[Federal Register Volume 84, Number 217 (Friday, November 8, 2019)]
[Rules and Regulations]
[Pages 60648-60809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24063]
[[Page 60647]]
Vol. 84
Friday,
No. 217
November 8, 2019
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 405, 410, 413 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 Program (CBP)
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; Final Rule
Federal Register / Vol. 84 , No. 217 / Friday, November 8, 2019 /
Rules and Regulations
[[Page 60648]]
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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-F]
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 Program (CBP)
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: Final rule.
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SUMMARY: This final rule updates and makes revisions to the End-Stage
Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year
(CY) 2020. This rule also updates the payment rate for renal dialysis
services furnished by an ESRD facility to individuals with acute kidney
injury (AKI). This rule also updates requirements for the ESRD Quality
Incentive Program (QIP). In addition, this rule establishes a
methodology for calculating fee schedule payment amounts for new
Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)
items and services, and a methodology for 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 revises existing regulations related
to the DMEPOS competitive bidding program. This rule also streamlines
the requirements for ordering DMEPOS items, and develops 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 rule summarizes responses to 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: These regulations are effective January 1, 2020.
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;
and Maria Ciccanti, (410) 786-3107, for issues related to the DMEPOS
written order, face-to-face encounter, and prior authorization
requirements.
SUPPLEMENTARY INFORMATION:
Addenda Are Only Available Through the Internet on the CMS Website
The Addenda for the annual ESRD PPS proposed and final rules will
no longer appear in the Federal Register. Instead, the Addenda will be
available only through the internet on the CMS website at http://www.cms.gov/ESRDPayment/PAY/list.asp. In addition to the Addenda,
limited data set (LDS) files are available for purchase at http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/EndStageRenalDiseaseSystemFile.html. Readers who
experience any problems accessing the Addenda or LDS files, should
contact [email protected].
Table of Contents
To assist readers in referencing sections contained in this
preamble, we are providing a Table of Contents. Some of the issues
discussed in this preamble affect the payment policies, but do not
require changes to the regulations in the Code of Federal Regulations
(CFR).
I. Executive Summary
A. Purpose
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. Summary of the Proposed Provisions, Public Comments, and
Responses to Comments on the Calendar Year (CY) 2020 ESRD PPS
C. Miscellaneous Comments
III. CY 2020 Payment for Renal Dialysis Services Furnished to
Individuals With Acute Kidney Injury (AKI)
A. Background
B. Summary of the Proposed Provisions, Public Comments, and
Responses to Comments on the CY 2020 Payment for Renal Dialysis
Services Furnished to Individuals With AKI
C. Annual Payment Rate Update for CY 2020
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
A. Background
B. Summary of the Proposed Provisions, Public Comments,
Responses to Comments, and Finalized Policies for the ESRD QIP
C. Updates to Regulation Text
D. Requirements Beginning With the PY 2022 ESRD QIP
E. Requirements Beginning With 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. Summary of the Proposed Provisions, Public Comments, and
Responses to Comments on 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. Summary of the Proposed Provisions, Public Comments, and
Responses to Comments on the Proposed Rule
C. Miscellaneous Comments
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. Additional Information Collection Requirements
X. 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
XI. Files Available to the Public via the internet
Regulations Text
I. Executive Summary
A. Purpose
This final rule finalizes changes related to the End-Stage Renal
Disease
[[Page 60649]]
(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, the
DMEPOS Competitive Bidding Program (CBP), 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
updates and makes 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
updates 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 final rule finalizes several
updates to the ESRD QIP.
4. DMEPOS Fee Schedule Payment Rules
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
This rule establishes a gap-filling methodology for the pricing of
new DMEPOS 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 finalizes 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.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
This rule will streamline the requirements for ordering DMEPOS
items. It will 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 final CY
2020 ESRD PPS base rate is $239.33. This 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 (1.000244), equaling
$239.33 ($235.27 x 1.017 x 1.000244 = $239.33).
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 updating the wage index values to the latest
available data.
Update to the outlier policy: We are updating the outlier
policy using the most current data, as well as updating the outlier
services fixed-dollar loss (FDL) amounts for adult and pediatric
patients and Medicare Allowable Payment (MAP) amounts for adult and
pediatric patients for CY 2020 using CY 2018 claims data. Based on the
use of the latest available data, the final FDL amount for pediatric
beneficiaries will decrease from $57.14 to $41.04, and the MAP amount
will decrease from $35.18 to $32.32, as compared to CY 2019 values. For
adult beneficiaries, the final FDL amount will decrease from $65.11 to
$48.33, and the MAP amount will decrease from $38.51 to $35.78. 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 will increase
payments for ESRD beneficiaries requiring higher resource utilization
in accordance with a 1.0 percent outlier percentage.
Eligibility criteria for the transitional drug add-on
payment adjustment (TDAPA): We are finalizing 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 excluding 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 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--
from being eligible for the transitional drug add-on payment adjustment
(TDAPA), effective January 1, 2020.
Modification of the basis of payment for the TDAPA for
calcimimetics: We will continue to pay the TDAPA for calcimimetics for
a third year in CY 2020 in order to collect
[[Page 60650]]
sufficient claims data for rate setting analysis, but we are finalizing
a reduction to 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.
Average sales price (ASP) conditional policy for
application of the TDAPA: Effective January 1, 2020, the basis of
payment for the TDAPA for all new renal dialysis drugs and biological
products 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 finalizing a policy 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 will 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 finalizing a policy 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.
New and innovative renal dialysis equipment and supplies:
We are finalizing our proposal to establish a transitional add-on
payment adjustment to support ESRD facilities in the uptake of certain
new and innovative renal dialysis equipment and supplies under the ESRD
PPS. We will pay this adjustment, which we are calling the Transitional
Add-on Payment Adjustment for New and Innovative Equipment and Supplies
(TPNIES), for equipment and supplies that: (1) Have been designated by
CMS as a renal dialysis service, (2) are new, meaning granted marketing
authorization by FDA on or after January 1, 2020, (3) are commercially
available by January 1 of the particular calendar year, meaning the
year in which the payment adjustment would take effect; (4) have a
Healthcare Common Procedure Coding System (HCPCS) application submitted
in accordance with the official Level II HCPCS coding procedures by
September 1 of the particular calendar year; (5) are innovative,
meaning they meet the substantial clinical improvement (SCI) criteria
specified in the Inpatient Prospective Payment System (IPPS)
regulations at 42 CFR 412.87(b)(1) and related guidance, and (6) are
not capital-related assets. Specifically, the equipment or supply must
represent an advance that substantially improves, relative to renal
dialysis services previously available, the diagnosis or treatment of
Medicare beneficiaries. CMS will only consider a complete application
received by CMS by February 1 prior to the particular calendar year.
FDA marketing authorization for the equipment or supply must occur by
September 1 prior to the particular calendar year.
We are finalizing that the TPNIES will 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 will pay the TPNIES for 2-calendar years,
after which the equipment or supply will qualify as an outlier service
and no change to the ESRD PPS base rate will be made.
Erythropoiesis-stimulating agent (ESA) monitoring policy
(EMP): We are discontinuing the application of the erythropoiesis-
stimulating agent (ESA) monitoring policy (EMP) under the ESRD PPS.
2. Payment for Renal Dialysis Services Furnished to Individuals With
AKI
We are updating the AKI payment rate for CY 2020. The final CY 2020
payment rate is $239.33, which is the same as the base rate finalized
under the ESRD PPS for CY 2020.
3. ESRD QIP
We are finalizing several new requirements for the ESRD QIP
beginning with payment year (PY) 2022, including an updated 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, and the conversion of the STrR
clinical measure (National Quality Forum [NQF] #2979) to a reporting
measure while we continue to examine concerns raised by stakeholders
regarding the measure's validity. We are not finalizing our proposal to
revise the scoring methodology for the MedRec reporting measure and
will continue to score that measure using the methodology we adopted in
the CY 2019 ESRD PPS final rule.
We are also finalizing the performance and baseline periods for the
PY 2023 ESRD QIP and that, beginning with the PY 2024 payment year, we
will automatically adopt performance and baseline periods that are
advanced 1 year from those specified for the previous payment year.
Finally, we are updating 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 finalizes 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
methodology could 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 finalizes a one-time adjustment to the gap-
filled fee schedule amounts. We will not make these price adjustments
in cases where prices increase.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
This rule will streamline the requirements for ordering DMEPOS
items. It will 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 X of this final rule, we set forth a detailed analysis
of the impacts of the finalized changes for affected entities and
beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
The impact chart in section X of this final 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 CY 2020
changes is projected to be a 1.6
[[Page 60651]]
percent increase in payments. Hospital-based ESRD facilities have an
estimated 2.1 percent increase in payments compared with freestanding
facilities with an estimated 1.6 percent increase.
We estimate that the aggregate ESRD PPS expenditures will increase
by approximately $210 million in CY 2020 compared to CY 2019. This
reflects a $220 million increase from the payment rate update, a $50
million increase due to the updates to the outlier threshold amounts,
and a $60 million decrease due to the change in 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 the refinement to the TDAPA eligibility criteria,
conditioning the TDAPA on the availability of ASP data, or providing
the TPNIES. The fiscal impact of these policies cannot be determined
because the new renal dialysis drugs and biological products eligible
for the TDAPA and new renal dialysis equipment and supplies eligible
for the TPNIES 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 will be an increase in beneficiary co-
insurance payments of 1.6 percent in CY 2020, which translates to
approximately $40 million.
2. Impacts of the Final Payment for Renal Dialysis Services Furnished
to Individuals With AKI
The impact chart in section X of this final 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 CY 2020
changes is projected to be a 1.7 percent increase in payments.
Hospital-based ESRD facilities have an estimated 1.6 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 final CY 2020
ESRD PPS base rate will increase by less than $1 million in CY 2020
compared to CY 2019.
3. Impacts of the Final ESRD QIP Requirements
We estimate that the overall economic impact of the PY 2022 ESRD
QIP will be approximately $229 million as a result of the policies we
have previously finalized and the proposals we are finalizing in this
final rule. The $229 million figure for PY 2022 includes costs
associated with the collection of information requirements, which we
estimate will be approximately $211 million. We also estimate that the
overall economic impact of the PY 2023 ESRD QIP will be approximately
$223 million as a result of the policies we have previously finalized
and are finalizing beginning with PY 2022. The $229 million figure for
PY 2023 includes costs associated with the collection of information
requirements, which we estimate will be approximately $211 million.
4. Impacts of the Final DMEPOS Fee Schedule Payment Rules
a. Establishing Payment Amounts for New DMEPOS Items and Services (Gap-
Filling)
This final rule establishes a specific methodology for calculating
fee schedule amounts for new DMEPOS items. The fiscal impact of
establishing payment amounts for new items based on this methodology
cannot be estimated as the new DMEPOS items are not identified and
would vary in uniqueness and costs. However, there is some inherent
risk that the final 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 finalizing 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 will 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 streamlines the requirements for ordering DMEPOS items,
and identifies the process for subjecting certain DMEPOS items to a
face-to-face encounter and written order prior to delivery and/or prior
authorization requirements 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 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
[[Page 60652]]
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 (IV)
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 finalized a policy to make the TDAPA available for all new
renal dialysis drugs and biological products, not just those in new
ESRD PPS functional categories, effective January 1, 2020.
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) (hereinafter 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, and 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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the Calendar Year (CY) 2020 ESRD PPS
The proposed rule, titled ``Medicare Program; End-Stage Renal
Disease Prospective Payment System, Payment for Renal Dialysis Services
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal
Disease Quality Incentive Program, Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts,
DMEPOS Competitive Bidding Program (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'' (84 FR 38330
through 38421), hereinafter referred to as the ``CY 2020 ESRD PPS
proposed rule,'' was published in the Federal Register on August 6,
2019, with a comment period that ended on September 27, 2019. In that
proposed rule, for the ESRD PPS, we proposed to make a number of annual
updates for CY 2020, including updates to the ESRD PPS base rate, wage
index, and outlier policy. We also proposed 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, a change in the basis of payment for the TDAPA for
calcimimetics, and an average sales price (ASP) conditional policy for
the application of the TDAPA. In addition, we proposed to establish a
transitional add-on payment adjustment for certain new and innovative
renal dialysis equipment and supplies under the ESRD PPS. We also
proposed to discontinue the application of the erythropoiesis-
stimulating agent (ESA) monitoring policy (EMP) under the ESRD PPS.
We received approximately 92 public comments on our proposals,
including comments from ESRD facilities; national renal groups,
nephrologists and patient organizations; patients and care partners;
manufacturers; health care systems; and nurses.
In this final rule, we provide a summary of each proposed
provision, a
[[Page 60653]]
summary of the public comments received and our responses to them, and
the policies we are finalizing for the CY 2020 ESRD PPS.
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 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 IV 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 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 IV product is used to treat or manage a
condition for which there is an ESRD PPS functional category, the new
injectable or IV product is considered included in the ESRD PPS bundled
payment and no separate payment is available. The new injectable or IV
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 IV product is used to
treat or manage a condition for which there is not an ESRD PPS
functional category, the new injectable or IV 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 IV product is used to treat or manage. Next, the new
injectable or IV product is paid for using the TDAPA described in Sec.
413.234(c). Then, the new injectable or IV 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 IV product are
available, but not for less than 2 years. During the time a new
injectable or IV 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 IV 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 IV 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
[[Page 60654]]
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 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, in the CY 2019 ESRD PPS
final rule, we finalized the expansion of the eligibility criteria for
the TDAPA to reflect the proposed policy (83 FR 56943). We explained
that there are 2 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
enable 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 and
biosimilar biological products, to be able to compete with higher
priced drugs during the TDAPA period. In addition, we noted 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.
[[Page 60655]]
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 would provide us with the opportunity to
address issues such as transitioning payment from Part D to Part B,
coordinating issues involving Medicaid 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
believed 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 believed
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
[[Page 60656]]
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 Refinement of the TDAPA Eligibility Criteria
In the CY 2020 ESRD PPS proposed rule (84 FR 38337 through 38339),
we explained that based on feedback received during and after the CY
2019 ESRD PPS rulemaking, we were 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 final
rule, we received many comments from all sectors of the dialysis
industry and other stakeholders on our proposal in the CY 2019 ESRD PPS
rulemaking 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. We noted in the CY 2020
ESRD PPS proposed rule (84 FR 38338) that 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, we noted
that commenters also had specific policy recommendations for each
element of the drug designation process, including which drugs should
qualify for the TDAPA.
We also noted in the CY 2020 ESRD PPS proposed rule (84 FR 38338)
that in the CY 2019 ESRD PPS final rule (83 FR 56938) some commenters
recommended that CMS not apply the TDAPA to generic drugs or to
biosimilar biological products. These 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. We also noted that 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, we stated in the CY 2020 ESRD PPS proposed rule (84 FR
38338) that a drug manufacturer had commented on the CY 2019 TDAPA
proposal (83 FR 56938) 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). The drug manufacturer further
stated that 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. We noted that 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.
We further explained in the CY 2020 ESRD PPS proposed rule (84 FR
38338), that some commenters on the CY 2019 TDAPA proposal recommended
that CMS require that the new renal dialysis drug or biological product
have a clinical superiority over existing drugs in the ESRD PPS bundled
payment in order to be eligible for the TDAPA, and provided suggestions
on clinical value criteria. We stated that 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. We noted that a drug manufacturer
recommended that CMS consider when FDA may re-profile a drug and that
the commenter further explained that re-profiling a drug may occur when
its utility and efficacy are further elucidated or expanded once on-
market. We also noted that 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.
In the CY 2020 ESRD PPS proposed rule (84 FR 38338) we discussed
MedPAC's comment from the CY 2019 ESRD PPS final rule (83 FR 56936).
MedPAC had 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. 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.
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38338) that
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.
We also stated in the CY 2020 ESRD PPS proposed rule (84 FR 38338),
that 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 the CY 2020 ESRD PPS proposed rule (84 FR 38396 through
38400), and in section VIII.A of this final rule. We noted that 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 a new drug application (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\ We explained that
section 505 of the FD&C Act, which includes sections 505(b)(1) and
(b)(2) and 505(j) for generic drugs, includes FDA approval of NDAs for
drugs that have a new dosage form, a reformulation, or a re-engineering
of an existing product and that some of 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.
---------------------------------------------------------------------------
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38338) that
due to the feedback received following publication of the CY 2019 ESRD
PPS final rule, we had continued to analyze certain aspects of the
policies finalized
[[Page 60657]]
in the CY 2019 ESRD PPS final rule and therefore we were revisiting
those issues as part of that 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 were 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.
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38338) that
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.'' We noted that
while there are several parts of this definition, in the proposed rule
we focused 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 proposed 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).
We explained in the CY 2020 ESRD PPS proposed rule (84 FR 38338
through 38339) that section 505 of the FD&C Act and section 351 of the
PHS Act provide the 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).
We noted that 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 stated 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.
We explained that 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. We further explained
that 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.
We also explained that section 505(b)(2) of the FD&C Act is another
pathway for NDAs, where at least some of the information for an
approval 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 divided into categories by FDA.
We explained in the CY 2020 ESRD PPS proposed rule (84 FR 38339)
that the Office of Pharmaceutical Quality in FDA's Center for Drug
Evaluation and Research (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 codes 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.
We stated that the NDA Classification Codes are not necessarily
indicative of the extent of innovation or therapeutic value that a
particular drug represents. More information regarding the NDA
Classification Codes 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.
------------------------------------------------------------------------
We further explained in the CY 2020 ESRD PPS proposed rule (84 FR
38339) that 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. We noted that
ANDAs are used for generic drugs and rely on FDA's finding that the
previously approved drug product, that is, the reference listed drug,
is safe and effective.
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\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,'' as a
previously approved drug product. See 54 FR 28872 (July 10, 1989).
An exception to this general rule is that FDA may approve ANDAs with
certain changes from a listed drug regarding active ingredient,
dosage form, strength, and route of administration if a
``suitability petition'' has been approved under section
505(j)(2)(C) of the FD&C Act.
---------------------------------------------------------------------------
We stated that biological products are licensed by FDA under
section 351 of the PHS Act. Section 351(a) of the PHS Act is the
pathway for ``stand-alone BLAs'' that contain all information and data
necessary to demonstrate that (among other things) the proposed
[[Page 60658]]
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. We noted that FDA does not assign
classification codes for BLAs like it does for NDAs.
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38339) that
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
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. We noted that we believed 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38339 through 38340)
we explained that we analyzed the information we gathered since
publishing 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
stated that we believed this is accomplished by providing an add-on
payment adjustment 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 noted that the TDAPA provides additional
payment for costs associated with these changes.
We stated that in addition to supporting innovation, we were
mindful of the increase in Medicare expenditures associated with the
expanded TDAPA policy. We noted 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
noted that we were balancing an increase in Medicare expenditures with
the rationale for fostering a competitive marketplace. We noted that in
the CY 2019 ESRD PPS final rule (83 FR 56937), we stated our belief
that by expanding the eligibility for TDAPA 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.
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38340) that
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 were reconsidering
the eligibility criteria that we finalized effective January 1, 2020.
Since there are not unlimited Medicare resources, we stated that we
believed those resources should not be expended on additional payments
to ESRD facilities for drugs and biological products that are not truly
innovative, and that such additional payments may facilitate perverse
incentives for facilities to choose new products simply for financial
gain. We also noted that we believed that 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 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 acknowledged 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 acknowledged 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 acknowledged that while dialysis industry stakeholders
recommended that we adopt significant clinical improvement standards
for the TDAPA eligibility, we believed 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. We stated that we believed
that 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. We further noted that 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 we believed that
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.
Therefore, in the CY 2020 ESRD PPS proposed rule (84 FR 38341
through 38344) we discussed categories of drugs that we proposed to
exclude from eligibility for the TDAPA and our proposed revisions to
the drug designation process regulation in Sec. 413.234 to reflect
those categories.
We also proposed 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 (84 FR 38340). The FDA/CDER MAPP 5018.2 is available at FDA
website https://www.fda.gov/media/94381/download. We recognized 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 stated that we believed 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 noted that we believed 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
[[Page 60659]]
advance the treatment for ESRD beneficiaries at a lower cost.
We stated that 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. We proposed that if FDA makes
changes to the NDA Classification Codes in FDA/CDER MAPP 5018.2, 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 (84 FR 38340). We stated that 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 solicited
comment on the proposal to rely on, as a proxy, the NDA Classification
Codes, as it exists as of November 4, 2015, which is part of the FDA/
CDER MAPP 5018.2. We also solicited comments on the proposal that we
would assess FDA changes to the NDA Classification Codes 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.
We explained in the CY 2020 ESRD PPS proposed rule (84 FR 38340)
that 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. We stated that,
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,\3\ 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. We explained that if the FDA NDA Type assigned
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 noted
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.
---------------------------------------------------------------------------
We stated that, as discussed in the CY 2019 ESRD PPS final rule (83
FR 56932), once the information requested by CMS is 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. We noted that 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.
We also noted that for new renal dialysis drugs and biological
products that are not eligible for the TDAPA, we will issue a change
request that will provide notice that the drug is included in the ESRD
PPS base rate, qualifies as an outlier service, and is available for
use, to help ensure patients have access to the new product.
i. Proposed Exclusions From the TDAPA Eligibility
In the CY 2020 ESRD PPS proposed rule (84 FR 38341 through 38343),
using the current categories in FDA/CDER MAPP 5018.2 effective November
4, 2015, we proposed 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(b)(1)(ii) and 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 explained that we would
use the NDA Classification Codes Type identified at FDA approval. If
FDA changes the classification code Type after we start applying the
TDAPA with respect to a particular new renal dialysis drug, we would
re-evaluate TDAPA eligibility. We also proposed to exclude generic
drugs from being eligible for the TDAPA under Sec. 413.234(b)(1)(ii)
and Sec. 413.234(c)(1).
In the following paragraphs we provide our description from the CY
2020 ESRD PPS proposed rule of each NDA Type, also referred to as NDA
Classification Codes, and generic drugs that we proposed for exclusion
and give our justifications for proposing that 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
As we discussed in the CY 2020 ESRD PPS proposed rule (84 FR
38341), 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
proposed 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)(ii). In addition, we proposed to
exclude Type 9 NDAs, as discussed in the CY 2020 ESRD PPS proposed rule
(84 FR 38345), when the ``parent NDA'' is a Type 3 NDA.
We explained that 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).
We also explained 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.
We further stated that 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.
We noted that we believed that for purposes of the ESRD PPS, we do
not want to incentivize the use of one
[[Page 60660]]
dosage form of the drug over another. Even though the original product
may be innovative, we would not consider making that product into a new
dosage form to be innovative for purposes of the ESRD PPS. Although
these drugs may provide an expansion of patient treatment options, we
believed these changes are not innovative and these drugs should not be
paid for using the TDAPA. We stated these drugs are still accounted for
in the ESRD PPS base rate and would be eligible for an outlier payment.
We noted that this type of research, development and marketing activity
has been termed ``product hopping'' and can help manufacturers prolong
revenue streams.\4\ We stated that we did not believe these products
should be eligible for the TDAPA because we did not want to provide
perverse incentives for facilities to choose a new dosage form in order
to obtain the TDAPA. In addition, we did 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. We noted
that we believed that this practice was 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
proposed to exclude Type 3 NDA drugs from 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
As discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38345),
we proposed to exclude Type 5 NDA drugs, which can be a new formulation
or new manufacturer, from being eligible for the TDAPA. In addition, we
proposed to exclude Type 9 NDAs, when the ``parent NDA'' is a Type 5
NDA. We noted that drugs that are classified as a Type 5 NDA are
sometimes referred to as reformulations or follow-on products. We
explained that 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 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. We explained that
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. We also explained that 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. We explained that 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 proposed to exclude it from eligibility
for the TDAPA under Sec. 413.234(b)(1)(ii).
The fifth characteristic is that the product contains a different
strength of one or more active ingredients in a previously approved or
marketed combination. We explained that a Type 5 NDA would generally be
submitted by an applicant other than the holder of the approved
application for the approved product. We also explained that 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).
In the CY 2020 ESRD PPS proposed rule (84 FR 38342 through 38343)
we noted that some commenters have characterized the types of drugs
that are often approved in Type 5 NDAs as reformulations or line
extensions. We explained that 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\ We further explained that 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 drug manufacturer 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 final rule. We noted that line extensions were
few in number prior to 1984, when the Drug Price Competition and Patent
Term Restoration Act was passed
[[Page 60661]]
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 also noted that we
were 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\ We stated that 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\ SH Hong et al. Product Line Extensions and Pricing
Strategies of Brand-Name Drugs Facing Patent Expirations, J MCP.
2005, 11(9): 746-754.
\7\ AC Fowler, October 6, 2017, White Paper--Pharmaceutical Line
Extensions in the United States, http://www.nber.org/aging/valmed/WhitePaper-Fowler10.2017.pdf.
\8\ SH 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 explained that we did not believe 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. We noted that we believed that while Type 5 NDA drugs may
have clinical benefits to patients over previously approved products,
we did not make that assessment as part of ESRD PPS payment policy. We
stated that we did not believe the types of changes represented by Type
5 NDAs enhance our goal of increased competition with the overarching
goal of lowering drug prices. We noted that to the contrary, it seems
that a goal of line extensions can be to thwart competition. We also
noted that 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 explained that we did not
believe 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.
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\10\ SH Hong et al. Product Line Extensions and Pricing
Strategies of Brand-Name Drugs Facing Patent Expirations, J MCP.
2005, 11(9): 746-754.
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We noted that 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\ We also noted that 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 noted that we believed it was 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 stated that we did not believe Type 5 NDA drugs
should be eligible for the TDAPA, and we proposed to exclude them in
new Sec. 413.234(e).
---------------------------------------------------------------------------
\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.
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(c) Type 7 NDA--Previously Marketed but Without an Approved NDA
As discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38345),
we proposed 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 proposed to exclude Type 9 NDAs
when the ``parent NDA'' is a Type 7 NDA. We explained that 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 stated that we did not believe 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. We stated that we believed this drug was not
innovative and does not significantly advance the treatment options for
ESRD. We also noted that we believed that 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 is one of the
goals of the TDAPA. In addition, we stated that we believed 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 did not consider Type 7 NDA drugs to be eligible for the TDAPA.
(d) Type 8 NDA--Prescription to Over-the-Counter (OTC)
As discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38345),
we proposed 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 proposed to exclude Type 9 NDAs
when the ``parent NDA'' is a Type 8 NDA. We explained that 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. We further explained that 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.
We explained that 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.
We noted that if the
[[Page 60662]]
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 stated that we did not believe 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. We noted that we
believed that although certain innovative approaches may help increase
access to a broader selection of nonprescription drugs for ESRD
beneficiaries, we did not consider the transition from prescription to
OTC to be innovative for purposes of the TDAPA policy. We stated that
we believed making the TDAPA available for Type 8 NDAs may defeat the
intent of lowering overall costs for both the ESRD beneficiary and for
Medicare, and was not needed by the facilities to provide additional
support during an uptake period so they can be incorporated into the
business model. We noted that OTC 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, we stated that we believed the newness is a reflection of
accessibility to the general public without having to obtain a
prescription through a licensed practitioner. We noted that we believed
these drugs, though new to the market, are not sufficiently innovative
to qualify for TDAPA eligibility.
(e) Generic Drugs
We proposed 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 we discussed in the CY 2020 ESRD PPS proposed rule (84 FR
38337 through 38339), 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.
We explained that 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. In
general, an ANDA would not be appropriate 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.
We noted that, 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. We explained that 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 beneficiary. We
then noted that 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.
We discussed a June 2018 report that 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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We also discussed a June 2018 article, which noted that competition
has a limited impact on American health care, particularly when it
comes to expensive interventions like prescription drugs. The article
noted that 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. The article stated that when the first generic
finally entered the market, its list price was only slightly less at
539 percent above the original entrant. It stated that economists call
this ``sticky pricing'' and the article noted 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 stated that companies have
decided it is not in their interest to compete.\13\
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\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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We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38344) that
for purposes of the ESRD PPS, we believed 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. We noted that we believed that our
goal in supporting competition among drugs in the ESRD PPS functional
categories was to ultimately affect the launch price of new drugs. We
stated that we questioned whether including all new renal dialysis
drugs and biological products as eligible for the TDAPA would help us
meet that goal. We expressed that 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 proposed 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 4, or Type 5 in combination with Type 2, or Type 9
[[Page 60663]]
when the ``parent NDA'' is a Type 3, 5, 7 or 8.
We solicited 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 proposed to exclude should be included,
for example, within the NDA Type 3 (new dosage form) the inclusion of
IV to oral route of administration.
ii. Examples of New Renal Dialysis Drugs and Biological Products That
Would Remain Eligible for the TDAPA
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38344) that
under our proposal, any new renal dialysis drug or biological product
that we did not propose for exclusion, would continue to be eligible
for the TDAPA. In the CY 2020 ESRD PPS proposed rule (84 FR 38344
through 38346), we provided some examples of the types of renal
dialysis drugs and biological products that we believed would continue
to be eligible for the TDAPA under our proposal, using the descriptions
in the NDA Classification Codes referenced in the CY 2020 ESRD PPS
proposed rule (84 FR 38339 through 38341). We noted that under our
proposal, BLAs approved by FDA under section 351 of the PHS Act, which
include 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38344), we explained
that a Type 1 NDA refers to drugs containing an NME. We further
explained that 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 stated that we believed 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. We noted that unlike the drugs proposed to be excluded from
the TDAPA as described above, these drugs are generally not line
extensions of previously existing drugs. We stated that we believed
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
In the CY 2020 ESRD PPS proposed rule (84 FR 38344 through 38345),
we explained that a Type 2 NDA is for a drug product that contains a
new active ingredient, but not an NME. We further explained that a new
active ingredient includes those products whose active moiety has been
previously approved or 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 stated that we believed 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. We
noted that single enantiomer drugs can lead to fewer drug interactions
in the ESRD population, which already has a significant medication
burden.\14\ We stated that we believed 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 noted that we believed 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.
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\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.
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(c) Type 4 NDA--New Combination
In the CY 2020 ESRD PPS proposed rule (84 FR 38345), we explained
that a Type 4 NDA is a new drug-drug combination of two or more active
ingredients. We further explained that 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 proposed 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. We
stated that we believed that 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. We noted that
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\
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\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 noted that we believed 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 Type, 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38345), we explained
that 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 explained that a Type 9 NDA is
generally submitted as a separate NDA so as to be in
[[Page 60664]]
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
Type 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.
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\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.
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We stated that we believed that since Type 9 NDA is a new clinical
indication, this suggests that a drug manufacturer 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 noted that we believed renal dialysis drugs that are classified
as NDA Types 1, 2, and 4 are all innovative and therefore we proposed
that these drugs should continue be eligible for the TDAPA. We stated
that when the ``parent NDA'' is Type 1, 2, or 4, Type 9 NDA would be a
new indication of those innovative drugs. Therefore we expressed that
the 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 noted that we believed 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38345), we explained
that a 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. We further explained that 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 Type 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 stated that we believed renal dialysis drugs with the Type 10
NDAs 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
manufacturer is pioneering a new approach to provide better
pharmacologic care for vulnerable ESRD patients with complex medical
needs. We noted that we believed 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 stated that we believed
applying the TDAPA with respect to Type 10 NDA new renal dialysis drugs
will 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.
(f) FDA Approvals of BLAs Submitted Under Section 351 of the PHS Act
In the CY 2020 ESRD PPS proposed rule (84 FR 38346), we stated that
under our proposal, products that are licensed under section 351 of the
PHS Act, which occurs for biological products and biological products
that are biosimilar to, or interchangeable with, a reference biological
product, would continue to be eligible for the TDAPA.
We explained that 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.
We explained that 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).
We explained that 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 for ``interchangeability.'' To meet the
standards for ``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\
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\17\ https://www.fda.gov/drugs/therapeutic-biologics-applications-bla/biosimilars.
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We stated that CMS continues to support the development and the
utilization of these products that contain innovative technology for
the treatment of ESRD. We explained that the process for licensure of
biosimilar biological products is a different pathway than that for
generic drugs and has different requirements. We noted that we believed
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 are highly similar to the
reference biological product notwithstanding minor differences in
clinically inactive components; and there are no clinically meaningful
differences between the biosimilar biological product and the
biological reference product in terms of the safety, purity, and
potency of the product, CMS believes the technology used to develop the
products is sufficiently new and innovative to warrant TDAPA payment at
this time.
However, we noted that unlike NDAs submitted pursuant to sections
505(b)(1) or 505(b)(2) of the FD&C Act, we did not have a categorical
system to use as a proxy for assistance in determining which types of
applications would meet
[[Page 60665]]
the intent of the TDAPA policy. Therefore, we proposed to continue to
allow all biological products that are biosimilar to or interchangeable
with a reference biological product to remain eligible for the TDAPA
instead of proposing to exclude all of them.
In the CY 2020 ESRD PPS proposed rule (84 FR 38346), we noted that
we were aware that there are similar concerns about providing the TDAPA
for these products that there are with generic drugs. Specifically, we
explained that according to a recent report, increased drug class
competition for biosimilar biological products has not translated 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.\18\ We stated that we would
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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\18\ 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. Feb 18. https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2724390.
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With regard to new renal dialysis drugs and biological products
that fall within an existing ESRD PPS functional category, we stated
that we believed 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 stated that we planned 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 noted 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.
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38344), that
compared to the TDAPA policy finalized in the CY 2019 ESRD PPS final
rule, we believed 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 co-insurance. Specifically, we noted that under the
expanded policy finalized in the CY 2019 ESRD PPS final rule (83 FR
56932), effective January 1, 2020, the TDAPA would apply for all new
renal dialysis drugs and biological products. We stated that we
believed that since our 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
co-insurance for beneficiaries.
We stated that based on our past experience and our expectation of
detailed analysis of future drug product utilization, pricing and
payment, we anticipated proposing further refinements to the TDAPA
policy through notice and comment rulemaking in the future.
Commenters generally supported our proposal to refine the TDAPA
eligibility criteria to target more innovative drugs and biological
products. However, they had specific suggestions regarding changes to
the proposal. For example, commenters provided suggestions for renal
dialysis drugs and biological products that should be excluded
(biosimilar biological products), included (first ESRD new indication),
and other eligibility criteria (SCI).
The comments and our responses to the comments on our proposal to
rely on, as a proxy, the NDA Classification Codes, as well as the
proposal for updating the TDAPA exclusions when FDA makes changes to
the NDA Classification Codes, are set forth below.
Comment: MedPAC commended CMS for reconsidering the TDAPA
eligibility criteria and proposing a standard that is stricter than the
one the agency adopted in the CY 2019 ESRD PPS rulemaking. Several
commenters supported the use of the TDAPA for encouraging the adoption
of new and innovative renal dialysis products by ESRD facilities, and
encouraged us to finalize the proposal to exclude drugs for which the
NDA Types are for products that are not truly innovative. They
recommended that CMS describe when a drug or biological product is
considered to be truly innovative. If a product qualifies, it should
receive the TDAPA. One drug manufacturer specifically supported CMS's
proposal to use NDA Classification Codes to establish TDAPA
eligibility, and to maintain eligibility for drugs approved through NDA
Types 1, 2, 4, 9, and 10. One national dialysis association noted that
the NDA Classification Codes seem to be reasonable proxies for
exclusion of products from TDAPA that are technically ``new'' but not
necessarily truly innovative. Commenters who supported the use of the
NDA Classification Codes recognized that the codes could change and
understood we would consider potential revisions to the regulatory
language in that case.
However, one drug manufacturer noted that the NDA Classification
Codes are contained in an FDA MAPP that is not subject to public
notice, input, or comment, and that can be changed at any time by FDA
without providing notice to or seeking input from stakeholders or from
CMS. The manufacturer noted that the NDA Classification Codes are not
codified in any statutory or regulatory provision and were created
solely for FDA's administrative purposes, without any relevance to
assessments of innovativeness or therapeutic value.
A drug manufacturer did not support CMS' proposal to exclude
certain NDA Types from TDAPA eligibility. The company stated the FDA's
NDA Classification Codes are a blunt instrument and an inadequate
standard on which to judge innovativeness. In addition, the company
stated that the proposal pegs the use of NDA Classification Codes to
the version dated November 4, 2015 and makes no provision for an
updated future version of such codes.
Response: We appreciate the supportive comments regarding our TDAPA
proposal and specifically our proposed reliance on the FDA NDA
Classification Codes as a proxy. We also appreciate the supportive
comments about our proposal to analyze any changes that FDA makes to
the NDA Classification Codes when they are publicly available and
propose in the next ESRD PPS rulemaking cycle any necessary revisions
to the TDAPA exclusions.
Regarding the comments that FDA created the NDA Classification
Codes for administrative purposes and they should not be used to assess
innovativeness or therapeutic value, and the comment requesting that we
describe when a drug or biological product is considered to be truly
innovative, we believe FDA's NDA Classification Codes provide an
objective basis that we can use to distinguish innovative from
noninnovative renal dialysis drugs and
[[Page 60666]]
biological products. That is, using the NDA Classification Codes will
help us in our effort to support innovation by directing Medicare
resources to innovative renal dialysis drugs and biological products,
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.
We acknowledge that the NDA Classification Codes are not subject to
public notice, input, or comment, and can be changed at any time by FDA
without providing notice to or seeking input from stakeholders or from
CMS. As discussed in section II.B.1.b of the CY 2020 ESRD PPS proposed
rule, the Classification Codes assigned to an NDA generally describe
FDA's classification of the relationship of the drug to drugs already
marketed or approved in the U.S. As we discussed in the CY 2020 ESRD
PPS proposed rule, if FDA makes changes to the NDA Classification Codes
in FDA/CDER MAPP 5018.2, 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 any necessary language revisions to the exclusions set
forth in proposed Sec. 413.234(e) in the next rulemaking cycle.
Comment: Many commenters appreciated CMS addressing the concerns
raised by stakeholders regarding the all-inclusive approach to TDAPA
eligibility finalized in the CY 2019 ESRD PPS final rule. They stated
we should finalize the use of the FDA NDA Classification Codes as
proposed, with one modification. Specifically, if a product falls into
an excluded NDA Type, but obtains FDA approval for its first ESRD new
indication, regardless of its NDA designation, that product should be
eligible for TDAPA. These commenters stated that without such
modification, using the NDA Classification Codes has the significant
potential to exclude from TDAPA eligibility truly new and innovative
drugs for ESRD patients.
Some commenters noted that CMS recognizes in its discussion of the
Type 10 NDA that a new ESRD indication for a previously approved non-
ESRD drug advances the field and presents a new approach to provide
care for ESRD patients. The commenters stated that not all products for
which a manufacturer obtains a new ESRD indication will be approved
through a Type 10 NDA. For example, a product originally approved for a
non-ESRD indication through an excluded NDA Type, may have a first ESRD
new indication added through an NDA supplement to that NDA, thus
resulting in the new ESRD product being excluded from TDAPA
eligibility. The commenters asserted that the innovation and investment
by this manufacturer to obtain the first ESRD new indication is no less
than that of the manufacturer who submits a Type 10 NDA for a new
indication, but CMS's proposed criteria would exclude such a drug from
TDAPA eligibility. The commenters stated that, by definition, a first
ESRD new indication denotes that the product has not been approved for
this population previously and is consistent with CMS's intent to limit
the TDAPA to truly innovative products.
An ESRD facility and a national dialysis association expressed
concerns regarding CMS's proposal to exclude FDA NDA Type 5 and Type 7
from TDAPA eligibility. Regarding Type 5, they believe that new drug
formulations may offer specific benefits to patients. For example, they
stated that if phosphate binders currently marketed in tablet form were
to become available in a topical form, it might offer benefits like
decreased satiety and decreased pill burden, which could lead to
improved compliance with the medications and increased protein intake,
which has been associated with better outcomes for patients with ESRD
treated by maintenance dialysis. Regarding Type 7, commenters agreed
with CMS that if a drug is being used by an ESRD facility, there is no
need for additional payment in the form of TDAPA. However, they believe
there should be a requirement to verify that use before CMS concludes
that the drug is not eligible.
A few commenters noted that the proposed exclusions would remove
from TDAPA eligibility important therapeutic advances that may happen
to be new formulations, new indications, and new dosage forms, which
can make it easier for the patient to adhere to prescribed therapy and
offer significant value in increased quality of life. Commenters noted
that the proposal would exclude, for example, a drug that receives a
new ESRD indication or is a reformulation that results in a patient
needing only one, rather than several doses a day, requiring the
patient to be awoken multiple times during the night. They stated that
to exclude such new drugs and biological products from TDAPA
eligibility could erect barriers to patient use and chill new research
into the entire category of ESRD medicine, and would be a great
disservice to patients, providers, and the Medicare program, as it
would inhibit the ability of physicians and ESRD facilities to
incorporate these innovative new therapies into the care of and
treatment protocols for their patients with ESRD. In contrast, one non-
profit provider association expressed support for CMS's proposal to
exclude line extensions from TDAPA eligibility.
One drug manufacturer stated the proposed approach imposes a
framework that would categorically exclude many types of innovative new
drugs from TDAPA eligibility. For example, the manufacturer stated that
a new drug potentially may be assigned a Type 3 or Type 5 NDA by FDA,
even if FDA reviews and approves the product under an original NDA
through the 505(b)(1) pathway, and even if the drug reflects innovative
characteristics and facilitates important benefits, such as improving
patient outcomes through safety or efficacy advantages, reducing
harmful complications, or providing patients (including specific
subpopulations of patients) with new treatment options and/or new
access options. The drug manufacturer stated that our proposed approach
would impair providers' ability to evaluate and incorporate these
important types of innovative new medicines into their practice, and
would have detrimental access implications for patients. As such, it
would undermine the goals that CMS seeks to achieve through TDAPA with
respect to facilitating innovation, competition, and the ability of
ESRD facilities to test and accommodate new therapies in their care
plans. The drug manufacturer strongly encouraged CMS to modify the
proposed criteria to allow for TDAPA eligibility for Type 3 and Type 5
NDAs, noting that new dosage forms and new formulations (among other
differences), particularly for IV and injectable products, reflect
significant innovation and lead to new access options and treatment
flexibility for patients.
One drug manufacturer urged CMS to adopt the modification that a
Type 5 drug should be eligible for TDAPA if it contains a previously
approved active moiety and obtains approval for an ESRD-related
indication for which the active moiety was not previously approved. The
drug manufacturer asserted that, to achieve a new indication, a
manufacturer will be required to invest the same resources and perform
the same research and development, whether the new indication is
approved through a Type 10 NDA or a different pathway, such as a
supplement to the original NDA.
The commenter noted that there are a myriad of considerations that
go into any particular drug's FDA approval
[[Page 60667]]
pathway. Because the reasoning to include ``Type 5'' for a new
indication is similar to that for including Type 10 NDA, the commenter
strongly urged CMS to also include Type 5 new indication. The commenter
stated that providing TDAPA eligibility when a drug containing a
previously approved active moiety is approved for an ESRD indication
for which such active moiety was not previously approved--regardless of
NDA type--would also encourage manufacturers to pursue development
strategies that capitalize on the benefits of expanding uses for
current treatments into new indications in the ESRD space. The drug
manufacturer urged CMS to recognize that a previously approved drug
product that later becomes approved for an ESRD indication should be
eligible for TDAPA.
Response: We thank commenters for the helpful comments and
suggestions. With regard to the suggestions that we allow new renal
dialysis drugs and biological products that have a new indication for
``ESRD'' or ``ESRD-related'' conditions to be eligible for the TDAPA,
we understand this to mean that the drug was not previously indicated
for a condition or conditions associated with ESRD, but after clinical
trials, the drug has been proven to be safe and efficacious for the
treatment or management of a condition or conditions associated with
ESRD, and the drug falls within an ESRD PPS functional category.
At this time, we do not believe that making a first ESRD new
indication for a Type 5 NDA drug eligible for the TDAPA is consistent
with CMS's intent to limit the TDAPA to truly innovative products. We
believe that while Type 5 NDA drugs may have clinical benefits to
patients over previously approved products, we did not make that
assessment as part of ESRD PPS payment policy because these are drugs
that are currently on the market but may have been reformulated or may
be line-extensions. 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. As we stated in section II.B.1.c.i.(b) of the CY
2020 ESRD PPS proposed rule (84 FR 38342), 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. We believe making Type 5 NDA drugs
eligible for the TDAPA, even for the first ESRD new indication, may
cause more attention to 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. In addition, this could cause
an influx of non-innovative drugs to the dialysis space, potentially
crowding out innovative drugs. For these reasons, we continue to
believe that providing the TDAPA to ESRD facilities to support the
uptake of a drug reflected in an ESRD PPS functional category that may
be a line extension or reformulation in their business model is not a
judicious use of Medicare resources.
In response to the commenter suggesting that Type 5 NDA drug
products are the same as Type 10 NDA drug products, we believe that
they are distinct in that Type 5 NDAs are reformulations or line
extensions that are not truly innovative and Type 10 NDA drug products
are not. As we discussed in the CY 2020 ESRD PPS proposed rule in
section II.B.1.c.ii.(e) (84 FR 38345), we believed that Type 10 NDA
drug products are sufficiently innovative because a new indication for
a previously submitted drug that is applicable to renal dialysis
advances the field and suggests the drug manufacturer is pioneering a
new approach to provide better pharmacologic care for vulnerable ESRD
patients with complex medical needs. We noted that we believed 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 stated that we believed applying the TDAPA with respect to
Type 10 NDA new renal dialysis drugs will 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.
In addition, as we stated in the CY 2020 ESRD PPS proposed rule (84
FR 38340), we believe FDA's NDA Classification Codes provide an
objective basis that we can use to distinguish innovative from
noninnovative renal dialysis service drugs. We believe that
distinguishing drugs in this categorical manner helps 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. We also
believe that including some characteristics of an NDA Type without
including others undermines the objective basis of the use of this
system as a proxy to determine if a new renal dialysis drug or
biological product is innovative for the purposes of the TDAPA.
The NDA Classification Code Type 7 is a drug that has been
previously marketed but without an approved NDA. With regard to the
suggestion that we verify ESRD facility use of a Type 7 drug before
deciding that the drug is ineligible for the TDAPA, we do not believe
the characteristics of Type 7 would advance the intent of the TDAPA
policy because these drugs are already on the market and may already be
in use in the ESRD facilities. Thus, providing the TDAPA for Type 7 NDA
drugs would not assist the facilities in their uptake for their
business model.
With regard to the comment about a drug currently marketed in
tablet form that becomes available in a topical form, we believe the
commenter is actually referring to Type 3 NDA, which is an NDA
Classification Code that we are excluding from the TDAPA. Regarding the
comments about excluding line extensions such as new formulations (Type
5) and new dosage forms (Type 3), we do not believe these drugs are
sufficiently innovative to warrant TDAPA eligibility and we do not want
to provide perverse incentives for ESRD facilities to choose a new
dosage form in order to obtain the TDAPA. Although these drugs may
provide an expansion of patient treatment options, we continue to
believe that these changes are not innovative and should not be
eligible for the TDAPA for new renal dialysis drugs and biological
products in existing functional categories.
Regarding the comments about erecting barriers to patient use,
chilling new research into ESRD medicine, and inhibiting the ability of
physicians and ESRD facilities to incorporate these innovative new
therapies into treatment protocols for their ESRD patients, we note
that beneficiaries have access to all FDA-approved drugs and biological
products for renal dialysis services, regardless of whether the ESRD
facility receives TDAPA or not. The TDAPA eligibility does not prevent
patient access to any renal dialysis services. ESRD patients currently
have, and will
[[Page 60668]]
continue to have access to all FDA-approved renal dialysis drugs and
biological products. Our policy would not prevent a physician from
determining that the new Type 3 drug facilitates additional benefits.
Such benefits could include improving patient outcomes through safety
or efficacy advantages, reducing harmful complications, or providing
patients with new treatment options over and above what is currently
available. Then, the physician could include the drug in a patient's
plan of care for the ESRD facility to furnish to that patient. We note
that because Type 3 drugs would not eligible for the TDAPA, there would
be no additional co-insurance for the beneficiary. We continue to
believe that the TDAPA for renal dialysis drugs and biological products
that fall within an ESRD PPS functional category should be applied only
to truly innovative drugs and biological products. We thank and agree
with the non-profit provider association that expressed support for our
proposal to exclude line extensions from TDAPA eligibility.
After careful consideration of the comments, we are finalizing our
proposal to exclude certain NDA types from TDAPA eligibility. That is,
we are finalizing to exclude 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.
Comment: A physician association expressed support for the proposal
to revise the TDAPA eligibility criteria but stated it is critical for
CMS to support and specifically focus on innovations that also pertain
to the pediatric space. The association noted that new products and
therapies that come to market are not always tested in the pediatric
population, and policies must be put in place to change this moving
forward. The association emphasized that children and adolescents are
not simply ``little adults.'' Rather, they have a unique physiology
characterized by maturing organ function, body metabolism, and body
distribution characteristics distinct from what adults manifest. Due to
these differences, the association noted, the safety and efficacy data
developed for adults and only studied in adults may not be appropriate
for pediatric patients. The association recognized that the small
number of pediatric patients complicates conducting safety, efficacy,
or interventional trials in children, but noted this data is crucial to
allow children to also benefit from innovation.
