[Federal Register Volume 83, Number 220 (Wednesday, November 14, 2018)]
[Rules and Regulations]
[Pages 56922-57073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24238]



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Vol. 83

Wednesday,

No. 220

November 14, 2018

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 413 and 414





Medicare Program; End-Stage Renal Disease Prospective Payment System, 
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 (DMEPOS) 
Competitive Bidding Program (CBP) and Fee Schedule Amounts, and 
Technical Amendments To Correct Existing Regulations Related to the CBP 
for Certain DMEPOS; Final Rule

Federal Register / Vol. 83 , No. 220 / Wednesday, November 14, 2018 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1691-F]
RIN 0938-AT28


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, 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 
(DMEPOS) Competitive Bidding Program (CBP) and Fee Schedule Amounts, 
and Technical Amendments To Correct Existing Regulations Related to the 
CBP for Certain DMEPOS

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

ACTION: Final rule.

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SUMMARY: This final rule updates and makes revisions to the End-Stage 
Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year 
(CY) 2019. This rule also updates the payment rate for renal dialysis 
services furnished by an ESRD facility to individuals with acute kidney 
injury (AKI). In addition, it updates and rebases the ESRD market 
basket for CY 2019. This rule also updates requirements for the ESRD 
Quality Incentive Program (QIP), and makes technical amendments to 
correct existing regulations related to the Competitive Bidding Program 
(CBP) for certain Durable Medical Equipment, Prosthetics, Orthotics and 
Supplies (DMEPOS). Finally, this rule finalizes changes to bidding and 
pricing methodologies under the DMEPOS competitive bidding program; 
adjustments to DMEPOS fee schedule amounts using information from 
competitive bidding for items furnished from January 1, 2019 through 
December 31, 2020; new payment classes for oxygen and oxygen equipment 
and a new methodology for ensuring that new payment classes for oxygen 
and oxygen equipment are budget neutral; payment rules for multi-
function ventilators or ventilators that perform functions of other 
durable medical equipment (DME); and revises the payment methodology 
for mail order items furnished in the Northern Mariana Islands. This 
rule also includes a summary of the feedback received for the request 
for information related to establishing fee schedule amounts for new 
DMEPOS items and services.

DATES: These regulations are effective January 1, 2019, except the 
amendments to 42 CFR 413.234, which are effective January 1, 2020.

FOR FURTHER INFORMATION CONTACT: 
    ESRDPayment@cms.hhs.gov, for issues related to the ESRD PPS and 
coverage and payment for renal dialysis services furnished to 
individuals with AKI.
    Delia Houseal, (410) 786-2724, for issues related to the ESRD QIP.
    DMEPOS@cms.hhs.gov, for issues related to DMEPOS payment policy.
    Julia Howard, (410) 786-8645, for issues related to DMEPOS CBP 
technical amendments only.

SUPPLEMENTARY INFORMATION: 

Electronic Access

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

Addenda Are Only Available Through the internet on the CMS website

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

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
    B. Summary of the Major Provisions
    C. Summary of Cost and Benefits
II. Calendar Year (CY) 2019 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on the Calendar Year (CY) 2019 ESRD PPS
    C. Solicitation for Information on Transplant and Modality 
Requirements
    D. Miscellaneous Comments
III. CY 2019 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 CY 2019 Payment for Renal Dialysis Services 
Furnished to Individuals with AKI
    C. Annual Payment Rate Update for CY 2019
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, 
Responses to Comments, and Newly Finalized Policies for the End-
Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    C. Requirements for the PY 2022 ESRD QIP
    D. Requirements Beginning with the PY 2024 ESRD QIP
V. Changes to the Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
    A. Background
    B. Current Method for Submitting Bids and Selecting Winners
    C. Current Method for Establishing SPAs
VI. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
from the DMEPOS CBP
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on DMEPOS CBP
VII. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on New Payment Classes for Oxygen and Oxygen 
Equipment and Methodology for Ensuring Annual Budget Neutrality of 
the New Classes
VIII. Payment for Multi-Function Ventilators
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on Payment for Multi-Function Ventilators
IX. Northern Mariana Islands in Future National Mail Order CBPs
    A. Background
    B. Summary of the Proposed Provisions, Public Comments, and 
Responses to Comments on Including the Northern Mariana Islands in 
Future National Mail Order CBPs
X. Summary of the Request for Information on the Gap-filling Process 
for Establishing Fees for New DMEPOS Items
XI. DMEPOS CBP Technical Amendments
    A. Background
    B. Proposed Technical Amendments
XII. Burden Reduction on Comorbidities
    A. Background

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    B. Final Documentation Requirements
XIII. Requests for Information
    A. Request for Information on Promoting Interoperability and 
Electronic Healthcare Information Exchange Through Possible 
Revisions to the CMS Patient Health and Safety Requirements for 
Hospitals and Other Medicare- and Medicaid-Participating Providers 
and Suppliers
    B. Request for Information on Price Transparency: Improving 
Beneficiary Access to Provider and Supplier Charge Information
XIV. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. Requirements in Regulation Text
    C. Additional Information Collection Requirements
XV. Economic Analyses
    A. Regulatory Impact Analysis
    B. Detailed Economic Analysis
    C. Accounting Statement
XVI. Regulatory Flexibility Act Analysis
XVII. Unfunded Mandates Reform Act Analysis
XVIII. Federalism Analysis
XIX. Reducing Regulation and Controlling Regulatory Costs
XX. Congressional Review Act
XXI. Files Available to the Public via the Internet Regulations Text

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    On January 1, 2011, we implemented the End-Stage Renal Disease 
(ESRD) Prospective Payment System (PPS), a case-mix adjusted, bundled 
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). Section 1881(b)(14) (F) of the Act, 
as added by section 153(b) of MIPPA, and amended by section 3401(h) of 
the Patient Protection and Affordable Care Act (the Affordable Care 
Act) (Pub. L. 111-148), established that beginning calendar year (CY) 
2012, and each subsequent year, the Secretary of the Department of 
Health and Human Services (the Secretary) shall annually increase 
payment amounts by an ESRD market basket increase factor, reduced by 
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
of the Act. This rule updates and makes revisions to the ESRD PPS for 
CY 2019.
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) of the Act to an individual with acute kidney injury (AKI). 
Section 808(b) of the TPEA amended section 1834 of the Act by adding a 
new subsection (r) that provides for payment for renal dialysis 
services furnished by renal dialysis facilities or providers of 
services paid under section 1881(b)(14) of the Act to individuals with 
AKI at the ESRD PPS base rate beginning January 1, 2017. This rule 
updates the AKI payment rate for CY 2019.
3. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is 
authorized under section 1881(h) of the Social Security Act (the Act) 
and is the most recent step in fostering improved patient outcomes by 
establishing incentives for dialysis facilities to meet or exceed 
performance standards established by the Centers for Medicare & 
Medicaid Services (CMS). This rule finalizes a number of updates for 
the ESRD QIP.
4. Changes to the DMEPOS Competitive Bidding Program and Fee Schedule 
Payment Rules
    i. Changes to the Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP): 
This rule finalizes revisions to the DMEPOS CBP by implementing lead 
item pricing based on maximum winning bid amounts.
    ii. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
From the DMEPOS CBP: This rule finalizes fee schedule adjustment 
methodologies for DMEPOS items and services furnished on or after 
January 1, 2019, in areas that are currently CBAs and in areas that are 
currently not CBAs. Altogether, this rule finalizes three different fee 
schedule adjustment methodologies depending on the area in which the 
items and services are furnished: (1) One fee schedule adjustment 
methodology for DME items and services furnished on or after January 1, 
2019, in areas that are currently CBAs, in the event of a gap in the 
CBP; (2) another fee schedule adjustment methodology for items and 
services furnished from January 1, 2019 through December 31, 2020, in 
areas that are currently not CBAs, are not rural areas, and are located 
in the contiguous United States (U.S.); and (3) another fee schedule 
adjustment methodology for items and services furnished from January 1, 
2019 through December 31, 2020, in areas that are currently not CBAs 
and are either rural areas or non-contiguous areas.
    iii. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes: 
This rule finalizes new, separate payment classes for portable gaseous 
oxygen equipment, portable liquid oxygen equipment, and high flow 
portable liquid oxygen contents. This rule also finalizes a new 
methodology for ensuring that all new payment classes for oxygen and 
oxygen equipment are budget neutral in accordance with section 
1834(a)(9)(D)(ii) of the Act.
    iv. Payment for Multi-Function Ventilators: This rule finalizes 
payment rules for certain ventilators that are classified under section 
1834(a)(3) of the Act but also perform the functions of other items of 
DME that are subject to payment rules other than those at section 
1834(a)(3) of the Act.
    v. Northern Mariana Islands in Future National Mail Order CBPs: 
This rule finalizes changes to 42 CFR 414.210(g)(7) indicating that, 
beginning on or after the date that contracts take effect for a 
national mail order competitive bidding program that includes the 
Northern Mariana Islands, the fee schedule adjustment methodology under 
this paragraph will no longer apply.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the ESRD PPS base rate for CY 2019: The final CY 
2019 ESRD PPS base rate is $235.27. This amount reflects a 
productivity-adjusted market basket increase as required by section 
1881(b)(14)(F)(i)(I) of the Act (1.3 percent), and application of the 
wage index budget-neutrality adjustment factor (0.999506), equaling 
$235.27 ($232.37 x 1.013 x 0.999506 = $235.27).
     Annual update to the wage index: 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 2019, we are increasing the wage index floor, for areas with 
wage index values below the floor, to 0.50 and we are updating the wage 
index values to the latest available data.
     Update to the outlier policy: We are updating the outlier 
policy using the

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most current data, as well as updating the outlier services fixed-
dollar loss (FDL) amounts for adult and pediatric patients and Medicare 
Allowable Payment (MAP) amounts for adult and pediatric patients for CY 
2019 using CY 2017 claims data. Based on the use of the latest 
available data, the final FDL amount for pediatric beneficiaries will 
increase from $47.79 to $57.14 and the MAP amount will decrease from 
$37.31 to $35.18, as compared to CY 2018 values. For adult 
beneficiaries, the final FDL amount will decrease from $77.54 to $65.11 
and the MAP amount will decrease from $42.41 to $38.51. The 1 percent 
target for outlier payments was not achieved in CY 2017. Outlier 
payments represented approximately 0.8 percent of total payments rather 
than 1.0 percent. We believe using CY 2017 claims data to update the 
outlier MAP and FDL amounts for CY 2019 will increase payments for ESRD 
beneficiaries requiring higher resource utilization in accordance with 
a 1 percent outlier percentage.
     Update to the drug designation process: We are updating 
and revising our drug designation process and expanding the 
transitional drug add-on payment adjustment (TDAPA) to all new renal 
dialysis drugs and biological products, not just those in new ESRD PPS 
functional categories. We are also changing the basis of payment for 
the TDAPA from pricing methodologies under section 1847A of the Act, 
which includes ASP+6, to ASP+0. These changes to the drug designation 
process and TDAPA will be effective January 1, 2020.
     Update to the low-volume payment adjustment: We are 
finalizing revisions to the low-volume payment adjustment regulations 
to allow for more flexibility with regard to attestation deadlines and 
cost reporting requirements, as well as updating the requirements for 
eligibility with respect to certain changes of ownership.
2. Payment for Renal Dialysis Services Furnished to Individuals With 
AKI
    We are updating the AKI payment rate for CY 2019. The final CY 2019 
payment rate is $235.27, which is the same as the base rate finalized 
under the ESRD PPS for CY 2019.
3. ESRD QIP
    This rule finalizes a number of new requirements for the ESRD QIP 
beginning with PY 2021, including the following:
     We are updating the ESRD QIP's measure removal criteria, 
which we now refer to as ``factors,'' so that they are more closely 
aligned with the measure removal factors we have adopted for other 
quality reporting and pay for performance programs, as well as the 
priorities we have adopted as part of the Meaningful Measures 
Initiative.
     We are removing four measures: Healthcare Personnel 
Influenza Vaccination, Pain Assessment and Follow-Up, Anemia 
Management, and Serum Phosphorus. The removal of these measures will 
align the ESRD QIP measure set more closely with the priorities we have 
adopted as part of our Meaningful Measures Initiative.
     We are finalizing several changes to the domains that we 
use for purposes of our scoring methodology to more closely align the 
ESRD QIP with the priorities we have adopted as part of our Meaningful 
Measures Initiative. We are removing the Reporting Domain from the 
Program and moving each reporting measure currently in that domain (and 
not being removed) to another domain that is better aligned with the 
focus area of that measure. Additionally, we are finalizing that the 
Patient and Family Engagement/Care Coordination Subdomain and the 
Clinical Care Subdomain, both of which are currently subdomains in the 
Clinical Measure Domain, will become their own domains. As a result, 
the ESRD QIP will be scored using four domains instead of three. 
Furthermore, we are finalizing new domain and measure weights that 
better align with the priority areas we have adopted as part of our 
Meaningful Measures Initiative.
     We are updating our policy governing when newly opened 
facilities must start reporting ESRD QIP data. Under our updated 
policy, new facilities will begin reporting ESRD QIP data beginning 
with the month that begins 4 months after the month during which the 
CMS Certification Number (CCN) becomes effective (for example, a 
facility with a CCN effective date of January 15th will be required to 
begin reporting ESRD QIP data collected in May). The policy will 
provide facilities with a longer time period to learn how to properly 
report ESRD QIP data.
     We are increasing the number of facilities that we select 
for validation under the National Healthcare Safety Network (NHSN) data 
validation study from 35 to 150 facilities. We are also increasing the 
number of records that each selected facility must submit to 20 records 
for each of the first 2 quarters of CY 2019 (for a total of 40 
records). This will improve the overall accuracy of the study.
     We are converting the current Consolidated Renal 
Operations in a Web-Enabled Network (CROWNWeb) data validation study 
into a permanent program requirement using the methodology we first 
adopted for PY 2016 because an analysis demonstrated that this 
methodology produced reliable validation results. We are also 
finalizing that the 10-point deduction for failure to comply with the 
data request, which was first adopted for PY 2017, will become a 
permanent program requirement.
    This rule also finalizes a number of new requirements for the ESRD 
QIP beginning with PY 2022, including the following:
     We are adopting the Percentage of Prevalent Patients 
Waitlisted (PPPW) Measure and placing it in the Care Coordination 
Measure Domain.
     We are adopting the Medication Reconciliation for Patients 
Receiving Care at Dialysis Facilities (MedRec) Measure (NQF #2988) and 
placing it in the Safety Measure Domain.
     We are increasing the number of facilities that we select 
for validation under the NHSN data validation study from 150 to 300 
facilities. This will further improve the overall accuracy of the 
study.
    Finally, we are codifying in our regulations several previously 
finalized requirements for the ESRD QIP by revising Sec.  413.177 and 
adopting a new Sec.  413.178.
4. Changes to the DMEPOS Competitive Bidding Program and Fee Schedule 
Payment Rules
    i. Changes to the Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP): The 
rule finalizes changes to the DMEPOS CBP to implement lead item pricing 
based on maximum winning bid amounts, including revisions to certain 
definitions under 42 CFR 414.402. The definition of bid is revised to 
mean an offer to furnish an item or items for a particular price and 
time period that includes, where appropriate, any services that are 
directly related to the furnishing of the item or items. The definition 
of composite bid is revised to mean the bid submitted by the supplier 
for the lead item in the product category. The definition of lead item 
is revised to mean the item in a product category with multiple items 
with the highest total nationwide Medicare allowed charges of any item 
in the product category prior to each competition.
    ii. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
from the DMEPOS CBP: This rule finalizes methodologies for using the 
payment determined under the DMEPOS CBP to adjust fee schedule

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amounts for DMEPOS items and services furnished on or after January 1, 
2019. Altogether, this rule finalizes three different fee schedule 
adjustment methodologies depending on the area in which the items and 
services are furnished: (1) One fee schedule adjustment methodology for 
DME items and services furnished on or after January 1, 2019, in areas 
that are currently CBAs, in the event of a gap in the CBP; (2) another 
fee schedule adjustment methodology for items and services furnished 
from January 1, 2019 through December 31, 2020, in areas that are 
currently not CBAs, are not rural areas, and are located in the 
contiguous U.S.; and (3) another fee schedule adjustment methodology 
for items and services furnished from January 1, 2019 through December 
31, 2020, in areas that are currently not CBAs and are either rural 
areas or non-contiguous areas.
    iii. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes: 
This rule establishes new, separate payment classes for portable 
gaseous oxygen equipment, portable liquid oxygen equipment, and high 
flow portable liquid oxygen contents. This rule also finalizes a new 
methodology for ensuring that all new payment classes for oxygen and 
oxygen equipment are budget neutral in accordance with section 
1834(a)(9)(D)(ii) of the Act.
    iv. Payment for Multi-Function Ventilators: This rule finalizes 
payment rules for certain ventilators that are classified under section 
1834(a)(3) of the Act but also perform the functions of other items of 
DME that are subject to payment rules other than those at section 
1834(a)(3) of the Act.
    v. Northern Mariana Islands in Future National Mail Order CBPs: 
This rule finalizes changes to Sec.  414.210(g)(7) to indicate that, 
beginning on or after the date that contracts take effect for a 
national mail order competitive bidding program that includes the 
Northern Mariana Islands, the fee schedule adjustment methodology under 
this paragraph will no longer apply.

C. Summary of Costs and Benefits

    In section XV of this final rule, we set forth a detailed analysis 
of the impacts of the finalized changes for affected entities and 
beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
    The impact chart in section XV of this final rule displays the 
estimated change in payments to ESRD facilities in CY 2019 compared to 
estimated payments in CY 2018. The overall impact of the CY 2019 
changes are projected to be a 1.6 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 1.7 percent increase 
in payments compared with freestanding facilities with an estimated 1.6 
percent increase.
    We estimate that the aggregate ESRD PPS expenditures will increase 
by approximately $210 million in CY 2019 compared to CY 2018. This 
reflects a $170 million increase from the payment rate update and a $40 
million increase due to the updates to the outlier threshold amounts. 
As a result of the projected 1.6 percent overall payment increase, we 
estimate that there will be an increase in beneficiary co-insurance 
payments of 1.6 percent in CY 2019, which translates to approximately 
$50 million.
2. Impacts of the Final Payment for Renal Dialysis Services Furnished 
to Individuals With AKI
    The impact chart in section XV of this final rule displays the 
estimated change in payments to ESRD facilities in CY 2019 compared to 
estimated payments in CY 2018. The overall impact of the CY 2019 
changes are projected to be a 1.3 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 1.2 percent increase 
in payments compared with freestanding facilities with an estimated 1.3 
percent increase.
    We estimate that the aggregate payments made to ESRD facilities for 
renal dialysis services furnished to AKI patients at the final CY 2019 
ESRD PPS base rate will increase by less than $1 million in CY 2019 
compared to CY 2018.
3. Impacts of the Finalized Updates to the ESRD QIP
    We estimate that the overall economic impact of the ESRD QIP will 
be approximately $213 million in PY 2021. The $213 million figure for 
PY 2021 includes costs associated with the collection of information 
requirements, which we estimate will be approximately $181 million. In 
PY 2022, we estimate that the overall economic impact of the ESRD QIP 
will be approximately $234 million. The $234 million figure for PY 2022 
includes costs associated with the collection of information 
requirements, which we estimate will be approximately $202 million.
4. Impacts of the Final Changes to the DMEPOS Competitive Bidding 
Program and Fee Schedule Payment Rules

i. Changes to the Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)

    The rule finalizes changes to the DMEPOS CBP to implement lead item 
pricing based on maximum winning bid amounts. The impacts of this rule 
are estimated by rounding to the nearer 5 million dollars and are 
expected to cost $10 million in Medicare benefit payments for the 5-
year period beginning January 1, 2019, and ending September 30, 2023. 
The impact on the Medicare beneficiary cost sharing is roughly $3 
million over this 5-year period. We estimate that the average per 
Medicare beneficiary increase in cost-sharing from median-priced SPAs 
to maximum-bid priced SPAs will be about $1.50. This average increase 
is based on 2017 claims data which divides the aggregate $3 million 
dollar cost-sharing impact by the number of Medicare beneficiaries 
residing in CBAs in 2017 of about 2 million beneficiaries. The Medicaid 
impacts for cost sharing for the beneficiaries enrolled in the Medicare 
Part B and Medicaid programs for the federal and state portions are 
assumed to both be $0 million.

ii. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
From the DMEPOS CBP

    This rule finalizes fee schedule adjustment methodologies for 
DMEPOS items and services furnished on or after January 1, 2019. 
Altogether, this rule finalizes three different fee schedule adjustment 
methodologies depending on the area in which the items and services are 
furnished: (1) One fee schedule adjustment methodology for DME items 
and services furnished on or after January 1, 2019, in areas that are 
currently CBAs, in the event of a gap in the CBP; (2) another fee 
schedule adjustment methodology for items and services furnished from 
January 1, 2019 through December 31, 2020, in areas that are currently 
not CBAs, are not rural areas, and are located in the contiguous U.S.; 
and (3) another fee schedule adjustment methodology for items and 
services furnished from January 1, 2019 through December 31, 2020, in 
areas that are currently not CBAs and are either rural areas or non-
contiguous areas.
    The estimated impacts for this part of the rule are calculated 
against a baseline that assumes payments for items furnished in CBAs 
and non-CBAs are made consistent with the rules in place

[[Page 56926]]

as of January 1, 2018, which establish payment for items furnished in 
CBAs based on fee schedule amounts fully adjusted in accordance with 
regulations at Sec.  414.210(g). The impacts are expected to cost $1.05 
billion in Medicare benefit payments and $260 million in Medicare 
beneficiary cost sharing for the 2-year period beginning January 1, 
2019, and ending December 31, 2020. In other words, the average per 
Medicare beneficiary increase in cost-sharing is about $65.00 dollars. 
This average increase is based on 2017 claims data which divides the 
aggregate $260 million cost-sharing impact by the number of 
beneficiaries residing in CBAs and non-CBAs of about 4 million 
beneficiaries. The Medicaid impacts for cost sharing for the 
beneficiaries enrolled in the Medicare Part B and Medicaid programs for 
the federal and state portions are assumed to be $45 million and $30 
million, respectively. Section 503 of the Consolidated Appropriations 
Act of 2016 (Pub. L. 114-113), and section 5002 of the 21st Century 
Cures Act (the Cures Act) (Pub. L. 114--255), added section 1903(i)(27) 
to the Act, which prohibits federal Medicaid reimbursement to states 
for certain DME expenditures that are, in the aggregate, in excess of 
what Medicare would have paid for such items. The requirement took 
effect January 1, 2018. We note that the costs for the Medicaid program 
and beneficiaries could be higher depending on how many state agencies 
adopt the higher Medicare adjusted fee schedule amounts for rural areas 
for use in paying claims under the Medicaid program. We are not able to 
quantify this impact.

iii. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes

    This rule establishes new payment classes for oxygen and oxygen 
equipment and will be budget neutral to the Medicare program and its 
beneficiaries.

iv. Payment for Multi-Function Ventilators

    This rule establishes new rules to address payment for certain 
ventilators that are classified under section 1834(a)(3) of the Act but 
also perform the functions of other items of durable medical equipment 
(DME) that are subject to payment rules other than those at section 
1834(a)(3) of the Act. The impacts are estimated by rounding to the 
nearer 5 million dollars and are expected to cost $15 million in 
Medicare benefit payments and $3 million in Medicare beneficiary cost 
sharing for the 5-year period beginning January 1, 2019, and ending 
September 30, 2023. The Medicaid impacts for cost sharing for the 
beneficiaries enrolled in the Medicare Part B and Medicaid programs for 
the federal and state portions are assumed to both be $0 million.

v. Northern Mariana Islands in Future National Mail Order CBPs

    This change will not have a fiscal impact because the amount paid 
for mail order items furnished in the Northern Mariana Islands will be 
the same as it would have been had the policy not changed.

II. Calendar Year (CY) 2019 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). 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), 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, the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) was enacted. 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 CY 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) of PAMA 
further amended section 632(b)(1) of ATRA by requiring that in 
establishing payment for oral-only drugs under the ESRD PPS, the 
Secretary must use data from the most recent year available. Section 
217(c) of PAMA provided that as part of the CY 2016 ESRD PPS 
rulemaking, the Secretary shall establish a process for--(1) 
determining when a product is no longer an oral-only drug; and (2) 
including new injectable and intravenous products into the ESRD PPS 
bundled payment.
    Finally, on December 19, 2014, the President signed the Stephen 
Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE) (Pub. 
L. 113-295). Section 204 of ABLE amended section 632(b)(1) of ATRA, as 
amended by section 217(a)(1) of PAMA, to provide that payment for oral-
only renal dialysis services cannot be made under the ESRD PPS bundled 
payment prior to January 1, 2025.
2. System for Payment of Renal Dialysis Services
    Under the ESRD PPS, a single, per-treatment payment is made to an 
ESRD facility for all of the renal dialysis services defined in section 
1881(b)(14)(B) of the Act and furnished to individuals for the 
treatment of ESRD in the ESRD facility or in a patient's home. We have 
codified our definitions of renal dialysis services at 42 CFR

[[Page 56927]]

413.171, which is in 42 CFR part 413, subpart H, along with other ESRD 
PPS payment policies. 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, low body mass index, onset of 
dialysis, four comorbidity categories, and pediatric patient-level 
adjusters consisting of two age categories and two dialysis modalities 
(Sec.  413.235(a) and (b)).
    The ESRD PPS provides for three facility-level adjustments. The 
first payment adjustment accounts for ESRD facilities furnishing a low 
volume of dialysis treatments (Sec.  413.232). The second adjustment 
reflects differences in area wage levels developed from core based 
statistical areas (CBSAs) (Sec.  413.231). The third payment adjustment 
accounts for ESRD facilities furnishing renal dialysis services in a 
rural area (Sec.  413.233).
    The ESRD PPS provides a training add-on for home and self-dialysis 
modalities (Sec.  413.235(c)) and an additional payment for high cost 
outliers due to unusual variations in the type or amount of medically 
necessary care when applicable (Sec.  413.237).
    The ESRD PPS also provides for a transitional drug add-on payment 
adjustment (TDAPA) to pay for a new injectable or intravenous product 
that is not considered included in the ESRD PPS bundled payment, 
meaning a product that is used to treat or manage a condition for which 
there is not an existing ESRD PPS functional category (Sec.  413.234). 
The ESRD PPS functional categories represent distinct groupings of 
drugs or biologicals, as determined by CMS, whose end action effect is 
the treatment or management of a condition or conditions associated 
with ESRD. New injectable or intravenous products that are not included 
in a functional category in the ESRD PPS base rate are paid for using 
the TDAPA for a minimum of 2 years, until sufficient claims data for 
rate setting analysis are available. At that point, utilization would 
be reviewed and the ESRD PPS base rate modified, if appropriate, to 
account for these products. The TDAPA is based on pricing methodologies 
under section 1847A of the Act (Sec.  413.234(c)).
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 1, 2017, we published a final rule in the Federal 
Register titled, ``Medicare Program; End-Stage Renal Disease 
Prospective Payment System, Payment for Renal Dialysis Services 
Furnished to Individuals With Acute Kidney Injury, and End-Stage Renal 
Disease Quality Incentive Program'' (82 FR 50738 through 50797) 
(hereinafter referred to as the CY 2018 ESRD PPS final rule). In that 
rule, we updated the ESRD PPS base rate for CY 2018, the wage index, 
the outlier policy, and pricing outlier drugs. For further detailed 
information regarding these updates, see 82 FR 50738.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on the Calendar Year (CY) 2019 ESRD PPS

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, 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 (DMEPOS) Competitive Bidding 
Program (CBP) and Fee Schedule Amounts, and Technical Amendments to 
Correct Existing Regulations Related to the CBP for Certain DMEPOS'' 
(83 FR 34304 through 34415), hereinafter referred to as the ``CY 2019 
ESRD PPS proposed rule'', was published in the Federal Register on July 
19, 2018, with a comment period that ended on September 10, 2018. In 
that proposed rule, for the ESRD PPS, we proposed to make a number of 
annual updates for CY 2019, including updates to the ESRD PPS base 
rate, wage index, and outlier policy. We also proposed to revise the 
drug designation process and expand the TDAPA to all new renal dialysis 
drugs and biologicals, not just those in new ESRD PPS functional 
categories, and change the basis for determining the TDAPA from pricing 
methodologies under section 1847A of the Act (which includes ASP+6) to 
ASP+0. We also proposed revisions to the low-volume payment adjustment 
(LVPA) regulations. We received approximately 156 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 2019 ESRD PPS.
1. Drug Designation Process
a. Protecting Access to Medicare Act of 2014
    Section 217(c) of PAMA requires the Secretary to implement a 
process for: (1) Determining when a product is no longer an oral-only 
drug; and (2) including new injectable and intravenous products into 
the bundled payment under the ESRD PPS. Therefore, in the CY 2016 ESRD 
PPS final rule (80 FR 69013 through 69027), we finalized a process, 
which we refer to as the drug designation process, that allows us to 
recognize when an oral-only renal dialysis service drug or biological 
product is no longer oral only and to include new injectable and 
intravenous products into the ESRD PPS bundled payment, and when 
appropriate, modify the ESRD PPS payment amount.
    In accordance with section 217(c)(1) of PAMA, we established Sec.  
413.234(d), which provides that an oral-only drug is no longer 
considered oral-only if an injectable or other form of administration 
of the oral-only drug is approved by the Food and Drug Administration 
(FDA). Additionally, in accordance with section 217(c)(2) of PAMA, we 
codified the drug designation process at Sec.  413.234(b). As discussed 
in the CY 2016 ESRD PPS final rule (80 FR 69017 through 69022), 
effective January 1, 2016, if a new injectable or intravenous product 
is used to treat or manage a condition for which there is an ESRD PPS 
functional category, the new injectable or intravenous product is 
considered included in the ESRD PPS bundled payment and no separate 
payment is available. The new injectable or intravenous product 
qualifies as an outlier service. The ESRD bundled market basket updates 
the PPS base rate annually and accounts for price changes of the drugs 
and biological products reflected in the base rate.
    Under Sec.  413.234(b)(2), if the new injectable or intravenous 
product is used to treat or manage a condition for which there is not 
an ESRD PPS functional category, the new injectable or intravenous 
product is not considered included in the ESRD PPS bundled payment and 
the following

[[Page 56928]]

steps occur. First, an existing ESRD PPS functional category is revised 
or a new ESRD PPS functional category is added for the condition that 
the new injectable or intravenous product is used to treat or manage. 
Next, the new injectable or intravenous product is paid for using the 
transitional drug add-on payment adjustment (TDAPA). Then, the new 
injectable or intravenous product is added to the ESRD PPS bundled 
payment following payment of the TDAPA.
    Under Sec.  413.234(c), the TDAPA is based on pricing methodologies 
under section 1847A of the Act and is paid until sufficient claims data 
for rate setting analysis for the new injectable or intravenous product 
are available, but not for less than 2 years. During the time a new 
injectable or intravenous product is eligible for the TDAPA, it is not 
eligible as an outlier service. Following payment of the TDAPA, the 
ESRD PPS base rate would be modified, if appropriate, to account for 
the new injectable or intravenous product in the ESRD PPS bundled 
payment.
b. Renal Dialysis Drugs and Biological Products Reflected in the Base 
Rate (ESRD PPS Functional Categories)
    In the CY 2016 ESRD PPS final rule (80 FR 69024), we finalized the 
drug designation process as being dependent upon the functional 
categories, consistent with our policy since the implementation of the 
PPS in 2011. We provided a detailed discussion on how we accounted for 
renal dialysis drugs and biological products in the ESRD PPS base rate 
since its implementation on January 1, 2011 (80 FR 69013 through 
69015). In the CY 2011 ESRD PPS final rule (75 FR 49044 through 49053) 
we explained that in order to identify drugs and biological products 
that are used for the treatment of ESRD and therefore meet the 
definition of renal dialysis services (defined at Sec.  413.171) that 
would be included in the ESRD PPS base rate, we performed an extensive 
analysis of Medicare payments for Part B drugs and biological products 
billed on ESRD claims and evaluated each drug and biological product to 
identify its category by indication or mode of action. Categorizing 
drugs and biological products on the basis of drug action allows us to 
determine which categories (and therefore, the drugs and biological 
products within the categories) would be considered used for the 
treatment of ESRD (75 FR 49047). We grouped the injectable and 
intravenous drugs and biological products into functional categories 
based on their action (80 FR 69014). This was done for the purpose of 
adding new drugs or biological products with the same functions to the 
ESRD PPS bundled payment as expeditiously as possible after the drugs 
become commercially available so that beneficiaries have access to 
them. We finalized the definition of an ESRD PPS functional category in 
Sec.  413.234(a) as a distinct grouping of drugs or biologicals, as 
determined by CMS, whose end action effect is the treatment or 
management of a condition or conditions associated with ESRD.
    Using the functional categorization approach, we established 
categories of drugs and biological products that are not considered 
used for the treatment of ESRD, categories of drugs and biological 
products that are always considered used for the treatment of ESRD, and 
categories of drugs and biological products that may be used for the 
treatment of ESRD but are also commonly used to treat other conditions 
(75 FR 49049 through 49051). The drugs and biological products that 
were identified as not used for the treatment of ESRD were not 
considered renal dialysis services and were not included in computing 
the base rate. The functional categories of drugs and biological 
products that are not included in the base rate can be found in the CY 
2011 ESRD PPS final rule (75 FR 49049). The functional categories of 
drugs and biological products that were always and may be considered 
used for the treatment of ESRD were considered renal dialysis services 
and were included in computing the base rate. Subsequent to the CY 2011 
discussion about the always and may be functional categories (75 FR 
49050 through 49051), we also discussed these categories in the CY 2016 
ESRD PPS final rule (80 FR 69015 through 69018) and clarified the 
medical conditions or symptoms that indicate the drugs are used for the 
treatment of ESRD. See Table 1.

                 Table 1--ESRD PPS Functional Categories
------------------------------------------------------------------------
           Category                    Rationale for association
------------------------------------------------------------------------
Access Management............  Drugs used to ensure access by removing
                                clots from grafts, reverse
                                anticoagulation if too much medication
                                is given, and provide anesthetic for
                                access placement.
Anemia Management............  Drugs used to stimulate red blood cell
                                production and/or treat or prevent
                                anemia. This category includes ESAs as
                                well as iron.
Bone and Mineral Metabolism..  Drugs used to prevent/treat bone disease
                                secondary to dialysis. This category
                                includes phosphate binders and
                                calcimimetics.
Cellular Management..........  Drugs used for deficiencies of naturally
                                occurring substances needed for cellular
                                management. This category includes
                                levocarnitine.
Antiemetic...................  Used to prevent or treat nausea and
                                vomiting related to dialysis. Excludes
                                antiemetics used for purposes unrelated
                                to dialysis, such as those used in
                                conjunction with chemotherapy as these
                                are covered under a separate benefit
                                category.
Anti-infectives..............  Used to treat vascular access-related and
                                peritonitis infections. May include
                                antibacterial and antifungal drugs.
Antipruritic.................  Drugs in this classification have
                                multiple clinical indications. Use
                                within an ESRD functional category
                                includes treatment for itching related
                                to dialysis.
Anxiolytic...................  Drugs in this classification have
                                multiple actions. Use within an ESRD
                                functional category includes treatment
                                of restless leg syndrome related to
                                dialysis.
Excess Fluid Management......  Drug/fluids used to treat fluid excess/
                                overload.
Fluid and Electrolyte          Intravenous drugs/fluids used to treat
 Management Including Volume    fluid and electrolyte needs.
 Expanders.
Pain Management..............  Drugs used to treat vascular access site
                                pain and to treat pain medication
                                overdose, when the overdose is related
                                to medication provided to treat vascular
                                access site pain.
------------------------------------------------------------------------

    In computing the ESRD PPS base rate, we used the payments in 2007 
for drugs and biological products included in the always functional 
categories, that is, the injectable forms (previously covered under 
Part B) and oral or other forms of

[[Page 56929]]

administration (previously covered under Part D) (75 FR 49050). For the 
oral or other forms of administration for those drugs that are always 
considered used for the treatment of ESRD, we determined that there 
were oral or other forms of injectable drugs only for the bone and 
mineral metabolism and cellular management categories. Therefore, we 
included the payments made under Part D for oral vitamin D (calcitriol, 
doxercalciferol and paricalcitol) and oral levocarnitine in our 
computation of the base rate (75 FR 49042).
    In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49051), we 
explained that drugs and biological products that may be used for the 
treatment of ESRD may also be commonly used to treat other conditions. 
We used the payments made under Part B in 2007 for these drugs in 
computing the ESRD PPS base rate, which only included payments made for 
the injectable version of the drugs. We excluded the Part D payments 
for the oral (or other form of administration) substitutes of the drugs 
and biological products described above because they were not furnished 
or billed by ESRD facilities or furnished in conjunction with dialysis 
treatments (75 FR 49051). For those reasons, we presumed that these 
drugs and biological products that were paid under Part D were 
prescribed for reasons other than for the treatment of ESRD. However, 
we noted that if these drugs and biological products paid under Part D 
are furnished by an ESRD facility for the treatment of ESRD, they would 
be considered renal dialysis services and not be billed or paid under 
Part D.
    In the CY 2011 ESRD PPS final rule (75 FR 49075 through 49076), 
Table 19 provides the Medicare allowable payments for all of the 
components of the ESRD PPS base rate for CY 2007, inflated to CY 2009, 
including payments for drugs and biological products and the amount 
each contributed to the base rate, except for the oral-only renal 
dialysis drugs where payment under the ESRD PPS was delayed. A list of 
the specific Part B drugs and biological products that were included in 
the final ESRD PPS base rate is located in Table C of the Appendix of 
the CY 2011 ESRD PPS final rule (75 FR 49205 through 49209). A list of 
the former Part D drugs that were included in the final ESRD PPS base 
rate is located in Table D of the Appendix of that rule (75 FR 49210). 
As discussed in section II.3.d of this final rule, the ESRD PPS base 
rate is updated annually by the ESRD bundled (ESRDB) market basket.
c. Section 1847A of the Social Security Act (the Act) and Average Sales 
Price (ASP) Methodology Under the ESRD PPS
    In the CY 2005 Physician Fee Schedule (PFS) final rule, published 
on November 15, 2004 (69 FR 66299 through 66302) in the Federal 
Register, we discussed that section 303(c) of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA) added section 
1847A to the Act and established the Average Sales Price (ASP) 
methodology for certain drugs and biological products not paid on a 
cost or prospective payment basis furnished on or after January 1, 
2005. The ASP methodology is based on quarterly data submitted to CMS 
by drug manufacturers. The ASP amount is based on the manufacturer's 
sales to all purchasers (with certain exceptions) net of all 
manufacturer rebates, discounts, and price concessions. Sales that are 
nominal in amount are exempted from the ASP calculation, as are sales 
excluded from the determination of ``best price'' in the Medicaid drug 
rebate program. Each drug with a Healthcare Common Procedure Coding 
System (HCPCS) code has a separately calculated ASP. To allow time to 
submit and calculate these data, the ASP is updated with a two-quarter 
lag.\1\
---------------------------------------------------------------------------

    \1\ Sheingold, S., Marchetti-Bowick, E., Nguyen, N., Yabrof, 
K.R. (2016, March). Medicare Part B Drugs: Pricing and Incentives. 
Retrieved from https://aspe.hhs.gov/system/files/pdf/187581/PartBDrug.pdf.
---------------------------------------------------------------------------

    Section 1847A(b)(1)(A) of the Act requires that the Medicare 
payment allowance for a multiple source drug included within the same 
HCPCS code be equal to 106 percent of the ASP for the HCPCS code. 
Section 1847A(b)(1)(B) of the Act also requires that the Medicare 
payment allowance for a single source drug HCPCS code be equal to the 
lesser of 106 percent of the ASP for the HCPCS code or 106 percent of 
the wholesale acquisition cost (WAC) of the HCPCS code.
    Section 1847A(c)(4) of the Act further provides a payment 
methodology in cases where the ASP during first quarter of sales is 
unavailable, stating that in the case of a drug or biological during an 
initial period (not to exceed a full calendar quarter) in which data on 
the prices for sales for the drug or biological are not sufficiently 
available from the manufacturer to compute an average sales price for 
the drug or biological, the Secretary may determine the amount payable 
under this section for the drug or biological based on (A) the WAC; or 
(B) the methodologies in effect under Medicare Part B on November 1, 
2003, to determine payment amounts for drugs or biologicals. For 
further guidance on how Medicare Part B pays for drugs and biological 
products under section 1847A of the Act, see Pub. 100-04, Chapter 17, 
section 20 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c17.pdf).
    In the CY 2018 ESRD PPS final rule (82 FR 50742 through 50743), we 
discussed how we have used the ASP methodology since the implementation 
of the ESRD PPS when pricing ESRD-related drugs and biological products 
previously paid separately under Part B (prior to the ESRD PPS) for 
purposes of ESRD PPS policies or calculations. In the CY 2016 ESRD PPS 
final rule (80 FR 69024), we adopted Sec.  413.234(c), which requires 
that the TDAPA is based on pricing methodologies available under 
section 1847A of the Act (including 106 percent of ASP). We also use 
such pricing methodologies for Part B ESRD-related drugs or biological 
products that qualify as an outlier service (82 FR 50745).
d. Revision to the Drug Designation Process Regulation
    As noted above, in prior rulemakings we addressed how new drugs and 
biological products are implemented under the ESRD PPS and how we have 
accounted for renal dialysis drugs and biological products in the ESRD 
PPS base rate since its implementation on January 1, 2011. Accordingly, 
the drug designation process we finalized is dependent upon the 
functional categories we developed and is consistent with the policy we 
have followed since the inception of the ESRD PPS. However, since PAMA 
only required the Secretary to establish a process for including new 
injectable and intravenous drugs and biological products in the ESRD 
PPS bundled payment, such new products were the primary focus of the 
regulation we adopted at Sec.  413.234. We did not codify our full 
policy for other renal dialysis drugs, such as drugs and biological 
products with other forms of administration, including oral, which by 
law are included under the ESRD PPS (though oral-only renal dialysis 
drugs are excluded from the ESRD PPS bundled payment until CY 2025).
    In the CY 2019 ESRD PPS proposed rule (83 FR 34311 through 34312), 
we proposed to revise the drug designation process regulations at Sec.  
413.234 to reflect that the process applies for all new renal dialysis 
drugs and biological products that are approved regardless of the form 
or route of administration, that is, new injectable, intravenous, oral, 
or

[[Page 56930]]

other route of administration, or dosage form. We noted in the proposed 
rule that for purposes of the ESRD PPS drug designation process, we use 
the term form of administration interchangeably with the term route of 
administration. We proposed these revisions so that the regulation 
reflects our longstanding policy for all new renal dialysis drugs and 
biological products, regardless of the form or route of administration, 
with the exception of oral-only drugs. Specifically, we proposed to 
replace the definition of ``new injectable or intravenous product'' at 
Sec.  413.234(a) with a definition for ``new renal dialysis drug or 
biological,'' which is ``an injectable, intravenous, oral or other form 
or route of administration drug or biological that is used to treat or 
manage a condition(s) associated with ESRD,'' to encompass the broader 
scope of the drug designation process. Under the proposed definition, a 
new renal dialysis drug or biological ``must be approved by the Food 
and Drug Administration (FDA) on or after January 1, 2019 under section 
505 of the Federal Food, Drug, and Cosmetic Act or section 351 of the 
Public Health Service Act, commercially available, have an HCPCS 
application submitted in accordance with the official Level II HCPCS 
coding procedures, and designated by CMS as a renal dialysis service 
under Sec.  413.171. Oral-only drugs or biologicals are excluded until 
January 1, 2025.''
    In our proposal to replace the definition of ``new injectable or 
intravenous product'' in Sec.  413.234(a) with the proposed definition 
of ``new renal dialysis drug or biological,'' we included the clause, 
``have an HCPCS application submitted in accordance with the official 
Level II HCPCS coding procedures.'' We explained that this would be a 
change from the existing policy of requiring that the new product be 
assigned an HCPCS code. We proposed that new renal dialysis drugs or 
biologicals are no longer required to be assigned an HCPCS code before 
the TDAPA can apply, instead we would require that an application has 
been submitted in accordance with the Level II HCPCS coding procedures. 
This would allow the application of the TDAPA to happen more quickly 
than under our current process, wherein a lag occurs when a drug or 
biological product is approved but is waiting for the issuance of a 
code. Information regarding the HCPCS process is available on the CMS 
website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Application_Form_and_Instructions.html.
    We stated that this proposed definition would also address prior 
concerns that we narrowly defined ``new'' in the context of the 
functional categories (that is, the drug designation process primarily 
addresses ``new'' drugs that fall outside of the functional categories 
for purposes of being newly categorized and eligible for the TDAPA). As 
we noted in section II.B.1.f of the CY 2019 ESRD PPS proposed rule, 
even though we were maintaining the functional categories to determine 
whether or not to potentially adjust or modify the ESRD PPS base rate 
(that is, those renal dialysis drugs and biological products that do 
not fall within an existing category), we proposed to expand the TDAPA 
policy based on whether the renal dialysis drug or biological product 
is new, that is, any renal dialysis drug or biological product newly 
approved on or after January 1, 2019.
    We solicited comment on the proposed revisions to Sec.  413.234(a), 
(b), and (c).
    The comments and our responses to the comments on our proposal to 
revise the drug designation process regulations are set forth below.
    Comment: Some commenters were supportive of the proposed change to 
the drug designation process regulation to allow all new drugs and 
biological products, regardless of form or route of administration, to 
be eligible for the TDAPA. A drug manufacturer asserted that the 
proposal recognizes that new innovative products in the treatment of 
ESRD need not be injectables and that limiting the TDAPA to any 
particular category of products (for example, by mode of action, cost, 
or inclusion in a functional category) would be arbitrary and impair 
access of patients to new therapeutic agents.
    Response: We appreciate the commenters' support and note that the 
change codifies our drug designation policy with regard to all drugs.
    Comment: A national dialysis association commented that CMS should 
implement the proposed drug designation process consistent with the 
limitations in the Medicare Improvements for Patients and Providers Act 
of 2009 (MIPPA) on including drugs and biological products in the ESRD 
PPS. The association stated it is imperative to return to the statutory 
text of MIPPA to review precisely what categories of drugs and 
biological products have and have not been authorized for inclusion 
within the ESRD PPS. The association believes the Congress was clear 
that only those drugs and biological products that are furnished for 
the treatment of ESRD and were separately paid prior to implementation 
of MIPPA--specified by CMS in regulation as of January 1, 2011--are 
defined as ``renal dialysis services''. The association maintains that 
drugs and biological products approved after January 1, 2011, that are 
not erythropoietin stimulating agents (ESAs) or composite rate drugs, 
are specifically excluded from ``renal dialysis services'' as defined 
in statute and cannot be included in the ESRD PPS without a legislative 
change.
    Response: We disagree with the commenter that section 1881(b)(14) 
of the Act excludes drugs and biological products approved after 
January 1, 2011 from being included in the ESRD PPS. As we explained in 
the CY 2016 ESRD PPS final rule (80 FR 69016), we have the authority to 
add new renal dialysis services to the bundle under section 
1881(b)(14)(B) of the Act and Congress recognized this authority under 
section 217(c)(2) of PAMA. First, we interpret section 
1881(b)(14)(B)(iii) of the Act as requiring the inclusion of a specific 
category of drugs in the ESRD PPS bundled payment--that is, drugs and 
biological products, including those with only an oral form, furnished 
to individuals for the treatment of ESRD and for which separate payment 
was made prior to January 1, 2011. We also interpret section 
1881(b)(14)(B)(iv) of the Act as specifying a different category of 
items that must be included in the bundle--that is, items and services, 
which includes drugs and biological products, not specified by sections 
1881(b)(14)(B)(i), (ii), or (iii) of the Act. Second, we read the 
language of section 217(c)(2) of PAMA--``the Secretary of Health and 
Human Services . . . shall establish a process for . . . including new 
injectable and intravenous products into the bundled payment system''--
as more than a directive to simply develop an inoperative scheme but 
that Congress recognized that this authority to include new drug 
products existed. As we discussed in the CY 2016 ESRD PPS final rule, 
we believe the provision required us to both define and implement a 
drug designation process for including new injectable and intravenous 
products into the bundle.
    Comment: A large dialysis organization (LDO) and a national 
dialysis association expressed concern that the proposed regulatory 
text, which defines a ``new drug or biological'' as one ``used to treat 
or manage a condition(s) associated with ESRD,'' exceeds the statutory 
and regulatory definition of ``renal dialysis services,'' which 
requires that drugs and biological products included in the ESRD PPS be 
``for the treatment'' of ESRD and be

[[Page 56931]]

``essential for the delivery of maintenance dialysis'' respectively.
    Response: We did not intend to expand the definition of ``new renal 
dialysis drug or biological'' beyond use in the treatment of ESRD, and 
we do not believe the proposed definition in Sec.  413.234 does that. 
With regard to limiting the definition to those drugs and biological 
products that are essential to the delivery of maintenance dialysis, we 
believe all drugs that fit into our existing ESRD PPS functional 
categories are essential to the delivery of maintenance dialysis 
because they are necessary to treat or manage conditions associated 
with the beneficiary's ESRD, and thus, help the beneficiary to remain 
sufficiently healthy to continue receiving maintenance dialysis.
    Comment: A drug manufacturer stated that CMS should avoid 
uncertainty about whether the definition of ``new renal dialysis drug 
or biological'' applies to oral-only drugs. The commenter recommended 
revising the last sentence in the proposed definition of ``new renal 
dialysis drug or biological'' in Sec.  413.234(a) from ``Oral-only 
drugs and biologicals are excluded until January 1, 2025,'' to ``Oral-
only drugs and biologicals will be included after December 31, 2024.'' 
The commenter believed this would clarify that oral-only drugs qualify 
for the TDAPA payment for new drugs and biological products once the 
statutory carve-out for oral-only drugs ends.
    Response: We believe the proposed definition of ``new renal 
dialysis drug or biological'' with regard to oral-only drugs is 
sufficiently clear regarding the timing of when oral-only drugs will be 
included in the ESRD PPS bundled payment. As specified in Sec.  
413.174(f)(6), oral-only renal dialysis drugs and biologicals will be 
included in the ESRD PPS bundled payment amount effective January 1, 
2025. That is, oral-only drugs will be treated in the same manner as 
other renal dialysis drugs and biological products with other routes of 
administration, beginning January 1, 2025. However, we are making a 
technical change to revise the definition from ``Oral-only drugs and 
biologicals are excluded until January 1, 2025,'' to ``Oral-only drugs 
are excluded until January 1, 2025,'' because ``oral-only drugs'' is a 
defined term in Sec.  413.234(a) that includes biological products.
    Comment: A drug manufacturer recommended that CMS revise the 
criterion pertaining to the date of FDA approval from January 1, 2019 
to January 1, 2018, to include the most current drug therapy 
innovations. The commenter explained that the proposals in the CY 2019 
ESRD PPS proposed rule are significant changes from last year's rule, 
which was the first application of the new drug designation process. 
Specifically, the commenter recommended CMS define new renal dialysis 
drugs or biological products as drugs or biological products that were 
FDA-approved on or after January 1, 2018, that are commercialized, and 
designated by CMS as a renal dialysis service under Sec.  413.171. The 
commenter explained that its recommended policy should not affect the 
past application of the payment, that is, it would be prospective from 
January 1, 2019 onward.
    Response: We believe that when the commenter refers to the 
proposals in the CY 2019 proposed rule as being ``significant changes 
from last year's rule, which was the first application of the new drug 
designation process,'' the commenter is confusing the original 
effective date for the TDAPA policy (January 1, 2016) with the date 
when the TDAPA was first implemented with respect to certain drugs 
(January 1, 2018). Specifically, we believe the commenter is referring 
to the January 1, 2018 date when ESRD facilities began to receive the 
TDAPA for calcimimetics, the first drugs to meet the criteria for the 
TDAPA. We finalized the policies for the drug designation process, 
including the applicability of TDAPA, in our regulations at Sec.  
413.234 in the CY 2016 ESRD PPS final rule (80 FR 69013 through 69027). 
Furthermore, the proposed CY 2019 revisions to the drug designation 
process regulations are an expansion of those finalized in the CY 2016 
ESRD PPS final rule since all new drugs would be eligible for the 
TDAPA, whereas before only new drugs that did not fall within an 
existing ESRD PPS functional category were eligible for the payment 
adjustment. We disagree with the commenter that the policy should be 
effective January 1, 2018 because with prospective rulemaking under the 
ESRD PPS, we generally do not finalize retroactive policies. That is, 
we generally use historical data, behaviors, and trends to make data-
driven changes for the future year(s). In addition, as we discussed in 
the CY 2019 ESRD PPS proposed rule, the purpose of the TDAPA 
eligibility expansion is to give the new renal dialysis drugs and 
biological products a foothold in the market so that when the TDAPA 
timeframe is complete, they are able to compete with the existing drugs 
and biologicals under the outlier policy, if applicable. Making the 
policy retroactive to drugs that are FDA-approved as of January 1, 2018 
would create an uneven playing field because those drugs would have a 
2-year head start for uptake compared to drugs that are FDA-approved 
and commercialized as of January 1, 2020 (which, as discussed below, is 
the effective date we are finalizing for the TDAPA expansion). We 
believe that drugs with FDA approval and commercialization in 2018 
would already have achieved that foothold if the dialysis centers saw 
the advantage of utilizing these new drugs. Therefore, we do not 
believe it would be appropriate to finalize this policy retroactively 
to apply to drugs or biological products FDA-approved on or after 
January 1, 2018.
    Comment: A drug manufacturer requested clarification on the term 
``new biological'' and questioned if this term would also include 
biosimilars as defined in Sec.  414.902, ``a biosimilar biological 
product approved under an abbreviated application for a license of a 
biological product.''
    Response: The proposed definition of ``new renal dialysis drug or 
biological'' specified that the drug or biological is required to be 
``approved by the Food and Drug Administration (FDA) on or after 
January 1, 2019 under section 505 of the Federal Food, Drug, and 
Cosmetic Act or section 351 of the Public Health Service Act.'' Section 
505 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 
351 of the Public Health Service Act (PHS Act) include applications for 
all new drugs and biological products, including generic drugs approved 
under 505(j) of the FD&C Act and biological products approved under 
section 351(k) of the PHS Act, the abbreviated pathway created by the 
Biologics Price Competition and Innovation Act of 2009.
    We are finalizing a revision at Sec.  413.234(a) to change ``new 
renal dialysis drug or biological'' to ``new renal dialysis drug or 
biological product,'' to be consistent with FDA nomenclature. For the 
same reason, we are changing the references to ``biological'' within 
the proposed definition to refer to ``biological product'' instead.
    Comment: We received several comments regarding the proposed 
clause, ``have an HCPCS application submitted in accordance with the 
official HCPCS Level II coding procedures.'' One drug manufacturer 
expressed support for the proposed definition and agreed with CMS's 
rationale that referring to submission of a HCPCS code application 
versus assignment of a code allows for quicker application of the 
TDAPA.
    MedPAC recommended that the proposed revisions to the drug

[[Page 56932]]

designation process, discussed in section II.B.1 of this final rule, 
should only apply to new renal dialysis drugs and biological products 
that have been assigned a HCPCS code. MedPAC explained that applying 
the proposed policy to new drugs that have not been assigned a HCPCS 
code could undermine the HCPCS process. MedPAC further explained that 
the proposed policy could result in overpayments by beneficiaries and 
taxpayers for a drug that the CMS HCPCS workgroup concludes fits into 
an existing HCPCS code. MedPAC stated that if CMS proceeds with this 
proposal, the agency should establish a policy for addressing 
situations in which an application does not lead directly to the 
assignment of a new HCPCS code.
    Several commenters pointed out that under the proposal, submission 
of a Level II HCPCS application could initiate the data collection 
period for drugs or biological products for TDAPA. As such, the 
commenters asserted data collection could begin prior to a drug or 
biological product's launch, effectively shortening the period and 
decreasing available data. The commenters requested that CMS confirm 
that a Level II HCPCS application would trigger eligibility for the 
TDAPA, but that the data collection period commences when the drug or 
biological product receives the HCPCS code. The commenters further 
requested that concurrent with the code being issued, CMS release 
detailed clinical and billing guidance regarding the drug or biological 
product.
    Response: We understand from these comments that the main concern 
with the proposed clause, ``have an HCPCS application submitted in 
accordance with the official HCPCS Level II coding procedures'' is how 
it relates to the duration of the TDAPA for the particular drug or 
biological product. We note that the definition of a ``new renal 
dialysis drug or biological product'' includes other requirements that 
must be met in addition to the submission of a HCPCS application, and 
we therefore believe beginning our review of the drug when the HCPCS 
application is received does not undermine the HCPCS process. The other 
requirements include that the drug must have FDA approval, be 
commercially available, and be designated by CMS as a renal dialysis 
service. Also, as discussed on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug.html, stakeholders must notify the Division of 
Chronic Care Management in our Center for Medicare of the interest for 
eligibility for the TDAPA and provide the information requested. We 
plan to work collaboratively with the CMS HCPCS workgroup when 
determining whether a drug or biological product is a renal dialysis 
service and how it should be coded. The materials submitted with the 
HCPCS application also assist in determining if the new drug or 
biological product fits into an existing ESRD PPS functional category 
or if it represents a new functional category. The submission of a 
Level II HCPCS code application is simply one criterion for the drug or 
biological product to be eligible for the TDAPA. Once the information 
is received and reviewed, we will issue a change request with billing 
guidance that will provide notice that the drug is eligible for TDAPA 
as of a certain date and guidance on how to report the new drug or 
biological product on the ESRD claim for purposes of TDAPA. The 
effective date of this change request will initiate the TDAPA payment 
period and, for drugs that do not fall within a functional category, 
the data collection period. Information regarding the duration of the 
TDAPA period is discussed in section II.B.1.g of this final rule. CMS 
will issue any applicable clinical guidance when necessary.
    With regard to the suggestion that the definition should only 
recognize new renal dialysis drugs and biological products that have 
been assigned a HCPCS code, we note that in section II.B.1.g of this 
final rule, we are finalizing a policy that the TDAPA will apply for 
all new renal dialysis drugs and biological products regardless of 
whether they fall within a functional category. That is, we are 
finalizing a policy where eligibility for TDAPA is based upon the 
definition of a new renal dialysis drug or biological product rather 
than a new HCPCS code. We therefore believe that our approach should 
shift away from requiring the assignment of an HCPCS code to the 
submission of an HCPCS application. The final policy does not depend on 
assignment of a new HCPCS code. We do not believe this would lead to 
overpayments because the final TDAPA policy recognizes all new renal 
dialysis drugs and biological products, and we do not agree that using 
the HCPCS process in this way undermines or weakens the process. As 
noted previously, we will issue further billing guidance for drugs and 
biological products that are eligible for the TDAPA, including those 
that are not assigned a unique HCPCS code.
    We believe it is appropriate for the definition to require the 
submission of a HCPCS application since we will use that information to 
evaluate whether the new renal dialysis drug or biological product 
falls into an existing ESRD PPS functional category or a new functional 
category. We will evaluate whether any additional operational changes 
are needed in light of the new TDAPA eligibility criteria we are 
finalizing, and issue guidance, as needed.
    Final Rule Action: We are finalizing the revisions to the drug 
designation process regulations at Sec.  413.234(a), (b), and (c) to 
reflect that the process applies for all new renal dialysis drugs and 
biological products that are FDA approved regardless of the form or 
route of administration, that is, new injectable, intravenous, oral, or 
other form or route of administration,'' that are ``used to treat or 
manage a condition(s) associated with ESRD.'' We are finalizing a 
revision at Sec.  413.234(a) to the term we are defining, from ``new 
renal dialysis drug or biological'' to ``new renal dialysis drug or 
biological product'' to be consistent with FDA nomenclature. We are 
also finalizing the definition for ``new renal dialysis drug or 
biological product'' in Sec.  413.234(a) to encompass the broader scope 
of the drug designation process with three revisions. First, we are 
revising the timing of the FDA approval to begin January 1, 2020, for 
consistency with our decision to finalize the policy for the TDAPA 
expansion with an effective date of January 1, 2020, for the reasons 
discussed in detail in section II.B.1.d of this final rule. This delay 
will provide an opportunity to engage in education and coordination 
with other CMS programs, including Medicare Parts C and D and Medicaid. 
The second revision is to refer to ``biological product,'' which is 
FDA's preferred nomenclature, within the definition instead of 
``biological.'' The third revision is to reflect the defined term 
``oral-only drugs'' in Sec.  413.234(a). Therefore, a new renal 
dialysis drug or biological product ``must be approved by the Food and 
Drug Administration (FDA) on or after January 1, 2020 under section 505 
of the Federal Food, Drug, and Cosmetic Act or section 351 of the 
Public Health Service Act, commercially available, have an HCPCS 
application submitted in accordance with the official HCPCS Level II 
coding procedures, and designated by CMS as a renal dialysis service 
under Sec.  413.171. Oral-only drugs are excluded until January 1, 
2025.''
e. Basis for Expansion of the TDAPA Eligibility Criteria
    In the CY 2016 ESRD PPS final rule (80 FR 69017 through 69024), we

[[Page 56933]]

acknowledged that there are unique situations identified by the 
commenters during rulemaking regarding the eligibility criteria for the 
TDAPA. For example, commenters stated that they believed the drug 
designation process was too restrictive, could hinder innovation, and 
prevent new treatment options from entering the marketplace, and that 
CMS should contemplate the cost of new drugs and biological products 
that fall within the ESRD PPS functional categories. In the following 
paragraphs we have summarized key concerns commenters have raised. We 
indicated in the CY 2016 ESRD PPS final rule that we anticipated 
addressing these situations in future rulemaking and stated that we 
planned to consider the issues of ESRD facility resource use, 
supporting novel therapies, and balancing the risk of including new 
drugs for both CMS and the dialysis facilities.
    As described in the CY 2016 ESRD PPS final rule, commenters seemed 
concerned about the cost of new drugs that fit into the functional 
categories, rather than the process of adding new drugs to existing 
categories (80 FR 69017 through 69024). For example, a drug 
manufacturer suggested that in order to promote access to new therapies 
and encourage innovation in ESRD care, the TDAPA should apply to all 
new drugs, not just those drugs that are used to treat or manage a 
condition for which we have not adopted a functional category. The 
commenter pointed out that the functional categories are very 
comprehensive and capture every known condition related to ESRD. The 
commenter indicated that under the proposed approach to TDAPA, CMS 
would make no additional payment regardless of whether the drug has a 
novel mechanism of action, new FDA approval, or other distinguishing 
characteristics and suggested that such distinguishing characteristics 
provided rationale for additional payment. The commenter believed the 
CMS proposal sent conflicting messages to manufacturers about the 
importance of developing new treatments for this underserved patient 
population (80 FR 69020).
    An organization of home dialysis patients commented with a similar 
concern, noting that the functional categories are too broad and could 
prevent people on dialysis from receiving needed care, and be 
detrimental to innovation (80 FR 69022). The commenter stated that in 
the future there could be a new medication to help with fluid 
management but patients would be shut out of ever having the option for 
a new fluid management therapy since there is an existing functional 
category for excess fluid management and therefore, these drugs are 
considered to be included in the ESRD PPS base rate. We interpreted the 
comment to mean that drug manufacturers would be less likely to develop 
a new fluid management drug knowing it would never qualify for 
additional payment under the ESRD PPS. The commenter asked that CMS 
provide additional payment for new drugs that fit into the functional 
categories in order to incentivize new medications to come to market 
and to ensure patients have the opportunity for better care, choices 
and treatment.
    A national dialysis patient advocacy organization explained that if 
new products are immediately added to the ESRD PPS bundle without 
additional payment it would curtail innovation in treatments for people 
on dialysis. The organization believed clinicians should have the 
ability to evaluate the appropriate use of a new product and its effect 
on patient outcomes, and that the CY 2016 ESRD PPS proposed rule did 
not allow for this. The commenter explained that Kidney Disease 
Improving Global Outcomes (KDIGO) and Kidney Disease Outcomes Quality 
Initiative (KDOQI) guidelines are often updated when evidence of 
improved therapies on patient outcomes are made available and that this 
rigorous and evidence-based process is extremely important in guiding 
widespread treatment decisions in nephrology. The commenter expressed 
concern that under the CY 2016 ESRD PPS proposed rule, reimbursement 
and contracting arrangements could instead dictate utilization of a 
product before real world evidence on patient outcomes is ever 
generated (80 FR 69021).
    The comments we received regarding the drug designation process in 
the CY 2016 ESRD PPS rulemaking indicated that commenters were also 
concerned about the cost of the new drugs and biological products, and 
in particular, new drugs and biological products that fall within the 
functional categories, and therefore, are considered by CMS to be 
reflected in the ESRD PPS base rate (80 FR 69017 through 69024).
    A national dialysis organization strongly recommended that CMS 
adopt the same drug designation process for all new drugs and 
biological products (as opposed to only those that do not fall within a 
functional category) unless they are substantially the same as drugs or 
biological products currently paid for under the ESRD PPS payment rate. 
For new drugs or biological products that are substantially the same as 
drugs or biological products currently paid under the ESRD PPS, the 
organization supported incorporating them into the PPS on a case-by-
case basis using notice-and-comment rulemaking and foregoing the 
transition period if it can be shown that the PPS rate is adequate to 
cover the cost of the drug or biological product. The organization 
believed if the rate is inadequate to cover the cost of the new drug 
then the TDAPA should apply (80 FR 69016 through 69017). An LDO stated 
that, if implemented, the proposed drug designation process could 
jeopardize patient access to drugs that are clinically superior to 
existing drugs in the same functional category. For example, the 
commenter stated, if a new substantially more expensive anemia 
management drug is released and is clinically proven to be more 
effective than the current standard of care, under the CY 2016 ESRD PPS 
proposed rule, the ESRD PPS base rate would remain stagnant. The 
commenter stated that it is not reasonable for CMS to expect that all 
dialysis facilities would incur frequent and substantial losses in 
order to furnish the more expensive, although more clinically 
effective, drug.
    A dialysis organization and a professional association asked that 
CMS consider a pass-through payment, meaning Medicare payment in 
addition to the ESRD PPS base rate for all new drugs that are 
considered truly new. They recommended a rate of 106 percent of ASP, 
minus the portion of the ESRD PPS base rate that CMS determines is 
attributable to the category of drugs that corresponds to a truly new 
drug (80 FR 69019). An LDO stated that defining new drugs requires 
special consideration of cost. The LDO suggested a similar approach by 
stating that rather than comparing the cost of the new drug to the ESRD 
PPS base rate, we should compare it to the cost of the existing drugs 
in the same CMS-defined ``mode of action'' category. In such a case, a 
drug might qualify for payment of the TDAPA on the basis that its cost 
per unit or dosage exceeds a specified percentage (for example 150 
percent) of the average cost per unit or dosage of the top three most 
common drugs in the same category (based on utilization data). This 
comparison would demonstrate that the amount allocated to that category 
in the ESRD PPS base rate is insufficient to cover the cost of the new 
drug (80 FR 69020).
    Other commenters referred to pathways in other payment systems that 
provide payment for new drugs and biological products to account for 
their associated costs. For example, the Outpatient Prospective Payment 
System

[[Page 56934]]

(OPPS) provides a pass-through payment and the Inpatient Prospective 
Payment System (IPPS) provides a new technology add-on payment. 
Commenters indicated that we should decouple the TDAPA from the 
functional categories and provide the additional payment for all new 
injectable and intravenous drugs and biological products and oral 
equivalents for 2 to 3 years, similar to the IPPS or the OPPS (80 FR 
69020).
f. Expansion of the TDAPA Eligibility Criteria
    As we discussed in the CY 2019 ESRD PPS proposed rule (83 FR 34313 
through 34314), we continue to believe that the drug designation 
process does not prevent ESRD facilities from furnishing available 
medically necessary drugs and biological products to ESRD 
beneficiaries. Additionally, our position has been that payment is 
adequate for ESRD facilities to furnish new drugs and biological 
products that fall within existing ESRD PPS functional categories. The 
per treatment payment amount is a patient and facility level adjusted 
base rate plus any applicable adjustments, such as training adjustment 
add-ons or outlier payments. In addition, the ESRD PPS includes the 
ESRDB market basket, which updates the PPS base rate annually for input 
price changes for providing renal dialysis services and accounts for 
price changes of the drugs and biological products that are reflected 
in the ESRD PPS base rate (80 FR 69019). However, in the CY 2016 ESRD 
PPS final rule, we also acknowledged that the outlier policy would not 
fully cover the cost of furnishing a new drug and that newer drugs may 
be more costly (80 FR 69021). Consequently, in the CY 2019 ESRD PPS 
proposed rule, we discussed a number of reasons why we were 
reconsidering our previous policy on the drug designation process.
    First, we recognized the unique situations identified by the 
commenters discussed in section II.B.1.e of this final rule, and how 
they are impacted by the eligibility criteria for the TDAPA. We stated 
that concerns regarding inadequate payment for renal dialysis services 
and hindrance of high-value innovation, among others, are important 
issues that we contemplate while determining appropriate payment 
policies. Additionally, we noted that subsequent to the issuance of the 
CY 2016 ESRD PPS final rule, we continued to hear concerns that the 
drug designation process is restrictive in nature; and received 
requests from the dialysis industry and stakeholders that we reconsider 
the applicability of the TDAPA.
    We acknowledged that ESRD facilities have unique circumstances with 
regard to implementing new drugs and biological products into their 
standards of care. For example, when new drugs are introduced to the 
market, ESRD facilities need to analyze their budget and engage in 
contractual agreements to accommodate the new therapies into their care 
plans. Newly launched drugs and biological products can be 
unpredictable with regard to their uptake and pricing which makes these 
decisions challenging for ESRD facilities. Furthermore, practitioners 
should have the ability to evaluate the appropriate use of a new 
product and its effect on patient outcomes. We noted that we agreed 
this uptake period would be best supported by the TDAPA pathway because 
it would help facilities transition or test new drugs and biological 
products in their businesses under the ESRD PPS. We stated that the 
TDAPA provides flexibility and targets payment for the use of new renal 
dialysis drugs and biological products during the period when a product 
is new to the market so that we can evaluate if resource use can be 
aligned with payment. As explained in section II.B.1.b of this final 
rule, the ESRD PPS base rate includes dollars allocated for drugs and 
biological products that fall within a functional category, but those 
dollars may not directly address the total resource use associated with 
the newly launched drugs trying to compete in the renal dialysis 
market.
    We explained in the CY 2019 ESRD PPS proposed rule that we believe 
we need to be conscious of ESRD facility resource use and the financial 
barriers that may be preventing uptake of innovative new drugs and 
biological products that, while are already accessible to them, may be 
under-prescribed because the new drugs are priced higher than currently 
utilized drugs (as recommended by commenters). Therefore, we proposed 
that beginning January 1, 2019, we would add Sec.  413.234(b)(1)(i), 
and (ii) and revise Sec.  413.234(c) to reflect that the TDAPA, under 
the authority of section 1881(b)(14)(D)(iv) of the Act, would apply to 
all new renal dialysis injectable or intravenous products, oral 
equivalents, and other forms of administration drugs and biological 
products, regardless of whether or not they fall within an ESRD PPS 
functional category. New renal dialysis drugs and biological products 
that do not fall within an existing functional category would continue 
to be paid under the TDAPA and the ESRD PPS base rate would be 
modified, if appropriate, to reflect the new functional category. We 
proposed to revise Sec.  413.234(b)(2)(ii) and Sec.  413.234(c)(2), 
removing Sec.  413.234(c)(3), and adding Sec.  413.234(c)(2)(i) to 
reflect that we would continue to provide the TDAPA, collect sufficient 
data, and modify the ESRD PPS base rate, if appropriate, for these new 
drugs and biologicals that do not fall within an existing functional 
category.
    We proposed to revise Sec.  413.234(c)(1) to reflect that for new 
renal dialysis drugs and biological products that fall within a 
functional category, the TDAPA would apply for only 2 years. We 
explained that while we would not collect claims data for purposes of 
analyzing utilization to result in a change to the base rate, we would 
still monitor renal dialysis service utilization for trends and we 
believed that this timeframe is adequate for payment. We also noted 
that we believed 2 years is a sufficient timeframe for facilities to 
set up system modifications, and adjust business practices so that 
there is seamless access to these new drugs within the ESRD PPS base 
rate. In addition, we stated that when we implement policy changes 
whereby facilities need to adjust their system modifications or 
protocols, we have provided a transition period. We believe that this 
2-year timeframe is similar in that facilities are making changes to 
their systems and care plan to incorporate the new renal dialysis drugs 
and biological products into their standards of care and this could be 
supported by a transition period. Also, we noted that providing the 
TDAPA for 2 years would address the stakeholders concerns regarding 
additional payment to account for higher cost of more innovative drugs 
that perhaps may not be adequately captured by the dollars allocated in 
the ESRD PPS base rate. That is, this transitional payment would give 
the new renal dialysis drugs and biological products a foothold in the 
market so that when the timeframe is complete, they are able to compete 
with the existing drugs and biological products under the outlier 
policy, if applicable. Meaning, once the timeframe is complete, drugs 
would then qualify as outlier services, if applicable, and the facility 
would no longer receive the TDAPA for any one particular drug. Instead, 
in the outlier policy space, there is a level playing field where drugs 
could gain market share by offering the best practicable combination of 
price and quality. We stated that we believed the proposed timeframe is 
long enough to be

[[Page 56935]]

meaningful but not too long as to improperly incentivize high cost 
items without more value, for example, substitutions of those drugs 
that already exist in the functional category.
    We noted that this proposal would increase Medicare expenditures, 
which would result in increases to ESRD beneficiary cost sharing, since 
we have not previously provided the TDAPA for new renal dialysis drugs 
and biological products in the past. We stated that we understand there 
are new drugs and biological products in the pipelines, for example, we 
are aware that there are new drugs that would fall within the anemia 
management, bone and mineral, and pain management categories. We noted 
that we would continue to monitor the use of the TDAPA and carefully 
evaluate the new renal dialysis drugs and biological products that 
qualify. We stated that we would address any concerns through future 
refinements to the TDAPA policy.
    We also proposed that when a new renal dialysis drug or biological 
product falls within an existing functional category at the end of the 
TDAPA period we would not modify the ESRD PPS base rate, but at the end 
of the 2 years, as consistent with the existing outlier policy, the 
drug would be eligible for an outlier payment. However, as discussed in 
section II.B.1.h of this final rule, if the new renal dialysis drug or 
biological product is considered to be a composite rate drug, it would 
not be eligible for an outlier payment. The intent of the TDAPA for a 
new renal dialysis drug or biological product that falls within an 
existing functional category is to provide a transition period for the 
unique circumstances experienced by ESRD facilities and to allow time 
for the uptake of the new drug. We explained that it would not be 
appropriate to add dollars to the ESRD PPS base rate for new renal 
dialysis drugs and biological products that fall within existing 
functional categories and that doing so would be in conflict with the 
fundamental principles of a PPS. Under a PPS, Medicare makes payments 
based on a predetermined, fixed amount that reflects the average 
patient, and the facility retains the profit or suffers a loss 
resulting from the difference between the payment rate and the 
facility's cost, which creates an incentive for cost control. It is not 
the intent of a PPS to add dollars to the base whenever something new 
is made available. We explained that the proposal to make no change to 
the base rate at the end of the TDAPA period for new renal dialysis 
drugs and biological products that fall within an existing functional 
category would maintain the overall goal of a bundled PPS, that is, the 
limitation of applying the TDAPA would not undermine the bundle since 
there is no permanent adjustment to the base rate. We also noted that 
this proposal would strike a balance of maintaining the existing 
functional category scheme of the drug designation process and not 
adding dollars to the ESRD PPS base rate when the base rate may already 
reflect costs associated with such services, while still promoting 
high-value innovation and allowing facilities to adjust or factor in 
new drugs through a short-term transitional payment. We proposed to add 
Sec.  413.234(c)(1)(i) to reflect that when a new renal dialysis drug 
or biological falls within an existing functional category at the end 
of the TDAPA period, we would not modify the ESRD PPS base rate. We 
solicited comment on this proposal.
    We proposed to operationalize this proposed policy no later than 
January 1, 2020. We stated that this deadline would provide us with the 
appropriate time to prepare the necessary changes to our claims 
processing systems.
    We solicited comment on the proposal to revise Sec.  413.234(c) and 
(c)(1) to reflect that the TDAPA would apply for all new renal dialysis 
drugs and biological products regardless of whether they fall within a 
functional category. Then, for a new renal dialysis drug or biological 
product that falls within an existing functional category, that payment 
would apply for 2 years and there would be no modification to the ESRD 
PPS base rate. We also solicited comment on the appropriateness of the 
2-year timeframe for the TDAPA for new renal dialysis drugs and 
biological products that fall within existing functional categories.
    We note that the nature of these proposals was to expand the 
applicability of TDAPA to new renal dialysis drugs and biological 
products that fall within an ESRD PPS functional category since we had 
already established a policy in the CY 2016 ESRD PPS final rule 
regarding the applicability of TDAPA to new renal dialysis drugs and 
biological products that do not fall within an ESRD PPS functional 
category. Therefore, the purpose of the proposal was supporting 
innovation, but geared solely toward those drugs and biological 
products that are considered reflected in the ESRD PPS base rate.
    The CY 2019 ESRD PPS proposed rule did not propose any changes with 
regard to how CMS determines if a new renal dialysis drug or biological 
product is reflected in the ESRD PPS base rate. That is, we did not 
propose a change in the basic structure of the drug designation 
process, which is based on the ESRD PPS functional categories. New 
renal dialysis drugs and biological products that fall within an 
existing functional category are considered to be reflected in the ESRD 
PPS base rate. As proposed, the purpose of providing the TDAPA for 
these drugs that fall into an existing functional category is to help 
ESRD facilities to incorporate new drugs and make appropriate changes 
in their businesses to adopt such drugs; provide additional payment for 
such associated costs, as well as promote competition among drugs and 
biological products within the ESRD PPS functional categories. New 
renal dialysis drugs and biological products that do not fall within an 
existing functional category are not considered to be reflected in the 
ESRD PPS base rate, and the purpose of TDAPA for those drugs is to be a 
pathway toward a potential base rate modification.
    We received many comments on the proposed revisions to the drug 
designation process regulations from all sectors of the dialysis 
industry, and each had their view on the direction the policy needed to 
go to support innovation. Commenters generally agreed that more drugs 
and biological products should be eligible for the TDAPA, that is, they 
agreed that drugs and biological products that fall within a functional 
category should be eligible for a payment adjustment when they are new 
to the market. However, the commenters had specific policy 
recommendations for each element of the drug designation process. 
Specifically, we received comments regarding which drugs should qualify 
for the TDAPA, the duration of the application of the adjustment, post-
TDAPA base rate modifications, and basis of payment for the TDAPA. 
While a couple of commenters cautioned against implementing any changes 
in the drug designation process, overall, the general consensus from 
commenters was to expand the payment adjustment to new renal dialysis 
drugs and biological products that fall into an existing functional 
category and have clinical value with the intent to modify the ESRD PPS 
base rate, if applicable.
    The comments and our responses to the comments on our proposals 
regarding the expansion of the TDAPA eligibility criteria are set forth 
below.
    Comment: Two commenters supported the proposals. A professional 
association expressed support for CMS's efforts to foster innovation of 
new renal dialysis drugs and biological products by revising its TDAPA 
policy and recommended that CMS keep the special needs of children with 
ESRD in

[[Page 56936]]

mind and consider policies to foster the innovation of new therapies 
for this population.
    A drug manufacturer supported CMS' flexibility and willingness to 
consider new approaches to improve access to innovative medicines. The 
commenter stated that CMS' proposed expansion of TDAPA eligibility will 
incentivize competition and innovation that encourages quality and 
cost-savings. The commenter appreciates CMS's acknowledgement of and 
willingness to take action to address uptake in innovations in 
treatment for ESRD patients through changes to the TDAPA for new drugs. 
The commenter also stated that these proposals encourage renal dialysis 
providers to consider the appropriate use of new drugs and biological 
products to improve the outcomes of their patients.
    Response: We appreciate the support of the stakeholders.
    Comment: Two commenters did not support the proposals. MedPAC 
expressed concern about the importance of maintaining the structure of 
the ESRD PPS and not creating policies that would unbundle services 
covered under the ESRD PPS or creating incentives that encourage high 
launch prices of new drugs and technologies. MedPAC stated that access 
to new dialysis products is favorable under the ESRD PPS. For example, 
in 2015, nearly one-quarter of all dialysis beneficiaries received 
epoetin beta, which was introduced to the U.S. market in that year. 
Consequently, MedPAC recommended that CMS should not proceed with its 
proposal to apply the TDAPA policy to new renal dialysis drugs that fit 
into a functional category (including composite rate drugs, which have 
never been paid separately by Medicare) for the following reasons:
     Although new dialysis drugs could improve patient 
outcomes, the proposal does not require that the new drugs be more 
effective than current treatment to qualify for the TDAPA.
     Paying the TDAPA for new dialysis drugs that fit into a 
functional category would be duplicative of the payment that is already 
made as part of the ESRD bundle. Beneficiaries and taxpayers already 
pay for drugs in each functional category because they are included in 
the ESRD PPS payment bundle.
     Applying the TDAPA to new dialysis drugs that fit into a 
functional category undermines the competition with existing drugs 
included in the PPS payment bundle. By bundling drugs with similar 
function together, CMS encourages providers to make decisions about 
each drug's clinical effectiveness for individual patients while also 
attempting to constrain costs. MedPAC pointed out that it has 
documented the changes in drug use due to increased price competition 
with the vitamin D and ESA therapeutic classes in both its 2016 and 
2018 Reports to the Congress. MedPAC asserted that finalizing the TDAPA 
proposal would unbundle all new dialysis drugs, removing all cost 
constraints during the TDAPA period and encouraging the establishment 
of high launch prices. MedPAC explained that under the proposal, after 
the 2-year TDAPA period concluded, the new, potentially high-priced 
dialysis drugs would be included in the PPS payment bundle and could 
thereby further increase dialysis spending through the periodic process 
of rebasing the ESRDB market basket.
     The proposed policy would increase spending for 
beneficiaries and taxpayers, as CMS acknowledges. However, the proposed 
rule did not include an estimate of expected spending changes in the 
``detailed economic analysis'' section.
    An LDO also did not support the TDAPA proposal. The commenter 
explained that it has observed significant issues for both patients and 
providers under the current TDAPA program, which support delaying 
expansion until the process can be better evaluated. The commenter 
further explained that under the TDAPA, patients will experience 
substantial increases in cost-sharing, as these drugs will be subject 
to Part B's 20 percent co-insurance, instead of being part of the PPS 
bundle. The commenter pointed to its experience under the current TDAPA 
period for calcimimetics, stating that this cost-shifting to vulnerable 
ESRD patients has had a detrimental effect on them, as many have had to 
refuse necessary medications due to their high costs. In addition, the 
commenter stated that providers frequently provide the medications to 
patients and then are unable to fully recoup the 20 percent coinsurance 
from them, resulting in considerable amounts of unreimbursed bad debt, 
which places additional burden on dialysis facilities.
    This LDO identified other significant issues encountered by 
patients and providers including revenue loss from the inability to 
bill Medicare for full prescriptions; payers not recognizing an oral 
medication under the medical benefit; Medicare paying for drugs 
consumed, for which dialysis facilities have little to no visibility, 
and not for drugs dispensed (a particular problem for oral drugs); 
payers experiencing system update problems that have resulted in 
incorrect or no reimbursement for current medications subject to TDAPA; 
lack of Medicaid secondary coverage for Medicare primary patients; 
pricing power shifting to pharmaceutical manufacturers; and an absence 
of reimbursement from Medicare Advantage plan contractors.
    Some commenters used their experience with the current TDAPA policy 
to express that due to the difficulties related to the transition of 
oral drugs from payment under Medicare Part D to Medicare Part B, CMS 
should obtain 2-full calendar years of claims data before engaging in 
rulemaking to incorporate the new drug or biological product into the 
ESRD PPS bundled payment. Again, referring to calcimimetics as the 
example, the commenters stressed how important it is for dialysis 
facilities to receive timely and clear clinical and billing guidance. A 
national LDO organization stated the current policy creates a 
disconnect between oral calcimimetics, which are prescribed for daily 
use, including days that do not include a dialysis treatment, and the 
per treatment payment methodology. The LDO stated this disconnect can 
result in dialysis facilities being unable to claim all the days when 
the patient took the oral calcimimetic.
    The LDO also stressed that further steps are needed to address 
confusion among plans regarding their coverage and payment 
responsibilities for new renal dialysis oral drugs under the MA 
program. The commenter further explained that CMS needs to take 
additional action to ensure that all MA enrollees with ESRD have good 
access to the drug formulation that meets their needs by issuing 
guidance that reiterates coverage and reimbursement for these drugs.
    The LDO further stated that it is premature to expand the TDAPA 
before data and experience from the first period is analyzed and 
thoughtfully considered, and strongly recommended that CMS not move 
forward on expanding TDAPA at this time. While the organization stated 
that it supports and encourages CMS's interest in developing a process 
to incentivize significant innovation in dialysis treatment, the 
organization believes the proposal may undermine investment in 
treatment advances that significantly improve outcomes or quality of 
life for vulnerable patients.
    Response: We understand and appreciate the concerns expressed by 
the commenters. With regard to MedPAC's concern that the proposal does 
not require that the new drugs be more effective than current treatment 
to qualify for the TDAPA, we believe that allowing all new drugs to be 
eligible for

[[Page 56937]]

TDAPA will provide an opportunity for the new drugs to compete with 
other similar drugs in the market which could mean lower prices for all 
drugs. We believe drug manufacturers understand that if they are to 
compete with drugs currently in the ESRD PPS bundle, they need to not 
only be better, but they also must come in at a lower price in order to 
continue to be utilized by the facilities in the post-TDAPA period. The 
2-year TDAPA period gives the innovative product an opportunity to 
demonstrate its clinical value and financial worth, while buffering the 
risk to both the manufacturer and the facility. If the facility finds 
the product sufficiently worthy of use among its patients, then the 
manufacturer has an incentive to keep the price lower than the drug it 
is replacing that is currently in the bundle. In addition, the 
effectiveness of drugs can depend on age, gender, race, genetic pre-
disposition and comorbidities. Innovation can provide options for those 
that do not respond to a certain preferred treatment regimen the same 
way the majority of patients respond. However, we appreciate MedPAC's 
feedback and will consider the comment for future refinements to the 
TDAPA policy.
    With respect to MedPAC's concern regarding duplicate payment for 
new drugs that fit into a functional category, as noted previously, we 
believe the TDAPA would help facilities to incorporate new drugs and 
make appropriate changes in their businesses to adopt such drugs; 
provide additional payment for such associated costs, as well as 
promote competition among other drugs and biological products in the 
same ESRD PPS functional categories. We do not view the expanded TDAPA 
as duplicative payment because at the end of the TDAPA time period, 
there is no additional money added to the base rate for those drugs 
that already fall within functional category. This TDAPA is a separate, 
temporary payment adjustment for the reasons discussed above. We 
believe the TDAPA expansion will encourage innovative products to come 
into the market, by facilitating the introduction of more drug options 
to the functional categories. We also believe this TDAPA expansion will 
enhance treatment options for those population subsets that currently 
may not respond optimally to what is available in the bundle. We have 
heard from ESRD facilities that newer drugs may carry higher financial 
risk for the centers due to inventory issues with higher cost drugs, 
and this may cause uneven access to the newer products. We note that 
the TDAPA for new drugs considered to be included in the functional 
categories would be temporary. In addition, we believe that in order 
for the new drugs to obtain a long-term market share, they will need to 
show better clinical results and be available at a competitive price 
once those drugs are bundled into the ESRD PPS. Some of the drugs 
currently in the bundle effectively target a specific condition but 
have side effects that manifest themselves differently across the 
population of ESRD patients. If a third or fourth generation product 
achieves the same clinical effect, and does not have those side 
effects, then it would be a clinically superior product for that 
population.
    With regard to MedPAC's assertion that finalizing the TDAPA 
proposal would unbundle all new dialysis drugs, remove all cost 
constraints during the TDAPA period and encourage the establishment of 
high launch prices, we believe that we are mitigating these issues by 
paying ASP+0 for a limited amount of time (2 years) and by not making 
modifications to the base rate. If manufacturers choose to respond with 
an even higher launch price, then there is a possibility their product 
will not be used as much because the beneficiary co-pays will also be 
increased. This could increase bad debt for the facilities. We believe 
as stated above that our policy could lead to lower drug prices during 
the TDAPA period and once the TDAPA period expires. We note that TDAPA 
is a transitional payment, and under this expansion does not result in 
a permanent addition to the base rate. Rather, this payment will help 
facilities to incorporate new drugs and make appropriate changes in 
their businesses to adopt such drugs; provide additional payment for 
such associated costs, as well as promote competition with other drugs 
and biological products within the same ESRD PPS functional categories. 
We believe paying the TDAPA for all new drugs will foster competition, 
and actually encourage the companies with existing drugs in the 
functional categories to produce a newer, better product, at a lower 
cost in order to retain their market share.
    With regard to MedPAC's concern regarding the ESRDB market basket 
rebasing, we believe that any impact that would result from the 
proposed TDAPA expansion is unknown at this time. We will continue to 
monitor the impact that these changes have on the relative cost share 
weights in the ESRDB market basket, over time, as reported in cost 
report data. When appropriate we will rebase the ESRDB market basket to 
reflect observed shifts in cost weights.
    In response to MedPAC's comment that we did not include an estimate 
of expected spending changes in the ``detailed economic analysis'' 
section for the proposal, we were unable to provide such impacts 
because the policy addresses drugs and biological products that have 
not been developed and therefore we would not be able to address 
hypothetical usage and project impacts accurately.
    With regard to the comments about beneficiary coinsurance, we 
acknowledge there will be increases; however, we believe that access to 
innovative new drugs that could provide better clinical outcomes and 
fewer side effects will be valuable to beneficiaries and help to offset 
the coinsurance obligation. In addition, we believe drug pricing 
information and coinsurance amounts should be a part of the discussion 
between the beneficiary and his or her physician regarding the decision 
to use new drugs. For this reason, we believe that concerns about what 
beneficiaries have to pay for coinsurance and whether ESRD facilities 
are able to obtain these payments from other payers versus directly 
from the ESRD beneficiary, would have an impact on the drugs that are 
used for treatment.
    We are finalizing the expansion of TDAPA to encourage development 
of new drugs within the current functional categories. However, we 
understand and acknowledge the concerns expressed by the LDO about 
operational difficulties and patient access issues experienced for the 
current drugs paid for using the TDAPA. In recognition of those 
concerns, we are making the changes to the drug designation process 
under Sec.  413.234 and the expansion of TDAPA eligibility effective 
January 1, 2020, as opposed to January 1, 2019, to address as many of 
those concerns as possible. We believe that the small dialysis 
organizations and rural facilities have a more difficult time 
developing processes than LDOs, and delaying the effective date of the 
expansion of TDAPA by 1 year would benefit both types of facilities. 
This additional year would also provide us with the opportunity to 
address issues such as transitioning payment from Part D to Part B, and 
coordination issues involving Medicaid and new Medicare Advantage 
policies. Finally, the additional year will allow more time for 
provider and beneficiary education about this new policy.
    In addition, regarding the previous discussion on HCPCS codes, we 
will need to work with the current HCPCS

[[Page 56938]]

process as it applies to the ESRD PPS to accommodate the initial influx 
of new drugs and biological products. In collaboration with the HCPCS 
workgroup we will make the determination of whether a drug or 
biological product is a renal dialysis service. We will also determine 
if the new renal dialysis drug or biological product falls within an 
existing functional category or if it represents a new functional 
category. We discuss the operational concerns that warrant a 1-year 
delay of the TDAPA expansion in section II.B.1.f of this final rule.
    Comment: A national kidney organization, a national dialysis 
association, a clinical association, a dialysis provider organization, 
as well as drug manufacturers, expressed support for the application of 
TDAPA to all new drugs and biological products approved on or after 
January 1, 2019, but they recommended that CMS not apply TDAPA to 
generic drugs or to biosimilars. The commenters explained that they 
believe the rationale for TDAPA is to allow the community and CMS to 
better understand the appropriate utilization of new products and their 
pricing. The commenters asserted that generic drugs and biosimilars 
seek to provide the same type of treatment and patient outcomes as 
existing drugs in the ESRD PPS bundled payment. Thus, the additional 
time is unnecessary for these drugs and biological products.
    A drug manufacturer further stated that a generic drug clearly is 
not innovative because it must have the same active ingredient, 
strength, dosage form, and route of administration as the innovator 
drug; a biosimilar also is not innovative because it is required under 
statute to be highly similar and have no clinically meaningful 
differences to the reference product and must be administered in the 
same manner to treat the same conditions that the reference product is 
licensed to treat. The commenter stated that because they have no 
clinically meaningful differences, biosimilars and reference products 
should be treated equally in payment and coverage policies; a 
biosimilar should not be eligible for the TDAPA when its reference 
product would not qualify for the payment.
    A different drug manufacturer made a similar comment and stated 
that while it appears clear that the proposal would exclude generic 
drugs, it appears to allow biosimilars to receive TDAPA. The commenter 
stated that it does not believe biosimilars need to be treated 
differently than generic drugs and recommended that CMS not extend 
TDAPA to these products as those dollars would be better spent 
adjusting the bundled rate to ensure adequate funding for truly 
innovative products.
    Response: We proposed to allow all new drugs in current functional 
categories, including generic drugs, and biosimilar biological products 
approved under 351(k) of the PHS Act, to receive the TDAPA because we 
want to foster a competitive marketplace in which all drugs within a 
functional category would compete for market share. We believe this 
will mitigate or discourage high launch prices. We believe including 
generic drugs and biosimilar biological products under the TDAPA 
expansion will foster innovation of drugs within the current functional 
categories. We also believe including these products will give a 
financial boost to support their utilization, and ultimately lower 
overall drug costs since these products generally have lower prices. 
Because of this, generic drugs and biosimilar products will provide 
cost-based competition for new higher priced drugs during the TDAPA 
period and also afterward when they are bundled into the ESRD PPS.
    Comment: Some commenters also recommended that CMS require that the 
new renal dialysis drug or biological have a clinical superiority over 
the existing drugs in the bundle and provided suggestions on clinical 
value criteria. For example, several commenters indicated that the 
following are examples of when a new drug has high clinical value:
     Drugs and biologicals that fill a treatment gap (address 
an unmet medical need) in an existing functional category;
     Drugs or biologicals that treat conditions in dialysis 
patients for which no FDA-approved product in an existing functional 
category may be used consistent with the drug's label;
     Drugs or biologicals for which there are multiple clinical 
outcomes as stated in the FDA labeling material approved by the FDA 
(including within the clinical pharmacology and study portion of the 
label approved by the FDA);
     Drugs and biologicals that are approved by the FDA (if 
appropriate to add to a functional category based on the indications 
listed in FDA-approved labeling) that have demonstrated clinical 
superiority to existing products in the bundle; or
     Drugs and biologicals that improve priority outcomes, such 
as:
    ++ Decreasing hospitalizations;
    ++ Reducing mortality;
    ++ Improving quality of life (based on a valid and reliable tool);
    ++ Creating clinical efficiencies in treatment (including but not 
limited to reducing the need for other items or services within the 
ESRD PPS);
    ++Addressing patient-centered objectives (including patient 
reported outcomes once they are developed and assessed by the FDA in 
its review of drugs and biologicals);
    ++Reducing in side effects or complications; or
    ++Drugs and biologicals that have a significantly better safety 
profile than existing products.
    An LDO recommended that CMS limit TDAPA to significantly innovative 
drug products that substantially advance the treatment and management 
of conditions associated with ESRD or have demonstrated safety 
advances. The LDO requested the opportunity to work with CMS and 
interested stakeholders to develop a uniform definition of significant 
innovation.
    Response: We believe that allowing all new drugs and biological 
products to be eligible for the TDAPA will provide an ability for new 
drugs to compete with other drugs in the market, which could mean lower 
prices for all drugs. We further believe, categorically limiting or 
excluding any group of drugs from TDAPA would reduce the 
competitiveness because there would be less incentive for manufacturers 
to develop lower-priced drugs, such as generic drugs, to be able to 
compete with higher priced drugs during the TDAPA period. In addition, 
the question of drugs being more effective can be subjective since 
effectiveness of drugs can depend on age, gender, race, genetic pre-
disposition and comorbidities. Innovation can provide options for those 
patient who do not respond to a certain preferred treatment regimen the 
same way the majority of patients respond. However, we appreciate the 
commenters' feedback and will consider these suggestions for future 
refinement of the drug designation process.
    Comment: A patient advocacy organization applauded the revisions to 
the drug designation process regulations and stated that while any 
innovations in treatment that improve quality of life or tolerability 
of dialysis have great value to patients, they do not support adding 
dollars to the base rate for more expensive ``me-too'' substitute drugs 
or biological products that add no value for patients or for the 
Medicare program.
    A dialysis provider organization also expressed concern that the 
proposed policy would encourage promotion of so called ``me too'' drugs 
and higher launch prices, even if moderated after 2 years. The 
organization stated that

