[Federal Register Volume 81, Number 126 (Thursday, June 30, 2016)]
[Proposed Rules]
[Pages 42802-42880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15188]



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Vol. 81

Thursday,

No. 126

June 30, 2016

Part II





Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Parts 413, 414, and 494





 Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals with Acute Kidney Injury, End-Stage Renal Disease Quality 
Incentive Program, Durable Medical Equipment, Prosthetics, Orthotics 
and Supplies Competitive Bidding Program Bid Surety Bonds, State 
Licensure and Appeals Process for Breach of Contract Actions, Durable 
Medical Equipment, Prosthetics, Orthotics and Supplies Competitive 
Bidding Program and Fee Schedule Adjustments, Access to Care Issues for 
Durable Medical Equipment; and the Comprehensive End-Stage Renal 
Disease Care Model; Proposed Rule

  Federal Register / Vol. 81 , No. 126 / Thursday, June 30, 2016 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413, 414 and 494

[CMS-1651-P]
RIN 0938-AS83


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals with Acute Kidney Injury, End-Stage Renal Disease Quality 
Incentive Program, Durable Medical Equipment, Prosthetics, Orthotics 
and Supplies Competitive Bidding Program Bid Surety Bonds, State 
Licensure and Appeals Process for Breach of Contract Actions, Durable 
Medical Equipment, Prosthetics, Orthotics and Supplies Competitive 
Bidding Program and Fee Schedule Adjustments, Access to Care Issues for 
Durable Medical Equipment; and the Comprehensive End-Stage Renal 
Disease Care Model

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to update and make revisions to the End-
Stage Renal Disease (ESRD) Prospective Payment System (PPS) for 
calendar year 2017 as well as proposing to implement policies for 
coverage and payment for renal dialysis services furnished by an ESRD 
facility to individuals with acute kidney injury. This rule also 
proposes to set forth requirements for the ESRD Quality Incentive 
Program, and proposes to establish and revise requirements for quality 
reporting and measurement, including the inclusion of new quality 
measures for payment year (PY) 2020 and beyond and updates to 
programmatic policies for the PY 2018 and PY 2019 ESRD QIP. This rule 
also proposes to implement statutory requirements for bid surety bonds 
and state licensure for the Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP). 
This rule also proposes to expand suppliers' appeal rights in the event 
of a breach of contract action by CMS. In particular, this rule 
proposes a revision to current regulations to provide that the appeals 
process is applicable to all breach of contract actions taken by CMS, 
rather than just for the termination of a competitive bidding contract. 
It also proposes changes to the methodologies for adjusting fee 
schedule amounts for DMEPOS using information from Competitive Bidding 
Programs and for submitting bids and establishing single payment 
amounts under the Competitive Bidding Programs for certain groupings of 
similar items with different features. Changes are also proposed to the 
methodology for establishing bid limits for items under the DMEPOS 
Competitive Bidding Programs. In addition, this rule also solicits 
comments on the impacts of coordinating Medicare and Medicaid Durable 
Medical Equipment for dually eligible beneficiaries. Finally, this rule 
announces a request for information related to the Comprehensive ESRD 
Care Model and future payment models affecting renal care.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 23, 2016.
    Application Submission Deadline: Applications must be received on 
or before July 15, 2016 for the Comprehensive ESRD Care Model.

ADDRESSES: In commenting, please refer to file code CMS-1651-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1651-P, P.O. Box 8010, Baltimore, MD 
21244-8010.

    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1651-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1810.

    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Janae James, (410) 786-0801 or Michelle Cruse, (410) 786-7540, for 
issues related to the ESRD PPS, and coverage and payment for renal 
dialysis services furnished to individuals with AKI.
    Tamyra Garcia, (410) 786-0856, for issues related to the ESRD QIP.
    Julia Howard, (410) 786-8645, for issues related to DMEPOS CBP and 
bid surety bonds, state licensure, and the appeals process for breach 
of DMEPOS CBP contract actions.
    Anita Greenberg, (410) 786-4601, or Hafsa Vahora, (410) 786-7899, 
for issues related to competitive bidding and payment for similar 
DMEPOS items with different features and bid limits.
    Kristen Zycherman, for issues related to DME access issues.
    Tom Duvall, (410) 786-8887 or email [email protected], for 
issues related to the Comprehensive ESRD Care Model.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in

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a comment. We post all comments received before the close of the 
comment period on the following Web site as soon as possible after they 
have been received: http://www.regulations.gov. Follow the search 
instructions on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

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. Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals with Acute Kidney Injury (AKI)
    3. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    4. Durable Medical Equipment, Prosthetics, Orthotics Supplies 
(DMEPOS) Competitive Bidding Bid Surety Bonds, State Licensure and 
Appeals Process for a Breach of DMEPOS Competitive Bidding Program 
Contract Actions Proposals
    5. Durable Medical Equipment, Prosthetics, Orthotics Supplies 
(DMEPOS) Competitive Bidding Program and Fee Schedule Adjustments
    B. Summary of the Major Provisions
    1. ESRD PPS
    2. Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals with AKI
    3. ESRD QIP
    4. DMEPOS Competitive Bidding Bid Surety Bonds, State Licensure 
and Appeals Process for a Breach of DMEPOS Competitive Bidding 
Program Contract Action Proposals
    5. DMEPOS Competitive Bidding Program and Fee Schedule 
Adjustments
    C. Summary of Cost and Benefits
    1. Impacts of the Proposed ESRD PPS
    2. Impacts of the Proposed Coverage and Payment for Renal 
Dialysis Services Furnished to Individuals with AKI
    3. Impacts of the Proposed ESRD QIP
    4. Impacts of the Proposed DMEPOS Competitive Bidding Bid Surety 
Bonds, State Licensure and Appeals Process for a Breach of DMEPOS 
Competitive Bidding Program Contract Action Proposal
    5. Impacts of the Proposed DMEPOS Competitive Bidding Program 
and Fee Schedule Adjustments
II. Calendar Year (CY) 2017 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background
    1. Statutory Background
    2. System for Payment of Renal Dialysis Services
    3. Updates to the ESRD PPS
    B. Provisions of the Proposed Rule
    1. Payment for Hemodialysis When More Than 3 Treatments are 
Furnished per Week
    a. Background
    b. Proposed Payment Methodology for HD When More Than 3 
Treatments are Furnished per Week
    c. Proposed Implementation Strategy
    d. Applicability to Medically-Justified Treatments
    e. Applicability to Home and Self-Dialysis Training Treatments
    2. Home and Self-Dialysis Training Add-on Payment Adjustment
    a. Background
    b. Analysis of ESRD Facility Claims Data
    c. Technical Correction of the Total Training Payment in the CY 
2016 Rule
    d. Analysis of ESRD Cost Report Data
    e. Proposed Increase to the Home and Self-Dialysis Training Add-
on Payment Adjustment
    3. Proposed CY 2017 ESRD PPS Update
    a. ESRD Bundled Market Basket
    i. Proposed CY 2017 ESRD Market Basket Update, Productivity 
Adjustment, and Labor-Related Share for ESRD PPS
    ii. Proposed CY 2017 ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity (MFP)
    b. The Proposed CY 2017 ESRD PPS Wage Indices
    i. Annual Update of the Wage Index
    ii. Application of the Wage Index under the ESRD PPS
    c. CY 2017 Update to the Outlier Policy
    i. CY 2017 Update to the Outlier Services MAP Amounts and Fixed-
Dollar Loss Amounts
    ii. Outlier Percentage
    d. Proposed Impacts to the CY 2017 ESRD PPS Base Rate
    i. ESRD PPS Base Rate
    ii. Annual Payment Rate Update for CY 2017
III. Proposed Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals with Acute Kidney Injury (AKI)
    A. Background
    B. Proposed Payment Policy for Renal Dialysis Services Furnished 
to Individuals with AKI
    1. Definition of ``Individual with Acute Kidney Injury''
    2. Payment for AKI Dialysis
    3. Geographic Adjustment Factor
    4. Other Adjustments to the AKI Payment Rate
    5. Renal Dialysis Services Included in the AKI Payment Rate
    C. Applicability of ESRD PPS Policies to AKI Dialysis
    1. Uncompleted Dialysis Treatment
    2. Home and Self-Dialysis
    3. Vaccines and their Administration
    D. Monitoring of Beneficiaries with AKI Receiving Dialysis in 
ESRD Facilities
    E. AKI and the ESRD Conditions for Coverage
    F. ESRD Facility Billing for AKI Dialysis
    G. Announcement of AKI Dialysis Payment Rate in Future Years
IV. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) 
for Payment Year (PY) 2019
    A. Background
    B. Proposed Revision to the Requirements for the PY 2018 ESRD 
QIP
    1. Proposal to Correct the Small Facility Adjuster (SFA) Policy 
for PY 2018
    2. Proposed Changes to the Hypercalcemia Clinical Measure
    C. Proposed Requirements for the PY 2019 ESRD QIP
    1. Proposed New Measures for the PY 2019 ESRD QIP
    a. Proposed Reintroduction of the Expanded NHSN Dialysis Event 
Reporting Measure
    2. Proposed New Measure Topic Beginning with the PY 2019 ESRD 
QIP
    a. Proposed NHSN BSI Measure Topic
    b. Proposal for Scoring the Proposed NHSN Dialysis Event 
Reporting Measure
    3. Proposal to Establish a New Safety Measure Domain
    4. Proposal for Scoring the Proposed NHSN BSI Measure Topic
    5. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Finalized for the PY 2019 ESRD 
QIP
    6. Proposal for Weighting the Proposed Safety Domain Within the 
TPS and Proposal to Change the Weighting of the Clinical Measure 
Domain for PY 2019
    7. Example of the Proposed PY 2019 ESRD QIP Scoring Methodology
    8. Proposed Payment Reductions for the PY 2019 ESRD QIP
    9. Data Validation
    D. Proposed Requirements for the PY 2020 ESRD QIP
    1. Proposed Replacement of the Mineral Metabolism Reporting 
Measure Beginning with the PY 2020 Program Year
    2. Proposed Measures for the PY 2020 ESRD QIP
    a. PY 2019 Measures Continuing for PY 2020 and Future Payment 
Years
    b. Proposed New Clinical Measures Beginning with the PY 2020 
ESRD QIP
    i. Proposed Standardized Hospitalization Ratio (SHR) Clinical 
Measure
    c. Proposed New Reporting Measures Beginning with the PY 2020 
ESRD QIP
    i. Proposed Serum Phosphorus Reporting Measure

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    ii. Proposed Ultrafiltration Rate Reporting Measure
    3. Proposed Performance Period for the PY 2020 ESRD QIP
    4. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2020 ESRD QIP
    a. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2020 ESRD QIP
    b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2020 ESRD 
QIP
    c. Proposed Performance Standards for the PY 2020 Reporting 
Measures
    5. Proposal for Scoring the PY 2020 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. Proposal for Calculating Facility Performance on Reporting 
Measures
    6. Proposal for Weighting the Clinical Measure Domain, and 
Weighting the Total Performance Score
    a. Proposal for Weighting the Clinical Measure Domain for PY 
2020
    b. Weighting the Total Performance Score
    7. Example of the Proposed PY 2020 ESRD QIP Scoring Methodology
    8. Proposed Minimum Data for Scoring Measures for the PY 2020 
ESRD QIP
    9. Proposed Payment Reductions for the PY 2020 ESRD QIP
    E. Future Policies and Measures Under Consideration
V. DMEPOS Competitive Bidding Program
VI. Methodology for Adjusting DMEPOS Fee Schedule Amounts for 
Similar Items with Different Features using Information from 
Competitive Bidding Programs
    A. Background
    1. Fee Schedule Payment Basis for Certain DMEPOS
    2. DMEPOS Competitive Bidding Programs Payment Rules
    3. Methodologies for Adjusting Payment Amounts using Information 
from the DMEPOS Competitive Bidding Program
    a. Adjusted Fee Schedule Amounts for Areas within the Contiguous 
United States
    b. Adjusted Fee Schedule Amounts for Areas outside the 
Contiguous United States
    c. Adjusted Fee Schedule Amounts for Items Included in 10 or 
Fewer CBAs
    d. Updating Adjusted Fee Schedule Amounts
    e. Methodology for Avoiding HCPCS Price Inversions When 
Adjusting Fee Schedule Amounts using Information from the DMEPOS 
Competitive Bidding Program
    B. Current Issues
VII. Submitting Bids and Determining Single Payment Amounts for 
Certain Groupings of Similar Items with Different Features under the 
DMEPOS Competitive Bidding Program
    A. Background on the DMEPOS Competitive Bidding Programs
    B. Item Weights
    C. Current Issues
    D. Proposed Revisions
VIII. Bid Limits for Individual Items under the DMEPOS Competitive 
Bidding Program
    A. Background
    B. Adjusting Fee Schedule Amounts and Bid Limits Established 
under the Competitive Bidding Program
    C. Current Issues
IX. Access to Care Issues for DME
X. Comprehensive End-Stage Renal Disease Model
XI. Technical Correction for 42 CFR 413.194 and 413.215
XII. Advancing Health Information Exchange
XIII. Collection of Information Requirements
    A. Legislative Requirement for the Solicitation of Comments
    B. Requirement in Regulation Text
    C. Additional Information Collection Requirements
    1. ESRD QIP
    a. Wage Estimates
    b. Time Required to Submit Data Based on Proposed Reporting 
Requirements
    c. Data Validation Requirements for the PY 2019 ESRD QIP
    d. Proposed Ultrafiltration Rate Reporting Measure
XV. Response to Comments
    XVI. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2017 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
    2. Proposed Payment for Renal Dialysis Services Furnished to 
Individuals with AKI
    a. Effects on ESRD Facilities
    b. Effects on Other Providers
    c. Effects on the Medicare Program
    d. Effects on Medicare Beneficiaries
    e. Alternatives Considered
    3. End-Stage Renal Disease Quality Incentive Program
    a. Effects of the PY 2020 QIP
    4. DMEPOS Competitive Bidding Bid Surety Bonds, State Licensure 
and Appeals Process for a
    Breach of DMEPOS Competitive Bidding Program Contract Action 
Proposals
    a. Effects on Competitive Bidding Suppliers
    b. Effects on the Medicare Program
    c. Effects on Medicare Beneficiaries
    d. Alternatives Considers
    5. DMEPOS Provisions
    a. Effects of the Methodology for Adjusting DMEPOS Fee Schedule 
Amounts For Similar Items with Different Features Using Information 
from the DMEPOS Competitive Bidding Programs
    b. Effects of the Proposal for Determining Single Payment 
Amounts for Similar Items with Different Features under the DMEPOS 
Competitive Bidding Program
    c. Effects of the Proposed Revision to the Bid Limits under the 
DMEPOS Competitive Bidding Program
    C. Accounting Statement
    XVII. Regulatory Flexibility Act Analysis
    XVIII. Unfunded Mandates Reform Act Analysis
    XIX. Federalism Analysis
    XX. Congressional Review Act
    XXI. Files Available to the Public via the Internet Regulations 
Text

Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:
AAPM Advanced Alternative Payment Model
ABLE The Achieving a Better Life Experience Act of 2014
AHRQ Agency for Healthcare Research and Quality
AKI Acute Kidney Injury
AMCC Automated Multi-Channel Chemistry
ANOVA Analysis of Variance
APM Alternative Payment Model
ARM Adjusted Ranking Metric
ASP Average Sales Price
ATRA The American Taxpayer Relief Act of 2012
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
BMI Body Mass Index
BSA Body Surface Area
BSI Bloodstream Infection
CB Consolidated Billing
CBA Competitive Bidding Area
CBP Competitive Bidding Program
CBSA Core Based Statistical Area
CCN CMS Certification Number
CDC Centers for Disease Control and Prevention
CEC Comprehensive ESRD Care
CFR Code of Federal Regulations
CHIP The Children's Health Insurance Program
CIP Core Indicators Project
CKD Chronic Kidney Disease
CLABSI Central Line Access Bloodstream Infections
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
DMEPOS Durable Medical Equipment, Prosthetics, Orthotics Supplies
DFR Dialysis Facility Report
ESA Erythropoiesis stimulating agent
ESCO End-Stage Renal Disease Seamless Care Organization
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
HAIs Healthcare-Acquired Infections
HCFA Health Care Financing Administration

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HCPCS Healthcare Common Procedure Coding System
HD Hemodialysis
HHD Home Hemodialysis
HHS Department of Health and Human Services
HCC Hierarchical Comorbidity Conditions
HRQOL Health-Related Quality of Life
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
KDQOL Kidney Disease Quality of Life
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
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
MLR Minimum Lifetime Requirement
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
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
NAMES National Association of Medical Equipment Suppliers
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
SPA Single Payment Amount
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
TPEA Trade Preferences Extension Act of 2015
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 ESRD PPS, a case-mix 
adjusted, bundled prospective payment system for renal dialysis 
services furnished by ESRD facilities. This rule proposes to update and 
make revisions to the End-Stage Renal Disease (ESRD) prospective 
payment system (PPS) for calendar year (CY) 2017. Section 1881(b)(14) 
of the Social Security Act (the Act), as added by section 153(b) of the 
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 
(Pub. L. 110-275), and section 1881(b)(14)(F) of the Act, as added by 
section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act Pub. L. 111-148), established that beginning CY 
2012, and each subsequent year, the Secretary shall annually increase 
payment amounts by an ESRD market basket increase factor, reduced by 
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
of the Act.
2. Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals With Acute Kidney Injury (AKI)
    On June 29, 2015, the President signed the Trade Preferences 
Extension Act of 2015 (TPEA) (Pub. L. 114-27). Section 808(a) of TPEA 
amended section 1861(s)(2)(F) of the Act to provide coverage for renal 
dialysis services furnished on or after January 1, 2017, by a renal 
dialysis facility or a provider of services paid under section 
1881(b)(14) to an individual with AKI. Section 808(b) of TPEA amended 
section 1834 of the Act by adding a new paragraph (r) of the Act that 
provides for payment for renal dialysis services furnished by renal 
dialysis facilities or providers of services paid under section 
1881(b)(14) to individuals with AKI at the ESRD PPS base rate beginning 
January 1, 2017.
3. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This rule also proposes to set forth requirements for the ESRD QIP, 
including for payment years (PYs) 2018, 2019, and 2020. 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.
4. Durable Medical Equipment, Prosthetics, Orthotics Supplies (DMEPOS) 
Competitive Bidding Bid Surety Bonds, State Licensure and Appeals 
Process for Breach of DMEPOS Competitive Bidding Program Contract 
Actions Proposals
    This rule proposes to implement statutory requirements for Bid 
Surety Bonds and State Licensure. This rule also proposes to expand 
suppliers' appeal rights in the event of a breach of contract 
determination to allow suppliers to appeal any breach of contract 
action CMS takes, rather than just a termination action. To effect this 
policy change, we propose revisions to the regulations to provide that 
the appeals process applies to all breach of contract actions that CMS 
may take.
5. Durable Medical Equipment, Prosthetics, Orthotics and Supplies 
(DMEPOS) Competitive Bidding Program and Fee Schedule Adjustments
    This rule proposes to adjust the methodology for adjusting DMEPOS 
fee schedule amounts for certain groupings of similar items with 
different features using information from DMEPOS competitive bidding 
programs (CBPs), submitting bids and determining single payment amounts 
for certain groupings of similar items with different features under 
the DMEPOS CBPs, and establishing bid limits for individual items under 
the DMEPOS CBP.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the ESRD PPS base rate for CY 2017: The proposed 
CY 2017 ESRD PPS base rate is $231.04. This amount reflects a reduced 
market basket increase as required by section 1881(b)(14)(F)(i)(I) 
(0.35 percent), and application of the wage index budget-neutrality 
adjustment factor (0.999552) as well as the application of the training 
budget-neutrality adjustment factor (0.999729). The proposed CY 2017 
ESRD PPS base rate is $231.04 ($230.39 x 1.0035 x 0.999552 x 0.999729 = 
$231.04).
     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

[[Page 42806]]

facilities are located. For CY 2017, we are not proposing any changes 
to the application of the wage index floor and we propose to continue 
to apply the current wage index floor (0.400) to areas with wage index 
values below the floor.
     Update to the outlier policy: Consistent with our proposal 
to annually update the outlier policy using the most current data, we 
are proposing to update the outlier services fixed dollar loss amounts 
for adult and pediatric patients and Medicare Allowable Payments (MAPs) 
for adult and pediatric patients for CY 2017 using 2015 claims data. 
Based on the use of more current data, the fixed-dollar loss amount for 
pediatric beneficiaries would increase from $62.19 to $67.44 and the 
MAP amount would increase from $39.20 to $39.92, as compared to CY 2016 
values. For adult beneficiaries, the fixed-dollar loss amount would 
decrease from $86.97 to $83.00 and the MAP amount would decrease from 
$50.81 to $47.26. The 1 percent target for outlier payments was not 
achieved in CY 2015. We believe using CY 2015 claims data to update the 
outlier MAP and fixed dollar loss amounts for CY 2017 will increase 
payments for ESRD beneficiaries requiring higher resource utilization 
in accordance with a 1 percent outlier percentage.
     Payment for hemodialysis when more than 3 treatments are 
furnished per week: We are proposing an equivalency payment for 
hemodialysis (HD) when more than 3 treatments are furnished in a week, 
similar to what is applied to peritoneal dialysis (PD). Specifically, 
we would calculate the total weekly amount that would be paid for 3 HD 
treatments per week and divide that number by the number of treatments 
furnished in a week when a beneficiary receives more than 3 HD 
treatments per week.
     The home and self-dialysis training add-on payment 
adjustment: We are proposing to increase the total number of hours of 
training by an RN for PD and HD that is accounted for by the home and 
self-dialysis training add-on payment adjustment (hereinafter referred 
to as the home dialysis training add-on). The current amount of the 
home dialysis training add-on is $50.16, which reflects 1.5 hours of 
training by a nurse per treatment. We propose to calculate the increase 
based on the average treatment times and weights based on utilization 
for each modality. We propose to use treatment times as proxies for the 
total time spent by nurses training beneficiaries for home or self-
dialysis in calculating the proposed increase to the home dialysis 
training add-on, with the assumed hourly wage for a nurse providing 
dialysis training for 2017 being $35.93. Under this proposal, we would 
increase the hours of per-treatment training time provided by a nurse 
that is accounted for by the home dialysis training add-on to 2.66 
hours.
2. Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals With AKI
    We are implementing the TPEA amendments to sections 1834(r) and 
1861(s)(2)(F) by proposing to cover renal dialysis services furnished 
by renal dialysis facilities paid under section 1881(b)(14) of the Act 
to individuals with acute kidney injury. We are also proposing to pay 
ESRD facilities for renal dialysis services furnished to individuals 
with acute kidney injury at the amount of the ESRD PPS base rate, as 
adjusted by the ESRD PPS wage index. In addition, drugs, biologicals, 
and laboratory services that ESRD facilities are certified to furnish, 
but that are not renal dialysis services, may be paid for separately 
when furnished by ESRD facilities to individuals with AKI. In addition, 
because AKI patients are often under the care of a hospital, physician, 
or other practitioner, these providers could continue to bill Medicare 
for services outside of the ESRD PPS payment rate.
3. ESRD QIP
    This rule proposes to set forth requirements for the ESRD QIP, 
including for payment years (PYs) 2018, 2019 and 2020.
    Updating the Hypercalcemia Clinical Measure: Beginning with the PY 
2018 ESRD QIP, we are proposing to update the technical specifications 
for the Hypercalcemia clinical measure so that they incorporate two 
substantive updates to the measure that were made during the measure 
maintenance process at National Quality Forum (NQF). First, plasma was 
added as an acceptable substrate in addition to serum calcium. Second, 
the denominator definition changed such that it now includes patients 
regardless of whether any serum calcium values were reported at the 
facility during the 3-month study period. These changes will ensure 
that the measure aligns with the NQF-endorsed measure and can continue 
to satisfy the requirements of the Protecting Access to Medicare Act 
(PAMA), which requires that the ESRD QIP include in its measure set 
measures (outcomes-based, to the extent feasible), that are specific to 
the conditions treated with oral-only drugs.
    Proposed New Requirements for the PY 2019 ESRD QIP: For PY 2019 and 
future payment years, we are proposing to reintroduce the National 
Healthcare Safety Network (NHSN) Dialysis Event Reporting Measure back 
into the ESRD QIP measure set. Additionally, for PY 2019 and future 
payment years, we are proposing to create a new NHSN BSI Measure Topic 
which will consist of the proposed NHSN Dialysis Event Reporting 
Measure and the existing NHSN BSI Clinical Measure. We are also 
proposing to establish a new Safety Measure Domain, which will be 
separate from, and in addition to, the existing Clinical Measure and 
Reporting Measure Domains for the purposes of scoring in the ESRD QIP. 
The proposed Safety Measure Domain will initially consist of the 
proposed NHSN BSI Measure Topic.
    PY 2020 Measure Set: For PY 2020 and future payment years, we are 
proposing to replace the Mineral Metabolism Reporting Measure with the 
proposed Serum Phosphorus Reporting Measure because replacing this 
measure is consistent with our intention to increasingly rely on 
CROWNWeb as the data source used to calculate measures in the ESRD QIP. 
Additionally, we are proposing to adopt two new measures: (1) The 
Standardized Hospitalization Ratio (SHR) Clinical Measure and (2) the 
Ultrafiltration Rate Reporting Measure.
    Updates to Weighting for the Clinical Measure Domain, the Reporting 
Measure Domain and the Proposed Safety Measure Domain: With the 
proposed addition of the Safety Measure Domain into the ESRD QIP, we 
are proposing changes to the weighting of the Clinical Measure Domain, 
the Reporting Measure Domain, and we are proposing to establish weights 
for the proposed Safety Measure Domain for PY 2019 and for PY 2020.
    Specifically, for PY 2019 we are proposing to assign 15 percent of 
a facility's TPS to the proposed Safety Measure Domain, 75 percent of 
the TPS to the Clinical Measure Domain and 10 percent to the Reporting 
Measure Domain. To accommodate the removal of the Safety Subdomain from 
the Clinical Measure Domain, we are proposing to adjust individual 
measure weights for the measures that remain in the Clinical Measure 
Domain. For PY 2020, we are proposing to reduce the weight of the 
Safety Measure Domain to 10 percent of a facility's Total Performance 
Score. This modification, in combination with the proposed addition of 
the SHR measure necessitates further adjustments to individual measure 
weights in the Clinical Measure Domain.
    Data Validation: In section IV.C.8 of this proposed rule, we set 
forth the

[[Page 42807]]

updates we are proposing to make to the data validation program in the 
ESRD QIP. For PY 2019, we are proposing to continue the pilot 
validation study for validation of CROWNWeb data. Under this continued 
validation study, we are proposing to continue using the same 
methodology used for the PY 2017 and PY 2018 ESRD QIP. We will sample 
the same number of records (approximately 10 per facility) from the 
same number of facilities (that is, 300) during CY 2017. 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.
    For PY 2019, we are also proposing to increase the size of the NHSN 
BSI Data Validation study. Specifically, we propose to randomly select 
35 facilities to participate in an NHSN dialysis event validation study 
for two quarters of data reported in CY 2017. A CMS contractor will 
send these facilities requests for medical records for all patients 
with ``candidate events'' during the evaluation period, as well as 
randomly selected patient records. Each facility selected will be 
required to submit 10 records total to the validation contractor. The 
CMS contractor will utilize a methodology for reviewing and validating 
the candidate events and will analyze those records to determine 
whether the facility reported dialysis events for those patients in 
accordance with the NHSN Dialysis Event Protocol. Information from the 
validation study may be used to develop a methodology to score 
facilities based on the accuracy of their reporting of the NHSN BSI 
measure.
4. DMEPOS Competitive Bidding Bid Surety Bonds, State Licensure and 
Appeals Process for a Breach of DMEPOS Competitive Bidding Program 
Contract Action Proposals.
    This proposed rule proposes to implement statutory requirements for 
the DMEPOS CBP for bid surety bonds and state licensure. In addition, 
we are proposing to define the term ``bidding entity'' for purposes of 
the DMEPOS CBP. We also propose to expand suppliers' appeal rights in 
the event of a breach of contract determination to allow suppliers to 
appeal any breach of contract action CMS takes, rather than just a 
termination action. We propose revisions to the regulations to extend 
the appeals process to all competitive bidding breach of contract 
actions.
     A bidding entity must obtain a bid surety bond from an 
authorized surety on the Department of the Treasury's Listing of 
Certified Companies, submit proof of the surety bond by the deadline 
for bid submission, and the bond must meet certain specifications. We 
are proposing to define the term ``bidding entity'' to mean the entity 
whose legal business name is identified in the ``Form A: Business 
Organization Information'' section of the bid.
     If the bidding entity is offered a contract for any 
product category for a competitive acquisition area (herein referred to 
as a ``Competitive Bidding Area'' or ``CBA''), and its composite bid 
for such product category and area is at or below the median composite 
bid rate for all bidding entities included in the calculation of the 
single payment amounts for the product category/CBA combination (herein 
also referred to as ``competition''), and the entity does not accept 
the contract offered, the entity's bid surety bond for the applicable 
CBA will be forfeited and CMS will collect on the bid surety bond via 
Electronic Funds Transfer from the respective authorized surety. If the 
forfeiture conditions are not met, the bond liability will be returned 
to the bidding entity. Bidding entities that provide a falsified bid 
surety bond will be prohibited from participation in the DMEPOS CBP for 
the current round of the CBP in which they submitted a bid and also 
from bidding in the next round of the CBP. Bidding entities that 
provide a falsified bid surety bond will also be referred to the Office 
of Inspector General and Department of Justice for further 
investigation.
     We propose to conform the language of our regulation at 42 
CFR 414.414(b)(3) to the language of section 1847(b)(2)(A)(v) of the 
Act, as added by section 522 of MACRA, which requires bidding entities 
to meet applicable State licensure requirements in order to be eligible 
for a DMEPOS CBP contract. We note, however, that this does not reflect 
a change in policy as CMS already has a regulation in place to require 
suppliers to meet applicable State licensure requirements.
     Appeals process for breach of DMEPOS CBP contract actions 
would extend the appeals process, specified in Sec.  414.423, that 
currently only applies to contract terminations to all breach of 
contract actions taken by CMS and specified in Sec.  414.422(g)(2). We 
propose to revise Sec.  414.422(g)(2) to eliminate certain breach of 
contract actions for the reasons explained below. We also propose to 
revise 414.423(l) to describe the effects of certain breach of contract 
actions CMS may take.
5. DMEPOS Competitive Bidding Program and Fee Schedule Adjustments
    This rule proposes to set forth requirements for the CBP and Fee 
Schedule Adjustments.
     Methodologies for Adjusting DMEPOS Fee Schedule Amounts 
for Certain Groupings of Similar Items with Different Features using 
Information from Competitive Bidding Programs: Within the Healthcare 
Common Procedure Coding System (HCPCS), there are many instances where 
there are multiple codes for an item that are distinguished by the 
addition of a feature (for example, non-powered versus powered 
mattress, Group 1 versus Group 2 power wheelchair, pump without alarm 
versus pump with alarm, walker without wheels versus walker with 
wheels, etc.) Under CBPs, the code with the higher utilization 
(typically the item with additional features and higher fee schedule 
amounts) receives a higher weight and the bid for this item has a 
greater impact on the supplier's composite bid than the bids for the 
less frequently used codes. This is resulting in price inversions where 
the single payment amounts (SPAs) for the item without the feature are 
higher than the SPAs for the item with the feature. This could lead to 
a program vulnerability by shifting beneficiaries from products with 
features to less appropriate products without the features because the 
latter receives higher payment under competitive bidding. We are 
proposing to limit SPAs for items without a feature to the weighted 
average of the SPAs for the items both with and without the feature 
prior to using the SPAs in adjusting the fee schedule amounts for 
certain groupings of similar items specified below. The item weights 
would be the same weights used in calculating the composite bids under 
the CBP.
     Submitting Bids and Determining Single Payment Amounts for 
Certain Groupings of Similar Items with Different Features under the 
DMEPOS CBP: This proposal addresses the price inversions under 
competitive bidding to prevent situations where beneficiaries receive 
items with fewer features at a higher price than items with more 
features. In addition to affecting the appropriateness of items 
supplied to beneficiaries, these price inversions also undermine the 
CBP and diminish the savings intended from implementation of the 
program. We are proposing to revise the provisions of Sec.  414.408 to 
add a lead item bidding methodology where all of the HCPCS codes for 
similar items with different features would be

[[Page 42808]]

grouped together and would be priced relative to the bid for the lead 
in order to prevent price inversions under the DMEPOS CBPs. We are 
proposing this as an alternative to the current bidding methodology 
that CMS would be able to apply to situations where groupings of 
similar items have resulted in price inversions based on past 
experience. This methodology would only replace the current method of 
bidding for select groupings of similar items within product 
categories.
     Bid Limits for Individual Items under the DMEPOS CBP: 
Current regulations require that bids submitted by suppliers under the 
CBP be lower than the amount that would otherwise apply (that is, the 
fee schedule amount). This ensures that total payments expected to be 
made to contract suppliers in a CBA are less than the total amounts 
that would otherwise be paid, which is a condition mandated by the 
section 1847(b) of the Act for awarding contracts under the program in 
an area. Beginning in 2016, the fee schedule amounts for DMEPOS items 
and services are adjusted based on information from the CBPs. We 
indicated in the final rule (79 FR 66232), which was published in the 
Federal Register on November 6, 2014, that these adjusted fee schedule 
amounts become the bid limits for future competitions (79 FR 66232). We 
have heard concerns that as the amounts paid under CBPs decline, this 
may ultimately make it difficult for suppliers to bid below the 
adjusted fee schedule amounts and accept contract offers at the median 
bid level. To avoid this situation and enhance the long term viability 
of the CBPs, we are proposing to limit bids for future competitions to 
the fee schedule amounts that would otherwise apply as if CBPs had not 
been implemented and prior to making adjustments to the fee schedule 
amounts using information from CBPs. This would allow suppliers to take 
into account both decreases and increases in costs in determining their 
bids, while ensuring that payments under the CBPs do not exceed the 
amounts that would otherwise be paid had the DMEPOS CBP not been 
implemented.

C. Summary of Costs and Benefits

    In section XVI.A of this proposed rule, we set forth a detailed 
analysis of the impacts that the proposed changes would have on 
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Proposed ESRD PPS
    The impact chart in section XVI.B.1 of this proposed rule displays 
the estimated change in payments to ESRD facilities in CY 2017 compared 
to estimated payments in CY 2016. The overall impact of the CY 2017 
changes is projected to be a 0.5 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 0.7 percent increase 
in payments compared with freestanding facilities with an estimated 0.5 
percent increase.
    We estimate that the aggregate ESRD PPS expenditures would increase 
by approximately $50 million from CY 2016 to CY 2017. This reflects a 
$30 million increase from the payment rate update and a $20 million 
increase due to the updates to the outlier threshold amounts. As a 
result of the projected 0.5 percent overall payment increase, we 
estimate that there will be an increase in beneficiary co-insurance 
payments of 0.5 percent in CY 2017, which translates to approximately 
$10 million.
2. Impacts of the Proposed Coverage and Payment for Renal Dialysis 
Services Furnished to Individuals with AKI
    We anticipate an estimated $2.0 million being redirected from 
hospital outpatient departments to ESRD facilities in CY 2017 as a 
result of some AKI patients receiving renal dialysis services in the 
ESRD facility at the lower ESRD PPS base rate versus continuing to 
receive those services in the hospital outpatient setting.
3. Impacts of the Proposed ESRD QIP
    We estimate that the overall economic impact of the ESRD QIP will 
be approximately $15.5 million in PY 2019 and $113 million in PY 2020. 
The $15.5 million figure for PY 2019 includes costs associated with the 
collection of information requirements, which we estimate will be 
approximately $21 thousand.\1\ For PY 2020, we estimate that ESRD 
facilities will experience an aggregate impact of approximately $113 
million as a result of the PY 2020 ESRD QIP.
---------------------------------------------------------------------------

    \1\ We note that the aggregate impact of the PY 2019 ESRD QIP 
was included in the CY 2016 ESRD PPS Final Rule (80 FR 68971). The 
previously finalized aggregate impact of $15.5 million reflects the 
PY 2019 estimated payment reductions and the collection of 
information requirements finalized in the PY 2019 ESRD QIP Final 
Rule.
---------------------------------------------------------------------------

    The ESRD QIP will continue to incentivize facilities to provide 
high-quality care to beneficiaries.
4. Impacts of the DMEPOS Competitive Bidding Bid Surety Bonds, State 
Licensure and Appeals Process for a Breach of DMEPOS Competitive 
Bidding Program Contract Actions Proposals
    The DMEPOS CBP bidding entities will be impacted by the bid surety 
bond requirement as they will be required to purchase a bid surety bond 
for each CBA in which they are submitting a bid. The state licensure 
requirement will have no new impact on the supplier community because 
this is already a Medicare DMEPOS supplier requirement and the appeals 
process for a breach of a DMEPOS CBP contract action(s) is expected to 
have a beneficial, positive impact on suppliers.
    Overall, the bid surety bond requirement may have a positive 
financial impact on the program as CMS anticipates that the requirement 
will encourage all bidding entities to submit substantiated bids. 
However, there will be an administrative burden for implementation of 
the bid surety bond requirement for CMS. The state licensure and 
appeals process for breach of DMEPOS CBP contract actions proposals 
will have minimal administrative costs.
    We do not anticipate that the proposed DMEPOS CBP regulations for 
bid surety bonds, state licensure, and the appeals process for breach 
of DMEPOS CBP contract actions will have an impact on Medicare 
beneficiaries.
5. Impacts of the Proposed DMEPOS Competitive Bidding Program and Fee 
Schedule Adjustments Proposals
    The overall economic impact for the proposed changes to the DMEPOS 
CBPs and Fee Schedule Adjustments would be about $20 million dollars in 
savings to the Part B Trust Fund over five years beginning January 1, 
2017. The savings is a result of avoiding price inversions. This 
proposal should have a minor impact on the suppliers of CBAs and in the 
non-competitive bidding areas (non-CBAs). Beneficiaries would have 
lower coinsurance payments and receive the most appropriate items as a 
result of this proposal.

II. Calendar Year (CY) 2017 End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)

A. Background

1. Statutory Background
    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

[[Page 42809]]

facilities as required by 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 with 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 required 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, 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, the Secretary 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, 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. 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 our other payment policies are included in regulations in subpart H 
of 42 CFR part 413. The ESRD PPS base rate is adjusted for 
characteristics of both adult and pediatric patients and accounts 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, four co-morbidity categories, and pediatric patient-
level adjusters consisting of two age categories and two dialysis 
modalities (42 CFR 413.235(a) and(b)).
    In addition, the ESRD PPS provides for three 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 third 
payment adjustment accounts for ESRD facilities furnishing renal 
dialysis services in a rural area (42 CFR 413.233).
    The ESRD PPS allows for a training add-on for home and self-
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).
3. Updates to the ESRD PPS
    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, 2015, we published in the Federal Register a final 
rule (80 FR 68968 through 69077) titled, ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, and Quality Incentive 
Program; Final Rule'' (hereinafter referred to as the CY 2016 ESRD PPS 
final rule). In that final rule, we made a number of routine updates to 
the ESRD PPS for CY 2016, refined the ESRD PPS case-mix adjustments, 
implemented a drug designation process, updated the outlier policy, and 
made additional policy changes and clarifications. Specifically, in 
that rule, we finalized the following:
     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. We 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 removed 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, we also revised the low-volume payment adjustment 
(LVPA) and implemented a new rural adjustment based on that regression 
analysis. We finalized new patient and facility-level adjustment 
factors and also revised the geographic proximity eligibility criterion 
for the LVPA and removed grandfathering from the criteria for the 
adjustment.
     Drug designation process: In accordance with section 
217(c) of

[[Page 42810]]

PAMA, we implemented 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 CY 2016 
ESRD PPS base rate was finalized at $230.39. This amount reflected a 
reduced market basket percentage rate of 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 was $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 completed the 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 was applied to the ESRD PPS base rate. We finalized 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 update the outlier policy 
using the most current data. Specifically, we updated the outlier 
services fixed dollar loss amounts for adult and pediatric patients and 
Medicare Allowable Payments (MAPs) for adult and pediatric patients for 
CY 2016 using 2014 claims data. Based on the use of more current data, 
the fixed-dollar loss amount for pediatric beneficiaries increased from 
$54.35 to $62.19 and the MAP amount decreased from $43.57 to $39.20, as 
compared to CY 2015 values. For adult beneficiaries, the fixed-dollar 
loss amount increased from $86.19 to $86.97 and the MAP amount 
decreased 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.

