or adversely and materially affecting a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or state, local or tribal governments or 
communities (also referred to as economically significant); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering the 
budgetary impacts of entitlement grants, user fees, or loan programs or 
the rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). This rule is not economically significant within the meaning of 
section 3(f)(1) of the Executive Order, since it does not meet the $100 
million threshold. However, OMB has determined that the actions are 
significant within the meaning of section 3(f)(4) of the Executive 
Order. Therefore, OMB has reviewed these final regulations, and the 
Departments have provided the following assessment of their impact. We 
solicited comments on the regulatory impact analysis provided.
2. Statement of Need
    This rule finalizes a number of routine updates for renal dialysis 
services and implements several policy changes to the ESRD PPS in CY 
2016. The routine updates include: Wage index values, wage index 
budget-neutrality adjustment factor, and outlier payment threshold 
amounts. Other policy changes include implementation of section 
1881(b)(14)(F)(i)(I), as amended by section 217(b)(2) of PAMA, which 
requires a 1.25 percent decrease to the payment update as discussed in 
section II.B.2. of this rule, the delay in payment for oral-only drugs 
under the ESRD PPS until January 1, 2025 as required by section 204 of 
ABLE, the implementation of a geographic facility adjustment paid to 
rural facilities, and the updated payment multipliers based upon the 
regression analysis discussed in section II.B.1.c. of this final rule. 
Failure to publish this final rule would result in ESRD facilities not 
receiving appropriate payments in CY 2016.
    This rule finalizes requirements for the ESRD QIP, including the 
adoption of a measure set for the PY 2019 program, as directed by 
section 1881(h) of the Act. Failure to finalize requirements for the PY 
2019 ESRD QIP would prevent continuation of the ESRD QIP beyond PY 
2018. In addition, finalizing requirements for the PY 2019 ESRD QIP 
provides facilities with more time to review and fully understand new 
measures before their implementation in the ESRD QIP.
3. Overall Impact
    We estimate that the final revisions to the ESRD PPS will result in 
an increase of approximately $10 million in payments to ESRD facilities 
in CY 2016, which includes the amount associated with updates to 
outlier threshold amounts, updates to the wage index, changes in the 
CBSA delineations, changes in the labor-related share, update to the 
payment rate and changes involved with the refinement.
    For PY 2018, we anticipate that the new burdens associated with the 
collection of information requirements will be approximately $19 
thousand, totaling an overall impact of approximately $11.8 million as 
a result of the PY 2018 ESRD QIP.\19\ For PY 2019, we estimate that the 
payment reductions will result in a total impact of approximately $15.5 
million across all facilities.
---------------------------------------------------------------------------

    \19\ We note that the aggregate impact of the PY 2018 ESRD QIP 
was included in the CY 2015 ESRD PPS final rule (79 FR 66256 through 
66258). The previously finalized aggregate impact of $11.8 million 
reflects the PY 2018 estimated payment reductions and the collection 
of information requirements for the NHSN Healthcare Personnel 
Influenza Vaccination reporting measure.
---------------------------------------------------------------------------

B. Detailed Economic Analysis

1. CY 2016 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 2015 to estimated payments in CY 2016. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2015 and CY 2016 
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 2015 update of CY 2014 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2014 claims 
to 2015 and 2016 using various updates. The updates to the ESRD PPS 
base rate are described in section II.B.2.d. of this final rule. Table 
27 shows the impact of the estimated CY 2016 ESRD payments compared to 
estimated payments to ESRD facilities in CY 2015.

                                 Table 27--Impact of Final Changes in Payments to ESRD Facilities for CY 2016 Final Rule
                                 [Percent change in total payments to ESRD facilities (both program and beneficiaries)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Effect of 2016                                     Effect of
                                                                                            changes in                    Effect of 2016    total 2016
                                                                          Effect of 2016   wage indexes,  Effect of 2016       final       final changes
                                             Number of       Number of      changes in         CBSA         changes in      refinement      (refinement
              Facility type                 facilities      treatments    outlier policy   designations    payment rate     changes to      and routine
                                                           (in millions)     (percent)       and labor        update       payment rate   updates to the
                                                                                               share         (percent)       (percent)     payment rate)
                                                                                             (percent)                                       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       A               B               C               D               E               F               G
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities..........................           6,374            44.5             0.0             0.0            0.15             0.0             0.2
Type
    Freestanding........................           5,919            41.9             0.0             0.0            0.15             0.0             0.2
    Hospital based......................             455             2.7             0.0             0.1            0.16            -0.1             0.2