[[Page 56939]]

developers need to have a clear roadmap and set of criteria based on 
whether a new drug is a significant clinical improvement that warrants 
a higher cost to the program, and beneficiaries, as well as possible 
financial tradeoffs to providers. Rather than an open-ended policy, 
several commenters recommended that CMS consider a new drug policy more 
in line with those in other parts of the Medicare program, such as the 
policies for new technologies under the hospital inpatient PPS which 
includes a substantial clinical improvement test and for devices under 
the outpatient PPS.
    Response: We understand drugs characterized as ``me too'' drugs are 
new drugs that are in the same product class as other drugs currently 
in the functional categories. We agree with the commenter that 
recommended not adding dollars to the base rate for more expensive 
``me-too'' substitute drugs or biological products and note that we did 
not propose such a policy. However, we believe the introduction of new 
drugs in the functional categories promotes competition that lowers 
prices, while frequently improving on the quality of the first-in-class 
drugs.
    With regard to the comment on significant clinical improvement, we 
did not propose this criteria because our goal was to be expansive 
regarding the applicability of TDAPA. In general, manufacturers compete 
on the basis of cost, and it is that competition that ignites 
negotiating. We believe when there is more than one choice of drug, 
ESRD facilities have the ability for bargaining, obtaining lower drug 
prices, and taking their drug needs to another manufacturer. When there 
is a monopoly by one drug company, the ability to bargain is removed. 
With respect to physicians, we note that those physicians prescribing 
drugs in the functional categories should not only be interested in 
their patient's clinical well-being and safety, but also take into 
consideration the patient's financial resources.
    With regard to other Medicare payment systems, although the systems 
are noteworthy, under the ESRD PPS there is a different programmatic 
approach to new drugs and biological products. We believe the TDAPA 
would apply for more new drugs and biological products than if we 
utilized a policy similar to the other payment systems. Under the final 
policy, the expanded TDAPA will apply to all new renal dialysis drugs 
and biological products and will be paid for 2 years, and these drugs 
and biological products will not need to meet clinical improvement or 
cost criteria. In addition, our goal in this approach is to assist ESRD 
facilities in incorporating these products and promote development of 
new renal dialysis drugs and biological products to compete with other 
drugs in the ESRD PPS functional categories with the aim of lowering 
drug prices.
    Comment: A drug manufacturer recommended that CMS consider when the 
FDA may re-profile a drug. The commenter further explained that re-
profiling a drug may occur when its utility and efficacy are further 
elucidated or expanded once on-market. The commenter recommended that 
CMS establish a pathway as part of the drug designation process that 
would allow for manufacturers or other stakeholders to request that CMS 
reconsider how a particular drug is classified with regard to the 
functional categories and, if appropriate, adjust the base rate when 
there is a change in the label approved by FDA.
    Response: When the commenter discusses re-profiling, we presume the 
commenter is referring to the FDA's approval of changes to the labeling 
of already approved drugs to add new indications for additional 
diseases or conditions. Under the current ESRD PPS functional 
categories, in that circumstance the drug would be automatically 
included in the ESRD PPS bundled payment amount when it is identified 
as a renal dialysis service based on its FDA approved labeling. We 
appreciate this feedback and will consider these recommendations for 
future refinements to the policy.
    Comment: A drug manufacturer commented that it is vitally important 
that CMS does not exclude new drugs from TDAPA that have been FDA 
approved for the treatment of ESRD since the bundled payment became 
active in 2011. The commenter stated there is no basis for excluding 
these drugs, and pointed out that Triferic is the only drug CMS would 
need to consider during that time period because CMS approved the TDAPA 
for the other drug (calcimimetics). The commenter stated that excluding 
this one drug from TDAPA would be unfair and prevent patients from 
gaining access to a new innovative therapy that is available and can 
improve their lives.
    Response: We generally are precluded from retroactively 
implementing regulations and therefore, we are unable to provide TDAPA 
payments for new drugs approved by the FDA since 2011. We apply the 
policy that was in effect when the drug is launched which, in the case 
of Triferic, was to provide no add-on payment for drugs in the existing 
ESRD PPS functional categories beyond the ESRD PPS bundled payment 
amount.
    The next set of comments and responses address the proposal 
regarding the 2-year duration of TDAPA for new renal dialysis drugs and 
biological products that fall within a functional category. Commenters 
had two main concerns with this aspect of the proposal. First, 
commenters were concerned with how long ESRD facilities would receive 
the payment adjustment. Second, commenters wanted clarification on the 
specific timeframe CMS would use to evaluate utilization for rate-
setting purposes.
    The comments and our responses to the comments on this proposal are 
set forth below:
    Comment: Many commenters suggested that CMS retain the flexibility 
to extend the TDAPA period beyond 2 years to ensure that accurate and 
complete data are available to make determinations about bundling new 
products and adjustments to the bundled rate. One commenter noted that 
a ``new'' drug or biological product that falls within an existing 
functional category, including composite rate drugs, could be one that 
has a relatively familiar mode of action in the body to drugs and 
biological products that are already included in this category. This 
type of drug could be appropriate for a 2-year TDAPA period, however, 
if the ``new'' drug or biological product has an entirely new mode of 
action with which clinicians are unfamiliar (including but not limited 
to new benefits, side-effects, or safety profile) that product could 
deserve a longer TDAPA period. The commenters explained that if the 
language in the drug designation regulations stated ``at least two 
years,'' consistent for both existing functional category drugs and new 
functional category drugs and biological products, CMS would maintain 
the flexibility to use a 2-year period in those instances where there 
is sufficient claims data to move a drug or biological product into the 
bundle, but also have the ability to extend that period when warranted.
    A few commenters requested for CMS to clarify it will evaluate at 
least 24-consecutive months of claims data prior to bundling any new 
drug or biological product into the ESRD PPS.
    A drug manufacturer recommended the TDAPA apply for 3 years to 
better protect access to new drugs and to increase the amount of data 
collected for rate setting. The commenter explained that when a new 
drug becomes available, it can take months for dialysis facilities to 
incorporate it into their treatment protocols and implement the 
required changes in coding and billing

[[Page 56940]]

to reflect use of the drug on their claims. A national provider 
association supported this statement and described situations that can 
slow the rate of uptake of new products. For example, this commenter 
stated that physicians, nurses and administrative staff must receive 
education and training from the drug manufacturer so that the drug or 
biological product can be safely and effectively administered. Eligible 
patients must receive education on the medication prior to prescription 
and administration. The facility staff must review all patient 
insurance plans to initiate the authorization process to start the new 
drug. And, facilities must negotiate with vendors for the supply and 
pricing of the item so it can be purchased and administered to 
patients. The commenter further explained that the particular acuity 
and severity of the ESRD patient population generally results in 
facilities more gradually increasing use of novel therapies in these 
patients over time.
    One commenter explained that due to the length of the rulemaking 
cycle, CMS typically has a 1-year lag between collecting claims data 
and implementing any reimbursement changes based on that data. The 
commenter asserted that if CMS extended a drug's TDAPA beyond 2 years, 
it would have more than 1 year of data available to use to adjust the 
base rate, and those data would be more likely to reflect mature 
utilization patterns in clinical practice. In addition, the commenter 
noted that when a drug does not qualify for an adjustment to the base 
rate, a longer TDAPA period would give facilities more time to 
determine how to accommodate use of the drug under the base rate.
    A different drug manufacturer and a clinical association 
recommended that CMS apply TDAPA for whatever the period of time 
required to obtain 2 full years of claims data, not just 2 calendar 
years. The commenters explained that while they appreciated the concern 
noted in the preamble to the proposed rule that a longer TDAPA period 
``could improperly incentivize high cost items without more value,'' 
they believed 2-calendar years of TDAPA would not provide adequate data 
to assess the information CMS has identified is necessary when new 
drugs come to market. They further explained that it is also important 
to have 2-full years of claims data to assess whether a new renal 
dialysis drug or biological product should be added to the bundle (or 
alternatively an add-on or adjuster be used to account for drugs not 
used in the average patient) and, if so, whether new dollars should be 
added to the base rate as well. They stated that depending on the 
variability in the prescribing protocols and general uptake in 
utilization, the data available at the end of 2-calendar years would 
not provide an adequate picture of utilization or cost.
    A drug manufacturer and a national dialysis association noted that 
both CMS and Congress have recognized the need for a longer 
transitional payment period than 2 years for new drugs in the OPPS 
setting. They explained that while initially pass-through payment for 
new drugs was provided for 2 years, the period was extended by CMS in 
2017 to 3 years. The commenters also indicated that in the Bipartisan 
Budget Act of 2018, Congress extended the pass-through period for 
certain outpatient drugs for an additional 2 years beyond the 3-year 
period CMS had implemented. The drug manufacturer estimated that the 
TDAPA period could be needed for up to 4 years to collect 2 full 
calendar years of claims data.
    An LDO indicated that sufficient time is needed to evaluate new 
drugs as they come onto the market and also recommended that CMS obtain 
2 full calendar years of claims data. The commenter recalled its 
experiences with an ESA and an iron replacement therapy product to 
illustrate concerns that may arise during the transition period. The 
commenter explained that since phase 3 studies are small, adverse 
events may not be recognized until a promising new drug is more widely 
used. The commenter went on to describe its experience with specific 
new drugs, identifying a higher rate of adverse effects in comparison 
to other products for these drugs, which resulted in its medical 
directors recommending discontinuing use of the drugs.
    Response: In expanding TDAPA to new renal dialysis drugs and 
biological products that fall within the existing ESRD PPS functional 
categories, we did not propose to incorporate these drugs into the ESRD 
PPS base rate when the TDAPA period ends. Rather, we proposed to apply 
TDAPA for 2 years to support access to the new drug during its uptake 
period. The purpose for this expanded TDAPA is to help ESRD facilities 
incorporate these drugs and foster competition and innovation for ESRD 
drugs. At the end of the TDAPA period, we expect that the drug would 
achieve its foothold and would be able to compete with other drugs in 
the functional category. We continue to believe providing TDAPA for 2 
years is appropriate for drugs in the current functional categories and 
that a longer timeframe to establish the drug's utilization is not 
necessary for drugs in a functional category, particularly since the 
ESRD PPS payment includes money for the drugs in these categories. With 
respect to the specific recommendation that we collect sufficient 
claims data, there is no data collection period for new renal dialysis 
drugs and biological products that fall within the existing functional 
categories for the purpose of modifying the base rate. However, we 
monitor utilization of all items and services available under the ESRD 
PPS. We will also use claims data to monitor for increased costs 
related to use of the new TDAPA drugs. We are not expanding the 
duration of TDAPA for these drugs because we believe that 2 years 
strikes the appropriate balance of supporting innovation while 
protecting the Medicare Trust Fund.
    Under our final policy, beginning January 1, 2020, for new renal 
dialysis drugs and biological products that fall within an existing 
functional category, the application of TDAPA will begin with the 
effective date of subregulatory billing guidance and end 2 years from 
that date.
    For new renal dialysis drugs and biological products that do not 
fall within an existing functional category, the application of TDAPA 
will begin with the effective date of subregulatory billing guidance 
and end after we determine, through notice-and-comment rulemaking, how 
the drug will be recognized in the ESRD PPS bundled payment.
    The next set of comments and responses address our proposal that 
when a new renal dialysis drug or biological product falls within an 
existing functional category, at the end of the TDAPA period, we would 
not modify the ESRD PPS base rate. In general, commenters expressed 
that there is a need to consider a base rate modification for all new 
renal dialysis drugs and biological products to support their long term 
use. The comments and our responses to the comments on this proposal 
are set forth below:
    Comment: We received several comments expressing concern that the 
functional categories are too broad to be the determining factor for 
when a drug or biological product is included in the ESRD PPS bundled 
payment. A national dialysis association asserted that the distinction 
CMS has drawn between drugs and biological products within an existing 
functional category, including composite rate drugs, and those outside 
an existing functional category is artificial and may not correspond to 
clinician, patient, or provider experience in the real world. The 
commenter recommended that all new renal dialysis drugs and biological

[[Page 56941]]

products, regardless of functional category, should have its 
utilization and price patterns evaluated before decisions are made with 
regard to the ESRD PPS bundled payment. The commenter believes CMS 
should consistently apply the review of utilization prior to making 
decisions about bundling drugs and biological products because this 
ensures that the bundling of a drug or biological product is based on 
the actual review of real and reliable data.
    Several commenters, including a national dialysis association, 
noted that there are several new drugs in the pipeline that are not 
generic drugs or biosimilars and, while likely to have an indication 
for which a product is labeled and approved focused on treating 
conditions in an existing functional category, will not be clinically 
substituted with drugs currently in the functional categories or will 
provide a more effective treatment option, that is, true innovations. 
The national dialysis association stated that while current funding 
within the ESRD PPS may be sufficient to cover the costs for some new 
drugs or biological products within an existing functional category, it 
may not be sufficient for all new drugs and biological products. For 
these other drugs and biological products, the commenter noted, having 
guaranteed access to the TDAPA is only part of the solution. The 
association stated that innovation requires appropriate and sustainable 
long-term funding as well.
    The commenters stated if CMS were to adopt a blanket policy of not 
adding new money to the bundle for any drug or biological product that 
comes within one of these categories, it will stifle innovation and 
leave patients with the same standard of care that existed in the 
1990s. The commenters noted that unless there is adequate reimbursement 
for new products, they simply will not be used. Patients will lose 
access to them, even if these products are used during the TDAPA 
period. A drug manufacturer with a similar concern explained that if 
the cost will not be covered afterward in the bundle or via some other 
payment mechanism, it is highly likely that a dialysis facility will 
not convert to the new therapy with just 2 years of TDAPA. Commenters 
noted that an investment in what could be a temporary payment 
adjustment could adversely affect the financial aspects of the company, 
and may affect prescribing decisions after the TDAPA period.
    A patient advocacy organization disagreed with our statement in the 
proposed rule that adding dollars to the ESRD PPS base rate for new 
renal dialysis drugs and biological products that fall within existing 
functional categories would be in conflict with the fundamental 
principles of a PPS and stated that a treatment that provides either 
longevity gain or improves quality of life or tolerability of treatment 
has great value to patients and is worthy of increased reimbursement. 
The commenter stated that if there is a colorable claim that a new 
treatment adds value, the cost of that treatment should be built into 
the base rate for year 3 while further developing evidence. Then, if 
the claims prove exaggerated and the new drug or biological product 
falls into disuse, CMS would have the option of reducing or eliminating 
the additional expenditure.
    While many commenters suggested that CMS implement a rate-setting 
exercise at the end of TDAPA for all new renal dialysis drugs and 
biological products, other commenters expressed concern that we would 
add dollars to the base rate for drugs and biological product without 
significant clinical value. Given that new drugs for dialysis patients 
are expected in 2019, some commenters encouraged CMS to develop a final 
rule with comment period, that describes the process and criteria it 
will use to evaluate drugs for functional category consideration and 
determine when additional money will be added to the bundle, 
particularly when the drug is considered a significant clinical 
improvement over existing drugs.
    Response: We appreciate the concerns raised by the stakeholders 
with regard to our proposal to not adjust the base rate after the end 
of the TDAPA period for new drugs or biological products that fall 
within an existing ESRD PPS functional category. We continue to believe 
that because the existing functional categories account for renal 
dialysis services in the ESRD PPS bundled payment, 2 years is long 
enough to be meaningful and to allow these new drugs to gain a foothold 
in the market, but not too long as to improperly incentivize high cost 
items without added value, for example, substitutions of those drugs 
that already exist in the functional category. The functional 
categories were designed to be broad because, when a new drug becomes 
available, it is added to the therapeutic armamentarium of the treating 
physician.
    With regard to the commenter stating that CMS should consider 
continuing the TDAPA for a third year while developing further 
evidence, we do not intend to modify the base rate for new renal 
dialysis drugs and biological product in existing functional 
categories. With regard to the longevity gain, we do not believe that 2 
years would provide the experience to assess longevity, and further, 
the intent of the TDAPA for new drugs is to be a short term payment to 
help facilities to incorporate new drugs and make appropriate changes 
in their businesses to adopt such drugs; provide additional payment for 
such associated costs, as well as promote competition with other drugs 
and biological products within the same ESRD PPS functional categories. 
Regarding the suggestion that increasing the base rate would be in 
keeping with the purpose of the ESRD PPS and would increase the quality 
of life of the ESRD beneficiary, we note that quality of life is a 
highly subjective determinant and is outside the purview of a PPS, 
however we believe this policy expands options which could enhance 
quality of life.
    We are concerned about the comment stating that there will be 
beneficiary access issues at the end of the TDAPA period for new renal 
dialysis drugs or biological products that fall within a functional 
category. As we noted above, these drugs will be paid under the ESRD 
PPS bundle and become eligible under the outlier policy, if they are 
not considered to be a composite rate drug. We expect that if a 
beneficiary is responding well to a drug or biological product paid for 
using the TDAPA that they will continue to have access to that therapy 
after the TDAPA period ends. We plan to monitor the use of the TDAPA 
and carefully evaluate the new renal dialysis drugs and biological 
products that qualify.
    We appreciate the suggestion of undergoing a rate-setting exercise 
wherein we compare the dollars allocated to a functional category to 
the cost of the new drugs to determine if reimbursement is appropriate. 
However, we did not propose to modify the base rate for new drugs that 
fall into the functional categories given that the purpose of the TDAPA 
for these drugs is to provide a short term boost to help ESRD 
facilities implement these products and to support innovation. We will 
consider this suggestion in future rulemaking.
    With regard to the functional categories, we note that they were 
established based on the drugs and biological products that were 
included in the ESRD composite rate or billed on claims in conjunction 
with a dialysis treatment when the ESRD PPS was developed. The 
functional categories are a mechanism for adding new drugs and 
biological products to the bundle and designed to capture all renal 
dialysis

[[Page 56942]]

services. Since the PPS began, we have routinely and consistently 
monitored the utilization and pricing of all drugs furnished to ESRD 
patients and will continue to do so as new drugs are developed. We 
appreciate the viewpoints expressed by the commenters and will take the 
comments into consideration.
    Comment: An LDO noted that CMS characterized the proposed TDAPA 
expansion as a means to give new renal dialysis drugs and biological 
products footholds in the market so that they can compete with existing 
drugs and biological products. The LDO stated that it is na[iuml]ve to 
conclude that after achieving a market foothold, a manufacturer would 
simply lower the cost of a drug or biological product whose development 
required additional financial support through the TDAPA. Rather, 
manufacturers will still have incentive to continue to recoup those 
development costs, giving them significant negotiating leverage over 
dialysis facilities. The commenter further explained that given that 
scenario and existing financial constraints, it will be difficult for 
dialysis facilities to offer such new drugs and biological products 
during the TDAPA period as well as after it expires.
    Response: We appreciate this feedback, however we believe that the 
TDAPA will incentivize competition, which will ultimately lower drug 
prices after the TDAPA period since there will be more drugs available 
to treat each condition. We believe that having more drug choices in 
the existing functional categories will increase both the negotiating 
power for facilities and their ability to obtain a competitive price 
after the TDAPA period ends. For example, we believe it is reasonable 
to conclude that once a lower cost drug, such as a generic drug, 
obtains a market foothold that dialysis providers will embrace the 
opportunity to switch to that drug's lower cost while maintaining 
quality of care. Under the ESRD PPS, ESRD facilities are responsible 
for furnishing all renal dialysis services either directly or under 
arrangement. As noted previously, we will monitor the application of 
the TDAPA adjustment and utilization during the TDAPA period, along 
with the utilization of the drugs that qualified for TDAPA, after the 
TDAPA period ends.
    Comment: Several commenters suggested that we uniformly apply the 
TDAPA and provided suggestions on how CMS should recognize new renal 
dialysis drugs and biological products in the ESRD PPS bundled payment 
after the TDAPA period ends. For example, commenters recommended that 
CMS clearly state when a drug or biological product, even if it were to 
qualify for a functional category, will not be bundled if it is not 
provided to the average patient. The commenters referred to the 
language in the CY 2019 ESRD PPS proposed rule where CMS stated that 
``the bundle is based on the costs incurred by the average patient.'' 
The commenters explained that if only a small portion of patients use 
the product, then it should not be added to the bundle because that 
would create the wrong incentives. The commenters further explained 
that providers who use the product will always be reimbursed less than 
it costs to provide the product and providers who do not use the 
product will receive a windfall (albeit a small one). The commenters 
asserted that bundling a product that is medically necessary for only a 
small percentage of patients only disincentivizes its use.
    Response: We disagree with the commenter that the TDAPA should be 
applied uniformly, because the purpose of the TDAPA is different 
depending on whether the new drug or biological product falls or does 
not fall within an existing functional category. That is, if the new 
drug falls within an existing functional category, the purpose of the 
TDAPA is to support its uptake period. For new drugs that do not fall 
within an existing functional category, the purpose of the TDAPA is a 
pathway to a potential base rate modification. When we describe the PPS 
as a payment system based on the ``average patient,'' that means based 
on the costs of the average patient, not that the majority of patients 
utilize specific drugs, items, or services.
    Comment: We received several comments expressing concern about the 
duration and sufficiency of data collection for calcimimetics and 
requesting clarification from CMS. Several commenters questioned 
whether paying the TDAPA for 2 years means CMS would be making 
utilization and pricing decisions based on a year or less of data due 
to CMS's rulemaking cycle. They maintained that the first year of 
utilization is not reflective of how the new drug will actually be 
used, and expressed concern about the impact of the thus far low and 
uneven utilization of calcimimetics on the data and any subsequent 
pricing decisions. To determine the appropriate duration for data 
collection, a drug manufacturer urged CMS to first consider the rate at 
which dialysis facilities incorporate new drugs into their treatment 
regimens. Several commenters also requested that CMS work with ESRD 
stakeholders to develop the methods CMS will use to evaluate the data 
as well as an approach to accounting for calcimimetics in the base 
rate. The commenters want to ensure that beneficiaries continue to have 
access to these drugs once the TDAPA period ends. In particular, an LDO 
noted the importance of recognizing the uniqueness of the oral 
calcimimetic in that it is taken daily when the payment system is 
designed for 3 treatments per week. A few commenters specifically 
requested that CMS outline its methodology in this final rule, with a 
comment period.
    Response: As we stated in the CY 2019 proposed rule (83 FR 34309 
through 34310), under Sec.  413.234(c), for new injectable or 
intravenous products that are not included in a functional category, 
the TDAPA is based on pricing methodologies under section 1847A of the 
Act and is paid until sufficient claims data for rate setting analysis 
for the new injectable or intravenous product are available, but not 
for less than 2 years. We note that this period begins with the 
effective date of a change request and, after at least 2 years of data 
collection, ends with rulemaking to modify the ESRD PPS base rate, if 
appropriate. After 2 years of data collection, we will evaluate the 
data, and if we determine that we need further data collection, we will 
continue TDAPA payments until data collection is sufficient. We further 
thank the commenters for their suggestions of methods we should employ 
when evaluating the data. We will keep these in mind and will provide 
further discussion about our methods in future rulemaking.
    Final Rule Action: After consideration of public comments, for CY 
2019 we are finalizing the revisions to the drug designation process 
regulations to reflect the proposed policy but are delaying the 
effective date of the policy revisions until January 1, 2020. The 
purpose of the delay is to mitigate the launch issues of the TDAPA 
expansion particularly for CMS programs (HCPCS, Medicaid and Medicare 
Part C). Also, many state Medicaid programs offer the same scope of 
services available under Part C and may need additional time to ensure 
proper communication so that dual eligible beneficiaries have access to 
drugs receiving the TDAPA. In addition, states may need time to modify 
their systems to adopt new renal dialysis drugs and biological 
products. For stakeholders (particularly small dialysis organizations 
and rural facilities) we believe the delay will be beneficial so that 
they can adapt and streamline processes to support a seamless transfer

[[Page 56943]]

between Agency programs when new drugs are launched and are eligible 
for the TDAPA. For example, facilities will have more time during this 
year to develop software to accommodate the diverse nature of all drugs 
receiving TDAPA so that they can be flexible and communicate with 
Medicare and Medicaid system requirements.
    Specifically, we are finalizing the addition of Sec.  
413.234(b)(1)(i), (ii) and revision of Sec.  413.234(c) with one 
revision to proposed Sec.  413.234(b)(1)(ii), to reflect that the 
TDAPA, under the authority of section 1881(b)(14)(D)(iv) of the Act, 
will apply to all new renal dialysis injectable or intravenous 
products, oral equivalents, and other forms of administration drugs and 
biological products, regardless of whether or not they fall within a 
functional category, effective January 1, 2020. We also note the 
revision to refer to ``biological product,'' which is FDA's preferred 
nomenclature, within the definition instead of ``biological''.
    We are finalizing the revision of Sec.  413.234(b)(2)(ii) and Sec.  
413.234(c)(2), removal of Sec.  413.234(c)(3), and addition of Sec.  
413.234(c)(2)(i) to reflect that we will continue to provide the TDAPA, 
collect sufficient data, and modify the ESRD PPS base rate, if 
appropriate, for new renal dialysis drugs and biological products that 
do not fall within an existing functional category.
    We are finalizing the revision to Sec.  413.234(c)(1) to reflect 
that for new renal dialysis drugs and biological products that fall 
within a functional category, the TDAPA applies for only 2 years, 
effective January 1, 2020.
    We are finalizing the addition of Sec.  413.234(c)(1)(i) to reflect 
that when a new renal dialysis drug or biological product falls within 
an existing functional category at the end of the TDAPA period we will 
not modify the ESRD PPS base rate, but at the end of the 2 years, as 
consistent with the existing outlier policy, the drug is eligible for 
outlier payment, effective January 1, 2020. However, as discussed in 
section II.B.1.h of this final rule, if the new renal dialysis drug or 
biological product is considered to be a composite rate drug, it will 
not be eligible for an outlier payment.
    Commenters did not specifically comment on the proposal to 
operationalize this proposed policy no later than January 1, 2020. 
Therefore, we are finalizing this proposal as proposed. We note that 
this action coincides with the delayed effective date to January 1, 
2020 to better coordinate with CMS and stakeholders as noted above. For 
CY 2019, the current regulations (and drug designation process) will 
remain in place and will apply to new renal dialysis drugs and 
biological products that come on the market, but beginning January 1, 
2020, the new regulations (and drug designation process) will take 
effect.
g. Basis of Payment for the TDAPA
    Currently, under Sec.  413.234(c), the TDAPA is based on pricing 
methodologies under section 1847A of the Act, including 106 percent of 
ASP (ASP+6). As we explained in the CY 2019 ESRD PPS proposed rule (83 
FR 3414), if we adopt the proposals discussed in section II.B.1.f of 
this final rule using the same pricing methodologies, Medicare 
expenditures would increase, which would result in increases of cost 
sharing for ESRD beneficiaries, since we have not previously provided 
the TDAPA for all new renal dialysis drugs and biological products.
    The TDAPA is a payment adjustment under the ESRD PPS and is not 
intended to be a mechanism for payment for new drugs and biological 
products under Medicare Part B, and under section 1881(b)(14)(D)(iv) of 
the Act, we believe it may not be appropriate to base the TDAPA 
strictly on section 1847A of the Act methodologies. For CY 2019, we 
considered options for basing payment under the TDAPA, for example, 
maintaining the policy as is and facility cost of acquiring drugs and 
biological products. As we explained in the proposed rule, we found 
that the while ASP could encourage certain unintended consequences 
(discussed below), it continues to be the best data available since it 
is commonly used to facilitate Medicare payment across care settings 
and, as described in section II.B.1.c of this final rule, is based on 
the manufacturer's sales to all purchasers (with certain exceptions) 
net of all manufacturer rebates, discounts, and price concessions.
    We further noted that, since the implementation of section 1847A of 
the Act, stakeholders and executive policy advisors have analyzed this 
section of the statute and issued their respective critiques on the 
purpose of the ASP add-on percentage. On March 8, 2016, the Assistant 
Secretary for Planning and Evaluation (ASPE) issued an Issue Brief 
titled, ``Medicare Part B Drugs: Pricing and Incentives'' (https://aspe.hhs.gov/pdf-report/medicare-part-b-drugs-pricing-and-incentives). 
In this brief ASPE notes several concerns with the ASP methodology. Two 
of those concerns relate to the economic incentives of cost and value. 
ASPE stated that the ASP methodology for Part B drugs falls short of 
providing value based incentives in several ways. Specifically, ASPE 
noted physicians can often choose between several similar drugs for 
treating a patient and although the current system may encourage 
providers and suppliers to pursue the lowest price for drugs that are 
multiple source, payment based on drug specific ASP provides little 
incentive to make choices among the therapeutic options with an eye 
towards value and choose among the lowest price among all drugs 
available to effectively treat a patient. ASPE noted that rationale for 
the 6 percent add-on has been to cover administrative and overhead 
costs, but such costs are not proportional to the price of the drug. 
The fixed 6 percent of ASP provides a larger ``add-on'' for higher 
priced drugs than for lower priced drugs, resulting in increased profit 
margins for the physicians' office and hospitals creating a perverse 
incentive to choose the high priced drugs as opposed to lower priced 
alternatives of similar effectiveness.
    We also noted in the proposed rule that in MedPAC's June 2015 
Report to Congress (http://medpac.gov/docs/default-source/reports/june-2015-report-to-the-congress-medicare-and-the-health-care-delivery-system.pdf), MedPAC discussed the meaning of the 6 percent that is 
added to the ASP and stated: ``There is no consensus on the original 
intent of the 6 percent add-on to ASP. A number of rationales have been 
suggested by various stakeholders. Some suggest that the 6 percent is 
intended to cover drug storage and handling costs. Others contend that 
the 6 percent is intended to maintain access to drugs for smaller 
practices and other purchasers who may pay above average prices for the 
drugs. Another view is that the add-on to ASP was intended to cover 
factors that may create a gap between the manufacturers' reported ASP 
and the average purchase price across providers (for example, prompt-
pay discounts). Another rationale for the percentage add-on may be to 
provide protection for providers when price increases occur and the 
payment rate has not yet caught up.''
    Finally, we stated in the CY 2019 ESRD PPS proposed rule that with 
regard to acquisition costs in a 2006 Report to Congress titled, 
``Sales of Drugs and Biological products to Large Volume Producers 
(https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/LVP_RTC_2_09_06.pdf), the 
Secretary was tasked to submit a Report to Congress (RTC) to include 
recommendations as to whether sales to large volume purchasers should 
be excluded from the computation of

[[Page 56944]]

manufacturer's ASP. The contractor made extensive efforts to collect 
and analyze data regarding large volume drug purchasers, but was unable 
to obtain data on ASP by type of purchaser from the drug manufacturers, 
and was unable to determine net acquisition costs. The sensitive and 
proprietary nature of prescription drug pricing data made it extremely 
difficult to obtain the data necessary for the report. Given that ASP 
was designed to broadly reflect market prices without data on net 
acquisition cost, it is not possible to accurately analyze the impact 
of large volume purchasers on overall ASP. We noted that in 2018, we 
remain unable to obtain contractual information regarding drug pricing 
and ESRD PPS, which is especially pertinent since the dialysis stage is 
dominated by two large dialysis organizations who administer drugs and 
biological products to the majority of ESRD beneficiaries.
    We explained in the proposed rule that to balance the price 
controls inherent in any PPS we believe that we need to take all of 
these issues into consideration to revise the basis for TDAPA payment. 
We noted that we are, and will continue to be, conscious of ESRD 
facility resource use and recognize the financial barriers that may be 
preventing uptake of innovative new drugs and biological products. 
Therefore, we proposed to revise Sec.  413.234(c) under the authority 
of section 1881(b)(14)(D)(iv) of the Act, to reflect that we would base 
the TDAPA payments on 100 percent of ASP (ASP+0) instead of the pricing 
methodologies available under section 1847A of the Act (which includes 
ASP+6).
    We noted that this proposal would apply to new renal dialysis drugs 
and biological products that fall within an existing functional 
category and to those that do not fall within an existing functional 
category. We stated that we believe ASP+0 is a reasonable basis for 
payment for the TDAPA for new renal dialysis drugs and biological 
products that fall within an existing functional category because there 
are already dollars in the per treatment base rate for a new drug's 
respective category. We also noted that we believe ASP+0 is a 
reasonable basis for payment for the TDAPA for new renal dialysis drugs 
and biological products that do not fall within the existing functional 
category because the ESRD PPS base rate has dollars built in for 
administrative complexities and overhead costs for drugs and biological 
products. We noted that there is no clear statement from Congress as to 
why the payment allowance is required to be 106 percent of ASP (ASP+6) 
as opposed to any other value from 101 to 105 percent, and, as MedPAC 
discussed in its June 2015 report, there is no consensus amongst 
stakeholders.
    We further explained that we believe moving from pricing 
methodologies available under section 1847A of the Act, (which includes 
ASP+6) to ASP+0 for all new renal dialysis drugs and biological 
products regardless of whether they fall within an ESRD PPS functional 
category strikes a balance between the increase to Medicare 
expenditures (subsequently increasing beneficiary coinsurance) and 
stakeholder concerns discussed in section II.B.1.e of this final rule. 
That is, we proposed to provide the TDAPA for new drugs that are within 
an existing functional category, which is an expansion of the existing 
policy. We stated that this proposal would also aim to promote 
innovation and bring more high-value drugs to market. This proposal 
would further address concerns about incentivizing use of high cost 
drugs in ESRD facilities, also discussed in section II.B.1.e of this 
final rule. We solicited comment on the proposal to revise Sec.  
413.234(c) to reflect that we would base the TDAPA payments on ASP+0. 
While we proposed to change the basis of payment for the TDAPA from 
pricing methodologies available under section 1847A of the Act, (which 
includes ASP+6) to ASP+0, we also solicited comment on other add-on 
percentages to the ASP amount, that is, ASP+1 to 6 percent for 
commenters to explain why it may be appropriate to have a higher 
percentage.
    We stated in the proposed rule that there are times when the ASP is 
not available. For example, when a new drug or biological product is 
brought to the market, sales data is not sufficiently available for the 
manufacturer to compute an ASP. Therefore, when the ASP is not 
available, we proposed that the TDAPA payment would be based on 100 
percent of Wholesale Acquisition Cost (WAC) and, when WAC is not 
available, the TDAPA payment would be based on the drug manufacturer's 
invoice. We solicited comment on this proposal.
    We noted that this proposal to use ASP+0 as the basis for the TDAPA 
payments, if adopted, would apply prospectively to new drugs and 
biological products as of January 1, 2019. Currently, calcimimetics are 
eligible for the TDAPA and payment for both the injectable and oral 
versions are based on pricing methodologies under section 1847A of the 
Act. We explained that this proposal would not affect calcimimetics, 
which would continue to be eligible for the TDAPA payment based on 
ASP+6.
    The comments and our responses to the comments on the basis of 
payment for the TDAPA proposal are set forth below:
    Comment: MedPAC commented that if CMS decides to finalize the 
proposed policy and apply TDAPA to new renal dialysis drugs that fit 
into an existing functional category, CMS should not make duplicative 
payments for a new product (assigned to a functional category) by 
paying the TDAPA for 2 years and paying for its functional category 
under the ESRD PPS base rate. For example, the agency could reduce the 
TDAPA amount to reflect the amount already included in the base rate. 
In addition, CMS could consider paying a reduced percentage of the 
estimated incremental cost of the new drug as a way to share risk with 
dialysis providers and provide some disincentive for the establishment 
of high launch prices.
    A drug manufacturer disagreed with MedPAC, pointing out that its 
product is an advance that substantially improves beneficiary outcomes 
and that CMS's assessment of the cost of other drugs in its functional 
category is trivial (the commenter asserted that there appears to be 
approximately 59 cents currently allocated in the ESRD PPS rate for the 
functional category). The manufacturer stated that the amount currently 
in the ESRD PPS rate does not account for the hundreds of millions of 
dollars it costs to develop a new, breakthrough drug; thus, a TDAPA 
would not be duplicative.
    Response: We understand MedPAC's suggestion is to base the TDAPA 
payment amount on a value that takes into account the dollars already 
included in the ESRD PPS base rate for the functional category. While 
we did not propose this approach, we can consider this mechanism in the 
future. With regard to the commenter that disagreed with MedPAC's 
comment, we appreciate the concern and understand there could be new 
renal dialysis drugs and biological products that have a high cost 
which is not directly accounted for by the functional category. 
However, as we mentioned previously, we did not propose to change the 
determinant on how a new renal dialysis drug or biological product is 
considered reflected in the ESRD PPS base rate, therefore, in the 
situation described by the commenter, this new high cost drug would be 
considered reflected in the base rate since it falls within an existing 
functional category. The ESRD PPS is a payment system that takes into 
account

[[Page 56945]]

the resource use of the ESRD facility for furnishing renal dialysis 
services to Medicare beneficiaries. We will, however, consider this 
situation in the future.
    Comment: Although MedPAC did not support the proposal to expand the 
TDAPA to all new dialysis drugs that fit into a functional category, 
MedPAC believed there was good rationale for CMS's proposal to change 
the basis for the TDAPA from ASP+6 percent to ASP with no percentage 
add-on. MedPAC pointed out that the ASP+6 percent policy was developed 
to reimburse physicians for the cost of drugs that they purchase 
directly and commonly administer in their offices. While the policy 
never stated what cost the ``+6 percent'' was intended to cover, MedPAC 
noted that applying the policy to dialysis facilities is considerably 
different from reimbursing physicians. First, the variation in 
physicians' purchasing power, whether they practice solo, as part of a 
group, or in a health system, is likely to result in considerably more 
variation in the acquisition price for a drug compared to the 
acquisition prices for dialysis facilities. If the intent of the ``+6 
percent'' was to address acquisition price variation, MedPAC believes 
that rationale is diminished for dialysis facilities. Second, MedPAC 
noted that the TDAPA is in addition to the ESRD base rate, which 
already includes reimbursement for the cost of storage and 
administration of ESRD-related drugs. Therefore, if the intent of the 
``+6 percent'' was to address storage and administration costs, MedPAC 
believes these costs are already addressed through the ESRD PPS bundled 
payment and do not contribute to the rationale for paying ASP+6 percent 
for the TDAPA. MedPAC stated that, overall, the proposal to change the 
basis of the TDAPA to ASP with no percentage add-on appears to be well 
founded.
    Response: We appreciate MedPAC's support for this proposal and 
agree that ASP+0 is appropriate as the basis for the TDAPA, 
particularly in light of the administrative costs included in the ESRD 
PPS bundled payment amount.
    Comment: Some commenters referenced an analysis completed by an 
analytic organization, stating that if CMS were to finalize the 100 
percent ASP policy for TDAPA, and that amount were used to fold drugs 
and biological products into the ESRD PPS, there will be insufficient 
dollars available to provide access to these products for patients. 
They stated that the actual payment amount would be closer to ASP-1.6 
or lower.
    Some commenters expressed concern that the ASP+0 proposal will 
result in a provider reimbursement falling far below that amount given: 
(1) The exclusion of the 20 percent coinsurance from bad debt recovery; 
(2) the fact that many states fail to fulfill their cost sharing 
obligations for dual-eligible beneficiaries; and (3) the budget 
sequestration. The commenter further explained that this considerable 
underpayment will challenge dialysis facilities' ability to offer a new 
drug or biological product during the TDAPA period.
    Response: We appreciate all of the feedback we received from the 
commenters with regard to basing payment for TDAPA at ASP+0 as opposed 
to using the pricing methodologies available under section 1847A of the 
Act.
    With regard to the concerns that ASP+0 will effectively yield a 
reimbursement below ASP after sequestration and bad debt reductions are 
applied, as discussed previously, the TDAPA policy is for purposes of 
the ESRD PPS and not designed to offset or mitigate other statutorily 
required cuts and instances in which facilities cannot recover 
beneficiary cost sharing.
    The TDAPA is a payment adjustment under the ESRD PPS, and we 
continue to believe it is not intended to be a mechanism for payment 
for new drugs and biological products under Medicare Part B. We believe 
that we have flexibility to determine the basis for payment for TDAPA 
on a methodology outside of how Part B pays because we need to take 
into account impacts to the Medicare Trust Fund when there are already 
administrative costs reflected in the ESRD PPS base rate. As a result 
we have reconsidered the use of pricing methodologies under section 
1847A of the Act and proposed ASP+0, as discussed above in section 
II.B.1.f of this final rule. We agree with MedPAC that the ASP+6 
percent policy was developed to reimburse physicians for the cost of 
drugs and that the TDAPA is in addition to the ESRD base rate, which 
already includes reimbursement for the cost of storage and 
administration of ESRD-related drugs. Therefore, we believe basing the 
TDAPA payment on ASP+0 is appropriate and we are finalizing the 
proposal.
    Comment: Some commenters explained that the ESRD PPS is unique and 
fragile and operates at razor-thin margins, with many facilities 
operating with negative Medicare margins. One commenter stated that it 
is not appropriate to assume that because a functional category exists 
there is sufficient funding for all future drugs and biological 
products developed to treat such conditions. One commenter expressed 
strong concern about the proposal and explained that facilities will 
have to reconcile potential differences in the amount that CMS 
reimburses in TDAPA and the amount that the facilities actually pay for 
new prescription drugs and associated costs of administering them to 
patients (overhead). The commenter stated that this discrepancy could 
have the unintended consequence of discouraging dialysis providers from 
including new therapies on their formularies.
    Some commenters expressed concern regarding the impact the proposal 
would have on medium and small dialysis organizations. One commenter 
stated that payment at ASP+0 may create a disincentive for medium and 
small dialysis organizations to acquire the product and provide it in 
their facilities because they may be under-reimbursed. This could lead 
to patient access issues in obtaining the drug as clinicians may be 
hesitant to prescribe a new therapy if they know the dialysis 
facilities are not stocking it.
    Many commenters expressed concern that ASP+0 is not sufficient to 
cover the cost of administering the drug or biological product during 
the transition period. One commenter stated that it is inappropriate to 
assume that new drugs and biological products will have the same 
administrative and overhead cost profile, or that dialysis facilities 
can simply cover these costs for multiple drugs or biologics with the 
current dollars. Commenters explained that drugs and biological 
products require support for costs related to storage, management, 
delivery, packaging, administration, and dispensing. Further, the 
availability of novel drugs and biological products will necessitate 
the dedication of resources to develop clinical protocols, educate and 
train staff, and change medical record and billing systems. Another 
commenter explained that some dialysis providers face unique and 
significant costs associated with implementing the TDAPA, including 
setting up and paying for pharmacy systems and substantially updating 
internal billing systems to comply with the TDAPA regulations. The 
commenter also stated that fulfillment, distribution and waste costs 
paid to dispensing pharmacies, as well as billing and administrative 
costs for these providers are examples of unique costs that would be 
better addressed with an ASP+6 policy. Another commenter stated that 
some dialysis providers face additional hurdles, such as state pharmacy 
laws,

[[Page 56946]]

which make more complex their ability to ``dispense'' medication. This 
commenter further explained that the consequence of adding new drugs, 
especially oral drugs, to the ESRD PPS is that an elaborate operational 
and clinical system is required when a new oral medication is approved 
and qualifies for the TDAPA in order to ensure patients receive the 
product and that dialysis providers can bill for the product. This 
commenter noted that these drugs were not included in the ESRD PPS at 
the outset or in the composite rate and therefore the administrative 
costs of developing the infrastructure to deliver new pharmaceutical 
products, especially oral drugs, is not built into the ESRD PPS.
    Another commenter explained that there are costs associated with 
establishing pilot programs, typically the manner in which dialysis 
organizations would evaluate the benefits and risks of newly approved 
therapies. This commenter further explained that pilot programs often 
involve chart reviews, selection of patients to initiate therapy, 
titration of dosing, additional lab monitoring, evaluation of outcomes, 
and ultimately incorporation into modified treatment protocols, if 
facilities determine there is value to the utilization of a new 
therapy. This would occur after a thorough evidence review of 
registration trials, peer reviewed literature and other clinical 
outcomes data.
    Some commenters noted that setting the TDAPA at ASP+0 will not 
likely have any impact on the drug or biological product's price. One 
commenter explained that there are challenges of delivering care with 
limited resources when the cost of prescription pharmaceuticals is 
outside of its control and frequently on the rise. The commenter 
expressed concern that none of the systemic issues that the 
Administration seeks to address regarding pharmaceutical prices will be 
changed by reducing the payment rate for drugs and biological products 
in the ESRD PPS from ASP+6 to ASP+0 because this change does not affect 
the actual price of pharmaceuticals. Instead, it only affects what 
Medicare will reimburse providers for the price they still have to pay 
to pharmaceutical companies. The commenter indicated that this 
reduction have a negative impact on dialysis facilities and further 
limit their ability to provide quality care to Medicare beneficiaries.
    Some commenters explained that ASP is driven by the ``average'' 
sales price for a drug to all purchasers, including hospitals and large 
purchasing groups, net of all manufacturer rebates, discount, and price 
concessions. A few commenters noted that while the drugs and biological 
products contained within the ESRD PPS are required to be ``renal 
dialysis services'' that are ``furnished for the treatment of ESRD,'' 
it is not necessarily the case that dialysis facilities are the only--
or largest--purchasers of the drugs and biological products in 
question. The commenters asserted that it is therefore faulty logic to 
assume that dialysis providers are necessarily the entities whose 
purchase price is represented by ASP. Commenters stated that many 
dialysis facilities are unable to acquire some drugs and biological 
products at or below ASP and may find that even ASP+6 does not 
adequately cover their costs to acquire and deliver drugs to 
beneficiaries.
    Another commenter stated that many dialysis facilities may not have 
the leverage or capacity to purchase the drug or biological product at 
or below the ASP, for example, small ESRD facilities and ESRD 
facilities in rural areas do not have the buying power of large 
dialysis organizations. The commenter further explained that for these 
facilities, the cost to provide drugs and biological products is higher 
than the average and includes additional costs such as transportation 
to the rural area. Often a drug is shipped to a central location and 
then transported to rural facilities which adds both transportation and 
administrative costs. Another commenter noted that drug manufacturers 
do not give small and mid-sized facilities the same discounts received 
by the two largest dialysis providers.
    Response: With regard to the concerns that ASP+0 will not cover the 
administrative costs associated with bringing a new drug or biological 
product as a therapeutic option in a facility, we point out that under 
the current ESRD PPS, new renal dialysis drugs that are considered to 
be in a functional category do not receive any additional payment. 
Payment for these drugs has been included in the ESRD PPS bundled 
payment amount since the inception of the ESRD PPS. We note that with 
this new policy, effective January 1, 2020, ESRD facilities will now 
get a payment adjustment for 2 years for new renal dialysis drugs and 
biological products, whereas before they did not. We continue to 
believe that ASP+0 is a reasonable basis for payment for the TDAPA for 
new renal dialysis drugs and biological products that fall within an 
existing functional category because there are already dollars in the 
per treatment base rate for a new drug's respective category. Beyond 
just capturing administrative costs in the base rate, there are also 
payment dollars for the respective functional category included in the 
base rate which, we believe, mitigates the financial risk to the 
facilities.
    We are concerned with the comment regarding that the discrepancy 
between ASP+0 and ASP+6 could have an unintended consequence of 
discouraging dialysis providers from including new therapies on their 
formularies. Under the ESRD PPS, ESRD facilities are responsible for 
furnishing all renal dialysis services directly or under arrangement. 
We understand that small, medium, and rural facilities may have 
additional challenges related to acquisition costs, transportation, and 
delivery which could lead to inequitable access for beneficiaries 
served by those communities. Again, we note that currently new renal 
dialysis drugs have entered the market since the implementation of the 
ESRD PPS in 2011 and were immediately rolled into the bundled payment 
rate. We believe the same would be true for new drugs and biological 
products and we believe the dollars included in the base rate for the 
specific functional groups would mitigate these challenges. Effective 
January 1, 2020, ESRD facilities will now get a payment adjustment for 
2 years for new renal dialysis drugs and biological products, whereas 
before they did not.
    With regard to pilot programs, we believe the issues that were 
mentioned are addressed by FDA clinical trials for new drug 
applications. For generic drugs, part of the reason they are approved 
in the section 505(j) program is that these safety and drug response 
issues have been addressed. It would seem that what the commenter is 
asking us to pay for is an evaluative business model and that is not 
considered payment for the treatment of a medical condition.
    With regard to the comment asserting that the consequence of adding 
new drugs, especially oral drugs, to the ESRD PPS is that an elaborate 
operational and clinical system is required when a new oral medication 
is approved and qualifies for the TDAPA in order to ensure patients 
receive the product and that dialysis providers can bill for the 
product, we believe this issue should be mitigated with the 1-year 
delay finalized in section II.B.1.e of this final rule. We note that 
there are oral equivalent drugs that have been bundled in the ESRD PPS 
since its inception.
    Comment: One commenter noted that patient's out-of-pocket costs may 
be higher with an ASP+6 TDAPA than under the ASP+0 proposal, however 
the

[[Page 56947]]

commenter believed the trade-off of spurring innovation in new 
treatments warrants the cost. The commenter stated that while it would 
prefer that the coinsurance would not be applied to TDAPA given this is 
a facility-level adjuster to the PPS, they recognize that CMS has 
stated it does not have the authority to waive the coinsurance.
    Response: We do not agree with the commenter that the TDAPA is a 
facility-level adjustment to the ESRD PPS. The TDAPA is a patient-level 
adjustment because it is only applicable if the patient is furnished 
the drug or biological product. We appreciate that coinsurance is a 
concern, but as the commenter noted, we do not have the authority to 
waive coinsurance requirements.
    Comment: While some commenters appreciated CMS working to reduce 
drug pricing, they expressed concern that changing the basis of payment 
for the TDAPA from ASP+6 to ASP+0 will not encourage innovation despite 
CMS's intent. Commenters stated that there has been little innovation 
in new ESRD therapies in over 2 decades and they requested that CMS not 
apply this untested new pricing policy to the TDAPA under the ESRD PPS.
    Several commenters discussed the Kidney Accelerator (KidneyX) 
project. The commenters noted that the Department of Health and Human 
Services (HHS) indicated that the project ``sends an important message 
to investors and innovators regarding the desire and demand for new 
therapies.'' Commenters explained that in addition to the activities 
around KidneyX, CMS needs to make sure that its policies also promote 
innovation and advances in case across these stakeholder groups and 
that properly aligning the payment component is essential to advancing 
innovation as well. The commenters stated that the ASP+0 proposal could 
result in creating a disincentive for the adoption and development of 
new drugs and biological products and undermines the KidneyX 
initiative. The commenters explained that promoting innovation in 
kidney care requires taking into account patients, providers, and 
manufacturers and that CMS should provide ASP+6 percent via TDAPA so 
that the cost of evaluation, training and implementation is cost-
neutral and providers will be eager to evaluate and utilize new 
therapies, and innovation of new products will be spurred in the renal 
space.
    Response: We agree with commenters that innovation and the KidneyX 
project are important and necessary for the development of new 
therapies. We believe that basing the TDAPA at ASP+0 provides 
sufficient resources to incentivize the development of new, innovative 
therapies and is a supplement to the KidneyX project. We believe that 
ASP+0 is sufficient because the ESRD PPS provides on a per treatment 
basis payment for administrative activities, including packaging and 
handling of drugs and staff costs. This per treatment payment along 
with the TDAPA is a reasonable basis for payment because we believe it 
mitigates the financial risk to the ESRD facilities. One of the 
objectives of KidneyX is to bring to market not only medications that 
will slow the progression and/or reverse kidney disease, but also drugs 
and biological products that will cure kidney disease. We believe 
providing the TDAPA for all new renal dialysis drugs and biological 
products provides an incentive for innovation as part of the treatment 
pathway for mitigating, reversing and ultimately curing ESRD.
    Comment: A few commenters referred to CMS' experience in the 
hospital outpatient setting when it tried to shift to ASP+4 percent. 
The commenter asserted that between 2009 and 2012, CMS worked to 
establish the appropriate payment rate for separately paid drugs in the 
hospital outpatient setting. During this time, CMS made various shifts 
in the percentage added to the ASP, but eventually for CY 2013 
concluded that the only way to establish a predictable and accurate 
payment for these drugs that recognized the real overhead costs 
associated with providing them was to set the amount at ASP+6 percent. 
The commenter noted that none of the proposals in the outpatient 
setting over the years ever suggested setting the rate at 100 percent 
of ASP. Some commenters suggested that the basis of payment policy 
remain consistent with how Medicare Part B pays other provider 
settings, for example, Physician Fee Schedule and the hospital 
outpatient PPS.
    Response: Again, we believe that ASP+0 is sufficient because the 
ESRD PPS provides on a per treatment basis payment for administrative 
activities, including packaging and handling of drugs and staff costs. 
This payment along with the TDAPA is a reasonable basis for payment 
because we believe it mitigates the financial risk to the ESRD 
facilities. We appreciate the comments on the Medicare payment 
adjustments for the hospital outpatient setting and physician offices. 
MedPAC, which agreed with us, noted that the TDAPA is in addition to 
the ESRD PPS base rate, which already includes payment for the cost of 
storage and administration of renal dialysis services, therefore if the 
intent of the 6 percent is to address storage and administration costs, 
additional payment is not necessary. The ESRD PPS per treatment payment 
amount is paid for every dialysis treatment regardless of the items and 
services furnished. We will monitor the efficacy of payment for the 
ESRD PPS under TDAPA.
    Comment: We received two comments on the proposal that in the event 
ASP is unavailable for a drug, WAC+0 would be used, and in the event 
both ASP and WAC are unavailable, the manufacturer's invoice would be 
used as the basis for the TDAPA payment. The commenters did not support 
WAC+0, and one commenter recommended that we base the payment in this 
circumstance on WAC+6. The other commenter suggested that, for 
instances in which ASP is not available, CMS should base payment on 
WAC+3 to be consistent with the hospital outpatient department. Both 
commenters supported basing the TDAPA on the manufacturer's invoice in 
the event ASP and WAC are not available.
    Response: We appreciate the comments on our proposal for situations 
when ASP is unavailable. However, we believe that this is the same 
rationale that we discuss above. We believe that the administrative 
costs of packaging, handling, and staff are included in the ESRD PPS 
base rate and therefore the TDAPA is a reasonable basis for payment 
because we believe it mitigates the financial risk to the ESRD 
facilities. With regard to the consistency with other payment systems, 
we believe that they have different administrative circumstances. We 
appreciate that the commenters supported use of the manufacturer's 
invoice in the event ASP and WAC are not available.
    Comment: Two commenters expressed concern that while the preamble 
of the proposed rule stated that the proposed drug designation changes 
would not apply to the use of ASP+6 percent for calcimimetics, the 
regulatory text is not clear. Commenters supported the statement in the 
preamble that CMS has not changed the TDAPA policy for calcimimetics 
with the new drug designation policy and strongly supports maintaining 
the policy as it is today. However the commenter is concerned that this 
intent be reflected in the regulatory text as well.
    Response: We appreciate the feedback on the ambiguity of the 
regulatory text. We are finalizing a revision to the drug designation 
process regulations to reflect that for calcimimetics, the basis of 
payment will be based on pricing methodologies under section 1847A of

[[Page 56948]]

the Social Security Act (which includes ASP+6). We are maintaining the 
current policy for calcimimetics because these drugs are the only ones 
that qualify for the TDAPA at this time and are currently receiving the 
adjustment, and the basis of payment was established when they were 
launched. We note that any new injectable or intravenous product that 
is eligible for TDAPA until January 1, 2020 would be paid under the 
current policy, which is a TDAPA based on pricing methodologies under 
1847A of the Act (which include ASP+6). As of January 1, 2020, all new 
renal dialysis drugs and biological products, regardless of functional 
category status, will be paid the TDAPA based on ASP+0.
    Final Rule Action: After considering the public comments, we are 
finalizing the policy as proposed with two revisions. Specifically, we 
are finalizing the revision of Sec.  413.234(c) under the authority of 
section 1881(b)(14)(D)(iv) of the Act, to reflect that we base the 
TDAPA payments on ASP+0 instead of the pricing methodologies available 
under section 1847A of the Act (which includes ASP+6), effective 
January 1, 2020. Since there are times when ASP is not available, we 
are finalizing that the TDAPA payment is based on WAC+0 and, when WAC 
is not available, the TDAPA payment is based on the drug manufacturer's 
invoice, effective January 1, 2020. We are also finalizing a revision 
to the proposed Sec.  413.234(c) to reflect that the basis of payment 
for TDAPA for calcimimetics continues to be based on the pricing 
methodologies available under section 1847A of the Act (which includes 
ASP+6).
h. Drug Designation Process for Composite Rate Drugs and Biological 
Products
    In the CY 2016 ESRD PPS final rule, we did not discuss composite 
rate drugs and biological products explicitly in context of the drug 
designation process. Composite rate services are discussed in the CY 
2011 ESRD PPS final rule (75 FR 49036, 49078 through 49079) and are 
identified as renal dialysis services in Sec.  413.171 and under 
section 1847(b)(14)(B) of the Act. Prior to the implementation of the 
ESRD PPS, certain drugs used in furnishing outpatient maintenance 
dialysis treatments were considered composite rate drugs and not billed 
separately. Composite rate drug and biological product policies are 
discussed in Pub. 100-02, chapter 11, section 20.3.F (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c11.pdf). This manual lists the drugs and fluids considered in the 
composite rate as heparin, antiarrythmics, protamine, local 
anesthetics, apresoline, dopamine, insulin, lidocaine, mannitol, 
saline, pressors, heparin antidotes, benadryl, hydralazine, lanoxin, 
solu-cortef, glucose, antihypertensives, antihistamines, dextrose, 
inderal, levophed, and verapamil. Drugs that are used as a substitute 
for any of these items, or are used to accomplish the same effect, are 
also covered under the ESRD PPS.
    We used the composite rate payments made under Part B in 2007 for 
dialysis in computing the ESRD PPS base rate. These are identified on 
Table 19 of the CY 2011 ESRD PPS final rule (75 FR 49075) as 
``Composite Rate Services''. In addition, under Sec.  413.237, 
composite rate drugs and biological products are not permitted to be 
considered for an outlier payment. The outlier policy is discussed in 
section II.B.3.c of this final rule.
    Composite rate drugs and biological products were also grouped into 
functional categories during the drug categorization for the CY 2011 
ESRD PPS final rule (75 FR 49044 through 49053). For example, heparin 
is a composite rate drug and falls within the Access Management 
category. However, these functional categories exclude certain 
composite rate items given that certain drugs and biological products 
formerly paid for under the composite rate were those that were 
routinely given during the time of the patient's dialysis and not 
always specifically for the treatment of their ESRD. For example, an 
antihypertensive composite rate drug that falls within the Cardiac 
Management category, which is not an ESRD PPS functional category, is 
not considered to be furnished for the treatment of ESRD and therefore, 
is not included under the ESRD PPS.
    In light of our proposal to expand the drug designation process and 
the TDAPA, we also proposed, under the authority of section 
1881(b)(14)(D)(iv) of the Act, that it extend to composite rate drugs 
and biological products that are furnished for the treatment of ESRD. 
Specifically, we proposed that beginning January 1, 2019, if a new 
renal dialysis drug or biological product as defined in the proposed 
revision at Sec.  413.234(a) is considered to be a composite rate drug 
or biological product and falls within an ESRD PPS functional category, 
it would be eligible for the TDAPA. We noted that composite rate drugs 
and biological products that are not considered to be furnished for the 
treatment of ESRD, and therefore, are not included in the ESRD PPS, 
would not be eligible for the TDAPA, for example, antihypertensives. We 
stated in the proposed rule that we believed the same unique 
consideration for innovation and cost exists for drugs that are 
considered composite rate drugs. That is, the ESRD PPS base rate 
dollars allocated for these types of drugs may not directly address the 
costs associated with drugs in this category when they are newly 
launched and are finding their place in the market. Accordingly, we 
proposed that the expanded drug designation process and the TDAPA 
policy we proposed in section II.B.1.f of this final rule, including 
the proposed changes to Sec.  413.234, would be applicable to composite 
rate drugs, with one exception. Under our proposal, new composite rate 
drugs would not be subject to outlier payments following the period 
that the TDAPA applies, since we did not propose to change the current 
outlier policy under Sec.  413.237, which does not apply to composite 
rate drugs. We did, however, solicit comments on whether we should 
consider applying our outlier policy to composite rate drugs in the 
future (see section II.B.3.c of this final rule).
    We solicited comment on the proposal to recognize composite rate 
drugs and biological products in the same manner as drugs that were 
formerly separately paid under Part B when furnished for the treatment 
of ESRD for purposes of the proposed revisions to the drug designation 
process and eligibility for the TDAPA.
    The comments and our responses to the comments on our proposal to 
extend the TDAPA expansion proposals to composite rate drugs and 
biological products that are furnished for the treatment of ESRD are 
set forth below.
    Comment: MedPAC commented that we should not proceed with our 
proposal to apply the TDAPA policy to new renal dialysis drugs that 
would be considered composite rate drugs for the same reasons that 
MedPAC believes we should not proceed with our proposal to apply the 
TDAPA to new renal dialysis drugs that would fall into an existing 
functional category.
    Some commenters referred to the inclusion of composite rate drugs 
in their overall comments regarding the TDAPA expansion and supported 
their inclusion in the drug designation process.
    Response: We appreciate MedPAC's feedback on our proposal to apply 
the TDAPA to composite rate drugs. As we stated in section B.1.f of 
this final rule, we believe that allowing all new renal dialysis drugs 
and biological products to be eligible for TDAPA will provide an

[[Page 56949]]

ability for a new drug to compete with other similar drugs in the 
market which could mean lower prices for all drugs. We believe that new 
renal dialysis composite rate drugs could benefit from this policy as 
well. Additionally, we continue to believe that the same unique 
consideration for innovation and cost exists for drugs that are 
considered composite rate drugs. That is, the ESRD PPS base rate 
dollars allocated for these types of drugs may not directly address the 
costs associated with drugs in this category when they are newly 
launched and are finding their place in the market. We will continue to 
monitor the use of the TDAPA, carefully evaluate the new renal dialysis 
drugs and biological products that qualify, and address any concerns 
through future refinements to the TDAPA policy.
    Final Rule Action: After the consideration of public comments, we 
are finalizing our policy to extend the TDAPA to composite rate drugs 
and biological products that are furnished for the treatment of ESRD. 
Specifically, beginning January 1, 2020, if a new renal dialysis drug 
or biological product as defined in the proposed revision at Sec.  
413.234(a) is considered to be a composite rate drug or biological 
product and falls within an ESRD PPS functional category, it would be 
eligible for the TDAPA. We note that composite rate drugs and 
biological products will not be eligible for an outlier payment after 
the TDAPA period.

2. Low-Volume Payment Adjustment (LVPA) Revision

a. Background
    As required by section 1881(b)(14)(D)(iii) of the Act, the ESRD PPS 
includes a payment adjustment that reflects the extent to which costs 
incurred by low-volume facilities in furnishing renal dialysis services 
exceed the costs incurred by other facilities in furnishing such 
services. We have established a LVPA factor of 23.9 percent for ESRD 
facilities that meet the definition of a low-volume facility. Under 
Sec.  413.232(b), a low-volume facility is an ESRD facility that, based 
on the submitted documentation--(1) Furnished less than 4,000 
treatments in each of the 3 cost reporting years (based on as-filed or 
final settled 12-consecutive month cost reports, whichever is most 
recent) preceding the payment year; and (2) Has not opened, closed, or 
received a new provider number due to a change in ownership in the 3 
cost reporting years (based on as-filed or final settled 12-consecutive 
month cost reports, whichever is most recent) preceding the payment 
year. Under Sec.  413.232(c), for purposes of determining the number of 
treatments furnished by the ESRD facility, the number of treatments 
considered furnished by the ESRD facility equals the aggregate number 
of treatments furnished by the ESRD facility and the number of 
treatments furnished by other ESRD facilities that are both under 
common ownership with, and 5 road miles or less from, the ESRD facility 
in question.
    For purposes of determining eligibility for the LVPA, 
``treatments'' mean total hemodialysis (HD) equivalent treatments 
(Medicare and non-Medicare as well as ESRD and non-ESRD). For 
peritoneal dialysis (PD) patients, 1 week of PD is considered 
equivalent to 3 HD treatments. As noted, we base eligibility on the 3 
years preceding the payment year and those years are based on cost 
reporting periods. Specifically, under Sec.  413.232(g), the ESRD 
facility's cost reports for the periods ending in the 3 years preceding 
the payment year must report costs for 12-consecutive months (76 FR 
70237).
    In order to receive the LVPA under the ESRD PPS, an ESRD facility 
must submit a written attestation statement to its Medicare 
Administrative Contractor (MAC) confirming that it meets all of the 
requirements specified in Sec.  413.232 and qualifies as a low-volume 
ESRD facility. Section 413.232(e) imposes a yearly November 1 deadline 
for attestation submissions. This timeframe provides 60 days for a MAC 
to verify that an ESRD facility meets the LVPA eligibility criteria (76 
FR 70236). Further information regarding the administration of the LVPA 
is provided in the Medicare Benefit Policy Manual, CMS Pub. 100-02, 
Chapter 11, section 60.B.1.
b. Revisions to the LVPA Requirements and Regulations
    As we discussed in the CY 2019 ESRD PPS proposed rule, we have 
heard from stakeholders that low-volume facilities rely on the low-
volume adjustment and loss of the adjustment could result in 
beneficiary access issues. Specifically, stakeholders expressed concern 
that the eligibility criteria in the LVPA regulations are very explicit 
and leave little room for flexibility in certain circumstances. For 
example, in the CY 2017 ESRD PPS final rule (81 FR 77863), a commenter 
suggested refinements to the definition of a low-volume facility to 
address the rare change of ownership (CHOW) instance wherein the new 
owner accepts the Medicare agreement but the ownership change results 
in a new provider number because of a facility's type reclassification. 
The commenter explained that in this example, due to the issuance of a 
new Medicare provider billing number or provider transaction access 
number (PTAN) when the facility's type is reclassified, this facility 
would be deemed ineligible for the LVPA since our policy requires that 
new Medicare provider billing numbers qualify for the LVPA, which takes 
3 years. We have also discovered that facilities that change their 
fiscal year without going through a CHOW become ineligible for the 
adjustment. Finally, stakeholders have recommended that the strict 
enforcement of the attestation deadline without exception should be 
reevaluated since missing the deadline results in the facility losing 
the LVPA and its payments are significantly reduced. Thus, in order to 
be responsive to stakeholders and increase flexibility with regard to 
eligibility for the LVPA, we proposed to make changes to the LVPA 
regulation at Sec.  413.232.
    The first proposed revision concerned the assignment of a PTAN when 
a facility undergoes a CHOW as described in 42 CFR 489.18. Under Sec.  
413.232(b)(2) and (g)(2), a facility is ineligible for the LVPA for 3 
years if it goes through a CHOW that results in a new PTAN. In response 
to a comment we received during the CY 2011 ESRD PPS rulemaking (75 FR 
49123), we explained that we believe that a 3-year waiting period 
serves as a safeguard against facilities establishing new facilities 
that are purposefully small. We also explained that we structured our 
analysis of the ESRD PPS by looking across data for 3 years as we 
believed that the 3-year timeframe provided us with a sufficient span 
of time to view consistency in business operations.
    However, as we noted above and in the CY 2019 ESRD PPS proposed 
rule, we have heard from stakeholders that this policy unfairly affects 
facilities that undergo a CHOW that results in a change in facility 
type (for example, the facility type changes from hospital-based to 
freestanding). Under this scenario, as discussed in the Medicare State 
Operations Manual, Pub. 100-07, Chapter 3, Section 3210.4C (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107c03.pdf) and the Medicare Program Integrity Manual, Pub. 100-08, 
Chapter 15, Section 15.7.7.1 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pim83c15.pdf), CMS requires the 
issuance of a new CMS Certification Number (CCN) and provider 
agreement, which may lead to the issuance of a new PTAN, even if the

[[Page 56950]]

new owner has accepted assignment of the existing Medicare provider 
agreement, that is, the new owner accepts the previous owner's assets 
and liabilities.
    As we stated in the CY 2019 ESRD PPS proposed rule, we agree with 
the stakeholders that the language in the regulation regarding PTAN 
status could restrict LVPA eligibility to an otherwise qualified ESRD 
facility from receiving the adjustment for 3 years, until the new PTAN 
qualifies for the adjustment. We recognize that there are 
technicalities regarding the assignment of a PTAN that could cause 
substantive impacts with eligibility for the LVPA that were not 
contemplated at the time the regulation was established. We noted that 
the intent of the LVPA has always been that if an ESRD facility 
undergoes a CHOW wherein the new owner accepts assignment of the 
existing Medicare provider agreement, the facility should continue to 
be eligible for the LVPA since this indicates a consistency in business 
operations.
    We proposed to expand the definition of a low-volume facility in 
Sec.  413.232(b)(2) to include CHOWs where the new owner accepts 
assignment of the existing Medicare provider agreement and a new PTAN 
is issued due to a change in facility type. We noted that this proposal 
does not extend to CHOWs where a new PTAN is issued for any other 
reason. We solicited comment on the proposal to revise the language at 
Sec.  413.232(b)(2) to reflect that ESRD facilities can meet the 
definition of a low-volume facility when they have a CHOW that results 
in a new PTAN due to a change in facility type but accepts assignment 
of the existing Medicare provider agreement. We also proposed to amend 
Sec.  413.232(g)(2), which governs the determination of LVPA 
eligibility, to recognize the proposed expansion of the low-volume 
facility definition to allow for PTAN changes when the facility type 
changes as a result of CHOW. We solicited comment on this proposal.
    We also proposed to allow for an extraordinary circumstance 
exception to the November 1 attestation deadline under Sec.  
413.232(e). As we explained in the CY 2019 ESRD PPS proposed rule, we 
agree with the stakeholders that there could be unforeseeable factors 
that contribute to a delay in the submission of the attestation, and we 
would not want to prevent an otherwise qualified ESRD facility from 
receiving the adjustment. For example, while a failure to timely submit 
the attestation because of poor communication between a facility and 
its respective MAC, or because a facility forgets to send the 
attestation to the MAC, would not constitute extraordinary 
circumstances; a natural disaster could, because such an event is 
unforeseeable and extraordinary, which may understandably delay the 
timely submission of the attestation. We noted that we expect 
extraordinary exceptions to be rare and the determination of 
acceptability would be made on a case-by-case basis. We stated that we 
have heard from stakeholders that they have lost eligibility for the 
LVPA due to extraordinary circumstances, such as natural disasters, 
that prevented them from submitting their attestation by the deadline. 
In those types of instances, we believe an exception to the attestation 
deadline could be warranted. Therefore, we proposed to add a clause in 
Sec.  413.232(e) to recognize an exception to the filing deadline for 
extraordinary circumstances. In order to request an extraordinary 
circumstance exception, we also proposed that the facility would need 
to submit a narrative explaining the rationale for the exception to 
their MAC. We stated that we would evaluate and review the narrative to 
determine if an exception is justified, and such a determination would 
be final, with no appeal. We solicited comment on the proposal to 
revise the language at Sec.  413.232(e) to reflect that CMS would allow 
an exception to the attestation deadline of November 1 for 
extraordinary circumstances, if determined appropriate.
    In addition, we proposed to allow ESRD facilities that change their 
fiscal year-end for cost reporting purposes outside of a CHOW to 
qualify for the LVPA if they otherwise meet the LVPA eligibility 
criteria. Under Sec.  413.24(f)(3), facilities are able to change their 
cost reporting period when they request a change in writing from their 
MAC and meet specific criteria for approval. However, the current LVPA 
regulation at Sec.  413.232(g)(2)(ii) does not technically address 
requirements for changing cost reporting periods except as a result of 
a CHOW, which has prohibited facilities from receiving the LVPA if they 
make a business decision to adjust their cost reporting period, which 
could interfere with the normal course of business. We stated in the CY 
2019 ESRD PPS proposed rule that we recognize there are business 
decisions an ESRD facility could make with regard to cost reporting 
periods that could substantively impact eligibility for the LVPA that 
we did not contemplate at the time the regulation was adopted. 
Specifically, there could be reasons why a cost report does not span 
12-consecutive months. We noted that we did not intend for an ESRD 
facility to lose its LVPA eligibility simply because the facility made 
a decision to change its cost reporting period. The requirement that 
cost reports span 12-consecutive months was to bring a measure of 
consistent business operations.
    We proposed to add a new paragraph (3) to Sec.  413.232(g) to 
provide direction for MACs in verifying the number of treatments when a 
change in a cost reporting period is approved. When this occurs, we 
proposed that MACs would combine the two non-standard cost reporting 
periods of less than 12 months to equal a full 12-consecutive month 
period or combine the two non-standard cost reporting periods that in 
combination may exceed 12-consecutive months and prorate the data to 
equal a full 12-consecutive month period. We stated that this proposal 
would not impact or change requirements for reporting, as established 
by the MACs, or those set forth in Sec.  413.24(f)(3). We solicited 
comment on the proposal to add Sec.  413.232(g)(3) to change the 
information and cost report timeframes MACs would review to determine 
LVPA eligibility. We noted that this provision would apply to ESRD 
facilities that change their cost reporting year for purposes outside 
of a CHOW to qualify for the LVPA, provided they otherwise meet the 
LVPA eligibility criteria for the purposes of allowing the ESRD 
facilities to continue to receive the adjustment.
    Finally, we proposed two additional changes to correct and further 
clarify the LVPA regulation. The first would correct a cross-reference 
in Sec.  413.232(b) by changing ``paragraph (h)'' to ``paragraph (g)''. 
We explained that this error is the result of prior changes we made to 
the regulation when we deleted other paragraphs, but did not update the 
reference accordingly. The second proposed revision would clarify that 
the reference to miles in Sec.  413.232(c)(2) is to road miles. We 
noted that CMS recognizes the current designation of miles under the 
regulation may not be specific enough and could cause confusion, and we 
have issued guidance in the Medicare Benefit Policy Manual (Pub. L. 
100-02), Chapter 11, Section 60, addressing road miles. Accordingly, we 
proposed clarifying edits to Sec.  413.232(c)(2).
    We did not receive comments regarding the two technical corrections 
to the regulations text for the LVPA or the proposed extraordinary 
circumstances exception; therefore, we are finalizing these revisions 
as proposed.
    The comments and our responses to the comments on our other 
proposed

[[Page 56951]]

revisions to the LVPA requirements and regulations are set forth below.
    Comment: Several commenters supported the proposed revisions to the 
LVPA regulations. A large dialysis organization (LDO), a health plan, a 
dialysis organization and a dialysis provider organization expressed 
support for CMS' proposals to allow ESRD facilities to continue to 
receive LVPAs when there are changes that do not affect the business 
operations of the facility. Specifically, they stated that they support 
and appreciate CMS' proposed policies to allow facilities to retain 
low-volume facility status when a new owner accepts assignment of the 
existing Medicare provider agreement and when a facility changes its 
fiscal year-end for cost reporting purposes.
    A patient advocacy organization commented that as CMS is proposing 
changes to the LVPA, CMS should consider removing the rural payment 
adjuster and instead include tiers for the LVPA to ensure it applies 
the most dollars to facilities that are serving a critical patient need 
and likely operating at a loss. The organization remains concerned that 
facilities in isolated areas serving predominately Medicare and 
Medicaid beneficiaries would be the first to be targeted for closure 
even with a rural payment adjuster. The organization pointed to the 
March 2018 MedPAC report that distinguished rural facilities adjacent 
to an urban area from rural non-adjacent facilities and stated that CMS 
should implement a tiered approach to the LVPA and ensure those 
facilities not adjacent to an urban area are receiving a higher 
adjuster.
    Response: We appreciate the stakeholders' support for the LVPA 
proposals. With regard to the implementation of tiered LVPA adjustment, 
this comment is out of scope for this rule because we did not propose 
any changes to the structure of the LVPA adjustment or the rural 
adjustment, however, we will consider this recommendation for future 
refinements to those policies. Additionally, we are undertaking a new 
research effort and plan to engage with stakeholders further on this 
issue.
    Final Rule Action: After considering the comments, we are 
finalizing the revisions to the LVPA regulations as proposed, with one 
technical edit. We are finalizing the revision to Sec.  413.232(b)(2) 
to expand the definition of a low-volume facility to include CHOWs 
where the new owner accepts assignment of the existing Medicare 
provider agreement and a new PTAN is issued due to a change in facility 
type. This definition does not extend to CHOWs where a new PTAN is 
issued for any other reason. We are also finalizing the amendment of 
Sec.  413.232(g)(2) to recognize the expansion of the low-volume 
facility definition and allow for PTAN changes when the facility type 
changes as a result of a CHOW.
    In addition, we are finalizing the revisions to Sec.  413.232(e) to 
include an exception to the attestation deadline of November 1st for 
extraordinary circumstances. In order to request an extraordinary 
circumstance exception, the facility will need to submit a narrative 
explaining the rationale for the exception to its MAC. The MAC will 
evaluate the narrative to determine if an exception is justified, and 
such a determination will be final, with no appeal.
    Additionally, we are finalizing the addition of paragraph (3) to 
Sec.  413.232(g) to provide direction for MACs in verifying the number 
of treatments when a change in a cost reporting period is approved. 
MACs should combine the two non-standard cost reporting periods of less 
than 12 months to equal a full 12-consecutive month period or combine 
the two non-standard cost reporting periods that in combination may 
exceed 12-consecutive months and prorate the data to equal a full 12-
consecutive month period. This policy does not impact or change any 
other requirements for cost reporting, as established by the MACs, or 
those set forth in Sec.  413.24(f)(3). This policy applies to ESRD 
facilities that change their cost reporting year for purposes outside 
of a CHOW to qualify for the LVPA, provided they otherwise meet the 
LVPA eligibility criteria for the purposes of allowing the ESRD 
facility to continue to receive the adjustment. We are making one 
technical change to refer to an ESRD facility that has changed ``its'' 
cost reporting period.
    Finally, we are finalizing two technical corrections to the LVPA 
regulations. We are finalizing the revision to Sec.  413.232(b) to 
reflect the correct cross-reference by changing ``paragraph (h)'' to 
``paragraph (g)'' and the revision to Sec.  413.232(c)(2) to reflect 
road miles.
3. Final CY 2019 ESRD PPS Update
a. ESRD Bundled (ESRDB) Market Basket and Labor-Related Share
i. Rebasing of the ESRDB Market Basket
    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.
    As required under section 1881(b)(14)(F)(i) of the Act, CMS 
developed an all-inclusive ESRD Bundled (ESRDB) input price index (75 
FR 49151 through 49162) and subsequently revised and rebased the ESRDB 
input price index in the CY 2015 ESRD PPS final rule (79 FR 66129 
through 66136). Effective for CY 2019, we proposed to rebase the ESRDB 
market basket to a base year of CY 2016.
    Although ``market basket'' technically describes the mix of goods 
and services used for ESRD treatment, this term is also commonly used 
to denote the input price index (that is, cost categories, their 
respective weights, and price proxies combined) derived from a market 
basket. Accordingly, the term ``ESRDB market basket,'' as used in this 
document, refers to the ESRDB input price index.
    The ESRDB market basket is a fixed-weight, Laspeyres-type price 
index. A Laspeyres-type price index measures the change in price, over 
time, of the same mix of goods and services purchased in the base 
period. Any changes in the quantity or mix of goods and services (that 
is, intensity) purchased over time are not measured.
    The index is constructed in three steps. First, a base period is 
selected and total base period expenditures are estimated for a set of 
mutually exclusive and exhaustive spending categories, with the 
proportion of total costs that each category represents being 
calculated. These proportions are called ``cost weights'' or 
``expenditure weights.'' Second, each expenditure category is matched 
to an appropriate price or wage variable, referred to as a ``price 
proxy''. In almost every instance, these price proxies are derived from 
publicly available statistical series that are published on a 
consistent schedule (preferably at least on a quarterly basis). 
Finally, the expenditure weight for each cost category is multiplied by 
the level of its respective price proxy. The sum of these products 
(that is, the expenditure weights multiplied by their price index 
levels) for all cost categories yields the

[[Page 56952]]

composite index level of the market basket in a given period. Repeating 
this step for other periods produces a series of market basket levels 
over time. Dividing an index level for a given period by an index level 
for an earlier period produces a rate of growth in the input price 
index over that timeframe.
    As noted above, the market basket is described as a fixed-weight 
index because it represents the change in price over time of a constant 
mix (quantity and intensity) of goods and services purchased to provide 
ESRD services. The effects on total expenditures resulting from changes 
in the mix of goods and services purchased subsequent to the base 
period are not measured. For example, an ESRD facility hiring more 
nurses to accommodate the needs of patients would increase the volume 
of goods and services purchased by the ESRD facility, but would not be 
factored into the price change measured by a fixed-weight ESRD market 
basket. Only when the index is rebased would changes in the quantity 
and intensity be captured, with those changes being reflected in the 
cost weights. Therefore, we rebase the market basket periodically so 
that the cost weights reflect changes between base periods in the mix 
of goods and services that ESRD facilities purchase to furnish ESRD 
treatment.
    We proposed to use CY 2016 as the base year for the rebased ESRDB 
market basket cost weights. The cost weights for the ESRDB market 
basket are based on the cost report data for independent ESRD 
facilities. We refer to the market basket as a CY market basket because 
the base period for all price proxies and weights are set to CY 2016 
(that is, the average index level for CY 2016 is equal to 100). The 
major source data for the ESRDB market basket is the 2016 Medicare cost 
reports (MCRs) (Form CMS-265-11), supplemented with 2012 data from the 
United States (U.S.) Census Bureau's Services Annual Survey (SAS) 
inflated to 2016 levels. The 2012 SAS data is the most recent year of 
detailed expense data published by the Census Bureau for North American 
International Classification System (NAICS) Code 621492: Kidney 
Dialysis Centers. We also proposed to use May 2016 Bureau of Labor 
Statistics (BLS) Occupational Employment Statistics data to estimate 
the weights for the Wages and Salaries and Employee Benefits 
occupational blends. We provide more detail on our methodology below.
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. The term 
``rebasing'' means moving the base year for the structure of costs of 
an input price index (that is, in the CY 2018 proposed rule (83 FR 
34318), we proposed to move the base year cost structure from CY 2012 
to CY 2016) without making any other major changes to the methodology. 
The term ``revising'' means changing data sources, cost categories, 
and/or price proxies used in the input price index. For CY 2019, we 
proposed to rebase the ESRDB market basket to reflect the 2016 cost 
structure of ESRD facilities. For CY 2019, we did not propose to revise 
the index; that is, we did not propose to make any changes to the cost 
categories or price proxies used in the index.
    We selected CY 2016 as the new base year because 2016 is the most 
recent year for which relatively complete MCR data are available. In 
developing the market basket, we reviewed ESRD expenditure data from 
ESRD MCRs (CMS Form 265-11) for 2016 for each freestanding ESRD 
facility that reported expenses and payments. The 2016 MCRs are those 
ESRD facilities whose cost reporting period began on or after October 
1, 2015 and before October 1, 2016. Of the 2016 MCRs, approximately 88 
percent of freestanding ESRD facilities had a begin date on January 1, 
2016, approximately 6 percent had a begin date prior to January 1, 
2016, and approximately 6 percent had a begin date after January 1, 
2016. Using this methodology allowed our sample to include ESRDs with 
varying cost report years including, but not limited to, the federal 
fiscal or CY.
    We proposed to maintain our policy of using data from freestanding 
ESRD facilities (which account for over 90 percent of total ESRD 
facilities) because freestanding ESRD data reflect the actual cost 
structure faced by the ESRD facility itself. In contrast, expense data 
for a hospital-based ESRD reflect the allocation of overhead from the 
entire institution.
    We developed cost category weights for the 2016-based ESRDB market 
basket in two stages. First, we derived base year cost weights for nine 
major categories (Wages and Salaries, Employee Benefits, 
Pharmaceuticals, Supplies, Lab Services, Housekeeping and Operations, 
Administrative and General, Capital-Related Building and Fixtures, and 
Capital-Related Machinery) from the ESRD MCRs. Second, we proposed to 
divide the Administrative and General cost category into further detail 
using 2012 U.S. Census Bureau Services Annual Survey (SAS) data for the 
industry Kidney Dialysis Centers NAICS 621492 inflated to 2016 levels. 
We apply the estimated 2016 distributions from the SAS data to the 2016 
Administrative and General cost weight to yield the more detailed 2016 
cost weights in the market basket. This is similar to the methodology 
we used to break the Administrative and General cost weight into more 
detail for the 2012-based ESRDB market basket (79 FR 40217 through 
40221). The only difference is that for this rebasing, because SAS data 
is not available after 2012, we inflated the 2012 expense levels to 
2016 dollars using appropriate price proxies and applied this expense 
distribution to the Administrative and General cost weight for 2016.
    We proposed to include a total of 20 detailed cost categories for 
the 2016-based ESRDB market basket, which is the same number of cost 
categories as the 2012-based ESRDB market basket. We proposed to 
continue to assume that 87 percent of Professional Fees and 46 percent 
of capital costs are labor-related costs and would be included in the 
labor-related share.
    The comments and our response to the comments on our proposal to 
rebase the ESRDB market basket are set forth below.
    Comment: Several commenters supported the rebasing of the ESRDB 
market basket to a 2016 base year.
    Response: We appreciate the commenters' support.
    A more thorough discussion of the market basket is provided below.
a. Cost Category Weights
    Using Worksheets A and B from the 2016 MCRs, we first computed cost 
shares for nine major expenditure categories: Wages and Salaries, 
Employee Benefits, Pharmaceuticals, Supplies, Lab Services, 
Housekeeping and Operations, Administrative and General, Capital-
Related Building and Equipment, and Capital-Related Machinery. Edits 
were applied to include only cost reports that had total costs greater 
than zero. Total costs as reported on the MCR include those costs 
reimbursable under the ESRD bundled payment system. For example, we 
excluded expenses related to vaccine costs from total expenditures 
since these are not reimbursable under the ESRD bundled payment.
    In order to reduce potential distortions from outliers in the 
calculation of the individual cost weights for the major expenditure 
categories, values less than the 5th percentile or greater than the 
95th percentile were excluded from the major cost weight computations. 
The data set, after removing cost reports with total costs equal to or 
less than zero and excluding outliers, included

[[Page 56953]]

information from approximately 5,700 independent ESRD facilities' cost 
reports from an available pool of 6,410 cost reports.
    Table 2 presents the final 2016-based ESRDB market basket and 2012-
based ESRDB market basket major cost weights as derived directly from 
the MCR data.

 TABLE 2--2016-Based ESRDB Market Basket Major Cost Weights Derived from
                      the Medicare Cost Report Data
------------------------------------------------------------------------
                                            2016-Based      2012-Based
              Cost category                ESRDB  market   ESRDB  market
                                            basket  (%)     basket  (%)
------------------------------------------------------------------------
Wages and Salaries......................            32.6            31.8
Employee Benefits.......................             7.0             6.6
Pharmaceuticals.........................            12.4            16.5
Supplies................................            10.4            10.1
Lab Services............................             2.2             1.5
Housekeeping and Operations.............             3.9             3.8
Administrative and General..............            18.4            17.4
Capital-related Building and Fixed                   9.2             8.4
 Equipment..............................
Capital-related Machinery...............             3.8             3.9
------------------------------------------------------------------------
Note: Totals may not sum to 100.0 percent due to rounding.

    We proposed to disaggregate certain major cost categories developed 
from the MCRs into more detail to more accurately reflect ESRD facility 
costs. Those categories include: Benefits, Professional fees, 
Telephone, Utilities, and All Other Goods and Services. We describe 
below how the initially computed categories and weights from the cost 
reports were calculated to yield the 2016 ESRDB market basket 
expenditure categories and weights.

Wages and Salaries

    The Wages and Salaries cost weight is comprised of direct patient 
care wages and salaries and non-direct patient care wages and salaries. 
Direct patient care wages and salaries for 2016 were derived from 
Worksheet B, column 5, lines 8 through 17 of the MCR. Non-direct 
patient care wages and salaries includes all other wages and salaries 
costs for non-health workers and physicians, which we derive using the 
following steps:
    Step 1: To capture the salary costs associated with non-direct 
patient care cost centers, we calculated salary percentages for non-
direct patient care from Worksheet A of the MCR. The estimated 
percentages were calculated as the ratio of salary costs (Worksheet A, 
columns 1 and 2) to total costs (Worksheet A, column 4). The salary 
percentages were calculated for seven distinct cost centers: 
`Operations and Maintenance' combined with `Machinery & Rental & 
Maintenance' (line 3 and 6), Housekeeping (line 4), Employee Health and 
Wellness (EH&W) Benefits for Direct Patient Care (line 8), Supplies 
(line 9), Laboratory (line 10), Administrative & General (line 11), and 
Pharmaceuticals (line 12).
    Step 2: We then multiplied the salary percentages computed in step 
1 by the total costs for each corresponding reimbursable costs center 
totals as reported on Worksheet B. The Worksheet B totals were based on 
the sum of reimbursable costs reported on lines 8 through 17. For 
example, the salary percentage for Supplies (as measured by line 9 on 
Worksheet A) was applied to the total expenses for the Supplies cost 
center (the sum of costs reported on Worksheet B, column 7, lines 8 
through 17). This provided us with an estimate of Non-Direct Patient 
Care Wages and Salaries.
    Step 3: The estimated wages and salaries for each of the cost 
centers on Worksheet B derived in step 2 were subsequently summed and 
added to the direct patient care wages and salaries costs.
    Step 4: The estimated non-direct patient care wages and salaries 
(see step 2) were then subtracted from their respective cost categories 
to avoid double-counting their values in the total costs.
    Using this methodology, we derive a Wages and Salaries cost weight 
of 32.6 percent, reflecting an estimated direct patient care wages and 
salaries cost weight of 25.1 percent and non-direct patient care wages 
and salaries cost weight of 7.5 percent, as seen in Table 3.
    The final adjustment made to this category is to include Contract 
Labor costs. These costs appear on the MCR; however, they are embedded 
in the Other Costs from the trial balance reported on Worksheet A, 
Column 3 and cannot be disentangled using the MCRs. To avoid double 
counting of these expenses, we proposed to remove the estimated cost 
weight for the contract labor costs from the Administrative and General 
category (where we believe the majority of the contract labor costs 
would be reported) to the Wages and Salaries category. We proposed to 
use data from the SAS (2012 data inflated to 2016), which reported 2.3 
percent of total expenses were spent on contract labor costs. We 
allocated 80 percent of that contract labor cost weight to Wages and 
Salaries. At the same time, we subtracted that same amount from 
Administrative and General, where the majority of contract labor 
expenses would likely be reported on the MCR. The 80 percent figure 
that was used was determined by taking salaries as a percentage of 
total compensation (excluding contract labor) from the 2016 MCR data. 
This is the same method that was used to allocate contract labor costs 
to the Wages and Salaries cost category for the 2012-based ESRDB market 
basket.
    The resulting cost weight for Wages and Salaries increases to 34.5 
percent when contract labor wages are added. The calculation of the 
Wages and Salaries cost weight for the 2016-based ESRDB market basket 
is shown in Table 3 along with the similar calculation for the 2012-
based ESRDB market basket.

[[Page 56954]]



                    Table 3--2016 and 2012 ESRD Wages and Salaries Cost Weight Determination
----------------------------------------------------------------------------------------------------------------
                                                   2016 Cost       2012 Cost
                  Components                        weight          weight                   Source
                                                   (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Wages and Salaries Direct Patient Care........            25.1            23.2  MCR
Wages and Salaries Non-direct Patient Care....             7.5             8.6  MCR
Contract Labor (Wages)........................             1.9             1.8  80% of SAS Contract Labor weight
                                               -----------------------------------------------------------------
    Total Wages and Salaries..................            34.5            33.7  ................................
----------------------------------------------------------------------------------------------------------------

Employee Benefits

    The Employee Benefits cost weight was derived from the MCR data for 
direct patient care and supplemented with data from the SAS (2012 data 
inflated to 2016) to account for non-direct patient care Employee 
Benefits. The MCR data only reflects Employee Benefit costs associated 
with health and wellness; that is, it does not reflect retirement 
benefits.
    In order to reflect the benefits related to non-direct patient care 
for employee health and wellness, we estimated the impact on the 
benefit weight using SAS. Unlike the MCR, data from the SAS benefits 
share includes expenses related to the retirement and pension benefits. 
In order to be consistent with the cost report definitions we do not 
want to include the costs associated with retirement and pension 
benefits in the cost share weights. These costs are relatively small 
compared to the costs for the health-related benefits, accounting for 
only 2.7 percent of the total benefits costs as reported on the SAS. 
Incorporating the SAS data produced an Employee Benefits (both direct 
patient care and non-direct patient care) weight that was 1.6 
percentage points higher (8.6 vs. 7.0) than the Employee Benefits 
weight for direct patient care calculated directly from the MCR. To 
avoid double-counting and to ensure all of the market basket weights 
still totaled 100 percent, we removed this additional 1.6 percentage 
points for Non-Direct Patient Care Employee Benefits from the 
Administrative and General cost category (where we believe the majority 
of the contract labor costs would be reported).
    The final adjustment made to this category is to include contract 
labor benefit costs. Once again, these costs appear on the MCR; 
however, they are embedded in the Other Costs from the trial balance 
reported on Worksheet A, Column 3 and cannot be disentangled using the 
MCR data. Identical to our methodology above for allocating Contract 
Labor Costs to Wages and Benefits, we applied 20 percent of total 
Contract Labor Costs, as estimated using the SAS, to the Benefits cost 
weight calculated from the cost reports. The 20 percent figure was 
determined by taking benefits as a percentage of total compensation 
(excluding contract labor) from the 2016 MCR data. The resulting cost 
weight for Employee Benefits increases to 9.1 percent when contract 
labor benefits are added. This is the same method that was used to 
allocate contract labor costs to the Benefits cost category for the 
2012-based ESRDB market basket.
    The Table 4 compares the 2012-based Benefits cost share derivation 
as detailed in the CY 2015 ESRD PPS proposed rule (79 FR 40218) to the 
2016-based Benefits cost share derivation.

                     Table 4--2016 and 2012 ESRD Employee Benefits Cost Weight Determination
----------------------------------------------------------------------------------------------------------------
                                                   2016 Cost       2012 Cost
                  Components                        weight          weight                   Source
                                                   (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Employee Benefits Direct Patient Care.........             7.0             6.6  MCR
Employee Benefits Non-direct Patient Care.....             1.6             1.8  SAS
Contract Labor (Benefits).....................             0.5             0.5  20% of SAS Contract Labor weight
                                               -----------------------------------------------------------------
    Total Employee Benefits...................             9.1             8.8
----------------------------------------------------------------------------------------------------------------

Pharmaceuticals

    The 2016-based ESRDB market basket includes expenditures for all 
drugs, including formerly separately billable drugs and ESRD-related 
drugs that were covered under Medicare Part D before the ESRD PPS was 
implemented. We calculated a Pharmaceutical cost weight from the 
following cost centers on Worksheet B, the sum of lines 8 through 17, 
for the following columns: 11 ``Drugs Included in Composite Rate''; 12 
``Erythropoiesis stimulating agents (ESAs)''; 13 ``ESRD-Related 
Drugs''. We also added the drug expenses reported on line 5 column 10 
``Non-ESRD related drugs''. The Non-ESRD related drugs would include 
drugs and biologicals administered during dialysis for non-ESRD related 
conditions as well as oral-only drugs. Since these are costs to the 
facility for providing ESRD treatment to the patient, we proposed to 
continue to include them in the Pharmaceutical cost weight. Section 
1842(o)(1)(A)(iv) of the Act requires that influenza, pneumococcal, and 
hepatitis B vaccines described in paragraph (A) or (B) of section 
1861(s)(10) of the Act be paid based on 95 percent of average wholesale 
price (AWP) of the drug. Since these vaccines are not reimbursable 
under the ESRD PPS, we exclude them from the 2016-based ESRDB market 
basket.
    Finally, to avoid double-counting, the weight for the 
Pharmaceuticals category was reduced to exclude the estimated share of 
Non-Direct Patient Care Wages and Salaries associated with the 
applicable pharmaceutical cost centers referenced above. This resulted 
in an ESRDB market basket weight for Pharmaceuticals of 12.4 percent. 
ESA expenditures accounted for 10.0 percentage points of the 
Pharmaceuticals cost weight, and All Other Drugs accounted for the 
remaining 2.4 percentage points.
    The Pharmaceutical cost weight decreased 4.1 percentage point from 
the 2012-based ESRDB market basket to the 2016-based ESRDB market 
basket (16.5

[[Page 56955]]

percent to 12.4 percent). Most providers experienced a decrease in 
their Pharmaceutical cost weight since 2012. One provider in 
particular, a major dialysis provider, experienced a significant 
pharmaceutical cost weight decline in 2016. This provider's decline had 
an effect on the overall Pharmaceutical cost weight in the 2016-based 
ESRDB market basket. We wish to note that the provider's decline in the 
pharmaceutical cost weight was found across the board in all states 
where the provider has facilities. Given this, we proposed to include 
this provider's decline in our market basket results treating it as a 
`real' change in relative pharmaceutical costs. We did not propose to 
use an alternative methodology, such as averaging cost weights from 
multiple years, which we proposed for Lab Services as stated below.

Supplies

    We calculated the Supplies cost weight using the costs reported in 
the Supplies cost center (Worksheet B, line 5 and the sum of lines 8 
through 17, column 7) of the MCR. To avoid double-counting, the 
Supplies costs were reduced to exclude the estimated share of Non-
Direct patient care Wages and Salaries associated with this cost 
center. The resulting 2016-based ESRDB market basket weight for 
Supplies is 10.4 percent, about the same as the weight for the 2012-
based ESRDB market basket.

Lab Services

    We calculated the Lab Services cost weight using the costs reported 
in the Laboratory cost center (Worksheet B, line 5 and the sum of line 
8 through 17, column 8) of the MCR. To avoid double-counting, the Lab 
Services costs were reduced to exclude the estimated share of Non-
Direct Patient Care Wages and Salaries associated with this cost 
center. The 2016-based ESRDB market basket weight for Lab Services is 
estimated at 2.2 percent.
    The 2016 Lab Services expenses reported for a main chain provider 
were significantly lower than those reported in the 3 years prior (2013 
through 2015) and lower than the 2016 Lab Services weight for all other 
providers. We believe the lower costs were based on a correction to the 
way that this chain is billing for these services, an assumption that 
is supported by the findings of a January 2016 Health and Human 
Services Office of the Inspector General (OIG) Report \2\. Because the 
recent reported costs from this chain reflect these unique 
circumstances, we proposed to take a 2-year average of Lab Services 
costs for 2015 and 2016 for this chain in order to smooth out the year-
to-year volatility. This approach results in a Lab cost weight for this 
chain that is higher than it was in 2012, which is then added to the 
2016 Lab Services costs for all other providers, where the cost weight 
was similar in 2012 and 2016. As a result, the overall Lab Services 
cost weight increased 0.7 percentage points (1.5 vs 2.2 percent) from 
the 2012-based ESRDB market basket to the 2016-based ESRDB market 
basket.
---------------------------------------------------------------------------

    \2\ Review of Medicare Payments for Laboratory Tests Billed with 
an AY Modifier by Total Renal Laboratories, Inc.; https://oig.hht.gov/oas/reports/region1/11400505.pdf.
---------------------------------------------------------------------------

Housekeeping and Operations

    We calculated the Housekeeping and Operations cost weight using the 
costs reported on Worksheet A, lines 3 and 4, column 8, of the MCR. To 
avoid double-counting, the weight for the Housekeeping and Operations 
category was reduced to exclude the estimated share of Non-Direct 
Patient Care Waged and Salaries associated with this cost center. These 
costs were divided by total costs to derive a 2016-based ESRDB market 
basket weight for Housekeeping and Operations of 3.9 percent.

