[Federal Register Volume 84, Number 151 (Tuesday, August 6, 2019)]
[Proposed Rules]
[Pages 38330-38421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16369]



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Vol. 84

Tuesday,

No. 151

August 6, 2019

Part II





 Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 410, et al.





 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) 
Fee Schedule Amounts, DMEPOS Competitive Bidding (CBP) Proposed 
Amendments, Standard Elements for a DMEPOS Order, and Master List of 
DMEPOS Items Potentially Subject to a Face-to-Face Encounter and 
Written Order Prior to Delivery and/or Prior Authorization 
Requirements; Proposed Rule

  Federal Register / Vol. 84 , No. 151 / Tuesday, August 6, 2019 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 413 and 414

[CMS-1713-P]
RIN 0938-AT70


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) Fee Schedule Amounts, DMEPOS Competitive Bidding (CBP) 
Proposed Amendments, Standard Elements for a DMEPOS Order, and Master 
List of DMEPOS Items Potentially Subject to a Face-to-Face Encounter 
and Written Order Prior to Delivery and/or Prior Authorization 
Requirements

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update and make revisions to the End-
Stage Renal Disease (ESRD) Prospective Payment System (PPS) for 
calendar year (CY) 2020. This rule also proposes to update the payment 
rate for renal dialysis services furnished by an ESRD facility to 
individuals with acute kidney injury (AKI). This proposed rule also 
proposes to update requirements for the ESRD Quality Incentive Program 
(QIP). In addition, this rule proposes a methodology for calculating 
fee schedule payment amounts for new Durable Medical Equipment, 
Prosthetics, Orthotics and Supplies (DMEPOS) items and services and 
making adjustments to the fee schedule amounts established using 
supplier or commercial prices if such prices decrease within 5 years of 
establishing the initial fee schedule amounts. This rule also proposes 
to revise existing regulations related to the competitive bidding 
program for DMEPOS. This proposed rule also would streamline the 
requirements for ordering DMEPOS items, and develop a new list of 
DMEPOS items potentially subject to a face-to-face encounter, written 
orders prior to delivery and/or prior authorization requirements. 
Finally, this proposed rule includes requests for information on data 
collection resulting from the ESRD PPS technical expert panel, changing 
the basis for the ESRD PPS wage index, and new requirements for the 
competitive bidding of diabetic testing strips.

DATES: To be assured consideration, comments must be submitted at one 
of the addresses provided below, no later than September 27, 2019.

ADDRESSES: In commenting, please refer to file code CMS-1713-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1713-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1713-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    [email protected], for issues related to the ESRD PPS and 
coverage and payment for renal dialysis services furnished to 
individuals with AKI.
    Delia Houseal, (410) 786-2724, for issues related to the ESRD QIP.
    [email protected], for issues related to DMEPOS payment policy.
    Julia Howard, (410) 786-8645, for issues related to DMEPOS CBP 
Amendments
    Jennifer Phillips, (410) 786-1023; Olufemi Shodeke, (410) 786-1649;
    Maria Ciccanti, (410) 786-3107; and Emily Calvert, (410) 786-4277, 
for issues related to the DMEPOS written order, face-to-face encounter, 
and prior authorization requirements.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to 
view public comments.

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) 2020 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background
    B. Provisions of the Proposed Rule
III. CY 2020 Payment for Renal Dialysis Services Furnished to 
Individuals With Acute Kidney Injury (AKI)
    A. Background
    B. Proposed Annual Payment Rate Update for CY 2020
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    A. Background and Proposed Regulation Text Update
    B. Proposed Update to Requirements Beginning With the PY 2022 
ESRD QIP
    C. Proposals for the PY 2023 ESRD QIP
V. Establishing Payment Amounts for New Durable Medical Equipment, 
Prosthetics, Orthotics and Supplies (DMEPOS) Items and Services 
(Gap-Filling)
    A. Background
    B. Current Issues
    C. Provisions of the Proposed Rule
VI. Standard Elements for a Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Order; Master List of DMEPOS Items 
Potentially Subject to a Face-to-Face Encounter and Written Order 
Prior to Delivery and/or Prior Authorization Requirements
    A. Background
    B. Provisions of the Proposed Regulations
VII. DMEPOS Competitive Bidding Program (CBP) Amendments
    A. Background
    B. Proposed Amendments
VIII. Requests for Information
    A. Data Collection
    B. Wage Index Comment Solicitation
    C. Comment Solicitation on Sources of Market-Based Data 
Measuring Sales of Diabetic Testing Strips to Medicare Beneficiaries 
(Section 50414 of the Bipartisan Budget Act of 2018)
IX. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. Requirements in Regulation Text
    C. Additional Information Collection Requirements
X. Response to Comments

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XI. Economic Analyses
    A. Regulatory Impact Analysis
    B. Detailed Economic Analysis
    C. Accounting Statement
    D. Regulatory Flexibility Act Analysis
    E Unfunded Mandates Reform Act Analysis
    F. Federalism Analysis
    G. Reducing Regulation and Controlling Regulatory Costs
    H. Congressional Review Act
XII. Files Available to the Public via the Internet
Regulations Text

I. Executive Summary

A. Purpose

    This proposed rule contains proposals related to the End-Stage 
Renal Disease (ESRD) Prospective Payment System (PPS), payment for 
renal dialysis services furnished to individuals with acute kidney 
injury (AKI), the ESRD Quality Incentive Program (QIP), the Durable 
Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Fee 
Schedule Amounts, DMEPOS Competitive Bidding Program (CBP) proposed 
amendments, and the regulations governing DMEPOS orders, face-to-face 
encounters, and prior authorization.
    In future rulemaking years, the DMEPOS provisions will be in a 
separate rule from the ESRD PPS, AKI and ESRD QIP provisions.
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) (Pub. L. 110-275). Section 
1881(b)(14) (F) of the Act, as added by section 153(b) of MIPPA, and 
amended by section 3401(h) of the Patient Protection and Affordable 
Care Act (the Affordable Care Act) (Pub. L. 111-148), established that 
beginning calendar year (CY) 2012, and each subsequent year, the 
Secretary of the Department of Health and Human Services (the 
Secretary) shall annually increase payment amounts by an ESRD market 
basket increase factor, reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. This rule 
proposes updates and revisions to the ESRD PPS for CY 2020.
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 
proposes to update the AKI payment rate for CY 2020.
3. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is 
authorized by section 1881(h) of the Act. The Program fosters 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 proposed rule proposes several 
updates for the ESRD QIP.
4. DMEPOS Fee Schedule Payment Rules
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
    This rule proposes to establish a gap-filling methodology in 
regulations for pricing new items and services in accordance with 
sections 1834(a), (h), (i) and 1833(o) of the Act for DME, prosthetic 
devices, orthotics, prosthetics, surgical dressings, and custom molded 
shoes, extra-depth shoes, and inserts, and section 1842(b) for parental 
and enteral nutrients (PEN) and medical supplies, including splints and 
casts and intraocular lenses inserted in a physician's office.
b. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled 
Using Supplier or Commercial Prices
    This rule proposes a one-time adjustment to the gap-filled fee 
schedule amounts in cases where prices decrease by less than 15 
percent.
5. Conditions of Payment To Be Applied to the Proposed Master List of 
DMEPOS Items
    This proposed rule would streamline the requirements for ordering 
DMEPOS items. It would also develop one Master List of DMEPOS items 
potentially subject to a face-to-face encounter, written orders prior 
to delivery and/or prior authorization requirements under the authority 
provided under sections 1834(a)(1)(E)(iv), 1834(a)(11)(B), and 
1834(a)(15) of the Act.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the ESRD PPS base rate for CY 2020: The proposed 
CY 2020 ESRD PPS base rate is $240.27. This proposed amount reflects a 
productivity-adjusted market basket increase as required by section 
1881(b)(14)(F)(i)(I) of the Act (1.7 percent), and application of the 
wage index budget-neutrality adjustment factor (1.004180), equaling 
$240.27 ($235.27 x 1.017 x 1.004180 = $240.27).
     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 2020, we are proposing to update the wage index values based on 
the latest available data.
     Update to the outlier policy: We are proposing to update 
the outlier policy using the most current data, as well as update 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 2020 using CY 2018 claims data. 
Based on the use of the latest available data, the proposed FDL amount 
for pediatric beneficiaries would decrease from $57.14 to $44.91, and 
the MAP amount would decrease from $35.18 to $33.82, as compared to CY 
2019 values. For adult beneficiaries, the proposed FDL amount would 
decrease from $65.11 to $52.50, and the MAP amount would decrease from 
$38.51 to $36.60. The 1.0 percent target for outlier payments was not 
achieved in CY 2018. Outlier payments represented approximately 0.5 
percent of total payments rather than 1.0 percent. We believe using CY 
2018 claims data to update the outlier MAP and FDL amounts for CY 2020 
would increase payments for ESRD beneficiaries requiring higher 
resource utilization in accordance with a 1.0 percent outlier 
percentage.

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     Eligibility criteria for the transitional drug add-on 
payment adjustment (TDAPA): We are proposing revisions to the drug 
designation process regulation at 42 CFR 413.234 for new renal dialysis 
drugs and biological products that fall within an existing ESRD PPS 
functional category. Specifically, we are proposing to exclude drugs 
approved by the Food and Drug Administration (FDA) under section 505(j) 
of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and drugs for 
which the new drug application (NDA) is classified by FDA as NDA Types 
3, 5, 7 and 8, Type 3 in combination with Type 2 or Type 4, Type 5 in 
combination with Type 2, or Type 9 when the ``parent NDA'' is a Type 3, 
5, 7 or 8--from being eligible for the transitional drug add-on payment 
adjustment (TDAPA), effective January 1, 2020.
     Proposal to change the basis of payment for the TDAPA for 
calcimimetics: We are continuing to pay the TDAPA for calcimimetics for 
a third year in CY 2020 in order to collect sufficient claims data for 
rate setting analysis, but are proposing to reduce the basis of payment 
for the TDAPA for calcimimetics for CY 2020 from the average sales 
price plus 6 percent (ASP+6) methodology to 100 percent of ASP. We 
believe that in paying the TDAPA for these products since 2018, we have 
provided sufficient time for ESRD facilities to address any 
administrative complexities and overhead costs that may have arisen 
with regard to furnishing the calcimimetics. We also believe we need to 
take into account the financial burden that increased payments place on 
beneficiaries and Medicare expenditures.
     Average sales price (ASP) conditional policy for 
application of the TDAPA: Under the policy finalized in the CY 2019 
ESRD PPS final rule, effective January 1, 2020, the basis of payment 
for the TDAPA for all new renal dialysis drugs and biological products 
except calcimimetics is ASP+0, but if ASP data is not available, then 
we use Wholesale Acquisition Cost (WAC) +0, and if WAC is not 
available, then we use invoice pricing. We are concerned that if ASP 
data is not available to CMS, WAC or invoice pricing would likely 
increase Medicare expenditures more than the value of the ASP. We are 
proposing to no longer apply the TDAPA for a new renal dialysis drug or 
biological product if CMS does not receive a full calendar quarter of 
ASP data within 30 days of the last day of the 3rd calendar quarter 
after we begin applying the TDAPA for that product. We would no longer 
apply the TDAPA for a new renal dialysis drug or biological product 
beginning no later than 2-calendar quarters after we determine a full 
calendar quarter of ASP data is not available. We are also proposing to 
no longer apply the TDAPA for a new renal dialysis drug or biological 
product if CMS does not receive the latest full calendar quarter of ASP 
data for the product, beginning no later than 2-calendar quarters after 
CMS determines that the latest full calendar quarter of ASP data is not 
available. We believe it is important to balance supporting ESRD 
facilities in their uptake of innovative new renal dialysis drugs and 
biological products with limiting increases to Medicare expenditures, 
and conditioning the TDAPA on the availability of ASP data would help 
us achieve that balance.
     New and innovative renal dialysis equipment and supplies 
under the ESRD PPS: We are proposing to pay a transitional add-on 
payment adjustment to support the use of certain new and innovative 
renal dialysis equipment or supplies furnished by ESRD facilities. We 
are proposing to include renal dialysis equipment and supplies (with 
the exception of capital-related assets) that are: (1) Granted 
marketing authorization by FDA on or after January 1, 2020, (2) 
commercially available, (3) have a Healthcare Common Procedure Coding 
System (HCPCS) application submitted in accordance with the official 
Level II HCPCS coding procedures, and (4) meet the substantial clinical 
improvement criteria specified in the Inpatient Prospective Payment 
System (IPPS) regulations at 42 CFR 412.87(b)(1). Specifically, under 
our proposal, the equipment or supply must represent an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. CMS would 
evaluate the application to determine eligibility for a transitional 
add-on payment adjustment. We are proposing that the payment adjustment 
for these new and innovative renal dialysis equipment and supplies 
would be based on 65 percent of the price established by the Medicare 
Administrative Contractors (MACs), using the information from the 
invoice and other relevant sources of information. We would pay the 
adjustment for 2-calendar years, after which the equipment or supply 
would qualify as an outlier service and no change to the ESRD PPS base 
rate would be made.
     Discontinue the application of the erythropoiesis-
stimulating agent (ESA) monitoring policy (EMP) under the ESRD PPS: We 
are proposing to discontinue the application of the erythropoiesis-
stimulating agent (ESA) monitoring policy (EMP) under the ESRD PPS. 
Prior to implementation of the ESRD PPS, ESAs were paid separately, 
which resulted in gross overutilization. We continued to apply the EMP 
edits when we implemented the ESRD PPS so that we did not overvalue 
these biological products in determining eligibility for outlier 
payments. Since we bundled ESAs into the per treatment payment amount, 
overutilization and the incentive for overutilization have been 
eliminated from the ESRD PPS; therefore we believe the EMP is no longer 
necessary.
2. Payment for Renal Dialysis Services Furnished to Individuals With 
AKI
    We are proposing to update the AKI payment rate for CY 2020. The 
proposed CY 2020 payment rate is $240.27, which is the same as the base 
rate proposed under the ESRD PPS for CY 2020.
3. ESRD QIP
    This proposed rule proposes several new requirements for the ESRD 
QIP beginning with payment year (PY) 2022, including but not limited to 
the following:
     Updates to the scoring methodology for the National 
Healthcare Safety Network (NHSN) Dialysis Event reporting measure to 
allow new facilities and facilities that are eligible to report data on 
the measure for less than 12 months to be able to receive a score on 
that measure.
     A proposal to convert the STrR clinical measure (NQF 
#2979) to a reporting measure while we examine concerns raised by 
stakeholders regarding the measure's validity.
    We are not proposing any new requirements beginning with the PY 
2023 ESRD QIP.
    We are also proposing to make updates to our regulation text so 
that it better informs the public of the Program's requirements.
4. DMEPOS Fee Schedule Payment Rules
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
    This rule proposes a specific methodology for calculating fee 
schedule amounts for new DMEPOS items. The fiscal impact of 
establishing payment amounts for new items based on our proposal cannot 
be estimated as these new items are not identified and would vary in 
uniqueness and costs. However, there is some inherent risk that the 
proposed methodology could

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result in fee schedule amounts for new items that greatly exceed the 
costs of furnishing the items.
b. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled 
Using Supplier or Commercial Prices
    In cases where fee schedule amounts for new DMEPOS items and 
services are gap-filled using supplier or commercial prices, these 
prices may decrease over time. In cases where such prices decrease by 
less than 15 percent within 5 years of establishing the initial fee 
schedule amounts, this rule proposes a one-time adjustment to the gap-
filled fee schedule amounts. We are not proposing these price 
adjustments in cases where prices increase.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
    This proposed rule would streamline the requirements for ordering 
DMEPOS items. It would also develop one Master List of DMEPOS items 
potentially subject to a face-to-face encounter, written orders prior 
to delivery and/or prior authorization requirements under the authority 
provided under sections 1834(a)(1)(E)(iv), 1834(a)(11)(B), and 
1834(a)(15) of the Act.

C. Summary of Costs and Benefits

    In section XI of this proposed rule, we set forth a detailed 
analysis of the impacts that the proposed changes would have on 
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Proposed ESRD PPS
    The impact chart in section XI of this proposed rule displays the 
estimated change in payments to ESRD facilities in CY 2020 compared to 
estimated payments in CY 2019. The overall impact of the proposed CY 
2020 changes is projected to be a 1.6 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 1.9 percent increase 
in payments compared with freestanding facilities with an estimated 1.5 
percent increase.
    We estimate that the aggregate ESRD PPS expenditures would increase 
by approximately $210 million in CY 2020 compared to CY 2019. This 
reflects a $230 million increase from the payment rate update and a $40 
million increase due to the updates to the outlier threshold amounts, 
and a $60 million decrease from the proposal to change the basis of 
payment for the TDAPA for calcimimetics from ASP+6 percent to ASP+0 
percent. These figures do not reflect estimated increases or decreases 
in expenditures based on our proposals to refine the TDAPA eligibility 
criteria, condition the TDAPA on the availability of ASP data, and 
provide a transitional add-on payment adjustment for new and innovative 
renal dialysis equipment and supplies. The fiscal impact of these 
proposals cannot be determined because these new renal dialysis drugs 
and biological products and new renal dialysis equipment and supplies 
are not yet identified and would vary in uniqueness and costs. As a 
result of the projected 1.6 percent overall payment increase, we 
estimate that there would be an increase in beneficiary co-insurance 
payments of 1.6 percent in CY 2020, which translates to approximately 
$50 million.
2. Impacts of the Proposed Payment for Renal Dialysis Services 
Furnished to Individuals With AKI
    The impact chart in section XI of this proposed rule displays the 
estimated change in proposed payments to ESRD facilities in CY 2020 
compared to estimated payments in CY 2019. The overall impact of the 
proposed CY 2020 changes is projected to be a 1.7 percent increase in 
payments. Hospital-based ESRD facilities have an estimated 1.8 percent 
increase in payments compared with freestanding facilities with an 
estimated 1.7 percent increase.
    We estimate that the aggregate payments made to ESRD facilities for 
renal dialysis services furnished to AKI patients at the proposed CY 
2020 ESRD PPS base rate would increase by less than $1 million in CY 
2020 compared to CY 2019.
3. Impacts of the Proposed ESRD QIP
    We estimate that the overall economic impact of the PY 2022 ESRD 
QIP would be approximately $219 million as a result of the policies we 
have previously finalized and the proposals in this proposed rule. The 
$219 million figure for PY 2022 includes costs associated with the 
collection of information requirements, which we estimate would be 
approximately $205 million. We also estimate that the overall economic 
impact of the PY 2023 ESRD QIP would be approximately $219 million as a 
result of the policies we have previously finalized. The $219 million 
figure for PY 2023 includes costs associated with the collection of 
information requirements, which we estimate would be approximately $205 
million.
4. Impacts of the Proposed DMEPOS Fee Schedule Payment Rules
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
    This rule proposes a specific methodology for calculating fee 
schedule amounts for new DMEPOS items. The fiscal impact of 
establishing payment amounts for new items based on our proposal cannot 
be estimated as these new items are not identified and would vary in 
uniqueness and costs. However, there is some inherent risk that the 
proposed methodology could result in fee schedule amounts for new items 
that greatly exceed the costs of furnishing the items.
b. Adjusting Gap-Filled Payment Amounts for DMEPOS Items and Services 
Using Supplier or Commercial Prices
    We are proposing a one-time adjustment to the gap-filled fee 
schedule amounts in cases where fee schedule amounts for new DMEPOS 
items and services are gap-filled using supplier or commercial prices, 
and these prices decrease by less than 15 percent within 5 years of 
establishing the initial fee schedule amounts. The one-time adjustment 
should generate savings although it would probably be a small offset to 
the potential increase in costs of establishing fee schedule amounts 
based on supplier invoices or prices from commercial payers. The fiscal 
impact for this provision is therefore considered negligible.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
    This rule proposes to streamline the requirements for ordering 
DMEPOS items, and to identify the process for subjecting certain DMEPOS 
items to a face-to-face encounter and written order prior to delivery 
and/or prior authorization as a condition of payment. The fiscal impact 
of these requirements cannot be estimated as this rule only identifies 
all items that are potentially subject to the face-to-face encounter 
and written order prior to delivery requirements and/or prior 
authorization.

II. Calendar Year (CY) 2020 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

[[Page 38334]]

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 Sec.  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). 
In the CY 2019 ESRD PPS final rule (83 FR 56929 through 56949), we 
expanded the TDAPA policy. Effective January 1, 2020, the TDAPA is 
available for all new renal dialysis drugs and biological products, not 
just those in new ESRD PPS functional categories.
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 14, 2018, 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, 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 56922 through 57073) (referred to as the CY 2019 ESRD PPS final 
rule). In that rule, we updated the ESRD PPS base rate for CY 2019, the 
wage index, the outlier policy, and we finalized revisions to the drug 
designation process and the low-volume payment adjustment. For further 
detailed information regarding these updates, see 83 FR 56922.

B. Provisions of the Proposed Rule

1. Eligibility Criteria for the Transitional Drug Add-On Payment 
Adjustment (TDAPA)
a. Background
    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. Therefore, in the CY 2016 ESRD PPS final rule (80 FR 
69013

[[Page 38335]]

through 69027), we finalized a process that allows us to recognize when 
an oral-only renal dialysis service drug or biological product is no 
longer oral-only, and a process 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). We finalized 
a policy in the CY 2016 ESRD PPS final rule (80 FR 69017 through 69022) 
that, 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.
    In the CY 2016 ESRD PPS final rule, we also established in Sec.  
413.234(b)(2) that, if the new injectable or intravenous product is 
used to treat or manage a condition for which there is not an ESRD PPS 
functional category, the new injectable or intravenous product is not 
considered included in the ESRD PPS bundled payment and the following 
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 
TDAPA described in Sec.  413.234(c). Then, the new injectable or 
intravenous product is added to the ESRD PPS bundled payment following 
payment of the TDAPA.
    In the CY 2016 ESRD PPS final rule, we finalized a policy in Sec.  
413.234(c) to base the TDAPA on pricing methodologies under section 
1847A of the Act and pay the TDAPA 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 will be modified, if appropriate, to account for the 
new injectable or intravenous product in the ESRD PPS bundled payment.
    After the publication of the CY 2016 ESRD PPS final rule, we 
continued to hear from the dialysis industry and other stakeholders 
with suggestions for improving the drug designation process. Therefore, 
in CY 2019 ESRD PPS rulemaking, we revisited the drug designation 
process to consider their concerns and we proposed policies that would 
mitigate these issues.
    In the CY 2019 ESRD PPS final rule (83 FR 56929 through 56949), we 
finalized several provisions related to the drug designation process 
and the TDAPA under Sec.  413.234, with an effective date of January 1, 
2020. In particular, we finalized changes to the drug designation 
process regulation to: (1) Reflect that the process applies for all new 
renal dialysis drugs and biological products; (2) establish a 
definition for ``new renal dialysis drug or biological product''; (3) 
expand the eligibility criteria for the TDAPA; (4) change the TDAPA's 
basis of payment; and (5) extend the TDAPA to composite rate drugs and 
biological products that are furnished for the treatment of ESRD. We 
discuss these changes in detail in the next several paragraphs.
    First, we revised the drug designation process regulation at Sec.  
413.234 to reflect that the drug designation process applies for all 
new renal dialysis drugs and biological products that are approved by 
FDA, regardless of the form or route of administration, that are used 
to treat or manage a condition associated with ESRD. In the CY 2019 
ESRD PPS proposed rule (83 FR 34309 through 34312), we described the 
prior rulemakings in which 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. We explained that the 
drug designation process is dependent upon the ESRD PPS functional 
categories we developed, and is consistent with the policy we have 
followed since the inception of the ESRD PPS.
    However, we noted in the CY 2019 ESRD PPS proposed rule (83 FR 
34311 through 34312) that, because section 217(c)(2) of 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 explained that we did not 
codify our full policy in the CY 2016 ESRD PPS final rule 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). Commenters were 
generally supportive of the proposal, and we finalized the changes to 
codify our drug designation policy with regard to all drugs.
    Second, as part of our updates to the drug designation process 
regulation in the CY 2019 ESRD PPS final rule (83 FR 56929 through 
56932), we replaced the definition of ``new injectable or intravenous 
product'' with a definition for ``new renal dialysis drug or biological 
product.'' Under the final definition, effective January 1, 2020, a 
``new renal dialysis drug or biological product'' is an ``injectable, 
intravenous, oral or other form or route of administration drug or 
biological product that is used to treat or manage a condition(s) 
associated with ESRD. It must be approved by the [FDA] on or after 
January 1, 2020 under section 505 of the [FD&C 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.''
    Third, we expanded the eligibility criteria for the TDAPA to 
include all new renal dialysis drugs and biological products, not just 
those in new ESRD PPS functional categories, in the CY 2019 ESRD PPS 
final rule (83 FR 56942 through 56843). In the CY 2019 ESRD PPS 
proposed rule (83 FR 34312 through 34314), we discussed a number of 
reasons why we were reconsidering our previous policy to limit the 
TDAPA to products for which there is not an ESRD PPS functional 
category. We described the concerns that commenters had raised during 
the CY 2016 ESRD PPS rulemaking regarding the eligibility criteria for 
the TDAPA, including concerns about inadequate payment for renal 
dialysis services and hindrance of high-value innovation, and noted 
that these are important issues that we contemplate while determining 
appropriate payment policies. We discussed that when new drugs and 
biological products are introduced to the market, ESRD facilities need 
to analyze their budget and engage in contractual agreements to 
accommodate

[[Page 38336]]

the new therapies into their care plans. We recognized that 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, we stated that practitioners should 
have the ability to evaluate the appropriate use of a new product and 
its effect on patient outcomes.
    We explained in the CY 2019 ESRD PPS proposed rule that this uptake 
period would be best supported by the TDAPA pathway because it would 
help ESRD facilities transition or test new drugs and biological 
products in their businesses under the ESRD PPS. We stated that the 
TDAPA could provide flexibility and target 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. We further explained 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. Thus, we proposed to revise Sec.  413.234(c) to 
reflect that the TDAPA would apply for all new renal dialysis drugs and 
biological products regardless of whether they fall within an ESRD PPS 
functional category, and, for those products that fall within an 
existing functional category, the payment would apply for only 2 years 
and there would be no subsequent modification to the ESRD PPS base rate 
(83 FR 34314). At the end of the 2 years, the product would be eligible 
for outlier payment unless it is a renal dialysis composite rate drug 
or biological product.
    As we discussed in the CY 2019 ESRD PPS final rule (83 FR 56934 
through 56943), we received a variety of feedback from stakeholders on 
this proposal. Some commenters recommended delaying the expansion of 
the TDAPA and some urged CMS to consider different policy proposals. 
Some commenters were supportive of revising the drug designation 
process regulation to allow more drugs to be eligible for the TDAPA, 
while others expressed that the process needs to be further evaluated 
before any expansion. The Medicare Payment Advisory Commission (MedPAC) 
recommended that we not finalize the policy because it did not require 
that a new drug be more effective than current treatment and could 
undermine competition with existing drugs; or, if we do move forward 
with the policy, that we narrow eligibility to new drugs that fall into 
an existing ESRD PPS functional category only if they substantially 
improve beneficiaries' outcomes.
    Other commenters had similar concerns and recommended that we 
require that the TDAPA apply for new renal dialysis drugs and 
biological products that have clinical superiority over the existing 
products in the existing functional categories, and they provided 
suggestions on clinical value criteria. In addition, some commenters 
believed that the TDAPA should not apply to generic drugs and 
biosimilar biological products. Commenters asserted that generic drugs 
and biosimilar biological products seek to provide the same type of 
treatment and patient outcomes as existing drugs in the ESRD PPS 
bundled payment. Commenters further believed that these types of drugs 
and biological products have no clinically meaningful differences and 
that they should be treated equally in payment and coverage policies. 
We also received several comments on our proposal to apply the TDAPA 
for a new renal dialysis drug or biological product that is considered 
included in the ESRD PPS base rate for 2 years, and to not modify the 
ESRD PPS base rate following payment of the TDAPA (83 FR 56934 through 
56943).
    After considering the public comments, we finalized the expansion 
of the eligibility criteria for the TDAPA to reflect the proposed 
policy in the CY 2019 ESRD PPS final rule (83 FR 56943). In that rule 
we explained that there are two purposes of providing the TDAPA. For 
renal dialysis drugs and biological products that fall into an existing 
ESRD PPS functional category, the purpose of the TDAPA is to help ESRD 
facilities to incorporate new drug and biological products and make 
appropriate changes in their businesses to adopt such products; provide 
additional payment for such associated costs, as well as promote 
competition among drugs and biological products within the ESRD PPS 
functional categories. For new renal dialysis drugs and biological 
products that do not fall within an existing ESRD PPS functional 
category and that are not considered to be reflected in the ESRD PPS 
base rate, the purpose of the TDAPA is to be a pathway toward a 
potential base rate modification (83 FR 56935).
    In response to commenters that recommended clinical superiority of 
new renal dialysis drugs and biological products, we explained in the 
CY 2019 ESRD PPS final rule (83 FR 56938) that we believed allowing all 
new drugs and biological products to be eligible for the TDAPA would 
provide an ability for new drugs and biological products to compete 
with other drugs and biological products in the market, which could 
mean lower prices for all such products. We also noted our belief that 
categorically limiting or excluding any group of drugs from the 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 whether one drug is more effective than 
another can be impacted by characteristics that vary across patients 
such as age, gender, race, genetic pre-disposition and comorbidities. 
We stated that innovation can provide options for those patients who do 
not respond to a certain preferred treatment regimen the same way the 
majority of patients respond.
    In response to commenters who recommended that we not apply the 
TDAPA to generic drugs and biosimilar biological products, we explained 
in the CY 2019 ESRD PPS final rule (83 FR 56938) that the purpose of 
this policy is to foster a competitive marketplace in which all drugs 
within a functional category would compete for market share. We stated 
that we believed including generic drugs and biosimilar biological 
products under the TDAPA expansion would mitigate or discourage high 
launch prices. We further explained that we believed including these 
products would foster innovation of drugs within the current functional 
categories. We also noted that we believed including these products 
would give a financial boost to support their utilization, and 
ultimately lower overall drug costs since these products generally have 
lower prices. Because of this, we stated that we believed that generic 
drugs and biosimilar biological products would provide cost-based 
competition for new higher priced drugs during the TDAPA period and 
also afterward when they are bundled into the ESRD PPS.
    In response to ESRD facilities that expressed concern regarding 
operational difficulties and patient access issues experienced for 
current drugs paid for using the TDAPA, we elected to make all of the 
changes to the drug designation process under Sec.  413.234 and the 
expansion of the TDAPA eligibility effective January 1, 2020, as 
opposed to January 1, 2019, to address as many of those concerns as 
possible (83 FR 56937). We explained in the CY 2019 ESRD PPS final rule 
that the additional year provides us with the opportunity to address 
issues such as transitioning payment from Part D to Part B, 
coordinating issues involving Medicaid

[[Page 38337]]

and new Medicare Advantage policies, and working with the current HCPCS 
process as it applies to the ESRD PPS to accommodate the initial influx 
of new drugs and biological products. We also indicated that the 
additional year would allow more time for ESRD facility and beneficiary 
education about this new policy.
    In addition, with regard to the HCPCS process, we explained the 
additional year would help us operationally in working with the HCPCS 
workgroup that manages the HCPCS process as it applies to the ESRD PPS 
to accommodate the initial influx of new renal dialysis drugs and 
biological products. We explained that in collaboration with the HCPCS 
workgroup we would make the determination of whether a drug or 
biological product is a renal dialysis service. We would 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 (83 FR 56937 through 56938).
    With regard to our proposal to not modify the ESRD PPS base rate 
for new renal dialysis drugs and biological products that fall within 
existing ESRD PPS functional categories, we explained that we believe 
the intent of the TDAPA for these products is to provide a transition 
period for the unique circumstances experienced by ESRD facilities and 
to allow time for the uptake of the new product. We further explained 
that we did not believe it would 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 such 
would be in conflict with the fundamental principles of a PPS.
    We also explained that the 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 supporting high-value innovation and allowing 
facilities to adjust or factor in new drugs through a short-term 
transitional payment.
    We stated in the CY 2019 ESRD PPS final rule (83 FR 56940) that 
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 the 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, we continued the existing 
policy that application of the 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.
    Fourth, in the CY 2019 ESRD PPS final rule, we changed the TDAPA's 
basis of payment (83 FR 34314 through 34316). We explained that if we 
adopted the proposals to expand the TDAPA eligibility criteria using 
the current basis of payment for the TDAPA--the pricing methodologies 
available under section 1847A of the Act--Medicare expenditures would 
increase, which would result in increases of cost sharing for ESRD 
beneficiaries, since we had not previously provided the TDAPA for all 
new renal dialysis drugs and biological products. We also discussed 
other reasons why we believed it may not be appropriate to base the 
TDAPA strictly on section 1847A of the Act methodologies (83 FR 34315).
    Therefore, we proposed to base the TDAPA on 100 percent of ASP 
(ASP+0) instead of the pricing methodologies available under section 
1847A of the Act (which includes ASP+6). For circumstances when ASP 
data is not available, we proposed that the TDAPA would be based on 100 
percent of Wholesale Acquisition Cost (WAC) and, when WAC is not 
available, the TDAPA would be based on the drug manufacturer's invoice.
    In the CY 2019 ESRD PPS final rule (83 FR 56943 through 56948), we 
discussed several comments received on this proposal. MedPAC supported 
the proposal to use ASP+0, stating that the ESRD PPS accounts for 
storage and administration costs and that ESRD facilities do not have 
acquisition price variation issues when compared to physicians. 
Conversely, industry stakeholders recommended the basis of payment 
remain at ASP+6 since they believe it assists with the administrative 
costs of packaging, handling, and staff. Commenters also recommended 
that CMS consider the impact of bad debt recovery and sequestration on 
payment when determining the basis of payment.
    After considering public comments, in the CY 2019 ESRD PPS final 
rule (83 FR 56948), we finalized the policy as proposed, with one 
revision to change the effective date to CY 2020, and another revision 
to reflect that the basis of payment for the TDAPA for calcimimetics 
would continue to be based on the pricing methodologies available under 
section 1847A of the Act (which includes ASP+6). We explained that we 
believe ASP+0 is reasonable 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 explained 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 (83 FR 56946).
    Fifth and finally, in the CY 2019 ESRD PPS final rule (83 FR 56948 
through 56949), we finalized a 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 Sec.  413.234(a) is 
considered to be a composite rate drug or biological product and falls 
within an existing ESRD PPS functional category, it will be eligible 
for the TDAPA.
    We explained that we believed by allowing all new renal dialysis 
drugs and biological products to be eligible for the TDAPA, we would 
provide an ability for a new drug to compete with other similar drugs 
in the market which could mean lower prices for all drugs. We further 
explained that we believed that new renal dialysis composite rate drugs 
and biological products could benefit from this policy as well. 
Additionally, we explained that 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 noted that we 
had not proposed to change the outlier policy and therefore these 
products will not be eligible for an outlier payment after the TDAPA 
period.
b. Basis for Proposed Refinement of the TDAPA Eligibility Criteria
    Based on feedback received during and after the CY 2019 ESRD PPS 
rulemaking, we are proposing to make further refinements to the TDAPA 
eligibility criteria. As we discussed in the CY 2019 ESRD PPS final 
rule (83 FR 56935) and in section II.B.1.a of this proposed rule, we 
received many comments from all sectors of the

[[Page 38338]]

dialysis industry and other stakeholders on our proposal to expand the 
TDAPA eligibility to all new renal dialysis drugs and biological 
products, 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 an ESRD PPS 
functional category should be eligible for a payment adjustment when 
they are new to the market. However, commenters also had specific 
policy recommendations for each element of the drug designation 
process, including which drugs should qualify for the TDAPA.
    In the CY 2019 ESRD PPS final rule (83 FR 56938) some commenters 
recommended, among other suggestions, that CMS not apply the TDAPA to 
generic drugs or to biosimilar biological products. The commenters 
explained that they believe the rationale for the TDAPA is to allow the 
community and CMS to better understand the appropriate utilization of 
new products and their pricing. Commenters asserted that generic drugs 
and biosimilar biological products seek to provide the same type of 
treatment and patient outcomes as existing drugs in the ESRD PPS 
bundled payment. Thus, they expressed that the additional time for 
uptake is unnecessary for these drugs and biological products.
    In addition, a drug manufacturer commented that a generic drug is 
not innovative because it must have the same active ingredient, 
strength, dosage form, and route of administration as the innovator 
drug it references in its abbreviated new drug application (ANDA). 
Further, a biosimilar biological product is not innovative because it 
is required under the Public Health Service Act (the PHS Act) to be 
highly similar and have no clinically meaningful differences to the 
reference product and cannot be licensed for a condition of use that 
has not been previously approved for the reference product or for a 
dosage form, strength, or route of administration that differs from 
that of the reference product. The commenter stated that because they 
have no clinically meaningful differences, biosimilar biological 
products and reference products should be treated equally in payment 
and coverage policies; a biosimilar biological product should not be 
eligible for the TDAPA when its reference product would not qualify for 
the payment.
    Some commenters recommended that CMS require that the new renal 
dialysis drug or biological product, in order to be eligible for the 
TDAPA, have a clinical superiority over existing drugs in the ESRD PPS 
bundled payment and provided suggestions on clinical value criteria. A 
dialysis facility organization 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 (83 FR 56938). A 
drug manufacturer recommended that CMS consider when FDA may re-profile 
a drug (83 FR 56939). 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.
    MedPAC recommended that CMS not proceed with its proposal to apply 
the TDAPA policy to new renal dialysis drugs that fit into an existing 
functional category for several reasons (83 FR 56936). For example, 
MedPAC stated that 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 PPS bundle. MedPAC also asserted that 
applying the TDAPA to new dialysis drugs that fit into an existing 
functional category undermines competition with existing drugs included 
in the PPS payment bundle since the TDAPA would effectively unbundle 
all new dialysis drugs, removing all cost constraints during the TDAPA 
period and encouraging the establishment of high launch prices.
    Since publishing the CY 2019 ESRD PPS final rule, we have continued 
to hear concerns about expanding the TDAPA policy from numerous 
stakeholders, including ESRD facilities and their professional 
associations, beneficiaries and their related associations, drug 
manufacturers, and beneficiary groups.
    Also, our data contractor held a Technical Expert Panel (TEP) in 
December 2018, and gathered input regarding the expanded TDAPA policy 
at that time. More information about the TEP is discussed in section 
VIII.A of this proposed rule. Some ESRD facility associations 
participating in the TEP generally expressed concern that the TDAPA 
policy, as finalized in the CY 2019 ESRD PPS final rule, would 
inappropriately direct Medicare dollars to drugs and biological 
products that may be new to the market but not new with regard to 
certain characteristics of the drug itself. For example, commenters 
noted that section 505 of the FD&C Act is broad and includes FDA 
approval of new drug applications (NDA), which is the vehicle through 
which drug sponsors formally propose that FDA approve a new 
pharmaceutical for sale and marketing in the U.S.\1\ Section 505 of the 
FD&C Act includes FDA approval of NDAs for drugs that have a new dosage 
form, a reformulation, or a re-engineering of an existing product. 
These types of drugs are referred to in the pharmaceutical industry as 
line extensions, follow-on products, or me-too drugs.
---------------------------------------------------------------------------

    \1\ FDA. New Drug Application (NDA). Available at: https://www.fda.gov/drugs/types-applications/new-drug-application-nda.
---------------------------------------------------------------------------

    Due to the feedback received following publication of the CY 2019 
ESRD PPS final rule, we continued to analyze certain aspects of the 
policies finalized in the CY 2019 ESRD PPS final rule and are 
revisiting these issues as part of this proposed rule. Specifically, 
since ESRD facilities and other dialysis stakeholders have expressed 
concern about the broad nature of including all new renal dialysis 
drugs and biological products as eligible for the TDAPA, we are 
reconsidering whether all new renal dialysis drugs and biological 
products that fall within an existing ESRD PPS functional category 
should be eligible for the TDAPA.
    As noted previously, in the CY 2019 ESRD PPS final rule (83 FR 
56932) we finalized that effective January 1, 2020, a new renal 
dialysis drug or biological product is defined in Sec.  413.234 as 
``[a]n injectable, intravenous, oral or other form or route of 
administration drug or biological product that is used to treat or 
manage a condition(s) associated with ESRD. It must be approved by the 
FDA on or after January 1, 2020, under section 505 of the [FD&C Act] or 
section 351 of the [PHS 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 are excluded until January 1, 
2025.'' While there are several parts of this definition, in this 
proposed rule we are focusing on the requirement that the product be 
approved by FDA ``under section 505 of the [FD&C Act] or section 351 of 
the [PHS Act].'' Specifically, we are proposing that certain new renal 
dialysis drugs approved by FDA under those authorities would not be 
eligible for the TDAPA under Sec.  413.234(c)(1).
    Section 505 of the FD&C Act and section 351 of the PHS Act provide 
the

[[Page 38339]]

authority to FDA for approving drugs and biological products, 
respectively, and provide several pathways for drug manufacturers to 
submit NDAs and biologics license applications (BLAs). Therefore, we 
have consulted with FDA and studied the different categories of NDAs 
and the different biological product pathways to consider whether the 
full breadth of these authorities aligned with our goals for the TDAPA 
policy under the ESRD PPS. As we explained in the CY 2019 ESRD PPS 
final rule (83 FR 56935), the purpose of the TDAPA for new renal 
dialysis drugs and biological products that fall within an existing 
functional category is to support innovation and help ESRD facilities 
to incorporate new products and make appropriate changes in their 
businesses to adopt such products; provide additional payment for such 
associated costs, as well as promote competition among drugs and 
biological products within the ESRD PPS functional categories.
    FDA approves certain new drugs under section 505(c) of the FD&C 
Act, which includes NDAs submitted pursuant to section 505(b)(1) or 
505(b)(2) of the FD&C Act. Section 505(b)(1) of the FD&C Act is a 
pathway for ``stand-alone'' applications and is used for drugs that 
have been discovered and developed with studies conducted by or for the 
applicant or for which the applicant has a right of reference, and are 
sometimes for new molecular entities and new chemical entities that 
have not been previously approved in the U.S.
    Section 505(b)(2) of the FD&C Act is another pathway for NDAs, but 
where at least some of the information for an approved drug comes from 
studies not conducted by or for the applicant and for which the 
applicant has not obtained a right of reference. A 505(b)(2) 
application may rely on FDA's finding of safety and/or effectiveness 
for a listed drug (an approved drug product) or published literature 
provided that such reliance is scientifically justified and the 
505(b)(2) applicant complies with the applicable statutory and 
regulatory requirements, including patent certification if appropriate. 
(See section 505(b)(2) of the FD&C Act and 21 CFR 314.54.) NDAs 
submitted pursuant to section 505(b)(1) or 505(b)(2) of the FD&C Act 
are then subdivided into categories by FDA.
    The Office of Pharmaceutical Quality in FDA's Center for Drug 
Evaluation and Research's (CDER) has an NDA categorizing system that 
utilizes NDA classification codes. As explained in FDA/CDER Manual of 
Policies and Procedures (MAPP) 5018.2, ``NDA Classification Codes'', 
the code evolved from both a management and a regulatory need to 
identify and group product applications based on certain 
characteristics, including their relationships to products already 
approved or marketed in the U.S. FDA tentatively assigns an NDA 
classification code (that is, Type 1 NDA through Type 10 NDA) by the 
filing date for an NDA and reassesses the code at the time of approval. 
The reassessment is based upon relationships of the drug product 
seeking approval to products already approved or marketed in the U.S. 
at the time of approval. FDA may also reassess the code after approval. 
The NDA classification code is not indicative of the extent of 
innovation or therapeutic value that a particular drug represents. More 
information regarding the NDA classification code is available in FDA/
CDER MAPP 5018.2 on FDA website at: https://www.fda.gov/downloads/aboutfda/centersoffices/officeofmedicalproductsandtobacco/cder/manualofpoliciesprocedures/ucm470773.pdf and summarized in Table 1.

                    Table 1--NDA Classification Codes
------------------------------------------------------------------------
           Classification                           Meaning
------------------------------------------------------------------------
Type 1..............................  New molecular entity.
Type 2..............................  New active ingredient.
Type 3..............................  New dosage form.
Type 4..............................  New combination.
Type 5..............................  New formulation or other
                                       differences.
Type 6..............................  New indication or claim, same
                                       applicant [no longer used].
Type 7..............................  Previously marketed but without an
                                       approved NDA.
Type 8..............................  Prescription to Over-the-Counter.
Type 9..............................  New indication or claim, drug not
                                       to be marketed under type 9 NDA
                                       after approval.
Type 10.............................  New indication or claim, drug to
                                       be marketed under type 10 NDA
                                       after approval.
Type 1/4............................  Type 1, New molecular entity, and
                                       Type 4, New combination.
Type 2/3............................  Type 2, New active ingredient, and
                                       Type 3, New dosage form.
Type 2/4............................  Type 2, New active ingredient and
                                       Type 4, New combination.
Type 3/4............................  Type 3, New Dosage Form, and Type
                                       4, New combination.
------------------------------------------------------------------------

    An ANDA is an application submitted by drug manufacturers and 
approved by FDA under section 505(j) of the FD&C Act for a 
``duplicate'' \2\ of a previously approved drug product. ANDAs are used 
for generic drugs. An ANDA relies on FDA's finding that the previously 
approved drug product, that is, the reference listed drug, is safe and 
effective.
---------------------------------------------------------------------------

    \2\ The term duplicate generally refers to a ``drug product that 
has the same active ingredient(s), dosage form, strength, route of 
administration, and conditions of use as a listed drug,'' that is, a 
previously approved drug product. See 54 FR 28872 (July 10, 1989).
---------------------------------------------------------------------------

    Biological products are approved by FDA under section 351 of the 
PHS Act. There are two pathways for biological products, one under 
section 351(a) and the other under section 351(k) of the PHS Act. A BLA 
submitted under section 351(a) of the PHS Act is the pathway for 
``stand-alone BLAs'' that contains all information and data necessary 
to demonstrate that (among other things) the proposed biological 
product is safe, pure and potent. The 351(k) BLA pathway requires that 
the application contain information demonstrating that the biological 
product is biosimilar to or interchangeable with an FDA-licensed 
reference product. FDA does not assign classification codes for BLAs 
like it does for NDAs.
    In addition to consulting with FDA, pharmaceutical statisticians 
within CMS have provided insight on the potential outcomes of providing 
payment incentives for promoting competition among drugs and biological 
products within the ESRD PPS functional categories. Specifically, we 
have learned that certain unintended consequences could arise from 
providing payment incentives for drugs with innovative qualities (for 
example, new molecular entities) in the same way as drugs with non-
innovative qualities (for example, generic drugs). For example, more 
attention might be diverted to the less costly duplication of drugs 
that are already available rather than those that may be more expensive 
to develop and bring to market. This could cause an influx of non-
innovative drugs to the dialysis space, potentially crowding out 
innovative drugs.
c. Proposed Refinement of the TDAPA Eligibility Criteria
    We analyzed the information we gathered since the publication of 
the CY 2019 ESRD PPS final rule and contemplated the primary goal of 
the TDAPA policy for new renal dialysis drugs and biological products 
that fall within ESRD PPS functional categories, which is to support 
innovation and encourage development of these products. We continue to 
believe that this is accomplished by providing payment to ESRD 
facilities during the uptake period for a new renal dialysis drug or 
biological product to help the facilities incorporate new drugs and 
make appropriate changes in their businesses to adopt such drugs. We 
also continue to believe that the TDAPA provides additional payment for 
costs associated with these changes.

[[Page 38340]]

    In addition to supporting innovation, we are mindful of the 
increase in Medicare expenditures associated with the expanded TDAPA 
policy. We note that the first year in which we paid the TDAPA, CY 
2018, resulted in an estimated $1.2 billion increase in ESRD PPS 
expenditures for two calcimimetic drugs used by approximately 25 
percent of the Medicare ESRD population. We recognized that the policy 
we finalized in the CY 2019 ESRD PPS final rule would mean that each 
new renal dialysis drug and biological product eligible for the TDAPA 
would result in an increase in Medicare expenditures. However, we were 
balancing an increase in Medicare expenditures with the rationale for 
fostering a competitive marketplace. In the CY 2019 ESRD PPS final rule 
(83 FR 56937), we stated that we believed that by expanding the 
eligibility to all new drugs and biological products we would promote 
competition among drugs and biological products within the ESRD PPS 
functional categories which could result in lower prices for all drugs.
    In response to ESRD facility and other dialysis stakeholders' 
concerns raised during and after the CY 2019 ESRD PPS rulemaking, and 
after conducting a closer study of FDA's NDA process, we are 
reconsidering the eligibility criteria that we finalized effective 
January 1, 2020. Since there are not unlimited Medicare resources, we 
believe those resources should not be expended on additional payments 
to ESRD facilities for drugs and biological products that are not truly 
innovative, and may facilitate perverse incentives for facilities to 
choose new products simply for financial gain. Since we have the 
ability to be more selective, through FDA's NDA classification codes, 
with the categories of renal dialysis drugs that would be eligible for 
the TDAPA for products in existing ESRD PPS functional categories, we 
believe that we can balance supporting innovation, incentivizing 
facilities with uptake of new and innovative renal dialysis products, 
and fostering competition for renal dialysis drugs and biological 
products that are new and innovative, rather than just new.
    We acknowledge that the definition finalized in the CY 2016 ESRD 
PPS final rule (80 FR 69015 through 69027), which includes products 
``approved by [FDA] . . . under section 505 of the [FD&C Act] or 
section 351 of the [PHS Act]'' has been part of the TDAPA eligibility 
criteria since the inception of the policy. We also acknowledge that 
this may be too expansive for purposes of determining eligibility for 
the TDAPA for new renal dialysis drugs and biological products that 
fall within an existing functional category. For example, there may be 
new renal dialysis drugs approved by FDA under section 505 of the FD&C 
Act that may not be innovative.
    We also acknowledge that while dialysis industry stakeholders 
recommended that we adopt significant clinical improvement standards 
for the TDAPA eligibility, we believe that unlike many Medicare 
beneficiaries, the Medicare ESRD beneficiary is significantly complex, 
with each patient having a unique and challenging profile for medical 
management of drugs and biological products. Practitioners should have 
the opportunity to evaluate the appropriate use of a new drug or 
biological product and its effect on patient outcomes and interactions 
with other medications the patient is currently taking. Further, the 
question of whether one drug is more effective than another can be 
impacted by characteristics that vary across patients such as age, 
gender, race, genetic pre-disposition and comorbidities. Innovation of 
drugs and biological products can provide options for those patients 
who do not respond to a certain preferred treatment regimen the same 
way the majority of patients respond.
    In section II.B.1.c.i of this proposed rule we discuss categories 
of drugs that we are proposing to exclude from eligibility for the 
TDAPA under Sec.  413.234(b)(1)(ii) and our proposed revisions to the 
drug designation process regulation in Sec.  413.234 to reflect those 
categories.
    We are also proposing to rely on, as a proxy, the NDA 
classification code, as it exists as of November 4, 2015, which is part 
of FDA/CDER MAPP 5018.2. The FDA/CDER MAPP 5018.2 is available at FDA 
website https://www.fda.gov/media/94381/download. We recognize that 
FDA's NDA classification codes do not necessarily reflect the extent of 
innovation or therapeutic advantage that a particular drug product 
represents. However, we believe FDA's NDA classification codes would 
provide an objective basis that we can use to distinguish innovative 
from non-innovative renal dialysis service drugs. We believe that 
distinguishing drugs would help us in our effort to support innovation 
by directing Medicare resources to renal dialysis drugs and biological 
products that are not reformulations or new dosage forms, while 
simultaneously balancing our goal to foster competition within the ESRD 
PPS functional categories by supporting products that advance the 
treatment for ESRD beneficiaries at a lower cost.
    As discussed in section II.B.1.b of this proposed rule, the 
classification code assigned to an NDA generally describes FDA's 
classification of the relationship of the drug to drugs already 
marketed or approved in the U.S. If FDA makes changes to the NDA 
classification code in FDA/CDER MAPP 5018.2, we are proposing that we 
would assess FDA changes at the time they are publicly available and we 
would analyze those changes with regard to their implications for the 
TDAPA policy under the ESRD PPS. We would plan to propose in the next 
rulemaking cycle, any necessary revisions to the exclusions set forth 
in proposed Sec.  413.234(e). We are soliciting comment on the proposal 
to rely on, as a proxy, the NDA classification code, as it exists as of 
November 4, 2015, which is part of the FDA/CDER MAPP 5018.2. We are 
also soliciting comments on the proposal that we would assess FDA 
changes to the NDA classification code at the time they are publicly 
available to analyze the changes with regard to their implications for 
the TDAPA policy and propose in the next rulemaking cycle, any 
necessary revisions to the proposed exclusions.
    Currently, 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 (83 FR 56932) for 
CMS to make a determination as to whether the new renal dialysis drug 
or biological product is eligible for the adjustment. With regard to 
operationalizing the proposed exclusions, in addition to the 
information currently described on the CMS ESRD PPS TDAPA web page 
under the Materials Required for CMS Determination Purposes, we would 
request that the stakeholder provide the FDA NDA Type classified at FDA 
approval or state if the drug was approved by FDA under section 505(j) 
of the FD&C Act.\3\ If the FDA NDA Type classified at FDA approval 
changes subsequently to the submission of the TDAPA application into 
CMS, we would expect that the submitter would resubmit the TDAPA 
request, and we would re-evaluate the submission. We note that we plan 
to have quarterly meetings with FDA to discuss new renal dialysis drugs 
and biological products that are eligible for the TDAPA.
---------------------------------------------------------------------------

    \3\ CMS. ESRD PPS Transitional Drug Add-on Payment Adjustment. 
Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug.html.
---------------------------------------------------------------------------

    As we discuss in the CY 2019 ESRD PPS final rule (83 FR 56932), 
once the information requested by CMS is

[[Page 38341]]

received and reviewed, for new renal dialysis drugs and biological 
products eligible for the TDAPA, we will issue a change request with 
billing guidance that will provide notice that the product is eligible 
for the TDAPA as of a certain date and guidance on how to report the 
new drug or biological product on the ESRD claim. 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.
    For new renal dialysis drugs and biological products that are not 
eligible for the TDAPA, we indicated that a change request would be 
issued that will provide notice that the drug is included in the ESRD 
PPS bundle, qualifies as an outlier service, and is available for use, 
allowing patients to have access to the new product.
i. Proposed Exclusions From the TDAPA Eligibility
    Using the current categories in FDA/CDER MAPP 5018.2 effective 
November 4, 2015, we are proposing to exclude Types 3, 5, 7 and 8, Type 
3 in combination with Type 2 or Type 4, Type 5 in combination with Type 
2, and Type 9 when the ``parent NDA'' is a Type 3, 5, 7 or 8 from being 
eligible for the TDAPA under Sec.  413.234(c)(1). A Type 9 NDA is for a 
new indication or claim for a drug product that is currently being 
reviewed under a different NDA (the ``parent NDA''), and the applicant 
does not intend to market this drug product under the Type 9 NDA after 
approval. We would use the NDA classification code Type identified at 
FDA approval. If FDA changes the classification type after we start 
applying the TDAPA with respect to a particular new renal dialysis 
drug, we would re-evaluate TDAPA eligibility. We are also proposing to 
exclude generic drugs from being eligible for the TDAPA under Sec.  
413.234(c)(1). In the following paragraphs we describe each NDA Type, 
as distinguished by FDA through the NDA classification code, and 
generic drugs proposed for exclusion and explain why we believe these 
products should not be eligible for the TDAPA for new renal dialysis 
drugs and biological products that fall within an existing ESRD PPS 
functional category.
(a) Type 3 NDA--New Dosage Form
    Some dialysis stakeholders expressed concern that we would be 
paying the TDAPA for changes that did not reflect a product being 
significantly innovative, such as a pill size, pill scoring, oral 
solutions and suspensions of drugs that were previously only approved 
as solid oral dosage forms, time-release forms, chewable or 
effervescent pills, orally disintegrating granules or adsorptive 
changes, or routes of administration. In response to these concerns, we 
are proposing to exclude Type 3 NDAs, which is for a new dosage form of 
an active ingredient that has been approved or marketed in the U.S. by 
the same or another applicant but has a different dosage form, as well 
as Type 3 in combination with Type 2 or Type 4, from being eligible for 
the TDAPA under Sec.  413.234(b)(1). In addition, we are proposing to 
exclude Type 9 NDAs, as discussed in section II.B.1.ii.(d), when the 
``parent NDA'' is a Type 3 NDA.
    FDA's regulation defines an active ingredient as a component of the 
drug product that is intended to furnish pharmacological activity or 
other direct effect in the diagnosis, cure, mitigation, treatment, or 
prevention of disease, or to affect the structure or any function of 
the body of man or other animals (21 CFR 314.3(b), which is 
incorporated in FDA/CDER MAPP 5018.2).
    FDA's regulation defines dosage form as the physical manifestation 
containing the active and inactive ingredients that delivers a dose of 
the drug product (21 CFR 314.3(b), which is incorporated in FDA/CDER 
MAPP 5018.2). This includes such factors as: (1) The physical 
appearance of the drug product, (2) the physical form of the drug 
product prior to dispensing to the patient, (3) the way the product is 
administered, and (4) the design features that affect the frequency of 
dosing.
    For Type 3 NDA drugs, the indication does not need to be the same 
as that of the already approved drug product. Once the new dosage form 
has been approved for an active ingredient, subsequent applications for 
the same dosage form and active ingredient should be classified as Type 
5 NDA.
    For purposes of the ESRD PPS, we do not want to incentivize the use 
of one dosage form of the drug over another. In addition to not being 
innovative, these drugs that are new to the market may not be 
innovative with regard to certain characteristics of the drug itself. 
Although these drugs may provide an expansion of patient treatment 
options, we believe these changes are not innovative and these drugs 
should not be paid for using the TDAPA. However, these drugs are still 
accounted for in the ESRD PPS base rate and would be eligible for an 
outlier payment. This type of research, development and marketing 
activity has been termed ``product hopping'' and can help manufacturers 
prolong revenue streams.\4\ We do not believe these products should be 
eligible for the TDAPA because we do not want to provide perverse 
incentives for facilities to choose a new dosage form in order to 
obtain the TDAPA. In addition, we do not want to encourage the practice 
of companies moving drug research and development dollars from one 
branded drug to another, very similar drug with a longer patent life, 
thus increasing its market exclusivity for many years. This practice is 
counter to our goal of not only increasing competition among drugs in 
the ESRD functional categories so there are better drugs at lower cost, 
but also making the best use of Medicare resources and directing of 
those resources to payment for the utilization of high value, 
innovative drugs. For these reasons we are proposing to exclude Type 3 
NDA drugs as being eligible for the TDAPA.
---------------------------------------------------------------------------

    \4\ Reed F. Beall et al. New Drug Formulations and Their 
Respective Generic Entry Dates, JMCP. February, 2019, 25(2): 218-
224. Available at: https://www.jmcp.org/doi/pdf/10.18553/jmcp.2019.25.2.218.
---------------------------------------------------------------------------

(b) Type 5 NDA--New Formulation or Other Differences
    We are proposing to exclude Type 5 NDA drugs, which can be a new 
formulation or new manufacturer, from being eligible for the TDAPA. In 
addition, we are proposing to exclude Type 9 NDAs, as discussed in 
section II.B.1.ii.(d) of this proposed rule, when the ``parent NDA'' is 
a Type 5 NDA. Drugs that are classified as a Type 5 NDA are sometimes 
referred to as reformulations or follow-on products. Specifically, a 
Type 5 NDA is for a product, other than a new dosage form, that differs 
from a product already approved or marketed in the U.S. because of one 
of the seven following product characteristics.
    The first characteristic involves changes in inactive ingredients 
that require either bioequivalence studies or clinical studies for 
approval and the product is submitted as an original NDA rather than as 
a supplement by the applicant of the approved product.
    The second characteristic is that the product is a ``duplicate'' of 
a drug product by another applicant (same active ingredient, same 
dosage form, same or different indication, or same combination, and 
requires one of the following 4 items: (a) Bioequivalence testing, 
including bioequivalence studies with clinical endpoints, but is not 
eligible for submission as a section 505(j) application; (b) safety or 
effectiveness testing because of novel inactive ingredients; (c) full 
safety or effectiveness testing because the

[[Page 38342]]

product is one of the following four items: (i) Is subject to 
exclusivity held by another applicant; (ii) is a product of 
biotechnology and its safety and/or effectiveness are not assessable 
through bioequivalence testing, (iii) it is a crude natural product, 
or, (iv) it is ineligible for submission under section 505(j) of the 
FD&C Act because it differs in bioavailability, for example, products 
with different release patterns or (d) the applicant has a right of 
reference to the application.
    The third characteristic is that the product contains an active 
ingredient or active moiety that has been previously approved or 
marketed in the U.S. only as part of a combination. This applies to 
active ingredients previously approved or marketed as part of a 
physical or chemical combination, or as part of a mixture derived from 
recombinant deoxyribonucleic acid technology or natural sources. An 
active moiety is the molecule or ion, excluding those appended portions 
of the molecule that cause the drug to be an ester, salt (including a 
salt with hydrogen or coordination bonds), or other noncovalent 
derivative (such as a complex, chelate, or clathrate) of the molecule, 
responsible for the physiological or pharmacological action of the drug 
substance (21 CFR 314.3(b)).
    The fourth characteristic is that the product is a combination 
product that differs from a previous combination product by removal of 
one or more active ingredients or by substitution of a new ester or 
salt or other noncovalent derivative of an active ingredient for one of 
more of the active ingredients. In the case of a substitution of a 
noncovalent derivative of an active ingredient for one or more of the 
active ingredients, the NDA would be classified as a Type 2, 5 
combination and we would propose to exclude it from eligibility for the 
TDAPA under Sec.  413.234(b)(1).
    The fifth characteristic is that the product contains a different 
strength of one or more active ingredients in a previously approved or 
marketed combination. A Type 5 NDA would generally be submitted by an 
applicant other than the holder of the approved application for the 
approved product. A similar change in an approved product by the 
applicant of the approved product would usually be submitted as a 
supplemental application.
    The sixth characteristic is that the product differs in 
bioavailability (for example, superbioavailable or different 
controlled-release pattern) and, therefore, is ineligible for 
submission as an ANDA under section 505(j) of the FD&C Act.
    The seventh characteristic is that the product involves a new 
plastic container that requires safety studies beyond limited 
confirmatory testing (see 21 CFR 310.509, Parenteral drugs in plastic 
containers, and FDA/CDER MAPP 6020.2, Applications for Parenteral 
Products in Plastic Immediate Containers).
    Some commenters have characterized the types of drugs that are 
often approved in Type 5 NDAs as reformulations or line extensions. A 
line extension is a variation of an existing product.\5\ The variation 
can be a new formulation (reformulation) of an existing product, or a 
new modification of an existing molecular entity.\6\ A line extension 
has been defined as a branded pharmaceutical product that: (1) Includes 
the same active ingredient (either alone or in combination with other 
active ingredients) as an original product, (2) is manufactured by the 
same pharmaceutical company that makes the original product, or by one 
of its partners or subsidiaries, and, (3) is launched after the 
original product.\7\ An NME is discussed in section II.B.1.c.ii.(a) of 
this proposed rule. Line extensions were few in number prior to 1984, 
when the Drug Price Competition and Patent Term Restoration Act was 
passed following public outcry over high drug prices and rising drug 
expenditures, and following passage of that law, line extensions became 
prevalent in the pharmaceutical drug industry. We are aware that one of 
the acknowledged criticisms of pharmaceutical line extensions is their 
use as a strategy to extend the patent protections for products that 
have patents that are about to expire, by developing a new formulation 
and taking out new patents for the new formulation.\8\ It has been 
noted that line extensions through new formulations are not being 
developed for significant therapeutic advantage, but rather for the 
company's economic advantage.\9\
---------------------------------------------------------------------------