[[Page 69072]]

 
Ownership Type
    Large dialysis organization.........           4,446            31.5             0.0            -0.1            0.15             0.1             0.2
    Regional chain......................             957             6.8             0.0             0.2            0.15            -0.3             0.1
    Independent.........................             594             4.0             0.0             0.1            0.15            -0.1             0.2
    Hospital based \1\..................             377             2.2             0.0             0.0            0.16             0.3             0.4
Geographic Location
    Rural...............................           1,259             6.6             0.0            -1.2            0.15             0.9            -0.1
    Urban...............................           5,115            37.9             0.0             0.2            0.15            -0.1             0.2
Census Region
    East North Central..................           1,049             6.5             0.0            -0.2            0.15             0.2             0.1
    East South Central..................             523             3.3             0.0            -1.2            0.15             0.7            -0.2
    Middle Atlantic.....................             687             5.4             0.0             0.8            0.15            -0.3             0.7
    Mountain............................             365             2.2             0.0            -0.3            0.15            -0.1            -0.2
    New England.........................             182             1.4             0.0             0.9            0.15            -0.6             0.5
    Pacific \2\.........................             778             6.2             0.0             1.7            0.15            -0.8             1.1
    Puerto Rico and Virgin Islands......              47             0.3             0.0            -3.9            0.15            -0.2            -3.8
    South Atlantic......................           1,414            10.3             0.0            -0.5            0.15             0.3             0.1
    West North Central..................             466             2.3             0.0            -0.8            0.15             0.2            -0.4
    West South Central..................             863             6.5             0.0            -0.8            0.15             0.2            -0.3
Facility Size
    Less than 4,000 treatments \3\......           1,416             3.4             0.0            -0.3            0.15             0.4             0.3
    4,000 to 9,999 treatments...........           2,346            12.2             0.0            -0.4            0.15             0.0            -0.1
    10,000 or more treatments...........           2,596            29.0             0.0             0.2            0.15            -0.1             0.3
    Unknown.............................              16             0.0             0.0            -0.3            0.14             0.0            -0.1
Percentage of Pediatric Patients
    Less than 2%........................           6,264            44.1             0.0             0.0            0.15             0.0             0.2
    Between 2% and 19%..................              42             0.4             0.0             0.1            0.15             0.3             0.6
    Between 20% and 49%.................              13             0.0             0.0            -0.1            0.15             0.6             0.7
    More than 50%.......................              55             0.1            -0.1            -0.2            0.15             0.6             0.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
\2\ Includes ESRD facilities located in the states in the Pacific region, including those located in Guam, American Samoa, and the Northern Mariana
  Islands.
\3\ Of the 1,416 ESRD facilities with less than 4,000 treatments, only 387 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 6.9 percent increase 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 final 
changes to the outlier payment policy described in section II.B.2.c. of 
this final rule is shown in column C. For CY 2016, the impact on all 
ESRD facilities as a result of the changes to the outlier payment 
policy will be a 0.0 percent increase in estimated payments. Nearly all 
ESRD facilities are anticipated to experience no effect in their 
estimated CY 2016 payments as a result of the final outlier policy 
changes.
    Column D shows the effect of the final CY 2016 wage indices, and 
the final year of the transitions for the implementation of both the 
new CBSA delineations and the labor-related share. 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 2016. 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 1.2 percent decrease to a 
1.7 percent increase due to these final updates.
    Column E shows the effect of the ESRD PPS payment rate update of 
0.15 percent, which reflects the final ESRDB market basket percentage 
increase factor for CY 2016 of 1.8 percent, the 1.25 percent reduction 
as required by the section 1881(b)(14)(F)(i)(I) of the Act, and the MFP 
adjustment of 0.4 percent.
    Column F shows the effect of the ESRD PPS refinement as discussed 
in

