Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1526-F]

RIN 0938-AR55

Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

This rule updates and makes revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2014. This rule also sets forth requirements for the ESRD quality incentive program (QIP), including for payment year (PY) 2016 and beyond. In addition, this rule clarifies the grandfathering provision related to the 3-year minimum lifetime requirement (MLR) for Durable Medical Equipment (DME), and provides clarification of the definition of routinely purchased DME. This rule also implements budget-neutral fee schedules for splints and casts, and intraocular lenses (IOLs) inserted in a physician's office. Finally, this rule makes a few technical amendments and corrections to existing regulations related to payment for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items and services.

DATES:

Effective Date:

These regulations are effective on January 1, 2014, except for amendments to §§ 414.100, 414.102, 414.106, 414.108, 414.200, and 414.226, which are effective on April 1, 2014.

FOR FURTHER INFORMATION CONTACT:

Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS.

Stephanie Frilling, (410) 786-4507, for issues related to the ESRD PPS wage index, home dialysis training, and the delay in payment for oral-only drugs under the ESRD PPS.

Heidi Oumarou, (410) 786-7942, for issues related to the ESRD bundled market basket.

Anita Segar, (410) 786-4614, for issues related to the ESRD QIP.

Sandhya Gilkerson, (410) 786-4085, for issues related to the clarification of the grandfathering provision related to the 3-year MLR for DME.

Anita Greenberg, (410) 786-4601, for issues related to the clarification of the definition of routinely purchased DME.

Christopher Molling, (410) 786-6399, for issues related to DMEPOS technical amendments and corrections.

Hafsa Vahora, (410) 786-7899, for issues related to the implementation of budget neutral fee schedules for splints and casts, and IOLs inserted in a physician's office.

SUPPLEMENTARY INFORMATION:

Electronic Access

This

Federal Register

document is also available from the

Federal Register

online database through

Federal Digital System (FDsys),

a service of the U.S. Government Printing Office. This database can be accessed via the internet at

http://www.gpo.gov/fdsys/.

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

In the past, a majority of the Addenda referred to throughout the preamble of our proposed and final rules were available in the

Federal Register

. However, the Addenda of the annual proposed and final rules will no longer be available in the

Federal Register

. Instead, these Addenda to the annual proposed and final rules will be available only through the Internet on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rules are available at:

http://www.cms.gov/ESRDPayment/PAY/list.asp.

Readers who experience any problems accessing any of the Addenda to the proposed and final rules of the ESRD PPS that are posted on the CMS Web site identified above should contact Michelle Cruse at 410-786-7540.

Table of Contents

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

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

3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

B. Summary of the Major Provisions

1. ESRD PPS

2. ESRD QIP

3. DMEPOS

C. Summary of Costs and Benefits

1. Impacts of the Final ESRD PPS

2. Impacts for ESRD QIP

3. Impacts for DMEPOS

II. Calendar Year (CY) 2014 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

B. Summary of the Proposed Provisions and Responses to Comments on the CY 2014 ESRD PPS

C. Routine Updates and Policy Changes to the CY 2014 ESRD PPS

1. Composite Rate Portion of the ESRD PPS Blended Payment

2. ESRD PPS Base Rate

a. Adjustment to the ESRD PPS Base Rate To Reflect the Change in Utilization of ESRD-Related Drugs and Biologicals

i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate

ii. Determining Utilization of ESRD-Related Drugs and Biologicals

iii. Pricing of ESRD-Related Drugs and Biologicals

iv. Calculation of the Amount of the Per Treatment Reduction

v. Final Amount of the Drug Utilization Adjustment

3. ESRD Bundled Market Basket

a. Overview and Background

b. Market Basket Update Increase Factor and Labor-related Share for ESRD Facilities for CY 2014

c. Productivity Adjustment for CY 2014

d. Calculation of the Final ESRDB Market Basket Update, Adjusted for Multifactor Productivity for CY 2014

4. The CY 2014 Wage Index

a. Payment under the ESRD PPS for Facilities Located in Guam, American Samoa, and the Northern Mariana Islands

b. Policies for Areas With No Wage Data

c. Reduction to the ESRD Wage Index Floor

d. Wage Index Budget-Neutrality Adjustment

5. Application of the International Classification of Diseases (ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes

a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code

b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes

c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code

6. Revisions to the Outlier Policy

a. Impact of Changes to the Outlier Policy

b. Outlier Policy Percentage

D. The Self-Dialysis and Home Dialysis Training Add On Adjustment

a. Medicare Policy for Self-Dialysis Training, Home Dialysis Training, and Retraining

b. Payment Methodology

E. Delay of Payment for Oral-Only Drugs Under the ESRD PPS

F. Miscellaneous Comments

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

A. Background

B. Summary of the Proposed Provisions and Responses to Comments on the ESRD QIP for PY 2016

C. Considerations in Updating and Expanding Quality Measures Under the ESRD QIP for PY 2016 and Subsequent PYs

1. Value-Based Purchasing (VBP) Overview

2. Brief Overview of Proposed PY 2016 Measures

3. Measures Application Partnership Review

D. Measures for the PY 2016 ESRD QIP and Subsequent PYs of the ESRD QIP

1. PY 2015 Measures Continuing in PY 2016 and Future Payment Years

2. Expansion of One PY 2015 Measure and Revision of Two PY 2015 Measures for PY 2016 and Subsequent Payment Years

a. Expanded ICH CAHPS Reporting Measure

b. Revised Mineral Metabolism Reporting Measure

c. Revised Anemia Management Reporting Measure

3. New Measures for PY 2016 and Subsequent Payment Years of the ESRD QIP

a. Anemia Management Clinical Measure Topic and Measures

i. Anemia Management: Hgb >12

ii. Anemia of Chronic Kidney Disease: Patient Informed Consent for Anemia Treatment

b. Hypercalcemia

c. Use of Iron Therapy for Pediatric Patients Reporting Measure

d. NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical Measure

e. Comorbidity Reporting Measure

4. Other Measures Under Development

5. Scoring for the PY 2016 ESRD QIP and Future Payment Years

6. Performance Period for the PY 2016 ESRD QIP

7. Performance Standards for the PY 2016 ESRD QIP and Future Payment Years

a. Clinical Measure Performance Standards

b. Performance Standards for Clinical Measures

c. Performance Standards for Reporting Measures

8. Scoring for the PY 2016 ESRD QIP Measures

a. Scoring Facility Performance on Clinical Measures Based on Achievement

b. Scoring Facility Performance on Clinical Measures Based on Improvement

c. Calculating Facility Performance on Reporting Measures

9. Weighting the PY 2016 ESRD QIP Measures and Calculating the PY 2016 ESRD QIP Total Performance Score

a. Weighting Individual Measures To Compute Measure Topic Scores for the Kt/V Dialysis Adequacy Measure Topic, the Vascular Access Type Measure Topic, and the Anemia Management Clinical Measure Topic

b. Weighting the Total Performance Score

c. Examples of the PY 2016 ESRD QIP Scoring Methodology

10. Minimum Data for Scoring Measures for the PY 2016 ESRD QIP and Future Payment Years

11. Payment Reductions for the PY 2016 ESRD QIP and Future Payment Years

12. Data Validation

13. Scoring Facilities Whose Ownership Has Changed

14. Public Reporting Requirements

IV. Clarification of the Definition of Routinely Purchased Durable Medical Equipment (DME)

A. Background

1. Background for DME

2. Medicare Guidance and Rulemaking Regarding Definition of Routinely Purchased DME

3. Payment for Inexpensive or Routinely Purchased Items and Capped Rental Items

B. Current Issues

C. Responses to Comments on the Clarification of the Definition of Routinely Purchased Durable Medical Equipment (DME)

V. Clarification of the 3-Year Minimum Lifetime Requirement (MLR) for DME

A. Current Issues

B. Scope of the 3-Year MLR for DME

C. Response to Comments on the 3-Year MLR for DME

VI. Implementation of Budget-Neutral Fee Schedules for Splints, Casts and Intraocular Lenses (IOLs)

A. Background

1. Payment Under Reasonable Charges

2. Payment Under Fee Schedules

B. Summary of the Proposed Provisions and Responses to Comments on the Implementation of Budget Neutral Fee Schedules for Splints, Casts and IOLs

VII. DMEPOS Technical Amendments and Corrections

A. Background

B. Summary of the Proposed Provisions and Responses to Comments on the Proposed Technical Amendments and a Correction

VIII. Waiver of Delayed Effective Date

IX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

B. Requirements in Regulation Text

C. Additional Information Collection Requirements

X. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impact

B. Detailed Economic Analysis

1. CY 2014 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

a. Effects of the PY 2016 ESRD QIP

b. Alternatives Considered for the PY 2016 ESRD QIP

3. DMEPOS Provisions

a. Effects of the Implementation of Fee Schedules for Splints, Casts and IOLs

b. Clarification of the 3-Year MLR for DME

c. Definition of Routinely Purchased DME

C. Accounting Statement.

XI. Regulatory Flexibility Act Analysis

XII. Unfunded Mandates Reform Act Analysis

XIII. Federalism Analysis

XIV. Congressional Review Act

XV. Files Available to the Public via the Internet Regulations Text

Acronyms

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

AHRQ Agency for Healthcare Research and Quality

ASP Average Sales Price

ATRA American Taxpayer Relief Act of 2012 BLS Bureau of Labor Statistics

CBSA Core Based Statistical Area

CCN CMS Certification Number

CDC Centers for Disease Control and Prevention

CKD Chronic Kidney Disease

CY Calendar Year

DFC Dialysis Facility Compare

DME Durable Medical Equipment

DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and Supplies

ESA Erythropoiesis Stimulating Agent

ESRD End-Stage Renal Disease

ESRDB End-Stage Renal Disease bundled

ESRD PPS End-Stage Renal Disease Prospective Payment System

FDA Food and Drug Administration

GEM General Equivalence Mappings

HAIs Healthcare-Acquired Infections

HCPCS Healthcare Common Procedure Coding System

HHS Department of Health and Human Services

ICD International Classification of Diseases

ICD-9-CM International Classification of Disease, 9th Revision, Clinical Modification

ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems

IGI IHS Global Insight

IOLs Intraocular Lenses

IPPS Inpatient Prospective Payment System

MAP Medicare Allowable Payment

MFP Multifactor Productivity

MLR Minimum Lifetime Requirement

NCD National Coverage Determination

NHSN National Health Safety Network

NQF National Quality Forum

OMB Office of Management and Budget

PFS Physician Fee Schedule

QIP Quality Incentive Program

SHR Standardized Hospitalization Ratio Admissions

SMR Standardized Mortality Ratio

TPS Total Performance Score

VBP Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

This final rule updates and makes revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2014. 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) (Public Law 110-275), and section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act (Public Law 111-148), established that beginning CY 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 addition, section 1881(b)(14)(I) of the Act, as added by section 632(a) of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), requires the Secretary, by comparing per patient utilization from 2007 with such data from 2012, to reduce the single payment amount to reflect the Secretary's estimate of the change in the utilization of ESRD-related drugs and biologicals. Section 632(b) of ATRA prevents the Secretary from paying for oral-only ESRD-related drugs and biologicals under the ESRD PPS before January 1, 2016.

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

This final rule also sets forth requirements for the ESRD Quality Incentive Program (QIP), including for payment year (PY) 2016. The program is authorized under section 153(c) of MIPPA, which added section 1881(h) to the Social Security Act (the Act). The ESRD QIP is the most recent step in fostering improved patient outcomes by establishing incentives for dialysis facilities to meet performance standards established by CMS.

3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

This final rule clarifies the definition of routinely purchased equipment covered under the DME benefit category and the scope of the 3-year minimum lifetime requirement (MLR) for DME. In addition, this final rule implements budget neutral fee schedules for splints and casts, and intraocular lenses (IOLs) inserted in a physician's office. Finally, this final rule makes a few technical amendments and corrections to existing regulations related to payment for DMEPOS items and services.

B. Summary of the Major Provisions

1. ESRD PPS

•

Update to the ESRD PPS base rate for CY 2014:

For CY 2014, the ESRD PPS base rate is $239.02. This reflects the CY 2013 ESRD PPS base rate of $240.36 adjusted by the ESRDB market basket (3.2 percent) minus productivity (0.4 percent) increase factor of 2.8 percent, the wage index budget neutrality factor of 1.000454, and the home dialysis training add-on budget neutrality adjustment factor of 0.999912 to get $247.18 ($240.36 * 1.028 * 1.000454 * 0.999912 = $247.18). We reduced this amount by the portion of the CY 2014 drug utilization adjustment that is being transitioned this year, or $8.16, to arrive at a final CY 2014 ESRD PPS base rate of $239.02 ($247.18−$8.16 = $239.02).

•

The CY 2014 wage index and wage index floor:

We adjust wage indices on an annual basis using the most current hospital wage data to account for differing wage levels in areas in which ESRD facilities are located. We did not propose any changes to the application of the wage index adjustment factor for CY 2014, and we will continue to apply the adjustment to the ESRD PPS base rate. For CY 2014 and CY 2015, we are continuing our policy for the gradual phase-out of the wage index floor and reducing the wage index floor values to 0.45 and 0.40, respectively.

•

The outlier policy:

We are updating the outlier services fixed dollar loss amounts for adult and pediatric patients and Medicare Allowable Payments (MAPs) for adult patients for CY 2014 using 2012 claims data. Based on the use of more current data, the fixed-dollar loss amount for pediatric beneficiaries would increase from $47.32 to $54.01 and the adjusted average outlier services MAP amount would decrease from $41.39 to $40.49 as compared to CY 2013 values. For adult beneficiaries, the fixed-dollar loss amount would decrease from $110.22 to $98.67 and the adjusted average outlier services MAP amount would decrease from $59.42 to $50.25. The 1 percent target for outlier payments was not achieved in CY 2012. We believe using CY 2012 claims data to update the outlier MAP and fixed dollar loss amounts for CY 2014 will increase payments for ESRD beneficiaries requiring higher resource utilization in accordance with a 1 percent outlier policy.

•

Application of ICD-10-CM Diagnosis Codes to the comorbidity payment adjustment codes:

Effective October 1, 2014, CMS will implement the 10th revision of the ICD coding scheme. We discuss and provide a crosswalk from ICD-9-CM to ICD-10-CM for codes that are subject to the comorbidity payment adjustment. We are finalizing our proposed policy that all ICD-10-CM codes to which ICD-9-CM codes that are eligible for the comorbidity payment adjustments crosswalk will be eligible for the comorbidity payment adjustments with two exceptions.

•

The self-dialysis and home dialysis training add-on adjustment:

In response to public comments, we are finalizing an increase in the amount of the self-dialysis and home dialysis training add-on adjustment of 50 percent for both peritoneal dialysis (PD) and home hemodialysis (HHD) training treatments furnished on or after January 1, 2014. In CY 2014, the nursing time accounted for in the training add-on adjustment will increase from one hour to 1.5 hours per training treatment, resulting in an increase of $16.72, for a total training add-on adjustment of $50.16 per training treatment. We note that the increase to the training add-on adjustment will be made in a budget neutral manner in that we have applied a training add-on budget-neutrality adjustment factor of 0.999912 to the base rate.

2. ESRD QIP

This final rule implements requirements for the ESRD QIP. With respect to the PY 2016 ESRD QIP, we are continuing some of the previous ESRD QIP measures, adding new measures, and expanding the scope of some of the existing measures to cover the measure topics as follows:

• To evaluate anemia management:

○ Hemoglobin Greater Than 12 g/dL, a clinical measure

○ Anemia Management, a reporting measure

†

• To evaluate dialysis adequacy:

○ A Kt/V measure for adult hemodialysis patients, a clinical measure

○ A Kt/V measure for adult peritoneal dialysis patients, a clinical measure

○ A Kt/V measure for pediatric hemodialysis patients, a clinical measure

• To determine whether patients are treated using the most beneficial type of vascular access:

○ An arteriovenous fistula measure, a clinical measure

○ A catheter measure, a clinical measure

• To address effective bone mineral metabolism management:

○ Hypercalcemia, a clinical measure*

○ Mineral Metabolism, a reporting measure

†

• To address safety:

○ National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Outpatients, a clinical measure

*

• To assess patient experience:

○ ICH CAHPS survey reporting measure ‡

* Denotes that this measure is new to the ESRD QIP.

