# Medicare Program; Changes to the End-Stage Renal Disease Prospective Payment System for CY 2012, End-Stage Renal Disease Quality Incentive Program for PY 2013 and PY 2014; Ambulance Fee Schedule; and Durable Medical Equipment > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2011-16874 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** July 8, 2011 - **Citation:** 76 FR 40498 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 413 and 414 [CMS-1577-P] RIN 0938-AQ27 Medicare Program; Changes to the End-Stage Renal Disease Prospective Payment System for CY 2012, End-Stage Renal Disease Quality Incentive Program for PY 2013 and PY 2014; Ambulance Fee Schedule; and Durable Medical Equipment AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: This proposed rule would update and make certain revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2012. This proposed rule would also set forth proposed requirements for the ESRD quality incentive program (QIP) for payment years (PYs) 2013 and 2014. In addition, this proposed rule would revise the ambulance fee schedule regulations to conform with statutory changes. Finally, this proposed rule would revise the definition of durable medical equipment (DME) by adding a 3-year minimum lifetime criterion that must be met by an item or device in order to be considered durable for the purpose of classifying the item under the Medicare benefit category for DME. (See the Table of Contents for a listing of the specific issues addressed in this proposed rule.) DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on August 30, 2011. ADDRESSES: In commenting, please refer to file code CMS-1577-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the “Submit a comment” instructions. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1577-P, P.O. Box 8010, Baltimore, MD 21244-8010. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1577-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Lisa Hubbard (410) 786-4533, for issues related to ESRD. Roechel Kujawa, (410) 786-9111, for issues related to ambulance services. Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market basket. Shannon Kerr, (410) 786-3039, for issues related to the quality incentive program. Sandhya Gilkerson, (410) 786-4085, for issues related to the definition of durable medical equipment (DME). SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments. Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951. Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/ Addenda Are Only Available Through the Internet on the CMS Web Site In the past, a majority of the Addenda referred to throughout the preamble of our proposed and final rules appeared in the Federal Register . However, beginning with this CY 2012 proposed rule, the Addenda of the annual proposed and final rules will no longer appear in the Federal Register . Instead, these Addenda to the annual proposed and final rules will be available only through the Internet on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. Readers who experience any problems accessing any of the Addenda to the proposed and final rules that are posted on the CMS Web site identified above should contact Lisa Hubbard at 410-786-4533. 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. Calendar Year (CY) 2012 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) A. Background for the End-Stage Renal Disease Prospective Payment System (ESRD PPS) for Calendar Year (CY) 2012 B. Routine Updates and Proposed Policy Changes for CY 2012 ESRD PPS 1. Proposals Related to the Composite Rate Portion of the ESRD PPS Blended Payment 2. Proposals Related to the ESRD PPS 3. Clarifications and Proposals Regarding the Low-Volume Adjustment Policy Under the ESRD PPS 4. Technical Corrections to the CY 2011 ESRD PPS Final Rule 5. Clarifications Regarding the ESRD PPS C. Provisions of the Proposed Regulations for the ESRD PPS 1. Proposed Updates to the Composite Rate and ESRD PPS Base Rate for CY 2012 a. Proposed Composite Rate b. ESRD PPS Base Rate 2. ESRD Bundled Market Basket a. Overview and Background b. Proposed Market Basket Update Increase Factor and Labor-Related Share for ESRD Facilities for CY 2012 c. Proposed Productivity Adjustment d. Multifactor Productivity-Adjusted Market Basket Update 3. Transition Budget-Neutrality Adjustment for CY 2011 4. Proposed Transition Budget-Neutrality Adjustment for CY 2012 5. Proposed Low-Volume Facility Provisions 6. Proposed Update to the Drug Add-on to the Composite Rate Portion of the ESRD Blended Payment Rate a. Estimating Growth in Expenditures for Drugs and Biologicals b. Estimating Per Patient Growth c. Applying the Proposed Growth Update to the Drug Add-on Adjustment d. Proposed Update to the Drug Add-on Adjustment for CY 2012 7. Updates to the Wage Index Values and Wage Index Floor For the Composite Portion of the ESRD PPS Blended Payment and Under the ESRD PPS Payment a. Proposed Reduction to the ESRD Wage Index Floor b. Proposed Policies for Areas With No Hospital Data c. Proposed Wage Index Budget-Neutrality Adjustment d. ESRD PPS Wage Index Tables 8. Drugs a. Vancomycin b. Drug Overfill 9. Proposed Revisions to Patient-Level Adjustment for Body Surface Area (BSA) 10. Proposed Revisions to the Outlier Policy a. Proposed Revisions Related to Outlier ESRD Drugs and Biologicals b. Proposed Exclusion of Automated Multi-Channel Chemistry (AMCC) Laboratory Tests From the Outlier Calculation c. Impact of Proposed Changes to the Outlier Policy D. Technical Corrections 1. Training Add-on 2. ESRD-Related Laboratory Test E. Clarifications Regarding the ESRD PPS 1. ICD-9-CM Diagnosis Codes 2. Emergency Services to ESRD Beneficiaries II. End-Stage Renal Disease Quality Incentive Program for Payment Year (PY) 2013 and 2014 A. Background for the End-Stage Renal Disease Quality Incentive Program for PY 2013 and PY 2014 1. Overview of Quality Monitoring Initiatives 2. Statutory Authority for the ESRD QIP 3. Payment Year (PY) 2012 ESRD QIP B. Provisions of the Proposed Regulations for End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for PY 2013 and PY 2014 1. Proposed PY 2013 ESRD QIP Requirements a. Overview of the Proposed PY 2013 ESRD QIP b. Proposed Performance Performance Measures for the PY 2013 ESRD QIP c. Proposed Performance Period for the PY 2013 ESRD QIP d. Performance Standards for the PY 2013 ESRD QIP e. Methodology for Calculating the Total Performance Score for the PY 2013 ESRD QIP f. Proposed Payment Reductions for the PY 2013 ESRD QIP 2. Proposed PY 2014 ESRD QIP a. Overview of the Proposed PY 2014 ESRD QIP b. Proposed Performance Measures for the PY 2014 ESRD QIP i. Proposed Anemia Management Measure (Hemoglobin Greater Than 12g/dL) ii. Proposed Kt/V Dialysis Adequacy Measure iii. Proposed Vascular Access Type Measure iv. Proposed Vascular Access Infections Measure v. Proposed Standardized Hospitalization Ratio—Admissions Measure vi. Proposed National Healthcare Safety Network (NHSN) Dialysis Event Reporting Measure vii. Proposed Patient Experience of Care Survey Usage Measure viii. Proposed Mineral Metabolism Reporting Measure c. Proposed Performance Period for the PY 2014 ESRD QIP d. Proposed Performance Standards for the PY 2014 ESRD QIP e. Proposed Methodology for Calculating the Total Performance Score for the PY 2014 ESRD QIP i. Setting Performance Benchmarks and Thresholds ii. Scoring Provider and Facility Performance on Clinical Measures Based on Achievement iii. Scoring Provider/Facility Performance on Clinical Measures Based on Improvement iv. Calculating the Proposed Vascular Access Type Measure Score v. Calculating the Proposed NHSN Dialysis Event Reporting Measure, Patient Experience Survey Usage Reporting Measure and Mineral Metabolism Reporting Measure Scores vi. Examples to Illustrate Proposed 2014 ESRD QIP Performance Scoring Model as Applied to Clinical Measures vii. Proposed Weighting of the PY 2014 ESRD QIP Measures and Calculation of the PY 2014 ESRD QIP Total Performance Score viii. Example of Applying the Proposed PY 2014 ESRD QIP Performance Scoring Model and Calculating the Total Performance Score f. Proposed Payment Reductions for the 2014 ESRD QIP 3. Proposed Public Reporting Requirements 4. Future QIP Measures 5. Proposed Process of Updating Measures III. Ambulance Fee Schedule A. Section 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) 1. Amendment to section 1834(l)(13) of the Act 2. Amendment to section 146(b)(1) of MIPPA 3. Amendment to section 1834(l)(12) of the Act B. Technical Correction IV. Durable Medical Equipment and Supplies A. Background for Durable Medical Equipment and Supplies B. Current Issues C. Provisions of the Proposed Regulations 1. Application of the 3-year lifetime standard to items currently covered as DME and to supplies and accessories of covered DME 2. Application of the 3-year minimum lifetime criteria to multi-component devices V. Collection of Information Requirements A. Legislative Requirement for Solicitation of Comments B. Requirements in Regulation Text C. Additional Information Collection Requirements 1. Proposed Display of Certificates for PY 2013 and PY 2014 ESRD QIP 2. Proposed NHSN Reporting Requirement for the PY 2014 ESRD QIP 3. Proposed Patient Experience Survey Usage Requirement for the PY 2014 ESRD QIP 4. Proposed Mineral Metabolism Reporting Requirement for the 2014 ESRD QIP VI. Response to Comments VII. Economic Analysis A. Regulatory Impact Analysis 1. Introduction 2. Statement of Need 3. Overall Impact B. Detailed Economic Analysis 1. CY 2012 End-Stage Renal Disease Prospective Payment System a. Effects on ESRD Facilities b. Effects on Other Providers c. Effects on the Medicare Program d. Effects on Medicare Beneficiaries e. Alternatives Considered 2. End-Stage Renal Disease Quality Incentive Program (QIP) a. Effects of the Proposed 2013 and 2014 ESRD QIP b. Alternatives Considered for 2013 and 2014 ESRD QIP 3. Ambulance Fee Schedule C. Accounting Statement VIII. Regulatory Flexibility Act Analysis IX. Unfunded Mandates Reform Act Analysis X. Federalism Analysis XI. Files Available to the Public via the Internet Regulations Text Acronyms In addition, because of the many terms to which we refer by acronym in this proposed rule, we are listing the acronyms used and their corresponding meanings in alphabetical order below: AMCC Automated Multi-Channel Chemistry ASP Average Sales Price AV Arteriovenous BLS Bureau of Labor Statistics BMI Body Mass Index BSA Body Surface Area CBSA Core Based Statistical Area CDC Centers for Disease Control and Prevention CLABSI Central Line Access Bloodstream Infections CFR Code of Federal Regulations CIP Core Indicators Project CMS Centers for Medicare & Medicaid Services CPM Clinical Performance Measure CPT Current Procedural Terminology CROWNWeb Consolidated Renal Operations in a Web-Enabled Network DFC Dialysis Facility Compare DFR Dialysis Facility Report DME Durable Medical Equipment ESA Erythropoiesis stimulating agent ESRD End-Stage Renal Disease ESRDB End-Stage Renal Disease Bundled FDA Food and Drug Administration FI/MAC Fiscal Intermediary Medicare Administrative Contractor FY Fiscal Year GDP Gross Domestic Product HAI Healthcare-associated Infections HCPCS Healthcare Common Procedure Coding System HD Hemodialysis HHD Home Hemodialysis ICD-9-CM International Classification of Diseases, 9th ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare Advisors IGI IHS Global Insight IPPS Inpatient Prospetive Payment System KDIGO Kidney Disease: Improving Global Outcomes KDOQI Kidney Disease Outcome Quality Initiative Kt/V A measure of dialysis adequacy where K is dialyzer clearance, t is dialysis time, and V is total body water volume LDO Large dialysis organization MAP Medicare Allowable Payment MCP Monthly Capitation Payment MIPPA Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) MMA Medicare Prescription Drug, Improvement and Modernization Act of 2003 MMEA Medicare and Medicaid Extenders Act of 2010 Pub. L. 111-309 MFP Multifactor Productivity NHSN National Healthcare Safety Network NQF National Quality Forum PD Peritoneal Dialysis PFS Physician Fee Schedule PPS Prospective payment system PY Payment Year QIP Quality incentive program REMIS Renal management information system RFA Regulatory Flexibility Act RUL Reasonable Useful Lifetime SBA Small Business Administration SIMS Standard information management system SHR Standardized Hospitalization Ratio SSA Social Security Administration the Act Social Security Act the Affordable Care Act The Patient Protections and Affordable Care Act URR Urea reduction ratio VBP Value Based Purchasing I. Calendar Year (CY) 2011 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) A. Background for the End-Stage Renal Disease Prospective Payment System (ESRD PPS) for Calendar Year (CY) 2012 On August 12, 2010, we published in the Federal Register , a final rule (75 FR 49030 through 49214), entitled, “End-Stage Renal Disease Prospective Payment System”, hereinafter referred to as the CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS final rule, we implemented a case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis patients beginning January 1, 2011, in accordance with 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). The ESRD PPS replaced the prior basic case-mix adjusted composite payment system and the methodologies for the reimbursement of separately billable outpatient ESRD services. Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of Public Law 111-148, the Affordable Care Act, for 2012 and each subsequent year, the Secretary shall reduce the market basket increase factor by a productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. In the CY 2011 ESRD PPS final rule (75 FR 49030), the Centers for Medicare & Medicaid Services (CMS) finalized the following: • A base rate of $229.63 per treatment for renal dialysis services (but postponed payment for oral-only renal dialysis drugs under the ESRD PPS until January 1, 2014) that applies to both adult and pediatric dialysis patients prior to the application of any case-mix adjustments. This amount included the 2 percent reduction for budget-neutrality required by MIPPA, a one percent reduction for estimated outlier payments, and a reduction to account for estimated payments for case-mix and the low-volume payment adjustments. • A 4-year transition (for those ESRD facilities that elected to receive blended payments during the transition) period during which ESRD facilities receive a blend of payments under the prior basic case-mix adjusted composite payment system and the new ESRD PPS. Although the statute uses the term “phase-in”, we are using the term “transition” to be consistent with other Medicare payment systems. • A −3.1 percent transition budget-neutrality adjustment to ensure that overall spending under the ESRD PPS did not increase as a result of the provision that permits ESRD facilities to be excluded from the 4-year transition. • A payment adjustments for dialysis treatments furnished to adults for patient age, body surface area (BSA), low body mass index (BMI), onset of dialysis, and six specified co-morbidities. • A home or self-care dialysis training payment adjustment of $33.44 per treatment which is wage adjusted and applies to claims for patients trained by ESRD facilities certified to provide home dialysis training. • Payment adjustments for dialysis treatments furnished to pediatric patients for patient age and dialysis modality. • A low-volume payment adjustment for adult patients of 18.9 percent that applies to the otherwise applicable case-mix adjusted payment rate for facilities that qualifies as low-volume ESRD facilities. • An outlier payment policy that provides an additional payment to ESRD facilities treating high cost, resource-intensive patients. • The wage index adjustment that is applied when calculating the ESRD PPS payment rates in order to account for geographic differences in area wage levels. • An ESRDB market basket index used to project prices in the costs of goods and services used to furnish outpatient maintenance dialysis. In addition, on April 6, 2011, we published an interim final rule with comment period in the Federal Register (76 FR 18930), entitled “Changes in the End-Stage Renal Disease Prospective Payment System Transition Budget-Neutrality Adjustment”, which revised the ESRD transition budget-neutrality adjustment for CY 2011. In the interim final rule, we revised the 3.1 percent transition budget-neutrality adjustment reduction to a zero percent transition budget-neutrality adjustment for renal dialysis services furnished on April 1, 2011 through December 31, 2011. B. Routine Updates and Proposed Policy Changes for CY 2012 ESRD PPS In this proposed rule, we propose to (1) Make a number of routine updates for CY 2012, (2) implement the second year of the transition, and (3) make several policy changes under the ESRD PPS, as well as technical changes to the CY 2011 ESRD PPS final rule. 1. Proposals Related to the Composite Rate Portion of the ESRD PPS Blended Payment This proposed rule would implement the second year of the transition period for those ESRD facilities that elected to go through the transition rather than electing to receive payment based on 100 percent of the payment amount under the ESRD PPS. Specifically, we would implement in CY 2012 the second year of the transition where 50 percent of payment is based on the basic case-mix adjusted composite payment system and the remaining 50 percent of payment is based on the payment amount under the ESRD PPS. As a result of the transition period under the ESRD PPS, we must continue to update the composite rate portion of the blended payment, which would include updates to the drug add-on adjustment required by section 1881(b)(12(F) of the Act, as well as the wage index values (which include a budget-neutrality factor) used to adjust the labor component of the composite rate. The proposed updates to the drug add-on adjustment under the composite rate portion of the blended rate can be found in section I.C.6.d of this proposed rule and the wage index is discussed in section I.C.d.7 of this proposed rule. Also, the ESRD bundled (ESRDB) market basket increase factor (which is further reduced, beginning in 2012, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act) is used to update the composite rate portion of the blended payment in accordance with section 1881(b)(14)(F)(ii) of the Act. A discussion of the proposed market basket increase factor for CY 2012 can be found in section I.C.2 of this proposed rule. A discussion of the proposed productivity adjustment can be found in section I.C.2.c of this proposed rule. We are also proposing to update the second part of the transition budget-neutrality adjustment for CY 2012 that is applied to both the blended payments under the transition and payments under the ESRD PPS. The discussion regarding the proposed transition budget-neutrality adjustment can be found in section I.C.4 of this proposed rule. In this proposed rule, we also are proposing to add the $.49 for the Part D drugs to the composite rate portion of the blended payment during the transition, which represents the first part of the transition budget-neutrality adjustment, and update it using the ESRDB market basket minus productivity adjustment. We discuss this proposal in the update to the composite rate and the proposed CY 2012 transition budget-neutrality adjustment in I.C.1.a and I.B.4, respectively, of this proposed rule. Finally, we are proposing to revise the national average used in calculating the BSA adjustment under the basic case-mix adjusted composite payment system. This change is discussed in detail in section I.C.9 of this proposed rule. 2. Proposals Related to the ESRD PPS As discussed above in section I.A, 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, requires the ESRD bundled payment amounts to be annually increased by an ESRD market basket increase factor that is reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Therefore, in CY 2012, an ESRD market basket increase factor that is reduced by a productivity adjustment would be applied to the ESRD PPS payment rate portion of the blended payment under the transition and under the full ESRD PPS. A discussion of the proposed market basket increase factor for CY 2012 can be found in section I.C.2 of this proposed rule. A discussion of the proposed productivity adjustment can be found in section I.C.2.c of this proposed rule. We are also proposing to update the transition budget-neutrality adjustment for CY 2012 which is applied to both the blended payments under the transition and payments under the full ESRD PPS. The discussion regarding the proposed transition budget-neutrality adjustment can be found in section I.C.4 of this proposed rule. This proposed rule would also update the wage index which is applied to both the ESRD PPS portion of the blended payments under the transition and payments under the full ESRD PPS. We are proposing to apply a wage index budget-neutrality adjustment factor to the ESRD PPS base rate. The discussion regarding the wage index can be found in section I.C.7 of this proposed rule. Also, for CY 2012, we are proposing the following revisions to the ESRD PPS outlier policy: (1) Eliminate the drug-specific list of eligible outlier services; (2) make modifications to the computation of the separately billable Medicare Allowable Payment (MAP) amounts to exclude access management drugs that are composite rate drugs and include certain anemia management drugs; and (3) stop using the 50 percent rule and eliminate the Automated Multi-Channel Chemistry (AMCC) laboratory tests from the definition of outlier services. In addition, we are proposing to consider anti-infective drugs when used at home by a patient to treat an infection of the catheter site or peritonitis associated with peritoneal dialysis as non-composite rate ESRD-related drugs, and reiterating that under the current regulation, all non-composite rate ESRD-related drugs are considered outlier services. That is, all non-composite rate ESRD-related drugs are considered outlier services for purposes of determining outlier payments. The discussion regarding the proposed changes to the outlier policy can be found in section I.C.10 of this proposed rule. 3. Clarifications and Proposals Regarding the Low-Volume Adjustment Policy Under the ESRD PPS In this proposed rule, we are clarifying that the term “payment year” is the period of time that we use for determining payment to ESRD facilities, which is a calendar year. We propose to establish a process for CY 2012 and each year thereafter that facilities would need to follow, when submitting its attestation to notify its FI/MAC that it is eligible for the low-volume adjustment. We are clarifying the term “year” that is used for purposes of establishing the treatment threshold for low-volume eligibility. A discussion of the low-volume payment adjustment can be found in section I.c.5 of this proposed rule. 4. Technical Corrections to the CY 2011 ESRD PPS Final Rule In the CY 2011 ESRD PPS final rule, we inadvertently made two technical errors: (1) The training add-on amount was listed incorrectly as $33.38 instead of $33.44; and (2) the composite rate laboratory test, “Assay of protein by other source,” which is identified by the Current Procedural Terminology code 84157, was inadvertently omitted from the list of ESRD-related laboratory tests. For more information regarding these technical corrections please see section I.B.4 of this proposed rule. 5. Clarifications Regarding the ESRD PPS In this proposed rule, we are clarifying the method for updating ICD-9-CM codes in accordance with ICD-9-CM annual updates and clarifying whether certain renal dialysis service furnished in an emergency room or department are considered renal dialysis services covered under the ESRD PPS. C. Provisions of the Proposed Regulations for the ESRD PPS 1. Proposed Updates to the Composite Rate and ESRD PPS Base Rate a. Proposed Composite Rate Under section 1881(b)(14)(E)(i) of the Act, we are required to provide a 4-year transition under the new ESRD PPS. For CY 2012, under 42 CFR § 413.239(a)(2), facilities that go through the transition will receive a blended rate equal to the sum of 50 percent of the full ESRD PPS amount and 50 percent of the basic case-mix adjusted payment amount. Accordingly, we continue to need to update the composite rate portion of the blended payment during the 4-year transition (that is, CYs 2011 through 2013). For a historical perspective of the basic case-mix adjusted composite payment system for ESRD facilities, including the CY 2011 update to the composite rate portion of the ESRD PPS blended rate, please see the CY 2011 Physician Fee Schedule (PFS) final rule (75 FR 40164) and the CY 2011 PFS proposed rule (75 FR 40164 through 40168). In addition, we discuss the proposed CY 2012 drug add-on and the updated wage index values for the composite rate portion of the blended payment in sections I.C.6 and I.C.7, respectively. As discussed in section i.B.2 of this proposed rule, section 1881(b)(14)(F)(ii) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act, provides that, for years during which the transition applies, the composite rate portion of the blend shall be annually increased by the ESRDB market basket for CY 2012 and each subsequent year shall be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. In sections I.C.2.b and I.C.2.c of this proposed rule, we describe the basis for the proposed CY 2012 ESRDB market basket increase of 3.0 percent, and the productivity offset of 1.2 percent, yielding a proposed forecasted rate of increase in the base rate of 1.8 percent. In addition, as discussed in the transition budget-neutrality adjustment in section I.C.a of this proposed rule, we are proposing to add the CY 2011 Part D per treatment amount (that is, $0.49) to the CY 2011 composite rate in order to update the Part D amount for CY 2012 using the ESRDB market basket minus the productivity adjustment. The basis for the first part of the transition budget-neutrality adjustment (that is, the calculation of the $0.49 Part D add-on) was set forth in the CY 2011 ESRD PPS final rule at 75 FR 49082. Consequently, for CY 2012, the composite rate portion of the ESRD PPS blended payment would be $141.52. The $141.52 reflects the addition of the CY 2011 Part D per treatment amount ($0.49) to the CY 2011 composite rate of $138.53, and application of the ESRD market basket minus productivity ($138.53 + 0.49 = $139.02; $139.02 × 1.018 = $141.52). b. ESRD PPS Base Rate We described the development of the ESRD PPS per-treatment base rate in the CY 2011 ESRD PPS final rule (75 FR 49071) under Medicare regulations at 42 CFR §§ 413.220 and 413.230. The CY 2011 ESRD PPS final rule has a detailed discussion of the methodology used to calculate the ESRD PPS base rate and the computation of reduction 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 (75 FR 49071 through 49082). Specifically, the ESRD PPS base rate was developed from CY 2007 claims (that is, the lowest per patient utilization year), updated to CY 2011, and represented the average per treatment Medicare allowable payment (MAP) for composite rate and separately billable services. In addition, in accordance with § 413.230, the per treatment base rate is adjusted for the patient-specific case-mix adjustments, any applicable facility adjustments, wages to reflect ESRD facility differences in area wage levels using an area wage index, as well as any outlier payment or training add-on. For CY 2011, the ESRD PPS base rate was $229.63 (75 FR 49082). As discussed previously, 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, provides that, beginning in 2012, the ESRD PPS payment amounts are required to be annually increased by the rate of increase in the ESRD market basket, reduced by the productivity adjustment. Accordingly, we applied the 1.8 percent increase to the CY 2011 ESRD PPS base rate of $229.63, which results in a CY 2012 ESRD PPS base rate of $233.76 ($229.63 × 1.018 = $233.76). The proposed CY 2012 ESRD PPS Base Rate applies to the ESRD PPS portion of the blend. In addition, as discussed in section I.C.7.c of this proposed rule, we are proposing to apply the wage index budget-neutrality adjustment factor of 1.001126 to the CY 2012 ESRD PPS base rate (that is, $233.76), yielding a proposed CY 2012 ESRD PPS wage-index budget-neutrality adjusted base rate of $234.02 ($233.76 × 1.001126 = $234.02). 