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 405, 411, 413, and 414

[CMS-1614-F]

RIN 0938-AS13

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 final rule will update and make revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2015. This rule also finalizes requirements for the ESRD quality incentive program (QIP), including for payment years (PYs) 2017 and 2018. This rule will also make a technical correction to remove outdated terms and definitions. In addition, this final rule sets forth the methodology for adjusting Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule payment amounts using information from the Medicare DMEPOS Competitive Bidding Program (CBP); makes alternative payment rules for certain DME under the Medicare DMEPOS CBP; clarifies the statutory Medicare hearing aid coverage exclusion and specifies devices not subject to the hearing aid exclusion; will not update the definition of minimal self-adjustment; clarifies the Change of Ownership (CHOW) and provides for an exception to the current requirements; revises the appeal provisions for termination of a CBP contract, including the beneficiary notification requirement under the Medicare DMEPOS CBP, and makes a technical change to the regulation related to the conditions for awarding contracts for furnishing infusion drugs under the Medicare DMEPOS CBP.

DATES:

Effective on January 1, 2015.

FOR FURTHER INFORMATION CONTACT:

Stephanie Frilling, (410) 786-4507, for issues related to the ESRD PPS, the ESRD PPS CY 2015 Base Rate, Wage Indices, Drugs Used for the Treatment of ESRD, and Payment for Frequent Hemodialysis.

Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS, the Low Volume Payment Adjustment, and the Wage Index.

Wendy Tucker, (410) 786-3004, for issues related to the Low Volume Payment Adjustment and the Wage Index.

Heidi Oumarou, (410) 786-7342, for issues related to the ESRD PPS Market Basket Update.

James Poyer, (410) 786-2261, for issues related to the ESRD QIP.

Christopher Molling (410) 786-6399 and Hafsa Vahora (410) 786-7899 for issues related to the methodology for making national price adjustments based upon information gathered from the DMEPOS CBP.

Sandhya Gilkerson, (410) 786-4085, for issues related to the alternative payment methodologies under the CBP.

Sandhya Gilkerson, (410) 786-4085 and Michelle Peterman, 410-786-2581 for issues related to the clarification of the statutory Medicare hearing aid coverage exclusion.

Michelle Peterman, (410) 786-2591 for issues related to the definition of minimal self-adjustment at 414.402.

Janae James (410) 786-0801 for issues related to CHOW and breach of contract appeals.

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 Stephanie Frilling at 410-786-4507.

Table of Contents

To assist readers in referencing sections contained in this final rule, we are providing a Table of Contents. Some of the issues discussed affect the payment policies, but do not require changes to the regulations in the Code of Federal Regulations (CFR).

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) 2015 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, Public Comments, and Responses to Comments on the CY 2015 ESRD PPS Proposed Rule

C. Routine Updates and Policy Changes to the CY 2015 ESRD PPS

1. ESRD PPS Base Rate

a. Changes to the Drug Utilization Adjustment

i. The Drug Utilization Adjustment Finalized in CY 2014 ESRD PPS Final Rule

ii. PAMA Changes to the Drug Utilization Adjustment

b. Payment Rate Update for CY 2015

c. CY 2015 ESRD PPS Wage Index Budget-Neutrality Adjustment

d. Labor-Related Share

2. ESRD Bundled Market Basket and Labor-Related Share

a. Rebasing and Revision the ESRD Bundled Market Basket

i. Cost Category Weights

ii. Price Proxies for the CY 2012 ESRDB Market Basket

iii. 2012-Based ESRDB Market Basket Updates Compared to 2008-Based ESRDB Market Basket Updates

b. Proposed ESRDB Market Basket Update, Adjusted for Multifactor Productivity for CY 2015

c. Labor-Related Share

d. Responses to Comments on Proposed Market Basket Rebasing & Revision

e. Final ESRDB Market Basket and Labor-Related Share

3. The CY 2015 ESRD PPS Wage Indices

a. Background

b. Implementation of New Labor Market Delineations

c. Transition Period

4. CY 2015 Update to the Outlier Policy

a.CY 2015 Update to the Outlier Services MAP Amounts and Fixed-Dollar Loss Amounts

b. Outlier Policy Percentage

D. Restatement of Policy Regarding Reporting and Payment for More than Three Dialysis Treatments per Week

1. Reporting More than Three Dialysis Treatments per Week on Claims

2. Medical Necessity for More Than Three Treatments per Week

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

F. ESRD Drug Categories Included in the ESRD PPS Base Rate

G. Low-Volume Payment Adjustment (LVPA)

1. Background

2. The United States Government Accountability Office Study on the LVPA

a. The GAO's Main Findings

b. The GAO's Recommendations

3. Clarification of the LVPA Policy

a. Hospital-Based ESRD Facilities

b. Cost Reporting Periods Used for Eligibility

H. Continued Use of ICD-9-CM Codes and Corrections to the ICD-10-CM Codes Eligible for the Co-morbidity Payment Adjustment

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

A. Background

B. Considerations in Updating and Expanding Quality Measures under the ESRD QIP

C. Web sites for Measure Specifications

D. Updating the NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical Measure for the PY 2016 ESRD QIP and Future Payment Years

E. Oral-Only Drug Measures in the ESRD QIP

F. Requirements for the PY 2017 ESRD QIP

1. Revision to the Expanded ICH CAHPS Reporting Measure

2. Measures for the PY 2017 ESRD QIP

a. PY 2016 Measures Continuing in PY 2017 and Future Payment Years

b. Policy for Determining when a Measure is “Topped-Out” in the ESRD QIP, and the Removal of a Topped-Out Measure from the ESRD QIP, Beginning with PY 2017

c. New Measures Proposed for PY 2017 and Future Payment Years

i. Standardized Readmission Ratio (SRR) Clinical Measure

3. Performance Period for the PY 2017 ESRD QIP

4. Performance Standards, Achievement Thresholds, and Benchmarks for the PY 2017 ESRD QIP

a. Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical Measures in the PY 2017 ESRD QIP

b. Finalized Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical Measures Proposed for the PY 2017 ESRD QIP

c. Performance Standards for the PY 2017 Reporting Measures

5. Scoring the PY 2017 ESRD QIP Measures

a. Scoring Facility Performance on Clinical Measures Based on Achievement

b. Scoring Facility Performance on Clinical Measures Based on Improvement

6. Weighting the Total Performance Score

7. Minimum Data for Scoring Measures for the PY 2017 ESRD QIP and Changing the Attestation Process for Patient Minimums

8. Payment Reductions for the PY 2017 ESRD QIP

9. Data Validation

10. Monitoring Access to Dialysis Facilities

11. Extraordinary Circumstances Exception

F. Requirements for the PY 2018 ESRD QIP

1. Modification of the Mineral Metabolism Reporting Measure Beginning in PY 2018

2. New Measures for the PY 2018 ESRD QIP and Future Payment Years

a. Standardized Transfusion Ratio (STrR) Clinical Measure

b. Adoption of the Pediatric Peritoneal Dialysis Adequacy Clinical Measure in the Dialysis Adequacy Measure Topic

