[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)]
[Rules and Regulations]
[Pages 77834-77969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26152]



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Vol. 81

Friday,

No. 214

November 4, 2016

Part III





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; Final Rule

  Federal Register / Vol. 81 , No. 214 / Friday, November 4, 2016 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413, 414, and 494

[CMS-1651-F]
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: Final rule.

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SUMMARY: This rule updates and makes revisions to the End-Stage Renal 
Disease (ESRD) Prospective Payment System (PPS) for calendar year 2017. 
It also finalizes policies for coverage and payment for renal dialysis 
services furnished by an ESRD facility to individuals with acute kidney 
injury. This rule also sets forth requirements for the ESRD Quality 
Incentive Program, including the inclusion of new quality measures 
beginning with payment year (PY) 2020 and provides updates to 
programmatic policies for the PY 2018 and PY 2019 ESRD QIP.
    This rule also implements 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 expands suppliers' appeal rights in the 
event of a breach of contract action taken by CMS, by revising the 
appeals regulation to extend the appeals process to all types of 
actions taken by CMS for a supplier's breach of contract, rather than 
limit an appeal for the termination of a competitive bidding contract. 
The rule also finalizes changes to the methodologies for adjusting fee 
schedule amounts for DMEPOS using information from CBPs and for 
submitting bids and establishing single payment amounts under the CBPs 
for certain groupings of similar items with different features to 
address price inversions. Final changes also are made to the method for 
establishing bid limits for items under the DMEPOS CBPs. In addition, 
this rule summarizes comments on the impacts of coordinating Medicare 
and Medicaid Durable Medical Equipment for dually eligible 
beneficiaries. Finally, this rule also summarizes comments received in 
response to a request for information related to the Comprehensive ESRD 
Care Model and future payment models affecting renal care.

DATES: These regulations are effective January 1, 2017.

FOR FURTHER INFORMATION CONTACT: [email protected], for issues 
related to the ESRD PPS and coverage and payment for renal dialysis 
services furnished to individuals with AKI.
    Stephanie Frilling, (410) 786-4597, 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:

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

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

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 Action
    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 Actions
    5. DMEPOS Competitive Bidding Program and Fee Schedule 
Adjustments
    C. Summary of Cost and Benefits
    1. Impacts of the Final ESRD PPS
    2. Impact of the Final Coverage and Payment for Renal Dialysis 
Services Furnished to Individuals With AKI
    3. Impacts of the Final ESRD QIP
    4. Impacts of the Final DMEPOS Competitive Bidding Bid Surety 
Bonds, State Licensure and Appeals Process for a Breach of DMEPOS 
Competitive Bidding Program Contract Action
    5. Impacts of the Final 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. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the Calendar Year (CY) 2017 ESRD PPS
    1. Payment for Hemodialysis When More Than 3 Treatments Are 
Furnished per Week
    a. Background
    b. Payment Methodology for HD When More Than 3 Treatments Are 
Furnished per Week
    c. Applicability to Medically Justified Treatments

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    d. 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 ESRD PPS Final Rule
    d. Analysis of ESRD Cost Report Data
    e. Final Increase to the Home and Self-Dialysis Training Add-On 
Payment Adjustment
    3. Final CY 2017 ESRD PPS Update
    a. Final CY 2017 ESRD Market Basket Update, Productivity 
Adjustment, and Labor-Related Share for the ESRD PPS
    b. The Final 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. Update of the ESRD PPS Base Rate for CY 2017
    i. Background
    ii. Payment Rate Update for CY 2017
    4. Miscellaneous Comments
III. Final Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals With Acute Kidney Injury (AKI)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the Coverage and Payment for Renal Dialysis 
Services Furnished to Individuals With Acute Kidney Injury (AKI)
    C. Final Payment Policy for Renal Dialysis Services Furnished to 
Individuals With AKI
    1. Definition of ``Individual With Acute Kidney Injury''
    2. The Payment Rate 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
    D. Applicability of ESRD PPS Policies to AKI Dialysis
    1. Uncompleted Dialysis Treatment
    2. Home and Self-Dialysis
    3. Vaccines and Their Administration
    E. Monitoring of Beneficiaries With AKI Receiving Dialysis in 
ESRD Facilities
    F. AKI and the ESRD Conditions for Coverage
    G. ESRD Facility Billing for AKI Dialysis
    H. Announcement of AKI Payment Rate in Future Years
IV. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the End-Stage Renal Disease (ESRD) Quality 
Incentive Program (QIP)
    C. Requirements for the Payment Year (PY) 2018 ESRD QIP
    1. Small Facility Adjuster (SFA) Policy for PY 2018
    2. Changes to the Hypercalcemia Clinical Measure
    D. Requirements for the PY 2019 ESRD QIP
    1. New Measures for the PY 2019 ESRD QIP
    a. Reintroduction of the Expanded NHSN Dialysis Event Reporting 
Measure
    b. Scoring the NHSN Dialysis Event Reporting Measure
    2. New Measure Topic Beginning With the PY 2019 ESRD QIP--NHSN 
BSI Measure Topic
    3. New Safety Measure Domain
    4. Scoring for the NHSN BSI Measure Topic
    5. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures Finalized for the PY 2019 ESRD QIP
    6. Weighting for the Safety Measure Domain and Clinical Measure 
Domain for PY 2019
    7. Example of the Final PY 2019 ESRD QIP Scoring Methodology
    8. Payment Reductions for the PY 2019 ESRD QIP
    9. Data Validation
    E. Requirements for the PY 2020 ESRD QIP
    1. Replacement of the Mineral Metabolism Reporting Measure 
Beginning With the PY 2020 Program Year
    2. Measures for the PY 2020 ESRD QIP
    a. PY 2019 Measures Continuing for PY 2020 and Future Payment 
Years
    b. New Clinical Measures Beginning With the PY 2020 ESRD QIP
    i. Standardized Hospitalization Ratio (SHR) Clinical Measure
    c. New Reporting Measures Beginning With the PY 2020 ESRD QIP
    i. Serum Phosphorus Reporting Measure
    ii. Ultrafiltration Rate Reporting Measure
    3. Performance Period for the PY 2020 ESRD QIP
    4. Performance Standards, Achievement Thresholds, and Benchmarks 
for the PY 2020 ESRD QIP
    a. Performance Standards, Achievement Thresholds, and Benchmarks 
for the Clinical Measures in the PY 2020 ESRD QIP
    4. Performance Standards, Achievement Thresholds, and Benchmarks 
for the PY 2020 ESRD QIP
    a. 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. Performance Standards for the PY 2020 Reporting Measures
    5. 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. Calculating Facility Performance on Reporting Measures
    6. Weighting the Clinical Measure Domain, and Weighting the 
Total Performance Score
    a. Weighting of the Clinical Measure Domain for PY 2020
    b. Weighting the Total Performance Score
    7. Example of the PY 2020 ESRD QIP Scoring Methodology
    8. Minimum Data for Scoring Measures for the PY 2020 ESRD QIP
    9. Payment Reductions for the PY 2020 ESRD QIP
    F. Future Policies and Measures Under Consideration
V. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the DMEPOS CBP
    1. Bid Surety Bond Requirement
    2. State Licensure Requirement
    3. Appeals Process for a DMEPOS Competitive Bidding Breach of 
Contract Action
VI. Method for Adjusting DMEPOS Fee Schedule Amounts for Similar 
Items With Different Features Using Information From Competitive 
Bidding Programs (CBPs)
    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. Method for Avoiding HCPCS Price Inversions When Adjusting Fee 
Schedule Amounts Using Information From the DMEPOS Competitive 
Bidding Program
    B. Summary of the Proposed Provisions on the Method for 
Adjusting DMEPOS Fee Schedule Amounts for Similar Items With 
Different Features Using Information From Competitive Bidding 
Programs
    C. Response to Comments on the Method for Adjusting DMEPOS Fee 
Schedule Amounts for Similar Items With Different Features Using 
Information From Competitive Bidding Programs
VII. Submitting Bids and Determining Single Payment Amounts for 
Certain Groupings of Similar Items With Different Features Under the 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)
    A. Background on the DMEPOS CBPs
    B. Summary of the Proposed Provisions on Submitting Bids and 
Determining Single Payment Amounts for Certain Groupings of Similar 
Items With Different Features

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Under the DMEPOS Competitive Bidding Program
    C. Response to Comments on Submitting Bids and Determining 
Single Payment Amounts for Certain Groupings of Similar Items With 
Different Features Under the DMEPOS Competitive Bidding Program
VIII. Bid Limits for Individual Items Under the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive 
Bidding Program (CBP)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the Bid Limits for Individual Items Under 
the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)
    C. Response to Comments on Bid Limits for Individual Items Under 
the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)
IX. Access to Care Issues for DME
    A. Background
    B. Summary of Public Comments, and Responses to Comments on 
Access to Care Issues for DME
    C. Provisions of Request for Information
X. Comprehensive End-Stage Renal Disease Care Model and Future 
Payment Models
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the Comprehensive End-Stage Renal Disease 
Care Model and Future Payment Models
    C. Provisions of the Notice
XI. Technical Correction for 42 CFR 413.194 and 413.215
XII. Waiver of Proposed Rulemaking
XIII. Advancing Health Information Exchange
XV. 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 Reporting Requirements
    c. Data Validation Requirements for the PY 2019 ESRD QIP
    d. Ultrafiltration Rate Reporting Measure
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. Coverage and 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
    a. Effects on Competitive Bidding Program Suppliers
    b. Effects on the Medicare Program
    c. Effects on Medicare Beneficiaries
    d. Alternatives Considers
    5. Other DMEPOS Provisions
    a. Effects of the Method for Adjusting DMEPOS Fee Schedule 
Amounts for Similar Items With Different Features Using Information 
From the DMEPOS Competitive Bidding Programs
    b. Effects of the Final Rules Determining Single Payment Amounts 
for Similar Items With Different Features Under the DMEPOS 
Competitive Bidding Program
    c. Effects of the Revisions 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
Regulations Text

Acronyms

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

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
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
EOD Every Other Day
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
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
LCD Local Coverage Determination
LDO Large Dialysis Organization
MAC Medicare Administrative Contractor
MAP Medicare Allowable Payment
MCP Monthly Capitation Payment
MDO Medium Dialysis Organization
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
MLR Minimum Lifetime Requirement
MMA Medicare Prescription Drug, Improvement and Modernization Act of 
2003
MMEA Medicare and Medicaid Extenders Act of 2010 Public Law 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

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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
REMIS Renal Management Information System
RFA Regulatory Flexibility Act
RN Registered Nurse
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 (PPS) system for renal dialysis 
services furnished by ESRD facilities. This rule updates and makes 
revisions to the End-Stage Renal Disease (ESRD) (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 sets 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 
Action
    This rule implements statutory requirements for Bid Surety Bonds 
and State Licensure. We are revising the appeals regulation 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.
5. Durable Medical Equipment, Prosthetics, Orthotics and Supplies 
(DMEPOS) Competitive Bidding Program and Fee Schedule Adjustments
    This rule adjusts the method 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: For CY 2017, 
the ESRD PPS base rate is $231.55. This amount reflects a final market 
basket increase (0.55 percent), and application of the wage index 
budget-neutrality adjustment factor (0.999781) as well as the 
application of the training budget-neutrality adjustment factor 
(0.999737).
     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 2017, we did not propose any 
changes to the application of the wage index floor and we will 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 policy 
to annually update the outlier policy using the most current data, we 
are updating 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 will increase from $62.19 to $68.49 and the MAP amount 
will decrease from $39.20 to $38.29, as compared to CY 2016 values. For 
adult beneficiaries, the fixed-dollar loss amount will decrease from 
$86.97 to $82.92 and the MAP amount will decrease from $50.81 to 
$45.00. 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 not finalizing 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). In response to 
comments received from stakeholders, we have determined that the burden 
placed on providers would be substantial and we are exploring alternate 
avenues for collecting these data.
     The home and self-dialysis training add-on payment 
adjustment: We are finalizing an increase in the total number of hours 
of training by an RN (registered nurse) for PD and HD that is accounted 
for by the home and self-dialysis training add-on payment adjustment 
(hereinafter referred to as

[[Page 77838]]

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 calculated the increase based on 
the average treatment times and weights based on utilization for each 
modality. We used treatment times as proxies for the total time spent 
by nurses training beneficiaries for home or self-dialysis in 
calculating the increase to the home dialysis training add-on. Based on 
these proxies, for CY 2017, we have increased 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. We also updated the 
national hourly wage for a nurse providing dialysis training for 2017 
to $35.94, resulting in a home and self-dialysis training add-on 
payment adjustment amount of $95.60.
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 finalizing coverage of renal dialysis services 
furnished by renal dialysis facilities paid under section 1881(b)(14) 
of the Act to individuals with AKI. We will pay ESRD facilities for 
renal dialysis services furnished to individuals with AKI 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 and practitioners may continue to bill Medicare for services 
in the same manner as they did before the payment rate for renal 
dialysis services furnished by dialysis facilities to individuals with 
AKI was adopted.
3. ESRD QIP
    This rule sets forth requirements for the ESRD QIP for payment 
years (PYs) 2018, 2019 and 2020.
    Hypercalcemia Clinical Measure: We proposed to make two substantive 
updates to the technical specifications for the Hypercalcemia clinical 
measure beginning with PY 2018, as recommended during the measure 
maintenance process at the National Quality Forum (NQF). In response to 
comments received, we are finalizing these changes but are delaying 
their implementation until PY 2019. First, we are adding plasma as an 
acceptable substrate in addition to serum calcium. Second, we are 
amending the denominator definition to include patients regardless of 
whether any serum calcium values were reported at the facility during 
the 3-month study period. These changes will ensure that, beginning in 
PY 2019, the measure aligns with the NQF-endorsed measure and will 
continue to satisfy the requirements of the Protecting Access to 
Medicare Act of 2014 (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.
    New Requirements for PY 2019: Beginning with PY 2019, we are 
reintroducing the National Healthcare Safety Network (NHSN) Dialysis 
Event Reporting Measure back into the ESRD QIP measure set. 
Additionally, beginning with PY 2019, we are creating a new NHSN 
Bloodstream Infection (BSI) Measure Topic which will consist of the 
proposed NHSN Dialysis Event Reporting Measure and the existing NHSN 
BSI Clinical Measure. We are also establishing 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 Safety Measure Domain will initially 
consist of the proposed NHSN BSI Measure Topic.
    PY 2020 Measure Set: Beginning with PY 2020, we are replacing the 
Mineral Metabolism Reporting Measure with the newly finalized 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 adopting two new measures: (1) The Standardized Hospitalization 
Ratio (SHR) Clinical Measure and (2) the Ultrafiltration Rate Reporting 
Measure.
    Weighting for the Clinical Measure Domain, the Reporting Measure 
Domain and the Safety Measure Domain: With the addition of the Safety 
Measure Domain into the ESRD QIP, we are making changes to the 
weighting of the Clinical Measure Domain and the Reporting Measure 
Domain, and we are establishing weights for the Safety Measure Domain 
for PY 2019 and for PY 2020.
    Specifically, for PY 2019, we are assigning 15 percent of a 
facility's total performance score (TPS) to the 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 adjusting individual 
measure weights for the measures that remain in the Clinical Measure 
Domain. In response to comments received, for PY 2020, we are 
maintaining the weight of the Safety Measure Domain at 15 percent of a 
facility's TPS rather than at 10 percent as proposed.
    Data Validation: In section IV.C.9 of this final rule, we set forth 
the updates to the data validation program in the ESRD QIP. For PY 
2019, we are continuing the pilot validation study for validation of 
CROWNWeb data. Under this continued validation study, we are continuing 
to use 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 increasing the size of the NHSN BSI Data 
Validation study. Specifically, we will 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
    This final rule implements statutory requirements for the DMEPOS 
CBP for bid surety bonds and state licensure. In addition, we are 
finalizing a definition for the term ``bidding entity'' for purposes of 
the DMEPOS CBP. We also are finalizing revisions to the appeals 
regulations to expand suppliers' appeal

[[Page 77839]]

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. The final rule establishes the 
following:
     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 
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 are conforming 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 that 
requires suppliers to meet applicable State licensure requirements.
     We are finalizing changes to Sec.  414.423 to extend the 
appeals process to all breach of contract actions taken by CMS 
specified in Sec.  414.422(g)(2). We are finalizing revisions to Sec.  
414.422(g)(2) to eliminate certain breach of contract actions. We also 
are finalizing revisions to Sec.  414.423(l) to describe the effects of 
certain breach of contract actions that CMS takes.
5. DMEPOS Competitive Bidding Program and Fee Schedule Adjustments
    This final rule sets 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 
program vulnerability by shifting beneficiaries from products with 
features to less appropriate products without the features because the 
product without the features receives higher payment under competitive 
bidding. We are finalizing provisions of Sec.  414.210 to limit SPAs 
for certain 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 
to adjust the fee schedule amounts for certain groupings of similar 
items specified below. The item weights will 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 rule 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 finalizing provisions of Sec.  414.412 to add a lead item bidding 
method where all of the HCPCS codes for similar items with different 
features will be grouped together and will be priced relative to the 
bid for the lead item in order to prevent price inversions under the 
DMEPOS CBPs. We are applying this as an alternative to the current 
bidding method so that CMS will be able to apply this method to 
situations where groupings of similar items have resulted in price 
inversions based on past experience. This alternative method will 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, as required by section 1847(b)(2)A)(iii) 
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 finalizing revisions to the regulations to limit bids 
for future competitions to the fee schedule amounts that would 
otherwise apply if CBPs had not been implemented, prior to making 
adjustments to the fee schedule amounts using information from CBPs. 
This will 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 XV.A of this final rule, we set forth a detailed 
analysis of the impacts of the finalized changes for affected entities 
and beneficiaries. The impacts include the following:

[[Page 77840]]

1. Impacts of the Final ESRD PPS
    The impact chart in section XV.B.1 of this final 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 0.73 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 0.9 percent increase 
in payments compared with freestanding facilities with an estimated 0.7 
percent increase.
    We estimate that the aggregate ESRD PPS expenditures will increase 
by approximately $80 million from CY 2016 to CY 2017. This reflects a 
$60 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 0.73 percent overall payment increase, we 
estimate that there will be an increase in beneficiary co-insurance 
payments of 4.2 percent in CY 2017, which translates to approximately 
$10 million.
2. Impact of the Final Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals With AKI
    We anticipate an estimated $2 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 Final ESRD QIP
    The impact chart in section XVI.B.3.a of this final rule displays 
estimated QIP impacts for payment year (PY) 2020. The overall impact is 
an expected reduction in payment to all facilities of $31 million, with 
an estimated total facility burden for the collection of data of $91 
million.
4. Impacts of the Final DMEPOS Competitive Bidding Bid Surety Bonds, 
State Licensure and Appeals Process for a Breach of DMEPOS Competitive 
Bidding Program Contract Actions
    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 actions 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 final state licensure and 
appeals process for breach of DMEPOS CBP contract actions regulations 
will have minimal administrative costs.
    We do not anticipate that the final 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 Final DMEPOS Competitive Bidding Program and Fee 
Schedule Adjustments
    The overall economic impact for the final changes to the DMEPOS 
CBPs and Fee Schedule Adjustments would be about $20 million dollars in 
savings to the Part B Trust Fund over 5 years beginning January 1, 
2017. The savings are a result of avoiding price inversions. This final 
rule 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 final rule.

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 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.,

[[Page 77841]]

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 
to 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 comorbidity 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. For a summary of the 
provisions in that final rule, we refer readers to the CY 2017 ESRD PPS 
proposed rule (81 FR 42809 through 42810).

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the Calendar Year (CY) 2017 ESRD PPS

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), hereinafter referred to as the CY 2017 ESRD PPS proposed rule, 
was published in the Federal Register on June 30, 2016, with a comment 
period that ended on August 23, 2016. In that proposed rule, for the 
ESRD PPS, we proposed to (1) make a number of annual updates for CY 
2017, (2) increase the home and self-dialysis training add-on payment 
adjustment, (3) implement the statutory provisions set forth in the 
Trade Preferences Extension Act of 2015 (TPEA) amendments to the Act, 
and (4) utilize a payment equivalency for hemodialysis furnished more 
than 3 times per week. We received approximately 340 public comments on 
our proposals, including comments from ESRD facilities; national renal 
groups, nephrologists and patient organizations; patients and care 
partners; manufacturers; health care systems; and nurses.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the CY 2017 ESRD PPS. 
Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.
1. 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 (c) 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

[[Page 77842]]

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 Medicare Administrative 
Contractors (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 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 (LCDs) 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, in some cases, 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 3 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 (c) of this section). As a result, 
the additional payments for treatments beyond 3 per week are 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 proposed 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. While the policy would be effective January 1, 2017, we proposed 
not to implement the HD equivalency payments until July 1, 2017, to 
allow time to make operational changes to accommodate this new payment 
mechanism.
b. Payment Methodology for HD When More Than 3 Treatments Are Furnished 
per Week
    For CY 2017, for adult patients, we proposed 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). 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, 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 proposed 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:

[[Page 77843]]



------------------------------------------------------------------------
                                         Maximum number   Maximum number
                                           of monthly      of  monthly
     Prescribed weekly  treatments      treatments--30-  treatments--31-
                                           day month        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 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. The comments and our responses 
to the comments for these proposals are set forth in section II.B.1.d 
below.
c. 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.
    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 is to provide a payment mechanism for patients 
with more than 3 HD treatments per week that do not have medical 
justification. 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. The comments and our responses to the comments for these 
proposals are set forth in section II.B.1.d below.
d. 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 discussed in section II.B.2 of the 
proposed rule (81 FR 42812) and in section II.B.2 below, 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 total 
sessions, in accordance with our policy for training for conventional 
HD.
    Because the home dialysis training add-on under the ESRD PPS 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.
    In the CY 2017 ESRD PPS proposed rule (81 FR 42812), we explained 
that we believe this payment mechanism 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.
    The comments and our responses to the comments for the proposals 
related to payment for HD when more than 3 treatments are furnished per 
week are set forth below.
    Comment: The majority of comments were from individual patients and 
their care partners describing their dialysis

[[Page 77844]]

experience from onset, through PD, transplant, return to in-center 3 
times weekly and finally to more frequent home HD. The commenters 
describe significant improvement in their health status, including 
better blood pressure, cardiac status, and phosphorus levels, fewer 
dietary restrictions, less fatigue after dialysis, and the ability to 
schedule dialysis around work and family activities. Many commenters 
strongly encouraged CMS to review the clinical literature related to 
dialysis frequency because based on the literature and their own 
clinical experience, more frequent dialysis has many benefits. They 
believe CMS payment policy should be modified to more closely align 
with evidence-based research. They urged CMS to take steps to 
facilitate access to home HD, such as routinely paying for more than 3 
treatments per week for any patient who agrees to have more, so that 
more patients can receive the same benefits.
    Other commenters indicated that their more frequent home dialysis 
resulted in more hours of dialysis treatment than is typically 
furnished in-center. One commenter pointed out that typically patients 
on more frequent dialysis generally treat 30-40 percent longer than 
patients receiving 3 times per week therapy in-center. Commenters also 
described the health advantages of nocturnal dialysis and other 
dialysis schedules that provide a similar level of toxin and fluid 
removal to in-center dialysis, but spread out the treatments over 4 or 
more days. Another commenter pointed out that with the same weekly 
volume of fluid to be removed it is clearly demonstrable that removal 
in five treatments is safer, protects vital organs and is far more 
stable for patients. This does not mean that all patients must be 
treated 5 times per week or that all patients receiving that frequency 
are necessarily fully dialyzed. Therefore, some flexibility in approach 
is necessary. The commenter concluded that dialysis patients are in 
general intolerant of fluid removal. Elderly nursing home patients are 
at greater risk of problems that can be alleviated substantially by 
more frequent dialysis.
    Many other commenters urged CMS to provide payment for customizing 
the dialysis treatment to the patient. One commenter indicated that 
unlike in-center dialysis, which is one size fits all, they are able to 
tailor each treatment to their physical needs; for example, if the 
beneficiary has too much fluid after travelling, then a few extra, 
longer, slower treatments could be done to gently remove the fluid. The 
commenter stated that a diabetic controls their treatment by regulating 
their blood sugar, and a patient on dialysis should be allowed the same 
freedom to treat accordingly. More frequent treatments, as needed, are 
a must for maintaining maximum health. There must not be a one size 
fits all dialysis treatment mentality.
    Several commenters objected to the proposed update to home HD 
payment policies because they believed that it locks in the 3-times-
per-week schedule. The comments indicated that there is no research 
that supports capping the dialysis dose in such an unsafe way. A 3-day 
a week schedule requires a nearly 3-day ``dialysis weekend'' every 
week, which is a risky choice. Another commenter stated that 3-times-
per-week dialysis (Monday, Wednesday, Friday and Tuesday, Thursday, 
Saturday schedules) was not based on clinical research, but rather was 
a way to dialyze two groups of patients and allow the nurses to have 
Sunday off. Another commenter believes the 3-times-per-week scheduling 
reflects the shortage of dialysis machines and supplies in the 1960s 
when HD began. Other commenters pointed out that alternative schedules 
are unavailable in-center, other than in very narrow circumstance where 
there is medical justification, and thus are generally furnished at 
home.
    Response: We believe that the choice of modality and frequency of 
treatments for a patient are decisions that are made by the physician 
and the patient. We continue to believe that patients should have 
access to various treatment options and schedules and facilities should 
offer various treatment options to meet the needs of its patients. 
Comments recommending that we facilitate access to home HD by routinely 
paying for more than 3 treatments per week are beyond the scope of the 
proposed rule. However, we believe that routinely paying ESRD 
facilities the full ESRD PPS payment for up to 6 or even 7 treatments 
per week for home HD patients would overpay facilities relative to 
their resources and cost. Patients on more frequent schedules have 
indicated in public comments that they no longer need to take many of 
the medications routinely provided to in-center patients and have 
limited involvement with their ESRD facility, two significant 
components of the ESRD PPS base rate.
    We acknowledge that the proposed HD equivalency would have 
maintained the current policy which limits monthly payment to 13 or 14 
treatments, which reflects the number of treatments received by the 
vast majority of ESRD patients; but our intention was to provide more 
flexibility for patients, not to increase the overall amount of 
payment. Patients with certain medical conditions reportedly benefit 
from shorter and/or longer and more frequent HD and, as a result, MACs 
can approve additional treatments. While we have reviewed the studies 
regarding more frequent HD that have been conducted, many of the 
studies are too small in scope and do not provide a sufficient basis 
for a national payment policy change of this magnitude. In particular, 
in a literature review reported November 2015 in the American Journal 
of Kidney Diseases, titled ``Timing of Dialysis Initiation, Duration 
and Frequency of Hemodialysis Sessions, and Membrane Flux: A Systematic 
Review for a KDOQI Clinical Practice Guideline'', Slinin et al, 
reported that more than thrice-weekly hemodialysis and extended-length 
hemodialysis did not improve clinical outcomes compared to conventional 
hemodialysis and resulted in a greater number of vascular access 
procedures. The authors concluded that the limited data available 
indicate that more frequent and longer hemodialysis did not improve 
clinical outcomes compared to conventional hemodialysis. As a result, 
we believe that payment for additional treatments should remain 
individualized to the patient as medically necessary and that the 
determination continue to be made on a case-by-case basis by the MACs.
    Comment: While many commenters expressed support for CMS' efforts 
to obtain a reliable source of data for the number of HD treatments 
patients receive each week, most of the comments from individual 
facilities and dialysis organizations of all sizes, physicians, and 
patient advocacy organizations strongly objected to the HD equivalency 
proposal because they believe it is unnecessary, would increase 
providers' burden, would be administratively complex, and would 
discourage growth of home HD. Although we developed the proposal based 
on provider feedback about their inability to report all dialysis 
treatments on a monthly claim, many commenters indicated that this 
concern is unfounded because current claims processes allow providers 
to report all dialysis treatments delivered either in-center or at 
home. They suggested that modifiers could be used to distinguish 
medically justified additional treatments from those that do not meet 
their MAC's LCD for medically justified treatments.
    Dialysis organizations pointed out that use of the prescribed 
number of treatments as the basis of payment increases the burden. An 
LDO pointed

[[Page 77845]]

out that the number of prescribed treatments can change weekly based on 
a patient's condition. For other various reasons (for example, 
hospitalization), a patient may not receive a prescribed treatment, 
making the proposal administratively challenging for facilities and 
providers. In addition, the HD equivalency proposal only achieves CMS' 
goal of allocating the total amount of payment based on three HD 
sessions per week in accordance with the number of treatments actually 
furnished when the actual and prescribed treatments are equal.
    An MDO agreed and expressed serious reservations about substituting 
prescribed treatments for delivered treatments in the calculation of 
payments, as the proposal contemplates. The commenter indicated the 
proposed HD equivalency policy would increase the reporting burden in 
order to correct claims for patients who do not attend the prescribed 
number of treatments. The line item billing requirements would impose 
further burden in billing for patients treated on schedules, such as 
every other day treatments. Moreover, months ending in the middle of a 
week would pose additional complexity, since it would be necessary to 
use 2 monthly claims to determine whether there had been more than 
three treatments during the week.
    The commenters stated these additional burdens would represent 
additional administrative cost for every dialysis provider, for every 
vendor supplying dialysis billing software, for every MAC receiving 
these claims, and for CMS itself. They stated that this will be 
particularly burdensome for smaller organizations and independent 
providers which are not highly automated and tightly integrated with 
clinical systems. Another organization representing nonprofit 
facilities pointed out that with all the other requirements being 
placed on providers, particularly smaller providers, they do not see 
how CMS' need for better data outweighs the additional burden at this 
time and strongly opposed CMS finalizing the proposal.
    Many other commenters objected to the proposal to pay for shorter, 
more frequent HD in a similar manner as PD, pointing out that PD and 
home HD are vastly different therapies and should not be compared to 
one another clinically or paid as if they are equivalent therapies. The 
comments indicated that PD is currently paid as the equivalent to 3 
treatments per week HD because it requires multiple exchanges per day 
to achieve the same basic outcomes for patients.
    Many commenters recommended that CMS issue simple billing 
clarifications to ESRD facilities to encourage reporting of all 
treatments and remind the MACs that their LCD or similar policies 
should include criteria for additional, medically justified dialysis 
treatments. Otherwise, the commenters indicated that CMS' current 
policies are sufficient to meet the needs of beneficiaries, providers, 
and Medicare, and the HD equivalency is not necessary.
    Response: After careful consideration of the public comments, we 
agree with commenters and believe that implementing HD-equivalent 
payment for shorter, more frequent HD could be burdensome. Following 
publication of the proposed rule, we learned that ESRD facilities in 
certain MAC areas have the ability to report all treatments furnished, 
whether paid or not. We are exploring claim reporting mechanisms, such 
as modifiers, to meet our data needs and reflect patient treatments 
provided while minimizing burden on facilities. Once we decide on the 
mechanism for reporting treatments that are medically justified and 
those that do not meet the MAC's LCD for medically justified additional 
treatments, we will issue billing clarifications to MACs and ESRD 
facilities.
    Comment: Although many commenters requested that CMS withdraw the 
equivalency proposal, a few commenters believe that the status quo 
should not remain in place and that CMS is on the right track with the 
HD equivalency proposal. One commenter expressed concern that the 
proposal could produce a perverse unintended consequence of rewarding 
facilities that provide more frequent dialysis but less in the 
aggregate than is necessary to give patients high-quality care. We are 
unsure exactly what the commenter meant by this comment and the 
commenter did not elaborate on this point.
    Another commenter pointed out that current reimbursement for more 
frequent home HD creates for this one particular therapy a 
reimbursement level that can be double that of conventional 3-times-
per-week HD if all the HD treatments are paid as medically justified 
treatments. The commenter stated that the cost to the provider for 
additional treatments (beyond 3 per week) delivered at home with more 
frequent home HD should be a relatively small incremental cost as 
compared to the first 3 treatments per week. Within the reimbursement 
of the first 3 treatments (the conventional schedule) the cost of the 
machine, the patient training, the nursing support, etc., would already 
have been covered and the incremental cost for additional home HD 
treatments is strictly the treatment supplies.
    The commenter stated that reimbursing for the additional treatments 
beyond 3 treatments per week at the full bundled base rate does not 
seem appropriate and creates at least the appearance of a profit 
incentive for providers (and their physician partners) to utilize this 
therapy. Patients should have access to more frequent home HD as a 
therapy option, but the reimbursement for this therapy should be more 
straightforward and transparent, and on a level playing field with 
other dialysis therapy options, such as conventional 3 times weekly HD 
or PD. The commenter believes the CMS equivalency proposal would do 
that.
    The commenter suggested that CMS consider adding a new lower 
incremental treatment rate for home HD treatments beyond 3 treatments 
per week to cover the additional incremental supply cost beyond the 
first 3 treatments per week, if CMS feels that is appropriate and is 
interested in promoting more frequent home HD therapy. However, another 
commenter stated that dialysis centers not only incur the cost of 
supplies for the additional treatments, but also incur the cost for 
staff to manage the treatments. It makes sense they should be paid 
accordingly and therefore avoid costly emergency rooms visits for 
episodes of fluid overload or hyperkalemia.
    Response: We agree with the commenter that paying the full base 
rate amount for treatments over 3 per week without documented medical 
justification would have created risks for patients but we note that 
this is not the policy that we proposed. We also note that we 
aggressively monitor ESRD facility claims so that we are aware of 
changes in practice, and they may prompt us to engage in future 
rulemaking in this area. As we explained previously, we are not 
finalizing the HD equivalency proposal. As an alternative, we will be 
making changes in reporting treatments that will allow us to monitor 
changes in treatment patterns more effectively.
    Comment: Several commenters, while disagreeing with the equivalency 
payment proposal as discussed above, supported CMS in paying the full 
ESRD PPS base rate for each home HD training treatments, even when 
those treatments are furnished more than 3 times per week. The 
commenters agreed that this frequency of payment would assist CMS in 
the investigation for payments and costs related to training for future 
refinement. The commenters indicated that the proposal is appropriate 
because

[[Page 77846]]

training treatments are an essential process to transitioning patients 
home safely. In addition, they agreed it would permit facilities to 
bill for training treatments that are furnished to beneficiaries 
receiving more than 3 HD treatments per week and allow these facilities 
to receive payment for training more consistently with how they are 
furnishing these treatments.
    Response: We appreciate the commenters' support for the proposal 
regarding allowing the payment of the full base rate for all home 
dialysis training treatments, even when they are furnished more than 3 
times per week, subject to our payment limit of 25 HD training 
sessions. While we are not finalizing the equivalency payment for 
maintenance HD (discussed above) when it is furnished more than 3 times 
per week, we continue to believe that it is important for our payment 
for home HD training to be consistent with how we pay for home PD 
training. In addition, we do not believe that this will change the 
amount of total dollars paid out for home HD training because 
facilities will receive the training add-on for only 25 treatments, 
which has been a longstanding policy. The difference is that facilities 
can receive the full base rate for more than 3 HD training treatments 
in a single week. Therefore, for this rule we are finalizing our 
proposal to pay the full ESRD PPS base rate for all training treatments 
even when they exceed 3 times per week with a limit of 25 sessions as 
proposed.
    Comment: A commenter suggested what they believe is a much simpler 
solution under which CMS would instruct the MACs to 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, the commenter believes payment should be limited to 13 
treatments and for a 31-day month the commenter believes payment should 
be limited to 14 treatments. The commenter indicates this approach 
enforces the 3 times a week rule effectively. In addition, it permits 
flexibility, allowing payment for a 4 treatment week followed by a 2 
treatment week for those few cases having logistical but no medical 
justification, such as Christmas and New Year's, weather or water 
system failures causing unexpected facility closure, as well as major 
events in patients' lives such as out of town family weddings and 
funerals.
    Several commenters stated that Medicare reimbursement should signal 
its willingness to support safe schedules, especially every other day 
(EOD) HD schedules. The commenter recommended that the PPS should base 
home HD reimbursement on 7 treatments every 2 weeks, that is, reimburse 
home HD fully, equivalent to EOD schedules, and to reimburse a partial 
bundle amount for treatments in excess of EOD.
    Other commenters implored CMS to explore paying for HD by the hour 
rather than by the treatment, or, minimally, to pay for up to 15 
standard in-center HD treatments per month without medical 
justification to allow dialysis every other day and eliminate the 3-day 
dialysis weekend.
    Response: Since ESRD facilities submit bills on a monthly basis, we 
currently enforce the 3-treatments-per-week payment policy through 
established treatment limits by month, that is, 13 treatments for 30-
day months and 14 treatments for 31-day months and we will continue to 
do so. We appreciate the suggestions to increase the monthly limits, 
however, these suggestions are beyond the scope of the proposed rule. 
As we mentioned above, payment for additional treatments should remain 
individualized to the patient as medically necessary and that the 
determination will continue to be made on a case-by-case basis by the 
MACs.
    Comment: We received many comments objecting to the notion 
expressed in the proposed rule that extra sessions would be prescribed 
based on patient preference or convenience. One commenter stated that 
the idea that they took on the responsibility for their treatments, 
coordinating and storage of medical supplies, cannulating themselves, 
drawing blood, completing and filing flow sheets, troubleshooting 
medical and mechanical emergencies, and then having to clean up and 
sanitize the equipment as a matter of convenience is ludicrous. Another 
commenter pointed out that patients receiving additional treatments 
only consent to them because they experience a real and sustained 
clinical benefit.
    Another commenter objected to statements in the proposed rule 
stating that more frequent HD is the result of evolving or new 
technology. The commenter believes it is more accurate to say that the 
option to furnish more than 3 HD treatments per week is an existing 
option that is increasingly utilized because of evolving technology 
that facilitates treatment in the home setting, where more frequent HD 
is more feasible, as well as increasing awareness of the unsolved 
clinical problems that more frequent HD can positively address. The 
commenter also pointed out evidence that more frequent HD is not new 
and referred to a systematic review of clinical outcomes in patients on 
more frequent HD that studied patients who initiated more frequent 
hemodialysis in Asia, Europe, North America, and South America as early 
as 1972. In other words, more frequent hemodialysis was an 
internationally-recognized prescription long before the advent of the 
currently dominant home HD technology in the US.
    One commenter expressed concern about the implication that a 
significant number of prescribed extra HD sessions are not predicated 
upon medical necessity. The commenter pointed out that more frequent HD 
requires a greater investment of time on therapy than thrice-weekly 
therapy, no matter how it is prescribed. This therapy is not prescribed 
for convenience. The commenter pointed out that CMS has noted that no 
HD session is without risks, and more frequent therapy would not be 
prescribed unless it is clinically necessary to address a particular 
patient's needs. The commenter believed suggesting otherwise is 
inconsistent with the responsible practice of medicine. Another 
commenter explained that the hemodynamic benefits are a major reason 
why doctors prescribe, and patients embrace, this form of therapy. As 
such, the hemodynamic benefits are at the very core of the basis for 
the medical necessity for more frequent HD therapy.
    Response: We appreciate these clarifications. Our intent was merely 
to pay appropriately for shorter, more frequent dialysis prescriptions 
that are equivalent to in-center treatments. We did not mean to imply 
that physicians order treatments that are not medically necessary, or 
that patients receive shorter, but more frequent dialysis solely for 
their convenience. However, when a home dialysis machine supplier met 
with us and was asked if their machine could perform in the same way as 
an in-center machine performs, that is, whether patients could dialyze 
3 times per week, we were told the patients could do so, but that it 
would take longer. Consequently, the patients using this home modality 
choose shorter, more frequent dialysis treatments at home 5 times per 
week. We agree with the commenter that it is more accurate to say that 
the option to furnish more than 3 HD treatments per week has been 
increasingly chosen as a treatment option. This may be due to the 
evolving technology facilitating more frequent HD treatment in the home 
setting.

[[Page 77847]]

    Comment: An LDO, a national dialysis industry organization, a 
patient advocacy organization and many patients, caregivers, 
physicians, and nurses supported the proposal to continue current 
payment policy for treatments determined medically justified based on 
MAC consideration of medical evidence as required under a LCD. The 
commenters stated this is an important existing policy that allows 
patients who have a medical need to be able to obtain extra treatments 
and for the facilities to be reimbursed for them. They also noted that 
this policy preserves the physician's medical decision-making to meet 
the individual needs of patients.
    A dialysis nursing association expressed concern that despite the 
promulgation of LCDs for additional dialysis treatments, there are 
substantial differences in the MAC's assessment of medical 
justification for these treatments. They urged CMS to continue to 
educate the MACs on what constitutes medical justification and ensure 
the MACs are thoroughly examining each medical record in its entirety 
when assessing whether there is medical justification for additional 
treatments. They pointed out that differences in documentation 
requirements necessitate additional work for their members, and it is 
imperative that the MACs exhibit greater consistency when determining 
the appropriateness of payment based upon the medical documentation.
    However, many other commenters, primarily physicians, implored 
Medicare not to interfere with the physician's clinical judgment in 
determining the best treatment regimen that meets the needs of their 
patients. Physicians indicated that all the treatments they prescribe 
are medically necessary. Several commenters expressed concern the 
proposal may limit the physician's freedom to prescribe additional HD 
sessions for patients who could benefit. Commenters pointed out that 
currently there is no national policy that restricts a physician's 
ability to prescribe medically appropriate extra HD sessions for their 
patients and that the decision about whether the therapy prescribed is 
medically appropriate is made locally, between the physician and the 
local MAC. The commenter expressed concern that the HD equivalency 
proposal may take away some of that freedom if certain language in the 
rule is not changed. One commenter stated they are not asking CMS to 
specify what the MACs should or should not pay for, but rather that CMS 
should leave that decision to physicians.
    A clinical association stated that while they are generally 
supportive of the current medical justification approach, they noted 
that it can create administrative burdens and, in some cases, interfere 
with the patient-physician relationship. Due to the heterogeneity with 
which various MACs interpret what is medically justified, clinicians in 
some areas have less latitude to provide what they believe is medically 
justified care. For example, it may be appropriate for certain patients 
who have benefitted from a fourth dialysis session in 1 week to receive 
a fourth dialysis session in the following week as a prophylactic 
measure to prevent an adverse outcome from occurring again. The 
commenter believes CMS should urge all MACs to approach medical 
justification with a consistent, broad view and a respect for 
physicians' responsibility in determining, in consultation with their 
patients, what constitutes medically necessary additional dialysis 
sessions.
    Another commenter agreed, stating that absence of documentation on 
some claims forms requesting payment for extra prescribed sessions does 
not indicate absence of medical necessity. Instead, it may be due to 
variations in the documentation particular MACs are seeking, or a 
misunderstanding of how to properly submit a claim for a type of 
therapy that is rarely prescribed. In these instances, documentation of 
medical necessity likely is to be found in the prescribing physician's 
patient records. The commenter stated that it is rational to assume 
that a reiteration of clear instructions on this point, from CMS and 
the MACs, would address the discrepancies in claims submissions that 
CMS has noted.
    An advocacy organization asked that CMS reiterate again in final 
rulemaking that there is no national coverage decision for additional 
hemodialysis sessions, that the determination of medical justification 
for both acute and chronic prescriptions involving more than three 
sessions per week is left entirely to the discretion of the MACs and 
that if a MAC wishes to restrict coverage to any certain conditions or 
require any unique documentation, it must execute a formal LCD process 
with public comment.
    Other commenters stated that the overwhelming clinical evidence 
shows that the closer HD treatment approximates the functioning of the 
healthy human kidney (24 hours/per day, 7 days/per week), the better 
the patient outcomes. Therefore, they believe Medicare should presume 
that longer, more frequent dialysis is medically justifiable in all 
cases, and that the actual treatment regimen should be determined by 
the patient, in consultation with their physician, taking into account 
both anticipated clinical outcomes and the patient's overall life 
goals.
    Another commenter suggested that a conversation should be opened 
with Medicare contractors to permit a full understanding for the 
reasons for more frequent HD therapy. Justifications for on-going more 
frequent HD therapy are not necessarily the same as that for a one-time 
only justification for an extra treatment for a conventionally treated 
patient. The justifications for the two groups should be separated. The 
commenter stated that Medicare should unequivocally signal support for 
the concept of more frequent HD and should also clearly signal that 
more frequent HD treatments, when justified, will be funded. Lastly, 
the commenter stated that should more frequent HD be prescribed without 
justification, then treatments in excess of 3-per-week should not be 
reimbursed. Another commenter agreed, stating that all home HD 
treatments provided should be reported and, through use of a modifier, 
be indicated as medically supported or not medically supported with all 
supported treatments being paid at the designated HD facility rate.
    Response: We thank the commenters for their comments. However, we 
did not propose to change the process for MAC approval of additional 
dialysis treatments. We believe the current process has been effective 
in approving additional treatments based on the medical evidence for 
individual patients. We agree with the commenter who stated that there 
is no national coverage decision for additional HD sessions and that 
the determination of medical justification for prescriptions involving 
more than three sessions per week is left entirely to the discretion of 
the MACs and related administrative processes. We support more frequent 
HD for those patients who can benefit from it and agree that if more 
frequent HD is prescribed without medical justification, the treatments 
in excess of 3-per-week should not be paid. We thank the commenters for 
their suggestions and will consider them if we make changes to this 
policy.
    Comment: Several commenters stated they appreciate that CMS listed 
heart failure, a chronic disease, as a potential medical justification 
for the delivery of more than 3 HD treatments per week. They noted that 
the medical directors of at least one MAC have asserted that CMS has 
guided that only acute diseases can constitute medical justification 
for additional treatments. They encouraged

[[Page 77848]]

CMS to reiterate in the final rule that both acute and chronic diseases 
can constitute medical justification. The commenter indicated that 
heart failure is a good example of a chronic disease that may 
constitute medical justification for more frequent HD because of its 
leading role in morbidity, mortality, and medical spending among 
dialysis patients, but it is certainly not the only example of a 
chronic disease. Persistent hypertension, persistent hyperphosphatemia, 
sleep disturbances, pain attributable to dialysis-related amyloidosis, 
and symptomatic intradialytic hypotension are all examples of chronic 
comorbid conditions that may be positively addressed by ongoing 
treatment with more frequent HD.
    However, another commenter pointed out that the need for more than 
3 HD treatments per week occurs in less than 1 percent of the ESRD 
population and the need for additional treatments is very brief in 
duration. This commenter indicated that after receiving perhaps a few 
extra treatments, the patient should be able to be managed with 3 
treatments a week. The commenter indicated that if facilities report a 
diagnostic code such as congestive heart failure (CHF), the extra 
treatments are automatically paid by the MAC without pre-payment review 
and, moreover, the MAC will continue to pay for these treatments as 
long as the diagnosis is included on the claim. The commenter believes 
that this payment procedure is an invitation to serious Medicare abuse 
and recommended that CMS demand pre-payment review of every patient 
requiring more than 3 treatments a week for a period of more than 1 
week. Specifically, the facility should be required to provide monthly 
physician progress notes, chest x-ray reports, and other confirmatory 
testing and medical justification for the ongoing need for extra 
treatments and the patient's inability to return to 3 times a week 
treatments.
    Response: In the proposed rule (81 FR 42810), we mentioned that 
additional conventional HD treatments are reimbursed at the full ESRD 
PPS payment if the facility's MAC determines the treatments are 
medically justified based on a patient condition, such as CHF or 
pregnancy. We did not mean to imply that the MACs should view the 
presence of a CHF diagnosis on a claim as medical justification for 
additional treatments, nor did we mean to imply that chronic disease 
diagnoses should confer medical justification. We agree with the 
commenter that automatically paying for additional treatments for 
patients with chronic medical conditions every month for as long as 
bills with the diagnosis code for CHF appear does not seem appropriate. 
However, all decisions regarding medical justification for additional 
dialysis treatments are paid at the discretion of the MAC. We will 
continue to monitor claims that include additional treatments and will 
consider whether additional guidance or other prepayment review as 
suggested by the commenter is needed.
    Final Rule Action: After considering the comments we received, we 
are not finalizing our proposal for payment for HD when more than 3 
treatments are furnished per week. Based on the feedback from 
commenters regarding the administrative burden associated with this 
policy, we have determined that the best course is not to finalize this 
policy and, instead, to evaluate other billing mechanisms to collect 
data on the treatments provided to beneficiaries. We are reiterating 
that facilities are expected to report all dialysis treatments 
provided, whether they are separately paid or not paid.
    However, we reiterate that we are finalizing our proposal to pay 
the full ESRD PPS base rate for all training treatments even when they 
exceed 3 times per week with a limit of 25 sessions as proposed.
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-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 (75 FR 49062), 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 Registered Nurses (RN), from the Bureau of 
Labor Statistics (BLS) data updated to 2011 (75 FR 49063), and reflects 
1 hour of training time by a 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 RNs as published in the Occupational 
Employment Statistics (OES) data compiled by 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.
    In response to the CY 2016 ESRD PPS proposed rule, we received a 
significant number of stakeholder comments

[[Page 77849]]

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 care partners have stated 
that the RN training time per session spanned from 2 to 6 hours per 
training treatment, that the number of training sessions ranged from 6 
to 25 sessions, and that the training they received took place in a 
group setting. The range of hours per training treatment may indicate 
that the amount of 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.
    We are 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. We indicated in the proposed rule that 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) (81 FR 42813). We also noted that 
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, we 
are unable to identify in the data when the maximum number of training 
treatments have been completed, 25 for HD and 15 for PD, however, 
administrative guidance will be forthcoming on this issue. 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 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. 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 stated our 
intention to issue sub-regulatory guidance to provide a method for 
facilities to report retraining treatments. We solicited input from 
stakeholders on retraining, how often retraining occurs, how much RN 
time is involved, and the most common reason for retraining.
    A summary of these comments and our responses are provided below. 
In addition, historically 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 the proposed rule (81 FR 42813), there are claims 
processing edits in place that may 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. 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 proposed 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.
    As we explain in section II.B.1 of this final rule, we are not 
finalizing the HD payment equivalency proposal due to the burden it 
would have on facilities, however, we are pursuing other methods for 
identifying medically justified treatments and treatments that do not 
meet the MAC's LCD for additional dialysis treatments, such as through 
the use of modifiers. We are also finalizing that we would not limit 
the number of home HD training treatments per week for which we would 
pay the full ESRD PPS base rate to be consistent with how we pay for PD 
training and to better align Medicare payments for training to when 
facilities are incurring the cost for training. We believe these 
changes will greatly improve the accuracy of the reporting of training 
treatments.
    We solicited comments on implementing the HD payment equivalency 
and sought information on the use of retraining and the establishment 
of coding on the ESRD

[[Page 77850]]

facility claim for retraining. The comments and our responses to the 
comments regarding retraining are set forth below. The comments and our 
responses regarding the HD payment equivalency proposal are located in 
section II.B.1.d of this final rule.
    Comment: A dialysis industry organization appreciates that CMS will 
begin working with the kidney care community as it seeks to better 
understand retraining, how often it occurs, the amount of nursing time 
involved, and the most common reasons for it. They and many other 
commenters stated their support for the definition of retraining found 
in the Medicare Claims Processing Manual, described above. They believe 
that retraining does not occur often, but when it does, each retraining 
can vary depending on the specific circumstances. In some instances, it 
would be the same as training, but designated as retraining only 
because the patient had received home dialysis training previously. For 
example, when a patient changes modality, there may be consistency in 
partner support, but the same amount of RN training time and number of 
training sessions may be required to ensure that the patient 
understands how to operate the new device safely. The same could be 
true if a patient experienced a temporary memory loss. In some 
instances, it might be possible to reduce the number of training 
sessions, such as when there is a minor modification to the device, 
something changes in the patient's home, or the patient's dialysis 
partner changes. As discussed in the Medicare Claims Processing Manual, 
Chapter 8, Section 50.8, retraining may also be necessary when there is 
evidence that a patient needs a refresher in how to properly use the 
device because they have developed an infection or other problems. They 
and other organizations expressed support for CMS' efforts to improve 
data collection that would give CMS and providers a clearer sense of 
the incidence of training and retraining in the aggregate to inform 
policy decisions.
    A physician organization agreed, stating that some research has 
shown that individuals starting PD commonly develop complications like 
peritonitis, need hospitalization, and are transferred to catheter-
based HD within the first 90 days of dialysis initiation. The 
organization noted that adapting to home dialysis is challenging and 
may indicate a need for improved initial training and a targeted 
increase in early retraining interventions.
    Based on an informal survey of their members, the organization 
suggests that retraining is warranted in the following circumstances: 
After any episode of peritonitis, bacteremia, or infection in which 
root-cause analyses suggests that the condition resulted from a break 
in sterility of technique; after prolonged period of hospitalization or 
skilled nursing facility care, when the patient or caregiver may be out 
of practice; after changes in HD access (catheter to fistula or graft, 
new fistula or graft, especially if on the opposite side, or difficulty 
with cannulation at a particular part of a fistula or graft); training 
for use of a heparin pump; change in dialysis machine or equipment; 
when there is a change in who is going to perform or assist with home 
PD or HD (for example, if a patient has had a stroke and now their 
spouse will do PD or if one caregiver is replaced by another); when 
home dialysis patients move or transfer to another program (whether 
permanently or temporarily), reflecting that protocols, equipment and 
care practices may differ among programs.
    An LDO indicated that in its experience retraining typically occurs 
at six-month intervals and following a hospitalization, infection, or 
return to therapy. The commenter agreed that in some circumstances, it 
can be difficult to differentiate training from retraining treatments. 
A patient advocacy organization urged CMS to allow flexibility for 
facilities to deliver retraining, when it is necessary, to ensure 
patients continue to dialyze safely at home. They also noted that 
training currently is and should continue to be individualized and 
tailored to the patients' needs and learning aptitude, and policies 
should remain flexible to ensure a patient-centered approach is 
attainable. A manufacturer stated that the first step will be to 
establish nomenclature and definitions. The commenter indicated that 
they plan to send a communication on this point separately, not as part 
of this comment process.
    Response: We appreciate the valuable information submitted and will 
address retraining once we are able to analyze claims data that 
identifies retraining treatments. We are pleased to announce that we 
have been approved to establish a condition code to identify retraining 
treatments. Change Request 9609 (https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9609.pdf), titled ``Updates to the 72X Type of Bill for Home and 
Self-Dialysis Training, Retraining, and Nocturnal Hemodialysis'' and 
issued on September 16, , which establishes a condition code for 
retraining treatments effective July 1, 2017.
c. Technical Correction of the Total Training Payment in the CY 2016 
ESRD PPS Final Rule
    In the CY 2016 ESRD PPS 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.
    We did not receive any comments on this technical correction.
d. Analysis of ESRD Cost Report Data
    CMS 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, and as we discussed in 
the CY 2017 ESRD PPS proposed rule (81 FR 42814), we are 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

[[Page 77851]]

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 also 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.
    The comments and our responses to the comments for this 3-pronged 
strategy to improve the ESRD cost report data are set forth below.
    Comment: Several industry organizations and clinical associations 
agreed that the current cost report data do not provide an accurate 
view of home dialysis training costs. They noted that there is 
significant variation between ESRD facilities' cost report data, and it 
is likely that CMS is collecting data that inaccurately assesses the 
adequacy of the home and self-dialysis training add-on. They believe 
CMS should update the cost reports and insert new fields with clear 
instructions on how to report training costs and labor. They and many 
other commenters strongly encouraged CMS to work with dialysis 
facilities to provide clear and accurate instructions as to how to 
report training costs and labor to address this problem. One 
organization emphasized the importance of CMS working with the provider 
community to identify possible changes to cost reports and other data 
collection mechanisms and expressed their interest in working with CMS 
on any proposals while in development and under consideration.
    One commenter indicated that new fields on the cost report can 
provide additional information on patient training resource allocation 
(among other issues), however, they strongly recommended that the new 
fields be designed to have clear and concise micro specifications (that 
is, specific description of definitions, criteria, and contents) to 
avoid ambiguity and multiple interpretations among dialysis facility 
personnel and vendors. They further recommended that these micro 
specifications be released for public comment in order for CMS to 
appreciate how the different stakeholders interpret them and to allow 
for feedback and questions, thereby allowing for clarification and 
modifications prior to implementation. They also urged CMS to implement 
changes in a manner that recognizes that providers have different cost 
reporting periods, requiring longer--at least 6 months--lead time to 
implement. As CMS begins this data collection and analysis initiative, 
they recommended inclusion of industry stakeholders to provide input on 
appropriate changes.
    Another commenter indicated that the proposed approach to improving 
the quality of cost report data, and to improve the estimate of the 
cost of home training, is very reasonable, as long as the locking 
mechanism is implemented cautiously. New fields on cost reports will 
probably require new fields in electronic health records and 
bookkeeping systems. Users should receive warnings and notifications 
when they skip mandatory fields, to avoid last-minute crises when they 
discover that they have omitted required data. If not prepared by such 
warnings, commenters fear that the requirement to meet a filing 
deadline might lead some users to submit less precise data.
    Another commenter strongly supports CMS' multi-pronged effort to 
improve the data associated with the cost of home dialysis training 
treatments. In their analysis of resources necessary to deliver home 
training, they found similar data variances, especially between those 
programs with a higher volume of home patients and those who were 
training only a few individuals. The commenters believe that the 
analysis and audits proposed will result in a greater understanding of 
common errors, and lead to agency clarification and guidance around the 
reporting elements that will greatly improve data quality.
    MedPAC supports CMS' effort to collect more reliable data on the 
cost of providing home dialysis training. Once CMS collects 
sufficiently reliable data about the duration and composition of 
training treatments, MedPAC believes the agency should assess the need 
to adjust the training add-on payment amount from the current rate.
    A dialysis industry organization had thoughtful suggestions on how 
the current cost report might be used in a way that avoids issues with 
data variability. They proposed using an alternative weighting scheme 
based on an analysis of total HD treatments versus PD treatments that 
yielded a training add-on payment of $229.83 for 2017. Using cost 
report data, the analysis established 4.65 hours of additional staff 
time per training treatment and RN hourly compensation of $49.43. As a 
result, the organization urged CMS to increase the proposed training 
add-on adjustment to $229.83 per treatment for 2017.
    Response and Final Rule Action: While we appreciate the efforts 
made by an organization to establish a training add-on amount using the 
current cost report, we note that the organization's analysis addressed 
the variability in costs by removing facilities with extreme values and 
estimated the add-on based on 70 percent of facility cost reports. 
Although we usually apply edits to remove outlier costs from our 
analyses to ensure that our results are not skewed by extreme values, 
we did not feel comfortable removing 30 percent of the data in order to 
set the training add-on payment amount. Rather, we believe our proposed 
approach to revise the cost report will allow us to use more facility 
cost report data to set the training add-on payment amount.
    We appreciate the views expressed by commenters and are proceeding 
with changes to the ESRD facility cost report as proposed. As we work 
to improve the data reporting ability on claims and cost reports, we 
will keep in mind the various helpful suggestions made by commenters on 
this topic. We are considering various options for obtaining assistance 
from stakeholders, such as obtaining feedback via the ESRD Payment 
mailbox at [email protected].
e. Final 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

[[Page 77852]]

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 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 dialysis 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 proposed 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 as described below, until such time as we have 
data that concretely indicates what an adequate payment should be.
    For wages, we proposed to 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 proposed 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 used the average 
treatment times for PD and HD as 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. We noted that 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 proposed 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.
    As we did in CY 2014 when we last increased the training add-on 
payment, we proposed that the 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 
resulted in a budget neutrality adjustment of 0.999729.
    The comments and our responses to the comments for the proposed 
increase to the home dialysis training add-on are set forth below.
    Comment: Many commenters, including patients and their care 
partners, nurses, and physicians described the benefits of home 
dialysis overall and the importance of training, and requested CMS' 
continued support of the modality. Commenters indicated that home 
dialysis is more convenient, particularly in rural settings, and 
stressed that training makes dialyzing at home feel safer.
    One LDO noted that dialysis modality selection is a complex 
decision for any individual and believes that too much attention has 
been paid to the training an individual receives (and the cost of such 
training) and too little has been paid to the myriad other factors that 
influence this decision. The commenter pointed out that numerous 
comment letters from the community and a recent report from the General 
Accounting Office (GAO) have identified factors that influence 
decisions regarding home dialysis, including everything from an 
individual's home life to their familial support structure to their 
clinical status, as well as their physician's familiarity with home 
therapies.
    One commenter urged CMS to set separate payment rates for home HD 
and for PD training to eliminate any payment incentive for a center to 
favor PD training over the more-costly home HD training. The commenter 
indicated that the only incentive for choosing one mode of home 
dialysis over the other should be how closely each modality comes to 
making it possible for patient to meet his or her treatment and 
lifestyle goals, after being fully informed about the clinical and 
lifestyle implications of each type of dialysis modality. Another 
commenter expressed support for CMS' proposals to obtain better data, 
and noted that separately evaluating the adequacy of the payment for 
each unique modality may be warranted.
    A physician stated that home HD is ultimately a better treatment 
option medically for many patients and would like to see improved 
access to home training. This commenter went on to explain that in 
order to accomplish this dialysis centers would need to invest 
additional resources into home training, and the physician is hopeful 
that the proposed increased training payment would allow for this. The 
commenter noted that in their experience most dialysis centers do not 
offer home HD training and those that do offer training usually have a 
long waitlist for patients to receive the training, resulting in delays 
in training for patients. The commenter indicated that applying the 
same training payment for PD and home HD seems to benefit PD because 
they have not experienced delays in training PD patients due to lack of 
staff resources. Finally, the commenter indicated that training 
treatments are an essential process to transitioning patients home 
safely and agrees that these treatments should all be paid.
    Response: We appreciate the comments emphasizing the importance of 
home dialysis training and we share the commenter's hope that the 
increased home dialysis training add-on will lead to greater investment 
by ESRD facilities into home modalities and home dialysis training. We 
believe that dialysis modality selection and whether dialysis will 
occur in-center or at home is a decision made by the patient and their 
physician. We continue to make an effort to provide proper payment for 
home dialysis training because that is something we can do through the 
ESRD PPS to encourage more ESRD facilities to offer home modalities and 
home dialysis training.