Capital

    We developed a market basket weight for the Capital category using 
data from Worksheet B of the MCRs. Capital-related costs include 
depreciation and lease expenses for buildings, fixtures and movable 
equipment, property taxes, insurance costs, the costs of capital 
improvements, and maintenance expense for buildings, fixtures, and 
machinery. Because Housekeeping and Operations and Maintenance costs 
are included in the Worksheet B cost center for Capital-Related costs 
(Worksheet B, column 2), we excluded the costs for these two categories 
and developed a separate expenditure category for Housekeeping and 
Operations, as detailed above. Similar to the methodology used for 
other market basket cost categories with a salaries component, we 
computed a share for non-direct patient care Wages and Salaries and 
Benefits associated with the Capital-related cost centers. We used 
Worksheet B to develop two capital-related cost categories: (1) 
Buildings and Fixtures (Worksheet B, the sum of lines 8 through 17, 
column 2 less housekeeping and operations as derived from expenses 
reported on Worksheet A (see above)), and (2) Machinery (Worksheet B, 
the sum of lines 8 through 17, column 4). We reasoned this delineation 
was particularly important given the critical role played by dialysis 
machines. Likewise, because price changes associated with Buildings and 
Equipment could move differently than those associated with Machinery, 
we continue to believe that two capital-related cost categories are 
appropriate. The resulting 2016-based ESRDB market basket weights for 
Capital-related Buildings and Fixtures and Capital-related Machinery 
are 9.2 percent and 3.8 percent, respectively.

Administrative and General

    We computed the proportion of total Administrative and General 
expenditures using the Administrative and General cost center data from 
Worksheet B, the sum of lines 8 through 17, (column 9) of the MCRs. 
Additionally, we removed contract labor from this cost category and 
apportioned these costs to the Wages and Salaries and Employee Benefits 
cost weights. Similar to other expenditure category adjustments, we 
then reduced the computed weight to exclude Wages and Salaries and 
Benefits associated with the Administrative and General cost center for 
Non-direct Patient Care as estimated from the SAS data. The resulting 
Administrative and General cost weight is 14.5 percent.
    We further disaggregated the Administrative and General cost weight 
to derive detailed cost weights for Electricity, Natural Gas, Water and 
Sewerage, Telephone, Professional Fees, and All Other Goods and 
Services. These detailed cost weights are derived by inflating the 
detailed 2012 SAS data forward to 2016 by applying the annual price 
changes from the respective price proxies to the appropriate market 
basket cost categories that are obtained from the 2012 SAS data. We 
repeated this practice for each year to 2016. We then calculated the 
cost shares that each cost category represents of the 2012 data 
inflated to 2016. These resulting 2016 cost shares were applied to the 
Administrative and General cost weight derived from the MCR (net of 
contract labor and additional benefits) to obtain the detailed cost 
weights for the 2016-based ESRDB market basket. This method is similar 
to the method used for the 2012-based ESRDB market basket.
    Table 5 lists all of the cost categories and cost weights in the 
2016-based ESRDB market basket compared to the 2012-based ESRDB market 
basket.

[[Page 56956]]



  Table 5--Comparison of the 2016-Based and the 2012-Based ESRDB Market
                   Basket Cost Categories and Weights
------------------------------------------------------------------------
                                             2016 Cost       2012 Cost
           2016 Cost category                 weights         weights
                                             (percent)       (percent)
------------------------------------------------------------------------
Total...................................           100.0           100.0
Compensation............................            43.6            42.5
Wages and Salaries......................            34.5            33.7
Employee Benefits.......................             9.1             8.8
Utilities...............................             2.0             1.8
Electricity.............................             1.1             1.0
Natural Gas.............................             0.1             0.1
Water and Sewerage......................             0.8             0.8
Medical Materials and Supplies..........            24.9            28.1
Pharmaceuticals.........................            12.4            16.5
ESAs....................................            10.0            12.9
Other Drugs (except ESAs)...............             2.4             3.6
Supplies................................            10.4            10.1
Lab Services............................             2.2             1.5
All Other Goods and Services............            16.4            15.3
Telephone & Internet Services...........             0.5             0.5
Housekeeping and Operations.............             3.9             3.8
Professional Fees.......................             0.7             0.6
All Other Goods and Services............            11.3            10.4
Capital Costs...........................            13.0            12.2
Capital Related-Building and Fixtures...             9.2             8.4
Capital Related-Machinery...............             3.8             3.9
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal and, therefore,
  the detail may not add to the total due to rounding.

    The comments and our response to the comments on the proposed cost 
category weights are set forth below.
    Comment: One commenter had a question related to the methodology 
for estimating the cost weight for the pharmaceuticals and lab services 
in the proposed ESRDB market basket rebasing. The commenter noted that, 
per the proposed rule, the pharmaceuticals and lab services cost 
categories are influenced significantly by one LDO. The commenter 
questioned the rationale of CMS's proposal to smooth the change in the 
lab services cost weight while, at the same time, not proposing to 
smooth the change in the pharmaceutical cost weight. The commenter 
stated that this difference in treatment seems inconsistent and 
recommended that CMS consider using a similar ``smoothing'' approach 
for both the pharmaceuticals cost weight and the lab services cost 
weight. The commenter further stated that, CMS has used phase-ins and 
smoothing methods when there were significant changes in the past.
    Response: We did not propose to use a ``smoothing'' or averaging 
approach for the proposed 2016-based pharmaceutical cost share weight 
because the decline in pharmaceutical costs, relative to the other cost 
categories, were based on a steady pattern of falling pharmaceutical 
expense shares from 2012 to 2016 for all ESRD providers. In the CY 2019 
ESRD PPS proposed rule (83 FR 34321), we noted that one provider 
experienced a relatively larger drop in its pharmaceutical cost weight 
relative to other providers. This LDO would have renegotiated its 
agreement on the prices for ESA's in 2016 since the agreement between 
the LDO and a major drug manufacturer ended in 2015. This renegotiation 
should have contributed to the large drop in the LDO's pharmaceutical 
cost weight.
    On the other hand, the rationale for using a 2-year average to 
determine the 2016 cost share weight for lab services was based on the 
documented instance of an LDO provider overbilling for lab services. 
The resulting low weight reported in 2016 was not reflective of normal 
business operations but was instead indicative of a correction to 
laboratory expenses. Therefore, reported laboratory expenses for 2013, 
2014, and 2015 were higher than they should have been and laboratory 
expenses for 2016 were lower than they should have been since the LDO 
was required to reimburse Medicare for the prior overbilling. Given 
these unique circumstances, we proposed to average the lab cost weights 
for 2015 and 2016 for this chain. We did not average the lab cost 
weight for any other providers. This particular situation is documented 
in detail in the January 2016 Health and Human Services Office of the 
Inspector General (OIG) Report and was referenced in the proposed rule 
(83 FR 34322).
    We did provide a rationale for the difference in the way we are 
estimating both the pharmaceuticals and lab services cost weight in the 
proposed rule, where we noted the OIG report and our analysis and 
research of the pharmaceutical cost weight trends. Thus, we disagree 
with the commenter that we should use a phase in or smoothing method 
for the pharmaceutical cost share weight for the 2016-based ESRDB 
market basket, as we believe the 2016 pharmaceutical cost weight 
reflects the pharmaceutical expenses experienced by providers in 2016. 
In contrast, we believe the lab services cost weight was being 
influenced by a reporting issue for one provider and did not reflect 
industry trends for 2016; therefore, averaging reported expenses for 
this provider produces a cost weight for 2016 that more appropriately 
reflects these industry trends.
    After consideration of public comments, we are finalizing the 2016-
based ESRDB market basket cost categories and weights as proposed 
without change.
b. Price Proxies for the 2016-Based ESRDB Market Basket
    After developing the cost weights for the 2016-based ESRDB market 
basket, we select the most appropriate wage and price proxies currently 
available to represent the rate of price change for each expenditure 
category. We based

[[Page 56957]]

the price proxies on Bureau of Labor Statistics (BLS) data and group 
them into one of the following BLS categories:
    (1) Employment Cost Indexes. Employment Cost Indexes (ECIs) measure 
the rate of change in employment wage rates and employer costs for 
employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the NAICS and the occupational 
ECIs are based on the Standard Occupational Classification System 
(SOC).
    (2) Producer Price Indexes. Producer Price Indexes (PPIs) measure 
price changes for goods sold in other than retail markets. PPIs are 
used when the purchases of goods or services are made at the wholesale 
level.
    (3) Consumer Price Indexes. Consumer Price Indexes (CPIs) measure 
change in the prices of final goods and services bought by consumers. 
CPIs are only used when the purchases are similar to those of retail 
consumers rather than purchases at the wholesale level, or if no 
appropriate PPIs were available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
    Reliability. Reliability indicates that the index is based on valid 
statistical methods and has low sampling variability. Widely accepted 
statistical methods ensure that the data were collected and aggregated 
in a way that can be replicated. Low sampling variability is desirable 
because it indicates that the sample reflects the typical members of 
the population. (Sampling variability is variation that occurs by 
chance because only a sample was surveyed rather than the entire 
population.)
    Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
    Availability. Availability means that the proxy is publicly 
available. We prefer that our proxies are publicly available because 
this helps to ensure that our market basket updates are as transparent 
to the public as possible. In addition, this enables the public to be 
able to obtain the price proxy data on a regular basis.
    Relevance. Relevance means that the proxy is applicable and 
representative of the cost category weight to which it is applied. The 
CPIs, PPIs, and ECIs that we have selected meet these criteria. 
Therefore, we believe that they continue to be the best measure of 
price changes for the cost categories to which they would be applied.
    Table 7 lists all price proxies for the 2016-based ESRDB market 
basket. We note that we proposed to use the same proxies as those used 
in the 2012-based ESRDB market basket. Below is a detailed explanation 
of the price proxies used for each cost category weight.
Wages and Salaries
    We proposed to continue using a blend of ECIs to proxy the Wages 
and Salaries cost weight in the 2016-based ESRDB market basket, and to 
continue using four occupational categories and associated ECIs based 
on full-time equivalents (FTE) data from ESRD MCRs and ECIs from BLS. 
We calculated occupation weights for the blended Wages and Salaries 
price proxy using 2016 FTE data from the MCR data and associated 2016 
Average Mean Wage data from the Bureau of Labor Statistics' 
Occupational Employment Statistics. This is similar to the methodology 
used in the 2012-based ESRDB market basket to derive these occupational 
wages and salaries categories.
Health Related Wages and Salaries
    We proposed to continue using the ECI for Wages and Salaries for 
All Civilian Workers in Hospitals (BLS series code #CIU1026220000000I) 
as the price proxy for health-related occupations. Of the two health-
related ECIs that we considered (``Hospitals'' and ``Health Care and 
Social Assistance''), the wage distribution within the Hospital NAICS 
sector (622) is more closely related to the wage distribution of ESRD 
facilities than it is to the wage distribution of the Health Care and 
Social Assistance NAICS sector (62).
    The Wages and Salaries--Health Related subcategory weight within 
the Wages and Salaries cost category accounts for 79.9 percent of total 
Wages and Salaries in 2016. The ESRD Medicare Cost Report FTE 
categories used to define the Wages and Salaries--Health Related 
subcategory include ``Physicians,'' ``Registered Nurses,'' ``Licensed 
Practical Nurses,'' ``Nurses' Aides,'' ``Technicians,'' and 
``Dieticians''.
Management Wages and Salaries
    We proposed to continue using the ECI for Wages and Salaries for 
Private Industry Workers in Management, Business, and Financial (BLS 
series code #CIU2020000110000I). We believe this ECI is the most 
appropriate price proxy to measure the wages and salaries price growth 
of management personnel at ESRD facilities.
    The Wages and Salaries--Management subcategory weight within the 
Wages and Salaries cost category is 6.7 percent in 2016. The ESRD 
Medicare Cost Report FTE category used to define the Wages and 
Salaries--Management subcategory is ``Management.''
Administrative Wages and Salaries
    We proposed to continue using the ECI for Wages and Salaries for 
Private Industry Workers in Office and Administrative Support (BLS 
series code #CIU2020000220000I). We believe this ECI is the most 
appropriate price proxy to measure the wages and salaries price growth 
of administrative support personnel at ESRD facilities.
    The Wages and Salaries--Administrative subcategory weight within 
the Wages and Salaries cost category is 7.7 percent in 2016. The ESRD 
MCR FTE category used to define the Wages and Salaries--Administrative 
subcategory is ``Administrative''.
Services Wages and Salaries
    We proposed using the ECI for Wages and Salaries for Private 
Industry Workers in Service Occupations (BLS series code 
#CIU2020000300000I). We believe this ECI is the most appropriate price 
proxy to measure the wages and salaries price growth of all other non-
health related, non-management, and non-administrative service support 
personnel at ESRD facilities.
    The Services subcategory weight within the Wages and Salaries cost 
category is 5.7 percent in 2016. The ESRD Medicare Cost Report FTE 
categories used to define the Wages and Salaries--Services subcategory 
are ``Social Workers'' and ``Other.''
    Table 6 lists the four ECI series and the corresponding weights 
used to construct the ECI blend for Wages and Salaries compared to the 
2012-based weights for the subcategories. We believe this ECI blend is 
the most appropriate price proxy to measure the

[[Page 56958]]

growth of wages and salaries faced by ESRD facilities.

         Table 6--ECI Blend for Wages and Salaries in the 2016-Based and 2012-Based ESRDB Market Baskets
----------------------------------------------------------------------------------------------------------------
                                                                                    2016 Weight     2012 Weight
               Cost category                              ECI series                    (%)             (%)
----------------------------------------------------------------------------------------------------------------
Health Related Wages and Salaries..........  ECI for Wages and Salaries for All             79.9            79.0
                                              Civilian Workers in Hospitals.
Management Wages and Salaries..............  ECI for Wages and Salaries for                  6.7             8.0
                                              Private Industry Workers in
                                              Management, Business, and
                                              Financial.
Administrative Wages and Salaries..........  ECI for Wages and Salaries for                  7.7             7.0
                                              Private Industry Workers in Office
                                              and Administrative Support.
Services Wages and Salaries................  ECI for Wages and Salaries for                  5.7             6.0
                                              Private Industry Workers in
                                              Service Occupations.
----------------------------------------------------------------------------------------------------------------

Employee Benefits
    We proposed to continue using an ECI blend for Employee Benefits in 
the 2016-based ESRDB market basket where the components match those of 
the Wage and Salaries ECI blend. The occupation weights for the blended 
Benefits price proxy are the same as those for the wages and salaries 
price proxy blend as shown in Table 5. BLS does not publish ECI for 
Benefits price proxies for each Wage and Salary ECI; however, where 
these series are not published, they can be derived by using the ECI 
for Total Compensation and the relative importance of wages and 
salaries with total compensation as published by BLS for each detailed 
ECI occupational index.
Health Related Benefits
    We proposed to continue using the ECI for Benefits for All Civilian 
Workers in Hospitals to measure price growth of this subcategory. This 
is calculated using the ECI for Total Compensation for All Civilian 
Workers in Hospitals (BLS series code #CIU1016220000000I) and the 
relative importance of Wages and Salaries within Total Compensation as 
published by BLS.
Management Benefits
    We proposed to continue using the ECI for Benefits for Private 
Industry Workers in Management, Business, and Financial to measure 
price growth of this subcategory. This ECI is calculated using the ECI 
for Total Compensation for Private Industry Workers in Management, 
Business, and Financial (BLS series code #CIU2010000110000I) and the 
relative importance of wages and salaries within total compensation.
Administrative Benefits
    We proposed to continue using the ECI for Benefits for Private 
Industry Workers in Office and Administrative Support to measure price 
growth of this subcategory. This ECI is calculated using the ECI for 
Total Compensation for Private Industry Workers in Office and 
Administrative Support (BLS series code #CIU2010000220000I) and the 
relative importance of Wages and Salaries within Total Compensation.
Services Benefits
    We proposed to continue using the ECI for Total Benefits for 
Private Industry Workers in Service Occupations (BLS series code 
#CIU2030000300000I) to measure price growth of this subcategory.
    We believe the benefits ECI blend continues to be the most 
appropriate price proxy to measure the growth of benefits prices faced 
by ESRD facilities. Table 7 lists the four ECI series and the 
corresponding weights used to construct the benefits ECI blend.

              Table 7--ECI Blend for Benefits in the 2016-Based and 2012-Based ESRDB Market Baskets
----------------------------------------------------------------------------------------------------------------
                                                                                   2016 Weight
               Cost category                             ECI series                    (%)       2012 Weight (%)
----------------------------------------------------------------------------------------------------------------
Health Related Benefits....................  ECI for Benefits for All Civilian             79.9            79.0
                                              Workers in Hospitals.
Management Benefits........................  ECI for Benefits for Private                   6.7             8.0
                                              Industry Workers in Management,
                                              Business, and Financial.
Administrative Benefits....................  ECI for Benefits for Private                   7.7             7.0
                                              Industry Workers in Office and
                                              Administrative Support.
Services Benefits..........................  ECI for Benefits for Private                   5.7             6.0
                                              Industry Workers in Service
                                              Occupations.
----------------------------------------------------------------------------------------------------------------

Electricity
    We proposed to continue using the PPI Commodity for Commercial 
Electric Power (BLS series code #WPU0542) to measure the price growth 
of this cost category.
Natural Gas
    We proposed to continue using the PPI Commodity for Commercial 
Natural Gas (BLS series code #WPU0552) to measure the price growth of 
this cost category.
Water and Sewerage
    We proposed to continue using the CPI U.S. city average for Water 
and Sewerage Maintenance (BLS series code #CUUR0000SEHG01) to measure 
the price growth of this cost category.
Pharmaceuticals
    We proposed to continue using the PPI Commodity for Biological 
Products, Excluding Diagnostic, for Human Use (which we will abbreviate 
as PPI-BPHU) (BLS series code #WPU063719) as the price proxy for the 
ESA drugs in the market basket. We proposed to continue using the PPI 
Commodity for Vitamin, Nutrient, and Hematinic Preparations (which we 
will abbreviate as PPI-VNHP) (BLS series code #WPU063807) for all other 
drugs included in the bundle other than ESAs.
    The PPI-BPHU measures the price change of prescription biologics, 
and ESAs would be captured within this index, if they are included in 
the PPI sample. Since the PPI relies on confidentiality with respect to 
the companies and drugs/biologicals included in the sample, we do not 
know if these drugs are indeed reflected in

[[Page 56959]]

this price index. However, we believe the PPI-BPHU is an appropriate 
proxy to use because although ESAs may be a small part of the fuller 
category of biological products, we can examine whether the price 
increases for the ESA drugs are similar to the drugs included in the 
PPI-BPHU. We did this by comparing the historical price changes in the 
PPI-BPHU and the ASP for ESAs and found the cumulative growth to be 
consistent over the past 4 years. We will continue to monitor the 
trends in the prices for ESA drugs as measured by other price data 
sources to ensure that the PPI-BPHU is still an appropriate price 
proxy.
    Additionally, since the non-ESA drugs used in the treatment of ESRD 
are mainly vitamins and nutrients, we believe that the PPI-VNHP 
continues to be the best available proxy for these types of drugs as it 
reflects vitamins and nutrients. While this index does include over-
the-counter drugs as well as prescription drugs, a comparison of trends 
in the prices for non-ESA drugs shows similar growth to the proposed 
PPI-VNHP.
Supplies
    We proposed to continue using the PPI Commodity for Surgical and 
Medical Instruments (BLS series code #WPU1562) to measure the price 
growth of this cost category.
Lab Services
    We proposed to continue using the PPI Industry for Medical 
Laboratories (BLS series code #PCU621511621511) to measure the price 
growth of this cost category.
Telephone Service
    We proposed to continue using the CPI U.S. city average for 
Telephone Services (BLS series code #CUUR0000SEED) to measure the price 
growth of this cost category.
Housekeeping and Operations
    In the proposed rule, we stated that we would continue using the 
PPI Commodity for Cleaning and Building Maintenance Services (BLS 
series code #WPU49) to measure the price growth of this cost category 
(83 FR 34325). This series name and series code from the proposed rule 
were incorrect. The series that we use to proxy the Housekeeping and 
Operations cost category is the PPI Industry for Janitorial Services 
(BLS series code #PCU561720561720). This is the same price proxy that 
was used in the 2012-based ESRDB market basket and is the same price 
proxy that we proposed to use in the 2016-based ESRDB market basket. 
Therefore, we have a technical correction to the price proxy for 
Housekeeping and Operations. Specifically, we will continue using the 
PPI Industry for Janitorial Services for this cost category, we 
incorrectly listed the series name as the PPI Commodity for Cleaning 
and Building Maintenance Services. This was not a proposed change to 
the price proxy for this category. We further note that the growth in 
these two indexes are essentially the same with an average growth rate 
of 1.4 percent over the 2010 through 2017 time period.
Professional Fees
    We proposed to continue using the ECI for Total Compensation for 
Private Industry Workers in Professional and Related (BLS series code 
#CIU2010000120000I) to measure the price growth of this cost category.
All Other Goods and Services
    We proposed to continue using the PPI Commodity for Final demand--
Finished Goods Less Foods and Energy (BLS series code #WPUFD4131) to 
measure the price growth of this cost category.
Capital-Related Building and Equipment
    We proposed to continue using the PPI Industry for Lessors of 
Nonresidential Buildings (BLS series code #PCU531120531120) to measure 
the price growth of this cost category.
Capital-Related Machinery
    We proposed to continue using the PPI Commodity for Electrical 
Machinery and Equipment (BLS series code #WPU117) to measure the price 
growth of this cost category.
    Table 8 shows all the price proxies and cost weights for the 2016-
based ESRDB Market Basket.

  Table 8--Price Proxies and Associated Cost Weights for the 2016-Based
                           ESRDB Market Basket
------------------------------------------------------------------------
                                                             2016 Cost
         Cost category                 Price proxy            weight
------------------------------------------------------------------------
  Total ESRDB Market Basket....  .......................           100.0
    Compensation...............  .......................            43.6
        Wages and Salaries.....  .......................            34.5
            Health-related       ECI for Wages and                  27.6
             Wages and Salaries.  Salaries for All
                                  Civilian Workers in
                                  Hospitals.
            Management Wages     ECI for Wages and                   2.3
             and Salaries.        Salaries for Private
                                  Industry Workers in
                                  Management, Business,
                                  and Financial.
            Administrative       ECI for Wages and                   2.7
             Wages and Salaries.  Salaries for Private
                                  Industry Workers in
                                  Office and
                                  Administrative Support.
            Services Wages and   ECI for Wages and                   2.0
             Salaries.            Salaries for Private
                                  Industry Workers in
                                  Service Occupations.
        Employee Benefits......  .......................             9.1
            Health-related       ECI for Total Benefits              7.3
             Benefits.            for All Civilian
                                  workers in Hospitals.
            Management Benefits  ECI for Total Benefits              0.6
                                  for Private Industry
                                  workers in Management,
                                  Business, and
                                  Financial.
            Administrative       ECI for Total Benefits              0.7
             Benefits.            for Private Industry
                                  workers in Office and
                                  Administrative Support.
            Services Benefits..  ECI for Total Benefits              0.5
                                  for Private Industry
                                  workers in Service
                                  Occupations.
    Utilities..................  .......................             2.0
        Electricity............  PPI Commodity for                   1.1
                                  Commercial Electric
                                  Power.
        Natural Gas............  PPI Commodity for                   0.1
                                  Commercial Natural Gas.
        Water and Sewerage.....  CPI-U for Water and                 0.8
                                  Sewerage Maintenance.
    Medical Materials and        .......................            24.9
     Supplies.
        Pharmaceuticals........  .......................            12.4
            ESAs...............  PPI Commodity for                  10.0
                                  Biological Products,
                                  Excluding Diagnostics,
                                  for Human Use.

[[Page 56960]]

 
            Other Drugs........  PPI Commodity for                   2.4
                                  Vitamin, Nutrient, and
                                  Hematinic Preparations.
        Supplies...............  PPI Commodity for                  10.4
                                  Surgical and Medical
                                  Instruments.
        Lab Services...........  PPI Industry for                    2.2
                                  Medical Laboratories.
    All Other Goods and          .......................            16.4
     Services.
        Telephone Service......  CPI-U for Telephone                 0.5
                                  Services.
        Housekeeping and         PPI--Industry--Janitori             3.9
         Operations.              al services.
        Professional Fees......  ECI for Total                       0.7
                                  Compensation for
                                  Private Industry
                                  Workers in
                                  Professional and
                                  Related.
        All Other Goods and      PPI for Final demand--             11.3
         Services.                Finished Goods less
                                  Foods and Energy.
    Capital Costs..............  .......................            13.0
        Capital Related          PPI Industry for                    9.2
         Building and Equipment.  Lessors of
                                  Nonresidential
                                  Buildings.
        Capital Related          PPI Commodity for                   3.8
         Machinery.               Electrical Machinery
                                  and Equipment.
------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For
  presentational purposes, we are displaying one decimal and therefore,
  the detail may not add to the total due to rounding.

    The comments and our responses to the comments on our proposed 
price proxies are set forth below.
    Comment: Several commenters recommended that CMS identify a more 
suitable price proxy to update non-ESA drugs. The commenters stated 
that they believe that the current proxy (PPI Commodity data for 
Vitamin, nutrient, and hematinic preparations) does not appropriately 
capture the price of drugs that fall within the non-ESA cost category. 
Specifically, the commenters stated that Vitamin D analogs in this 
category, such as Doxercalciferol and Paricalcitol, are distinct from 
over-the-counter vitamins. They further assert that the non-ESA drugs 
in the bundle are unique chemical entities, Food and Drug 
Administration (FDA)-approved, and available by prescription only.
    These commenters suggested the use of the BLS series PPI Commodity 
data for Chemical and allied products--Drugs and Pharmaceuticals, 
seasonally adjusted (series ID WPS063) because it is based on 
prescription drugs and would include fewer over-the-counter drugs.
    Some commenters also noted that while the non-ESA drugs represent a 
small portion of overall cost of providing dialysis services currently, 
the proposed expansion of the transitional drug add-on payment 
adjustment (TDAPA) for all new renal dialysis drugs will likely result 
in a shift in the type and use of drugs (that is, the drug mix) that is 
included within the ESRD PPS bundled payment and introduce new oral 
products that deserve an accurate price proxy for updating.
    Response: We finalized the use of a blended price proxy for the 
pharmaceutical cost category in the CY 2015 ESRD final rule (79 FR 
66135). We proxied the ESA drugs in the 2012-based ESRDB market basket 
by the PPI for biological products, human use (PPI BPHU) and the non-
ESA drugs in the market basket by the PPI for Vitamin, Nutrient, and 
Hematinic preparations (PPI VNHP).
    We continue to believe that the PPI VNHP is the most technically 
appropriate price proxy for non-ESA drugs in the ESRDB market basket 
for several reasons. The non-ESA drugs included in the bundled per 
treatment amount are comprised primarily of vitamins and nutrients. 
While the PPI VNHP index does include over-the-counter drugs, it also 
includes prescription-required vitamins and nutrients. The commenters' 
suggested index--the PPI for Drugs and Pharmaceuticals--mostly reflects 
drugs that are not reimbursable under the ESRD PPS. Furthermore, 
prescription-required vitamins and nutrients (such as non-ESA drugs 
included in the ESRD bundled payment) would represent a small 
proportion of drugs represented in this index, making it less 
representative of the non-ESA drug prices. Furthermore, analysis of the 
ASP data over the period 2012 through 2017 found the prices of the non-
ESA drugs in the ESRD PPS bundle declined by 27.4 percent compared to 
the PPI VNHP which grew by 13.0 percent and the PPI for Drugs and 
Pharmaceuticals which increased by 34.5 percent.
    The non-ESA drugs represent 2.4 percent of total costs in the 2016-
based ESRDB market basket or 19 percent of all ESRD drug expenses for 
2016. In comparison, non-ESA drugs represented 3.6 percent of total 
costs in the 2012-based ESRDB market basket, or 22 percent of all drug 
costs. This indicates that from 2012 to 2016, the relative costs 
(reflecting both price and quantity) faced by ESRD facilities for non-
ESA drugs has grown slower than other ESRD costs included in the PPS 
ESRD bundle.
    Lastly, we disagree with the commenters' rationale that we should 
switch to an alternative price index in anticipation of potential 
shifts in the mix of drugs within the ESRD PPS bundled payment amount 
as a result of the proposed TDAPA provisions. Any impact that would 
result from the proposed TDAPA expansion are unknown at this time. We 
will continue to monitor the impact that these changes have on the 
relative cost share weights in the ESRDB market basket, over time, as 
reported on the MCR data. When appropriate we will rebase the ESRDB 
market basket to reflect observed shifts in cost weights.
    For the reasons stated above, we continue to believe it is 
technically appropriate to proxy the price change for non-ESA related 
drugs included in the ESRD PPS bundled payment by the PPI VNHP. 
Therefore, we are finalizing the PPI VNHP as the price proxy for non-
ESA drugs in the 2016-based ESRDB market basket.
    After consideration of public comments, we are finalizing the price 
proxies of the 2016-based ESRDB market basket as proposed--noting the 
error in the CY 2019 ESRD PPS proposed rule for the Housekeeping and 
Operations cost category.
ii. CY 2019 ESRDB Market Basket Update, Adjusted for Multifactor 
Productivity
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by the productivity 
adjustment. We proposed to use the 2016-based ESRDB market basket to 
compute the CY 2019 ESRDB market basket increase factor

[[Page 56961]]

and labor-related share. Consistent with historical practice, we 
estimate the ESRDB market basket update based on IHS Global Inc.'s 
(IGI's) 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.
a. Market Basket Update
    After consideration of public comments, we are finalizing the 
proposed 2016-based ESRDB market basket without modification. A 
comparison of the yearly changes from CY 2014 to CY 2021 for the 2012-
based ESRDB market basket and the final 2016-based ESRDB market basket 
is shown in Table 9.

 Table 9--Comparison of the 2012-Based ESRDB Market Basket and the Final 2016-Based ESRDB Market Basket, Percent
                                                Change, 2014-2021
----------------------------------------------------------------------------------------------------------------
                                                                 ESRDB Market    ESRDB Market      Difference
                                                                 basket, 2012-   basket, 2016-  (2016[dash]based
                                                                     based           based      less 2012-based)
----------------------------------------------------------------------------------------------------------------
Historical data:
    CY 2014...................................................             1.6             1.5             -0.1
    CY 2015...................................................             2.2             2.0             -0.2
    CY 2016...................................................             2.0             1.9             -0.1
    CY 2017...................................................             1.3             1.4              0.1
    Average CYs 2014-2017.....................................             1.8             1.7             -0.1
Forecast:
    CY 2018...................................................             1.7             1.7              0.0
    CY 2019...................................................             2.2             2.1             -0.1
    CY 2020...................................................             2.4             2.4              0.0
    CY 2021...................................................             2.5             2.4             -0.1
    Average CYs 2018-2021.....................................             2.2             2.2              0.0
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Inc. 3rd Quarter 2018 forecast with historical data through 2nd Quarter 2018.

    Table 9 shows that the forecasted rate of growth for CY 2019 for 
the 2016-based ESRDB market basket is 2.1 percent, which is 0.1 
percentage point lower than the rate of growth as estimated using the 
2012-based ESRDB market basket. The lower update is mainly due to a 
lower relative pharmaceuticals (particularly ESAs) cost weight in the 
2016-based ESRD market basket compared to the 2012-based ESRDB market 
basket,
    The growth rates in Table 9 are based on IHS Global Inc.'s (IGI) 
3rd quarter 2018 forecast. IGI is a nationally recognized economic and 
financial forecasting firm that contracts with CMS to forecast the 
components of the market baskets. We noted in the proposed rule that if 
more recent data were subsequently available (for example, a more 
recent estimate of the market basket), we would use such data to 
determine the market basket increases in the final rule. In the 
proposed rule the forecasted rate of growth for CY 2019, based on IGI's 
1st quarter 2018 forecast, for the 2016-based ESRDB market basket was 
2.2 percent (83 FR 34326).
b. Multifactor Productivity (MFP)
    Under section 1881(b)(14)(F)(i) of the Act, as amended by section 
3401(h) of the Affordable Care Act, for CY 2012 and each subsequent 
year, the ESRD market basket percentage increase factor shall be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. The multifactor productivity (MFP) is 
derived by subtracting the contribution of labor and capital input 
growth from output growth. The detailed methodology for deriving the 
MFP projection was finalized in the CY 2012 ESRD PPS final rule (76 FR 
70232 through 70235). The most up-to-date MFP projection methodology is 
available on the CMS website at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. We did not propose 
any changes to the methodology for the projection of the MFP 
adjustment.
    Based on IGI's 3rd quarter 2018 forecast with history through the 
2nd quarter of 2018, the projected MFP adjustment (the 10-year moving 
average of MFP for the period ending December 31, 2019) for CY 2019 is 
0.8 percent.
    We noted in the proposed rule that if more recent data were 
subsequently available (for example, a more recent estimate of the MFP 
adjustment), we would use such data to determine the MFP adjustment in 
the final rule. For comparison purposes, the proposed MFP adjustment 
for CY 2019 was 0.7 percent (83 FR 34327), and was based on IGI's 1st 
quarter 2018 forecast.
    The comments and our responses to the comments on the proposed MFP 
adjustment for CY 2019 are set forth below.
    Comment: Many commenters expressed their objection to the MFP 
adjustment to the ESRD PPS bundled payment update. Several commenters 
requested that CMS support development and adoption of a dialysis 
facility-specific productivity adjustment that: (1) Better reflects 
factors that affect opportunities for productivity gains over which 
dialysis providers have little, if any, control; and (2) account for 
the statutory reductions to the ESRD PPS already in place to account 
for expected gains in efficiency.
    The commenters provided several reasons why they believe that a MFP 
adjustment is not appropriate to apply to ESRD care which includes: 
overall rising labor costs, dialysis facilities compliance with 
staffing minimums to assure quality of care, the mix of contracted and 
staffed employment, increased labor costs due to wage pressures, and 
additional administrative costs to comply with quality incentive 
program (QIP) reporting requirements.
    One commenter noted that 55 percent of facilities have negative 
margins (as calculated by the Moran Company). The commenter also stated 
that MedPAC estimated ESRD margins at 0.5 percent. The commenter stated 
that these low margins challenge the idea that productivity can be 
improved year over year. One commenter further stated that the 
industry's ability to remain viable is directly tied to the unique 
private[hyphen]public partnership that supports the Medicare ESRD 
program.

[[Page 56962]]

    The commenters noted that current law requires CMS to apply an MFP 
adjustment. Regardless, they agree with the views of the Medicare Board 
of Trustees, per the 2018 Trustees Report, that unrealistic 
productivity gain targets could negatively impact beneficiaries' access 
to care and quality of service. The commenters encouraged CMS to work 
with the kidney care community to find a more appropriate adjustment 
and potentially encourage Congress to eliminate the MFP adjustment for 
ESRD facilities in the future.
    Response: Section 1881(b)(14)(F)(i) of the Act requires the 
application of the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act to the ESRD PPS market basket update 
for 2012 and subsequent years. We will continue to monitor the impact 
of the payment updates, including the effects of the MFP adjustment, on 
ESRD provider margins as well as beneficiary access to care as reported 
by MedPAC. However, as mentioned, any changes to the productivity 
adjustment would require a change to current law.
    In the March 2018 Report to Congress \3\, MedPAC found that 
outpatient dialysis payments are adequate, noting positive indicators 
for beneficiaries' access to care, the supply and capacity of 
providers, volume of services, quality of care, and access to capital.
---------------------------------------------------------------------------

    \3\ https://medpac.gov/docs/default-source/reports/mar18_medpac_ch6_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    While we understand that the kidney care community would like to 
find a more appropriate adjustment, such as an ESRD-specific MFP 
measure, we encourage commenters to discuss the feasibility of such 
measures with the Bureau of Labor Statistics, the agency that produces 
and publishes industry-level MFP. We would also refer commenters to the 
November 2006 article, ``Hospital Multifactor Productivity: A 
Presentation and Analysis of Two Methodologies'', published in the 
Health Care Financing Review \4\ that discusses challenges that exist 
in measuring health care specific multifactor productivity.
---------------------------------------------------------------------------

    \4\ D Cylus, Jonathan & A Dickensheets, Bridget. (2006). 
Hospital Multifactor Productivity: A Presentation and Analysis of 
Two Methodologies. Health care financing review. 29. 49-64.
---------------------------------------------------------------------------

    Finally, we understand that labor costs may be rising due to the 
tighter labor market and additional administrative costs resulting from 
QIP reporting requirements; however, we would remind commenters that 
these increased compensation pressures are taken into account within 
the annual market basket update. Increasing relative wage costs are 
reflected in a higher Wages and Salaries cost weight of 34.5 percent in 
the 2016-based ESRDB market basket compared to the 2012-based ESRDB 
market basket wage cost weight of 33.7 percent. Also, expected 
compensation pressures are taken into account via the annual forecasts 
of the price proxies for wages used in the annual payment update. The 
CY 2019 payment update of 2.1 percent reflects compensation prices 
increasing faster than the majority of the non-compensation price 
proxies, which is evident with a Compensation relative importance of 
about 45 percent in CY 2019 compared to the 2016 base weight of 43.6 
percent. The relative importance reflects the different rates of price 
change for cost categories between the base year (2016) and CY 2019.
c. Market Basket Update Adjusted for Multifactor Productivity (MFP)
    As a result of these provisions, the CY 2019 ESRDB market basket 
increase is 1.3 percent. This market basket increase is calculated by 
starting with the 2016-based ESRDB market basket percentage increase 
factor of 2.1 percent for CY 2019, and reducing it by the MFP 
adjustment (the 10-year moving average of MFP for the period ending CY 
2019) of 0.8 percentage point.
    The CY 2019 ESRDB increase factor would be 0.1 percentage point 
higher if we used the 2012-based ESRDB market basket. That is, the CY 
2019 ESRDB market basket increase factor is 1.4 percent using the 2012-
based ESRDB market basket.
    The comments and our response to the comments on the proposed CY 
2019 market basket increase are set forth below.
    Comment: Several commenters supported the proposed market basket 
update for CY 2019.
    Response: We appreciate the commenters' support. The proposed 1.5 
percent payment increase was based on IGI's 1st quarter 2018 forecast 
of the proposed 2016-based ESRDB market basket and the 10-year moving 
average of annual economy-wide private nonfarm business MFP. As noted 
in the proposed rule, if a more recent forecast of the market basket 
and MFP adjustment becomes available, we would use such data to 
determine the CY 2019 market basket update and MFP adjustment in the 
final rule. Based on IGI's more recent 3rd quarter 2018 forecast, we 
determined a payment increase of 1.3 percent for the final update 
percentage.
iii. Labor-Related Share for ESRD PPS
    We define the labor-related share as those expenses that are labor-
intensive and vary with, or are influenced by, the local labor market. 
The labor-related share of a market basket is determined by identifying 
the national average proportion of operating costs that are related to, 
influenced by, or vary with the local labor market. The labor-related 
share is typically the sum of Wages and Salaries, Benefits, 
Professional Fees, Labor-related Services, and a portion of Capital 
from a given market basket.
    We proposed to use the 2016-based ESRDB market basket cost weights 
to determine the labor-related share for ESRD facilities. Therefore, 
effective for CY 2019, we proposed a labor-related share of 52.3 
percent, slightly higher than the current 50.673 percent that was based 
on the 2012-based ESRDB market basket, as shown in Table 10. We 
proposed to move the labor-related share to a one decimal level of 
precision rather than the three decimal level of precision used 
previously. CMS is migrating all payment system labor-related shares to 
a one decimal level of precision. These figures represent the sum of 
Wages and Salaries, Benefits, Housekeeping and Operations, 87 percent 
of the weight for Professional Fees (details discussed below), and 46 
percent of the weight for Capital-related Building and Equipment 
expenses (details discussed below). We used the same methodology for 
the 2012-based ESRDB market basket.

  Table 10--CY 2019 Labor-Related Share and CY 2018 Labor-Related Share
------------------------------------------------------------------------
                                           CY 2019 ESRD    CY 2018 ESRD
              Cost category                labor-related   labor-related
                                               share           share
------------------------------------------------------------------------
Wages and Salaries......................            34.5          33.650
Employee Benefits.......................             9.1           8.847
Housekeeping and Operations.............             3.9           3.785

[[Page 56963]]

 
Professional Fees (Labor-Related).......             0.6           0.537
Capital Labor-Related...................             4.2           3.854
Total Labor-Related Share...............            52.3          50.673
------------------------------------------------------------------------

    The labor-related share for Professional Fees reflects the 
proportion of ESRD facilities' professional fees expenses that we 
believe vary with local labor market (87 percent). We conducted a 
survey of ESRD facilities in 2008 to better understand the proportion 
of contracted professional services that ESRD facilities typically 
purchase outside of their local labor market. These purchased 
professional services include functions such as accounting and 
auditing, management consulting, engineering, and legal services. Based 
on the survey results, we determined that, on average, 87 percent of 
professional services are purchased from local firms and 13 percent are 
purchased from businesses located outside of the ESRD's local labor 
market. Thus, we include 87 percent of the cost weight for Professional 
Fees in the labor-related share (87 percent is the same percentage as 
used in prior years).
    The labor-related share for capital-related expenses reflects the 
proportion of ESRD facilities' capital-related expenses that we believe 
varies with local labor market wages (46 percent of ESRD facilities' 
Capital-related Building and Equipment expenses). Capital-related 
expenses are affected in some proportion by variations in local labor 
market costs (such as construction worker wages) that are reflected in 
the price of the capital asset. However, many other inputs that 
determine capital costs are not related to local labor market costs, 
such as interest rates. The 46-percent figure is based on regressions 
run for the inpatient hospital capital PPS in 1991 (56 FR 43375). We 
use a similar methodology to calculate capital-related expenses for the 
labor-related shares for rehabilitation facilities (70 FR 30233), 
psychiatric facilities, long-term care facilities, and skilled nursing 
facilities (66 FR 39585).
    The comments and our response to the comments on the proposed 
labor-related share for CY 2019 are set forth below.
    Comment: Several commenters supported the proposal to increase the 
labor-related share for CY 2019 to 52.3 percent.
    Response: We appreciate the commenters' support of the proposed 
labor-related share of 52.3 percent. This increase in the ESRD labor-
related share reflects the relative increase in labor-related costs 
compared to non-labor-related costs that ESRD facilities have 
experienced since 2012.
    After consideration of public comments, CMS is finalizing the 
labor-related share of 52.3 percent, as proposed.
b. The CY 2019 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 49200), we finalized an adjustment for wages at Sec.  
413.231. Specifically, CMS adjusts the labor-related portion of the 
base rate to account for geographic differences in the area wage levels 
using an appropriate wage index which reflects the relative level of 
hospital wages and wage-related costs in the geographic area in which 
the ESRD facility is located. We use the Office of Management and 
Budget's (OMB's) CBSA-based geographic area designations to define 
urban and rural areas and their corresponding wage index values (75 FR 
49117). OMB publishes bulletins regarding CBSA changes, including 
changes to CBSA numbers and titles. The bulletins are available online 
at https://www.whitehouse.gov/omb/bulletins/.
    For CY 2019, we updated the wage indices to account for updated 
wage levels in areas in which ESRD facilities are located using our 
existing methodology. We use the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the inpatient 
PPS. The ESRD PPS wage index values are calculated without regard to 
geographic reclassifications authorized under sections 1886(d)(8) and 
(d)(10) of the Act and utilize pre-floor hospital data that are 
unadjusted for occupational mix. The final CY 2019 wage index values 
for urban areas are listed in Addendum A (Wage Indices for Urban Areas) 
and the final CY 2019 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 website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    We have also adopted methodologies for calculating wage index 
values for ESRD facilities that are located in urban and rural areas 
where there is no hospital data. For a full discussion, we refer 
readers to the CY 2011 and CY 2012 ESRD PPS final rules at 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. We apply the statewide urban 
average based on the average of all urban areas within the state to 
Hinesville-Fort Stewart, Georgia (78 FR 72173), and we apply the wage 
index for Guam to American Samoa and the Northern Mariana Islands (78 
FR 72172). A wage index floor value is applied under the ESRD PPS as a 
substitute wage index for areas with very low wage index values. 
Currently, all areas with wage index values that fall below the floor 
are located in Puerto Rico. However, the wage index floor value is 
applicable for any area that may fall below the floor.
    In the CY 2011 ESRD PPS final rule (75 FR 49116 through 49117), we 
finalized a policy to reduce the wage index floor by 0.05 for each of 
the remaining years of the ESRD PPS transition, that is, until CY 2014. 
We applied a 0.05 reduction to the wage index floor for CYs 2012 and 
2013, resulting in a wage index floor of 0.55 and 0.50, respectively 
(CY 2012 ESRD PPS final rule, 76 FR 70241). We continued to apply and 
reduce the wage index floor by 0.05 in CY 2013 (77 FR 67459 through 
67461). Although we only intended to provide a wage index

[[Page 56964]]

floor during the 4-year transition in the CY 2014 ESRD PPS final rule 
(78 FR 72173), we decided to continue to apply the wage index floor and 
reduce it 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 
decided to maintain a wage index floor of 0.40, rather than further 
reduce the floor by 0.05. We stated 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 (80 FR 69006).
    In the CY 2017 ESRD PPS proposed rule (81 FR 42817), we presented 
the findings from analyses of ESRD facility cost report and claims data 
submitted by facilities located in Puerto Rico and mainland facilities. 
We solicited public comments on the wage index for CBSAs in Puerto Rico 
as part of our continuing effort to determine an appropriate policy. We 
did not propose to change the wage index floor for CBSAs in Puerto 
Rico, but we requested public comments in which stakeholders could 
provide useful input for consideration in future decision-making. 
Specifically, we solicited comment on the suggestions that were 
submitted in the CY 2016 ESRD PPS final rule (80 FR 69007). After 
considering the public comments we received regarding the wage index 
floor, we finalized a wage index floor of 0.40 in the CY 2017 ESRD PPS 
final rule (81 FR 77858).
    In the CY 2018 ESRD PPS final rule (82 FR 50747), we finalized a 
policy to maintain the wage index floor of 0.40 for CY 2018 and 
subsequent years, because we believed it was appropriate and continuing 
to provide additional payment support to the lowest wage areas. It also 
obviated the need for an additional budget-neutrality adjustment that 
would reduce the ESRD PPS base rate, beyond the adjustment needed to 
reflect updated hospital wage data, in order to maintain budget 
neutrality for wage index updates.
ii. Wage Index Floor for CY 2019 and Subsequent Years
    For CY 2019 and subsequent years, we proposed to increase the wage 
index floor to 0.50. As we explained in the CY 2019 ESRD PPS proposed 
rule, this wage floor increase would be responsive to stakeholder 
comments, safeguard access to care in areas at the lowest end of the 
current wage index distribution, and be supported by data, as discussed 
below, which supports a higher wage index floor. We noted that 
stakeholders, particularly those located in Puerto Rico, have described 
the adverse impact the low wage index floor value has on a facility, 
such as closure and the resulting impact on access to care. Also, 
natural disasters (for example, hurricanes, floods) common to this 
geographic area can cause significant infrastructure issues, create 
limited resources, and create conditions that may accelerate kidney 
failure in patients predisposed to chronic kidney disease, all of which 
have a significant impact on renal dialysis services. These negative 
effects of natural disasters on the local economy affect wages and 
salaries. For example, there is the potential of the outmigration of 
qualified staff that would cause a facility the need to change its 
hiring practices or increase the wages that it would otherwise pay had 
there not been a natural disaster.
    We noted that in response to the CY 2018 ESRD PPS proposed rule, 
commenters described the economic and health care crisis in Puerto Rico 
and recommended that CMS use the United States (U.S.) Virgin Islands 
wage index for payment rate calculations in Puerto Rico as a proxy for 
CY 2018.
    Commenters indicated that the primary issue is that Puerto Rico 
hospitals report comparatively lower wages that are not adjusted for 
occupational mix and, as indicated in the CY 2017 ESRD PPS proposed 
rule (81 FR 42817), in Puerto Rico, only registered nurses (RNs) can 
provide dialysis therapy in the outpatient setting. Commenters 
explained that this staffing variable artificially lowers the 
reportable index values even though the actual costs of dialysis 
service wages in Puerto Rico are much higher than the data CMS is 
relying upon. In addition, several commenters stated that non-labor 
costs, including utilities and shipping costs and the CY 2015 change in 
the labor-share based on the rebased and revised ESRDB market basket 
compound the issue even further. One organization stated that it did 
not believe maintaining the current wage index for Puerto Rico for CY 
2018 would be enough to offset the poor economic conditions, high 
operational costs and epidemiologic burden of ESRD on the island.
    Since we did not propose to change the wage index floor or 
otherwise change the wage indexes for Puerto Rico in the CY 2018 ESRD 
PPS proposed rule, we maintained the wage index floor of 0.40 for CY 
2018. We noted that the current wage index floor and labor-related 
share have been in effect since CY 2015 and neither the floor nor the 
labor share has been reduced since then. We also explained that the 
wage index is solely intended to reflect differences in labor costs and 
not to account for non-labor cost differences, such as utilities or 
shipping costs (82 FR 50747).
    With regard to staffing in Puerto Rico facilities, we noted that 
ESRD facilities there utilize RNs similarly to ESRD facilities on the 
mainland, that is, facilities utilize dialysis technicians and aides to 
provide dialysis services with oversight by an RN, and that hourly 
wages for RNs and dialysis support staff were approximately half of 
those salaries in mainland ESRD facilities. For those reasons, we 
stated that we did not agree that the hospital-reported data is 
unreliable, and we believed using that data is more appropriate than 
applying the wage index value for the Virgin Islands where salaries are 
considerably higher.
    We explained in the CY 2019 ESRD PPS proposed rule that even though 
we did not propose a change in the wage index floor for CY 2018, we 
continued to analyze the cost of furnishing dialysis care in Puerto 
Rico, staffing in Puerto Rico ESRD facilities and hospital wage data. 
We stated that while we found the analyses to be inconclusive for the 
CY2018 ESRD PPS final rule (82 FR 50746), in light of the recent 
natural disasters that profoundly impacted delivery of ESRD care in 
Puerto Rico, we revisited the analyses and concluded that we should 
propose a new wage index floor. We conducted various analyses to test 
the reasonableness of the current wage index floor value of 0.40. The 
details of these analyses and our proposal for CY 2019 are provided 
below.
a. Analysis of Puerto Rico Cost Reports
    We performed an analysis using cost reports and wage information 
specific to Puerto Rico from the BLS (https://www.bls.gov/oes/2015/may/oes_pr.htm).
     The analysis utilized data from cost reports for 
freestanding facilities and for hospital-based facilities in Puerto 
Rico for CYs 2013 through 2015. We noted that the available variables 
differ between these two sources. For freestanding facilities, data 
were obtained regarding treatment counts, costs, salaries, benefits, 
and FTEs by labor category. For hospital-based facilities, a more 
limited set of variables are available for treatment counts and FTEs.
     We annualized cost report data for each facility in order 
to create one cost report record per facility per calendar. If cost 
report forms were submitted at a non-calendar-year cycle, multiple cost 
report records were proportionated and combined in order to create an 
annualized cost report record.

[[Page 56965]]

     We calculated weighted means across all facilities for 
each variable. The means were weighted by treatment counts, where 
facilities with more treatment counts contributed more to the value of 
the overall mean.
    Using this data, we calculated alternative wage indices for Puerto 
Rico that combined labor quantities (FTEs) from cost reports with BLS 
wage information to create two regular Laspeyres price indexes. The 
Laspeyres index can be thought of as a price index in which there are 
two prices for goods (prices for labor FTEs in Puerto Rico and the 
mainland U.S.), where the distribution of goods (labor share of FTEs) 
is held constant (across Puerto Rico and the U.S.). The first index 
used quantity weights from the overall U.S. use of labor inputs. The 
second index used quantity weights from the Puerto Rico use of labor 
inputs.
    The alternative wage indices derived from the analysis indicated 
that Puerto Rico's wage index likely lies between 0.51 and 0.55. Both 
of these values are above the current wage index floor and suggested 
that the current 0.40 wage index floor may be too low.
b. Statistical Analysis of the Distribution of the Wage Index
    We also performed a statistical outlier analysis to identify the 
upper and lower boundaries of the distribution of the current wage 
index values and remove outlier values at the edges of the 
distribution.
    In the general sense, an outlier is an observation that lies an 
abnormal distance from other values in a population. In this case, the 
population of values is the various wage indices within the CY 2019 
wage index. The lower and upper quartiles (the 25th and 75th 
percentiles) are also used. The lower quartile is Q1 and the upper 
quartile is Q3. The difference (Q3 - Q1) is called the interquartile 
range (IQR). The IQR is used in calculating the inner and outer fences 
of a data set. The inner fences are needed for identifying mild outlier 
values in the edges of the distribution of a data set. Any values in 
the data set that are outside of the inner fences are identified as an 
outlier. The standard multiplying value for identifying the inner 
fences is 1.5.
    First, we identified the Q1 and Q3 quartiles of the CY 2018 wage 
index, which are as follows: Q1 = 0.8303 and Q3 = 0.9881. Next, we 
identified the IQR: IQR = 0.9881 - 0.8303 = 0.578. Finally, we 
identified the inner fence values as shown below.
Lower inner fence: Q1 - 1.5*IQR = 0.8303 - (1.5 x 0.1578) = 0.5936
Upper inner fence: Q3 + 1.5*IQR = .881 + (1.5 x 0.1578) = 1.2248

    This statistical outlier analysis demonstrated that any wage index 
values less than 0.5936 are considered outlier values, and 0.5936 as 
the lower boundary also suggested that the current wage index floor 
could be appropriately reset at a higher level.
    Based on these analyses, we proposed a wage index floor of 0.50. We 
noted that we believe this increase from the current 0.40 wage index 
floor value minimizes the impact to the ESRD PPS base rate while 
providing increased payment to areas that need it. We considered the 
various wage index floor values based on our analyses. We noted that 
while the statistical analysis supports our decision to propose a 
higher wage index floor, the cost report analysis is more definitive as 
it is based on reported wages using an alternative data source. As a 
result, we considered wage index floor values between 0.40 and 0.55 and 
proposed 0.50 in an effort to strike a balance between providing 
additional payments to affected areas while minimizing the impact on 
the base rate. We stated that we believe the proposed 25 percent 
increase from the current 0.40 value would help to address stakeholder 
requests for a higher wage index floor, would minimize patient access 
issues, and would have a lower impact to the base rate than if we 
proposed a higher wage index floor value.
    We noted that the wage index floor directly affects the base rate 
and currently, only rural Puerto Rico and four urban CBSAs in Puerto 
Rico receive the wage index floor of 0.40. The next lowest wage index 
is in the Wheeling, West Virginia CBSA with a value of 0.6598. Under 
our proposal, all CBSAs in Puerto Rico would receive the wage index 
floor of 0.50. Though the proposed wage index value currently affects 
CBSAs in Puerto Rico, we noted that, consistent with our established 
policy, any CBSA that falls below the floor would be eligible to 
receive the floor. We solicited comment on the proposal to increase the 
wage index floor from 0.40 to 0.50 for CY 2019 and beyond.
iii. 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 section II.B.3.b.iv of this final rule, we 
finalized the labor-related share of 52.3 percent, which is based on 
the final 2016-based ESRDB market basket. Thus, for CY 2019, the labor-
related share to which a facility's wage index would be applied is 52.3 
percent.
iv. New Urban Core-Based Statistical Area (CBSA)
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provide detailed information on the update to statistical areas since 
July 15, 2015, and are based on the application of the 2010 Standards 
for Delineating Metropolitan and Micropolitan Statistical Areas to the 
U.S. Census Bureau population estimates for July 1, 2014 and July 1, 
2015. In OMB Bulletin No. 17-01, OMB announced that one Micropolitan 
Statistical Area now qualifies as a Metropolitan Statistical Area. The 
new urban CBSA is as follows:
     Twin Falls, Idaho (CBSA 46300). This CBSA is comprised of 
the principal city of Twin Falls, Idaho in Jerome County, Idaho and 
Twin Falls County, Idaho.
    The OMB bulletin is available on the OMB website at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. In the CY 2019 ESRD PPS proposed rule (83 FR 34330) we noted 
that we did not have sufficient time to include this change in the 
computation of the proposed CY 2019 wage index, rate setting, and 
Addenda associated with this proposed rule and stated that this new 
CBSA may affect the budget neutrality factors and wage indexes, 
depending on the impact of the overall payments of the hospital located 
in this new CBSA. However, we provided an estimate of this new area's 
wage index based on the average hourly wage, unadjusted for 
occupational mix, for new CBSA 46300 and the national average hourly 
wages from the wage data for the proposed CY 2019 wage index. We noted 
that currently, provider 130002 is the only hospital located in Twin 
Falls County, Idaho, and there are no hospitals located in Jerome 
County, Idaho. Thus, the proposed wage index for CBSA 46300 was 
calculated using the average hourly wage data for one provider 
(provider 130002). Taking the estimated unadjusted average hourly wage 
of $35.833564813 of the new CBSA 46300 and dividing by the national 
average hourly wage of $42.990625267 resulted in the proposed estimated 
wage index of 0.8335 for CBSA 46300.
    We noted that in the final rule, we would incorporate this change 
into the final CY 2019 ESRD PPS wage index, rate setting and Addenda. 
Thus, for CY 2019, we are using the OMB delineations that were adopted

[[Page 56966]]

beginning with CY 2015 to calculate the area wage indexes, with updates 
as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01.
    The comments and our responses to the comments on our proposed 
revisions to the wage index floor are set forth below.
    Comment: MedPAC commented that its standing position, as stated in 
its June 2007 report to the Congress, is that creating rural floors and 
implementing other changes (for example, exceptions and 
reclassifications) to a wage index system distorts area wage indexes. 
In addition, the Commission stated that the current ESRD PPS wage index 
is flawed in that it is based only on data from hospitals, rather than 
data for all of the health care providers in a given market. In place 
of using the hospital wage index for ESRD facilities, MedPAC 
recommended that CMS establish an ESRD PPS wage index for all ESRD 
facilities (not just those located in Puerto Rico) that: (1) Uses wage 
data representing all employers and industry-specific occupational 
weights; (2) is adjusted for geographic differences in the ratio of 
benefits to wages; (3) is adjusted at the county level and smooths 
large differences between counties; and (4) is implemented so that 
large changes in wage index values are phased in over a transition 
period.
    MedPAC commented that this alternative approach to the wage index 
is based on wage data from BLS and the Census Bureau, and benefits data 
from provider cost reports submitted to CMS. The Commission noted that 
CMS's analysis of alternative wage indices (ranging between 0.510 and 
0.550) for Puerto Rico also combined labor data from provider (ESRD 
facilities) cost reports with BLS wage information and recommended CMS 
provide additional documentation of its analysis to determine the two 
alternative wage indices for Puerto Rico.
    Response: As described in the CY 2019 ESRD PPS proposed rule (83 FR 
34328 through 34330), the analysis we conducted to test the 
reasonableness of the current wage index floor used wages from the BLS 
and full-time equivalents (FTEs) by occupation reported on the cost 
reports for independent facilities. Specifically, we calculated labor 
weights by occupation for Puerto Rico and the greater U.S. as the 
treatment-weighted average of the FTEs reported on independent facility 
cost reports. We did not include hospital-based cost report data 
because the occupations for which the FTEs were reported were not 
identical between independent and hospital-based cost reports (for 
example, hospital cost reports do not have FTEs for administrative and 
management staff associated with renal units). Although we used the 
wages from the BLS data, we did not use benefits data and therefore we 
did not adjust for geographic differences in the ratio of benefits to 
wages.
    The values of 0.510 and 0.550 are the calculated 2015 wage index 
values based on the use of FTEs specific to Puerto Rico and the greater 
U.S., respectively. The 2015 wage index based on Puerto Rico FTEs is a 
standard Laspeyres price (wage) index that used quantity weights from 
the reported composition of FTEs in Puerto Rico, such that the wage 
index can be represented as the FTE-weighted sum of Puerto Rico wages 
by occupation divided by the FTE-weighted sum of U.S. wages by 
occupation. Note that the numerator and denominator in this formula use 
the same FTEs. Similarly, we constructed the 2015 wage index based on 
U.S. FTEs as a standard Laspeyres price index using quantity weights 
from the reported composition of FTEs in the U.S. The wage index value 
in each of these calculated indices exceeds the current wage floor, 
suggesting that the current wage index may not adequately capture the 
full cost of labor at dialysis facilities operating in Puerto Rico. 
Also, we did not calculate the wage index at the county level because 
the analysis was aimed at calculating a single wage index for all of 
Puerto Rico. We appreciate MedPAC's feedback on the current wage index 
and suggestions for establishing a new wage index for the ESRD PPS and 
will consider the Commission's recommendations for future rulemaking.
    Comment: Several commenters, including a national dialysis provider 
organization, two LDOs, and an insurance company expressed support for 
the proposal to increase the wage index from 0.40 in 2018 to 0.50 in 
2019, because they believe it will assist dialysis clinics in providing 
access to high-quality care particularly in rural areas where access 
challenges may be present.
    Another insurance company urged CMS to take another look at the 
amount of the wage index increase. This commenter pointed out that in 
the proposed rule, CMS noted that its analysis indicates that the wage 
index in Puerto Rico likely lies between 0.51 and 0.55. The commenter 
urged the adoption of the 0.55 level as most accurately reflecting the 
post-hurricane wage environment, which includes provider migration and 
higher costs for capital and utilities.
    A coalition of Puerto Rico stakeholders and a dialysis organization 
expressed support for CMS's position that the current wage index floor 
is too low and steps should be taken to increase it. While they 
appreciate any increase in ESRD fee for service (FFS) rates that move 
payment closer to a level where providers can cover costs, they stated 
CMS has an opportunity to further narrow the gap between FFS rates and 
costs in Puerto Rico so that ESRD providers are not wholly dependent on 
rates from Medicare Advantage plans to sustain operations. The dialysis 
organization stated that while an incremental increase would move the 
gauge toward better alignment with costs, the 0.50 falls far short, and 
would perpetuate a cycle of rate challenges for the healthcare 
stakeholders and high dialysis patient mortality and hospitalization 
rates.
    The stakeholders recommended CMS evaluate increasing the floor to 
0.70 to mitigate the distance of payments for dialysis services in 
critical areas relative to the range of wage index levels across the 
nation. They pointed out this amount is still lower than most 
jurisdictions, including the U.S. Virgin Islands, but could support a 
tangible and meaningful change in FFS payments considering the need for 
these services, as Puerto Rico goes through a crucial disaster recovery 
period. The stakeholders asserted that this wage index floor is 
necessary to reduce the flight of health care providers out of Puerto 
Rico, and this level of wage index floor would be related to actual 
wage indices in the states. The commenters stated that CMS should use 
its administrative authority to adjust payment formulas in Puerto Rico 
to address the endemic problems in the health care system: Provider 
migration due to low wages and reimbursement; poor infrastructure; 
higher costs for capital and utilities. The commenter estimated 
increasing the wage index floor to 0.70 could raise the Puerto Rico 
ESRD PPS rate to approximately $200 to $212 per episode, which would 
represent an approximate 18 percent increase over the 2018 rate.
    At a minimum, they recommended CMS set the wage index floor at 
0.5936, which was identified as the lower boundary of CMS's statistical 
outlier analysis. They also recommended CMS conduct a new survey on 
ESRD wages in Puerto Rico that distinguishes inpatient facility wages 
from outpatient facility wages, and recognizes the value of proposed 
increases on all the high cost health care factors faced by Puerto Rico 
in the wake of Hurricanes Irma and Maria. They pointed out the 
professional scope of practice for technicians is different between

[[Page 56967]]

inpatient and outpatient facilities in Puerto Rico. They noted that 
while such technicians are permitted to assist in ESRD care under the 
supervision of an RN in inpatient facilities, this is not the case in 
outpatient facilities where RNs must provide all the care per local 
scope of practice laws. Therefore, to get a fully accurate projection 
of wage costs for ESRD providers in Puerto Rico, they recommended CMS 
evaluate inpatient and outpatient facility data separately.
    A dialysis provider also stated the recruitment of bilingual staff 
and the shortage of bilingual RN's is a huge challenge. They pointed 
out the databases and websites used by all facilities are all English 
based and facilities must hire additional staff to work around the 
language barriers, and the current methodology and payment policies do 
not capture this anomaly. Although they expressed support for the wage 
index floor increase from 0.40 to 0.50, they pointed out CMS's analysis 
shows that Puerto Rico's wage index ``likely lies between 0.51 and 
0.55'', while additional analyses note that any wage index values less 
than 0.5936 are considered outlier values, with 0.5936 therefore as the 
lower wage index boundary. They expressed concern that CMS proposed a 
new floor of only 0.50 despite CMS's own analyses and recognition that 
the present methodology applied to Puerto Rico has created the only 
outlier in the U.S.
    Response: As we stated in the CY 2019 ESRD PPS proposed rule, we 
continue to believe that a wage index floor of 0.50 strikes an 
appropriate balance between providing additional payments to areas that 
fall below the wage floor while minimizing the impact on the ESRD PPS 
base rate. The analyses were conducted to gauge the appropriateness of 
the current wage index floor and determine whether it is too low; we 
did not propose to use these analyses to determine the exact value for 
a new wage index floor. Instead, we considered these analyses along 
with the hospital wage data to determine an appropriate policy for a 
wage index floor. The purpose of the wage index adjustment is to 
recognize differences in ESRD facility resource use for wages specific 
to the geographic area in which facilities are located. While a wage 
index floor of 0.50 would continue to be the lowest wage index 
nationwide, we note that the areas subject to the floor continue to 
have the lowest wages compared to mainland facilities. We note that an 
increase to the wage index floor to 0.50 is a 25 percent increase over 
the current floor and will provide a higher wage index for all 
facilities in Puerto Rico where wage indexes, based on hospital 
reported data, range from .33 to .44. For these reasons, we believe a 
wage index floor of 0.50 is appropriate and will support labor costs in 
low wage areas.
    With regard to concerns raised about the need to hire bilingual 
RNs, the need for bilingual staff occurs in both inpatient and 
outpatient settings and hospital cost reports should reflect those 
additional costs. We note that in every analysis we conducted, the 
average salary of RNs in Puerto Rico was approximately half that of 
mainland facilities and none of the analyses produced a 0.70 wage index 
value. We do not believe it is appropriate to raise the wage index 
floor to 0.70 in order to mitigate non-labor losses from the disaster. 
The wage index adjustment is intended to recognize geographic 
differences in wage levels in areas in which ESRD facilities are 
located. As such it would not be appropriate to utilize the wage index 
floor policy to address infrastructure, capital, and other non-labor 
related costs.
    With regard to the use of RNs in Puerto Rico facilities, we have 
received conflicting information from Puerto Rico about the how local 
scope of practice for RNs and other staff impact ESRD facility costs. 
We are continuing to explore alternative methodologies for accounting 
for the labor-related costs of all Medicare providers and we may 
revisit the use of a wage index floor under the ESRD PPS in that 
context.
    Final Rule Action: After considering the public comments we 
received regarding the wage index floor, we are finalizing an increase 
to the wage index floor from 0.40 to 0.50 for CY 2019 and subsequent 
years as proposed. Currently, all areas with wage index values that 
fall below the floor are located in Puerto Rico. However, the wage 
index floor value is applicable for any area that may fall below the 
floor. For CY 2019, the labor-related share to which a facility's wage 
index is applied is 52.3 percent, based on the finalized 2016-based 
ESRDB market basket which is discussed in section II.B.2 of this final 
rule.
c. Final CY 2019 Update to the Outlier Policy
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Some examples of the patient 
conditions that may be reflective of higher facility costs when 
furnishing dialysis care would be frailty, obesity, and comorbidities, 
such as cancer. The ESRD PPS recognizes high cost patients, and we have 
codified the outlier policy and our methodology for calculating outlier 
payments at Sec.  413.237. The policy provides that the following ESRD 
outlier items and services are included in the ESRD PPS bundle: (1) 
ESRD-related drugs and biologicals that were or would have been, prior 
to January 1, 2011, separately billable under Medicare Part B; (2) 
ESRD-related laboratory tests that were or would have been, prior to 
January 1, 2011, separately billable under Medicare Part B; (3) 
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 (4) renal dialysis 
services drugs that were or would have been, prior to January 1, 2011, 
covered under Medicare Part D, including ESRD-related oral-only drugs 
effective January 1, 2025.
    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 Medicare 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

[[Page 56968]]

the list of renal dialysis items and services that qualify as outlier 
services, which are made through administrative issuances.
    Under Sec.  413.237, 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 
and described below) plus the fixed-dollar loss (FDL) 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 and at Sec.  413.220(b)(4), 
using 2007 data, we established the outlier percentage, which is used 
to reduce the per treatment base rate to account for the proportion of 
the estimated total payments under the ESRD PPS that are outlier 
payments, at 1.0 percent of total payments (75 FR 49142 through 49143). 
We also established the FDL amounts that are added to the predicted 
outlier services MAP amounts. The outlier services MAP amounts and FDL 
amounts are different for adult and pediatric patients due to 
differences in the utilization of separately billable services among 
adult and pediatric patients (75 FR 49140). As we explained in the CY 
2011 ESRD PPS final rule (75 FR 49138 through 49139), the predicted 
outlier services MAP amounts for a patient are determined by 
multiplying the adjusted average outlier services MAP amount by the 
product of the patient-specific case-mix adjusters applicable using the 
outlier services payment multipliers developed from the regression 
analysis to compute the payment adjustments.
    For CY 2019, we proposed that the outlier services MAP amounts and 
FDL amounts would be derived from claims data from CY 2017. 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 the outlier 
thresholds for CY 2019 would be based on utilization of renal dialysis 
items and services furnished under the ESRD PPS in CY 2017. We stated 
in the CY 2019 ESRD PPS proposed rule that 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 FDL amounts every year under the ESRD PPS.
i. CY 2019 Update to the Outlier Services Medicare Allowable Payment 
(MAP) Amounts and Fixed Dollar Loss (FDL) Amounts
    For this final rule, the outlier services MAP amounts and FDL 
amounts were updated using 2017 claims data. The impact of this update 
is shown in Table 11, which compares the outlier services MAP amounts 
and FDL amounts used for the outlier policy in CY 2018 with the updated 
final estimates for this rule. The estimates for the final CY 2019 
outlier policy, which are included in Column II of Table 11, were 
inflation adjusted to reflect projected 2019 prices for outlier 
services.

               Table 11--Outlier Policy: Impact of Using Updated Data to Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                   Column I final outlier policy  Column II final outlier policy
                                                    for CY 2018 (based on 2016      for CY 2019 (based on 2017
                                                   data, price inflated to 2018)   data, price inflated to 2019)
                                                                 *               -------------------------------
                                                 --------------------------------
                                                     Age < 18        Age >= 18       Age < 18        Age >= 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $37.41          $44.27          $34.18          $40.18
 treatment......................................
Adjustments.....................................  ..............  ..............  ..............  ..............
    Standardization for outlier services........          1.0177          0.9774          1.0503          0.9779
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount           37.31           42.41           35.18           38.51
Fixed-dollar loss amount that is added to the              47.79           77.54           57.14           65.11
 predicted MAP to determine the outlier
 threshold......................................
Patient-month-facilities qualifying for outlier             9.0%            7.4%            7.2%            8.2%
 payment........................................
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table 11, the estimated FDL amount per treatment 
that determines the CY 2019 outlier threshold amount for adults (Column 
II; $40.18) is lower than that used for the CY 2018 outlier policy 
(Column I; $44.27). The lower threshold is accompanied by a decrease in 
the adjusted average MAP for outlier services from $42.41 to $38.51. 
For pediatric patients, there is an increase in the FDL amount from 
$47.79 to $57.14. There is a corresponding decrease in the adjusted 
average MAP for outlier services among pediatric patients, from $37.31 
to $35.18.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2019 will be 8.2 percent for adult patients and 
7.2 percent for pediatric patients, based on the 2017 claims data. The 
pediatric outlier MAP and FDL 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) and under Sec.  
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 as described in Sec.  413.237. For 
this final rule and based on the 2017 claims, outlier payments 
represented approximately 0.80 percent of total payments, slightly 
below the 1 percent target due to declines in the use of outlier 
services. Recalibration of the thresholds using 2017 data is expected 
to result in aggregate outlier payments close to the 1 percent target 
in CY 2019. We believe the update to the outlier MAP and FDL amounts 
for CY 2019 would increase payments for ESRD beneficiaries requiring 
higher resource utilization and move us closer to meeting our 1 percent 
outlier policy because we are using more current data for computing the 
MAP and FDL which is more in line with current outlier services 
utilization rates. We note that recalibration of the FDL amounts in 
this

[[Page 56969]]

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, as well as co-insurance 
obligations for beneficiaries with renal dialysis services eligible for 
outlier payments.
    The comments and our responses to the comments on our proposed 
updates to the outlier policy are set forth below.
    Comment: Although we did not propose changes to the outlier target 
percentage or methodology for computing the MAP or FDL amounts, we 
received many comments regarding the difference between estimated 
outlier payments and the 1.0 percent outlier target.
    An LDO and a patient advocacy organization pointed out that since 
its inception, the outlier policy has not consistently achieved parity 
in distributing dollars withheld to fund the pool. The commenters 
stated that although the undistributed outlier pool dollars may not 
represent a significant amount per treatment, their analyses estimate 
that since 2011, $5.48 per treatment has been removed from the ESRD PPS 
by outlier pool underpayments. They noted that the outlier pool's 
imperfect performance further supports their view that it is 
inappropriate to extend the outlier policy to new drugs and biologicals 
upon the expiration of the TDAPA. The patient advocacy organization 
stated that although the use of updated claims data has led to small 
improvements, the persistent gap indicates the need for additional 
efforts to achieve parity and end what the organization views as 
inappropriate reductions to ESRD PPS payments. The organization stated 
paying out any remaining outlier pool dollars to providers in a 
subsequent year should be a central part of those efforts.
    A dialysis provider organization urged CMS to reconsider the 1 
percent outlier policy and pointed out while an outlier adjustment is 
required under the statute, it does not specify a particular value. The 
organization stated a 0.5 percent outlier threshold would reduce the 
offset to the base payment and still provide for payment in the case of 
extraordinary costs. A national dialysis organization, as part of its 
comment on the outlier expansion comment solicitation, expressed 
concern that the outlier policy continues to underestimate the outlier 
payment actually paid out each year since 2011, and believes money has 
been inappropriately removed from the ESRD PPS overall funding that is 
not returned to the system. For example, the organization noted the 
change from 2017 to 2018 is only 0.78 to 0.80. Over time, the 
organization estimates that the amount has resulted in a loss of $67 
million since 2015 and $231 million since 2011.
    Response: We appreciate the suggestions provided. We continue to 
believe that 1.0 percent is an appropriate target for outlier payments 
and that the recalibrated thresholds will lead to increased payments 
that are closer to the 1.0 percent target. A 1.0 percent outlier target 
percentage is a modest amount in comparison to other Medicare 
prospective payment systems and helps ensure high cost patients receive 
the individualized services they need. We disagree that a .50 percent 
threshold is more appropriate since the outlier payments represent .80 
percent of total payments, close to the 1.0 percent target. We will, 
however, take the commenters' views into consideration as we explore 
ways to enhance and update the outlier policy.
    Final Rule Action: After considering the public comments, we are 
finalizing the updated outlier thresholds for CY 2019 displayed in 
Column II of Table 11 of this final rule and based on CY 2017 data.
iii. Solicitation on the Expansion of the Outlier Policy
    Currently, former separately payable Part B drugs, laboratory 
services, and supplies are eligible for the outlier payment. In the 
interest of supporting innovation, ensuring appropriate payment for all 
drugs and biologicals, and as a complement to the TDAPA proposals, in 
the CY 2019 ESRD PPS proposed rule, we solicited comment on whether we 
should expand the outlier policy to include composite rate drugs and 
supplies (83 FR 34332). We noted that under the proposed expansion to 
the drug designation process, such expansion of the outlier policy 
could support appropriate payment for composite rate drugs once the 
TDAPA period has ended. Additionally, with regard to composite rate 
supplies, an expansion of the outlier policy could support use of new 
innovative devices or items that would otherwise be considered in the 
ESRD PPS bundled payment. We stated that if commenters believe such an 
approach is appropriate, we requested they provide input on how we 
would effectuate such a shift in policy. For example, the reporting of 
these services may be challenging since they have never been reported 
on ESRD claims previously. We specifically requested feedback about how 
such items might work under the existing ESRD PPS outlier framework or 
whether specific changes to the policy to accommodate such items are 
needed. We stated that we will consider all comments and address them 
by making proposals, if appropriate.
    A summary of the comments we received and our response to the 
comments are set forth below.
    Comments: A dialysis provider association supported the proposed 
expansion of the outlier policy to include drugs, biologicals, and 
supplies that currently fall into the ESRD PPS composite rate. The 
association strongly agreed with CMS that an expansion of the outlier 
policy would promote and incentivize the development of innovative new 
therapies and devices to treat the highly vulnerable ESRD adult and 
pediatric patient populations, and therefore urged CMS to propose such 
an expansion in future rulemaking. The association further suggested 
that CMS include a line in the claim for identification of supplies for 
outlier payment, explaining that having this information on the claim 
would both ease administrative burden and improve payment accuracy.
    A dialysis provider organization commented that within the context 
of an expanded TDAPA policy, including formerly composite rate drugs 
within the outlier calculation in the future would be a positive step, 
even if a new drug added to the ESRD PPS bundled payment includes 
additional payment. The organization stated if a new drug is folded 
into an existing ESRD PPS functional category without additional 
payment, providing outlier eligibility to these drugs could be even 
more important. The organization also indicated that collecting the 
data necessary to implement such a policy may have merit and encouraged 
CMS to continue to seek stakeholder input in future rulemaking in the 
context of whatever final policy it establishes for an expanded TDAPA 
in this year's CY 2019 ESRD PPS final rule.
    A health plan encouraged CMS to propose changes to the outlier 
policy that would take into account composite rate drugs and supplies 
because the health plan believes all costs of treating a patient should 
be included when determining outlier payments. The health plan pointed 
out that many patients who receive composite rate drugs and supplies 
have complex needs due to non-compliance or comorbid conditions and 
excluding composite rate drugs and supplies could discourage ESRD 
facilities from accepting higher acuity patients.

[[Page 56970]]

    An LDO commented that it does not support the proposal to expand 
the outlier policy to include composite rate drugs and supplies and 
would prefer the outlier payment adjustment be removed from the ESRD 
PPS. The LDO expressed concern that money is being taken out of the 
system that is never returned to support patient care and expanding 
this policy will only make matters worse. The LDO understands the 
agency would require statutory authority to eliminate the outlier 
provision, however, it stated CMS does have discretion to reduce the 
size of the outlier pool and recommended CMS decrease the outlier 
percentage from 1 percent to 0.5 percent.
    A national LDO and a national dialysis organization stated the 
outlier pool cannot provide adequate reimbursement for costly new drugs 
and biologicals in the ESRD PPS. In the national dialysis 
organization's view, outlier payments are not designed to pay for 
drugs. They are meant for patients with unusually high costs. The LDO 
noted that while the outlier pool had an early connection to 
beneficiaries who were high utilizers of certain high-cost drugs and 
biologicals in the ESRD PPS bundled payment, specifically ESAs, the 
outlier pool was never designed to provide comprehensive reimbursement 
for such products. Rather, the LDO stated, CMS incorporated funding for 
ESAs into the ESRD PPS base rate and the small number of individuals 
whose ESA utilization was a true outlier would then qualify for an 
outlier payment in addition to what was already built into the base 
rate for the average patient. Both commenters expressed that expanding 
the outlier pool would still not address the need for money to be added 
to the base rate.
    The national dialysis organization does not support extending the 
outlier payment to new drugs or biologicals that CMS would classify as 
being within the existing ESRD PPS functional categories. The 
organization believes it would be inappropriate to do so because 
outlier payments are not designed to pay for drugs and biologicals used 
regularly.
    MedPAC commented that an outlier policy should act as a stop-loss 
insurance for medically necessary care, and outlier payments are needed 
when the PPS's payment adjustments do not capture all of the factors 
affecting providers' costs of delivering care. For example, MedPAC 
stated, when higher costs arise due to the occurrence of random events, 
such as patients who suffer serious complications, then outlier 
payments would be appropriately triggered. Consequently, MedPAC noted 
in order to develop an effective outlier policy, CMS must first develop 
accurate patient- and facility-level payment adjustments.
    Further, MedPAC indicated CMS should develop an outlier policy that 
accounts for variation in the cost of providing the full ESRD PPS 
payment bundle; the outlier policy should not apply solely to 
exceedingly high costs of ESRD drugs and supplies. MedPAC stated that 
this approach would be more patient-centric and would align the ESRD 
PPS outlier policy with the policies of other Medicare PPSs.
    However, MedPAC cautioned if CMS elects to expand the outlier pool 
only for composite rate drugs and supplies, then the agency should 
explicitly define which supplies would be eligible for an outlier 
payment. In addition, MedPAC recommended that the agency should develop 
clinical criteria for the use of all drugs and supplies eligible for 
outlier payments to ensure their appropriate (medically necessary) use.
    MedPAC noted that expanding the outlier policy may require the 
agency to impose additional reporting requirements on facilities in 
order to determine patient-level costs. Should the agency elect to 
expand the outlier policy, MedPAC recommended minimizing the 
administrative burden on providers and including a mechanism for 
validating the additional collected data.
    Response: We appreciate the thoughtful responses from the 
commenters. We recognize that the commenters' concerns regarding the 
expansion of outlier eligibility to include composite rate drugs and 
supplies are inextricably linked to their views on the effectiveness of 
our broader outlier policy or other payment adjustments. We will take 
these views into account as we consider the outlier policy and payment 
adjustments for future rulemaking.
d. Final Impacts to the CY 2019 ESRD PPS Base Rate
i. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
established the methodology for calculating the ESRD PPS per-treatment 
base rate, that is, ESRD PPS base rate, and the determination of the 
per-treatment payment amount, which are codified at Sec.  413.220 and 
Sec.  413.230. The CY 2011 ESRD PPS final rule also provides a detailed 
discussion of the methodology used to calculate the ESRD PPS base rate 
and the computation of factors used to adjust the ESRD PPS base rate 
for projected outlier payments and budget neutrality in accordance with 
sections 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 MAP for composite rate and 
separately billable services. In accordance with section 1881(b)(14)(D) 
of the Act and our regulation at Sec.  413.230, per-treatment payment 
amount is the sum of the ESRD PPS base rate, adjusted for the patient 
specific case-mix adjustments, applicable facility adjustments, 
geographic differences in area wage levels using an area wage index, 
and any applicable outlier payment, training adjustment add-on, and 
transitional drug add-on payment adjustment.
ii. Annual Payment Rate Update for CY 2019
    The ESRD PPS base rate for CY 2019 is $235.27. This update reflects 
several factors, described in more detail as follows:
     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 2019 projection for the final 
ESRDB market basket is 2.1 percent. In CY 2019, this amount must be 
reduced by the multifactor 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. As discussed above, the final MFP 
adjustment for CY 2019 is 0.8 percent, thus yielding a final update to 
the base rate of 1.3 percent for CY 2019 (2.1 - 0.8 = 1.3). Therefore, 
the ESRD PPS base rate for CY 2019 before application of the wage index 
budget-neutrality adjustment factor would be $235.39 ($232.37 x 1.013 = 
$235.39).
     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 2019, we did not propose any changes to the 
methodology used to calculate this factor, which is described in detail 
in the CY 2014 ESRD PPS final rule (78 FR 72174). The final CY 2019 
wage index budget-neutrality adjustment factor is 0.999506, based on 
the updated wage index data. This application would yield a final CY 
2019 ESRD PPS base rate of $235.27 ($235.39 x 0.999506 = $235.27).

[[Page 56971]]

    The comments and our responses to the comments on our proposals to 
update the ESRD PPS base rate for CY 2019 are set forth below.
    Comment: A dialysis provider organization expressed appreciation 
for the proposed increase to the ESRD PPS base rate for CY 2019 but 
stated the increase is insufficient to cover the annual growth in costs 
for dialysis facilities necessary to offer life-sustaining, high-
quality care to pediatric and adult ESRD patients. The organization 
noted that this is a concern for small and independent providers in 
rural and underserved areas, and can significantly impact whether a 
facility remains open. Therefore, the organization believes an 
appropriate increase in overall reimbursement is required.
    A clinician association stated that while it appreciates the 
proposed increase to the ESRD PPS base rate, the association is 
concerned about other policies in the ESRD PPS and ESRD QIP that may 
result in reductions to the already limited resources used by 
nephrology nurses to provide high quality care to Medicare ESRD 
beneficiaries.
    The association stated that since the implementation of the ESRD 
PPS, nephrology nurses have been required to balance the constant 
increases in demands for data collection and the time required to 
provide quality patient care to a population of individuals with 
complex care needs. The commenter explained nephrology nurses 
understand the increased administrative burden placed on dialysis 
facilities in meeting regulatory documentation requirements and are 
often the collectors and providers of this data at the unit level.
    We received many comments, including from MedPAC, national kidney 
dialysis organizations, professional associations, patient advocacy 
organizations, LDOs, and a health plan, related to the current ESRD PPS 
patient and facility-level adjustments and the negative impact these 
adjustment factors have on the ESRD PPS base rate due to the 
standardization adjustment.
    Response: We appreciate the support for the increase in the ESRD 
PPS base rate and the comments regarding the issues impacting ESRD 
facilities. We understand facilities in rural and underserved areas 
face unique challenges. We also recognize the administrative work done 
by the nephrology nurses. We note that in a PPS, the payment is for the 
average patient and the facility and patient adjusters attempt to 
mitigate any loss by those at the lower end of the payment spectrum.
    As we stated in section II.B.3.d.i of this final rule, we 
established an ESRD PPS base rate that reflected the lowest per patient 
utilization data as required by statute. This amount is adjusted for 
patient specific case-mix adjustments, applicable facility adjustments, 
and geographic difference in area wage levels which are reflective of 
facility costs since cost data is used to derive the adjustment 
factors. The CY 2016 ESRD PPS final rule discusses the methodology for 
calculating the patient and facility-level adjustments (80 FR 68972 
through 69004). In addition, the base rate is adjusted for any 
applicable outlier payment, training add-on payment, and the TDAPA to 
arrive at the per treatment payment amount. The ESRD PPS base rate is 
annually updated by the ESRDB market basket and adjusted for 
productivity and wage index budget neutrality. For these reasons, we 
believe that the CY 2019 ESRD PPS base rate is appropriate despite the 
challenges some facilities experience. We also continue to believe that 
the rural adjustment and LVPA provide payment for the challenges faced 
by those facilities that are eligible for the adjustment. We note that 
the ESRDB market basket for CYs 2015 through 2018 was reduced in 
accordance with section 217(b)(2) of PAMA and for CY 2019, ESRD 
facilities are getting the full ESRDB market basket update, which 
increases payment.
    The comments on the current ESRD PPS patient and facility-level 
adjustments based on the regression analysis are out of scope for this 
final rule since we proposed changes to the administration of certain 
adjustments (that is, LVPA and comorbidities), but did not propose any 
changes related to the calculation of these adjustments. However, we 
will continue to consider these comments for future refinements to ESRD 
PPS policies. Additionally, we are undertaking a new research effort 
and plan to engage with stakeholders further on this issue.
    Final Rule Action: We are finalizing a CY 2019 ESRD PPS base rate 
of $235.27.

C. Solicitation for Information on Transplant and Modality Requirements

    When an individual is faced with failing kidneys, life-extending 
treatment is available. The most common treatment is dialysis, but the 
best treatment is receiving a kidney transplant from a living or 
deceased donor. Dialysis, either HD or PD, can sustain life by removing 
impurities and extra fluids but cannot do either job as consistently or 
efficiently as a functioning kidney. Dialysis also carries risks of its 
own, including anemia, bone disease, hypotension, hypertension, heart 
disease, muscle cramps, itching, fluid overload, nerve damage, 
depression, and infection. Timely transplantation, despite requiring a 
major surgery and ongoing medication, offers recipients a longer, 
higher quality of life, without the ongoing risks of dialysis. 
Unfortunately, the number of people waiting for healthy donor kidneys 
far exceeds the number of available organs. In 2015, the most recent 
year for which complete data is available, 18,805 kidney transplants 
were performed in the U.S., while over 80,000 individuals remained on 
waiting lists (https://www.usrds.org/2017/view/v2_06.aspx). That same 
year, there were 124,114 newly reported cases of ESRD and over 703,243 
prevalent cases of ESRD (https://www.usrds.org/2017/view/v2_01.aspx).
    In recognition of the superiority of transplantation but the need 
for dialysis, CMS has required for nearly 10 years that Medicare-
certified dialysis facilities evaluate all patients for transplant 
suitability and make appropriate referrals to local transplant centers 
(73 FR 20370). Specifically, dialysis facilities must:
     Inform every patient about all treatment modalities, 
including transplantation (Sec.  494.70(a)(7)).
     Evaluate every patient for suitability for a 
transplantation referral (Sec.  494.80(b)(10)).
     Document any basis for non-referral in the patient's 
medical record (Sec.  494.80(b)(10)).
     Develop plans for pursuing transplantation for every 
patient who is a transplant referral candidate (Sec.  
494.90(a)(7)(ii)).
     Track the results of each kidney transplant center 
referral (Sec.  494.90(c)(1)).
     Monitor the status of any facility patients who are on the 
transplant waitlist (Sec.  494.90(c)(2)).
     Communicate with the transplant center regarding patient 
transplant status at least annually, and when there is a change in 
transplant candidate status (Sec.  494.90(c)(3)).
     Educate patients, family members, or caregivers or both 
about transplantation, as established in a patient's plan of care 
(Sec.  494.90(d)).
    Despite these requirements, the percentage of prevalent dialysis 
patients wait-listed for a kidney has recently declined (https://www.usrds.org/2017/view/v2_06.aspx, Figure 6.2), meaning that fewer 
people have the opportunity to be matched with a donor kidney. Some 
individuals do receive kidneys

[[Page 56972]]

directly from suitable friends or family members, but still must be 
placed on the waiting list. Organ Procurement and Transplantation 
Network (OPTN) policy requires that all transplant recipients, 
including recipients of organs from living donors, be registered and 
added to the OPTN waiting list. Until a dialysis patient is referred to 
a transplant center, he or she is not able to be placed on the waiting 
list, and is ineligible to receive a kidney. While dialysis facilities 
have no control over the total supply of kidneys made available for 
transplantation, transplantation education, referral, and waitlist 
tracking are appropriate and necessary services for them to furnish. 
Unfortunately, there are performance gaps and disparities between 
dialysis facilities in providing these services.\5\ Therefore, as 
discussed in section IV.C.1.a. of section IV ``End-Stage Renal Disease 
Quality Incentive Program (ESRD QIP)'' of the CY 2019 ESRD PPS proposed 
rule (83 FR 34344), we proposed a reporting measure under the ESRD QIP 
that would track the percentage of patients at each dialysis facility 
who are on the kidney or kidney-pancreas transplant waiting list. We 
also solicited input on other ways to increase kidney transplant 
referrals and improve the tracking process for patients on the 
waitlist:
---------------------------------------------------------------------------

    \5\ R. E. Patzer, L. Plantinga, J. Krisher, S.O. Pastan, 
``Dialysis facility and network factors associated with low kidney 
transplantation rates among U.S. dialysis facilities,'' American 
Journal of Transplantation, 2014 Jul; 14(7):1562-72; and Sudeshna 
Paul, Laura C. Plantinga, Stephen O. Pastan, Jennifer C. Gander, 
Sumit Mohan, and Rachel E. Patzer, ``Standardized Transplantation 
Referral Ratio to Assess Performance of Transplant Referral among 
Dialysis Facilities,'' Clinical Journal of the American Society of 
Nephrology, January 2018.
---------------------------------------------------------------------------

     Are there ways to ensure facilities are meeting the 
Conditions for Coverage (CfC) requirements, in addition to the survey 
process?
     Are the current dialysis facility CfC requirements 
addressing transplantation support services adequately, or should 
additional requirements be considered?
    With regard to other treatment for failed kidneys, HD performed in 
an outpatient dialysis center is most common, followed by HD performed 
at home, and PD (almost always performed at home). Just as we are 
concerned about disparities in access to transplantation, we are also 
concerned about disparities in access to dialysis modality options. 
Although ESRD disproportionately affects racial and ethnic minority 
patients, minority individuals are far less likely to be treated with 
home dialysis than white patients.\6\ Home dialysis modalities 
necessitate a higher level of self-care than in-center care, and are 
not appropriate for or desired by every dialysis patient. We are 
concerned, however that not all dialysis patients are aware of, or 
given the opportunity to learn about, home modalities or their 
benefits--primarily greater independence and flexibility. Individuals 
performing home dialysis treatments are able to schedule their 
treatments at times most convenient for them, allowing them to 
coordinate with family and work schedules, and eliminate the need for 
thrice weekly transportation to and from a dialysis facility. The 
transportation savings are especially valuable to rural individuals, 
who might have to travel hours each week for regular treatments in a 
facility.
---------------------------------------------------------------------------

    \6\ Mehrotra, R., Soohoo, M., Rivara, M.B., Himmelfarb, J., 
Cheung, A.K., Arah, O.A., Nissenson, A.R., Ravel, V., Streja, E., 
Kuttykrishnan, S., Katz, R., Molnar, M., Kalantar-Zadeh, K., 
``Racial and Ethnic Disparities in Use of and Outcomes with Home 
Dialysis in the United States,'' Journal of the American Society of 
Nephrology December 10, 2015.
---------------------------------------------------------------------------

    We take this opportunity to remind dialysis facilities of their 
responsibilities regarding modality education and options. Some 
dialysis facilities do not support home modalities, but all facilities 
are required to make appropriate referrals if a patient elects to 
pursue home treatments. Specifically, dialysis facilities must:
     Inform every patient about all treatment modalities, 
including transplantation, home dialysis modalities (home HD, 
intermittent PD, continuous ambulatory PD, continuous cycling PD), and 
in-facility HD (Sec.  494.70(a)(7)).
     Ensure all patients are provided access to resource 
information for dialysis modalities not offered by the facility, 
including information about alternative scheduling options for working 
patients (Sec.  494.70(a)(7)).
     Assess every patient's abilities, interests, preferences, 
and goals, including the desired level of participation in the dialysis 
care process; the preferred modality (hemodialysis or peritoneal 
dialysis), and setting, (for example, home dialysis), and the patient's 
expectations for care outcomes (Sec.  494.80(a)(9)).
     Identify a plan for every patient's home dialysis or 
explain why the patient is not a candidate for home dialysis (Sec.  
494.90(a)(7)(i)).
     Provide education and training, as applicable, to patients 
and family members or caregivers or both, in aspects of the dialysis 
experience, dialysis management, infection prevention and personal 
care, home dialysis and self-care, quality of life, rehabilitation, 
transplantation, and the benefits and risks of various vascular access 
types (Sec.  494.90(d)).
    Persons with failed kidneys often begin dialysis with no prior 
exposure to nephrology care or knowledge of treatment options. The 
practitioners and professionals who care for them are best suited to 
provide the necessary information to support informed, shared decision-
making. Patient education is not a one-time incident, but an ongoing 
aspect of all health care services and settings. We welcomed your 
suggestions on ways to ensure that dialysis facilities are meeting 
these obligations, and to ensure equal access to dialysis modalities.
    In the proposed rule we reviewed the importance of treatment 
modality options and education for individuals with failed kidneys, 
including transplantation and home dialysis, and the related CfC 
standards that dialysis facilities must meet. We requested suggestions 
on other ways to increase kidney transplant referrals and improve the 
tracking process for patients on the waitlist. We also asked for input 
on ways to better ensure that dialysis facilities are meeting these 
obligations, and to ensure equal access to dialysis modalities. We 
received extensive comments on these issues from approximately 20 
stakeholders. While we will not respond to these comments here, we will 
take them into consideration during future policy development. We thank 
the commenters for their input.