B. Provisions of the Proposed Rule

1. Payment for Hemodialysis When More Than 3 Treatments Are Furnished 
per Week
a. Background
    Since the composite rate payment system was implemented in the 
1980s, we have reimbursed ESRD facilities for up to three hemodialysis 
(HD) treatments per week and only paid for weekly dialysis treatments 
beyond this limit when those treatments were medically justified due to 
the presence of specific comorbid diagnoses that necessitate additional 
dialysis treatments (see paragraph (d) of this section). When we 
implemented the ESRD PPS in 2011, we adopted a per treatment unit of 
payment (75 FR 49064). This per treatment unit of payment is the same 
base rate that is paid for all dialysis treatment modalities furnished 
by an ESRD facility (HD and the various forms of peritoneal dialysis 
(PD)) (75 FR 49115). Consistent with our policy since the composite 
rate payment system was implemented in the 1980s, we also adopted the 
3-times weekly payment limit for HD under the ESRD PPS (74 FR 49931). 
When a beneficiary's plan of care requires more than 3 weekly dialysis 
treatments, whether HD or daily PD, we apply payment edits to ensure 
that Medicare payment on the monthly claim is consistent with the 3-
times weekly dialysis treatment payment limit. Thus, for a 30-day 
month, payment is limited to 13 treatments, and for a 31-day month 
payment is limited to 14 treatments.
    Because PD is typically furnished more frequently than HD, we 
calculate HD-equivalent payment rates for PD that are based on the ESRD 
PPS base rate per treatment. To do this, we adjust the base rate by any 
applicable patient- or facility-level adjustments, and then multiply 
the adjusted base rate by 3 (the weekly treatment limit), and divide 
this number by 7. This approach creates a per treatment amount that is 
paid for each day of PD treatment and that complies with the monthly 
treatment payment limit. With regard to HD, because we do not have a 
payment mechanism for the ESRD facility to bill and be paid for every 
treatment furnished when more than 3 treatments are furnished per week 
(for example, how they bill daily for PD), we apply edits to the 
monthly claim so that in total for the month (as described above) 
Medicare does not make payment for more than 3 weekly HD treatments. In 
the situation where an ESRD facility bills for more than 3 weekly HD 
treatments (or more than 13 or 14 for the month, depending on the days 
in the month) without medical justification, we deny payment for the 
additional HD treatments. We calculate HD-equivalent payments for PD so 
that the amount we pay for dialysis is modality-neutral. As we 
explained in the CY 2011 ESRD PPS final rule (75 FR 49115), we chose 
not to use dialysis modality as a payment variable when we developed 
the ESRD PPS because utilizing one dialysis-neutral payment resulted in 
a slightly higher payment for PD than a modality-specific payment, 
which we believed would encourage home dialysis, which is typically PD.
    In recent years, ESRD facilities have increasingly begun to offer 
HD where the standard treatment regimen exceeds 3 treatments per week. 
At the same time, we observed variation in how MACs processed claims 
for HD treatments exceeding three treatments per week, resulting in 
payment of more than 13 or 14 treatments per month. As a result, in the 
CY 2015 ESRD PPS final rule (79 FR 66145 through 66147), we reminded 
ESRD facilities and MACs that the Medicare ESRD benefit allows for the 
payment of 3 weekly dialysis treatments, and that additional weekly 
dialysis treatments may be paid only if there is documented medical 
justification. Additional conventional HD treatments are reimbursed at 
the full ESRD PPS payment if the facility's Medicare Administrative 
Contractor (MAC) determines the treatments are medically justified 
based on a patient condition, such as congestive heart failure or 
pregnancy. MACs have developed local coverage determinations and 
automated processes to pay for all the treatments reported on the claim 
if the ESRD facility reports diagnoses determined by the MAC to 
medically justify treatments beyond 3 times per week.
    The option to furnish more than 3 HD treatments per week is the 
result of evolving technology. We believe that use of this treatment 
option provides a level of toxin clearance on a weekly basis similar to 
that achieved through 3-times weekly conventional in-center HD. 
However, HD treatments exceeding three times per week are generally 
shorter and afford patients greater flexibility in managing their ESRD 
and other activities. As stated above, under the ESRD PPS, we currently 
do not have a payment mechanism that could apply a 3 treatments-per 
week equivalency to claims for patients with prescriptions for more 
than 3 HD treatments per week that do not have medical justification 
(see paragraph (d) of this section). As a result, the additional 
payments for treatments beyond 3 per week are

[[Page 42811]]

denied, except where medically justified. Payment for HD treatments 
that exceed 3 treatments per week occurs when those treatments are 
medically justified, as indicated by diagnosis codes. There are 
specific conditions that require more medical attention, documentation 
in the medical record, and the results of the higher frequency 
treatments can be objectively measured through the collection of 
testing data and are therefore justified as necessary. In cases where 
the HD exceeds 3 treatments per week for reasons other than medical 
justification, there is a lack of objective data to justify additional 
payment for HD treatments beyond 3 treatments per week.
    ESRD facilities have expressed concern that due to the monthly 
payment limit of 13 or 14 treatments, they are unable to report all 
dialysis treatments on their monthly claim, and therefore, they are not 
appropriately paid for each treatment furnished. We understand ESRD 
facilities' concerns and also would like to ensure that facilities are 
able to accurately report all of the treatments they furnish. 
Therefore, we analyzed 2015 ESRD facility claims data and found that 
there is a discrepancy between treatments furnished and treatments 
billed and paid for HD patients. The data indicate that HD patients are 
receiving HD treatments in excess of 3 per week, but facilities are 
usually only being paid for 3 treatments per week. The creation of an 
equivalency payment mechanism serves multiple purposes. First, it 
allows for payment for situations in which more than 3 HD treatments 
are furnished in a week that complies with the 3 treatment per week 
payment limit. Second, it encourages facilities to report all 
treatments furnished. This, in turn, would provide us with the 
information necessary to determine exactly how many treatments are 
being furnished. Finally, it would allocate the total amount of payment 
based on 3 HD sessions per week in accordance with the number of 
treatments actually furnished. For these reasons, we are proposing a 
payment equivalency for HD treatment regimens when more than 3 
treatments are furnished per week, similar to the HD-equivalency 
payment that has been used for PD since the composite rate payment 
system was implemented in 1983. As discussed in paragraph (d) of this 
section, while the policy would be effective January 1, 2017, we are 
proposing not to implement the HD equivalency payments until July 1, 
2017. We believe it is necessary to delay implementation of this policy 
until July 1, 2017 to allow time to make operational changes to 
accommodate this new payment mechanism. We would expect that, for dates 
of service between January 1, 2017 and July 1, 2017, facilities would 
continue to submit claims under the current claims submission 
parameters. Once the operational elements are implemented on July 1, 
2017, facilities will be expected to have the appropriate billing 
systems in place to accommodate claims submission changes. Educational 
materials will be distributed to stakeholders as the claims processing 
changes are implemented.
b. Proposed Payment Methodology for HD When More Than 3 Treatments Are 
Furnished per Week
    For CY 2017, for adult patients, we propose to calculate a per 
treatment payment amount that would be based upon the number of 
treatments prescribed by the physician and would be composed of the 
ESRD PPS base rate as adjusted by applicable patient and facility-level 
adjustments, the home dialysis training add-on (if applicable), and the 
outlier payment adjustment (if applicable). As discussed above, the 
policy would be effective on January 1, 2017, but the operational 
elements would be implemented no later than July 1, 2017 to give 
interested parties time to operationalize the changes. For dates of 
service from January 1, 2017 through June 30, 2017, facilities would 
submit claims consistent with current payment limits. On July 1, 2017, 
the operational changes will be implemented and facilities would be 
expected to submit claims in compliance with the new policy where more 
than 3 HD treatments can be billed for a week and paid using the HD 
equivalency payment. To calculate the equivalency payment where more 
than 3 HD treatments are furnished per week, we would first adjust the 
ESRD PPS base rate by the applicable patient-level adjustments (patient 
age, body surface area, low body mass index, comorbidities--acute and 
chronic, and onset of dialysis) and facility-level adjustments (wage 
index, rural facility, and low-volume facility). Second, we would 
multiply the adjusted ESRD PPS base rate by 3 to develop the weekly 
treatment amount and then we would divide this number by the number of 
treatments prescribed to determine the per treatment amount. Third, we 
would multiply the calculated outlier payment amount by 3 and divide 
this number by the number of treatments prescribed to determine the per 
treatment outlier amount. Finally, we would add the per-treatment ESRD 
PPS base rate and the per treatment outlier amount together to 
determine the final per treatment payment amount. For example, a 
beneficiary whose prescription indicates 5 treatments per week would be 
paid as follows: (Adjusted Base Rate * \3/5\) + (Outlier Payment * \3/
5\) = per treatment payment amount.
    While we are proposing an equivalency payment based on 3 HD 
treatments per week, ESRD facilities submit bills monthly and, as a 
result, the monthly maximums presented below are the treatment limits 
that would be applied to 30-day and 31-day months:

----------------------------------------------------------------------------------------------------------------
                                                      Maximum number of monthly      Maximum number of monthly
           Prescribed weekly treatments                treatments--30 day month       treatments--31 day month
----------------------------------------------------------------------------------------------------------------
4.................................................                            18                             19
5.................................................                            23                             24
6.................................................                            26                             27
7.................................................                            30                             31
----------------------------------------------------------------------------------------------------------------

For pediatric patients, the calculation would be the same as that 
proposed for adult patients, except that the ESRD PPS payment amount 
for pediatric patients would be based on the pediatric case mix 
adjustments and would not include the rural or low-volume facility-
level adjustments.
    In order to accommodate this proposed policy change, we would 
establish new claim processing guidelines and edits that would allow 
facilities to report the prescribed number of HD treatments for each 
patient. There would be individual claims processing system identifiers 
established for treatments provided 4 times per week, 5 times per week, 
6 times per week, and 7 times per week. These identifiers would allow 
the claims processing system to adjust the payment calculation and 
allow the appropriate payment for each treatment.

[[Page 42812]]

c. Proposed Implementation Strategy
    We are proposing that this policy change would be effective on 
January 1, 2017 but implemented on July 1, 2017, in order to allow 
sufficient time for CMS and ESRD facilities to implement necessary 
operational and systems changes. We recognize that this is a 
substantial change for the ESRD facility's billing systems and for the 
MACs and we want to allow ample time for changes to be implemented.
d. Applicability to Medically-Justified Treatments
    While the majority of ESRD patients are prescribed conventional 3-
times-per-week HD, we have always recognized that some patient 
conditions benefit from more than 3 HD sessions per week and as such, 
we developed a policy for payment of medically necessary dialysis 
treatments beyond the 3-treatments-per-week payment limit. Under this 
policy, the MACs determine whether additional treatments furnished 
during a month are medically necessary and when the MACs determine that 
the additional treatments are medically justified, we pay the full base 
rate for the additional treatments. While Medicare does not define 
specific patient conditions that meet the requirements of medical 
necessity, the MACs consider appropriate patient conditions that would 
result in a patient's medical need for additional dialysis treatments 
(for example, excess fluid). When such patient conditions are indicated 
on the claim, we instruct MACs to consider medical justification and 
the appropriateness of payment for the additional sessions.
    Extra treatments that are medically justifiable would be for 
conditions such as congestive heart failure. The medical necessity for 
additional dialysis sessions must be documented in the patient's 
medical record at the dialysis facility and available for review upon 
request. The documentation should include the physician's progress 
notes, the dialysis records and the results of pertinent laboratory 
tests. The submitted medical record must support the use of the 
diagnosis code(s) reported on the claim and the medical record 
documentation must support the medical necessity of the services. This 
documentation would need to be available to the contractor upon 
request.
    In section 50.A of the Medicare Benefit Policy Manual (Pub. 100-
02), we explain our policy regarding payment for HD-equivalent PD and 
payment for more than 3 dialysis treatments per week under the ESRD 
PPS. This proposal does not affect our policy to pay the full ESRD PPS 
base rate for medically justified treatments beyond 3 treatments per 
week. Rather, the intent of this proposal is to provide a mechanism for 
payment for evolving technologies that provide for a different schedule 
of treatments that accommodate a patient's preference and thereby 
improve that patient's quality of life. In the event that a beneficiary 
receives traditional HD treatments in excess of 3 per week without 
medical justification for the additional treatments, these additional 
treatments will not be paid.
e. Applicability to Home and Self-Dialysis Training Treatments
    Beneficiary training is crucial for the long-term efficacy of home 
dialysis. Under our current policy for PD training, we pay the full 
ESRD PPS base rate, not the daily HD-equivalent payment amount, for 
each PD training treatment a beneficiary receives up to the limit of 15 
training treatments for PD. As we stated in the CY 2011 ESRD PPS final 
rule (75 FR 49056) we pay the full ESRD PPS base rate during training 
because it is the base rate that accounts for the costs involved in 
furnishing the treatment and the add-on accounts for the additional 
staffing costs that are incurred. As we discuss in section II.B.2, we 
are investigating payments and costs related to training and plan to 
refine training payments in the future. Until that time, we believe 
that paying the full base rate during training continues to support 
home dialysis modalities. When training accompanies HD treatments 
exceeding 3 per week, the training would continue to be limited to 25 
sessions, in accordance with our policy for training for conventional 
HD.
    Because the home dialysis training add-on under the ESRD PPS 
(described in more detail in section II.B.2 of this proposed rule) is 
applied to each treatment on training claims up to the applicable 
limits for HD or PD, we anticipate that ESRD facilities will appreciate 
the ability to receive payment for each training treatment when more 
than 3 HD treatments are furnished per week and training is furnished 
with each of those treatments. We believe this effect of our proposed 
policy would be beneficial to facilities and beneficiaries receiving HD 
treatment more than 3 times per week because, as mentioned above, under 
our current policy, our claim edits only allow payment for 13 or 14 HD 
treatments in a monthly billing cycle. This means that ESRD facilities 
can only bill for 13 or 14 treatments for the month and may not receive 
the full number of home dialysis training add-on for the treatments 
that would otherwise be billable because of these payment limits. We 
believe that permitting facilities to bill for training treatments that 
are furnished to beneficiaries receiving more than 3 HD treatments per 
week will allow these facilities to receive payment for training more 
consistently with how they are furnishing these treatments. We expect 
ESRD facilities to engage patients in the decision making process for 
determining the best candidates for additional weekly hemodialysis 
beyond 3 treatments per week and thoroughly discuss with the patient 
the potential benefits and adverse effects associated with more 
frequent dialysis. For example, while there could be potential quality 
of life and physiological benefits there is also risk of a possible 
increase in vascular access procedures and the potential for 
hypotension during dialysis.
    We believe this proposed payment mechanism, if finalized, would 
provide several benefits. Facilities would be able to bill for 
treatments accurately and be paid appropriately for the treatments they 
furnish. This policy would provide clarity for the MACs and providers 
on billing and payment for HD regimens that exceed 3 treatments per 
week and assist MACs in determining which HD treatments should be paid 
at the equivalency payment rate and which HD treatments should be paid 
at the full base rate because the facility has provided adequate 
evidence of medical justification. Beneficiaries and facilities would 
have more flexibility to request and furnish patient-centered treatment 
options. Finally, the proposal would increase the accuracy of payments 
and data and would provide CMS the ability to monitor outcomes for 
beneficiaries utilizing various treatment frequencies.
2. Home and Self-Dialysis Training Add-on Payment Adjustment
a. Background
    In 2014, Medicare paid approximately $30 million to ESRD facilities 
for home and self-dialysis training claims, $6 million of which is in 
the form of home dialysis training add-on payments. These payments 
accounted for 115,593 dialysis training treatments (77,481 peritoneal 
dialysis (PD) training treatments and 38,112 hemodialysis (HD) training 
treatments) for 12,829 PD beneficiaries and 2,443 HD beneficiaries. 
Hereinafter, we will refer to this training as home dialysis training. 
Under the ESRD PPS, there are three components to payment for home 
dialysis training: The base rate, a wage-

[[Page 42813]]

adjusted home dialysis training add-on payment, and an allowable number 
of training treatments to which the training add-on payment can be 
applied.
    When the ESRD PPS was implemented in 2011, we proposed that the 
cost for all home dialysis services would be included in the bundled 
payment (74 FR 49930), and therefore, the computation of the base rate 
included home dialysis training add-on payments made to facilities as 
well as all composite rate payments, which account for facility costs 
associated with equipment, supplies, and staffing. In response to 
public comments, in the CY 2011 ESRD PPS final rule, we noted 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. Accordingly, we finalized 
the home dialysis training add-on amount 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 HD or PD training 
or retraining (75 FR 49063). In addition, we continued the policy of 
paying the home dialysis training add-on payment for 15 training 
treatments for PD and 25 training treatments for HD. In 2011, the 
amount we finalized for the home dialysis training add-on was $33.44, 
which was updated from the previous adjustment amount of $20. This 
updated amount of $33.44 per treatment was based on the national 
average hourly wage for nurses from the Bureau of Labor Statistics data 
updated to 2011 (75 FR 49063), and reflects 1 hour of training time by 
a registered nurse (RN) for both HD and PD. Section 494.100(a)(2) of 
the Conditions for Coverage for ESRD Facilities stipulates that the RN 
must conduct the home dialysis training, but in the ESRD Program 
Interpretive Guidance published October 3, 2008 (http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/downloads/SCletter09-01.pdf) we clarify that 
other members of the clinical dialysis staff may assist in providing 
the home training. We also elaborate in this guidance that the 
qualified home training RN is responsible for ensuring that the 
training is in accordance with the requirements at Sec.  494.100, with 
oversight from the ESRD facility's interdisciplinary team.
    The $33.44 amount of the home dialysis training add-on was based on 
the national mean hourly wage for Registered Nurses as published by the 
Occupational Employment Statistics (OES) data compiled by the Bureau of 
Labor Statistics (BLS). This mean hourly wage was then inflated to 2011 
by the ESRD wages and salaries proxy used in the 2008-based ESRD 
bundled market basket. In the calendar year (CY) 2014 ESRD PPS final 
rule (78 FR 72185), CMS further increased this amount from $33.44 to 
$50.16 to reflect 1.5 hours of training time by an RN in response to 
stakeholder concerns that the training add-on was insufficient. The 
$50.16 training add-on amount was consistent with average costs based 
on an analysis of pre-PPS cost report data.
    In response to the CY 2016 ESRD PPS proposed rule, we received a 
significant number of stakeholder comments concerning the adequacy of 
the home dialysis training add-on for HD. Because we did not make any 
proposals regarding the home dialysis training add-on in the CY 2016 
ESRD PPS proposed rule, we made no changes to the home dialysis 
training add-on for CY 2016 but we did provide a history of the home 
dialysis training add-on and stated our intention to conduct further 
analysis of the adjustment.
    While some commenters, primarily patients on home HD and a 
manufacturer of home HD machines, requested that we increase the home 
dialysis training add-on payment adjustment so that more ESRD patients 
could receive the benefit of home HD, we also heard from large dialysis 
organizations (LDOs) that the current home dialysis training add-on 
amount is sufficient. In addition to these differing viewpoints, we 
received public comments indicating a wide variance in training hours 
per treatment and the number of training sessions provided. As we 
indicated in the CY 2016 ESRD PPS final rule (80 FR 69004), patients 
who have been trained for home HD and their caregivers have stated that 
the RN training time per session spanned from 2 to 6 hours per training 
treatment and the number of training sessions ranged from 6 to 25 
sessions. Home HD patients also acknowledged that the training they 
received took place in a group setting, indicating perhaps that the 
amount of hands-on RN training time gradually decreased over the course 
of training so that by the end of training, the patient was able to 
perform home dialysis independently.
    In order to incentivize the use of PD when medically appropriate, 
Medicare pays the same home dialysis training add-on for all home 
dialysis training treatments for both PD and HD, even though PD 
training takes fewer hours per training treatment. It has never been 
our intention that the training add-on payment adjustment would 
reimburse a facility for all of its costs associated with home dialysis 
training treatments. Rather, for each home dialysis training treatment, 
Medicare pays the ESRD PPS base rate, all applicable case-mix and 
facility-level adjustments, and outlier payments plus a training add-on 
payment of $50.16 to account for RN time devoted to training. The home 
dialysis training add-on payment provides ESRD facilities with payment 
in addition to the ESRD PPS payment amount. Therefore, the ESRD PPS 
payment amount plus the $50.16 training add-on payment should be 
considered the Medicare payment for each home dialysis training 
treatment and not the home dialysis training add-on payment alone.
    As we indicated in the CY 2016 ESRD PPS final rule, we committed to 
analyzing the home dialysis training add-on to determine whether an 
increase in the amount of the adjustment is appropriate. To begin an 
analysis of the home dialysis training add-on payment adjustment, we 
looked at the information on 2014 ESRD facility claims and cost 
reports.
b. Analysis of ESRD Facility Claims Data
    We analyzed the ESRD facility claims data to evaluate if the 
information currently reported provides a clear representation of the 
utilization of training. We note that after an initial home dialysis 
training program is completed, ESRD facilities may bill for the 
retraining of patients who continue to be good candidates for home 
dialysis. Retraining is allowed for certain reasons as specified in the 
Medicare Claims Processing Manual (Pub 100-4, Chapter 8, section 50.8): 
the patient changes from one dialysis modality to another (for example, 
from PD to HD); the patient's home dialysis equipment changes; the 
patient's dialysis setting changes; the patient's dialysis partner 
changes; or the patient's medical condition changes (for example, 
temporary memory loss due to stroke, physical impairment). Currently, 
we are not able to differentiate training treatments from retraining 
treatments. That is, all training claims are billed with condition code 
73, which is what an ESRD facility would use for both training and 
retraining treatments. Under the current claims processing systems, 
there is no mechanism that limits the allowable training treatments to, 
25 for HD and 15 for PD. Therefore, we are unable to clearly tell when 
the patient is still training on the modality versus when they have 
completed the initial training and need retraining for one of these 
reasons provided in the

[[Page 42814]]

claims processing manual noted above. To be able to make informed 
decisions on future training payment policies we would need to have 
specificity regarding the utilization for each service. For example, 
once we have more specific data indicating the actual number of 
training treatments furnished, we could refine the payment policy. We 
are interested in assessing the extent to which patients are retrained 
and the number of retraining sessions furnished. The findings of this 
assessment will inform future decisions about how we compute the 
training add-on payment and whether we should consider payment edits 
for retraining treatments. For this reason, we are planning to issue 
sub-regulatory guidance to provide a method for facilities to report 
retraining treatments. We are soliciting input from stakeholders on 
retraining, how often retraining occurs, how much RN time is involved, 
and the most common reason for retraining.
    In addition, ESRD facilities have indicated they are unable to 
report all treatments furnished on the monthly claim. For this reason, 
we believe the number of training treatments currently reported on 
claims may be inaccurate. As discussed in detail in section II.B.1.a of 
this proposed rule, there are claims processing edits in place that 
prevent reporting of HD treatments, including both training and 
maintenance treatments, that exceed the number of treatments typically 
furnished for conventional HD, that is, 3 per week, unless the 
additional treatments are medically justified. This is because of the 
longstanding Medicare payment policy of basing payment on 3 HD 
treatments per week, which, for claims processing purposes is 13 to 14 
treatments per month. As we discuss in detail in section II.B.1.a of 
this proposed rule, for PD, which is furnished multiple times each day, 
ESRD facilities report a treatment every day of the month and MACs pay 
for these treatments by applying an HD-equivalent daily rate. We are 
proposing a similar payment approach for HD treatments furnished more 
than 3 times per week, which would allow facilities to report all HD 
treatments furnished, but payment would be made based on a 3 treatments 
per week daily rate. Implementation of the proposed HD payment 
equivalency would allow facilities to bill accurately for all the HD 
treatments furnished during home dialysis training, which would better 
align Medicare payments for training to when facilities are incurring 
the cost for training.
    Further, we believe that finalizing the proposed HD payment 
equivalency and establishing coding for retraining will greatly improve 
the accuracy of the reporting of training treatments. We solicit 
comments on this approach for improving reporting on ESRD facility 
claims.
c. Technical Correction of the Total Training Payment in the CY 2016 
Rule
    In the CY 2016 Final Rule (80 FR 60093), we incorrectly cited the 
payment amount to facilities for HD training as $1,881 based on a total 
of 37.5 hours of training. The amount we should have cited is $1,254. 
This is the result of a multiplication error.
d. Analysis of ESRD Cost Report Data
    CMS has evaluated 2014 ESRD cost report data in an effort to 
identify the nature of the specific costs reported by ESRD facilities 
associated with home dialysis training treatments. We found that there 
is a significant disparity among facilities with regard to their 
reported average cost per home dialysis training treatment particular 
to HD training, ranging from under $100 per treatment to as high as 
several thousand dollars per treatment. Because of this substantial 
variation, we believe that the cost report data we currently collect 
cannot be used to accurately gauge the adequacy of the current $50.16 
amount of the per treatment training add-on and that additional cost 
reporting instructions are necessary. We believe that the cost 
difference between training treatment costs and maintenance treatment 
costs is primarily the additional staff time required for training and 
inconsistencies in how to report related costs. All other training 
costs, that is, equipment, supplies, and support staff are accounted 
for in the ESRD PPS base rate. Based on this understanding, extreme 
variations in staff time should not occur as the number of hours 
required should fluctuate only slightly for some patients depending on 
modality or other factors. However, one patient needing a total nursing 
time of 1-2 hours compared to another patient needing 50 hours for the 
same modality indicates a lack of precision in the data. In response to 
these findings and in an effort to obtain a greater understanding of 
costs for dialysis facilities, CMS is considering a 3-pronged approach 
to improve the quality and the value of the cost report data and to 
enable us to use the average cost per home dialysis training treatment 
reported by ESRD facilities to set the amount of the training add-on 
payment adjustment in the future.
    First, CMS would complete an in-depth analysis of cost report data 
elements. The analysis would assist CMS in determining what areas of 
the cost report are being incorrectly populated by ESRD facilities, 
what fields are left blank, and which ESRD facilities are deviating 
from the instructions for the proper completion of various fields 
within the report. Once we identify facilities that are deviating from 
proper reporting procedures, we would further evaluate the specific 
nature of how other ESRD facilities' cost reports were completed to see 
if there is a systemic problem that may be the result of imprecise 
instructions. If so, we would update the instructions appropriately to 
fix the common error. If we believe the instructions are clear but 
facilities are not following the guidance, we would work through the 
MACs to correct errors. We anticipate the result of our analysis will 
be greater uniformity in reporting methods and in turn, heightened data 
quality in future years.
    Second, in accordance with section 217(e) of PAMA, CMS is currently 
performing comprehensive audits of ESRD facility cost reports. We 
anticipate the audits will result in greater uniformity in reporting 
methods and in turn, heightened data quality in future years.
    Third, we are considering an update to the independent ESRD 
facility cost report (CMS-265-11) to include new fields and to rework 
several worksheets in an effort to obtain more granularity in data on 
home dialysis training. Also, we are considering a locking mechanism 
that would prevent a facility from submitting a cost report if certain 
key fields have not been completed, such as those in Worksheet S, 
allowing CMS to capture the needed information to appropriately pay 
home dialysis training by an RN.
e. Proposed Increase to the Home and Self-Dialysis Training Add-on 
Payment Adjustment
    Based on our analysis of ESRD facility claims and cost reports 
which we describe above, we are pursuing changes which we believe will 
enable us to use the data to set the home dialysis training add-on 
payment adjustment in the future. Although we have already begun the 
process to implement changes to the cost report and claims, it will 
take several years for the changes to be implemented and yield data we 
could use as the basis for a change in the home training add-on payment 
adjustment. However, each year since implementation of the ESRD PPS in 
2011, we have received public

[[Page 42815]]

comments about the inadequacy of the home dialysis training add-on 
payment adjustment. In addition, we are committed to ensuring that all 
beneficiaries who are appropriate candidates for home dialysis have 
access to these treatment options, which generally improve 
beneficiaries' quality of life. For these reasons, we looked for a 
reasonable proxy for the home training add-on so that we could provide 
additional payments to support home dialysis in the interim until we 
are able to make changes to the home dialysis training add-on based on 
claims and cost report data.
    Under the ESRD PPS, and in accordance with section 
1881(b)(14)(A)(i) of the Act, we implemented a single base rate that 
applies to all treatments, even though PD costs facilities less than HD 
in terms of staff time, equipment, and supplies. To be consistent with 
this payment approach for routine maintenance dialysis treatments, we 
implemented a single home dialysis training add-on for both PD and HD, 
even though home dialysis training for PD takes half the time per 
training treatment on average than HD.
    In order to maintain this payment approach and provide an increase 
in the payment for home dialysis training treatments, we are proposing 
an increase in the single home dialysis training add-on amount for PD 
and HD, based on the average treatment time for PD and HD and the 
percentage of total training treatments for each modality as a proxy 
for nurse training time. We have received industry feedback that our 
training payment amount is not adequate. In addition, as KDOQI 
guidelines specify an average HD time of 4 hours and an average PD time 
of 2 hours, this tells us our payment should reflect a number of hours 
somewhere in this range. Because our current payment reflects 1.5 
hours, we propose increasing the number of hours using the weighted 
average formula described below, until such time as we have data that 
concretely indicates what an adequate payment should be.
    For wages, we would use the latest Occupational Employment 
Statistics (http://www.bls.gov/oes/tables.htm) released by BLS ($34.14 
in 2015), inflated to CY 2017 using the wages and salaries proxy used 
in the 2012-based ESRD bundled market basket. This would result in a 
new RN hourly wage of $35.93. For the hours, we are proposing an 
increase to the number of hours of home dialysis training by an RN that 
is accounted for by the home dialysis training add-on. We would use the 
average treatment times for PD and HD as a proxies for training times. 
The sources we researched indicated 4 hours is a clinically appropriate 
length of time for HD and 2 hours is a clinically appropriate length of 
time for a PD treatment. The Kidney Disease Outcomes Quality Initiative 
(KDOQI) guidelines and educational material from various patient 
advocacy groups are examples of these sources. Since PD training is 
approximately 67 percent of total training treatments and takes an 
average of 2 hours per treatment and HD is 33 percent of total training 
treatments and takes an average of 4 hours per treatment, we propose to 
base the payment for home dialysis training on 2.66 hours of treatment 
time ((.67 x 2 hours) + (.33 x 4 hours) = 2.66 hours) resulting in a 
training add-on payment of $95.57 (2.66 hours x $35.93 = $95.57). This 
would provide for an increase of $45.41 per training treatment (that 
is, $95.57 - $50.16 = $45.41). . This approach would provide a 
significant increase in payment for home dialysis training for CY 2017 
while maintaining consistent payment for both PD and HD modalities. 
Again, given that we are unable at this time to utilize cost report 
information to set the training add-on payment and that the number of 
hours of home dialysis training by an RN varies over the course of 
training, we believe using average treatment time for PD and HD as a 
proxy for training by an RN is reasonable. Once we have more specific 
and uniform cost report data to analyze, we intend to compare the 
average cost per training treatment for PD and HD to the proxy value of 
$95.57, assess the extent to which the home dialysis training add-on 
reflects ESRD facility costs for home dialysis training on average, and 
propose a new training add-on which may either be an increase or a 
decrease from the CY 2017 training add-on amount.
    As we did in CY 2014 when we last increased the training add-on 
payment, we are proposing that the proposed increase in the training 
add-on payment would be made in a budget neutral manner by applying a 
budget neutrality adjustment to the ESRD PPS base rate. The proposed 
increase would result in a budget neutrality adjustment of 0.999729.
3. Proposed CY 2017 ESRD PPS Update
a. ESRD Bundled Market Basket
i. Proposed CY 2017 ESRD Market Basket Update, Productivity Adjustment, 
and Labor-Related Share for ESRD PPS
    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 PPS payment amounts 
are required to be annually increased by an ESRD market basket increase 
factor and 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 1.0 
percentage point for 2018. Accordingly, for CY 2017, we will reduce the 
proposed 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.
    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 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 propose to use the CY 2012-based ESRDB market basket as 
finalized and described in the CY 2015 ESRD PPS final rule (79 FR 66129 
through 66136) to compute the CY 2017 ESRDB market basket increase 
factor and labor-related share based on the best available data. 
Consistent with historical practice, we estimate the ESRDB market 
basket update based on IHS Global Insight (IGI), Inc.'s forecast using 
the most recently available data. IGI is a nationally recognized 
economic and financial forecasting firm that contracts

[[Page 42816]]

with CMS to forecast the components of the market baskets.
    Using this methodology and the IGI forecast for the first quarter 
of 2016 of the CY 2012-based ESRDB market basket (with historical data 
through the fourth quarter of 2015), and consistent with our historical 
practice of estimating market basket increases based on the best 
available data, the proposed CY 2017 ESRDB market basket increase 
factor is 2.1 percent. As required by section 1881(b)(14)(F)(I)(i) of 
the Act as amended by section 217(b)(2) of PAMA, we must reduce the 
amount of the market basket increase factor by 1.25 percent, resulting 
in a proposed CY 2017 ESRDB market basket percentage increase factor of 
0.85 percent.
    Under section 1881(b)(14)(F)(i) of the Act, as amended by section 
3401(h) of the Affordable Care Act, for CY 2012 and each subsequent 
year, the ESRD market basket percentage increase factor shall be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. MFP is derived by subtracting the 
contribution of labor and capital input growth from output growth, the 
detailed methodology for deriving the MFP projection was finalized in 
the CY 2012 ESRD PPS final rule (76 FR 40503 through 40504). The most 
up-to-date MFP projection methodology is available on the CMS Web site 
at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
    Using IGI's first quarter 2016 forecast, the MFP adjustment for CY 
2017 (the 10-year moving average of MFP for the period ending CY 2017) 
is projected to be 0.5 percent.
    For the CY 2017 ESRD payment update, we propose 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).
ii. Proposed CY 2017 ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity (MFP)
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by the productivity 
adjustment. For CY 2017, section 1881(b)(14)(F)(i)(I) of the Act, as 
amended by section 217(b)(2)(A)(ii) of PAMA, requires the Secretary to 
implement a 1.25 percentage point reduction to the ESRDB market basket 
increase factor in addition to the productivity adjustment.
    As a result of these provisions, the proposed CY 2017 ESRD market 
basket increase is 0.35 percent. This market basket increase is 
calculated by starting with the proposed CY 2017 ESRDB market basket 
percentage increase factor of 2.1 percent, reducing it by the mandated 
legislative adjustment of 1.25 percent (required by section 
1881(b)(14)(F)(I)(i)), and reducing it further by the MFP adjustment 
(the 10-year moving average of MFP for the period ending CY 2017) of 
0.5 percent. As is our general practice, if more recent data are 
subsequently available (for example, a more recent estimate of the 
market basket or MFP adjustment), we will use such data to determine 
the CY 2017 market basket update and MFP adjustment in the CY 2017 ESRD 
PPS final rule.
b. The Proposed CY 2017 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. OMB publishes bulletins regarding CBSA 
changes, including changes to CBSA numbers and titles. The latest 
bulletin, as well as subsequent bulletins, is available online at 
http://www.whitehouse.gov/omb/bulletins_index2003-2005.
    For CY 2017, 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 2017 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 proposed CY 2017 wage index values for urban 
areas are listed in Addendum A (Wage Indices for Urban Areas) and the 
proposed CY 2017 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 https://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.
    We apply the wage index for Guam as established in the CY 2014 ESRD 
PPS final rule (78 FR 72172) (0.9611) to American Samoa and the 
Northern Mariana Islands. We apply the statewide urban average based on 
the average of all urban areas within the state (78 FR 72173) (0.8637) 
to Hinesville-Fort Stewart, Georgia. 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 ESRD 
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.
    In the CY 2016 ESRD PPS final rule (80 FR 69006 through 69008), we

[[Page 42817]]

finalized the continuation of the application of the wage index floor 
of 0.4000 to areas with wage index values below the floor, rather than 
reducing the floor by 0.05. We stated in that rule that we needed more 
time to study the wage indices that are reported for Puerto Rico to 
assess the appropriateness of discontinuing the wage index floor. Also, 
in that rule a commenter provided several alternative wage indexes for 
Puerto Rico for the CY 2016 ESRD PPS final rule: (1) Utilize our policy 
for areas that do not have reliable hospital data by applying 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) reestablish the wage index 
floor in effect in 2010 when Puerto Rico became the only wage areas 
subject to the floor, that is, 0.65.
    For the CY 2017 proposed rule, we analyzed ESRD facility cost 
report and claims data submitted by facilities located in Puerto Rico 
and compared them to mainland facilities. Specifically, we analyzed CY 
2013 claims and cost report data for 37 freestanding Puerto Rico 
facilities and compared it to 5,024 non-Puerto Rico freestanding 
facilities. We found that the freestanding facilities in Puerto Rico 
are bigger than facilities elsewhere in the United States. The Puerto 
Rico facilities produce roughly twice the number of treatments as other 
facilities and this larger size likely results in higher labor 
productivity. Finally, dialysis patients in Puerto Rico are much more 
likely to be non-Medicare. We discuss the findings below in detail.
    Total Composite Rate Cost and Operational Efficiency: Total 
composite rate cost per dialysis treatment is about 15 percent lower in 
Puerto Rico than elsewhere. This lower total cost reflects several 
production process differences: (1) Puerto Rico facilities make much 
higher use of equipment, as reflected in achieving about 50 percent 
more treatments per chair and (2) Approximately 30 percent of the 
freestanding Puerto Rico facilities indicated some operations during a 
third shift in comparison to only 12 percent of all other freestanding 
facilities in the United States. This higher rate of a third shift, on 
average, improves the rates of operational efficiency as some of these 
facilities more fully utilize equipment and decrease associated fixed 
costs per treatment.
    Salary, Benefits, and Administrative Salaries: Salary and benefits 
for direct care staff includes costs for RNs, LPNs, nurse aides (NA), 
technicians, licensed social workers (LSWs), and registered dieticians 
(RDs). Although salaries and benefit expenses per chair are somewhat 
higher in Puerto Rico than those in other facilities, salaries and 
benefits expenses for direct care staff per treatment are about 19 
percent lower because of the higher use rate of chairs. Including 
administrative salaries (including RN nurse managers), salaries and 
benefits per treatment are reported to be about 27 percent lower in 
Puerto Rico freestanding facilities when compared to other freestanding 
facilities.
    Full-Time Employees (FTEs) per Treatment: Total direct care FTEs 
per treatment in Puerto Rico are about 12 percent less than elsewhere, 
but the data shows that Puerto Rico facilities employ a richer mix of 
staffing, as reflected in more than double the RNs per treatment in 
Puerto Rico than elsewhere. The data suggests that RNs are substituted 
for technicians in Puerto Rico facilities. The calculated variable of 
salaries and benefits per direct care FTE are approximately 8 percent 
lower in Puerto Rico than elsewhere. This difference likely reflects 
the net of a richer mix of labor and somewhat lower wage rates per 
employee classification.
    In addition to this analysis, we researched staffing requirements 
for ESRD facilities located in Puerto Rico and confirmed that under 
Puerto Rico law, ESRD facilities cannot hire technicians and must only 
hire RNs. This requirement supports the data findings above, 
specifically, that Puerto Rico facilities employ a richer mix of 
staffing, as reflected in more than double the RNs per treatment in 
Puerto Rico than elsewhere.
    We believe that this information provides evidence that in 
furnishing renal dialysis services, Puerto Rico could potentially have 
an economic disadvantage that the rest of the country may not be 
experiencing. Although we have this information available, we still 
believe that we need to engage the industry for input on potential 
changes and to assist us in assessing the appropriateness of 
discontinuing the wage index floor. Therefore, we are proposing to 
continue to apply a wage index floor of 0.4000 to areas with wage index 
values below the floor for CY 2017 and soliciting comments on the use 
of a wage index floor for Puerto Rico going forward. 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. 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 would be insignificant. 
To the extent other geographical areas fall below the floor in CY 2017 
or beyond, we believe they should have the benefit of the 0.4000 wage 
index floor as well.
    For CY 2017, we are soliciting public comments on the wage index 
for CBSAs in Puerto Rico as part of our continuing effort to determine 
an appropriate course of action. We are not proposing to change the 
wage index floor for CBSAs in Puerto Rico, but we are requesting public 
comments in which stakeholders can provide useful input for 
consideration in future decision-making. Specifically, we are 
soliciting comment on the useful suggestions that were submitted in 
last year's final rule (80 FR 69007) and reiterated above. Along with 
comments we will continue to review wage index values and the 
appropriateness of a wage index floor in the future.
ii. Application of the Wage Index Under the ESRD PPS
    A facility's wage index is applied to the labor-related share of 
the ESRD PPS base rate. 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 2012-based ESRDB market basket finalized in that rule, 
and transitioned the new labor-related share over a 2-year period. 
Thus, for CY 2017, the labor-related share to which a facility's wage 
index would be applied is 50.673 percent.
c. CY2017 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, and comorbidities 
such as cancer. The ESRD PPS recognizes high cost patients, and we have 
codified the outlier policy in our regulations at 42 CFR 413.237. The 
policy provides the following ESRD outlier items and services 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,

[[Page 42818]]

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 (that is, date of service) on the monthly claim. Renal 
dialysis 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 section 
413.237(c) of our 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 2017 outlier policy, we would use the existing 
methodology for determining outlier payments by applying outlier 
services payment multipliers that were developed for the CY 2016 ESRD 
PPS final rule (80 FR 68993-68994, 69002). We used these outlier 
services payment multipliers to calculate the predicted outlier service 
MAP amounts and projected outlier payments for CY 2017.
    For CY 2017, we propose that the outlier services MAP amounts and 
fixed-dollar loss amounts would be derived from claims data from CY 
2015. Because we believe that any adjustments made to the MAP amounts 
under the ESRD PPS should be based upon the most recent data year 
available in order to best predict any future outlier payments, we 
propose the outlier thresholds for CY 2017 would be based on 
utilization of renal dialysis items and services furnished under the 
ESRD PPS in CY 2015. We recognize 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. We continue to believe that since the 
implementation of the ESRD PPS, data for CY 2015 are reflective of 
relatively stable ESA use, in contrast with the relatively large 
initial declines in the use of both EPO and darbepoetin in the first 2 
years of the ESRD PPS. In 2015, there were both decreases in the use of 
EPO and increases in the use of darbepoetin based on estimates of 
average ESA utilization per session, suggesting a relative shift 
towards the use of darbepoetin between 2014 and 2015.
i. CY 2017 Update to the Outlier Services MAP Amounts and Fixed-Dollar 
Loss Amounts
    For CY 2017, we are not proposing any change to the methodology 
used to compute the MAP or fixed-dollar loss amounts. Rather, we will 
continue to update the outlier services MAP amounts and fixed-dollar 
loss amounts to reflect the utilization of outlier services reported on 
2015 claims. For this proposed rule, the outlier services MAP amounts 
and fixed dollar loss amounts were updated using 2015 claims data. The 
impact of this update is shown in Table 1, which compares the outlier 
services MAP amounts and fixed-dollar loss amounts used for the outlier 
policy in CY 2016 with the updated proposed estimates for this rule. 
The estimates for the proposed CY 2017 outlier policy, which are 
included in Column II of Table 1, were inflation adjusted to reflect 
projected 2017 prices for outlier services.

[[Page 42819]]



               TABLE 1--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                   Column I Final outlier policy    Column II Proposed outlier
                                                    for CY 2016 (based on 2014     policy for  CY 2017 (based on
                                                   data price  inflated to 2016)    2015 data price inflated to
                                                 --------------------------------              2017)
                                                                                 -------------------------------
                                                      Age <18       Age > = 18        Age <18       Age > = 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $40.20          $53.29          $40.49          $49.28
 treatment......................................
Adjustments
    Standardization for outlier services........          0.9951          0.9729          1.0061          0.9786
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $39.20          $50.81          $39.92          $47.26
Fixed-dollar loss amount that is added to the             $62.19          $86.97          $67.44          $83.00
 predicted MAP to determine the outlier
 threshold......................................
Patient months qualifying for outlier payment...            5.8%            6.5%            4.5%            6.7%
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table 1, the estimated fixed-dollar loss amount 
per treatment that determines the CY 2017 outlier threshold amount for 
adults (Column II; $83.00) is lower than that used for the CY 2016 
outlier policy (Column I; $86.97). The lower threshold is accompanied 
by a decline in the adjusted average MAP for outlier services from 
$50.81 to $47.26. For pediatric patients, there is an increase in the 
fixed dollar loss amount from $62.19 to $67.44. Unlike the adult 
patients, there was a slight increase in the adjusted average MAP for 
outlier services among pediatric patients, from $39.20 to $39.92.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2017 will be 6.7 percent for adult patients and 
4.5 percent for pediatric patients, based on the 2015 claims data. The 
pediatric outlier MAP and fixed-dollar loss amounts continue to be 
lower for pediatric patients than adults due to the continued lower use 
of outlier services (primarily reflecting lower use of ESAs and other 
injectable drugs).
ii. Outlier 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 2015 claims, 
outlier payments represented approximately 0.9 percent of total 
payments, slightly below the 1 percent target due to small overall 
declines in the use of outlier services. Recalibration of the 
thresholds using 2015 data is expected to result in aggregate outlier 
payments close to the 1 percent target in CY 2017. We believe the 
update to the outlier MAP and fixed-dollar loss amounts for CY 2017 
will increase payments for ESRD beneficiaries requiring higher resource 
utilization and move us closer to meeting our 1 percent outlier policy. 
We note that recalibration of the fixed-dollar loss amounts in this 
proposed rule would 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 would increase payments to ESRD 
facilities for beneficiaries with renal dialysis items and services 
that are eligible for outlier payments. Therefore, beneficiary co-
insurance obligations would also increase for renal dialysis services 
eligible for outlier payments.
    We note that many industry stakeholder associations and renal 
facilities have expressed concern that the outlier target percentage 
has not been achieved under the ESRD PPS and have asked that CMS 
eliminate the outlier policy. With regard to the suggestion that we 
eliminate the outlier adjustment altogether, we note that, under 
section 1881(b)(14)(D)(ii) of the Act, the ESRD PPS must include a 
payment adjustment for high cost outliers due to unusual variations in 
the type or amount of medically necessary care, including variations in 
the amount of erythropoiesis stimulating agents necessary for anemia 
management. 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, while we believe that the ESRD PPS base rate and other 
payment adjustments capture the cost for the average renal patient 
having certain characteristics, there may continue to be certain 
individual patients or certain subgroups of patients, such as patients 
with bacterial pneumonia or monoclonal gammopathy, which were 
eliminated as payment adjustments factors for CY2016, who receive more 
ESAs or other outlier services than the average patient. We believe 
that the inclusion of the 1 percent outlier policy helps to protect 
patient access to care by providing additional payment for patients 
requiring higher use of outlier services not otherwise captured in the 
payment adjustments made under the ESRD PPS.
    We understand the industry's concern that payments under the 
outlier policy have not reached 1 percent of total ESRD PPS payments 
since the implementation of the payment system. As we explained in the 
CY 2015 ESRD PPS final rule (78 FR 72165), each year we simulate 
payments under the ESRD PPS in order to set the outlier fixed-dollar 
loss and MAP amounts for adult and pediatric patients to try to achieve 
the 1 percent outlier policy. As we stated above, based on the 2015 
claims, outlier payments represented approximately 0.9 percent of total 
payments, slightly below the 1 percent target, which could indicate 
that ESRD facilities are getting better at reporting outlier services. 
We note that we would not increase the base rate to account for years 
where outlier payments were less than 1 percent of total ESRD PPS 
payments, nor would we reduce the base rate if the outlier payments 
exceed 1 percent of total ESRD PPS payments.
d. Proposed Impacts to the CY 2017 ESRD PPS Base Rate
i. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the development of the ESRD PPS per treatment base rate that 
is codified in the Medicare regulations at Sec.  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 
for projected outlier payments and budget neutrality in accordance with 
sections

[[Page 42820]]

1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, respectively. 
Specifically, the ESRD PPS base rate was developed from CY 2007 claims 
(that is, the lowest per patient utilization year as required by 
section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, and 
represented the average per treatment Medicare Allowable Payment (MAP) 
for composite rate and separately billable services. In accordance with 
section 1881(b)(14)(D) of the Act and regulations at Sec.  413.230, the 
ESRD PPS base rate is adjusted for the patient specific case-mix 
adjustments, applicable facility adjustments, geographic differences in 
area wage levels using an area wage index, as well as applicable 
outlier payments or training payments.
ii. Annual Payment Rate Update for CY 2017
    We are proposing an ESRD PPS base rate for CY 2017 of $231.04. This 
update reflects 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 2017 projection for the ESRDB market 
basket is 2.1 percent. In CY 2017, 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 2.1-
1.25 = 0.85 percent. This amount is then 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 CY 2017 is 0.5 percent, thus 
yielding a proposed update to the base rate of 0.35 percent for CY 2017 
(0.85-0.5 = 0.35 percent). Therefore, the proposed ESRD PPS base rate 
for CY 2017 before application of the wage index and training budget-
neutrality adjustment factors would be $231.20 ($230.39 x 1.0035 = 
$231.20).
    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 2017, we are not proposing 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 2017 proposed wage 
index budget-neutrality adjustment factor is 0.999552. Therefore, the 
proposed ESRD PPS base rate for CY 2017 before application of the 
training budget-neutrality adjustment factor would be $231.10 ($231.20 
x 0.999552 = $231.10).
    Home and Self-Dialysis Training Add-on Budget-Neutrality Adjustment 
Factor: Also, as discussed in section II.B.2 of this proposed rule, we 
are proposing an increase in the home dialysis training add-on in a 
budget-neutral manner. The home dialysis training add-on budget-
neutrality factor ensures that the increase in the training add-on 
payment adjustment does not affect aggregate Medicare payments. 
Therefore, we are finalizing a home dialysis training add-on payment 
adjustment budget-neutrality adjustment factor of 0.999729, which will 
be applied directly to the CY 2017 ESRD PPS base rate. This application 
yields a CY 2017 ESRD PPS base rate of $231.04 ($231.10 x 0.999729 = 
$231.04).
    In summary, we are proposing a CY 2017 ESRD PPS base rate of 
$231.04. This amount reflects a market basket increase of 0.35 percent, 
the CY 2017 wage index budget-neutrality adjustment factor of 0.999552, 
and the home dialysis training add-on payment adjustment budget-
neutrality adjustment of 0.999729.