[[Page 69073]]

section II.B.1. While the overall estimated impact of the refinement is 
0.0 percent, the impact by categories ranges from a 0.8 percent 
decrease to a 0.9 percent increase.
    Column G reflects the overall impact (that is, the effects of the 
final outlier policy changes, the final wage index, the effect of the 
change in CBSA delineations, the effect of the change in the labor-
related share, the effect of the payment rate update, and the effect of 
the refinement). We expect that overall ESRD facilities will experience 
a 0.2 percent increase in estimated payments in 2016. ESRD facilities 
in Puerto Rico and the Virgin Islands are expected to receive a 3.8 
percent decrease in their estimated payments in CY 2016. 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 0.4 percent to an 
increase of 1.1 percent in their 2016 estimated payments.
b. Effects on Other Providers
    Under the ESRD PPS, Medicare pays ESRD facilities a single bundled 
payment for renal dialysis services, which may have been separately 
paid to other providers, (for example, laboratories, durable medical 
equipment suppliers, and pharmacies) by Medicare prior to the 
implementation of the ESRD PPS. Therefore, in CY 2016, we estimate that 
the final 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 2016 will be approximately $9.6 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 1.4 percent in 
CY 2016.
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 
0.2 percent overall increase in the final ESRD PPS payment amounts in 
CY 2016, we estimate that there will be an increase in beneficiary co-
insurance payments of 0.2 percent in CY 2016, which translates to 
approximately $0 million due to rounding.
e. Alternatives Considered
    In section II.B.1.c.1. of this final rule, we finalized the updated 
payment multipliers for five age groups resulting from our regression 
analysis. In section II.B.2.d., we discuss and finalize a refinement 
budget-neutrality adjustment to account for the overall effects of the 
refinement. We are finalizing a 4 percent reduction (that is, a factor 
of .960319) to the ESRD PPS base rate to account for the additional 
dollars paid to facilities through the payment adjustments. We 
indicated that a significant portion of additional impact of the 
adjusters on the base rate arises from changes in the age adjustments. 
To mitigate some of the reduction, we considered reducing the number of 
age categories to three and providing a payment adjustment for only 
those patients in the youngest (18-44) and oldest (80+) age groups. We 
did not adopt this approach because while it would reduce the impact of 
the age adjustments on the base rate, it would also significantly 
reduce the explanatory power of the system and reduce payments to 
facilities with patients who are between the ages of 44 through 79, 
that is, approximately 75 percent of patients.
    Also, in section II.B.1.d. of this final rule, we finalized the 
eligibility criteria for the low-volume payment adjustment by excluding 
facilities of common ownership that are located within 5 road miles off 
one another. We considered a geographic proximity criterion of 10 road 
miles; however, this approach negatively impacted rural facilities 
which are important to ensure access to essential renal dialysis 
services.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2019 ESRD QIP
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility services provided to 
beneficiaries as a result of payment changes under the ESRD PPS. The 
methodology that we are using to determine a facility's TPS for PY 2019 
is described in section III.H.8 of this final rule. Any reductions in 
ESRD PPS payments as a result of a facility's performance under the PY 
2019 ESRD QIP would affect the facility's reimbursement rates in CY 
2019.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 23 percent or 
1,405 of the facilities would likely receive a payment reduction in PY 
2019. 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 6,264 dialysis facilities paid under the 
ESRD PPS. Table 28 shows the overall estimated distribution of payment 
reductions resulting from the PY 2019 ESRD QIP.

                     Table 28--Estimated Distribution of PY 2019 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                                                                    Cumulative      Cumulative
              Percentage reduction                   Frequency        Percent        frequency        percent
----------------------------------------------------------------------------------------------------------------
0...............................................            4629           76.72            4629           76.72
0.5.............................................             961           15.93            5590           92.64
1...............................................             362            6.00            5952           98.64
1.5.............................................              65            1.08            6017           99.72
2...............................................              17            0.28            6034          100.00
----------------------------------------------------------------------------------------------------------------
Note: This table excludes 230 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 2019, 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 29.

[[Page 69074]]



   Table 29--Data Used to Estimate PY 2019 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 2013-Dec 2013.  Jan 2014-Dec 2014.
    % Catheter..................  Jan 2013-Dec 2013.  Jan 2014-Dec 2014.
Dialysis Adequacy...............  Jan 2013-Dec 2013.  Jan 2014-Dec 2014.
Hypercalcemia...................  Jan 2013-Dec 2013.  Jan 2014-Dec 2014.
SRR.............................  Jan 2013-Dec 2013.  Jan 2014-Dec 2014.
STrR............................  Jan 2013-Dec 2013.  Jan 2014-Dec 2014.
NHSN BSI........................  Jan 2014-Dec 2014.  Jan 2014-Dec 2014.
------------------------------------------------------------------------

    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.H.8 of this final rule. Facility reporting measure 
scores were estimated using available data from CY 2014. 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 2019 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
January 2014 and December 2014 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 2014 through December 2014 times the estimated payment 
reduction percentage). For PY 2014, the total payment reduction for the 
1,405 facilities estimated to receive a reduction is approximately 
$15.5 million ($15,470,309). As a result, we estimate that ESRD 
facilities will experience an aggregate impact of approximately $15.5 
million in PY 2019, as a result of the CY 2016 ESRD PPS final rule with 
comment period.
    Table 30 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2019. 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 2019 ESRD QIP, the actual 
impact of the PY 2019 ESRD QIP may vary significantly from the values 
provided here.