D. Miscellaneous Comments

    We received many comments from beneficiaries, physicians, 
professional organizations, renal organizations, and manufacturers 
related to issues not specifically addressed in the CY 2019 ESRD PPS 
proposed rule. These comments are discussed below.
    Comment: A device manufacturer and device manufacturer association 
asked CMS to establish a transitional add-on payment adjustment for new 
FDA-approved medical devices. They commented on the lack of FDA 
approved or authorized new devices for use in a dialysis facility, 
highlighting the need to promote dialysis device innovation for use by 
dialysis clinics. The commenters indicated they believe the same 
rationale CMS used to propose broadening the TDAPA eligibility also 
would apply to new medical devices. Specifically, the commenters noted 
the statute provides CMS with ``discretionary authority'' to adopt 
payment adjustments determined

[[Page 56973]]

appropriate by the Secretary, and precedent supports CMS' authority to 
use non-budget neutral additions to the base rate for adjustments under 
specific circumstances. The commenters asserted CMS could finalize this 
adjustment in the CY 2019 ESRD PPS final rule. A professional 
association urged CMS and other relevant policymakers to prioritize the 
development of a clear pathway to add new devices to the ESRD PPS 
bundled payment. They believe new money must be made available to 
appropriately reflect the cost of new devices added to the ESRD PPS 
bundled payment.
    A national dialysis organization and an LDO asked CMS to clarify 
how it incentivizes the development of new dialysis devices. The 
organization asked CMS to describe how such a device would be included 
in the ESRD PPS bundle, and suggested the initial application of a 
pass-through payment which would be evaluated later, based on the data. 
This evaluation would determine if the device should be included in the 
ESRD PPS base rate and whether or not additional funds should be added 
to the bundle. The organization offered to engage with CMS to develop a 
more detailed policy, but in the short-term, asked CMS to indicate in 
the final rule that it will provide such a pathway and work with 
stakeholders in future rulemakings to further define it.
    An LDO requested CMS plan appropriately for innovative devices or 
other new innovative products. However, as the unfolding of the drug 
designation process has demonstrated the complexity of the process, the 
commenter noted the process should be both thoughtful and 
collaborative. The commenter asked CMS to work with the kidney 
community to consider if and how new devices or other new innovative 
products delivering high clinical value, can be delivered to 
beneficiaries, whether through the ESRD PPS or through other payment 
systems.
    A home dialysis patient group also expressed concern regarding the 
absence of a pathway or guidance for adding new devices to the ESRD PPS 
bundled payment or for reimbursement, stating that it left investors 
and industry wary of investing in the development of new devices for 
patients.
    Response: We appreciate the commenters' thoughts regarding payment 
for new and innovative devices, either via a TDAPA for medical devices 
or a pass-through payment for medical devices. We also appreciate the 
commenter's comments regarding the complexity of such an adjustment as 
well as the concerns related to a lack of pathway for new devices. We 
did not include any proposals regarding these topics in the CY 2019 
ESRD PPS proposed rule, and therefore we consider these suggestions to 
be beyond the scope of this rule.
    Comment: MedPAC strongly encouraged CMS to accelerate completion of 
the ESRD facility cost report audits and release its final results. 
MedPAC has repeatedly discussed the importance of auditing the cost 
reports dialysis facilities submit to CMS to ensure the data are 
accurate. MedPAC made the following points: First, inaccurate cost 
report data could affect the ESRD PPS's payment adjustment factors and 
ESRD market basket index, which are derived from this data source. 
Second, accurate accounting of costs is essential for assessing 
facilities' financial performance under Medicare. The Medicare margin 
is calculated from this data source, and policymakers consider the 
margin (and other factors) when assessing the adequacy of Medicare's 
payments for dialysis services. If costs are overstated, then the 
Medicare margin is understated. Third, it has been more than 15 years 
since cost reports were audited, and in 2011, the outpatient dialysis 
payment system underwent a significant change, which might have 
affected how facilities report their costs. Fourth, historically, 
facilities' cost reports have included costs Medicare does not allow.
    Response: We appreciate MedPAC's thoughts and suggestions on our 
cost reports and audits. The audit process is complete and the audit 
staff are reviewing the findings. We did not include any proposals 
regarding these topics in the CY 2019 ESRD PPS proposed rule, and 
therefore we consider these suggestions to be beyond the scope of this 
rule.
    Comment: An LDO stated excluding the 50-cent network fee from 
dialysis facilities' cost reports remains problematic, explaining that 
failure to account for the fee understated facilities' costs by more 
than $20 million in 2017 and inhibits informed policymaking. The 
commenter noted that in response to a prior recommendation on this 
issue, CMS suggested it does not have the statutory authority to 
include the network fee on cost reports. However, this commenter stated 
the Omnibus Budget Reconciliation Act of 1986 (OBRA 86), which 
established the network fee, does not address its inclusion or 
exclusion. The House Report accompanying OBRA 86 elaborates on 
Congressional intent with respect to the network fee, but it too does 
not address the fee's inclusion or exclusion. The organization urged 
CMS to reexamine its interpretation of the statute, which they believe 
affords CMS the necessary authority to add the network fee as a revenue 
reduction on Worksheet D effective with CY 2019 dialysis facility cost 
reports. A national LDO organization made a similar comment.
    Response: We appreciate the feedback regarding the 50-cent network 
fee and its inclusion in the cost reports. We did not include any 
proposals regarding these topics in the CY 2019 ESRD PPS proposed rule, 
and therefore we consider these suggestions to be beyond the scope of 
this rule.
    Comment: An LDO stated several years have elapsed since CMS 
eliminated the medical director fee limitation, but the ESRD Medicare 
Claims Processing Manual instructions, despite being updated in 
November 2016, do not reflect this policy change. Some Medicare 
contractors incorrectly continue to require dialysis facilities to 
submit detailed physician logs and apply the fee. The organization 
urged CMS to resolve this small, administrative matter to ensure the 
even application of its long-standing decision to eliminate the medical 
director fee limitation.
    Response: The ESRD Medicare Claims Processing Manual (Pub 100-02 
Section 40.6) was updated via Change Request 10541 (transmittal 4010) 
effective June 26, 2018.
    Comment: An LDO stated the claim submission requirement to report 
the amount of an oral equivalent used by an ESRD patient, not the 
amount dispensed, presents significant challenges for dialysis 
facilities. The organization noted that changes in a patient's 
condition may require a different course of treatment that calls for a 
lower or higher dose than initially recommended. Other common 
circumstances, such as a patient's relocation, necessitating the 
delivery of services at a different, geographically closer facility, 
further complicate compliance with the reporting requirement. The 
organization recommended CMS modify the current requirement and permit 
dialysis facilities to report the dispensed amount of an oral drug. The 
organization suggested the following revised requirement: CMS should 
permit dialysis facilities to claim products dispensed in good faith, 
even if discarded, because of death, change in prescription, transfer 
to another facility, hospitalization, or transplant. CMS also should 
cover any replacement medication should the beneficiary lose it.

[[Page 56974]]

    Response: We appreciate the commenter's feedback on the reporting 
of oral equivalent drugs. We did not include any proposals regarding 
these topics in the CY 2019 ESRD PPS proposed rule, and therefore we 
consider these suggestions to be beyond the scope of this rule.
    Comment: We received comments on home dialysis from several 
different commenters, including patient advocacy groups, national 
kidney organizations, a national LDO organization, dialysis provider 
associations, dialysis equipment manufacturers, and a large number of 
beneficiaries. These commenters called for modifications or rescission 
of the Medicare Administrative Contractor proposed Local Coverage 
Determinations, in order to remove uncertainty in reimbursement for 
more frequent dialysis for home dialysis patients. They urged CMS to 
ensure all MACs abide by the requirements included in the Medicare 
Program Integrity Manual in implementing policies regarding payment for 
more frequent dialysis. They expressed strong support for efforts to 
increase access to home dialysis for patients for whom it is medically 
appropriate. Additionally, they encouraged CMS to eliminate ambiguity 
in past rulemaking regarding CMS' payment policy for medically 
justified more frequent hemodialysis sessions, to provide clear and 
correct information for the MAC's understanding and for providers who 
may be inadvertently discouraged from informing patients of all 
suitable treatment options.
    Response: We appreciate the commenters' thoughts on home dialysis. 
We did not include any proposals regarding these topics in the CY 2019 
ESRD PPS proposed rule, and therefore we consider these suggestions to 
be beyond the scope of this rule.
    Comment: We received many other comments that we consider outside 
the scope of the CY 2019 ESRD PPS proposed rule, including the 
following suggestions: Incorporation of the CFC requirement to document 
why a patient is not a candidate for home dialysis on the UB[hyphen]04 
claims; modification of the kidney dialysis education program so it may 
be practically implemented and more broadly utilized; and reinforcement 
of providers' responsibility to inform Skilled Nursing Facility (SNF) 
dialysis patients of their option to perform home dialysis in a SNF, 
and a reminder to providers to appropriately code their home dialysis 
patients residing in SNFs to allow for better population surveillance.
    Response: We appreciate receiving these comments regarding issues 
affecting ESRD facilities and beneficiaries. However, we did not 
include any proposals regarding these topics in the CY 2019 ESRD PPS 
proposed rule, and therefore we consider these suggestions to be beyond 
the scope of this rule.

III. CY 2019 Payment for Renal Dialysis Services Furnished to 
Individuals With Acute Kidney Injury (AKI)

A. Background

    The Trade Preferences Extension Act of 2015 (TPEA), Public Law 114-
27, was enacted on June 29, 2015, and amended the Act to provide 
coverage and payment for dialysis furnished by an ESRD facility to an 
individual with acute kidney injury (AKI). Specifically, section 808(a) 
of the 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) of the Act to an individual with AKI. Section 
808(b) of the TPEA amended section 1834 of the Act by adding a new 
paragraph (r) to provide payment, beginning January 1, 2017, for renal 
dialysis services furnished by renal dialysis facilities or providers 
of services paid under section 1881(b)(14) of the Act to individuals 
with AKI at the ESRD PPS base rate, as adjusted by any applicable 
geographic adjustment applied under section 1881(b)(14)(D)(iv)(II) of 
the Act and adjusted (on a budget neutral basis for payments under 
section 1834(r) of the Act) by any other adjustment factor under 
section 1881(b)(14)(D) of the Act.
    In the CY 2017 ESRD PPS final rule, we finalized several coverage 
and 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, 
including the payment rate for AKI dialysis (81 FR 77866 through 77872, 
and 77965). We interpret section 1834(r)(1) of the Act as requiring the 
amount of payment for AKI dialysis services to be the base rate for 
renal dialysis services determined for a year under 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. We codified this policy in Sec.  
413.372 (81 FR 77965).

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on CY 2019 Payment for Renal Dialysis Services Furnished to 
Individuals With AKI

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, 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 (DMEPOS) Competitive Bidding 
Program (CBP) and Fee Schedule Amounts, and Technical Amendments to 
Correct Existing Regulations Related to the CBP for Certain DMEPOS'' 
(83 FR 34304 through 34415), hereinafter referred to as the ``CY 2019 
ESRD PPS proposed rule'', was published in the Federal Register on July 
19, 2018, with a comment period that ended on September 10, 2018. In 
that proposed rule, we proposed to update the AKI dialysis payment 
rate. We received approximately 7 public comments on our proposal, 
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 the proposed 
provisions, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for CY 2019 payment for 
renal dialysis services furnished to individuals with AKI.

C. Annual Payment Rate Update for CY 2019

1. CY 2019 AKI Dialysis Payment Rate
    The payment rate for AKI dialysis is the ESRD PPS base rate 
determined for a year under section 1881(b)(14) of the Act, which is 
the finalized ESRD PPS base rate, including market basket adjustments, 
wage adjustments and any other discretionary adjustments, for such 
year. We note that ESRD facilities 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.
    As discussed in section II.B.3.d of the CY 2019 ESRD PPS proposed 
rule (83 FR 34332 through 34333), the CY 2019 proposed ESRD PPS base 
rate was $235.82, which reflected the proposed ESRD bundled market 
basket and multifactor productivity adjustment. Therefore, we proposed 
a CY 2019 per treatment payment rate of $235.82 for renal dialysis 
services furnished by ESRD facilities to individuals with AKI.

[[Page 56975]]

This payment rate is further adjusted by the wage index as discussed 
below.
2. Geographic Adjustment Factor
    Under section 1834(r)(1) of the Act and Sec.  413.372, the amount 
of payment for AKI dialysis services is the base rate for renal 
dialysis services determined for a year under section 1881(b)(14) of 
the Act (updated by the ESRD bundled market basket and multifactor 
productivity adjustment), as adjusted by any applicable geographic 
adjustment factor applied under section 1881(b)(14)(D)(iv)(II) of the 
Act. Accordingly, we apply the same wage index under Sec.  413.231 that 
is used under the ESRD PPS and discussed in section II.B.3.f of the CY 
2019 ESRD PPS proposed rule (83 FR 34332). The AKI dialysis payment 
rate is adjusted by the wage index for a particular ESRD facility in 
the same way that the ESRD PPS base rate is adjusted by the wage index 
for that facility (81 FR 77868). Specifically, we apply the wage index 
to the labor-related share of the ESRD PPS base rate that we utilize 
for AKI dialysis to compute the wage adjusted per-treatment AKI 
dialysis payment rate. We proposed a CY 2019 AKI dialysis payment rate 
of $235.82, adjusted by the ESRD facility's wage index.
    The comments and our responses to the comments on the AKI payment 
proposal are set forth below.
    Comment: A national dialysis organization expressed appreciation 
that CMS announced the AKI payment rate as part of the CY 2019 ESRD PPS 
proposed rule and provided the kidney care community with the 
opportunity to provide comments on the recommendations.
    A dialysis provider association urged CMS to increase payments for 
AKI treatments to be consistent with its analysis of preliminary 2017 
cost report data showing that average costs for an AKI treatment are 
nearly $50 (about 19 percent) higher than average costs for in-center 
hemodialysis patients. In the analysis, 1,524 of a total of 5,255 
freestanding facilities reported AKI treatments. The association 
explained that the nearly $50 higher per treatment costs for AKI versus 
in-center maintenance dialysis were driven by the higher direct patient 
care staffing needs for AKI patients (4.0 staff hours per treatment) 
compared to maintenance dialysis (2.5 staff hours per treatment). 
Additionally, laboratory costs ($4.93 vs. $3.91) and administrative and 
general services costs ($80.06 vs. $65.48) were higher for AKI 
treatments than for in-center maintenance hemodialysis treatments.
    Given that the facility costs vastly exceed payment rates for AKI 
treatments on average, the association urged CMS to increase the AKI 
payment rate and make appropriate payment adjustments for case-mix, 
comorbidities, and others (described below) to more accurately account 
for the costs that facilities bear when treating AKI patients. The 
association stated that it believes with more accurate and adequate 
reimbursement it is likely more dialysis facilities will be able to 
extend dialysis treatment access to AKI patients in a generally lower 
cost setting than the outpatient hospital setting, where many AKI 
patients currently receive treatment.
    The association also requested that CMS establish payment adjusters 
beyond the wage index in order to ensure that facilities have 
sufficient resources to provide high-quality care to AKI patients, 
including the following:
     Low-volume adjustment: The association noted that 
facilities with low treatment volumes face similar cost challenges in 
providing dialysis to AKI and ESRD patients. The relatively high fixed 
costs in operating a dialysis clinic are more difficult to offset in 
facilities with low treatment volume. Therefore, the association urged 
CMS to apply a low-volume adjustment to AKI treatments for patients in 
low-volume facilities.
     Pediatric adjustment: The association stated that similar 
to pediatric patients with ESRD, pediatric patients with AKI experience 
costly treatment challenges that are unique and distinct from the adult 
AKI patient population. As such, the association urged CMS to adopt a 
pediatric adjustment to the AKI payment rate for facilities treating 
pediatric AKI patients.
     A rural adjustment factor: The association noted that this 
should be added to the AKI payment rate to account for the additional 
treatment costs incurred by rural facilities. The association also 
asked CMS to review the CBSA methodology used for purposes of the rural 
adjustment, which prevents units that reside within a county that is 
rural from receiving the adjustment if the CBSA in which they reside is 
deemed urban.
    Response: We appreciate the support from commenters with regard to 
our CY 2019 per treatment base rate for renal dialysis services 
furnished by ESRD facilities to individuals with AKI. We also 
appreciate the feedback on the costs associated with an AKI treatment 
as compared to an ESRD treatment. We note that the Independent Renal 
Dialysis Facility Cost Report (Form CMS-265-11) was revised in February 
2018 for AKI renal dialysis services furnished on and after January 1, 
2017 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R4PR242.pdf). We will use the data reported 
on this form to review the efficacy of the AKI payment rate and 
determine the appropriate steps toward further developing the AKI 
payment rate.
    We also appreciate the commenters' feedback on the application of 
the LVPA, pediatric, and rural adjustments to AKI dialysis treatments. 
In the CY 2017 ESRD PPS final rule (81 FR 77868), we discussed not 
applying the case-mix adjusters to the payment for AKI treatments 
because those adjusters were developed based on ESRD treatments, and we 
continue to believe this is the most appropriate policy at this time. 
As we continue to monitor data, we will review the efficacy of the AKI 
payment rate to determine if modification is required.
    We also received comments related to monitoring programs, data 
collection, budget neutrality, inclusion of AKI in the ESRD QIP, 
questions related to a patient's transition from AKI to ESRD and 
eligibility for transplant, home dialysis for AKI patients, and other 
operational concerns. We did not include any proposals on these topics 
in the proposed rule, and therefore we believe these comments are out 
of scope for this rulemaking. However, we will consider these comments 
for future refinements to AKI payment policies.
    Final Rule Action: We are finalizing the AKI payment rate as 
proposed, that is, based on the finalized ESRD PPS base rate. 
Specifically, the final CY 2019 ESRD PPS base rate is $235.27. 
Accordingly, we are finalizing a CY 2019 payment rate for renal 
dialysis services furnished by ESRD facilities to individuals with AKI 
as $235.27.

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

A. Background

    For a detailed discussion of the End-Stage Renal Disease Quality 
Incentive Program's (ESRD QIP's) background and history, including a 
description of the Program's authorizing statute and the policies that 
we have adopted in previous final rules, we refer readers to the 
calendar year (CY) 2018 ESRD Prospective Payment System (PPS) final 
rule (82 FR 50756 through 50757).

[[Page 56976]]

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

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, 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 (DMEPOS) Competitive Bidding 
Program (CBP) and Fee Schedule Amounts, and Technical Amendments to 
Correct Existing Regulations Related to the CBP for Certain DMEPOS'' 
(83 FR 34304 through 34415), hereinafter referred to as the ``CY 2019 
ESRD PPS proposed rule'', was published in the Federal Register on July 
19, 2018, with a comment period that ended on September 10, 2018. In 
that proposed rule, we proposed updates to the ESRD QIP, including for 
PY 2021 through PY 2024. We received approximately 36 public comments 
on our proposal, including comments from large dialysis organizations, 
renal dialysis facilities, national renal groups, nephrologists, 
patient organizations, patients and care partners, 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.
    We received numerous general comments on the ESRD QIP.
    Comment: Commenters provided feedback on adding new measures to the 
QIP. Commenters' suggestions for new measures included a standardized 
mortality measure, outcome measures that can replace existing process 
measures, a measure of shared decision-making, two process measure for 
evaluating the share of patients receiving dialysis modality education 
(one measure focusing on education within 90 days of initiating 
dialysis and a second measure focusing on annual education). Another 
commenter recommended that CMS allow providers to test upcoming changes 
or software updates to CROWNWeb and the ESRD QIP system.
    Response: We appreciate these comments and thank the commenters for 
their feedback. We will consider these comments for future rulemaking.
1. Improving Patient Outcomes and Reducing Burden Through the 
Meaningful Measures Initiative
    Regulatory reform and reducing regulatory burden are high 
priorities for the Centers for Medicare & Medicaid Services (CMS). To 
reduce the regulatory burden on the healthcare industry, lower health 
care costs, and enhance patient care, in October 2017, we launched the 
Meaningful Measures Initiative.\7\ This initiative is one component of 
our agency-wide Patients Over Paperwork Initiative,\8\ which is aimed 
at evaluating and streamlining regulations with a goal to reduce 
unnecessary cost and burden, increase efficiencies, and improve 
beneficiary experience. The Meaningful Measures Initiative is aimed at 
identifying the highest priority areas for quality measurement and 
quality improvement in order to assess the core quality of care issues 
that are most vital to advancing our work to improve patient outcomes. 
The Meaningful Measures Initiative represents a new approach to quality 
measures that will foster operational efficiencies and will reduce 
costs, including collection and reporting burden, while producing 
quality measurement that is more focused on meaningful outcomes.
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    \7\ Meaningful Measures webpage: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
    \8\ Remarks by Administrator Seema Verma at the Health Care 
Payment Learning and Action Network (LAN) Fall Summit, as prepared 
for delivery on October 30, 2017. Available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html.
---------------------------------------------------------------------------

    The Meaningful Measures Initiative has the following objectives:
     Address high-impact measure areas that safeguard public 
health;
     Patient-centered and meaningful to patients;
     Outcome-based where possible;
     Fulfill each program's statutory requirements;
     Minimize the level of burden for health care providers 
(for example, through a preference for EHR-based measures where 
possible, such as electronic clinical quality measures);
     Significant opportunity for improvement;
     Address measure needs for population based payment through 
alternative payment models; and
     Align across programs and/or with other payers.
    In order to achieve these objectives, we discussed in the CY 2019 
ESRD PPS proposed rule that we had identified 19 Meaningful Measures 
areas and mapped them to six overarching quality priorities as shown in 
Table 12.

   Table 12--Quality Priority Associated With Meaningful Measure Areas
------------------------------------------------------------------------
            Quality priority                 Meaningful measure area
------------------------------------------------------------------------
Making Care Safer by Reducing Harm       Healthcare-Associated
 Caused in the Delivery of Care.          Infections.
                                         Preventable Healthcare Harm.
Strengthen Person and Family Engagement  Care is Personalized and
 as Partners in Their Care.               Aligned with Patient's Goals.
                                         End of Life Care According to
                                          Preferences.
                                         Patient's Experience of Care.
                                         Patient Reported Functional
                                          Outcomes.
Promote Effective Communication and      Medication Management.
 Coordination of Care.                   Admissions and Readmissions to
                                          Hospitals.
                                         Transfer of Health Information
                                          and Interoperability.
Promote Effective Prevention and         Preventive Care.
 Treatment of Chronic Disease.           Management of Chronic
                                          Conditions.
                                         Prevention, Treatment, and
                                          Management of Mental Health.
                                         Prevention and Treatment of
                                          Opioid and Substance Use
                                          Disorders.
                                         Risk Adjusted Mortality.
Work with Communities to Promote Best    Equity of Care.
 Practices of Healthy Living.            Community Engagement.

[[Page 56977]]

 
Make Care Affordable...................  Appropriate Use of Healthcare.
                                         Patient-focused Episode of
                                          Care.
                                         Risk Adjusted Total Cost of
                                          Care.
------------------------------------------------------------------------

    By including Meaningful Measures in our programs, we stated our 
belief that we can also address the following cross-cutting measure 
criteria:
     Eliminating disparities;
     Tracking measurable outcomes and impact;
     Safeguarding public health;
     Achieving cost savings;
     Improving access for rural communities; and
     Reducing burden.
    We also stated that we believe that the Meaningful Measures 
Initiative will improve outcomes for patients, their families, and 
health care providers while reducing burden and costs for clinicians 
and providers as well as promoting operational efficiencies.
    The comments and responses to the Meaningful Measure Initiative are 
set forth below.
    Comment: Many commenters were pleased with our launch of the 
Meaningful Measures Initiative. One commenter expressed support for our 
aim to focus the Program on the highest priority areas for quality 
measurement and quality improvement. The commenter recommended that we 
differentiate between the ESRD QIP, a pay-for-performance or value-
based purchasing (VBP) program, and Dialysis Facility Compare (DFC), a 
public reporting site. The commenter suggested that the relationship 
between these two programs is confusing and called on CMS to separate 
the programs clearly by using different measures in each program, using 
star ratings based on the ESRD QIP payment penalties, and improving the 
DFC website's functionality. Another commenter urged CMS to be 
cognizant of the unfunded regulatory burden on dialysis facilities to 
track and monitor QIP measures and recommended aligning measures in QIP 
with those in Dialysis Facility Reports (DFR), DFC, and Core Survey, 
suggesting that facility burden is significant, and using a single 
website such as the ESRD Quality Reporting System (EQRS) to track and 
report data for all programs. Another commenter appreciated our 
interest in focusing the Program on measures that improve quality care, 
drive improved patient health outcomes, and reduce administrative 
burdens on providers, but was concerned with the overlap between the 
ESRD QIP, the Five Star Program, and DFC. The commenter recommended 
that we streamline the ESRD QIP and reduce the Program's administrative 
burden and promote transparency.
    Response: We appreciate and thank the commenters for their feedback 
and support of the Meaningful Measures Initiative, and we will consider 
this feedback in future rulemaking as we continue to examine our 
programs for opportunities to improve operational efficiencies and 
clinical efficacy. As part of the Meaningful Measures Initiative and 
our desire to reduce provider burden, we are working to align 
requirements across CMS quality programs where possible and we will 
consider ways to align the requirements for QIP, DFR, DFC, the Five 
Star Program, and Core Survey in future years.
    In addition, we would like to clarify that the ESRD QIP and the 
Five Star Program have different objectives. The purpose of the ESRD 
QIP is to assign a payment penalty to facilities that do not meet 
national performance standards on quality measures. The purpose of Five 
Star Program is to provide patients with an easy way to assess quality 
of care, so they can make health care decisions or learn about their 
current dialysis facility. Analysis has shown that using the payment 
reduction categories developed for the QIP as a basis for assigning 
Star Ratings would result in over 80 percent of facilities receiving 
four or five stars. This would render the Five Star Program inadequate 
for being able to determine the differences between facilities and 
allowing patients to make informed choices about their health care. The 
ESRD QIP is designed to reduce Medicare payments to penalize facilities 
that do not meet national performance standards on quality measures. 
Because the national performance standards are set at the median 
performance level from a previous time period and national performance 
on quality measures has typically been stable or improving over time, 
the majority of facilities have historically tended to meet or exceed 
those standards in the aggregate and have not received receive a 
payment reduction. We believe, however, that a 5-star rating should 
indicate excellence. Awarding the highest star rating to facilities 
based solely on where their performance for a program year falls 
relative to the minimum total performance score used in the ESRD QIP 
would not allow patients to discern the difference between facilities 
and would not appropriately distinguish those facilities that are 
providing excellent care.
    Comment: One commenter agreed that our VBP programs should assess 
those core issues that are most critical to providing high-quality care 
and restated its long support for a smaller QIP measure set. Another 
commenter appreciated our development of the Meaningful Measures 
objectives and quality priorities and expressed its agreement with the 
application of those priorities to the QIP. The commenter also 
appreciated the Initiative's call for alignment across programs, noting 
that dialysis patients see multiple health care providers and are 
frequently hospitalized. A third commenter was supportive of our goal 
to align the QIP more closely with the Meaningful Measures Initiative, 
and also stated its support for our efforts to account for social risk 
factors in the ESRD QIP. Another commenter expressed support for CMS's 
evaluation of each QIP measure in the context of improving outcomes and 
reducing burden.
    Response: We thank the commenters for their support.
    Comment: A commenter supported our work on the Meaningful Measures 
Initiative and suggested that the catheter >90 days measure is the most 
meaningful measure in the ESRQ QIP measure set because long-term 
catheter use is associated with poorer clinical outcomes.
    Response: We thank the commenter for its support and feedback. We 
believe that all of the measures included in the QIP are meaningful.
    Comment: A commenter supported our prioritization of regulatory 
reform and burden reduction, including through Meaningful Measures. The 
commenter supported the use of fewer, more meaningful measures in QIP 
and other programs and appreciated CMS's efforts to incorporate these 
concepts in its proposed policies.
    Response: We thank the commenter for its support.

[[Page 56978]]

    Comment: One commenter explained that development of a patient-
reported outcome measure for dialysis is one of its priorities and 
suggested that it would be a worthwhile investment for CMS to explore 
the topic further.
    Response: We thank the commenter for this suggestion and agree that 
patient reported outcomes are important to examining quality of care. 
We will consider the feasibility of developing such a measure along 
with our other quality measure development priorities.
    Comment: One commenter explained that it did not believe that 
measures of Transfusion Ratios, Mortality, Hospitalizations/
Readmissions, Pain Management, or Transplant Access are appropriate for 
the QIP because the outcomes assessed by measures on those topics are 
largely not within the control of facilities. However, the commenter 
acknowledged that the Meaningful Measures Initiative emphasizes the 
inclusion of measures covering significant outcomes, and that the 
avoidance of hospitalizations and mortality are significant outcomes. 
The commenter also acknowledged that including measures of 
hospitalizations and mortality is consistent with the Meaningful 
Measures Initiative, despite facilities' lack of control over those 
outcomes.
    Response: We thank the commenter for this feedback. However, we 
continue to believe that shared responsibility for patients' health is 
an important feature of the ESRD QIP's quality measure set, and we 
therefore do not agree that these measures are inappropriate for the 
Program. We note that we have previously adopted measures that 
incorporate shared responsibility for patients' health across care 
settings, including the Standardized Hospitalization Ratio (SHR) and 
Standardized Readmission Ratio (SRR) measures. Though dialysis 
facilities may not have total control over patients' hospitalizations 
or readmissions, we have adopted those measures to highlight the shared 
responsibility that providers and suppliers have for ensuring that 
their patients remain healthy, which is an important clinical goal. We 
are continuing to build on this belief by adopting a measure of 
transplant waitlisting (discussed in more detail in section IV.C.1.a. 
of this final rule), which focuses on the responsibility shared by 
dialysis facilities and transplant centers for patient education about 
transplant options and maintaining patients' health status so that they 
are suitable for waitlisting. We view our efforts to improve health 
care quality through the adoption of cross-cutting quality measures as 
necessary to ensure that providers of all types have strong incentives 
to ensure their patients' continued health.
    As we noted with respect to the SRR measures in the CY 2015 ESRD 
PPS final rule (79 FR 66177), while the specific causes of readmissions 
are multifactorial, our analyses supported the view that the dialysis 
facility exerts an influence on readmissions roughly equivalent to that 
exerted by the discharging acute care hospital. We continue to believe 
that the care coordination required for numerous ESRD QIP measures 
requires interaction between multiple care providers, and that quality 
measures spanning those providers' care will necessarily incorporate 
shared responsibility for improved clinical outcomes.
    Comment: One commenter asked that we focus the QIP's measure set on 
dialysis adequacy, safety/bloodstream infections (BSIs), depression 
management, medication management, in-center hemodialysis consumer 
assessment of healthcare providers and systems (ICH CAHPS), and 
patient-reported outcomes, and suggested that we reduce the Program's 
measure set to ensure that facilities focus on those clinical topics.
    Response: We thank the commenter for this feedback. We proposed to 
reduce the ESRD QIP's measure set specifically to ensure that 
facilities focus on the most relevant clinical topics. However, we do 
not believe that the subset of topics identified by the commenter 
represents the fullest possible picture of care quality in dialysis 
facilities.
    We appreciate commenters' feedback on the Meaningful Measures 
Initiative and its application to the ESRD QIP.
2. Accounting for Social Risk Factors in the ESRD QIP
    In the fiscal year (FY) 2018 Inpatient Prospective Payment System 
(IPPS)/Long-Term Care Hospital Prospective Payment System (LTCH PPS) 
final rule (82 FR 38237 through 38239), we discussed the importance of 
improving beneficiary outcomes including reducing health disparities. 
We also discussed our commitment to ensuring that medically complex 
patients, as well as those with social risk factors, receive excellent 
care. We discussed how studies show that social risk factors, such as 
being near or below the poverty level as determined by the Department 
of Health and Human Services, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\9\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in CMS VBP programs.\10\ As we noted in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38237), ASPE's report to Congress found that, in the 
context of VBP programs, dual eligibility was the most powerful 
predictor of poor health care outcomes among those social risk factors 
that they examined and tested. In addition, as we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38237), the National Quality Forum 
(NQF) undertook a 2-year trial period in which certain new measures and 
measures undergoing maintenance review have been assessed to determine 
if risk adjustment for social risk factors is appropriate for these 
measures.\11\ The trial period ended in April 2017 and a final report 
is available at: http://www.qualityforum.org/SES_Trial_Period.aspx. The 
trial concluded that ``measures with a conceptual basis for adjustment 
generally did not demonstrate an empirical relationship'' between 
social risk factors and the outcomes measured. This discrepancy may be 
explained in part by the methods used for adjustment and the limited 
availability of robust data on social risk factors. NQF has extended 
the socioeconomic status (SES) trial,\12\ allowing further examination 
of social risk factors in outcome measures.
---------------------------------------------------------------------------

    \9\ See, for example, United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: http://www.healthypeople.gov/2020/about/foundation-health-measures/Disparities; or National Academies of Sciences, 
Engineering, and Medicine. Accounting for Social Risk Factors in 
Medicare Payment: Identifying Social Risk Factors. Washington, DC: 
National Academies of Sciences, Engineering, and Medicine 2016.
    \10\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016. Available at 
https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \11\ Available at http://www.qualityforum.org/SES_Trial_Period.aspx.
    \12\ Available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018 IPPS/LTCH PPS and CY 2018 ESRD PPS proposed rules 
for our quality reporting and VBP programs, we solicited feedback on 
which social

[[Page 56979]]

risk factors provide the most valuable information to stakeholders and 
the methodology for illuminating differences in outcomes rates among 
patient groups within a hospital or provider that would also allow for 
a comparison of those differences, or disparities, across providers. 
Feedback we received across our quality reporting programs included 
encouraging CMS to explore whether factors that could be used to 
stratify or risk adjust the measures (beyond dual eligibility); 
considering the full range of differences in patient backgrounds that 
might affect outcomes; exploring risk adjustment approaches; and 
offering careful consideration of what type of information display 
would be most useful to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters noted that stratified measures 
could serve as tools for hospitals to identify gaps in outcomes for 
different groups of patients, improve the quality of health care for 
all patients, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to VBP programs, commenters also cautioned to balance fair 
and equitable payment while avoiding payment penalties that mask health 
disparities or discouraging the provision of care to more medically 
complex patients. Commenters also noted that VBP program measure 
selection, domain weighting, performance scoring, and payment 
methodology must account for social risk.
    As a next step, CMS is considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital Inpatient 
Quality Reporting (IQR) Program outcome measures. Furthermore, we 
continue to consider options to address equity and disparities in our 
VBP programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
    The comments on social risk factors in the ESRD QIP, as well as our 
responses to those comments, are set forth below.
    Comment: Some commenters appreciated our exploration of social risk 
factor adjustments and reiterated their support for evaluating social 
risk factors' impact on measuring dialysis facility performance. 
Commenters suggested that stratifying performance reporting for each 
dialysis facility by social risk factors known to influence measure 
performance may help illuminate outcomes disparities in dialysis 
facilities. Commenters also recommended that we provide support through 
quality improvement activities to facilities with lower quality 
performance and high proportions of patients with social risk factors, 
potentially through the ESRD Networks. However, commenters recommended 
against adopting any social risk factor adjustment due to the risk of 
masking poor performance and because they believe that risk adjustment 
may discourage additional improvement efforts.
    Response: We thank the commenters for their support and will take 
their recommendations on stratifying performance under advisement. We 
agree with the commenters' recommendation about providing support to 
dialysis facilities through quality improvement activities, such as 
promoting best practices for performance on ESRD QIP quality measures, 
and we will continue to do so to the greatest extent feasible. We also 
share the commenters' concern about masking poor performance rates via 
social risk factors adjustment and will continue to consider our 
options on this topic.
    Comment: One commenter recommended assessing four measures for 
sociodemographic status (SDS) risk factors regardless of whether they 
are expressed as a rate or ratio: SRR, standardized transfusion ratio 
(STrR), standardized mortality ratio, and SHR. The commenter stated 
that evidence shows that patient-level SDS factors affect performance 
on these measures in other settings.
    Response: We thank the commenter for these specific suggestions and 
will continue to consider our options on this topic.
    Comment: One commenter suggested assessing whether a patient's 
insurance status at the start of his or her dialysis treatment should 
be applied to the arteriovenous fistula (AV fistula) clinical measure 
and the catheter > 90 days clinical measure. The commenter noted that 
patients who are uninsured when their dialysis treatment begins may 
have had trouble obtaining appropriate pre-dialysis care from a 
nephrologist. The commenter further noted that while the QIP makes some 
allowances for the care that dialysis patients initially receive, 
additional review of insurance status is appropriate.
    Response: We thank the commenter for this suggestion and will 
consider it as we continue to examine this issue.
    Comment: One commenter was concerned about the possibility that 
facilities may be discouraged from accepting patients with social risk 
factors if measures are not risk-adjusted to account for such factors. 
The commenter was also concerned that facilities could be discouraged 
from opening or maintaining service in areas where patients with social 
risk factors reside and suggested that we consider a reward-based 
incentive for facilities that improve outcomes in populations with 
social risk factors.
    Response: We thank the commenter for this feedback and will 
consider whether any of its suggestions are feasible and within the 
scope of our statutory authority as we further examine whether social 
risk factors should be accounted for in the ESRD QIP. We do not agree 
that incorporating social risk factors into the Program will discourage 
facilities from accepting patients who have those factors. We are 
committed to ensuring that the interests of consumers are put first and 
we expect providers to do the same. We encourage the commenter to 
contact the U.S. Department of Health and Human Services, Office for 
Civil Rights to submit a formal complaint if it believes that dialysis 
patients are being discriminated against.
    Comment: A commenter requested that we consider additional social 
risk factors for pediatric patients, including race, ethnicity, 
insurance status, and other socioeconomic factors, as well as school 
attendance, academic performance, and peer interactions. The commenter 
also suggested that we consider additional factors for parents and 
other primary caregivers, including employment status, financial burden 
of a chronically ill dependent child, and levels of fatigue and 
caregiver burn-out. The commenter also noted that pediatric patients 
may face disparities in access to care when they are displaced by 
natural disasters.
    Response: We thank the commenter for these suggestions and will 
take them into account as we continue analyzing

[[Page 56980]]

whether social risk factors should be accounted for in the ESRD QIP.
    Comment: A commenter suggested studying the following SDS factors 
to determine whether and to what extent they affect patient outcomes: 
income (for example, dual eligibility/low-income subsidy), race and 
ethnicity, insurance status at dialysis initiation, and geographic area 
of residence. The commenter offered to work with CMS to identify 
additional SDS factors that affect patient outcomes. The commenter also 
suggested that CMS use its dual eligibility/low-income subsidy data and 
geographic area of residence data as additional data points for social 
risk factors adjustment. The commenter also recommended using patient 
self-reporting to collect data for race/ethnicity. Another commenter 
suggested that we consider developing a temporary risk-adjustment 
policy based on our experience with risk adjustment for dual-eligible 
patients in the Medicare Advantage Program.
    Response: We thank the commenters for these suggestions and will 
take them into account as we continue to examine this issue. We also 
note that we will continue to welcome input from all stakeholders on 
this important topic.
    Comment: A commenter expressed support for our efforts to assess 
and account for social risk factors in the QIP through adjusters and 
other mechanisms. The commenter agreed that providers and suppliers 
should be assessed fairly, without masking potential disparities or 
creating disincentives to care for more medically complex patients.
    Response: We thank the commenter for its feedback.
    Comment: A commenter supported the elimination of health 
disparities and noted that health disparities are particularly 
pronounced in the kidney patient population, where African Americans 
are four times as likely and Latino Americans are twice as likely to 
have kidney disease. The commenter encouraged CMS to revisit the 
commenter's recommendations related to improving health equity that 
were submitted in response to the CY 2018 ESRD PPS proposed rule.
    Response: We thank the commenter for its suggestions and 
recommendations submitted in response to the CY 2018 ESRD PPS proposed 
rule, to which we responded in the CY 2018 ESRD PPS final rule (82 FR 
50759). In that final rule, we stated that we intend to consider all 
suggestions as we continue to assess each measure and the overall 
Program. We will continue to take these suggestions into account as we 
continue to examine health disparities and health equity.
    Comment: A commenter suggested not applying SDS factors to three 
measures: the Kt/V Dialysis Adequacy Comprehensive clinical measure, 
the Hypercalcemia clinical measure, and the New Medication 
Reconciliation for Patients Receiving Care at Dialysis Facilities 
(MedRec) reporting measure. The commenter believed that no evidence 
shows that SDS factors affect performance on these measures. Another 
commenter suggested not adjusting the NHSN BSI in Hemodialysis Patients 
clinical measure for SDS factors. Another commenter suggested not 
adjusting the QIP's reporting measures for SDS factors. The commenter 
stated that the purpose of reporting measures is to assess whether the 
facility has reported the required data, rather than assessing patient 
outcomes.
    Another commenter acknowledged the importance of trying to account 
for social risk factors through risk adjustment in the Program but 
expressed concern that those adjustments could have unintended 
consequences on the quality of care received in dialysis facilities. 
The commenter recommended that CMS ensure that patients continue 
receiving the highest standards of care and acknowledge the challenges 
associated with capturing data for Program measures under the current 
systems.
    Response: We thank the commenters for these suggestions and will 
take them into account as we continue analyzing the social risk factors 
topic.
    Comment: A commenter suggested that we review and make publicly 
available the data needed to determine the effect of SDS factors on the 
ICH CAHPS Survey clinical measure. The commenter believed that the 
effect of SDS factors on the survey's response rate is unknown. Another 
commenter was uncertain about the effects of SDS adjustment on the ICH 
CAHPS Survey and requested that we study the issue further.
    Response: We thank the commenters for this feedback. Education is 
included as a case mix adjuster for the ICH CAHPS Survey. We are 
currently examining the effects of other social risk factors on ICH 
CAHPS Survey responses and will provide as much information as possible 
to the public as these results are finalized.
    Comment: A commenter offered to assist CMS in assessing the effects 
of SDS factors, such as geography, biological factors, and demographic 
factors, on transplantation measures. The commenter believed that 
factors such as regional differences may affect transplantation access 
and eligibility, and therefore may affect waitlist placement.
    Response: We always welcome feedback from all stakeholders on these 
and other issues related to the ESRD QIP.
    Comment: A commenter recommended that we continue studying ESRD QIP 
measures for appropriate social risk factors adjustment. The commenter 
specifically suggested that we consider such adjustments for the SRR, 
STrR, and SHR measures, as well as the vascular access type (VAT) 
measures (for insurance status at time of dialysis initiation). 
However, the commenter recommended against adjustment for the Kt/V 
Dialysis, Hypercalcemia, and NHSN BSI clinical measures, and the 
reporting measures. The commenter also requested that we study the 
effects of SDS factors on measures of transplantation.
    Response: We thank the commenter for this feedback and will take it 
into account as we continue to examine this issue.
    Comment: One commenter questioned the ASPE report's conclusion that 
dual-eligible status is the strongest predictor of disparate clinical 
outcomes, noting that many patients with dual Medicare and Medicaid 
coverage have access to social services that patients without Medicaid 
coverage do not. The commenter suggested that CMS evaluate additional 
data points on social risk factors such as mental health status and 
income ranges.
    Response: We thank the commenter for this feedback and acknowledge 
that there are other critical social risk factors that should be 
considered. However, as noted in the ASPE report, our analyses are 
limited to the social risk factors available in Medicare claims data. 
We will continue to examine other social determinants of health as 
additional social risk factor data are made available.
3. Updated Regulation Text for the ESRD QIP
    In the CY 2019 ESRD PPS proposed rule (83 FR 34336), we proposed to 
codify a number of previously adopted requirements for the ESRD QIP in 
our regulations by revising Sec.  413.177 and adopting a new Sec.  
413.178. We stated that codification of these requirements would make 
it easier for the public to locate these requirements, and that 
proposed Sec.  413.178 would codify the following:
     Definitions of key terms used in the ESRD QIP;

[[Page 56981]]

     Rules for determining the applicability of the ESRD QIP to 
facilities, including new facilities;
     Measure selection;
     Rules governing performance scoring, including how we 
calculate the total performance score;
     Our process for making ESRD QIP performance information 
available to the public; and
     The limitation on administrative and judicial review.
    We also stated that revised Sec.  413.177(a) would codify that an 
ESRD facility that does not earn enough points under the ESRD QIP to 
meet or exceed the minimum total performance score established for a 
payment year would receive up to a 2 percent reduction to its otherwise 
applicable payment amount under the ESRD PPS for renal dialysis 
services furnished during that payment year.
    We invited public comments on the proposed regulation text.
    The comments and our responses to our regulation text proposals are 
set forth below.
    Comment: One commenter suggested including a reference in the 
performance standards definition to the 50th percentile of national 
performance during the baseline period for the performance year, 
similar to its inclusion in the attainment threshold and benchmark 
definitions.
    Response: We thank the commenter for the suggestion. However, we 
disagree with the commenter's suggestion to include a reference in the 
performance standards definition to the 50th percentile of national 
performance during the baseline period for the performance year. As 
initially defined in the PY 2012 ESRD QIP final rule (76 FR 629 through 
631), the performance standards term applies more broadly to levels of 
achievement and improvement and is not a specific reference to the 50th 
percentile of national performance.
    Comment: One commenter suggested that CMS revise the clinical and 
reporting measure definitions proposed to be codified at Sec.  
413.178(a)(4) and (a)(13), respectively, and reclassify the QIP's 
measures using terms more widely used in the community--structural, 
process, outcomes, access, and efficiency--in future rulemaking. The 
commenter expressed concern that the proposed definitions could be 
manipulated and suggested defining outcome measures as clinical 
measures and structural measures as reporting measures. The commenter 
also suggested clarifying in the scoring section that paragraphs 
(d)(1)(i) through (iii) describe the scoring for clinical measures and 
that paragraph (d)(1)(iv) describes the scoring for reporting measures.
    Response: We disagree with the commenter's suggestion to reclassify 
the Program's measures because the Program's current measure 
classification--reporting and clinical--represents the way in which the 
Program measures are scored and are Program specific. The commenters 
suggested classification system--structural, process, outcome, access, 
and efficiency--describe individual measure goals in terms of quality 
assessment.
    We also disagree with the commenter's suggestion to add clarifying 
language to the scoring section to differentiate between scoring for 
clinical measures and reporting measures; each paragraph in Sec.  
413.178(d)(1) specifies whether the scoring methodology described in 
that paragraph applies to clinical measures or reporting measures.
    Comment: A commenter expressed concern that that the proposed 
language to be codified at Sec.  413.178(c) deviates from the statutory 
text at 42 U.S.C. 1395rr(h)(2). The commenter also expressed concern 
that CMS has not referenced the patient satisfaction provision in the 
language proposed to be codified. The commenter also expressed concern 
that CMS has not proposed to codify the requirement that the QIP use 
measures that are NQF-endorsed unless the exception applies. The 
commenter suggested that the regulatory text state that if NQF has 
reviewed but not endorsed a measure, then the exception does not apply.
    Response: We thank the commenter for this feedback. We have revised 
the regulation text in Sec.  413.178(c)(3) to reflect the statutory 
requirement to include a patient satisfaction measure to the extent 
feasible. However, we disagree that the regulatory text should state 
that if the NQF has reviewed but not endorsed a measure, then the 
exception that allows us to adopt a measure that has not been endorsed 
by the NQF should not apply. Section 1881(h)(2)(B) of the Act does not 
limit us to using only NQF-endorsed measures in the Program. Rather, 
that section allows us, in the case of a specified area or medical 
topic determined appropriate for which a feasible and practical measure 
has not been endorsed, to specify a measure that is not so endorsed as 
long as we give due consideration to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. We 
do not believe it would be in the best interest of the Program to limit 
our ability to adopt measures that are not NQF-endorsed if, for 
example, they address significant clinical topics (as outlined by the 
priorities we described under the Meaningful Measures Initiative in 
section IV.B.1 of this final rule), or if they otherwise present 
significant opportunities for care quality improvement in dialysis 
facilities.
    Comment: A commenter raised concerns that the proposed regulatory 
text that would be codified at Sec.  413.178(d) does not reflect 
current scoring policies. The commenter suggested removing 0 as an 
achievement score option at paragraph (d)(i), noting that the FY 2019 
Program details show that a facility with a measure performance below 
the achievement threshold receive an achievement score of 0 points, a 
facility with a measure performance that falls within the range 
receives an achievement score of 1 to 9 points, and a facility with a 
measure performance at or above the benchmark receives an achievement 
score of 10 points. The commenter also suggested clarifying at 
paragraph (d)(ii) that 0 points is provided as an option for scoring 
achievement for facilities whose performance falls below their 
comparison rate. The commenter also raised concerns that the references 
in paragraph (d)(iv) are very general and that the Program details 
recommend including reporting measure requirements in the rule. The 
commenter suggested that the regulatory text refer the reader to the 
location of the specific requirements if the Program details cross-
reference remains.
    Response: We thank the commenter for this feedback. However, we 
would like to clarify that the proposed regulation text at Sec.  
413.178(d)(1)(i) states that we will award between 1 and 9 points for 
achievement to each ESRD facility whose performance on that measure 
during the applicable performance period meets or exceeds the 
achievement threshold but is less than the benchmark. Facilities whose 
performance on a measure does not meet or exceed the achievement 
threshold for that measure will not be awarded between 1 and 9 points; 
they will instead be awarded 0 points for that measure, because their 
performance does not fall within the specified range.
    We would also like to clarify that the language that we proposed at 
Sec.  413.178(d)(1)(ii) is intended to capture situations where a 
facility's performance on a measure does not improve from the 
comparison period. By stating that we will award between 0 and 9 points 
for improvement, we believe we have appropriately captured that 
possibility.
    Comment: A commenter expressed concern about the regulatory text

[[Page 56982]]

proposing to codify the recent changes to the performance score 
certificate (proposed Sec.  413.178(e)(3)). The commenter raised 
concerns about including only the total performance score (TPS) on the 
revised performance score certificate (PSC). The commenter stated that 
the DFC website--where detailed information is available--needs 
improvement, that many patients may not have internet access, and past 
inclusion of more detailed information on the PSC has created an 
expectation among patients that they can view detailed information on 
the PSC. The commenter suggested that the PSC is difficult to read 
because QIP does not use a parsimonious set of measures.
    Response: We thank the commenter for this feedback. We finalized 
changes to the PSC in the CY 2018 ESRD PPS final rule (82 FR 50759 
through 50760), and we did not address this topic in the CY 2019 ESRD 
PPS proposed rule. However, we will take this feedback into 
consideration in future years.
    Final Rule Action: After consideration of the public comments we 
received, we are finalizing our proposed regulation text with revisions 
to more clearly reflect previously finalized ESRD QIP policies. 
Specifically, we are revising the regulation text at Sec.  413.178(c) 
to more clearly incorporate the requirement at section 1881(h)(2)(A) of 
the Act that the ESRD QIP measure set include, to the extent feasible, 
a measure (or measures) of patient satisfaction. We are also revising 
our proposed regulations text to include two new additional paragraphs 
at Sec.  413.178(d)(1)(ii) and (d)(1)(iv) to clarify that we will award 
zero points for achievement on a clinical measure to each facility 
whose performance falls below the achievement threshold for that 
measure, and that we will award zero points for improvement on a 
clinical measure to each facility whose performance falls below the 
improvement threshold for that measure. We are renumbering the 
provisions in the proposed paragraph (d)(1) to accommodate these new 
paragraphs.

Update to Requirements Beginning with the PY 2021 ESRD QIP

1. Updates to the PY 2021 Measure Set
    In the CY 2019 ESRD PPS proposed rule (83 FR 34336-34340), we 
proposed to refine and update the criteria for removing measures from 
the ESRD QIP measure set, and for consistency with the terminology we 
are adopting for other CMS quality reporting and VBP programs, stated 
that we would now refer to these criteria as factors. We also proposed 
to remove four of the reporting measures that we previously finalized 
for the PY 2021 ESRD QIP measure set. Table 13 summarizes the proposed 
revisions to the PY 2021 ESRD QIP measure set, and we discuss the 
measure removal proposals in section IV.B.1.c of this final rule.

              Table 13--Proposed Revisions to the Previously Finalized PY 2021 ESRD QIP Measure Set
----------------------------------------------------------------------------------------------------------------
              NQF #                      Measure title and description          Measure  continuing  in PY 2021
----------------------------------------------------------------------------------------------------------------
0258............................  ICH CAHPS Survey Administration, a clinical  Yes.
                                   measure.
                                  Measure assesses patients' self-reported
                                   experience of care through percentage of
                                   patient responses to multiple testing
                                   tools.
2496............................  Standardized Readmission Ratio (SRR), a      Yes.
                                   clinical measure.
                                  Ratio of the number of observed unplanned
                                   30-day hospital readmissions to the number
                                   of expected unplanned 30-day readmissions.
2979............................  Standardized Transfusion Ratio (STrR), a     Yes.
                                   clinical measure.
                                  Risk-adjusted TrR 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.
N/A.............................  A measure of dialysis adequacy where K is    Yes.
                                   dialyzer clearance, t is dialysis time,
                                   and V is total body water volume (Kt/V)
                                   Dialysis Adequacy Comprehensive, a
                                   clinical measure.
                                  Percentage of all patient months for
                                   patients whose delivered dose of dialysis
                                   (either hemodialysis or peritoneal
                                   dialysis) met the specified threshold
                                   during the reporting period.
2977............................  Hemodialysis Vascular Access: Standardized   Yes.
                                   Fistula Rate clinical measure.
                                  Measures the use of an AV fistula as the
                                   sole means of vascular access as of the
                                   last hemodialysis treatment session of the
                                   month.
2978............................  Hemodialysis Vascular Access: Long-Term      Yes.
                                   Catheter Rate clinical measure.
                                  Measures the use of a catheter continuously
                                   for 3 months or longer as of the last
                                   hemodialysis treatment session of the
                                   month.
1454............................  Hypercalcemia, a clinical measure..........  Yes.
                                  Proportion of patient-months with 3-month
                                   rolling average of total uncorrected serum
                                   or plasma calcium greater than 10.2 mg/dL.
1463*...........................  Standardized Hospitalization Ratio (SHR), a  Yes.
                                   clinical measure.
                                  Risk-adjusted SHR of the number of observed
                                   hospitalizations to the number of expected
                                   hospitalizations.
0255............................  Serum Phosphorus, a reporting measure.       Proposed for Removal.
                                   Percentage of all adult (>=18 years of
                                   age) peritoneal dialysis and hemodialysis
                                   patients included in the sample for
                                   analysis with serum of plasma phosphorus
                                   measured at least once within month.
N/A.............................  Anemia Management Reporting, a reporting     Proposed for Removal.
                                   measure. Number of months for which
                                   facility reports erythropoiesis-
                                   stimulating agent (ESA) dosage (as
                                   applicable) and hemoglobin/hematocrit for
                                   each Medicare patient, at least once per
                                   month.
Based on NQF #0420..............  Pain Assessment and Follow-Up, a reporting   Proposed for Removal.
                                   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.
Based on NQF #0418..............  Clinical Depression Screening and Follow-    Yes.
                                   Up, a reporting measure.
                                  Facility reports in CROWNWeb one of six
                                   conditions for each qualifying patient
                                   treated during performance period.

[[Page 56983]]

 
Based on NQF #0431..............  National Healthcare Safety Network (NHSN)    Proposed for Removal.
                                   Healthcare Personnel Influenza
                                   Vaccination, a reporting measure. Facility
                                   submits Healthcare Personnel Influenza
                                   Vaccination Summary Report to the Centers
                                   for Disease Control and Prevention's
                                   (CDC's) NHSN system, according to the
                                   specifications of the Healthcare,
                                   Personnel Safety Component Protocol by May
                                   15 of the performance period.
N/A.............................  Ultrafiltration Rate, a reporting measure..  Yes.
                                  Number of months for which a facility
                                   reports elements required for
                                   ultrafiltration rates for each qualifying
                                   patient.
Based on NQF #1460..............  NHSN Bloodstream Infection (BSI) in          Yes.
                                   Hemodialysis Patients, a clinical measure.
                                  The Standardized Infection Ratio (SIR) of
                                   BSIs will be calculated among patients
                                   receiving hemodialysis at outpatient
                                   hemodialysis centers.
N/A.............................  NHSN Dialysis Event reporting measure......  Yes.
                                  Number of months for which facility reports
                                   NHSN Dialysis Event data to CDC.
----------------------------------------------------------------------------------------------------------------

    Comment: Numerous commenters provided feedback on various aspects 
of measures that are continuing in PY 2021. These comments included 
recommendations to keep or remove continuing measures from the Program, 
recommendations to modify continuing measures (for example, by revising 
their exclusions), and recommendations to reduce the provider burden 
associated with continuing measures (for example, by changing the 
administration of the ICH CAHPS Survey).
    Response: We thank the commenters for their feedback. We note that 
these comments are not responsive to a proposal included in the CY 2019 
ESRD PPS proposed rule, and therefore, are considered beyond the scope 
of the proposed rule. We refer readers to the CY 2018 ESRD PPS final 
rule (82 FR 50767 through 50769), the CY 2017 ESRD PPS final rule (81 
FR 77898 through 77906), and the CY 2016 ESRD PPS final rule (80 FR 
69052 through 69053) for public comments on measures that we have 
previously adopted for the ESRD QIP and our responses.
a. Refinement and Update to the Factors Used for ESRD QIP Measure 
Removal
    Under our current policy, we consider an ESRD QIP 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; (2) 
performance or improvement on a measure does not result in better or 
the intended patient outcomes; (3) a measure no longer aligns with 
current clinical guidelines or practice; (4) a more broadly applicable 
(across settings, populations, or conditions) measure for the topic 
becomes available; (5) a measure that is more proximal in time to 
desired patient outcomes for the particular topic becomes available; 
(6) a measure that is more strongly associated with desired patient 
outcomes for the particular topic becomes available; or (7) collection 
or public reporting of a measure leads to negative or unintended 
consequences (77 FR 67475). In the CY 2015 ESRD PPS final rule, we 
adopted statistical criteria for determining whether a clinical measure 
is topped out, and 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 set would address the unique needs of 
a specific subset of the ESRD population (79 FR 66174). In the CY 2013 
ESRD PPS final rule (77 FR 67475), we finalized that we would generally 
remove an ESRD QIP measure using notice and comment rulemaking, unless 
we determined that the continued collection of data on the measure 
raised patient safety concerns. In that case, we stated that we would 
promptly remove the measure and publish the justification for the 
removal in the Federal Register during the next rulemaking cycle. In 
addition, we stated that we would immediately notify ESRD facilities 
and the public through the usual communication channels, including 
listening sessions, memos, email notification, and Web postings.
    In order to align with terminology we are adopting for use across a 
number of quality reporting and pay for performance programs, we stated 
in the CY 2019 ESRD PPS proposed rule (83 FR 34338) that we would now 
refer to these criteria as ``factors'' rather than ``criteria.'' We 
also proposed to update these measure removal factors so that they are 
more closely aligned with the factors we have adopted or proposed to 
adopt for other quality reporting and pay for performance programs, as 
well as the priorities we have adopted as part of our Meaningful 
Measures Initiative. Specifically, we proposed to combine current 
Factors 4 and 5 (proposed new Factor 4), and we proposed to adjust the 
numbering of subsequent factors to account for this change. We also 
proposed to add a new factor for measures where it is not feasible to 
implement the measure specifications; we would refer to this new factor 
as Factor 7. The proposed Factors 1 through 7 are as follows:
     Factor 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 (for example, the 
measure is topped-out).
     Factor 2. Performance or improvement on a measure does not 
result in better or the intended patient outcomes.
     Factor 3. A measure no longer aligns with current clinical 
guidelines or practice.
     Factor 4. A more broadly applicable (across settings, 
populations, or conditions) measure for the topic or a measure that is 
more proximal in time to desired patient outcomes for the particular 
topic becomes available.
     Factor 5. A measure that is more strongly associated with 
desired patient outcomes for the particular topic becomes available.
     Factor 6. Collection or public reporting of a measure 
leads to negative or unintended consequences.
     Factor 7. It is not feasible to implement the measure 
specifications.
    We stated that we believe these proposed updates would better 
ensure that we use a consistent approach across our quality reporting 
and VBP programs when considering measures for removal, and that they 
reflect the considerations we have long used when evaluating measures 
for removal from the ESRD QIP. However, even if one or more of the 
measure removal factors applies, we stated that we might nonetheless 
choose to retain the measure for certain specified reasons. Examples of 
such

[[Page 56984]]

instances could include when a particular measure addresses a gap in 
quality that is so significant that removing the measure could result 
in poor quality, or in the event that a given measure is statutorily 
required. Furthermore, consistent with other quality reporting 
programs, we proposed to apply these factors on a case-by-case basis.
    We invited public comment on these proposals. The comments and our 
responses to those comments are set forth below.
    Comment: A commenter supported measure removal factors 1 through 8. 
The commenter urged CMS to include stakeholders in decisions related to 
factor 8 removal.
    Response: We thank the commenter for its support and note that we 
always welcome feedback from all stakeholders regarding our policies 
for the ESRD QIP. We also note that we would propose to remove any 
measures under Factor 8 through notice and comment rulemaking, thereby 
allowing opportunities for stakeholders to participate in decisions 
related to that factor.
    Comment: A commenter expressed support for Factors 1, 2, 3, 6, 7, 
and 8 as well as the proposed list of costs that CMS would consider for 
Factor 8. The commenter suggested that Factors 4 and 5 be revised to 
state that ``become available'' means that the replacement has been 
tested for patients with ESRD and at the dialysis facility level.
    Response: We thank the commenter for its support. Our intention is 
to adopt measures that have been tested for patients with ESRD and at 
the dialysis facility level. This policy is consistent with our policy 
to only adopt measures that are reliable and valid. We note that we can 
remove a measure without a replacement using other measure removal 
factors.
    Comment: A commenter supported our adjustments to the measure 
removal factors. Two commenters encouraged us to consider adding an 
additional factor for measures that do not meet NQF's scientifically-
accepted measure evaluation and testing criteria. One of those 
commenters noted that the QIP includes several measures that NQF has 
rejected and suggested that their inclusion is inconsistent with our 
statutory authority.
    Response: We thank the commenter for its support. Although we 
acknowledge that there are some QIP measures that are not currently 
NQF-endorsed, we note that we have statutory discretion to include such 
measures in the QIP where there is no feasible or practical NQF-
endorsed measure on a topic that we have determined appropriate as long 
as we give due consideration to measures that have been endorsed or 
adopted by a consensus organization identified by the Secretary.
    Comment: A commenter stated general agreement with the proposed 
measure removal factors and expressed appreciation that they align with 
factors in other programs. The commenter also suggested that we 
continue to require CROWNWeb reporting of measures that have been 
removed from the ESRD QIP due to topped-out status for at least 3 years 
in order to monitor unintended changes in performance.
    Response: We appreciate the commenter's feedback. We agree that we 
should strive to prevent unintended consequences related to the removal 
of a QIP measure, and we currently monitor for such consequences 
through our usual monitoring and evaluation activities.
    Comment: A commenter supported our proposal to add additional 
measure removal factors to the ESRD QIP.
    Response: We thank the commenter for this support.
    Comment: A commenter expressed strong support for including the new 
measure removal factors and agreed that topped out measures should be 
removed. However, the commenter believed that the current definition of 
topped-out is too stringent and not patient centered. The commenter 
suggested revising CMS's mathematical definition to allow for a measure 
that is clinically topped out to remain in the QIP if the removal of 
that measure would discourage facilities from incorporating patient 
preference into their care decisions.
    Response: We thank the commenter for its support. We also carry 
that in the CY 2015 ESRD PPS final rule, we 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 set would address 
the unique needs of a specific subset of the ESRD population (79 FR 
66174). We believe that this policy provides us sufficient flexibility 
to continue using a measure that might be topped-out according to our 
statistical criteria but otherwise addresses an important aspect of 
clinical quality for the ESRD population.
    Comment: A commenter expressed concern with the proposal that would 
allow CMS to retain a measure even if the measure otherwise qualified 
for removal under one of the proposed measure removal factors. The 
commenter believed that the purpose of the measure removal factors is 
to provide predictability and consistency among programs, and that 
retaining a measure that satisfies one of the measure removal factors 
would undermine those goals.
    Response: We understand the commenter's concern. However, we may 
have strong justification for continuing to use a measure that 
satisfies one of the measure removal factors and that this 
justification may outweigh removing the measure from QIP. We also note 
that unless a measure needed to be immediately removed for patient 
safety reasons, we intend to continue making measure removal decisions 
for the ESRD QIP through rulemaking, and we believe that this process 
provides sufficient predictability for facilities and consistency among 
our programs.
    Comment: A commenter recommended that CMS utilize a consistent 
numbering sequence for the measure removal factors across all of its 
programs and that all of the measure removal factors be standardized. 
The commenter stated that ESRD QIP, Hospital VBP, Inpatient Quality 
Reporting, and PPS-Exempt Cancer Hospital Quality Reporting; and 
Inpatient Psychiatric Facilities Quality Reporting Programs have a 
removal factor (measure is not feasible to implement as specified) not 
included in the other programs. The commenter believed that 
inconsistent numbering and removal factors across programs may 
contribute to confusion and add to the burden of managing and reviewing 
rules.
    Response: We thank the commenter for this feedback. Our proposals 
in the CY 2019 ESRD PPS proposed rule were intended to conceptually 
align our measure removal factors across our programs. While we have 
attempted to align the numbering and language of the measure removal 
factors across programs, we acknowledge that the ESRD QIP's measure 
removal factors have minor, non-substantive differences in language and 
numbering when compared to HIQR, HVBP, PCHQR, and IPFQR.
    Final Rule Action: After considering public comments, we are 
finalizing the updates to the existing measure removal factors as 
proposed.
b. New Measure Removal Factor
    In the CY 2019 ESRD QIP proposed rule (83 FR 34338 through 34339), 
we proposed to adopt an additional factor to consider when evaluating 
measures for removal from the ESRD QIP measure set: Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the Program.

[[Page 56985]]

    As we discuss in the CY 2019 ESRD PPS proposed rule (83 FR 34338 
through 34339), with respect to our new ``Meaningful Measures 
Initiative,'' we are engaging in efforts to ensure that the ESRD QIP 
measure set continues to promote improved health outcomes for 
beneficiaries while minimizing the overall costs associated with the 
Program. We believe these costs are multifaceted and include not only 
the burden associated with reporting, but also the costs associated 
with implementing and maintaining the Program. We have identified 
several different types of costs, including, but not limited to: (1) 
Provider, supplier and clinician information collection burden and 
related cost and burden associated with the submission/reporting of 
quality measures to CMS; (2) provider, supplier and clinician cost 
associated with complying with other quality programmatic requirements; 
(3) provider, supplier and clinician cost associated with participating 
in multiple quality programs, and tracking multiple similar or 
duplicative measures within or across those programs; (4) CMS cost 
associated with the Program oversight of the measure, including measure 
maintenance and public display; and (5) provider, supplier and 
clinician cost associated with compliance with other federal and/or 
state regulations (if applicable). For example, it may be needlessly 
costly and/or of limited benefit to retain or maintain a measure which 
our analyses show no longer meaningfully supports Program objectives 
(for example, informing beneficiary choice). It may also be costly for 
health care providers to track confidential feedback preview reports 
and publicly reported information on a measure where we use the measure 
in more than one Program. CMS may also have to expend unnecessary 
resources to maintain the specifications for the measure, as well as 
the tools needed to collect, validate, analyze, and publicly report the 
measure data. Furthermore, beneficiaries may find it confusing to see 
public reporting on the same measure in different Programs.
    We stated in the CY 2019 ESRD PPS proposed rule (83 FR 34338 
through 34339) that when these costs outweigh the evidence supporting 
the continued use of a measure in the ESRD QIP, we believe it may be 
appropriate to remove the measure from the Program. Although we 
recognize that one of the main goals of the ESRD QIP is to improve 
beneficiary outcomes by incentivizing health care providers to focus on 
specific care issues and making public data related to those issues, we 
also recognize that those goals can have limited utility where, for 
example, the publicly reported data are of limited use because they 
cannot be easily interpreted by beneficiaries to influence their choice 
of providers. In these cases, we stated our belief that removing the 
measure from the ESRD QIP may better accommodate the costs of Program 
administration and compliance without sacrificing improved health 
outcomes and beneficiary choice.
    We proposed that we would remove measures based on this factor on a 
case-by-case basis. We stated that we might, for example, decide to 
retain a measure that is burdensome for health care providers to report 
if we conclude that the benefit to beneficiaries justifies the 
reporting burden. We stated that our goal is to move the Program 
forward in the least burdensome manner possible, while maintaining an 
appropriately sized set of meaningful quality measures and continuing 
to incentivize improvement in the quality of care provided to patients.
    We invited public comment on our proposal to adopt an additional 
measure removal factor, ``the costs associated with a measure outweigh 
the benefit of its continued use in the Program,'' beginning with PY 
2021.
    Comment: A commenter urged us to consider that the benefits of a 
measure's continued use in the ESRD QIP may not be the same for the 
agency, providers, and patients when assessing whether a measure's 
costs outweigh the benefits of its continued use in the Program. The 
commenter stated that some facilities struggle to participate fully in 
the Program because the Program does not include pediatric-specific 
measures and pediatric dialysis patients are excluded from the 
calculation of most QIP measures. The commenter stated that facilities 
that furnish dialysis mainly to pediatric patients might benefit from 
the retention of measures that impose costs to other stakeholders 
because the retention of those measures would enlarge the overall 
number of measures that these facilities can report.
    Response: We thank the commenter for this suggestion, and we agree. 
We intend to balance the costs with the benefits to a variety of 
stakeholders. These stakeholders include, but are not limited to, 
patients and their families or caregivers, providers, the healthcare 
research community, healthcare purchasers, and patient and family 
advocates. Because for each measure the relative benefits to each 
stakeholder may vary, we believe that the benefits to be evaluated for 
each measure are specific to the measure and the original rationale for 
including the measure in the Program.
    We also understand that while a measure's use in the ESRD QIP may 
benefit many entities, the primary benefit is to patients and 
caregivers through incentivizing the provision of high quality care and 
through providing publicly reported data regarding the quality of care 
available. One key aspect of patient benefits is assessing the improved 
beneficiary health outcomes if a measure is retained in our measure 
set. We believe that these benefits are multifaceted and are 
illustrated through the domains of the Meaningful Measures Initiative. 
When the costs associated with a measure outweigh the evidence 
supporting the benefits to patients with the continued use of a measure 
in the ESRD QIP, we believe it may be appropriate to remove the measure 
from the Program.
    Final Rule Action: After considering public comments, we are 
finalizing Measure Removal Factor 8, the costs associated with a 
measure outweigh the benefit of its continued use in the Program, as 
proposed, for use in the ESRP QIP, beginning with PY 2021.
c. Removal of Four Reporting Measures
    As we discussed in the CY 2019 ESRD PPS proposed rule (83 FR 
34339), we have undertaken efforts to review the existing ESRD QIP 
measure set in the context of the Meaningful Measures Initiative. Based 
on that analysis and our evaluation of the Program's measures, we 
proposed to remove four measures previously adopted for the ESRD QIP, 
starting with PY 2021. We stated that if these proposals are finalized, 
facilities would no longer be required to report data specific to these 
measures beginning with January 1, 2019 dates of service. The four 
measures we proposed to remove from the ESRD QIP measure set are:
     Healthcare Personnel Influenza Vaccination.
     Pain Assessment and Follow-Up.
     Anemia Management.
     Serum Phosphorus.
Removal of the Healthcare Personnel Influenza Vaccination Reporting 
Measure From the ESRD QIP Measure Set
    In the CY 2015 ESRD PPS final rule, we adopted the Healthcare 
Personnel Influenza Vaccination reporting measure in the ESRD QIP 
measure set beginning with PY 2018 because we recognize that influenza 
immunization is an important public health issue and that vaccinating 
healthcare personnel against influenza can help to protect healthcare 
personnel and their patients

[[Page 56986]]

(79 FR 66206 through 66208). We stated in the CY 2019 ESRD PPS proposed 
rule (83 FR 34339) that we continue to believe that the Healthcare 
Personnel Influenza Vaccination measure provides the benefit of 
protecting patients against influenza. However, we stated that our 
analysis of CY 2016 data indicates that ESRD facility performance on 
the measure was consistently high; 98 percent of ESRD facilities 
received the highest possible score on the measure (10 points) and the 
remaining 2 percent received no score on the measure because they did 
not report the required data. We stated that this finding indicates 
that influenza vaccination of healthcare personnel in ESRD facilities 
is a widespread practice and that there is little room for improvement 
on this measure. Accordingly, we proposed to remove this measure from 
the ESRD QIP measure set beginning with PY 2021 under Factor 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).
Removal of the Pain Assessment and Follow-Up Reporting Measure From the 
ESRD QIP Measure Set
    In the CY 2015 ESRD PPS final rule, we adopted the Pain Assessment 
and Follow-Up reporting measure beginning with PY 2018 (79 FR 66203 
through 66206) because patients with ESRD frequently experience pain 
that has a debilitating impact on their daily lives, and research has 
shown a lack of effective pain management strategies in place in 
dialysis facilities. We stated in the CY 2019 ESRD PPS proposed rule 
(83 FR 34339) that we continue to believe that effective pain 
management is an important component of the care received by ESRD 
patients. However, our analysis of CY 2016 data indicates that with 
respect to that year, 90 percent of ESRD facilities received the 
highest possible score on the measure (10 points) and 1 percent of ESRD 
facilities received no score on the measure. We stated that this 
finding indicates that documentation of pain management using a 
standardized tool, as well as documentation of a follow-up plan where 
pain is present, are widespread practices in ESRD facilities and that 
there is little room for improvement on the measure. Accordingly, we 
proposed to remove this measure from the ESRD QIP measure set based on 
our proposed Factor 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).
Removal of the Anemia Management Reporting Measure From the ESRD QIP 
Measure Set
    In the CY 2013 ESRD PPS final rule, we adopted the Anemia 
Management reporting measure beginning with the PY 2015 ESRD QIP (77 FR 
67491 through 67495) because we believe that it is important to monitor 
hemoglobin levels in patients to ensure that anemia is properly 
treated. Additionally, we stated that the measure's adoption fulfilled 
the statutory requirement at section 1881(h)(2)(A)(i) of the Act that 
the ESRD QIP include measures on anemia management that reflect 
labeling approved by the Food and Drug Administration (FDA) for such 
management. Additionally, in the CY 2015 ESRD PPS final rule (79 FR 
66192 through 66197), we adopted the NQF-endorsed Standardized 
Transfusion Ratio (STrR) measure beginning with PY 2018 to ensure that 
patients with ESRD are not negatively affected by underutilization of 
ESAs, with the result that these patients have lower achieved 
hemoglobin levels and more frequently need red-blood-cell transfusions. 
We stated that there is a strong association between achieved 
hemoglobin levels and subsequent transfusion events, and that 
facilities have a direct role in determining achieved hemoglobin as a 
result of their anemia management practices (79 FR 66194). We also 
noted that the STrR measure meets the requirement at section 
1881(h)(2)(A)(i) of the Act for the ESRD QIP to adopt measures of 
anemia management that reflect the labeling approved by the Food and 
Drug Administration for such management.
    In the CY 2019 ESRD PPS proposed rule (83 FR 34339), we stated that 
our analysis of CY 2016 data indicates that ESRD facility performance 
on the Anemia Management reporting measure was consistently high; 96 
percent of ESRD facilities received the highest possible score on the 
measure (10 points). This finding indicates that facility tracking of 
hemoglobin values and, as applicable, ESA dosages, is widely performed 
among ESRD facilities and that there is little room for improvement on 
the measure.
    We therefore proposed to remove the Anemia Management reporting 
measure from the ESRD QIP measure set based on Factor 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).
Removal of the Serum Phosphorus Reporting Measure From the ESRD QIP 
Measure Set
    In the CY 2014 ESRD PPS final rule, we adopted the Hypercalcemia 
measure beginning with the PY 2016 ESRD QIP (78 FR 72200 through 72203) 
as a measure of bone mineral metabolism. Specifically, this measure 
assesses the number of patients with uncorrected serum calcium greater 
than 10.2 mg/dL for a 3-month rolling average. In the CY 2017 ESRD PPS 
final rule (81 FR 77876 through 77879), we finalized two modifications 
to the measure's technical specifications, as recommended during the 
measure maintenance process at the NQF, beginning with PY 2019. First, 
we added plasma as an acceptable substrate in addition to serum 
calcium. Second, we amended 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 ensure 
that, beginning with PY 2019, the measure aligns with the NQF-endorsed 
measure.
    In the CY 2017 ESRD PPS final rule, we adopted a second measure of 
bone mineral metabolism, beginning with PY 2020: the Serum Phosphorus 
reporting measure (81 FR 77911 through 77912). This measure evaluates 
the extent to which facilities monitor and report patient phosphorus 
levels.
    In the CY 2019 ESRD PPS proposed rule (83 FR 34340), we stated that 
while we consider both the Hypercalcemia measure and the Serum 
Phosphorus measure to be measures of bone mineral metabolism, the two 
measures track different minerals. Hypercalcemia measures calcium 
levels and Serum Phosphorus measures phosphorus levels. 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 (81 FR 77911).
    As a result of the NQF's 2017 re-endorsement of the Hypercalcemia 
measure, as well as the Hypercalcemia measure's focus on clinical 
factors that are more directly under the facility's control, we stated 
in the CY 2019 ESRD PPS proposed rule that we now consider the 
Hypercalcemia measure to be a superior measure of bone mineral 
metabolism compared with Serum Phosphorus. In addition, of the two 
measures, the Hypercalcemia measure is more focused on outcomes; the 
Serum Phosphorus is a reporting measure

[[Page 56987]]

while the Hypercalcemia measure is a clinical measure. Finally, the 
Hypercalcemia measure is an outcome-based measure specific to the 
conditions treated with oral-only drugs, which is a statutory 
requirement for the ESRD QIP measure set. Based on the limited benefit 
provided to the Program by the Serum Phosphorus measure as well as its 
reporting burden, we proposed to remove the Serum Phosphorus reporting 
measure from the ESRD QIP measure set based on Factor 5 (that is, a 
measure that is more strongly associated with desired patient outcomes 
for the particular topic becomes available).
    We invited comments on these proposals. We also stated in the CY 
2019 ESRD PPS proposed rule that we did not propose any changes to the 
PY 2021 performance period or performance standards, and we referred 
readers to the CY 2018 ESRD PPS final rule (82 FR 50778 through 50779) 
for a discussion of those policies.
    Comment: One commenter supported our proposal to remove the HCP 
Influenza Vaccination, Pain Assessment and Follow-up, and Anemia 
Management Reporting measures.
    Response: We thank the commenter for its support for removing the 
HCP Influenza Vaccination, Pain Assessment and Follow-up, and Anemia 
Management Reporting Measures.
    Comment: Some commenters suggested keeping the Serum Phosphorus 
measure in the QIP and removing the Hypercalcemia measure. One 
commenter noted that the NQF has concluded that the hypercalcemia 
measure is topped out and that there is agreement among nephrologists 
that the Hypercalcemia measure is not the best measure to affect 
patient outcomes. Another commenter stated that physicians and nurses 
use the Serum Phosphorus measure in clinical decision-making and that 
the Serum Phosphorus measure meets PAMA requirements. Another commenter 
believed that Serum Phosphorus is the only measure that meets PAMA 
requirements for an NQF-endorsed quality measure of conditions treated 
with oral-only medications. Another commenter noted that the 
Hypercalcemia measure is topped out and that dialysis facilities may 
focus less on other, more important clinical topics to avoid QIP 
penalties. Another commenter disagreed with our assessment that the 
Hypercalcemia clinical measure is a better measure than the Serum 
Phosphorus reporting measure, particularly for the pediatric 
population. The commenter stated that it takes a significant amount of 
time and clinical effort to control phosphorus levels in pediatric 
patients and suggested that the Serum Phosphorus reporting measure is 
particularly meaningful for that population.
    Another commenter recommended that CMS remove the Hypercalcemia 
measure instead of the Serum Phosphorus measure. The commenter also 
suggested that the statutory requirement to include a mineral 
metabolism measure in the ESRD QIP no longer applies to hypercalcemia 
drugs with the launch of the IV calcimimetic. In addition, the 
commenter suggested that the Hypercalcemia measure is not clinically 
useful, is topped out, and discourages the home dialysis modality due 
to its reliance on monthly labs that require the patient to visit the 
facility.
    Response: As we described in the CY 2019 ESRD PPS proposed rule (83 
FR 34340), in 2017, the NQF re-endorsed the Hypercalcemia measure and 
its focus on clinical factors that are more directly under the 
facility's control. We noted further that the Hypercalcemia clinical 
measure is more focused on outcomes, which we believe should be 
emphasized more heavily in the ESRD QIP than reporting measures. 
However, we will continue examining the effects of the ESRD QIP's 
measures on different patient populations, including pediatric 
patients.
    We note, however, that we have not adopted an IV calcimimetic 
measure in the ESRD QIP, and we therefore, do not agree that its launch 
means that the statutory requirement that we include measures of 
mineral metabolism in the ESRD QIP no longer applies.
    We would also like to clarify that we have not concluded that the 
Hypercalcemia measure is topped out, and we will continue to assess the 
ESRD QIP to ensure that dialysis patients are not discouraged from 
pursuing treatment via their preferred modalities.
    Comment: Commenters supported our proposal to remove four reporting 
measures from the Program. One commenter noted that the proposal takes 
a much-needed step towards creating a smaller, more patient-centered 
measure set. Another commenter suggested that we consider adding health 
care personnel influenza vaccinations to Medicare's conditions for 
coverage for ESRD facilities. One commenter requested clarification as 
to whether facility reporting on the health care personnel influenza 
vaccination measure would be discontinued beginning October 1, 2018--
the start of the PY 2021 period of performance.
    Response: We thank the commenters for their feedback and support, 
and we will consider whether we should add health care personnel 
influenza vaccinations to our conditions for coverage in the future. We 
intend to continue monitoring outcomes associated with influenza in the 
dialysis patient population. We would like to clarify that facilities 
can discontinue data collection on the HCP influenza vaccination 
measure beginning with October 1, 2018 dates of service and will not be 
required to submit vaccination reports in May 2019 for PY 2021.
    We would also like to clarify that the Healthcare Personnel 
Influenza Vaccination reporting measure is evaluated on the basis of 
facility reporting to the NHSN, not on healthcare personnel influenza 
vaccination rates, and that the consistently high facility performance 
on the measure indicates that facility reporting, not influenza 
vaccination rates of facility staff, is a widespread practice and that 
there is little room for improvement on this reporting measure.
    Comment: Commenters expressed support for the proposed removal of 
the Pain Assessment and Follow-Up reporting measure. One commenter 
stated that performance on the measure is uniformly high, and another 
commenter agreed that if meaningful distinctions among facilities for a 
specific measure cannot be made, then that measure should be removed 
from QIP. Another commenter stated that these types of measures may 
contribute to the opioid epidemic and that the pain management measure 
was not designed for dialysis patients. Another commenter believed that 
the standardized pain measurement tool is expensive and burdensome for 
facility staff and data entry coordinators.
    Response: We thank the commenters for their support.
    Comment: One commenter did not have any objection to our proposal 
to remove the Serum Phosphorus and Pain Assessment measures from the 
Program. Another commenter expressed support for removing the 
Healthcare Personnel Influenza Vaccination reporting measure, stating 
that it does not align with current clinical practice. Other commenters 
supported our proposal to remove HCP Influenza Vaccination, Pain 
Assessment and Follow-Up, and Anemia Management reporting measures.
    Response: We thank the commenters for their support of the measure 
removals. We note that the CDC and the Advisory Committee on 
Immunization Practices recommend annual seasonal influenza vaccination 
for all healthcare personnel, including those working in dialysis 
facilities. However, the ESRD QIP does not include a Healthcare

[[Page 56988]]

Personnel Influenza Vaccination clinical measure that would evaluate 
facility performance on the basis of the proportion of ESRD healthcare 
personnel who undergo vaccination. The Program's Healthcare Personnel 
Influenza Vaccination measure proposed for removal is a reporting 
measure that assesses facilities' reporting of healthcare personnel 
influenza vaccination data to the NHSN system. Since facility reporting 
on the measure is high and there is little room for improvement, we 
proposed to remove the measure from the Program.
    Comment: Commenter supported the removal of the Healthcare 
Personnel Influenza Vaccination reporting measure, suggesting that the 
data suggests facility compliance with the measure is close to 100 
percent and the measure is no longer necessary for inclusion in QIP.
    Response: We thank the commenter for this feedback and support.
    Comment: Commenter generally supported our proposal to remove four 
reporting measures from the Program but expressed concern about the 
removal of the influenza vaccination measure. The commenter believed 
that the measure helps ensure that a healthy workforce furnishes 
services to ESRD patients, and worried that the removal of the measure 
will result in fewer employees becoming vaccinated.
    Response: We thank the commenter for this support. As we noted in 
the CY 2019 ESRD PPS proposed rule (83 FR 34339), 98 percent of ESRD 
facilities received the highest possible score on the influenza 
vaccination measure, indicating that almost all ESRD facilities were 
reporting influenza vaccination of healthcare personnel. CDC and the 
Advisory Committee on Immunization Practices (ACIP) recommends that all 
healthcare personnel (HCP) and persons in training for healthcare 
professions should be vaccinated annually against influenza, given that 
HCP vaccination has been associated with reduced work absenteeism and 
fewer deaths among elderly patients. We and CDC will continue 
monitoring the effects of the measure's removal and the distal outcomes 
associated with influenza in the dialysis patient population, and will 
work to ensure that ESRD facilities continue to maintain the healthiest 
possible workforce. CDC also encourages ESRD facilities to continue to 
report this measure as part of their quality improvement programs.
    Comment: A commenter supported the removal of the Serum Phosphorus 
reporting measure. However, the same commenter raised concerns that 
removing this measure from QIP will not reduce facility burden, as it 
is still a required field in CROWNWeb and CMS would still collect 
phosphorus values for use in DFC/DFR reports.
    Response: Our goal is to streamline the QIP and implement a 
parsimonious, effective quality measure set. To that end, we are 
removing the Serum Phosphorus measure from the QIP because we have 
determined that the Hypercalcemia measure is a better measure of bone 
mineral metabolism compared to the Serum Phosphorus measure and given 
NQF's recent re-endorsement of the Hypercalcemia measure. We continue 
to believe that this removal reduces the burden associated with the 
ESRD QIP. However, we will examine the other burdens associated with 
the measure that the commenter highlighted and will consider whether we 
should remove any of those requirements in service of reducing 
facilities' reporting burden further.
    Comment: Commenter was generally supportive of reducing the size of 
the ESRD QIP measure set but expressed concern about the proposed 
removal of the HCP Influenza Vaccination reporting measure. The 
commenter agreed with our assessment that performance on the measure is 
likely high across the industry and acknowledged the comparatively high 
burden associated with the measure but noted that the measure is also 
required by CDC's NHSN, meaning that its removal from the QIP wouldn't 
relieve facilities of the responsibility to report on it. Commenter 
encouraged us to work with CDC to align reporting requirements. Another 
commenter stated that the HCP Influenza Vaccination reporting measure 
is still meaningful, and its reporting burden is not particularly 
burdensome.
    Response: As noted above, our goal is to streamline the QIP and 
implement a parsimonious, effective quality measure set. We also note 
that the CDC continues to encourage vaccination reporting, and that the 
CDC and the Advisory Committee on Immunization Practices (ACIP) 
recommend that all healthcare personnel (HCP) be vaccinated annually 
against influenza.
    Comment: A commenter was concerned that the dates of vaccine 
availability for the HCP Influenza Vaccination measure do not coincide 
with the measure's reporting dates. The commenter encouraged us to 
modify the measure to align with CDC's immunization guidelines. Another 
commenter recommended that we adjust the reporting dates for the HCP 
Influenza vaccination to allow administrations beginning October 1 or 
when the vaccine becomes available.
    Response: We thank the commenter for their feedback. Since we are 
finalizing our proposal to remove the Healthcare Personnel Influenza 
Vaccination measure from QIP, facilities will not be required to 
collect vaccination data beginning October 1, 2018--which would have 
been the beginning of the PY 2021 period of performance for that 
measure.
    Comment: Commenters were concerned about our proposal to remove the 
HCP Influenza Vaccination measure from the QIP. One commenter believed 
that the measure's removal will send the message that preventive health 
services such as immunizations are no longer a priority. That commenter 
noted that sustained influenza vaccination should be a top priority for 
workers treating ESRD patients since they are at high risk for 
infectious diseases and that the measure's removal would create greater 
inconsistency across CMS's quality programs. Another commenter believed 
that removing the measure may result in facilities no longer mandating 
that their personnel receive vaccinations.
    One commenter opposed the measure's removal based on its belief 
that the measure supports patient outcomes. The commenter stated that 
high compliance should be expected because the measure was adopted 
recently. The commenter noted that healthcare personnel can 
unintentionally expose patients to seasonal influenza if they have not 
been vaccinated and that patients with ESRD and acute kidney injury are 
often at risk for influenza due to their complex underlying 
comorbidities. The commenter also stated that annual influenza 
vaccination of healthcare personnel has been shown to reduce flu-
related morbidity and mortality among health care personnel and their 
patients and reduce work absenteeism. The commenter also believed that 
a vaccinated workforce creates a safe environment for patients, their 
families, and employees.
    Response: We agree that influenza vaccination of healthcare 
personnel is an important public health measure to protect both the 
healthcare personnel and ESRD patients against flu-related morbidity 
and mortality and healthcare personnel absenteeism. As we have noted 
previously, CDC and the Advisory Committee on Immunization Practices 
recommend annual seasonal influenza vaccination for all healthcare 
personnel, including those working in dialysis centers. However, as 
described above, our goal is to streamline the QIP and implement a 
parsimonious, effective

[[Page 56989]]

quality measure set for dialysis facilities, and we continue to believe 
that the high reporting rate on the HCP Influenza Vaccination measure 
indicates that there is little room for facilities to improve reporting 
on the measure. However, we will continue to monitoring the issue to 
assess whether the measure's removal results in any negative unintended 
consequences.
    Comment: A commenter encouraged us to continue requiring reporting 
of the Pain Assessment and Follow-up reporting measure, the Healthcare 
Personnel Influenza Vaccination reporting measure, and the Anemia 
Management reporting measure. The commenter also urged us to maintain 
the Serum Phosphorus measure in the QIP until a better measure of bone 
and mineral metabolism can be developed. The commenter believed that 
the Pain Assessment measure, in particular, is important to patients 
and that a high performance rate on the measure does not indicate 
absence of a gap in addressing pain in dialysis patients. Another 
commenter stated that data do not support a performance measure based 
on hemoglobin level at this time but suggested that anemia management 
is still important as a reporting measure. Another commenter stated 
that anemia measures are helpful and may improve clinical outcomes for 
people in earlier stages of chronic kidney disease (CKD). The commenter 
recommended that we continue collecting the data for both the 
hemoglobin level and whether the patient received anemia treatment 
prior to ESRD onset. That commenter also suggested that we allow more 
granular anemia reporting.
    Response: As we noted in the CY 2019 ESRD PPS proposed rule (83 FR 
34339 through 34340), the NQF recently re-endorsed the Hypercalcemia 
measure, and the Hypercalcemia measure focuses on clinical factors that 
are more directly under the facility's control. We therefore believe 
that the Hypercalcemia clinical measure is a better measure of bone 
mineral metabolism than the Serum Phosphorus reporting measure, and in 
the interest of maintaining a more parsimonious quality measure set 
under the ESRD QIP, as well as a quality measure set more focused on 
clinical outcomes, we proposed to remove Serum Phosphorus.
    With respect to the Pain Assessment measure, while we understand 
the commenter's point that high performance rates on the measure may 
not indicate the absence of a gap in addressing pain in dialysis 
patients, we weighed high performance on the measure against the 
measure's reporting burden and clinical value when we proposed to 
remove it. We expect that dialysis facilities will continue working to 
ensure that their patients' pain is assessed as thoroughly as possible.
    We continue to believe that Anemia Management measure should be 
removed from the QIP because it is a reporting measure, is topped out, 
and is not consistent with FDA guidelines on the use of Erythropoietic 
Stimulating Agents (ESAs), because any measure focused on a specific 
hemoglobin level or target encourages ESA use for reasons other than 
symptom relief, and that action is associated with adverse 
cardiovascular effects.
    Comment: Commenter opposed the removal of the Anemia Management 
measure, suggesting that its removal would not reduce burden. Commenter 
stated that facilities are still required to report this information on 
Medicare claims on a monthly basis.
    Response: We thank the commenter for this feedback. Our goal is to 
streamline the QIP and implement a parsimonious, effective quality 
measure set. To that end, we are removing the Anemia Management measure 
from the QIP because as previously noted, our analysis of CY 2016 data 
indicates that ESRD facility performance on the Anemia Management 
reporting measure was consistently high, indicating that facility 
tracking of hemoglobin values and, as applicable, ESA dosages, is 
widely performed among ESRD facilities and that there is little room 
for improvement on the measure. Given these findings, we believe that 
the measure's continued inclusion in QIP is no longer necessary. 
However, we agree that removing the Anemia Management reporting measure 
from QIP will not reduce facility burden as measured by the Program 
because facilities do not report the measure's data through CROWNWeb. 
We will examine the other burdens associated with the measure that the 
commenter highlighted and will consider whether we should remove any of 
those requirements in service of further reducing facilities' reporting 
burden.
    Comment: Commenter cautioned that removing the Anemia Management 
measure may result in facilities' skimping on medications vital to 
anemia management, which is a critical aspect of dialysis care. The 
commenter believed that anemia management in general remains of 
critical importance as a quality indicator.
    Response: We understand the commenter's concern. We undertake a 
robust monitoring and evaluation effort for the ESRD QIP, and we will 
work to ensure that dialysis facilities do not skimp on needed 
medications or otherwise reduce the quality of the care they provide 
due to quality measure removals. In addition, the STrR measure remains 
in QIP, and facilities are still required to report hemoglobin levels 
in CROWNWeb and claims.
    Comment: Commenter stated its opposition to removing the Anemia 
Management measure, suggesting that its removal while continuing to 
rely on the STrR measure raises significant concerns because the STrR 
measure will not accurately reflect the quality of care at dialysis 
facilities. Commenter stated its belief that STrR has not been a valid 
measure of transfusions since the implementation of the ICD-10-CM/PCS 
coding system and encouraged us to maintain the Anemia Management 
measure until we can assess the STrR measure's validity independently.
    Response: We thank the commenter for its feedback. As we discuss 
further in a subsequent section of this final rule, we are finalizing a 
lower weight for the STrR measure in response to concerns raised about 
the measure, but we decided to retain that measure in the QIP as a way 
to monitor quality for anemia management.
    Comment: A commenter supported the creation of a new reporting-only 
measure for anemia management, based on the average of 3 months of 
data. The commenter suggested that this measure is especially 
appropriate for the pediatric population, contending that, within the 
pediatric population, data shows that morbidity and hospitalizations 
rise when hemoglobin is less than 10g/dL.
    Response: We thank the commenter for this feedback. We are 
constantly evaluating our measures of anemia management and will 
consider measures that address the pediatric population in future 
years.
    Final Rule Action: After consideration of public comments received, 
we are finalizing the removal of the Healthcare Personnel Influenza 
Vaccination reporting measure, the Pain Assessment and Follow-Up 
reporting measure, the Anemia Management reporting measure, and the 
Serum Phosphorus reporting measure beginning with the PY 2021 ESRD QIP.
2. Performance Standards, Achievement Thresholds, and Benchmarks for 
the PY 2021 ESRD QIP
    In the CY 2018 ESRD PPS final rule (82 FR 50763 through 50764) we 
finalized that for PY 2021, 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

[[Page 56990]]

CY 2017, because this would give us enough time to calculate and assign 
numerical values to those performance standards prior to the beginning 
of the performance period for that payment year. We stated in the CY 
2019 ESRD PPS proposed rule (83 FR 34340) that we did not have the 
necessary data to assign numerical values to those performance 
standards, achievement thresholds, and benchmarks because we did not 
yet have complete data from CY 2017. Nevertheless, we stated that we 
could estimate these numerical values based on the most recent data 
available at the time we issued the CY 2019 ESRD PPS proposed rule. We 
have since updated those values based on more recently available data. 
In Table 14, we provide the estimated numerical values for all 
finalized PY 2021 ESRD QIP clinical measures, as shown in the CY 2019 
ESRD PPS proposed rule (83 FR 34340). We also provide updated values 
for the clinical measures, using CY 2017 data that facilities submitted 
in the first part of CY 2018 in Table 15.

  Table 14--Estimated Numerical Values for the Performance Standards for the PY 2021 ESRD QIP Clinical Measures
                                     Using the Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
                                                                    Achievement                     Performance
                             Measure                                 threshold       Benchmark       standard
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    Standardized Fistula Rate...................................           0.518           0.752           0.628
    Long-Term Catheter Rate.....................................          19.23%           5.47%          12.02%
Kt/V Composite..................................................          91.09%          98.56%          95.64%
Hypercalcemia...................................................           2.41%           0.00%           0.86%
Standardized Transfusion Ratio..................................           1.683           0.200           0.846
Standardized Readmission Ratio..................................           1.273           0.630           0.998
NHSN BSI........................................................           1.598               0           0.740
SHR measure.....................................................           1.249           0.670           0.967
ICH CAHPS: Nephrologists' Communication and Caring..............          57.36%          78.09%          67.04%
ICH CAHPS: Quality of Dialysis Center Care and Operations.......          53.14%          71.52%          61.22%
ICH CAHPS: Providing Information to Patients....................          73.31%          86.83%          79.79%
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..............          52.24%          82.48%          66.82%
----------------------------------------------------------------------------------------------------------------
Data sources: VAT measures: 2016 CROWNWeb; SRR, STrR, SHR: 2016 Medicare claims; Kt/V: 2016 CROWNWeb;
  Hypercalcemia: 2016 CROWNWeb; NHSN: 2016 CDC, ICH CAHPS: CMS 2015 and 2016.

    In previous rulemaking, we have finalized that if final numerical 
values for the performance standard, achievement threshold, and/or 
benchmark are worse than they were for that measure in the previous 
year of the ESRD QIP, then we would substitute the previous year's 
performance standard, achievement threshold, and/or benchmark for that 
measure. In the CY 2017 ESRD PPS final rule, we finalized an update to 
that policy because in certain cases, it may be appropriate to re-
baseline the National Healthcare Safety Network (NHSN) Bloodstream 
Infection (BSI) clinical measure, such that expected infection rates 
are calculated on the basis of a more recent year's data (81 FR 77886). 
In such cases, we stated that numerical values assigned to performance 
standards may appear to decline, even though they represent higher 
standards for infection prevention. For PY 2021 and future payment 
years, we proposed to continue use of this policy.
    The comments and our responses regarding the estimated performance 
values and our proposal to continue our policies for substituting the 
performance standard, achievement threshold, and benchmark in 
appropriate cases, are set forth below.
    Comment: Commenters generally supported the continued use of 
benchmarks, attainment and improvement standards, and payment penalty 
tiers in the QIP. One commenter recognized of the importance of the 
NHSN re-baselining process and its impact on the NHSN BSI clinical 
measure.
    Response: We thank the commenters for their support.
    Comment: Commenter requested that we consider new approaches to 
care, such as Transitional Care Dialysis units, when developing QIP 
standards, and suggested that we consider an acuity adjustment when 
scoring facilities in the QIP.
    Response: We thank the commenter for this suggestion. At this time, 
we do not believe it is feasible to implement an acuity adjustment for 
scoring facilities in the QIP. However, as we discussed earlier in this 
final rule, we are continuing to consider appropriate adjustments to 
account for social risk factors in the ESRD QIP's measurements and in 
our other VBP and quality reporting programs.
    Comment: Commenter called on us to consider incorporating 
flexibility into our performance standards to ensure that facilities 
failing to achieve Kt/V performance standards due to patient 
preferences can still perform well on the measure. The commenter 
suggested that treatment changes that would enable a facility to score 
more highly on the measure would not be desirable if those treatment 
changes were not consistent with the patients' preferences.
    Response: We thank the commenter for their feedback. However, the 
methodology that we employ to performance standards reflects national 
performance on quality measures because we believe that setting 
national standards of care will drive quality improvement in this 
sector. We agree with the commenter that quality measurements that do 
not accord with the patients' preferences would not be a desirable 
outcome, but we believe that dialysis adequacy as measured by Kt/V 
remains a critically important indicator of clinical quality for all 
dialysis patients.
    Comment: A commenter requested that CMS provide adequate notice if 
the achievement thresholds and benchmarks change after the final rule 
is published.
    Response: We will make every effort to notify all stakeholders if 
the achievement thresholds and benchmarks change after we publish the 
final rule. Potential notification options include (but are not limited 
to) correction notices, email blasts, and announcements on our website.
    Comment: Commenter suggested that STrR's benchmark for PY 2021 is 
too

[[Page 56991]]

low at 0.2 and should be higher, stating that the ratio of the number 
of observed transfusions being \1/5\ of the number of those expected 
seems unrealistic and difficult to achieve, especially if it was the 
90th percentile of national performance in 2016. The commenter also 
stated that few providers received a 10 on the STrR measure.
    Response: We thank the commenter for this feedback, but we disagree 
and note that national data dictates the performance standards levels 
that we adopt under the ESRD QIP.
    Final Rule Action: After consideration of public comments, we are 
finalizing our proposal to substitute performance standards, 
achievement thresholds, and benchmarks if they are worse than they were 
in the prior payment year and to periodically re-baseline the BSI 
measure as needed, in PY 2021 and future payment years. In the 
performance standards we are finalizing for the PY 2021 ESRD QIP in 
Table 15, we applied this substitution policy to four measures: the SRR 
measure, the SHR measure, the ICH CAHPS: Overall Rating of 
Nephrologists) measure, and the ICH CAHPS: Overall Rating of the 
Dialysis Facility measure.
    We are also updating the performance standards, achievement 
thresholds, and benchmarks for the finalized PY 2021 ESRD QIP clinical 
measures as shown in Table 15, using the most recently available data.