    \5\ V. Kadiyali et al. Product line extensions and competitive 
market interactions: An empirical analysis. J Econometrics. 1998, 89 
(1-2): 339-63.
    \6\ S.H. Hong et al. Product Line Extensions and Pricing 
Strategies of Brand-Name Drugs Facing Patent Expirations, J MCP. 
2005, 11(9): 746-754.
    \7\ A.C. Fowler, October 6, 2017, White Paper--Pharmaceutical 
Line Extensions in the United States, http://www.nber.org/aging/valmed/WhitePaper-Fowler10.2017.pdf.
    \8\ S.H. Hong et al. Product Line Extensions and Pricing 
Strategies of Brand-Name Drugs Facing Patent Expirations, J MCP. 
2005, 11(9): 746-754.
    \9\ R. Collier Drug patents: The evergreening problem. CMAJ. 
2013 Jun11; 185(9):E385-6. doi: 10.1503/cmaj.109-4466. Epub 2013 Apr 
29.
---------------------------------------------------------------------------

    We do not believe that the characteristics of Type 5 NDA drugs 
would advance the intent of the TDAPA for new renal dialysis drugs and 
biological products that fall within an existing functional category. 
While Type 5 NDA drugs may have clinical benefits to patients over 
previously approved products, we do not make that assessment as part of 
ESRD PPS payment policy. We do not believe that the types of changes 
represented by Type 5 NDAs enhance our goal of increased competition 
with the overarching goal of lowering drug prices. To the contrary, it 
seems that a goal of line extensions can be to thwart competition. 
Studies indicate that there is no lowering of prices through 
competition from line extensions. Rather, it has been reported that 
prices remain rigid and are not lowered. In fact, not only can product 
line extensions thwart competition, but they inherit the market success 
of the original brand, sometimes with little quality improvement over 
the original brand.\10\ For these reasons, we do not believe that 
providing a payment adjustment to ESRD facilities to support the uptake 
of a drug that is a line extension in their business model is a 
judicious use of Medicare resources. In addition, a study published in 
February 2019, concluded that the pattern of a considerable subset of 
reformulations prolonged the consumption of costly brand-name products 
at the expense of timely market entry of low cost generics.\11\ This 
and other recent publications this past year have been helpful to 
inform policy proposals by demonstrating that reformulations frequently 
kept drug prices high, which does not meet our goal of increased 
competition assisting in the lowering of drug prices, at the expense of 
Medicare resources being directed to innovative drugs that advance the 
treatment of ESRD. Consequently, we believe it is important to propose 
to install guardrails to ensure that sufficient incentives exist for 
timely innovative drugs for the ESRD patients, that competition for 
lowering drug prices is not thwarted, and that perverse incentives do 
not exist for patients to receive a drug because it is financially 
rewarding, through the TDAPA, for the ESRD facilities. For these 
reasons, we do not believe Type 5 NDA drugs should be eligible for the 
TDAPA, and we are

[[Page 38343]]

proposing to exclude them in new Sec.  413.234(e).
---------------------------------------------------------------------------

    \10\ S.H. Hong et al. Product Line Extensions and Pricing 
Strategies of Brand-Name Drugs Facing Patent Expirations, J MCP. 
2005, 11(9): 746-754.
    \11\ Reed F. Beall et al. New Drug Formulations and Their 
Respective Generic Entry Dates, JMCP. February, 2019, 25(2): 218-
224. Available at: https://www.jmcp.org/doi/pdf/10.18553/jmcp.2019.25.2.218.
---------------------------------------------------------------------------

(c) Type 7 NDA--Previously Marketed but Without an Approved NDA
    We are proposing to exclude Type 7 NDA, which is for a drug product 
that contains an active moiety that has not been previously approved in 
an application but has been marketed in the U.S., from being eligible 
for the TDAPA for renal dialysis drugs and biological products in 
existing functional categories. In addition, we are proposing to 
exclude Type 9 NDAs, as discussed in section II.B.1.ii.(d) of this 
proposed rule, when the ``parent NDA'' is a Type 7 NDA. This 
classification only applies to the first NDA approved for a drug 
product containing this (these) active moiety(ies). They include, but 
are not limited to the following four items: (1) The first post-1962 
application for an active moiety marketed prior to 1938; (2) The first 
application for an active moiety first marketed between 1938 and 1962 
that is identical, related or similar (IRS) to a drug covered by a Drug 
Efficacy Study Implementation (DESI) notice (FDA's regulation at 21 CFR 
310.6(b)(1) states that, ``[a]n identical, related, or similar drug 
includes other brands, potencies, dosage forms, salts, and esters of 
the same drug moiety as well as any of drug moiety related in chemical 
structure or known pharmacological properties''); (3) The first 
application for an IRS drug product first marketed after 1962; and (4) 
The first application for an active moiety that was first marketed 
without an NDA after 1962.
    We do not believe that the characteristics of Type 7 NDA drugs 
would advance the intent of the TDAPA policy because these drugs were 
already on the market. For example, FDA received an application for 
calcium gluconate, which is on the Consolidated Billing List and is 
already recognized as a renal dialysis service included in the ESRD PPS 
base rate. The NDA for calcium gluconate was classified by FDA in 2017 
to be a Type 7 NDA. This drug is not innovative and does not 
significantly advance the treatment options for ESRD. If the Type 7 NDA 
drug is determined to be a renal dialysis service, it is likely it is 
already being used by the facility, so paying the TDAPA for it does not 
assist the facilities in uptake for their business model, which was one 
of the goals of the TDAPA. In addition, paying the TDAPA for Type 7 NDA 
drugs uses Medicare resources that ultimately could be used to pay for 
innovative drugs and services that result from research and development 
in areas of high value innovation.
    Therefore, we do not consider Type 7 NDA drugs to be eligible for 
the TDAPA.
(d) Type 8 NDA--Prescription to Over-the-Counter (OTC)
    We are proposing to exclude Type 8 NDA, which is when a 
prescription drug product changes to an over-the-counter (OTC) drug 
product, from being eligible for the TDAPA. In addition, we are 
proposing to exclude Type 9 NDAs, as discussed in section II.B.1.ii.(d) 
of this proposed rule, when the ``parent NDA'' is a Type 8 NDA. A Type 
8 NDA is for a drug product intended for OTC marketing that contains an 
active ingredient that has been approved previously or marketed in the 
U.S. only for dispensing by prescription. A Type 8 NDA may provide for 
a different dosing regimen, different strength, different dosage form, 
or different indication from the product approved previously for 
prescription sale.
    If the proposed OTC switch would apply to all indications, uses, 
and strengths of an approved prescription dosage form (leaving no 
prescription-only products of that particular dosage form on the 
market), then FDA indicates that the application holder should submit 
the change as a supplement to the approved application. If the 
applicant intends to switch only some indications, uses, or strengths 
of the dosage form to OTC status (while continuing to market other 
indications, uses, or strengths of the dosage form for prescription-
only sale), FDA indicates that the applicant should submit a new NDA 
for the OTC products, which would be classified as Type 8 NDA.
    We do not believe that the characteristics of Type 8 NDA drugs 
would advance the intent of the TDAPA policy for renal dialysis drugs 
and biological products in existing functional categories because Type 
8 NDAs are for drugs transitioning from prescription to OTC, and 
Medicare does not provide coverage of OTC drugs. Although certain 
innovative approaches may help increase access to a broader selection 
of nonprescription drugs for ESRD beneficiaries, we do not consider the 
transition from prescription to OTC to be innovative for purposes of 
the TDAPA policy. We believe that making the TDAPA available for Type 8 
NDAs may defeat the intent of lowering overall costs for both the ESRD 
beneficiary and for Medicare, is not needed by the facilities to 
provide additional support during an uptake period so they can be 
incorporated into the business model. Over the counter drugs have 
already gone through safety trials if they were previously prescription 
drugs and their end-point physiologic activity had been recognized and 
documented. Therefore, the newness is a reflection of accessibility to 
the general public without having to obtain a prescription through a 
licensed practitioner. We believe that these drugs, though new to the 
market, are not sufficiently innovative to qualify for TDAPA 
eligibility.
(e) Generic Drugs
    We are proposing to exclude drugs approved by FDA under section 
505(j) of the FD&C Act, which are generic drugs, from being eligible 
for the TDAPA. As discussed previously in section II.B.1.b of this 
proposed rule, an ANDA is an application submitted by drug 
manufacturers and approved by FDA under section 505(j) of the FD&C Act 
for a duplicate of a previously approved drug product.
    An ANDA generally must contain information to show that the 
proposed generic product: (1) Is the same as the reference listed drug 
(RLD) with respect to the active ingredient(s), conditions of use, 
route of administration, dosage form, strength, and labeling (with 
certain permissible differences) and (2) is bioequivalent to the RLD. 
See section 505(j)(2)(A) of the FD&C Act. An ANDA may not be submitted 
if clinical investigations are necessary to establish the safety and 
effectiveness of the proposed product. A drug product approved in an 
ANDA is presumed to be therapeutically equivalent to its RLD. A drug 
product that is therapeutically equivalent to an RLD can be substituted 
with the full expectation that the substituted product will produce the 
same clinical effect and safety profile as the RLD when administered to 
patients under the conditions specified in the labeling.
    In the CY 2019 ESRD PPS final rule (83 FR 56931), we included 
generic drugs in the definition of a new renal dialysis drug or 
biological product eligible for the TDAPA because we believed this 
would foster both a competitive marketplace and innovation of drugs 
within functional categories, mitigate high launch prices, and provide 
a financial boost to support utilization. During the CY 2019 ESRD PPS 
rulemaking, we were aware of the pricing strategies being used by 
certain pharmaceutical companies to block the entry of generic drugs 
into the market in order to keep drug prices high. Though generic drugs 
are not considered innovative products, our primary intent in making 
generic drugs eligible for the TDAPA was to increase competition so 
that drug prices would be lower for the

[[Page 38344]]

beneficiary. However, we have since learned that bringing more generic 
drugs to market, though a significant component in lowering drug 
prices, is not in and of itself the solution.
    For example, in June 2018, a report examined increased generic drug 
competition as the primary impetus to curtail skyrocketing drug prices, 
and found that though it is helpful, there is a ceiling on its impact. 
It found that generic competition would not affect 46 percent of the 
estimated sales revenue of the top 100 drugs through 2023.\12\
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    \12\ B. Isgur et al., Health Research Institute, The FDA is 
approving more generic drugs than ever before. Faster than ever 
before. Is it enough to lower drug costs? June 2018. Available at: 
https://www.pwc.com/us/en/health-industries/health-research-institute/pdf/pwc-health-research-institute-generic-drug-pricing-june-2018.pdf.
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    In June 2018, an article noted that competition has a limited 
impact on American health care, particularly when it comes to expensive 
interventions like prescription drugs. Notably, when an expensive 
drug's competition within the same family of drugs came on the market 
the prices did not go down. Rather, the prices increased approximately 
675 percent. Each new entrant cost more than its predecessors, and 
their makers then increased their prices to match the newcomer's. When 
the first generic finally entered the market, its list price was only 
slightly less at 539 percent above the original entrant. Economists 
call this ``sticky pricing'' and the article notes that this is common 
in pharmaceuticals, and has raised the prices in the U.S. of drugs for 
serious conditions even when there are multiple competing drugs. 
Compounding this problem, the article states that companies have 
decided it is not in their interest to compete.\13\
---------------------------------------------------------------------------

    \13\ E. Rosenthal, New York Times, Why Competition Won't Bring 
Down Drug Prices. June 21, 2018. Available at: https://www.nytimes.com/2018/06/21/opinion/competition-drug-prices.html.
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    For purposes of the ESRD PPS, we believe that we need to strike a 
balance between enhancing significant renal dialysis drug innovation 
and encouraging competition through support of innovative drugs that 
would become optimal choices for ESRD patients and advance their care 
through improved treatment choices. Our goal in supporting competition 
among drugs in the ESRD PPS functional categories was to ultimately 
affect the launch price of new drugs. We now questions whether 
including all new renal dialysis drugs and biological products as 
eligible for the TDAPA would help us meet that goal. Rather, we believe 
reining in launch prices by placing guardrails on line extensions, 
reformulations and ``sticky pricing'' while staying mindful of the 
Medicare trust fund would better enable us to achieve our goals for the 
TDAPA policy.
    Therefore, we are proposing to revise the drug designation process 
regulation at Sec.  413.234 by revising paragraph (b)(1)(ii) and adding 
paragraph (e), effective January 1, 2020, to specify that a new renal 
dialysis drug used to treat or manage a condition for which there is an 
ESRD PPS functional category is not eligible for payment using the 
TDAPA if it is a generic drug or if the NDA for the drug is classified 
by FDA as a certain type--specifically, if the drug is approved under 
section 505(j) of the FD&C Act or the NDA for the drug is classified by 
FDA as Type 3, 5, 7 or 8, Type 3 in combination with Type 2 or Type 4, 
or Type 5 in combination with Type 2, or Type 9 when the ``parent NDA'' 
is a Type 3, 5, 7 or 8.
    We are soliciting comments as to whether any NDA Types that would 
remain eligible for the TDAPA under our proposal should be excluded, 
and whether any NDA Types that we are proposing to exclude should be 
included, for example, within the NDA Type 3 (new dosage form) the 
inclusion of intravenous to oral route of administration.
    We are also proposing a technical change to Sec.  413.234(a) to 
revise the definitions ``ESRD PPS functional category'' and ``Oral-only 
drug'' to be consistent with FDA nomenclature. We are proposing to 
change the definition of ``ESRD PPS functional category'' to replace 
``biologicals'' with ``biological products.'' We are also proposing to 
change the definition of ``Oral-only drug'' to replace ``biological'' 
with ``biological product.''
    As compared to the TDAPA policy finalized in the CY 2019 ESRD PPS 
final rule, we believe that these proposed revisions would reduce CY 
2020 Medicare expenditures for new renal dialysis drugs and biological 
products, which would also have a better downstream impact for 
beneficiary coinsurance. Specifically, in the CY 2019 ESRD PPS final 
rule (83 FR 56932), we finalized that, effective January 1, 2020, the 
TDAPA would apply for all new renal dialysis drugs and biological 
products. Since the proposed policy would carve out certain drug types 
from being eligible for the TDAPA and would be more limited than the 
expansive policy finalized in the CY 2019 ESRD PPS final rule for CY 
2020, there would be lower Medicare expenditures in CY 2020. Further, 
the downstream effect of lower Medicare expenditures is lower 
coinsurance for beneficiaries.
    We solicit comment on the proposals to revise the drug designation 
process regulation at Sec.  413.234 to reflect that certain new renal 
dialysis drugs would be excluded from eligibility for the TDAPA.
ii. Examples of New Renal Dialysis Drugs and Biological Products That 
Would Remain Eligible for the TDAPA
    Under our proposal, any new renal dialysis drug or biological 
product that we are not proposing for exclusion in section II.B.1.c.i 
of this proposed rule, would continue to be eligible for the TDAPA. In 
the following paragraphs we provide some examples of the types of renal 
dialysis drugs and biological products that we believe would continue 
to be eligible for the TDAPA under our proposal, using the descriptions 
in the NDA classification code referenced in section II.B.1.c of this 
proposed rule. We note that under our proposal, FDA approvals under 
section 351 of the PHS Act, which includes biological products and 
biological products that are biosimilar to, or interchangeable with, a 
reference biological product, also would continue to be eligible for 
the TDAPA.
(a) Type 1 NDA--New Molecular Entity
    Type 1 NDA refers to drugs containing an NME. An NME is an active 
ingredient that contains no active moiety that has been previously 
approved by FDA in an application submitted under section 505(b) of the 
FD&C Act or has been previously marketed as a drug in the U.S.
    We believe the new renal dialysis drugs that are classified by FDA 
as a Type 1 NDA should continue to be eligible for the TDAPA because 
they generally fall within the 505(b)(1) pathway typically used for 
novel drugs, meaning they have not been previously studied or approved, 
and their development requires the sponsor to conduct all studies 
needed to demonstrate the safety and efficacy of the drug. Unlike the 
drugs proposed to be excluded from the TDAPA as described above, these 
drugs are generally not line extensions of previously existing drugs. 
There will be expenses with uptake by ESRD facilities of Type 1 NDA 
drugs, and one of the goals of the TDAPA is to provide additional 
support to ESRD facilities during the uptake period for these 
innovative drugs and help incorporate them into their business model.
(b) Type 2 NDA--New Active Ingredient
    Type 2 NDA is for a drug product that contains a new active 
ingredient, but not an NME. A new active ingredient includes those 
products whose active moiety has been previously approved or

[[Page 38345]]

marketed in the U.S., but whose particular ester, salt, or noncovalent 
derivative of the unmodified parent molecule has not been approved by 
FDA or marketed in the U.S., either alone, or as part of a combination 
product. Similarly, if any ester, salt, or noncovalent derivative has 
been marketed first, the unmodified parent molecule would also be 
considered a new active ingredient, but not an NME. Furthermore, if the 
active ingredient is a single enantiomer and a racemic mixture (the 
name for a 50:50 mixture of 2 enantiomers) containing that enantiomer 
has been previously approved by FDA or marketed in the U.S., or if the 
active ingredient is a racemic mixture containing an enantiomer that 
has been previously approved by FDA or marketed in the U.S., the NDA 
will be classified as a Type 2 NDA. Enantiomers are chiral molecules 
that are non-superimposable, mirror images of one another.
    We believe the new renal dialysis drugs classified by FDA as Type 2 
NDAs should be eligible for the TDAPA because, in part, it covers a 
single enantiomer active ingredient for which a racemic mixture 
containing that enantiomer has been approved by FDA. Single enantiomer 
drugs can lead to fewer drug interactions in the ESRD population, which 
already has a significant medication burden.\14\ We believe these drugs 
are innovative and it is important to support their development because 
of their lower development cost burden, coupled with enhancement of 
patient choice, which supports not only innovation, but the ability of 
the product to successfully launch and compete. We believe having the 
Type 2 NDA drugs be eligible for the TDAPA would support our goal of 
providing support to the ESRD facilities for 2 years while the drug is 
being incorporated into their business model.
---------------------------------------------------------------------------

    \14\ A Calcaterra and I D'Acquarica, J Pharmaceutical and 
Biomedical Analysis, ``The market of chiral drugs: Chiral switches 
versus de novo enantiomerically pure compounds,'' 147(2018). Pages 
323-340. Available at: https://www.sciencedirect.com/science/article/pii/S0731708517314838?via%3Dihub.
---------------------------------------------------------------------------

(c) Type 4 NDA--New Combination
    Type 4 NDA is a new drug-drug combination of two or more active 
ingredients. An application for a new drug-drug combination product may 
have more than one classification code if at least one component of the 
combination is an NME or a new active ingredient.
    We are proposing that new renal dialysis drugs that are classified 
as a Type 4 NDA should continue to be eligible for the TDAPA if at 
least one of the components is a Type 1 NDA (NME) or a Type 2 NDA (new 
active ingredient), both of which merit the TDAPA as previously 
discussed. An added advantage is that while introducing an innovative 
product, which is not the case for Type 3 NDA drugs, it reduces the 
pill burden to a patient population challenged with multiple 
medications and a complex drug regimen. Medication adherence is thought 
to be around 50 percent in the dialysis population and reducing this 
burden can improve adherence and should lead to improvement in 
treatment outcomes.\15\
---------------------------------------------------------------------------

    \15\ K Parker et al., Medication Burden in CKD-5D: Impact of 
dialysis modality and setting, Clin Kidney J. 2014, 7: 557-561. 
Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4389130/pdf/sfu091.pdf.
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    We believe the advantages of Type 1 NDA and Type 2 NDA drugs, 
coupled with the possibility of improved adherence, merits eligibility 
for the TDAPA in that it encourages both innovators to develop 
competitive drugs at lower prices for this NDA classification code, and 
ESRD facilities to use the products with the boost that the TDAPA will 
provide in facilitating uptake of these new products.
(d) Type 9 NDA--New Indication or Claim, Drug Not To Be Marketed Under 
Type 9 NDA After Approval
    Type 9 NDA is for a new indication or claim for a drug product that 
is currently being reviewed under a different NDA (the ``parent NDA''), 
and the applicant does not intend to market this drug product under the 
Type 9 NDA after approval. Generally, a Type 9 NDA is submitted as a 
separate NDA so as to be in compliance with the guidance for industry 
on Submitting Separate Marketing Applications and Clinical Data for 
Purposes of Assessing User Fees.\16\ When the Type 9 NDA is submitted, 
it is given the same NDA classification code as the pending NDA. When 
one application is approved, the other application will be reclassified 
as a Type 9 NDA regardless of whether it was the first or second NDA 
actually submitted. After the approval of a Type 9 NDA, FDA will 
``administratively close'' the Type 9 NDA and thereafter only accept 
submissions to the ``parent'' NDA.
---------------------------------------------------------------------------

    \16\ FDA. Guidance for Industry. Submitting Separate Marketing 
Applications and Clinical Data for Purposes of Assessing User Fees. 
Available at: https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM079320.pdf.
---------------------------------------------------------------------------

    Since Type 9 NDA is a new clinical indication, this suggests that a 
drug company is pioneering a new approach to provide better 
pharmacologic care for vulnerable ESRD patients with complex medical 
needs, and we consider this to be sufficiently innovative to warrant 
TDAPA eligibility.
    We believe renal dialysis drugs that are classified as NDA Types 1, 
2, and 4 are all innovative and therefore we propose that these drugs 
should continue be eligible for the TDAPA as discussed in sections 
II.B.1.c.ii.(a), II.B.1.c.ii.(b), and II.B.1.c.ii.(c), of this proposed 
rule. When the ``parent NDA'' is Type 1, 2, or 4, Type 9 NDA would be a 
new indication of those innovative drugs. Therefore we believe Type 9 
NDA, when the ``parent'' is Type 1, 2, or 4, is just as innovative as 
Type 1, 2, or 4 and therefore should also be eligible for the TDAPA. We 
believe applying the TDAPA with respect to Type 9 NDA new renal 
dialysis drugs would assist ESRD facilities in adopting these drugs 
into their treatment protocols for patients, when these drugs are 
warranted for use in that subset of patients.
(e) Type 10 NDA--New Indication or Claim, Drug To Be Marketed Under 
Type 10 NDA After Approval
    Type 10 NDA is for a drug product that is a duplicate of a drug 
product that is the subject of either a pending or approved NDA, and 
the applicant intends to market the drug product under this separate 
Type 10 NDA after approval. A Type 10 NDA is typically for a drug 
product that has a new indication or claim, and it may have labeling 
and/or a proprietary name that is distinct from that of the original 
NDA. When the Type 10 NDA is submitted, it would be given the same NDA 
classification code as the original NDA unless that NDA is already 
approved. When one application is approved, the other would be 
reclassified as Type 10 NDA regardless of whether it was the first or 
second NDA actually submitted.
    We believe renal dialysis drugs with the Type 10 NDA classification 
code are sufficiently innovative and should be eligible for the TDAPA 
because a new indication for a previously submitted drug that is 
applicable to renal dialysis advances the field and suggests the drug 
company is pioneering a new approach to provide better pharmacologic 
care for vulnerable ESRD patients with complex medical needs. We 
believe this could provide savings in terms of time-to-market and 
research and development, which could be reflected in the launch price 
of the drug. We further believe applying the TDAPA with respect to Type 
10 NDA new renal dialysis drugs will assist ESRD facilities in adopting 
these drugs into their treatment

[[Page 38346]]

protocols for patients when these drugs are warranted for use in that 
subset of patients.
(f) FDA Approvals Under Section 351 of the PHS Act
    Under our proposal, products that receive FDA approval under 
section 351 of the PHS Act, which occurs for new biological products 
and biological products that are biosimilar to, or interchangeable 
with, a reference biological product, would continue to be eligible for 
the TDAPA.
    A BLA submitted under section 351(a) of the PHS Act is a ``stand-
alone BLA'' that contains all information and data necessary to 
demonstrate that (among other things) the proposed biological product 
is safe, pure, and potent.
    An application for licensure of a proposed biosimilar biological 
product submitted in a BLA under section 351(k) of the PHS Act must 
contain information demonstrating that the biological product is 
biosimilar to a reference product. `Biosimilar' means ``that the 
biological product is highly similar to the reference product 
notwithstanding minor differences in clinically inactive components'' 
and that ``there are no clinically meaningful differences between the 
biological product and the reference product in terms of the safety, 
purity, and potency of the product'' (see section 351(i)(2) of the PHS 
Act).
    An application for licensure of a proposed interchangeable product 
submitted in a BLA under section 351(k) of the PHS Act must meet the 
standards of ``interchangeability.'' To meet the additional standard of 
``interchangeability,'' an applicant must provide sufficient 
information to demonstrate biosimilarity, and also to demonstrate that 
the biological product can be expected to produce the same clinical 
result as the reference product in any given patient and, if the 
biological product is administered more than once to an individual, the 
risk in terms of safety or diminished efficacy of alternating or 
switching between use of the biological product and the reference 
product is not greater than the risk of using the reference product 
without such alternation or switch (see section 351(k)(4) of the PHS 
Act). Interchangeable products may be substituted for the reference 
product without the intervention of the prescribing healthcare provider 
(see section 351(i)(3) of the PHS Act). Further information regarding 
biosimilar biological products is available on the FDA 
website.17 18 19
---------------------------------------------------------------------------

    \17\ FDA. Guidance for Industry--Questions and Answers on 
Biosimilar Development and the BPCI Act. December, 2018. Available 
at: https://www.fda.gov/regulatory-information/search-fda-guidance-documents/questions-and-answers-biosimilar-development-and-bpci-act-guidance-industry.
    \18\ FDA. Draft guidance for industry--New and Revised Draft 
Q&As on Biosimilar Development and the BPCI Act (Revision 2) (when 
final, this guidance will represent FDA's current thinking on this 
topic). Available at: https://www.fda.gov/regulatory-information/search-fda-guidance-documents/new-and-revised-draft-qas-biosimilar-development-and-bpci-act-revision-2.
    \19\ FDA. Webinar. Overview of the Regulatory Framework and 
FDA's Guidance for the Development and Approval of Biosimilar and 
Interchangeable Products in the US. Available at: https://www.fda.gov/drugs/biosimilars/fda-webinar-overview-regulatory-framework-and-fdas-guidance-development-and-approval-biosimilar-and.
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    CMS continues to support the development and the utilization of 
these products that contain innovative technology for the treatment of 
ESRD. The approval process for biosimilar biological products is a 
different pathway than that for generic drugs and has different 
requirements. We believe that a categorical exclusion from TDAPA 
eligibility for all biological products that are biosimilar to or 
interchangeable with a reference biological product, would disadvantage 
this sector of biological products in a space where we are trying to 
support technological innovation. While the products themselves may not 
be innovative, CMS believes the technology used to develop the products 
is sufficiently new and innovative to warrant TDAPA payment at this 
time.
    However, unlike NDAs submitted pursuant to sections 505(b)(1) or 
505(b)(2) of the FD&C Act, we do not have a categorical system to use 
as a proxy for assistance in determining which types of applications 
would meet the intent of the TDAPA policy. Therefore, we are proposing 
to continue to allow all biosimilar to or interchangeable with a 
reference biological products to remain eligible for the TDAPA instead 
of proposing to exclude all of them.
    We are aware, however, that there are similar concerns about 
providing the TDAPA for these products that there are with generics. 
Specifically, according to a recent report, increased drug class 
competition for biosimilar biological products did not translate into 
pricing reductions, and there was a market failure contributing to the 
rising costs of prescription drugs. The researchers noted that the 
increases were borne solely by Medicare. \20\ We will continue to 
monitor future costs of biosimilar biological products as they pertain 
to renal dialysis, the TDAPA, and the ESRD PPS.
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    \20\ A San-Juan-Rodriguez et al. ``Assessment of Price Changes 
of Existing Tumor Necrosis Factor Inhibitors After the Market Entry 
of Competitors.'' JAMA Intern Med 2019. Feb18 https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2724390.
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    In summary, with regard to new renal dialysis drugs and biological 
products that fall within an existing ESRD PPS functional category, we 
believe that continuing to include these drugs and biological products 
as eligible for the TDAPA focuses payment to those products that are 
innovative in a way that meets the intent of the adjustment. That is, 
our intention is to support innovation by helping ESRD facilities make 
appropriate changes in their businesses to adopt such products, provide 
additional payment for such associated costs, incorporate these drugs 
and biological products into their beneficiaries' care plans and 
potentially promote competition among drugs and biological products 
within the ESRD PPS functional categories. We plan to continue to 
monitor the use of the TDAPA for new renal dialysis drugs and 
biological products that fall within an existing functional category 
and will carefully evaluate the products that qualify for the payment 
adjustment. We note that for new renal dialysis drugs and biological 
products that do not fall within an existing ESRD PPS functional 
category, the purpose of the TDAPA continues to be a pathway toward a 
potential base rate modification.
    Based on our past experience and our expectation of detailed 
analysis of future drug product utilization, pricing and payment, CMS 
anticipates proposing further refinements to the TDAPA policy through 
notice and comment rulemaking in the future.
d. Proposal To Modify the Basis of Payment for the TDAPA for 
Calcimimetics in CY 2020
    In the CY 2016 ESRD PPS final rule (80 FR 69025 through 69026), we 
finalized an exception to the drug designation process for 
calcimimetics. Specifically, we identified phosphate binders and 
calcimimetics as oral-only drugs and, in accordance with Sec.  
413.234(d), 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 FDA. We stated that under Sec.  413.234(b)(1), if 
injectable or intravenous forms of phosphate binders or calcimimetics 
are approved by FDA, these drugs would be considered reflected in the 
ESRD PPS bundled

[[Page 38347]]

payment because these drugs are included in an existing functional 
category, so no additional payment would be available for inclusion of 
these drugs.
    However, we recognized the uniqueness of these drugs and finalized 
in the CY 2016 ESRD PPS final rule that we will not apply this process 
to injectable or intravenous forms of phosphate binders and 
calcimimetics when they are approved because payment for the oral forms 
of these drugs was delayed and dollars were never included in the base 
rate to account for these drugs. We further stated that we intend to 
use notice-and-comment rulemaking to include the oral and non-oral 
forms of calcimimetics and phosphate binders in the ESRD PPS bundled 
payment after the payment of the TDAPA. We explained that when these 
drugs are no longer oral-only drugs, we will pay for them under the 
ESRD PPS using the TDAPA based on the payment methodologies in section 
1847A of the Act for a period of at least 2 years.
    Change Request 10065, Transmittal 1889 issued August 4, 2017, 
replaced by Transmittal 1999 issued January 10, 2018, implemented the 
TDAPA for calcimimetics effective January 1, 2018. As discussed 
previously, calcimimetics will be paid using the TDAPA for a minimum of 
2 years. Since payments have been made beginning January 1, 2018, a 2-
year period would end December 31, 2019. We are still in the process of 
collecting utilization claims data for both the oral and non-oral form 
of calcimimetics, which will be used for a rate setting analysis. 
Therefore, we will continue to pay for calcimimetics using the TDAPA in 
CY 2020.
    We stated in the CY 2019 ESRD PPS final rule (83 FR 56943) that we 
would continue to pay the TDAPA using the pricing methodologies under 
section 1847A of the Act (which includes ASP+6 percent) until 
sufficient claims data for rate setting analysis for the new injectable 
or intravenous product are available, but not for less than 2 years. 
Calcimimetics were the first drugs for which we paid the TDAPA (83 FR 
56931), and this increased Medicare expenditures by $1.2 billion in CY 
2018. It is clear, therefore, that ESRD facilities are furnishing these 
innovative drugs. We explained in the CY 2019 ESRD PPS final rule (83 
FR 56943) that one of the rationales for the 6 percent add-on to ASP 
has been to cover administrative and overhead costs. We explained that 
the ESRD PPS base rate has dollars built in for administrative 
complexities and overhead costs for drugs and biological products (83 
FR 56944). We have provided the TDAPA for calcimimetics for 2-full 
years, and we believe that is sufficient time for ESRD facilities to 
address any administrative complexities and overhead costs that may 
have arisen with regard to furnishing the calcimimetics. We also 
believe this proposal strikes a balance between supporting ESRD 
facilities in their uptake of these products and limiting the financial 
burden that increased payments place on beneficiaries and Medicare 
expenditures. Finally, this policy is consistent with the policy 
finalized for all other new renal dialysis drugs and biological 
products in the CY 2019 ESRD PPS final rule (83 FR 56948). We therefore 
propose that the basis of payment for the TDAPA for calcimimetics, 
beginning in CY 2020, will be 100 percent of ASP. That is, we propose 
to modify Sec.  413.234(c) by removing the clause ``except that for 
calcimimetics it is based on the pricing methodologies under section 
1847A of the Social Security Act.''
    In addition, under the proposal discussed in section II.B.2.c of 
this proposed rule, since we currently receive ASP data for 
calcimimetics, beginning January 1, 2020, we would no longer apply the 
TDAPA for calcimimetics if we stop receiving the latest full calendar 
quarter of ASP data for calcimimetics during the TDAPA payment period.
e. Proposed Revision to 42 CFR 413.230
    In the CY 2011 ESRD PPS final rule (75 FR 49200), we added Sec.  
413.230 to 42 CFR part 413, subpart H to codify that the per treatment 
payment amount is the sum of the per treatment base rate established in 
Sec.  413.220, adjusted for wages as described in Sec.  413.231, and 
adjusted for facility-level and patient-level characteristics described 
in Sec. Sec.  413.232 and 413.235; any outlier payment under Sec.  
413.237; and any training adjustment add-on under Sec.  414.335(b). The 
per treatment payment amount is Medicare's payment to ESRD facilities 
under the ESRD PPS for furnishing renal dialysis services to Medicare 
ESRD beneficiaries.
    In the CY 2016 ESRD PPS final rule (80 FR 69024), we codified the 
drug designation process regulation in Sec.  413.234, which provides a 
TDAPA under Sec.  413.234(c) when certain eligibility criteria are met. 
We apply the TDAPA at the end of the calculation of the ESRD PPS 
payment, which is similar to the application of the outlier payment 
(Sec.  413.237(c)) and the training add-on adjustment (Sec.  
413.235(c)). That is, once the ESRD PPS base rate is adjusted by any 
applicable patient- and facility-level adjustments we add to it any 
applicable outlier payment, training add-on adjustment, or the TDAPA.
    In CY 2016 ESRD PPS rulemaking, we did not propose a corresponding 
revision to Sec.  413.230 to reflect that the TDAPA is a component in 
the determination of the per treatment payment amount. In this proposed 
rule, we are proposing a revision to Sec.  413.230 to add paragraph (d) 
to reflect the TDAPA. We believe this modification is necessary so the 
regulation appropriately reflects all inputs in the calculation of the 
per treatment payment amount. This revision to the regulation would not 
change how the ESRD PPS per treatment payment amount is currently 
calculated. We are also proposing to revise Sec.  413.230 to include, 
as part of the calculation of the per treatment payment amount, any 
Transitional Add-on Payment Adjustment for New and Innovative Equipment 
and Supplies (TPNIES) as proposed in section II.B.3.b.iii of this 
proposed rule.
    We are also proposing a technical change to Sec.  413.230(c) to 
replace ``Sec.  414.335(b)'' with a more appropriate reference to the 
training adjustment add-on requirement, which is ``Sec.  413.235(c).'' 
In the CY 2011 ESRD PPS final rule (75 FR 49202) we inadvertently 
referred to Sec.  414.335(b), which states, ``After January 1, 2011, a 
home and self-training amount is added to the per treatment base rate 
for adult and pediatric patients as defined in Sec.  413.230'' when 
finalizing Sec.  413.230. Section 413.235(c) similarly states ``CMS 
provides a wage-adjusted add-on per treatment adjustment for home and 
self-dialysis training.'' However, Sec.  414.335(b) describes the 
training adjustment add-on when erythropoietin (EPO) is furnished to 
home dialysis patients, whereas Sec.  413.235(c) describes the training 
adjustment add-on applicable, generally, even when EPO is not 
furnished. When we finalized Sec.  413.230 in the CY 2011 ESRD PPS 
final rule, we intended for the training adjustment to apply more 
generally, rather than just when EPO is furnished and therefore, we are 
proposing to refer to Sec.  413.235(c). We solicit comment on these 
proposed changes to Sec.  413.230 to (1) add paragraph (d) to reflect 
that the TDAPA is a component in the determination of the per treatment 
payment amount and (2) replace the reference to ``Sec.  414.335(b)'' in 
Sec.  413.230(c) with a more appropriate reference to the training 
adjustment add-on requirement, which is ``Sec.  413.235(c).''

[[Page 38348]]

2. Proposed Average Sales Price (ASP) Conditional Policy for the TDAPA
a. Background
    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 a payment methodology for certain 
drugs and biological products not paid on a cost or prospective payment 
basis furnished on or after January 1, 2005. Payments made under this 
methodology are primarily based on quarterly data submitted to CMS by 
drug manufacturers, and most payments under this methodology are based 
on the ASP. ASP-based payments are determined from manufacturer's sales 
to all purchasers (with certain exceptions) net of 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. ASP-based payments are determined for individual HCPCS codes. 
To allow time for manufacturers to submit quarterly data and for CMS to 
determine, check and disseminate payment limits to contractors that pay 
claims, the ASP-based payment limits are subject to a 2 quarter lag, 
which means that sales from January to March are used to determine 
payment limits in effect from July to September.\21\
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    \21\ ASPE. Issue Brief. Medicare Part B Drugs: Pricing and 
Incentives. March 2016. Available at: https://aspe.hhs.gov/system/files/pdf/187581/PartBDrug.pdf.
---------------------------------------------------------------------------

    Section 1847A(b)(1)(A) of the Act requires that the Medicare 
payment for a multiple source drug included within the same HCPCS code 
be equal to 106 percent of the ASP for the drug products included in 
the HCPCS code. Section 1847A(b)(1)(B) of the Act also requires that 
the Medicare payment 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 (83 FR 
56929). The WAC is defined in section 1847A(c)(6)(B) of the Act as the 
manufacturer's list price for the drug or biological to wholesalers or 
direct purchasers in the U.S., not including prompt pay or other 
discounts, rebates or reductions in price, for the most recent month 
for which the information is available, as reported in wholesale price 
guides or other publications of drug or biological pricing data.
    Section 1847A(c)(4) of the Act further provides a payment 
methodology in cases where the ASP during 1st quarter of sales is 
unavailable, stating that in the case of a drug or biologicals during 
an initial period (not to exceed a full calendar quarter) in which data 
on the prices for sales for the drug or biological product are not 
sufficiently available from the manufacturer to compute an ASP for the 
biological product, the Secretary may determine the amount payable 
under this section for the drug or biological product based on the WAC 
or the methodologies in effect under Medicare Part B on November 1, 
2003, to determine payment amounts for drugs or biological products. 
For further guidance on how Medicare Part B pays for certain drugs and 
biological products, see Medicare Claims Processing Manual (Pub. L. 
100-04) (chapter 17, section 20) (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c17.pdf.).
    We have used the payment methodology under section 1847A of the Act 
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 (82 FR 50742 through 50743). 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 payment methodologies available under section 
1847A of the Act (including 106 percent of ASP). We also use such 
payment methodologies for Part B ESRD related drugs or biological 
products that qualify as an outlier service (82 FR 50745). For the 
purposes of the ESRD PPS, we use ``payment methodology'' 
interchangeably with ``pricing methodology.''
    In the CY 2019 ESRD PPS final rule (83 FR 56948) we finalized a 
revision to Sec.  413.234(c) under the authority of section 
1881(b)(14)(D)(iv) of the Act, to base the TDAPA on 100 percent of ASP 
(ASP+0) instead of the pricing methodologies available under section 
1847A of the Act (which includes ASP+6). We also explained in the CY 
2019 ESRD PPS final rule (83 FR 56944) 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 from the manufacturer to compute an ASP. Therefore, we 
finalized a change to Sec.  413.234(c) to specify that if ASP is not 
available, the TDAPA is based on 100 percent of WAC (WAC+0) and, when 
WAC is not available, the payment is based on the drug manufacturer's 
invoice. We also modified Sec.  413.234(c) to reflect that the basis of 
payment for the TDAPA for calcimimetics would continue to be based on 
the pricing methodologies available under section 1847A of the Act 
(which includes ASP+6). We specified that these changes to Sec.  
413.234(c) would be effective January, 1, 2020.
    In the CY 2019 ESRD PPS final rule (83 FR 56943), we discussed that 
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. We further explained that we believe it 
may not be appropriate under section 1881(b)(14)(D)(iv) of the Act to 
base the TDAPA strictly on the pricing methodologies under section 
1847A of the Act. We explained that, in the CY 2019 ESRD PPS proposed 
rule (83 FR 34315), we considered options on which to base payment 
under the TDAPA, for example, maintaining the policy as is or 
potentially basing payments on the facility cost of acquiring drugs and 
biological products. We found that while the pricing methodologies 
under 1847A of the Act, and specifically ASP, could encourage certain 
unintended consequences, ASP data continues to be the best data 
available since it is commonly used to facilitate Medicare payment 
across care settings and is based on the manufacturer's sales to all 
purchasers (with certain exceptions) and is net of manufacturer 
rebates, discounts, and price concessions (83 FR 34315).
b. Basis for Conditioning the TDAPA on the Availability of ASP Data
    As noted previously, under the change to Sec.  413.234(c) finalized 
in the CY 2019 ESRD PPS final rule (83 FR 56948), effective January 1, 
2020, the basis of payment for the TDAPA is ASP+0, but if ASP is not 
available, then it is WAC+0, and if WAC is not available, then it is 
based on the drug manufacturer's invoice. We also modified Sec.  
413.234(c) to reflect that the basis of payment for the TDAPA for 
calcimimetics would continue to be based on the pricing methodologies 
available under section 1847A of the Act (which includes ASP+6). We 
also note that as discussed in section II.B.1.d of this proposed rule, 
we are now proposing to modify the basis of payment for the TDAPA for 
calcimimetics for CY 2020 to ASP+0.
    Following publication of the CY 2019 ESRD PPS final rule, we have 
continued to assess our policy allowing for WAC

[[Page 38349]]

or invoice pricing if ASP is not available, and we have become 
concerned that it could lead to drug manufacturers who are not 
otherwise required to submit ASP data to CMS to delay submission or 
withhold ASP data from CMS so that ESRD facilities would receive a 
higher basis of payment for the TDAPA and be incentivized to purchase 
drugs from those manufacturers.
    Calcimimetics were the first drugs for which we paid the TDAPA (83 
FR 56931), and this increased Medicare expenditures by $1.2 billion in 
CY 2018. We note that the TDAPA for one form of the calcimimetics was 
based on WAC for 2 quarters, and was more expensive than ASP. In 
addition, there were delays in the submission of ASP data for that 
drug, but we are now receiving ASP data for both calcimimetics. We are 
concerned about the significant increase in Medicare expenditures that 
resulted from paying the TDAPA for calcimimetics, and about this trend 
continuing with new renal dialysis drugs and biological products that 
become eligible for the TDAPA in the future. We therefore believe we 
need to limit the use of WAC (or invoice pricing) as the basis of the 
TDAPA to as few quarters as practicable to help limit increases to 
Medicare expenditures while maintaining our goals for the TDAPA 
policy--namely, supporting ESRD facilities in their uptake of 
innovative new renal dialysis drugs and biological products for those 
products that fall within a functional category and providing a pathway 
towards a potential base rate modification for those products that do 
not fall within a functional category.
    Further, we are concerned that ASP will not be made available to 
CMS by drug manufacturers not currently required by statute to do so. 
Drug manufacturers who have Medicaid Drug Rebate Agreements as part of 
the Medicaid Drug Rebate Program are required by section 1927(b)(3) of 
the Act to submit ASP sales data into CMS quarterly. However, we 
anticipate there could be drugs marketed in the future that are 
eligible for the TDAPA, but may not be associated with ASP reporting 
requirements under section 1927(b) of the Act. While manufacturers that 
do not have Medicaid Drug Rebate Agreements may voluntarily submit ASP 
data into CMS,\22\ we are concerned manufacturers may not elect to do 
so. MedPAC and the Office of the Inspector General (OIG) have both 
noted concerns about manufacturers not reporting ASP data for Part B 
drugs. As discussed in MedPAC's June 2017 Report to Congress,\23\ the 
OIG found that for the 3rd quarter of 2012, out of 45 drug 
manufacturers who were not required to submit ASP for Part B drugs, 
only 22 voluntarily submitted ASP data.\24\
---------------------------------------------------------------------------

    \22\ MedPAC. Part B Drugs Payment Systems. October 2017. Page 2. 
Available at: http://www.medpac.gov/docs/default-source/payment-basics/medpac_payment_basics_17_partb_final.pdf?sfvrsn=0.
    \23\ Report to Congress, MedPAC, June 2017, page 42. Available 
at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
    \24\ Limitations in Manufacturer Reporting of Average Sales 
Price Data for Part B Drugs, Office of the Inspector General, page 
7. Available at: https://oig.hhs.gov/oei/reports/oei-12-13-00040.pdf.
---------------------------------------------------------------------------

    We point out that even for those drug manufacturers who are 
required to submit ASP data into CMS, not all may fully comply. For the 
same 3rd quarter of 2012, the OIG found that at least 74 out of the 207 
drug manufacturers with Medicaid Drug Rebate Agreements in place did 
not submit all of their required ASP data for their Part B drugs.\25\ 
MedPAC's recommendations in its June 2017 report \26\ would require 
that all Part B drug manufacturers submit ASP data into CMS, whether or 
not those manufacturers have a Medicaid Drug Rebate Agreement.\27\ 
Based on this data and our own experience with the calcimimetics, we 
are concerned that manufacturers may not voluntarily report ASP data 
into CMS. We continue to believe that ASP is the best data currently 
available for the basis of payment for the TDAPA, because it is 
commonly used to facilitate Medicare payment across care settings and 
is based on the manufacturer's sales to all purchasers (with certain 
exceptions) net of all manufacturer rebates, discounts, and price 
concessions (83 FR 56943). Therefore, we believe conditioning the TDAPA 
on the availability of ASP data is appropriate and necessary to ensure 
that we are basing the amount of the TDAPA on the best data available.
---------------------------------------------------------------------------

    \25\ Limitations in Manufacturer Reporting of Average Sales 
Price Data for Part B Drugs, Office of the Inspector General, pages 
7-8, Available at: https://oig.hhs.gov/oei/reports/oei-12-13-00040.pdf.
    \26\ Report to Congress, MedPAC, June 2017, pages 10-12. 
Available at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
    \27\ OMB. A Budget for a Better America. Fiscal Year 2020, page 
41. Available at: https://www.whitehouse.gov/wp-content/uploads/2019/03/budget-fy2020.pdf.
---------------------------------------------------------------------------

    In addition to our concerns about ASP data reporting generally, we 
are concerned that the TDAPA policy finalized in the CY 2019 ESRD PPS 
final rule effective January 1, 2020, could potentially incentivize 
drug manufacturers who do not have a Medicaid Drug Rebate Agreement to 
delay or to never submit ASP data in order for ESRD facilities to 
receive an increased TDAPA for their products. As noted in section 
II.B.2.a of this proposed rule, under Sec.  413.234(c), effective 
January 1, 2020, if ASP is not available to CMS, the basis of payment 
for the TDAPA is WAC+0 and when WAC is not available, then the TDAPA is 
based on invoice pricing. As MedPAC discussed in its June 2017 Report 
to Congress, WAC-based payments would likely increase Medicare 
expenditures as compared to ASP-based payments. As stated in section 
1847A(c)(5) of the Act, ASP is calculated to include discounts and 
rebates. WAC is ultimately controlled by the manufacturer, and its 
statutory definition in section 1847A(c)(6)(B) of the Act does not 
include the discounts that ASP includes.\28\ Similarly, invoice pricing 
may not reliably capture all available discounts and thus may be 
inflated. This means if a drug manufacturer chooses not to submit ASP 
data into CMS, the TDAPA would be based on an inflated amount beyond 
what the average cost to ESRD facilities to acquire those drugs. This 
additional amount would also then increase the coinsurance for the 
beneficiaries who receive those drugs. We believe conditioning the 
TDAPA on the availability of ASP data is necessary to mitigate this 
potential incentive and limit increases to Medicare expenditures.
---------------------------------------------------------------------------

    \28\ MedPAC. Part B Drugs Payment Systems. October 2017. Pages 
43-44. Available at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
---------------------------------------------------------------------------

c. Proposal To Condition the TDAPA Application on the Availability of 
ASP Data
    We are proposing to revise Sec.  413.234(c) to address the 
following concerns: (1) Increases to Medicare expenditures by the 
calcimimetics; (2) drug manufacturers not reporting ASP data; and (3) 
our TDAPA policy potentially incentivizing drug manufacturers to 
withhold ASP data from CMS. Under our proposed revisions, we would no 
longer apply the TDAPA for a new renal dialysis drug or biological 
product if CMS does not receive a full calendar quarter of ASP data 
within 30 days of the last day of the 3rd calendar quarter after we 
begin paying the TDAPA for the product. We note that we are not 
proposing to modify the current ASP reporting process \29\ and our 
proposals are

[[Page 38350]]

consistent with this process. Since it is possible for a drug 
manufacturer to begin sales of its product in the middle of a calendar 
quarter, it may take approximately 2 to 3 quarters for CMS to obtain a 
full calendar quarter of ASP data. We believe that 3-calendar quarters 
is a reasonable amount of time for drug manufacturers to submit a full 
calendar quarter of ASP data to CMS; therefore, we are proposing to 
allow 3-calendar quarters for drug manufacturers to make ASP available 
to CMS to enable ESRD facilities to continue to receive the TDAPA for a 
product.
---------------------------------------------------------------------------

    \29\ CMS. Medicare Part B Drug Average Sales Price. Available 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
---------------------------------------------------------------------------

    As discussed in section II.B.2.a of the proposed rule, there is a 2 
quarter lag between the sales period for which ASP is reported and the 
effective date of the rate based on that ASP data. During this period 
between when the TDAPA is initiated for a product and the effective 
date of the rate based on the full quarter of ASP data made available 
to CMS, consistent with the policy finalized in the CY 2019 ESRD PPS 
final rule (83 FR 56948), the basis of the TDAPA would be WAC+0, and if 
WAC is not available, then invoice pricing. Once the drug manufacturer 
begins submitting ASP data, the basis of the TDAPA would be ASP+0. We 
are proposing that if we have not received a full calendar quarter of 
ASP data for a new renal dialysis drug or biological product by 30 days 
after the last day of the 3rd calendar quarter of applying the TDAPA 
for that product, we would stop applying the TDAPA within the next 2-
calendar quarters. For example, if we begin applying the TDAPA on 
January 1, 2021 for an eligible new renal dialysis drug or biological 
product, and a full calendar quarter of ASP data for that product has 
not been made available to CMS by October 30, 2021 (30 days after the 
last day of the 3rd quarter of paying the TDAPA), we would stop 
applying the TDAPA for that product no later than March 31, 2022 (2 
quarters after the 3rd quarter of paying the TDAPA).
    We are therefore proposing to revise the regulatory text at Sec.  
413.234(c) to provide that, notwithstanding the time periods for 
payment of the TDAPA specified in paragraphs (c)(1) and (c)(2), we 
would no longer apply the TDAPA for a new renal dialysis drug or 
biological product if CMS has not received a full calendar quarter of 
ASP data for the product within 30 days after the last day of the 3rd 
calendar quarter after the TDAPA is initiated for the product.
    We expect that once drug manufacturers begin submitting ASP data 
into CMS, they would continue to do so for the duration of the TDAPA 
period as set forth in Sec.  413.234(c). We continue to believe that 
basing the TDAPA on ASP+0, as compared to WAC+0 or invoice pricing, is 
the most appropriate choice for the ESRD PPS, and strikes the right 
balance of supporting ESRD facilities in their uptake of innovative new 
renal dialysis drugs and biological products and limiting increases to 
Medicare expenditures. If drug manufacturers were to stop submitting 
full quarters of ASP data for products that are eligible for the TDAPA, 
and we had to revert to basing the TDAPA on WAC or invoice pricing, we 
believe we would be overpaying for the TDAPA for those products.
    Therefore, we are also proposing to revise the regulatory text at 
Sec.  413.234(c) to no longer apply the TDAPA for a new renal dialysis 
drug or biological product if a drug manufacturer submits a full 
calendar quarter of ASP data into CMS within 30 days after the close 
last day of the 3rd calendar quarter after the TDAPA is initiated for 
the product, but at a later point during the applicable TDAPA period 
specified in Sec.  413.234(c)(1) or (c)(2), stops submitting a full 
calendar quarter of ASP data into CMS. We assess pricing for new renal 
dialysis drugs and biological products eligible for the TDAPA on a 
quarterly basis. Once we determine that the latest full calendar 
quarter of ASP is not available, we would stop applying the TDAPA for 
the new renal dialysis drug or biological product within the next 2-
calendar quarters. For example, if we begin paying the TDAPA on January 
1, 2021 for an eligible new renal dialysis drug or biological product, 
and a full calendar quarter of ASP data is made available to CMS by 
October 30, 2021 (30 days after the close of the 3rd quarter of paying 
the TDAPA), but a full calendar quarter of ASP data is not made 
available to CMS as of January 30, 2022 (30 days after the close of the 
4th quarter of paying the TDAPA), we would stop applying the TDAPA for 
the product no later than June 30, 2022 (2 quarters after the 4th 
quarter of paying the TDAPA).
3. New and Innovative Renal Dialysis Equipment and Supplies Under the 
ESRD PPS
a. Background on Renal Dialysis Equipment and Supplies Under the ESRD 
PPS
    In the CY 2011 ESRD PPS final rule (75 FR 49075), we stated that 
when we computed the ESRD PPS base rate, we used the composite rate 
payments made under Part B in 2007 for dialysis in computing the ESRD 
PPS base rate. These are identified in Table 19 of the CY 2011 ESRD PPS 
final rule (75 FR 49075) as ``Composite Rate Services''. Sections 
1881(b)(14)(A)(i) and 1881(b)(14)(B) of the Act specify the renal 
dialysis services that must be included in the ESRD PPS bundled 
payment, which includes items and services that were part of the 
composite rate for renal dialysis services as of December 31, 2010. As 
we indicated in the CY 2011 ESRD PPS proposed rule (74 FR 49928), the 
case-mix adjusted composite payment system represents a limited PPS for 
a bundle of outpatient renal dialysis services that includes 
maintenance dialysis treatments and all associated services including 
historically defined dialysis-related drugs, laboratory tests, 
equipment, supplies and staff time (74 FR 49928). In the CY 2011 ESRD 
PPS final rule (75 FR 49062), we noted that total composite rate costs 
in the per treatment calculation included costs incurred for training 
expenses, as well as all home dialysis costs. Currently, ESRD 
facilities are required to report their use of syringes on claims in 
order to receive separate payment, as discussed in the CY 2011 final 
rule (75 FR 49141). However, historically, ESRD facilities were not 
required to report any other renal dialysis equipment and supplies on 
claims (with the exception of syringes) because these items were paid 
through the composite rate and did not receive separate payment. As 
discussed in the Medicare Claims Processing Manual (chapter 8, section 
50.3), CMS directs ESRD facilities to report a dialysis treatment and 
their charge for the treatment. That charge is intended to reflect the 
cost of the dialysis treatment (equipment, supplies, and staff time) as 
well as routine drugs and laboratory tests. This manual is available on 
the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c08.pdf.
    In the CY 2019 ESRD PPS final rule (83 FR 56942 through 56943), we 
finalized an expansion of the TDAPA to all new renal dialysis drugs and 
biological products, not just those in new ESRD PPS functional 
categories, including composite rate drugs and biological products that 
fall within an ESRD PPS functional category. A detailed discussion of 
the TDAPA policy is found in section II.B.1.a of this proposed rule. As 
part of the CY 2019 ESRD PPS rulemaking, we received several comments 
regarding payment under the ESRD PPS for certain new, innovative 
equipment and supplies used in the treatment of ESRD. For

[[Page 38351]]

example, as we described in the CY 2019 ESRD PPS final rule (83 FR 
56972), a device manufacturer and device manufacturer association asked 
CMS to establish a transitional add-on payment adjustment for new FDA 
approved devices. They commented on the lack of FDA approved or 
authorized new devices for use in an ESRD facility, highlighting the 
need to promote dialysis device innovation. The commenters indicated 
they believed the same rationale CMS used to propose broadening the 
TDAPA eligibility also would apply to new medical devices. 
Specifically, the commenters noted that CMS has discretionary authority 
under section 1881(b)(14)(D)(iv) of the Act to adopt payment 
adjustments determined appropriate by the Secretary, and stated that 
precedent supports CMS' authority to use non-budget neutral additions 
to the ESRD PPS base rate for adjustments under specific circumstances.
    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 (83 FR 56973). The 
association stated that additional money should be made available to 
appropriately reflect the costs of new devices under the ESRD PPS 
bundled payment. A national dialysis organization and a large dialysis 
organization (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. The organization stated 
that 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 ESRD PPS bundled payment.
    In addition, as we discussed in the CY 2019 ESRD PPS final rule (83 
FR 56973), an LDO requested CMS plan appropriately for innovative 
devices or other new innovative products and asked CMS to work with the 
kidney care community to consider if and how new devices or other new 
innovative products delivering high clinical value, can be made 
available 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 for adding new devices to 
the ESRD PPS bundled payment, stating that it left investors and 
industry wary of investing in the development of new devices for 
patients. In response, we expressed appreciation for the commenters' 
thoughts regarding payment for new and innovative devices, and stated 
that we did not include any proposals regarding this issue in the CY 
2019 ESRD PPS proposed rule, so we considered these suggestions to be 
beyond the scope of that rule.
    Also, 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, we noted, 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 received mixed feedback in response to the comment solicitation, 
which was summarized in the CY 2019 ESRD PPS final rule (83 FR 56969 
through 56970). Some LDOs and national dialysis organizations stated 
that they would prefer a smaller outlier pool with more money in the 
per treatment base rate while other ESRD facilities agreed that the 
outlier policy should be more comprehensive and expanded to include 
more items and services. In our response, we stated we recognized 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 indicated we would take these views into 
account as we consider the outlier policy and payment adjustments for 
future rulemaking.
    In light of these comments, we are considering whether additional 
payment may be warranted for certain new and innovative renal dialysis 
equipment and supplies. In sections II.B.3.a.i and II.B.3.a.ii of this 
proposed rule is a general description of the IPPS new technology add-
on payment (NTAP) and its substantial clinical improvement (SCI) 
criteria. We believe a process similar to the IPPS process for 
establishing SCI for the NTAP described in section II.B.3.a.ii of this 
proposed rule could be used to identify the innovative renal dialysis 
equipment and supplies for which commenters were requesting additional 
payment under the ESRD PPS. We believe an NTAP-like payment adjustment 
under the ESRD PPS would be appropriate in order to support innovation 
while being responsive to stakeholders.
i. Add-On Payments for New Technology Under the Inpatient Prospective 
Payment System
    In the CMS Innovators' Guide to Navigating Medicare,\30\ we explain 
that the hospital IPPS makes payments to acute care hospitals for each 
Medicare patient or case treated. Hospitals are paid based on the 
average national resource use for treating patients in similar 
circumstances, not the specific cost of treating each individual 
patient. With few exceptions, Medicare does not pay separately for 
individual items or services. Physicians and hospital staff determine 
the appropriate course of treatment, and hospitals receive a bundled 
payment for the covered inpatient facility services provided to the 
Medicare patient. Hospitals receive one IPPS payment per Medicare case 
at discharge that equates to the total Medicare payment for the 
facility costs of caring for that Medicare patient. More information on 
determining IPPS payment is located on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
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    \30\ https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.pdf.
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    Also as discussed in the CMS Innovators' Guide to Navigating 
Medicare,\31\ the IPPS is designed to adapt to changing technology 
through year-to-year adjustments in Medicare Severity--Diagnosis 
Related Groups (MS-DRG) weights based on historical cost data. In 
theory, if new technologies lead to better care but are more expensive, 
or if they lead to more efficient care and are less expensive, 
hospitals will eventually receive appropriate payment as the MS-DRG 
weights are adjusted over time to reflect the impact of fluctuating 
costs. In practice, however, there are concerns that the system may be 
slow to react to

[[Page 38352]]

rapidly evolving technological advancements.
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    \31\ https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.pdf.
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    Hospitals may experience a financial disadvantage as they provide 
more expensive products and services to Medicare beneficiaries while 
waiting for MS-DRG payments to reflect the higher costs. Sections 
1886(d)(5)(K) and (L) of the Act establish a process of identifying and 
ensuring adequate payment for new medical services and technologies 
under the IPPS. As an incentive for hospitals to adopt new technologies 
during the period before their costs are recognized in the MS-DRG 
weights, certain new medical services or technologies may be eligible 
for new technology add-on payments. The new technology add-on payment 
policy provides additional payments for eligible high cost cases 
without significantly eroding the incentives provided by a payment 
system based on averages. To qualify for add-on payments, the 
regulations at Sec.  412.87 specify a service or technology must be: 
(1) New, (2) demonstrate a SCI over existing technology, and (3) be 
high cost such that the MS-DRG payment that would normally be paid is 
inadequate. For a complete discussion on the new technology add-on 
payment criteria, we refer readers to the fiscal year (FY) 2012 IPPS/
LTCH PPS final rule (76 FR 51572 through 51574).
    Since it can take 2 to 3 years for reflection of cost data in the 
calculation of the MS-DRG weights, technologies generally are 
considered new for 2 to 3 years after they become available. Applicants 
must demonstrate that their product offers SCI and the other NTAP 
requirements.
    Under the cost criterion, consistent with the formula specified in 
section 1886(d)(5)(K)(ii)(I) of the Act, to assess the adequacy of 
payment for a new technology paid under the applicable MS-DRG 
prospective payment rate, we evaluate whether the charges for cases 
involving the new technology exceed the threshold amount for the MS-DRG 
(or the case-weighted average of all relevant MS-DRGs, if the new 
technology could be assigned to many different MS-DRGs).
    Although any interested party may submit an application for a new 
technology add-on payment, applications often come from the 
manufacturer of a new drug or device. Preliminary discussions on 
whether or not new technologies qualify for add-on payments are 
published in the annual IPPS proposed rules and are open to public 
comment.
    The actual add-on payments are based on the cost to hospitals for 
the new technology. A new technology add-on payment is made if the 
total covered costs of the patient discharge exceed the MS-DRG payment 
of the case (including adjustments for indirect medical education (IME) 
and disproportionate share hospital (DSH), but excluding outlier 
payments). The total covered costs are calculated by applying the cost-
to-charge ratio (that is used for inpatient outlier purposes) to the 
total covered charges of the discharge.
    Under Sec.  412.88, if the costs of the discharge exceed the full 
MS-DRG payment, the additional payment amount equals the lesser of the 
following: (1) 50 percent of the costs of the new medical service or 
technology; (2) or 50 percent of the amount by which the total covered 
costs of the case (as determined above) exceed the standard MS-DRG 
payment, plus any applicable outlier payments if the costs of the case 
exceed the MS-DRG, plus adjustments for IME and DSH. More information 
on IPPS new technology add-on payments, including the deadline to 
submit an application, is located on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html.
ii. SCI Criteria for the New Technology Add-On Payment Under the IPPS
    Under section 1886(d)(5)(K)(vi) of the Act, a medical service or 
technology will be considered a ``new medical service or technology'' 
if the service or technology meets criteria established by the 
Secretary after notice and an opportunity for public comment. For a 
more complete discussion of the establishment of the current criteria 
for the new technology add-on payment, we refer readers to the IPPS 
final rule published on September 7, 2001 in the Federal Register (66 
FR 46913), referred to as ``FY 2001 IPPS final rule,'' where we 
finalized the ``substantial improvement'' criterion to limit new 
technology add-on payments under the IPPS to those technologies that 
afford clear improvements over the use of previously available 
technologies. Specifically, we stated that we would evaluate a request 
for new technology add-on payments against the following criteria to 
determine if the new medical service or technology would represent a 
SCI over existing technologies:
     The device offers a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
treatments.
     The device offers the ability to diagnose a medical 
condition in a patient population where that medical condition is 
currently undetectable or offers the ability to diagnose a medical 
condition earlier in a patient population than allowed by currently 
available methods. There must also be evidence that use of the device 
to make a diagnosis affects the management of the patient.
     Use of the device significantly improves clinical outcomes 
for a patient population as compared to currently available treatments. 
We also noted examples of outcomes that are frequently evaluated in 
studies of medical devices. For example,
    ++ Reduced mortality rate with use of the technology.
    ++ Reduced rate of technology related complications.
    ++ Decreased rate of subsequent diagnostic or therapeutic 
interventions (for example, due to reduced rate of recurrence of the 
disease process).
    ++ Decreased number of future hospitalizations or physician visits. 
More rapid beneficial resolution of the disease process treatment 
because of the use of the device.
    ++ Decreased pain, bleeding, or other quantifiable symptom.
    ++ Reduced recovery time.
    In the FY 2001 IPPS final rule (66 FR 46913), we stated that we 
believed the special payments for new technology should be limited to 
those new technologies that have been demonstrated to represent a 
substantial improvement in caring for Medicare beneficiaries, such that 
there is a clear advantage to creating a payment incentive for 
physicians and hospitals to utilize the new technology. We also stated 
that where such an improvement is not demonstrated, we continued to 
believe the incentives of the DRG system would provide a useful balance 
to the introduction of new technologies. In that regard, we also 
pointed out that various new technologies introduced over the years 
have been demonstrated to have been less effective than initially 
thought, or in some cases even potentially harmful. We stated that we 
believe that it is in the best interest of Medicare beneficiaries to 
proceed very carefully with respect to the incentives created to 
quickly adopt new technology.
    We noted in the FY 2020 IPPS proposed rule (84 FR 19274 through 
19275), that applicants for add-on payments for new medical services or 
technologies must submit a formal request, including a full description 
of the clinical applications of the medical service or technology and 
the results of any clinical evaluations demonstrating that the new 
medical service or technology represents a SCI, along with a 
significant sample of cost data to demonstrate that the medical service 
or technology meets the cost criterion.