[[Page 77853]]

    With respect to the comments requesting that we establish separate 
training rates for PD and HD, we will take these views into account as 
we contemplate revisions to the cost report to better capture training 
costs. However, we note that historically, we have paid the same base 
rate and per treatment training add-on to both PD and HD to encourage 
use of PD for those patients who can benefit from that modality. As we 
explained in the CY 2011 ESRD PPS proposed rule (74 FR 49115), 
composite rate costs and separately billable payments are lower for PD, 
and as a result, the use of a modality payment variable would result in 
substantially lower payments for PD patients. We stated that we 
believed the substantially lower payments for PD patients that would 
result if modality were used as a payment adjuster in the ESRD PPS 
would discourage the increased use of PD for patients able to use that 
modality (74 FR 49967). Because we want to encourage home dialysis, in 
which PD is currently the prevailing mode of treatment, we adopted an 
ESRD PPS base rate that did not rely on separate payment rates based on 
modality.
    With regard to the comment about the proposal to pay for all 
treatments during training, we will no longer apply weekly training 
limits during HD training. However, we continue to believe that the 
limit of 25 home HD training treatments is appropriate. In response to 
the CY 2011 ESRD PPS proposed rule, we received numerous comments 
requesting that CMS retain the existing policy that limits coverage of 
the total number of training treatments at the current levels of 15 for 
PD (CAPD and CCPD) and 25 for HD. In the CY 2011 ESRD PPS final rule 
(75 FR 49063, we agreed with the commenters and stated that under the 
ESRD PPS, we will continue the current cap on training treatments at 15 
for PD (CAPD and CCPD) and 25 for HD training because most commenters 
indicated that they can complete training within these training 
treatment parameters. Based on an analysis of claims data, it appears 
that patients are still able to be trained for home dialysis within the 
existing limits and we are finalizing the proposal to pay the full base 
rate for all treatments furnished during home dialysis training, up to 
the current limits of 15 for PD and 25 for HD.
    Comment: Several industry organizations, a manufacturer and a 
clinical association supported the training add-on increase but only if 
CMS implements the increase without applying the budget neutrality 
reduction to the base rate. Commenters stated that there is no 
requirement for CMS to make such a change in a budget neutral manner. 
The commenter noted that the budget neutrality requirements associated 
with the ESRD PPS, as set forth in section 1881(b)(14)(A) of the Act, 
are plainly limited to the first year of the ESRD PPS. As we are many 
years into the functioning of the ESRD PPS, the commenters believe that 
CMS has no statutory obligation to continue to apply a budget 
neutrality adjustment. Another commenter indicated that the budget-
neutral approach is inappropriate because the increased training add-on 
payments represent new costs outside of the ESRD PPS that facilities 
incur for a specific group of patients.
    Many commenters argued that the training add-on is different than 
other adjusters. For example, case-mix adjusters seek to tailor the 
more general base rate to ensure that facilities are not penalized for 
caring for patients who require more resources than those who do not. 
So, while the rate goes up slightly for the more expensive patients, it 
is reduced for the less expensive patients. This approach seeks to even 
out the resources being provided.
    However, due to the fact that the training rate is an add-on and 
not an adjuster, the commenter contends that the training add-on is not 
redistributing existing resources according to patient need. Rather, it 
is meant to reimburse facilities for additional costs that otherwise 
would not be necessary for the typical in-center patient. These costs 
are outside of the base rate and, as such, the commenter believes there 
is no rationale for making the adjustment budget-neutral.
    The commenter acknowledged that CMS has historically made 
modifications to the home dialysis training add-on in a budget-neutral 
manner. However, given the ongoing concerns related to the integrity of 
the ESRD PPS bundle, underpayments, and the growing instability of the 
economics of the ESRD system overall, the commenter believes there is a 
solid rationale for changing this policy. The commenter indicated that 
the ESRD PPS bundle continues to erode each year and creating further 
erosion by imposing budget neutrality in the context of the training 
add-on is inappropriate. While it may be true that a 6-cents-per-
treatment reduction is small, the problem is that the ongoing systemic 
reduction of the base rate places in-center patients, as well as those 
receiving home dialysis, at risk.
    MedPAC, however, believes that CMS should make a change to the 
training add-on payment in a budget-neutral manner. They stated that it 
is unclear whether the proposed budget-neutrality adjustment factor 
accounts for any increase in the number of home HD training treatments 
eligible for Medicare payment that may result from the proposed claims 
adjudication process change and recommended that CMS clearly explain 
the methods used to calculate the budget-neutrality adjustment factor 
and identify the total number of training treatments accounted for by 
the factor.
    Response: In responding to these comments, we believe it may be 
helpful to first recount the significant history of the home dialysis 
training add-on adjustment. In the CY 2011 ESRD PPS proposed rule, we 
proposed that the cost for all home dialysis services would be included 
in the bundled payment (74 FR 49930). We noted that because we were 
proposing that training costs under the ESRD PPS would be treated no 
differently than any other overhead expense, an explicit adjustment to 
the bundled payment amount for HD and PD training expenditures would 
not be necessary (74 FR 49931). We also explained in the proposed rule 
that we were proposing modality-neutral payments, because PD, the 
predominant modality for home dialysis at that time, is less costly 
than HD, and we believed that estimating a prospective rate that is 
higher for PD than it would otherwise be would encourage home dialysis 
for PD patients (74 FR 49967).
    In the CY 2011 ESRD PPS final rule, we explained that we received 
comments encouraging us to consider utilizing an add-on payment 
adjustment to pay for the costs of home dialysis training. In response 
to those comments, we explained that although we were continuing to 
include training payments in computing the ESRD PPS base rate, we 
agreed with commenters that we should treat training as an adjustment 
under the ESRD PPS. Thus, we finalized the home dialysis training add-
on payment adjustment of $33.44 per treatment as an additional payment 
made under the ESRD PPS when one-on-one home dialysis training is 
furnished by a nurse for either hemodialysis or peritoneal dialysis 
training and retraining (75 FR 49063). We chose to calculate a home 
dialysis training add-on payment adjustment based on one hour of 
nursing time because it was similar to the existing training add-on 
payments under the basic case-mix payment system (75 FR 49062). The 
amount we finalized for the adjustment--$33.44 per training treatment--
was updated from the previous adjustment amount of $20 per hour and was 
based on the national

[[Page 77854]]

average hourly wage for nurses from Bureau of Labor Statistics data 
updated to 2011 (75 FR 49063). We noted that because nursing salaries 
differ greatly based on geographic location, we would adjust the 
training add-on payment by the geographic area wage index applicable to 
the ESRD facility. Based on the amount of the home dialysis training 
add-on payment adjustment that was finalized in 2011, facilities that 
furnished 25 HHD training treatments would receive around $500 in the 
form of home dialysis training add-on adjustment payments in addition 
to the dollars included in the base rate to account for training costs.
    We clarified our policy on payment for home dialysis training again 
in the CY 2013 ESRD PPS final rule in which we stated that training 
costs are included in the ESRD PPS base rate, however, we also provide 
an add-on adjustment for each training treatment furnished by a 
Medicare-certified home dialysis training facility (77 FR 67468). As 
such, we explained that it is not the intent of the add-on treatment to 
reimburse a facility for all of the training costs furnished during 
training treatments. Rather, the single ESRD PPS base rate, all 
applicable case-mix and facility-level adjustments, as well as the add-
on payment should be considered the Medicare payment for each training 
treatment and not the training add-on payment alone. We noted that the 
fact that the add-on payment for training accounts for one hour of 
training time per treatment is not intended to imply that it only takes 
one hour per training session to properly educate a beneficiary to 
perform home dialysis.
    Then in the CY 2014 ESRD PPS final rule (78 FR 72183), we concluded 
in response to public comments that the training add-on, which 
represented 1 hour of nursing time, did not adequately represent the 
staff time required to ensure that a patient is able to perform home 
dialysis safely. We had received numerous comments on the home dialysis 
training add-on payment adjustment raising concerns about access to 
home dialysis and identifying training elements that were not 
contemplated in 2011, such as self-cannulation and certain aspects of 
operating an HHD machine. As a result, we recomputed the add-on based 
upon 1.5 hours of nursing time per training treatment, which amounted 
to a 50 percent payment increase of $16.72 per training treatment in 
addition to the training treatment costs included in the base rate. 
Therefore, the add-on payment rose from $33.44 to $50.16. In 
calculating the budget neutrality factor, the historical number of home 
HD training treatments was used. We did not attempt to guess how much 
that number would change in the future under the new reporting 
principles. This is consistent with the approach taken for other issues 
in the past such as the number of patients with comorbidity adjusters 
or outlier thresholds. Historic data, not speculation about future 
behavior, were used to set the payment parameters. We have the 
flexibility to make adjustments budget neutral and have chosen to do so 
with past adjustments. Our decision to make the training add-on 
adjustment budget neutral is consistent with other past adjustments.
    We believe increasing the training adjustment in a budget-neutral 
manner is appropriate. As noted above, we consider this increase to be 
a temporary accommodation while we collect cost and claims data to 
determine a more accurate training add-on payment adjustment in the 
future. We are increasing the training adjustment before we are able to 
collect that data to ensure continued access to this important 
modality. However, we do not believe it is appropriate to increase 
overall expenditures under the ESRD PPS during this interim period. As 
we note above, home dialysis training is also accounted for in the base 
rate and not just paid for through the home dialysis training 
adjustment. Because of this, we view moving dollars from the base rate 
to the home dialysis training adjustment as a way to effectively target 
this modality. When we have collected sufficient data to examine the 
cost and utilization of home dialysis training, we will be in a better 
position to evaluate whether it may be more appropriate to not make the 
adjustment budget neutral.
    Finally, in terms of how we calculated the budget neutrality 
adjustment factor, we first evaluated the impact of increasing the home 
and self-dialysis training add-on from $50.16 (as of CY 2016) to $95.60 
(which is being finalized for CY 2017). This was done by comparing the 
Medicare Allowable Payments (MAP) that were estimated under a PPS with 
the existing training add-on of $50.16 with those that were estimated 
under a PPS with the revised training add-on of $95.60. This comparison 
was made while holding other aspects of the ESRD PPS policy constant, 
and before determining estimated outlier payments. The number of 
training treatments estimated to be eligible for the adjustment was 
based on the most recent year of claims data. Training treatments were 
identified on 2015 claims containing pricer return codes that indicated 
the training adjustment was applied, which included 72,364 training 
treatments during 2015 based on the claims data used for the final 
rule. In estimating payments, the existing training-add on for CY 2016 
and the revised training add-on for CY 2017 were applied to the 
eligible training treatments identified on the 2015 claims. The 
training budget neutrality adjustment factor was calculated as the 
ratio of the estimated MAP when applying the CY 2016 training add-on to 
the total estimated MAP when applying the CY 2017 training add-on. This 
calculation resulted in a training budget neutrality adjustment factor 
of 0.999737 for CY 2017.
    Comment: Many home dialysis advocates requested that the training 
add-on be increased to recognize the full cost of training and include 
a factor to reflect the value of employee benefits and taxes. They 
believe that CMS intended to reimburse the full cost of the incremental 
labor necessary to deliver home training treatments. Commenters pointed 
out that the Office of Management and Budget (OMB) suggests a benefit 
rate of 36.2 percent. As OMB Circular 76-A states, in calculating 
direct labor, agencies should not only include salaries and wages, but 
also other ``entitlements'' such as fringe benefits. CMS uses the 
fringe benefits assumptions from OMB Circular 76-A in calculations in 
other sections of the proposed rule, but neglected to apply it in the 
calculation of the training adjustment. The factor defined in OMB 76-A 
for civilians is 36.25 percent. The commenters recommended that we 
apply the fringe benefit percentage to the reference wage rate which 
would increase the wage rate from the proposed $35.93/hour to $48.95/
hour ($35.93 x 1.3625) and result in a home dialysis training add-on 
payment of $130.21 ($48.95/hour x 2.66 hours = $130.21.
    Many other commenters pointed out that the proposed payment is a 
move in the right direction; however, the training add-on falls short 
of covering training costs. One commenter stated that while they 
appreciate CMS' proposal to increase the training add-on payment 
adjustment in 2017, they strongly urged CMS to raise the amount to 
$229.83 per treatment to better account for facility training costs. 
The commenters contend that the proposed amount simply does not 
adequately cover facility training costs to sufficiently promote and 
facilitate greater use of home and self-dialysis, particularly for 
small and medium dialysis facilities.
    Response: We did not propose the increase to the home dialysis 
training

[[Page 77855]]

add-on payment amount to reflect the full cost for the RN. Instead, as 
we explained in the proposed rule, 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 
$95.60 (as finalized below) to account for RN time devoted to training. 
As such, we did not apply the fringe benefit factor described in OMB 
Circular 76-A to the training add-on proxy, similar to the original 
add-on methodology, as it was not intended to cover all costs. We 
further note that most of the training treatment payment is derived 
from the ESRD PPS payment amount which is updated annually by the ESRD 
bundled market basket and includes a fringe benefits weighting factor. 
The home dialysis training add-on payment provides ESRD facilities with 
payment in addition to the ESRD PPS payment amount, which accounts for 
the costs associated with the actual treatment, that is, the equipment, 
supplies, and staffing. Therefore, the ESRD PPS payment amount plus the 
$95.60 (as finalized below) 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.
    In order to 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, we looked for a 
reasonable proxy for the home dialysis training add-on. We believe the 
interim rate, which is not intended to reflect the full cost of the RN, 
and almost doubles the current training add-on payment amount, is 
sufficient. Once reliable data is available, we will consider whether 
the adjustment needs to be increased or decreased.
    Comment: Several individual commenters indicated that nursing care 
during training is vital to the success of the training period and that 
the proposed increase to 2.6 hours is good, but more is needed as 3 to 
3.5 hours of training better represents the typical amount of time 
needed. Other commenters pointed out that their training was 4 hours 
per day for four weeks, others said eight weeks, some commenters 
recommended 4.5 hours and others said 4 to 5 hours, and one commenter 
recommended 6 hours.
    However, another commenter pointed out that increasing the training 
add-on from 1.5 to 2.66 hours of RN labor is a move in the right 
direction. Providing training for patients and care partners is a 
critical element of facilitating and maintaining a home treatment 
regimen for the highest number of patients who are candidates for home 
dialysis. The commenter stated that as CMS works to improve their own 
data related to costs, this is an appropriate interim step.
    Response: We have learned through public comments that training 
appears to vary widely from patient to patient. As we stated above, the 
ESRD PPS base rate reflects the costs for the staff time involved with 
treatment and the training add-on serves as a supplemental payment. 
Furthermore, we pay based on averages. While home HD training may take 
4 hours, PD takes considerably less time. As the training add-on is 
meant to address the training for both modalities, 2.66 hours 
represents the average time for both modalities, weighted by their 
frequency. Lastly, we believe that the updated training add-on payment 
rate is sufficient as an interim rate until we are able to develop a 
rate based on our data.
    Comment: A patient advocacy organization expressed concern that 
when outlining the formula CMS used for determining the increased 
training adjuster, CMS references that there are KDOQI guidelines on 
the nursing hours recommended to train patients. However, none of the 
KDOQI guidelines include recommendations related to the number of hours 
a nurse is involved in training patients for PD or home HD and the 
commenter is unaware of any conclusive evidence that would point to 
such a recommendation.
    Another commenter agreed indicating that the KDOQI guidelines are 
clinical practice guidelines which are not based on time studies of 
actual training sessions. While guidelines may provide an outline of 
the expected time for training sessions, they do not accurately 
represent the time spent training home dialysis patients. The commenter 
encouraged CMS to continue to research and evaluate this issue to align 
payments with the true cost of training services.
    Response: We did not mean to imply that the KDOQI guidelines were 
used as a source for establishing the number of hours of RN training 
time. We used the KDOQI guidelines strictly for the average number of 
hours for HD, which is 3 to 4 hours. We intend to maintain the current 
amount of the training add-on, which is based on treatment times, until 
we are able to analyze reliable cost report data after the cost report 
refinements are complete in order to align payments with the true cost 
of training services.
    Comment: One commenter stated that CMS allows dialysis providers 90 
days to stabilize a patient on therapy and create a plan of care and 
questioned why that approach was not the same for training patients on 
a new therapy. The commenter pointed out that dialysis providers take 
months to train employees who already have medical backgrounds and 
throughout employee training, there is a mentor who continues to 
educate and ensure the new employee's work is thorough and reflects 
knowledge of the therapy and the job. The commenter questioned why we 
do not ensure that home dialysis patients receive the same level of 
intensive training.
    Response: ESRD facilities that are certified to provide home 
dialysis training are responsible for providing support services to 
patients dialyzing at home. The support services required are specified 
in 42 CFR 494.100(c) and include periodic monitoring of the patient's 
home adaptation, including visits to the patient's home by facility 
personnel in accordance with the patient's plan of care, coordination 
of the home patient's care by a member of the dialysis facility's 
interdisciplinary team, and development and periodic review of the 
patient's individualized comprehensive plan of care that specifies the 
services necessary to address the patient's needs and expected 
outcomes.
    We thank the commenter for their suggestion. Our policy is to pay 
for 25 training treatments for home hemodialysis patients and 15 
training treatments for peritoneal dialysis patients, which remains 
unchanged at this time. The goal of training is to ensure that 
beneficiaries are able to safely dialyze independently at home once 
complete. We do allow for additional retraining treatments under 
specific reasons detailed in the Medicare Claims Processing Manual (Pub 
100-4, Chapter 8, section 50.8). We will consider this comment as we 
evaluate our training and retraining policies as we collect data.
    Comment: An LDO indicated that CMS needs to ensure that it does not 
create a perverse incentive for physicians to start patients on a 
modality that is unlikely to succeed for them. The commenter does not 
observe an access barrier to home HD, and they noted that they do not 
turn away eligible patients from this modality. However, they are 
mindful of the long-term viability of this modality for many of their 
patients given the burdens it

[[Page 77856]]

places on them and their care partners. Rather than view home HD 
myopically as a stand-alone therapy as some in the dialysis community 
seek to do, they agree with CMS that home HD must be viewed in the 
broader context of the overall performance of the ESRD PPS.
    Response: As we have previously stated, the decision about modality 
selection and location is determined by the patient and their 
physician. We rely on the physician to recommend home HD only for those 
patients who have the ability to learn the dialysis process and dialyze 
themselves at home, with the support of their ESRD facility.
    Comment: One commenter pointed out that the 67 percent/33 percent 
weighting used in the calculation appears to assume that the dialysis 
training add-on payment is paid for in all PD training treatments, 
when, in fact, most are paid under the new patient adjustment, or more 
specifically, the onset of dialysis payment adjustment. The commenter 
urged CMS to recalculate the proxy to take into account only those PD 
training sessions that actually receive the training add-on payment 
rather than those that are paid under the new patient adjustment (onset 
of dialysis adjustment).
    Response: When patients are in the onset of dialysis period (the 
first 4 months of dialysis), the ESRD facility receives the onset of 
dialysis adjustment and does not receive the training add-on payment 
adjustment. As a result, the calculation for the weighting ratio of PD 
included only PD treatments with the home dialysis training add-on 
payment applied which is what we understand the commenter to suggest. 
We believe that ESRD facilities correctly accounted for all PD 
treatments during training because they receive the full ESRD PPS base 
rate for training treatments rather than the HD-equivalent rate they 
receive for treatments after training is completed.
    Comment: One commenter recommended that CMS provide for an annual 
inflation adjustment to the training add-on payment.
    Response: In consideration of industry concerns about applying the 
training add-on in a budget neutral manner, we are not implementing an 
annual inflation update to the training add-on. Instead, we intend to 
monitor changes in the BLS data to determine if an update to the 
national average RN hourly wage is warranted. If we determine an update 
is necessary, we would propose a change to the training add-on and 
solicit public comments.
    Comment: One organization commented that it would have been more 
appropriate for CMS to use the BLS RN salary for Outpatient Care 
Centers (Industry Group 621400) in the BLS Occupational Employment 
Statistics. Thus, the more appropriate wage proxy for renal nurses is 
the national mean hourly wage for RN (Occupation 29-1141) in the 
Outpatient Care Centers industry group. The commenter pointed out that 
the data collected by BLS are gross pay wages, excluding overtime, 
shift differentials, and employer cost of supplemental benefits.
    Response: We agree that the BLS data provides various wages for RNs 
that we could have proposed to use for establishing an interim increase 
for the home dialysis training add-on and we are aware that the BLS 
data are gross wages, without supplemental benefits. We looked at many 
sources of wage data and selected the BLS because their Occupational 
Employment Statistics (OES) program provides comprehensive data on 
wages which is updated annually and identifies wages by setting. In CY 
2011 when we first established the training add-on, we based the 
training add-on on the national RN average hourly wage because we 
believed that the training activities we were paying for were best 
reflected in that wage rather than any of the other categories BLS data 
includes.
    We do not believe that use of the Outpatient Care Center group wage 
is a better reflection of the training performed by these RNs, and, for 
this reason, we are utilizing the BLS wage rate we proposed.
    Final Rule Action: We are finalizing the proposal 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 $95.60 (2.66 hours x $35.94 = $95.60). This 
provides an increase of $45.44 per training treatment (that is, $95.60-
$50.16 = $45.44). This approach provides a significant increase in 
payment for home dialysis training for CY 2017 while maintaining 
consistent payment for both PD and HD modalities. We intend to apply 
the above referenced payment amount, without adjustment, until we have 
empirical evidence for a change, which could increase or decrease the 
home dialysis training add-on payment amount. Additionally, we are also 
finalizing the home and self-dialysis training add-on budget neutrality 
adjustment factor.
3. Final CY 2017 ESRD PPS Update
a. Final CY 2017 ESRD Market Basket Update, Productivity Adjustment, 
and Labor-Related Share for the 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 proposed to 
reduce the amount of the market basket percentage increase by 1.25 
percent and to further reduce it by the productivity adjustment.
    We proposed 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 the IHS Global Insight (IGI), Inc. forecast 
using the most recently available data. IGI is a nationally recognized 
economic and financial forecasting firm that contracts with CMS to 
forecast the components of the market baskets.
    As a result of these provisions, and using 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), the proposed CY 
2017 ESRD market basket increase was 0.35 percent. This market basket 
increase was calculated by starting with the proposed CY 2017 ESRDB 
market basket percentage

[[Page 77857]]

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) of 
the Act), 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, we proposed that 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.
    For the CY 2017 ESRD payment update, we proposed to continue using 
a labor-related share of 50.673 percent for the ESRD PPS payment, which 
was finalized in the CY 2015 ESRD final rule (79 FR 66136).
    We did not receive any comments on the proposed market basket 
update, multi-factor productivity (MFP) adjustment, or labor-related 
share.
    Final Rule Action: As noted, the final CY 2017 market basket update 
and MFP adjustment in the ESRD PPS final rule will be based on the most 
recent forecast of data available. Therefore, using the most recent 
data available, the final CY 2017 ESRDB update is 0.55 percent. This is 
based on a 2.1 percent market basket update, less a 1.25 percent 
adjustment as required by section 1881(b)(14)(F)(i)(I) of the Act, as 
amended by section 217(b)(2)(A)(ii) of PAMA, and further reduced by a 
0.3 percent MFP update. The CY 2017 ESRDB market basket update and MFP 
adjustment are based on the IGI 3rd quarter 2016 forecast with 
historical data through the 2nd quarter 2016.
b. The Final 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 Area (CBSA)-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 stated that we would continue to use the same 
methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR 
49117) for determining the wage indices for ESRD facilities. 
Specifically, we are updating the wage indices for CY 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 final CY 2017 wage index values for urban areas 
are listed in Addendum A (Wage Indices for Urban Areas) and the final 
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 
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 discussed the findings in

[[Page 77858]]

detail in the CY 2017 proposed rule (81 FR 42817)
    Therefore, for CY 2017, we solicited 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 did not propose to change 
the wage index floor for CBSAs in Puerto Rico, but requested public 
comments in which stakeholders can provide useful input for 
consideration in future decision-making. Specifically, we solicited 
comment on the useful suggestions that were submitted in last year's 
final rule (80 FR 69007) and reiterated above.
    The comments and our responses to the comments for the proposal and 
solicitation are set forth below.
    Comment: An LDO that operates 27 ESRD facilities in Puerto Rico 
pointed out that the continued gradual reduction in the wage index 
floor has impaired operations in Puerto Rico since all areas of the 
island have been subject to the floor due to low wage index values. 
This commenter appreciates CMS' recommendation to apply a wage index of 
.40 to areas with a wage index below the floor for CY 2017, but 
believes the Agency must do more. Until CMS is able to adjust the wage 
index used to calculate ESRD facility reimbursements and fully take 
into account the totality of circumstances challenging facilities 
operating in Puerto Rico, they recommend that the wage index floor be 
re-instituted at a level that will avoid a negative impact on dialysis 
facilities. They recommend that CMS consider using the wage index for 
Guam or the Virgin Islands as they are similar to Puerto Rico in their 
island and U.S. territory status. The commenter believed CMS' policy to 
utilize the same wage index as Guam for the Northern Marianas and 
American Samoa could serve as a precedent for doing the same thing for 
Puerto Rico. The commenter does not believe maintaining a wage index of 
0.40 for CY 2017 in Puerto Rico is adequate to offset the poor economic 
conditions to which patients and dialysis facilities are exposed.
    An organization of community stakeholders agreed, suggesting that 
CMS apply ESRD wage indexes in Puerto Rico that are consistent with 
other territories through the use of a temporary proxy. This group is 
requesting urgent administrative action from CMS. They are requesting 
that CMS: (1) Re-establish a fair and meaningful wage index floor given 
factual uncertainties and the demonstrated anomalies with the wage 
index for Puerto Rico; (2) Establish a temporary alternative wage index 
for Puerto Rico, given the observed disadvantage and the 
inconsistencies with the indexes used for other Territories; and (3) 
Ensure the corresponding adjustment in MA benchmarks for ESRD to secure 
the appropriate support to the Medicare program that serves 90 percent 
of all the Medicare A & B beneficiaries in Puerto Rico.
    However, an industry organization expressed support for our current 
methodology for determining the wage indices and the continued 
application of the wage index floor of 0.4000.
    Response: For the commenters that asked us to take an 
administrative action to establish a temporary alternative wage index 
value for Puerto Rico until we are able to correct the anomalies, we 
unfortunately, are unable to do so for several reasons. First, we did 
not propose an alternative to the wage indices for Puerto Rico based on 
reported hospital wage data. Rather, we presented various alternatives 
and requested public comment on those alternatives. We would need to 
have proposed changes to the Puerto Rico wage index in order to 
finalize a change in their wage index. With regard to the corresponding 
adjustment in MA benchmarks for ESRD to secure the appropriate support 
to the Medicare program, we note that this comment is beyond the scope 
of the proposed rule.
    One of the commenters who addressed the proposed wage index 
alternatives expressed an interest in basing the wage indices for 
Puerto Rico CBSAs on the wage values applied to other U.S. Territories 
and another commenter suggested applying the wage value for the U.S. 
Virgin Islands. The only other recommendation was maintenance of the 
current floor of 0.4000 with no comment on the alternatives in the 
proposed rule.
    When we developed the wage indices for the Pacific Rim territories 
in the CY 2014 ESRD PPS final rule (78 FR 40845), we applied 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. Those policies were finalized in the CY 2011 and CY 2012 ESRD PPS 
final rules (75 FR 49116 through 49117 and 76 FR 70239 through 70241, 
respectively). 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.
    As we explained in the CY 2014 ESRD PPS final rule (78 FR 72172 
through 72173), in the case of American Samoa and the Northern Mariana 
Islands, we determined that Guam represented a reasonable proxy because 
the islands are located within the Pacific Rim and share a common 
status as United States Territories. In addition, the Northern Marianas 
and American Samoa are rural areas with no hospital data. Therefore, we 
used the established methodology to compute an appropriate wage index 
using the average wage index values from contiguous CBSAs, to represent 
a reasonable proxy. While the islands of the Pacific Rim are not 
actually contiguous, we determined that Guam is a reasonable proxy for 
American Samoa and the Northern Marianas.
    The primary difference between how we handled the wage index for 
the Pacific Rim islands and the situation in Puerto Rico is that we 
were able to rely upon existing policy for determining a wage index for 
areas with no hospital data for the Pacific Rim islands. We have 
hospital data upon which to base wage index values for Puerto Rico 
CBSAs, so our policy for CBSAs without wage index data does not apply 
to Puerto Rico, despite the fact that its, wage index data results in 
very low wage index values compared to other Territories and mainland 
CBSAs. This is a complex policy issue that cannot be resolved for CY 
2017. We intend to continue analysis in this area so that we can 
address this issue in a future rulemaking.
    Final Rule Action: After considering the public comments we 
received regarding the wage index, we are finalizing the CY 2017 ESRD 
PPS wage indices based on the latest hospital wage data as proposed. In 
addition, we are maintaining a wage index floor of 0.4000.
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. CY 2017 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

[[Page 77859]]

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, 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 that were or would have been covered under Part D for 
outlier eligibility purposes and in order to provide unit prices for 
calculating imputed outlier services. In addition, we also identify 
through our monitoring efforts items and services that are either 
incorrectly being identified as eligible outlier services or any new 
items and services that may require an update to the list of renal 
dialysis items and services that qualify as outlier services, which are 
made through administrative issuances.
    Our regulations at 42 CFR 413.237 specify the methodology used to 
calculate outlier payments. An ESRD facility is eligible for an outlier 
payment if its actual or imputed MAP amount per treatment for ESRD 
outlier services exceeds a threshold. The MAP amount represents the 
average incurred amount per treatment for services that were or would 
have been considered separately billable services prior to January 1, 
2011. The threshold is equal to the ESRD facility's predicted ESRD 
outlier services MAP amount per treatment (which is case-mix adjusted) 
plus the fixed-dollar loss amount. In accordance with Sec.  413.237(c) 
of 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 used 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 proposed 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 
proposed that 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 did not propose any change to the methodology used 
to compute the MAP or fixed-dollar loss amounts. Rather, we proposed 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 final 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 estimates for this final rule. The estimates for 
the final 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 77860]]



               Table 1--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                   Column I final outlier policy  Column II final outlier policy
                                                    for CY 2016 (based on 2014       forCY 2017 (based on 2015
                                                  data price inflated to 2016) *   data price inflated to 2017)
                                                 ---------------------------------------------------------------
                                                      Age <18        Age >=18         Age <18        Age >=18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $40.20          $53.29          $38.77          $47.00
 treatment......................................
Adjustments
    Standardization for outlier services........          0.9951          0.9729          1.0078          0.9770
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $39.20          $50.81          $38.29          $45.00
Fixed-dollar loss amount that is added to the             $62.19          $86.97          $68.49          $82.92
 predicted MAP to determine the outlier
 threshold......................................
Patient months qualifying for outlier payment...            5.8%            6.5%            4.6%            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; $82.92) 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 $45.00. For pediatric patients, there is an increase in the 
fixed-dollar loss amount from $62.19 to $68.49, and a decrease in the 
adjusted average MAP for outlier services from $39.20 to $38.29.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2017 will be 6.7 percent for adult patients and 
4.6 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 0.93 percent of total 
payments, close to the 1 percent target. 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 
final 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.
    The comments and our responses to the comments for the proposal to 
update the outlier thresholds using CY 2015 data are set forth below.
    Comment: A national industry organization stated they were pleased 
that CMS has refined the outlier pool to align the dollars paid out 
more closely with the estimated amount used to create the outlier pool. 
However, they noted that the alignment has not yet addressed the fact 
that the outlier pool is consistently paying out less than the amount 
removed from the base rate. Commenters estimate the outlier pool 
underpaid $0.68 per treatment in 2015. Other Medicare payment systems 
at times pay out less than the estimate and at other times pay out 
more. This fluctuation above and below the estimate indicates that the 
outlier pool amount is appropriate. The organization strongly 
encouraged CMS to further refine the outlier policy so that it is more 
consistent with how outlier policies in other Medicare payment systems 
work.
    Other industry organization indicated that, since the outlier 
threshold has not been met since the implementation of the ESRD PPS and 
continues to fall short of 1 percent, CMS should propose a 0.5 outlier 
percentage for CY 2018. This 0.5 percent outlier percentage would 
reduce the offset to the base rate yet continue to provide payment for 
extraordinary costs. An MDO would prefer that CMS remove the outlier 
provision from the payment system, however, they understand that an 
outlier policy is statutorily required. Since CMS does not have the 
authority to remove the provision, they also suggested that the outlier 
percentage be reduced to 0.5 percent.
    A professional association stated that they appreciate the efforts 
of CMS to recognize that the needs of all patients are not universally 
equal, and that a minority of patients will require treatments that 
carry markedly higher costs than the average ESRD patient. They support 
the concept of an outlier policy to sufficiently reimburse dialysis 
facilities for implementing necessary dialysis-related treatments to 
meet the needs of these patients and established therapeutic goals. 
However, in their view the outlier payments amount should equal the 
withhold amount.
    As CMS continues to assess the outlier policy in future years, they 
suggested that future adjustments to the threshold for outlier payments 
be done annually to fully expend the withholding or adjust the 
withholding based on the running average expenditures from the prior 3 
years (not to exceed 1 percent).
    Response: We appreciate the commenters' support for the outlier 
policy. As we explained above, our analysis of ESRD PPS claims show 
that outlier payments reached 0.93 percent of the 1.0 percent outlier 
target in 2015. Specifically, outlier payments were made for 200,544 
patient months, totaling $82,419,791 ($103,024,739 when including 
patient or secondary insurer obligations). For these patient months, 
outlier payments represented 17.2 percent of total Medicare ESRD 
payments. About 6,540 facilities received at least one outlier payment. 
Eighteen percent of outlier payments in dollars were received by 
independent

[[Page 77861]]

facilities and another 16 percent were received by facilities that were 
part of a multi-facility organization other than the three largest 
chains. As we stated in the CY 2016 ESRD PPS final rule (80 FR 69010), 
outlier payments are particularly important for small dialysis 
organizations and independent dialysis facilities because they often 
lack the volume of patients necessary to offset the high cost of 
certain patients. The 1.0 percent outlier target is small compared to 
outlier policies in other Medicare payment systems and was not designed 
to cover a large number of claims. As indicated in Table 1, we estimate 
that the percentage of patient months qualifying for outlier payments 
in CY 2017 will be 6.7 percent for adult patients and 4.6 percent for 
pediatric patients, based on the 2015 claims data.
    Also discussed in the CY 2016 ESRD PPS final rule (80 FR 69010 
through 69011) we acknowledge that the 1.0 percent target has not been 
achieved since 2011 primarily because our annual update of the fixed-
dollar loss amounts and MAP amounts could not keep up with the 
continued decline in the use of outlier services (primarily ESAs). That 
is, facilities incurred lower costs than anticipated, and those savings 
accrued to facilities more than offsetting the extent to which the 
consequent outlier payments fell short of the 1.0 percent target. In 
last year's rule we stated that we believed that decline was leveling 
off, which would make our projections of outlier payments more 
accurate. Using the most recent data, we found outlier payments to come 
close to the 1 percent target (at 0.93 percent). Outlier payments may 
not have reached 1 percent during 2015 primarily due to patterns in ESA 
utilization. There is evidence in the 2015 claims of increased use of 
epoetin beta, which may have been used as a lower cost substitute for 
other ESAs (at a clinically equivalent dose) and contributed to a 
decrease in the average outlier service MAP amounts for 2015.
    With regard to the suggestion that we annually adjust the 
withholding based on the running average of the expenditure from the 
prior three years, with the total withholding not to exceed 1.0 
percent, as we explain above, each year we simulate payments under the 
ESRD PPS in order to set the outlier fixed-dollar loss and MAP amounts 
for adult and pediatric patients to try to achieve the 1.0 percent 
outlier policy. We would not increase the base rate to account for 
years where outlier payments were less than 1.0 percent of total ESRD 
PPS payments and, more importantly we would not reduce the base rate if 
the outlier payments exceed 1.0 percent of total ESRD PPS payments. 
Rather than increasing and decreasing the base rate, we re-estimate the 
fixed-dollar loss threshold and MAP amounts so that outlier payments in 
the following year are 1.0 percent of total ESRD PPS payments. This is 
the approach used in other Medicare payment systems that include an 
outlier policy, such as the Inpatient Psychiatric Facility PPS. As we 
have done since 2011, we will continue to monitor outlier payments and 
assess annually the extent to which adjustments need to be made in the 
fixed-dollar loss and MAP amounts in order to achieve outlier payments 
that are 1.0 percent of total ESRD PPS payments.
    Final Rule Action: After consideration of the public comments, we 
are finalizing the updated outlier thresholds based on CY 2015 data.
d. Update of the ESRD PPS Base Rate for CY 2017
i. Background
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the development of the ESRD PPS per treatment base rate that 
is codified in the Medicare regulations at Sec. Sec.  413.220 and 
413.230. The CY 2011 ESRD PPS final rule also provides a detailed 
discussion of the methodology used to calculate the ESRD PPS base rate 
and the computation of factors used to adjust the ESRD PPS base rate 
for projected outlier payments and budget neutrality in accordance with 
sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, 
respectively. Specifically, the ESRD PPS base rate was developed from 
CY 2007 claims (that is, the lowest per patient utilization year as 
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, 
and represented the average per treatment Medicare Allowable Payment 
(MAP) for composite rate and separately billable services. In 
accordance with section 1881(b)(14)(D) of the Act and regulations at 
Sec.  413.230, the ESRD PPS base rate is adjusted for the patient 
specific case-mix adjustments, applicable facility adjustments, 
geographic differences in area wage levels using an area wage index, as 
well as applicable outlier payments or training payments.
ii. Payment Rate Update for CY 2017
    The ESRD PPS base rate for CY 2017 is $231.55. 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) of the 
Act, 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 
final multi-factor productivity adjustment for CY 2017 is 0.3 percent, 
yielding an update to the base rate of 0.55 percent for CY 2017 (0.85-
0.3 = 0.55 percent). Therefore, the ESRD PPS base rate for CY 2017 
before application of the wage index and training budget-neutrality 
adjustment factors would be $231.66 ($230.39 x 1.0055 = $231.66).
    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 did not propose any changes to the 
methodology used to calculate this factor which is described in detail 
in CY 2014 ESRD PPS final rule (78 FR 72174). The CY 2017 wage index 
budget-neutrality adjustment factor is 0.999781. Therefore, the ESRD 
PPS base rate for CY 2017 before application of the training budget-
neutrality adjustment factor would be $231.61 ($231.66 x 0.999781 = 
$231.61).
    Home and Self-Dialysis Training Add-on Budget-Neutrality Adjustment 
Factor: Also, as discussed in section II.B.2.e of this final rule, we 
are establishing 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 0.999737, which is 
applied to the CY 2017 ESRD PPS base rate. This application yields a CY 
2017 ESRD PPS base rate of $231.55 ($231.61 x 0.999737 = $231.55).
    In summary, the final CY 2017 ESRD PPS base rate is $231.55. This 
amount reflects a payment rate update of 0.55 percent, the CY 2017 wage 
index budget-neutrality adjustment factor of 0.999781, and the home 
dialysis training add-on payment adjustment budget-neutrality 
adjustment of 0.999737.

[[Page 77862]]

    The comments and our responses to the comments for the base rate 
proposals are set forth below:
    Comment: Generally, commenters were supportive of the CY 2017 
proposed base rate. One commenter contended CMS should increase the 
proposed ESRD base rate for 2017 positing that, as proposed, the base 
rate is too low for dialysis facilities--particularly small and medium 
facilities--working to provide high-quality, patient-centered care to 
this highly vulnerable adult and pediatric patient population. Another 
commenter supported CMS' continued labor-related share of 50.673 
percent that recognizes the enhanced role of registered dietary 
nutritionists and other providers in improving outcomes and promoting 
therapy adherence, including dialysis treatments, dietary 
recommendations, and medication regimes.
    Response: We appreciate the commenters' support of the CY 2017 
proposed base rate. We also thank the commenter's support of the labor-
related share and the perspective that it supports interdisciplinary 
staff roles in enhancing patient care. With regard to the comment on 
the base rate being too low for dialysis facilities, as discussed in 
section II.A.3, the base rate is updated annually by the ESRD bundled 
market basket. For CY 2017, CMS is mandated by legislation to reduce 
this increase by two factors. The first factor is the multi-factor 
productivity adjustment discussed in section II.B.3.d.ii. The second 
factor is a specified reduction amount determined in section 
217(b)(2)(A) of PAMA. For CY 2017, this reduction is 1.25 percentage 
point. For CY 2018, the reduction will be 1.00 percentage point.
    Final Rule Action: As stated above the final CY 2017 ESRD PPS base 
rate is $231.55.
4. Miscellaneous Comments
    We received many comments from Medicare beneficiaries, family 
members, ESRD facilities, nurses, physicians, professional 
organizations, renal organizations, and manufacturers related to issues 
that were not specifically addressed in the CY 2017 ESRD PPS proposed 
rule. Some of these comments are discussed below.
    Comment: A pharmaceutical company believes that the transitional 
drug add-on payment adjustment (TDAPA) should be paid for innovative 
therapies for at least 2 years so that innovation will not be stifled 
and ESRD patients will not be denied access to the benefits of improved 
clinical outcomes. This commenter also states that CMS should revisit 
and refine the drug designation process finalized in the 2016 ESRD PPS 
final rule and provide transitional add-on payment for new innovative 
products that are neither generic nor biosimilar to products already 
included within the ESRD PPS bundle. Another pharmaceutical company 
believes that CMS should use the TDAPA to incentivize the development 
of products that will prevent catheter-related bloodstream infections 
and clarify the anti-infective functional category to ensure that new 
drugs qualify for the TDAPA.
    A congressional delegation also submitted a comment regarding the 
application of the TDAPA for an injectable drug that replaces iron and 
maintains hemoglobin in dialysis patients. An industry organization, an 
MDO, and a pharmaceutical company had similar concerns, adding that the 
benefits of new injectable drugs must be accounted for as an increase 
in the bundle, and specifically pointed to an injectable calcimimetic 
that has not received FDA approval to date.
    An LDO and an MDO stressed that the drug designation policy is a 
critical issue for ESRD providers and urges CMS to confirm and clarify 
how the drug designation policy will be implemented. These commenters 
also asked for clarification regarding how payment for oral-only drugs 
that will be transitioned into the bundle as well.
    Response: We appreciate and understand how important the 
implementation of this policy is and have begun developing the 
administrative guidance for the TDAPA which will be forthcoming. In the 
2016 Final Rule (80 FR 69023), we explained that we anticipate that 
there may be new drugs that do not fall within the existing ESRD PPS 
functional categories and therefore, are not reflected in the ESRD PPS 
bundled payment. Where a new injectable or intravenous product is used 
to treat or manage a condition for which there is not a functional 
category, we would pay for the new injectable or intravenous product 
using a transitional drug add-on payment adjustment under the authority 
of section 1881(b)(14)(D)(iv) of the Act. We proposed that the 
transitional drug add-on payment adjustment would be based on the ASP 
pricing methodology and would be paid until we have collected 
sufficient claims data for rate setting for the new injectable or 
intravenous product, but not for less than 2 years.
    With regard to the application of the TDAPA for an injectable 
anemia management drug, the anemia management functional category is 
one of the drug categories for which we have included dollars in the 
base rate and that has been updated with the annual ESRD market basket 
percentage increase factor. As a result, there is no separate 
transitional drug-add-on payment adjustment available for drugs and 
biologicals that manage an ESRD beneficiary's anemia. As we stated 
above, the transitional drug add-on adjustment payment is intended to 
capture those drugs and biologicals that are not reflected in the base 
rate. We note that drugs and biologicals that are accounted for in the 
ESRD PPS base rate could qualify as an outlier service when the 
manufacturer reports the Average Sales Price to CMS.
    Comment: One patient expressed concern that copays for dialysis can 
be expensive on Medicare Part B, and the commenter would prefer to have 
a Medicare Advantage plan because of the out-of-pocket maximum. Another 
patient commented that his facility has told him that they are doing 
too many blood tests related to his polycystic kidney disease and that 
he may have to pay for them himself because Medicare will not. This 
commenter also states that he or she believes their treatment is not 
about patient care, but is about money and that his care team does not 
have compassion toward him.
    Response: We are saddened to hear of these situations that 
beneficiaries have shared with us. We thank commenters for sharing 
their experience regarding the dialysis care they receive at their 
facilities, and we note that when care is less than desirable we 
encourage beneficiaries to reach out to their ESRD Network or Quality 
Improvement Organization (QIO) for their state. ESRD Networks were 
mandated by the Congress and are accountable for, among other things, 
assuring the effective and efficient administration of benefits, 
improving quality of care for ESRD patients, collecting data to measure 
quality of care, providing assistance to ESRD patients and facilities, 
and evaluating and resolving patient grievances. More information on 
the ESRD Networks is available on the CMS Web site: https://www.cms.gov/Medicare/End-Stage-Renal-Disease/ESRDNetworkOrganizations/index.html. QIOs are groups of health quality experts, clinicians, and 
consumers organized to improve the care delivered to people with 
Medicare. QIOs work under the direction of the CMS to assist Medicare 
providers with quality improvement and to review quality concerns for 
the protection of beneficiaries and the Medicare Trust Fund. We value 
each of our beneficiaries and want them to receive the best care 
experience. We urge any beneficiary who requires assistance or

[[Page 77863]]

has a grievance to contact the ESRD Networks for help. The ESRD Network 
can also ensure that beneficiaries receive the care they need for their 
specific condition. With regard to joining a Medicare Advantage plan, 
they are open to ESRD beneficiaries under specific circumstances: (1) 
If you're already in a Medicare Advantage Plan when you develop ESRD, 
you may be able to stay in your plan or join another plan offered by 
the same company; (2) If you're already getting your health benefits 
(for example, through an employer health plan) through the same 
organization that offers the Medicare Advantage Plan; (3) If you had 
ESRD, but have had a successful kidney transplant, and you still 
qualify for Medicare benefits (based on your age or a disability), you 
can stay in Original Medicare, or join a Medicare Advantage Plan; and 
(4) You may be able to join a Medicare Special Needs Plan (SNP) for 
people with ESRD if one is available in your area.
    Comment: An industry organization suggested refinements to the low-
volume payment adjustment to address the rare change of ownership 
instance wherein the new owner accepts the provider agreement but the 
ownership change results in a new provider number because of provider 
type classifications. In this example, due to the issuance of a new 
provider number, this facility would be deemed ineligible for the Low-
Volume Payment Adjustment (LVPA).
    Response: We appreciate the commenter bringing this scenario to our 
attention; we will consider updating our policies and regulations to 
address this specific instance in the future.
    Comment: A health system recommended that other professional 
specialties be allowed to bill for their services from the ESRD 
facility site of service. Because ESRD patients spend hours each week 
immobile while they receive their treatment, this would be an opportune 
time for patients to receive care from other specialists 
(cardiologists, psychiatrists, endocrinologists, vascular surgeons, 
etc.).
    Response: We appreciate the commenter's suggestion for providing 
other specialties of care to beneficiaries while they receive dialysis. 
This is an interesting perspective that would require changes across 
programs, but it is one we will consider exploring in the future.
    Comment: Several commenters expressed concern that the inaccuracy 
of the case-mix adjusters causes leakage from the ESRD PPS. Another 
commenter recommended that case-mix adjusters included in the payment 
system should be selected based on the policy goal of improving patient 
access and that some adjusters may work together while others may 
cancel each other out. The commenter encourages CMS to ensure that the 
adjusters truly cover the costs of providing care for those patients 
with more health care needs. Commenters also suggest that CMS eliminate 
the remaining four comorbid case-mix adjusters for the same reason that 
bacterial pneumonia and monoclonal gammopathy were removed. 
Additionally, another commenter suggested that CMS discard the changes 
made to the age categories in the CY 2016 final rule by returning to 
the CY 2015 methodology. These same commenters stated that CMS should 
address the way that the body size (that is, the low body mass index 
(BMI) and body surface area (BSA)) adjusters cancel each other out and 
ultimately benefit very few beneficiaries. Another commenter believes 
that using the age range of 70-79 as the reference age group is 
inappropriate since facilities would not receive an adjustment for this 
age range, however, they would receive an adjustment for patients 
between the ages of 60 and 69. This commenter also had concerns about 
the rationale for using both a BSA and a BMI adjustment and encourages 
CMS to adopt a BMI adjustment for overweight and underweight patients 
that will better account for costs of treatment.
    Finally, another commenter urges CMS to reevaluate and update the 
pediatric case mix adjuster utilizing the most recent data available. 
This commenter elaborates that pediatric patients have an increased 
level of acuity of nursing care when compared to adult dialysis 
patients, these patients often need developmental or behavioral 
specialists, social workers or school-based specialists to assist with 
optimizing school performance, as well as increased assessments from 
dietitians to adjust formulas and diet for the patient's growth and 
nutrition requirements. The array of dialysis supplies required by 
these patients is also broader.
    Response: With regard to the comments regarding the ESRD PPS 
refinement implemented in CY 2016, as we stated in the CY 2016 ESRD PPS 
final rule (80 FR 68974) we continue to believe that the CY 2016 
updated model aligns with our goals for the prospective payment system 
in establishing accurate payments and safeguarding access for Medicare 
beneficiaries. We modeled the ESRD PPS using methodologies that were 
tested under the Basic Case-Mix Adjusted (BCMA) composite rate payment 
system and in using the most recently available data, we made our best 
estimate for predicting the payment variables that best reflect cost 
variation among ESRD facilities for furnishing renal dialysis services 
to a vulnerable population of patients. This refinement uses data that 
illustrates a fully bundled prospective payment system and reflects the 
practice patterns under such environment. We continue to believe that 
it would not be appropriate to both perpetuate certain payment 
adjusters into the future that were developed using pre-PPS data and 
update the other adjusters using ESRD claims data and cost reports from 
2012 and 2013. We thank the commenters for their views about the 
pediatric case mix adjustment. We describe in the detail how we 
reevaluated and updated the pediatric case mix adjusters utilizing the 
most recent data available in the CY 2016 Final Rule (80 FR 69001).
    Comment: One commenter expressed support for the ESRD PPS 
refinement based upon an updated regression analysis and established in 
the CY 2016 ESRD PPS final rule (80 FR 68973) and the low-volume and 
rural payment adjustments. This commenter agrees that these adjustments 
are necessary to ensure beneficiaries' access to services where they 
may otherwise lack dialysis options. This commenter also urged CMS to 
ensure that stagnation in the base rate does not negatively impact 
patient care, specifically with regard to payments to rural ESRD 
facilities and for facilities that treat pediatric patients. This 
commenter appreciates CMS' consideration of the potentially 
disproportionate impact of the ESRD PPS on those facilities. Another 
commenter stated that CMS should eliminate the rural adjuster and add a 
second tier, low-volume adjuster for facilities with 4,001-6,000 
treatments per year. An industry organization expressed their concern 
that there is an incentive for facilities to limit access to specific 
locations in order to meet the requirements for the LVPA.
    Response: We appreciate the support and agree that our diligence 
with regard to the base rate needs to be ongoing. We appreciate the 
useful suggestions for refining the LVPA from the commenters. However, 
significant changes to the eligibility criteria would need to be 
adopted through notice and comment rulemaking. We believe that the 
finalized CY 2016 policy changes represent improvement in the targeting 
of the payment adjustments. We will certainly consider these 
suggestions for future refinement. We plan to continue to monitor the 
utilization of renal