  Table 15--Finalized Performance Standards for the PY 2021 ESRD QIP Clinical Measures Using the Most Recently
                                                 Available Data
----------------------------------------------------------------------------------------------------------------
                                                                    Achievement                     Performance
                             Measure                                 threshold       Benchmark       standard
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    Standardized Fistula Rate...................................          51.79%          75.22%          62.80%
    Catheter Rate...............................................          19.20%           5.47%          12.01%
Kt/V Composite..................................................          92.98%          99.14%          96.88%
Hypercalcemia...................................................           1.86%           0.00%           0.58%
Standardized Transfusion Ratio..................................           1.684           0.200           0.847
Standardized Readmission Ratio..................................           1.268           0.629           0.998
NHSN Bloodstream Infection......................................           1.479               0           0.694
SHR measure.....................................................           1.249           0.670           0.967
ICH CAHPS: Nephrologists' Communication and Caring..............          58.09%          78.52%          67.81%
ICH CAHPS: Quality of Dialysis Center Care and Operations.......          54.16%          72.03%          62.34%
ICH CAHPS: Providing Information to Patients....................          73.90%          87.07%          80.38%
ICH CAHPS: Overall Rating of Nephrologists......................          49.33%          76.57%          62.22%
ICH CAHPS: Overall Rating of Dialysis Center Staff..............          49.12%          77.46%          63.04%
ICH CAHPS: Overall Rating of the Dialysis Facility..............          53.98%          82.48%          67.93%
----------------------------------------------------------------------------------------------------------------
Data sources: VAT measures: 2016 CROWNWeb; STrR, SHR: 2016 Medicare claims; SRR: 2017 Medicare claims; Kt/V:
  2017 CROWNWeb and Medicare claims; Hypercalcemia: 2017 CROWNWeb; NHSN: 2017 CDC, ICH CAHPS: CMS 2017.

3. Update to the Scoring Methodology Previously Finalized for the PY 
2021 ESRD QIP
    As described in the CY 2019 ESRD PPS proposed rule (83 FR 34334 
through 34335), we discussed our establishment of the Meaningful 
Measures Initiative to help guide and focus measure development efforts 
across settings. In order to align the ESRD QIP more closely with the 
priorities of that initiative, we proposed to remove four reporting 
measures from the ESRD QIP measure set, beginning with PY 2021 (83 FR 
34339 through 34340). As described above, we are finalizing that 
proposal. We also proposed to make changes to the measure domains and 
weights (83 FR 34341 through 34342).
a. Revision to Measure Domains Beginning With the PY 2021 ESRD QIP
    To more closely align with the Meaningful Measures Initiative, in 
the CY 2019 ESRD PPS proposed rule (83 FR 34341 through 34342), we 
proposed to eliminate the Reporting Domain and to reorganize the 
Clinical Domain into three distinct domains: Patient & Family 
Engagement Domain (currently part of the Patient and Family Engagement/
Care Coordination Subdomain), Care Coordination Domain (currently part 
of the Patient and Family Engagement/Care Coordination Subdomain), and 
Clinical Care Domain (currently the Clinical Care Subdomain). We stated 
that adopting these topics as separate domains would result in a 
measure set that is more closely aligned with the priority areas in the 
Meaningful Measures Initiative. The proposed Clinical Care Domain would 
align with the Meaningful Measure Initiative priority to promote 
effective prevention and treatment of chronic disease. The proposed 
Patient & Family Engagement Domain would align with the Meaningful 
Measures Initiative priority to strengthen person and family engagement 
as partners in their care. The proposed Care Coordination Domain would 
align with the Meaningful Measures Initiative priority to promote 
effective communication and coordination of care. We also proposed to 
continue use of the Patient Safety Domain. We stated that the Patient 
Safety Domain would align with the Meaningful Measures Initiative 
priority to make care safer by reducing harm caused in the delivery of 
care. We also proposed to eliminate the Reporting Measure Domain from 
the ESRD QIP measure set, beginning in the PY 2021 Program, because 
there would no longer be any measures in that domain if our measure 
removal proposals in section IV.B.1.c of the CY 2019 ESRD PPS proposed 
rule and our proposals in section IV.B.3.b of the CY 2019 ESRD PPS 
proposed rule to reassign the Ultrafiltration Rate, and Clinical 
Depression Screening and Follow-Up Reporting measures to the Clinical 
Care Measure Domain and the Care Coordination Measure Domain, 
respectively, were finalized.
    Comment: Commenter supported our proposal to restructure the ESRD 
QIP's domains, suggesting that such efforts streamline the Program and 
ensures that patient and family engagement is a cornerstone of the QIP. 
Another commenter supported our proposal to remove the Reporting 
Domain, noting that the policy will enable CMS to focus on metrics that 
improve clinical outcomes and reduces complexity. Another commenter 
expressed support for reorganizing the Clinical Domain into three 
distinct domains.

[[Page 56992]]

    Response: We thank the commenters for their support.
    Comment: Commenter urged us to develop a pediatric CAHPS Survey to 
allow pediatric dialysis facilities to participate fully in the QIP, 
noting that our proposed domain changes will leave these facilities 
able to participate in only 3 of the new domains in the absence of a 
CAHPS Survey that captures their population.
    Response: We thank the commenter for this feedback. The current ICH 
CAHPS measure excludes pediatric patients because the survey is not 
validated for pediatric patients. We intend to examine what 
modifications to the survey might be necessary to include these 
patients in the future.
    Final Rule Action: After considering public comments, we are 
finalizing our proposal to update the measure domains, beginning with 
the PY 2021 ESRD QIP, without change. The finalized domains beginning 
in PY 2021 are the Patient & Family Engagement Domain, the Care 
Coordination Domain, the Clinical Care Domain, and the Safety Domain.
b. Revisions to the PY 2021 Domain and Measure Weights Used To 
Calculate the Total Performance Score (TPS)
    We proposed to update the domain weights to reflect our proposed 
removal of the Reporting Domain and our proposed reorganization of the 
Clinical Domain into three distinct domains, as shown in Table 16. We 
stated our belief that this proposed domain weighting best aligns the 
ESRD QIP's measure set with our preferred emphasis on clinical outcomes 
by assigning the two largest weights in the Program to the domains most 
focused on clinical outcomes (Clinical Care Domain and the Care 
Coordination Domain). Of those two domains, we proposed to assign the 
Clinical Care Domain the highest weight because it contains the largest 
number of measures. We proposed to assign the remaining two domains a 
smaller share of the total performance score (TPS) (both 15 percent) 
because they are more focused on measures of clinical processes and 
less on measures of patient outcomes. We stated that we continue to 
believe that the measures in the Patient & Family Engagement and Safety 
domains address important clinical topics, but we also concluded that 
placing more weighting on measures more directly tied to clinical 
outcomes would be the most appropriate method to structure the ESRD 
QIP's measure domains.
    We also proposed to adjust the PY 2021 measure weights that were 
finalized in the CY 2018 ESRD PPS final rule (82 FR 50781 through 
50783), as shown in Table 16. We stated that our proposal was intended 
to reflect our preferred emphasis on weighting measures that directly 
impact clinical outcomes more heavily. We also took into consideration 
the degree to which a facility can influence a measure rate by 
assigning a higher weight to measures where a facility has greater 
influence compared to measures where a facility has less influence.

Table 16--Proposed Domain and Measure Weighting for the PY 2021 ESRD QIP
------------------------------------------------------------------------
                                                        Proposed measure
      Proposed measures/measure topics by domain       weight as percent
                                                             of TPS
------------------------------------------------------------------------
               PATIENT & FAMILY ENGAGEMENT MEASURE DOMAIN
------------------------------------------------------------------------
ICH CAHPS measure....................................              15.00
                                                      ------------------
                                                                   15.00
------------------------------------------------------------------------
                    CARE COORDINATION MEASURE DOMAIN
------------------------------------------------------------------------
SRR measure..........................................              14.00
SHR measure..........................................              14.00
Clinical Depression and Follow-Up reporting measure..               2.00
                                                      ------------------
                                                                      30
------------------------------------------------------------------------
                      CLINICAL CARE MEASURE DOMAIN
------------------------------------------------------------------------
Kt/V Dialysis Adequacy Comprehensive measure.........               6.00
Vascular Access Type measure topic*..................               6.00
Hypercalcemia measure................................               3.00
STrR measure.........................................              22.00
Ultrafiltration Rate reporting measure...............               3.00
                                                      ------------------
                                                                      40
------------------------------------------------------------------------
                          SAFETY MEASURE DOMAIN
------------------------------------------------------------------------
NHSN BSI measure.....................................               9.00
NHSN Dialysis Event reporting measure................               6.00
                                                      ------------------
                                                                      15
------------------------------------------------------------------------
* The VAT Measure Topic is weighted for each facility based on the
  number of eligible patients for each of the two measures in the topic,
  with each measure score multiplied by the respective percentage of
  patients within the topic to reach a weighted topic score that will be
  unique for each facility (76 FR 70265, 70275).

    As shown in Table 16, we proposed to decrease the weight of the 
following measures: In-Center Hemodialysis Consumer Assessment of 
Healthcare Providers and Systems (ICH CAHPS) measure (18.75 to 15 
percent), Kt/V Dialysis Adequacy Comprehensive measure (13.5 to 6 
percent), and Vascular Access Type (VAT) measure

[[Page 56993]]

topic (13.5 to 6 percent). We also proposed to increase the weights of 
the following measures: Standardized Readmission Ratio (SRR) measure 
(11.25 to 14 percent), Standardized Hospitalization Ratio (SHR) measure 
(8.25 to 14 percent), Clinical Depression and Follow-Up measure (1.66 
to 2 percent), Hypercalcemia measure (1.5 to 3 percent), STrR measure 
(8.25 to 22 percent), and Ultrafiltration reporting measure (1.66 to 3 
percent). We proposed these changes to reflect our continued evaluation 
of the ESRD QIP's measures and their contribution to the TPS in light 
of the proposed domain structure and weights as well as the proposed 
removal of the four reporting measures. We did not propose any changes 
to the two measures included in the Safety Measure Domain: NHSN BSI and 
NSHN Dialysis Event measures. We stated that we continue to believe 
that the Safety domain appropriately contains these two NHSN measures 
and we believe their assigned weights--9 percent and 6 percent 
respectively--reflect the importance that we place on measures of 
patient safety for the PY 2021 ESRD QIP.
    We invited public comment on our proposed domain and measure 
weighting proposals.
    Comment: A commenter supported our proposal to reduce the weight 
assigned to the ICH CAHPS Survey from 18 percent to 15 percent given 
the challenges associated with the survey, including low response 
rates, and the large percentage of facilities that cannot be scored on 
the measure.
    Response: We thank the commenter for its support.
    Comment: A commenter expressed concern that the VAT measure topic 
has a proposed topic weight of only 6 percent of the TPS, stating that 
vascular access is highly leveraged with respect to patient morbidity 
and mortality. The commenter noted that since 2004, CMS has advocated 
for a ``Fistula First Catheter Last'' approach for vascular access use. 
The commenter also noted that catheter use rates have leveled off since 
2013, and stated that this recent trend is an indication that progress 
on shifting the balance of vascular access use has halted. The 
commenter also stated that given the lack of progress in shifting the 
balance in recent years, it is counterproductive to decrease the VAT 
topic's weight below the current level of 13.5 percent. In addition, 
the commenter suggested adding to the VAT measure topic some or all of 
the 14 percentage points currently proposed to be added to the STrR 
measure.
    Response: We thank the commenter for this feedback and agree that 
the VAT measure topic's proposed weight of 6 percent is too low given 
the importance of vascular access for patient outcomes. After further 
consideration of the importance of the VAT measure topic to clinical 
outcomes for dialysis patients, we are finalizing that the VAT measure 
topic will receive 12 percent weight.
    Comment: Several commenters were concerned about the weight 
assigned to the STrR measure. One commenter was concerned about our 
proposal to increase the STrR measure's weight given the validity 
issues associated with the ICD-10-CM/PCS transition. The commenter 
noted that the proposal would make the STrR measure the highest-
weighted measure in the QIP even though the measure tracks a clinical 
condition that may not reflect anemia management at the dialysis 
facility. The commenter also noted that many hospitals may not code 
blood transfusions accurately given the increased specificity 
requirements of the ICD-10-CM/PCS system and encouraged us to assess 
the measure's validity before attributing significant weight to it. 
Another commenter recommended reducing the weight of the STrR measure, 
stating that transfusions are only a surrogate for very low hemoglobin, 
are not typically in the dialysis facility's control, and may not be 
accurately ascertained due to hospital reporting patterns. The 
commenter noted that many facilities do not have sufficient ICH CAHPS 
Surveys to be scored on the measure and for those facilities, the STrR 
measure will have a weight that is more than 25 percent of their TPS. 
Another commenter was concerned that facilities are not currently able 
to independently validate the third-party data used for STrR 
calculations and cannot correct hospital or outpatient facility claims. 
Another commenter believed that anemia management is a critically 
important clinical outcome but suggested that heavy weighting proposed 
for the STrR measure is concerning given the coding and validity 
concerns associated with the measure. The commenter noted that blood 
transfusions often occur in the hospital setting, which is outside the 
dialysis facility's control. The commenter stated that we should not 
place that much weight on a single measure unless we identify a 
significant performance gap, the measure has met NQF's standards for 
reliability and validity, and clinicians and patients agree that the 
measure addresses a critical opportunity for quality improvement.
    Another commenter did not agree with the proposed weight for the 
STrR measure, suggesting that patients often need transfusions for 
reasons unrelated to ESRD, and that dialysis facilities should not be 
penalized for transfusions unrelated to dialysis care. The commenter 
also noted that hospital-based dialysis facilities often accept all 
patients regardless of acuity or comorbidities, resulting in higher 
transfusion ratios than standalone facilities, and believed that 
weighting the STrR measure at 22 percent could affect access to care if 
facilities start limiting the number of high acuity patients they 
accept.
    Response: We thank the commenters for this feedback. Given the 
concerns these commenters have raised about the STrR measure's validity 
and the significant percentage of facilities that are not eligible to 
receive an ICH CAHPS score, we will finalize a lower weight (10 
percent) than proposed for the STrR measure and, after additional 
consideration of our clinical priorities as shaped by the Meaningful 
Measures Initiative, will adjust certain other measures' weights within 
the Clinical Care domain to account for that change. We are not 
adjusting weights in the other domains and will finalize the weights of 
the measures in those domains as proposed. However, as we discuss in 
more detail later in this final rule, we are also finalizing a 
different weighting redistribution policy to account for commenters' 
concerns about how the measures would be re-weighted if a facility 
reports data for some, but not all, of the measures in a domain.
    Specifically, after further consideration of the public comments, 
the validity concerns raised about the STrR measure, the importance of 
the VAT measure topic to dialysis patients, and our clinical priorities 
as shaped by the Meaningful Measures initiative, we are finalizing that 
the STrR measure will be weighted at 10 percent of the TPS, instead of 
22 percent as proposed. We determined that a 10 percent weight for the 
measure more appropriately captures the measure's clinical 
significance, as shaped by the Meaningful Measures Initiative's 
priorities, and addresses concerns raised by commenters about the 
measure's validity and that the measure could be weighted too highly 
when facilities are missing scores from other measures. We are also 
finalizing that the VAT measure topic will be weighted at 12 percent of 
the TPS. To account for these changes and retain the same overall 
domain weight for the Clinical Care domain, we are finalizing that that 
the Kt/V measure will be weighted at 9 percent of the TPS and the 
Ultrafiltration measure will be weighted at 6 percent of the TPS. We

[[Page 56994]]

believe that these changes respond to commenters' concerns about the 
proposed measure weights, and ensure that our clinical quality 
priorities continue to be reflected in the Program's scores.
    Comment: Some commenters raised concerns about the reliability and 
validity of the StrR measure and the measure's sensitivity to changes 
in coding practices related to the ICD-10 conversion. The commenters 
also believed that the STrR measure should be replaced because 
facilities are being penalized for transfusions that occur outside of 
that facility's control.
    Response: We thank the commenters for their feedback. As already 
noted, we are finalizing a lower weight for the STrR measure due to 
commenters' concerns about the overall measure weighting proposal. 
However, we do not agree that the STrR measure is invalid, and we 
continue to believe that the STrR measure ensures that dialysis 
facilities do not underutilize ESAs and, as a result, play a role in 
more frequent red-blood-cell transfusions. Additionally, we continue to 
believe that the STrR measure, along with other measures in the ESRD 
QIP, ensure that dialysis facilities fulfill their shared 
responsibilities to work with other types of providers to provide the 
best possible care and ensure their patients' continued health.
    Comment: A commenter requested that we provide additional 
justification for our proposals to update the PY 2021 measure weights, 
noting that two measures (dialysis adequacy and vascular access 
measures) are set to decrease in weight by more than half, and that we 
proposed to more than double the weight assigned to the STrR measure.
    Response: We thank the commenter for this feedback. We proposed the 
PY 2021 domain weighting changes to reflect what we believed to be the 
clinical priorities assessed by the quality measures, informed by the 
Meaningful Measures Initiative. However, as noted in response to other 
comments, we are finalizing a lower weight for the STrR measure than 
proposed and will finalize a 9 percent weight for the Kt/V measure to 
account for the lower STrR weight.
    Comment: A commenter was concerned about the proposed domain 
changes, stating that our proposal to provide a TPS to any facility 
with at least one measure in at least two domains would only result in 
a small number of additional facilities receiving a TPS.
    Response: We thank the commenter for this feedback. However, while 
the commenter may be correct that the proposal may only result in a 
small number of additional facilities receiving a TPS, we believe that 
adjustment to our policies to be warranted to ensure that the ESRD QIP 
can provide incentives to improve care quality in as many dialysis 
facilities as possible and to accommodate the changes that we proposed 
to the measure set. While the policy's effect may be small, we believe 
it to be an appropriate policy change to encourage participation in the 
Program.
    Comment: A commenter expressed significant concern about the 
proposed new domain weights and the influence that the StrR and ICH 
CAHPS measures have on the total performance score, especially because 
the commenter believed the two measures have validity issues. Commenter 
suggested that CMS weight the catheter measure higher than the 
fistulas, contending that equal weighing of the two measures and the 
lack of a graft measure has resulted in patients experiencing 
clinically inappropriate AV fistula placement attempts. Commenter also 
stated that the evidence that AV fistulas and AV grafts are preferable 
for improved outcomes is significant, and that giving the catheter 
measure a greater weight supports a ``catheter last'' approach.
    Another commenter raised concerns the VAT measure topic weight is 
too low. The commenter stated that vascular access is critically 
important to patients, is modifiable by dialysis facilities, and is a 
key factor influencing infection risk, hospitalizations, and death. The 
commenter also stated that the VAT topic's near topped out status can 
be addressed in other ways, including through modified achievement 
thresholds that permit greater individualization and incorporation of 
the newly revised VAT measures that account for some patient factors. 
Another commenter suggested that we increase the weight placed on the 
VAT measure topic to incentivize facilities to promote fistula use.
    Response: We thank the commenters for their feedback. We may 
consider differential weighting for the VAT measure in the future, but 
we do not believe it would be appropriate to separate the measures for 
weighting purposes at this time. Catheter reduction and increased use 
of AV fistula are both important steps to improve patient care, and are 
tightly interrelated, so we do not want to penalize providers or 
facilities twice for related outcomes. Further details about our view 
of the appropriateness of maintaining the VAT measures as a topic are 
available in the CY 2013 ESRD PPS final rule (76 FR 70264). As 
discussed in response to other commenters, we proposed these domain 
weight changes to reflect the clinical importance we ascribe to each 
quality measure, as informed by the Meaningful Measures Initiative's 
priorities, but after consideration of the comments, we are finalizing 
a lower weight for the STrR measure and a higher weight for the VAT 
measure topic.
    We do not believe that the ICH CAHPS Survey has validity issues 
that would necessitate a change to its weighting. However, we will 
continue monitoring survey performance and will consider additional 
ways to improve its administration to minimize the burden undertaken by 
facilities and beneficiaries, and to otherwise improve its efficiency.
    Comment: Commenter recommended that we maintain the StrR measure 
weight near the CY 2018 level of 8.25 percent, suggesting that the 
proposed increase in measure weight from 8.25 percent to 22 percent in 
PY 2021 is disproportionate compared to other measures of equal or 
greater clinical importance, especially given its concerns previously 
raised about the STrR measure.
    Response: We thank the commenter for this suggestion. As discussed 
more fully above, we are finalizing a 10 percent weight for the STrR 
measure to reflect the concerns raised by commenters, and we believe 
this final policy is responsive to the commenter's concern about 
disproportionate weight being assigned to the STrR measure.
    Comment: A commenter recommended reducing the weight of the STrR 
measure from 22 percent to 12 percent (equal to the SRR and SHR 
measures) and suggesting that CMS consider increasing the current 
weight of the ICH CAHPS and Depression reporting measures.
    The commenter also recommended a series of changes to the proposed 
domain weights for PY 2021, including reducing the SRR and SHR measure 
weights slightly, increasing the Clinical Depression and Follow-up 
measure weights from 2 percent to 4 percent, increasing the Kt/V 
measure and VAT topic weights to 12 percent, reducing the STrR measure 
weight to 5 percent, maintaining the Anemia Management reporting 
measure in the QIP with a 4 percent weight, and increasing the 
Ultrafiltration Rate reporting measure to 4 percent.
    Another commenter recommended increasing the weights of Kt/V and 
VAT measures to 11 and 15 percent respectively, stating that dialysis 
facilities are most likely to be able to influence these measures.

[[Page 56995]]

    Response: We thank the commenters for their feedback. We are 
finalizing the STrR measure's weight at 10 percent and reweighting 
certain other measures within the Clinical Care domain to reflect the 
change to the STrR measure's weight because we believe that the 
Clinical Care domain should remain the most significant within the ESRD 
QIP, at a total domain weight of 40 percent. As previously noted, we 
believe that that this domain weighting best aligns the ESRD QIP's 
measure set with our preferred emphasis on clinical outcomes by 
assigning the two largest weights in the Program to the domains most 
focused on clinical outcomes (Clinical Care Domain and the Care 
Coordination Domain). Of those two domains, we believe that is 
appropriate to assign the Clinical Care Domain the highest weight 
because it contains the largest number of measures.
    Comment: A commenter expressed concern that the dialysis facilities 
that are not eligible to be scored on certain measures will be subject 
to an even more distorted weighting approach if CMS finalizes its 
domain weighting proposals. The commenter stated that the StrR measure 
weight would increase from 22 percent to 26 percent of TPS for the 49 
percent of facilities ineligible for an ICH CAHPS score, based on CY 
2016 industry data. The commenter also believed that the measure 
weighting imbalance would be even more extreme for facilities that 
predominantly or exclusively care for patients who dialyze at home, as 
they are do not have enough data for the ICH CAHPS, NHSN BSI, NHSN 
dialysis event reporting, and ultrafiltration reporting measures and 
most are ineligible for the VAT measures. In addition, the commenter 
stated that for these facilities, 82 percent of the TPS would be based 
on 3 measures (SHR, SRR, and STrR) and that this weighting approach may 
hinder greater adoption of home modalities. The commenter also 
suggested the development of an alternative measure weighing approach 
for home-only facilities.
    Another commenter expressed concern that home-only dialysis 
programs will be scored on only two domains--Care Coordination and 
Clinical Care--using the proposed domain and weighting approach. The 
commenter stated that four measures currently do not apply to home-only 
programs due to either patient-level or facility-level exclusions: 
ultrafiltration, ICH CAHPS, HSNH BSI, and NHSN Dialysis Event. The 
commenter also stated that it is important to assess patient and family 
engagement among home dialysis patients, in part to address burn out 
issues. In addition, the commenter stated that infection complications 
are a well-recognized challenge for both home hemodialysis and 
peritoneal dialysis. The commenter was also concerned that the TPS of 
home-only programs will be heavily influenced by 3 claims-based 
measures: SHR, SRR, and STrR, and that STrR will comprise one-third of 
the TPS. The commenter also raised concerns that for small home-only 
programs, SHR and STrR are not estimated. The commenter stated CMS to 
correct these distortions.
    Another commenter stated that we should develop an alternative 
weighting scheme for facilities that predominantly or exclusively treat 
patients dialyzing at home. The commenter stated that the current 
makeup of the QIP score could be a barrier to home dialysis uptake 
because low scores on a small number of measures can drastically affect 
facilities' TPSs. The commenter suggested that we consider applying the 
current low-volume scoring adjustment separately to home dialysis 
patients at each facility, which would alleviate the small sample size 
problem for those providers' scores.
    Another commenter requested that CMS align the weights of 
applicable measures for all programs, including home-only programs, 
with a consistent definition of quality. The commenter stated that the 
QIP currently includes measures for programs that offer in-center 
hemodialysis, large home-only programs, and small home-only programs. 
The commenter also stated that this approach is not in the interest of 
CMS and Medicare ESRD beneficiaries who may use multiple dialysis 
modalities in multiple programs.
    Response: We thank the commenters for their feedback. We 
acknowledge that the exclusions specified for the ICH CAHPS measure, 
the NHSN BSI measure, the NHSN dialysis event reporting measure, the 
Ultrafiltration reporting measure, and the measures comprising the VAT 
measure topic prevent most if not all facilities that predominantly or 
exclusively care for patients who dialyze at home from receiving a 
score on those measures. We are finalizing a lower weight for the STrR 
measure than proposed, and we believe the change will result in the 
STrR, SRR, and SHR comprising a smaller percentage of the TPS for these 
facilities.
    Our intent is to include as many facilities in the Program as 
possible to provide broad-reaching incentives for facilities to improve 
the quality of care provided to their patients. We appreciate the 
commenter's concern regarding home dialysis facilities. However, we do 
not believe it is equitable to develop a separate policy for facilities 
that serve a large number of home dialysis facilities, as the Program 
currently accounts for these issues through policies that reweight the 
TPS to account for missing measures. We will continue examining issues 
associated with home dialysis quality.
    Comment: A commenter suggested that CMS conduct a more 
comprehensive review and update of the measure weights prior to the 
next annual update of the QIP, including giving stakeholders an 
opportunity to submit feedback and measure specific quantitative 
analysis of the measures' reliability and the opportunity for 
improvement provided for each measure. The commenter also recommended 
not finalizing the proposed weights and working with the kidney care 
community to refine the weighting policy.
    Another commenter urged CMS to consider adopting additional 
criteria when determining measure and domain weights in the QIP, 
including the following: strength of evidence (including suggestive 
clinical or epidemiological studies or theoretical rationale); 
opportunity for improvement (including assessing the coefficient of 
variation for each measure); and clinical significance (which the 
commenter suggested could serve as a refinement to ``clinical 
priorities'' and could focus on the number of patients affected by 
measure compliance and the impact that compliance has on patient 
outcomes).
    Response: While we understand the commenter's concern about 
opportunities for stakeholder input, the public comment period 
subsequent to the publication of the CY 2019 ESRD PPS proposed rule 
afforded stakeholders and the public an opportunity to provide feedback 
to CMS on the weights and this final rule provides an opportunity for 
CMS to respond to that feedback and revise the proposed weights if 
needed. As we have already noted, we are revising the weights of four 
measures in response to public comments on the CY 2019 ESRD PPS 
proposed rule. We intend to re-assess how the ESRD QIP domain weights 
being finalized in this final rule affect TPSs awarded under the 
Program in the future, and we always welcome stakeholder feedback on 
our policies and suggestions for improvement.
    We take numerous factors into account when determining appropriate 
domain and measure weights, including clinical evidence, opportunity 
for improvement, clinical significance, and patient and provider 
burden, and we

[[Page 56996]]

therefore believe we considered the factors suggested by one of the 
commenters. We also consider criteria previously used to determine 
appropriate domain and measures weights (see the CY 2015 ESRD PPS final 
rule, (79 FR 66214)), including (1) The number of measures and measure 
topics in a proposed domain; (2) how much experience facilities have 
had with the measures and measure topics in a proposed domain; and (3) 
how well the measures align with CMS's highest priorities for quality 
improvement for patients with ESRD (that is, the Meaningful Measures 
Initiative priorities, which includes our preferred emphasis on patient 
outcomes).\13\ However, we will consider the commenter's specific 
suggestions for suggestive clinical studies, assessing coefficients of 
variation, and the number of patients affected by measure compliance in 
future rulemaking.
---------------------------------------------------------------------------

    \13\ In the CY 2015 ESRD PPS final rule (79 FR 66214), we 
referred to ``subdomains'' in two of these criteria. Since we are 
finalizing a domain structure that no longer employs subdomains, we 
have reworded to use the term ``domains'' instead.
---------------------------------------------------------------------------

    Comment: Some commenters opposed the proposed weight of 9 percent 
for the NHSN BSI measure, suggesting that the BSI measure counts all 
infections regardless of whether the infection was acquired at the ESRD 
facility or elsewhere. One commenter did not believe that ESRD 
facilities should be held accountable for infections acquired in other 
care settings and believed that we should reduce the BSI measure's 
weight or revise it to include only vascular access-related bloodstream 
infections. Another commenter supported the Safety Domain's weight but 
recommended that we convert that domain to a reporting domain due to 
the lack of validity in the NHSN BSI measure. The commenter recommended 
that at a minimum, the NHSN Dialysis Event reporting measure should be 
assigned a higher value than the NHSN BSI clinical measure. The 
commenter stated that it is more critical to provide incentives for 
facilities to accurately track and examine their infection data and 
that this assessment will promote high quality dialysis care.
    Response: We disagree with commenters' concerns about the BSI 
measure. As we stated when we adopted the NHSN BSI measure in the CY 
2014 ESRD final rule (78 FR 72204 through 72207), healthcare-acquired 
infections are a leading cause of preventable mortality and morbidity 
across different settings in the healthcare sector, including dialysis 
facilities. BSIs are a pressing concern in a population where 
individuals are frequently immunocompromised and depend on regular 
vascular access to facilitate dialysis therapy. We continue to believe 
that accurately reporting dialysis events to the NSHN by dialysis 
facilities supports national goals for the reduction of healthcare-
acquired infections. In light of the importance of monitoring and 
preventing infections in the ESRD population, and because a clinical 
measure would have a greater impact on clinical practice by holding 
facilities accountable for their actual performance, we adopted the 
NSHN BSI measure as a clinical measure. We continue to believe that 
tracking these infection events and rewarding facilities for minimizing 
these events is of critical importance to protecting patient safety and 
improving the quality of care provide to patients with ESRD.
    Comment: A commenter suggested reducing the proposed weight of the 
Hypercalcemia measure, explaining its view that many patients continue 
experiencing challenges outside of dialysis facilities' control, 
including a lack of access to medications and poor health outcomes 
related to surgery for hyperparathyroidism and hypercalcemia.
    Response: We thank the commenter for this feedback. We are not 
finalizing a different weight for the Hypercalcemia measure in response 
to comments received on the CY 2019 ESRD PPS proposed rule because we 
believe that a weight of 3 percent aligns with the Meaningful Measure 
Initiative--specifically its priority to promote effective prevention 
and treatment of chronic disease.
    Comment: One commenter opposed decreasing the Patient and Family 
Engagement Domain weight to 15 percent of the TPS. The commenter 
disagreed with our stated reasoning that this policy emphasizes the two 
domains most focused on clinical outcomes, suggesting instead that the 
Patient & Family Engagement focuses on patient outcomes and should 
therefore not be assigned decreased weight. The commenter noted that 
the NQF views patient assessments of their experience as a patient-
reported outcome and suggested that the ICH CAHPS measure therefore 
assesses patient outcomes. The commenter also stated that the ICH CAHPS 
measure is closely aligned with Meaningful Measure objectives because 
it is outcome-based, patient-centered, and meaningful to patients, in 
addition to providing a significant opportunity for improvement. The 
commenter recognized the importance of clinical outcome measures in the 
Care Coordination and Clinical Care Domains but expressed concern that 
the proposed change demonstrates that less focus should be placed on 
improving patient experience.
    Response: While we appreciate the commenter's concerns and agree in 
general that patients' assessments of their experience are important 
for clinical quality measurement, we are also cognizant of the 
challenges that many facilities have submitting enough ICH-CAHPS data 
to be scored on that measure. We have balanced the domain weight that 
we proposed for the ICH CAHPS Survey in accordance with that 
consideration as well as the high clinical priority that we place on 
the patient experience. We will continue monitoring facilities' focus 
on improving the patient experience and will consider whether we should 
revisit the ICH CAHPS Survey's weighting in the future.
    Comment: A commenter recommended that CMS refrain from decreasing 
the Patient and Family Engagement Domain weight and instead assign 
equal weights to the four domains for PY 2012 and future years. The 
commenter noted that the impact of the six ICH CAHPS measures is 
relatively smaller in the ESRD QIP compared to other CMS VBP programs. 
The commenter used the Hospital VBP Program as an example of a program 
that attributes equal weight to its four domains, noting that this 
approach encourages hospitals to focus on improvement in each of the 
four domains.
    Response: While the commenter is correct that the Patient & Family 
Engagement domain receives less weight than the Care Coordination or 
Clinical Care domains under our proposals, we note that the Patient & 
Family Engagement domain contains just one measure: The ICH CAHPS 
Survey. After the reduction to the STrR measure that we are finalizing, 
the ICH CAHPS Survey will be the most heavily weighted measure in the 
QIP. We believe such a domain weighting will ensure that facilities 
focus on improving the patient experience. With respect to the 
commenter's suggestion that we consider equal domain weighting, or 25 
percent for each domain, we do not believe assigning such a significant 
weight to the Patient & Family Engagement domain with its single 
measure would be appropriate or reflect our clinical priorities for 
dialysis patients because it would entail reducing significantly the 
weights that we have assigned to other measures, such as those placed 
in the Clinical Care domain, and increasing the weights of the measures 
that we have placed in the Safety domain.

[[Page 56997]]

    Final Rule Action: After considering the public comments received, 
we are finalizing our domain and measure weighting policy for PY 2021 
as reflected in Table 17. We are finalizing as proposed; the weights of 
the measures in the Patient & Family Engagement Domain, the Care 
Coordination Domain, and the Safety Domain. We are also finalizing as 
proposed the weight of the Hypercalcemia measure, which is assigned to 
the Clinical Care Domain. We are finalizing different weights for the 
other measures in the Clinical Domain than we proposed. Specifically, 
we are increasing the Kt/V measure weight from 6 to 9 percent of the 
TPS; increasing the VAT measure topic weight from 6 to 12 percent of 
the TPS; decreasing the STrR measure weight from 22 to 10 percent of 
the TPS; and increasing the Ultrafiltration measure weight from 3 to 6 
percent of the TPS.

  Table 17--Finalized Measure and Domain Weighting for the PY 2021 ESRD
                                   QIP
------------------------------------------------------------------------
                                                       Proposed  measure
      Proposed measures/measure topics by domain            weight as
                                                         percent of TPS
------------------------------------------------------------------------
               PATIENT & FAMILY ENGAGEMENT MEASURE DOMAIN
------------------------------------------------------------------------
ICH CAHPS measure....................................              15.00
                                                      ------------------
                                                                   15.00
------------------------------------------------------------------------
                    CARE COORDINATION MEASURE DOMAIN
------------------------------------------------------------------------
SRR measure..........................................              14.00
SHR measure..........................................              14.00
Clinical Depression and Follow-Up reporting measure..               2.00
                                                      ------------------
                                                                      30
------------------------------------------------------------------------
                      CLINICAL CARE MEASURE DOMAIN
------------------------------------------------------------------------
Kt/V Dialysis Adequacy Comprehensive measure.........               9.00
Vascular Access Type measure topic *.................              12.00
Hypercalcemia measure................................               3.00
STrR measure.........................................              10.00
Ultrafiltration Rate reporting measure...............               6.00
                                                      ------------------
                                                                      40
------------------------------------------------------------------------
                          SAFETY MEASURE DOMAIN
------------------------------------------------------------------------
NHSN BSI measure.....................................               9.00
NHSN Dialysis Event reporting measure................               6.00
                                                      ------------------
                                                                      15
------------------------------------------------------------------------
* The VAT Measure Topic is weighted for each facility based on the
  number of eligible patients for each of the two measures in the topic,
  with each measure score multiplied by the respective percentage of
  patients within the topic to reach a weighted topic score that will be
  unique for each facility (76 FR 70265, 70275).

Update to Eligibility Requirement for Receiving a TPS for a PY and New 
Weighting Redistribution Policy (Reassignment of Measure Weights)
    In the CY 2017 ESRD PPS final rule (81 FR 77888 through 77889), we 
finalized that 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 Domain. In the CY 2019 
ESRD PPS proposed rule (83 FR 34342), we proposed to revise this policy 
due to our proposed removal of the Reporting Domain from the ESRD QIP 
measure set and our proposal to increase the number of domains overall 
from three to four. We proposed that to be eligible to receive a TPS, a 
facility must be eligible to be scored on at least one measure in any 
two out of the four domains in the ESRD QIP measure set. We stated that 
the proposed approach is consistent with our previously finalized 
policy because it would allow facilities to receive a TPS with as few 
as two measure scores. We also stated that the proposed approach would 
enable us to maximize the number of facilities that can participate 
while ensuring that ESRD facilities are scored on a sufficient number 
of measures to create a sufficiently-reliable TPS.
    Because of this proposed eligibility requirement to receive a TPS, 
we stated in the CY 2019 ESRD PPS proposed rule that we had concluded 
that we must also consider how to reassign measure weights in those 
cases where facilities do not receive a score on every measure but 
receive scores on enough measures to receive a TPS. We considered two 
alternatives to address this issue: (1) Redistribute the weights of 
missing measures evenly across the remaining measures (that is, we 
would divide up the missing measure weights equally across the 
remaining measures), and (2) redistribute the weights of missing 
measures proportionately across the remaining measures, based on their 
weights as a percentage of TPS (that is, when dividing up missing 
measure weights, we would shift a larger share of the weights to 
measures with higher assigned weights; measures with lower weights 
would gain a smaller portion of the missing measure weights).
    We stated that while the first policy alternative is 
administratively simpler to implement, this option would not maintain 
the Meaningful Measures Initiative priorities in the measure weights as 
effectively, and therefore, we proposed the second policy alternative.

[[Page 56998]]

We proposed an approach for reweighting the domains and measures in the 
ESRD QIP for PY 2021 based on the priorities identified in the 
Meaningful Measures Initiative. Under this approach, we proposed to 
assign a higher weight to measures that focus on outcomes and a lower 
weight to measures that focus on clinical processes. We stated that if 
we adopted the first policy alternative, measures that we consider a 
lower priority would represent a much larger share of TPS relative to 
measures that we consider a higher priority, in situations where a 
facility is missing one or more measure scores. Under the second policy 
alternative, when a facility is not scored on a measure, the weight of 
lower priority measures relative to higher priority measures would be 
more consistent with the weights assigned to the complete measure set.
    Therefore, based on these considerations, we proposed that in cases 
where a facility does not receive a score on one or more measures but 
receives scores on enough measures to receive a TPS, we would 
redistribute the weights of any measures for which the facility does 
not receive a score to the remaining measures proportionately based on 
their measures weight as a percent of the TPS. This redistribution 
would occur across all measures, regardless of their domain, and would 
be effective beginning PY 2021. We stated that we had concluded that 
this policy would more effectively maintain the Meaningful Measure 
Initiative's priorities in the ESRD QIP's measure weights in situations 
where a facility does not receive a score on one or more measures. We 
also stated that we believed that this proportional reweighting would 
ensure ESRD QIP TPSs are calculated in a fair and equitable manner.
    We invited public comment on this proposal.
    Comment: A commenter was concerned that under our weighting 
redistribution proposal, a facility could receive a TPS based solely on 
two measures (as long as they are assigned to different domains). The 
commenter believed that two measures is not sufficient to accurately 
assess the quality of care provided at a facility. The commenter was 
also concerned that the proposed policy could result in lower TPSs for 
home-only facilities because those facilities are the most likely to be 
eligible for scoring on a limited number of QIP measures.
    Response: We thank the commenter for this feedback. However, we 
disagree with the commenter's view that facility performance on two 
measures is insufficient to accurately assess the quality of care 
provided at a facility. The Program's current policy, which allows 
facilities to receive a TPS if they receive a score on at least one 
reporting measure and at least one clinical measure, is a longstanding 
policy and one we believe that facilities understand well. As discussed 
in the CY 2012 ESRD PPS final rule (76 FR 70275), where we initially 
adopted that policy, we believe that maintaining a two-measure score 
minimum for receipt of a TPS continues to achieve this goal and 
provides as many dialysis facilities as possible with the opportunity 
to participate in the ESRD QIP.
    We will continue monitoring the effects of the ESRD QIP's policies 
carefully and will continue assessing the effects that this eligibility 
policy will have on home-only dialysis facilities and other types of 
dialysis facilities that may receive scores on only a few measures. It 
is not our intention to affect access to home dialysis services 
negatively, and we do not believe that our policy does so. Rather, we 
intend to ensure that the Program provides incentives to improve care 
quality as broadly as possible among dialysis facilities and enables 
patients to pursue their preferred treatment modalities. However, we 
note that we intend for the ESRD QIP to provide incentives to improve 
quality no matter what treatment modality the patient prefers, which 
includes home dialysis.
    Comment: A commenter recommended modifying the proposed policy 
where a facility is eligible to be scored on at least one measure in 
any two out of four domains, so that the two measures cannot both be 
reporting measures. The commenter also suggested that CMS require one 
clinical measure and one reporting measure in any of the four domains.
    Response: We thank the commenter for this feedback. Because we are 
finalizing the removal of four reporting measures, we do not believe it 
is likely that a facility would receive a TPS based entirely on two 
reporting measures, but in any case, we do not share the commenter's 
concern that a TPS based on two reporting measures would be invalid on 
its face. We have not seen any evidence that a TPS based on two 
reporting measures would be invalid. We have adopted this policy to 
ensure that the ESRD QIP can reach as many dialysis facilities as 
possible, and thus improve quality in as many facilities as possible. 
We do not believe that we should narrow the Program's reach in this 
form at this time, but we will consider whether we should adopt this 
type of requirement in the future.
    Comment: A commenter was concerned about our proposal to 
redistribute domain weighting proportionately for facilities that do 
not receive a score on all ESRD QIP measures. The commenter stated that 
this approach could result in one or two quality measures, including 
the STrR, determining the majority of a facility's TPS. The commenter 
recommended that we redistribute the weights for missing measures 
equally across remaining measures, and more equally weight the measures 
generally.
    Response: We appreciate the commenter's feedback and concerns that 
the STrR measure's weight will comprise a significant share of the TPS 
for some facilities. Given these concerns, as well as others raised by 
other commenters and summarized earlier in this section--specifically, 
that the StrR measure weight would increase from 22 percent to 26 
percent of TPS for the roughly 49 percent of facilities ineligible for 
an ICH CAHPS score, and that facilities that predominantly or 
exclusively care for patients that dialyze at home would be scored 
predominately on only a handful of measures--we are not finalizing our 
proposed weight redistribution policy. Instead, we are finalizing that 
if a facility does not receive a score on any of the measures in a 
domain, then that domain's weight will be redistributed evenly across 
the remaining domains and then evenly across the measures within each 
of those domains on which the facility receives a score. Additionally, 
if a facility receives a score on some, but not all of the measures 
within a domain, the weight of the measure(s) for which a score is 
missing will be redistributed evenly across the other measures in that 
domain.
    The weighting redistribution policy we are finalizing differs from 
the two policy alternatives discussed in the CY 2019 ESRD PPS proposed 
rule (83 FR 34342). We are not finalizing our proposed weight 
redistribution policy because we agree with commenters' concerns that 
certain facilities could receive a TPS that is dominated by the scores 
of only a few measures. We also reconsidered the other policy 
alternative discussed in the CY 2019 ESRD PPS proposed rule but still 
believe that this policy alternative would not maintain the Meaningful 
Measures Initiative priorities in measure weights as effectively as we 
prefer.
    We then considered how best to address commenters' concerns while 
maintaining the Meaningful Measures Initiative priorities and 
determined that the policy we are finalizing accomplishes this 
objective. Our

[[Page 56999]]

finalized policy maintains the Meaningful Measures Initiative 
priorities and our preferred emphasis on those topic areas because when 
a facility is not scored on a measure, the domain weights will be the 
same as the domain weights of a complete measure set (unless an entire 
domain's worth of measures is missing, in which case the domain's 
weight would be redistributed across the remaining domains; for 
example, if a facility did not receive an ICH CAHPS score, one-third of 
the Patient & Family Engagement Domain's weight of 15 percent would be 
distributed to each of the three remaining domains). Our finalized 
policy also addresses commenters concerns that certain facilities could 
receive a TPS that is dominated by the scores of only a few measures 
because the weight of measures for which a facility does not receive a 
score is redistributed evenly within its domain rather than 
proportionately across the entire measure set; measures with high 
weights will not receive the largest share of redistributed weights.
    Final Rule Action: After considering the public comments we 
received, we are not finalizing our proposed weighting redistribution 
policy or the alternative discussed in the CY 2019 ESRD PPS proposed 
rule. Instead, we are finalizing that we will redistribute the weight 
of any measures within a domain for which a facility does not receive a 
score evenly across the other measures in that domain, and if a 
facility does not receive a score on any measures within a domain, we 
will redistribute that domain's entire weight evenly across the 
remaining domains, and then evenly across the measures within each of 
those domains on which the facility receives a score. We are also 
finalizing our proposal to consider facilities eligible to receive a 
TPS if they receive at least one measure score in two of the four 
domains.
4. Update to the Requirement To Begin Reporting Data for the ESRD QIP
    In the CY 2013 ESRD PPS final rule, we finalized our current policy 
to begin counting the number of months in which a facility is open on 
the first day of the month after the facility's CMS Certification 
Number (CCN) Open Date (77 FR 67512 through 67513). In response to 
comments suggesting that facilities be required to begin reporting on 
the first day of the third month after its CCN Open Date, we agreed 
that a facility needs time to ensure that its systems are in place to 
report the data, and we adopted policies that would allow new 
facilities to be exempted from scoring on individual measures based on 
their CCN Open Date. Despite these policies, we have continued to 
receive feedback that new facilities need additional time to deploy 
their information systems and enroll in CROWNWeb and NHSN. This 
feedback was presented both through the rulemaking process (80 FR 
69066), and during the period in which facilities preview their scores. 
In response to this continued feedback, we have taken another look at 
our eligibility policies for new facilities, keeping in mind that 
Program requirements have become more complex over time, and have 
concluded that our existing policy may not provide new facilities with 
sufficient time to enroll in CROWNWeb and the NHSN, or otherwise 
prepare to report the data needed for the ESRD QIP.
    Accordingly, for PY 2021 and beyond, we proposed to update this 
policy. We stated that under the proposed policy, facilities would be 
required to collect data for purposes of the ESRD QIP beginning with 
services furnished on the first day of the month that is 4 months after 
the month in which the CCN becomes effective. For example, if a 
facility has a CCN effective date of January 15, 2019, that facility 
would be required to begin collecting data for purposes of the ESRD QIP 
beginning with services furnished on May 1, 2019. We stated that the 
proposed policy would provide facilities with a longer time period than 
they are given now to become familiar with the processes for collecting 
and reporting ESRD QIP data before those data are used for purposes of 
scoring. We also stated our belief that this policy would appropriately 
balance our desire to incentivize prompt participation in the ESRD QIP 
with the practical challenges facing new ESRD facilities as they begin 
operations.
    We invited public comments on this proposal.
    Comment: Some commenters expressed support for the grace period 
provided to new facilities before they are required to begin reporting 
QIP data. One commenter appreciated that CMS is continuing to take 
provider feedback on this issue into consideration and stated that the 
extension for new facilities will allow them to complete the necessary 
steps to enroll in NHSN. Another commenter appreciated that the policy 
relies on the CCN effective date rather than the facility open date.
    Response: We thank the commenters for their support.
    Comment: A commenter strongly supported the proposal to update the 
requirement to begin reporting data for the QIP, noting that this 
policy update takes into consideration the time it takes new facilities 
to get up to speed on all required web-based data collection systems. 
The commenter supported using a full year's worth of data for both NHSN 
measures and strongly suggested requiring a full year's worth of data 
for all other standardized measures. The commenter requested 
clarification on how the updated policy affects measure eligibility and 
whether the updated policy should be changed to beginning 4 months 
after the month of certification.
    Response: We thank the commenter for its support and will consider 
whether we should require a full year's worth of data for all measures 
in cases when a facility is new. We do not believe it is necessary to 
shift the reporting deadline from the first day of the month that is 4 
months after the CCN eligibility date. We believe the policy as 
proposed is simpler for facilities to understand than adjusting 
reporting dates based on the specific day of the month that the 
facility received its CCN.
    Table 18 summarizes the minimum data requirements for measure 
eligibility, including the updated requirement for new facilities.

                         Table 18--Eligibility Requirements Scoring on ESRD QIP Measures
----------------------------------------------------------------------------------------------------------------
                                   Minimum data
            Measure                requirements      CCN Open date              Small facility adjuster
----------------------------------------------------------------------------------------------------------------
Dialysis Adequacy (Clinical)..  11 qualifying      N/A..............  11-25 qualifying patients.
                                 patients.
Vascular Access Type: Long-     11 qualifying      N/A..............  11-25 qualifying patients.
 term Catheter Rate (Clinical).  patients.
Vascular Access Type:           11 qualifying      N/A..............  11-25 qualifying patients.
 Standardized Fistula Rate       patients.
 (Clinical).
Hypercalcemia (Clinical)......  11 qualifying      N/A..............  11-25 qualifying patients.
                                 patients.

[[Page 57000]]

 
NHSN Bloodstream Infection      11 qualifying      Before October 1   11-25 qualifying patients.
 (Clinical).                     patients.          of the
                                                    performance
                                                    period that
                                                    applies to the
                                                    program year.
NHSN Dialysis Event             11 qualifying      Before October 1   11-25 qualifying patients.
 (Reporting).                    patients.          of the
                                                    performance
                                                    period that
                                                    applies to the
                                                    program year.
SRR (Clinical)................  11 index           N/A..............  11-41 index discharges.
                                 discharges.
STrR (Clinical)...............  10 patient-years   N/A..............  10-21 patient years at risk.
                                 at risk.
SHR (Clinical)................  5 patient-years    N/A..............  5-14 patient-years at risk.
                                 at risk.
ICH CAHPS (Clinical)..........  Facilities with    Before October 1   N/A.
                                 30 or more         of the
                                 survey-eligible    performance
                                 patients during    period that
                                 the calendar       applies to the
                                 year preceding     program year.
                                 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.
Depression Screening and        11 qualifying      Before April 1     N/A.
 Follow-Up (Reporting).          patients.          after the
                                                    performance
                                                    period that
                                                    applies to the
                                                    program year.
Ultrafiltration Rate            11 qualifying      Before April 1     N/A.
 (Reporting).                    patients.          after the
                                                    performance
                                                    period that
                                                    applies to the
                                                    program year.
----------------------------------------------------------------------------------------------------------------

    Comment: A commenter suggested that we consider applying the 
proposed updated new facility policy to NHSN measures, noting that 
facilities with CCN eligibility dates late in the year may be penalized 
for complying with the new requirement but not submitting a full 12 
months of data to NHSN.
    Response: We thank the commenter for this suggestion. Under our 
current policy, facilities that do not submit a full 12 months of data 
to NHSN are not eligible to be scored on the NHSN measures under the 
ESRD QIP for that payment year and, as a result, are scored only on the 
measures for which they have submitted sufficient data.
    Final Rule Action: After considering comments received, we are 
finalizing our proposed update to the requirement for new facilities to 
begin reporting ESRD QIP data, beginning with the PY 2021 ESRD QIP.
5. Estimated Payment Reductions for the PY 2021 ESRD QIP
    Under our current policy, a facility will not receive a payment 
reduction in connection with its performance under the PY 2021 ESRD QIP 
if it achieves a minimum TPS that is equal to or greater than the total 
of the points it would have received if: (1) It performs at the 
performance standard for each clinical measure; and (2) it receives the 
number of points for each reporting measure that corresponds to the 
50th percentile of facility performance on each of the PY 2019 
reporting measures (82 FR 50787 through 50788).
    In the CY 2019 ESRD PPS proposed rule (83 FR 34343), we stated that 
we were unable to calculate a minimum a TPS for PY 2021 in the CY 2018 
ESRD PPS final rule because we were not yet able to calculate the 
performance standards for each of the clinical measures. We also stated 
in the CY 2018 ESRD PPS final rule (82 FR 50787 through 50788) that we 
would publish the minimum TPS for the PY 2021 ESRD QIP in the CY 2019 
ESRD PPS final rule.
    Based on the estimated performance standards that we described in 
the CY 2019 ESRD PPS proposed rule (83 FR 34340), we estimated in the 
CY 2019 ESRD PPS proposed rule that a facility must meet or exceed a 
minimum TPS of 56 for PY 2021. For all of the clinical measures, we 
stated that these estimates were based on CY 2017 data. We also 
proposed that a facility that achieves a TPS below the minimum TPS that 
we set for PY 2021 would receive payment reduction based on the 
estimated TPS ranges indicated in Table 19.

  Table 19--Estimated Payment Reduction Scale for PY 2021 Based on the
                      Most Recently Available Data
------------------------------------------------------------------------
                                                               Reduction
                   Total performance score                        (%)
------------------------------------------------------------------------
100-57......................................................           0
56-47.......................................................         0.5
46-37.......................................................         1.0
36-27.......................................................         1.5
26-0........................................................         2.0
------------------------------------------------------------------------

We stated in the CY 2019 ESRD PPS proposed rule (83 FR 34343) that we 
intended to finalize the minimum TPS for PY 2021, as well as the 
payment reduction ranges for that PY, in the CY 2019 ESRD PPS final 
rule.
    We received a number of comments on the estimated payment 
reductions.
    Comment: Several commenters expressed concern about the effects of 
the proposed domain weighting changes on payment reductions under the 
QIP, noting that an analysis of PY 2018 data showed that the proposed 
weighting system would result in a slightly lower median TPS and an 
increasing number of individual facilities with a decrease in their 
TPS. Another commenter requested that we provide a policy rationale for 
the projected increases in payment penalties. One commenter recommended 
that CMS work with the community to modify the TPS methodology, 
suggesting that the increase in projected payment penalties over the 
past few rule cycles does not reflect underlying measure performance 
trends. One commenter also expressed concern about the estimates 
showing that southern states will experience larger payment reductions 
than other parts of the country and suggested that we consider scoring 
facilities within peer groups rather than on a national basis.
    Response: We understand the commenters' concern and we are willing 
to work with the community to understand specific concerns about the 
TPS calculation. However, we note that the TPS's specific composition 
changes

[[Page 57001]]

year over year as we propose and adopt new measures and as we weight 
those measures in accordance with our priorities. Our adoption of 
several outcome and patient experience of care measures (such as the 
STrR measure and the ICH CAHPS survey) with large variation in 
aggregate performance and room for improvement in more recent years of 
the QIP has contributed to an increase in the number of facilities that 
are receiving payment reductions. We also proposed domain weights 
changes to reflect the ESRD QIP's changing measure set. These changes 
have included shifts in clinical priorities, removing measures where 
there is little room for improvement, and adding measures where 
facilities' performance is broader. We believe that some increases in 
payment penalties are inevitable as the Program's measure set changes, 
particularly as we accumulate sufficient data to assess facilities on 
measure performance and not simply on reporting. As a result of these 
policy changes, we believe it is reasonable for the payment reductions 
to shift even if performance on some measures is comparatively high. We 
will continue monitoring regional and other differences in ESRD QIP 
performance scores by facility type or other factors.
    Comment: A commenter requested that CMS extend the preview period 
for PY 2021 and PY 2022 to at least 60 days given the number of 
facilities estimated to receive a payment reduction in those years, 
stating that facilities need more time to analyze their TPSs.
    Response: We do not believe we need to extend the preview period at 
this time because we have not observed any relationship between the 
number of facilities receiving a payment reduction and submitted 
inquiries. That is, we do not believe that a facility's receiving a 
payment reduction necessitates a preview period request, and to date, 
the 30-day period has been long enough to accommodate facilities' 
requests. We will monitor this issue and if necessary, will propose to 
address it in the future.
    Final Rule Action: After consideration of the public comments 
received and an analysis of the most recently available data, we are 
finalizing that the minimum TPS for PY 2021 will be 56. We are also 
finalizing the payment reduction scale shown in Table 20.

  Table 20--Finalized Payment Reduction Scale for PY 2021 Based on the
                      Most Recently Available Data
------------------------------------------------------------------------
                                                               Reduction
                   Total performance score                        (%)
------------------------------------------------------------------------
100-56......................................................           0
55-46.......................................................         0.5
45-36.......................................................         1.0
35-26.......................................................         1.5
25-0........................................................         2.0
------------------------------------------------------------------------

6. Data Validation Policies for PY 2021 and Subsequent Years
    In the CY 2019 ESRD PPS proposed rule (83 FR 34343), we stated that 
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. 
The ESRD QIP currently includes two validation studies for this 
purpose: The CROWNWeb pilot data validation study (OMB Control Number 
0938-1289) and the NHSN dialysis event validation study (OMB Control 
Number 0938-1340).
    Since the PY 2016 ESRD QIP, we have validated data submitted to 
CROWNWeb for each payment year by sampling no more than 10 records from 
300 randomly selected facilities (78 FR 72223 through 72224). In the CY 
2018 ESRD PPS final rule, we finalized that for PY 2020, we would 
continue validating these data using the same methodology, but also 
finalized that we would deduct 10 points from a facility's TPS for PY 
2020 if the facility was selected for validation but did not submit the 
requested records within 60 calendar days of receiving a request (82 FR 
50766 through 50767).
    Since we issued the CY 2018 ESRD PPS final rule, we have considered 
whether it is appropriate to continue to refer to this validation of 
CROWNWeb data as a study. We noted in the CY 2019 ESRD PPS proposed 
rule that we had analyzed the CROWNWeb data that we used for purposes 
of the PY 2016 validation study to determine how reliable the current 
methodology is, and our analysis showed an overall match rate of 92.2 
percent among the facilities selected for participation. Additionally, 
based on our statistical analyses, we stated that we had concluded that 
the validation study is well-powered when we sample 10 records per 
facility from 300 facilities, meaning that a validation study 
implemented with those sampling requirements will meet our needs when 
assessing the accuracy and completeness of facilities' CROWNWeb data 
submissions.
    We stated that based on this analysis, we believed that our 
validation methodology produces reliable results and can be used to 
ensure that accurate ESRD QIP data are reported to CROWNWeb. Therefore, 
we proposed to validate the CROWNWeb data submitted for the ESRD QIP, 
beginning with CY 2019 data submitted for PY 2021, using the 
methodology we first adopted for the PY 2016 ESRD QIP and updated for 
the PY 2020 ESRD QIP. Under this methodology, we would sample no more 
than 10 records from 300 randomly selected facilities each year, and we 
would deduct 10 points from a facility's TPS if the facility was 
selected for validation but did not submit the requested records.
    We also discussed the data that is submitted to the NSHN, and how 
we have been developing and testing a protocol for validating those 
data on a statistically relevant scale. For PY 2020, our methodology 
for this feasibility study is to randomly select 35 facilities and 
require that each of those facilities submit 10 patient records 
covering 2 quarters of data reported in CY 2018. Our selection process 
targets facilities for NHSN validation by identifying which facilities 
that are at risk for under-reporting. For additional information on 
this methodology, we refer readers to the CY 2018 ESRD PPS final rule 
(82 FR 50766 through 50767).
    We stated that we have continued to work with the Centers for 
Disease Control and Prevention (CDC) to determine the most appropriate 
sample size for achieving reliable validation results through this NSHN 
dialysis event validation study. Based on recent statistical analyses 
conducted by the CDC, we also stated that we had concluded that to 
achieve the most reliable results for a payment year, we would need to 
review approximately 6,072 charts submitted by 303 facilities. This 
sample size would produce results with a 95 percent confidence level 
and a 1 percent margin of error. Based on these results and our desire 
to ensure that dialysis event data reported to the NHSN for purposes of 
the ESRD QIP is accurate, we proposed in the CY 2019 ESRD PPS proposed 
rule (83 FR 34343 through 34344) to increase the sample sizes used for 
the NHSN dialysis event validation study, over a 2 year period, to 300 
facilities and 20 records per quarter for each of the first 2 quarters 
of the CY for each facility selected to participate in the study.
    Specifically, for PY 2021, we proposed to increase the number of 
facilities that we would select for validation to 150, and then for PY 
2022, to increase that number to 300. With

[[Page 57002]]

respect to the number of patient records that each selected facility 
would be required to submit to avoid a 10 point deduction to its TPS 
for that payment year, we proposed that for both PY 2021 and PY 2022, 
each selected facility must submit 20 patient records per quarter for 
each of the first 2 quarters of the CY, within 60 calendar days of 
receiving a request. We also proposed to continue targeted validation.
    We invited comments on these proposals. We also invited comments on 
potential future policy proposals that would encourage accurate, 
comprehensive reporting to the NHSN, such as introducing a penalty for 
facilities that do not meet an established reporting or data accuracy 
threshold, introducing a bonus for facilities that perform above an 
established reporting or data accuracy threshold, developing targeted 
education on NHSN reporting, or requiring that a facility selected for 
validation that does not meet an established reporting or data accuracy 
threshold be selected again the next year.
    The comments and our responses to the comments on our data 
validation proposals are set forth below.
    Comment: A commenter supported our proposal to increase the number 
of facilities selected for NHSN validation, noting that accurate 
reporting by all facilities will ensure that we are able to set 
accurate benchmarks and performance standards.
    Response: We thank the commenter for its support.
    Comment: A commenter supported the expansion of the NHSN validation 
study and the adaptation of the CROWNWeb validation study into a 
permanent feature of the Program.
    Response: We thank the commenter for its support.
    Comment: A commenter supported our proposal to expand the NHSN 
validation study in PY 2021 and PY 2022 but suggested that we should 
consider expanding the validation sample to 10 percent of all 
facilities.
    Response: We thank the commenter for its support. However, we do 
not believe that a 10 percent sample is appropriate at this time 
principally because such an increase in sample size would represent a 
significant increase in the reporting burden for facilities selected 
for validation. We considered several factors when developing our 
sample size proposal, including the overall burden to facilities, 
number of facilities validated, and reliability of validation results 
at the facility level.
    Our goal for the NHSN validation study is to ensure that the data 
reported for purposes of the QIP is accurate. We are committed to 
validating data, monitoring the quality of submitted data, and 
identifying opportunities to improve the accuracy of data reported.
    Comment: A commenter supported reselecting for the following year 
facilities that have undergone NHSN validation and have not met the 
established reporting or data accuracy threshold. The commenter 
believed that lessons learned from validation are important to share 
with all ESRD facilities as a way to ensure overall NHSN data quality.
    Response: We thank the commenter for its feedback.
    Comment: Several commenters expressed support for increasing the 
number of facilities included in the NHSN validation study to 300. One 
commenter also raised concerns that this facility increase will not 
resolve substantial underlying problems with the NHSN BSI measure.
    Response: We thank the commenters for their support. We believe 
that validating NHSN data will ensure that NHSN measures' data are 
accurate and complete and will therefore enable us to address any 
further methodological issues with NHSN measures as needed.
    Comment: A commenter strongly opposed expanding the validation 
program as proposed. The commenter stated that a validation program 
expansion suggests that previous validation cycles have identified 
problems or inconclusive results on measure validity. The commenter 
suggested that prior results should be released and once the data 
collection tools are validated, the validation program should continue 
under a process that ensures facilities due process rights under the 
U.S. Constitution. The commenter believed that the current timeframes 
and penalties do not give facilities due process and that CMS is 
auditing facilities, not validating their data. The commenter also 
stated that this audit should include the right to appeal adverse 
decisions.
    Response: We thank the commenter for this feedback. The purpose of 
our validation program is to assess the accuracy and completeness of 
data reported to NHSN and scored under the ESRD QIP, and we have 
expanded it to ensure that we have the sufficient statistical power to 
do so.
    We intend to publish the results of our CY 2018 validation studies 
at the end of 2019, but we do not agree with the commenter's 
characterization of our validation studies as audits. As we noted in 
the CY 2017 ESRD PPS final rule (81 FR 77895), the ultimate objective 
of our validation studies is to improve the validity of QIP data 
reported to CROWNWeb and to NHSN, not to penalize facilities for 
reporting invalid data. We note further that we have never penalized 
facilities for reporting invalid data in either of the validation 
studies, and if we were to consider proposing to do this in the future, 
we would also consider implementing an appeal process. We also note 
that the ESRD QIP Inquiry Period currently gives facilities an 
opportunity to inquire and receive feedback on their performance score 
and associated payment, and we will consider whether to incorporate 
feedback mechanisms into our validation processes in the future.
    Comment: Some commenters opposed the NHSN validation study's 
expansion to 40 records per facility and recommended that it be reduced 
to 20 records per facility. One commenter supported targeting NHSN 
studies for dialysis facilities that might be under-reporting, 
requested information about the NHSN study results, and suggested that 
poor results should trigger an update to the benchmarks and achievement 
thresholds for the BSI measure. The commenter also noted that CMS 
requested ideas related to penalizing facilities that do not meet 
established reporting or data accuracy thresholds but noted that both 
validation studies already include a penalty associated with measure 
performance. The commenter supported targeted education, raised 
concerns that the annual training is not checked to ensure it is 
completed, and suggested having targeted training within the NHSN 
system itself. The comment also supported introducing a bonus such as 
adding points to the TPS, to encourage accurate reporting.
    Another commenter believed that it is inappropriate to try to 
validate an invalid measure by imposing a burdensome data validation 
program on any provider. The commenter recommended that CMS suspend the 
use of the NHSN BSI measure and the reporting measure until they are 
validated outside of the QIP. Another commenter expressed concern that 
CMS has not validated CROWNWeb data or data for the NHSN Bloodstream 
Infection clinical measure and has not released the report summarizing 
the results of efforts to validate those data collection tools to date. 
The commenter requested that CMS first establish reliability and 
validity for the BSI measure before using it in the QIP and the TPS 
since CMS has noted in previous rulemaking that up to 60-80 percent of 
dialysis events are underreported and this high rate of

[[Page 57003]]

underreporting would not be present in a valid and reliable measure.
    Response: We thank the commenters for their support for targeted 
NHSN validation and will consider whether we should introduce a scoring 
adjustment for accurate NHSN reporting.
    We disagree that NHSN measures are unreliable, and we firmly 
believe that a robust validation effort will ensure that facilities are 
reporting accurate and comprehensive data to NHSN. We also disagree 
with comments stating that the measure is clinically invalid. The BSI 
measure is endorsed by the NQF, which closely reviews measures for 
clinical validity and evidence base. We therefore do not agree that we 
should suspend the BSI measure at this time.
    Further, our NHSN dialysis event validation study has focused 
primarily on the feasibility of undertaking more comprehensive data 
validation activity. Prior pilot studies were initially conducted on 
nine dialysis facilities and subsequently on 35 randomly selected 
facilities. Validation studies on small sample sizes focused on 
improving our understanding of the time and resources required to 
accomplish validation activity on a larger scale. A small sample size 
below thresholds lacks precision and is subject to large sampling 
variability. Hence, as a next step after the feasibility studies phase, 
we believe expanding the sample size of facilities to be validated is 
warranted to accurately and precisely estimate the extent of errors in 
dialysis event case classification (both under- and over-reporting).
    In addition, as already noted, we intend to publish the results of 
our CY 2018 validation studies in 2019.
    Comment: A commenter was concerned about the burden associated with 
validation activities and encouraged us to consider alternative 
approaches to data validation, potentially including requesting records 
related only to the specific clinical topic being validated, allowing a 
longer timeline such as 90 days for facilities to respond to requests, 
and electronic information exchange.
    Response: While the focus of NHSN Dialysis Event validation lies on 
positive BSI, other candidate events (pus, increased redness or 
swelling, and IV antibiotic start) tend to co-occur frequently. Since 
most of these events are uncommon, to assure that at least 10 candidate 
events are reviewed per facility for the validation timeframe, 
additional patient lists for example, individuals with pus, increased 
redness or swelling, and individuals with IV antibiotic start (in 
addition to positive BSI) are also requested.
    We believe that allowing 90 days for facilities to respond to 
requests is not feasible because our goal is to provide facilities with 
timely feedback about reporting accuracy. Validation studies are 
conducted within a timeframe of 24- through 30 weeks and addition of 
more facility response time is prohibitive due to the time constraints.
    There is a potential that future exchange of medical records could 
be accomplished via electronic information exchange. As validation 
studies progress we aim to make the process less burdensome for 
facilities.
    Comment: A commenter strongly agreed with our policy goal of 
reducing rates of bloodstream infections, but worried that NHSN-based 
reporting of these infections does not differentiate between those 
related to dialysis and those that are unrelated. The commenter also 
urged us to consider working with CDC to allow facilities to validate 
third-party data submitted to NHSN on BSIs.
    Response: We thank the commenter for their feedback and we will 
consider it in future payment years. However, we would like to clarify 
that data validation is an ESRD QIP policy intended to ensure the 
accuracy of NHSN data scored under the QIP. We will continue to work 
with CDC on appropriate NHSN data accuracy policies.
    Final Rule Action: After considering public comments received, we 
are finalizing our proposals to update the NHSN validation study and to 
adopt CROWNWeb validation as a permanent feature of the ESRD QIP, as 
proposed without change.

C. Requirements for the PY 2022 ESRD QIP

1. Continuing and New Measures for the PY 2022 ESRD QIP
    Since we are finalizing our proposal to remove four measures 
beginning with the PY 2021 ESRD QIP, the PY 2021 ESRD QIP measure set 
will have 12 measures. In the CY 2013 ESRD PPS final rule, we finalized 
that once a quality measure is selected and finalized for the ESRD QIP 
through rulemaking, the measure would continue to remain part of the 
Program for all future years, unless we remove or replace it through 
rulemaking or notification (if the measure raises potential safety 
concerns) (77 FR 67475). In addition to continuing all of the measures 
included in the PY 2021 ESRD QIP, we proposed to adopt two new measures 
beginning with the PY 2022 ESRD QIP: Percentage of Prevalent Patients 
Waitlisted clinical measure and the Medication Reconciliation for 
Patients Receiving Care at Dialysis Facilities reporting measure.
a. Percentage of Prevalent Patients Waitlisted (PPPW) Clinical Measure
    We proposed to add one new transplant clinical measure to the ESRD 
QIP measure set beginning with PY 2022: (1) Percentage of Prevalent 
Patients Waitlisted (PPPW). The proposed new PPPW measure would align 
the ESRD QIP more closely with a Meaningful Measures Initiative 
priority area--increased focus on effective communication and 
coordination. The proposed measure assesses the percentage of patients 
at each dialysis facility who were on the kidney or kidney-pancreas 
transplant waitlist.
Background
    The benefits of kidney transplantation over dialysis as a modality 
for renal replacement therapy for patients with ESRD are well 
established. Although no clinical trials comparing the two have ever 
been done due to ethical considerations, a large number of 
observational studies have been conducted demonstrating improved 
survival and quality of life with kidney transplantation.\14\ Despite 
the benefits of kidney transplantation, the total number of transplants 
performed in the U.S. has stagnated since 2006.\15\ There is also wide 
variability in transplant rates across ESRD networks.\16\ Given the 
importance of kidney transplantation to patient survival and quality of 
life, as well as the variability in waitlist rates among facilities, we 
stated in the CY 2019 ESRD PPS proposed rule that a quality measure to 
encourage facilities to coordinate care with transplant centers to 
waitlist patients is warranted.
---------------------------------------------------------------------------

    \14\ Tonelli M, Wiebe N, Knoll G, et al. Systematic review: 
kidney transplantation compared with dialysis in clinically relevant 
outcomes. American Journal of Transplanatation 2011 Oct; 
11(10):2093-2109.
    \15\ Schold JD, Buccini LD, Goldfarb DA, et al. Association 
between kidney transplant center performance and the survival 
benefit of transplantation versus dialysis. Clin J Am Soc Nephrol. 
2014 Oct 7; 9(10):1773-80.
    \16\ Patzer RE, Plantinga L, Krisher J, Pastan SO. Dialysis 
facility and network factors associated with low kidney 
transplantation rates among United States dialysis facilities. Am J 
Transplant. 2014 Jul; 14(7):1562-72.
---------------------------------------------------------------------------

    This measure emphasizes shared accountability between dialysis 
facilities and transplant centers.
Data Sources
    The proposed PPPW measure uses CROWNWeb data to calculate the 
denominator, including the risk adjustment and exclusions. The Organ 
Procurement and Transplant Network

[[Page 57004]]

(OPTN) is the data source for the numerator (patients who are 
waitlisted. The OPTN is a public-private partnership established by the 
National Organ Transplant Act in 1984. The private nonprofit 
organization, United Network for Organ Sharing (UNOS) handles 
administration of the waitlist under a contract with the federal 
government. The Nursing Home Minimum Dataset and Questions 17u and 22 
on the Medical Evidence Form CMS-2728 are used to identify ESRD 
patients who were admitted to a skilled nursing facility (SNF) because 
those patients are excluded from the measure. A separate CMS file that 
contains final action claims submitted by hospice providers is used to 
identify ESRD patients who have been admitted to hospice because those 
patients are also excluded from the measure.
Outcome
    The PPPW measure tracks the percentage of patients attributed to 
each dialysis facility during a 12-month period who were on the kidney 
or kidney-pancreas transplant waitlist. The measure is a directly 
standardized percentage, in that each facility's percentage of kidney 
transplant patients on the kidney transplant waitlist is based on the 
number of patients one would expect to be waitlisted for a facility 
with patients of similar age and co-morbidities.
Cohort
    The PPPW measure includes ESRD patients who are under the age of 75 
on the last day of each month and who are attributed to the dialysis 
facility. We would create a treatment history file using a combination 
of Medicare dialysis claims, the Medical Evidence Form CMS-2728, and 
data from CROWNWeb as the data source for the facility attribution. 
This file would provide a complete history of the status, location, and 
dialysis treatment modality of an ESRD patient from the date of the 
first ESRD service until the patient dies or until the measurement 
period ends. For each patient, a new record would be created each time 
he or she changes facility or treatment modality. Each record would 
represent a time period associated with a specific modality and 
dialysis facility. Each patient-month would be assigned to only one 
facility. A patient could be counted up to 12 times in a 12-month 
reporting period, and home dialysis would be included.
Inclusion and Exclusion Criteria
    The PPPW measure excludes patients 75 years of age or older on the 
last day of each month. Additionally, patients who are admitted to a 
SNF or hospice during on the date that the monthly count takes place 
are excluded from the denominator for that month. An eligible monthly 
patient count takes place on the last day of each month during the 
performance period.
Risk Adjustment
    The PPPW measure is adjusted for patient age. The measure is a 
directly standardized percentage, in the sense that each facility's 
percentage of patients on the waitlist is adjusted to the national age 
distribution. Further information on the risk adjustment model can be 
found in the PPPW Methodology Report (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html). We assume a logistic regression 
model for the probability that a prevalent patient is waitlisted.
2017 Measures Application Partnership Review
    We submitted the PPPW measure to the Measures Application 
Partnership in 2017 for consideration as part of the pre-rulemaking 
process, and Measures Application Partnership's final recommendations 
may be found at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972.
    The Measures Application Partnership expressed conditional support 
for the PPPW measure for inclusion in the ESRD QIP. The Measures 
Application Partnership acknowledged that the measure addresses an 
important quality gap in dialysis facilities, but discussed a number of 
factors that it believed should be balanced when implementing the 
measure. The Measures Application Partnership reiterated the critical 
need to help patients receive kidney transplants to improve their 
quality of life and reduce their risk of mortality. The Measures 
Application Partnership also noted that there are disparities in the 
receipt of kidney transplants and there is a need to incentivize 
dialysis facilities to educate patients about waitlisting processes and 
requirements. The Measures Application Partnership also acknowledged 
that a patient's suitability to be waitlisted may not be within the 
control of a dialysis facility or transplant centers. The Measures 
Application Partnership also noted the need to ensure that the measure 
is appropriately risk-adjusted and recommended that CMS explore whether 
it would be appropriate to adjustment the measure for social risk 
factors and proper risk model performance. The Measures Application 
Partnership conditionally supported the measure with the condition that 
CMS submit it to the NQF for consideration of endorsement. 
Specifically, the Measures Application Partnership recommended that 
this measure be reviewed by NQF's Scientific Methods Panel as well the 
Renal Standing Committee. The Measures Application Partnership 
recommended that as part of the endorsement process, the NQF examine 
the validity of the measure, particularly the risk adjustment model and 
if it appropriately accounts for social risk. Finally, the Measures 
Application Partnership noted the need for the Disparities Standing 
Committee to provide guidance on potential health equity concerns.
    In response to these recommendations, we submitted the measure to 
the NQF for consideration of endorsement, and the Renal Standing 
Committee did not recommend the PPPW measure. Nonetheless, our 
understanding is that it will be evaluated by all of the committees 
that the Measures Application Partnership suggested. We note further 
that access to transplantation is a known area of disparity and has a 
known performance gap, and the Measures Application Partnership 
coordinating committee expressed conditional support for the measure.
    For additional information on the Measures Application 
Partnership's evaluation of measures for the ESRD QIP, we refer readers 
to Measures Application Partnership's website at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972.
    Based on the benefits of kidney transplantation over dialysis as a 
modality for renal replacement therapy for patients with ESRD, and 
taking into account the Measures Application Partnership's conditional 
endorsement and our submission of the measure to the NQF for 
consideration of endorsement, we proposed to adopt the PPPW measure 
beginning with the PY 2022 ESRD QIP. We noted also that there are 
currently no NQF-endorsed transplant measures that we could have 
considered, and that we believed we could adopt this measure under 
section 1881(h)(2)(B)(ii) of the Act due to its clinical significance 
for the ESRD patient population.
    We invited comments on this proposal.
    The comments and our responses to the comments on our proposals are 
set forth below. We also address comments on the proposed Standardized 
Waitlist

[[Page 57005]]

Ratio (SWR) measure (discussed further in a subsequent section of this 
final rule) in this section because commenters frequently addressed the 
PPPW and SWR measures together.
    Comment: One commenter strongly supported the proposed PPPW 
measure.
    Response: We thank the commenter for this support.
    Comment: A commenter strongly supported CMS' proposals to adopt the 
PPPW and SWR measures, stating that timely access to transplantation 
for ESRD patients is widely acknowledged as important, and that longer 
wait times for transplants are associated with poorer outcomes. The 
commenter also noted the key role that dialysis facilities play in 
placing patients on transplant wait lists. The commenter offered to 
work with CMS on additional risk adjustment policies as needed but 
stated that CMS should not wait to adopt the measures. Another 
commenter stated that the proposed measures will ensure that dialysis 
facilities are held accountable for access to transplantation.
    Response: We thank the commenters for their support.
    Comment: Commenter supported our proposed adoption of the PPPW 
measure for the ESRD QIP but suggested that we accelerate its adoption 
to PY 2019 rather than waiting until PY 2022.
    Response: We thank the commenter for this support, but we do not 
believe it is possible to accelerate the measure's adoption to PY 2019 
since that would have meant adopting the measure for the CY 2017 
performance period. Furthermore, we are unable to accelerate the 
adoption of the PPPW measure earlier than PY 2022 due to operational 
constraints.
    Comment: A commenter raised concerns that the risk models for the 
PPPW and SWR measures will not adequately discriminate performance, 
noting that risk model testing showed an overall C-statistic of 0.72 
for the PPW measure and 0.67 for the SWR measure. The commenter stated 
that a minimum C-statistic of 0.8 is a more appropriate indicator of a 
model's goodness of fit, predictive ability, and validity to represent 
meaningful differences among facilities.
    Response: We believe that the reliability of the PPPW and SWR 
measures is appropriate based on recent literature and note that their 
reliability estimates are similar to other current NQF endorsed quality 
measures implemented by CMS.
    Commenter: Some commenters expressed concerns about the PPPW and 
SWR measures' use, noting that dialysis facilities do not have control 
over transplant waitlists and that dialysis facilities should not have 
incentives to refer all patients for transplants. One commenter stated 
that dialysis facilities are unable to meaningfully impact their 
performance on these measures. Another commenter stated that numerous 
factors outside the facility's control determine whether an individual 
is placed on a transplant waitlist or receives an organ transplant. 
Other commenters stated that the transplant center decides whether a 
patient is added to a waitlist, not the dialysis facility. One 
commenter stated that the evaluation process includes many obstacles 
and delays across multiple parties that are irrelevant to the dialysis 
facility and that this misattribution is misaligned with NQF's first 
``Attribution Model Guiding Principle'', which says measure attribution 
models should fairly and accurately assign accountability. One 
commenter stated that other transplantation access measures more 
appropriately capture dialysis facilities' sphere of control over 
transplant waitlists. One commenter stated that hospitals set criteria 
for transplant waitlists and suggested that we work with transplant 
programs to find ways to align and streamline their criteria. The 
commenter also noted that transplant centers will not include patients 
on their waitlists unless they can prove they can pay for 
immunosuppressive drugs post-transplant.
    One commenter suggested that patient-centered education about 
transplantation may be more useful for dialysis patients. Another 
commenter agreed that dialysis facilities have a role in educating 
patients about transplants, assisting patients with being evaluated, 
and keeping patients healthy enough to remain active on the waitlist 
but recommended that we work with the community to develop a more 
actionable transplant measure for dialysis facilities. The commenter 
suggested that we consider applying the PPPW measure to nephrologists 
participating in the Merit-Based Incentive Payment System.
    Another commenter reiterated its belief that dialysis clinics 
should not be held accountable for transplants and urged us to report 
the transplant measures on the Dialysis Facility Compare site and not 
include them in the QIP. Another commenter suggested adoption of a 
transplant measures over which facilities have more control. Another 
commenter recommended that we develop alternative quality measures that 
more accurately reflect the care provided in dialysis facilities, such 
as measures of transplant education and/or referral for transplant 
evaluation.
    Response: Waitlisting for transplantation is the culmination of a 
variety of preceding activities. These include (but are not limited to) 
education of patients about the transplant option, referral of patients 
to a transplant center for evaluation, completion of the evaluation 
process and optimizing the health of the patient while on dialysis. 
These efforts depend heavily and, in many cases, primarily, on dialysis 
facilities. Although some aspects of the waitlisting process may not 
entirely depend on facilities, such as the actual waitlisting decision 
by transplant centers, or a patient's choice about the transplantation 
option, these can also be nevertheless influenced by the dialysis 
facility. For example, through strong communication with transplant 
centers and advocacy for patients by dialysis facilities, as well as 
proper education, we believe dialysis facilities are well-positioned to 
provide encouragement and support of patients during their decision-
making about the transplantation option. The waitlisting measures were 
therefore proposed in the spirit of shared accountability, with the 
recognition that success requires substantial effort by dialysis 
facilities. In this respect, the measures represent an explicit 
acknowledgment of the tremendous contribution dialysis facilities can 
be and are already making towards access to transplantation, to the 
benefit of the patients under their care.
    Comment: A commenter raised concerns about the PPPW and SWR 
measures. Commenter stated that many factors outside of dialysis 
facilities' control influence whether or not a patient is waitlisted, 
including changes in the patients' health status, overall transplant 
center performance, and the level of risk tolerance of a given 
transplant center. The commenter recommended adopting a reporting 
requirement for referrals to transplant centers instead, suggesting 
that it would increase CMS's understanding of referral patterns and 
assist with the development of appropriate policies and incentives to 
promote transplant in the future. The commenter also noted that the NQF 
declined to endorse the PPPW measure. The commenter suggested that CMS 
explore the development of a process measure related to patient 
education about modality options and its documentation in patients' 
care plans. The commenter also recommended that CMS collaborate with 
the community to develop measures that synergize across the dialysis 
and transplant settings.

[[Page 57006]]

    Response: We will consider the commenters' suggestions for 
additional measures on the transplant topic in the future. However, as 
we stated in the CY 2019 ESRD PPS proposed rule (83 FR 34344), we 
believe that the benefits of kidney transplantation as a renal 
replacement therapy modality are well-established, and we continue to 
believe that dialysis facilities should make every effort to ensure 
that their patients are appropriately wait-listed for transplants.
    Comment: Some commenters opposed the adoption of the PPPW and SWR 
measures. One commenter believed that the two measures will not 
encourage transplants due to poor design. The commenter recommended 
that CMS develop a transplant measure that is actionable by dialysis 
facilities. Another commenter recommended that CMS work with transplant 
programs to align and streamline waitlist criteria and consider ways to 
create a single point of access for patients and transplant physicians 
to access potential living donors.
    Another commenter stated that any transplant measures should be 
actionable by dialysis facilities and should meet other scientifically-
based criteria. The commenter stated that the proposed PPPW and SWR 
measures do not assess what they purport to measure, and therefore will 
not incentivize transplants.
    Some commenters stated that the NQF has not endorsed either the 
PPPW or the SWR. One commenter stated that the NQF's Renal Standing 
Committee reviewed the measures in the spring of 2018 and did not 
recommend either measure for endorsement, finding that the submitted 
evidence was focused on the impact of transplantation on patient 
outcomes rather than the impact of transplant waitlisting, that the 
transplant facilities have varying selection criteria for their 
waitlists, and that the measure did not address patient preference to 
not receive a transplant. The commenter recommended the development of 
alternative measures that relate to the outcome of transplant rather 
than waitlisting.
    Another commenter stated that ESRD facilities are not the barrier 
to placing patients on transplant lists. The commenter stated that the 
stagnant percentage of patients on waitlists since 2006 that we noted 
in the CY 2019 ESRD PPS proposed rule is due to the implementation of 
new conditions of participation for organ transplant centers in 2007, 
which may result in centers losing their CMS certification if enough 
organ grafts fail. The commenter further stated that transplant centers 
have thus become risk-averse and suggested that we review those 
conditions of participation again rather than adopt these measures. The 
commenter also stated that we should not incentivize ESRD facilities to 
increase the percentage of their patients on transplant waitlists if 
those patients are not appropriate for transplant services.
    Response: We will consider working with transplant programs and 
stakeholders, including HRSA's Organ Procurement Organizations to align 
and streamline waitlist criteria within our current legal authorities. 
However, we disagree that the proposed measures will not encourage 
transplants. We believe that adopting these measures will encourage 
dialysis facilities to make every effort possible to place their 
patients on transplant waitlists and thereby ensure that their patients 
receive the benefits of that treatment modality.
    We disagree with the concerns raised by the commenters about the 
PPPW and SWR measures not meeting scientifically-based criteria. We 
would like to clarify that the NQF submission included multiple high 
quality scientific studies demonstrating the positive impact of 
successful kidney transplantation on patient outcomes. Since deceased 
donation kidney transplant does not legally occur in the U.S. without 
waitlisting, we continue to believe that the literature focus of the 
measure's submission was appropriate. We respectfully disagree with the 
Renal Standing Committee's view that the evidence we provided on the 
benefits of kidney transplantation was insufficient.
    Although it is true that transplant facilities contribute to the 
variation in waitlisting, it is also true that extensive variation in 
dialysis facility referrals results in facility-level variation in 
waitlisting that is not well explained by available risk adjustors. 
This dialysis facility-level variation strongly suggests an opportunity 
for improvement in patient access to kidney transplantation through 
incentivization of dialysis facility involvement in preparing patients 
for transplantation.
    Patient preference for or against kidney transplantation may well 
depend, at least in part, on information about the relative benefits of 
chronic dialysis vs. transplant provided by the dialysis facility. As 
noted above, dialysis facility-level variation in referrals for 
evaluation and follow-up strongly suggests opportunities for 
improvement in educating and preparing patients for transplantation.
    We believe that the transplant topic is an important issue that 
should be covered in the QIP; the benefits of kidney transplantation 
over dialysis as a modality for renal replacement therapy among ESRD 
patients are well-established.
    We will consider reviewing the conditions of participation for 
organ transplant centers to evaluate whether prior policy changes have 
resulted in more risk-averse behavior by those centers. However, we do 
not agree that we should fail to adopt these measures as a result and 
note that measuring the percentage of patients waitlisted is a 
different clinical measurement than assessing patients that receive 
organ grafts. We believe a measure of patients waitlisted is more 
appropriate than a measure of patients receiving organ grafts due 
principally to the scarcity of kidneys for transplant and long waiting 
times. Further, we believe a measure of patients waitlisted ensures 
that facilities work with transplant centers to prepare as many 
patients as possible and clinically appropriate for those procedures.
    We also believe that both the PPPW measure and the SWR measure are 
clinically appropriate measures covering the transplant topic. However, 
in response to public comments received and in accordance with our 
Meaningful Measures-based priority of adopting a smaller, more 
parsimonious measure set, we are finalizing our proposal to adopt the 
PPPW measure beginning in PY 2022, and as discussed further in section 
IV.D.1 of this final rule, we are not finalizing our proposal to adopt 
the SWR measure beginning in PY 2024. We believe that the PPPW measure 
is more appropriate to include in the QIP at this time because the PPPW 
measure affects more patients and includes the SWR measure's 
population; the SWR measure has a 3-year period of performance versus 
the PPPW measure's 1-year period of performance, and the PPPW measure's 
reliability is higher than the SWR measure's reliability (0.72 versus 
0.67). We have therefore concluded that the PPPW measure is more 
consistent with our policy goals of promoting kidney transplantation, 
and in the interest of adopting a more effective measure set, will 
finalize it and will not finalize the SWR measure. Adoption of one 
transplant measure rather than both will also reduce facility burden 
under the QIP because facilities will only need to track their progress 
on one transplant measure.
    Comment: A commenter supported exploring transplantation measures 
for dialysis care quality but did not support the proposal to adopt the 
PPPW or SWR measures due to geographic variability

[[Page 57007]]

in access to transplantation. The commenter stated that access to 
transplantation depends heavily on the dialysis facility's proximity to 
transplant programs. The commenter suggested that CMS instead evaluate 
each facility based on the historical percentage of patients waitlisted 
at each facility.
    Response: We will consider whether evaluating a historical 
percentage of patients waitlisted at each facility represents a viable 
quality measurement option. We will also examine issues related to 
geographic variability in access to transplantation. However, we do not 
believe that these concerns necessitate not finalizing measures of 
transplantation given the clinical benefits associated with that 
treatment modality.
    Comment: A commenter supported our proposal to adopt the PPPW 
measure, stating that kidney transplantation is widely regarded as a 
better ESRD treatment option than dialysis for patients' clinical and 
quality of life outcomes.
    Response: We thank the commenter for this support.
    Comment: A commenter supported our desire to include transplant 
measures in the QIP and stated that pediatric dialysis facilities will 
be able to report the PPPW measure successfully.
    Response: We thank the commenter for this support.
    Comment: A commenter expressed concerns that the proposed PPPW 
measure would not address underlying care disparities for pediatric 
patients and suggested that CMS consider additional exclusion criteria 
such as excluding patients under 2 years of age and exclusions for 
patients with medical and sociodemographic criteria that may preclude 
transplantation.
    Another commenter recommended that CMS consider risk-adjusting the 
PPPW and SWR measures using factors that take into consideration 
regional differences, eligibility criteria at the transplant center, 
and demographic variables such as family support, and insurance issues 
that may influence the likelihood of transplant waitlisting. Another 
commenter expressed concerns about dialysis patients' being unable to 
receive premium support payments for commercial health insurance after 
transplantation, which may delay transplants as those patients cannot 
then demonstrate that they have a coverage source following the 
transplant.
    Some commenters expressed concern that the PPPW and SWR measures 
include age as the only sociodemographic risk variable. They stated 
that transplant centers assess demographic factors such as family 
support, ability to adhere to medication regimens, capacity for follow-
up, and insurance issues. One commenter stated that not accounting for 
other important biological and demographic variables raises concerns 
about validity for both measures but did not support adjusting for 
waitlisting based on economic factors or by race or ethnicity. Another 
commenter suggested examining geography as a risk variable, stating 
that regional variation in transplantation access is considerable and 
that these differences will change the share of patients waitlisted and 
affect performance measure scores. One commenter also raised concerns 
that the ``not eligible'' criteria for transplantation can differ by 
transplantation center location.
    Response: We agree that financial and other social issues can pose 
substantial barriers to waitlisting for patients. However, they do not 
take away from the fact that many patients with these issues will still 
stand to benefit substantially from transplantation as compared with 
remaining on dialysis. As such, it is expected that dialysis facilities 
will work with transplant centers, advocate for patients and assist 
them in overcoming barriers to waitlisting to the extent possible. We 
also recognize that even with the best efforts, not all dialysis 
patients will ultimately be suitable candidates for waitlisting. 
Thresholds for the measures are assessed at the facility level. 
Examination of facility level measures essentially allows comparison of 
an individual facility's performance to a consensus standard, 
empirically set by the achievement of dialysis facilities across the 
nation. Through comparison with the performance of other facilities, 
these measures may help individual dialysis facilities identify 
opportunities for improvement in their waitlisting rates.
    Regarding geography, we examined this issue extensively and 
ultimately decided against including an adjustment for the following 
reasons:
    1. The transplant center's geographic rate adjustment is not 
statistically significant in the model and is unstable dependent on how 
a small percent of missing values are handled.
    2. The C-Index (a measure of goodness of fit) for both the model 
with and without this geographic adjustment is 0.72, suggesting no 
improvement in discrimination with inclusion of the geographic effect.
    We will continue to examine issues associated with the pediatric 
population, including possible additional exclusions from transplant 
measures.
    Comment: A commenter expressed support for the exclusion of 
patients admitted to hospice during the month of evaluation based on 
its belief that the transplantation access measures should not apply to 
persons with a limited life expectancy.
    Response: We thank the commenter for this support.
    Comment: A commenter recommended indicating that the PPPW measure 
is an intermediate outcome measure rather than a process measure.
    Response: We have consulted with the NQF on this topic, and it 
currently classifies this measure as a process measure. We agree with 
that assessment since the measure assesses a clinical process--
placement on a waitlist--rather than an outcome, such as successful 
kidney transplants.
    Comment: A commenter agreed with CMS that dialysis facilities and 
transplant centers need to coordinate care related to the transplant 
referral and waitlisting process, including starting the transplant 
evaluation and starting the multiple tests and consultations needed for 
that evaluation. However, the commenter raised concerns about adopting 
the PPPW measure as a clinical measure rather than a reporting measure. 
The commenter stated that when the technical expert panel (TEP) 
convened by CMS's contractor recommended that we adopt the PPPW as a 
clinical measure, the new kidney allocation system (KAS) on waitlisting 
was unknown. The commenter noted that the TEP also acknowledged recent 
evidence suggesting that the mere possibility that a PPPW measure was 
being developed for potential inclusion in the QIP has changed 
clinician behavior and reduced waitlisting rates. The commenter also 
stated that this change in clinician behavior may also be due to the 
new KAS, where wait-time begins at dialysis initiation, and has caused 
providers to wait until a patient has spent several years on dialysis 
prior to referral rather than refer patients early. In addition, the 
commenter raised concerns that a transplant evaluation conducted by a 
transplant center can take many months and that the distribution of 
transplant centers has geographic inequity. Another commenter also 
raised concerns that eligible patients may not be waitlisted due to 
factors outside of the dialysis facility's control, such as transplant 
center eligibility and the lack of NQF endorsement. The commenter 
recommended that CMS refer this issue

[[Page 57008]]

to the ESRD Networks for further discussion with facilities.
    Response: We understand the commenter's concerns. However, we do 
not believe that these concerns should prevent us from finalizing the 
PPPW measure because the measure incentivizes facilities to do what 
they can to ensure that their patients are waitlisted as timely as 
possible. We will continue discussions with the stakeholder community 
about barriers to organ transplants, but we view transplants as a 
clinically appropriate goal for dialysis patients. We note further that 
the measure's testing involved analyses that controlled for geography, 
and we did not observe any effects on the measure's reliability 
associated with geographic inequity.
    Comment: A commenter stated that one PPPW exclusion has been 
changed since the measure was originally developed and that the measure 
being proposed for the QIP now contains an exclusion for ``patients 
admitted to a skilled nursing facility at incidence or previously 
according to Form CMS 2728.'' The commenter expressed support for this 
change and recommended providing information on the impact of this 
exclusion on performance.
    Response: We thank the commenter for its support. Our goal is to 
test all of our measures as a part of our measure maintenance and 
development process.
    Comment: A commenter suggested that CMS provide for the PPPW and 
SWR measures a detailed description of measure scores, such as 
distribution by quartile, mean, median, standard deviation, and 
outliers, stating that this information is needed for stakeholders to 
assess the measures and review the measures' performance. The commenter 
also stated that with large sample sizes, statistically significant 
differences in performance may not be clinically meaningful.
    Response: We thank the commenter for this feedback. We believe that 
this is a reasonable request and we will consider how to include this 
information in future versions of the measure methodology reports for 
each measure.
    Comment: A commenter suggested that CMS develop a multi-pronged 
strategy to increase the kidney transplantation rate. The commenter 
suggested improving the consistency of information requirements for 
initial referrals across transplant centers and encouraging the 
exchange of information through electronic medical records. The 
commenter also suggested improving the organ donor supply, noting that 
increasing the number of patients on the waitlist without addressing 
the limited availability of health donor kidneys will have little 
effect on increasing the rate of successful transplantations.
    Response: We thank the commenter for its suggestions. We will take 
them under consideration to the extent feasible within our legal 
authorities.
    Comment: A commenter suggested that CMS consider adopting a measure 
on education for transplantation as a modality.
    Response: We thank the commenter for its suggestion. We'll take it 
under consideration as part of our measure development work.
    Comment: A commenter suggested that we consider adopting a measure 
comparing facilities' transplantation rates to their prior performance. 
The commenter suggested that this proposal, along with the PPPW 
measure, could ensure that dialysis facilities in all areas of the 
country (including those with differing waitlisting rates) work to 
improve their transplantation practices.
    Response: We thank the commenter for its suggestion of a measure 
concept focused on improvement in transplantation rates. We will take 
it under consideration as part of our measure development efforts. We 
note, however, that we will assess performance on the PPPW on both 
achievement and improvement using the ESRD QIP's current measure 
scoring methodology. Based on our past experience using this 
methodology, we believe that dialysis facilities will be able to score 
points for improving their performance on the measure over time.
    Comment: A commenter suggested that referral rates are more 
appropriate than waitlisting rates as a QIP measure but recognized that 
data challenges exist.
    Response: We thank the commenter for its suggestion of a measure 
concept focused on transplantation referral rates. We will take it 
under consideration as part of our measure development work.
    Final Rule Action: After considering public comments, we are 
finalizing our proposal to add the PPPW measure to the ESRD QIP measure 
set beginning with PY 2022.
b. Medication Reconciliation for Patients Receiving Care at Dialysis 
Facilities (MedRec) Reporting Measure
    We proposed to adopt the New Medication Reconciliation for Patients 
Receiving Care at Dialysis Facilities (MedRec) reporting measure for 
the ESRD QIP measure set, beginning with PY 2022. The MedRec measure 
assesses whether a facility has appropriately evaluated a patient's 
medications, an important safety concern for the ESRD patient 
population because those patients typically take a large number of 
medications. Inclusion of the MedRec measure in the ESRD QIP measure 
set would align with the Meaningful Measure Initiative priority area of 
making care safer by reducing harm caused by care delivery.
    Medication management is a critical safety issue for all patients, 
but especially for patients with ESRD, who are often prescribed 10 or 
more medications simultaneously, take an average of 17 to 25 doses per 
day, have numerous comorbid conditions, have multiple healthcare 
providers and prescribers, and undergo frequent medication regimen 
changes.\17\ Medication-related problems contribute significantly to 
the approximately $40 billion in public and private funds spent 
annually on ESRD care in the U.S.; for patients with chronic kidney 
disease alone, this figure is $10 billion.\18\ We believe that 
medication management practices focusing on medication documentation, 
review, and reconciliation could systematically identify and resolve 
medication-related problems, improve ESRD patient outcomes, and reduce 
total costs of care.
---------------------------------------------------------------------------

    \17\ Cardone KE, Bacchus S, Assimon MM, Pai AB, Manley HJ. 
Medication-related problems in CKD. Adv Chronic Kidney Dis. 
2010;17(5):404-412.
    \18\ Parker WM and Cardone KE. Medication Management Services in 
a Dialysis Center: Patient and Dialysis Staff Perspectives. Albany 
College of Pharmacy and Health Services. January 2015. Available at: 
http://www.acphs.edu. Accessed March 22, 2016.
---------------------------------------------------------------------------

Data Sources
    The proposed MedRec measure is calculated using administrative 
claims and electronic clinical data from CROWNWeb, and facility medical 
records. For additional information on the measure, we refer readers to 
the measure steward's website; the Kidney Care Quality Alliance (KCQA): 
http://kidneycarepartners.com/wp-content/uploads/2014/11/tbKCQA_NQFendorsedSpecs10-26-17.pdf. The KCQA is funded by Kidney Care 
Partners (KCP), a coalition of patient advocates, dialysis 
professionals, care providers, and manufacturers, and was established 
in 2005 as an independent organization for the purpose of developing 
quality measures for use in the dialysis setting of care.
Outcome
    The outcome of the MedRec measure is the provision of medication 
reconciliation services and their documentation by an eligible 
professional for patients attributed to dialysis facilities each month.