[[Page 38353]]

Complete application information, along with final deadlines for 
submitting a full application, is posted on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html.
    Per section 1886(d)(5)(K)(i) of the Act, the Secretary is required 
to establish a mechanism to recognize the costs of new medical services 
and technologies under the payment system after notice and opportunity 
for public comment. The payment rate updates and policy changes 
including new technology add-on payments under the IPPS are completed 
through the annual notice-and-comment rulemaking process with an 
October 1 effective date. In the proposed rule, CMS reviews each 
application and the information and clinical evidence provided by the 
applicant on how it meets each of the new technology add-on payment 
criteria. Regarding substantial clinical improvement, we work with our 
medical officers to evaluate whether a technology represents a 
substantial clinical improvement. Under the IPPS, public input before 
publication of a notice of proposed rulemaking on add-on payments is 
required by section 1886(d)(5)(K)(viii) of the Act, as amended by 
section 503(b)(2) of Public Law 108-173, and provides for a mechanism 
for public input before publication of a notice of proposed rulemaking 
regarding whether a medical service or technology represents a SCI or 
advancement. In the final rule, we make a determination whether an 
applicant has met the new technology add-on payment criteria and is 
eligible for the add-on payment.
    The IPPS proposed and final rules go on display around April and 
August, respectively, each year. The FY 2020 IPPS proposed rule is 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices-Items/CMS-1716.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending.
b. Proposed Additional Payment for New and Innovative Renal Dialysis 
Equipment and Supplies Under the ESRD PPS
    Following publication of the CY 2019 ESRD PPS final rule (83 FR 
56969 through 56970), which discussed the comment solicitation on 
expanding the outlier policy to include composite rate drugs and 
supplies, we have received additional information from dialysis 
equipment and supply manufacturers and a Technical Expert Panel (TEP) 
meeting held in December 2018 regarding composite rate equipment and 
supplies. Discussions of the key findings from the TEP meeting can be 
found in section VIII.A of this proposed rule. In addition, some 
manufacturers have informed us that there is little incentive for them 
to develop innovative equipment and supplies for the treatment of ESRD 
primarily because ESRD facilities have no incentive to adopt innovative 
dialysis equipment and supplies since they are included in the ESRD PPS 
bundled payment and currently no additional payment is made.
    In addition we believe innovations in kidney care are likely as a 
result of the Kidney Innovation Accelerator (known as KidneyX). KidneyX 
is a public-private partnership between the Department of Health and 
Human Services and the American Society of Nephrology to accelerate 
innovation in the prevention, diagnosis, and treatment of kidney 
diseases.
    KidneyX seeks to improve the lives of dialysis patients by 
accelerating the development of drugs, devices, biologics and other 
therapies across the spectrum of kidney care including prevention, 
diagnostics, and treatment. KidneyX's first round of prize funding 
focused on accelerating the commercialization of next-generation 
dialysis products, aiming to reduce the risk of innovation by 
streamlining processes, reducing regulatory barriers, and modernizing 
the way we pay for treatment. More than 150 applications were reviewed, 
covering a full-range of innovative proposals, including advances in 
access, home hemodialysis and peritoneal dialysis, adjuncts to current 
in-center dialysis, and proposals for implantable devices, externally-
worn devices and prototypes for an artificial kidney. More information 
regarding KidneyX is available at the following link: http://www.kidneyx.org/.
    We believe some of the prototypes developed as part of the KidneyX 
will be the type of innovation the commenters requested and we want to 
incentivize ESRD facility use of those products. We note that in order 
for equipment and supplies awarded through the KidneyX to be eligible 
for the additional payment under the ESRD PPS proposals in this section 
of the proposed rule, the items would also need to be determined by CMS 
to be a renal dialysis service and meet other eligibility criteria 
described in section II.B.3.b.i of this proposed rule. We also note 
that the goals for KidneyX and our proposal in this section are 
different but complementary; KidneyX is focused on accelerating 
innovation in the prevention, diagnosis, and treatment of kidney 
disease, at the beginning stages of the development of an innovative 
product, while our proposals in this section are intended to support 
uptake of new and innovative renal dialysis products after they have 
been authorized for marketing by FDA and meet other requirements, all 
of which happen after the development stage.
    In addition, on July 10, 2019, the President signed an Executive 
Order \32\ aimed at transforming kidney care in America. The executive 
order established many initiatives, including the launch of a public 
awareness campaign to prevent patients from going into kidney failure 
and proposals for the Secretary to support research regarding 
preventing, treating, and slowing progression of kidney disease and 
encouraging the development of breakthrough technologies to provide 
patients suffering from kidney disease with better options for care 
than those that are currently available.
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    \32\ https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/.
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i. Proposed Eligibility Criteria for Additional Payment for New and 
Innovative Renal Dialysis Equipment and Supplies
    In consideration of the feedback we have received, we agree that 
additional payment for certain renal dialysis equipment and supplies 
may be warranted under specific circumstances outlined in this section 
of the proposed rule. We are proposing to provide additional payment 
for new and innovative renal dialysis equipment and supplies furnished 
by ESRD facilities (with the exception of capital-related assets), 
through a transitional add-on payment adjustment as described further 
in this proposed rule.
    Renal dialysis equipment and supplies are medically necessary 
equipment and supplies used to furnish renal dialysis services in a 
facility or in a patient's home. We are proposing that ``new'' renal 
dialysis equipment and supplies are those that are granted marketing 
authorization by FDA on or after January 1, 2020. By including FDA 
marketing approvals on or after January 1, 2020, we intend to support 
ESRD facility use and beneficiary access to the latest technological 
improvements to renal dialysis equipment and supplies. We solicit 
comment on this aspect of our proposal and whether a different FDA 
marketing approval date--for example, on or after January 1, 2019--
might be appropriate.
    For new and innovative equipment and supplies, we believe the IPPS 
SCI

[[Page 38354]]

criteria and the process used to evaluate SCI can be used as a proxy 
for identifying new and innovative items worthy of additional payment 
under the ESRD PPS. Under the IPPS, CMS has been assessing new 
technologies for many years to assure that the additional new 
technology add-on payments to hospitals are made only for truly 
innovative and transformative products. CMS is proposing to adopt the 
IPPS SCI criteria under the ESRD PPS for the same reason. We want to 
ensure that additional payments made under the ESRD PPS are limited to 
new equipment and supplies that are truly innovative. In addition, 
since renal dialysis services are routinely furnished to hospital 
inpatients and outpatients, we believe the same SCI criteria should be 
used to assess whether a new renal dialysis equipment or supply 
warrants additional payment under Medicare.
    Therefore, we are proposing to adopt IPPS's SCI criteria specified 
in Sec.  412.87(b)(1) including modifications finalized in future IPPS 
final rules, to determine when a new and innovative renal dialysis 
equipment or supply is eligible for additional payment under the ESRD 
PPS. That is, we would adopt IPPS's SCI criteria in Sec.  412.87(b)(1) 
and any supporting policy around this criteria as discussed in IPPS 
preamble language. We believe that by incorporating the SCI criteria 
for new and innovative renal dialysis equipment under the ESRD PPS, we 
would be consistent with IPPS and innovators would have a standard for 
criteria to meet for both settings. We are also proposing to establish 
a process modeled after IPPS's process of determining if a new medical 
technology meets the SCI criteria specified in Sec.  412.87(b)(1) 
discussed in section II.B.3.a.ii of this proposed rule. That is, we 
propose that CMS would determine whether the renal dialysis equipment 
or supply meets the eligibility criteria proposed in newly added Sec.  
413.236(b). Similar to how we evaluate whether a new drug or biological 
product is eligible for the TDAPA as discussed in the CY 2016 ESRD PPS 
final rule (80 FR 69019), we would need to determine whether the renal 
dialysis equipment and supply meets our eligibility criteria.
    We note that as described in section II.B.3.a.i of this proposed 
rule, IPPS has additional criteria that is specific to its payment 
system, that is, a high cost criteria relative to the MS-DRG payment. 
We would not adopt the specific IPPS high cost criteria requirements 
under Sec.  412.87(b)(3) under the ESRD PPS since the basis of payment 
is different. Specifically, under the ESRD PPS, the basis of payment is 
the per treatment payment amount that is updated annually by the ESRD 
bundled market basket and the multifactor productivity adjustment. 
Since the elements of the IPPS payment system differ from that of the 
ESRD PPS, we are only proposing to adopt the SCI criteria in Sec.  
412.87(b)(1) at this time.
    We are proposing to exclude capital-related assets from the 
additional payment, which we would define based on the Provider 
Reimbursement Manual (Pub. L. 15-1) (chapter 1, section 104.1) as 
assets that a provider has an economic interest in through ownership 
(regardless of the manner in which they were acquired). The Provider 
Reimbursement Manual is available on the CMS website at https://www.cms.gov/NoRegulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.html. This would include certain renal dialysis 
equipment and supplies. Examples of capital-related assets for ESRD 
facilities are dialysis machines, water purification systems and 
systems designed to clean dialysis filters for reuse. We do not believe 
that we should provide additional payment for capital-related assets 
because the cost of these items are captured in cost reports, 
depreciate over time, and are generally used for multiple patients. 
Since the costs of these items are reported in the aggregate, there is 
considerable complexity in establishing a cost on a per treatment 
basis. We therefore believe capital-related assets should be excluded 
from additional payment at this time, and we have proposed an exclusion 
to the eligibility criteria in new Sec.  413.236(b)(2). However, we 
note that capital-related cost data from cost reports are used by CMS 
in regression analyses to refine the ESRD PPS so that the cost of any 
new capital-related assets is accounted for in the ESRD PPS payment 
adjustments.
    Under our proposal, in addition to having marketing authorization 
by FDA on or after January 1, 2020, and meeting SCI criteria as 
determined under Sec.  412.87(b)(1) as described in section II.B.3.a.ii 
of this proposed rule, the equipment or supply must be commercially 
available, have a HCPCS application submitted in accordance with the 
official Level II HCPCS coding procedures, and have been designated by 
CMS as a renal dialysis service under Sec.  413.171. Following FDA 
marketing authorization, in order to establish a mechanism for payment, 
the equipment or supply would then go through a process to establish a 
billing code, specifically a HCPCS code. This information is necessary 
to conform to the requirements for both CMS and provider billing 
systems. Information regarding the HCPCS process is available on the 
CMS website at https://www.cms.gov/medicare/coding/MedHCPCSGenInfo/Index.html.
    Under our proposal, we would model our determination process 
similar to that of IPPS's NTAP. That is, manufacturers would submit all 
information necessary for determining that the renal dialysis equipment 
or supply meets the eligibility criteria listed in Sec.  413.236(b). 
That would include FDA marketing authorization information, the HCPCS 
application information, and studies submitted as part of these two 
standardized processes, an approximate date of commercial availability, 
and any information necessary for SCI criteria evaluation. For example, 
clinical trials, peer reviewed journal articles, study results, meta-
analyses, systematic literature reviews, and any other appropriate 
information sources can be considered. We would provide a description 
of the equipment or supply and pertinent facts related to it that can 
be evaluated through notice-and-comment rulemaking. We would consider 
whether a new renal dialysis equipment or supply meets the eligibility 
criteria specified in newly added Sec.  413.236(b) and announce the 
results in the Federal Register as part of our annual updates and 
changes to the ESRD PPS. We would only consider, for additional payment 
for a particular calendar year, an application for which the renal 
dialysis equipment or supply is considered new by February 1 prior to 
the particular calendar year.
    For example, in order to receive additional payment under the ESRD 
PPS in CY 2022 we would require that a complete application meeting our 
requirements be received by CMS no later than February 1, 2021. Then, 
we would include a discussion of the renal dialysis equipment or supply 
requesting additional payment in the CY 2022 ESRD PPS proposed rule. 
The evaluation of the eligibility criteria would be in the CY 2022 ESRD 
PPS final rule. If the renal dialysis equipment or supply qualifies for 
the additional payment, payment would begin January 1, 2022.
    Alternatively, we considered an application deadline of September 
1, however, we are proposing an earlier timeframe so that this 
additional policy would be implemented sooner. However, a September 1 
deadline would provide more time initially for manufacturers to submit 
applications. We solicit comment on the proposed deadline date for the 
application.

[[Page 38355]]

    We also solicit comment on the proposed criteria to determine new 
and innovative renal dialysis equipment and supplies that would be 
eligible for additional payment. In addition, we are soliciting comment 
on the use of different evaluative criteria and, where applicable, 
payment methodologies, for renal dialysis supplies and equipment that 
may be eligible for an additional payment under the ESRD PPS. These 
criteria could include cost thresholds for high cost items. We solicit 
comment on whether any of the IPPS SCI criteria would not be 
appropriate for the ESRD facility setting and whether there should be 
additional criteria specific to ESRD. We seek comment on whether to use 
FDA's pre-market approval and De Novo pathways as a proxy for or in 
place of the proposed SCI criteria. In addition, we are soliciting 
comment on potential implementation challenges, such as what sources of 
data that CMS should utilize to assess SCI. We are also soliciting 
comment on the proposed process that would be used to determine SCI. 
Also, we are soliciting comment on the benefits and drawbacks of the 
SCI criteria proposed in this rulemaking.
ii. Pricing of New and Innovative Renal Dialysis Equipment and Supplies
    With respect to the new and innovative renal dialysis equipment and 
supplies discussed in section II.B.3.b.i of this proposed rule, we are 
not aware of pricing compendia currently available to price these items 
for the transitional add-on payment adjustment proposal discussed in 
this section. We also note that, unlike for new renal dialysis drugs 
and biological products eligible for the TDAPA, ASP and WAC pricing do 
not exist for renal dialysis equipment and supplies. Unlike the IPPS 
NTAP methodology, which uses MS-DRG payment and cost-to-charge ratios 
in their high cost criteria payment calculation, the ESRD PPS has a 
single per treatment payment amount. Therefore, we must propose a 
pricing method in the absence of data indicating a true market price.
    In accordance with ESRD billing instructions of the Medicare Claims 
Processing Manual (chapter 8, section 50.3), we are proposing that ESRD 
facilities would report the HCPCS code, when available, and their 
corresponding charge for the item. In accordance with the Provider 
Reimbursement Manual (chapter 22, section 2203), Medicare does not 
dictate a provider's charge structure or how it itemizes charges but it 
does determine whether charges are acceptable for Medicare purposes. 
Charges should be reasonably and consistently related to the cost of 
services to which they apply and are uniformly applied. In addition, 
the Provider Reimbursement Manual (chapter 22, section 2202.4) 
specifies that charges refer to the regular rates established by the 
provider for services rendered to both beneficiaries and to other 
paying patients. Charges should be related consistently to the cost of 
the services and uniformly applied to all patients whether inpatient or 
outpatient. All patients' charges used in the development of 
apportionment ratios should be recorded at the gross value; that is, 
charges before the application of allowances and discounts deductions.
    Since we require charges to be reported at the gross value, we are 
not proposing to use charges as the basis of payment. The ESRD PPS does 
not have a charge structure or a gap-filling policy similar to the 
DMEPOS policy. We are proposing to obtain a pricing indicator that 
requires the item to be priced by Medicare Administrative Contractors 
(MACs). We propose to adopt a process that utilizes invoiced-based 
pricing. We note that there are instances that invoice pricing is also 
used for DMEPOS. Specifically, in the Medicare Claims Processing 
Manual, (chapter 23, section 60.3), we state that ``potential 
appropriate sources for such commercial pricing information can . . . 
include verifiable information from supplier invoices.''
    In addition, in the CY 2019 Physician Fee Schedule final rule (83 
FR 59663), we discuss that invoice based pricing is used to pay for 
Part B drugs and biologicals in certain circumstances as described in 
the Medicare Claims Processing Manual (chapter 17, section 20.1.3). For 
example, if a payment allowance limit for a drug or biological is not 
included in the quarterly ASP Drug Pricing File or Not Otherwise 
Classified Pricing File, MACs are permitted to use invoice pricing. 
MACs may also use invoice based pricing for new drugs and biologicals 
that are not included in the ASP Medicare Part B Drug Pricing File or 
Not Otherwise Classified Pricing File. The new drug provision may be 
applied during the period just after a drug is marketed, that is before 
ASP data has been reported to CMS. We believe using invoices for new 
drugs and drugs without national pricing is a similar situation to 
dealing with new and innovative renal dialysis equipment and supplies 
that do not have a national price.
    We believe that an invoice-based approach could be applied to the 
renal dialysis equipment and supplies that are the focus of our 
proposal. As noted previously, ESRD facility charges are gross values; 
that is, charges before the application of allowances and discounts 
deductions. We believe the MAC-determined price should reflect the 
discounts, rebates and other allowances the ESRD facility (or parent 
company) receives. These terms are defined in the Provider 
Reimbursement Manual (chapter 8).\33\ If the MAC-determined price does 
not reflect discounts, rebates and other allowances, the price would 
likely exceed the facility's cost for the item and result in higher 
coinsurance obligations for beneficiaries. For this reason, we believe 
it is important for MACs to develop a payment rate taking into 
consideration the invoice amount, the facility's charge for the item on 
the claim, discounts, allowances, rebates, the price established for 
the item by other MACs and the sources of information used to establish 
that price, payment amounts from other payers and the information used 
to establish those payment amounts, and information on pricing for 
similar items used to develop a payment rate. We believe the 
information that ESRD facilities would supply to the MACs should be 
verifiable, so that we can more appropriately establish the actual 
facility cost of the items.
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    \33\ Medicare Provider Reimbursement Manual. Chapter 8. 
Available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R450PR1.pdf.
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    The specific amounts would be established for the new and 
innovative renal dialysis equipment or supply HCPCS code using 
verifiable information from the following sources of information, if 
available: The invoice amount, facility charges for the item, 
discounts, allowances, and rebates; the price established for the item 
by other MACs and the sources of information used to establish that 
price; payment amounts determined by other payers and the information 
used to establish those payment amounts; and charges and payment 
amounts, required for other equipment and supplies that may be 
comparable or otherwise relevant.
    Once there is sufficient payment data across MACs, we would 
consider establishing a national price for the item through notice and 
comment rulemaking. We are inviting public comment on this proposed 
approach for pricing new and innovative renal dialysis equipment and 
supplies for the transitional add-on payment adjustment proposal 
discussed in section II.B.3.b.iii of this proposed rule. We also 
solicit comment on other pricing criteria and other verifiable sources 
of information that should be considered.
    As discussed in section II.B.3.a.i of this proposed rule, under the 
IPPS's

[[Page 38356]]

NTAP payment policy, the additional payment for cases with high costs 
involving eligible new technologies preserves some of the incentives 
under the average-based payment system. The payment mechanism is based 
on the cost to hospitals for the new technology. Under Sec.  412.88, 
Medicare pays a marginal cost factor of 50 percent for the costs of the 
new technology in excess of the full DRG payment. If the costs of the 
discharge exceed the full MS-DRG payment, the additional payment amount 
equals the lesser of the following: 50 percent of the costs of the new 
medical service or technology; or 50 percent of the amount by which the 
total covered costs of the case (as determined above) exceed the 
standard MS-DRG payment, plus any applicable outlier payments if the 
costs of the case exceed the MS-DRG, plus adjustments for IME and DSH.
    To mitigate the Medicare expenditures incurred as a result of the 
transitional add-on payment adjustment proposal discussed later in this 
section of the proposed rule, we are proposing to base the additional 
payment on 65 percent of the MAC-determined price. We noted in the FY 
2020 IPPS proposed rule (84 FR 19162) a 50 percent capped add-on amount 
was considered low with regard to providing hospitals with a sufficient 
incentive to use the new technology. In that rule, we proposed to 
modify the current payment mechanism to increase the amount of the 
maximum add-on payment amount to 65 percent. We believe that we have 
the same goal as IPPS with regard to supporting ESRD facility use of 
new and innovative renal dialysis equipment and supplies. Therefore, we 
are proposing to base the transitional add-on payment adjustment for 
new and innovative equipment and supplies on 65 percent of the MAC-
determined price. We are also soliciting comment on whether we should 
explicitly link to the IPPS NTAP mechanism's maximum add-on payment 
amount percentage so that any change in that percentage would also 
change for the proposed transitional add-on payment adjustment paid to 
ESRD facilities for furnishing new and innovative renal dialysis 
equipment and supplies.
iii. Proposed Use of a Transitional Add-On Payment Adjustment for New 
and Innovative Renal Dialysis Equipment and Supplies
    We are proposing to provide a transitional add-on payment 
adjustment for new and innovative renal dialysis equipment and supplies 
furnished by ESRD facilities that meet the eligibility criteria 
described in section II.B.3.b.i of this proposed rule. That is, the 
payment adjustment would only be available for renal dialysis equipment 
and supplies that meet the proposed eligibility criteria discussed in 
section II.B.3.b.i of this proposed rule. We would refer to the 
adjustment as the Transitional Add-on Payment Adjustment for New and 
Innovative Equipment and Supplies (TPNIES).
    We would establish the TPNIES based on our authority under section 
1881(b)(14)(D)(iv) of the Act, which provides in relevant part that the 
ESRD PPS may include such other payment adjustments as the Secretary 
determines appropriate. We believe this authority is broad enough to 
support the creation of the TPNIES.
    We acknowledge that ESRD facilities have unique challenges with 
regard to implementing new renal dialysis drugs and biological products 
as discussed in section II.B.1.a of this proposed rule, and we believe 
that the same issues would apply with respect to incorporating new and 
innovative equipment and supplies into their standards of care. For 
example, when new and innovative equipment and supplies are introduced 
to the market, ESRD facilities would need to analyze their budgets and 
engage in contractual agreements to accommodate the new items into 
their care plans. Newly marketed equipment and supplies 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 product and its effect on patient outcomes. We believe this uptake 
period would be supported by the proposed TPNIES because it would help 
facilities transition or test new and innovative equipment and supplies 
in their businesses under the ESRD PPS. The proposed TPNIES would 
target payment for the use of new and innovative renal dialysis 
equipment and supplies during the period when a product is new to the 
market.
    We are proposing to apply the TPNIES for 2-calendar years from the 
effective date of the change request, which would coincide with the 
effective date of the CY ESRD PPS final rule. We would monitor renal 
dialysis service utilization trends, after which we are proposing that 
the item would become an eligible outlier service as provided in Sec.  
413.237. Therefore, we are proposing revisions to Sec.  413.237(a)(1) 
to reflect outlier eligibility once the TPNIES period ends. We believe 
that 2 years would be a sufficient timeframe for ESRD facilities to set 
up or adjust business practices so that there is seamless access to the 
new and innovative equipment and supplies. In addition, historically 
when we have implemented 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 plans to 
incorporate the new renal dialysis equipment and supplies into their 
standards of care and this could be supported by a transition period.
    We further believe providing the TPNIES for 2 years would address 
the stakeholders' concerns regarding additional payment to account for 
higher cost of more new and innovative equipment and supplies that they 
believe may not be adequately captured by the dollars allocated in the 
ESRD PPS base rate. That is, this transitional add-on payment 
adjustment would give the new and innovative equipment and supplies a 
foothold in the market so that when the timeframe is complete, they are 
able to compete with the other equipment and supplies also accounted 
for in the ESRD PPS base rate. Once the 2-year timeframe is complete, 
we propose that the equipment or supply would then qualify as an 
outlier service, if applicable, and the facility would no longer 
receive the TPNIES for that particular item. Instead, in the outlier 
policy space, there is a level playing field where products could gain 
market share by offering the best practicable combination of price and 
quality.
    We note that this proposal would increase Medicare expenditures, 
which would result in increases to ESRD beneficiary coinsurance, since 
we have not previously provided a payment adjustment for renal dialysis 
equipment and supplies in the past. However, to support agency 
initiatives and to be consistent with both our TDAPA policy and 
inpatient hospital payment policies, we believe that the proposed 
TPNIES would be appropriate to support ESRD facility uptake in 
furnishing new and innovative renal dialysis equipment and supplies.
    The intent of the TPNIES for new and innovative equipment and 
supplies would be to provide a transition period for the unique 
circumstances experienced by ESRD facilities when incorporating certain 
new and innovative equipment and supplies into their businesses and to 
allow time for the uptake of the new and innovative equipment and 
supplies. At this time, we do not believe that it would be appropriate 
to add dollars to the ESRD PPS base rate for new and innovative renal 
dialysis equipment and supplies

[[Page 38357]]

because, as noted previously, the ESRD PPS base rate includes the cost 
of equipment and supplies used to furnish a dialysis treatment. As we 
have stated in CY 2019 ESRD PPS proposed rule (83 FR 34314), we believe 
that increasing the base rate for these items could be in conflict with 
the fundamentals of a PPS. That is, under a PPS, Medicare makes 
payments based on a predetermined, fixed amount that reflects the 
average cost and the facility retains the profit or suffers a loss 
resulting from the difference between the payment rate and the 
facility's resource use which creates an incentive for facilities to 
control their costs. It is not the intent of a PPS to add dollars to 
the base whenever something new is made available.
    Therefore, we propose to add Sec.  413.236, Transitional Add-on 
Payment Adjustment for New and Innovative Equipment and Supplies. We 
propose to add Sec.  413.236(a) to state that the basis for the TPNIES 
is to establish a payment adjustment to support ESRD facilities in the 
uptake of new and innovative renal dialysis equipment and supplies 
under the ESRD PPS under the authority of section 1881(b)(14)(D)(iv) of 
the Act. We also propose to add Sec.  413.236(b) to require that a 
renal dialysis equipment or supply meet the following eligibility 
criteria in order to receive the TPNIES: (1) Has been designated by CMS 
as a renal dialysis service under Sec.  413.171, (2) is new, meaning it 
is granted marketing authorization by FDA on or after January 1, 2020, 
(3) is commercially available, (4) has a Healthcare Common Procedure 
Coding System (HCPCS) application submitted in accordance with the 
official Level II HCPCS coding procedures, (5) is innovative, meaning 
it meets the criteria specified in Sec.  412.87(b)(1) and related 
guidance in that it represents an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries, and (6) is not a capital-related 
asset that an ESRD facility has an economic interest in through 
ownership (regardless of the manner in which it was acquired).
    We also propose to add Sec.  413.236(c) to establish a process for 
SCI determination and deadline for consideration of new renal dialysis 
equipment or supply applications under the ESRD PPS. That is, we 
propose that we would consider whether a new renal dialysis supply or 
equipment meets the eligibility criteria specified in Sec.  413.236(b) 
and announce the results in the Federal Register as part of our annual 
updates and changes to the ESRD PPS. We propose that we would only 
consider a complete application received by CMS by February 1 prior to 
the particular calendar year.
    We also propose to add Sec.  413.236(d) to provide a payment 
adjustment for a new and innovative renal dialysis equipment or supply 
based on 65 percent of the MAC-determined price, as described in 
proposed Sec.  413.236(e). The TPNIES would be paid for 2-calendar 
years. Following payment of the TPNIES, the ESRD PPS base rate would 
not be modified and the new and innovative renal dialysis equipment or 
supply would be an eligible outlier service as provided in Sec.  
413.237.
    We also propose to add Sec.  413.236(e) to require that the MAC on 
behalf of CMS would establish prices for the new and innovative renal 
dialysis equipment and supplies described in newly added Sec.  
413.236(b), and that we would use these prices for the purposes of 
determining the TPNIES. The specific amounts would be established for 
the new and innovative renal dialysis equipment or supply HCPCS code 
using verifiable information from the following sources of information, 
if available: The invoice amount, facility charges for the item, 
discounts, allowances, and rebates; the price established for the item 
by other MACs and the sources of information used to establish that 
price; payment amounts determined by other payers and the information 
used to establish those payment amounts; and charges and payment 
amounts, required for other equipment and supplies that may be 
comparable or otherwise relevant.
    We are also proposing to add paragraph (e) to Sec.  413.230 to 
reflect the TPNIES. We believe this modification is necessary so the 
regulation appropriately reflects all inputs in the calculation of the 
per treatment payment amount.
    Since we are adding paragraphs (d) (discussed in section II.B.1.e 
of this proposed rule) and (e) to Sec.  413.230, we also propose a 
technical change to remove ``and'' from the end of Sec.  413.230(b). We 
propose that the ``and'' would be added to the end of Sec.  413.230(d).
    In addition, we are proposing to revise the definition of ESRD 
outlier services at Sec.  413.237(a)(1) by adding a new paragraph 
(a)(1)(v) to include renal dialysis equipment and supplies that receive 
the TPNIES as specified in Sec.  413.236 after the payment period has 
ended. We propose to redesignate existing paragraph (a)(1)(v) as 
paragraph (a)(1)(vi) and revise the paragraph to state ``As of January 
1, 2012, the laboratory tests that comprise the Automated Multi-Channel 
Chemistry panel are excluded from the definition of outlier services.'' 
We are proposing this technical edit to reflect an order in the 
definition of ESRD outlier services as first, items and services 
included and second, items and services that are excluded.
    We are also proposing technical changes to Sec.  413.237(a)(1)(i) 
through (iv) to replace the phrases ``ESRD-related'' and ``used in the 
treatment of ESRD'' with ``renal dialysis'' to reflect the current 
terminology used under the ESRD PPS and to replace the word 
``biologicals'' with ``biological products'' to reflect FDA's preferred 
terminology.
c. Comment Solicitation on Payment for Renal Dialysis Humanitarian Use 
Devices (HUD)
    Medical devices and related innovations are integral in meeting the 
needs of patients, especially the most vulnerable patients, such as 
ESRD patients and those with rare medical conditions. While FDA 
determines which devices are authorized for marketing, public 
healthcare programs such as Medicare determine how these products will 
be covered and paid, which affects patient access to new and innovative 
products. We are soliciting comments on Medicare payment for renal 
dialysis services that have a Humanitarian Use Device (HUD) 
designation. Under FDA regulations (21 CFR 814.3(n)), a HUD is a 
``medical device intended to benefit patients in the treatment or 
diagnosis of a disease or condition that affects or is manifested in 
not more than 8,000 individuals in the United States per year.'' 
Medicare has no specific rules, regulations or instructions with regard 
to HUDs. We are particularly interested in receiving comments on HUDs 
that would be considered renal dialysis services under the ESRD PPS, 
any barriers to payment encountered, and past experience in obtaining 
Medicare payment for these items through the MACs.
4. Proposal To Discontinue the ESA Monitoring Policy (EMP) Under the 
ESRD PPS
a. Background
    In the CY 2011 ESRD PPS final rule (75 FR 49067, 49145 through 
49147), CMS adopted the ESA monitoring policy (EMP) under the ESRD PPS 
for purposes of calculating the base rate and for establishing the 
outlier policy's percentage and thresholds.
    For purposes of calculating the CY 2011 ESRD PPS base rate, 
payments for ESAs were capped based on determined dose limits as 
discussed in the Medicare Claims Processing Manual (chapter 8,

[[Page 38358]]

section 60.4.1). Payments for epoetin alfa in excess of 500,000 units 
per month in 2007 were capped at 500,000 units and a similar cap was 
applied to claims for darbepoetin alfa, in which the caps were based on 
1500 mcg per month in 2007 (75 FR 49067).
    With regard to the application of the outlier policy, since ESAs 
are considered to be an ESRD outlier service under Sec.  
413.237(a)(1)(i), covered units are priced and considered toward the 
eligibility for outlier payment consistent with Sec.  413.237(b). That 
is, we apply dosing reductions and ESA dose limits consistent with the 
EMP prior to any calculation of outlier eligibility. Medicare 
contractors apply a 25 percent reduction in the reported ESA dose on 
the claim when the hemoglobin (or hematocrit) level exceeded a certain 
value, unless the ESRD facility reported a modifier to indicate the 
dose was being decreased. Also under the EMP, ESRD facilities are 
required to report other modifiers to indicate a patient's 3-month 
rolling average hemoglobin (or hematocrit) level so that the Medicare 
contractor knows when to apply a 50 percent reduction in the reported 
ESA dose on the claim. In addition to these dosing reductions, we also 
apply ESA dose limits as discussed in the Medicare Claims Processing 
Manual (chapter 8, section 60.4.1) prior to any calculation of outlier 
eligibility.
    When we adopted the EMP for the ESRD PPS in the CY 2011 ESRD PPS 
final rule, we explained that we believed that the continued 
application of the EMP would help ensure the proper dosing of ESAs and 
provide a safeguard against the overutilization of ESAs, particularly 
where the consumption of other separately billable services may be 
high, in order to obtain outlier payments (75 FR 49146). Due to 
implementation of the ESRD PPS and FDA relabeling of epoetin alfa, 
which stated that the individualized dosing should be that which would 
achieve and maintain hemoglobin levels within the range of 10 to 12 g/
dL, we no longer believe application of the EMP is necessary to control 
utilization of ESAs in the ESRD population. That is, the impact of no 
longer paying separately for ESAs, which discourages overutilization, 
along with practitioners prescribing the biological product to maintain 
a lower hemoglobin level, has resulted in a decline in its utilization 
and a stringent monitoring of the biological product's levels in 
patients.
b. Proposal To Discontinue the Application of the EMP to Outlier 
Payments Under the ESRD PPS
    Effective January 1, 2020, CMS is proposing to no longer apply the 
EMP under the ESRD PPS. Since the implementation of the ESRD PPS, ESA 
utilization has decreased significantly because the structure of the 
PPS removed the incentives to overuse these biological products. ESRD 
facilities would no longer be required to report the EMP-related 
modifiers and Medicare contractors would no longer apply dosing 
reduction or dose limit edits to ESA dosing. Therefore, these edits 
would no longer be applied prior to calculation of outlier eligibility 
and would no longer be reflected in outlier payments.
    We would continue to require ESRD facilities to report all 
necessary information for the ESRD Quality Incentive Program. As part 
of managing the ESRD PPS, CMS has a monitoring program in place that 
studies the trends and behaviors of ESRD facilities under the ESRD PPS 
and the health outcomes of the beneficiaries who receive their 
care.\34\ If we finalize this proposal, we would continue to monitor 
the utilization of ESAs to determine if additional medically unlikely 
edits are necessary. In addition, with the increased use of certain 
phosphate binders that have the secondary effect of anemia management, 
CMS would closely monitor ESA usage in conjunction with phosphate 
binder prescribing and usage.
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    \34\ ESRD PPS Claims-Based Monitoring Program. Available at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Claims-Based-Monitoring.html.
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    We believe that discontinuing this policy would reduce burden for 
ESRD facilities because the EMP provides an opportunity for appeal to 
address those situations where there might be medical justification for 
higher hematocrit or hemoglobin levels. Beneficiaries, physicians, and 
ESRD facilities are required to submit additional documentation to 
justify medical necessity, and any outlier payment reduction amounts 
are subsequently reinstated when documentation supports the higher 
hematocrit or hemoglobin levels. Thus, we believe this proposal would 
reduce the documentation burden on ESRD facilities because they would 
no longer have to go through the EMP appeal process and submit 
additional documentation regarding medical necessity.
    We request public comments on our proposal to discontinue the 
application of the EMP under the ESRD PPS.
5. Proposed CY 2020 ESRD PPS Update
a. Proposed CY 2020 ESRD Bundled (ESRDB) Market Basket Update, 
Productivity Adjustment, and Labor-Related Share for ESRD PPS
    In accordance with section 1881(b)(14)(F)(i) of the Act, as added 
by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, beginning in 2012, the ESRD PPS payment amounts 
are required to be annually increased by an ESRD market basket increase 
factor and reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. The application of the productivity 
adjustment may result in the increase factor being less than 0.0 for a 
year and may result in payment rates for a year being less than the 
payment rates for the preceding year. The statute also provides that 
the market basket increase factor should reflect the changes over time 
in the prices of an appropriate mix of goods and services used to 
furnish renal dialysis services.
    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). In the CY 2015 ESRD PPS final rule we rebased 
and revised the ESRDB input price index to reflect a 2012 base year (79 
FR 66129 through 66136). Subsequently, in the CY 2019 ESRD PPS final 
rule, we finalized a rebased ESRDB input price index to reflect a 2016 
base year (83 FR 56951 through 56962).
    Although ``market basket'' technically describes the mix of goods 
and services used for ESRD treatment, this term is also commonly used 
to denote the input price index (that is, cost categories, their 
respective weights, and price proxies combined) derived from a market 
basket. Accordingly, the term ``ESRDB market basket,'' as used in this 
document, refers to the ESRDB input price index.
    We propose to use the CY 2016-based ESRDB market basket as 
finalized and described in the CY 2019 ESRD PPS final rule (83 FR 56951 
through 56962) to compute the CY 2020 ESRDB market basket increase 
factor based on the best available data. Consistent with historical 
practice, we propose to estimate the ESRDB market basket update based 
on IHS Global Inc.'s (IGI), forecast using the most recently available 
data. IGI is a nationally recognized economic and financial forecasting 
firm that contracts with CMS

[[Page 38359]]

to forecast the components of the market baskets. Using this 
methodology and the IGI first quarter 2019 forecast of the CY 2016-
based ESRDB market basket (with historical data through the fourth 
quarter of 2018), the proposed CY 2020 ESRDB market basket increase 
factor is 2.1 percent.
    Under section 1881(b)(14)(F)(i) of the 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. We finalized the detailed methodology for 
deriving the MFP projection in the CY 2012 ESRD PPS final rule (76 FR 
40503 through 40504). The most up-to-date MFP projection methodology is 
available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/Downloads/MFPMethodology.pdf. Using this 
methodology and the IGI first quarter 2019 forecast, the proposed MFP 
adjustment for CY 2020 (the 10-year moving average of MFP for the 
period ending CY 2020) is projected to be 0.4 percent.
    As a result of these provisions, the proposed CY 2020 ESRD market 
basket adjusted for MFP is 1.7 percent. This market basket increase is 
calculated by starting with the proposed CY 2020 ESRDB market basket 
percentage increase factor of 2.1 percent and reducing it by the 
proposed MFP adjustment (the 10-year moving average of MFP for the 
period ending CY 2020) of 0.4 percent.
    As is our general practice, if more recent data are subsequently 
available (for example, a more recent estimate of the market basket 
update or MFP adjustment), we propose to use such data to determine the 
final CY 2020 market basket update and/or MFP adjustment.
    For the CY 2020 ESRD payment update, we propose to continue using a 
labor-related share of 52.3 percent for the ESRD PPS payment, which was 
finalized in the CY 2019 ESRD PPS final rule (83 FR 56963).
b. The Proposed CY 2020 ESRD PPS Wage Indices
    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) core-based statistical area (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 2020, we would update 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 proposed CY 2020 wage index values 
for urban areas are listed in Addendum A (Wage Indices for Urban Areas) 
and the proposed CY 2020 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, see 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). Beginning in CY 
2020, we are proposing that the statewide urban average based on the 
average of all urban areas within the state also be applied to the 
Carson City, Nevada CBSA.
    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 0.5500 and 0.5000, 
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 
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), 
however, we decided to maintain a wage index floor of 0.4000, rather 
than further reduce the floor by 0.05. We stated that we needed more 
time to study the wage indices that are reported for Puerto Rico to 
assess the appropriateness of discontinuing the wage index floor (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

[[Page 38360]]

wage index floor, we finalized a wage index floor of 0.4000 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 permanently maintain the wage index floor of 0.4000, because 
we believed it was appropriate and provided 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.
    In the CY 2019 ESRD PPS final rule (83 FR 56964 through 56967), we 
finalized an increase to the wage index floor from 0.4000 to 0.5000 for 
CY 2019 and subsequent years. We explained that we revisited our 
evaluation of payments to ESRD facilities located in the lowest wage 
areas to be responsive to stakeholder comments and to ensure payments 
under the ESRD PPS are appropriate. We provided statistical analyses 
that supported a higher wage index floor and finalized an increase from 
0.4000 to 0.5000 to safeguard access to care in those areas. We further 
explained that we believe a wage index floor of 0.5000 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. 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.
    A facility's wage index is applied to the labor-related share of 
the ESRD PPS base rate. In the CY 2019 ESRD PPS final rule (83 FR 
56963), we finalized a labor-related share of 52.3 percent, which is 
based on the 2016-based ESRDB market basket. Thus, for CY 2020, the 
labor-related share to which a facility's wage index would be applied 
is 52.3 percent.
    We were recently made aware of a minor calculation error in the 
file used to compute the ESRD PPS wage index values for this proposed 
rule. We are posting the corrected wage index values on the ESRD PPS 
payment page and we will correct this error when computing the ESRD PPS 
wage index values and payment rates for the final rule.
c. Proposed CY 2020 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 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 included one technical correction.
    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 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 in the following paragraphs) plus the 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 2020, we propose that the outlier services MAP amounts and 
FDL amounts would be derived from claims data from CY 2018. 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

[[Page 38361]]

future outlier payments, we propose the outlier thresholds for CY 2020 
would be based on utilization of renal dialysis items and services 
furnished under the ESRD PPS in CY 2018. 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.
    In the CY 2019 ESRD PPS final rule (83 FR 56968), we stated that 
based on the CY 2017 claims data, outlier payments represented 
approximately 0.80 percent of total payments. For this proposed rule, 
as discussed in section II.B.5.c.ii of this proposed rule, CY 2018 
claims data show outlier payments represented approximately 0.5 percent 
of total payments.
i. CY 2020 Update to the Outlier Services MAP Amounts and FDL Amounts
    For CY 2020, we propose to update the outlier services MAP amounts 
and FDL amounts to reflect the utilization of outlier services reported 
on 2018 claims. For this proposed rule, the outlier services MAP 
amounts and FDL amounts were updated using 2018 claims data. We note 
that, beginning in CY 2020, the total expenditure amount includes 
payments made for calcimimetics under the TDAPA policy (calculated to 
be $21.15 per treatment). The impact of this update is shown in Table 
2, which compares the outlier services MAP amounts and FDL amounts used 
for the outlier policy in CY 2019 with the updated proposed estimates 
for this rule. The estimates for the proposed CY 2020 outlier policy, 
which are included in Column II of Table 2, were inflation adjusted to 
reflect projected 2020 prices for outlier services.

               Table 2--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                   Column I Final outlier policy    Column II Proposed outlier
                                                    for CY 2019 (based on 2017     policy for  CY 2020 (based on
                                                   data, price inflated to 2019)   2018 data, price inflated to
                                                                 *                             2020)
                                                 ---------------------------------------------------------------
                                                     Age < 18        Age >= 18       Age < 18        Age >= 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $34.18          $40.18          $32.27          $38.15
 treatment......................................
Adjustments:
    Standardization for outlier services........          1.0503          0.9779          1.0692          0.9789
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $35.18          $38.51          $33.82          $36.60
    FDL amount that is added to the predicted             $57.14          $65.11          $44.91          $52.50
     MAP to determine the outlier threshold.....
    Patient-months qualifying for outlier                   7.2%            8.2%           10.8%            9.9%
     payment....................................
----------------------------------------------------------------------------------------------------------------
* Note that Column I was obtained from Column II of Table 11 from the CY 2019 ESRD PPS final rule (83 FR 56968).

    As demonstrated in Table 2, the estimated FDL amount per treatment 
that determines the CY 2020 outlier threshold amount for adults (Column 
II; $52.50) is lower than that used for the CY 2019 outlier policy 
(Column I; $65.11). The lower threshold is accompanied by a decrease in 
the adjusted average MAP for outlier services from $38.51 to $36.60. 
For pediatric patients, there is a decrease in the FDL amount from 
$57.14 to $44.91. There is a corresponding decrease in the adjusted 
average MAP for outlier services among pediatric patients, from $35.18 
to $33.82.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2020 would be 9.9 percent for adult patients and 
8.2 percent for pediatric patients, based on the 2018 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. Based 
on the 2018 claims, outlier payments represented approximately 0.5 
percent of total payments, which is below the 1 percent target due to 
declines in the use of outlier services. Recalibration of the 
thresholds using 2018 data is expected to result in aggregate outlier 
payments close to the 1 percent target in CY 2020. We believe the 
update to the outlier MAP and FDL amounts for CY 2020 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 proposed rule would result in 
no change in payments to ESRD facilities for beneficiaries with renal 
dialysis items and services that are not eligible for outlier payments, 
but would increase payments to ESRD facilities for beneficiaries with 
renal dialysis items and services that are eligible for outlier 
payments, as well as co-insurance obligations for beneficiaries with 
renal dialysis services eligible for outlier payments.
d. Proposed Impacts to the CY 2020 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

[[Page 38362]]

and separately billable services. In accordance with section 
1881(b)(14)(D) of the Act and our regulation at Sec.  413.230, the 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, any applicable outlier payment and training adjustment add-
on, the TDAPA (as proposed in section II.B.1.e of this proposed rule), 
and the TPNIES (as proposed in section II.B.3.b.iii of this proposed 
rule).
ii. Annual Payment Rate Update for CY 2020
    We are proposing an ESRD PPS base rate for CY 2020 of $240.27. 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 2020 projection for the 
proposed ESRDB market basket is 2.1 percent. In CY 2020, this amount 
must be reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, as required by section 
1881(b)(14)(F)(i)(II) of the Act. As discussed previously, the proposed 
MFP adjustment for CY 2020 is 0.4 percent, thus yielding a proposed 
update to the base rate of 1.7 percent for CY 2020. Therefore, the 
proposed ESRD PPS base rate for CY 2020 before application of the wage 
index budget-neutrality adjustment factor would be $239.27 ($235.27 x 
1.017 = $239.27).
     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 2020, we are not proposing 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). We computed 
the proposed CY 2020 wage index budget-neutrality adjustment factor 
using treatment counts from the 2018 claims and facility-specific CY 
2019 payment rates to estimate the total dollar amount that each ESRD 
facility would have received in CY 2019. The total of these payments 
became the target amount of expenditures for all ESRD facilities for CY 
2020. Next, we computed the estimated dollar amount that would have 
been paid for the same ESRD facilities using the ESRD wage index for CY 
2020. The total of these payments becomes the new CY 2020 amount of 
wage-adjusted expenditures for all ESRD facilities. The wage index 
budget-neutrality factor is calculated as the target amount divided by 
the new CY 2020 amount. When we multiplied the wage index budget-
neutrality factor by the applicable CY 2020 estimated payments, 
aggregate payments to ESRD facilities would remain budget neutral when 
compared to the target amount of expenditures. That is, the wage index 
budget-neutrality adjustment factor ensures that wage index adjustments 
do not increase or decrease aggregate Medicare payments with respect to 
changes in wage index updates.
    The CY 2020 proposed wage index budget-neutrality adjustment factor 
is 1.004180. This application would yield a CY 2020 ESRD PPS proposed 
base rate of $240.27 ($239.27 x 1.004180 = $240.27).
    In summary, we are proposing a CY 2020 ESRD PPS base rate of 
$240.27. This amount reflects a proposed market basket increase of 1.7 
percent and the proposed CY 2020 wage index budget-neutrality 
adjustment factor of 1.004180.

III. CY 2020 Payment for Renal Dialysis Services Furnished to 
Individuals With Acute Kidney Injury (AKI)

A. Background

    The Trade Preferences Extension Act of 2015 (TPEA) (Pub. L. 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 that the Secretary elects.
    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. Proposed Annual Payment Rate Update for CY 2020

1. CY 2020 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.5.d of this proposed rule, the CY 2020 
proposed ESRD PPS base rate is $240.27, which reflects a proposed 
market basket increase of 2.1 percent reduced by the multifactor 
productivity adjustment of 0.4 percentage points, that is, 1.7 percent, 
and application of the proposed CY 2020 wage index budget-neutrality 
adjustment factor of 1.004180. Accordingly, we are proposing a CY 2020 
per treatment payment rate of $240.27 for renal dialysis services 
furnished by ESRD facilities to individuals with AKI. 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

[[Page 38363]]

section II.B.5.b of this proposed rule. 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. As stated above, we are proposing a CY 2020 AKI dialysis 
payment rate of $240.27, adjusted by the ESRD facility's wage index.

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

A. Background and Proposed Regulation Text Update

    For a detailed discussion of the 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 following final rules: 75 FR 49030, 76 FR 628, 76 FR 70228, 77 
FR 67450, 78 FR 72156, 79 FR 66120, 80 FR 68968, 81 FR 77834, 82 FR 
50738, and 83 FR 56922. We have also codified many of our policies for 
the ESRD QIP at 42 CFR 413.177 and 178.
    As we discuss in section IV.C.2 of this proposed rule, we are 
proposing to adopt the baseline period and performance period for each 
payment year automatically by advancing each period by 1 year from the 
baseline and performance period that were adopted for the previous 
payment year.
    We propose to revise the requirements at Sec.  413.178 by 
redesignating paragraphs (d) through (f) as paragraphs (e) through (g), 
respectively. In addition, we propose to add a new paragraph (d) to 
specify the data submission requirements for calculating measure 
scores. Specifically, we are proposing to codify the requirement that 
facilities must submit measure data to CMS on all measures. This 
proposed regulation text codifies previously finalized policies and 
will make it easier for the public to locate and understand the 
Program's quality data submission requirements.
    Additionally, the proposed text in new paragraph (d)(2) would 
codify our proposed policy to adopt the performance period and baseline 
period for each payment year automatically by advancing 1 year from the 
previous payment year. At Sec.  413.178(d)(3) through (d)(7), we are 
proposing to codify requirements for the Extraordinary Circumstances 
Exception (ECE) process, including a new option for facilities to 
reject an extraordinary circumstance exception granted by CMS under 
certain circumstances. This new option will provide facilities with 
flexibility under the ECE process. We are proposing this provision to 
provide clear guidance to the public on the scope of our ECE process.
    We invite public comments on these proposals.

B. Proposed Update to Requirements Beginning With the PY 2022 ESRD QIP

1. PY 2022 ESRD QIP Measure Set
    The PY 2022 ESRD QIP measure set includes 14 measures, which are 
described in Table 3. For more information on these measures, including 
the two measures that are new beginning with PY 2022 (the Percentage of 
Prevalent Patients Waitlisted (PPPW) clinical measure and the 
Medication Reconciliation for Patients Receiving Care at Dialysis 
Facilities (MedRec) reporting measure), please see the CY 2019 ESRD QIP 
final rule (83 FR 57003 through 57010).

                  Table 3--PY 2022 ESRD QIP Measure Set
------------------------------------------------------------------------
            NQF No.                   Measure title and description
------------------------------------------------------------------------
0258..........................  In-Center Hemodialysis Consumer
                                 Assessment of Healthcare Providers and
                                 Systems (ICH CAHPS) Survey
                                 Administration, a clinical measure.
                                Measure assesses patients' self-reported
                                 experience of care through percentage
                                 of patient responses to multiple
                                 testing tools.
2496..........................  Standardized Readmission Ratio (SRR), a
                                 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
                                 clinical measure.
                                Risk-adjusted STrR for all adult
                                 Medicare dialysis patients.
                                Ratio of the 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...........................  (Kt/V) Dialysis Adequacy Comprehensive,
                                 a clinical measure.
                                A measure of dialysis adequacy where K
                                 is dialyzer clearance, t is dialysis
                                 time, and V is total body water volume.
                                 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 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
                                 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.
                                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 clinical measure.
                                Risk-adjusted SHR of the number of
                                 observed hospitalizations to the number
                                 of expected hospitalizations.
Based on NQF #0418............  Clinical Depression Screening and Follow-
                                 Up, a reporting measure.
                                Facility reports in CROWNWeb one of six
                                 conditions for each qualifying patient
                                 treated during performance period.
N/A...........................  Ultrafiltration Rate, a reporting
                                 measure.
                                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
                                 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.
                                Number of months for which facility
                                 reports NHSN Dialysis Event data to
                                 CDC.
N/A...........................  Percentage of Prevalent Patients
                                 Waitlisted (PPPW), a clinical measure.

[[Page 38364]]

 
                                Percentage of patients at each dialysis
                                 facility who were on the kidney or
                                 kidney-pancreas transplant waitlist
                                 averaged across patients prevalent on
                                 the last day of each month during the
                                 performance period.
2988..........................  Medication Reconciliation for Patients
                                 Receiving Care at Dialysis Facilities
                                 (MedRec), a reporting measure.
                                Percentage of patient-months for which
                                 medication reconciliation was
                                 performance and documented by an
                                 eligible professional.
------------------------------------------------------------------------

2. Estimated Performance Standards for the PY 2022 ESRD QIP
    Section 1881(h)(4)(A) of the Act requires the Secretary to 
establish performance standards with respect to the measures selected 
for the ESRD QIP for a performance period with respect to a year. The 
performance standards must include levels of achievement and 
improvement, as required by section 1881(h)(4)(B) of the Act, and must 
be established prior to the beginning of the performance period for the 
year involved, as required by section 1881(h)(4)(C) of the Act. We 
refer readers to the CY 2013 ESRD PPS final rule (76 FR 70277) for a 
discussion of the achievement and improvement standards that we have 
established for clinical measures used in the ESRD QIP. We recently 
codified definitions for the terms ``achievement threshold,'' 
``benchmark,'' ``improvement threshold,'' and ``performance standard'' 
in our regulations at Sec.  413.178(a)(1), (3), (7), and (12), 
respectively.
    In the CY 2019 ESRD PPS final rule (83 FR 57010), we set the 
performance period for the PY 2022 ESRD QIP as CY 2020 and the baseline 
period as CY 2018. In this proposed rule, we are estimating in Table 4 
the achievement thresholds, 50th percentiles of the national 
performance, and benchmarks for the PY 2022 clinical measures using 
data from 2016 and 2017. We intend to update these standards, using CY 
2018 data, in the CY 2019 ESRD PPS final rule. We also note that we are 
proposing in this proposed rule to convert the STrR measure from a 
clinical measure to a reporting measure and that if that proposal is 
finalized, we would not update these standards for the STrR measure.

               Table 4--Estimated Performance Standards for the PY 2022 ESRD QIP Clinical Measures Using the Most Recently Available Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Achievement  threshold  (15th       Median  (50th percentile of national      Benchmark  (90th percentile of
              Measure                 percentile of national performance)                performance)                      national performance)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    Standardized Fistula Rate......  52.61%...............................  63.69%...............................  76.11%.
    Catheter Rate..................  18.24%...............................  11.15%...............................  5.02%.
    Kt/V Comprehensive.............  92.98% (92.75%) *....................  96.88% (96.83%) *....................  99.14% (99.10%). *
    Hypercalcemia..................  1.81%................................  0.57%................................  0.00%.
    Standardized Readmission Ratio.  1.268 (1.273) *......................  0.998................................  0.629 (0.642). *
    Standardized Transfusion Ratio.  1.684 (1.695) *......................  0.840................................  0.194.
    NHSN Bloodstream Infection.....  1.477................................  0.694 (0.698) *......................  0.
    Standardized Hospitalization     1.248................................  0.967 (0.971) *......................  0.670 (0.687). *
     Ratio.
    PPPW...........................  8.75%................................  17.77%...............................  34.29%.
    ICH CAHPS: Nephrologists'        58.09%...............................  67.81%...............................  78.53%.
     Communication and Caring.
    ICH CAHPS: Quality of Dialysis   54.16%...............................  62.34%...............................  72.03%.
     Center Care and Operations.
    ICH CAHPS: Providing             73.90% (73.89%) *....................  80.38%...............................  87.08%.
     Information to Patients.
    ICH CAHPS: Overall Rating of     49.33% (47.85%) *....................  62.22% (60.37%) *....................  76.57% (74.50%). *
     Nephrologists.
    ICH CAHPS: Overall Rating of     49.12% (49.10%) *....................  63.04% (63.03%) *....................  77.48%.
     Dialysis Center Staff.
    ICH CAHPS: Overall Rating of     53.98% (53.97%) *....................  67.93%...............................  82.48% (82.34%). *
     the Dialysis Facility.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* If the PY 2022 final numerical value is worse than the PY 2021 finalized value, we will substitute the PY 2022 final numerical value for the PY 2021
  finalized value. We have provided the PY 2021 finalized value as a reference for clinical measures whose PY 2022 estimated value is worse than the PY
  2021 finalized value.
Data sources: VAT measures: 2017 CROWNWeb; SRR, STrR, SHR: 2017 Medicare claims; Kt/V: 2017 CROWNWeb; Hypercalcemia: 2017 CROWNWeb; NHSN: 2017 CDC; ICH
  CAHPS: CMS 2017; PPPW: 2017 CROWNWeb and 2017 OPTN.

3. Proposed Changes to the Scoring Methodology Previously Finalized for 
the PY 2022 ESRD QIP
a. Proposed Update to the Scoring Methodology for the National 
Healthcare Safety Network (NHSN) Dialysis Event Reporting Measure
    There are currently two similar measures in the ESRD QIP that 
assess dialysis events: (1) The National Healthcare Safety Network 
(NHSN) Bloodstream Infection (BSI) clinical measure, and (2) the NHSN 
Dialysis Event reporting measure. For the NHSN BSI clinical measure, 
facilities must be eligible to report 12 months of data to the NHSN on 
a quarterly basis in order to receive a score on the measure, and are 
scored based on whether they submitted data for that 12-month period 
and how many dialysis events they reported during that 12-month period. 
For the NHSN Dialysis Event reporting measure, facilities must enroll 
in the NHSN, complete any required training, and report monthly 
dialysis event data on a quarterly basis to the NHSN. The current 
scoring methodology for the NHSN Dialysis Event reporting measure was 
finalized in the CY 2017 ESRD PPS final rule, and it was selected for 
two reasons. First, due to the seasonal variability of bloodstream 
infection rates, we stated that we wanted to incentivize facilities to 
report the full 12 months of data and reward reporting

[[Page 38365]]

consistency over the course of the entire performance period. Second, 
we stated that from the perspective of national prevention strategies 
and internal quality improvement initiatives, there was still value in 
collecting fewer than 12 months of data from facilities. For those 
reasons, we finalized a policy in the CY 2017 ESRD PPS final rule to 
award facilities 10 points for submitting 12 months of data, 2 points 
for reporting between 6 and 11 months of dialysis event data, and 0 
points for reporting fewer than 6 months of data. See Table 5 for the 
current scoring distribution.

    Table 5--Current Scoring Distribution for the NHSN Dialysis Event
                            Reporting Measure
------------------------------------------------------------------------
                                                                Points
                 Number of reporting months                  awarded  to
                                                               facility
------------------------------------------------------------------------
12 months..................................................           10
6-11 months................................................            2
0-5 months.................................................            0
------------------------------------------------------------------------

    As we have accumulated experience with this policy, we are 
concerned that new facilities and facilities for which CMS grants an 
ECE for part of the performance period that applies for a payment year 
are not eligible to receive a score on the NHSN Dialysis Event 
reporting measure because they are not eligible to report data for the 
full 12-month period. As a result, we do not believe that this policy 
appropriately accounts for the effort made by these facilities to 
report these data for the months in which they are eligible to report. 
For example, for PY 2020, the number of new facilities certified during 
the performance year (CY 2018) was 390 and the number of facilities 
granted an ECE during CY 2018 was 31, but none of those facilities was 
eligible to receive a score on the measure. In addition, if a facility 
is aware that it will not be eligible to receive a score on the NHSN 
Dialysis Event reporting measure, we are concerned that the facility 
will not be incentivized to report data at all for that payment year.
    We have therefore reconsidered our previous policy. We propose to 
remove the NHSN Dialysis Event reporting measure's exclusion of 
facilities with fewer than 12 eligible reporting months. Beginning with 
the PY 2022 ESRD QIP, we propose to assess successful reporting based 
on the number of months facilities are eligible to report the measure. 
Under this proposal, facilities would receive credit for scoring 
purposes based on the number of months they successfully report data 
out of the number of eligible months. For example, if a facility had 10 
eligible reporting months because it was granted an ECE for 2 months of 
the performance period, and reported data for those 10 eligible months, 
the facility would receive a score, whereas under the current policy, 
the facility would not receive a score. To accommodate this proposed 
change and to ensure that our scoring methodology appropriately 
incentivizes facilities to report data on the NHSN Dialysis Event 
reporting measure, even if they are not eligible to report data for all 
12 months of a performance period, we also propose to assign scores for 
reporting different quantities of data as summarized in Table 6.

   Table 6--Proposed Scoring Distribution for the NHSN Dialysis Event
                            Reporting Measure
------------------------------------------------------------------------
                                                                Points
          Percentage of eligible months * reported           awarded  to
                                                               facility
------------------------------------------------------------------------
100% of eligible months....................................           10
Less than 100% but no less than 50% of eligible months.....            2
Less than 50% of eligible months...........................            0
------------------------------------------------------------------------
* We define the term ``eligible months'' to mean the months in which
  dialysis facilities are required to report dialysis event data to NHSN
  per the measure eligibility criteria. This includes facilities that
  offer in-center hemodialysis and facilities that treat at least 11
  eligible in-center hemodialysis patients during the performance
  period.