c. ICH CAHPS Clinical Measure

d. Screening for Clinical Depression and Follow-Up Reporting Measure

e. Pain Assessment and Follow-Up Reporting Measure

f. NHSN Healthcare Personnel Influenza Vaccination Reporting Measure

2. Performance Period for the PY 2018 ESRD QIP

3. Performance Standards, Achievement Thresholds, and Benchmarks for the PY 2018 ESRD QIP

a. Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical Measures in the PY 2018 ESRD QIP

b. Estimated Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical Measures Proposed for the PY 2018 ESRD QIP

c. Performance Standards for the PY 2018 Reporting Measures

4. Scoring the PY 2018 ESRD QIP Measures

a. Scoring Facility Performance on Clinical Measures Based on Achievement

b. Scoring Facility Performance on Clinical Measures Based on Improvement

c. Scoring the ICH CAHPS Clinical Measure

d. Calculating Facility Performance on Reporting Measures

5. Minimum Data for Scoring Measures for the PY 2018 ESRD QIP

6. Calculating the Clinical Measure Domain Score

7. Calculating the Reporting Measure Domain Score and the TPS for the PY 2018 ESRD QIP

8. Example of the PY 2018 ESRD QIP Scoring Methodology

9. Payment Reductions for the PY 2018 ESRD QIP

H. Future Considerations for Stratifying ESRD QIP Measures for Dual-Eligible Beneficiaries

IV. Technical Corrections for 42 Part 405

A. Background

B. Summary of the Proposed Provisions and Responses to Comments on the CY 2015 ESRD PPS

V. Methodology for Adjusting DMEPOS Payment Amounts using Information from Competitive Bidding Programs

A. Background

1. Fee Schedule Payment Basis for Certain DMEPOS

2. DMEPOS Competitive Bidding Programs Payment Rules

3. Adjusting Payment Amounts using Information from the DMEPOS Competitive Bidding Program

B. Summary of the Proposed Provisions and Responses to Comments on the Methodology for Adjusting DMEPOS Payment Amounts using Information from Competitive Bidding Programs

1. Proposed Regional Adjustments Limited by National Parameters

2. Methodology for Items and Services Included in Limited Number of Competitive Bidding Programs

3. Adjusted Payment Amounts for Accessories used with Different Types of Base Equipment

4. Adjustments to Single Payment Amounts that Result from Unbalanced Bidding

5. National Mail Order Program—Northern Mariana Islands

6. Updating Adjusted Payment Amounts

VI. Final Payment Methodologies and Payment Rules for Durable Medical Equipment and Enteral Nutrition Furnished under the Competitive Bidding Program

A. Background

B. Summary of the Proposed Provisions and Responses to Comments on the Payment Methodologies and Payment Rules for Durable Medical Equipment and Enteral Nutrition Furnished under the Competitive Bidding Program

1. Payment on a continuous rental basis for select items

2. Responsibility for repair of beneficiary-owned power wheelchairs furnished under CBPs

VII. Scope of Hearing Aid Coverage Exclusion

A. Background

B. Current Issues

C. Proposed Provisions

VIII. Definition of Minimal Self-Adjustment of Orthotics Under Competitive Bidding

A. Background

B. Current Issues

C. Summary of the Proposed Provisions and Responses to Comments on the Definition of Minimal Self-Adjustment of Orthotics Under Competitive Bidding

IX. Revision to Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business

A. Background

B. Summary of the Proposed Provisions and Responses to Comments on the Revision to Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business

X. Changes to the Appeals Process for Termination of Competitive Bidding Contract

XI. Technical Change Related to Submitting Bids for Infusion Drugs under the DMEPOS Competitive Bidding Program

XII. Accelerating Health Information Exchange

XIII. Collection of Information Requirements

XIV. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impact

B. Detailed Economic Analysis

1. CY 2015 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 2017 ESRD QIP

b. Effects of the PY 2018 ESRD QIP

3. DMEPOS Provisions

a. Effects of the Final Methodology for Adjusting DMEPOS Payment Amounts using Information from Competitive Bidding Programs

b. Effects of the Final Special Payment Methodologies under the Competitive Bidding Program

c. Effects of the Final Clarification of the Scope of the Medicare Hearing Aid Coverage Exclusion

d. Definition of Minimal Self-Adjustment of Orthotics Under Competitive Bidding

e. Effects of the Final Revision to Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business

C. Accounting Statement

XV. Regulatory Flexibility Act Analysis

XVI. Unfunded Mandates Reform Act Analysis

XVII. Federalism Analysis

XVIII. Congressional Review Act

XIX. 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:

ACO—Affordable Care Organization

AHRQ—Agency for Healthcare Research and Quality

ANOVA—Analysis of Variance

ARM—Adjusted Ranking Metric

ASP—Average Sales Price

ATRA—The American Taxpayer Relief Act of 2012

AV—Arterial Venous

BEA—Bureau of Economic Analysis

BLS—Bureau of Labor Statistics

BMI—Body Mass Index

CBA—Competitive Bidding Area

CBP—Competitive Bidding Program

CBSA—Core based statistical area

CCN—CMS Certification Number

CDC—Centers for Disease Control and Prevention

CfC—Conditions for Coverage

CHOW—Change of Ownership

CKD—Chronic Kidney Disease

CMSQS—CMS Quality Strategy

CPAP—Continuous positive airway pressure

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

HCP—Healthcare Personnel

Health IT—Health Information Technology

HD—Hemodialysis

HAIs—Healthcare-Acquired Infections

HCPCS—Healthcare Common Procedure Coding System

HCFA—Health Care Financing Administration

HLM—Hierarchical Logistic Modeling

HHS—Department of Health and Human Services

ICD—International Classification of Diseases

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

ICD-10-CM—International Classification of Disease, 10th Revision, Clinical Modification