[[Page 57009]]

Cohort
    The MedRec measure includes all patients attributed to a dialysis 
facility during each month of the performance period. The numerator is 
the number of patient-months for which medication reconciliation was 
performed and documented by an eligible professional during the 
reporting period. The denominator statement is the total number of 
eligible patient-months for all patients attributed to a dialysis 
facility during the reporting period.
Inclusion and Exclusion Criteria
    The MedRec measure excludes in-center patients who receive less 
than 7 hemodialysis treatments in the facility during the reporting 
month.
Risk Adjustment
    The MedRec measure is not risk-adjusted because it is process 
measure.
2017 Measures Application Partnership Review
    We submitted the MedRec measure to the Measures Application 
Partnership in 2017 for consideration as part of the pre-rulemaking 
process, and the Measures Application Partnership addressed the measure 
in its February 2018 Hospital Workgroup report.\19\ The Measures 
Application Partnership supported the measure for the ESRD QIP, noting 
that the measure is NQF-endorsed and addresses both patient safety and 
care coordination. The Measures Application Partnership also noted that 
the topic of medication reconciliation is currently a gap area in the 
ESRD QIP's measure set and that the measure has broad support across 
stakeholders. The Measures Application Partnership emphasized that 
medication reconciliation is an important issue for ESRD patients who 
see multiple clinicians and may require numerous medications. The 
Measures Application Partnership noted that administration of the wrong 
medication can have grave consequences for an ESRD patient.
---------------------------------------------------------------------------

    \19\ Available at: https://www.qualityforum.org/Publications/2018/02/2018_Considerations_for_Implementing_Measures_Final_Report_-_Hospitals.aspx.
---------------------------------------------------------------------------

    For additional information on the Measures Application 
Partnership's evaluation of measures for the ESRD QIP, we refer readers 
to the Measures Application Partnership's website at: https://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx.
    We agree with the Measures Application Partnership's assessment 
that the MedRec measure is appropriate for the ESRD QIP because 
medication reconciliation is currently a gap area in the Program's 
measure set and is an important issue for ESRD patients who receive 
care from multiple clinicians and providers and may require numerous 
medications. ESRD patients can be significantly harmed by medication 
administration errors. We continue to believe that care coordination is 
a critical quality improvement topic. Therefore, we proposed to adopt 
the MedRec measure beginning with the PY 2022 ESRD QIP and to place the 
measure into the Patient Safety Domain. We note further that, as 
required by section 1881(h)(2)(B)(i) of the Act, CMS is required to use 
endorsed measures in the ESRD QIP unless the exception at section 
1881(h)(2)(B)(ii) of the Act applies. The MedRec measure is endorsed by 
NQF as #2988.
    The comments and our responses to the comments on our proposal are 
set forth below.
    Comment: Several commenters supported our proposal to adopt the 
MedRec measure, stating that the measure has clinical merit. One 
commenter stated that the measure is NQF endorsed and that patients on 
dialysis are on numerous medications, have multiple prescribers and 
have frequent changes. Another commenter noted that medication 
management is extremely important for ESRD patients that often receive 
multiple prescriptions from numerous health care providers. Another 
commenter stated that the measure will improve patient care and safety.
    Response: We thank the commenters for their support.
    Comment: A commenter supported the MedRec measure but suggested 
that the QIP should include a limited set of measures that can more 
broadly assess facility performance on clinical topics.
    Response: We thank the commenter for its support. We agree that the 
QIP should include a focused quality measure set, which is why we 
proposed to remove several reporting measures beginning with the PY 
2021 ESRD QIP. We intend to continue examining the ESRD QIP measure set 
to ensure that it remains as effective as possible at providing 
incentives for high-quality care while minimizing the reporting burden 
on participating facilities. Further, we believe that the MedRec 
measure broadly assesses facility performance by focusing on a topic 
critical to patient safety. By protecting patients from medication 
errors, dialysis facilities will ensure that their performance on 
quality measures accords with good clinical practices.
    Comment: Two commenters supported the MedRec measure's adoption but 
suggested that we place it into the Care Coordination domain rather 
than the Safety domain in order to align with the Meaningful Measures 
Initiative priorities.
    Response: We thank the commenter for their support. However, while 
we agree that medication reconciliation can be considered a measure of 
care coordination, we believe that it is more properly aligned with 
patient safety because patients can be harmed by medication errors.
    Comment: A commenter supported our proposal to add the MedRec 
measure to the QIP beginning in PY 2022, noting that it is critically 
important for dialysis facilities to have the most accurate record 
possible of their patients' prescriptions, medications, and 
supplements.
    Response: We thank the commenter for its support.
    Comment: A commenter supported adoption of the MedRec measure. The 
commenter noted that requiring hospitals to provide data regarding 
patients' inpatient care to dialysis facilities would greatly 
facilitate dialysis facilities' ability to conduct medication 
reconciliation. The commenter also noted that the lack of interoperable 
EHRs hampers this type of data-sharing but recommended that CMS 
consider how it can better encourage hospitals to provide this 
information in a timely fashion.
    Response: We thank the commenter for its support. We will take 
their feedback on the lack of interoperable EHRs into consideration in 
future years and will consider how we can better encourage hospitals to 
engage with dialysis facilities to share patient information as 
appropriate.
    Comment: A commenter supported adding the MedRec measure to the QIP 
starting with PY 2022. The commenter noted that medication 
reconciliation is an example of a safety intervention that is effective 
in research settings but is difficult to implement successfully in 
general practice. The commenter stated that several reports show that 
dialysis patients have frequent discordant medication regimens and 
stated that medication reconciliation is the process for keeping an 
accurate medication list. The commenter noted that no information 
supports that medication reconciliation alone improves health outcomes 
and that it should be combined with medication assessment/comprehensive 
medication review focused on indication, effectiveness, and safety of 
drugs as well as patients' convenience. The commenter also stated

[[Page 57010]]

that multidisciplinary medication therapy management programs that 
provide both medication reconciliation and review services to dialysis 
patients have been shown to reduce hospital readmissions. In addition, 
the commenter recommended that CMS combine medication reconciliation 
with a comprehensive medication review.
    Response: We thank the commenter for its support. We will take its 
suggestions into consideration in future years.
    Comment: A commenter generally supported our proposal to adopt the 
MedRec measure but requested that we define ``eligible professional'' 
as any clinician who can perform medication reconciliation in 
accordance with state licensure requirements. The commenter noted that 
this could include registered nurses (RNs), advance practice registered 
nurses (APRNs), and physician assistants. The commenter also supported 
the exclusion of patients who receive fewer than 7 hemodialysis 
treatments in a reporting month. Another commenter requested that we 
consider adding licensed practical nurses (LPNs) to the measure's 
``eligible professionals'' list to avoid causing burden to its RN 
staff.
    Response: We thank the commenters for their feedback. We proposed 
to define ``eligible professional'' by incorporating the NQF's 
definition of that term (physicians, RNs, APRNs, PAs, pharmacists, and 
pharmacy technicians).\20\ However, in response to this feedback, we 
are finalizing the MedRec measure with an expanded definition of 
``eligible professional.'' Specifically, we will remove the reference 
to RNs and replace that reference with ``nurses.'' This change will 
allow all types of nurses, including LPNs, to perform medication 
reconciliations within the scope of their licenses.
---------------------------------------------------------------------------

    \20\ See https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/NQF-2988-Patients-Receiving-Care-at-Dialysis-Facilities.pdf.
---------------------------------------------------------------------------

    Comment: A commenter supported medication reconciliation in 
concept, acknowledging that medication reconciliation is a critical 
safety issue for dialysis patients, but expressed concern about the 
continued reliance on measures of processes. The commenter was worried 
that process measures can be burdensome for providers to report. The 
commenter suggested that CMS consider addressing this topic through 
Medicare's conditions for coverage for ESRD facilities rather than 
adopting the measure.
    Response: We disagree with the commenter's recommendation to 
address medication reconciliation through Medicare's conditions for 
coverage for ESRD facilities rather than adopting the MedRec measure in 
the QIP. Given that medication reconciliation is currently a gap area 
in QIP's measure set and is an important patient safety issue for the 
ESRD patient population, we believe that the benefits of the measure's 
inclusion outweigh the providers' reporting burden.
    Comment: Commenter suggested adding an exclusion to MedRec for 
patients in their first month of treatment or transient patients.
    Response: We disagree with the commenter's suggestion. It is 
important to engage in medication reconciliation during a patient's 
first month or their first visit because medication errors are more 
likely to occur during care transitions.
    Final Rule Action: After considering public comments, we are 
finalizing our proposal to adopt the MedRec measure for the ESRD QIP 
beginning with PY 2022, with one change; as previously discussed. We 
are finalizing the definition of ``eligible professions'' to include 
all nurses, instead of RNs only.
2. Performance Period for the PY 2022 ESRD QIP
    We proposed to establish CY 2020 as the performance period for the 
PY 2022 ESRD QIP for all measures. We continue to believe that a 12-
month performance period provides us sufficiently reliable quality 
measure data for the ESRD QIP.
    We invited comment on this proposal. However, we did not receive 
any comments specific to the PY 2022 ESRD QIP's performance period. We 
are therefore finalizing the PY 2022 performance period as proposed.
3. Performance Standards, Achievement Thresholds, and Benchmarks for 
the PY 2022 ESRD QIP and Subsequent Years
    Section 1881(h)(4)(A) of the Act provides that ``the Secretary 
shall establish performance standards with respect to measures elected 
. . . for a performance period with respect to a year.'' Section 
1881(h)(4)(B) of the Social Security Act (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.
a. Performance Standards, Achievement Thresholds, and Benchmarks for 
Clinical Measures in the PY 2022 ESRD QIP
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we proposed for PY 2022 to set the performance 
standards, achievement thresholds, and benchmarks for the clinical 
measures (including the proposed PPPW measure) at the 50th, 15th, and 
90th percentile, respectively, of the national performance in CY 2018. 
We also proposed to apply these performance standards to all clinical 
measures we use for the ESRD QIP in future payment years. We invited 
comment on these proposals.
    At the time of the CY 2019 ESRD PPS proposed rule's publication, we 
did not have the necessary data to assign numerical values to the 
proposed performance standards for the clinical measures because we did 
not yet have sufficient CY 2018 data. We stated our intent to publish 
these numerical values, using CY 2018 data received in CY 2018 and the 
first portion of CY 2019, in the CY 2019 ESRD PPS final rule. However, 
we erred in that statement, and should have said that we would publish 
those numerical values in the CY 2020 ESRD PPS final rule, as we would 
not be able to collect any data from the first portion of CY 2019 prior 
to the CY 2019 ESRD PPS final rule's publication.
    We sought comments on the proposed performance standards for 
clinical measures. However, we did not receive any comments and are 
finalizing these performance standards as proposed without change.
b. Performance Standards for the PY 2022 Reporting Measures
    In the CY 2016 ESRD PPS final rule, we finalized performance 
standards for the Screening for Clinical Depression and Follow-Up 
reporting measure (79 FR 66209). In the CY 2017 ESRD PPS final rule, we 
finalized performance standards for the Ultrafiltration Rate reporting 
measure (81 FR 77916) and the NHSN Dialysis Event reporting measure (81 
FR 77916). In the CY 2019 ESRD PPS proposed rule (83 FR 34346), we 
proposed to continue use of these performance standards for these 
reporting measures for the PY 2022 and future payment years.
    For the proposed MedRec reporting measure, we also proposed to set 
the performance standard for PY 2022 and future payment years as 
successfully reporting the following data elements for the measure to 
CROWNWeb, for

[[Page 57011]]

each qualifying patient, on a monthly basis, during the performance 
period: (1) The date that the facility completed the medication 
reconciliation, (2) the type of clinician who completed the medication 
reconciliation, and (3) the name of the clinician.
    We invited comments on these proposals. However, we did not receive 
any public comments and are finalizing the proposed performance 
standards as proposed for PY 2022 and future payment years.
4. Scoring the PY 2022 ESRD QIP and Subsequent Years
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    In the CY 2014 ESRD PPS final rule, we finalized a policy for 
scoring performance on clinical measures based on achievement (78 FR 
72215). In the CY 2019 ESRD PPS proposed rule (83 FR 34346), we 
proposed to use this methodology for scoring achievement for each 
clinical measure, including the proposed PPPW measure, for the PY 2022 
ESRD QIP and for future payment years.
    We invited public comments on this proposal. However, we did not 
receive any public comments are finalizing our policy to score facility 
performance on clinical measures based on achievement as proposed for 
PY 2022 and future payment years.
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 the CY 2019 ESRD PPS proposed rule (83 FR 
34346), we proposed that for the PY 2022 ESRD QIP, we would continue 
that policy, defining the improvement threshold as the facility's 
performance on the measure during the baseline period (which for PY 
2022, would be CY 2019). We stated that the facility's improvement 
score would be calculated by comparing its performance on the measure 
during CY 2020 (the proposed performance period) to the improvement 
threshold and benchmark. We also proposed to use this same methodology 
for scoring the PPPW measure proposed in section IV.C.1.a of the CY 
2019 ESRD PPS proposed rule. Finally, we proposed to continue this 
policy for subsequent years of the ESRD QIP.
    We invited public comments on this proposal. However, we did not 
receive any public comments are finalizing our policy to score facility 
performance on clinical measures based on improvement as proposed for 
PY 2022 and future payment years.
c. Scoring Facility Performance on Reporting Measures
    In the CY 2015 ESRD PPS final rule, we finalized policies for 
scoring performance on the Clinical Depression Screening and Follow-Up 
reporting measures in the ESRD QIP (79 FR 66210 through 66211). In the 
CY 2017 ESRD PPS final rule, we finalized policies for scoring 
performance on the Ultrafiltration Rate reporting measure (81 FR 
77917). In the CY 2019 ESRD PPS proposed rule (83 FR 34346 through 
34347), we proposed to continue use of these policies for the two 
continuing reporting measures for the PY 2022 ESRD QIP and subsequent 
years.
    For the PY 2022 ESRD QIP, we also proposed to score facilities with 
a CCN Open Date before January 1st of the performance period year 
(which, for the PY 2022 ESRD QIP, would be 2020) on the proposed MedRec 
measure using a formula similar to the one previously finalized for the 
Ultrafiltration Rate reporting measure (81 FR 77917):

((# patient-months successfully reporting data)/(# eligible patient-
months)*12) - 2)

    As with the Ultrafiltration Rate reporting measure, we would round 
the result of this formula (with half rounded up) to generate a measure 
score from 0 through 10. We also proposed to score facilities using 
this methodology for subsequent years of the ESRD QIP.
    We invited public comment on these scoring proposals. However, we 
did not receive any public comments specific to scoring facilities' 
performance on reporting measures. Therefore, we are finalizing our 
policies for scoring facility performance on the Clinical Depression 
Screening and Follow-up and Ultrafiltration Rate reporting measures, as 
proposed, for PY 2022 and future payment years. We are also finalizing 
our proposal to score the MedRec measure and will apply that scoring 
methodology to PY 2022 and future payment years.
d. Scoring the ICH CAHPS Clinical Measure
    In the CY 2015 ESRD PPS final rule, we finalized a policy for 
scoring performance on the ICH CAHPS clinical measure based on both 
achievement and improvement (79 FR 66209 through 66210). We proposed to 
use this scoring methodology for the PY 2022 ESRD QIP and subsequent 
years.
    We invited comments on this scoring proposal. However, we did not 
receive any public comments and are finalizing our policy to score 
facility performance on the ICH CAHPS reporting measure as proposed.
5. Weighting the Measure Domains TPS for PY 2022
    For PY 2022, we proposed in the CY 2019 ESRD PPS proposed rule (83 
FR 34347) to continue use of the domain weights proposed for PY 2021, 
and to update the individual measure weights in the Care Coordination 
Domain and Safety Domain to reflect the introduction of one new 
proposed measure in each of those domains. We proposed to assign the 
proposed PPPW measure to the Care Coordination Domain, with a weight of 
4 percent of the TPS. To accommodate the addition of the PPPW measure 
to the Care Coordination Domain without having to adjust the domain's 
overall weight, we proposed to reduce the weight of two continuing 
measures in the Care Coordination Domain as follows: The SRR measure 
from 14 to 12 percent and the SHR measure from 14 to 12 percent. We 
proposed to assign the proposed MedRec measure to the Safety Domain, 
with a weight of 4 percent of the TPS (see Table 21). To accommodate 
the addition of the new MedRec measure to the Safety Domain without 
having to adjust the domain's overall weight, we proposed to reduce the 
weight of two continuing measures in the Safety Domain as follows: The 
NHSN BSI clinical measure from 9 to 8 percent and the NHSN Dialysis 
Event measure from 6 to 3 percent. To assign these proposed measure 
weights, we used the same rationale as proposed for PY 2021.

[[Page 57012]]



                    Table 21--Proposed Revisions to Measure Weights for the PY 2022 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                                                                               Measure weight as
                                                  Measure weight within the domain  (proposed    percent of TPS
      Measures/measure topics by subdomain                       for PY 2022)                   (proposed for PY
                                                                                                     2022)
----------------------------------------------------------------------------------------------------------------
                                        CARE COORDINATION MEASURE DOMAIN
----------------------------------------------------------------------------------------------------------------
SRR measure....................................  40.00%......................................            12.00%.
SHR measure....................................  40.00%......................................            12.00%.
PPPW measure...................................  13.33%......................................             4.00%.
Clinical Depression and Follow-Up reporting      6.67%.......................................             2.00%.
 measure.
                                                ----------------------------------------------------------------
    Total: Care Coordination Measure Domain....  100% of Care Coordination Measure Domain....                30%
----------------------------------------------------------------------------------------------------------------
                                              SAFETY MEASURE DOMAIN
----------------------------------------------------------------------------------------------------------------
MedRec measure.................................  26.67%......................................             4.00%.
NHSN BSI clinical measure......................  53.33%......................................             8.00%.
NHSN Dialysis Event reporting measure..........  20.00%......................................             3.00%.
                                                ----------------------------------------------------------------
    Total: Safety Measure Domain...............  100% of Safety Measure Domain...............                15%
----------------------------------------------------------------------------------------------------------------

    In the CY 2019 ESRD PPS proposed rule (83 FR 34347), we proposed 
that to be eligible to receive a TPS, a facility must be eligible to be 
scored on at least one measure in two of the four measure domains. We 
also stated that if that proposal is finalized, we would apply it to PY 
2022 and subsequent payment years.
    We invited comments on these proposals.
    The comments and our responses to the comments on our weighting 
proposals are set forth below.
    Comment: A commenter was concerned that we had not fully considered 
the reporting burden associated with each quality measure when 
reweighting for PY 2022, specifically with respect to the NHSN Dialysis 
Event Reporting measure. The commenter stated that dialysis facilities 
undertake significant effort to report data for that measure, and that 
its importance to care quality measurement means that its weight should 
not be reduced as proposed. The commenter requested that we reconsider 
lowering the Dialysis Event Reporting measure's weight.
    Response: We disagree with the commenter's concern that the NHSN 
Dialysis Event reporting measure's proposed PY 2022 weight is too low. 
The measure's weight reflects the Meaningful Measures priorities and 
our preferred emphasis on weighting measures that directly impact 
clinical outcomes more heavily than other measures.
    Final Rule Action: After considering the public comments received, 
we are finalizing our domain and measure weighting policy for PY 2022 
as reflected in Table 22. These measure weighting changes are 
consistent with those finalized for PY 2021 (and thus incorporate the 
commenters' feedback on the PY 2021 domain weighting) (see Table 17) 
and accommodate the new measures that we are finalizing for PY 2022, 
which we are placing in the Care Coordination Domain (PPPW measure) and 
the Safety Domain (MedRec measure).

  Table 22--Finalized Measure Domain Weighting for the PY 2022 ESRD QIP
------------------------------------------------------------------------
                                                       Measure weight as
                                                         percent of TPS
         Measures/measure topics by subdomain          (finalized for PY
                                                             2022)
------------------------------------------------------------------------
               PATIENT & FAMILY ENGAGEMENT MEASURE DOMAIN
------------------------------------------------------------------------
ICH CAHPS measure....................................              15.00
                                                      ------------------
                                                                   15.00
------------------------------------------------------------------------
                    CARE COORDINATION MEASURE DOMAIN
------------------------------------------------------------------------
SRR measure..........................................              12.00
SHR measure..........................................              12.00
PPPW measure.........................................               4.00
Clinical Depression and Follow-Up reporting measure..               2.00
                                                      ------------------
    Total: Care Coordination Measure Domain..........                 30
------------------------------------------------------------------------
                      CLINICAL CARE MEASURE DOMAIN
------------------------------------------------------------------------
Kt/V Dialysis Adequacy Comprehensive measure.........               9.00
Vascular Access Type measure topic *.................              12.00

[[Page 57013]]

 
Hypercalcemia measure................................               3.00
STrR measure.........................................              10.00
Ultrafiltration Rate reporting measure...............               6.00
                                                      ------------------
                                                                      40
------------------------------------------------------------------------
                          SAFETY MEASURE DOMAIN
------------------------------------------------------------------------
MedRec measure.......................................               4.00
NHSN BSI clinical measure............................               8.00
NHSN Dialysis Event reporting measure................               3.00
                                                      ------------------
    Total: Safety Measure Domain.....................                 15
------------------------------------------------------------------------

6. Eligibility Requirements for the PY 2022 ESRD QIP and Subsequent 
Payment Years
    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 (77 FR 67510 through 67512). In the CY 
2019 ESRD PPS proposed rule (83 FR 34347), we proposed to continue use 
of these minimum data policies for the PY 2022 ESRD QIP measure set and 
in subsequent years. We also proposed to use these same minimum data 
policies for the proposed PPPW measure and proposed MedRec measure for 
the PY 2022 ESRD QIP and subsequent years.
    We invited comment on these eligibility proposals.
    The comments and our responses to the comments on our proposal are 
set forth below.
    Comment: A commenter stated that there is a lack of consistency in 
the minimum data requirements and a lack of clear and empirical 
rationale for the small facility adjuster. The commenter suggested that 
CMS adjust measures to yield a result with a reliability statistic of 
at least 0.70, which the commenter believed is consistent with how NQF 
assesses its evaluation of measures. The commenter stated that this 
change would prevent small facilities from receiving scores with random 
variability.
    Response: We thank the commenter for this feedback. We would like 
to clarify that under our current policy, we will use a small facility 
adjuster threshold of 11 through 25 eligible patients for the PPPW 
measure. We would also like to clarify that NQF does not employ a 
specific standard for a quality measure's reliability statistic. We 
have adopted minimum data requirements and the small facility adjuster 
to accommodate the different types of quality measures that we have 
adopted in the ESRD QIP and the different types of data collected for 
them. We have concluded that different minimum data thresholds are 
appropriate. We further believe that the small facility adjuster 
appropriately ensures that small facilities do not receive measure 
scores with random variability. However, we will continue to examine 
this issue.
    Final Rule Action: After considering public comments received, we 
are finalizing our eligibility policies, as proposed. Table 23 provides 
a summary of these eligibility policies for the PY 2022 ESRD QIP 
measure set and future years.

                     Table 23--Eligibility Requirements for the PY 2022 ESRD QIP Measure Set
----------------------------------------------------------------------------------------------------------------
                                    Minimum data
           Measure                  requirements        CCN open date            Small facility adjuster
----------------------------------------------------------------------------------------------------------------
Dialysis Adequacy (Clinical).  11 qualifying          N/A.............  11-25 qualifying patients.
                                patients.
Vascular Access Type: Long-    11 qualifying          N/A.............  11-25 qualifying patients.
 term Catheter Rate             patients.
 (Clinical).
Vascular Access Type:          11 qualifying          N/A.............  11-25 qualifying patients.
 Standardized Fistula Rate      patients.
 (Clinical).
Hypercalcemia (Clinical).....  11 qualifying          N/A.............  11-25 qualifying patients.
                                patients.
NHSN Bloodstream Infection     11 qualifying          Before October    11-25 qualifying patients.
 (Clinical).                    patients.              1, 2019.
NHSN Dialysis Event            11 qualifying          Before October    11-25 qualifying patients.
 (Reporting).                   patients.              1, 2019.
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     N/A.............  5-14 patient-years at risk.
                                risk.
ICH CAHPS (Clinical).........  Facilities with 30 or  Before October    N/A.
                                more survey-eligible   1, 2019.
                                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.

[[Page 57014]]

 
Depression Screening and       11 qualifying          Before April 1,   N/A.
 Follow-Up (Reporting).         patients.              2020.
Ultrafiltration Rate           11 qualifying          Before April 1,   N/A.
 (Reporting).                   patients.              2020.
Medication Reconciliation      In-center patients     Before October    N/A.
 (Reporting).                   who receive 7 or       1, 2019.
                                more hemodialysis
                                treatments in the
                                facility during the
                                reporting month.
Percentage of Prevalent        11 qualifying          N/A.............  11-25 qualifying patients.
 Patients Waitlisted            patients.
 (Clinical).
----------------------------------------------------------------------------------------------------------------

7. Payment Reductions for the PY 2022 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 across facilities, such that facilities 
achieving the lowest TPSs receive the largest payment reductions. For 
additional information on payment reduction policies, we refer readers 
to the CY 2018 ESRD PPS final rule (82 FR 50787 through 50788).
    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. In the CY 2020 ESRD PPS proposed 
rule, we will propose the minimum TPS based on CY 2018 data.

D. Requirements Beginning with the PY 2024 ESRD QIP

1. Standardized First Kidney Transplant Waitlist Ratio for Incident 
Dialysis Patients Clinical Measure
    In the CY 2019 ESRD PPS proposed rule, we proposed to add one new 
transplant measure to the ESRD QIP measure set beginning with PY 2024: 
Standardized First Kidney Transplant Waitlist Ratio for Incident 
Dialysis Patients (SWR). The proposed new SWR measure would align the 
ESRD QIP more closely with the Meaningful Measures Initiative priority 
area of increased focus on effective communication and coordination. 
The SWR Measure assesses the number of patients who are placed on the 
transplant waitlist or receive a living donor kidney within 1 year of 
the date when dialysis is initiated. We stated that we believe this 
measure would encourage facilities to more rapidly evaluate patients 
for transplant and coordinate the waitlisting of those patients.\21\ 
Because the proposed SWR measure is limited to patients in their first 
year of dialysis, it is more limited in scope than the proposed PPPW 
measure, which includes patients who have been on dialysis for longer 
than 1 year. We proposed to introduce the SWR measure for PY 2024 
rather than PY 2022 because the proposed SWR measure is calculated 
using 3 years of data.
---------------------------------------------------------------------------

    \21\ Meier-Kriesche, Herwig-Ulf, and Bruce Kaplan. ``Waiting 
time on dialysis as the strongest modifiable risk factor for renal 
transplant outcomes: A Paired Donor Kidney Analysis1.'' 
Transplantation 74.10 (2002): 1377-1381; Meier-Kriesche, H. U., 
Port, F. K., Ojo, A. O., Rudich, S. M., Hanson, J. A., Cibrik, D. 
M., Leichtman, A.B. & Kaplan, B. (2000). Effect of waiting time on 
renal transplant outcome. Kidney international, 58(3), 1311-1317.
---------------------------------------------------------------------------

Data Sources
    The SWR Measure is calculated using administrative claims and 
electronic clinical data. CROWNWeb is the primary source used to 
attribute patients to dialysis facilities and dialysis claims are used 
as an additional source. Information regarding onset of ESRD, the first 
ESRD treatment date, death, and transplant is obtained from CROWNWeb 
(including the Medical Evidence Form CMS-2728 and the Death 
Notification Form CMS-2746) and Medicare claims, as well as the Organ 
Procurement and Transplant Network.
Outcome
    The SWR Measure tracks the number of incident patients attributed 
to the dialysis facility under the age of 75 listed on the kidney or 
kidney-pancreas transplant waitlist or who received living donor 
transplants within the first year of initiating dialysis. Similar to 
the PPPW measure, the SWR measure emphasizes shared accountability 
between dialysis facilities and transplant centers.
Cohort
    The SWR measure includes patients under the age of 75 and 
attributed to the dialysis facility using CROWNWeb data and Medicare 
claims who are listed on the kidney or kidney-pancreas transplant 
waitlist or who received living donor transplants within the first year 
of initiating dialysis. Patients are attributed to the dialysis 
facility listed on the Medical Evidence Form CMS-2728.
Inclusion and Exclusion Criteria
    The SWR measure excludes patients at the facility who were 75 years 
of age or older at initiation of dialysis and patients at the facility 
who were listed on the kidney or kidney-pancreas transplant waitlist 
prior to the start of dialysis. Additionally, patients who are admitted 
to a SNF or hospice at the time of initiation of dialysis are excluded.
Risk Adjustment
    The SWR measure is adjusted for incident comorbidities and age. 
Incident comorbidities were selected for adjustment into the SWR model 
based on demonstration of a higher associated mortality (hazard ratio 
above 1.0) and statistical significance (p-value in first year 
mortality model). More details about the risk adjustment model can be 
found in the SWR Methodology Report (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html).
2017 Measures Application Partnership Review
    We submitted the SWR measure to the Measures Application 
Partnership in 2017 for consideration as part of the pre-rulemaking 
process.
    In its report (available on its website at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972), the Measures Application 
Partnership acknowledged that the SWR measure addresses an important 
quality gap for dialysis facilities and discussed a number of factors 
that it believed should be balanced when implementing the measure. The 
Measures Application Partnership reiterated the critical need

[[Page 57015]]

to help patients receive kidney transplants to improve their quality of 
life and reduce their risk of mortality. The Measures Application 
Partnership also noted there are disparities in the receipt of kidney 
transplants and there is a need to incentivize dialysis facilities to 
educate patients about waitlist processes and requirements. The 
Measures Application Partnership also acknowledged concerns and public 
comment about the locus of control of the measure, where dialysis 
facilities may not be able to as adequately influence a patient's 
suitability to be waitlisted as well as the transplant center. The 
Measures Application Partnership also noted the need to ensure the 
measure is appropriately risk-adjusted and recommended the exploration 
of adjustment for social risk factors and proper risk model 
performance. The Measures Application Partnership ultimately 
conditionally supported the measure with the condition that it is 
submitted for NQF review and endorsement. Specifically, the Measures 
Application Partnership recommended that this measure be reviewed by 
the NQF Scientific Methods Panel as well the Renal Standing Committee. 
The Measures Application Partnership recommended the endorsement 
process examine the validity of the measure, particularly the risk 
adjustment model and if it appropriately accounts for social risk. 
Finally, the Measures Application Partnership noted the need for the 
Disparities Standing Committee to provide guidance on potential health 
equity concerns. Our understanding is that the NQF endorsement process 
covers all of the Measure Application Partnership's conditions, and we 
have submitted the measure for endorsement.
    For additional information on the Measures Application 
Partnership's evaluation of measures for the ESRD QIP, we refer readers 
to Measures Application Partnership's website at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972.
    Based on the benefits of kidney transplantation over dialysis as a 
modality for renal replacement therapy for patients with ESRD, and 
taking into account the Measures Application Partnership's conditional 
endorsement and our submission of the measure for NQF endorsement, we 
propose to adopt the SWR measure beginning with the PY 2024 ESRD QIP. 
We also proposed to place this measure in the Transplant Waitlist 
measure topic in the Care Coordination Domain, along with the PPPW 
measure proposed in section IV.C.1.a of this final rule, and to score 
the two measures accordingly as a measure topic. We note also that 
there are currently no NQF-endorsed transplant measures that we could 
have considered, and we believe that we should adopt this measure under 
section 1881(h)(2)(B)(ii) of the Act due to its clinical significance 
for the ESRD patient population.
    We invited comments on this proposal. Because many public 
commenters addressed the PPPW and SWR measures together, we addressed 
some comments on the SWR measure in section IV.C.1.a of this final 
rule.
    Additional comments and our responses to the comments on our 
proposal to add the SWR measure to the ESRD QIP measures set are set 
forth below.
    Comment: Some commenters opposed our proposal to adopt the SWR 
measure, stating that the measure is limited in its action ability by 
the dialysis center because the waitlist decision is made by the 
transplant center, not the dialysis facility. One commenter noted that 
incident dialysis patients not listed for transplants may be more 
complex or have comorbidities that make them ineligible for the 
waitlist during the first year. The commenter also stated that the 
measure could create a perceived incentive to start advanced chronic 
kidney disease (CKD) patients on dialysis earlier because it would not 
recognize dialysis units' role in pre-education and care coordination 
for patients who have received a pre-emptive transplant. One commenter 
noted that disparities remain an issue in the pediatric population, and 
that facilities' ability to waitlist or coordinate transplant waitlists 
is limited. The commenter reiterated its view that a patient-centered 
educational effort would be more appropriate for use in the QIP than 
the SWR measure. The commenter also recommended us to revisit and 
expand the measure's exclusion criteria if it decides to finalize the 
measure.
    Response: As we noted with respect to the PPPW measure above, 
waitlisting for transplantation is the culmination of a variety of 
preceding activities. These include (but are not limited to) education 
of patients about the transplant option, referral of patients to a 
transplant center for evaluation, completion of the evaluation process 
and optimizing the health of the patient while on dialysis. These 
efforts depend heavily and, in many cases, primarily, on dialysis 
facilities. Although some aspects of the waitlisting process may not 
entirely depend on facilities, such as the actual waitlisting decision 
by transplant centers, or a patient's choice about the transplantation 
option, these can also be nevertheless influenced by the dialysis 
facility. The waitlisting measures were therefore proposed in the 
spirit of shared accountability, with the recognition that success 
requires substantial effort by dialysis facilities. In this respect, 
the measures represent an explicit acknowledgment of the tremendous 
contribution dialysis facilities can be and are already making towards 
access to transplantation, to the benefit of the patients under their 
care.
    With respect to the commenter's concern about potentially creating 
an incentive for nephrologists to start advanced ESRD patients on 
dialysis earlier, we believe that dialysis facilities have a 
responsibility to ensure that they furnish proper care to their 
patients.
    Comment: A commenter opposed our proposal to adopt the SWR measure, 
stating that its adoption seems to conflict with stricter outcome 
guidelines that we have adopted for transplant centers. The commenter 
also suggested that it would be helpful if we developed CROWNWeb 
software changes proactively for new quality measures, as the SWR 
measure could require significant resources and time to report.
    Response: We will develop CROWNWeb software changes as proactively 
as is feasible for new measures to ensure that dialysis facilities are 
able to understand those changes and report their quality measure data 
as promptly and effectively as possible.
    However, as we discuss further below, we are not finalizing the SWR 
measure at this time, so such changes will not be necessary. We 
disagree that the SWR measure's adoption would conflict with guidelines 
that we have adopted for transplant centers, however, as the goal of 
the measure is to ensure that patients are appropriately waitlisted for 
transplants and not that they must receive transplants. While we 
appreciate that transplant centers must focus on clinical outcomes, the 
purpose of adopting a measure of transplant waitlisting for dialysis 
facilities is not to encourage unnecessary transplants but to ensure 
that patients can receive the benefit of that treatment modality when 
appropriate.
    Comment: A commenter expressed concern that it is unable to discern 
how widely reliability varies across the spectrum of facility sizes 
because CMS has not provided stratification of reliability scores by 
facility size for the PPPW measure and the SWR measure. The commenter 
expressed concern that the reliability for small facilities may be 
significantly lower than the overall inter-unit reliabilities (IURs), 
as the

[[Page 57016]]

commenter explained is the case with other CMS standardized ratio 
measures. The commenter expressed special concern for the SWR, which 
has an IUR of 0.6 and is considered moderately reliable by statistical 
convention. The commenter suggested that CMS demonstrate reliability 
for all facilities by providing data by facility size.
    Response: We acknowledge the commenter's concern about smaller 
facilities. For each measure respectively, facilities with fewer than 
two expected events (SWR) or 11 eligible patients (PPPW) are not 
included in the respective measure calculations.
    In regards to the specific comment about IUR, the IUR for these 
measures is ``moderate'' and similar to or higher than many other 
population-based measures used in public reporting and VBP programs. 
IUR is a general expression of the distribution of within and between 
facility variance in the population of facilities. The formula for IUR 
includes a term for patient number, so IUR will always be lower for 
smaller facilities and higher for larger facilities regardless of the 
measure. The IUR for all facilities is what the NQF uses to evaluate 
the measure, so we believe including values stratified by different 
facility size would be misleading for the public. For public reporting, 
our method for identifying outlier facilities utilizes the empiric null 
approach, which adjusts for flagging rates by facility size; that is, 
smaller facilities that have more extreme outcomes compared to other 
smaller facilities will be flagged.
    Comment: A commenter expressed a preference for normalized rates or 
year-over-year improvement in rates for the SWR measure instead of a 
standardized ratio, suggesting that comprehension, transparency, and 
utility to stakeholders is superior with a scientifically valid rate 
methodology.
    Response: Placing a facility's risk adjusted rate in context 
requires reference to a standard rate that applies to the population as 
a whole. The ratio estimate that we proposed is the ratio of the 
facility adjusted rate to the standard rate. The ratio is also a 
scientifically valid approach and, in our experience, most people find 
the ratio to be understandable and to sufficiently convey the rates. 
Most regression analyses (of binary or count responses) in the clinical 
and epidemiologic literature are based on ratios. Ratio measures are 
well accepted in the published literature. Additionally, the risk-
adjustment approach currently used for the STrR, SHR, SRR, and SWR 
measures are based on indirect standardization which also forms the 
basis of many measures implemented in the ESRD QIP and other CMS 
quality reporting and VBP programs, and we believe that this approach 
leads naturally to a standardized ratio. This ratio compares the rate 
for this facility with the national rate, having adjusted for the 
patient mix and as such is relatively straightforward.
    Comment: A commenter raised concerns about the validity of CMS Form 
2728--the source for 11 of the SWR's incident comorbidities--and urged 
CMS to work with the community to assess this issue in further detail.
    Response: We disagree with the commenter's concerns about the 
validity of CMS form 2728. Comorbidities reported on this form have 
been found to be useful predictors of mortality, suggesting that the 
most salient comorbidities are reported.22 The comorbidities from the 
CMS Form 2728 included in the SWR model were chosen based on their 
association with first year mortality. Additionally, we believe that it 
is reasonable to expect dialysis facilities to have an awareness of 
patient comorbidities at incidence. When dialysis facilities receive an 
intake call, they receive an extract of the patient's chart, which 
includes current conditions/comorbidities. Facilities should be 
reviewing that chart before accepting a patient. Dialysis facilities 
also attest to the accuracy of the information reported on the 2728 
prior to submitting the form to CMS.
    Comment: A commenter requested information as to why the proposed 
SWR measure does not include an exclusion for patients with a previous 
transplant. The commenter noted that during the NQF Renal Standing 
Committee's consideration of the SWR measure, CMS said that this 
exclusion would be present in the measure's specifications.
    Response: We thank the commenter for their feedback. The following 
exclusion is incorporated into the denominator definition for the PPPW 
and SWR measures:
     Preemptive patients: patients at the facility who had the 
first transplantation prior to the start of ESRD treatment; or were 
listed on the kidney or kidney-pancreas transplant waitlist prior to 
the start of dialysis.
    We will modify the technical specifications to make sure that the 
exclusion is fully and clearly stated in the posted materials to 
prevent any misunderstanding.
    Comment: A commenter raised concerns about the exclusion of 
patients waitlisted prior to the start of dialysis, noting that this 
may be a disincentive to those nephrologists actively attempting to 
enable preemptive transplantation as a viable alternative to dialysis. 
The commenter recommended that CMS remove that exclusion if the SWR 
measure is included in the final rule.
    Response: We thank the commenter for this concern. However, as 
noted above, we are not finalizing the SWR measure at this time. We 
will consider addressing this exclusion if we propose to adopt the SWR 
measure in the future.
    Final Rule Action: After considering the public comments that we 
have received, we are not finalizing our proposal to add the SWR 
measure to the Program.
2. Performance Period for the SWR Measure
    Because the SWR measure is calculated using 36 months of data, we 
proposed to establish a 36-month performance period for the proposed 
SWR measure. With respect to PY 2024 ESRD QIP, this period would be CY 
2019 through 2021. We continue to believe that a 36-month performance 
period for the SWR measure would enable us to calculate sufficiently 
reliable measure data for the ESRD QIP.
    Final Rule Action: We are not finalizing the SWR measure, 
therefore, we are not finalizing the performance period for the SWR 
measure.
3. Performance Standards, Achievement Thresholds, and Benchmarks for 
the SWR Measure in the PY 2024 ESRD QIP
    We stated that, if finalized, we would score the proposed SWR 
measure using a 36-month performance period for purposes of achievement 
and a corresponding 36-month baseline period for purposes of 
improvement. For the PY 2024 ESRD QIP, these periods would be CY 2017 
through 2019 for achievement and CY 2018 through 2020 for improvement.
    We also stated that at the time of the CY 2019 ESRD PPS proposed 
rule's publication, we did not have the necessary data to assign 
numerical values to the performance standards for the SWR measure, 
because we did not yet have data from CY 2017 through CY 2020.
    We welcomed public comments on the performance standards for the 
SWR measure. However, we did not receive any public comments specific 
to the SWR measure's performance standards.
    Final Rule Action: As discussed above, we are not finalizing the 
SWR measure, and we are therefore not finalizing the performance 
standards for the SWR measure.

[[Page 57017]]

V. Changes to the 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 competitive bidding programs in 
competitive bidding areas (CBAs) throughout the United States (U.S.) 
for contract award purposes for the furnishing of certain competitively 
priced DMEPOS items and services. The competitive bidding programs of 
the Medicare Durable Medical Equipment Prosthetics Orthotics and 
Supplies (DMEPOS) Competitive Bidding Program (CBP), mandated by 
section 1847(a) of the Act, are collectively referred to as ``DMEPOS 
CBP''. A final rule published on April 10, 2007 in the Federal 
Register, titled ``Competitive Acquisition for Certain DMEPOS and Other 
Issues'', (72 FR 17992), referred to as ``2007 DMEPOS final rule'', 
established competitive bidding programs for certain Medicare Part B 
covered items of DMEPOS throughout the U.S. The competitive bidding 
programs, which were phased in over several years, utilize bids 
submitted by DMEPOS suppliers to establish applicable payment amounts 
under Medicare Part B for certain DMEPOS items and services. Section 
1847(a)(2) of the Act describes the items and services subject to the 
DMEPOS CBP:
     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.
     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 DMEPOS CBP was modeled after successful demonstration programs 
from the late 1990s and early 2000s, discussed in the proposed rule 
published on May 1, 2006 in the Federal Register, titled ``Competitive 
Acquisition for Certain Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) and Other Issues'' (71 FR 25654) 
referred to as ``2006 DMEPOS proposed rule''. We received substantial 
advice in the development of the DMEPOS CBP from the Program Advisory 
and Oversight Committee (PAOC), which was mandated through section 
1847(c) of the Act, as amended by section 302(b)(1) of the MMA, to 
establish a committee to provide advice to the Secretary with respect 
to the following functions:
     The implementation of the Medicare DMEPOS CBP.
     The establishment of financial standards for entities 
seeking contracts under the Medicare DMEPOS CBP, taking into account 
the needs of small providers.
     The establishment of requirements for collection of data 
for the efficient management of the Medicare DMEPOS CBP.
     The development of proposals for efficient interaction 
among manufacturers, providers of services, suppliers (as defined in 
section 1861(d) of the Act), and individuals.
     The establishment of quality standards for DMEPOS 
suppliers under section 1834(a)(20) of the Act.
    As authorized under section 1847(c)(2) of the Act, the PAOC members 
were appointed by the Secretary of the Department of Health and Human 
Services (the Secretary) and represented a broad mix of relevant 
industry, consumer, and government parties. The representatives had 
expertise in a variety of subject matter areas, including DMEPOS, 
competitive bidding methodologies and processes, and rural and urban 
marketplace dynamics.
    In the DMEPOS CBP, suppliers bid for contracts for furnishing 
multiple items and services, identified by Healthcare Common Procedure 
Coding System (HCPCS) codes, under several different product 
categories. Section 1847(a)(1)(B) and (D) of the Act mandated the phase 
in of the DMEPOS CBP in nine of the largest MSAs (Round 1), followed by 
91 additional large MSAs (Round 2), and finally in additional areas, 
which do not necessarily need to be tied to MSAs. Round 1 and Round 2 
CBAs that included more than one state have been subdivided into state-
specific CBAs. More information on the different rounds of competitions 
and general information regarding the CBP is available on the following 
website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSCompetitiveBid/index.html. The CBP is currently operating in 130 
CBAs throughout the nation, and those CBAs contain approximately half 
of the enrolled Medicare Part B population. The other half of the 
Medicare Part B population resides in areas where the CBP has not yet 
been phased in, including approximately 275 MSAs. In addition, CMS 
phased in a national mail order program for diabetic testing supplies 
in 2013. In the Round 1 2017 and Round 2 Recompete competitions, the 
product categories currently include: Enteral Nutrients, Equipment and 
Supplies; General Home Equipment and Related Supplies and Accessories 
(including hospital beds, pressure reducing support surfaces, commode 
chairs, patient lifts, and seat lifts); Nebulizers and Related 
Supplies; Negative Pressure Wound Therapy (NPWT) Pumps and Related 
Supplies and Accessories; Respiratory Equipment and Related Supplies 
and Accessories (including oxygen and oxygen equipment, continuous 
positive pressure airway devices, and respiratory assist devices); 
Standard Mobility Equipment and Related Accessories (including walkers, 
standard manual wheelchairs, and standard power wheelchairs); and 
Transcutaneous Electrical Nerve Stimulation (TENS) Devices and 
Supplies. Since there are multiple items in each product category, a 
``composite'' bid is calculated for each supplier to determine which 
supplier's bids would result in the greatest savings to Medicare for 
the product category. A supplier's composite bid for a product category 
currently is calculated by multiplying a supplier's bid for each item 
in a product category by the item's weight and taking the sum of these 
numbers across items. This calculation is reflected in the current 
definition of composite bid under existing Sec.  414.402, which we are 
further modifying in this final rule. The weight of an item is based on 
the annual utilization of the individual item compared to other items 
within that product category based on recent Medicare national claims 
data. Item weights are used to reflect the relative market importance 
of each item in the product category. Item weights ensure that the 
composite bid is directly comparable to the costs that Medicare would 
pay if it bought the expected bundle of items in the product category 
from the supplier.
    Currently, each supplier submits a bid amount for each item in the 
product category, and multiple contracts must be awarded for each 
product category in each CBA. Section 1847(b)(5) of the Act mandates a 
single payment amount (SPA) for each item based on bids submitted and 
accepted from suppliers, so various options for calculating the SPA 
were addressed in the 2006 DMEPOS proposed rule (71 FR 25679). The 
methods of using the minimum winning bid amount for each item, the 
maximum winning bid amount for each item, the median of the winning bid 
amounts for each item, and an average

[[Page 57018]]

adjusted price based on the method used during the demonstrations were 
discussed during this rulemaking. The SPA calculation method using the 
median of the winning bids was finalized in the 2007 DMEPOS final rule 
(72 FR 18044) based on the rationale that the median of winning bids 
represents the bid amounts of the winning suppliers as a whole, whereas 
the minimum and maximum bids did not; it is a simpler method than the 
average adjusted price method; and it is consistent with the 
longstanding Medicare payment rules for DMEPOS that established allowed 
payment amounts based on average reasonable charges rather than minimum 
or maximum charges.
    To implement section 522(a) of the Medicare Access and Children's 
Health Insurance Program Reauthorization Act of 2015 (Pub. L. 114-10) 
(MACRA), we published a final rule on November 4, 2016 in the Federal 
Register, 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 77834), referred to as ``2016 ESRD PPS 
final rule''.
    Section 1847(a)(1)(G) of the Act, as added by section 522(a) of 
MACRA, requires bidding entities to secure a bid surety bond by the 
deadline for bid submission. Section 1847(a)(1)(G) of the Act provides 
that, with respect to rounds of competitions under section 1847 of the 
Act 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 paragraph (H) of 
section 1847(a)(1) of the Act, 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). We believe that section 522(a) of MACRA was 
drafted under the assumption that the next round of competitive bidding 
would have been implemented at some point between January 1, 2017 and 
January 1, 2019. We have interpreted section 522(a) of MACRA as 
applying to the next round of competitive bidding even though the next 
round of competition will begin after the time period specified in the 
statute. Section 1847(a)(1)(H)(i) of the Act 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 SPAs 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 the 
Secretary will collect on the bid surety bond(s). In instances where a 
bidding entity does not meet the bid bond 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. As aforementioned, this requirement was implemented as part 
of the CY 2016 ESRD PPS final rule (81 FR 77834), so Sec.  414.412(h) 
now requires that bidding entities obtain bid surety bonds, and if an 
entity is offered a contract for any product category for a 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 SPAs for the product category/CBA combination, and 
the entity does not accept the contract offered, the 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 
bonding company. Further detailed conditions of the surety bonds were 
also clarified in that final rule (81 FR 77931). The bid bond 
requirement was mentioned in the background section of the proposed 
rule because bid bond forfeiture is tied to composite bids under the 
DMEPOS CBP, and this rule finalizes a change to how composite bids are 
defined and implements lead item pricing under the DMEPOS CBP (83 FR 
34350).
    Section 1847(b)(5) of the Act provides that Medicare payment for 
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. The DMEPOS CBP also 
includes provisions to ensure beneficiary access to quality DMEPOS 
items and services. Section 1847(b)(2)(A) 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, that is, more than one contract supplier is available for 
the product category in the area.
    Section 1847(b)(6)(A) of the Act provides that payment will not be 
made under Medicare Part B for items and services furnished under the 
CBP unless the supplier has submitted a bid to furnish those items and 
has been awarded a contract. Except in limited circumstances, 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. In past rounds of competition, CMS has allowed a 60-day 
bidding window for suppliers to prepare and submit their bids. Our 
existing regulation at Sec.  414.412, which we are modifying in this 
final rule, specifies the rules for submission of bids under the DMEPOS 
CBP. Each bid submission is evaluated and contracts are awarded to 
qualified suppliers in accordance with the requirements and conditions 
for awarding contracts under section 1847(b)(2) of the Act and Sec.  
414.414, which we are also modifying in this final rule. Under the 
Round 2 and Round 1 Recompete competitions, 92 percent of suppliers 
accepted contract offers at the SPAs set through the competitions. In 
addition, CMS reviewed all contract suppliers based on financial 
standards when evaluating their bids. This process includes review of 
tax records, credit reports, and other financial data, which leads to 
the calculation of a score, similar to processes used by lenders when 
evaluating the viability of a company. All contract suppliers met the 
financial standards established for the program. Before awarding 
contracts, each bid is screened and evaluated to ensure that it is bona 
fide so that CMS can verify that the supplier can provide the product 
to the beneficiary for the bid amount, and those that fail are excluded 
from the competition. Approximately 94 percent of bids screened as part 
of the Round 2

[[Page 57019]]

and Round 1 Recompete competitions were determined to be bona fide.
    Section 1847(b)(6)(D) of the Act requires that appropriate steps be 
taken to ensure that small suppliers of items and services have an 
opportunity to be considered for participation in the DMEPOS CBP. We 
have established a number of provisions to ensure that small suppliers 
are given an opportunity to participate in the DMEPOS CBP. For example, 
under Sec.  414.414(g)(1)(i), we have established a 30 percent target 
for small supplier participation; thereby ensuring efforts are made to 
award at least 30 percent of contracts to small suppliers. Also, CMS 
worked in coordination with the Small Business Administration and based 
on advice from the PAOC to develop an appropriate definition of ``small 
supplier'' for this program. Under Sec.  414.402, a small supplier is 
one that generates gross revenues of $3.5 million or less in annual 
receipts, including Medicare and non-Medicare revenue. Under Sec.  
414.418, small suppliers may join together in ``networks'' in order to 
submit bids that meet the various program requirements. A majority of 
the bids used in establishing SPAs come from small suppliers with a 
history of furnishing items in the CBAs.

B. Current Method for Submitting Bids and Selecting Winners

    Currently, in the DMEPOS CBP, CMS awards contracts to suppliers for 
furnishing multiple items and services needed in a given CBA that fall 
under a product category (for example, respiratory equipment). The 
product categories are mostly large and include multiple items used for 
different purposes (for example, the respiratory equipment category 
includes oxygen equipment and positive pressure airway devices and 
multiple related accessories) based on past feedback from stakeholders 
to promote easy access for beneficiaries and referral agents to receive 
all items in a product category from one location, and to prevent 
instances where a supplier wins a contract for one product category but 
loses the competitions for several other product categories. Because 
multiple bids for individual items are submitted when competing to 
become a contract supplier for the product category of items and 
services as a whole, it is necessary to calculate a composite bid for 
each bidding supplier to determine the lowest bids for the category as 
a whole. In accordance with existing Sec.  414.402, a composite bid 
means the sum of a supplier's weighted bids for all items within a 
product category for purposes of allowing a comparison across bidding 
suppliers. Using a composite bid is a way to aggregate a supplier's 
bids for individual items within a product category into a single bid 
for the whole product category.
    In order to compute a composite bid, a weight must be applied to 
each item in the product category. In accordance with Sec.  414.402, 
item weight is a number assigned to an item based on its beneficiary 
utilization rate using national data when compared to other items in 
the same product category. Item weights are used to reflect the 
relative market importance of each item in the product category. Table 
26 depicts the calculation of the item weights for a supplier's bid. 
The expected volume for items A, B, and C are 5, 3, and 2 units, 
respectively, for a total volume of 10 units. The item weight for item 
A is 0.5 (5/10), the weight for item B is 0.3 (3/10), etc. The total 
item weight for the supplier's bid is 1.

                                             Table 26--Item Weights
----------------------------------------------------------------------------------------------------------------
                      Item                               A               B               C             Total
----------------------------------------------------------------------------------------------------------------
Units...........................................               5               3               2              10
Item Weight.....................................             0.5             0.3             0.2               1
----------------------------------------------------------------------------------------------------------------

    The composite bid for a supplier equals the item weight multiplied 
by the item bid summed across all items in the product category. For 
example, supplier 1 bid $1.00 for item A, $4.00 for item B and $1.00 
for item C. The composite bid for Supplier 1 = (0.5 * $1.00) + (0.3 * 
$4.00) + (0.2 * $1.00) = 1.90. Table 27 shows the expected cost of the 
bundle based on each supplier's bids. The expected costs are directly 
proportional to the composite bids; the factor of proportionality is 
equal to the total number of units (10) in the product category. The 
composite bid is used to determine the expected costs for all of the 
items in the product category based upon expected volume.

                                                          Table 27--Composite Bids by Supplier
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        Product category
                           Item                                    A                  B                  C            Composite bid       bid (cost of
                                                                                                                                            bundle)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units....................................................                  5                  3                  2  .................  .................
Item weight..............................................                0.5                0.3                0.2  .................  .................
Supplier 1 bid...........................................              $1.00              $4.00              $1.00              $1.90             $19.00
Supplier 2 bid...........................................               3.00               5.00               3.00               3.60              36.00
Supplier 3 bid...........................................               3.00               4.00               3.00               3.30              33.00
Supplier 4 bid...........................................               2.00               2.00               2.00               2.00              20.00
Supplier 5 bid...........................................               2.00               4.00               2.00               2.60              26.00
Supplier 6 bid...........................................               2.00               3.00               2.00               2.30              23.00
Supplier 7 bid...........................................               3.00               3.00               2.00               2.80              28.00
Supplier 8 bid...........................................               3.00               4.00               2.00               3.10              31.00
Supplier 9 bid...........................................               2.00               3.00               3.00               2.50              25.00
Supplier 10 bid..........................................               3.00               4.00               1.00               2.90              29.00
Supplier 11 bid..........................................               3.00               2.00               3.00               2.70              27.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    After computing composite bids for each supplier, a pivotal bid is 
established for each product category in each CBA. In accordance with 
Sec.  414.402, pivotal bid means the lowest composite bid based on bids 
submitted

[[Page 57020]]

by suppliers for a product category that includes a sufficient number 
of suppliers to meet beneficiary demand for items in that category. As 
explained in the 2007 DMEPOS final rule (72 FR 18039), demand for items 
and services is projected using Medicare claims data for allowed 
services during the previous 2 years, trended forward to the contract 
period. Table 28 shows the pivotal bid is the point where expected 
combined capacity of the bidders is sufficient to meet expected demands 
of beneficiaries for items in a product category. In Table 28, the 
projected demand is 1,800 units, therefore the composite bid for 
supplier 7 represents the pivotal bid, since the cumulative capacity of 
1,845 would exceed the projected demand of 1,800. In accordance with 
existing Sec.  414.414(e)(6), all suppliers and networks whose 
composite bids are less than or equal to the pivotal bid for the 
product category, and that meet the supplier eligibility requirements 
in Sec.  414.414(b) through (d) are selected as winning suppliers. 
Suppliers 1, 4, 6, 9, 5, 11 and 7 are selected as winning suppliers in 
the example below in Table 28. The composite bids for suppliers 10, 8, 
3, and 2 are above the pivotal bid, so these suppliers are not selected 
as winning suppliers for the product category and are eliminated from 
the competition.

   Table 28--Determining the Pivotal Bid for Product Category Point Where Beneficiary Demand (1,800) Is Met by
                                                Supplier Capacity
----------------------------------------------------------------------------------------------------------------
                                                        Supplier       Cumulative
          Supplier No. \1\            Composite bid     capacity        capacity                Result
----------------------------------------------------------------------------------------------------------------
1..................................           $1.90             250             250  Winning bid.
4..................................            2.00             300             550  Winning bid.
6..................................            2.30               0             550  Winning bid.
9..................................            2.50             300             850  Winning bid.
5..................................            2.60             360           1,210  Winning bid.
11.................................            2.70             275           1,485  Winning bid.
7..................................            2.80             360           1,845  Pivotal bid.
10.................................            2.90             200           2,045  Losing bid.
8..................................            3.10             300           2,345  Losing bid.
3..................................            3.30             200           2,545  Losing bid.
2..................................            3.60              25           2,570  Losing bid.
----------------------------------------------------------------------------------------------------------------
\1\ By ascending composite bid.

C. Current Method for Establishing SPAs

    For competitively bid items and services furnished in a CBA, the 
SPAs replace the Medicare allowed amounts established using the lower 
of the supplier's actual charge or the payment amount recognized under 
sections 1834(a)(2) through (7), 1834(h), and 1842(s) of the Act. We 
discussed various ways for determining the SPA for individual items 
under the DMEPOS CBP during the notice and comment rulemaking conducted 
in 2006 and 2007 (71 FR 25653 and 72 FR 17992, respectively), including 
using the minimum winning bid, using the maximum winning bid, using the 
median of winning bids, and using an average adjusted price methodology 
similar to the methodology used in competitive bidding demonstrations 
mandated by section 4319 of the Balanced Budget Act of 1997 (BBA) (Pub. 
L. 105-33). A detailed discussion of the various ways for determining 
the SPA for individual items under the DMEPOS CBP can be found in the 
2007 DMEPOS final rule (72 FR 17992, 18044 through 18047). Under 
existing Sec.  414.416, we finalized use of the median of winning bids 
for each item in each CBA to determine the SPA for each item in each 
CBA. The individual items within each product category are identified 
by the appropriate HCPCS codes. In cases where there is an even number 
of winning bids for an item, the SPA is equal to the average (mean) of 
the two bid prices in the middle of the array. Table 29 illustrates the 
current method.

                                Table 29--Median of the Winning Bids Methodology
----------------------------------------------------------------------------------------------------------------
                      Item                               A               B               C         Composite bid
----------------------------------------------------------------------------------------------------------------
Supplier 1 bid..................................           $1.00           $4.00           $1.00           $1.90
Supplier 4 bid..................................            2.00            2.00            2.00            2.00
Supplier 6 bid..................................            2.00            3.00            2.00            2.30
Supplier 9 bid (median A and B).................            2.00            3.00            3.00            2.50
Supplier 5 bid (median C).......................            2.00            4.00            2.00            2.60
Supplier 11 bid.................................            3.00            2.00            3.00            2.70
Supplier 7 bid (pivotal bid)....................            3.00            3.00            2.00            2.80
Median/SPA......................................            2.00            3.00            2.00
----------------------------------------------------------------------------------------------------------------

    For a more complete discussion of this methodology, see section V.C 
of the CY 2019 ESRD PPS DMEPOS proposed rule.

D. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on DMEPOS CBP

    In the CY 2019 ESRD PPS DMEPOS proposed rule, we proposed two 
reforms to simplify the DMEPOS CBP, eliminate the possibility for price 
inversions, and ensure the long term sustainability of the program. We 
proposed lead item pricing for all product categories under the DMEPOS 
CBP and calculation of SPAs using maximum winning bids for lead items. 
We proposed to amend Sec. Sec.  414.402, 414.412, 414.414, and

[[Page 57021]]

414.416 to add and revise certain existing definitions, and revise the 
methodology for the calculation of SPAs and the evaluation of bids 
under the CBP to reflect and establish a lead item pricing methodology.
    We received approximately 258 public comments on the proposed rules 
from manufacturers, suppliers, accrediting organizations, clinician 
organizations, Congress, government entities, hospital associations, 
beneficiary and industry representative groups, and other individual 
stakeholders. Several comments were outside the scope of this 
rulemaking.
    In this final rule, we provide a summary of the proposed 
provisions, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for DMEPOS CBP.
1. Lead Item Pricing for all Product Categories Under the DMEPOS CBP
    In the CY 2016 ESRD PPS final rule (81 FR 77945), we established 
alternative rules for submitting bids and determining SPAs for certain 
groupings of similar items with different features under the DMEPOS 
CBP. As discussed in that 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 price 
inversions from occurring under future competitions, we established an 
alternative ``lead item'' bidding method for submitting bids and 
determining single payment amounts for certain groupings of similar 
items (for example, walkers) with different features (wheels, folding, 
etc.) under the DMEPOS CBP. 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 total national allowed services (paid units of service) during 
a specified base period would be considered the lead item of the 
grouping. CMS established a 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).
    Under the CBP, in all rounds since 2011, we found price inversions 
for groupings of similar items within the following categories: 
Standard power wheelchairs, walkers, hospital beds, enteral infusion 
pumps, transcutaneous electrical nerve stimulation (TENS) devices, 
support surface mattresses and overlays and seat lift mechanisms. We 
consider the price of an item to be ``inverted'' when a more 
complicated item is cheaper than a simple version. For instance, when a 
walker without wheels costs more than a walker with wheels. The 
detailed method, examples, and responses to public comments regarding 
lead item bidding were explained in the CY 2016 ESRD PPS final rule (81 
FR 77945 through 77949).
    In the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34354 through 
34359), we proposed to establish a lead item pricing methodology for 
all items and all product categories under the DMEPOS CBP. We proposed 
that the methodology would apply to all items in the product category. 
We also proposed that the lead item would be identified based on total 
national allowed charges. We proposed that the lead item pricing 
methodology would replace the current bidding method, where bids are 
submitted for each item in the product category, for all items. Since 
the bid for the lead item would be used to establish the SPAs for both 
the lead item and all other items in the product category, we referred 
to this proposed policy as ``lead item pricing'' rather than ``lead 
item bidding.'' We proposed to implement lead item pricing and change 
the methodology for establishing SPAs under the CBP for a number of 
reasons which are discussed in more detail in the CY 2019 ESRD PPS 
DMEPOS proposed rule (83 FR 34349). We stated that we believed that 
lead item pricing would greatly reduce the complexity of the bidding 
process and address all price inversions we have already identified as 
well as potential future price inversions for other items. It would 
also reduce the burden on suppliers since they would no longer have to 
submit bids for numerous items in a product category. For some product 
categories, there are hundreds of items, and many suppliers submit bids 
for multiple product categories and in multiple CBAs. The more bids a 
supplier has to submit, the more time it takes to complete the bidding 
process and the greater the risk for keying errors, which have 
disqualified bidders in the past, reducing the level of competition and 
opportunity for savings under the program. Lead item pricing would also 
eliminate the need for item weights and calculation of composite bids 
based on item weights. This would greatly eliminate the burden for 
suppliers since they would no longer have to submit bids for each 
individual item in a product category.
    We refer readers to section V.D.2 of the CY 2019 ESRD PPS DMEPOS 
proposed rule for examples of how this pricing method would work.
    We proposed to revise the current definition for ``composite bid'' 
under Sec.  414.402 to mean ``the bid submitted by the supplier for the 
lead item in the product category.'' As discussed in section V.A of 
this final rule, section 1847(a)(1)(G) of the Act and our regulations 
require that bidding suppliers obtain bid surety bonds when 
participating in future competitions under the CBP. If the supplier is 
offered a contract for any product category for a CBA, and its 
composite bid for such product category and area is at or below the 
median composite bid rate for all bidding suppliers included in the 
calculation of the SPAs for the product category/CBA combination, the 
supplier must accept the contract offered or the supplier's bid surety 
bond for the applicable CBA will be forfeited. Because we proposed a 
change to the definition of composite bid (the composite bid would be 
defined as the supplier's bid for the lead item in the product 
category), we noted that the supplier's bid for the lead item would 
also be treated as the ``composite bid'' for the purpose of 
implementing the statutory and regulatory bid surety bond requirement 
(83 FR 34355). Under the lead item pricing method, suppliers would 
forfeit their bid surety bond for a product category in a CBA if their 
composite bid (their bid for the lead item) is at or below the median 
composite bid rate for all bidding suppliers included in the 
calculation of SPAs for the product category and CBA and they do not 
accept a contract offer for the product category and CBA. In other 
words, the median of the winning bids for the lead item in the product 
category would be calculated and used to implement the bid surety bond 
requirement at section 1847(a)(1)(H)(i) of the Act and Sec.  
414.412(h).
    Currently under existing Sec.  414.412(d)(2) the ``lead item'' in 
the product category is described as ``the code with the highest total 
nationwide allowed services for calendar year 2012,'' and ``total 
nationwide allowed services'' is defined in Sec.  414.402 as meaning 
the total number of services allowed for an item furnished in all 
states, territories, and DC where Medicare beneficiaries reside and can 
receive covered DMEPOS items and services. We proposed to delete the 
lead item bidding provision that currently appears in Sec.  
414.412(d)(2) and replace it with the proposed lead item pricing 
provision. We proposed to replace the ``lead item'' description in 
Sec.  414.412(d)(2) and ``total nationwide allowed services'' 
definition with a new definition of ``lead item'' in Sec.  414.402 (83 
FR 34414). We believed that using allowed charges rather than allowed 
services is a better way to identify the

[[Page 57022]]

lead item in a product category for the purpose of implementing lead 
item pricing because the item with the highest allowed charges is the 
item that generates the most revenue for the suppliers of the items in 
the product category. We also believed the item with the most allowed 
services is not always the item that generates the most revenue for the 
supplier.
    Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of 
contracts under the CBP unless the total amounts to be paid to contract 
suppliers in a CBA are expected to be less than the total amounts that 
would otherwise be paid. In order to implement this requirement for 
assurance of savings under the CBP, we proposed to revise Sec.  
414.412(b)(2) to require that the supplier's bid for each lead item and 
product category in a CBA cannot exceed the fee schedule amount that 
would otherwise apply to the lead item without any adjustments based on 
information from the CBP (83 FR 34414).
    Finally, we proposed to amend the conditions for awarding contracts 
under the CBP in Sec.  414.414(e) related to evaluation of bids under 
the CBP. Currently, this section specifies that CMS evaluates bids 
submitted for items within a product category, and that expected 
beneficiary demand in a CBA is calculated for items in the product 
category. We proposed to specify that CMS evaluates composite bids 
submitted for the lead item within a product category, and that 
expected beneficiary demand in a CBA is calculated for the lead item in 
the product category (83 FR 34414).
2. Calculation of Single Payment Amounts Using Maximum Winning Bids for 
Lead Items
    We proposed to revise Sec.  414.416 to change the methodology for 
calculating SPAs under the CBP. We proposed to base the SPA for the 
lead item in each product category and CBA on the maximum or highest 
amount bid for the lead item by suppliers in the winning range as 
illustrated in Table 30. The SPAs for all other items in the product 
category would be based on a percentage of the maximum winning bid for 
the lead item. Specifically, the SPA for a non-lead item in the product 
category would be equal to the SPA for the lead item multiplied by the 
ratio of the average of the 2015 fee schedule amounts for all areas 
(that is, all states, DC, Puerto Rico, and the U.S. Virgin Islands) for 
the item to the average of the 2015 fee schedule amounts for all areas 
for the lead item. Thus, since 2015 is the last year the fee schedule 
amounts were not adjusted based on information from the CBP, the SPAs 
for a non-lead item would be based on the relative difference in the 
fee schedule amounts for the lead and non-lead item before the fee 
schedule amounts were adjusted based on information from the CBP. For 
example, if the average 2015 fee schedule amount for a non-lead item 
such as a wheelchair battery is $107.25, and the average 2015 fee 
schedule amount for the lead item (Group 2, captains chair power 
wheelchair) is $578.51, the ratio for these two items would be computed 
by dividing $107.25 by $578.51 to get 0.18539. Multiplying $578.51 by 
0.18539 then generates the amount of $107.25. Under the lead item 
pricing methodology, if the maximum winning bid for the lead item in 
this example (Group 2, captains chair power wheelchair) is used to 
compute an SPA of $433.88 for this lead item, then the SPA for the non-
lead item in this example (wheelchair battery) would be computed by 
multiplying $433.88 by 0.18539 to generate an SPA of $80.44 for the 
non-lead item (wheelchair battery). Under the proposed revised 
definition of composite bid, each supplier's bid for the lead item 
would be their composite bid. The proposed methodology of using the 
maximum winning bids to establish SPAs is illustrated in Table 30. We 
believe lead item pricing would greatly reduce the complexity of the 
bidding process and the burden on suppliers since they would no longer 
have to submit bids for numerous items in a product category. For a 
more complete discussion of the rationale for this methodology, see 
section V.D.2 of the CY 2019 ESRD PPS DMEPOS proposed rule.

           Table 30--Proposed Maximum Winning Bids Methodology
------------------------------------------------------------------------
                                                            Bid amounts
                      Supplier bids                        for the lead
                                                               item
------------------------------------------------------------------------
Supplier 1 bid..........................................           $1.00
Supplier 4 bid..........................................            2.00
Supplier 6 bid..........................................            2.00
Supplier 9 bid..........................................            2.00
Supplier 5 bid..........................................            2.00
Supplier 11 bid.........................................            3.00
Supplier 7 bid (pivotal bid)............................            3.00
Maximum bid/SPA.........................................            3.00
------------------------------------------------------------------------

    Finally, we invited feedback from the public on whether or not 
certain large CBAs should be split into smaller size CBAs to create 
more manageable service areas for suppliers, as has been done for the 
New York, Los Angeles, and Chicago CBAs. We solicited feedback that we 
could consider in potentially adjusting the size and boundaries of CBAs 
for future competitions. We noted there are currently nine CBAs with 
more than 7,000 square miles: Phoenix-Mesa-Scottsdale, Arizona; Boise 
City, Idaho; Dallas-Fort Worth-Arlington, Texas; Riverside-San 
Bernardino-Ontario, California; Houston-The Woodlands-Sugar Land, 
Texas; Bakersfield, California; Salt Lake City, Utah; San Antonio-New 
Braunfels, Texas; and Atlanta-Sandy Springs-Roswell, Georgia.
    The comments and our responses to the comments on our proposals are 
set forth below.
    Comment: Many commenters supported the proposal to establish lead 
item pricing for all items and product categories in the CBP because it 
simplifies the bidding process and eliminates price inversions. Some 
commenters supported the proposal to establish lead item pricing for 
all items and product categories in the CBP, but only if the product 
categories were discrete categories of like items that are generally 
provided together to address a beneficiary's medical needs. The 
commenters recommended that large product categories with varying items 
(such as standard mobility equipment) be subdivided. Some commenters 
recommended that some product categories (such as power wheelchairs) 
include subcategories with lead items for each subcategory (such as 
power wheelchair bases, batteries, etc.). One commenter representing 
suppliers of oxygen and oxygen equipment was concerned that maintaining 
the term ``composite bid'' could lead to confusion, but indicated that 
they are committed to working with CMS to ensure that defining this 
term to mean the lead item bid is well understood by suppliers.
    Response: We appreciate the support for this proposal. Although 
product categories are not defined through rulemaking, we will be 
taking into consideration the various product category recommendations, 
including the recommendation to structure product categories to ensure 
that they contain discrete categories of like items that are generally 
provided together to address a beneficiary's medical needs, when 
implementing future rounds of competition under the CBP. We appreciate 
the one commenter's willingness to educate suppliers regarding the 
revised definition for composite bid.
    Comment: One commenter expressed concern that the lead item pricing 
method effectively makes it possible for suppliers to submit bids on 
lead items without verifying they can furnish the entire category. The 
commenter recommended that when awarding

[[Page 57023]]

contracts, CMS consider not only bid price, but also a supplier's range 
of available supplies and devices.
    Response: We do not agree. Suppliers are educated at the start of 
each round of competitive bidding that they are responsible for 
furnishing all items in the product category for which they are 
submitting bids. Under lead item pricing, which we are adopting in this 
final rule, we will educate suppliers that their bid for the lead item 
is a bid for furnishing all items in the product category. We will also 
educate suppliers on how the payment amounts for the items in the 
product category will be established based on the maximum winning bid 
for the lead item. If the product categories are discrete categories of 
like items as commenters have suggested, a supplier that can furnish 
the lead item in the product category should have the capacity to 
furnish all other items in the product category as well. For example, 
if the supplier bids in the power mobility devices product category, 
the supplier would need to be accredited and meet the quality standards 
applicable to power mobility devices, namely part II of Appendix B of 
the Medicare DMEPOS Quality Standards. If the supplier meets these 
standards, then they should have the ability to furnish all of the 
different types of power mobility devices. If a supplier historically 
has furnished certain types of power mobility devices, such as standard 
weight captains chair products, and not others, such as heavy duty 
sling seat products, it should be relatively easy for the supplier to 
purchase the additional types of power mobility devices and deliver 
those items as well. It is important to note that under competitive 
bidding, CMS ensures that a sufficient number of contract suppliers are 
available to meet the expected demand for a product in each CBA. In 
accordance with section 1847(b)(2)(A) of the Act and Sec.  414.414, a 
supplier cannot be awarded a contract unless they meet certain 
financial standards that ensure they have an ability to expand their 
capacity beyond their historic capacity. The amounts suppliers bid and 
the capacity they report are reviewed to ensure they are bona fide. In 
addition, a special analysis of the supplier's reported capacity is 
performed and the supplier's reported capacity is adjusted to their 
historic levels of performance if there is any question regarding their 
ability to expand their capacity. CMS awards contracts to a sufficient 
number of contract suppliers to meet projected demand in each CBA.
    The supplier's bid for the lead item would reflect the cost of 
furnishing the various types of power mobility devices and related 
accessories in the product category. Even if the current product 
categories are maintained as is, a supplier would have to be able to 
furnish all of the items in the product category in order to be 
considered for a contract. Under the terms of the DMEPOS CBP contracts, 
a contract supplier must furnish every item in the product category for 
which it was awarded a contract. All suppliers are educated at the time 
of bidding that in accordance with Sec.  414.422(e)(1), a contract 
supplier must agree to furnish items under its contract to any 
beneficiary who maintains a permanent residence in, or who visits, the 
CBA and who requests those items from that contract supplier. Suppliers 
are made aware of this requirement and understand that they must have 
the capacity to furnish every item in the product category if they want 
to be a contract supplier. If the supplier does not comply with this 
regulation or a term of their contract, then the supplier would be in 
breach and CMS could terminate the contract.
    Comment: One commenter expressed concern that it would be 
inaccurate to assume that the bid rate for a single lead item is 
representative of the entire product category and believes the ratios 
that would be used to price the non-lead items do not accurately 
reflect the difference in cost of the items in the product category 
because of lack of consistency in how the fee schedule amounts for the 
items were established (that is, average reasonable charges for some 
items and gap-filling using supplier price lists for other items). 
Another concern was related to the supplier's inability to control the 
bid price of non-lead items without adjusting their lead item bid 
amount. For example, if the supplier is willing to accept payment for 
the lead item at an amount that is 50 percent below the historic, 
unadjusted fee schedule amount for the lead item, but is not willing to 
accept that large of a payment reduction for a non-lead item, the 
supplier would not be able to submit a bid for the lead item that is 50 
percent below the historic, unadjusted fee schedule amount for the lead 
item. A commenter also mentioned that there could be little to no 
commonality in the manufacturing processes between lead item and non-
lead items, which could lead to excessive or discounted payments for 
non-lead items.
    Response: We understand that the inability of the supplier to 
submit specific bid amounts for non-lead items in order to determine 
the payment amounts for these items is a cost or negative aspect of 
lead item pricing. However, we believe that the benefits associated 
with lead item pricing outweigh this cost. Lead item pricing would 
greatly reduce the complexity of the bidding process and address all 
price inversions we have already identified as well as potential future 
price inversions for other items. It would also reduce the burden on 
suppliers since they would no longer have to submit bids for numerous 
items in a product category. Under lead item pricing, suppliers will be 
educated on how the payment amounts for the items in the product 
category will be established based on the maximum winning bid for the 
lead item, and that they should consider their costs for furnishing all 
items in the product category in formulating their bid for the lead 
item. In the example provided above, a supplier that cannot accept a 
payment reduction of 50 percent for a non-lead item would need to 
factor this fact into what they bid for the lead item, because the bid 
for the lead item would also represent their bid for furnishing all of 
the items in the product category. They may have to bid an amount that 
is higher than the amount they would bid if they were bidding for the 
lead item alone in order to factor in the cost of furnishing all of the 
other items in the product category. If the historic differences in the 
fees for the various items in the product category do not align well 
with the actual differences in the cost of the items, the supplier will 
need to take this into consideration when submitting their bid for the 
lead item. The ratios that will be used to price the non-lead items are 
based on the historic differences in the fee schedule amounts for the 
items, and we do not think that these historic ratios inaccurately 
reflect the relative differences in the cost of the items. Rather, the 
ratios usually follow a logical pattern. For example, the historic fees 
for manual hospital beds are lower than the historic fees for semi-
electric hospital beds, and the historic fees for manual hospital beds 
without side rails are lower than the historic fees for manual hospital 
beds with side rails. Suppliers are given an opportunity, by bidding 
for the lead item, to control the minimum amount (that is, under lead 
item bidding, suppliers are paid at least what they bid or higher) that 
they would be paid for any non-lead item, as illustrated in the 
supplier non-lead item bidding example directly above. Suppliers must 
take this and other factors into consideration when

[[Page 57024]]

determining how much to bid based on what they are willing to accept as 
payment for the items in the product category as a whole. Again, we 
believe that the benefits associated with lead item pricing, as 
explained above and in the CY 2019 ESRD PPS DMEPOS proposed rule, 
outweigh the cost of less flexibility in setting payment rates for non-
lead items. We are not sure what point the commenter was making 
regarding little to no commonality in the manufacturing processes 
between a lead item and non-lead items, and how this could lead to 
excessive or discounted payments for non-lead items. We will educate 
suppliers regarding how their bid for the lead item is used to generate 
the payment amounts for the non-lead items and that they should ensure 
that the payment amounts for all of the other items in the product 
category, which are established based on their bid for the lead item, 
would be sufficient to cover their costs for furnishing all of the 
items in the product category in the CBA.
    Comment: A few commenters suggested that bids from suppliers added 
to meet the small supplier target be included in the calculation of the 
SPAs.
    Response: We appreciate the comment, however, we do not agree. The 
small supplier target was established due to the statutory mandate to 
ensure that small suppliers are considered for participation under the 
CBP. Small suppliers that are offered contracts after the pivotal bid 
is determined are not needed to meet projected demand. We do not think 
that payment to suppliers needed to meet projected demand should be 
based on higher bids from suppliers that are not needed to meet 
projected demand.
    Comment: Several commenters offered suggestions on how to determine 
the capacity of bidding suppliers to meet projected demand for items 
and services. For example, some commenters suggested that the actual 
historic capacity of suppliers should be used and should not be 
adjusted. One commenter suggested capping assumed supplier capacity at 
25 or 33 percent of total projected demand. Many commenters recommended 
that the process of determining projected demand and supplier capacity 
should be transparent and that the determinations should be made 
publically available to ensure the bid evaluation is accurate.
    Response: As a part of the competitive bidding program, we strive 
to ensure a sufficient number of contract suppliers are available to 
meet the expected demand for a product in each CBA. As a part of the 
bid evaluation process, bidders are required to report their capacity 
to furnish bid items on the bid form. CMS awards contracts to a 
sufficient number of contract suppliers to meet projected demand in 
each CBA. CMS purposely sets a high demand target by increasing 
historic utilization using two trending factors (national growth in DME 
utilization and change in enrolled beneficiaries in the CBA) rather 
than just one. In addition, if the change in enrolled beneficiaries in 
a CBA is negative, CMS does not decrease the demand target number based 
on this negative trend in the beneficiary population in the area and 
still increases the number based on the national growth in utilization 
for the item. In addition, the projected demand for DME items is not 
reduced based on the number of items that would likely be furnished by 
grandfathered suppliers, which typically furnish approximately 15 
percent of rented DME items and related accessories. Each supplier's 
capacity is capped at 20 percent of total projected demand, and each 
supplier's capacity is evaluated, scrutinized and adjusted if necessary 
to ensure that they are not relied upon to furnish more items and 
services than they can based on their financial strength and ability to 
expand their historic capacity. This approach to estimating demand and 
capacity has worked well over the past eight years to ensure that a 
sufficient number of contracts are awarded under the CBP. We thank the 
commenters for their suggestions and will take them into consideration.
    Comment: In response to our request for feedback about the risk 
that under our proposed methodology, the maximum winning bid could be 
an outlier bid that is much higher than the other winning bids, most 
commenters generally felt that this risk was minimal, some suggested, 
as long the product categories are evaluated in detail. Another 
commenter believed the risk was minimal because the lead item SPA is 
capped at the historical fee schedule amount. One commenter suggested 
an approach to limit maximum winning bids that are more than double the 
next highest winning bid. Under the suggested approach, the average of 
the maximum winning bid and the next highest winning bid would be used 
to establish the lead item SPA. Another commenter suggested we monitor 
the range of winning bids in each product category to assess risks in 
the next round of bidding. One commenter believed that SPAs based on 
the maximum winning bids could result in excessive payment rates if 
beneficiary demand is overestimated or supplier capacity is 
underestimated.
    Response: We thank the commenter that provided a suggestion to 
address the scenario of an outlier bid. At this time, however, we have 
no reason to believe this will be a problem and have set certain limits 
under the CBP. For example, the SPA must be less than or equal to the 
amount that would otherwise be paid. CMS may only award a contract to a 
bidder if it finds that the total amounts to be paid to suppliers in a 
CBA are expected to be less than the total amounts that would otherwise 
be paid. CMS will monitor the program and make changes in the future if 
such situations occur. We agree that basing the SPAs on maximum winning 
bids could result in excessive payment rates if beneficiary demand is 
overestimated or supplier capacity is underestimated. As explained in 
response to the preceding comment, CMS inflates historic demand by 
double trending the numbers, does not reduce the number for DME items 
to account for grandfathered suppliers, and scrutinizes and adjusts 
supplier capacity to ensure that a sufficient number of contracts are 
awarded under the CBP. To the extent that more contracts are awarded 
than necessary as a result of this process, this could result in higher 
payment amounts than would otherwise be paid if fewer contracts were 
awarded. However, we note that this is true regardless of whether SPAs 
are based on maximum winning bids or the median of winning bids. We 
intend to closely monitor the impact of the new pricing methodology to 
determine if it results in excessive payment rates and whether the 
process for estimating demand and capacity should be revised to 
eliminate excessive payment rates.
    Comment: Regarding bid surety bonds, one commenter suggested that a 
supplier should forfeit the bond if their bid is at or below the 
maximum winning bid for the lead item, rather than the median of the 
winning bids for the lead item, and the supplier does not accept the 
contract offer. One commenter recommended that any winning bidder that 
does not accept a contract offer should forfeit the bid surety bond.
    Response: We appreciate the suggestions but the statute at section 
1847(a)(1)(H)(i) of the Act specifically mandates forfeiture of a 
bidding supplier's bid bond in cases where the supplier's composite bid 
is at or below the median composite bid rate for all bidding entities 
included in the calculation of the SPAs and the entity does not accept 
the contract offered.

[[Page 57025]]

    Comment: Most commenters provided negative feedback in response to 
our solicitation of comments on whether nine large CBAs should be 
subdivided into smaller size CBAs to create more manageable service 
areas for suppliers. The commenters contended that subdividing the CBAs 
would result in increasing administrative complexity and costs. The 
commenters discussed increased costs to prepare bids for more 
geographic areas, including obtaining more bid surety bonds for more 
geographic areas. Also, the commenters discussed increasing complexity 
for referrals, prescribers, and beneficiaries to coordinate furnishing 
DMEPOS items with different contracted suppliers based on more CBAs and 
the home zip code of the Medicare beneficiary. One commenter stated 
that the CBAs as currently set are appropriate for defining markets in 
which the costs are aligned and subdividing the CBAs could reduce the 
economies of scale achievable in these areas. Also, the commenters 
expressed concern that subdividing CBAs could lead to substantially 
different payment amounts for similar products furnished in close 
proximity geographic areas. To further specify, several commenters did 
not support subdividing the CBA areas for Atlanta-Sandy Springs-
Roswell, GA MSA, the Houston-The Woodlands-Sugar Land, TX MSA and Boise 
City, ID MSA. In contrast, one commenter provided positive feedback to 
our solicitation on whether certain large CBAs should be subdivided 
into smaller size CBAs to create more manageable service areas for 
suppliers for the Riverside-San Bernardino-Ontario CA MSA. Also 
commenters did not provide specific feedback to our solicitation 
regarding the following CBAs: Phoenix-Mesa-Scottsdale, Dallas-Fort 
Worth-Arlington, Bakersfield, CA, Salt Lake City, Utah, and San 
Antonio-New Braunfels, Texas. Some commenters recommended that CMS 
consult with the suppliers in the specific CBA before finalizing a 
subdivision of a CBA. One commenter described an example that if the 
San Francisco-Oakland-Fremont, CA CBA is subdivided beneficiaries could 
experience access problems in Fremont but not San Francisco. The 
commenters recommended further consideration for subdividing areas 
should be considered from both contracting and oversight perspectives.
    Response: We appreciate the range of the comments we received. We 
will consider these comments carefully as we contemplate future 
policies.
    Final Rule Action: After consideration of comments received on the 
CY 2019 ESRD PPS DMEPOS proposed rule and for reasons we set forth 
previously in this final rule, we are finalizing the proposed revisions 
to Sec.  414.402 to change the definitions of bid, composite bid, and 
lead item. We are also finalizing the proposed revisions to Sec.  
414.414 and Sec.  414.416 to change the processes for submitting bids, 
evaluating bids and calculating SPAs based on lead item pricing. 
However, to eliminate confusion over the inclusion of the words 
``maximum or highest bid,'' in the language of the proposed rule, we 
are finalizing a slight change to the language in Sec.  414.416 to 
refer to the ``maximum bid'' submitted for an item rather than the 
``maximum or highest bid'' submitted for an item. We are also making 
some minor technical changes to Sec.  414.412. In the CY ESRD PPS 
DMEPOS proposed rule, we incorrectly noted the conforming changes to 
remaining paragraphs in Sec.  414.412 as a result of the proposal to 
delete paragraph (d) of Sec.  414.412, which currently requires 
suppliers to submit separate bids for each item in the product 
category. Therefore, along with the removal of paragraph (d), we are 
finalizing Sec.  414.412 with technical edits to re-designate 
paragraphs (e) through (h) as paragraphs (d) through (g), respectively. 
Additionally, in newly redesignated paragraph (e)(2), we are removing 
the reference to paragraph ``(f)(1)'' and adding in its place the 
reference ``(e)(1)''; and in newly redesignated paragraph (g)(2)(i)(D) 
we are removing the reference to ``paragraph (h)(3)'' and adding in its 
place the reference '' paragraph (g)(3)''.

VI. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
from the DMEPOS CBP

A. Background

    For DME furnished on or after January 1, 2016, section 
1834(a)(1)(F)(ii) of the Act requires the Secretary to use information 
on the payment determined under the DMEPOS CBP to adjust the fee 
schedule amounts for DME items and services furnished in all non-CBAs. 
Section 1834(a)(1)(F)(iii) of the Act requires the Secretary to 
continue to make these adjustments as additional covered items are 
phased in or information is updated as new CBP contracts are awarded. 
Similarly, sections 1842(s)(3)(B) and 1834(h)(1)(H)(ii) of the Act 
authorize the Secretary to use payment information from the DMEPOS CBP 
to adjust the fee schedule amounts for enteral nutrition and OTS 
orthotics, respectively, furnished in all non-CBAs. Section 
1834(a)(1)(G) of the Act requires that in promulgating the methodology 
used in making these adjustments to the fee schedule amounts, the 
Secretary consider the costs of items and services in areas in which 
the adjustments would be applied compared to the payment rates for such 
items and services in the CBAs.
    Section 16008 of the 21st Century Cures Act (the Cures Act) (Pub. 
L. 114-255) was enacted on December 13, 2016, and amended section 
1834(a)(1)(G) of the Act to require in the case of items and services 
furnished in non-CBAs on or after January 1, 2019, that in making any 
adjustments to the fee schedule amounts in accordance with sections 
1834(a)(1)(F)(ii) and (iii), 1834(a)(1)(H)(ii), or 1842(s)(3)(B) of the 
Act, the Secretary shall: (1) Solicit and take into account stakeholder 
input; and (2) take into account the highest bid by a winning supplier 
in a CBA and a comparison of each of the following factors with respect 
to non-CBAs and CBAs:
     The average travel distance and cost associated with 
furnishing items and services in the area.
     The average volume of items and services furnished by 
suppliers in the area.
     The number of suppliers in the area.
1. Stakeholder Input Gathered in Accordance With Section 16008 of the 
Cures Act
    On March 23, 2017, CMS hosted a national provider call to solicit 
stakeholder input regarding adjustments to fee schedule amounts using 
information from the DMEPOS CBP. We also received 125 written comments 
from stakeholders. More than 330 participants called into our national 
provider call, with 23 participants providing oral comments during the 
call. In general, the commenters were mostly suppliers, but also 
included manufacturers, trade organizations, and healthcare providers 
such as physical and occupational therapists. These stakeholders 
expressed concerns that the level of the adjusted payment amounts 
constrains suppliers from furnishing items and services to rural areas. 
Stakeholders requested an increase to the adjusted payment amounts for 
these areas. The written comments generally echoed the oral comments 
from the call held on March 23, 2017, whereby stakeholders claimed that 
the adjusted fees are not sufficient to cover the costs of furnishing 
items and services in non-CBAs and that this is having an impact on 
access to items and services in these areas. For further detailed 
information, we refer readers to

[[Page 57026]]

section VI.A.1 of the CY 2019 ESRD PPS DMEPOS proposed rule.
2. Highest Winning Bids in CBAs Analysis
    We considered the highest amounts bid by a winning supplier for a 
specific item (maximum bid) in the various CBAs in Round 1 2017 and 
Round 2 Recompete to see if maximum bids varied in different types of 
areas (that is, low volume versus high volume areas, large versus small 
delivery service areas, areas with few suppliers versus many 
suppliers). We analyzed maximum bids for the lead items in each product 
category (those with the highest allowed charges) and for other lower 
volume items. For lower volume items with low item weights, suppliers 
had less of an incentive to bid low on these items, and therefore, the 
maximum bids for many of these items are not significantly below the 
unadjusted fee schedule amounts. For the lead items, we focused 
primarily on items that clearly are delivered locally such as large 
bulky hospital beds and oxygen equipment (concentrators and tanks) 
since variations in maximum bid amounts from CBA to CBA due to 
differences in travel distances and costs would be most noticeable for 
these items. There are 130 CBAs in total in Round 1 2017 and Round 2 
Recompete varying greatly in size, volume, and number of suppliers. We 
found no pattern indicating that maximum bids are higher for areas with 
lower volume than they are for areas with higher volume. For further 
detailed information, we refer readers to section VI.A.2 of the CY 2019 
ESRD PPS DMEPOS proposed rule.
3. Travel Distance Analysis
    We considered the average travel distances associated with 
furnishing items and services in CBAs and non-CBAs using two analyses. 
We first examined the average travel distances in CBAs versus non-CBAs 
by analyzing differences in the geographic size in square miles of CBAs 
versus non-CBAs consisting of MSAs and micropolitan statistical areas 
(micro areas). In non-CBAs, the majority of items that are subject to 
the fee schedule adjustments are furnished in these two geographic 
delineations. The U.S. Office of Management and Budget (OMB) delineates 
MSAs and micro areas, which are referred to collectively as ``core 
based statistical areas'' (CBSAs), or core area containing a 
substantial population nucleus, together with adjacent communities 
having a higher degree of economic and social integration with that 
core. We compared the average size of the different areas nationally 
and by Bureau of Economic Analysis (BEA) region and found that the CBAs 
have much larger service areas than the non-CBA MSAs and micro areas. 
Under the CBP, a contract supplier is required to furnish items to any 
beneficiary in the CBA that requests an item or service from the 
contract supplier. The size of CBAs can be compared to the size of non-
CBAs to indicate how far a supplier located in or near the areas may 
have to travel to serve beneficiaries located in the various areas. As 
shown in Table 31, the average size of CBAs in each of the eight BEA 
regions is larger than the average size of both non-rural areas and 
rural areas classified as micro areas by OMB. Micro areas are areas 
where competitive bidding, for the most part, has not yet been 
implemented, and where the vast majority of items are not competitively 
bid.