    We believe that it is important to encourage new facilities and 
facilities with an approved ECE to report complete and accurate 
dialysis event data to the NHSN for all the months in which they are 
eligible to submit data so that we have as comprehensive as possible a 
view of these facilities' performance on this important clinical topic. 
We continue to believe that complete and accurate reporting of NHSN 
data is critical to maintaining the integrity of the NHSN surveillance 
system, enables facilities to implement their own quality improvement 
initiatives, and enables the Centers for Disease Control and Prevention 
(CDC) to design and disseminate prevention strategies. We believe the 
fairest way to balance these goals is to adopt a new NHSN Dialysis 
Event reporting measure policy focused more specifically on considering 
reporting successful based on the number of months that a facility is 
eligible to report the measure. We are not proposing changes to the 
NHSN BSI clinical measure's scoring methodology and will continue to 
require that facilities report data for the full 12 months of data in 
order to receive a score on that measure.
    We seek comment on these proposals.
b. Proposal To Convert the Standardized Transfusion Ratio (STrR) 
Clinical Measure to a Reporting Measure
    In the CY 2015 ESRD PPS final rule (79 FR 66192 through 66197) we 
finalized the adoption of the Standardized Transfusion Ratio (STrR) 
clinical measure to address gaps in the quality of anemia management, 
beginning with the PY 2018 ESRD QIP. We also finalized policies to 
score facility performance on the STrR clinical measure based on 
achievement and improvement in the PY 2018 ESRD QIP (79 FR 66209). We 
finalized identical scoring policies for the STrR clinical measure in 
the PY 2019 ESRD QIP and the PY 2020 ESRD QIP in the CY 2016 ESRD PPS 
final rule (80 FR 69060 through 69061) and the CY 2017 ESRD PPS final 
rule (81 FR 77916), respectively.
    After finalizing the STrR clinical measure in the CY 2015 ESRD PPS 
final rule, we submitted the measure to the NQF for consensus 
endorsement, but the Renal Standing Committee did not recommend it for 
endorsement, in part due to concerns that variability in hospital 
coding practices with respect to the use of 038 and 039 revenue codes 
might unduly bias the measure rates. Upon reviewing the committee's 
feedback, we revised the STrR clinical measure's specifications to 
address those concerns. The updated measure specifications for the STrR 
clinical measure contain a more restricted definition of transfusion 
events than was previously used in the STrR clinical measure. 
Specifically, the revised definition excludes inpatient transfusion 
events for claims that include only 038 or 039 revenue codes without an 
accompanying International Statistical Classification of Diseases and 
Related Health Problems--9 (ICD-9) or ICD--10 procedure code or value 
code. As a result, the measure can identify transfusion events more 
specifically and with less bias related to regional coding variation, 
which means that the measure assesses a smaller number of events as 
well as a smaller range of total events.
    Following this revision, we resubmitted the STrR clinical measure 
(NQF #2979) to NQF for consensus endorsement. The NQF endorsed the 
revised STrR clinical measure in 2016, and in the CY 2018 ESRD PPS 
final rule (82 FR 50771 through 50774), we finalized changes to the 
STrR clinical measure that aligned the measure specifications used for 
the ESRD QIP with the measure specifications that

[[Page 38366]]

NQF endorsed in 2016 (NQF #2979), beginning with the PY 2021 ESRD QIP. 
We also finalized policies to score facility performance on the revised 
STrR clinical measure based on achievement and improvement (82 FR 50779 
through 50780), and we subsequently finalized that those policies would 
continue for PY 2022 and in subsequent payment years (83 FR 57011).
    Commenters to the CY 2019 ESRD PPS proposed rule raised concerns 
about the validity of the modified STrR measure (NQF #2979) finalized 
for adoption beginning with PY 2021. Commenters specifically stated 
that due to the new level of coding specificity required under the ICD-
10-CM/PCS coding system, many hospitals are no longer accurately coding 
blood transfusions. The commenters further stated that because the STrR 
measure is calculated using hospital data, the rise of inaccurate blood 
transfusion coding by hospitals has negatively affected the validity of 
the STrR measure (83 FR 56993 through 56994).
    We are currently in the process of examining the concern raised by 
commenters about the validity of the modified STrR measure, and we 
considered three alternatives for scoring the measure until we complete 
that process: (1) Assign the score that a facility would need to earn 
if it performed at the 50th percentile of national ESRD performance 
during the baseline year to every facility that would otherwise earn a 
score during the performance period below that median score, (2) align 
the measure specifications with those used for the measure prior to the 
PY 2021 ESRD QIP, and (3) convert the STrR clinical measure to a 
reporting measure.
    We considered the second alternative because the previously adopted 
measure specifications for the STrR clinical measure include a more 
expansive definition of transfusions. However, we rejected the second 
policy alternative because that version of the STrR clinical measure 
was not endorsed by the NQF due to the concern expressed by the Renal 
Standing Committee that variability in hospital coding practices with 
respect to the use of 038 and 039 revenue codes might unduly bias the 
measure rates. We are in the process of evaluating the concern raised 
by commenters to the CY 2019 ESRD PPS proposed rule, and we intend 
present our analyses and measure changes to the NQF under an ad hoc 
review of the STrR clinical measure later this year before making a 
final decision regarding implementation in the ESRD QIP. Additionally, 
any substantive changes to the STrR that result from this process may 
require a MAP review prior to any future implementation effort. Under 
the first policy alternative, the Program would continue use of a 
measure endorsed by NQF, and if a facility does receive a payment 
reduction, it would not be due to its performance on the STrR clinical 
measure. Facilities would have to score below the median score used in 
the minimum TPS (mTPS) for a different measure in order to receive a 
payment reduction. If a facility scores at the median used in the mTPS 
calculation for all measures, it will receive the same TPS as the mTPS 
and therefore not receive a payment reduction. However, we rejected the 
first policy alternative because it would score facilities based on 
their performance on a measure whose validity we are currently 
examining.
    Under the third policy alternative, we would be using a reporting 
measure that is based on an NQF-endorsed measure, but we would not be 
scoring facilities on the measure based on their performance. While the 
current concerns regarding measure validity may call into question the 
capacity for current data to adequately capture transfusion rates 
attributable to facilities, we believe that the transfusions captured 
by the measure are a conservative estimate of the number of events that 
actually occur, and that those events represent an undesirable health 
outcome for patients that is potentially modifiable by the dialysis 
facility through appropriate anemia management.
    In light of the concerns raised about the validity of the STrR 
clinical measure, we are continuing to examine this issue. We would 
like to ensure that the Program's scoring methodology results in fair 
and reliable STrR measure scores because those scores are linked to 
dialysis facilities' TPS and possible payment reductions. We believe 
that the most appropriate way to continue fulfilling the statutory 
requirement to include a measure of anemia management in the Program 
while ensuring that dialysis facilities are not adversely affected 
during our continued examination of the measure is to convert the STrR 
clinical measure to a reporting measure for the reasons discussed 
above.
    We are also proposing that, beginning with PY 2022, we would score 
the STrR reporting measure as follows: facilities that meet previously 
finalized minimum data and eligibility requirements will receive a 
score on the STrR reporting measure based on the successful reporting 
of data, not on the values actually reported. We are proposing that in 
order to receive 10 points on the measure, a facility would need to 
report the data required to determine the number of eligible patient-
years at risk and have at least 10 eligible patient-years at risk. A 
patient-year at risk is a period of 12-month increments during which a 
single patient is treated at a given facility. A patient-year at risk 
can be comprised of more than 1 patient if, when added together, their 
time in treatment equals a year. For example, if 1 patient is treated 
at the same facility for 4 months and a second patient is treated at a 
facility for 8 months, then the two patients would combine to form a 
full patient year.
    We believe this scoring adjustment policy would enable us to retain 
an anemia management measure in the ESRD QIP measure set while we 
continue to examine the measure's validity concerns raised by 
stakeholders.
    We seek comments on these proposals.
c. Proposed Update to the MedRec Reporting Measure's Scoring 
Methodology
    In the CY 2019 ESRD PPS final rule (83 FR 57011), we finalized a 
policy to score the MedRec reporting measure using the following 
equation, beginning with the PY 2022 ESRD QIP.
[GRAPHIC] [TIFF OMITTED] TP06AU19.000


[[Page 38367]]


    We also stated that this equation was similar to the equation used 
for the Ultrafiltration reporting measure (81 FR 77917):
[GRAPHIC] [TIFF OMITTED] TP06AU19.001

    However, we inadvertently used the term ``patient-months'' in the 
MedRec reporting measure's scoring equation. We calculate a subset of 
our clinical measures using patient-months (the Kt/V Comprehensive 
clinical measure, the Standard Fistula Rate clinical measure, the 
Catheter Rate clinical measure, and the Hypercalcemia clinical measure) 
because patient-months is the unit of analysis based on their measure 
specifications. Facility-months are generally used for a reporting 
measure because they assess the proportion of months in a year that a 
facility reported to CMS the data necessary to calculate the measure.
    The use of facility-months for the MedRec reporting measure is also 
consistent with the scoring methodology we have used for all other 
reporting measures which require monthly reporting, including the 
Anemia Management reporting measure (finalized for removal beginning 
with the PY 2021 ESRD QIP measure), the Serum Phosphorus reporting 
measure (finalized for removal beginning with the PY 2021 ESRD QIP 
measure), and the Ultrafiltration reporting measure.
    We are therefore proposing to revise the scoring equation for the 
MedRec reporting measure so that the scoring methodology accurately 
describes our intended policy. We propose to score the MedRec reporting 
measure using the following equation, beginning with the PY 2022 ESRD 
QIP.
[GRAPHIC] [TIFF OMITTED] TP06AU19.002

    We seek public comment on this proposal.
    Additionally, in section IV.B.4 of the CY 2019 ESRD PPS final rule, 
we finalized a requirement for PY 2021 and beyond for facilities to 
begin collecting 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 CMS Certification Number (CCN) becomes effective 
(83 FR 56999 through 57000). In section IV.C.4.c of the CY 2019 ESRD 
PPS final rule, we also finalized a policy for the MedRec reporting 
measure to begin scoring facilities with a CCN Open Date before the 
January 1st of the performance period (83 FR 57011). In section IV.C.6 
of the CY 2019 ESRD PPS final rule (83 FR 57013 through 57014), we 
applied the updated reporting requirement for new facilities finalized 
in section IV.B.4 of the CY 2019 ESRD PPS final rule to the MedRec 
reporting measure eligibility requirements finalized in section 
IV.C.4.c of the CY 2019 ESRD PPS final rule. We specified in Table 23 
of the CY 2019 ESRD PPS final rule that facilities with a CCN Open Date 
before October 1, 2019 would meet the eligibility requirements for the 
MedRec reporting measure.
    In order to ensure that there is no confusion regarding these 
requirements, we are clarifying that for the MedRec reporting measure, 
facilities with a CCN Open Date before the October 1st prior to the 
performance period (which, for the PY 2022 ESRD QIP, would be a CCN 
Open Date before October 1, 2019) must begin collecting data on that 
measure.
4. Proposed Update to the Eligibility Requirements for the PY 2022 ESRD 
QIP
    In the CY 2019 ESRD PPS final rule, we finalized a policy where, 
with respect to the NHSN Dialysis Event reporting measure, facilities 
are required to have a CCN Open Date on or before the October 1 prior 
to the performance period to be eligible to receive a score, beginning 
with the PY 2021 ESRD QIP (83 FR 56999 through 57000). In section 
IV.B.3.a of this proposed rule, we are proposing to remove the NHSN 
Dialysis Event reporting measure's exclusion of facilities with fewer 
than 12 eligible reporting months and to assess successful reporting 
based on the number of months facilities are eligible to report the 
measure, beginning with the PY 2022 ESRD QIP. To accommodate this 
proposed policy, we are proposing to remove the requirement that, to be 
eligible to receive a score on the NHSN Dialysis Event reporting 
measure, new facilities must have a CCN Open Date before October 1 
prior to the performance period that applies to the payment year. Table 
7 summarizes the ESRD QIP's minimum eligibility requirements for 
scoring, including the proposed change to the eligibility requirement 
for the NHSN Dialysis Event reporting measure.

                   Table 7--Proposed Eligibility Requirements for Scoring on ESRD QIP Measures
----------------------------------------------------------------------------------------------------------------
                                      Minimum data
             Measure                  requirements        CCN open date            Small facility adjuster
----------------------------------------------------------------------------------------------------------------
Kt/V Comprehensive (Clinical)...  11 qualifying        N/A................  11-25 qualifying patients.
                                   patients.
Vascular Access Type: Long-term   11 qualifying        N/A................  11-25 qualifying patients.
 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 38368]]

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

5. Estimated Payment Reduction for the PY 2022 ESRD QIP
    Under our current policy, a facility will not receive a payment 
reduction in connection with its performance the ESRD QIP for a payment 
year if it achieves a TPS that is at or above the minimum TPS that we 
establish for the payment year. We have defined the minimum TPS in our 
regulations at Sec.  413.178(a)(8) as, with respect to a payment year, 
the TPS that an ESRD facility would receive if, during the baseline 
period, it performed at the 50th percentile of national performance on 
all clinical measures and the median of national ESRD facility 
performance on all reporting measures.\35\
---------------------------------------------------------------------------

    \35\ We recently codified definitions for the terms 
``achievement threshold,'' ``benchmark,'' ``improvement threshold,'' 
and ``performance standard'' in our regulations at 42 CFR 
413.178(a)(1), (3), (7), and (12), respectively. When we codified 
the definition of the ``performance standard,'' we declined to 
include a reference to the 50th percent of national performance in 
that definition because the term ``performance standards'' applies 
more broadly to levels of achievement and improvement and is not a 
specific reference to the 50th percentile of national performance. 
Instead, we have incorporated the concept of the 50th percentile of 
national performance into recently codified definition of the 
minimum TPS.
---------------------------------------------------------------------------

    Our current policy, which is codified at Sec.  413.177 of our 
regulations, is also to implement the payment reductions on a sliding 
scale using ranges that reflect payment reduction differentials of 0.5 
percent for each 10 points that the facility's TPS falls below the 
minimum TPS (76 FR 634 through 635).
    For PY 2022, we estimate using available data that a facility must 
meet or exceed a minimum TPS of 53 in order to avoid a payment 
reduction. We note that the mTPS estimated in this proposed rule is 
based on data from CY 2017 instead of the PY 2022 baseline period (CY 
2018) because CY 2018 data are not yet available. We will update and 
finalize the mTPS using CY 2018 data in the CY 2020 ESRD PPS final 
rule.
    We refer the reader to Table 4 for the estimated values of the 50th 
percentile of national performance for each clinical measure. Under our 
current policy, a facility that achieves a TPS below 53 would receive a 
payment reduction based on the TPS ranges indicated in Table 8.

 Table 8--Payment Reduction Scale for PY 2022 Based on the Most Recently
                             Available Data
------------------------------------------------------------------------
                                                               Reduction
                   Total performance score                        (%)
------------------------------------------------------------------------
100-53......................................................           0
52-43.......................................................         0.5
42-33.......................................................         1.0
32-23.......................................................         1.5
22-0........................................................         2.0
------------------------------------------------------------------------

    We intend to update the minimum TPS for PY 2022, as well as the 
payment reduction ranges for that payment year, in the CY 2020 ESRD PPS 
final rule.
6. Data Validation Proposals for PY 2022 and Beyond
    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 data validation study (OMB Control Number 
0938-1289) and the NHSN validation study (OMB Control Number 0938-
1340). In the CY 2019 ESRD PPS final rule, we adopted the CROWNWeb data 
validation study as a permanent feature of the Program (83 FR 57003). 
Under that policy, we will continue validating CROWNWeb data in PY 2022 
and subsequent payment years, and we will deduct 10 points from a 
facility's TPS if it is selected for validation but does not submit the 
requested records.
    We also adopted a methodology for the PY 2022 NHSN validation 
study, which targets facilities for NHSN validation by identifying 
facilities that are at risk for under-reporting. A sample of 300 
facilities will be selected, and each facility will be required to 
submit 20 patient records covering 2 quarters of data reported in the 
performance year (for PY 2022, this would be CY 2020). For additional 
information on this methodology, we refer readers to the CY 2018 ESRD 
PPS final rule (82 FR 50766 through 50767).
    We are proposing to continue using this methodology for the NHSN 
validation study for PY 2023 and

[[Page 38369]]

subsequent years because based on a recent statistical analysis 
conducted by the CDC, we have 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 those results and our desire to 
ensure that dialysis event data reported to the NHSN for purposes of 
the ESRD QIP are accurate, we are proposing to continue use of this 
methodology in the PY 2023 NHSN validation study and for subsequent 
years.
    Additionally, as we finalized for CROWNWeb validation, we are 
proposing to adopt NHSN validation as a permanent feature of the ESRD 
QIP with the methodology we first finalized for PY 2022 and are 
proposing to continue for PY 2023 and subsequent years. We continue to 
believe that the purpose of our validation programs is to ensure the 
accuracy and completeness of data that are scored under the ESRD QIP, 
and we believe that validating NHSN data using this methodology 
achieves that goal. Now that we have adopted a larger sample size of 
300 facilities for the NHSN validation study and have thus ensured 
enough precision within the study, we believe that making the 
validation study permanent will signal our commitment to accurate 
reporting of the important clinical topics covered by the NHSN measures 
that we have adopted.
    We welcome public comments on these proposals.

C. Proposals for the PY 2023 ESRD QIP

1. Continuing Measures for the PY 2023 ESRD QIP
    Under our previously-adopted policy, we are continuing all measures 
from the PY 2022 ESRD QIP for PY 2023. We are not proposing to adopt 
any new measures beginning with the PY 2023 ESRD QIP.
2. Proposed Performance Period for the PY 2023 ESRD QIP and Subsequent 
Years
    We continue to believe that 12-month performance and baseline 
periods provide us sufficiently reliable quality measure data for the 
ESRD QIP. We therefore propose to establish CY 2021 as the performance 
period for the PY 2023 ESRD QIP for all measures. Additionally, we 
propose to establish CY 2019 as the baseline period for the PY 2023 
ESRD QIP for all measures for purposes of calculating the achievement 
threshold, benchmark, and the minimum TPS, and CY 2020 as the baseline 
period for the PY 2023 ESRD QIP for purposes of calculating the 
improvement threshold. Beginning with PY 2024, we propose to adopt 
automatically a performance and baseline period for each year that is 
1-year advanced from those specified for the previous payment year. For 
example, under this policy, we would automatically adopt CY 2022 as the 
performance period for the PY 2024 ESRD QIP. We would also 
automatically adopt CY 2020 as the baseline period for purposes of 
calculating the achievement threshold, benchmark, and minimum TPS and 
CY 2021 as the baseline period for purposes of calculating the 
improvement threshold, for the PY 2024 ESRD QIP.
    We welcome comment on these proposals.
3. Performance Standards for the PY 2023 ESRD QIP and Subsequent Years
    Section 1881(h)(4)(A) of the Act requires the Secretary to 
establish performance standards with respect to the measures selected 
for the ESRD QIP for a performance period with respect to a year. The 
performance standards must include levels of achievement and 
improvement, as required by section 1881(h)(4)(B) of the Act, and must 
be established prior to the beginning of the performance period for the 
year involved, as required by section 1881(h)(4)(C) of the Act. We 
refer readers to the CY 2013 ESRD PPS final rule (76 FR 70277) for a 
discussion of the achievement and improvement standards that we have 
established for clinical measures used in the ESRD QIP. We recently 
codified definitions for the terms ``achievement threshold,'' 
``benchmark,'' ``improvement threshold,'' and ``performance standard'' 
in our regulations at Sec.  413.178(a)(1), (3), (7), and (12), 
respectively.
a. Performance Standards for Clinical Measures in the PY 2023 ESRD QIP
    At this time, we do not have the necessary data to assign numerical 
values to the achievement thresholds, benchmarks, and 50th percentiles 
of national performance for the clinical measures because we do not 
have CY 2019 data. We intend to publish these numerical values, using 
CY 2019 data, in the CY 2021 ESRD PPS final rule.
b. Performance Standards for the Reporting Measures in the PY 2023 ESRD 
QIP
    In the CY 2019 ESRD PPS final rule, we finalized the continued use 
of existing performance standards for the Screening for Clinical 
Depression and Follow-Up reporting measure, the Ultrafiltration Rate 
reporting measure, the NHSN Dialysis Event reporting measure, and the 
MedRec reporting measure (83 FR 57010 through 57011). We will continue 
use of these performance standards in PY 2023.
4. Scoring the PY 2023 ESRD QIP
a. Scoring Facility Performance on Clinical Measures
    In the CY 2014 ESRD PPS final rule, we finalized policies for 
scoring performance on clinical measures based on achievement and 
improvement (78 FR 72215 through 72216). In the CY 2019 ESRD PPS final 
rule, we finalized a policy to continue use of this methodology for 
future payment years (83 FR 57011) and we codified these scoring 
policies at Sec.  413.178(d).\36\
---------------------------------------------------------------------------

    \36\ Please note that we are proposing to redesignate paragraph 
(d) as subparagraph (e) in this proposed rule.
---------------------------------------------------------------------------

    We are not proposing to change our scoring policies.
b. Scoring Facility Performance on Reporting Measures
    In the CY 2019 ESRD PPS final rule, we codified our policy for 
scoring performance on reporting measures at Sec.  413.178(d), \37\ and 
we finalized the continued use of existing policies for scoring 
performance on the Ultrafiltration Rate reporting measure and the 
MedRec reporting measure (83 FR 57011). We will continue use of the 
Ultrafiltration Rate reporting measure's scoring policy in PY 2023. In 
section IV.B.3.c of this proposed rule, we propose to use facility-
months instead of patient-months when scoring the MedRec reporting 
measure and clarify our intention to begin scoring new facilities with 
a CCN Open date before the October 1st of the year prior to the 
performance period rather than before the January 1st of the 
performance period. Those proposals, if finalized, would apply to PY 
2023 and subsequent payment years.
---------------------------------------------------------------------------

    \37\ As noted above, we are proposing to redesignate paragraph 
(d) as subparagraph (e) in this proposed rule.
---------------------------------------------------------------------------

5. Proposals for Weighting the Measure Domains, and for Weighting the 
TPS for PY 2023
    Under our current policy, we assign the Patient & Family Engagement 
Measure Domain a weight of 15 percent of TPS, the Care Coordination 
Measure Domain a weight of 30 percent of TPS, the Clinical Care Measure 
Domain a weight of 40 percent of TPS, and the Safety Measure domain a 
weight of 15 percent of TPS, for the PY 2022 ESRD QIP (83 FR 57011 
through 57012).

[[Page 38370]]

    In the CY 2019 ESRD PPS final rule, we finalized a policy to assign 
weights to individual measures and a policy to redistribute the weight 
of unscored measures in the PY 2022 ESRD QIP (83 FR 57011 through 
57012). We are proposing to continue use of the PY 2022 measure weights 
for the PY 2023 ESRD QIP and subsequent payment years. We also 
proposing to continue use of the PY 2022 measure weight redistribution 
policy in the PY 2023 ESRD QIP and subsequent payment years.
    We welcome comments on these proposals.
    Under our current policy, a facility must be eligible to be scored 
on at least one measure in two of the four measures domains in order to 
be eligible to receive a TPS (83 FR 57012).

V. Establishing Payment Amounts for New Durable Medical Equipment, 
Prosthetics, Orthotics and Supplies (DMEPOS) Items and Services (Gap-
Filling)

A. Background

1. Calculating Fee Schedule Amounts for DMEPOS Items and Services
    Section 1834(a) of the Act mandates payment based on the lesser of 
the supplier's actual charge or a fee schedule amount for DME other 
than customized items defined at 42 CFR 414.224 and items included in a 
competitive bidding program in a competitive bidding area under section 
1847(a) of the Act. Section 1834(h) of the Act mandates payment based 
on the lesser of the supplier's actual charge or a fee schedule amount 
for most prosthetic devices, orthotics, and prosthetics other than off-
the-shelf orthotics included in a competitive bidding program in a 
competitive bidding area under section 1847(a) of the Act. Section 
1834(i) of the Act mandates payment based on the lesser of the 
supplier's actual charge or a fee schedule amount for surgical 
dressings. Section 1833(o)(2)(A) of the Act mandates payment based on 
the lesser of the supplier's actual charge or a fee schedule amount in 
accordance with section 1834(h) of the Act for custom molded shoes, 
extra-depth shoes, and inserts. Section 1842(s) of the Act authorizes 
payment based on the lesser of the supplier's actual charge or a fee 
schedule amount for parenteral and enteral nutrients, equipment, and 
supplies (PEN), other than enteral nutrients, equipment, and supplies 
included in a competitive bidding program in a competitive bidding area 
under section 1847(a) of the Act, and medical supplies, including 
splints and casts and intraocular lenses inserted in a physician's 
office. The fee schedule amounts established for these items and 
services are based on payments made previously under the reasonable 
charge payment methodology, which is set forth in section 1842(b) of 
the Act and in our regulations at 42 CFR 405.502. Generally, reasonable 
charge determinations are based on customary and prevailing charges 
derived from historic charge data. The fee schedule amounts for DME, 
prosthetic devices, orthotics, prosthetics, and custom molded shoes, 
extra-depth shoes, and inserts are based on average reasonable charges 
from 1986 and 1987. The fee schedule amounts for surgical dressings are 
based on average reasonable charges from 1992. The fee schedule amounts 
for PEN are calculated on a nationwide basis and are the lesser of the 
reasonable charges for 1995, or the reasonable charges that would have 
been used in determining payment for these items in 2002 under the 
former reasonable charge payment methodology (Sec.  414.104(b)). The 
fee schedule amounts for splints and casts are based on reasonable 
charges for 2013 and the fee schedule amounts for intraocular lenses 
inserted in a physician's office are based on reasonable charges for 
2012. In accordance with sections 1834(a)(14)(L), 1834(h)(4)(xi), and 
1842(s)(1)(B)(ii) of the Act, the DMEPOS fee schedule amounts are 
generally adjusted annually by the percentage increase in the CPI-U for 
the 12-month period ending with June 30 of the preceding year reduced 
by a productivity adjustment. The Medicare payment amount for a DMEPOS 
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 Medicare 
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.
    The statute does not specify how to calculate fee schedule amounts 
when the base reasonable charge data does not exist. As discussed later 
on, since 1989, we have used a process referred to as ``gap-filling'' 
to fill the gap in the reasonable charge data for new DMEPOS items, 
which are newly covered items or technology or items paid under 
Healthcare Common Procedure Coding System (HCPCS) codes for 
miscellaneous items. The gap-filling process is used to estimate what 
Medicare would have paid for the item under the reasonable charge 
payment methodology during the period of time from which reasonable 
charge data is used to calculate the fee schedule amounts, or the fee 
schedule ``base period'' (for example, 1986 and 1987 for DME). Various 
methods have been used by CMS and its contractors to gap-fill DMEPOS 
fee schedule amounts including use of fees for comparable items, 
supplier prices, manufacturer's suggested retail prices (MSRPs), 
wholesale prices plus a markup percentage to convert the prices to 
retail prices, or other methods. In any case where prices are used for 
gap-filling, the prices are deflated to the fee schedule base period by 
the percentage change in the consumer price index for all urban 
consumers (CPI-U) from the mid-point of the year the price is in effect 
to the mid-point of the fee schedule base period. Program guidance 
containing instructions for contractors (mainly for use by the Durable 
Medical Equipment Medicare Administrative Contractors (DME MACs)) for 
gap-filling DMEPOS fee schedule amounts is found at section 60.3 of 
chapter 23 of the Medicare Claims Processing Manual (Pub. L. 100-04). 
The instructions indicate that the DMEPOS fee schedule for items for 
which reasonable charge data were unavailable during the fee schedule 
base period are to be gap-filled using the fee schedule amounts for 
comparable items or supplier price lists with prices in effect during 
the fee schedule base period. The instructions specify that supplier 
price lists include catalogs and other retail price lists (such as 
internet retail prices) that provide information on commercial pricing 
for the item. Potential appropriate sources for such commercial pricing 
information can also include verifiable information from supplier 
invoices and non-Medicare payer data (for example, fee schedule amounts 
comprised of the median of the commercial pricing information adjusted 
as described below). Mail order catalogs are suitable sources of 
routinely available price information for items such as urological and 
ostomy supplies which require frequent replacement. We issued 
Transmittal 4130, Change Request 10924 dated September 14, 2018 which 
updated the manual instruction to clarify that supplier price lists can 
include internet retail prices or verifiable information from supplier 
invoices and non-Medicare payer data. Prior to 2018, non-Medicare payer 
data had not been included to establish gap-filled DMEPOS fee schedule 
amounts. CMS and its contractors have used internet retail prices in 
the past in addition to catalogue prices, as well as wholesale prices 
plus a retail price mark up, and on one occasion hospital

[[Page 38371]]

invoices plus a 10 percent markup as a source for commercial pricing 
information.
    In 2015, in revising the DME MAC statement of work, CMS clarified 
to the DME MACs that manufacturer's suggested retail prices (MSRP) 
should not be used for gap-filling due to CMS's concerns that MSRPs may 
not represent routinely available supplier price lists, which are 
incorporated for supplier charges in calculating fee schedule amounts 
that the statute mandates be based on historic reasonable charges. 
Although MSRPs were used in certain cases in the past to gap-fill 
DMEPOS fee schedule amounts, our experience has revealed the retail 
prices suggested by manufacturers often are inflated and do not reflect 
commercial competitive pricing, or a price that is paid to a supplier 
for furnishing items and services. Using MSRPs to gap-fill DMEPOS fee 
schedule amounts led to excessive fee schedule amounts compared to fees 
established for other DMEPOS items paid for in 1986, 1987, 1992, 2001, 
or other fee schedule base periods. In many cases, a single 
manufacturer may produce a new item, and pricing information may 
therefore be limited to the MSRP. In these situations, unlike other 
items and services paid for under Medicare, there is not yet 
independently substantiated pricing information. In addition, similar 
items are not available to create competition and to potentially limit 
the price a sole source manufacturer charges for the new item. We 
believe the MSRP may represent the amount the manufacturer charges to 
Medicare and other health insurance payers before pricing is 
established in a competitive market by suppliers furnishing the product 
and competitor products.
    Currently, when we release our program instruction to the DME MACs 
to update the DMEPOS fee schedule, we include a list of new HCPCS 
codes, which are then added to the DMEPOS fee schedule. Also, we 
release updated DMEPOS fee schedule amounts in fee schedule files to 
our contractors and available online at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule.html.
    If a HCPCS code for a new item is added and takes effect, and the 
fee schedule amounts for the new code have not yet been added to the 
DMEPOS fee schedule file, our contractors establish payment on an 
interim basis using local fee schedule amounts gap-filled in accordance 
with the program instructions at section 60.3 of chapter 23 of the 
Medicare Claims Processing Manual until the fee schedule amounts on the 
national files are available.
2. Coding for New DMEPOS Items
    The HCPCS is a standardized coding system used to process claims 
submitted to Medicare, Medicaid, and other health insurance programs. 
Level I of the HCPCS codes is comprised of Current Procedural 
Terminology (CPT) codes identifying primarily medical services and 
procedures furnished by physicians and other health care practitioners, 
published and maintained by the American Medical Association. Level II 
of the HCPCS codes primarily identifies items, supplies, services and 
certain drugs used outside the practitioner setting. Assignment of a 
HCPCS code is not a coverage determination and does not imply that any 
payer will cover the items in the code category.
    In 2001, section 531(b) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-
554) mandated procedures that permit public consultation for coding and 
payment determinations for new DMEPOS items under Medicare Part B in a 
manner consistent with the procedures established for implementing ICD-
9-CM coding modifications. As a result, beginning in 2002, after the 
HCPCS Workgroup's preliminary decision has been developed, the 
preliminary decisions are made available to the public via our website 
and public meetings are scheduled to receive public comment on the 
preliminary decisions.
    Following the HCPCS public meetings, we make a final decision on 
each new DMEPOS code request and payment category. Then, we prepare and 
release the HCPCS and DMEPOS fee schedule files and program 
instructions for the next applicable update (annual or quarterly) to 
our contractors and via our website. Also, a summary of the final 
coding and payment category decisions is made available on our website. 
See the following websites for more information:
     HCPCS Files: https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.html;
     DMEPOS Fee Schedule Files: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule.html;
     Program Instructions: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/index.html; and
     Public Meeting Summaries: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/HCPCSPublicMeetings.html.
    Typically, more than 100 applications are submitted to the CMS 
HCPCS Workgroup each year, with approximately one-third requesting new 
or revised DMEPOS codes. The number of approved new DMEPOS codes is not 
finalized until shortly before the release of the HCPCS dataset, which 
in some cases, leaves very short timeframes to prepare and release the 
updated DMEPOS fee schedule.
3. Continuity of Pricing
    Instructions for contractors addressing how to establish DMEPOS 
payment amounts following updates to HCPCS codes are contained at 
section 60.3.1 of chapter 23 of the Medicare Claims Processing Manual. 
When an item receives a new HCPCS code, it does not necessarily mean 
that Medicare payment on a fee schedule basis has never been made for 
the item described by the new code. If a new code is established, 
contractors are instructed to make every effort to determine whether 
the item has a pricing history and profile. If there is a pricing 
history, that is, the items and services described by the new code were 
paid for in the past under other codes based on the fee schedule 
amounts for the other codes, the fee schedule amounts used to pay for 
the item previously are mapped or cross walked to the new code(s) for 
the item to ensure continuity of pricing. Since there are different 
kinds of coding changes, there are various ways pricing is cross walked 
from old codes to new codes, which is addressed in our program 
instructions at section 60.3.1 of chapter 23 of the Medicare Claims 
Processing Manual. For example, when the code for an item is divided 
into multiple codes for the components of that item, the total of the 
separate fee schedule amounts established for the components must not 
be higher than the fee schedule amount for the original item. However, 
when there is a single code that describes two or more distinct 
complete items (for example, two different but related or similar 
items), and separate codes are subsequently established for each item, 
the fee schedule amounts for the single code are applied to each of the 
new codes. Conversely, when the codes for the components of a single 
item are combined in a single global code, the fee schedule amounts for 
the new code are established by totaling the fee schedule amounts used 
for the components (that is, use the total of the fee schedule amounts 
for the components as the fee schedule amount for the global code). 
However, when the codes for several

[[Page 38372]]

different items are combined into a single code, the fee schedule 
amounts for the new code are established using the average (arithmetic 
mean), weighted by allowed services, of the fee schedule amounts for 
the formerly separate codes. These instructions are used to ensure 
continuity of pricing under the Medicare program, but do not apply to 
items when a pricing history does not exist, that is, in situations 
where an item was not paid for under a HCPCS code or codes with an 
established DMEPOS fee schedule amount(s). The gap-filling process only 
applies to items not assigned to existing HCPCS codes with established 
fee schedule amounts and items that were not previously paid for by 
Medicare under either a deleted or revised HCPCS code.
4. Authority for Establishing Special Payment Limits
    Section 1842(b)(8) of the Act authorizes CMS to adjust payment 
amounts if, subject to the factors described in the statute and the 
regulations, CMS determines that such payment amounts are grossly 
excessive or grossly deficient, and therefore are not inherently 
reasonable. CMS may make a determination that would result in an 
increase or decrease of more than 15 percent of the payment amount for 
a year only if it follows all of the requirements under paragraphs (B), 
(C), and (D) of section 1842(b)(8) of the Act. Under these 
requirements, CMS must take certain factors into account, such as 
whether the payment amount does not reflect changing technology. In 
addition, section 1842(b)(9) of the Act mandates a specific process 
that CMS must follow when using this ``inherent reasonableness'' 
authority (IR authority) to adjust payment amounts by more than 15 
percent a year. CMS has established the methodology and process for 
using the IR authority at Sec. Sec.  405.502(g) and (h). Use of the IR 
authority involves many steps mandated under sections 1842(b)(8) and 
(9) of the Act, which can include consulting with supplier 
representatives before making a determination that a payment amount is 
not inherently reasonable; publishing a notice of a proposed 
determination in the Federal Register which explains the factors and 
data taken into account; a 60-day comment period; and publishing a 
final notice, again explaining the factors and data taken into account 
in making the determination. Medicare can only make payment adjustments 
for ``inherent reasonableness'' that would result in a change of more 
than 15 percent per year by going through the process outlined in the 
statute and at Sec. Sec.  405.502(g) and (h). As a result, the 
requirements under sections 1842(b)(8) and (9) of the Act regarding 
``inherent reasonableness'' adjustments are applicable to special 
payment limits established in cases where supplier or commercial prices 
used for gap-filling decrease by more than 15 percent.
    Examples of factors that may result in grossly excessive or grossly 
deficient payment amounts are set forth at Sec.  405.502(g)(1)(vii) and 
include, but are not limited to, the following:
     The market place is not competitive.
     Medicare and Medicaid are the sole or primary sources of 
payment for a category of items and services.
     The payment amounts for a category of items and services 
do not reflect changing technology, increased facility with that 
technology, or changes in acquisition, production, or supplier costs.
     The payment amounts for a category of items or services in 
a particular locality are grossly higher or lower than payment amounts 
in other comparable localities for the category of items or services.
     Payment amounts for a category of items and services are 
grossly higher or lower than acquisition or production costs for the 
category of items and services.
     There have been increases in payment amounts for an item 
or service that cannot be explained by inflation or technology.
     Payment amounts for a category of items or services are 
grossly higher or lower than payments made for the same category of 
items or services by other purchasers in the same locality.
     A new technology exists which is not reflected in the 
existing payment allowances.
    Prior to making a determination pursuant to section 1842(b)(8) of 
the Act that would result in an increase or decrease of more than 15 
percent in a payment amount for a year, CMS is required to consult with 
representatives of suppliers or other individuals who furnish an item 
or service. In addition, section 1842(b)(8)(D) of the Act mandates that 
CMS consider the potential impact of a determination pursuant to 
section 1842(b)(8) that would result in a payment amount increase or 
decrease of more than 15 percent for a year on quality, access, 
beneficiary liability, assignment rates, and participation of 
suppliers. In establishing a payment limit for a category of items or 
services, we consider the available information relevant to the 
category of items or services in order to establish a payment amount 
that is realistic and equitable. Under Sec.  405.502(g)(2), the factors 
we may consider in establishing a payment limit include the following:
     Price markup. The relationship between the retail and 
wholesale prices or manufacturer's costs of a category of items and 
services. If information on a particular category of items and services 
is not available, we may consider the price markup on a similar 
category of items and services and information on general industry 
pricing trends.
     Differences in charges. The differences in charges for a 
category of items and services made to non-Medicare and Medicare 
patients or to institutions and other large volume purchasers.
     Costs. Resources (for example, overhead, time, acquisition 
costs, production costs, and complexity) required to produce a category 
of items and services.
     Use. Imputing a reasonable rate of use for a category of 
items or services and considering unit costs based on efficient use.
     Payment amounts in other localities. Payment amounts for a 
category of items and services furnished in another locality.
    In determining whether a payment amount is grossly excessive or 
grossly deficient, and in establishing an appropriate payment amount, 
we use valid and reliable data. To ensure the use of valid and reliable 
data, we must meet the criteria set forth at Sec.  405.502(g)(4), to 
the extent applicable. This includes, but is not limited to, 
considering the cost of the services necessary to furnish a product to 
beneficiaries if wholesale costs are used.
    If we make a determination that a special payment limit is 
warranted to adjust a grossly excessive or grossly deficient payment 
amount for a category of items and services by more than 15 percent 
within a year, CMS must publish in the Federal Register a proposed and 
final notice of any special payment limits before we adopt the limits, 
with at least a 60-day period for public comments on the proposed 
notice. The proposed notice must explain the factors and data 
considered in determining the payment amount is grossly excessive or 
deficient and the factors and data considered in determining the 
special payment limits. The final notice must explain the factors and 
data considered and respond to public comment.
5. The 2006 Proposed Rule and 2018 Solicitation of Comments on Gap-
Filling
    On May 1, 2006, we published several proposed changes for the gap-
filling process in our rule titled ``Medicare

[[Page 38373]]

Program; Competitive Acquisition for Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues'' (71 FR 
25687 through 25689). The May 2006 proposed rule discussed the existing 
gap-filling process and the results of pilot assessments conducted by 
two CMS contractors to assess the benefits, effectiveness, and costs of 
several products. The purpose of the pilot assessments was to compile 
the technical information necessary to evaluate the technologies of the 
studied products with the objective of making payment and HCPCS coding 
decisions for new items. The contractors evaluated the products based 
on: (1) A functional assessment; (2) a price comparison analysis; and 
(3) a medical benefit assessment. The functional assessment involved 
evaluating a device's operations, safety, and user documentation 
relative to the Medicare population. The price comparison analysis 
involved determining how the cost of the product compared with similar 
products on the market or alternative treatment modalities. The medical 
benefit assessment focused on the effectiveness of the product in doing 
what it claims to do.
    As a result of the pilot studies, we proposed to use what we 
referred to as the ``functional technology assessment'' process, in 
part or in whole, to establish payment amounts for new items (71 FR 
25688). We also suggested that we would make every effort to use 
existing fee schedule amounts or historic Medicare payment amounts for 
new HCPCS codes; that we would retain the method of using payment 
amounts for comparable items (properly calculated fee schedule amounts, 
or supplier price lists); but that we would discontinue the practice of 
deflating supplier prices and manufacturer suggested retail prices to 
the fee schedule base period. In response to our proposal, many 
commenters recommended a delay for finalizing regulations for the gap-
filling process due to an overwhelming number of new proposals in the 
rule, including the DMEPOS competitive bidding program. In our final 
rule published on April 10, 2007 in the Federal Register titled 
``Medicare Program; Competitive Acquisition for Certain Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Other 
Issues,'' we did not finalize our proposals for regulations for the 
gap-filling process, as a result of commenters feedback. We stated that 
we would address comments and address regulations for the gap-filling 
process in future rulemaking (72 FR 17994).
    In our CY 2019 ESRD PPS 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'', we issued a request for information on 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. In 
the final rule, we summarized the comments received and stated we would 
consider these comments carefully as we contemplate future policies (83 
FR 57046 through 57047). The majority of the comments focused on the 
aspects of transparency, sources of information, and comparable items 
in the gap filling process. Overall, the commenters recommended that 
CMS increase transparency for stakeholders during the 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. Also, some commenters did 
not want CMS to include internet or catalog pricing in the 
gap[hyphen]filling process unless there is evidence that the price 
meets all Medicare criterion and includes all Medicare required 
services. The commenters stated that internet and catalog prices do not 
reflect the costs to suppliers of compliance with the many Medicare 
requirements such as supplier accreditation, in[hyphen]the[hyphen]home 
assessment, beneficiary training, and documentation, and thereby do not 
contribute to a reasonable payment level. Furthermore, commenters 
suggested developing additional guidelines and definitions for 
determining whether a Medicare covered DMEPOS item is comparable to a 
new item 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 that would factor in the 
existing market demand/share/utilization of each product and price 
included in the array of retail prices used for gap-filling using 
supplier price lists. 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 
were concerned that the calculation of a gap-filled amount for a new 
item does not reflect the utilization of an existing item.

B. Current Issues

    Concerns have been raised by manufacturers and stakeholders about 
CMS' processes for establishing fees for new DMEPOS items. In 
particular, our process for reviewing information and data when 
establishing fee schedule amounts for new DMEPOS items in some 
instances has led to confusion among some stakeholders. For example, 
some manufacturers have been confused in the past about why fee 
schedule amounts for comparable items are sometimes used to establish 
fee schedule amounts for new items and what CMS considers when 
determining whether new items are comparable to other DMEPOS items. 
Some have asked for a process that is more predictable in determining 
what sources of data CMS would use to establish fee schedule amounts 
for new DMEPOS items and services, given the amount of time and money 
associated with investing in the development of new technology for 
DMEPOS items and services.
    Major stakeholder concerns related to gap-filling DMEPOS fee 
schedule amounts have been: (1) How CMS determines that items and 
services are comparable; (2) sources of pricing data other than fees 
for comparable items; (3) timing of fee schedule calculations and use 
of interim fees; (4) public consultation; (5) pricing data and 
information integrity; and (6)

[[Page 38374]]

adjustment of newly established fees over time.
1. Code or Item Comparability Determinations
    We have heard frequently from manufacturers that do not agree that 
their newly developed DMEPOS item is comparable to older technology 
DMEPOS items and services. Using fee schedule amounts for comparable 
items to establish fee schedule amounts for new items can involve a 
number of pricing combinations including, but not limited to: (1) A one 
to one mapping where the fees for one code are used to establish the 
fees for a new code, (2) the use of fees for a combination of codes 
with established fee schedule amounts; (3) the use of fees for one or 
more codes minus the fees for one or more other codes identifying a 
missing feature(s) the newer item does not include; or (4) the use of 
one or more codes plus additional amounts for the costs of an 
additional feature(s) the newer items has that the older item(s) does 
not include. The benefit of using fee schedule amounts for comparable 
items, especially items that CMS paid for during the fee schedule base 
period, is that average reasonable charge data or pricing data that is 
closer to the fee schedule base period is used in establishing the fee 
schedule amounts, and this better reflects the requirements of the 
statute than using more recent supplier prices as a proxy for 
reasonable charge data from the past. In addition, establishing fees 
for a new item that are significantly higher than fees for comparable 
items based on reasonable charge data can result in a competitive 
advantage for the new item because the suppliers of the older item are 
paid considerably less than the suppliers of the new item even though 
the new item is comparable to the older item. This could create an 
incentive for suppliers to furnish the new item more often than the 
older item, which would create an unfair advantage for the 
manufacturer(s) of the new item.
    We undertook a review of the major components and attributes of 
DMEPOS items that we evaluate when determining whether items are 
comparable in order to develop and propose a standard for when and how 
fees for comparable items would be used to establish fees for new 
items. We identified five main categories upon which new DMEPOS items 
can be compared to older DMEPOS items: Physical components; mechanical 
components; electrical components (if applicable); function and 
intended use; and additional attributes and features.
    As shown in Table 9, a comparison can be based on, but not limited 
to, these five main components and various attributes falling under the 
five main components. When examining whether an item is comparable to 
another item, the analysis can be based on the items as a whole or its 
subcomponents. A new product does not need to be comparable within each 
category, and there is no prioritization of the categories. The 
attributes listed in Table 9 under the five main components are 
examples of various attributes CMS evaluates within each category. We 
believe that establishing a set framework and basis for identifying 
comparable items in regulation would improve the transparency and 
predictability of establishing fees for new DMEPOS items.

                    Table 9--Comparable Item Analysis
   [Any combination of, but not limited to, the categories below for a
                      device or its subcomponents]
------------------------------------------------------------------------
          Components                           Attributes
------------------------------------------------------------------------
Physical Components..........  Aesthetics, Design, Customized vs.
                                Standard, Material, Portable, Size,
                                Temperature Range/Tolerance, Weight.
Mechanical Components........  Automated vs. Manual, Brittleness,
                                Ductility, Durability, Elasticity,
                                Fatigue, Flexibility, Hardness, Load
                                Capacity, Flow-Control, Permeability,
                                Strength.
Electrical Components........  Capacitance, Conductivity, Dielectric
                                Constant, Frequency, Generator,
                                Impedance, Piezoelectric, Power, Power
                                Source, Resistance.
Function and Intended Use....  Function, Intended Use.
Additional Attributes and      ``Smart'', Alarms, Constraints, Device
 Features.                      Limitations, Disposable Parts, Features,
                                Invasive vs. Non-Invasive.
------------------------------------------------------------------------

    We believe that by establishing a basis for comparability, 
stakeholders would be better informed on how these analyses are 
performed, creating a more transparent process that stakeholders would 
better understand and which would facilitate a more efficient exchange 
of information between stakeholders and CMS on the various DMEPOS items 
and services, both old and new. We believe this would also help avoid 
situations where comparable DMEPOS items have vastly different fee 
schedule amounts or where items that are not comparable have equal fee 
schedule amounts.
2. Sources of Pricing Data Other Than Fees for Comparable Items
    When CMS is establishing the fee schedule amount for a new item 
that lacks a Medicare pricing history and CMS is unable to identify 
comparable items with existing fee schedule amounts, other sources of 
pricing data must be used to calculate the DMEPOS fee schedule amount 
for the new item. Current program instructions in section 60.3 of 
chapter 23 of the Medicare Claims Processing Manual specify that 
supplier price lists may be used in these cases, and that supplier 
price lists can include catalogs and other retail price lists (such as 
internet retail prices) that provide information on commercial pricing 
for the item. In 2018, we clarified in the instructions in section 60.3 
of the Medicare Claims Processing Manual that potential appropriate 
sources for such commercial pricing information can also include 
verifiable information from supplier invoices and non-Medicare payer 
data. Our rationale for using supplier price lists for gap-filling 
purposes is that supplier price lists provide the best estimate of what 
suppliers would have routinely charged for furnishing DMEPOS items 
during the fee schedule base period (if reasonable charge data for the 
new item is not available and comparable items with existing fee 
schedule amounts are not identified). When using supplier price lists 
to estimate what reasonable charge amounts would have been during the 
base period, CMS deflates the prices listed in supplier price lists to 
the fee schedule base period. For example, section 1834(a)(2)(B) of the 
Act mandates fee schedule amounts for inexpensive DME items based on 
the average reasonable charges for the item(s) from July 1, 1986 
through June 30, 1987. If supplier price lists are used to estimate 
what these average reasonable charges would have been

[[Page 38375]]

during the base period of 1986/87, the 2018 (for example) prices listed 
in the supplier price lists are converted to 1986/87 dollars by 
multiplying the 2018 prices by a deflation factor (.439 in this 
example) that is listed in section 60.3 of chapter 23 of the Medicare 
Claims Processing Manual. The deflation factor is equal to the 
percentage change in the consumer price index for all urban consumers 
(CPI-U) from the mid-point of the year the price is in effect (June of 
2018 in this example) to the mid-point of the fee schedule base period 
(December of 1986 in this example). So, if the 2018 price is $100, this 
price is multiplied by .439 to compute a1986/87 price of $43.90. CMS 
then applies the covered items update factors mandated by section 
1834(a)(14) of the Act for use in updating the data from the base 
period to establish current fee schedule amounts. In the example above, 
the $43.90 base fee is updated to $66.80 for 2019 if the device is a 
class II device or $74.16 if it is a class III device, after applying 
the update factors mandated by section 1834(a)(14) of the Act.
    In addition to using information from supplier or commercial price 
lists, CMS can determine the relative supplier costs of furnishing new 
DMEPOS items compared to other DMEPOS items with existing fee schedule 
amounts by using technology assessments to determine the relative cost 
of a new DMEPOS item versus older items for which Medicare fee schedule 
amounts have been established. Under this option for obtaining pricing 
information, the cost of new DMEPOS items relative to the cost of items 
with existing fee schedule amounts would be assessed and used to 
establish fee schedule amounts for the new DMEPOS items. The assessment 
would be made by biomedical engineers, certified orthotists/
prosthetists and other experts at CMS and its contractors. Payment 
amounts for new items and services under the old reasonable charge 
payment methodology were sometimes gap-filled using relative value 
scales, which filled gaps in charge data for an item based on the 
relative value or cost of the item compared to other items with charge 
data. This same concept can be used to price new DMEPOS items relative 
to existing DMEPOS items under the fee schedule. In the past, we have 
contracted with companies to conduct technology assessments, and the 
process involved analyzing samples of the product(s) being priced as 
well as older technology items. Under this option, it may be necessary 
for us to obtain samples of new items as well as existing items if the 
relative cost of the items cannot be determined without obtaining 
samples. For more complex items, it may be necessary to use a separate 
technology assessment contractor in addition to skilled CMS and 
contractor personnel such as biomedical engineers to conduct the 
technology assessment. To clarify, this option is not the same as using 
fees for comparable items, where existing fee schedule amounts for 
older items are used for newer items determined to be comparable to the 
older items. If new items are not comparable to older items with 
existing fee schedule amounts, the supplier cost of furnishing the new 
item(s) can be compared to the supplier cost of furnishing an older 
item(s) with established fee schedule amounts and the relative 
difference in the cost of the new item versus the older item(s) can be 
determined using a technology assessment.
    Once the relative cost of the new item is determined, a pricing 
percentage would be established based on the results of the technology 
assessment to establish the fee schedule amount for the new DMEPOS 
item. For example, if it is determined that the cost of a new DMEPOS 
item is approximately twice the cost of existing DMEPOS item(s), the 
pricing percentage would equal 200. Thus, if the fee schedule amount 
for an existing DMEPOS item is $500, then the fee schedule amount for 
the new DMEPOS item would be $1,000 (200 percent of $500 or $500 
multiplied by two). Another example is when it is determined that the 
cost of the new DMEPOS item is approximately 75 percent of the cost of 
the old DMEPOS item(s). For example, if the fee schedule amount for the 
old DMEPOS item is $500, then the fee schedule amount for the new 
DMEPOS item would be $375 (75 percent of $500 or $500 multiplied by 
0.75). We believe using the relative cost of new items versus older 
items keeps all DMEPOS items (old and new) on a level playing field and 
priced in accordance with the historic reasonable charges for DMEPOS in 
general. We believe this method also helps foster innovation since new 
items that cost more would be priced based on these higher costs 
relative to older items with lower costs. We propose that technology 
assessments would be used whenever we believe it is necessary to 
determine the relative cost of a new DMEPOS item compared to DMEPOS 
items that CMS paid for during the fee schedule base period. CMS would 
use these technology assessments to gap-fill fees for the new DMEPOS 
item when supplier or commercial price lists are not available or 
verifiable or do not appear to represent a reasonable relative 
difference in supplier costs of furnishing the new DMEPOS item relative 
to the supplier costs of furnishing DMEPOS items from the fee schedule 
base period. For example, if a code is added for a new type of manual 
hospital bed and supplier or commercial prices are 20 times higher than 
the fee schedule amounts for all other types of manual hospital beds, 
we would use a technology assessment of the supplier costs of 
furnishing different types of manual hospital beds to determine the 
relative supplier costs of furnishing the new type of manual hospital 
bed, which in turn would be used to establish the fee schedule amounts 
for the new type of manual hospital bed. The technology assessment is a 
tool for obtaining more information about the costs of the new item 
relative to the older items.
    To summarize, we propose to add a provision to the regulations at 
Sec.  414.236 that addresses the continuity of pricing when items are 
re-designated from one HCPCS code to another. For new items without a 
pricing history, we propose to add a provision to the regulations at 
Sec. Sec.  414.112 and 414.238 to establish five main categories of 
components or attributes of DMEPOS items that would be evaluated to 
determine if a new item is comparable to older existing item(s) for 
gap-filling purposes. If it is determined that the new item is 
comparable to the older existing item(s), we are proposing to use the 
fee schedule amounts for the older existing item(s) to establish the 
fee schedule amounts for the new item. We also propose that if it is 
determined that there are no comparable items to use for gap-filling 
purposes, the fee schedule amounts for a new item would generally be 
based on supplier or commercial price lists, deflated to the fee 
schedule base period and updated by the covered item update factors. If 
supplier or commercial price lists are not available or verifiable or 
do not appear to represent a reasonable relative difference in supplier 
costs of furnishing the new DMEPOS item relative to the supplier costs 
of furnishing DMEPOS items from the fee schedule base period, we 
propose to use technology assessments that determine the relative costs 
of the newer DMEPOS items compared to older DMEPOS item(s) to establish 
the fee schedule amounts for the newer DMEPOS items.
3. Timing of Fee Schedule Calculations and Interim Pricing
    In some cases, HCPCS codes for new DMEPOS items may take effect 
before the DMEPOS fee schedule amounts have been calculated and added 
to the national DMEPOS fee schedule files. In

[[Page 38376]]

these cases, the DME MACs and other contractors establish interim local 
fee schedule amounts in order to allow for payment of claims in 
accordance with fee schedule payment rules. We anticipate the need to 
continue the establishment of interim fees and in certain cases, an 
interim fee could be effective as long as 6 months to a year if complex 
technology assessments are needed in order to establish a fee schedule 
amount for the new item. Changes to the national DMEPOS fee schedule 
files can be made on a quarterly basis, and this can include 
corrections of errors made in calculating fee schedule amounts (see 
section 60.2 of chapter 23 of the Medicare Claims Processing Manual). 
Corrections to errors in fee schedule amounts are made on a quarterly 
basis due to limited resources and the need to test changes to the fee 
schedule files and claims processing edits and systems.
    As explained in section V.B.4 of this proposed rule, the time 
during which temporary, local fee schedule amounts may be necessary for 
payment purposes could be affected by the process used to obtain public 
consultation and feedback from stakeholders on the pricing of new 
items.
4. Public Consultation and Stakeholder Input
    Consistent with section 531(b) of BIPA, CMS obtains public 
consultation on preliminary coding and payment determinations for new 
DME items and services each year at public meetings held at CMS 
headquarters in Baltimore, Maryland. These meetings are also held to 
obtain public consultation on preliminary coding and payment 
determinations for other DMEPOS items in addition to DME. The public 
meetings for preliminary coding and payment determinations could be 
used to obtain public consultation on gap-filling issues such as the 
comparability of new items versus older items, the relative cost of new 
items versus older items, and additional information on the pricing of 
new DMEPOS items. In addition, manufacturers of new items often request 
meetings with CMS to provide information about their products, and CMS 
can reach out to manufacturers and other stakeholders for additional 
information that may be necessary in the future for pricing new DMEPOS 
items.
5. Pricing Data and Information Integrity
    Our concerns about the integrity of the data and information 
submitted by manufacturers for the purpose of assisting CMS to 
establish new DMEPOS fee schedule amounts have led CMS to review our 
process for establishing fee schedule amounts for new DMEPOS items. We 
have concerns with using supplier invoices and information for 
commercial pricing such as internet and manufacturer-submitted pricing. 
Our experience with reviewing manufacturer submitted prices and 
available information on the internet for new DMEPOS has caused CMS to 
have the following concerns about using invoices and information for 
commercial pricing:
     Internet prices may not be available or reliable, 
especially if the posted price is the manufacturer's suggested price or 
some other price that does not represent prices that are actually paid 
in the commercial markets.
     New products are often only available from one 
manufacturer that controls the market and price.
     Current invoices from suppliers may not represent the 
entire universe of prices and typically do not reflect volume 
discounts, manufacturer rebates, or other discounts that reduce the 
actual cost of the items.
     Prices from other payers may not reflect the unique costs 
and program requirements applicable to Medicare payment for DMEPOS and 
may be excessive if they represent the manufacturer suggested retail 
prices rather than negotiated lower rates.
     If the prices result in excessive payment amounts, it may 
be difficult to determine a realistic and equitable payment amount 
using the inherent reasonableness authority or lower the payment 
amounts by, for example, including the items in a competitive bidding 
program.
     Using excessive prices to calculate fee schedule amounts 
for new items would be unfair to manufacturers and suppliers of older, 
competitor products not priced using the same inflated commercial 
prices.
    Numerous challenges exist including the significant number of 
sources of pricing information: Medicare Advantage (MA) plans, private 
insurers, the Veterans Benefits Administration, Tricare, Federal 
Employee Health Plans, Medicaid state agencies, internet prices, 
catalog prices, retail store prices, and other sources. Prices for a 
particular item or service can vary significantly depending on the 
source used. If the median price paid by one group of payers (for 
example, non-Medicare payers) is significantly higher than the median 
price paid by another group of payers (for example, MA plans), not 
using or factoring in the prices from the group of payers with the 
lower prices could result in grossly excessive fee schedule amounts 
that are then difficult to adjust using the inherent reasonableness 
authority, which requires numerous time consuming and resource-
intensive steps. These are just a few of the reasons why we believe it 
is always best to use established fee schedule amounts for older items, 
if possible, and compare those older items to the newer items, rather 
than using supplier invoices and information for commercial pricing 
such as internet and manufacturer-submitted pricing to establish the 
fee schedule amounts for new items. This is also why we believe we 
should use technology assessments to price newer items if the newer 
items are not comparable to older items and available supplier invoices 
and/or commercial pricing information is either not verifiable or 
appears to be unreasonable.
6. Adjustment of Fees Over Time
    We have been consistent in applying the following guidelines once 
fee schedule amounts have been established using the gap-filling 
process and included in the DMEPOS fee schedule: (1) Fee schedule 
amounts are not changed by switching from one gap-filling method (such 
as using supplier price lists) to another gap-filling method (such as 
using fees for comparable items); and (2) fee schedule amounts are not 
changed as new items falling under the same HCPCS code. However, we 
have revised fee schedule amounts established using the gap-filling 
process when we determined that an error was made in the initial gap-
filling of the fee schedule amounts or when adjustments were made to 
the fee schedule amounts based on the payments determined under the 
DMEPOS competitive bidding program. If fee schedule amounts were gap-
filled using supplier price lists, and the prices subsequently decrease 
or increase, the gap-filled fee schedule amounts are not revised to 
reflect the changes in the prices.
    However, we recognize that this gap-filling method of using 
supplier prices could result in excessive fee schedule amounts in cases 
where the market for the new category of items is not yet competitive 
due to a limited number of manufacturers and suppliers. We now believe 
that if supplier or commercial prices are used to establish fee 
schedule amounts for new items, and the prices decrease within 5 years 
(once the market for the new items is more established), that CMS 
should gap-fill those prices again in an effort to reflect supplier 
prices from a market that is more established, stable, and competitive 
than the market and prices for the item at the time CMS initially gap-
filled the fee schedule amounts. For

[[Page 38377]]

example, most DME items furnished during the applicable 1986/87 fee 
schedule base period, such as wheelchairs, hospital beds, ventilators, 
and oxygen equipment, were covered by Medicare in 1986/87 and paid for 
on a reasonable charge basis for many years (20 years in many cases). 
Thus the fee schedule amounts calculated using average reasonable 
charges from the 1986/87 fee schedule base period(s) reflected prices 
from stable, competitive markets. In contrast, new items that are not 
comparable to older items are often made by one or a few manufacturers, 
so the market for a new item is not yet stable or competitive, 
especially as compared to the market for most DMEPOS items that have 
fee schedule amounts that were established based on reasonable charges 
during the fee schedule base period. During the various fee schedule 
base periods such as 1986/87 for DME, prosthetic devices, prosthetics 
and orthotics, most items had been on the market for many years, were 
made by multiple competing manufacturers, and were furnished by 
multiple competing suppliers in different localities throughout the 
nation. Therefore, the average reasonable charges from the fee schedule 
base period generally reflect supplier charges for furnishing items in 
a stable and competitive market.
    We believe that if supplier or commercial prices used to gap-fill 
fee schedule amounts for a new item decrease within 5 years of the 
initial gap-filling exercise, that the new, lower prices likely 
represent prices from a more stable and competitive market. We also 
believe that supplier prices from a stable and competitive market 
better represent the prices in the market for DMEPOS items covered 
during the fee schedule base period and therefore are a better proxy 
for average reasonable charges from a fee schedule base period (as 
specified in the statute) as compared to supplier or commercial prices 
when an item is brand new to the market. We believe that gap-filling a 
second time once the market for the item has become more stable and 
competitive would result in fee schedule amounts that are more 
reflective of average reasonable charges for DMEPOS items from the fee 
schedule base period. We believe CMS should conduct gap-filling the 
second time within a relatively short period of time after the fees are 
initially established (5 years) and only in cases where the result of 
the second gap-filling is a decrease in the fee schedule amounts of 
less than 15 percent. Thus, if the supplier or commercial prices used 
to establish fee schedule amounts for a new DMEPOS item decrease by any 
amount below 15 percent within 5 years of establishing the initial fee 
schedule amounts, and fee schedule amounts calculated using the new 
supplier or commercial prices would be no more than 15 percent lower 
than the initial fee schedule amounts, we believe gap-filling should be 
conducted a second time to reduce the fee schedule amounts by up to 
14.99 percent as a result of using new, lower prices from a more stable 
and competitive market. We do not believe that a similar adjustment is 
necessary to account for increases in supplier or commercial prices 
within 5 years of establishing initial fee schedule amounts since the 
fee schedule calculation methodology already includes an annual covered 
item update to address increases in costs of furnishing items and 
services over time.
    Thus we are proposing a one-time adjustment to gap-filled fee 
schedule amounts based on decreases in supplier or commercial prices. 
The statute requires CMS to establish fee schedule amounts for DMEPOS 
items and services based on average reasonable charges from a past 
period of time, generally when the market for most items was stable and 
competitive. In many cases, fee schedule amounts may be gap-filled 
using manufacturer prices or prices from other payers for new 
technology items that may only be made by one manufacturer with limited 
competition. In these situations, competition from other manufacturers 
or increases in the volume of items paid for by Medicare and other 
payers could bring down the market prices for the item within a 
relatively short period of time after the initial fee schedule amounts 
are established, creating a more stable and competitive market for the 
item, we believe that gap-filling using prices from a stable, 
competitive market is a better reflection of average reasonable charges 
for the item from the fee schedule base period. While the fee schedule 
covered item update as described in sections 1834(a)(14), 1834(h)(4), 
1834(i)(1)(B), and 1842(s)(1)(B)(ii) of the Act allow for increases to 
the fees schedule amounts that can address increases in cost of 
furnishing items and services over time or track increases in supplier 
or commercial prices, there is no corresponding covered item update 
that results in a decrease in fee schedule amounts when the market for 
a new item becomes more mature and competitive following the initial 
gap-filling of the fee schedule amounts. We also do not believe that a 
situation in which prices increase within a short period of time after 
the item comes on the market and fee schedule amounts are initially 
established for the item would be common. We therefore are not 
proposing similar one-time increases in fee schedule amounts 
established using supplier or commercial prices, however, we invite 
comments on this issue.
    We do not believe gap-filling fee schedule amounts for new items 
should be conducted a second time in situations where the prices 
decrease by 15 percent or more within 5 years of the initial gap-
filling of the fee schedule amounts. In cases where supplier or 
commercial prices used to establish original gap-filled fee schedule 
amounts increase or decrease by 15 percent or more after the initial 
fee schedule amounts are established, this would generally mean that 
the fee schedule amounts would be grossly excessive or deficient within 
the meaning of section 1842(b)(8)(A)(i)(I) of the Act. In such 
circumstances we believe that CMS could consider making an adjustment 
to the fee schedule amounts in accordance with regulations at Sec.  
405.502(g). We can also consider whether changes to the regulations at 
Sec.  405.502(g) should be made in the future to specifically address 
situations where supplier or commercial prices change by 15 percent or 
more and how this information could potentially be used to adjust fee 
schedule amounts established using supplier or commercial prices.