2. ESRD Bundled Market Basket a. Overview and Background Under 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 bundled payment amounts are required to be annually increased by an ESRD market basket increase factor that is reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute further 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. Under section 1881(b)(14)(F)(ii) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act, the ESRD bundled (ESRDB) rate market basket increase factor will also be used to update the composite rate portion of ESRD payments during the ESRD PPS transition period from 2011 through 2013; though beginning in 2012, such market basket increase factor will be reduced by the productivity adjustment. As a result of amendments by section 3401(h) of the Affordable Care Act, a full market basket was applied to the composite rate portion of the blended payment in CY 2011 during the first year of the transition. b. Proposed Market Basket Update Increase Factor and Labor-Related Share for ESRD Facilities for CY 2012 As required under section 1881(b)(14)(F) of the Act, effective beginning CY 2012 (and for purposes of the transition, effective beginning CY 2011), CMS developed an all-inclusive ESRDB input price index (75 FR 49151 through 49162). Although “market basket” technically describes the mix of goods and services used to produce ESRD care, 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 that market basket. Accordingly, the term “ESRDB market basket”, as used in this document, refers to the ESRDB input price index. For this proposed rule, we have used the same methodology described in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2012 ESRDB market basket increase factor and labor-related share. Using this method and the IHS Global Insight, Inc. (IGI) forecast for the first quarter of 2011 of the CY 2008-based ESRDB market basket, the proposed CY 2012 ESRDB market basket increase factor is 3.0 percent. IGI is an economic and financial forecasting firm that contracts with CMS to forecast the components of providers' market baskets. The labor-related share of a market basket is determined by identifying the national average proportion of its operating costs that are related to, influenced by, or vary with the local labor market. In the CY 2011 ESRD PPS final rule, we finalized a labor-related share for CY 2011 of 41.737 percent using the base year cost weights for the CY 2008-based ESRDB market basket (75 FR 49161 through 49162). Table 1 below contains the calculation of the labor-related share. This labor-related share represented the sum of Wages and Salaries, Benefits, Housekeeping and Operations, All Other Labor-related Services, 87 percent of the cost weight for Professional Fees, and 46 percent of the cost weight for Capital-related Building and Equipment expenses. The 87 percent of Professional fees was determined based on a survey that CMS conducted of ESRD facilities. Based on the survey results, we determined that, on average, 87 percent of professional services are purchased from local firms and 13 percent are purchased from businesses located outside of the ESRD's local labor market. The 46 percent of Capital-related Building and Equipment expenses is based on regressions run for the inpatient hospital capital PPS (56 FR 43375). We use a similar methodology to calculate capital-related expenses for the labor-related shares for rehabilitation facilities (70 FR 30233), psychiatric facilities, long-term care facilities, and skilled nursing facilities (66 FR 39585). Table 1—ESRDB Market Basket Labor-Related Share Cost category 2008-based ESRDB labor-related share (percent) Wages and Salaries 26.755 Benefits 6.754 Housekeeping and Operations 2.029 All Other Labor-related Services 1.219 Professional Fees, Labor-related 1.549 Capital, Labor-related 3.431 Total 41.737 In this proposed rule, we are not proposing to make any further changes to the labor-related share since we have not proposed to update the cost weights of the ESRDB market basket. Therefore, we are proposing to continue to use a labor-related share of 41.737 percent for CY 2012 for the ESRDB PPS. If an ESRD facility elected to transition to the bundled PPS system, then the CY 2012 payment to these providers will be based on a 50/50 blended payment of the composite rate and the ESRD PPS bundled rate. The labor-related share under the composite portion of the blended payment is 53.711 percent. This labor-related share was developed from the labor-related components of the 1997 ESRD composite rate market basket that was finalized in the 2005 PFS final rule (70 FR 70168). We propose to continue to use the labor-related share of 53.711 for the ESRD composite rate portion of the ESRD payment for all years of the transition. This labor-related share is consistent with the mix of labor-related services paid under the composite rate and is consistent with the method finalized in the CY 2011 ESRD PPS final rule (75 FR 49116). c. Proposed Productivity Adjustment Section 3401(h) of the Affordable Care Act requires that, in CY 2012 (and in subsequent calendar years), the market basket percentage under the ESRD prospective payment system as described in section 1881(b)(14)(F) of the Act be annually adjusted by changes in economy-wide productivity. Specifically, section 3401(h) of the Affordable Care Act amends section 1881(b)(14)(F)(i) of the Act to add clause (II) which sets forth the application of this productivity adjustment, which is defined in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment to be equal to 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, year, cost reporting period, or other annual period) (the “MFP adjustment”). The Bureau of Labor Statistics (BLS) is the agency that publishes the official measure of private nonfarm business MFP. Please see http://www.bls.gov/mfp to obtain the BLS historical published MFP data. CMS notes that the proposed methodology for calculating and applying the MFP adjustment to the ESRD payment update is similar to the methodology used in other payment systems as required by section 3401 of the Affordable Care Act. The projection of MFP is currently produced by IGI, an economic forecasting firm. In order to generate a forecast of MFP, IGI replicated the MFP measure calculated by the BLS using a series of proxy variables derived from IGI's U.S. macroeconomic models. These models take into account a very broad range of factors that influence the total U.S. economy. IGI forecasts the underlying proxy components such as gross domestic product (GDP), capital, and labor inputs required to estimate MFP and then combines those projections according to the BLS methodology. In Table 2 below, we identify each of the major MFP component series employed by the BLS to measure MFP. We also provide the corresponding concepts forecasted by IGI and determined to be the best available proxies for the BLS series. Table 2—Multifactor Productivity Component Series Employed by the Bureau of Labor Statistics and IHS Global Insight BLS series IGI series Real value-added output, constant 2005 dollars Non-housing non-government non-farm real GDP, Billions of chained 2005 dollars—annual rate. Private non-farm business sector labor input; 2005 = 100.00 Hours of all persons in private nonfarm establishments, 2005 = 100.00, adjusted for labor composition effects. Aggregate capital inputs; 2005 = 100.00 Real effective capital stock used for full employment GDP, Billions of chained 2005 dollars. IGI found that the historical growth rates of the BLS components used to calculate MFP and the IGI components identified are consistent across all series and therefore suitable proxies for calculating MFP. We have included below a more detailed description of the methodology used by IGI to construct a forecast of MFP, which is aligned closely with the methodology employed by the BLS. For more information regarding the BLS method for estimating productivity, please see the following link: http://www.bls.gov/mfp/mprtech.pdf . During the development of this proposed rule, the BLS published a historical time series of private nonfarm business MFP for 1987 through 2009, with 2009 being a preliminary value. Using this historical MFP series and the IGI forecasted series, IGI has developed a forecast of MFP for 2010 through 2021, as described below. To create a forecast of BLS' MFP index, the forecasted annual growth rates of the “non-housing, nongovernment, non-farm, real GDP,” “hours of all persons in private nonfarm establishments adjusted for labor composition,” and “real effective capital stock” series (ranging from 2010 to 2021) are used to “grow” the levels of the “real value-added output,” “private non-farm business sector labor input,” and “aggregate capital input” series published by the BLS. Projections of the “hours of all persons” measure are calculated using the difference between the projected growth rates of real output per hour and real GDP. This difference is then adjusted to account for changes in labor composition in the forecast interval. Using these three key concepts, MFP is derived by subtracting the contribution of labor and capital inputs from output growth. However, in order to estimate MFP, we need to understand the relative contributions of labor and capital to total output growth. Therefore, two additional measures are needed to operationalize the estimation of the IGI MFP projection: Labor compensation and capital income. The sum of labor compensation and capital income represents total income. The BLS calculates labor compensation and capital income (in current dollar terms) to derive the nominal values of labor and capital inputs. IGI uses the “nongovernment total compensation” and “flow of capital services from the total private non-residential capital stock” series as proxies for the BLS' income measures. These two proxy measures for income are divided by total income to obtain the shares of labor compensation and capital income to total income. In order to estimate labor's contribution and capital's contribution to the growth in total output, the growth rates of the proxy variables for labor and capital inputs are multiplied by their respective shares of total income. These contributions of labor and capital to output growth is subtracted from total output growth to calculate the “change in the growth rates of multifactor productivity:” MFP = Total output growth − ((labor input growth * labor compensation share) + (capital input growth * capital income share)) The change in the growth rates (also referred to as the compound growth rates) of the IGI MFP are multiplied by 100 in order to calculate the percent change in growth rates (the percent change in growth rates are published by the BLS for its historical MFP measure). Finally, the growth rates of the IGI MFP are converted to index levels based to 2005 to be consistent with the BLS' methodology. For benchmarking purposes, the historical growth rates of IGI's proxy variables were used to estimate a historical measure of MFP, which was compared to the historical MFP estimate published by the BLS. The comparison revealed that the growth rates of the components were consistent across all series, and therefore validated the use of the proxy variables in generating the IGI MFP projections. The resulting MFP index was then interpolated to a quarterly frequency using the Bassie method for temporal disaggregation. The Bassie technique utilizes an indicator (pattern) series for its calculations. IGI uses the index of output per hour (published by the BLS) as an indicator when interpolating the MFP index. d. Multifactor Productivity-Adjusted Market Basket Update Under section 1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the Affordable Care Act, the Secretary “shall annually increase payment amounts established under this paragraph by an ESRD market basket percentage increase factor for a bundled payment system for renal dialysis services that reflects changes over time in the prices of an appropriate mix of goods and services included in renal dialysis services”. Also, under section 1881(b)(14)(F)(ii)(II), as amended by section 3401(h) of the Affordable Care Act, for years in which the transition of the payment system is applicable, the Affordable Care Act states that the Secretary “shall annually increase such composite rate by the ESRD market basket percentage increase factor described in clause (i)(I)” subject to this factor being reduced by a productivity adjustment beginning in 2012. As described in section I.C.2.b of this proposed rule, we are proposing to estimate the ESRDB market basket percentage for CY 2012 based on the CY 2008-based ESRDB market basket. Section 3401(h) of the Affordable Care Act amends section 1881(b)(14)(F)(i) of the Act by adding a new clause (II), which requires that after establishing the percentage for a calendar year 2012 (and each subsequent year), “the Secretary shall reduce such percentage by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II)” (which we refer to as the multifactor productivity adjustment or MFP adjustment). In order to calculate the MFP-adjusted update for the ESRDB market basket during the transition period, we propose that the MFP percentage adjustment be subtracted from the CY 2012 market basket update calculated using the CY 2008-based ESRDB market basket. We propose that the end of the 10-year moving average of changes in the MFP should coincide with the end of the appropriate CY update period. Since the market basket update is reduced by the MFP adjustment to determine the annual update for the ESRDB PPS and the ESRD composite rate during the transition, we believe it is appropriate for the numbers associated with both components of the calculation (the market basket and the productivity adjustment) to coincide so that changes in market conditions are aligned. Therefore, for the CY 2012 update, we