Response: We thank the physician association for its support for
the refinement of TDAPA eligibility and for its comments regarding the
pediatric dialysis population. We recognize that the pediatric dialysis
population has unique needs and that those needs must be closely
examined. Our data analysis contractor will be holding a Technical
Expert Panel meeting in December 2019 and intends to facilitate
discussions on the topic of pediatric dialysis.
Comment: Some commenters strongly encouraged CMS and FDA to work
together to: (i) Provide greater transparency into the NDA Type
decision; and (ii) develop a process for manufacturer involvement in
that decision. A commenter also suggested that a formal process be
adopted to request and appeal NDA Type classification decisions.
Response: We have been conferring with FDA regarding new and
innovative renal dialysis products, and intend continue to work with
FDA in the future to discuss NDA Types as they pertain to new renal
dialysis drugs and biological products. It is our understanding that
FDA will meet with drug manufacturers for discussions regarding the NDA
Types that may be considered for their applications.
Comment: MedPAC, a professional association and 2 pharmaceutical
companies commented that they disagreed with and did not support the
proposal to use the NDA Classification Codes to determine TDAPA
eligibility for new renal dialysis drugs, arguing that this is not an
appropriate or well-suited proxy for determining TDAPA eligibility.
They stated that they did not support CMS's proposed approach to judge
the innovativeness of drugs. MedPAC commented that an SCI standard
would be the best way to ensure taxpayer and beneficiary dollars are
spent to improve patient care or outcomes. MedPAC noted that using a
clinical improvement standard for the TDAPA policy would be consistent
with: (1) Medicare's payment for certain new technologies under the
outpatient PPS (OPPS) and inpatient PPS (IPPS); and (2) CMS's proposal
to apply the IPPS SCI standard (specified in Sec. 412.87(b)(1)) to the
add-on payment for new ESRD equipment and supplies.
MedPAC asserted that to protect the well-being of beneficiaries and
ensure good value for the Medicare program and taxpayers, Medicare
should not pay more for drug or biological products that have not yet
been proven to provide better outcomes for beneficiaries. Therefore,
MedPAC noted, a new drug or biological product should not qualify for
the TDAPA if there is no evidence that it is an improvement relative to
existing care. Similarly, a large dialysis organization (LDO) requested
a patient-centered approach to TDAPA eligibility with clear evidence of
an improvement in one or more patient-centered outcomes. The LDO
suggested that CMS could structure a TDAPA clinical improvement
standard similar to the standard that the agency uses to pay for new
technologies under the IPPS (specified in Sec. 412.87(b)(1)).
MedPAC stated that CMS's approach relies on FDA approval pathways
using a standard that is less stringent than a clinical improvement
standard for all drugs and biological products that fit into an ESRD
functional category, and should not be used, because on its own does
not necessarily reflect improvements in outcomes nor the
appropriateness of increased payment for Medicare beneficiaries. The
Commission also asserted that the Medicare program, not FDA, should
adjudicate spending determinations based on the specific needs of the
Medicare population. MedPAC stated that the evaluation of the evidence
of whether a new drug or biological product improves Medicare
beneficiaries' outcomes should rest with CMS. One non-profit provider
association and an LDO suggested the proposed policy could go further
by also addressing whether new drugs for renal care represent an SCI,
and that the proposed policy stands in contrast to the more robust
policy that CMS proposed for new equipment and supplies based on the
Medicare IPPS new technology add-on payment. These commenters stated
that while it is expected that some drugs with a new molecular entity
or new active ingredient will represent an SCI, not all will. They
urged CMS to also consider whether a new drug or biological product
addresses the needs of a patient population unresponsive to, or
ineligible for, currently available treatments, or significantly
improves clinical outcomes for a patient population compared to
currently available treatments. They maintained that CMS' TDAPA policy
should spur innovation by targeting products that do more than offer
minor, if any, clinical improvement. For example, a drug that
significantly improves compliance because it is not accompanied by
complications such as gastrointestinal effects, which can deter patient
compliance, might warrant eligibility for TDAPA and higher payment. The
commenters suggested that CMS should consider refining TDAPA
eligibility based on its own assessment of a product's clinical
significance, similar to its proposed approach for the TPNIES.
[[Page 60669]]
One drug manufacturer commented that relying on NDA Classification
Codes for TDAPA eligibility would significantly discourage investment
in the ESRD space. The manufacturer argued that the proposed changes
would create a rigid and narrow set of criteria for TDAPA eligibility
that would significantly limit the chances for new products to qualify
for the opportunity to be evaluated and incorporated into ESRD care
plans. The manufacturer expressed concern that innovators will be
discouraged from investing time and resources in ESRD research,
development, and innovation, because product uptake potential will be
uncertain and unlikely. That, in turn, would also result in reduced
competition, to the further detriment of ESRD stakeholders and the
Medicare program, according to the commenter.
Response: We appreciate the thoughtful and insightful comments from
MedPAC and other commenters. With regard to MedPAC not supporting our
proposed approach to judge the innovativeness of drugs, and noting that
an SCI standard is the best way to ensure taxpayer and beneficiary
dollars are spent to improve patient care or outcomes, we respectfully
disagree.
We believe that using the NDA Classification Codes will help us to
objectively distinguish drugs that would assist our efforts to support
innovation by directing Medicare resources to those new renal dialysis
drugs and biological products. We also believe that our proposed
approach would promote 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. Additionally, our
proposed approach would promote our goal of providing a transition
period for the unique circumstances experienced by ESRD facilities and
to allow uptake of the new product. 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 proposed to narrow the types of new renal
dialysis drugs and biological products within the ESRD PPS functional
groups that are eligible for TDAPA, effective January 1, 2020. To do
so, we proposed to extend TDAPA eligibility to those renal dialysis
products that are new and innovative, not just new, based on the FDA's
NDA Classification Code used for investigational product review. As
detailed in the CY 2020 ESRD PPS proposed rule, we believe that the NDA
classifications that we are excluding, which includes Type 3 (new
dosage forms) are not innovative.
With regard to having an SCI standard, as we discuss in section
II.B.1.c of this final rule, we continue to believe that unlike many
Medicare beneficiaries, the Medicare ESRD beneficiary is significantly
complex, with each patient having a unique and challenging profile, due
to a variety of causes, including biochemical differences, genetics
and/or co-morbidities, all of which factor into the 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, with other co-morbidities,
and with what is age-appropriate. Further, unlike the SCI criteria for
the TPNIES, where biochemical differences in patients rarely have an
impact, 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 predisposition and comorbidities. Each
patient's unique medical profile must be assessed by the patient's
physician in determining the plan of care, and we believe that, rather
than being too rigid and limiting investment in new therapies, using
the NDA Classification Codes for purposes of determining TDAPA
eligibility will help promote innovative therapies for the ESRD patient
on dialysis and support ESRD facility uptake.
Comment: One drug manufacturer stated CMS should be cautious in
taking any steps to judge the innovativeness of new renal dialysis
drugs. Beyond the specific proposals to narrow the TDAPA eligibility,
the company questioned whether CMS should be judging which drugs are or
are not innovative. The company acknowledged CMS' desire to provide an
objective basis to distinguish innovative from non-innovative renal
dialysis service drugs, but asserted that it could be outside our
authority to judge innovativeness of new drugs, regardless of the
standard employed. Such a step could contravene section 1801 of the
Act, which prohibits the Medicare program from interfering in the
practice of medicine. The commenter states that the choice of
prescribing any drug, including a new ESRD drug, should be between a
patient and his or her doctor. As an example, they noted the Part D
program has exhibited continuously high beneficiary satisfaction and
costs below estimates, but has explicit prohibitions on government
involvement in setting any kind of formulary.
Response: We appreciate this comment and believe that in using the
FDA NDA Classification Codes, we are not interfering in the practice of
medicine. We are not dictating what drugs may or may not be used on
what patients. Rather, all FDA-approved renal dialysis drugs and
biological products are accessible to all ESRD patients for the
treatment of ESRD. As noted previously, we believe FDA's NDA
Classification Codes would provide an objective basis that we can use
to distinguish innovative from noninnovative renal dialysis service
drugs for eligibility for the TDAPA for renal dialysis drugs that are
included in functional categories. Unlike Part D, we are not setting a
formulary, and we do not prohibit accessibility of any FDA-approved
drug that is indicated for an ESRD patient for renal dialysis services.
What we are limiting is eligibility for the TDAPA for new renal
dialysis drugs and biological products in existing ESRD PPS functional
categories to truly innovative products. We continue to believe that
practitioners and their patients should make treatment decisions
collaboratively.
Comment: We received comments from 2 pharmaceutical companies and a
few individuals regarding the exclusion of specific products from TDAPA
eligibility and the more restrictive eligibility of new renal dialysis
drugs and biological products in the CY 2020 ESRD PPS proposed rule
from what was finalized in the CY 2019 ESRD PPS final rule, which
included all new renal dialysis drugs and biological products. A
professional association, a drug manufacturer, a physician and an
individual commenter urged CMS not to finalize the proposed changes to
the TDAPA eligibility criteria under the CY 2020 ESRD PPS proposed
rule, and to instead maintain the CY 2019 ESRD PPS final rule's
expanded eligibility criteria for TDAPA, with an effective date of
January 1, 2020. They stated that under our current proposal the TDAPA
eligibility criteria would be too narrowed, resulting in ESRD
facilities not having the opportunity to incorporate the many new and
innovative drugs into their care plans and to make appropriate changes
in their businesses to adopt such products.
They also commented that, compared to the TDAPA eligibility
criteria finalized under the CY 2019 ESRD PPS
[[Page 60670]]
final rule, the CY 2020 ESRD proposed rule has significant differences
that affect what the stakeholders have been expecting, planning,
relying upon and preparing for since the November 2018 publication of
the CY 2019 ESRD PPS final rule. The commenter noted that those
provisions currently are scheduled to take effect on January 1, 2020
and asserted that changing the TDAPA eligibility criteria would provide
stakeholders with very little time between issuance of a final rule and
the proposed effective date to plan for or adapt to any changes. The
commenters stated that implementing such a significant change so
quickly would be imprudent and unfair to ESRD stakeholders.
One drug manufacturer commented that NDA approval pathways, rather
than NDA Classification Codes, are the clearest method for making TDAPA
eligibility determinations for new renal dialysis drugs. The same drug
manufacturer noted that for drug products, approval through FDA's
statutory 505(b)(1) NDA pathway reflects a rigorous process used for
new and novel drugs, and requires substantial clinical data and robust
review. As such, drugs approved under the 505(b)(1) NDA pathway should
be eligible for TDAPA. The drug manufacturer opined that this is a
clear standard anchored in statute and not subject to changes based in
internal FDA policies and procedures created for administrative
purposes.
In addition, the drug manufacturer noted that eligibility on the
basis of NDA approval pathway allows clarity for stakeholders and
reflects an appropriate balance between the goals CMS has articulated
in the CY 2020 ESRD PPS proposed rule with respect to incentives for
innovation and concerns regarding costs. The drug manufacturer
suggested that CMS should maintain the TDAPA eligibility criteria
finalized under the CY 2019 ESRD PPS final rule, which would apply the
TDAPA to all new renal dialysis drugs or biological products approved
under section 505 of the Federal Food, Drug, and Cosmetic Act or
section 351 of the PHS Act, effective January 1, 2020. The drug
manufacturer explained that basing the TDAPA eligibility criteria on
NDA approval pathway also would be consistent with CMS regulations and
policies in other contexts that refer to NDA approval pathways. For
example, the Medicaid program has definitions for innovator drugs that
focus on NDA approval pathways, and the CMS HCPCS Level II coding
process involves considerations of FDA approval pathways (as well as
certain FDA Orange Book designations), among other criteria. The
commenter further noted that, if CMS does move forward with the
proposed modifications, the changes should not go into effect until
January 1, 2021. The commenter urged CMS to re-evaluate and revise both
the substance of the proposed TDAPA eligibility changes, as well as the
proposed effective date for any changes that may be finalized.
Response: Thank you for these comments. As discussed in the CY 2020
ESRD PPS proposed rule, we re-evaluated the expanded TDAPA policy in
the CY 2019 ESRD PPS final rule based on numerous calls,
correspondence, meetings and comments, requesting we narrow TDAPA
eligibility, as well as based on our overall policy goals for the TDAPA
and the financial impact of those broad-reaching goals. As the TDAPA
eligibility policy finalized in the CY 2019 ESRD PPS final rule had not
been implemented yet, and as we evaluated our goal to support
innovation and promote competition, while simultaneously being prudent
with regard to Medicare spending, we weighed all aspects of the current
and future risks in these areas and carefully made a decision to
propose to narrow the CY 2019 ESRD PPS TDAPA eligibility policy in the
most objective way possible. As noted previously, we are finalizing
this proposal effective January 1, 2020. We do not believe postponing
the implementation of this new policy to January 1, 2021 is necessary
and we believe doing so would be operationally challenging.
With regard to using the FDA approval pathways to determine
innovation, we found the use of only the 505(b)(1) pathway to be too
narrow and the 505(b)(2) pathway to be too broad. The commenter
mentioned using Medicaid's definition of innovator drugs, but that
definition includes line extensions and generic drugs and we do not
believe those drugs and biological products to be truly innovative for
purposes of our TDAPA policy.
Comment: One commenter requested that CMS review every new FDA
approved drug for dialysis.
Response: To date, only one type of renal dialysis drug
(calcimimetics) has been eligible for the TDAPA. We anticipate that
additional renal dialysis drugs and biological products will become
eligible in the future and are exploring the potential use of
application forms requesting specific information. Consistent with our
current policy, we will review all requests submitted for the TDAPA.
We do not agree with the commenter that we should review every new
FDA approved drug for dialysis. We believe that it is appropriate for
us to use the process that we discussed in the CY 2016 ESRD PPS final
rule and on the CMS website \19\ whereby after FDA approves drugs and
biological products for use in ESRD patients, the products then go
through a process to establish a billing code, that is, the HCPCS code
process. When the HCPCS application is submitted and the drug
manufacturer notifies us of its interest in eligibility for the TDAPA
we then analyze the information in the FDA-approved labeling and the
HCPCS application information, including studies submitted as part of
these two standardized processes. This process provides an approach
that facilitates a dialogue between the interested stakeholder and CMS
creating a more robust forum for the evaluation of the eligibility for
the drug or biological product for the TDAPA under the ESRD PPS.
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\19\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug.html.
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Comment: One national dialysis association stated that CMS should
remain open to future refinements of the TDAPA eligibility
requirements, including the ability to make exceptions to these rules
if a drug would be of significant clinical value for the treatment of
ESRD. They asserted that the excluded NDA Classification Codes are a
good place to start, but CMS should ensure that this policy is adjusted
or that exceptions are granted, as needed.
Response: We appreciate the support and noted in our CY 2020 ESRD
PPS proposed rule (84 FR 38346) that we would remain open to future
refinements of the TDAPA eligibility requirements. Specifically, we
said that 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.
We received several comments from stakeholders specifically
supporting the exclusion of generic drugs. The comments and our
responses to the comments on our proposal to exclude generic drugs are
set forth below.
Comment: Some commenters supported our proposal to exclude drugs
approved by FDA under section 505(j) of the FD&C and drugs for which
the NDA types are for products that are not truly innovative. MedPAC
and several
[[Page 60671]]
other commenters supported the exclusion of generic drugs from TDAPA
eligibility. However, they also stated CMS should exclude biosimilar
biological products because they would be neither new nor innovative.
MedPAC questioned our proposal that 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, even though we acknowledged that these
products may not be innovative. MedPAC asserted that CMS should not pay
more for a new technology without evidence that it improves outcomes
for Medicare beneficiaries. One non-profit provider association
recommended CMS revisit its assumptions and conclusions about
biosimilar biological products in future rulemaking with the benefit of
more experience.
Response: We thank commenters for the support regarding the
exclusion of generic drugs reflected in ESRD PPS functional categories
from eligibility for the TDAPA. CMS continues to support the
development and the utilization of these products that contain
innovative technology for the treatment of ESRD. As we discussed in the
CY 2020 ESRD PPS proposed rule, 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 finalizing our proposal 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.
However, as noted in the CY 2020 ESRD PPS proposed rule, we are
aware that there are similar concerns about providing the TDAPA for
these products that there are with generics, that 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 with the increases borne solely by
Medicare. Therefore, we will monitor future costs of biosimilar
biological products as they pertain to renal dialysis, the TDAPA, and
the ESRD PPS, and we may revisit the recommendation to exclude
biosimilar biological products from TDAPA eligibility in future
rulemaking.
Comment: A few commenters asked about TDAPA eligibility for
specific products and their placement in the ESRD PPS functional
categories, and requested that CMS permit eligibility for the TDAPA for
drugs within functional categories with a different mechanism of
action. One commenter requested that CMS support FDA Breakthrough
Therapy Designation products.
Response: Currently, we have established a TDAPA request process
which is available on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug.html. We anticipate establishing a more formal application process
in the future as more new renal dialysis drugs and biological products
become available. With regard to TDAPA eligibility for specific
products, we would need to review the submitted TDAPA request to make
that determination. We intend to provide further information regarding
a TDAPA application process in the future.
Regarding the comment about FDA Breakthrough Therapy Designation
products, this refers to a drug that is intended alone or in
combination with one or more other drugs to treat a serious or life-
threatening disease or condition and has preliminary clinical evidence
indicating that the drug may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints,
such as substantial treatment effects observed early in clinical
development. If a drug is granted Breakthrough Therapy Designation by
FDA, FDA will expedite the development and review of such a drug. The
FDA does not announce when a drug has been granted Breakthrough Therapy
Designation. It does not disclose information regarding sponsors who
submitted requests for or who have been granted or denied Breakthrough
Therapy Designation. Breakthrough Therapy Designation requests are
typically submitted to an Investigational New Drug (IND), and the FDA
cannot disclose the existence of an IND, or any submissions that have
been submitted to the IND, unless it has previously been publicly
disclosed or acknowledged per 21 CFR 312.130(a). The restrictions
discussed previously create an issue for determining TDAPA eligibility
since this information is not publicly available. To the extent a new
renal dialysis drug or biological product is designated as a
Breakthrough Therapy and otherwise meets the eligibility criteria for
the TDAPA, it would be eligible for the add-on payment adjustment.
Comment: Numerous stakeholders requested that CMS increase the ESRD
PPS base rate following any one of the following scenarios: At the end
of the TDAPA eligibility period; when a new drug is added to the ESRD
PPS functional category; or, when a new product emerges within a
functional category or composite rate that is of high clinical value to
patients and is utilized by a significant number of beneficiaries with
ESRD where there are simply not sufficient funds allocated within the
ESRD PPS to cover the cost of the new drug. Counter to this, MedPAC
asserted CMS should not make duplicative payments for a new product
assigned to a functional category by providing the TDAPA for 2 years in
addition to paying for its functional category under the ESRD PPS base
rate. For example, MedPAC stated, the agency could reduce the TDAPA
amount to reflect the amount already included in the ESRD PPS base
rate. MedPAC noted that CMS should consider paying a reduced percentage
of the estimated incremental cost of the new drug as a way to share
risk with dialysis providers and provide some disincentive for the
establishment of high launch prices. MedPAC pointed out that CMS
proposed a similar approach for the TPNIES. Some commenters suggested
that CMS should apply funds not expended under the narrower TDAPA
eligibility policy to make ESRD PPS adjustments when it adds new
products to the ESRD PPS base rate. These commenters recommended that
CMS establish a payment adjustment that equals the incremental
difference between any amounts associated with the functional category
currently in the base rate attributable to the new product's cost,
which may result in CMS adding the product's full cost if the ESRD PPS
base rate does not include any such reimbursement or a lesser amount
that reflects current dollars in the ESRD PPS base rate.
Another commenter advocated that CMS create a non-budget neutral
methodology to incorporate novel or improved technologies, including
drugs and devices that will better the lives of
[[Page 60672]]
patients with kidney failure, into the ESRD PPS bundled payment and
that future novel products or technologies for treating patients with
kidney failure will require different reimbursement pathways than the
PPS. This commenter stated there needs to be new money for innovative
drugs and devices, and that a bundled payment works for drugs, devices,
and care strategies that are used by the vast majority of patients at
similar doses or that are inexpensive enough to be affordable within a
highly capitated payment model. However, the commenter does not believe
that a bundled payment works for drugs, devices, and care strategies
that are both expensive and used by a minority of patients treated
within the capitated payment model, particularly when the total number
of patients within each payment unit are sufficiently small that one or
2 high utilizers will make a marked difference in margins.
Response: We appreciate the comments and suggestions of MedPAC and
the many commenters regarding increasing the base rate in several
scenarios, including making any additions to it in a non-budget neutral
manner; reconciling the TDAPA with either what is already in the ESRD
PPS base rate or with what is in each ESRD PPS functional category;
making separate, non-PPS reimbursement pathways for new and innovative
drugs, and fund-shifting from ``would have been'' expenditures under
the TDAPA eligibility criteria finalized in the CY 2019 ESRD PPS final
rule to adding those dollars to the base rate. As described previously,
the comments ranged widely from adding the cost of all new renal
dialysis drugs to the ESRD PPS base rate to only adding the difference
to what is currently in the base rate, to still more fiscally
conservative suggestions of netting out TDAPA expenditures with what is
already in the base rate.
As we stated in the CY 2016 ESRD PPS final rule (80 FR 69016), we
believe we have the authority to add new renal dialysis services to the
bundle under both sections 1881(b)(14)(B) of the Act and 217(c)(2) of
PAMA. First, we read section 1881(b)(14)(B)(iii) of the Act as
requiring the inclusion of a specific category of drugs in the bundle--
that is, drugs and biologicals, including those with only an oral form,
furnished to individuals for the treatment of ESRD and for which
separate payment was made prior to January 1, 2011. We also read
section 1881(b)(14)(B)(iv) of the Act as specifying a different
category of items that must be included in the bundle--that is, items
and services, which includes drugs and biologicals, not specified by
sections 1881(b)(14)(B)(i), (ii), or (iii) of the Act. Second, we read
the language of section 217(c)(2) of PAMA--``the Secretary of Health
and Human Services . . . shall establish a process for . . . including
new injectable and intravenous products into the bundled payment
system''-- to require us to both define and implement a drug
designation process for including new injectable and IV products into
the ESRD PPS bundled payment.
As we stated in the CY 2019 ESRD PPS final rule (84 FR 56935), we
do 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 so would be
in conflict with the fundamental principles of a PPS. Under a PPS,
Medicare makes payments based on a predetermined, fixed amount that
reflects the average patient, and the facility retains the profit or
suffers a loss resulting from the difference between the payment rate
and the facility's cost, which creates an incentive for cost control.
It is not the intent of a PPS to add dollars to the base rate whenever
something new is made available. Additionally, the statute does not
require that we add dollars to the ESRD PPS base rate when a new item
is available. As we explained in that rule, the intent of the TDAPA for
new renal dialysis drugs and biological products that fall within an
ESRD PPS functional category is to provide a transition period for the
unique circumstances experienced by ESRD facilities and to allow time
for the uptake of the new drug.
Through the legal levers available to us, we strive to not only
support innovation and competition for new renal dialysis drugs and
biological products that fall within an ESRD PPS functional category,
but also to align resource use with payment, while simultaneously
balancing that payment with prudent spending of Medicare dollars.
Medicare spending on prescription drugs continues to grow at rates far
in excess of inflation, which poses challenges for both CMS and for
providers seeking to give patients innovative therapies that can
improve health outcomes and quality of life but at a cost that both
patients and providers can afford.
Comment: One LDO requested that the drug designation process be
patient centered and not increase patient expense for a new drug
eligible for the TDAPA in which there is no clear evidence of an
improvement in one or more patient-centered outcomes. The LDO stated
that improvements in surrogate outcomes, such as laboratory values, is
not sufficient. The LDO noted that if a new drug really improves
patient-centered outcomes, the ESRD PPS base rate should be increased
to pay for it after the 2 year TDAPA period regardless of whether the
drug fits into a functional category. However, one national dialysis
association referenced CMS' assertion that restricting TDAPA
eligibility would reduce CY 2020 Medicare expenditures, which would
have a favorable downstream impact on beneficiary co-insurance, and
argued that patients are willing to accept higher cost sharing in
exchange for any innovation in the ESRD space.
Response: We agree with the LDO that all treatment should be
patient-centered, and encourage drug choices be made in discussion with
the patient regarding potential improved outcomes weighed against
additional out-of-pocket cost to the patient. We note that physicians
are not obligated to prescribe a new drug for a dialysis patient if
they do not feel it would yield improved clinical outcomes for the
additional co-insurance obligation of the patient. For any new renal
dialysis drug or biological product that meets the TDAPA eligibility
criteria, the 20 percent co-insurance for those drugs is statutorily
mandated on the ESRD PPS payment amount, which includes the amount for
the TDAPA.
Final Rule Action: After consideration of public comments, for CY
2020, we are finalizing the revisions to the drug designation process
regulation as proposed. That is, we are finalizing the proposed
revisions to 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 also proposed 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 proposed to change the
definition of ``ESRD PPS functional category'' to replace
``biologicals'' with ``biological products.'' We also proposed to
change the definition of ``Oral-only drug'' to
[[Page 60673]]
replace ``biological'' with ``biological product.''
We did not receive any comments on our proposed technical changes
to Sec. 413.234(a) to revise the definitions. We are therefore
finalizing these changes as proposed.
d. Modification of 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 IV forms of phosphate binders or calcimimetics are
approved by FDA, these drugs would be considered reflected in the ESRD
PPS bundled payment because these drugs are included in an existing
functional category, so no additional payment would be available for
inclusion of these drugs.
However, we recognized the uniqueness of these drugs and finalized
in the CY 2016 ESRD PPS final rule that we will not apply this process
to injectable or IV 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 until sufficient claims data for rate setting analysis is
available for these products. 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, in the CY 2020 ESRD PPS proposed rule, we
stated that we will continue to pay for calcimimetics using the TDAPA
in CY 2020 (84 FR 38347).
We also discussed in the proposed rule that in the CY 2019 ESRD PPS
final rule (83 FR 56943), we stated 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 IV product are available,
but not for less than 2 years. We noted that calcimimetics were the
first drugs for which we paid the TDAPA (83 FR 56931), and 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 also 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).
As we stated in the CY 2020 ESRD PPS proposed rule (84 FR 38347),
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. Therefore, we proposed
that the basis of payment for the TDAPA for calcimimetics, beginning in
CY 2020, would be 100 percent of ASP. That is, we proposed 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.'' We stated that we believed 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. We also noted that
this policy would be 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).
In addition, we noted that our proposal to condition the
application of the TDAPA on CMS's receipt of ASP data, discussed in
section II.B.2.c of this final rule, would also apply with respect to
calcimimetic products.
The public comments and our responses to the comments regarding our
proposal to change the basis of payment for the TDAPA for calcimimetics
are set forth below.
Comment: MedPAC supported the proposal and stated that there is
good rationale to change the basis for the TDAPA from ASP plus 6
percent to ASP with no percentage add-on. MedPAC noted that the ASP
plus 6 percent policy was developed to reimburse physicians for the
cost of drugs that they purchase directly and commonly administer in
their offices. While the policy never stated what cost the ``+6
percent'' was intended to cover, MedPAC noted that applying the policy
to ESRD facilities is considerably different from reimbursing
physicians. First, the variation in physicians' purchasing power,
whether they practice solo, as part of a group, or in a health system,
is likely to result in considerably more variation in the acquisition
price for a drug compared to the acquisition prices for ESRD
facilities. If the intent of the ``+6 percent'' was to address
acquisition price variation, MedPAC asserted that rationale is
diminished for ESRD facilities. Second, MedPAC noted that the TDAPA is
an add-on payment adjustment to the ESRD base rate, which already
includes reimbursement for the cost of storage and administration of
renal dialysis drugs and biological products. Therefore, if the intent
of the ``+6 percent'' was to address storage and administration costs,
MedPAC believed these costs are already addressed through the ESRD PPS
bundled payment and thus do not warrant the additional 6 percent.
A national dialysis association disagreed with MedPAC regarding
ASP+6 in the ESRD facility setting. The commenter stated that while
ASP+6 is used in physician reimbursement, it is also used across the
Medicare program as the reimbursement standard for health care
providers of all types, including providers that are much larger than
ESRD facilities, such as large hospital systems. This commenter, along
with another commenter, expressed that recommending that ESRD
facilities be paid differently than other health care providers for the
same pharmaceutical products runs counter to MedPAC's longstanding view
that Medicare should pay similar rates for similar care.
A drug manufacturer and an LDO expressed similar beliefs as the
national dialysis association, stating that CMS should maintain parity
in reimbursement across other settings of care in which ASP-based
reimbursement is provided at ASP plus
[[Page 60674]]
6 percent. One commenter noted that the 6 percent add-on is important
for patient access in ESRD facilities, like other health care
providers. The other commenter noted that other Medicare payment
systems provide dispensing fees to recognize such costs, and the
commenter believes ESRD facilities should be compensated for these
costs as well.
An LDO and a drug manufacturer were disappointed with CMS' proposal
to decrease the TDAPA for calcimimetics from ASP+6 to ASP+0. They noted
that not all ESRD facilities can purchase a drug at the ASP and stated
that this is particularly the case with calcimimetics. They also
expressed concern that other policies, including the budget sequester,
the 20 percent co-insurance exclusion from bad debt, and unpaid cost-
sharing obligations by states, will result in TDAPA payments for
calcimimetics far below the ASP. One association stated that cutting
the TDAPA reimbursement for calcimimetics to ASP+0 would actually move
the baseline reimbursement to, at best, ASP-1.6 after application of
the ongoing sequester.
A national dialysis stakeholder organization stated that given the
amount of money attributed to the ESRD PPS functional categories other
than anemia management, it is difficult to see how any dollars could be
used to cover the administrative costs of calcimimetics or any other
products. A drug manufacturer and a national dialysis organization
noted that ESRD facilities, like other providers of Part B- covered
drugs, rely on the 6 percent add-on to help cover the costs of
acquiring and handling drugs, and in the case of the oral form of the
calcimimetic, dispensing the drug.
Another commenter explained that ESRD facilities need the current 6
percent add-on amount to help pay for the expensive storage, packaging,
and administration costs associated with products eligible for the
TDAPA (which require facilities to ensure registered nurses are
available because they administer calcimimetics to patients). For
example, such costs include: Shipping medications to the patient's
home, particularly for homecare and nursing home patients; pharmacy
dispensing fees, especially in the case of the many small providers
that do not have pharmacy licenses; storage and utility costs to
account for the drug's refrigeration requirement; purchasing costs;
rinse back procedures, which require a registered nurse and the
facility ensuring that a registered nurse is on-site; pill usage
accounting; and billing procedures and processes, among others. The
commenter explained that these costs are especially challenging for
small and independent providers to bear when considering the fact that
they also generally experience less favorable drug acquisition pricing
than LDOs with significant market advantage and negotiating power.
An LDO explained that it continues to face significant
administrative and overhead costs resulting from the inclusion of the
calcimimetics into the ESRD PPS via the TDAPA. The commenter stated
that these costs not transitional as CMS asserts. The commenter
explained that it incurs ongoing costs for staff training on clinical
protocols as well as costs related to internal updates for clinical and
financial systems. A national dialysis association provided similar
comments, stating the operational costs associated with furnishing
calcimimetics to ESRD beneficiaries, such as storing, handling, and
dispensing the drugs, are ongoing for so long as the drugs are
furnished under the ESRD PPS and that there is no mechanism through
which ESRD facilities can address these costs without reimbursement.
A home dialysis association expressed concern regarding the ESRD
facility costs associated with home dialysis patients. The commenter
noted that according to their members, approximately 25 percent of
patients, both home and in-center, take some form of calcimimetic drug.
The commenter explained that for home dialysis patients, the costs
associated with actually getting the drug to the patient is especially
important given that they are not present in clinic as often as in-
center patients. The commenter stated that ESRD facilities must spend
considerable time and resources making certain that these patients have
access to necessary medications, like calcimimetics. Two commenters
stated that CMS made a commitment in the CY 2016 ESRD PPS final rule,
and reiterated that commitment in subsequent rulemaking, that it would
reimburse the TDAPA using the pricing methodologies under section 1847
of the Act, which includes ASP+6 percent, until sufficient claims data
for rate setting analysis are available, but not for less than 2 years.
The commenters noted CMS should maintain this commitment to pay the
TDAPA for calcimimetics at ASP+6 percent for the duration of the TDAPA
period.
Response: The TDAPA is an add-on payment adjustment under the ESRD
PPS, and is not intended to be a mechanism to make separate payment for
Part B drugs. Section 1842(o) of the Act, which specifies payment for
drugs included in a physician's or supplier's bill that are not paid on
a cost or prospective payment basis as otherwise provided under Part B,
provides for payment using the methodologies under section 1847A of the
Act. In our CY 2019 ESRD PPS final rule(83 FR 56948), we stated that
ASP+0 would be the basis for the TDAPA prospectively for all new renal
dialysis drugs and biological products effective January 1, 2020. We
explained that calcimimetics were excluded from this policy and 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 stated that we believe ASP+0 is a
reasonable basis for payment for the TDAPA for new renal dialysis drugs
and biological products that fall within an existing functional
category because there are already dollars in the per treatment base
rate for a new drug's respective category. We noted that there is no
clear statement from Congress as to why the payment allowance is
required to be 106 percent of ASP (ASP+6) as opposed to any other value
from 101 to 105 percent, and, as MedPAC discussed in its June 2015
report, there is no consensus among stakeholders. We further explained
that we believe moving from pricing methodologies available under
section 1847A of the Act (which includes ASP+6) to ASP+0 for all new
renal dialysis drugs and biological products regardless of whether they
fall within an ESRD PPS functional category strikes a balance between
the increase to Medicare expenditures (subsequently increasing
beneficiary co-insurance) and stakeholder concerns, including those
about incentivizing use of high cost drugs in ESRD facilities.
We believe that we have flexibility under section
1881(b)(14)(D)(iv) of the Act to base the amount of the TDAPA on a
methodology that is not based on a payment methodology under section
1847A of the Act. There is no requirement to use the payment
methodologies under section 1847A of the Act for renal dialysis drugs
under the ESRD PPS. As a result we have reconsidered the use of the
ASP+6 percent methodology under section 1847A of the Act for the TDAPA
for calcimimetics and proposed to use ASP+0 instead.
We agree with MedPAC that the ASP+6 percent policy was developed to
reimburse physicians for the cost of drugs and that the TDAPA is an
add-on payment adjustment to the ESRD PPS
[[Page 60675]]
base rate, which already includes reimbursement for the cost of storage
and administration of ESRD-related drugs. We appreciate MedPAC's
support for this proposal and agree that ASP+0 is appropriate as the
basis for the TDAPA for calcimimetics for CY 2020. For all of these
reasons, we are finalizing the proposal without modification.
Comment: Some commenters explained that the ASP does not reflect
the cost of many ESRD facilities who purchase products well above the
ASP. An LDO noted that not all ESRD facilities can purchase a drug at
the ASP and that this is particularly the case with calcimimetics. A
drug manufacturer explained that the ASP is a market-based price that
reflects the weighted average of all manufacturer sales prices and
includes most rebates and discounts that are negotiated between
manufacturers and purchasers in the commercial market. The manufacturer
explained that not all health care providers receive the same
discounts, therefore the manufacturer believes that the 6 percent add-
on is important in ensuring patient access across providers. The
commenter further explained that discounts provided to the supply
chain--such as wholesalers--may be included in the ASP but may not be
passed on to ESRD facilities.
Response: We understand the concerns expressed by the commenters
about ASP, and the difficulties that may be encountered by small
dialysis centers unable to negotiate the lower drug prices attributed
to volume, and inaccessibility to supply chain discounts. The purpose
of the TDAPA policy is not to offset business losses or to enhance
business profits. The TDAPA is an add-on payment adjustment under the
ESRD PPS, and is not intended to be a mechanism to make separate
payment for Part B drugs. Section 1842(o) of the Act, which specifies
payment for drugs included in a physician's or supplier's bill that are
not paid on a cost or prospective payment basis as otherwise provided
under Part B provides for payment using the methodologies under section
1847A of the Act. We do, however, continue to believe ASP data is the
best data available for the purposes of determining the basis of
payment for the TDAPA 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. With regard to the
importance of the six percent add-on, we continue to believe ASP+0 is a
reasonable basis for payment for the TDAPA for new renal dialysis drugs
and biological products that fall within an existing functional
category because there are already dollars in the per treatment base
rate for a new drug's respective category.
Comment: Some commenters expressed concern that our proposal to
base the TDAPA payments for calcimimetics at 100 percent of ASP for CY
2020 could jeopardize patient access to calcimimetics and have
unintended consequences. One commenter stated that this would
particularly affect patients treated by small and independent providers
often in rural and underserved areas with limited resources and low to
negative Medicare margins. A drug manufacturer commented that basing
the TDAPA on ASP+0 would disincentivize the adoption of innovative new
therapies and that policies designed to facilitate patient access to
innovative new therapies should not reduce the add-on payment to the
ASP that ensures providers are able to deliver these medicines to
patients.
An LDO expressed concern that ESRD facilities will be forced to
choose between ceasing to provide the calcimimetics or losing
additional money every time they provide calcimimetics. The LDO also
expressed concern that the proposal could inhibit generic drug adoption
and encourage utilization of the branded IV calcimimetic at great
expense to the Medicare program and its beneficiaries. The LDO stated
that it is committed to providing patients with the most cost-effective
option for treatment, which typically results in prioritizing oral
generic drugs and reserving the IV option for patients who otherwise
fail to respond to treatment on the oral form. However the LDO strongly
urged CMS to consider that, at ASP+0, many providers will lose money on
cinacalcet, which could incentivize a shift in first line treatment to
the IV version at a much greater cost to the program. A national
dialysis association expressed similar concerns, stating that the
proposal could incentivize use of the IV calcimimetic over the generic
oral calcimimetic as ESRD facilities grapple with choosing the product
for which they will lose the least amount of money due to declining
reimbursement.
An LDO expressed concern that shifting the basis of payment in the
middle of the TDAPA period for calcimimetics could skew the utilization
and claims data used to inform post-TDAPA payment and that CMS should
continue payment at 106 percent of ASP during the third year of TDAPA
to ensure payment adequacy and consistency in utilization data it is
collecting.
Response: As noted previously, we continue to believe that ASP+0 is
a reasonable basis for payment for the TDAPA for new renal dialysis
drugs and biological products that fall within an existing functional
category because there are already dollars in the per treatment base
rate for a new drug's respective category. We further 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. Regarding the concern that reducing the basis of
TDAPA payment to ASP+0 for calcimimetics will steer ESRD facilities
toward not providing the drug, or toward providing an alternative form
of the drug, we believe that physicians and their patients should make
the decision together on the appropriate form of the drug for
treatment. It is not our intent to interfere with that decision making
process. As the number of drugs within each functional group increases
and market share competition from the manufacturers is a factor, we
anticipate easier access, more choices in care and lower prices. We
acknowledge that payment policies may have unintended consequences as
identified by the commenters, however, it is our expectation that ESRD
facilities will follow the physician's plan of care for the patient and
we will closely monitor drug utilization at the beneficiary and
facility level for these types of issues.
With respect to the concern that reducing the basis of payment to
ASP+0 for calcimimetics will complicate the data we will use when
considering whether to modify the base rate at the end of the TDAPA
period, we are currently evaluating potential methodologies for this
purpose. There are a number options being discussed as a result of
stakeholder input and at the time we undergo rulemaking, we will
analyze the data available and input received from stakeholders when
developing our proposal to incorporate these products into the ESRD PPS
base rate.
Comment: Several commenters stated that CMS has indicated in
previous rules that the ESRD PPS base rate does not include
administrative costs associated with dispensing oral drugs. One
commenter noted in addition to the small dollar amounts allocated to
drugs in most ESRD PPS functional categories,
[[Page 60676]]
CMS has stated that the base rate does not include the cost of oral-
only drugs. Another commenter stated that while CMS indicates that the
ESRD PPS base rate has dollars built in for administrative complexities
and overhead costs for drugs and biological products, this statement
contradicts CMS' earlier statement regarding calcimimetics that dollars
were never included in the base rate to account for these drugs. The
commenter noted that CMS acknowledged there are no dollars in the base
rate for calcimimetics and therefore cannot assert that there are
dollars in the base rate available to cover administration and overhead
related to calcimimetics.
Response: As we discussed in the CY 2019 ESRD PPS final rule (83 FR
56944 through 56946), with regard to the concerns that ASP+0 will not
cover the administrative costs associated with bringing a new drug or
biological product as a therapeutic option in a facility, we pointed
out that under the current ESRD PPS, new renal dialysis drugs that are
considered to be in a functional category would not receive any
additional payment. Payment for these drugs has been included in the
ESRD PPS bundled payment amount since the inception of the ESRD PPS.
There is no clear reason for the 6 percent add-on, and, as MedPAC
discussed in its June 2015 report, there is no consensus among
stakeholders on the purpose of the 6 percent add-on. We further
explained that we believe moving from pricing methodologies available
under section 1847A of the Act, (which includes ASP+6) to ASP+0 for all
new renal dialysis drugs and biological products regardless of whether
they fall within an ESRD PPS functional category strikes a balance
between the increase to Medicare expenditures (subsequently increasing
beneficiary co-insurance) and stakeholder concerns discussed in section
II.B.1.e of the CY 2019 ESRD PPS final rule. We note that since January
1, 2018, ESRD facilities have been receiving the TDAPA for
calcimimetics at ASP+6 as part of the ESRD PPS payment amount. We
continue to believe that 2 full years of paying the TDAPA at ASP+6 is
sufficient time for ESRD facilities to address any administrative
complexities and overhead costs that may have arisen with regard to
furnishing the calcimimetics.
Comment: A national dialysis association explained that its review
of the publicly available data on Medicare's spending on calcimimetics
indicates that Medicare spending has decreased under the TDAPA as
compared to prior payment policies. The commenter explained that in CY
2017, prior to CMS moving calcimimetics from Medicare Part D to the
ESRD PPS under Part B, CMS spent more than $1.4 billion on
calcimimetics. Between 2013 and 2017, the price per unit of
calcimimetics increased by an average of 15 percent each year, compared
to an average increase in patients utilizing calcimimetics of 6 percent
each year. The commenter asserted that had these trends continued, CMS
would have paid almost $1.8 billion for calcimimetics in Part D in CY
2018. The commenter acknowledged that the Part D data set includes all
beneficiaries using calcimimetics and not just those with ESRD, but
noted that majority of beneficiaries using calcimimetics are ESRD
beneficiaries. The commenter stated that it cannot identify a data
source that supports CMS' claim of a $1.2 billion increase in Medicare
spending on calcimimetics in CY 2018. On the contrary, the commenter's
review of the data indicates that Medicare spending on calcimimetics
decreased under the TDAPA from more than $1.4 billion in CY 2017 to $1
billion represented in the file containing 85 percent of the claims in
CY 2018. The commenter believes that that because calcimimetics moved
from Part D spending to Part B spending in CY 2018, that CMS should not
claim an increase in Part B spending. The commenter stated that if
there is another source of data that the public should review in order
to fully evaluate CMS' claims, then that data should be made available
along with the rulemaking. The commenter further asserted that if CMS's
statement of an increase in Medicare spending on calcimimetics is not
correct or corroborated by the data, it is not adequate justification
for the proposal to change reimbursement for the TDAPA for
calcimimetics from ASP+6 to ASP+0 and CMS should not finalize this
proposal.
Response: In response to the commenter's questions about the $1.2
billion increase in Medicare costs for calcimimetics, we clarify that
the $1.2 billion figure refers to expenditures under the ESRD PPS for
CY 2018, as reflected in claims, due to the utilization of
calcimimetics alone.
We do not believe that it is appropriate to consider expenditures
in other Medicare or Medicaid funding areas when developing policies
under the ESRD PPS. These funding areas are not co-mingled or mutually
interchangeable. In addition, the Part B spending includes the
injectable form of the calcimimetic which was not covered under Part D.
We have further reviewed our data for CY 2018 and stand by the stated
1.2 billion increase to ESRD PPS expenditures.
Final Rule Action: After careful consideration of public comments,
we are finalizing our proposal that the basis of payment for the TDAPA
for calcimimetics, beginning in CY 2020, will be 100 percent of ASP.
Specifically, we are finalizing the proposed modification to Sec.
413.234(c) by removing the clause ``except that for calcimimetics it is
based on pricing methodologies under section 1847A of the Social
Security Act.''
e. 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 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. Therefore, in
the CY 2020 ESRD PPS proposed rule (84 FR 38347), we proposed a
revision to Sec. 413.230 to add paragraph (d) to reflect the TDAPA. We
stated that we believed this modification is necessary so that the
regulation appropriately reflects all inputs in the calculation of the
per treatment payment amount. We noted that this revision to the
regulation would not change how the ESRD PPS per treatment payment
amount is currently calculated. We also proposed
[[Page 60677]]
to revise Sec. 413.230 to include, as part of the calculation of the
per treatment payment amount, any TPNIES as discussed in section
II.B.3.b.iii of this final rule.
We also proposed 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, as we explained in the CY 2020 ESRD PPS
proposed rule, 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 application of the training
adjustment add-on more 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 add-on to apply more generally,
not just when EPO is furnished, and therefore we are proposing to refer
to Sec. 413.235(c).
We did not receive any comments on our proposal for technical
changes to Sec. 413.230. Therefore, we are finalizing the changes as
proposed.
2. 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.\20\
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\20\ 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
[[Page 60678]]
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 we discussed in the CY 2020 ESRD PPS proposed rule (84 FR
38348), 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. In the CY 2019 ESRD PPS final rule, 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). As discussed in section II.B.1.d of the CY 2020 ESRD PPS
proposed rule (84 FR 38330) and section II.B.1.d of this final rule, we
proposed to modify the basis of payment for the TDAPA for calcimimetics
for CY 2020 to ASP+0.
In the CY 2020 ESRD PPS proposed rule (84 FR 38348 through 38349),
we discussed that, following publication of the CY 2019 ESRD PPS final
rule, we continued to assess our policy allowing for WAC or invoice
pricing if ASP is not available, and became 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.
We stated that 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 noted 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 explained that we were 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 believed we needed 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.
We also noted that we were 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 anticipated 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,\21\ we stated that we were
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,\22\ 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.\23\
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\21\ 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.
\22\ Report to Congress, MedPAC, June 2017, page 42. Available
at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
\23\ 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 pointed 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.\24\
MedPAC's recommendations in its June 2017 report \25\ would require
that all Part B drug manufacturers submit ASP data into CMS, whether or
not those manufacturers have a Medicaid Drug Rebate Agreement. Based on
this data and our own experience with the calcimimetics, we expressed
concern that manufacturers may not voluntarily report ASP data into
CMS. We noted that 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 stated that we believed
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.
---------------------------------------------------------------------------
\24\ 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-12-3-00040.pdf.
\25\ Report to Congress, MedPAC, June 2017, pages 10-12.
Available at: http://www.medpac.gov/docs/default-source/reports/jun17_reporttocongress_sec.pdf.
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We noted in the CY 2020 ESRD PPS proposed rule (84 FR 38349) that,
in addition to our concerns about ASP data reporting generally, we were
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 the
CY 2020 ESRD PPS 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
[[Page 60679]]
that ASP includes.\26\ 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 co-insurance for the beneficiaries who receive
those drugs. We explained in the CY 2020 ESRD PPS proposed rule that we
believed conditioning the TDAPA on the availability of ASP data is
necessary to mitigate this potential incentive and limit increases to
Medicare expenditures.
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\26\ 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38349), we proposed to
revise Sec. 413.234(c) to address the following concerns: (1)
Increases to Medicare expenditures due to the TDAPA for calcimimetics;
(2) drug manufacturers not reporting ASP data for products eligible for
the TDAPA; 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 noted in
the CY 2020 ESRD PPS proposed rule that we were not proposing to modify
the current ASP reporting process \27\ and our proposals were
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 explained in the CY 2020 ESRD PPS
proposed rule that we believed 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 proposed 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.
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\27\ 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.
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As we discussed in section II.B.2.a of the CY 2020 ESRD PPS
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 proposed 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 therefore proposed 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 noted in the CY 2020 ESRD PPS proposed rule that 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 explained that 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. We stated that 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 believed we would be overpaying for the TDAPA
for those products.
Therefore, we also proposed to revise the regulatory text at Sec.