C. Provisions of the Proposed Rule

1. Continuity of Pricing When HCPCS Codes Are Divided or Combined
    We propose to add Sec.  414.110 under subpart C for fee schedule 
amounts for PEN and medical supplies, including splints and casts and 
intraocular lenses inserted in a physician's office, and Sec.  414.236 
under subpart D for DME, prosthetic devices, prosthetics, orthotics, 
surgical dressings, and therapeutic shoes and inserts to address the 
continuity of pricing when HCPCS codes are divided or combined. If a 
DMEPOS item is assigned a new HCPCS code, it does not necessarily mean 
that Medicare payment on a fee schedule basis has never been made for 
the item and service described by the new code. For example, Medicare 
payment on a fee schedule basis may have been made for the item under a 
different code. We propose that if a new code is added, CMS or 
contractors would make every effort to determine whether the item and 
service has a fee schedule pricing history. If there is a fee schedule 
pricing history, the previous fee schedule amounts for the old code(s) 
would be associated with, or cross walked to the

[[Page 38378]]

new code(s), to ensure continuity of pricing. Since there are different 
kinds of coding changes, the way the proposed rule would be applied 
varies. For example, when the code for an item is divided into several 
codes for the components of that item, the total of the separate fee 
schedule amounts established for the components would not be higher 
than the fee schedule amount for the original item. However, when there 
is a single code that describes two or more distinct complete items 
(for example, two different but related or similar items), and separate 
codes are subsequently established for each item, the fee schedule 
amounts that applied to the single code would continue to apply to each 
of the items described by the new codes. When the codes for the 
components of a single item are combined in a single global code, the 
fee schedule amounts for the new code would be established by adding 
the fee schedule amounts used for the components (that is, use the 
total of the fee schedule amounts for the components as the fee 
schedule amount for the global code). However, when the codes for 
several different items are combined into a single code, the fee 
schedule amounts for the new code would be established using the 
average (arithmetic mean), weighted by allowed services, of the fee 
schedule amounts for the formerly separate codes.
2. Establishing Fee Schedule Amounts for New HCPCS Codes for Items and 
Services Without a Fee Schedule Pricing History
    We are proposing to add Sec.  414.112 under subpart C for fee 
schedule amounts for PEN and medical supplies, including splints and 
casts and intraocular lenses inserted in a physician's office, and 
Sec.  414.238 under subpart D for DME, prosthetic devices, prosthetics, 
orthotics, surgical dressings, and therapeutic shoes and inserts to 
address the calculation of fee schedule amounts for new HCPCS codes for 
items and services without a fee schedule pricing history. We propose 
that if a HCPCS code is new and describes items and services that do 
not have a fee schedule pricing history, the fee schedule amounts for 
the new code would be established whenever possible using fees for 
comparable items with existing fee schedule amounts. We propose that 
items with existing fee schedule amounts are determined to be 
comparable to the new items and services based on a comparison of: 
Physical components; mechanical components; electrical components; 
function and intended use; and additional attributes and features. We 
propose that if there are no items with existing fee schedule amounts 
that are comparable to the items and services under the new code, the 
fee schedule amounts for the new code would be established using 
supplier or commercial price lists or technology assessments if 
supplier or commercial price lists are not available or verifiable or 
do not appear to represent a reasonable relative difference in supplier 
costs of furnishing the new DMEPOS item relative to the supplier costs 
of furnishing DMEPOS items from the fee schedule base period.
    We propose that if items with existing fee schedule amounts that 
are comparable to the new item are not identified, the fee schedule 
amounts for the new item would be established using supplier or 
commercial price lists. However, if the supplier or commercial price 
lists are not available or verifiable or do not appear to represent a 
reasonable relative difference in supplier costs of furnishing the new 
DMEPOS item relative to the supplier costs of furnishing DMEPOS items 
from the fee schedule base period, we propose that the fee schedule 
amounts for the new item would be established using technology 
assessments. We propose that supplier or commercial price lists would 
include catalogs and other retail price lists (such as internet retail 
prices) that provide information on commercial pricing for the item, 
which could include payments made by Medicare Advantage plans, as well 
as verifiable information from supplier invoices and non-Medicare payer 
data. We propose that if the only available price information is from a 
period other than the fee schedule base period, deflation factors would 
be applied against current pricing in order to approximate the base 
period price. We propose that the annual deflation factors would be 
specified in program instructions and would be based on the percentage 
change in the consumer price index for all urban consumers (CPI-U) from 
the mid-point of the year the prices are in effect to the mid-point of 
the fee schedule base period, as calculated using the following 
formula:

((base CPI-U minus current CPI-U) divided by current CPI-U) plus one

    The deflated amounts would then be considered an approximation to 
average reasonable charges from the fee schedule base period and would 
be increased by the annual covered item update factors specified in 
statute for use in updating average reasonable charges from the fee 
schedule base period, such as the covered item update factors specified 
for DME at section 1834(a)(14) of the Act. We propose that, if within 5 
years of establishing fee schedule amounts using supplier or commercial 
prices, the supplier or commercial prices decrease by less than 15 
percent, a one-time adjustment to the fee schedule amounts would be 
made using the new prices. As a result of the market for the new item 
becoming more established over time, the new prices would be used to 
establish the new fee schedule amounts in the same way that the older 
prices were used, including application of the deflation formula. 
Again, supplier price lists can include catalogs and other retail price 
lists (such as internet retail prices) that provide information on 
commercial pricing for the item. Potential appropriate sources for such 
commercial pricing information can also include verifiable information 
from supplier invoices and non-Medicare payer data. We are not 
proposing a similar adjustment if supplier or commercial prices 
increase by less than 15 percent, but we invite comments on this issue.
    We propose that fee schedule amounts for items and services 
described by new HCPCS codes without a fee schedule pricing history 
that are not comparable to items and services with existing fee 
schedule amounts may also be established using technology assessments. 
We propose that these technology assessments would be performed by 
biomedical engineers, certified orthotists and prosthetists, and CMS, 
and others knowledgeable about DMEPOS items and services, to determine 
the relative cost of the items and services described by the new codes 
to items and services with existing fee schedule amounts. We propose 
that a pricing percentage would be established based on the results of 
the technology assessment and would be used to establish the fee 
schedule amounts for the new code(s). For example, if it is determined 
that the cost of the item and services described by the new code(s) is 
approximately twice the cost of the items and services described by the 
code(s) with existing fee schedule amounts, the pricing percentage 
would be 200, and the current fee schedule amount for the old code(s) 
would be multiplied by two to establish the fee schedule amounts for 
the new code(s). Or, if it is determined that the cost of the items and 
services described by the new code(s) is approximately 75 percent of 
the cost of the items and services described by the code(s) with 
existing fee schedule amounts, the pricing percentage would be 75. The 
pricing percentages would be applied to the current fee schedule 
amounts for

[[Page 38379]]

HCPCS codes with existing fee schedule amounts to calculate the fee 
schedule amounts for new HCPCS codes without a fee schedule pricing 
history.
    We propose that technology assessments would be used when we 
believe it is necessary to determine the relative cost of a new item 
compared to items that were available and had established fee schedule 
amounts using data from the fee schedule base period in order to gap-
fill fees for the new item when supplier or commercial price lists are 
not available or verifiable or do not appear to represent a reasonable 
relative difference in supplier costs of furnishing the new DMEPOS item 
relative to the supplier costs of furnishing DMEPOS items from the fee 
schedule base period. Technology assessments are a tool for obtaining 
more information about the relative costs of the new item to the older 
items.
    We are soliciting comments on these proposals.

VI. Standard Elements for a Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Order; Master List of DMEPOS Items 
Potentially Subject to Face-to-Face Encounter and Written Order Prior 
to Delivery and/or Prior Authorization Requirements

A. Background

    The Comprehensive Error Rate Testing (CERT) program measures 
improper payments in the Medicare Fee-For-Service (FFS) program. CERT 
is designed to comply with the Improper Payments Information Act of 
2002 (IPIA) (Pub. L. 107-300), as amended by the Improper Payments 
Elimination and Recovery Act of 2010 (IPERA) (Pub. L. 111-204), as 
updated by the Improper Payments Elimination and Recovery Improvement 
Act of 2012 (IPERIA) (Pub. L. 112-248). As stated in the CERT 2018 
Medicare FFS Supplemental Improper Payment Data report, Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) claims had an 
improper payment rate of 35.5 percent, accounting for approximately 8.2 
percent of the overall Medicare FFS improper payment rate.\38\
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    \38\ 2018 Medicare Fee-for-Service Supplemental Improper Payment 
Data: https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/CERT-Reports-Items/2018MedicareFFSSupplementalImproperPaymentData.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=descending. Accessed January 8, 2019.
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    The Department of Health and Human Services Office of Inspector 
General (HHS-OIG) provides independent and objective oversight that 
promotes economy, efficiency, and effectiveness in the programs and 
operations of the HHS. HHS-OIG's mission is to protect the integrity of 
HHS programs and is carried out through a network of audits, 
investigations, and inspections.
    The Government Accountability Office (GAO) audits the Centers for 
Medicare & Medicaid Services' (CMS') operations to determine whether 
federal funds are being spent efficiently and effectively, as well as 
to identify areas where Medicare and other CMS programs may be 
vulnerable to fraud and/or improper payments.
    A number of HHS-OIG and GAO reports have focused on waste, fraud, 
and abuse within the DMEPOS sector, which has led to the enactment of 
legislation (as outlined in the background section of this proposed 
regulation) to safeguard beneficiaries and the Medicare Trust Funds. In 
an effort to reduce improper payments, CMS has issued regulations and 
sub-regulatory guidance to clarify the payment rules for Medicare 
DMEPOS suppliers rendering items and submitting claims for payment.
    Currently, the scope of payment for medical supplies, appliances, 
and devices, including prosthetics and orthotics, are defined at 42 CFR 
410.36(a) and the scope and certain conditions for payment of durable 
medical equipment (DME) are described at Sec.  410.38. Medicare pays 
for DMEPOS items only if the beneficiary's medical record contains 
sufficient documentation of the beneficiary's medical condition to 
support the need for the type and quantity of items ordered. In 
addition, other conditions of payment must be satisfied for the claim 
to be paid. These conditions of payment vary by item, but are specified 
in statute and in our regulations. They are further detailed in our 
manuals and in local and national coverage determinations.
    The purpose of this rule is to simplify and revise conditions of 
payment aimed at reducing unnecessary utilization and aberrant billing 
for items described in Sec.  410.36(a) and Sec.  410.38. To avoid 
differing conditions of payment for different items paid under the 
DMEPOS Fee Schedule, we propose the conditions of payment described in 
proposed Sec.  410.38(d), would also be applied to items specified 
under Sec.  410.36(a).
1. Face-to-Face and Prescription Requirements for Power Mobility 
Devices (PMDs)
    Section 302(a)(2) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173), in part, added 
conditions of coverage specific to power mobility devices (PMDs) in 
section 1834(a)(1)(E)(iv) of the Social Security Act (the Act), that 
specify payment may not be made for a covered item consisting of a 
motorized or power wheelchair unless a physician (as defined in section 
1861(r)(1) of the Act), physician assistant (PA), nurse practitioner 
(NP), or clinical nurse specialist (CNS) (as such non-physician 
practitioners are defined in section 1861(aa)(5) of the Act) has 
conducted a face-to-face examination of the individual and written a 
prescription for the item.
    On April 5, 2006, we published a final rule in the Federal Register 
titled ``Medicare Program; Conditions for Payment of Power Mobility 
Devices, including Power Wheelchairs and Power-Operated Vehicles'' (71 
FR 17021), hereinafter referred to as ``April 2006 final rule,'' to 
implement the requirements for a face-to-face examination and written 
prescription in accordance with the authorizing legislation. In Sec.  
410.38(c)(2)(ii), we required that prescriptions for PMDs must be in 
writing, signed and dated by the treating practitioner who performed 
the face-to-face examination, and received by the supplier within 45 
days after the face-to-face examination. The April 2006 final rule 
mandated that the supplier receive supporting documentation, including 
pertinent parts of the beneficiary's medical record to support the 
medical necessity for the PMD, within 45 days after the face-to-face 
examination. It provided that the PMD prescription must include a 7-
element order composed of--(1) The beneficiary's name; (2) the date of 
the face-to-face examination; (3) the diagnoses and conditions that the 
PMD is expected to modify; (4) a description of the item (for example, 
a narrative description of the specific type of PMD; (5) the length of 
need; (6) the physician or treating practitioner's signature; and (7) 
the date the prescription is written.
2. Face-to-Face and Prescription Requirements for Specified DMEPOS
    Section 6407 of the Patient Protection and Affordable Care Act of 
2010 (Pub. L. 111-148) amended section 1834(a)(11)(B) of the Act, which 
already required a written order, to also require that a physician, PA, 
NP, or CNS have a face-to-face encounter with the beneficiary within a 
6-month period preceding the written order for certain DMEPOS, or other 
reasonable timeframe as determined by the Secretary of the Department 
of Health and Human Services (the Secretary).
    On November 16, 2012, we published a final rule with comment period 
in the

[[Page 38380]]

Federal Register titled ``Medicare Program; Revisions to Payment 
Policies Under the Physician Fee Schedule, DME Face-to-Face Encounters, 
Elimination of the Requirement for Termination of Non-Random Prepayment 
Complex Medical Review and Other Revisions to Part B for CY 2013'' (77 
FR 68892) hereinafter referred to as ``November 2012 final rule,'' that 
established a list of DME items subject to the face-to-face encounter 
and written order prior to delivery requirements as a condition of 
payment. CMS selected items for this list based on an item having met 
one of the following four criteria: (1) Items that required a written 
order prior to delivery per instructions in the Medicare Program 
Integrity Manual (at the time of rulemaking); (2) items that cost more 
than $1,000 (at the time of rulemaking in 2012); (3) items CMS, based 
on experience and recommendations from the DME MACs, believed were 
particularly susceptible to fraud, waste, and abuse; and (4) items 
determined by CMS as vulnerable to fraud, waste and abuse based on 
reports of the OIG, GAO, or other oversight entities.
    Section 504 of the Medicare Access and Children's Health Insurance 
Program (CHIP) Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) 
amended section 1834(a)(11)(B)(ii) of the Act to eliminate the 
requirement that only physicians could document face-to-face 
encounters, including those conducted by NPs, PAs, or CNSs. In effect, 
this change in the law permits NPs, PAs, or CNSs to document their 
face-to-face encounter, without the co-signature of a physician. For 
the purpose of this proposed rule, we use the term ``practitioner'' as 
an all-inclusive term to capture physicians and non-physician 
practitioners (that is, NPs, PAs, and CNSs).
    Section 1834(a)(11)(B)(ii) of the Act, as amended by section 504 of 
MACRA, mandates that the Secretary require for certain items of DMEPOS 
(as identified by the Secretary) a written order pursuant to a 
physician, a PA, an NP, or a CNS (as these three terms are defined in 
section 1861 of the Act) documenting that such a physician, PA, NP, or 
CNS has had a face-to-face encounter (including through use of 
telehealth under section 1834 (m) of the Act and other than with 
respect to encounters that are incident to services involved) with the 
individual involved during the 6-month period preceding such written 
order, or other reasonable timeframe as determined by the Secretary.
    Our regulations at Sec.  410.38(g)(4) require written orders for 
certain specified covered items, as selected per the regulatory 
instruction in Sec.  410.38(g)(2), to contain 5 elements: (1) The 
beneficiary's name; (2) the item of DME ordered; (3) the signature of 
the prescribing practitioner; (4) the prescribing practitioner National 
Provider Identifier (NPI); and (5) the date of the order.
3. Subregulatory Requirements for Orders and Face-to-Face Encounters 
for Other DMEPOS
    CMS through subregulatory guidance developed standards for orders 
for DMEPOS items not included on the list of specified covered items 
requiring a written order prior to delivery and a face-to-face 
encounter. In addition, certain items of DMEPOS require face-to-face 
encounters in item-specific coverage requirements, such as those in the 
MAC-developed local coverage determinations.
4. Prior Authorization
    The Medicare Prior Authorization of PMDs Demonstration was 
initially implemented in 2012 in 7 states and subsequently extended in 
2014 to 12 additional states (for 19 states in total) until its 
completion in August of 2018. For additional information about this 
demonstration, see the notice we published in the Federal Register on 
August 3, 2012 (77 FR 46439).
    Based on early signs of the demonstration's promising results, on 
December 30, 2015 we published a final rule in the Federal Register 
titled ``Medicare Program; Prior Authorization Process for Certain 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' (80 
FR 81674), hereinafter referred to as the ``December 2015 final rule,'' 
that established a permanent prior authorization program nationally. 
The December 2015 final rule was based on the authority outlined in 
section 1834(a)(15) of the Act, which permits the Secretary to develop 
and periodically update a list of DMEPOS items that the Secretary 
determines, on the basis of prior payment experience, are frequently 
subject to unnecessary utilization and to develop a prior authorization 
process for these items. Specifically, the December 2015 final rule 
established a new provision at Sec.  414.234 that specified a process 
for the prior authorization of DMEPOS items. The provision interpreted 
``frequently subject to unnecessary utilization'' to include items on 
the DMEPOS fee schedule with an average purchase fee of $1,000 
(adjusted annually for inflation using consumer price index for all 
urban consumers (CPI-U)) or greater, or an average rental fee schedule 
of $100 (adjusted annually for inflation using CPI-U) or greater, that 
also met one of the following two criteria: (1) The item has been 
identified as having a high rate of fraud or unnecessary utilization in 
a report that is national in scope from 2007 or later, as published by 
the OIG or the GAO; or (2) the item was listed in the 2011 or later 
CERT program's Annual Medicare FFS Improper Payment Rate DME and/or 
DMEPOS Service Specific Report(s). Section 414.234(b) lists DMEPOS 
items that met these criteria on a ``Master List of Items Frequently 
Subject to Unnecessary Utilization.'' Placement on the Master List 
makes an item eligible for CMS to require prior authorization as a 
condition of payment. CMS selects items from the Master List to require 
prior authorization as a condition of payment and publishes notice of 
such items in the Federal Register. Items on the Master List are 
updated annually, based on payment thresholds and changes in 
vulnerability reports, as well as other factors described in Sec.  
414.234.
    We note that burden estimates associated with prior authorization 
are related to the time and effort necessary for the submitter to 
locate and obtain the supporting documentation for the prior 
authorization request and to forward the materials to the contractor 
for medical review. Prior authorization does not change documentation 
requirements specified in policy or who originates the documentation. 
The associated information collection (OMB Control number 0938-1293) 
was revised and OMB approved the revision on March 6, 2019.
5. Overview
    Over time, the implementation of the aforementioned overlapping 
rules and guidance may have created unintended confusion for some 
providers and suppliers and contributed to unintended noncompliance. We 
continue to believe that practitioner involvement in the DMEPOS 
ordering process, through the face-to-face and written order 
requirements assists in limiting waste, fraud, and abuse. We believe 
practitioner involvement also helps to ensure that beneficiaries can 
access DMEPOS items to meet their specific needs. In addition, we 
maintain that the explicit identification of information to be included 
in a written order/prescription, for payment purposes, promotes 
uniformity among practitioners and precision in rendering intended 
items. It also supports our program integrity goals of limiting 
improper payments and fraudulent or abusive activities by having 
documentation of practitioner oversight

[[Page 38381]]

and standardized ordering requirements. Likewise, prior authorization 
supports ongoing efforts to safeguard beneficiaries' access to 
medically necessary items and services, while reducing improper 
Medicare billing and payments. This is important because documentation 
of practitioner involvement, including their orders for DMEPOS items 
and documented medical necessity (as assessed under prior 
authorization), are all used to support proper Medicare payment for 
DMEPOS items.
    The purpose of this subsequent proposal is to streamline the 
existing requirements and reduce provider or supplier confusion, while 
maintaining the concepts of practitioner involvement, order 
requirements, and a prior authorization process. We believe 
streamlining our requirements would further our efforts to reduce 
waste, fraud, and abuse by promoting a better understanding of our 
conditions of payment, which may result in increased compliance.

B. Provisions of the Proposed Regulations

1. Technical Corrections to Sec.  410.38(a) and (b)
    We propose to make technical changes to Sec.  410.38 by adding 
headings for paragraphs (a) and (b), and to update obsolete language 
under paragraph (a). For paragraphs (a) and (b), we propose the 
headings as ``General scope'' and ``Institutions that may not qualify 
as the patient's home,'' respectively. Paragraph (a) addresses the 
general scope of the DME benefit, but includes outdated language 
related to the Medicare payment rules for DME, which are more 
appropriately addressed under Sec. Sec.  414.210 and 414.408. In 
addition, the terms ``iron lungs'' and ``oxygen tents'' refer to 
obsolete DME technology that is no longer in use. We are therefore 
proposing to revise Sec.  410.38(a) to remove language related to 
payment rules for DME and to replace the terms ``iron lungs'' and 
``oxygen tents'' with ``ventilators'' and ``oxygen equipment,'' 
respectively.
2. Definitions
    We are proposing to update Sec.  410.38(c) to include definitions 
related to certain requirements for the DMEPOS benefit.
    We are proposing to add new definitions, redesignate existing 
definitions within the regulatory text, and amend existing definitions. 
We believe these changes would promote transparency and create uniform 
definitions applicable across the DMEPOS benefit and consequently, 
increase understanding of DMEPOS payment requirements, and may result 
in increased compliance.
    We propose at Sec.  410.38(c) to include the following terms:
     Physician means a practitioner defined in section 
1861(r)(1) of the Act. We are proposing this definition as paragraph 
(c)(1) and we note that it is same as our current definition of 
``physician'' in Sec.  410.38.
     Treating practitioner means both physicians, as defined in 
section 1861(r)(1) of the Act, and non-physician practitioners (that 
is, PAs, NPs, and CNSs) defined in section 1861(aa)(5) of the Act. This 
definition is consistent with the practitioners permitted to perform 
and document the face-to-face encounter pursuant to section 
1834(a)(11)(B) of the Act. We are proposing this definition as 
paragraph (c)(2).
     DMEPOS supplier means an entity with a valid Medicare 
supplier number that furnishes durable medical equipment prosthetics 
orthotics and/or supplies including an entity that furnishes these 
items through the mail. We have a similar definition in our current 
regulation but Sec.  410.38 required revisions to accommodate the 
proposed unified conditions of payment. We are proposing this 
definition as paragraph (c)(3).
     Written order/prescription means an order/prescription 
that is a written communication from a treating practitioner that 
documents the need for a beneficiary to be provided an item of DMEPOS. 
All DMEPOS items require a written order/prescription to be 
communicated to the supplier prior to claim submission. In the case of 
items appearing on the Required Face-to-Face Encounter and Written 
Order Prior to Delivery List, the written order/prescription must 
additionally be communicated to the supplier before the delivery of the 
item. As discussed further in this proposed rule, we would standardize 
the elements of written orders/prescriptions provided for DMEPOS. We 
are proposing this definition as paragraph (c)(4).
     Face-to-face encounter means an in-person or telehealth 
encounter between the treating practitioner and the beneficiary. The 
face-to-face encounter is used for the purpose of gathering subjective 
and objective information associated with diagnosing, treating, or 
managing a clinical condition for which the DMEPOS is ordered. As 
discussed further in this proposed rule, we would standardize the face-
to-face and documentation requirements for certain DMEPOS. We are 
proposing this definition as paragraph (c)(5).
     Power Mobility Device (PMD) means a covered item of DME 
that is in a class of wheelchairs that includes a power wheelchair (a 
four-wheeled motorized vehicle whose steering is operated by an 
electronic device or a joystick to control direction and turning) or a 
power-operated vehicle (a three or four-wheeled motorized scooter that 
is operated by a tiller) that a beneficiary uses in the home. Our 
proposal is the same as our current regulatory definition of this term. 
Section 410.38(c)(1) required reformatting to accommodate the proposed 
unified conditions of payment and therefore, we are proposing this 
definition as paragraph (c)(6).
     Master List of DMEPOS Items Potentially Subject to Face-
To-Face Encounter and Written Orders Prior to Delivery and/or Prior 
Authorization Requirements, referred to as the ``Master List'' means 
items of DMEPOS that CMS has identified in accordance with sections 
1834(a)(11)(B) and 1834(a)(15) of the Act. The criteria for this list 
are specified in proposed Sec.  414.234(b). The Master List shall serve 
as a library of DMEPOS items from which items may be selected for 
inclusion on the Required Face-to-Face Encounter and Written Order 
Prior to Delivery List and/or the Required Prior Authorization List. We 
are proposing this definition as paragraph (c)(7).
     Required Face-to-Face Encounter and Written Order Prior to 
Delivery List means a list of DMEPOS items selected from the Master 
List and subject to the requirements of a Face-to-Face Encounter and 
Written Order Prior to Delivery, and communicated to the public via a 
60-day Federal Register notice. When selecting items from the Master 
List for inclusion on the Required Face-to-Face Encounter and Written 
Order Prior to Delivery List, CMS may consider factors such as 
operational limitations, item utilization, cost-benefit analysis (for 
example, comparing the cost of review versus the anticipated amount of 
improper payment identified), emerging trends (for example, billing 
patterns, medical review findings,) vulnerabilities identified in 
official agency reports, or other analysis. We are proposing this 
definition as paragraph (c)(8). We note that Required Face-to-Face 
Encounter and Written Order Prior to Delivery List is distinct from the 
``Required Prior Authorization List,'' as defined in existing Sec.  
414.234(c)(1)(i).

[[Page 38382]]

3. Master List
a. Creating the Master List
    In the April 2006 final rule, we established face-to-face 
examination and written order prior to delivery requirements for PMDs.
    In the November 2012 final rule (77 FR 68892), we created a list of 
Specified Covered Items always subject to face-to-face encounter and 
written order prior to delivery requirements based on separate 
inclusion criteria currently outlined in Sec.  410.38.
    In the December 2015 final rule (80 FR 81674), we created a 
``Master List of Items Frequently Subject to Unnecessary Utilization'' 
based on inclusion criteria found at Sec.  414.234 that would 
potentially be subject to prior authorization upon selection. We 
propose to create one list of items known as the ``Master List of 
DMEPOS Items Potentially Subject to Face-To-Face Encounter and Written 
Order Prior to Delivery and/or Prior Authorization Requirements,'' or 
the ``Master List,'' and specify the criteria for this list in Sec.  
414.234.
    Our proposal would harmonize the resultant three lists created by 
the former rules and develop one master list of items potentially 
subject to prior authorization and/or the face-to-face encounter and 
written order prior to delivery requirement. In determining DMEPOS 
appropriate for inclusion in the Master List, we believe there to be 
inherent similarities in those items posing vulnerabilities mitigated 
by additional practitioner oversight (face-to-face encounters and 
written orders prior to delivery) and those items posing 
vulnerabilities mitigated by prior authorization. Therefore, we believe 
it is appropriate for the Master List to include both those items that 
may potentially be subject to the face-to-face encounter and written 
order prior to delivery requirements as conditions of payment upon 
selection, and those items that may potentially be subject to prior 
authorization as a condition of payment upon selection. As such, we 
propose to have a single Master List of items potentially subject to 
face-to-face and written order prior to delivery and/or prior 
authorization requirements. (See Table 10: Proposed Master List Of 
DMEPOS Items Potentially Subject to a Face-To-Face Encounter and 
Written Order Prior To Delivery and/or Prior Authorization 
Requirements.) We note that prosthetic devices and orthotic and 
prosthetic items have the same requirements under section 1834(a)(11) 
of the Act as other items of DME have in statute. Section 1834(h)(3) of 
the Act requires that section 1834(a)(11) of the Act apply to 
prosthetic devices, orthotics, and prosthetics in the same manner as it 
applies to items of DME. Therefore, we are proposing the items 
identified in Sec.  410.36(a) would be subject to the requirements 
identified in proposed Sec.  410.38.
    While the regulatory requirements used to create the resultant 
three lists (outlined in the April 2006, November 2012, and December 
2015 final rules) were inherently distinct and conformed to different 
legislative mandates, we nonetheless assessed the items captured by 
those individual lists to determine whether the items are included in 
the new proposed inclusion criteria and resultant Master List. We 
compared the proposed Master List to both those items of DME that 
require a face-to-face encounter and written order prior to delivery 
due to (i) the statutory requirements for all PMDs or (ii) the list of 
specified covered items of DME that we established in accordance with 
section 1834(a)(11)(B) of the Act. We found that 103 items currently 
captured as either a PMD or included in the list published in the 
November 2012 rule would not be included in the proposed Master List. 
We further identified there are 306 items potentially subject to a 
face-to-face encounter and a written order prior to delivery under the 
proposed Master List that do not require it under our current 
conditions of payment. The remainder of items on the proposed Master 
List are both currently subject to a face-to-face encounter and a 
written order prior to delivery requirements as a condition of payment, 
and potentially would be subject to these conditions of payment under 
our proposal. All 135 items on the current list potentially subject to 
prior authorization are also included in our proposed Master List. This 
proposal would outline the inclusion criteria that developed the 
proposed Master List of 413 items potentially subject to these 
conditions of payment.
    While the Master List created by this proposed rule would increase 
the number of DMEPOS items potentially eligible to be selected and 
added to the Required Prior Authorization list (which requires a 
technical update to Paperwork Reduction Act Information Collection CMS-
10524; OMB-0938-1293,) there is no newly identified burden, no change 
in the required documentation associated with prior authorization and 
no plans to exponentially increase the number of items subject to 
required prior authorization in the near future.
    We propose at Sec.  414.234(b)(1) that items that meet the 
following criteria would be added to the Master List:
     Any DMEPOS items included in the DMEPOS Fee Schedule that 
have an average purchase fee of $500 (adjusted annually for inflation 
using CPI-U, and reduced by the 10-year moving average of changes in 
annual economy-wide private nonfarm business multifactor productivity 
(MFP) (as projected by the Secretary for the 10-year period ending with 
the applicable fiscal year (FY), year, cost reporting period, or other 
annual period)) or greater, or an average monthly rental fee schedule 
of $50 (adjusted annually for inflation using CPI-U, and reduced by the 
10-year moving average of changes in annual economy-wide private 
nonfarm business MFP (as projected by the Secretary for the 10-year 
period ending with the applicable FY, year, cost reporting period, or 
other annual period)) or greater, or are identified as accounting for 
at least 1.5 percent of Medicare expenditures for all DMEPOS items over 
a recent 12-month period, that are:
    ++ Identified as having a high rate of potential fraud or 
unnecessary utilization in an OIG or GAO report that is national in 
scope and published in 2015 or later, or
    ++ Listed in the CERT 2018 or later Medicare FFS Supplemental 
Improper Payment Data report as having a high improper payment rate.
     The annual Master List updates shall include any items 
with at least 1,000 claims and 1 million dollars in payments during a 
recent 12-month period that are determined to have aberrant billing 
patterns and lack explanatory contributing factors (for example, new 
technology or coverage policies). Items with aberrant billing patterns 
would be identified as those items with payments during a 12-month 
timeframe that exceed payments made during the preceding 12-months, by 
the greater of:
    ++ Double the percent change of all DMEPOS claim payments for items 
that meet the above claim and payment criteria, from the preceding 12-
month period, or
    ++ exceeding a 30 percent increase in payments for the item from 
the preceding 12-month period.
     Any item statutorily requiring a face-to-face encounter, a 
written order prior to delivery, or prior authorization.
    The following hypothetical data patterns are not factual, but 
rather provided for exemplary purposes, to demonstrate how data would 
be assessed in coordination with our new criteria for identifying 
items, subject to aberrant billing patterns and having a lack of 
explanatory contributing factors, that would be appropriate for 
inclusion in the Master List:

[[Page 38383]]

    Example 1: After removing any item for which there are less than 
1,000 claims billed or less than $1 million paid from CY 2018, there 
were $6.2 billion in total payments for all DMEPOS items. There were 
$5.6 billion in total payments for all DMEPOS items in the prior 12-
month period (CY 2017). The percent change in payments between CY 2017 
and CY 2018 is 10.7 percent. The doubled percent change is 21.4 
percent.

--DMEPOS Item X had $3.2 million in payments in CY 2018 and $2.4 
million in payments in CY 2017. This is a 33.3 percent change in 
payment for DMEPOS Item X. Therefore, Item X would be added to the 
Master List since it exceeds a 30 percent increase in payments, which 
is greater than double the percent change of all DMEPOS claim payments, 
for items that meet the claim and payment criteria (more than 1,000 
claims billed or $1 million paid), from the preceding 12-month period.
--DMEPOS Item Y had $17.1 million in payments in CY 2018 and $13.4 
million in payments in CY 2017. This is a 27.6 percent change in 
payment for DMEPOS Item Y. Therefore, Item Y would not be added to the 
Master List since it is less than 30 percent.

    Example 2: After removing any item for which there are less than 
1,000 claims billed or less than $1 million paid from CY 2018, there 
were $6.5 billion in total payments for all DMEPOS items. There were 
$5.5 billion in total payments for all DMEPOS items in the prior 12-
month period (CY 2017). The percent change in payments between CY 2017 
and CY 2018 is 18.2 percent. The doubled percent change is 36.4 
percent.

--DMEPOS Item X had $20.4 million in payments in CY 2018 and $14.3 
million in payments in CY 2017. This is a 42.7 percent change in 
payment for DMEPOS Item X. Therefore, Item X would be added to the 
Master List since it exceeds a 36.4 percent increase in payments which 
is more than double the percent change in payment in the preceding 12-
month period, and is greater than 30 percent.
--DMEPOS Item Y had $3.2 million in payments in CY 2018 and $2.4 
million in payments in CY 2017. This is a 33.3 percent change in 
payment for DMEPOS Item Y. Therefore, Item Y does not meet the 
inclusion criteria since it is less than 36.4 percent or double the 
percent change in payment in the preceding 12-month period.

    The proposed criteria adheres to the statutory language in section 
1834(a)(11)(B) of the Act, which allows us to specify covered items for 
the face-to-face and written order prior to delivery requirements, and 
section 1834(a)(15) of the Act, which provides discretion for the 
Secretary to develop and periodically update a list of items that on 
the basis of prior payment experience, are frequently subject to 
unnecessary utilization.
    We also note that under our proposal, any item that by statute 
requires a face-to-face encounter, a written order prior to delivery, 
or prior authorization would be added to the Master List and 
potentially subject to any of these requirements. For example, in 
accordance with section 1834(a)(1)(E)(iv) of the Act, payment may not 
be made for motorized or power wheelchairs unless there is a face-to-
face encounter and a written order prior to delivery. Under our 
proposal, motorized and power wheelchairs would also potentially be 
subject to the prior authorization requirement. We think this is 
appropriate because any item statutorily subject to additional program 
integrity measures can reasonably be assumed to be ``frequently subject 
to unnecessary utilization'' (the standard for prior authorization in 
section 1834(a)(15)) and therefore should be included on the Master 
List.
    In addition, we believe that proposing criteria based on (1) cost, 
(2) spending thresholds, and (3) data conveying possible 
overutilization and/or abuse allows us to more effectively focus our 
program integrity efforts. While the November 2012 and December 2015 
final rules included higher cost thresholds ($1,000 purchase/$100 
rental thresholds), we note that programmatic changes, including 
competitive bidding, had the overall impact of lowering the payment 
amount for certain items, which is the reason we are proposing to lower 
these cost thresholds. We are proposing the $500 purchase/$50 rental 
thresholds based on analysis of the current fee schedule cost of DMEPOS 
items when compared with known vulnerabilities. This threshold captures 
items of known vulnerability, as previously identified and included in 
the Master List of items potentially subject to prior authorization, 
while remaining cognizant of the overall impact to DMEPOS items. To 
select the cumulative threshold, we identified low cost items with a 
significant cumulative impact on the Trust Fund. We then found that 
approximately the top 10 items individually account for at least 1.5 
percent of DMEPOS allowed costs. We accordingly are proposing 1.5 
percent to capture the items with the highest allowed amounts, while 
not creating an overly inclusive list. However, we recognize that 
item(s) may fail to meet the $500 purchase, $50 rental, or cumulative 
cost thresholds identified in this proposed rule; nonetheless, such 
items may demonstrate aberrant billing patterns inconsistent with 
predictable claim volumes.
    We use the CERT Medicare FFS Supplemental Improper Payment Data to 
identify DMEPOS service-specific rates of improper payments; and the 
OIG and GAO reports to identify DMEPOS items as having a high rate of 
fraud or unnecessary utilization. Inclusion of an item in these reports 
are indications that the item is frequently subject to unnecessary 
utilization. We recognize that there are inherent delays from the time 
aberrant billing patterns are identified and the publication of CERT, 
OIG, and GAO reports. We previously captured reports dating as far back 
as 2007; however, we have learned that billing practices may be subject 
to shifts as a result of changed policies from CMS, new technologies 
and other emerging trends.
    Our objective is to focus on more current data, and in this 
proposed rule, we propose to redefine the timeframe for identifying 
items in OIG and GAO reports to 2015 or later, in CERT Medicare FFS 
Supplemental Improper Payment Data reports to 2018 or later, and add a 
new Master List inclusion criteria to capture current aberrant billing 
patterns. We believe the Master List, as it appears in this proposed 
rule, is a good representation of those items that may pose risk to the 
Medicare Trust Funds. If this proposed rule is finalized as proposed, 
in future years, we would apply the new criteria on billing patterns 
occurring over a 12-month period to allow CMS to be nimble to industry 
change.
    We propose the identification of aberrant billing patterns to be 
limited to those instances in which the total payment is at least 1 
million dollars and at least 1,000 claims in a recent 12-month period 
prior to CMS updating the list annually. This avoids us targeting items 
with very low payments or very few claims, when considered overall.
b. Notice and Maintenance of the Master List
    We propose at Sec.  414.234(b)(2) that the Master List would be 
self-updating, at a minimum, annually. The current ``self-updating'' 
process remains unchanged and includes applying the criteria to items 
that appear on the DMEPOS fee-for-service payment schedule. That is, 
items on the DMEPOS Fee Schedule that meet the payment threshold (for

[[Page 38384]]

monthly rentals, purchases, or cumulative impacts) are added to the 
list when the item is also listed in a future CERT, OIG, or GAO 
reports, and items not meeting the cost thresholds would be added based 
on findings of aberrant billing patterns (meeting the above inclusion 
criteria in section VI.B.3.a of this proposed rule) that are not 
otherwise explained. We believe the proposed inclusion criteria are 
capable of capturing more current vulnerabilities. However, we also 
believe that the current standard process in which items on the list 
expire after 10 years if they have not otherwise been removed is 
appropriate to achieve behavioral change (such as compliance with 
Medicare coverage instructions and the correction of behaviors 
previously resulting in improper payments) and protect the Medicare 
Trust Funds. To that end, we propose to keep this timeframe, and 
further clarify that if we identify any item currently on the Master 
List as being included in a subsequent OIG or GAO report, as having a 
high rate of fraud or unnecessary utilization, or as having a high 
improper payment rate in the CERT Medicare FFS Supplemental Improper 
Payment Data report, the item would be maintained on the Master List 
for 10 years from the date of the most recent report's publication.
    All other list maintenance processes currently specified in Sec.  
414.234(b) would be maintained with two exceptions: (1) First, we 
propose to allow the Master List to be updated as needed and more 
frequently than annually (for example, to address emerging billing 
trends). (2) Second, we are also making technical changes to the 
language in Sec.  414.234(b) to reflect the proposed new cost 
thresholds and report years discussed in this proposed rule. We would 
maintain our current process and publish any additions or deletions to 
the Master List, for any of the reasons and conditions discussed, in a 
Federal Register notice and on the CMS website.
4. Required Face-to-Face Encounter and Written Order Prior to Delivery 
List
a. Creating the Required Face-to-Face Encounter and Written Order Prior 
to Delivery List
    Section 1834(a)(1)(E)(iv) of the Act prohibits payment for 
motorized or power wheelchairs unless a practitioner conducts a face-
to-face examination and writes an order for the item. Section 
1834(a)(11)(B) of the Act requires that a practitioner have a face-to-
face encounter and written order communicated to the supplier prior to 
delivery for other specified covered items of DMEPOS, as identified by 
the Secretary. Analysis of a 1-year snapshot of claims indicates that 
approximately 97 percent of beneficiaries receiving DMEPOS have had a 
recent face-to-face encounter (either before or after the DMEPOS date 
of service). This data was drawn without regard for the item's presence 
on the existing DME List of Specified Covered Items, which requires a 
face-to-face encounter and a written order prior to delivery. While we 
believe this information helps provide important context, we note that 
this rule requires that face-to-face encounters occur prior to the 
delivery of DMEPOS for those items selected for inclusion on the 
Required Face-to-Face Encounter and Written Order Prior to Delivery 
List. We propose to revise Sec.  410.38(d)(1) and Sec.  410.38(d)(2) to 
limit the face-to-face encounter and written order prior to delivery 
conditions of payment to only those items selected from the Master List 
and included on the ``Required Face-to-Face Encounter and Written Order 
Prior to Delivery List.'' In this way, we have a broader list of 
potential items that could be selected, but expect only a subset of 
items from the Master List to be subject to the Required Face-to-Face 
Encounter and Written Order Prior to Delivery List, based on those 
items identified to be of highest risk. Tailoring the lists in this way 
significantly reduces any potential provider impact--and could even 
decrease the scope of impacted items and providers.
    Since the face-to-face encounter and written order are statutorily 
required for PMDs, they would be included on the Master List and the 
Required Face-to-Face Encounter and Written Order Prior Delivery List 
in accordance with our statutory obligation, and would remain there. 
The Master List would include statutorily-identified items, as well as 
any other items posing potential vulnerability to the Trust Fund, as 
identified via the proposed Master List inclusion criteria.
    We propose at Sec.  410.38(c), in the definition of the Required 
Face-to-Face Encounter and Written Order Prior to Delivery List, the 
factors that we may consider when determining which items may be 
appropriate to require a face-to-face encounter and written order prior 
to delivery. Specifically, we may consider: operational limitations, 
item utilization, cost-benefit analysis, emerging trends, 
vulnerabilities identified in official agency reports, or other 
analysis. We developed factors that we believe to be indicative of the 
need for the face-to-face encounter and written order prior to delivery 
requirements, but this list is not exhaustive. We note that we have not 
proposed an all-inclusive list of factors to account for the fluidity 
of program operations and associated vulnerabilities, and believe this 
is critical to protect beneficiaries, the program, and industry. We 
solicit comments on both our underlying presumption that the list 
should not be exhaustive, as well as the factors we should consider 
when selecting an item from the Master List and including it on the 
Required Face-to-Face Encounter and Written Order Prior to Delivery 
List. We also note that this notice and comment rulemaking provides the 
forum for stakeholders to comment on the proposed Master List from 
which items may be selected in the future to be subject to the Face-to-
Face Encounter and Written Order Prior to Delivery requirement.
    As previously stated, we propose at Sec.  410.38(c)(5) to define 
the term ``face-to-face encounter'' as an in-person or telehealth 
encounter between the treating practitioner and the beneficiary. We 
further propose at Sec.  410.38(d)(2) that any telehealth encounter 
must meet the existing telehealth requirements of Sec.  410.78 and 
Sec.  414.65. Telehealth services currently are permitted to be used to 
satisfy the DME face-to-face encounter requirements. Proposed Sec.  
410.38(d)(2) emphasizes that telehealth services used to meet DMEPOS 
face-to-face encounter requirements must meet the requirements found at 
Sec.  410.78 and Sec.  414.65 to support payment of the DMEPOS claim.
    Additionally, the face-to-face encounter must be used for the 
purpose of gathering subjective and objective information associated 
with diagnosing, treating, or managing a clinical condition for which 
the DMEPOS is ordered and must occur within the 6 months preceding the 
date of the order/prescription. We propose at Sec.  410.38(d)(3) to 
clarify the documentation necessary to support the face-to-face 
encounter and associated claims for payment. This documentation 
includes the written order/prescription and documentation to support 
medical necessity, which may include the beneficiary's medical history, 
physical examination, diagnostic tests, findings, progress notes, and 
plans for treatment. We believe our proposed definition in Sec.  
410.38(c)(5) of a face-to-face encounter and required documentation in 
Sec.  410.38(d)(3) are reflective of clinical practice and the 
information necessary to demonstrate medical necessity and the 
appropriateness of claim payment.

[[Page 38385]]

    Section 1834(h)(5) of the Act states that for purposes of 
determining the reasonableness and medical necessity of orthotics and 
prosthetics, documentation created by orthotists and prosthetists shall 
be considered part of the individual's medical record to support 
documentation created by eligible professionals as described in section 
1848(k)(3)(B) of the Act. Documentation from a face-to-face encounter 
conducted by a treating practitioner, as well as documentation created 
by an orthotist or prosthetist, becomes part of the medical records and 
if the notes corroborate, together they can be used to support medical 
necessity of an ordered DMEPOS item.
    Our regulations currently require that the written order be 
communicated prior to delivery for certain specified covered items, 
within 6 months of the face-to-face encounter, and for PMDs, within 45 
days of the face-to-face examination. We propose to revise Sec.  410.38 
to apply the 6-month timeframe to all items on the Required Face-to-
Face Encounter and Written Order Prior to Delivery List (including 
PMDs, which previously required a 45-day timeframe) for uniformity 
purposes. Since the industry has become accustomed to the 6-month 
timeframe, we believe this timeframe is relevant, and changing it would 
create unnecessary confusion. Therefore, if finalized as proposed, a 
face-to-face encounter would be consistently required within 6 months 
of a written order prior to delivery for those items for which a face-
to-face encounter is required.
    The 6-month timing requirement does not supplant other policies 
that may require more frequent face-to-face encounters for specific 
items. For example, the National Coverage Determination 240.2 titled 
``Home Use of Oxygen'' requires a face-to-face examination within a 
month of starting home oxygen therapy.
    The Paperwork Reduction Act Record of Information Collection for 
medical review (CMS-10417; OMB-0938-0969) covers the burden for 
responding to documentation requests, generally. Medical review 
requests require the provider or supplier to submit all documentation 
necessary to demonstrate compliance with coverage and payment 
requirements, including the face-to-face encounter. We do not believe 
this proposed rule would create any new burdens for the medical review 
process, but we ask commenters for feedback on this assumption.
b. Notice and Application of the Required Face-to-Face Encounter and 
Written Order Prior to Delivery List
    We propose at Sec.  410.38(c)(8) that CMS would publish a 60-day 
Federal Register notice and post on the CMS' website any item on the 
Master List that is selected for inclusion on the Required Face-to-Face 
Encounter and Written Order Prior to Delivery List. This is consistent 
with our current practices for items selected from the Master list of 
items frequently subject to unnecessary utilization. Any DMEPOS item 
included on this list would be subject to the face-to-face encounter 
and written order prior to delivery requirement as a national condition 
of payment, and claims for those items would be denied if the condition 
of payment is not met.
    We propose at Sec.  410.38(e) to allow the face-to-face encounter 
and written order prior to delivery requirements to be nationally 
suspended by CMS for any items at any time, without undertaking a 
separate rulemaking, except for those items whose inclusion on the 
Master List (and subsequently, the Required Face-to-Face Encounter and 
Written Order Prior to Delivery List) was required by statute. For 
example, we may need to suspend or cease the face-to-face encounter and 
written order prior to delivery requirements for a particular item(s) 
for which we determine the face-to-face encounter and written order 
prior to delivery requirements are unnecessary to meet our previously 
described objective of limiting waste, fraud, and abuse. If we suspend 
or cease the face-to-face encounter and the written order prior to 
delivery requirement for any item(s), we would provide stakeholder 
notification of the suspension on the CMS website.
5. Required Prior Authorization List
a. Creation and Application of the Required Prior Authorization List
    In order to balance minimizing provider and supplier burden with 
our need to protect the Medicare Trust Funds, we propose to continue to 
limit prior authorization to a subset of items on the Master List as 
currently specified at Sec.  414.234(a)(4). The subset of items 
requiring prior authorization are referred to as the Required Prior 
Authorization List.
    OIG and GAO reports, as well as the CERT Medicare FFS Supplemental 
Improper Payment Data reports, provide national summary data and also 
often include regional data. Utilization trends within Medicare 
Contractor localities may show aberrant billing patterns or other 
identifiable vulnerabilities. At times, claims data analysis shows that 
unnecessary utilization of the selected item(s) is concentrated among 
certain suppliers or in certain locations or regions. Similar to the 
requirements at current Sec.  414.234(c)(1)(ii), we propose that we may 
decide to select and implement prior authorization of an item(s) 
nationally or, in collaboration with the DME MACs locally. We propose 
to revise Sec.  414.234(c)(1)(ii) to state that all suppliers (either 
nationally or within a contractor jurisdiction) would initially be 
subject to prior authorization for items identified through a Federal 
Register notice and posted to CMS' website. However, CMS may later 
elect to exempt suppliers demonstrating compliance from such 
requirements through the prior authorization process. We believe this 
proposal meets our fiduciary obligation to protect the Medicare Trust 
Funds while remaining cognizant of contractor resource limitations and 
provider/supplier burden.
    We specify at Sec.  414.234 that we may consider factors such as 
geographic location, item utilization or cost, system capabilities, 
emerging trends, vulnerabilities identified in official agency reports, 
or other analysis in selecting items for national or local 
implementation. For example, items that are the focus of law 
enforcement investigations may require additional oversight and be 
appropriate for prior authorization. Likewise, when assessing cost we 
may prior authorize low dollar items for which the prior authorization 
decision is applied to duplicates of the same items rendered to the 
same beneficiary (for example, items dispensed in units or billed 
monthly for which the initial decision would remain appropriate), but 
would not prior authorize a single low cost item for which the cost of 
the review would outweigh the anticipated amount of improper payments 
identified.
    We solicit comments on the proposed factors to be considered when 
selecting an item from the Master List and including it on the Required 
Prior Authorization List, such as whether the factors could be over-
inclusive or under-inclusive. We also note that this notice and comment 
rulemaking provides the forum for stakeholders to comment on the 
proposed Master List from which items may be selected in the future to 
be placed on the Required Prior Authorization List.
    We note that despite the proposed changes in the Master List 
inclusion criteria, the prior authorization program would continue to 
apply in all competitive bidding areas because CMS conditions of 
payment apply under the Medicare DMEPOS Competitive Bidding

[[Page 38386]]

Program. We recognize that there may be accessories for which 
stakeholders would like to request prior authorization that may not 
always appear on the Master List and would not be eligible to include 
on the Required Prior Authorization List. Any accessory included on a 
prior authorization request submitted for an item on the Required Prior 
Authorization List, may nonetheless receive a prior authorization 
decision for operational simplicity even if the accessory is not on the 
Required Prior Authorization List. The inclusion of such items is 
voluntary and does not create a condition of payment for items not 
present on the Required Prior Authorization List. An example of when 
this occurs is accessories for certain PMDs subject to prior 
authorization. If this proposed rule is finalized as proposed, the 
effective date of the final rule may precede shared systems changes 
that are required to support the addition of accessories that are not 
on the Master List and Required Prior Authorization List. Accordingly, 
there may be a delay in the adoption of this proposed operational 
change from the date of publication.
    As previously stated in the November 2015 final rule, CMS 
established a prior authorization process for certain DMEPOS items. In 
2017, CMS operationalized a prior authorization program, based on the 
regulatory process codified in 2015, which was initially established in 
four states for certain PMDs and subsequently expanded nationally (81 
FR 93636). The DMEPOS items currently subject to the prior 
authorization requirement also meet the proposed Master List inclusion 
criteria, in this rule, and would continue to be eligible for prior 
authorization if the proposed criteria are finalized as proposed. To 
date, feedback related to the DMEPOS prior authorization process has 
been largely positive; however, the majority of comments have been from 
suppliers. We encourage all stakeholders, including those representing 
beneficiaries and Medicare consumer advocacy organizations, to submit 
their comments about prior authorization during the public comment 
period, as specified in the ADDRESSES section of this proposed rule.
    We propose that the items currently subject to prior authorization 
would be grandfathered into the prior authorization program, if this 
rule is finalized as proposed, until the implementation of the first 
Required Prior Authorization List (which would be published subsequent 
to the rule). This proposal would avoid the administrative and 
stakeholder burdens associated with the termination of the current 
prior authorization program and the implementation of a revised program 
created under this rule, if finalized as proposed. We would maintain 
the current process, as described in Sec.  414.234, of publishing in 
the Federal Register and on the CMS website the Required Prior 
Authorization List at least 60 days prior to the effective date.
    We propose to retain the documentation requirements for submitting 
prior authorization requests at Sec.  414.234(d); however, we are 
proposing to add a reference to encompass the payment requirements 
proposed at Sec.  410.38. In addition, we propose to retain the process 
for submitting prior authorization requests and receiving responses, 
but propose restructuring Sec.  414.234(e) to conform to the formatting 
of the preceding paragraphs.
    We propose to maintain the authority to suspend or cease the prior 
authorization requirement generally or for a particular item or items 
at any time without undertaking a separate rulemaking, as described in 
current Sec.  414.234(f). For example, we may need to suspend or cease 
the prior authorization program due to new payment policies, which may 
render the prior authorization requirement obsolete or remove the item 
from Medicare coverage. If we suspend or cease the prior authorization 
requirement, we would publish a notice in the Federal Register and post 
notification of the suspension on the CMS website and include the date 
of suspension.
b. Notice of the Required Prior Authorization List
    Section Sec.  414.234 currently requires us to inform the public of 
items included on the Required Prior Authorization List in the Federal 
Register with 60-day notice before implementation. We are not proposing 
any changes to this section. In addition, all other prior authorization 
processes described in Sec.  414.234 not mentioned in this proposed 
rule remain unchanged.
    We believe that it is important that CMS have the authority to 
require prior authorization for an eligible item(s) (that is, on the 
Master List) locally to encourage immediate response to shifts in 
billing patterns, which may be related to potential fraud or abuse, or 
nationally, as the situation may so dictate. We would maintain our 
current process, as outlined in Sec.  414.234, and publish a 60-day 
Federal Register notice and post on the CMS website when items are 
placed on the Required Prior Authorization List.
6. Standardizing the Written Order/Prescription
    We note that through subregulatory guidance and the implementation 
of several regulations, we have adopted different requirements for 
orders for different items of DMEPOS. To simplify order/prescription 
requirements and to reduce confusion, we propose at Sec.  410.38(d)(1) 
to adopt one set of required written order/prescription elements for 
orders/prescriptions for all DMEPOS items.
    We believe that the process to obtain DMEPOS items is sufficiently 
similar across the healthcare environment, and that a standardized 
order requirement is appropriate and would help promote compliance and 
reduce the confusion associated with complying with multiple, different 
order/prescription requirements for DMEPOS items. However, we note that 
the required timing for the order to be provided (from the treating 
practitioner to the supplier) would continue to vary for DMEPOS items. 
We propose at Sec.  410.38(d) that for those items on the Required 
Face-to-Face Encounter and Written Order Prior to Delivery List, the 
written order/prescription must be communicated to the supplier prior 
to delivery of the item (per statutory requirement); for all other 
DMEPOS items, a written order/prescription must be communicated to the 
supplier prior to claim submission.
    We believe the proposed requirements of the standardized DMEPOS 
orders/prescriptions are commonly included in orders/prescriptions 
rendered in clinical practice. We believe consistent requirements for 
all items would prove useful as electronic vendors develop programs in 
support of electronic records for provider and supplier use. We propose 
at Sec.  410.38(d)(1)(i) that the standardized order/prescription 
require the elements listed here:
     Beneficiary Name or Medicare Beneficiary Identifier (MBI).
     General Description of the Item.
     Quantity To Be dispensed, if applicable.
     Date.
     Practitioner Name or National Provider Identifier.
     Practitioner Signature.
    Traditionally, these required standardized order elements are 
written on a prescription/order; however, we recognize that these 
required elements may be found in the beneficiary's medical record. We 
propose at Sec.  410.38(d)(1) that if the rule is finalized as 
proposed, DME MACs shall consider

[[Page 38387]]

the totality of the medical records when reviewing for compliance with 
standardized order/prescription elements.
    While the above standardized elements are conditions of payment, we 
recognize that additional information might be helpful on the order/
prescription for clinical practice and quality of care. Information may 
be added to the order/prescription or found in the beneficiary's 
medical records but are not conditions of payment. For example, route 
of administration--such as whether oxygen is delivered via nasal 
cannula or face mask is not required as a condition of payment, but may 
be indicated for good clinical practice.
    Current Sec.  410.38(d), (e) and (f) contain written order and 
documentation requirements specific to equipment that is used for 
treatment of decubitus ulcers, seat-lifts, and transcutaneous 
electrical nerve stimulator units. We believe the requirements found at 
Sec.  410.38(d), (e) and (f) are appropriate for inclusion in the 
standardized written order/prescription and medical record 
documentation requirements outlined in this proposed rule. In addition, 
we believe item-specific coverage requirements may be included in 
national or local coverage documents, as appropriate. Therefore, we 
propose to delete the coverage requirements currently outlined in Sec.  
410.38(d), (e) and (f), and to replace sections Sec.  410.38(d) and 
(e), with our proposed conditions of payment and process for suspending 
the face-to-face encounter and written order prior to delivery 
requirements, respectively.

  Table 10--Proposed Master List of DMEPOS Items Potentially Subject to
 Face-To-Face Encounter and Written Order Prior to Delivery and/or Prior
                       Authorization Requirements
------------------------------------------------------------------------
          HCPCS                           Long description
------------------------------------------------------------------------
A4253....................  Blood Glucose Test Or Reagent Strips For Home
                            Blood Glucose Monitor, Per 50 Strips.
A4351....................  Intermittent Urinary Catheter; Straight Tip,
                            With Or Without Coating (Teflon, Silicone,
                            Silicone Elastomer, Or Hydrophilic, Etc.),
                            Each.
A7025....................  High Frequency Chest Wall Oscillation System
                            Vest, Replacement For Use With Patient Owned
                            Equipment, Each.
E0170....................  Commode Chair With Integrated Seat Lift
                            Mechanism, Electric, Any Type.
E0193....................  Powered Air Flotation Bed (Low Air Loss
                            Therapy).
E0194....................  Air Fluidized Bed.
E0250....................  Hospital Bed, Fixed Height, With Any Type
                            Side Rails, With Mattress.
E0251....................  Hospital Bed, Fixed Height, With Any Type
                            Side Rails, Without Mattress.
E0255....................  Hospital Bed, Variable Height, Hi-Lo, With
                            Any Type Side Rails, With Mattress.
E0256....................  Hospital Bed, Variable Height, Hi-Lo, With
                            Any Type Side Rails, Without Mattress.
E0260....................  Hospital Bed, Semi-Electric (Head And Foot
                            Adjustment), With Any Type Side Rails, With
                            Mattress.
E0261....................  Hospital Bed, Semi-Electric (Head And Foot
                            Adjustment), With Any Type Side Rails,
                            Without Mattress.
E0265....................  Hospital Bed, Total Electric (Head, Foot And
                            Height Adjustments), With Any Type Side
                            Rails, With Mattress.
E0266....................  Hospital Bed, Total Electric (Head, Foot And
                            Height Adjustments), With Any Type Side
                            Rails, Without Mattress.
E0277....................  Powered Pressure-Reducing Air Mattress.
E0290....................  Hospital Bed, Fixed Height, Without Side
                            Rails, With Mattress.
E0292....................  Hospital Bed, Variable Height, Hi-Lo, Without
                            Side Rails, With Mattress.
E0293....................  Hospital Bed, Variable Height, Hi-Lo, Without
                            Side Rails, Without Mattress.
E0294....................  Hospital Bed, Semi-Electric (Head And Foot
                            Adjustment), Without Side Rails, With
                            Mattress.
E0295....................  Hospital Bed, Semi-Electric (Head And Foot
                            Adjustment), Without Side Rails, Without
                            Mattress.
E0296....................  Hospital Bed, Total Electric (Head, Foot And
                            Height Adjustments), Without Side Rails,
                            With Mattress.
E0297....................  Hospital Bed, Total Electric (Head, Foot And
                            Height Adjustments), Without Side Rails,
                            Without Mattress.
E0300....................  Pediatric Crib, Hospital Grade, Fully
                            Enclosed, With Or Without Top Enclosure.
E0301....................  Hospital Bed, Heavy Duty, Extra Wide, With
                            Weight Capacity Greater Than 350 Pounds, But
                            Less Than Or Equal To 600 Pounds, With Any
                            Type Side Rails, Without Mattress.
E0302....................  Hospital Bed, Extra Heavy Duty, Extra Wide,
                            With Weight Capacity Greater Than 600
                            Pounds, With Any Type Side Rails, Without
                            Mattress.
E0303....................  Hospital Bed, Heavy Duty, Extra Wide, With
                            Weight Capacity Greater Than 350 Pounds, But
                            Less Than Or Equal To 600 Pounds, With Any
                            Type Side Rails, With Mattress.
E0304....................  Hospital Bed, Extra Heavy Duty, Extra Wide,
                            With Weight Capacity Greater Than 600
                            Pounds, With Any Type Side Rails, With
                            Mattress.
E0316....................  Safety Enclosure Frame/Canopy For Use With
                            Hospital Bed, Any Type.
E0371....................  Nonpowered Advanced Pressure Reducing Overlay
                            For Mattress, Standard Mattress Length And
                            Width.
E0372....................  Powered Air Overlay For Mattress, Standard
                            Mattress Length And Width.
E0373....................  Nonpowered Advanced Pressure Reducing
                            Mattress.
E0424....................  Stationary Compressed Gaseous Oxygen System,
                            Rental; Includes Container, Contents,
                            Regulator, Flowmeter, Humidifier, Nebulizer,
                            Cannula Or Mask, And Tubing.
E0431....................  Portable Gaseous Oxygen System, Rental;
                            Includes Portable Container, Regulator,
                            Flowmeter, Humidifier, Cannula Or Mask, And
                            Tubing.
E0433....................  Portable Liquid Oxygen System, Rental; Home
                            Liquefier Used To Fill Portable Liquid
                            Oxygen Containers, Includes Portable
                            Containers, Regulator, Flowmeter,
                            Humidifier, Cannula Or Mask And Tubing, With
                            Or Without Supply Reservoir And Contents
                            Gauge.
E0434....................  Portable Liquid Oxygen System, Rental;
                            Includes Portable Container, Supply
                            Reservoir, Humidifier, Flowmeter, Refill
                            Adaptor, Contents Gauge, Cannula Or Mask,
                            And Tubing.
E0439....................  Stationary Liquid Oxygen System, Rental;
                            Includes Container, Contents, Regulator,
                            Flowmeter, Humidifier, Nebulizer, Cannula Or
                            Mask, & Tubing.
E0462....................  Rocking Bed With Or Without Side Rails.
E0465....................  Home Ventilator, Any Type, Used With Invasive
                            Interface, (For Example, Tracheostomy Tube).
E0466....................  Home Ventilator, Any Type, Used With Non-
                            Invasive Interface, (For Example, Mask,
                            Chest Shell).
E0470....................  Respiratory Assist Device, Bi-Level Pressure
                            Capability, Without Backup Rate Feature,
                            Used With Noninvasive Interface, (For
                            Example, Nasal Or Facial Mask (Intermittent
                            Assist Device With Continuous Positive
                            Airway Pressure Device)).
E0471....................  Respiratory Assist Device, Bi-Level Pressure
                            Capability, With Back-Up Rate Feature, Used
                            With Noninvasive Interface, (For Example,
                            Nasal Or Facial Mask (Intermittent Assist
                            Device With Continuous Positive Airway
                            Pressure Device)).