III. Proposed Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals With Acute Kidney Injury (AKI)

A. Background

    On June 29, 2015, the Trade Protection Extension Act of 2015 (TPEA) 
(Pub. L. 114-27) was enacted. In the TPEA, the Congress amended the Act 
to include coverage and provide for payment for dialysis furnished by 
an ESRD facility to an individual with AKI. Specifically, section 
808(a) of the TPEA amended section 1861(s)(2)(F) of the Act by 
including coverage for renal dialysis services furnished on or after 
January 1, 2017 by a renal dialysis facility or provider of services 
currently paid under section 1881(b)(14) of the Act to an individual 
with AKI. In addition, section 808(b) of TPEA amended section 1834 of 
the Act by adding a new subsection (r). Subsection (r)(1) of section 
1834 of the Act provides that in the case of renal dialysis services 
(as defined in subparagraph (B) of section 1881(b)(14) of the Act) 
furnished under Part B by a renal dialysis facility or a provider of 
services paid under such section during a year (beginning with 2017) to 
an individual with acute kidney injury, the amount of payment under 
Part B for such services shall be the base rate for renal dialysis 
services determined for such year under such section, as adjusted by 
any applicable geographic adjustment applied under subparagraph 
(D)(iv)(II) of such section and may be adjusted by the Secretary (on a 
budget neutral basis for payments under section 1834(r) of the Act) by 
any other adjustment factor under subparagraph (D) of section 
1881(b)(14) of the Act. Section 1834(r)(2) defines ``individual with 
acute kidney injury'' to mean an individual who has acute loss of renal 
function and does not receive renal dialysis services for which payment 
is made under section 1881(b)(14). In this rule, we are proposing 
payment and billing requirements as discussed below.

B. Proposed Payment Policy for Renal Dialysis Services Furnished to 
Individuals With AKI

1. Definition of ``Individual with Acute Kidney Injury''
    Consistent with section 1834(r)(2) of the Act, we propose to define 
an individual with AKI as an individual who has acute loss of renal 
function and does not receive renal dialysis services for which payment 
is made under section 1881(b)(14). Section 1881(b)(14) of the Act 
contains all of the provisions related to the ESRD PPS. We interpret 
the reference to section 1881(b)(14) of the Act to mean that we would 
pay renal dialysis facilities for renal dialysis services furnished to 
individuals with acute loss of kidney function when the services 
furnished to those individuals are not payable under section 
1881(b)(14) because the individuals do not have ESRD. We propose to 
codify the statutory definition of individual with acute kidney injury 
at 42 CFR 413.371 and we solicit comments on this definition.
2. The Payment Rate for AKI Dialysis
    Section 1834(r)(1) of the Act, as added by section 808(b) of TPEA, 
provides that the amount of payment for AKI services shall be the base 
rate for renal dialysis services determined for a year under section 
1881(b)(14). We propose to interpret this provision to mean the ESRD 
PPS per treatment base rate as set forth in 42 CFR 413.220, which is 
updated annually by the market basket less the productivity adjustment 
as set forth in 42 CFR 413.196(d)(1), and adjusted by any other 
adjustment factor applied to the ESRD PPS base rate. This amount would 
be established on an annual basis through rulemaking and finalized in 
the CY ESRD PPS final rule. We recognize that there could be rulemaking 
years in which legislation or policy decisions could directly impact 
the ESRD PPS base rate because of changes to ESRD PPS policy that may 
not relate to the services furnished for

[[Page 42821]]

AKI dialysis. For example, for CY 2017 we are applying a training add-
on budget neutrality adjustment factor to the otherwise applicable base 
rate. In those situations, we would still consider the ESRD PPS base 
rate as the payment rate for AKI dialysis. We believe that the statute 
was clear in that the payment rate for AKI dialysis shall be the ESRD 
PPS base rate determined for a year under section 1881(b)(14), which we 
interpret to mean the finalized ESRD PPS base rate and not to be some 
other determined amount. As described below, ESRD facilities will have 
the ability to bill Medicare for non-renal dialysis items and services 
and receive separate payment in addition to the payment rate for AKI 
dialysis. For example, beneficiaries with AKI may require certain 
laboratory tests so that their practitioner can gauge organ function 
and accurately adjust the dialysis prescription that would be optimal 
for kidney recovery. These beneficiaries would require laboratory tests 
specific to their condition which would not be included in the ESRD PPS 
and thus, would be paid for separately. For instance, an individual 
with AKI might need to be tested for a biochemical indication of a urea 
cycle defect resulting in hyperammonemia. We propose to codify the AKI 
dialysis payment rate in our regulations at 42 CFR 413.372 and solicit 
comment on this proposal. This year's proposed ESRD PPS base rate is 
$231.04. Accordingly, we propose that the CY 2017 payment rate for 
renal dialysis services furnished by ESRD facilities for individuals 
with AKI will be $231.04.
3. Geographic Adjustment Factor
    Section 1834(r)(1) of the Act further provides that the amount of 
payment for AKI dialysis services shall be the base rate for renal 
dialysis services determined for a year under section 1881(b)(14), as 
adjusted by any applicable geographic adjustment factor applied under 
section 1881(b)(14)(D)(iv)(II). We interpret the reference to ``any 
applicable geographic adjustment factor applied under section 
(D)(iv)(II)'' of such section to mean the geographic adjustment factor 
that is actually applied to the ESRD PPS base rate for a particular 
facility. Accordingly, we propose to apply the same wage index that is 
used under the ESRD PPS, that is, the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the inpatient 
prospective payment system that are unadjusted for occupational mix. 
The ESRD PPS wage index policy was finalized in the CY 2011 ESRD PPS 
final rule (75 FR 49117) and codified at 42 CFR 413.231. The AKI 
dialysis payment rate would be adjusted for wage index for a particular 
facility in the same way that the ESRD PPS base rate is adjusted for 
wage index for that facility. Specifically, we would apply the wage 
index to the labor-related share of the ESRD PPS base rate that we will 
utilize for AKI dialysis to compute the wage-adjusted per-treatment AKI 
dialysis payment rate. We propose that for CY 2017, the AKI dialysis 
payment rate would be the CY 2017 ESRD PPS base rate (established in 
the CY 2017 ESRD PPS final rule), adjusted by the ESRD facility's wage 
index. In proposed 42 CFR 413.372(a), we refer to the ESRD PPS wage 
index regulation at 42 CFR 413.231 as an adjustment we will apply to 
the ESRD PPS base rate.
4. Other Adjustments to the AKI Payment Rate
    Section 1834(r)(1) also provides that the payment rate for AKI 
dialysis may be adjusted by the Secretary (on a budget neutral basis 
for payments under section 1834(r)) by any other adjustment factor 
under subparagraph (D) of section 1881(b)(14). For purposes of payment 
for AKI dialysis, we are not proposing to adjust the AKI payment rate 
by any other adjustments at this time. Therefore, for at least the 
first year of implementation of the AKI payment rate, we are not 
proposing to apply any of the optional payment adjustments under 
subparagraph (D) of section 1881(b)(14). We propose to codify our 
authority to adjust the AKI payment rate by any of the adjustments 
under section 1881(b)(14)(D) in our regulations at 42 CFR 413.373.
5. Renal Dialysis Services Included in the AKI Payment Rate
    Section 1834(r)(1) provides that the AKI payment rate applies to 
renal dialysis services (as defined in subparagraph (B) of section 
1881(b)(14)) furnished under Part B by a renal dialysis facility or 
provider of services paid under section 1881(b)(14). We propose that 
drugs, biologicals, laboratory services, and supplies that are 
considered to be renal dialysis services under the ESRD PPS as defined 
in 42 CFR 413.171, would be considered to be renal dialysis services 
for patients with AKI. As such, no separate payment would be made for 
renal dialysis drugs, biologicals, laboratory services, and supplies 
that are included in the ESRD PPS base rate when they are furnished by 
an ESRD facility to an individual with AKI. We propose to codify this 
policy in the regulations at 42 CFR 413.374(a).
    However, we recognize that the utilization of items and services 
for beneficiaries with AKI receiving dialysis may differ from the 
utilization of these same services by ESRD beneficiaries. This is 
because we expect that individuals with AKI will only need dialysis for 
a finite number of days while they recover from kidney injury, while 
ESRD beneficiaries require dialysis indefinitely unless they receive a 
kidney transplant. We recognize that the intent of dialysis for 
patients with AKI is curative; therefore, we are proposing that we will 
pay for all hemodialysis treatments furnished to beneficiaries with AKI 
in a week, even if the number of treatments exceeds the three times-
weekly limitation we apply to HD treatments furnished to beneficiaries 
with ESRD.
    Other items and services furnished to beneficiaries with AKI that 
are not considered to be renal dialysis services as defined in 42 CFR 
413.171, but that are related to their dialysis treatment as a result 
of their AKI and that an ESRD facility might furnish to a beneficiary 
with AKI, would be separately payable. In particular, an ESRD facility 
could seek separate payment for drugs, biologicals, laboratory 
services, and supplies that ESRD facilities are certified to furnish 
and that would otherwise be furnished to a beneficiary with AKI in a 
hospital outpatient setting. Therefore, we are proposing to pay for 
these items and services separately when they are furnished to 
beneficiaries with AKI receiving dialysis in ESRD facilities. We 
propose to codify this policy at 42 CFR 413.374(b).

C. Applicability of ESRD PPS Policies to AKI Dialysis

1. Uncompleted Dialysis Treatment
    Generally, we would pay for only one treatment per day across all 
settings. However, similar to the policy applied under the ESRD PPS for 
treatments for patients with ESRD, in the interest of fairness and in 
accordance with Chapter 8, section 10.2 of the Medicare Claims 
Processing Manual, if a dialysis treatment is started, that is, a 
patient is connected to the machine and a dialyzer and blood lines are 
used, but the treatment is not completed for some unforeseen, but valid 
reason, for example, a medical emergency when the patient must be 
rushed to an emergency room, both the ESRD facility and the hospital 
would be paid. We consider this to be a rare occurrence that must be 
fully documented to the A/B MAC's satisfaction.

[[Page 42822]]

2. Home and Self-Dialysis
    We do not expect that beneficiaries with AKI will receive dialysis 
in their homes due to the duration of treatment and the unique needs of 
AKI. Specifically, it is our understanding that these patients require 
supervision by qualified staff during their dialysis and close 
monitoring through laboratory tests to ensure that they are receiving 
the necessary care to improve their condition and get off of dialysis. 
Therefore, we are proposing not to extend the home dialysis benefit to 
beneficiaries with AKI.
3. Vaccines and Their Administration
    Section 1881(b)(14)(B) of the Act specifically excludes vaccines 
covered under section 1861(s)(10) of the Act from the ESRD PPS. 
However, ESRD facilities are identified as an entity that can bill 
Medicare for vaccines and their administration. Therefore, we propose 
to allow ESRD facilities to furnish vaccines to beneficiaries with AKI 
and bill Medicare in accordance with billing requirements in Pub. 100-
04, Chapter 18 Preventive and Screening Services, section 10.2 which is 
located on the CMS Web site: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c18.pdf. We solicit comment 
on the proposal for ESRD facilities to administer vaccines to 
beneficiaries with AKI.

D. Monitoring of Beneficiaries With AKI Receiving Dialysis in ESRD 
Facilities

    Because we are aware of the unique acute medical needs of the AKI 
population, we plan to closely monitor utilization of dialysis and all 
separately billable items and services furnished to individuals with 
AKI by ESRD facilities. For example, stakeholders have stated that 
beneficiaries with AKI will require frequent labs to monitor renal 
function or they will be at risk for developing chronic renal failure. 
Another recurrent concern is the flexibility necessary in providing 
dialysis sessions to beneficiaries with AKI. Stakeholders have told us 
that these patients may need frequent dialysis, but will also require 
days with no dialysis to test for kidney recovery. Consequently, we 
will closely monitor utilization of dialysis treatments and the drugs, 
labs and services provided to these beneficiaries.
    We have met with both physician and provider associations with 
regard to the care of patients with AKI. Both have expressed concerns 
that physician oversight will be limited for these beneficiaries, based 
on current operational models used by ESRD facilities. They have 
encouraged CMS to support close monitoring of this patient population--
particularly with regard to lab values--in the interest of preventing 
these patients from becoming ESRD patients. A close patient-physician 
relationship is critical for the successful outcome of the AKI patient.

E. AKI and the ESRD Conditions for Coverage

    The ESRD Conditions for Coverage (CfCs) at 42 CFR part 494 are 
health and safety standards that all Medicare-participating dialysis 
facilities must meet. These standards set baseline requirements for 
patient safety, infection control, care planning, staff qualifications, 
record keeping, and other matters to ensure that all ESRD patients 
receive safe and appropriate care.
    We propose a technical change to 42 CFR 494.1(a), statutory basis, 
to incorporate the changes to ESRD facilities and treatment of AKI in 
the Act as enacted by section 808 of the Trade Protection Extension Act 
of 2015 (Pub. L. 114-27, June 29, 2015) (TPEA).
    While the substance of the ESRD CfCs (comprehensively updated in 
2008) does not directly address treatment of patients with AKI, we 
believe that the current ESRD facility requirements are sufficient to 
ensure that such patients are dialyzed safely. For example, infection 
control protocols would be the same for an ESRD patient receiving 
maintenance dialysis and an AKI patient. For the areas in which care 
and care planning may differ, such as frequency of certain patient 
assessments, we note that the CfCs set baseline standards and do not 
limit additional or more frequent services that may be necessary for 
AKI patients receiving temporary dialysis to restore kidney function.
    Accordingly, we are not proposing changes to the CfCs specific to 
AKI at this time. However, we are soliciting comment from the dialysis 
community as to whether revisions to the CfCs might be appropriate for 
addressing treatment of AKI in ESRD facilities. Some of our specific 
questions include: Should we address AKI care directly in the ESRD 
CfCs? Should care planning for AKI patients be addressed differently 
than care planning for ESRD patients? Are there other areas, such as 
medical records, that might be appropriate for AKI-related revisions? 
We do not intend to respond to comments related to potential CfC 
revisions for AKI in the final rule, but will consider them in future 
rulemaking.

F. ESRD Facility Billing for AKI Dialysis

    For payment purposes, claims for beneficiaries with AKI would be 
identified through a specific condition code, an AKI diagnosis, an 
appropriate revenue code, and an appropriate Common Procedural 
Terminology code. These billing requirements would serve to verify that 
a patient has AKI and differentiate claims for AKI from claims for 
patients with ESRD. ESRD facilities are expected to report all items 
and services furnished to individuals with AKI and include comorbidity 
diagnoses on their claims for monitoring purposes. We anticipate that 
with exceptions for separately billable items and services, most of the 
claims policies laid out in Chapter 8 of the Medicare Claims Processing 
Manual will also apply to claims for dialysis furnished to AKI 
beneficiaries. All billing requirements will be implemented and 
furnished through sub-regulatory guidance.

G. Announcement of AKI Payment Rate in Future Years

    In future years, we anticipate announcing the AKI payment rate in 
the annual ESRD PPS rule or in a Federal Register notice. We will adopt 
through notice and comment rulemaking any changes to our methodology 
for payment for AKI as well as any adjustments to the AKI payment rate 
other than the wage index. When we are not making methodological 
changes or adjusting (as opposed to updating) the payment rate, 
however, we will announce the update to the rate rather than subjecting 
it to public comment every year. We are proposing to announce the 
annual AKI payment rate in a notice published in the Federal Register 
or, alternatively, in the annual ESRD PPS rulemaking, and provide for 
that announcement at proposed 42 CFR 413.375. We welcome comments on 
announcing the AKI payment rate in future years.

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

A. Background

    Section 1881(h) of the Act requires the Secretary to establish an 
End-stage renal disease (ESRD) quality incentive program (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 proposed 
rule discusses

[[Page 42823]]

each of these elements and our proposals for their application to the 
ESRD QIP.

B. Proposed Changes to the Requirements for the Payment Year (PY) 2018 
ESRD QIP

1. Proposal to Correct the Small Facility Adjuster (SFA) Policy for PY 
2018
    In the CY 2016 ESRD PPS Final Rule, we revised the calculation of 
the Small Facility Adjuster (SFA) (80 FR 69039). We are proposing to 
correct our description of the SFA for payment year (PY) 2017 and 
future years. Our original proposal pegged the SFA to the national 
mean, such that small facilities scoring below the national mean would 
receive an adjustment, but small facilities scoring above the national 
mean would not. Several commenters supported the overall objectives of 
the proposed SFA modification but were concerned that too few 
facilities would receive an adjustment under our proposed methodology. 
They recommended that rather than pegging the SFA to the national mean, 
we peg the SFA to the benchmark, which is the 90th percentile of 
national facility performance on a measure, such that facilities 
scoring below the benchmark would receive an adjustment, but those 
scoring above the benchmark would not. In the process of updating the 
finalized policy to reflect public comment, we inadvertently neglected 
to update this sentence from our statement of finalized policy: ``For 
the standardized ratio measures, such as the Standardized Readmission 
Ratio (SRR) and Standardized Transfusion Ratio (STrR) clinical 
measures, the national mean measure rate (that is, P) is set to 1.'' 
(80 FR 69039). Setting the ratio measures at the national mean in the 
SFA equation would have been inconsistent with our desired policy 
position and would have been unresponsive to the commenter's point. It 
was also inconsistent with another part of our statement on the 
finalized SFA methodology and was more punitive for facilities because 
it did not provide an adjustment for a number of small facilities that 
may have been adversely affected by a small number of outlier patients. 
Therefore, we propose to correct the description of the SFA methodology 
such that, for the standardized ratio measures such as the SRR and STrR 
clinical measures, P is set to the benchmark, which is the 90th 
percentile of national facility performance.
    We seek comments on this proposal.
2. Proposed Changes to the Hypercalcemia Clinical Measure
    During the measure maintenance process at National Quality Forum 
(NQF), two substantive changes were made to the Hypercalcemia clinical 
measure. First, plasma was added as an acceptable substrate in addition 
to serum calcium. Second, the denominator definition changed such that 
it now includes patients regardless of whether any serum calcium values 
were reported at the facility during the 3-month study period. 
Functionally, this means that a greater number of patient-months will 
be included in this measure, because patient-months will not be 
excluded from the measure calculations solely because a facility 
reports no calcium data for that patient during the entire three month 
study period.
    We are proposing to update the measure's technical specifications 
for PY 2018 and future years to include these two substantive changes 
to the Hypercalcemia clinical measure included in the ESRD QIP. These 
changes will positively impact data completeness in the ESRD QIP 
because facilities' blood tests typically use plasma calcium rather 
than serum calcium. Including patients with unreported calcium values 
in the measure calculations will encourage more complete reporting of 
this data. Additionally, these changes will ensure that the measure 
aligns with the NQF-endorsed measure and can continue to satisfy the 
requirements of the Protecting Access to Medicare Act (PAMA), which 
requires that the ESRD QIP include in its measure set measures 
(outcomes-based, to the extent feasible), that are specific to the 
conditions treated with oral-only drugs.
    We seek comments on this proposal.

C. Proposed Requirements for the PY 2019 ESRD QIP

1. Proposed New Measures for the PY 2019 ESRD QIP
a. Proposed Reintroduction of the Expanded NHSN Dialysis Event 
Reporting Measure
    We first adopted the National Healthcare Safety Network (NHSN) 
Dialysis Event Reporting Measure for the PY 2014 ESRD QIP. For that 
program year, we required facilities to (1) enroll in the NHSN and 
complete any training required by the CDC; and (2) submit three or more 
consecutive months of dialysis event data to the NHSN (76 FR 70268 
through 69). For PY 2015, we retained the requirement for facilities to 
enroll in the NHSN and complete any training required by the CDC, but 
expanded the reporting period to require facilities to report a full 12 
months of dialysis event data (77 FR 67481 through 84). Beginning with 
PY 2016, we replaced the NHSN Dialysis Event Reporting Measure with the 
clinical version of the measure (78 FR 72204 through 07). As a result, 
facilities were scored for purposes of the ESRD QIP based on how many 
dialysis events they reported to the NHSN in accordance with the NHSN 
protocol. We introduced the clinical version of the measure because we 
believed that the measure would hold facilities accountable for 
monitoring and preventing infections in the ESRD population. We 
continue to believe it is vitally important to hold facilities 
accountable for their actual clinical performance on this measure.
    Since we introduced the NHSN Bloodstream Infection (BSI) Clinical 
Measure into the ESRD QIP, some stakeholders have expressed significant 
concerns about two distinct types of accidental or intentional under-
reporting. First, these stakeholders believe that many facilities do 
not consistently report monthly dialysis event data for the full 12-
month performance period. Second, these stakeholders believe that even 
with respect to the facilities that report monthly dialysis event data, 
many of those facilities do not consistently report all of the dialysis 
events that they should be reporting. (80 FR 69048). These public 
comments, as well as our thorough review of data reported for the PY 
2015 NHSN Dialysis Event Reporting Measure and results from the PY 2014 
NHSN data validation feasibility study, suggest that as many as 60-80 
percent of dialysis events are under-reported.2 3
---------------------------------------------------------------------------

    \2\ Duc B. Nguyen, et al. Completeness of Methicillin-Resistant 
Staphylococcus aureus Bloodstream Infection Reporting From 
Outpatient Hemodialysis Facilities to the National Healthcare Safety 
network, 2013. Infection Control & Hospital Epidemiology, http://journals.cambridge.org/abstract_S0899823X15002652.
    \3\ Nicola D. Thompson, Matthew Wise, Ruth Belflower, Meredith 
Kanago, Marion A Kainer, Chris Lovell and Priti R. Patel. Evaluation 
of Manual and Automated Bloodstream Infection Surveillance in 
Outpatient Dialysis Centers. Infection Control & Hospital 
Epidemiology, Available on CJO 2016 doi: 10.1017/ice.2015.336.
---------------------------------------------------------------------------

    We believe that there are delicate tradeoffs associated with 
incentivizing facilities to both report monthly dialysis event data and 
to accurately report such data. On the one hand, if we incentivize 
facilities to report monthly dialysis event data but do not hold them 
accountable for their performance, we believe that facilities will be 
more likely to accurately report all dialysis events.

[[Page 42824]]

Complete and accurate reporting is critical to maintaining the 
integrity of the NHSN surveillance system, enables facilities to 
implement their own quality improvement initiatives, and enables the 
CDC to design and disseminate prevention strategies. Nevertheless, 
incentivizing full and accurate reporting without financial 
consequences for poor performance will not necessarily improve patient 
safety. On the other hand, if we incentivize facilities to achieve high 
clinical performance scores without also incentivizing them to 
accurately report monthly dialysis event data, we believe that 
facilities will be less likely to report complete and accurate monthly 
data, which could diminish the integrity of the NHSN surveillance 
system and the quality improvement efforts that it supports. 
Maintaining an incentive structure along these lines increases the 
financial consequences for not achieving high clinical scores, but 
jeopardizes the accuracy and completeness of the dialysis event data 
upon which those scores are based.
    In light of these considerations, we believe that the best way to 
strike the proper balance between these competing interests is to 
propose to reintroduce the expanded NHSN Dialysis Event Reporting 
Measure, beginning with PY 2019, and to include both this measure and 
the NHSN BSI Clinical Measure in the ESRD QIP measure set.
    In combination with other programmatic features described more 
fully below (see sections IV.C.2. and IV.C.8.), we believe this 
reporting measure will bolster incentives for facilities to report 
complete and accurate data to NHSN, while the clinical measure will 
preserve incentives to reduce the number of dialysis events. We believe 
that including both of these measures in the ESRD QIP measure set will 
ensure that we hold facilities accountable for the frequency with which 
they report data to the NHSN and will address validation concerns 
related to the two distinct types of under-reporting of data, described 
above.
    , we propose that beginning with PY 2019, facilities must enroll in 
NHSN and complete any training required by the CDC related to reporting 
dialysis events via NHSN, and that they must report monthly dialysis 
event data on a quarterly basis to the NHSN. We also propose that each 
quarter's data would be due 3 months after the end of the quarter. For 
example, data from January 1 through March 31, 2017 would need to be 
submitted to NHSN by June 30, 2017; data from April 1 through June 30, 
2017 would need to be submitted by September 30, 2017; data from July 1 
through September 30, 2017 would need to be submitted by December 31, 
2017; and data from October 1 through December 31, 2017 would need to 
be submitted by March 31, 2018. For further information regarding 
NHSN's dialysis event reporting protocols, please see http://www.cdc.gov/nhsn/pdfs/pscmanual/8pscdialysiseventcurrent.pdf. These 
requirements are the same ones that previously applied to the expanded 
NHSN Dialysis Event Reporting Measure when that measure was included in 
the ESRD QIP (77 FR 67481 through 84).
    Section 1881(h)(2)(B)(i) of the Act requires that, unless the 
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies, 
the measures specified for the ESRD QIP under section 
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity 
with a contract under section 1890(a) of the Act (which is currently 
NQF). Under the exception set forth in 1881(h)(2)(B)(ii) of the Act, in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed so 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. The 
proposed NHSN Dialysis Event Reporting Measure is not endorsed by the 
NQF, but for the reasons explained above, we believe that it is 
appropriate to assess facilities solely based on whether they actually 
report full and accurate monthly dialysis event data to the NHSN. 
Although we recognize that the NHSN BSI Clinical Measure is currently 
included in the ESRD QIP measure set and that this measure and the 
proposed NHSN Dialysis Event Reporting Measure would be calculated 
using the same set of data, the two measures assess different outcomes. 
We believe that including both of these measures in the ESRD QIP 
measure set will collectively support our efforts to ensure that 
facilities report, and are scored based on, complete and accurate 
dialysis event data.
    For the reasons stated above, we propose to reintroduce the NHSN 
Dialysis Event Reporting Measure to the ESRD QIP beginning with PY 
2019.
    We seek comments on this proposal.
b. Proposal for Scoring the Proposed NHSN Dialysis Event Reporting 
Measure
    With respect to the proposed NHSN Dialysis Event Reporting measure, 
we are proposing to score facilities with a CCN Open Date on or before 
January 1, 2017. Using the methodology described below, we propose to 
assign the following scores for reporting different quantities of data:

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Scoring Distribution for the Proposed NHSN Dialysis Event Reporting
 Measure:
Number of Reporting Months:
    12 months = 10 points
    6-11 months = 2 points
    0-5 months = 0 points
------------------------------------------------------------------------

    We selected these scores for the following reasons: First, due to 
the seasonal variability of bloodstream infection rates, we want to 
incentivize facilities to report the full 12 months of data and reward 
reporting consistency over the course of the entire performance period. 
We therefore propose that facilities will receive 10 points for 
submitting twelve months of data. We recognize, however, that from the 
perspective of national prevention strategies and internal quality 
improvement initiatives, there is still some value in collecting fewer 
than 12 months of data from facilities. We also need at least 6 months 
of data in order to calculate reliable scores on the NHSN BSI Clinical 
Measure. For these reasons, we propose that facilities will receive 2 
points for reporting between 6 and 11 months of dialysis event data. 
Finally, in consultation with the CDC, we have determined that NHSN BSI 
Clinical Measure rates are not reliable when they are calculated using 
fewer than six months of data. For that reason, we propose that a 
facility will receive 0 points on the proposed NHSN Dialysis Event 
Reporting Measure if it reports fewer than six months of data.
    The proposed scoring methodology for the proposed NHSN Dialysis 
Event Reporting Measure differs slightly from what we finalized for PY 
2015. For that year of the program, facilities were awarded 0 points 
for reporting fewer than 6 months of data, 5 points for reporting 6 
consecutive months, and 10 points for reporting all 12 months of data. 
We believe that it is appropriate to reduce the number of points 
facilities receive for reporting 6-11 months of data from 5 to 2 
because by PY 2019, facilities will have had 3 more years of experience 
reporting data to NHSN than they had for PY 2015.

[[Page 42825]]

2. Proposed New Measure Topic Beginning With the PY 2019 ESRD QIP
a. Proposed NHSN BSI Measure Topic
    For PY 2019 and future years of the program, we are proposing to 
create a new NHSN BSI Measure Topic. We propose that this measure topic 
consist of the following two measures:
(i) NHSN (NHSN) Bloodstream Infection (BSI) in Hemodialysis Patients, a 
Clinical Measure
(ii) NHSN Dialysis Event Reporting Measure.
    We believe it is appropriate to combine these two measures into one 
measure topic, because data from the reporting measure will be used to 
score both that measure and the clinical measure, and combining both 
measures under the same measure topic will better enable us to 
precisely calibrate incentives for complete and accurate reporting and 
high clinical performance. The NHSN BSI Clinical Measure and the NHSN 
Dialysis Event Reporting Measure are mutually reinforcing because one 
measure encourages accurate reporting while the other uses the reported 
data to assess facility performance on preventing BSIs in their 
patients. Therefore, combining the reporting and clinical measures 
under the same measure topic will simplify the process of weighting 
each of the two measures, such that incentives from one measure can be 
simply reallocated to the other if new evidence suggests that the 
incentives are not properly balanced to optimize both reporting and 
prevention.
    We seek comments on this proposal.
3. Proposal To Establish a New Safety Measure Domain
    We currently use two domains in the ESRD QIP for purposes of 
scoring. The first of these domains, termed the Clinical Measure 
Domain, is defined as an aggregated metric of facility performance on 
the clinical measures and measure topics in the ESRD QIP, and we use 
subdomains within the Clinical Measure Domain for the purposes of 
calculating the Clinical Measure Domain score (79 FR 66213). We also 
have a Reporting Measure Domain, in which scores on reporting measures 
are weighted equally (79 FR 66218 through 66219).
    In section IV.C.2 above, we describe the proposed NHSN BSI Measure 
Topic. We believe that this measure topic, consisting of both the 
proposed NHSN Dialysis Event Reporting Measure and the NHSN BSI 
Clinical Measure, is fundamentally different from the other measures 
and measure topics included in the ESRD QIP's measure set. The two 
measures included in this measure topic are inextricably linked because 
data from the reporting measure is used to calculate the clinical 
measure. No other reporting measures currently included in the ESRD 
QIP's measure set are used for this purpose. As mentioned above, 
placing these two measures together in a single measure topic that is 
given a single measure topic score, creates the important linkage 
between the two measures and balances out the competing incentives 
involved: Incentivizing complete and accurate reporting of data to NHSN 
while also incentivizing facilities to achieve high clinical scores on 
the clinical measure. Without complete and accurate data, the clinical 
measure will not produce meaningful results. The measure topic is also 
different from others included in the ESRD QIP's measure set because it 
is comprised of both a clinical measure and a reporting measure. It 
therefore does not appropriately belong in either the Reporting Measure 
Domain or the Clinical Measure Domain.
    Because of these fundamental differences, we propose to remove the 
Safety Subdomain from the Clinical Measure Domain for PY 2019 and 
future payment years. We propose that the Safety Subdomain will instead 
be a new, third Domain, separate from and in addition to the existing 
Clinical and Reporting Measure Domains. Additionally, we propose that 
facilities will receive a Safety Measure Domain score in addition to 
their Reporting Measure Domain and Clinical Measure Domain scores. We 
describe our proposed scoring methodology more fully below in section 
IV.C.6, but we propose that these three Domain scores will be combined 
and weighted to produce a Total Performance Score (TPS) for each 
facility.
    We seek comments on these proposals.
4. Proposal for Scoring the Proposed NHSN BSI Measure Topic
    In light of the concerns we have discussed above, including the 
accidental or intentional underreporting of dialysis event data, we are 
proposing to assign significant weight to the proposed NHSN Dialysis 
Event Reporting Measure in the overall NHSN BSI Measure Topic score. 
However, our proposed weighting scheme also reflects our goal to 
incentivize strong performance on the clinical measure. For these 
reasons, we propose that the NHSN Dialysis Event Reporting Measure be 
weighted at 40 percent of the measure topic score and the NHSN BSI 
Clinical Measure be weighted at 60 percent of the measure topic score. 
The formula below depicts how the NHSN BSI Measure Topic would be 
scored.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Proposed Formula To Derive NHSN BSI Measure Topic Score:
    [NHSN Dialysis Event Reporting Measure Score * 0.4] + [NHSN BSI
     Clinical Measure Score * 0.6] = Measure Topic Score
------------------------------------------------------------------------

    We seek comment on this proposal.
5. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Finalized for the PY 2019 ESRD QIP
    In the calendar year (CY) 2016 ESRD PPS final rule, we finalized 
that for PY 2019, the performance standards, achievement thresholds, 
and benchmarks for the clinical measures would be set 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. (80 FR 69060). At 
this time, we do not have the necessary data to assign numerical values 
to the proposed performance standards, achievement thresholds, and 
benchmarks because we do not yet have complete data from CY 2015. 
Nevertheless, we are able to estimate these numerical values based on 
the most recent data available. For the Vascular Access Type, 
Hypercalcemia, NHSN BSI and ICH CAHPS clinical measures, this data 
comes from the period of January through December 2015. For the SRR and 
STrR clinical measures, this data comes from the period of January 
through December 2014. In Table 2, we have provided the estimated 
numerical values for all of the finalized PY 2019 ESRD QIP clinical 
measures. We will publish updated values for the clinical measures, 
using data from the first part of CY 2016, in the CY 2017 ESRD PPS 
final rule.

[[Page 42826]]



  Table 2--Estimated Numerical Values for the Performance Standards for the PY 2019 ESRD QIP Clinical Measures
                                     Using the Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
                                                            Achievement                           Performance
                        Measure                              threshold          Benchmark           standard
----------------------------------------------------------------------------------------------------------------
Vascular Access Type
    %Fistula...........................................             53.72%             79.62%             66.04%
    %Catheter..........................................             17.06%              2.89%              9.15%
Hypercalcemia..........................................              4.21%               0.32              1.85%
NHSN Bloodstream Infection SIR.........................              1.812                  0              0.861
Standardized Readmission Ratio.........................              1.276              0.629              0.998
Standardized Transfusion Ratio.........................              1.470              0.431              0.923
Comprehensive Dialysis Adequacy Measure Set............             86.85%             97.19%             92.53%
ICH CAHPS: Nephrologists' Communication and Caring.....             56.41%             77.06%             65.89%
ICH CAHPS: Quality of Dialysis Center Care and                      52.88%             71.21%             60.75%
 Operations............................................
ICH CAHPS: Providing Information to Patients...........             72.09%             85.55%             78.59%
ICH CAHPS: Overall Rating of Nephrologists.............             49.33%             76.57%             62.22%
ICH CAHPS: Overall Rating of Dialysis Center Staff.....             48.84%             77.42%             62.26%
ICH CAHPS: Overall Rating of the Dialysis Facility.....             51.18%             80.58%             65.13%
----------------------------------------------------------------------------------------------------------------

    In previous rulemaking, we have finalized policies to the effect 
that if final numerical values for the performance standard, 
achievement threshold, and/or benchmark were worse than they were for 
that measure in the previous year of the ESRD QIP, then we would 
substitute the previous year's performance standard, achievement 
threshold, and/or benchmark for that measure. We finalized this policy 
because we believe that the ESRD QIP should not have lower performance 
standards than in previous years. In light of recent discussions with 
CDC, we have determined that in certain cases it may be appropriate to 
re-baseline the NHSN BSI Clinical Measure, such that expected infection 
rates are calculated on the basis of a more recent year's data. In such 
cases, numerical values assigned to performance standards may appear to 
decline, even though they represent higher standards for infection 
prevention. For this reason, with the exception of the NHSN BSI 
Clinical Measure, we propose to substitute the PY 2018 performance 
standard, achievement threshold, and/or benchmark for any measure that 
has a final numerical value for a performance standard, achievement 
threshold, and/or benchmark that is worse than it was for that measure 
in the PY 2018 ESRD QIP. We also propose that the performance standards 
for the NHSN BSI Clinical Measure for PY 2019 will be used irrespective 
of what values were assigned to the performance standards for PY 2018.
    We seek comments on this proposal.
6. Proposal for Weighting the Proposed Safety Measure Domain Within the 
TPS and Proposal To Change the Weighting of the Clinical Measure Domain 
for PY 2019
    As discussed in Section IV.C.3 above, we are proposing to remove 
the Safety Subdomain from the Clinical Measure Domain and establish it 
as a third domain alongside the Clinical Measure and Reporting Measure 
Domains for the purposes of scoring facilities and determining Total 
Performance Scores.
    In light of stakeholder comments we have received about the 
prevalence of under-reporting for the NHSN BSI Clinical Measure, as 
well as the tradeoffs (discussed more fully in section IV.C.1.a. above) 
between our desire to maintain strong incentives for facilities to 
report bloodstream infections and to prevent those infections, and 
because the Safety Domain is comprised of a single measure topic, we 
believe it is necessary to reduce the weight of the Safety Measure 
Domain as a percentage of the TPS. However, we believe it is important 
to maintain as much consistency as possible in the ESRD QIP scoring 
methodology. Therefore, we are proposing to gradually reduce the weight 
of the Safety Measure Domain to 15 percent of the TPS in PY 2019, and 
then reduce it further in PY 2020, as proposed below. We further 
propose that the Clinical Measure Domain will be weighted at 75 percent 
of the TPS, and the Reporting Measure Domain will continue to be 
weighted at 10 percent of the TPS because we do not want to diminish 
the incentives to report data on the reporting measures.
    In the CY 2015 ESRD PPS final rule, we finalized the criteria we 
will use to assign weights to measures in a facility's Clinical Measure 
Domain score (79 FR 66214 through 66216). Under these criteria, we take 
into consideration: (1) the number of measures and measure topics in a 
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.
    With respect to criterion 3, one of our top priorities for 
improving the quality of care furnished to ESRD patients includes 
increasing the number and significance of both outcome and patient 
experience of care measures because these measures track important 
patient outcomes, instead of focusing on the implementation and 
achievement of clinical processes that may not result in improved 
health for patients.\4\ We believe that a shift toward outcome measures 
will establish a sounder connection between payment and clinical 
results that matter to patients. We similarly believe that it is 
important to prioritize measures of patient experience because high 
performance on these measures improves clinical outcomes and patient 
retention. Accordingly, we believe that increasing the impact of 
outcome and patient experience of care measures in the ESRD QIP measure 
set will ensure that facilities that fail to perform well on these 
measures are much more likely to receive a payment reduction.
---------------------------------------------------------------------------

    \4\ CMS Quality Strategy, page 10, 2016. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
---------------------------------------------------------------------------

    In light of the proposed addition of the Safety Measure Domain as 
well as the policy priorities discussed above, we are proposing to 
change the Clinical Measure Domain weighting for the PY 2019 ESRD QIP. 
Specifically, we are proposing to increase the weight of the

[[Page 42827]]

Vascular Access Type, Dialysis Adequacy and Hypercalcemia measures by 1 
percentage point each in the Clinical Measure Domain. This will result 
in a minor reduction of the weight that each of these measures receives 
as a percentage of the TPS, which is consistent with our policy to 
assign greater weight to outcome and experience of care measures. We 
are also proposing to apportion six percent of the Clinical Measure 
Domain to the SRR and ICH CAHPS measures, and to apportion the 
remaining five percent to the STrR measure. We believe this is 
appropriate because it distributes points as equally as possible among 
the outcome and experience of care measures, with a slight preference 
for SRR and ICH CAHPS because facilities will have had more experience 
with these measures than they will have had with STrR.
    For the reasons discussed above, we propose to use the following 
weighting system in Table 3 below, for calculating a facility's 
Clinical Measure Domain score for PY 2019. For comparison, in Table 4, 
we have also provided the Measure Weights we originally finalized for 
PY 2019 in the CY 2016 ESRD PPS Final Rule (80 FR 69063).

Table 3--Proposed Clinical Measure Domain Weighting for the PY 2019 ESRD
                                   QIP
------------------------------------------------------------------------
                                          Measure weight
                                              in the
                                             clinical     Measure weight
  Measures/Measure topics by subdomain    measure domain   as percent of
                                               score       TPS (proposed
                                           (proposed for   for PY 2019)
                                             PY 2019)
------------------------------------------------------------------------
Patient and Family Engagement/Care                   42%
 Coordination Subdomain.................
    ICH CAHPS measure...................             26%           19.5%
    SRR measure.........................             16%             12%
Clinical Care Subdomain.................             58%  ..............
    STrR measure........................             12%              9%
    Dialysis Adequacy measure...........             19%          14.25%
    Vascular Access Type measure topic..             19%          14.25%
    Hypercalcemia measure...............              8%              6%
------------------------------------------------------------------------
Note: For PY 2019, we are proposing that the Clinical Domain will make
  up 75% of a facility's Total Performance Score (TPS). The percentages
  listed in this Table represent the measure weight as a percent of the
  Clinical Domain Score.