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

IGI—IHS Global Insight

IIC—Inflation-indexed charge

IOLs—Intraocular Lenses

IPPS—Inpatient Prospective Payment System

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

IUR—Inter-unit reliability

MAC—Medicare Administrative Contractor

MAP—Medicare Allowable Payment

MFP—Multifactor Productivity

MIPPA—Medicare Improvements for Patients and Providers Act of 2008

MLR—Minimum Lifetime Requirement

MSA—Metropolitan statistical areas

NAMES—National Association of Medical Equipment Suppliers

NHSN—National Health Safety Network

NQF—National Quality Forum

NQS—National Quality Strategy

OBRA—Omnibus Budget Reconciliation Act

OMB—Office of Management and Budget

P&O—Prosthetics and orthotics

PAMA—Protecting Access to Medicare Act of 2014

PC—Product category

PD—Peritoneal Dialysis

PEN—Parenteral and enteral nutrition

PFS—Physician Fee Schedule

QIP—Quality Incentive Program

RMA—Reporting Measure Adjuster

RSPA—Regional single payment amounts

RUL—Reasonable useful lifetime

SAF—Standard Analysis File

SHR—Standardized Hospitalization Ratio Admissions

SMR—Standardized Mortality Ratio

SPA—Single payment amount

SRR—Standardized Readmissions Ratio

STrR—Standardized Transfusion Ratio

TENS—Transcutaneous electrical nerve stimulation

TEP—Technical Expert Panel

TPS—Total Performance Score

VBP—Value Based Purchasing

I. Executive Summary

A. Purpose

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

On January 1, 2011, we implemented the ESRD PPS, a case-mix adjusted bundled prospective payment system for renal dialysis services furnished by ESRD facilities. This rule updates and makes revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2015. Section 1881(b)(14) of the Social Security Act (the Act), as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), 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 annually increase payment amounts by an ESRD market basket increase factor, reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

Section 632 of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L 112-240) included several provisions that apply to the ESRD PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act, which required the Secretary, by comparing per patient utilization data from 2007 with such data from 2011, to reduce the single payment amount to reflect the Secretary's estimate of the change in utilization of ESRD-related drugs and biologicals. We finalized the amount of the drug utilization adjustment pursuant to this section in the CY 2014 ESRD PPS final rule with a 3- to 4-year transition (78 FR 72161 through 72170). Section 632(b) of ATRA prohibited the Secretary from paying for oral-only ESRD-related drugs and biologicals under the ESRD PPS before January 1, 2016. And finally, section 632(c) of ATRA requires the Secretary, by no later than January 1, 2016, to analyze the case-mix payment adjustments under section 1881(b)(14)(D)(i) of the Act and make appropriate revisions to those adjustments.

On April 1, 2014, the Congress enacted the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93). Section 217 of PAMA included several provisions that apply to the ESRD PPS. Specifically, sections 217(b)(1) and (2) of PAMA amend sections 1881(b)(14)(F) and (I) of the Act. We interpret the amendments to sections 1881(b)(14)(F) and (I) as replacing the drug utilization adjustment that was finalized in the CY 2014 ESRD PPS final rule (78 FR 72161 through 72170) with specific provisions that dictate what the market basket update will be for CY 2015 (0.0 percent) and how it will be reduced in CYs 2016 through 2018. Section 217(a)(1) of PAMA amends section 632(b)(1) of ATRA, which now provides that the Secretary may not pay for oral-only

drugs and biologicals used for the treatment of ESRD under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) further amends section 632(b)(1) of ATRA by adding a sentence that provides: “Notwithstanding section 1881(b)(14)(A)(ii) of the Social Security Act (42 U.S.C. 1395rr(b)(14)(A)(ii)), implementation of the policy described in the previous sentence shall be based on data from the most recent year available.” Finally, PAMA section 217(c) provides that, as part of the CY 2016 ESRD PPS rulemaking, the Secretary shall establish a process for (1) determining when a product is no longer an oral-only drug; and (2) including new injectable and intravenous products into the ESRD PPS bundled payment. As discussed further below, section 212 of PAMA provides that the Secretary may not adopt ICD-10-CM prior to October 1, 2015. Accordingly, HHS published a final rule on August 4, 2014 that established October 1, 2015 as the new ICD-10 compliance date, and required the use of ICD-9 through September 30, 2015.

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 years (PYs) 2017 and 2018. The program is authorized under section 1881(h) of 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 or exceed performance standards established by CMS.

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

This final rule finalizes a methodology for making national price adjustments to payments for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) paid under fee schedules based upon information gathered from the DMEPOS competitive bidding programs (CBPs) and finalizes the phase-in of special payment rules in a limited number of competitive bidding areas (CBAs) under the CBP for certain specified DME at 42 CFR 414.408 and 414.409. This final rule clarifies the statutory Medicare hearing aid coverage exclusion under section 1862(a)(7) of the Act and the regulation at § 411.15(d) to further specify the scope of this exclusion. In addition, this final rule will not finalize the definition of minimal self-adjustment at § 414.402 to identify certain individuals with specialized training with regard to off-the-shelf (OTS) orthotics under the CBP. This final rule revises the Change of Ownership (CHOW) policy in the current regulations to allow a product category to be severed from a competitive bidding contract and transferred to a new contract when a contract supplier sells a distinct line of business to a new qualified owner. This rule amends § 414.423 to clarify the effective date for terminations of competitive bidding contracts, and the deadline for contract suppliers notifying its beneficiaries of its contract termination. Finally, this rule includes a technical change related to submitting bids for infusion drugs under the CBP.

B. Summary of the Major Provisions

1. ESRD PPS

•

CY 2015 ESRD PPS base rate:

For CY 2015, the ESRD PPS base rate is $239.43. This amount reflects a 0.0 percent update to the payment rate as required by section 1881(b)(14)(F)(i) of the Act, as amended by section 217(b)(2) of PAMA, and the application of the wage index budget-neutrality adjustment factor of 1.001729 to the CY 2014 ESRD PPS base rate of $239.02.

•

Rebasing and revision of the ESRD bundled (ESRDB) market basket:

For CY 2015, we are rebasing and revising the ESRDB market basket; which entails an update to the base year of the ESRDB market basket from 2008 to 2012. The base year update results in a shift in relative costs from prescription drugs to compensation; mainly driven by the decreased utilization of drugs in furnishing ESRD treatments experienced from 2008 to 2012. Additionally, while we proposed to use PPI—Vitamin, Nutrient, and Hematinic Preparations as the pharmaceutical price proxy (instead of the current PPI—Pharmaceuticals for Human Use, Prescription), we are finalizing, based on comments, a blend of PPI—Biological Products for Human Use (78 percent) and PPI—Vitamin, Nutrient, and Hematinic Preparations (22 percent). The resulting CY 2015 market basket less MFP adjustment would have been 1.6 percent (2.1 percent ESRDB market basket update less 0.5 percent MFP adjustment); however, section 1881(b)(14)(F)(i) of the Act, as amended by section 217(b)(2) of PAMA requires the market basket less MFP adjustment to be 0.0 percent for CY 2015.

•

CY 2015 ESRD PPS labor-related share:

As a result of the ESRDB market basket rebasing and revision, outlined above, the CY 2015 labor-related share is 50.673 percent compared to the current labor-related share of 41.737 percent. This change to the labor-related share will have a significant impact on payments for certain ESRD facilities, specifically those ESRD facilities that have low wage index values. Therefore, for CY 2015 we are implementing the labor-related share of 50.673 with a 2-year transition.

•

CY 2015 wage indices 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. In CY 2015, the application of the wage index budget-neutrality adjustment factor will continue to apply to the base rate when computing payments under the ESRD PPS. In addition, we will continue our policy for the gradual phase-out of the wage index floor and reduce the wage index floor values to 0.40 for CY 2015, as finalized in the CY 2014 ESRD PPS final rule (78 FR 72173 through 72174).