[[Page 38388]]

 
E0472....................  Respiratory Assist Device, Bi-Level Pressure
                            Capability, With Backup Rate Feature, Used
                            With Invasive Interface, (For Example,
                            Tracheostomy Tube (Intermittent Assist
                            Device With Continuous Positive Airway
                            Pressure Device)).
E0483....................  High Frequency Chest Wall Oscillation Air-
                            Pulse Generator System, (Includes Hoses And
                            Vest), Each.
E0550....................  Humidifier, Durable For Extensive
                            Supplemental Humidification During Ippb
                            Treatments Or Oxygen Delivery.
E0575....................  Nebulizer, Ultrasonic, Large Volume.
E0600....................  Respiratory Suction Pump, Home Model,
                            Portable Or Stationary, Electric.
E0601....................  Continuous Positive Airway Pressure (Cpap)
                            Device.
E0617....................  External Defibrillator With Integrated
                            Electrocardiogram Analysis.
E0620....................  Skin Piercing Device For Collection Of
                            Capillary Blood, Laser, Each.
E0630....................  Patient Lift, Hydraulic Or Mechanical,
                            Includes Any Seat, Sling, Strap(s) Or
                            Pad(s).
E0635....................  Patient Lift, Electric With Seat Or Sling.
E0636....................  Multipositional Patient Support System, With
                            Integrated Lift, Patient Accessible
                            Controls.
E0639....................  Patient Lift, Moveable From Room To Room With
                            Disassembly And Reassembly, Includes All
                            Components/Accessories.
E0640....................  Patient Lift, Fixed System, Includes All
                            Components/Accessories.
E0747....................  Osteogenesis Stimulator, Electrical, Non-
                            Invasive, Other Than Spinal Applications.
E0748....................  Osteogenesis Stimulator, Electrical, Non-
                            Invasive, Spinal Applications.
E0760....................  Ostogenesis Stimulator, Low Intensity
                            Ultrasound, Non-Invasive.
E0781....................  Ambulatory Infusion Pump, Single Or Multiple
                            Channels, Electric Or Battery Operated, With
                            Administrative Equipment, Worn By Patient.
E0784....................  External Ambulatory Infusion Pump, Insulin.
E0791....................  Parenteral Infusion Pump, Stationary, Single
                            Or Multi-Channel.
E0912....................  Trapeze Bar, Heavy Duty, For Patient Weight
                            Capacity Greater Than 250 Pounds, Free
                            Standing, Complete With Grab Bar.
E0983....................  Manual Wheelchair Accessory, Power Add-On To
                            Convert Manual Wheelchair To Motorized
                            Wheelchair, Joystick Control.
E0986....................  Manual Wheelchair Accessory, Push-Rim
                            Activated Power Assist System.
E0988....................  Manual Wheelchair Accessory, Lever-Activated,
                            Wheel Drive, Pair.
E1002....................  Wheelchair Accessory, Power Seating System,
                            Tilt Only.
E1003....................  Wheelchair Accessory, Power Seating System,
                            Recline Only, Without Shear Reduction.
E1004....................  Wheelchair Accessory, Power Seating System,
                            Recline Only, With Mechanical Shear
                            Reduction.
E1005....................  Wheelchair Accessory, Power Seating System,
                            Recline Only, With Power Shear Reduction.
E1006....................  Wheelchair Accessory, Power Seating System,
                            Combination Tilt And Recline, Without Shear
                            Reduction.
E1007....................  Wheelchair Accessory, Power Seating System,
                            Combination Tilt And Recline, With
                            Mechanical Shear Reduction.
E1008....................  Wheelchair Accessory, Power Seating System,
                            Combination Tilt And Recline, With Power
                            Shear Reduction.
E1010....................  Wheelchair Accessory, Addition To Power
                            Seating System, Power Leg Elevation System,
                            Including Leg Rest, Pair.
E1012....................  Wheelchair Accessory, Addition To Power
                            Seating System, Center Mount Power Elevating
                            Leg Rest/Platform, Complete System, Any
                            Type, Each.
E1030....................  Wheelchair Accessory, Ventilator Tray,
                            Gimbaled.
E1035....................  Multi-Positional Patient Transfer System,
                            With Integrated Seat, Operated By Care
                            Giver, Patient Weight Capacity Up To And
                            Including 300 Pounds.
E1036....................  Multi-Positional Patient Transfer System,
                            Extra-Wide, With Integrated Seat, Operated
                            By Caregiver, Patient Weight Capacity
                            Greater Than 300 Pounds.
E1037....................  Transport Chair, Pediatric Size.
E1161....................  Manual Adult Size Wheelchair, Includes Tilt
                            In Space.
E1232....................  Wheelchair, Pediatric Size, Tilt-In-Space,
                            Folding, Adjustable, With Seating System.
E1233....................  Wheelchair, Pediatric Size, Tilt-In-Space,
                            Rigid, Adjustable, Without Seating System.
E1234....................  Wheelchair, Pediatric Size, Tilt-In-Space,
                            Folding, Adjustable, Without Seating System.
E1235....................  Wheelchair, Pediatric Size, Rigid,
                            Adjustable, With Seating System.
E1236....................  Wheelchair, Pediatric Size, Folding,
                            Adjustable, With Seating System.
E1237....................  Wheelchair, Pediatric Size, Rigid,
                            Adjustable, Without Seating System.
E1238....................  Wheelchair, Pediatric Size, Folding,
                            Adjustable, Without Seating System.
E1390....................  Oxygen Concentrator, Single Delivery Port,
                            Capable Of Delivering 85 Percent Or Greater
                            Oxygen Concentration At The Prescribed Flow
                            Rate.
E1391....................  Oxygen Concentrator, Dual Delivery Port,
                            Capable Of Delivering 85 Percent Or Greater
                            Oxygen Concentration At The Prescribed Flow
                            Rate, Each.
E1392....................  Portable Oxygen Concentrator, Rental.
E1405....................  Oxygen And Water Vapor Enriching System With
                            Heated Delivery.
E1406....................  Oxygen And Water Vapor Enriching System
                            Without Heated Delivery.
E2000....................  Gastric Suction Pump, Home Model, Portable Or
                            Stationary, Electric.
E2100....................  Blood Glucose Monitor With Integrated Voice
                            Synthesizer.
E2204....................  Manual Wheelchair Accessory, Nonstandard Seat
                            Frame Depth, 22 To 25 Inches.
E2227....................  Manual Wheelchair Accessory, Gear Reduction
                            Drive Wheel, Each.
E2228....................  Manual Wheelchair Accessory, Wheel Braking
                            System And Lock, Complete, Each.
E2310....................  Power Wheelchair Accessory, Electronic
                            Connection Between Wheelchair Controller And
                            One Power Seating System Motor, Including
                            All Related Electronics, Indicator Feature,
                            Mechanical Function Selection Switch, And
                            Fixed Mounting Hardware.
E2311....................  Power Wheelchair Accessory, Electronic
                            Connection Between Wheelchair Controller And
                            Two Or More Power Seating System Motors,
                            Including All Related Electronics, Indicator
                            Feature, Mechanical Function Selection
                            Switch, And Fixed Mounting Hardware.
E2312....................  Power Wheelchair Accessory, Hand Or Chin
                            Control Interface, Mini-Proportional Remote
                            Joystick, Proportional, Including Fixed
                            Mounting Hardware.
E2321....................  Power Wheelchair Accessory, Hand Control
                            Interface, Remote Joystick, Nonproportional,
                            Including All Related Electronics,
                            Mechanical Stop Switch, And Fixed Mounting
                            Hardware.

[[Page 38389]]

 
E2322....................  Power Wheelchair Accessory, Hand Control
                            Interface, Multiple Mechanical Switches,
                            Nonproportional, Including All Related
                            Electronics, Mechanical Stop Switch, And
                            Fixed Mounting Hardware.
E2325....................  Power Wheelchair Accessory, Sip And Puff
                            Interface, Nonproportional, Including All
                            Related Electronics, Mechanical Stop Switch,
                            And Manual Swingaway Mounting Hardware.
E2327....................  Power Wheelchair Accessory, Head Control
                            Interface, Mechanical, Proportional,
                            Including All Related Electronics,
                            Mechanical Direction Change Switch, And
                            Fixed Mounting Hardware.
E2328....................  Power Wheelchair Accessory, Head Control Or
                            Extremity Control Interface, Electronic,
                            Proportional, Including All Related
                            Electronics And Fixed Mounting Hardware.
E2329....................  Power Wheelchair Accessory, Head Control
                            Interface, Contact Switch Mechanism,
                            Nonproportional, Including All Related
                            Electronics, Mechanical Stop Switch,
                            Mechanical Direction Change Switch, Head
                            Array, And Fixed Mounting Hardware.
E2330....................  Power Wheelchair Accessory, Head Control
                            Interface, Proximity Switch Mechanism,
                            Nonproportional, Including All Related
                            Electronics, Mechanical Stop Switch,
                            Mechanical Direction Change Switch, Head
                            Array, And Fixed Mounting Hardware.
E2351....................  Power Wheelchair Accessory, Electronic
                            Interface To Operate Speech Generating
                            Device Using Power Wheelchair Control
                            Interface.
E2368....................  Power Wheelchair Component, Drive Wheel
                            Motor, Replacement Only.
E2369....................  Power Wheelchair Component, Drive Wheel Gear
                            Box, Replacement Only.
E2370....................  Power Wheelchair Component, Integrated Drive
                            Wheel Motor And Gear Box Combination,
                            Replacement Only.
E2373....................  Power Wheelchair Accessory, Hand Or Chin
                            Control Interface, Compact Remote Joystick,
                            Proportional, Including Fixed Mounting
                            Hardware.
E2374....................  Power Wheelchair Accessory, Hand Or Chin
                            Control Interface, Standard Remote Joystick
                            (Not Including Controller), Proportional,
                            Including All Related Electronics And Fixed
                            Mounting Hardware, Replacement Only.
E2375....................  Power Wheelchair Accessory, Non-Expandable
                            Controller, Including All Related
                            Electronics And Mounting Hardware,
                            Replacement Only.
E2376....................  Power Wheelchair Accessory, Expandable
                            Controller, Including All Related
                            Electronics And Mounting Hardware,
                            Replacement Only.
E2377....................  Power Wheelchair Accessory, Expandable
                            Controller, Including All Related
                            Electronics And Mounting Hardware, Upgrade
                            Provided At Initial Issue.
E2378....................  Power Wheelchair Component, Actuator,
                            Replacement Only.
E2402....................  Negative Pressure Wound Therapy Electrical
                            Pump, Stationary Or Portable.
E2614....................  Positioning Wheelchair Back Cushion,
                            Posterior, Width 22 Inches Or Greater, Any
                            Height, Including Any Type Mounting
                            Hardware.
E2616....................  Positioning Wheelchair Back Cushion,
                            Posterior-Lateral, Width 22 Inches Or
                            Greater, Any Height, Including Any Type
                            Mounting Hardware.
E2620....................  Positioning Wheelchair Back Cushion, Planar
                            Back With Lateral Supports, Width Less Than
                            22 Inches, Any Height, Including Any Type
                            Mounting Hardware.
E2621....................  Positioning Wheelchair Back Cushion, Planar
                            Back With Lateral Supports, Width 22 Inches
                            Or Greater, Any Height, Including Any Type
                            Mounting Hardware.
E2626....................  Wheelchair Accessory, Shoulder Elbow, Mobile
                            Arm Support Attached To Wheelchair,
                            Balanced, Adjustable.
E2627....................  Wheelchair Accessory, Shoulder Elbow, Mobile
                            Arm Support Attached To Wheelchair,
                            Balanced, Adjustable Rancho Type.
E2628....................  Wheelchair Accessory, Shoulder Elbow, Mobile
                            Arm Support Attached To Wheelchair,
                            Balanced, Reclining.
E2629....................  Wheelchair Accessory, Shoulder Elbow, Mobile
                            Arm Support Attached To Wheelchair,
                            Balanced, Friction Arm Support (Friction
                            Dampening To Proximal And Distal Joints).
E2630....................  Wheelchair Accessory, Shoulder Elbow, Mobile
                            Arm Support, Monosuspension Arm And Hand
                            Support, Overhead Elbow Forearm Hand Sling
                            Support, Yoke Type Suspension Support.
K0002....................  Standard Hemi (Low Seat) Wheelchair.
K0003....................  Lightweight Wheelchair.
K0004....................  High Strength, Lightweight Wheelchair.
K0005....................  Ultralightweight Wheelchair.
K0006....................  Heavy Duty Wheelchair.
K0007....................  Extra Heavy Duty Wheelchair.
K0009....................  Other Manual Wheelchair/Base.
K0455....................  Infusion Pump Used For Uninterrupted
                            Parenteral Administration Of Medication,
                            (For example, Epoprostenol Or Treprostinol).
K0606....................  Automatic External Defibrillator, With
                            Integrated Electrocardiogram Analysis,
                            Garment Type.
K0609....................  Replacement Electrodes For Use With Automated
                            External Defibrillator, Garment Type Only,
                            Each.
K0730....................  Controlled Dose Inhalation Drug Delivery
                            System.
K0738....................  Portable Gaseous Oxygen System, Rental; Home
                            Compressor Used To Fill Portable Oxygen
                            Cylinders; Includes Portable Containers,
                            Regulator, Flowmeter, Humidifier, Cannula Or
                            Mask, And Tubing.
K0800....................  Power Operated Vehicle, Group 1 Standard,
                            Patient Weight Capacity Up To And Including
                            300 Pounds.
K0801....................  Power Operated Vehicle, Group 1 Heavy Duty,
                            Patient Weight Capacity, 301 To 450 Pounds.
K0802....................  Power Operated Vehicle, Group 1 Very Heavy
                            Duty, Patient Weight Capacity 451 To 600
                            Pounds.
K0806....................  Power Operated Vehicle, Group 2 Standard,
                            Patient Weight Capacity Up To And Including
                            300 Pounds.
K0807....................  Power Operated Vehicle, Group 2 Heavy Duty,
                            Patient Weight Capacity 301 To 450 Pounds.
K0808....................  Power Operated Vehicle, Group 2 Very Heavy
                            Duty, Patient Weight Capacity 451 To 600
                            Pounds.
K0813....................  Power Wheelchair, Group 1 Standard, Portable,
                            Sling/Solid Seat And Back, Patient Weight
                            Capacity Up To And Including 300 Pounds.
K0814....................  Power Wheelchair, Group 1 Standard, Portable,
                            Captains Chair, Patient Weight Capacity Up
                            To And Including 300 Pounds.
K0815....................  Power Wheelchair, Group 1 Standard, Sling/
                            Solid Seat And Back, Patient Weight Capacity
                            Up To And Including 300 Pounds.
K0816....................  Power Wheelchair, Group 1 Standard, Captains
                            Chair, Patient Weight Capactiy Up To And
                            Including 300 Pounds.
K0820....................  Power Wheelchair, Group 2 Standard, Portable,
                            Sling/Solid Seat/Back, Patient Weight
                            Capacity Up To And Including 300 Pounds.
K0821....................  Power Wheelchair, Group 2 Standard, Portable,
                            Captains Chair, Patient Weight Capacity Up
                            To And Including 300 Pounds.

[[Page 38390]]

 
K0822....................  Power Wheelchair, Group 2 Standard, Sling/
                            Solid Seat/Back, Patient Weight Capacity Up
                            To And Including 300 Pounds.
K0823....................  Power Wheelchair, Group 2 Standard, Captains
                            Chair, Patient Weight Capacity Up To And
                            Including 300 Pounds.
K0824....................  Power Wheelchair, Group 2 Heavy Duty, Sling/
                            Solid Seat/Back, Patient Weight Capacity 301
                            To 450 Pounds.
K0825....................  Power Wheelchair, Group 2 Heavy Duty,
                            Captains Chair, Patient Weight Capacity 301
                            To 450 Pounds.
K0826....................  Power Wheelchair, Group 2 Very Heavy Duty,
                            Sling/Solid Seat/Back, Patient Weight
                            Capacity 451 To 600 Pounds.
K0827....................  Power Wheelchair, Group 2 Very Heavy Duty,
                            Captains Chair, Patient Weight Capacity 451
                            To 600 Pounds.
K0828....................  Power Wheelchair, Group 2 Extra Heavy Duty,
                            Sling/Solid Seat/Back, Patient Weight
                            Capacity 601 Pounds Or More.
K0829....................  Power Wheelchair, Group 2 Extra Heavy Duty,
                            Captains Chair, Patient Weight Capacity 601
                            Pounds Or More.
K0835....................  Power Wheelchair, Group 2 Standard, Single
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity Up To And Including 300
                            Pounds.
K0836....................  Power Wheelchair, Group 2 Standard, Single
                            Power Option, Captains Chair, Patient Weight
                            Capacity Up To And Including 300 Pounds.
K0837....................  Power Wheelchair, Group 2 Heavy Duty, Single
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity 301 To 450 Pounds.
K0838....................  Power Wheelchair, Group 2 Heavy Duty, Single
                            Power Option, Captains Chair, Patient Weight
                            Capacity 301 To 450 Pounds.
K0839....................  Power Wheelchair, Group 2 Very Heavy Duty,
                            Single Power Option, Sling/Solid Seat/Back,
                            Patient Weight Capacity 451 To 600 Pounds.
K0840....................  Power Wheelchair, Group 2 Extra Heavy Duty,
                            Single Power Option, Sling/Solid Seat/Back,
                            Patient Weight Capacity 601 Pounds Or More.
K0841....................  Power Wheelchair, Group 2 Standard, Multiple
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity Up To And Including 300
                            Pounds.
K0842....................  Power Wheelchair, Group 2 Standard, Multiple
                            Power Option, Captains Chair, Patient Weight
                            Capacity Up To And Including 300 Pounds.
K0843....................  Power Wheelchair, Group 2 Heavy Duty,
                            Multiple Power Option, Sling/Solid Seat/
                            Back, Patient Weight Capacity 301 To 450
                            Pounds.
K0848....................  Power Wheelchair, Group 3 Standard, Sling/
                            Solid Seat/Back, Patient Weight Capacity Up
                            To And Including 300 Pounds.
K0849....................  Power Wheelchair, Group 3 Standard, Captains
                            Chair, Patient Weight Capacity Up To And
                            Including 300 Pounds.
K0850....................  Power Wheelchair, Group 3 Heavy Duty, Sling/
                            Solid Seat/Back, Patient Weight Capacity 301
                            To 450 Pounds.
K0851....................  Power Wheelchair, Group 3 Heavy Duty,
                            Captains Chair, Patient Weight Capacity 301
                            To 450 Pounds.
K0852....................  Power Wheelchair, Group 3 Very Heavy Duty,
                            Sling/Solid Seat/Back, Patient Weight
                            Capacity 451 To 600 Pounds.
K0853....................  Power Wheelchair, Group 3 Very Heavy Duty,
                            Captains Chair, Patient Weight Capacity, 451
                            To 600 Pounds.
K0854....................  Power Wheelchair, Group 3 Extra Heavy Duty,
                            Sling/Solid Seat/Back, Patient Weight
                            Capacity 601 Pounds Or More.
K0855....................  Power Wheelchair, Group 3 Extra Heavy Duty,
                            Captains Chair, Patient Weight Capacity 601
                            Pounds Or More.
K0856....................  Power Wheelchair, Group 3 Standard, Single
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity Up To And Including 300
                            Pounds.
K0857....................  Power Wheelchair, Group 3 Standard, Single
                            Power Option, Captains Chair, Patient Weight
                            Capacity Up To And Including 300 Pounds.
K0858....................  Power Wheelchair, Group 3 Heavy Duty, Single
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity 301 To 450 Pounds.
K0859....................  Power Wheelchair, Group 3 Heavy Duty, Single
                            Power Option, Captains Chair, Patient Weight
                            Capacity 301 To 450 Pounds.
K0860....................  Power Wheelchair, Group 3 Very Heavy Duty,
                            Single Power Option, Sling/Solid Seat/Back,
                            Patient Weight Capacity 451 To 600 Pounds.
K0861....................  Power Wheelchair, Group 3 Standard, Multiple
                            Power Option, Sling/Solid Seat/Back, Patient
                            Weight Capacity Up To And Including 300
                            Pounds.
K0862....................  Power Wheelchair, Group 3 Heavy Duty,
                            Multiple Power Option, Sling/Solid Seat/
                            Back, Patient Weight Capacity 301 To 450
                            Pounds.
K0863....................  Power Wheelchair, Group 3 Very Heavy Duty,
                            Multiple Power Option, Sling/Solid Seat/
                            Back, Patient Weight Capacity 451 To 600
                            Pounds.
K0864....................  Power Wheelchair, Group 3 Extra Heavy Duty,
                            Multiple Power Option, Sling/Solid Seat/
                            Back, Patient Weight Capacity 601 Pounds Or
                            More.
L0631....................  Lumbar-Sacral Orthosis, Sagittal Control,
                            With Rigid Anterior And Posterior Panels,
                            Posterior Extends From Sacrococcygeal
                            Junction To T-9 Vertebra, Produces
                            Intracavitary Pressure To Reduce Load On The
                            Intervertebral Discs, Includes Straps,
                            Closures, May Include Padding, Shoulder
                            Straps, Pendulous Abdomen Design,
                            Prefabricated Item That Has Been Trimmed,
                            Bent, Molded, Assembled, Or Otherwise
                            Customized To Fit A Specific Patient By An
                            Individual With Expertise.
L0635....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, Lumbar Flexion, Rigid Posterior
                            Frame/Panel(S), Lateral Articulating Design
                            To Flex The Lumbar Spine, Posterior Extends
                            From Sacrococcygeal Junction To T-9
                            Vertebra, Lateral Strength Provided By Rigid
                            Lateral Frame/Panel(S), Produces
                            Intracavitary Pressure To Reduce Load On
                            Intervertebral Discs, Includes Straps,
                            Closures, May Include Padding, Anterior
                            Panel, Pendulous Abdomen Design,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L0636....................  Lumbar Sacral Orthosis, Sagittal-Coronal
                            Control, Lumbar Flexion, Rigid Posterior
                            Frame/Panels, Lateral Articulating Design To
                            Flex The Lumbar Spine, Posterior Extends
                            From Sacrococcygeal Junction To T-9
                            Vertebra, Lateral Strength Provided By Rigid
                            Lateral Frame/Panels, Produces Intracavitary
                            Pressure To Reduce Load On Intervertebral
                            Discs, Includes Straps, Closures, May
                            Include Padding, Anterior Panel, Pendulous
                            Abdomen Design, Custom Fabricated.
L0637....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, With Rigid Anterior And Posterior
                            Frame/Panels, Posterior Extends From
                            Sacrococcygeal Junction To T-9 Vertebra,
                            Lateral Strength Provided By Rigid Lateral
                            Frame/Panels, Produces Intracavitary
                            Pressure To Reduce Load On Intervertebral
                            Discs, Includes Straps, Closures, May
                            Include Padding, Shoulder Straps, Pendulous
                            Abdomen Design, Prefabricated Item That Has
                            Been Trimmed, Bent, Molded, Assembled, Or
                            Otherwise Customized To Fit A Specific
                            Patient By An Individual With Expertise.

[[Page 38391]]

 
L0638....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, With Rigid Anterior And Posterior
                            Frame/Panels, Posterior Extends From
                            Sacrococcygeal Junction To T-9 Vertebra,
                            Lateral Strength Provided By Rigid Lateral
                            Frame/Panels, Produces Intracavitary
                            Pressure To Reduce Load On Intervertebral
                            Discs, Includes Straps, Closures, May
                            Include Padding, Shoulder Straps, Pendulous
                            Abdomen Design, Custom Fabricated.
L0639....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, Rigid Shell(S)/Panel(S), Posterior
                            Extends From Sacrococcygeal Junction To T-9
                            Vertebra, Anterior Extends From Symphysis
                            Pubis To Xyphoid, Produces Intracavitary
                            Pressure To Reduce Load On The
                            Intervertebral Discs, Overall Strength Is
                            Provided By Overlapping Rigid Material And
                            Stabilizing Closures, Includes Straps,
                            Closures, May Include Soft Interface,
                            Pendulous Abdomen Design, Prefabricated Item
                            That Has Been Trimmed, Bent, Molded,
                            Assembled, Or Otherwise Customized To Fit A
                            Specific Patient By An Individual With
                            Expertise.
L0640....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, Rigid Shell(S)/Panel(S), Posterior
                            Extends From Sacrococcygeal Junction To T-9
                            Vertebra, Anterior Extends From Symphysis
                            Pubis To Xyphoid, Produces Intracavitary
                            Pressure To Reduce Load On The
                            Intervertebral Discs, Overall Strength Is
                            Provided By Overlapping Rigid Material And
                            Stabilizing Closures, Includes Straps,
                            Closures, May Include Soft Interface,
                            Pendulous Abdomen Design, Custom Fabricated.
L0648....................  Lumbar-Sacral Orthosis, Sagittal Control,
                            With Rigid Anterior And Posterior Panels,
                            Posterior Extends From Sacrococcygeal
                            Junction To T-9 Vertebra, Produces
                            Intracavitary Pressure To Reduce Load On The
                            Intervertebral Discs, Includes Straps,
                            Closures, May Include Padding, Shoulder
                            Straps, Pendulous Abdomen Design,
                            Prefabricated, Off-The-Shelf.
L0650....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, With Rigid Anterior And Posterior
                            Frame/Panel(S), Posterior Extends From
                            Sacrococcygeal Junction To T-9 Vertebra,
                            Lateral Strength Provided By Rigid Lateral
                            Frame/Panel(S), Produces Intracavitary
                            Pressure To Reduce Load On Intervertebral
                            Discs, Includes Straps, Closures, May
                            Include Padding, Shoulder Straps, Pendulous
                            Abdomen Design, Prefabricated, Off-The-
                            Shelf.
L0651....................  Lumbar-Sacral Orthosis, Sagittal-Coronal
                            Control, Rigid Shell(S)/Panel(S), Posterior
                            Extends From Sacrococcygeal Junction To T-9
                            Vertebra, Anterior Extends From Symphysis
                            Pubis To Xyphoid, Produces Intracavitary
                            Pressure To Reduce Load On The
                            Intervertebral Discs, Overall Strength Is
                            Provided By Overlapping Rigid Material And
                            Stabilizing Closures, Includes Straps,
                            Closures, May Include Soft Interface,
                            Pendulous Abdomen Design, Prefabricated, Off-
                            The-Shelf.
L1680....................  Hip Orthosis, Abduction Control Of Hip
                            Joints, Dynamic, Pelvic Control, Adjustable
                            Hip Motion Control, Thigh Cuffs (Rancho Hip
                            Action Type), Custom Fabricated.
L1685....................  Hip Orthosis, Abduction Control Of Hip Joint,
                            Postoperative Hip Abduction Type, Custom
                            Fabricated.
L1686....................  Hip Orthosis, Abduction Control Of Hip Joint,
                            Postoperative Hip Abduction Type,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L1690....................  Combination, Bilateral, Lumbo-Sacral, Hip,
                            Femur Orthosis Providing Adduction And
                            Internal Rotation Control, Prefabricated,
                            Includes Fitting And Adjustment.
L1700....................  Legg Perthes Orthosis, (Toronto Type), Custom-
                            Fabricated.
L1710....................  Legg Perthes Orthosis, (Newington Type),
                            Custom Fabricated.
L1720....................  Legg Perthes Orthosis, Trilateral, (Tachdijan
                            Type), Custom-Fabricated.
L1730....................  Legg Perthes Orthosis, (Scottish Rite Type),
                            Custom-Fabricated.
L1755....................  Legg Perthes Orthosis, (Patten Bottom Type),
                            Custom-Fabricated.
L1832....................  Knee Orthosis, Adjustable Knee Joints
                            (Unicentric Or Polycentric), Positional
                            Orthosis, Rigid Support, Prefabricated Item
                            That Has Been Trimmed, Bent, Molded,
                            Assembled, Or Otherwise Customized To Fit A
                            Specific Patient By An Individual With
                            Expertise.
L1833....................  Knee Orthosis, Adjustable Knee Joints
                            (Unicentric Or Polycentric), Positional
                            Orthosis, Rigid Support, Prefabricated, Off-
                            The Shelf.
L1834....................  Knee Orthosis, Without Knee Joint, Rigid,
                            Custom-Fabricated.
L1840....................  Knee Orthosis, Derotation, Medial-Lateral,
                            Anterior Cruciate Ligament, Custom
                            Fabricated.
L1843....................  Knee Orthosis, Single Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment,
                            Prefabricated Item That Has Been Trimmed,
                            Bent, Molded, Assembled, Or Otherwise
                            Customized To Fit A Specific Patient By An
                            Individual With Expertise.
L1844....................  Knee Orthosis, Single Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment, Custom
                            Fabricated.
L1845....................  Knee Orthosis, Double Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment,
                            Prefabricated Item That Has Been Trimmed,
                            Bent, Molded, Assembled, Or Otherwise
                            Customized To Fit A Specific Patient By An
                            Individual With Expertise.
L1846....................  Knee Orthosis, Double Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment, Custom
                            Fabricated.
L1847....................  Knee Orthosis, Double Upright With Adjustable
                            Joint, With Inflatable Air Support
                            Chamber(S), Prefabricated Item That Has Been
                            Trimmed, Bent, Molded, Assembled, Or
                            Otherwise Customized To Fit A Specific
                            Patient By An Individual With Expertise.
L1848....................  Knee Orthosis, Double Upright With Adjustable
                            Joint, With Inflatable Air Support
                            Chamber(S), Prefabricated, Off-The-Shelf.
L1851....................  Knee Orthosis (Ko), Single Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment,
                            Prefabricated, Off-The-Shelf.
L1852....................  Knee Orthosis (Ko), Double Upright, Thigh And
                            Calf, With Adjustable Flexion And Extension
                            Joint (Unicentric Or Polycentric), Medial-
                            Lateral And Rotation Control, With Or
                            Without Varus/Valgus Adjustment,
                            Prefabricated, Off-The-Shelf.
L1860....................  Knee Orthosis, Modification Of Supracondylar
                            Prosthetic Socket, Custom-Fabricated (Sk).
L1907....................  Ankle Orthosis, Supramalleolar With Straps,
                            With Or Without Interface/Pads, Custom
                            Fabricated.
L1932....................  Afo, Rigid Anterior Tibial Section, Total
                            Carbon Fiber Or Equal Material,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L1940....................  Ankle Foot Orthosis, Plastic Or Other
                            Material, Custom-Fabricated.
L1945....................  Ankle Foot Orthosis, Plastic, Rigid Anterior
                            Tibial Section (Floor Reaction), Custom-
                            Fabricated.
L1950....................  Ankle Foot Orthosis, Spiral, (Institute Of
                            Rehabilitative Medicine Type), Plastic,
                            Custom-Fabricated.
L1951....................  Ankle Foot Orthosis, Spiral, (Institute Of
                            Rehabilitative Medicine Type), Plastic Or
                            Other Material, Prefabricated, Includes
                            Fitting And Adjustment.
L1960....................  Ankle Foot Orthosis, Posterior Solid Ankle,
                            Plastic, Custom-Fabricated.
L1970....................  Ankle Foot Orthosis, Plastic With Ankle
                            Joint, Custom-Fabricated.

[[Page 38392]]

 
L2000....................  Knee Ankle Foot Orthosis, Single Upright,
                            Free Knee, Free Ankle, Solid Stirrup, Thigh
                            And Calf Bands/Cuffs (Single Bar Ak
                            Orthosis), Custom-Fabricated.
L2005....................  Knee Ankle Foot Orthosis, Any Material,
                            Single Or Double Upright, Stance Control,
                            Automatic Lock And Swing Phase Release, Any
                            Type Activation, Includes Ankle Joint, Any
                            Type, Custom Fabricated.
L2010....................  Knee Ankle Foot Orthosis, Single Upright,
                            Free Ankle, Solid Stirrup, Thigh And Calf
                            Bands/Cuffs (Single Bar Ak Orthosis),
                            Without Knee Joint, Custom-Fabricated.
L2020....................  Knee Ankle Foot Orthosis, Double Upright,
                            Free Ankle, Solid Stirrup, Thigh And Calf
                            Bands/Cuffs (Double Bar Ak Orthosis), Custom-
                            Fabricated.
L2030....................  Knee Ankle Foot Orthosis, Double Upright,
                            Free Ankle, Solid Stirrup, Thigh And Calf
                            Bands/Cuffs, (Double Bar Ak Orthosis),
                            Without Knee Joint, Custom Fabricated.
L2034....................  Knee Ankle Foot Orthosis, Full Plastic,
                            Single Upright, With Or Without Free Motion
                            Knee, Medial Lateral Rotation Control, With
                            Or Without Free Motion Ankle, Custom
                            Fabricated.
L2036....................  Knee Ankle Foot Orthosis, Full Plastic,
                            Double Upright, With Or Without Free Motion
                            Knee, With Or Without Free Motion Ankle,
                            Custom Fabricated.
L2037....................  Knee Ankle Foot Orthosis, Full Plastic,
                            Single Upright, With Or Without Free Motion
                            Knee, With Or Without Free Motion Ankle,
                            Custom Fabricated.
L2038....................  Knee Ankle Foot Orthosis, Full Plastic, With
                            Or Without Free Motion Knee, Multi-Axis
                            Ankle, Custom Fabricated.
L2050....................  Hip Knee Ankle Foot Orthosis, Torsion
                            Control, Bilateral Torsion Cables, Hip
                            Joint, Pelvic Band/Belt, Custom-Fabricated.
L2060....................  Hip Knee Ankle Foot Orthosis, Torsion
                            Control, Bilateral Torsion Cables, Ball
                            Bearing Hip Joint, Pelvic Band/Belt, Custom-
                            Fabricated.
L2106....................  Ankle Foot Orthosis, Fracture Orthosis,
                            Tibial Fracture Cast Orthosis, Thermoplastic
                            Type Casting Material, Custom-Fabricated.
L2108....................  Ankle Foot Orthosis, Fracture Orthosis,
                            Tibial Fracture Cast Orthosis, Custom-
                            Fabricated.
L2114....................  Ankle Foot Orthosis, Fracture Orthosis,
                            Tibial Fracture Orthosis, Semi-Rigid,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L2116....................  Ankle Foot Orthosis, Fracture Orthosis,
                            Tibial Fracture Orthosis, Rigid,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L2126....................  Knee Ankle Foot Orthosis, Fracture Orthosis,
                            Femoral Fracture Cast Orthosis,
                            Thermoplastic Type Casting Material, Custom-
                            Fabricated.
L2128....................  Knee Ankle Foot Orthosis, Fracture Orthosis,
                            Femoral Fracture Cast Orthosis, Custom-
                            Fabricated.
L2132....................  Kafo, Fracture Orthosis, Femoral Fracture
                            Cast Orthosis, Soft, Prefabricated, Includes
                            Fitting And Adjustment.
L2134....................  Kafo, Fracture Orthosis, Femoral Fracture
                            Cast Orthosis, Semi-Rigid, Prefabricated,
                            Includes Fitting And Adjustment.
L2136....................  Kafo, Fracture Orthosis, Femoral Fracture
                            Cast Orthosis, Rigid, Prefabricated,
                            Includes Fitting And Adjustment.
L2350....................  Addition To Lower Extremity, Prosthetic Type,
                            (Bk) Socket, Molded To Patient Model, (Used
                            For Ptb Afo Orthoses).
L2510....................  Addition To Lower Extremity, Thigh/Weight
                            Bearing, Quadri-Lateral Brim, Molded To
                            Patient Model.
L2525....................  Addition To Lower Extremity, Thigh/Weight
                            Bearing, Ischial Containment/Narrow M-L Brim
                            Molded To Patient Model.
L2526....................  Addition To Lower Extremity, Thigh/Weight
                            Bearing, Ischial Containment/Narrow M-L
                            Brim, Custom Fitted.
L2570....................  Addition To Lower Extremity, Pelvic Control,
                            Hip Joint, Clevis Type Two Position Joint,
                            Each.
L2627....................  Addition To Lower Extremity, Pelvic Control,
                            Plastic, Molded To Patient Model,
                            Reciprocating Hip Joint And Cables.
L2628....................  Addition To Lower Extremity, Pelvic Control,
                            Metal Frame, Reciprocating Hip Joint And
                            Cables.
L3330....................  Lift, Elevation, Metal Extension (Skate).
L3671....................  Shoulder Orthosis, Shoulder Joint Design,
                            Without Joints, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3674....................  Shoulder Orthosis, Abduction Positioning
                            (Airplane Design), Thoracic Component And
                            Support Bar, With Or Without Nontorsion
                            Joint/Turnbuckle, May Include Soft
                            Interface, Straps, Custom Fabricated,
                            Includes Fitting And Adjustment.
L3720....................  Elbow Orthosis, Double Upright With Forearm/
                            Arm Cuffs, Free Motion, Custom-Fabricated.
L3730....................  Elbow Orthosis, Double Upright With Forearm/
                            Arm Cuffs, Extension/Flexion Assist, Custom-
                            Fabricated.
L3740....................  Elbow Orthosis, Double Upright With Forearm/
                            Arm Cuffs, Adjustable Position Lock With
                            Active Control, Custom-Fabricated.
L3761....................  Elbow Orthosis (Eo), With Adjustable Position
                            Locking Joint(S), Prefabricated, Off-The-
                            Shelf.
L3763....................  Elbow Wrist Hand Orthosis, Rigid, Without
                            Joints, May Include Soft Interface, Straps,
                            Custom Fabricated, Includes Fitting And
                            Adjustment.
L3764....................  Elbow Wrist Hand Orthosis, Includes One Or
                            More Nontorsion Joints, Elastic Bands,
                            Turnbuckles, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3765....................  Elbow Wrist Hand Finger Orthosis, Rigid,
                            Without Joints, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3766....................  Elbow Wrist Hand Finger Orthosis, Includes
                            One Or More Nontorsion Joints, Elastic
                            Bands, Turnbuckles, May Include Soft
                            Interface, Straps, Custom Fabricated,
                            Includes Fitting And Adjustment.
L3900....................  Wrist Hand Finger Orthosis, Dynamic Flexor
                            Hinge, Reciprocal Wrist Extension/Flexion,
                            Finger Flexion/Extension, Wrist Or Finger
                            Driven, Custom-Fabricated.
L3901....................  Wrist Hand Finger Orthosis, Dynamic Flexor
                            Hinge, Reciprocal Wrist Extension/Flexion,
                            Finger Flexion/Extension, Cable Driven,
                            Custom-Fabricated.
L3904....................  Wrist Hand Finger Orthosis, External Powered,
                            Electric, Custom-Fabricated.
L3905....................  Wrist Hand Orthosis, Includes One Or More
                            Nontorsion Joints, Elastic Bands,
                            Turnbuckles, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3960....................  Shoulder Elbow Wrist Hand Orthosis, Abduction
                            Positioning, Airplane Design, Prefabricated,
                            Includes Fitting And Adjustment.
L3961....................  Shoulder Elbow Wrist Hand Orthosis, Shoulder
                            Cap Design, Without Joints, May Include Soft
                            Interface, Straps, Custom Fabricated,
                            Includes Fitting And Adjustment.
L3962....................  Shoulder Elbow Wrist Hand Orthosis, Abduction
                            Positioning, Erbs Palsey Design,
                            Prefabricated, Includes Fitting And
                            Adjustment.
L3967....................  Shoulder Elbow Wrist Hand Orthosis, Abduction
                            Positioning (Airplane Design), Thoracic
                            Component And Support Bar, Without Joints,
                            May Include Soft Interface, Straps, Custom
                            Fabricated, Includes Fitting And Adjustment.
L3971....................  Shoulder Elbow Wrist Hand Orthosis, Shoulder
                            Cap Design, Includes One Or More Nontorsion
                            Joints, Elastic Bands, Turnbuckles, May
                            Include Soft Interface, Straps, Custom
                            Fabricated, Includes Fitting And Adjustment.

[[Page 38393]]

 
L3973....................  Shoulder Elbow Wrist Hand Orthosis, Abduction
                            Positioning (Airplane Design), Thoracic
                            Component And Support Bar, Includes One Or
                            More Nontorsion Joints, Elastic Bands,
                            Turnbuckles, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3975....................  Shoulder Elbow Wrist Hand Finger Orthosis,
                            Shoulder Cap Design, Without Joints, May
                            Include Soft Interface, Straps, Custom
                            Fabricated, Includes Fitting And Adjustment.
L3976....................  Shoulder Elbow Wrist Hand Finger Orthosis,
                            Abduction Positioning (Airplane Design),
                            Thoracic Component And Support Bar, Without
                            Joints, May Include Soft Interface, Straps,
                            Custom Fabricated, Includes Fitting And
                            Adjustment.
L3977....................  Shoulder Elbow Wrist Hand Finger Orthosis,
                            Shoulder Cap Design, Includes One Or More
                            Nontorsion Joints, Elastic Bands,
                            Turnbuckles, May Include Soft Interface,
                            Straps, Custom Fabricated, Includes Fitting
                            And Adjustment.
L3978....................  Shoulder Elbow Wrist Hand Finger Orthosis,
                            Abduction Positioning (Airplane Design),
                            Thoracic Component And Support Bar, Includes
                            One Or More Nontorsion Joints, Elastic
                            Bands, Turnbuckles, May Include Soft
                            Interface, Straps, Custom Fabricated,
                            Includes Fitting And Adjustment.
L3981....................  Upper Extremity Fracture Orthosis, Humeral,
                            Prefabricated, Includes Shoulder Cap Design,
                            With Or Without Joints, Forearm Section, May
                            Include Soft Interface, Straps, Includes
                            Fitting And Adjustments.
L4010....................  Replace Trilateral Socket Brim.
L4020....................  Replace Quadrilateral Socket Brim, Molded To
                            Patient Model.
L4030....................  Replace Quadrilateral Socket Brim, Custom
                            Fitted.
L4130....................  Replace Pretibial Shell.
L4631....................  Ankle Foot Orthosis, Walking Boot Type, Varus/
                            Valgus Correction, Rocker Bottom, Anterior
                            Tibial Shell, Soft Interface, Custom Arch
                            Support, Plastic Or Other Material, Includes
                            Straps And Closures, Custom Fabricated.
L5000....................  Partial Foot, Shoe Insert With Longitudinal
                            Arch, Toe Filler.
L5010....................  Partial Foot, Molded Socket, Ankle Height,
                            With Toe Filler.
L5020....................  Partial Foot, Molded Socket, Tibial Tubercle
                            Height, With Toe Filler.
L5050....................  Ankle, Symes, Molded Socket, Sach Foot.
L5060....................  Ankle, Symes, Metal Frame, Molded Leather
                            Socket, Articulated Ankle/Foot.
L5100....................  Below Knee, Molded Socket, Shin, Sach Foot.
L5105....................  Below Knee, Plastic Socket, Joints And Thigh
                            Lacer, Sach Foot.
L5150....................  Knee Disarticulation (Or Through Knee),
                            Molded Socket, External Knee Joints, Shin,
                            Sach Foot.
L5160....................  Knee Disarticulation (Or Through Knee),
                            Molded Socket, Bent Knee Configuration,
                            External Knee Joints, Shin, Sach Foot.
L5200....................  Above Knee, Molded Socket, Single Axis
                            Constant Friction Knee, Shin, Sach Foot.
L5210....................  Above Knee, Short Prosthesis, No Knee Joint
                            (Stubbies), With Foot Blocks, No Ankle
                            Joints, Each.
L5220....................  Above Knee, Short Prosthesis, No Knee Joint
                            (Stubbies), With Articulated Ankle/Foot,
                            Dynamically Aligned, Each.
L5230....................  Above Knee, For Proximal Femoral Focal
                            Deficiency, Constant Friction Knee, Shin,
                            Sach Foot.
L5250....................  Hip Disarticulation, Canadian Type; Molded
                            Socket, Hip Joint, Single Axis Constant
                            Friction Knee, Shin, Sach Foot.
L5270....................  Hip Disarticulation, Tilt Table Type; Molded
                            Socket, Locking Hip Joint, Single Axis
                            Constant Friction Knee, Shin, Sach Foot.
L5280....................  Hemipelvectomy, Canadian Type; Molded Socket,
                            Hip Joint, Single Axis Constant Friction
                            Knee, Shin, Sach Foot.
L5301....................  Below Knee, Molded Socket, Shin, Sach Foot,
                            Endoskeletal System.
L5312....................  Knee Disarticulation (Or Through Knee),
                            Molded Socket, Single Axis Knee, Pylon, Sach
                            Foot, Endoskeletal System.
L5321....................  Above Knee, Molded Socket, Open End, Sach
                            Foot, Endoskeletal System, Single Axis Knee.
L5331....................  Hip Disarticulation, Canadian Type, Molded
                            Socket, Endoskeletal System, Hip Joint,
                            Single Axis Knee, Sach Foot.
L5341....................  Hemipelvectomy, Canadian Type, Molded Socket,
                            Endoskeletal System, Hip Joint, Single Axis
                            Knee, Sach Foot.
L5400....................  Immediate Post Surgical Or Early Fitting,
                            Application Of Initial Rigid Dressing,
                            Including Fitting, Alignment, Suspension,
                            And One Cast Change, Below Knee.
L5420....................  Immediate Post Surgical Or Early Fitting,
                            Application Of Initial Rigid Dressing,
                            Including Fitting, Alignment And Suspension
                            And One Cast Change Ak Or Knee
                            Disarticulation.
L5430....................  Immediate Post Surgical Or Early Fitting,
                            Application Of Initial Rigid Dressing, Incl.
                            Fitting, Alignment And Supension, Ak Or Knee
                            Disarticulation, Each Additional Cast Change
                            And Realignment.
L5460....................  Immediate Post Surgical Or Early Fitting,
                            Application Of Non-Weight Bearing Rigid
                            Dressing, Above Knee.
L5500....................  Initial, Below Knee Ptb Type Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Plaster Socket, Direct Formed.
L5505....................  Initial, Above Knee--Knee Disarticulation,
                            Ischial Level Socket, Non-Alignable System,
                            Pylon, No Cover, Sach Foot, Plaster Socket,
                            Direct Formed.
L5510....................  Preparatory, Below Knee Ptb Type Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Plaster Socket, Molded To Model.
L5520....................  Preparatory, Below Knee Ptb Type Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Thermoplastic Or Equal, Direct Formed.
L5530....................  Preparatory, Below Knee Ptb Type Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Thermoplastic Or Equal, Molded To
                            Model.
L5535....................  Preparatory, Below Knee Ptb Type Socket, Non-
                            Alignable System, No Cover, Sach Foot,
                            Prefabricated, Adjustable Open End Socket.
L5540....................  Preparatory, Below Knee Ptb Type Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Laminated Socket, Molded To Model.
L5560....................  Preparatory, Above Knee- Knee
                            Disarticulation, Ischial Level Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Plaster Socket, Molded To Model.
L5570....................  Preparatory, Above Knee--Knee
                            Disarticulation, Ischial Level Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Thermoplastic Or Equal, Direct Formed.
L5580....................  Preparatory, Above Knee--Knee Disarticulation
                            Ischial Level Socket, Non-Alignable System,
                            Pylon, No Cover, Sach Foot, Thermoplastic Or
                            Equal, Molded To Model.
L5585....................  Preparatory, Above Knee--Knee
                            Disarticulation, Ischial Level Socket, Non-
                            Alignable System, Pylon, No Cover, Sach
                            Foot, Prefabricated Adjustable Open End
                            Socket.
L5590....................  Preparatory, Above Knee--Knee Disarticulation
                            Ischial Level Socket, Non-Alignable System,
                            Pylon No Cover, Sach Foot, Laminated Socket,
                            Molded To Model.

[[Page 38394]]

 
L5595....................  Preparatory, Hip Disarticulation-
                            Hemipelvectomy, Pylon, No Cover, Sach Foot,
                            Thermoplastic Or Equal, Molded To Patient
                            Model.
L5600....................  Preparatory, Hip Disarticulation-
                            Hemipelvectomy, Pylon, No Cover, Sach Foot,
                            Laminated Socket, Molded To Patient Model.
L5610....................  Addition To Lower Extremity, Endoskeletal
                            System, Above Knee, Hydracadence System.
L5611....................  Addition To Lower Extremity, Endoskeletal
                            System, Above Knee--Knee Disarticulation, 4
                            Bar Linkage, With Friction Swing Phase
                            Control.
L5613....................  Addition To Lower Extremity, Endoskeletal
                            System, Above Knee-Knee Disarticulation, 4
                            Bar Linkage, With Hydraulic Swing Phase
                            Control.
L5614....................  Addition To Lower Extremity, Exoskeletal
                            System, Above Knee-Knee Disarticulation, 4
                            Bar Linkage, With Pneumatic Swing Phase
                            Control.
L5616....................  Addition To Lower Extremity, Endoskeletal
                            System, Above Knee, Universal Multiplex
                            System, Friction Swing Phase Control.
L5617....................  Addition To Lower Extremity, Quick Change
                            Self-Aligning Unit, Above Knee Or Below
                            Knee, Each.
L5626....................  Addition To Lower Extremity, Test Socket, Hip
                            Disarticulation.
L5628....................  Addition To Lower Extremity, Test Socket,
                            Hemipelvectomy.
L5638....................  Addition To Lower Extremity, Below Knee,
                            Leather Socket.
L5639....................  Addition To Lower Extremity, Below Knee, Wood
                            Socket.
L5640....................  Addition To Lower Extremity, Knee
                            Disarticulation, Leather Socket.
L5642....................  Addition To Lower Extremity, Above Knee,
                            Leather Socket.
L5643....................  Addition To Lower Extremity, Hip
                            Disarticulation, Flexible Inner Socket,
                            External Frame.
L5644....................  Addition To Lower Extremity, Above Knee, Wood
                            Socket.
L5645....................  Addition To Lower Extremity, Below Knee,
                            Flexible Inner Socket, External Frame.
L5646....................  Addition To Lower Extremity, Below Knee, Air,
                            Fluid, Gel Or Equal, Cushion Socket.
L5647....................  Addition To Lower Extremity, Below Knee
                            Suction Socket.
L5648....................  Addition To Lower Extremity, Above Knee, Air,
                            Fluid, Gel Or Equal, Cushion Socket.
L5649....................  Addition To Lower Extremity, Ischial
                            Containment/Narrow M-L Socket.
L5650....................  Additions To Lower Extremity, Total Contact,
                            Above Knee Or Knee Disarticulation Socket.
L5651....................  Addition To Lower Extremity, Above Knee,
                            Flexible Inner Socket, External Frame.
L5653....................  Addition To Lower Extremity, Knee
                            Disarticulation, Expandable Wall Socket.
L5661....................  Addition To Lower Extremity, Socket Insert,
                            Multi-Durometer Symes.
L5665....................  Addition To Lower Extremity, Socket Insert,
                            Multi-Durometer, Below Knee.
L5671....................  Addition To Lower Extremity, Below Knee/Above
                            Knee Suspension Locking Mechanism (Shuttle,
                            Lanyard Or Equal), Excludes Socket Insert.
L5673....................  Addition To Lower Extremity, Below Knee/Above
                            Knee, Custom Fabricated From Existing Mold
                            Or Prefabricated, Socket Insert, Silicone
                            Gel, Elastomeric Or Equal, For Use With
                            Locking Mechanism.
L5677....................  Additions To Lower Extremity, Below Knee,
                            Knee Joints, Polycentric, Pair.
L5679....................  Addition To Lower Extremity, Below Knee/Above
                            Knee, Custom Fabricated From Existing Mold
                            Or Prefabricated, Socket Insert, Silicone
                            Gel, Elastomeric Or Equal, Not For Use With
                            Locking Mechanism.
L5681....................  Addition To Lower Extremity, Below Knee/Above
                            Knee, Custom Fabricated Socket Insert For
                            Congenital Or Atypical Traumatic Amputee,
                            Silicone Gel, Elastomeric Or Equal, For Use
                            With Or Without Locking Mechanism, Initial
                            Only (For Other Than Initial, Use Code L5673
                            Or L5679).
L5682....................  Addition To Lower Extremity, Below Knee,
                            Thigh Lacer, Gluteal/Ischial, Molded.
L5683....................  Addition To Lower Extremity, Below Knee/Above
                            Knee, Custom Fabricated Socket Insert For
                            Other Than Congenital Or Atypical Traumatic
                            Amputee, Silicone Gel, Elastomeric Or Equal,
                            For Use With Or Without Locking Mechanism,
                            Initial Only (For Other Than Initial, Use
                            Code L5673 Or L5679).
L5700....................  Replacement, Socket, Below Knee, Molded To
                            Patient Model.
L5701....................  Replacement, Socket, Above Knee/Knee
                            Disarticulation, Including Attachment Plate,
                            Molded To Patient Model.
L5702....................  Replacement, Socket, Hip Disarticulation,
                            Including Hip Joint, Molded To Patient
                            Model.
L5703....................  Ankle, Symes, Molded To Patient Model, Socket
                            Without Solid Ankle Cushion Heel (Sach)
                            Foot, Replacement Only.
L5704....................  Custom Shaped Protective Cover, Below Knee.
L5705....................  Custom Shaped Protective Cover, Above Knee.
L5706....................  Custom Shaped Protective Cover, Knee
                            Disarticulation.
L5707....................  Custom Shaped Protective Cover, Hip
                            Disarticulation.
L5711....................  Additions Exoskeletal Knee-Shin System,
                            Single Axis, Manual Lock, Ultra-Light
                            Material.
L5716....................  Addition, Exoskeletal Knee-Shin System,
                            Polycentric, Mechanical Stance Phase Lock.
L5718....................  Addition, Exoskeletal Knee-Shin System,
                            Polycentric, Friction Swing And Stance Phase
                            Control.
L5722....................  Addition, Exoskeletal Knee-Shin System,
                            Single Axis, Pneumatic Swing, Friction
                            Stance Phase Control.
L5724....................  Addition, Exoskeletal Knee-Shin System,
                            Single Axis, Fluid Swing Phase Control.
L5726....................  Addition, Exoskeletal Knee-Shin System,
                            Single Axis, External Joints Fluid Swing
                            Phase Control.
L5728....................  Addition, Exoskeletal Knee-Shin System,
                            Single Axis, Fluid Swing And Stance Phase
                            Control.
L5780....................  Addition, Exoskeletal Knee-Shin System,
                            Single Axis, Pneumatic/Hydra Pneumatic Swing
                            Phase Control.
L5781....................  Addition To Lower Limb Prosthesis, Vacuum
                            Pump, Residual Limb Volume Management And
                            Moisture Evacuation System.
L5782....................  Addition To Lower Limb Prosthesis, Vacuum
                            Pump, Residual Limb Volume Management And
                            Moisture Evacuation System, Heavy Duty.
L5785....................  Addition, Exoskeletal System, Below Knee,
                            Ultra-Light Material (Titanium, Carbon Fiber
                            Or Equal).
L5790....................  Addition, Exoskeletal System, Above Knee,
                            Ultra-Light Material (Titanium, Carbon Fiber
                            Or Equal).
L5795....................  Addition, Exoskeletal System, Hip
                            Disarticulation, Ultra-Light Material
                            (Titanium, Carbon Fiber Or Equal).
L5810....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Manual Lock.
L5811....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Manual Lock, Ultra-Light
                            Material.
L5812....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Friction Swing And Stance Phase
                            Control (Safety Knee).
L5814....................  Addition, Endoskeletal Knee-Shin System,
                            Polycentric, Hydraulic Swing Phase Control,
                            Mechanical Stance Phase Lock.
L5816....................  Addition, Endoskeletal Knee-Shin System,
                            Polycentric, Mechanical Stance Phase Lock.

[[Page 38395]]

 
L5818....................  Addition, Endoskeletal Knee-Shin System,
                            Polycentric, Friction Swing, And Stance
                            Phase Control.
L5822....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Pneumatic Swing, Friction
                            Stance Phase Control.
L5824....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Fluid Swing Phase Control.
L5826....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Hydraulic Swing Phase Control,
                            With Miniature High Activity Frame.
L5828....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Fluid Swing And Stance Phase
                            Control.
L5830....................  Addition, Endoskeletal Knee-Shin System,
                            Single Axis, Pneumatic/Swing Phase Control.
L5840....................  Addition, Endoskeletal Knee/Shin System, 4-
                            Bar Linkage Or Multiaxial, Pneumatic Swing
                            Phase Control.
L5845....................  Addition, Endoskeletal, Knee-Shin System,
                            Stance Flexion Feature, Adjustable.
L5848....................  Addition To Endoskeletal Knee-Shin System,
                            Fluid Stance Extension, Dampening Feature,
                            With Or Without Adjustability.
L5856....................  Addition To Lower Extremity Prosthesis,
                            Endoskeletal Knee-Shin System,
                            Microprocessor Control Feature, Swing And
                            Stance Phase, Includes Electronic Sensor(S),
                            Any Type.
L5857....................  Addition To Lower Extremity Prosthesis,
                            Endoskeletal Knee-Shin System,
                            Microprocessor Control Feature, Swing Phase
                            Only, Includes Electronic Sensor(S), Any
                            Type.
L5858....................  Addition To Lower Extremity Prosthesis,
                            Endoskeletal Knee Shin System,
                            Microprocessor Control Feature, Stance Phase
                            Only, Includes Electronic Sensor(S), Any
                            Type.
L5859....................  Addition To Lower Extremity Prosthesis,
                            Endoskeletal Knee-Shin System, Powered And
                            Programmable Flexion/Extension Assist
                            Control, Includes Any Type Motor(S).
L5920....................  Addition, Endoskeletal System, Above Knee Or
                            Hip Disarticulation, Alignable System.
L5930....................  Addition, Endoskeletal System, High Activity
                            Knee Control Frame.
L5940....................  Addition, Endoskeletal System, Below Knee,
                            Ultra-Light Material (Titanium, Carbon Fiber
                            Or Equal).
L5950....................  Addition, Endoskeletal System, Above Knee,
                            Ultra-Light Material (Titanium, Carbon Fiber
                            Or Equal).
L5960....................  Addition, Endoskeletal System, Hip
                            Disarticulation, Ultra-Light Material
                            (Titanium, Carbon Fiber Or Equal).
L5961....................  Addition, Endoskeletal System, Polycentric
                            Hip Joint, Pneumatic Or Hydraulic Control,
                            Rotation Control, With Or Without Flexion
                            And/Or Extension Control.
L5962....................  Addition, Endoskeletal System, Below Knee,
                            Flexible Protective Outer Surface Covering
                            System.
L5964....................  Addition, Endoskeletal System, Above Knee,
                            Flexible Protective Outer Surface Covering
                            System.
L5966....................  Addition, Endoskeletal System, Hip
                            Disarticulation, Flexible Protective Outer
                            Surface Covering System.
L5968....................  Addition To Lower Limb Prosthesis, Multiaxial
                            Ankle With Swing Phase Active Dorsiflexion
                            Feature.
L5973....................  Endoskeletal Ankle Foot System,
                            Microprocessor Controlled Feature,
                            Dorsiflexion And/Or Plantar Flexion Control,
                            Includes Power Source.
L5976....................  All Lower Extremity Prostheses, Energy
                            Storing Foot (Seattle Carbon Copy Ii Or
                            Equal).
L5979....................  All Lower Extremity Prosthesis, Multi-Axial
                            Ankle, Dynamic Response Foot, One Piece
                            System.
L5980....................  All Lower Extremity Prostheses, Flex Foot
                            System.
L5981....................  All Lower Extremity Prostheses, Flex-Walk
                            System Or Equal.
L5982....................  All Exoskeletal Lower Extremity Prostheses,
                            Axial Rotation Unit.
L5984....................  All Endoskeletal Lower Extremity Prosthesis,
                            Axial Rotation Unit, With Or Without
                            Adjustability.
L5986....................  All Lower Extremity Prostheses, Multi-Axial
                            Rotation Unit (Mcp Or Equal).
L5987....................  All Lower Extremity Prosthesis, Shank Foot
                            System With Vertical Loading Pylon.
L5988....................  Addition To Lower Limb Prosthesis, Vertical
                            Shock Reducing Pylon Feature.
L5990....................  Addition To Lower Extremity Prosthesis, User
                            Adjustable Heel Height.
L8035....................  Custom Breast Prosthesis, Post Mastectomy,
                            Molded To Patient Model.
V2531....................  Contact Lens, Scleral, Gas Permeable, Per
                            Lens (For Contact Lens Modification, See
                            92325).
------------------------------------------------------------------------

VII. DMEPOS Competitive Bidding Program (CBP) 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 propose to revise the existing DMEPOS 
Competitive Bidding Program (CBP) regulations in Sec.  414.422(d) on 
change of ownership (CHOW) in recognition of the fact that CHOWs may 
occur on shorter timeframes than our regulations previously 
contemplated. We also propose to revise Sec.  414.423(f) for the 
submission of a hearing request in notices of breach of contract.

B. Proposed Amendments

    In Sec.  414.422(d) we propose to revise the following amendments:
     We propose to add the acronym ``CHOW'' after the title of 
the paragraph and use the acronym throughout the section where we 
previously wrote out in full text ``change of ownership''.
     We propose to remove the notification requirement at 
paragraph (d)(1) because we no longer believe it is necessary for CMS 
to be notified 60 days in advance when a contract supplier is 
negotiating a CHOW. In past rounds of the CBP, there have been 
situations in which contract suppliers have undergone CHOWs within the 
60-day timeframe and they were unable to meet the 60-day notice 
requirement due to circumstances that were not fully within their 
control. We now recognize that the 60-day notice requirement is a bit 
onerous and as such we are proposing to remove paragraph (d)(1) in its 
entirety. We are also proposing changes to the rest of paragraph (d).
     We propose to remove the distinction of a ``new entity'' 
from paragraph (d)(2)(ii) in its entirety, and retain the successor 
entity requirements in paragraph (d)(2)(i) with changes, as we are 
aligning the CHOW requirements for all entities, regardless of whether 
a ``new'' entity is formed as a result of the CHOW. We also propose to 
revise the requirement to submit the documentation described in Sec.  
414.414(b) through (d) from 30 days prior to the anticipated effective 
date of the CHOW to instead require submission prior to the effective 
date of the CHOW. We further propose to change the requirement on 
submission of a signed novation agreement 30 days before the CHOW to 
instead require that the novation agreement be submitted by

[[Page 38396]]

the successor entity no later than 10 days after the effective date of 
the CHOW. We want to allow flexibility for the timing of submission of 
documents since it may not always be possible for the successor entity 
to submit the applicable documentation 30 days before the anticipated 
effective date of the CHOW. Through our education and outreach efforts, 
we will encourage the successor entity to work with CMS to submit draft 
documentation as far in advance as possible for CMS to review to ensure 
that the novation agreement is acceptable to CMS. We believe shortening 
the timeframe for submission from 30 days to 10 days would expedite 
CMS's determination on whether to allow transfer of the contract to the 
successor entity. We also propose that the successor entity must submit 
a novation agreement that states that it assumes all obligations under 
the contract.
     We propose to remove the phrase ``new qualified'' before 
``entity'' and replace it with the term ``successor'' in paragraph 
(d)(3) as this is applicable to all successor entities. We also propose 
to add the term ``may'' to make it clear that the transfer of the 
entire contract to a successor entity is at CMS' discretion upon CMS' 
review of all required documentation. The revision would align with 
existing language in paragraph (d)(4), which specifies that CMS may 
transfer the portion of the contract if certain conditions are met.
     We propose to revise paragraph (d)(4) by removing the 
``e.g.'' parenthetical after ``distinct company'' to retain only the 
example of a subsidiary, and noting it as ``for example'' as we 
realized that it is the clearest example. In addition, some of the 
other examples were not accurate (for example, a sole proprietor) and 
this could lead to confusion. We also propose to remove the reference 
to ``new qualified'' before ``entity'' and replace it with the term 
``successor,'' as the resulting entity in a transfer of a portion of 
the contract may not result in a ``new'' entity but would always result 
in a ``successor'' entity. In addition, we propose to remove the phrase 
``new qualified owner who'' in paragraph (d)(4)(i) and replace it with 
``successor entity that'' to align with the language used throughout 
Sec.  414.422(d). We also propose to remove the acronym ``i.e.'' and 
replace it with ``that is.''
    In Sec.  414.423(f)(2), we currently require that a request for a 
hearing be ``received by'' the Competitive Bidding Implementation 
Contractor (CBIC) within 30 days from the date of the notice of breach 
of contract. We propose to revise paragraph (f)(2) to specify that the 
request for a hearing must be ``submitted to'' the CBIC rather than 
``received by'' the CBIC. Previously, the CBIC was only able to receive 
a written request via mail or fax for a hearing from a contract 
supplier, however, now contract suppliers have a secure online method 
to submit hearing requests. Now that hearing requests can be submitted 
online, it will be apparent to all parties when the request for a 
hearing is submitted, as the date on which the request was received by 
the CBIC was not apparent to suppliers in the past. Furthermore, this 
revision aligns with language used throughout Sec.  414.423.
    We solicit public comments on these amendments and request that 
when commenting on this section, commenters reference ``DMEPOS CBP 
Proposed Amendments.''