†

Denotes that this measure is revised in the ESRD QIP.

‡ Denotes that this measure is expanded in the ESRD QIP.

We also establish CY 2014 as the performance period for the PY 2016

ESRD QIP, establish performance standards for each measure, and adopt scoring and payment reduction methodologies that are similar to those finalized for the PY 2015 ESRD QIP.

3. DMEPOS

•

Definition of routinely purchased DME:

This final rule clarifies the definition of routinely purchased DME set forth at section § 414.220(a), as well as addresses the classification of and payment for expensive items of DME and accessories (over $150) as a capped rental items in accordance with § 414.229, if the items were not acquired by purchase on a national basis at least 75 percent of the time during the period July 1986 through June 1987.

•

Clarification of to the 3-year MLR and Related Grandfathering Policy:

This final rule provides further clarification about how we will apply the 3-year MLR set forth at § 414.202, which must be satisfied for an item or device to be considered DME.

•

Implementation of budget neutral fee schedules for splints and casts, and IOLs inserted in a physician's office:

For CY 2014, we are implementing budget neutral fee schedule amounts for splints and casts, and IOLs inserted in a physician's office. Section 1842(s) of the Act authorizes CMS to implement fee schedule amounts for these items if they are established so that they are initially budget neutral. In 2011, total allowed charges for splints and casts were $5.6 million, while total allowed charges for IOLs inserted in a physician's office were $76 thousand.

C. Summary of Costs and Benefits

In section XI. of this final rule, we set forth a detailed analysis of the impacts that the changes will have on affected entities and beneficiaries. The impacts include the following:

1. Impacts of the Final ESRD PPS

The impact chart in section XI.B.1.a. of this final rule displays the estimated change in payments to ESRD facilities in CY 2014 compared to estimated payments in CY 2013. The overall impact of the CY 2014 changes is projected to result in an average increase in payments of 0.0 percent from CY 2013 to CY 2014. Hospital-based ESRD facilities have an estimated 0.8 percent increase in payments compared with freestanding facilities with an estimated 0.0 percent increase.

We estimate that there will be no change in aggregate ESRD PPS expenditures from CY 2013 to CY 2014. This reflects a $240 million increase from the payment rate update, a $30 million increase due to the updates to the outlier threshold amounts, and a $20 million increase due to the change in the blend of payments, and a $290 million decrease in expenditures specifically related to the drug utilization adjustment. The drug utilization adjustment for CY 2014 represents 27 percent of the total drug utilization adjustment amount of $29.93. The estimated 0.0 percent overall payment change will result in a small reduction in beneficiary coinsurance compared to CY 2013 beneficiary because the CY 2014 ESRD PPS base rate is slightly less than that CY 2013 base rate, discussed in section II.C.2.a.v.

2. Impacts for ESRD QIP

The overall economic impact of the proposed ESRD QIP is an estimated $15.2 million in PY 2016. In PY 2016, we expect the total payment reductions to be approximately $15.1 million, and the costs associated with the collection of information requirements for certain measures to be approximately $39.5 thousand. For PY 2017 and future payment years, we expect the costs associated with the collection of information requirements for the expanded ICH CAHPS measure in the proposed ESRD QIP to be approximately $9.7 million.

The ESRD QIP will continue to incentivize facilities to provide higher quality care to beneficiaries. The reporting measures associated with the collection of information requirements are critical to better understanding the quality of care beneficiaries receive, particularly patients' experience of care, and will be used to incentivize improvements in the quality of care provided.

3. Impacts for DMEPOS

The overall impact of implementing fee schedules for splints and casts, and IOLs inserted in a physician's office is insignificant. The reasonable charge amounts that we convert to fee schedule amounts will be budget neutral the first year and will be updated annually thereafter based on the consumer price index for all consumers (CPI-U) for the 12-month period ending June 30 of the previous year and, reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. For the 3-year MLR, we believe that a vast majority of the categories of items that were classified as DME before January 1, 2012, did function for 3 or more years (76 FR 70289). The 3-year MLR is designed to represent a minimum threshold for determination of durability for equipment that is consistent with the statutory DME payment provisions and applies on a prospective basis, effective January 1, 2012. CMS recognizes that the healthcare industry and beneficiaries have come to rely on items that have qualified as DME on or prior to January 1, 2012, regardless of whether those items met the 3-year MLR set forth at § 414.202. We note that given that reliance and consistent with the regulation at § 414.202, CMS would not reopen those prior decisions and reclassify the equipment in light of the new 3-year standard. We believe that continuing the Medicare coverage for all the items that qualified as DME on or prior to January 1, 2012, would avoid disrupting the continuity of care for the beneficiaries that received these items for medical treatment prior to January 1, 2012, without creating a significant fiscal impact on the Medicare Program. We also do not expect any significant impact as a result of how this rule will be applied in terms of equipment that is modified. Based on our experience with the Medicare Program, items covered as DME prior to 2012 that have lifetimes of less than 3 years are well established and have been used in treating illnesses or injuries of patients for many years. The items are designed to provide treatment for the period of time generally needed for the patient and it is unlikely that devices will be modified to be less durable.

We expect that the overall impact of clarifying the definition of routinely purchased DME and finalizing our proposal to classify certain expensive items as cap rental will be a decrease in expenditures because payment on a 13-month capped rental basis rather than a lump sum purchase basis for certain, very expensive items will lower total payments for these items and because many beneficiaries would not rent the items for as long as 13 months.

II. Calendar Year (CY) 2014 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

On August 12, 2010, we published in the

Federal Register

a final rule (75 FR 49030 through 49214) titled, “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 services beginning January 1, 2011, in accordance with section 1881(b)(14) of the Act, as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).

On November 10, 2011, we published in the

Federal Register

, a final rule (76 FR 70228 through 70316) titled, “Medicare Program; End-Stage Renal Disease Prospective Payment System and Quality Incentive Program; Ambulance Fee Schedule; Durable Medical Equipment; and Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies” (hereinafter referred to as the CY 2012 ESRD PPS final rule). In that final rule, for the ESRD PPS, we made a number of routine updates for CY 2012, implemented the second year of the transition to the ESRD PPS, made several policy changes and clarifications, and made technical changes.

On November 9, 2012, we published in the

Federal Register

, a final rule (77 FR 67450 through 67531) titled, “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Bad Debt Reductions for All Medicare Providers” (hereinafter referred to as the CY 2013 ESRD PPS final rule). In that final rule, for the ESRD PPS, we made a number of routine updates for CY 2013, implemented the third year of the transition to the ESRD PPS, and made several policy changes and reiterations. For a summary of the provisions in that final rule, we refer readers to the CY 2014 ESRD PPS proposed rule at 78 FR 40836, 40840-40841 (July 8, 2013).

B. Summary of the Proposed Provisions and Responses to Comments on the CY 2014 ESRD PPS

The proposed rule, titled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies” (78 FR 40836 through 40890), (hereinafter referred to as the CY 2014 ESRD PPS proposed rule), was published in the

Federal Register

on July 8, 2013, with a comment period that ended on August 30, 2013. In that proposed rule, for the ESRD PPS, we proposed to (1) make a number of routine updates for CY 2014, (2) implement the fourth and last year of the transition where payments are based 100 percent on the ESRD PPS, and (3) make revisions to the ESRD PPS base rate as required by statute. We received approximately 1282 public comments on the ESRD PPS proposals, including comments from ESRD facilities; national renal groups, nephrologists and patient organizations; patients; manufacturers; health care systems; and nurses.

In this final rule, we provide a summary of each proposed provision, a summary of the public comments received and our responses to them, and the policies we are finalizing for the CY 2014 ESRD PPS. Comments related to the paperwork burden are addressed in the “Collection of Information Requirements” section in this final rule. Comments related to the impact analysis are addressed in the “Economic Analyses” section in this final rule.

C. Routine Updates and Policy Changes to the CY 2014 ESRD PPS

1. Composite Rate Portion of the ESRD PPS Blended Payment

Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition under the ESRD PPS. This final rule implements the fourth year of the transition for those ESRD facilities that did not elect to receive 100 percent of the payment amount under the ESRD PPS. For services furnished beginning in CY 2014, under 42 CFR 413.239(a)(4), 100 percent of the payment amount will be determined in accordance with section 1881(b)(14) of the Act. Accordingly, a blended rate will no longer be provided, all facilities will be paid 100 percent under the ESRD PPS, and there will no longer be a transition budget neutrality adjustment factor applied to these payments starting on January 1, 2014. Therefore, facilities that participate in the transition will no longer receive a portion of their payments based on the basic case-mix adjusted composite rate payment system. Because payments will no longer be based on the basic case-mix adjusted composite rate, we will not update the drug add-on or wage index values (which included a budget-neutrality adjustment factor) that comprised that rate. In this final rule, we only discuss updates and policy changes that affect the components of the ESRD PPS.

2. ESRD PPS Base Rate

In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we discussed the development of the ESRD PPS per treatment base rate that is codified in the Medicare regulations at § 413.220 and § 413.230. The CY 2011 ESRD PPS final rule also provides a detailed discussion of the methodology used to calculate the ESRD PPS base rate and the computation of factors used to adjust the ESRD PPS base rate for projected outlier payments and budget neutrality in accordance with sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, respectively. Specifically, the ESRD PPS base rate was developed from CY 2007 claims (that is, the lowest per patient utilization year as required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, and represented the average per treatment Medicare Allowable Payment (MAP) for composite rate and separately billable services. In accordance with section 1881(b)(14)(D) of the Act and codified in regulations at § 413.230, the ESRD PPS base rate is adjusted for the patient-specific case-mix adjustments, applicable facility adjustments, geographic differences in area wage levels using an area wage index, as well as applicable outlier payments or training payments.

As discussed in section II.C.3. of this final rule, 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 described in section 1886(b)(3)(B)(xi)(II). Accordingly, we applied the 2.8 percent increase factor, that is the ESRDB market basket (3.2 percent) minus productivity (0.4 percent) to the CY 2013 ESRD PPS base rate of $240.36, which results in a CY 2014 ESRD PPS base rate of $247.09 ($240.36 × 1.028 = $247.09).

In addition, as discussed in section II.C.4.d. of this final rule, we apply the wage index budget-neutrality adjustment factor of 1.000454 to the CY 2014 ESRD PPS base rate (that is, $247.09), yielding a CY 2014 ESRD PPS wage-index budget-neutrality adjusted base rate of $247.20 ($247.09 × 1.000454 = $247.20). Also, as discussed in section II.D.b. of this final rule, we finalized an increase in the home dialysis training add-on in a budget-neutral manner. Because this adjustment was applied in a budget-neutral manner, we needed to adjust the CY 2014 ESRD PPS base rate after the application of the wage index budget neutrality adjustment factor to account for the increase in training payments. This application yields a CY 2014 ESRD PPS base rate of $247.18 ($247.20 × 0.999912 = $247.18). This amount is then reduced by the portion of the drug utilization adjustment that is being implemented this year, which is $8.16, which yields a final CY 2014 base rate of $239.02. The drug utilization adjustment is addressed in the following section.

a. Adjustment to the ESRD PPS Base Rate To Reflect the Change in Utilization of ESRD-Related Drugs and Biologicals

Section 1881(b)(14)(I) of the Act, as added by section 632(a) of the ATRA, requires that, for services furnished on or after January 1, 2014, the Secretary shall make reductions to the single payment for renal dialysis services to reflect the Secretary's estimate of the change in the utilization of ESRD-related drugs and biologicals (excluding oral-only ESRD-related drugs) by comparing per patient utilization data from 2007 with such data from 2012. Section 1881(b)(14)(I) further requires that in making the reductions, the Secretary take into account the most recently available data on Average Sales Prices (ASP) and changes in prices for drugs and biologicals reflected in the ESRD market basket percentage increase factor under section 1881(b)(14)(F) of the Act. Consistent with these requirements, in the CY 2014 ESRD PPS proposed rule (78 FR 40843) we proposed to apply a payment adjustment to the CY 2014 ESRD PPS base rate that reflects the change in utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012.

i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate

In the CY 2014 ESRD PPS proposed rule (78 FR 40841 through 40843), we discussed the methodology used for calculating the drug utilization adjustment that will reduce the ESRD PPS base rate. Because the ESRD PPS base rate is a per treatment base rate, the adjustment is calculated on a per treatment basis. We proposed to calculate the amount of the per treatment adjustment by applying CY 2014 prices for ESRD-related drugs and biologicals to the utilization data for CY 2007 and CY 2012. We noted that the CY 2014 ESRD PPS base rate is reflective of 2007 utilization because the base rate was derived from CY 2007 data. We explained that using prices for drugs and biologicals inflated to 2014 levels allows us to appropriately measure changes that are attributable to utilization patterns as opposed to differences in pricing for drugs and biologicals in 2007 and 2012. In addition, because we proposed to make the reduction in CY 2014, we priced the ESRD-related drugs and biologicals for the year in which the adjustment applies. We explained that for purposes of this analysis, we view utilization of drugs and biologicals as units of an ESRD-related drug or biological furnished to a patient on a per treatment basis. We took the estimated amount of the per treatment difference between the estimated spending on drugs and biologicals in CY 2007 and CY 2012 and reduced this amount by the same adjustment factors that were used to calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per treatment, which are the standardization, outlier, and the 98 percent budget-neutrality adjustments. A detailed explanation of these adjustment factors is provided in the CY 2011 ESRD PPS final rule (75 FR 49081 through 49082). We proposed to reduce the CY 2014 ESRD PPS base rate by the resulting amount.

ii. Determining Utilization of ESRD-Related Drugs and Biologicals

In the CY 2014 ESRD PPS proposed rule (78 FR 40841 through 40842), we explained how we determined utilization of ESRD-related drugs and biologicals. Section 1881(b)(14)(I) of the Act requires the single payment amount to be reduced by an amount that “reflects the Secretary's estimate of the change in utilization of drugs and biologicals described in clauses (ii), (iii), and (iv) of subparagraph (B) (other than oral-only ESRD-related drugs, as such term is used in the final rule promulgated by the Secretary in the

Federal Register

on August 12, 2010 (75 FR 49030))”. As we mentioned above, for purposes of this analysis, we view utilization of drugs and biologicals as units of a drug or biological furnished to a patient per treatment. ESRD facilities report this information on claims. To calculate this adjustment, we analyzed the utilization of erythropoiesis stimulating agents (ESAs) and any oral forms of such agents furnished to individuals for the treatment of ESRD. We also analyzed the utilization of other injectable drugs and biologicals (such as iron sucrose and doxercalciferol) and any oral equivalent form of such drug or biological furnished to individuals for the treatment of ESRD that were included in the expanded bundle of services covered by the ESRD PPS. We did not include diagnostic laboratory tests or other items and services in the comparison analysis because section 1881(b)(14)(I) only refers to estimating the change in utilization of drugs and biologicals.