[[Page 77864]]

dialysis services furnished in low-volume and rural facilities.
    Comment: An LDO commented that increasing costs and utilization of 
certain clinical diagnostic laboratory services have not yet been 
recognized through a corresponding adjustment to the base rate, which 
undermines the integrity of the ESRD PPS bundled payment.
    Another LDO urged CMS to repair the underlying methodology of the 
ESRD PPS, which, based on their analysis, results in millions of 
dollars intended by CMS for patients' care to leak from the system. The 
organization stated that returning resources to the ESRD base rate will 
improve treatment for all Medicare dialysis beneficiaries, including 
home dialysis patients.
    An industry organization commented that the ESRD PPS has underpaid 
providers by over $1 billion since 2011 and are predicting negative 
profit margins through 2018. The organization provided the same 
critique of the ESRD PPS regression methodology that they provided in 
response to the CY 2016 ESRD PPS proposed rule, reiterating their view 
that the ESRD PPS refinement regression methodology used by CMS 
violates the core assumptions for a valid analysis.
    Response: As we stated in the CY 2011 ESRD PPS final rule (75 FR 
49054), we included payments for all laboratory tests billed by ESRD 
facilities and independent laboratories for ESRD patients in 
calculating the final base rate in order to appropriately account for 
such tests as renal dialysis services. The ESRD PPS base rate is 
updated annually (as discussed in section II.B.3. of this final rule) 
by the ESRD bundled market basket. Therefore, we believe the base rate 
reflects price increases for laboratory renal dialysis services. With 
respect to increases in utilization of laboratory renal dialysis 
services, we continue to monitor utilization of laboratory services 
under the ESRD PPS and encourage ESRD facilities to report all 
laboratories services that they furnish. With regard to repairs to the 
ESRD PPS, we received comments of this nature last year and responded 
to them in the CY 2016 ESRD PPS final rule. As we stated in the CY 2016 
final rule (80 FR 68974), we thoroughly reviewed these comments in 
consultation with our research team and other internal experts. We 
examined the outcomes of the current ESRD PPS specifically looking at 
access and quality of the PPS and based on our comprehensive monitoring 
of health outcomes and access under the ESRD PPS, we believe the 
current payment model has been successful in allocating payments across 
facilities and patients while supporting access and quality. While we 
recognize there can be theoretically optimal approaches to addressing 
payment model design, the availability of data is often an important 
factor in the approach ultimately undertaken. This is true with the 
ESRD PPS and the use of a two-equation model that relies on both claims 
and cost report data, as other payment systems do under Medicare.
    Comment: One commenter expressed concern about the lack of 
transparency in the use of data regarding the factors used in 
calculating payments. Although they appreciate that CMS has made more 
data available, the commenters stated that there continue to be 
differences in the calculations between what providers believe is the 
correct amount to adequately care for ESRD patients and the ESRD PPS 
base rate. The best way to resolve the differences would be through 
full transparency by releasing all data and calculations used in 
development of payment rates and adjusters.
    Response: Transparency is important to us. Therefore, we make the 
Limited Data Set (LDS) available with each rule. More information is 
located: https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/standardanalyticalfiles.html. We 
believe the data provided and the availability of technical reports 
explaining the methodology is sufficient to enable stakeholders to 
provide meaningful feedback, however, we have asked industry partners 
to identify specific instances in which the results of the calculations 
vary from what we have developed so that the CMS contractors can 
reconcile the variance.
    Comment: Several commenters provided information on the barriers 
that they believe minimize the growth of home dialysis and gave 
suggestions on how to increase the utilization of home modalities. 
Commenters expressed concern about medical staff providing 
misinformation on home dialysis in an effort to keep new patients 
coming in-center for treatment rather than choosing home dialysis. They 
attributed this to poor patient education and improperly incentivized 
facilities. Other commenters suggested creating payment incentives to 
encourage home dialysis and stated whatever needs to be done to 
encourage people to take their dialysis home, should be done even if 
that means increasing payments to clinics for training. These 
commenters suggested that CMS fund wages and salaries for nurses and 
technicians to train because there is confusion and misinformation 
coming from medical professionals that scares patients away from home 
dialysis when they should be doing just the opposite.
    One commenter noted that the U.S. Food and Drug Administration 
approvals for dialysis machines for home use require that the patient 
have a care partner who can assist in emergencies. This requirement 
prevents people who live alone (or whose care partner is temporarily 
absent) from doing home HD, and may place an undue burden on the family 
unit. The commenter believes that a dialyzer should be able to choose 
to perform home HD with or without a care partner, as their training 
and comfort level dictates. The ESRD facility should discuss with the 
patient the risks of dialyzing alone, assess the dialyzer's ability to 
perform his or her own treatments without assistance, and discuss 
alternate safety precautions available to the patient if the patient 
chooses to forego having a care partner.
    One LDO expressed concern that some home HD machines are designed 
in such a way that the patient must dialyze more frequently than three 
times per week and has found that a significant number of patients 
``burn out.'' That is, they begin therapy on home HD but later decide 
they cannot effectively manage such a complex task at home and choose 
to dialyze in-center instead. The LDO's own data indicate that the 
average year-over-year ``burn out'' rate for home HD is 42 percent, 
compared to 24 percent for their PD patients. The primary cause for the 
drop-off among home HD patients is the burden on the patient's care 
partner.
    Another commenter suggested that CMS standardize the elements of 
the training manuals across dialysis machine manufacturers for 
patients. The commenter noted that they appreciated having a 
professionally written training manual, which was provided by one 
manufacturer, and believes that similar manuals would enhance 
dialyzer's confidence in what they were learning. Another improvement 
the commenter suggested is to require that training clinic managers be 
more experienced. The commenter described their experience of having a 
training clinic that only required 3 months of training experience for 
their clinical nurse managers. The commenter believes that this amount 
of training experience does not seem sufficient for them to manage 
their staff and know how to evaluate and improve their work. The 
commenter also suggested that CMS implement a requirement for ongoing 
home dialysis training because in the commenter's experience when some 
training clinics

[[Page 77865]]

re-write their procedures, the only people that find out about the 
changes, besides the nurses, are the new patients and the long-term 
dialyzers are not informed of things that could make their treatments 
more efficient or safer. The commenter also suggested an increase in 
training dollars for clinics expressing that in the long run, it is 
money well spent since the cost of home dialysis is less than the cost 
of dialyzing in center.
    Response: The goal of our policy with regard to the treatment of 
ESRD is for ESRD facilities to provide the most appropriate care 
available for the beneficiary, whether in home or in-center. With the 
increased training add-on finalized in this rule, we hope that 
facilities will encourage home dialysis for beneficiaries who can 
benefit from it. Not all ESRD facilities are appropriately certified to 
provide training for home dialysis but we expect that if a beneficiary 
would like to receive home dialysis, the facility would refer the 
beneficiary to a home dialysis training facility. We encourage all ESRD 
facilities to be knowledgeable in all aspects of dialysis in order to 
educate beneficiaries. We appreciate the comments regarding barriers to 
home dialysis and will consider them for future policy changes, as 
appropriate.
    Comment: One commenter stated that although patients often receive 
pre-dialysis education in group settings, they know of no one who has 
been trained to perform home HD in a group setting in recent years. The 
commenter expressed concern that CMS has received comments to the 
contrary, and wanted to indicate that such instances should be 
extremely rare in light of the Conditions of Participation and should 
not affect the calculation of the costs of home HD training.
    Response: We appreciate the commenter's concern about the 
utilization of group training for home dialysis. As the commenter 
indicates, we have received many comments to the contrary and with this 
mixed information from the industry, we find that more analysis needs 
to take place in order for us to develop an appropriate methodology for 
computing the home dialysis training add-on based on updated cost 
report data.
    Comment: We received comments from SDOs, healthcare investment 
companies, and a nursing facility company indicating the benefits of 
Skilled Nursing Facility (SNF)/Nursing Facility (NF) patients receiving 
their home HD in the SNF/NF. They highlight lower readmission rates, 
decreased lengths of stay, and improved social outcomes when patients 
receive dialysis in the SNF/NF as opposed to being transported to an 
ESRD facility. One commenter stated that their patients benefit greatly 
from staff-assisted, more frequent HD within their SNF.
    Response: We recognize that receiving renal dialysis services in a 
SNF or NF can be beneficial to the patient. As we stated in the CY 2011 
ESRD PPS final rule (75 FR 49057), nursing home patients are regarded 
as home dialysis patients because they are considered residents of the 
nursing home and receive dialysis treatments at the nursing homes and 
not at dialysis facilities. In addition, we note that the Medicare 
Benefit Policy Manual (Pub 100-02, chapter 11, section 40.D (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c11.pdf)) indicates that Medicare ESRD beneficiaries who 
permanently reside in a nursing home or long term care facilities and 
who meet the home dialysis requirements set forth under 42 CFR 494.100 
are considered home dialysis patients. All home dialysis items and 
services will be paid under the ESRD PPS and no separate payment will 
be made to the facility. Also in the Medicare Benefit Policy Manual we 
indicated in section 30.1.C that staff-assisted home dialysis using 
nurses to assist ESRD beneficiaries is not included in the ESRD PPS and 
is not a Medicare covered service. We appreciate the commenter's 
suggestions for furnishing renal dialysis services in a SNF or NF and 
will consider them for future rulemaking.
    Comment: One dietician and nutritionist organization supports the 
``implementation of the outlier statute'' and notes that registered 
dietitian nutritionists are able to assist in addressing the patient 
conditions that may increase facility costs when furnishing dialysis 
care and recommends that CMS make available the reimbursement for these 
services.
    Response: Response: We appreciate the commenters bringing these 
services to our attention. We agree that dietary needs are very 
important in the multidisciplinary care for ESRD beneficiaries and will 
consider these comments for future policy refinement; however, it's 
unclear what the commenters mean by the ``implementation of the outlier 
statute''.
    Comment: One dialysis equipment supplier commented on the Kidney 
Disease Education benefit and suggested that we allow regional training 
centers to have management contracts with ESRD facilities to provide 
the home dialysis training in a centralized location. They also 
recommended defining a minimally adequate form of modality education as 
well as a minimally acceptable frequency of administration, and link 
this to eligibility for the payment model. In addition they noted that 
programs focusing on educational efforts have historically been very 
effective. Studies of focused, unbiased ESRD modality education, 
offered in the months prior to dialysis initiation have demonstrated 
that nearly one third of patients begin home dialysis when they have 
completed a balanced education program. In the field of diabetes, the 
American Diabetes Association, the Association of Diabetes Educators, 
and other organizations have developed extensive tools, assessments, 
and professional standards to deliver the education required by CMS in 
the provision of Diabetes Self-Management Education. Unfortunately, 
this success has not generally extended to the education of kidney 
patients, where the Kidney Disease Education Benefit is historically 
underutilized and too narrow in scope to meet the needs of patients 
approaching dialysis. Thus, incident dialysis patient awareness and 
knowledge of self-management (home dialysis) treatment modalities is 
highly variable. The commenters believe that, without minimal 
standards, dialysis modality education will fall victim to provider 
priority conflicts or short-term economic disincentives. With 
demonstration of a balanced and effective chronic kidney disease 
education program as a baseline requirement, and with the percentage 
target of home dialysis utilization described above, the market will 
make training better and more consistent, allowing patients to make 
truly informed decisions and increasing the likelihood that patients 
choose and remain on a home dialysis therapy option.
    Another commenter noted that home dialysis innovations are limited 
by the local scale of the provider census and the resultant experience 
of providers' training programs. In the current ESRD market, home 
dialysis training is a small percentage of the activity at any single 
center; therefore, the level of expertise needed to develop certain 
skills and cost benefits is unattainable for many. As an alternative to 
the current model, many have identified the need for regional home 
training centers that service a network of traditional dialysis 
centers. Yet regional training centers are not the norm because centers 
do not want to refer patients to other programs for fear of losing the 
patient and their corresponding revenue. The commenter stated that CMS 
should strive to

[[Page 77866]]

eliminate barriers to establishment of regional training centers. For 
example, modification of ESRD facility certification processes to allow 
for a CMS certified management service organization that provides 
transitional care, home dialysis training, and home dialysis ongoing 
management under a traditional management services construct could 
dramatically improve scale, skill, etc. The outsourcing of training and 
transitional care of incident patients or those moving from one 
modality to another would allow the ``home and transition care'' to be 
done in specialized programs that are contracted by the patients' 
originating centers. Coordination of care would occur naturally, as 
training centers could focus exclusively on the best means of providing 
home training and transitional care, without threatening the interests 
of patients' originating center in retaining home patients. Smaller 
centers, unable to support the requirements of home training services 
mandated by the Conditions for Coverage would likely be willing to 
refer patients for training, without fearing that their patients will 
be lost to another center. Under this paradigm, patients benefit by 
getting access to true centers of excellence for home dialysis training 
and support, physicians benefit by placing the care of their patients 
in the most expert hands, and providers benefit by having access to 
therapy services that may otherwise be economically infeasible due to 
scale, geography or other limiting factors.
    Response: We appreciate the suggestions with regard to regional 
training centers and other training delivery models. While these 
comments are out of scope of this final rule, we will consider them for 
future rulemaking.

III. Final 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 Social Security 
Act (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) of the Act 
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) 
of the Act.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals With Acute Kidney Injury (AKI)

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. In that proposed rule, 
for the Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals with Acute Kidney Injury (AKI), we proposed several payment 
policies in order to implement subsection (r) of section 1834 of the 
Act and the amendments to section 1881(s)(2)(F) of the Act. We received 
approximately 30 public comments on our proposals, including comments 
from ESRD facilities; national renal groups, nephrologists and patient 
organizations; patients and care partners; manufacturers; health care 
systems; and nurses.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the Coverage and 
Payment for Renal Dialysis Services Furnished to Individuals with AKI. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.

C. Final 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 proposed 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) of the Act. 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) of the Act because the individuals do not have 
ESRD. We proposed to codify the statutory definition of individual with 
acute kidney injury at 42 CFR 413.371 and we solicited comments on this 
definition.
    The comments and our responses to the comments for this proposal 
are set forth below.
    Comment: Many individual commenters as well as dialysis nursing 
associations, dialysis industry associations, and a large dialysis 
organization supported the legislation allowing the coverage of and 
payment for renal dialysis services furnished to individuals with AKI 
in an ESRD facility. The commenters believe that it will decrease 
inpatient hospital lengths of stay and hospital-acquired infections, 
utilize the resources available in the outpatient setting, and that 
this access will be paramount to the care of beneficiaries with 
multiple co-morbidities, frequent procedures or diagnostics, and 
specialist visits. These commenters also believe that access to these 
services in ESRD facilities for beneficiaries with AKI is important in

[[Page 77867]]

the management of patients with delayed graft function post-kidney 
transplant when patients may need dialysis until the transplant begins 
to function. One individual commenter expressed gratitude that these 
policies will assist patients if their kidney disease progresses and 
they ultimately must make the emotional and clinical transition to 
maintenance dialysis at the ESRD facility.
    Response: We appreciate the support and agree that these policies, 
described in detail below, provide individuals with AKI the option to 
receive dialysis in either the hospital outpatient department or, if 
able, in their community ESRD facility. We would like to note that this 
benefit is for beneficiaries already Medicare eligible, that have AKI 
and need dialysis. Specifically, needing dialysis for AKI does not 
entitle these individuals to Medicare and is not the same as being 
certified as ESRD and initiating life-sustaining maintenance dialysis.
    Comment: Many commenters, including dialysis industry organizations 
and a health system, support the proposed definition of an individual 
with AKI. Industry organizations commended CMS for its recognition and 
acknowledgement of the unique acute medical needs of the AKI 
population, noting that AKI dialysis patients are, by definition, in a 
transitory state. The commenters indicated that utilization of renal 
dialysis services furnished to beneficiaries with AKI may substantially 
differ from that of patients with ESRD in other ways.
    One industry organization commented that CMS should reaffirm the 
distinct needs of AKI patients and support the flexibility for 
physicians to determine the classification, frequency of treatment, and 
types of services provided to these patients. A dialysis organization 
stated that the most meaningful definition for an AKI patient would be 
``a patient needing dialysis who does not require acute inpatient care 
for whom the nephrologist believes that there is a reasonable chance of 
kidney function recovery, and for whom the nephrologist therefore 
declines to sign the form 2728 (the physician's certification that a 
patient has reached stage 5 chronic kidney disease, or end-stage renal 
disease)''. A patient advocacy group recommended that CMS convene a 
technical expert panel of dialysis clinicians, nephrologists, and 
beneficiary organization to discuss how AKI patients can have 
guaranteed access to this new benefit.
    Response: We appreciate commenter's support of the CMS definition 
of AKI. We also acknowledge the alternative definitions suggested. We 
continue to believe that the definition set forth in the statute 
provides an appropriate way to distinguish an individual with AKI from 
an individual with ESRD. We believe the broad nature of the definition 
ensures access to renal dialysis services in an ESRD facility to those 
beneficiaries that have an acute loss of renal function.
    Final Rule Action: After review and consideration of our proposal, 
the statute, and the comments, we are finalizing Sec.  413.371 as 
proposed in the regulation text 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) of the Act.
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) of the Act. We proposed 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. The ESRD PPS 
per-treatment base rate is 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 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) of the Act, 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 proposed to codify the AKI dialysis 
payment rate in our regulations at 42 CFR 413.372 and solicited comment 
on this proposal.
    The comments and our responses to the comments for this proposal 
are set forth below.
    Comment: A health system and an industry group support the proposed 
payment rate but believe that the AKI payment rate should not include 
legislative and policy decisions that directly impact ESRD PPS 
services, but not AKI services.
    Response: We believe that the statute was clear in that we would 
pay ESRD facilities for renal dialysis services furnished to 
beneficiaries with AKI in the amount of the ESRD PPS base rate. 
Specifically, we believe the statute requires us to utilize the wage-
adjusted ESRD PPS base rate as the payment rate for AKI. As discussed 
below, ESRD facilities will receive payment based on Part B fee 
schedules for other items and services that are not considered to be 
renal dialysis services. In addition, and also discussed below, there 
is no weekly limit on the number of treatments that will be paid. We 
continue to believe that these payment considerations are sufficient 
for Medicare payment of renal dialysis services furnished to 
beneficiaries with AKI and as these services evolve we can address any 
changes in future rulemaking.
    Final Rule Action: Therefore, for CY 2017 and subsequent years, we 
are finalizing the AKI dialysis payment rate as set forth in Sec.  
413.372 as proposed.
    The CY 2017 final ESRD PPS base rate is $231.55. Accordingly, we 
are finalizing a CY 2017 payment rate for renal dialysis services 
furnished by ESRD facilities to individuals with AKI as $231.55.
    Comment: An industry organization commented that the ESRD Network 
fee should not be removed from the AKI payments since Networks focus on 
ESRD, not AKI.
    Response: Thank you for bringing the ESRD Network fee portion of 
payment to our attention. We agree with the commenter that section 
1834(r) of the Act, as added by section 808(b) of TPEA does not give 
CMS the authority to reduce the AKI payment rate by the 50

[[Page 77868]]

cent network fee. Specifically, section 1881(b)(7) of the Act provides 
that ``[t]he Secretary shall reduce the amount of each composite rate 
payment under this paragraph for each treatment by 50 cents . . . and 
provide for payment of such amount to the organizations (designated 
under subsection (c)(1)(A) of this section) for such organizations' 
necessary and proper administrative costs incurred in carrying out the 
responsibilities described in subsection (c)(2) of this section''. This 
language provides that (1) the reduction can only be taken from the 
payment provided for in section 1881(b)(7) of the Act--the composite 
rate--a payment system that was later subsumed by the ESRD PPS and (2) 
the reduction can only be used for the costs incurred in carrying out 
the network organization's responsibilities in (c)(2), which pertain to 
the ESRD population. After consideration of the comment and review of 
the statutory provision, we will not apply the per treatment reduction 
of $0.50 to the AKI dialysis payment rate.
    Comment: MedPAC expressed concern regarding the payment rate 
variance for furnishing outpatient dialysis to AKI beneficiaries in a 
hospital outpatient department as compared to the ESRD facility and 
suggested that this variance may cause Medicare and beneficiaries to 
pay more than necessary. MedPAC suggested that CMS should not pay more 
in one setting versus another for the same treatment.
    Response: We appreciate MedPAC's comments regarding site-neutral 
payment, however, section 808(b) of TPEA did not address payments to 
hospital outpatient departments for dialysis furnished to beneficiaries 
with AKI.
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) of 
the Act, as adjusted by any applicable geographic adjustment factor 
applied under section 1881(b)(14)(D)(iv)(II) of the Act. 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 proposed to apply the same 
wage index that is used under the ESRD PPS that is based on the most 
recent pre-floor, pre-reclassified hospital wage data collected 
annually under the inpatient prospective payment system that are 
unadjusted for occupational mix to the AKI dialysis payment rate. 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. We explained in the 
CY 2017 ESRD PPS proposed rule (81 FR 42821) that the AKI dialysis 
payment rate would be adjusted by the wage index for a particular 
facility in the same way that the ESRD PPS base rate is adjusted by the 
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 proposed 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.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Several commenters supported the proposal to apply the 
same wage index that is used under the ESRD PPS to the AKI dialysis 
payment rate.
    Response: We appreciate the commenters' support.
    Final Rule Action: We are finalizing application of the wage index 
to the AKI dialysis payment rate and the accompanying regulation at 
Sec.  413.372(a) as proposed.
4. Other Adjustments to the AKI Payment Rate
    Section 1834(r)(1) of the Act 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) of the Act) by any other 
adjustment factor under subparagraph (D) of section 1881(b)(14) of the 
Act. For purposes of payment for AKI dialysis, we did not propose 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 did not propose to apply any of the optional payment 
adjustments under subparagraph (D) of section 1881(b)(14) of the Act. 
We proposed to codify our authority to adjust the AKI payment rate by 
any of the adjustments under section 1881(b)(14)(D) of the Act in our 
regulations at 42 CFR 413.373.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: A large dialysis organization and dialysis industry 
associations supported CMS' decision not to apply ESRD-based case-mix 
adjusters to the AKI dialysis payment rate. Another dialysis industry 
group explained that the ESRD case-mix adjusters were not designed to 
target the costs involved in treating individuals with AKI.
    A health system disagreed with the CMS' proposal of paying the ESRD 
base rate with no adjustments and expressed that the AKI patients cost 
substantially more than ESRD patients. The commenter suggested that CMS 
develop an AKI adjustor to be applied to the ESRD PPS base rate. A 
dialysis industry association suggested that in the future, CMS apply 
patient and facility-level adjustments to the AKI dialysis payment 
rate, similar to how CMS adjusts for ESRD beneficiaries.
    Response: We appreciate the thoughtful comments on the adjustments 
to the ESRD PPS base rate applicable to the AKI dialysis payment rate 
and we will consider the suggestions for future rulemaking. As 
discussed above, the AKI dialysis payment rate will be the finalized 
ESRD PPS base rate adjusted by the wage index that is used under the 
ESRD PPS. We are not adjusting the payment amount by any other factors 
at this time, but may in future years.
    With regard to the higher costs associated with AKI patients as 
compared to ESRD patients, we are finalizing a policy of paying for all 
treatments provided to a patient, without applying the monthly 
treatment limits applicable under the ESRD PPS. We are also finalizing 
a policy to pay separately for all items and services that are not part 
of the ESRD PPS base rate. Once we have substantial data related to the 
AKI population and its associated utilization, we will determine the 
appropriate steps toward further developing the AKI payment rate.
    Final Rule Action: After consideration of the comments we are 
finalizing our authority to adjust the AKI dialysis payment in the 
regulations text at Sec.  413.373 as proposed.
    Comment: One individual commenter asked CMS to clarify how 
treatments for patients with AKI would count toward the attestation for 
the Low-Volume Payment Adjustment (LVPA) and asked if the 4,000 limit 
should be increased to account for the impact of this new policy.
    Response: Since the implementation of the LVPA, we have indicated 
that for purposes of determining eligibility for the LVPA (defined in 
Sec.  413.232(b)), ``treatments'' mean total hemodialysis

[[Page 77869]]

equivalent treatments, that is, Medicare and non-Medicare. Since the 
total treatment count includes all treatments furnished by the ESRD 
facility regardless of payer, we believe that AKI dialysis treatments 
also count toward the number of treatments furnished by an ESRD 
facility and should be reported to the MAC in the facility's 
attestation for the LVPA. More information regarding the eligibility 
criteria of the LVPA is available in the Medicare Benefit Policy Manual 
(Pub 100-02, chapter 11, section 60.B.1 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c11.pdf)). At 
this time, we do not believe that the eligibility criteria for the LVPA 
need to be changed, however we will monitor utilization of the LVPA for 
future refinements. Facilities should include AKI dialysis treatment in 
their counts for purposes of the LVPA.
5. Renal Dialysis Services Included in the AKI Payment Rate
    Section 1834(r)(1) of the Act provides that the AKI 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. We proposed 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 proposed 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 proposed to 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 proposed to pay for these 
items and services separately when they are furnished to beneficiaries 
with AKI receiving dialysis in ESRD facilities. We proposed to codify 
this policy at 42 CFR 413.374(b).
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Generally, commenters agreed with the proposal to consider 
renal dialysis services as defined in Sec.  413.171 to be renal 
dialysis services for AKI patients. However, some commenters expressed 
concern that over time the adequacy of the ESRD PPS base rate for such 
services may be questionable. Specifically, dialysis nursing 
organizations, an individual, and an LDO commented that it is important 
for CMS to recognize that AKI patients utilize treatments, drugs, labs, 
and other services differently than ESRD beneficiaries. For example, 
AKI patients may require more frequent laboratory services, antibiotic 
administration, and infection monitoring. The commenter further warned 
that these patients may be more likely to miss treatments due to 
recurrent illnesses, hospital-based treatments, or debility. The 
commenters suggested that CMS work with the dialysis community to 
determine if the AKI payment rate should be adjusted for adequacy as a 
result of more frequent utilization in the future.
    The commenters cautioned CMS that when analyzing historic 
utilization that the data may not be representative of the actual 
prevalence of AKI patients who require dialysis. A dialysis industry 
association urged CMS to closely track the utilization of items and 
services that patients with AKI dialysis receive that are in the bundle 
because the utilization could be higher.
    A dialysis industry organization supported CMS' decision not to 
modify payment until there is more experience with these patients in 
the ESRD facility setting. Another dialysis industry organization 
concurred with CMS' intent to monitor separately billable services for 
appropriate utilization and urges CMS to strike a careful balance 
between monitoring and recognizing that utilization will be higher. A 
different dialysis industry organization commented that CMS should 
reaffirm the distinct needs of AKI patients and be supportive of 
flexibility for physicians to determine AKI versus ESRD classification, 
frequency of treatment, and the types of services provided.
    Response: We appreciate the comments from stakeholders regarding 
the utilization of drugs, labs, and other services by patients with 
AKI. We continue to believe that since the basis of payment is the ESRD 
PPS base rate, payment for renal dialysis services is accounted for 
through the per treatment AKI dialysis payment rate. Additionally, as 
discussed below, other items and services furnished to beneficiaries 
with AKI are separately payable.
    We acknowledge the commenters' concerns regarding AKI patients' 
more frequent use of renal dialysis services when compared to ESRD 
beneficiaries. We encourage the reporting of all items and services 
furnished to beneficiaries with AKI. We also expect ESRD facilities to 
continue to report all services that are furnished to ESRD 
beneficiaries. We plan to monitor the utilization of these items and 
services to support any necessary changes in future rulemaking.
    With regard to the flexibility for physicians to determine when an 
AKI patient has regained kidney function, or whether the transition 
must be made to ESRD treatment, we agree that this is a medical 
decision that should be supported by lab tests and a dialysis 
scheduling protocol, including withdrawing dialysis to determine the 
extent of recovery of renal function. The goal of AKI should be to have 
the kidneys return to normal functioning.
    Comment: Several commenters, including dialysis industry 
associations and large dialysis organizations, are supportive of the 
CMS proposal to pay separately for 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.
    Response: We appreciate the support on this issue. We continue to 
believe what commenters have explained, that AKI patients have various 
treatment needs and outcomes that may not be the same as an ESRD 
patient. We acknowledge that this distinction between the two 
populations is important and will monitor the

[[Page 77870]]

utilization of items and services along with health outcomes.
    Final Rule Action: After consideration of public comments, we are 
finalizing in Sec.  413.374(a) 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 are also finalizing in Sec.  413.374(b) that 
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.

D. 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.

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 did not propose 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 proposed 
to allow ESRD facilities to furnish vaccines to beneficiaries with AKI 
and bill Medicare in accordance with billing requirements in the 
Medicare Claims Processing Manual (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 solicited comment on the proposal for ESRD 
facilities to administer vaccines to beneficiaries with AKI.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Many commenters, including dialysis nursing organizations, 
dialysis organizations, and dialysis industry associations applauded 
CMS for proposing to pay for all treatments provided to AKI patients in 
a week and suggested that we finalize the policy as proposed. One 
dialysis physician association and a couple of dialysis organizations 
requested that CMS clarify that both peritoneal dialysis (PD) and 
hemodialysis (HD) modalities will be available to these patients and 
that the beneficiaries should be allowed to complete their PD treatment 
at home.
    Response: We thank the commenters for their support. We continue to 
believe and expect to continue to see through monitoring initiatives 
that individuals with AKI will only need dialysis for a finite number 
of days while they recover from kidney injury. As we stated above, we 
recognize that the intent of dialysis for patients with AKI is curative 
as opposed to long term. Therefore, we are finalizing the policy to 
provide payment for all hemodialysis treatments furnished to 
beneficiaries with AKI in a week, even if the number of treatments 
exceeds the 3 times-weekly limitation we apply to HD treatments 
furnished to beneficiaries with ESRD.
    With regard to the commenter's concern regarding modalities, we 
agree with commenters that individuals with AKI should have the 
ability, if they are candidates, for other modalities of dialysis while 
they are in the facility. Therefore, in response to commenters we will 
apply our policy of payment for AKI dialysis to both in-center PD and 
HD. We are finalizing payment for both of these dialysis modalities 
furnished to individuals with AKI in a week, including peritoneal 
dialysis when clinically appropriate, when the dialysis is furnished in 
the ESRD facility. Further discussion regarding home dialysis is below.
    Comment: Many commenters supported the policy proposals regarding 
uncompleted dialysis treatments and vaccine administration. One 
dialysis industry organization requested additional clarification in 
regard to the ESRD policies that do not apply to AKI. Another dialysis 
industry group encouraged CMS to work with the community to understand 
the specific treatment needs of this population.
    Response: We thank the commenters for their support regarding our 
policies on vaccine administration and uncompleted treatments. We are 
finalizing these policies as proposed.
    With regard to the commenter's suggestion to clarify the ESRD 
policies that do not apply to AKI, as we stated below, we anticipate 
that most of the policies laid out in Chapter 8 of the Medicare Claims 
Processing Manual will also apply to claims for dialysis furnished to 
individuals with AKI. In the timeframe available for the implementation 
of the payment for dialysis furnished to individuals with AKI, we 
believe that it is prudent to move into CY 2017 with payment policies 
that ESRD facilities are accustomed to following. As we monitor 
utilization of renal dialysis services and other items and services 
that the ESRD facilities furnish to individuals with AKI, we plan to 
engage the dialysis community to determine through rulemaking the 
continuation or discontinuation of certain policies which are or are 
not applicable to this population.
    Comment: One dialysis industry association urged CMS to consider 
adding renal dialysis services furnished to individuals with AKI to the 
list of telehealth eligible services.
    Response: Telehealth services are Part B benefits that are outside 
of the scope of the ESRD PPS, and therefore, outside of the scope of 
this final rule. We note that telehealth dialysis services are limited 
to renal dialysis services for home dialysis patients. For more 
information on telehealth services, we refer readers to the Medicare 
Claims Processing Manual Chapter 12, section 190. (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c12.pdf). As 
discussed below, we do not believe at this time that it is appropriate 
for individuals with AKI to be trained to perform home dialysis. The 
dialysis industry has repeatedly shared with us

[[Page 77871]]

that this population of patients is unstable and needs close physician 
supervision while they receive renal dialysis services. The literature 
characterizes this population as needing meticulous attention to fluid, 
acid-base, and electrolyte balance, as well as the removal of uremic 
toxins (http://www.uptodate.com/contents/use-of-peritoneal-dialysis-for-the-treatment-of-acute-kidney-injury-acute-renal-failure).
    Comment: A dialysis industry association suggested that CMS use the 
data when dialysis is initiated for individuals with AKI for purposes 
of determining transplant wait-list priority status and Medicare 
entitlement for patients who transition from AKI to ESRD. This 
commenter urged CMS to explicitly include the transplant recipients who 
develop AKI and need dialysis after having a functional allograft, in 
the rules governing delivery of care, reporting, and conditions for 
coverage for individuals with AKI and on dialysis as they believe the 
restoration of allograft function in transplant recipients with AKI 
dialysis is a critical outcome.
    Response: We appreciate the comments related to individuals with 
AKI dialysis and kidney transplantation as well as the request for 
clarification. If an individual has had a kidney transplant and is just 
receiving temporary dialysis for AKI, then facilities could receive 
payment for their services under the AKI benefit, provided the 
beneficiary meets the criteria for being an AKI patient. If however, 
the beneficiary is a kidney transplant recipient and they're beginning 
a regular course of dialysis because their ESRD has returned, then 
they'd be entitled to the ESRD benefit. Dialysis furnished to kidney 
transplant recipients would be covered, whether the dialysis is 
necessary because of AKI or ESRD. With regard to AKI beneficiaries who 
develop AKI after having a functional allograft and need dialysis. We 
note that payment would be made for dialysis furnished to these 
beneficiaries under this policy.
    Comment: An individual commenter believes that CMS should not 
restrict renal dialysis services furnished to individuals with AKI to 
the ESRD facility and should allow for home dialysis. They believe that 
this particularly impacts patients with ambulation problems, with an 
immunosuppressed status, or those that reside in a long term care 
facility. This comment is in direct contrast to a comment received from 
a patient advocacy organization, a large health system, a dialysis 
industry association, and dialysis nursing organizations who agree with 
our proposal to limit AKI dialysis to in-center treatments since most 
AKI patients will not use home dialysis because the modality takes time 
to initiate. An LDO suggested that CMS specifically define requirements 
for patients that reside in a facility that could be designated as a 
home. A dialysis industry organization requested that CMS reconsider a 
blanket rejection of home dialysis care pointing out that PD, initially 
begun in the facility, could be appropriate in the home and would be 
particularly helpful to patients for whom transportation is a 
challenge.
    Response: We appreciate the feedback regarding allowing AKI 
patients to dialyze at home. This policy decision is one that we will 
monitor for future changes. Multiple sources in the industry, however, 
including, physicians, patient advocacy groups, and dialysis 
organizations of all sizes, have communicated to us that this 
population of patients is unstable. Some commenters stated that 
patients require close attention while they receive their dialysis, 
which is why alternatively the service was primarily available in the 
hospital outpatient setting prior to the TPEA amendments. In addition, 
based on the data we have received, at this time we believe that this 
population will dialyze primarily in an ESRD facility. Therefore we are 
finalizing as proposed. However, as we gather data on the AKI 
population and the extent of home training necessary to safely self-
administer PD in the home, we may consider the use of PD in the home 
for the AKI patient in the future as we may find that there are be 
subsets of patients whose injury may lend itself, after an initial 
treatment period, to PD in the home. (http://www.uptodate.com/contents/use-of-peritoneal-dialysis-for-the-treatment-of-acute-kidney-injury-acute-renal-failure).
    Final Rule Action: We will keep this option as one to consider in 
the future.

E. 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 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 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.
    The comments and our responses to the comments for this approach 
are set forth below.
    Comment: An LDO and dialysis industry associations encouraged CMS 
to consult with stakeholders regarding monitoring of these patients and 
to also be transparent regarding AKI utilization data collected for 
payment and delivery of AKI services. Another dialysis industry 
association appreciated that CMS recognizes the importance of 
monitoring and suggests that a monitoring add-on payment is 
appropriate. A third dialysis industry association commented that 
nephrologists and other dialysis caregivers should implement active 
measures to promote and to monitor renal recovery.
    Response: We appreciate the support on this issue. We will be 
developing formal monitoring programs for utilization to inform future 
payment policy. When we refer to monitoring, we are referring to data 
review based on claims data, not physician monitoring. Physician 
oversight for these beneficiaries would be included in the AKI dialysis 
payment rate or payable through the appropriate fee for service 
benefit, if not a renal dialysis service. We will develop public use 
files for the utilization of these services, but do not anticipate that 
this data will be available for at least 1 year. If stakeholders have 
data, we would welcome the receipt of that data.

F. 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

[[Page 77872]]

matters to ensure that all ESRD patients receive safe and appropriate 
care. We proposed 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), and are 
finalizing this change as proposed.
    We did not propose changes to the CfCs specific to AKI, but did 
request comment from the dialysis community as to whether revisions to 
the CfCs might be appropriate for addressing treatment of AKI in ESRD 
facilities. We received 11 timely comments addressing this issue and 
thank the commenters for their input. While we are not formally 
responding to the comments at this time, the comments are summarized 
(with some clarification on our part), below.
    All commenters agreed that we do not need to revise the ESRD CfCs 
to address AKI at this time. About half of the commenters recommended 
that we not revise the CfCs to directly address AKI at all, while the 
remaining commenters suggested we consider revisions to requirements 
addressing the comprehensive patient assessment, care planning, 
modality options, and transplantation. A few commenters recommended 
that we not revise the ESRD CfCs to address AKI because AKI and ESRD 
are different diseases. We understand the reasoning behind this 
statement but wish to clarify that the ESRD CfCs apply to ESRD 
facilities, not to ESRD patients, and note that the ESRD CfCs would be 
the appropriate regulatory location for standards addressing care 
provided to AKI patients in ESRD facilities.
    We thank the commenters, and will consider their comments for 
future rulemaking and regulatory guidance.

G. 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.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Industry organizations, an LDO, and an MDO made claims 
processing and cost report modification suggestions. Another industry 
organization commented that reimbursement policy should be clearly and 
unequivocally conveyed to all MACs. Another industry organization 
agrees with the creation of a specific payment code and corresponding 
Current Procedural Terminology code to distinguish AKI patients from 
ESRD patients. Another industry organization made suggestions for 
modifications to the cost report. Yet another industry organization 
suggested the CMS develop an intake form, a treatment form, and a 
recovery form with data elements specific to AKI.
    Response: We appreciate the thorough and thoughtful responses 
provided in regards to claims processing and cost report changes. We 
have completed a similar analysis and administrative guidance will be 
forthcoming. The usage of other forms will be considered for future 
updates as well.

H. 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 proposed 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 welcomed comments on 
announcing the AKI payment rate for future years.
    The comments and our responses to the comments for this proposal 
are set forth below.
    Comment: We received several comments from industry organizations 
encouraging CMS to allow for notice and comment rulemaking when 
updating the AKI payment rate.
    Response: Because we believe we are required under section 1834(r) 
to utilize the ESRD PPS base rate as adjusted by the wage index, we do 
not believe it is necessary to adopt that rate through notice and 
comment rulemaking as we don't believe we have discretion to adopt an 
amount other than that, except to the extent that we apply other 
payment adjustments to that amount. As noted above, any methodology 
changes or payment adjustments that are applied to the AKI dialysis 
payment rate will be adopted through notice and comment rulemaking.
    Final Rule Action: We are finalizing the announcement of the AKI 
payment as proposed and revising the regulations text at Sec.  413.375 
to reflect this proposal.

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 final rule 
discusses each of these elements and our policies for their application 
to the ESRD QIP.

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

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with

[[Page 77873]]

a comment period that ended on August 23, 2016.
    In that proposed rule, for the ESRD QIP, we proposed updates to the 
ESRD QIP, including updates for the PY 2018 through PY 2020 programs. 
We received approximately 50 public comments on our proposals related 
to the ESRD QIP, including comments from large dialysis organizations, 
ESRD facilities; national renal groups, nephrologists, patient 
organizations, patients and care partners, manufacturers, health care 
systems; nurses, and other stakeholders.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the ESRD QIP. Comments 
related to the paperwork burden are addressed in the ``Collection of 
Information Requirements'' section in this final rule. Comments related 
to the impact analysis are addressed in the ``Economic Analyses'' 
section in this final rule.
    We received comments about general policies and principles of the 
ESRD QIP. The comments and our responses are set forth below.
    Comment: Many commenters expressed concern about CMS' continued 
reliance on process measures and recommended that CMS seek to use risk-
adjusted outcome measures that capture the effective management of 
dialysis patients. Commenters stressed that CMS should strive to adopt 
evidence-based measures that promote the delivery of high-quality care 
and improved patient outcomes. Commenters also stressed the importance 
of working with stakeholders in the nursing community when developing 
and implementing measures because nephrology nurses in particular are 
integral to the collection and processing of quality improvement data 
and it is vitally important to represent their perspective during the 
measure development and implementation process.
    Many commenters raised particular concerns about the lack of 
measures in the QIP that adequately address the needs of the pediatric 
population or of home hemodialysis patients. They argued that the 
current measurement criteria do not take their unique needs into 
consideration. Commenters asked CMS to ensure that the reporting 
structure is viable for all providers, whether they service patients 
in-center or at home. Many of the smaller facilities enter data 
manually into CROWNWeb, and commenters argued that given the current 
structure of the QIP, many pediatric facilities in particular are 
unable to participate. They recommended that CMS focus its attention on 
aligning quality metrics and value-based programs with the goal of 
achieving a high quality of care for pediatric patients. One commenter 
argued that it is counter-productive to subject providers who care for 
unique populations to penalties for not achieving results which are 
unrealistic in their populations.
    Response: We appreciate the commenters' commitment to the adoption 
of evidence-based measures that address high-quality care and improved 
patient outcomes. We share this commitment, which is why we've made an 
effort to incorporate measures that address patient experiences of 
care, readmissions and hospitalizations, and bloodstream infections. We 
hope to continue this trend in the future. We are cognizant of the 
issues around adequately assessing the quality of care provided for 
pediatric and home hemodialysis patients and we continue to investigate 
options to more effectively incorporate measures relevant to those 
patient populations. We continue to believe that existing data sources 
used to capture data for calculating ESRD QIP measures, (that is, 
CROWNWeb and NHSN) are viable for facilities that provide home as well 
as in-center hemodialysis, because they utilize web-based applications 
that can be accessed with a personal computer. Facilities providing 
home dialysis should also not experience any undue burden using claims 
to report clinical data if they are also able to submit claims for 
reimbursement.
    Comment: One commenter questioned why CMS believed it was necessary 
to develop Dialysis Facility Compare in addition to the QIP, because 
the commenter believes having two quality systems may lead to confusion 
for beneficiaries and their families. The commenter recommended that 
CMS align measurement methodologies and reporting requirements across 
CMS ESRD quality programs or, in the alternative, move toward using one 
quality measurement system that could be based on a reasonable number 
of outcomes-based performance measures as this would reduce 
administrative costs and confusion.
    Response: The ESRD QIP and Dialysis Facility Compare program have 
different purposes, which in certain cases necessitates divergent 
measure specifications and scoring methodologies. However, we 
continuously review measure specifications and scoring methodologies 
across the programs and will continue to create alignments where 
appropriate. The recently developed ESRD Measures Manual may help ease 
some of the confusion for facilities because it provides a 
comprehensive list of detailed measure specifications. The ESRD 
Measures Manual can be found here: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/CMS-ESRD-Measures-Manual-Final-v1_0.pdf.
    Comment: One commenter sought additional information about whether 
any data collected under the ESRD QIP measure set shows the impact of 
these measures on patient outcomes or Medicare spending on patients 
with ESRD.
    Response: We thank the commenter for their question. Unfortunately, 
with so many interdependent factors influencing the quality of care 
provided at dialysis facilities (for example, payment policies in the 
prospective payment system, FDA labeling policies, and independent 
advancement in the treatment of ESRD), it is difficult to disentangle 
the impact of ESRD QIP policies from other policies and developments in 
the field. CMS is actively monitoring the impact of ESRD QIP measures 
on the quality of care received by patients with ESRD, and has yet to 
identify any unintended consequences caused by policies or measures 
implemented by the program. In the future, as more studies are 
conducted and results become available, we will consider releasing 
these types of monitoring studies for review by the community.
    One objective measure we can examine is the improvement of 
performance standards over time. Table 2 below shows that as the ESRD 
QIP has refined its measure set and as facilities have gained 
experience with the measures included in the program, performance 
standards have generally continued to rise. We view this as evidence 
that facility performance is objectively improving. It remains 
difficult to disentangle these results from the impact of the ESRD QIP 
policies or those of other policies and developments in the field, but 
they show a steady rise in the quality of care received by patients 
with ESRD.

[[Page 77874]]



                             Table 2--Improvement of Performance Standards Over Time
----------------------------------------------------------------------------------------------------------------
             Measure                  PY 2015         PY 2016         PY 2017         PY 2018         PY 2019
----------------------------------------------------------------------------------------------------------------
Hemoglobin > 12 g/dL............              1%              0%
Vascular Access Type:
    % Fistula...................             60%           62.3%          64.46%          53.51%          53.72%
    % Catheter..................             13%           10.6%           9.92%          16.79%          17.06%
Kt/V:
    Adult Hemodialysis..........             93%           93.4%          96.89%          91.08%  ..............
    Adult, Peritoneal Dialysis..             84%           85.7%          87.10%          75.42%  ..............
    Pediatric Hemodialysis......             93%             93%          94.44%          84.16%  ..............
    Pediatric Peritoneal          ..............  ..............  ..............          43.22%  ..............
     Dialysis...................
Hypercalcemia...................  ..............            1.7%           1.30%           3.92%           4.21%
NHSN Bloodstream Infection SIR..  ..............  ..............  ..............          1.812%           1.812
Standardized Readmission Ratio..  ..............  ..............           0.996           0.996           1.276
Standardized Transfusion Ratio..  ..............  ..............  ..............           1.470           1.470
----------------------------------------------------------------------------------------------------------------

    Comment: One commenter expressed concerns that if the ESRD QIP 
continues to take payment reductions from facilities, some facilities 
may be forced to close. They added that accountability for the outcomes 
facilities can influence is appropriate but it is important that CMS 
not become overzealous in its implementation of new measures.
    Response: Section 1881(h) of the Act requires that we implement the 
ESRD QIP program each year. We have carefully constructed policies 
related to each of the requirements specified in Section 1881(h). Our 
policies related to payment reductions for the ESRD QIP have been 
constructed 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. The largest payment reduction the ESRD QIP 
applies is 2 percent of a facility's total payment for the year. 
Additionally, we finalized a Small Facility Adjuster which ensures that 
small facilities are not adversely impacted by their small number of 
patients or by any outlier patients who may adversely impact their 
scores on quality measures included in the program. We believe the ESRD 
QIP's scoring methodology combined with payment reductions is the best 
way to ensure that facilities are held accountable for the care that 
they provide and are only penalized for providing care to their 
beneficiaries which does not meet a certain threshold. 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.
    Regarding commenter's concern that facilities may be forced to 
close based upon the ESRD QIP's payment reductions, we have reviewed 
data on facility closures from 2008 through 2013 and we have seen a 
steady decrease in the number of facilities that have closed from 80 in 
2010 to 56 in 2013. We recognize that the absolute number rose slightly 
from 45 in 2012 to 56 in 2013. However these numbers must be looked at 
in context. As a percentage of the total number of dialysis facilities 
nationwide, the number of facilities closing each year is not 
significant. Additionally, facility closures cannot be definitively 
attributed to any single factor. The ESRD QIP policies may play a small 
role in these numbers, but many other factors, both within and outside 
of healthcare, have an impact. Table 3 below shows the number of 
facilities closed from 2008 through 2013.

                               Table 3--ESRD Facility Closures, 2008 Through 2013
----------------------------------------------------------------------------------------------------------------
                                                Closed facilities
-----------------------------------------------------------------------------------------------------------------
       2008               2009               2010               2011               2012               2013
----------------------------------------------------------------------------------------------------------------
             50                 82                 80                 72                 45                 56
----------------------------------------------------------------------------------------------------------------

    Comment: Several commenters expressed concerns about the number of 
measures included in the QIP and about the addition of more measures, 
and argued that too many measures dilute the impact of quality 
programs. One commenter suggested that with the current measure set, 
patients are no longer being held responsible for their own care and 
urged CMS to consider more measures that assess patient compliance with 
treatment and medication. Another recommended that CMS look into 
developing a system to allocate Medicare benefits for patients 
depending on their responsibility in their medical treatment and care. 
One commenter argued this dilution of measure impact is evidenced by a 
close examination of the measure weights CMS proposed for PY 2020. 
Specifically, the small percentage assigned to each measure means that 
critical measures such as reducing catheter use are weighted in a 
similar manner to measures of less importance, such as the 
hypercalcemia clinical measure, which is ``topped out'' under the 
criteria previously finalized by the ESRD QIP. Commenters encouraged 
CMS to refrain from continuing to develop more measures and instead to 
work on finding a small set of measures to use in the program on an 
ongoing basis. One commenter encouraged CMS to pause its measure-
development efforts in favor of working with the entire kidney care 
community (as opposed to a small group of TEP members) in order to 
identify a small set of core measures that matter. Commenters 
recommended that new measures be limited to evidence-based outcomes 
measures that promote the delivery of high-quality care and improved 
patient outcomes, and that they should be the most impactful measures. 
One commenter also stressed

[[Page 77875]]

that CMS should consider which measures might be ready to be retired 
from the program, and they pointed out that critically important 
measures, such as the VAT: Catheter measure, are competing for 
percentage points with other measures that have less clinical 
significance to patients. This work would likely require addressing 
some of the underlying problems with existing measures. For example, 
commenter urged CMS to focus on developing a new bone mineral 
metabolism measure before pursuing other measure development to make 
sure the statutory requirement in PAMA is met.
    In developing this core set of measures, commenters urged CMS to 
adopt a set of minimum global exclusions that would be automatically 
applied to all measures. Specifically, they recommended the following 
exclusions: (1) Beneficiaries who die within the applicable month; (2) 
Beneficiaries who receive fewer than 7 treatments in a month; (3) 
Beneficiaries receiving home dialysis therapy who miss their in-center 
appointments when there is a documented good faith effort to have them 
participate in such a visit during the applicable month; (4) Transient 
dialysis patients; (5) Pediatric patients (unless the measure is 
specific to pediatric patients); and (6) Kidney transplant recipients 
with a functioning graft. Additionally, commenter asked that CMS 
clarify that beneficiaries must have treatment for at least 60 days to 
be assigned to a facility. One commenter added that CMS should 
particularly consider the needs of small facilities, pediatric 
patients, and patients who have received a transplant when developing 
exclusions which would apply across the board.
    Response: We understand that there are a number of measures we 
proposed to be added to the ESRD QIP for PY 2019 and PY 2020. Although 
we recognize that adopting more measures in the ESRD QIP increases 
costs to facilities as well as CMS, we believe these increased costs 
are outweighed by the benefits to patients of incentivizing quality 
care in the domains that the measures cover. We are constantly re-
examining the measures that are included in the program to ensure that 
they are capturing a variety of information about the care that 
patients receive, and we carefully consider whether measures should be 
retired from the program. In an effort to ensure that the impact of the 
program is not diluted and that each measure receives an appropriate 
weight, we are finalizing changes to the weighting of measures and of 
the measure domains for both PY 2019 and PY 2020. We believe the 
weights we are finalizing will preserve the program's strong incentives 
for facilities to achieve high scores on the clinical measures and to 
fully and accurately report data for the reporting measures. In future 
years of the program, we will consider the feasibility of including 
measures that assess patient compliance with treatment and medication.
    As we stated in the CY 2015 ESRD PPS Final Rule (79 FR 66164), we 
considered applying these six global exclusion criteria in response to 
comments on the CY 2014 ESRD PPS proposed rule (78 FR 72192). We agree 
with commenters that exclusion criteria for the ESRD QIP measures 
should be consistent, where feasible. We further believe, however, that 
exclusions also need to take into account the population to which a 
measure applies and the settings for which the measures were developed 
(for example, in-center hemodialysis as opposed to home hemodialysis). 
As stated in previous rules, we will continue to look for ways to align 
exclusion criteria for measures in the ESRD QIP, as long as there is 
evidence to support such consistency.
    Comment: One commenter made several recommendations regarding the 
preview period and the Performance Score Report (PSR) provided to 
facilities as part of the preview period. First, commenter recommended 
that CMS consider lengthening the preview period from 30 to 60 days, 
because smaller facilities find it difficult to review their scores in 
detail, research patients and labs, write up comments and questions and 
submit formal inquiries within 30 days. Second, commenter requested 
that the PSR be updated to include the number of eligible patients and 
patient-months for each measure and for each facility rather than just 
including the number of patient-months. Third, commenter requested that 
CMS consider including new measures in the PSR the first year the 
measure is included in the QIP without counting scores towards a 
facility's TPS so that facilities may see how they would be scored and 
how they would rate but they could be given time to work on internal 
improvement before the new measure is officially finalized. Commenter 
also noted this would also give facilities time to prepare and update 
necessary billing system changes, policies and procedures and record-
keeping/patient forms. Fourth, commenter requested that CMS release 
summary statistics each year about the Preview Period--specifically, 
how many formal inquiries are received, how many are received from each 
dialysis organization, how many are overturned and how many result in 
score changes, and how many systemic changes are approved. Finally, 
commenter requested that the PSR be updated to include actual numerical 
percentages rather than ``requisite percentages'' because this would 
avoid many questions and would help personnel understand how measures 
are scored.
    Response: We thank the commenter for their suggestions on ways to 
improve the Preview Period experience for facilities as well as ways to 
ensure that the PSR provides as much helpful information to facilities 
as possible. We will consider the feasibility of implementing some of 
these recommendations in future years of the program.
    Comment: One commenter questioned why CMS must make so many changes 
each year to the ESRD QIP Program--specifically, why new measures must 
be added, why the scoring methodology is changed, why new exclusion and 
eligibility criteria are added each year, etc. and argued that these 
changes are overly demanding and burdensome for facilities.
    Response: As new policies are implemented and new measures are 
added to the program, we are continually evaluating the program to 
ensure that we are capturing a broad range of information about the 
care that dialysis facilities are providing to patients and to ensure 
that our policies are in line with the goals we are seeking to achieve. 
As measures undergo maintenance and are evaluated by measures 
developers and by the NQF, new exclusion and eligibility criteria are 
added to ensure that each measure is specified appropriately to include 
only those patients who should be included in the measure's numerator 
and denominator. As these changes are incorporated into the program, 
other changes must follow, but we seek to provide facilities with as 
much notice as possible through rulemaking and other means of 
communication so that they are given appropriate time to make necessary 
changes within their own programs and policies.
    Commenter: One commenter asked whether CMS will allow Calcium, 
Phosphorus, and Kt/V to be obtained from outside sources the way 
hemoglobin (Hgb) is able to be collected from outside sources.
    Response: In response to the commenter's question, Calcium, 
Phosphorus, and Kt/V can all be obtained from outside sources in the 
same way that Hgb can be collected from outside sources. In fact, in 
the CY 2013 ESRD PPS Final Rule (77 FR 67473), we finalized that if a 
patient is hospitalized or transient during a claim

[[Page 77876]]

month, the facility could monitor the serum calcium and serum 
phosphorus readings for that patient for the month if a patient has 
labs drawn by another provider/facility, those labs are evaluated by an 
accredited laboratory (a laboratory that is accredited by, for example, 
Joint Commission, College of American Pathologists, AAB (American 
Association of Bioanalysts), or State or Federal Agency), and the 
dialysis facility reviews the serum calcium and serum phosphorus 
readings. The Kt/V can also be obtained from outside sources in the 
same way, provided those same conditions are met.