VIII. Requests for Information

A. Data Collection

1. Technical Expert Panel on Improving the Reporting of Composite Rate 
Costs Under the ESRD PPS
a. Background
    A Technical Expert Panel (TEP) was held on December 6, 2018 to 
discuss options for improving data collection to refine the ESRD PPS 
case-mix adjustment model. CMS contracted with a data contractor to 
convene this TEP and conduct research and analysis to refine the case-
mix adjustment model. This TEP represented the first step in acquiring 
stakeholder and expert input to inform these refinements. The final TEP 
report and other materials can be found at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Educational_Resources.html.
    The TEP was comprised of 16 expert stakeholders, including ESRD 
facilities, representatives of professional associations, independent 
academic clinical researchers, and patient advocates. In addition, a 
select number of observers attended, including representatives of 
governmental agencies and independent policy advisory groups. The TEP 
was organized into seven sessions, including an overview of the ESRD 
PPS and the cost components of dialysis treatment, four topical 
sessions corresponding to potential data collection strategies, and a 
final summary session.
b. Summary of the Data Contractor's Presentation to the TEP
i. Components of Dialysis Treatment Costs and Limitations of Current 
Data Collection
    The data contractor's pre-TEP analysis of CY 2016 cost report data 
showed that composite rate costs comprise nearly 90 percent of average 
total treatment costs, with capital, direct patient care labor, and 
administrative costs representing approximately 88 percent of total 
average composite rate cost per treatment. Nevertheless, under current 
reporting practices, there are no data on the patient- and treatment-
level variation in the cost of composite rate items and services. These 
findings underscore the importance of identifying variation in these 
costs to inform the development of a refined case-mix adjustment model.
ii. Data Collection Options
    The data contractor presented the participants in the TEP with 
several options for optimizing data collection on composite rate items 
and services, and each option was specifically formulated to minimize 
reporting burden for ESRD facilities where possible. Feedback on these 
options and input on alternative approaches, as provided by the 
participants, would be used to further develop practical approaches for 
more accurate data collection.
    Among the options presented for optimizing the collection of 
composite rate cost data were (1) improving the accuracy of charges 
and/or itemizing the use of composite rate services on claims; (2) 
reporting duration of each dialysis treatment session on claims (3) 
identifying and allocating costs to discrete categories of patients or 
patient characteristics that are associated with high cost of 
treatment; and (4) improving the reporting of facility-level costs. 
Each of these options is described in the following sections. The TEP 
participants' responses to these approaches are summarized in the Key 
Findings section at the end of this section. We note that our summary 
of the key findings is based on a review of the individual comments and 
is not meant to represent a consensus view shared by all TEP 
participants, but rather to consolidate related suggestions made by one 
or more participant.
iii. Improving the Accuracy of Charges
    The data contractor presented two approaches for directly 
collecting data on the utilization of composite rate items and 
services. The first was to require more accurate reporting of

[[Page 38397]]

charges for each dialysis session. Recent analysis of charge data 
revealed little variation in charges for any given revenue center code 
associated with a dialysis treatment, indicating that facilities are 
using standardized charges. The second approach was to require itemized 
reporting of all or a limited number of high cost composite rate items 
and services. Beginning in 2015,\39\ ESRD facilities were required to 
report selected composite rate services that were included on the 
Consolidated Billing List (CBL), however, the data contractor's 
analysis of reporting on use of these items showed that compliance has 
been minimal. Participants noted that these two options would be 
burdensome for ESRD facilities.
---------------------------------------------------------------------------

    \39\ Department of Health and Human Services. Centers for 
Medicare and Medicaid Services. Change Request 8978. December 2, 
2014 (pp 3-4). https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R200BP.pdf.
---------------------------------------------------------------------------

iv. Collection of Data on Duration of Dialysis Treatment
    A singular option that would provide sufficient data to develop a 
refined case-mix adjustment model is the collection of dialysis 
treatment duration for each session. If dialysis session time were 
reported for each dialysis treatment, cost report and treatment-level 
data could be integrated to infer differences in composite rate costs 
across patients. In this paradigm, patient-level differences in 
composite rate costs could be attributed to two discrete categories: 
Differences due to dialysis treatment duration (measured in units of 
time) and differences unrelated to treatment duration. Treatment 
duration would not be used to directly adjust payment, rather, it would 
be used to apportion composite rate costs that are currently only 
observable at the facility level to the patient or treatment level for 
use in the case-mix adjustment. Data on the duration of dialysis 
session would allow for a proportionately higher proportion of 
composite rate costs to be allocated to patients with longer dialysis 
treatment times.
    The data contractor provided examples of ways that longer duration 
of dialysis time might be associated with increased treatment costs, 
including utility costs, accelerated depreciation on equipment, and 
lower daily census counts, which, among other things, would result in 
increased per-treatment capital costs. Additional labor hours for a 
patient with longer treatments on average could increase per-treatment 
labor costs, and patients with increased use of dialysate and water 
treatment supplies or equipment likely have higher average per-
treatment supply costs.
    The data contractor proposed two approaches to collect treatment 
duration data: (1) Use existing data from Consolidated Renal Operations 
in a Web-Enabled Network (CROWNWeb) on delivered dialysis minutes 
during the monthly session when a laboratory specimen is drawn to 
measure blood urea nitrogen (BUN) or (2) have ESRD facilities report 
treatment duration on Medicare claims. For the latter, treatment 
duration data could be reported by using a new HCPCS or revenue center 
code to indicate units of treatment time for each dialysis treatment or 
by updating the definition of the existing revenue center code for 
dialysis treatments so that the units correspond to treatment time 
instead of the number of treatments. ESRD facilities already report to 
CMS a single monthly treatment time in CROWNWeb for in-facility 
treatments, indicating that facilities currently collect treatment 
duration.\40\ Moreover, many ESRD facilities' electronic health records 
(EHR) systems automatically collect this information for every dialysis 
treatment, minimizing additional burden of reporting this metric on 
claims.
---------------------------------------------------------------------------

    \40\ Centers for Medicare & Medicaid Services (CMS) End-Stage 
Renal Disease Quality Incentive Program (ESRD QIP) Payment Year (PY) 
2021 Measure Technical Specifications. Page 23. Available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/Downloads/PY-2021-Technical-Specifications-.pdf.
---------------------------------------------------------------------------

v. Capturing Variation in Costs Associated With Complex Patients
    Participants on the TEP also discussed the variation in composite 
rate costs that is independent of treatment duration and associated 
with severity of illness or disability in the dialysis patient 
population. In preparation for the TEP, the data contractor interviewed 
a number of ESRD facilities to identify sources of composite rate cost 
variation associated with the provision of care to more complex 
patients. Patient level-factors identified during the course of these 
interviews and during the TEP included seven points: (1) Maintenance of 
isolation rooms and use of dedicated nurses to attend patients with 
active hepatitis B infection; (2) treatment and care for incident 
dialysis patients (first 120 days); (3) treatment and care for 
catheterized patients; (4) pre- and post-dialysis session care for non-
ambulatory patients; (5) treatment and care for pediatric patients; (6) 
treatment of patients exhibiting behavioral problems related to mental 
illness/drug dependency; and (7) treatment and care for home dialysis 
patients.
    During the TEP, participants identified additional factors 
associated with higher treatment costs. These included hemodynamic 
instability, dual eligibility for Medicare and Medicaid, depression or 
mental illness, poor functional status, no primary caregiver, and 
institutionalized status or incarcerated or residence in a skilled 
nursing facility.
    A common thread among these factors is that they all require more 
intense use of labor, especially direct patient care staff and highly 
specialized nursing or social work care or other intervention, such as 
would be provided by staff to assist in transfer for non-ambulatory 
patients.
    The data contractor described alternative approaches for collecting 
sufficient data on these composite rate costs to inform a refined case-
mix adjustment model. The first would entail reporting such items and 
services as line items on the claim. The second would involve grouping 
patients into a set of ``high-risk'' or ``high-cost'' patient types, in 
a hierarchical fashion and apportioning costs to each patient grouping 
based on known use of services.
vi. Facility-Level Costs
    The TEP also included discussion of facility-level costs, 
identifying drivers of these costs, and the ESRD facility 
characteristics that may result in cost differences across facility 
types and potential revisions to the cost reports to better capture 
these costs. Participants on the TEP indicated that drivers of 
facility-level costs include: (1) Facility size (treatment volume and 
treatment capacity), which affects economies of scale; (2) geographic 
location, which affects both input prices and wages; (3) hospital 
versus freestanding status; (4) ownership type; and (5) whether the 
facility offers specialized services, such as pediatric or home 
dialysis treatment. These facility characteristics can affect both 
capital and labor costs, as well as the costs for drugs, laboratory 
tests and supplies.
c. Key Findings
    Based on a review of the individual participant responses to each 
of the data collection options, CMS has summarized key conclusions in 
the following sections. The sections are arranged in the order of the 
topical sessions, as they were presented earlier.

[[Page 38398]]

i. Components of Dialysis Treatment Costs and Limitations of Current 
Data Collection
    During this session, the participants agreed that capital, labor, 
and administrative costs make up the majority of composite rate costs. 
They stated that the level of complexity of dialysis patients has been 
increasing over time, and noted some costs at the margins (for example, 
information technology costs) that are not reflected in cost reports. 
Participants were averse to reporting individualized charges to reflect 
treatment-level variation in the items and services provided, unless 
this reporting was somehow linked to payment.
ii. Duration of Dialysis Treatment
    To record time on dialysis, participants preferred that the data be 
collected on Medicare claims. They did not support using existing 
CROWNWeb data on treatment duration, as there were too many questions 
about its completeness and timeliness. They agreed that if duration of 
dialysis treatment time is collected on claims that it should be 
reported in actual minutes dialyzed and not, for example, in 15-minute 
increments. The participants cautioned that reporting time on dialysis 
on the claims would place additional burden on facilities, but for 
facilities with EHRs, the burden associated with the collection of 
dialysis treatment time is expected to be small and temporary because 
the information is already collected. Collecting time on dialysis could 
be difficult to accomplish for ESRD facilities that do not use EHRs. 
Some participants maintained that certain factors related to patient 
complexity--such as comorbidities and mental health status--that are 
associated with treatment costs are unrelated to treatment duration.
iii. Identifying Costs Associated With Complex Patients
    The participants expressed support for improving consistency in 
cost reporting across facilities. They recommended clarifying cost 
report instructions to ensure comparable reporting across facilities. 
They agreed that labor is the major source of patient-level cost 
variation, but expressed concern that allocating labor costs to the 
patient level or even the patient type would pose significant 
challenges. The participants noted that certain high-cost items and 
services used to treat complex patients, such as isolation rooms or 
lifts, could be easily itemized on claims and reported in cost reports. 
They proposed alternative approaches for quantifying resource use 
associated with complex patients, such as classifying resource use by 
intensity of care provided or tracking staff time across patients.
iv. Facility-Level Costs
    The participants stated that there are differences in cost at the 
facility level associated with the characteristics presented in the 
Facility-level Drivers of Cost session. They noted EHR practices are 
also associated with variation in facility-level cost. In addition, 
they emphasized that treatment volume relative to capacity has a 
significant financial impact on dialysis facilities; however, these 
costs currently are not reflected in cost reports. They also suggested 
that it might be beneficial to reflect missed treatments through a 
capacity utilization measure on the cost report and this could 
distinguish between more costly missed treatments and less costly 
planned absences, as the latter can be adjusted so that the facility 
chair is filled. The participants also indicated that rural facilities 
have costs not incurred by non-rural facilities, even among facilities 
with similar treatment volume, and do not believe the low volume 
payment adjustment and rural adjuster to be redundant.
d. Summary
    This TEP focused on data collection on composite rate costs to 
inform the development of a more refined case-mix adjustment model for 
the ESRD PPS. Currently two equations are used to calculate the base 
rate for payment: (1) One at the facility level and, (2) one at the 
patient or treatment level--because items in the composite rate are not 
collected at the patient level.\41\
---------------------------------------------------------------------------

    \41\ Medicare Claims Processing Manual. Chapter 8--Outpatient 
ESRD Hospital, Independent Facility, and Physician/Supplier Claims. 
(Rev. 4202, 01-18-19). Page 7/143.
---------------------------------------------------------------------------

    While formerly separately billable items and services are itemized 
at the treatment level on claims and also reflected in cost reports, 
composite rate services, which comprise the bulk of the total costs for 
dialysis treatment are not itemized and can only be estimated at the 
facility level from cost reports. Charges for these services, as 
reported on claims, show little variation across facilities and cannot 
be used for estimating patient- or treatment-level variation in cost. 
Solutions for optimizing data collection on individual use of composite 
rate services were proposed by the data contractor and discussed by the 
participants. CMS' current goal, as emphasized throughout the TEP, is 
to explore options to improve the identification of per-treatment 
composite rate costs, and we invite comment on all of the options 
proposed during this TEP and discussed as part of this comment 
solicitation. We agree with the participants on the TEP that the 
benefits of improving the ESRD PPS case-mix adjustment model must be 
weighed against any additional ESRD facility burden that could result 
from changes to claims and cost reporting.
e. Solicitation for Input and Comment: Improving Data Collection on 
Composite Rate Costs
    CMS seeks input on options for improving the reporting of composite 
rate costs for the ESRD PPS. We believe improved reporting of both 
patient level costs, as reported on claims, and facility level costs, 
as reported on cost reports, is needed in order to obtain sufficient, 
high quality data to inform a refined case mix adjusted model for the 
ESRD PPS. We are seeking comments on, or elaborations of, the options 
presented and discussed during the TEP, described previously in section 
VIII.A.1.b.ii of this proposed rule, as well as novel approaches for 
improving the reporting of patient-level and facility-level costs that 
are not described here. CMS will consider new input from stakeholders 
as we develop methodologies for implementing select changes to claims 
and cost reports that serve to elucidate composite rate costs. CMS has 
not endorsed any particular method or option at this time.
i. Input Sought on Identifying Components of Composite Rate Costs
    During the TEP, the data contractor identified six cost components 
comprising composite rate costs for the ESRD PPS. These include: (1) 
Capital, (2) administrative, (3) labor, (4) drug, (5) laboratory and, 
(6) supply costs. Options were presented to improve the precision and 
accuracy of reporting costs for each component. Data on costs of some 
components, including capital, administrative and labor, are found 
chiefly in facility cost reports and reflect spending at the facility 
level. These facility-level costs, in combination with treatment counts 
can be used to estimate patient or treatment level composite rate 
costs. Data on other cost components, including drugs, laboratory tests 
and supplies, can be found both on the cost reports and on claims, 
however composite rate laboratory and supply costs are not specified on 
the cost report. Basic treatment charges are seen to vary little across 
patients or across facilities. Cost report data were questioned by the 
participants with regard to their accuracy and reliability.
    Therefore, CMS seeks further input on ways to improve (1) the 
accuracy of

[[Page 38399]]

charges and (2) the precision and reliability with which cost composite 
rate costs are identified and reported in cost reports.
    Commenters are invited to submit their responses to the following 
questions and requests:
     Do the six cost components include all aspects of dialysis 
treatment costs covered by Medicare?
    ++ If not, please describe any further component costs within each 
component?
    ++ Within each component, are there significant costs that are not 
currently captured in cost reports?
     The data contractor found that most composite rate costs 
are embedded in the capital, administrative and labor components. Given 
the relatively small contribution of drugs, laboratory tests, and 
supplies to composite rate costs, is there a justification for any 
further consideration of composite rate costs from capital, labor and 
administrative components?
     Why is there such limited variation in reported charges? 
Would it be useful to focus on improving reporting of these charges 
instead of collecting new information on cost reports or claims? Why is 
there such limited reporting of costs for items and services included 
in the CBL? Are there subsets of composite rate items and services that 
could be successfully reported on claims?
ii. Input Sought on Collection of Duration of Treatment Data
    During the TEP, the data contractor proposed a paradigm by which to 
consider select changes to cost reporting that would reveal patient-
level variation in costs, differentiating costs by those which can be 
attributed to dialysis treatment duration and those unrelated to 
treatment duration. Capturing data on these two types of differences 
was the thrust of the discussion during much of the TEP. CMS seeks 
further input on these two elements of cost differential.
    Dialysis session duration data could be used to refine calculations 
of per-treatment costs by increasing specificity in the allocation of 
composite rate costs. Applying this change only to current data 
collection practices would suffice to account for treatment level 
differences in costs due to length of treatment. Duration data would 
allow for the distribution of composite rate component costs in such a 
way that a higher proportion of a facility's composite rate costs could 
be attributed to patients with longer dialysis treatment times. This 
would improve the precision with which costs for the use of such 
composite rate items and services as capital equipment use, water 
treatment and dialysate are allocated.
    We invite comments on the option of collecting duration of 
treatments data, including responses to the following questions:
     Which of the six composite rate cost components (capital, 
administrative, labor, drug, laboratory, and supply costs) are most 
likely to vary with treatment duration?
     Should new information for these cost components be 
collected on cost reports, for use in better inferring the composite 
rate costs associated with treatment duration? If yes, please describe 
the additional information that would be needed and how this 
information could be used.
     Describe any challenges that would be encountered by ESRD 
facilities in reporting treatment duration, using a line item 
corresponding to units of time as a new revenue center code on the 
claim.
     Describe any alternatives to the use of dialysis treatment 
duration that could be used as a proxy for intensity of resource 
utilization and which can be reported at the patient/treatment level.
     Do facilities record the total time the patient spends in 
the facility before and after the actual dialysis treatment time, as 
well as the duration of the actual dialysis treatment? If so, please 
describe any obstacles to reporting this information on the claim.
iii. Input Sought on Collection of Data To Identify Sources of 
Variation in Treatment Costs Associated With Complex Patients
    The data contractor presented a list of conditions, identified 
during pre-TEP interviews with ESRD facilities, associated with higher 
cost treatment for dialysis patients. During the TEP, the participants 
added to this list. The combined list of these conditions is described 
in section VIII.A.1.b.v of this proposed rule.
    The data contractor also presented alternative approaches for 
collecting sufficient data on these composite rate costs so as to 
inform a refined case-mix model. One approach would entail reporting 
such items and services as line items on the claim. The second would 
involve grouping patients into a set of ``high risk'' or ``high cost'' 
patient types, in a hierarchical fashion, and apportioning costs to 
each patient grouping based on known use of services. There was no 
consensus among participants with regard to the best way to capture 
these costs.
    CMS solicits comments and suggestions about how to best capture 
these costs. Some questions to consider include the following: First, 
to the extent labor is the dominant source of variation in cost in 
providing dialysis services to complex patients, please describe the 
amount and type of labor required to care for patients with the 
conditions described above or any other conditions which complicate the 
provision of basic dialysis treatment. Second, please describe other 
dimensions of dialysis care and treatment for which composite rate 
costs vary independent of treatment duration. Third, are there 
discrete, high-cost composite rate items and services that vary at the 
patient level that could be feasibly itemized on claims? Fourth, how 
could a set of mutually exclusive, exhaustive patient groups be 
constructed to incorporate patients with common patterns of resource 
use? Fifth, what challenges might be faced in implementing the proposed 
reporting solutions (a) on claims and (b) on cost reports? Sixth, are 
pediatric and home dialysis costs accurately apportioned across cost 
components in cost reports? If not, please describe.
iv. Input Sought on Collection of Facility-Level Data
    During the TEP the data contractor presented a framework for 
considering facility-level drivers of cost, which meet two criteria: 
(i) They are independent of patient-level factors, and (ii) they affect 
the cost of dialysis treatment. The TEP debated each criterion for 
facility-level cost drivers, including facility size and realized 
treatment capacity. Geographic location affects wages and prices of 
goods and services. While some commenters have suggested that rural 
ESRD facilities incur higher costs, the data contractor's analysis of 
2016 cost report data for the December 2018 TEP indicates that overall 
composite rate costs for rural facilities may be lower than for urban 
facilities. Further analysis by cost component suggests that with the 
exception of drug costs, urban facilities incur higher costs for each 
composite rate cost component. Ownership and other organizational 
factors, such as whether the facility administers a home dialysis 
program or serves the pediatric population also have a bearing on cost.
    CMS seeks input from stakeholders regarding the further 
identification of facility-level drivers of cost, especially those that 
affect the cost of composite rate services. Please consider the 
following questions: First, what facility level factors should be added 
or further specified in the cost report to better reflect actual 
facility costs for the provision of composite rate items and services? 
Second, what are costs

[[Page 38400]]

incurred by pediatric dialysis units that do not vary at the patient-
level? Third, what types of costs do facilities providing home dialysis 
services incur that do not vary at the patient-level? Fourth, how do 
variations in drivers of facility costs affect composite rate costs at 
the facility level? Fifth, to what extent are these composite rate 
costs outside the facility's control? Sixth, what are the challenges or 
barriers to reporting missed treatments on claims and/or cost reports?
v. Other Input Needed
    We also seek to gather responses to the following questions that 
arose during the TEP. Answers to these questions from the stakeholder 
community will help us to develop and refine reporting options for 
composite rate costs.
    Beginning January 1, 2015, ESRD facilities have been required to 
itemize on claims the use of composite rate drugs listed on the 
CBL.\42\ As presented at the TEP, the data contractor's analysis of 
2016 claims data revealed that approximately 40 percent of facilities 
were not reporting these items. We are requesting that commenters 
identify any obstacles that might be preventing ESRD facilities from 
reporting the use of these composite rate drugs. Also, are there any 
drugs listed in the most recent CBL that are particularly challenging 
to report? If there are, please describe those challenges.
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    \42\ Department of Health and Human Services. Centers for 
Medicare and Medicaid Services. Change Request 8978. December 2, 
2014 (pp 3-4). https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R200BP.pdf.
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    The participants mentioned that Medicare Advantage and other 
secondary payers will sometimes reject claims that include billing for 
certain items and services, such as oral medications. We are requesting 
comments on the specific billing practices that lead to such claims 
being rejected, along with the specific items and services that are 
rejected by payers.
    The participants expressed reservations about the reliability of 
cost report data and also about the comparability of cost reports 
between freestanding and hospital-based ESRD facilities.
    We are also soliciting comments regarding suggested specific 
changes to the cost reports or cost report instructions that would be 
most useful to improve the consistency of reporting across facilities.
    We solicit public comments for the request for information 
regarding data collection and request that when commenting on this 
section, commenters reference ``RFI--Data Collection.''

B. Wage Index Comment Solicitation

    As discussed in section II.B.5.b of this proposed rule, 
historically, we have calculated the ESRD PPS wage index values using 
unadjusted wage index values from another provider setting. 
Stakeholders have frequently commented on certain aspects of the ESRD 
PPS wage index values and their impact on payments. We are soliciting 
comments on concerns stakeholders may have regarding the wage index 
used to adjust the labor-related portion of the ESRD PPS base rate and 
suggestions for possible updates and improvements to the geographic 
wage index payment adjustment under the ESRD PPS.
    We solicit public comments for the request for information 
regarding the wage index and request that when commenting on this 
section, commenters reference ``RFI--Wage Index.''

C. Comment Solicitation on Sources of Market-Based Data Measuring Sales 
of Diabetic Testing Strips to Medicare Beneficiaries (Section 50414 of 
the Bipartisan Budget Act of 2018)

1. Background
    Section 1847(a)(2)(A) of the Act mandates competitive bidding 
programs for ``covered items'' and supplies used in conjunction with 
DME such as blood glucose monitors used by beneficiaries with diabetes. 
The supplies used with these blood glucose monitors (such as blood 
glucose test strips and lancets) are referred to under the DMEPOS CBP 
as diabetic supplies or diabetic testing supplies. In the April 10, 
2007 final rule published in the Federal Register titled ``Medicare 
Program; Competitive Acquisition for Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues'' (72 FR 
17992), which implemented the DMEPOS CBP, we established regulations to 
implement competitions on a regional or national level for certain 
items such as diabetic testing supplies that are furnished on a mail 
order basis. We explained our rationale for establishing a national 
DMEPOS CBP for items furnished on a mail order basis in the May 1, 2006 
proposed rule published in the Federal Register titled ``Medicare 
Program; Competitive Acquisition for Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues'' (71 FR 
25669) and in the April 2007 final rule (72 FR 18018).
    On January 16, 2009, we published an interim final rule in the 
Federal Register titled ``Medicare Program; Changes to the Competitive 
Acquisition of Certain Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS) by Certain Provisions of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA)'' that 
implemented certain changes to the DMEPOS CBP (74 FR 2873). 
Specifically, the rule implemented section 154 of MIPPA (Pub. L. 110-
275), which delayed implementation of Round One of the program, 
required CMS to conduct a second Round One competition in 2009, and 
mandated certain changes for both the Round One Rebid and subsequent 
rounds of the program. In the January 2009 interim final rule, we 
indicated that we would be considering alternatives for competition of 
diabetic testing supplies in future notice and comment rulemaking.
    On July 13, 2010 we published a proposed rule in the Federal 
Register titled ``Medicare Program; Payment Policies Under the 
Physician Fee Schedule and Other Revisions to Part B for CY 2011'' (75 
FR 40211), in which we discussed alternatives for competition of 
diabetic testing supplies and proposed the implementation of a revised 
national mail order CBP for diabetic testing supplies. Under the 
proposed mail order DMEPOS CBP, we would award contracts to suppliers 
to furnish these items across the nation to beneficiaries who elect to 
have replacement diabetic testing supplies delivered to their 
residence. Suppliers wishing to furnish these items through the mail to 
Medicare beneficiaries would be required to submit bids to participate 
in the national mail order CBP for diabetic testing supplies.
    Section 154(d) of MIPPA modified section 1847(b)(10) of the Act to 
prohibit CMS from awarding a contract to a supplier of diabetes test 
strips if the supplier's bid does not cover at least 50 percent, by 
volume, of all types of diabetes test strips on the market. With 
respect to any competition for diabetic testing strips after the first 
round of competition, a supplier must demonstrate that its bid to 
furnish diabetic testing strips covers the types of diabetic testing 
strip products that, in the aggregate and taking into account volume 
for the different products, cover at least 50 percent of all such types 
of products on the market. CMS and the CBIC refer to this rule as the 
``50 percent rule.'' \43\ Section 1847(a)(10)(A) of the

[[Page 38401]]

Act also specified that the volume for the different products may be 
determined in accordance with data (which may include market based 
data) recognized by the Secretary.
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    \43\ https://www.dmecompetitivebid.com/Palmetto/Cbic.nsf/files/
R2_Fact_Sheet_Mail-Order_Diabetic_Supplies.pdf/$FIle/
R2_Fact_Sheet_Mail-Order_Diabetic_Supplies.pdf.
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    Section 1847(b)(10)(B) of the Act mandated that the Office of 
Inspector General (OIG) conduct a study before 2011 to determine the 
types of diabetic testing strips by volume that could be used by CMS 
for the purpose of evaluating bidders in the national mail order CBP 
for diabetic testing supplies. Under the DMEPOS CBP, bidding suppliers 
are required to provide information on the products they plan to 
furnish if awarded a contract. We proposed in the July 2010 proposed 
rule (75 FR 40211) to use information submitted by bidding suppliers 
and information on the market share (volume) of the various diabetic 
testing strip products to educate suppliers on meeting the requirements 
of this special 50 percent rule. We noted that it may be necessary to 
obtain additional information from suppliers such as invoices or 
purchase orders to verify that the requirements in the statute have 
been met (75 FR 40214). We proposed that suppliers be required to 
demonstrate that their bids cover the minimum 50-percent threshold 
provided in the statute, but we invited comments on whether a higher 
threshold should be used (75 FR 40214). We proposed the 50 percent 
threshold in part because we believed that all suppliers have an 
inherent incentive to furnish a wide variety of types of diabetic 
testing products to generate a wider customer referral base (75 FR 
40214). The 50 percent threshold would ensure that beneficiaries have 
access to mail order delivery of the top-selling diabetic test strip 
products (75 FR 40214). In addition, we proposed an ``anti-switching 
provision'' that we said would obviate the need to establish a 
threshold of greater than 50 percent for the purpose of implementing 
this special rule because the contract suppliers would not be able to 
carry a limited variety of products and switch beneficiaries to those 
products (75 FR 40214). For purposes of implementing the special rule 
in section 1847(b)(10)(A) of the Act, we proposed to define ``diabetic 
testing strip product'' as a specific brand and model of test strip, as 
we said that was the best way to distinguish among different products 
(75 FR 40214). Therefore, we planned to use market based data for 
specific brands and models of diabetic test strips to determine the 
relative market share or volume of the various products on the market 
that are available to Medicare beneficiaries (75 FR 40214). We said we 
would apply this rule to non-mail order competitions and/or local 
competitions conducted for diabetic testing strips after Round One of 
the DMEPOS CBP (75 FR 40214).
    In the November 29, 2010 final rule with comment period published 
in the Federal Register titled ``Medicare Program; Payment Policies 
Under the Physician Fee Schedule and Other Revisions to Part B for CY 
2011'' (75 FR 73567), we established requirements for the national mail 
order CBP for diabetic testing supplies. We finalized the proposed 
special 50 percent rule mandated by section 1847(b)(10)(A) of the Act 
(75 FR 73611). We finalized our proposal to require each bidder in the 
national mail order CBP for diabetic testing supplies to demonstrate 
that its bid covers types of diabetic testing strip products that, in 
the aggregate and taking into account volume for the different 
products, cover 50 percent (or such higher percentage as the Secretary 
may specify) of all such types of products (75 FR 73611). We said that 
the 50 percent threshold would ensure that beneficiaries have access to 
mail order delivery of the top selling diabetic test strip products 
from every contract supplier, and we adopted the 50 percent rule 
because we believed this was reflective of what suppliers were 
currently doing and ensured appropriate access for beneficiaries (75 FR 
73611). We also said that the OIG was conducting a study to generate 
volume data for various diabetic testing strip products furnished on a 
mail order basis (75 FR 73572). We said that we would use this data as 
guidance to implement this special rule for mail order contract 
suppliers and ensure that their bids cover at least 50 percent of the 
volume of testing strip products currently furnished to beneficiaries 
via mail order (75 FR 73572). The OIG was required to complete their 
study before 2011 and we said we would make their data available to the 
public (75 FR 73572).
    The OIG released its study in 2010, and the OIG has since 
determined the market shares of the types of diabetes test strips 
before each round of competitive bidding.\44\ The data from this series 
of reports informs CMS about the types of diabetes test strips that 
suppliers provide to Medicare beneficiaries via mail order.
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    \44\ https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000311.asp.
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2. Current Issues
    The Bipartisan Budget Act of 2018 (BBA) was enacted on February 9, 
2018, and section 50414 of the BBA amended section 1847(b)(10)(A) of 
the Act to establish additional rules for the competition for diabetic 
testing strips. Section 1847(b)(10)(A) of the Act now requires that for 
bids to furnish diabetic testing strips on or after January 1, 2019, 
the volume for such products be determined by the Secretary through the 
use of multiple sources of data (from mail order and non-mail order 
Medicare markets), including market-based data measuring sales of 
diabetic testing strip products that are not exclusively sold by a 
single retailer from such markets.
    The OIG reports to CMS the Medicare Part B market share of mail 
order diabetic test strips before each round of the Medicare national 
mail order CBP, and pursuant to section 1847(b)(10)(A) of the Act, the 
OIG will now report on the non-mail order diabetic test strip Medicare 
Part B market. On January 19, 2019, the OIG released a report that 
documented the Medicare Part B market share of mail order diabetic test 
strips for the 3-month period of April through June 2018.\45\ On March 
19, 2019, the OIG released another report that documented the Medicare 
Part B market share of non-mail-order diabetic test strip for the same 
3-month period.\46\ These data briefs represent OIG's third round of 
diabetic test strip Medicare market share reports since 2010, but this 
is the first series of reports that includes non-mail-order diabetic 
test strip data.\47\
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    \45\ https://oig.hhs.gov/oei/reports/oei-04-18-00440.pdf.
    \46\ https://oig.hhs.gov/oei/reports/oei-04-18-00441.pdf.
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    Because section 1847(b)(10)(A) of the Act now requires the use of 
``multiple sources of data,'' we are requesting public comments on 
other potential sources of data (sources other than the OIG), that 
fulfill the data requirements set forth in section 1847(b)(10)(A) of 
the Act. We are requesting comments on other potential sources of data 
because the word ``multiple'' in the phrase ``multiple sources of 
data'' could mean that we should use more than one source of data, and 
that the OIG is one source of data. We are therefore requesting 
comments from the public on other potential sources of data regarding 
the mail order and non-mail order Medicare markets for diabetic testing 
strips through this request for information. In particular, we are 
seeking data that:
     Has a sufficient sample size, and is unbiased and 
credible;
     Separately provides the market shares of the mail-order 
Medicare Part B market, and the non-mail order Medicare Part B market 
(does not combine the two markets into one); and

[[Page 38402]]

     Includes market-based data measuring sales of diabetic 
testing strip products that are not exclusively sold by a single 
retailer from such markets.

IX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

    In sections II.B.1, II.B.2 and II.B.3 of this proposed rule, we are 
proposing changes to regulatory text for the ESRD PPS in CY 2020. 
However, the changes that are being proposed do not impose any new 
information collection requirements.

C. Additional Information Collection Requirements

    This proposed rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, there 
are changes in some currently approved information collections. The 
following is a discussion of these information collections.
1. ESRD QIP--Wage Estimates
    To derive wages estimates, we used data from the U.S. Bureau of 
Labor Statistics' May 2018 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, are the individuals tasked with 
submitting measure data to CROWNWeb and NHSN, as well as compiling and 
submitting patient records for purpose of the data validation studies, 
rather than a Registered Nurse, whose duties are centered on providing 
and coordinating care for patients. The mean hourly wage of a Medical 
Records and Health Information Technician is $21.16 per hour.\48\ 
Fringe benefit and overhead are calculated at 100 percent. Therefore, 
using these assumptions, we estimate an hourly labor cost of $42.32 as 
the basis of the wage estimates for all collections 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.
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    \48\ https://www.bls.gov/oes/current/oes292071.htm.
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    We used this updated wage estimate, along with updated facility and 
patient counts as well as a refined estimate of the time spent 
completing data entry for reporting data, to re-estimate the total 
information collection burden in the ESRD QIP for PY 2022 that we 
discussed in the CY 2019 ESRD QIP final rule (83 FR 57050 through 
57052) and to estimate the total information collection burden in the 
ESRD QIP for PY 2023. We provide the re-estimated information 
collection burden associated with the PY 2022 ESRD QIP and the newly 
estimated information collection burden associated with the PY 2023 
ESRD QIP in sections IV.C.2 and IV.C.3 of this proposed rule.
2. Estimated Burden Associated With the Data Validation Requirements 
for PY 2022 and PY 2023
    In the CY 2019 ESRD PPS final rule, we finalized a policy to adopt 
the CROWNWeb data validation methodology that we previously adopted for 
the PY 2016 ESRD QIP as the methodology we would use to validate 
CROWNWeb data for all payment years, beginning with PY 2021 (83 FR 
57001 through 57002). Under this methodology, 300 facilities would be 
selected each year to submit to CMS not more than 10 records, and we 
would 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 estimated 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. In this proposed 
rule, we are updating these estimates using a newly available wage 
estimate of a Medical Records and Health Information Technician and 
have made no other changes to our methodology for calculating the 
annual burden associated with the CROWNWeb validation study. We 
estimate that it would 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 would be 750 hours (300 facilities x 2.5 hours). Since we 
anticipate that Medical Records and Health Information Technicians or 
similar administrative staff would submit these data, we estimate that 
the aggregate cost of the CROWNWeb data validation each year would be 
approximately $31,740 (750 hours x $42.32), or an annual total of 
approximately $105.80 ($31,740/300 facilities) per facility in the 
sample. The increase in our burden estimate is due to an updated wage 
estimate for Medical Records and Health Information Technicians or 
similar staff and is not the result of any policies proposed in this 
proposed rule. The burden associated with these requirements is 
captured in an information collection request (OMB control number 0938-
1289).
    In section IV.B.7 of this proposed rule, we propose to continue in 
PY 2023 and subsequent payment years the NHSN data validation study 
using the methodology finalized in the CY 2019 ERD PPS final rule for 
PY 2022 (83 FR 57001 through 57002) and to adopt the NHSN validation 
study as a permanent feature of the ESRD QIP. Under this methodology, 
we would select 300 facilities for participation in the PY 2023 
validation study. A CMS contractor would send these facilities requests 
for 20 patients' records for each of the first 2 quarters of CY 2021 
(for a total of 40 patient records per facility).

[[Page 38403]]

The burden associated with these data validation requirements is the 
time and effort necessary to submit the requested records to a CMS 
contractor. Using the newly available wage estimate of a Medical 
Records and Health Information Technician, we estimate that it would 
take each facility approximately 10 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 would be 
3,000 hours (300 facilities x 10 hours). Since we anticipate that 
Medical Records and Health Information Technicians or similar staff 
would submit these data, we estimate that the aggregate cost of the 
NHSN data validation each year would be approximately $126,960 (3,000 
hours x $42.32), or a total of approximately $423.20 ($126,960/300 
facilities) per facility in the sample. The increase in our burden 
estimate is due to an updated wage estimate for Medical Records and 
Health Information Technicians or similar staff and is not the result 
of any policies proposed in this proposed rule. The burden associated 
with these requirements is captured in an information collection 
request (OMB control number 0938-1340).
3. CROWNWeb Reporting Requirements for PY 2022 and PY 2023
    To determine the burden associated with the CROWNWeb reporting 
requirements, we look at the total number of patients nationally, the 
number of data elements per patient-year that the facility would 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 the CY 2019 ESRD PPS final rule, we estimated that the 
burden associated CROWNWeb reporting requirements for the PY 2022 ESRD 
QIP was approximately $202 million. We are not proposing any changes 
that would affect the burden associated with CROWNWeb reporting 
requirements for PY 2022 or PY 2023. However, we have re-calculated the 
burden estimate for PY 2022 using updated estimates of the total number 
of dialysis facilities, the total number of patients nationally, and 
wages for Medical Records and Health Information Technicians or similar 
staff as well as a refined estimate of the number of hours needed to 
complete data entry for CROWNWeb reporting. In the CY 2019 ESRD PPS 
final rule, we estimated that the amount of time required to submit 
measure data to CROWNWeb was 2.5 minutes per element and used a rounded 
estimate of 0.042 hours in our calculations. In this proposed rule, we 
did not use a rounded estimate of the time needed to complete data 
entry for CROWNWeb reporting. As a result of these changes in the 
methodology, we estimate that the PY 2022 burden is $205 million (or 
4.8 million hours), and the net incremental burden from PY 2022 to PY 
2023 is $0 (or 0 hours).

X. Response to Comments

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

XI. 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 (RIA) 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 RIA 
that to the best of our ability presents the costs and benefits of the 
rulemaking.
    We solicit comments on the regulatory impact analysis provided.
2. Statement of Need
a. ESRD PPS
    This rule proposes a number of routine updates and several policy 
changes to the ESRD PPS in CY 2020. The proposed routine updates 
include the CY 2020 wage index values, the wage index budget-neutrality 
adjustment factor, and outlier payment threshold amounts. Failure to 
publish this proposed rule would result in ESRD facilities not 
receiving appropriate payments in CY 2020 for renal dialysis services 
furnished to ESRD patients.
b. AKI
    This rule also proposes routine updates to the payment for renal 
dialysis services furnished by ESRD facilities to individuals with AKI. 
Failure to publish this proposed rule would result in ESRD facilities 
not receiving appropriate payments in CY 2020 for renal dialysis 
services furnished to patients with AKI in accordance with section 
1834(r) of the Act.
c. ESRD QIP
    This rule proposes to implement requirements for the ESRD QIP, 
including proposals to modify the scoring methodology for the NHSN 
Dialysis Event reporting measure beginning with the PY 2022 ESRD QIP; a 
proposal to convert the STrR clinical measure to a reporting measure; 
and a proposal to convert the NHSN validation study into a permanent 
feature of the program using the

[[Page 38404]]

methodology finalized for the PY 2022 NHSN validation study. In 
addition, we are proposing to establish CY 2021 and CY 2019 as the 
performance period and baseline period, respectively, for the PY 2023 
ESRD QIP for all measures. For future ESRD QIP payment years, we 
propose to adopt automatically a performance and baseline period for 
each year that is 1 year advanced from those specified for the previous 
payment year.
d. DMEPOS
i. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
    This rule proposes to establish a gap-filling methodology.
ii. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled 
Using Supplier or Commercial Prices
    This rule proposes a method for making a one-time adjustment to the 
gap-filled fee schedule amounts in cases where prices decrease by less 
than 15 percent within 5 years of establishing the initial fee schedule 
amounts.
e. Conditions of Payment To Be Applied to Certain DMEPOS Items
    This proposed rule would streamline the requirements for ordering 
DMEPOS items. It would also develop one Master List of DMEPOS items 
potentially subject to a face-to-face encounter, written orders prior 
to delivery and/or prior authorization requirements under the authority 
provided under sections 1834(a)(1)(E)(iv), 1834(a)(11)(B), and 
1834(a)(15) of the Act.
3. Overall Impact
a. ESRD PPS
    We estimate that the proposed revisions to the ESRD PPS would 
result in an increase of approximately $210 million in payments to ESRD 
facilities in CY 2020, which includes the amount associated with 
updates to the outlier thresholds, payment rate update, updates to the 
wage index, and the proposal to change the basis of payment for the 
TDAPA for calcimimetics from ASP+6 percent to ASP+0 percent. These 
figures do not reflect estimated increases or decreases in expenditures 
based on our proposals to refine the TDAPA eligibility criteria, 
condition the TDAPA on ASP data availability, and provide a 
transitional add-on payment adjustment for new and innovative renal 
dialysis equipment and supplies. The fiscal impact of these proposals 
cannot be determined due to the uniqueness of the new renal dialysis 
drugs and biological products and new renal dialysis equipment and 
supplies and their costs.
b. AKI
    We are estimating approximately $42 million that would now be paid 
to ESRD facilities for dialysis treatments provided to AKI 
beneficiaries.
c. ESRD QIP
    For PY 2022, we have re-estimated the costs associated with 
information collection requirements under the Program with updated 
estimates of the total number of dialysis facilities, the total number 
of patients nationally, wages for Medical Records and Health 
Information Technicians or similar staff, and a refined estimate of the 
number of hours needed to complete data entry for CROWNWeb reporting. 
We have made no other changes to our methodology for calculating the 
annual burden associated with the information collection requirements 
for with the CROWNWeb validation study, the NHSN validation study, and 
CROWNWeb reporting. None of the policies proposed in this proposed rule 
would affect our estimates of the annual burden associated with the 
Program's information collection requirements.
    We also re-estimated the payment reductions under the ESRD QIP to 
correct an error in the way the weights were redistributed when 
estimating the PY 2022 payment reductions for the CY 2019 ESRD PPS 
final rule (83 FR 57060) and in accordance with the proposed policy 
changes described earlier, including the proposed changes to the 
scoring methodology for the NHSN Dialysis Event reporting measure and 
the proposed conversion of the STrR measure from a clinical measure to 
a reporting measure. We also updated the payment reduction estimates 
using newly available data for the PPPW clinical measure and the 
Ultrafiltration reporting measure and more recent data for the other 
measures in the ESRD QIP measure set. We estimate that these updates 
would result in an overall impact of $219 million as a result of the 
policies we have previously finalized and the policies we have proposed 
in this proposed rule, which includes an estimated $205 million in 
information collection burden and an additional $14 million in 
estimated payment reductions across all facilities, for PY 2022.
    For PY 2023, we estimate that the proposed revisions to the ESRD 
QIP would result in an overall impact of $219 million as a result of 
the policies we have previously finalized and the policies we have 
proposed in this proposed rule, which includes a $14 million in 
estimated payment reductions across all facilities.
d. DMEPOS
i. Establishing Payment Amounts for New DMEPOS Items and Services
    This rule proposes to establish a gap-filling methodology for new 
items and services. The fiscal impact of establishing payment amounts 
of new items based on the proposed gap-filling methodology cannot be 
determined due to the uniqueness of new items and their costs.
ii. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled 
Using Supplier or Commercial Prices
    While these adjustments would decrease fee schedule amounts that 
have been established using supplier or commercial prices by less than 
15 percent, the savings are considered a small offset to the potential 
increase in costs of establishing fee schedule amounts based on 
supplier invoices or prices from commercial payers. The fiscal impact 
for this provision is therefore considered negligible.
e. Conditions of Payment To Be Applied to Certain DMEPOS Items
    This rule proposes to streamline the requirements for ordering 
DMEPOS items, and to identify the process for subjecting certain DMEPOS 
items to a face-to-face encounter and written order prior to delivery 
and/or prior authorization as a condition of payment. The fiscal impact 
of these requirements cannot be estimated as this rule only identifies 
all items that are potentially subject to the face-to-face encounter 
and written order prior to delivery requirements and/or prior 
authorization.
4. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed 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 proposed rule will be the number of reviewers 
of this proposed 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 
proposed 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

[[Page 38405]]

welcome any comments on the approach in estimating the number of 
entities which will review this proposed rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule, 
and therefore for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule. We seek comments 
on this assumption.
    Using the wage information from the Bureau of Labor Statistics 
(BLS) (https://www.bls.gov/oes/2018/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 proposed 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 
$107,250. ($687.50 x 156 reviewers).
    For manufacturers of DMEPOS products, DMEPOS suppliers, and other 
DMEPOS industry representatives, we calculate a different cost of 
reviewing this rule. Assuming an average reading speed, we estimate 
that it would take approximately 1 hour for the staff to review this 
proposed rule. For each entity that reviews this proposed rule, the 
estimated cost is $110.00. Therefore, we estimate that the total cost 
of reviewing this proposed rule is $71,500 ($110.00 x 650 reviewers).

B. Detailed Economic Analysis

1. CY 2020 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 2019 to estimated payments in CY 2020. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2019 and CY 2020 
contain similar inputs. Therefore, we simulated payments only for those 
ESRD facilities for which we are able to calculate both current 
payments and new payments.
    For this proposed rule, we used CY 2018 data from the Part A and 
Part B Common Working Files as of February 15, 2019, as a basis for 
Medicare dialysis treatments and payments under the ESRD PPS. We 
updated the 2018 claims to 2019 and 2020 using various updates. The 
updates to the ESRD PPS base rate are described in section II.B.5.d of 
this proposed rule. Table 11 shows the impact of the estimated CY 2020 
ESRD payments compared to estimated payments to ESRD facilities in CY 
2019.

                              Table 11--Impact of Proposed Changes in Payment to ESRD Facilities for CY 2020 Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Effect of 2020                  Effect of 2020                     Effect of
                                             Number of       Number of      changes in    Effect of 2020    changes in    Effect of 2020    total 2020
              Facility type                 facilities    treatments (in  outlier policy    changes in     payment rate     changes in       proposed
                                                             millions)          (%)       wage index (%)    update (%)       TDAPA (%)      changes (%)
                                                     (A)             (B)             (C)             (D)             (E)             (F)             (G)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities..........................           7,386            44.6             0.3             0.0             1.7            -0.4             1.6
Type:
    Freestanding........................           6,995            42.7             0.3             0.0             1.7            -0.4             1.5
    Hospital based......................             391             1.9             0.6             0.0             1.7            -0.3             1.9
Ownership Type:
    Large dialysis organization.........           5,603            34.5             0.3             0.0             1.7            -0.4             1.5
    Regional chain......................             927             5.7             0.3             0.1             1.7            -0.5             1.6
    Independent.........................             512             2.9             0.3            -0.1             1.7            -0.4             1.5
    Hospital based \1\..................             305             1.5             0.6             0.0             1.7            -0.3             1.9
    Unknown.............................              39             0.0             0.5             0.0             1.7            -0.5             1.7
Geographic Location:
    Rural...............................           1,285             6.5             0.3             0.3             1.7            -0.4             1.8
    Urban...............................           6,101            38.2             0.3             0.0             1.7            -0.4             1.5
Census Region:
    East North Central..................           1,188             6.1             0.3            -0.1             1.7            -0.4             1.5
    East South Central..................             587             3.3             0.3             0.1             1.7            -0.5             1.5
    Middle Atlantic.....................             806             5.4             0.3            -0.2             1.7            -0.4             1.4
    Mountain............................             409             2.3             0.2             0.1             1.7            -0.3             1.7
    New England.........................             198             1.4             0.3            -0.4             1.7            -0.4             1.2
    Pacific \2\.........................             870             6.4             0.3             0.0             1.7            -0.3             1.7
    Puerto Rico and Virgin Islands......              47             0.3             0.1             0.3             1.7            -0.3             1.7
    South Atlantic......................           1,699            10.5             0.3            -0.1             1.7            -0.5             1.4
    West North Central..................             508             2.2             0.4             0.4             1.7            -0.4             2.1
    West South Central..................           1,074             6.6             0.3             0.1             1.7            -0.5             1.6
Facility Size:
    Less than 4,000 treatments..........           1,206             2.5             0.3             0.1             1.7            -0.4             1.7
    4,000 to 9,999 treatments...........           2,644            11.9             0.3             0.1             1.7            -0.4             1.6
    10,000 or more treatments...........           3,159            29.8             0.3             0.0             1.7            -0.5             1.5
    Unknown.............................             377             0.5             0.4             0.0             1.7            -0.4             1.7
Percentage of Pediatric Patients:
    Less than 2%........................           7,288            44.3             0.3             0.0             1.7            -0.4             1.6
    Between 2% and 19%..................              38             0.2             0.3             0.0             1.7            -0.4             1.6
    Between 20% and 49%.................              14             0.0             0.2            -0.1             1.7            -0.1             1.8
    More than 50%.......................              46             0.0             0.2            -0.1             1.7             0.0             1.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the 
proposed changes to the outlier payment policy described in section 
II.B.5.c of this proposed rule is shown in column C. For CY 2020, the 
impact on all ESRD facilities as a result of the changes to the outlier 
payment policy would be a 0.3 percent increase

[[Page 38406]]

in estimated payments. Nearly all ESRD facilities are anticipated to 
experience a positive effect in their estimated CY 2020 payments as a 
result of the proposed outlier policy changes.
    Column D shows the effect of the proposed CY 2020 wage indices and 
the wage index floor of 0.50. The categories of types of facilities in 
the impact table show changes in estimated payments ranging from a 0.4 
percent decrease to a 0.4 percent increase due to these proposed 
updates in the wage indices.
    Column E shows the effect of the proposed CY 2020 ESRD PPS payment 
rate update. The proposed ESRD PPS payment rate update is 1.7 percent, 
which reflects the proposed ESRDB market basket percentage increase 
factor for CY 2020 of 2.1 percent and the proposed MFP adjustment of 
0.4 percent.
    Column F reflects the change in the payment of the TDAPA from ASP+6 
percent to ASP+0 percent.
    Column G reflects the overall impact, that is, the effects of the 
proposed outlier policy changes, the proposed wage index floor, payment 
rate update, and proposed TDAPA payment changes. We expect that overall 
ESRD facilities would experience a 1.6 percent increase in estimated 
payments in CY 2020. The categories of types of facilities in the 
impact table show impacts ranging from an increase of 1.2 percent to 
2.1 percent in their CY 2020 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 2020, we estimate that 
the proposed ESRD PPS would have zero impact on these other providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2020 would be approximately $11.1 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 1.7 percent in 
CY 2020.
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 2020 ESRD PPS payment 
amounts, we estimate that there would be an increase in beneficiary co-
insurance payments of 1.6 percent in CY 2020, which translates to 
approximately $50 million.
e. Alternatives Considered
i. Eligibility Criteria for the TDAPA
    In section II.B.1 of this proposed rule, we proposed revisions to 
the drug designation process regulation for new renal dialysis drugs 
and biological products that fall within an existing ESRD PPS 
functional category. In an effort to support innovation in the renal 
dialysis space, while simultaneously considering the cost to Medicare, 
for the refinement of the TDAPA eligibility we considered limiting it 
to only the Type 1 NDA classification code, section 351(a) biological 
products and section 351(k) biosimilar or interchangeable biological 
products. However, we wanted to support other innovative changes of 
drugs and biological products in the renal dialysis space and 
acknowledge that innovation may occur incrementally.
ii. New and Innovative Renal Dialysis Equipment and Supplies Under the 
ESRD PPS
    In section II.B.3 of this proposed rule, we proposed to provide a 
transitional add-on payment adjustment to support the use of new and 
innovative renal dialysis equipment and supplies by ESRD facilities. 
With regard to pricing mechanisms for equipment and supplies, we 
considered alternatives such as those used in the DMEPOS program and 
consultation with the Pricing, Data, and Analysis Contractor. However, 
methodologies such as reasonable charges and use of fee schedules was 
lacking for many items and did not address the upcoming new and 
innovative renal dialysis equipment and supplies that we expect to be 
forthcoming with the KidneyX program.
2. Proposed Payment for Renal Dialysis Services Furnished to 
Individuals With AKI
a. Effects on ESRD Facilities
    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 2019 to estimated payments in CY 2020. 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 2019 and CY 2020 contain similar inputs. 
Therefore, we simulated payments only for those ESRD facilities for 
which we are able to calculate both current payments and new payments.
    For this proposed rule, we used CY 2018 data from the Part A and 
Part B Common Working Files as of February 15, 2019, as a basis for 
Medicare for renal dialysis services furnished to individuals with AKI. 
We updated the 2018 claims to 2019 and 2020 using various updates. The 
updates to the AKI payment amount are described in section III.B of 
this proposed rule. Table 12 shows the impact of the estimated CY 2020 
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 2019.

  Table 12--Impact of Proposed Changes in Payment for Renal Dialysis Services Furnished to Individuals With AKI
                                            for CY 2020 Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                                  Effect of 2020     Effect of
                                     Number of       Number of    Effect of 2020    changes in      total 2020
          Facility type             facilities    treatments (in    changes in     payment rate      proposed
                                                    thousands)    wage index (%)    update (%)      changes (%)
                                             (A)             (B)             (C)             (D)             (E)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           4,372           172.7            -0.1             1.7             1.7
Type:
    Freestanding................           4,257           168.8            -0.1             1.7             1.7
    Hospital based..............             115             3.9             0.1             1.7             1.8
Ownership Type:
    Large dialysis organization.           3,600           135.0            -0.0             1.7             1.7

[[Page 38407]]

 
    Regional chain..............             526            25.5            -0.1             1.7             1.6
    Independent.................             171             9.9            -0.1             1.7             1.6
    Hospital based \1\..........              68             2.2             0.1             1.7             1.8
    Unknown.....................               7             0.1             0.3             1.7             2.0
Geographic Location:
    Rural.......................             772            30.5             0.3             1.7             2.0
    Urban.......................           3,600           142.2            -0.1             1.7             1.6
Census Region:
    East North Central..........             790            33.0            -0.0             1.7             1.7
    East South Central..........             372            16.2             0.2             1.7             1.9
    Middle Atlantic.............             452            20.0            -0.3             1.7             1.4
    Mountain....................             267            11.0             0.0             1.7             1.7
    New England.................             138             5.0            -0.4             1.7             1.3
    Pacific \2\.................             513            21.5            -0.1             1.7             1.6
    Puerto Rico and Virgin                     2             0.0             0.4             1.7             2.1
     Islands....................
    South Atlantic..............           1,008            41.3            -0.1             1.7             1.6
    West North Central..........             278             8.3             0.4             1.7             2.1
    West South Central..........             552            16.4             0.0             1.7             1.8
Facility Size:
    Less than 4,000 treatments..             493            15.9            -0.1             1.7             1.6
    4,000 to 9,999 treatments...           1,646            61.4             0.0             1.7             1.7
    10,000 or more treatments...           2,108            92.0            -0.1             1.7             1.6
    Unknown.....................             125             3.4             0.1             1.7             1.8
Percentage of Pediatric
 Patients:
    Less than 2%................           4,371           172.7            -0.1             1.7             1.7
    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             0.0            -1.6             1.7             0.1
----------------------------------------------------------------------------------------------------------------
\1\ Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain
  ownership.
\2\ Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.

    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 proposed CY 2020 wage indices and 
the wage index floor of 0.50. The categories of types of facilities in 
the impact table show changes in estimated payments of a 0.1 percent 
decrease due to these proposed updates in the wage indices.
    Column D shows the effect of the proposed CY 2020 ESRD PPS payment 
rate update. The proposed ESRD PPS payment rate update is 1.7 percent, 
which reflects the proposed ESRDB market basket percentage increase 
factor for CY 2020 of 2.1 percent and the MFP adjustment of 0.4 
percent.
    Column E reflects the overall impact, that is, the effects of the 
proposed wage index floor and payment rate update. We expect that 
overall ESRD facilities would experience a 1.7 percent increase in 
estimated payments in CY 2020. The categories of types of facilities in 
the impact table show impacts ranging from an increase of 0.0 percent 
to 2.1 percent in their CY 2020 estimated payments.
b. Effects on Other Providers
    Under section 1834(r) of the Act, as added by section 808(b) of 
TPEA, we are proposing to update the payment rate for renal dialysis 
services furnished by ESRD facilities to beneficiaries with AKI. The 
only two Medicare providers and suppliers 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 $42 million would be paid to ESRD 
facilities in CY 2020 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 would 
continue to be responsible for a 20 percent co-insurance. Because the 
AKI dialysis payment rate paid to ESRD facilities is lower than the 
outpatient hospital PPS's payment amount, we would 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

[[Page 38408]]

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 2022 ESRD QIP on ESRD Facilities
    The ESRD QIP is intended to prevent possible reductions in the 
quality of ESRD dialysis facility services provided to beneficiaries. 
We are proposing in this proposed rule to convert the STrR clinical 
measure to a reporting measure, and also to change the way the NHSN 
Dialysis Event reporting measure is scored. The general methodology 
that we are using to determine a facility's TPS is described in our 
regulations at Sec.  413.178(d).\49\
---------------------------------------------------------------------------

    \49\ We are proposing to redesignate paragraph (d) as paragraph 
(e) in this proposed rule.
---------------------------------------------------------------------------

    Any reductions in the ESRD PPS payments as a result of a facility's 
performance under the PY 2022 ESRD QIP would apply to the ESRD PPS 
payments made to the facility for services furnished in CY 2022, as 
codified in our regulations at Sec.  413.177.
    For the PY 2022 ESRD QIP, we estimate that, of the 7,099 dialysis 
facilities (including those not receiving a TPS) enrolled in Medicare, 
approximately 21.9 percent or 1,506 of the facilities that have 
sufficient data to calculate a TPS would receive a payment reduction 
for PY 2022. The total payment reductions for all the 1,506 facilities 
expected to receive a payment reduction is approximately 
$13,905,923.02. Facilities that do not receive a TPS do not receive a 
payment reduction.
    Table 13 shows the overall estimated distribution of payment 
reductions resulting from the PY 2022 ESRD QIP.

 Table 13--Estimated Distribution of PY 2022 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                              Percent of
             Payment reduction (%)               Number of    facilities
                                                 facilities       *
------------------------------------------------------------------------
0.0...........................................        5,370        78.10
0.5...........................................        1,116        16.23
1.0...........................................          325         4.73
1.5...........................................           56         0.81
2.0...........................................            9         0.13
------------------------------------------------------------------------
* 223 facilities not scored due to insufficient data.

    To estimate whether a facility would receive a payment reduction 
for PY 2022, we scored each facility on achievement and improvement on 
several clinical measures we have previously finalized and for which 
there were available data from CROWNWeb and Medicare claims. Payment 
reduction estimates are calculated using the most recent data available 
(specified in Table 14) in accordance with the policies proposed in 
this proposed rule. Measures used for the simulation are shown in Table 
14. We also note that we are proposing in section IV.B.3.b of this 
proposed rule to convert the STrR measure from a clinical measure to a 
reporting measure.

                       Table 14--Data Used To Estimate PY 2022 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                            Period of time used to
                                             calculate achievement
                                         thresholds, 50th percentiles
                Measure                  of the national performance,              Performance period
                                          benchmarks, and improvement
                                                  thresholds
----------------------------------------------------------------------------------------------------------------
ICH CAHPS Survey......................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
SRR...................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
STrR..................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
SHR...................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
PPPW..................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
Kt/V Dialysis Adequacy Comprehensive..  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
VAT:
    Standardized Fistula Ratio........  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
    %Catheter.........................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
Hypercalcemia.........................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
----------------------------------------------------------------------------------------------------------------

    For all measures except SHR and STrR, 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 at risk patients and 10 at risk patients, 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 
of this proposed rule. Facility reporting measure scores were estimated 
using available data from CY 2017 and CY 2018. Facilities were required 
to have at least one measure in at least two domains to receive a TPS.
    To estimate the total payment reductions in PY 2022 for each 
facility resulting from this proposed 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 15 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 size (both among 
facilities considered to be small entities and by number of treatments 
per facility), geography (both rural and urban and by region), and by 
facility type (hospital based and freestanding facilities). Given that 
the performance period used for these calculations differs from the 
performance period we are using for the PY 2022 ESRD QIP, the actual 
impact of the PY 2022 ESRD QIP may vary significantly from the values 
provided here.

[[Page 38409]]



             Table 15--Impact of Proposed ESRD QIP Payment Reductions to ESRD Facilities for PY 2022
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of      treatments       Number of      expected to      (percent
                                    facilities       2017 (in       facilities       receive a       change in
                                                     millions)    with QIP score      payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           7,099            45.1           6,876           1,506           -0.14
Facility Type:
    Freestanding................           6,681            43.0           6,510           1,407           -0.13
    Hospital-based..............             418             2.2             366              99           -0.22
Ownership Type:
    Large Dialysis..............           5,400            34.9           5,290           1,068           -0.12
    Regional Chain..............             881             5.7             848             192           -0.14
    Independent.................             485             2.9             454             165           -0.26
    Hospital-based (non-chain)..             327             1.7             284              81           -0.24
    Unknown.....................               6             0.0               0               0               -
Facility Size:
    Large Entities..............           6,281            40.6           6,138           1,260           -0.12
    Small Entities \1\..........             812             4.6             738             246           -0.25
    Unknown.....................               6             0.0               0               0               -
Rural Status:
    (1) Yes.....................           1,271             6.5           1,231             119           -0.05
    (2) No......................           5,828            38.6           5,645           1,387           -0.16
Census Region:
    Northeast...................             968             7.0             930             205           -0.15
    Midwest.....................           1,642             8.6           1,584             347           -0.14
    South.......................           3,193            20.5           3,099             763           -0.15
    West........................           1,237             8.6           1,205             166           -0.08
    U.S. Territories \2\........              59             0.4              58              25           -0.30
Census Division:
    Unknown.....................               8             0.1               7               4           -0.42
    East North Central..........           1,145             6.3           1,107             286           -0.17
    East South Central..........             572             3.3             562             116           -0.13
    Middle Atlantic.............             777             5.5             745             184           -0.16
    Mountain....................             400             2.3             390              39           -0.06
    New England.................             191             1.5             185              21           -0.07
    Pacific.....................             837             6.4             815             127           -0.09
    South Atlantic..............           1,622            10.6           1,571             405           -0.16
    West North Central..........             497             2.3             477              61           -0.08
    West South Central..........             999             6.6             966             242           -0.16
    U.S. Territories \2\........              51             0.3              51              21           -0.28
Facility Size (# of total
 treatments):
    Less than 4,000 treatments..           1,246             2.1           1,060             193           -0.14
    4,000-9,999 treatments......           2,666            11.9           2,656             439           -0.10
    Over 10,000 treatments......           3,147            31.0           3,144             866           -0.17
    Unknown.....................              40             0.2              16               8           -0.37
----------------------------------------------------------------------------------------------------------------
\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 2023 ESRD QIP on ESRD Facilities
    For the PY 2023 ESRD QIP, we estimate that, of the 7,099 dialysis 
facilities (including those not receiving a TPS) enrolled in Medicare, 
approximately 21.9 percent or 1,506 of the facilities that have 
sufficient data to calculate a TPS would receive a payment reduction 
for PY 2023. The total payment reductions for all the 1,506 facilities 
expected to receive a payment reduction is approximately 
$13,905,923.02. Facilities that do not receive a TPS do not receive a 
payment reduction.
    Table 16 shows the overall estimated distribution of payment 
reductions resulting from the PY 2023 ESRD QIP.