Section 1881(b)(14)(I) of the Act requires the Secretary to compare per patient utilization data from 2007 with per patient utilization data from 2012. For the CY 2007 utilization data for ESRD-related drugs and biologicals, we proposed to use the data analysis prepared for the CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we discuss in detail the development of the ESRD PPS base rate and, as we stated above, the base rate represents the average MAP for composite rate and separately billable services, which was derived from 2007 claims data. We also explained in the CY 2011 ESRD PPS final rule that in order to comply with section 1881(b)(14)(A)(ii) of the Act, we determined that 2007 was the year with the lowest per patient utilization of renal dialysis services by Medicare ESRD beneficiaries among the years 2007, 2008, and 2009. Therefore, utilization data for ESAs and other drugs and biologicals including the oral-equivalent forms of those drugs and biologicals furnished for the treatment of ESRD was readily available for purposes of analyzing 2007 utilization.

For the CY 2012 utilization data for ESRD-related drugs and biologicals, we proposed to use the latest available claims data based on the CY 2012 ESRD facility claims. For the proposed rule, we used CY 2012 ESRD facility claims updated through December 31, 2012 (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of December 31, 2012). We stated that we would use the CY 2012 claims file updated through June 30, 2013, (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013) to calculate 2012 utilization for the final rule. We solicited comments on the proposed use of 2007 and 2012 claims data to capture the utilization of ESRD-related drugs and biologicals in those years. The comments and our responses are set forth below.

Comment:

Several commenters agreed with CMS that claims data from 2007 and 2012 are reliable sources for ESRD-related drugs and biologicals utilization.

Response:

We thank the commenters for their support. For this final rule, we used the CY 2007 claims data that was used in preparation of the CY 2011 ESRD PPS final rule. In addition, we used the CY 2012 claims file updated through June 30, 2013, (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013) to calculate 2012 utilization.

In the CY 2014 ESRD PPS proposed rule (78 FR 40842), we explained that because section 1881(b)(14)(I) requires

that we compare per patient utilization of ESRD-related drugs and biologicals in 2007 with per patient utilization in 2012, we would also include utilization of drugs and biologicals furnished in ESRD facilities located in the United States Territories of Guam, American Samoa and the Northern Mariana Islands (the Pacific Rim), even though facilities in the Pacific Rim were not paid under the ESRD PPS during these years. Therefore, we proposed to use 2007 and 2012 utilization of ESRD-related drugs and biologicals (including oral equivalents) for ESRD facilities located in these territories in our analysis of the reduction required by section 1881(b)(14)(I). For the proposed rule, we did not readily have access to the 2007 utilization data for the ESRD facilities located in these areas; however, we planned to include these data in our calculation for the final rule. Because there are very few ESRD facilities in this region, we indicated that the inclusion of utilization of drugs and biologicals furnished in CY 2007 at these facilities would not have a significant impact on the amount of the adjustment.

We solicited comments on the proposal to include data on the utilization of drugs and biologicals furnished in ESRD facilities located in the Pacific Rim when comparing utilization of drugs and biologicals in CY 2007 with CY 2012. We did not receive any comments objecting to the use of data from ESRD facilities located in the Pacific Rim in the analysis. In the analysis for this final rule, we have included the drug utilization data from facilities located in the Pacific Rim.

iii. Pricing of ESRD-Related Drugs and Biologicals

In the CY 2014 ESRD PPS proposed rule (78 FR 40842 through 40843), we explained how we priced ESRD-related drugs and biologicals to CY 2014 to allow for an accurate comparison between utilization of those drugs and biologicals furnished in CY 2007 with utilization in CY 2012. In order to price ESRD-related drugs and biologicals based on CY 2014 prices, we started with CY 2011 prices as established and published in the CY 2011 ESRD PPS final rule.

In developing the CY 2011 ESRD PPS base rate, we included the MAP amounts for ESRD-related drugs and biologicals that were, prior to January 1, 2011, separately paid under Part B. We used the second quarter of 2010 ASP+6 prices (which was the most current data available at the time) and then used the Producer Price Index (PPI) to inflate the prices to CY 2011 (75 FR 49079). We also included the MAP amounts for the ESRD-related oral-equivalent drugs and biologicals that were, prior to January 1, 2011, separately paid under Part D (75 FR 49080). For setting the CY 2011 ESRD PPS base rate for these drugs, we used the growth rates for overall prescription drug prices that were used in the National Health Expenditure Projections (NHE) for updating prices for former Part D drugs to CY 2011 from CY 2007.

We proposed to inflate the prices established in the CY 2011 ESRD PPS final rule for ESRD-related drugs and biologicals and their oral equivalents to CY 2014 by applying the ESRD bundled (ESRDB) market basket, the productivity adjustment, and the wage index budget neutrality adjustment factors. Because the base rate and the ESRDB market basket account for ESRD-related drugs and biologicals and we have updated all components of the base rate annually using a market basket minus productivity with wage index budget neutrality adjustment factor, we believe that using these inflation factors is consistent with how these services are paid under the ESRD PPS. The drug component of the ESRDB market basket uses the PPI for prescription drugs as a proxy for the growth in drug prices. We believe using the ESRDB market basket to price drugs and biologicals for CY 2014 complies with the requirement in section 1881(b)(14)(I) that the Secretary take into account the changes in prices for drugs and biologicals reflected in the ESRDB market basket percentage increase factor. The ESRDB market basket minus productivity increase factors were 2.1 percent and 2.3 percent for CY 2012 and CY 2013, respectively. The proposed CY 2014 update was 2.5 percent. The wage index budget neutrality adjustment factors for the same years are 1.001520, 1.000613, and a CY 2014 proposed factor of 1.000411. Therefore, we proposed to use a total growth update factor of 7.3 percent (1.021 * 1.023 * 1.025 * 1.001520 * 1.000613 * 1.000411 = 1.073) to inflate prices for ESRD-related drugs and biologicals from CY 2011 levels to CY 2014 levels. We solicited comments on the use of the ESRDB market basket percentage increase factor to inflate prices for drugs and biologicals to CY 2014 levels. The comment and our response is set forth below.

Comment:

A few commenters expressed concern that inflating the prices from 2007 levels does not capture the true cost of the drugs and biologicals for small and independent ESRD facilities and small dialysis organizations (SDOs). One commenter stated that if the price is an average number, then SDOs and mid-sized dialysis organizations (MDOs) would be at a disadvantage because their prices are far greater than the prices paid by large dialysis organizations. Therefore, the commenters did not believe that the costs incurred by SDOs and MDOs were accounted for by using 7.3 percent to inflate prices for ESRD-related drugs and biologicals from CY 2011 levels to CY 2014 levels and urged CMS to use actual drug costs reported on ESRD facility cost reports.

Response:

The drug utilization adjustment is a per treatment reduction to the single ESRD PPS base rate, which is a payment amount that reflects the average cost for an ESRD facility to furnish a dialysis treatment. Because the drug utilization adjustment is a reduction to the average payment, the drug utilization analysis needs to be performed at an aggregate level, that is, across all facilities using the same sources of data regardless of ownership type. In addition, we do not believe that it would be beneficial to SDOs/MDOs to use drug costs that are reported in ESRD facility cost reports. Even if we were to use cost report drug data, the SDO/MDO costs for drugs would continue to be averaged out by that of the large dialysis organizations (LDOs), which furnish the majority of dialysis treatments. More importantly, we would only be able to consider the ESRD facility cost reports for cost reporting periods ending in 2011 and in 2012 for the drug utilization adjustment analysis, We would not have the information for cost reporting periods ending in 2013, which is when significant price increases have reportedly occurred.

For these reasons, we continue to believe using the ESRDB market basket to price drugs and biologicals for CY 2014 complies with the requirement in section 1881(b)(14)(I) that the Secretary take into account the changes in prices for drugs and biologicals reflected in the ESRDB market basket percentage increase factor and provides the most accurate way to price drugs at 2014 levels. Therefore, in this final rule we are finalizing the use of the ESRDB market basket percentage increase factor to inflate prices for drugs and biologicals to CY 2014 levels.

To determine the final growth update factor's value, we used the methodology discussed above with one modification (described below) and updated the calculation using the final CY 2014 ESRDB market basket minus the CY 2014 multifactor productivity adjustment and the final CY 2014 wage index budget neutrality adjustment factor, which are based on the most recently available data. The ESRDB

market basket minus productivity increase factors were 2.1 percent and 2.3 percent for CY 2012 and CY 2013, respectively. The final ESRDB market basket minus productivity increase factor for CY 2014 is 2.8 percent. The wage index budget neutrality adjustment factors for the same years are 1.001520, 1.000613, and a final CY 2014 factor of 1.000454.

In addition to the ESRDB market basket minus productivity increase factor and the wage index budget neutrality adjustment factor, to account for the home dialysis training add-on increase for CY 2014 we applied an additional factor of 0.999912. We made this modification so that the methodology for developing the growth update factor is consistent with the way we update the ESRD PPS base rate. For CY 2014, we are increasing the home dialysis training add-on in a budget-neutral manner, and therefore, we needed to include an adjustment that accounts for the increase. We are finalizing a total growth update factor of 7.64 percent (1.021 * 1.023 * 1.028 * 1.001520 * 1.000613 * 1.000454 * 0.999912 = 1.0764) to inflate prices for ESRD-related drugs and biologicals from CY 2011 levels to CY 2014 levels. For more information regarding the increase in the home dialysis training add-on payment, see section II.D.b. of this final rule.

In addition to proposing the use of the ESRDB market basket percentage increase factor to inflate prices for drugs and biologicals to CY 2014 levels, in the CY 2014 ESRD PPS proposed rule (78 FR 40843) we discussed an alternative method of using ASP instead of the PPI. Specifically, section 1881(b)(14)(I) requires the Secretary to “take into account the most recently available data on average sales prices and changes in prices for drugs and biologicals reflected in the ESRDB market basket percentage increase factor” in making the reduction to the ESRD PPS base rate to reflect the change in utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012. While we could have chosen to inflate prices for drugs and biologicals to 2014 levels with more recently available ASP data, we stated that we believed using a growth based on the ESRDB market basket is more appropriate because it reflects what Medicare is required to pay for drugs and biologicals through the ESRD PPS base rate.

In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we discussed an alternative analysis using prices based on the first quarter 2013 ASP+6 percent prices and the National Drug Code (NDC) prices published on the CMS Web site located at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Outlier_Services.html

that are used for outlier calculations, and the PPI to project to CY 2014. The results were minimally different (a difference of $29.40 versus $29.52), and because we believed that the ESRDB market basket approach was a more appropriate measure of how Medicare pays for these drugs under the ESRD PPS, we proposed to use it to update drug prices. Nonetheless, we solicited comments on the potential use of ASP instead of the ESRDB market basket to inflate drug prices to 2014 levels for purposes of the drug utilization adjustment. The comments and our responses are set forth below.

Comment:

An SDO expressed concern that the alternative analysis of comparing ASP to PPI is not accurate because there is an inherent problem with using ASP data. The commenter stated that ASP data does not accurately reflect the cost of epogen because the ASP data reports the combined price of epogen and procrit. The commenter further explained that procrit has a lower price than epogen but it is not a drug that ESRD facilities can purchase as an ESA to furnish to their patients because it is indicated for non-ESRD use. The commenter stated that while the average cost of procrit has diminished since 2007, the cost of epogen has risen significantly for SDOs and therefore the commenter believes that this results in a lower overall ASP amount because procrit dilutes the ASP price. A national organization for SDOs and an MDO expressed concern that due to the lag in the reporting and publishing of ASP data, the price increases that they have experienced were not fully reflected in the analysis.

Response:

We thank the commenters for this information. The ASP+6 payment limits are based on actual marketplace prices submitted by manufacturers to CMS. Given that the ASP is an average price, some National Drug Codes (NDCs) in a given HCPCS code will be available at prices below the payment limit and others will be above the payment limit. The payment limits are evaluated and updated on a quarterly basis. We will initiate discussions with appropriate staff regarding the ASP for epogen to gain a better understanding of how including procrit impacts the ASP. We agree that the lag in reporting price increases in the ASP system as well as the combination of ASP data for Epoetin with that of procrit makes the use of ASP+6 prices to update the prices of drugs and biologicals to 2014 levels less desirable.

After consideration of the comments that we received on the use of ASP versus PPI, we continue to believe that using a growth based on the ESRDB market basket is more appropriate because it reflects what Medicare is required to pay for the drugs and biologicals through the ESRD PPS base rate and because, as commenters noted, ASP prices may not be accurate or up-to-date for drugs and biologicals used in the treatment of ESRD.

iv. Calculation of the Amount of the Per Treatment Reduction

In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we provided detail on how the drug utilization reduction amount was calculated. We applied the 2014 prices to the CY 2007 and CY 2012 drug and biological utilization data to calculate aggregate amounts for each year. For drugs and biologicals for which we have utilization data for CY 2012, but that were not present on CY 2007 claims, we priced those drugs using the ASP+6 percent price for 2012, which is an average of the four quarter prices, and inflated it using the CY 2013 and the CY 2014 proposed ESRDB market basket, productivity, and wage index budget neutrality adjustment factors. We noted that while most of these drugs had minimal utilization, feraheme was the only significant exception. Specifically, feraheme was not available until January 2010 and once the drug was available, the use of the drug rose to the top 12th drug furnished to ESRD beneficiaries.

Next, we divided each year's estimated aggregate amount for drugs and biologicals by that year's count of treatments furnished to Medicare beneficiaries to get an average payment per treatment for the year. This resulted in a per treatment amount for drugs and biologicals of $83.76 in 2007 and a per treatment amount for drugs and biologicals of $51.42 in 2012. We then subtracted the average payment per treatment for CY 2012 from the average amount per treatment for CY 2007 to get a total of $32.34 ($83.76−$51.42 = $32.34). We then reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustments to get a total of $29.52 ($32.34 × .9407 × .99 × .98 = $29.52). We applied these adjustments before reducing the base rate because the base rate was reduced by these adjustments when it was first established, and the reduction should be adjusted in the same way to make the two figures comparable. We then reduced the CY 2014 proposed base rate of $246.47 by $29.52, resulting in the CY 2014 proposed base rate of $216.95. A

reduction of $29.52 from the proposed CY 2014 ESRD PPS base rate would have amounted to a 12 percent reduction in Medicare payments. We solicited comments on the proposed methodology for the reduction to the ESRD PPS base rate to reflect the change in the utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012. The comments and our responses are set forth below.

Comment:

We received comments from national organizations and a drug manufacturer that stated they were unable to determine if the methodology CMS used to calculate the reduction was proper because they did not have access to the same data that was used in the calculation.

Response:

We disagree with commenters who contend that they were unable to determine whether CMS's methodology was proper because they did not have access to all of the data used to calculate the amount of the reduction. Our methodology for calculating the drug utilization adjustment required by section 1881(b)(14)(I) was described in substantial detail in the CY 2014 ESRD PPS proposed rule. As a result, we do not believe that it was necessary for commenters to have every data point used in our calculations in order to have commented meaningfully on the methodological approach to the adjustment. Nonetheless, between the information provided in the proposed rule and included in the CY 2011 ESRD PPS final rule, commenters did have data we used in calculating the drug utilization adjustment. Moreover, shortly after the CY 2014 ESRD PPS proposed rule was published we posted a table titled, “Drug Utilization Adjustment” onto the CMS Web site as a convenience to stakeholders following requests for the data points used in our calculation of the drug utilization adjustment amount. This table includes the data we used to perform the calculation of the reduction amount for the proposed rule and it is posted with the rule's addenda. Addendum C titled, “Calculation of the Amount of the Per Treatment Reduction Using the End-Stage Renal Disease Bundled Market Basket” contains updated data and the methodology used for this final rule. The Addendum can be found on the CMS Web site:

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html

.

Comment:

We received a comment from the Medicare Payment Advisory Commission (MedPAC) stating that they compared their own analyses of the changes in drug utilization using CMS's methods and alternative methods to check for errors in the methodology. They concluded that CMS' methods are consistent with the ATRA mandate and appear to be reasonable.