propose that the MFP adjustment be calculated as the 10-year moving average of changes in MFP for the period ending December 31, 2012. We propose to round the final annual adjustment to the one-tenth of one percentage point level up or down as applicable according to conventional rounding rules (that is, if the number we are rounding is followed by 5, 6, 7, 8, or 9, we will round the number up; if the number we are rounding is followed by 1, 2, 3, or 4, we will round the number down). The market basket percentage we are proposing for CY 2012 for the ESRDB market basket is based on the 1st quarter 2011 forecast of the CY 2008-based ESRDB market basket update, which is estimated to be 3.0 percent. This market basket percentage would then be reduced by the MFP adjustment (the 10-year moving average of MFP for the period ending CY 2012) of 1.2 percent, which is calculated as described above and based on IGI's 1st quarter 2011 forecast. The resulting MFP-adjusted ESRDB market basket update is equal to 1.8 percent, or 3.0 percent less 1.2 percent. We propose that if more recent data are subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data, if appropriate, to determine the CY 2012 market basket update and MFP adjustment in the CY 2012 ESRD PPS final rule. 3. Transition Budget-Neutrality Adjustment for CY 2011 Section 1881(b)(14)(E)(iii) of the Act requires that an adjustment to payments be made for renal dialysis services provided by ESRD facilities during the transition so that the estimated total payments under the ESRD PPS, including payments under the transition, equal the estimated total amount of payments that would otherwise occur under the ESRD PPS without such a transition. In the CY 2011 ESRD PPS final rule, we explained that because we would not know the actual number of ESRD facilities that would elect to opt out of the transition prior to publishing the final rule, we would simulate payments under the existing basic case-mix adjusted composite payment system and under the ESRD PPS to determine the number of ESRD facilities that we believed would elect to receive payment under 100 percent ESRD PPS. We explained that based on our simulations using 2007 data, we estimated that 43 percent of ESRD facilities would financially benefit from receiving full payment under the ESRD PPS. We also indicated that based on the simulation of estimated payments, a 3.1 percent reduction would be applied to all payment made to ESRD facilities for renal dialysis services furnished on January 1, 2011 through December 31, 2011 (75 FR 49082 through 49083). On April 6, 2011, we published an interim final rule with comment period in the Federal Register (76 FR 18930), entitled “Changes to the End-Stage Renal Disease Prospective Payment System Transition Budget-Neutrality Adjustment”, which revised the ESRD transition budget-neutrality adjustment finalized for CY 2011. In the interim final rule, we indicated that based on the election data submitted by ESRD facilities, 87 percent of ESRD facilities elected to opt out of the transition. When we applied the actual number of ESRD facilities electing to receive payment under the ESRD PPS, the transition budget-neutrality adjustment was determined to be zero rather than a 3.1 reduction in payments. We revised the 3.1 percent transition budget-neutrality adjustment reduction to a zero percent transition budget-neutrality adjustment for renal dialysis services furnished on April 1, 2011 through December 31, 2011. We will respond to comments submitted on the interim final rule in the CY 2012 ESRD PPS final rule. 4. Proposed Transition Budget-Neutrality Adjustment for CY 2012 As we discussed in the background section of this proposed rule, section 1881(b)(14)(E)(i) of the Act requires the Secretary to provide “a four year phase-in” of the payments under the ESRD PPS for renal dialysis services furnished on or after January 1, 2011, with payments under the ESRD PPS “fully implemented for renal dialysis services furnished on or after January 1, 2014.” Also, we indicated that instead of using the term “phase-in”, we are using the term “transition” to be consistent with other Medicare payment systems. Section 1881(b)(14)(E)(ii) of the Act permits ESRD facilities to make a one-time election to be excluded from the transition. An ESRD facility that elected to be excluded from the transition would receive payment for renal dialysis services provided on or after January 1, 2011, based on 100 percent of the payment rate under the ESRD PPS rather than a blended payment based in part on the payment rate under the basic case-mix adjusted composite payment system and in part on the payment rate under the ESRD PPS. Section 1881(b)(14)(E)(iii) of the Act also requires that we make an adjustment to payments for renal dialysis services provided by ESRD facilities during the transition so that the estimated total amount of payments under the ESRD PPS, including payments under the transition, equals the estimated total amount of payments that would otherwise occur under the ESRD PPS without such a transition. We refer to this provision as the transition budget-neutrality adjustment. As described in the CY 2011 ESRD PPS final rule (75 FR 49082), the transition budget-neutrality adjustment is comprised of two parts. For the first part, we created a payment adjustment under the basic case-mix adjusted composite payment system portion of the blended rate during the transition to account for the per treatment costs of drugs that are currently paid under Part D. For the second part, we computed a factor that would make the estimated total amount of payments under the ESRD PPS, including payments under the transition, equal the estimated total amount of payments that would otherwise occur without such a transition. In this proposed rule, we are addressing both parts of the transition budget-neutrality adjustment. For the first part of the transition budget-neutrality adjustment, for CY 2012, we propose to add the $0.49, which represents the CY 2011 Part D payment amount, to the composite rate portion of the ESRD PPS blended payment. We then propose to apply the ESRDB market basket minus productivity adjustment to the updated composite rate (which includes the $0.49). Since the composite rate is updated by the ESRDB market basket minus productivity and we are proposing to add the $0.49 to the composite rate, it would be consistent to use the same update. We believe that this approach is preferable to applying a growth factor to the $0.49 that is based on the rates for overall prescription drug prices that were used in the National Health Expenditure Projections, as we did for the establishment of the CY 2011 ESRD PPS base rate, because it is consistent with the update applied to the ESRD PPS base rate, which includes a per treatment amount for former Part D drugs (that is, $0.49). We discuss the addition of the $0.49 to the composite portion of the ESRD PPS payment in section I.c.1.a of this proposed rule. For the first part of the transition budget-neutrality adjustment, we are seeking comment on our proposal to add the CY 2011 Part D payment amount (that is, $0.49) to the composite rate portion of the blended payment and update it using the ESRDB market basket minus productivity adjustment. For the second part, as described in the CY 2011 ESRD PPS proposed rule (74 FR 49946), to calculate the transition budget-neutrality adjustment, we first determined the estimated increases in payments under the transition and then determined an offset factor, based on estimates of which facilities would choose to opt out of the transition. We estimated the number of facilities that would choose to opt out of the transition by comparing payment under the transition to payment under the PPS and choosing the option that was financially beneficial to each facility. Using that approach, we estimated that 43 percent of facilities would choose to opt out of the transition and determined the transition budget-neutrality adjustment to be a reduction of 3.1 percent. In the April 6, 2011 interim final rule with comment (76 FR 18930 through 18934) published in the Federal Register , however, we revised the number of facilities that chose to opt out of the transition to 87 percent, based on actual election data that we received, and recalculated a transition budget-neutrality adjustment of 0 percent. Given that the transition budget-neutrality adjustment required under section 1881(b)(14)(A)(ii) of the Act applies in each year of the transition, we must update the transition budget-neutrality adjustment for CY 2012, the second year of the transition. As discussed in detail below, and in accordance with section 1881(b)(14)(E)(iii) of the Act, that requires an adjustment to be made to payments so that total payments under the transition equal total payment amounts without such a transition, that results in the reduction of all payments to ESRD facilities in CY 2012 by a factor that is equal to 1 minus the ratio of estimated payments under the ESRD PPS if there were no transition to the total estimated payments under the transition. In this proposed rule, we are not proposing for CY 2012 to change the methodology used to calculate the second part of the budget-neutrality adjustment. We are, however, proposing to use more updated data. For CY 2012, we started with 2009 utilization data from claims, as 2009 is the latest complete year of claims data available. We updated the CY 2009 utilization data to CY 2011 and CY 2012 payments by using the price growth factors for CY 2011 and CY 2012, as discussed in the impact analysis in section VII of this proposed rule. We then took the estimated payments under the full CY 2012 ESRD PPS and the blended payments under the transition based on actual facility election data and compared these estimated payments to the total estimated payments in CY 2012 as if all facilities had elected to receive payment under the ESRD PPS. We then calculated the transition budget-neutrality factor to be 1 minus the ratio of estimated payments under the ESRD PPS if there were no transition to the total estimated payments under the transition, which results in 0 percent. Therefore, for CY 2012, we are proposing a 0 percent reduction to all payments made to ESRD facilities (that is, the 0 percent adjustment would be applied to both the blended payments made under the transition and payments made under the 100 percent ESRD PPS) for renal dialysis items and services furnished January 1, 2012 through December 31, 2012. We solicit comments on the proposed second part of CY 2012 transition budget-neutrality adjustment. 5. Proposed Low-Volume Facility Provisions In the CY 2011 ESRD PPS final rule, we established a low-volume payment adjustment as required by section 1881(b)(14)(D)(iii) of the Act, that “reflects the extent to which costs incurred by low-volume facilities (as defined by the Secretary) in furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such services, and for payment for renal dialysis services furnished on or after January 1, 2011, and before January 1, 2014, such payment adjustment shall not be less than 10 percent” (75 FR 49117). We explained in the CY 2011 ESRD PPS final rule (75 FR 49120) that we analyzed the effect of facility size on cost by analyzing the total treatment counts from ESRD facility cost reports for 2006, 2007, and 2008. We used all treatments including non-Medicare treatments from the cost reports because we believe that inclusion of all treatments regardless of payer type represents the true volume of treatments that an ESRD facility furnishes (75 FR 49122). Because the analysis included data that spanned a 3-year period, we defined a low-volume ESRD facility as a facility that is able to maintain its low-volume status each year of the 3-year period because we believed that this timeframe provided us with a sufficient span of time to view consistency in business operations through the data (75 FR 49123). Our analysis showed that when compared to larger facilities, facilities that would be eligible for the low-volume adjustment are more likely to be located in a rural area, less likely to be part of a large dialysis organization (LDO), more likely to be hospital-based, likely to have a somewhat higher percentage of Medicare patients, more likely to be a pediatric facility, more likely to have previously received an isolated essential facility composite rate payment exception, and more likely to concentrate on home dialysis (75 FR 49120). Under 42 CFR § 413.232(b), a low-volume facility is as an ESRD facility that: (1) Furnished less than 4,000 dialysis treatments in each of the 3 years preceding the payment year and (2) has not opened, closed, or received a new provider number due to a change in ownership during the 3 years preceding the payment year. Under § 413.232(c), for purposes of determining the number of treatments furnished by the ESRD facility, the number of treatments shall be equal to the aggregate number of treatments furnished by the other ESRD facilities that are both under common ownership, and 25 road miles or less from the ESRD facility in question. This geographic proximity criterion is only applicable to ESRD facilities that are Medicare certified on or after January 1, 2011. Section 413.232(f) requires an ESRD facility to provide an attestation statement to their respective fiscal intermediary medicare administrative contractor (FI/MAC) that the facility has met all the criteria in order to receive the low-volume adjustment. We note that furnishing 4,000 treatments in a year equates to approximately 25 patients per year receiving three dialysis treatments a week (or hemo-equivalent treatments). The regulation at § 413.232 provides the criteria that an ESRD facility must meet to be eligible for the low-volume adjustment and uses the term “payment year.” Although we believe the meaning of this term is clear, in response to questions that we received subsequent to the publication of the CY 2011 ESRD PPS final rule demonstrating confusion between the payment year and eligibility year, we are clarifying that the term “payment year” is the period