413.234(c) to state that we would 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 explained
that we assess pricing for new renal dialysis drugs and biological
products eligible for the TDAPA on a quarterly basis. Under our
proposal, 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).
The comments and our responses to the comments on our proposal to
implement an ASP conditional policy for application of the TDAPA are
set forth below.
Comment: Several commenters stated that it is unfair to impose this
condition on the TDAPA because it would reduce the payment amount
provided to ESRD facilities, while it is the manufacturers who are
responsible for submitting the ASP data into CMS. One LDO noted that
ESRD facilities have no ability to influence whether a manufacturer
submits ASP data into CMS, while another LDO further argued that CMS
does not have the authority to impose this condition on the TDAPA since
the facilities do not have control over whether the ASP data is
submitted into CMS by the manufacturer.
Response: We have authority under section 1881(b)(14)(D)(iv) of the
Act to include under the ESRD PPS such other
[[Page 60680]]
payment adjustments as the Secretary determines appropriate, and we
established the TDAPA for new renal dialysis drugs and biological
products under this authority. We also have authority to place
conditions on those payment adjustments, as we have otherwise done for
the TDAPA by requiring that the renal dialysis drug or biological
product meet certain eligibility criteria under Sec. 413.234. As we
explained in the CY 2020 ESRD PPS proposed rule (84 FR 38349), we are
concerned about (1) increases to Medicare expenditures due to the TDAPA
for calcimimetics; (2) drug manufacturers not reporting ASP data for
products eligible for TDAPA; and (3) our TDAPA policy potentially
incentivizing drug manufacturers to withhold ASP data from CMS. We
believe conditioning the TDAPA on the availability of ASP data is
appropriate and necessary to address these concerns and ensure that we
are basing the amount of the TDAPA on the best data available to
address these concerns, and not overpaying through WAC or invoice
pricing. In addition, we do not believe that this policy is unfair
because we believe that ESRD facilities have the ability to influence
drug manufacturers to submit ASP data due to the manufacturers' desire
to have market share. With more choices available through the ESRD PPS
functional categories, drug manufacturers may want to retain or capture
more market share with their products as competition increases. ESRD
facilities are able to have discussions with drug manufacturers as to
whether they reported the ASP into CMS and, if not, when they plan to
do so.
Comment: A drug manufacturer and an LDO stated that we should only
apply this policy on an individual basis, that is, if a drug is multi-
source, meaning available from a brand-name drug manufacturer and also
from other manufacturers, we should not penalize all manufacturers of
the drug if one manufacturer fails to submit ASP data. The drug
manufacturer further asked us to clarify whether the ASP conditional
policy will apply to payments made on or after 2020 or to ASP data
reported in 2020.
Response: First, we would like to reassure the commenters that the
intent of our proposal was to apply this policy on an individual
product basis. That is, under the revisions to Sec. 413.234(c), we
would condition the TDAPA for an individual renal dialysis drug or
biological product on the availability of ASP data for that product. We
would not condition the TDAPA for an individual drug or biological
product on the availability of ASP data from all manufacturers of that
drug or biological product. For example, if drug X is manufactured by
manufacturer A and manufacturer B and manufacturer A does not make ASP
data available to CMS but manufacturer B does, we would not apply the
ASP conditional policy to manufacturer B's drug. That is, the ESRD
facility would not receive the TDAPA when reporting on ESRD facility
claims drug X from manufacturer A.
With regard to whether the ASP conditional policy will apply to
payments made on or after January 1, 2020 or to ASP data reported in
2020, we note that this policy would become effective January 1, 2020.
Therefore, for a renal dialysis drug or biological product for which we
are currently paying the TDAPA and for which ASP data is currently
being reported, beginning January 1, 2020, if CMS does not receive the
latest full calendar quarter of ASP data for the product, CMS will no
longer apply the TDAPA beginning no later than 2-calendar quarters
after CMS determines that the latest full calendar quarter of ASP data
is not available.
Comment: Several commenters were concerned that this policy could
create consequences such as increased costs to ESRD facilities, which
is particularly problematic for small and independent facilities, and
could lead to facilities choosing not to furnish those drugs or
biological products, which could decrease access for their patients.
One commenter also argued this policy would complicate the collection
of utilization data and thereby negatively affect how these drugs and
biological products would be incorporated into the ESRD PPS bundled
payment. Another commenter asserted that this proposal would impact the
continuity of patient care and cause confusion in the billing and
ordering process. A national dialysis stakeholder organization stated
that it did not believe this policy would actually increase ASP
reporting as it is intended to do.
Response: We understand the commenters' concerns. However, we
continue to be concerned that drug manufacturers who are not otherwise
required to submit ASP data to CMS would 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. Additionally, we believe that this policy will
incentive ASP reporting and ESRD facilities will want to provide the
new renal dialysis drugs and biological products that are eligible for
the TDAPA to their patients. We expect that, as the number of drugs and
biological products within each ESRD PPS functional category increases
and market share competition from the manufacturers is a factor, there
would be easier access, more choices in care and lower prices.
Comment: Several commenters recognized the issue of underreporting
of ASP data that CMS was trying to solve, but preferred that CMS use
other mechanisms to enforce ASP reporting. One commenter suggested CMS
use Average Manufacturer Price (AMP) after a certain period of time of
ASP not being reported. One drug manufacturer suggested that we allow a
temporary deferment or exclusion from the ASP conditional policy when
manufacturers encounter extraordinary circumstances beyond their
control.
Response: We thank the commenters for their suggestions. We have
the same concern with AMP as we do with WAC and invoice pricing in that
it is more expensive than ASP. We continue to believe ASP data is the
best data available for the purposes of the TDAPA 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.
We also believe that our policy provides sufficient time to deal with
extraordinary circumstances, so it is not necessary to establish that
type of exception. However, we will monitor the effects of this
proposal and consider these suggestions for future rulemaking.
Comment: One LDO suggested that CMS's motivation for proposing this
policy was the perception that ESRD facilities were putting financial
gain over the wellbeing of the patients. The LDO explained that when
the new IV and generic oral calcimimetics became available the LDO
followed the guiding principle that patients deserve access to the
formulation that best meets their needs, while also remaining mindful
of overall system costs.
Response: We appreciate that the commenter is focused on providing
its patients with access to formulations that best meet their clinical
needs. However, we believe the comment about our motivation for this
policy is unfounded. As noted previously, we based this proposal on our
concerns about (1) increases to Medicare expenditures due to TDAPA for
calcimimetics; (2) drug manufacturers not reporting ASP data for drugs
eligible for TDAPA; and (3) our TDAPA policy potentially incentivizing
drug manufacturers to withhold ASP data from CMS.
[[Page 60681]]
Comment: MedPAC and a non-profit provider association were
supportive of conditioning the TDAPA on the availability of ASP data.
Both suggested CMS consider going further by either requiring all Part
B drug manufacturers to report ASP data, or by not applying the TDAPA
to all eligible drugs from a noncompliant manufacturer rather than just
the new renal dialysis drug or biological product for which the
manufacturer is not reporting ASP data.
One national dialysis association supported MedPAC's suggestion
that CMS take steps to ensure manufacturers report ASP data. However,
the association specifically disagreed with MedPAC that CMS should
require all Part B drug manufacturers report ASP data and believed any
such requirement should be imposed directly on drug manufacturers under
CMS authorities, and not on ESRD facilities.
Response: We have authority under section 1881(b)(14)(D)(iv) of the
Act to include under the ESRD PPS such other payment adjustments as the
Secretary determines appropriate, and we established the TDAPA for new
renal dialysis drugs and biological products under this authority. We
also have authority to place conditions on those payment adjustments,
as we have otherwise done for the TDAPA by requiring that the renal
dialysis drug or biological product meet certain eligibility criteria
under Sec. 413.234. At this time, we believe this policy appropriately
targets the condition on the particular renal dialysis drug or
biological product for which CMS has not received ASP data. We will
take these suggestions under consideration for future rulemaking.
Comment: A national dialysis association explained that its review
of the publicly available data on Medicare's spending on calcimimetics
indicate that Medicare spending has decreased under the TDAPA as
compared to prior payment policies. The commenter stated that it cannot
identify a data source that supports CMS' claim of a $1.2 billion
increase in Medicare spending on calcimimetics in CY 2018. On the
contrary, the commenter's review of the data indicates that Medicare
spending on calcimimetics decreased under the TDAPA from more than $1.4
billion in CY 2017 to $1 billion represented in the file containing 85
percent of the claims in CY 2018. The commenter believes that because
calcimimetics moved from Part D spending to Part B spending in CY 2018,
that CMS should not claim an increase in Part B spending. The commenter
stated that if there is another source of data that the public should
review in order to fully evaluate CMS' claims, then that data should be
made available along with the rulemaking. The commenter further
asserted that as CMS's statement of an increase in Medicare spending on
calcimimetics is not correct or corroborated by the data, it is not
adequate justification for the proposal to condition the TDAPA on the
provision of ASP data.
An LDO noted the decrease in expenditures due to calcimimetics
discussed in the comment from the national dialysis association and
stated that the data was inconsistent with CMS' analysis in the
proposed rule.
Response: In response to the commenter's questions about the $1.2
billion increase in Medicare costs for calcimimetics, we clarify that
the $1.2 billion figure refers to expenditures under the ESRD PPS for
CY 2018, as reflected in claims, due to the utilization of
calcimimetics alone. We do not believe that it is appropriate to
consider expenditures in other Medicare or Medicaid funding areas when
developing policies under the ESRD PPS. These funding areas are not co-
mingled or mutually interchangeable. In addition, the Part B spending
includes the injectable form of the calcimimetic which was not covered
under Part D. We have further reviewed our data for CY 2018 and stand
by the stated 1.2 billion increase to ESRD PPS expenditures.
Final Rule Action: After consideration of public comments, we are
finalizing the ASP conditional policy as proposed, effective January 1,
2020. Under our final policy, the basis of payment for the TDAPA for
all new renal dialysis drugs and biological products is ASP+0, but if
ASP is not available then the TDAPA is based on 100 percent of WAC and,
when WAC is not available, the payment is based on the drug
manufacturer's invoice. We are revising Sec. 413.234(c) to state that
notwithstanding the provisions in paragraphs (c)(1) and (2) of that
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
TDAPA for the product, CMS will no longer apply the TDAPA for that
product beginning no later than 2-calendar quarters after we determine
a full calendar quarter of ASP data is not available. In addition, 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 Sec. 413.234, CMS
will no longer apply the TDAPA 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.
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 ESRD PPS 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.
[[Page 60682]]
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. 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 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 devices that have been granted marketing
authorization by FDA. They commented on the lack of new devices granted
marketing authorization by FDA 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
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 and innovative products and asked CMS to work with
the kidney care community to consider if and how new devices or other
new and 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 to these comments, 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 and 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, in the CY 2020 ESRD PPS proposed rule
(84 FR 38350 through 38357), we considered whether additional payment
may be warranted for certain new and innovative renal dialysis
equipment and supplies. In the CY 2020 ESRD PPS proposed rule, we
provided a general description of the IPPS new technology add-on
payment (NTAP) and its SCI criteria, and we include that description
again in sections II.B.3.a.i and II.B.3.a.ii of this final rule. We
stated that we believe a process similar to the IPPS process for
establishing SCI for the NTAP could be used to identify the innovative
renal dialysis equipment and supplies for which commenters were
requesting additional payment under the ESRD PPS. We noted that we
believed 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,\28\ 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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Also as discussed in the CMS Innovators' Guide to Navigating
Medicare,\29\ the IPPS is designed to adapt to changing technology
through
[[Page 60683]]
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 rapidly evolving technological advancements.
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\29\ 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 42 CFR 412.87 generally specify a medical 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 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 continue 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.
[[Page 60684]]
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. 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 SCI, we work with our medical officers to evaluate
whether a technology represents an SCI. 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 Transitional Add-On Payment Adjustment for New and
Innovative Renal Dialysis Equipment and Supplies Under the ESRD PPS
As we stated in the CY 2020 ESRD PPS proposed rule (84 FR 38350
through 38353), 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 received additional information from dialysis
equipment and supply manufacturers and a 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 final 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 stated that we believed 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 stated that we believed 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
noted that in order for equipment and supplies awarded through the
KidneyX to be eligible for the additional payment 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 the CY
2020 ESRD PPS proposed rule (84 FR 38353 through 38355). We also noted
that the goals for KidneyX and our proposal 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 were intended to support uptake of new and innovative renal
dialysis equipment and supplies 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 \30\ 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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\30\ https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/.
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i. Proposed Eligibility Criteria for Transitional Add-On Payment
Adjustment for New and Innovative Renal Dialysis Equipment and Supplies
As we stated in the CY 2020 ESRD PPS proposed rule (84 FR 38354
through 38355), 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. We proposed to
provide a transitional add-on payment adjustment for new and innovative
renal dialysis equipment and supplies furnished by ESRD facilities
(with the exception of capital-related assets). We proposed to call
this payment adjustment the Transitional Add-on Payment Adjustment for
New and Innovative Equipment and Supplies or TPNIES.
Renal dialysis equipment and supplies are medically necessary
[[Page 60685]]
equipment and supplies used to furnish renal dialysis services in a
facility or in a patient's home. We proposed 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 authorizations 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
solicited comment on this aspect of our proposal and whether a
different FDA marketing authorization date--for example, on or after
January 1, 2019--might be appropriate.
We stated in the CY 2020 ESRD PPS proposed rule that, for new and
innovative equipment and supplies, we believed the IPPS SCI criteria
and the process used to evaluate SCI under the IPPS can be used as a
proxy for identifying new and innovative equipment and supplies worthy
of additional payment under the ESRD PPS. We noted that 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, and we stated
that CMS is proposing to adopt the IPPS SCI criteria under the ESRD PPS
for the same reason. We explained that we wanted to ensure that the
add-on payment adjustments 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 stated that we believed the same SCI criteria
should be used to assess whether a new renal dialysis equipment or
supply warrants additional payment under Medicare.
Therefore, we proposed 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 the TPNIES 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 stated that we believed that by incorporating the IPPS SCI
criteria for new and innovative renal dialysis equipment under the ESRD
PPS, we would be consistent with IPPS and innovators would have
standard criteria to meet for both settings. We also proposed to
establish a process modeled after IPPS's process of determining if a
new medical service or technology meets the SCI criteria specified in
Sec. 412.87(b)(1). That is, we proposed that CMS would use a similar
process to 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 renal dialysis
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 for the TPNIES.
We noted that IPPS has additional criteria that is specific to its
payment system, that is, a high cost criteria relative to the MS-DRG
payment. We did not propose to 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 (MFP) adjustment. For this reason we only proposed to
adopt the SCI criteria in Sec. 412.87(b)(1) and did not consider the
high cost criteria requirements.
We proposed to exclude capital-related assets from eligibility for
the TPNIES, 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. We explained that this would include certain renal
dialysis equipment and supplies. An examples of a capital-related asset
for ESRD facilities could include water purification systems. We stated
that we did not believe that we should provide an add-on payment
adjustment 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 stated that we believed
capital-related assets should be excluded from the TPNIES at this time,
and proposed an exclusion to the eligibility criteria in new Sec.
413.236(b)(2). However, we noted that capital-related asset 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), 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.
We proposed that 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 proposed to provide a description of the equipment or supply and
pertinent facts related to it that can be evaluated through notice-and-
comment rulemaking. We stated that 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. In order to implement the TPNIES for a particular calendar
year, we would only consider a complete application received by CMS by
February 1 prior to the particular calendar year.
For example, under our proposal, in order to receive the TPNIES
under the
[[Page 60686]]
ESRD PPS effective January 1, 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 the TPNIES in the CY 2022 ESRD
PPS proposed rule. Our evaluation of the eligibility criteria would be
addressed in the CY 2022 ESRD PPS final rule. If the renal dialysis
equipment or supply qualifies for the TPNIES, payment would begin
January 1, 2022.
Alternatively, we considered an application deadline of September
1, however, we proposed an earlier timeframe so that the TPNIES would
be implemented sooner. We noted that a September 1 deadline would
provide more time initially for manufacturers to submit applications.
We solicited comment on the proposed deadline date for the application.
To codify the requirements for the TPNIES, including the
eligibility, we proposed to add Sec. 413.236, Transitional Add-on
Payment Adjustment for New and Innovative Equipment and Supplies. We
proposed to add Sec. 413.236(a) to state that the basis for the
section 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 proposed to add Sec. 413.236(b) to address the eligibility
requirements for the TPNIES. Under the proposed paragraph (b), for
dates of service occurring on or after January 1, 2020, we would
provide a TPNIES as specified in paragraph (d) 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 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, 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 proposed to add Sec. 413.236(c) to establish a process for
the TPNIES eligibility determinations and a deadline for consideration
of new renal dialysis equipment or supply applications under the ESRD
PPS. That is, we proposed 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 proposed
that we would only consider a complete application received by CMS by
February 1 prior to the particular calendar year, meaning the year in
which the TPNIES would take effect.
We solicited comment on the proposed criteria to determine new and
innovative renal dialysis equipment and supplies that would be eligible
for TPNIES. In addition, we solicited comment on the use of different
evaluative criteria and, where applicable, payment methodologies, for
renal dialysis supplies and equipment that may be eligible for the
TPNIES under the ESRD PPS. These criteria could include cost thresholds
for high cost items. We solicited 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 sought
comment on whether to use FDA's pre-market authorization and De Novo
pathways as a proxy for or in place of the proposed SCI criteria. In
addition, we solicited comment on potential implementation challenges,
such as what sources of data that CMS should utilize to assess SCI and
the proposed process that would be used to determine SCI. Finally, we
solicited comment on the benefits and drawbacks of the proposed SCI
criteria.
The comments and our responses to the comments on our proposals
regarding eligibility criteria for the TPNIES are set forth below.
Comment: All of the comments we received supported the
establishment of the TPNIES to spur innovation for new renal dialysis
equipment and supplies. Several commenters expressed support for the
proposed TPNIES definition of ``new'' and ``innovative'' as a device
granted FDA marketing authorization that demonstrates SCI using
criteria similar to those applied under the IPPS NTAP. MedPAC and an
LDO also expressed support for the process outlined in the CY 2020 ESRD
PPS proposed rule. MedPAC expressed support for transparent and
predictable processes with established routines for the agency,
stakeholders, and the public. MedPAC pointed out that the proposed
annual process of review for TPNIES eligibility provides manufacturers
a forum for feedback and questions, and it provides other stakeholders
with opportunities to participate in the process.
Response: We appreciate the commenters' support.
Comment: A physician association stated that it is critical to
support innovation in kidney care, but stressed that there must also be
a specific focus on innovations that also pertain to the pediatric
space. New products and therapies that come to market are not always
tested in the pediatric population or are even appropriate for
children, and. policies must be put in place to change this moving
forward. The association emphasized that children and adolescents are
not simply ``little adults.'' Rather, they have a unique physiology
characterized by maturing organ function, body metabolism, and body
distribution characteristics distinct from what adults manifest. Due to
these differences, the safety and efficacy data of equipment and
supplies developed for adults and only studied in adults may not be
appropriate for pediatric patients. The association acknowledged that
the small number of pediatric patients complicates conducting safety,
efficacy, or interventional trials in children, but stated that the
importance of this data is crucial to allow children to also benefit
from innovation.
Response: We hope that by providing the TPNIES, equipment and
supply manufacturers will develop new and innovative renal dialysis
products for pediatric patients as well as adult patients and that the
clinical trials conducted for such products include pediatric patients.
By establishing the TPNIES for new and innovative renal dialysis
equipment and supplies, we believe that manufacturers will be
encouraged to develop new products, including new and innovative
products for pediatric patients. We note that our data analysis
contractor will be holding a TEP meeting in December 2019 and intends
to address the topic of pediatric dialysis.
Comment: Most stakeholders expressed concern that the TPNIES
proposal excludes capital-related assets. A national dialysis
stakeholder organization and an LDO requested that CMS propose in the
next rulemaking a pathway for accounting for new capital equipment in
the ESRD PPS. The organization pointed out that the IPPS NTAP payment
for new devices does not address capital equipment because those costs
are incorporated in the base rates using other mechanisms linked to
[[Page 60687]]
the cost reports. As there is no similar mechanism under the ESRD PPS,
the organization asked that CMS propose in the CY 2021 ESRD PPS
proposed rule a mechanism that would adjust the ESRD PPS base rate to
account for the cost of innovative renal dialysis capital equipment as
well. The organization stated that this policy is important because
many innovative devices, including some that the President has
highlighted, would be capital equipment. A device manufacturer also
recommended that we propose to include purchased capital equipment in
the CY 2021 ESRD PPS proposed rule.
An LDO stated that the proposed eligibility for the TPNIES is
overly narrow, and does not address the need and potential for
achieving innovations in the most central component of dialysis care. A
professional association agreed, noting that significant innovation and
technology improvement is occurring in the area of dialysis machines
and peritoneal dialysis cyclers and that innovation in the efficiency
and effectiveness of water systems would both improve patient quality
of care, as well as reduce costs for facilities and help to preserve
the nation's water supply.
Another LDO also recommended that CMS eliminate the exclusion for
capital-related assets from the TPNIES criteria. The LDO noted it is
sensitive to the operational challenges highlighted by CMS that would
emerge if capital-related assets were eligible for the TPNIES. The LDO
expressed appreciation for CMS' desire to arrive at a policy that is
operationally simple but maintained that the challenges cited by CMS in
applying the TPNIES to capital-related assets can be overcome.
Alternatively, the LDO recommended that CMS consider a separate add-on
payment methodology to capture the costs of capital-related assets
under its existing authority to include other payment adjustments in
the ESRD PPS as the Secretary determines appropriate.
MedPAC stated that the proposal is unclear about whether capital-
related assets that are leased are excluded from eligibility for the
TPNIES. MedPAC pointed out that in the proposed rule, the definition of
a capital-related asset refers to the Provider Reimbursement Manual
(Chapter 1, Section 104.1), which does not distinguish between capital-
related items that are purchased versus those that are leased. MedPAC
requested that we clarify in the CY 2020 ESRD PPS final rule whether a
capital-related asset that is leased would be eligible for the TPNIES.
A health services company recommended that CMS clarify that
equipment or supplies used for home dialysis are not subject to the
``capital-related asset'' criteria and confirm that a leased home
dialysis device would not be a capital-related asset. The company
stated that our proposal uses the hospital cost reporting definition of
a depreciable asset, which it strongly believes should not apply in the
case of home dialysis equipment or supplies that are not used by
multiple patients in a facility but rather are used exclusively by a
single patient in the patient's home. The company indicated that this
change to the eligibility criteria would help better align the TPNIES
with the Administration's bold goals for moving kidney care away from
its current reliance on in-center dialysis to more availability and use
of home dialysis. A device manufacturer stated that including leased
capital equipment is feasible under the currently proposed payment
approach, leveraging existing coding mechanisms and the proposed
invoice-based payment process.
An LDO acknowledged that the cost report design may make it
difficult to differentiate capital-related assets on a per treatment
basis and that is why CMS proposed to exclude capital-related assets.
However, the LDO stated that in doing so, in effect, CMS is only
creating a payment adjustment for renal dialysis supplies. Until the
work can be accomplished to differentiate capital related assets on
cost reports, the commenter suggested that CMS only exclude capital-
related assets generally used for multiple patients. The commenter
stated that by allowing single patient use equipment, CMS would be
fostering more patient-engaged solutions like those found in the Kidney
X prize competition and for home modalities.
A patient advocacy organization stated that while it appreciates
the complexity involved in establishing a payment adjustment for
capital-related assets on a per-treatment basis, the organization
believes it is critically important to implement incentives that may
result in lighter and easier to use home dialysis machines, especially
given the Administration's efforts to increase the uptake of home
dialysis. The organization stated that home dialysis machines are both
leased and purchased by facilities, so it believes both types of
machines should ultimately be eligible for the TPNIES, though it
supports CMS' efforts to begin with considering leased equipment for
eligibility.
Response: As we stated in the CY 2020 ESRD PPS proposed rule, we do
not believe that we should provide the TPNIES for capital-related
assets because the cost of these items is captured in cost reports,
depreciate over time, and are generally used for multiple patients.
Additionally, since the costs of these items are reported in the
aggregate, there is considerable complexity in establishing a cost on a
per treatment basis. Therefore, we proposed to exclude capital-related
assets from eligibility for the TPNIES in new Sec. 413.236(b)(6).
Further, we believe providing the TPNIES for capital-related assets is
complex given the various leasing arrangements and depreciation.
While we acknowledge that significant innovation and technology
improvement is occurring with dialysis machines and peritoneal dialysis
cyclers, as well as innovation in the efficiency and effectiveness of
water systems, at this time we do not have enough information regarding
current usage of the various financial and leasing arrangements, such
as those involving capital-leases for depreciable assets versus
operating leases recorded as operating expenses. In addition,
methodological issues regarding depreciation need to be assessed in
order to determine whether TPNIES eligibility for these items would be
appropriate. We need to further study the specifics of the various
business arrangements for equipment related to renal dialysis services.
This would include items that are: (1) Purchased in their entirety and
owned as capital-related assets; (2) assets that are acquired through a
capital-lease arrangement; (3) equipment obtained through a finance
lease and recorded as an asset per the Financial Accounting Standards
Board (FASB) guidance on leases (Topic 842) effective for fiscal years
beginning after December 15, 2018,\31\ or (4) equipment obtained
through an operating lease and recorded as an operating expense. In
addition to the variety of business arrangements, there are unknown
issues relating to ownership of the item and who retains title, which
flows into the equipment's maintenance expenses for capital-related
assets. Further, there is the question of the definition of single use
versus multiple use for equipment used for renal dialysis services. For
example, capital-related assets used in-center and in the home may be
used by multiple patients over their useful lifetime. Specifically,
equipment classified as capital-related assets may be refurbished and
used by another patient. At this
[[Page 60688]]
time, we are unable to adequately assess the eligibility of these items
for the TPNIES. We intend to gather additional information about how
ESRD facilities obtain their capital-related equipment in future
meetings with the TEP.
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\31\ FASB Accounting Standards Update: No. 2016-02, February
2016; Leases (Topic 842); An Amendment of the FASB Accounting
Standards Codification. https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167901010&acceptedDisclaimer=true.
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With regard to capital-lease equipment for home dialysis, we note
that historically we have always supported patient choice with regard
to dialysis modality and we support the Administration's initiatives
for home dialysis. However, we did not intend for capital-lease assets
to be eligible for the TPNIES at this time. We note that regulations at
Sec. 413.130(b)(1) ``Introduction to capital-related costs,''
specifies that leases and rentals are includable in capital-related
costs if they relate to the use of assets that would be depreciable if
the provider owned them outright. In the future, we will be closely
examining the treatment of capital-related assets under Medicare,
including our regulations at Sec. 412.302 regarding capital costs in
inpatient hospitals and Sec. 413.130, as they relate to accounting for
capital-related assets, including capital-lease and the newly
implemented guidance for finance lease arrangements, to determine if
similar policies would be appropriate under the ESRD PPS.
Comment: A device manufacturers' association pointed out that since
most medical equipment is purchased as a capital-related asset, the
TPNIES effectively would exclude the innovative equipment identified in
the title of the adjustment. The association noted that meaningful
clinical improvements and patient experience improvements are arguably
more likely to come from innovation outside single-use supplies. The
association stated that expanding the TPNIES to include medical
equipment, regardless of how it is purchased by the provider, would
stimulate greater investment in a broader array of new technologies for
ESRD patients.
Response: We recognize that accounting for renal dialysis service
equipment can vary depending on the individual ESRD facility's business
model. For example, when the owner of the capital-related asset retains
title, then the renal dialysis service equipment is a depreciable asset
and depreciation expense could be itemized. When there is no ownership
of the renal dialysis service equipment, then the item is recorded as
an operating expense. We disagree with the commenter and believe that
there could be new and innovative equipment that are not capital-
related assets and could therefore be eligible for the TPNIES. For
example, there could be a supply or piece of equipment that is
purchased outright by the ESRD facility that may be able to withstand
repeated use over the treatment month and lasts less than a year, that
does not fall under the definition of capital-related asset in Sec.
413.236(b)(6).
Comment: A device manufacturer recommended that CMS change the
definition of the TPNIES from new and innovative equipment and supplies
to new and innovative equipment, supplies, and services. The
manufacturer stated that this modification would align the ESRD PPS
TPNIES definition with the IPPS NTAP and would clarify that the TPNIES
would apply not only to new technologies, but also to new services that
meet the SCI requirements. In addition to aligning the TPNIES
definition with that of the IPPS NTAP, the manufacturer noted, this
modification would clarify that non-technology services that benefit
ESRD patients can also qualify for the TPNIES if they meet the SCI
criteria. The manufacturer stated that this is important because
innovations to address care of ESRD patients are not limited solely to
new technology. For example, novel home dialysis educational programs
or remote monitoring services could create real benefit for ESRD
beneficiaries, but would not necessarily be defined as technologies.
Response: Our proposal was limited to renal dialysis supplies and
equipment that receive FDA marketing authorization, so we are unable to
adopt this recommendation to include services in the definition of
TPNIES for CY 2020.
Comment: A national dialysis stakeholder organization, a national
dialysis association, an LDO and other commenters asked that CMS shift
the application deadline for the TPNIES to later in the year. They
expressed concern that the February 1 deadline may be difficult to
meet, but the September deadline might not provide enough time for CMS
to apply the TPNIES in the next calendar year.
Many commenters recommended that CMS adopt timelines that provide
maximum flexibility to manufacturers in meeting the application
deadline, particularly in the first year of the program and asked that
CMS extend the February 1, 2020 application deadline to April or May.
They stated that manufacturers would benefit from additional time in
the first year of the program because the process will be new and
manufacturers were not able to prepare for it during development of
their products. More importantly, several commenters urged CMS to allow
manufacturers to file applications for products that are expected to
receive FDA authorization for marketing before the next calendar year,
but not require that marketing authorization take place prior to the
application deadline. The commenter pointed out that this approach is
allowed for the NTAP application, which requires only that a product is
pending marketing authorization at the FDA at the time of filing the
NTAP application.
Response: The commenters are correct that finalizing a September 1
deadline for submission of an application for the TPNIES would delay
payment of the TPNIES for an entire year. In order to obtain public
comment on the TPNIES application through the ESRD PPS rulemaking
process, we would need to receive a complete application with
sufficient information to include in the annual ESRD PPS proposed rule
by February 1. We agree that a February 1 deadline, particularly for CY
2020, may not provide sufficient time for manufacturers with products
in FDA review to meet the new requirements of Sec. 413.236(c).
However, our goal is to support uptake of new and innovative equipment
and supplies for those manufacturers that are ready to supply ESRD
facilities with these innovative products. Therefore, for CY 2020 we
are finalizing the February 1 application deadline because we want to
provide the opportunity for expedited payment of the TPNIES. We note
that otherwise ESRD facilities would not receive the TPNIES for any
equipment and supplies in CY 2021. We are clarifying that submissions
to FDA for marketing authorization must have been submitted to FDA by
the time the TPNIES application is submitted to CMS, that is, February
1. The FDA marketing authorization need not occur until September 1 of
the same year so that we are able to finalize the TPNIES in the annual
ESRD PPS final rule. We are revising Sec. 413.236(c) to clarify that
FDA marketing authorization must occur by September 1 in order for the
product to be eligible for the TPNIES on January 1 of the following
year. More information regarding TPNIES application submissions in CY
2020 is discussed later in this section.
Comment: As explained previously, we proposed to define new renal
dialysis equipment and supplies as those that are granted marketing
authorization by FDA on or after January 1, 2020. However, we solicited
comment on whether a different FDA marketing authorization date, for
example, on or after January 1, 2019, might be appropriate. Many
commenters, including a device
[[Page 60689]]
manufacturers association, a device manufacturer, a medical technology
company, a national dialysis stakeholder organization, a national
dialysis association, an LDO, and a home dialysis association expressed
support for a January 1, 2019 FDA marketing authorization date.
One of the commenters suggested that CMS eliminate the newness
criterion. The commenter stated that while little innovation has
occurred in ESRD in decades, there are a limited number of products
developed that have been unsuccessful in entering the market because of
reimbursement barriers. The commenter asserted that the proposed
January 1, 2020 date would encourage use of technologies that are
currently in development, but have not yet entered the market, putting
earlier innovators at a disadvantage. The commenter maintained that the
same incentive for use should be applied to technologies that have
recently gained approval and have had limited market uptake, in many
cases because they are more costly than existing technologies, despite
presenting substantial clinical improvement.
A software development company stated that it is important that CMS
implement the TPNIES in a manner that maintains a level playing field.
In other words, CMS must work collaboratively with FDA to ensure all
new market entrants undergo the appropriate regulatory oversight prior
to marketing their equipment and supplies. The company stated that CMS
must also implement the TPNIES in a manner that avoids rewarding
technology vendors for achieving overdue FDA marketing authorization.
Further, technologies that have already completed the regulatory
oversight process should be able to access the same incentives, that
is, the new add-on payment adjustment.
The company encouraged CMS to ensure the eligibility of
technologies that have already obtained FDA marketing authorization,
and are not reimbursed under the ESRD PPS, for the TPNIES. This
approach would assist CMS in achieving greater competition and
innovation, as opposed to making eligible just those products granted
marketing authorization by the FDA on or after January 1, 2020, as
envisioned by the proposed rule.
Another commenter expressed similar concerns and recommended that
CMS extend eligibility for the TPNIES to products receiving marketing
authorization on or after January 1, 2019, and even consider on or
after January 1, 2018 as the criterion. The commenter stated that this
would allow a technology to be eligible for the TPNIES if it recently
received marketing authorization but has struggled with market adoption
because of financial disincentives in the ESRD PPS.
Another commenter recommended that CMS extend the eligibility for
the TPNIES back to a January 1, 2018 FDA marketing authorization date.
This would give new devices (and drugs) that may be eligible to
participate in IPPS' NTAP or OPPS' pass-through, a 2-year window from
the regulatory date of approval, or when the product is introduced to
market, to participate in the respective programs. The commenter also
noted that there have been highly innovative products, which could
significantly benefit the Medicare population, which have been approved
over the last 2 years. The commenter stated there are a limited number
of recently approved highly innovative products for the ESRD patient
population and encouraged CMS to grant as much flexibility as possible
related to the FDA marketing authorization date.
However, a non-profit provider association stated that a
prospective, rather than retrospective, date is appropriate, since part
of the basis for providing additional payment is to spur innovation,
which industry stakeholders have said has been thwarted.
Response: After careful consideration of these comments, we have
decided to finalize the proposed definition of new to mean granted
marketing authorization by FDA on or after January 1, 2020. While we
appreciate that manufacturers of renal dialysis equipment and supplies
that were granted FDA marketing authorization in prior years would want
these products to be eligible for the TPNIES, our goal is not to
provide a payment adjustment for all the products that have received
FDA marketing authorization or for products that have had limited
market uptake, but rather to establish an add-on payment adjustment for
certain new and innovative products in order to support uptake by ESRD
facilities of new and innovative renal dialysis equipment and supplies.
In addition, we appreciate the complex issues the commenters raised if
we were to select an earlier FDA marketing authorization date, and
believe our approach will avoid the need to address those issues. We
note that the ESRD PPS is a prospective payment system, in which
changes are generally made prospectively, including eligibility
requirements for add-on payment adjustments. In addition, this
marketing authorization date of January 1, 2020 or later is consistent
with the TDAPA's definition of a new renal dialysis drug or biological
product.
Comment: Many commenters recommended that all FDA marketing
authorizations under the PMA, De Novo, and 510(k) products that
represent SCI should be eligible to receive the TPNIES. Given the
shortage of new and innovative technologies in this disease area and
the many differences between dialysis care and acute hospital services
that often receive NTAP payment, they recommended that CMS consider
deeming FDA's marketing authorization under the PMA or De Novo pathways
as a criterion that would meet the SCI requirement. Additionally, they
recommended adding a policy that would allow all approved and cleared
FDA Breakthrough Therapy Designation products to meet the criteria.
A device manufacturers association and a device manufacturer and
others made a similar recommendation based on their concern that the
requirement that all products undergo the SCI determination process
will delay patient access to needed therapies. They pointed out that
products that receive FDA marketing authorization under the PMA or De
Novo pathways must undergo more stringent regulatory review and provide
FDA with more data than a 510(k) submission and have demonstrated a
level of clinical effectiveness and newness that products cleared under
the 510(k) process have not.
They believe that this policy modification would have a negligible
effect on the cost of the TPNIES program to the Federal Government, but
it would have a tremendous effect on encouraging innovation. The
commenters pointed out that no new devices for use in an ESRD facility
were authorized by the FDA under a PMA or De Novo application from 2013
to 2017.
A medical technology company agreed, recommending that we allow
devices, including capital equipment, that have made significant
improvements upon an existing approved device be eligible for the
TPNIES when delivering product updates that meet SCI or patient
preference criteria. The company stated that this approach would
encourage significant innovation that is achievable in a relatively
short time period, reaching today's patients.
However, MedPAC stated that CMS should not use FDA's marketing
authorization processes, including PMA and De Novo pathways, as a proxy
for or in place of the proposed SCI criteria. They maintain that the
Medicare program, not the FDA, should adjudicate spending
determinations
[[Page 60690]]
based on the specific needs of the Medicare population. MedPAC stated
that FDA's role in the drug and device development process as a
regulator is distinct and separate from the role of CMS as a payer.
MedPAC noted that FDA regulates whether a device or pharmaceutical is
``safe and effective'' for its intended use by consumers. The FDA
marketing authorization process may or may not include the new device
or pharmaceutical's safety or effectiveness with regard to the Medicare
population.
MedPAC also pointed out that there have been many examples where
devices approved through expedited FDA marketing authorization have not
resulted in improvements in care relative to existing technologies, and
in fact many have been recalled.
Response: In the CY 2020 ESRD PPS proposed rule, we referenced the
SCI criteria in Sec. 412.87(b)(1) and did not propose the alternative
pathway described in Sec. 412.87(c) which includes devices that have
FDA marketing authorization and are part of FDA's Breakthrough Devices
Program (which can include De Novo and PMA) that is deemed to meet the
conditions specified in Sec. 412.87(b)(1), that is, the SCI criterion.
For this reason, we are unable to adopt this change in this final rule.
In addition, we believe that instead of limiting eligibility for the
TPNIES to PMA and De Novo as several commenters suggested, the SCI
policy will provide an opportunity for a product that has no predicate
product, that is, is not the first of its kind but offers SCI, to
receive the TPNIES. Additionally, with regard to the comment regarding
SCI delaying patient access to therapies, we believe that this is
balanced with our opportunity to review more applications for TPNIES
eligibility which may lead to more treatment choice for patients.
Comment: A device manufacturers association and 2 device
manufacturers stated that CMS should finalize the proposal to adopt the
IPPS SCI criteria specified including modifications finalized in future
IPPS rules. They pointed out that on August 2, 2019, in the FY 2020
IPPS final rule, CMS finalized changes to the SCI criteria so that
manufacturers can now present a wider variety of information to support
the NTAP application. These changes were made to introduce greater
flexibility in the SCI decision making process. Although they believe
that adoption by reference is implied, they recommended that CMS
explicitly adopt the new SCI criteria in the final rule and,
ultimately, in the TPNIES application itself.
Response: We acknowledge that revised criteria for assessing SCI
was published in the FY 2020 IPPS final rule (84 FR 42180 through
42181). In accordance with the proposed reference to Sec.
412.87(b)(1), which we are finalizing in new Sec. 413.236(b)(5), we
have adopted the FY 2020 IPPS changes to the SCI criteria, and any
future changes to the SCI criteria, by reference, unless and until we
make any changes to the criteria through notice and comment rulemaking.
Specifically, CMS will use the following criteria to evaluate SCI
for purposes of the TPNIES under the ESRD PPS (see Sec. 412.87(b)(1)
and Sec. 413.236(b)), based on the IPPS SCI criteria and related
guidance:
A new renal dialysis equipment or supply represents an advance that
substantially improves, relative to renal dialysis services previously
available, the diagnosis or treatment of Medicare beneficiaries. First,
and most importantly, the totality of the circumstances is considered
when making a determination that a new renal dialysis equipment or
supply represents an advance that substantially improves, relative to
renal dialysis services previously available, the diagnosis or
treatment of Medicare beneficiaries.
Second, a determination that a new renal dialysis equipment or
supply represents an advance that substantially improves, relative to
renal dialysis services previously available, the diagnosis or
treatment of Medicare beneficiaries means:
The new renal dialysis equipment or supply offers a
treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments; or
The new renal dialysis equipment or supply 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, and there must also be evidence
that use of the new renal dialysis service to make a diagnosis affects
the management of the patient; or
The use of the new renal dialysis equipment or supply
significantly improves clinical outcomes relative to renal dialysis
services previously available as demonstrated by one or more of the
following: A reduction in at least one clinically significant adverse
event, including a reduction in mortality or a clinically significant
complication; a decreased rate of at least one subsequent diagnostic or
therapeutic intervention; a decreased number of future hospitalizations
or physician visits; a more rapid beneficial resolution of the disease
process treatment including, but not limited to, a reduced length of
stay or recovery time; an improvement in one or more activities of
daily living; an improved quality of life; or, a demonstrated greater
medication adherence or compliance; or,
The totality of the circumstances otherwise demonstrates
that the new renal dialysis equipment or supply substantially improves,
relative to renal dialysis services previously available, the diagnosis
or treatment of Medicare beneficiaries.
Third, evidence from the following published or unpublished
information sources from within the U.S. or elsewhere may be sufficient
to establish that a new renal dialysis equipment or supply represents
an advance that substantially improves, relative to renal dialysis
services previously available, the diagnosis or treatment of Medicare
beneficiaries: Clinical trials, peer reviewed journal articles; study
results; meta-analyses; consensus statements; white papers; patient
surveys; case studies; reports; systematic literature reviews; letters
from major healthcare associations; editorials and letters to the
editor; and public comments. Other appropriate information sources may
be considered.
Fourth, the medical condition diagnosed or treated by the new renal
dialysis equipment or supply may have a low prevalence among Medicare
beneficiaries.
Fifth, the new renal dialysis equipment or supply may represent an
advance that substantially improves, relative to services or
technologies previously available, the diagnosis or treatment of a
subpopulation of patients with the medical condition diagnosed or
treated by the new renal dialysis equipment or supply.
Comment: An LDO recommended that CMS finalize its proposal to adopt
SCI as an eligibility criteria for the TPNIES, clarify and provide
further guidance on how it intends to apply the new criteria, and
establish a process that includes at least one reviewer of TPNIES
applications with clinical expertise in ESRD care.
Response: We intend to establish a workgroup of CMS medical and
other staff to review the studies and papers submitted as part of the
TPNIES application, the public comments we receive, and the FDA
marketing authorization and HCPCS application information and assess
the extent to which the product provides SCI over current technologies.
Our intent is to
[[Page 60691]]
obtain input from a nephrologist along with other subject matter
experts throughout our decision making process for determining TPNIES
eligibility.
Comment: Several commenters, including a patient advocacy
organization, a medical technology company, and a medical technology
association requested that CMS expand on the SCI criteria for the
TPNIES to include patient preference data, and clarify at least some of
the elements that would be considered as improved quality of life. The
commenters noted that the Kidney Health Initiative Renal Replacement
Therapy Roadmap outlines the elements that should constitute improved
quality of life for patients and they believe CMS should include and
apply these elements in the CY 2020 ESRD PPS final rule. They also
recommended that patient preference data should be considered for
evaluating SCI. They stated that it is critically important for TPNIES
approvals to reflect the preferences of ESRD patients and empower their
choice to do home dialysis or self-care. The organization offered to
work with CMS to define a process for evaluating improvements in one or
more activities of daily living and improved quality of life. The
organization stated that such a process is especially important because
patient preference and patient reported outcome data are not always
available at the time that marketing authorization is granted by FDA.
They want to ensure that equipment or supplies that represent a
meaningful advance for ESRD patients, but where the patient's
preferences have not yet been formally evaluated at the time of FDA
marketing authorization, would be eligible for TPNIES.
Response: As stated in section II.B.1.a of the CY 2020 ESRD PPS
proposed rule (84 FR 38354), 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 the ESRD
PPS. We intend to study in the future how patient preference
information could be used to inform SCI determinations under the ESRD
PPS to determine if we should establish any criteria that are specific
to the ESRD PPS. In the interim, since TPNIES applications will be
described in the annual ESRD PPS proposed rules, we urge ESRD patients
and patient advocacy organizations to provide the patient perspective
on the TPNIES applications in comments on the proposed rule. We note
that the CMS determinations on the TPNIES applications will be issued
in the annual ESRD PPS final rules based on the totality of the
information provided, including public comments receiving during the
rulemaking process.
Comment: A health services company pointed out that CMS did not
provide a definition for commercially available and asked that we
eliminate the requirement in the final rule. The company pointed out
that neither the IPPS add-on payment nor OPPS pass through payment
rules require that the equipment or supply be commercially available
and the CY 2020 ESRD PPS proposed rule provided no rationale for
including this eligibility requirement.
Response: We included the eligibility requirement that a new and
innovative renal dialysis equipment or supply be commercially available
for the reasons set forth below, not to be consistent with the IPPS
NTAP or OPPS pass-through payment. Regarding the request that we define
commercially available, we are clarifying that commercially available
means available for sale to ensure that manufacturing or other delays
do not significantly delay patient access to the new equipment or
supply.
We expect that if an application for the TPNIES is submitted by
February 1, 2020 for the equipment or supply, the equipment or supply
would be available to be sold by January 1, 2021, when the TPNIES
period begins, if we determine the item is eligible. In addition, we
note that the TPNIES period for a product begins on January 1 and ends
2 years later on December 31. We would expect that manufacturers would
want to capitalize on the marketing opportunity available during the
TPNIES period and ensure that the equipment or supply is commercially
available on January 1. We are concerned that if the equipment or
supply is not commercially available on January 1, there may be
confusion from ESRD facilities over when the TPNIES period starts and
ends. Therefore, we believe this is an important criteria for
eligibility for the TPNIES. If the equipment or supply is not
commercially available on January 1, the manufacturer would not meet
one of the eligibility criteria for TPNIES and no TPNIES payments
should be made. For this reason, we expect for the manufacturer to
notify CMS by September 1 if the equipment or supply will not be
commercially available by January 1. If the manufacturer is unable to
have market availability by January 1, 2021, the equipment or supply is
not eligible for TPNIES in CY 2021.
Final Rule Action: After consideration of public comments, for CY
2020 we are finalizing the addition of Sec. 413.236, Transitional Add-
on Payment Adjustment for New and Innovative Equipment and Supplies,
with 5 modifications. First, we are clarifying that applicants must
receive FDA marketing authorization by September 1 and not February 1;
second, we are clarifying what commercially available means and when it
needs to occur; third, we are clarifying when the HCPCS application
needs to be submitted; fourth, we are clarifying what particular
calendar year means; and fifth; we are taking out the reference to the
application of the TPNIES in the calculation of the per treatment
payment amount because we do not believe it is necessary in light of
our changes to Sec. 413.230. We are finalizing the addition of Sec.
413.236(a) to state that the basis for the TPNIES is to establish an
add-on 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 are finalizing the addition of Sec. 413.236(b) to state
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 by January 1 of
the particular calendar year, meaning the year in which the payment
adjustment would take effect, (4) has a Healthcare Common Procedure
Coding System (HCPCS) application submitted in accordance with the
official Level II HCPCS coding procedures by September 1 of the
particular calendar year (5) is innovative, meaning it meets the
criteria specified in Sec. 412.87(b)(1) 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).
We are also finalizing the addition of Sec. 413.236(c) to
establish a process for the TPNIES determination and deadline for
consideration of new renal dialysis equipment or supply applications
under the ESRD PPS. That is, we are finalizing that we will 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 are finalizing that we will only consider a complete
application received by CMS by February 1 prior to the particular
calendar year, meaning the year in which the payment adjustment would
[[Page 60692]]
take effect, and that FDA marketing authorization for the equipment or
supply must occur by September 1 prior to the particular calendar year.
ii. Pricing of New and Innovative Renal Dialysis Equipment and Supplies
In the CY 2020 ESRD PPS proposed rule (84 FR 38355), we stated
that, with respect to the new and innovative renal dialysis equipment
and supplies, we were 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 noted that,
unlike 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 its high cost criteria
payment calculation, the ESRD PPS has a single per treatment payment
amount. Therefore, we proposed to establish 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 proposed that ESRD
facilities would report the HCPCS code, when available, and their
corresponding charge for the item. We explained that, 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 did
not propose 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. As a result, we proposed to obtain a pricing indicator
that requires the item to be priced by Medicare Administrative
Contractors (MACs). We proposed to adopt a process that utilizes
invoiced-based pricing. We noted that there are instances in which
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, we noted that in the CY 2019 Physician Fee Schedule
final rule (83 FR 59663), we discussed 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 stated
that we believed using invoices for new drugs and drugs without
national pricing is a similar situation to addressing new and
innovative renal dialysis equipment and supplies that do not have a
national price.