•

Update to wage index core-based statistical areas (CBSA):

Beginning January 1, 2015, we will implement the new CBSA delineations as described in the February 28, 2013 OMB Bulletin No. 13-01, for all ESRD facilities, with a 2-year transition. Facilities will receive 50 percent of their CY 2015 wage index based on the CBSA delineations for CY 2014 and 50 percent of their CY 2015 wage index based on the new CBSA delineations. In CY 2016, facilities' wage index values will be based 100 percent on the new CBSA delineations.

•

CY 2015 ESRD PPS outlier payment adjustment:

We have updated the outlier services fixed-dollar loss and Medicare Allowable Payments (MAPs) amounts for adult and pediatric patients for CY 2015 using 2013 claims data. Based on the use of more current data, the fixed-dollar loss amount for pediatric beneficiaries will increase from $54.01 to $54.35 and the MAP amount will increase from $40.49 to $43.57, as compared to CY 2014 values. For adult beneficiaries, the fixed-dollar loss amount will decrease from $98.67 to $86.19 and the MAP amount will increase from $50.25 to $51.29.

•

Clarification for the low-volume payment adjustment (LVPA):

We clarified two policies regarding Medicare Administration Contractor (MAC) verification for LVPA eligibility requirements and are implementing conforming changes to the LVPA regulation text at 42 CFR 413.232. The first clarification explains that MACs can consider supporting data from hospital-based ESRD facilities to verify the facility's total treatment count. The second clarification explains that MACs can add or prorate treatment counts from non-standard cost reporting

periods (those that are not 12-month periods) where there is a change in ownership that does not result in a new Provider Transaction Access Number.

•

ICD-10-CM codes eligible for the ESRD PPS co-morbidity payment adjustment:

Section 212 of PAMA provides that the Secretary may not adopt ICD-10-CM prior to October 1, 2015. An August 4, 2014 HHS final rule delayed the transition from ICD-9-CM to ICD-10-CM until October 1, 2015 and required the continued use of ICD-9 through September 30, 2015.Therefore, the ESRD PPS will continue to use ICD-9-CM through September 30, 2015, and will require the use of ICD-10-CM beginning October 1, 2015 for purposes of the co-morbidity payment adjustments. For CY 2015, we are correcting several typographical errors and omissions in the ICD-9-CM to ICD-10-CM crosswalk tables that appeared in the CY 2014 ESRD PPS final rule.

•

Delay of payment for oral-only drugs under the ESRD PPS:

Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA, which now provides that the Secretary “may not implement the policy under section 413.174(f)(6) of title 42, Code of Federal Regulations (relating to oral-only ESRD-related drugs in the ESRD prospective payment system), prior to January 1, 2024.” Accordingly, we are finalizing our proposal to amend the date in 42 CFR 413.174(f)(6) from January 1, 2016 to January 1, 2024, and to amend the date in § 413.237(a)(1)(iv) regarding outlier payments for oral-only ESRD-related drugs made under the ESRD PPS to January 1, 2024.

2. ESRD QIP

This final rule implements requirements for the ESRD QIP, including measure sets for PYs 2017 and 2018.

•

PY 2017 Measure Set:

For PY 2017, we are removing one measure from the ESRD QIP, the Hemoglobin Greater than 12 g/dL clinical measure, on the basis that it is “topped out”. We are also adopting the Standardized Readmission Ratio (SRR) clinical measure, which assesses care coordination.

•

PY 2018 Measure Set:

For PY 2018, we are adopting two new clinical measures—the Standardized Transfusion Ratio (STrR) and Pediatric Peritoneal Dialysis Adequacy—and three new reporting measures: (1) Pain Assessment and Follow-Up; (2) Clinical Depression Screening and Follow-Up; and (3) National Healthcare Safety Network (NHSN) Healthcare Personnel Influenza Vaccination. We are also converting the In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) survey reporting measure to a clinical measure.

•

Revision to the ICH CAHPS Reporting Measure:

Beginning with the PY 2017 program year, we are revising the ICH CAHPS reporting measure to determine facility eligibility for the measure based on the number of survey-eligible patients treated during the “eligibility period”, which we define as the Calendar Year (CY) that immediately precedes the performance period. Survey-eligible patients are defined in the ICH CAHPS measure specifications available at

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html

and

https://ichcahps.org.

•

Revision to the Mineral Metabolism Reporting Measure:

Beginning with the PY 2018 program year, we are revising the Mineral Metabolism reporting measure to allow facilities to submit both serum phosphorus and plasma phosphorus measurements.

•

Extraordinary Circumstances Exemption:

Beginning with the PY 2017 ESRD QIP, we are exempting dialysis facilities from all requirements of the ESRD QIP clinical and reporting measures during the months in which they are forced to close due to a natural disaster or other extraordinary circumstances.

•

New Scoring Methodology for PY 2018:

Beginning with PY 2018, we are using a new scoring methodology for the ESRD QIP. This scoring methodology creates the Clinical Measure Domain, within which facility scores on clinical measures will be divided into subdomains that align with National Quality Strategy (NQS) domains and weighted according to the number of measures in a subdomain, facility experience with the measure, and the measure's alignment with CMS priorities for quality improvement. These weighted scores will be summed to produce a facility's Clinical Measure Domain score. A facility's Clinical Measure Domain score will be weighted to comprise 90 percent of the facility's TPS, and the facility's scores on the reporting measures will be weighted equally to comprise the remaining 10 percent of the facility's TPS.

3. DMEPOS

•

The methodology for making national price adjustments based upon information gathered from the DMEPOS CBPs:

As required by the MIPPA, this rule finalizes methodologies for using information from the DMEPOS CBP to adjust the fee schedule amounts for DME in areas where CBPs are not implemented. The rule finalizes the same methodologies to adjust the fee schedule amounts for enteral nutrition and off-the shelf (OTS) orthotics in areas where CBPs are not implemented.

•

Phase-in of special payment rules in a limited number of CBAs under the CBP for certain, specified DME:

This rule finalizes a phase-in of special payment rules for certain DME at 42 CFR 414.408 and 414.409 under the DMEPOS CBP in a limited number of CBAs.

•

Medicare hearing aid coverage exclusion under section 1862(a)(7) of the Act:

This rule modifies the regulation at § 411.15 to address the scope of the statutory hearing aid exclusion and note the types of devices that are not subject to the hearing aid exclusion.

•

Definition of minimal self-adjustment at § 414.402:

This rule will not finalize changes to the “minimal self-adjustment” definition to specify certain “individuals with specialized training” with regard to the definition of OTS orthotics under the CBP.

•

Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business:

This rule establishes an exception under the CHOW rules to allow CMS to sever a product category from a contract, incorporate the product category into a new contract, and transfer the new contract to a qualified new owner under certain specific circumstances.