  Table 4--Finalized Clinical Measure Domain Weighting for the PY 2019
         ESRD QIP (Finalized in the CY 2016 ESRD PPS Final Rule)
------------------------------------------------------------------------
                                          Measure weight
                                              in the
                                             clinical     Measure weight
  Measures/Measure topics by subdomain    measure domain   as percent of
                                               score      TPS (finalized
                                          (finalized for   for PY 2019)
                                             PY 2019)
------------------------------------------------------------------------
Safety Subdomain........................             20%
    NHSN BSI Clinical Measure...........             20%             18%
Patient and Family Engagement/Care                   30%  ..............
 Coordination Subdomain.................
    ICH CAHPS measure...................             20%             18%
    SRR measure.........................             10%              9%
Clinical Care Subdomain.................             50%  ..............
    STrR measure........................              7%            6.3%
    Dialysis Adequacy measure...........             18%           16.2%
    Vascular Access Type measure topic..             18%           16.2%
Hypercalcemia measure...................              7%            6.3%
------------------------------------------------------------------------

    In the CY 2016 ESRD PPS Final Rule, we finalized a requirement 
that, to be eligible to receive a TPS, a facility had to be eligible 
for at least one reporting measure and at least one clinical measure 
(80 FR 69064). With the proposed addition of the Safety Measure Domain 
for PY 2019, we are proposing a change to this policy. Specifically, 
for PY 2019, we propose that to be eligible to receive a TPS, a 
facility must be eligible for at least one measure in the Clinical 
Measure Domain and at least one measure in the Reporting Measure 
Domain. As such, facilities do not need to receive a score on a measure 
in the Safety Measure Domain in order to be eligible to receive a TPS. 
The NHSN BSI Clinical Measure and the NHSN Dialysis Event Reporting 
Measure have the same eligibility requirements (specifically they 
require that a facility treated at least 11 eligible patients during 
the performance period). We are proposing this change in policy to 
avoid a situation in which a facility is eligible to receive a TPS when 
they only receive a score for a single measure topic. We are not 
proposing any changes to the policy that a facility's TPS will be 
rounded to the nearest integer, with half of an integer being rounded 
up.
    We seek comments on these proposals.
7. Example of the Proposed PY 2019 ESRD QIP Scoring Methodology
    In this section, we provide an example to illustrate the proposed 
scoring methodology for PY 2019. Figures 1 through 4 illustrate how to 
calculate the Clinical Measure Domain score, the Reporting Measure 
Domain score, the Safety Measure Domain score, and the TPS. Figure 5 
illustrates the full proposed scoring methodology for PY 2019. Note 
that for this example,

[[Page 42828]]

Facility A, a hypothetical facility, has performed very well.
    Figure 1 illustrates the methodology used to calculate the Clinical 
Measure Domain score for Facility A.
[GRAPHIC] [TIFF OMITTED] TP30JN16.000

    Figure 2 illustrates the general methodology for calculating the 
Reporting Measure Domain score for Facility A.

[[Page 42829]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.001

    Figure 3 illustrates the methodology used for calculating the 
Safety Measure Domain score for Facility A.

[[Page 42830]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.002

    Figure 4 illustrates the methodology used to calculate the TPS for 
Facility A.

[[Page 42831]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.003

    Figure 5 illustrates the full scoring methodology for PY 2019.

[[Page 42832]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.004

8. Proposed 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 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 2016 ESRD PPS final rule, we finalized 
our proposal for calculating the minimum TPS for PY 2019 and future 
payment years (80 FR 69067). 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 2017 reporting measures (80 FR 69067).
    We were unable to calculate a minimum TPS for PY 2019 in the CY 
2016 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 2019 ESRD QIP 
in the CY 2017 ESRD PPS final rule (80 FR 69068).
    Based on the estimated performance standards listed above, we 
estimate that a facility must meet or exceed a minimum TPS of 59 for PY 
2019. For all of the clinical measures except the SRR and STrR, these 
data come from CY 2015. The data for the SRR and STrR clinical measures 
come from CY 2014 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 2019 performance period. We are 
proposing that a facility failing to meet the minimum TPS, as 
established in the CY 2017 ESRD PPS final rule, will receive a payment 
reduction based on the estimated TPS ranges indicated in Table 5 below.

Table 5--Estimated Payment Reduction Scale for PY 2019 Based on the Most
                         Recently Available Data
------------------------------------------------------------------------
          Total performance score                     Reduction
------------------------------------------------------------------------
100--59...................................                          0.0%
58--49....................................                          0.5%
48--39....................................                          1.0%
38--29....................................                          1.5%
28--0.....................................                          2.0%
------------------------------------------------------------------------

    We seek comments on these proposals.
9. Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the

[[Page 42833]]

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 
Consolidated Renal Operations in a Web-Enabled Network (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 and PY 2018 ESRD QIP, 
and propose to continue doing so for the PY 2019 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 2017. 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 calendar days of receiving a 
request, then we propose 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 the Centers 
for Disease Control and Prevention (CDC's) National Healthcare Safety 
Network (NHSN) Dialysis Event Module for the NHSN BSI 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. 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 2019 ESRD QIP, we propose to randomly select 35 
facilities to participate in an NHSN dialysis event validation study by 
submitting 10 patient records covering two quarters of data reported in 
CY 2017. A CMS contractor will send these facilities requests for 
medical records for all patients with ``candidate events'' during the 
evaluation period; i.e., patients who had any positive blood cultures; 
received any intravenous antimicrobials; had any pus, redness, or 
increased swelling at a vascular access site; and/or were admitted to a 
hospital during the evaluation period. Facilities will have 30 calendar 
days to respond to the request for medical records based on candidate 
events either electronically or on paper. If the contractor determines 
that additional medical records are needed to reach the 10-record 
threshold from a facility to validate whether the facility accurately 
reported the dialysis events, then the contractor will send a request 
for additional, randomly selected patient records from the facility. 
The facility will have 30 calendar days from the date of the letter to 
respond to the request. With input from CDC, the CMS contractor will 
utilize a methodology for reviewing and validating records from 
candidate events and randomly selected patients, in order to determine 
whether the facility reported dialysis events for those patients in 
accordance with the NHSN Dialysis Event Protocol. If a facility is 
selected to participate in the validation study but does not provide 
CMS with the requisite lists of positive blood cultures within 30 
calendar days of receiving a request, then we propose to deduct 10 
points from the facility's TPS. Information from the validation study 
may be used in future years of the program to inform our consideration 
of future policies that would incorporate NHSN data accuracy into the 
scoring process.
    We recognize that facilities have previously had 60 days to respond 
to these requests. However, in the process of implementing the pilot 
validation study for CY 2015 data, we recognized that the validation 
contractor did not have enough time to initiate requests, receive 
responses, validate data reported to NHSN, and generate a comprehensive 
validation report before the end of the contract cycle. Although 
facilities will have less time, the 30-day response requirement is 
consistent with validation studies conducted in the Hospital IQR 
Program, and we believe that 30 days is a reasonable amount of time for 
facilities to obtain and transmit the requisite medical records.
    We seek comments on this proposal.

D. Proposed Requirements for the PY 2020 ESRD QIP

1. Proposed Replacement of the Mineral Metabolism Reporting Measure 
Beginning with the PY 2020 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 66174).
    Subsequent to the publication of the CY 2016 ESRD PPS final rule, 
we evaluated the finalized PY 2019 ESRD QIP measures that would be 
continued in PY 2020 against all of these criteria. We determined that 
none of these measures met criterion (1), (2), (3), (4), (5) or (6). As 
part of this evaluation for criterion one, we performed a statistical 
analysis of the PY 2019 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/061_TechnicalSpecifications.html and a summary of 
our topped-out analysis results appears in Table 6 below.

[[Page 42834]]



                         Table 6--PY 2020 Clinical Measures Including Facilities With at Least 11 Eligible Patients per Measure
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             75th/25th    90th/10th                  Statistically     Truncated    Truncated
           Measure                  N        Percentile   Percentile   Std Error   indistinguishable      Mean          SD          TCV       TCV's 0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kt/V Delivered Dose above             6210         96.0         98.0        0.093              No            92.5         4.20         0.05          Yes
 minimum.....................
Fistula Use..................         5906         73.2         79.6        0.148              No            65.7         8.88         0.14           No
Catheter Use.................         5921         5.43         2.89        0.093              No        90.1 \1\         5.16        <0.01          Yes
Serum Calcium >10.2..........         6257         0.91         0.32        0.049              No         97.8\1\         1.48        <0.01          Yes
NHSN--SIR....................         5781         0.41         0.00        0.011              No           0.963         0.57        <0.01          Yes
SRR..........................         5739         0.82         0.64        0.004              No           0.995         0.21        <0.01          Yes
STrR.........................         5650         0.64         0.43        0.008              No           0.965         0.37        <0.01          Yes
SHR..........................         6086         0.79         0.63        0.004              No           0.983         0.23        <0.01          Yes
ICH CAHPS....................
Nephrologists communication           3349         71.8         77.1        0.159              No            65.7         7.11         0.11           No
 and caring..................
Quality of dialysis center            3349         66.2         71.2        0.134              No            60.9         6.20         0.10           No
 care and operations.........
Providing information to              3349         82.4         85.6        0.101              No            78.4         4.61         0.06          Yes
 patients....................
Rating of Nephrologist.......         3349         69.9         76.6        0.204              No            62.0         9.29         0.15           No
Rating of dialysis facility           3349         70.9         77.4        0.215              No            62.0         9.92         0.16           No
 staff.......................
Rating of dialysis center....         3349         73.8         80.6        0.221              No            64.8        10.18         0.16           No
--------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Truncated mean for percentage is reversed (100%--truncated mean) for measures where lower score = better performance.

    As the information in Table 6 indicates, none of these clinical 
measures are currently topped-out in the ESRD QIP. Accordingly, we are 
not proposing to remove any of these measures from the ESRD QIP for PY 
2020 because they are topped out.
    We consider the data sources we use to calculate our measures based 
on the reliability of the data, and we also try to use CROWNWeb data 
whenever possible. The Mineral Metabolism measure currently in the ESRD 
QIP measure set uses CROWNWeb data to determine how frequently 
facilities report serum phosphorus data, but it also uses Medicare 
claims data to exclude patients when they were treated at a facility 
fewer than seven times in a month. There is no evidence to suggest that 
the Mineral Metabolism reporting measure is leading to negative or 
unintended clinical consequences. However, we do not think it is 
optimal to use claims data to calculate the measure because that is 
inconsistent with our intention to increasingly use CROWNWeb as the 
data source for calculating measures in the ESRD QIP. There is also 
another available measure that can be calculated using only CROWNWeb 
data and that we believe is as reliable as the Mineral Metabolism 
Reporting Measure. The measure also excludes patients using criteria 
consistent with that used by other ESRD QIP measures. For these 
reasons, we are proposing to remove the Mineral Metabolism Reporting 
Measure from the ESRD QIP measure set beginning with the PY 2020 
program and to replace that measure with the proposed Serum Phosphorus 
Reporting measure, the specifications for which are described below in 
section IV.D.2.c.i.
    We seek comments on this proposal.
 2. Proposed Measures for the PY 2020 ESRD QIP
a. PY 2019 Measures Continuing for PY 2020 and Future Payment Years
    We previously finalized 12 measures in the CY 2016 ESRD PPS final 
rule for the PY 2019 ESRD QIP, and these measures are summarized in 
Table 7 below. In accordance with our policy to continue using measures 
unless we propose to remove or replace them, (77 FR 67477), we will 
continue to use 11 of these measures in the PY 2020 ESRD QIP. As noted 
above, we are proposing to replace the Mineral Metabolism

[[Page 42835]]

Reporting Measure with the Serum Phosphorus Reporting Measure and we 
are proposing to reintroduce the NHSN Dialysis Event Reporting Measure 
into the ESRD QIP measure set beginning with PY 2019.

      Table 7--PY 2019 ESRD QIP Measures Being Continued in PY 2020
------------------------------------------------------------------------
            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 [gteqt] 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..........................  National Healthcare Safety Network (NHSN)
                                Bloodstream Infection in Hemodialysis
                                Patients, a clinical measure.
                               The Standardized Infection Ratio (SIR) of
                                Bloodstream Infections (BSI) will be
                                calculated among patients receiving
                                hemodialysis at outpatient hemodialysis
                                centers.
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.
N/A..........................  Standardized Readmission Ratio, a
                                clinical measure.
                               Standardized hospital readmissions ratio
                                of the number of observed unplanned 30-
                                day hospital 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 dialysis
                                patients.
                               Number of observed eligible red blood
                                cell transfusion events occurring in
                                patients dialyzing at a facility to the
                                number of eligible transfusions that
                                would be expected.
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 twice in accordance with survey
                                specifications and submits survey
                                results to CMS.
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..........................  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..........................  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..........................  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.
N/A..........................  Kt/V Dialysis Adequacy Comprehensive
                                Clinical Measure.
                               Percentage of all patient months for
                                patients whose average delivered dose of
                                dialysis (either hemodialysis or
                                peritoneal dialysis) met the specified
                                threshold during the reporting period.
NA...........................  NHSN Dialysis Event Reporting Measure
                                (Proposed for PY 2019 in Section
                                IV.C.1.a. of this Proposed Rule).
------------------------------------------------------------------------

b. Proposed New Clinical Measures Beginning With the PY 2020 ESRD QIP
i. Proposed Standardized Hospitalization Ratio (SHR) Clinical Measure
Background
    Hospitalization rates are an important indicator of patient 
morbidity and quality of life. On average, dialysis patients are 
admitted to the hospital nearly twice a year and spend an average of 
11.2 days in the hospital per year.\5\ Hospitalizations account for 
approximately 40 percent of total Medicare expenditures for ESRD 
patients.\6\ Measures of the frequency of hospitalization have the 
potential to help control escalating medical costs, play an important 
role in identifying potential problems, and help facilities provide 
cost-effective health care.
---------------------------------------------------------------------------

    \5\ United States Renal Data System. 2015 USRDS annual data 
report: Epidemiology of kidney disease in the United States. 
National Institutes of Health, National Institute of Diabetes and 
Digestive and Kidney Diseases, Bethesda, MD, 2015.
    \6\ USRDS Annual Data Report (2015).
---------------------------------------------------------------------------

    At the end of 2013 there were 661,648 patients being dialyzed, of 
which 117,162 were new (incident) ESRD patients.\7\ In 2013, total 
Medicare costs for the ESRD program were $30.9 billion, a 1.6 percent 
increase from 2012.\8\ Correspondingly, hospitalization costs for ESRD 
patients are very high with Medicare costs of over $10.3 billion in 
2013.
---------------------------------------------------------------------------

    \7\ USRDS Annual Data Report (2015).
    \8\ United States Renal Data System. 2015 USRDS annual data 
report: Epidemiology of kidney disease in the United States. 
National Institutes of Health, National Institute of Diabetes and 
Digestive and Kidney Diseases, Bethesda, MD, 2015.
---------------------------------------------------------------------------

    Hospitalization measures have been in use in the Dialysis Facility 
Reports (formerly Unit-Specific Reports) since 1995. The Dialysis 
Facility Reports are used by the dialysis facilities and ESRD Networks 
for quality improvement, and by ESRD state surveyors for monitoring and 
surveillance. In particular, the Standardized Hospitalization Ratio 
(SHR) for Admissions is used in the CMS ESRD Core Survey Process, in 
conjunction with other standard criteria for prioritizing and selecting 
facilities to survey. In addition, the SHR has been found to be 
predictive of dialysis facility deficiency citations in the past (ESRD 
State Outcomes List). The SHR is also a measure that has been publicly 
reported since January 2013 on the Centers for Medicare and Medicaid 
Services (CMS) Dialysis Facility Compare Web site.
Overview of Measure
    The SHR measure is an NQF-endorsed all-cause, risk-standardized 
rate of hospitalizations during a 1-year observation window. The 
Measures Application Partnership supports the direction of this measure 
for inclusion in the ESRD QIP.

[[Page 42836]]

    We are proposing to adopt a modified version of the SHR currently 
endorsed by NQF (NQF #1463). We have submitted this modified measure to 
NQF for endorsement consideration as part of the standard maintenance 
process for NQF #1463. When we previously proposed the SHR for 
implementation in the QIP, we received public comments urging us to not 
rely solely on CMS Medical Evidence Form 2728 as the only source of 
patient comorbidity data in the risk-adjustment calculations for the 
SHR measure. These comments correctly stated that incident comorbidity 
data are collected for all ESRD patients on CMS Form 2728 when patients 
first become eligible to receive Medicare ESRD benefits, regardless of 
payer. Although CMS Form 2728 is intended to inform both facilities and 
us whether one or more comorbid conditions are present at the start of 
ESRD, ``there is currently no mechanism for either correcting or 
updating patient comorbidity data on CMS' Medical Evidence Reporting 
Form 2728'' (76 FR 70267). Commenters were concerned that risk-
adjusting the SHR solely on the basis of comorbidity data from CMS Form 
2728 would create access to care problems for patients, because 
patients typically develop additional comorbidities after they begin 
chronic dialysis, and facilities would have a disincentive to treat 
these patients if recent comorbidities were not included in the risk-
adjustment calculations (77 FR 67495 through 67496).
    In the CY 2013 ESRD PPS proposed rule, we noted that updated 
comorbidity data could be captured on the ESRD 72x claims form. Some 
public comments stated that, ``reporting comorbidities on the 72x claim 
could be a huge administrative burden for facilities, including time 
associated with validating that the data they submit on these claims is 
valid'' (77 FR 67496). In response to these comments, we stated that we 
would ``continue to assess the best means available for risk-adjustment 
for both the SHR and Standardized Mortality Ratio (SMR) measures, 
taking both the benefits of the information and the burden to 
facilities into account, should we propose to adopt these measures in 
future rulemaking'' (77 FR 67496). We proposed to adopt a Comorbidity 
Reporting Measure for the PY 2016 ESRD QIP. This measure would have 
allowed us to collect and analyze the updated comorbidity data ``to 
develop risk adjustment methodologies for possible use in calculating 
the SHR and SMR measures'' (78 FR 72208). We chose not to finalize the 
comorbidity measure ``as a result of the significant concerns expressed 
by commenters (78 FR 72209).
    In response to the comments on the SHR when originally proposed, 
and subsequently the proposed comorbidity reporting measure, we have 
made revisions to the SHR specifications. The modified SHR that we are 
currently proposing to adopt beginning with the PY 2020 ESRD QIP 
includes a risk adjustment for 210 prevalent comorbidities in addition 
to the incident comorbidities from the CMS Medical Evidence Form 2728. 
The 210 prevalent comorbidities were identified through review by a 
Technical Expert Panel (TEP) first convened in late 2015. The details 
of how the 210 comorbidities were identified are described below. We 
propose to identify these prevalent comorbidities for purposes of risk 
adjusting the measure using available Medicare claims data. We believe 
this approach allows us to address commenters' concerns about increased 
reporting burden, while also resulting in a more robust risk-adjustment 
methodology.
    Our understanding is that the NQF evaluates measures on the basis 
of four criteria: importance, scientific acceptability, feasibility, 
and usability. The validity and reliability of a measure's risk-
adjustment calculations fall under the ``scientific acceptability'' 
criterion, and Measure Evaluation Criterion 2b4 specifies NQF's 
preferred approach for risk-adjusting outcome measures (http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=79434). Under this approach, 
patient comorbidities should only be included in risk-adjustment 
calculations if the following criteria are met: (1) Risk adjustment 
should be based on patient factors that influence the measured outcome 
and are present at the start of care; (2) measures should not be 
adjusted for factors related to disparities in care or the quality of 
care; (3) risk adjustment factors must be substantially related to the 
outcome being measured; and (4) risk adjustment factors should not 
reflect the quality of care furnished by the provider/facility being 
evaluated. As indicated in the ``Inclusion and Exclusion Criteria'' 
subsection below, as well as in the NQF-endorsed measure 
specifications, the proposed SHR clinical measure includes dialysis 
patients starting on day 91 of ESRD treatment. Accordingly, we believe 
that consistent with NQF Measure Evaluation Criterion 2b4, it is 
appropriate to risk adjust the proposed SHR measure on the basis of 
incident patient comorbidity data collected on CMS Form 2728 because 
these comorbidities are definitively present at the start of care (that 
is, on day 91 of ESRD treatment). The 210 prevalent comorbidities now 
included for adjustment were also selected with these criteria in mind. 
Specifically, in developing its recommendations, the TEP was asked to 
apply the same criteria that the NQF uses to assign risk-adjusters 
under the approach described above.
    Reflecting these criteria, the TEP evaluated a list of prevalent 
comorbidities derived through the following process. First, the ESRD 
Hierarchical Comorbidity Conditions (ESRD-HCCs) were used as a starting 
point to identify ICD-9 diagnosis codes that could be used for risk 
adjustment. Those individual ICD-9 conditions that comprised the 
respective ESRD HCCs, with a prevalence of at least 0.1 percent in the 
patient population, were then selected for analysis to determine their 
statistical relationship to mortality or hospitalization. This step 
resulted in 555 diagnoses for comorbidities (out of over 3000 ICD-9 
diagnosis codes in the ESRD-HCCs). Next, an adaptive lasso variable 
selection method was applied to these 555 diagnoses to identify those 
with a statistically significant relationship to mortality and/or 
hospitalization (p<0.05). This process identified 242 diagnoses. The 
TEP members then scored each of these diagnoses as follows:

    1. Very likely the result of dialysis facility care.
    2. Likely the result of dialysis facility care.
    3. May or may not be the result of dialysis facility care.
    4. Unlikely to be the result of dialysis facility care.
    5. Very likely not the result of dialysis facility care.

    This scoring exercise aimed at identifying a set of prevalent 
comorbidities are not likely the result of facility care and therefore 
potentially are risk adjusters for SHR and SMR. The TEP concluded that 
comorbidities scored as ``unlikely'' or ``very unlikely the result of 
facility care'' by at least half of TEP members (simple majority) were 
appropriate for inclusion as risk-adjusters. This process resulted in 
210 conditions as risk adjustors. The TEP recommended incorporation of 
these adjustors in the risk model for the SHR, and CMS concurred.
    Section 1881(h)(2)(B)(i) of the Act requires that, unless the 
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies, 
the measures specified for the ESRD QIP under section 1881(h)(2)(A)(iv) 
of the Act must have been endorsed by the entity with a contract under 
section 1890(a) of the Act (that entity currently is NQF).

[[Page 42837]]

Under the exception set forth in section 1881(h)(2)(B)(ii) of the Act, 
in the case of a specified area or medical topic determined appropriate 
by the Secretary for which a feasible and practical measure has not 
been endorsed by the entity with a contract under section 1890(a) of 
the Act, the Secretary may specify a measure that is not so endorsed, 
so long as due consideration is given to measures that have been 
endorsed or adopted by a consensus organization identified by the 
Secretary. We have given due consideration to endorsed measures, 
including the endorsed SHR (NQF #1463), as well as those adopted by a 
consensus organization, and we are proposing this measure under the 
authority of 1881(h)(2)(B)(ii) of the Act. Although the NQF has 
endorsed a hospitalization measure (NQF #1463), our analyses suggest 
that incorporating prevalent comorbidities results in a more robust and 
reliable measure of hospitalization.
    We have analyzed the measure's reliability, the results of which 
are provided below and in greater detail in the SHR Measure Methodology 
report, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The Inter-Unit Reliability (IUR) was 
calculated for the proposed SHR using data from 2012 and a 
``bootstrap'' approach, which uses a resampling scheme to estimate the 
within-facility variation that cannot be directly estimated by the 
analysis of variance (ANOVA). A small IUR (near 0) reveals that most of 
the variation of the measures between facilities is driven by random 
noise, indicating the measure would not be a good characterization of 
the differences among facilities, whereas a large IUR (near 1) 
indicates that most of the variation between facilities is due to the 
real difference between facilities.
    Overall, we found that IURs for the 1-year SHRs have a range of 
0.70 through 0.72 across the years 2010, 2011, 2012 and 2013, which 
indicates that two-thirds of the variation in the 1-year SHR can be 
attributed to the between-facility differences and one-third to within-
facility variation.

                                          Table 9--IUR for 1-Year SHR, Overall and by Facility Size, 2010-2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2010                  2011                  2012                  2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Facility size (number of patients)                    IUR         N         IUR         N         IUR         N         IUR         N
--------------------------------------------------------------------------------------------------------------------------------------------------------
All.............................................................       0.72       5407       0.71       5583       0.70       5709       0.70       5864
Small (<=50)....................................................       0.54       1864       0.51       1921       0.48       1977       0.46       2028
Medium (51-87)..................................................       0.65       1702       0.63       1785       0.58       1825       0.57       1930
Large (>=88)....................................................       0.81       1841       0.81       1877       0.81       1907       0.82       1906
--------------------------------------------------------------------------------------------------------------------------------------------------------

We also tested the SHR for measure validity, assessing its association 
with established quality metrics in the ESRD dialysis population. The 
SHR measure is correlated with the SMR for each individual year from 
2010 through 2013, where Spearman's correlation coefficient ranged from 
0.27 to 0.30, with all four correlations being highly significant 
(p<0.0001). Also for each year from 2011 through 2013, the SHR was 
correlated with the Standardized Readmission Ratio (SRR) (Spearman's 
rho=0.54, 0.50, 0.48; p<0.0001).

    In addition, SHR is negatively correlated in each of the 4-years 
with the measure assessing percentage of patients in the facility with 
an AV Fistula (Spearman's rho= -0.12, -0.15, -0.12, -0.13). Thus higher 
values of SHR are associated with lower usage of AV Fistulas. Further, 
SHR is positively correlated with catheter use >= 90 days (Spearman's 
rho=0.21, 0.21, 0.18, 0.16), indicating that higher values of SHR are 
associated with increased use of catheters. These correlations are all 
highly significant (p<0.001). For each year of 2010 through 2013, the 
SHR is also found to be negatively correlated with the percent of 
hemodialysis patients with Kt/V>=1.2, again in the direction expected 
(Spearman's rho= -0.11, -0.13, -0.10,-0.11; p<0.0001). Lower SHRs are 
associated with a higher percentage of patients receiving adequate 
dialysis dose.
Data Sources
    Data are derived from an extensive national ESRD patient database, 
which is largely derived from the CMS Consolidated Renal Operations in 
a Web-enabled Network (CROWN), which includes Renal Management 
Information System (REMIS), and the Standard Information Management 
System database, the Enrollment Database, Medicare dialysis and 
hospital payment records, the CMS Medical Evidence Form (Form CMS-
2728), transplant data from the Organ Procurement and Transplant 
Network, the Death Notification Form (Form CMS-2746), the Nursing Home 
Minimum Dataset, the Dialysis Facility Compare and the Social Security 
Death Master File. The database is comprehensive for Medicare Parts A 
and B patients. Non-Medicare patients are included in all sources 
except for the Medicare payment records. Standard Information 
Management System/CROWNWeb provides tracking by dialysis provider and 
treatment modality for non-Medicare patients. Information on 
hospitalizations and patient comorbidities are obtained from Medicare 
Inpatient Claims Standard Analysis Files.
Outcome
    The outcome for this measure is the number of inpatient hospital 
admissions among eligible chronic dialysis patients under the care of 
the dialysis facility during the 1-year reporting period.
Measure Eligible Population
    The measure eligible population includes adult and pediatric 
Medicare ESRD patients who have reached day 91 of ESRD treatment and 
who received dialysis within the 1-year period.
Inclusion and Exclusion Criteria
    Patients are included in the measure after the first 90 days of 
treatment. For each patient, we identify the dialysis provider at each 
point in time. Starting with day 91 of ESRD treatment, we attribute 
patients to facilities according to the following rules. A patient is 
attributed to a facility once the patient has been treated there for 60 
days. When a patient transfers from one facility to another, the 
patient continues to be attributed to the original facility for 60 days 
and then is attributed to the destination facility. In particular, a 
patient is attributed to his or her current facility on day 91 of ESRD 
treatment if that facility had treated him or her for at least 60 days. 
If on day 91, the facility had treated a patient for fewer than 60 
days, we wait until the patient reaches day 60 of treatment at that 
facility before

[[Page 42838]]

attributing the patient to the facility. When a patient is not treated 
in a single facility for a span of 60 days (for instance, if there were 
two switches within 60 days of each other), we do not attribute that 
patient to any facility. Patients are removed from facilities 3 days 
prior to transplant in order to exclude the transplant hospitalization. 
Patients who withdrew from dialysis or recovered renal function remain 
assigned to their treatment facility for 60 days after withdrawal or 
recovery.
Risk Adjustment
    The SHR measure estimates expected hospitalizations calculated from 
a Cox model that adjusts for patient risk factors and demographic 
characteristics. This model accounts for clustering of patients in 
particular facilities and allows for an estimate of the performance of 
each individual facility, while applying the risk adjustment model to 
obtain the expected number of hospitalizations for each facility. The 
model does not adjust for sociodemographic status. We understand the 
important role that sociodemographic status plays in the care of 
patients. However, we continue to have concerns about holding dialysis 
facilities to different standards for the outcomes of their patients of 
diverse sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. We routinely monitor the impact of 
sociodemographic status on facilities' results on our measures.
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. For 2-years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the Improving 
Medicare Post-Acute Care Transformation Act. We will closely examine 
the findings of the Assistant Secretary for Planning and Evaluation 
reports and related Secretarial recommendations and consider how they 
apply to our quality programs at such time as they are available.
Calculating the SHR Measure
    The SHR measure is calculated as the ratio of the number of 
observed hospitalizations to the number of expected hospitalizations. A 
ratio greater than one means that facilities have more hospitalizations 
than would be expected for an average facility with a similar patient-
mix; a ratio less than one means the facility has fewer 
hospitalizations than would be expected for an average facility with a 
similar patient-mix.
    The SHR uses expected hospital admissions calculated from a Cox 
model as extended to handle repeated events, with piecewise constant 
baseline rates. The model is fit in two stages. The stage 1 model is 
first fitted to the national data with piecewise constant baseline 
rates applied to each facility. Hospitalization rates are adjusted for 
patient age, sex, diabetes, duration of ESRD, nursing home status, BMI 
at incidence, comorbidity index at incidence, and calendar year. This 
model allows the baseline hospitalization rates to vary between 
facilities then applies the regression coefficients equally to all 
facilities. This approach is robust to possible differences between 
facilities in the patient mix being treated. The second stage then uses 
a risk adjustment factor from the first stage as an offset. The stage 2 
model then calculates the national baseline hospitalization rate. The 
predicted value from stage 1 and the baseline rate from stage 2 are 
then used to calculate the expected number of hospital days for each 
patient over the period during which the patient is seen to be at risk.
    The SHR is a point estimate--the best estimate of a facility's 
hospitalization rate based on the facility's patient- mix. For more 
detailed information on the calculation methodology please refer to our 
Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on our proposal to adopt the SHR measure for the 
ESRD QIP beginning with PY 2020.
c. Proposed New Reporting Measures Beginning With the PY 2020 ESRD QIP
i. Proposed Serum Phosphorus Reporting Measure
    As mentioned above, for PY 2020 we are proposing to adopt a new 
Proposed Serum Phosphorus Reporting Measure. Section 1881(h)(2)(A)(iii) 
of the Act states that the measures specified for the ESRD QIP shall 
include other measures as the Secretary specifies, including, to the 
extent feasible, measures of bone mineral metabolism. Abnormalities of 
bone mineral metabolism are exceedingly common and contribute 
significantly to morbidity and mortality in patients with advanced 
Chronic Kidney Disease (CKD). Numerous studies have associated 
disorders of mineral metabolism with morbidity, including fractures, 
cardiovascular disease, and mortality. Overt symptoms of these 
abnormalities often manifest in only the most extreme states of 
calcium-phosphorus dysregulation, which is why we believe that routine 
blood testing of calcium and phosphorus is necessary to detect 
abnormalities.
    The proposed Serum Phosphorus Reporting Measure is based on a serum 
phosphorus measure that is endorsed by the NQF (NQF #0255), which 
evaluates the extent to which facilities monitor and report patient 
phosphorus levels. In addition, and as explained above, the proposed 
Serum Phosphorus Reporting Measure is collected using CROWNWeb data and 
excludes patients using criteria consistent with other ESRD QIP 
measures. The Measure Applications Partnership expressed full support 
for this measure.
    For PY 2020 and future payment years, we propose that facilities 
must report serum or plasma phosphorus data to CROWNWeb at least once 
per month for each qualifying patient. Qualifying patients for this 
proposed measure are defined as patients 18 years of age or older, who 
have a completed CMS Medical Evidence Form 2728, who have not received 
a transplant with a functioning graft, 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 the month, the 
facility will not be required to report for that patient for that 
month). We further propose 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 Serum Phosphorus rates for January 
2018 on or before February 28, 2018. Facilities would be scored on 
whether they successfully report the required data within the timeframe

[[Page 42839]]

provided, not on the values reported. Technical specifications for the 
Serum Phosphorus reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal.
ii. Proposed Ultrafiltration Rate Reporting Measure
    The ultrafiltration rate measures the rapidity with which fluid 
(ml) is removed during dialysis per unit (kg) of 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,\9\ and that rapid rates of fluid removal at dialysis 
can precipitate events such as intradialytic hypotension, subclinical 
yet significantly decreased organ perfusion, and in some cases 
myocardial damage and heart failure.
---------------------------------------------------------------------------

    \9\ 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.
---------------------------------------------------------------------------

    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 that require 
reporting of relevant ultrafiltration data currently exist, we are 
proposing to adopt the Ultrafiltration Rate reporting measure under the 
authority of section 1881(h)(2)(B)(ii) of the Act.
    The proposed Ultrafiltration Rate reporting measure is based upon 
the NQF-endorsed Avoidance of Utilization of High Ultrafiltration Rate 
(>/= 13 ml/kg/hr) (NQF #2701). This measure assesses the percentage of 
patient-months for patients with an ultrafiltration rate greater than 
or equal to 13 ml/kg/hr. The Measure Applications Partnership expressed 
full support for this measure.
    For PY 2020 and future payment years, we propose that facilities 
must report the following data to CROWNWeb for all hemodialysis 
sessions during the week of the monthly Kt/V draw submitted to CROWNWeb 
for that clinical month, for each qualifying patient (defined below):
 HD Kt/V Date
 Post-Dialysis Weight
 Pre-Dialysis Weight
 Delivered Minutes of BUN Hemodialysis
 Number of sessions of dialysis delivered by the dialysis unit 
to the patient in the reporting month

Qualifying patients for this proposed measure are defined as patients 
18 years of age or older, who have a completed CMS Medical Evidence 
Form 2728, who have not received a transplant with a functioning graft, 
who are on in-center 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 the month, the 
facility will not be required to report for that patient for that 
month). We further propose 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 
2018 on or before February 28, 2018. 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 seek comments on this proposal.
3. Proposed Performance Period for the PY 2020 ESRD QIP
    We are proposing to establish CY 2018 as the performance period for 
the PY 2020 ESRD QIP for all but the NHSN Healthcare Personnel 
Influenza Vaccination reporting measure because it is consistent with 
the performance periods we have historically used for these measures 
and accounts for seasonal variations that might affect a facility's 
measure score.
    We are proposing that the performance period for the NHSN 
Healthcare Personnel 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 seek comments on these proposals.
4. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2020 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 2020 ESRD QIP
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we are proposing for PY 2020 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 2016, because this will give us enough 
time to calculate and assign numerical values to the proposed 
performance standards for the PY 2020 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 
seek comments on these proposals.
b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2020 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 2016 or the first portion of CY 
2017. We will publish values for the clinical measures, using data from 
CY 2016 and the first portion of CY 2017, in the CY 2018 ESRD PPS final 
rule.
c. Proposed Performance Standards for the PY 2020 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

[[Page 42840]]

72213). We are not proposing any changes to these policies for the PY 
2020 ESRD QIP.
    In the CY 2016 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 are not proposing any 
changes to these policies.
    For the proposed Ultrafiltration Rate Reporting Measure, we propose 
to set the performance standard as successfully reporting the following 
data to CROWNWeb for all hemodialysis sessions during the week of the 
monthly Kt/V draw for that clinical month, for each qualifying patient 
(1) HD Kt/V Date; (2) Post-Dialysis Weight; (3) Pre-Dialysis Weight; 
(4) Delivered Minutes of BUN Hemodialysis; and (5) Number of sessions 
of dialysis delivered by the dialysis unit to the patient in the 
reporting month. This information must be submitted for each qualifying 
patient in CROWNWeb on a monthly basis, for each month of the reporting 
period.
    For the proposed Serum Phosphorus Reporting measure, we propose to 
set the performance standard as successfully reporting a serum 
phosphorus value for each qualifying patient in CROWNWeb on a monthly 
basis, for each month of the reporting period.
    For the proposed NHSN Dialysis Event Reporting measure, we propose 
to set the performance standard as successfully reporting 12 months of 
data from CY 2018.
    We seek comments on these proposals.
5. Proposal for Scoring the PY 2020 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 2020 ESRD QIP, 
we propose 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 2018 (the proposed performance period) to the achievement threshold 
and benchmark (the 15th and 90th percentiles of national performance on 
the measure in CY 2016).
    We seek comment on this proposal.
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 2020 ESRD QIP, we propose 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 propose to define the 
improvement threshold as the facility's performance on the measure 
during CY 2017. The facility's improvement score would be calculated by 
comparing its performance on the measure during CY 2018 (the proposed 
performance period) to the improvement threshold and benchmark.
    We seek comment on this proposal.
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). We are not 
proposing any changes to this policy. 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 2020, 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 2018 falls 
relative to the achievement threshold and benchmark for that measure 
and rating based on CY 2016 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 2018 to its 
performance rates on these items during CY 2017.
    We seek comments on this proposal.

d. Proposal for 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 are not proposing 
any changes to these policies for the PY 2020 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 are not 
proposing any changes to these policies.
    With respect to the proposed Ultrafiltration Rate and Serum 
Phosphorus reporting measures, we are proposing to score facilities 
with a CMS Certification Number (CCN) Open Date before July 1, 2018 
using the same formula previously finalized for the Mineral Metabolism 
and Anemia Management reporting measures (77 FR 67506):
[GRAPHIC] [TIFF OMITTED] TP30JN16.005


[[Page 42841]]


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.

    We seek comments on these proposals.
6. Proposal for Weighting the Clinical Measure Domain, and Weighting 
the Total Performance Score
a. Proposal for Weighting the Clinical Measure Domain for PY 2020
    In light of the proposed removal of the Safety Subdomain from the 
Clinical Measure Domain, our policy priorities for quality improvement 
for patients with ESRD discussed in Section IV.C.6 above, and the 
criteria finalized in the CY 2015 ESRD PPS Final Rule used to assign 
weights to measures in a facility's Clinical Measure Domain score (79 
FR 66214 through 66216), we propose to weight the following measures in 
the following subdomains of the proposed clinical measure domain as 
follows (see Table 10, below):

  Table 10--Proposed Clinical Measure Domain Weighting for the PY 2020
                                ESRD QIP
------------------------------------------------------------------------
                                          Measure weight
                                              in the      Measure weight
                                             clinical      as percent of
  Measures/measure topics by subdomain     domain score    TPS (proposed
                                           (proposed for   for PY 2020)
                                             PY 2020)
------------------------------------------------------------------------
Patient and Family Engagement/Care                   40%  ..............
 Coordination Subdomain.................
    ICH CAHPS measure...................             25%             20%
    SRR Measure.........................             15%             12%
Clinical Care Subdomain.................             60%  ..............
    STrR measure........................             11%            8.8%
    Dialysis Adequacy measure...........             18%           18.8%
    Vascular Access Type measure topic..             18%           18.8%
    Hypercalcemia measure...............              2%            1.6%
    (Proposed) SHR measure..............             11%            8.8%
------------------------------------------------------------------------
Note: We propose that the Clinical Domain make up 80% of a facility's
  Total Performance Score (TPS) for PY 2020. The percentages listed in
  this Table represent the measure weight as a percent of the Clinical
  Domain Score.

    Specifically, we are proposing to reduce the weight of the Safety 
Measure Domain in light of validation concerns discussed above in the 
context of the proposal to reintroduce the NHSN Dialysis Event 
Reporting Measure (see Section (IV)(1)(a) above). For PY 2020 we are 
proposing to reduce the weight of the Safety Measure Domain from 15 
percent to 10 percent. In future years of the program, we may consider 
increasing the weight of the NHSN BSI Clinical Measure and/or the NHSN 
BSI Measure Topic once we see that facilities are completely and 
accurately reporting to NHSN and once we have analyzed the data from 
the proposed increased NHSN Data Validation Study. In order to 
accommodate the reduction of the weight of the Safety Measure Domain, 
we are proposing to increase the weight of the Clinical Measure Domain 
to 80 percent, and to keep the weight of the Reporting Measure Domain 
at 10 percent.
    We are also proposing to weight the proposed SHR Clinical Measure 
at 11 percent of a facility's Clinical Measure Domain score. Facilities 
have had significant experience with SHR via public reporting on 
Dialysis Facility Compare, and reducing hospitalizations is a top 
policy goal for CMS. Further, increasing the emphasis on outcome 
measures is an additional policy goal of CMS, for reasons discussed 
above. For these reasons, we believe it is appropriate to weight the 
proposed SHR Clinical Measure at 11 percent of a facility's Clinical 
Measure Domain score.
    Next, we are proposing to decrease the weight of the Hypercalcemia 
clinical measure within the Clinical Care Subdomain to 2 percent of a 
facility's clinical domain score. We are proposing to do so at this 
time to accommodate the weight assigned to the proposed SHR measure. 
The Hypercalcemia clinical measure was recently re-endorsed at NQF with 
a reserved status because there was very little room for improvement 
and facility scores on the measure are very high overall. Although this 
is true, the Hypercalcemia clinical measure does not meet the criterion 
for being topped out in the ESRD QIP (as described in Section IV.D.1. 
above). Therefore, despite its limited value for assessing facility 
performance, we decided not to propose to remove the Hypercalcemia 
clinical measure from the ESRD QIP measure set, but rather to 
significantly reduce its weight in the clinical subdomain because it 
provides some indication of the quality of care furnished to patients 
by facilities.
    Finally, to accommodate the proposed addition of the SHR Clinical 
Measure beginning in PY 2020 and the proposed reduction in weight of 
the Hypercalcemia measure, we are proposing to reduce the weights of 
the following measures by 1 percentage point each from what we have 
proposed for PY 2019, within the Clinical Measure Domain: ICH CAHPS, 
SRR, STrR, Dialysis Adequacy, and Vascular Access Type. As illustrated 
in Table 10, these minor reductions in the weights of these measures in 
the Clinical Measure Domain would be counterbalanced by the increase in 
the overall percent of the TPS that we are proposing to make to the 
Clinical Measure Domain, such that the proposed weights for these 
measures as a percentage of the TPS will remain as constant as possible 
from PY 2019 to PY 2020. Accordingly, this proposal would generally 
maintain the percentage of the TPS assigned to these measures.
    We seek comments on these proposals.
b. 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 are 
proposing to reduce the weight of the Safety Measure Domain from 15 
percent of a facility's TPS for PY 2019 to 10 percent of a facility's 
TPS for PY 2020. As noted in Section IV.C.1.a. above, we are gradually 
reducing the weight of this Safety Measure Domain over the course of 2 
years because we believe it is important to reduce the weight of the 
Domain in light validation concerns, but it is important to maintain as 
much

[[Page 42842]]

consistency as possible in the QIP Scoring Methodology from year to 
year.
    For the same reasons discussed above, in Section IV.C.6., we 
propose that for PY 2020, to be eligible to receive a TPS, a facility 
must be eligible to be scored on at least one measure in the Clinical 
Measure Domain and at least one measure in the Reporting Measure 
Domain.
    We seek comments on these proposals.
7. Example of the Proposed PY 2020 ESRD QIP Scoring Methodology
    In this section, we provide an example to illustrate the proposed 
scoring methodology for PY 2020. Figures 6-9 illustrate how to 
calculate the Clinical Measure Domain score, the Reporting Measure 
Domain score, the Safety Measure Domain score, and the TPS. Figure 10 
illustrates the full proposed scoring methodology for PY 2020. Note 
that for this example, Facility A, a hypothetical facility, has 
performed very well. Figure 6 illustrates the methodology used to 
calculate the Clinical Measure Domain score for Facility A.
[GRAPHIC] [TIFF OMITTED] TP30JN16.006

    Figure 7 illustrates the general methodology for calculating the 
Reporting Measure Domain score for Facility A.

[[Page 42843]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.007

    Figure 8 illustrates the methodology used for calculating the 
Safety Measure Domain score for Facility A.

[[Page 42844]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.008

    Figure 9 illustrates the methodology to calculate the TPS for 
Facility A.

[[Page 42845]]

[GRAPHIC] [TIFF OMITTED] TP30JN16.009

8. Proposed Minimum Data for Scoring Measures for the PY 2020 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 Hospitalization 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, 10 patient-years at risk to be eligible to 
receive a score on the STrR clinical measure, and 5 patient-years at 
risk to be eligible to receive a score on the SHR 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 are not proposing to change these minimum data 
policies for the measures that we have proposed to continue including 
in the PY 2019 ESRD QIP measure set.
    For the proposed Ultrafiltration Rate and Serum Phosphorus 
Reporting Measures, we also propose 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 CMS Certification Number (CCN) Open Date. Only facilities 
with a CCN Open Date before July 1, 2018 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, 
2018 would be eligible to be scored on the NHSN Bloodstream Infection 
Clinical Measure, ICH CAHPS Clinical Measure, and NHSN Healthcare 
Personnel Influenza Vaccination reporting measure. We further propose 
that, consistent with our CCN Open Date policy for other reporting 
measures, facilities with a CCN Open Date after July 1, 2018, 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.
    We seek comments on these proposals.
    Table 11 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.