                                         Table 31--Average Size of Area
                                                 [Square miles]
----------------------------------------------------------------------------------------------------------------
                           BEA region                                   CBA             MSA            Micro
----------------------------------------------------------------------------------------------------------------
New England.....................................................           1,241           1,175             968
Mideast.........................................................           1,659             833             859
Great Lakes.....................................................           2,061             942             638
Plains..........................................................           3,700           1,880           1,029
Southeast.......................................................           2,776           1,218             681
Southwest.......................................................           5,737           3,637           1,992
Rocky Mountain..................................................           6,457           3,025           3,002
Far West........................................................           3,791           2,308           3,776
Average.........................................................           3,428           1,877           1,618
----------------------------------------------------------------------------------------------------------------

    The data in Table 32 shows what percentage of suppliers furnishing 
items and services subject to the fee schedule adjustments are located 
in the same areas where the items and services are furnished (that is, 
the percentage of suppliers located in the same area as the 
beneficiary). We separated the data by CBA, and then non-CBA MSA, micro 
area, or Outside Core Based Statistical Area (OCBSA), which are 
counties that do not qualify for inclusion in a CBSA. The data in Table 
32 shows that the majority of suppliers furnishing items and services 
subject to the fee schedule adjustments are located in the same areas 
where these items and services are furnished. This means that the 
majority of suppliers serving non-CBAs are travelling no further than 
the distance of the non-CBAs they are located in, which again are much 
smaller than the CBAs.

    Table 32--Percentage of Items and Services in 2016 Furnished by Suppliers Located in the Same Area as the
                                                   Beneficiary
----------------------------------------------------------------------------------------------------------------
                    Beneficiary area                     Hospital beds (%)      Oxygen (%)       All items (%)
----------------------------------------------------------------------------------------------------------------
CBAs...................................................                 68                 77                 64
Non-CBA MSAs...........................................                 68                 63                 65
Non-CBA Micro Areas....................................                 64                 61                 61
Non-CBA OCBSAs.........................................                 78                 82                 81
----------------------------------------------------------------------------------------------------------------


[[Page 57027]]

    In our second analyses, we compared the average travel distances 
for suppliers in the different areas using claims data for items and 
services subject to the fee schedule adjustments. For each allowed DME 
item and service, we used the shortest distance between the coordinates 
of the beneficiary's residential ZIP code and those of the supplier's 
ZIP code on the surface of a globe as a proxy of DME delivery distance. 
In addition, we prioritized 9-digit ZIP codes over 5-digit ZIP codes 
when determining the coordinates. The results in Table 33 are for 
hospital beds and oxygen and oxygen equipment, items that are most 
likely to be delivered locally by suppliers using company vehicles, as 
well as all items subject to the fee schedule adjustments. We compared 
average distances in CBAs versus non-CBAs broken out based on whether 
the beneficiary resided in an MSA, micro area, or a super rural (SR) 
area based on the definition of super rural area used in the ambulance 
fee schedule rules in Sec.  414.610(c)(5)(ii). CBAs have greater 
average service distances than non-CBAs, with the exception of SR 
areas.

                     Table 33--Average Number of Miles Between Supplier and Beneficiary \1\
----------------------------------------------------------------------------------------------------------------
                    Beneficiary area                       Hospital beds          Oxygen           All items
----------------------------------------------------------------------------------------------------------------
CBAs...................................................                 25                 21                 27
Non-CBA MSAs...........................................                 22                 19                 24
Non-CBA Micro Areas....................................                 23                 21                 27
SR Areas...............................................                 36                 35                 41
----------------------------------------------------------------------------------------------------------------
\1\ Claims where the supplier billing address is in the same or adjoining state as the beneficiary address,
  excluding claims from suppliers with multiple locations that always use the same billing address.

    The average distances from the supplier to the beneficiary in the 
CBAs are the same or greater than the average distances from the 
supplier to the beneficiary in the non-CBA MSAs and micro areas where 
most of the items subject to the fee schedule adjustments are 
furnished. However, the average distances for super rural areas are 
greater than the average distances for the CBAs. For further detailed 
information, we refer readers to section VI.A.3 of the CY 2019 ESRD PPS 
DMEPOS proposed rule.
4. Cost Analysis
    We examined four sources of cost data: (1) The Practice Expense 
Geographic Practice Cost Index (PE GPCI), (2) delivery driver wages 
from the Bureau of Labor Statistics (BLS), (3) real estate taxes from 
the U.S. Census Bureau's American Community Survey (ACS), and (4) gas 
and utility prices from the Consumer Price Index (CPI). Overall, we 
found that CBAs tended to have the highest costs out of the cost data 
that we examined, when compared to non-CBAs. For further detailed 
information, we refer readers to section VI.A.4 of the CY 2019 ESRD PPS 
DMEPOS proposed rule.
    In the CY 2019 ESRD PPS DMEPOS proposed rule, we analyzed the 
aforesaid cost data, and overall, each cost variable was, for the most 
part, higher on average in the CBAs than it was for every other 
geographic delineation (MSA, micro, OCBSA). The more urbanized areas 
tended to have higher costs than the less urbanized areas. We think 
this may be due to several reasons.
    The Bureau of Labor Statistics explains, ``. . . that the principal 
differences in overall expenditures between rural and urban households 
are the amounts spent on the chief elements of housing: mortgage 
interest and rental payments. These expenditures are affected by many 
different variables, but can be understood fundamentally by supply and 
demand, and are often dependent on location. Land is scarce in urban 
areas, and many people are vying for limited housing; therefore, rent 
is higher and houses are more expensive. In many rural areas, land is 
plentiful, so prices tend to be lower.'' \23\
---------------------------------------------------------------------------

    \23\ Expenditures of urban and rural households in 2011 https://www.bls.gov/opub/btn/volume-2/expenditures-of-urban-and-rural-households-in-2011.htm.
---------------------------------------------------------------------------

    With regard to CBAs generally having higher wages and PE GPCI 
values, values which attribute much of their calculation to wages, 
there are several reasons for this as well. A report prepared by RTI 
International for the Medicare Payment Advisory Commission (MedPac) 
describes how differences in local labor productivity are partly 
responsible for the observed differences in nominal wages, which are 
the wages that appear on paychecks.\24\ The theory of compensating wage 
differentials was originally used to explain why nominal wages differ 
across workers. The report explains how ``[t]he term `compensating' 
refers to attributes of jobs that attract or repel workers to specific 
occupations or geographic areas. A job that has repellent attributes 
commands a ``compensating'' amount. Conversely, holding constant other 
attributes, nominal wages can be lower for jobs that have attractive 
attributes. The theory of geographic wage differences, then, is the 
theory of compensating wage differentials applied to the geographic 
dimensions of wages.''
---------------------------------------------------------------------------

    \24\ Geographic Adjustment of Medicare Payments for the Work of 
Physicians and Other Health Professionals http://www.medpac.gov/docs/default-source/contractor-reports/jun13_geoadjustment_contractor.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    Additionally, the report describes how geographic variation in 
wages is affected by the amenities available in different areas. For 
instance, ```[a]menities' include such factors as climate and local 
cultural and recreational opportunities. High amenity areas do not need 
to pay as much to attract workers, hence wages in these areas will be 
lower relative to their cost-of-living than in areas with low levels of 
amenities. The reverse is also true; workers may also demand higher 
real (that is, cost-of-living-adjusted) wages for a job located in an 
area with unattractive features. The valuation of amenities will differ 
across individuals, partly related to systematic factors such as 
education and income, and partly due to idiosyncratic preferences. It 
may also vary across professions; for example, if physicians value 
location in an area with access to colleagues and multiple medical 
facilities, then they might demand a wage premium for locating in 
isolated rural communities.''
    Furthermore, the report mentions that as more workers take jobs in 
high-wage industries in a given area, they tend to bid up the price of 
housing, which increases the cost of living and lowers the real wages 
of workers of other industries in the area.
    Lastly, the U.S. Department of Agriculture (USDA) suggests there 
are several factors that may contribute to

[[Page 57028]]

higher earnings in urban areas.\25\ For one, ``[b]usinesses that 
provide skill-intensive employment may be clustered in urban areas, 
where a larger market allows for closer proximity to customers and 
suppliers, shared infrastructure, and better matching between employers 
and employees. The density of businesses and people in urban areas may 
also facilitate the promotion and adoption of innovative ideas. These 
benefits may enhance the productivity of businesses and workers, 
contributing to higher urban wages.'' However, the USDA concludes that 
other differences between urban and rural workers--such as work 
experience, job tenure, and ability--may also contribute to higher 
urban wages. For further detailed information, we refer readers to the 
CY 2019 ESRD PPS proposed rule (83 FR 34372).
---------------------------------------------------------------------------

    \25\ Urban Areas Offer Higher Earnings for Workers With More 
Education https://www.ers.usda.gov/amber-waves/2017/july/urban-areas-offer-higher-earnings-for-workers-with-more-education/.
---------------------------------------------------------------------------

5. The Average Volume of Items and Services Furnished by Suppliers in 
the Area Analysis
    We found that in virtually all cases, the average volume of items 
and services for suppliers when furnishing those items to the various 
areas is higher in CBAs than non-CBAs. This is likely due to CBAs 
generally being located in the most populated areas of the country, 
with more beneficiaries, and therefore, more suppliers in these areas 
than in non-CBAs. For further detailed information, we refer readers to 
section VI.A.5 of the CY 2019 ESRD PPS DMEPOS proposed rule.
6. Number of Suppliers Analysis
    We examined data regarding the number of suppliers serving the 
various CBAs and did not find any correlation between number of 
suppliers and SPA or maximum winning bid amount. We are not certain how 
much the number of suppliers in a given area might affect costs, but it 
does not appear to have been a factor under the competitive bidding 
program in terms of bids submitted in the various CBAs. For further 
detailed information, we refer readers to section VI.A.6 of the CY 2019 
ESRD PPS DMEPOS proposed rule.
7. Fee Schedule Adjustment Impact Monitoring Data
    In an effort to determine whether the fee schedule adjustments have 
resulted in adverse beneficiary health outcomes, we have been 
monitoring claims data from non-CBAs and it does not show any 
observable trends indicating an increase in adverse health outcomes 
such as mortality, hospital and nursing home admission rates, monthly 
hospital and nursing home days, physician visit rates, or emergency 
room visits in 2016, 2017, or 2018 compared to 2015 in the non-CBAs, 
overall. In addition, we have been monitoring data on the rate of 
assignment in non-CBAs and it remains high (over 99 percent) in most 
areas, which reflects when suppliers are accepting Medicare payment as 
payment in full and not balance billing beneficiaries for the cost of 
the DME. We solicited comments on ways to improve our fee schedule 
adjustment impact monitoring data (83 FR 34380).

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on Adjustments to DMEPOS Fee Schedule Amounts Based on 
Information from the DMEPOS CBP

    In the CY 2019 ESRD PPS DMEPOS proposed rule, we proposed to base 
the fee schedule amounts for items and services furnished from January 
1, 2019 through December 31, 2020, in areas that are currently rural or 
non-contiguous non-CBAs, on a blend of 50 percent of the unadjusted fee 
schedule amounts and 50 percent of the fee schedule amounts adjusted in 
accordance with the current methodologies under Sec.  414.210(g)(1) 
through (g)(8). We proposed to pay the fully adjusted fee schedule 
rates for items and services furnished in non-rural and contiguous non-
CBAs from January 1, 2019 through December 31, 2020. We proposed that 
in the event of a temporary gap in the CBP, we would adjust the fee 
schedule amounts applicable in each CBA based on the SPA for the area 
increased by the projected change in the consumer price index for all 
urban consumers (CPI-U) for the 12-month period ending on the date that 
the adjusted fee schedule amounts take effect (for example, January 1, 
2019). The adjusted fee schedule amounts would be increased every 
January 1 by a similar update factor for as long as the temporary gap 
in the CBP continues. We received approximately 281 public comments on 
our proposals, including comments from homecare associations, DME 
manufacturers, suppliers, senior advocacy associations, the Medicare 
Payment Advisory Commission (MedPAC), Members of Congress, and 
individuals. Comments related to the paperwork burden are addressed in 
the ``Collection of Information Requirements'' section of this final 
rule. Comments related to the impact analysis are addressed in the 
``Economic Analyses'' section of this final rule.
    In this final rule, we provide a summary of the proposed 
provisions, a summary of the public comments received and our responses 
to them, and the policies we are finalizing.
1. Proposed Fee Schedule Adjustments for Items and Services Furnished 
in Non-Competitive Bidding Areas
    The Round 2 Recompete, National Mail-Order Recompete, and Round 1 
2017 contract periods of performance will end on December 31, 2018. 
Competitive bidding for items furnished on or after January 1, 2019 has 
not yet begun, and therefore, we do not expect that CBP contracts will 
be in place on January 1, 2019. Thus, we anticipate there will be a gap 
in the CBP beginning January 1, 2019. During a gap in the CBP beginning 
January 1, 2019, there will not be any contract suppliers and payment 
for all items and services previously included under the CBP will be 
based on the lower of the supplier's charge for the item or fee 
schedule amounts adjusted in accordance with sections 1834(a)(1)(F) and 
1842(s)(3)(B) of the Act. We proposed specific fee schedule adjustments 
as a way to temporarily pay for items and services in the event of a 
gap in the CBP due to CMS being unable to timely recompete CBP 
contracts before the current DMEPOS competitive bidding contract 
periods of performance end.
    We have taken into account the information mandated by section 
16008 of the Cures Act. Section 16008 of the Cures Act first mandates 
that we take stakeholder input into account in making fee schedule 
adjustments based on information from the DMEPOS CBP for items and 
services furnished beginning in 2019. The information we collected 
included input from many stakeholders indicating that the fully 
adjusted fee schedule amounts are too low and that this is having an 
adverse impact on beneficiary access to items and services furnished in 
rural and remote areas. Industry stakeholders have stated that the 
fully adjusted fee schedule amounts are not sufficient to cover the 
supplier's costs, particularly for delivering items in rural, remote 
areas. We are monitoring outcomes, assignment rates, and other issues 
related to access of items and services such as changes in allowed 
services and number of suppliers. We believe it is important to 
continue monitoring these things before proposing a more long term fee 
schedule adjustment methodology using information from the CBP. If fee 
schedule amounts are too low, they could impact beneficiary access and 
potentially damage the businesses that furnish DMEPOS items

[[Page 57029]]

and services. If fee schedule amounts are too high, this increases 
Medicare program and beneficiary costs unnecessarily. For these 
reasons, we believe that we should proceed cautiously when adjusting 
fee schedules in the short term in an effort to protect access to 
items, while we continue to monitor and gather data and information. We 
plan to address fee schedule adjustments for items furnished on or 
after January 1, 2021, in future rulemaking after we have continued to 
monitor health outcomes, assignment rates, and other information.
    Section 16008 of the Cures Act mandates that we take into the 
account the highest amount bid by a winning supplier in a CBA. However, 
as previously discussed in section VI.A.2 of this final rule, the 
highest winning bids from Round 2 Recompete varied widely across the 
CBAs and the variance does not appear to be based on any geographic 
factor (that is, there is no pattern of maximum bid amounts for items 
being higher in certain CBAs or regions of the country versus others). 
Thus, we did not find any supporting evidence for the development of a 
payment methodology for the non-CBAs based on the highest winning bids 
in a CBA.
    Section 16008 of the Cures Act mandates that we take into account a 
comparison of the average travel distance and cost associated with 
furnishing items and services in the area. We found that the average 
travel distance and cost for suppliers in non-CBAs is generally lower 
than the average travel distance and cost for suppliers in CBAs. 
However, oftentimes costs in the non-contiguous areas of the U.S., 
particularly in Hawaii and Alaska, were higher than costs in the 
contiguous areas of the U.S., for most of the cost data that we 
examined and presented in this rule. As noted in section VI.A.1 of this 
final rule, this was confirmed by one commenter who stated that non-
contiguous areas, such as Alaska and Hawaii, face unique and greater 
costs due to higher shipping costs, a smaller amount of suppliers, and 
more logistical challenges related to delivery. Additionally, from our 
analysis presented in this rule, the average distance traveled in CBAs 
is generally greater than in most non-CBAs. However, when looking at 
certain non-CBA rural areas such as FAR, OCBSAs, and super rural areas, 
suppliers, on average, must travel farther distances to beneficiaries 
located in these areas than beneficiaries located in CBAs and other 
non-CBAs. Thus, we believe this supports a payment methodology that 
factors in the increased costs in non-contiguous areas, and the 
increased travel distance suppliers face in reaching certain rural 
areas.
    Section 16008 of the Cures Act mandates that we take into account a 
comparison of the average volume of items and services furnished by 
suppliers in the area. We found that in virtually all cases, the 
average volume of items and services for suppliers when furnishing 
those items is higher in CBAs than non-CBAs. We believe this finding 
supports a payment methodology that factors in and ensures beneficiary 
access to items and services in non-CBAs with relatively low volume.
    Finally, section 16008 of the Cures Act mandates that we take into 
account a comparison of the number of suppliers in the area. According 
to Medicare claims data, the number of supplier locations furnishing 
DME items and services subject to the fee schedule adjustments 
decreased by 22 percent from 2013 to 2016. In 2016 alone there was a 
little over 6 percent decline from the previous year in the number of 
DME supplier locations furnishing items and services subject to the fee 
schedule adjustments. The number of DME supplier locations declined 
from 13,535 (2015) to 12,617 (2016), indicating that the number of DME 
supplier locations serving these areas continues to decline. There has 
been a further reduction in supplier locations of 9 percent in 2017. We 
can attribute a certain percentage of this decline in the number of 
suppliers to audits, investigations, and evaluations by CMS and its 
contractors that enhanced fraud and abuse controls to monitor 
suppliers. Furthermore, we have noted in section VI.A.6 of this final 
rule that instances of beneficiaries located in areas being served by 
one supplier were extremely rare, when looking at users of oxygen and 
oxygen equipment, and were mostly in non-contiguous areas of the 
country. The suppliers for these non-contiguous areas were all 
accepting the fully adjusted fee schedule amounts as payment in full 
100 percent of the time in 2016 and 2017. Additionally, while the 
number of suppliers in the non-CBAs decreased by a little over 6 
percent in 2016 overall, volume per supplier increased, suggesting a 
consolidation in the number of locations serving the non-CBAs. However, 
we are still concerned about the potential beneficiary access issues 
that might occur in more rural and remote areas based on this 
consistent decline in number of suppliers. As such, out of an abundance 
of caution, we believe that the consistent decline in number of 
suppliers supports adjusting the fee schedule amounts in a way that 
seeks to abate this declining trend and ensure access to items and 
services for beneficiaries living in rural areas and other remote areas 
such as Alaska, Hawaii, Puerto Rico and other U.S. territories.
    Based on the stakeholder comments, the higher costs for non-
contiguous areas, the increased average travel distance in certain 
rural areas, the significantly lower average volume per supplier in 
non-CBAs, especially in rural and non-contiguous areas, and the 
decrease in the number of non-CBA supplier locations, we believe the 
fee schedule amounts for items and services furnished from January 1, 
2019 through December 31, 2020, in all areas that are currently rural 
or non-contiguous non-CBAs, should be based on a blend of 50 percent of 
the unadjusted fee schedule amounts and 50 percent of the adjusted fee 
schedule amounts in accordance with the current methodologies under 
Sec.  414.210(g)(1) through (g)(8). We believe that since the 
information from the CBP comes from bidding in non-rural areas only and 
in all but one case in areas located in the contiguous U.S., that full 
adjustments based on this information should not be applied to fee 
schedule amounts for items and services furnished in rural and non-
contiguous areas on or after January 1, 2019 because rural and non-
contiguous face unique circumstances, such as lower volume, and in 
certain areas, higher costs. We believe that blended rates can help 
ensure beneficiary access to needed DME items and services in rural and 
non-contiguous areas, and better account for the differences in costs 
for these areas versus more densely populated areas. We believe the fee 
schedule amounts for items and services furnished from January 1, 2019 
through December 31, 2020, in all areas that are currently non-CBAs, 
but are not rural or non-contiguous areas, should be based on 100 
percent of the adjusted fee schedule amounts in accordance with the 
current methodologies under Sec.  414.210(g)(1) through (g)(8). 
Although the average volume of items and services furnished by 
suppliers in non-rural non-CBAs is lower than the average volume of 
items and services furnished by suppliers in CBAs, the travel distances 
and costs for these areas are lower than the travel distances and costs 
for CBAs. Because the travel distances and costs for these areas are 
lower than the travel distances and costs for CBAs, we believe the 
fully adjusted fee schedule amounts are sufficient for suppliers in 
non-rural non-CBAs. We requested specific comments on the issue of 
whether the 50/50 blended rates

[[Page 57030]]

should apply to these areas as well (83 FR 34382).
    We believe that the changes to the CBP that we outlined in section 
V ``Changes to the Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)'' (which change 
bidding and the SPA calculation methodology under the CBP for future 
competitions) may warrant further changes to the fee schedule 
adjustment methodologies under Sec.  414.210(g)(1) through (8). We 
would address further changes to the fee schedule adjustment 
methodologies in future rulemaking.
    In summary, based on stakeholder input, the higher costs for 
suppliers in non-contiguous areas, the longer average travel distance 
for suppliers furnishing items in certain rural areas, the 
significantly lower average volume that most non-CBA suppliers furnish, 
and the decrease in the number of non-CBA supplier locations, we 
proposed to revise Sec.  414.210(g)(9) and to adjust the fee schedule 
amounts for items and services furnished in rural and non-contiguous 
non-CBAs from January 1, 2019 through December 31, 2020, based on a 
blend of 50 percent of the unadjusted fee schedule amounts and 50 
percent of the adjusted fee schedule amounts in accordance with the 
current methodologies under Sec.  414.210(g)(1) through (g)(8). We 
proposed to adjust the fee schedule amounts for items and services 
furnished in non-rural and contiguous non-CBAs from January 1, 2019 
through December 31, 2020, using the current methodologies under Sec.  
414.210(g)(1) through (g)(8). We plan to continue monitoring health 
outcomes, assignment rates, and other information and would address fee 
schedule adjustments for all non-CBAs for items furnished on or after 
January 1, 2021, in future rulemaking.
    The comments on our proposals and our responses to the comments are 
set forth below.
    Comment: Many commenters supported the proposal to base the fee 
schedule amounts for items and services furnished in rural and non-
contiguous areas during the time period from January 1, 2019 through 
December 31, 2020 on a 50/50 blend of adjusted and unadjusted rates. 
Many commenters said that this would help suppliers stay in business 
and that it would help prevent access issues. Some commenters said 
rural areas have higher costs than urban areas. For instance, one 
commenter in Minnesota said that although costs, such as the utility 
cost and real estate tax data we presented in our CY 2019 ESRD PPS 
DMEPOS proposed rule, may be higher in urban areas than in some areas 
of the country, their experience in Minnesota has shown that operating 
costs for branches in rural areas can be significantly higher than 
those for urban areas. Another commenter talked about the costs that 
Native American reservations in very rural areas must face. They 
include frequent power failures, extreme weather, no running water, 
lack of cell phone service, and increased travel distances.
    Response: We appreciate the support for that proposal.
    Comment: Many commenters stated CMS should apply the 50/50 blended 
rate to items and services furnished in the non-rural non-CBAs. As 
support for this, commenters stated that the average volume of items 
and services furnished by suppliers in non-rural non-CBAs is lower than 
the average volume of items and services furnished by suppliers in 
CBAs, and that the decline in number of suppliers has occurred in both 
rural and non-rural areas, which they claim has resulted in problems 
obtaining access to items and services and health issues. Some 
commenters who were suppliers said that they no longer offer some 
products, and that they do not accept Medicare assignment on several 
products, and that this non-assignment would increase if the fee 
schedule amounts for non-rural non-CBAs are not increased. Some 
commenters discussed how suppliers in non-rural non-CBAs must travel 
far distances to deliver DME, and that this and a low population 
density causes costs to suppliers to be higher in non-rural non-CBAs 
than in CBAs. One commenter said that when looking at their costs in 
metropolitan areas, they have a much higher labor cost than rural 
areas, and the delivery costs are also significant, not because of the 
distance, but more so because of the downtime with traffic. Another 
commenter said that there are fewer people in rural non-CBAs than in 
non-rural non-CBAs, and there are fewer people in non-rural non-CBAs 
than there are in CBAs. The commenter also said that this serves as a 
proxy for the volume of patients in the non-rural non-CBAs, and that 
with fewer patients to spread the costs over, the costs are higher. A 
few commenters said that in addition to allowing fixed costs to be 
spread over more patients, there are greater efficiencies of scale 
available in the CBAs. Therefore, while some costs may increase in 
CBAs, such as those CMS listed in the CY 2019 ESRD PPS DMEPOS proposed 
rule, these costs are offset by these economies of scale and the 
ability of suppliers to spread their fixed costs over multiple 
patients. Another commenter said that the most significant variables 
that affect DME supplier costs are labor rates, transportation (fuel, 
trucks and related costs such as vehicle and driver insurance), 
population density, miles/time between points of service, and 
regulatory compliance costs. The commenter stated that the cost of fuel 
is therefore a significant cost factor, and that in recent years, fuel 
costs have risen significantly due to the rising cost of petroleum. The 
commenter then stated that those costs are significantly amplified in 
non-CBAs where the distances to travel to beneficiaries' homes are much 
greater.
    Response: We agree that the average volume of items and services 
furnished by suppliers in non-rural non-CBAs is lower than the average 
volume of items and services furnished by suppliers in CBAs, and that 
total population and population density are both lower in non-rural 
non-CBAs than in CBAs. However, volume of services furnished is only 
one factor impacting the cost of furnishing DMEPOS items and services. 
A number of other factors affecting the costs of furnishing DMEPOS 
items and services such as wages, gasoline, rent, utilities, travel 
distance and service area size point to higher costs in CBAs than non-
rural non-CBAs. Further, although the cost of fuel may have increased 
in recent years, as detailed in our CY 2019 ESRD PPS/DMEPOS proposed 
rule, the price of gas is overall slightly lower in non-CBAs, and 
travel distances are generally lower in non-CBAs than they are in CBAs. 
Travel distances were also only greater in certain non-CBAs, which were 
Frontier and Remote (FAR), OCBSAs, and Super Rural areas. Additionally, 
as one commenter pointed out, metropolitan areas generally have higher 
labor costs than rural areas, and the delivery costs can also be 
significant because of the downtime with traffic. However, we believe 
that these factors are likely only amplified in the more heavily 
populated CBAs.
    Also, as discussed in our CY 2019 ESRD PPS DMEPOS proposed rule, 
past stakeholder input and studies suggest that delivery costs and 
wages affect a suppliers' overall costs more than equipment acquisition 
costs and volume discounts (83 FR 34378). In 2006, Morrison 
Informatics, Inc. conducted a study for the American Association for 
Homecare titled ``A Comprehensive Cost Analysis of Medicare Home Oxygen 
Therapy'', which used a survey of 74 oxygen suppliers to determine 
which factors are more important in influencing oxygen suppliers' cost 
of furnishing oxygen and oxygen

[[Page 57031]]

equipment.\26\ The study concluded that equipment acquisition only 
accounted for 28 percent of the cost of providing medically necessary 
oxygen to Medicare beneficiaries. This study concluded that services 
such as preparing and delivering equipment, driving to the home to 
repair and maintain equipment, training and educating patients, 
obtaining required medical necessity documentation, customer service, 
and operating and overhead costs accounted for 72 percent of overall 
costs.
---------------------------------------------------------------------------

    \26\ Morrison Informatics, Inc., A Comprehensive Cost Analysis 
of Medicare Home Oxygen Therapy (Mechanicsburg, Pa.: June 27, 2006).
---------------------------------------------------------------------------

    Also, as a supplier increases their volume, the costs associated 
with labor, delivery, and overhead also increase proportionally. The 
conclusion drawn from the Morrison study is that although the average 
volume of oxygen and oxygen equipment furnished by suppliers in the 
CBAs may be higher than the average volume of oxygen and oxygen 
equipment furnished by suppliers in the non-CBA areas, this factor 
alone does not mean that the overall costs of furnishing oxygen and 
oxygen equipment in the CBAs is lower than the overall costs of 
furnishing oxygen and oxygen equipment in the non-CBAs. As we have 
previously indicated, our data indicates that the labor, delivery, and 
overhead costs of suppliers furnishing oxygen and oxygen equipment in 
CBAs are higher than the labor, delivery, and overhead costs of 
suppliers furnishing oxygen and oxygen equipment in non-CBAs, and the 
Morrison study concludes that these costs make up 72 percent of the 
oxygen supplier's overall costs.
    We agree that the number of suppliers furnishing items and services 
subject to the fee schedule adjustments is decreasing in non-rural non-
CBAs and we have been monitoring the impact of the fee schedule 
adjustments in these areas closely. In the non-rural non-CBAs, the 
percentage of participating suppliers, meaning suppliers who agree to 
accept Medicare payment for every claim and accept assignment for an 
entire year, has only slightly decreased in non-CBA non-rural areas 
from 29.66 percent in January 2015 to 27.73 percent in July 2018, when 
looking at claims data through week 34 of 2018. It is also worth noting 
that while volume is lower in the non-rural non-CBAs, and the total 
number of suppliers has been decreasing steadily since before the 
implementation of the adjusted fees in 2016, the services per supplier 
in the non-rural non-CBAs has been increasing during that time. Thus, 
while volume is generally less in non-rural non-CBAs than it is in 
CBAs, the volume per supplier in the non-rural non-CBAs has been 
increasing. For instance, when looking at data through week 34 of the 
respective year, from 2016-2017, the services per supplier in non-rural 
non-CBAs increased by 11.33 percent, and from 2017-2018 it increased by 
12.88 percent.
    We have not found evidence that this is causing access beneficiary 
problems or health outcomes issues. Health outcomes for both 
beneficiaries using items and services subject to the fee schedule 
adjustments and beneficiaries who may need items and services subject 
to the fee schedule adjustments have remained stable or have improved 
since the fully adjusted fees were implemented. Regarding beneficiary 
access, as shown in Table 34, allowed services for items and services 
subject to the fee schedule adjustments continue to increase each year 
and the rate that suppliers are accepting assignment of claims paid at 
the fully adjusted rates in non-rural non-CBAs remains very high and 
have increased in 2018 thus far.

  Table 34--Allowed Services and Assignment Rates for Claims for Items Subject to the Fee Schedule Adjustments
                                         Furnished in Non-Rural Non-CBAs
----------------------------------------------------------------------------------------------------------------
                                                          Full year data            Claims paid through week 34
                                                 ---------------------------------------------------------------
                      Year                            Allowed       Assignment        Allowed       Assignment
                                                     services           (%)          services           (%)
----------------------------------------------------------------------------------------------------------------
2015............................................      11,885,241           99.89       6,288,952           99.89
2016............................................      12,266,590           99.85       6,520,165           99.88
2017............................................      12,484,248           99.81       6,697,219           99.80
2018............................................             n/a             n/a       6,954,277           99.83
----------------------------------------------------------------------------------------------------------------

    As the number of suppliers has decreased in non-rural non-CBAs, the 
average volume of items and services furnished by suppliers in non-
rural non-CBAs has increased, which may explain why the rate of 
assignment increased slightly in the first half of 2018 in these areas. 
The high rate of assignment and increase in allowed services indicate 
that payments in these areas are sufficient to cover the costs of 
furnishing the items and services in these areas.
    Comment: Some commenters said that typically, the same DME 
suppliers are serving both the non-rural and the remaining non-CBAs, 
that financial viability and beneficiary access issues are therefore 
not limited to rural and non-contiguous non-CBAs, and that the blended 
50/50 payment rates should thus not be limited to the rural and non-
contiguous non-CBAs.
    Response: As discussed in our CY 2019 ESRD PPS DMEPOS proposed 
rule, our data indicates that the majority of suppliers furnishing 
items and services subject to the fee schedule adjustments are located 
in the same areas where these items and services are furnished (that 
is, the percentage of suppliers located in the same area as the 
beneficiary). For this, we separated the data by CBA, and then non-CBA 
MSA (non-rural), micro area (rural), or Outside Core Based Statistical 
Area (OCBSA), which are counties that do not qualify for inclusion in a 
CBSA (rural). Thus, our data do not confirm that typically, the same 
DME suppliers are serving both the non-rural and the remaining non-
CBAs. In addition, because assignment rates in the non-rural non-CBAs 
continue to be very high despite the full fee schedule adjustments, we 
believe the 50/50 blended rates are appropriate for DME items and 
services furnished in rural and non-contiguous areas, but not in other 
non-CBAs.
    Comment: Some commenters mentioned studies that found beneficiaries 
had problems obtaining DME. For instance, some commenters mentioned an 
industry-funded survey done by Dobson DaVanzo & Associates, LLC that 
claimed that the Medicare competitive bidding program has negatively 
affected beneficiaries' access to DME services and supplies, adversely

[[Page 57032]]

impacted case managers' ability to coordinate DME for their patients, 
and placed additional strain on suppliers to deliver quality products 
without delay. Some commenters mentioned a survey done by the American 
Thoracic Society (ATC) that found that supplemental oxygen users 
experienced frequent and varied problems, particularly a lack of access 
to effective instruction and adequate portable systems, and that 
patients living in Competitive Bidding Program areas reported oxygen 
problems more often than those who did not.27 28
---------------------------------------------------------------------------

    \27\ Dobson DaVanzo & Associates, LLC. Access to Home Medical 
Equipment: Survey of Beneficiary, Case Manager, and Supplier 
Experiences. (October 9, 2017).
    \28\ American Thoracic Society. Patient Perceptions of the 
Adequacy of Supplemental Oxygen Therapy. Results of the American 
Thoracic Society Nursing Assembly Oxygen Working Group Survey. 
(January 1, 2018).
---------------------------------------------------------------------------

    Response: The GAO reviewed these and other studies mentioned by 
commenters that assessed the effect of the implementation of fee 
schedule adjustments on beneficiaries, DME suppliers, and others in a 
report titled ``Information on the First Year of Nationwide Reduced 
Payment Rates for Durable Medical Equipment'' (GAO-18-534). The GAO 
found that these studies did not provide persuasive evidence of 
substantial effects of fee schedule adjustments on DME access, 
primarily because of methodological issues with how the participants in 
the studies were recruited. Specifically, respondents were recruited on 
social media platforms or through targeted email notifications, raising 
concerns about selection bias. The GAO did note that some effects may 
take longer to appear, underscoring the importance of our continued 
monitoring activities, and we will continue to monitor the effects of 
the fee schedule adjustments on beneficiary access to DME items and 
services.
    Comment: A few commenters recommended that CMS develop a mechanism 
to better understand why utilization has decreased in non-CBAs. Some 
commenters disagreed with CMS' determination that a decrease in 
utilization can be attributed to a reduction in waste, fraud, and 
abuse.
    Response: We would like to note that while utilization of DME 
varies throughout area and by particular item, the number of total 
services increased from 2016 to 2017 (2.05 percent), and from 2017 to 
2018 (3.08 percent) when looking at the number of total services 
furnished through week 34 of the respective year. There has been a 
persistent increase in total volume of services furnished in non-CBAs 
from 2016 to 2018, driven by an increase in CPAP/RADs. All other 
products exhibit either a continuous decline from 2016 through 2018, or 
at least a decline from 2017 to 2018. However, when looking at data 
through week 34 of the respective year, from 2016 to 2017, the services 
per supplier in non-rural non-CBAs increased by 11.33 percent, and from 
2017 to 2018 it increased by 12.88 percent. Rural non-CBAs follow a 
similar trend, in that when looking at data through week 34 of the 
respective year, from 2016 to 2017, the services per supplier in rural 
non-CBAs increased by 10.91 percent, and from 2017 to 2018 it increased 
by 10.39 percent. Although we cannot be certain how much a decrease in 
utilization can be attributed to a reduction in waste, fraud, and 
abuse, the OIG has noted that services provided by DME suppliers have 
been consistent targets of Medicare fraud schemes, and the OIG has also 
previously noted that there have been reductions in Medicare billing 
and payments for certain services and geographic areas known for fraud 
risks.
    Comment: Another commenter said that the geographic areas that CMS 
examines are too large and heterogeneous to detect access problems or 
other negative beneficiary outcome issues. The commenter asserted that 
even the size of the CBAs can be too large to detect access issues 
related to DMEPOS supplies. The commenter also said that these 
aggregate data mask important access issues to DMEPOS that may not 
ultimately result in negative outcomes -- but only because hospitals or 
other stakeholders act to ensure that beneficiaries receive their 
DMEPOS and related supplies in a timely manner, despite suppliers' 
failure.
    Response: We agree that individual problems with access to items 
and services may not be detected in the claims and health outcomes 
monitoring, but we do not agree that widespread issues exist that are 
undetected. The level of analysis performed would pick up any spikes in 
the data if they occurred. For example, an increase in the average 
length of stay in hospitals and nursing homes that might suggest a 
delay in receiving DME in the home would be detected and flagged for 
more detailed analysis. We believe the geographic areas that we examine 
are appropriate because they allow us to have an appropriately sized 
study population and that a smaller sized population might prevent us 
from drawing meaningful conclusions.
    Comment: Some commenters, when commenting on ways to improve our 
fee schedule monitoring data, said that although CMS indicates no 
significant changes have been observed in assignment rates, nonassigned 
claims are not an option for dual eligible beneficiaries. This is 
because all Medicare providers must accept assignment (payment in full) 
for Part B services furnished to dual eligible beneficiaries. 
Therefore, the commenters concluded, using assignment rates for people 
with disabilities and who are eligible for Medicaid is not a valid 
monitor for access problems.
    We also received many comments that focused on furnishing and 
billing for respiratory services, particularly oxygen. A few commenters 
said that the assignment rates are an interesting point, but it is not 
practical to assume that suppliers can seek additional payments from 
beneficiaries. The commenters said that suppliers take assignment 
because the beneficiaries cannot afford to pay suppliers directly for 
the services, and that even a monopoly supplier would take assignment 
because some payment is better than nothing, especially if there is 
some hope that policy-makers will reform the system. In addition, the 
commenters said that due to the rental nature of the equipment, and the 
compliance rules regarding monthly notification, and acknowledgement of 
non-assignment to the beneficiary, it is nearly impossible for 
reputable providers to compliantly bill for respiratory services on a 
non-assigned basis. Thus, the commenters asserted that assignment data 
do not really tell policy-makers anything about access. One commenter 
said that assignment provides no indication of a supplier's true 
willingness to accept the Medicare rate for products and services 
because assignment assumes suppliers can collect the difference in cost 
from beneficiaries. Another commenter said that any additional charges 
are highly unlikely to be recouped and will function as bad debt. The 
commenter also said that unlike other Medicare providers, home 
respiratory therapy suppliers are not required to report such bad debts 
and there is no policy to provide any bad debt relief to suppliers. 
Thus, even if Medicare payment amounts are too low, the commenter said 
suppliers are unlikely to seek the difference between the rates and the 
cost of providing equipment and services from beneficiaries, because 
the cost of seeking the additional payment coupled with the low 
likelihood of obtaining payment make the process impracticable.
    Response: Our data shows that suppliers in the non-rural, non-CBAs

[[Page 57033]]

accept the fully adjusted fee schedule amounts as payment in full over 
99 percent of the time, while allowed services in these areas continues 
to increase each year. We also would like to note that the assignment 
rate for suppliers furnishing oxygen in the non-rural non-CBAs was 
99.96 percent in 2017, and remains unchanged at 99.96 percent in 2018, 
when looking at data through week 34 of 2018. Additionally, the number 
of services per supplier for suppliers furnishing oxygen in the non-
rural non-CBAs is also increasing, for example, it increased 2.64 
percent from 2016 to 2017, and increased 3.62 percent from 2017 to 
2018, when looking at data through week 34 of 2018. We do not believe 
that a supplier can accept assignment if the payment amount is below 
their cost, certainly not on a sustained basis over several years. Even 
when we exclude claims for items and services furnished to 
beneficiaries dually enrolled in Medicare and Medicaid, which are cases 
in which suppliers must accept assignment of the claim, the rate of 
assignment remains extremely high. Table 35 shows the same data from 
Table 34 for non-rural non-CBAs, after excluding data for items and 
services furnished to beneficiaries dually enrolled in Medicare and 
Medicaid. Thus, the high overall assignment rates in the non-CBAs are 
not due to cases in which supplier must accept assignment. Rather, high 
assignment rates are prevalent throughout the non-CBAs. We believe that 
assignment rates are one effective method of determining whether 
Medicare payment rates are sufficient, and that these high assignment 
rates in the non-rural non-CBAs support our decision to apply the fully 
adjusted payment rates in these areas.

  Table 35--Allowed Services and Assignment Rates for Claims for Items Subject to the Fee Schedule Adjustments
                                         Furnished in Non-Rural Non-CBAs
                     [Excluding claims for dual (Medicare/Medicaid)-eligible beneficiaries]
----------------------------------------------------------------------------------------------------------------
                                                          Full year data            Claims paid through week 34
                                                 ---------------------------------------------------------------
                      Year                            Allowed                         Allowed
                                                     services      Assignment  %     services      Assignment  %
----------------------------------------------------------------------------------------------------------------
2015............................................       8,809,268           99.87       4,639,097           99.87
2016............................................       9,223,208           99.81       4,884,326           99.86
2017............................................       9,487,963           99.77       5,067,065           99.76
2018............................................             n/a             n/a       5,374,904           99.79
----------------------------------------------------------------------------------------------------------------

    Comment: A few commenters recommended that CMS study the number of 
delivery/service calls a DME provider can make in a day in CBAs and 
non-CBAs. The commenters stated that the cost per delivery/service call 
will vary significantly in more densely populated areas than in less 
populated areas. For example, some commenters stated that in a CBA, a 
DME supplier can make multiple stops in a day, while a DME supplier in 
a non-CBA can make significantly fewer. Therefore, the cost per visit 
in non-CBAs is significantly higher. One commenter went on to explain 
that this means that DME suppliers in non-CBAs require more trucks, 
more employees, more fuel (and all the related overhead costs) to be 
able to serve the same number of beneficiaries. Another commenter 
disagreed with the way CMS measured its travel distance analysis, 
saying that CMS operated under the premise that DME suppliers use 
single round trips to deliver items to beneficiaries, when DME 
suppliers rely on the efficiency of routes and volume to deliver items 
to beneficiaries. The commenter asserted that had CMS started with this 
presumption of DME operations, they would have arrived at the 
conclusion that it is more costly to operate in non-CBAs.
    Response: Since we do not have data on the number of stops a 
delivery truck makes and the distance between stops, we are not able to 
factor this variable into our data for average travel distance. 
However, our analysis was not based on a premise that DME suppliers use 
single round trips to deliver items to beneficiaries. We understand 
that this is not the case in practice and used other data besides the 
distance between the beneficiary address and the supplier address on 
claim forms to determine the service areas and delivery distances for 
suppliers. We looked at the differences in land areas for the CBAs 
compared to the land areas for non-CBAs (MSAs and micropolitan 
statistical areas not included in the CBP) and found that the areas 
served by the contract suppliers under the CBP are much larger than the 
non-CBA areas. The size of the CBAs are approximately double the size 
of the MSAs where competitive bidding has not yet been phased in. Data 
also show that 65 percent of the items furnished to beneficiaries in 
these MSAs are furnished from suppliers located within the MSA, meaning 
that the greatest distance the majority of suppliers serving these 
areas would have to travel to furnish items within these areas is half 
the distance that suppliers in CBAs would have to travel. We understand 
that suppliers serving larger, more densely populated areas will 
generally have more locations, trucks, drivers, and other employees to 
serve the larger populated areas, but as one commenter pointed out, 
travel time in heavily populated areas is affected by traffic and costs 
in larger, more densely populated areas metropolitan areas (wages, 
rent, utilities, tolls) is higher. Suppliers in CBAs will spend more 
money on rent and utilities, trucks, and wages to serve the larger, 
more densely populated urban areas than suppliers in smaller, less 
densely populated non-CBA urban areas. So, even though the supplier in 
the larger, more densely populated area may have more items to spread 
these costs over, the costs they spread over the items are considerably 
greater. We have not found that the total costs of suppliers in non-
rural, non-CBAs are greater than or less than the total costs of 
suppliers in CBAs, nor have we seen data suggesting that the cost per 
visit in non-CBAs is significantly higher than in CBAs.
    Comment: A few commenters stated that CMS should have compared the 
average travel distance and cost, the average volume of items and 
services furnished by suppliers, and the number of suppliers in CBAs to 
the average travel distance and cost, the average volume of items and 
services furnished by suppliers, and the number of suppliers in all 
non-CBAs, and not by any other geographic delineation (MSAs, 
micropolitan statistical areas, super rural areas, etc.). The commenter 
stated that the Cures Act mandated the Secretary to take into account a 
comparison of certain factors with

[[Page 57034]]

``respect to non-competitive acquisition areas and competitive 
acquisition areas'' when determining fee schedule adjustments for items 
and services furnished after January 1, 2019. The commenter also stated 
that as a result, CMS should make the same fee schedule adjustments for 
all non-CBAs, regardless of whether the area is rural or non-rural. 
Some commenters stated that because Congress passed Section 16007 of 
the Cures Act, which retroactively applied the 50/50 blended rates in 
all non-CBAs from June 30, 2016 to December 31, 2016, that it was the 
intent of Congress in passing section 16008 of the Cures Act for CMS to 
increase payment in all non-CBAs.
    Response: We took into consideration the issues that stakeholders 
have raised for this analysis. Many stakeholders have claimed that the 
costs of furnishing items and services in rural areas are different 
than the cost of furnishing items and services in urban areas. 
Specifically, stakeholders have indicated that costs in rural areas are 
higher than costs in urban areas. All CBAs are currently located in 
MSAs or urban areas, whereas non-CBAs are a mixture of areas that are 
urban/MSAs (similar to CBAs) and other areas that are rural (not 
similar to CBAs). Based on stakeholder input, it is important to 
distinguish between urban and rural areas, and separately analyzing 
data for rural and urban non-CBAs and comparing this data and 
information to data and information for CBAs comports with this 
stakeholder input. Section 16008 of the Cures Act mandated that CMS 
take certain information into account when adjusting fee schedule 
amounts for items furnished on or after January 1, 2019. Section 16008 
of the Cures Act does not require CMS to adjust fee schedule amounts 
any differently (upward or downward) based on this information. CMS 
conducted an analysis of the factors outlined in section 16008 of the 
Cures Act, and the results of the analysis are summarized in this final 
rule and in the proposed rule (83 FR 34380). Based on the stakeholder 
comments, and our data showing higher costs for non-contiguous areas, 
the increased average travel distance in certain rural areas, the 
significantly lower average volume per supplier in non-CBAs, especially 
in rural and non-contiguous areas, and the decrease in the number of 
non-CBA supplier locations, we believe the fee schedule amounts for 
items and services furnished from January 1, 2019 through December 31, 
2020, in all areas that are currently rural or non-contiguous non-CBAs, 
should be based on a blend of 50 percent of the unadjusted fee schedule 
amounts and 50 percent of the adjusted fee schedule amounts in 
accordance with the current methodologies under Sec.  414.210(g)(1) 
through (g)(8).
    Comment: Some commenters recommended that CMS adopt add-on payment 
policies for the non-CBAs. For instance, a few commenters recommended 
that after the end of the blended rate extension, that CMS establish 
two percentage add-ons for the non-CBA areas: one for the non-rural 
non-CBAs and one for the rural non-CBAs. The commenters recommended 
setting the non-rural non-CBAs at the regional SPA + 16 percent, and 
the rural non-CBAs at the regional SPA + 22 percent. The commenters 
said that these amounts are based on data obtained from a survey of 
suppliers indicating that costs were 5 percent higher than the SPAs in 
CBAs and the cost differential they identified through their cost 
survey. As an example, a few commenters mentioned that Congress set the 
ambulance fee schedule urban and rural add-ons through statute, but 
left the calculation of the super rural add-on to CMS to determine. To 
make this calculation, CMS used existing GAO report data that 
ultimately supported the current super-rural add-on of 22.6 percent. 
One commenter said that this supports paying higher in these super-
rural areas. Another commenter said that once CMS implements the next 
CBP, CMS should apply rural and super-rural add-on payments to all non-
CBAs.
    One commenter recommended that CMS establish a special payment 
policy for suppliers providing service to rural beneficiaries. The 
commenter mentioned how, currently, CMS uses a special rule for rural 
areas for items included in more than 10 CBAs. In addition, the 
commenter said CMS could supplement this special rule by making it more 
generous, and also applying the national ceiling prices in areas with a 
limited number of suppliers or low average volume of Medicare business. 
As an example, the commenter said the national ceiling amount could 
apply to areas with low volume of Medicare business or to suppliers 
meeting a low numerical threshold; for instance, the lowest quartile 
based on volume of a particular DMEPOS item or number of suppliers in 
an area. The commenter also said that this would help boost payment 
levels in other markets, and not just rural ones. In addition, the 
commenter also suggested CMS as another option, or in addition to the 
aforesaid policy, establish an add-on payment for these defined low 
volume or low supplier areas, based on its general approach used for 
rural areas in the ambulance fee schedule. The commenter also said that 
this could involve increasing the base payment by a percentage amount 
such as 10 percent.
    One commenter recommended CMS conduct its own survey of costs to 
support the cost differential. The commenter also recommended that CMS 
extend the blended 50/50 payment rates in rural and non-rural non-CBAs 
until CMS can determine and implement the appropriate percentage add-on 
adjustments. Another commenter welcomed the opportunity to work with 
CMS to identify the specific data such a survey would collect and to 
work with other stakeholders.
    One commenter recommended that CMS should add another percentage 
add-on to the current 50/50 blended rates in rural areas.
    Another commenter said that CMS should create a formula to factor 
in costs due to distance and a lack of other patients. Similarly, 
another commenter said CMS should ensure there are a sufficient number 
of qualified suppliers within certain distances of rural and non-
contiguous service areas to ensure products are available within 
acceptable time frames.
    Response: We thank the commenters for their specific 
recommendations regarding adopting add-on payments for items and 
services furnished in non-CBAs. We did not propose any payments like 
those described by commenters. We will keep these recommendations in 
mind for future rulemaking.
    We currently believe that finalizing the fee schedule adjustment 
policy of paying the 50/50 blended rates for items and services 
furnished in all rural and non-contiguous non-CBAs ensures access to 
DME in all of these areas and is administratively simpler than applying 
payments like those described by commenters only in certain areas. We 
recognize that there are certain supplier cost and volume differences 
in rural and non-contiguous non-CBAs, which is why this final rule 
distinguishes rural and non-contiguous non-CBAs from other non-CBAs and 
results in higher payments to suppliers furnishing items in the rural 
and non-contiguous non-CBAs. We also believe that paying an amount in 
addition to the blended 50/50 payment rates would be excessive and 
unnecessary, and not in line with what most commenters requested, as 
most commenters specifically requested the blended 50/50 payment rates 
in rural and non-contiguous non-CBAs. This indicates that such payment 
rates are sufficient, which is why we are also

[[Page 57035]]

not incorporating the ambulance fee schedule's concept of a super rural 
add-on into our payment. We do not believe that we need to conduct a 
survey of costs, as we have already analyzed several cost data 
variables as part of section 16008 of the Cures Act, as discussed in 
section VI.A.4 of the CY 2019 ESRD PPS DMEPOS proposed rule, and 
briefly described in section VI.A.1 in this final rule.
    We will continue to monitor the effects of these adjustments. 
However, as discussed in section VI.A.7 of the CY 2019 ESRD PPS DMEPOS 
proposed rule, we have been monitoring the effects of the fee schedule 
adjustments since they took effect in 2016 in non-CBAs, and the data 
does not show any observable trends indicating an increase in adverse 
health outcomes such as mortality, hospital and nursing home admission 
rates, monthly hospital and nursing home days, physician visit rates, 
or emergency room visits in 2016, 2017, or 2018 compared to 2015 in the 
non-CBAs, overall. In addition, we have been monitoring data on the 
rate of assignment in non-CBAs and it remains high (over 99 percent) in 
most areas, which reflects when suppliers are accepting Medicare 
payment as payment in full and not balance billing beneficiaries for 
the cost of the DME.
    Comment: A few commenters commented on our analysis of maximum 
winning bids for section 16008 of the Cures Act. One commenter said 
that CMS did not include in its analysis the bidding logic used by 
those who submitted bids, and the commenter went on to say that the 
factors that play a role in how one determines their bid amount are bid 
ceilings, median pricing, potential increased volumes, limited 
competition, out of area bid winners, how much of the service area is 
impacted by a bid area and the ability to remain in the Medicare 
business or not, logic, emotion, and financial impact. A few commenters 
said that they were not surprised that we found no discernable patterns 
in the maximum winning bids, given that, as the commenter says, the 
ability of suppliers to game the current methodology, a lack of 
transparency, and confusion around the bid ceiling, and that it is 
unlikely that the bids represent a true gauge of cost or reflect 
rationale and consistent behavior. The commenters went on to say that 
they believe that if the proposed changes to the CBP in section V of 
the CY 2019 ESRD PPS DMEPOS proposed rule are finalized, there will be 
more rational behavior among suppliers when determining their bids, 
which will lead suppliers to bid in a way that is more reflective of 
their costs and the markets they are serving.
    Response: We agree that many factors influence what amount a 
supplier will submit as their bid amount, but there is no way to 
itemize all of the possible factors and which factors are more 
important to which types of suppliers. The circumstances surrounding 
the costs and efficiencies of every individual supplier as well as the 
bidding strategies they use can vary widely from supplier to supplier. 
We believe this reinforces the fact that this factor (the highest 
winning bid in an area is subjective and supplier-specific) provides 
little to no insight regarding supplier costs in general and how fee 
schedule amounts should be adjusted in non-CBAs.
    Comment: A few commenters raised concerns with our proposal to 
adjust the fee schedule amounts for items and services furnished in 
rural and non-contiguous non-CBAs from January 1, 2019 through December 
31, 2020 based on a blend of 50 percent of the unadjusted fee schedule 
amounts and 50 percent of the adjusted fee schedule amounts. The 
Medicare Payment Advisory Commission (MedPAC) did not support our 
proposal to pay the 50/50 blended rates for items and services 
furnished in rural and non-contiguous areas and said CMS should adopt a 
more limited, targeted, and less costly approach. MedPAC said that 
using 50/50 blended payment rates results in large payment increases, 
often of 50 percent or more. MedPAC also said that while CMS presents 
data indicating that some supplier costs are higher in rural and non-
contiguous areas, the agency also found that other costs are lower in 
those areas, and the agency does not present data to justify the large 
magnitude of the proposed adjustment. MedPAC also said that the 50/50 
blended payment rates in all rural and non-contiguous areas for all 
DMEPOS products included in the CBP is not well targeted. For example, 
MedPAC noted that micropolitan areas (which are considered rural for 
the purposes of fee schedule adjustments) likely face different 
challenges than remote, non-contiguous areas. Finally, MedPAC as well 
as another commenter, noted that the 50/50 blend rates creates a 
financial burden for the Medicare program and beneficiaries. Commenters 
noted that over 2 years, we estimate that the proposed fee schedule 
adjustments will cost more than $1.3 billion dollars--$1.05 billion for 
the Medicare program and $260 million in beneficiary cost sharing. 
MedPAC also noted the $360 million in additional costs incurred by the 
Medicare program and beneficiaries associated with using 50/50 blended 
rates in rural and non-contiguous areas for the last seven months of 
2018, as a result of the interim final rule published in the Federal 
Register on May 11, 2018, titled ``Medicare Program; Durable Medical 
Equipment Fee Schedule Adjustments To Resume the Transitional 50/50 
Blended Rates To Provide Relief in Rural Areas and Non-Contiguous 
Areas'' (83 FR 21912). MedPAC said that it continues to believe that 
CMS should use its current statutory authority (and seek additional 
legislative authority where necessary) to expand the CBP to offset 
these increased burdens. MedPAC said that expanding the CBP into new 
product categories, such as orthotics, would produce substantial 
savings and help prevent fraud and abuse.
    Response: We thank the commenter for raising their concerns with us 
regarding our proposal to pay the 50/50 blended rates for items and 
services furnished in rural and non-contiguous non-CBAs. The extension 
of these blended rates is for a 2-year period and we will continue to 
monitor the effects of these rates. Based on the stakeholder comments, 
our data showing higher costs for non-contiguous areas, the increased 
average travel distance in certain rural areas, the significantly lower 
average volume per supplier in non-CBAs, especially in rural and non-
contiguous areas, and the decrease in the number of non-CBA supplier 
locations, we believe the fee schedule amounts for items and services 
furnished from January 1, 2019 through December 31, 2020 in all areas 
that are currently rural or non-contiguous non-CBAs, should be based on 
a blend of 50 percent of the unadjusted fee schedule amounts and 50 
percent of the adjusted fee schedule amounts in accordance with the 
current methodologies under Sec.  414.210 (g)(1) through (g)(8).
    Comment: MedPAC supported the proposal to continue to fully adjust 
the fee schedule amounts for items and services furnished in non-rural, 
contiguous non-CBAs based on information from the CBP. MedPAC believes 
CMS's analyses, which suggest that the travel distance and costs are 
lower in non-rural non-CBAs relative to CBAs, support fully adjusting 
the fee schedule amounts based on information from the CBP, instead of 
using a 50/50 blend of adjusted and unadjusted fee schedule amounts. In 
the long term, MedPAC said that CMS should use its current authority to 
expand the CBP to non-rural, non-CBAs to the extent any future concerns 
arise about the appropriateness of using CBP rates from

[[Page 57036]]

large non-rural areas to set payment rates in smaller non-rural areas.
    Response: We thank MedPAC for their support of our proposal with 
respect to the fee schedule adjustments for items and services 
furnished in non-rural, contiguous non-CBAs. We agree that our 
analyses, which suggest that the travel distance and costs are lower in 
urban non-CBAs relative to CBAs, and support fully adjusting the fee 
schedule amounts for items and services furnished in non-rural, 
contiguous non-CBAs based on information from the CBP instead of using 
a 50/50 blend in such areas.
    Comment: In the 2019 ESRD PPS DMEPOS proposed rule, we sought 
comments on ways to improve the fee schedule monitoring data that we 
use to monitor beneficiary health and access issues in the non-CBAs. 
These comments were outside the scope of the proposals. A few 
commenters suggested creating a position within CMS, such as an 
ombudsman, whose position would be to monitor and address access, 
quality, supplier availability, and other issues regarding the adequacy 
of payment levels in non-CBAs. One commenter said that because CMS 
already has an ombudsman focused on CBAs, an ombudsman focused on non-
CBA issues would be able to better understand the impacts of payment 
rates in non-CBAs.
    Some commenters said that it is impossible to track changes in the 
features and options available to Medicare beneficiaries within the CBP 
compared to those available to beneficiaries outside of the CBA due to 
the fact that the HCPCS codes contain heterogeneous products. The 
commenters recommended that CMS enable better monitoring of changes in 
product offerings as a result of the CBP and fee schedule adjustments 
through HCPCS coding. One commenter said that CMS has no measure of the 
access to services or the quality of services provided.
    One commenter recommended that CMS examine the 2013 fee-for-service 
diabetic population that used insulin at the time, and track that 
population through 2017, with cohorts for those continuing use of 
diabetic testing supplies compared to those not using or discontinuing 
their use of diabetic testing supplies, and to assess the outcomes and 
costs for Part A and B for each subgroup by year.
    A few commenters recommended that CMS compare the number of 
Medicare beneficiaries with chronic obstructive pulmonary disease 
(COPD) with the number of beneficiaries receiving home oxygen therapy. 
One commenter requested a standard benchmark to assess whether the 
percentage of patients who require the therapy because of their 
diagnosis actually receive it.
    Another commenter said CMS should determine whether hospital data, 
admissions, or readmissions are specific enough to track admissions/
readmissions related to complications associated with noncompliance 
with home respiratory therapy. The commenter also noted that the 
analysis should be sensitive to whether metrics of hospitalizations for 
other chronic conditions are improving but the metric for COPD patients 
is flat or declining, which could indicate that there is a problem with 
access to home therapies.
    A few commenters said CMS should determine whether SNF/long-term 
care (LTC) beneficiaries using home respiratory therapies is 
increasing, and that an increase might suggest that patients are being 
institutionalized rather than being able to remain in their homes.
    Other commenters said CMS should survey prescribers of home 
respiratory therapy to evaluate the difficulty of discharging patients 
who require such therapy.
    Some commenters recommended that CMS support the ATC survey of 
patients and suggest modifications to target questions about services 
more specifically.
    More commenters said CMS should enhance beneficiary awareness of 
the CMS complaint process and publicly report on the complaints it 
registers, and not just those that are ultimately resolved by a 
supplier.
    They also said CMS should establish a patient satisfaction survey/
patient-reported outcomes measure for home respiratory therapy that 
would capture issues like isolation, reduced services, reduced delivery 
areas, and other impacts that cannot be measured using claims data.
    One commenter agreed that hospital and nursing home admission 
rates, monthly hospital and nursing home days, physician visit rates, 
and emergency room visits are all reasonable indicators for continued 
monitoring. The commenter encouraged CMS to also consider obtaining and 
monitoring information from discharge planners, prescribers and 
beneficiaries regarding delays and issues in obtaining DMEPOS services 
for their patients in impacted areas.
    Another commenter said that the approach CMS currently uses to 
monitor access solely through review of claims data would not capture 
these, or similar, situations. In addition, the commenter then 
recommended a more refined and granular approach to detect meaningful 
differences that CMS can act on as part of an ongoing monitoring 
approach. The commenter also believed that a quantitative approach 
complemented by a qualitative approach, such as ongoing surveys or 
selective case studies of sites where issues have been reported, would 
improve CMS' efforts to monitor beneficiary access and health outcomes 
and provide more actionable data to resolve access-related issues.
    Response: We thank the commenters for suggesting ways in which to 
improve our fee schedule monitoring data. We will take these comments 
into consideration going forward.
2. Proposed Fee Schedule Adjustments for Items and Services Furnished 
in Former Competitive Bidding Areas During a Gap in the DMEPOS CBP
    In the event of a future gap in the CBP due to CMS being unable to 
timely recompete contracts under the program before the DMEPOS 
competitive bidding contract periods of performance end, we proposed a 
fee schedule adjustment methodology that would be used to adjust the 
fee schedules for items and services that are currently subject to and 
included in competitive bidding programs. We believe that a fee 
schedule adjustment methodology for items and services furnished during 
a gap in the CBP in areas that were included in the CBP should result 
in payment amounts that are comparable to the SPAs that would otherwise 
be established under the CBP in order to maintain the level of savings 
that would otherwise be achieved if the CBP was in effect. We proposed 
a specific fee schedule adjustment methodology for items and services 
furnished within former CBAs in accordance with sections 1834(a)(1)(F) 
and 1834(a)(1)(G) of the Act. Specifically, we proposed to add a new 
paragraph (10) under Sec.  414.210(g) that would establish a 
methodology for adjusting fee schedule amounts paid in areas that were 
formerly CBAs during periods when there is a temporary lapse in the 
CBP. We proposed to adjust the fee schedule amounts for items and 
services furnished in former CBAs based on the SPAs in effect in the 
CBA on the last day before the CBP contract periods of performance 
ended, increased by the projected percentage change in the CPI for all 
Urban Consumers (CPI-U) for the 12-month period on the date after the 
contract periods ended (for example, January 1, 2019). If the gap in 
the CBP lasts for more than 12 months, the fee schedule amounts are 
increased once every 12 months on the anniversary date of the first day 
after the contract period

[[Page 57037]]

ended based on the projected percentage change in the CPI-U for the 12-
month period ending on the anniversary date.
    We also proposed to revise Sec.  414.210(g)(4), so that it does not 
conflict with the proposed new paragraph (g)(10), by revising the first 
sentence in paragraph (g)(4) to read: ``In the case where adjustments 
to fee schedule amounts are made using any of the methodologies 
described, other than paragraph (g)(10) of this section, if the 
adjustments are based solely on SPAs from competitive bidding programs 
that are no longer in effect, the SPAs are updated before being used to 
adjust the fee schedule amounts.''
    With regard to payment for non-mail order diabetic testing 
supplies, section 1834(a)(1)(H) of the Act mandates that payment for 
non-mail order diabetic testing supplies be equal to the SPAs 
established under the national mail order competition for diabetic 
testing supplies. We believe that as of January 1, 2019, we must 
continue payment for non-mail order diabetic supplies at the current 
SPA rates. These SPA rates would not be updated by inflation adjustment 
factors and would remain in effect until new SPA rates are established 
under the national mail order program. We do not believe that this 
statutory provision would cease to apply in situations where there is a 
gap in the national mail order competitions for diabetic testing 
supplies; and therefore, we will continue to use the SPAs for mail 
order diabetic testing supplies as the payment amounts for non-mail 
order diabetic testing supplies in the event that there is a gap in the 
CBP.
    We requested comments on these proposals.
    The comments and our responses to the comments on our proposals for 
fee schedule adjustments for items and services furnished in former 
CBAs during a gap in the DMEPOS CBP are set forth below.
    Comment: Several commenters endorsed increasing the payment levels 
in former CBAs beyond the proposal to adjust the fee schedule amounts 
in former CBAs based on the SPA increased by the projected percentage 
change in the CPI-U for the 12 month period ending January 2019. Some 
commenters raised a concern that the SPAs were based upon bids from 
suppliers who anticipated a larger volume of business as contract 
suppliers than what would occur starting January 1, 2019, in the former 
CBAs when any supplier can furnish the items and services. Some DME 
suppliers and industry associations said that without that greater 
volume, prices will have to increase to better ensure continuing 
beneficiary access. Other commenters stated that during the gap period 
in competitive bidding, CMS should recalculate SPAs based on the 
clearing price (maximum winning bids) and change the reimbursement 
rates for the non-CBAs and CBAs accordingly until the next round of 
competitive bidding begins. Some commenters recommended that CMS should 
apply the 50/50 blended rates to the former CBAs, until the next round 
of competitive bidding takes place. Other commenters recommended that 
CMS adjust the SPAs in the former CBAs by adding a CPI-U increase 
compounded from 2013 through 2018 or 2019 to generate the adjusted 2019 
CBA SPA rate, as 2013 was when the CBP was expanded throughout the 
nation under Round 2. Another commenter said that previously contracted 
suppliers should not be penalized for providing service in CBAs during 
the contract terms, and that CMS should pay a premium to previously 
contracted suppliers to offset the reduction in the volume of patients, 
such as 15 percent.
    Response: We thank the commenters for their recommendations for how 
to adjust the fee schedule amounts for items and services furnished in 
the former CBAs during the gap in the CBP. We believe that the CY 2019 
ESRD PPS DMEPOS proposed rule, which we are finalizing, will result in 
adequate fee schedule amounts given that the SPAs that the adjusted 
fees are based on are the same amounts that have been used to adjust 
the fee schedule amounts for non-rural non-CBAs since January 1, 2017, 
and suppliers in these areas have accepted these rates as payment in 
full over 99 percent of the time. Stakeholders overwhelmingly have 
claimed that costs in non-rural non-CBAs are higher than costs in CBAs 
based on differences in population and volumes of items furnished. 
Thus, if fully adjusted fees based on SPAs are sufficient to cover the 
costs in the non-rural, non-CBAs, they should be sufficient to cover 
the costs in the higher populated, higher volume areas. As shown in 
Table 50 of the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34377), 
for items subject to the fee schedule adjustments, the 2016 allowed 
services in CBAs are approximately double the 2016 allowed services in 
non-rural, non-CBAs.
    We believe that adjusting fees based on maximum winning bids would 
result in excessive payments based on this same logic.
    Comment: Some commenters opposed the proposed rule, and 
specifically focused on the payment amounts for mail order diabetic 
supplies, requesting higher payments. They cited previous payment 
reductions for suppliers, a decline in the number of suppliers, claims 
that there are lower quality supplies due to the National Mail Order 
CBP, potential health and access issues during the gap in the National 
Mail Order, and the National Mail Order CBP contract periods of 
performance ending on December 31, 2018 as reasons why payments should 
be higher for mail order diabetic supplies during the gap in the CBP. 
Lastly, multiple commenters suggested ways CMS should pay higher 
amounts for diabetic testing supplies during the gap in the National 
Mail Order CBP. A few commenters said CMS should return to the 
unadjusted fee schedule reimbursement rate, or the lesser of the 
supplier's charge for an item. A few other commenters recommended that 
CMS apply an inherent reasonableness standard based on valid and 
reliable data, and reduce the unadjusted fee schedule price of a box of 
diabetic test strips by fifteen percent, for instance. A few commenters 
said that there was an average 45 percent reduction in the SPA for 
items in product categories other than diabetic testing supplies, and 
as a result, CMS should apply a 45 percent reduction in the price of 
diabetic testing supplies from the unadjusted fee schedule amount, 
which would result in a SPA of $18.70 per box. One commenter went on to 
say that if CMS decides to maintain the current reimbursement structure 
of SPA plus CPI-U for all former CBAs, CMS should set the SPA for 
diabetic testing supplies at the $18.70 amount plus the CPI-U for every 
12 months since 2013, or set an amount that is above $20 per box for 
blood glucose test strips.
    Response: We thank the commenters for their recommendations for how 
to adjust the fee schedule amounts used to pay for mail order diabetic 
testing supplies during the gap in the National Mail Order CBP. We 
believe that the proposed fee schedule adjustment methodology will 
result in payment amounts that will be adequate given the high rate of 
assignment of claims by suppliers for non-mail order diabetic testing 
supplies since July 2016, when fee schedule amounts adjusted based on 
the current SPAs from the National Mail Order CBP were implemented. We 
will continue our monitoring efforts during the gap in the CBP once 
contracts expire. With regard to the comment recommending that CMS 
apply an inherent reasonableness standard based on valid and reliable 
data in establishing the fee schedule amounts

[[Page 57038]]

for mail order diabetic testing supplies during the gap in the CBP, we 
note that the 15 percent threshold the commenters refer to is used to 
determine which of two processes outlined in section 1842(b)(8) of the 
Act CMS must follow when invoking the inherent reasonableness authority 
to adjust fee schedule amounts for items and services not subject to 
competitive bidding. This threshold has little bearing on what a 
reasonable payment amount is for diabetic testing supplies.
    Comment: A few commenters said CMS did not have the authority to 
adjust fee schedule amounts for diabetic testing supplies by the 
current SPAs. For instance, one commenter stated section 
1834(a)(1)(F)(ii) of the Act does not provide authority for fee 
schedule adjustments during a gap in the CBP because the commenter 
believed section 1834(a)(1)(F) only applies where there is an active 
CBP. The commenter went on to say that CMS did not follow the process 
required by section 1834(a)(1)(G), as amended by section 16008 of Cures 
Act, which as discussed in section VI of this final rule, requires that 
the Secretary in making any adjustments to the fee schedule amounts in 
accordance with sections 1834(a)(1)(F)(ii) and (iii), 
1834(a)(1)(H)(ii), or 1842(s)(3)(B) of the Act, shall: (1) Solicit and 
take into account stakeholder input; and (2) take into account the 
highest bid by a winning supplier in a CBA and a comparison of each of 
the following factors with respect to non-CBAs and CBAs:
     The average travel distance and cost associated with 
furnishing items and services in the area.
     The average volume of items and services furnished by 
suppliers in the area.
     The number of suppliers in the area.
    The commenter also said that section 1834(a)(1)(B) of the Act 
requires that, in the absence of a CBP, the Secretary make payments 
based on the unadjusted fee schedule, and that according to section 
1834(a)(1)(F) of the Act, in these situations, the Congress established 
a reimbursement scheme for DMEPOS centered around a default payment of 
the lesser of the actual charge or the unadjusted fee schedule. The 
commenter asserted that reimbursing items based on the SPA is an 
exception to this more general rule and is only done for items and 
services included in, as section 1834(a)(1)(F) of the Act says, a 
``competitive acquisition program in a competitive acquisition area.'' 
The commenter said that since there will be no competitive acquisition 
program for diabetic testing supplies beginning on January 1, 2019, 
this special rule does not apply, and the payment must be based on the 
unadjusted fee schedule.
    The commenter also discussed how CMS has taken this approach on at 
least two occasions. The first being during a previous gap in the CBP, 
in which CMS paid for diabetic testing supplies based on the fee 
schedule, and contracts for bidding on mail order diabetic testing 
supplies were in place from January 1, 2011 through December 31, 2012, 
and then again from July 1, 2013 through June 30, 2016. For that gap 
period of January 1, 2013 to July 1, 2013, the commenter said that CMS 
paid based on the fee schedule rates across all regions.
    The other occasion the commenter discussed was when CMS resorted to 
the fee schedule during the first round of competitive bidding when an 
auction was considered ``nonviable'' because beneficiary demand could 
not be met by qualified suppliers. In the seven Round 1 auctions that 
were considered nonviable, the commenter said that the DME items in 
that competitive bidding area were paid according to the ``fee schedule 
and all Medicare enrolled DME suppliers [were allowed to] continue . . 
. to submit DME claims for these items in that [competitive bidding 
area].''
    The commenter also stated that if CMS determines that the payment 
amounts based on the fee schedule are not inherently reasonable, CMS 
can use its authority under section 1842(b)(8)(A)(i) of the Act to 
adjust the amounts. Under this section, the commenter said that CMS has 
the ability to deviate from the fee schedule and alter payment rates 
for items or services that are ``grossly excessive or grossly 
deficient'' and to determine an amount that is ``realistic and 
equitable.'' The commenter concluded by saying that it is this 
authority and not the authority in section 1834(a)(1)(F) of the Act 
that would allow CMS to adjust the fee schedule for diabetic testing 
supplies.
    Response: We disagree with the commenters' assertions that we do 
not have the authority to adjust fee schedule amounts for mail order 
diabetic testing supplies furnished beginning January 1, 2019 by the 
current SPAs. In the Patient Protection and Affordable Care Act (the 
Affordable Care Act), Congress mandated fee schedule adjustments for 
items and services furnished in non-CBAs using the payment determined 
under the CBP. The relevant section of the Affordable Care Act (section 
6410(b)) is titled ``Requirement to Either Competitively Bid Areas or 
Use Competitive Bid Prices by 2016.'' The intent of the CBP and fee 
schedule adjustments is to thus pay SPAs in CBAs and generate savings 
in other areas, either by bidding or by adjusting fee schedule amounts 
based on the payment determined under the CBP. In addition, in the 
final rule published in the Federal Register on November 6, 2014 titled 
``Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Quality Incentive Program, and Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies'' (79 FR 66120), we finalized Sec.  
414.210(g)(4), which describes fee schedule adjustments when the only 
information available is from a competitive bidding program no longer 
in effect. Thus, CMS has already promulgated a rule to address 
instances when items are no longer competitively bid. Consistent with 
that policy, we believe we should continue to adjust the fee schedule 
amounts for such items during a gap in competitive bidding rather than 
reverting to completely unadjusted fee schedules. We note that when 
promulgating this rule, we did take into account the relevant factors 
under section 16008 of the Cures Act for items furnished in former 
CBAs, including mail order diabetic testing supplies. With regard to 
mail order diabetic testing supplies, average travel distance is not 
applicable since these items are mail order items. Shipping and 
handling charges typically do not change based on the distance the item 
is mailed or shipped. The number of mail order suppliers during the gap 
should be higher and the average volume of mail order diabetic testing 
supplies furnished by suppliers during the gap will be somewhat lower 
than the average volume of mail order diabetic testing supplies 
furnished by suppliers under the CBP. We do not believe that this will 
have a significant impact on the overall cost of the diabetic testing 
supplies or the ability of the suppliers to furnish the items at 
approximately the same rate as suppliers of non-mail order diabetic 
testing supplies.
    Lastly, we disagree with the commenter that the requirement to 
adjust fee schedule amounts does not apply if there is not an active 
CBP in place for an item, and that CMS should instead invoke its 
authority under section 1842(b)(8)(A)(i) of the Act to adjust the fee 
schedule amounts for diabetic testing supplies. Under section 
1834(a)(1)(F) of the Act, if items furnished on or after January 1, 
2011 are included in a CBP, the fee schedule amounts must be adjusted 
for those items if they are furnished on or after January 1, 2016 
outside of CBAs. Diabetic testing supplies have been

[[Page 57039]]

included in the national mail order CBP from January 1, 2011 through 
December 31, 2018, and because the statute mandates the adjustment of 
the fee schedule amounts based on the payment determined under the CBP 
for items furnished on or after January 1, 2016, CMS must continue to 
adjust the fee schedule amounts for such items furnished on or after 
January 1, 2019.
    Final Rule Action: After consideration of comments received on the 
proposed rule and for reasons we set forth previously in this final 
rule and in the proposed rule, we are finalizing the three fee schedule 
adjustment methodologies we proposed without change. Specifically, we 
are finalizing the proposed revisions to Sec.  414.210(g)(9) to adjust 
the fee schedule amounts for items and services furnished in rural and 
noncontiguous non-CBAs by extending through December 31, 2020 the 
current fee schedule adjustment methodology which bases the fee 
schedule amounts on a blend of 50 percent of the unadjusted fee 
schedule amounts and 50 percent of the adjusted fee schedule amounts. 
We are also finalizing our proposal to continue fully adjusting the fee 
schedule amounts for items and services furnished from January 1, 2019 
through December 31, 2020, in non-rural and contiguous non-CBAs in 
accordance with the current methodologies under Sec.  414.210(g)(1) 
through (g)(8). We are also finalizing the proposed addition of 
paragraph (g)(10) to Sec.  414.210 to establish a methodology for 
adjusting fee schedule amounts for items and services furnished in 
former CBAs during temporary gaps in the DMEPOS CBP.

VII. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes

A. Background

    The Medicare payment rules for durable medical equipment are set 
forth in section 1834(a) of the Act and 42 CFR part 414, subpart D of 
our regulations. In general, Medicare payment for DME items and 
services paid on a fee schedule basis is equal to 80 percent of the 
lower of either the actual charge or the fee schedule amount for the 
item. The beneficiary coinsurance is equal to 20 percent of the lower 
of either the actual charge or the fee schedule amount for the item. 
General payment rules for DME are set forth in section 1834(a)(1) of 
the Act and Sec.  414.210 of our regulations, and Sec.  414.210 also 
addresses maintenance and servicing of items and replacement of items. 
Specific payment rules for oxygen and oxygen equipment are set forth in 
section 1834(a)(5) of the Act and Sec.  414.226 of our regulations. The 
average monthly payment to suppliers serving beneficiaries with a 
prescribed flow rate of greater than 4 liters per minute in 2006 was 
approximately $299.76. Before the enactment of the Deficit Reduction 
Act of 2005 (DRA) (Pub. Law No. 109-171), these monthly payments 
continued for the duration of use of the equipment, provided that 
Medicare Part B coverage and eligibility criteria were met. Medicare 
covers three types of oxygen delivery systems: (1) Stationary or 
portable oxygen concentrators, which concentrate oxygen in room air; 
(2) stationary or portable liquid oxygen systems, which use oxygen 
stored as a very cold liquid in cylinders and tanks; and (3) stationary 
or portable gaseous oxygen systems, which administer compressed oxygen 
directly from cylinders. There is also transfilling equipment that 
takes oxygen from concentrators and fills up small portable gaseous 
tanks. Both liquid and gaseous oxygen systems require delivery of 
oxygen contents. Concentrators and transfilling systems do not require 
delivery of oxygen contents. Medicare payment for furnishing oxygen and 
oxygen equipment is made on a monthly basis and the fee schedule 
amounts vary by state.
    Effective January 1, 2006, section 5101(b) of the DRA amended 
section 1834(a)(5) of the Act, limiting the monthly payments for oxygen 
equipment to 36 months of continuous use. The limit of 36 months of 
payment also applies to cases where there is an oxygen flow rate of 
greater than 4 liters per minute. The DRA mandated that payment for the 
delivery of oxygen contents continue after the 36-month cap on payments 
for oxygen equipment. At this time, Medicare already had an established 
fee schedule amount or payment class for oxygen contents only for 
beneficiaries who owned the stationary and/or portable oxygen 
equipment. The monthly payment for oxygen contents for beneficiaries 
who purchased oxygen equipment prior to 1989 included payment for 
delivery of both stationary and portable contents and was approximately 
$156 on average in 2006. CMS implemented section 1834(a)(5) of the Act, 
as amended by section 5101 of the DRA, in the final rule published on 
November 9, 2006 in the Federal Register, titled ``Home Health 
Prospective Payment System Rule Update for Calendar Year 2007 and 
Deficit Reduction Act of 2005 Changes to Medicare Payment for Oxygen 
Equipment and Capped Rental Durable Medical Equipment'' (71 FR 65884). 
As part of this rule, we amended Sec.  414.226 by adding a new 
paragraph (c) and separate payment classes for: oxygen generating 
portable equipment (OGPE) consisting of portable oxygen concentrators 
and transfilling equipment that met the patient's portable oxygen needs 
without relying on the delivery of oxygen contents; stationary oxygen 
contents after the 36-month rental period; and portable oxygen contents 
after the 36-month rental period. With the addition of the new class 
for OGPE, rather than paying the standard monthly add-on payment of 
$31.79 for portable oxygen equipment, we established a higher amount of 
$51.63 per month for this new technology while portable gaseous or 
liquid oxygen equipment continued to be paid at the lower add-on 
payment rate of $31.79 per month.
    Section 1834(a)(9)(D) of the Act provides CMS the authority to 
create separate classes of oxygen and oxygen equipment. Section 
1834(a)(9)(D)(ii) of the Act mandates that new, separate classes of 
oxygen and oxygen equipment be budget neutral; the Secretary may 
establish new classes for oxygen and oxygen equipment only if the 
establishment of such classes does not result in expenditures for any 
year that are less or more than the expenditures which would have been 
made had the classes not been established. It is important to stress 
that the budget neutrality requirement in section 1834(a)(9)(D)(ii) of 
the Act applies regardless of whether fee schedule amounts are adjusted 
based on information from the DMEPOS CBP. Since 2008, in accordance 
with our regulations at Sec.  414.226(c), CMS has ensured budget 
neutrality each year by determining how much expenditures increased as 
a result of the higher paying OGPE class and reducing the monthly 
payment amount for stationary oxygen equipment and oxygen contents by a 
certain percentage to offset the increase in payments attributed to 
OGPE. Stakeholders have suggested that the budget neutrality 
requirement should not apply in situations where the fee schedule 
amounts for oxygen and oxygen equipment, including the fee schedule 
amounts for OGPE, are adjusted based on information from the DMEPOS 
CBP. We disagree. As long as the add-on payment amounts for OGPE are 
higher than the add-on payment amounts that would otherwise have been 
made if the OGPE class not been established, an offset is required to 
ensure budget neutrality.
    As of January 1, 2018, the average adjusted monthly fee schedule 
add-on

[[Page 57040]]

amount was $40.08 for OGPE and $18.20 for portable gaseous and liquid 
oxygen equipment. Either of these monthly add-on amounts is added to 
the average adjusted fee schedule monthly payment for stationary oxygen 
equipment and oxygen contents, which was $72.95. We note that if the 
fee schedule amounts for oxygen and oxygen equipment are adjusted based 
on information from the DMEPOS CBP, and these adjustments result in the 
fees for OGPE being lower than the add-on payment amounts that would 
otherwise have been made if the OGPE class not been established, a 
positive rather than a negative budget neutrality offset would be 
needed to ensure that total expenditures for any year are not more or 
less than the expenditures which would have been made if the class had 
not been established.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes

    We received approximately 65 oxygen-related public comments on our 
proposals in the CY 2019 ESRD PPS proposed rule, including comments 
from suppliers and industry representative groups.
    In this final rule, we provide a summary of the proposed provision, 
a summary of the public comments received and our responses to them, 
and the policies we are finalizing.
1. Adding a Portable Liquid Oxygen Equipment Class and a Liquid High-
Flow Oxygen Contents Class and Applying Budget Neutrality Offset to All 
Oxygen and Oxygen Equipment Classes
    We proposed in the CY 2019 ESRD PPS proposed rule (83 FR 34383 
through 34386) to revise Sec.  414.226(e) to add separate payment 
classes for portable gaseous oxygen equipment only and portable liquid 
oxygen equipment only. Instead of having one class for portable oxygen 
equipment only (gaseous and liquid tanks), we proposed splitting this 
class into two classes and increasing the add-on amount for portable 
liquid oxygen equipment. We proposed establishing the initial add-on 
amounts for portable liquid oxygen equipment so that they are equal to 
the add-on amounts for OGPE, thus reducing the incentive to furnish 
OGPE over portable liquid oxygen equipment. Thus, we believe that 
adding the portable liquid oxygen equipment class and adding a 
provision to the regulations that would ensure that the payment amount 
for portable liquid oxygen equipment is the same as OGPE would 
encourage suppliers to furnish this modality when it is requested by 
beneficiaries.
2. Adding a Liquid High-Flow Oxygen Contents Class
    In Sec.  414.226(e) we also proposed to add a separate payment 
class for portable liquid oxygen contents for prescribed flow rates of 
more than 4 liters per minute. We proposed to establish the initial fee 
schedule amounts for portable liquid oxygen contents for prescribed 
flow rates of more than 4 liters per minute by multiplying the fee 
schedule amounts for portable oxygen contents by 1.5 to increase the 
payment amount by 50 percent above the payment amount for portable 
oxygen contents. For patients with high flow needs who are also 
ambulatory, the liquid portable oxygen modality is the only one that 
allows use of the contents for more than a short period of time. We 
believe that adding this class and higher payment would encourage 
suppliers to furnish this modality when it is requested by 
beneficiaries. Table 36 compares the current classes of oxygen and 
oxygen equipment and the proposed classes of oxygen and oxygen 
equipment.

   Table 36--Current and Proposed Oxygen and Oxygen Equipment Classes
------------------------------------------------------------------------
                                            Proposed oxygen and oxygen
 Current oxygen and oxygen equipment: 5     equipment, for years after
      classes described in 414.226         2018: 7 classes described in
                                                     414.226
------------------------------------------------------------------------
Stationary oxygen equipment (including   Stationary oxygen equipment
 stationary concentrators) and oxygen     (including stationary
 contents (stationary and portable).      concentrators) and oxygen
                                          contents (stationary and
                                          portable).
Portable equipment only (gaseous or      Portable gaseous equipment
 liquid tanks).                           only.
                                         Portable liquid equipment only.
Oxygen generating portable equipment     Oxygen generating portable
 only.                                    equipment only.
Stationary oxygen contents only........  Stationary oxygen contents
                                          only.
Portable oxygen contents only..........  Portable gaseous and liquid
                                          oxygen contents only, except
                                          for portable liquid oxygen
                                          contents for prescribed flow
                                          rates greater than four liters
                                          per minute.
                                         Portable liquid oxygen contents
                                          only for prescribed flow rates
                                          greater than four liters per
                                          minute.
------------------------------------------------------------------------

3. Applying Budget Neutrality Offset to All Oxygen and Oxygen Equipment 
Classes
    We proposed to change Sec.  414.226(c)(6) and the methodology for 
applying the budget neutrality offset in the CY 2019 ESRD PPS DMEPOS 
proposed rule (83 FR 34385 through 34386), in addition to adding the 
two new proposed oxygen and oxygen equipment classes. We proposed to 
apply the budget neutrality offset to all items of oxygen and oxygen 
equipment, rather than just stationary oxygen equipment. This proposed 
approach would lower the amount of the offset applied to stationary 
equipment. Table 37 is an example of the 2018 fee schedule amounts when 
the budget neutrality offset is applied only to the stationary oxygen 
equipment rate versus the proposed approach of applying the budget 
neutrality offset to all oxygen classes. This particular example 
depicts fully adjusted fee schedule amounts, including budget 
neutrality adjustments, for oxygen and oxygen equipment furnished in 
non-rural areas in the Southeast United States.

[[Page 57041]]



                Table 37--January 1, 2018 Fees for Current and Proposed Budget Neutrality Methods
----------------------------------------------------------------------------------------------------------------
                Current method                    2018 rate              Proposed method             2018 rate
----------------------------------------------------------------------------------------------------------------
Stationary oxygen equipment (including                 $70.23   Stationary oxygen equipment               $72.59
 stationary concentrators) and oxygen                            (including stationary
 contents (stationary and portable).                             concentrators) and oxygen
                                                                 contents (stationary and
                                                                 portable).
Portable equipment only (gaseous or liquid              17.29   Portable gaseous equipment only.           16.04
 tanks).
                                                                Portable liquid equipment only..           34.73
Oxygen generating portable equipment only....           37.44   ................................           34.73
                                                                Oxygen generating portable
                                                                 equipment only.
Stationary oxygen contents only..............           53.32   Stationary oxygen contents only.           49.46
Portable oxygen contents only................           53.32   Portable gaseous and liquid                49.46
                                                                 oxygen contents only with the
                                                                 exception of portable liquid
                                                                 contents greater than four
                                                                 liters per minute.
                                                                Portable liquid contents only              74.19
                                                                 greater than four liters per
                                                                 minute.
----------------------------------------------------------------------------------------------------------------

    For further detailed information, we refer readers to section VII.B 
of the CY 2019 ESRD PPS DMEPOS proposed rule.
    We solicited comments on these proposals.
    Comment: Some commenters simply stated that the payments for 
portable liquid oxygen equipment and high-flow liquid contents are too 
low given the high cost of furnishing these items.
    Response: We agree that the cost of furnishing liquid oxygen and 
oxygen equipment is higher than the cost of furnishing other oxygen 
modalities. The proposals, which we are finalizing, will increase 
payment for portable liquid oxygen and oxygen equipment and portable 
oxygen contents for patients with high flow needs and therefore, will 
help to address the higher costs of these modalities. Although we could 
increase the rates by more than the amount we proposed, any increase to 
payment amounts would require a higher budget neutrality off-set. We 
believe the best course of action is to see what effect finalizing the 
proposed changes will have on access to liquid oxygen and oxygen 
equipment before deciding to increase the rates further and requiring a 
larger off-set to be applied to other items.
    Comment: One commenter representing Medicare beneficiaries 
supported the proposed rule for establishing separate classes and 
higher payments for portable liquid oxygen equipment and high-flow 
liquid oxygen contents because of the unique nature of furnishing 
liquid oxygen and its higher cost.
    Response: We agree and appreciate the support for the proposed 
provisions. For this and the reasons we set forth previously, we are 
finalizing the separate classes and higher payments for portable liquid 
oxygen equipment and high-flow liquid oxygen contents.
    Comment: Many commenters stated that the budget neutrality 
adjustment should not apply to fee schedule amounts adjusted based on 
information on the payment determined under the CBP because they 
believe that the budget neutrality requirement no longer applies once 
fee schedule amounts have been adjusted based on information from the 
CBP.
    Response: We do not agree. Section 1834(a)(1)(F)(ii) and (iii) of 
the Act mandates that the fee schedule amounts for DME be adjusted 
using information on the payment determined under the CBP and does not 
set aside the requirement of section 1834(a)(9)(D)(ii) of the Act. 
Section 1834(a)(9)(D)(ii) of the Act specifies that separate classes of 
oxygen and oxygen equipment may only be created to the extent that they 
do not result in expenditures for any year that are more or less than 
the expenditures which would have been made if such classes were not 
created. Even though the fee schedule amounts for oxygen and oxygen 
equipment have been reduced using information on the payment determined 
under the CBP, without a budget neutrality off-set, current 
expenditures for oxygen and oxygen equipment would be more than the 
expenditures which would have been made if the OGPE class was not 
created. Therefore, in order to ensure that expenditures are not more 
or less than they would have been without the introduction of higher 
payment oxygen classes, we must apply a budget neutrality off-set to 
the classes of oxygen and oxygen equipment even if we have already 
adjusted the fee schedules based on information from the CBP.
    Comment: One commenter recommended spreading the budget neutrality 
offset over all items of DME rather than the proposed rule to spread 
the offset over all items of oxygen and oxygen equipment.
    Response: We do not believe that payments should be reduced for DME 
items other than oxygen and oxygen equipment, since many suppliers who 
furnish such other items do not furnish oxygen and oxygen equipment and 
therefore are very unlikely to benefit from the higher payments 
resulting from the additional, separate classes of oxygen and oxygen 
equipment.
    Final Rule Action: After consideration of comments and for reasons 
we set forth previously in this final rule and in the CY 2019 ESRD PPS 
DMEPOS proposed rule, we are finalizing the proposals as proposed. 
Specifically, we are finalizing the proposed revisions to Sec.  
414.226(e) to establish the following classes of items: Portable 
gaseous equipment only; portable liquid equipment only; portable oxygen 
contents only, except for portable liquid oxygen contents for 
prescribed flow rates greater than four liters per minute; and portable 
liquid oxygen contents for prescribed flow rates greater than four 
liters per minute. We are also finalizing the proposed revision to 
Sec.  414.226(e) to initially set the monthly payment rate for portable 
liquid equipment only, based on the monthly payment rate for OGPE and 
to subsequently adjust the monthly payment rates using the applicable 
methodologies in Sec.  414.210(g) for items and services furnished 
beginning January 1, 2019. We are also finalizing the proposed revision 
to Sec.  414.226(e) to initially set the monthly payment rate for 
portable liquid oxygen contents for prescribed flow rates greater than 
four liters per minute based on 150 percent of the monthly payment rate 
for portable oxygen contents only, and to subsequently adjust the 
monthly payment rates using the applicable methodologies in Sec.  
414.210(g) for items and services furnished beginning January 1, 2019. 
We are finalizing the proposed revisions to Sec.  414.226(e) to make 
annual adjustments beginning in 2019 to the monthly payment rates for 
all items of oxygen and oxygen equipment in order to ensure the annual

[[Page 57042]]

budget neutrality of all classes of oxygen and oxygen equipment. 
Further, we are finalizing the proposed revision to Sec.  414.226(f) to 
explain the application of the monthly fee schedule amounts as listed 
in Sec.  414.226(e). As proposed, we are to re-designating paragraphs 
Sec.  414.226(e), (f) and (g) to Sec.  414.226(g), (h), and (i), 
respectively. We are also finalizing a number of changes throughout 
Sec.  414.226 and in Sec.  414.230(h) due to the redesignation of 
paragraphs (e), (f) and (g) of Sec.  414.226. For example, as proposed, 
we are finalizing a technical edit to Sec.  414.230(h)--we are by 
removing the reference to ``Sec.  414.226(f)'' and adding in its place 
a reference to ``Sec.  414.226(h)''. In newly redesignated paragraph 
(g)(1)(i), we are removing the reference to ``paragraph (e)(2)'' and 
replacing it with ``paragraph (g)(2)''; and in newly redesignated 
paragraph (g)(2)(ii) by removing the reference ``paragraph (e)(2)(i)'' 
and adding in its place the reference ``paragraph (g)(2)(i).''

VIII. Payment for Multi-Function Ventilators

A. Background

    Section 1834(a) of the Act governs payment for 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 amounts for items under each of the categories are 
established. Significantly, the payment rules for these categories are 
different and in some cases mutually exclusive. Table 38 provides a 
general summary of the payment categories, corresponding payment 
methodology, and statutory and regulatory provisions. The main payment 
categories are: Inexpensive or other routinely purchased items, items 
requiring frequent and substantial servicing, customized items, oxygen 
and oxygen equipment, and other items of DME (capped rental). There are 
some differences in the payment rules for the payment categories. For 
example, while sections 1834(a) (2), (4), (6), and (7) of the Act allow 
for the lump sum purchase of certain items classified under these 
categories, sections 1834(a)(3) and (5) of the Act do not allow for 
lump sum purchase of items in those categories. Also, sections 
1834(a)(2), (5), and (7) of the Act cap or limit total rental payments 
for items in these categories, whereas section 1834(a)(3) does not. 
With regard to rented items, section 1834(a)(7) of the Act mandates 
beneficiary ownership of the item after 13 months of continuous rental, 
whereas sections 1834(a)(2), (3), and (5) do not require transfer of 
ownership to the beneficiary. Finally, section 1834(a)(3) of the Act 
mandates that payment for covered items such as ventilators and 
intermittent positive pressure breathing machines be made on a monthly 
basis for the rental of the item, whereas ventilators that are either 
continuous positive airway pressure devices or intermittent assist 
devices with continuous positive airway pressure devices are excluded 
from section 1834(a)(3) of the Act. Respiratory assist devices, suction 
pumps (aspirators), and nebulizers fall under section 1834(a)(7) of the 
Act (capped rental items).

   Table 38--Summary of DME Equipment Payment Categories and Rules \1\
------------------------------------------------------------------------
         Payment category                     Payment rules
-----------------------------------------------------------------------
Inexpensive or other routinely     Purchase price of $150 or less, OR
 purchased items--section           were routinely purchased (75
 1834(a)(2) of the Act.             percent of the time or more) under
                                    the rent/purchase program prior to
                                    1989, OR are speech generating
                                    devices, OR are accessories used
                                    in conjunction with nebulizers,
                                    aspirators, continuous positive
                                    airway pressure devices,
                                    respiratory assist devices, or
                                    speech generating devices. If
                                    covered, these items can be
                                    purchased new or used and can be
                                    rented; however, total payments
                                    cannot exceed the purchase new fee
                                    for the item. See 42 CFR 414.220.
Items requiring frequent and       Items, such as ventilators,
 substantial servicing--section     requiring frequent and substantial
 1834(a)(3) of the Act.             servicing, in order to avoid risk
                                    to the patient's health. If
                                    covered, these items can be rented
                                    as long as they are medically
                                    necessary with the supplier
                                    retaining ownership of the
                                    equipment. Payment is generally
                                    made on a monthly rental basis
                                    with no cap on the number of
                                    rental payments made as long as
                                    medically necessary. Excludes CPAP
                                    devices, respiratory assist
                                    devices, suction pumps/aspirators,
                                    and nebulizers. See 42 CFR 414.222.
Customized items--section          Payment amounts are not calculated
 1834(a)(4) of the Act.             for a customized DME item.
                                    Customized DME is defined at 42
                                    CFR 414.224, including customized
                                    wheelchairs. If covered, payment
                                    is made in a lump-sum amount for
                                    the purchase of the item based on
                                    the DME Medicare Administrative
                                    Contractor (MAC), Part A MAC, or
                                    Part B MAC's individual
                                    determination. See 42 CFR 414.224.
Oxygen and oxygen equipment--      One bundled monthly rental payment
 section 1834(a)(5) of the Act.     amount is made, not to exceed a 36
                                    month cap, for all covered
                                    stationary equipment, stationary
                                    and portable contents, and all
                                    accessories used in conjunction
                                    with the oxygen equipment. An add-
                                    on payment may also be made for
                                    portable oxygen. After 36 months,
                                    payment can continue to be made on
                                    a monthly basis for oxygen
                                    contents for liquid or gaseous
                                    oxygen equipment. Payment for in-
                                    home maintenance and servicing of
                                    supplier-owned oxygen
                                    concentrators and transfilling
                                    equipment may be made every 6
                                    months, beginning 6 months after
                                    the 36 month rental cap, for any
                                    period of medical need for the
                                    remainder of the reasonable useful
                                    lifetime of the equipment (5
                                    years). See 42 CFR 414.226.
Other Covered Items (Other than    Payment under a lump sum purchase..
 DME)--section 1834(a)(6) of the
 Act.
Other items of DME (capped rental  Monthly rental payment amount is
 items)--section 1834(a)(7) of      made not to exceed a 13 month cap
 the Act.                           at which point the beneficiary
                                    takes over ownership of the
                                    equipment. Complex rehabilitative
                                    power wheelchairs can be purchased
                                    in the first month of use. For
                                    capped rental items other than
                                    power wheelchairs, the payment
                                    amount is calculated based on 10
                                    percent of the base year purchase
                                    price for months 1 through 3.
                                    Beginning with the fourth month,
                                    the payment amount is equal to 7.5
                                    percent of the purchase price. For
                                    power wheelchairs, the rental
                                    payment amount is calculated based
                                    on 15 percent of the base year
                                    purchase price for months 1
                                    through 3. Beginning with the
                                    fourth month, the fee schedule
                                    amount is equal to 6 percent of
                                    the purchase price. See 42 CFR
                                    414.229.
------------------------------------------------------------------------
\1\ This is a general summary of the DME payment rules. The reader
  should refer to the statute and regulations for the full payment
  rules.