We stated that we believed 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 stated that we believed 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).\32\ 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 co-insurance obligations for beneficiaries.
For this reason, we noted that 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 explained that 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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\32\ Medicare Provider Reimbursement Manual. Chapter 8.
Available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R450PR1.pdf.
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Under our proposal, 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 stated that once there is sufficient payment data across MACs,
we would consider establishing a national price for the item through
notice and comment rulemaking. We invited 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 final rule. We also
solicited comment on other pricing criteria and other verifiable
sources of information that should be considered.
To mitigate the Medicare expenditures incurred as a result of the
TPNIES proposal discussed later in this section of the final rule, we
proposed to base the additional payment on 65 percent of the MAC-
determined price. We noted that 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. In the FY 2020 IPPS final rule (84 FR 42048), the
percentage was revised to be 65 percent. In the CY 2020 ESRD PPS
proposed rule (84 FR 38356), we stated we believed 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
proposed to base the TPNIES on 65 percent of the
[[Page 60693]]
MAC-determined price. We also solicited 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 TPNIES 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
In the CY 2020 ESRD PPS proposed rule, we acknowledged that ESRD
facilities have unique challenges with regard to implementing new renal
dialysis drugs and biological products as discussed in section II.B.1.b
of this final rule, and we stated that we believed 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 stated that we believed 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 proposed 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 also proposed that
after the TPNIES period ends, the item would become an eligible outlier
service as provided in Sec. 413.237. Therefore, we proposed revisions
to Sec. 413.237(a)(1) to reflect outlier eligibility for the new renal
dialysis equipment or supply once the TPNIES period ends. We stated
that we believed 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 noted that we believed 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.
Further, we stated that we believed 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, the TPNIES 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 proposed 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 noted that this proposal would increase Medicare expenditures,
which would result in increases to ESRD beneficiary co-insurance, 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 IPPS
payment policies, we noted that we believed that the proposed TPNIES
would be appropriate to support ESRD facility uptake in furnishing new
and innovative renal dialysis equipment and supplies.
We stated that the intent of the TPNIES 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. We explained that, 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 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 rate whenever a new product is made available.
Therefore, we also proposed to add Sec. 413.236(d) to provide a
transitional add-on payment adjustment for 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 proposed 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 also proposed to add paragraph (e) to Sec. 413.230, Determining
the per treatment payment amount, to reflect the TPNIES. We stated that
we believed this modification is necessary so the regulation
appropriately reflects all inputs in the calculation of the per
treatment payment amount.
Since we were proposing to add paragraphs (d) (discussed in section
II.B.1.e of this final rule) and (e) to Sec. 413.230, we also proposed
a technical change to remove ``and'' from the end of
[[Page 60694]]
Sec. 413.230(b). We proposed that the ``and'' would be added to the
end of Sec. 413.230(d).
In addition, we proposed 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
proposed 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 proposed 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 also proposed 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.
The comments and our responses to the comments on our proposals
regarding pricing of new and innovative renal dialysis equipment and
supplies and the proposed changes to ESRD PPS regulations are set forth
below. We did not receive comments on our proposal to add paragraph (e)
to Sec. 413.230 to reflect the TPNIES, for a technical change to
remove ``and'' from the end of Sec. 413.230(b), for a technical change
to include ``and'' to the end of Sec. 413.230(d), or the 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. We are therefore finalizing these
revisions to the regulation text as proposed.
Comment: Most commenters, including a national dialysis stakeholder
organization, an LDO, a nursing association, a device manufacturers
association and a patient advocacy organization expressed concern that
after the 2-year TPNIES period, we did not propose to make changes to
the base rate. Rather, we proposed to make these items eligible for
outlier payments. Several commenters asked that CMS adjust the base
rate to include dollars for the incremental difference of the cost of
the new device and what may be reflected in the ESRD PPS base rate
already. They asserted that this comprehensive approach is the best way
to align the TPNIES policy with the President's goal to incentive the
adoption of new innovations in the ESRD program. In addition, MedPAC
stated that CMS should not make duplicative payments for new ESRD-
related equipment and supplies by paying under the TPNIES for 2 years
and paying for an item with a similar purpose or use that is already
paid under the ESRD PPS base rate. For example, CMS could reduce the
TPNIES payment amount to reflect the amount already included in the
base rate. An LDO also made this suggestion.
The LDO suggested that CMS should apply funds not expended under
the narrower TDAPA eligibility policy to make ESRD PPS adjustments when
it adds new products to the ESRD PPS base rate. An adjustment could be
established that equals the incremental difference between any amounts
associated with the functional category currently in the base rate
attributable to the new product's cost. The LDO noted that this might
result in CMS adding the product's full cost if the base rate does not
include any such reimbursement or a lesser amount that reflects current
dollars in the base rate. The LDO also recommended that CMS make
similar adjustments to ensure that the base rate reflects costs
associated with a new device after a TPNIES ends.
A device manufacturer suggested that, at the end of the TPNIES
period, CMS positively adjusts the ESRD PPS base rate to reflect the
added value of the TPNIES product. For example, CMS could adjust the
ESRD PPS via a value-based modifier adjustment by exercising its
authority under section 1881(b)(14)(D)(iv) of the Act to adjust
payments under the ESRD PPS for value-enhancing medical products
following the expiration of the transitional pass-through period. The
value-based modifier could be derived from the demonstrated value of a
given TPNIES product--for example, a device's demonstrated impact on
averting hospitalizations and other additional resources. The
manufacturer suggested that value could be shared between facilities
using the new device and the Medicare program.
The patient advocacy organization expressed concern that by leaving
a funding ``cliff'' at the end of the 2-year TPNIES period, clinics may
not test new products. The organization also expressed concern that if
the device reduces complications and thereby reduces the total cost of
care for ESRD patients, but that these savings are not reflected in the
fee-for-service (FFS) payment system, the device will be offered to
Medicare Advantage enrollees but not to FFS beneficiaries.
Another commenter recommended collection of use data similar to
that collected under the TDAPA policy for new renal dialysis drugs and
biological products that are in new ESRD PPS functional categories, and
if a product is used by a sufficient proportion of Medicare
beneficiaries, CMS should increase the ESRD PPS base rate.
A national dialysis association, a device manufacturers association
and a device manufacturer also recommended that at the end of the
TPNIES period, CMS positively adjust the ESRD PPS base rate to reflect
the added value of the TPNIES product. The commenters stated that
failure to positively adjust the ESRD PPS base rate after the TPNIES
period will result in a situation where providers must absorb the costs
of the new product after the expiration of the add-on payment
adjustment. This could discourage providers from adopting the new
device in the first instance or from using the device for the long-
term. The commenters noted that both outcomes would hinder innovation
and stall improvements in patient care, which undercuts the fundamental
purpose of the TPNIES. The organization stated that the outlier pool
was never designed to provide comprehensive reimbursement for new,
high-cost products to a significant number of beneficiaries. The
outlier pool cannot function as a substitute for thoughtfully building
dollars into the base rate to cover expected care.
An LDO disagreed that it would be inappropriate to add new dollars
to the ESRD PPS base rate at the end of the TPNIES timeframe. The LDO
is concerned that the TPNIES will encourage uptake of high-cost new
technologies and then leave providers without a way to cover the costs
above the amount accounted for in the base rate after the 2-year window
closes. The LDO stated that the outlier policy does not address this
funding shortfall and would exclude lower cost innovative supplies that
do not exceed the FDL threshold. In addition, although the LDO has
longstanding concerns with the outlier mechanism, the LDO agreed that
device technologies (like drugs) should be part of the outlier payment
mechanism, as they are for other Medicare providers, to address
individual high cost cases.
While the LDO agrees that it is not the intent of the PPS to add
new money whenever something new is made available, the LDO expressed
concern that the current policy does not leave
[[Page 60695]]
CMS any flexibility to do so when appropriate and is a significant
disincentive for technology developers to enter the ESRD space. The LDO
recommended that CMS establish a process for adding dollars into the
base rate, where appropriate, to ensure PPS payments are sufficient to
reflect improved technologies once the TPNIES timeframe ends. In
addition, CMS should finalize its proposal to add TPNIES-eligible
products to its definition of ESRD outlier services to account for
individual high cost cases.
Response: We appreciate the concerns raised by the stakeholders
with regard to our proposal to not adjust the ESRD PPS base rate after
the end of the TPNIES period. As we explained in the CY 2020 ESRD PPS
proposed rule, 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. When implementing the ESRD PPS for CY 2011, we used the composite
rate payments made under Part B in 2007 for dialysis in computing the
ESRD PPS base rate (75 FR 49075). Therefore, we believe the ESRD PPS
base rate currently reflects the renal dialysis equipment and supplies
that will be eligible for TPNIES.
Moreover, as we have explained with respect to the TDAPA for drugs
already reflected in the ESRD PPS functional categories, we believe
adding dollars to the ESRD PPS base rate for items that are already
reflected in the ESRD PPS base would be inappropriate and would be in
conflict with the fundamental principles of a PPS. Under a PPS,
Medicare makes payments based on a predetermined, fixed amount that
reflects the average patient, and the facility retains the profit or
suffers a loss resulting from the difference between the payment rate
and the facility's cost, which creates an incentive for cost control.
It is not the intent of a PPS to add dollars to the base rate whenever
something new is made available. Additionally, the statute does not
require that we add dollars to the ESRD PPS base rate when a new item
is available.
With regard to the comment about CMS using a value-based modifier
adjustment, as we explained in the CY 2020 ESRD PPS proposed rule, the
intent of the TPNIES for new and innovative equipment and supplies is
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. 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 TPNIES because it would help facilities transition or test new
and innovative equipment and supplies in their businesses under the
ESRD PPS.
We appreciate the suggestion of reducing the TPNIES payment by the
amount already included in the ESRD PPS base rate, however, ESRD
facilities have historically not reported on claims the utilization of
composite rate items and services, which is what these products are
considered to be. Therefore we do not have the data sufficient to make
these calculations at this time. We note that we included a request for
this information in section VIII.A of the CY 2020 ESRD PPS proposed
rule on how to collect this data. In response some commenters stated
that the composite rate components to price the cost of dialysis
treatment was outmoded and unnecessary concept and counter to the
objective of the bundled system instituted with the ESRD PPS in CY
2011.
We are concerned about the comment stating that ESRD facilities
will choose to not adopt new and innovative equipment and supplies. We
do not agree with these commenters because we believe that innovative
products that are competitively priced and that add value will be able
to be successfully marketed and that ESRD facilities will want to use
them. In addition, since we collect monitoring data, we will be aware
of utilization and behavior trends and will be able to use this data to
inform future policies.
Comment: Most provider organizations including a national dialysis
stakeholder organization, an LDO, a professional association, a nursing
association and a national dialysis association requested that we
provide the TPNIES for 2-full calendar years of cost and utilization
data. They stated that patients and providers take time to integrate
new technologies and innovation into ongoing care practice. To ensure
that cost and utilization data are accurate, they recommended that CMS
extend the TPNIES period for the time required to collect 2 full years
of cost and utilization data.
However, a device manufacturer association and a medical technology
company requested that we extend the TPNIES period to 4 years. They
opined that a 2-year period would discourage small start-up companies
from developing innovative equipment and supplies, as building the
support and distribution infrastructure nationwide to support new
technology implementation takes far longer. They stated that extending
the coverage period to 4 years would help level the playing field
between small innovators and large, global manufacturers with an
existing support and distribution footprint. Several other commenters
recommended a 3-year TPNIES period because facilities need several
years to set up system modifications and adjust business practices.
They stated they believe that at least 3 years is an appropriate
timeframe based on CMS' experience with other new technology add-on
payment mechanisms.
Response: In providing an add-on payment, that is, the TPNIES, for
new and innovative renal dialysis equipment and supplies that are
accounted for in the ESRD PPS base rate, we did not propose to
incorporate these products into the ESRD PPS base rate when the TPNIES
period ends. The purpose for the TPNIES is 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. For example, when new and innovative
renal dialysis 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 TPNIES because it would help facilities transition or test new
and innovative equipment and supplies in their businesses under the
ESRD PPS. The TPNIES would target payment for the use of new and
innovative renal dialysis equipment and supplies during the
[[Page 60696]]
period when a product is new to the market.
Further, we believe that the 2-year period gives the ESRD facility
the opportunity to incorporate the product into their business model if
they choose. The facility would be comparing a product currently in use
with a new and innovative product and making a choice if the increased
cost would be commensurate with increased clinical value to the
beneficiary. We continue to believe providing the TPNIES for 2 years is
appropriate for new and innovative products and that a longer timeframe
to establish the product's uptake is not necessary, particularly since
the ESRD PPS base rate includes money for these products. We are not
expanding the duration of the TPNIES period because we believe that 2
years strikes the appropriate balance of supporting innovation while
protecting the Medicare expenditures. We note that the TPNIES period
begins on January 1, the effective date of the annual ESRD PPS final
rule in which we announce our determinations with regard to TPNIES
applications, and ends on December 31, that is, 2 years later.
Comment: Many comments expressed support for the proposal to base
payment for the TPNIES on the price established by the MACs using
information from invoices and other relevant sources of information.
However, MedPAC expressed support for the proposal but only for the
first 2-calendar quarters after CMS begins applying the TPNIES.
Thereafter, MedPAC recommended that CMS should set the price of new
equipment and supplies using a method based on pricing data collected
directly from each manufacturer, similar to how CMS establishes the
average sales price (ASP) for Part B drugs.
The Commission pointed out that the ASP for a Part B drug reflects
the average price realized by the manufacturer for its sales broadly
across different types of purchasers and for patients with different
types of insurance coverage. It is based on the manufacturer's sales to
all purchasers (with certain exceptions) net of manufacturer rebates,
discounts, and price concessions. There is a 2-quarter lag in the data
used to set ASP-based payment rates. MedPAC stated that an approach
similar to how CMS collects ASP data would increase the consistency of
pricing data and should lead to more accurate payment rates for items
paid under the TPNIES. In establishing a process for collection of
average sales price data for equipment and supplies, the Commission
recommended that, similar to the TDAPA for new renal dialysis drugs and
biological products, CMS should link payment of the TPNIES to a
requirement that equipment and supply manufacturers submit ASP-like
data to CMS.
Other commenters, including a device manufacturer, a device
manufacturers association, and a patient advocacy organization
recommended that, instead of the invoice-based pricing process at the
MAC level, with possible national-level rates set once there is enough
data across multiple MACs, CMS adopt a rate determination process like
the NTAP. Under this process, TPNIES applicants, when providing SCI
data and other information in their application, can also provide
information on the cost of the product. Then, when CMS discusses the
application in the ESRD PPS proposed rule, CMS could discuss the cost
information provided by the applicant and ask stakeholders (including
providers, innovation leaders and patient-centered advocacy
organizations) for comments. The national payment rate could then be
finalized in the ESRD PPS final rule when CMS accepts or denies the
TPNIES application. The commenters indicated that this change in
process would elevate the principle and practice transparency and
provide far greater certainty for ESRD providers and, more importantly,
limit the impact of the TPNIES administrative process on patient
access.
A national dialysis stakeholder organization and an LDO asked that
CMS ensure that the pricing for the TPNIES is transparent and provides
predictability and consistency in pricing. A professional association
stated that by their very nature, MACs make local coverage and
reimbursement decisions that can vary by region. To ensure consistency
and adequacy in pricing and reimbursement, they urged CMS to ensure
that the proposed MAC pricing process is transparent and understandable
for all stakeholders. Another LDO agreed and requested that CMS specify
in the CY 2020 ESRD PPS final rule that MACs must disclose the sources
of information relied on (without disclosing proprietary information)
so stakeholders can understand the basis for pricing determinations as
well as any variations in prices jurisdictions.
A national dialysis association recommended that the MACs should
use a transparent, notice-and-comment process in order to establish the
reimbursement associated with the TPNIES. The association stated that
if the MACs cannot accommodate a notice-and-comment process, then CMS
should consider an alternative process for the establishment of
reimbursement policy that would ensure the opportunity for notice-and-
comment to the public.
Response: As we stated in the CY 2020 ESRD PPS proposed rule, at
this time, we do not have the data to set a price for new and
innovative renal dialysis equipment and supplies. We note that there
are other times when items and services do not have fee schedule
payment rates assigned to them that are paid under Medicare via a MAC-
determined value, for example, when new drugs do not have an ASP. We
agree with the commenters that transparency and predictability is
important, however, we would need time to develop a national price for
a particular product. We note that in comparison to IPPS's NTAP policy,
we do not apply the ESRD PPS outlier policy during the TPNIES period,
which makes process we have laid out for determining the price more
predictable than the IPPS. With regard to MedPAC's suggestion for an
ASP-like data reporting system, we do not have sufficient data at this
time to develop such a system, but will take the comment into
consideration for future rulemaking.
With regard to the comments that we rely solely on the
manufacturer's estimated cost to the facility and public comments to
establish a national payment amount for a TPNIES equipment or supply,
we are requesting that manufacturers estimate the cost of the equipment
or supply to the facility on a per treatment basis in the application.
However, while we believe this information from the manufacturer is one
factor in the MAC price determination process, we do not believe it
would be appropriate to set a national price based solely on that
information. As we explained in the CY 2020 ESRD PPS proposed rule (84
FR 38355), the MAC-determined price would be established 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 did not propose to establish a national price because we do not
have historical cost data and we are only in the initial phases of
developing a
[[Page 60697]]
process to evaluate cost criteria. However, we will consider this idea
for future rulemaking.
Comment: While most commenters expressed support for the TPNIES
proposal to pay 65 percent of the MAC-determined price, an organization
of LDOs and an LDO suggested that CMS consider whether or not the
innovation replaces a product currently reflected in the ESRD PPS base
rate and take a more customized approach in establishing a product's
TPNIES amount. They also stated that the proposed TPNIES payment of 65
percent of prices obtained from invoices or other relevant data sources
might be sufficient for a product that replaces one included in the
ESRD PPS bundled payment. However, they noted it will likely fall short
in covering the costs of a completely new and innovative product. The
commenters stated that with ESRD facilities' negative margins,
facilities will have little room to absorb these costs, which will
compromise the adoption of, and beneficiaries' access to, truly
innovative products. They further stated that it is possible that for
new devices, 65 percent of the MAC-determined price will sufficiently
cover facility costs. They asked that CMS monitor this policy and leave
open the possibility of amendments, as needed, to ensure that
clinically valuable, new technology can actually reach beneficiaries.
A device manufacturer and a device manufacturers association and
others urged CMS to pay 100 percent of the cost of the new product to
ensure maximum adoption of the new TPNIES product, and to compensate
for any unforeseen costs associated with that product. The commenters
stated that the ESRD PPS bundled payment for thrice-weekly dialysis
care is a model that encourages efficiency among existing services and
inputs but discourages investment in new technologies that offer a new
value proposition. They asserted that providing 65 percent of the known
costs of the new device through TPNIES does not provide payment for any
unanticipated costs of the new technology such as additional staff
training, product administration, or facility handling.
In addition, the commenters pointed out that there is a significant
lag in payment that requires facilities to assume liability for any
excess costs associated with a new device above the ESRD PPS bundled
payment amount. Thus, the commenters opined that new devices create a
dilemma for providers under the ESRD PPS: Either absorb the costs
associated with a new technology to advance the standard of care or
forego the new technology despite its clinical benefits. For these
reasons, they urged CMS to set the payment adjustment at 100 percent of
the cost of the new TPNIES approved product.
However, MedPAC expressed support for the proposal to pay a reduced
percentage of the new item's cost as a way to share risk with dialysis
providers and provide some disincentive for the establishment of high
launch prices. MedPAC also recommended that CMS not explicitly link the
ESRD PPS TPNIES payment percentage to the IPPS NTAP mechanism's maximum
add-on payment percentage. The Commission pointed out that CMS would
have greater flexibility about any future changes to the ESRD PPS
payment percentage if it was not explicitly linked to the IPPS payment
percentage.
Response: We appreciate the support for the proposal to pay 65
percent of the MAC-determined price and agree with MedPAC that this
would disincentivize high launch prices. At this time, we are not
finalizing a policy to explicitly tie the ESRD PPS to future changes to
the IPPS NTAP policy with regard to the IPPS NTAP mechanism's maximum
add-on payment amount percentage. However, we believe that we have the
same goal as the IPPS with regard to supporting ESRD facility use of
new and innovative renal dialysis equipment and supplies. In addition,
we agree with MedPAC that the TPNIES amount needs to be a value that is
enough to incentivize uptake of the new and innovative equipment or
supply by ESRD facilities but believe that we need to balance this with
sharing risk for the new product. We agree with commenters with regard
to monitoring utilization of these products that are eligible for the
TPNIES and we note that any future changes to this policy would be
addressed through notice and comment rulemaking.
Comment: MedPAC stated that CMS should publish in the final rule an
estimate of the increase in beneficiaries' and taxpayers' spending due
to the proposed policy change and the method used to develop the
estimate.
Response: As we explain in section X of this final rule, the fiscal
impact of Medicare and beneficiary spending cannot be determined due to
the uniqueness of the new renal dialysis equipment and supplies
eligible for the TPNIES and their costs.
Final Rule Action: After consideration of public comments, for CY
2020 we are finalizing the addition of 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
newly added Sec. 413.236(e). The TPNIES will be paid for 2-calendar
years. Following payment of the TPNIES, 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.
We are also finalizing the addition of Sec. 413.236(e) to require
that the MAC on behalf of CMS will establish prices for the new and
innovative renal dialysis equipment and supplies described in newly
added Sec. 413.236(b), and that we will use these prices for the
purposes of determining the TPNIES. The MAC will use verifiable
information from the following sources of information, if available:
(1) The invoice amount, facility charges for the item, discounts,
allowances, and rebates; (2) the price established for the item by
other MACs and the sources of information used to establish that price;
(3) payment amounts determined by other payers and the information used
to establish those payment amounts; and (4) charges and payment amounts
required for other equipment and supplies that may be comparable or
otherwise relevant.
In addition, we are finalizing the proposed revision to 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 are finalizing the redesignation of
existing paragraph (a)(1)(v) as paragraph (a)(1)(vi) and the revision
of 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.''
iv. Implementation Process for CY 2020
We intend to develop an electronic application for the TPNIES over
the next year. In the meantime, in order to implement the TPNIES for CY
2020 and provide an opportunity for equipment and supply manufacturers
to apply for TPNIES payment for CY 2021, we are providing in this final
rule certain technical instructions for applications submitted in CY
2020. In addition, we will provide these instructions on a new CMS web
page under development for the TPNIES.
Deadline
Submit a complete application with a response to each question
below no later than February 1, 2020. An application is considered
complete when all of the information requested has been submitted by
the date specified and when questions related to the
[[Page 60698]]
submission have been answered by the applicant.
Address To Send Applications
Mail four copies of the completed applications to the following
address: ESRD PPS TPNIES Application, Division of Chronic Care
Management, Centers for Medicare and Medicaid Services, M/S C5-05-07,
7500 Security Blvd., Baltimore, MD 21244-1850.
Additionally, submit an electronic version of the application via
email to [email protected]. Emailed versions of the materials
must be compatible with standard CMS software such as Adobe Acrobat DC
for 2015 or Microsoft Word 2010. The subject line of the email must say
ESRD PPS TPNIES application. Total attachments in one email must not
exceed 20 megabytes. If necessary, send multiple emails with
attachments less than 20 megabytes. Questions pertaining to the TPNIES
process may also be sent to the electronic mailbox noted above.
Required Information
Applications must include a response to each question below. CMS
may request other information to evaluate specific TPNIES requests. A
separate application is required for each distinct equipment or supply
included in the TPNIES request.
1. Name, address, telephone number, and email address for the
primary and backup contact for the application. If using a consultant,
provide a contact from the manufacturer in addition to the consultant's
contact information.
2. Trade/brand name of the equipment or supply.
3. Describe the technology in general terminology--What is it? What
does it do? How is it used? Also, submit relevant descriptive booklets,
brochures, package inserts, as well as copies of published peer-
reviewed articles relevant to the new equipment or supply.
4. Have you submitted an application for pass-through payments
under the Medicare outpatient prospective payment system or new
technology payments under the IPPS? If so, please provide the tracking
number or, if it was approved, please provide the date of approval.
5. Under what pathway are you seeking marketing authorization from
FDA? What is the date of anticipated FDA marketing authorization for
the equipment or supply? Provide a copy of the FDA marketing
authorization. If marketing authorization has not yet been granted,
provide a copy of the authorization to CMS immediately after it becomes
available.
Per 42 CFR 413.236(c), an applicant for the TPNIES must receive FDA
marketing authorization for its new equipment or supply by September 1
prior to the beginning of the calendar year (CY) for which the TPNIES
would be effective (for CY 2021 payment, not later than September 1,
2020).
6. List the name and telephone number or email address of a contact
at FDA who is knowledgeable about the submission for marketing
authorization for the new equipment or supply listed above.
7. Will the equipment or supply be available on the market
immediately after FDA marketing authorization? If not, provide the date
that the equipment or supply came on the market (that is, first sales
or availability) and an explanation and documentation of any
anticipated delay (for example, manufacturing issues or other reasons).
If commercial availability has not yet occurred, provide proof of
commercial availability to CMS immediately after it becomes available,
for example, a manufacturer's bill of sale. Note that the manufacturer
must inform CMS by September 1 if the equipment or supply will not be
available by January 1.
8. Is there an investigational device exemption number from the FDA
assigned to the equipment or supply? If yes, please provide this code.
Refer to http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/HowtoMarketYourDevice/InvestigationalDeviceExemptionIDE/ucm051480.htm
for more details.
9. What class (I, II, or III) was/is assigned to the equipment or
supply? Refer to http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/overview/default.htm for more details.
10. Has an application for an HCPCS code been submitted? If not,
please note that submission of the HCPCS application is required by
September 1, 2020, so that we are able to use information from the
HCPCS application in our determination process. Refer to http://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/index.html for more
information.
11. What is the anticipated cost of the equipment or supply to the
ESRD facility, per treatment? Provide a breakdown of how the cost of
the new equipment or supply is calculated.
12. What is the anticipated Medicare and Non-Medicare volume of
this equipment or supply for the 2 years in the TPNIES period? Describe
how you arrived at this estimate. This estimate should be based on the
actual or projected sales of your equipment or supply, not the total
population eligible for the equipment or supply.
Note: Applicants are not required to submit proprietary or
confidential information as part of the application. However, an
applicant may choose to include such information to support its
request. Applicants should note that information they include in an
application is not explicitly protected from disclosure in response to
a Freedom of Information Act (FOIA) request. However, FOIA does include
an exemption for trade secrets and commercial and financial information
obtained from a person that is privileged or confidential.
Once the information requested by CMS is received and reviewed, for
equipment and supplies eligible for the TPNIES, we will issue a change
request with billing guidance that will provide notice that the
equipment or supply is eligible for the TPNIES as of January 1 and
technical instructions on how to report the equipment or supply on the
ESRD claim. This change request will initiate the TPNIES period and it
will end 2 years from the change request's effective date.
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 can affect patient access to new and
innovative products.
In the CY 2020 ESRD PPS proposed rule (84 FR 38357), we solicited
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.'' We explained in the CY 2020 ESRD PPS proposed rule that
Medicare has no specific rules, regulations or instructions with regard
to HUDs. We noted that we were 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
[[Page 60699]]
Medicare payment for these items through the MACs.
We received 7 comments on this solicitation. The comments and our
response are set forth below.
Comment: We received comments from a device manufacturer, a medical
device manufacturing association, a drug manufacturer, a non-profit
provider, a professional society, a national dialysis stakeholder
organization and a patient advocacy organization.
The commenters noted that in 1990, Congress created the HUD program
to encourage the research, development and marketing of innovative
devices for the treatment of rare diseases or conditions where no
comparable devices are available to those patients. They stated that
lack of Medicare reimbursement for HUDs impedes access to these
treatments for Medicare beneficiaries. They also stated that CMS should
ensure that HUDs are eligible for Medicare reimbursement, and suggested
that a Congressional directive that HUDs be sold by manufacturers at
cost indicates that CMS should establish Medicare payment for HUDs at
invoice.
A medical device manufacturing association and a patient advocacy
organization noted that there should be Medicare coverage of HUDs and
payment for these devices under the ESRD benefit if such devices are
required to be used in the ESRD facility, whether they are for the
treatment of ESRD or for the treatment of other conditions related to
renal dialysis.
A drug manufacturer noted its understanding that the HUD program is
a specific FDA program, but encouraged CMS to work with the company and
other innovators to protect access to innovative products that treat a
disease or condition affecting a very small number of individuals in
the U.S. annually. The company noted that drugs that are administered
to a small percentage of patients cannot be accounted for properly in a
bundled payment system. If dollars are allocated across all patients,
then those who require the drug may not receive the care they need
because the providers administering it will not have sufficient funds,
while those providers who do not provide the product will see a small
increase in their base rate. The company stated that money should
follow the patient in these circumstances to protect access to drugs
that benefit a small number of patients.
A device manufacturer urged CMS to promulgate a regulation
clarifying that HUDs are within the definition of renal dialysis
services or dialysis services depending on the device's function, and
explicitly define that HUDs should be reimbursed based on invoice given
that Congress has already addressed the invoice price to be charged. A
patient advocacy group urged CMS to ensure a reimbursement pathway for
devices with a HUD designation.
Response: We appreciate the range of comments we received on this
issue. We will consider these comments carefully as we contemplate
future policies related to HUDs.
4. Discontinuation of 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, 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 1,500 mcg
per month in 2007 (75 FR 49067).
As we explained in the CY 2020 ESRD PPS proposed rule (84 FR 38357
through 38358) 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 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 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). In the CY 2020 ESRD PPS proposed rule,
we explained that 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 believed 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. Discontinuing Application of the EMP to Outlier Payments Under the
ESRD PPS
CMS proposed that, effective January 1, 2020, we would no longer
apply the EMP under the ESRD PPS. As we explained in the CY 2020 ESRD
PPS proposed rule, 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. Under
our proposal, 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 stated that we would continue to require ESRD facilities to
report all necessary information for the ESRD Quality Incentive
Program, and noted that, 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.\33\ We stated that if we finalize
this proposal, we would continue to monitor the utilization of
[[Page 60700]]
ESAs to determine if additional medically unlikely edits are necessary.
In addition, we noted that 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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\33\ 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 stated in the CY 2020 ESRD PPS proposed rule that we believed
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 explained that 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.
The comments and our responses to the comments on our proposal to
discontinue the application of the EMP under the ESRD PPS are set forth
below.
Comment: Several commenters were supportive of the proposal to no
longer apply the EMP under the ESRD PPS. The commenters agreed with the
underlying rationale that the EMP is no longer needed because ESAs have
been incorporated into the ESRD PPS. Some of the commenters asked that
we confirm that hemoglobin or hematocrit value codes are still required
on Medicare claims.
Response: We appreciate the commenters' support. With regard to the
reporting of hemoglobin or hematocrit value codes, ESRD facilities are
required to continue to report all necessary information for the ESRD
Quality Incentive Program under the ESRD PPS, which includes hemoglobin
or hematocrit values.
Comment: MedPAC and a software company opposed the proposal. The
software company stated that in its efforts to better manage hemoglobin
cycling in the ESRD population, the company has found there is an
opportunity to further reduce overutilization, cut drug waste, and
decrease hospitalizations. The company strongly encouraged CMS to
preserve the EMP for this reason.
MedPAC stated that the implementation of the ESRD PPS created
incentives for ESRD facilities to furnish services more efficiently.
MedPAC stated that under the ESRD PPS, in which all renal dialysis
drugs and biological products are included in the payment bundle, ESRD
facilities have been more judicious in providing all drugs, including
ESAs. For example, MedPAC stated that between 2010 and 2017, use of all
renal dialysis drugs and biological products paid under the ESRD PPS
has declined by 12 percent per year. MedPAC noted that the decline in
the use of ESRD drugs under the PPS has occurred without any negative
effect on clinical outcomes.
MedPAC stated that by contrast, the TDAPA, which is an add-on
payment adjustment for nearly all renal dialysis drugs and biological
products that FDA approves on or after January 1, 2020, may promote
excess provision of renal dialysis drug products (to the extent
clinically possible). MedPAC explained that paying according to the
number of units administered gives ESRD facilities greater profits from
larger doses than smaller doses (as long as Medicare's payment rate
exceeds providers' costs). MedPAC expressed concern that in addition to
increased and unnecessary spending for beneficiaries and taxpayers,
overuse of drugs can have negative clinical consequences. MedPAC stated
that because of the incentive for potential overuse of drugs paid under
the TDAPA policy, CMS should not discontinue the EMP. MedPAC urged CMS
to establish a formal monitoring policy for all renal dialysis drugs
and biological products that are paid under the TDAPA to address their
potential for overuse.
Response: We appreciate the software company's comment that there
may still be an opportunity to further reduce overutilization, cut drug
waste, and decrease hospitalizations. According to the ESRD PPS
monitoring data \34\ that is available to the public on the CMS
website, we have found that ESA utilization has declined since the
implementation of the ESRD PPS with no sustained negative changes in
beneficiary health status. We believe that this finding indicates,
overall, that patients are not suffering negative health consequences
and that the EMP adds a layer of unnecessary burden for ESRD facilities
at this time.
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\34\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Claims-Based-Monitoring.html.
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With regard to MedPAC's concern that renal dialysis drugs and
biological products eligible for the TDAPA may increase unnecessary
spending for beneficiaries and taxpayers, in addition to potential
negative clinical consequences, we will take these concerns into
consideration for future monitoring policies. We believe that with
near-real-time claims monitoring we have the ability to closely track
ESRD facility behaviors and can take action if we see something
concerning.
Final Rule Action: After consideration of public comments, we are
finalizing the proposal to no longer apply the EMP under the ESRD PPS
effective January 1, 2020. We will issue administrative guidance to
provide instructions on the technical changes to the claims processing
requirements.
5. CY 2020 ESRD PPS Update
a. 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.
[[Page 60701]]
We proposed 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 proposed to estimate the ESRDB market basket update based
on IHS Global Inc.'s (IGI) most recently available forecast. IGI is a
nationally recognized economic and financial forecasting firm that
contracts with CMS 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 was 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-andReports/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) was projected to be 0.4 percent.
As a result of these provisions, the proposed CY 2020 ESRD market
basket adjusted for MFP was 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.
The comments and our responses to the comments on the proposed
productivity-adjusted market basket annual update and MFP adjustment
for CY 2020 are set forth below.
Comment: One commenter expressed appreciation for the proposed
increase to the ESRD PPS base rate for CY 2020, but expressed concern
that the proposed amount will not fully cover costs associated with
providing high-quality care to patients, particularly by small and
independent providers with limited resources offering care in many
cases to patients in rural and underserved areas where access
challenges may be present.
Response: We appreciate the commenter's concern that the proposed
annual update factor may not be sufficient to cover the cost of care
for small independent providers or those in rural areas. The annual
update factor is intended to account for the overall increase in cost
of care at the national level. The patient case-mix payment adjustments
and the facility level adjustments, such as the rural adjustment and
low-volume payment adjustment account for differences in both patient
and facility characteristics. These payment adjustments are provided to
address the variation of costs of a particular facility relative to the
national standard.
Comment: One LDO reiterated its concerns submitted in response to
the CY 2019 ESRD PPS proposed rule (83 FR 56961) related to the ability
of ESRD facilities to achieve and maintain high levels of productivity
gains. The LDO noted that several factors impact the potential for
productivity gains including required staffing level minimums and the
unique nature of contracted versus employed labor in the ESRD setting.
The commenter stated that the current MFP adjustment is a crude measure
that does not reflect circumstances unique to ESRD facilities. The LDO
further stated that it seeks to engage with CMS to support developing
an ESRD-specific MFP in collaboration with Congress and the Bureau of
Labor Statistics (BLS).
Response: Section 1881(b)(14)(F)(i) of the Act requires the
application of the MFP adjustment, described in section
1886(b)(3)(B)(xi)(II) of the Act, to the ESRD PPS market basket update
for 2012 and subsequent years. The statute does not provide the
Secretary with the authority to apply a different adjustment. We will
continue to monitor the impact of the payment updates, including the
effects of the MFP adjustment, on ESRD provider margins as well as
beneficiary access to care as reported by MedPAC. However, as noted
previously, any changes to the MFP adjustment would require a change to
current law.
The March 2019 MedPAC Report to Congress finds, ``Most of our
indicators of payment adequacy are positive, including beneficiaries'
access to care, the supply and capacity of providers, volume of
services, quality of care, and access to capital. Providers have become
more efficient in the use of dialysis drugs under the PPS.'' (http://www.medpac.gov/docs/default-source/reports/mar19_medpac_ch6_sec.pdf?sfvrsn=0).
While we understand that the kidney care community is interested in
an adjustment more specific to ESRD facilities, we encourage commenters
to discuss the feasibility of such measures with the BLS, the agency
that produces and publishes industry-level MFP. CMS is unable to
estimate MFP for ESRD facilities since the publicly available data for
the NAICS 621492 Kidney Dialysis Centers is insufficient to develop an
estimate using a similar methodology used to estimate Hospital sector
MFP in the November 2006 Health Care Financing Review article, ``
`Hospital Multifactor Productivity: A Presentation and Analysis of Two
Methodologies' ''. We would also encourage the kidney care community to
make available to CMS any research into alternative methods and data
sources that could be used to estimate ESRD-specific MFP. Specifically,
we would be interested in any information on how cost report data
submitted to CMS could be utilized to better understand the operating
conditions facing ESRD facilities.
Based on public comments and in accordance with section
1881(b)(14)(F)(i) of the Act, we are finalizing the CY 2020 update to
the ESRD facilities as proposed. Also, as noted in the proposed rule
and consistent with CMS general practice, if more recent data are
subsequently available (for example, a more recent estimate of the
market basket update or MFP adjustment), we proposed to use such data
to determine the final CY 2020 market basket update and/or MFP
adjustment. Therefore, using the IGI third quarter 2019 forecast of the
CY 2016-based ESRDB market basket (with historical data through the
second quarter of 2019), the final CY 2020 ESRDB market basket increase
factor is projected to be 2.0 percent. The final MFP adjustment for CY
2020 (the 10-year moving average of MFP for the period ending CY 2020)
is projected to be 0.3 percent. The final CY 2020 ESRD market basket
adjusted for MFP is projected to be 1.7 percent. This market basket
increase is calculated by starting with the CY 2020 ESRDB market basket
percentage increase factor of 2.0 percent and reducing it by the MFP
adjustment (the 10-year moving average of MFP for the period ending CY
2020) of 0.3 percent.
For the CY 2020 ESRD payment update, we proposed 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
[[Page 60702]]
rule (83 FR 56963). We did not receive any public comments on this
proposal and therefore are finalizing the continued use of a 52.3
percent labor-related share.
b. Annual Update of the Wage Index
Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD
PPS may include a geographic wage index payment adjustment, such as the
index referred to in section 1881(b)(12)(D) of the Act, as the
Secretary determines to be appropriate. In the CY 2011 ESRD PPS final
rule (75 FR 49200), we finalized an adjustment for wages at Sec.
413.231. Specifically, CMS adjusts the labor-related portion of the
base rate to account for geographic differences in the area wage levels
using an appropriate wage index which reflects the relative level of
hospital wages and wage-related costs in the geographic area in which
the ESRD facility is located. We use the Office of Management and
Budget's (OMB's) 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 updated the wage indices to account for updated
wage levels in areas in which ESRD facilities are located using our
existing methodology. We used the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the inpatient
PPS. The ESRD PPS wage index values are calculated without regard to
geographic reclassifications authorized under sections 1886(d)(8) and
(d)(10) of the Act and utilize pre-floor hospital data that are
unadjusted for occupational mix. The final CY 2020 wage index values
for urban areas are listed in Addendum A (Wage Indices for Urban Areas)
and the final 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 the CY 2011
and CY 2012 ESRD PPS final rules at 75 FR 49116 through 49117 and 76 FR
70239 through 70241, respectively. For urban areas with no hospital
data, we compute the average wage index value of all urban areas within
the state and use that value as the wage index. For rural areas with no
hospital data, we compute the wage index using the average wage index
values from all contiguous CBSAs to represent a reasonable proxy for
that rural area. We apply the statewide urban average based on the
average of all urban areas within the state to Hinesville-Fort Stewart,
Georgia (78 FR 72173), and we apply the wage index for Guam to American
Samoa and the Northern Mariana Islands (78 FR 72172). As we discussed
in the CY 2020 ESRD PPS proposed rule (84 FR 38359), beginning in CY
2020, the statewide urban average based on the average of all urban
areas within the state also will 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 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.
As discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38360),
we were made aware of a minor calculation
[[Page 60703]]
error in the file used to compute the ESRD PPS wage index values for
the proposed rule. We posted the corrected wage index values on the
ESRD PPS payment page and used the corrected values when computing the
ESRD PPS wage index values and payment rates for this final rule.
CMS received several comments on the wage index. The comments and
our responses are set forth below.
Comment: One LDO and one national dialysis association stated that
CMS noted in the proposed rule that it was made aware of a ``minor
calculation error'' in the file used to compute the ESRD PPS wage index
values. The agency has since published a corrected file on the ESRD PPS
payment web page.
They expressed concern that CMS has not published information to
inform stakeholders about the impact of the updated ESRD wage index
values on the ESRD PPS base rate. They stated that they believe a
revised wage index budget neutrality factor, based on the revised wage
indices, may result in a downward effect on the proposed base rate. As
the labor-related share represents such a significant component of
facility payment, they noted the importance of transparency and
accuracy in proposed rates published by CMS so that providers and other
stakeholders can understand the impact of proposed policy changes and
provide input during the regulatory comment period. They recommended
that CMS retain the prior year's wage indices to ensure consistency and
transparency for stakeholders.
While the national dialysis association stated that it was able to
run the complex calculations to determine the likely, corrected base
rate and associated reimbursement factors, other stakeholders may not
be able to utilize the technical files and available methodological
information to re-run calculations and derive a corrected base rate.
The association stated that independent analysis indicates that the
wage index error published in the CY 2020 ESRD PPS proposed rule
understated the wage adjustment amount by 0.84 percent across all
calculations. The association stated that in the final rule, CMS should
correct this error and simultaneously apply a corresponding, corrected
budget neutrality factor that will reduce the proposed base rate by
approximately $1 per treatment, resulting in approximately $41 million
less for dialysis care in CY 2020 than was indicated in the CY 2020
ESRD PPS proposed rule.
The commenter suggested that if CMS discovers an error in the wage
indices after publication of the proposed rule, the agency should
provide the public with complete information, including the corrected
wage indices, wage index budget neutrality factor, and revised ESRD PPS
base rate.
Response: We thank the commenter for its comment that we
understated the wage adjustment amount by 0.84 percent across all
calculations. We note that the minor calculation error was that the
wage and hour data for CBSA 31084 were inadvertently doubled. This
caused an error in the national average hourly wage, which factors into
the calculation of all wage index values. We have changed the
programming logic to correct this error. In addition, we corrected the
classification of one provider in North Carolina that was erroneously
identified as being in an urban CBSA. We also standardized our
procedures for rounding, to ensure consistency.
We also note that it is not uncommon for the ESRD PPS wage index
values to change between the proposed and final rules. In this specific
case, the proposed rule correction resulted in a wage index budget
neutrality adjustment factor that lowered the base rate, but in the
time between the proposed and final rule with updated wage index data,
the wage index budget neutrality adjustment factor changed and the ESRD
PPS base rate was increased. We make every effort to be fully
transparent in our calculations and will continue to do so in the
future.
Comment: Several health insurance organizations in Puerto Rico
commented on the wage index for Puerto Rico, expressing that the
historical downward trending of the ESRD PPS wage index is having a
negative impact on the funding of Puerto Rico's dialysis program. The
commenters stated that despite the 0.10 increase in 2019, there still
remains a disparity gap. Currently, the USVI maintains a 0.70 ESRD wage
index. The commenters noted that a movement towards parity funding
between the two territories would be a significant step in narrowing
the disparity-funding gap.
The commenters asserted that a wage index floor of 0.70 would
result in rates that more accurately reflect actual cost per treatment
based on costs after Hurricane Maria for the years 2018 and 2019. They
believe that the average in-center hemodialysis costs for independent
facilities in Puerto Rico is $232.25 per treatment using CMS data from
2017. They asserted that this number is significantly higher than the
average FFS payment rate for Puerto Rico and significantly lower than
the rates contracted by Medicare Advantage companies for the same
service. They noted that in-center hemodialysis represents the majority
of the treatments for Puerto Rico ESRD patients. In future reforms to
the ESRD PPS wage index system, they suggested that CMS should use
adjusted inpatient facility (Part A) wage index values to reverse the
wage index ``downward spiral'' consistently across all Medicare payment
systems. In addition, they stated that CMS should consider basing the
ESRD PPS wage index on a new survey of ESRD outpatient facility wage
costs. Finally, they recommended that CMS assure that the corresponding
adjustment in Medicare Advantage benchmarks for ESRD is made to reflect
any adjustments in FFS ESRD payments.
Response: We thank commenters for sharing their concerns regarding
Puerto Rico's wage index and their opinion of an existing disparity
gap, along with the recommendation of a wage index for Puerto Rico of
0.70 and their concern regarding the Medicare Advantage benchmarks for
ESRD. We will take these thoughtful suggestions into consideration when
considering future rulemaking.
Final Rule Action: We are finalizing the CY 2020 ESRD PPS wage
indices based on the latest hospital wage data as proposed. For CY
2020, the labor-related share to which a facility's wage index is
applied is 52.3 percent.
c. Final 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
[[Page 60704]]
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 proposed 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 future outlier payments, we proposed 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 stated
in the CY 2020 ESRD PPS proposed rule (84 FR 38361) that we recognize
that the utilization of ESAs and other outlier services have continued
to decline under the ESRD PPS, and that we have lowered the MAP amounts
and FDL amounts every year under the ESRD PPS.
i. CY 2020 Update to the Outlier Services MAP Amounts and FDL Amounts
For this final rule, the outlier services MAP amounts and FDL
amounts were updated using 2018 claims data. In the CY 2020 ESRD PPS
proposed rule (84 FR 38361), we noted that, beginning in CY 2020, the
total expenditure amount includes add-on payment adjustments made for
calcimimetics under the TDAPA policy (calculated to be $21.15 per
treatment). For this final rule, we project that for each dialysis
treatment furnished, the average amount attributed to the TDAPA is
$21.03.
The impact of the final rule 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 estimates for this final
rule. The estimates for the final CY 2020 outlier policy, which are
included in Column II of Table 2, were inflation adjusted to reflect
projected 2020 prices for outlier services.
BILLING CODE 4120-01-P
[[Page 60705]]
[GRAPHIC] [TIFF OMITTED] TR08NO19.059
BILLING CODE 4120-01-C
As demonstrated in Table 2, the estimated FDL amount per treatment
that determines the CY 2020 outlier threshold amount for adults (Column
II; $48.33) 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 $35.78.
For pediatric patients, there is a decrease in the FDL amount from
$57.14 to $41.04. There is a corresponding decrease in the adjusted
average MAP for outlier services among pediatric patients, from $35.18
to $32.32.
We estimate that the percentage of patient months qualifying for
outlier payments in CY 2020 will be 10.38 percent for adult patients
and 11.35 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. For
this final rule and 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 final rule would result in no change in payments to ESRD
facilities for beneficiaries with renal dialysis items and services
that are not eligible for outlier payments, but would increase payments
to ESRD facilities for beneficiaries with renal dialysis items and
services that are eligible for outlier payments, as well as co-
insurance obligations for beneficiaries with renal dialysis services
eligible for outlier payments.
The comments and our responses to the comments on our proposed
updates to the outlier policy are set forth below.
Comment: MedPAC requested that CMS clarify the reference to
calcimimetic payments being included in total expenditure amounts in
the CY 2020 ESRD PPS proposed rule discussion of updating the outlier
services MAP and FDL amounts. MedPAC stated that it is not clear how
CMS is using calcimimetic expenditure data to estimate the CY 2020 MAP
and FDL amounts. MedPAC noted that CMS has previously said that drugs
eligible for the TDAPA (including calcimimetics) are not eligible for
[[Page 60706]]
outlier payments and that the 1 percent target for outlier payments is
based on total ESRD PPS expenditures.