C. Requirements for the Payment Year (PY) 2018 ESRD QIP

1. 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). In that rule we 
proposed 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, in this year's rule making we proposed 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 sought comments on this proposal. The comments and our responses 
to comments are set forth below.
    Comment: One commenter expressed concerns about the SFA, arguing 
that the inclusion of very small sample sizes leads to many facilities' 
scores being driven more by luck than by actual performance, and 
stressed that this effect is particularly exacerbated for the 
standardized ratio measures.
    Response: We thank the commenter for their concern regarding the 
SFA. We want to clarify that this adjuster provides a positive 
adjustment to eligible small facilities' measure scores which we 
believe is sufficient to counteract the negative effects of a small 
patient census on facility scores.
    Final Rule Action: We are finalizing our proposal 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. The purpose of this policy change is to ensure that small 
facilities are not adversely impacted by outlier patients and that 
facilities are being fairly scored on their actual performance 
regardless of their size.
2. 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 3-month 
study period.
    We proposed 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 of 2014 (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 sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters requested clarification regarding the 
technical specifications for the Hypercalcemia Clinical Measure, noting 
that there is an apparent discrepancy. Specifically, they asked whether 
the exclusion ``patients without at least one uncorrected serum calcium 
value at that facility during the 3-month study period'' should be 
applicable for PY's 2017 through 2020.
    Response: We understand why there may be some confusion, however 
there is no real discrepancy in the technical specifications published 
at the time of the proposed rule. The technical specifications for PY 
2017 are correct, and do not include the exclusion ``patients without 
at least one uncorrected serum calcium value at that facility during 
the 3-month study period'' because the updates to the measure were 
proposed for PY 2018 and future years. The PY 2018 Technical 
Specifications published at the time of the proposed rules reflected 
the change that we proposed. We note below that we are now delaying 
implementation of this change until PY 2019, so updated Technical 
Specifications for PY 2018 are now published on the CMS Web site. The 
Technical Specifications proposed for PY 2019, published at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/PY-2020-NPRM-NHSN-Dialysis-Event-tech-spec-for-PY-2019.pdf only included specifications for the measure being 
added to the program for PY 2019 (that is, the proposed NHSN Dialysis 
Event Reporting Measure's Specifications). The Technical Specifications 
proposed for PY 2020 included all measures previously finalized for 
inclusion in the ESRD QIP for PY 2020, as well as the substantive 
changes described above

[[Page 77877]]

which we proposed for the Hypercalcemia Clinical Measure.
    Because we are now finalizing the changes proposed to the 
Hypercalcemia Clinical Measure for PY 2019, we have provided updated 
Technical Specifications for PY 2018 at https://www.cms.gov/Medicare/Quality-INitiatives-Patient-Assessment-Instruments/ESRDQIP/index.html. 
The Technical Specifications that we are finalizing for PY 2019 and PY 
2020 already contain these changes to the measure.
    Comment: One commenter recommended that CMS consult with 
stakeholders to determine whether a different Performance Standard 
should apply to Home Dialysis patients for the Hypercalcemia Clinical 
Measure, because the commenter believes the standards established in 
the rule are difficult for home dialysis programs to achieve due to 
dependence upon patient adherence and compliance. While in-center 
hemodialysis patients are generally given their medication through IV 
while they are in the dialysis center, home dialysis patients need to 
pick up their medications and adjust dosing as directed.
    Response: We thank commenter for their recommendation. However, 
``hypercalcemia is usually an inadvertent complication of the 
management of CKD mineral and bone disorder, so therapy should be 
focused on preventing the development of sustained serum calcium 
greater than 10.2 mg/dL. The TEP felt that the measure's threshold 
(>10.2 mg/dL) addressed concerns about adverse events in patients that 
exceeded the upper limit of normal and therefore was a safety concern 
for all ESRD patients. That safety concern, we argue, is irrespective 
of whether patients are on in-center hemodialysis or home peritoneal 
dialysis therapies (home HD, or PD), and we note that the TEP did not 
consider for discussion separate thresholds based on modality. Based on 
the TEP's reasoning, we feel there is an expectation that facilities 
are responsible for ensuring home dialysis patients as well as in-
center patients avoid elevated calcium levels ``above the normal 
range'' as per clinical practice guideline recommendations. [KDIGO 
2009]. As such, we believe it is appropriate to include home dialysis 
patients in the denominator of the hypercalcemia measure.
    Comment: Several commenters expressed concerns that the 
Hypercalcemia clinical measure is not impactful and is not the best 
indicator of clinical care because it is topped out and recommended 
that CMS instead focus its measure development efforts on developing 
and testing a more appropriate measure to meet the statutory 
requirement of PAMA, particularly in light of NQF's conclusion that 
there is very little room for improvement and that the performance gap 
identified by the developer did not warrant a national performance 
measure. One commenter specifically argued that the Hypercalcemia 
measure should not be characterized as a measure specific to conditions 
treated with oral-only drugs because Hypercalcemia is not only treated 
with oral-only drugs and because it may sometimes be treated with a 
calcimimetic when calcium levels have risen due to treatment with 
active Vitamin D, which is typically given intravenously during 
hemodialysis.
    Commenters also asserted that the measure provides no value to the 
patient and does not relate to the provision of quality care. Despite 
these concerns, they expressed an understanding that maintaining this 
measure in the ESRD QIP measure set meets the statutory requirements of 
PAMA, and encouraged CMS to work with the kidney care community to find 
replacement measures. They added that CMS should continue to track 
hypercalcemia, but stated that linking hypercalcemia to specific 
medications without including the influence of active Vitamin D is 
problematic and unlikely to produce reliable data. In the interim, 
commenters expressed support for the proposed changes to the measure to 
ensure that the measure continues to satisfy NQF recommendations, but 
urged CMS to continue monitoring the Food and Drug Administration's 
(FDA's) approach to new injectables because that may require CMS to 
reconsider its approach.
    Response: We thank the commenters for their comments. Hypercalcemia 
is the only measure of which we are aware that meets the statutory 
requirements in PAMA for an NQF-endorsed quality measure of conditions 
treated with oral-only medications. The measure has been recommended 
for reserve status endorsement by the NQF in part because of its 
utility as an important safety measure for dialysis patients. The NQF 
recommends measures for ``reserve status'' when they are ``highly 
credible, reliable, and valid measures that have high levels of 
performance due to quality improvement actions. The purpose of reserve 
status is to retain endorsement of reliable and valid quality 
performance measures that have overall high levels of performance with 
little variability so that performance could be monitored in the future 
if necessary to ensure that performance does not decline.'' \1\ While 
hypercalcemia (as defined in the measure's technical specifications, as 
the serum calcium level of 10.2) is not a common complication among 
ESRD patients, it is still associated with elevated risks for 
mortality, suggesting that when it occurs, it can have serious 
consequences for patients.
---------------------------------------------------------------------------

    \1\ Glossary of Terms, National Quality Forum, https://www.qualityforum.org/Measuring_Performance/.../NQF_Glossary.aspx.
---------------------------------------------------------------------------

    We recognize that the Hypercalcemia measure is not a comprehensive 
measure of all oral-only medications, but limitations in available 
evidence have prevented us from developing measures that might address 
oral-only medications more broadly used in the ESRD dialysis 
population. We will continue to work with the community to develop more 
comprehensively applicable measures that meet these requirements. Three 
TEPs have been convened in 2006, 2010, and 2013 to address the topic of 
mineral bone disease measures, but the limited clinical evidence 
available has prevented those panels from recommending any measures 
that identify elevated levels of parathyroid hormone (PTH) or 
phosphorus. We have consulted with the dialysis community on this 
matter and will continue to do so, but we are unaware of any other 
specified and NQF-endorsed measure that would meet the requirements in 
PAMA. As evidence evolves to support more comprehensive measures of 
conditions treated by and these measures earn consensus endorsement, we 
agree that it will be appropriate to carefully consider the role of the 
Hypercalcemia measure in the ESRD QIP.
    Comment: One commenter expressed concerns about the effect the 
proposed changes to the Hypercalcemia clinical measure may have on 
facilities' TPSs and requested that CMS evaluate the impact of these 
changes on facility scores to ensure that no facility is penalized due 
to a change in methodology.
    Response: We have conducted additional analyses, the results of 
which are published here: https://www.cms.gov/Medicare/Quality-INitiatives-Patient-Assessment-Instruments/ESRDQIP/index.html. An 
analysis of the effect the changes to the Hypercalcemia clinical 
measure will have on payment reductions shows that only 11 additional 
facilities would receive a payment reduction under the new methodology 
compared to the old methodology. Table 4 below shows

[[Page 77878]]

simulated payment reductions for PY 2020 using the old Hypercalcemia 
methodology (on the left) and the new Hypercalcemia methodology (on the 
right).

      Table 4--PY 2020 Simulated Payment Reductions Comparing Prior
       Hypercalcemia Methodology to New Hypercalcemia Methodology
------------------------------------------------------------------------
                                   Simulated payment   Simulated payment
                                   reductions for PY   reductions for PY
            Reduction              2020 using prior     2020 using new
                                     hypercalcemia       hypercalcemia
                                  methodology (N(%))      methodology
------------------------------------------------------------------------
0/5.............................  3322 (55.2%)......  3311 (55.0%).
0.5%............................  1552 (25.8%)......  1538 (25.5%).
1.0%............................  823 (13.7%).......  832 (13.8%).
1.5%............................  255 (4.2%)........  269 (4.5%).
2.0%............................  69 (1.2%).........  71 (1.2%).
------------------------------------------------------------------------

    Comment: One commenter expressed concern that the ESRD QIP has not 
adopted a measure specific to bone mineral disorder. The commenter 
noted that CMS correctly identified calcimimetics and phosphate binders 
as two types of oral-only drugs but argued that CMS incorrectly 
identified the three conditions that are treated with these two classes 
of drugs, and encouraged CMS to continue looking at measures specific 
to Chronic Kidney Disease (CKD) Mineral Bone Disease (MBD) broadly. 
They specifically recommended a composite measure which would focus on 
the three biochemical parameters associated with Chronic Kidney Disease 
Mineral Bone Disease: Calcium, phosphorous, and PTH, rather than 
focusing on one individual biochemical parameter in isolation.
    Response: We thank the commenter for raising concerns about 
adopting measures specific to bone mineral disorder. At present, we 
have two measures that address mineral bone disorder (MBD). We 
finalized a measure of hypercalcemia (NQF #1454) beginning with the PY 
2016 program and we are finalizing the implementation of a phosphorus 
reporting measure (NQF #0255) beginning with PY 2020.
    The 2013 Mineral and Bone Disorder TEP recognized the current 
limited evidence supporting development of a new MBD measure. They 
repeatedly raised the issue of the overall lack of evidence that was 
available due to the lack of randomized clinical trials that exist in 
order to inform recommendations for proposed measures, and meet the 
criterion of scientific acceptability. The TEP did discuss the strength 
of evidence regarding PTH as a risk factor in light of recent 
randomized trials including EVOLVE (2012) and the ADVANCE study 
(2011).\2\ The TEP lacked agreement over the strength of the evidence 
but also concluded that these two trials are the current strongest 
bodies of evidence that exist since the 2010 TEP was convened. The 2013 
TEP recognized that the previously cited problem with PTH assay 
variability could be overcome if the same assay is used each time; and 
that given the normal physiologic oscillations in PTH, measurement 
should be conducted more often to minimize variability. To that end, 
the TEP recommended a process measure that included documenting 
measurement of PTH and documentation of assay used. This measure still 
needs to undergo testing once required data elements are available for 
collection from dialysis facilities via CROWNWeb, or another system.
---------------------------------------------------------------------------

    \2\ Raggi P, Chertow GM, Torres PU, et al. ``The ADVANCE study: 
A randomized study to evaluate the effects of cinacalcet plus low-
dose vitamin D on vascular calcification in patients on 
hemodialysis.'' Nephrology, dialysis, transplantation: Official 
publication of the European Dialysis and Transplant Association--
European Renal Association (2011) 26; 1327-39. PMID 21148030.
    EVOLVE Trial Investigators, Chertow GM, Block GA, et al. 
``Effect of cinacalcet on cardiovascular disease in patients 
undergoing dialysis.'' The New England journal of medicine (2012) 
367:2482-94. PMID: 23121374.
---------------------------------------------------------------------------

    The 2013 TEP members agreed that the combination of laboratory 
values (PTH with calcium and phosphorus) may be more predictive of 
mortality, but since each lab value changes individually, it would be 
very difficult to make a recommendation based on a combination. It 
should also be noted that, the kidney care community would more readily 
support such a composite measure if each constituent measure were NQF 
endorsed. Previously one PTH measure, and two phosphorous measures were 
submitted to NQF (in 2010). These measures, respectively, were not 
endorsed due to the lack of evidence supporting a PTH target or range, 
and similarly lack of evidence to support a target for phosphorous. The 
suggested composite measure may be conceptually satisfying, but we are 
concerned that we lack sufficient evidence to justify implementing such 
a measure at this time.
    Comment: One commenter objected to the continued inclusion of the 
hypercalcemia measure in the QIP and encouraged CMS to consult with 
stakeholders to develop a more appropriate measure specific to the 
conditions treated with oral-only drugs. One commenter added that until 
CMS develops and implements a more suitable measure, calcimimetic 
agents should not be included in the ESRD PPS base rate.
    Response: We continue to believe that the hypercalcemia measure 
most effectively meets current statutory requirements as defined by 
MIPPA to include measures of mineral metabolism, and by PAMA, to 
include measures specific to conditions treated with oral-only drugs 
that are NQF-endorsed. As far as we are aware, there are no other 
clinical performance measures that currently meet these criteria.
    Comment: One commenter opposed the implementation of technical 
changes to the Hypercalcemia Clinical Measure for PY 2018 and 
recommended a delay until PY 2019 because facilities are currently in 
the performance period for PY 2018. They argued that it is 
inappropriate to change the technical specifications half way through a 
performance period.
    Response: We thank the commenter for their suggestion, and we agree 
that it would be unfair to facilities to make this change for PY 2018, 
given that the changes were not proposed until over half way through 
the performance period. The substantive modifications to the 
Hypercalcemia clinical measure were made during the NQF measure 
maintenance process that concluded at

[[Page 77879]]

the end of last year, and while we believe it is crucial to keep 
measures in the ESRD QIP measure set consistent with NQF-endorsed 
specifications, we also recognize that notice should be given to 
facilities prior to making such substantive changes. The changes to the 
Hypercalcemia Clinical Measure will not affect the way in which 
facilities provide care to their beneficiaries or the reporting 
requirements for the measure. Rather, this change will affect the way 
this measure is calculated because the denominator definition has 
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. Eligible facilities that do not report data for 3 
consecutive months will be included in both the numerator and 
denominator for this measure's calculations. Functionally, facilities 
do not need to make any changes in response to the changes proposed.
    Final Rule Action: In consideration of the comments received, we 
are finalizing the changes to the hypercalcemia measure's technical 
specifications for PY 2019 and future years, rather than for PY 2018 as 
proposed. We note that these changes will positively impact data 
completeness, as facilities typically use plasma calcium blood tests 
and including patients with unreported calcium values in the measure 
calculation will encourage more complete data. Lastly, these measure 
changes will ensure alignment with NQF and satisfy the statutory 
requirements set forth in PAMA.

D. Requirements for the PY 2019 ESRD QIP

1. New Measures for the PY 2019 ESRD QIP
a. 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 Centers for Disease Control and 
Prevention (CDC); and (2) submit 3 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 to80 
percent of dialysis events are under-reported.3 4
---------------------------------------------------------------------------

    \3\ 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.
    \4\ 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. 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 in the 
proposed rule (see sections IV.C.2. and IV.C.8. of the proposed rule 
(81 FR 42824)), 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.
    Beginning with PY 2019, we proposed that 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 proposed 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;

[[Page 77880]]

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.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters did not support the proposal to 
reintroduce the Expanded NHSN Dialysis Event Reporting Measure, calling 
into question the validity and reliability of the clinical measure. 
They argued that the 60-80 percent of under-reporting of dialysis 
events demonstrates that the NHSN BSI Clinical Measure is not valid, 
and added that with that lack of validity comes uncertainty about 
whether the measure results in accurate findings. They argued that CMS 
should not finalize the measure, because giving facilities extra credit 
will not move the needle in ensuring that all events are reported, nor 
will this change the difficulties facilities have in obtaining 
information from hospitals. Several commenters also urged us to include 
the NHSN BSI Measure as a Reporting Measure for PY 2018 and PY 2019, 
and discontinue the inclusion of the NHSN BSI Clinical Measure until 
reliability and validity testing of the Clinical Measure has been 
completed.
    Response: Although previous studies have suggested that 60-80% of 
bloodstream infections might be underreported to NHSN, these results 
must be considered in the proper context. First, it is important to 
note that these studies have largely attributed under-reporting to poor 
communication of reportable positive blood cultures (PBCs) from 
hospitals to dialysis centers when bloodstream infections are 
identified in hospitals. Second, these studies are based on small 
sample sizes. Although we are aware that underreporting can occur in 
all dialysis facilities, the degree of variation in underreporting 
across facilities is unknown and this is a truer reflection of the 
reliability of the ESRD QIP measure. Underreporting by itself does not 
lead to an unreliable measure.
    The NHSN BSI measure has been endorsed by the National Quality 
Forum (NQF). The quantitative centerpiece of the NQF-endorsed NHSN 
Dialysis Event Bloodstream Infection Measure is the Standardized 
Infection Ratio (SIR), which is the ratio of observed to predicted 
events. Because the SIR has withstood scrutiny from NQF, which 
explicitly considered the measure's reliability, we continue to believe 
that it is reliable enough to remain in the ESRD QIP measure set.
    We recognize that there are shortfalls in BSI ascertainment for 
purposes of reporting and that more needs to be done to improve the 
quality and completeness of data used in the NHSN BSI measure. 
Nevertheless, the measure itself remains an important tool for 
assessing the quality of care and closing performance gaps when and 
where they are identified, and there is no other measure available that 
would serve this purpose. We believe that further improvements in the 
reliability of NSHN data can be achieved through more complete 
communications between hospitals and dialysis facilities of relevant 
measure data, in particular the results of diagnostic microbiology 
testing by hospitals that are indicative of bloodstream infections in 
dialysis patients. We also believe that more robust validation of 
measure data, such as the validation approach we are finalizing, offer 
additional safeguards against incomplete case finding and shortcomings 
in measure data. Additionally, the CDC has encouraged dialysis 
providers, especially large dialysis organizations, to perform a 
validation of their own data. The CDC has provided a validation 
toolkit, available for any facility to use on its own. The goal of the 
validation, whether performed internally or by an external observer, is 
to improve the quality of the data. Taking all these considerations 
into account, we believe that on balance the ESRD QIP and patients' 
interests are best served by retaining the NHSN BSI measure in the ESRD 
QIP measure set.
    Comment: Several commenters supported the reintroduction of the 
NHSN Dialysis Event Reporting Measure, as well as the continued 
inclusion of the NHSN BSI Clinical Measure and creation of the NHSN BSI 
Measure Topic as BSIs are serious events in ESRD patients. They argued 
that the integrity of the data that is submitted is essential for 
accurate analysis and benchmarking to improve BSI prevention, and that 
underreporting can be a serious hindrance to the data accuracy. One 
commenter suggested that scoring should be modified to incentivize 
reporting only for 12 complete months of data, awarding no points for 
incomplete reporting. One commenter recommended that CMS ensure 
facilities that are accurately reporting are not singled out as having 
worse outcomes because of being engaged in quality improvement projects 
and to develop a process whereby CMS would provide monthly feedback to 
providers so they can identify inconsistencies in their own reporting. 
One commenter also recommended that both the CDC and CMS should 
validate the data in a timely manner, and that NHSN data should be bi-
directional such that a facility could review submitted data, analyze 
it to determine why there are inconsistencies, and make any necessary 
corrections to their process.
    Response: We thank commenters for their support and we agree that 
this approach will appropriately address bloodstream infections in ESRD 
patients. We agree that the integrity of the data submitted is 
essential for accurate analysis and benchmarking and that is precisely 
the reason we have taken the approach proposed. We hope that by 
incentivizing complete reporting, we will obtain as much information as 
possible to accurately

[[Page 77881]]

analyze and benchmark the data for the NHSN BSI Clinical Measure, and 
by incentivizing the reduction of infections among facilities' 
patients, we will encourage facilities to pay close attention to these 
important events. Similarly, we believe that the increased data 
validation study we are finalizing and our updated data validation 
methodology will help us to determine the extent and types of 
underreporting that are occurring. We disagree that the scoring 
methodology should be modified to incentivize reporting only for 12 
complete months of data because there is still some value in reporting 
6-11 months of data. We believe our scoring methodology makes it clear 
that 12 complete months are ideal, but we still value the effort 
facilities are making in reporting 6-11 months of data and we believe 
it is important to recognize that through the methodology. Regarding 
commenter's suggestion to institute a bi-directional data validation 
process, NHSN data are already bi-directional. The data are immediately 
available within NHSN to be viewed and edited. CDC encourages all 
facilities to review their data on a regular basis to identify and 
correct errors. A dialysis data review tool is available here: http://www.cdc.gov/nhsn/pdfs/dialysis/3-steps-to-review-de-data-2014.pdf. It 
can be found on the following page under ``Analysis Resources to Create 
Reports'': http://www.cdc.gov/nhsn/dialysis/event/index.html.
    Final Rule Action: For the reasons stated above, we are finalizing 
our proposal to reintroduce the NHSN Dialysis Event Reporting Measure 
to the ESRD QIP beginning with PY 2019 as proposed.
b. Scoring the NHSN Dialysis Event Reporting Measure
    With respect to the NHSN Dialysis Event Reporting measure, we 
proposed to score facilities with a CCN Open Date on or before January 
1, 2017. Using the methodology described below, we proposed 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 proposed that facilities will receive 10 points for 
submitting 12 months of data. Second, we recognized, 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 stated that we would 
need at least 6 months of data in order to calculate reliable scores on 
the NHSN BSI Clinical Measure. For these reasons, we proposed 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 6 months of data. For that reason, 
we proposed that a facility will receive 0 points on the NHSN Dialysis 
Event Reporting Measure if it reports fewer than 6 months of data.
    The proposed scoring methodology for the 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.
    We sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported CMS's proposed methodology for 
scoring the proposed NHSN BSI Measure Topic and the NHSN Reporting 
Measure because it rewards dialysis facilities that have made 
investments to support robust surveillance programs by allowing for 
monthly data input. The commenter added that the proposed scoring 
methodology strongly encourages facilities to report all 12 months of 
data, which serves to improve the integrity of the data.
    Response: We thank the commenter for its support, and we agree that 
our proposed scoring methodology will encourage facilities to report 
all 12 months of data and that this will in turn improve the integrity 
of the data.
    Comment: Several commenters did not support the proposal for 
scoring the proposed NHSN Dialysis Event Reporting Measure because it 
inappropriately penalizes facilities and, combined with the proposed 
weight of the measure for PY 2019, does not accurately distinguish 
among facilities that fail to report varying amounts of data. 
Commenters noted that missing one month of reporting is not the same as 
missing 5 months, yet the proposed scoring methodology treats these 
situations the same. One commenter expressed concern about facilities 
that may miss something very insignificant for 1 month and then lose 8 
points, and recommended that the measure be scored in the same way that 
the Mineral Metabolism reporting measure is currently scored, because 
it would still encourage a facility to report 12 months. Two commenters 
argued that a sliding scale would me more appropriate. One commenter 
specifically recommended that CMS consider 0 points for 0 months of 
data, 1 point for 1-2 months of data, and so on. Another commenter 
recommended that CMS change the weight of the NHSN BSI Clinical Measure 
to make it one quarter the weight of the other clinical measures.
    Response: We thank commenters for their suggestions, however we 
disagree that the proposed scoring methodology for the NHSN Dialysis 
Event Reporting Measure inappropriately penalizes facilities. In fact, 
we believe the scoring methodology appropriately rewards facilities for 
complete reporting and for their efforts at preventing infections, and 
that this scoring approach is consistent with the ESRD QIP's goal of 
incentivizing complete and accurate reporting as well as successful 
efforts to prevent bloodstream infections appropriate given the goals 
we are trying to accomplish. Unlike the Mineral Metabolism Reporting 
measure, facilities need to report all twelve months of data to NHSN in 
order to appropriately score and baseline the NHSN BSI Clinical Measure 
because there is seasonal variability in bloodstream infection rates. A 
sliding scale would not appropriately incentivize facilities to report 
the full 12 months' worth of data, which is needed to accurately score 
the NHSN BSI clinical measure. Additionally, we do not believe that 
reporting 1-2 months' worth of data significantly contributes to 
national prevention campaigns and internal quality improvement 
initiatives, and we therefore do not believe that it is appropriate to 
allocate any points on the reporting measure for this level of 
reporting. We want to incentivize facilities to report the full 12 
months of data because without this data, the surveillance program that 
the CDC has established to monitor

[[Page 77882]]

bloodstream infections will not function to its fullest extent. Scoring 
the reporting measure on a sliding scale is therefore inconsistent with 
the need to provide strong incentives for facilities to report the full 
12 months of data. We recognize that facilities occasionally have 
difficulty accessing the NHSN system and the CDC is diligently working 
to ensure that facilities have the information and training that they 
need to report successfully, but we believe that the system functions 
appropriately and does not impose impediments that would prevent 
facilities from reporting data on a monthly basis. Although the NHSN 
BSI clinical measure cannot be scored accurately on the basis of less 
than 12 months of data, from the perspective of national prevention 
strategies and internal quality improvement initiatives, there is still 
some value in collecting between 6 and 11 months of data. This is why 
we have proposed to give facilities that do so 2 points on the 
Reporting Measure, even though they will continue to receive a score of 
zero on the NHSN BSI clinical measure.
    Final Rule Action: After consideration of the comments above we are 
finalizing the proposal for scoring the NHSN Dialysis Event Reporting 
Measure, described above, beginning in PY 2019. We believe this is the 
best way to incentivize complete and accurate reporting of NHSN data.
2. New Measure Topic Beginning With the PY 2019 ESRD QIP--NHSN BSI 
Measure Topic
    Beginning with PY 2019, we proposed to create a new NHSN BSI 
Measure Topic. We proposed that this measure topic would consist of the 
following two measures:
    (i) NHSN Bloodstream Infection (BSI) in Hemodialysis Patients, a 
clinical measure;
    (ii) NHSN Dialysis Event Reporting Measure.

We stated our belief that 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 sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Two commenters supported the proposed creation of the NHSN 
BSI Measure Topic because it encourages accurate reporting as well as 
the prevention of bloodstream infections, but one commenter recommended 
that in an effort to avoid confusion, the two measures that comprise 
the Measure Topic should be renamed to avoid referring to them as 
either ``Clinical'' or ``Reporting'' measures. They suggested instead 
that CMS change the ``NHSN Bloodstream Infection in Hemodialysis 
Patients Clinical Measure'' name to ``NHSN Bloodstream Infection in 
Hemodialysis Patients'' without referring to it as a Clinical Measure 
and suggested changing the name of the ``NHSN Dialysis Event Reporting 
Measure'' to ``NHSN Dialysis Event Surveillance'' or ``NHSN Dialysis 
Event Participation'' or even ``NHSN Dialysis Event Data Entry''.
    Response: We thank commenters for their support of the proposed 
NHSN BSI Measure Topic. However, we disagree that the names of the 
measures should be changed as the commenter recommended. The NHSN BSI 
Clinical measure is correctly referred to as a Clinical Measure because 
it measures the Standardized Infection Ratio (SIR) of BSIs among 
patients receiving hemodialysis at outpatient hemodialysis centers and 
is therefore a measure of the care being provided to beneficiaries. 
Similarly, the NHSN Dialysis Event Reporting Measure is correctly 
referred to as a Reporting Measure because it measures the number of 
months for which facilities report NHSN Dialysis Event data to the 
CDC's NHSN system and is therefore a measure of the completeness of a 
facility's data reporting. We agree with commenter that the proposed 
Measure Topic is neither purely clinical nor purely reporting, which is 
why we have proposed to place it within its own Safety Domain. However, 
the two measures that make up the Measure Topic are still fundamentally 
different in that one is a Clinical Measure and one is a Reporting 
Measure.
    Comment: In light of reliability issues discussed above, commenters 
encouraged CMS to retain the NHSN BSI Measure as a Reporting Measure, 
and to not finalize the NHSN BSI Measure Topic or the proposed addition 
of the Safety Measure Domain in the QIP until CMS can resolve issues 
surrounding reliability and validity of the Clinical Measure before 
including it in the QIP's measure set.
    Response: We thank commenters for their suggestion, however we have 
decided to finalize the NHSN BSI Measure Topic and the Safety Measure 
Domain. As discussed above, the studies conducted on the reporting of 
bloodstream infections to NHSN were largely attributed to poor 
communication of reportable positive blood cultures from hospitals to 
dialysis centers and were based on small sample sizes. We do not 
believe they are generally indicative of any issues of reliability or 
validity with the NHSN BSI measures. And we continue to believe that it 
is essential to retain the NHSN BSI clinical measure because it is 
absolutely critical to evaluate facilities' efforts to prevent 
bloodstream infections. In light of this this need to retain the NHSN 
BSI clinical measure, we continue to believe that the introduction of 
the NHSN BSI Measure Topic and the addition of the Safety domain is the 
best way to ensure complete and accurate reporting of data, while at 
the same time hold facilities accountable for preventing bloodstream 
infections.
    Comment: Commenter offered support to work with CMS to address the 
validity issues in the NHSN BSI measure and stated that ensuring the 
appropriate sharing of patient information between hospitals and 
dialysis facilities is a priority, but until that problem is solved and 
the validity of the NHSN Bloodstream Infection measure has been 
affirmed, they cannot support the proposed approach to NHSN.
    Response: We agree that it is vitally important to ensure the 
appropriate sharing of patient information between hospitals and 
dialysis facilities. We have addressed commenter's concerns about the 
validity of the NHSN BSI measure above, in section IV(D)(1)(a). 
Regarding commenter's suggestions surrounding communication between 
dialysis facilities and hospitals, we encourage facilities to implement 
processes and procedures to ensure that they are best able to receive 
information from local hospitals and that they are coordinating the 
care of their patients in the most effective ways possible.
    Comment: One commenter expressed concerns that the data 
specifications for the NHSN BSI Clinical Measure require

[[Page 77883]]

collection of events from dialysis center and non-dialysis outpatient 
laboratories. They added that this measure originated in the hospital 
setting where all cultures are sent to a single lab, but extra data 
collection efforts are needed in the dialysis setting because cultures 
are performed at a variety of sites of care. They requested additional 
data testing to show that this is actually occurring. They added that 
the providers who are complying with the data specifications will 
likely appear to have a higher infection rate as more infections will 
be captured, whereas those who are not collecting data from other 
providers may not be accurately reporting all infections.
    Response: We are aware that underreporting can occur, and in some 
studies, has been largely attributed to poor communication of 
reportable positive blood cultures (PBCs) from hospitals to dialysis 
centers. The measure did not originate in the hospital setting. It has 
always been an outpatient dialysis center measure. The reporting of 
PBCs within one calendar day of a hospital admission is a necessary 
element of the BSI measure. Without it, facilities could refer most or 
all patients to an ED or hospital for suspected BSI and the measure 
would be compromised. We recognize that obtaining this information from 
hospitals can be challenging, and requires knowledge and implementation 
of the NHSN protocol. However, CDC, CMS and other stakeholders in the 
dialysis community agree that good communication across care 
transitions is important for not just surveillance, but optimal 
clinical care of patients. ESA dose, hepatitis B status, and 
communication of antibiotics prescribed and planned duration of 
treatment are just a few examples of information that should routinely 
be shared across healthcare facilities. A positive blood culture and 
organism identification and susceptibility results are equally 
important to communicate. CDC hosts protocol trainings that users 
should attend yearly to ensure NHSN participants are aware of the 
protocol requirements. CDC has also made available data validation 
tools that facilities can use to assess their knowledge and adherence 
to the reporting protocol. Facilities are given 90 days from the end of 
a quarter (before the reporting deadline) to facilitate obtaining 
records from hospitals and EDs. CDC is working with ESRD Networks and 
others to try to improve hospital-to-dialysis center communication. 
Networks will target facilities that have challenges obtaining these 
data from hospitals to assist them in developing more effective 
communication strategies. Together, we are actively seeking best 
practice strategies that can be shared with other facilities.
    Comment: One commenter requested that the CDC and CMS address 
potential data quality issues before the NHSN BSI Clinical Measure is 
used in the QIP and specifically requested that the CDC produce a 
histogram of infection events to determine if a bimodal distribution 
exists, which would suggest data reporting issues. They also 
recommended that CMS update the data submission process for CROWNWeb to 
improve data accuracy and reduce costs. They suggested that one 
solution may be to enable dialysis providers to ``copy and paste'' 
their entire database to CMS and that CMS and CDC should release 
histograms to determine if the NHSN BSI metric is truly valid and 
should be used in the QIP as currently structured.
    Response: We thank commenter for their suggestions and we will 
consider developing histograms of this nature for future analysis. We 
are constantly seeking ways to improve data accuracy and to reduce 
costs for facilities. We will take commenter's ideas about improving 
the data submission process for CROWNWeb into consideration for future 
updates of the CROWNWeb system.
    Comment: A commenter requested that CMS establish a minimum 
threshold for data submission completeness before using CROWNWeb data 
for the ESRD QIP or for other purposes and suggested that this could be 
accomplished by comparing the number of Medicare beneficiaries at a 
given facility who have claims with the number of patients with 
accepted data in CROWNWeb. One commenter also recommended that CMS 
validate patient counts against provider Electronic Medical Records to 
determine when the minimum threshold for the use of both Medicare and 
non-Medicare CW data is met.
    Response: We thank commenter for their suggestions. At this time, 
we are not proposing to establish a minimum threshold for data 
submission completeness however, as we stated in the CY 2014 ESRD PPS 
Final Rule (78 FR 72210), we encourage facilities to ensure that their 
patient censuses are accurately reflected in CROWNWeb. In this way, 
facilities can compare for themselves the number of Medicare 
beneficiaries they have seen and who have claims with the number of 
patients with accepted data in CROWNWeb attributed to their facility. 
With regards to validation, we agree that updates should be made to 
CROWNWeb to ensure that accurate data passes validation testing while 
also ensuring that inaccurate data is not used to calculate scores on 
ESRD QIP clinical performance measures, and we are in the process of 
enhancing CROWNWeb to accomplish this task. Nevertheless, facilities 
are ultimately responsible for ensuring that patient data is accurately 
reflected in CROWNWeb.
    Comment: One commenter urged CMS to change the definition of 
``positive blood culture'' for the NHSN BSI Clinical Measure to ensure 
that positive blood cultures are only counted toward the measure 
calculation if the suspected source of blood culture was ``vascular 
access,'' not any of the other three options.
    Response: As we stated in the CY 2014 ESRD PPS Final Rule (78 FR 
72205), NQF endorsed a bloodstream infection measure (NQF #1460, the 
measure upon which the proposed NHSN BSI Clinical Measure is based) 
because BSIs can be objectively identified. NQF raised concerns about 
an access-related bloodstream infection measure because determining the 
source of infections (for example, determining whether an infection was 
related to vascular access) requires subjective assessments. The NHSN 
BSI Clinical Measure avoids this subjectivity by including all positive 
blood cultures. This makes it simpler and more reliable than an access-
related bloodstream infection measure. While we recognize that the NHSN 
BSI Clinical Measure may occasionally misattribute BSIs to dialysis 
facilities, we believe that the measure's objectivity, simplicity, and 
reliability make it the most appropriate measure for assessing facility 
performance. NHSN relies upon use of standard definitions to ensure 
that infection events are reported in the same manner across 
facilities. The vast majority of reported bloodstream infection events 
represent true HAIs that are not the result of misclassification or 
misattribution. Therefore, considering the benefits to patients 
associated with strong incentives to reduce BSIs, we believe that these 
technical issues are not significant enough to warrant changing the 
definition of ``positive blood culture'' for purposes of this measure. 
CDC will continue to assess the possibility that certain facility-
related factors could systematically overestimate infection rates, and 
it will consider risk-adjusting the measure to take these factors into 
account.
    Comment: Commenter argued that when entering data for NHSN, it 
would be more logical for facilities to report the number of patients 
who were treated

[[Page 77884]]

on the last two working days of the month, not the first two. Growing 
clinics' census numbers can increase dramatically over the course of a 
month, and entering a small number on the first two days as opposed to 
a larger number on the last two days will cause the estimated amount of 
blood cultures to be lower. This then impacts facility scoring, because 
the denominator derived from the first two working days of the month is 
not representative of the patient population treated at the facility 
during that full month.
    Response: To reduce the burden of manual denominator data 
collection, the National Healthcare Safety Network (NHSN) uses the 
number of patients dialyzed at a clinic during the first two working 
days of a reporting month as a proxy measure for the total number of 
patient-days-at-risk during that month.
    In a small study, CDC compared the NHSN denominator to various 
denominator measures including the last 2 days of the month and the 
entire month using electronically captured data and found that the 
first two working days was a generally good estimate of the entire 
month denominator.
    Specifically, the results revealed a strong correlation between 
monthly total denominator and NHSN denominator and between the NHSN 
denominator and the other denominator methods [p< 0.0001].\5\
---------------------------------------------------------------------------

    \5\ Poster Abstract Session: HAI Surveillance and Public 
Reporting, October 10, 2014. https://idsa.confex.com/idsa/2014/webprogram/Paper46611.html.
---------------------------------------------------------------------------

    We note that although a ``growing clinic'' might have an NHSN 
denominator that is low in one month (if there is a drastic increase 
during that month), the denominator should be a good estimator of the 
number of patients at the facility for all subsequent months. If the 
growth is more gradual, then the NHSN denominator is still a relatively 
good estimator of the month census. The only way this would not be the 
case is if census fluctuated drastically within each month so that the 
first 2 days were always somehow different than the rest of the month 
(for example, patients always added in the middle of the month and then 
removed before the start of the next month). We have not encountered a 
systematically occurring example of this type of phenomenon.
    Comment: One commenter recommended that CMS add some patient-level 
exclusions to the NHSN BSI Clinical Measure, and specifically urged CMS 
to exclude positive blood cultures for transient patients. They also 
urged CMS to consider implementing a threshold for number of patient 
months for a facility to qualify for the NHSN BSI Clinical Measure.
    Response: NHSN is designed to capture dialysis events for all 
dialysis patients (including transient patients). BSIs are important in 
all patients, including transient patients and meeting the 
``transient'' definition does not exclude the patient from having an 
infection that could have been acquired in the dialysis center. Measure 
inclusions and exclusions were considered by the NQF when they reviewed 
and endorsed the BSI measure. NHSN has a field facilities can use to 
identify dialysis events that occurred in transient patients. This 
information can be used to inform internal QI purposes. See dialysis 
event protocol here: https://www.cdc.gov/nhsn/pdfs/pscmanual/8pscdialysiseventcurrent.pdf. We use claims to determine whether 
facilities meet the 11-patient minimum to be eligible for the NHSN BSI 
Clinical Measure.
    Final Rule Action: After considering the comments received, we are 
finalizing our proposal to include the NHSN BSI Measure Topic in the 
ESRD QIP. This new Measure Topic will consist of the NHSN Dialysis 
Event Reporting Measure and the NHSN BSI Clinical Measure, as described 
above. We believe these two measures are mutually reinforcing in that 
one measure rewards reporting and the other uses reported data to 
assess facilities' efforts to prevent dialysis events.
3. New Safety Measure Domain
    We currently use two domains in the ESRD QIP for purposes of 
scoring. The first domain, 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). Second is a Reporting 
Measure Domain, in which scores on reporting measures are weighted 
equally (79 FR 66218 through 66219).
    In section IV.C.2 of the proposed rule (81 FR 42825), we described 
the NHSN BSI Measure Topic. We believe that this measure topic, 
consisting of both the 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. Placing these two 
measures together in a single measure topic to which we can assign 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. Therefore, it does not appropriately belong in either 
the Reporting Measure Domain or the Clinical Measure Domain.
    Because of these fundamental differences, we proposed to remove the 
Safety Subdomain from the Clinical Measure Domain for PY 2019 and 
future payment years. We proposed 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 
proposed 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 in 
section IV.C.6 of our proposed rule (81 FR 42826), and note that these 
three Domain scores will be combined and weighted to produce a Total 
Performance Score (TPS) for each facility.
    We sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Several commenters supported CMS' goals of reducing BSIs 
and specifically supported the proposed creation of the new Safety 
Domain separate from the Clinical and Reporting Domains because the 
NHSN BSI Measure Topic does not belong solely in either in the 
Reporting or the Clinical Domains. They added that inclusion of both 
the Clinical and the Reporting measures for NHSN will encourage 
improvement and provide additional incentives for complete reporting.
    Response: We thank the commenters for their support, and we agree 
that inclusion of both the Clinical and the Reporting Measures for NHSN 
will encourage improvement and provide additional incentives for 
complete reporting.
    Comment: One commenter did not support CMS's proposal to establish 
a safety measure domain due to the reliability and validity issues of 
the NHSN BSI measure. The commenter further stated they do not believe 
the reintroduction of the NHSN Dialysis

[[Page 77885]]

Event Reporting Measure is appropriate or necessary, nor do they 
believe the Measure Topic is necessary and they therefore believe the 
creation of the Safety Measure Domain is also unnecessary.
    Response: We have addressed the concerns raised by the commenter 
about the reliability and validity of the NHSN BSI Clinical Measure 
above (see section IV.D.1.a.). We believe that combining the NHSN 
Dialysis Event Reporting Measure together with the NHSN BSI Clinical 
Measure in a single NHSN BSI Measure Topic, as proposed, within the 
proposed Safety Measure Domain is the best way to ensure that the 
incentives for complete and accurate reporting and for the prevention 
of BSIs are appropriately calibrated. Combining the clinical and 
reporting measure into a hybrid measure topic accomplishes this 
objective because it reflects aggregated performance and reporting 
requirements.
    Final Rule Action: After careful consideration of the comments 
received, we are finalizing our proposal to remove the Safety Subdomain 
from the Clinical Measure Domain for PY 2019 and future payment years, 
and to add a new third domain, the Safety Measure Domain, to the ESRD 
QIP's scoring methodology. We believe that this approach is the best 
way to ensure complete and accurate reporting, while also incentivizing 
facilities to lower the incidence of BSIs among their patients.
4. Scoring for the NHSN BSI Measure Topic
    We proposed to assign significant weight to the 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 
proposed 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 sought comment on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter supported CMS's proposal for scoring the 
NHSN BSI Measure Topic and believes that the 40/60 split between the 
Reporting and Clinical Measures will encourage both accurate reporting 
and strong clinical performance.
    Response: We thank the commenter for their support, and we agree 
that assigning 40 percent of the Measure Topic Score to the NHSN 
Dialysis Event Reporting Measure and 60 percent of the Measure Topic 
Score to the NHSN BSI Clinical Measure is the best way to incentivize 
both strong performance on the clinical measure and thorough and 
accurate reporting.
    Final Rule Action: Based upon the comments received, we will 
finalize the scoring for the NHSN BSI Measure Topic as proposed. We 
will assign 40 percent of the measure topic score to the NHSN Dialysis 
Event Reporting Measure and 60 percent of the measure topic score to 
the NHSN BSI Clinical Measure.
5. 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 the 
time the proposed rule was published, we did not have the necessary 
data to assign numerical values to the proposed performance standards, 
achievement thresholds, and benchmarks because we did not yet have 
complete data from CY 2015. Nevertheless, we were able to estimate 
these numerical values based on the most recent data available at the 
time. For the Vascular Access Type, Hypercalcemia, NHSN BSI and ICH 
CAHPS clinical measures, this data came from the period of January 
through December 2015. For the SRR and STrR clinical measures, this 
data came from the period of January through December 2014. In Table 5, 
we provided the estimated numerical values for all of the finalized PY 
2019 ESRD QIP clinical measures.

  Table 5--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,

[[Page 77886]]

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 proposed 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 proposed 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 sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: Several commenters supported our continued reliance on the 
methodology used to set the Performance Standard, Achievement 
Threshold, and Benchmark at the 50th, 15th and 90th percentiles 
respectively of national facility performance for PY 2019. One 
commenter requested that CMS clarify in Table 2 of the proposed rule 
(81 FR 42826) whether the Benchmarks, Achievement Thresholds and 
Performance Standards listed for the ICH CAHPS measures are the percent 
of responses or the percent of top box responses. Another commenter 
asserted that if the national average for the NHSN BSI Clinical Measure 
is 5.15, then the benchmark of an SIR of 0.0 cannot be correct.
    Response: We thank the commenter for their support. In Table 2 of 
the proposed rule (81 FR 42826), the Benchmarks, Achievement Thresholds 
and Performance Standards listed for the ICH CAHPS measures represent 
the percent of top box responses. Table 2 in the proposed rule (81 FR 
42826) indicates that the Achievement Threshold for the NHSN BSI SIR is 
1.812, the Benchmark is 0 and the Performance Standard (that is, the 
average national performance) is 0.861. These values were estimated 
numerical values using the most recently available data at the time the 
proposed rule was published, and we have ensured that they were 
calculated correctly.
    Final Rule Action: Since the time that the Proposed Rule was 
published, we have collected the data needed to calculate finalized 
performance standards for the PY 2019 ESRD QIP. After consideration of 
the comments, we will finalize the performance standards, achievement 
thresholds, and benchmarks for the clinical measures included in the PY 
2019 ESRD QIP as updated below, using the most recently available data. 
Table 6 below lists the finalized numerical values for all of the 
finalized PY 2019 ESRD QIP clinical measures.

  Table 6--Finalized 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...........................................             53.66%             79.62%             65.93%
    %Catheter..........................................             17.20%              2.95%              9.19%
Kt/V Composite.........................................             87.22%             97.74%             93.16%
Hypercalcemia..........................................              4.15%              0.32%              1.83%
Standardized Transfusion Ratio.........................              1.564              0.336              0.894
Standardized Readmission Ratio.........................              1.289              0.624              0.998
NHSN Bloodstream Infection.............................              1.738                  0              0.797
SHR measure............................................              1.244              0.665              0.967
ICH CAHPS: Nephrologists' Communication and Caring.....             56.41%             76.93%             65.87%
ICH CAHPS: Quality of Dialysis Center Care and                      52.88%             71.15%             60.74%
 Operations............................................
ICH CAHPS: Providing Information to Patients...........             72.10%             85.54%             78.54%
ICH CAHPS: Overall Rating of Nephrologists.............             49.37%             76.54%             62.17%
ICH CAHPS: Overall Rating of Dialysis Center Staff.....             48.63%             77.41%             62.24%
ICH CAHPS: Overall Rating of the Dialysis Facility.....             51.10%             80.45%             65.02%
----------------------------------------------------------------------------------------------------------------
Data sources: VAT measures: 2015 Medicare claims; SRR, STrR: 2015 Medicare claims; Kt/V: 2015 Medicare claims
  and 2015 CROWNWeb; Hypercalcemia: 2015 CROWNWeb; NHSN: CDC; SHR: 2014 Medicare claims, CAHPS: 2015 ICH CAHPS
  surveys.

6. Weighting for the Safety Measure Domain and Clinical Measure Domain 
for PY 2019
    As discussed in section IV.C.3 of the proposed rule (81 FR 42825), 
we proposed 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 (TPSs).
    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. of the 
proposed rule (81 FR 42823) 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 proposed 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 proposed 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

[[Page 77887]]

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.\6\ 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.
---------------------------------------------------------------------------

    \6\ 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 proposed to change 
the Clinical Measure Domain weighting for the PY 2019 ESRD QIP. 
Specifically, we proposed to increase the weight of the 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 also 
proposed to apportion six percent of the Clinical Measure Domain to the 
standardized readmission ratio (SRR) and In-center hemodialysis 
consumer assessment of healthcare providers and systems (ICH CAHPS) 
measures, and to apportion the remaining 5 percent to the standardized 
transfusion ratio (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 proposed to use the following 
weighting system in Table 7 below, for calculating a facility's 
Clinical Measure Domain score for PY 2019. For comparison, in Table 8, 
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 7--Proposed Clinical Measure Domain Weighting for the PY 2019 ESRD
                                   QIP
------------------------------------------------------------------------
                                    Measure weight in
                                       the clinical    Measure weight as
    Measures/Measure topics by        measure domain     percent of TPS
             subdomain               score (proposed    (proposed for PY
                                     for PY 2019) (%)      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                   19              14.25
     topic........................
    Hypercalcemia measure.........                  8                  6
------------------------------------------------------------------------
Note: For PY 2019, we proposed that the Clinical Domain will make up 75
  percent of a facility's TPS. The percentages listed in this Table
  represent the measure weight as a percent of the Clinical Domain
  Score.