of time that we use for determining payment to ESRD facilities, which is a calendar year. We are also clarifying that the eligibility years means the 3 years preceding the payment year and that the eligibility years are based on cost reporting years. We are making this clarification to ensure that ESRD facilities and their respective FI/MACs understand the distinction between eligibility (which is based on cost reporting years) and the payment year (when ESRD facilities can begin to receive the low-volume payment adjustment). In this proposed rule, we also are proposing to establish the process, for CY 2012 and each year thereafter that an ESRD facility would be required to follow when submitting its attestation to notify its FI/MAC that it is eligible for the low-volume payment adjustment. The attestation is required because: (1) The ESRD facility's cost reporting periods vary and may not be based on the calendar year; and (2) the cost reports are due 5 months after the close of the cost reporting period (that is, there is a lag in the cost reporting submission). Thus, the FI/MACS may not have the cost report for the third year to determine eligibility and will need to rely on the attestation for that year. If an ESRD facility believes that it is eligible for the low-volume adjustment, we are proposing that the ESRD facility would be required to submit an attestation to its respective FI/MAC no later than November 1st of each year. This timeframe provides 60 days for a FI/MAC to verify the cost report information and update the systems. For example, for payment year 2012 (January 1, 2012 through December 31, 2012), ESRD facilities that believe they are eligible for the low-volume adjustment must submit an attestation to their respective FI/MAC no later than November 1, 2011 (with regard to its low-volume status based on services furnished in its cost reporting period ending in 2009, 2010, and 2011). ESRD facilities that are receiving the low-volume adjustment for the CY 2011 payment year should submit another attestation to their respective FI/MAC no later than November 1, 2011, to qualify for the low-volume adjustment for the CY 2012 payment year. Thus, for an attestation applicable to the 2012 payment year, the ESRD facility would attest that it meets the low-volume facility requirements based on its cost reporting periods ending in 2009, 2010, and 2011. The ESRD facility would continue to attest that it is a low-volume facility for each subsequent payment year it believes it is eligible for the low-volume facility adjustment. As we indicated above, we propose that attestations be submitted to theFI/MAC no later than November 1 preceding each payment year to allow the FI/MACs time to review the attestation and ensure that accurate payment is made for renal dialysis services provided on or after January 1. We suggest that ESRD facilities submitting a low-volume attestation verify that the attestation has been received by the appropriate FI/MAC prior to the November 1 deadline. In the event that a dialysis organization submits the low-volume attestation on behalf of its ESRD facilities, the dialysis organization will be required to identify each ESRD facility by name and provider number and submit them by the November 1 deadline. If the FI/MAC does not receive an ESRD facility's attestation stating that the ESRD facility is eligible for the low-volume adjustment on or before November 1 prior to the payment year, the ESRD facility would not receive the low-volume adjustment for that payment year. In this proposed rule, with regard to the deadline for attestation submission, we are proposing to amend the regulation text at § 413.232(f) to require an ESRD facility to submit its attestation no later than November 1. This requirement would provide FI/MACs time to review and verify ESRD facilities low-volume eligibility. We are soliciting comment on the proposed regulation text changes at § 413.232(f). Under § 413.232(b)(1) and (b)(2), a low-volume facility is defined as an ESRD facility that “furnished less than 4,000 treatments in each of the 3 years preceding the payment year” and “has not opened, closed, or had a change in ownership in the 3 years preceding the payment year” (emphasis added). In response to comments we received subsequent to the CY 2011 ESRD PPS final rule, we are clarifying the meaning of the term “years” in this regulation, with regard to the treatment threshold that determines low-volume eligibility, and how it relates to the “payment year.” We are providing this additional clarification to emphasize because there are ESRD facilities that do not have cost reporting periods that fall on a calendar year period (January 1 through December 31), and there may be confusion about how the eligibility year relates to the payment year. Specifically, we emphasize again that for the purpose of low-volume eligibility, the term “years” refers to cost reporting periods because low-volume eligibility is determined based on the ESRD facility's cost report. For example, an ESRD facility's cost reporting period could span a fiscal year rather than a calendar year. However, the low-volume payment adjustment is paid according to the ESRD PPS payment year (that is, the calendar year). Accordingly, FI/MACs are reviewing the ESRD facility's cost reporting periods ending in the 3 years preceding the payment year for low-volume eligibility, and those cost reporting periods may not necessarily be calendar years (January 1 to December 31). We believe that it is also important to reiterate that the ESRD facility's cost reports for the cost reporting periods ending in the 3 years immediately preceding the payment year, as discussed above, must report costs for 12-consecutive months. For example, an FI/MAC would not consider a short period cost report (that is, reporting costs for less than 12 months which may occur for new facilities or facilities under new ownership), for low-volume eligibility. Specifically, when an ESRD facility is assessing its eligibility for the low-volume adjustment and preparing its attestation, the ESRD facility would look at its 12-consecutive month cost reports for the cost reporting periods that end in the 3 years immediately preceding the payment year. We acknowledge that the FI/MAC may not have a final-settled cost report for all 3 years needed to complete the ESRD facility's verification. For example, using a June 30th cost reporting period year end, for purposes of determining low-volume eligibility, the ESRD facility would need to have met the low-volume criteria for their cost reporting periods ending on June 30, 2009, June 30, 2010, and June 30, 2011, to begin to receive the low-volume adjustment January 1, 2012. The FI/MAC should have the ESRD facility's cost reports for 2009 and 2010 and both years should be either final-settled or as-filed (that is, submitted to and accepted by the FI/MAC) and such cost reports should be for 12-consecutive months in each of the 2 years. The facility would be required to submit an attestation for all 3 years, including the third eligibility year because the cost report for that year is not available and no cost report has been submitted. Therefore, in this rule, we propose to amend the regulations text at § 413.232(b)(1) and (b)(2) to clarify the type of year that is used for determining low-volume eligibility. This change in the regulations text also provides clarification to the ESRD facilities and the FI/MACs that in the absence of an ESRD facility's final settled cost report, an FI/MAC can review the ESRD facility's as-filed cost report when determining if an ESRD facility meets the low-volume criteria. We believe that it is appropriate for the FI/MAC to determine eligibility based upon an as-filed cost report because the number of total treatments should not change between submission of the as-filed cost report and the final settled cost report. We are soliciting comment on the proposed changes at § 413.232(b)(1) and (b)(2). Continuing with the example discussed above in which we address an ESRD facility with a cost reporting year that ends on June 30, the ESRD facility attests to its FI/MAC that it met the low-volume criteria for its cost reporting periods ending in 2009 and 2010 and that it expects to meet the low-volume criteria for its cost reporting period ending in 2011. The ESRD facility's cost report for its cost reporting period ending in 2011 is the third year that is needed to meet the criteria specified at § 413.232 for purposes of the 2012 payment year. If the FI/MAC receives the ESRD facility's cost report for 2011 and finds that the ESRD facility did not meet the low-volume criteria in its cost reporting period ending on June 30, 2011 (that is, the third eligibility year), the FI/MAC will discontinue application of the low-volume adjustment to the facility's payments for CY 2012 because the facility was not eligible for the adjustment. If the ESRD facility does not remain low-volume for each of the 3 years (12-consecutive month cost reporting periods) immediately preceding the payment year, the ESRD facility will not be eligible for the low-volume adjustment until it can demonstrate again that for 3 years (12-consecutive month cost reporting periods) it met the low-volume criteria. 6. Proposed Update to the Drug Add-On to the Composite Rate Portion of the ESRD Blended Payment Rate Section 1881(b)(14)(E)(i) of the Act requires a four-year transition under the ESRD PPS. Under § 413.239, ESRD facilities were permitted to make a one-time election by November 1, 2011, to be excluded from the transition and receive full payment under the ESRD PPS. Under § 413.239, in CY 2012, ESRD facilities that elected to receive payment under the transition will be paid a blended amount that will consist of 50 percent of the basic case-mix adjusted composite payment system and 50 percent on the ESRD PPS payment. Thus, we must continue to update the composite rate portion of the blended payment amount during the ESRD PPS 4-year transition (CYs 2011 through 2013), which includes an update to the drug add-on, the application of the wage index, and an update to the composite rate portion of the ESRD PPS blended payment amount for the second year (CY 2012) of the ESRD PPS. The proposed wage index and composite rate portion of the ESRD PPS blended payment are discussed in sections I.C.7 and I.C.1.a of this proposed rule. As required under section 1881(b)(12) of the Act, the basic case-mix adjusted composite payment system includes services comprising the composite rate and an add-on to the composite rate component to account for the difference between pre-MMA payments for separately billed drugs and the revised drug pricing specified in the statute. For the drug add-on for CY 2012, in this proposed rule, we are not proposing any changes to the methodology but are merely updating the data used in computing the drug add-on as described below. a. Estimating Growth in Expenditures for Drugs and Biologicals in CY 2012 Section 1881(b)(12)(F) of the Act specifies that the drug add-on increase must reflect “the estimated growth in expenditures for drugs and biologicals (including erythropoietin) that are separately billable * * *”. By referring to “expenditures”, we believe the statute contemplates that the update would account for both increases in drug prices, as well as increases in utilization of those drugs. In order to account for increases in drug prices and utilization, since we now have 5 years of drug expenditure data based on ASP pricing, for CY 2012, we continue estimating growth in drug expenditures based on the trends in available data. We then removed growth in enrollment for the same time period from the expenditure growth so that the residual reflects the per patient expenditure growth (which includes price and utilization combined). To estimate drug expenditure growth using trend analysis, for CY 2012, we looked at the average annual growth in total drug expenditures between 2006 and 2010. First, we estimated the total drug expenditures for all ESRD facilities in CY 2010. We used the final CY 2006 through CY 2009 ESRD claims data and the latest available CY 2010 ESRD facility claims, updated through December 31, 2010 (that is, claims with dates of service from January 1 through December 31, 2010, that were received, processed, paid, and passed to the National Claims History File as of December 31, 2010). For the CY 2012 PPS final rule, we intend to use additional updated CY 2010 claims with dates of service for the same timeframe. This updated CY 2010 data file will include claims received, processed, paid, and passed to the National Claims History File as of June 30, 2011. While the CY 2010 claims file used in this proposed rule is the most current available, we recognize that it does not reflect a complete year, as claims with dates of service towards the end of the year have not all been processed. To more accurately estimate the update to the drug add-on, completed aggregate drug expenditures are required. Next, for CY 2012, based on an analysis of the 2009 claims data, we inflated the CY 2010 drug expenditures to estimate the June 30, 2011 update of the 2010 claims file. We used the relationship between the December 2009 and the June 2010 versions of 2009 claims to estimate the more complete 2010 claims that will be available in June 2011 and applied that ratio to the 2010 claims data from the December 2010 claims file. The net adjustment to the CY 2010 claims data is an increase of 11.62 percent to the 2010 expenditure data. This adjustment allows us to more accurately compare the 2009 and 2010 drug expenditure data to estimate per patient growth. Using the completed full-year 2010 drug expenditure figure, we calculated the average annual change in drug expenditures from 2006 through 2010. This average annual change showed an increase of 1.4 percent in drug expenditures from 2006 through 2010. We used this 1.4 percent increase to project drug expenditures for both 2011 and 2012. b. Estimating Per Patient Growth Once we had the projected growth in drug expenditures from 2011 to 2012, we calculated per patient growth