•

Appeals Process for Termination of a Competitive Bidding Contract:

This rule amends § 414.423 to clarify the effective date for terminations of competitive bidding contracts, and the deadline for contract suppliers notifying its beneficiaries of its contract termination.

C. Summary of Costs and Benefits

In section XIV of this final rule, we set forth a detailed analysis of the impacts of the finalized changes for affected entities and beneficiaries. The impacts include the following:

1. Impacts of the Final ESRD PPS

The impact chart in section XIV.B.1 of this final rule displays the estimated change in payments to ESRD facilities in CY 2015 compared to estimated payments in CY 2014. The overall impact of the CY 2015 changes is projected to be a 0.3 percent increase in payments. Hospital-based ESRD facilities have an estimated 0.5 percent increase in payments compared with freestanding facilities with an estimated 0.3 percent increase.

We estimate that the aggregate ESRD PPS expenditures will increase by approximately $30 million from CY 2014 to CY 2015. This reflects a $0 change from the payment rate update and a $30 million increase due to the updates to the outlier threshold amounts. As a result of the projected 0.3 percent overall payment increase, we estimate that there will be an increase in beneficiary co-insurance payments of 0.3 percent in CY 2015, which translates to approximately $10 million.

2. Impacts for ESRD QIP

The overall economic impact of the ESRD QIP is an estimated $12 million in PY 2017 and $11.8 million in PY 2018. In PY 2017, we expect the total payment reductions to be approximately $11.9 million, and the costs associated with the collection of information requirements for the validation of NHSN data feasibility study to be approximately $27 thousand for all ESRD facilities. In PY 2018, we expect the total payment reductions to be approximately $11.6 million, and the costs associated with the collection of information requirements for the NHSN Healthcare Personnel Influenza Vaccination reporting measure to be approximately $248 thousand for all ESRD facilities.

The ESRD QIP will continue to incentivize facilities to provide high-quality care to beneficiaries.

3. Impacts for DMEPOS

a. Final Methodology for Making National Price Adjustments to DMEPOS Fee Schedule Amounts Based Upon Information Gathered From the CBPs

The final regulation adjusts Medicare fee schedule amounts for items subject to DMEPOS CBPs beginning January 1, 2016, using information from the DMEPOS CBPs to be applied to items in non-competitive bidding areas. It is estimated that these adjustments would save over $4.4 billion in gross payments for the 5-year period beginning January 1, 2016, and ending December 30, 2020. The estimated gross savings are primarily derived from price reductions for items. It is expected that most of the economic impact would result from reduced payment amounts. The ability of suppliers to furnish items is not expected to be impacted.

b. Phase-In of Special Payment Rules Under the CBP for Certain DME and Enteral Nutrition in Certain CBAs

We believe that the special payment rules we are finalizing for certain DME under the DMEPOS CBPs would not have a significant impact on beneficiaries and suppliers. Contract suppliers are responsible for furnishing items and services needed by the beneficiary, and the cost to suppliers for furnishing these items and services does not change based on whether or not the equipment and related items and services are paid for separately under a capped rental payment method. Because the supplier's bids would reflect the cost of furnishing items in accordance with the new payment rules, we expect the overall savings to generally be the same as they are under the current payment rules.

Furthermore, the final special payment rules would be phased in under a limited number of areas first to evaluate their impact on the program, beneficiaries, and suppliers, including costs, quality, and access. Expanded use of the special payment rules in other areas or for other items would be addressed in future rulemaking.

c. Clarification of the Statutory Medicare Hearing Aid Coverage Exclusion Under Section 1862(a)(7) of the Act

This final rule clarifies the scope of the Medicare coverage exclusion for hearing aids. This rule will not have a fiscal impact on the Medicare program because there will be no change in the devices that are currently covered for Medicare payment purposes. This rule provides further guidance about coverage of DME with regard to the statutory hearing aid exclusion.

d. Definition of Minimal Self-Adjustment at 42 CFR 414.402

This final rule will not finalize the definition of minimal self-adjustment at this time.

e. Change of Ownership Rules To Allow Contract Suppliers To Sell Specific Lines of Business

This rule finalizes changes to the CHOW rules in order to limit disruption to the normal course of business for DME suppliers. This final rule establishes an exception under the current CHOW rules to allow CMS to sever a product category from a contract, incorporate the product category into a new contract, and transfer the new contract to a qualified new owner under certain specific circumstances. This change would impact businesses in a positive way by allowing them to conduct everyday transactions with less disruption from our rules and regulations.

II. Calendar Year (CY) 2015 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) in which 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 MIPPA. On November 10, 2011, we published in the

Federal Register

a final rule (76 FR 70228 through 70316) in which 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) in which 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.

On December 2, 2013, we published in the

Federal Register

a final rule (78 FR 72156 through 72253) in which we made a number of routine updates for CY 2014, implemented the fourth and final year of the transition to the ESRD PPS, implemented sections 632(a) and (b)(1) of ATRA, and made several policy changes and clarifications. Specifically, we updated the ESRD PPS base rate to $239.02 per treatment to reflect the CY 2014 ESRD bundled (ESRDB) market basket update of 3.2 percent minus a multifactor productivity adjustment of 0.4 percent, that is, a 2.8 percent increase. This amount also reflected the application of the wage index budget-neutrality adjustment of 1.000454, the home dialysis training add-on budget-neutrality adjustment factor of 0.999912, and the portion of the drug utilization adjustment for CY 2014, or $8.16, and delayed the payment for oral-only ESRD-related drugs and biologicals until January 1, 2016. In addition, this rule also extends the gradual reduction of the wage index floor, delays application of ICD-10-CM diagnosis codes to the comorbidity payment adjustment and updates the fixed-dollar loss and MAP amounts for the outlier policy.

B. Summary of the Proposed Provisions, Public Comments, and Responses to Comments on the CY 2015 ESRD PPS Proposed Rule

The proposed rule, titled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies” (79 FR 40208 through 40315), (hereinafter referred to as the CY 2015 ESRD PPS proposed rule), was published in the

Federal Register

on July 11, 2014, with a comment period that ended on September 2, 2014. In that proposed rule, for the ESRD PPS, we proposed routine updates to the payment system; proposed to implement the statutory provisions set forth in PAMA, and clarified policies for billing and payment of short frequent hemodialysis services and facility eligibility requirements for the low-volume payment adjustment (LVPA) available under the ESRD PPS. We received approximately 400 public comments on our proposals, including comments from: ESRD facilities; national renal groups, nephrologists and patient organizations; patients and care partners; manufacturers; health care systems; and nurses. In addition, we received a several thousand signature petition requesting that CMS include “full coverage “of the cost of home hemodialysis patient training under Medicare. We note that we made no proposals in our CY 2015 ESRD PPS proposed rule regarding these issues, and therefore we are not finalizing a modification to them in this final rule. We will, however, consider the comments set forth in the petition and in other public comments in the future.