Response:

We thank the MedPAC for their support.

v. Final Amount of the Drug Utilization Adjustment

Using the methodology we proposed in the 2014 ESRD PPS proposed rule, we are updating the drug utilization adjustment based on the most current claims data available, that is, CY 2012 claims with dates of service from January 1 through December 31, 2012 that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013. We applied the 2014 prices to the CY 2007 and CY 2012 drug and biological utilization data to calculate aggregate amounts for each year. For drugs and biologicals for which we have utilization data for CY 2012, but that were not present on CY 2007 claims, we priced those drugs using the ASP+6 percent price for 2012, which is an average of the four quarter prices, and inflated it using the CY 2013 and the CY 2014 ESRDB market basket, productivity, and wage index budget-neutrality adjustment factors.

Next, we divided each year's estimated aggregate amount for drugs and biologicals by that year's count of treatments furnished to Medicare beneficiaries to get an average payment per treatment for the year. This resulted in a per treatment amount for drugs and biologicals of $83.96 in 2007 and a per treatment amount for drugs and biologicals of $51.17 in 2012. We then subtracted the average payment per treatment for CY 2012 from the average amount per treatment for CY 2007 to get a total of $32.79 ($83.96−$51.17 = $32.79). We then reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustments to get a total of $29.93 ($32.79 × .9407 × .99 × .98 = $29.93). As in the proposed rule, we applied these adjustments because the base rate was reduced by these adjustments when it was first established, and the reduction should be adjusted in the same way to make the two figures comparable. We are finalizing the drug utilization adjustment amount of $29.93. As discussed further below, this amount will be applied to the base rate over the course of a 3- to 4-year transition.

Comment:

Several national organizations representing the dialysis industry and dialysis patients believe our CY 2011 ESRD PPS base rate is incorrect and recommended that we correct the base rate prior to application of the drug utilization adjustment to account for overstated estimates of payment adjustments, especially the comorbidity case-mix adjusters, the outlier policy, and the low-volume adjuster. Because these adjustments have been paid out at a rate less than anticipated, the commenters stated that we have not met our obligation under section 1881(b)(14)(A)(ii) of the Act, which requires the Secretary to ensure that the estimated total amount of payments for 2011 for renal dialysis services equals 98 percent of the estimated total amount of payments that would have been made for services furnished in 2011 if the ESRD PPS had not been implemented. Furthermore, these commenters indicated that they were unable to receive discharge information from hospitals to document the comorbid conditions, which is necessary to seek reimbursement for the comorbidity payment adjustments. In order to the make the comorbidity adjustments more accessible, the commenters urged us to revisit the documentation requirements or remove the comorbidity adjustments entirely and return the dollars to the base rate.

Dialysis organizations also encouraged CMS to substantially reduce the percentage of the outlier pool or eliminate it entirely. One commenter is concerned that SDO and non-profit providers are disproportionately impacted by this provision because they do not have the infrastructure of larger providers and therefore are less likely to capture all of the costs for a patient. The commenter went on to state the net effect of the outlier policy is that a provision that was originally put into place to protect small providers is actually penalizing them by decreasing the base rate. This same commenter recommended that CMS either suspend or, if that is not feasible, lower the outlier withhold from 1.0 percent to 0.5 percent.

Finally, several commenters referenced the GAO report 13-287, entitled, “End-Stage Renal Disease: CMS Should Improve Design and Strengthen Monitoring of Low-Volume Adjustment” and published March 1, 2013, that found discrepancies in the identification of low-volume facilities. One commenter suggested that CMS delay implementation of the drug utilization adjustment until the purported problems with the underlying PPS can be resolved.

Response:

In developing the final ESRD PPS base rate for 2011, in accordance with section 1881(b)(14)(A)(ii) of the Act, we standardized the rate to account for the

payment adjustments and the outlier policy. As stated in the 2011 ESRD PPS final rule (75 FR 49081), to account for the overall effects of the proposed ESRD PPS case-mix patient and facility adjustment factors and wage indexes, we had to standardize payments in order to ensure that total projected PPS payments were equal to what would otherwise have been paid had the ESRD PPS not been implemented, prior to application of the 98 percent budget-neutrality adjustment. The standardization factor was calculated by dividing total estimated payments in 2011 under the basic case-mix adjusted composite rate payment system by estimated payments under the final ESRD PPS in 2011. We do not intend to revise the standardization factor that was applied to the 2011 ESRD PPS base rate to reflect actual payments made under each of the adjustments and therefore we did not propose to re-standardize the CY 2014 ESRD PPS base rate. Rather, we used the best data available and made a good faith effort to simulate payments under the ESRD PPS to determine the standardization factor that was applied to the CY 2011 ESRD PPS base rate. The final standardization adjustment was .9407 or a reduction of 5.93 percent from the unadjusted per treatment base rate.

Since the ESRD PPS began, organizations representing LDOs have expressed concern about the comorbidity adjustments and requested that we return the 5.93 percent standardization factor to the base rate. In response to this concern, in preparation for this final rule, we performed an analysis of the composition of the standardization factor and determined that the bulk of the 5.93 percent standardization reduction to the base rate arises from factors other than the comorbidities. Age adjustments account for approximately 3.0 percent, the onset of dialysis adjustment accounts for approximately 2.4 percent, the low volume adjustment accounts for approximately 0.3 percent, the body size adjustments account for approximately 0.2 percent, and the wage adjustment accounts for approximately −0.7 percent (this was negative and partially offset the effects of the other adjustments because the average wage adjustment was less than 1.00, unlike the other adjustments). The comorbidity adjustments jointly account for approximately 0.8 percent.

Section 632(c) of ATRA requires the Secretary, by not later than January 1, 2016, to conduct an analysis of the case mix payment adjustments under section 1881(b)(14)(D)(i) of the Act and make appropriate revisions to those adjustments. Pursuant to this authority, CMS plans to conduct a regression analysis for the CY 2016 ESRD PPS rulemaking cycle to reassess the appropriateness of the patient and facility level payment adjustments. At that time, we plan to analyze the various payment adjustments under the PPS to determine whether they should continue to apply as well as whether the magnitude of the adjustments is appropriate.

In responses to the comments regarding the comorbidity adjustments, we will consider whether changes to documentation requirements are warranted with respect to qualifying for the comorbidity payment adjustment.

In regards to the outlier policy, as we explained in section II.C.6. of this final rule, 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 variations in the amount of erythropoiesis stimulating agents necessary for anemia management. Each year, we simulate payments under the ESRD PPS in order to set the outlier fixed dollar loss and MAP amounts for adult and pediatric patients to try to achieve the 1 percent outlier policy. We would not increase the base rate in years where outlier payments were less than 1 percent of total ESRD PPS payments, nor would we reduce the base rate if the outlier payments exceed 1 percent of total ESRD PPS payments. Rather, we would simulate payments in the following year and adjust the fixed dollar loss and MAP amounts to try to achieve outlier payments that meet the 1 percent outlier percentage. This approach to updating the outlier policy is consistent with how we update outlier policies in other Medicare prospective payment systems, for example, the prospective payment system for inpatient psychiatric facilities. We believe that the outlier policy continues to be important for patient access to ESRD-related services because it offsets the cost of high-cost patients, particularly those who receive more drugs and biologicals than the average patient. We will reassess the outlier policy along with our review of the other payment adjustments for the CY 2016 ESRD PPS. With respect to the low-volume payment adjustment, we are reviewing the GAO's findings and are considering their recommendations.

Comment:

A national organization representing large dialysis organizations (LDOs) and ESRD facilities recommended that prior to making any adjustment to reduce payments to reflect changes in utilization of drugs and biologicals, CMS should take into consideration what these commenters believe to be a cross subsidization of items and services that were previously paid for under the basic case-mix adjusted composite rate payment system with payments for formerly separately billable items. The commenters believe that because the composite rate, which historically did not have annual market basket increases, was underfunded, payments for separately billable drugs, laboratory tests, and supplies offset those losses. The organization provided a report that estimates that $15-20 of costs for items and services that were previously paid for under the basic case-mix adjusted composite rate payment system are subsidized by the incorporation into the base rate of formerly separately billable drugs and biologicals, laboratory tests, and supplies. The commenters stated that CMS has the authority to take into account that Congress intended that some previously separately billable drug dollars be used to compensate for items and services formerly paid for under the purportedly underfunded basic case-mix adjusted composite rate payment system. This comment was supported by other national providers and patient organizations.

Response:

Section 1881(b)(14)(I) of the Act requires that the single payment amount be reduced by an amount that reflects the Secretary's estimate of the change in utilization of drugs and biologicals. It does not provide for the reduction to account for cross-subsidization of other components of the base rate. We do not believe we would be in compliance with section 1881(b)(14)(I) if we were to eliminate most of the drug utilization reduction to reflect the purported need for cross-subsidization of the composite rate with separately billable services.

Comment:

In making the reduction to the ESRD PPS base rate, national organizations representing the dialysis industry and dialysis patients recommended that we factor in the 2 percent reduction already made to the original ESRD PPS base rate in 2011 as required by section 1881(b)(14)(A)(ii), which was implemented in the form of the 98 percent budget neutrality adjustment. The comments indicated that this reduction accounts for the anticipated reduction in drug utilization and has already been built into the payment rate. The commenters stated that CMS has the authority to temper the drug utilization adjustment because section 1881(b)(14)(I) does not require a dollar-for-dollar adjustment. Rather, the statute indicates that the adjustment

should “reflect” the Secretary's estimate of the change in utilization of drugs and biologicals. Therefore, the commenters contended, CMS has the authority to consider the 2 percent reduction implemented in 2011 as part of the drug utilization adjustment.

Response:

In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we explained that once we determined the per-treatment difference in utilization of drugs and biologicals ($32.34), we reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustment to yield the proposed drug utilization adjustment amount of $29.52. As noted previously, for this final rule, the difference in drug utilization per treatment was computed to be $32.79 and this amount was also reduced by the standardization, the outlier, and the 98 percent budget neutrality adjustment to yield the final drug utilization adjustment amount of $29.93. Therefore, the 98 percent budget neutrality adjustment was considered in computing the drug utilization adjustment. Moreover, because the 98 percent budget neutrality adjustment and the drug utilization adjustment both apply to the “single” payment rate required by section 1881(b)(14)(A), we do not believe it would be appropriate to reduce the drug utilization adjustment by the amount of the 98 percent budget neutrality adjustment, absent a clear statement of congressional intent that we should do so.

Comment:

Several national dialysis organizations indicated that CMS has an obligation to ensure that the single payment amount is consistent with the factors set forth in section 1881(b)(2)(B) of the Act, which provides that payment amounts for renal dialysis services be determined on a “cost-related basis or other economical and equitable basis.” The commenters submitted data that displayed profit margins for ESRD facilities prior to the proposed one-time reduction and then what the profit margins would look like after the one-time reduction. The comments stated that if payment rates do not reflect the cost of providing care, then they are neither economical nor equitable. Also, since section 1881(b)(14)(I) did not repeal section 1881(b)(2)(B) and the sections do not conflict with one another, both must be considered. In addition, because Congress inserted an “and” between section 1881(b)(2)(B) requirements and section 1881(b)(7)—the reference to the payment system in effect at the time the provision was modified—this suggests the intent to have a two-step process for setting the payment rate. Commenters claim this conjunction suggests that the Secretary must not only apply the provisions that prescribe the payment model, but also evaluate the final payment amount against the factors outlined in subsection (b)(2)(B). Using these authorities, commenters claim CMS could temper any payment reduction so the final amount remains based either upon the cost of providing services or upon economic and equitable factors. The commenters indicated that a payment amount that does not cover the cost of providing care would not be cost-related or equitable. The commenters believe use of the word “reflect” in section 1881(b)(14)(I) provides CMS the authority to adjust the drug utilization adjustment consistent with other provisions of section 1881. The commenters contend that this interpretation is also supported by the fact that section 1881(b)(14)(I) notes that the drug utilization adjustment applies to “this paragraph” (which establishes the PPS bundle) and thus, does not override or repeal other provisions of this section, including section 1881(b)(2)(B).

Response:

We disagree with the commenters that section 1881(b)(2)(B) of the Act applies to the ESRD PPS. The MIPPA revisions to section 1881 of the Act did not specify that we must take section 1881(b)(2) of the Act into account in implementing the ESRD PPS. Instead, it required that we base the ESRD PPS on the lowest per patient utilization year out of 2007, 2008, and 2009 and that the system should result in payments that are 98 percent of what would otherwise have been paid. Once we established that 2007 was the lowest per patient utilization year, we used cost report and claims data to compute the base rate. Section 1881(b)(14)(I) requires the Secretary to compare per patient utilization data for 2007 with such data for 2012 and then make reductions to the ESRD PPS single payment amount to reflect the Secretary's estimate of the change in utilization of drugs and biologicals. We do not believe this very specific statutory provision gives us discretion to mitigate the amount of the reduction based on the very general authority of section 1881(b)(2)(B), which, moreover, we believe no longer applies to payment for renal dialysis services.

Other commenters pointed out that the prospective payment systems should protect beneficiary access while conserving beneficiaries' and taxpayers' resources. Accordingly, in addition to proposing a full reduction of $29.52 in CY 2014, in the CY 2014 ESRD PPS proposed rule (78 FR 40843), we noted that a one-time reduction to the ESRD PPS base rate could be a significant reduction for ESRD facilities for the year and potentially impact beneficiary access to care. Therefore, we solicited comments on a potential transition or phase-in period of the proposed 12 percent reduction and the number of years for such transition or phase-in period. The comments related to a transition and our responses are set forth below.

Comment:

We received a comment from MedPAC providing the details from their March 2013 report to Congress which is one of two reports that they issue each year to advise Congress on issues affecting the Medicare program (the March 2013 report is available at the following link:

http://www.medpac.gov/documents/Mar13_entirereport.pdf

). Specifically, MedPAC noted that there is historical evidence that implementation of PPSs in Medicare has been characterized by providers quickly reducing use of services included in the payment bundle, resulting in periods of “overpayment” where providers benefit from the change in practice patterns and the Medicare program does not realize savings until the payment is adjusted. The MedPAC recommended that the Medicare program move expeditiously toward correcting overpayments, while also adjusting payments so that providers have time to respond in a way that does not disrupt beneficiary access. The MedPAC further recommended that CMS consider their analyses of Medicare margins, that is, the extent to which facilities are reimbursed more than their cost of furnishing services to Medicare beneficiaries, in implementing the drug utilization reduction. Based upon the available 2011 cost reports at the time of their analysis, MedPAC estimated an aggregate 2011 Medicare margin of about 4 percent for free standing ESRD facilities.

Specifically, MedPAC recommended that the Secretary take action to freeze the payment rates for 2014 at 2013 levels, consistent with their recommendation to the Congress in their March 2013 report. MedPAC explained that this method would accomplish several goals. First, it would start to move the payment system toward greater accuracy and in doing so, protect scarce Medicare resources paid for by the beneficiary and the taxpayer. Second, it would protect beneficiary access and give MedPAC the ability to report back to Congress on any developing access issues should they occur. Third, it would give ESRD facilities time to respond to payment changes by identifying efficiencies in care. Lastly, it would give CMS,

MedPAC, and the Congress time to consider policies that should be changed concurrent with further refinements, such as targeting facilities critical to beneficiary access (rather than protecting industry-wide payment rates) and improving the case-mix adjustments.