MedPAC stated that given that CMS has said that total ESRD
expenditure amounts for 2020 include TDAPA expenditures for
calcimimetics, they believe CMS proposed to target 1 percent of total
expenditures, including TDAPA expenditures in 2020, when establishing
the FDL amount. However, MedPAC noted, the outlier pool has been funded
through a 1 percent reduction in the base rate (that was applied in
2011 and has remained in effect in each subsequent year by applying all
annual updates to the reduced base rate) and therefore does not account
for the TDAPA expenditures for calcimimetics, which are currently an
add-on payment adjustment to the base rate. MedPAC stated that CMS has
not proposed a budget-neutral method for funding the outlier policy in
2020 that accounts for the additional ESRD expenditures from add-on
payment adjustments for calcimimetics under the TDAPA policy. MedPAC
suggested that CMS should maintain a budget-neutral outlier policy
either by excluding the TDAPA expenditures for calcimimetics from the
total ESRD expenditures so that the 1 percent outlier payment target
does not include the TDAPA expenditures (that is, the policy applied to
the TDAPA payments for calcimimetics in 2018 and 2019), or by reducing
the TDAPA expenditures by 1 percent so that funding for the outlier
policy accounts for the TDAPA expenditures for calcimimetics. One
national dialysis association expressed support for MedPAC's analysis,
but did not support MedPAC's alternative recommendation that CMS
consider reducing the TDAPA payments by 1 percent so that funding for
the outlier policy accounts for the TDAPA expenditures for
calcimimetics.
Several commenters expressed concern that CMS has proposed to
include the TDAPA costs for calcimimetics in the outlier calculation,
even though the drugs eligible for the TDAPA are not eligible for an
outlier payment. A national dialysis stakeholder organization noted
that while the statute requires CMS to include as part of the single
payment amount for the ESRD PPS a payment adjustment for high cost
outliers due to unusual variations in the type or amount of medically
necessary care, it does not provide specifics as to how the outlier
pool is determined or paid out. The organization acknowledged CMS's
position that the TDAPA is part of the ESRD PPS single payment amount
but expressed concerned that the calcimimetics should be included in
the outlier pool. The organization noted that the CY 2020 ESRD PPS
proposed rule estimated that more than $21 per treatment is removed
from the base rate by including these drugs in the outlier
calculations; yet, there is no ability to recover the dollars and they
are permanently removed from the program. The organizations further
commented that Congress established an outlier pool so that ESRD
facilities treating extraordinarily costly patient are not
disincentivized from doing so, but interpreting the statute to
incorporate an add-on payment adjustment into the outlier calculation
is inconsistent with this intent.
Another LDO and a national dialysis association expressed concern
with CMS' proposal to include TDAPA spending on calcimimetics in the
outlier pool for CY 2020. They stated that they see no justification in
the rule for CMS to significantly increase the outlier target for CY
2020 by including calcimimetics when it is not statutorily required to
do so and when the outlier target has not been achieved under the ESRD
PPS in any year since implementation. The commenters stated that this
has a decreasing effect on the base rate while increasing the
likelihood that CMS will not actually spend these additional dollars on
high cost cases, given that calcimimetics do not even qualify for
outlier payments in CY 2020. They further stated that it seems
incongruous to include calcimimetics expenditures in the outlier pool,
given what they called the separate treatment of calcimimetics outside
the base rate under the TDAPA and the fact that, under Medicare
regulations, these drugs do not qualify toward the outlier calculation
while they are eligible for the TDAPA. They recommended that rather
than increasing the amount of funding withheld from providers that they
are unlikely to see in outlier payments, CMS should exclude
calcimimetics (which are not eligible for outlier payment during the
TDAPA) from the target percentage for CY 2020.
One national dialysis association opposed CMS' methodology
described in the proposed rule to include the TDAPA expenditures for
calcimimetics in the calculation for the outlier pool, noting that CMS
proposed to add more than $21 per treatment to the ESRD PPS base rate
and then withhold 1 percent of this for the outlier pool. They stated
this will result in CMS withholding an even greater amount of dollars
from the ESRD PPS that, based on the long history of poor performance
in the outlier pool, will not be repaid to facilities. The association
stated that CMS's proposal is particularly concerning because drugs
paid through the TDAPA (including calcimimetics) and devices paid
through the proposed TPNIES are not eligible for the outlier pool.
Therefore, the association stated, any increase in the withhold for the
outlier pool as a result of the TDAPA and the proposed TPNIES will have
no correlation to utilization of the outlier pool. The association
objected to CMS increasing the withhold for the outlier pool knowing
that the withheld dollars will not be returned to the system for
patient care.
The association does not believe that CMS should finalize the
proposed outlier methodologies that would include expenditures for the
TDAPA or the proposed TPNIES in the outlier calculation. The
association stated that CMS has sufficient statutory authority to
exclude both the TDAPA and the proposed TPNIES from the outlier pool
calculation and should do so in the final rule for CY 2020 and beyond.
The association noted that there is no statutory requirement that the
outlier pool include the ESRD PPS base rate plus the TDAPA or TPNIES.
Nor does the ESRD PPS statute require the outlier pool to be based on
the total payments made under the ESRD PPS.
Response: We recognize the confusion by the commenters regarding
our discussion of calcimimetics and the outlier policy, and we would
like to clarify we did not propose any changes to the outlier policy
methodology in the CY 2020 ESRD PPS proposed rule, nor did we make any
changes to the methodology when calculating the FDL amounts published
in the CY 2020 ESRD PPS proposed rule. The projected total ESRD PPS
outlier payment for CY 2020 is 1 percent of the sum of ESRD PPS base
rate expenditures and TDAPA expenditures. We acknowledge that including
the TDAPA expenditures in this calculation results in a larger than
expected outlier payment compared to a scenario in which these TDAPA
expenditures are not included. However, the TDAPA is a part of the ESRD
PPS, and expenditures for the TDAPA are ESRD PPS expenditures. Because
of this, these amounts are used when updating the outlier thresholds.
We also note that other renal dialysis items and services, such as
composite rate items and services, are not eligible outlier services
but their expenditures are included in the overall ESRD PPS
expenditures and are therefore taken into account when calculating the
FDL amounts. We will take these concerns into consideration for future
rulemaking.
[[Page 60707]]
Comment: An LDO expressed concern about extending outlier payment
eligibility subsequent to applying a TDAPA or TPNIES as the sole
payment mechanism for new treatments. They noted that CMS has
recognized that outlier payments address ``unusual variations in the
type or amount of medically necessary care'' related to patient
conditions such as frailty, obesity, and comorbidities, such as cancer.
The LDO asserted that using the outlier pool in this manner goes beyond
its intent and design, and will always lead to lower reimbursement
relative to the TDAPA and TPINES. The LDO stated that there is no
guarantee that a facility would receive any payment for the new
treatment. The LDO suggested that an ESRD facility would at best
receive the equivalent of ASP-20 percent less the sequestration's
impact for a drug or biological product. The LDO stated that any relief
under this policy would likely be further compromised by the lack of
outlier payment pool parity.
Some commenters also suggested that CMS adjust the outlier
percentage to more accurately represent the percentage of total
payments that have been historically paid under the outlier policy or
otherwise address what appears to be weakness in CMS' approach.
Finally, they recommended that CMS establish a mechanism in the ESRD
PPS to return unpaid amounts withheld from providers as part of the
target percentage when it does not achieve the 1 percent outlier policy
in a given year.
Response: We appreciate the commenters' concerns regarding the
incorporation of TDAPA or TPNIES products into the outlier policy after
the respective add-on payment adjustments end. As we have stated in the
TDAPA and TPNIES sections above, these add-on payment adjustment are to
support the ESRD facilities in the uptake of new and innovative drugs
and biological products and equipment and supplies. We believe that
once these products complete the TDAPA or TPNIES period that they
compete in the outlier space. However, we note that the TEP will
address the outlier policy as part of its efforts to refine the ESRD
PPS. In addition, we will take these concerns into consideration for
future rulemaking.
Comment: A physician association commented on the proposed
pediatric adjustment for outlier payments of 8.2 percent. The
association noted that the pediatric outlier amount is decreasing as a
result of a decrease in utilization of these services in the pediatric
population. The association expressed concern that the outlier
calculation does not currently capture all of the services pediatric
ESRD patients require, including management of co-morbidities seen in
many pediatric dialysis patients such as failure to thrive and seizure
disorder. Additional unique costs are for care coordination, as the
pediatric dialysis unit frequently functions as the child's medical
home. The association stated that CMS should ensure that the pediatric
outlier policy recognizes conditions and services unique to the
pediatric population, and requested that CMS examine the accuracy of
its data in capturing pediatric co-morbidities before implementing any
cuts to the pediatric outlier services. The association also noted that
any pediatric modifiers should be based on actual cost data from
pediatric dialysis facilities for recent years. Without adjustments
based on accurate cost data, the association maintained, the long-term
economic viability of pediatric dialysis units will be jeopardized, and
adult units will be further disincentivized to meet the special needs
of their pediatric patients who are unable to access specialized
pediatric dialysis units.
Response: We note that outlier payments are based on services
billed on claims. As a result, the pediatric thresholds are based upon
reported data. In addition, the reduction to the FDL amount reflects
that outlier payments did not reach the 1 percent target percentage.
When that occurs, the FDL amount is lowered so that more claims qualify
for outlier payment so that 1 percent of total ESRD PPS payments are
outlier payments. In response to the physician association's suggestion
that we capture all of the services pediatric ESRD patients require,
including management of comorbidities seen in many pediatric dialysis
patients such as failure to thrive and seizure disorder, we intend to
address data issues through the next TEP meeting which will inform the
next refinement of the ESRD PPS.
Final Rule Action: After considering the public comments, we are
finalizing the updated outlier thresholds for CY 2020 displayed in
Column II of Table 2 of this final rule and based on CY 2018 data.
d. Final 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 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,
and any applicable outlier payment, training adjustment add-on, and the
TDAPA (as finalized in section II.B.1.e of this final rule). Beginning
in CY 2020 the per-treatment payment amount also will be adjusted for
any applicable TPNIES (as finalized in section II.B.3.b.iii of this
final rule).
ii. Annual Payment Rate Update for CY 2020
The ESRD PPS base rate for CY 2020 is $239.33. 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 final
ESRDB market basket is 2.0 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 final
MFP adjustment for CY 2020 is 0.3 percent, thus yielding a final update
to the base rate of 1.7 percent for CY 2020. Therefore, the 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 did not
[[Page 60708]]
propose any changes to the methodology used to calculate this factor,
which is described in detail in the CY 2014 ESRD PPS final rule (78 FR
72174). We computed the final 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 became 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 final CY 2020 wage index budget-neutrality adjustment factor is
1.000244, based on the updated wage index data. This application would
yield a final CY 2020 ESRD PPS base rate of $239.33 ($239.27 x 1.000244
= $239.33).
The comments and our responses to the comments on our proposals to
update the ESRD PPS base rate for CY 2020 are set forth below.
Comment: A professional association expressed appreciation for the
proposed increase to the ESRD PPS base rate for CY 2020, but noted that
the proposed amount will not fully cover costs associated with
providing high-quality care to patients, particularly by small and
independent providers with limited resources offering care in many
cases to patients in rural and underserved areas where access
challenges may be present. The commenter stated that the proposed
payment increase will not sufficiently cover the annual growth in costs
for ESRD facilities necessary to offer high-quality care to pediatric
and adult ESRD patients. Particularly with respect to the provision of
home dialysis, the association underscored that only 2 vendors
currently offer home dialysis equipment and supplies. They further
stated that the home dialysis equipment and supplies have increased in
cost by 20 percent to 30 percent. The commenter asserted that the ESRD
PPS does not reflect these significant cost increases in home dialysis
equipment and supplies. The association noted that MedPAC reported an
overall -1.1 percent Medicare margin for ESRD facilities in its 2019
March Report to Congress, including a -5.5 percent margin for rural
facilities and a -21.3 percent margin for facilities in the lowest
quintile by volume.
Response: We appreciate these comments. As we stated in section
II.B.3.d.i of this final rule, we established an ESRD PPS base rate
that reflected the lowest per patient utilization data as required by
statute. This amount is adjusted for patient specific case-mix
adjustments, applicable facility adjustments, and geographic difference
in area wage levels which are reflective of facility costs since cost
data is used to derive the adjustment factors. The CY 2016 ESRD PPS
final rule discusses the methodology for calculating the patient and
facility-level adjustments (80 FR 68972 through 69004). In addition,
the ESRD PPS base rate is adjusted for any applicable outlier payment,
training add-on payment, and the TDAPA to arrive at the per treatment
payment amount. The ESRD PPS base rate is annually updated by the ESRDB
market basket and adjusted for productivity and wage index budget
neutrality.
For these reasons, we believe that the CY 2020 ESRD PPS base rate
is appropriate despite the challenges some ESRD facilities experience.
We also continue to believe that the payment adjustments help mitigate
the challenges faced by those facilities that are eligible for the
adjustments. We note that the ESRDB market basket for CYs 2015 through
2018 was reduced in accordance with section 217(b)(2) of PAMA but for
CY 2019 and CY 2020, ESRD facilities are getting the full productivity-
adjusted ESRDB market basket update, which results in increased per
treatment payments.
Final Rule Action: We are finalizing a CY 2020 ESRD PPS base rate
of $239.33.
C. Miscellaneous Comments
We received many comments from beneficiaries, physicians,
professional organizations, renal organizations, and manufacturers
related to issues that were not the subject of proposals and therefore,
were out of scope of the CY 2020 ESRD PPS proposed rule. These comments
and our responses are summarized below:
Comment: MedPAC noted that PAMA required that the Secretary conduct
audits of Medicare cost reports beginning in 2012 for a representative
sample of freestanding and hospital-based facilities furnishing
dialysis services, consistent with a prior MedPAC recommendation.
MedPAC noted that in September 2015, CMS awarded a contract to conduct
the audit. MedPAC requested that CMS release the final results of the
audit.
MedPAC noted that in the CY 2019 ESRD PPS final rule, CMS said that
the audit process is complete and the audit staff are reviewing the
findings. MedPAC emphasized the importance of auditing the cost reports
that ESRD facilities submit to CMS to ensure that the data are
accurate. First, inaccurate cost report data could affect the ESRD
PPS's payment adjustment factors and ESRD market basket index, which
are derived from this data source. Second, accurate accounting of costs
is essential for assessing facilities' financial performance under
Medicare. The Medicare margin is calculated from this data source, and
policymakers consider the margin (and other factors) when assessing the
adequacy of Medicare's payments for dialysis services. MedPAC noted
that if costs are overstated, then the Medicare margin is understated.
Third, it has been more than 15 years since cost reports were audited,
and in 2011, the outpatient dialysis payment system underwent a
significant change, which might have affected how facilities report
their costs. Fourth, historically, facilities' cost reports have
included costs that Medicare does not allow.
Response: We appreciate MedPAC's thoughts and suggestions on our
cost reports and audits. As we stated in the CY 2019 ESRD PPS final
rule (83 FR 56973), the audit process is complete. CMS is conducting
follow-up activities related to the audit to obtain summary results and
investigating what adjustments were made on the cost reports of
specific ESRD facilities. We will discuss the results when these
follow-up activities are available in a future rule.
Comment: A professional association suggested that CMS implement
changes to Medicare cost reports, claims, and Explanation of Benefits
(EOB) forms to allow for separate identification, coding, and
reimbursement of the TDAPA-eligible products so that providers and CMS
can more easily track use of and spending on these therapies. The
professional association stated that currently, many facilities do not
have a clear understanding of how much reimbursement they receive
specifically for each calcimimetic claim because the Medicare EOBs do
not separate out calcimimetic reimbursement. To remedy this, the
professional association
[[Page 60709]]
recommended that Medicare EOBs should reflect separately all
procedures, pharmaceutical products, laboratory tests, etc. so that
these items are able to receive separate reimbursement and able to be
appropriately tracked and reported on CMS Provider Statistical &
Reimbursement Reports and facility cost reports.
Responses: We appreciate the commenter's suggestion for
transparency of payment directly related to the TDAPA. While this add-
on payment adjustment is one component of the ESRD PPS payment amount
as described in the newly revised Sec. 413.230, in Change Request
10065,\35\ we included instruction for the contractors to capture the
payment amount directly related to the TDAPA and make this information
available in reports. Therefore the CMS Provider Statistical &
Reimbursement Report is capturing this value.
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\35\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018-Transmittals-Items/R1999OTN.html?DLPage=1&DLEntries=10&DLFilter=10065&DLSort=1&DLSortDir=ascending.
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Comments: Several commenters suggested refinements to the ESRD PPS
with regard to the case-mix adjusters. A patient advocacy organization
requested that CMS ensure the patient case mix adjusters are serving
their intended purpose. The organization is concerned that using cost
reports as the data source for the age, weight, BSA, and BMI case mix
adjusters are neither reliable nor reflecting the patient
characteristics that clinicians believe are drivers of higher costs.
The organization stated that it agrees with MedPAC and supports the
elimination of the co-morbid case-mix adjusters for pericarditis,
gastrointestinal tract bleeding with hemorrhage, hereditary hemolytic
or sickle cell anemia, and myelodysplastic syndrome. The organization
noted that the documentation of these conditions can be burdensome, and
it has found limited benefit to the use of information collected. The
organization stated that misaligned payment adjusters can negatively
impact a facility's ability to provide individualized high-quality care
to pediatric and adult ESRD patients, and this is concerning, as it
creates greater financial risk for ESRD facilities, particularly for
small and independent facilities with limited resources, that are
bearing financially burdensome costs for costly patients. The
organization stated that returning the funding to the ESRD PPS base
rate will benefit patient care. The organization urged CMS to eliminate
comorbidity adjustments from the payment system until the agency
develops appropriate adjusters that accurately capture variance in
costs of care for particularly high-cost, high-acuity patients, and
work quickly with clinicians to revise the patient adjusters to ensure
they serve their purpose of accounting for higher cost patients.
An LDO commented on the shortcomings of the case-mix adjusters. The
LDO provided a detailed analysis of internal treatment run time data,
showing that costs comprising nearly 40 percent of the market basket
rate, wages, salaries, and benefits, had virtually no correlation to
age. The LDO stated that it focused on these costs because there is no
patient-level variation in housekeeping and operations, administration,
and capital expenses, and thus no age correlation. Although costs for
pharmaceuticals and laboratory services do vary minimally by patient,
their correlation to age is ambiguous due to confounding with the BSA,
BMI, and outlier adjustments. Given the consistency in treatment run
times across age groups, the LDO noted that it was difficult to
understand the nearly 15 percent swing in relative costs between
patients aged 45 to 59 and patients aged 70 to 79 under the 2011 and
2016 models. The LDO further noted that it, along with other members of
the kidney care community, and MedPAC have consistently raised concerns
about the use of facility cost report data in developing patient-level
adjusters. The LDO stated that the mean treatment run time analysis may
not be achieving the intended purpose.
A professional association noted that during the December 8, 2018
ESRD PPS Technical Expert Panel (TEP) meeting convened by CMS, the
panelists shared the same concerns as the LDO about alignment of
resource use with payment with regard to patient-level adjusters.. The
association stated that even when pressed to try to identify additional
new adjusters, the vast majority indicated that very few adjusters are
truly necessary for the ESRD population.
Some commenters noted concern with the low-volume and rural
adjustments, and referenced MedPAC's concern about the overlapping
nature of the low-volume and rural adjusters in its most recent
Commission meetings. Commenters described MedPAC's April 2019 meeting,
in which the staff presented an example of a single low-volume and
isolated (LVI) facility adjuster that would better target payments.
Some professional associations stated that they conceptually support
such an approach. The structure of the low-volume payment adjustment
(LVPA) and rural payment adjuster resulted in more than 50 percent of
ESRD facilities that received the LVPA also claiming the rural
adjuster. Commenters noted that MedPAC's analysis to date supports a
conclusion that these adjusters have not led to an efficient
distribution of resources or had much impact in improving a low-volume
or rural ESRD facility's financial position. An LDO said CMS should
explore modifying the low-volume and rural adjusters, such as creating
a 2-tiered low-volume adjuster as MedPAC has discussed, and by
considering a rural ESRD facility's coverage mix. One healthcare
provider urged CMS to consider additional ways to appropriately
reimburse low volume, rural facilities. The healthcare provider noted
CMS should be aware of several closures of small rural facilities in
the Midwest and stated that these closures are directly related to
operational losses sustained by the ESRD facilities over a period of
several years. The healthcare provider urged CMS to evaluate the base
rate and rural and low volume adjusters to ensure ESRD facilities are
reimbursed at a rate that covers the cost of care in rural communities.
The healthcare provider stated that appropriate reimbursement rates
will allow facilities to maintain high quality care and maintain local
access to dialysis services.
A national dialysis stakeholder organization commented on the
overall underfunding of ESRD facilities due to patient-level, facility
level, add-on payment and outlier adjustments. The organization
asserted that the application of these current policies results in the
actual dollars CMS pays out for ESRD care to be significantly less than
what the Congress had indicated it should be. The organization stated
that while sequestration continues to be a driving source of
underpayments, the underpayment amount attributable to other factors,
which are due to a mismatch among adjusters frequencies assumed by the
standardization factor compared to actual payment increased
substantially in 2018, remains high. The organization noted that
estimations indicate that, taken together, the total underpayment for
the PPS per treatment in 2018 was $11.11. The organization further
stated that the underpayment due to the outlier pool was $1.54 per
treatment. Sequestration accounted for $4.45 per treatment, with the
ESRD QIP taking out 25 cents per treatment. The organization stated
that the remainder of the underpayment appears to be due to the fact
that CMS has incorporated the expenditures for calcimimetics into the
outlier pool calculation. The commenter strongly objected to this
inclusion. The commenter stated that given the
[[Page 60710]]
negative margins, each dollar that comes out of the program reduced the
funding available to support patient care and innovation.
Response: We appreciate the concerns raised by stakeholders
regarding the technical nature of the ESRD PPS model. We intend to
address these issues through the next TEP meeting which will inform the
next refinement of the ESRD PPS. We will also consider these concerns
for future rulemaking.
Comment: An LDO expressed appreciation for CMS' response to
comments on the CY 2019 ESRD PPS proposed rule regarding the challenges
ESRD facilities encounter when trying to obtain information on a
patient's comorbid conditions. The LDO agreed that this information is
important in developing comprehensive, effective treatment plans. The
LDO also agreed that collecting these data should not be burdensome or
cumbersome for ESRD facilities, but stated that it is finding it
particularly difficult to get these data when a patient overwhelmed by
a health crisis that requires a hospitalization forgets to provide
necessary contact information. In these situations, despite several
attempts, the LDO states that it frequently cannot obtain discharge
instructions/summaries, pending laboratory results, and other relevant
information on its patients' behalf. The LDO noted that this lack of
communication complicates dialysis providers' ability to submit
documentation necessary to receive comorbidity adjustments, which when
left unclaimed lead to inappropriate reductions in ESRD PPS payments.
The LDO disagreed with CMS's suggestion that in the absence of data
necessary to receive a comorbidity adjustment, receiving funds through
the outlier pool is an acceptable alternative.
The LDO suggested that, rather than a work-around through the
outlier policy, CMS should take steps to ensure that the comorbidity
adjusters perform as intended. The LDO stated that without an explicit
requirement to do so, some providers rarely, if ever, make the
necessary information available to ESRD facilities. The LDO recommended
that CMS should require hospitals, particularly those using certified
health information technology, to send the following information to
other providers involved in an ESRD patient's care: (1) Discharge
instructions and discharge summary within 48 hours; (2) pending test
results within 72 hours of their availability; and (3) all other
necessary information specified in the ``transfer to another facility''
requirements.
Response: We appreciate the LDO's concerns regarding the
difficulties of obtaining documentation. We note that the agency has
addressed this concern in the final rule entitled, ``Medicare and
Medicaid Programs; Revisions to Requirements for Discharge Planning for
Hospitals, Critical Access Hospitals, and Home Health Agencies, and
Hospital and Critical Access Hospital Changes to Promote Innovation,
Flexibility, and Improvement in Patient Care'' (84 FR 51836).\36\
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Comments: Two commenters noted that unrecovered bad debt cuts into
reimbursement. One professional association suggested that we make the
TDAPA-eligible products eligible for bad debt reimbursement. The
commenter stated that the TDAPA-eligible products are expensive for
both the ESRD facilities that administer them and the Medicare
beneficiaries who pay 20 percent co-insurance with their use. Small and
independent facilities with limited resources face especially
significant challenges in providing the TDAPA-eligible products to
patients when they risk not receiving full payment, inclusive of
beneficiary cost-sharing, for the costs associated with acquiring,
storing, and administering these therapies. The association emphasized
that all ESRD Medicare beneficiaries should have access to the
medications they need to treat their ESRD-related medical conditions to
improve or maintain their health and prevent hospitalizations or other
costly therapies and interventions without concern for their
affordability.
Several commenters provided suggestions on the incorporation of
calcimimetics into the ESRD PPS base rate. Commenters urged CMS to work
with stakeholders when developing a mechanism that does not result in
facilities that provide the drugs used by only a small percentage of
dialysis patients do so at a significant loss, while facilities that do
not provide these drugs receive additional payments because the amount
added to the base rate is distributed evenly across all payments.
Commenters requested that before CMS incorporates costs for these drugs
into the ESRD PPS base rate, it consider how their limited utilization
will impact the distribution of dollars that will be added.
One drug manufacturer suggested that CMS should have the option to
lengthen the duration of the TDAPA payment period for new renal
dialysis drugs and biological products in existing ESRD PPS functional
categories beyond 2 years, and use the language ``at least 2 years''
for these products similar to the language for products in new ESRD PPS
functional categories. An LDO and a national dialysis association
commented that CMS should ensure accurate expense accounting by
including the ESRD network fee on cost reports. The association noted
that the composite rate has been replaced by the ESRD PPS, but the 50
cents reduction has remained intact. The commenters noted that when
Congress first created the ESRD Networks in 1978, the programs were
funded through the appropriations process, with the goal of
establishing funding for the programs through a network fee that
reduced payments to dialysis facilities was to ensure stable funding
for these programs. They noted that the history is silent as to whether
this ESRD network fee should be accounted for on the ESRD cost reports.
The association recommended CMS account for the ESRD network fee as a
``revenue reduction'' on the Cost Report. This addition could influence
policymakers to increase the payment rate over time, better aligning
cost reporting with the basis of payment. However, they do not think
adding this information will affect the payment rate directly. They
noted that since Medicare based rates on total historic payments, then
use of actual historic payments means the reduction has already been
included in its data. The association maintained that the cost reports
(1) have not been used in calculating payment rates in a way that would
affect the payment rates, and (2) have been used in the regression
analysis to estimate adjuster values, but this change should not affect
these analyses as the revenue reductions do not vary with any patient,
facility or modality characteristic.
A dialysis organization encouraged CMS to include the $0.50 ESRD
network fee in dialysis facilities' cost reports, noting that the fee's
exclusion understated facilities' costs by more than $20 million in
2017. The organization asserted that since neither the Omnibus Budget
Reconciliation Act of 1986 (OBRA 86), which established the network
fee, nor accompanying House report address the fee's inclusion or
exclusion, CMS has the necessary authority to implement this policy
change, and the organization encouraged CMS to explore other policy
guidance avenues to add the network fee as a revenue reduction on
Worksheet D effective with CY 2020 ESRD facility cost reports.
Two LDOs and a national dialysis organization requested CMS change
its TDAPA billing guidance for ESRD facilities to report oral drugs on
a claim
[[Page 60711]]
from the amount consumed (or amount according to the plan of care) to
the amount dispensed. The LDO stated that documenting the amount
consumed is overly burdensome and creates a significant challenge to
dialysis providers, and ultimately cannot be proven for medications
taken by patients at home.
The commenters noted that this creates a significant challenge for
ESRD facilities. Over the course of a treatment, a lower or higher dose
than initially recommended may be needed due to changes in a patient's
condition. Other practical matters, such as a patient's relocation that
necessitates the delivery of services at a different, geographically
closer facility, make the requirement even more complicated and
impractical. The commenters noted that the policy leads to losses for
facilities that are not incurred by other provider types or Part D
pharmacies and also makes facilities unfairly financially responsible
for the entire amount dispensed. For oral drugs delivered through the
ESRD PPS, the commenters stated, there is a disconnect between oral
drugs prescribed for daily use, including days that do not include a
dialysis treatment, and the ``per treatment'' payment methodology. This
disconnect can result in ESRD facilities being unable to report oral
drug utilization on days without a dialysis treatment. The commenters
noted that current CMS policies require providers to attest in good
faith on claims the amount of certain oral drugs consumed by
beneficiaries, but this is not possible for dialysis providers, who
cannot track beneficiary conduct in their homes on non-treatment days.
The commenters therefore urged CMS to allow the reporting of the amount
of dispensed but not consumed by beneficiaries as a more accurate and
fair representation of what is under the control of the facility.
The commenters stated that this change would align the reporting
requirement with those applied to other sectors including a skilled
nursing facility (SNF) providing immunosuppressants and a hospital
outpatient department providing patients with more than a 1-day supply
of an anti-cancer drug. The commenters maintained that this
modification also would ensure that CMS remains neutral with respect to
providers' prescribing decisions and that patients have good access to
the formulation that best meets their clinical needs. They also
suggested that CMS provide guidance and appropriate reimbursement for a
pharmaceutical product that must be discarded due to patient death,
prescription change, facility transfer, hospitalization,
transplantation or other circumstances that are outside the control of
the ESRD facility. The commenters suggested that CMS provide guidance
for product that, despite best efforts, has been lost in delivery, or
misplaced by the beneficiary, and allow the facility to submit, and be
reimbursed for, the second supply, perhaps through use of a modifier or
similar system.
One national dialysis stakeholder organization and 1 drug
manufacturer urged CMS in the coming year to work with the industry to
find a better price proxy for non-ESAs that are not over the counter
(OTC) vitamins. Specifically, they recommended that CMS use the BLS
Series ID: WPS063 Series Title: PPI Commodity data for Chemicals and
allied products--Drugs and pharmaceuticals, seasonally adjusted. They
noted that the current category references ``vitamins,'' in a way that
does not appropriately capture the price of drugs that fall within this
category. Currently, the drugs in this category represent a small
portion of the overall cost of providing dialysis services; however,
the need for a more accurate and appropriate price proxy for oral and
non-ESA drugs should be addressed now. Vitamin D analogs in this
category, such as doxercalciferol and paricalcitol, are synthesized
hormones that suppress PTH without inducing severe hypercalcemia,
distinguishing them from OTC vitamins. They stated that these products
are all unique chemical entities, FDA-approved, available by
prescription only, and indicated for the treatment of secondary
hyperparathyroidism (SHPT) which contributes to the development of bone
disease. Moreover, these prescription drugs are classified by the U.S.
Pharmacopeia in the Medicare Model Guidelines, a classification system
that supports drug formulary development by Medicare Part D
prescription drug plans, as ``Metabolic Bone Disease Agents,'' not
vitamins.
The commenters stated that the creation of the TDAPA for new renal
dialysis drugs and biological products will likely result in a shift in
drug mix within the bundle, as well as introduce new oral products that
deserve an accurate price proxy for updating. They noted that there are
new drugs in the pipeline currently that, if the ESRD PPS does not
create disincentives for their continued development, will likely be
added to the ESRD PPS bundled payment during the next 2 to 3 years. The
association recommended that CMS establish an alternative price proxy
for these other drugs that is based on prescription drugs rather than
vitamins and that would include fewer OTC drugs.
A drug manufacturer asked CMS to clarify how it will evaluate new
products to determine whether they will fall within the definition of a
``renal dialysis service.''
An LDO commented that the absence of adequate and sustained
payments in the ESRD PPS bundled payment for new treatments will not
just affect ESRD beneficiaries in Medicare FFS, but will also flow
into, and lower, Medicare Advantage (MA) ESRD payments. The LDO urged
CMS to consider this impact and how it will affect ESRD beneficiaries,
who will have the opportunity starting in 2021 to enroll in an MA plan
just like other beneficiaries.
A physician association stated that it continued to have
significant concerns about the pediatric case mix adjuster and the
undervaluation of pediatric ESRD supplies and services. The association
noted that it has previously requested that CMS evaluate pediatric
facility Medicare cost reports and ensure that the Medicare claims
forms and CROWNWeb data accurately reflect what is required to deliver
quality care to pediatric patients. The association stated that the
data CMS is using fail to reflect the necessary resources and
associated costs of delivering pediatric ESRD care. In particular, the
association stated that there is not a good mechanism to report some of
the costs uniquely associated with pediatric patients, such as costs
associated with the allied health team. The association recommended
that CMS look beyond the currently required report data and consider
what expenses unique to pediatric dialysis should be included to
appropriately reflect the costs of pediatric ESRD care, and to improve
the completeness and accuracy of pediatric data being reported.
The association listed certain unique expenses related to pediatric
dialysis care that should be reflected in any pediatric ESRD facility
payment formula, including: (1) Increased reliance on registered nurses
to provide dialysis care; (2) developmental/behavioral specialists; (3)
more frequent assessment by pediatric dieticians; (4) social workers,
teachers, and designated liaisons to interface regularly with schools;
and, (5) a broad array of dialysis supplies.
The commenter noted that without accurate reimbursement to
pediatric facilities, those who are specially trained to care for this
unique patient population, as well as pediatric ESRD patients
themselves, face an uncertain future. The commenter stated there is
already a shortage of pediatric
[[Page 60712]]
nephrologists and inadequate reimbursement will further exacerbate this
shortage and result in limited access of pediatric dialysis patients to
specialized facilities with pediatric personnel trained to care for
their unique needs. The commenter noted that the result will likely be
worse health outcomes for children with ESRD, with the potential for
higher costs of care when these children mature to adulthood. The
commenter stated that the ultimate goal should be to ensure that
reimbursement is appropriate so that pediatric facilities and providers
can continue to provide high quality services to those in need.
Response: We appreciate receiving these comments regarding issues
affecting ESRD facilities and beneficiaries. However, we did not
include any proposals regarding these topics in the CY 2020 ESRD PPS
proposed rule, and therefore we consider these suggestions to be beyond
the scope of this rule. We will consider these comments and issues when
developing ESRD PPS policies in the future.
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 an
ESRD 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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the CY 2020 Payment for Renal Dialysis Services
Furnished to Individuals With AKI
The proposed rule, titled ``Medicare Program; End-Stage Renal
Disease Prospective Payment System, Payment for Renal Dialysis Services
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal
Disease Quality Incentive Program, Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts,
DMEPOS Competitive Bidding Program (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'' (84 FR 38330
through 38421), hereinafter referred to as the ``CY 2020 ESRD PPS
proposed rule,'' was published in the Federal Register on August 6,
2019, with a comment period that ended on September 27, 2019. In that
proposed rule, we proposed to update the AKI dialysis payment rate. We
received approximately 4 public comments on our proposal, including
comments from ESRD facilities; national renal groups, transplant
organizations; and nurses.
In this final rule, we provide a summary of the proposed
provisions, a summary of the public comments received and our responses
to them, and the policies we are finalizing for CY 2020 payment for
renal dialysis services furnished to individuals with AKI.
C. 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 the CY 2020 ESRD PPS proposed
rule (84 FR 38362), the CY 2020 proposed ESRD PPS base rate was
$240.27, which reflected the proposed market basket, multifactor
productivity adjustment, and CY 2020 wage index budget-neutrality
adjustment factor. Therefore, we proposed 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 section II.B.5.b of the CY
2020 ESRD PPS proposed rule (84 FR 38359 through 38360). The AKI
dialysis payment rate is adjusted by the wage index for a particular
ESRD facility in the same way that the ESRD PPS base rate is adjusted
by the wage index for that facility (81 FR 77868). Specifically, we
apply the wage index to the labor-related share of the ESRD PPS base
rate that we utilize for AKI dialysis to compute the wage adjusted per-
treatment AKI dialysis payment rate. We proposed a CY 2020 AKI dialysis
payment rate of $240.27, adjusted by the ESRD facility's wage index.
The comments and our responses to the comments regarding the AKI
dialysis payment proposal are set forth below.
Comment: Some commenters noted that they support the proposed AKI
payment rate for CY 2020. They noted that in the CY 2017 ESRD PPS final
rule, CMS announced that it would be developing a formal monitoring
program for AKI dialysis payments, but the specifics have yet to be
published. They said they would also find it helpful to
[[Page 60713]]
understand how CMS is monitoring the AKI benefit. They stated their
support for CMS's plan to develop a program to monitor utilization of
dialysis and all separately billable items and services furnished to
beneficiaries with AKI. They reiterated their interest in maintaining a
dialogue as part of this monitoring program to ensure that the payments
for AKI patients are adequate and stated that it may be necessary for
CMS to establish an ``AKI adjustment'' to the payment rate to address
the differences in the services provided to AKI patients from those
provided to ESRD patients. They encouraged CMS to make the AKI
benefit's monitoring plan and any insight obtained to date available to
stakeholders, noting that transparency regarding this information is
crucial to supporting our shared objectives of ensuring AKI payment
adequacy.
Response: We thank the commenters for their support of the AKI
payment rate. We are in the process of evaluating the methodology to be
used for determining significant differences in resource use with AKI
patients in contrast to ESRD patients. We have met with dialysis center
physicians affiliated with academic medical centers to discuss
differences in care requirements for the AKI patient and the ESRD
patient. The stated that they separate their AKI patients from their
ESRD patients and monitor their treatment, recovery, or progression to
ESRD. Along with our in-house medical officers, our data contractor
employs 2 nephrologists with whom we are consulting on differences in
treatment of AKI patients and ESRD patients in order to evaluate
resource use and a potential AKI adjustment. Such resource use would
include time on dialysis machine, frequency of dialysis, drug
requirements and lab tests, treatment protocols and additional
practitioner time to evaluate medical status. In addition, CMS has an
ESRD monitoring and evaluation team in the Centers for Clinical
Standards and Quality clinical monitoring, that regularly discusses the
monitoring of ESRD beneficiaries. We continue to be interested in
feedback and data from the public regarding AKI patients and we intend
to continue researching these issues and potentially addressing them
through rulemaking and other mechanisms in the future.
Comment: One nursing association emphasized the critical role of
nephrology nurses and the increased responsibilities that are placed on
them when managing the complex nursing and care needs of patients with
AKI. The association stated that the unique and distinct
characteristics of the ESRD and AKI patient populations require
critical differences in treatment protocols. The association noted that
AKI patients require more vigilant monitoring, particularly in
infection prevention, blood pressure management, more frequent
laboratory testing, additional medication administration, and increased
educational needs. The care of an AKI patient often requires more care
coordination of the interdisciplinary team. The association stated that
these are not patient care responsibilities that can be delegated to
technicians or other staff; only specialized nephrology nurses can
provide the type of highly intensive and coordinated care that is
necessary for these patients to achieve improved health outcomes. Given
the increased nursing time required to provide high-quality care to AKI
patients, the commenter urged CMS to recognize the specialized high-
quality nursing care that nephrology nurses offer as CMS considers
modifications to the AKI payment policy.
Response: We thank the commenter for noting the differences such as
increased monitoring of signs for infection, infection prevention,
blood pressure management, more frequent laboratory testing and
increased nursing time in the AKI patients. As we noted previously, we
are aware of these differences and would encourage the association to
continue to share information with us as we evaluate the differences in
resource use of the ESRD and AKI patient. We will take all the cited
examples into consideration for AKI monitoring and for future
rulemaking.
Comment: One commenter suggested that AKI payments be competitive
with ESRD PPS payments. The commenter noted that transplant recipients
often have AKI early after transplant surgery and require dialysis
support until transplant function is established. The commenter stated
that currently, outpatient dialysis centers can receive payment for
patients that are dialyzed for the diagnosis of AKI, however, most
centers are not dialyzing these patients. The commenter stated that it
suspects this is because the ESRD facilities do not want to give up a
chronic spot to an acute patient that may only require treatment for a
limited time. The commenter stated that the chronic ESRD patient is a
guaranteed bundled payment patient. Physicians typically see the AKI
patient weekly for 4 weeks. The commenter stated that if a patient is
only in the unit 1 week as an acute patient, the reimbursement is much
less and therefore, the units tend to not want these patients in the
chronic chairs.
Response: We thank the commenter for sharing this insight into the
post-transplant scenario when it involves AKI patients. 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.
Final Rule Action: We are finalizing the AKI payment rate as
proposed, that is, the AKI payment rate is based on the finalized ESRD
PPS base rate. Specifically, the final CY 2020 ESRD PPS base rate is
$239.33. Accordingly, we are finalizing a CY 2020 payment rate for
renal dialysis services furnished by ESRD facilities to individuals
with AKI as $239.33.
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
A. Background
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 83FR 56922. We have also codified many of our policies for
the ESRD QIP at 42 CFR 413.177 and 413.178.
B. Summary of the Proposed Provisions, Public Comments, Responses to
Comments, and Finalized Policies for the ESRD QIP
The proposed rule, titled ``Medicare Program; End-Stage Renal
Disease Prospective Payment System, Payment for Renal Dialysis Services
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal
Disease Quality Incentive Program, Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts,
DMEPOS Competitive Bidding Program (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'' (84 FR 38330
through 38421), hereinafter referred to as the ``CY 2020 ESRD PPS
proposed rule,'' was published in the Federal Register on August 6,
2019, with a comment period that ended on September 27, 2019. In that
rule, for the ESRD QIP, we proposed updates to the ESRD QIP, including
for PY 2022 and
[[Page 60714]]
PY 2023. We received approximately 29 public comments on our proposal,
including comments from large dialysis organizations, renal dialysis
facilities, national renal groups, nephrologists, patient
organizations, patients and care partners, health care systems; nurses,
and other stakeholders. In this final rule, we provide a summary of
each proposed provision, a summary of the public comments received and
our responses to them, and the policies we are finalizing for the ESRD
QIP.
The comments and our responses to the comments on the ESRD QIP are
set forth below.
Comment: Commenters provided feedback on adding new measures to the
ESRD QIP. Commenters' suggestions for new measures included NQF-
endorsed measures of dialysis adequacy, different Kt/V measures for
different dialysis patient demographics, an NQF-endorsed alternative to
the ESRD QIP's Ultrafiltration reporting measure, and a depression
measure specific to the ESRD community.
Response: We thank the commenters for their recommendations and
welcome feedback on ways to improve the program, including the adoption
of new or revised measures. However, we note that these comments are
not responsive to a proposal included in the CY 2020 ESRD PPS proposed
rule, and therefore, are considered beyond the scope of the CY 2020
ESRD PPS proposed rule. We refer readers to the CY 2019 ESRD PPS final
rule (83 FR 56982 through 57016), CY 2018 ESRD PPS final rule (82 FR
50767 through 50769), the CY 2017 ESRD PPS final rule (81 FR 77898
through 77906) and the CY 2016 ESRD PPS final rule (80 FR 69052) for
discussions of the measures that we have previously adopted for the
ESRD QIP.
C. Updates to Regulation Text
We proposed to revise the requirements at Sec. 413.178 by
redesignating paragraphs (d) through (f) as paragraphs (e) through (g),
respectively. In addition, we proposed to add a new paragraph (d) to
specify the data submission requirements for calculating measure
scores. Specifically, we proposed to codify the requirement that
facilities must submit measure data to CMS on all measures. We stated
that this proposed regulation text would codify previously finalized
policies and would make it easier for the public to locate and
understand the Program's quality data submission requirements.
Additionally, we stated that the proposed text in new paragraph
(d)(2) would codify our proposed policy (discussed more fully in
section IV.E.2 of this final rule) 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 proposed 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. We stated that this new option would provide
facilities with flexibility under the ECE process. We also proposed
this provision to provide clear guidance to the public on the scope of
our ECE process. We invited public comments on these proposals.
The comments and our responses regarding the proposed regulation
text are set forth below.
Comment: Commenter expressed support for the proposal to codify the
requirement that facilities must submit measure data to CMS on all
measures. Commenter noted its appreciation of the predictability that
will result from CMS codifying its previously finalized policies.
Response: We appreciate and thank the commenter for its support.
Comment: Commenters expressed support for CMS's proposal to codify
its requirements for the ECE process, including a new option for
facilities to reject an ECE granted by CMS under certain circumstances.
Response: We appreciate and thank the commenters for their support.
Final Rule Action: After consideration of the public comments we
received, we are finalizing our proposed regulation text with one
technical change. Section 413.178(d)(5) now clarifies that CMS will not
consider an ECE request unless the facility making the request has
complied with the requirements in Sec. 413.178(d)(4).
D. Requirements Beginning With the PY 2022 ESRD QIP
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).
---------------------------------------------------------------------------
\37\ We are finalizing in section IV.D.2.b of this final rule
that beginning with the PY 2022 ESRD QIP, the STrR measure will be
scored as a reporting measure.
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 reporting
measure.\37\
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.
[[Page 60715]]
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.
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.
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.
------------------------------------------------------------------------
The comments and our response to the comments regarding our
continuing measures are set forth below.
Comment: Commenters provided feedback on various aspects of
measures that are continuing in PY 2022. These comments included
recommendations to keep or remove continuing measures from the Program,
recommendations to modify continuing measures (for example, by revising
the Kt/V clinical measure's pooled approach in combining multiple
dialysis patient populations into a single dialysis adequacy measure or
by creating an additional exclusion for the PPPW clinical measure), and
recommendations to change the ICH CAHPS survey to improve patients'
response rates and reduce the associated provider burden by changing
its administration. Commenters also urged CMS to be cognizant of the
reporting burden imposed by quality measures and recommended aligning
quality measures with other programs, using a single website to track
and report performance data, and improving EHR data sharing.
Response: We thank the commenters for their recommendations and
welcome feedback on ways to improve the program, including the adoption
of new or revised measures. However, we note that these comments are
not responsive to a proposal included in the CY 2020 ESRD PPS proposed
rule, and therefore, are considered beyond the scope of the proposed
rule.
1. 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 the CY 2020 ESRD PPS proposed rule (84 FR 38364),
we estimated the achievement thresholds, 50th percentiles of the
national performance, and benchmarks for the PY 2022 clinical measures
using data from 2016 and 2017, as shown in Table 4. We also stated that
we had proposed in the CY 2020 ESRD PPS proposed rule to convert the
STrR measure from a clinical measure to a reporting measure and that if
that proposal was finalized, we would not update these standards for
the STrR measure.
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[[Page 60716]]
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We are now updating the achievement thresholds, 50th percentiles of
the national performance, and benchmarks for the PY 2022 clinical
measures as shown in Table 5, using the most recently available data,
which includes CY 2018 data.\38\ As discussed more fully in section
IV.D.2.b of this final rule, we are finalizing our proposal to convert
the STrR measure from a clinical measure to a reporting measure.
Accordingly, we did not include the STrR clinical measure in Table 5.
---------------------------------------------------------------------------
\38\ In the CY 2020 ESRD PPS proposed rule (84 FR 38364), we
inadvertently stated that the updated values would appear in the CY
2019 ESRD PPS final rule, instead of this final rule.
---------------------------------------------------------------------------
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[[Page 60717]]
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BILLING CODE 4120-01-C
In addition, we have summarized in Table 6 our finalized
performance standards for the reporting measures in the PY 2022 ESRD
QIP.
BILLING CODE 4120-01-P
[[Page 60718]]
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\39\ In section IV.D.2.b of this final rule we finalized a
policy to convert the STrR measure from a clinical measure to a
reporting measure.
---------------------------------------------------------------------------
BILLING CODE 4120-01-C
2. Update to the Scoring Methodology Previously Finalized for the PY
2022 ESRD QIP
a. Update to the Scoring Methodology for the National Healthcare Safety
Network (NHSN) Dialysis Event Reporting Measure
We stated in the CY 2020 ESRD PPS proposed rule that there were 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. We
stated that for the NHSN BSI clinical measure, facilities must be
eligible to report 12 months of data to the NHSN on a
[[Page 60719]]
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.
We stated that 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. We
stated that the current scoring methodology for the NHSN Dialysis Event
reporting measure was finalized in the CY 2017 ESRD PPS final rule (81
FR 77881), and it was selected for two reasons. First, due to the
seasonal variability of bloodstream infection rates, we stated that we
wanted to incentive facilities to report the full 12 months of data and
reward reporting 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 7 for the scoring distribution finalized in the CY 2017
ESRD PPS final rule.
[GRAPHIC] [TIFF OMITTED] TR08NO19.063
We stated in the CY 2020 ESRD PPS proposed rule (84 FR 38365) that
as we have accumulated experience with this policy, we were concerned
that new facilities and facilities for which CMS grants an ECE for part
of the performance period that applies for a payment year were not
eligible to receive a score on the NHSN Dialysis Event reporting
measure because they were not eligible to report data for the full 12-
month period. We stated that as a result, we did not believe that this
policy appropriately accounted for the effort made by these facilities
to report these data for the months in which they were 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. We also
stated our concern that if a facility was aware that it would not be
eligible to receive a score on the NHSN Dialysis Event reporting
measure, the facility would not be incentive to report data at all for
that payment year.
We stated that as a result of these concerns, we reconsidered our
policy. We proposed 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 also proposed 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 incentive 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 proposed to assign scores for reporting different quantities of
data as summarized in Table 8.