between CYs 2011 and 2012 by removing the estimated growth in enrollment data between CY 2011 and CY 2012. We estimate a 4.2 percent estimated growth in enrollment between CY 2011 and CY 2012. To obtain the per-patient estimated growth in expenditures, we divided the total drug expenditure change between 2011 and 2012 (1.014) by enrollment growth of 4.2 percent (1.042) for the same timeframe. The result is a per-patient growth factor equal to 0.973 (1.014/1.042 = 0.973). Thus, we are projecting a 2.7 percent decrease (2.7% = .027 = 0.973 − 1) in per patient growth in drug expenditures between 2011 and 2012. c. Applying the Proposed Growth Update to the Drug Add-On Adjustment In the CY 2006 PFS final rule (71 FR 69683), we applied the projected growth update percentage to the total amount of drug add-on dollars established for CY 2005 to establish a dollar amount for the CY 2006 growth update. In addition, we projected the growth in dialysis treatments for CY 2006 based on the projected growth in ESRD enrollment. We divided the projected total dollar amount of the CY 2006 growth by the projected growth in total dialysis treatments to develop the per treatment growth update amount. This growth update amount, combined with the CY 2005 per treatment drug add-on amount, resulted in an average drug add-on amount per treatment of $18.88 (or a 14.5 percent adjustment to the composite rate) for CY 2006. In the CY 2007 PFS final rule with comment period (71 FR 69684), as a result of public comments, we revised our update methodology by applying the growth update to the per treatment drug add-on amount. That is, for CY 2007, we applied the growth update factor of 4.03 percent to the $18.88 per treatment drug add-on amount resulting in an updated per treatment drug add-on amount of $19.64 per treatment (71 FR 69684). For CY 2008, the per treatment drug add-on amount was updated to $20.33. In the CY 2009, 2010 and 2011 PFS final rule with comment period (73 FR 69755 through 69757, 74 FR 61923, and 75 FR 73485, respectively), we applied a zero update to the per treatment drug add-on amount resulting in a per treatment drug add-on amount of $20.33. As discussed in detail below, for CY 2012, we are again proposing no update to the per treatment drug add-on amount of $20.33 established in CY 2008. d. Proposed Update to the Drug Add-On Adjustment for CY 2012 As discussed above, we estimate a 1.4 percent increase in drug expenditures between CY 2011 and CY 2012. Combining this increase with a 4.2 percent increase in enrollment, as described above, we are projecting a 2.7 percent decrease in per patient growth of drug expenditures between CY 2011 and CY 2012. Therefore, we are projecting that the combined growth in per patient utilization and pricing for CY 2012 would result in a decrease to the drug add-on equal to 0.4 percentage points. This figure is derived by applying the 2.7 percent decrease to the CY 2011 drug add-on of $20.33. This would result in a revised drug add-on of $19.78, which is 14.0 percent of the proposed CY 2012 base composite rate of $141.52. If we were to apply no decrease to the drug add-on of $20.33, this would result in 14.4 percent drug add-on. However, similar to last year and as indicated above, we are proposing a zero update to the drug add-on adjustment. We believe this approach is consistent with the language under section 1881(b)(12)(F) of the Act which states in part that “the Secretary shall annually increase” the drug add-on amount based on the growth in expenditures for separately billed ESRD drugs. Our understanding of the statute contemplates “annually increase” to mean a positive or zero update to the drug add-on. Therefore, we propose to apply a zero update and maintain the $20.33 per treatment drug add-on amount for CY 2012. We are seeking comment on our proposed zero update to the drug add-on. The current $20.33 per treatment drug add-on reflected a 14.7 percent drug add-on adjustment to the composite rate in effect for CY 2011. As discussed in section I.c.2.b of this proposed rule, section 1881(b)(14)(F) of the Act requires that an ESRDB market basket minus productivity adjustment be used to update the composite rate portion of the ESRD PPS payment (forecast of 1.8 percent in 2012 effective January 1, 2012), resulting in a decrease to the CY 2012 drug add-on adjustment from 14.7 to 14.4 percent to maintain the drug add-on at $20.33. This decrease occurs because the drug add-on adjustment is a percentage of the composite rate. Since the proposed CY 2012 composite rate is higher than the CY 2011 composite rate, and since the drug add-on remains at $20.33, the percentage decreases. Therefore, we are proposing a drug add-on adjustment to the composite rate for CY 2012 of 14.4 percent. 7. Updates to the Wage Index Values and Wage Index Floor for the Composite Portion of the ESRD PPS Blended Payment and Under the ESRD PPS Payment Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD PPS may include such other payment adjustments as the Secretary determines appropriate, such as a payment adjustment by a geographic wage index, such as in the index referred to in section 1881(b)(12)(D), as the Secretary determines appropriate. In the CY 2011 ESRD PPS final rule (75 FR 49117 through 49117) and CY 2011 PFS final rule (75 FR 73486), we finalized the wage index policy under the ESRD PPS. Specifically, under the ESRD PPS, we have adopted the same method and source of wage index values used previously for the basic case-mix adjusted composite payment system. We use Office of Management and Budget's (OMB's) Core Based Statistical Area (CBSA)-based geographic area designations to define urban/rural areas and corresponding wage index values. In addition, the wage index values used under the ESRD PPS are the inpatient prospective payment system (IPPS) wage index values calculated without regard to geographic reclassifications authorized under sections 1881(d)(8) and (d)(10) of the Act, and utilize pre-floor hospital data that are unadjusted for occupational case mix. The CBSA-based geographic area designations are described in OMB Bulletin 03-04, originally issued June 6, 2003, and available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html . In addition, OMB has published subsequent bulletins regarding CBSA changes, including changes in CBSA numbers and titles. We wish to point out that this and all subsequent ESRD rules and notices are considered to incorporate the CBSA changes published in the most recent OMB bulletin that applies to the hospital wage index used to determine the current ESRD wage index. The OMB bulletins may be accessed online at http://www.whitehouse.gov/omb/bulletins/index.html. Under the ESRD PPS, we have adopted a wage index floor during the transition, though as we previously noted, we intend to gradually reduce the ESRD wage index floor (75 FR 49117, 75 FR 73486). We also use the labor-related share for both the ESRD PPS and the composite rate portion of the blend, as measured by the ESRDB market basket (see section I.c.2.b of this proposed rule). Finally, the wage data used to construct the wage index under the ESRD PPS is updated annually, based on the most current data available and based on OMB's rural definitions and corresponding wage index values. With regard to the transition, as we noted in the CY 2011 PFS final rule (75 FR 40163), because ESRD facilities could elect to receive a blended payment during the transition, we would continue to update the composite rate portion of the ESRD PPS blended payment, including adjusting payments for geographic differences in area wage levels, as noted above. We also discussed the application of the wage index budget-neutrality adjustment factor to the area wage index values for the composite rate portion of the ESRD PPS blended payment. In this proposed rule, we are not proposing any changes to the methodology for the wage index used to adjust the composite rate portion of the ESRD PPS blended payment. However, we are proposing to update the wage index values and the wage index budget-neutrality adjustment factor for CY 2012 for the composite rate portion of the blended payment under the transition. In addition, in this proposed rule, we are not proposing to make any changes to the methodology for updating the CY 2012 wage index under the ESRD PPS (that is, for full ESRD PPS payments and the ESRD PPS portion of the blended payment under the transition). However, we are proposing a wage index budget-neutrality adjustment factor to be applied in CY 2012 and in subsequent years for the ESRD PPS which is discussed in detail below. a. Proposed Reduction to the ESRD Wage Index Floor In the CY 2011 ESRD PPS final rule, we stated our intention to continue to reassess the need for a wage index floor (75 FR 49117). The wage index floor for CY 2011 is 0.600. For CY 2012 and CY 2013, we propose to continue to reduce the wage index floor by 0.05 for each of the remaining years of the transition (that is, for CY 2012, the wage index value would be reduced from 0.600 to 0.550, and further reduced to 0.500 for CY 2013). The ESRD wage index floor value of 0.550 would be applied to areas that are below the proposed wage index floor of 0.550. Beginning January 1, 2014, we propose that the wage index floor would no longer be applied because the wage index floor would be equal to or lower than areas with low wage index values. We continue to believe that a gradual reduction in the floor is needed to support continuing patient access to dialysis in areas that have low wage index values, especially in areas where the wage index values are below the current wage index floor—specifically, ESRD facilities located in Puerto Rico. b. Proposed Policies for Areas With No Hospital Data In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the same methodology we have used for areas with no hospital data in the past, that is, we compute the average wage index value of all urban areas within the State and use that value as the wage index. In this proposed rule, we are not proposing to change the methodology that we have used in the past to compute a wage index value for areas with no hospital data. We are for CY 2012 and for future years, proposing to continue to use the methodology we adopted for identifying the small number of ESRD facilities in both urban and rural geographic areas where there are no hospital wage data from which to calculate ESRD wage index values that we have used for CYs 2006 through 2010 under the composite payment system and for CY 2011 and which we described in the ESRD PPS final rule (75 FR 49116). Thus far, we note the following affected areas: Rural Puerto Rico, Yuba, CA (CBSA 49700) and the urban area Hinesville-Fort Stewart, GA (CBSA 25980). For rural Puerto Rico, because all wage index values in Puerto Rico are below the wage index floor, we previously used the wage index floor as the wage index value for Puerto Rico. For CY 2012 and CY 2013, we propose to continue to use the methodology we have previously used for computing the wage index for Puerto Rico, that is, use the ESRD wage index floor. c. Proposed Wage Index Budget-Neutrality Adjustment As noted above, we have broad discretion under section 1881(b)(14)(D)(iv)(II) of the Act to develop a geographic wage index. In addition, that section cites the wage index under the basic case-mix adjustment payment system as an example. We have previously interpreted the statute for the prior basic case-mix adjusted composite payment system (section 1881(b)(12)(D) of the Act) as requiring that the geographic adjustment be made in a budget-neutral manner. In CY 2011, we did not apply a wage index budget-neutrality adjustment factor under the ESRD PPS because budget-neutrality was achieved through the overall 98 percent budget-neutrality requirement in section 1881(b)(14)(A)(ii) of the Act. Given our authority to develop a wage index under section 1881(b)(14)(D)(iv)(II) of the Act, as well as the authority to use the geographic index under section 1881(b)(12)(D) of the Act (for purposes of the ESRD PPS geographic payment adjustment under section 1881(b)(14)(D)(iv)(II) of the Act), we propose to apply the wage index in a budget-neutral manner under the ESRD PPS using a wage budget-neutrality adjustment factor. However, as we discuss in greater detail below, with regard to the application of the wage index budget-neutrality adjustment factor, we are proposing that under the ESRD PPS, we would apply a wage index budget-neutrality adjustment factor to the ESRD PPS base rate. Under the basic case-mix adjustment composite payment system, we began applying the wage index budget-neutrality adjustment factor in CY 2006 (70 FR 70171). During the transition, we are not proposing to change the application of the wage index budget-neutrality adjustment to the wage index of the composite rate portion of the ESRD PPS blended payment, because we do not believe that we should make changes to the methodology for updating the composite rate portion of the ESRD PPS blended payment as the composite rate portion of the blended payment will no longer apply after the transition ends in CY 2014. We believe that continuing to apply the budget-neutrality adjustment to the wage index for the composite rate portion of the ESRD PPS blended payment allows ESRD facilities going through the transition to continue to use a methodology that they are accustomed to and one that may have been the basis for facilities electing to receive a blended payment during the transition. However, under the ESRD PPS, we believe by applying the wage index budget-neutrality adjustment factor to the ESRD PPS base rate, we would be consistent with the application of the wage index budget-neutrality adjustment factor in other prospective payment systems. We also believe that applying the wage index budget-neutrality adjustment factor to the ESRD PPS base rate is simpler and more straightforward in application and calculation. Applying the wage index budget-neutrality adjustment factor to the ESRD PPS base rate produces results that are not measurably different from applying the adjustment factor to the wage index, as