In addition, we received other comments regarding policies for the ESRD PPS for which we made no proposals. For example, a few comments from industry stakeholders and medical associations encouraged CMS to consider race and ethnicity when assessing the cost of care. One commenter contended that African American dialysis patients require significantly more ESA utilization per treatment. Another commenter encouraged CMS to monitor race and ethnicity for the purpose of establishing a race adjustment factor in the future. We will consider these comments as we refine the payment system in CY 2016. Other comments requested that CMS clarify inconsistent manual language in Internet Only Manual Pub. 100-02 Medicare Benefit Policy, chapter 11 End-Stage Renal Disease. We appreciate these suggestions and will clarify our manual language through sub-regulatory guidance.

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 2015 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 2015 ESRD PPS

1. 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 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.

a. Changes to the Drug Utilization Adjustment

i. The Drug Utilization Adjustment Finalized in the CY 2014 ESRD PPS Final Rule

Section 1881(b)(14)(I) of the Act, as added by section 632(a) of the American Taxpayer Relief Act of 2012 (ATRA), required 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 required 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). Consistent with these requirements, in CY 2014, we finalized a payment adjustment to the CY 2014 ESRD PPS base rate that reflected the change in utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012.

Specifically, we finalized the drug utilization adjustment amount of $29.93 per treatment, and finalized a policy to implement this amount over a 3- to 4-year transition period. For CYs 2014 and 2015, we stated that we would implement the transition by offsetting the payment update by a portion of the reduction amount necessary to create an overall impact of zero percent for facilities from the previous year's payments. For example, in CY 2014 we finalized a per treatment drug utilization adjustment amount for the first transition year of $8.16 or 3.3 percent, which represented the CY 2014 ESRDB market basket update minus productivity and other impacts to create an overall impact of zero percent. For a complete discussion of the methodology for computing the drug utilization adjustment, please see the CY 2014 ESRD PPS final rule (78 FR 72161 through 72170).

ii. PAMA Changes to the Drug Utilization Adjustment

On April 1, 2014, Congress enacted PAMA. Section 217(b), titled “Mitigation of the Application of Adjustment to ESRD Bundled Payment Rate to Account for Changes in the Utilization of Certain Drugs and Biologicals,” amends section 1881(b)(14)(I) of the Act by inserting “and before January 1, 2015” after January 1, 2014. This amendment effectively eliminates the remaining years of the drug utilization adjustment transition. In its place, the PAMA amendments to section 1881(b)(14)(F)(i) dictate what the market basket increase factor will be for 2015 and how it will be reduced in 2016 through 2018. In particular, PAMA section 217(b)(2)(C) amended section 1881(b)(14)(F)(i) by adding subclause (III), which provides that “[n]otwithstanding subclauses (I) and (II), in order to accomplish the purposes of subparagraph (I) with respect to 2015, the increase factor described in subclause (I) for 2015 shall be 0.0 percent.” We interpret subclause

(III) to mean that the market basket increase factor less the productivity adjustment for 2015 is 0.0 percent.

The PAMA amendments also provide for a payment reduction in lieu of the drug utilization adjustment in 2016 through 2018. In particular, PAMA section 217(b)(2)(ii) further amends section 1881(b)(14)(i)(I) by adding at the end the following new sentence, “In order to accomplish the purpose of subparagraph (I) with respect to 2016, 2017, and 2018, after determining the increase factor described in the preceding sentence for each of 2016, 2017, and 2018, the Secretary shall reduce such increase factor by 1.25 percentage points for each of 2016 and 2017 and by 1 percentage point for 2018.” We interpret this provision as requiring us to reduce the market basket increase factor for 2016 through 2018 by the percentages prescribed in the statute.

Comment:

All commenters were supportive of CMS's interpretation of section 217 of PAMA and agreed that PAMA required a 0.0 percent market basket update in CY 2015. A few commenters expressed concern that the cumulative economic effect of ATRA's drug reduction, sequestration, and now PAMA's 0.0 percent update may be jeopardizing care and access for Medicare beneficiaries. Some commenters noted an unstainable Medicare payment trajectory and cited an independent analysis that estimates a mean gross margin of negative 7.4 percent for CY 2018.

Response:

We thank the commenters for their support of our interpretation of section 217 of PAMA as requiring a 0.0 percent market basket update for CY 2015. We acknowledge the commenters' concern for the collective effects of reduced Medicare margins on care quality and patient access. However, PAMA, ATRA, and sequestration were congressionally mandated payment reductions and CMS must implement them. CMS has finalized policies that would mitigate the negative impacts of statutorily mandated reductions on facility margins. For example, we proposed and finalized a transition not to exceed four years for the ATRA drug utilization adjustment, thus reducing the CY 2014 payment reduction from $29.93 to $8.16. We adopted this transition policy to mitigate the negative economic impact for facilities (78 FR 72161 through 72170), and to ensure our beneficiaries' access to quality care.

Comment:

A few commenters requested greater transparency in the data used to establish the annual update and other Medicare payment updates included in the ESRD PPS. One commenter noted that transparency in rate setting data gives the industry confidence in a predictable and fair payment methodology, and that facilities can only then make operational and investment decisions for the future. Other commenters provided a specific list of data files they need in order to replicate CMS's update calculations, and provided additional analysis to CMS: annual claims level rate setting files for the ESRD PPS; Medicare Part D Standard Analytic File (SAF); 100 percent SAF for physician services; and Medicare Part C SAF.

Response:

We agree with commenters that transparency in rate setting is desirable. We posted the provider-level impact file with the proposed rule because we believe that furnishing an impact file, sorted by facility, is the most transparent method and enables facilities to assess the economic impact of policy changes at the facility level. In addition, beginning in CY 2015, we have made a Limited Data Set (LDS) of ESRD PPS facility claims used for CY 2015 rate settings available for purchase. A link to the LDS file was included in our proposed rule in section XIX titled Files Available to the Public via the Internet (79 FR 40311). Likewise, we included an updated LDS file with this final rule that is discussed in section XIX of this rule. The LDS files are available for purchase at

http://www.cms.gov/research-statistics-data-and=systems/files-for-order/limiteddatasets/endstagerenaldiseasesystemfile.html.

We note that interested parties may request Part D data from CMS at

http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/GuidePartD,

and we will consider furnishing encounter data under Medicare Part C, and other Medicare claims files in the future.

b. Payment Rate Update for CY 2015

As discussed in section II.A 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) of the Act. In accordance with section 1881(b)(14)(F)(i)(III) of the Act, as added by PAMA section 217(b)(2)(C), we are finalizing a 0.0 percent update to the CY 2014 ESRD PPS base rate of $239.02 for CY 2015.