Response:

We agree with the MedPAC suggestion that freezing payments could ensure access to essential ESRD services while not further perpetuating overpayments. However, we believe that section 1881(b)(14)(I) of the Act requires that, effective January 1, 2014, we “make reductions to the single payment that would otherwise apply. . . .” and therefore, we believe the base rate must be reduced by some portion of the drug utilization adjustment amount to be consistent with this provision. We interpreted MedPAC's recommendation of freezing payment rates at the CY 2013 level, provided in both their public comment and in their March 2013 Report to Congress, to mean that payment is adequate in CY 2013. We believe that we can be in compliance with section 1881(b)(14)(I) and follow MedPAC's recommendation by applying a portion of the drug utilization reduction to the base rate to offset the payment update, that is, the ESRDB market basket minus productivity increase factor, and other impacts (such as, changes in the outlier thresholds) to create an overall impact of zero percent for ESRD facilities from the previous year's payments in CYs 2014 and 2015. We relied on the impact chart provided in the impact analysis section of our annual rules to determine the impact of various policy changes on aggregate ESRD facility payments and took those values into consideration to determine the drug utilization adjustment for this year, and we will do the same next year.

To implement a portion of the drug utilization adjustment in CY 2014, we adjusted the CY 2013 ESRD PPS base rate by the CY 2014 ESRDB market basket minus productivity increase factor, the wage index budget-neutrality factor, and the home dialysis training add-on budget-neutrality factor. As we mentioned above, we took into consideration other impacts (provided in Table 12 presented in section XI.B.1.a. of this final rule) of the CY 2014 ESRD PPS that will cause a change in average payments to ESRD facilities in order to create and overall impact of zero percent. Specifically, for CY 2014, we are accounting for the changes to outlier payments and the movement from a 75/25 blend of PPS and pre-PPS payments to 100 percent ESRD PPS payments (for those ESRD facilities transitioning to the ESRD PPS) to create a zero percent average impact for facilities from the CY 2013 estimated payments. As indicated in Table 12, the average increase resulting from changes to the fixed dollar loss threshold and Medicare allowable payment (MAP) amounts under the ESRD PPS outlier policy is estimated to be a 0.4 percent increase over 2013 payments. For the ESRD PPS transition change to 100 percent ESRD PPS payments, the estimated average increase is 0.2 percent. These percentage increases, in addition to the ESRDB market basket minus productivity adjustment increase of 2.8 percent as discussed in section II.C.3. of this final rule, yield a drug utilization reduction for CY 2014 of 3.3 percent or $8.16 per treatment. Specifically, in Table 12, the overall impact of all of the changes for CY 2014 ESRD PPS totals 3.4 percent, however, in a multiplicative system to achieve a zero percent overall impact we had to divide 1 by 1.034 to derive a 0.967 or 3.3 percent decrease. Therefore, we are finalizing a transition of the drug utilization adjustment amount as an annual offset to payment rate updates and other impacts that would otherwise cause a change in average payments to ESRD facilities, thereby creating an overall impact of zero percent for ESRD facilities from the previous year's payments. We are finalizing this methodology for CY 2014 and CY 2015.

For CY 2016, we will evaluate how to apply the balance of the adjustment when we conduct an analysis of the case-mix adjustments required by section 632(c) of ATRA and implement the inclusion of oral-only ESRD-related drugs and biologicals consistent with section 632(b) of ATRA. At that time, this evaluation will allow us to determine if we should apply the balance of the reduction in CY 2016 or provide one additional transition year so that the entire amount of the drug utilization adjustment will have been applied to the base rate no later than CY 2017. This transition approach will make it easier for ESRD facilities to plan and budget, allow time for providers to respond to payment changes by identifying efficiencies, and allow time for CMS to consider further refinements to the ESRD PPS.

Comment:

We received several comments from national organizations representing ESRD facilities stating that they were unable to provide useful or constructive comments on the nature, extent and operation of a transition until they understand how CMS intends to correct the base rate to reflect cross-subsidization of the composite rate services with separately billable services, standardization, comorbidity case-mix adjusters, the low-volume adjuster, and the outlier policy. However, the commenters stated that the transition should not be viewed as a substitute for making necessary corrections to the current payment system.

The commenters suggested that if CMS does utilize a transition to implement the drug utilization adjustment, then it should do so over a period of 2 to 4 years to minimize system disruption for beneficiaries, assess the impact on access, and correct course, as needed. The commenters further explained that a transition would allow providers to adjust to the payment reduction and engage in a more thoughtful process to evaluate and close facilities that cannot be made viable, reduce service, and change staffing. The commenters also explained that the transition would allow CMS to evaluate the impact of the payment reduction.

Response:

As stated previously, we do not intend to offset the drug utilization adjustment amount to reflect purported cross-subsidization of items and services paid for under the composite rate with formerly separately billable services, nor do we intend to update the standardization and outlier reductions made to the 2011 ESRD PPS base rate to reflect actual payments of the adjustments. However, the transition approach we are adopting will spread the reduction over a 3- to 4-year period to minimize system disruption.

Comment:

One national organization that represents small dialysis organizations and several independent ESRD facilities suggested that we treat small dialysis organizations differently from large dialysis organizations when implementing a transition of the reduction to the base rate because we determined in the CY 2014 ESRD PPS proposed rule (78 FR 40888) that a one-time reduction to the base rate would have a significant economic impact on a substantial number of small entities. The commenter explained that ESRD facilities that are owned by small dialysis organizations have less flexibility and working capital to withstand a substantial decrease in revenue. The commenter urged CMS to hold off on implementing the reduction for the first 6 months of CY 2014 because the rule is not likely to be finalized until November 2013 and without a 6-month delay, ESRD facilities would not have sufficient time to plan for and make adjustments in their operations. The commenter further suggested that the amount of the reduction should be transitioned over a period of 6 years after the 6-month

deferral and should not exceed 2 percent of the base rate in any given year.

Another national organization that represents not-for-profit ESRD facilities with support from several ESRD facilities recommended a transition under which the base rate is not reduced by more than $5.00 in a given year. One commenter recommended that CMS continue to provide a market basket update each year and apply the drug utilization adjustment to the base rate after the market basket update is applied. The commenter stated that CMS does not have an obligation to meet a certain overall reduction in expense over time and that it has discretion to implement a transition that does not effectively end with a lower rate than would have been in place if there were no transition. One commenter suggested that CMS implement the transition as optional, just as how the original ESRD PPS implementation allowed the option of accepting the full bundle or a 4-year transition.

Another commenter suggested that CMS create a differential payment for non-profit and SDOs. The commenter pointed out that the Regulatory Flexibility Act allows CMS to assess the impact of the regulation on small entities. A medium dialysis organization that was created as a result of a divestiture requirement imposed by the Federal Trade Commission (FTC) pointed out that the proposed drug utilization adjustment will undermine specific FTC action to preserve competition in the dialysis facility's marketplace. The commenter stated that overall the diminished competition in the marketplace will result in lower capacity, lower quality of care, and higher private payer prices in those markets.

Response:

We agree with the commenters that implementing the full amount of the drug utilization adjustment in CY 2014 would have a significant impact on access to ESRD services. We believe that the transition approach we are taking, which will apply the drug utilization adjustment amount to the base rate over several years, will allow ESRD facilities an opportunity to plan for and adjust their future operations accordingly. Because facilities are currently operating efficiently under the CY 2013 payment rates and we are largely offsetting future increases to achieve an average impact of zero percent for ESRD facilities in CYs 2014 and 2015, we do not believe a 6-month grace period is necessary. We note that the dollar value of the 3.3 percent drug utilization reduction for CY 2014 is $8.16 per treatment. Although this amount is higher than the $5.00 reduction suggested by the commenters, we believe that ESRD facilities will be able to maintain their current programs and services because payments will remain close to CY 2013 levels for the next 2 years. With regard to the comment that we should provide a market basket increase prior to application of the reduction, we note that under our approach to the drug utilization adjustment we apply the ESRDB market basket minus productivity increase prior to making the drug utilization reduction.

In regards to the commenters that suggested that CMS create a different payment amount or transition scheme for non-profit ESRD facilities and SDOs, as well as for those ESRD facilities that were created due to FTC-ordered divestiture, we believe that we must provide for a single payment rate in accordance with section 1881(b)(14)(A)(i) of the Act, but that the transition will mitigate the potential negative effects of the adjustment that commenters pointed out. In addition, any other adjustments to the payment rate, such as an adjustment for non-profit facilities and SDOs would be established through regression analysis.

Comment:

One patient advocacy group supported the drug utilization reduction but pointed out that the industry got the benefit of a base rate that included higher utilization of ESRD-related drugs and biologicals since CY 2011, but CMS did not make an adjustment to the payment until CY 2014 and continued to increase the base rate using the ESRDB market basket. The commenter further pointed out that prior to implementation of the ESRD PPS, annual increases to the composite rate were sporadic.

Response:

We share the commenter's view that small, medium, and large dialysis facilities have benefited from an inflated base rate since CY 2011. As noted previously, there is historical evidence that implementation of PPSs has resulted in providers quickly reducing use of services included in the bundle, thereby creating periods of overpayment in which providers benefit from the change in practice patterns and the Medicare program does not realize savings until the payment is adjusted. Section 1881(b)(14)(I) of the Act provided the specific authority to reduce the base rate to reflect only the change in utilization of ESRD-related drugs and biologicals and not all renal dialysis services. We note that annual market basket increases to the ESRD PPS base rate are required by section 1881(b)(14)(F)(i)(I) of the Act, although these increases are reduced by the multifactor productivity adjustments required by section 1881(b)(14)(F)(i)(II) of the Act.

Comment:

Several commenters expressed concern that with the implementation of the ESRD PPS and QIP have come a significant number of unfunded mandates that the Agency has not acknowledged in any specific way and the market basket does not address. The commenters recommended that a thorough analysis of costs should include those that have increased since the initiation of the bundle when calculating the drug utilization reduction. Notable among these are the costs of new IT requirements for participation in CROWNWeb, administration of Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys, participation in the National Healthcare Safety Network (NHSN), and transitioning to ICD-10-CM coding. One small dialysis organization indicated that the costs of these initiatives are as much as $5 per treatment. In addition to the costs discussed, commenters urged us to consider the reductions caused by sequestration and QIP penalties. The commenters urged us to take these costs into consideration when computing the drug utilization adjustment.

Response:

We understand the commenter's concerns. Nonetheless, section 1881(b)(14)(I) of the Act requires us to make reductions to the single payment amount to reflect the Secretary's estimate of the change in utilization of drugs and biologicals from 2007 to 2012. Section 1881(b)(14)(I) does not give us authority to take into account any additional factors that may impact the cost of care, such as the sequestration, and the QIP requirements. We note that entering data in CROWNWeb is a Condition for Coverage for dialysis facilities (42 CFR § 494.180(h)), and that CROWNWeb was implemented in accordance with the 1995 Paperwork Reduction Act. In regards to the transition to ICD-10-CM coding scheme, this is a requirement that is shared by all Health Insurance Portability and Accountability Act of 1996 covered entities and is not unique to ESRD facilities.

Comment:

Hundreds of comments from ESRD patients, their family members, friends and caregivers, to national organizations representing dialysis patients and facilities, to ESRD facility staff expressed grave concerns about steps facilities would take if we were to adopt the proposed drug utilization adjustment. They were concerned about facility closures, staffing cuts, cuts to hours of operation,

loss of transportation services, and their continued access to life-saving ESRD treatment. Some commenters indicated that facilities have already begun to shift costs to patients and cut back staffing and programs even though the reduction will not be applied until January 1, 2014. Patients who attend nocturnal dialysis programs stated that without these programs they would be unable to continue working. ESRD facility staff also expressed concern about the magnitude of the proposed reduction and the likelihood of facility closures and resulting job losses. One commenter pointed out that pediatric patients often require more intensive staffing; it is not uncommon for younger pediatric patients to need a staffing ratio of two nurses to one patient. The commenter stated that the drastic payment reduction proposed by CMS will challenge pediatric facilities to provide safe care for these vulnerable patients.

Commenters expressed concern about facility closures and their continued access to quality ESRD services, especially in rural and inner city areas. Many commenters noted the burden and expense of traveling long distances should their facilities close. Another commenter stated that the drug utilization adjustment threatens the networks of dialysis facilities where profitable facilities allow organizations to subsidize those facilities that operate at a loss in underserved areas. Conversely, a few comments indicated support for the proposed drug utilization adjustment, stating that facilities are primarily interested in higher profits and high corporate salaries at the expense of patient care.

One patient advocacy group expressed concern about the corporate practice by ESRD facilities of shifting the responsibility of prescribing therapy and medication from the nephrologist to the dialysis organization. Another commenter representing nephrology nurses expressed concern that the proposed reduction will cause ESRD facilities to curtail the number of nursing positions and no longer maintain staff education and competencies. Other commenters pointed out that many commercial payers use Medicare reimbursement rates as a basis for their reimbursement, limiting ESRD facilities' ability to make up the lost revenue from other sources. Several commenters expressed concern that the 12 percent payment reduction in CY 2014 may hinder the ESRD facilities' ability to participate in the Center for Medicare and Medicaid Innovation's (CMMI) Comprehensive ESRD Care model which is testing innovative models of care.

Response:

We believe that the approach we have taken to transition the drug utilization reduction over a 3 to 4-year timeframe will minimize disruption in the delivery of ESRD services and will hopefully lead facilities to reverse cuts they may have already implemented in anticipation that the full amount of the drug utilization adjustment would be applied to the base rate in CY 2014. In addition, part of our rationale for the transition was to enable facilities to maintain their current programs and services. We developed a comprehensive claims-based monitoring system when we implemented the ESRD PPS in 2011 and will use that system to identify changes in practice patterns, prescribing patterns, health outcomes, and ownership that may impact the furnishing of ESRD services. We have provided sufficient information in this final rule about how we plan to transition the drug utilization adjustment so that ESRD facilities can assess whether to participate in the CMMI Comprehensive ESRD Care model.

Comment:

One commenter recommended that CMS specify how it plans to ensure that access to and quality of care is not compromised by the drug utilization adjustment. They provided a list of monitoring elements including ESA and other drug utilization rates, hospital admission/readmission rates, transfusion rates, availability to patients of dietitian and social worker services, changes in numbers of shifts per facility, changes in staffing ratios or staffing composition (that is, fewer nurses), consolidation/sales of dialysis facilities in markets with limited numbers of providers, and facility closures. The commenter recommended that CMS post quarterly updates on monitored aspects of care that are feasible to report publically.

Response:

We intend to monitor access through the comprehensive claims monitoring program we implemented when the ESRD PPS began in 2011. We believe that the transition approach we are adopting for implementing the drug utilization reduction will mitigate many of the unintended consequences identified by the commenters. We note that many of the suggested monitoring elements are already part of the comprehensive claims monitoring program (for example, ESA and other drug utilization rates, use of inpatient hospital services, and transfusion rates). Other elements suggested by the commenters warrant additional review by CMS to assess the burden associated with collecting the information. We currently provide a workbook that displays several key trends from CY 2011 through CY 2013 on the CMS Web site:

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Spotlight.html

. This workbook is updated on a quarterly basis.

Comment:

Comments from ESRD patients indicated that they believe Medicare will no longer pay for dialysis or that the cost of the reduction would be shifted to patients.

Response:

We want to reassure ESRD patients, their families, and caregivers that Medicare will continue to cover dialysis services, but at a lower rate. As a result of the small reduction to the ESRD PPS base rate (that is, from the CY 2013 ESRD PPS base rate of $240.36 to CY 2014 ESRD PPS base rate of $239.02), beneficiary co-insurance will also decrease slightly. We believe the transition approach we are finalizing makes cost shifting to beneficiaries less likely.

In summary, to comply with section 1881(b)(14)(I) of the Act we have computed the drug utilization adjustment to be $29.93 as detailed in section II.C.2.a.v. above. Specifically, we used the CY 2007 claims data that was used in the preparation of the CY 2011 ESRD PPS final rule for CY 2007 utilization and included the drug utilization data from facilities located in the Pacific Rim. For CY 2012 utilization we used the CY 2012 claims file updated through June 30, 2013, (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013) to calculate 2012 utilization.