                                    Table 30--Impact of Proposed QIP Payment Reductions to ESRD Facilities in PY 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Number of           Payment
                                                                                       Number of       Number of        facilities         reduction
                                                                       Number of      treatments      facilities       expected to      (percent change
                                                                      facilities       2014 (in     with QIP Score      receive a        in total ESRD
                                                                                       millions)                    payment reduction      payments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities....................................................           6,264            40.0           6,023              1,313              -0.15
Facility Type:
Freestanding......................................................           5,812            37.7           5,625              1,215              -0.15
Hospital-based....................................................             452             2.3             398                 98              -0.23
Ownership Type:
Large Dialysis....................................................           4,380            28.5           4,271                870              -0.13
Regional Chain....................................................             926             6.0             891                196              -0.15
Independent.......................................................             584             3.6             536                165              -0.26
Hospital-based (non-chain)........................................             374             1.9             325                 82              -0.24
Facility Size:
Large Entities....................................................           5,306            34.5           5,162              1,066              -0.13
Small Entities \1\................................................             958             5.5             861                247              -0.25
Rural Status:
1) Yes............................................................           1,332             6.5           1,257                194              -0.10
2) No.............................................................           4,932            33.5           4,766              1,119              -0.16
Census Region:
Northeast.........................................................             861             6.2             832                199              -0.17
Midwest...........................................................           1,490             7.9           1,392                336              -0.17
South.............................................................           2,744            18.1           2,658                602              -0.15
West..............................................................           1,112             7.5           1,088                150              -0.09
US Territories \2\................................................              57             0.4              53                 26              -0.44
Census Division:
East North Central................................................           1,036             5.8             966                272              -0.20
East South Central................................................             518             3.0             502                 83              -0.11
Middle Atlantic...................................................             680             4.9             662                168              -0.18
Mountain..........................................................             359             2.0             350                 48              -0.08
New England.......................................................             182             1.3             170                 31              -0.12
Pacific...........................................................             760             5.6             745                104              -0.09
South Atlantic....................................................           1,386             9.3           1,340                352              -0.18
West North Central................................................             455             2.1             426                 64              -0.09
West South Central................................................             841             5.8             816                167              -0.13
US Territories \2\................................................              47             0.3              46                 24              -0.48
Facility Size (# of total treatments)
Less than 4,000 treatments........................................           1,305             3.5           1,202                220              -0.15

[[Page 69075]]

 
4,000-9,999 treatments............................................           2,239            10.8           2,207                444              -0.13
Over 10,000 treatments............................................           2,514            25.3           2,484                612              -0.16
Unknown...........................................................             206             0.3             130                 37              -0.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 2014.

b. Alternatives Considered
    In section III.G.2.c.ii of the CY 2016 ESRD PPS proposed rule, we 
proposed to adopt the Full-Season Influenza Vaccination reporting 
measure. Under this proposed measure, data on patient immunization 
status would be entered into CROWNWeb for each qualifying patient 
treated at the facility during the performance period. We considered 
proposing to collect patient immunization data using the CDC's 
Surveillance for Dialysis Patient Influenza Vaccination module within 
the NHSN; however, the proposed measure's data sources are 
administrative claims and ``electronic clinical data'' which the 
Measure Justification Form explains will be collected via CROWNWeb (MAP 
#XDEFM). Because the measure specifications reviewed by the Measure 
Applications Partnership do not include NHSN as a data source for this 
measure, we decided not to propose to use the NHSN system to collect 
patient-level influenza vaccination data for this measure at this time.
    We ultimately decided to have facilities report data for this 
measure in CROWNWeb rather than using an alternative data source, for 
two main reasons. First, the data elements needed for this measure have 
already been developed in CROWNWeb and will appear in a new release 
soon. Second, facilities are already familiar with the use and 
functionality of CROWNWeb because they are using it to report data for 
other measures in the ESRD QIP, and we believe that familiarity with 
CROWNWeb will reduce the burden of reporting data for the Full Season 
Influenza reporting measure.
    As discussed in section III.H.2.c.ii above, based on comments 
received, we decided not to finalize the Full-Season Influenza 
Vaccination reporting measure at this time.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 31 below, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
final rule.