[[Page 42846]]



                      Table 11--Proposed Minimum Data Requirements for the PY 2020 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.  On or before January 1,  11-25 qualifying
                                                                 2018.                    patients.
NHSN Dialysis Event (Reporting)......  11 qualifying patients.  On or before January 1,  N/A
                                                                 2018.
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.
SHR (Clinical).......................  5 patient-years at risk  N/A....................  5-14 patient-years at
                                                                                          risk.
ICH CAHPS (Clinical).................  Facilities with 30 or    On or before January 1,  N/A
                                        more survey-eligible     2018.
                                        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, 2018....  N/A
Serum Phosphorus (Reporting).........  11 qualifying patients.  Before July 1, 2018....  N/A
Depression Screening and Follow-Up     11 qualifying patients.  Before July 1, 2018....  N/A
 (Reporting).
Pain Assessment and Follow-Up          11 qualifying patients.  Before July 1, 2017....  N/A
 (Reporting).
NHSN Healthcare Personnel Influenza    N/A....................  Before January 1, 2018.  N/A
 Vaccination (Reporting).
Ultrafiltration Rate (Reporting).....  11 qualifying patients.  Before July 1, 2018....  N/A
----------------------------------------------------------------------------------------------------------------

9. Proposed Payment Reductions for the PY 2020 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 propose that, for the PY 2020 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 2018 reporting measures.

We note this proposed policy for PY 2020 is identical to the policy 
finalized for PY 2019.
    We recognize that we are not proposing 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 have not proposed such a policy because no measures in 
the proposed PY 2020 measure set meet this criterion. However, 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 2018 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 2020 (that is, CY 2018). Because we have not 
yet calculated final measure scores, we are unable to determine the 
50th percentile of facility performance on the PY 2018 reporting 
measures. We will publish that value in the CY 2018 ESRD PPS final rule 
once we have calculated final measure scores for the PY 2018 program.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. In 
the CY 2014 ESRD PPS final rule (78 FR 72223 through 72224), we 
finalized a payment reduction scale for PY 2016 and future payment 
years: for every 10 points a facility falls below the minimum TPS, the 
facility would receive an additional 0.5 percent reduction on its ESRD 
PPS payments for PY 2016 and future payment years, with a maximum 
reduction of 2.0 percent. We are not proposing any changes to this 
policy for the PY 2020 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 2016 and the first part of CY 2017, in the CY 
2018 ESRD PPS final rule.
    We seek comments on this proposal.

E. Future Policies and Measures Under Consideration

    As we continue to refine the ESRD QIP's policies and measures, we 
are evaluating different methods of ensuring that facilities strive for 
continuous improvement in their delivery of care to patients with ESRD. 
We also seek to refine our scoring methodology in an effort to make it 
easier for facilities and the ESRD community to understand. For future 
rulemaking, we are considering several policies and measures, and we 
are seeking comments on each of these policies and measures.
    As discussed in Section III.D.3.a.i above, we are proposing to 
adopt the Standardized Hospitalization Ratio (SHR) Clinical measure and 
calculate performance rates for that measure in

[[Page 42847]]

accordance with NQF-endorsed, Measures Application Partnership reviewed 
specifications. Similarly, performance rates for the SRR and STrR will 
continue to be calculated in accordance with NQF-endorsed, Measures 
Application Partnership reviewed specifications. Stakeholders have 
expressed that for most standardized ratio measures, rates are easier 
to understand than ratios. (The exception is the NHSN BSI Clinical 
Measure, which is intentionally expressed as a ratio, and cannot be 
transformed into a rate without distorting the underlying results.) For 
future years of the QIP, we are considering a proposal to express the 
ratios as rates instead, for the SRR and STrR measures. Specifically, 
we would not propose any changes to the manner in which performance 
rates themselves are calculated, but would propose to calculate rates 
by multiplying the facility's ratio for each of these measures by the 
national raw rate of events (also known as the median), which is 
specific to the measure each year. We are also considering reporting 
national performance standards and individual facility performance 
rates as rates, as opposed to ratios, for these measures. Similarly, we 
are considering a proposal to use rates, as opposed to ratios, when 
calculating facility improvement scores for these measures.
    In PY 2019, we proposed to adopt a patient-level influenza 
immunization reporting measure that could be used to calculate a future 
clinical measure based on either ``ESRD Vaccination--Full-Season 
Influenza Vaccination'' (MAP #XDEFM) or NQF #0226: ``Influenza 
Immunization in the ESRD Population (Facility Level).'' We continue to 
believe that it is important to include a clinical measure on patient-
level influenza vaccination in the ESRD QIP. However, at this time we 
are not proposing to add a patient-level influenza immunization 
reporting measure into the ESRD QIP. Nevertheless, data elements were 
recently amended in CROWNWeb to support data collection for either of 
the two potential clinical measures on patient-level influenza (that 
is, MAP # XDEFM and NQF #0226). We will continue to collect these data 
and conduct detailed analyses to determine whether either of these 
clinical measures would be appropriate for future inclusion in the ESRD 
QIP. We are seeking comments on these issues, including whether data 
for a patient-level influenza immunization clinical measure should be 
collected through CROWNWeb or through NHSN.
    As part of our effort to continuously improve the ESRD QIP, we are 
also working on developing additional, robust measures that provide 
valid assessments of the quality of care furnished to ESRD patients by 
ESRD facilities. Some measures we are considering developing for future 
inclusion in the ESRD QIP measure set include a Standardized Mortality 
Ratio (SMR) measure, a measure examining utilization of hospital 
Emergency Departments, a measure examining medication reconciliation 
efforts, and a measure examining kidney transplants in patients with 
ESRD.
    We seek comments on these measures and policies that we are 
considering for adoption in the ESRD QIP in the future.

V. DMEPOS Competitive Bidding Program

A. Background

    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement the CBP in CBAs throughout the United States for contract 
award purposes for the furnishing of certain competitively priced 
DMEPOS items and services. The programs, mandated by section 1847(a) of 
the Act, are collectively referred to as the ``Medicare DMEPOS 
Competitive Bidding Program.'' The 2007 DMEPOS competitive bidding 
final rule (Medicare Program; Competitive Acquisition for Certain 
DMEPOS and Other Issues published in the April 10, 2007 Federal 
Register (72 FR 17992)), established CBPs for certain Medicare Part B 
covered items of DMEPOS throughout the United States. The CBP, which 
was phased in over several years, utilizes bids submitted by DMEPOS 
suppliers to establish applicable payment amounts under Medicare Part B 
for certain DMEPOS items and services.
    Section 1847(a)(1)(G) of the Act, added by section 522(a) of the 
Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) 
(MACRA), now requires a bid surety bond for bidding entities.
    Section 1847(a)(1)(G) of the Act, as added by section 522(a) of 
MACRA, provides that, with respect to rounds of competitions under 
section 1847 beginning not earlier than January 1, 2017 and not later 
than January 1, 2019, a bidding entity may not submit a bid for a CBA 
unless, as of the deadline for bid submission, the entity has (1) 
obtained a bid surety bond, in the range of $50,000 to $100,000 in a 
form specified by the Secretary consistent with subparagraph (H) of 
section 1847(a)(1), and (2) provided the Secretary with proof of having 
obtained the bid surety bond for each CBA in which the entity submits 
its bid(s). Section 1847(a)(1)(H)(i) provides that in the event that a 
bidding entity is offered a contract for any product category for a 
CBA, and its composite bid for such product category and area was at or 
below the median composite bid rate for all bidding entities included 
in the calculation of the single payment amount(s) for the product 
category and CBA, and the entity does not accept the contract offered, 
the bid surety bond(s) for the applicable CBAs will be forfeited and 
CMS will collect on the bid surety bond(s). In instances where a 
bidding entity does not meet the bid forfeiture conditions for any 
product category for a CBA as specified in section 1847(a)(1)(H)(i) of 
the Act, then the bid surety bond liability submitted by the entity for 
the CBA will be returned to the bidding entity within 90 days of the 
public announcement of the contract suppliers for such area.
    Section 522 of MACRA further amended Section 1847(b)(2)(A) of the 
Act by adding clause (v) to the conditions that a bidding entity must 
meet in order for the Secretary to award a contract to any entity under 
a competition conducted in a CBA to furnish items and services. New 
clause (v) of section 1847(b)(2)(A) of the Act adds the requirement 
that the bidding entity must meet applicable State licensure 
requirements in order to be eligible for a DMEPOS CBP contract award. 
We note, however, that this does not reflect a change in policy as CMS 
already requires contract suppliers to meet applicable State licensure 
requirements in order to be eligible for a contract award.

B. Appeals Process for Breach of DMEPOS Competitive Bidding Program 
Contract Action

    This rule proposes to extend our current appeals process for 
contract terminations to all breach of contract actions that CMS might 
take. We propose to effectuate this change by expanding the breach of 
contract actions to which our current appeals process at Sec.  414.423 
applies to include all of the breach of contract actions specified in 
Sec.  414.422(g)(2) and not just Sec.  414.422(g)(2)(iii), which 
currently describes CMS' ability to terminate a supplier's contract. 
Any deviation from contract requirements, including a failure to comply 
with governmental agency or licensing organization requirements, 
constitutes a breach of contract under our regulations at Sec.  
414.422(g)(1). Pursuant to

[[Page 42848]]

Sec.  414.422(g)(2), CMS may take one or more actions in the event that 
a contract supplier breaches its contract, including, for example, 
terminating or suspending the contract supplier's contract. We have 
determined that there are certain actions specified in Sec.  
414.422(g)(2) that are not breach of contract actions, such as 
requiring a contract supplier to submit a corrective action plan and 
revoking a supplier's billing number under the DMEPOS CBP. We are 
proposing to remove these two actions from Sec.  414.422(g)(2) . If CMS 
determines a contract supplier to be in breach of its contract, it will 
provide a notice of breach of contract to the supplier. Currently, the 
notice states that a supplier has the right to request a hearing by a 
Competitive Bidding Implementation Contractor (``CBIC'') hearing 
officer to appeal the termination, but does not specify that there is 
also a formal process for appealing any of the other breach of contract 
actions that CMS may take in Sec.  414.422(g)(2). As such, we propose 
revisions to Sec.  414.422, Terms of Contracts, and Sec.  414.423, 
Appeals Process for Termination of Competitive Bidding Contract, to 
extend the appeals process to any breach of contract actions that CMS 
may take pursuant to the revised Sec.  414.422(g)(2).

C. Provisions of the Proposed Regulations

1. Bid Surety Bond Requirement
    At Sec.  414.402, we propose adding a definition for ``bidding 
entity'' to mean the entity whose legal business name is identified in 
the ``Form A: Business Organization Information'' section of the bid.
    At Sec.  414.412, ``Submission of bids under a competitive bidding 
program,'' we propose to add a new paragraph (h) that would allow CMS 
to implement section 1847(a)(1)(G) of the Act, as amended by section 
522(a) of MACRA, to state that an entity may not submit a bid for a CBA 
unless, as of the deadline for bid submission, the entity has obtained 
a bid surety bond for the CBA. Proposed Sec.  414.412(h)(1) would 
specify that the bond must be obtained from an authorized surety. An 
authorized surety is a surety that has been issued a Certificate of 
Authority by the U.S. Department of the Treasury as an acceptable 
surety on Federal bonds and the certificate has neither expired nor 
been revoked.
    At proposed Sec.  414.412(h)(2) ``Bid Surety Bond requirements,'' 
we propose a bid surety bond contain the following information: (1) the 
name of the bidding entity as the principal/obligor; (2) The name and 
National Association of Insurance Commissioners number of the 
authorized surety; (3) CMS as the named obligee; (4) The conditions of 
the bond as specified in this proposed rule at (h)(3); (5) The CBA 
covered by the bond; (6) The bond number; (7) The date of issuance; and 
(8) The bid bond value of $100,000.
    Section 1847(a)(1)(G) of the Act permits CMS to determine the 
amount of the bond within a range of $50,000 to $100,000. Given the 
importance of this provision, we have determined that it is appropriate 
to require bidding entities to obtain bid surety bonds in an amount of 
$100,000 for each CBA in which they submit a bid. This requirement is 
intended to ensure that bidding entities accept a contract offer(s) 
when their composite bid(s) is at or below the median composite bid 
rate used in the calculation of the single payment amounts. We also 
believe that setting the bid surety bond amount at $100,000 will 
provide an additional level of assurance that all bidding entities 
submit substantiated bids. The CBP has historically had a contract 
acceptance rate exceeding 90 percent, and we believe that this 
acceptance rate will increase with the promulgation of this regulation. 
We are considering whether a lower bid surety bond amount would be 
appropriate for a particular subset of suppliers, for example, small 
suppliers as defined by Sec.  414.402, and are specifically soliciting 
comments on whether to establish a lower bid surety bond amount for 
certain types of suppliers.
    Proposed 414.412(h)(3) specifies conditions for forfeiture of the 
bid surety bond and return of the bond liability. Pursuant to section 
1847(a)(1)(H) of the Act, when (1) a bidding entity is offered a 
contract for any product category in a CBA, (2) the entity's composite 
bid is at or below the median composite bid rate for all bidding 
entities included in the calculation of the single payment amounts for 
the product category and CBA, and (3) the entity does not accept the 
contract offer, then the entity's bid surety bond for that CBA will be 
forfeited and CMS will collect on it. When the bidding entity does not 
meet these forfeiture conditions, the bid bond liability will be 
returned within 90 days of the public announcement of the contract 
suppliers for the CBA. The proposed provision requires CMS to notify a 
bidding entity when it does not meet the bid forfeiture conditions and 
as a result CMS will not collect on the bid surety bond.
    We propose that bidding entities that provide a falsified bid 
surety bond would be prohibited from participation in the current round 
of the CBP in which they submitted a bid and from bidding in the next 
round of the CBP. Additionally, offending suppliers would be referred 
to the Office of Inspector General and Department of Justice for 
further investigation. We also propose that if we find that a bidding 
entity has accepted a contract offer and then breached the contract in 
order to avoid bid surety bond forfeiture, the breach would result in a 
termination of the contract and preclusion from the next round of 
competition in the CBP. These proposed penalties would be included in 
our regulations at Sec.  414.412(h)(4).
2. State Licensure Requirement
    We propose to revise Sec.  414.414(b)(3), ``Conditions for awarding 
contracts,'' to align with 1847(b)(2)(A) of the Act as amended by 
section 522(b) of MACRA. The amendment to the Act states that ``[t]he 
Secretary may not award a contract to any entity under the competition 
conducted in an [sic] competitive acquisition area . . . to furnish 
such items or services unless the Secretary finds . . . [t]he entity 
meets applicable State licensure requirements.'' The regulation at 
Sec.  414.414 (b)(3) currently states that ``[e]ach supplier must have 
all State and local licenses required to perform the services 
identified in the request for bids.'' Therefore, we are proposing to 
revise 414.414(b)(3)to align with the language of section 1847(b)(2)(A) 
of the Act as revised by MACRA, to state that a contract will not be 
awarded to a bidding entity unless the entity meets applicable State 
licensure requirements. We note, however, that this does not reflect a 
change in policy as CMS already has a regulation in place to require 
suppliers to meet applicable State and local licensure requirements.
3. Procedure on Appeals Process for a Breach of Contract of DMEPOS 
Competitive Bidding Contract Action(s)
    We believe suppliers should have the option to appeal all breach of 
contract actions. As a result, we propose to revise Sec.  414.423, 
Appeals Process for Termination of Competitive Bidding Contract, to 
expand the appeals process for suppliers who have been sent a notice of 
a breach of contract stating that CMS intends to take one or more of 
the actions described in Sec.  414.422(g)(2) as a result of the breach. 
While we recognize that we have the authority to take one or more 
breach of contract actions specified in Sec.  414.422(g)(2), we 
currently only have an appeals process for one of those actions, 
specifically, contract termination. Therefore, the

[[Page 42849]]

proposed revisions will expand Sec.  414.423 to allow appeal rights for 
each breach of contract action specified in Sec.  414.422(g)(2). If a 
supplier's notice of breach of contract includes more than one breach 
of contract action and the supplier chooses to appeal, CMS will make 
separate decisions for each breach of contract action after reviewing 
the hearing officer's recommendation. Proposed revisions are made in 
Sec.  414.422(g)(2) to remove the breach of contract actions of (1) 
requiring a contract supplier to submit a corrective action plan; and 
(2) revoking the supplier number of the contract supplier. We are 
proposing to remove Sec.  414.423(g)(2)(i) because a corrective action 
plan is a part of the formal appeals process outlined in Sec.  414.423, 
rather than an action CMS imposes on contract suppliers that it 
considers to be in breach. We are also proposing to remove the supplier 
number revocation action at Sec.  414.422(g)(2)(v) because the DMEPOS 
CBP does not have the authority to revoke a DMEPOS supplier's Medicare 
billing number. Furthermore, we are proposing to revise this section to 
state that CMS will specify in the notice of breach of contract which 
actions they are taking as a result of the breach of contract.
    Proposed revisions are made throughout Sec.  414.423 to extend the 
appeals process to any breach of contract actions described in Sec.  
414.422(g)(2) that we might take as a result of the breach, rather than 
just contract termination actions. We are also proposing to remove the 
references to termination throughout 414.423 and instead to cross-
reference all of the breach of contract actions in Sec.  414.422(g)(2).
    In revisions to Sec.  414.423(a), we are proposing to delete the 
language indicating that termination decisions made under this section 
are final and binding as this reference is not inclusive of all breach 
of contract actions, and the finality of a decision is correctly 
addressed in paragraph (k)(4) of this section.
    In the revisions to Sec.  414.423(b)(1), we propose to delete the 
phrase ``either in part or in whole'' because 414.422(g)(1) specifies 
that any deviation from contract requirements constitutes a breach of 
contract. In addition, we propose to remove the requirement that the 
breach of contract notice to the supplier be delivered by certified 
mail from Sec.  414.423(b)(1) to allow CMS the flexibility to use other 
secure methods for notifying suppliers. We are also proposing changes 
to Sec.  414.423 (b)(2)(i) and (b)(2)(ii). The revised Sec.  
414.423(b)(2)(i) states that the notice of breach of contract will 
include the details of the breach of contract, while Sec.  
414.423(b)(2)(ii) requires CMS to include the action(s) that it is 
taking as a result of the breach of contract and the timeframes 
associated with the each breach of contract action in the notice. For 
example, when a notice of breach of contract includes preclusion, the 
effective date of the preclusion will be the date specified in the 
letter and the timeframe of the preclusion will specify the round of 
the CBP from which the supplier is precluded. We have also added 
language to (b)(2)(vi) to specify that the effective date of the 
action(s) that CMS is taking is the date specified by CMS in the notice 
of breach of contract, or 45 days from the date of the notice of breach 
of contract unless a timely hearing request has been filed or a CAP has 
been submitted within 30 days of the date of the notice of breach of 
contract where CMS allows a supplier to submit a CAP.
    We are proposing to revise Sec.  414.423(c)(2)(ii) to specify that 
the subsequent notice of breach of contract may, at CMS' discretion, 
allow the supplier to submit another written CAP pursuant to Sec.  
414.423(c)(1)(i). Section 414.423(e)(3) will be revised to clarify that 
CMS retains the option to offer the supplier an opportunity to submit 
another CAP, if CMS deems appropriate, in situations where CMS has 
already accepted a prior CAP.
    Proposed revisions to Sec.  414.423(f)(5) explain that in the event 
the supplier fails to timely request a hearing, the breach of contract 
action(s) specified in the notice of breach of contract will take 
effect 45 days from the date of the notice of breach of contract. 
Proposed revisions to Sec.  414.423(g)(3) will be made to clarify that 
the scheduling notice must be sent to all parties, not just the 
supplier.
    We are proposing to revise Sec.  414.423(j) to clarify that the 
hearing officer will issue separate recommendations for each breach of 
contract action in situations where there is more than one breach of 
contract action presented at the hearing.
    In Sec.  414.423(k), we are proposing to specify that CMS will make 
separate decisions for each recommendation when the hearing officer 
issues multiple recommendations. In addition, we are proposing 
revisions to this paragraph to expand CMS' final determination process, 
clarifying that the notice of CMS' decision will be sent to the 
supplier and the hearing officer and will indicate whether any breach 
of contract actions included in the notice of breach of contract still 
apply and will be effectuated, and will indicate the effective date of 
the breach of contract action, if applicable. We propose to expand on 
Sec.  414.423(l), effect of breach of contract action(s), to specify 
effects of all contract actions described in Sec.  414.422(g)(2). We 
propose to add Sec.  414.423(l)(1), effect of contract suspension, to 
outline the supplier's requirements regarding furnishing items and 
reimbursement for the duration of the contract suspension, as well as 
the details regarding the supplier's obligation to notify 
beneficiaries. We are also proposing to add Sec.  414.423(l)(3), effect 
of preclusion, to specify that a supplier who is precluded will not be 
allowed to participate in a specific round of the CBP, which will be 
identified in the original notice of breach of contract. Additionally, 
we propose to add Sec.  414.423(l)(4), effect of other remedies allowed 
by law, to state if CMS decides to impose other remedies under Sec.  
414.422(g)(2)(iv), the details of the remedies will be included in the 
notice of breach of contract. Proposed Sec.  414.423(l) also specifies 
the steps suppliers must take to notify beneficiaries after CMS takes 
the contract action(s) described in Sec.  414.422(g)(2). Lastly, we 
have removed language from Sec.  414.423(l)(2), effect of contract 
termination, to avoid confusion as to which supplier is providing 
notice to the beneficiary.

VI. Methodology for Adjusting DMEPOS Fee Schedule Amounts for Similar 
Items With Different Features Using Information From Competitive 
Bidding Programs

A. Background

1. Fee Schedule Payment Basis for Certain DMEPOS
    Section 1834(a) of the Act governs payment for durable medical 
equipment (DME) covered under Part B and under Part A for a home health 
agency and provides for the implementation of a fee schedule payment 
methodology for DME furnished on or after January 1, 1989. Sections 
1834(a)(2) through (a)(7) of the Act set forth separate payment 
categories of DME and describe how the fee schedule for each of the 
following categories is established:
     Inexpensive or other routinely purchased items;
     Items requiring frequent and substantial servicing;
     Customized items;
     Oxygen and oxygen equipment;
     Other covered items (other than DME); and
     Other items of DME (capped rental items).
    Section 1834(h) of the Act governs payment for prosthetic devices, 
prosthetics, and orthotics (P&O) and sets

[[Page 42850]]

forth fee schedule payment rules for P&O. Effective for items furnished 
on or after January 1, 2002, payment is also made on a national fee 
schedule basis for parenteral and enteral nutrition (PEN) in accordance 
with the authority under section 1842(s) of the Act. The term ``enteral 
nutrition'' will be used throughout this document to describe enteral 
nutrients supplies and equipment covered as prosthetic devices in 
accordance with section 1861(s)(8) of the Act and paid for on a fee 
schedule basis and enteral nutrients under the Medicare DMEPOS 
Competitive Bidding Program (CBP), as authorized under section 
1847(a)(2)(B) of the Act. Additional background discussion about DMEPOS 
items subject to section 1834 of the Act, rules for calculating 
reasonable charges, and fee schedule payment methodologies for PEN and 
for DME prosthetic devices, prosthetics, orthotics, and surgical 
dressings, was provided in the July 11, 2014 proposed rule at 79 FR 
40275 through 40277.
2. DMEPOS Competitive Bidding Programs Payment Rules
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement CBPs in competitive bidding areas (CBAs) throughout the 
United States for contract award purposes for the furnishing of certain 
competitively priced DMEPOS items and services. The programs mandated 
by section 1847(a) of the Act are collectively referred to as the 
``Medicare DMEPOS Competitive Bidding Program.'' Section 1847(a)(2) of 
the Act provides that the items and services to which competitive 
bidding applies are:
     Off-the-shelf (OTS) orthotics for which payment would 
otherwise be made under section 1834(h) of the Act;
     Enteral nutrients, equipment and supplies described in 
section 1842(s)(2)(D) of the Act; and
     Certain DME and medical supplies, which are covered items 
(as defined in section 1834(a)(13) of the Act) for which payment would 
otherwise be made under section 1834(a) of the Act.
    The DME and medical supplies category includes items used in 
infusion and drugs (other than inhalation drugs) and supplies used in 
conjunction with DME, but excludes class III devices under the Federal 
Food, Drug, and Cosmetics Act and Group 3 or higher complex 
rehabilitative power wheelchairs and related accessories when furnished 
with such wheelchairs. Sections 1847(a) and (b) of the Act specify 
certain requirements and conditions for implementation of the Medicare 
DMEPOS CBP.
3. Methodologies for Adjusting Payment Amounts Using Information From 
the DMEPOS Competitive Bidding Program
    Below is a summary of the three general methodologies used in 
adjusting payment amounts for DMEPOS items in areas that are not CBAs 
for the items using information from the DMEPOS CBP. Also summarized 
are the processes for updating adjusted fee schedule amounts and for 
addressing the impact of unbalanced bidding on SPAs when adjusting 
payment amounts using information from the DMEPOS CBPs. We issued a 
final rule (Medicare Program; End-Stage Renal Disease Prospective 
Payment System, Quality Incentive Program, and Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies; Final Rule) on 
November 6, 2014 (hereinafter, the CY 2015 final rule) in which we 
adopted these methodologies (79 FR 66223-66233). We also issued program 
instructions on these methodologies in Transmittal #3350, (Change 
Request # 9239), issued on September 11, 2015 and Transmittal #3416, 
(Change Request # 9431) issued on November 23, 2015. The CBP product 
categories, HCPCS codes and single payment amounts (SPAs) included in 
the CBPs are available on the Competitive Bidding Implementation 
Contractor (CBIC) Web site: http://www.dmecompetitivebid.com/palmetto/cbic.nsf/DocsCat/Home.
    Section 1834(a)(1)(F)(ii) of the Act provides the Secretary with 
the authority to use information from the DMEPOS CBPs to adjust the DME 
payment amounts for covered items furnished on or after January 1, 
2011, in areas where competitive bidding is not implemented for the 
items. Similar authority exists at section 1834(h)(1)(H)(ii) of the Act 
for OTS orthotics. Also, Section 1842(s)(3)(B) of the Act provides 
authority for making adjustments to the fee schedule amounts for 
enteral nutrients, equipment, and supplies (enteral nutrition) based on 
information from CBPs. Section 1834(a)(1)(F)(ii) also requires 
adjustments to the payment amounts for all DME items subject to 
competitive bidding furnished in areas where CBPs have not been 
implemented on or after January 1, 2016.
    For items furnished on or after January 1, 2016, section 
1834(a)(1)(F)(iii) requires us to continue to make such adjustments to 
DME payment amounts where CBPs have not been implemented as additional 
covered items are phased in or information is updated as contracts are 
re-competed. Section 1834(a)(1)(G) of the Act requires that the 
methodology used to adjust payment amounts for DME and OTS orthotics 
using information from the CBPs be promulgated through notice and 
comment rulemaking. Also, Section 1834(a)(1)(G) of the Act requires 
that we consider the ``costs of items and services in areas in which 
such provisions [sections 1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii)] 
would be applied compared to the payment rates for such items and 
services in competitive acquisition [competitive bidding] areas.''
a. Adjusted Fee Schedule Amounts for Areas Within the Contiguous United 
States
    Pursuant to Sec.  414.210(g)(1), CMS determines a regional price 
for DME items or services for each state in the contiguous United 
States and the District of Columbia equal to the un-weighted average of 
the single payment amounts (SPAs) for an item or service for CBAs that 
are fully or partially located in the same region that contains the 
state or the District of Columbia. CMS uses the regional prices to 
determine a national average price equal to the un-weighted average of 
the regional prices. The regional SPAs (RSPAs) cannot be greater than 
110 percent of the national average price (national ceiling) or less 
than 90 percent of the national average price (national floor). This 
methodology applies to enteral nutrition and most DME items furnished 
in the contiguous United States (that is, items that are included in 
more than 10 CBAs).
    The fee schedule amounts for areas defined as rural areas for the 
purposes of the CBP are adjusted to 110 percent of the national average 
price described above. The regulations at Sec.  414.202 define a rural 
area to mean, for the purpose of implementing Sec.  414.210(g), a 
geographic area represented by a postal zip code if at least 50 percent 
of the total geographic area of the area included in the zip code is 
estimated to be outside any metropolitan area (MSA). A rural area also 
includes a geographic area represented by a postal zip code that is a 
low population density area excluded from a CBA in accordance with the 
authority provided by section 1847(a)(3)(A) of the Act at the time the 
rules at Sec.  414.210(g) are applied.
b. Adjusted Fee Schedule Amounts for Areas Outside the Contiguous 
United States
    Pursuant to Sec.  414.210(g)(2), in areas outside the contiguous 
United States

[[Page 42851]]

(that is, noncontiguous areas such as Alaska, Guam, and Hawaii), the 
fee schedule amounts are reduced to the greater of the average of SPAs 
for the item or service for CBAs outside the contiguous United States 
(currently only applicable to Honolulu, Hawaii) or the national ceiling 
amounts calculated for an item or service based on RSPAs for CBAs 
within the contiguous United States.
c. Adjusted Fee Schedule Amounts for Items Included in 10 or Fewer CBAs
    Pursuant to Sec.  414.210(g)(3), for DME items included in ten or 
fewer CBAs, the fee schedule amounts for the items are reduced to 110 
percent of the un-weighted average of the SPAs from the ten or fewer 
CBAs. This methodology applies to all areas within and outside the 
contiguous United States.
d. Updating Adjusted Fee Schedule Amounts
    Section 1834(a)(1)(F)(ii) of the Act requires the Secretary to use 
information from the CBP to adjust the DMEPOS payment amounts for items 
furnished on or after January 1, 2016, and section 1834(a)(1)(F)(iii) 
requires the Secretary to continue to make such adjustments as 
additional covered items are phased in or information is updated as 
competitive bidding contracts are recompeted. In accordance with Sec.  
414.210(g)(8), the adjusted fee schedule amounts are revised when an 
SPA for an item or service is updated following one or more new 
competitions and as other items are added to CBPs. DMEPOS schedule 
amounts that are adjusted using SPAs will not be subject to the annual 
DMEPOS covered item update and will only be updated when SPAs from the 
CBP are updated. Updates to the SPAs may occur at the end of a contract 
period as contracts are recompeted, as additional items are added to 
the CBP, or as new CBAs are added. In cases where adjustments to the 
fee schedule amounts are made using any of the methodologies described 
above, and the adjustments are based solely on the SPAs from CBPs that 
are no longer in effect, the SPAs are updated before being used to 
adjust the fee schedule amounts. The SPAs are adjusted based on the 
percentage change in the Consumer Price Index for all Urban Consumers 
(CPI-U) over the course of time described in Sec.  414.210(g)(4). For 
example, if the adjustments were to be effective January 1, 2017, the 
SPAs from CBPs no longer in effect would be updated based on the 
percentage change in the CPI-U from the mid-point of the last year the 
SPAs were in effect to June 30, 2016, the month ending 6 months prior 
to the date the initial fee schedule reductions go into effect. 
Following the initial adjustment, if the adjustments continue to be 
based solely on the SPAs that are no longer in effect, the SPAs will be 
updated every 12 months using the CPI-U for the 12-month period ending 
6 months prior to the date the updated payment adjustments would go 
into effect.
e. Methodology for Avoiding HCPCS Price Inversions When Adjusting Fee 
Schedule Amounts Using Information From the DMEPOS Competitive Bidding 
Program
    In our CY 2015 final rule (79 FR 66263), we adopted a methodology 
to address unbalanced bidding, which is a situation that results in 
price inversions under CBPs. We added Sec.  414.210(g)(6) for certain 
limited situations where bidding for similar but different enteral 
infusion pumps and standard power wheelchairs resulted in the SPAs for 
higher utilized items with additional features (for example, an enteral 
infusion pump with an alarm or a Group 2 power wheelchair) being less 
than the SPAs for lower utilized items without those additional 
features (for example, an enteral infusion pump without an alarm or 
Group 1 power wheelchair). A Group 2 power wheelchair is faster, 
travels further, and climbs higher obstacles than a Group 1 power 
wheelchair. Under CBPs, when similar items with different features are 
included in the same product category, the code with higher utilization 
at the time of the competition receives a higher weight and the bid for 
this item has a greater impact on the supplier's composite bid as well 
as the competitiveness of the supplier's overall bid for the product 
category (PC) within the CBP as compared to the bid for the less 
frequently utilized item. If, at the time the competition takes place 
under the CBP, the item with the additional features is priced higher 
and over time is utilized more than the other similar items without 
these features, it could result in unbalanced bidding, which in turn 
causes the item without the additional features to receive a higher 
single payment amount under the CBP than the item with the additional 
features. This situation results in a price inversion, where the higher 
weighted and higher priced item at the time of the competition becomes 
the lower priced item in the CBP following the competition. Unbalanced 
bidding can occur when a bidder has a higher incentive to submit a 
lower bid for one item than another due to the fact that the item has a 
higher weight and therefore a greater effect on the supplier's 
composite bid for the product category than the other item. Our current 
regulation at Sec.  414.210(g)(6) for adjusting DMEPOS fee schedule 
amounts paid in non-CBAs using information from CBPs includes 
methodologies to address price inversions for power wheelchairs and 
enteral infusion pumps only. This rule limits SPAs for items without 
additional features (for example, an enteral infusion pump without an 
alarm) to the SPAs for items with the additional features (for example, 
an enteral infusion pump with an alarm) prior to using these SPAs to 
adjust fee schedule amounts.
    For example, if most of the utilization or allowed services for 
standard power wheelchairs are for higher paying Group 2 wheelchairs 
than Group 1 wheelchairs at the time the competition occurs, the bids 
for the Group 2 wheelchairs have a greater impact on the supplier's 
composite bid and chances of being offered a contract. Therefore the 
supplier has a much greater incentive to make a lower bid for the Group 
2 wheelchairs relative to the fee schedule payment than they do for the 
Group 1 wheelchairs. If, for example, Medicare is paying $450 per month 
for a Group 2 wheelchair at the time of the competition and a Group 2 
wheelchair has a high weight, while Medicare is paying $350 per month 
for the Group 1 version of the same wheelchair at the time of the 
competition and the Group 1 wheelchair has a very low weight, the bids 
for the two items could be unbalanced or inverted whereby the bid 
submitted for the Group 2 wheelchair is $250 (44 percent below the fee 
schedule amount for the item) while the bid submitted for the Group 1 
wheelchair is $300 (14 percent below the fee schedule amount for the 
item). A price inversion therefore results where Medicare previously 
paid $450 for one item and now pays $250, and previously paid $350 for 
another item for which it now pays $300. The item weight under the CBP 
results in Medicare paying more for a Group 1 power wheelchair than a 
higher-performing Group 2 power wheelchair.
    In the CY 2015 proposed rule published on July 11, 2014 in the 
Federal Register (79 FR 40208) (hereinafter, CY 2035 proposed rule), we 
referred to an additional feature that one item has and another item 
does not have as a ``hierarchal'' feature, meaning that one item 
provides an additional, incremental service that the other item does 
not provide (79 FR 40287). For example, code B9002 in the HCPCS 
describes an enteral infusion pump with

[[Page 42852]]

an alarm, while code B9000 describes an enteral infusion pump without 
an alarm. Code B9002 describes an item that provides an additional 
service (an alarm) and the alarm was referred to as a hierarchal 
feature, meaning the item with the alarm provides an item and service 
above what the item without the alarm provides. Commenters believed the 
term ``hierarchal feature'' should be better defined (79 FR 66231). We 
agreed and finalized the rule only for the specific scenarios addressed 
in the proposed rule, namely, enteral infusion pumps and standard power 
wheelchairs. The final regulation at 42 CFR 414.210(g)(6)(i) 
specifically requires that in situations where a SPA for an enteral 
infusion pump without alarm is greater than the SPA in the same CBA for 
an enteral infusion pump with alarm, the SPA for the enteral infusion 
pump without alarm is adjusted to equal the SPA for the enteral 
infusion pump with alarm prior to applying the payment adjustment 
methodologies for these items in non-CBAs. We also adopted regulations 
at 42 CFR 414.210(g)(6)(ii) through (v) to address bid inversion for 
standard power wheelchairs. In the CY 2015 final rule at 79 FR 66231, 
we stated that we would consider whether to add a definition of 
hierarchal feature, or to apply the rule we proposed to other items not 
identified in the final rule through future notice and comment 
rulemaking.

B. Current Issues

    We performed a review of all HCPCS codes in the CBPs in order to 
comply with our commitment to consider whether to apply the regulation 
at Sec.  414.210(g)(6) to other cases of price inversion that resulted 
from unbalanced bidding that were not identified or addressed in the CY 
2015 final rule (79 FR 66231). We found a significant number of price 
inversions resulting from the 2016 DMEPOS CBP Round 2 Recompete for 
contract periods beginning July 1, 2016. The items affected included 
transcutaneous electrical nerve stimulation (TENS) devices, walkers, 
hospital beds, power wheelchairs, group 2 support surfaces (mattresses 
and overlays), enteral infusion pumps, and seat lift mechanisms. As a 
result of our review, we are proposing a rule that will expand the 
provisions of Sec.  414.210(g)(6) to address these and other price 
inversions.
    To perform our review, we examined instances within the HCPCS where 
there are multiple codes for an item (for example, a walker) that are 
distinguished by the addition of features (for example, folding walker 
versus rigid walker or wheels versus no wheels) which may experience 
price inversions. Our review included all groupings of similar items 
with different features within each of the product categories. We have 
included the HCPCS codes describing groupings of similar items that 
would be subject to this proposed rule and the features associated with 
each code below:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
ENTERAL INFUSION PUMPS
    B9000.........................  Pump without alarm.
    B9002.........................  Pump with alarm.
HOSPITAL BEDS
    E0250.........................  Fixed Height With Mattress & Side
                                     Rails.
    E0251.........................  Fixed Height With Side Rails.
    E0255.........................  Variable Height With Mattress & Side
                                     Rails.
    E0256.........................  Variable Height With Side Rails.
    E0260.........................  Semi-Electric With Mattress & Side
                                     Rails.
    E0261.........................  Semi-Electric With Side Rails.
    E0290.........................  Fixed Height With Mattress.
    E0291.........................  Fixed Height.
    E0292.........................  Variable Height With Mattress.
    E0293.........................  Variable Height.
    E0294.........................  Semi-Electric With Mattress.
    E0295.........................  Semi-Electric.
    E0303.........................  Heavy Duty Extra Wide With Side
                                     Rails.
    E0302.........................  Extra Heavy Duty Extra Wide With
                                     Side Rails.
    E0303.........................  Heavy Duty Extra Wide With Mattress
                                     & Side Rails.
    E0304.........................  Extra Heavy Duty Extra Wide With
                                     Mattress & Side Rails.
MATTRESSES AND OVERLAYS
    E0277.........................  Powered mattress.
    E0371.........................  Powered overlay.
    E0372.........................  Non-powered overlay.
    E0373.........................  Non-powered mattress.
POWER WHEELCHAIRS
    K0813.........................  Group 1 Sling Seat, Portable.
    K0814.........................  Group 1 Captains Chair, Portable.
    K0815.........................  Group 1 Sling Seat.
    K0816.........................  Group 1 Captains Chair, Standard
                                     Weight.
    K0820.........................  Group 2 Sling Seat, Portable.
    K0821.........................  Group 2 Captains Chair, Portable.
    K0822.........................  Group 2 Sling Seat, Standard Weight.
    K0823.........................  Group 2 Captains Chair, Standard
                                     Weight.
SEAT LIFT MECHANISMS
    E0627.........................  Electric.
    E0628.........................  Electric.
    E0629.........................  Non-electric.
TRANSCUTANEOUS ELECTRICAL NERVE
 STIMULATION (TENS) DEVICES
    E0720.........................  Two leads.
    E0730.........................  Four leads.
WALKERS
    E0330.........................  Rigid.

[[Page 42853]]

 
    E0335.........................  Folding.
    E0341.........................  Rigid With Wheels.
    E0343.........................  Folding With Wheels.
------------------------------------------------------------------------

    As shown in Table 12 below, under the 2015 DMEPOS fee schedule, 
Medicare pays more for walkers with wheels than walkers without wheels. 
The same is true for walkers that fold as compared to walkers that do 
not fold. Walkers that are rigid and do not fold are very rarely used 
and have extremely low utilization, and a walker that folds and has 
wheels is used much more frequently than a walker that folds but does 
not have wheels.

                  Table 12--Average of 2015 DMEPOS Fee Schedule Amounts for Purchase of Walkers
----------------------------------------------------------------------------------------------------------------
                                                                             Average 2015 fee
                    Code                                  Item               schedule amount      2014 Allowed
                                                                                   \1\              services
----------------------------------------------------------------------------------------------------------------
E0130......................................  Rigid Walker without Wheels..             $64.97                 59
E0135......................................  Folding Walker without Wheels             $78.97              5,053
E0141......................................  Rigid Walker with Wheels.....            $107.89                455
E0143......................................  Folding Walker with Wheels...            $111.69             95,939
----------------------------------------------------------------------------------------------------------------
\1\ Average of 2015 fee schedule amounts for all areas.

    Under the DMEPOS CBP, because the folding walker without wheels 
(E0135) is used more frequently than the rigid walker without wheels 
(E0130), code E0135 receives a higher weight than code E0130. In 
addition, under the 2015 fee schedule, Medicare pays more for code 
E0135 than code E0130. Weights are assigned to individual items (HCPCS 
codes) within a product category (for example, standard mobility 
equipment) under the DMEPOS CBP for the purpose of calculating a 
composite bid for each supplier submitting bids for that product 
category in a CBA. The weights are based on the beneficiary utilization 
rate using national data when compared to other items in the same 
product category. The beneficiary utilization rate of an item captures 
the total allowed services for the item from Medicare claims submitted 
for the item on a national basis. A supplier's bid for each item in the 
product category is multiplied by the weight assigned to the item, and 
the sum of these calculations equals the supplier's composite bid. 
Contracts are offered to eligible suppliers with the lowest composite 
bids. Therefore, the higher the weight for an item in a product 
category, the more the bid for that item will affect the supplier's 
composite bid and chances of being offered a contract for that product 
category. Conversely, the lower the weight for an item in a product 
category, the less the bid for that item will affect the supplier's 
composite bid and chances of being offered a contract for that product 
category.
    Similarly, because the folding walker with wheels (E0143) is used 
more frequently than the rigid walker with wheels (E0141), and more 
frequently than the walkers without wheels (E0130 and E0135), it 
receives a higher weight under the DMEPOS CBP than all three codes for 
the less expensive, less frequently utilized codes with fewer features: 
E0130, E0135, and E0141. Under the 2015 fee schedule, Medicare pays 
more for code E0143 than codes E0130 (rigid walkers without wheels), 
E0135 (folding walkers without wheels) or E0141 (rigid walkers with 
wheels). Under the Round 2 Recompete, the fact that code E0143 (folding 
walkers with wheels) received a far greater weight than the other 
walkers that either did not fold, did not have wheels, or had neither 
feature resulted in price inversions as illustrated in Table 13 below. 
The first price inversion involves a rigid walker without wheels 
(E0130). A rigid walker without wheels has lower fee schedule amounts 
on average and a lower weight than a folding walker without wheels 
(E0135), yet under competitive bidding, it has a greater SPA than the 
folding walker. The second price inversion involves a rigid walker with 
wheels (E0141), which has lower fee schedule amounts on average and a 
lower weight than a folding walker with wheels (E0143), but has a 
greater SPA than the folding walker with wheels under competitive 
bidding. The third price inversion involves a rigid walker without 
wheels (E0130), which has a greater SPA than a folding walker with 
wheels despite having lower fee schedule amounts on average and a lower 
weight than the folding walker with wheels (E0143).

                        Table 13--Round 2 (2016) Price Inversions for Purchase of Walkers
----------------------------------------------------------------------------------------------------------------
                    Code                                  Item                 2015 Fee \1\       Avg SPA \2\
----------------------------------------------------------------------------------------------------------------
E0130......................................  Rigid Walker without Wheels..             $64.97             $47.23
E0135......................................  Folding Walker without Wheels             $78.97             $43.05
E0141......................................  Rigid Walker with Wheels.....            $107.89             $75.03
E0143......................................  Folding Walker with Wheels...            $111.69             $45.92
----------------------------------------------------------------------------------------------------------------
\1\ Average of 2015 fee schedule amounts for all areas.
\2\ Average of Round 2 2016 SPAs.