Comment:

Generally, commenters were supportive of the CY 2015 proposed base rate. Some commenters cautioned that CMS “maintain financial integrity” of the ESRD PPS by addressing crucial components of the payment system that inappropriately reduce the base rate. A few commenters identified the ESRD PPS payment components of case-mix and the outlier policy as examples of payment adjustments that they believe are structurally broken. The commenters contend that these adjustments result in lowering overall payments to facilities, making it difficult for facilities to furnish high quality care to patients.

Response:

We thank the commenters for their support of the proposed CY 2015 ESRD PPS base rate. While we do not agree with the commenters who contend that the case-mix and outlier adjustments are structurally broken, we believe that these adjustments have been underutilized in the payment system. We note that section 632 of ATRA requires CMS to review the case-mix payment adjustments and make appropriate modifications by CY 2016. We will consider these comments as part of that larger ESRD PPS refinement that will take place for CY 2016.

Comment:

Other commenters cautioned CMS to correct what they term “flaws in standardization,” calling upon CMS to use the most current data available in re-calculating the standardization factor in this final rule in order to mitigate losses facilities may have in CY 2015. As an alternative, commenters suggest that CMS make an interim reduction to the adjustor values that would take into account the decrease in drug utilization. With these values, CMS could reduce the dollars in the standardization factor for CY 2015. They estimated that the standardization factor discrepancy accounts for a loss of one to two percent in the base rate.

They also suggested that for 2015, CMS: (1) Eliminate the co-morbidity case-mix adjustments because the facilities are unable to obtain the necessary documentation to substantiate a co-morbid diagnosis and thus, are unable to claim the adjustment; and (2) reduce the outlier percentage so that it reflects the percentage of cases paid as outlier cases (0.5 percent) and so that it is paid out annually in its entirety, or else provide for a zero percent outlier policy.

Response:

We thank the commenters for their suggestions for protecting the integrity of the base rate and questioning the necessity for some payment adjustments available under the ESRD PPS. However, as we stated in the CY 2011 ESRD PPS final rule (75 FR

49081), to account for the overall effects of the proposed ESRD PPS patient- and facility-level 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 wish to remind commenters that we used the best data available for the development of the standardization factor and made a good faith effort to simulate payments under the ESRD PPS beginning in CY 2011. In addition, 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 applied under the ESRD PPS. This analysis will include a thoughtful assessment of utilization and economic impact of the various payment adjustments under the PPS to determine whether they should continue to apply, or if the magnitude of the adjustments is over or understated in the ESRD PPS.

We plan to consider all of the improvements suggested as part of the ESRD PPS refinement for CY 2016. We do not think it would be appropriate to eliminate any co-morbidity adjustments in isolation from a broader refinement that assesses all current and potentially significant adjustments.

c. CY 2015 ESRD PPS Wage Index Budget-Neutrality Adjustment

As discussed in section II.C of this final rule, for CY 2015 we apply the wage index budget-neutrality adjustment factor of 1.001729 to the CY 2014 ESRD PPS base rate (that is, $239.02), yielding a CY 2015 ESRD PPS wage index budget-neutrality adjusted base rate of $239.43 ($239.02 × 1.001729 = $239.43).

Comment:

Commenters were supportive of the CY 2015 proposed wage index budget-neutrality adjustment. A few commenters noted the small payment increase for CY 2015, and thanked CMS for continuing to apply an updated wage index budget-neutrality adjustment in a year where a 0.0 percent market basket update was congressionally mandated.

Response:

We thank the commenters for their support of our finalized wage index budget-neutrality factor, and note that the wage index budget-neutrality update is computed separately from the annual market basket update. Therefore, the wage index budget-neutrality update continues to apply even in years when a 0.0 market basket update is statutorily required.

d. Labor-Related Share

As discussed in section II.C.2 of this final rule, as part of the ESRDB market basket rebase and revision, we are updating the labor-related share from 41.737 percent to 50.673 percent. We noted that some ESRD facilities are adversely affected by this update. For example, rural facilities and facilities located in core-based statistical areas (CBSA) with wage indexes below 1.0 will experience reduced payments due to an increase in the labor-related share, while other facilities located in CBSAs where wage indices are above 1.0 will experience increased payments. While we are finalizing the new labor-related share of 50.673 percent, we shall implement this value using a 2-year transition.

Therefore, for CY 2015 we will apply 50 percent of the value of the current labor-related share under the ESRD PPS (41.737 percent) and 50 percent of the value of the new labor-related share (50.673 percent), add the percentages together and divide by two, for a CY 2015 labor-related share of 46.205 percent ((41.737 + 50.673)/2 = 46.205). Beginning in CY 2016, we will apply 100 percent of the total labor-related share of 50.673 percent. We shall continue to apply a labor-related share of 50.673 percent in computing a wage index-adjusted base rate for ESRD facilities until such time in the future the ESRDB market basket is again rebased or revised. This approach is similar to the transition finalized for the CY 2015 wage indexes and discussed in section II.3 of this final rule, and is intended to allow ESRD facilities time to adjust to the new labor-related share.

Comment:

While the majority of commenters supported the updated labor-related share, some commenters expressed concern regarding the negative impact for rural facilities and any facility with a wage index value of less than 1.0, and noted that they will experience reduced ESRD PPS payments in CY 2015 as a result of the updated labor-related share. A few commenters contended that this update would be better received during a larger payment system refinement and encouraged CMS to delay the ESRDB market basket update, with the new labor-related share, until CY 2016 where negative impacts could be offset with other payment system refinements. Another commenter noted that if the ESRDB market basket update was delayed until CY 2016, 2012 audited cost reports would be available to ensure better accuracy. The commenter noted that the PAMA legislation mandated the audits and provided $18 million to fund the effort.

Response:

We thank the commenters for their support of our updated labor-related share. We share stakeholders' concern for negatively impacted facilities. Moreover, we agree with commenters that delaying the ESRDB market basket update until CY 2016 may have the advantage of offsetting some of the negative impact indicated in section XIV of this final rule. However, we believe the labor-related share has been undervalued in the payment system, especially after the ATRA drug utilization reduction finalized in the ESRD PPS CY 2014 final rule (78 FR 72161 through 72170). Therefore, we are finalizing a labor-related share of 46.205 percent for CY 2015 and a labor-related share of 50.673 percent for CY 2016 and until such time in the future the labor-related share is updated.

Lastly, we wish to clarify for commenters that the audits of Medicare cost reports beginning during 2012 will not be available for CY 2016 rulemaking. Any cost report findings resulting from the statutorily-mandated audits of Medicare cost reports beginning during 2012 will be available for future ESRDB market basket updates.

Comment:

Many commenters supported the update to the labor-related share and the 2-year transition to dampen the immediate impact of the change. A few commenters thanked CMS for appropriately recognizing shifting costs in furnishing dialysis services from drugs to labor.