  Table 31--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          ESRD PPS for CY 2016
------------------------------------------------------------------------
Category                                      Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $10 million.
From Whom to Whom.........................  Federal government to ESRD
                                             providers.
------------------------------------------------------------------------
Category                                      Transfers
------------------------------------------------------------------------
Increased Beneficiary Co-insurance          $0 million.
 Payments.
From Whom to Whom.........................  Beneficiaries to ESRD
                                             providers.
------------------------------------------------------------------------
                        ESRD QIP for PY 2018 \20\
------------------------------------------------------------------------
Category                                      Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $-11.8 million.
------------------------------------------------------------------------
Category                                      Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider Costs..  $19 thousand.
------------------------------------------------------------------------
                          ESRD QIP for PY 2019
------------------------------------------------------------------------
Category                                      Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $-15.5 million.
From Whom to Whom.........................  Federal government to ESRD
                                             providers.
------------------------------------------------------------------------
Category                                      Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider Costs..  N/A.
------------------------------------------------------------------------

VII. 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 15 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 15 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 27. Using the 
definitions in this ownership category, we consider the 594 facilities 
that are independent and the 377 facilities that are shown as hospital-
based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more 
than $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 updates finalized 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 2016. An

[[Page 69076]]

independent facility (as defined by ownership type) is also estimated 
to receive a 0.2 percent increase in payments for CY 2016.
    We estimate that of the 495 ESRD facilities expected to receive a 
payment reduction in the PY 2019 ESRD QIP, 84 are ESRD small entity 
facilities. We present these findings in Table 27 (``Estimated 
Distribution of PY 2019 ESRD QIP Payment Reductions'') and Table 28 
(``Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 
2019'') above. We estimate that the payment reductions will average 
approximately $7,797 per facility across the 495 facilities receiving a 
payment reduction, and $7,509 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 958 small entity facilities with 
the aggregate ESRD payments to all small entity facilities. We estimate 
that there are a total of 958 small entity facilities, and that the 
aggregate ESRD PPS payments to these facilities would decrease 0.07 
percent in PY 2019.
    Therefore, the Secretary has determined that this final rule will 
not have a significant economic impact on a substantial number of small 
entities. We solicited comment on the RFA analysis provided.
    In addition, section 1102(b) of the Social Security Act (the Act) 
requires us to prepare a regulatory impact analysis if a rule may have 
a significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this final rule will have a significant impact on operations of 
a substantial number of small rural hospitals because most dialysis 
facilities are freestanding. While there are 139 rural hospital-based 
dialysis facilities, we do not know how many of them are based at 
hospitals with fewer than 100 beds. However, overall, the 139 rural 
hospital-based dialysis facilities will experience an estimated 1.1 
percent decrease in payments. As a result, this final rule is not 
estimated to have a significant impact on small rural hospitals. 
Therefore, the Secretary has determined that this final rule will not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.

VIII. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
is approximately $144 million. This final rule does not include any 
mandates that will impose spending costs on State, local, or Tribal 
governments in the aggregate, or by the private sector, of $144 
million.

IX. Federalism Analysis

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

X. 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 
final rule was reviewed by the Office of Management and Budget.

XI. Files Available to the Public via the Internet

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

List of Subjects in 42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, 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 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

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

    Authority:  42 U.S.C. 1302; 42 U.S.C. 1395d(d); 42 U.S.C. 
1395f(b); 42 U.S.C. 1395g; 42 U.S.C. 1395l(a), (i), and (n); 42 
U.S.C. 1395x(v); 42 U.S.C. 1395hh; 42 U.S.C. 1395rr; 42 U.S.C. 
1395tt; 42 U.S.C. 1395ww; sec. 124 of Pub. L. 106-113, 113 Stat. 
1501A-332; sec. 3201 of Pub. L. 112-96, 126 Stat. 156; sec. 632 of 
Pub. L. 112-240, 126 Stat. 2354; sec. 217 of Pub. L. 113-93, 129 
Stat. 1040; and sec. 204 of Pub. L. 113-295, 128 Stat. 4010.
0
2. Section 413.174 is amended by revising paragraph (f)(6) to read as 
follows:


Sec.  413.174  Prospective rates for hospital based and independent 
ESRD facilities.