    In all cases, Medicare pays higher payment for walkers with wheels 
than walkers without wheels under the fee schedule. This differential 
in payment amounts is significant because it reflects the fact that the 
walker with wheels has a feature that likely resulted in higher fee 
schedule amounts for this item, making it more costly than the same 
type of walker without the addition of wheels. Rather than defining the 
ability of a walker to fold or the presence of wheels as a 
``hierarchal'' feature, it can simply be noted that under the fee 
schedule, Medicare pays more for walkers with the ability to fold than 
walkers without the ability to fold and that Medicare pays more for 
walkers

[[Page 42854]]

with wheels than for walkers without wheels. If the items with 
additional features are more expensive and are also utilized more than 
the items without the features, a price inversion can result in a CBA 
due to the item weights and how they factor into the composite bids, as 
described above. Therefore, we propose to adopt a definition of price 
inversion in our regulations at 414.402 as any situation where the 
following occurs: (a) One item in a product category includes a feature 
that another, similar item in the same product category does not have 
(for example, wheels, an alarm, or Group 2 performance); (b) the 
average of the 2015 fee schedule amounts for the code with the feature 
is higher than the average of the 2015 fee schedule amounts for the 
code without the feature; and (c) the SPA for the item with the feature 
is lower than the SPA for the item without that feature. We propose to 
classify this circumstance as a price inversion under competitive 
bidding that would be adjusted prior to revising the fee schedule 
amounts for the items. For this adjustment, we considered two 
methodologies.
    The first methodology we considered for addressing price inversions 
(method 1) uses the methodologies at 42 CFR 414.210(g)(6) and limits 
the SPA for the code without the feature to the SPA for the code with 
the feature before the SPA is used to adjust the fee schedule amounts 
for the item. For example, under the Round 2 Recompete, the SPA for 
code E0141 for the South Haven-Olive Branch, MS CBA is $106.52. Code 
E0143 describes the same type of walker, but code E0143 walkers fold, 
while code E0141 walkers are rigid and do not fold. However, under the 
Round 2 Recompete, the SPA for code E0143 (wheeled walkers that fold) 
for the South Haven-Olive Branch, MS CBA is $44.00, or $62.52 less than 
the SPA for E0141 (wheeled walkers that do not fold). The average of 
the 2015 fee schedule amounts for codes E0141 and E0143 are $107.89 and 
$111.69, respectively. Altogether, since (a) one walker in a product 
category includes a feature that another, similar walker in the same 
product category does not have (in this situation, the ability to 
fold); (b) the average of the 2015 fee schedule amounts for the folding 
walker (E0143) is higher than the average of the 2015 fee schedule 
amounts for the rigid walker (EO141); and (c) the SPA for the folding 
walker ($44.50) is lower than the SPA for the rigid walker ($106.52), 
these items would meet the proposed definition of a price inversion 
under the DMEPOS CBP. Under method 1, the SPA of $106.52 for code E0141 
in this CBA would be adjusted to the SPA of $44.00 for code E0143 in 
this CBA, so that $44.00, rather than $106.52, would be used for this 
CBA in computing the regional price for code E0141 described in Sec.  
414.210(g)(1)(i) under the methodology used to adjust the fee schedule 
amounts for code E0141. To further illustrate how method 1 would work, 
the 2016 SPAs for codes E0130, E0135, E0141, and E0143 for the Akron, 
Ohio CBA, and the amounts they would be adjusted to before applying the 
fee schedule adjustment methodologies are listed in Table 14 below.

   Table 14--Adjustment of 2016 SPAs for Purchase of Walkers for Akron, OH To Eliminate Price Inversions With
                                                    Method 1
----------------------------------------------------------------------------------------------------------------
                                                                                                     Adjusted
              Code                             Item                2015 Fee \1\      2016 SPA       amount \2\
----------------------------------------------------------------------------------------------------------------
E0130...........................  Rigid Walker without Wheels...          $64.97          $50.85          $44.88
E0135...........................  Folding Walker without Wheels.           78.97           44.88             n/a
E0141...........................  Rigid Walker with Wheels......          107.89           84.82           48.62
E0143...........................  Folding Walker with Wheels....          111.69           48.62             n/a
----------------------------------------------------------------------------------------------------------------
\1\ Average of 2015 fee schedule amounts for all areas.
\2\ The SPA would be adjusted to this amount before making adjustments to the fee schedule.

    The method 1 approach is currently used for enteral infusion pumps 
and standard power wheelchairs at Sec.  414.210(g)(6), and each price 
inversion correction is made for a set of two items, as described in 
the regulation. For example, Sec.  414.210(g)(6)(ii) states: ``In 
situations where a single payment amount in a CBA for a Group 1, 
standard, sling/solid seat and back power wheelchair is greater than 
the single payment amount in the same CBA for a Group 2, standard, 
sling/solid seat and back power wheelchair, the single payment amount 
for the Group 1, standard, sling/solid seat and back power wheelchair 
is adjusted to be equal to the single payment amount for the Group 2, 
standard, sling/solid seat and back power wheelchair prior to applying 
the payment adjustment methodologies in this section.'' If method 1 is 
finalized, we would indicate that additional price inversions involving 
additional sets of two items to which this rule would be applied would 
be identified in a table in the preamble of the final rule. An example 
of such a table is provided below in Table 15 using codes for walkers, 
seat lift mechanisms, and TENS devices:

                      Table 15--Additional Price Inversions Subject to 42 CFR 414.210(g)(6)
----------------------------------------------------------------------------------------------------------------
                                   Code without          Code with
             Item                   feature(s)          feature(s)          Feature(s)           Adjustment
----------------------------------------------------------------------------------------------------------------
Walker........................  E0130.............  E0135.............  Folding..........  E0130 SPA adjusted
                                                                                            not to exceed (NTE)
                                                                                            SPA for E0135.
Walker........................  E0141.............  E0143.............  Folding..........  E0141 SPA adjusted
                                                                                            NTE SPA for E0143.
Walker........................  E0130.............  E0143.............  Folding, Wheels..  E0130 SPA adjusted
                                                                                            NTE SPA for E0143.
Walker........................  E0135.............  E0143.............  Wheels...........  E0135 SPA adjusted
                                                                                            NTE SPA for E0143.
Seat Lift.....................  E0629.............  E0627[sup1].......  Powered..........  E0629 SPA adjusted
                                                                                            NTE SPA for E0627.
Seat Lift.....................  E0629.............  E0628[sup1].......  Powered..........  E0629 SPA adjusted
                                                                                            NTE SPA for E0628.
TENS..........................  E0720.............  E0730.............  Two Additional     E0720 SPA adjusted
                                                                         Leads.             NTE SPA for E0730.
----------------------------------------------------------------------------------------------------------------
\1\ Codes E0627 and E0628 both describe powered electric seat lift mechanisms. Code E0627 describes powered seat
  lift mechanisms incorporated into non-covered seat lift chairs.


[[Page 42855]]

    The second methodology we considered and are proposing (method 2) 
would limit the SPAs in situations where price inversions occur so that 
the SPAs for all of the similar items, both with and without certain 
features, are limited to the weighted average of the SPAs for the items 
based on the item weights assigned under competitive bidding. This 
approach would factor in the supplier bids for the lower volume and 
higher volume items. This would establish one payment for similar types 
of items that incorporates the volume and weights for items furnished 
prior to the unbalanced bidding and resulting price inversions. To 
illustrate how method 2 would work, the 2016 SPAs for codes E0130, 
E0135, E0141, and E0143 for the Vancouver, WA CBA, and the amounts they 
would be adjusted to before applying the fee schedule adjustment 
methodologies using the weights from Round 2 Recompete are listed in 
Table 16 below.

Table 16--Adjustment of 2016 SPAs for Purchase of Walkers for Vancouver, WA to Eliminate Price Inversions Method
                                                        2
----------------------------------------------------------------------------------------------------------------
                                                                                      Round 2
          Code                     Item            2015 Fee \1\      2016 SPA     recompete item     Adjusted
                                                                                     weight %       amount \2\
----------------------------------------------------------------------------------------------------------------
E0130...................  Rigid Walker without            $64.97          $51.62             0.1          $45.53
                           Wheels.
E0135...................  Folding Walker without           78.97           47.65             4.8           45.53
                           Wheels.
E0141...................  Rigid Walker with               107.89           81.62             0.5           45.53
                           Wheels.
E0143...................  Folding Walker with             111.69           45.22            94.6           45.53
                           Wheels.
----------------------------------------------------------------------------------------------------------------
\1\ Average of 2015 fee schedule amounts for all areas.
\2\ The SPA would be adjusted to this amount before making adjustments to the fee schedule.

    The item weights from the Round 2 Recompete for the four walker 
codes in this subcategory of walkers in the table above are 0.1 percent 
for E0130, 4.8 percent for E0135, 0.5 percent for E0141, and 94.6 
percent for E0143. The weighted average of the SPA for the four walker 
codes would be $45.53 ($51.62 x 0.001 + $47.65 x 0.048 + $81.62 x 0.005 
+ $45.22 x 0.946). This weighted average SPA would be used to adjust 
the fee schedule amounts for these four codes rather than simply 
limiting the SPAs for E0135 and E0143 in Table 16 above. This method 
uses item weights in a product category to adjust the SPA before making 
adjustments to the fee schedule amount. In accordance with the proposed 
definition of a price inversion, (a) E0135 and E0143 include features 
that other, similar walkers in the same product category do not (the 
ability to fold); (b) the average of the 2015 fee schedule amounts for 
the folding walkers (E0135 & E0143) are higher than the average of the 
2015 fee schedule amounts for the rigid walkers (E0130 & E0141); and 
(c) the 2016 SPAs for the folding walkers were less than the SPAs for 
the respective rigid walkers. Therefore, the SPA for code E0130 is 
higher than the SPA for code E0135, the SPAs for codes E0141 and E0143 
were inverted such that the SPA for code E0141 is higher than the SPA 
for code E0143, and the SPAs for codes E0135 and E0143 were inverted 
such that the SPA for code E0135 is higher than the SPA for code E0143. 
Under proposed method 2, these three price inversions would be 
addressed so that the SPAs for all of the similar items described by 
codes E0130, E0135, E0141, and E0143 in this CBA would be adjusted to 
the weighted average of the SPAs for these codes for similar items in 
this CBA. As a result, the adjusted SPA of $45.53 rather than $51.62, 
$47.65, $81.62, and $45.22, would be used to compute the regional price 
for codes E0130, E0135, E0141, and E0143, respectively, using method 2 
to adjust the fee schedule amounts for these items and in accordance 
with Sec.  414.210(g)(1)(i).
    Although we believe that both method 1 and method 2 would correct 
inverted SPAs, method 1 simply limits the amount paid for the item 
without a feature(s) to the item with the feature(s), while method 2 
factors in the SPAs for all of the items. Therefore, if the cost of an 
item without a feature was actually more than the cost of an item with 
a feature (for example, for volume discounts for the item with the 
feature drives the price down below the price for the item without the 
feature), method 1 would not allow the higher cost of the item without 
the feature to be factored into the payment made to the suppliers of 
the items. Therefore, we are proposing to use method 2 because it takes 
into account the supplier bids for all of the similar items into 
account in establishing the payment amounts used to adjust fees; and 
therefore, factors in contemporary information relative to bids and 
supplier information for various items with different features and 
costs. The SPAs established based on supplier bids for all of the 
similar items are used to calculate the weighted average. If, for some 
reason, the market costs for an item without a feature are actually 
higher than the market costs for an item with the feature, due to 
economies of scale, supply and demand, or other economic factors, these 
costs are accounted for in the weighted average of the SPAs established 
for each of the similar items. Under method 1, the SPA for the lower 
weight item without a feature is limited to the SPA for the higher 
weight item with the feature, and so potential cost inversions driven 
by market forces or supplier costs are not accounted for in 
establishing the adjusted payment amounts. However, we are soliciting 
comments on both method 2, which we are proposing, and method 1, which 
we are considering.
    Other examples of price inversions resulting from the Round 2 
Recompete are listed in Table 17 below. This is not an exhaustive list 
of price inversions that have resulted under the CBPs and to which the 
proposed rule would apply.

[[Page 42856]]



 Table 17--Examples of Round 2 Recompete SPA Price Inversions for Items
                   With Additional Feature(s), by CBA
------------------------------------------------------------------------
                                Lower priced item    Number of CBAs out
  Higher priced item under       under 2015 fee       of 117 with price
      2015 fee schedule             schedule              inversion
------------------------------------------------------------------------
Folding Walker with Wheels    Rigid Walker with     117 CBAs in which
 (E0143).                      Wheels (E0141).       E0143 now priced
                                                     lower than E0141.
Powered Group 2 Support       Non-powered Group 2   117 CBAs in which
 Surface Mattress (E0277).     Support Surface       E0277 now priced
                               Mattress (E0373).     lower than E0373.
Enteral Pump with Alarm       Enteral Pump without  112 CBAs in which
 (B9002).                      Alarm (B9000).        B9002 now priced
                                                     lower than B9000.
Group 2 Power Wheelchair      Group 1 Power         103 CBAs in which
 (K0823).                      Wheelchair (K0816).   K0823 now priced
                                                     lower than K0816.
Four lead TENS (E0730)......  Two lead TENS         93 CBAs in which
                               (E0720).              E0730 now priced
                                                     lower than E0720.
------------------------------------------------------------------------

    In summary, we propose to expand use of the methodology at Sec.  
414.210(g)(6) to other situations where price inversions occur under 
CBPs. First, we propose to revise 42 CFR 414.402 to add the definition 
of price inversion as any situation where the following occurs:
     One item (HCPCS code) in a grouping of similar items (for 
example, walkers, enteral infusion pumps or power wheelchairs) in a 
product category includes a feature that another, similar item in the 
same product category does not have (for example, wheels, alarm, or 
Group 2 performance);
     The average of the 2015 fee schedule amounts (or initial, 
unadjusted fee schedule amounts for subsequent years for new items) for 
the code with the feature is higher than the average of the 2015 fee 
schedule amounts for the code without the feature; and
     The SPA in any year after and including 2016 for the code 
with the feature is lower than the SPA for the code without that 
feature.
    Second, we propose to revise Sec.  414.210(g)(6) to specify that, 
in situations where price inversions occur under a CBP, the SPAs for 
the items would be adjusted before applying the fee schedule adjustment 
methodologies under Sec.  414.210(g). We are proposing that the 
adjustments to the SPAs would be made using method 2 described above. 
We are proposing changes to the regulation text at 414.210(g)(6) to 
reflect use of method 2 to adjust the SPAs for all of the similar items 
where price inversions have occurred, both with and without certain 
features, so that they are limited to the weighted average of the SPAs 
for the items in the product category in the CBA before applying the 
fee schedule adjustment methodologies under Sec.  414.210(g). We 
propose to apply this rule to price inversions as defined in this 
proposed rule for the groupings of similar items listed in the Table 18 
below. For the purpose of calculating the weighted average at proposed 
Sec.  414.210(g)(6)(iii), we are proposing to add a definition of 
``total nationwide allowed services'' at Sec.  414.202, to mean the 
total number of services allowed for an item furnished in all states, 
territories, and the District of Columbia where Medicare beneficiaries 
reside and can receive covered DMEPOS items and services. We are 
proposing to define the weight for each code in a grouping of similar 
items at Sec.  414.210(g)(6)(iii) for purposes of calculating the 
weighted average as the proportion of the total nationwide allowed 
services for the code for claims with dates of service in calendar year 
2012 relative to the total nationwide allowed services for each of the 
other codes in the grouping of similar items for claims with dates of 
service in calendar year 2012. We are proposing to use data from 
calendar year 2012 because this is the most recent calendar year that 
includes data for items furnished before implementation of Round 2 of 
the CBP and the beginning of the price inversions. The weights reflect 
the frequency that covered items in a grouping of similar items were 
furnished in calendar year 2012 on a national basis relative to other 
items in the grouping.

                  Table 18--Groupings of Similar Items
------------------------------------------------------------------------
       Grouping of similar items                 HCPCS codes \1\
------------------------------------------------------------------------
Enteral Infusion Pumps.................  B9000, B9002.
Hospital Beds..........................  E0250, E0251, E0255, E0256,
                                          E0260, E0261, E0290, E0291,
                                          E0292, E0293, E0294, E0295,
                                          E0301, E0302, E0303, E0304.
Mattresses and Overlays................  E0277, E0371, E0372, E0373.
Power Wheelchairs......................  K0813, K0814, K0815, K0816,
                                          K0820, K0821, K0822, K0823.
Seat Lift Mechanisms...................  E0627, E0628, E0629.
TENS Devices...........................  E0720, E0730.
Walkers................................  E0130, E0135, E0141, E0143.
------------------------------------------------------------------------
\1\ The descriptions for each HCPCS code are available at: https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.html.


[[Page 42857]]

    We are soliciting comments on this section.

VII. Submitting Bids and Determining Single Payment Amounts for Certain 
Groupings of Similar Items With Different Features Under the DMEPOS 
Competitive Bidding Program

A. Background on the DMEPOS Competitive Bidding Programs

    Medicare pays for most DMEPOS furnished after January 1, 1989, 
pursuant to fee schedule methodologies set forth in sections 1834 and 
1842 of the Social Security Act (the Act). Specifically, subsections 
(a) and (h) of section 1834 and subsection (s) of section 1842 of the 
Act provide that Medicare payment for these items is equal to 80 
percent of the lesser of the actual charge for the item or a fee 
schedule amount for the item. The regulations implementing these 
provisions are located at 42 CFR part 414, subparts C and D.
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement CBPs in competitive bidding areas (CBAs) throughout the 
United States for contract award purposes for the furnishing of certain 
competitively priced DMEPOS items and services. Section 1847(b)(5) of 
the Act directs the Secretary to base the single payment amount (SPA) 
for each item or service in each CBA on the bids submitted and accepted 
in the CBP. For competitively bid items, the SPAs have replaced the fee 
schedule payment methodology. Section 1847(b)(5) of the Act provides 
that Medicare payment for these competitively bid items and services is 
made on an assignment-related basis and is equal to 80 percent of the 
applicable SPA, less any unmet Part B deductible described in section 
1833(b) of the Act. Section 1847(b)(2)(A)(iii) of the Act prohibits the 
Secretary from awarding a contract to an entity in a CBA unless the 
Secretary finds that the total amounts to be paid to contractors in a 
CBA are expected to be less than the total amounts that would otherwise 
be paid. This requirement guarantees savings to both the Medicare 
program and its beneficiaries.
    We implemented CBPs in 9 Round 1 metropolitan statistical areas on 
January 1, 2011, and an additional 91 Round 2 metropolitan statistical 
areas on July 1, 2013. Bids are submitted during a 60-day bidding 
period allowing suppliers adequate time to prepare and submit their 
bids. We then evaluated each submission and awarded contracts to 
qualified suppliers in accordance with the requirements of section 
1847(b)(2) of the Act, Sec.  414.414, which specifies conditions for 
awarding contracts, and Sec.  414.416, which specifies how single 
payment amounts are established.

B. Definitions of Item, Item Weight, Product Category and Composite Bid

    ``Item'' is defined in our regulations at 414.402 as a product 
included in a CBP that is identified by a HCPCS code, which may be 
specified for competitive bidding, or a combination of codes and/or 
modifiers, and includes the services directly related to the furnishing 
of that product to the beneficiary. Item weight is a number assigned to 
an item based on its beneficiary utilization rate using national data 
when compared to other items in the same product category. A product 
category is a grouping of similar items that are used to treat a 
similar medical condition. Pursuant to Sec.  414.414(e)(3), CMS 
evaluates bids for items within a product category by establishing a 
composite bid for each supplier and network that submitted a bid for 
the product category. A composite bid is the sum of a supplier's 
weighted bids for all items within a product category for purposes of 
allowing a comparison across bidding suppliers. Because suppliers bid 
for multiple items of similar equipment within a product category, the 
lowest bid for each item will not always be submitted by the same 
supplier. Evaluating single bids for individual items would not 
determine which suppliers should be selected to be contract suppliers 
because different suppliers may submit the lowest bids for different 
items. We established this provision (72 FR 18040) for using a 
composite bid as a way to aggregate a supplier's bids for individual 
items within a product category into a single bid for the whole product 
category. This allows us to determine which suppliers can offer the 
lowest expected costs to Medicare for all items in a product category.
    To compute the composite bid for a product category, we multiply a 
supplier's bid for each item in a product category by the item's weight 
and sum these numbers across items. The weight of an item is based on 
the utilization of the individual item compared to other items within 
that product category based on historic Medicare claims. The sum of 
each supplier's weighted bids for every item in a product category is 
the supplier's composite bid for that product category. When an item 
receives a very low weight within its product category, suppliers have 
little incentive to bid lower for this item because the bids have a 
minimal effect on the composite bid of the suppliers, whereas the bids 
for higher weighted items have a significant effect on the supplier's 
composite bid. This results in price inversions, as discussed further 
below.

C. Current Issues

    As explained in section VI above, price inversions may occur when 
items that are similar in terms of the general purpose they serve (for 
example, walkers), but have different features (for example, wheels, 
folding capability, etc.), fall within the same product category and 
have different item weights, therefore having varying degrees of 
influence on a supplier's composite bid. An item in a product category 
that is rented and/or purchased by beneficiaries more often than 
another similar item(s) in the product category has a higher item 
weight than the other similar item(s) in the product category, and 
typically will have a higher fee schedule amount at the time the 
competition takes place than the other similar item(s) in the product 
category. In a price inversion, an SPA is established for the higher 
volume item with the higher fee schedule amount that is lower than the 
SPA(s) established for the other similar item(s) that had lower fee 
schedule amounts at the time the competition took place. For example, 
prior to the implementation of the Round 2 CBPs in July 2013, the 2013 
rental fee schedule amounts in Akron, Ohio for the infrequently 
furnished Group 1 power wheelchair (K0816) and portable Group 2 power 
wheelchair (K0821) were significantly lower than the 2013 rental fee 
schedule amount for the heavily utilized Group 2 power wheelchair 
(K0823). Table 19 below shows these fee schedule amounts and also 
includes national data for calendar year 2012 indicating the percentage 
of claims for all standard power wheelchairs furnished in 2012 
attributed to each code.

[[Page 42858]]



  Table 19--2013 Rental Fee Schedule Amounts and 2012 Utilization Rates
            for Certain Power Wheelchairs in Akron, Ohio CBA
------------------------------------------------------------------------
                                                             Percent of
                                                              standard
                                                               power
       Code            2013 Fee         Akron, OH--Fee       wheelchair
                                           schedule         utilization
                                                              in 2012
                                                            (national) %
------------------------------------------------------------------------
K0816.............         $471.38  Group 1 Power                   0.16
                                     Wheelchair.
K0821.............          463.01  Group 2 Portable                0.09
                                     Power Wheelchair.
K0823.............          563.26  Group 2 Power                  81.7
                                     Wheelchair.
------------------------------------------------------------------------

    Because codes K0816 and K0821 had comparatively low utilization and 
received very low weights within the product category, suppliers had 
little incentive to bid lower for these items than for K0823, since the 
bids for K0816 and K0821 had a minimal effect on the suppliers' 
composite bids, while the bids for K0823 had a significant effect on 
the suppliers' composite bids. This resulted in the price inversions 
described in the Table 20 below, whereby the payment rate for code 
K0816 was 16 percent lower than the SPA for code K0823 before 
competitive bidding, but 39 percent higher than the SPA for code K0823 
after competitive bidding. Similarly, the payment rate for code K0821 
was 18 percent lower than the SPA for code K0823 before competitive 
bidding, but 43 percent higher than the SPA for code K0823 after 
competitive bidding.

 Table 20--Price Inversions for Certain Power Wheelchairs in Akron, Ohio
                                   CBA
------------------------------------------------------------------------
                                                            Percent of
                                                          standard power
                                        Akron, OH--          wheelchair
       Code           2013 SPA      Competitive bidding   utilization in
                                                               2015
                                                           (national) %
------------------------------------------------------------------------
K0816............         $374.55  Group 1 Power                     7.2
                                    Wheelchair.
K0821............          387.31  Group 2 Portable                  4.1
                                    Power Wheelchair.
K0823............          270.00  Group 2 Power                    65.9
                                    Wheelchair.
------------------------------------------------------------------------

    The 2012 and 2015 utilization percentages above are the national 
data for all areas, including areas that are not CBAs. As the tables 
above show, some utilization of standard power wheelchairs shifted from 
Group 2 non-portable power wheelchairs to less durable and lower 
performing Group 1 and Group 2 portable power wheelchairs. This results 
in the beneficiaries receiving items without additional features at a 
higher SPA price than items with these additional features. It also 
undermines the purpose of the CBP and savings intended by the Act and 
implementation of the program.
    The true magnitude of the problem of price inversions is best 
illustrated by data for power wheelchairs furnished in the Round 2 
CBAs. Under the Round 2 competitions and contracts that took effect on 
July 1, 2013, code K0816 received a very low item weight based on the 
low utilization rate for this item whereas code K0823 received a very 
high item weight. The average rental fee schedule amount of $471.38 for 
code K0816 in 2013 decreased to an average SPA of $344.32 under the 
CBP, a 27 percent decrease. In comparison, the average reduction in the 
rental payment amount for code K0823 under Round 2 2013 was 49 percent; 
from an average rental fee schedule amount in 2013 of $563.26 to an 
average SPA of $287.05.
    After the SPAs took effect in the Round 2 CBAs, we found trends 
indicating increased expenditures or total allowed charges for code 
K0816 in the Round 2 CBAs, but a decrease in expenditures or total 
allowed charges for code K0823 in the Round 2 CBAs. Also, under the 
Round 2 competition, total allowed charges from July 2013 through 
December 2015 (2.5 years) for K0816 increased by 1,159 percent as 
compared to the total allowed charges from January 2011 through June 
2013 (2.5 years). By comparison, total allowed charges for K0823 for 
these same time periods and areas decreased by 86 percent. This 
inversion in both charges and utilization was more pronounced in 
certain CBAs than others. In the Atlanta-Sandy Springs-Marietta, 
Georgia CBA, allowed charges for K0816 (SPA = $361.59) increased by 
10,239 percent from $8,010 to $828,995, while allowed charges for K0823 
(SPA = $281.89) decreased by 87 percent from $11,051,027 to $1,477,062. 
We found the same phenomenon for hospital beds where utilization of 
non-electric hospital beds (code E0250) increased by 214 percent in the 
Round 2 CBAs while utilization of semi-electric beds (code E0260) 
decreased by 63 percent. Therefore, the data shows that due to 
unbalanced bidding in various CBAs, item utilization is shifting from 
certain items to others, and Medicare is now paying more for these 
items under the CBP than it was before the CBP was implemented for 
these items in these CBAs. This is an unacceptable outcome because it 
results in the beneficiary receiving an item with less functionality 
(for example, a manual hospital bed rather than a semi-electric 
hospital bed) at a higher cost for both the Medicare program and the 
beneficiary than the item with more functionality.

D. Proposed Revisions

    To avoid the aforementioned price inversions, we are proposing in 
Sec.  414.412(d)(2), that in situations where we find that a product 
category includes

[[Page 42859]]

a grouping of two or more similar items with different features, that 
we would utilize an alternative to the current bidding methodology that 
CMS may apply for certain items within product categories for which 
previous competitions resulted in price inversions. Under this 
alternative bidding methodology, we will designate one item as the lead 
item for the grouping for bidding purposes. The item in the grouping 
with the highest allowed services during a specified base period, as 
detailed below, will be considered the lead item of the grouping. For 
purposes of this proposed rule, the lead item bidding method described 
below only applies to a subset of similar items with different features 
identified in this rule, as opposed to an entire product category. The 
supplier's bid for the lead item would be used as the basis for 
calculating the SPAs for the similar items within that grouping. That 
is, we would automatically calculate the SPAs for any similar item in 
the grouping based on the ratio of the average of the similar item's 
fee schedule amounts for all areas nationwide in 2015, to the average 
of the lead item's fee schedule amounts for all areas nationwide in 
2015. In Sec.  414.412(d)(2), we are proposing to use the fee schedule 
amounts for 2015 for the purpose of determining the relative difference 
in fee schedule payments for similar items because we believe they 
reflect the relative difference in cost for the items under the fee 
schedule prior to any adjustments being made to the amounts based on 
information from the CBPs. We found price inversions for groupings of 
similar items within the following categories: Standard power 
wheelchairs, walkers, hospital beds, enteral infusion pumps, TENS 
devices, support surface mattresses and overlays and seat lift 
mechanisms. These groupings of similar items are a subset of similar 
items with different features identified in this rule, as opposed to 
entire product categories.
    Under our proposal, when bidding for the lead item, a supplier is 
bidding to furnish the entire grouping of similar items with different 
features (for example, standard power wheelchairs); however, rather 
than submitting bids for each individual HCPCS code for each item, a 
supplier would make one bid that should take into account the cost of 
furnishing all of the similar items. For example, a $300 bid for K0823 
would automatically establish the payment amounts for all the other 
power wheelchairs in the grouping, so that K0816 would be .84 times 
$300, and K0829 would be 1.58 times $300 (as shown in the Table 21 
below). The supplier may have to adjust its initial K0823 bid before 
deciding on a final bid, depending on the utilization of the lower 
volume items in the grouping, and its targeted total revenue for the 
grouping according to its item weights. The supplier would also be 
educated at the time of bidding that the SPAs for the other similar 
items would be based on its bid for the lead item, and the supplier is 
therefore submitting bids for all of these items when bidding on the 
lead item. Thus, to avoid cases of price inversions, the supplier is 
submitting a bid for an item (for example, standard power wheelchair), 
and for lead item bidding purposes, an ``item'' is a product that is 
identified by a combination of codes, as described in Sec.  414.402. We 
also believe that the proposed lead item-focused bidding method would 
greatly reduce the burden on suppliers of formulating and submitting 
multiple bids for similar items because it would require less time to 
enter their bids and would reduce the chances of keying errors when 
submitting bids. The items subject to this proposed rule would include 
a broader set of items than those subject to the proposed rule under 
section VI above. Namely all codes for walkers, hospital beds, and 
standard power wheelchairs would be subject to this proposed rule and 
not just those codes for walkers, hospital beds, and standard power 
wheelchairs where price inversions have already occurred. The lead item 
bidding method is intended to prevent future price inversions for a 
grouping of similar items, including codes for items (for example, 
total electric hospital beds) where price inversions have not occurred 
thus far, but where we believe price inversions would be likely based 
on information about the fee schedule amounts and the utilization of 
these items. By applying the lead item bidding method to all hospital 
beds, including total electric hospital beds, this prevents price 
inversions from occurring for all hospital beds. We also believe it is 
a more efficient method for implementing CBPs and pricing.
    To identify the lead item, we propose using allowed services from 
calendar year 2012 for the first time this bidding method is used for 
specific items in specific CBAs. We did not observe price inversions 
under the Round 1 competitions and contracts that were in effect from 
January 2011 through December 2013. The price inversions began with the 
Round 2 competitions and contracts that began on July 1, 2013; 
therefore, we propose using data for allowed services from calendar 
year 2012 to ensure that the effects of price inversions do not impact 
the utilization of the various items that is used to identify the lead 
item. Once this bidding method has been used in all competitions for an 
item (for example, standard power wheelchairs), we propose that the 
lead item would be identified for future competitions based on allowed 
services for the items at the time the subsequent competitions take 
place rather than the allowed services from calendar year 2012. For 
example, using allowed services from calendar year 2012 is necessary to 
identify the lead items initially since utilization of items for years 
subsequent to 2012 could be affected by the price inversions that began 
with the Round 2 competitions and contracts on July 1, 2013. Once the 
lead item bidding method is implemented for a grouping of similar 
items, and the price inversions are eliminated, utilization of items 
for years subsequent to the point at which the price inversions are 
eliminated can be used for the purpose of identifying the lead item 
because they would not be affected by price inversions. This proposed 
rule would also help to prevent price inversions in adjusted fee 
schedule amounts using competitive bidding SPAs. We propose to announce 
which items would be subject to this bidding method at the start of 
each competition in each CBA where this bidding method is used.
    The following tables 21, 22, and 23 show how the lead item for 
three groupings of similar items (standard power wheelchairs, walkers, 
and hospital beds, respectively) would be identified using 2012 allowed 
services and how the SPAs would be established based on the method 
described above. Under our proposal, when bidding for the lead item, a 
supplier is bidding to furnish the entire grouping of similar items. In 
the charts below, the lead items identified would be the lead items in 
initial competitions where the lead item bidding method is used. The 
first proposed category for lead item bidding is standard power 
wheelchairs.

[[Page 42860]]



           Table 21--Lead Item Bidding for Standard Power Wheelchairs and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services  for    2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
K0823 (lead item)..................  Group 2 Captains Chair,           1,108,971         $578.51            1.00
                                      Standard Weight.
K0825..............................  Group 2 Captains Chair,             122,422          637.40            1.10
                                      Heavy Duty.
K0822..............................  Group 2 Sling Seat,                  99,597          574.73            0.99
                                      Standard Weight.
K0824..............................  Group 2 Sling Seat, Heavy            10,609          696.23            1.20
                                      Duty.
K0827..............................  Group 2 Captains Chair,               6,683          766.42            1.32
                                      Very Heavy Duty.
K0814..............................  Group 1 Captains Chair,               6,287          443.98            0.77
                                      Portable.
K0816..............................  Group 1 Captains Chair,               2,176          484.14            0.84
                                      Standard Weight.
K0826..............................  Group 2 Sling Seat, Very              1,063          901.38            1.56
                                      Heavy Duty.
K0821..............................  Group 2 Captains Chair,               1,048          475.55            0.82
                                      Portable.
K0813..............................  Group 1 Sling Seat,                     771          346.83            0.60
                                      Portable.
K0815..............................  Group 1 Sling Seat.........             545          505.52            0.87
K0828..............................  Group 2 Sling Seat, Extra               114          993.20            1.72
                                      Heavy Duty.
K0829..............................  Group 2 Captains Chair,                 105          912.06            1.58
                                      Extra Heavy Duty.
K0820..............................  Group 2 Sling Seat,                      46          370.46            0.64
                                      Portable.
----------------------------------------------------------------------------------------------------------------

    Rather than submitting 14 individual bids for each of the 14 items, 
the supplier would submit one bid for the lead item. The SPA for lead 
item K0823 would be based on the median of the bids for this code, 
following the rules laid out in Sec.  414.416(b) and for calculating 
rental amounts pursuant to Sec.  414.408(h)(2). The SPAs for the other 
items would be based on the relative difference in fees for the other 
items as compared to the lead item. For example, if the SPA for code 
K0823 is $300.00, the SPA for code K0825 would be equal to $330.00, or 
$300.00 multiplied by 1.1. Similarly, if the SPA for code K0823 is 
$300.00, the SPA for code K0816 would be equal to $252.00, or $300.00 
multiplied by 0.84. Suppliers submitting bids would be educated in 
advance that their bid for code K0823 is a bid for all 14 codes and 
bidding suppliers would factor this into their decision on what amount 
to submit as their bid for the lead item. This would avoid price 
inversions and would carry over the relative difference in item weight 
that establishes Medicare payment amounts for standard power 
wheelchairs under the fee schedule into the CBPs. The second proposed 
category for lead item bidding is walkers as shown in Table 22 below. 
Under our proposal, when bidding for the lead item, a supplier is 
bidding to furnish the entire grouping.

                     Table 22--Lead Item Bidding for Walkers and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services  for   2015 purchase   Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
E0143 (lead item)..................  Folding With Wheels........         958,112         $111.69            1.00
E0135..............................  Folding....................          56,399           78.97            0.71
E0149..............................  Heavy Duty With Wheels.....          23,144          214.34            1.92
E0141..............................  Rigid With Wheels..........           6,319          107.89            0.97
E0148..............................  Heavy Duty.................           4,366          122.02            1.09
E0147..............................  Heavy Duty With Braking &             4,066          551.98            4.94
                                      Variable Wheel Resistance.
E0140..............................  With Trunk Support.........           1,483          346.38            3.10
E0144..............................  Enclosed With Wheels & Seat           1,275          305.95            2.74
E0130..............................  Rigid......................             788           64.97            0.58
----------------------------------------------------------------------------------------------------------------

    Rather than submitting 9 individual bids for each of the 9 items, 
the supplier would submit one bid for the lead item. The SPA for lead 
item E0143 would be based on the median of the bids for this code, 
following the rules laid out in Sec.  414.416(b) and for calculating 
rental and purchase amounts per Sec.  414.408(f) and (h)(7). We propose 
to include a new section 414.416(b)(3) that would include the lead item 
bidding method. The SPAs for the other items would be based on the 
relative difference in fees for the item compared to the lead item, 
following the rules for inexpensive or routinely purchased items at 
Sec.  414.408(f) and (h)(7), and, for E0144, following the rules for 
capped rental items at Sec.  414.408(h)(1). For example, if the SPA for 
purchase for code E0143 is $80.00, Medicare payment for rental of E0143 
would be $8.00 per month in accordance with Sec.  414.408(h)(7), and 
the SPA for purchase of E0143 used would be $60.00. The SPAs for code 
E0135 would be equal to $56.80 ($80.00 multiplied by 0.71), for 
purchase of a new E0135 walker, $5.68 per month for rental of E0135, 
and $42.60 for purchase of a used E0135 walker. The SPAs for rental of 
code E0144 would be equal to $21.92 ($8.00 multiplied by 2.74) for 
rental months 1 through 3, and $16.44 for rental months 4 through 13. 
Suppliers submitting bids would be educated in advance that their bid 
for code E0143 is a bid for all 9 codes and bidding suppliers would 
factor this into their decision on what amount to submit as their bid 
for the lead item. This would avoid price inversions and would carry 
over the relative difference in item weights that establish Medicare 
payment amounts for walkers under the fee schedule into the CBPs.
    The third proposed category for lead item bidding is hospital beds 
as shown in the Table 23. Under our proposal, when bidding for the lead 
item, a supplier is bidding to furnish the entire grouping.

[[Page 42861]]



                  Table 23--Lead Item Bidding for Hospital Beds and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services for     2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
E0260 (lead item)..................  Semi-Electric With Mattress       2,201,430         $134.38            1.00
                                      & Side Rails.
E0261..............................  Semi-Electric With Side             109,727          124.20            0.92
                                      Rails.
E0303..............................  Heavy Duty Extra Wide With           47,795          284.67            2.12
                                      Mattress & Side Rails.
E0265..............................  Total Electric With                  37,584          185.75            1.38
                                      Mattress & Side Rails.
E0255..............................  Variable Height With                 25,003          108.10            0.80
                                      Mattress & Side Rails.
E0250..............................  Fixed Height With Mattress           15,075           88.95            0.66
                                      & Side Rails.
E0295..............................  Semi-Electric..............          15,056          113.78            0.85
E0294..............................  Semi-Electric With Mattress           9,446          119.93            0.89
E0301..............................  Heavy Duty Extra Wide With            6,075          252.96            1.88
                                      Side Rails.
E0256..............................  Variable Height With Side             4,135           76.53            0.57
                                      Rails.
E0304..............................  Extra Heavy Duty Extra Wide           2,448          737.98            5.49
                                      With Mattress & Side Rails.
E0266..............................  Total Electric With Side              1,969          166.51            1.24
                                      Rails.
E0251..............................  Fixed Height With Side                1,463           68.26            0.51
                                      Rails.
E0297..............................  Total Electric.............             957          129.68            0.97
E0296..............................  Total Electric With                     955          148.29            1.10
                                      Mattress.
E0302..............................  Extra Heavy Duty Extra Wide             732          685.28            5.10
                                      With Side Rails.
E0292..............................  Variable Height With                    305           76.97            0.57
                                      Mattress.
E0293..............................  Variable Height............             189           65.29            0.49
E0290..............................  Fixed Height With Mattress.              64           67.29            0.50
E0291..............................  Fixed Height...............               7           48.85            0.36
----------------------------------------------------------------------------------------------------------------

    Rather than submitting 20 individual bids for each of the 20 items, 
the supplier would submit one bid for the lead item. The SPA for lead 
item E0260 would be based on the median of the bids for this code, 
following the rules laid out in Sec.  414.416(b) and for calculating 
rental amounts per Sec.  414.408(h)(1). The SPAs for the other items 
would be based on the relative difference in the average of the 2015 
fee schedule amounts for the item compared to the lead item. For 
example, if the SPA for code E0260 is $75.00, the SPA for code E0261 
would be equal to $69.00, or $75.00 multiplied by 0.92. Suppliers 
submitting bids would be educated in advance that their bid for code 
E0260 is a bid for all 20 codes and bidding suppliers would factor this 
into their decision on what amount to submit as their bid for the lead 
item.
    The fourth through seventh proposed categories for lead item 
bidding are as are shown in Table 24, Table 25 and Table 26 below. 
Under our proposal, when bidding for the lead item, a supplier is 
bidding to furnish the entire grouping.

             Table 24--Lead Item Bidding for Enteral Infusion Pumps and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services for     2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
B9002 (lead item)..................  Pump with alarm............         265,890         $121.70            1.00
B9000..............................  Pump without alarm.........             935          115.47            0.95
----------------------------------------------------------------------------------------------------------------


                  Table 25--Lead Item Bidding for TENS Devices and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services for     2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
E0730 (lead item)..................  4 lead.....................         267,428         $402.70            1.00
E0720..............................  2 lead.....................          46,238          388.83            0.97
----------------------------------------------------------------------------------------------------------------


        Table 26--Lead Item Bidding for Support Surface Mattress/Overlay and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services for     2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
E0277 (lead item)..................  Powered mattress...........         139,240         $663.22            1.00
E0372..............................  Powered air mattress                  2,076          505.82            0.76
                                      overlay.
E0371..............................  Nonpower mattress overlay..           1,444          416.85            0.63
E0373..............................  Nonpowered mattress........             716          576.84            0.87
----------------------------------------------------------------------------------------------------------------


[[Page 42862]]


                Table 27--Lead Item Bidding for Seat Lift Devices and Relative Difference in Fees
----------------------------------------------------------------------------------------------------------------
                                                                      Allowed       Average of
               HCPCS                           Features            services for     2015 rental    Fee relative
                                                                       2012            fees        to lead item
----------------------------------------------------------------------------------------------------------------
E0627 (lead item)..................  Electric, in chair.........          49,162         $372.22            1.00
E0629..............................  Non-electric...............           5,901          366.70            0.99
E0628..............................  Electric...................           5,091          372.22            1.00
----------------------------------------------------------------------------------------------------------------

    In summary, we propose to revise Sec.  414.412(d) to add this 
bidding method as an alternative to the current method for submitting 
bid amounts for each item in the seven groupings of similar items 
identified above. Suppliers participating in future CBPs may be 
required to use this method when submitting bids for these groups of 
similar items. Also, we propose to revise Sec.  414.416(b) to add the 
method for calculating SPAs for items within each grouping of similar 
items based on the SPAs for lead items within each grouping of similar 
items. We believe that the proposed method would better accomplish the 
CBP objectives, which include reducing the amount Medicare pays for 
DMEPOS and limiting the financial burden on beneficiaries by reducing 
their out-of-pocket expenses for DMEPOS they obtain through the CBP (72 
FR 17996).
    We believe this approach to bidding would safeguard beneficiaries 
from receiving items with fewer features simply because of the price 
inversions. We also believe that the proposed lead item bidding method 
would greatly reduce the burden on suppliers of formulating and 
submitting multiple bids for similar items because it would require 
less time to enter bids and would reduce the chances of keying errors 
when submitting bids. Finally, we believe this approach would safeguard 
beneficiaries and the Trust Fund from paying higher amounts for items 
with fewer features.
    We are soliciting comments on this section.