[[Page 57043]]

    The Medicare allowed amount for DMEPOS items and services paid 
under the DMEPOS fee schedule in accordance with section 1834 of the 
Act (outside of the CBP) is equal to the lower of the supplier's actual 
charge or the fee schedule amount. The Medicare payment amount for a 
DME item is generally equal to 80 percent of the lesser of the actual 
charge or the fee schedule amount for the item, less any unmet Part B 
deductible. The beneficiary coinsurance for such items is generally 
equal to 20 percent of the lesser of the actual charge or the fee 
schedule amount for the item once the deductible is met.
    Concerns have been raised by the manufacturer of a multi-function 
ventilator about how the separate payment categories set forth at 
sections 1834(a)(2) through (a)(7) of the Act would apply to a new type 
of ventilator, which consists of a ventilator base item classified 
under section 1834(a)(3) of the Act, but can also perform the function 
of portable oxygen equipment classified under the payment category in 
section 1834(a)(5) of the Act, and the functions of a nebulizer, a 
suction pump, and a cough stimulator classified under section 
1834(a)(7) of the Act. In particular, a new product was recently 
cleared by the Food and Drug Administration (FDA) as a ventilator, but 
can also function as a portable oxygen concentrator, nebulizer, suction 
pump (aspirator), and cough stimulator. The multi-function ventilator 
assists with serving multiple, different medical needs of beneficiaries 
with diagnoses such as chronic lung disease, cystic fibrosis, ALS, and 
muscular dystrophy. As shown in Table 39, separate DME items perform 
each of these functions, and the DME items that perform these functions 
have already been assigned separate HCPCS codes and payment amounts 
under the DMEPOS fee schedule. Currently, HCPCS codes E0465 and E0466 
denote home ventilator item, any type, used with either an invasive 
interface (for example, tracheostomy tube) or non-invasive interface 
(for example, mask, chest shell). Portable oxygen concentrators are 
identified using a combination of codes E1390 plus E1392.

  Table 39--Functions, Payment Category, and HCPCS Codes for DME Items
          That Perform Functions of a Multi-Function Ventilator
------------------------------------------------------------------------
          HCPCS code                 Function         Payment category
------------------------------------------------------------------------
E0465 or E0466................  Ventilator.......  Items requiring
                                                    frequent and
                                                    substantial
                                                    servicing.
E1390 and E1392...............  Portable Oxygen    Oxygen and oxygen
                                 Concentrator.      equipment.
E0570.........................  Nebulizer........  Capped rental items.
E0600.........................  Suction Pump.....  Capped rental items.
E0482.........................  Cough Stimulator.  Capped rental items.
------------------------------------------------------------------------

    In the CY 2019 ESRD PPS DMEPOS proposed rule, we noted additional 
concerns in considering how to categorize and pay for the multi-
function ventilator. One concern is that a patient may not need all of 
the functions that the new multi-function ventilator performs, and 
there are different Medicare medical necessity coverage criteria for 
each of the five different functions typically performed by five 
different pieces of equipment. In addition, another concern we have is 
while section 1847(a)(2)(A) of the Act mandates the implementation of 
competitive bidding for covered items, the only items that comprise the 
multi-function ventilator that have been phased into the DMEPOS CBP at 
this time are portable oxygen concentrators and nebulizers. As a 
result, in CBAs, only contract suppliers can furnish portable oxygen 
concentrators or nebulizers to beneficiaries in these areas, whereas 
non-contract suppliers can furnish ventilators, suction pumps, and 
cough stimulators in these same areas. The current competitive bid 
product categories do not include a single item, furnished by one 
supplier, which performs the functions of five separate items, as the 
multi-function ventilator does. Even so, upon determination that the 
multi-function ventilator is a covered item within the meaning of 
section 1834(a)(13) of the Act and its payment category under section 
1834(a)(3) of the Act, the multi-function ventilator item can be 
eligible for inclusion in a CBP in the future along with other 
ventilator items.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on Payment for Multi-Function Ventilators

    In the CY 2019 ESRD PPS DMEPOS proposed rule, we proposed to add a 
provision to the regulation at Sec.  414.222(f) to establish a payment 
methodology for multi-function ventilators effective for dates of 
service on or after January 1, 2019 (83 FR 34386). As we noted, we 
believe that our proposal complies with the Medicare payment rules for 
DME in section 1834(a) of the Act, while recognizing and encouraging 
innovations in technology such as multi-function ventilators. We 
proposed that multi-function ventilators be classified under section 
1834(a)(3) of the Act because the statute specifically mandates that 
ventilators other than continuous airway pressure devices or 
intermittent assist devices with continuous airway pressure devices be 
classified under this section. Items classified under section 
1834(a)(3) of the Act are paid on a continuous monthly rental basis.
    We proposed to establish the monthly rental fee schedule amounts 
for a multi-function ventilator based on the existing monthly rental 
fee schedule amounts for ventilators plus payment for the average cost 
of the additional functions. Under this proposal, a single monthly 
rental fee schedule amount would be paid to encompass the base 
ventilator item and its additional functional components as follows.
     The monthly rental fee schedule amount for a multi-
function ventilator is equal to the monthly rental fee schedule amount 
for a ventilator established in Sec.  414.222(c) and (d) plus the 
average of the lowest monthly cost for one additional function and the 
monthly cost of all additional functions, increased by the annual 
coverage item updates of section 1834(a)(14) of the Act.
     The monthly cost for additional functions shall be 
determined as follows:
    ++ For functions performed by items classified under Sec.  414.222 
prior to 1994 the monthly cost is equal to the monthly rental fee 
schedule amount established in paragraphs (c) and (d) of this section 
increased by the covered item update of section 1834(a)(14) of the Act.
    ++ For functions performed by items classified under Sec.  414.220, 
the monthly cost is equal to the fee schedule amount for purchased 
equipment established in

[[Page 57044]]

Sec.  414.220 (c), (d), (e), and (f), adjusted in accordance with Sec.  
414.210(g), divided by 60 months or total number of months of the 
reasonable useful lifetime of the equipment. There are currently no 
multi-function ventilators on the market that perform the function for 
items classified under Sec.  414.220.
    ++ For functions performed by items classified under Sec.  414.226 
for oxygen equipment, the monthly cost is equal to the monthly payment 
amount established in Sec.  414.226(e), and (f), adjusted in accordance 
with Sec.  414.210(g), multiplied by 36 and divided by 60 months or 
total number of months of the reasonable useful lifetime of the oxygen 
equipment.
    ++ For functions performed by items classified under Sec.  414.229 
for cough stimulator, the monthly cost is equal to the purchase price 
established in Sec.  414.229(c), adjusted in accordance with Sec.  
414.210(g), divided by 60 months or total number of months of the 
reasonable useful lifetime of the equipment.

    Table 40--Proposed Payment Method for Multi-Function Ventilators
                                [Example]
------------------------------------------------------------------------
        Step                 Method                  HCPCS codes
------------------------------------------------------------------------
(1)................  Base amount =           E0465 or E0466.
                      ventilator monthly
                      rental fee schedule
                      amount.
(2)................  Determine monthly
                      rental fee schedule
                      amount for each
                      additional function:
    (a)............  (Portable Oxygen        E1392 + E1390.
                      Concentrator monthly
                      fee schedule amount x
                      36 months)/60 months
                      *.
    (b)............  CY 1993 Nebulizer       E0570.
                      monthly rental fee
                      schedule amount x
                      covered item update
                      factor for DME to CY
                      2019 **.
    (c)............  CY 1993 Suction Pump    E0600.
                      monthly rental fee
                      schedule amount x
                      covered item update
                      factor for DME to CY
                      2019 **.
    (d)............  (Cough Stimulator       E0482.
                      newly purchased fee
                      schedule amount)/60
                      months *.
(3)................  Base amount from Step
                      1 + lowest cost
                      function amount from
                      Step 2.
(4)................  Base amount from Step
                      1 + all function
                      amounts from Step 2.
(5)................  Determine Payment for
                      Multi-function
                      ventilator (average
                      of step 3 and 4).
------------------------------------------------------------------------
* 5 year (60 months) reasonable useful lifetime of the equipment.
** The monthly rental amounts paid prior to 1994 included payment for
  the equipment and all related accessories.

    Medicare coverage and payment would be available for multi-function 
ventilators furnished to beneficiaries who are prescribed a multi-
function ventilator and meet the Medicare medical necessity coverage 
criteria for a ventilator and at least one of the four additional 
functions of the device. The fee schedule amount for the multi-function 
ventilator would be determined in advance for each calendar year and 
would not vary regardless of how many additional functions the 
beneficiary needs in addition to the ventilator function. We proposed 
that the payment amount would be established for CY 2019 and then 
updated each year after 2019 using the covered item update factors 
mandated by section 1834(a)(14) of the Act. In the event that a patient 
is furnished a multi-function ventilator and only meets the Medicare 
medical necessity coverage criteria for a ventilator, Medicare coverage 
and monthly rental payments would be for the ventilator only, and 
payment could not be made for the other functions of the device.
    We proposed a payment method that we believe ensures an integration 
of the functions of the multi-function ventilator with a bundled 
corresponding payment amount that addresses additional functions of the 
items that are necessary for patient care. If a beneficiary is 
furnished a multi-function ventilator, payment would be denied for any 
separate claims for oxygen and oxygen equipment, nebulizers and related 
accessories, suction pumps and related accessories, and cough 
stimulators and any related accessories if these separate items are 
furnished on or after the date that the multi-function ventilator is 
furnished. Thus, we noted our proposal would prevent division of the 
multi-function item into separate parts with separate fee schedule 
amounts for each function of the item, some of which have conflicting 
payment rules (83 FR 34389). Also, this proposed payment method would 
lessen confusion for the supplier which could occur if the supplier 
were to receive varying monthly rental amounts for a multi-function 
item and instead permits a supplier to receive predictable monthly 
payments over the 60 month reasonable useful lifetime of the multi-
function ventilator.
    We note, we did not propose to apply proposed Sec.  414.222(f) to 
other DME items. Subsequent rulemaking would be necessary to address 
other multi-function items in the future. For further detailed 
information, we refer readers to section VIII.C of the CY 2019 ESRD PPS 
DMEPOS proposed rule.
    We received approximately 23 public comments on our proposal from 
manufacturers, suppliers, beneficiary advocacy groups, and industry 
representative groups including respiratory associations. The comments 
on the proposed rule and our responses to the comments are set forth 
below. We also provide a summary of several comments that were outside 
the scope of this rulemaking.
    Comment: Most commenters supported our proposal to establish a 
payment methodology for the new technology multi-function ventilator. 
Commenters support reimbursement for this integrated item that is 
innovative and improves care for complex beneficiaries and their 
caregivers in the home and permits improved patient mobility.
    Response: We appreciate the support for our proposal. We are 
finalizing Sec.  414.222(f) to establish a payment method for multi-
function ventilators.
    Comment: Two commenters recommended that CMS monitor this new 
payment method to ensure that patients who require all five functions 
and have a short life expectancy maintain access to the multi-function 
device. The commenters were concerned that the proposed rule spreads 
payments for the additional functions performed by the ventilator over 
60 months (the reasonable useful lifetime of equipment performing these 
functions). The commenters explain that certain patients with a life 
expectancy of 1 or 2 years may require all five therapies, but would 
not benefit from payment spread over 60 months. The commenters are 
concerned this shorter life expectancy may not coincide with the 
payment structure spread over 60 months.
    Response: In the CY 2019 ESRD PPS DMEPOS proposed rule, we proposed 
to

[[Page 57045]]

establish a monthly rental fee schedule amount for the equipment that 
does not cap consistent with the mandated payment rule for ventilators 
and other items classified under section 1834(a)(3) of the Act. 
Moreover, the supplier never loses title to the equipment, and the 
supplier can rent the equipment to other beneficiaries once one 
beneficiary has rented the item for one or two years. As a result, the 
supplier can receive payment for each rental month and over the 
duration that the equipment is medically necessary even in cases when 
the supplier rents the equipment to a beneficiary with a short term 
need for the equipment. We believe the ability to re-rent the multi-
function ventilator to another beneficiary permits a supplier to 
furnish the item in instances where a beneficiary might only have a 
short term need and receive payment for the number of months rented.
    Comment: Some commenters did not support our proposal for payment 
of a multi-function ventilator under a methodology which establishes a 
fee schedule amount. The commenters recommended the item be paid based 
on the reasonable charge payment method (42 CFR 405.502). The 
commenters recommended the item be paid under reasonable charge method 
as use of the item's functions may change based on the beneficiary's 
medical needs and the commenters recommend that suppliers should bill 
additional charges for each function utilized on the multi-function 
ventilator item.
    Response: We appreciate this comment. However, as discussed in the 
CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34387), the information we 
gathered during our review supported our proposal to classify the 
multi-function ventilator item under the frequent and substantial 
servicing payment category at section 1834(a)(3) of the Act, which is 
the statutory payment category for ventilators other than continuous 
airway pressure devices or intermittent assist devices with continuous 
airway pressure devices. Also, section 1834(a)(1)(C) of the Act 
mandates that payment for DME be based on the lesser of the actual 
charge for the item or the payment amount recognized under sections 
1834(a)(2) through 1834(a)(7) of the Act (the fee schedule). In 
coordination with our review of the item and the statutory payment 
requirements, we believe a monthly rental fee schedule amount can be 
established for a multi-function ventilator based on the cost of the 
ventilator function and the average costs of the various additional 
functions or features for oxygen concentration, drug nebulization, 
respiratory airway suction, and cough stimulation. This payment method 
permits a supplier to receive a predictable monthly payment amount from 
the start of the rental period for a multi-function ventilator. Also, 
the item will only be covered for beneficiaries that have a medical 
need for a ventilator and additional function(s).
    Final Rule Action: After consideration of comments received and for 
the reasons we articulated above and in the CY 2019 ESRD PPS DMEPOS 
proposed rule, we are finalizing Sec.  414.222(f) similar to our 
proposal to establish a payment methodology for multi-function 
ventilators effective for dates of service on or after January 1, 2019. 
However, we are finalizing three minor technical edits to Sec.  
414.222(f) to correct for typos. Specifically, we are deleting the 
extraneous word ``of'' in two places where it appeared in the proposed 
regulation text in Sec.  414.222(f)(3)(iii) and (iv) and we are 
deleting the cross reference to subparagraph ``(g)'' in Sec.  414.226, 
as it does not apply.

IX. Northern Mariana Islands in Future National Mail Order CBPs

A. Background

    In our CY 2015 ESRD PPS DMEPOS final rule (79 FR 66223 through 
66265), we said that while section 1847(a)(1)(A) of the Act provides 
that CBPs be established throughout the U.S., the definition of U.S. at 
section 210(i) of the Act does not include the Northern Mariana 
Islands. Therefore, at the time we did not consider the Northern 
Mariana Islands to be an area eligible for inclusion under a national 
mail order CBP. We also finalized a fee schedule adjustment methodology 
based on information from the national mail order program for items and 
services furnished in the Northern Mariana Islands at Sec.  
414.210(g)(7) to provide that the fee schedule amounts for mail order 
items furnished in the Northern Mariana Islands are adjusted so that 
they are equal to 100 percent of the SPAs established under a national 
mail order program.
    The national mail order program for diabetic testing supplies is 
currently in effect in all areas of the U.S., except for the Northern 
Mariana Islands. Thus, the Northern Mariana Islands are currently the 
only non-CBA for mail order diabetic testing supplies. However, even 
though the Northern Mariana Islands are currently not included in the 
national mail order program, per Sec.  414.210(g)(7), CMS currently 
pays for mail order items furnished in the Northern Mariana Islands at 
100 percent of the SPAs established under the national mail order CBP. 
After further examining this issue, it is now our view that the 
Northern Mariana Islands are an area eligible for inclusion under a 
national mail order CBP. A Joint Resolution addressing the Northern 
Mariana Islands titled ``Covenant to Establish a Commonwealth of the 
Northern Mariana Islands in Political Union with the United States of 
America'' was approved in 1976 (Pub. L. 94-241 (HJRes 549), 90 Stat 
263, March 24, 1976). The Joint Resolution addresses the applicability 
of certain federal laws to the Northern Mariana Islands. Article V 
(``Applicability of Laws''), section 502(a) specifies:

    ``The following laws of the United States in existence as of the 
effective date of this Section and subsequent amendments to such laws 
will apply to the Northern Mariana Islands, except as otherwise noted 
in this Covenant: (1) Those laws which provide federal services and 
financial assistance programs and the federal banking laws as they 
apply to Guam;''

    Thus, under the Joint Resolution, laws which provide federal 
services and financial assistance apply to the Northern Mariana Islands 
to the same extent as they do to Guam. CMS has recognized the Joint 
Resolution and taken the position that the Northern Mariana Islands 
fall within the definition of U.S. under Medicare in 42 CFR 411.9(a). 
In a proposed rule published on April 25, 2006, in the Federal Register 
titled ``Medicare Program; Proposed Changes to the Hospital Inpatient 
Prospective Payment Systems and Fiscal Year 2007 Rates'', we discussed 
the Joint Resolution and defined the U.S. to include the 50 States, the 
District of Columbia, Puerto Rico, the Virgin Islands, Guam, American 
Samoa, and the Northern Mariana Islands (71 FR 23996). The Northern 
Mariana Islands are also included in the definition of U.S. at 42 CFR 
400.200. Thus, even though the Northern Mariana Islands are not 
explicitly referenced in sections 1861(x) and 210(h) and (i) (which 
notably do reference Guam) of the Act, we believe that we can consider 
the Northern Mariana Islands to be part of the U.S. for the purposes of 
the national mail order program as well.

B. Summary of the Proposed Provisions, Public Comments, and Responses 
to Comments on Including the Northern Mariana Islands in Future 
National Mail Order CBPs

    In the CY 2019 ESRD PPS DMEPOS proposed rule, we proposed to amend 
Sec.  414.210(g)(7) to say that beginning on or after the date that the 
Northern

[[Page 57046]]

Mariana Islands are included under a national mail order CBP, the fee 
schedule adjustment methodology under this paragraph would no longer 
apply (83 FR 34389). Section 414.210(g)(7) currently states that the 
fee schedule amounts for mail order items furnished to beneficiaries in 
the Northern Mariana Islands are adjusted so that they are equal to 100 
percent of the single payment amounts established under a national mail 
order competitive bidding program. Once the Northern Mariana Islands 
are included under a national mail order CBP, this part of Sec.  
414.210(g)(7) would be confusing and unnecessary, which is why we 
proposed to amend Sec.  414.210(g)(7) to say that beginning on or after 
the date that the Northern Mariana Islands are included under a 
national mail order CBP, the fee schedule adjustment methodology under 
this paragraph would no longer apply (83 FR 34389). We are finalizing 
this amendment to Sec.  414.210(g)(7) because we intend to include the 
Northern Mariana Islands in the CBA for all competitions under the 
national mail order CBP beginning on or after January 1, 2019.
    We received approximately four public comments on our proposal from 
suppliers, and industry representative groups; however, none of the 
suppliers were located in the Northern Mariana Islands. The comments 
and our responses to those comments are set forth below.
    Comment: The commenters recommended that the Northern Mariana 
Islands not be included in future National Mail Order CBPs, saying that 
including the Northern Mariana Islands in future National Mail Order 
CBPs will create access issues due to increased shipping times, and 
causing what they believed to be an already at-risk population to face 
an increased risk.
    Response: We do not believe that including the Northern Mariana 
Islands in a future National Mail Order CBP will limit access. On the 
contrary, we believe it will help ensure access for the beneficiaries 
in this area. Including the Northern Mariana Islands under the National 
Mail Order CBP ensures access to mail order diabetic supplies since 
suppliers awarded contracts under the program must make the supplies 
available to any beneficiary in the area who requests the items from 
the supplier. Because there are a limited number of pharmacies in the 
Northern Mariana Islands, we believe that adding the Northern Mariana 
Islands to a future National Mail Order CBP will help ensure access for 
beneficiaries in Northern Mariana Islands who need diabetic testing 
supplies. We also do not have any evidence to suggest that implementing 
the National Mail Order CBP in the Northern Mariana Islands will 
increase shipping times. Beneficiaries will also still be able to 
obtain their diabetic testing supplies from pharmacy storefronts as 
well, if they so choose. As with all CBPs, we will continue to monitor 
the National Mail Order CBP for any access issues, including any 
negative beneficiary health outcomes.
    Final Rule Action: After consideration of comments received and for 
reasons we set forth previously in this final rule and in the CY 2019 
ESRD PPS DMEPOS proposed rule, we are finalizing the proposed revision 
to Sec.  414.210(g)(7) with a minor technical change to the language to 
denote that beginning on or after the date that the Northern Mariana 
Islands are included under a national mail order competitive bidding 
program, the fee schedule adjustment methodology under Sec.  
414.210(g)(7) no longer applies. Thus, beginning on or after the date 
that the Northern Mariana Islands are included under a National Mail 
Order CBP, the fee schedule adjustment methodology under Sec.  
414.210(g)(7) will no longer apply to mail order items furnished to 
beneficiaries in the Northern Mariana Islands.

X. Summary of the Request for Information on the Gap-Filling Process 
for Establishing Fees for New DMEPOS Items

    In general, the statute mandates that fee schedule amounts 
established for DME, prosthetics and orthotics and other items be based 
on average payments made previously under the reasonable charge payment 
methodology. The criteria for determining reasonable charges are at 42 
CFR 405.502. For example, the exclusive payment rule at sections 
1834(a)(2), (3), (8), and (9) of the Act mandates that the fee schedule 
amounts for DME generally be based on average reasonable charges from 
1986 and/or 1987, increased by annual covered item update factors. 
Since section 1834(a)(1)(C) of the Act mandates that this be the 
exclusive payment rule for DME, as section 1834(h)(1)(D) of the Act 
does for prosthetic devices, prosthetics and orthotics, CMS is required 
to establish fee schedule amounts for these items based on the amounts 
and levels established under the reasonable charge payment periods set 
forth in the statute (that is, July 1, 1986 through June 30, 1987, for 
prosthetic devices, prosthetics and orthotics, therapeutic shoes, and 
most DME items).
    Because there may be DMEPOS items that come on the market that were 
not paid for by Medicare during the reasonable charge payment periods 
that the statute mandates be used for establishing the fee schedule 
amounts for these items, we establish the fee schedule amounts for 
newly covered items using a ``gap-filling'' process. The gap-filling 
process allows Medicare to establish fee schedule amounts that align 
with the statutory basis for the DMEPOS fee schedule. We essentially 
fill the gap in the data due to the lack of historic reasonable charge 
payments from 1986 and 1987 by estimating what the historic reasonable 
charge payments would have been for the items. As described in section 
60.3 of chapter 23 of the Medicare Claims Processing Manual (Pub. L. 
100-04), CMS gap-fills by using fees for comparable equipment or prices 
from supplier price lists, such as mail order catalogs. The gap-filling 
process only applies to items not assigned existing HCPCS codes that 
are also not items that previously were paid for under a HCPCS code 
that was either deleted or revised, in other words truly new items or 
technology as opposed to recoded/reclassified or technologically 
refined items or technology. This gap-filling process can result in fee 
schedule amounts that greatly exceed the cost to suppliers of the new 
technology items (such as when inflated prices from a manufacturer were 
used as a proxy for supplier price lists under past gap-filling 
exercises) or do not cover the costs of furnishing the technology if 
the comparable items used for gap-filling purposes are less expensive 
than the new item.
    We are considering if changes should be made to the gap-filling 
process for establishing fees for newly covered DMEPOS items paid on a 
fee schedule basis. We solicited comments for information on how the 
gap-filling process could be revised in terms of what data sources or 
methods could be used to estimate historic allowed charges for new 
technologies in a way that satisfies the exclusive payment rules for 
DMEPOS items and services, while preventing excessive overpayments or 
underpayments for new technology items and services.
    We received approximately 25 public comments from manufacturers, 
suppliers, beneficiary advocacy groups, and industry representative 
groups. The comments received in response to the Request for 
Information on the Gap-filling Process for Establishing Fees for New 
DMEPOS Items are set forth below.
    Comments: Overall the commenters recommended that CMS increase 
transparency for stakeholders during the

[[Page 57047]]

gap-filling process for establishing fees for new DMEPOS items and 
revise the process for filling the gap in the data due to the lack of 
historic reasonable charge payments by estimating what the historic 
reasonable charge payments would have been for the items from a base 
year of 1986 and 1987 and inflating to the current year. Many 
commenters recommended discontinuing the application of past Consumer 
Price Index (CPI) freezes and reductions when establishing new fee 
schedule amounts for new HCPCS codes. Some commenters recommended that 
CMS include in its next budget proposal a provision to amend the 
statute at 42 U.S.C. 1395 to eliminate or modify the 1987 base year 
requirement for payment for DMEPOS items and 1992 base year requirement 
for payment for surgical dressing items. Also, some commenters 
recommended against CMS including internet or catalog pricing in the 
gap-filling process unless there is evidence that the price meets all 
Medicare criterion and includes all Medicare required services. The 
commenters elaborated that internet and catalog prices do not reflect 
the costs of the many Medicare supplier requirements such as supplier 
accreditation, in[hyphen]the[hyphen]home assessment, beneficiary 
training, and documentation, and therefore, do not contribute to a 
reasonable payment level. Several commenters suggested developing 
additional guidelines and definitions for determining whether an item 
is comparable for the purpose of assigning a fee schedule amount to a 
new item. The commenters elaborated that in order for an item to be 
comparable to another item, both should have similar features and 
function, should be intended for the same patient population, for the 
same clinical indicators, and to fill the same medical need. In 
addition, some commenters endorsed the addition of a weighting 
calculation to apply to a median price to factor in the existing market 
share of the item. The commenters expressed concern that the current 
gap[hyphen]filling methodology assumes that all products within a given 
HCPCS code have equal characteristics, minimum specifications, and the 
gap-filling method does not account for relative quality, durability, 
clinical preference, and overall market demand. Thus, the commenters 
are concerned that the calculation of a gap-fill amount for a new item 
does not reflect the utilization experience of an existing item. Two 
commenters recommended that CMS develop an appeals process in 
situations where the manufacturer or supplier disagrees with the 
recommendation of a contractor or a final payment decision by CMS and 
there is data to support the opposition. One commenter recommended that 
CMS develop a separate gap-filling process for orthotics and 
prosthetics items. The commenter described that most orthotic and 
prosthetic care requires a significant, ongoing patient-clinician 
relationship which is different from the furnishing of DME, which the 
commenter stated is typically a one-time or short-term encounter 
between the home health agency or DME supplier. Finally, two commenters 
stated changes to the HCPCS coding process are required to establish 
more codes for new technology DMEPOS items before applying the gap-
filling process.
    We appreciate the range of the comments we received. We will 
consider these comments carefully as we contemplate future policies. We 
recognize exploring ways to accommodate new technology, accessibility 
and affordability are important goals while satisfying the exclusive 
payment rules for DMEPOS items and services.

XI. DMEPOS CBP Technical Amendments

A. Background

    Medicare pays for certain DMEPOS items and services furnished 
within competitive bidding areas based on the payment rules that are 
set forth in section 1847 of the Social Security Act (the Act) and 42 
CFR part 414, subpart F. We proposed to make two minor technical 
amendments to correct the existing DMEPOS CBP regulations in 42 CFR 
414.422 published in the Federal Register on November 6, 2014, titled 
``Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Quality Incentive Program, and Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies; Final Rule'' (79 FR 66120) and in Sec.  
414.423 in a final rule published in the Federal Register on November 
29, 2010, titled ``Medicare Program; Payment Policies Under the 
Physician Fee Schedule and Other Revisions to Part B for CY 2011; Final 
Rule'' (75 FR 73169).

B. Proposed Technical Amendments

    We proposed to make minor technical amendments as follows:
     In Sec.  414.422, we proposed to correct the numbering in 
paragraph (d)(4), which contains subsections (i) through (vi), but 
omits (ii) in the numbering sequence. This error was made when the 
regulation was promulgated. The proposed new numbering in paragraph 
(d)(4) contains subsections (i) through (v), including (ii). The 
content of paragraph (d)(4) would remain the same.
     In Sec.  414.423(i)(8), we proposed to remove the 
reference to ``42 U.S.C.'' before Title 18. This statutory citation was 
inadvertently included when the regulation was promulgated.
    We solicited public comments on these technical amendments. We did 
not receive any comments, and therefore, we are finalizing as proposed 
without change. We are finalizing the technical amendments to Sec.  
414.422 to correct the numbering so that paragraph (d)(4) contains 
subsections (i) through (v), including (ii). The content of paragraph 
(d)(4) would remain the same. We are also finalizing the removal of the 
reference to ``42 U.S.C.'' in Sec.  414.423.

XII. Burden Reduction on Comorbidities

A. Background

    In the CY 2011 ESRD PPS final rule (75 FR 49094), we finalized six 
comorbidity categories that are eligible for a comorbidity payment 
adjustment, each with associated International Classification of 
Diseases (ICD) Clinical Modification diagnosis codes (75 FR 49100). 
Beginning January 1, 2011, these categories included three acute, 
short-term diagnostic categories (pericarditis, bacterial pneumonia, 
and gastrointestinal tract bleeding with hemorrhage) and three chronic 
diagnostic categories (hereditary hemolytic anemia (including sickle 
cell anemia), myelodysplastic syndrome, and monoclonal gammopathy).
    We stated in the same rule (75 FR 49099) that we would require ESRD 
facilities to have documentation in the patient's medical/clinical 
record to support any diagnosis recognized for a payment adjustment, 
utilizing specific criteria that we issued in sub-regulatory guidance, 
specifically the Medicare Benefit Policy Manual, Pub. 100-02, Chapter 
11, Section 60.A.5 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c11.pdf). For example, to qualify for 
the pericarditis comorbidity adjustment, at least two of the four 
following criteria must be met: Atypical chest pain; pericardial 
friction rub; suggestive electrocardiogram changes (for example, 
widespread ST segment elevation with reciprocal ST segment depressions 
and PR depressions) not previously reported; and new or worsening 
pericardial effusion. In response to such requirements, stakeholders 
have suggested it would require additional

[[Page 57048]]

testing or procedures to document a comorbidity, which was not our 
intent. Rather, our assumption was that the patient's diagnosing 
physician would provide the documentation. In the CY 2011 ESRD PPS 
final rule (75 FR 49105), we stated that ESRD facilities will obtain 
diagnostic information through increased communication with their 
patients, their patient's nephrologists and their patient's families. 
If there is no documentation in the medical record, the ESRD facility 
would be unable to claim a comorbidity payment adjustment for that 
patient, but could seek payment through the outlier mechanism.
    In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that 
the ICD-9-CM codes eligible for the comorbidity payment adjustment are 
subject to the annual ICD-9-CM coding updates that occur in the 
hospital Inpatient Prospective Payment System final rule and are 
effective October 1st of each year. We explained that any updates to 
the ICD-9-CM codes that affect the categories of comorbidities and the 
diagnoses within the comorbidity categories that are eligible for a 
comorbidity payment adjustment would be communicated to ESRD facilities 
through sub-regulatory guidance. We update the list of eligible 
diagnosis codes on an annual basis and communicate these changes 
through the CMS.gov website.
    In the CY 2016 ESRD PPS final rule (80 FR 68989 through 68990), in 
consideration of stakeholder concerns about the burden associated with 
meeting the documentation requirements for bacterial pneumonia, we 
finalized the elimination of the case-mix payment adjustment for the 
comorbidity categories of bacterial pneumonia and monoclonal gammopathy 
beginning in CY 2016.

B. Final Documentation Requirements

    In the CY 2018 ESRD PPS proposed rule (82 FR 31224), we published a 
request for information (RFI) related to improvements to the health 
care delivery system that reduce unnecessary burdens for clinicians, 
other providers, and patients and their families, and we invited the 
public to submit their ideas for regulatory, sub-regulatory, policy, 
practice, and procedural changes to better accomplish these goals. The 
aim of the RFI was to request information that would lead to increased 
quality of care, lower costs, improved program integrity, and to make 
the health care system more effective, simple and accessible.
    As we discussed in the CY 2019 ESRD PPS proposed rule (83 FR 
34390), after reviewing the comments received in response to the RFI, 
we have determined that the documentation requirements associated with 
the conditions that are eligible for the comorbidity payment adjustment 
should be revisited. We have heard from stakeholders that they continue 
to face challenges in obtaining the required documentation in order to 
report specific diagnosis codes and obtain the comorbidity payment 
adjustments. Additionally, we have determined that the ESRD PPS 
documentation requirements are more rigorous than the documentation 
requirements under other CMS payment systems that generally rely on the 
ICD Official Guidelines.
    In order to reduce burden on ESRD facilities and provide consistent 
policy across Medicare payment systems, we proposed to reduce the 
documentation requirements necessary for justification of the 
comorbidity payment adjustment. Specifically, we would no longer 
require that ESRD facilities obtain results from specific diagnostic 
tests in order to qualify for a comorbidity payment adjustment. 
Instead, we proposed to rely on the guidelines established by the 
Official ICD Guidelines for Coding and Reporting. This proposal did not 
preclude the requirement for ESRD facilities to maintain clear 
documentation in the beneficiary's medical record used to justify the 
reporting of diagnosis codes, which is also necessary for adherence to 
ICD Guidelines. Documentation required to meet ICD guidelines continues 
to be required for purposes of the adjustment.
    We solicited comment on this proposal. The comments and our 
responses to the comments on the comorbidity documentation burden 
reduction proposal are set forth below.
    Comment: A national dialysis organization thanked CMS for 
acknowledging its concerns regarding comorbidity documentation, but 
indicated the use of ICD Official Guidelines will not sufficiently 
address this problem. The organization stated the proposed rule is 
silent on what documentation will be required to support the reporting 
of comorbid condition ICD-10 codes and pointed out the dialysis 
facilities do not diagnose patients with these conditions, which means 
they will continue to have to rely upon documentation from other 
providers to support the claim. An LDO stated that the use of the ICD 
Official Guidelines will have no material effect on the root problem 
dialysis facilities encounter in receiving payments under the 
comorbidity adjustment.
    A dialysis provider organization stated the use of ICD-10 codes to 
document comorbidities is an improvement over the current documentation 
requirements, since both pericarditis and hemolytic anemia (including 
sickle cell anemia) are more likely to be captured as a routine matter 
by ESRD providers than the current requirements. However, the commenter 
pointed out gastrointestinal tract bleeding with hemorrhage is not a 
diagnosis for which a dialysis clinic has ready access to the necessary 
documentation and when a hospital admission is involved, gathering the 
required supporting documentation such as from a colonoscopy or 
endoscopy, can be difficult, if not impossible. The commenter 
questioned whether these comorbidities are appropriate to begin with 
from both clinical, as well as cost vantage points. The commenter 
stated that from a clinical vantage point, cardiovascular disease, 
which is not among the current comorbidities is a, if not the, leading 
cause of death in the ESRD population. The commenter stated the ESRD 
PPS outlier policy can help address disproportionate costs associated 
with comorbidities and, since the Secretary has discretion as to what 
may be included in the case mix adjustment, CMS should consider 
suspending use of comorbidities.
    An LDO expressed appreciation for the proposal to no longer require 
ESRD facilities obtain results from specific diagnostic tests in order 
to qualify for a comorbidity payment adjustment and to rely on the 
guidelines established by the Official ICD Guidelines for Coding and 
Reporting. The LDO stated CMS's assumption that the patient's 
diagnosing physician would provide the documentation is not accurate. 
In the majority of the cases, the LDO asserted, coding for the 
comorbidities is performed by hospital system professional coders at 
the time of a hospital discharge by reading though a patient's chart. 
In most cases the treating physicians are hospitalists, and they are 
unfamiliar with ESRD policies about comorbidities and payment. 
Furthermore, the LDO sees no reason to obtain more results to get to 
the granularity of the ICD-10 code currently required to support ESRD 
comorbidity reporting, because the LDO believes that in many or most 
cases, this diagnostic information will not change the treatment 
course.
    Response: We appreciate the feedback from commenters on our 
proposal to rely on ICD Official Guidelines. We continue to believe it 
is important for ESRD facilities to be aware of patients'

[[Page 57049]]

conditions. The CfCs for ESRD facilities at Sec.  494.80(a)(1) 
indicates a patient's comprehensive assessment must include evaluation 
of current health status and medical condition, including co-morbid 
conditions. For the purpose of receiving a payment adjustment, the 
appropriate ICD-10-CM codes are required to be present on the claim 
with the appropriate documentation as required by ICD official 
guidelines in the patient's medical record.
    We also continue to believe obtaining the medical documentation 
necessary to receive payments should not be complicated or burdensome, 
and is important for care coordination purposes. In situations where 
the patient's medical record is incomplete and the ESRD facility is 
unable to obtain the documentation needed to report the comorbidity 
diagnosis, we would expect the facility to include the cost for all 
outlier-eligible services on the claim and qualify for an outlier 
payment when the cost exceeds the outlier fixed dollar loss threshold. 
This approach supports access to dialysis for high cost patients. We 
will continue to monitor the extent to which the comorbidities are 
reported.
    Comment: Several commenters expressed concern regarding the 
availability of the documentation needed to support the reporting of 
the diagnosis code describing the comorbidity eligible for the 
adjustment and provided suggestions on how to streamline the process.
    Some commenters indicated that the documentation is rarely, if 
ever, available because CMS does not require the other providers to 
disclose the information to dialysis facilities. An LDO stated that 
that despite its best attempts in following up with other providers, 
the organization has encountered challenges in receiving discharge 
instructions/summaries, pending laboratory results, and other relevant 
information on their patients. The LDO asserted that to ensure 
effective care delivery, patient safety, and the application of a 
revised, valid and reliable comorbidity adjuster, CMS should require 
hospitals, particularly those using certified health information 
technology, to send the following information to other providers 
involved in an ESRD patient's care: (1) Discharge instructions and 
discharge summary within 48 hours; (2) pending test results within 72 
hours of their availability; and (3) all other necessary information 
specified in the ``transfer to another facility'' requirements.
    One health plan encouraged CMS to reduce documentation burden by 
automatically incorporating diagnosis codes from all claims (that is, 
hospital and physician claims in addition to ESRD claims) when 
determining if a comorbidity adjustment applies. The health plan 
explained that ESRD facilities struggle to obtain documentation from 
other providers in order to include the diagnosis on the ESRD claim, 
even when the ESRD facility has a common electronic health record with 
the hospital and physician practice. The health plan noted that because 
the diagnosis coding does not automatically transfer to the ESRD 
medical record the hospital medical record has to be thoroughly 
reviewed to determine the appropriate diagnosis codes to enter on the 
ESRD claim. The health plan believes automation within CMS's system 
would create a more seamless and accurate application of the 
comorbidity adjustment.
    One dialysis provider organization requested that CMS use claims 
data in addition to the ICD Guidelines for Coding and Reporting to 
identify comorbidities present in patients eligible for payment 
adjustments. The organization believes the supplementing of ICD coding 
information with claims data will ensure more accurate payment to 
providers, as well as further ease administrative burden. As part of 
this effort, the organization would welcome the opportunity to work 
with CMS to help educate dialysis providers on how to code patient 
comorbidities on their claims.
    Response: We appreciate the requests for interoperability with 
other care settings either through electronic health records or claims 
data and agree that it could reduce the burden related to comorbidity 
documentation. We will consider these for future updates and will 
coordinate with other federal partners, as feasible.
    Comment: MedPAC commented CMS should consider removing all 
comorbidity payment adjustments used in the current ESRD PPS because 
these adjustment factors may not be estimated accurately. A MedPAC 
analysis showed the comorbid conditions are poorly identified on 
dialysis claims and reflect only differences in the cost of dialysis 
services formerly separately billable. MedPAC further stated that to 
the extent unreported comorbid conditions increase the cost of 
treatment above the ESRD PPS base rate, those costs are currently borne 
by the facility and the outlier payment pool.
    An LDO stated CMS's proposal to have facilities document different 
criteria does not change the fundamental challenge with claiming case 
mix adjusters. The LDO recommended CMS follow the long-standing 
recommendations of the kidney community and MedPAC and eliminate the 
comorbid case mix adjusters from the ESRD PPS in the CY 2019 ESRD PPS 
final rule.
    A national dialysis organization, in its comment on the outlier 
expansion solicitation, recommended CMS address the comorbidity 
documentation burden by relying upon the outlier payments for the 
higher costs it assumes are addressed through the comorbid case-mix 
adjusters. The organization expressed concern that these adjusters do 
not actually reflect higher cost patients and that money is being taken 
out of the system that is never returned to support patient care. 
Additionally, the organization stated outlier payments would be 
sufficient to address the higher costs related to patients with these 
conditions. Instead, the organization recommended that CMS eliminate 
the comorbid case-mix adjusters for CY 2019 and recognize any patient 
with one of the remaining conditions would use more of the drugs 
currently eligible for the outlier payment.
    A national provider organization also urged CMS to eliminate 
comorbidity adjustments from the payment system until CMS develops 
appropriate adjusters that accurately capture variance in costs of care 
for particularly high-cost, high-acuity patients. The organization 
agrees with CMS that the cost of dialysis treatment varies depending on 
the volume of services provided at the facility, its location and the 
adult and pediatric patients it serves, and thus appreciates 
appropriate adjustments in the payment system that account for these 
differences in cost of care. However, the organization stated the 
existing comorbidity adjustments in the ESRD PPS do not correspond well 
with the significant variance in costs facilities experience in 
treating patients with certain particularly complex and costly 
comorbidities and other acute illness or trauma events. As a result, 
the organization believes the current comorbidity adjustments 
inappropriately take away funding from the ESRD base rate that 
otherwise could support provision of high-quality care. An LDO 
recommended removing the remaining comorbid adjustors; and if not 
removed, they should be adjusted. Another LDO advised CMS to add more 
generic codes to the list including:

K29.51 Unspecified chronic gastritis with bleeding
K29.61 Other gastritis with bleeding
K29.71 Gastritis, unspecified, with bleeding
K29.91 Gastroduodenitis, unspecified, with bleeding

[[Page 57050]]

K92.2 Gastrointestinal hemorrhage, unspecified

    A professional association expressed concern that, without a clear, 
simple process to obtain detailed comorbid condition data and the 
ability to document these data for submission to CMS, comorbid 
conditions impacting the ESRD PPS bundled payment will continue to be 
insufficiently documented. Consequentially, funds set aside for care of 
dialysis patients will not be expended. The association expressed that 
it is inappropriate to have funds set aside to improve care for the 
most complex patients remain unused due to a documentation hurdle, 
ultimately missing an opportunity to improve the lives of dialysis 
patients.
    Response: We acknowledge that some commenters would prefer 
comorbidity adjusters be removed from the payment system with the 
dollars returned to the base rate and allow more expensive care for 
certain patients be addressed through the outlier policy. As we 
discussed in the CY 2016 ESRD PPS final rule (80 FR 68981 through 
68982), the comorbidity adjusters have economically meaningful 
multipliers so we will continue to include them in the payment system. 
We will, however, consider this feedback.
    With regard to the commenter's suggestion on adding more generic 
diagnosis codes to the list of comorbidities eligible for the payment 
adjustment, we would like to refer the commenter to the CY 2011 ESRD 
PPS final rule (75 FR 49095) where we discuss the exclusion criteria 
used when determining the eligible diagnosis codes. Specifically, we 
explained that based on various issues and concerns raised in public 
comments regarding the proposed co-morbidity categories recognized for 
a payment adjustment, we further evaluated the co-morbidity categories 
with regard to: (1) Inability to create accurate clinical definitions; 
(2) potential for adverse incentives regarding care; and (3) potential 
for ESRD facilities to directly influence the prevalence of the co-
morbidity either by altering dialysis care, diagnostic testing 
patterns, or liberalizing the diagnostic criteria. We believe that 
unspecified codes would meet the first criteria since the code would 
not provide an accurate description of the active condition. 
Additionally, in that rule (75 FR 49108), we finalized eliminating 
diagnostic codes identified in Table 16 of the CY 2011 ESRD PPS 
proposed rule (74 FR 49956) described as unspecified, not otherwise 
specified, or not elsewhere specified, since these codes are general 
and do not provide meaningful identification of a disease. With this 
information in mind, we believe the diagnosis codes suggested by the 
commenter would meet the exclusion criteria and would exclude them from 
being eligible for a payment adjustment.
    We remain concerned eliminating the comorbidity categories may 
result in access to care issues. We continue to believe the payment 
model aligns with our goals for the PPS in establishing accurate 
payments and safeguarding access for Medicare beneficiaries. We plan to 
continue to monitor the reporting of diagnosis codes and are conducting 
research on potential future refinements. Additionally, we are 
undertaking a new research effort and plan to engage with stakeholders 
further on this issue
    Final Rule Action: After considering the public comments, we are 
finalizing the proposal to rely on ICD Official Guidelines and general 
documentation requirements to receive the comorbidity payment 
adjustment without change.

XIII. Requests for Information

A. Request for Information on Promoting Interoperability and Electronic 
Healthcare Information Exchange through Possible Revisions to the CMS 
Patient Health and Safety Requirements for Hospitals and Other 
Medicare- and Medicaid-Participating Providers and Suppliers

    In the CY 2019 ESRD PPS proposed rule (83 FR 34304 through 34415), 
we included a Request for Information (RFI) related to promoting 
interoperability and electronic health care information exchange. We 
received approximately 9 timely pieces of correspondence on this RFI. 
We appreciate the input provided by commenters.

B. Request for Information on Price Transparency: Improving Beneficiary 
Access to Provider and Supplier Charge Information

    In the CY 2019 ESRD PPS proposed rule (83 FR 34304 through 34415), 
we included a Request for Information (RFI) related to price 
transparency and improving beneficiary access to provider and supplier 
charge information. We received approximately 8 timely pieces of 
correspondence on this RFI. We appreciate the input provided by 
commenters.

XIV. 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. We 
solicited comments in the notice of proposed rulemaking that published 
in the Federal Register on July 19, 2018 (83 FR 34304 through 34415). 
For the purpose of transparency, we are republishing the discussion of 
the information collection requirements. All of the requirements 
discussed in this section are already accounted for in OMB approved 
information collection requests.

B. Requirements in Regulation Text

    In sections II.B.1 and II.B.2.b of this final rule, we are 
finalizing changes to regulatory text for the ESRD PPS in CY 2019. We 
are also finalizing changes to regulatory text for the ESRD QIP in 
section IV.A.3 of this final rule. However, the changes that are being 
finalized do not impose any new information collection requirements.

C. Additional Information Collection Requirements

    This final rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
final rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP--Wage Estimates
    To derive wage estimates, we used data from the U.S. Bureau of 
Labor Statistics' May 2016 National Occupational Employment and Wage 
Estimates. In the CY 2016 ESRD PPS final rule (80 FR 69069), we stated 
that it was reasonable to assume that Medical Records and Health 
Information Technicians, who are responsible for organizing and 
managing health information data,\29\ are the individuals tasked with 
submitting measure data to CROWNWeb and NHSN, as well as compiling and 
submitting patient records for purposes of the data validation studies 
rather than a Registered Nurse, whose duties are centered on providing 
and coordinating care for patients.\30\ The mean hourly wage of a 
Medical Records and Health Information Technician is $20.59 per hour. 
Fringe benefit and overhead are calculated at 100 percent. Therefore, 
using these assumptions, we estimate an

[[Page 57051]]

hourly labor cost of $41.18 as the basis of the wage estimates for all 
collection of information calculations in the ESRD QIP. We have 
adjusted these employee hourly wage estimates by a factor of 100 
percent to reflect current HHS department-wide guidance on estimating 
the cost of fringe benefits and overhead. These are necessarily rough 
adjustments, both because fringe benefits and overhead costs vary 
significantly from employer to employer and because methods of 
estimating these costs vary widely from study to study. Nonetheless, 
there is no practical alternative and we believe that these are 
reasonable estimation methods.
---------------------------------------------------------------------------

    \29\ https://www.bls.gov.oes/current/oes292071.htm.
    \30\ https://www.bls.gov.oes/current/oes291141.htm.
---------------------------------------------------------------------------

    We used these updated wage estimates along with updated facility 
counts and patient counts to re-estimate the total information 
collection burden under the ESRD QIP. We estimate the total information 
collection burden for the PY 2021 ESRD QIP to be $181 million, and for 
PY 2022, to be $202 million for a net incremental burden of $21 
million.
a. Estimated 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 to ensure that 
they meet CROWNWeb's internal data format requirements.
b. Estimated Burden Associated With the Data Validation Requirements 
for PY 2021 and PY 2022
    Section IV.B.6 of this final rule outlines the new data validation 
policies that we are finalizing for the ESRD QIP. Specifically, for the 
CROWNWeb validation, we are finalizing a policy to adopt the CROWNWeb 
data validation methodology that we previously adopted for the PY 2016 
ESRD QIP as the methodology we will use to validate CROWNWeb data for 
all payment years, beginning with PY 2021. Under this methodology, 300 
facilities will be selected each year to submit to CMS not more than 10 
records, and we will reimburse these facilities 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 will submit these data, we estimate that 
the aggregate cost of the CROWNWeb data validation each year will be 
approximately $30,885 (750 hours x $41.18), or an annual total of 
approximately $103 ($30,885/300 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 continued study for validating data reported to the NHSN 
Dialysis Event Module, we are finalizing a modification of the sampling 
methodology that we previously finalized in the CY 2018 ESRD PPS final 
rule (82 FR 50766 through 50767). Under the finalized modifications, we 
will select 150 facilities for participation in the PY 2021 validation 
study and 300 facilities for participation in the PY 2022 validation 
study. A CMS contractor will send these facilities requests for 20 
patient records for each of 2 quarters of data reported in CY 2018 (for 
a total of 40 patient records per facility). 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 10 hours to comply with this 
requirement. We also estimate that in PY 2021, the total combined 
annual burden for the 150 facilities asked to submit records will be 
1,500 hours (150 facilities x 10 hours). Since we anticipate that 
Medical Records and Health Information Technicians or similar 
administrative staff will submit these data, we estimate that the 
aggregate cost of the NHSN data validation in PY 2021 will be $61,770 
(1,500 hours x $41.18), or a total of approximately $412 ($61,770/150 
facilities) per facility in the sample in PY 2021. We finalized a 
policy to ask 300 facilities to submit records for PY 2022, and we 
estimate that the total combined annual burden for these facilities 
will be 3,000 hours (300 facilities x 10 hours). Since we anticipate 
that Medical Records and Health Information Technicians or similar 
administrative staff will submit these data, we estimate that the 
aggregate cost of the NHSN data validation in PY 2022 would be $123,540 
(3,000 hours x $41.18), or a total of approximately $412 ($123,540/300 
facilities) per facility in the sample for PY 2022. The information 
collection request (OMB control number 0938-1340) will be revised and 
sent to OMB for approval.
2. New CROWNWeb Reporting Requirements for PY 2021 and PY 2022
    To determine the burden associated with the new collection of 
information requirements, we look at the total number of patients 
nationally, the number of data elements per patient-year that the 
facility will be required to submit to CROWNWeb for each measure, the 
amount of time required for data entry, the estimated wage plus 
benefits applicable to the individuals within facilities who are most 
likely to be entering data into CROWNWeb, and the number of facilities 
submitting data to CROWNWeb. In section IV.B.1.c of this final rule, we 
are finalizing a policy to modify our data collection requirements for 
PY 2021 by removing four reporting measures from the ESRD QIP measure 
set. These changes will result in a burden collection savings of 
approximately $12 million for PY 2021 (from an estimated $193 million 
in total ESRD QIP burden for PY 2021 to an estimated $181 million). 
Approximately $2 million of that reduction is attributable to the 
removal of the Pain Assessment and Follow-Up reporting measure and the 
remaining $10 million of that reduction is attributable to the removal 
of the Serum Phosphorus reporting measure. The total reduction in 
burden hours is approximately 300,000 hours (from an estimated 4.7 
million burden hours for PY 2021 to an estimated 4.4 million burden 
hours). Approximately 40,000 hours of that reduction is attributable to 
the removal of the Pain Assessment and Follow-Up reporting measure and 
the remaining 260,000 hours of that reduction is attributable to the 
removal of the Serum Phosphorus reporting measure. The removal of the 
other two reporting measures (Healthcare Personnel Influenza 
Vaccination and Anemia Management) will not affect our burden 
calculations because data on those measures are not reported through 
CROWNWeb.
    In section IV.C.1 of this final rule, we are finalizing policies to 
adopt two new measures beginning with PY 2022. We estimate that the 
burden associated with this new data collection requirement will be 
approximately $21 million, or an estimated 510,000 burden hours, and 
that this burden will be attributable entirely to the reporting of data 
on the proposed MedRec measure. Since facilities are not required to 
submit data

[[Page 57052]]

to CROWNWeb for the PPPW measure, we estimate that there will be no 
additional burden on facilities related to the PPPW measure. We 
estimate that the total burden increase associated with reporting data 
on the two new measures finalized for PY 2022 is $21 million. The 
information collection request under OMB control number 0938-1289 will 
be revised and sent to OMB.
    In section IV.D.1 of the CY 2019 ESRD PPS proposed rule, we 
proposed to adopt one new measure beginning in PY 2024. We estimated 
that the burden associated with the proposed measure will be zero. 
Since facilities would not have been required to submit data to 
CROWNWeb for the SWR measure, we estimated that there would be no 
burden in connection with this measure in PY 2024. We are not 
finalizing this proposal.
3. DMEPOS Competitive Bidding Program
a. Bidding Forms A and B
    Section V.D.1 of this final rule outlines our changes to the DMEPOS 
CBP. DMEPOS suppliers submit bids in order to compete to become a 
contract supplier to furnish competitively bid items to Medicare 
beneficiaries who live in a CBA. CMS publishes Request for Bids 
instructions to describe DMEPOS CBP requirements and to instruct 
bidders through the bid submission process. Bids are submitted 
electronically via the DMEPOS Bidding System (DBidS), which is the 
DMEPOS CBP online bidding system. The bids submitted before the close 
of the bid window are evaluated to determine which bidders will be 
offered contracts. Form A collects key business information to identify 
a bidder, the areas and products where the bidder chooses to bid, and 
pertinent information to indicate whether the bidder meets all 
eligibility requirements. A thorough analysis is performed of all 
information submitted to determine that the bidder has met all 
requirements, including licensure, financial, and quality standards. 
Form B contains key bid information including the bid amount for each 
item, historical experience providing each item, and specific 
manufacturer and model information for each item. The manufacturer and 
model information is utilized to populate the Medicare Supplier 
Directory during the contract period for bidders that are awarded a 
contract. CMS utilizes the combined information from Forms A and B to 
select winning bidders and establish single payment amounts for 
competitively bid items and services. The previously approved 
information collection request is under OMB control number 0938-1016.
    All bidders must submit their information and signature(s) 
electronically into Forms A and B using DBidS. This system allows 
bidders to efficiently and consistently provide the necessary 
information contained on Forms A and B for CMS to review. Bidders are 
allowed to make changes to their bids at any time prior to the close of 
the bid window, at which time bidders are required to complete, 
approve, and certify their bids. The Competitive Bidding Implementation 
Contractor (CBIC) will use the appropriate technology to obtain and 
secure the bidding information that is transmitted. Assistance and 
technical support is available to bidders throughout the competitive 
bidding process. Bidders will be required to submit supporting 
documentation, such as required financial documents, proof of a bid 
surety bond(s), and any network agreement(s) to the CBIC.
b. Burden Estimates (Hours and Wages) for Bidding Forms A and B
    Form A is used to identify the bidder. This form includes 
information for all locations that would be included with the bid(s). 
In preparation for the next round of bidding, CMS has incorporated an 
update to this form that would also provide new instructions in 
accordance with Sec.  414.412(h), allowing the bidder to attest that 
they have obtained a bid surety bond for each CBA for which they are 
submitting a bid.
    We have estimated the time to obtain a bid surety bond from a 
surety company (including contacting the company, filling out forms, 
submitting forms, filing paperwork, etc.) to be 11 minutes. 
Additionally, we estimated that the time to assemble and complete the 
new bid surety bond section of Form A to be 5 minutes. The time to 
submit the bid surety bond documentation is estimated to take an 
additional 5 minutes. Therefore, the total time to complete Form A has 
changed from 8 hours to 8 hours and 21 minutes. Based on the number of 
bidders from prior rounds of competition, we estimated the number of 
respondents (bidders) to be 1,500 for the next round. Each bidder would 
be required to complete one Form A for each round in which it bids. We 
anticipated that this form would be completed by the equivalent of an 
Administrative Services Manager with a mean hourly wage of $49.70, plus 
fringe benefits and overhead of $49.70, for a total of $99.40. This 
wage is based on the May 2017 Occupational Employment Statistics from 
the Bureau of Labor Statistics, plus fringe benefits and overhead, 
https://www.bls.gov/oes/current/oes113011.htm. It is anticipated that 
an Administrative Services Manager would have the requisite knowledge, 
access to information, and decision making authority related to a 
bidder's business operations necessary to formulate a bid. We sought 
comments on this assumption and we did not receive any comments. We 
estimated, based on information from previous rounds of competition, 
the burden for each bidder to complete Form A is 8 hours and 21 
minutes, and $829.99 ($99.40 x 8 hours and 21 minutes). This estimate 
is based on the time it takes a bidder to develop their business 
strategy on which CBAs and product categories to bid; obtain their bid 
surety bond(s); gather the required documents; and enter and review 
their information.
    We do not know the exact number of bidders who would bid in the 
next round; however, for purposes of this estimate, we assumed that the 
number of bidders would be roughly the same as in previous rounds of 
competition. We estimated there would be approximately 1,500 bidders in 
the next round and each bidder would complete Form A once for a total 
of 12,525 hours and a total cost of $1,244,985.
    Bidders will use Form B to submit bids for items included in the 
DMEPOS CBP. This form would be completed once for each CBA and product 
category combination with an estimated completion time of 3 hours. 
Total completion time assumes the time it takes a bidder to familiarize 
itself on how to complete Form B, develop its bid amount and enter the 
applicable information into Form B. For the next round, we do not know 
how many bids will be submitted; however, for purposes of this 
estimate, we assumed the average bidder would bid in 5 CBAs in 7 
product categories for an average total of 35 Form Bs. We expected the 
number of hours to complete Form B to decrease from previous rounds 
based on the removal of the expansion plan section, as well as the 
change in bidding methodology to move to lead item pricing as described 
in section V.D.1 of this final rule. Specifically, the expansion plan 
section is being removed from Form B to reduce the burden for bidders 
as we have learned from past rounds that this information is no longer 
necessary. The change in bidding methodology to move to lead item 
pricing would require bidders to only submit a single bid for an entire 
product category, instead of multiple bids (which can be over 100 for 
some product categories). We anticipated that this form would be 
completed by the

[[Page 57053]]

equivalent of an Administrative Services Manager with a mean hourly 
wage of $49.70, plus fringe benefits and overhead of $49.70, for a 
total of $99.40. It is anticipated that an Administrative Services 
Manager would have the requisite knowledge, access to information, and 
decision making authority related to a bidder's business operations 
necessary to formulate the bid. As a result, we estimated it would 
require the average bidder 105 hours to complete all 35 Form Bs with a 
cost of $10,437 ($99.40 x 105 hours). Assuming 1,500 bidders 
participate in the next round of the DMEPOS CBP, and each bidder 
completes 35 Form Bs, there would be an estimated 52,500 Form Bs 
submitted taking an estimated 157,500 hours for a total estimated cost 
of $15,655,500 ($99.40 x 157,500 hours).
    The information collection request associated with the DMEPOS CBP 
will be revised and submitted to OMB under control number 0938-1016. 
The requirement to use Forms A and B when bidding in the next round of 
the DMEPOS CBP will not be effective until the two forms are approved 
by OMB.

XV. 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), the Congressional Review Act (5 U.S.C. 804(2)) and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We estimate that this rulemaking is ``economically significant'' as 
measured by the $100 million threshold, and hence also a major rule 
under the Congressional Review Act. Accordingly, we have prepared a 
regulatory impact analysis that to the best of our ability presents the 
costs and benefits of the rulemaking. We solicited comments on the 
regulatory impact analysis provided, and we received 1 comment, which 
we discuss in section XVI of this final rule.
2. Statement of Need
a. ESRD PPS
    This rule finalizes a number of routine updates and several policy 
changes to the ESRD PPS in CY 2019. The finalized routine updates 
include the CY 2019 wage index values, the wage index budget-neutrality 
adjustment factor, and outlier payment threshold amounts. Failure to 
publish this final rule would result in ESRD facilities not receiving 
appropriate payments in CY 2019 for renal dialysis services furnished 
to ESRD beneficiaries.
b. AKI
    This rule also finalizes routine updates to the payment for renal 
dialysis services furnished by ESRD facilities to individuals with AKI. 
Failure to publish this final rule would result in ESRD facilities not 
receiving appropriate payments in CY 2019 for renal dialysis services 
furnished to patients with AKI in accordance with section 1834(r) of 
the Act.
c. ESRD QIP
    This rule finalized policies to implement requirements for the ESRD 
QIP, including the adoption of two new measures beginning with PY 2022. 
Failure to finalize requirements for the PY 2022 ESRD QIP would prevent 
continuation of the ESRD QIP beyond PY 2021. In addition, finalizing 
requirements for the PY 2022 ESRD QIP provides facilities with more 
time to review and fully understand new measures before their 
implementation in the ESRD QIP.
d. DMEPOS
i. Changes to the Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
    The final revisions include implementation of lead item pricing and 
determination of SPAs based on maximum winning bids submitted for a 
lead item in each product category. This rule also finalizes revisions 
to the definitions of ``bid'' and ``composite bid'' and establishes a 
new definition for ``lead item.''
ii. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
From the DMEPOS CBP
    We are finalizing transitional fee schedule adjustments for DMEPOS 
items and services furnished on or after January 1, 2019, in areas that 
are currently CBAs and in areas that are currently not CBAs. 
Altogether, we are finalizing three different fee schedule adjustment 
methodologies depending on the area in which the items and services are 
furnished: (1) One fee schedule adjustment methodology for DME items 
and services furnished on or after January 1, 2019, in areas that are 
currently CBAs, in the event of a gap in the CBP; (2) another fee 
schedule adjustment methodology for items and services furnished from 
January 1, 2019 through December 31, 2020, in areas that are currently 
not CBAs, are not rural areas, and are located in the contiguous U.S.; 
and (3) another fee schedule adjustment methodology for items and 
services furnished from January 1, 2019 through December 31, 2020, in 
areas that are currently not CBAs and are either rural areas or non-
contiguous areas.
    The estimated impacts for this part of the rule are calculated 
against a baseline that assumes payments for items furnished in CBAs 
and non-CBAs are made consistent with the rules in place as of January 
1, 2018.
    The impacts are expected to cost $1.05 billion in Medicare benefit 
payments and $260 million in Medicare beneficiary cost sharing for the 
2-year period beginning January 1, 2019, and ending December 31, 2020. 
The Medicaid impacts for cost sharing for the dual eligibles for the 
federal and state portions are assumed to be $45 million and $30 
million, respectively.

[[Page 57054]]

iii. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes
    This final rule amends our regulations at Sec.  414.226 by revising 
the payment rules for oxygen and oxygen equipment and adding a new 
paragraph that establishes some new oxygen and oxygen equipment payment 
classes effective January 1, 2019. Instead of having one class for 
portable oxygen equipment only (gaseous and liquid tanks), we are 
establishing two classes for portable oxygen equipment: (1) One class 
for gaseous tanks, and (2) another class for liquid tanks. We are also 
finalizing an additional class for liquid oxygen contents for 
prescribed flow rates greater than 4 liters per minute and used with 
portable equipment. We are also finalizing a new budget neutrality 
offset to ensure the budget neutrality of all oxygen and oxygen 
equipment classes added after 2006.
iv. Payment for Multi-Function Ventilators
    We are finalizing a payment rule in Sec.  414.222(f) for multi-
function ventilators that establishes payment in accordance with 
section 1834(a)(3) of the Act for ventilators that also perform the 
functions of other items of durable medical equipment subject to 
payment rules under paragraphs (2), (5), and (7) of section 1834(a) of 
the Act.
v. Northern Mariana Islands in Future National Mail Order CBPs
    We are finalizing an amendment to Sec.  414.210(g)(7) to say that 
beginning on or after the date that the Northern Mariana Islands are 
included under a national mail order competitive bidding program, the 
fee schedule adjustment methodology under this paragraph no longer 
applies.
3. Overall Impact
a. ESRD PPS
    We estimate that the finalized revisions to the ESRD PPS will 
result in an increase of approximately $210 million in payments to ESRD 
facilities in CY 2019, which includes the amount associated with 
updates to the outlier thresholds, and updates to the wage index. These 
payments represent transfers from the Federal Government to ESRD 
providers ($160 million) and transfers from the beneficiaries to ESRD 
providers ($50 million).
b. AKI
    We are estimating approximately $40 million will be paid to ESRD 
facilities for dialysis treatments provided to AKI beneficiaries.
c. ESRD QIP
    For PY 2021, we have re-estimated the costs associated with 
information collection requirements under the Program for this final 
rule with updated wage estimates, facility counts, and patient counts, 
as well as the policy changes described earlier in the preamble of this 
final rule, including the measure removals and measure weighting 
changes. We also re-estimated the payment reductions under the ESRD QIP 
in accordance with the policy changes described earlier, including the 
domain restructuring and reweighting. We estimate that these updates 
will result in an overall impact of $213 million associated with 
quality reporting burden and payment reductions, which includes a $12 
million incremental reduction in burden in collection of information 
requirements and $32 million in estimated payment reductions across all 
facilities. PY 2021 ESRD QIP payment reductions represent transfers 
from the federal government to ESRD providers of -$32 million, and 
total ESRD provider costs under the ESRD QIP for PY 2021 total $181 
million.
    For PY 2022, we estimate that the proposed revisions to the ESRD 
QIP will result in an increase in overall impact to $234 million, which 
includes a $21 million incremental increase associated with the 
collection of information requirements and $32 million in estimated 
payment reductions across all facilities. PY 2022 ESRD QIP payment 
reductions represent transfers from the federal government to ESRD 
providers of -$32 million, and total ESRD provider costs under the ESRD 
QIP for PY 2022 total $202 million.
d. DMEPOS
    Impacts are generally considered against the Medicare, Medicaid and 
beneficiary cost sharing. A special consideration of impacts is made in 
Table 50 wherein impacts are considered as transfer amounts based on 
annualized value against two different interest rates.
i. Changes to the Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
    We estimate that the finalized revisions to base SPAs on the 
maximum winning bid and to implement lead item pricing in the Medicare 
DMEPOS CBP, (which we expect could potentially be delayed until January 
1, 2021) will cost about $10 million in Medicare benefit payments and 
roughly $3 million in Medicare beneficiary cost sharing for the 5-year 
period beginning January 1, 2019, and ending September 30, 2023. The 
Medicaid impacts for cost sharing for the dual eligibles for the 
federal and state portions are assumed to be $0 million.
ii. Adjustments to DMEPOS Fee Schedule Amounts Based on Information 
From the DMEPOS CBP
    We are finalizing transitional fee schedule adjustments for DMEPOS 
items and services furnished on or after January 1, 2019, in areas that 
are currently CBAs and in areas that are currently not CBAs. 
Altogether, we are finalizing three different fee schedule adjustment 
methodologies depending on the area in which the items and services are 
furnished: (1) One fee schedule adjustment methodology for DME items 
and services furnished on or after January 1, 2019, in areas that are 
currently CBAs, in the event of a gap in the CBP; (2) another fee 
schedule adjustment methodology for items and services furnished from 
January 1, 2019 through December 31, 2020, in areas that are currently 
not CBAs, are not rural areas, and are located in the contiguous U.S.; 
and (3) another fee schedule adjustment methodology for items and 
services furnished from January 1, 2019 through December 31, 2020, in 
areas that are currently not CBAs and are either rural areas or non-
contiguous areas.
    The estimated impacts for this part of the rule are calculated 
against a baseline that assumes payments for items furnished in CBAs 
and non-CBAs are made consistent with the rules in place as of January 
1, 2018.
    The impacts are expected to cost $1.05 billion in Medicare benefit 
payments and $260 million in Medicare beneficiary cost sharing for the 
2-year period beginning January 1, 2019, and ending December 31, 2020. 
The Medicaid impacts for cost sharing for the dual eligibles for the 
federal and state portions are assumed to be $45 million and $30 
million, respectively.
iii. New Payment Classes for Oxygen and Oxygen Equipment and 
Methodology for Ensuring Annual Budget Neutrality of the New Classes
    This rule finalizes new payment classes for oxygen and oxygen 
equipment and is estimated to be budget neutral to the Medicare 
program. However, the new payment classes may result in overall 
slightly increased beneficiary cost-sharing.

[[Page 57055]]

iv. Payment for Multi-Function Ventilators
    This final rule establishes payment rules for multi-function 
ventilators. The impacts are estimated by rounding to the nearer 5 
million dollars and are expected to cost $15 million in Medicare 
benefit payments and $3 million in Medicare beneficiary cost sharing 
for the 5-year period beginning January 1, 2019, and ending September 
30, 2023. The Medicaid impacts for cost sharing for the beneficiaries 
enrolled in the Medicare Part B and Medicaid programs for the federal 
and state portions are assumed to both be $0 million.
v. Northern Mariana Islands in Future National Mail Order CBPs
    This change will not have a fiscal impact.
4. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on last year's final rule will be the number of reviewers of 
this final rule. We acknowledge that this assumption may understate or 
overstate the costs of reviewing this rule. It is possible that not all 
commenters reviewed last year's rule in detail, and it is also possible 
that some reviewers chose not to comment on the final rule. For these 
reasons we thought that the number of past commenters would be a fair 
estimate of the number of reviewers of this rule. We welcomed comments 
on the approach in estimating the number of entities which will review 
this final rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final rule, and 
therefore for the purposes of our estimate we assume that each reviewer 
reads approximately 50 percent of the rule. We sought comments on this 
assumption. We did not receive any comments on this section of the 
rule.
    Using the wage information from the BLS (https://www.bls.gov/oes/2017/may/naics4_621100.htm) for medical and health service managers 
(Code 11-9111), we estimate that the cost of reviewing this rule is 
$110.00 per hour, including overhead and fringe benefits. Assuming an 
average reading speed, we estimate that it would take approximately 
6.25 hours for the staff to review half of this final rule. For each 
ESRD facility that reviews the rule, the estimated cost is $687.50 
(6.25 hours x $110.00). Therefore, we estimate that the total cost of 
reviewing this regulation rounds to $39,875. ($687.50 x 58 reviewers).
    For DME suppliers, we calculate a different cost of reviewing this 
rule. Assuming an average reading speed, we estimate that it would take 
approximately 2 hours for the staff to review this final rule. For each 
entity that reviews this final rule, the estimated cost is $220.00 (2 
hours x $110.00). Therefore, we estimate that the total cost of 
reviewing this final rule is $143,000 ($220.00 x 650 reviewers).

B. Detailed Economic Analysis

1. CY 2019 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 2018 to estimated payments in CY 2019. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2018 and CY 2019 
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 CY 2017 data from the Part A and Part 
B Common Working Files, as of August 3, 2018, as a basis for Medicare 
dialysis treatments and payments under the ESRD PPS. We updated the 
2017 claims to 2018 and 2019 using various updates. The updates to the 
ESRD PPS base rate are described in section II.B.3 of this final rule. 
Table 41 shows the impact of the estimated CY 2019 ESRD payments 
compared to estimated payments to ESRD facilities in CY 2018.

                                   Table 41--Impact of Finalized Changes in Payment to ESRD Facilities for CY 2019 \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Effect of 2019
                                                               Number of        Effect of 2019    changes in wage     Effect of 2019    Effect of total
             Facility type                  Number of        treatments (in       changes in        index, wage         changes in         2019 final
                                            facilities         millions)        outlier policy   floor, and labor-     payment rate       changes (%)
                                                                                     (%)         related share (%)      update (%)
                                                        A                  B                  C                  D                  E                  F
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities........................              7,099               45.1                0.3                0.0                1.3                1.6
Type:
    Freestanding......................              6,681               43.0                0.3                0.0                1.3                1.6
    Hospital based....................                418                2.2                0.6               -0.1                1.3                1.7
Ownership Type:
    Large dialysis organization.......              5,400               34.9                0.3               -0.1                1.3                1.6
    Regional chain....................                881                5.7                0.4                0.1                1.3                1.9
    Independent.......................                485                2.9                0.4                0.2                1.3                1.9
    Hospital based \2\................                327                1.7                0.6               -0.1                1.3                1.8
    Unknown...........................                  6                0.0                0.2                0.4                1.2                1.8
Geographic Location:
    Rural.............................              1,271                6.5                0.3               -0.3                1.3                1.3
    Urban.............................              5,828               38.6                0.3                0.1                1.3                1.7
Census Region:

[[Page 57056]]

 
    East North Central................              1,145                6.3                0.3               -0.4                1.3                1.3
    East South Central................                572                3.3                0.3               -0.7                1.3                1.0
    Middle Atlantic...................                777                5.5                0.4                0.1                1.3                1.7
    Mountain..........................                400                2.3                0.2               -0.4                1.3                1.1
    New England.......................                191                1.5                0.3               -0.4                1.3                1.2
    Pacific \3\.......................                845                6.5                0.3                1.1                1.3                2.7
    Puerto Rico and Virgin Islands....                 51                0.3                0.1                4.5                1.3                6.0
    South Atlantic....................              1,622               10.6                0.4               -0.3                1.3                1.4
    West North Central................                497                2.3                0.4               -0.3                1.3                1.3
    West South Central................                999                6.6                0.3                0.0                1.3                1.6
Facility Size:
    Less than 4,000 treatments........              1,246                2.1                0.3               -0.2                1.3                1.5
    4,000 to 9,999 treatments.........              2,666               11.9                0.4               -0.2                1.3                1.5
    10,000 or more treatments.........              3,147               31.0                0.3                0.1                1.3                1.7
    Unknown...........................                 40                0.2                0.6                0.3                1.3                2.2
Percentage of Pediatric Patients:
    Less than 2.......................              6,993               44.8                0.3                0.0                1.3                1.6
    Between 2 and 19..................                 41                0.3                0.4                0.1                1.3                1.8
    Between 20 and 49.................                 11                0.0                0.1               -0.2                1.3                1.2
    More than 50......................                 54                0.0               -0.1                0.1                1.3                1.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Calcimimetics will be paid under the transitional drug add-on payment adjustment for CY 2019. In CY 2016 there was approximately $840 million in
  spending for Sensipar under Part D.
\2\ Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
\3\ Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.
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 of this 
final rule is shown in column C. For CY 2019, the impact on all ESRD 
facilities as a result of the changes to the outlier payment policy 
would be a 0.3 percent increase in estimated payments. Nearly all ESRD 
facilities are anticipated to experience a positive effect in their 
estimated CY 2019 payments as a result of the proposed outlier policy 
changes.
    Column D shows the effect of the finalized CY 2019 wage indices, 
the wage index floor of 0.50, and the updated labor-related share. The 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a -0.7 percent to a 4.5 percent 
increase due to these final updates.
    Column E shows the effect of the finalized CY 2019 ESRD PPS payment 
rate update. The final ESRD PPS payment rate update is 1.3 percent, 
which reflects the final ESRDB market basket percentage increase factor 
for CY 2019 of 2.1 percent and the final MFP adjustment of 0.8 percent.
    Column F reflects the overall impact, that is, the effects of the 
finalized outlier policy changes, wage index floor, labor-related 
share, and payment rate update. We expect that overall ESRD facilities 
will experience a 1.6 percent increase in estimated payments in CY 
2019. The categories of types of facilities in the impact table show 
impacts ranging from an increase of 1.0 percent to 6.0 percent in their 
CY 2019 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 2019, we estimate that 
the finalized ESRD PPS payment rate will have zero impact on these 
other providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2019 will be

[[Page 57057]]

approximately $10.5 billion. This estimate takes into account a 
projected increase in fee-for-service Medicare dialysis beneficiary 
enrollment of 2.0 percent in CY 2019.
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 
1.6 percent overall increase in the proposed CY 2019 ESRD PPS payment 
amounts, we estimate that there will be an increase in beneficiary co-
insurance payments of 1.6 percent in CY 2019, which translates to 
approximately $50 million.
e. Alternatives Considered
    In section II.B.3 of this final rule, we finalized a new wage index 
floor of 0.50. In establishing the new wage index floor, we considered 
maintaining the existing wage index floor of 0.40 and also considered 
increasing the wage floor to 0.51 and 0.55. However, based on the 
analyses we have conducted, we no longer believe a wage index floor 
value of 0.40 is appropriate and we are concerned about the impact a 
higher floor value than .50 would have on the base rate.
2. Proposed Payment for Renal Dialysis Services Furnished to 
Individuals with AKI
    To understand the impact of the changes affecting payments to 
different categories of ESRD facilities for renal dialysis services 
furnished to individuals with AKI, it is necessary to compare estimated 
payments in CY 2018 to estimated payments in CY 2019. To estimate the 
impact among various types of ESRD facilities for renal dialysis 
services furnished to individuals with AKI, it is imperative that the 
estimates of payments in CY 2018 and CY 2019 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 CY 2017 data from the Part A and Part 
B Common Working Files, as of August 3, 2018, as a basis for Medicare 
for renal dialysis services furnished to individuals with AKI. We 
updated the 2017 claims to 2018 and 2019 using various updates. The 
updates to the AKI payment amount are described in section III of this 
final rule. Table 42 shows the impact of the estimated CY 2019 payments 
for renal dialysis services furnished to individuals with AKI compared 
to estimated payments for renal dialysis services furnished to 
individuals with AKI in CY 2018.

               Table 42--Impact of Finalized Changes in Payment for Renal Dialysis Services Furnished to Individuals With AKI for CY 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Effect of 2019
                                                                                  Number of       changes in wage     Effect of 2019    Effect of total
                      Facility type                            Number of        treatments (in      index, wage         changes in         2019 final
                                                               facilities         thousands)     floor, and labor-     payment rate       changes (%)
                                                                                                 related share (%)     update  (%)
                                                                           A                  B                  C                  D                  E
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities...........................................              3,930              163.7                0.0                1.3                1.3
Type:
    Freestanding.........................................              3,837              160.3                0.0                1.3                1.3
    Hospital based.......................................                 93                3.4               -0.1                1.3                1.2
Ownership Type:
    Large dialysis organization..........................              3,318              139.7                0.0                1.3                1.3
    Regional chain.......................................                426               16.6               -0.0                1.3                1.3
    Independent..........................................                125                4.8                0.0                1.3                1.4
    Hospital based \1\...................................                 61                2.7               -0.1                1.3                1.2
    Unknown..............................................                  0                0.0                0.0                0.0                0.0
Geographic Location:
    Rural................................................                703               26.6               -0.3                1.3                1.0
    Urban................................................              3,227              137.1                0.1                1.3                1.4
Census Region:
    East North Central...................................                718               31.2               -0.3                1.3                1.0
    East South Central...................................                315               11.3               -0.6                1.3                0.8
    Middle Atlantic......................................                406               17.4                0.0                1.3                1.3
    Mountain.............................................                248               11.3               -0.4                1.3                0.9
    New England..........................................                126                4.9               -0.4                1.3                1.0
    Pacific \2\..........................................                486               27.7                1.1                1.3                2.5
    Puerto Rico and Virgin Islands.......................                  2                0.0                5.9                1.3                7.3
    South Atlantic.......................................                889               35.7               -0.4                1.3                1.0
    West North Central...................................                255                7.8               -0.3                1.3                1.0
    West South Central...................................                485               16.3               -0.1                1.3                1.2
Facility Size:
    Less than 4,000 treatments...........................                394               11.4                0.0                1.3                1.4
    4,000 to 9,999 treatments............................              1,538               58.0               -0.1                1.3                1.2
    10,000 or more treatments............................              1,990               93.9                0.1                1.3                1.4
    Unknown..............................................                  8                0.4                0.6                1.3                1.9
Percentage of Pediatric Patients:
    Less than 2..........................................              3,929              163.5                0.0                1.3                1.3
    Between 2 and 19.....................................                  0                0.0                0.0                0.0                0.0
    Between 20 and 49....................................                  0                0.0                0.0                0.0                0.0
    More than 50.........................................                  1                0.2                0.6                1.3                1.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.


[[Page 57058]]

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of AKI dialysis treatments (in thousands).
    Column C shows the effect of the final CY 2019 wage indices, the 
wage index floor of 0.50, and the updated labor-related share. The 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a 0.0 percent to a 5.9 percent increase 
due to these final updates.
    Column D shows the effect of the final CY 2019 ESRD PPS payment 
rate update. The final ESRD PPS payment rate update is 1.3 percent, 
which reflects the final ESRDB market basket percentage increase factor 
for CY 2019 of 2.1 percent and the final MFP adjustment of 0.8 percent.
    Column E reflects the overall impact, that is, the effects of the 
final wage index floor, labor-related share, and payment rate update. 
We expect that overall ESRD facilities would experience a 1.3 percent 
increase in estimated payments in CY 2019. The categories of types of 
facilities in the impact table show impacts ranging from an increase of 
0.0 percent to 7.3 percent in their CY 2019 estimated payments.
b. Effects on Other Providers
    Under section 1834(r) of the Act, as added by section 808(b) of 
TPEA, we are updating the 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 his or her physician. Therefore, 
this proposal will have zero impact on other Medicare providers.
c. Effects on the Medicare Program
    We estimate approximately $40.0 million would be paid to ESRD 
facilities in CY 2019 as a result of AKI patients receiving renal 
dialysis services in the ESRD facility at the lower ESRD PPS base rate 
versus receiving those services only in the hospital outpatient setting 
and paid under the outpatient prospective payment system, where 
services were required to be administered prior to the TPEA.
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 will 
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 hospital PPS's payment amount, we will expect beneficiaries 
to pay less co-insurance when AKI dialysis is furnished by ESRD 
facilities.
e. Alternatives Considered
    As we discussed in the CY 2017 ESRD PPS proposed rule (81 FR 
42870), we considered adjusting the AKI payment rate by including the 
ESRD PPS case-mix adjustments, and other adjustments at section 
1881(b)(14)(D) of the Act, as well as not paying separately for AKI 
specific drugs and laboratory tests. 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. We continue to monitor utilization 
and trends of items and services furnished to individuals with AKI for 
purposes of refining the payment rate in the future. This monitoring 
would assist us in developing knowledgeable, data-driven proposals.
3. ESRD QIP
a. Effects of the PY 2021 ESRD QIP on ESRD Facilities
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility services provided to 
beneficiaries. The methodology that we are finalizing to use to 
determine a facility's TPS for the PY 2021 ESRD QIP is described in 
section IV.C of this final rule. Any reductions in ESRD PPS payments as 
a result of a facility's performance under the PY 2021 ESRD QIP will 
apply to ESRD PPS payments made to the facility for services furnished 
in CY 2021.
    For the PY 2021 ESRD QIP, we estimate that of the 7,042 dialysis 
facilities (including those not receiving a TPS) enrolled in Medicare, 
approximately 46.01 percent or 3,240 of the facilities would receive a 
payment reduction for PY 2021. The total payment reduction for all of 
the 3,240 facilities expected to receive a reduction is approximately 
$32,196,724. Facilities that do not receive a TPS do not receive a 
payment reduction. Additionally, we estimate that the proposed removal 
of four reporting measures beginning with PY 2021 will reduce the 
information collection burden by $12 million.
    Table 43 shows the overall estimated distribution of payment 
reductions resulting from the PY 2021 ESRD QIP.

 Table 43--Estimated Distribution of PY 2021 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                 Number of    Percent of
              Payment  reduction                 facilities   facilities
------------------------------------------------------------------------
0.0%..........................................        3,802        56.10
0.5%..........................................        1,532        22.61
1.0%..........................................          896        13.22
1.5%..........................................          359         5.30
2.0%..........................................          188         2.77
------------------------------------------------------------------------
Note: This table excludes 256 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a TPS.

    To estimate whether a facility would receive a payment reduction in 
PY 2021, 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 44.

                       Table 44--Data Used To Estimate PY 2021 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                              Period of time used to
                                               calculate achievement
                 Measure                      thresholds, performance               Performance period
                                            standards, benchmarks, and
                                              improvement thresholds
----------------------------------------------------------------------------------------------------------------
VAT:
    Standardized Fistula Rate............  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
    Long Term Catheter Rate..............  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
Kt/V Dialysis Adequacy Comprehensive.....  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
Hypercalcemia............................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
STrR.....................................  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
ICH CAHPS Survey.........................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
SRR......................................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
NHSN BSI.................................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017

[[Page 57059]]

 
SHR......................................  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
----------------------------------------------------------------------------------------------------------------

    For all measures except STrR and SHR, clinical measure topic areas 
with less than 11 cases for a facility were not included in that 
facility's TPS. For SHR and STrR, facilities were required to have at 
least 5 and 10 patient-years at risk, respectively, in order to be 
included in the facility's TPS. Each facility's TPS was compared to an 
estimated minimum TPS and an estimated payment reduction table that 
were consistent with the proposals outlined in section IV.B.3.b of this 
final rule. Facility reporting measure scores were estimated using 
available data from CY 2016 and 2017. Facilities were required to have 
a score on at least one measure in any two out of the four domains to 
receive a TPS.
    To estimate the total payment reductions in PY 2021 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the 1-year period between 
January 2017 and December 2017 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 2017 through December 2017 times the estimated payment 
reduction percentage.
    Table 45 shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2021. The table also 
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 performance periods used for these calculations will differ 
from those we are finalizing to use for the PY 2021 ESRD QIP, the 
actual impact of the PY 2021 ESRD QIP may vary significantly from the 
values provided here.

               Table 45--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2021
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of       Number of      facilities       reduction
                                     Number of      treatments      facilities     expected  to      (percent
                                    facilities       2017 (in        with  QIP      receive  a       change in
                                                     millions)         score          payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           7,042            44.5           6,777           2,975           -0.38
Facility Type:
    Freestanding................           6,626            42.4           6,415           2,728           -0.35
    Hospital-based..............             416             2.1             362             247           -0.79
Ownership Type:
    Large Dialysis..............           5,355            34.4           5,208           2,096           -0.32
    Regional Chain..............             871             5.7             841             388           -0.38
    Independent.................             479             2.9             447             286           -0.68
    Hospital-based (non-chain)..             325             1.6             280             204           -0.88
    Unknown.....................              12             0.0               1               1           -0.50
Facility Size:
    Large Entities..............           6,226            40.0           6,049           2,484           -0.33
    Small Entities \1\..........             804             4.5             727             490           -0.75
    Unknown.....................              12             0.0               1               1           -0.50
Rural Status:
    (1) Yes.....................           1,263             6.4           1,221             350           -0.23
    (2) No......................           5,779            38.1           5,556           2,625           -0.41
Census Region:
    Northeast...................             960             6.9             917             427           -0.42
    Midwest.....................           1,628             8.5           1,559             625           -0.34
    South.......................           3,168            20.2           3,048           1,491           -0.42
    West........................           1,228             8.5           1,195             381           -0.26
    US Territories \2\..........              58             0.4              58              51           -1.03
Census Division:
    Unknown.....................               7             0.1               7               5           -1.00
    East North Central..........           1,136             6.2           1,089             475           -0.37
    East South Central..........             569             3.3             553             225           -0.31
    Middle Atlantic.............             769             5.4             733             372           -0.46
    Mountain....................             398             2.3             386             101           -0.21
    New England.................             191             1.5             184              55           -0.23
    Pacific.....................             830             6.3             809             280           -0.28
    South Atlantic..............           1,612            10.4           1,551             822           -0.46
    West North Central..........             492             2.3             470             150           -0.27
    West South Central..........             987             6.5             944             444           -0.40
    US Territories \2\..........              51             0.3              51              46           -1.03
Facility Size (number of total
 treatments):
    Less than 4,000 treatments..           1,689             5.9           1,478             731           -0.49
    4,000-9,999 treatments......           2,502            11.8           2,493             920           -0.29

[[Page 57060]]

 
    Over 10,000 treatments......           2,776            26.7           2,773           1,294           -0.38
    Unknown.....................              75             0.2              33              30           -1.22
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC self-
  reported status.
\2\ Includes American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands.

b. Effects of the PY 2022 ESRD QIP on ESRD Facilities
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility services provided to 
beneficiaries. The methodology that we are finalizing to use to 
determine a facility's TPS for the PY 2022 ESRD QIP is described in 
section IV.C of this final rule. Any reductions in ESRD PPS payments as 
a result of a facility's performance under the PY 2022 ESRD QIP will 
apply to ESRD PPS payments made to the facility for services furnished 
in CY 2022.
    For the PY 20co22 ESRD QIP, we estimate that of the 7,042 dialysis 
facilities (including those not receiving a TPS) enrolled in Medicare, 
approximately 43.34 percent or 2,937 of the facilities would receive a 
payment reduction for PY 2022. The total payment reduction for all of 
the 2,937facilities expected to receive a reduction is approximately 
$31,624,158.67. Facilities that do not receive a TPS do not receive a 
payment reduction.
    Table 46 shows the overall estimated distribution of payment 
reductions resulting from the PY 2022 ESRD QIP.

 Table 46--Estimated Distribution of PY 2022 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                 Number of    Percent of
              Payment  reduction                 facilities   facilities
------------------------------------------------------------------------
0.0%..........................................        3,840        56.66
0.5%..........................................        1,535        22.65
1.0%..........................................          872        12.87
1.5%..........................................          352         5.19
2.0%..........................................          178         2.63
------------------------------------------------------------------------
Note: This table excludes 265 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a TPS.

    To estimate whether a facility would receive a payment reduction in 
PY 2022, 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 47.

                       Table 47--Data Used To Estimate PY 2022 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                              Period of time used to
                                               calculate achievement
                 Measure                      thresholds, performance               Performance period
                                            standards, benchmarks, and
                                              improvement thresholds
----------------------------------------------------------------------------------------------------------------
VAT:
    Standardized Fistula Rate............  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
    Long Term Catheter Rate..............  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
Kt/V Dialysis Adequacy Comprehensive.....  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
Hypercalcemia............................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
STrR.....................................  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
ICH CAHPS Survey.........................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
SRR......................................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
NHSN BSI.................................  Jan 2016-Dec 2016...........  Jan 2017-Dec 2017
SHR......................................  Jan 2015-Dec 2015...........  Jan 2016-Dec 2016
----------------------------------------------------------------------------------------------------------------

    For all measures except STrR and SHR, clinical measure topic areas 
with less than 11 cases for a facility were not included in that 
facility's TPS. For SHR and STrR, facilities were required to have at 
least 5 and 10 patient-years at risk, respectively, in order to be 
included in the facility's TPS. Each facility's TPS was compared to an 
estimated minimum TPS and an estimated payment reduction table that 
were consistent with the proposals outlined in section IV.B.3.b of this 
final rule. Facility reporting measure scores were estimated using 
available data from CY 2016 and 2017. Facilities were required to have 
a score on at least one measure in any two out of the four domains to 
receive a TPS.
    To estimate the total payment reductions in PY 2022 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the 1-year period between 
January 2017 and December 2017 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 2017 through December 2017 times the estimated payment 
reduction percentage.
    Table 48 shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2022. 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 performance periods used for these calculations will differ 
from those we are finalizing to use for the PY 2022 ESRD QIP, the 
actual impact of the PY 2022 ESRD QIP may

[[Page 57061]]

vary significantly from the values provided here.

               Table 48--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2022
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of       Number of      facilities       reduction
                                     Number of      treatments      facilities     expected  to      (percent
                                    facilities       2017 (in        with  QIP      receive  a       change in
                                                     millions)         score          payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           7,042            44.5           6,777           2,937           -0.37
Facility Type:
    Freestanding................           6,626            42.4           6,415           2,691           -0.34
    Hospital-based..............             416             2.1             362             246           -0.78
Ownership Type:
    Large Dialysis..............           5,355            34.4           5,208           2,065           -0.31
    Regional Chain..............             871             5.7             841             383           -0.37
    Independent.................             479             2.9             447             285           -0.66
    Hospital-based (non-chain)..             325             1.6             280             203           -0.87
    Unknown.....................              12             0.0               1               1           -0.50
Facility Size:
    Large Entities..............           6,226            40.0           6,049           2,448           -0.32
    Small Entities \1\..........             804             4.5             727             488           -0.74
    Unknown.....................              12             0.0               1               1           -0.50
Rural Status:
    (1) Yes.....................           1,263             6.4           1,221             346           -0.22
    (2) No......................           5,779            38.1           5,556           2,591           -0.40
Census Region:
    Northeast...................             960             6.9             917             421           -0.40
    Midwest.....................           1,628             8.5           1,559             614           -0.33
    South.......................           3,168            20.2           3,048           1,481           -0.41
    West........................           1,228             8.5           1,195             369           -0.25
    US Territories \2\..........              58             0.4              58              52           -1.03
Census Division:
    Unknown.....................               7             0.1               7               5           -0.92
    East North Central..........           1,136             6.2           1,089             465           -0.36
    East South Central..........             569             3.3             553             221           -0.30
    Middle Atlantic.............             769             5.4             733             369           -0.45
    Mountain....................             398             2.3             386              98           -0.20
    New England.................             191             1.5             184              52           -0.22
    Pacific.....................             830             6.3             809             271           -0.27
    South Atlantic..............           1,612            10.4           1,551             822           -0.46
    West North Central..........             492             2.3             470             149           -0.27
    West South Central..........             987             6.5             944             438           -0.40
    US Territories \2\..........              51             0.3              51              47           -1.04
Facility Size (number of total
 treatments):
    Less than 4,000 treatments..           1,689             5.9           1,478             718           -0.48
    4,000-9,999 treatments......           2,502            11.8           2,493             907           -0.29
    Over 10,000 treatments......           2,776            26.7           2,773           1,282           -0.37
    Unknown.....................              75             0.2              33              30           -1.22
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC self-
  reported status.
\2\ Includes American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands.

c. Effects on Other Providers
    The ESRD QIP is applicable to dialysis facilities. We are aware 
that several of our measures impact other providers. For example, with 
the introduction of the SRR clinical measure in PY 2017 and the SHR 
clinical measure in PY 2020, we anticipate that hospitals may 
experience financial savings as dialysis facilities work to reduce the 
number of unplanned readmissions and hospitalizations. We are exploring 
various methods to assess the impact these measures have on hospitals 
and other outpatient facilities, such as through the impacts of the 
Hospital Readmissions Reduction Program and the Hospital-Acquired 
Conditions Reduction Program, and we intend to continue examining the 
interactions between our quality programs to the greatest extent 
feasible.
d. Effects on the Medicare Program
    For PY 2022, we estimate that ESRD QIP will contribute 
approximately $31,624,159 in Medicare savings. For comparison, Table 49 
shows the payment reductions that we estimate will be achieved by the 
ESRD QIP from PY 2017 through PY 2022. We note that we have updated the 
PY 2021 payment reduction estimate that we published in the CY 2018 
ESRD PPS final rule (82 FR 50795).

  Table 49--Estimated Payment Reductions Payment Year 2017 Through 2022
------------------------------------------------------------------------
                                                  Estimated payment
               Payment year                    :reductions  (citation)
------------------------------------------------------------------------
PY 2022...................................  $31,624,159.
PY 2021...................................  32,196,724.
PY 2020...................................  31,581,441 (81 FR 77960).
PY 2019...................................  15,470,309 (80 FR 69074).
PY 2018...................................  11,576,214 (79 FR 66257).
PY 2017...................................  11,954,631 (79 FR 66255).
------------------------------------------------------------------------


[[Page 57062]]

e. Effects on Medicare Beneficiaries
    The ESRD QIP is applicable to dialysis facilities. Since the 
Program's inception, there is evidence of improved performance on ESRD 
QIP measures. As we stated in the CY 2018 ESRD PPS final rule, one 
objective measure we can examine to demonstrate the improved quality of 
care over time is the improvement of performance standards (82 FR 
50795). 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 (and therefore the quality of care 
provided to Medicare beneficiaries) is objectively improving. To date 
we have been unable to examine the impact of the ESRD QIP on Medicare 
beneficiaries including the financial impact of the Program or the 
impact on the health outcomes of beneficiaries. However, in future 
years we are interested in examining these impacts through the addition 
of new measures to the Program and through the analysis of available 
data from our existing measures.
    Additionally, in this final rule, we are finalizing changes to the 
ESRD QIP to reflect the Meaningful Measures Initiative's priorities, 
including focusing our quality measure set on more outcome-oriented, 
less burdensome quality measures. We believe that the changes we are 
finalizing will help focus the Program's measurements on the most 
clinically appropriate topics while ensuring that facilities are not 
unduly burdened by quality reporting requirements.
f. Alternatives Considered
    As discussed in the CY 2019 ESRD PPS proposed rule (83 FR 34405) 
and in section IV.B.3.b of this final rule, we proposed two 
alternatives for reassigning measure weights in situations where a 
facility does not receive a score on at least one measure but is still 
eligible to receive a TPS score: (1) Redistribute the weight of missing 
measures evenly across the remaining measures (that is, we would divide 
up the missing measure's weight equally across the remaining measures), 
(2) redistribute the weight of missing measures proportionately across 
the remaining measures, based on their weight as a percentage of TPS 
(that is, when dividing up a missing measure's weight, we would shift a 
larger share of that weight to measures with a higher assigned weight; 
measures with a lower weight woul