  Table 8--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 as
    Measures/Measure topics by        measure domain     percent of TPS
             subdomain               score (finalized  (finalized for PY
                                     for PY 2019) (%)      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                   18               16.2
     topic........................
Hypercalcemia measure.............                  7                6.3
------------------------------------------------------------------------


[[Page 77888]]

    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 proposed a change to this policy. Specifically, for PY 
2019, we proposed 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 proposed this change in policy to avoid a situation in 
which a facility is eligible to receive a TPS when it only receives a 
score for a single measure topic. We did not propose 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 sought comments on these proposals. The comments and our 
responses for these proposals are set forth below.
    Comment: Two commenters did not support our proposal for weighting 
the proposed safety domain within the TPS or our proposal to change the 
weighting of the clinical measure domain for PY 2019. They suggested 
that CMS consider re-weighting the Subdomains in the Clinical Measure 
Domain and reduce the weight of the Patient and Family Engagement/Care 
Coordination Subdomain because the measures within this subdomain--
Readmissions and ICH CAHPS--may not have any relation with clinical 
performance. Specifically, one commenter argued that the SRR measure 
accounts for readmissions due to foot ulcers or cancer treatment and 
may have nothing to do with facility performance. Likewise, the Patient 
Satisfaction survey scores may be skewed, commenter argued, due to end 
of life grief, loss, chronic illness, anger with diagnosis, organic 
brain diagnosis or other cognitive disabilities. For these reasons, the 
commenter urged CMS to reduce the weight of the Patient and Family 
Engagement/Care Coordination Subdomain to 20 percent or less of the 
Clinical Measure Domain score and give more weight to the Clinical 
Measures themselves. One commenter also argued that the current 
weighting proposal is not balanced and recommended that CMS either 
reduce the weight of the Patient and Family Engagement Subdomain back 
to 30 percent, consider adding another measure to the subdomain, or 
reduce the number of completed ICH CAHPS surveys needed to be eligible 
for that measure.
    Response: We thank commenters for their suggestions. We proposed 
the weighting structure for several reasons, outlined in more detail in 
the proposal. We carefully considered the criteria finalized in the CY 
2015 ESRD PPS Final Rule (79 FR 66213 through 66216) to construct the 
proposed scoring methodology. Specifically, we considered the number of 
measures and measure topics within a subdomain, the experience 
facilities have had with the measures, and how well the measures align 
with CMS' highest priorities for quality improvement for patients with 
ESRD. We have weighted the SRR and ICH CAHPS measures as proposed 
because facilities will have had more experience with these measures 
than they will have had with the STrR measure, and because the focus on 
patient satisfaction and care coordination constitutes and important 
policy priority for CMS. Furthermore, we disagree with the commenters 
that the SRR measure does not have any relation with clinical 
performance. The SRR measure is carefully risk adjusted to account for 
comorbidities and patient characteristics relevant to the ESRD 
population. Additionally, while the causes of readmissions are 
multifactorial, our analyses demonstrate that facilities are able to 
exert an influence on readmissions that is roughly equivalent to that 
exerted by the discharging acute care hospital. We believe that 
coordination of care requires interaction between multiple providers, 
including those discharging the patient, and those continuing patient 
care following discharge. While cultural factors and patient 
noncompliance can lead to hospital admissions, this is no less true for 
the acute care hospitals, long-term care hospitals, inpatient 
rehabilitation facilities, nursing homes, and home health agencies, and 
it does not negate the deleterious consequences readmissions can have 
for those patients. At this time there are no additional measures that 
can appropriately be added to the Patient and Family Engagement 
Subdomain. However we are constantly working with the kidney care 
community to identify measures that are appropriate for the ESRD QIP 
program. Finally, the ICH CAHPS measure cannot be reliably scored on 
the basis of fewer than 30 completed surveys, so we do not believe it 
is appropriate to reduce this aspect of the minimum data requirements 
for the measure. It is important to note that the weight allocated to 
ICH CAHPS in the TPS will be distributed evenly throughout the measures 
on which a facility received a score, in the event that the facility 
does not obtain the 30 completed surveys needed to score the ICH CAHPS 
measure.
    Comment: Two commenters supported CMS's criteria for weighting 
measures but recommended adding three additional criteria: (1) Strength 
of Evidence; (2) Opportunity for Improvement; and (3) Clinical 
Significance.
    Response: We thank the commenters for their support. We agree with 
the commenters that these criteria encompass important considerations 
for evaluating measures. As stated in the CY 2015 ESRD PPS Final Rule 
with comment period (79 FR 66216) and the CY 2016 ESRD PPS Final Rule 
with comment period (80 FR 69063), we take these criteria into account 
when making decisions about whether to adopt a measure in the ESRD QIP, 
because it would be inappropriate to adopt a measure that did not meet 
these criteria. Based on this understanding, we developed the three 
criteria discussed above for determining subdomain weighting within the 
Clinical Measure Domain (80 FR 37849). We believe these criteria 
account for the programmatic and operational concerns associated with 
scoring facilities on the ESRD QIP while also reflecting our focus on 
improving the quality of care provided to ESRD patients. This analysis 
also implicitly includes a review of the strength of the clinical 
evidence supporting the measure, the opportunity for improvement among 
facilities, and the clinical significance of the measure because these 
issues are inextricably linked with an assessment of the measure's 
appropriateness and importance of measurement within the ESRD QIP. 
Because the additional criteria recommended by the commenter are used 
as a threshold for adopting ESRD QIP measures and are sub-components of 
the three previously finalized measure weighting criteria, we do not 
believe it would be appropriate to also factor these criteria into 
decisions about how much weight to give measures in a facility's 
Clinical Domain Score.
    Final Rule Action: After consideration of the comments, we will 
finalize the weighting structure for PY 2019 as proposed. We are also 
finalizing the new policy described above that to be

[[Page 77889]]

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. This policy will ensure that facilities will 
not be eligible to receive a TPS if they only receive a score for a 
single measure topic.
    The weights we are finalizing appear in Table 9, below:

                    Table 9--Final Clinical Measure Domain Weighting for the PY 2019 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                                                 Measure weight in the
                                                                    clinical measure        Measure weight as
             Measures/measure topics by subdomain                domain score (proposed       percent of TPS
                                                                    for PY 2019) (%)      (proposed for PY 2019)
----------------------------------------------------------------------------------------------------------------
Patient and Family Engagement/Care Coordination Subdomain.....                       42  .......................
    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, the Clinical Domain will make up 75 percent of a facility's TPS. The percentages listed in
  this Table represent the measure weight as a percent of the Clinical Domain Score.

7. Example of the Final PY 2019 ESRD QIP Scoring Methodology
    In this section, we provide examples 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, 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] TR04NO16.304


[[Page 77890]]


    Figure 2 illustrates the general methodology for calculating the 
Reporting Measure Domain score for Facility A.
[GRAPHIC] [TIFF OMITTED] TR04NO16.305


[[Page 77891]]


    Figure 3 illustrates the methodology used for calculating the 
Safety Measure Domain score for Facility A.
[GRAPHIC] [TIFF OMITTED] TR04NO16.306


[[Page 77892]]


    Figure 4 illustrates the methodology used to calculate the TPS for 
Facility A.
[GRAPHIC] [TIFF OMITTED] TR04NO16.307


[[Page 77893]]


    Figure 5 illustrates the full scoring methodology for PY 2019.
    [GRAPHIC] [TIFF OMITTED] TR04NO16.308
    
8. Payment Reductions for the PY 2019 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the 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 
estimated 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 
proposed 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 10.

[[Page 77894]]



  Table 10--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 sought comments on these proposals. The comments and our 
responses are set forth below.
    Comment: Two commenters did not support our proposed payment 
reductions for the PY 2019 ESRD QIP. One commenter expressed the 
following concerns with the proposed Scoring Methodology. First, they 
are concerned about the unresolved methodological issues surrounding 
the validity and reliability of the NHSN BSI Measure. Second, CROWNWeb 
data transmission issues remain a concern. Third, CMS seems to be 
pursuing a strategy of including ESRD QIP measures that are outside the 
dialysis facility's direct sphere of influence. One commenter argued 
that all three of these issues could result in an artificial 
deterioration in dialysis facility performance with respect to the ESRD 
QIP performance scoring, in the absence of a demonstrable change in the 
quality of care delivered. One commenter urged CMS to delay increasing 
the stringency of ESRD QIP scoring until these issues have been 
addressed. Another commenter argued that the current scoring 
methodology unfairly penalizes small facilities, particularly those 
that are affiliated with academic medical centers, and they were 
troubled by CMS's assertion that the care they provide to their 
patients is anything less than high quality. One commenter suggested 
that TPSs should not be calculated for low-volume dialysis programs 
because doing so may cause an inappropriate distribution of payments 
across facilities, which is contrary to Section 1881(h)(3)(A)(ii) of 
the Act.
    Response: We thank commenters for sharing their concerns. We have 
several policies in place designed to address the commenters' concerns. 
Specifically, the SFA is designed to ensure that small facilities, many 
of which are affiliated with academic medical centers, are not 
adversely affected by a small number of outlier patients. We have 
addressed concerns about the reliability and validity of the NHSN BSI 
Clinical Measure in section IV.D.1.a in this rule. We believe it is 
important to include even the low-volume dialysis facilities in the 
ESRD QIP and to calculate a TPS for them so that these facilities 
receive appropriate incentives to deliver high quality care to their 
patients. We are continually striving to improve the data submission 
process in CROWNWeb to make the process easier for facilities, and we 
note that low rejection rates achieved by certain batch-submitting 
organizations demonstrates that CROWNWeb is equipped to accept this 
mode of data submission. Additionally, we believe that all of the 
measures in the ESRD QIP measure set evaluate the quality of care that 
is within the dialysis facility's sphere of influence, included to SRR 
measure, because our analyses demonstrate that the facility exerts an 
influence on readmissions roughly equivalent to that exerted by the 
discharging acute care hospital. Finally, we are constantly examining 
our policies and methodologies to ensure that they fairly and 
accurately assess the quality of care provided by dialysis facilities, 
and we do not believe that the proposed payment reduction policies 
constitute increased stringency because this policy has remained 
constant since the PY 2014 program (76 FR 70282).
    Comment: Several commenters supported our continuation of the 
current policy for determining payment reductions, including the 
process for setting the minimum TPS. One commenter argued that it is 
critical to ensure that the ESRD QIP performance scoring is well 
thought-out and fair to all facilities, including low-volume facilities 
which service sicker-than average populations.
    Response: We thank the commenters for their support and we believe 
that the ESRD QIP's scoring methodology is fair to all facilities. We 
also note that we finalized the SFA specifically to ensure that low-
volume facilities are not unfairly penalized for a few outlier patients 
who could significantly impact their measure scores.
    Final Rule Action: After careful consideration of the comments 
received and an analysis of the most recently available data, we are 
finalizing that the minimum TPS for PY 2019 will be 60. We are also 
finalizing the payment reduction scale shown in Table 11.

Table 11--Payment Reduction Scale for PY 2019 Based on the Most Recently
                             Available Data
------------------------------------------------------------------------
                 Total performance score                   Reduction (%)
------------------------------------------------------------------------
100-60..................................................             0.0
50-59...................................................             0.5
40-49...................................................             1.0
30-39...................................................             1.5
0-29....................................................             2.0
------------------------------------------------------------------------

9. Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. We began a pilot data validation program in CY 2013 for the 
ESRD QIP, and 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 proposed 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

[[Page 77895]]

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 BSI 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 proposed 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 sought comments on this proposal. The comments and our responses 
for these proposals are set forth below.
    Comment: Several commenters supported our proposed changes to Data 
Validation in the ESRD QIP. One commenter specifically supported our 
proposed extension of the data validation pilot study as well as the 
proposal to validate NHSN data. They also supported our proposal to 
implement a penalty for failure to comply with the 30-day response 
window. One commenter specifically supported our proposed NHSN Data 
Validation methodology because providers do not always report dialysis 
events or do not report them in accordance with the CDC's NHSN Dialysis 
Event Protocol and they argued that this validation study, if done 
correctly, will better hold facilities accountable for the quality of 
care they provide to patients. One commenter added that validation, 
when coupled with meaningful accountability, is the best way to 
guarantee that the dialysis events of ESRD patients are reported 
accurately and appropriately.
    Response: We thank commenters for their support.
    Comment: Two commenters raised concerns that the two data 
validation studies are masked attempts at auditing quality data 
submissions and that CMS is actually conducting the study because the 
CROWNWeb validation study showed that CROWNWeb is not reliable or valid 
as a collection tool and because the NHSN BSI Measure has not been 
appropriately validated. They argued that if the actual goal of the 
validation studies is to audit facilities, then CMS should provide a 
mechanism to appeal adverse decisions before points are taken away from 
facilities' total performance scores. The commenter offered support in 
working with CMS to ensure the validity and reliability of the data 
submitted to NHSN but argued that the validation studies is not the 
appropriate way to address concerns that CMS has and asked that CMS 
state clearly in the final rule the reason that such studies are 
necessary and whether or not the purpose of them is to audit 
facilities.
    Response: As stated previously in the CY 2015 final rule with 
comment period (79 FR 66188) and the CY 2016 final rule with comment 
period (80 FR 69049), we agree that one of the purposes of the 
validation studies is to identify instances in which facilities are 
reporting invalid data either to CROWNWeb or to NHSN. However, we 
continue to believe it is inappropriate to designate the validation 
studies as ``audits'' of facility data, because the ultimate objective 
of the studies is to improve the validity of data reported to CROWNWeb 
and to NHSN, rather than to penalize facilities for reporting invalid 
data. We further note that we did not propose to penalize facilities 
for reporting invalid data for either of the validation studies. If we 
propose to do so in future rulemaking, we will consider implementing an 
appeal process that facilities can use to contest CMS determinations 
that invalid data was reported to either CROWNWeb or to NHSN. The 
purpose of these studies is not to audit facilities but to improve the 
validity of the data by identifying instances of intentional or 
unintentional under-reporting.
    Comment: One commenter suggested that CMS consider providing 
resources to state health departments so that they can conduct on-site 
data validation as this would also help with educating facility staff 
on surveillance, reporting, and infection prevention, identify areas of 
misunderstanding and improve communication, and provide technical 
assistance to facilities in reporting and data validation efforts. 
Another commenter requested that CMS release the results of the 
CROWNWeb validation study and that CMS stop using CROWNWeb as part of 
the ESRD QIP until it has been appropriately validated. Two commenters 
offered suggestions for expanding the Data Validation Studies. If 
financial barriers are a concern, the commenter suggested an 
alternative approach would be to require facilities to engage in a 
self-validation exercise module which would still be a burden of labor 
on the facility but would provide useful information to both CMS and 
the facility. They offered examples of such self-validation modules, 
available through the California Department of Public Health. One 
commenter recommended that CMS increase the size of the validation 
study to include at least 5 percent of facilities, arguing that a 
larger, more representative sample is needed for validation, especially 
considering that this data will soon be publicly available for the 
first time via

[[Page 77896]]

Dialysis Facility Compare. Another commenter specifically recommended 
that CMS perform validation on at least one percent of (or at least 70) 
facilities. They also recommended increasing the number of records 
reviewed at each facility from the 10 proposed in the rule. They also 
encouraged CMS to conduct validations of facilities that do not report 
dialysis events or that report zero events, because these non-compliant 
facilities could be skewing national averages, negatively impacting 
those facilities that do comply with the measure requirements.
    Response: We thank commenters for their recommendations about ways 
to improve the NHSN BSI validation study and increase the size of the 
study. We appreciate the commenter's recommendation to require 
facilities to conduct a self-validation module as a means to overcome 
these resource limitations, and we will consider the feasibility of 
such an approach in the future. We also appreciate the recommendation 
to provide funding to state health departments to conduct validation 
studies; we agree that these agencies have conducted very successful 
studies of this nature and will consider the feasibility of this 
approach. We also appreciate the suggestion to selectively sample 
facilities that report zero dialysis events for validation, and we will 
investigate the utility of using a non-random sample in the future. 
Unfortunately, at this time, resource limitations prevent us from 
increasing the size of the NHSN BSI Validation Study, both respect to 
the number of facilities sampled, as well as the number of records from 
each facility that are validated. We believe the proposed study 
methodology will provide the CDC and CMS with greater insights than 
previous studies because this study will yield information about the 
types of under-reporting, the extent of under-reporting and the reasons 
for under-reporting to the NHSN system. We look forward to continuing 
to refine this study to ensure that we are collecting as much reliable 
and useful data about bloodstream infections as possible.
    CDC agrees that there are substantial benefits that occur when 
health departments conduct on-site assessments of facility data and 
direct education of staff to improve surveillance practices. The CDC 
supports the suggestion of providing state health departments with 
funds to conduct data validation activities. Few states are currently 
funded via the CDC cooperative agreement (Epidemiology and Laboratory 
Capacity grant) to conduct external HAI data validation. These states 
have conducted data validation of patient safety modules that resulted 
in an improvement in states' understanding of gaps in HAI reporting, 
commonly made errors, improved partnerships and communication between 
state health departments and healthcare facilities.
    Comment: Several commenters did not support our proposal to 
decrease the response time for the NHSN Data Validation Study for 
facilities from 60 to 30 days, and argued that the reduced response 
time, coupled with the penalty for non-response, is too harsh compared 
with the problem identified by the studies, particularly in light of a 
lack of due process for facilities that are found to be non-compliant.
    With respect to the proposed reduced response time, one commenter 
argued that facilities often do not receive the faxed or written 
request for records or they are lost, leaving them with less time to 
respond to the request, and recommended that CMS instead email the 
requests to all of the NHSN users within each facility to ensure that 
the request is received. Another argued that 30 days is simply too 
short a period of time to ensure the request is received and can be 
completed. One commenter also added that providers often must obtain 
documentation from other healthcare providers in order to respond to 
the request and that 60 days is simply not enough time to receive the 
request, coordinate with other providers, and send in the required 
documentation. One commenter suggested that while the data validation 
study is ongoing, CMS should not reduce a facility's TPS since the 
purpose of the study, as commenter sees it, is to assess future 
policies to ensure the accuracy of the data submitted to NHSN.
    With regards to the penalty for non-response, commenters urged CMS 
to eliminate the proposed 10-point reduction in a facility's TPS due to 
non-compliance with the NHSN Data Validation Study for two reasons. 
First, they argued that compliance with a data validation study is 
unrelated to the quality of care provided at a facility and therefore 
is inappropriate for inclusion in a facility's TPS. Second, they 
suggested that reducing a facility's TPS score confuses and misinforms 
patients, caregivers and families about the quality of care provided at 
a given facility.
    Response: Based upon the comments received, we are not going to 
finalize the 30-day response time. Instead, we will give facilities 60 
days to respond to record requests. However, facilities should not need 
to collect records from other healthcare facilities solely for the 
purposes of the data validation record request.
    We disagree with the comment about deducting points from a 
facility's TPS for noncompliance with the CROWNWeb and NHSN validation 
studies. As stated previously at (79 FR 66189), our policy to deduct 
points from a facility's TPS is consistent with section 
1881(h)(3)(A)(i) of the Act, because it is part of our methodology for 
assessing the total performance of each provider of services and renal 
dialysis facility based on performance standards with respect to the 
measures selected. The main purpose of these studies is to assess 
whether facilities are reporting accurate data, and we have determined 
that review of medical records is integral to that determination.
    Comment: One commenter pointed out that being admitted to a 
hospital should not qualify as a reportable Dialysis Event for purposes 
of the Data Validation Study.
    Response: The validation study includes positive blood cultures 
collected or identified in patients during the first day of a 
hospitalization because these events are included in the calculations 
for the NHSN BSI clinical measure. In order to report these events, 
facilities will need to obtain medical records from hospitals that 
capture these results.
    Final Rule Action: After careful consideration of the comments 
received, we are finalizing the methodologies for Data Validation with 
one change. Specifically, we are increasing the amount of time 
facilities will have to respond to record requests for the NHSN Data 
Validation Study from 30 days to 60 days. We believe this should give 
facilities ample time to collect and submit the required records.

E. Requirements for the PY 2020 ESRD QIP

1. 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

[[Page 77897]]

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 12.

                         Table 12--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.................     \1\90.1        5.16       <0.01  Yes.
Serum Calcium >10.2...........        6257        0.91        0.32       0.049  No.................     \1\97.8        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                     3349        71.8        77.1       0.159  No.................        65.7        7.11        0.11  No
     communication 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                3349        70.9        77.4       0.215  No.................        62.0        9.92        0.16  No
     facility 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 percent-truncated mean) for measures where lower score = better performance.

    As the information in Table 12 indicates, none of these clinical 
measures are currently topped-out in the ESRD QIP. Accordingly, we did 
not propose 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 proposed 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 in section 
IV.D.2.c.i. of the proposed rule (81 FR 42838)
    We sought comments on this proposal. The comments and our responses 
for these proposals are set forth below.
    Comment: Many commenters supported the replacement of the Mineral 
Metabolism Reporting Measure with the Serum Phosphorus measure. They 
noted that NQF 0255 is topped out because of high facility performance 
and minimal room for improvement, so it's not the best indicator of 
quality, but they understand that CMS is required to comply with PAMA. 
They further encouraged CMS to work with the kidney care community to 
identify more appropriate measures to satisfy the statutory 
requirement.
    Response: We appreciate the commenters' support, and we agree that 
it would be desirable to have more robust measures on bone mineral 
metabolism. We note that neither the Mineral Metabolism nor the Serum 
Phosphorus measures can be topped out in the same sense as other 
clinical measures, because reporting measures are scored on the basis 
of how much data are reported, and clinical measures are scored on the 
basis of what the data represent. In the case of clinical measures, 
uniformly high performance indicates that the measure may no longer be 
necessary because high quality care is being delivered virtually across 
the board. In the case of reporting measures, by contrast, high levels 
of reporting do not obviate the need for the measure, because the 
measures are largely put in place to capture data on an ongoing basis.
    Comment: Commenters asked CMS for two clarifications regarding the 
proposed Serum Phosphorus Reporting Measure. First, commenters noted 
that plasma is absent from the measure title and from the measure's 
Technical Specifications, although it is mentioned in the ``additional 
information'' in the Serum Phosphorus Technical Specifications and 
recommended that the title of the measure be modified to clearly denote 
plasma as an acceptable

[[Page 77898]]

substrate and that the specifications make this abundantly clear. 
Second, commenters requested that CMS review the measure's 
specifications and standardize the exclusions between the Mineral 
Metabolism Measure and the Serum Phosphorus Measure.
    Response: We thank commenter for their suggestion, however at this 
time we are not proposing to change the title of the proposed Serum 
Phosphorus Reporting Measure. This measure is based upon an NQF-
endorsed measure, #0255 Measurement of Serum Phosphorus Concentration. 
The measure's technical specifications clearly indicate that plasma is 
an acceptable substrate and we do not believe it is necessary to 
indicate this in the title of the measure. The differences in the 
exclusions between the Mineral Metabolism Measure and the Serum 
Phosphorus measure appear in the technical specifications of the 
measures and pertain to the determination of patient eligibility (that 
is, Mineral Metabolism uses number of treatments in claims to determine 
this, but Serum Phosphorus uses days at the facility as indicated in 
CROWNWeb). As we indicated in the proposed rule, we proposed this 
change because of our intention to increasingly use CROWNWeb as the 
data source for calculating measures in the ESRD QIP and because this 
reporting measure is based upon an NQF-endorsed measure.
    Final Rule Action: After considering the comments received, we are 
finalizing our proposal to replace the Mineral Metabolism Reporting 
Measure with the Serum Phosphorus Reporting Measure beginning in PY 
2020. This measure change is consistent with our intention to 
increasingly use CROWNWeb as the data source for calculating measures 
in the ESRD QIP, and it brings measure exclusion criteria into 
alignment with other measures used in the ESRD QIP program.
2. 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 13. 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 proposed to replace the Mineral Metabolism Reporting Measure 
with the Serum Phosphorus Reporting Measure and we proposed to 
reintroduce the NHSN Dialysis Event Reporting Measure into the ESRD QIP 
measure set beginning with PY 2019.

     Table 13--PY 2019 ESRD QIP Measures Being Continued in PY 2020
------------------------------------------------------------------------
           NQF No.                   Measure title and description
------------------------------------------------------------------------
0257.........................  Vascular Access Type: AV Fistula, a
                                clinical measure.
                               Percentage of patient-months on
                                hemodialysis during the last
                                hemodialysis treatment of the month
                                using an autogenous AV fistula with two
                                needles.
0256.........................  Vascular Access Type: Catheter >= 90
                                days, a clinical measure.
                               Percentage of patient-months for patients
                                on hemodialysis during the last
                                hemodialysis treatment of month with a
                                catheter continuously for 90 days or
                                longer prior to the last hemodialysis
                                session.
N/A..........................  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.
N/A..........................  NHSN Dialysis Event Reporting Measure
                                (Proposed for PY 2019 in section
                                IV.C.1.a. of the proposed rule (81 FR
                                42823)).
------------------------------------------------------------------------

    We received general comments on the PY 2020 measure set. The 
comments and our responses for these proposals are set forth below.
    Comment: Commenter argued that the measures being proposed for 
inclusion in the ESRD QIP do not take a patient-

[[Page 77899]]

centric approach to care because they do not take into consideration 
the fact that many of these patients have multiple comorbidities and 
that dialysis is just one treatment being offered to them. Commenter 
added that the patient's primary care physician should be at the center 
of the complex care plan model used for patients with ESRD.
    Response: We thank the commenter for sharing these concerns. The 
SRR, SHR, and STrR do consider patient comorbidities through 
standardized risk adjustment models that incorporate a variety of 
comorbidities that contribute to the risk of poor health outcomes. We 
agree that a patient's primary care physician should be involved in the 
complex care planning required for many ESRD dialysis patients, and 
coordination between the facility and the primary care physician is 
part of the responsibility of the interdisciplinary team. We also 
believe that the SRR and SHR epitomize our aim to include patient-
centered measures in the ESRD QIP measure set, because these measures 
assess outcomes that deeply matter to patients, and because high 
performance on these measures requires a patient-centered orientation 
that emphasizes care coordination and special attention to patients in 
precarious situations (for example, those who are at-risk for a 
hospitalization and/or readmission).
    Comment: Two commenters argued that the technical specifications 
for the Kt/V measure, the hypercalcemia measure, and the phosphorus 
measure may be creating barriers to accessing home dialysis due to the 
ways in which they address patients who switch from hemodialysis to 
home dialysis. They recommended that CMS modify the exclusion criteria 
for these measures to remove these barriers. Specifically, commenter 
pointed out that under the current specifications, if a patient is on 
in-center HD for more than 90 days and then switches to home PD, the 
patient is included in the QIP calculation as soon as they have a PD-
related Medicare claim. The patient who switches from in-center HD to 
PD and has no Kt/V during the month is viewed as not meeting the 
standard. However, if a new patient begins dialysis as a home PD 
patient, the specs provide a 90-day grace period during which no Kt/V 
data is expected. The current specifications therefore encourage 
facilities to perform a Kt/V on PD patients during training which is 
not clinically necessary. To address this concern, commenter 
recommended that CMS modify the exclusion criteria from ``patients on 
dialysis for less than 90 days'' to ``patients on the PD modality for 
less than 90 days.''
    For Hypercalcemia and Phosphorus, commenter recommended that CMS 
modify the exclusion criteria to state: ``home dialysis patients for 
whom a facility does not submit a claim during the claim month or PD 
patients with fewer than 15 billable days or home HD patients with 
fewer than seven treatments during claim month.'' Commenter argued that 
the way the specifications are currently written, home patients are 
required to receive a lab result while in-center patients have a six-
treatment grace period. Additionally, if a home patient receives a 
treatment on the first of the month and then goes to the hospital for 
the remainder of the month, the patient-month will be counted as not 
meeting the standard. Patients are therefore being treated to medically 
unnecessary tests, and the commenter argued that this modification to 
the specifications for these measures will address this problem for 
patients who sift from in-center HD to home PD in relation to the 
hypercalcemia and phosphorus measures.
    Response: We thank the commenters for their concerns. The Kt/V 
measure does provide a longer timeline for completion of Kt/V 
assessment for a new ESRD patient beginning dialysis on PD than it does 
for a patient who has previously been on In-center HD and subsequently 
switches modality. The commenter's suggestion to change the denominator 
exclusion to ``patients on the PD modality for less than 90 days'' 
would effectively provide similar timelines for completion of the first 
Kt/V assessment. However, it is not certain that this proposed approach 
is the most appropriate one. Patients new to dialysis whose initial 
modality is PD almost always have significant residual renal function 
that allows initiation of less aggressive PD prescriptions during and 
for several weeks after initial training. Since Kt/V for PD is defined 
as a combination of both residual renal function and dialytic Kt/V, the 
contribution of residual renal function is typically substantial in 
this situation. For patients having previously been treated with In-
center HD who subsequently change modality, the likelihood of having 
persisting significant residual renal function is much lower. In this 
scenario, the clinical team may well need to provide more aggressive 
initial PD prescription to compensate for absent residual renal 
function in order to provide adequate PD. Whether or not allowing 120 
days for the provider to assess delivered Kt/V in these very different 
scenarios has not been carefully evaluated. Prior to revising the 
current specifications, more study is needed to assess the safety 
impact of this revision. Finally, the comment that the current 
specifications encourage facilities to perform a Kt/V on PD patients 
during training is not necessarily correct. The current specifications 
encourage providers to perform Kt/V as soon as possible after 
initiation of PD in order to evaluate the adequacy of the initial 
dialysis prescription in this setting where residual renal function may 
be reduced.
    With regard to hypercalcemia and phosphorus, the commenter 
describes a claims-based exclusion paradigm that is not used for the 
hypercalcemia or phosphorus measures, nor is it consistent with the DFC 
specification of Kt/V. Irrespective of modality, patients are included 
in the measures' denominator based primarily on CROWNWeb admission and 
discharge data and not primarily on the number of Medicare Claims 
treatment events. In addition, assessment of calcium and phosphorus 
concentrations and avoidance of hypercalcemia apply equally to both In-
center HD and home dialysis patients.
    Comment: Commenter expressed dismay at the fact that there is no 
health-related quality of life measure in the ESRD QIP and recommended 
that starting in CY 2018 (for PY 2020), each facility must report in 
CROWNWeb whether each eligible patient completed the KDQOL. Commenter 
argued that this is the most important measure because it is a patient-
reported outcome measure which predicts hospitalization and survival in 
dialysis patients as strongly as dialysis dose and serum albumin.
    Response: We thank commenter for their suggestion. We agree that it 
is vitally important to examine the quality of life of patients with 
ESRD, and for that reason, we have included important measures such as 
the Pain Assessment and Follow-Up Reporting Measure and the Depression 
Screening and Follow-Up Reporting Measure. The CMS Dialysis Conditions 
for Coverage already requires, under Condition 494.90, that facilities 
complete an annual psychosocial evaluation for each patient, and 
facilities typically use the KDQOL survey for this purpose. Therefore, 
adding an additional measure on how many patients receive the KDQOL 
survey for the ESRD QIP would be unnecessarily duplicative and would 
unnecessarily dilute the significance of other measures in the ESRD QIP 
measure set. We will continue working with the community to identify 
appropriate patient-reported outcome measures for use in the ESRD QIP.

[[Page 77900]]

    Comment: Several commenters supported our proposal to study the 
impact of the SRR and STrR measures on quality of care.
    Response: We thank commenters for their support and we look forward 
to sharing the results of the study with the community when they become 
available.
    Comment: Commenters generally supported the continued inclusion of 
the ICH CAHPS measure in the ESRD QIP but expressed some concerns and 
made several recommendations for improving the measure as implemented 
in the program.
    The concerns expressed by commenters include: (1) Patients need to 
be involved with the survey in a meaningful way; (2) The ESRD National 
Coordinating Center (NCC) LAN Affinity Group is in the process of 
trying to address #1; (3) Patients remain concerned with 
inconsistencies in the administration and understanding of the survey; 
(4) Patients remain concerned that while a minority of patients may see 
benefits from the results of the survey, it will not improve the 
patient experience of care or have a meaningful impact on process 
change at the facility level as it currently exists; (5) In light of 
these concerns, the current weight being assigned to this metric 
appears to be excessive. They recommended reconsideration for the 
weighting assigned to the CAHPS measure until these concerns are 
addressed.
    The changes commenters recommended include: (1) Provide a specific 
list of the exclusions that would exclude homeless patients as well; 
(2) Expand the ICH CAHPS survey to include peritoneal dialysis and home 
hemodialysis patients in future rulemaking; (3) Administer the survey 
consistent with the AHRQ specifications, including by dividing it into 
three sections that were independently tested; (4) Require that the 
survey be administered only once each year, consistent with the 
findings of the American Institutes for Research/RAND et al.; (5) 
Coordinate with the ESRD Networks to reduce duplication in its 
administration; (6) Implement a mechanism for facilities to ensure that 
patients' contact information is as accurate and up-to-date as 
possible; (7) Review the lingual translations of the surveys to ensure 
that they are accurate.
    Response: We appreciate the concerns listed by the commenters. We 
will address each one separately. (1) A specific list of the exclusions 
from the ICH CAHPS survey is published in the In-Center Hemodialysis 
CAHPS[supreg] Survey Administration and Specifications Manual, which 
can be found on the survey technical Web site, https://ichcahps.org 
under the Survey and Protocols tab. We explicitly chose not to exclude 
homeless persons based on the advice of our technical expert panel, 
which indicated that some homeless persons can be contacted for survey 
research. (2) We are considering creating an ICH CAHPS survey for home 
and peritoneal dialysis patients. However, we do not currently have 
concrete plans for this expansion. (3) The commenter suggests using the 
AHRQ specifications for administering the ICH CAHPS Survey. The AHRQ 
specifications are not designed to support public reporting of survey 
data. The CMS specifications are much more detailed because they are to 
ensure, to the extent possible, that the survey is conducted the same 
way by all vendors. This improves the quality of the data for public 
reporting purposes. We do not understand the comment that the survey 
should be divided into three sections that were independently tested. 
The entire ICH CAHPS survey has been tested. (4) We considered the 
option of doing the survey once a year, but realized that a single 
administration could miss patients and that it would cover patient 
experiences for only part of the year. We decided to require that the 
survey be conducted twice a year to increase opportunities for patients 
to make their experiences known. (5) We are already working with the 
ESRD networks and are receptive to suggestions for reducing 
duplication. (6) We currently ask that survey vendors contact 
facilities for updated patient contact information. However, we ask 
that the vendor request updated information for all patients, not just 
those that are in the sample, in an effort to protect patient 
confidentiality. (7) We are currently reviewing translations of the 
questionnaires.
    Comment: Commenter appreciates that the current ICH CAHPS measure 
is not appropriate for assessing the care of home patients but urged 
CMS to invest in the development and adoption of a patient experience 
instrument validated for assessing the home dialysis population. 
Commenter added that it is extremely important for CMS to recognize 
that PD and HHD are distinct from each other and from in-center 
dialysis and to keep these important differences in mind when 
developing a survey instrument that would be more appropriate for the 
home dialysis population.
    Response: We thank the commenter for their comments and 
suggestions. We are considering the possibility of developing an 
additional CAHPS survey for home and peritoneal patients. However, we 
do not have specific plans for this survey at this time.
    Comment: One commenter opposed the continued use of the ICH CAHPS 
measure as a clinical measure and expressed concerns that the twice 
annual survey requirement does not allow sufficient time for facilities 
to make improvements based on the first survey responses before the 
second survey is due to be conducted. They added that the current 
required timing is contrary to the goal of improving the patient 
experience and urged CMS to reconsider the requirement for two annual 
surveys.
    Another commenter supported CMS's willingness to consider expanding 
the ICH CAHPS survey in future years to include peritoneal dialysis, 
home hemodialysis patients, and homeless patients. In the interim, they 
recommended that CMS consider certain modifications to the measure to 
make it less burdensome to facilities and patients. First, they 
recommended addressing concerns about the burden on patients by 
aligning the ICH CAHPS measure specifications with those AHRQ relied 
upon when testing the measure. Specifically, they recommended that CMS 
divide the survey into three sections, which were each independently 
tested, and they suggested reducing the requirement to a single 
administration of the survey each year. They also urged CMS to work 
with facilities to develop a mechanism to ensure that patients' contact 
information is accurate and up-to-date so that facilities are not 
penalized for non-response when the patient's address was incorrect and 
encouraged CMS to ensure that the ICH CAHPS survey is correctly 
translated for all foreign-language speakers, and that the translation 
is meaningful and accurate.
    Response: One of the goals of the ICH CAHPS survey is to encourage 
quality improvements. We are aware that some improvement efforts will 
take more than one survey period to be reflected in the data. This is 
particularly true for the publicly-reported data, which is reported for 
two survey administration periods. However this does not mean that the 
facility cannot or should not undertake quality improvement efforts.
    The AHRQ guidelines were not designed to support public reporting. 
They are, therefore, less detailed than the CMS guidelines, which are 
designed to improve data quality for public reporting. We conduct the 
survey twice a year in order to provide patients with multiple 
opportunities to report their experiences. We also report the data from 
two survey administrations to improve the possibility that the sample

[[Page 77901]]

sizes will be large enough to provide useful information.
    Comment: Commenters generally supported the continued inclusion of 
the NHSN Healthcare Personnel Influenza Vaccination Reporting Measure 
in the ESRD QIP, as well as the elimination of the requirement for 
written documentation, but they made several recommendations for 
improving the measure. Most importantly, commenters recommended 
changing the Performance Period for the NHSN HPI Vaccination Reporting 
Measure to align with CDC guidelines and to set it as October 1 through 
March 31 so that facilities are not penalized for complying with 
established clinical guidelines and so that patients are not placed at 
increased risk early in the influenza season. Second, commenters 
recommended that exemptions should be in place for short-term visitors 
and that the performance period be extended to allow for early 
vaccination. Third, commenters expressed concerns about the third part 
of the denominator, requiring students/trainees and volunteers to be 
vaccinated. They argued that facilities often have such individuals on 
a very short-term basis and documenting their vaccination status is 
difficult, highly burdensome and diverts resources away from important 
clinical care. Finally, commenters recommended that CMS include a 
baseline reporting threshold for the measure, similar to what is 
required for inpatient rehab hospitals and other healthcare facilities.
    Response: The current performance period for NHSN's measure of 
healthcare personnel influenza vaccination is from October 1 through 
March 31. All personnel who physically work in a reporting facility for 
at least one day from October 1 through March 31 are eligible for 
inclusion in the measure denominator. The numerator of the measure 
begins ``as soon as vaccine becomes available'' for a given influenza 
season. Personnel who are working in the reporting facility during the 
denominator reporting period (October 1 through March 31) may be 
vaccinated as early as August or September and this vaccination would 
be included in the NHSN measure; therefore, there is no penalty for 
early vaccination built into the NHSN measure.
    Since short-term visitors can transmit or acquire influenza even 
when in a healthcare facility for a limited amount of time, all 
healthcare personnel working one day or more during the reporting 
period are included in the NHSN measure. Facilities are encouraged to 
develop tracking systems that will capture these data from short-term 
HCP when they come into the facility during the reporting period. Among 
short-term healthcare personnel, adult students/trainees and volunteers 
may be reasonably anticipated to have substantial contact with patients 
and/or other healthcare personnel in a healthcare facility, increasing 
the risk of acquiring or transmitting influenza infection during the 
influenza season. To alleviate the challenges associated with 
collecting data on groups that do not regularly work in a facility, CDC 
encourages facilities to devise tracking systems to reach these 
individuals. CDC developed an information sheet that lists methods and 
strategies on how this can be accomplished, based on interviews 
conducted with a sample of acute care facilities that collected these 
data during the 2012-2013 influenza season: http://www.cdc.gov/nhsn/PDFs/HPS/General-Strategies-HCP-Groups.pdf.
    Comment: Two commenters urged CMS to establish batch submission to 
NHSN as soon as possible for the NHSN HPI Vaccination Measure, arguing 
that it's very problematic that facilities are not yet able to do this.
    Response: One of CDC's goals is to minimize reporting burden. Due 
to the development time needed to support batch submission, CDC is not 
able to rapidly transition to this data collection system. Currently, 
CDC anticipates the batch submission of healthcare personnel influenza 
vaccination data will be available for the 2018/2019 influenza season 
(PY 2021 QIP).
    Comment: Several commenters expressed concerns about the effect the 
SRR measure is having on patient access to care, but they added that 
they are looking forward to seeing the results of the access to care 
study, to better understand the impact the SRR and STrR measures are 
having on access to care. One commenter recommended evaluating the 
effectiveness of these two measures at measuring the actual care 
provided in dialysis facilities, and urged CMS not to use the measures 
in the program until it has been determined whether they have a 
positive or negative impact on dialysis patients.
    Response: We thank commenters for sharing their concerns. We look 
forward to sharing the results of the access to care study with the 
community once they become available. We believe these two measures are 
vitally important to continue including in the ESRD QIP measure set 
because they measure important aspects of patient care. We are 
continually evaluating the effectiveness of all of the measures 
included in the program and we have policies in place to determine when 
a measure should be retired from the program (77 FR 67475). Neither of 
these measures meet the criteria established through rule-making.
    Comment: One commenter recommended that CMS exclude patients with 
an incomplete claims history from the SRR measure.
    Response: We considered excluding patients without a full 1-year 
Medicare history but decided in the end that this was not necessary. 
Many patients without a full year of claims history are not Medicare 
eligible when they begin dialysis. They subsequently become Medicare 
eligible and may experience a hospitalization and a readmission in the 
first year. In the event of a readmission, CMS has the data from the 
diagnoses of the index discharge, and these data provide substantial 
detail on comorbidities and are available for all patients. The 
availability of these data enables adequate risk adjustment. We 
additionally note that the SRR does make use of the hierarchical 
condition categories (HCCs) to capture comorbidities. Excluding such 
patients would eliminate much of the incentive to avoid readmissions in 
a highly vulnerable population during their first year of care. We 
believe care coordination is important in this population and strive to 
include assessment of appropriate populations where feasible.
    Comment: Commenter supports efforts to reduce hospital readmissions 
that are directly related to the care provided by dialysis facilities, 
but is concerned that the SRR measure does not provide actionable 
information that promotes quality improvement in facilities.
    Response: High readmission rates may indicate the facility may be 
missing opportunities to improve care transitions during and after 
hospital discharge. A few pilot studies have shown that better care 
coordination between the facility and the hospital can reduce 
readmissions. The SRR measure development TEP considered the 
possibility of constraining the assessment of readmissions to those 
directly related to the care provided by dialysis facilities, but could 
not reach a consensus defining such events. The TEP recommended moving 
forward with the development of the SRR as an all-cause readmission 
measure. We have met with kidney community stakeholders regarding 
methods that can make measure data more actionable, including the 
provision of patient-level quality data and more timely reporting. 
While we believe we have improved upon this, we also agree that we 
should work toward continuing enhancement

[[Page 77902]]

of the quality information made available to facilities for this 
measure and others.
    Comment: One commenter recommended that CMS work to develop an 
appropriate risk model that accounts for hospital-specific patterns and 
adjusts for physician-level admitting patterns as there is great 
geographic variability in both of these factors that need to be 
accounted for. They also urged CMS to align the standardized risk 
measures methodology with that used for other Medicare programs and 
other providers such as MA plans, by using the CMS claims-data 
available for the hierarchical conditions categories (CMS-HCC).
    Response: The SRR risk adjustment model does adjust for hospital 
effects by including hospital-level random effects. Our methodology 
uses past-year comorbidities that are obtained from ICD-9/ICD-10 
diagnoses codes from Medicare claims. These diagnoses are grouped using 
the HCC. This approach is aligned with the methodology for the CMS 
Hospital Wide Readmission measure. Our position on the adjustment for 
physician-level admitting patterns has not changed, however. The 
treating nephrologist is, by definition, part of the inter-disciplinary 
team that treats patients under the aegis of the dialysis facility, as 
outlined in the Conditions for Coverage. As a consequence, any 
component of care provided by the treating nephrologist that influences 
risk for readmissions is appropriately attributable to the dialysis 
facility, and not appropriate for risk adjustment.
    Comment: One commenter recommended that CMS consider adding a page 
in CROWNWeb for the patient's medical history with start and end dates 
in order to gather all the patient's medical history and to ensure that 
STrR excludes the correct patients. This medical history page would be 
a part of the patient's information, which would mean it would travel 
with them from facility to facility.
    Response: We are constantly evaluating the effectiveness and 
usability of CROWNWeb and we will consider adding a page for the 
patient's medical history with start and end dates in future updates of 
the system.
    Comment: One commenter expressed concerns that the STrR measure is 
flawed and that facilities could be unfairly penalized for transfusions 
they had no opportunity to avoid or control.
    Response: While we recognize most transfusions occur in the 
hospital, facilities are directly responsible for appropriate anemia 
management based on the Medicare Conditions for Coverage and Medicare 
payment policies. Since dialysis facilities have a direct role in 
determining achieved hemoglobin as a result of their anemia management 
practices, which influences the risk for transfusion in dialysis 
patients, dialysis facilities share responsibility with other providers 
for transfusion events. The responsibility of the dialysis facility for 
achieved hemoglobin outcomes (and transfusion risk related to achieved 
hemoglobin) is strengthened by applying an extensive list of exclusions 
for comorbid conditions that are associated with decreased ESA 
responsiveness, increased transfusion risk, and increased risk of ESA 
complication.
    Comment: Commenter suggested that the timely monitoring and 
reporting of transfusions for patients on dialysis are extremely 
important and recommended the ongoing collection of data and timely 
reporting on the percentage of patients with Hgb levels between 6 and 
10. This data could be merged, they suggested, with an individual 
patient's transfusion history to determine the Hgb level or levels that 
are typically associated with a transfusion, and can be used to see 
whether low Hgb levels in a dialysis center are contributing to the 
increase in transfusions across all clinical settings. These data could 
also be used to develop future transfusion best practice guidelines for 
people on dialysis and for those hoping to get a kidney transplant.
    Response: We thank the commenter for offering this suggestion. 
Studies investigating this issue are available in the published medical 
literature. We note that dialysis facilities already monitor hemoglobin 
concentration for the patients they treat as part of their 
responsibility for anemia management under the Medicare ESRD Conditions 
for Coverage. The dialysis receives the results of the hemoglobin test 
results drawn in the outpatient setting and is able to respond with 
appropriate changes to the patients' medical needs.
    Comment: Commenter argued that a transfusion avoidance measure 
should be stratified to appropriately capture blood transfusions that 
could have been prevented by the dialysis facility and should exclude 
those that resulted from acute or chronic medical conditions outside 
the scope of practice of the facility or nephrologist caring for the 
patient. Commenter acknowledged that tracking blood transfusion data is 
critical to understand patient safety issues and that will be difficult 
because most transfusions are not provided in the dialysis setting, and 
they expressed concern that the STrR measure alone does not completely 
counteract the potential to under-treat anemia and may permit patients 
hemoglobin levels to fall below the range recommended in the KDOQI 
Anemia Management guidelines. Finally, commenter argued that the 
transfusion avoidance measure does not take into account patients' 
quality of life or cardiovascular risks associated with low hemoglobin 
levels.
    Response: We are not aware of data that allow us to directly 
distinguish between transfusion events that are preventable and those 
that are not. In lieu of this, the STrR includes an extensive list of 
patient comorbidity exclusions, based on Technical Expert Panel input. 
These exclude patients with malignancy, hereditary anemias and other 
bone marrow conditions that are associated with erythropoiesis 
stimulating agent (ESA) hyporesponsiveness and/or increased risk of ESA 
use. This exclusion approach excludes many patients with medical 
conditions that complicate anemia management by the treating 
nephrologist and dialysis facility. We agree that the STrR does not 
address all aspects of clinical anemia management, including patient 
quality of life related to anemia. However, it assesses an important 
outcome of anemia management provided by the dialysis facility and we 
believe its use encourages avoidance of unacceptably low hemoglobin 
levels.
    Comment: One commenter expressed concerns that the STrR Measure is 
not driving improvement in patient outcomes and is therefore not useful 
or appropriate for inclusion in the QIP. Instead, they recommended an 
alternative measure that would assess erythropoietin dosage levels 
compared to hemoglobin outcomes as a better measure to ensure that 
patients are receiving appropriate amounts of erythropoietin.
    Response: We believe that STrR contributes to quality of care in 
ESRD anemia management by reporting on dialysis facility results in the 
important area of transfusion avoidance, which is an area of 
substantial concern in the kidney community, as indicated by the 
numerous comments we received when removing the Hgb <10 measure from 
the ESRD QIP (79 FR 66172 through 66174). Blood transfusion in dialysis 
patients has been associated with increased HLA sensitivity and may 
adversely affect access to kidney transplantation. Additionally, it is 
not clear to us what evidence exists to establish requirements for 
particular dosage levels, or how comparing them to hemoglobin levels 
would be

[[Page 77903]]

operationalized for a measure in the ESRD QIP.
    Comment: One commenter expressed concerns that the STrR measure is 
not the right measure to use for evaluating anemia management in the 
dialysis setting for several reasons, and they offered support to CMS 
to help identify a different measure for use in the QIP that would 
monitor anemia management in dialysis facilities, consistent with the 
changes in the FDA labeling for ESAs. Their first concern is that 
dialysis facilities do not provide or direct transfusions; rather, 
patients typically receive transfusions in the hospital setting. 
Second, the decision to provide a transfusion is typically based upon 
hospital protocols that rarely take into account the unique nature of 
dialysis patients. Finally, the NQF Renal Standing Committee echoed 
these concerns and added that this measure more accurately reflects 
transfusion practices and behaviors at the hospital level rather than 
at the dialysis facility level, and they identified the potential for 
such coding inconsistencies to be a threat to measure validity.
    Commenter explained that one of the most problematic aspects of the 
STrR measure is that dialysis facilities are not always able to obtain 
information from other providers about patient transfusions that they 
need to understand the metric and act upon it. If this measure is going 
to be of value, dialysis facilities need to obtain quarterly data bout 
the raw transfusion, hospitalization, readmissions, and mortality data 
using DFR calculations, and the six-month lagged data file. Without 
this important information, facilities have no insight on patients who 
may or may not be receiving transfusions.
    Response: We thank the commenter. We believe the STrR, developed 
after the 2011 changes to Food and Drug Administration labeling for 
ESAs, reflects those revised recommendations. The FDA position defines 
the primary indication of ESA use in the CKD population as transfusion 
avoidance, reflecting the assessment of the relative risks and benefits 
of ESA use versus blood transfusion.
    Dialysis providers are responsible for anemia management as part of 
the ESRD Conditions for Coverage. Best dialysis provider practice 
should include effective anemia management algorithms that focus on (1) 
prevention and treatment of iron deficiency, inflammation and other 
causes of ESA resistance, (2) use of the lowest dose of ESAs that 
achieves an appropriate target hemoglobin that is consistent with FDA 
guidelines and current best practices including transfusion avoidance, 
and (3) education of patients, their families and medical providers to 
avoid unnecessary blood transfusion so that risk of allosensitization 
is minimized, eliminating or reducing one preventable barrier to 
successful kidney transplantation.
    The STrR measures dialysis facility performance in avoidance of 
transfusions for their patients. We agree that the majority of blood 
transfusions occur during hospitalization. However, the results of pre-
hospitalization anemia management, reflected in achieved hemoglobin 
concentration prior to hospitalization, are a significant contributor 
to transfusion risk. The decision to transfuse blood is intended to 
improve or correct the pathophysiologic consequences of severe anemia, 
defined by achieved hemoglobin or hematocrit, in a specific clinical 
context for each patient situation (8). Consensus guidelines in the 
U.S. and other consensus guidelines defining appropriate use of blood 
transfusions are based, in large part, on the severity of anemia (9-
11). Given the role of hemoglobin as a clinical outcome that defines 
anemia as well as forms a basis for consensus recommendations regarding 
use of blood transfusion, it is not surprising that the presence of 
decreased hemoglobin concentration is a strong predictor of subsequent 
risk for blood transfusion in multiple settings, including chronic 
dialysis (12-21). For example, Gilbertson, et al. found a nearly four-
fold higher risk-adjusted transfusion rate in dialysis patients with 
achieved hemoglobin <10 gm/dl compared to those with >10 gm/dl 
hemoglobin. (19) In addition to achieved hemoglobin, other factors 
related to dialysis facility practices, including the facility's 
response to their patients achieved hemoglobin, may influence blood 
transfusion risk in the chronic dialysis population (22, 25). In an 
observational study recently published by Molony, et al. (2016) 
comparing different facility level titration practices, among patients 
with hemoglobin <10 and those with hemoglobin >11, they found increased 
transfusion risk in patients with larger ESA dose reductions and 
smaller dose escalations, and reduced transfusion risk in patients with 
larger ESA dose increases and smaller dose reductions (25). The authors 
reported no clinically meaningful differences in all-cause or cause-
specific hospitalization events across groups.
    We appreciate the offer to consider additional measures that might 
more comprehensively assess anemia management care provided by dialysis 
facilities and are willing to discuss this issue with stakeholders in 
the future. We are also aware of the desire within the community for 
more granular detail with regard to quality of care and we will look 
into ways to provide this level of detail. The recently released ESRD 
Measures Manual does provide a great amount of detail on technical 
microspecifications related to the ways in which measures are 
calculated and we are continuing to find ways to make the process more 
transparent for the community. The commenter mentioned the DFRs, and it 
may be that other quality programs, such as Dialysis Facility Compare 
and the DFR offer more opportunity for this type of quality improvement 
data.
    Comment: Many commenters generally supported the continued 
inclusion in the ESRD QIP of Dialysis Adequacy measures, but expressed 
concerns with the Comprehensive Dialysis Adequacy Measure finalized in 
the CY 2016 ESRD PPS Final Rule, and which they characterized as a 
``pooled'' dialysis adequacy measure. Commenters argued that it is not 
appropriate to draw conclusions about quality from one group (the 
larger adult population) to quality for the pediatric population at 
that facility, and expressed concerns that the vast clinical 
differences between these two groups makes it difficult to accurately 
assess a facility's quality. Specifically, commenters are concerned 
that by combining pediatric and adult PD and HD patients into a single 
adequacy metric, the transparency provided for pediatric and home 
dialysis metrics will be lost and the larger adult and HD populations 
will mask actual facility performance for pediatric and PD patients. 
Commenters believe that because these categories of patients are 
clinically different, pooling of the measures is inappropriate. 
Additionally, they stated that the MAP supported the measure when it 
was characterized as a composite measure and they therefore did not 
review the issue of pooling. Furthermore, they stated that the NQF 
Renal Standing Committee recommended against endorsement of this 
measure and found that it failed on the performance gap criterion and 
the threshold requirement for further discussion on factors such as 
validity and reliability. Commenters recommended that rather than 
continuing to use the Comprehensive Dialysis Adequacy Clinical Measure 
in the program, CMS should return to the four individual dialysis 
adequacy measures as separate measures or that they should work to 
develop and implement a true composite measure.