VIII. Bid Limits for Individual Items Under the DMEPOS Competitive 
Bidding Program

A. Background

    Under the DMEPOS CBP, Medicare sets payment amounts for selected 
DMEPOS items and services furnished to beneficiaries in CBAs based on 
bids submitted and accepted by Medicare. For competitively bid items, 
these new payment amounts, referred to as single payment amounts 
(SPAs), replace the fee schedule payment methodology. Section 
1847(b)(5) of the Act provides that Medicare payment for these 
competitively bid items and services is made on an assignment-related 
basis and is equal to 80 percent of the applicable single payment 
amount, less any unmet part B deductible described in section 1833(b) 
of the Act. Section 1847(b)(2)(A)(iii) of the Act prohibits the 
Secretary from awarding a contract to an entity unless the Secretary 
finds that the total amounts to be paid to contractors in a CBA are 
expected to be less than the total amounts that would otherwise be 
paid. This requirement guarantees savings to both the Medicare program 
and its beneficiaries. The CBP also includes provisions to ensure 
beneficiary access to quality DMEPOS items and services: Section 1847 
of the Act directs the Secretary to award contracts to entities only 
after a finding that the entities meet applicable quality and financial 
standards and beneficiary access to a choice of multiple suppliers in 
the area is maintained.
    We implemented Round 1 of the DMEPOS CBP on January 1, 2011, and 
the Round 1 Recompete on January 1, 2014. Round 2 of the DMEPOS CBP and 
the national mail order program were implemented on July 1, 2013, and 
Round 2 and national mail order Recompete will be implemented on July 
1, 2016. The programs phased in under Round 1 and 2 are in place in 
approximately 100 metropolitan statistical areas (MSAs) throughout the 
nation, including Honolulu, Hawaii. A 60-day bidding window allows 
bidders adequate time to prepare and submit their bids. Sec.  414.412 
specifies the rules for submission of bids under a CBP. Each bid 
submission is evaluated and contracts are awarded to qualified 
suppliers in accordance with the requirements of section 1847(b)(2) of 
the Act and Sec.  414.414, which specifies conditions for awarding 
contracts.
    Sections 1847(b)(6)(A)(i) and (b)(6)(A)(ii) of the Act provide that 
payment will not be made under Medicare part B for items and services 
furnished under a CBP unless the supplier has submitted a bid to 
furnish those items and has been awarded a contract. Therefore, in 
order for a supplier that furnishes competitively bid items in a CBA to 
receive payment for those items, the supplier must have submitted a bid 
to furnish those particular items and must have been awarded a contract 
to do so.

B. Adjusting Fee Schedule Amounts and Bid Limits Established Under the 
Competitive Bidding Program

    The April 10, 2007 final rule (Medicare Program; Competitive 
Acquisition for Certain Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) and Other Issues; Final Rule) 
finalized requirements for providers to submit bids under the DMEPOS 
CBP (Sec.  414.412(b)) (79 FR 18026). Sec.  414.412 outlines the 
requirements associated with submitting bids under the competitive 
bidding process. Furthermore, Sec.  414.412(b)(2) states that the bids 
submitted for each item in a product category cannot exceed the payment 
amount that would otherwise apply to the item under Subpart C or 
Subpart D of part 414, which is the fee schedule amount. Therefore, 
under our current policy, bid amounts that are submitted under the CBP 
cannot exceed the fee schedule amount. Contracts cannot be awarded in a 
CBA if total payments under the contracts are expected to be greater 
than what would otherwise be paid. In the preamble of the CY 2015 final 
rule that implemented the methodologies to adjust fee schedule amounts 
using information from CBPs, we indicated that the adjusted fee 
schedule amounts become the new bid limits (79 FR 66232).
    Sections 1834(a)(1)(F)(ii) and (iii), 1834(h)(2)(H)(ii), and 
1842(s)(3)(B) of the Act mandate adjustments to the fee schedule 
amounts for certain DMEPOS items furnished on or after January 1, 2016, 
in areas that are not CBAs, based on information from CBPs. Section 
1842(s)(3)(B) of the Act also provides authority for making adjustments 
to the fee schedule amounts for enteral nutrients, equipment, and 
supplies (enteral nutrition) based on information from the CBPs. In the 
CY 2015 final rule (79 FR 66223), we finalized the methodologies for 
adjusting DMEPOS fee schedule amounts using information from CBPs at 
Sec.  414.210(g).

[[Page 42863]]

C. Current Issues

    If the fee schedule amounts are adjusted as new SPAs are 
implemented under the CBPs, and these fee schedule amounts and 
subsequent adjusted fee schedule amounts continue to serve as the bid 
limits under the programs, the SPAs under the programs can only be 
lower under future competitions because the bidders cannot exceed the 
bid limits in the CBP. To continue using the adjusted fee schedule 
amounts as the bid limits for future competitions does not allow SPAs 
to fluctuate up or down as the cost of furnishing items and services 
goes up or down over time.
    Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of 
contracts under the program if total payments to contract suppliers in 
an area are expected to be more than would otherwise be paid. For the 
purpose of implementing section 1847(b)(2)(A)(iii) of the Act, we 
propose to revise Sec.  414.412(b) to use the unadjusted fee schedule 
amounts (the fee schedule amounts that would otherwise apply if no 
adjustments to the fee schedule amounts based on information from CBPs 
had been made) for the purpose of establishing limits on bids for 
individual items for future competitions (including re-competes). We 
are proposing this change because we believe the general purpose of the 
DMEPOS CBP is to establish reasonable payment amounts for DMEPOS items 
and services based on competitions among suppliers for furnishing these 
items and services, with bids from suppliers being based in part on the 
suppliers' costs of furnishing the items and services at that point in 
time. We believe the intent of the program is to replace unreasonably 
high fee schedule amounts for DMEPOS items and services with lower, 
more reasonable amounts as a result of the competitive bidding. We 
believe that as long as the amounts established under CBPs are lower 
than the fee schedule amounts that would otherwise apply had the DMEPOS 
CBP not been implemented, savings will continue to be generated by the 
programs.
    For competitions held thus far for contract periods starting on 
January 1, 2011, July 1, 2013, January 1, 2014, and July 1, 2016, the 
unadjusted fee schedule amounts were used as the bid limits for all 
items in all CBAs, and the SPAs for each subsequent competition were 
generally lower than the SPAs for the preceding competitions. We 
believe that competition for contracts under the programs will continue 
to keep bid amounts low and, together with utilizing unadjusted fee 
schedule amounts as bid limits, ensure that total payments under the 
program will be less than what would otherwise be paid. We believe that 
prices established through the competitions should be allowed to 
fluctuate both up and down over time as long as they do not exceed the 
previous fee schedule amounts that would otherwise have been paid if 
the CBP had not been implemented, and savings below the previous fee 
schedule amounts are achieved. This would not apply to drugs included 
in a CBP which would otherwise be paid under Subpart I of part 414 of 
42 CFR based on 95 percent of the average wholesale price in effect on 
October 1, 2003.
    In addition, the amount of the SPAs established under the program 
is only one factor affecting total payments made to suppliers for 
furnishing DMEPOS items and services. Although the bid limits were 
created and are used for implementation of section 1847(b)(2)(A)(iii) 
of the Act, they are not the only factor that affects total payments to 
suppliers. The DMEPOS CBP is effective in reducing fraud and abuse by 
limiting the number of entities that can submit claims for payment, 
while ensuring beneficiary access to necessary items and services in 
CBAs. Section 1847(b)(5) of the Act requires that payment to contract 
suppliers be made on an assignment-related basis and limits beneficiary 
cost sharing to 20 percent of the SPA. We plan to take all of these 
factors into account before awarding contracts for subsequent 
competitions in order to determine if total payments to contract 
suppliers in an area are expected to be less than would otherwise be 
paid.

D. Summary of Proposed Bid Limits

    We are proposing to revise Sec.  414.412(b) to specify that the 
bids submitted for each individual item of DMEPOS other than drugs 
cannot exceed the fee schedule amounts established in accordance with 
sections 1834(a), 1834(h), or 1842(s) of the Act for DME, off-the-shelf 
(OTS) orthotics, and enteral nutrition, respectively, as if adjustments 
to these amounts based on information from CBPs had not been made. 
Specifically, the bid limits for DME would be based on the 2015 fee 
schedule amounts established in accordance with section 
1834(a)(1)(B)(ii) of the Act, prior to application of section 
1834(a)(1)(F)(ii) and (iii), but updated for subsequent years based on 
the factors provided at section 1834(a)(14) of the Act. In other words, 
the bid limits would be based on fee schedule amounts established in 
accordance with section 1834(a), without applying the adjustments 
mandated by section 1834(a)(1)(F)(ii) of the Act. The bid limits for 
OTS orthotics would also be based on the 2015 fee schedule amounts 
established in accordance with section 1834(h)(1)(B)(ii) of the Act, 
prior to application of section 1834(h)(1)(H), but updated for 
subsequent years based on the factors provided at section 1834(h)(4) of 
the Act. In other words, the bid limits would be based on fee schedule 
amounts established in accordance with section 1834(h), without 
applying the adjustments authorized by section 1834(h)(1)(H) of the 
Act. The bid limits for enteral nutrients, equipment, and supplies 
(enteral nutrition) would be based on the 2015 fee schedule amounts 
established in accordance with section 1842(s)(1) of the Act, prior to 
application of section 1842(s)(3), but updated for subsequent years 
based on the factors provided at section 1842(s)(1)(B)(ii) of the Act. 
In other words, the bid limits would be based on fee schedule amounts 
established in accordance with section 1842(s)(1), without applying the 
adjustments authorized by section 1842(s)(3)(B) of the Act.
    Finally, with respect to the alternative bidding rules proposed in 
section VII. above, when evaluating bids for a grouping of similar 
items in a product category submitted in the form of a single bid for 
the highest volume item in the grouping, or lead item, we propose to 
use the weighted average fee schedule amounts for the grouping of 
similar items in order to establish the bid limit for the purpose of 
implementing this proposed provision. We are proposing to revise Sec.  
414.412(b)(2) to use total nationwide allowed services for all areas 
for the individual items, initially from calendar year 2012, to weight 
the fee schedule amount for each item for the purpose of determining a 
bid limit for the lead item based on the weighted average fee schedule 
amounts for the entire grouping of similar items. This would ensure 
that the payment amounts established under the CBPs do not exceed the 
fee schedule amounts that would otherwise apply to the grouping of 
similar items as a whole. Table 28 below illustrates the data that 
would be used to calculate the bid limit for the lead item (code E0143) 
in the grouping of walkers for a CBA located in the state of Maryland 
using 2015 fee schedule amounts for illustration purposes. The item 
weight for each code is based on 2012 total nationwide allowed services 
for the code divided by total nationwide

[[Page 42864]]

allowed services for 2012 for all of the codes in the grouping.

                Table 28--Data Used To Calculate Bid Limit for Lead Item for Walkers for Maryland
----------------------------------------------------------------------------------------------------------------
                                                                       Total
                                                                    nationwide
               HCPCS                           Features               allowed      2015 purchase    Item weight
                                                                   services for      fees (MD)
                                                                       2012
----------------------------------------------------------------------------------------------------------------
E0143 (lead item)..................  Folding With Wheels........         958,112         $115.02         0.90734
E0135..............................  Folding....................          56,399           77.51         0.05341
E0149..............................  Heavy Duty With Wheels.....          23,144          213.53         0.02192
E0141..............................  Rigid With Wheels..........           6,319          110.30         0.00598
E0148..............................  Heavy Duty.................           4,366          121.56         0.00413
E0147..............................  Heavy Duty With Braking &             4,066          549.90         0.00385
                                      Variable Wheel Resistance.
E0140..............................  With Trunk Support.........           1,483          345.08         0.00140
E0144..............................  Enclosed With Wheels & Seat           1,275          304.80         0.00121
E0130..............................  Rigid......................             788           67.19         0.00075
                                                                 -----------------------------------------------
    Total..........................  ...........................       1,055,952  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    Summing the 2015 fee schedule amounts multiplied by the weights for 
each item results in a bid limit of $117.37 for lead item E0143. Bids 
submitted for the lead item E0143 for walkers for a CBA located in the 
state of Maryland would not be able to exceed $117.37 in this example.
    We therefore propose to amend Sec.  414.412(b) to establish this 
method for determining bid limits for lead items identified in 
accordance with proposed Sec.  414.412(d)(2) in section VII above.
    We are soliciting comments on this proposed rule.

IX. Access to Care Issues for DME

A. Background

    The Medicare and Medicaid programs generally serve distinct 
populations, but more than ten million individuals (``dual eligible 
beneficiaries'') were enrolled in both programs in 2014.\10\ As a 
group, dual eligible beneficiaries comprise a population with complex 
chronic care needs and functional impairments.\11\ Compared to 
Medicare-only or Medicaid-only beneficiaries, dual eligible 
beneficiaries are more likely to experience multiple chronic health 
conditions, mental illness, functional limitations, and cognitive 
impairments.
---------------------------------------------------------------------------

    \10\ Data Analysis Brief: Medicare-Medicaid Dual Enrollment from 
2006 through 2013, Medicare-Medicaid Coordination Office (MMCO), 
Centers for Medicare and Medicaid Services, December 2014 at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-, Medicaid-Coordination-Office/Downloads/
DualEnrollment20062013.pdf.
    \11\ Overall these individuals have higher prevalence of many 
conditions (including, but not limited to diabetes, pulmonary 
disease, stroke, Alzheimer's disease, and mental illness) than their 
Medicare-only and Medicaid-only peers. Medicare-Medicaid enrollees' 
health costs are four times greater than all other people with 
Medicare. Medicare Medicaid Enrollee State Profile: The National 
Summary--2008, Centers for Medicare and Medicaid Services at https://www.cms.gov/Medicare-Medicaid-CoordiNation/Medicare-and-Medicaid-CoordiNation/Medicare-Medicaid-CoordiNation-Office/Downloads/2008NationalSummary.pdf.
---------------------------------------------------------------------------

    Both Medicare and Medicaid cover Durable Medical Equipment (DME), 
which can be essential to dual eligible beneficiaries' mobility, 
respiratory function, and activities of daily living. However, the 
programs' different eligibility, coverage, and supplier rules can 
impact access to medically-appropriate DME and repairs of existing 
equipment for the population enrolled in both benefits.

B. Request for Information

    CMS seeks to examine how overlapping but differing coverage 
standards for DME under Medicare and Medicaid may affect access to care 
for beneficiaries and administrative processes for providers and 
suppliers. In response to a May 2011 Request for Information, CMS 
received over one hundred comments from a range of stakeholders 
regarding 29 areas of program alignment opportunities, including 
DME.\12\ In the intervening years, CMS has continued to engage 
stakeholders--including beneficiaries, payers, suppliers, and states--
to understand opportunities and challenges caused by differing program 
requirements.
---------------------------------------------------------------------------

    \12\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/FederalRegisterNoticefor Comment052011.pdf.
---------------------------------------------------------------------------

    According to stakeholders, a common barrier to DME access stems 
from conflicting approval processes among Medicare and Medicaid that 
can leave suppliers uncertain about whether and how either program will 
cover items. Medicare is the primary payer for DME and other medical 
benefits covered by both programs. Medicaid typically pays Medicare 
cost-sharing amounts and may cover DME that Medicare does not, 
including certain specialized equipment that promotes independent 
living. Medicaid pays secondary to most other legally liable payers, 
including Medicare, and requires those payers to pay to the limit of 
their legal liability before any Medicaid payment is available. Many of 
the Medicare requirements related to DME, including the definition and 
scope of the benefit, are mandated by the statute; therefore, we do not 
have the authority to bypass or alter these requirements. Medicare 
generally only processes claims after the equipment is delivered. 
Because suppliers lack assurance regarding how Medicare or Medicaid 
will cover DME at the point of sale--and dual eligible beneficiaries 
cannot pay out-of-pocket up front--suppliers may refuse to provide 
needed DME.
    Other barriers may emerge for beneficiaries who have Medicaid first 
and get DME prior to enrolling in Medicare. Stakeholders report that 
many individuals may have difficulty getting coverage for repairs on 
equipment obtained through Medicaid coverage, since Medicare will only 
pay for repairs after making a new medical necessity determination. 
Additionally, not all Medicaid-approved DME suppliers are Medicare-
approved suppliers, meaning beneficiaries may need to change suppliers 
after enrolling in Medicare.
    CMS seeks to obtain additional information to help target efforts 
to promote timely access to DME benefits

[[Page 42865]]

for people dually eligible for Medicare and Medicaid.
    Please provide comments on the scope of the following issues 
related to DME access for dual eligible beneficiaries:
     Obstacles to timely receipt of needed DME and repairs due 
to conflicting program requirements;
     Challenges or opportunities faced by Medicaid 
beneficiaries who newly qualify for Medicare, including challenges 
related to new and preexisting items, repairs, and providers;
     The percentage of Medicare competitive bidding contractors 
in the state which accept Medicaid;
     The role of prior authorization policies under either 
program and whether these policies offer suppliers sufficient advance 
notice regarding coverage;
     Impacts on beneficiaries from delayed access to needed 
equipment and repairs;
     If access problems are more pronounced for certain 
categories of equipment, the categories of DME for which the access 
problems arise the most frequently or are most difficult to resolve;
     Challenges faced by suppliers in meeting different 
supporting documentation and submission requirements, and
     Other prevalent access challenges due to DME program 
misalignments.
    We also invite feedback regarding potential regulatory or 
legislative reforms to address DME program misalignments including:
     State Medicaid program policies that promote coordination 
of benefits and afford beneficiaries full access to benefits;
     Strategies to promote access to timely, effective repairs, 
including from suppliers who that did not originally furnish the 
equipment;
     Policies to address challenges faced when beneficiaries 
transition from Medicaid-only to dual eligible status; and
     Other ways to promote timely DME access for dual eligible 
beneficiaries, without introducing new program integrity risks or 
increasing total expenditures in either Medicare or Medicaid.
    Please include specific examples when possible while avoiding the 
transmission of protected information. Please also include a point of 
contact who can provide additional information upon request.

X. Comprehensive End-Stage Renal Disease Care Model and Future Payment 
Models

A. Background

    CMS seeks input on innovative approaches to care delivery and 
financing for beneficiaries with end-stage renal disease (ESRD). This 
input could include ideas related to innovations that would go above 
and beyond the Comprehensive ESRD Care (CEC) Model with regard to 
financial incentives, populations or providers engaged, or the scale of 
change, among other topics. We will consider information received as we 
develop future payment models in this area, and as we launch 
solicitation for a second round of entry into the CEC Model to begin on 
January 1, 2017.
    The CEC Model is a CMS test of a dialysis-specific Accountable Care 
Organization (ACO) model. In the model, dialysis clinics, nephrologists 
and other providers join together to create an End-Stage Renal Disease 
Seamless Care Organization (ESCO) to coordinate care for aligned 
beneficiaries. ESCOs are accountable for clinical quality outcomes and 
financial outcomes measured by Medicare Part A and B spending, 
including all spending on dialysis services for their aligned ESRD 
beneficiaries. This model encourages dialysis providers to think beyond 
their traditional roles in care delivery and supports them as they 
provide patient-centered care that will address beneficiaries' health 
needs, both in and outside of the dialysis clinic.

B. Provisions of the Notice

    Section 1115A of the Social Security Act (the Act), as added by 
section 3021 of the Affordable Care Act, authorizes the Innovation 
Center to test innovative payment and service delivery models that 
reduce spending under Medicare, Medicaid or The Children's Health 
Insurance Program (CHIP), while preserving or enhancing the quality of 
care. We seek to gather responses to the following questions that will 
help us to develop and refine innovative payment models related to 
kidney care.
    Questions:
    1. How could participants in alternative payment models (APMs) and 
advanced alternative payment models (AAPMs) coordinate care for 
beneficiaries with chronic kidney disease and to improve their 
transition into dialysis?
    2. How could participants in APMs and AAPMs target key 
interventions for beneficiaries at different stages of chronic kidney 
disease?
    3. How could participants in APMs and AAPMs better promote 
increased rates of renal transplantation?
    4. How could CMS build on the CEC Model or develop alternative 
approaches for improving the quality of care and reducing costs for 
ESRD beneficiaries?
    5. Are there specific innovations that are most appropriate for 
smaller dialysis organizations?
    6. How could primary-care based models better integrate with APMs 
or AAPMs focused on kidney care to help prevent development of chronic 
kidney disease in patients and progression to ESRD? Primary-care based 
models may include patient-centered medical homes or other APMs.
    7. How could APMs and AAPMs help reduce disparities in rates of 
CKD/ESRD and adverse outcomes among racial/ethnic minorities?
    8. Are there innovative ways APMs and AAPMs can facilitate changes 
in care delivery to improve the quality of life for CKD and ESRD 
patients?
    9. Are there specific innovations that are most appropriate for 
evaluating patients for suitability for home dialysis and promoting its 
use in appropriate populations?
    10. Are there specific innovations that could most effectively be 
tested in a potential mandatory model?
    For additional information on the Comprehensive ESRD Care Model and 
how to apply, click on the Request for Applications located on the 
Innovation Center Web site at: innovation.cms.gov/initiatives/comprehensive-ESRD-care.

XI. Technical Correction for 42 CFR 413.194 and 413.215

    In the CY 2013 ESRD PPS final rule (77 FR 67520), we revised Sec.  
413.89(h)(3) to set forth the percentage reduction in allowable bad 
debt payment required by section 1861(v)(1)(W) of the Act for ESRD 
facilities for cost reporting periods beginning during fiscal year 
2013, fiscal year 2014 and subsequent fiscal years. We also revised 
Sec.  413.89(h)(3) to set forth the applicability of the cap on bad 
debt reimbursement to ESRD facilities for cost reporting periods 
beginning between October 1, 2012 and December 31, 2012. In addition, 
in that rule, we removed and reserved Sec.  413.178, since there were 
revised provisions set out at Sec.  413.89.
    As a part of these revisions, we intended to correct the cross-
reference in section Sec. Sec.  413.194 and 413.215 so that Sec.  
413.89(h)(3) was referenced instead of Sec.  413.178. We inadvertently 
omitted the regulations text that would have made those changes. 
Therefore, in

[[Page 42866]]

this rule, we are proposing a technical correction to revise the 
regulations text at Sec. Sec.  413.194 and 413.215 to correct the 
cross-reference to the Medicare bad debt reimbursement regulation, so 
that Sec. Sec.  413.194 and 413.215 would reference 42 CFR 413.89(h)(3) 
instead of the current outdated reference to Sec.  413.178.

XII. 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 (health IT) 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 health information in a standardized 
format that can be securely exchanged between the patient, providers, 
and others involved in the individual's care. Health IT that 
facilitates the secure, efficient, and effective sharing and use of 
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 
Version 1.0 (Roadmap) (available at https://www.healthit.gov/sites/default/files/hie-interoperability/nationwide-interoperability-roadmap-final-version-1.0.pdf) which describes barriers to interoperability 
across the current health IT landscape, the desired future state that 
the industry believes will be necessary to enable a learning health 
system, and a suggested path for moving from the current state to the 
desired future state. 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 a common set of 
electronic clinical information at the nationwide level by the end of 
2017. Moreover, the vision described in the Roadmap significantly 
expands the types of electronic health information, information 
sources, and information users well beyond clinical information derived 
from electronic health records (EHRs). This shared strategy is intended 
to reflect important actions that both public and private sector 
stakeholders can take to enable nationwide interoperability of 
electronic health information such as: (1) Establishing a coordinated 
governance framework and process for nationwide health IT 
interoperability; (2) improving technical standards and implementation 
guidance for sharing and using a common clinical data set; (3) 
enhancing incentives for sharing electronic health information 
according to common technical standards, starting with a common 
clinical data set; and (4) clarifying privacy and security requirements 
that enable interoperability.
    In addition, ONC has released the 2016 Interoperability Standards 
Advisory (available at https://www.healthit.gov/sites/default/files/2016-interoperability-standards-advisory-final-508.pdf), 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.

XIII. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

    In section II and III of this proposed rule, we are proposing 
changes to regulatory text for the ESRD PPS in CY 2017 as well as the 
inclusion of Subpart K for AKI. However, the changes that are being 
proposed do not impose any new information collection requirements.

C. Additional Information Collection Requirements

    This proposed rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
proposed 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 the CY 2016 ESRD PPS Final Rule (80 FR 69069), we stated that it 
was reasonable to assume that Medical Records and Health Information 
Technicians, who are responsible for organizing and managing health 
information data,\13\ are the individuals tasked with submitting 
measure data to CROWNWeb and NHSN for purposes of the Data Validation 
Studies rather than a Registered Nurse, whose duties are centered on 
providing and coordinating care for patients.\14\ The mean hourly wage 
of a Medical Records and Health Information Technician is $18.68 per 
hour. 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.\15\ 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 
information calculations in the ESRD QIP.
---------------------------------------------------------------------------

    \13\ http://www.bls/gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
    \14\ http://www.bls.gov/ooh/healthcare/registered-nurses.htm.
    \15\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.

---------------------------------------------------------------------------

[[Page 42867]]

b. Time Required To Submit Data Based on Proposed Reporting 
Requirements
    In the CY 2016 ESRD PPS Final Rule (80 FR 69070), we estimated that 
the time required to submit measure data using CROWNWeb is 2.5 minutes 
per data element submitted, 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.
c. Data Validation Requirements for the PY 2019 ESRD QIP
    Section IV.C.8. in this proposed rule outlines our data validation 
proposals for PY 2019. Specifically, for the CROWNWeb validation, we 
propose to randomly sample records from 300 facilities as part of our 
continuing pilot data-validation program. Each sampled facility would 
be required to produce approximately 10 records, and the sampled 
facilities will be reimbursed by our validation contractor for the 
costs associated with copying and mailing the requested records. The 
burden associated with these validation requirements is the time and 
effort necessary to submit the requested records to a CMS contractor. 
We 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 
approximately $19,088 (750 hours x $25.45/hour) total of approximately 
$64 ($19,088/300 facilities) per facility in the sample. The burden 
associated with these requirements is captured in an information 
collection request (OMB control number 0938-1289).
    Under the proposed data validation study for validating data 
reported to the NHSN Dialysis Event Module, we propose to randomly 
select 150 facilities. A CMS contractor will send these facilities 
requests for medical records for all patients with ``candidate events'' 
during the evaluation period. 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. We estimate that it will take each facility approximately 60 
minutes to comply with this requirement (30 minutes from each of the 
two quarters in the evaluation period). If 150 facilities are asked to 
submit records, we estimate that the total combined annual burden for 
these facilities will be 150 hours (150 facilities x 1 hour). 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 NHSN data validation would be $3,817.50 (150 
hours x $25.45/hour) total of $25.45 ($3,817.50/150 facilities) per 
facility in the sample. The burden associated with these requirements 
is captured in an information collection request (OMB control number 
0938-NEW).
d. Proposed Ultrafiltration Rate Reporting Measure
    We proposed to include, beginning with the PY 2020 ESRD QIP, a 
reporting measure requiring facilities to report in CROWNWeb an 
ultrafiltration rate at least once per month for each qualifying 
patient. We estimate the burden associated with this measure to be the 
time and effort necessary for facilities to collect and submit the 
information required for the Ultrafiltration Rate Reporting Measure. We 
estimated that approximately 6,454 facilities will treat 548,430 ESRD 
patients nationwide in PY 2020. The Ultrafiltration Rate Reporting 
Measure requires facilities to report 13 elements per patient per month 
(156 elements per patient per year) and we estimate it will take 
facilities approximately 0.042 hours (2.5 minutes) to submit data for 
each data element. Therefore, the estimated total annual burden 
associated with reporting this measure in PY 2020 is approximately 
3,593,313 hours (548,430 ESRD patients nationwide x 156 data elements/
year x 0.042 hours per element), or approximately 553 hours per 
facility. We anticipate that Medical Records and Health Information 
Technicians or similar administrative staff will be responsible for 
this reporting. We therefore believe the cost for all ESRD facilities 
to comply with the reporting requirements associated with the 
ultrafiltration rate reporting measure would be approximately 
$91,449,815.80 (3,593,313 x $25.45/hour), or $14,082.20 per facility. 
The burden associated with these requirements is captured in an 
information collection request (OMB control number 0938-NEW).

XV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XVI. 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 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

[[Page 42868]]

are significant within the meaning of section 3(f)(4) of the Executive 
Order. Therefore, OMB has reviewed these proposed regulations, and the 
Departments have provided the following assessment of their impact. We 
solicit comments on the regulatory impact analysis provided.
2. Statement of Need
    This rule proposes a number of routine updates and several policy 
changes to the ESRD PPS in CY 2017. The proposed routine updates 
include the CY 2017 wage index values, the wage index budget-neutrality 
adjustment factor, and outlier payment threshold amounts. Other 
proposed policy changes include implementation of policy related to 
payment for hemodialysis treatments furnished more than three times per 
week and changes to the home dialysis training policy. Failure to 
publish this proposed rule would result in ESRD facilities not 
receiving appropriate payments in CY 2017 for renal dialysis services 
furnished to ESRD patients and to patients with AKI in accordance with 
section 1861(s)(2)(F) of the Act.
    This rule proposes to implement the provisions in TPEA which 
provide for coverage and payment for renal dialysis services furnished 
by ESRD facilities to individuals with AKI. Failure to publish would 
result in a failure to comply with the requirements of the Act, as 
added by the TPEA.
    This rule proposes to implement requirements for the ESRD QIP, 
including a proposal to adopt a measure set for the PY 2020 program, as 
directed by section 1881(h) of the Act. Failure to propose requirements 
for the PY 2020 ESRD QIP would prevent continuation of the ESRD QIP 
beyond PY 2019. In addition, proposing requirements for the PY 2020 
ESRD QIP provides facilities with more time to review and fully 
understand new measures before their implementation in the ESRD QIP.
    This rule proposes a requirement for the DMEPOS CBP for bid surety 
bonds and state licensure in accordance with section 1847 of the Act, 
as amended by section 522(a) of MACRA. The rule also proposes an 
appeals process for all breach of contract actions CMS may take.
    This rule also proposes a methodology for adjusting DMEPOS fee 
schedule amounts for similar items with different features using 
information from the DMEPOS CBPs, a methodology for determining single 
payment amounts for similar items with different features under the 
DMEPOS CBPs, and revising bid limits for individual items under DMEPOS 
CBP.
3. Overall Impact
    We estimate that the proposed revisions to the ESRD PPS will result 
in an increase of approximately $50 million in payments to ESRD 
facilities in CY 2017, which includes the amount associated with 
updates to the outlier thresholds, home dialysis training policy, 
payment for hemodialysis treatments furnished more than 3 times per 
week, and updates to the wage index. We are estimating approximately 
$2.0 million that would now be paid to ESRD facilities for dialysis 
treatments provided to AKI beneficiaries.
    For PY 2019, we anticipate that the new burdens associated with the 
collection of information requirements will be approximately $21 
thousand, totaling an overall impact of approximately $15.5 million as 
a result of the PY 2019 ESRD QIP.\16\ For PY 2020, we estimate that the 
proposed requirements related to the ESRD QIP will cost approximately 
$91 million dollars, and the payment reductions will result in a total 
impact of approximately $22 million across all facilities, resulting in 
a total impact from the proposed ESRD QIP of approximately $113 
million.
---------------------------------------------------------------------------

    \16\ 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 $15.5 million 
reflects the PY 2019 estimated payment reductions and the collection 
of information requirements for the NHSN Healthcare Personnel 
Influenza Vaccination reporting measure.
---------------------------------------------------------------------------

    We anticipate that DMEPOS CBP bidding entities will be impacted by 
the bid surety bond requirement. The state licensure requirement will 
have no new impact on the supplier community because this is already a 
basic supplier eligibility requirement at Sec.  414.414(b)(3), and the 
appeals process for breach of contract actions may have a beneficial, 
positive impact on suppliers.
    Overall, the bid surety bond requirement may have a positive 
financial impact on the CBP as we anticipate that the requirement will 
provide an additional incentive for bidding entities to submit 
substantiated bids. However, there will be an administrative burden for 
implementation of the bid surety bond requirement for CMS. We expect 
minimal administrative costs associated with the state licensure and 
appeals process for breach of DMEPOS CBP contract proposed rules.
    We do not anticipate that the proposed DMEPOS Competitive Bidding 
regulations will have an impact on Medicare beneficiaries.
    We estimate that our proposal for a methodology for adjusting 
DMEPOS fee schedule amounts for similar items with different features 
using information from the DMEPOS CBPs, proposed change for determining 
single payment amounts for similar items with different features under 
the DMEPOS CBPs, and proposed revision to the bid limits for items 
under the DMEPOS CBP will have no significant impact on the suppliers, 
beneficiaries, Part B trust fund and economy as a whole.

B. Detailed Economic Analysis

1. CY 2017 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 2016 to estimated payments in CY 2017. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2016 and CY 2017 
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 proposed rule, we used the December 2015 update of CY 2015 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2015 claims 
to 2016 and 2017 using various updates. The updates to the ESRD PPS 
base rate are described in section II.B.3 of this proposed rule. Table 
29 shows the impact of the estimated CY 2017 ESRD payments compared to 
estimated payments to ESRD facilities in CY 2016.

[[Page 42869]]



                              Table 29--Impact of Proposed Changes in Payment to ESRD Facilities for CY 2017 Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    Effect of total 2017
                                                                                                                                      proposed changes
                                                                                                    Effect of 2017  Effect of 2017     (outlier, wage
                                                                       Number of       Number of      changes in      changes in      indexes, training
                           Facility type                              facilities      treatments    outlier policy   wage indexes      adjustment and
                                                                                     (in millions)        (%)             (%)        routine updates to
                                                                                                                                      the payment rate)
                                                                                                                                          \4\  (%)
                                                                                 A               B               C               D                     E
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities....................................................           6,453            40.0             0.2             0.0                   0.5
Type:
    Freestanding..................................................           6,022            37.8             0.2             0.0                   0.5
    Hospital based................................................             431             2.2             0.3             0.1                   0.7
Ownership Type:
    Large dialysis organization...................................           4,541            28.6             0.2             0.0                   0.5
    Regional chain................................................             990             6.2             0.2             0.0                   0.6
    Independent...................................................             568             3.5             0.2            -0.0                   0.4
    Hospital based \1\............................................             354             1.8             0.3             0.1                   0.7
Geographic Location:
    Rural.........................................................           1,260             6.0             0.2             0.0                   0.6
    Urban.........................................................           5,193            34.0             0.2             0.0                   0.5
Census Region:
    East North Central............................................           1,045             5.5             0.2             0.0                   0.6
    East South Central............................................             522             3.0             0.2            -0.1                   0.5
    Middle Atlantic...............................................             702             4.9             0.2            -0.3                   0.2
    Mountain......................................................             368             2.0             0.1            -0.1                   0.4
    New England...................................................             182             1.3             0.2            -0.5                   0.1
    Pacific \2\...................................................             782             5.7             0.1             0.5                   1.0
    Puerto Rico and Virgin Islands................................              49             0.3             0.2            -0.2                   0.3
    South Atlantic................................................           1,458             9.4             0.2            -0.2                   0.4
    West North Central............................................             469             2.1             0.2             0.0                   0.6
    West South Central............................................             876             5.8             0.2             0.1                   0.7
Facility Size:
    Less than 4,000 treatments \3\................................           1,211             2.7             0.2             0.0                   0.6
    4,000 to 9,999 treatments.....................................           2,401            11.0             0.2             0.0                   0.6
    10,000 or more treatments.....................................           2,680            26.1             0.2             0.0                   0.5
    Unknown.......................................................             161             0.2             0.2            -0.1                   0.5
Percentage of Pediatric Patients:
    Less than 2%..................................................           6,349            39.7             0.2             0.0                   0.5
    Between 2% and 19%............................................              44             0.3             0.2             0.1                   0.7
    Between 20% and 49%...........................................               9             0.0             0.0             0.3                   0.6
    More than 50%.................................................              51             0.0             0.0             0.0                   0.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes hospital based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
\2\ Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.
\3\ Of the 1,211 ESRD facilities with less than 4,000 treatments, only 396 qualify for the low-volume payment adjustment. The low-volume payment
  adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these low volume facilities is a 0.5 percent increase in
  payments.
\4\ Includes adjustment of training add-on from $50.16 to $95.57 per treatment and a payment rate update of 0.35 percent.
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 
proposed changes to the outlier payment policy described in section 
II.B.3.c of this proposed rule is shown in column C. For CY 2017, the 
impact on all ESRD facilities as a result of the changes to the outlier 
payment policy would be a 0.2 percent increase in estimated payments. 
Nearly all ESRD facilities are anticipated to experience a positive 
effect in their estimated CY 2017 payments as a result of the proposed 
outlier policy changes.
    Column D shows the effect of the proposed CY 2017 wage indices. The 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a 0.5 percent decrease to a 0.5 percent 
increase due to these proposed updates.
    Column E reflects the overall impact, that is, the effects of the 
proposed outlier policy changes, the proposed wage index, the effect of 
the change in the home dialysis training add-on from $50.16 to $95.57 
and the effect of the payment rate update. The ESRD PPS payment rate 
update is 0.35 percent, which reflects the proposed ESRDB market basket 
percentage increase factor for CY 2017 of 2.1 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 0.5 percent. We expect that overall ESRD 
facilities would experience a 0.5 percent increase in estimated 
payments in 2017. The categories of types of facilities in the impact 
table show impacts ranging from an increase of 0.1 percent to an 
increase of 1.0 percent in their 2017 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 2017, we estimate

[[Page 42870]]

that the proposed ESRD PPS would 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 2017 would be approximately $9.7 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 1.5 percent in 
CY 2017.
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 
0.5 percent overall increase in the proposed ESRD PPS payment amounts 
in CY 2017, we estimate that there will be an increase in beneficiary 
co-insurance payments of 0.5 percent in CY 2017, which translates to 
approximately $10 million.
e. Alternatives Considered
    In section II.B.1 of this proposed rule, we propose payment for 
hemodialysis furnished more than 3 times per week. We considered not 
proposing the payment changes; however, without the proposed changes, 
facilities would continue to be unable to appropriately bill all of the 
HD treatments they furnish causing the total number of treatments in 
our claims data to be understated, and thus the improvement to payment 
and data collection would not be achieved.
    In section II.B.2, we propose changes to the home dialysis training 
add-on based on the average number of hours for PD and HD and weighted 
by the percentage of total treatments for each modality. We considered 
an approach to update the current training add-on amount annually using 
the market basket increase or the wage and price proxy in the market 
basket. However, under either approach, the increase to the training 
add-on payment was small and would not incentivize home dialysis 
training.
2. Proposed Coverage and Payment for Renal Dialysis Services Furnished 
to Individuals With AKI
a. Effects on ESRD Facilities
    We analyzed CY 2015 hospital outpatient claims to identify the 
number of treatments furnished historically for AKI patients. We 
identified 7,155 outpatient claims with AKI that also had dialysis 
treatments that were furnished in CY 2015. Since the data for 2015 is 
not complete, we inflated the 7,155 treatments by 22 percent to 8,729 
treatments. This inflation factor was determined by comparing the 2014 
treatment counts submitted and processed by June 30, 2015 to the 2014 
treatment counts submitted and processed by January 8, 2015. We then 
further inflated the 8,729 treatments to 2017 values using estimated 
population growth for fee-for service non-ESRD beneficiaries. This 
results in an estimated 8,938 treatments that would now be paid to ESRD 
facilities for furnishing dialysis to beneficiaries with AKI. Using the 
CY 2017 proposed ESRD base rate of $231.04 and an average wage index 
multiplier, we are estimating approximately $2.0 million that would now 
be paid to ESRD facilities for dialysis treatments provided to AKI 
beneficiaries.
    Ordinarily, we would provide a table showing the impact of this 
provision on various categories of ESRD facilities. Because we have no 
way to project how many patients with AKI requiring dialysis will 
choose to have dialysis treatments at an ESRD facility, we are unable 
to provide a table at this time.
b. Effects on Other Providers
    Under section 1834(r) of the Act, as added by section 808(b) of 
TPEA, we are proposing a payment rate for renal dialysis services 
furnished by ESRD facilities to beneficiaries with AKI. The only two 
Medicare providers authorized to provide these outpatient renal 
dialysis services are hospital outpatient departments and ESRD 
facilities. The decision about where the renal dialysis services are 
furnished is made by the patient and their physician. Therefore, this 
proposal will have zero impact on other Medicare providers.
c. Effects on the Medicare Program
    We anticipate an estimated $2.0 million being redirected from 
hospital outpatient departments to ESRD facilities in CY 2017 as a 
result of some AKI patients receiving renal dialysis services in the 
ESRD facility at the lower ESRD PPS base rate versus continuing to 
receive those services in the hospital outpatient setting.
d. Effects on Medicare Beneficiaries
    Currently, beneficiaries have a 20 percent co-insurance obligation 
when they receive AKI dialysis in the hospital outpatient setting. When 
these services are furnished in an ESRD facility, the patients would 
continue to be responsible for a 20 percent co-insurance. Because the 
AKI dialysis payment rate paid to ESRD facilities is lower than the 
Outpatient Prospective Payment System's payment amount, we would expect 
beneficiaries to pay less co-insurance when AKI dialysis is furnished 
by ESRD facilities.
e. Alternatives Considered
    In section III.B.2 of this proposed rule, we propose policy related 
to the implementation of section 808(b) of TPEA, which amended section 
1834 by adding a new paragraph (r) which provides payment for renal 
dialysis services furnished by ESRD facilities to beneficiaries with 
AKI. We considered adjusting the AKI payment rate by including the ESRD 
PPS case-mix adjustments, other adjustments at 1881(b)(14)(D), as well 
as not paying separately for AKI specific drugs and labs. We ultimately 
determined that treatment for AKI is substantially different from 
treatment for ESRD and the case-mix adjustments applied to ESRD 
patients may not be applicable to AKI patients and as such, including 
those policies and adjustment would be inappropriate.
3. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2020 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 proposing to use to determine a facility's TPS 
for the PY 2020 ESRD QIP is described in sections III.F.6 and III.F.7 
of this proposed rule. Any reductions in ESRD PPS payments as a result 
of a facility's performance under the PY 2020 ESRD QIP would apply to 
ESRD PPS payments made to the facility in CY 2020.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 48 percent or 
2,840 of the facilities would likely receive a payment reduction in PY 
2020. 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 6,454 dialysis facilities paid through the PPS. Table 30 shows 
the overall estimated distribution of payment reductions resulting from 
the PY 2020 ESRD QIP.

[[Page 42871]]



 Table 30--Estimated Distribution of PY 2020 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                             Number of      Percent of
            Payment reduction               facilities      facilities
------------------------------------------------------------------------
0.0%....................................           3,174            52.8
0.5%....................................           1,576            26.2
1.0%....................................             903            15.0
1.5%....................................             280             4.7
2.0%....................................              81             1.4
------------------------------------------------------------------------
Note: This table excludes 477 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 2020, 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 31.

                       Table 31--Data Used to Estimate PY 2020 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                              Period of time used to
                                               calculate achievement
                 Measure                     thresholds,  performance               Performance period
                                            standards,  benchmarks, and
                                              improvement  thresholds
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    %Fistula.............................  Jan 2014-Dec 2014...........  Jan 2015-Dec 2015.
    %Catheter............................  Jan 2014-Dec 2014...........  Jan 2015-Dec 2015.
Kt/V Composite...........................  Jan 2013-Dec 2013...........  Jan 2014-Dec 2014.
Hypercalcemia............................  Jan 2014-Dec 2014...........  Jan 2015-Dec 2015.
Standardized Transfusion Ratio...........  Jan 2013-Dec 2013...........  Jan 2014-Dec 2014.
ICH CAHPS Survey.........................  NA..........................  NA.
Standardized Readmission Ratio...........  Jan 2013-Dec 2013...........  Jan 2014-Dec 2014.
NHSN Bloodstream Infection...............  Jan 2014-Dec 2014...........  Jan 2014-Dec 2014.
SHR......................................  Jan 2013-Dec 2013...........  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 an estimated minimum 
Total Performance Score and an estimated payment reduction table that 
were consistent with the proposals outlined in Section III.G.9 of this 
proposed rule. Facility reporting measure scores were estimated using 
available data from CY 2015. 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 2020 for each 
facility resulting from this proposed rule, we multiplied the total 
Medicare payments to the facility during the one-year period between 
January 2015 and December 2015 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 2015 through December 2015 times the estimated payment 
reduction percentage). For PY 2020, the total payment reduction for all 
of the 1,996 facilities expected to receive a reduction is 
approximately $22 million ($21,990,410). Further, we estimate that the 
total costs associated with the collection of information requirements 
for PY 2020 described in section VIII.1.b of this proposed rule would 
be approximately $91,449,815 million for all ESRD facilities. As a 
result, we estimate that ESRD facilities will experience an aggregate 
impact of approximately $113 million ($91,449,815 + $21,990,410 = 
$113,440,225) in PY 2020, as a result of the PY 2020 ESRD QIP.
    Table 32 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2020. The table 
details the distribution of ESRD facilities by facility size (both 
among facilities considered to be small entities and by number of 
treatments per facility), geography (both urban/rural and by region), 
and by facility type (hospital based/freestanding facilities). Given 
that the time periods used for these calculations will differ from 
those we propose to use for the PY 2020 ESRD QIP, the actual impact of 
the PY 2020 ESRD QIP may vary significantly from the values provided 
here.