[GRAPHIC] [TIFF OMITTED] TR08NO19.064
We stated our belief that it was 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 would have as comprehensive
as possible a view of these facilities' performance on this important
clinical topic. We stated our belief that complete and accurate
reporting of NHSN data was critical to maintaining the integrity of the
NHSN surveillance system, enabled facilities to implement their own
quality improvement initiatives, and enabled the Centers for Disease
Control and Prevention (CDC) to design and disseminate prevention
strategies. We stated our belief that the fairest way to balance these
goals was to adopt a new NHSN Dialysis Event reporting measure policy
focused more specifically on considering reporting successful based
[[Page 60720]]
on the number of months that a facility is eligible to report the
measure. We did not propose changes to the NHSN BSI clinical measure's
scoring methodology and stated that we will continue to require that
facilities report data for the full 12 months of data in order to
receive a score on that measure.
The comments and our responses to the comments on the proposed
updates to the NHSN Dialysis Event reporting measure's scoring
methodology are set forth below.
Comment: Some commenters expressed support for the proposed change
to remove the NHSN Dialysis Event reporting measure's exclusion of
facilities with fewer than 12 eligible reporting months. One commenter
also supported CMS's proposal to assess successful reporting based on
the number of months facilities are eligible to report the measure,
stating that it is important to encourage facilities to submit dialysis
event data that is as complete and accurate as possible. Another
commenter recognized the importance of having complete NHSN data and
incentivizing all facilities to submit data regardless of the number of
months they are eligible to report. This commenter further agreed that
there is value in having new facilities and facilities with an approved
ECE report data. One commenter suggested that we submit the measure to
NQF for its review.
Response: We thank the commenters for their support.
Comment: One commenter recommended that CMS not finalize the
proposed scoring distribution for the NHSN Dialysis Event reporting
measure and recommended that CMS amend the scoring distribution for the
NSHN Dialysis Event reporting measure so that facilities earn 10 points
for 100 percent of eligible months; 8 points for reporting 80 percent
or more eligible months but less than 100 percent of eligible months; 4
points for reporting 50 percent or more eligible months but less than
80 percent of eligible months; and 0 points for reporting fewer than 50
percent of eligible months. Commenter stated that a facility that
misses only 1 month of reporting will earn two points instead of the
full ten points under the proposed scoring distribution and that such
facilities should not be penalized so drastically. However, the
commenter appreciates CMS' decision to allow facilities to receive
credit on this measure based on the number of months they successfully
report data out of the number of eligible months instead of penalizing
new facilities unable to report for the full year and facilities with
an approved ECE.
Response: We thank the commenter for its overall support of the
proposal to allow new facilities and facilities with an approved ECE to
receive credit for reporting data. We also thank the commenter for its
suggested scoring distribution. However, we believe that the scoring
methodology recommended by the commenter would allow facilities to be
awarded too many points for reporting fewer than 100 percent of
eligible months and could encourage facilities to pick and choose which
months they want to report. We believe that our proposed methodology
better incentivizes facilities to report data for all 12 months while
also discouraging the selective suppression of data.
Final Rule Action: After considering public comments, we are
finalizing the update to the scoring methodology for the NHSN Dialysis
Event reporting measure as proposed.
b. Conversion of 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 final rule (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 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).
In the CY 2020 ESRD PPS proposed rule (84 FR 38366), we stated that
we are in the process of examining the concern raised by commenters
about the validity of the modified STrR measure, and we stated that we
had 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 stated that we had considered the second alternative because the
previously adopted measure
[[Page 60721]]
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 stated that we are in the process of evaluating the concern
raised by commenters to the CY 2019 ESRD PPS proposed rule, and we
stated our intention to present our analyses and measure changes to the
NQF under an ad hoc review of the STrR clinical measure later in the
year before making a final decision regarding implementation in the
ESRD QIP. Additionally, we stated that any substantive changes to the
STrR measure that result from this process might require a MAP review
prior to any future implementation effort. We stated that under the
first policy alternative, the Program would continue use of a measure
endorsed by NQF, and if a facility did 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 scored at the median used in the mTPS
calculation for all measures, it would receive the same TPS as the mTPS
and therefore would not receive a payment reduction. However, we stated
that we rejected the first policy alternative because it would score
facilities based on their performance on a measure whose validity we
are currently examining.
We stated that 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 concerns regarding measure validity might call
into question the capacity for current data to adequately capture
transfusion rates attributable to facilities, we stated our belief 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 stated that we are continuing to examine this
issue. We stated our desire 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 stated our belief 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 also proposed that, beginning with PY 2022, we would score the
STrR reporting measure as follows: Facilities that meet previously
finalized minimum data and eligibility requirements would receive a
score on the STrR reporting measure based on the successful reporting
of data, not on the values actually reported. We proposed 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. We stated
that a patient-year at risk was 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 stated our belief that 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.
The comments and our responses to the comments on the proposal to
convert the STrR measure from a clinical measure to a reporting
measures are set forth below.
Comment: To ensure reporting accuracy of the STrR reporting
measure, a commenter suggested that CMS apply an approach similar to
that proposed for the NHSN Dialysis event measure. Commenter suggested
that the STrR reporting measure should be based on the number of months
a facility is eligible to report the measure.
Response: Unlike the NHSN Dialysis Event reporting measure, which
is calculated using monthly data, the STrR reporting measure is
calculated based on if a facility has at least 10 eligible patient-
years at risk over a full year. Consequently, it is not feasible to
calculate the STrR reporting measure using the number of months a
facility is eligible to report the data.
Comment: Some commenters supported CMS's examination into the
validity of the STrR measure and the proposal to convert it to a
reporting measure. One commenter advised CMS to seek NQF review of the
STrR clinical measure. Another commenter requested that CMS clarify and
specify the STrR reporting requirements, including those pertaining to
data elements, information submission, and the reporting schedule. One
commenter suggested that the STrR clinical measure should only include
patients who receive CKD anemia-related transfusions, given the number
of acute and chronic conditions suffered by ESRD patients which may
also necessitate a transfusion.
Response: We thank the commenter for its support of our proposal to
convert the STrR clinical measure to a reporting measure. We agree with
the commenter's recommendation to seek NQF review of the STrR clinical
measure and have submitted the measure to NQF for review. Information
gleaned from the review will be used to help support any future
policies related to the STrR clinical measure. We acknowledge the
commenter's recommendation to provide additional clarity regarding the
scoring methodology for the STrR reporting measure and have provided
additional details below. We note that the measure specifications for
the STrR reporting measure remain the same as those finalized in the CY
2015 ESRD PPS final rule (79 FR 66192 through 66197). However, because
we are finalizing that we will now score the measure as a reporting
measure, we will no longer score the measure based on the actual
clinical values reported by facilities. Rather, for the STrR Reporting
measure, facilities with at least 10 patient-years at risk will receive
a score of 10; facilities with fewer than 10 patient-years at risk will
not be eligible to receive a score on the STrR reporting measure.
Specifically, the calculation of a patient-year at risk excludes the
time periods when:
1. Patients are less than 18 years old.
2. Patients are on ESRD treatment for fewer than 90 days.
3. Patients are on dialysis at the facility for fewer than 60 days.
4. Time during which patients have a functioning kidney transplant
(exclusion begins 3 days prior to the date of transplant).
5. Patients have not been treated by any facility for a year or
longer.
[[Page 60722]]
6. Patients with a Medicare claim (Part A inpatient, home health,
hospice, and skilled nursing facility claims; Part B outpatient and
physician supplier) for one of the following conditions in the past
year: Hemolytic and aplastic anemia, solid-organ cancer (breast,
prostate, lung, digestive tract and others), lymphoma, carcinoma in
situ, coagulation disorders, multiple myeloma, myelodysplastic syndrome
and myelofibrosis, leukemia, head and neck cancer, other cancers
(connective tissue, skin, and others), metastatic cancer, or sickle
cell anemia.
7. Patient-months not within two months of a month in which a
patient has $900 of Medicare-paid dialysis claims or at least one
Medicare inpatient claim.
8. Patients beginning 60 days after they recover renal function or
withdraw from dialysis.
We also thank the commenter for its recommendation to include only
patients who receive CKD anemia-related transfusions in the STrR
clinical measure. We will assess the feasibility of this recommendation
during our review of the STrR clinical measure.
Comment: Commenter expressed concern regarding the reliability and
accuracy of the STrR clinical measure for small dialysis facilities,
stating that it was often inappropriately scored. Commenter proposed
removing the measure from the ESRD QIP until such issues are resolved.
Response: We thank the commenter for highlighting its concerns
regarding the impact of the STrR clinical measure on small dialysis
facilities. We will take this into account as we continue to examine
the STrR clinical measure. In recognition of stakeholder concerns, we
proposed to convert the STrR clinical measure to a reporting measure
until all issues are resolved. We believe this approach allows us to
continue assessing facilities on anemia management and avoid an adverse
financial impact on facilities.
Comment: Commenter expressed concern regarding the validity of the
STrR measure as a reporting measure, due to the accuracy difficulties
presented by hospital coding practices. Commenter suggested that CMS
adopt a risk-standardized rate measure as a potential alternative to
submit for NQF endorsement.
Response: We disagree that variations in hospital coding practices
would adversely impact facility performance on the STrR reporting
measure. Based on the scoring methodology for the STrR reporting
measure, facilities will receive 10 points on the measure if the
facility successfully reports data on the measure and has at least 10
patient-years at risk during the performance period. We disagree with
the commenter's suggestion to consider a risk-standardized rate instead
of a ratio for the STrR clinical measure. Placing a facility's risk
adjusted rate in context requires reference to a standard rate that
applies to the population as a whole. The utilization of a ratio allows
us to compare the ratio of the facility-adjusted rate to the standard
rate. The ratio is also a scientifically valid approach and, in our
experience, most people find the ratio to be understandable and to
sufficiently convey the rates.
Comment: Several commenters recommended that CMS examine whether a
hemoglobin threshold measure could be used as possible alternative to
the STrR clinical measure in the ESRD QIP to satisfy its statutory
anemia management measure requirement. Some commenters recommended
replacing the STrR clinical measure with a measure of hemoglobin less
than 10 g/dL. The commenters stated that a hemoglobin less than 10 g/dL
measure is supported by considerable evidence, is most actionable for
dialysis providers, and is operationally feasible. One commenter stated
that hemoglobin is routinely measured, and its elevation is the most
proximate effect of ESA administration. The commenter further stated
that low hemoglobin is a predictor of transfusion risk, and that a
hemoglobin of 10 g/dL is an effective level for reducing the need for
transfusions. Commenter stated that CMS's removal of the hemoglobin
measure from the ESRD QIP in 2012 was due to inconsistency with ESA
labeling that was revised in June 2011 and that while the measure's
standard became inappropriate, the measure is valid and places adequate
anemia treatment under dialysis facility control.
Response: Use of a hemoglobin threshold measure has been previously
considered and was not implemented based on several concerns. First,
studies reporting results of anemia management in chronic dialysis
settings typically result in hemoglobin distributions with relatively
large outcome variation, creating concern that attempts at achievement
of a specific target will result in a substantial minority of treated
patients either well above or below the target at any point in time.
Given the significant concerns about potential clinical risks of
overtreatment with ESAs, implementation of a hemoglobin threshold could
result in increased risk of ESA-related complication for the subset of
patients above the threshold. One major consequence of under treatment
is increased transfusion risk. Emphasis on minimizing avoidable
transfusions in this population focuses on avoiding a major consequence
of under-treatment without explicitly contributing to the risks
associated with over-treatment with ESAs. This approach is consistent
with the Food and Drug Administration (FDA) guidance for use of ESAs in
this population. In addition, the available literature has not clearly
established a minimum hemoglobin threshold that reliably maximizes the
primary outcomes of survival, hospitalization, and quality of life for
most patients. If new evidence becomes available, we will reassess the
feasibility of replacing the STrR clinical measure with a hemoglobin
measure as part of our future measure development work.
Comment: Commenter expressed concerns about the proposal to convert
the STrR clinical measure to a reporting measure. Commenter agreed that
facilities should not be adversely affected while CMS investigates the
measure's validity concerns. However, the commenter expressed concerned
about giving facilities credit for reporting a measure that is derived
using hospital claims data and not values collected and reported in the
facility. The commenter expressed concern that this approach stretches
the ESRD QIP's statutory requirement to include a measure of anemia
management to its limit. Commenter stated that CMS should examine
anemia management practices in clinics through random audits or
validation surveys to monitor compliance and identify signs of
stinting.
Response: Anemia is a complication of end-stage renal disease that
can be avoided if a patient's dialysis facility is undertaking proper
anemia management. When anemia is not managed patients are subjected to
unnecessary transfusions that increase morbidity and mortality. The
STrR measure is calculated using data reported by hospitals because
poor anemia management results in transfusions that most often occur in
hospitals and not dialysis facilities. The commenter's recommendation
to conduct random audits of anemia management practices is not feasible
because we do not have the authority to examine anemia management
practices in clinics through our validation activities. However, we
will assess the feasibility of gathering more data about anemia
management practices in clinics through our monitoring and evaluation
work.
Comment: Commenter expressed concern that CMS may consider
eliminating the STrR clinical measure
[[Page 60723]]
from the ESRD QIP. Commenter advocated preserving the STrR clinical
measure in the ESRD QIP in PY 2022 and beyond, emphasizing the
importance of a measure monitoring anemia management. Acknowledging
accuracy issues associated with the current STrR clinical measure,
commenter suggested that CMS determine an appropriate measure of anemia
management to incentivize reducing the need for transfusions.
Response: We agree that it is important to include a measure
monitoring anemia management in the program. However, in light of
concerns regarding the STrR clinical measure, we do not believe it is
appropriate to potentially penalize facilities for their performance on
the clinical measure while we examine concerns raised by stakeholders.
We believe that converting the STrR clinical measure to a reporting
measure is appropriate to ensure that facilities are not penalized for
their performance. If we conclude that the concerns about the STrR
clinical measure raised by stakeholders are not supported by the
evidence, we will consider reintroducing the measure or an updated
version of the measure into the program through the rulemaking process.
Final Rule Action: After considering public comments, we are
finalizing our proposals to convert the STrR clinical measure to a
reporting measure and to update the scoring methodology as proposed.
c. MedRec Reporting Measure 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] TR08NO19.065
We also stated that this equation was similar to the equation used for
the Ultrafiltration reporting measure (81 FR 77917):
[GRAPHIC] [TIFF OMITTED] TR08NO19.066
However, we stated in the CY 2020 ESRD PPS proposed rule (84 FR 38367)
that we inadvertently used the term ``patient-months'' in the MedRec
reporting measure's scoring equation. We stated that 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. We stated that 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.
We stated that 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), the Serum Phosphorus
reporting measure (finalized for removal beginning with the PY 2021
ESRD QIP measure), and the Ultrafiltration reporting measure.
We therefore proposed to revise the scoring equation for the MedRec
reporting measure so that the scoring methodology accurately describes
our intended policy. We proposed to score the MedRec reporting measure
using the following equation, beginning with the PY 2022 ESRD QIP. We
solicited public comments on this proposal.
[GRAPHIC] [TIFF OMITTED] TR08NO19.067
Additionally, we stated that in section IV.B.4 of the CY 2019 ESRD
PPS final rule, we had 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
[[Page 60724]]
eligibility requirements for the MedRec reporting measure.
In order to ensure that there is no confusion regarding these
requirements, we clarified in the CY 2020 ESRD PPS proposed rule (84 FR
38367) 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.
The comments and our responses regarding the MedRec reporting
measure's scoring methodology updates are set forth below.
Comment: Some commenters expressed concerns with our proposal to
change the term ``patient-months'' in the MedRec reporting measure's
scoring equation to the term ``facility months.'' Commenters stated
that the term ``patient-months'' is more consistent with the NQF's
definition, and disagreed with CMS's assertion that using ``facility
months'' is more appropriate for a reporting measure. One commenter
noted that this change could potentially result in lower scores for
facilities that fail to perfectly report for all patients in all
months. This commenter suggested that CMS use the ``patient-month''
metric used in the NQF-endorsed measure, or alternatively allow room
for less than perfect reporting in the scoring equation.
Response: We acknowledge commenters' concerns and thank them for
their feedback. While we reiterate our desire to align the scoring
methodologies of all reporting measures, we also recognize the value of
alignment with NQF measure specifications when possible and the
incorporation of more outcomes focused measures in ESRD QIP. As such,
we have been persuaded by commenters' concerns and given that the
outcome of the MedRec measure is the provision of medication
reconciliation services and their documentation by an eligible
professional for patients attributed to dialysis facilities each month,
we have decided to use ``patient-months'' instead of ``facility
months'' when calculating ``eligible months'' for the MedRec measure.
We believe this approach supports our desire to incorporate more
outcomes-based measures in the ESRD QIP and is responsive to
stakeholder concerns. We also plan to reevaluate other reporting
measures for opportunities to more closely align them with NQF measure
specifications.
Comment: One commenter supported the proposed change to the MedRec
reporting measure scoring equation. Commenter agreed that MedRec is a
reporting measure and should be scored like other reporting measures.
Response: We thank the commenter for its support of our proposal to
score the MedRec measure consistent with how other reporting measures
are scored. However, in recognition of stakeholder concerns regarding
misalignment with the NQF endorsed measure specifications in addition
to our desire to focus on more outcome-based measures, we plan to
calculate the measure using patient months instead of facility months.
This approach is aligned with our policy finalized in the CY 2019 ESRD
PPS final rule (83 FR 57008 through 57010) and consistent with the NQF
approved version of the measure.
Final Rule Action: After considering public comments, we are not
finalizing the proposed update to the MedRec reporting measure's
scoring methodology.
3. 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 the CY 2020 ESRD PPS proposed rule, we proposed 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 were eligible to
report the measure, beginning with the PY 2022 ESRD QIP. To accommodate
this proposed policy, we proposed 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. We
stated that Table 9 summarized the ESRD QIP's minimum eligibility
requirements for scoring, including the proposed change to the
eligibility requirement for the NHSN Dialysis Event reporting measure.
BILLING CODE 4120-01-P
[[Page 60725]]
[GRAPHIC] [TIFF OMITTED] TR08NO19.068
BILLING CODE 4120-01-C
The comments and our responses regarding the minimum eligibility
requirements are set forth below.
Comment: One commenter supported the removal of the CCN Open Date
requirement for the Dialysis Event reporting measure. The commenter
appreciated the interest in accurately capturing dialysis event data.
Response: We thank the commenter for its support of our proposal to
remove the CCN Open Date requirement for the Dialysis Event reporting
measure.
Comment: One commenter recommended that CMS give facilities a
minimum of 90 days before being subject to the ESRD QIP's reporting
requirements and exclude all facilities from ESRD QIP participation for
the first 90 days after Medicare certification. Another commenter
stated that new facilities have significant obligations when beginning
operations and that they should not be penalized if they are unable to
comply with CMS's reporting requirements.
Response: Under our current policy, which was finalized in the CY
2019 ESRD PPS final rule (83 FR 56669), new facilities are required to
collect data for purposes of the ESRD QIP beginning with services
furnished on the first day of the month that is 4 months after the
month in which the CCN becomes effective. We believe that this policy
gives new facilities the flexibility they need to put into place the
mechanisms needed in order to successfully participate in the ESRD QIP.
Final Rule Action: After considering public comments, we are
finalizing as proposed the update to the NHSN Dialysis Event reporting
measure's minimum eligibility requirements, which apply for the PY 2022
ESRD QIP and beyond.
4. Payment Reduction for the PY 2022 ESRD QIP
We stated in the CY 2020 ESRD PPS proposed rule that under our
current policy, a facility will not receive a payment reduction in
connection with its performance in 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
[[Page 60726]]
facility performance on all reporting measures.\40\
---------------------------------------------------------------------------
\40\ 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 the recently codified definition of the
minimum TPS.
---------------------------------------------------------------------------
We also stated that 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 estimated using available data that a facility must
meet or exceed a minimum TPS of 53 in order to avoid a payment
reduction. We noted that the mTPS estimated in the CY 2020 ESRD PPS
proposed rule was based on data from CY 2017 instead of the PY 2022
baseline period (CY 2018) because CY 2018 data were not yet available.
We referred the reader to Table 4 for the estimated values of the
50th percentile of national performance for each clinical measure. We
stated in the CY 2020 ESRD PPS proposed rule that 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 10.
Table 10--Estimated Payment Reduction Scale for PY 2022
------------------------------------------------------------------------
Reduction
Total performance score (%)
------------------------------------------------------------------------
100-53...................................................... 0
52-43....................................................... 0.5
42-33....................................................... 1.0
32-23....................................................... 1.5
22-0........................................................ 2.0
------------------------------------------------------------------------
We stated our intention 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.
The comments and our responses regarding the mTPS and payment
reduction scale are set forth below.
Comment: One commenter stated that ESRD QIP penalties do not align
with actual performance and are problematic in a program designed to
only apply payment penalties. The commenter also expressed concern
about the percentage of facilities anticipated to face penalties in PY
2020 and PY 2021 given that facility performance is improving overall.
Response: We thank the commenters for their feedback. However, we
disagree that ESRD QIP penalties do not align with actual performance
as our measure set assesses the degree to which evidence-based
treatment guidelines are followed and assess the results of care. While
we recognize the commenters concerns regarding the increase in payment
penalties, our adoption of several outcome and patient experience of
care measures (such as the STrR measure and the ICH CAHPS survey) with
large variation in aggregate performance and room for improvement in
more recent years of the QIP has contributed to an increase in the
number of facilities that are receiving payment reductions. We also
proposed domain weights changes to reflect the ESRD QIP's changing
measure set. These changes have included alignment with our meaningful
measures initiative and measure removal criteria (83 FR 56983 through
56989). We believe that some increases in payment penalties are
inevitable as the Program's measure set changes, particularly as we
accumulate sufficient data on reporting measures and convert them to
more outcomes based measures or as actual performance data on new
measures become available to establish real and not estimated
performance standards. Because of these policy changes, we believe it
is reasonable for the payment reductions to shift even if performance
on some measures is comparatively high. Nevertheless, we will continue
monitoring the amount of payment penalties imposed on facilities and
facilities performance on our quality measures.
Comment: One commenter recommended that CMS share details about the
methodology used to project payment adjustments. Commenter expressed
concern regarding the lack of transparency in CMS's methodology for
penalty projections. Commenter expressed concerns that the ESRD QIP has
grown more complex over time and that relatively small changes to the
Program can significantly change the distribution of payment penalties.
Commenter stated that its analysis of the STrR proposal, for example,
shows that the proposal resulted in a significant change in the number
of facilities projected to receive a penalty in PY 2022. Commenter
noted that CMS has implicitly acknowledged validity concerns based on
its proposal to make data validation activities permanent.
Response: We describe the methodology used to project payment
adjustments for the ESRD QIP in the Regulatory Impact Analysis section
of both the ESRD PPS proposed and final rules each year. The most
recent analyses, which apply to the PY 2022 and PY 2023 ESRD QIP,
appeared in section XI.B.3.a of the CY 2020 ESRD QIP proposed rule and
is in section X.B.3.b of this final rule. We calculate our projections
by using the most recently available CROWNWeb and Medicare claims data.
The list of eligible facilities is determined using the most recently
published PPS eligible facility list. Simulated achievement scores are
calculated using the achievement threshold and benchmark for each
clinical measure. We use the achievement threshold and benchmark from
the previous calendar year final rule rather than the standards
published in the most current rule in order to simulate improvement in
performance that we observe for some of the clinical measures from one
year to the next. Improvement scores are calculated using the same
methodology comparing the facility's performance year measure rate to
the rate in the year prior. In the simulation, the performance year is
based on the most recently available data, which will be at least 2
years prior to the actual performance year. Once the facility-level
achievement and improvement scores are calculated, the measure weights
are applied and the Total Performance Score is calculated. If a
facility is missing one or more measures, then the measure weight(s)
for the missing measures are redistributed to the other measures, based
on the methodology proposed in the rule. For PY 2022 and PY 2023, the
measure weights are redistributed equally among all other measures in
the same domain. If we do not have data for a measure that is new to
the ESRD QIP (for example, MedRec for PY 2022), we set the measure
score to missing for all facilities and redistribute that weight
equally among all other eligible measures in the same domain.
Finally, payment reductions are estimated using the mTPS that we
calculate using the performance standards published in the previous
year's final rule. Oftentimes the simulated mTPS is the same as the
final mTPS proposed in the current rule, but we use an estimated
simulated mTPS in order to simulate the differences in performance in
prior years. Additionally, the methodology used to estimate
performances scores is consistent with how the actual facility payment
reductions are determined,
[[Page 60727]]
which use the mTPS, achievement threshold, and benchmark that are
determined using data from the same year.
At the time the proposed rule was published, the most recently
available data for a complete year was CY 2017. We have now updated the
payment reductions that will apply to the PY 2022 ESRD QIP using CY
2018 data. The mTPS for PY 2022 will be 54, and the updated payment
reduction scale is shown in Table 11.
Table 11--Finalized Payment Reduction Scale for PY 2022 Based on the
Most Recently Available Data
------------------------------------------------------------------------
Reduction
Total performance score (%)
------------------------------------------------------------------------
100-54...................................................... 0
53-44....................................................... 0.5
43-34....................................................... 1.0
33-24....................................................... 1.5
23-0........................................................ 2.0
------------------------------------------------------------------------
5. Data Validation for PY 2022 and Beyond
In the CY 2020 ESRD PPS proposed rule (84 FR 38368), we stated that
one of the critical elements of the ESRD QIP's success is ensuring that
the data submitted to calculate measure scores and TPSs are accurate.
We stated that the ESRD QIP 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).
We stated that 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 referred readers to the CY 2018
ESRD PPS final rule (82 FR 50766 through 50767).
In the CY 2020 ESRD PPS proposed rule, we proposed to continue
using this methodology for the NHSN validation study for PY 2023 and
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. We stated that
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 proposed 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 proposed
to adopt NHSN validation as a permanent feature of the ESRD QIP with
the methodology we first finalized for PY 2022 and proposed to continue
for PY 2023 and subsequent years. We stated our belief that the purpose
of our validation programs is to ensure the accuracy and completeness
of data that are scored under the ESRD QIP and 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 show our
commitment to accurate reporting of the important clinical topics
covered by the NHSN measures that we have adopted. We welcomed public
comments on these proposals.
The comments and our responses to the comments on our data
validation proposals are set forth below.
Comment: Some commenters supported continued use of the CROWNWeb
validation study and the 10-point non-compliance penalty. One commenter
also supported the permanent adoption of the NHSN validation
methodology and the continued use of the PY 2022 methodology in future
payment years.
Response: We thank the commenters for their support.
Comment: One commenter recommended that CMS adopt an alternative
data validation approach, such as requesting data that only applies to
the specific area of the validation, giving facilities more time to
comply with data requests, and using electronic data exchange. The
commenter expressed concerns about the burden placed on facilities to
conduct data validation activities. The commenter also stated that CMS
is not considering facility burden for validation activities.
Response: We will consider these recommendations during future
rulemaking. Our validation studies are conducted within a timeframe
that is consistent with our operational schedule. Currently facilities
are given 60 days to respond to data request. We do not believe that
increasing the time is feasible because our goal is to provide
facilities with timely feedback about reporting accuracy. We disagree
with the characterization that CMS is not taking facility burden into
consideration for these validation activities. Each year we calculate
facility burden associated with our validation activities and submit
this information as part of our Paperwork Reduction Act (PRA)
submission package. For example, in our most recent PRA package, we
estimated that the burden associated with the collection of information
for our PY 2022 NHSN validation activities is 10 hours annually and
$423 per facility, which we believe is a minimal burden on facilities.
Additionally, given that our validation activities are widely supported
by stakeholders and encourage improvements in data completeness and
accuracy, we believe the value of our validation activities outweigh
the current estimated burden posed on facilities. Currently, our
validation activities are restricted to measures that utilize CrownWeb
or NHSN as their primary data sources. If we impose further
restrictions on data collected for validation actions, our ability to
measure the accuracy of data submitted to CROWNWeb or NHSN will be
severely limited. We also encourage facilities to submit data
electronically through our secured transfer file system instead of
submitting hard copies of requested records. We believe this approach
is more efficient and effective for facilities.
Final Rule Action: After consideration of public comments we
received, we are finalizing as proposed the continuation of the PY 2022
NHSN validation study methodology in PY 2023 and subsequent years as
well as adoption of the NHSN validation study as a permanent feature of
the Program.
E. Requirements for the PY 2023 ESRD QIP
1. Continuing Measures for the PY 2023 ESRD QIP
In the CY 2020 ESRD PPS proposed rule (84 FR 38369), we stated
that, under our previously adopted policy, we were continuing all
measures from the PY 2022 ESRD QIP for PY 2023. We did not propose to
adopt any new measures beginning with the PY 2023 ESRD QIP.
[[Page 60728]]
2. Proposed Performance Period for the PY 2023 ESRD QIP and Subsequent
Years
In the CY 2020 ESRD PPS proposed rule (84 FR 38369), we stated our
continued belief that 12-month performance and baseline periods would
provide us sufficiently reliable quality measure data for the ESRD QIP.
We therefore proposed to establish CY 2021 as the performance period
for the PY 2023 ESRD QIP for all measures. Additionally, we proposed 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 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 proposed 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 welcomed public comments on these proposals.
The comments and our responses to the comments on our proposals for
establishing the performance and baseline periods are set forth below.
Comment: One commenter expressed support for CMS's proposal to
codify the automatic adoption of a baseline period and a performance
period for each payment year that is 1-year advanced from those
specified for the previous payment year. The commenter also expressed
its appreciation for the predictability and efficiency provided by this
proposal.
Response: We thank the commenter for its support.
Final Action Decision: After considering public comments received,
we are finalizing our proposals for establishing the performance and
baseline periods as proposed.
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. In the
CY 2020 ESRD PPS proposed rule (84 FR 38369), we referred 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 stated that 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38369), we stated that
at that time, we did 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 did not
have CY 2019 data. We stated our intention 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). In the CY 2020
ESRD PPS proposed rule (84 FR 38369), we stated that we would continue
use of those 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).\41\
---------------------------------------------------------------------------
\41\ Please note that we are finalizing our proposal to
redesignate Sec. 413.178(d) as Sec. 413.178(e) in this final rule.
---------------------------------------------------------------------------
In the CY 2020 ESRD PPS proposed rule (84 FR 38369), we stated that
we were not proposing to change these 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),\42\ 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). In the CY 2020 ESRD PPS
proposed rule (84 FR 38369), we stated that we would continue use of
the Ultrafiltration Rate reporting measure's scoring policy in PY 2023.
In section IV.B.3.c of the CY 2020 ESRD PPS proposed rule, we proposed
to use facility-months instead of patient-months when scoring the
MedRec reporting measure and clarified 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. We stated in the CY 2020 ESRD PPS proposed rule
that those proposals, if finalized, would apply to PY 2023 and
subsequent payment years. In Section IV.D.2.c of this final rule, we
did not finalize our proposal to update the scoring methodology for the
MedRec reporting measure, so that measure will be scored in accordance
with the methodology we finalized in the CY 2019 ESRD PPS final rule.
(83 FR 57008 through 57010).
---------------------------------------------------------------------------
\42\ Please note that we are finalizing our proposal to
redesignate Sec. 413.178(d) as Sec. 413.178(e) in this final rule.
---------------------------------------------------------------------------
5. Weighting the Measure Domains and the TPS for PY 2023
In the CY 2020 ESRD PPS proposed rule (84 FR 38369), we stated that
under our current policy, we have assigned the Patient & Family
Engagement Measure Domain a weight of 15 percent of the TPS, the Care
Coordination Measure Domain a weight of 30 percent of the TPS, the
Clinical Care Measure Domain a weight of 40 percent of the TPS, and the
Safety Measure domain a weight of 15 percent of the TPS, for the PY
2022 ESRD QIP (83 FR 57011 through 57012).
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). In the CY 2020 ESRD PPS proposed rule (84 FR 38370), we
proposed to continue use of
[[Page 60729]]
the PY 2022 measure weights for the PY 2023 ESRD QIP and subsequent
payment years. We also proposed to continue use of the PY 2022 measure
weight redistribution policy in the PY 2023 ESRD QIP and subsequent
payment years. We solicited public comments on these proposals.
We also noted that 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).
The comments and our responses to the comments on our measure
weight assignments and weight redistribution proposals are set forth
below.
Comment: One commenter expressed concern with the weight of the
MedRec reporting measure within the Safety Measure Domain, and its
application to home dialysis facilities. The commenter noted that
because other measures within the domain do not apply to home dialysis
facilities, the MedRec reporting measure effectively has more weight in
the ESRD QIP TPS than otherwise intended. To remedy this concern,
commenter suggested that CMS move the MedRec reporting measure from the
Safety Measure Domain to the Care Coordination Measure Domain. The
commenter also suggested that CMS add the following patient-level
exclusions for home dialysis facilities: (1) Patients not assigned to
the facility for the entire reporting month, and (2) patient-months
where there is a more than one treatment modality.
Response: In the CY 2019 ESRD PPS final rule (83 FR 57003 through
57010), we finalized the MedRec reporting measure for the ESRD QIP
measure set, beginning with PY 2022. The MedRec reporting measure
assesses whether a facility has appropriately evaluated a patient's
medications, an important safety concern for the dialysis patient
population because those patients typically take a large number of
medications. Inclusion of the MedRec measure in the ESRD QIP measure
set aligns with the Meaningful Measure Initiative priority area of
making care safer by reducing harm caused by care delivery. As noted in
the CY 2019 ESRD PPS final rule, while we agree that medication
reconciliation can be considered a measure of care coordination, we
believe that it is more properly aligned with patient safety because
patients can be harmed by medication errors. While it is possible that
MedRec will be weighted more for home dialysis facilities, we do not
believe this is inappropriate because regardless of the facility type,
all facilities are required to provide high quality services to
patients that do not cause harm. Additionally, in accordance with our
monitoring and evaluation efforts, we plan to monitor the impact of
measures on dialysis facilities and the quality of care provided to
facilities and propose any changes we think are warranted. We thank the
commenter for its recommendation regarding patient-level exclusions to
the measure; however these comments are out of scope given that we are
not proposing to make any updates to the underlying measure
specifications. Nevertheless, we will review and assess the feasibility
of the commenter's recommendation and if warranted, consider in future
rulemaking.
Comment: One commenter expressed concern that the current weighting
of measure domains, given the increasing number of quality measures,
may dilute the importance of each individual measure and potentially
result in decreased quality of care. The commenter recommended that we
continually reevaluate the ESRD QIP to ensure that the measures
included are all meaningful. Another commenter stated that the
weighting assigned to the SRR and SHR measures (12 percent each) is too
high given the amount of control that dialysis facilities have over
admissions and readmissions to the hospital. The commenter stated that
we should reduce the weights assigned to those measures and increase
the weighting applied to measures in the Clinical Care and Safety
domains.
Response: We disagree that our current measure domains and
weighting dilutes the importance of each individual measure and
decreases quality of care. We believe our core set of measures
addresses areas that are agency priorities, safeguard public health,
and are meaningful to patients. Further, we take numerous factors into
account when determining appropriate domain and measure weights,
including clinical evidence, opportunity for improvement, clinical
significance, patient and provider burden) the number of measures and
measure topics in the domain, how much experience facilities have had
with the measures and measure topics in the domain, and how well the
measures align with CMS's highest priorities for quality improvement
from patients receiving dialysis. We also continuously review our
existing measures and weights and propose changes that we think are
warranted. We disagree with the commenter's recommendation to reduce
the weight of SHR and SRR. We believe that our weights for SRR and SHR
are appropriate given that reducing hospitalizations and readmission is
a top policy goal for CMS. We also continue to believe that the SHR and
SRR measures, along with other measures in the ESRD QIP, ensure that
dialysis facilities fulfill their shared responsibilities to coordinate
with other types of providers to provide the best possible care and
ensure their patients' continued health.
Comment: Commenter requested clarification on how the TPS would be
reweighted for facilities that are unable to reach the required 30 ICH-
CAHPS survey count. Commenter suggested that many facilities will not
receive ICH-CAHPS scores and noted that the additional clarity would be
helpful to those facilities.
Response: In the CY 2019 ESRD PPS final rule (83 FR 56998), we
finalized a policy that would redistribute the weights of any measures
for which the facility does not receive a score to the remaining
measures proportionately based on their measure weight as a percent of
the TPS. This redistribution would occur across all measures regardless
of their domain. If a facility did not receive an ICH CAHPS score, one-
third of the Patient & Family Engagement Domain's weight of 15 percent
would be distributed to each of the three remaining domains and evenly
split among measures within each domain. We believe this approach
addresses concerns that certain facilities could receive a TPS that is
dominated by the scores of only a few measures.
Final Rule Action: After considering the public comments we
received, we are finalizing as proposed continuation of the PY 2022
measure weights in PY 2023 and subsequent payment years as well as our
continued use of the PY 2022 weight redistribution policy in PY 2023
and subsequent payment years.
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 and furnished 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
[[Page 60730]]
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. Pursuant to 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. 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 catalog prices,
as well as wholesale prices plus a retail price mark up, and on one
occasion hospital invoices plus a 10 percent markup as a source for
commercial pricing information.
In 2015, when revising the DME MAC statement of work, CMS clarified
to the DME MACs that 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 some cases, a single manufacturer may produce a new item, and
pricing information may therefore be limited to the MSRP. In these
cases, unlike other items and services paid for under Medicare, there
is not yet independently substantiated pricing information. In
addition, similar items may not be 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 announcing
[[Page 60731]]
updates to the DMEPOS fee schedule, we include a list of new Healthcare
Common Procedure Coding System (HCPCS) codes, which are 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 the establishment of procedures for coding and payment
determinations for new DMEPOS items under Medicare Part B that permit
public consultation 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 has developed its
preliminary decision, these 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 update (annual or quarterly) to our
contractors and via our website for public access. 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 list of approved new DMEPOS codes is not
finalized until shortly before the release of the updated HCPCS file,
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, CMS
and our contractors follow the instructions in section 60.3.1 to make
every effort to determine whether the item has a pricing history. If
there is a pricing history, that is, the item(s) and services described
by the new code were paid for in the past under existing codes based on
the fee schedule amounts for these codes, the fee schedule amounts
previously used to pay for the item 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 are 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
an item are combined in a single global code, the fee schedule amount
for the new code is established by totaling the fee schedule amounts
used for the components (that is, the total of the fee schedule amounts
for the components is used to determine 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
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
[[Page 60732]]
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, we 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 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
[[Page 60733]]
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 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 items' technologies in a way that satisfies the 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. Also, the commenters expressed concern that the
current gap[hyphen]filling methodology does not always incorporate
comparability analysis and 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.
B. Current Issues
In the CY 2020 DMEPOS proposed rule (84 FR 38373-38375), we
discussed that 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 how CMS determines that new
items are comparable to other DMEPOS items. Some have asked for a
process that is more predictable in determining the 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) adjustment of newly established fees
over time.
1. Code or Item Comparability Determinations
A major stakeholder concern that we have heard frequently from
manufacturers is that they do not agree that their newly developed
DMEPOS item is comparable to older technology DMEPOS items and services
(84 FR 38374). Our program instructions set forth a process to
establish DMEPOS payment amounts following updates to HCPCS codes in
section 60.3.1 of chapter 23 of the Medicare Claims Processing Manual.
Under this process, 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
[[Page 60734]]
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.
As explained in the CY 2020 DMEPOS proposed rule (84 FR 38374), in
an effort to consider the concerns about our process for establishing
payment amounts for new DMEPOS item and services, 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 12, 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 12 under the five main components are
examples of various attributes CMS evaluates within each category. We
believe that establishing a framework and basis for identifying
comparable items in regulation would improve the transparency and
predictability of establishing fees for new DMEPOS items.
Table 12--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
We also reviewed the concerns about our process for establishing
payment amounts for new DMEPOS item and services 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 (84 FR 38374). In these cases, 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 set forth a process for obtaining the
main source of pricing data when establishing the fee schedule amount
for a new item that lacks a Medicare pricing history. The instructions
at 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 chapter 23 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 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 a
1986/87 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
[[Page 60735]]
$74.16 if it is a class III device, after applying the update factors
mandated by section 1834(a)(14) of the Act.
In the CY 2020 DMEPOS proposed rule (84 FR 38375), we noted that
another source of information is a technology assessment. We proposed
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.
As a result of our review of the major stakeholder concerns about
our process for establishing payment amounts for new DMEPOS items and
services involving code or item comparability determinations, we
proposed to add provisions to the regulations at Sec. Sec. 414.110 and
414.236 to codify how CMS and our contractors will make efforts to
determine when a new or existing DMEPOS item is comparable and the
application of continuity of pricing when items are re-designated from
one HCPCS code to another (84 FR 38375). Also as a result of our review
of the major stakeholder concerns about our process for establishing
payment amounts for new DMEPOS items and services without a fee
schedule pricing history, we proposed to add a provision to the
regulations at Sec. Sec. 414.112 and 414.238 to establish 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 proposed to use the fee
schedule amounts for the older existing item(s) to establish the fee
schedule amounts for the new item. We also proposed that if it is
determined that there are no comparable items to use for gap-filling
purposes and other sources of pricing data must be used to calculate
the DMEPOS fee schedule amount for the new item, 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 proposed
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 (84 FR 38375).
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 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. Also, instructions for the implementation of interim
fees may be released along with other updates to the national DMEPOS
fee schedule files on a quarterly basis, along with any corrections of
errors made in calculating fee schedule amounts (see section 60.2 of
chapter 23 of the Medicare Claims Processing Manual). Changes to fee
schedule amounts are generally implemented on a quarterly basis to
permit preparation and testing of the fee schedule files and claims
processing edits and systems.
Also, as explained in section V.B.4 of this final rule, the time
period that an interim local fee may be effective for claims payment
could be affected by the process used to obtain public consultation and
feedback from stakeholders on the establishment of a fee schedule
amount for a new item.
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,
[[Page 60736]]
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.
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 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 proposed 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
[[Page 60737]]
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 did not propose
similar one-time increases in fee schedule amounts established using
supplier or commercial prices, however, we invited 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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the Proposed Rule
The proposed rule, titled ``Medicare Program; End-Stage Renal
Disease Prospective Payment System, Payment for Renal Dialysis Services
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal
Disease Quality Incentive Program, Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts,
DMEPOS Competitive Bidding Program (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'' (84 FR 38330
through 38421), hereinafter referred to as the ``CY 2020 DMEPOS
proposed rule,'' was published in the Federal Register on August 6,
2019, with a comment period that ended on September 27, 2019.
In the CY 2020 DMEPOS proposed rule, we proposed a gap-filling
methodology for establishing payment amounts for new DMEPOS items and
services and one-time adjustment to gap-filled payment amounts for
DMEPOS items and services using supplier or commercial prices in cases
where such prices decrease within 5 years. We solicited comments on our
proposals and we summarize the comments that we received below. We
received approximately 30 comments on these topics from suppliers,
manufacturers, and associations or organizations representing suppliers
and manufacturers. In this final rule, we provide a summary of each
proposed provision, a summary of the public comments received and our
responses to them, and the DMEPOS provisions we are finalizing.
The comments and our responses to those comments are set forth
below.
Comment: Some commenters expressed appreciation for the detailed
explanation of the gap-filling process in the proposed rule.
Response: We appreciate the comments.
Comment: Many commenters supported increased transparency during
the process for establishing fee schedule amounts for new or revised
HCPCS codes that allows for stakeholder input and consultation on the
pricing methodology used as well as sources of data used in
establishing the tentative or preliminary fee schedule amounts.
Specifically, some commenters suggested that CMS increase transparency
by establishing a process for stakeholders to receive information and
provide feedback to CMS if they believe that the new HCPCS code should
not be paid at the fee schedule amount that CMS is proposing as the
result of the addition or subdivision of previous codes. Some
commenters recommended CMS's comparability analysis should include a
written report that is shared with the public, prior to a final
decision on establishing new fee schedule amounts for new items. One
commenter recommended simultaneous expansion of the HCPCS Level II Code
application to allow applicants to address this specific topic without
limiting other important information by virtue of application page
limits. In addition, the commenter requested that the public meetings
for DMEPOS should also be updated to allow additional presentation time
for this information at the discretion of the applicant. Another
commenter stated that CMS should also permit an opportunity for
stakeholders to show that the pricing that was applicable in the past
was established inappropriately or fails to consider technological
changes.
Response: We appreciate the support for our proposal to establish a
methodology for calculating fee schedule payment amounts for new DMEPOS
items and services. Section 531(b) of BIPA mandated the establishment
of procedures for coding and payment determinations for new DMEPOS
items that permit public consultation in a manner consistent with the
procedures established for implementing coding modifications for ICD-9-
CM. We implemented procedures that permit public consultation regarding
requests for codes for new DME and also extended these procedures to
external requests for codes for all DMEPOS items and services. CMS
holds annual public meetings to obtain public consultation on
preliminary coding and payment determinations for new DMEPOS, that is,
requests for codes for DMEPOS items and services. For more information
about the HCPCS public meetings, see https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/HCPCSPublicMeetings.html. We believe that
stakeholders can use this process to provide input and consultation on
sources of information for gap-filling for new DMEPOS items.
Comment: Many commenters recognized that sections of our gap-
filling methodology proposal had been available in program guidance and
implemented; however, the commenters did not support adding regulations
which codify the program guidance. The commenters expressed concern
that the methodology may not be appropriate in all situations. Also,
some commenters expressed concern that the methodology maintains that
the use of gap filling to address more than a 30-year span between the
base year of 1986 to 1987 and 2020, which may not be a reasonable
methodology to establish current year fee schedule amounts. Several
commenters suggested that CMS delay implementation of the DMEPOS
proposals by one calendar year to collect further stakeholder input on
the appropriate cross-walk categories, comparable item methodology, and
procedures.
Response: We believe that the procedures described above for
obtaining public consultation on preliminary coding and payment
determinations for DMEPOS can be used by stakeholders to provide
consultation on sources of information for gap-filling for new DMEPOS
items
[[Page 60738]]
and other preliminary coding determinations for DMEPOS that might
affect pricing of the items under the fee schedule. With regard to the
comments regarding the 30-year span between the fee schedule base year
of 1986 to 1987 and items furnished in 2020, sections 1834(a) and (h)
of the Act specifically require that fee schedule amounts for DME,
prosthetics, orthotics, and prosthetic devices be based on average
reasonable charges from 1986 and 1987. Sections 1834(a)(14) and
1834(h)(4)(A) of the Act mandate annual updates to the fee schedule
amounts established using average reasonable charges from 1986 and
1987, and sections 1842(b)(8) and (9) of the Act provide CMS with the
authority and a process for establishing special payment amounts in
cases where the fee schedule amounts become grossly excessive or
deficient over time, for example, due to changes in technology.
Sections 1842(b)(8) and (9) of the Act outline a process for
establishing realistic and equitable payment amounts in cases where the
fee schedule amounts are not inherently reasonable.
The gap-filling methodology that we proposed is a multi-step
process. The proposed regulations at Sec. Sec. 414.110 and 414.236
address the continuity of pricing when items are re-designated from one
HCPCS code to another and for new items without a pricing history. The
proposed regulations at Sec. Sec. 414.112 and 414.238 set forth 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. The gap-filling methodology ensures a
case by case review is conducted of each item that is assigned a new
HCPCS code. Furthermore, as discussed in our proposal (84 FR 38373), we
have repeatedly solicited feedback from our stakeholders through past
rulemaking (71 FR 25687 through 25689 and 83 FR 57046 through 57047,
and in our CY 2020 DMEPOS proposed rule (84 FR 38379)). Our proposed
gap-filling methodology enhances predictability of pricing for new
items and services and improves transparency as compared to the
existing program guidance. We also believe it is important to have
regulations addressing the pricing of new DMEPOS to create a firm basis
for establishing fee schedule amounts in accordance with the statute.
We can consider additional updates through future rulemaking if
necessary.
1. Continuity of Pricing When HCPCS Codes Are Divided or Combined
We proposed 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 proposed 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 mapped to, or cross walked to the 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, 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.
We solicited comments on these proposals. The comments and our
responses to the comments are set forth below.
Comment: Several commenters supported our proposal for continuity
of pricing when existing HCPCS codes are divided or combined. One
commenter, a national trade association for prosthetics and orthotics,
stated that the use of pricing continuity when establishing new fees
must be reserved only for those instances where there is a direct
relationship between the former HCPCS code(s) and the new HCPCS
code(s). The commenter stated failure to ensure that a continuity
relationship exists could lead to fee schedule calculations that are
either inadequate or excessive for the items represented by the new
HCPCS codes.
Response: We thank the commenters. We agree that the use of pricing
continuity when establishing new fees must be reserved only for those
instances where there is a direct relationship between the former HCPCS
code(s) and the new HCPCS code(s). An item must fall within the
category of items described by existing codes that are combined or
divided in order for the continuity of pricing rules to apply to that
item. If an item does not fall under one of the four example
categories, then the continuity of pricing rules would not apply. For
example, if the code for a cane is divided into codes for red canes,
white canes, blue canes, and canes of any color other than red, white,
or blue, there is a direct relationship between the former code (cane)
and the four new codes, which are all the canes that used to be
described by the former code separated into new codes based on color.