[[Page 77904]]

    Response: As we stated in the CY 2016 ESRD PPS Final Rule (80 FR 
69055), we acknowledge that there might have been some confusion 
surrounding our use of the term ``composite'' in the title of the 
Comprehensive Dialysis Adequacy Clinical Measure, especially because we 
are now aware that the NQF uses a specific set of criterion to 
determine whether a measure is a composite for endorsement purposes. 
However, as we noted in the CY 2016 ESRD PPS Final Rule, the measure 
specifications presented in the CY 2016 ESRD PPS proposed rule were 
identical to those submitted for review by the Measure Applications 
Partnership, and the calculation methodology uses a pooled approach.
    The Comprehensive Dialysis Adequacy Clinical Measure does not 
clinically co-mingle different groups of patients. Rather, peritoneal 
dialysis patients are assessed based on clinical standards appropriate 
for these patients, while hemodialysis patients are assessed based on 
clinical standards appropriate for them. Similarly, adult and pediatric 
patients are assessed based on clinical standards that are appropriate 
for each of those groups. We understand that patient groups that 
comprise a smaller percentage of a facility's total population will 
have less impact on the facility's performance score for the 
Comprehensive Dialysis Adequacy clinical measure. The alternative, 
however, is to implement individual measures for each subpopulation in 
the Comprehensive Dialysis Adequacy clinical measure, as we had done 
previously. This would reintroduce the problem of limiting our ability 
to assess dialysis adequacy for patients in facilities large enough to 
provide reliable assessments using the Comprehensive Dialysis Adequacy 
clinical measure, but also lacking enough patients within the 
individual subpopulations to provide reliable assessments using the 
more granular measures of dialysis adequacy previously implemented in 
the ESRD QIP.
    With regard to the question of whether the measure was described as 
``pooled'' or ``composite'' at the Measures Application Partnership, we 
don't believe characterizing it as a composite measure at the time of 
MAP review changes the substance of what the MAP discussed; ``pooled'' 
was always part of the measure concept. The measure design and 
specifications are not substantively changed from those reviewed by the 
MAP.
    Finally, this measure was not endorsed due to a limited performance 
gap criterion. This was also identified for some the previously 
implemented Kt/V dialysis adequacy measures that had been previously 
endorsed and implemented on ESRD QIP, but exhibited limited variation 
in performance. These measures retained a ``reserve'' endorsed status, 
which reflects that while other NQF criteria are met, performance on 
the measure is extremely high. The Comprehensive Dialysis Adequacy 
measure is not eligible for this designation by NQF because it had not 
been previously endorsed. However, it is methodologically aligned with 
these ``reserve'' measures, leading us to conclude that it is 
methodologically sound. Returning to the use of the more granular 
measures of dialysis adequacy would not address the underlying concern 
reflected in this comment, which is that the performance gap is 
limited, as this is reflected by these measures current ``reserve'' 
status. Under MIPPA, we are required to assess dialysis adequacy as 
part of the QIP. Because the Comprehensive Dialysis Adequacy clinical 
measure allows us to assess dialysis adequacy among the greater number 
of dialysis patients, we believe its continued implementation is 
appropriate.
    Comment: Commenter disagreed with CMS's assertion in the CY 2016 
ESRD PPS Final Rule that including the pediatric population into a 
pooled measure is more beneficial than having a separate measure 
because the ``pooled'' measure does not ensure that pediatric patients 
are receiving adequate dialysis since the pediatric population is not 
evaluated separately from the adult population.
    Response: The Comprehensive Dialysis Adequacy Clinical Measure 
assesses pediatric patients based on clinical standards that are 
appropriate for the respective pediatric PD and HD patient populations. 
To address the concerns about the combined measure that incorporates 
both adult and pediatric populations and modality types, CMS found that 
a significant number of facilities that have <11 pediatric patients 
would now be assessed for dialysis adequacy in the new combined 
measure. Currently these facilities are excluded from the individual 
pediatric specific measures due to small facility size. This leads to 
the systematic exclusion of these facilities from assessment on these 
measures because of the reporting requirements. We believe it is 
important that patients at these facilities also be included in the 
assessment of adequate dialysis. This provides a mechanism to assess 
adequate, with respect to these small patient subpopulations.
    Comment: Commenter argued that there are other tests which would be 
better indicators of dialysis adequacy than Kt/V. Specifically, 
commenter recommended the Beta-2 microglobulin or a 24-hour urine test 
when applicable, arguing that these tests, though more costly, would 
contribute more accurate information about the patient's dialysis 
adequacy.
    Response: Assessment of small solute clearance during dialysis 
using urea-based metrics has been the industry standard for decades. 
This statement is reflected in widely accepted standards of practice, 
evidenced by KDOQI clinical guidelines and multiple endorsed NQF 
quality metrics based on urea clearance and expressed as Kt/V. These 
standards are reflected in the Comprehensive Dialysis Adequacy Clinical 
Measure.
    Comment: One commenter noted that the evidence for the Kt/V targets 
for the hemodialysis population is based on three times per week 
dialysis, not four, and that therefore the dialysis adequacy goals may 
not be appropriate for patients who dialyze more than three times per 
week. Another commenter recommended that CMS revise the technical 
specifications for the Comprehensive Dialysis Adequacy Clinical Measure 
to include only the evidence-based Kt/V threshold because when the 
measure was reviewed by the NQF Renal Standing Committee, they 
recommended that the upper Kt/V threshold exclusions be removed from 
the measure's specifications due to insufficient evidence supporting 
the selected values.
    Response: The Kt/V measure included in ESRD QIP did not include an 
upper limit for the Kt/V value; the value only needs to be greater than 
the target value for the specific population to be included in the 
numerator. The measure is also limited to those who dialyze three times 
per week. Therefore, we believe the goal is appropriate.
    Comment: Two commenters supported the continued inclusion of the 
Vascular Access Type Measures in the QIP but asked that CMS adjust the 
weights to place more emphasis on reducing catheters in order to 
encourage the use of fistulas and grafts. One commenter recommended 
that CMS give credit for the fistula measure only if the catheter has 
been removed because the presence of a catheter increases the risk of 
infection even if it is not in use.
    Response: We thank the commenter for sharing concerns relating to 
the presence of a catheter increasing the risk

[[Page 77905]]

of infection, even when not in use. We will assess this concern and 
consider its implications for future measurement in the ESRD QIP 
through our ongoing measure develop and maintenance process. We note 
that this issue was raised during the development of a new set of 
vascular access measures in 2015. These measures are currently being 
reviewed by the National Quality Forum Standing Renal Committee for 
consensus endorsement. Once these measures have completed the NQF 
endorsement process, we will consider whether they are appropriate for 
inclusion in the ESRD QIP. In the interim, we continue to believe that 
the weights associated with the Vascular Access Type measures, and 
their relative weighting within the Vascular Access Type measure topic, 
appropriate disincentivize the use of catheters and appropriately 
incentive the use of fistulae. Because existing measures on vascular 
access type do not include adjustments to take into account cases where 
grafts are more appropriate than fistulae, we believe the existing 
weights and measure specification are appropriately neutral with 
respect to the use of grafts.
    Comment: One commenter supported CMS's submission of changes to the 
NQF Renal Standing Committee for the Vascular Access Type Measures that 
modify the measure to address the small number of patients for whom a 
catheter may be the most appropriate vascular access type when life 
expectancy is limited. They also added that they would like the measure 
to include all patients with a catheter in place for the reporting 
period in the numerator, whether the catheter is in continuous use or 
not.
    Response: We thank you for your comment and note that the measures 
submitted to the NQF Renal Standing Committee this year are not part of 
the proposed rule.
    Comment: One commenter encouraged CMS to modify the depression 
screening measure to require that the same methodology for detecting 
depression be used across facilities, or at a minimum that facilities 
be required to report how they screened for depression.
    Response: We do not believe it is appropriate for CMS to dictate 
the depression screening tools that facilities use, and that facilities 
are in a better position to determine which tools are appropriate for 
their patient populations. We also appreciate the suggestion to require 
reporting of the screening tool used, and we will take this 
consideration into account in the future.
    Comment: Two commenters supported the pain and depression measures 
but expressed concern that pain in ESRD patients may be treated with 
medication when emotional pain is really the cause of the patient's 
pain, because emotional and physical pain are so closely related. One 
of the commenters also raised concerns that depression needs to be 
clearly differentiated from fatigue or fear and that appropriate 
identification of these issues is important to enable dialysis facility 
social workers to identify which patients and families might benefit 
from additional social and family support.
    Response: We thank commenter for their support and for sharing 
their concerns. The Pain and Depression measures are measures that 
assess how well facilities report rates of screening for these 
conditions. They are not designed to differentiate among different 
causes of pain or depression. Nor are they designed to evaluate the 
intensity and completeness of facilities' screening efforts.
    Comment: One commenter supported the continued inclusion of the 
Pain Assessment measure in the QIP along with the modification to the 
measure from the CY 2016 ESRD PPS Final Rule that based a facility's 
score solely on the percentage of eligible patients treated in one six-
month period if the facility treated no eligible patients in the other 
six-month period.
    Response: We thank commenter for their support.
    Comment: One commenter argued that the Pain & Depression measures 
included in the ESRD QIP measure set are global measures of patient 
well-being which are not specific for dialysis and should be under the 
purview of the patients' primary care physician. They argued that 
nephrologists and dialysis care teams should not be held responsible 
for all medical conditions of the dialysis patients because often the 
nephrologist's only option is to inform the patient's PCP and refer out 
to appropriate specialists.
    Response: We thank commenter for sharing their concerns. These 
measures are designed to assess not the treatment of pain or depression 
but whether facilities report data on how and whether they screen their 
patients for these conditions, document an appropriate plan of care, 
and refer their patients to other healthcare providers when necessary. 
Nephrologists themselves are not being held responsible for these 
medical conditions, and we believe that dialysis facilities' close 
connections with patients (due to the regular need for dialysis 
treatment) often places them in a better position to provide such 
screenings and assessments, in comparison with primary care providers 
who typically see ESRD patient far less frequently.
    Comment: Two commenters requested an extension of the reporting 
deadline for the Pain Assessment Reporting Measure in CROWNWeb. They 
expressed that due to system downtime, they were unable to submit their 
data by the August 1, 2016 deadline, and they requested that CMS extend 
the submission deadline to September 16, 2016.
    Response: We thank commenters for their comments regarding the 
systems issues encountered during system downtime for CROWNWeb, and we 
appreciate that the fulfillment of ESRD QIP requirements is dependent 
upon facilities' ability to access CROWNWeb. In an effort to avoid 
similar issues in future years of the ESRD QIP, we are making updates 
to the reporting deadlines for all measures with CROWNWeb reporting 
deadlines beginning in PY 2019 (ICH CAHPS (76 FR 70269), Mineral 
Metabolism Reporting Measure (76 FR 70271), Anemia Management Reporting 
Measure (78 FR 72199), Pain Assessment and Follow-Up Reporting Measure 
(79 FR 66204), Clinical Depression Screening and Follow-Up Reporting 
Measure (79 FR 66200)) as well as those being finalized for PY 2020 
(Serum Phosphorus Reporting Measure (81 FR 42838) and Ultrafiltration 
Rate Reporting Measure (81 FR 42839)). Rather than being required to 
submit data or attestations by a certain calendar date, facilities will 
now be required to submit data or attestations in CROWNWeb for the 
following measures before the clinical month closes in CROWNWeb: 
Hypercalcemia, ICH CAHPS, Mineral Metabolism/Proposed Serum Phosphorus 
Reporting Measure, Anemia Management Reporting Measure, Pain Assessment 
and Follow-Up Reporting Measure, Clinical Depression Screening and 
Follow-Up Reporting Measure, and Ultrafiltration Rate Reporting 
Measure.
    Comment: One commenter supported the anemia management reporting 
measure and requested that CMS require facilities to note the Hb level 
at the first treatment of the week before dialysis is initiated. They 
also requested that CMS work to establish an anemia clinical measure to 
protect those on dialysis.
    Response: Thank you for supporting the measure and for your 
recommendation.
    Comment: One commenter requested information about their specific 
NHSN BSI Data. Specifically, their center

[[Page 77906]]

incurred 11 cases of BSI. Out of the 11 cases, 5 were access related. 
Of the remaining 6, 2 were related to foot gangrene, 1 to a UTI, 2 were 
due to infected sacral decubiti, and 1 was for a perforated abdomen. 
The facility requests clarification as to why BSI infections extend 
beyond access related bacteremia.
    Response: CDC submitted several NHSN Dialysis Event measures to the 
National Quality Forum (NQF), an independent organization that 
evaluates healthcare measures. This includes the NHSN BSI measure, and 
a measure of access-related BSI (ARBSI), which is also captured in 
NHSN. Determining the source of a positive blood culture is inherently 
challenging and introduces significant subjectivity to (and opportunity 
for gaming) any measure of ARBSI. NQF evaluated these measures, but 
only endorsed the BSI measure because of its standardization and 
objectivity, and only that measure is included in the ESRD QIP. Because 
BSI includes all positive blood cultures regardless of suspected 
source, it's an objective and more reliable measure, relatively easily 
captured with electronic data alone, and well suited for use in 
assessment and inter-facility comparisons.
    We thank commenters for their suggestions on improving the measures 
included in the program and we will consider the feasibility of making 
some of their recommended changes in future years of the program.
b. New Clinical Measures Beginning With the PY 2020 ESRD QIP
i. 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.\7\ Hospitalizations account for 
approximately 40 percent of total Medicare expenditures for ESRD 
patients.\8\ 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.
---------------------------------------------------------------------------

    \7\ 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.
    \8\ 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.\9\ In 2013, total 
Medicare costs for the ESRD program were $30.9 billion, a 1.6 percent 
increase from 2012.\10\ Correspondingly, hospitalization costs for ESRD 
patients are very high with Medicare costs of over $10.3 billion in 
2013.
---------------------------------------------------------------------------

    \9\ USRDS Annual Data Report (2015).
    \10\ 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.
    We proposed 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 have 
proposed 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 proposed 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

[[Page 77907]]

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). 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 proposed 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 14 below shows the IURs for the 1-year SHR.

                                          Table 14--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
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 77908]]

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 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 
studies 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

[[Page 77909]]

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 sought comments on our proposal to adopt the SHR measure for the 
ESRD QIP beginning with PY 2020. The comments and our responses for 
these proposals are set forth below.
    Comment: One commenter fully supported the proposed addition of the 
SHR measure. Several commenters supported the fact that the SHR measure 
now accounts for prevalent co-morbidities but stated that they could 
not support the incorporation of the measure into the QIP until its 
reliability at the proposed facility size has been demonstrated. The 
commenter stated that CMS's own data points out the significant issues 
of reliability, particularly for smaller facilities, with the 1-year 
SHR, and commenters expressed concerns that facilities will be 
penalized for performance due to what they termed ``random chance,'' 
noting that the reliability statistics for medium and small facilities 
fall significantly short of the 0.7 IUR threshold generally recommended 
and considered the minimum by the NQF. Specifically, commenters 
expressed concerns that only facilities with <5 patient-years at risk 
during the performance period are not eligible for the measure. They 
also asked CMS to align specifications across the standardized ratio 
measures, pointing out that the SHR measure uses a <5 patient-years at 
risk threshold while the SMR and STrR use <10 patient-years at risk. 
One commenter requested that CMS wait to incorporate the SHR measure 
until its reliability at the proposed facility size has been tested and 
demonstrated.
    Several commenters appreciated CMS's proposal to cast the SHR 
measure in terms of patient-years rather than patient numbers but noted 
that even under a scenario of a small facility with 50 patients, for 
example, where all 50 contribute 12 months of data to the denominator, 
the data indicate that the facility's performance score would still be 
more due to random chance than actual performance. These commenters 
stated that smaller facilities will have even lower reliability, 
possibly low enough to make the measure completely unreliable. One 
commenter added that even for medium sized facilities, the IUR is below 
the 0.7 threshold and argued that it is therefore inappropriate to 
penalize facilities when so much of their performance on the measure is 
due to random chance.
    Response: The SHR was recently reviewed and recommended for 
endorsement by the National Quality Forum Standing Renal Committee 
(report available here: http://www.qualityforum.org/Renal_2015-2017.aspx) based on the reliability statistics referenced in the 
comment, which is consistent with our assessment that the SHR is 
sufficiently reliable for use in quality programs. All components of 
measure reliability were reviewed in detail at the NQF ESRD Standing 
Committee's meeting in June, 2016. The reliability result reported in 
the NQF submission showing the overall IURs of 0.70-0.72 across all 
facilities was determined acceptable by the NQF Standing Committee as 
the measure passed on the reliability criterion, and passed on 
scientific acceptability overall. The evaluation and voting process and 
result adhered to consensus development guidelines in the evaluation, 
thereby reinforcing acceptance of the reliability results.
    Given the established effect of sample size on IUR calculations, it 
is expected that large facilities will have higher IUR values and small 
facilities will have lower IUR values for any given measure. CMS and 
consensus-endorsement bodies consider the overall reliability in 
determining the acceptability of the measure. We are aware of no 
published literature standard requiring an IUR of 0.7 for quality 
measure implementation, and are aware of no standard by NQF requiring 
this threshold as the minimum for endorsement or implementation. 
Nonetheless, the SHR does achieve an overall IUR of >.7.
    Comment: One commenter requested that CMS release the reliability 
statistics for the proposed SHR measure using the patient-years at risk 
construction so that additional analyses can be performed on the 
measure's reliability.
    Response: We thank the commenter for their request and we have 
provided the reliability statistics for the proposed SHR measure below. 
The Inter Unit Reliability (IUR) for assessing the reliability of a 
measure is defined as:
[GRAPHIC] [TIFF OMITTED] TR04NO16.309

Where:

sb2 is the between-facility variance,
sw2 is the within-facility variance of the 
response for a single individual, and
n' is (approximately) the average number of patients in a facility.

    Table 15 below stratifies facilities into three strata based on 
patient years at risk for each facility.

                              Table 15--IUR for 1-Year SHR, Overall and by Facility Size (Patient Years at Risk), 2010-2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2010                  2011                  2012                  2013
                          Facility size                          ---------------------------------------------------------------------------------------
                                                                     IUR         N         IUR         N         IUR         N         IUR         N
--------------------------------------------------------------------------------------------------------------------------------------------------------
All.............................................................       0.72       5407       0.71       5583       0.70       5709       0.70       5864
<32.02..........................................................       0.60       1811       0.56       1874       0.53       1884       0.53       1919
[32.02, 58.64)..................................................       0.63       1788       0.64       1830       0.57       1891       0.56       2032
>=58.64.........................................................       0.81       1808       0.80       1879       0.81       1934       0.82       1913
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 16 below stratifies into three strata based on the number of 
patients for each facility.

[[Page 77910]]



                               Table 16--IUR for 1-Year SHR, Overall and by Facility Size (Number of Patients), 2010-2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2010                  2011                  2012                  2013
                          Facility size                          ---------------------------------------------------------------------------------------
                                                                     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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: Several commenters asked CMS to update the exclusion 
criteria for the SHR and SRR measures such that a facility is not 
penalized twice for certain readmissions. As the measures are currently 
specified, a readmission occurring within 30 days of the index 
discharge will be captured as a hospitalization by the SHR and a 
readmission by the SRR, such that a facility is penalized twice for 
each such readmission. Commenters urged CMS to modify the SHR 
specifications to incorporate an exclusion for hospitalizations that 
occur within 29 days of the index discharge such that the two measures 
will appropriately measure two different types of events. One commenter 
questioned why CMS is proposing to include both the SRR and the SHR 
measures in the QIP concurrently.
    Additionally, commenters are concerned that the proposed SHR 
measure inappropriately penalizes facilities for hospitalizations over 
which they have little to no control, such as from foot ulcers, lupus 
flare-ups, myocardial infarction, congestive heart failure, etc. They 
pointed out that many providers are involved in the care of ESRD 
patients and that while there is a need to coordinate with other 
providers, it is not always feasible. Providers struggle with different 
EMR systems which often do not communicate with one another and there 
is often a lack of resources on either side which prevents effective 
communication efforts. Commenters recommended that rather than 
implementing an all-cause hospitalization measure, CMS should consider 
specific measures such as hospitalization for catheter infection, 
hospitalization for volume overload, hospitalization for anemia/blood 
transfusions, etc. so that facilities are only being held accountable 
for hospitalizations related to conditions directly related to the 
patient's dialysis treatment.
    Response: It is true that the SHR and SRR may simultaneously 
capture the same hospitalization event. We believe this is appropriate 
because it places additional emphasis on the importance of avoiding 
hospitalizations for dialysis patients. In addition, while the SRR and 
SHR are moderately correlated with one another, as might be expected, 
it is possible for a facility to score relatively well on one measure, 
and relatively poorly on the other. We also believe that the measures 
capture distinct aspects of the quality of care provided by a dialysis 
facility. While the SRR assesses the coordination of care transitions 
as dialysis patients are discharged from an acute care hospital into 
the care of a dialysis facility, the SHR evaluates the facility's 
overall performance in reducing hospitalizations.
    The 2007 TEP that participated in developing the SHR considered the 
possibility of developing cause specific SHRs, but recommended the use 
of all-cause SHR measures due to various reasons including the lack of 
clear research to indicate what causes (that is, reason for admission) 
should be selected as valid indicators of poor ESRD care, and issues 
associated with inter-rater reliability in assessing cause of 
hospitalization. The TEP reached a strong consensus that the all-cause 
measure would be reliable and valid and the measure would typically be 
related to quality of care. We have some crude measures of cause of 
hospitalization which we have used to assess the relationship between 
the all-cause measure and cause specific components. These measures are 
useful in assessing the overall SHR measures, but we caution that the 
cause specific hospitalizations have not been tested or validated at 
this time. All correlations are in the expected direction and highly 
significant, (p<0.0001). Thus these preliminary analyses show that the 
overall hospitalization rate also correlates with specific causes that 
are commonly thought to be potentially related to poor quality of care.
    Comment: Several commenters strongly supported CMS's use of 
prevalent comorbidities in the risk models for the SMR and SHR, and 
commended CMS for moving to incorporate prevalent comorbidities in the 
proposed specifications for the SHR measure. One commenter encouraged 
CMS to review co-morbidities as they relate to the pediatric ESRD 
population since these measures include all patients with ESRD. 
Commenters also requested that CMS allow for the CMS Medical Evidence 
Reporting Form 2728 be permitted to be updated because the UB04 and 
8371 forms are unable to accommodate the vast number of diagnosis codes 
that patients with ESRD often present with. These commenters stated 
that patients often develop additional comorbidities after beginning 
dialysis, and facilities would be disincentivized to treat patients if 
recently developed comorbidities were not included in the risk-
adjustment calculation. Some commenters supported CMS's proposal to 
include a risk adjustment for 210 prevalent comorbidities in addition 
to the incident comorbidities from the 2728 Form. One commenter asked 
CMS to confirm whether providers will be able to report all conditions/
diagnoses on 72X claim forms, not just those related to ESRD or the 
medications and treatments given. Specifically, they asked whether the 
Medicare Contractor and their system would be able to accommodate this 
much information or whether including additional comorbidities would 
cause a billing issue, cause claims to pend, or cause claims to get 
stuck in T-status.
    Response: We thank commenters for their suggestions, and we agree 
wholeheartedly that prevalent comorbidity data should be collected from 
multiple sources. We would like to clarify that prevalent comorbidity 
information for the measure is obtained from all Medicare claims data 
from all facility settings (not limited to dialysis claims only), and 
CROWNWeb data, and as such, we are not limited to the comorbidities 
filed on 72X claim forms.
    Comment: Commenter agrees that strategies to reduce 
hospitalizations are an important area to focus on because they will 
save the government money and improve the quality of life for patients, 
however commenter urged CMS to modify the SHR measure to ensure that 
facilities are not unfairly penalized when they have had no impact on 
the reason for the hospitalization. They recommended that CMS develop 
exclusions for patients

[[Page 77911]]

admitted before being treated at a dialysis unit, patients admitted for 
other comorbidities not related to kidney failure, and patients who 
repeatedly fail to adhere to their treatment regime. Additionally, 
commenter argued that hospitals need to be mandated to share their 
discharge information to ensure optimal continuum of care.
    Response: The SHR does contain adjustments for comorbidities that 
were determined likely not to be the result of facility care (as 
determined by a 2015 Technical Expert Panel). We also exclude patients 
from a facility if they have not had ESRD for more than 90 days, or if 
they have not been receiving treatment at the facility for more than 60 
days, which precludes the risk of patients being included in a 
facility's SHR prior to treatment. However, the measure is an all-cause 
hospitalization measure, reflecting hospital admissions regardless of 
cause. The measure's design accounts for hospitalizations that are 
random occurrences by assessing facilities' performances relative to 
one another. At present, we are aware of no means of distinguishing 
what hospitalizations are related to dialysis facility treatment. The 
SHR was originally endorsed as an all-cause measure, and this is 
consistent in approach to other NQF-endorsed measures, such as the SRR 
(NQF #2496). Finally, we appreciate the suggestion to mandate hospitals 
to share discharge information with dialysis facilities and we will 
take it under advisement.
    Comment: Commenter supported the proposed SHR measure but expressed 
concerns about the potential for it driving unintended changes in 
practice. Specifically, they want CMS to make sure that any error in 
measure rates due to small number of cases will not adversely affect 
facility payment.
    Response: In order to avoid allowing small numbers of cases to 
adversely affect facility payment, for the purposes of the SHR measure, 
facilities with fewer than 5 patient-years at risk during the 
performance period are not eligible for the measure. Additionally, a 
small facility adjustment will be applied to small facilities deemed 
eligible for the measure.
    Comment: Commenter agreed with CMS that outcome measures need to be 
emphasized more in pay-for-performance programs. But they disagreed 
that rankings should result from nationwide ``tournaments'' because 
this format disadvantages certain providers based on not on the quality 
of care they deliver but on the demographics of the geographic area 
they serve.
    Response: We agree with the commenter on the importance of 
including outcome measures in the ESRD QIP, which is one reason why we 
proposed to adopt the SHR measure. We also note that unlike other CMS 
value-based purchasing programs (for example, Hospital Value-Based 
Purchasing), the ESRD QIP does not introduce a ``tournament'' mentality 
because payment increases from some facilities are off-set by payment 
reductions from other facilities. Rather, all facilities that receive a 
TPS that is greater than the minimum TPS will avoid a payment 
reduction, and this means that a facility's payment is not impacted by 
scores received by another facility.
    Comment: Commenter requested that for the Standardized 
Hospitalization Ratio Clinical Measure, CMS clearly define what counts 
as a comorbid condition because, given the definition of ``comorbid 
condition'' in the ESRD PPS, there is confusion surrounding this term 
and whether it is only referring to the 4 payable ``comorbid 
conditions'' or whether it refers to all conditions outside of ESRD 
that ail the patient.
    Response: We encourage the commenter to refer to the SHR 
methodology report, which contains specific information about the 
comorbidities that are adjusted for in the SHR. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/SHR-Methodology-Report.pdf.
    Comment: Commenter supported the limit of the denominator for the 
SHR measure to Medicare patients because they understand the trade-off 
to now limit the denominator population due to claims data 
availability.
    Response: We thank you for your comment and supporting this aspect 
of the SHR.
    Final Rule Action: After consideration of the comments received, we 
are finalizing the Standardized Hospitalization Ratio Clinical Measure 
for inclusion in the ESRD QIP measure set beginning in PY 2020.
c. Reporting Measures Beginning With the PY 2020 ESRD QIP
i. Serum Phosphorus Reporting Measure
    As mentioned above, for PY 2020 we proposed 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 proposed 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 
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 sought comments on this proposal. The comments and our responses 
are set forth below.
    Comment: One commenter specifically recommended that CMS work to 
create a mineral metabolism composite measure which would

[[Page 77912]]

include Hypercalcemia, intact-PTH and Phosphorus. One commenter urged 
CMS to convene a TEP to identify measures on Mineral Bone Disease that 
drive quality outcomes and are within the facility's domain to manage 
because Serum Phosphorus levels remain highly dependent on patients' 
adherence to prescribed medications.
    Response: We thank commenters for their support. We have worked 
with the community in an attempt to find measures that are more 
appropriate for assessing bone and mineral metabolism. Unfortunately, 
we are not aware of any measures which are appropriate for inclusion in 
the ESRD QIP at this time. We will take commenters' suggestions into 
consideration as we continue to work on identifying more appropriate 
measures. We will also consider convening a TEP to identify measures on 
Mineral Bone Disease.
    Comment: One commenter pointed out that the deadlines listed for 
the Serum Phosphorus Reporting Measure are 30 days sooner than the 
deadlines for the other measures submitted in CROWNWeb and requested 
that CMS align the reporting deadlines so that all of January data is 
required to be submitted by March 31. It would be very confusing, they 
argued, to have to submit just phosphorus by February 28th but 
everything else by March 31.
    Response: We thank commenter for sharing their concerns, however we 
believe that the reporting deadlines are consistent across measures 
submitted in CROWNWeb. Facilities are granted at least 1-month window 
after the end of the applicable month to report data. In section 
IV(E)(2)(a) above, we have finalized a new policy that, for measures 
reported in CROWNWeb, facilities must report data for the relevant 
clinical month by the date on which the clinical month closes in 
CROWNWeb. For example, under our old policy, February data was required 
to be submitted by March 31st. Under our revised policy, February data 
will need to be submitted by the date on which the February clinical 
month closes in CROWNWeb. In normal circumstances, this data would be 
required by March 31st, but this policy provides an exception in the 
event that CROWNWeb is not available on that day. The NHSN measures are 
an exception to this approach to reporting deadlines; in the cases of 
those measures, facilities have more time to report because they are 
only required to do so on a quarterly basis.
    Comment: Commenters noted that the exclusions between the proposed 
Serum Phosphorus Reporting Measure and the Mineral Metabolism measure 
differ and they argued that changing the exclusion criteria causes 
unnecessary confusion. They urged CMS to harmonize the measure 
specifications across measures. Specifically, though they agree with 
the exclusions, the previous exclusion of ``in-center HD patients 
treated at the facility <7 times during the claim month'' has been 
replaced with ``transient dialysis patients (in unit <30 days).'' 
Additionally, another exclusion expanding on this is provided: 
``Patients not at the facility for the entire month (``Admit Date'> the 
first day of the month and ``Discharge Date'' < the last day of the 
month).'' One commenter also pointed to the exclusion from the Mineral 
Metabolism measure of ``in-center HD patients treated at a facility 
fewer than 7 times during the claim month'' and noted that the proposed 
Serum Phosphorus Reporting Measure specifies instead the exclusion of 
``transient dialysis patents'' and of ``patients not at the facility 
for the entire month'' and requested an explanation for why these 
differences exist.
    Response: We thank commenters for their suggestions. However, the 
differences in the exclusion criteria between the Mineral Metabolism 
Reporting Measure and the proposed Serum Phosphorus Reporting Measure 
can be explained by our rationale for making this proposed replacement. 
As we explained above, we are proposing to replace the Mineral 
Metabolism Reporting Measure with the Proposed Serum Phosphorus 
Reporting Measure to align with NQF specifications. The Proposed Serum 
Phosphorus Reporting Measure is based on an NQF-endorsed measure, NQF 
#0255 Measurement of Serum Phosphorus Concentration, which includes the 
same exclusion criteria we have included. Treatments per month and time 
at facilities represent different methods for determining patient 
eligibility. We are updating the exclusion criteria to be more 
consistent with the other measures included in the ESRD QIP measure 
set. The Dialysis Adequacy clinical measures use the same exclusion 
criteria as the proposed Serum Phosphorus Reporting Measure and it is 
likely that as measures undergo review at NQF, they will also be 
updated for consistency. Additionally, we are proposing to use admit 
and discharge data from CROWNWeb as part of our intention to 
increasingly use CROWNWeb as the data source for calculating measures 
in the ESRD QIP.
    Comment: One commenter argued that the proposed serum phosphorus 
measure inappropriately penalizes facilities and care teams for 
patients' non-compliance with their medication. They stated that 
compliance with phosphorus binders is a challenging problem and that 
dialysis units are working to address it by having dieticians reviewing 
the importance of compliance with their patients, as well as handing 
out educational handouts and presenting webinars to patients.
    Response: We disagree that the Serum Phosphorus measure penalizes 
facilities for patient non-compliance with their medical regime. 
Because Serum Phosphorus is a reporting measure, facilities are 
evaluated on the basis of how much data they submit, as opposed to what 
those data represent.
    Final Rule Action: After consideration of the comments received, we 
are finalizing the adoption of the Serum Phosphorus Reporting Measure 
into the ESRD QIP Measure set beginning in PY 2020. As discussed above, 
this measure will replace the Mineral Metabolism Reporting Measure and 
will ensure that exclusion criteria come into alignment across the ESRD 
QIP measure set as well as moving the program in the direction of 
relying increasingly on CROWNWeb as a data source rather than claims.
ii. 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,\11\ 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.
---------------------------------------------------------------------------

    \11\ Flythe S.E., Kimmel S.E., Brunelli S.M. Rapid fluid removal 
during dialysis is associated with cardiovascular morbidity and 
mortality. Kidney International (2011) Jan; 79(2): 50-7. Flythe 
J.E., Curhan G.C., Brunelli S.M. 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

[[Page 77913]]

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 proposed 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 proposed that facilities will be granted a 1-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 sought comments on this proposal. The comments and our responses 
for these proposals are set forth below.
    Comment: One commenter noted that CMS's proposal to adopt the UFR 
measure for the QIP seems inconsistent with the proposed payment 
restrictions for patients receiving dialysis more frequently than 3 
times per week. The UFR measure restricts the amount of fluid that can 
be removed from a patient per session, which results in the medically 
justified need for extra dialysis sessions for some patients. The 
commenter argued that CMS should therefore allow for payment for extra 
dialysis sessions for those patients whose UFR rates exceed the 
proposed QIP threshold. Another commenter questioned the value in 
implementing UFR as a reporting measure when there is an NQF-endorsed 
clinical measure that, if implemented, would be more meaningful to 
patient outcomes. Commenter instead encouraged CMS to implement NQF 
#2701 as a Clinical Measure in the ESRD QIP.
    Several commenters expressed concern about the clinical rationale 
behind the UFR measure's technical specifications. Specifically, one 
commenter noted that the KDOQI hemodialysis adequacy clinical practice 
guidelines do not include a target for UFR and instead recommend 
minimizing UFR as much as possible to maximize hemodynamic stability 
and tolerability of the hemodialysis procedure. The commenter stated 
that the reason for this is that there is limited evidence for setting 
a specific target, and that one study suggested an increased risk for 
individuals with heart failure with a UFR between 10-14 ml/h/kg but 
improvements for those without heart failure with a UFR in that range. 
The commenter therefore stated that they would support the 
implementation of NQF #2701 in the QIP with the knowledge that there 
will be challenges in the implementation process that will require 
efforts from facilities, staff, physicians and patients to ensure 
patient participation and adherence to their dialysis prescription and 
fluid restrictions. The commenter stated that the KCQA measure excludes 
patients who dialyze for less time than the average patient, and 
commenter urged CMS to include this exclusion. Commenters added that 
due to individualized patient responses to fluid removal, it is 
difficult to arrive at a single rate for UFR that is ``too high'' for 
patients. Rather than the UFR >/= 13 ml/kg/hr that CMS has proposed, 
commenters urged CMS to consider a measure of UFR >/= 10 ml/kg/hr. One 
commenter suggested that they would not recommend excluding patients 
who dialyze more than 3 times per week, transient patients or patients 
who are new to ESRD because these patients would not be expected to be 
at risk of developing intradialytic hypotension when compared to the 
general ESRD population. Another commenter specifically recommended 
that CMS exclude patients with <3 hemodialysis treatments in the 
facility during the reporting month. One commenter also suggested that 
patients who are new to ESRD and in their first 90 days of treatment 
should not be excluded from any UFR reporting requirements because of 
their particularly high mortality risk. Finally, one commenter stated 
that they would support efforts by CMS to ensure that time on dialysis 
is adjusted in such a way that patients would not suffer from symptoms 
related to rapid ultrafiltration. The commenter stated that monitoring 
Kt/V solely instead of taking into consideration the greater role of 
fluid management and removal is likely to result in more problems with 
sickness for patients, potentially impacting quality of life, and that 
while correction of uremia remains important, limiting our focus on the 
rate of fluid removal is to the detriment of patients, leading to an 
increase in the risk of cardiovascular disease.
    Response: We thank the commenters for support of the measure's 
implementation, despite the challenges inherent in implementation 
described in the comment. We recognize that successful fluid management 
in this setting requires a multidisciplinary approach, including 
patient education. Regarding the KDOQI reference, we believe that those 
clinical practice guidelines are relatively outdated, having been 
published before most of the recent literature related to the 
association between high UFR and patient risk. We note that both NQF 
2700 and 2701 UFR measures passed NQF review criteria for strength of 
evidence. Regarding the statement ``The KCQA measure excludes patients 
who dialyze for less time than the average patient, and commenter urged 
CMS to include this exclusion'', the statement is not factually 
correct. NQF 2701 provides a numerator exclusion for patients dialyzing 
for > or equal to 240 minutes. The average duration of dialysis session 
length for U.S. patients on thrice weekly dialysis is approximately 210 
minutes, with a minority of U.S. dialysis patients receiving 240 or 
more minutes of dialysis per session.
    The rate threshold of >13 ml/kg/hr was chosen to be consistent with 
the NQF endorsed threshold, and is also consistent with most of the 
published evidence demonstrating associations of poorer outcomes with 
UFR between 10-15 ml/kg/hr.
    We thank the commenter for generally supporting the importance of 
the UFR

[[Page 77914]]

measure. Patients new to ESRD do have increased mortality risk in 
general, but there is no convincing evidence to suggest that the 
observed risk is directly related to high UFR. In addition, fluid 
management generally and, response to high UFR in particular, may 
include varied clinically appropriate interventions by the dialysis 
provider, including patient education, counselling and dietary planning 
by Renal Dietitian and assessment and interventions by social workers 
and other members of the Interdisciplinary Care Team to address root 
causes for large interdialytic weight gains. Patients new to dialysis 
often have not received much of this education and support. Excluding 
patients new to dialysis increases the opportunities for dialysis 
providers to include these interventions and ultimately enhances the 
attribution of the measure outcome to the dialysis facility. We agree 
that both small solute removal (for example, Kt/V) and appropriate 
fluid management (UFR) are important measures of overall adequate care 
of dialysis patients.
    Comment: Several commenters supported fluid management as an 
important quality improvement area, but stated that they would support 
the inclusion of the NQF-endorsed measure, 2701: Avoidance of 
Utilization of High Ultrafiltration if CMS incorporated it consistent 
with the specifications reviewed and endorsed by the NQF rather than 
with the modifications CMS has proposed. They expressed concerns about 
the changes that CMS proposed to the measure and asked for 
justification for the approach taken to the measure's exclusion 
criteria.
    Specifically, commenters requested that CMS retain the exclusion of 
facilities with 25 or fewer patients, rather than the modified ``fewer 
than 11 patients'' that CMS proposed, because commenters believe this 
modification would hurt small facilities. Additionally, commenters 
requested that CMS expressly state that reporting the number of 
hemodialysis sessions delivered during the Kt/V week will be required 
for the reporting measure because the NQF-endorsed measure excludes 
patients regularly prescribed >3 sessions/week. They noted that CMS has 
not indicated this requirement and that NQF 2701 excludes patients 
regularly prescribed >3 sessions/week. Commenters asked for 
confirmation that the intent is to implement this measure as specified 
for those patients receiving thrice weekly HD. Commenters requested 
clarification as to whether excluding patients on dialysis <90 days at 
the beginning of the reporting month, an exclusion not present in the 
KCQA measure, was a data collection issue, or whether CMS has any 
additional justification for this approach.
    Response: We appreciate the comments. We first note that we have 
not proposed the NQF-endorsed #2701: Avoidance of Utilization of High 
Ultrafiltration, but a reporting based upon that measure. This is 
because the reporting measure is not a measure of clinical performance, 
as is 2701, but a measure that collects data relevant to the quality of 
care provided by dialysis facilities. The reporting measure does not 
limit the measure to patients receiving dialysis less than 3 weekly 
sessions as ultrafiltration is considered consequential for these 
patients as well. At a later date, CMS may consider through rulemaking 
the implementation of NQF #2701 as a clinical performance measure, at 
which point such an exclusion could be calculated, as specified, using 
the required data elements for each treatment in the week for which the 
Kt/V is reported to us.
    Comment: Several commenters supported the proposal to adopt the UFR 
measure but expressed concerns with CMS's definition of qualifying 
patients, and requested clarification regarding the exclusions listed 
in the technical specifications. Commenter urged CMS to clarify how 
dialysis facilities should report patients who may be assigned to a 
facility for a full calendar month but not physically present during a 
portion of that month due to events such as hospitalization. They 
suggested that CMS use the same exclusion criteria as for other 
measures, that is, to exclude patients who dialyze at the facility less 
than seven times during the applicable month. Another commenter 
requested clarification regarding the exclusion of patients on dialysis 
for more than 90 days at the beginning of the reporting month.
    Response: As with other measures, such as the Comprehensive 
Dialysis Adequacy Measure finalized for PY 2019, we define the 
population for this reporting measure by assignment to a facility for a 
full month. While a patient may spend part of that month hospitalized, 
the facility is still required to provide data for dialysis adequacy, 
and we believe it is appropriate to require reporting of 
ultrafiltration data for these patients as well, since the data 
elements are products of ongoing dialysis treatment. We do not restrict 
facilities from coordinating with hospitals to obtain relevant data, 
and we believe that such coordination is appropriate. We proposed to 
require providers to report the number of HD treatments received by 
each patient in the reporting month, which should alert us to 
unintended consequences of defining the population as we have.
    Comment: Several commenters urged CMS to exclude transient patients 
from the UFR measure, and encouraged CMS to include a standard 
specification for transient patients within the measure specifications. 
One commenter pointed out that ``number of HD sessions delivered during 
the month'' is included as a data element but the transient exclusion 
is not included in the qualifying patients' description. They also 
pointed out that the Mineral Metabolism measure had an exclusion for 
patients with <7 treatments, while the Serum Phosphorus measure defines 
transient patients as ``in unit <30 days'' but the proposed UFR measure 
seems to lack this exclusion altogether, despite its having been 
present in the measure's original specifications.
    Response: As proposed, transient patients are excluded from the 
Ultrafiltration Rate Reporting Measure. We wish to clarify that the 
denominator is defined by patients who are assigned to the facility for 
an entire month, similar to the Serum Phosphorus measure referenced in 
the comments.
    Comment: Two commenters supported the proposed UFR measure but 
recommended that CMS review the reporting deadlines for the measure. 
Specifically they suggested that rates for January 2018 be due on or 
before March 31, 2018 rather than February 28 to align with the 
reporting of other clinical values for January 2018 and to avoid 
confusion.
    Response: The Proposed Ultrafiltration Rate Reporting measure 
requires facilities to report data to CROWNWeb for all hemodialysis 
sessions during the week of the monthly Kt/v draw for that clinical 
month. We are finalizing that facilities are required to report 
ultrafiltration rates for January 2018 by the date on which the 
clinical month closes in CROWNWeb, which is approximately 1-month after 
the end of that month. These requirements are consistent with our newly 
finalized policy for other measures reported monthly in CROWNWeb. For 
example, the proposed Serum Phosphorus Reporting Measure requires 
facilities to report data monthly to CROWNWeb. Data for January, 2018 
must be reported by the date on which the clinical month closes in 
CROWNWeb.
    Comment: Several commenters supported the proposed UFR measure but 
encouraged CMS to further investigate whether the threshold should be 
set at UFR >10 ml/Kg/Hr or at 13 ml/kg/hr. They recommended that paying 
for HD hourly rather than by treatment would likely resolve concerns

[[Page 77915]]

about overly aggressive ultrafiltration amounts and rates as the 
reluctance of providers to offer longer treatments is financial, and 
they recommended that the UFR measure be used for home HD as well as 
in-center. Commenters also urged CMS to continue efforts to identify an 
improved fluid management measure for use in the ESRD QIP.
    Response: We appreciate the comments. We agree that all in the 
dialysis community should be pursuing ongoing enhancements of quality 
measures. Regarding the specific recommendation for UFR >10 threshold, 
the rate threshold of >13 ml/kg/hr was chosen to be consistent with the 
NQF endorsed threshold, and is also consistent with most of the 
published evidence demonstrating associations of poorer outcomes with 
UFR between 10-15 ml/kg/hr.
    Comment: One commenter expressed concerns that the administrative 
and financial burden associated with the UFR measure is too much for 
facilities to take on and urged CMS to adopt a transition period for 
complying with this measure.
    Response: We thank the commenter for expressing their concerns, and 
we appreciate that the proposed Ultrafiltration Rate Reporting Measure 
does require a large number of data elements. We believe that there are 
important clinical and clinical quality reasons for collecting and 
monitoring these data which outweigh the administrative and financial 
burden concerns expressed by the commenter. As we indicated in the 
proposed rule, higher ultrafiltration rates are associated with higher 
mortality and higher odds of an ``unstable'' dialysis session. 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.
    Final Rule Action: After a careful consideration of the comments 
received, we are finalizing the Ultrafiltration Rate Reporting Measure 
for inclusion in the ESRD QIP measures set beginning in PY 2020.
3. Performance Period for the PY 2020 ESRD QIP
    We proposed 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 proposed 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 sought comments on these proposals. The comments and our 
responses for these proposals are set forth below.
    Comment: Commenters generally supported setting CY 2018 as the 
Performance Period for PY 2020 but many commenters expressed concern 
about the performance period for the NHSN HCP Influenza Vaccination 
Reporting Measure and urged CMS to align with the NHSN protocol upon 
which the measure is based, and with NQF's Standardized Influenza 
Immunization Specifications, which define the acceptable immunization 
period as beginning on ``October 1 or when the vaccine became 
available'' so that facilities are not penalized for early vaccination, 
which is generally recommended to protect patients before the virus 
begins spreading through the community. One commenter suggested that 
the performance period should span the entire calendar year, while 
others recommended that the performance period go from October 1, 2017 
through March 31, 2018.
    One commenter also expressed concerns with the CCN Open Date 
criteria for the NHSN HCP Influenza Vaccination Reporting Measure. They 
suggested that if the flu season spans from October 1, 2016 through 
March 31, 2017, then the CCN open date should be January 1, 2016 rather 
than January 1, 2017. Similarly, for the flu season that spans from 
October 1, 2017 through March 31, 2018, facilities should be required 
to have a CCN open date of January 1, 2017. The reason for this is that 
if a facility is certified on December 31, 2016, they are still 
required to report this data for the full 2016/2017 flu season even 
though they were not certified for the full flu season and they should 
not be required to create a detailed employee log to track the 
vaccination status of each employee while also having to focus on 
opening a new facility, keeping track of new admits, and registering 
for CROWNWeb and NHSN access.
    Response: We thank commenters for their support. As we stated in 
the CY 2015 ESRD PPS Final Rule (79 FR 66207) under the NHSN HCP 
Influenza Vaccination reporting measure, the performance period for the 
denominator (the number of healthcare personnel working in a facility) 
is from October 1 through March 31. However, the numerator measurement 
(vaccination status) includes vaccines obtained ``as soon as vaccine is 
available.'' As a result, HCP working at the facility as of October 1 
who were vaccinated in September would be considered vaccinated for the 
performance period under this measure. Facilities are not penalized in 
any way for vaccinating their employees prior to the start of the 
performance period.
    With regards to commenter's suggestion about our CCN Open Date 
policy, we accounted for this concern in the CY 2015 ESRD PPS Final 
Rule (79 FR 66212). We stated that facilities with a CCN open date 
after January 1, 2016 would not be eligible to receive a score on the 
NHSN Healthcare Personnel Influenza Vaccination reporting measure in 
the PY 2018 program. We acknowledged that it takes time for facilities 
to register with NHSN and become familiar with the NHSN Healthcare 
Personnel Safety Component Protocol.
4. 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. 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 proposed 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

[[Page 77916]]

reducing incentives to facilities that score at or above the national 
performance rate for the clinical measures.
    We sought comments on these proposals. The comments and our 
responses for these proposals are set forth below.
    Comment: Two commenters supported our continued reliance on the 
methodology used to set the Performance Standard, Achievement 
Threshold, and Benchmark at the 50th, 15th and 90th percentiles 
respectively of national facility performance for PY 2020, as well as 
the continuation of our current policy for determining payment 
reductions, including the process for setting the minimum TPS.
    Response: We thank the commenters for their support.
    Final Rule Action: After considering the comments received, we will 
finalize the performance standards, achievement thresholds, and 
benchmarks for the clinical measures included in the ESRD QIP for PY 
2020.
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. 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 72213). We did not propose 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 did not propose any 
changes to these policies.
    For the proposed Ultrafiltration Rate Reporting Measure, we 
proposed 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 proposed 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 proposed to 
set the performance standard as successfully reporting 12 months of 
data from CY 2018.
    We sought comments on these proposals. We did not receive any 
comments on these proposed policies for setting Performance Standards 
for the PY 2020 Reporting Measures.
    Final Rule Action: We are finalizing the performance standards for 
the Reporting Measures as proposed for the PY 2020 ESRD QIP
5. 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 proposed to continue using this methodology for all clinical 
measures except the ICH CAHPS clinical measure. The facility's 
achievement score would be calculated by comparing its performance on 
the measure during CY 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 sought comment on this proposal. We did not receive any comments 
on this proposal.
    Final Rule Action: We are finalizing our policy for scoring 
facility performance on clinical measures based on achievement as 
proposed.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on improvement (78 FR 
72215 through 72216). In determining a facility's improvement score for 
each measure under the PY 2020 ESRD QIP, we proposed to continue using 
this methodology for all clinical measures except the ICH CAHPS 
clinical measure. Under this methodology, facilities receive points 
along an improvement range, defined as a scale running between the 
improvement threshold and the benchmark. We proposed to define the 
improvement threshold as the facility's performance on the measure 
during CY 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 sought comment on this proposal. The comments and our responses 
are set forth below.
    Comment: Commenter expressed concerns that the QIP's scoring and 
assessment methodology is so complex that facilities are unable to 
evaluate their progress in real time so they can take action during the 
performance period to strengthen their performance. They urged CMS to 
consider ways of simplifying the scoring methodology or to develop a 
secure Web site that can provide each facility with an ongoing 
scorecard. Another commenter asked that CMS clarify whether a facility 
needs a score on either measure in the Safety Domain in order to 
receive a TPS for PY 2020.
    Response: We thank the commenter and will consider ongoing 
scorecards and facility level feedback on a quarterly or semiannual 
basis in future rule making. Under our finalized policy for both PY 
2019 and PY 2020, facilities need to have a score on at least one 
measure in the Clinical Domain and at least one measure in the 
Reporting Measure Domain to receive a TPS.
    Final Rule Action: After considering the comment received, we will 
finalize our policy for scoring facility performance on clinical 
measures based on improvement as proposed.
c. Scoring the ICH CAHPS Clinical Measure
    In the CY 2015 ESRD PPS final rule, we finalized a policy for 
scoring performance on the ICH CAHPS clinical measure based on both 
achievement and improvement (79 FR 66209 through

[[Page 77917]]

66210). We did not propose 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 sought comments on this proposal.
    Final Rule Action: We did not receive comments on our proposal for 
scoring the ICH CAHPS Clinical Measure. Accordingly, we will finalize 
our policy for scoring the ICH CAHPS Clinical Measure as proposed.
d. Calculating Facility Performance on Reporting Measures
    In the CY 2013 ESRD PPS final rule, we finalized policies for 
scoring performance on the Anemia Management and Mineral Metabolism 
reporting measures in the ESRD QIP (77 FR 67506). We did not propose 
any changes to these policies for the PY 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 did not 
propose any changes to these policies.
    With respect to the proposed Ultrafiltration Rate and Serum 
Phosphorus reporting measures, we proposed 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] TR04NO16.310

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 sought comments on these proposals. We did not receive comments 
on these proposals.
    Final Rule Action: We did not receive any comments on our proposals 
for calculating facility performance on reporting measures. 
Accordingly, we will finalize these policies as proposed.
6. Weighting the Clinical Measure Domain, and Weighting the Total 
Performance Score
a. Weighting of 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 of the proposed rule 
(81 FR 42826), 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 proposed to weight 
the following measures in the following subdomains of the proposed 
clinical measure domain as follows (see Table 17):

  Table 17--Proposed Clinical Measure Domain Weighting for the PY 2020
                                ESRD QIP
------------------------------------------------------------------------
                                      Measure weight
                                     in the clinical   Measure weight as
    Measures/measure topics by         domain score      percent of TPS
             subdomain              (proposed for  PY  (proposed for  PY
                                         2020) %            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                   18               18.8
     topic........................
    Hypercalcemia measure.........                  2                1.6
    (Proposed) SHR measure........                 11                8.8
------------------------------------------------------------------------
Note: We proposed that the Clinical Domain make up 80 percent 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 proposed 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 
proposed to reduce the weight of the Safety Measure Domain from 15 
percent

[[Page 77918]]

to 10 percent. In future years of the program, we stated that 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 proposed 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 also proposed 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 proposed 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 proposed 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. of 
the proposed rule (81 FR 42833)). 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 proposed to reduce the weights of the 
following measures by 1 percentage point each from what we 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 proposed 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 sought comments on these proposals. The comments and our 
responses to are set forth below.
    Comment: Another commenter pointed out an error in the VAT measure 
weight as a percent of the TPS for PY 2020 in Table 10 of the proposed 
rule (81 FR 42841), reproduced as Table 17 above. Specifically, the 
table in the proposed rule indicated that the VAT measure topic would 
be weighted as 18.8 percent of the TPS in PY 2020, however both Table 
10 and Figure 6 indicated the combined VAT measure will be weighted as 
18.0 percent of the Clinical Measure Domain. Commenter's analysis found 
that the 18.0 percent combined VAT weight and the 80 percent Clinical 
Domain Weight results in a combined VAT measure that would comprise 
14.4 percent of the TPS rather than 18.8 percent.
    Response: We thank commenters for bringing this calculation error 
to our attention. We acknowledge that our calculation was incorrect. 
The column showing the weights within the clinical measure domain was 
correct but when we calculated the measure weights as a percent of the 
TPS, we miscalculated the weight of the VAT measure. The column showing 
measure weights as a percent of the TPS is provided for illustrative 
purposes only. We note, however, that we are not finalizing the weights 
as proposed. Section IV.E.5.b of this rule describes the policy and 
weighting that we are finalizing for PY 2020.
    Comment: One commenter requested that CMS assign less weight to the 
ICH CAHPS measure because of the subjective nature of the survey. They 
argued that administering it twice a year may become bothersome to 
patients, thus leading to less honest and less valid responses, and 
fewer responses in general.
    Response: We believe that the subjective nature of the ICH CAHPS 
survey should not factor into the weight assigned to the measure within 
the Clinical Measure Domain. Response to the ICH CAHPS Survey is 
completely voluntary. Patients may refuse to respond if they find the 
survey bothersome or if they do not wish to respond for any other 
reason. The survey data reflects the reported experiences of the 
respondents. The fact that the data may be subjective does not mean 
that it is incorrect. Instead the survey reflects the patients' 
perspectives on their care, and we continue to believe that this 
measure is vitally important because it is the only measure in the ESRD 
QIP which measures the patients' experience of the care they receive.
    Final Rule Action: In response to the comments received, we are not 
finalizing the weighting as proposed. Instead, we are finalizing a 
revised weighting structure. Specifically, for PY 2020 we are 
finalizing that the Clinical Measure Domain will continue to comprise 
75 percent of the TPS, the Safety Measure Domain will comprise 15 
percent of the TPS and the Reporting Measure Domain will comprise 10 
percent of the TPS. Table 18 below shows the weights being finalized 
for PY 2020.
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 proposed 
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. 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 consistency as possible in the QIP 
Scoring Methodology from year to year.
    We proposed 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 sought comments on these proposals. The comments and our 
responses for these proposals are set forth below.
    Comment: One commenter did not support CMS's proposed modifications 
to the weighting of the safety measure domain and clinical measure 
domain for PY 2020 because they do not believe addition of the proposed 
Safety Measure Domain is necessary. They also argued that CMS is 
proposing too many measures that focus little attention on patient 
outcomes and recommended

[[Page 77919]]

that CMS evaluate the existing and proposed measures for PY 2020 and 
remove those that are less relevant to quality of care.
    Response: We thank commenter for their recommendations. We are not 
finalizing the weighting of the safety measure domain and clinical 
measure domain as proposed and instead we are finalizing a revised 
weighting structure. We believe it is crucial to emphasize the 
importance of the NHSN BSI Measure Topic so that facilities prioritize 
their efforts to accurately and completely report to NHSN their 
Dialysis Event data, while at the same time mount significant efforts 
to reduce bloodstream infections. Accordingly, we are going to maintain 
the Safety Measure Domain at 15 percent of the TPS for PY 2020. We have 
prioritized outcome measures for inclusion in the ESRD QIP, and we will 
continue to try identifying appropriate outcome measures, specified for 
use in dialysis facilities, which we believe will contribute to 
improved patient outcomes. We have clearly identified criteria for use 
when determining which measures should be removed from the program. At 
this time, we are not proposing to remove any measures from the ESRD 
QIP's measure set.
    Comment: A commenter recommended that CMS maintain the Safety 
Measure Domain at 15 percent of the TPS for PY 2020, arguing that the 
reintroduction of the NHSN Dialysis Event Reporting Measure compensates 
for any concerns regarding the validity of the NHSN BSI Clinical 
Measure, along with the more robust data validation methodology. 
Commenter argued that lowering the weight of the Safety Measure Domain 
would dis-incentivize reporting to NHSN.
    Response: We thank the commenter for their recommendation and we 
agree that for PY 2020, in order to ensure that facilities continue to 
be appropriately incentivized both for reporting to NHSN, through the 
NHSN Dialysis Event Reporting Measure, and for continued efforts to 
reduce infections among their patients, through the NHSN BSI Clinical 
Measure, we should maintain the Safety Measure Domain at 15 percent of 
the TPS rather than reducing the weight of that Domain to 10 percent in 
PY 2020. By maintaining the Safety Measure Domain at a higher 
percentage of the TPS, we are ensuring that facilities continue to 
report complete and accurate data beyond PY 2019. Therefore, we have 
provided updated weights for the Clinical Measure Domain for PY 2020 in 
Table 18.