To determine the final growth update factor's value, we used the methodology discussed above resulting in a 7.64 percent growth update factor to inflate prices for ESRD-related drugs and biologicals from CY 2011 levels to CY 2014 levels. The 7.64 percent growth update factor represents the ESRDB market basket minus the multifactor productivity adjustments finalized in CYs 2012, 2013, and 2014, the wage index budget-neutrality adjustment factors finalized in CYs 2012, 2013, and 2014, and the home dialysis training add-on budget neutrality adjustment factor finalized for CY 2014. We applied the CY 2014 prices to the CY 2007 and CY 2012 drug utilization data to calculate aggregate amounts for each year. Next, we divided each year's estimated aggregate amount for drugs and biologicals by that year's count of treatments furnished to Medicare beneficiaries to get an average payment per treatment for the year. This resulted

in a per treatment amount for drugs and biologicals of $83.96 in 2007 and a per treatment amount for drugs and biologicals of $51.17 in 2012. We then subtracted the average payment per treatment for CY 2012 from the average amount per treatment for CY 2007 to get a total of $32.79 ($83.96 − $51.17 = $32.79). We then reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustments to get a total of $29.93 ($32.79 × .9407 × .99 × .98 = $29.93). We are finalizing $29.93 as the total drug utilization reduction.

In response to comments we are finalizing the following approach for implementing the amount of the drug utilization adjustment over a 3- to 4-year transition period. For CYs 2014 and 2015, we are implementing a transition of the drug utilization adjustment by offsetting the payment update, that is the ESRDB market basket minus productivity increase factor and other impacts (such as, changes to the outlier thresholds), by a portion of the reduction amount necessary to create an overall impact of zero percent for ESRD facilities from the previous year's payments. We relied on the impact chart provided in the impact analysis section of our annual rules to determine the impact of various policy changes on aggregate ESRD facility payments and took those values into consideration to determine the drug utilization adjustment for this year, and we will do the same for next year.

For CY 2014, this approach results in a base rate reduction of $8.16, which yields a CY 2014 ESRD PPS base rate of $239.02. This reflects the CY 2013 ESRD PPS base rate of $240.36 adjusted by the ESRDB market basket minus productivity increase factor of 2.8 percent, the wage index budget neutrality factor of 1.000454, and the home dialysis training add-on budget neutrality adjustment factor of 0.999912 to get $247.18 ($240.36*1.028*1.000454*0.999912 = $247.18). Then we reduced this amount by the portion of the drug utilization reduction that is being implemented this year—$8.16—to arrive at a final CY 2014 ESRD PPS base rate of $239.02 ($247.18 − $8.16=$239.02).

For CY 2016, we will evaluate how to apply the balance of the reduction when we conduct an analysis of the case-mix adjustments as required by section 632(c) of ATRA and implement the inclusion of oral-only ESRD-related drugs and biologicals as permitted by section 632(b) of ATRA. Following this evaluation, we will determine whether we should apply the balance of the reduction in CY 2016 or provide one additional transition year so that the full amount of the drug utilization adjustment will have been applied to the base rate over a 4-year transition period ending in CY 2017.

3. ESRD Bundled Market Basket

a. Overview and Background

In accordance with section 1881(b)(14)(F)(i) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act, beginning in 2012, the ESRD 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 application of the productivity adjustment described may result in the increase factor being less than 0.0 for a year and may result in payment rates for a year being less than the payment rates for the preceding year. The statute also provides that the market basket increase factor should reflect the changes over time in the prices of an appropriate mix of goods and services used to furnish renal dialysis services.

b. Market Basket Update Increase Factor and Labor-related Share for ESRD Facilities for CY 2014

As required under section 1881(b)(14)(F)(i) of the Act, 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 for ESRD treatment, this term is also commonly used to denote the input price index (that is, cost categories, their respective weights, and price proxies combined) derived from a market basket. Accordingly, the term “ESRDB market basket,” as used in this document, refers to the ESRDB input price index.

We proposed to use the CY 2008-based ESRDB market basket described in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2014 ESRDB market basket increase factor and labor-related share based on the best available data. Consistent with historical practice, we estimate the ESRDB market basket update based on IHS Global Insight (IGI), Inc.'s forecast using the most recently available data. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of the market baskets.

Using this methodology and the IGI forecast for the first quarter of 2013 of the CY 2008-based ESRDB market basket (with historical data through the fourth quarter of 2012), and consistent with our historical practice of estimating market basket increases based on the best available data, the proposed CY 2014 ESRDB market basket increase factor was 2.9 percent.

For the CY 2014 ESRD payment update, we proposed to continue using a labor-related share of 41.737 percent for the ESRD PPS payment, which was finalized in the CY 2011 ESRD final rule (75 FR 49161).

Comment:

Several commenters supported the ESRDB proposed market basket update.

Response:

We appreciate the commenters support and are finalizing our update to the ESRDB market basket for CY 2014 based on the most recent forecast of the ESRDB market basket.

c. Productivity Adjustment for CY2014

Under section 1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the Affordable Care Act, for CY 2012 and each subsequent year, the ESRD market basket percentage increase factor shall be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment as 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 and final 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. The details regarding the methodology for forecasting MFP and how it is applied to the market basket were finalized in the CY 2012 ESRD PPS final rule (76 FR 70232 through 70234). Using this method and the IGI forecast for the first quarter of 2013 of the 10-year moving average of MFP, the proposed CY 2014 MFP factor was 0.4 percent. We did not receive any comments on this proposal.

Accordingly, are finalizing the CY 2014 MFP adjustment to the ESRDB market basket for CY 2014 based on the most recent forecast available.

d. Calculation of the Final ESRDB Market Basket Update, Adjusted for Multifactor Productivity for CY 2014

Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD PPS payment amounts shall be annually increased by an ESRD market basket percentage increase factor reduced by the productivity adjustment. We proposed to use the same methodology for calculating the ESRDB market basket updates adjusted for MFP that was finalized in the CY 2012 ESRD PPS final rule (76 FR 70234) and based on the most recent forecast of the data.

It is our policy that if more recent data are available after publication of the proposed rule (for example, a more recent estimate of the market basket or MFP adjustment), we will use such data, if appropriate, to determine the CY 2014 market basket update and MFP adjustment in the CY 2014 ESRD PPS final rule. Thus, in accordance with section 1881(b)(14)(F)(i) of the Act, the final ESRDB market basket percentage increase factor for CY 2014 is based on the 3rd quarter 2013 forecast of the CY 2008-based ESRDB market basket, which is estimated to be 3.2 percent. This market basket percentage is then reduced by the MFP adjustment (the 10-year moving average of MFP for the period ending CY 2014) of 0.4 percent, which is based on IGI's 3rd quarter 2013 forecast. The resulting final MFP-adjusted ESRDB market basket update for CY 2014 is equal to 2.8 percent, or 3.2 percent less 0.4 percentage point.

4. The CY 2014 Wage Index

Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD PPS may include a payment adjustment by geographic wage index payment adjustment, such as the index referred to in section 1881(b)(12)(D) of the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the use of the Office of Management and Budget's (OMB) Core-Based Statistical Areas (CBSAs)-based geographic area designations to define urban and rural areas and their corresponding wage index values. In the CY 2012 ESRD PPS final rule (76 FR 70239-70241), we finalized that, under the ESRD PPS, we will continue to utilize the ESRD PPS wage index methodology, first established under the basic case-mix adjusted composite rate payment system, for updating the wage index values using the OMB's CBSA-based geographic area designations to define urban and rural areas and corresponding wage index values; the gradual reduction of the wage index floor during the transition; and the policies for areas with no hospital data. The CBSA-based geographic area designations were originally described in OMB bulletin 03-04, issued June 6, 2003. This bulletin, as well as subsequent bulletins, are available online at

http://www.whitehouse.gov/omb/bulletins_default

.

OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles. In accordance with our established methodology, we have historically adopted any CBSA changes that are published in the OMB bulletin that correspond with the IPPS hospital wage index. For CY 2014, we use the FY 2014 pre-floor, pre-reclassified hospital wage index to adjust the ESRD PPS payments. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which establishes revised delineations of statistical areas based on OMB standards published in the

Federal Register

on June 28, 2010 and 2010 Census Bureau data. Because the FY 2013 pre-floor, pre-reclassified hospital wage index was finalized prior to the issuance of this Bulletin, the FY 2013 pre-floor, pre-reclassified hospital wage index does not reflect OMB's new area delineations based on the 2010 Census. Further, as stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications must be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule; therefore, the FY 2014 pre-floor, pre-reclassified hospital wage index does not reflect OMB's new area delineations based on the 2010 Census. CMS intends to propose changes to the hospital wage index based on this OMB Bulletin in the FY 2015 IPPS/LTCH PPS proposed rule. Therefore, we anticipate that the OMB Bulletin changes will be reflected in the FY 2015 hospital wage index. Because we base the ESRD PPS wage index on the hospital wage index, we anticipate that the OMB Bulletin changes would be reflected in the FY 2015 hospital wage index and, thus, in the CY 2015 ESRD PPS wage index.

For CY 2014, we will continue to use the same methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR 49117), for determining the wage indices for ESRD facilities in CY 2014. Specifically, we proposed to adjust wage indices for CY 2014 to account for annually updated wage levels in areas in which ESRD facilities are located. We proposed to use the most recent, FY 2014 IPPS pre-floor, pre-reclassified hospital wage index, which, as discussed above, does not reflect OMB's new area delineations based on the 2010 Census. The ESRD PPS wage index values are calculated without regard to geographic reclassifications authorized under section 1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data that are unadjusted for occupational mix. The CY 2014 wage index values for urban areas are listed in Addendum A (Wage Indices for Urban Areas) and the CY 2014 wage index values for rural areas are listed in Addendum B (Wage Indices for Rural Areas). Addenda A and B are located on the CMS Web site at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html

.

In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a policy to use the labor-related share of 41.737 for the ESRD PPS portion of the payment. For the CY 2014 ESRD PPS, we did not propose any changes to the labor-related share of 41.737. However, because all providers that elected to participate in the transition are entering the fourth year of the transition and will begin being paid 100 percent under the ESRD PPS, the 53.711 labor-related share that was applied to the composite rate portion of the blended payment is no longer applicable. We discuss the methodology for the ESRD PPS labor-related share in our CY 2011 ESRD PPS final rule (75 FR 49161), where we noted that the labor-related share is typically the sum of Wages and Salaries, Benefits, Housekeeping and Operations, Professional Fees, Labor-related Services, and a portion of the Capital-related Building and Equipment expenses. For additional discussions on the labor-related share please refer to section II.C.3.b. of this final rule.

Comment:

We received several comments expressing concern about applying the same labor-related share in CY 2014, as was finalized in CY 2011. Many commenters suggested that CMS review the labor-related share and update the factor to reflect 2012 cost report data. Other commenters noted that smaller providers cannot “offset negative impacts across a national market base” and therefore are disadvantaged by rising salary costs in labor markets that compete regionally. A few commenters suggested that CMS has erred in not updating the labor-related share for CY 2014 to appropriately reflect the decrease in pharmaceutical spending identified in ESRD facility cost reports for 2011 and 2012. One commenter noted that the current labor-related share calculation is based upon

2008 cost report data, and the decrease in pharmaceutical spending since that time has resulted in an “understated labor-related share” used to adjust wages when making ESRD PPS payments.

Response:

The ESRD bundled labor-related share is based on the cost weights for wages and salaries, benefits, housekeeping and operation, professional fees, labor-related services and a portion of the capital-related building and equipment expenses. Because we did not propose to rebase or revise the ESRDB market basket for CY 2014, the labor-related share will remain 41.737 percent. At the time of preparing the CY 2014 ESRD PPS proposed rule we had access to cost report data through 2010. The 2011 cost report data was captured on the revised ESRD cost report form and complete data files were not available in time to estimate cost shares on the 2011 data in time for the proposed rule. In order to estimate if any major changes had occurred since 2008 (the current base years of the ESRDB market basket) we did produce ESRD market basket cost shares based on the Medicare Cost Report data for 2009 and 2010 (which were the latest, complete year of data we had available at the time) and we did not have access to the files in order to estimate the cost weights based on data from 2011 or later. We did run the cost report data for 2009 and 2010 and found that the cost share weights for the market basket and the estimated labor-related share as described in the CY 2011 ESRD PPS final rule (75 FR 49161) did not change significantly. We understand that under the bundled payment system the relative shares of wages and salaries and pharmaceuticals may change. We will be rebasing and revising the ESRD market basket for CY 2015 based on the most up-to-date and complete year of cost report data available, which will be based on data from a year after 2011. This will reflect the costs for ESRD services that were reported in a payment year under the bundled system.

a. Payment Under the ESRD PPS for Facilities Located in Guam, American Samoa, and the Northern Mariana Islands

It came to our attention after the ESRD PPS was implemented that ESRD facilities located in the United States Territories of Guam, American Samoa and the Northern Mariana Islands (collectively, the Pacific Rim) have been paid on the basis of reasonable costs and charges, rather than under the ESRD PPS. Because section 1881(b)(14)(A)(i) of the Act requires the Secretary to implement a payment system under which a single payment is made to a renal dialysis facility for renal dialysis services in lieu of any other payment for services furnished on or after January 1, 2011, and section 1881(b)(14)(E)(i) requires that the payment amounts under the ESRD PPS by fully implemented for services furnished on or after January 1, 2014, ESRD facilities located in the Pacific Rim must be paid under the ESRD PPS beginning for services furnished on or after January 1, 2014. In order to pay these facilities under the ESRD PPS, we would need to identify a wage index value for these areas to make payment adjustments for geographic wages according to § 413.231 of the regulations. We proposed to use the current value calculated under the existing methodology, that is, the pre-floor, pre-reclassified, hospital wage data that is unadjusted for occupational mix for the island of Guam of 0.9611, which is displayed in Addendum B (Wage Indices for Rural Areas), because the FY 2014 IPPS pre-floor, pre-reclassified hospital wage data does not include wage data for American Samoa and the Northern Mariana Islands. Accordingly, we proposed to apply the wage index value for Guam to facilities located in American Samoa and the Northern Mariana Islands as discussed below in section II.C.4.b. of this final rule.

Comment:

We received two comments suggesting that the ESRD PPS does not sufficiently account for the unique economic circumstances faced by dialysis facilities located in the Territory of Guam. One commenter noted higher costs for shipping and warehousing of supplies, as well as significant training costs, which results from high employee turnover when military personnel and their families relocate to the mainland. Another commenter requested that Medicare continue to make payments to ESRD facilities located in Guam under reasonable costs and charges payment methodologies.

Response:

We appreciate the concern expressed by commenters' regarding the payment change. However, section 1881(b)(14)(A)(i) of the Act requires the Secretary to implement a payment system under which a single payment is made to a renal dialysis facility for renal dialysis services in lieu of any other payment. In order to comply with the statute, ESRD facilities located in the Pacific Rim must be paid under the ESRD PPS and will be paid under this system for renal dialysis services furnished on or after January 1, 2014. We understand that ESRD facilities located in Guam, as well as many other geographic areas where Medicare services are furnished, have unique geographic, labor, or regulatory circumstances that have an impact on their provision of dialysis services. For example, the states of Hawaii and Alaska have similar shipping and storage considerations as Guam and these areas are paid under the ESRD PPS. Likewise, the island of Puerto Rico, (which shares the status of a United States Territory), must comply with unique staffing requirements, in that only registered nurses may furnish dialysis services to dialysis patients and these facilities are paid under the ESRD PPS. Further, many ESRD facilities are located near military bases where there is high turnover of staff and these facilities are also paid under the ESRD PPS. Nonetheless, CMS has no authority to continue to pay ESRD facilities located in the Territory of Guam or elsewhere in the Pacific Rim based on reasonable costs or any other payment methodology. Therefore, beginning January 1, 2014, in accordance with section 1881(b)(14)(A)(i) of the Act, all ESRD facilities furnishing renal dialysis services to Medicare beneficiaries will be paid 100 percent under the ESRD PPS, including ESRD facilities located in the Pacific Rim.

b. Policies for Areas With No Wage Data

In the CY 2011 ESRD PPS final (75 FR 49116 through 49117), we also discussed and finalized the methodologies we use to calculate wage index values for ESRD facilities that are located in urban and rural areas where there is no hospital data. We further explained our approach for areas with no hospital data in the CY 2012 ESRD PPS final rule (76 FR 70241). For urban areas with no hospital data, we compute the average wage index value of all urban areas within the State and use that value as the wage index. For rural areas with no hospital data, we compute the wage index using the average wage index values from all contiguous CBSAs to represent a reasonable proxy for that rural area. Therefore, we use our established methodology to compute an appropriate wage index using the average wage index values from contiguous CBSAs, to represent a reasonable proxy.