is done for the composite rate portion of the blended payment during the transition. We are seeking comment on our proposal to apply the wage index budget-neutrality adjustment factor to the ESRD PPS base rate for purposes of the ESRD PPS payments and the ESRD PPS component of the ESRD PPS payments during the transition. As discussed above, we are not proposing any changes to the wage index budget-neutrality adjustment factor application for the composite rate portion of the ESRD PPS payment. We would continue to apply the wage-index budget-neutrality adjustment factor directly to the ESRD wage index values for the composite rate portion of the ESRD PPS blended payment for CY 2012 and CY 2013. Because the ESRD wage index is only applied to the labor-related portion of the composite rate, we computed the wage index budget-neutrality adjustment factor based on that portion. That is, the labor portion of the composite rate portion of the ESRD PPS blended payment of 53.711 percent. This labor-related share was developed from the labor-related components of the 1997 ESRD composite rate market basket that was finalized in the 2005 PFS final rule (70 FR 70168). As we discussed above, in CY 2012, we are proposing to apply the wage index budget-neutrality adjustment factor to the ESRD PPS base rate. That is, the wage index budget-neutrality adjustment factor, which includes 41.737 percent labor portion of the ESRD PPS payment rate. To compute the proposed CY 2012 wage index budget-neutrality adjustment factors, we used the fiscal year (FY) 2012 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data to compute the wage index values, 2010 outpatient claims (paid and processed as of December 31, 2010), and geographic location information for each facility which may be found through Dialysis Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2012 hospital wage index data for each urban and rural locale by CBSA may also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp . The wage index data are located in the section entitled, ”FY 2012 Proposed Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by CBSA.” For this proposed rule, using treatment counts from the 2009 claims and facility-specific CY 2011 payment rates, we computed the estimated total dollar amount each ESRD provider would have received in CY 2011. The total of these payments became the target amount of expenditures for all ESRD facilities for CY 2012. Next, we computed the estimated dollar amount that would have been paid for the same ESRD facilities using the proposed ESRD wage index for CY 2012. The total of these payments becomes the new CY 2012 amount of wage-adjusted payment rate expenditures for all ESRD facilities. After comparing these two dollar amounts (target amount divided by the new CY 2012 amount), we calculated two wage index budget-neutrality adjustment factors that when multiplied by the applicable CY 2012 estimated payments would result in aggregate payments to ESRD facilities that would remain budget-neutral when compared against the target amount of payment rate expenditures. One factor would be applied to the ESRD PPS base rate. The second factor would be applied to the wage index value for the composite rate portion of the ESRD PPS payment. Therefore, in this proposed rule, for CY 2012, we are proposing a wage index budget-neutrality adjustment factor for the composite portion of the ESRD PPS blended payment of 1.002096, which would be applied directly to the ESRD wage index values. For the ESRD PPS (that is, for the full ESRD PPS payments and the ESRD PPS portion of the blended payments during the transition), we are proposing to apply a wage index budget-neutrality adjustment factor of 1.001126 to the ESRD PPS base rate. Because we are proposing to apply the wage index budget-neutrality adjustment factor to the wage index values to ensure budget-neutrality under the composite rate portion of the ESRD PPS blended payment, we also applied the wage index budget-neutrality adjustment factor to the wage index floor of 0.550 which results in an adjusted wage index floor of 0.551 (0.550 × 1.002096) for CY 2012. d. ESRD PPS Wage Index Tables The CY 2012 ESRD proposed wage index tables, referred to as Addendum A (ESRD facilities located in urban areas), and Addendum B (ESRD facilities located in rural areas) are posted on the CMS Web site at: http://www.cms.gov/ESRDPayment/PAY/list.asp. The wage index tables list two separate columns of wage index values. One column represents the wage index values for the composite portion of the blended payment to which the wage index budget-neutrality adjustment factor has been applied. Another column lists the wage index values for the ESRD PPS, which does not reflect the application of the wage index budget-neutrality adjustment factor, because as we discussed above, we are proposing to apply the wage index budget-neutrality adjustment factor to the ESRD PPS base rate. 8. Drugs a. Vancomycin In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49052), we stated that antibiotics used for the treatment of venous access infections and peritonitis, are renal dialysis services under the ESRD PPS. Payments for anti-infective drugs in injectable forms (covered under Part B) and oral or other forms of administration (formerly covered under Part D) used in the treatment of ESRD, were included in computing the final ESRD PPS base rate and, therefore, would not be separately paid under the ESRD PPS. We also noted that the oral versions of Vancomycin are not used for ESRD-related conditions and, therefore, would not be considered a renal dialysis service. We further stated that any anti-infective drugs or biologicals used for the treatment ESRD-related conditions would be considered a renal dialysis service and, therefore, not eligible for separate payment. This policy also applies to any drug or biological that may be developed in the future. Since the publication of the CY 2011 ESRD PPS final rule, we received numerous comments indicating that Vancomycin is indicated for both ESRD and non-ESRD conditions, such as skin infections. After consultation with our medical experts, we concur with our commenters. Therefore, in this proposed rule, we are proposing to eliminate the restriction on Vancomycin to allow ESRD facilities to receive separate payment by placing the AY modifier on the claim for Vancomycin when furnished to treat non-ESRD related conditions. In accordance with ICD-9 guidelines as described in the ESRD PPS final rule (75 FR 49107), the ESRD facility would also be required to indicate the diagnosis code for which the Vancomycin is indicated. We note that treatment of any skin infection that is related to renal dialysis access management would be considered a renal dialysis service and would continue to be paid under the ESRD PPS, and no separate payment would be made. We are soliciting public comments on our proposal to eliminate the restriction on Vancomycin to allow ESRD facilities to receive separate payment for these drugs when furnished to treat non-ESRD related conditions. b. Drug Overfill In the CY 2011 PFS final rule (75 FR 73466), we explained the methodology for Part B payment for drugs and biologicals which includes intentional overfill, and that the Medicare average sales price (ASP) payment limit is based on the amount of drug conspicuously indicated on the labeling approved by the Food and Drug Administration (FDA). We indicated that we have become aware of situations where manufacturers intentionally included a small amount of overfill in drug containers, and that this overfill is provided at no extra charge to the provider. We also noted that the intent of the intentional overfill was to compensate for product loss during the proper preparation and administration of a drug. We explained that ASP calculations are based on data reported by manufacturers, including “volume per item”. Therefore, providers may only bill for the amount of drug product actually purchased and the cost that the product represents (75 FR 73467). This Part B provision applies under the ESRD PPS. ESRD facilities receiving blended payments under the ESRD PPS transition will receive payments based on ASP for separately billable ESRD drugs and biologicals for the composite rate portion of the blend. In addition, under the ESRD PPS outlier policy, the ESRD-related drugs that ESRD facilities report on claims are priced for the outlier policy based on ASP. Therefore, ESRD facilities may only report units and charges for drugs or biologicals actually purchased. 9. Proposed Revisions to Patient-Level Adjustment for Body Surface Area (BSA) Section 1881(b)(14)(D)(i)of the Act requires that the bundled ESRD PPS must include a payment adjustment based on case-mix that may take into account patient weight, body mass index (BMI), body surface area (BSA), and other appropriate factors. In the CY 2077 ESRD PPS final rule, we explained that we evaluated height and weight because the combination of these two characteristics allows us to analyze two measures of body size: BSA and BMI. We further explained that both body size measures are strong predictors of variation in payment for ESRD patients (75 FR 49089 through 49090). As a result, in developing the ESRD PPS, we established a case-mix patient level adjustment for BSA that would be applied to each 0.1 m2 change in BSA compared to the national average (1.02). In this proposed rule, we are proposing to make one change related to the use of the national BSA average value used in the calculation of the BSA adjustment applied to the composite rate portion of the blended payment for those dialysis facilities that undergo the transition. We believe this change is necessary because we believe that the BSA national average used to compute payment under the composite portion of the ESRD PPS blended rate and under the ESRD PPS should be both the most recent and consistent measurement available. For CY 2011, the BSA adjustment we calculated for the composite rate portion of the ESRD PPS blended rate used the BSA national average of 1.84, which reflected the average among Medicare dialysis patients in 2002. However, the BSA national average we used for computing the BSA under the ESRD PPS was 1.87, which reflects the average among Medicare dialysis patients in 2007. We did not realize that we had used 2 different national averages in CY 2011, nor was it brought to our attention during the comment period. We are proposing that for CY 2012 and in subsequent years, to use one national average for computing the BSA under the composite portion of the blended payment during the transition and under the ESRD PPS. In the CY 2004 PFS final rule (69 FR 66329), we explained that the BSA factor was defined as an exponent equal to the value of the patient's BSA minus the reference. If, for example, a beneficiary with a BSA of 1.94 using the CY 2011 national average of 1.84 under the composite rate would yield a BSA adjustment factor of 1.0370. For the same patient using the national average used for the CY 2011 ESRD PPS BSA computation using 1.87 would yield a BSA adjustment factor of 1.0258, or a ratio or proportional difference of 1.0258 divided by 1.0370 equals .9892 difference the between the two BSA adjustment factors. This corresponds to a reduction of 1.08 percent (1-0.9892 = 0.0108) in the composite rate payment for ages 18 and older by increasing the BSA reference value from 1.84 to 1.87. The impact on facility payments of increasing the composite rate BSA reference value from 1.84 to 1.87 is shown in Table 3 for each year from 2011 to 2014. These results apply only to dialysis facilities that go through the transition. The impact on facility payments would have been greatest in 2011, where the blended payment during the transition period was weighted more heavily towards the composite rate/separately billable system, and declines through 2014 when there is no impact on facility payments under a fully implemented expanded PPS. The impact on the average payment in 2012 was calculated as −0.0108 * 0.9979 * 0.6498 * 0.50 = −0.350 percent. That is, the average facility payment for those facilities electing the ESRD PPS transition would be reduced by approximately 0.35 percent in 2012. We derived the −0.350 percent reduction from the following factors: the estimated reduction in BSA multipliers due to the increase in the BSA reference value (−0.0108); the proportion of patients 18 and older (0.9979); the percentage of composite rate and separately billable payments that are composite rate payments (0.6498); and the percentage of composite rate payments in CY 2012 (0.50). This reduction only applies to those ESRD facilities that elected to receive blended payments during the transition. EP08JY11.000 Therefore, we are proposing for CY 2012, to use the latest national average (that is, 1.87) as the reference point for the computation of the BSA adjustment for both the composite rate portion of the ESRD PPS blended payment and for the ESRD PPS. We are also proposing that we will review the BSAs on CY 2012 claims (and every 5 years thereafter) to determine if any adjustments to the national average will be required in the future. We are seeking comments on the proposal to use one national BSA average to compute the BSA under the composite portion of the ESRD PPS blended payment and under the ESRD PPS. We are also seeking comment on the proposal to review CY 2012 ESRD claims and every 5 years thereafter, to determine if a change to the BSA national average is warranted. 