  Table 18--Finalized Clinical Measure Domain Weighting for the PY 2020
                                ESRD QIP
------------------------------------------------------------------------
                                      Measure weight
                                     in the clinical   Measure weight as
    Measures/measure topics by         domain score      percent of TPS
             subdomain              (proposed for  PY      (updated)
                                        2020) (%)
------------------------------------------------------------------------
Patient and Family Engagement/Care                 40  .................
 Coordination Subdomain...........
    ICH CAHPS measure.............                 25              18.75
    SRR Measure...................                 15              11.25
Clinical Care Subdomain...........                 60  .................
    STrR measure..................                 11               8.25
    Dialysis Adequacy measure.....                 18               13.5
    Vascular Access Type measure                   18               13.5
     topic........................
    Hypercalcemia measure.........                  2                1.5
    SHR measure...................                 11               8.25
------------------------------------------------------------------------
Note: We initially proposed that the Clinical Domain make up 80 percent
  of a facility's TPS for PY 2020. We are finalizing a different
  weighting structure: For PY 2020 we are maintaining the Clinical
  Domain at 75 percent of a facility's TPS. The percentages listed in
  this Table represent the measure weight as a percent of the Clinical
  Domain Score.

    Final Rule Action: After consideration of the comments received, we 
are not finalizing these policies as proposed. Instead, as discussed 
above, we are finalizing the weighting structure shown in Table 18 
above. We are going to maintain the Safety Measure Domain at 15 percent 
of a facility's TPS for PY 2020. Accordingly, the measure weights in 
the Clinical Measure Domain Score have not changed but the Measure 
Weights as a Percent of TPS have changed as shown. We believe this 
change to our proposal will ensure that facilities continue to be 
appropriately incentivized both for reporting to NHSN and for continued 
efforts to reduce infections among their patients.
7. Example of the PY 2020 ESRD QIP Scoring Methodology
    In this section, we provide an example to illustrate the 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 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.

[[Page 77920]]

[GRAPHIC] [TIFF OMITTED] TR04NO16.311

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

[[Page 77921]]

[GRAPHIC] [TIFF OMITTED] TR04NO16.312

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

[[Page 77922]]

[GRAPHIC] [TIFF OMITTED] TR04NO16.313

    Figure 9 illustrates the methodology used to calculate the TPS for 
Facility A.
[GRAPHIC] [TIFF OMITTED] TR04NO16.314


[[Page 77923]]


    Figure 10 illustrates the full scoring methodology for PY 2020.
    [GRAPHIC] [TIFF OMITTED] TR04NO16.315
    
    We received comments on the Figures provided in this example. The 
comments and our responses are set forth below.
    Comment: Two commenters identified calculation errors in Figure 7 
of the proposed rule (81 FR 42843) and requested clarification. 
Specifically, commenters pointed out that each of the six measures in 
the Reporting Domain should be weighted as 16.67 percent rather than 14 
percent, as presented in Figure 7 of the CY 2017 ESRD PPS proposed 
rule.
    Response: We thank the commenters for bringing this calculation 
error to our attention. Figure 11 below has been updated to correct the 
calculation errors which appeared in the proposed rule.

[[Page 77924]]

[GRAPHIC] [TIFF OMITTED] TR04NO16.316

    Additionally, in light of the weighting structure we are finalizing 
for PY 2020, we have created an updated figure, Figure 12 below, 
showing the weights we are finalizing. For PY 2020, the Safety Measure 
Domain will comprise 15 percent of the TPS, the Clinical Measure Domain 
will make up 75 percent of the TPS and the Reporting Measure Domain 
will make up 10 percent of the TPS.

[[Page 77925]]

[GRAPHIC] [TIFF OMITTED] TR04NO16.317

8. 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 did not propose to change these minimum data 
policies for the measures that we proposed to continue including in the 
PY 2019 ESRD QIP measure set. For the proposed Ultrafiltration Rate and 
Serum Phosphorus Reporting Measures, we also proposed that facilities 
with at least 11 qualifying patients will receive a score on the 
measure. We believe that setting the case minimum at 11 for these 
reporting measures strikes the appropriate balance between the need to 
maximize data collection and the need to not unduly burden or penalize 
small facilities. We further believe that setting the case minimum at 
11 is appropriate because this aligns with case minimum policy for the 
vast majority of the reporting measures in the ESRD QIP.
    Under our current policy, we begin counting the number of months 
for which a facility is open on the first day of the month after the 
facility's 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 proposed 
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.

[[Page 77926]]

    Table 19 displays the proposed patient minimum requirements for 
each of the measures, as well as the proposed CCN Open Dates after 
which a facility would not be eligible to receive a score on a 
reporting measure.

                      Table 19--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.
----------------------------------------------------------------------------------------------------------------

    We sought comments on these proposals. The comments and our 
responses for these proposals are set forth below.
    Comment: Several commenters expressed concerns about the numbers 
included in the Minimum Data Table (Table 11) in the proposed rule (81 
FR 42846) because of the effect on small facilities with very small 
sample sizes. Commenters asserted that performance scores for many such 
facilities are random and may not reflect actual performance. One 
commenter requested additional detail from CMS so they can better 
understand CMS's rationale for these values and for the unit of 
analysis. They pointed out that NQF considered patients as the unit of 
analysis for reliability testing, while CMS proposed to use patient-
years at risk as the unit of analysis in the QIP. Commenters argued 
that these values are too low and will result in too much random 
volatility in performance scoring under the QIP. Commenters urged CMS 
to adopt consistent criteria for the establishment of minimum data 
requirements and ranges for the SFA, particularly for the Standardized 
Ratio Measures, and mentioned that the NQF uses 0.7 as a recommended 
IUR value to limit random noise as much as possible. Several commenters 
specifically urged CMS to set the minimum data requirement for each 
measure at the sample size at which the IUR reaches 0.70. 
Alternatively, if CMS does not choose to implement this change, they 
recommended that the top end of the SFA range be set at a sample size 
adequate to reach an IUR of 0.7 so that enough of the observed result 
for each measure is due to actual performance rather than to random 
``noise'' due to small sample numbers.
    Commenters offered the STrR as an example of the problem with the 
small sample sizes used. This measure was found to have very low 
reliability, particularly for small facilities. The IUR for facilities 
with sample sizes below 46 patients was about 0.4, suggesting that 60 
percent of inter-facility difference was due to random noise rather 
than underlying performance. The SFA in this case only raises the 
scores for very small facilities but does not offset the substantial 
effect of random variation for small sample sizes.
    Response: We thank the commenters for their recommendations. We 
recognize the importance of the scientific standard of measure 
reliability, and note that the STrR satisfied this condition. All 
components of measure reliability were reviewed in detail at the NQF 
ESRD Standing Committee's meeting in June, 2016. The reliability result 
reported in the NQF submission showing the overall IURs of 0.60-0.66 
across all facilities was determined acceptable by the NQF Standing 
Committee as the measure passed on the reliability criterion, and 
passed on scientific acceptability overall. The evaluation and voting 
process and result adhered to consensus development guidelines in the 
evaluation, thereby reinforcing acceptance of the reliability results.
    Given the established effect of sample size on IUR calculations, it 
is expected that large facilities will have a higher IUR and that 
smaller facilities will have lower IUR values for any given measure. 
Reliability results by facility size were not required by NQF. However, 
the decision to include reliability based on tertiles of facility size 
was intended to enhance interpretation of the detail provided in the 
measure submission.
    Regarding the commenter's recommendation to use an IUR of 0.7, we 
are not aware of any formal or prescriptive NQF guideline or standard

[[Page 77927]]

that sets or requires this test result value as a minimum threshold for 
passing reliability. The commenter may be referring to a non-peer 
reviewed prior RAND Report referenced by NQF as an example of signal to 
noise method that can be used for reliability testing. Additionally, 
there is no formal required threshold identified by NQF, as 
demonstrated in the endorsement of other quality metrics that have a 
range of reliability statistics, several of which are below the 
threshold of 0.7. Specifically, the STrR reliability results are 
comparable to the reliability test results for other NQF-endorsed risk 
adjusted outcome measures used in public reporting. For example, four 
NQF endorsed, cause-specific hospital mortality measures demonstrated 
similar levels of reliability (for example, #0229 Heart Failure 
Measure, ICC: 0.55; #0468 Pneumonia Mortality Measure, ICC: 0.79; #1893 
COPD Mortality Measure, ICC: 0.51; #2558 CABG Mortality Measure, ICC: 
0.32).
    Final Rule Action: After consideration of the comments received, we 
are finalizing these policies as proposed. For the reasons described 
above, at this time, we do not believe it would be appropriate to 
establish a minimum IUR threshold.
9. 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 proposed 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 noted this proposed policy for PY 2020 is identical to the policy 
finalized for PY 2019 and we recognized that we were not proposing a 
policy regarding the inclusion of measures for which we were 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 stated that we did not propose 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 
stated that we would 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 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 did not propose 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 sought comments on this proposal regarding our policy to 
determine payment reductions for PY 2020.
    Final Rule Action: We did not receive comments on this proposal. 
Accordingly, we are finalizing this policy as proposed.

F. 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 IV.E.2.b.i. above, we proposed to adopt the 
Standardized Hospitalization Ratio (SHR) Clinical measure and calculate 
performance rates for that measure in 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'' (Measures Application Partnership #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, we did not propose 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, Measures Application Partnership #XDEFM and NQF 
#0226). We will continue to collect these data and conduct detailed 
analyses to determine whether either of these clinical

[[Page 77928]]

measures would be appropriate for future inclusion in the ESRD QIP.
    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 sought comments on these issues, including whether data for a 
patient-level influenza immunization clinical measure should be 
collected through CROWNWeb or through NHSN.
    Comment: Commenters supported CMS's future policy for consideration 
which would allow for the use of rates rather than ratios for the SRR 
and STrR measures because they are easier to understand and because the 
current ratio measures have a wide range of uncertainty that does not 
provide an accurate view of a facility's performance when the ratio is 
reduced to a single number. One commenter argued that this approach 
will improve accuracy, transparency and clinical relevance. They 
recommended that CMS use the year-over-year difference between 
normalized rates, currently available from DFR data until they can be 
replaced by risk-standardized rate measures.
    Despite support for the general concept, several commenters urged 
CMS to carefully consider the methodology used if it is decided to 
convert ratios to rates. They suggested that the use of the national 
median rate as the conversion factor would be potentially misleading in 
certain regions of the country where typical performance varies 
significantly from the national rate.
    One commenter offered two simulations of possible methodologies to 
convert rates to ratios: First, using the median rate to convert the 
ratio to a rate; second, using the mean rate to convert the ratio to a 
rate. In both of these scenarios, QIP scores remained identical--
dialysis facilities received the same scores regardless of the ratio or 
rate methodology. The commenter concluded that they would likely 
support this proposal but would need to see additional analyses 
regarding the methodology to be used.
    Response: We thank commenters for their suggestions and for sharing 
the two simulations provided. We will take their suggestions into 
consideration as we consider the possibility of introducing this policy 
in future years of the ESRD QIP. If we consider proposing this policy 
for future years of the program, we will share the proposed methodology 
through rulemaking.
    Comment: A commenter stated that they would likely support a 
proposal to report national performance standards and individual 
facility performance as rates, as opposed to ratios, but they would 
need to see the complete proposal first. They also supported CMS's 
discussion about possibly using rates instead of ratios for the 
readmissions and transfusion measures because the current ratios are 
problematic in that they have a wide range of uncertainty that does not 
provide an accurate view of a facility's performance when the ratio is 
reduced to a single number. There are also problems with regard to the 
reliability of a standardized ratio. Commenter suggested that CMS could 
immediately switch to rates and encouraged the Agency to use the year-
over-year difference between normalized rates currently available from 
DFR data until they can be replaced by risk standardized rate measures. 
Commenter also suggested that the use of the national median rate as 
the conversion factor for ratios may be misleading in parts of the 
country where typical performance varies significantly from the 
national rate. Using rates instead of ratios would make the measure 
results more meaningful by expressing results in terms that have 
intrinsic meaning.
    Response: We thank the commenter for sharing their suggestions and 
concerns, which we will carefully consider as we consider the 
possibility of introducing this policy in future years of the ESRD QIP 
program.
    Comment: One commenter recommended that CMS consider calculating 
rates in the same manner currently utilized in DFC rather than by 
calculating a ratio and then converting it into a rate because the 
latter approach may be methodologically flawed and create unnecessary 
complexity.
    Response: We thank commenter for their suggestion and, as we 
continue to consider the possibility of introducing this policy in 
future years of the ESRD QIP, we will consider the feasibility of 
calculating rates in the same manner currently utilized in DFC.
    Comment: Commenters submitted a great deal of feedback on the 
possible introduction of an influenza immunization measure in the ESRD 
QIP. One commenter pointed out that despite recommendations, vaccines 
are consistently underutilized in the adult population and urged CMS to 
consider developing and implementing a comprehensive composite measure 
for all vaccines recommended for ESRD Patients, as such a measure would 
be of great benefit to ESRD patients and to the ESRD QIP. 
Alternatively, they recommended that CMS consider including reporting 
measures for pneumococcal and hepatitis B vaccination in addition to 
the existing and proposed Influenza vaccination measures. Several 
commenters stated that they would support the adoption of NQF #0226, 
Influenza Immunization in the ESRD Population, in the QIP because it 
fully aligns with NQF's specifications for influenza vaccinations, and 
because it is endorsed by the NQF. They also appreciate that the 
measure is standardized with NQF's 2008 immunization report which set 
the measurement timeframe as October 1 through March 31, or when the 
vaccine becomes available. They expressed serious concerns about MUC 
#XDEFM for several reasons. First, it does not follow the NQF 
specifications for a measurement timeframe of October 1 through March 
31 or when the vaccine became available,'' and second it has not been 
fully tested or specified. They added that scientific acceptability 
should be considered an essential component of a measure's properties 
and that measure developers should be required to show that data 
elements can be reliably reported and that the measure is valid.
    Commenters also supported the proposal to use CROWNWeb to collect 
patient-level influenza clinical measure data, because KCQA specified 
and tested the patient-level influenza measure using facility data with 
the intention that such data would be submitted through CROWNWeb. They 
added that using NHSN would introduce another factor that would require 
reliability and validity testing as well as increasing the burden on 
dialysis facilities because of manual entry issues. They strongly 
recommended that if CMS does add a patient-level influenza immunization 
clinical measure, it should add NQF #0226 unchanged and collect the 
data through CROWNWeb.
    Response: We thank commenters for their support and for their 
suggestions regarding the potential future introduction of a patient-
level influenza immunization measure into the ESRD QIP for future years 
of the program. We will take their suggestions into consideration as we 
evaluate options.
    Comment: Several commenters supported the influenza vaccination 
reporting measure for future

[[Page 77929]]

consideration in the QIP and suggested that NHSN be used to collect 
data for the measure for consistency, ease of use, and access purposes. 
Given that the NHSN HCP Influenza vaccination measure is already 
collected in NHSN, adding the patient-level measure to the existing 
reporting system would provide consistency and continuity for 
facilities. Additionally, commenters pointed out that state health 
departments, LDO's and ESRD Networks can gain access to the data 
reported in NHSN and continued use of this system would more easily 
facilitate sharing of data with other entities engaged in the oversight 
of infection prevention. One commenter added that if NHSN is used to 
collect data, it will serve as a single repository for influenza 
vaccination data, and therefore could be used by regulatory agencies 
and local health departments who are able to access the data and use it 
for quality improvement and other public health purposes. One commenter 
also recommended that CMS consider adding an additional incentive for 
facilities that report vaccination rates, above the proposed required 
vaccination information.
    Response: We thank commenters for their support, and we will take 
their suggestions into consideration as we consider the feasibility of 
introducing a patient-level influenza immunization measure into the 
ESRD QIP's measure set in future years of the program.
    Comment: One commenter expressed concerns about the potential use 
of Measures Application Partnership #XDEFM as the basis for a future 
clinical measure because it does not follow the NQF standardized 
specifications for a measurement timeframe and given that the vaccine 
is often available in late July or early August, omitting patients who 
were vaccinated before October 1 unfairly penalizes those facilities 
who are able to obtain the vaccine early and serves as a disincentive 
to early and thorough vaccination.
    Another commenter disagreed with CMS's concerns that NQF #0226 
would exclude patients who die from influenza, but might not have died 
if they had been vaccinated. The measure specifications do not include 
such an exclusion and in fact the measure excludes unvaccinated 
patients who die prior to March 31. This exclusion does not penalize 
facilities for patients who could still have received a vaccination 
within the timeframe specified by the Agency's own measurement 
timeframe. The commenter recommended setting the denominator such that 
it is aligned with the NHSN protocol and NQF specifications and that 
CMS clearly state that the CDC would determine the date when a vaccine 
is made available each year.
    Response: We thank commenters for sharing their suggestions 
regarding the future potential introduction of either NQF #0226 or 
Measures Application Partnership #XDEFM, and we will take them into 
consideration when considering the future adoption of a patient-level 
influenza immunization measure.
    Comment: Commenters submitted a great deal of feedback on the 
possible introduction of a Standardized Mortality Ratio measure in the 
ESRD QIP. Several commenters stated that they would potentially support 
the adoption of an SMR measure into the QIP but expressed a few 
concerns with the measure. Two commenters stressed that any mortality 
measure would need to be carefully tailored to the actions of the 
dialysis facility and they recommended that CMS work more closely with 
stakeholders to establish an appropriate measure that focuses on year-
over-year, facility-specific improvement before considering its 
addition into the QIP, particularly in light of the decision of the 
NQF's Renal Standing Committee not to recommend the revised SMR 
Measure. Commenters urged CMS to update the SMR Specifications to make 
them less ambiguous and more precise, and they argued that the 1-year 
period is inappropriate based on the testing data. Instead, they 
recommended at minimum a 4-year period and they encouraged CMS to 
consider including a larger list of relevant prevalent comorbidities as 
identifiable in Medicare claims data because they feel it's important 
to adapt the SHR and SMR in a way that takes into account the effect 
that such comorbidities have on hospitalization and mortality rates. 
Commenters appreciated that the introduction of an SMR measure in the 
QIP would promote high quality care for ESRD patients and recommended 
that the measure reflect a rolling average of facility performance due 
to the potential for a small number of outliers to impact facility 
performance substantially on the measure and further recommended that 
the measure include an adjuster for small facilities so that those with 
small sample sizes are not inappropriately penalized. Finally, they 
recommended that CMS adopt an NQF-endorsed SMR measure.
    Response: We thank the commenters for sharing their suggestions 
regarding the potential implementation of a Standardized Mortality 
Ratio Measure in future years of the ESRD QIP. We will take these 
comments and suggestions into consideration as we consider whether to 
propose such a measure in the future.
    Comment: Commenters provided a great deal of feedback regarding the 
possible introduction of a Transplant Measure in future years of the 
ESRD QIP. One commenter agreed that referrals and patient education 
about transplants are important concepts to measure, but stated that 
they could not support the two transplant-related wait list measures 
proposed by a recent TEP because they are not appropriate for the QIP 
based upon the most recent specifications released by CMS because they 
measure the success of being waitlisted and attribute that to dialysis 
facilities when that responsibility rests solely with the transplant 
center. Instead, the commenter recommended that CMS focus efforts on 
developing measures related to patient education, referral to a 
transplant center, initiation of the waitlist evaluation process, or 
completion of the waitlist evaluation process, and care coordination. 
Another commenter had specific concerns about the proposed future 
adoption of a transplant measure. Specifically, they argued that 
transplants carry a level of risk that patients must assume, so it is 
important to require that all patients be assessed for transplant, 
however commenter expressed concern with the expectation that a 
percentage of a facility's patients be required to actively pursue a 
transplant. Another commenter stated that as CMS moves toward a more 
bundled care environment, it is important for the ESRD QIP to implement 
a transplant measure. They added that it would be beneficial to track 
and report the number of transplant patients, number of transplants, 
and the employment status of these patients in order to identify key 
indicators and best practices to help patients get transplanted and 
retain employment.
    Response: We thank the commenters for sharing their suggestions 
regarding the potential implementation of a Transplant Measure in 
future years of the ESRD QIP. We will take these comments and 
suggestions into consideration as we consider whether to propose such a 
measure in the future.
    Comment: Commenters agreed that emergency department (ED) visits 
are an important marker of healthcare utilization and cautiously 
supported the concept of measuring Emergency Department Utilization but 
added that it would be a complex measure which would require careful 
construction and risk modeling. One commenter stated that without more 
information about the potential emergency department utilization 
measure, they could not

[[Page 77930]]

support such a measure for inclusion in the QIP. Another commenter 
stated that any such measure would need to include dialysis-related 
emergency room visits. Commenters stated that much work would need to 
be done to appropriately construct an ED visit measure for dialysis 
facility accountability and that such a measure would need to include 
risk modeling to account for many factors that may influence the 
frequency of ED visit. It would need to account for the fact that there 
are a wide variety of circumstances that lead to ED visits, many of 
which are completely beyond the control or the knowledge of the 
facility at the time they are occurring. Commenters stressed that CMS 
will need to carefully consider the specifications for the measure as 
certain facilities may not be able to achieve low rates of unnecessary 
patient utilization of the ED. They provided two examples: A facility 
that is only open three days a week should not be penalized if their 
patients utilize the ED on a day that they are not open. Second, 
patients in urban settings may live close enough to the hospital that 
they have the option to go home and see if their illness subsides 
sufficiently without having to go to a hospital ED, while patients in 
rural settings may not have that option. Facilities in more rural 
settings should not be penalized simply because their patients live in 
rural settings and feel the need to go to the ED out of an abundance of 
caution.
    Response: We thank the commenters for sharing their suggestions 
regarding the potential implementation of an ED Utilization measure in 
future years of the ESRD QIP. We will take these comments and 
suggestions into consideration as we consider whether to propose such a 
measure in the future.
    Comment: Many commenters supported CMS's proposal to consider the 
inclusion of a Medication Reconciliation measure in future years of the 
ESRD QIP, and specifically stated that they would support the adoption 
of NQF #2988: Medication Reconciliation for Patients Receiving Care at 
Dialysis Facilities, which is currently under evaluation by the NQF 
Patient Safety Standing Committee. They supported this measure because 
it is an important patient safety process for patients with ESRD given 
that many of them have multiple prescriptions and because it would help 
providers identify unnecessary medications, duplicate therapies or 
incorrect dosages, thus reducing the risk of patients experiencing 
adverse drug events. One commenter added that such a measure would 
incentivize providers to perform medication reconciliation across the 
continuum of care and would increase the focus on patient safety, 
resulting in improved patient outcomes.
    Response: We thank the commenters for their support and input and 
will take their recommendations into consideration as we proceed with 
our measure development work.
    Comment: One commenter stated that, provided they are outcome 
measures, rather than process measures, they would support all of the 
following measures for consideration in future payment years of the 
ESRD QIP: The SMR Measure, an ED Utilization Measure, a Medication 
Reconciliation measure, and a measure examining kidney transplants in 
ESRD patients.
    Response: We thank commenter for their support of these measures 
under future consideration.
    Comment: A commenter argued that future pediatric measure 
development should consider the entire pediatric population, beyond 
Medicare beneficiaries and include the full range of pediatric patients 
without regard to provider in order to ensure the greatest knowledge of 
their health status and to provide meaningful and appropriate data 
about the quality of pediatric care. The commenter also urged CMS to 
examine the appropriateness of including measures that evaluate adult 
and pediatric patients together and to work on finding measures that 
are more appropriate for assessing small numbers of pediatric patients 
who are dialyzed at adult facilities.
    Response: We thank the commenter for their suggestions and we agree 
that it is vitally important to measure the care being provided for 
pediatric patients, both in pediatric facilities and in facilities that 
treat adult and pediatric patients together. Unfortunately, in large 
part due to the small numbers of pediatric patients, there are 
currently very few measures available that focus on the care furnished 
to pediatric patients with ESRD. For example, as we noted in the CY 
2015 ESRD PPS Final Rule (79 FR 66172), using 2013 data, there were 
only 10 facilities that were eligible to receive a score on the 
Pediatric Hemodialysis Adequacy measure. We will continue to work with 
the ESRD community to identify measures for inclusion in the ESRD QIP 
that examine the care of this vulnerable population.
    Comment: One commenter urged CMS to reinstitute a measure 
establishing a minimal standard for anemia management to ensure that 
patients are neither over-treated nor under-treated.
    Response: When we retired the Hemoglobin Less Than 10 g/dL measure, 
we did so for important clinical reasons which we continue to believe 
warrant including this measure only as a Reporting Measure and not as a 
Clinical Measure (76 FR 70257). Specifically, we could not identify a 
specific hemoglobin lower bound level that has been proven safe for all 
patients treated with ESAs. Additionally, at the time the measure was 
retired, we discussed with the FDA our proposal to retire the 
Hemoglobin Greater than 10 g/dL measure starting in PY 2013. Because 
the measure encouraged providers/facilities to keep hemoglobin above 10 
g/dL, the FDA agreed that retiring the measure was consistent with the 
new labeling for ESAs approved by the FDA. We are also not aware of, 
nor have any stakeholders noted, any studies that identify a specific 
hemoglobin level which should be maintained to increase quality of life 
or minimize transfusions or hospitalizations. However, if any new 
evidence or studies emerge, we will take such evidence into 
consideration in adopting future measures for the ESRD QIP. Factors 
that impact anemia management, including optimal iron stores, dialysis 
adequacy, avoidance of infections, reduction of inflammation, and other 
factors should be addressed by the health care team to improve patient 
health. We urge patients and providers to work together to achieve 
optimal hemoglobin levels for each individual patient. We will continue 
to monitor and evaluate practice patterns and outcomes for all segments 
of the Medicare ESRD population as we develop and refine our 
measurement of the quality of anemia management.
    Comment: A commenter urged CMS to consider developing quality 
measures for use with patients with AKI. Some of their specific 
recommendations were to develop a Kt/V measure specific for AKI 
patients with a target of 3.9. They also recommended a BSI measure 
specific to AKI patients, arguing that AKI patients should not be 
included in the same measure pool as ESRD patients given that they have 
a higher risk of infections and have additional complex complications. 
Finally, they urged CMS to develop patient-reported outcomes measures 
specific to AKI patients, including assessments of patient 
satisfaction.
    Response: We thank the commenter for their recommendations. We 
agree that patients with AKI must be ensured a high quality of care, 
however given the measures that are currently available for use in 
Dialysis Facilities, we are unable to measure care for patients with 
AKI at this time. The quality measures

[[Page 77931]]

currently in use in the ESRD QIP specifically include patients with 
end-stage renal disease and are not designed to measure the care of 
patients with AKI. In the event that measures are developed that 
include patients with AKI, we will consider the feasibility of 
including those measures in our measure set in future years of the 
program.
    Comment: One commenter argued that recovery time is an important 
and powerful indicator of day-to-day quality of life and is associated 
with patient survival and recommended that CMS start collecting and 
reporting data on recovery time as a meaningful clinical outcomes 
measure.
    Response: We thank the commenter for their suggestion and we agree 
that recovery time is an important and powerful indicator of the 
quality of life of patients with ESRD. However, at this time, we are 
not aware of any clinical quality measures that are available to 
measure this important outcome. Should one become available, we will 
consider the feasibility of including it in the measure set for the 
ESRD QIP in future years of the program.

V. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)

A. Background

    Section 1847(a) of the Social Security Act (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 of the Department of Health and Human Services (the 
Secretary) to establish and implement the Competitive Bidding Program 
(CBP) in Competitive Bidding Areas (CBAs) throughout the United States 
for contract award purposes for the furnishing of certain competitively 
priced Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(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, as 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 product category 
and 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. Section 
1847(b)(2)(A)(v) 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. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the DMEPOS CBP

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. In the proposed rule for 
the DMEPOS Competitive Bidding Program, we made proposals to implement 
statutory requirements for bid surety bonds and state licensure for the 
DMEPOS CBP, as well as to revise the 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. We received approximately 14 public 
comments on our proposals, including comments from homecare 
associations, a surety association, DME manufacturers, and individuals.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the DMEPOS Competitive 
Bidding Program. Comments related to the paperwork burden are addressed 
in the ``Collection of Information Requirements'' section in this final 
rule. Comments related to the impact analysis are addressed in the 
``Economic Analyses'' section in this final rule.
1. Bid Surety Bond Requirement
    At proposed Sec.  414.402, we proposed 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 (81 FR 42877).
    At proposed Sec.  414.412, ``Submission of bids under a competitive 
bidding program,'' we proposed adding 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

[[Page 77932]]

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 (81 FR 42879). 
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 (81 FR 42879).
    At proposed Sec.  414.412(h)(2) ``Bid Surety Bond requirements,'' 
we proposed that 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 the 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 (81 FR 42879).
    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. We proposed 
setting the bid surety bond amount at $100,000 for each CBA in which a 
bidding entity submits a bid (81 FR 42879). 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. The CBP has 
historically had a contract acceptance rate exceeding 90 percent, and 
we believe that this acceptance rate will increase with this rule. We 
considered 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 therefore, specifically solicited 
comments on whether to establish a lower bid surety bond amount for 
certain types of suppliers (81 FR 42848).
    Proposed Sec.  414.412(h)(3) specifies conditions for forfeiture of 
the bid surety bond and return of the bond liability (81 FR 42879). 
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 provision at proposed Sec.  
414.412(h) 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 (81 FR 42879).
    We proposed 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 proposed 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 are included in 
proposed Sec.  414.412(h)(4).
    We sought comments on these proposals. We note that we did not 
receive any comments on whether a lower bid surety bond amount would be 
appropriate for a particular subset of suppliers, for example, small 
suppliers, as defined at Sec.  414.402.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: A majority of commenters supported setting the bid surety 
bond amount at $50,000, with some commenters suggesting that the bid 
surety bond amount could be raised in the future if necessary. One 
commenter stated that this is a ``new requirement'' and that ``little 
is known about how [bid surety bonds] will work''. Another commenter 
stated that they do not ``know of any real-life experience'' with 
obtaining a bid surety bond. Another commenter stated that due to the 
unknown nature and specifics regarding the new bid surety bond, the 
requirement of $100,000 per CBA would be ``administratively burdensome 
to qualify for and obtain the [bid surety] bond.'' A commenter 
suggested that the large expenditure potentially required by suppliers 
bidding in multiple CBAs could ``deter some highly qualified suppliers 
from choosing to participate in the bidding process.''
    Response: We agree with commenters that there may be unknown 
variables associated with obtaining this new bid surety bond, as well 
as the potential financial and administrative burdens that will be 
placed on bidders. We believe that a lower bid surety bond amount would 
be appropriate to encourage continued participation of bidders in the 
CBP and are therefore revising the bid surety bond amount to $50,000 in 
the final rule. While we acknowledge that there will be a number of 
entities that are required to make large expenditures in order to 
obtain a bid surety bond for each CBA in which they are submitting a 
bid, we anticipate that this revision on the bid surety bond amount 
from $100,000 to $50,000 will reduce that overall burden on all 
suppliers. We intend to monitor the implementation of the bid surety 
bond requirement and will consider increasing the bid surety bond 
amount in future rulemaking if necessary.
    Comment: Several commenters proposed setting the bid surety bond 
amount higher for National Mail Order (NMO) suppliers with a suggested 
range from $100,000 to $1,000,000 since the NMO has a ``national 
scope'' and that NMO suppliers ``operate nationally.''
    Response: We appreciate the comments suggesting that NMO suppliers 
should be required to obtain a higher bid surety bond amount since they 
provide competitively bid items nationwide. MACRA section 522(a) 
requires CMS to set the bid surety bond requirement in a competitive 
acquisition area within a range of $50,000 to $100,000. We proposed to 
implement the requirement to obtain a bid surety bond for each CBA in 
the manner required by MACRA. We proposed that the bid surety bond 
amount be applied in a consistent manner and will not vary by CBA. A 
``nationwide competitive bidding area'' is defined in regulation at 
Sec.  414.402 as a CBA that includes the United States, its 
Territories, and the District of Columbia. In the proposed rule, we did 
not contemplate setting a different bid surety bond amount for the NMO 
competition since the NMO competition, by definition, is a single CBA 
(emphasis added) and the NMO competition is not a specific subset of 
suppliers. The contract acceptance rate for the original NMO 
competition and the NMO Recompete were 95 percent and 100 percent, 
respectively. This indicates to us that a higher bid surety bond amount 
for an NMO competition is not necessary at this time. Furthermore, the 
highest bid surety bond amount we are permitted to set under section 
522(a) of MACRA is $100,000. In this final rule, we will be setting the 
bond amount at $50,000 for all suppliers.

[[Page 77933]]

    Comment: One commenter suggested implementing stronger penalties 
for submission of false bid surety bonds such as a prohibition from 
participation in all future rounds of the CBP.
    Response: We did not propose to prohibit an entity from 
participation in all future rounds of the CBP in this rulemaking and do 
not think it is necessary at this time because we believe that 
referring bidding entities that provide a falsified bid surety bond to 
the Office of the Inspector General and Department of Justice for 
further investigation is sufficient.
    Comment: A commenter inquired as to why the bid surety bond was 
only required until January 1, 2019.
    Response: This commenter's interpretation that the bid surety bond 
is only required until January 1, 2019 is incorrect. Section 
1847(a)(1)(G) of the Act provides that the bid bond requirement is 
applicable to rounds of competition beginning not earlier than January 
1, 2017 and not later than January 1, 2019. Thus, the bid surety bond 
will be required by bidders submitting bids starting with the Round 1 
2019 competition.
    Comment: Several commenters suggested that CMS create a limit on 
either the amount of bid surety bonds required to be purchased by an 
entity, or the amount of bid surety bonds that could be forfeited by an 
entity in the event of default.
    Response: Section 1847(a)(1)(G) of the Act does not provide us with 
the authority to limit the number of bid surety bonds purchased by an 
entity or to place a cap on the forfeiture amount. Section 
1847(a)(1)(G) of the Act explicitly states that a bid surety bond must 
be purchased for each competitive acquisition area in which a bidder is 
submitting a bid.
    Comment: One commenter suggested that CMS add a provision that sets 
forth the discharge of the authorized surety more explicitly.
    Response: For purposes of responding to this comment, we are 
assuming that the term discharge refers to the return of the bid surety 
bond liability. We will issue guidance (for example, in the Request for 
Bids instructions) prior to the opening of the bidding window on the 
mechanism for the return of the bid surety bond liability to the 
bidding entity.
    Final Rule Action: As a result of the comments received regarding 
the bid surety bond requirement, and our reevaluation of the potential 
impact to the CBP, in this final rule we are adopting a lower amount of 
$50,000 for the bid surety bond instead of $100,000 for each CBA and 
revising Sec.  414.412(h)(2)(i)(H) accordingly. We agree that there are 
a number of unknown variables associated with bid surety bonds and 
there will be financial and administrative burdens that will be placed 
on bidders. Therefore, we have revised the bid surety bond amount to 
$50,000. After considering the comments and for the reasons we set 
forth previously, the provisions at Sec.  414.412 (h)(1) through 
(h)(2)(i)(G) for bid surety bonds will be finalized. However, we have 
updated Sec.  414.412(h)(2)(i)(D) to reference Sec.  414.412(h)(3), 
which specifies the conditions of the bond. In addition, proposed Sec.  
414.412(h)(3) through (4) will be finalized as proposed.
2. State Licensure Requirement
    We proposed 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 (81 FR 42848). 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) stated that 
``[e]ach supplier must have all State and local licenses required to 
perform the services identified in the request for bids.'' Therefore, 
we proposed revisions to Sec.  414.414(b)(3) to align with the language 
of section 1847(b)(2)(A) of the Act as revised by section 522(b) of 
MACRA, to state that a contract will not be awarded to a bidding entity 
unless the entity meets applicable State licensure requirements (81 FR 
42878). We noted, however, that this does not reflect a change in 
policy asSec.  414.414(b)(3) already requires suppliers to have 
applicable State and local licenses (81 FR 42848).
    We sought comments on these proposals. The comments and our 
responses to the comments regarding these proposals are set forth 
below.
    Comment: One commenter stated that ``state licensure for DMEPOS 
will add an extra layer of unnecessary regulation. Currently, we must 
also be accredited which costs thousands of dollars for the privilege 
just to have a license.''
    Response: We are not adding requirements or additional layers of 
regulation. Suppliers currently are required to have applicable state 
and local licenses under Sec.  414.414(b)(3). The regulation we are 
finalizing at Sec.  414.414(b)(3) simply captures the language of 
section 1847(b)(2)(A)(v) of the Act, as added by section 522 of MACRA, 
which prohibits CMS from awarding a contract to any entity in a CBA 
unless those requirements are met (81 FR 42848). Therefore, the change 
we are adopting in this final rule does not represent a change in 
policy.
    Comment: We received a number of comments on our proposed revisions 
to Sec.  414.414(b)(3) that were beyond the scope of the proposed 
rulemaking.
    Response: These comments were beyond the scope of the proposed 
rulemaking, therefore, we will not be addressing these comments in our 
final rule.
    Final Rule Action: We are finalizing Sec.  414.414(b)(3) as 
proposed, to state that a contract may not be awarded to a bidding 
entity unless the entity meets applicable State licensure requirements. 
This action does not place a new burden on suppliers nor does it 
represent a change in policy as CMS currently requires suppliers to be 
in compliance with all State and local licenses. The final regulation 
makes it explicit that CMS may not award a contract to any entity in a 
CBA unless the entity meets applicable State licensure requirements, as 
required by section 522(b) of MACRA.
3. Appeals Process for a DMEPOS Competitive Bidding Breach of Contract 
Action
    We believe DMEPOS suppliers should have the option to appeal all 
actions that CMS may take for breaches of contract. As a result, we 
proposed revising 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 (81 FR 42848). While we 
recognize that we have the authority to take one or more actions 
specified in Sec.  414.422(g)(2), the current appeals process is 
available for one of those actions, specifically, contract termination. 
Therefore, the proposed revisions would expand Sec.  414.423 to allow 
appeal rights for each action specified in Sec.  414.422(g)(2) for a 
breach of contract (81 FR 42848). If a supplier's notice of breach of 
contract includes more than one breach of contract action CMS would 
take, and the supplier chooses to appeal more than one action, CMS 
would make separate decisions for each breach of contract action after 
reviewing the hearing officer's recommendation (81 FR 42849). We also 
proposed revisions to 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)

[[Page 77934]]

revoking the supplier number of the contract supplier (81 FR 42849). We 
proposed removing Sec.  414.423(g)(2)(i) because a corrective action 
plan is already a part of the formal appeals process outlined in Sec.  
414.423, and therefore, unnecessary to list as an action CMS can impose 
on contract suppliers that it considers to be in breach (81 FR 42849). 
We also proposed removing 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 (81 FR 
42849). Furthermore, we proposed revising this section to state that 
CMS will specify in the notice of breach of contract which actions it 
is taking as a result of the breach of contract (81 FR 42849).
    Proposed revisions were made throughout Sec.  414.423 to extend the 
appeals process to any breach of contract actions described in proposed 
Sec.  414.422(g)(2) that we might take as a result of the breach, 
rather than just contract termination actions (81 FR 42849). We also 
proposed removing the references to termination throughout Sec.  
414.423 and instead cross-reference all of the breach of contract 
actions in proposed Sec.  414.422(g)(2) (81 FR 42849).
    In proposed revisions to Sec.  414.423(a), we proposed deleting 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 (81 FR 42878).
    In the proposed revisions to Sec.  414.423(b)(1), we proposed 
deleting the phrase ``either in part or in whole'' because Sec.  
414.422(g)(1) specifies that any deviation from contract requirements 
constitutes a breach of contract (81 FR 42878). In addition, we 
proposed removing 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 (81 FR 42878). We also proposed changes to Sec.  414.423 
(b)(2)(i) and (ii) (81 FR 42878). The revised Sec.  414.423(b)(2)(i) 
states that the notice of breach of contract would include the details 
of the breach of contract, while Sec.  414.423(b)(2)(ii) requires CMS 
to include the action or actions that it is taking as a result of the 
breach of contract and the timeframes associated with each breach of 
contract action in the notice (81 FR 42878). For example, when a notice 
of breach of contract includes an action of preclusion, the effective 
date of the preclusion would 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 also proposed to add language to 
paragraph (b)(2)(vi) to specify that the effective date of the action 
or actions that CMS would take 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 (81 FR 
42878-79).
    We proposed revising 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) (81 FR 42879). We proposed to revise Sec.  
414.423(e)(3) 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 
(81 FR 42879).
    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 or actions specified in the notice of breach of contract would 
take effect 45 days from the date of the notice of breach of contract 
(81 FR 42879). Proposed revisions to Sec.  414.423(g)(3) were made to 
clarify that the hearing scheduling notice must be sent to all parties, 
not just the supplier (81 FR 42879).
    We proposed revising Sec.  414.423(j) to clarify that the hearing 
officer would 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 (81 FR 42880).
    In Sec.  414.423(k), we proposed specifying that CMS would make 
separate decisions for each recommendation when the hearing officer 
issues multiple recommendations (81 FR 42880). In addition, we proposed 
revisions to this paragraph to expand CMS' final determination process, 
clarifying that the notice of CMS' decision would be sent to the 
supplier and the hearing officer and would indicate whether any breach 
of contract actions included in the notice of breach of contract still 
apply and will be effectuated, and would indicate the effective date of 
the breach of contract action, if applicable (81 FR 42880). We also 
proposed expanding on Sec.  414.423(l), effect of breach of contract 
action or actions, to specify effects of all contract actions described 
in Sec.  414.422(g)(2) (81 FR 42880). In addition, we proposed adding 
proposed 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 
(81 FR 42880). We also proposed adding proposed Sec.  414.423(l)(3) (81 
FR 42880), effect of preclusion, to specify that a supplier who is 
precluded would not be allowed to participate in a specific round of 
the CBP, which would be identified in the original notice of breach of 
contract. Additionally, we proposed adding proposed 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 would be included in the notice of breach of 
contract (81 FR 42880). Proposed Sec.  414.423(l) also specifies the 
steps suppliers must take to notify beneficiaries after CMS takes the 
contract action or actions described in Sec.  414.422(g)(2) (81 FR 
42880). Lastly, we proposed to remove language from Sec.  
414.423(l)(2), effect of contract termination, to avoid confusion as to 
which supplier is providing notice to the beneficiary (81 FR 42880).
    We sought comments on these proposals. The comments and our 
responses to the comments regarding these proposals are set forth 
below.
    Comment: Numerous commenters suggested that notification of breach 
of contract should be sent via a manner that provided a ``verifiable 
and guarantee receipt.'' Some commenters suggested retaining certified 
mail in additional to the proposed secure manner.
    Response: We will send a breach of contract notification to 
contract supplier via electronic means in the future once we have this 
functional capability. Specifically, contract suppliers will receive an 
email notifying them to check their secure inbox located in CMS' secure 
online portal for the DMEPOS CBP (currently known as ``Connexion''). 
Once a supplier logs in to retrieve the notice, the audit logs will 
record the download history for the document (for example, user name 
date/time stamp, etc.). However, until the portal has this 
functionality, we will continue to provide suppliers with notification 
through certified mail. We will provide advanced notice to contract 
suppliers when the transition to electronic breach of contract 
notifications occurs.
    Comment: One commenter stated that in the breach of contract 
hearing

[[Page 77935]]

scheduling notice CMS should ``clearly state the parties that would 
receive the notice in addition to the supplier.''
    Response: The supplier and CMS are the parties to the hearing (and 
the parties may have representatives appear on their behalf). We do not 
find it necessary, however, to further describe these parties in the 
breach of contract hearing scheduling notice or make this delineation 
within the text of Sec.  414.423.
    Comment: One commenter stated that CMS should address the problem 
of binding bids by exercising its general contracting authority to 
include in each competitive bidding contract severe financial penalties 
for any supplier that does not provide services after signing a 
contract. This penalty should also be referenced as part of the appeals 
process policies.
    Response: We have adopted regulations to take one or more of the 
breach of contract actions outlined in Sec.  414.422(g)(2) against 
contract suppliers that accept competitive bidding contracts and fail 
to meet the terms of the contracts. We believe those actions are 
appropriate and we are not considering other types of penalties at this 
time.
    Final Rule Action: After considering the comments and for the 
reasons we discussed previously, we are finalizing the proposed changes 
to Sec.  414.423 to expand the breach of contract appeals process to 
all breach of contract actions that CMS may take pursuant to Sec.  
414.422(g)(2). We are also finalizing Sec.  414.422(g)(2) to adopt the 
proposed changes to the breach of contract actions that CMS may take 
when a supplier is in breach of its competitive bidding contract (81 FR 
42949). We are removing the word ``only'' from Sec.  414.423(c)(2)(ii) 
to clarify when suppliers may submit a CAP. CMS proposed affording 
suppliers the opportunity to submit a CAP, at CMS' discretion, when the 
supplier receives a subsequent notice of breach of contract action (81 
FR 42849). Removing ``only'' from this section clarifies that CMS may 
accept a CAP in response to a subsequent termination notice and not 
just the initial termination notice. This final regulation provides 
suppliers who are in breach of contract the opportunity to appeal any 
breach of contact action that CMS may take rather than only having the 
opportunity to appeal a contract termination action. This provides 
greater transparency to suppliers and affords CMS greater flexibility 
in managing suppliers that are in breach of their competitive bidding 
contract. Also, in Sec.  414.423(c)(2)(ii), we are changing ``paragraph 
(1)(i)'' to ``paragraph (c)(1)(i)'' to make the paragraph reference 
more clear.
    In the final rule we are also making a revision to Sec.  414.402, 
Definitions, for the term ``hearing officer''. In the revised 
definition, we are removing the references to ``termination'' and 
replacing those references with ``breach of contract'' to align with 
the final changes to Sec.  414.423 that we are adopting in this final 
rule, as well as deleting the abbreviation ``(HO)'', which is no longer 
used in Sec.  414.423 As we discuss in section XII. ``Waiver of 
Proposed Rulemaking,'' because these revisions to Sec.  414.202 are 
technical in nature, to align the definition of hearing officer with 
the terminology and process finalized in Sec.  414.423, we find good 
cause to waive notice and comment rulemaking for this definition 
revision.

VI. Method for Adjusting DMEPOS Fee Schedule Amounts for Similar Items 
With Different Features Using Information From Competitive Bidding 
Programs (CBPs)

A. Background

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

[[Page 77936]]

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 published a final rule titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' on 
November 6, 2014 (hereinafter, the CY 2015 final rule), in which we 
adopted these methodologies (79 FR 66223 through 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) of the Act 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) of the Act 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 (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 fee 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.

[[Page 77937]]

e. Method 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 method to 
address unbalanced bidding, which is a situation that results in price 
inversions under CBPs. We added Sec.  414.210(g)(6) to the regulations 
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 HCPCS code with 
higher beneficiary 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 2015 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, HCPCS code B9002 describes an 
enteral infusion pump with 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 CY 2015 proposed rule, namely, 
enteral infusion pumps and standard power wheelchairs. Therefore, the 
final regulation at Sec.  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 Sec.  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. Summary of the Proposed Provisions on the Method for Adjusting 
DMEPOS Fee Schedule Amounts for Similar Items With Different Features 
Using Information From Competitive Bidding Programs

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. During the comment 
period, we issued a correction to the proposed rule with minor 
technical edits, including corrections to several HCPCS codes we listed 
describing groupings of similar items with different features (81 FR 
42825). The correction notice, which went on public display on August 
2, 2016, was published in the Federal Register on August 3, 2016 (FR 
Doc. C1-2016-15188) (81 FR 51147).
    In the proposed rule, for the Method for Adjusting DMEPOS Fee 
Schedule Amounts for Similar Items with

[[Page 77938]]

Different Features using Information from Competitive Bidding Programs, 
we proposed changes to the methodologies for adjusting fee schedule 
amounts for DMEPOS items using information from CBPs and for submitting 
bids and establishing single payment amounts under the CBPs for certain 
groupings of similar items with different features.
    After performing 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 proposed a rule 
that would 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 final 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.
    E0301.........................  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
    E0130.........................  Rigid.
    E0135.........................  Folding.
    E0141.........................  Rigid With Wheels.
    E0143.........................  Folding With Wheels.
------------------------------------------------------------------------

    As shown in Table 20, 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.

[[Page 77939]]



                  Table 20--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) are 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: 
Codes 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 
21. 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 21--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 a 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 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 
proposed to adopt a definition of price inversion in our regulations at 
proposed Sec.  414.402 as any situation where the following occurs: (a) 
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, an alarm, or Group 
2 performance); (b) 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 (c) 
following a competition, the SPA for the code with the feature is lower 
than the SPA for the item without

[[Page 77940]]

that feature (81 FR 42877). We proposed 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 (81 FR 42854). 
For this adjustment, we considered two methodologies.
    The first method 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 (81 FR 42854). 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 method 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 
22 below.

   Table 22--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 that 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 the section. We stated in the 
proposed rule that, if method 1 is finalized, we would indicate that 
additional price inversions involving additional sets of two items to 
which this rule would apply would be identified in a table in the 
preamble of the final rule (81 FR 42854). An example of such a table is 
provided below in Table 23 using codes for walkers, seat lift 
mechanisms, and TENS devices:

                      Table 23--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 \1\           Powered..........  E0629 SPA adjusted
                                                                                            NTE SPA for E0627.
Seat Lift.....................  E0629               E0628 \1\           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.

    The second method we considered and proposed (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 (81 FR 42855). 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

[[Page 77941]]

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 24.

Table 24--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 the 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 proposed to use method 2 because it took into 
account the supplier bids for all of the similar items when 
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 (81 FR 
42855). 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. We solicited comments on 
both method 2, which we proposed, and method 1, which we considered.
    In summary, we proposed to expand use of the method at Sec.  
414.210(g)(6) to other situations where price inversions occur under 
CBPs. First, we proposed to revise 42 CFR 414.402 to add the definition 
of price inversion as any situation where the following occurs (81 FR 
42856, 42877):
     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 proposed 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) (81 FR 42877). We proposed that 
the adjustments to the SPAs would be made using method 2 described 
above (81 FR 42855). We also proposed changes to the regulation text at 
Sec.  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

[[Page 77942]]

the items in the product category in the CBA before applying the fee 
schedule adjustment methodologies under Sec.  414.210(g) (81 FR 42856, 
42877). We proposed to apply this rule to price inversions as defined 
in the proposed rule for the groupings of similar items listed in the 
Table 18 of the proposed rule and identified again below in Table 25 
(81 FR 42856). For the purpose of calculating the weighted average at 
proposed Sec.  414.210(g)(6)(iii), we proposed 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 (81 FR 42856, 
42877). We proposed 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 proposed 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 (81 FR 42856). 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 25--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.