As stated previously, the FY 2014 IPPS pre-floor, pre-reclassified hospital wage data does not include wage data for American Samoa and the Northern Mariana Islands, which are rural areas with no hospital data. While we appreciate that the islands of the Pacific Rim are not actually contiguous, we believe the same principle applies here, and that Guam is a reasonable proxy for American Samoa and the Northern

Mariana Islands. We believe that Guam represents a reasonable proxy because the islands are located within the Pacific Rim and share a common status as United States Territories. We noted that if hospital data becomes available for American Samoa or the Northern Mariana Islands, we will use that data for the CBSA instead of the proxy. As discussed previously, the current wage index value for Guam using the existing methodology is 0.9611. Therefore, for CY 2014, we proposed to apply this wage index value of 0.9611 to ESRD facilities located in America Samoa and the Northern Mariana Islands and included this value in Addendum B.

For CY 2014, the only urban area without wage index data is Hinesville-Fort Stewart, GA. As we discussed in our CY 2013 ESRD PPS final rule (77 FR 67459), we will continue to use the statewide urban average based on the average of all urban areas within the state for urban areas without hospital data. Accordingly, we proposed to apply the statewide urban average wage index value for Georgia of 0.7582 to Hinesville-Fort Stewart, GA and included this value in Addendum A.

We received no public comments regarding our proposal to use the wage index value for Guam of 0.9611 as an appropriate proxy for American Samoa and the Northern Mariana Islands. Therefore, we are finalizing our proposal. For renal dialysis services furnished in American Samoa or the Northern Mariana Islands and paid under the ESRD PPS on or after January 1, 2014, a wage index value of 0.9611, as calculated for the Territory of Guam, will be applied to the ESRD PPS base rate when making Medicare payments. The wage index values for Guam, America Samoa and the Northern Mariana Islands are included in Addendum B.

We received no comments on our proposal to apply the computed statewide urban average wage index value for Georgia to the CBSA for Hinesville-Fort Stewart, GA. Therefore, we are finalizing the proposal with the following clarification. In the CY 2014 ESRD PPS proposed rule (78 FR 40845), we incorrectly stated the computed value for the statewide urban average wage index value for Georgia of 0.7582. The correct value computed for the urban average wage index value for Georgia and applied to Hinesville-Fort Stewart, GA was correctly identified in Addendum A of the CY 2014 ESRD PPS proposed rule as 0.8602. We apologize for this error. In addition, the urban wage index values have been updated with more recent data for this final rule, and therefore for CY 2014 we are finalizing a statewide urban average wage index value for Georgia of 0.8700 and will apply this value to the CBSA for Hinesville-Fort Stewart, GA and include this value in Addendum A.

c. Reduction to the ESRD Wage Index Floor

A wage index floor value has been used in lieu of the calculated wage index values below the floor in making payment for renal dialysis services under the ESRD PPS. In the CY 2011 ESRD PPS final rule (75 FR 49116 through 49117), we finalized that we would continue to reduce the wage index floor by 0.05 for each of the remaining years of the transition. In the CY 2012 ESRD PPS final rule (76 FR 70241), we finalized the 0.05 reduction to the wage index floor for CYs 2012 and 2013, resulting in a wage index floor of 0.550 and 0.500, respectively. Most recently, in the CY 2013 ESRD PPS final rule (77 FR 67459 through 67461), we discussed the elimination of the wage index floor beginning in CY 2014, noting that we would propose a new methodology in CY 2014 to address wages in rural Puerto Rico because we would no longer be applying a wage index floor.

As described above, our intention has been to provide a wage index floor only through the transition to 100 percent implementation of the ESRD PPS (75 FR 49116 through 49117; 76 FR 70240 through 70241). However, the CY 2014 wage index values for both urban and rural Puerto Rico remain below the finalized CY 2013 ESRD PPS wage index floor of 0.500 (77 FR 67459), and we believe that both rural and urban facilities in Puerto Rico would benefit from continuing the gradual reduction of the floor. We believe that continuing the wage index floor for CY 2014 and CY 2015 will allow renal dialysis facilities located in Puerto Rico the benefit afforded to other geographical areas in the fifty states, that is, a gradual and systematic elimination of the wage index floor. Therefore, for CY 2014 and for CY 2015, we proposed to continue to apply the wage index floor to areas with wage indexes below the floor. For CY 2014, Puerto Rico is the only area with a wage index value below the proposed floor; however, to the extent that other geographical areas fall below the floor in CY 2015, we believe they should have the benefit of a gradual reduction in the floor as well. Thus, for CY 2014 and CY 2015, we proposed to continue our policy of gradually reducing the wage index floor by 0.05 per year. Specifically, we proposed a wage index floor value of 0.450 for CY 2014 and a wage index floor value of 0.400 for CY 2015. We believe that continuing our policy of applying a wage index floor for an additional two years would allow Puerto Rico to benefit from the anticipated and predictable phase out of the wage index floor. While we would not expect to continue this policy past CY 2015, we will review the appropriateness of a wage index floor for CY 2016 at that time.

Comment:

We received a few comments requesting that CMS review hospital wage data and consider the appropriateness of a wage index floor. For example, a commenter from Wheeling, WV, suggested that CMS consider increasing the wage index floor value, so that rural facilities with low wage index values will be able to compete with urban facilities in attracting qualified staff members. Another commenter requested that CMS modify the current wage index methodology to capture “true” ESRD facility wages in Puerto Rico. The current methodology relies upon hospital wage data and the commenter contended that the hospital occupational wage mix does not adequately reflect wages in ESRD facilities in Puerto Rico, where registered nurses are required to furnish dialysis care. In addition, the commenter requested that the wage index floor be frozen at 2011 levels.

Response:

We thank the commenters for their comments and we appreciate their concerns regarding the impact of a wage index floor on dialysis facilities. We have committed to reviewing the appropriateness of applying a wage index floor for CY 2016. However, for CY 2014 and CY 2015, we are finalizing our proposal. We will continue our policy of gradually reducing the wage index floor by 0.05 per year. Accordingly, we are finalizing in this rule a wage index floor value of 0.450 for CY 2014, and a wage index floor value of 0.400 for CY 2015. This policy will benefit ESRD facilities located in Puerto Rico, where wage index values remain below the wage index floor values finalized in this rule. We note that if another geographic CBSA area wage index value falls below the floor in CY 2015, the facilities in that CBSA will also have the benefit of the wage index floor.

In summary, for CY 2014, we will continue to use the same wage index methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR 49117). That is, we will use the most recent IPPS pre-floor, pre-reclassified hospital wage index to calculate the ESRD PPS wage index values. Thus, for CY 2014, we will use the FY 2014 IPPS pre-floor, pre-reclassified hospital wage index to

calculate the CY 2014 ESRD PPS waged index. The 2014 wage index values for urban areas, Addendum A (Wage Indices for Urban Areas) and the CY 2014 wage index values for rural areas, Addendum B (Wage Indices for Rural Areas) may be viewed at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html

.

Lastly, for CY 2014 and CY 2015, we are continuing our policy of gradually reducing the wage index floor by 0.05 per year. That is, we are finalizing a wage index floor value of 0.450 for CY 2014, and a wage index floor value of 0.400 for CY 2015.

d. Wage Index Budget-Neutrality Adjustment

Section 1881(b)(14)(D)(iv)(II) of the Act gives us broad discretion to implement payment adjustments to the ESRD PPS, including an adjustment of the ESRD PPS by a geographic index. Section 1881(b)(14)(D)(iv)(II) specifically refers to section 1881(b)(12)(D) as an example of such a geographic index, and in the CY 2011 ESRD PPS final rule, we finalized the use of the same wage index methodology that we utilized under the basic case-mix adjusted composite rate payment system (75 FR 49116). We had applied a wage index budget-neutrality adjustment factor under the basic case-mix adjusted composite payment system, and accordingly, in the CY 2012 ESRD PPS final rule, we finalized a policy for CY 2012 and future years to apply wage index budget-neutrality adjustment factors to the composite rate portion of the ESRD PPS blended payments for facilities participating in the transition as well as to the base rate for the ESRD PPS portion of the blended payment and the full ESRD PPS for those facilities that elected to receive 100 percent of their payment under that system (76 FR 70241 and 70242). We also finalized the methodology for computing the wage index budget-neutrality adjustment factors for CY 2012 and subsequent years (76 FR 70242).

For CY 2014, we did not propose any changes to the methodology, but we noted that we will no longer compute a wage index budget-neutrality adjustment factor for the composite rate portion of the ESRD PPS blended payment because all facilities will be paid 100 percent under the ESRD PPS in CY 2014. For ease of reference, we explain the methodology for computing the budget-neutrality adjustment factor here. For the CY 2014 wage index budget-neutrality adjustment factor, we use the fiscal year (FY) 2014 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data to compute the wage index values, 2012 outpatient claims (paid and processed as of June 30, 2013), and geographic location information for each facility, which may be found through Dialysis Facility Compare. Dialysis Facility Compare (DFC) can be found at the DFC Web page on the CMS Web site at

http://www.medicare.gov/dialysisfacilitycompare/

. The FY 2014 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.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/.

The wage index data are located in the section entitled, “FY 2014 Final Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by CBSA”.

We computed the proposed CY 2014 wage index budget-neutrality adjustment factor using treatment counts from the 2012 claims and facility-specific CY 2013 payment rates to estimate the total dollar amount that each ESRD facility would have received in CY 2013. The total of these payments became the target amount of expenditures for all ESRD facilities for CY 2014. Next, we computed the estimated dollar amount that would have been paid for the same ESRD facilities using the ESRD wage index for CY 2014. The total of these payments becomes the new CY 2014 amount of wage-adjusted expenditures for all ESRD facilities.

The wage index budget-neutrality factor is calculated as the target amount divided by the new CY 2014 amount. When we multiplied the wage index budget-neutrality factor by the applicable CY 2014 estimated payments, aggregate payments to ESRD facilities would remain budget neutral when compared to the target amount of expenditures. That is, the wage index budget-neutrality adjustment factor ensures that wage index adjustments do not increase or decrease aggregate Medicare payments with respect to changes in wage index updates. Therefore, we proposed a wage index budget-neutrality adjustment factor of 1.000411, which would be computed in ESRD PPS base rate payment methodology when making payment for renal dialysis services in CY 2014.

We received no public comments on this proposal, and therefore, we are finalizing the proposed CY 2014 wage index budget-neutrality adjustment factor as updated with the most recently available data. In the proposed rule, the CY 2014 wage index budget-neutrality adjustment factor was computed at 1.000411. This calculation was based upon the use of the FY 2014 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data computed for wage index values and the CY 2012 Medicare outpatient claims data file as of December 31, 2012. For CY 2014, we are finalizing a wage index budget-neutrality adjustment factor of 1.000454. This final calculation reflects the most recent Medicare claims data available, which is the FY 2014 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data computed for wage index values and the CY 2012 Medicare outpatient claims data file (that is, claims with dates of service from January 1, through December 31, 2012, that were received, processed, paid, and passed to the National Claims History file as of June 30, 2013).

5. Application of the International Classification of Diseases (ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes

In the CY 2011 ESRD PPS final rule (75 FR 49094), we explained that section 1881(b)(14)(D)(i) of the Act, as added by section 153(b) of MIPPA, requires that the ESRD PPS include a payment adjustment based on case-mix that may take into account, among other things, patient comorbidities. Comorbidities are specific patient conditions that coexist with the patient's principal diagnosis that necessitates dialysis. The comorbidity payment adjustments recognize the increased costs associated with comorbidities and provide additional payment for certain conditions that occur concurrently with the need for dialysis.

To develop the comorbidity payment adjustments, we used a stepwise regression model to analyze comorbidity data and found that certain comorbidities are predictors of variation in payments for ESRD patients. Details on the development of the comorbidity categories eligible for a comorbidity payment adjustment, including an explanation of the stepwise regression model that we used to analyze comorbidity data, is discussed in the CY 2011 ESRD PPS final rule (75 FR 49094 through 49108). We analyzed the comorbidity categories and excluded those categories from the comorbidity payment adjustments that met any of three exclusion criteria (75 FR 49095 through 49100): (1) Inability to create accurate clinical definitions; (2) potential for adverse incentives regarding care; and (3) potential for

ESRD facilities to directly influence the prevalence of the comorbidity either by altering dialysis care, changing diagnostic testing patterns, or liberalizing the diagnostic criteria.

We finalized six comorbidity categories that are eligible for a comorbidity payment adjustment, each with associated International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis codes (75 FR 49100). Among these categories are three acute, short-term diagnostic categories (pericarditis, bacterial pneumonia, and gastrointestinal tract bleeding with hemorrhage) and three chronic diagnostic categories (hereditary hemolytic anemia with sickle cell anemia, myelodysplastic syndrome, and monoclonal gammopathy). The comorbidity categories eligible for an adjustment and their associated ICD-9-CM codes were published in the Appendix of the CY 2011 ESRD PPS final rule as Table E: ICD-9-CM Codes Recognized for a Comorbidity Payment Adjustment (75 FR 49211).

In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that the ICD-9-CM codes eligible for a comorbidity payment adjustment are subject to the annual ICD-9-CM coding updates that occur in the hospital IPPS final rule and are effective October 1st of every year. We explained that any updates to the ICD-9-CM codes that affect the categories of comorbidities and the diagnoses within the comorbidity categories that are eligible for a comorbidity payment adjustment would be communicated to ESRD facilities through sub-regulatory guidance. Accordingly, Change Request (CR) 7476, Transmittal 2255, entitled, “Quarterly Update to the End-Stage Renal Disease Prospective Payment System,” was issued on July 15, 2011 to update the ICD-9-CM codes eligible for a comorbidity payment adjustment in accordance with the annual ICD-9-CM update effective October 1, 2011. This CR can be found on the CMS Web site at the following link:

http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2255CP.pdf

. There have not been updates to the ICD-9-CM codes eligible for a comorbidity payment adjustment since October 1, 2011.

Effective October 1, 2014, CMS will implement the 10th revision of the ICD coding scheme—ICD-10-CM. Because the transition to ICD-10-CM coding will occur during CY 2014, we discuss here the crosswalk from ICD-9-CM to ICD-10-CM codes for the purpose of determining eligibility for a comorbidity payment adjustment.

We crosswalked the ICD-9-CM codes that are eligible for a comorbidity payment adjustment to ICD-10-CM codes using the General Equivalence Mappings (GEM) tool, which is the authoritative source for crosswalking developed by the National Center for Health Statistics and CMS. The crosswalk from ICD-9-CM to ICD-10-CM diagnosis codes resulted in three scenarios: one ICD-9-CM code crosswalked to one ICD-10-CM code; one ICD-9-CM code crosswalked to multiple ICD-10-CM codes; or multiple ICD-9-CM codes crosswalked to one ICD-10-CM code. We applied the three exclusion criteria listed above to each of the ICD-10-CM codes to which the ICD-9-CM codes crosswalked.