The direct relationship is also present in the reverse scenario where
multiple canes of all different colors are combined into one code for
all of the canes that previously fell under the four separate codes.
The same is true for global codes for one item versus separate codes
for components of an item. If the code for a cane is divided into codes
for cane handle, cane staff, and cane tip, there is a direct
relationship between the three new codes for the cane handle, cane
staff, and cane tip and the old code for cane since the cane handle,
cane staff, and cane tip were all three previously combined in the one
code for cane. The direct relationship is also present in the reverse
scenario where codes for a cane handle, cane staff, and cane tip that
describe the components of a cane are combined into a single code for
cane.
Comment: Another concern expressed by the commenters is that the
proposed continuity of pricing can lock in historical levels of
reimbursement when establishing fee schedule amounts for
[[Page 60739]]
new items. Commenters explained that if reimbursement levels are
arbitrarily depressed due to the consolidation and bifurcation of
codes, practitioners will have a financial incentive to provide the
patient with the less expensive component in order to make ends meet.
Providers should not be placed in this situation, and patients should
not be denied access to the technologies with which they may achieve
optimal outcomes. Therefore, the commenters urged CMS to recognize
differences in separate components or devices when assigning codes, and
determine reimbursement levels based on those differences so that
patients can gain access to innovative DMEPOS items and services.
Some commenters stated the methodology may discourage manufacturers
from innovating and investing in technology that would result in
improved patient outcomes and satisfaction. Another commenter
representing rehabilitation technology suppliers stated consolidating
and splitting codes will have a negative effect on access to necessary
technology. The commenter stated the long-term effects for individuals
who rely on complex technology requires an increase recognizing that
new technology items can result in decreases in hospitalizations,
pressure wounds, and other secondary health issues. Thus, the commenter
suggested that CMS should instead establish more codes that have a more
focused description.
Response: We do not agree. The continuity of pricing proposal
addresses combining or dividing existing codes that already describe
certain categories of items, for example canes. Canes are inexpensive
DME items that were paid on a reasonable charge basis in 1986 and 1987.
Section 1834(a)(2) of the Act mandates that the fee schedule amounts
for inexpensive and routinely purchased items be based on average
reasonable charges from July 1, 1986 through June 30, 1987, increased
by annual covered item update factors. Thus, in accordance with the
statute, the fee schedule amounts for canes are based on the 1986/87
reasonable charge data. If the code for canes is divided into four
codes--one for red canes, one for white canes, one for blue canes, and
one for canes of any color other than red, white, or blue, payment for
the four new codes for canes would still be made on the basis of the
fee schedule (and therefore the 1986/87 reasonable charge data), in
accordance with the statute. If technology innovations for canes over
time result in a situation where the cost of canes has risen to the
point where the fee schedule amounts are grossly deficient, CMS could
use the authority and process at sections 1842(b)(8) and (9) of the Act
to establish a different fee schedule amount for canes than the one
established in accordance with the payment rules under section 1834(a)
of the Act. Subdividing the HCPCS code for a DMEPOS item such as canes
into more specific items (for example, types or colors of canes) should
not result in fee schedule amounts that are based on something other
than the payment rules described in section 1834 of the Act.
Comment: Some commenters disagreed with CMS' concern that
manufacturer suggested retail prices (MSRPs) are inflated and without
merit. The commenter asserted MSRPs should be considered when
establishing base prices subject to gap-filling. One commenter
recommended that CMS rescind any contractor instruction to discontinue
utilizing MSRPs in the gap-filling process.
Response: We have found that manufacturer suggested retail prices
are not supplier prices or commercial prices. We therefore do not
believe they represent accurate pricing from actual retail markets. We
do not believe that MSRPs represent a valid and reliable proxy for
supplier charges or market prices for furnishing DMEPOS items. We
consider fees for comparable items and verifiable supplier or
commercial prices to be better proxies for supplier charges or retail
costs than suggestions made by the manufacturer of the product about
what the supplier or commercial prices should be for the product. As
such, we will not use the MSRP to set the fee schedule rates, and
instead, will rely on fees for comparable items and verifiable supplier
or commercial prices in an effort to best approximate reasonable
charges from the fee schedule base period for the item.
2. Establishing Fee Schedule Amounts for New HCPCS Codes for Items and
Services Without a Fee Schedule Pricing History
We proposed 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 proposed 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 proposed 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 proposed 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 proposed 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, we proposed that 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 proposed 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 proposed 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
proposed that the annual deflation factors would be specified in
program instructions and would be based on the percentage change in the
CPI-U from the mid-point of the year the prices are in effect to the
mid-point of the fee schedule base
[[Page 60740]]
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 proposed 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 did not propose
a similar adjustment if supplier or commercial prices increase by less
than 15 percent, but we invited comments on this issue.
We proposed 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
performed by CMS and experts who could help determine the relative cost
of the items and services described by the new codes to items and
services with existing fee schedule amounts. We proposed 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) based on the fee schedule amounts for existing codes.
We proposed 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 during the fee schedule base period and
had established fee schedule amounts. We proposed that we would use
technology assessments 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.
We solicited comments on these proposals.
Comment: One commenter indicated that a separate gap-filling
process is needed for orthotics and prosthetics since the cost of the
professional orthotist and prosthetist services are unique to these
items.
Response: We do not agree. All DMEPOS items and services will have
different costs for services to furnish the item that are unique to one
group of items versus another. Gap-filled fee schedule amounts for
orthotics and prosthetics based on comparable orthotics and prosthetics
accounts for the costs of the professional orthotist and prosthetist
services because they are based on historic charges by the orthotists
and prosthetists who furnished the devices in 1986/87 and therefore
accounted for the cost of all of their services in the charges they
submitted to Medicare during that time. Gap-filling fees for orthotics
and prosthetics using supplier or commercial prices for orthotics and
prosthetics likewise accounts for the costs of the professional
orthotist and prosthetist services because they are based on prices
established by or paid to the orthotists and prosthetists who furnish
the devices and therefore account for the cost of all of the services
performed by the orthotists and prosthetists in furnishing the items.
Comment: Some 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. One commenter recommended
that CMS apply a markup percentage to incorporate the various costs of
furnishing a new DMEPOS item that are not reflected in internet or
catalog prices.
Response: We thank the commenters for their input. As discussed in
our CY 2020 DMEPOS proposed rule, our rationale for using supplier
price lists for gap-filling purposes is that supplier price lists
provide a good estimate of what suppliers would have 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). Retail
prices generally include all costs associated with furnishing items
directly to the customer, including overhead and all business expenses
such as licensure and accreditation, debt collection, credit cards,
filing health insurance claims, delivery, set-up, and education. We
believe retail prices for furnishing DMEPOS items and services are a
good representation of supplier charges for furnishing DMEPOS items and
services.
Comment: One commenter recommended that a weighting method should
be applied to a median price when establishing a new fee schedule
amount. The commenter stated that the proposed methodology does not
account for relative quality, durability, clinical preference, and
overall market demand for the various items falling under a HCPCS code.
The commenters are concerned that newer items within a code are given
the same weight in calculating the median deflated price as items with
years of history, use, and sizable market share. The commenter
recommended that each item in the payment calculation be weighted based
on historic market demand.
Response: We do not agree. We proposed to use supplier or
commercial prices to establish fee schedule amounts for new items that
we determine are not comparable to any existing item(s). Thus, we do
not see the need to give certain prices more weight than other prices
as long as we believe they are valid prices for the item described by
the HCPCS code. We believe the proposed rule provides the flexibility
for us to use the combination of supplier or commercial prices we
believe best reflects what suppliers would have charged for items
during the fee schedule base period.
Comment: Some commenters expressed concern with our proposals at
Sec. Sec. 414.112(c)(1)(i) and (ii) and Sec. 414.238(c)(1)(i) and
(ii) for cases when 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 and then the pricing amount would be increased by the
annual covered item update factors specified in statute to the current
year in order to establish a fee schedule amount for a new item.
Several commenters expressed concerns that this step results in fee
schedule amounts that are too low. Specifically, the commenters stated
that CMS has
[[Page 60741]]
omitted inflation rate factors for certain years when the statue
required a freeze or no update for those years.
Response: The statute mandates that DMEPOS fee schedule amounts be
based on the lesser of the actual charge for the item or the average
reasonable charges from a specific period in time. As discussed
previously, the statute does not describe how to determine the payment
amounts for new items for which there is no average reasonable charge
data from the base period, so we have established a gap-filling
methodology to attempt to calculate fee schedule amounts for new items
and services that reflect the requirements under the statute. Sections
1834(a)(14)(L), 1834(h)(4)(xi), and 1842(s)(1)(B)(ii) of the Act
generally require that the DMEPOS fee schedule amounts be 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. Through gap-filling, CMS can fill the gap in
the historic reasonable charge data, apply the fee schedule update
factors mandated by the Act, and then establish a fee schedule amount
applicable to the year in which the item is furnished. We are
finalizing Sec. Sec. 414.112(c)(1)(i) and (ii) and 414.238(c)(1)(i)
and (ii) as proposed.
Comment: Some commenters suggested that CMS extend the preferential
treatment it has finalized for devices designated by the FDA as
Breakthrough Devices applying for NTAP in the Medicare Hospital
Inpatient Prospective Payment System and proposed for transitional
device pass-through payments in the Hospital Outpatient Prospective
Payment System to DMEPOS devices too. Specifically, if FDA has assigned
``breakthrough'' or ``expedited access'' designation to a device,
clears a device under the ``de novo'' pathway, or decides to establish
a new category for a device, then CMS should automatically determine
that there is no comparable product for that new item on the DMEPOS fee
schedule and set payment rates using market based pricing data
accordingly.
Response: We do not agree that classification by the FDA for the
purpose of approving or clearing devices as safe and effective should
in any way dictate whether one device is comparable to another device
for the purposes of establishing a fee schedule amount for the device.
If we determine that a new DMEPOS item is comparable to an older item,
we believe that the prices established for the older item are a good
estimate of what suppliers would have charged for the new item.
Comment: Some commenters suggested CMS implement an appeals process
after releasing its determinations with respect to whether a new DMEPOS
item is comparable to any existing item; if not, whether there is
reliable market-based pricing to use in establishing a fee schedule
rate; and the findings of any technology assessment performed to adjust
the market-based pricing. CMS also should provide its reasoning to
support each of these determinations so that the public may assess and
provide feedback on that reasoning. In addition, the commenter
suggested CMS should establish a timely, formal appeals process that
would allow the manufacturer or other interested party to appeal the
fee schedule rate based on (a) disagreement that there is a comparable
product or the specific comparison that CMS made; (b) disagreement
about whether CMS appropriately used (or did not use) market based
pricing data; and (c) disagreement about the findings of the technology
assessment.
Response: We obtain public consultation on preliminary coding and
payment determinations for DMEPOS items at annual public meetings.
These meetings can be used by stakeholders to provide consultation on
gap-filling for new DMEPOS items and other preliminary coding
determinations for DMEPOS that might affect pricing of the items under
the fee schedule. Outside these meetings, the public is able to submit
written documentation and other information to CMS via written
correspondence at any time if they feel that the information should be
considered when establishing a fee schedule amount for a DMEPOS item.
CMS also meets with manufacturers and stakeholders about establishing
fee schedule amounts when requested. In addition, once fee schedule
amounts have been established, the public can submit written
documentation and other information to CMS at any time if they believe
that an error was made in a fee schedule calculation(s) and CMS would
evaluate the information and, if necessary, make corrections to the fee
schedule amounts.
Comment: Many commenters opposed our proposal to apply a one-time
adjustment to fee schedule amounts previously established using
supplier or commercial prices to account for decreases in the supplier
or commercial price within five years of establishing the initial fee
schedule amounts. One commenter asserted this is not balanced for price
fluctuations, and that the same price decrease policy should apply to
when prices increase, and that CMS should apply the decrease/increase
gap fill equitably. One commenter stated that expanding CMS' authority
to reduce (but not increase) Medicare fee schedule amounts based on its
perception of reduced charges through market competition is unnecessary
and exceeds its statutory authority under inherent reasonableness.
Also, some commenters noted since 2011, the annual Medicare fee
schedule adjustment has been subject to a statutory reduction known as
the Productivity Adjustment. The commenter stated that the Productivity
Adjustment is intended to account for changes in economic factors which
impact supplier and commercial prices.
However, some commenters supported CMS using the current inherent
reasonableness process to adjust pricing--either downward or upward--if
the fee schedule level for a particular DMEPOS item or service is found
excessive or grossly deficient compared with supplier or commercial
prices.
A few commenters stated that CMS should not presume that a short
term pricing decrease is appropriate for all new HCPCS codes, and that
CMS should first conduct an analysis and use statistically valid and
reliable data to substantiate any reduction of up to 15 percent for a
particular item. The commenters stated that statistically valid data
means obtaining pricing data from at least three independent sources,
and ensuring the process is transparent by disclosing what data it
proposes to use to substantiate any pricing decrease, and obtaining
public input on whether the data it proposes to use to support a
payment decrease is appropriate.
Response: As explained in the CY 2020 DMEPOS proposed rule, if
supplier or commercial prices are used to gap-fill fee schedule amounts
and these prices decrease within 5 years once the market for the new
item has become more mature, we believe it would be appropriate to make
a one-time adjustment to the fee schedule amounts as long as the same
pricing sources are used and the new prices are not lower than the
initial prices by 15 percent or more. CMS has been using supplier or
commercial prices to gap-fill fee schedule amounts for DMEPOS items
since 1989 and this method of gap-filling has not resulted in barriers
to access for these items and services. If the prices decrease over
time, we believe they would still be valid and reliable market-based
prices representing what suppliers charge for furnishing the items and
services. As discussed in our proposal (84 FR 38377), we do not believe
that a similar adjustment is necessary to account for
[[Page 60742]]
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. We do not agree that the productivity adjustment would fully
address more than very modest decreases in prices as the average
adjustment over the past 5 years from 2015 to 2019 has been only 0.5
percent.
Comment: CMS received comments that emphasized concern for the
proposed five framework comparison categories in our proposal (84 FR
38374 through 38375) to determine if an item in a new HCPCS code is
comparable to items in an existing HCPCS code. Those categories are
physical components; mechanical components; electrical components;
function and intended use; and additional attributes and features.
Commenters stated additional criteria should be added to the
comparability (for example, service intensity of the item, value to
patient care, professional services, customization, intended
population, health economic, digital technologies, service intensity,
clinical outcome, and clinical care) and the focus of each criterion
should be weighted. However, many commenters stated that in order to be
considered comparable an item should be interchangeable. Some expressed
concern that CMS and/or contractors do not have the required expertise
to understand and evaluate technology's inherent relative complexities
and costs. That manufacturers, stakeholders, and beneficiaries should
have a say in final pricing. On the other side, CMS received comments
that supported the transparency of the five categories of used to
determine comparability and support of not having a weighted
prioritization.
Response: We appreciate the input from the commenters on the
proposed five framework comparison categories for determining whether a
new item is comparable to items with existing fee schedule amounts. We
believe the five categories capture the main categories that should be
considered. We would compare all attributes and features that impact
the cost of the items, such as service intensity of the item and all
services associated with furnishing the item, customization of the
item, intended population or intended use, and digital technologies. An
evaluation and comparison of attributes that do not impact a supplier's
cost for furnishing an item, such as value to patient care, would
likely not be necessary in determining whether items are comparable for
pricing purposes.
Comment: Many commenters expressed concerns about the use of
technology assessments for use in establishing fee schedule amounts for
new DMEPOS items. The commenters stated that our proposal (84 FR 38374
through 38375) lacked sufficient details on how the technology
assessment process would work and what impact it might have on payment
for DMEPOS items and services. The commenters stated a technology
assessment is a complicated process and requires the expertise of
engineers and others to understand technology's inherent relative
complexities and costs. The commenters asserted that even a third party
would not be able to break down the costs of a device to understand its
production and related costs. Some commenters stated that technology
assessments would fail to account for changes in manufacturing (for
example, direct and indirect labor, material and equipment, taxes, and
shipping costs).
Response: We appreciate the feedback from our stakeholders and we
are not finalizing Sec. Sec. 414.110(d) and 414.238(d) in order to
have the opportunity to consider additional information on the use of
technology assessments in the gap-filling methodology for DMEPOS items
and services. We will consider whether to include a revised proposal
addressing the use of technology assessments in gap-filling in future
rulemaking. Even so, if supplier prices are not available, we would not
use a manufacturer's suggested price for their own product to gap-fill
the fees. We would use information from the comparability analysis and
any other pricing information that is available to establish the fee
schedule amount so that it best reflects what the 1986/87 supplier
charges for the item would have been if the item were on the market
during the fee schedule base period.
Final Rule Action: After consideration of comments received on the
CY 2020 DMEPOS proposed rule and for the reasons we set forth
previously in this final rule, we are finalizing Sec. Sec. 414.110 and
414.236 as proposed. In addition, we are finalizing Sec. Sec. 414.112
and 414.238 as proposed, with the exceptions of Sec. Sec. 414.112(d)
and 414.238(d), which outlined a process for using technology
assessments to establish the fee schedule amounts for new DMEPOS items.
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.\43\
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\43\ 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/2018Medicare-FFSSupplementalImproperPaymentData.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=descending. Accessed September 4, 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. 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
[[Page 60743]]
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 proposed 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 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 initial 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 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.
Prior to this rule, the regulation at Sec. 410.38(g)(4) required
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
[[Page 60744]]
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). In addition, Sec. 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. That regulation instructed CMS
to select items from the Master List to require prior authorization as
a condition of payment and to publish notice of such items in the
Federal Register. We stated that items on the Master List would be
updated annually, based on payment thresholds and changes in
vulnerability reports, as well as other factors described in Sec.
414.234.
We noted in the proposed rule (84 FR 38380) 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 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.
This final rule streamlines the existing requirements and reduces
provider or supplier confusion, while maintaining the concepts of
practitioner involvement, order requirements, and a prior authorization
process. We believe streamlining our requirements furthers 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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the Proposed Rule
The proposed rule, titled ``Medicare Program; End-Stage Renal
Disease Prospective Payment System, Payment for Renal Dialysis Services
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal
Disease Quality Incentive Program, Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule Amounts,
DMEPOS Competitive Bidding Program (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'' (84 FR 38330
through 38421), hereinafter referred to as the ``CY 2020 DMEPOS
proposed rule,'' was published in the Federal Register on August 6,
2019, with a comment period that ended on September 27, 2019. In that
rule, we proposed technical corrections; updates to definitions and
documentation requirements; standard elements of a DMEPOS order; the
creation of and inclusion factors for the ``Required Face-to-Face
Encounter and Written Order Prior to Delivery List''; and authority to
suspend face-to-face encounter and written order prior to delivery
requirements at Sec. 410.38. In addition, we proposed to establish a
``Master List of DMEPOS Items Potentially Subject to Face-To-Face
Encounter and Written Orders Prior to Delivery and/or Prior
Authorization Requirements'' (the ``Master List''); revisions to the
factors for placing an item on the Required Prior Authorization List;
and the authority to exempt compliant suppliers at Sec. 414.234. We
received approximately 29 public comments on our proposals, including
comments from suppliers, practitioners, professional supplier
organizations, electronic record vendors, beneficiary advocacy
organizations and health care systems.
In this final rule, we provide a summary of each proposed
provision, a summary of the public comments received and our responses
to them, and the policies we are finalizing.
1. Technical Corrections to Sec. 410.38(a) and (b).
We proposed 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 proposed the
headings as ``General scope'' and ``Institutions that may not qualify
as the patient's home,'' respectively. Paragraph
[[Page 60745]]
(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 therefore proposed
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.
We received comments on the technical corrections to Sec.
410.38(a) and (b), and our responses are below.
Comment: Some commenters supported CMS' proposal to modernize
regulations through the removal of outdated language related to the
Medicare payment rules for DME, including the terms ``iron lungs'' and
``oxygen tents.''
Response: We appreciate the commenters support of our proposal.
Final Rule Action: We are finalizing the changes to Sec. 410.38 by
adding headings for paragraphs (a) and (b), and by updating obsolete
language in paragraph (a).
2. Definitions
We proposed to update Sec. 410.38(c) to include definitions
related to certain requirements for the DMEPOS benefit.
We proposed to add new definitions, redesignate existing
definitions within the regulatory text, and amend existing definitions.
We shared our belief that 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 proposed at Sec. 410.38(c) to include the following terms:
Physician means a practitioner defined in section
1861(r)(1) of the Act. We proposed this definition as paragraph (c)(1)
and we noted that it is the 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 proposed this definition as paragraph
(c)(2).
We proposed that a 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 proposed this definition as
paragraph (c)(3).
We proposed that a 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. We proposed that 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, we proposed that
the written order/prescription must additionally be communicated to the
supplier before the delivery of the item. As discussed further below,
we also noted our intent to standardize the elements of written orders/
prescriptions provided for DMEPOS. We proposed this definition as
paragraph (c)(4).
We proposed that a face-to-face encounter means an in-
person or telehealth encounter between the treating practitioner and
the beneficiary. As discussed further below, we also noted our intent
that the face-to-face encounter 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. We also noted our intent to standardize the face-to-face and
documentation requirements for certain DMEPOS. We proposed this
definition as paragraph (c)(5).
We proposed to maintain the definition of a Power Mobility
Device (PMD), which is 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. Section 410.38(c)(1)
required reformatting to accommodate the proposed unified conditions of
payment and therefore, we proposed this definition as paragraph (c)(6).
We proposed that the 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 were specified in proposed Sec. 414.234(b). We
stated 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 proposed this definition as paragraph
(c)(7).
We proposed that the 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, we
proposed that 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 proposed this definition as paragraph
(c)(8). We noted that the Required Face-to-Face Encounter and Written
Order Prior to Delivery List is distinct from the ``Required Prior
Authorization List.''
We received comments regarding our proposal to update Sec.
410.38(c) to include definitions related to certain requirements for
the DMEPOS benefit. The comments and our responses are set forth below.
Comment: Some commenters indicated that the 60-day notice was not
sufficient time for suppliers to adjust business practices. Various
commenters suggested we increase the notification period to more than
60 days.
Response: We agree that in some cases, a longer notification
timeframe may be appropriate. For example, if we choose to require
prior authorization for an item that is very similar to an item already
subject to prior authorization, we may choose a shorter notice period,
while we may choose a longer period for items that require more
substantial education and changes in practice to put into operation. We
believe similar types of considerations are appropriate in relation to
the face-to-face encounter and written order prior to delivery
requirements. Therefore, we are revising the public notice process to
allow for longer notification timeframes so that Required Face-to-Face
Encounter and Written Order Prior to Delivery List would become
effective no less than 60
[[Page 60746]]
days after a Federal Register notice publication and CMS website
posting.
Final Rule Action: We are revising the 60-day public notice
timeframe listed in the Required Face-to-Face Encounter and Written
Order Prior to Delivery List definition to state ``The list of items is
published in the Federal Register and posted on the CMS website. The
list is effective no less than 60 days following its publication.'' All
other definitions will be finalized as proposed.
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 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. In the CY
2020 DMEPOS proposed rule, we proposed 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 specified the
criteria for this list in Sec. 414.234.
In the CY 2020 DMEPOS proposed rule, we shared our belief that our
proposed changes 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. We further explained, in
determining DMEPOS appropriate for inclusion in the Master List, our
belief that there are 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 proposed that the Master List would 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. (See
Table 13: 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 noted 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 proposed 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
statutory 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 was established in accordance with section
1834(a)(11)(B) of the Act and the November 2012 final rule. 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 that 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 did not require
it under the conditions of payment that preceded this regulation. The
remainder of items on the proposed Master List were both subject to a
face-to-face encounter and a written order prior to delivery under the
conditions of payment that preceded this regulation, and are
potentially subject to these conditions of payment per this final rule.
All 135 items that were potentially subject to prior authorization
under the conditions of payment that preceded this regulation are also
included in our proposed Master List. We outlined the inclusion
criteria that developed the proposed Master List of 413 items
potentially subject to these conditions of payment.
We shared that while the Master List created by the CY 2020 DMEPOS
proposed rule (84 FR 38382) 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 proposed 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
[[Page 60747]]
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.
We provided the following hypothetical data patterns, which are not
factual, 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:
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 noted 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. We stated that motorized and power
wheelchairs would therefore also potentially be subject to the prior
authorization requirement. We shared our belief that 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 expressed 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 noted that programmatic changes, including
competitive bidding, had the overall impact of lowering the payment
amount for certain items, which is the reason we proposed to lower
these cost thresholds. We proposed 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 proposed 1.5 percent to
capture the items with the highest allowed amounts, while not creating
an overly inclusive list. However, we recognized that item(s) may fail
to meet the $500 purchase, $50 rental, or cumulative cost thresholds
identified in the CY 2020 DMEPOS proposed rule (84 FR 38383);
nonetheless, such items may demonstrate aberrant billing patterns
inconsistent with predictable claim volumes.
We proposed to 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. Under our prior
regulations, we captured reports dating as far back as 2007; however,
we have learned that billing practices may be subject to imminent
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 the CY 2020
DMEPOS proposed rule (84 FR 38383), we redefined 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 added a new Master List inclusion criteria to capture
current aberrant billing patterns. We believe the Master List is a good
representation of those items that may pose risk to the Medicare Trust
Funds. 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 proposed the identification of aberrant billing patterns to be
limited to
[[Page 60748]]
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.
We summarize the comments and our responses for the Master List
section of this final rule along with our final decisions applicable to
this section.
Comment: Several commenters were supportive of CMS' proposal to
harmonize the three lists through the creation of one Master List.
However, some commenters expressed concern that the extended length of
the list was indicative of our intent to prior authorize more
frequently, and worried about delays in patient care.
Response: The longer Master List grants the agency the ability to
impose conditions of payment to mitigate emerging program integrity
vulnerabilities for a wider array of items, but is not indicative of
any known plans to widely increase prior authorization. Rather, items
would only be moved to the Required Prior Authorization List after
consideration of the regulatory factors--including item utilization,
cost, and other analyses--and would be subject to a no less than a 60-
day notice.
We encourage open communication between the beneficiaries and the
practitioners, as well as between practitioners and suppliers to ensure
that beneficiaries receive medically necessary items in a timely
fashion. If beneficiaries, practitioners, or suppliers are observing or
experiencing significant delays in beneficiary access to DMEPOS items,
they are advised to call 1-800-MEDICARE to report their specific
concerns. We note that this rule requires CMS to consider multiple
factors prior to subjecting DMEPOS items to conditions of payment, and
grants CMS the authority to suspend such condition of payment or remove
DMEPOS items from the required list, as needed.
Comment: Some commenters suggested CMS retain the prior cost
thresholds ($1,000 purchase price/$100 rental price) for inclusion on
the Master List.
Response: We noted in the preamble that the November 2012 and
December 2015 final rules included higher cost thresholds ($1,000
purchase/$100 rental thresholds). Programmatic changes, including
competitive bidding, had the overall impact of lowering the payment
amount for certain items, which is the reason we proposed to lower
these cost thresholds. We considered known vulnerabilities impacting
DMEPOS items, and the item costs listed on the DMEPOS fee schedule
prior to selecting the $500 purchase/$50 rental thresholds.
Comment: Some commenters questioned the methodology for inclusion
on the list and requested greater transparency in identifying how an
item was selected for inclusion. For example, some commenters suggested
that CMS increase its percentage threshold for identifying an item's
Medicare expenditures, in relation to Medicare expenditures for all
DMEPOS items over a recent 12-month period, from 1.5 percent to 2.0
percent. Commenters also questioned the inclusion of certain HCPCS
codes on the list. For example, a commenter questioned which criteria
applied to HCPCS code A4351--intermittent urinary catheter.
Response: While we appreciate stakeholder feedback on the inclusion
criteria, we are not adopting changes at this time. The criteria were
based on analysis of our data and consideration of known
vulnerabilities and burden. We continue to believe the proposed
criteria are most appropriate. While items may meet multiple factors
for inclusion, items are only added to the list if they meet one of the
inclusion criteria. Due to the varying inclusion criteria, the
potential for items to meet multiple factors, and the ever evolving
nature of the list, we do not believe it's feasible to maintain a
current list that also identifies our underlying reason for inclusion
on the list.
We have confirmed the appropriateness of including the HCPCS on the
Master List, including those questioned by commenters, based on the
list inclusion criteria. For example, commenters questioned the
inclusion of HCPCS A4351-intermittent urinary catheter on the Master
List. Urological supplies appears on the 2018 CERT Medicare FFS
Supplemental Improper Payment Data report chart titled ``Top 20 Service
Types with Highest Improper Payments: DMEPOS.'' Thus, HCPCS A4351 meets
the Master List inclusion criteria both based on cost (1.5 percent of
DMEPOS fee schedule expenditure) and based on its identification in a
CERT Medicare FFS Supplemental Improper Payment Data report as an item
subject to high improper payments.
Comment: One commenter suggested that the application of the face-
to-face encounter and written order prior to delivery was inappropriate
for prosthetics and orthotics, and therefore, it is inappropriate to
create a combined Master List. For example, commenters suggested that
many of the Master List codes describe orthoses that typically must be
provided to treat an acute injury.
Response: We respectfully disagree that the application of the
face-to-face encounter and written order prior to delivery is
inappropriate for prosthetics and orthotics. In our proposal, we noted
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, and therefore we believe their inclusion to be
appropriate. Further practitioners typically have face-to-face
encounters in order to assess beneficiary's acute injury before
ordering the appropriate orthoses. Therefore, we believe the
documentation resulting from this face to face encounter does not
create any barrier to treating acute injuries.
Comment: One commenter expressed concern that the lowered cost
threshold would create undue burden, because it expands the list to
include less expensive DMEPOS items and therefore less likely to
achieve savings.
Response: We agree with the commenter that a successful program
balances both the cost of the item and resources extended to maintain
program integrity. However, experience with prior authorization has
demonstrated methods of program efficiencies that allow us to look at
lower cost items and still be cost effective.
Comment: One commenter stated that the creation of a single master
list of HCPCS codes subject to multiple CMS conditions of payment will
further confuse providers and beneficiaries.
Response: We believe there are inherent similarities in those items
posing vulnerabilities that can be mitigated by additional practitioner
oversight (face-to-face encounters and written orders prior to
delivery) and those items posing vulnerabilities that can be mitigated
by prior authorization. We emphasize that we will maintain separate
``required'' lists that will enable us to select the most appropriate
program integrity action. We believe that the dissemination of two
separate lists derived from the Master List will decrease provider
burden and confusion.
Comment: One commenter suggested that CMS recognize that while some
increases in utilization are indicative of abusive behaviors, others
are a result of recent innovations and may be appropriate.
Response: While our rule allows us to focus on increased
utilization, we specifically note that we would consider contributory
factors when selecting items posing vulnerabilities that may be
appropriate for application of these
[[Page 60749]]
conditions of payment. An example of a contributory factor that may be
considered could be innovative or new technologies.
Final Rule Action: After careful consideration of the comments
received, we are finalizing the updates to the Master List criteria as
proposed. We believe the updates will allow us to appropriately
identify and target items posing vulnerabilities to the Trust Funds, to
nimbly take action to promote appropriate claim submissions, and to
limit improper payments.
b. Notice and Maintenance of the Master List
In Sec. 414.234(b)(2), we proposed that the Master List would be
self-updating, at a minimum, annually. We highlighted in our proposal
that the ``self-updating'' process would remain unchanged from the
prior regulation and would include applying the criteria to items that
appear on the DMEPOS FFS payment schedule. That is, items on the DMEPOS
Fee Schedule that meet the payment threshold (for monthly rentals,
purchases, or cumulative impacts) will be 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 will be added based on findings of
aberrant billing patterns (meeting the inclusion criteria in section
VI.B.3.a of this final rule) that are not otherwise explained. We noted
that we believe the inclusion criteria are capable of capturing more
current vulnerabilities. We also noted that the current standard
process in which items on the list, expire after 10 years if they have
not otherwise been removed. We believe this is an appropriate
representation of the time needed 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. We also clarified 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.
We proposed that all other list maintenance processes specified in
Sec. 414.234(b) would be maintained with two exceptions: (1) We
proposed to allow the Master List to be updated as needed and more
frequently than annually (for example, to address emerging billing
trends), and (2) we proposed to make technical changes to the language
in Sec. 414.234(b) to reflect the new cost thresholds and report
years. We proposed to maintain the process outlined in the December
2015 final rule (80 FR 81674) 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.
We did not receive any comments in regards to the maintenance of
the Master List section of the final rule, and we are finalizing this
section as proposed.
Final Rule Action: We are finalizing our proposal at Sec.
414.234(b)(2) that the Master List would be self-updating, at a
minimum, annually. We are also finalizing our proposals related to the
application of the 10-year timeframe. We are adopting the technical
updates to Sec. 414.234(b), and finalizing our capacity to update the
list more frequently than annually, as needed. We will 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. In the CY 2020 DMEPOS proposed rule (84 FR 38384), we
noted the analysis of a 1-year snapshot of claims indicated that
approximately 97 percent of beneficiaries receiving DMEPOS 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 DME List of Specified Covered Items (stemming from the November
2012 final rule), which required a face-to-face encounter and a written
order prior to delivery. While we believe this information helped to
provide important context, we noted that this final 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 proposed 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.'' We
noted in the CY 2020 DMEPOS proposed rule (84 FR 38384) that this
provides us with 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 face-to-face encounter and written order prior to
delivery requirements, based on those items identified to be of highest
risk. We believe tailoring the lists this way significantly reduces any
potential supplier/provider impact and may decrease the number of items
affected.
We also noted in the CY 2020 DMEPOS proposed rule (84 FR 38384)
that 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. In
addition, 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 proposed 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 proposed to 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 noted this list is not exhaustive. We also noted that
we did not propose an all-inclusive list of factors to account for the
fluidity of program operations and associated vulnerabilities, and we
believe this is critical to protect beneficiaries, the program, and
industry.
We solicited 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.
[[Page 60750]]
We proposed 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 proposed at Sec.
410.38(d)(2) that any telehealth encounter must meet the existing
telehealth requirements of Sec. 410.78 and Sec. 414.65. We noted in
the CY 2020 DMEPOS proposed rule (84 FR 38384) that under the November
2012 final rule, telehealth services were permitted to be used to
satisfy the DME face-to-face encounter requirements. We emphasized in
the CY 2020 DMEPOS proposed rule at Sec. 410.38(d)(2) 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, we specified that 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 proposed to codify at
Sec. 410.38(d)(3) that the documentation necessary to support the
face-to-face encounter and associated claims for payment 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 this is reflective of clinical practice
and the information necessary to demonstrate medical necessity and the
appropriateness of claim payment.
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 orthotist or prosthetist notes support the documentation created
by eligible professionals described in section 1848(k)(3)(B), they can
be used together to support medical necessity of an ordered DMEPOS
item. In the event the orthotist or prosthetist documentation does not
support the documentation created by the eligible professional, CMS may
deny payment.
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 proposed 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. We believe the 6-month timeframe is relevant, and
changing it would create unnecessary confusion since the industry has
become accustomed to it.
We noted that 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.
We also noted in the CY 2020 DMEPOS proposed rule (84 FR 38385)
that we do not believe the requirements for the face-to-face encounter
and written order prior to delivery would create any new burdens for
the medical review process. 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.
The comments with regard to the Required Face-to-Face Encounter and
Written Order Prior to Delivery List and associated burden, and our
responses are set forth below.
Comment: One commenter suggested that CMS add information to the
Required Face-to-Face Encounter and Written Order Prior to Delivery
List, when items are selected from the Master List, to indicate why
items are being subject to a condition of payment.
Response: If an item were chosen to be included on the Required
Face-to-Face Encounter and Written Order Prior to Delivery List, we
plan to include narrative information in the Federal Register notice
explaining why such item is being subject to a condition of payment. We
believe this narrative to be most helpful to stakeholder understanding.
Comment: Commenters urged CMS to ensure that the burden of
providing face-to-face encounter documentation, used to comply with our
statutory requirements and demonstrate medical need, falls upon the
beneficiary's treating practitioner and not community pharmacists who
may dispense items of durable medical equipment and supplies.
Response: We agree that the beneficiary's practitioner is charged
with creating the documentation of the face-to-face encounter. However,
we did not propose to amend the longstanding process whereby additional
documentation requests are generally sent to the entity requesting
Medicare payment.
Comment: Some commenters urged CMS to permit remote patient
monitoring using digitally enabled equipment to satisfy the requirement
for face-to-face encounters. Another commenter stated that CMS should
begin to recognize telemedicine as part of the face-to-face procedure.
Response: We recognize the increasing use of technology to achieve
clinical oversight of Medicare beneficiaries. While we believe
digitally enhanced items serve a clinical purpose, we note that the
face-to-face requirement is required by statute and removing the face-
to-face requirement for digitally enhanced items is not within our
regulatory purview. The statute allows for the face-to-face encounter
to be conducted through use of telehealth in accordance with section
1834(m) of the Act, which sets the requirements for Medicare telehealth
services. We explicitly codified that Medicare telehealth services used
for meeting the face-to-face encounter requirement when ordering DMEPOS
items must meet the existing telehealth requirements of Sec. 410.78
and Sec. 414.65. In this way, documentation submitted to support
payment for DMEPOS items that was created based upon a telehealth visit
must also meet the requirements for telehealth services to support
DMEPOS payment.
Comment: Commenters supported the adoption of the uniform 6-month
timeframe in which the face-to-face must occur for written orders prior
to delivery.
Response: We appreciate the feedback in support of our proposal of
the 6-month uniform timeframes.
Final Rule Action: We are finalizing the process for selecting
items from the Master List and factors considered in creating the
Required Face-to-Face Encounter and Written Order Prior to Delivery
List, as proposed. Items that require a face-to-face encounter and
written order prior to delivery, will be included on the Master List
and the
[[Page 60751]]
Required Face-to-Face Encounter and Written Order Prior Delivery List
in accordance with our statutory obligation. We are finalizing our
proposal that documentation submitted to support payment for DMEPOS
items that was created based upon a telehealth visit must also meet the
requirements for telehealth services to support DMEPOS payment. We are
also finalizing our documentation requirements as proposed, and the
requirement for a face-to-face to occur within 6 months, as proposed.
b. Notice and Application of the Required Face-to-Face Encounter and
Written Order Prior to Delivery List
We proposed 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, which is consistent
with our current prior authorization practices for items selected from
the Master List of Items Frequently Subject to Unnecessary Utilization
and included on the Required Prior Authorization List. Similarly, any
DMEPOS item selected from the proposed Master List and included on the
Required Face-to-Face Encounter and Written Order Prior to Delivery
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 proposed 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. We stated that
should 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.
The comments with regard to the Notice and Application of the
Required Face-to-Face Encounter and Written Order Prior to Delivery
List, and our responses are set forth below.
Comment: Some commenters indicated that the 60-day notice was not
sufficient time for suppliers to adjust business practices. Various
commenters suggested we increase the notification period to more than
60 days.
Response: As previously stated earlier in this final rule, we agree
that in some cases, a longer notification timeframe may be appropriate.
As a result, we are revising the 60-day public notice timeframe for the
Required Face-to-Face Encounter and Written Order Prior to Delivery
List to be effective no less than 60 days after a Federal Register
notice and CMS website posting.
Comment: Some commenters expressed concern that the face-to-face
encounter and written order prior to delivery requirements could
inadvertently impede beneficiary access to medically necessary care,
and suggested such requirements were inappropriate for certain items
such as orthotics and prosthetics.
Response: We believe practitioner involvement assists in reducing
waste, fraud and abuse, and also helps to ensure that beneficiaries
receive DMEPOS to meet their specific needs. We encourage open
communication between the beneficiaries and the practitioners, as well
as between practitioners and suppliers to ensure that beneficiaries
receive medically necessary items in a timely fashion. Practitioners
typically have face-to-face encounters in order to assess the
beneficiary's clinical need before ordering DMEPOS items. Therefore, we
believe the documentation resulting from this face to face encounter
does not create any barrier to treating acute injuries or other
clinical needs.
If beneficiaries, practitioners, or suppliers are observing or
experiencing significant delays in beneficiary access to DMEPOS due to
the imposition of the face-to-face encounter requirement, they are
advised to call 1-800-MEDICARE to report their specific concerns.
This rule allows 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. We note that the inclusion of items on
the Required Face-to-Face Encounter and Written Order Prior to Delivery
List will be monitored for unintended consequences (including
beneficiary access concerns).
Final Rule Action: We are revising the 60-day public notice
timeframe listed in the Required Face-to-Face Encounter and Written
Order Prior to Delivery List to say ``The list of items is published in
the Federal Register and posted on the CMS website. The list is
effective no less than 60 days following its publication.'' We are also
finalizing our authority to suspend or cease the face-to-face encounter
and written order prior to delivery requirements, with notifications
provided on the CMS website, as initially proposed.
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 proposed 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. We proposed to
select and implement prior authorization of an item(s) nationally or,
in collaboration with the medical review contractors locally. We
proposed 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. We also proposed
that CMS may elect to exempt suppliers demonstrating compliance from
prior authorization for such requirements. We noted in our CY 2020
DMEPOS proposed rule (84 FR 38385) that we believe this meets our
fiduciary obligation to protect the Medicare Trust Funds while
remaining cognizant of contractor resource limitations and provider/
supplier burden.
In Sec. 414.234, we proposed that we may consider factors such as
geographic location, item utilization or cost, system capabilities,
emerging trends,
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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
consumables that are the same item, 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 solicited 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 noted in the CY 2020 DMEPOS proposed rule (84 FR 38385) 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 Program.
We also noted that 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. In addition, we
discussed our intent to update the program so that 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. We stated
that 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. We stated that 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 the Required Prior Authorization List.
Accordingly, there may be a delay in the adoption of this proposed
operational change from the date of publication.
We also discussed that historically, we received positive feedback
related to the DMEPOS prior authorization process and the majority of
comments have been from suppliers. We encouraged all stakeholders,
including those representing beneficiaries and Medicare consumer
advocacy organizations, to submit their comments about prior
authorization during the public comment period.
We proposed that the items currently subject to prior authorization
would be grandfathered into the prior authorization program until the
implementation of the first Required Prior Authorization List published
subsequent to this 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.
We proposed to retain the documentation requirements for submitting
prior authorization requests at Sec. 414.234(d); however, we proposed
to cross reference the payment requirements proposed at Sec. 410.38.
In addition, we proposed to retain the process for submitting prior
authorization requests and receiving responses, but proposed to
restructure Sec. 414.234(e) to conform to the formatting of the
preceding paragraphs.
We proposed 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. 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.
The comments with regard to The Required Prior Authorization List,
and our responses are set forth below.
Comment: One commenter suggested that CMS add information to the
Required Prior Authorization List, when items are selected from the
Master List, to indicate why items are being subject to a condition of
payment.
Response: As indicated earlier in this final rule, if an item were
selected for inclusion in a required list (meaning the Required Prior
Authorization List or Required Face-to-Face Encounter and Written Order
Prior to Delivery List), we plan to include information in the Federal
Register notice explaining why an item is being subject to the
condition of payment. We believe this information to be most helpful to
stakeholder understanding.
Comment: Commenters urged CMS to be cognizant of items that may be
needed imminently when selecting items requiring prior authorization.
Response: We consider multiple factors when determining if an item
is appropriate for inclusion on the Required Prior Authorization List,
including beneficiary access in a timely fashion. We understand the
concerns raised by the comments and will take them into consideration.
If beneficiaries, practitioners, or suppliers are observing or
experiencing significant delays in beneficiary access to DMEPOS due to
their inclusion on the Required Prior Authorization List, they are
advised to call 1-800-MEDICARE to report their specific concerns.
Comment: One commenter suggested that prior authorization be
reserved for aberrant billers, and proposed relief for billers who
participate in standardized data collection. Another commenter
suggested that CMS consider compliance incentives to waive prior
authorizations and face-to-face requirements for providers that meet
such standards.
Response: The prior authorization program is item-based and targets
over utilized items billed by all applicable suppliers. In the future,
we may elect to exempt suppliers demonstrating compliance from prior
authorization requirements for subject items. If so, we will define how
we will identify compliant suppliers in future rulemaking.
Comment: Some commenters expressed support for continuing the prior
authorization process, and appreciated the assurance of likely payment
in advance of delivering the item and services that is medically
necessary for the beneficiary. Another commenter suggested that prior
authorization helps limit appeals and corresponding resources.
Response: We appreciate the commenters' feedback on the prior
authorization process.
Comment: One commenter expressed support of CMS' proposal to
include in the prior authorization decision for PMDs the accessories
that are used with the PMD base. Another commenter expressed concern
that prior authorizing accessories for which the base was already prior
authorized, may create undue delay in the delivery of care. The
commenter was also concerned that the addition of accessories was
occurring without formal rulemaking.
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Response: We appreciate the commenter's support of our proposal to
allow accessories to be included on a prior authorization request, at
the supplier's discretion. We emphasize that this is voluntary, and
prior authorization of accessories is not a condition of payment. We
note that although this voluntary action is being implemented, there
will be a delay in implementation until systems changes are made to
support the addition of accessories. Regarding supplies, as noted
earlier, a prior authorization of supplies will be valid over a period
of time and will not require a prior authorization for each subsequent
claim submission. These procedural operations will be clarified in
subregulatory guidance.
Comment: Commenters expressed concern that supplies be prior
authorized at the outset of care, with affirmation decisions being
extended across multiple Medicare payments, in order to prevent undue
burden and potential interruptions in care.
Response: Claims for subsequent and serial rental items will be
covered under the initial prior authorization decision for time periods
stated in NCDs, LCDs, statutes, regulations, and CMS issued manuals and
publication. For example, if a policy for the subject DMEPOS item
requires medical necessity documentation to be updated annually, the
initial prior authorization decision will cover the claims for the
subject DMEPOS item for 12 months.
Comment: Commenters suggested that if a DMEPOS item is subject to
prior authorization and receives an affirmative decision, then by
default, the prior authorization would extend to all related options,
supplies, and accessories. Likewise, commenters believed the decision
on the initial item would support claim payment for future repairs, or
should the beneficiary require a same or similar item.
Response: While we are trying to be increasingly cohesive in our
prior authorization process, and are implementing changes to
voluntarily include accessories, we note that reviewers are limited in
their review to the documentation submitted with the request. In
addition, we will only make payment for medically necessary items,
options, supplies and accessories. Thus, submitted documentation must
support the medical necessity of any related options, supplies or
accessories. Similarly, if a request for payment is being made for a
new replacement item, medical necessity must be established for the
replacement.
Comment: Some commenters suggested that prior authorization should
not be viewed as a fraud and abuse tool but as an efficiency tool.
Commenters suggested that Targeted Probe and Educate (TPE) or other
pre-payment audits serve as the primary means of curbing abuse.
Response: While we agree prior authorization creates efficiencies,
we note that the statutory construct emphasizes the importance of prior
authorization in preventing overutilization before the improper payment
occurs. Prior authorization provides assurances to both providers/
suppliers and the agency that items or services furnished will likely
be covered by Medicare. An affirmation prior authorization decision is
provisional because other information that is only available after the
claim is submitted may result in a denial. For example, there may be
technical issues, such as a duplicate claim, which can only be known
only after the claim is submitted.
Final Rule Action: We are finalizing the creation and application
process of the Required Prior Authorization List, as proposed.
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 notice no less than 60 days before implementation. We did not
propose any changes to this section. We note that all other prior
authorization processes described in Sec. 414.234 not mentioned in
this 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 proposed to maintain
our current process, as outlined in Sec. 414.234, and publish a
Federal Register notice no less than 60 days prior to implementation
and post on the CMS website when items are placed on the Required Prior
Authorization List.
The comments with regard to the Notice of the Required Prior
Authorization List, and our responses are set forth below.
Comment: Some commenters indicated that the 60-day notice was not
sufficient time for suppliers to adjust business practices. Various
commenters suggested we increase the notification period to more than
60 days.
Response: We did not propose any regulatory changes to the
notification process for prior authorization, and plan to maintain the
regulatory text indicating that the Required Prior Authorization List
is effective no less than 60 days after publication and posting. We
note that we have granted longer notification periods, to date, in
consideration of both the newness of the programs and the types of
items selected.
Final Rule Action: We are maintaining our current Notice of the
Required Prior Authorization List process, as outlined in Sec.
414.234. When items are placed on the Required Prior Authorization
List, we will publish a Federal Register notice no less than 60 days
before implementation, and post notification on the CMS website.