C. Response to Comments on the Method for Adjusting DMEPOS Fee Schedule 
Amounts for Similar Items With Different Features Using Information 
From Competitive Bidding Programs

    We solicited comments on the method for adjusting DMEPOS fee 
schedule amounts for similar items with different features using 
information from competitive bidding programs and received 8 public 
comments on our proposals, including comments from DMEPOS manufacturers 
and suppliers.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Some commenters suggested there are underlying/additional 
issues to price inversions and suggest that CMS analyze the history of 
the product group and how payment rates for the applicable codes were 
originally established. Comments suggested other factors may have 
caused price inversions such as the method used to ``gap-fill'' fee 
schedule amounts for items when the data mandated by the statute for 
calculating the fee schedule amounts does not exist, awarding contracts 
under the CBP based on composite bids (individual bids for items 
multiplied by item weights), and establishing single payment amounts 
under the CBP based on the median of bids submitted. Some commenters 
suggested that these underlying issues should be addressed and the 
competitions re-competed in order to address the situation.
    Response: We appreciate the comments but do not agree with these 
comments. The fee schedule amounts for walkers, TENS devices, and 
hospital bed codes E0250 through E0261 were established based on 
average reasonable charges from 1986 and 1987 as mandated by section 
1834(a) of the Act. The fee schedule amounts for these items, based on 
supplier's average reasonable charges, are higher as more features are 
added to the items (for example wheels, folding, 4 lead rather than 2 
lead, with mattress, variable height, and semi-electric). The fee 
schedule amounts for hospital beds without side rails (for example 
E0294) were gap-filled using the fee schedule amounts for hospital beds 
with side rails (for example E0260) and subtracting the fee schedule 
amounts for side rails (E0305 and E0310). We do not agree that the 
establishment of fee schedule amounts contributed to price inversions 
since the fee schedule amounts increased with addition of a feature 
when fees were established under both the reasonable charge and gap-
filling methodologies. The fee schedule amounts for heavy duty hospital 
beds (E0301 thru E0304) were established based on manufacturer 
suggested retail prices and are higher than the fee schedule amounts 
for the standard weight versions of these beds to reflect the ability 
to accommodate heavier patients. The fee schedule amounts for electric 
and non-electric seat lift mechanisms are very similar, with the fee 
schedule amounts for electric seat lift mechanisms being slightly 
higher than the fee schedule amounts for the seat lift mechanisms 
without the power feature. The fee schedule amounts for power 
wheelchairs are based on manufacturer suggested retail prices and in no 
case does the fee schedule amount for a Group 1 power wheelchair exceed 
the fee schedule amount for the Group 2 version of the same type of 
power wheelchair. The fee schedule amounts for enteral infusion pumps 
(code B9000 for the pump without alarm and code B9002 for the pump with 
alarm) are the same. For hospital beds, power wheelchairs, and enteral 
infusion pumps, in no case was a fee schedule amount for an item 
without a feature established so that it exceeded the fee schedule 
amount for an item with the feature. For this reason, we do not believe 
that the methods used to establish fee schedules contributed to price 
inversions. The fee schedule amounts for Group 2 support surfaces 
(mattresses and overlays) are addressed below. We do not believe that 
using composite bids to select contract suppliers for contract award or 
median bids to establish single payment

[[Page 77943]]

amounts under the competitive bidding program are underlying causes for 
the price inversions.
    Establishing single payment amounts based on the median of bids (as 
opposed to the highest bid) is applied consistently to each item in the 
product category and reflects the bids of all of the winning suppliers 
rather than just one. It is also similar to how the DME fee schedule 
amounts were initially established for each item, either based on 
average reasonable charges or average supplier prices (as opposed to 
the highest charge or price). We fail to see how establishing SPAs 
under the CBP using median bid amounts is an underlying cause of price 
inversions. We believe that use of composite bids is necessary when a 
competition under the CBP is for a group of items versus a single item. 
It is the method used to determine which bids are the most competitive 
(that is, generate the most savings) for the items in the product 
category as a whole. Use of a composite bid would not be necessary if 
the competition under the program were for a single item (for example, 
for one HCPCS code for oxygen and oxygen equipment used to bill and 
receive payment for all items and services furnished on a monthly basis 
related to oxygen and oxygen equipment). Therefore, we do not believe 
price inversions are caused by use of composite bids and item weights 
alone. Based on our analysis and the examples we discussed previously, 
we believe the problem results when there are multiple codes for items 
that can be substituted for one another because they serve the same 
general purpose (for example, standard power wheelchairs), but have 
different item weights that may vary significantly. As discussed in the 
proposed rule, price inversions result under the CBP when different 
item weights are assigned to similar items with different features 
within the product category. To prevent this from occurring under 
future competitions, we proposed, and as discussed in this final rule, 
an alternative ``lead item'' bidding method addressed in the section on 
submitting bids and determining single payment amounts for certain 
groupings of similar items with different features under the DMEPOS CBP 
(81 FR 42862).
    In the interim period before this new bidding method, which we are 
adopting in this final rule, can be implemented, we must maintain the 
current contracts and payment amounts currently in effect, as required 
by section 1847(a) of the Act. We do not believe that other changes are 
necessary to address price inversions during this interim period. Under 
the final regulation, we will adjust inverted SPA prices prior to 
adjusting the fee schedule amounts for items that have been 
specifically listed in the rule.
    Comment: Some commenters suggested that a definition be established 
for a ``grouping of similar items or products'' to require that all 
items included in the grouping be comprised of items with the exact 
same features or some subset of those features. A few commenters 
suggested further sub-groupings of items into smaller groups with 
similar features, such as a separate grouping for heavy duty hospital 
beds. These commenters also suggested that a definition be established 
for ``product feature(s)'' to require that feature(s) differentiating 
products within the group subject to the rule provide additional 
functional or clinical necessity.
    Response: We appreciate the comments but do not agree that either 
definition is necessary because this specific groupings of items and 
the specific items within each grouping that would be subject to the 
proposed rule were listed in the proposed rule, and the definition of 
price inversion was included in the proposed rule, to identify 
situations where the SPA's for these items would be considered 
inverted.
    We do not believe that a definition of product feature(s) is needed 
because we believe that situations where one item includes a certain 
feature and another item does not include that feature is clear, and 
generally Medicare should not pay more for the item without the feature 
than with a feature under any circumstances. Items without features 
should be paid less or equal to an item with a feature because the 
addition of a feature adds value to an item. We believe, for example, 
the Medicare payment rate for a non-electric hospital bed with side 
rails and mattress should not be higher than the payment rate for a 
semi-electric hospital bed with side rails and mattress. The Medicare 
program would be paying more for less features such as the non-electric 
bed. Likewise, we believe the Medicare payment rate for a semi-electric 
hospital bed without a mattress should not be higher than the Medicare 
payment rate for a semi-electric hospital bed with a mattress.
    We do not believe that establishing smaller ``subgroupings'' of 
items is necessary because the groupings of items, relate to the items 
where existing price inversions have been identified for two or more of 
the codes in at least one CBA. In some cases, a code in a grouping may 
not be involved in a price inversion with another code in the grouping, 
and no adjustment is therefore necessary to adjust the difference in 
the SPAs for the two codes. In the case of heavy duty hospital beds, we 
have not determined that any price inversions have occurred where the 
SPA for a standard weight bed exceeds the SPA for a heavy duty version 
of the same bed. As such, there would be no situation where an SPA for 
a heavy duty bed will be adjusted using a weighted average of an SPA 
for a standard weight bed and an SPA for a heavy duty bed. The price 
inversions that have occurred for heavy duty beds within the grouping 
of codes for hospital beds have involved situations where the SPA for a 
heavy duty bed without a mattress is higher than the SPA for the same 
type of heavy duty bed with a mattress (the exact same feature). The 
changes we are finalizing to the regulation for addressing this 
situation are to adjust the SPAs for both heavy duty beds based on the 
weighted average of the SPAs for both heavy duty beds. The SPAs for 
standard weight beds would not be affected by this adjustment. 
Therefore, we are finalizing as we proposed.
    Comment: Some commenters believe that that the grouping for 
mattresses and overlays (HCPCS codes E0277, E0371, E0372 and E0373) 
should not be subject to the rule. The commenters believe that there 
may be valid reasons why the cost of a non-powered mattress or overlay 
falling under the general category of Group 2 support surfaces may be 
higher than the costs of a powered mattress or overlay falling under 
the general category of Group 2 support surfaces. For example, a non-
powered mattress or overlay product cannot be billed to Medicare until 
it has been classified under a HCPCS code by the Medicare Pricing, Data 
Analysis, and Coding (PDAC) contractor. These are costs that a powered 
mattress or overlay system do not incur. The commenters stated that 
there is no evidence that the powered systems are more effective or are 
superior to the non-powered mattresses and overlays.
    Response: We appreciate the comments, however we do not agree. The 
fee schedule amounts for all four codes for Group 2 support surfaces 
(E0277, E0371, E0372, and E0373) were established from 1992 to 1996 
using the same gap-filling methodology. Manufacturer suggested retail 
prices were used from the same general timeframe for various products 
falling under each code. The fee schedule amounts for the Group 2 
overlays (E0371 and E0372) established in 1996 initially as codes K0413 
and K0414, respectively, and non-powered mattress (E0373) established 
in 1997 initially as

[[Page 77944]]

code K0464, did not exceed the fee schedule amounts for powered 
mattress code E0277, but would have been limited to the fees for code 
E0277 if they had exceeded those amounts. The position of CMS in 1996 
and 1997 and today is that the fee schedule amounts for overlays should 
not exceed the fee schedule amounts for mattresses, and that the fee 
schedule amounts for a non-powered Group 2 mattress should not exceed 
the fee schedule amounts for a powered Group 2 mattress. The addition 
of power or a complete mattress rather than an overlay that sits on top 
of a standard mattress are recognized as additional features. This 
position is supported by the structure of fee schedule amounts for 
Group 1 support surfaces calculated using average reasonable charges 
from 1986 and 1987. The fee schedule amounts for Group 1 mattresses are 
higher than the fee schedule amounts for Group 1 overlays, and fee 
schedule amounts for powered overlays are higher than the fee schedule 
amounts for non-powered overlays. We believe our proposal, which we are 
finalizing as proposed, provides a solution to address price inversions 
for this grouping of items that is necessary to avoid the risk of 
beneficiaries receiving items with less functionality (for example, a 
non-powered overlay), and preventing access to items with more 
functionality (for example, a powered mattress system), only because 
the payment amounts for the non-powered items are higher than the 
payment amounts for the powered items, or, as has occurred in 128 out 
of 130 competitive bidding areas, because the payment amounts for a 
non-power overlay (a support surface that is neither powered, nor 
mattress size) are higher than the payment amounts for a powered 
mattress system. The cost incurred to have a product code verified by 
the PDAC under codes E0371 or E0373 is a one-time, insignificant cost 
and prevents products from being classified as Group 1 products paid 
below $200 under the current fee schedule rather than Group 2 products 
paid at fee schedule amounts exceeding $3,000 under the current fee 
schedule.
    Comment: Four of the eight commenters provided comments regarding 
the method to be used for adjusting SPAs in situations where price 
inversions have occurred. Three commenters preferred the proposed 
method 2, where a weighted average of the SPAs for the items involved 
in the price inversion is used to establish the payment amount for all 
of the items. The commenters favored this method because it takes into 
account the SPAs and supplier bids for all of the items involved in the 
price inversion rather than simply limiting the SPA for the lower 
volume item without a certain feature(s) to the higher volume item with 
the feature(s). One commenter preferred alternative method 1, where the 
SPA for the lower volume item without a certain feature(s) is limited 
to the SPA for the higher volume item with the feature(s). Method 1 is 
the method in the regulations that currently addresses price inversions 
for enteral infusion pumps and standard power wheelchairs. This 
commenter stated that since method 2 calculates a weighted average 
single payment amount using the item volume weights for groupings for 
similar items assigned under competitive bidding, it has the potential 
to compound unintended consequences with the assumption that current 
pricing and volume using ``total nationwide allowed services'' for 
multiple products will be balanced by a weighted average.
    Response: We agree with the three commenters that method 2 should 
be used rather than method 1 for the reasons noted above. The weighted 
average approach takes into account the supplier's bids for all of the 
items in the grouping of items and therefore addresses the commenter's 
concerns that the supplier bids for the lower volume items be taken 
into account in setting the payment amounts for the items. We do not 
understand what the commenter that favored method 1 versus method 2 
means by ``compounding unintended consequences'' and so it is not clear 
why the commenter suggested method 1 over method 2.
    Final Rule Action: After consideration of comments received on the 
proposed rule and for the reasons we set forth previously, we are 
finalizing the proposed revisions to Sec.  414.210(g)(6), with two 
technical changes. As a result of the administrative HCPCS editorial 
process, code B9000 for enteral infusion pumps without alarm is 
discontinued, effective January 1, 2017. Since only one code (B9002), 
rather than a group of codes, will remain in the HCPCS for enteral 
infusion pumps, there will no longer be multiple codes for this 
category of items, and so the proposed grouping of enteral infusion 
pumps is being removed from this section and therefore, not being 
finalized. Similarly, a decision was made to discontinue HCPCS code 
E0628 for electric seat lift mechanisms, effective January 1, 2017, and 
therefore this code is being removed from the grouping of seat lift 
mechanisms in this section and not being finalized in the regulation. 
We are also finalizing the proposed definitions at Sec.  414.402 of 
``price inversion'' and ``total nationwide allowed services.''

VII. Submitting Bids and Determining Single Payment Amounts for Certain 
Groupings of Similar Items With Different Features Under the Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Competitive Bidding Program (CBP)

A. Background on the DMEPOS CBP

    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 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 aims to guarantee 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

[[Page 77945]]

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

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. Under the heading of 
Submitting Bids and Determining Single Payment Amounts for Certain 
Groupings of Similar Items with Different Features under the DMEPOS 
CBP, we proposed to establish an alternative bidding method in proposed 
Sec.  414.412(d)(2) that could be used to avoid price inversions 
discussed above in section VI of the proposed rule (81 FR 42877). Under 
this alternative bidding method, one item in the grouping of similar 
items would be 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, would be considered the lead 
item of the grouping (8 FR 42858 through 42859). For purposes of this 
final rule, the lead item bidding method described below only applies 
to the groupings of similar items with different features identified in 
this rule, and does not apply to other items not listed in this rule 
that may be in the same product category as the items listed in this 
rule.
    For each grouping of similar items, we proposed that the supplier's 
bid for the lead item would be used as the basis for calculating the 
SPAs for the other items within that grouping, based on the ratio of 
the average of the fee schedule amounts for each item for all areas 
nationwide in 2015, to the average of the fee schedule amounts for the 
lead item for all areas nationwide in 2015 (81 FR 42859, 42878). In 
proposed Sec.  414.412(d)(2), we proposed to use the fee schedule 
amounts for 2015 for the purpose of maintaining the relative difference 
in fee schedule amounts for the items in each grouping as it existed 
prior to any adjustments being made to the amounts based on information 
from the CBPs (81 FR 42877). This is to avoid the impact of price 
inversions that have occurred in pricing items under the CBP from 
affecting the relative difference in fee schedule amounts for the 
items. Under the CBP, 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 the proposed lead item bidding method, a supplier submits one 
bid amount for furnishing all of the items in the grouping (for 
example, standard power wheelchairs), rather than submitting bid 
amounts for each individual HCPCS code describing each different item 
(81 FR 48259). The competitive bidding item in this case (for example, 
standard power wheelchairs) is a combination of HCPCS codes (for 
example, K0813 thru K0829) for power wheelchairs with different 
features (Group 1/Group 2, portable/standard weight/heavy duty weight/
very heavy duty weight/extra heavy duty weight, sling seat/captains 
chair). Suppliers submitting bids under the method will understand that 
if their bid is in the winning range, it would be used to establish the 
single payment amounts for all of the codes in the grouping. Suppliers 
will therefore take into account the cost of furnishing all of the 
items described by the various codes when determining their bid amount 
for 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 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 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 proposed using allowed services from 
calendar year 2012 for the first time this bidding method is used for 
specific items in specific CBAs (81 FR 42859). 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 proposed 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 
proposed 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 will also help to prevent price inversions in adjusted 
fee schedule amounts using competitive bidding SPAs. We proposed to 
announce which items would be subject to this bidding method at the 
start of each competition in each CBA where

[[Page 77946]]

this bidding method is used (81 FR 42859).
    The following Tables 26, 27, and 28 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 the proposal, when bidding for the lead item, a 
supplier is bidding to furnish the entire grouping of similar items. In 
the tables 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 (81 FR 42860).

           Table 26--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 27 below. 
Under our proposal, when bidding for the lead item, a supplier is 
bidding to furnish the entire grouping (81 FR 42860).

                     Table 27--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 
proposed to include a new Sec.  414.416(b)(3) that would include the 
lead item bidding method (81 FR 42860, 42878). 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

[[Page 77947]]

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 Table 28. Under the proposal, when bidding for the lead 
item, a supplier is bidding to furnish the entire grouping (81 FR 42860 
through 42861).

                  Table 28--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 29, Table 30, Table 31 and Table 32. 
Under our proposal, when bidding for the lead item, a supplier is 
bidding to furnish the entire grouping (81 FR 42861).

             Table 29--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 30--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 31--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

[[Page 77948]]

 
E0372..............................  Powered air mattress                  2,076          505.82            0.76
                                      overlay.
E0371..............................  Nonpowered mattress overlay           1,444          416.85            0.63
E0373..............................  Nonpowered mattress........             716          576.84            0.87
----------------------------------------------------------------------------------------------------------------


                Table 32--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
----------------------------------------------------------------------------------------------------------------
* Chair excluded from coverage by section 1861(n) of the Act.

    In summary, we proposed 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 (81 FR 42862). Suppliers participating in future CBPs 
may be required to use this method when submitting bids for these 
groups of similar items. Also, we proposed to revise Sec.  
414.416(b)(3) 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 (81 FR 42878). 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 Medicare Trust Fund from paying higher amounts 
for items with fewer features.

C. Response to Comments on Submitting Bids and Determining Single 
Payment Amounts for Certain Groupings of Similar Items With Different 
Features Under the DMEPOS Competitive Bidding Program

    We solicited comments on this section. We received 4 public 
comments on our proposals from medical device manufacturers and 
suppliers.
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: One commenter believes that the lead item bidding method 
does not align with Congressional intent for basing payment for items 
under the competitive bidding program on bids submitted and accepted 
for a single item.
    Response: We believe that single payment amounts under the program 
are based on bids submitted and accepted for covered items and services 
described in section 1847(a)(2) of the Act. DMEPOS items and services 
are also described by HCPCS codes, which group covered items and 
services into categories for billing purposes. For the purpose of 
implementing the DMEPOS competitive bidding program, the definition of 
``item'' at Sec.  414.402 states that an item is a product that is 
identified by a HCPCS code or a combination of codes and/or modifiers. 
Therefore, we maintain that under the DMEPOS competitive bidding 
program, an item can be a group of HCPCS codes, such as a group of 
codes for similar items with different features under the proposed lead 
item bidding method. Under the lead item bidding method, suppliers take 
into account the cost of furnishing all of the covered items and 
services into their bid for the lead item, just as they would take into 
account the cost of furnishing a range of covered items and services 
described by a single HCPCS code, as HCPCS codes rarely describe a 
single DMEPOS product. One alternative to the lead item bidding method 
for eliminating price inversions under the DMEPOS competitive bidding 
program is to eliminate the multiple codes from the HCPCS for similar 
items with different features and establish a single code that 
describes all the items and services (for example, one codes for 
``hospital bed, any type, includes all related accessories''). This is 
a long term alternative we can consider in the future to address price 
inversions if we determine that there is no need for multiple codes for 
similar items.
    Comment: One commenter believes that it is unreasonable to keep 
constant the relative price difference among items under the fee 
schedule, as product prices could vary over time due to market factors 
and other reasons.
    Response: We appreciate these comments, but do not agree that the 
lead item bidding method would prevent suppliers from accounting for 
changes in costs for the items over time or that it is unreasonable to 
keep the relative difference in prices constant for the items and 
services identified in the proposed rule. If, for example, the costs of 
Group 1 power wheelchairs increases over time, suppliers can take these 
costs into account in submitting their bid for the lead item, a Group 2 
power wheelchair, as their bid is used to calculate the payment amounts 
for all of the items in the grouping of similar items. If the costs of 
Group 1 power wheelchairs increases to the point where they cost more 
than a Group 2 power wheelchair, the supplier can elect to furnish the 
lower cost Group 2 power wheelchair instead, since this

[[Page 77949]]

product would also meet the needs of the beneficiary. Or, alternatively 
as a long term solution if we determine that there is not a need for 
multiple codes for the similar items with different features can be 
eliminated from the HCPCS and a single code can be established that 
describes all the items and services (for example, standard power 
wheelchair, any type). This would address the issue of price inversions 
as well, and the supplier would take into account the cost of 
furnishing the different types of standard power wheelchairs into their 
bid for the single code, just as they would under the lead item bidding 
method.
    Comment: Commenters suggested that (1) other factors other than 
allowed services should be considered when determining lead items such 
as allowed payment amounts for HCPCS codes and (2) CMS analyze features 
defined in the existing HCPCS codes and (3) CMS segregate products that 
exceed the code requirements in clinically or functionally relevant 
ways to ensure beneficiaries don't lose access to necessary features.
    Response: We appreciate the comments but do not agree. These 
comments are based on the assumption that the presence or absence of a 
feature (for example, heavy duty versus non-heavy duty) is not 
sufficient to determine a pricing order for similar items (for example, 
hospital beds). As we indicated in the section for the method for 
adjusting DMEPOS fee schedule amounts for similar items with different 
features using information from CBPs, we do not believe that a Medicare 
fee schedule amount for an item without a certain feature(s) should 
exceed the Medicare fee schedule amount for the item with that 
feature(s). If products within a HCPCS code exceed the code 
requirements in clinically or functionally relevant ways, consideration 
can be made to revise the HCPCS codes to separately identify these 
products.
    Comment: One commenter wants CMS to make the process of determining 
the groupings and the lead item transparent and open for industry or 
stakeholder input.
    Response: We believe that the proposed rule is transparent in 
identifying the groupings of similar items and the lead item. We 
included a proposed definition of price inversion, a listing of codes 
representing groupings of similar items, and a method for determining 
the lead item in each grouping.
    Comment: One commenter wants CMS to consider the highest Medicare 
fee schedule amounts for the items when deciding upon a lead item.
    Response: We appreciate the comments but do not agree. We believe 
the item with the most allowed services of any item in a group is the 
item that is used most often and therefore should be considered the 
lead item since it is likely to be the one that suppliers furnish more 
than any of the other items in the group of similar items. The item 
with the highest fee schedule amount may not be the item that suppliers 
furnish more than any of the other items in the group of similar items; 
however, in many cases the item with the highest fee schedule amount is 
also the item with the most allowed services of any item in the group 
of similar items.
    Comment: One commenter specifically suggested that CMS consider 
heavy-duty items as a separate grouping when determining the lead item 
because they believed heavy duty items were more costly.
    Response: We believe that that the presence or absence of a feature 
can be used to determine the pricing order for similar items with 
different features. We believe that all hospital beds are similar items 
used for the same purpose and that the heavy duty feature (the ability 
to accommodate heavier patients) is clearly an additional feature. We 
see no reason to single out this feature (heavy duty) from other 
features as warranting a separate category of hospital beds. There is 
no evidence that heavy-duty items are more costly than the grouping of 
hospital beds. We believe it is more efficient to include these items 
in the grouping of hospital beds so that suppliers do not have to enter 
additional bids for these items, increasing the chance of keying 
errors.
    Final Rule Action: After consideration of comments received on the 
proposed rule and for the reasons we articulated, we are finalizing our 
final policy for submitting bids and determining single payment amounts 
for certain groupings of similar items with different features under 
the DMEPOS CBP (alternative bidding methodology), with two technical 
changes. We are finalizing the provisions of Sec.  414.412 to add the 
lead item bidding method described above to prevent price inversions 
under the DMEPOS CBPs. This method would only replace the current 
method of bidding for select groups of similar items identified in the 
final regulation. A decision was made as part of the administrative 
HCPCS editorial process to discontinue code B9000 for enteral infusion 
pumps without alarm, effective January 1, 2017. Since only one code 
(B9002), rather than a group of codes, will remain in the HCPCS for 
enteral infusion pumps, there will no longer be multiple codes for this 
category of items, and so the proposed grouping of enteral infusion 
pumps is being removed and not being finalized in Sec.  414.412(d). 
Similarly, a decision was made to discontinue HCPCS code E0628 for 
electric seat lift mechanisms, effective January 1, 2017, and therefore 
this code is being removed from the grouping of seat lift mechanisms 
and not being finalized in Sec.  414.412(d).

VIII. Bid Limits for Individual Items Under the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive 
Bidding Program (CBP)

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. 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 
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 were 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. Section 414.412 
specifies the rules for submission of bids under a CBP. Each bid 
submission is evaluated

[[Page 77950]]

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.
    The April 10, 2007 final rule titled, ``Medicare Program; 
Competitive Acquisition for Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues'', 
finalized requirements for providers to submit bids under the DMEPOS 
CBP (Sec.  414.412(b)) (72 FR 17992, 18088). Section 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).

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the Bid Limits for Individual Items Under the Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Competitive Bidding Program (CBP)

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. In that proposed rule, we 
noted that 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 (81 FR 42863). 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 
proposed 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) (81 FR 
42863). We proposed 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 will continue to take all of 
these factors into account before awarding contracts for subsequent 
competitions in order to

[[Page 77951]]

determine if total payments to contract suppliers in an area are 
expected to be less than would otherwise be paid.
    In summary, we proposed 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 (81 
FR 42863). 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) of the Act, 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 (81 FR 
42863).
    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 proposed 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 (81 FR 42863). We proposed 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. As discussed in the proposed 
rule, Table 33 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 allowed services for 2012 for all of the 
codes in the grouping (81 FR 42864).

                Table 33--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 proposed to amend Sec.  414.412(b) to establish this 
method for determining bid limits for lead items identified in 
accordance with section Sec.  414.412(d)(2) in section VII. B and as 
referenced also in the proposed rule (81 FR 42864, 42877), which we are 
now finalizing.

C. Response to Comments on Bid Limits for Individual Items Under the 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP)

    We solicited comments and we received approximately 13 public 
comments on our proposals, including comments from medical device 
manufacturers, suppliers, advocacy groups and coalitions, and the 
Medicare Payment Advisory Committee (MedPAC).
    The comments and our responses to the comments for these proposals 
are set forth below.
    Comment: Most commenters supported the bid limit provision that was 
proposed. MedPAC suggested that some adjustment to reflect competitive 
bid results should be factored in to the bid limit rather than using 
the unadjusted 2015 fee schedule amounts, but did not suggest what 
adjustment should be factored into the bid limits. In addition, 
commenters stated that the fee schedule amounts should continue to be 
adjusted in all parts of the country to take into account the 
information from the CBP.
    Response: We agree with commenters with the proposed provision on 
the bid

[[Page 77952]]

limit to use the unadjusted 2015 fee schedule amounts. This will allow 
suppliers to factor in both increases and decreases in SPA. We believe 
the comment from MedPAC is reasonable; however, a specific 
recommendation for adjusting the bid limits based on this general 
comment was not provided. Therefore, we do not have a specific 
recommendation in the comments that we can act upon in establishing the 
final rule.
    Final Rule Action: After consideration of comments received on the 
proposed rule and for the reasons we discussed previously, we are 
finalizing the proposed Sec.  414.412(b), without changes. 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.

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.\12\ As a 
group, dual eligible beneficiaries comprise a population with complex 
chronic care needs and functional impairments.\13\ 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.
---------------------------------------------------------------------------

    \12\ 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.
    \13\ 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. Summary of Public Comments, and Responses to Comments on Access to 
Care Issues for DME

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August 23, 2016. In that proposed rule, 
for Access to Care Issues for DME, we solicited public comment on the 
impacts of coordinating Medicare and Medicaid Durable Medical Equipment 
for dually eligible beneficiaries. We received approximately 36 public 
comments, including comments from individual beneficiaries, beneficiary 
advocates, providers, suppliers, and state organizations.
    In this final rule, we provide a summary of the public comments 
received and our response to them.

C. Provisions of Request for Information

    CMS sought 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.\14\ 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.
---------------------------------------------------------------------------

    \14\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/FederalRegisterNoticeforComment052011.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 requested to receive additional information to help target 
efforts to promote timely access to DME benefits for people dually 
eligible for Medicare and Medicaid.
    We requested public input on 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

[[Page 77953]]

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.
     Other prevalent access challenges due to DME program 
misalignments.
    We also invited 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.
     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.
    We requested specific examples to be included, when possible, while 
avoiding the transmission of protected information, and to include a 
point of contact who can provide additional information upon request.
    The comments and our response to the comments for issues related to 
DME access for dual eligible beneficiaries are set forth below.
    Comments: Overall the comments reinforced that dual eligible 
beneficiaries face numerous challenges navigating the two programs to 
obtain new DME and repairs of existing equipment. Several commenters 
stated that the general lack of Medicaid reimbursement for the Medicare 
deductibles and coinsurances for Qualified Medicare Beneficiaries (that 
is, due to states opting for the ``lessor of'' policy, in which they 
may opt to only cover those costs to the extent that Medicaid payment 
rate exceeds what Medicare pays for the same item) results in supplier 
reluctance to serve dual eligible beneficiaries generally. Several 
commenters pointed out that beneficiaries with complex needs often need 
to use multiple suppliers to obtain all needed items, as well as face 
long wait times to receive items. Some commenters gave examples of 
beneficiaries unable to access needed DME due to limited supplier 
options with limited inventory, especially in rural and small 
communities. A few commenters offered examples of how beneficiaries 
face difficulties obtaining and repairing equipment while in a skilled 
nursing facility, which may delay discharge to the community. A few 
commenters reported problems obtaining repairs and backup equipment 
when necessary. Some commenters raised concerns about challenges that 
arise when suppliers selected through Medicare's competitive bidding 
program do not accept Medicaid.
    In addition to elaborating on the challenges faced, a number of 
commenters suggested potential changes to the administration of 
Medicare and Medicaid DME benefits. With respect to Medicare, some 
commenters suggested that CMS require that DME suppliers accept 
Medicaid as a condition of being selected in Medicare's competitive 
bidding program. One commenter suggested expansions to the Advance 
Determination of Medicare Coverage (ADMC) policy related to certain 
replacement parts. Many commenters support certain Medicare payment 
changes to promote easier access to needed repairs. Some commenters 
suggested establishing a Medicare transition policy for DME similar to 
the Part D transition policy that would cover suppliers and certain 
DME.
    Commenters also suggested changes to Medicaid administrative 
processes. Many commenters suggested a Medicaid prior authorization 
process that assures suppliers of Medicaid coverage if Medicare were to 
deny coverage. A few commenters suggested clarifying that Medicare 
denial should not be required for items Medicare never covers. Finally, 
some commenters suggested that any such changes apply as well to 
Medicaid managed care organizations that enroll dual eligible 
beneficiaries and are contracted to provide Medicaid DME coverage.
    Response: We appreciate the range and depth of comments and 
suggestions we received. We will consider these comments carefully as 
we contemplate future policies. We are also exploring ways to share 
best practices with the State Medicaid Agencies to promote more 
efficient and effective ``wrap around'' coverage at the state level.

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

A. Background

    The Comprehensive ESRD Care (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 (ESRD) 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.
    CMS sought input on innovative approaches to care delivery and 
financing for beneficiaries with ESRD. We explained that 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 stated that we would consider information 
received as we developed future payment models in this area, and as we 
launched solicitation for a second round of entry into the CEC Model to 
begin on January 1, 2017.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the Comprehensive End-Stage Renal Disease Care Model and 
Future Payment Models

    The proposed rule, titled ``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'' (81 FR 42802 through 
42880), was published in the Federal Register on June 30, 2016, with a 
comment period that ended on August

[[Page 77954]]

23, 2016. In that proposed rule, for the Comprehensive End-Stage Renal 
Disease Care Model and Future Payment Models, we sought comments on a 
range of issues affecting the development of alternative payment model 
(APM) and advanced APM related to the care of beneficiaries with kidney 
disease. We received approximately 21 public comments, including 
comments from ESRD facilities; national renal groups, nephrologists and 
patient organizations; patients and care partners; manufacturers; and 
nurses.
    We also noted a solicitation for new entrants to the CEC model, 
which has since closed. New ESCOs will be announced on or before 
January 1, 2017, when they begin participation in the model.

C. 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 sought public input 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 APMs coordinate care for beneficiaries with chronic kidney 
disease and to improve their transition into dialysis?
    2. How could participants in APMs and advanced APMs target key 
interventions for beneficiaries at different stages of chronic kidney 
disease?
    3. How could participants in APMs and advanced APMs 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 advanced APMs 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 advanced APMs help reduce disparities in 
rates of chronic kidney disease (CKD)/ESRD and adverse outcomes among 
racial/ethnic minorities?
    8. Are there innovative ways APMs and advanced APMs 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?
    Additional information on the Comprehensive ESRD Care Model is 
located at: innovation.cms.gov/initiatives/comprehensive-ESRD-care.
    The comments and our responses to the comments are set forth below.
    Comment: Several commenters recognized the potential value of APM 
and advanced APM in the care of beneficiaries with CKD, ESRD and renal 
transplant. Commenters discussed the structures that might be most 
effective for such models, as well as the role of payment incentives, 
quality measures, and waivers of existing regulations. Several 
commenters identified attributes of existing models and programs that 
would be helpful in such models. In addition, several commenters 
described optimal care patterns around the beneficiaries' transition 
from CKD to ESRD and renal replacement therapy or transplant.
    Response: We thank commenters for their suggestions and input. We 
agree that there are a number of opportunities to improve the care of 
and reduce the costs associated with beneficiaries with kidney disease 
and we appreciate the detailed suggestions offered for such 
improvement, however, we are not finalizing at this time. We intend to 
develop and address comments in future rulemaking.

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 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, we 
proposed 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.
    We did not receive any comments on our proposed technical 
correction to revise the regulations text at Sec. Sec.  413.194 and 
413.215, therefore, we are finalizing this revision as proposed.

XII. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 553(b) of the Administrative 
Procedure Act (APA) (5 U.S.C. 553(b)) and section 1871(b)(1) of the 
Act. We can waive this procedure, however, if the agency finds that the 
notice and comment procedure is impracticable, unnecessary, or contrary 
to the public interest and incorporates a statement of the finding and 
reasons in the rule. See section 553(b)(B) of the APA and section 
1871(b)(2)(C) of the Act.
    We find it unnecessary to undertake notice and comment rulemaking 
in this instance for the additional changes we are making to the 
definition of ``hearing officer'' in Sec.  414.402, because these are 
merely technical edits in order to conform the definition to the 
revised regulation we are finalizing at Sec.  414.423, which was 
promulgated under the notice and comment rulemaking procedures. 
Removing the reference to ``contract terminations'' and the 
abbreviation ``(HO)'' under the existing definition of ``hearing 
officer'' will reconcile the definition with the terminology and 
appeals process we are adopting in this final rule and thus, makes 
additional notice and comment unnecessary. Therefore, under section 
553(b)(B) and section 1871(b)(1) of the Act, for good cause, we waive 
notice and comment procedures.

XIII. 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

[[Page 77955]]

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.

XV. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

B. Requirements in Regulation Text

    In section II and III of this final rule, we include changes to the 
regulatory text for the ESRD PPS in CY 2017 as well as the inclusion of 
subpart K to part 494 for AKI. However, we note that those changes do 
not impose any new information collection requirements.
    In section V of this final rule, we discussed changes to the DMEPOS 
Competitive Bidding Program. Section V.B.1 discusses the changes to the 
program relative to the bid surety bond requirements imposed at Sec.  
414.412. As a result of the new bid surety bond requirements, we have 
revised the information collection request (ICR) associated with the 
DMEPOS Competitive Bidding Program. The ICR is currently approved under 
OMB control number 0938-1016 (CMS-10169). Specifically, we have revised 
Form A (Application for DMEPOS Competitive Bidding Program) in the ICR 
to account for the new bid surety bond requirements. The revised form 
was under development and not available for public review and comment 
when the DMEPOS Competitive Bidding Program proposed rule published. 
Therefore, we have published a separate 60-day Federal Register notice 
to announce the changes to the ICR. The notice published on October 14, 
2016 (81 FR 71100). The notice contains instructions on how to both 
obtain copies of and submit comments on the revised ICR. Copies of the 
revised ICR can be obtained at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10169.html?DLPage=1&DLEntries=10&DLSort=1&DLSortDir=descending. At the 
conclusion of the 60-day public comment period, we will review all 
public comments (if applicable) and then publish a 30-day Federal 
Register notice to announce the submission to OMB as well as another 
public comment period.

C. Additional Information Collection Requirements

    This final rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
final rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP
a. Wage Estimates
    In 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

[[Page 77956]]

information data,\15\ 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.\16\ 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.\17\ 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.
---------------------------------------------------------------------------

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

b. Time Required To Submit Data Based on 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
    In our proposed rule (81 FR 42867), we outlined our data validation 
proposal for PY 2019. Specifically, for the CROWNWeb validation, we 
proposed to randomly sample records from 300 facilities as part of our 
continuing pilot data-validation program. Each sampled facility would 
be required to produce approximately 10 records, and the sampled 
facilities will be reimbursed by our validation contractor for the 
costs associated with copying and mailing the requested records. The 
burden associated with these validation requirements is the time and 
effort necessary to submit the requested records to a CMS contractor. 
We 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 proposed to randomly 
select 35 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 35 facilities are asked to 
submit records, we estimate that the total combined annual burden for 
these facilities will be 35 hours (35 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 $890.75 (35 
hours x $25.45/hour) total of $25.45 ($890.75/35 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. 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).
    We sought comments on the Collection of Information proposals and 
did not receive any comments. Therefore, we are finalizing as proposed.

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

[[Page 77957]]

otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raising novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). This rule is not economically significant within the meaning of 
section 3(f)(1) of the Executive Order, since it does not meet the $100 
million threshold. However, OMB has determined that the actions are 
significant within the meaning of section 3(f)(4) of the Executive 
Order. Therefore, OMB has reviewed these final regulations, and the 
Departments have provided the following assessment of their impact.
    We sought comments on the Regulatory Impact Analysis but did not 
receive any comments. Therefore we are not making any changes at this 
time and are finalizing as proposed.
2. Statement of Need
    This rule finalizes a number of annual updates and several policy 
changes to the ESRD PPS in CY 2017. The annual updates include the CY 
2017 wage index values, the wage index budget-neutrality adjustment 
factor, and outlier payment threshold amounts. In addition to these 
annual updates, we are changing the home dialysis training policy. 
Failure to publish this final rule by November 1, 2016, would result in 
ESRD facilities not receiving appropriate payments in CY 2017 for renal 
dialysis services furnished to ESRD patients in accordance with section 
1861(s)(2)(F) of the Act.
    This rule finalizes 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 this final rule 
by November 1, 2016 would result in a failure to comply with the 
requirements of the Act, as added by the TPEA, including ESRD 
facilities not receiving payment for furnishing renal dialysis services 
to patients with AKI.
    This rule finalizes requirements for the ESRD QIP, including 
adopting a measure set for the PY 2020 program, as directed by section 
1881(h) of the Act. Failure to finalize requirements for the PY 2020 
ESRD QIP would prevent continuation of the ESRD QIP beyond PY 2019. In 
addition, finalizing 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 finalizes 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 finalizes an 
appeals process for all breach of contract actions CMS may take.
    This rule also finalizes a method for adjusting DMEPOS fee schedule 
amounts for similar items with different features using information 
from the DMEPOS CBPs, a method 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 finalized revisions to the ESRD PPS will 
result in an increase of approximately $80 million in payments to ESRD 
facilities in CY 2017, which includes the amount associated with 
updates to the outlier thresholds, home dialysis training policy, and 
updates to the wage index. We estimate 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.\18\ For PY 2020, we estimate that the 
final 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.
---------------------------------------------------------------------------

    \18\ 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.
---------------------------------------------------------------------------

    As explained previously in this final rule, we anticipate that 
DMEPOS CBP bidding entities will be impacted by the bid surety bond 
requirement. Bidding entities will be required to purchase and provide 
proof of a bid surety bond for each CBA in which they bid. We estimate 
that the total cost for all bidding suppliers in Round 2019 will be 
$13,000,000. 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 DMEPOS Competitive Bidding 
regulations we are finalizing will have an impact on Medicare 
beneficiaries.
    We estimate that our final methodology for adjusting DMEPOS fee 
schedule amounts for similar items with different features using 
information from the DMEPOS CBPs, changes for determining single 
payment amounts for similar items with different features under the 
DMEPOS CBPs, and revisions 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 final rule, we used the June 2016 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 final rule. Table 34 
shows the impact of the estimated CY 2017 ESRD

[[Page 77958]]

payments compared to estimated payments to ESRD facilities in CY 2016.

                                    Table 34--Impact of Changes in Payment to ESRD Facilities for CY 2017 Final Rule
                                     [Impact of changes in payments to ESRD Facilities for CY 2017 ESRD final rule]
                                 [Percent change in total payments to ESRD facilities (both program and beneficiaries)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    Effect of total 2017
                                                                                                                                      proposed changes
                                                                                    Effect of 2017  Effect of 2017  Effect of 2017     (outlier, wage
                                                       Number of       Number of      changes in      changes in      changes in      indexes, training
                   Facility Type                      Facilities    treatments (in  outlier policy   wage indexes    payment rate      adjustment and
                                                                       millions)          (%)             (%)         update (%)     routine updates to
                                                                                                                                     the  payment rate)
                                                                                                                                             (%)
                                                                 A               B               C               D               E                     F
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities....................................           6,542            44.5             0.2             0.0            0.55                  0.73
Type:
    Freestanding..................................           6,106            42.0             0.2             0.0            0.55                   0.7
    Hospital based................................             436             2.5             0.3             0.1            0.55                   0.9
Ownership Type:
    Large dialysis organization...................           4,606            31.7             0.2             0.0            0.55                   0.7
    Regional chain................................             999             6.9             0.2             0.0            0.54                   0.7
    Independent...................................             578             3.9             0.1             0.0            0.54                   0.7
    Hospital based \1\............................             358             2.1             0.3             0.1            0.55                   0.9
Geographic Location:
    Rural.........................................           1,225             6.4             0.2             0.1            0.54                   0.9
    Urban.........................................           5,317            38.2             0.2             0.0            0.55                   0.7
Census Region:
    1East North Central...........................           1,056             6.2             0.2            -0.1            0.55                   0.7
    East South Central............................             528             3.3             0.2            -0.1            0.54                   0.7
    Middle Atlantic...............................             713             5.5             0.2            -0.1            0.54                   0.7
    Mountain......................................             375             2.2             0.1            -0.1            0.55                   0.5
    New England...................................             183             1.4             0.2            -0.5            0.56                   0.2
    Pacific \2\...................................             790             6.3             0.1             0.5            0.55                   1.2
    Puerto Rico and Virgin Islands................              51             0.3             0.2            -0.3            0.54                   0.5
    South Atlantic................................           1,485            10.5             0.2            -0.2            0.56                   0.6
    West North Central............................             473             2.3             0.2             0.0            0.56                   0.7
    West South Central............................             888             6.4             0.2             0.1            0.54                   0.8
Facility Size:
    Less than 4,000 treatments \3\................           1,414             3.2             0.2             0.1            0.57                   0.8
    4,000 to 9,999 treatments.....................           2,424            12.3             0.2             0.0            0.54                   0.7
    10,000 or more treatments.....................           2,683            29.0             0.2             0.0            0.55                   0.7
    Unknown.......................................              21             0.0             0.3             0.2            0.59                   1.0
Percentage of Pediatric Patients:
    Less than 2%..................................           6,435            44.2             0.2             0.0            0.55                   0.7
    Between 2% and19%.............................              41             0.3             0.2             0.0            0.59                   0.7
    Between 20% and 49%...........................               9             0.0             0.0             0.2            0.52                   0.7
    More than 50%.................................              57             0.1             0.0            -0.1            0.52                   0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 1,414 ESRD facilities with less than 4,000 treatments, only 352 qualify for the low-volume adjustment. The low-volume adjustment is mandated
  by Congress, and is not applied to pediatric patients. The impact to these low-volume facilities is a 0.8 percent increase in payments.
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the final 
changes to the outlier payment policy described in section II.B.3.c of 
this final 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 0.73 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 outlier policy 
changes.
    Column D shows the effect of the final CY 2017 wage indices. The 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a 0.0 percent decrease to a 0.1 percent 
increase due to these updates.
    Column E shows the effect of the final ESRD PPS payment rate update 
of 0.55 percent. This update reflects the final 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 0.3 percent.
    Column F reflects the overall impact, that is, the effects of the 
outlier policy changes, the wage index, the effect of the change in the 
home dialysis training add-on from $50.16 to $95.60 and the effect of 
the payment rate update. We expect that overall ESRD facilities will 
experience a 0.73 percent increase in estimated payments in 2017. The 
categories of types of facilities in the impact table show impacts 
ranging from an increase of 0.7 percent to an increase

[[Page 77959]]

of 0.9 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 that 
the 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 $9.6 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 1.4 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 
0.73 percent overall increase in the ESRD PPS payment amounts in CY 
2017, we estimate that there will be an increase in beneficiary co-
insurance payments of 4.2 percent in CY 2017, which translates to 
approximately $10 million.
e. Alternatives Considered
    In section II.B.2, we finalized a change 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. 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 8,047 outpatient dialysis treatments for beneficiaries with 
AKI that were furnished in CY 2015. We then inflated the 8,047 
treatments to 2017 values using estimated population growth for fee-for 
service non-ESRD beneficiaries. This results in an estimated 8,234 
treatments that would now be paid to ESRD facilities for furnishing 
dialysis to beneficiaries with AKI. Using the CY 2017 ESRD base rate of 
$231.55 and an average wage index multiplier, we estimate 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.
    We note that in the CY 2017 ESRD PPS proposed rule (81 FR 42870), 
we stated that we identified 7,155 outpatient claims with AKI that also 
had dialysis treatments that were furnished in CY 2015. This is an 
incorrect statement. We should have stated that we identified 7,155 
outpatient dialysis treatments for beneficiaries with AKI.
b. Effects on Other Providers
    Under section 1834(r) of the Act, as added by section 808(b) of 
TPEA, we are finalizing 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 final rule, we finalize 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 at this time.
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 proposed using 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 final 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 42 percent or 
2,710 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 6,453 dialysis facilities paid through the PPS. Table 35 shows 
the overall estimated distribution of payment reductions resulting from 
the PY 2020 ESRD QIP.

 Table 35--Estimated Distribution of PY 2020 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                              Percent of
              Payment  reduction                 Number of    facilities
                                                 facilities      (%)
------------------------------------------------------------------------
0.0%..........................................         3311         55.0
0.5%..........................................         1538         25.5
1.0%..........................................          832         13.8

[[Page 77960]]

 
1.5%..........................................          269          4.5
2.0%..........................................           71          1.2
------------------------------------------------------------------------
Note: This table excludes 432 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 36.

                       Table 36--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 2014-Dec 2014..........  Jan 2015-Dec 2015.
Hypercalcemia...........................  Jan 2014-Dec 2014..........  Jan 2015-Dec 2015.
Standardized Transfusion Ratio..........  Jan 2014-Dec 2014..........  Jan 2015-Dec 2015.
ICH CAHPS Survey........................  Jan 2015-Dec 2015..........  Jan 2015-Dec 2015.
Standardized Readmission Ratio..........  Jan 2014-Dec 2014..........  Jan 2015-Dec 2015.
NHSN Bloodstream Infection..............  Jan 2014-Dec 2014..........  Jan 2015-Dec 2015.
SHR.....................................  Jan 2014-Dec 2014..........  Jan 2015-Dec 2015.
----------------------------------------------------------------------------------------------------------------

    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 
final 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 the proposed rule, we multiplied the total 
Medicare payments to the facility during the 1-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 2,710 facilities expected to receive a reduction is 
approximately $32 million ($31,581,441). 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 final rule would be 
approximately $91 million for all ESRD facilities. As a result, we 
estimate that ESRD facilities will experience an aggregate impact of 
approximately $123 million ($91,449,815 + $31,581,441= $123,031,256) in 
PY 2020, as a result of the PY 2020 ESRD QIP.
    Table 37 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 proposed 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.
    Lastly, we note that the facilities located in the US Territories 
and earning a payment penalty are primarily urban, Large Dialysis 
Organizations and we wish to confirm that we will work through the ESRD 
Networks to address issues of quality of care at these locations.

                    Table 37--Impact of QIP Payment Reductions to ESRD Facilities for PY 2020
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of       Number of      facilities       reduction
                                     Number of      treatments      facilities      expected to      (percent
                                    facilities       2014 (in        with  QIP       receive a       change in
                                                     millions)         score          payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           6,453            40.0           6,021           2,710           -0.35
Facility Type:
    Freestanding................           6,022            37.8           5,853           2,661           -0.36
    Hospital-based..............             431             2.2             168              49           -0.22
Ownership Type:

[[Page 77961]]

 
    Large Dialysis..............           4,541            28.6           4,433           2,025           -0.35
    Regional Chain..............             989             6.2             929             344           -0.27
    Independent.................             568             3.5             536             300           -0.53
    Hospital-based (non-chain)..             354             1.8             123              41           -0.26
    Unknown.....................               1             0.0               0               0              --
Facility Size:
    Large Entities..............           5,530            34.8           5,362           2,369           -0.34
    Small Entities \1\..........             922             5.2             659             341           -0.48
    Unknown.....................               1             0.0               0               0              --
Rural Status:
    (1) Yes.....................           1,260             6.0           1,146             355           -0.22
    (2) No......................           5,193            34.0           4,875           2,355           -0.38
Census Region:
    Northeast...................             881             6.2             785             362           -0.35
    Midwest.....................           1,511             7.6           1,356             593           -0.34
    South.......................           2,853            18.2           2,744           1,356           -0.39
    West........................           1,143             7.6           1,084             362           -0.25
    US Territories \2\..........              65             0.4              52              37           -0.52
Census Division:
    Unknown.....................               1             0.0               0               0              --
    East North Central..........           1,045             5.5             951             471           -0.40
    East South Central..........             522             3.0             515             209           -0.32
    Middle Atlantic.............             702             4.9             623             317           -0.40
    Mountain....................             368             2.0             336              83           -0.17
    New England.................             182             1.3             164              47           -0.17
    Pacific.....................             782             5.7             753             282           -0.28
    South Atlantic..............           1,458             9.4           1,389             771           -0.44
    West North Central..........             469             2.1             406             123           -0.21
    West South Central..........             875             5.8             841             376           -0.36
    US Territories \2\..........              49             0.3              43              31           -0.53
Facility Size (# of total
 treatments):
    Less than 4,000 treatments..           1,211             2.7           1,006             376           -0.33
    4,000-9,999 treatments......           2,401            11.0           2,324             938           -0.32
    Over 10,000 treatments......           2,680            26.1           2,603           1,342           -0.38
    Unknown.....................             161             0.2              88              54           -0.60
----------------------------------------------------------------------------------------------------------------
\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 $50,000 
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 $13,000,000. 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 $1,000 per bid 
surety bond price. Given the unknown variables with this new type of 
bond, we sought comments on how the

[[Page 77962]]

authorized sureties will set the purchase amount for bidding entities 
in order to finalize a more accurate estimate. We received one comment 
which stated that a ``surety will review the capabilities and financial 
strength of the bid surety bond applicants and provide bid surety bonds 
only to those entities that the surety has determined are capable of 
performing the underlying obligation''. Overall, in response to the 
comments, we revised the bid bond amount from $100,000 in the proposed 
rule to $50,000 in this final rule and use the assumption that purchase 
price for a bid surety bond will be approximately $1,000 per CBA. We 
believe that there will be many variables that will impact the bidder's 
out of pocket cost to purchase a bid surety bond(s) and as such, 
believe that by lowering the bid surety bond amount that this will in 
turn lower the overall impact and lessen the burden for bidders.
    We do anticipate that there will be an impact on small suppliers. 
We sought 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 
the final 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.
    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(a) 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.
    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(a) 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 revision to the regulation 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 final 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 final CBP requirements for bid surety bond, state licensure and 
appeals process for 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 proposed that the bid 
surety bond be in an amount of $100,000, we sought 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. In finalizing the rule we determined that the bid surety 
bond will be set at $50,000 for all bidding entities based on comments 
received. No alternatives were considered for the state licensure 
requirement, as Sec.  414.414(b)(3) of the regulations already requires 
suppliers to have all applicable state and local licenses.
    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 we considered is to retain the current appeals process 
for terminations, and allow suppliers to appeal other breach of 
contract actions through an informal sub-regulatory process or a 
process similar to the existing appeals 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. Other DMEPOS Provisions
a. Effects of the Method for Adjusting DMEPOS Fee Schedule Amounts for 
Similar Items With Different Features Using Information From the DMEPOS 
Competitive Bidding Programs
    For this final rule, we estimate that the method 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 final policy will also 
prevent beneficiaries from potentially receiving lower cost items at 
higher coinsurance rates. Suppliers will be impacted little by the 
methodological change because the final methodology we are adopting has 
a small saving attached to it.
b. Effects of the Final Rules Determining Single Payment Amounts for 
Similar Items With Different Features Under the DMEPOS Competitive 
Bidding Program
    In this final rule, we estimate that the method for determining 
single payment amounts for certain groupings of similar items with 
different features under the

[[Page 77963]]

DMEPOS CBPs will generate small savings by not allowing SPAs for 
certain similar items without features to be priced higher than items 
with features. Our final policy will benefit beneficiaries who would 
have lower coinsurance payments as a result of this proposal. We also 
believe this methodology will 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 Revision to the Bid Limits Under the DMEPOS 
Competitive Bidding Program
    In this final rule, we estimate the bid limits for items under the 
DMEPOS CBP will not have a 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 revision to the bid limits at the unadjusted fee level 
would have little fiscal impact in that competitions will continue to 
reduce prices. This final rule will benefit suppliers and beneficiaries 
because payments will 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 38, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
final rule.

  Table 38--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
                      ESRD PPS and AKI for CY 2017
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $80 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 \19\
------------------------------------------------------------------------
                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.........  -$31 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
                Category                              Costs
Annualized Monetized ESRD Provider       $91 million.
 Costs.
------------------------------------------------------------------------
                             DME Provisions
------------------------------------------------------------------------


 
                                                                          Transfer
                                           ---------------------------------------------------------------------
                 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.
----------------------------------------------------------------------------------------------------------------

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

    \19\ We note that the aggregate impact of the PY 2018 ESRD QIP 
was included in the CY 2015 ESRD PPS final rule (79 FR 66256 through 
66258). The 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.
---------------------------------------------------------------------------

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. Approximately 14 percent of ESRD dialysis 
facilities are considered small

[[Page 77964]]

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 14 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 34. Using the 
definitions in this ownership category, we consider the 578 facilities 
that are independent and the 358 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 in this final rule, a hospital-based ESRD 
facility (as defined by ownership type) is estimated to receive a 0.9 
percent increase in payments for CY 2017. An independent facility (as 
defined by ownership type) is also estimated to receive a 0.7 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 
final rule is not estimated to have a significant impact on small 
entities.
    We estimate that of the 2,710 ESRD facilities expected to receive a 
payment reduction in the PY 2020 ESRD QIP, 341 are ESRD small entity 
facilities. We present these findings in Table 35 (``Estimated 
Distribution of PY 2020 ESRD QIP Payment Reductions'') and Table 37 
(``Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 
2020'') above. We estimate that payment reductions will average 
approximately $11,653 per facility across the 2,710 facilities 
receiving a payment reduction, and $13,675.56 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 will decrease 0.48 percent in PY 2020.
    We anticipate that the bid surety bond provision will have an 
impact on all suppliers, including small suppliers; therefore, we 
requested comments regarding the bid bond amount. No comments were 
received from small suppliers. The state licensure and appeal of 
preclusion rules are not expected to have an impact on any supplier.
    We expect that finalizing our proposals for a method for adjusting 
DMEPOS fee schedule amounts for certain groupings of similar items with 
different features using information from the DMEPOS CBPs, our final 
change for submitting bids for a grouping of two or more similar items 
with different features, our final policy for determining single 
payment amounts for similar items with different features under the 
DMEPOS CBPs, and our 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 final rule would 
not have a significant economic impact on a substantial number of small 
entities. We solicited comments on the RFA analysis provided and did 
not receive comments.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this final rule will have a significant impact on operations of 
a substantial number of small rural hospitals because most dialysis 
facilities are freestanding. While there are 139 rural hospital-based 
ESRD 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 ESRD facilities will experience an estimated 0.1 percent increase 
in payments. As a result, this final rule is not estimated to have a 
significant impact on small rural hospitals. Therefore, the Secretary 
has determined that this final rule 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 final rule does not include any 
mandates that would impose spending costs on State, local, or Tribal 
governments in the aggregate, or by the private sector, of $141 
million.

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 
final rule under the threshold criteria of Executive Order 13132, 
Federalism, and have determined that it will not have substantial 
direct effects on the rights, roles, and responsibilities of States, 
local or Tribal governments.

[[Page 77965]]

XX. Congressional Review Act

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

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 amends 42 CFR chapter IV as set forth below:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES; 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 Public Law 106-113, 113 Stat. 
1501A- 332; sec. 3201 of Public Law 112-96, 126 Stat. 156; sec. 632 
of Public Law 112-240, 126 Stat. 2354; sec. 217 of Public Law 113-
93, 129 Stat. 1040; sec. 204 of Public Law 113-295, 128 Stat. 4010; 
and sec. 808 of Public Law 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 to 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 paragraph (a) of this section, the ESRD facility may receive payment 
for bad debts of Medicare beneficiaries as specified in Sec.  
413.89(h)(3).

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 any 
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) of this section are 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:

[[Page 77966]]

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 paragraph (g) of this section 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) Hospital beds (HCPCS codes E0250, E0251, E0255, E0256, E0260, 
E0261, E0290, E0291, E0292, E0293, E0294, E0295, E0301, E0302, E0303, 
and E0304).
    (B) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373)
    (C) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, and K0823).
    (D) Seat lift mechanisms (HCPCS codes E0627 and E0629).
    (E) TENS devices (HCPCS codes E0720 and E0730).
    (F) 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 revising the definition of ``Hearing 
officer'' and adding the definitions of ``Bidding entity,'' ``Price 
Inversion,'' and ``Total nationwide allowed services'' 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.
* * * * *
    Hearing officer means an individual, who was not involved with the 
CBIC recommendation to take action for a breach of a DMEPOS Competitive 
Bidding Program contract, who is designated by CMS to review and make 
an unbiased and independent recommendation when there is an appeal of 
CMS's initial determination to take action for a breach of a DMEPOS 
Competitive Bidding Program contract.
* * * * *
    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 of this part, without the application of Sec.  414.210(g), or 
subpart D of this part, 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 of this part, without the 
application of Sec.  414.210(g), or subpart D of this part, 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) 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).
    (ii) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373).
    (iii) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, K0823, K0824, K0825, K0826, K0827, K0828, and 
K0829).
    (iv) Seat lift mechanisms (HCPCS codes E0627 and E0629).
    (v) TENS devices (HCPCS codes E0720 and E0730).
    (vi) Walkers (HCPCS codes E0130, E0135, E0140, E0141, E0143, E0144, 
E0147, E0148, and E0149).
* * * * *
    (h) Requiring bid surety bonds for bidding entities--(1) Bidding 
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

[[Page 77967]]

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 as specified in paragraph (h)(3) of 
this section;
    (E) The CBA covered by the bond;
    (F) The bond number;
    (G) The date of issuance; and
    (H) The bid bond value of $50,000.00.
    (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 in 
the next round of 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 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:
    (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.

[[Page 77968]]

    (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 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 (c)(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;
    (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

[[Page 77969]]

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: October 24, 2016.

Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 25, 2016.

Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-26152 Filed 10-28-16; 4:15 pm]
 BILLING CODE 4120-01-P