* * * * *
    (f) * * *
    (6) Effective January 1, 2025, payment to an ESRD facility for 
renal dialysis service drugs and biologicals with only an oral form 
furnished to ESRD patients is incorporated within the prospective 
payment system rates established by CMS in Sec.  413.230 and separate 
payment will no longer be provided.
0
3. Section 413.232 is amended by--
0
a. Revising paragraph (c)(2).
0
b. Removing paragraph (d).
0
c. Redesignating paragraphs (e), (f), (g), and (h) as paragraphs (d), 
(e), (f), and (g) respectively.
0
d. Revising newly redesignated paragraph (e).
0
e. In newly redesignated paragraph (g) introductory text, the reference 
``paragraph (f)'' is removed and the reference ``paragraph (e)'' is 
added in its place.
0
f. In newly redesignated paragraph (g)(1), the reference ``paragraph 
(f)'' is removed and the reference ``paragraph (e)'' is added in its 
place.
    The revision reads as follows:


Sec.  413.232  Low-volume adjustment.

* * * * *

[[Page 69077]]

    (c) * * *
    (2) Five (5) miles or less from the ESRD facility in question.
* * * * *
    (e) Except as provided in paragraph (f) 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, for calendar 
year 2015, the attestation must be provided by December 31, 2014, and 
for calendar year 2016, the attestation must be provided by December 
31, 2015.
* * * * *
0
4. Add Sec.  413.233 to read as follows:


Sec.  413.233  Rural facility adjustment.

    CMS adjusts the base rate for facilities in rural areas, as defined 
in Sec.  413.231(b)(2).
0
5. Add Sec.  413.234 to read as follows:


Sec.  413.234.  Drug designation process.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    ESRD PPS functional category. A distinct grouping of drugs or 
biologicals, as determined by CMS, whose end action effect is the 
treatment or management of a condition or conditions associated with 
ESRD.
    New injectable or intravenous product. An injectable or intravenous 
product that is approved by the Food and Drug Administration under 
section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 
of the Public Health Service Act, commercially available, assigned a 
Healthcare Common Procedure Coding System code, and designated by CMS 
as a renal dialysis service under Sec.  413.171.
    Oral-only drug. A drug or biological with no injectable equivalent 
or other form of administration other than an oral form.
    (b) Drug designation process. Effective January 1, 2016, new 
injectable or intravenous products are included in the ESRD PPS bundled 
payment using the following drug designation process:
    (1) If the new injectable or intravenous product is used to treat 
or manage a condition for which there is an ESRD PPS functional 
category, the new injectable or intravenous product is considered 
included in the ESRD PPS bundled payment and no separate payment is 
available.
    (2) If the new injectable or intravenous product is used to treat 
or manage a condition for which there is not an ESRD PPS functional 
category, the new injectable or intravenous product is not considered 
included in the ESRD PPS bundled payment and the following steps occur:
    (i) An existing ESRD PPS functional category is revised or a new 
ESRD PPS functional category is added for the condition that the new 
injectable or intravenous product is used to treat or manage;
    (ii) The new injectable or intravenous product is paid for using 
the transitional drug add-on payment adjustment described in paragraph 
(c) of this section; and
    (iii) The new injectable or intravenous product is added to the 
ESRD PPS bundled payment following payment of the transitional drug 
add-on payment adjustment.
    (c) Transitional drug add-on payment adjustment. (1) A new 
injectable or intravenous product that is not considered included in 
the ESRD PPS base rate is paid for using a transitional drug add-on 
payment adjustment, which is based on pricing methodologies under 
section 1847A of the Social Security Act.
    (2) The transitional drug add-on payment adjustment is paid until 
sufficient claims data for rate setting analysis for the new injectable 
or intravenous product is available, but not for less than two years.
    (3) Following payment of the transitional drug add-on payment 
adjustment the ESRD PPS base rate will be modified, if appropriate, to 
account for the new injectable or intravenous product in the ESRD PPS 
bundled payment.
    (d) Oral-only drug determination. An oral-only drug is no longer 
considered oral-only if an injectable or other form of administration 
of the oral-only drug is approved by the Food and Drug Administration.
0
6. Section 413.237 is amended by revising paragraph (a)(1)(iv) to read 
as follows:


Sec.  413.237  Outliers.

    (a) * * *
    (1) * * *
    (iv) Renal dialysis services drugs that were or would have been, 
prior to January 1, 2011, covered under Medicare Part D, including 
ESRD-related oral-only drugs effective January 1, 2025.
* * * * *

    Dated: October 26, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 27, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-27928 Filed 10-29-15; 4:15 pm]
 BILLING CODE 4120-01-P