10. Proposed Revisions to the Outlier Policy Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS include a payment adjustment for high cost outliers due to unusual variations in the type or amount of medically necessary care, including variability in the amount of erythropoiesis stimulating agents (ESAs) necessary for anemia management. In the CY 2011 ESRD PPS final rule, 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 on the monthly claim (75 FR 49142). Medicare regulation § 413.237(a)(1) provides that ESRD outlier services include: (1) ESRD-related drugs and biologicals that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (2) ESRD-related laboratory tests that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (3) medical/surgical supplies, including syringes used to administer ESRD-related drugs, that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; and (4) renal dialysis service drugs that were or would have been, prior to January 1, 2011, covered under Medicare Part D, excluding ESRD-related oral-only drugs. Drugs, laboratory tests, and medical/surgical supplies that we would recognize as outlier services were specified in Attachment 3 of Change Request 7064, issued August 20, 2010 under Transmittal 2033. Transmittal 2033 was rescinded and replaced by Transmittal 2094, dated November 17, 2010. The replacement document involved the (1) Deletion of several drugs; (2) identified drugs that may be eligible for ESRD outlier payment; (3) provided a list of laboratory tests that comprise the AMCC tests; (4) deleted several laboratory tests; and (5) included the latest version of the ESRD PRICER layout file. Transmittal 2094 was subsequently rescinded and was replaced by Transmittal 2134 issued January 14, 2011. That transmittal was issued to correct the subject on the transmittal page and made no other changes. Medicare regulations at § 413.237(a)(2) through (a)(6), and (b) specify the methodology used to calculate outlier payments. An ESRD facility is eligible for an outlier payment if its actual or imputed Medicare Allowable Payment (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) MAP plus the fixed dollar loss amount. In accordance with § 413.237(c) of the regulation, facilities are paid 80 percent of the per treatment amount by which the imputed MAP amount for outlier services (that is, the actual incurred amount) exceeds this threshold. ESRD facilities are eligible to receive outlier payments for treating both adult and pediatric dialysis patients. In the CY 2011 ESRD PPS final rule, using 2007 data, we established the outlier percentage at 1.0 percent of total payments (75 FR 49142 through 49143). We also established the fixed dollar loss amounts that are added to the predicted outlier services MAP amounts. The outlier services MAP amounts and fixed dollar loss amounts are different for adult and pediatric patients due to differences in the utilization of separately billable services among adult and pediatric patients (75 FR 49140). a. Proposed Revisions Related to Outlier ESRD Drugs and Biologicals Attachment 3 of Change Request 7064 issued August 20, 2010 under Transmittal 2033, as modified by Transmittal 2094 issued November 17, 2010 and Transmittal 2134 issued January 14, 2011, specified the former separately billable Part B drugs that are recognized as ESRD-related eligible outlier services. These drugs are classified under the categories of anemia management, antiemetics, anxiolytics, bone and mineral metabolism, cellular management, pain management, and anti-infectives (see Pub. 100-04, Chapter 8, section 60.2.1.1). Attachment 3 also identified the former Part D drugs by National Drug Code (NDC) for the three vitamin D analogues (calcitriol, paracalcitol, and doxercalciferol) and levocarnitine that are recognized as eligible outlier service drugs. We had intended to update both the lists of former Part B drugs and biologicals and former Part D drugs that are outlier services (75 FR 49138). However, we have since concluded that any CMS prepared lists of drugs and biologicals recognized as outlier services may be difficult to keep up-to-date. This is attributed to the lag in the receipt of claims data; changes in ESRD practice patterns; and inadvertent omissions and oversights. Because of the number of Part B drugs and biologicals that may be considered ESRD outlier services, we are proposing to eliminate the issuance of a list of former separately payable Part B drugs and biologicals that would be eligible for outlier payments. Medicare regulations at § 413.237(a)(1)(i) and (iv) specify that any ESRD-related drug or biological furnished by an ESRD facility that was or would have been considered separately billable under Part B or formerly covered under Part D prior to January 1, 2011, is an ESRD outlier service, excluding ESRD-related oral-only drugs. Because the regulation defines eligible outlier service drugs, we believe there is no need for CMS to issue a list of former separately payable Part B ESRD outlier services drugs. In addition, because the list of drugs is derived from paid ESRD claims, it would not be comprehensive, completely represent drugs and biologicals furnished to ESRD patients, accurate, or up-to-date. We note that, consistent with current policy, all composite rate drugs, as defined in the Medicare Benefit Policy Manual, Pub. 100-02, chapter 11, section 30.4.1, would not be eligible for an outlier payment, as these drugs would not have been separately paid under Part B or Part D prior to January 1, 2011, and do not meet the definition for ESRD outlier services. Under current policy, antibiotics furnished in the home are considered to be composite rate drugs and therefore, not eligible for outlier payment. As discussed above, Pub. 100-02, chapter 11, section 30.4.1 lists the drugs covered under the composite rate. The list includes a statement that antibiotics when used at home by a patient to treat an infection of the catheter site or peritonitis associated with peritoneal dialysis are considered composite rate drugs. Because composite rate drugs and their administration (both the staff time and the supplies) are covered under the composite rate, antibiotics furnished in the patient's home used for the reasons noted above may not be billed and paid separately. However, antibiotics furnished in an ESRD facility were considered separately payable in accordance the Medicare Claims Processing Manual, Pub. 100-04, chapter 8, section 60.2.1.1. In addition, Pub. 100-02, chapter 11, section 50.9 states that an antibiotic used at home by a patient to treat an infection of the catheter site or peritonitis associated with peritoneal dialysis is covered as home dialysis supplies included in the Method II (Direct Dealing) payment cap for home dialysis supplies administered by the Durable Medical Equipment (DME) Supplier. Prior to January 1, 2011, under Method II, durable medical equipment suppliers received direct payment from Medicare for furnishing dialysis services to home dialysis patients. Effective January 1, 2011, as indicated in § 413.210(b) of the regulations, CMS will not pay any entity or supplier other than ESRD facilities for covered items and services furnished to a Medicare beneficiary. Therefore, payment to medical equipment suppliers for antibiotics under Method II could no longer be made. Additionally, under the ESRD PPS, the dialysis facility is responsible for furnishing all renal dialysis services, regardless of the site of service. Under the ESRD PPS, there is no payment distinction made as to the site where a renal dialysis service is provided (that is, in the home or in a facility). Therefore, we do not believe that it is appropriate to have a distinction in which antibiotics administered in an ESRD facility, used to treat an infection of the catheter or other access site, or peritonitis associated with peritoneal dialysis, would be considered as separately billable under the composite rate portion of the ESRD PPS and eligible for outlier payments under the ESRD PPS, while antibiotics used at home by home patients for the same purpose would be considered to be included in the composite rate and not eligible for outlier payments. Consequently, we are proposing to eliminate the inclusion of antibiotics when used in the home to treat an infection of the catheter site or peritonitis associated with peritoneal dialysis as part of the composite rate drugs, and allow them to be separately paid under the composite portion of the ESRD PPS blended payment for ESRD facilities receiving payment during the transition. We are also proposing that antibiotic drugs used at home to treat catheter site infections or peritonitis associated with peritoneal dialysis will qualify as separately billable and eligible as ESRD outlier services. Antibiotics furnished in facility would continue to be recognized as separately billable for ESRD outlier payment purposes. We are soliciting comments on our proposal to recognize antibiotics furnished in the home for catheter infections or peritonitis as ESRD outlier services and eligible for outlier payment. As we indicated above, we would no longer issue a list of ESRD-related drugs and biologicals eligible for outlier payments. However, under separate administrative issuances, we plan to continue to identify renal dialysis service drugs which were or would have been covered under Part D for outlier eligibility purposes in order to provide unit prices for calculating imputed outlier services. We believe that the elimination of a list of certain ESRD outlier services drugs we mentioned above and the inclusion of antibiotics used by home dialysis patients as outlier services would reduce confusion over drugs and biologicals that are eligible outlier services and eliminate the distinction in the eligibility of a drug for outlier eligibility based on where it is furnished. Accordingly, we are soliciting public comments on our proposal to eliminate the issuance of a specific list of eligible outlier service drugs which were or would have been separately billable under Medicare Part B prior to January 1, 2011. As new drugs emerge, we intend to update the HCPCS codes corresponding to new drugs and biologicals for billing purposes, and to determine whether any of those drugs are considered to be composite rate drugs. Drugs and biologicals which were or would have been considered composite rate drugs are not eligible ESRD outlier services under § 413.237. We are also proposing two modifications to the computation of the separately billable MAP amounts used to calculate outlier payments for the reasons described below. Subsequent to the publication of the CY 2011 ESRD PPS final rule, our clinical review of the 2007 ESRD claims used to develop the ESRD PPS revealed that dialysis facilities routinely used Alteplase and other thrombolytic drugs for access management purposes. As discussed in the ESRD Benefit Policy Manual, Pub. 100-02, chapter 11, section 30.4.1, drugs that are used as a substitute for any of the listed items or are used to accomplish the same effect, are covered under the composite rate. Because heparin, as a composite rate drug, could be used for access management, any drug or biological used for the same purpose may not be separately paid. As outlier payments are restricted, under § 413.237(a), to those items or services that were or would have been considered separately billable prior to January 1, 2011, we have recalculated the average outlier services MAP amounts to exclude these composite rate drugs. In developing the outlier service MAP amounts for 2011, we excluded testosterone and anabolic steroids. We have subsequently learned from discussions with clinicians and ESRD facilities that these drugs can be used for anemia management. Because drugs used for anemia management in ESRD patients were or would have been considered separately billable under Medicare Part B, these drugs would be outlier eligible drugs under § 413.237(a)(1). Consequently, we have recomputed the outlier service MAP amounts for CY 2012 to include these drugs. As shown in Table 4, when comparing the outlier service MAP amounts based on the current definition of ESRD outlier services to the revised ESRD outlier definition, the net effect of these two revisions (the exclusion of thrombolytic drugs and inclusion of anabolic steroids) results in an increase to the outlier service MAP amounts by $2.21 for adult patients and a decrease of $4.58 for pediatric patients. b. Proposed Exclusion of Automated Multi-Channel Chemistry (AMCC) Laboratory Tests From the Outlier Calculation Medicare regulations at § 413.237 provide that ESRD-related laboratory tests that were or would have been considered separately billable under Medicare Part B prior to January 1, 2011, are eligible outlier services. Those laboratory tests were specified in Attachment 3 of Change request 7064 issued under Transmittal 2033, as modified by Transmittals 2094 and 2134. In the CY 2011 ESRD PPS final rule (75 FR 49135 through 49138), we indicated that in order to compute the outlier payment for laboratory tests, the 50 percent rule is required. In addition, because the 50 percent rule is necessary to calculate the composite rate portion of the blended payment during the 3-year transition period, we retained the 50 percent rule to determine whether Automated Multi-Channel Chemistry (AMCC) panel tests would be considered composite rate or separately billable for the ESRD portion of the blended payment (75 FR 49137). The AMCC panel tests and an explanation of the 50 percent rule are identified in Pub. 100-2, chapter 11, section 30.2.2. ESRD laboratory billing rules can be found in Pub 100.04, chapter 16, section 40.6. The 50 percent rule provides that if 50 percent or more of covered laboratory tests comprising a panel of AMCC tests are included under the composite payment rate, then all submitted tests are included within the composite payment and, therefore, no laboratory tests are considered separately billable. Conversely, if less than 50 percent of the covered panel tests are composite rate tests, then all AMCC tests submitted for the date of service for that beneficiary are considered separately billable. In addition, Pub. 100-2, chapter 8, section 60.1 provides that an AMCC test that is a composite rate test, but is furnished beyond the normal frequency covered under the composite rate, is separately billable based on medical necessity. After publication of the CY 2011 ESRD PPS final rule, we received numerous requests to eliminate the 50 percent rule due to the commenters' assertions that they were confused about its application. Unlike specific drugs which are class [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2011-16874. Public record. Not legal advice.