               Table 32--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2020
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of      treatments       Number of      expected to      (percent
                                    facilities       2015  (in      facilities       receive a       change in
                                                     millions)    with QIP score      payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           6,454            40.0           5,977           1,996           -0.24
Facility Type:
    Freestanding................           6,023            37.8           5,807           1,943           -0.24

[[Page 42872]]

 
    Hospital-based..............             431             2.2             170              53           -0.23
Ownership Type:
    Large Dialysis..............           4,542            28.6           4,403           1,416           -0.22
    Regional Chain..............             989             6.2             923             299           -0.23
    Independent.................             568             3.5             526             241           -0.42
    Hospital-based (non-chain)..             354             1.8             125              40           -0.23
Facility Size:
    Large Entities..............           5,531            34.8           5,326           1,715           -0.22
    Small Entities \1\..........             922             5.2             651             281           -0.39
Rural Status:
    (1) Yes.....................           1,261             6.0           1,137             254           -0.16
    (2) No......................           5,193            34.0           4,840           1,742           -0.25
Census Region:
    Northeast...................             883             6.2             785             324           -0.29
    Midwest.....................           1,512             7.6           1,341             451           -0.24
    South.......................           2,855            18.2           2,724             953           -0.25
    West........................           1,143             7.6           1,080             234           -0.15
    US Territories \2\..........              61             0.4              47              34           -0.62
Census Division:
    East North Central..........           1,045             5.5             939             374           -0.29
    East South Central..........             522             3.0             512             162           -0.20
    Middle Atlantic.............             702             4.9             621             277           -0.32
    Mountain....................             368             2.0             334              53           -0.10
    New England.................             183             1.3             165              47           -0.17
    Pacific.....................             782             5.7             751             182           -0.17
    South Atlantic..............           1,458             9.4           1,378             547           -0.29
    West North Central..........             469             2.1             402              77           -0.13
    West South Central..........             875             5.8             834             244           -0.20
    U.S. Territories \2\........              49             0.3              41              33           -0.69
    Facility Size (# of total              1,211             2.7             975             217           -0.17
     treatments)................
Less than 4,000 treatments:
    4,000-9,999 treatments......           2,402            11.0           2,324             759           -0.24
    Over 10,000 treatments......           2,680            26.1           2,605           1,003           -0.26
    Unknown.....................             161             0.2              73              17           -0.18
----------------------------------------------------------------------------------------------------------------
\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.

4. DMEPOS Competitive Bidding Bid Surety Bond, State Licensure and 
Appeals Process for Breach of DMEPOS Competitive Bidding Program 
Contract Actions
a. Effects on Competitive Bidding Program Suppliers
    Bid Surety Bonds. It is difficult to estimate the precise financial 
impact the bid surety bond requirement will have on competitive bidding 
entities as this type of bond is not currently available. Based on our 
research of the bond industry, as well as the structure of the existing 
CMS DMEPOS surety bond requirement for all DMEPOS suppliers, we 
anticipate that the cost to obtain a bid surety bond will be based on a 
percentage of the total bond amount. This percentage may be adjusted by 
the authorized surety based upon certain criteria such as: (1) The 
number of bid surety bonds purchased by a bidding entity, (2) the 
credit score of the bidding entity and, (3) the prior contracting 
experience the bidding entity has had with the DMEPOS CBP, that is, 
history of accepting/rejecting contracts.
    For instance, an authorized surety may establish a preliminary 
charge amount of 2 percent of the total bond amount to obtain a 
$100,000 bid surety bond. We anticipate that the authorized surety may 
adjust their charge percentage based on the number of CBAs in which a 
bidding entity bids, that is, a bulk discount. Bidding entities that 
purchase multiple bid surety bonds from the authorized surety would 
likely receive a reduced charge per bid surety bond as compared to a 
bidding entity that only purchases a single bid surety bond. We also 
expect that authorized sureties will evaluate each bidding entity's 
credit score(s) to either establish an appropriate charge percentage or 
to decide not to issue a bond if the bidding entity's credit score is 
too low. Lastly, we anticipate that an authorized surety may also 
request documentation from prior rounds of bidding to understand the 
bidding entity's experience with contract acceptance. Bidding entities 
that have accepted more contract offers in the prior round without any 
contract rejections may be viewed by an authorized surety as less risky 
than a bidding entity who has rejected numerous contract offers with 
few or no contract acceptance.
    On January 1, 2019, CMS will be combining all CBAs into a 
consolidated round of competition. As a result, we estimate the 
aggregate total out of pocket cost for bidding entities to bid in this 
competition to be $26,000,000. This estimate is based upon the 
approximately 13,000 distinct bidders for CBAs included in both the 
Round 2 Recompete and Round 1 2017 multiplied by a $2,000 per bid 
surety bond price. Given the unknown variables with this new type of 
bond, we are seeking comments on how the authorized sureties will set 
the purchase amount for bidding entities in order to finalize a more 
accurate estimate.

[[Page 42873]]

    We do anticipate that there will be an impact on small suppliers. 
We are seeking comments on whether we should have a reduced bid surety 
bond amount for a particular subset of suppliers, for example, small 
suppliers as defined by the CBP. In terms of a small supplier obtaining 
a bond, the Small Business Administration (SBA) has a statement on 
their Web site stating that their guarantee ``encourages surety 
companies to bond small businesses,'' and as such we anticipate that 
small suppliers will be able to reach out to the SBA if they encounter 
difficulty in obtaining a bond.
    As a result of the implementation of this proposed rule, we 
anticipate that this requirement may deter some suppliers from bidding, 
which would result in a lower number of bids submitted to the DMEPOS 
CBP. We are seeking comments on the impact of the bid surety bond 
requirement on supplier participation in the DMEPOS CBP.
    State Licensure. Contract suppliers in the CBP are already required 
to have the proper state licensure in order to be eligible for a 
contract award. We do not anticipate that conforming the language of 
the regulation to the language in section 1847(b)(2)(A), as added by 
section 522 of MACRA, will have any additional impact beyond what is 
already being imposed on suppliers.
    Appeals Process for Breach of DMEPOS Competitive Bidding Program 
Contract Actions. We believe the expansion of the appeal rights for 
breach of contract may have a positive impact on contract suppliers by 
providing the formal opportunity to appeal any of the actions that CMS 
may take as a result of a breach of contract.
b. Effects on the Medicare Program
    Bid Surety Bonds. We anticipate that the bid surety bond 
requirement will result in bidding entities being more conscientious 
when formulating their bid amounts. In addition, given the already high 
historic contract acceptance rate exceeding 90 percent per round, we 
anticipate that the bid surety bond provision will result in an even 
higher rate of contract acceptance.
    As a result of the implementation of this proposed rule, we 
anticipate that this regulation may deter some bidding entities from 
bidding, which would result in a lower number of bids submitted to the 
DMEPOS CBP. This reduction could reduce competition and lead to a 
decreased number of contract suppliers and, as a result, less savings 
from the program.
    Additionally, we expect that there will be an administrative burden 
for implementing the bid surety bond requirement, which includes 
educating bidding entities, updating CMS bidding and contracting 
systems, and verifying that the bonds are valid.
    State Licensure. We do not anticipate that conforming the language 
of the regulation to the language in section 1847(b)(2)(A), as added by 
section 522 of MACRA, will have any additional impact beyond what is 
already being imposed on suppliers. Therefore, the burden of meeting 
this statutory requirement has already been estimated in previous 
regulations and this proposed rule does not add to the burden.
    Appeals Process for Breach of DMEPOS Competitive Bidding Program 
Contract Actions. We expect that there may be some de minimis costs to 
expand the appeals process. We anticipate that overall this proposed 
rule will have a positive impact on the program by allowing suppliers a 
full appeals process for any breach of contract action that CMS may 
take pursuant to Sec.  414.422(g)(2).
c. Effects on Medicare Beneficiaries
    The proposed CBP requirements for bid surety bond, state licensure 
and appeals process for a breach of contract actions are not expected 
to have an impact on Medicare beneficiaries.
d. Alternatives Considered
    Section 1847(a)(1)(G) of the Act, as amended by section 522(a) of 
MACRA, provides that a bidding entity may not submit a bid for a CBA 
unless, as of the deadline for bid submission, the entity has (1) 
obtained a bid surety bond, and (2) provided proof of having obtained 
the bid surety bond for each CBA associated with its bid(s) in a form 
specified by the Secretary. No alternatives to this bid surety bond 
requirement were considered. However, while we are proposing that the 
bid surety bond be in an amount of $100,000, we are seeking comments on 
whether a lower bond amount for a certain subset of bidding entities, 
for example, small suppliers as defined by 42 CFR 414.402, would be 
appropriate. Additionally, we are seeking comments on the impact of the 
bid surety bond requirement on participation in the DMEPOS CBP. No 
alternatives were considered for the state licensure requirement, as 
Sec.  414.414(b)(3) of the regulations already requires suppliers to 
have state and local licensure.
    For appeals for breach of contract actions, we believe that it 
would be beneficial to expand the appeals process to any of the breach 
of contract actions that CMS may take pursuant to Sec.  414.422(g)(2). 
The alternative is to retain the current appeals process for 
terminations, while still allowing suppliers to appeal other breach of 
contract actions through an undefined process. However, in order to 
provide an opportunity for notice and comment, we believe that the 
better option is to revise the current regulations to allow for a clear 
and defined appeals process for any breach of contract action that CMS 
may take.
5. DMEPOS Provisions
a. Effects of the Methodology for Adjusting DMEPOS Fee Schedule Amounts 
for Similar Items With Different Features Using Information From the 
DMEPOS Competitive Bidding Programs
    We estimate that our proposal for a methodology for adjusting 
DMEPOS fee schedule amounts for certain groupings of similar items with 
different features using information from the DMEPOS CBPs will generate 
small savings by lowering the price of similar items to be equal to the 
weighted average of the SPAs for the items based on the item weights 
assigned under competitive bidding. The reduced price causes lower 
copayments to the beneficiary. We believe our proposal would also 
prevent beneficiaries from potentially receiving lower cost items at 
higher coinsurance rates. Suppliers will be impacted little by the 
methodological change because the proposal has a small saving attached 
to it.
b. Effects of the Proposal for Determining Single Payment Amounts for 
Similar Items With Different Features Under the DMEPOS Competitive 
Bidding Program
    We estimate that our proposal for a methodology for determining 
single payment amounts for certain groupings of similar items with 
different features under the DMEPOS CBPs will generate small savings by 
not allowing SPAs for similar items without features to be priced 
higher than items with features. Our proposal would benefit 
beneficiaries who would have lower coinsurance payments as a result of 
this proposal. We believe our proposal would also prevent beneficiaries 
from potentially receiving lower cost items at higher coinsurance 
rates. Suppliers will have a reduced administrative burden due to the 
fact that bidding is simplified.
c. Effects of the Proposed Revision to the Bid Limits Under the DMEPOS 
Competitive Bidding Program
    We estimate our proposed revision to the bid limits for items under 
the DMEPOS CBP will not have a

[[Page 42874]]

significant fiscal impact on the Medicare program because we anticipate 
little change in Medicare payment due to the revised bid limits. This 
revision will provide clearer limits. We estimate our proposed revision 
to the bid limits at the unadjusted fee level would have little fiscal 
impact in that competitions will continue to reduce prices. This 
proposed rule would benefit suppliers and beneficiaries because 
payments would be allowed to fluctuate somewhat to account for 
increases in the costs of furnishing items, including newer technology 
items.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 33 below, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the various \17\ provisions of this 
proposed rule.
---------------------------------------------------------------------------

    \17\ 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 values presented here capture those previously finalized 
impacts plus the collection of information requirements related for 
PY 2018 presented in this notice of proposed rulemaking.

  Table 33--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
                      ESRD PPS and AKI for CY 2017
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $50 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Increased Beneficiary Co-insurance       $ 10 million.
 Payments.
From Whom to Whom......................  Beneficiaries to ESRD
                                          providers.
------------------------------------------------------------------------
                        ESRD QIP for PY 2019 \17\
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$15.5 million
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $21 thousand.
 Costs.
------------------------------------------------------------------------
                          ESRD QIP for PY 2020
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$22 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $91 million.
 Costs.
------------------------------------------------------------------------
                             DME Provisions


----------------------------------------------------------------------------------------------------------------
                                                                          Transfers
                                           ---------------------------------------------------------------------
                 Category                                                                    Year      Discount
                                                              Estimates                     dollar       rate
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfer on            -$1.9.......................................        2016          7%
 Beneficiary Cost Sharing (in $Millions).   -$1.9.......................................        2016          3%
From Whom to Whom.........................  Beneficiaries to Medicare providers.
----------------------------------------------------------------------------------------------------------------
                                                                          Transfers
----------------------------------------------------------------------------------------------------------------
                                                              Estimates                      Year      Discount
                                                                                            dollar       rate
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfer Payments (in  -$7.5.......................................        2016          7%
 $Millions).                                -$7.8.......................................        2016          3%
From Whom to Whom.........................  Federal government to Medicare providers.
----------------------------------------------------------------------------------------------------------------

XVII. 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.

[[Page 42875]]

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 32. Using the 
definitions in this ownership category, we consider the 568 facilities 
that are independent and the 354 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 proposed in this rule, a hospital-based 
ESRD facility (as defined by ownership type) is estimated to receive a 
0.7 percent increase in payments for CY 2017. An independent facility 
(as defined by ownership type) is also estimated to receive a 0.4 
percent increase in payments for CY 2017.
    We are unable to estimate whether patients will go to ESRD 
facilities for AKI dialysis, however, we have estimated there is a 
potential for $2.0 million in payment for AKI dialysis treatments that 
could potentially be furnished in ESRD facilities. As a result, this 
proposed rule is not estimated to have a significant impact on small 
entities.
    We estimate that of the 2,840 ESRD facilities expected to receive a 
payment reduction in the PY 2020 ESRD QIP, 349 are ESRD small entity 
facilities. We present these findings in Table 21 (``Estimated 
Distribution of PY 2020 ESRD QIP Payment Reductions'') and Table 23 
(``Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 
2020'') above. We estimate that the payment reductions will average 
approximately $11,510 per facility across the 2,840 facilities 
receiving a payment reduction, and $13,884 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 922 
small entity facilities with the aggregate ESRD payments to all small 
entity facilities. We estimate that there are a total of 922 small 
entity facilities, and that the aggregate ESRD PPS payments to these 
facilities would decrease 0.49 percent in PY 2020.
    We anticipate that the bid surety bond provision will have an 
impact on all suppliers, including small suppliers; therefore, we are 
requesting comments regarding the bid bond amount. The state licensure 
and appeal of preclusion proposed rules are not expected to have an 
impact on any supplier.
    We expect our proposals for a methodology for adjusting DMEPOS fee 
schedule amounts for certain groupings of similar items with different 
features using information from the DMEPOS CBPs, our proposed change 
for submitting bids for a grouping of two or more similar items with 
different features, our proposal for determining single payment amounts 
for similar items with different features under the DMEPOS CBPs, and 
our proposed revision to the bid limits for items under the DMEPOS CBP 
will not have a significant impact on a substantial number of small 
suppliers. Although suppliers furnishing items and services outside 
CBAs do not have to compete and be awarded contracts in order to 
continue furnishing these items and services, the fee schedule amounts 
for these items and services will be more equitable using the proposals 
established as a result of this rule. We believe that these rules will 
have a positive impact on suppliers because it reduces the burden and 
time it takes for suppliers to submit bids and data entry. It will also 
allow for suppliers to furnish items necessary to beneficiaries while 
getting compensated a reasonable payment.
    Therefore, the Secretary has determined that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities. We solicit comment on the RFA analysis provided.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 603 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 proposed 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 0.1 
percent decrease in payments. As a result, this proposed rule is not 
estimated to have a significant impact on small rural hospitals. 
Therefore, the Secretary has determined that this proposed rule would 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.

XVIII. 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 2016, that 
is approximately $146 million. This proposed rule does not include any 
mandates that would impose spending costs on State, local, or Tribal 
governments in the aggregate, or by the private sector, of $141 
million.

XIX. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
proposed rule (and subsequent final rule) that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. We have reviewed this 
proposed 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.

[[Page 42876]]

XX. Congressional Review Act

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

XXI. Files Available to the Public via the Internet

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

List of Subjects

42 CFR Part 413

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

42 CFR Part 414

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

42 CFR Part 494

    Conditions for Coverage for End-Stage Renal Disease Facilities.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR Chapter IV as set forth 
below:

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

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; sec. 204 of Pub. L. 113-295, 128 Stat. 4010; and sec. 
808 of Pub. L. 114-27, 129 Stat. 362.

0
2. The heading for part 413 is revised to read as set forth above:
0
3. Section 413.194 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  413.194  Appeals.

    (a) * * *
    (1) A facility that disputes the amount of its allowable Medicare 
bad debts reimbursed by CMS under Sec.  413.89(h)(3) may request review 
by the contractor or the Provider Reimbursement Review Board (PRRB) in 
accordance with subpart R of part 405 of this chapter.
* * * * *
0
4. Section 413.215 is amended by revising paragraph (b) to read as 
follows:


Sec.  413.215  Basis of payment.

* * * * *
    (b) In addition to the per-treatment payment amount, as described 
in Sec.  413.215(a), the ESRD facility may receive payment for bad 
debts of Medicare beneficiaries as specified in Sec.  413.89(h)(3) of 
this part.
0
5. Add Subpart K to part 413 to read as follows:
Subpart K--Payment for Acute Kidney Injury (AKI) Dialysis
Sec.
413.370 Scope.
413.371 Definition.
413.372 AKI dialysis payment rate.
413.373 Other adjustments to the AKI dialysis payment rate
413.374 Renal dialysis services included in the AKI dialysis payment 
rate
413.375 Notification of changes in rate-setting methodologies and 
payment rates.

Subpart K--Payment for Acute Kidney Injury (AKI) Dialysis


Sec.  413.370  Scope.

    This subpart implements section 1834(r) of the Act by setting forth 
the principles and authorities under which CMS is authorized to 
establish a payment amount for renal dialysis services furnished to 
beneficiaries with an acute kidney injury in or under the supervision 
of an ESRD facility that meets the conditions of coverage in part 494 
of this chapter and as defined in Sec.  413.171.


Sec.  413.371  Definition.

    For purposes of the subpart, the following definition applies:
    Individual with Acute Kidney Injury. The term individual with acute 
kidney injury means an individual who has acute loss of renal function 
and does not receive renal dialysis services for which payment is made 
under section 1881(b)(14) of the Act.


Sec.  413.372  AKI dialysis payment rate.

    The amount of payment for AKI dialysis services shall be the base 
rate for renal dialysis services determined for such year under section 
1881(b)(14), that is, the ESRD base rate as set forth in Sec.  413.220, 
updated by the ESRD bundled market basket percentage increase factor 
minus a productivity adjustment as set forth in Sec.  413.196(d)(1), 
adjusted for wages as set forth in Sec.  413.231, and adjusted by any 
other amounts deemed appropriate by the Secretary under Sec.  413.373.


Sec.  413.373  Other adjustments to the AKI dialysis payment rate.

    The payment rate for AKI dialysis may be adjusted by the Secretary 
(on a budget neutral basis for payments under section 1834(r)) by other 
adjustment factor under subparagraph (D) of section 1881(b)(14) of the 
Act.


Sec.  413.374  Renal dialysis services included in the AKI dialysis 
payment rate.

    (a) The AKI dialysis payment rate applies to renal dialysis 
services (as defined in subparagraph (B) of section 1881(b)(14) of the 
Act) furnished under Part B by a renal dialysis facility or provider of 
services paid under section 1881(b)(14) of the Act.
    (b) Other items and services furnished to beneficiaries with AKI 
that are not considered to be renal dialysis services as defined in 
Sec.  413.171, but that are related to their dialysis treatment as a 
result of their AKI, would be separately payable, that is, drugs, 
biologicals, laboratory services, and supplies that ESRD facilities are 
certified to furnish and that would otherwise be furnished to a 
beneficiary with AKI in a hospital outpatient setting.


Sec.  413.375  Notification of changes in rate-setting methodologies 
and payment rates.

    (a) Changes to the methodology for payment for renal dialysis 
services furnished to beneficiaries with AKI as well as any adjustments 
to the AKI payment rate other than wage index will be adopted through 
notice and comment rulemaking.
    (b) Annual updates in the AKI dialysis payment rate as described in 
Sec.  413.372 that do not include those changes described in paragraph 
(a) are

[[Page 42877]]

announced by notice published in the Federal Register without 
opportunity for public comment.
    (c) Effective for cost reporting periods beginning on or after 
January 1, 2017, on an annual basis CMS updates the AKI dialysis 
payment rate.

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

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

    Authority:  Secs. 1102, 1871, and 1881(b)(1) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).

0
8. Section 414.210 is amended by revising paragraph (g)(6) to read as 
follows:


Sec.  414.210  General payment rules.

* * * * *
    (g) * * *
    (6) Adjustments of single payment amounts resulting from price 
inversions under the DMEPOS Competitive Bidding Program.
    (i) In situations where a price inversion defined in Sec.  414.402 
occurs under the DMEPOS Competitive Bidding Program in a competitive 
bidding area (CBA) following a competition for a grouping of similar 
items identified in paragraph (g)(6)(ii) of this section, prior to 
adjusting the fee schedule amounts under Sec.  414.210(g) the single 
payment amount for each item in the grouping of similar items in the 
CBA is adjusted to be equal to the weighted average of the single 
payment amounts for the items in the grouping of similar items in the 
CBA.
    (ii) The groupings of similar items subject to this rule include--
    (A) Enteral infusion pumps (HCPCS codes B9000 and B9002).
    (B) Hospital beds (HCPCS codes E0250, E0251, E0255, E0256, E0260, 
E0261, E0290, E0291, E0292, E0293, E0294, E0295, E0301, E0302, E0303, 
and E0304).
    (C) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373).
    (D) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, and K0823).
    (E) Seat lift mechanisms (HCPCS codes E0627, E0628, and E0629).
    (F) TENS devices (HCPCS codes E0720 and E0730).
    (G) Walkers (HCPCS codes E0130, E0135, E0141, and E0143).
    (iii) The weight for each item (HCPCS code) used in calculating the 
weighted average described in paragraph (g)(6)(ii) of this section is 
equal to the proportion of total nationwide allowed services furnished 
in calendar year 2012 for the item (HCPCS code) in the grouping of 
similar items, relative to the total nationwide allowed services 
furnished in calendar year 2012 for each of the other items (HCPCS 
codes) in the grouping of similar items.
* * * * *
0
9. Section 414.402 is amended by adding the definitions of ``Bidding 
entity,'' ``Price Inversion,'' and ``Total nationwide allowed service'' 
in alphabetical order to read as follows:


Sec.  414.402  Definitions.

* * * * *
    Bidding entity means the entity whose legal business name is 
identified in the ``Form A: Business Organization Information'' section 
of the bid.
* * * * *
    Price inversion means any situation where the following occurs: One 
item (HCPCS code) in a grouping of similar items (e.g., walkers, 
enteral infusion pumps, or power wheelchairs) in a product category 
includes a feature that another, similar item in the same product 
category does not have (e.g., wheels, alarm, or Group 2 performance); 
the average of the 2015 fee schedule amounts (or initial, unadjusted 
fee schedule amounts for subsequent years for new items) for the code 
with the feature is higher than the average of the 2015 fee schedule 
amounts for the code without the feature; and, following a competition, 
the SPA for the code with the feature is lower than the SPA for the 
code without that feature.
* * * * *
    Total nationwide allowed services means the total number of 
services allowed for an item furnished in all states, territories, and 
the District of Columbia where Medicare beneficiaries reside and can 
receive covered DMEPOS items and services.
0
10. Section 414.412 is amended by revising paragraphs (b)(2) and (d) 
and adding paragraph (h) to read as follows:


Sec.  414.412  Submission of bids under a competitive bidding program.

* * * * *
    (b) * * *
    (2) The bids submitted for each item in a product category cannot 
exceed the payment amount that would otherwise apply to the item under 
Subpart C, without the application of Sec.  414.210(g), or Subpart D, 
without the application of Sec.  414.105, or Subpart I of this part. 
The bids submitted for items in accordance with paragraph (d)(2) of 
this section cannot exceed the weighted average, weighted by total 
nationwide allowed services, as defined in Sec.  414.202, of the 
payment amounts that would otherwise apply to the grouping of similar 
items under Subpart C, without the application of Sec.  414.210(g), or 
Subpart D, without the application of Sec.  414.105.
* * * * *
    (d) Separate bids. (1) Except as provided in paragraph (d)(2) of 
this section, for each product category that a supplier is seeking to 
furnish under a Competitive Bidding Program, the supplier must submit a 
separate bid for each item in that product category.
    (2) An exception to paragraph (d)(1) of this section can be made in 
situations where price inversions defined in Sec.  414.402 have 
occurred in past competitions for items within groupings of similar 
items within a product category. In these situations, an alternative 
method for submitting bids for these combinations of codes may be 
announced at the time the competition begins. Under this alternative 
method, the combination of codes for the similar items is the item for 
bidding purposes, as defined under Sec.  414.402. Suppliers submit bids 
for the code with the highest total nationwide allowed services for 
calendar year 2012 (the ``lead item'') within the grouping of codes for 
similar items, and the bids for this code are used to calculate the 
single payment amounts for this code in accordance with Sec.  
414.416(b)(1). The bids for this code would also be used to calculate 
the single payment amounts for the other codes within the grouping of 
similar items in accordance with Sec.  414.416(b)(3). For subsequent 
competitions, the lead item is identified as the code with the highest 
total nationwide allowed services for the most recent and complete 
calendar year that precedes the competition. The groupings of similar 
items subject to this rule include--
    (i) Enteral infusion pumps (HCPCS codes B9000 and B9002).
    (ii) Hospital beds (HCPCS codes E0250, E0251, E0255, E0256, E0260, 
E0261, E0266, E0265, E0290, E0291, E0292, E0293, E0294, E0295, E0296, 
E0297, E0301, E0302, E0303, and E0304).
    (iii) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373).
    (iv) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, K0823, K0824, K0825, K0826, K0827, K0828, and 
K0829).
    (v) Seat lift mechanisms (HCPCS codes E0627, E0628, and E0629).
    (vi) TENS devices (HCPCS codes E0720 and E0730).
    (vii) Walkers (HCPCS codes E0130, E0135, E0140, E0141, E0143, 
E0144, E0147, E0148, and E0149).
* * * * *
    (h) Requiring bid surety bonds for bidding entities. (1) Bidding

[[Page 42878]]

requirements. For competitions beginning on or after January 1, 2017, 
and no later than January 1, 2019, a bidding entity may not submit a 
bid(s) for a CBA unless it obtains a bid surety bond for the CBA from 
an authorized surety on the Department of the Treasury's Listing of 
Certified Companies and provides proof of having obtained the bond by 
submitting a copy to CMS by the deadline for bid submission.
    (2) Bid surety bond requirements. (i) The bid surety bond issued 
must include at a minimum:
    (A) The name of the bidding entity as the principal/obligor;
    (B) The name and National Association of Insurance Commissioners 
number of the authorized surety;
    (C) CMS as the named obligee;
    (D) The conditions of the bond;
    (E) The CBA covered by the bond;
    (F) The bond number;
    (G) The date of issuance; and
    (H) The bid bond value of $100,000.00.
    (ii) The bid surety bond must be maintained until it is either 
collected upon due to forfeiture or the liability is returned for not 
meeting bid forfeiture conditions.
    (3) Forfeiture of bid surety bond. (i) When a bidding entity is 
offered a contract for a CBA/product category (``competition'') and its 
composite bid for the competition is at or below the median composite 
bid rate for all bidding entities included in the calculation of the 
single payment amounts within the competition and the bidding entity 
does not accept the contract offer, its bid surety bond submitted for 
that CBA will be forfeited and CMS will collect on the bond via 
Electronic Funds Transfer (EFT) from the respective bonding company. As 
one bid surety bond is required for each CBA in which the bidding 
entity is submitting a bid, the failure to accept a contract offer for 
any product category within the CBA when the entity's bid is at or 
below the median composite bid rate will result in forfeiture of the 
bid surety bond for that CBA.
    (ii) Where the bid(s) does not meet the specified forfeiture 
conditions in paragraph (h)(3)(i) of this section, the bid surety bond 
liability will be returned within 90 days of the public announcement of 
contract suppliers for the CBA. CMS will notify the bidding entity that 
it did not meet the specified forfeiture requirements and the bid 
surety bond will not be collected by CMS.
    (4) Penalties. (i) A bidding entity that has been determined to 
have falsified its bid surety bond may be prohibited from participation 
in the DMEPOS Competitive Bidding Program for the current round of the 
Competitive Bidding Program in which it submitted a bid and also from 
participating in the next round of the Competitive Bidding Program. 
Offending suppliers will also be referred to the Office of Inspector 
General and Department of Justice for further investigation.
    (ii) A bidding entity, whose composite bid is at or below the 
median composite bid rate, that--
    (A) Accepts a contract award and
    (B) Is found to be in breach of contract for nonperformance of the 
contract to avoid forfeiture of the bid surety bond will have its 
contract terminated and will be precluded from participation in the 
DMEPOS Competitive Bidding Program.
0
11. Section 414.414 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  414.414  Conditions for awarding contracts.

* * * * *
    (b) * * *
    (3) Each supplier must have all State and local licenses required 
to perform the services identified in the request for bids. CMS may not 
award a contract to any entity in a CBA unless the entity meets 
applicable State licensure requirements.
* * * * *
0
12. Section 414.416 is amended by adding a new paragraph (b)(3) to read 
as follows:


Sec.  414.416  Determination of competitive bidding payment amounts.

* * * * *
    (b) * * *
    (3) In the case of competitions where bids are submitted for an 
item that is a combination of codes for similar items within a product 
category as identified under Sec.  414.412(d)(2), the single payment 
amount for each code within the combination of codes is equal to the 
single payment amount for the lead item or code with the highest total 
nationwide allowed services multiplied by the ratio of the average of 
the 2015 fee schedule amounts for all areas (i.e., all states, the 
District of Columbia, Puerto Rico, and the United States Virgin 
Islands) for the code to the average of the 2015 fee schedule amounts 
for all areas for the lead item.
0
13. Section 414.422 is amended by revising paragraph (g) to read as 
follows:


Sec.  414.422  Terms of contracts.

* * * * *
    (g) Breach of contract. (1) Any deviation from contract 
requirements, including a failure to comply with governmental agency or 
licensing organization requirements, constitutes a breach of contract.
    (2) In the event a contract supplier breaches its contract, CMS may 
take one or more of the following actions, which will be specified in 
the notice of breach of contract:
    (i) Suspend the contract supplier's contract;
    (ii) Terminate the contract;
    (iii) Preclude the contract supplier from participating in the 
competitive bidding program; or
    (iv) Avail itself of other remedies allowed by law.
0
14. Section 414.423 is revised to read as follows:


Sec.  414.423  Appeals process for breach of a DMEPOS competitive 
bidding program contract actions.

    This section implements an appeals process for suppliers that CMS 
has determined are in breach of their Medicare DMEPOS Competitive 
Bidding Program contract and where CMS has issued a notice of breach of 
contract indicating its intent to take action(s) pursuant to Sec.  
414.422(g)(2).
    (a) Breach of contract. CMS may take one or more of the actions 
specified in Sec.  414.422(g)(2) as a result of a supplier's breach of 
their DMEPOS Competitive Bidding Program contract.
    (b) Notice of breach of contract. (1) CMS notification. If CMS 
determines a supplier to be in breach of its contract, it will notify 
the supplier of the breach of contract in a notice of breach of 
contract.
    (2) Content of the notice of breach of contract. The CMS notice of 
breach of contract will include the following:
    (i) The details of the breach of contract.
    (ii) The action(s) that CMS is taking as a result of the breach of 
the contract pursuant to Sec.  414.422(g)(2), and the duration of or 
timeframe(s) associated with the action(s), if applicable.
    (iii) The right to request a hearing by a CBIC hearing officer and, 
depending on the nature of the breach, the supplier may also be allowed 
to submit a corrective action plan (CAP) in lieu of requesting a 
hearing by a CBIC hearing officer, as specified in paragraph (c)(1)(i) 
of this section.
    (iv) The address to which the written request for a hearing must be 
submitted.
    (v) The address to which the CAP must be submitted, if applicable.
    (vi) The effective date of the action(s) that CMS is taking is the 
date specified by CMS in the notice of breach of contract, or 45 days 
from the date of the notice of breach of contract unless:

[[Page 42879]]

    (A) A timely hearing request has been filed; or
    (B) A CAP has been submitted within 30 days of the date of the 
notice of breach of contract where CMS allows a supplier to submit a 
CAP.
    (c) Corrective action plan (CAP). (1) Option for a CAP. (i) CMS has 
the option to allow a supplier to submit a written CAP to remedy the 
deficiencies identified in the notice at its sole discretion, including 
where CMS determines that the delay in the effective date of the breach 
of contract action(s) caused by allowing a CAP will not cause harm to 
beneficiaries. CMS will not allow a CAP if the supplier has been 
excluded from any Federal program, debarred by a Federal agency, or 
convicted of a healthcare-related crime, or for any other reason 
determined by CMS.
    (ii) If a supplier chooses not to submit a CAP, if CMS determines 
that a supplier's CAP is insufficient, or if CMS does not allow the 
supplier the option to submit a CAP, the supplier may request a hearing 
on the breach of contract action(s).
    (2) Submission of a CAP. (i) If allowed by CMS, a CAP must be 
submitted within 30 days from the date on the notice of breach of 
contract. If the supplier decides not to submit a CAP the supplier may, 
within 30 days of the date on the notice, request a hearing by a CBIC 
hearing officer.
    (ii) Suppliers will only have the opportunity to submit a CAP when 
they are first notified that they have been determined to be in breach 
of contract. If the CAP is not acceptable to CMS or is not properly 
implemented, suppliers will receive a subsequent notice of breach of 
contract. The subsequent notice of breach of contract may, at CMS' 
discretion, allow the supplier to submit another written CAP pursuant 
to paragraph (1)(i) of this section.
    (d) The purpose of the CAP. The purpose of the CAP is: (1) For the 
supplier to remedy all of the deficiencies that were identified in the 
notice of breach of contract.
    (2) To identify the timeframes by which the supplier will implement 
each of the components of the CAP.
    (e) Review of the CAP. (1) The CBIC will review the CAP. Suppliers 
may only revise their CAP one time during the review process based on 
the deficiencies identified by the CBIC. The CBIC will submit a 
recommendation to CMS for each applicable breach of contract action 
concerning whether the CAP includes the steps necessary to remedy the 
contract deficiencies as identified in the notice of breach of 
contract.
    (2) If CMS accepts the CAP, including the supplier's designated 
timeframe for its completion, the supplier must provide a follow-up 
report within 5 days after the supplier has fully implemented the CAP 
that verifies that all of the deficiencies identified in the CAP have 
been corrected in accordance with the timeframes accepted by CMS.
    (3) If the supplier does not implement a CAP that was accepted by 
CMS, or if CMS does not accept the CAP submitted by the supplier, then 
the supplier will receive a subsequent notice of breach of contract, as 
specified in paragraph (b) of this section.
    (f) Right to request a hearing by the CBIC Hearing Officer. (1) A 
supplier who receives a notice of breach of contract (whether an 
initial notice of breach of contract or a subsequent notice of breach 
of contract under Sec.  414.422(e)(3)) has the right to request a 
hearing before a CBIC hearing officer who was not involved with the 
original breach of contract determination.
    (2) A supplier that wishes to appeal the breach of contract 
action(s) specified in the notice of breach of contract must submit a 
written request to the CBIC. The request for a hearing must be received 
by the CBIC within 30 days from the date of the notice of breach of 
contract.
    (3) A request for hearing must be in writing and submitted by an 
authorized official of the supplier.
    (4) The appeals process for the Medicare DMEPOS Competitive Bidding 
Program is not to be used in place of other existing appeals processes 
that apply to other parts of Medicare.
    (5) If the supplier is given the opportunity to submit a CAP and a 
CAP is not submitted and the supplier fails to timely request a 
hearing, the breach of contract action(s) will take effect 45 days from 
the date of the notice of breach of contract.
    (g) The CBIC Hearing Officer schedules and conducts the hearing. 
(1) Within 30 days from the receipt of the supplier's timely request 
for a hearing the hearing officer will contact the parties to schedule 
the hearing.
    (2) The hearing may be held in person or by telephone at the 
parties' request.
    (3) The scheduling notice to the parties must indicate the time and 
place for the hearing and must be sent to the parties at least 30 days 
before the date of the hearing.
    (4) The hearing officer may, on his or her own motion, or at the 
request of a party, change the time and place for the hearing, but must 
give the parties to the hearing 30 days' notice of the change.
    (5) The hearing officer's scheduling notice must provide the 
parties to the hearing the following information:
    (i) A description of the hearing procedure.
    (ii) The specific issues to be resolved.
    (iii) The supplier has the burden to prove it is not in violation 
of the contract or that the breach of contract action(s) is not 
appropriate.
    (iv) The opportunity for parties to the hearing to submit 
additional evidence to support their positions, if requested by the 
hearing officer.
    (v) A notification that all evidence submitted, both from the 
supplier and CMS, will be provided in preparation for the hearing to 
all affected parties at least 15 days prior to the scheduled date of 
the hearing.
    (h) Burden of proof and evidence submission. (1) The burden of 
proof is on the Competitive Bidding Program contract supplier to 
demonstrate to the hearing officer with convincing evidence that it has 
not breached its contract or that the breach of contract action(s) is 
not appropriate.
    (2) The supplier's evidence must be submitted with its request for 
a hearing.
    (3) If the supplier fails to submit the evidence at the time of its 
submission, the Medicare DMEPOS supplier is precluded from introducing 
new evidence later during the hearing process, unless permitted by the 
hearing officer.
    (4) CMS also has the opportunity to submit evidence to the hearing 
officer within 10 days of receiving the scheduling notice.
    (5) The hearing officer will share all evidence submitted by the 
supplier and/or CMS, with all parties to the hearing at least 15 days 
prior to the scheduled date of the hearing.
    (i) Role of the Hearing Officer. The hearing officer will conduct a 
thorough and independent review of the evidence including the 
information and documentation submitted for the hearing and other 
information that the hearing officer considers pertinent for the 
hearing. The role of the hearing officer includes, at a minimum, the 
following:
    (1) Conduct the hearing and decide the order in which the evidence 
and the arguments of the parties are presented;
    (2) Determine the rules on admissibility of the evidence;
    (3) Examine the witnesses, in addition to the examinations 
conducted by CMS and the contract supplier;
    (4) The CBIC may assist CMS in the appeals process including being 
present at the hearing, testifying as a witness, or performing other, 
related ministerial duties;

[[Page 42880]]

    (5) Determine the rules for requesting documents and other evidence 
from other parties;
    (6) Ensure a complete record of the hearing is made available to 
all parties to the hearing;
    (7) Prepare a file of the record of the hearing which includes all 
evidence submitted as well as any relevant documents identified by the 
hearing officer and considered as part of the hearing; and
    (8) Comply with all applicable provisions of 42 U.S.C. Title 18 and 
related provisions of the Act, the applicable regulations issued by the 
Secretary, and manual instructions issued by CMS.
    (j) Hearing officer recommendation. (1) The hearing officer will 
issue a written recommendation(s) to CMS within 30 days of the close of 
the hearing unless an extension has been granted by CMS because the 
hearing officer has demonstrated that an extension is needed due to the 
complexity of the matter or heavy workload. In situations where there 
is more than one breach of contract action presented at the hearing, 
the hearing officer will issue separate recommendations for each breach 
of contract action.
    (2) The recommendation(s) will explain the basis and the rationale 
for the hearing officer's recommendation(s).
    (3) The hearing officer must include the record of the hearing, 
along with all evidence and documents produced during the hearing along 
with its recommendation(s).
    (k) CMS' final determination. (1) CMS' review of the hearing 
officer's recommendation(s) will not allow the supplier to submit new 
information.
    (2) After reviewing the hearing officer's recommendation(s), CMS' 
decision(s) will be made within 30 days from the date of receipt of the 
hearing officer's recommendation(s). In situations where there is more 
than one breach of contract action presented at the hearing, and the 
hearing officer issues multiple recommendations, CMS will render 
separate decisions for each breach of contract action.
    (3) A notice of CMS' decision will be sent to the supplier and the 
hearing officer. The notice will indicate:
    (i) If any breach of contract action(s) included in the notice of 
breach of contract, specified in paragraph (b)(1) of this section, 
still apply and will be effectuated, and
    (ii) The effective date for any breach of contract action specified 
in paragraph (k)(3)(i) of this section.
    (4) This decision(s) is final and binding.
    (l) Effect of breach of contract action(s). (1) Effect of contract 
suspension. (i) All locations included in the contract cannot furnish 
competitive bid items to beneficiaries within a CBA and the supplier 
cannot be reimbursed by Medicare for these items for the duration of 
the contract suspension.
    (ii) The supplier must notify all beneficiaries who are receiving 
rented competitive bid items or competitive bid items on a recurring 
basis of the suspension of their contract.
    (A) The notice to the beneficiary from the supplier must be 
provided within 15 days of receipt of the final notice.
    (B) The notice to the beneficiary must inform the beneficiary that 
they must select a new contract supplier to furnish these items in 
order for Medicare to pay for these items.
    (2) Effect of contract termination. (i) All locations included in 
the contract can no longer furnish competitive bid items to 
beneficiaries within a CBA and the supplier cannot be reimbursed by 
Medicare for these items after the effective date of the termination.
    (ii) The supplier must notify all beneficiaries, who are receiving 
rented competitive bid items or competitive bid items received on a 
recurring basis, of the termination of their contract.
    (A) The notice to the beneficiary from the supplier must be 
provided within 15 days of receipt of the final notice of termination.
    (B) The notice to the beneficiary must inform the beneficiary that 
they are going to have to select a new contract supplier to furnish 
these items in order for Medicare to pay for these items.
    (3) Effect of preclusion. A supplier who is precluded will not be 
allowed to participate in a specific round of the Competitive Bidding 
Program, which will be identified in the original notice of breach of 
contract, as specified in paragraph (b)(1) of this section.
    (4) Effect of other remedies allowed by law. If CMS decides to 
impose other remedies under Sec.  414.422(g)(2)(iv), the details of the 
remedies will be included in the notice of breach of contract, as 
specified in paragraph (b)(2) of this section.

PART 494--CONDITIONS FOR COVERAGE FOR END-STAGE RENAL DISEASE 
FACILITIES

0
15. The authority citation for part 494 continues to read as follows:

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

0
16. Amend Sec.  494.1 by revising paragraph (a)(3) and adding paragraph 
(a)(7) to read as follows:


Sec.  494.1  Basis and Scope.

    (a) * * *
    (3) Section 1861(s)(2)(F) of the Act, which describes ``medical and 
other health services'' covered under Medicare to include home dialysis 
supplies and equipment, self-care home dialysis support services, and 
institutional dialysis services and supplies, for items and services 
furnished on or after January 1, 2011, renal dialysis services (as 
defined in section 1881(b)(14)(B)), including such renal dialysis 
services furnished on or after January 1, 2017, by a renal dialysis 
facility or provider of services paid under section 1881(b)(14) to an 
individual with acute kidney injury (as defined in section 1834(r)(2)).
* * * * *
    (7) Section 1861(s)(2)(F) of the Act, which authorizes coverage for 
renal dialysis services furnished on or after January 1, 2017 by a 
renal dialysis facility or provider of services currently paid under 
section 1881(b)(14) of the Act to an individual with AKI.
* * * * *

    Dated: June 16, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 22, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-15188 Filed 6-24-16; 4:15 pm]
 BILLING CODE 4120-01-P