 Table 16--Estimated Distribution of PY 2023 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                              Percent of
             Payment reduction (%)               Number of    facilities
                                                 facilities       *
------------------------------------------------------------------------
    0.0.......................................        5,370        78.10
    0.5.......................................        1,116        16.23
    1.0.......................................          325         4.73
    1.5.......................................           56         0.81
    2.0.......................................            9         0.13
------------------------------------------------------------------------
* 223 facilities not scored due to insufficient data.

    To estimate whether a facility would receive a payment reduction in 
PY 2023, we scored each facility on achievement and improvement on 
several clinical measures we have previously finalized and for which 
there were available data from CROWNWeb and Medicare claims. Payment 
reduction estimates are calculated using the most recent data available 
(specified in Table 16) in accordance with the policies proposed in 
this proposed rule. Measures used for the simulation are shown in Table 
17. We also note that we are proposing in section IV.B.3.b of this 
proposed rule to convert the STrR measure from a clinical measure to a 
reporting measure.

[[Page 38410]]



                       Table 17--Data Used To Estimate PY 2023 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                            Period of time used to
                                             calculate achievement
                                         thresholds, 50th percentiles
                Measure                  of the national performance,              Performance period
                                          benchmarks, and improvement
                                                  thresholds
----------------------------------------------------------------------------------------------------------------
ICH CAHPS Survey......................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
SRR...................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
STrR..................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
SHR...................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
PPPW..................................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
Kt/V Dialysis Adequacy Comprehensive..  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
VAT:
    Standardized Fistula Ratio........  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
    %Catheter.........................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
Hypercalcemia.........................  Jan 2016-Dec 2016.............  Jan 2017-Dec 2017.
----------------------------------------------------------------------------------------------------------------

    For all measures except SHR and STrR, 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 at-risk patients and 10 at-risk patients, 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 
and IV.C of this proposed rule. Facility reporting measure scores were 
estimated using available data from CY 2017 and CY 2018. Facilities 
were required to have at least one measure in at least two domains to 
receive a TPS.
    To estimate the total payment reductions in PY 2023 for each 
facility resulting from this proposed 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 18 shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2023. The table 
details the distribution of ESRD facilities by size (both among 
facilities considered to be small entities and by number of treatments 
per facility), geography (both rural and urban and by region), and by 
facility type (hospital based and freestanding facilities). Given that 
the performance period used for these calculations differs from the 
performance period we are proposing to use for the PY 2023 ESRD QIP, 
the actual impact of the PY 2023 ESRD QIP may vary significantly from 
the values provided here.

               Table 18--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2023
----------------------------------------------------------------------------------------------------------------
                                                                                     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..............           7,099            45.1           6,876           1,506           -0.14
Facility Type:
    Freestanding................           6,681            43.0           6,510           1,407           -0.13
    Hospital-based..............             418             2.2             366              99           -0.22
Ownership Type:
    Large Dialysis..............           5,400            34.9           5,290           1,068           -0.12
    Regional Chain..............             881             5.7             848             192           -0.14
    Independent.................             485             2.9             454             165           -0.26
    Hospital-based (non-chain)..             327             1.7             284              81           -0.24
    Unknown.....................               6             0.0               0               0  ..............
Facility Size:
    Large Entities..............           6,281            40.6           6,138           1,260           -0.12
    Small Entities \1\..........             812             4.6             738             246           -0.25
    Unknown.....................               6             0.0               0               0  ..............
Rural Status:
    (1) Yes.....................           1,271             6.5           1,231             119           -0.05
    (2) No......................           5,828            38.6           5,645           1,387           -0.16
Census Region:
    Northeast...................             968             7.0             930             205           -0.15
    Midwest.....................           1,642             8.6           1,584             347           -0.14
    South.......................           3,193            20.5           3,099             763           -0.15
    West........................           1,237             8.6           1,205             166           -0.08
    U.S. Territories \2\........              59             0.4              58              25           -0.30
Census Division:
    Unknown.....................               8             0.1               7               4           -0.42
    East North Central..........           1,145             6.3           1,107             286           -0.17
    East South Central..........             572             3.3             562             116           -0.13
    Middle Atlantic.............             777             5.5             745             184           -0.16
    Mountain....................             400             2.3             390              39           -0.06

[[Page 38411]]

 
    New England.................             191             1.5             185              21           -0.07
    Pacific.....................             837             6.4             815             127           -0.09
    South Atlantic..............           1,622            10.6           1,571             405           -0.16
    West North Central..........             497             2.3             477              61           -0.08
    West South Central..........             999             6.6             966             242           -0.16
    U.S. Territories \2\........              51             0.3              51              21           -0.28
Facility Size (# of total
 treatments):
    Less than 4,000 treatments..           1,246             2.1           1,060             193           -0.14
    4,000-9,999 treatments......           2,666            11.9           2,656             439           -0.10
    Over 10,000 treatments......           3,147            31.0           3,144             866           -0.17
    Unknown.....................              40             0.2              16               8           -0.37
----------------------------------------------------------------------------------------------------------------
\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 facilities, such as through the impacts of the Hospital 
Readmission 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 2023, we estimate that the ESRD QIP would contribute 
approximately $13,905,923.02 in Medicare savings. For comparison, Table 
19 shows the payment reductions that we estimate will be applied by the 
ESRD QIP from PY 2018 through PY 2023. We note that Table 19 contains a 
lower estimated payment reduction for PY 2022 than we included in Table 
49 of the CY 2019 ESRD PPS final rule (83 FR 57061).

 Table 19--Estimated Payment Reductions Payment Years 2018 Through 2023
------------------------------------------------------------------------
            Payment year                 Estimated payment reductions
------------------------------------------------------------------------
PY 2023.............................  $13,905,923.02.
PY 2022.............................  13,905,923.02.
PY 2021.............................  32,196,724 (83 FR 57062).
PY 2020.............................  31,581,441 (81 FR 77960).
PY 2019.............................  15,470,309 (80 FR 69074).
PY 2018.............................  11,576,214 (79 FR 66257).
------------------------------------------------------------------------

e. Effects on Medicare Beneficiaries
    The ESRD QIP is applicable to dialysis facilities. Since the 
Program's inception, there is evidence on 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. We are in 
the process of monitoring and evaluating trends in the quality and cost 
of care for patients under the ESRD QIP, incorporating both existing 
measures and new measures as they are implemented in the Program. We 
will provide additional information about the impact of the ESRD QIP on 
beneficiaries as we learn more. However, in future years we are 
interested in examining these impacts through the analysis of available 
data from our existing measures.
f. Alternatives Considered
    In response to the concern raised by commenters about the validity 
of the modified STrR measure, we considered aligning the STrR measure's 
specifications with those used for the measure prior to the PY 2021 
ESRD QIP. However, that version of the STrR clinical measure was not 
endorsed by the NQF due to the concern expressed by the Renal Standing 
Committee about variability in hospital coding practices.
4. DMEPOS
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
(1) Effects on Other Providers
    We believe that establishing payment amounts for new DMEPOS items 
and services would have a positive economic impact on suppliers by 
making the pricing of new items more easily understood and encourage 
innovation. The cost of this proposal cannot be estimated as these new 
items are not identified.
(2) Effects on the Medicare Program
    This proposal has an indeterminable cost to the Medicare program 
associated with it due to the unpredictable nature of future new items.
(3) Effects on Medicare Beneficiaries
    This proposal has an indeterminable cost to the Medicare 
beneficiary due to the unpredictable nature of future new items. 
Likewise, this proposal has an indeterminable cost to the dual-eligible 
beneficiary who is enrolled in the Medicare and the Medicaid programs 
for the same reason as indicated above.
(4) Alternatives Considered
    One alternative we considered was to continue the process for 
establishing payment amounts for new items on a sub-regulatory basis. 
This would have

[[Page 38412]]

no economic impact on the Medicare program or its beneficiaries.
b. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled 
Using Supplier or Commercial Prices
(1) Effects on Other Providers
    We believe that adjusting payment amounts for new DMEPOS items and 
services when initially set based on supplier or commercial prices 
would have a negative economic impact on suppliers by lowering fees. 
The savings of this proposal cannot be estimated as these new items are 
not identified.
(2) Effects on the Medicare Program
    We believe that adjusting payment amounts for new DMEPOS items and 
services when initially set based on supplier or commercial prices 
would have a positive economic impact on the Medicare Program by 
lowering fees and achieving savings. The savings of this proposal 
cannot be estimated as these new items are not identified.
(3) Effects on Medicare Beneficiaries
    We believe that adjusting payment amounts for new DMEPOS items and 
services when initially set based on supplier or commercial prices 
would have a positive economic impact on Medicare beneficiaries by 
lowering fees, therefore resulting in lower coinsurance for such items. 
The savings of this proposal cannot be estimated as these new items are 
not identified.
(4) Alternatives Considered
    An alternative we considered was to continue not adjusting payment 
amounts for new items based on revised supplier and commercial price 
lists. This would have created, in some cases, what we consider to be 
unreasonable fee schedule amounts and a cost to the program and 
beneficiaries.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
    This rule proposes to streamline the requirements for ordering 
DMEPOS items, and to identify the process for subjecting certain DMEPOS 
items to a face-to-face encounter and written order prior to delivery 
and/or prior authorization as a condition of payment. The fiscal impact 
of these requirements cannot be estimated as this rule only identifies 
all items that are potentially subject to the face-to-face encounter 
and written order prior to delivery requirements and/or prior 
authorization.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 20, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
proposed rule.

  Table 20--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                            ESRD PPS and AKI
-------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $160 million.
From Whom to Whom.........................  Federal government to ESRD
                                             providers.
Increased Beneficiary Co-insurance          $50 million.
 Payments.
From Whom to Whom.........................  Beneficiaries to ESRD
                                             providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2022
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$14 million.
From Whom to Whom.........................  Federal government to ESRD
                                             providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2023
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$14 million.
From Whom to Whom.........................  Federal government to ESRD
                                             providers.
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

D. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) 
(RFA) requires agencies to analyze options for regulatory relief of 
small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Approximately 11 percent of ESRD dialysis 
facilities are considered small entities according to the Small 
Business Administration's (SBA) size standards, which classifies small 
businesses as those dialysis facilities having total revenues of less 
than $38.5 million in any 1 year. Individuals and states are not 
included in the definitions of a small entity. For more information on 
SBA's size standards, see the Small Business Administration's website 
at http://www.sba.gov/content/small-business-size-standards (Kidney 
Dialysis Centers are listed as 621492 with a size standard of $38.5 
million).
    We do not believe ESRD facilities are operated by small government 
entities such as counties or towns with populations of 50,000 or less, 
and therefore, they are not enumerated or included in this estimated 
RFA analysis. Individuals and states are not included in the definition 
of a small entity.
    For purposes of the RFA, we estimate that approximately 11 percent 
of ESRD facilities are small entities as that term is used in the RFA 
(which includes small businesses, nonprofit organizations, and small 
governmental jurisdictions). This amount is based on the number of ESRD 
facilities shown in the ownership category in Table 11. Using the 
definitions in this ownership category, we consider 512 facilities that 
are independent and 305 facilities that are shown as hospital-based to 
be small entities. The ESRD facilities that are owned and operated by 
Large Dialysis Organizations (LDOs) and regional chains would have 
total revenues of more than $38.5 million in any year when the total 
revenues for all locations are combined for each business (individual 
LDO or regional chain), and are not, therefore, included as small 
entities.
    For the ESRD PPS updates proposed in this rule, a hospital-based 
ESRD facility (as defined by type of ownership, not by type of dialysis 
facility) is estimated to receive a 1.9 percent increase in payments 
for CY 2020. An independent facility (as defined by ownership type) is 
also estimated to receive a 1.5 percent increase in payments for CY 
2020.
    For AKI dialysis, we are unable to estimate whether patients would 
go to ESRD facilities, however, we have estimated there is a potential 
for $42 million in payment for AKI dialysis treatments that could 
potentially be furnished in ESRD facilities.
    For the ESRD QIP, we estimate that of the 1,506 ESRD facilities 
expected to receive a payment reduction as a result of their 
performance on the PY 2023 ESRD QIP, 246 are ESRD small entity 
facilities. We present these findings in Table 16 (``Estimated 
Distribution of PY 2023 ESRD QIP Payment Reductions'') and Table 18 
(``Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 
2023''). We estimate that the payment reductions would average 
approximately $9,233.68 per facility across the 1,506 facilities 
receiving a payment reduction, and $8,850.82 for each small entity 
facility. We also estimate that there are 812 small entity facilities 
in total, and that the aggregate ESRD PPS payments to these facilities 
would decrease 0.25 percent in CY 2023.
    The DMEPOS provisions in this proposed rule, Establishing Payment 
Amounts for New DMEPOS Items and Services and Gap-Filling and Adjusting 
Payment Amounts for DMEPOS Items

[[Page 38413]]

and Services Gap-Filled Using Supplier or Commercial Prices in section 
V of this proposed rule, are not considered to have a significant 
impact on a number of small suppliers. We note that the fiscal impact 
of the Conditions of Payment to be applied to Certain DMEPOS Items in 
section VI of this proposed rule cannot be estimated as this rule only 
identifies all items that are potentially subject to the face-to-face 
encounter and written order prior to delivery requirements and/or prior 
authorization.
    Therefore, the Secretary has determined that these proposed rules 
would not have a significant economic impact on a substantial number of 
small entities. The economic impact assessment is based on estimated 
Medicare payments (revenues) and HHS's practice in interpreting the RFA 
is to consider effects economically ``significant'' only if greater 
than 5 percent of providers reach a threshold of 3 to 5 percent or more 
of total revenue or total costs.
    We solicit comment on the RFA analysis provided.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this proposed rule would have a significant impact on 
operations of a substantial number of small rural hospitals because 
most dialysis facilities are freestanding. While there are 126 rural 
hospital-based dialysis facilities, we do not know how many of them are 
based at hospitals with fewer than 100 beds. However, overall, the 126 
rural hospital-based dialysis facilities will experience an estimated 
2.2 percent increase in payments.
    Therefore, the Secretary has determined that these proposed rules 
would not have a significant impact on the operations of a substantial 
number of small rural hospitals.

E. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2019, that 
threshold is approximately $154 million. These proposed rules do not 
include any mandates that would impose spending costs on state, local, 
or Tribal governments in the aggregate, or by the private sector, of 
$154 million. Moreover, HHS interprets UMRA as applying only to 
unfunded mandates. We do not interpret Medicare payment rules as being 
unfunded mandates, but simply as conditions for the receipt of payments 
from the federal government for providing services that meet federal 
standards. This interpretation applies whether the facilities or 
providers are private, state, local, or tribal.

F. Federalism Analysis

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

G. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, entitled Reducing Regulation and Controlling 
Regulatory Costs (82 FR 9339), was issued on January 30, 2017. It has 
been determined that this is a transfer rule, which imposes no more 
than de minimis costs. As a result, this rule is not considered a 
regulatory or deregulatory action under Executive Order 13771.

H. Congressional Review Act

    These proposed rules are subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.

XII. Files Available to the Public via the Internet

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

List of Subjects

42 CFR Part 405

    Federal health insurance for the aged and disabled, Administrative 
practice and procedure, Diseases, Health facilities, Health 
professions, Medical devices, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 410

    Health facilities, Health professions, Diseases, Laboratories, 
Medicare, Reporting and recordkeeping requirements, Rural areas, X-
rays.

42 CFR Part 413

    Health facilities, Diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 414

    Administrative practice and procedure, Biologicals, Drugs, Health 
facilities, Health professions, Medicare, Reporting and recordkeeping 
requirements.

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

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
 1. The authority citation for part 410 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395m, 1395hh, 1395rr, and 1395ddd.

0
2. Section 410.36 is amended by revising paragraph (b) to read as 
follows:


Sec.  410.36  Medical supplies, appliances, and devices: Scope.

* * * * *
    (b) The conditions of payment described in Sec.  410.38(d) also 
apply to medical supplies, appliances, and devices.
0
3. Section 410.38 is amended--
0
a. By revising section heading;
0
b. By revising paragraph (a);
0
c. In paragraph (b), by adding a paragraph heading;
0
d. By revising paragraphs (c), (d), and (e); and
0
e. By removing paragraphs (f) and (g).
    The revisions and addition read as follows:

[[Page 38414]]

Sec.  410.38  Durable medical equipment, prosthetics, orthotics and 
supplies (DMEPOS): Scope and conditions.

    (a) General scope. Medicare Part B pays for durable medical 
equipment, including ventilators, oxygen equipment, hospital beds, and 
wheelchairs, if the equipment is used in the patient's home or in an 
institution that is used as a home.
    (b) Institutions that may not qualify as the patient's home. * * *
    (c) Definitions. As used in this section:
    (1) Physician has the same meaning as in section 1861(r)(1) of the 
Act.
    (2) Treating practitioner means physician as defined in section 
1861(r)(1) of the Act, or physician assistant, nurse practitioner, or 
clinical nurse specialist, as those terms are defined in section 
1861(aa)(5) of the Act.
    (3) DMEPOS supplier means an entity with a valid Medicare supplier 
number, including an entity that furnishes items through the mail.
    (4) Written Order/Prescription is a written communication from a 
treating practitioner that documents the need for a beneficiary to be 
provided an item of DMEPOS.
    (5) Face-to-face encounter is an in-person or telehealth encounter 
between the treating practitioner and the beneficiary.
    (6) Power mobility device (PMD) means a covered item of durable 
medical equipment that is in a class of wheelchairs that includes a 
power wheelchair (a four-wheeled motorized vehicle whose steering is 
operated by an electronic device or a joystick to control direction and 
turning) or a power-operated vehicle (a three or four-wheeled motorized 
scooter that is operated by a tiller) that a beneficiary uses in the 
home.
    (7) Master List of DMEPOS items Potentially Subject to Face-to-Face 
Encounter and Written Orders Prior to Delivery and/or Prior 
Authorization Requirements, also referred to as ``Master List'' are 
items of DMEPOS that CMS has identified in accordance with sections 
1834(a)(11)(B) and 1834(a)(15) of the Act. The criteria for this list 
are specified in Sec.  414.234. The Master List shall serve as a 
library of DMEPOS items from which items may be selected for inclusion 
on Required Face-to-Face Encounter and Written Order Prior to Delivery 
List and/or the Required Prior Authorization List.
    (8) Required Face-to-Face Encounter and Written Order Prior to 
Delivery List is a list of DMEPOS items selected from the Master List 
and subject to the requirements of a Face-to-Face Encounter and Written 
Order Prior to Delivery. The list of items would be communicated to the 
public via a 60-day Federal Register document and posted to the CMS 
website. When selecting items from the Master List, CMS may consider 
factors such as operational limitations, item utilization, cost-benefit 
analysis, emerging trends, vulnerabilities identified in official 
agency reports, or other analysis.
    (d) Conditions of payment. The requirements described in this 
paragraph (d) are conditions of payment applicable to DMEPOS items.
    (1) Written Order/Prescription. All DMEPOS items require a written 
order/prescription for Medicare payment. Medicare Contractors shall 
consider the totality of the medical records when reviewing for 
compliance with standardized written order/prescription elements.
    (i) Elements. A written order/prescription must include the 
following elements:
    (A) Beneficiary Name or Medicare Beneficiary Identifier (MBI).
    (B) General Description of the item.
    (C) Quantity to be dispensed, if applicable.
    (D) Date.
    (E) Practitioner Name or National Provider Identifier (NPI).
    (F) Practitioner Signature.
    (ii) Timing of the Written Order/Prescription. (A) For PMDs and 
other DMEPOS items selected for inclusion on the Required Face-to-Face 
Encounter and Written Order Prior to Delivery List, the written order/
prescription must be communicated to the supplier prior to delivery.
    (B) For all other DMEPOS, the written order/prescription must be 
communicated to the supplier prior to claim submission.
    (2) Items requiring a Face-to-Face Encounter. For PMDs and other 
DMEPOS items selected for inclusion on the Required Face-to-Face 
Encounter and Written Order Prior to Delivery List, the treating 
practitioner must document and communicate to the DMEPOS supplier that 
the treating practitioner has had a face-to-face encounter with the 
beneficiary within the 6 months preceding the date of the written 
order/prescription.
    (i) The encounter must be used for the purpose of gathering 
subjective and objective information associated with diagnosing, 
treating, or managing a clinical condition for which the DMEPOS is 
ordered.
    (ii) If it is a telehealth encounter, the requirements of 
Sec. Sec.  410.78 and 414.65 must be met.
    (3) Documentation: A supplier must maintain the written order/
prescription and the supporting documentation provided by the treating 
practitioner and make them available to CMS and its agents upon 
request.
    (i) Upon request by CMS or its agents, a supplier must submit 
additional documentation to CMS or its agents to support and/or 
substantiate the medical necessity for the DMEPOS item.
    (ii) The face-to-face encounter must be documented in the pertinent 
portion of the medical record (for example, history, physical 
examination, diagnostic tests, summary of findings, progress notes, 
treatment plans or other sources of information that may be 
appropriate). The supporting documentation must include subjective and 
objective beneficiary specific information used for diagnosing, 
treating, or managing a clinical condition for which the DMEPOS is 
ordered.
    (e) Suspension of face-to-face encounter and written order prior to 
delivery requirements. CMS may suspend face-to-face encounter and 
written order prior to delivery requirements generally or for a 
particular item or items at any time and without undertaking 
rulemaking, except those items for which inclusion on the Master List 
was statutorily imposed.

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

0
4. The authority citation for part 413 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww; and sec. 
124 of Public Law 106-113, 113 Stat. 1501A-332; sec. 3201 of Public 
Law 112-96, 126 Stat. 156; sec. 632 of Public Law 112-240, 126 Stat. 
2354; sec. 217 of Public Law 113-93, 129 Stat. 1040; and sec. 204 of 
Public Law 113-295, 128 Stat. 4010; and sec. 808 of Public Law 114-
27, 129 Stat. 362.

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5. Section 413.178 is amended--
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a. In paragraph (a)(4) by removing the reference ``paragraphs (d)(1)(i) 
through (v)'' and adding in its place the reference ``paragraphs 
(e)(1)(i) through (v)'';
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b. In paragraph (a)(13) by removing the reference to ``paragraph 
(d)(1)(vi)'' and adding in its place the reference ``paragraph 
(e)(1)(vi)'';

[[Page 38415]]

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c. By redesignating paragraphs (d) through (f) as paragraphs (e) 
through (g), respectively;
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d. By adding a new paragraph (d);
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e. In newly redesignated paragraph (e)(2)(i) by removing the reference 
``paragraph (d)(1)'' and adding in its place the reference ``paragraph 
(e)(1)''; and
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f. In newly redesignated paragraph (f)(2) by removing the cross-
reference to ``paragraph (e)(1)'' and adding in its place ``paragraph 
(f)(1)''.
    The addition reads as follows:


Sec.  413.178  ESRD quality incentive program.

* * * * *
    (d) Data submission requirement. (1) Except as provided in 
paragraph (d)(3) and (4) of this section, and for a payment year, 
facilities must submit to CMS data on each measure specified by CMS 
under paragraph (c) of this section. Facilities must submit these data 
in the form, manner, and at a time specified by CMS.
    (2) For purposes of paragraph (d)(1) of this section, the baseline 
period that applies to the 2023 payment year is calendar year 2019 for 
purposes of calculating the achievement threshold, benchmark and 
minimum total performance score, and calendar year 2020 for purposes of 
calculating the improvement threshold, and the performance period that 
applies to the 2023 payment year is calendar year 2021. Beginning with 
the 2024 payment year, the performance period and corresponding 
baseline periods are each advanced 1 year for each successive payment 
year.
    (3) A facility may request and CMS may grant exceptions to the 
reporting requirements under paragraph (d)(1) of this section for one 
or more calendar days, when there are certain extraordinary 
circumstances beyond the control of the facility.
    (4) A facility may request an exception within 90 days of the date 
that the extraordinary circumstances occurred by submitting the 
Extraordinary Circumstances Exception request form, which is available 
on the QualityNet website (https://www.qualitynet.org/), to CMS via 
email to the ESRD QIP mailbox at [email protected]. Facilities must 
provide the following information on the form:
    (i) Facility CCN.
    (ii) Facility name.
    (iii) CEO name and contact information.
    (iv) Additional contact name and contact information.
    (v) Reason for requesting an exception.
    (vi) Dates affected.
    (vii) Date the facility will start submitting data again, with 
justification for this date.
    (viii) Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper, and other media 
articles.
    (5) CMS will not consider an exception request unless the facility 
requesting such exception has complied fully with the requirements in 
paragraph (d) of this section.
    (6) CMS may grant exceptions to facilities without a request if it 
determines that one or more of the following has occurred:
    (i) An extraordinary circumstance affects an entire region or 
locale.
    (ii) An unresolved issue with a CMS data system affected the 
ability of a facility to submit data in accordance with paragraph 
(d)(1) of this section and CMS was unable to provide the facility with 
an alternative method of data submission.
    (7) A facility that has been granted an exception to the data 
submission requirements under paragraph (d)(6) of this section may 
notify CMS that it will continue to submit data under paragraph (d)(1) 
of this section by sending an email signed by the CEO or another 
designated contact to the ESRD QIP mailbox at [email protected]. Upon 
receipt of an email under this clause, CMS will notify the facility in 
writing that CMS is withdrawing the exception it previously granted to 
the facility.
* * * * *
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6. Section 413.230 is amended by revising paragraphs (b) and (c) and 
adding paragraph (d) and (e) to read as follows:


Sec.  413.230  Determining the per treatment payment amount.

* * * * *
    (b) Any outlier payment under Sec.  413.237;
    (c) Any training adjustment add-on under Sec.  413.235(c);
    (d) Any transitional drug add-on payment adjustment under Sec.  
413.234(c); and
    (e) Any transitional add-on payment adjustment for new and 
innovative equipment and supplies under Sec.  413.236(d).
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7. Section 413.234 is amended--
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a. In paragraph (a) by revising the definitions of ``ESRD PPS 
functional category'' and ``Oral only drug;''
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b. By revising paragraph (b)(1)(ii), as amended November 14, 2018, at 
83 FR 57070, and effective January 1, 2020;
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c. By revising paragraph (c) introductory text, as amended November 14, 
2018, at 83 FR 57070, and effective January 1, 2020; and
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d. By adding paragraph (e).
    The revisions and addition read as follows:


Sec.  413.234  Drug designation process.

    (a) * * *
    ESRD PPS functional category. A distinct grouping of drugs or 
biological products, as determined by CMS, whose end action effect is 
the treatment or management of a condition or conditions associated 
with ESRD.
* * * * *
    Oral-only drug. A drug or biological product with no injectable 
equivalent or other form of administration other than an oral form.
    (b) * * *
    (1) * * *
    (ii) Except as provided in paragraph (e) of this section, the new 
renal dialysis drug or biological product is paid for using the 
transitional drug add-on payment adjustment described in paragraph 
(c)(1) of this section.
* * * * *
    (c) Transitional drug add-on payment adjustment. A new renal 
dialysis drug or biological product is paid for using a transitional 
drug add-on payment adjustment, which is based on 100 percent of 
average sales price (ASP). If ASP is not available then the 
transitional drug add-on payment adjustment is based on 100 percent of 
wholesale acquisition cost (WAC) and, when WAC is not available, the 
payment is based on the drug manufacturer's invoice. Notwithstanding 
the provisions in paragraphs (c)(1) and (2) of this section, if CMS 
does not receive a full calendar quarter of ASP data for a new renal 
dialysis drug or biological product within 30 days of the last day of 
the 3rd calendar quarter after we begin applying the transitional drug 
add-on payment adjustment for the product, CMS will no longer apply the 
transitional drug add-on payment adjustment for that product beginning 
no later than 2-calendar quarters after we determine a full calendar 
quarter of ASP data is not available. If CMS stops receiving the latest 
full calendar quarter of ASP data for a new renal dialysis drug or 
biological product during the applicable time period specified in 
paragraph (c)(1) or (2) of this section, CMS will no longer apply the 
transitional drug add-on payment adjustment for the product beginning 
no later than 2-calendar quarters after CMS determines that the latest 
full calendar quarter of ASP data is not available.
* * * * *
    (e) Exclusion criteria for the transitional drug add-on payment

[[Page 38416]]

adjustment. A new renal dialysis drug used to treat or manage a 
condition for which there is an ESRD PPS functional category is not 
eligible for payment using the transitional drug add-on payment 
adjustment described in paragraph (c)(1) of this section if the drug is 
approved by FDA under section 505(j) of the Federal Food, Drug, and 
Cosmetic Act (FD&C Act) or the new drug application (NDA) for the drug 
is classified by FDA as Type 3, 5, 7, or 8, Type 3 in combination with 
Type 2 or Type 4, or Type 5 in combination with Type 2, or Type 9 when 
the parent NDA is a Type 3, 5, 7 or 8 as described in paragraphs (e)(1) 
through (7) of this section, respectively:
    (1) Type 3 NDA--New Dosage Form. (i) A Type 3 NDA is for a new 
dosage form of an active ingredient that has been approved or marketed 
in the United States (U.S.) by the same or another applicant but in a 
different dosage form. The indication for the drug product does not 
need to be the same as that of the already marketed drug product. Once 
a new dosage form has been approved for an active ingredient, 
subsequent applications for the same dosage form and active ingredient 
should be classified as a Type 5 NDA, as described in paragraph (e)(2) 
of this section.
    (ii) [Reserved]
    (2) Type 5 NDA--New Formulation or Other Differences. (i) A Type 5 
NDA is for a product, other than a new dosage form, that differs from a 
product already approved or marketed in the U.S. because of one of the 
following:
    (A) The product involves changes in inactive ingredients that 
require either bioequivalence studies or clinical studies for approval 
and is submitted as an original NDA rather than as a supplement by the 
applicant of the approved product;
    (B) The product is a duplicate of a drug product by another 
applicant (same active ingredient, same dosage form, same or different 
indication, or same combination), and
    (1) Requires bioequivalence testing (including bioequivalence 
studies with clinical endpoints), but is not eligible for submission as 
a section 505(j) of the FD&C Act application; or
    (2) Requires safety or effectiveness testing because of novel 
inactive ingredients; or
    (3) Requires full safety or effectiveness testing because it is:
    (i) Subject to exclusivity held by another applicant, or
    (ii) A product of biotechnology and its safety and/or effectiveness 
are not assessable through bioequivalence testing, or
    (iii) A crude natural product, or
    (iv) Ineligible for submission under section 505(j) of the FD&C Act 
because it differs in bioavailability (for example, products with 
different release patterns); or
    (4) The applicant has a right of reference to the application.
    (C) The product contains an active ingredient or active moiety that 
has been previously approved or marketed in the U.S. only as part of a 
combination. This applies to active ingredients previously approved or 
marketed as part of a physical or chemical combination, or as part of a 
mixture derived from recombinant deoxyribonucleic acid technology or 
natural sources.
    (D) The product is a combination product that differs from a 
previously marketed combination by the removal of one or more active 
ingredients or by substitution of a new ester or salt or other 
noncovalent derivative of an active ingredient for one or more of the 
active ingredients. In the latter case, the NDA would be classified as 
a combination of a Type 2 NDA as described in paragraph (e)(5)(i) of 
this section, with a Type 5 NDA as described in this paragraph (e)(2).
    (E) The product contains a different strength of one or more active 
ingredients in a previously approved or marketed combination. A Type 5 
NDA, as described in this paragraph (e)(2), would generally be 
submitted by an applicant other than the holder of the approved 
application for the approved product. A similar change in an approved 
product by the applicant of the approved product would usually be 
submitted as a supplemental application.
    (F) The product differs in bioavailability (for example, 
superbioavailable or different controlled-release pattern) and, 
therefore, is ineligible for submission as an abbreviated new drug 
application (ANDA) under section 505(j) of the FD&C Act.
    (G) The product involves a new plastic container that requires 
safety studies beyond limited confirmatory testing (see 21 CFR 310.509, 
Parenteral drug products in plastic containers).
    (ii) [Reserved]
    (3) Type 7 NDA--Previously Marketed But Without an Approved NDA. 
(i) A Type 7 NDA is for a drug product that contains an active moiety 
that has not been previously approved in an application, but has been 
marketed in the U.S. This classification applies only to the first NDA 
approved for a drug product containing this (these) active moiety(ies). 
Type 7 NDAs include, but are not limited to:
    (A) The first post-1962 application for an active moiety marketed 
prior to 1938.
    (B) The first application for an active moiety first marketed 
between 1938 and 1962 that is identical, related or similar (IRS) to a 
drug covered by a Drug Efficacy Study Implementation notice. The 
regulation at 21 CFR 310.6(b)(1) states that an identical, related, or 
similar drug includes other brands, potencies, dosage forms, salts, and 
esters of the same drug moiety as well as any of drug moiety related in 
chemical structure or known pharmacological properties.
    (C) The first application for an IRS drug product first marketed 
after 1962.
    (D) The first application for an active moiety that was first 
marketed without an NDA after 1962.
    (ii) [Reserved]
    (4) Type 8 NDA--Prescription to Over-the-Counter (OTC). (i) A Type 
8 NDA is for a drug product intended for OTC marketing that contains an 
active ingredient that has been approved previously or marketed in the 
U.S. only for dispensing by prescription (OTC switch). A Type 8 NDA may 
provide for a different dosing regimen, different strength, different 
dosage form, or different indication from the product approved 
previously for prescription sale.
    (ii) If the proposed OTC switch will apply to all indications, 
uses, and strengths of an approved prescription dosage form (leaving no 
prescription-only products of that particular dosage form on the 
market), the application holder should submit the change as a 
supplement to the approved application. If the applicant intends to 
switch only some indications, uses, or strengths of the dosage form to 
OTC status (while continuing to market other indications, uses, or 
strengths of the dosage form for prescription-only sale), the applicant 
should submit a new NDA for the OTC products, which would be classified 
as a Type 8 NDA.
    (5) Combination of Type 3 NDA. Type 3 NDA, as described in 
paragraph (e)(1) of this section, in combination with a Type 2 NDA, as 
described in paragraph (e)(5)(i) of this section, or in combination 
with a Type 4 NDA, as described in paragraph (e)(5)(ii) of this 
section;
    (i) Type 2 NDA--New Active Ingredient. (A) A Type 2 NDA is for a 
drug product that contains a new active ingredient, but not a new 
molecular entity (NME). A new active ingredient includes those products 
whose active moiety has been previously approved or marketed in the 
U.S., but whose

[[Page 38417]]

particular ester, salt, or noncovalent derivative of the unmodified 
parent molecule has not been approved by FDA or marketed in the U.S., 
either alone, or as part of a combination product. Similarly, if any 
ester, salt, or noncovalent derivative has been marketed first, the 
unmodified parent molecule would also be considered a new active 
ingredient, but not an NME. The indication for the drug product does 
not need to be the same as that of the already marketed product 
containing the same active moiety.
    (B) If the active ingredient is a single enantiomer and a racemic 
mixture containing that enantiomer has been previously approved by FDA 
or marketed in the U.S., or if the active ingredient is a racemic 
mixture containing an enantiomer that has been previously approved by 
FDA or marketed in the U.S., the NDA will be classified as a Type 2 
NDA.
    (ii) Type 4 NDA--New Combination. (A) A Type 4 NDA is for a new 
drug-drug combination of two or more active ingredients. An application 
for a new drug-drug combination product may have more than one 
classification code if at least one component of the combination is an 
NME or a new active ingredient. The new product may be a physical or 
chemical (for example, covalent ester or noncovalent derivative) 
combination of two or more active moieties.
    (B) A new physical combination may be two or more active 
ingredients combined into a single dosage form, or two or more drugs 
packaged together with combined labeling. When at least one of the 
active moieties is classified as an NME, the NDA is classified as a 
combination of a Type 1 NDA, as described in paragraph (e)(5)(ii)(B)(1) 
of this section, with a Type 4 NDA, as described in paragraph 
(e)(5)(ii) of this section. When none of the active moieties is an NME, 
but at least one is a new active ingredient, the NDA is classified as a 
combination of a Type 2 NDA, as described in paragraph (e)(5)(i) of 
this section, with a Type 4 NDA, as described in paragraph (e)(5)(ii) 
of this section.
    (1) Type 1 NDA--New Molecular Entity. (i) A Type 1 NDA is for a 
drug product that contains an NME. An NME is an active ingredient that 
contains no active moiety that has been previously approved by FDA in 
an application submitted under section 505 of the FD&C Act or has been 
previously marketed as a drug in the U.S. A pure enantiomer or a 
racemic mixture is an NME only when neither has been previously 
approved or marketed.
    (ii) An NDA for a drug product containing an active moiety that has 
been marketed as a drug in the U.S., but never approved in an 
application submitted under section 505 of the FD&C Act, would be 
considered a Type 7 NDA as described in paragraph (e)(3) of this 
section, not a Type 1 NDA.
    (iii) An NDA for a drug-drug combination product containing an 
active moiety that is an NME in combination with another active moiety 
that had already been approved by FDA would be classified as a new 
combination containing an NME (that is, Type 1,4 NDA, as described in 
paragraph (e)(5)(ii) of this section). For example, a drug-drug 
combination can include a fixed-combination drug product or a co-
packaged drug product with two or more active moieties.
    (iv) An active moiety in a radiopharmaceutical (or radioactive drug 
product) which has not been approved by the FDA or marketed in the U.S. 
is classified as an NME.
    (v) In addition, if a change in isotopic form results in an active 
moiety that has never been approved by the FDA or marketed in the U.S., 
the active ingredient is classified as an NME.
    (C) An NDA for an active ingredient that is a chemical combination 
of two or more previously approved or marketed active moieties that are 
linked by an ester bond is classified as a combination of a Type 2 NDA 
as described in paragraph (e)(5)(i) of this section, with a Type 4 NDA 
as described in paragraph (e)(5)(ii) of this section, if the active 
moieties have not been previously marketed or approved as a physical 
combination. If the physical combination has been previously marketed 
or approved, however, such a product would no longer be considered a 
new combination and the NDA would thus be classified as a Type 2 NDA, 
as described in paragraph (e)(5)(i) of this section.
    (6) Combination of Type 5 NDA. Type 5 NDA, as described in 
paragraph (e)(2) of this section, in combination with a Type 2 NDA, as 
described in paragraph (e)(5)(i) of this section.
    (7) Type 9 NDA when the parent NDA is a Type 3, Type 5, Type 7, or 
a Type 8. A Type 9 NDA, as described in paragraph (e)(7)(i) of this 
section when the parent NDA is a Type 3 NDA as described in paragraph 
(e)(1) of this section or a Type 5 NDA as described in paragraph (e)(2) 
of this section or Type 7 NDA as described in paragraph (e)(3) of this 
section or a Type 8 NDA as described in paragraph (e)(4) of this 
section.
    (i) Type 9 NDA--New Indication or Claim, Drug Not to be Marketed 
under Type 9 NDA after Approval. (A) A Type 9 NDA is for a new 
indication or claim for a drug product that is currently being reviewed 
under a different NDA (the ``parent NDA''), and the applicant does not 
intend to market this drug product under the Type 9 NDA after approval. 
Generally, a Type 9 NDA is submitted as a separate NDA so as to be in 
compliance with the guidance for industry on Submitting Separate 
Marketing Applications and Clinical Data for Purposes of Assessing User 
Fees.
    (B) When the Type 9 NDA is submitted, it will be given the same NDA 
classification as the pending NDA. When one application is approved, 
the other will be reclassified as Type 9 regardless of whether it was 
the first or second NDA actually submitted. After the approval of a 
Type 9 NDA, FDA will ``administratively close'' the Type 9 NDA and 
thereafter only accept submissions to the ``parent'' NDA.
    (ii) [Reserved]
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8. Section 413.236 is added to read as follows:


Sec.  413.236  Transitional Add-on Payment Adjustment for New and 
Innovative Equipment and Supplies.

    (a) Basis. This section establishes a payment adjustment to support 
ESRD facilities in the uptake of new and innovative renal dialysis 
equipment and supplies under the ESRD prospective payment system under 
the authority of section 1881(b)(14)(D)(iv) of the Social Security Act.
    (b) Eligibility criteria. For dates of service occurring on or 
after January 1, 2020, CMS provides for a transitional add-on payment 
adjustment for new and innovative equipment and supplies (as specified 
in paragraph (d) of this section) that is added to the per treatment 
base rate established in Sec.  413.220, adjusted for wages as described 
in Sec.  413.231, and adjusted for facility-level and patient-level 
characteristics as described in Sec. Sec.  413.232 and 413.235 to an 
ESRD facility for furnishing a covered equipment or supply only if the 
item:
    (1) Has been designated by CMS as a renal dialysis service under 
Sec.  413.171;
    (2) Is new, meaning it is granted marketing authorization by the 
Food and Drug Administration (FDA) on or after January 1, 2020;
    (3) Is commercially available;
    (4) Has a Healthcare Common Procedure Coding System (HCPCS) 
application submitted in accordance with the official Level II HCPCS 
coding procedures;

[[Page 38418]]

    (5) Is innovative, meaning it meets the criteria specified in Sec.  
412.87(b)(1) of this chapter and related guidance; and
    (6) Is not a capital-related asset that an ESRD facility has an 
economic interest in through ownership (regardless of the manner in 
which it was acquired).
    (c) Announcement of determinations and deadline for consideration 
of new renal dialysis equipment or supply applications. CMS will 
consider whether a new renal dialysis supply or equipment meets the 
eligibility criteria specified in paragraph (b) of this section and 
announce the results in the Federal Register as part of its annual 
updates and changes to the ESRD prospective payment system. CMS will 
only consider a complete application received by CMS by February 1 
prior to the particular calendar year.
    (d) Transitional add-on payment adjustment for new and innovative 
equipment and supplies. A new and innovative renal dialysis equipment 
or supply will be paid for using a transitional add-on payment 
adjustment for new and innovative equipment and supplies based on 65 
percent of the MAC-determined price, as specified in paragraph (e) of 
this section.
    (1) The transitional add-on payment adjustment for new and 
innovative equipment and supplies is paid for 2-calendar years.
    (2) Following payment of the transitional add-on payment adjustment 
for new and innovative equipment and supplies, the ESRD PPS base rate 
will not be modified and the new and innovative renal dialysis 
equipment or supply will be an eligible outlier service as provided in 
Sec.  413.237.
    (e) Pricing of new and innovative renal dialysis equipment and 
supplies. (1) The Medicare Administrative Contractors (MACs) on behalf 
of CMS will establish prices for new and innovative renal dialysis 
equipment and supplies that meet the eligibility criteria specified in 
paragraph (b) of this section using verifiable information from the 
following sources of information, if available:
    (i) The invoice amount, facility charges for the item, discounts, 
allowances, and rebates;
    (ii) The price established for the item by other MACs and the 
sources of information used to establish that price;
    (iii) Payment amounts determined by other payers and the 
information used to establish those payment amounts; and
    (iv) Charges and payment amounts required for other equipment and 
supplies that may be comparable or otherwise relevant.
    (2) [Reserved]
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9. Section 413.237 is amended by--
0
 a. Revising paragraphs (a)(1)(i) through (iv);
0
b. Redesignating paragraph (a)(1)(v) as paragraph (a)(1)(vi);
0
 c. Adding new paragraph (a)(1)(v); and
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d. Revising newly redesignated paragraph (a)(1)(vi).
    The revisions and addition read as follows:


Sec.  413.237  Outliers.

    (a) * * *
    (1) * * *
    (i) Renal dialysis drugs and biological products that were or would 
have been, prior to January 1, 2011, separately billable under Medicare 
Part B;
    (ii) Renal dialysis laboratory tests that were or would have been, 
prior to January 1, 2011, separately billable under Medicare Part B;
    (iii) Renal dialysis medical/surgical supplies, including syringes, 
used to administer renal dialysis drugs and biological products that 
were or would have been, prior to January 1, 2011, separately billable 
under Medicare Part B;
    (iv) Renal dialysis drugs and biological products that were or 
would have been, prior to January 1, 2011, covered under Medicare Part 
D, including renal dialysis oral-only drugs effective January 1, 2025; 
and
    (v) Renal dialysis equipment and supplies that receive the 
transitional add-on payment adjustment as specified in Sec.  413.236 
after the payment period has ended.
    (vi) As of January 1, 2012, the laboratory tests that comprise the 
Automated Multi-Channel Chemistry panel are excluded from the 
definition of outlier services.
* * * * *

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

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

    Authority: 42 U.S.C. 1302, 1395hh, and 1395rr(b)(l).

0
 11. Section 414.110 is added to subpart C to read as follows:


Sec.  414.110  Continuity of pricing when HCPCS codes are divided or 
combined.

    (a) General rule. If a new HCPCS code is added, CMS or contractors 
make every effort to determine whether the item and service has a fee 
schedule pricing history. If there is a fee schedule pricing history, 
the previous fee schedule amounts for the old code(s) are mapped to the 
new code(s) to ensure continuity of pricing.
    (b) Mapping fee schedule amounts based on different kinds of coding 
changes. When the code for an item is divided into several codes for 
the components of that item, the total of the separate fee schedule 
amounts established for the components must not be higher than the fee 
schedule amount for the original item. When there is a single code that 
describes two or more distinct complete items (for example, two 
different but related or similar items), and separate codes are 
subsequently established for each item, the fee schedule amounts that 
applied to the single code continue to apply to each of the items 
described by the new codes. When the codes for the components of a 
single item are combined in a single global code, the fee schedule 
amounts for the new code are established by totaling the fee schedule 
amounts used for the components (that is, use the total of the fee 
schedule amounts for the components as the fee schedule amount for the 
global code). When the codes for several different items are combined 
into a single code, the fee schedule amounts for the new code are 
established using the average (arithmetic mean), weighted by allowed 
services, of the fee schedule amounts for the formerly separate codes.
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12. Section 414.112 is added to subpart C to read as follows:


Sec.  414.112  Establishing fee schedule amounts for new HCPCS codes 
for items and services without a fee schedule pricing history.

    (a) General rule. If a HCPCS code is new and describes items and 
services that do not have a fee schedule pricing history (classified 
and paid for previously under a different code), the fee schedule 
amounts for the new code are established based on the process described 
in paragraphs (b) through (d) of this section.
    (b) Comparability. Fee schedule amounts for new HCPCS codes for 
items and services without a fee schedule pricing history are 
established using existing fee schedule amounts for comparable items 
when items with existing fee schedule amounts are determined to be 
comparable to the new items and services based on a comparison of: 
Physical components; mechanical components; electrical components; 
function and intended use; and additional attributes and features. If 
there are no items with existing fee schedule amounts that are 
comparable to the items and services under the new code, the fee 
schedule amounts for the new code are established in accordance with 
paragraph (c) or (d) of this section.

[[Page 38419]]

    (c) Use of supplier or commercial price lists. (1) Fee schedule 
amounts for items and services without a fee schedule pricing history 
described by new HCPCS codes that are not comparable to items and 
services with existing fee schedule amounts may be established using 
supplier price lists, including catalogs and other retail price lists 
(such as internet retail prices) that provide information on commercial 
pricing for the item. Potential appropriate sources for such commercial 
pricing information can also include payments made by Medicare 
Advantage plans, as well as verifiable information from supplier 
invoices and non-Medicare payer data. If the only available price 
information is from a period other than the fee schedule base period, 
deflation factors are applied against current pricing in order to 
approximate the base period price.
    (i) The annual deflation factors are specified in program 
instructions and are based on the percentage change in the consumer 
price index for all urban consumers (CPI-U) from the mid-point of the 
year the prices are in effect to the mid-point of the fee schedule base 
period, as calculated using the following formula:

((base CPI-U minus current CPI-U) divided by current CPI-U) plus one

    (ii) The deflated amounts are then increased by the update factors 
specified in Sec.  414.102(c).
    (2) If within 5 years of establishing fee schedule amounts using 
supplier or commercial prices, the supplier or commercial prices 
decrease by less than 15 percent, a one-time adjustment to the fee 
schedule amounts is made using the new prices. The new supplier or 
commercial prices would be used to establish the new fee schedule 
amounts in the same way that the older prices were used, including 
application of the deflation formula in paragraph (c)(1) of this 
section.
    (d) Use of technology assessments. (1) Fee schedule amounts for 
items and services without a fee schedule pricing history described by 
new HCPCS codes that are not comparable to items and services with 
existing fee schedule amounts may be established using technology 
assessments, performed by biomedical engineers, certified orthotists 
and prosthetists, and others knowledgeable about the cost of DMEPOS 
items and services, to determine the relative cost of the items and 
services described by the new codes to items and services with existing 
fee schedule amounts to determine a pricing percentage as described in 
paragraph (d)(2) of this section for the purpose of establishing the 
fee schedule amounts for the new code.
    (2) A pricing percentage is established based on the results of the 
technology assessment and is used to establish the fee schedule amounts 
for the new code(s). The pricing percentages are applied to the fee 
schedule amounts for HCPCS codes with existing fee schedule amounts to 
calculate the fee schedule amounts for new HCPCS codes without a fee 
schedule pricing history. Technology assessments would be used whenever 
it is necessary to determine the relative cost of a new item compared 
to items from the fee schedule base period in order to establish fee 
schedule amounts for the new item when supplier or commercial price 
lists are not available or verifiable or do not appear to represent a 
reasonable relative difference in supplier costs of furnishing the new 
DMEPOS item relative to the supplier costs of furnishing DMEPOS items 
from the fee schedule base period.
0
13. Section 414.234 is amended--
0
a. In paragraph (a) by adding in alphabetical order a definition for 
``Required Prior Authorization List'';
0
b. By revising the heading of paragraph (b) and revising paragraphs 
(b)(1) and (2), (b)(3)(i) through (iii), and (b)(4) and (6);
0
c. By revising paragraphs (c)(1)(i) and (ii), (d)(1) introductory text 
and (d)(1)(i), and (e)(3) and (4); and
0
d. By adding paragraph (e)(5).
    The revisions and addition read as follows:


Sec.  414.234  Prior authorization for items frequently subject to 
unnecessary utilization.

    (a) * * *
    Required Prior Authorization List is a list of DMEPOS items 
selected from the Master List and subject to the requirements of prior 
authorization as a condition of payment.
* * * * *
    (b) Master List of Items Potentially Subject to Face-to-Face 
Encounter and Written Order Prior to Delivery and/or Prior 
Authorization Requirements. (1) Master List Inclusion Criteria are as 
follows:
    (i) Any DMEPOS items included in the DMEPOS Fee Schedule that have 
an average purchase fee of $500 (adjusted annually for inflation using 
consumer price index for all urban consumers (CPI-U), and reduced by 
the 10-year moving average of changes in annual economy-wide private 
nonfarm business multifactor productivity (MFP) (as projected by the 
Secretary for the 10-year period ending with the applicable FY, year, 
cost reporting period, or other annual period)) or greater, or an 
average monthly rental fee schedule of $50 (adjusted annually for 
inflation using consumer price index for all urban consumers (CPI-U), 
and reduced by the 10-year moving average of changes in annual economy-
wide private nonfarm business multifactor productivity (MFP) (as 
projected by the Secretary for the 10-year period ending with the 
applicable FY, year, cost reporting period, or other annual period)) or 
greater, or are identified as accounting for at least 1.5 percent of 
Medicare expenditures for all DMEPOS items over a 12-month period that 
are:
    (A) Identified as having a high rate of potential fraud or 
unnecessary utilization in an Office of Inspector General (OIG) or 
Government Accountability Office (GAO) report that is national in scope 
and published in 2015 or later, or
    (B) Listed in the 2018 or later Comprehensive Error Rate Testing 
(CERT) Medicare Fee-for-Service (FFS) Supplemental Improper Payment 
Data report as having a high improper payment rate, or
    (ii) The annual Master List updates shall include any items with at 
least 1,000 claims and 1 million dollars in payments during a recent 
12-month period that are determined to have aberrant billing patterns 
and lack explanatory contributing factors (for example, new technology 
or coverage policies). Items with aberrant billing patterns would be 
identified as those items with payments during a 12-month timeframe 
that exceed payments made during the preceding 12-months, by the 
greater of:
    (A) Double the percent change of all DMEPOS claim payments for 
items that meet the above claim and payment criteria, from the 
preceding 12-month period, or
    (B) Exceeding a 30 percent increase in payment, or
    (iii) Any item statutorily requiring a face-to-face encounter, a 
written order prior to delivery, or prior authorization.
    (2) The Master List is self-updating at a minimum annually, and is 
published in the Federal Register.
    (3) * * *
    (i) OIG reports published after 2020.
    (ii) GAO reports published after 2020.
    (iii) Listed in the CERT Medicare FFS Supplemental Improper Payment 
Data report(s) published after 2020 as having a high improper payment 
rate.
    (4) Items are removed from the Master List after 10 years from the 
date the item was added to the Master List, unless the item was 
identified in an OIG report, GAO report, or having been identified in 
the CERT Medicare FFS Supplemental

[[Page 38420]]

Improper Payment Data report as having a high improper payment rate, 
within the 5-year period preceding the anticipated date of expiration.
* * * * *
    (6) An item is removed from the list if the cost drops below the 
payment threshold criteria set forth in paragraph (b)(1)(i) of this 
section.
* * * * *
    (c) * * *
    (1) * * *
    (i) The Required Prior Authorization List specified in paragraph 
(c)(1) of this section is selected from the Master List. CMS may 
consider factors such as geographic location, item utilization or cost, 
system capabilities, emerging trends, vulnerabilities identified in 
official agency reports, or other analysis and may implement prior 
authorization nationally or locally.
    (ii) CMS may elect to limit the prior authorization requirement to 
a particular region of the country if claims data analysis shows that 
unnecessary utilization of the selected item(s) is concentrated in a 
particular region. CMS may elect to exempt suppliers from prior 
authorization upon demonstration of compliance with Medicare coverage, 
coding, and payment rules through such prior authorization process.
* * * * *
    (d) * * *
    (1) Include all relevant documentation necessary to show that the 
item meets applicable Medicare coverage, coding, and payment rules, 
including those outlined in Sec.  410.38 and all of the following:
    (i) Written order/prescription.
* * * * *
    (e) * * *
    (3) If applicable Medicare coverage, coding, and payment rules are 
not met, CMS or its contractor issues a non-affirmation decision to the 
requester.
    (4) If the requester receives a non-affirmation decision, the 
requester may resubmit a prior authorization request before the item is 
furnished to the beneficiary and before the claim is submitted for 
processing.
    (5) A prior authorization request for an expedited review must 
include documentation that shows that processing a prior authorization 
request using a standard timeline for review could seriously jeopardize 
the life or health of the beneficiary or the beneficiary's ability to 
regain maximum function. If CMS or its contractor agrees that 
processing a prior authorization request using a standard timeline for 
review could seriously jeopardize the life or health of the beneficiary 
or the beneficiary's ability to regain maximum function, then CMS or 
its contractor expedites the review of the prior authorization request 
and communicates the decision following the receipt of all applicable 
Medicare required documentation.
* * * * *
0
14. Section 414.236 is added to subpart D to read as follows:


Sec.  414.236  Continuity of pricing when HCPCS codes are divided or 
combined.

    (a) General rule. If a new HCPCS code is added, CMS or contractors 
make every effort to determine whether the item and service has a fee 
schedule pricing history. If there is a fee schedule pricing history, 
the previous fee schedule amounts for the old code(s) are mapped to the 
new code(s) to ensure continuity of pricing.
    (b) Mapping fee schedule amounts based on different kinds of coding 
changes. When the code for an item is divided into several codes for 
the components of that item, the total of the separate fee schedule 
amounts established for the components must not be higher than the fee 
schedule amount for the original item. When there is a single code that 
describes two or more distinct complete items (for example, two 
different but related or similar items), and separate codes are 
subsequently established for each item, the fee schedule amounts that 
applied to the single code continue to apply to each of the items 
described by the new codes. When the codes for the components of a 
single item are combined in a single global code, the fee schedule 
amounts for the new code are established by totaling the fee schedule 
amounts used for the components (that is, use the total of the fee 
schedule amounts for the components as the fee schedule amount for the 
global code). When the codes for several different items are combined 
into a single code, the fee schedule amounts for the new code are 
established using the average (arithmetic mean), weighted by allowed 
services, of the fee schedule amounts for the formerly separate codes.
0
15. Section 414.238 is added to subpart D to read as follows:


Sec.  414.238  Establishing fee schedule amounts for new HCPCS codes 
for items and services without a fee schedule pricing history.

    (a) General rule. If a HCPCS code is new and describes items and 
services that do not have a fee schedule pricing history (classified 
and paid for previously under a different code), the fee schedule 
amounts for the new code are established based on the process described 
in paragraphs (b) through (d) of this section.
    (b) Comparability. Fee schedule amounts for new HCPCS codes for 
items and services without a fee schedule pricing history are 
established using existing fee schedule amounts for comparable items 
when items with existing fee schedule amounts are determined to be 
comparable to the new items and services based on a comparison of: 
Physical components; mechanical components; electrical components; 
function and intended use; and additional attributes and features. If 
there are no items with existing fee schedule amounts that are 
comparable to the items and services under the new code, the fee 
schedule amounts for the new code are established in accordance with 
paragraph (c) or (d) of this section.
    (c) Use of supplier or commercial price lists. (1) Fee schedule 
amounts for items and services without a fee schedule pricing history 
described by new HCPCS codes that are not comparable to items and 
services with existing fee schedule amounts may be established using 
supplier price lists, including catalogs and other retail price lists 
(such as internet retail prices) that provide information on commercial 
pricing for the item. Potential appropriate sources for such commercial 
pricing information can also include payments made by Medicare 
Advantage plans, as well as verifiable information from supplier 
invoices and non-Medicare payer data. If the only available price 
information is from a period other than the fee schedule base period, 
deflation factors are applied against current pricing in order to 
approximate the base period price.
    (i) The annual deflation factors are specified in program 
instructions and are based on the percentage change in the consumer 
price index for all urban consumers (CPI-U) from the mid-point of the 
year the prices are in effect to the mid-point of the fee schedule base 
period, as calculated using the following formula:

((base CPI-U minus current CPI-U) divided by current CPI-U) plus one

    (ii) The deflated amounts are then increased by the update factors 
specified in section 1834(a)(14) of the Act for DME, section 1834(h)(4) 
of the Act for prosthetic devices, prosthetics, orthotics, and 
therapeutic shoes and inserts, and section 1834(i)(1)(B) of the Act for 
surgical dressings.
    (2) If within 5 years of establishing fee schedule amounts using 
supplier or commercial prices, the prices decrease by less than 15 
percent, a one-time adjustment to the fee schedule amounts

[[Page 38421]]

is made using the new prices. The new prices would be used to establish 
the new fee schedule amounts in the same way that the older prices were 
used, including application of the deflation formula in paragraph 
(c)(1) of this section.
    (d) Use of technology assessments. (1) Fee schedule amounts for 
items and services without a fee schedule pricing history described by 
new HCPCS codes that are not comparable to items and services with 
existing fee schedule amounts may be established using technology 
assessments, performed by biomedical engineers, certified orthotists 
and prosthetists, and others knowledgeable about the cost of DMEPOS 
items and services, to determine the relative cost of the items and 
services described by the new codes to items and services with existing 
fee schedule amounts to determine a pricing percentage as described in 
paragraph (d)(2) of this section for the purpose of establishing the 
fee schedule amounts for the new code.
    (2) A pricing percentage is established based on the results of the 
technology assessment and is used to establish the fee schedule amounts 
for the new code(s). The pricing percentages are applied to the fee 
schedule amounts for HCPCS codes with existing fee schedule amounts to 
calculate the fee schedule amounts for new HCPCS codes without a fee 
schedule pricing history. Technology assessments would be used whenever 
it is necessary to determine the relative cost of a new item compared 
to items from the fee schedule base period in order to establish fee 
schedule amounts for the new item when supplier or commercial price 
lists are not available or verifiable or do not appear to represent a 
reasonable relative difference in supplier costs of furnishing the new 
DMEPOS item relative to the supplier costs of furnishing DMEPOS items 
from the fee schedule base period.
0
16. Section 414.422 is amended by revising paragraph (d) to read as 
follows:


Sec.  414.422  Terms of contracts.

* * * * *
    (d) Change of ownership (CHOW). (1) CMS may transfer a contract to 
a successor entity that merges with, or acquires, a contract supplier 
if the successor entity--
    (i) Meets all requirements applicable to contract suppliers for the 
applicable competitive bidding program;
    (ii) Submits to CMS the documentation described under Sec.  
414.414(b) through (d) if documentation has not previously been 
submitted by the successor entity or if the documentation is no longer 
sufficient for CMS to make a financial determination. A successor 
entity is not required to duplicate previously submitted information if 
the previously submitted information is not needed to make a financial 
determination. This documentation must be submitted prior to the 
effective date of the CHOW; and
    (iii) Submits to CMS a signed novation agreement acceptable to CMS 
stating that it assumes all obligations under the contract. This 
documentation must be submitted no later than 10 days after the 
effective date of the CHOW.
    (2) Except as specified in paragraph (d)(3) of this section, CMS 
may transfer the entire contract, including all product categories and 
competitive bidding areas, to a successor entity.
    (3) For contracts issued in the Round 2 Recompete and subsequent 
rounds in the case of a CHOW where a contract supplier sells a distinct 
company (for example, a subsidiary) that furnishes a specific product 
category or services a specific CBA, CMS may transfer the portion of 
the contract performed by that company to a successor entity, if the 
following conditions are met:
    (i) Every CBA, product category, and location of the company being 
sold must be transferred to the successor entity that meets all 
competitive bidding requirements; that is, financial, accreditation, 
and licensure;
    (ii) All CBAs and product categories in the original contract that 
are not explicitly transferred by CMS remain unchanged in that original 
contract for the duration of the contract period unless transferred by 
CMS pursuant to a subsequent CHOW;
    (iii) All requirements of paragraph (d)(1) of this section are met;
    (iv) The sale of the distinct company includes all of the contract 
supplier's assets associated with the CBA and/or product category(s); 
and
    (v) CMS determines that transfer of part of the original contract 
will not result in disruption of service or harm to beneficiaries.
* * * * *
0
17. Section 414.423 is amended by revising paragraph (f)(2) to read as 
follows:


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

* * * * *
    (f) * * *
    (2) A supplier that wishes to appeal the breach of contract 
action(s) specified in the notice of breach of contract must submit a 
written request to the CBIC. The request for a hearing must be 
submitted to the CBIC within 30 days from the date of the notice of 
breach of contract.
* * * * *

    Dated: June 21, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 24, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-16369 Filed 7-29-19; 4:15 pm]
 BILLING CODE 4120-01-P