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 proposed at Sec. 410.38(d)(1)
to adopt one set of required written order/prescription elements 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 proposed 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
proposed at Sec. 410.38(d)(1)(i) that the standardized order/
prescription require the elements listed here:
[[Page 60754]]
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
proposed at Sec. 410.38(d)(1) that CMS' medical review contractors
shall consider 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 the CY 2020 DMEPOS proposed
rule. In addition, we believe item-specific coverage requirements may
be included in national or local coverage documents, as appropriate.
Therefore, we proposed to delete the coverage requirements 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.
The comments with regard to standardizing the written order/
prescription, and our responses are set forth below.
Comment: We received feedback that the term ``date'' is not
sufficiently specific for reviewers and billing entities to know how to
date their order/prescription to comply with regulatory and statutory
requirements, as applicable. Some commenters supported the uniform
order requirements without issue. In particular, one commenter
supported the ability to include either the beneficiary name or the
Medicare beneficiary identifier (MBI), and either the prescriber name
or his/her national provider identifier (NPI), and suggested this
policy be adopted for all other Medicare services. One commenter
supported the use of the totality of the medical records to document
the order/prescription required elements. A commenter reminded CMS that
the significant regulatory updates codified in this rule should be
reflected and updated in supporting materials.
Response: We appreciate the commenters' support of our proposal to
standardize order requirements and the use of the totality of the
medical records to document the order/prescription required elements.
The comment suggesting that MBI and NPI would be helpful if adopted
across all sectors is outside the scope of this rule. Regarding the
comment about the date element, we agree with the commenter that the
date element may have been subject to interpretation. Accordingly, we
will change ``date'' to ``order date''. We will revise its
subregulatory guidance to reflect these changes. As noted at Sec.
410.38(d)(1)(ii), a completed order for items on the Required Face-To-
Face Encounter And Written Order Prior To Delivery List must occur
prior to the item being dispensed. Items not on the list require the
order prior to claim submission.
Comment: One commenter requested confirmation whether a
standardized order element that is not on the order but is found within
the medical record would be considered for payment purposes.
Response: While we believe the basic order requirements imposed by
this rule are typical to good clinical practice, we provide reviewers
with the capacity to consider the totality of the medical record when a
missing or flawed element is clearly documented elsewhere in the
record.
Comment: Commenters expressed concern that documentation include
quantity to support payment even when the quantity of the item
dispensed is one.
Response: We believe the comment is specifically about the written
order/prescription included in the documentation required for a face-
to-face encounter. As we stated in the CY 2020 DMEPOS proposed rule (84
FR 38379), 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. However, we note ``quantity, as applicable'', is one of
the required elements of the order. For many DMEPOS items, the
prescription/order will not need to state that ``one'' is the quantity
because quantity is not applicable for those items. An example would be
a wheelchair. Alternately, a prescription order for disposable supplies
will need to include the quantity to be furnished. When reviewing
supporting documentation, the reviewer would expect to see clinical
need to support any quantity furnished, whether one DMEPOS item or
more.
Comment: One commenter suggested that we update the required
elements of the standardized order/prescription to specify that
``Practitioner Name or National Provider Identifier (NPI)'' refers to
the treating practitioner.
Response: We agree with commenter's suggestion. Treating
practitioner is consistent with our intent, as defined throughout this
final rule. We have updated the written order/prescription section to
clarify our intent that the practitioner signing the document and
including his or her name be the treating practitioner, as defined
throughout Sec. 410.38 (c) and (d). It will now explicitly state
``Treating Practitioner Name or National Provider Identifier (NPI)''
and ``Treating Practitioner Signature.''
Final Rule Action: We are finalizing the order section as proposed
in Sec. 410.38(d), with modifications made at Sec. 410.38(d)(1)(i)(D)
and Sec. 410.38(d)(1)(i)(E). We are revising the element
``Practitioner Name or National Provider Identifier'' to say ``Treating
Practitioner Name or National Provider Identifier (NPI).'' and the
element ``Practitioner Signature'' to say ``Treating Practitioner
Signature.'' We are also revising the element ``date'' to say ``order
date.''
C. Miscellaneous Comments
We received several comments that were outside the scope of the CY
2020 DMEPOS proposed rule. While some of these comments were related to
prior authorization topics, they were not the issues we addressed in
detail in the proposed rule. In the following discussion, we summarize
and respond to the comments.
Comment: Some commenters suggested shortening the procedural
timeframes provided to the contractors via operational instructions
regarding prior authorization decisions.
Response: The prior authorization operational process is outside
the scope
[[Page 60755]]
of this final rule, however, we continually strive to make program
improvements. After adding an item to the Required Prior Authorization
List, we customize final review and decision timelines for each item.
In the December 30, 2015 final rule, we stated that this approach to
final timelines provides flexibility to develop a process that involves
fewer days, as may be appropriate, and allows us to safeguard
beneficiary access to care. This is evident in the process developed
for the prior authorization of pressure reducing support surfaces,
which allows up to 5 days for both initial and resubmitted requests,
while prior authorization of PMDs allows up to 10 days for an initial
request and 20 days for a subsequent request.
Comment: One commenter urged CMS to allow for more electronic prior
authorization communication to further expedite the process for certain
items.
Response: The prior authorization operational process is outside
the scope of this final rule, however, we continue to discuss with
industry about future enhancements to electronic prior authorization
processes. Additionally, our medical review contractors have recently
started offering prior authorization request submissions and decisions
via their online web portals, in efforts to provide suppliers
flexibility in communication approaches.
Comment: Some commenters requested CMS clarify that the electronic
documentation generated by e-prescribing platforms is an appropriate
source of information that can be relied upon during medical reviews.
Response: The format and use of electronic platforms is outside the
scope of this rule.
Comment: Commenters suggested that if a beneficiary receives an
affirmative prior authorization decision, it should continue to apply
even if the beneficiary changes suppliers or moves locations.
Response: We appreciate these comment. Although this suggestion is
outside the scope of this regulation, we note that our current
processes outlined in our prior authorization operational guides allow
for the prior authorization decision and corresponding claim
information to remain with the beneficiary. We assume such transfers
would be made in accordance with applicable privacy laws.
Comment: Commenters shared their support of the prior authorization
process, but expressed concern about the administrative resources
needed to effectuate prior authorization requests, which should be
reflected in Medicare payments.
Response: We thank the commenters for sharing their concerns. We
believe that some assurance of payment and some protection from future
audits may ultimately reduce administrative resources. Adjustments to
Medicare payments for items subject to prior authorization is outside
the scope of this regulation.
Comment: One commenter expressed concern regarding the application
of Medicare rules during the audit process, and believes that this
ultimately impacts patient care.
Response: We strive to ensure that patients receive the benefits
that they are entitled to, while protecting the Medicare Trust Funds
against improper payments. The tools that are provided in this rule
help limit improper payments. In addition, we believe that the
increased communication offered by prior authorization helps ensure
suppliers that items furnished are covered by Medicare and provide an
assurance of likely payment. We note that we have robust oversight
processes in place to ensure the accuracy of medical review and prior
authorization decision making thereby avoiding impacts to patient care.
Comment: Some commenters expressed concern that items subject to
prior authorization should not be subject to additional audit.
Response: Paid claims for which there is an associated affirmed
prior authorization decision will be afforded some protection from
future audits. However, when the subject claim falls within the CERT
annual sample or when a supplier's billing patterns signal potential
fraud, inappropriate utilization or changes in billing patterns, the
claim may be subject to an audit.
Comment: Some commenters suggested the face-to-face encounter
requirement be eliminated.
Response: We do not have the authority to eliminate the face-to-
face encounter requirement since it is statutorily mandated.
Comment: Some commenters requested that CMS initially implement new
items to prior authorization within a limited geographic scope, prior
to expansion, to ensure a smooth transition to national implementation.
Response: We appreciate the commenters' support of our roll-out
processes to date. We will continue to evaluate new items to ensure
sufficient timeframes are provided when planning national
implementation.
Comment: Some commenters suggested methods to align Part C prior
authorization activities with the FFS program, and suggested
operational improvements to such programs.
Response: We note that changes to the Medicare Advantage program
were not proposed and subject to formal notice and comment under this
rulemaking, and are outside the scope of this rule.
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BILLING CODE 4120-01-C
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 proposed to revise the existing DMEPOS
Competitive Bidding Program (CBP) change of ownership (CHOW)
regulations in Sec. 414.422(d) in recognition of the fact that CHOWs
may occur on shorter timeframes than our regulations previously
contemplated. We also proposed to revise Sec. 414.423(f) for the
submission of a hearing request in notices of breach of contract.
B. Proposed Amendments
We proposed to revise the following amendments in Sec. 414.422(d)
as follows:
We proposed 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 proposed 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 recognize that the 60-day notice requirement is a bit
onerous and as such we proposed to remove paragraph (d)(1) in its
entirety. We also proposed to redesignate and reorganize the remaining
text of paragraph (d).
We proposed 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 proposed 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 proposed 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 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 will expedite
CMS's determination on whether to allow transfer of the contract to the
successor entity. We also proposed that the successor entity must
submit a novation agreement that states that it assumes all obligations
under the contract.
We proposed 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
proposed 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 will 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 proposed 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 proposed 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 will always result
in a ``successor'' entity. In addition, we proposed 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 proposed to remove the acronym
``i.e.'' and replace it with ``that is.''
In Sec. 414.423(f)(2), we 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 proposed to revise paragraph (f)(2) to specify that the
request for a hearing
[[Page 60778]]
must be ``submitted to'' the CBIC rather than ``received by'' the CBIC
within 30 days from the date of the notice of breach of contract.
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 solicited public comments on these amendments. We received
comments in support of our CHOW proposal to remove the 60-day
requirement and require submission of the novation agreement within 10
days of the effective date of the CHOW. We did not receive any comments
on our other proposals for CHOWs or on our proposal for submission of a
hearing request in a notice of a breach of contract appeal. We are
finalizing our DMEPOS CBP proposals without change.
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
As we discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38396
through 38400), 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 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,\44\ 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.
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\44\ 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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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
[[Page 60779]]
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.\45\ 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.
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\45\ 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.
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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.
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
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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.\46\
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\46\ Medicare Claims Processing Manual. Chapter 8--Outpatient
ESRD Hospital, Independent Facility, and Physician/Supplier Claims.
(Rev. 4202, 01-18-19). Page 7/143.
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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
In the CY 2020 ESRD PPS proposed rule (84 FR 38398), CMS solicited
input on options for improving the reporting of composite rate costs
for the ESRD PPS. We explained that we believed 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 solicited comments on, or elaborations of,
the options presented and discussed during the TEP, described in the CY
2020 ESRD PPS proposed rule (84 FR 38396) and also in section
VIII.A.1.b.ii of this final rule, as well as novel approaches for
improving the reporting of patient-level and facility-level costs that
are not described here. We stated that 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. We noted that 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, in the CY 2020 ESRD PPS proposed rule (84 FR 38398
through 38399), CMS solicited further input on ways to improve (1) the
accuracy of charges and (2) the precision and reliability with which
cost composite rate costs are identified and reported in cost reports.
We invited commenters 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. In the CY 2020
ESRD PPS proposed rule (84 FR 38399), CMS solicited 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
[[Page 60781]]
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 invited 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 was described
in the CY 2020 ESRD PPS proposed rule (84 FR 38397) and in section
VIII.A.1.b.v of this final 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.
In the CY 2020 ESRD PPS proposed rule (84 FR 38399), CMS solicited
comments and suggestions about how to best capture these costs. In the
proposed rule we provided the following questions to consider: 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.
In the CY 2020 ESRD PPS proposed rule (84 FR 38399 through 38400),
CMS solicited input from stakeholders regarding the further
identification of facility-level drivers of cost, especially those that
affect the cost of composite rate services. We asked commenters to
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 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
In the CY 2020 ESRD PPS proposed rule (84 FR 38400), we also
solicited responses to the following questions that arose during the
TEP. We noted that 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.\47\ 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 requested 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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\47\ 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 requested
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.
[[Page 60782]]
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 also solicited 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 received extensive comments on these issues from approximately 9
stakeholders and an additional 35 comments that indirectly addressed
the request for information (RFI) for data collection. Below we provide
a short synopsis of the findings for each of the topics discussed in
the TEP and solicited for comment in the CY 2020 ESRD PPS proposed
rule. We will provide a more detailed summary of the comments received
on this RFI on the CMS website https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Educational_Resources.html. While
we will not respond to these comments here, we will take them into
consideration during future policy development. We thank the commenters
for their detailed and thoughtful comments. We will consider these
recommendations for future rulemaking.
Refinements to the Components of Composite Rate Costs
Some commentators expressed the opinion that use of composite rate
components to price the cost of dialysis treatment was outmoded and
counter to the objective of the bundled system instituted with the ESRD
PPS in 2011. Although the RFI directed stakeholders to consider and
comment on improving data collection for the determination of composite
rate (CR) costs, the CR was not at the heart of their concerns. In
fact, some commenters stated that the CR was an outmoded and
unnecessary concept, dating back to the time before the implementation
of the ESRD PPS in 2011, and attempts to discern individual cost
components of the CR essentially served to ``unbundle'' the PPS.
However, there was general support for improved reporting of patient
level costs on claims and facility level costs on cost reports.
Several commenters objected to CMS' continued use of the two-
equation payment model. They claimed the two equation model is flawed
insofar as it uses facility level regression analysis of cost report
data to determine the cost per treatment for CR services and the
results from patient level regression analysis from data derived from
claims to determine the average payment per patient for drugs,
laboratory services and supplies. Multiplying factors from each
regression model ``with different bases'' diminishes the accuracy of
the model.
Little Variation Found in Charges
Commenters claimed that charges for individual treatments were
hard, if not impossible, to capture and that doing so would represent
an undue burden for facilities.
CMS' contractor analyzed charges for basic dialysis services, as
they are reported on claims, and found little variation in charges
either across patients within facilities or across facilities.
Stakeholders were asked to comment on this phenomenon and provide
explanation. Commenters responded by stating that variations in charges
are inconsistent and [their occurrence is non-systematic] making it
difficult to focus on assessing charges for the purposes of itemizing
composite rate costs. Examples were provided for items and services
that could vary by treatment, but which would be difficult to capture
in charges. These included nurse training and the difficulty of
separating nurse training hours from other hours worked. Others
commented that it is not possible to assess specific items to include
in charges for each dialysis treatment.
Patient-Level Factors Contributing to Higher Costs
With regard to patient-level factors contributing to high costs of
care, commenters opined that patient-level adjusters should be based on
sound, empirical evidence of their contribution to cost of care. There
was general agreement that adjustments for the use of isolation rooms
for patients with active HBV infection and for patients in their
initial months of dialysis treatment were warranted. Commenters opposed
the use of dialysis treatment duration maintaining that other factors
were more directly related to cost of treatment.
Commenters expressed the opinion that the cost report data was an
inappropriate source from which to derive accurate patient-level
adjusters from aggregated facility data, such as is recorded in the
cost reports.
Commenters also asked to eliminate or significantly revise the
current case mix adjusters. Commenters repeatedly expressed concerns
that the methodology that was used to derive the case mix adjusters was
flawed and not empirically based. Some commenters recommended the
elimination of all the current case mix adjusters. Others suggested
revisions, including removal of some adjusters. Some stated that case
mix adjusters were not necessary and that they defeated the purpose of
the bundled payment, effectively unbundling it. Others believed that
the use of multiple adjusters that were highly correlated was
problematic.
Another objection to the use of too many patient level adjusters
related to the difficulty of obtaining accurate comorbidity data.
Commenters stated that these diagnoses are made by medical providers,
not by ESRD facility staff, and are contained in medical records which
are not readily accessible by the ESRD facility. They claimed that the
operational costs of claiming comorbidity payment adjustment exceeded
the value of the adjustment.
In particular the use of age, BMI, and BSA was challenged.
Commenters stated that there was no correlation between these factors
and cost of dialysis treatment. Some commenters supported the use of
patient-level cost factors that were presented at the 2019 TEP,
including use of a catheter, non-ambulatory status, and some combined
measure indicating behavioral, drug addiction or mental health
problems, while others did not. Commenters endorsed the use of
isolation rooms for patients with active HBV infection and an
adjustment for patients in their initial period of dialysis.
The proposed use of duration of dialysis treatment time as a
single, patient-level factor to estimate variation in CR costs was
opposed. There was some indication that commenters thought that this
method was being proposed in lieu of taking into account factors
unrelated to treatment duration that made some patients more expensive
to treat. Some commenters voiced the objection that use of this measure
would not be productive because there was great homogeneity in
treatment times across patients. Other commenters claimed that many
subgroups of patients are challenged to stay on dialysis for the
prescribed treatment time because of their physical status or other
limitations, leading to more frequent treatment and/or higher costs and
that these higher costs are related to patients' special circumstances
and comorbidities and not to treatment duration.
Facility Level Adjusters and Suggested Changes to Cost Reports
With regard to facility-level factors driving costs, commenters
agreed that the LVPA and rural adjustments needed refinement. They also
were in agreement in calling for ESRD network fees and all bad debt to
be added to cost reports as revenue reductions. Finally there was
generally agreement that cost
[[Page 60783]]
reports needed revisions to improve accuracy and consistency of
reporting.
Commenters agreed that current cost reports omit several key cost
components and that more could be done to clarify reporting
requirements in the cost report instructions. In particular, the ESRD
network fee and bad debt were mentioned by several stakeholders as
factors missing from the cost reports. Virtually all commenters who
addressed this issue urged the inclusion of the ESRD network fee as a
revenue reduction in Worksheet D of the cost report. They claimed that
facilities were losing millions of dollars in reimbursable costs due to
the omission of the ESRD network fee.
Bad debt was another facility-level cost that commenters strongly
believed should be included in the cost report. Bad debt was
characterized by contractors as pervasive problem that results when
beneficiaries who face financial challenges cannot meet their cost
sharing obligations. Presently, CMS only reimburses for 65 percent of
bad debt liability (or 98 percent of 65 percent, if sequestration is
taken into account). Commenters requested that 100 percent of bad debt
be reimbursed. Commenters expressed that this problem will be
exacerbated as new, more expensive treatments and devices come on the
market. Commenters expressed the opinion that omission of unrecoverable
bad debt results in a distorted representation of ESRD facility
economics.
Several stakeholders also suggested that other revenue reductions
should be allowed on the cost reports, including costs related to the
ESRD QIP and losses related to budget sequestration. Finally,
commenters requested that the cap on reporting of administrative
salaries be removed.
The Low Volume Payment Adjuster (LVPA) and the Rural Adjuster were
mentioned by several commenters as being problematic. First, some
commenters expressed the opinion that the two adjusters were
``overlapping'' and suggested that a single, tiered low volume and
``isolated facility'' adjusters would serve better to target
supplemental payments where they were most needed. Others commented
that the LVPA should be targeted at small and independent facilities,
whose treatment costs were higher, rather than go to large dialysis
organizations which are better able to absorb any excess costs in
isolated less populated facilities and whose treatment costs in such
facilities were lower than those incurred by independent facilities.
Home dialysis costs were mentioned by commenters as representing a
cost component that has risen significantly in recent years. Commenters
maintained that current allocation for facility level costs for home
dialysis is not adequate due to higher costs for supplies and equipment
and limited competition among vendors. Commenters stated that
exacerbating this problem are training costs for the more highly
skilled nurses required to train and attend to home dialysis
beneficiaries, as well as survey and certification requirements.
Finally, hospital and freestanding facility costs are seen by
commenters to be vastly different with hospitals incurring higher costs
due to a ``more intensive cost structure and/or clinically complex
patient population'' compared to freestanding facilities. Additionally
higher costs may be an artifact of the peculiar structure of the
hospital based ESRD cost report. Commenters suggested that revisions be
made to correct data reporting and structural problems in the cost
report. Commenters also expressed support for more granular reporting
of costs in cost reports.
Reporting of Composite Rate Items on the Consolidated Billing List
Commenters expressed that the lack of availability of HCPCS codes
for oral drugs prevent their reporting on claims.
Stakeholders were asked to comment on why so few facilities
reported on the use of composite rate drugs that appeared on the
Consolidated Billing List, as has been required since 2015. Responders
stated that many oral medications do not have HCPCS codes that would
allow them to be itemized on claims and if claims are submitted to
Medicare Advantage, including these items, the entire claim is
rejected. Please see the Billing Practices section below for a further
explanation of the consequences faced when such items are included on
claims.
Billing Problems and Medicare Advantage
Commenters stated that Medicare Advantage and some other secondary
payers rejected claims if they included certain items, including oral
medications which did not have a HCPCS code.
Commenters mentioned several problems with Medicare Advantage (MA)
billing practices for dialysis services. They stated that some MA plans
will reject certain claims for a variety of reasons. Commenters
reiterated the case made by panelists at the 2019 TEP that claims would
be rejected by Medicare Advantage and other secondary payers if they
contained certain drugs, including those that do not have HCPCS codes,
as mentioned above, and in certain cases will not make separate payment
to facilities for their provision of the TDAPA-eligible drugs.
Commenters also stated that Medicare Advantage plans will reject claims
that include more than 13 treatments per month, even when medically
justified. This includes both in-center and home dialysis treatments.
Commenters claimed that these practices discourage providers from
offering home dialysis as a treatment option because of substantial
increases in supply costs in recent years. Commenters also mentioned
that MA plans often reject claims for dialysis treatments for
beneficiaries traveling outside of the plan's network, having the
unintentional result of restricting beneficiaries' ability to travel.
Finally, commenters noted that Medicare Advantage plans do not always
pay applicable payment adjustments for patients whose care otherwise is
eligible for such adjustments. For example, MA plans do not always
provide for the additional costs attendant to caring for patients in
their first months of dialysis treatment, nor for the extra care
required for patients with complex comorbidities.
Special Consideration: Pediatric Dialysis Facilities
Commenters highlighted that pediatric dialysis facilities are a
special case, that a pediatric case mix adjuster is warranted, and that
significant revisions to cost reports should be made to allow for the
true cost of providing care to this special population to be adequately
reported.
The 2019 ESRD PPS TEP identified treatment and care for pediatric
patients as a source of composite rate cost variation associated with
providing care to more complex patients and called for further input on
those costs. In response to the RFI, commenters itemized exceptional
costs that were incurred by pediatric dialysis facilities, including
the need for specialized staff, such as behavioral specialists, school
liaisons and child life specialists. Additional expenses include a
broad array of supplies and devices to accommodate a range of patient
sizes. Commenters recommended that in addition to a pediatric case mix
adjuster, CMS consider the additional capital and labor costs
associated with pediatric patients and use these to formulate a more
robust pediatric ESRD facility payment formula. Finally, they suggested
that CMS consider alternative billing practices for pediatric
facilities. They stated that these facilities are usually housed in
children's hospitals which do
[[Page 60784]]
not have experience with Medicare billing and reporting and lack the
infrastructure to bill or provide required data accordingly.
B. Wage Index Comment Solicitation
As discussed in the CY 2020 ESRD PPS proposed rule (84 FR 38359
through 38360) and in section II.B.5.b of this final 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. In the CY 2020 ESRD
PPS proposed rule (84 FR 38400), we solicited 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 received comments on this topic from approximately 6
stakeholders. Below we provide summaries of the comments received in
response to the solicitation in the CY 2020 proposed rule. While we
will not respond to these comments here, we will take them into
consideration during future policy development. We thank the commenters
for their detailed and thoughtful comments. We will consider these
recommendations for future rulemaking.
Several commenters addressed the impact of data lag issues that
they believe undermine the accuracy of the ESRD PPS wage indices. Under
the current wage index methodology, CMS applies the most recent pre-
floor, pre-classified hospital wage data collected annually under the
Hospital IPPS. While commenters generally continue to support the
methodology for determining the wage indices and the continued
application of the wage index floor, they asked that CMS consider how
the current policy could be modified to adjust wage index values to
take into account laws requiring wage increases. They expressed that
the wage index calculation data lag is particularly troublesome given
higher wages due to state and municipality minimum wage actions and
overall economic growth. They asserted that the current methodology
will not capture these wage increases until years after their effect.
They also noted that wage indices that do not reflect ESRD facilities'
actual, current experience or the labor resources necessary to fulfill
obligations under the Five-Star Quality Rating System and QIP will
devalue the labor-related portion of the ESRD PPS base rate and
inappropriately constrain ESRD PPS payments.
Commenters noted that under the current methodology, there can be a
several year lag with the wage index recognizing these changes. They
urged CMS to work to minimize the data lag and ensure the expeditious
incorporation of current state and municipality minimum wage
requirements and overall labor market trends that influence labor costs
into the wage indices' calculation.
One healthcare organization commented on CMS' proposal, in section
II.B.5.b of the CY 2020 ESRD PPS proposed rule, to continue to use the
pre-floor, pre-reclassified hospital wage index for ESRD services in CY
2020. The healthcare organization said that it understood that, until
CMS is able to develop a wage index system for ESRD, CMS will need to
use a proxy such as the hospital wage index. However, the organization
does not agree with using the pre reclassified wage index values.
Hospitals are regularly allowed to reclassify to higher wage index
areas which results in higher payment rates. Because ESRD providers
compete with local hospitals for staff, the payment differentials allow
hospitals to offer higher compensation than can be maintained in a
nonhospital setting. As a result, the healthcare organization stated,
other providers such as ESRD facilities are at a disadvantage when
competing for nursing staff. Rather than contributing to the
disparities between facilities, the healthcare organization recommended
that CMS equalize the wage index rates between hospitals and ESRD
providers that utilize the hospital wage index by using the post floor,
post-reclassification wage index for each CBSA.
A national dialysis association stated that CMS should not apply
any wage index changes associated with the IPPS final rule without
undergoing notice-and-comment rulemaking in an ESRD PPS proposed rule.
The association explained that the wage index promulgated in the IPPS
impacts the base rate for the ESRD PPS since the labor-related portion
of the ESRD PPS base rate is adjusted to account for geographic
differences in the area wage levels. The association noted that the
ESRD wage-index is based on the hospital index and utilizes pre-floor
hospital data that are unadjusted for occupational mix. In addition to
the hospital wage index being a critical component of the ESRD PPS base
rate calculation, it also influences some of the facility-level
adjusters, including the low-volume payment adjustment and the rural
adjustment.
A professional association requested that CMS consider any such
wage index changes in connection with any potential broad refinements
to the ESRD PPS. The professional association recommended using a
similar approach as the RFI for Data Collection because experiences of
its members indicate that cost of care varies most by the patient's
individual characteristics, comorbidities and psychosocial factors--as
well as the relative severity of those individual comorbidities and
psychosocial factors.
The association also noted that small and independent ESRD
facilities typically have higher labor costs than larger dialysis
organizations because of the generally higher proportion of skilled
labor used in care delivery. The association urged CMS to formally
recognize in the ESRD PPS the disproportionately higher labor costs
borne by small and independent facilities as it considers possible
changes to the ESRD PPS wage index.
The association also expressed that rural regions tend to
experience higher labor costs than facilities in non-rural areas due to
their difficulty in attracting labor. It noted that challenges in
attracting qualified labor to care for the highly vulnerable ESRD
patient population in rural areas are particularly acute given the
overall shortage of nursing supply available and such issues have
become even more critical with respect to attracting registered nurses
and other clinical staff with experience in the provision of home
dialysis--an expertise clearly sought after with the Administration's
important initiatives to increase rates of home dialysis in ESRD
treatment. Moreover, the association stated, if rural facilities are
not able to find permanent staff locally, they must pay the associated
travel costs and wages for travel time for staff traveling from units
outside of the area qualified to treat patients. The association noted
that these staffing challenges raise labor costs for rural providers,
increasing their overall costs to provide high-quality care for
patients. The association therefore asked CMS to formally account for
the additional financial burden rural providers face in securing
qualified labor to meet ESRD patient care needs in any changes
considered for the ESRD PPS wage index.
The association further suggested that as CMS considers possible
changes to the ESRD PPS wage index, CMS examines how and why these two
approaches of calculating the labor-related share have varied over
time. The association stated that such examination may provide useful
information about the specific approach to measurement
[[Page 60785]]
and/or quality of the underlying data under either method, and could
offer useful insights about the implications for the cost-side data
sources utilized for any potential refinement to the ESRD PPS.
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.'' \48\ Section 1847(a)(10)(A) of the 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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\48\ 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 stated
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
[[Page 60786]]
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 stated 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 stated 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 stated
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. 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.
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.\49\ 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.\50\ 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.
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\49\ https://oig.hhs.gov/oei/reports/oei-04-18-00440.pdf.
\50\ 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 requested 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 requested 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 therefore requested 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 sought 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
Includes market-based data measuring sales of diabetic
testing strip products that are not exclusively sold by a single
retailer from such markets.
We received 6 comments from suppliers, industry representative
groups, and others in response to this Comment Solicitation on Sources
of Market-Based Data Measuring Sales of Diabetic Testing Strips to
Medicare Beneficiaries. Of the comments we received, none included
data, or readily available sources of data, and were otherwise outside
the scope of the request for information.
The comments received in response to the Comment Solicitation on
Sources of Market-Based Data Measuring Sales of Diabetic Testing Strips
to Medicare Beneficiaries are set forth below.
A few commenters recommended that CMS require suppliers to bill as
they do for Medicare Part D. The commenters said that Part D billing
allows for on-line claim adjudication, requiring that suppliers bill
with a National Drug Code (NDC) product number so CMS can collect that
data (the commenter recognized that there may be Paperwork Reduction
Act issues). The commenters said that any survey of current Medicare
Part B claims for diabetic testing strips would not accurately
represent the overall market because reduced payment rates have caused
suppliers to offer beneficiaries fewer product options. The commenters
went on to say that the challenge with requesting this utilization
information from manufacturers is that manufacturers do not know who
will be paying for the product, and that manufacturer sales data is
therefore not representative of products provided to Medicare
beneficiaries.
One commenter said that CMS should only consider data for brands
obtained under Medicare Part B, and that CMS should not consider
diabetic testing supplies obtained through Part C or D because many of
the supplies provided under Part C or Part D are on the formulary of
the private insurance company. The commenter also stated that providers
in the previous national mail order CBP did not have contracts with
certain test strip manufacturers, as these manufacturers shut out the
mail order providers in an attempt to drive patients to a pharmacy
where they were able to work within the pharmacy benefit manager rebate
programs. Another commenter said that information about access to
certain test strip brands are potentially inaccurate, because some
brands only contracted with certain national mail order CBP providers.
We appreciate the range of the comments we received. We will
consider these comments carefully as we contemplate future policies.
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. We
solicited comments in the proposed rule, which published in the Federal
Register on August 6, 2019 (84 FR 38330 through 38421). For the purpose
of transparency, we are republishing the discussion of the information
collection requirements. All of the requirements discussed in this
[[Page 60787]]
section are already accounted for in OMB approved information requests.
B. Additional Information Collection Requirements
This final rule does not impose any new information collection
requirements in the regulation text. However, this final rule does make
reference to several associated information collections that are not
discussed in the regulation text contained in this document. The
following is a discussion of these information collections.
1. ESRD QIP--Wage Estimates
To derive 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.\51\
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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\51\ 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 final 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 final
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 will take each facility approximately 2.5 hours to
comply with this requirement. If 300 facilities are asked to submit
records, we estimate that the total combined annual burden for these
facilities will be 750 hours (300 facilities x 2.5 hours). Since we
anticipate that Medical Records and Health Information Technicians or
similar administrative staff would submit these data, we estimate that
the aggregate cost of the CROWNWeb data validation each year will 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 finalized in this
final rule. The burden associated with these requirements is captured
in an information collection request (OMB control number 0938-1289).
In section IV.D.5 of this final rule, we are finalizing that we
will 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 adopt the NHSN
validation study as a permanent feature of the ESRD QIP. Under this
methodology, we will select 300 facilities for participation in the PY
2023 validation study. A CMS contractor will 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). 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 will 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 will submit these data,
we estimate that the aggregate cost of the NHSN data validation each
year will 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 finalized in this
final 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
[[Page 60788]]
PPS final rule, we estimated that the burden associated CROWNWeb
reporting requirements for the PY 2022 ESRD QIP was approximately $202
million. We did not propose in the CY 2020 ESRD PPS proposed rule any
changes that would affect the burden associated with CROWNWeb reporting
requirements for PY 2022 or PY 2023. However, we 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 the proposed rule and
in this final rule, we did not use a rounded estimate of the time
needed to complete data entry for CROWNWeb reporting. Based on the
updated estimates that we used to re-calculate the burden estimate for
PY 2022, we estimate that the PY 2022 burden is $211 million (or 4.8
million hours), and the net incremental burden from PY 2022 to PY 2023
is $0 (or 0 hours).
X. 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 solicited comments on the regulatory impact analysis provided.
With regard to the ESRD PPS, we did not receive any comments on the
RIA.
2. Statement of Need
a. ESRD PPS
This rule finalizes a number of routine updates and several policy
changes to the ESRD PPS in CY 2020. The finalized 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 final rule will result in ESRD facilities not receiving
appropriate payments in CY 2020 for renal dialysis services furnished
to ESRD patients.
b. AKI
This rule also finalizes routine updates to the payment for renal
dialysis services furnished by ESRD facilities to individuals with AKI.
Failure to publish this final rule will 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 finalizes updates to the ESRD QIP, including a
modification to the scoring methodology for the NHSN Dialysis Event
reporting measure beginning with the PY 2022 ESRD QIP; the conversion
of the STrR clinical measure to a reporting measure; and the adoption
of the NHSN validation study as a permanent feature of the program
using the methodology finalized for the PY 2022 NHSN validation study.
In addition, we finalized that for all clinical measures in PY 2023
ESRD QIP, CY 2021 would be the performance period, CY 2020 would be the
baseline period used to establish the improvement thresholds, and CY
2019 would be used for establishing the achievement thresholds,
benchmarks, and minimum TPS. For future ESRD QIP payment years, we
finalized that we would 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 finalizes a gap-filling methodology for new DMEPOS items
and services.
ii. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled
Using Supplier or Commercial Prices
This rule finalizes 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 final rule will 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 final revisions to the ESRD PPS will 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 change in the basis of payment for the TDAPA for
calcimimetics from ASP+6 percent to
[[Page 60789]]
ASP+0 percent. These figures do not reflect estimated increases or
decreases in expenditures based on the refinement to the TDAPA
eligibility criteria, conditioning the TDAPA on ASP data availability,
or providing the TPNIES. The fiscal impact of these policies cannot be
determined due to the uniqueness of the new renal dialysis drugs and
biological products and new renal dialysis equipment and supplies
eligible for these add-on payment adjustments and their costs.
b. AKI
We are estimating approximately $40 million that will 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 finalized in this final rule
will 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 finalized policy
changes described earlier, including the changes to the scoring
methodology for the NHSN Dialysis Event reporting measure and the
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 will result in an
overall impact of $229 million as a result of the policies we have
previously finalized and the policies we have finalized in this final
rule, which includes an estimated $211 million in information
collection burden and an additional $18 million in estimated payment
reductions across all facilities, for PY 2022.
For PY 2023, we estimate that the finalized revisions to the ESRD
QIP will result in an overall impact of $229 million as a result of the
policies we have previously finalized and the policies we have
finalized in this final rule, which includes an $18 million in
estimated payment reductions across all facilities.
d. DMEPOS
i. Establishing Payment Amounts for New DMEPOS Items and Services
This final rule establishes a gap-filling methodology for new items
and services. The fiscal impact of the gap-filling methodology cannot
be determined due to the uniqueness of potential new DMEPOS items and
their costs.
ii. Adjusting Payment Amounts for DMEPOS Items and Services Gap-Filled
Using Supplier or Commercial Prices
While these adjustments will 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 finalizes 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 requirements 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 final rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on last year's final rule will be the number of reviewers of
this final rule. We acknowledge that this assumption may understate or
overstate the costs of reviewing this rule. It is possible that not all
commenters reviewed last year's rule in detail, and it is also possible
that some reviewers chose not to comment on the 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 welcomed
comments on the approach in estimating the number of entities, which
will review this final rule. We did not receive any comments on this
section on the rule.
We also recognize that different types of entities are in many
cases affected by mutually exclusive sections of this final rule, and
therefore for the purposes of our estimate we assume that each reviewer
reads approximately 50 percent of the rule. We sought comments on this
assumption. We did not receive any comments on this section on the
rule.
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 final rule. For each ESRD facility that reviews the rule, the
estimated cost is $687.50 (6.25 hours x $110.00). Therefore, we
estimate that the total cost of reviewing this regulation rounds to
$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
final rule. For each entity that reviews this final rule, the estimated
cost is $110.00. Therefore, we estimate that the total cost of
reviewing this 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
[[Page 60790]]
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 final rule, we used CY 2018 data from the Part A and Part
B Common Working Files as of September 18, 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 final rule. Table 14 shows the impact of the estimated CY 2020
ESRD payments compared to estimated payments to ESRD facilities in CY
2019.
BILLING CODE 4120-01-P
[[Page 60791]]
[GRAPHIC] [TIFF OMITTED] TR08NO19.091
BILLING CODE 4120-01-C
Column A of the impact table indicates the number of ESRD
facilities for each impact category and column B indicates the number
of dialysis treatments (in millions). The overall effect of the final
changes to the outlier payment policy described in section II.B.5.c of
this final 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 0.4 percent increase in estimated payments. All ESRD
facilities are anticipated to experience a positive effect in their
estimated CY 2020 payments as a result of the final outlier policy
changes.
[[Page 60792]]
Column D shows the effect of the final CY 2020 wage indices. The
categories of types of facilities in the impact table show changes in
estimated payments ranging from a 0.8 percent decrease to a 0.5 percent
increase due to these final updates.
Column E shows the effect of the final CY 2020 ESRD PPS payment
rate update. The final ESRD PPS payment rate update is 1.7 percent,
which reflects the final ESRDB market basket percentage increase factor
for CY 2020 of 2.0 percent and the final MFP adjustment of 0.3 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
final outlier policy changes, the final wage index, payment rate
update, and final 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
2.2 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 final 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 $10.3
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 1.4 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 final 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 $40 million.
e. Alternatives Considered
i. Eligibility Criteria for the TDAPA
In section II.B.1 of this final rule, we finalized 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 final rule, we finalized to provide a
transitional add-on payment adjustment to support the use of certain
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 were lacking for many items and did not address the
new and innovative renal dialysis equipment and supplies that we expect
to be forthcoming with the KidneyX initiative.
2. Final 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 final rule, we used CY 2018 data from the Part A and Part
B Common Working Files as of September 18, 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 final rule. Table 15 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.
BILLING CODE 4120-01-P
[[Page 60793]]
[GRAPHIC] [TIFF OMITTED] TR08NO19.093
BILLING CODE 4120-01-C
Column A of the impact table indicates the number of ESRD
facilities for each impact category and column B
[[Page 60794]]
indicates the number of AKI dialysis treatments (in thousands).
Column C shows the effect of the final CY 2020 wage indices. The
categories of types of facilities in the impact table show changes in
estimated payments ranging from a 1.8 percent decrease to a 0.7 percent
increase due to these final updates.
Column D shows the effect of the final CY 2020 ESRD PPS payment
rate update. The final ESRD PPS payment rate update is 1.7 percent,
which reflects the final ESRDB market basket percentage increase factor
for CY 2020 of 2.0 percent and the final MFP adjustment of 0.3 percent.
Column E reflects the overall impact, that is, the effects of the
final wage index 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 a 0.1 percent decrease to a 2.4
percent increase 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 updating 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 update will have zero impact on other Medicare providers.
c. Effects on the Medicare Program
We estimate approximately $40 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 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
will 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 finalizing in this final rule that we will convert the STrR
clinical measure to a reporting measure, and also 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).\52\
---------------------------------------------------------------------------
\52\ We are redesignating Sec. 413.178(d) as Sec. 413.178(e)
in this final rule.
---------------------------------------------------------------------------
Any reductions in the ESRD PPS payments as a result of a facility's
performance under the PY 2022 ESRD QIP will 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 7,386 dialysis
facilities (including those not receiving a TPS) enrolled in Medicare,
approximately 26.1 percent or 1,871 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 1,871 facilities
expected to receive a payment reduction is approximately
$18,247,083.76. 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 2022 ESRD QIP.
[GRAPHIC] [TIFF OMITTED] TR08NO19.095
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
[[Page 60795]]
were available data from CROWNWeb and Medicare claims. Payment
reduction estimates are calculated using the most recent data available
(specified in Table 17) in accordance with the policies finalized in
this final rule. Measures used for the simulation are shown in Table
17. We also note that because we are finalizing in section IV.D.2.b of
this final rule that we will convert the STrR measure from a clinical
measure to a reporting measure, the STrR measure is no longer listed in
Table 17.
[GRAPHIC] [TIFF OMITTED] TR08NO19.096
For all measures except SHR, clinical measure topic areas with less
than 11 cases for a facility were not included in that facility's TPS.
For SHR, facilities were required to have at least 5 at risk patients,
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.D
of this final rule. Facility reporting measure scores were estimated
using available data from 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 final rule, we multiplied the total
Medicare payments to the facility during the 1-year period between
January 2018 and December 2018 by the facility's estimated payment
reduction percentage expected under the ESRD QIP, yielding a total
payment reduction amount for each facility.
Table 18 shows the estimated impact of the 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.
BILLING CODE 4120-01-P
[[Page 60796]]
[GRAPHIC] [TIFF OMITTED] TR08NO19.097
[[Page 60797]]
BILLING CODE 4120-01-C
b. Effects of the PY 2023 ESRD QIP on ESRD Facilities
For the PY 2023 ESRD QIP, we estimate that, of the 7,386 dialysis
facilities (including those not receiving a TPS) enrolled in Medicare,
approximately 26.1 percent or 1,871 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 1,871 facilities
expected to receive a payment reduction is approximately
$18,247,083.76. Facilities that do not receive a TPS do not receive a
payment reduction.
Table 19 shows the overall estimated distribution of payment
reductions resulting from the PY 2023 ESRD QIP.
[GRAPHIC] [TIFF OMITTED] TR08NO19.098
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 19) in accordance with the policies finalized in
this final rule. Measures used for the simulation are shown in Table
20. We also note that because we are finalizing in section IV.D.2.b of
this final rule that we will convert the STrR measure from a clinical
measure to a reporting measure, the STrR measure is no longer listed in
Table 20.
[GRAPHIC] [TIFF OMITTED] TR08NO19.099
For all measures except SHR, clinical measure topic areas with less
than 11 cases for a facility were not included in that facility's TPS.
For SHR, facilities were required to have at least 5 at-risk patients,
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 policies finalized in section IV.D
and IV.E of this final rule. Facility reporting measure scores were
estimated using available data from 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 final rule, we multiplied the total
Medicare payments to the facility during the 1-year period between
January 2018 and December 2018 by the facility's estimated payment
reduction percentage expected under the ESRD QIP, yielding a total
payment reduction amount for each facility.
Table 21 shows the estimated impact of the 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
[[Page 60798]]
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 that we are finalizing
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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR08NO19.100
[[Page 60799]]
BILLING CODE 4120-01-C
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 will contribute
approximately $18,247,083.76 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 22 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).
[GRAPHIC] [TIFF OMITTED] TR08NO19.101
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 will have a positive economic impact on suppliers by
making the pricing of new items more easily understood and encourage
innovation. The cost cannot be estimated as these new items are not
identified.
(2) Effects on the Medicare Program
This final rule 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 final rule has an indeterminable cost to the Medicare
beneficiary due to the unpredictable nature of future new items. This
rule also 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 but did not propose was to continue
the process for establishing payment amounts for new items on a sub-
regulatory basis. This would have 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 will
have a negative economic impact on suppliers by lowering fees. The
savings 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 will
have a positive economic impact on the Medicare Program by lowering
fees and achieving savings. The savings 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 will
have a positive economic impact on Medicare beneficiaries by lowering
fees, therefore resulting in lower coinsurance for such items. The
savings cannot be estimated as these new items are not identified.
(4) Alternatives Considered
An alternative we considered but did not propose was to continue
not adjusting payment amounts for new items based on revised supplier
and commercial price lists. This would have resulted, in some cases, in
what we
[[Page 60800]]
consider to be fee schedule amounts that were too high and a cost to
the program and beneficiaries.
5. Conditions of Payment To Be Applied to Certain DMEPOS Items
This rule streamlines 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 requirements 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 23, we have
prepared an accounting statement showing the classification of the
transfers and costs associated with the various provisions of this
final rule.
[GRAPHIC] [TIFF OMITTED] TR08NO19.102
In accordance with the provisions of Executive Order 12866, this
final 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 $41.5 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 https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf) (Kidney Dialysis Centers are listed as 621492 with a size standard
of $41.5 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 14. Using the
definitions in this ownership category, we consider 502 facilities that
are independent and 304 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 $41.5 million in any year when the total
revenues for all locations are combined for each business (individual
LDO or regional chain), and are not, therefore, included as small
entities.
For the ESRD PPS updates finalized in this rule, a hospital-based
ESRD facility (as defined by type of ownership, not by type of ESRD
facility) is estimated to receive a 2.2 percent increase in payments
for CY 2020. An independent facility (as defined by ownership type) is
estimated to receive a 1.7 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 $40 million in payment for AKI dialysis treatments that could
potentially be furnished in ESRD facilities.
For the ESRD QIP, we estimate that of the 1,871 ESRD facilities
expected to receive a payment reduction as a result of their
performance on the PY 2023 ESRD QIP, 314 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 QIP Payment Reductions to ESRD Facilities for PY
[[Page 60801]]
2023''). We estimate that the payment reductions will average
approximately $9,752.58 per facility across the 1,871 facilities
receiving a payment reduction, and $9,288.57 for each small entity
facility. We also estimate that there are 817 small entity facilities
in total, and that the aggregate ESRD PPS payments to these facilities
will decrease 0.32 percent in CY 2023.
The DMEPOS provisions in this final rule, Establishing Payment
Amounts for New DMEPOS Items and Services and Gap-Filling and Adjusting
Payment Amounts for DMEPOS Items and Services Gap-Filled Using Supplier
or Commercial Prices in section V of this final 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 final 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 final 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 solicited comment on the RFA analysis provided. We received no
comments on this section.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. Any
such regulatory impact analysis must conform to the provisions of
section 604 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital that is located outside of
a metropolitan statistical area and has fewer than 100 beds. We do not
believe this final rule 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 final 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 final 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
final 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 final 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.
XI. 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 amends 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.
* * * * *
[[Page 60802]]
(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 the 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:
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 of this chapter. 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 is published in the Federal
Register and posted on the CMS website. The list is effective no less
than 60 days following its publication. 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) Order Date.
(E) Treating Practitioner Name or National Provider Identifier
(NPI).
(F) Treating 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 of this chapter 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.
[[Page 60803]]
0
5. Section 413.178 is amended --
0
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)'';
0
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)'';
0
c. By redesignating paragraphs (d) through (f) as paragraphs (e)
through (g), respectively;
0
d. By adding a new paragraph (d);
0
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
0
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 revisions and additions read 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 with the requirements in
paragraph (d)(4) 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.
* * * * *
0
6. Section 413.230 is amended by--
0
a. Revising paragraphs (b) and (c); and
0
b. Adding paragraph (d) and (e).
The revision and additions 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).
0
7. Section 413.234, as previously amended on November 14, 2018, is
further amended--
0
a. In paragraph (a) by revising the definitions of ``ESRD PPS
functional category'' and ``Oral only drug;''
0
b. By revising paragraph (b)(1)(ii);
0
c. By revising paragraph (c) introductory text; and
0
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
[[Page 60804]]
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
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 paragraph (e)(2) of
this section.
(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 paragraph (e)(2) of this section, 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. 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
[[Page 60805]]
(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 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]
* * * * *
0
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 an add-on 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) 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
[[Page 60806]]
and Drug Administration (FDA) on or after January 1, 2020;
(3) Is commercially available by January 1 of the particular
calendar year, meaning the year in which the payment adjustment would
take effect;
(4) Has a Healthcare Common Procedure Coding System (HCPCS)
application submitted in accordance with the official Level II HCPCS
coding procedures by September 1 of the particular calendar year;
(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. FDA marketing authorization for
the equipment or supply must occur by September 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]
0
9. Section 413.237 is amended by--
0
a. Revising paragraph (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
0
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.
0
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
[[Page 60807]]
described in paragraphs (b) or (c) 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) 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 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.
0
13. Section 414.234 is amended --
0
a. In paragraph (a) by adding the definition of ``Required Prior
Authorization List'' in alphabetical order;
0
b. By revising the heading of paragraph (b) and revising paragraphs
(b)(1), (b)(2), (b)(3)(i) through (b)(3)(iii), (b)(4), and (b)(6);
0
c. By revising paragraphs (c)(1)(i) and (ii);
0
d. By revising paragraphs (d)(1) introductory text and (d)(1)(i);
0
e. By revising paragraph (e)(3) and (4); and
0
f. 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 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
[[Page 60808]]
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) or (c) 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) 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 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.
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--
[[Page 60809]]
(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: October 24, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 28, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-24063 Filed 10-31-19; 4:15 pm]
BILLING CODE 4120-01-P