In our clinical evaluation, we found the ICD-9-CM codes generally crosswalked to one ICD-10-CM code that codes for the same diagnosis, has the same code descriptor, and does not meet any of our exclusion criteria. Accordingly, with the exceptions noted below, we proposed that ICD-10-CM codes will be eligible for a comorbidity payment adjustment where they crosswalk from ICD-9-CM codes that are eligible for a comorbidity payment adjustment. There are, however, two instances where ICD-9-CM codes crosswalk to ICD-10-CM codes that we believe meet one or more of the exclusion criteria described above, and we proposed to exclude these codes from eligibility for a comorbidity payment adjustment.

a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code

Table 1 lists all the instances in which one ICD-9-CM code crosswalks to one ICD-10-CM code. We proposed that all of those ICD-10-CM codes would receive a comorbidity payment adjustment with the exception of K52.81 Eosinophilic gastritis or gastroenteritis. Currently, 535.71 Eosinophilic gastritis with hemorrhage is one of 40 ICD-9-CM diagnosis codes under the acute comorbidity category of Gastrointestinal (GI) Bleeding. The descriptor of K52.81, the ICD-10-CM code to which this ICD-9-CM code crosswalks, does not include the word “hemorrhage.” In the CY 2011 ESRD PPS final rule (75 FR 49097), we specifically limited the GI bleeding category for the comorbidity payment adjustment to GI bleed with hemorrhage because we believed that the gastrointestinal tract bleeding category met our first exclusion criterion—inability to create accurate clinical definitions—because it was overly broad. We also believed that use of this diagnosis category could lead to gaming consistent with the second and third exclusion criteria listed above. For these reasons, we limited the gastrointestinal tract bleeding diagnosis category to gastrointestinal tract bleeding with hemorrhage, which we believe creates accurate clinical definitions and mitigates the potential for adverse incentives in ESRD care. Accordingly, we proposed to exclude ICD-10-CM code K52.81 Eosinophilic gastritis or gastroenteritis from eligibility for the comorbidity payment adjustment because the code descriptor does not indicate the diagnosis of a hemorrhage. We proposed that all of the other ICD-10-CM codes listed in the Table 1 below would be eligible for a comorbidity payment adjustment.

Table 1—One ICD-9-CM Code Crosswalks to One ICD-10-CM Code

GASTROINTESTINAL BLEEDING

ICD-9

Descriptor

ICD-10

Descriptor

530.21

Ulcer of esophagus with bleeding

K22.11

Ulcer of esophagus with bleeding

535.71

Eosinophilic gastritis, with hemorrhage

K52.81

Eosinophilic gastritis or gastroenteritis

537.83

Angiodysplasia of stomach and duodenum with hemorrhage

K31.811

Angiodysplasia of stomach and duodenum with bleeding

569.85

Angiodysplasia of intestine with hemorrhage

K55.21

Angiodysplasia of colon with hemorrhage

BACTERIAL PNEUMONIA

ICD-9

Descriptor

ICD-10

Descriptor

003.22

Salmonella pneumonia

A02.22

Salmonella pneumonia

482.0

Pneumonia due to Klebsiella pneumonia

J15.0

Pneumonia due to Klebsiella pneumoniae

482.1

Pneumonia due to Pseudomonas

J15.1

Pneumonia due to Pseudomonas

482.2

Pneumonia due to Hemophilus influenzae [H. influenzae]

J14

Pneumonia due to Hemophilus influenzae

482.32

Pneumonia due to Streptococcus, group B

J15.3

Pneumonia due to streptococcus, group B

482.40

Pneumonia due to Staphylococcus, unspecified

J15.20

Pneumonia due to staphylococcus, unspecified

482.41

Methicillin susceptible pneumonia due to Staphylococcus aureus

J15.211

Pneumonia due to Methicillin susceptible Staphylococcus aureus

482.42

Methicillin resistant pneumonia due to Staphylococcus aureus

J15.212

Pneumonia due to Methicillin resistant Staphylococcus aureus

482.49

Other Staphylococcus pneumonia

J15.29

Pneumonia due to other staphylococcus

482.82

Pneumonia due to escherichia coli [E. coli]

J15.5

Pneumonia due to Escherichia coli

482.83

Pneumonia due to other gram-negative bacteria

J15.6

Pneumonia due to other aerobic Gram-negative bacteria

482.84

Pneumonia due to Legionnaires' disease

A48.1

Legionnaires' disease

507.0

Pneumonitis due to inhalation of food or vomitus

J69.0

Pneumonitis due to inhalation of food and vomit

507.8

Pneumonitis due to other solids and liquids

J69.8

Pneumonitis due to inhalation of other solids and liquids

510.0

Empyema with fistula

J86.0

Pyothorax with fistula

510.9

Empyema without mention of fistula

J86.9

Pyothorax without fistula

PERICARDITIS

ICD-9

Descriptor

ICD-10

Descriptor

420.91

Acute idiopathic pericarditis

I30.0

Acute nonspecific idiopathic pericarditis

HEREDITARY HEMOLYTIC AND SICKLE CELL ANEMIA

ICD-9

Descriptor

ICD-10

Descriptor

282.0

Hereditary spherocytosis

D58.0

Hereditary spherocytosis

282.1

Hereditary elliptocytosis

D58.1

Hereditary elliptocytosis

282.41

Sickle-cell thalassemia without crisis

D57.40

Sickle-cell thalassemia without crisis

282.43

Alpha thalassemia

D56.0

Alpha thalassemia

282.44

Beta thalassemia

D56.1

Beta thalassemia

282.45

Delta-beta thalassemia

D56.2

Delta-beta thalassemia

282.46

Thalassemia minor

D56.3

Thalassemia minor

282.47

Hemoglobin E-beta thalassemia

D56.5

Hemoglobin E-beta thalassemia

282.49

Other thalassemia

D56.8

Other thalassemias

282.61

Hb-SS disease without crisis

D57.1

Sickle-cell disease without crisis

282.63

Sickle-cell/Hb-C disease without crisis

D57.20

Sickle-cell/Hb-C disease without crisis

282.68

Other sickle-cell disease without crisis

D57.80

Other sickle-cell disorders without crisis

MYELODYSPLASTIC SYNDROME

ICD-9

Descriptor

ICD-10

Descriptor

238.7

Essential thrombocythemia

D47.3

Essential (hemorrhagic) thrombocythemia

238.73

High grade myelodysplastic syndrome lesions

D46.22

Refractory anemia with excess of blasts 2

238.74

Myelodysplastic syndrome with 5q deletion

D46.C

Myelodysplastic syndrome with isolated del(5q) chromosomal abnormality

238.76

Myelofibrosis with myeloid metaplasia

D47.1

Chronic myeloproliferative disease

b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes

Table 2 lists all of the instances in which one ICD-9-CM code crosswalks to multiple ICD-10-CM codes. In those instances, we proposed that all the crosswalked ICD-10-CM codes would receive a comorbidity payment adjustment, with the exception of D89.2 Hypergammaglobulinemia, unspecified. ICD-9-CM code 273.1 Monoclonal paraproteinemia is the only ICD-9-CM code eligible for the comorbidity payment adjustment under the chronic comorbidity category of Monoclonal gammopathy. ICD-9-CM code 273.1 Monoclonal paraproteinemia crosswalks to two ICD-10-CM codes: D47.2 Monoclonal gammopathy and D89.2 Hypergammaglobulinemia, unspecified. We analyzed both of these ICD-10-CM codes and determined that D47.2 Monoclonal gammopathy should be eligible for the comorbidity payment adjustment because, like ICD-9-CM code 273.1 Monoclonal paraproteinemia, it indicates that there is an excessive amount of a single monoclonal gammaglobulin. When we analyzed the comorbidity category for the CY 2011 ESRD PPS final rule, single monoclonal gammaglobulin was shown to have an association with higher ESA usage, thereby resulting in higher costs to dialysis facilities. After clinical evaluation of D89.2 Hypergammaglobulinemia, unspecified, however, we determined that this ICD-10-CM code should not be eligible for the comorbidity payment adjustment because D89.2 Hypergammaglobulinemia, unspecified indicates only that 1 or more immunoglobulins are elevated, but does not identify which immunoglobulin(s) are elevated. We believe that the lack of specificity of this particular code results in an inability to create an accurate clinical definition, which is the first of the three exclusion criteria. Accordingly, we proposed that D89.2 Hypergammaglobulinemia, unspecified would not be eligible for the comorbidity payment adjustment. We proposed that all of the other ICD-10-CM codes listed in Table 2 below would be eligible for the comorbidity payment adjustment.

Table 2—One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes

GASTROINTESTINAL BLEEDING

ICD-9

Descriptor

ICD-10

Descriptor

562

Diverticulosis of small intestine with hemorrhage

K57.11

Diverticulosis of small intestine without perforation or abscess with bleeding

K57.51

Diverticulosis of both small and large intestine without perforation or abscess with bleeding

562.03

Diverticulitis of small intestine with hemorrhage

K57.01

Diverticulitis of small intestine with perforation and abscess with bleeding

K57.13

Diverticulitis of small intestine without perforation or abscess with bleeding

K57.41

Diverticulitis of both small and large intestine with perforation and abscess with bleeding

K57.53

Diverticulitis of both small and large intestine without perforation or abscess with bleeding

562.12

Diverticulosis of colon with hemorrhage

K57.31

Diverticulosis of large intestine without perforation or abscess with bleeding

K57.91

Diverticulosis of intestine, part unspecified, without perforation or abscess with bleeding

K57.51

Diverticulosis of both small and large intestine without perforation or abscess with bleeding

562.13

Diverticulitis of colon with hemorrhage

K57.21

Diverticulitis of large intestine with perforation and abscess with bleeding

K57.33

Diverticulitis of large intestine without perforation or abscess with bleeding

K57.41

Diverticulitis of both small and large intestine with perforation and abscess with bleeding

K57.53

Diverticulitis of both small and large intestine without perforation or abscess with bleeding

BACTERIAL PNEUMONIA

ICD-9

Descriptor

ICD-10

Descriptor

513.0

Abscess of lung

J85.0

Gangrene and necrosis of lung

J85.1

Abscess of lung with pneumonia

J85.2

Abscess of lung without pneumonia

PERICARDITIS

ICD-9

Descriptor

ICD-10

Descriptor

420.0

Acute pericarditis in diseases classified elsewhere

A18.84

Tuberculosis of heart

I32

Pericarditis in diseases classified elsewhere

M32.12

Pericarditis in systemic lupus erythematosus

420.90

Acute pericarditis, unspecified

130.1

Infective pericarditis

I30.9

Acute pericarditis, unspecified

420.99

Other acute pericarditis

I30.8

Other forms of acute pericarditis

I30.9

Acute pericarditis, unspecified

HEREDITARY HEMOLYTIC AND SICKLE CELL ANEMIA

ICD-9

Descriptor

ICD-10

Descriptor

282.2

Anemias due to disorders of glutathione metabolism

D55.0

Anemia due to glucose-6-phosphate dehydrogenase [G6PD] deficiency

D55.1

Anemia due to other disorders of glutathione metabolism

282.3

Other hemolytic anemias due to enzyme deficiency

D55.2

Anemia due to disorders of glycolytic enzymes

D55.3

Anemia due to disorders of nucleotide metabolism

D55.8

Other anemias due to enzyme disorders

D55.9

Anemia due to enzyme disorder, unspecified

282.42

Sickle-cell thalassemia with crisis

D57.411

Sickle-cell thalassemia with acute chest syndrome

D57.412

Sickle-cell thalassemia with splenic sequestration

D57.419

Sickle-cell thalassemia with crisis, unspecified

282.62

Hb-SS disease with crisis

D57.00

Hb-SS disease with crisis, unspecified

D57.01

Hb-SS disease with acute chest syndrome

D57.02

Hb-SS disease with splenic sequestration

282.64

Sickle-cell/Hb-C disease with crisis

D57.211

Sickle-cell/Hb-C disease with acute chest syndrome

D57.212

Sickle-cell/Hb-C disease with splenic sequestration

D57.219

Sickle-cell/Hb-C disease with crisis, unspecified

282.69

Other sickle-cell disease with crisis

D57.811

Other sickle-cell disorders with acute chest syndrome

D57.812

Other sickle-cell disorders with splenic sequestration

D57.819

Other sickle-cell disorders with crisis, unspecified

MONOCLONAL GAMMOPATHY

ICD-9

Descriptor

ICD-10

Descriptor

273.1

Monoclonal paraproteinemia

D47.2

Monoclonal gammopathy

D89.2

Hypergammaglobulinemia, unspecified

MYELODYSPLASTIC SYNDROME

ICD-9

Descriptor

ICD-10

Descriptor

238.72

Low grade myelodysplastic syndrome lesions

D46.0

Refractory anemia without ring sideroblasts, so stated

D46.1

Refractory anemia with ring sideroblasts

D46.20

Refractory anemia with excess of blasts, unspecified

D46.21

Refractory anemia with excess of blasts 1

D46.4

Refractory anemia, unspecified

D46.A

Refractory cytopenia with multilineage dysplasia

D46.B

Refractory cytopenia with multilineage dysplasia and ring sideroblasts

238.75

Myelodysplastic syndrome, unspecified

D46.9

Myelodysplastic syndrome, unspecified

D46.Z

Other myelodysplastic syndromes

c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code

Table 3 displays the crosswalk where multiple ICD-9-CM codes crosswalk to one ICD-10-CM code. For the reasons explained above, we propose that all of the crosswalked ICD-10-CM codes listed below would be eligible for a comorbidity payment adjustment.

Table 3—Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code

GASTROINTESTINAL BLEEDING

ICD-9

Descriptor

ICD-10

Descriptor

533.20

Acute peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction

K27.2

Acute peptic ulcer, site unspecified, with both hemorrhage and perforation

533.21

Acute peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction

533.40

Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, without mention of obstruction

K27.4

Chronic or unspecified peptic ulcer, site unspecified, with hemorrhage

533.41

Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, with obstruction

533.60

Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction

K27.6

Chronic or unspecified peptic ulcer, site unspecified, with both hemorrhage and perforation

533.61

Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction

534.00

Acute gastrojejunal ulcer with hemorrhage, without mention of obstruction

K28.0

Acute gastrojejunal ulcer with hemorrhage

534.01

Acute gastrojejunal ulcer, with hemorrhage, with obstruction

534.20

Acute gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction

K28.2

Acute gastrojejunal ulcer with both hemorrhage and perforation

534.21

Acute gastrojejunal ulcer with hemorrhage and perforation, with obstruction

534.40

Chronic or unspecified gastrojejunal ulcer with hemorrhage, without mention of obstruction

K28.4

Chronic or unspecified gastrojejunal ulcer with hemorrhage

534.41

Chronic or unspecified gastrojejunal ulcer, with hemorrhage, with obstruction

534.60

Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction

K28.6

Chronic or unspecified gastrojejunal ulcer with both hemorrhage and perforation

534.61

Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, with obstruction

BACTERIAL PNEUMONIA

ICD-9

Descriptor

ICD-10

Descriptor

482.30

Pneumonia due to Streptococcus, unspecified

J15.4

Pneumonia due to other streptococci

482.31

Pneumonia due to Streptococcus, group A

482.39

Pneumonia due to other Streptococcus

482.81

Pneumonia due to anaerobes

J15.8

Pneumonia due to other specified bacteria

482.89

Pneumonia due to other specified bacteria

In summary, based on our clinical evaluation of the ICD-10-CM codes to which the eligible ICD-9-CM codes crosswalk, we proposed that both D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic gastritis or gastroenteritis would not be eligible for the comorbidity payment adjustment. We proposed that all other ICD-10-CM codes to which eligible ICD-9-CM codes crosswalk that are list

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