Response:

We thank the commenters for their support and note that we considered implementing the full amount of the revised labor-related share percentage of 50.673 for CY 2015, but that would have increased the CY 2015 proposed wage index budget-neutrality factor. Such an increase would have resulted in a further decrease in CY 2015 Medicare payments to rural facilities, and an additional increase to urban facilities. When we apply the transition labor-related share of 46.205 percent the disparity in impacts for rural and urban facilities is reduced, resulting in a more stable economic environment for all facilities in general. We believe that offsetting the negative economic impact for rural facilities with the 2-year transition for the labor-share will enhance access to quality care for Medicare beneficiaries living in rural communities. (For more information of the CY 2015 Impact of

Changes in Payments to ESRD Facilities for CY 2015 ESRD final rule, see section XIV of this final rule). Therefore, we believe a 2-year transition strikes an appropriate balance between ensuring that ESRD PPS payments are as accurate and stable as possible, while giving rural and urban facilities in low wage index areas time to adjust to the new labor-related share.

Comment:

A few commenters requested that CMS consider a longer transition to further mitigate the financial pressures on rural providers. One commenter encouraged CMS to provide a longer transition period, “such as 3 or 4 years.” Another commenter encouraged CMS to extend the transition to 3 years to give rural facilities more time to adjust to the lower reimbursement and “get them closer to the end of the PAMA cuts.”

Response:

We thank the commenters for their concern for the economic impacts on rural and urban facilities located in areas with low wage indices. In addition, we acknowledge the commenter's suggestion to extend the transition period to 3 or 4 years to allow disadvantaged facilities time to adjust to the new labor-related share percentage. However, we continue to believe a 2-year transition strikes an appropriate balance between allowing ESRD facilities time to adjust to the new labor-related share while appropriately accounting for facility costs associated with labor in furnishing renal dialysis services.

In summary, we are finalizing a CY 2015 ESRD PPS base rate of $239.43. This reflects, updated claims data used for rate setting, a 0.0 percent payment update consistent with section 1881(b)(14)(F)(i)(III) of the Act, as added by section 217(b)(2) of PAMA, a 2-year transition for the labor related share(46.205 percent for CY 2015 and 50.673 for CY 2016), and the CY 2015 wage index budget-neutrality adjustment factor of 1.001729.

2. ESRD Bundled Market Basket and Labor-Related Share

a. Rebasing and Revision of the ESRD Bundled Market Basket

In July, we proposed to rebase and revise the ESRD Bundled (ESRDB) market basket for CY 2015. In accordance with section 1881(b)(14)(F)(i) of the 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 in section 1886(b)(3)(B)(xi)(II) of the Act. The application of the productivity adjustment may result in the increase factor being less than 0.0 for a year and may result in payment rates for a year being less than the payment rates for the preceding year. The statute also provides that the market basket increase factor should reflect the changes over time in the prices of an appropriate mix of goods and services used to furnish renal dialysis services.

In the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162), we established an ESRDB market basket using CY 2008 as the base year. This market basket was used to annually update the ESRD base rate payments for CY 2012, CY 2013, and CY 2014.

In the CY 2015 ESRD proposed rule, we proposed to rebase and revise the ESRDB market basket for CY 2015, in accordance with, section 1881(b)(14)(F)(i) of the Act, which 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. The multi-factor productivity adjustment is applied to the ESRDB market basket update under the requirements of sections 1881(b)(14)(F)(i)(II) and 1886(b)(3)(B)(xi)(II) of the Act.

The CY 2012-based ESRDB market basket represents the costs of operating and capital-related costs. The percentage change in the ESRDB market basket reflects the average change in the price of a fixed set of goods (both operating and capital) and services purchased by ESRD facilities necessary for providing renal dialysis services. For further background information, see the CY 2011 final rule with comment period (75 FR 49151 through 49162).

The ESRDB market basket is a fixed-weight (Laspeyres-type) price index. A Laspeyres-type index compares the cost of purchasing a specified mix of goods and services in a selected base period to the cost of purchasing that same group of goods and services at current prices. The effects on total expenditures resulting from changes in the quantity or mix of goods and services purchased subsequent or prior to the base period are, by design, not considered.

The market basket is constructed in three main steps: the first step is to select a base period and estimate total base period expenditure shares for mutually exclusive and exhaustive spending categories. We use total costs for operating and capital expenses. These shares are called “cost” or “expenditure” weights. The second step is to match each expenditure category to a price/wage variable, called a price proxy. We draw these price proxy variables from publicly available statistical series published on a consistent schedule, preferably at least quarterly. The final step involves multiplying the price proxy index level for each spending category by the cost weight for that category. The sum of these products (that is, cost weights multiplied by proxy index levels) for all cost categories yields the composite index level of the market basket for a given quarter or year. Repeating the third step for other quarters and years produces a time series of market basket index levels, from which we can calculate rates of growth.

We proposed to use CY 2012 as the base year for the rebased and revised ESRDB market basket cost weights. The cost weights are based on the cost report data for independent ESRD facilities. We refer to the market basket as a CY market basket because the base period for all price proxies and weights are set to CY 2012 = 100. Source data included CY 2012 Medicare cost reports (Form CMS-265-11), supplemented with 2012 data from the U.S. Census Bureau's Services Annual Survey (SAS) for Kidney Dialysis Centers (NAICS 621492). Medicare cost reports from hospital-based ESRD providers were not used to construct the proposed ESRDB market basket because data from independent ESRD facilities tend to better reflect the actual cost structure faced by the ESRD facility itself, and are not influenced by the allocation of overhead over the entire institution, as can be the case with hospital-based providers. This approach is consistent with our standard methodology used in the development of other market baskets.

b. Rebasing and Revision of the ESRD Bundled Market Basket

The terms “rebasing” and “revising”, while often used interchangeably, actually denote different activities. Rebasing means shifting the base year for the structure of costs of the input price index (for example, we proposed to shift the base year cost structure from CY 2008 to CY 2012). Revising means changing data sources, cost categories, price proxies, and/or methodology used in developing the input price index. We proposed both to rebase and revise the ESRDB market basket.

We selected CY 2012 as the new base year because 2012 is the most recent year for which relatively complete Medicare cost report (MCR) data are available. In developing the market basket, we reviewed ESRD expenditure data from ESRD MCRs (CMS Form 265-11) for CY 2012 for each freestanding ESRD facility that reported expenses and payments. The CY 2012 cost reports

are those with cost reporting periods beginning on or after January 1, 2012 and before December 31, 2012.

We developed cost category weights for the proposed CY 2012-based ESRDB market basket in two stages. First, we derived base weights for nine major categories (Wages and Salaries, Employee Benefits, Medical Supplies, Lab Services, Housekeeping & Operations, Pharmaceuticals, Administrative and General, Capital-Related Building & Fixed Equipment, and Capital-Related Machinery) from the ESRD MCRs. Second, we proposed to divide the Administrative & General cost category into further detail using 2012 U.S. Census Bureau Services Annual Survey (SAS) Data for the industry Kidney Dialysis Centers (NAICS 621492). We applied the 2012 distributions from the SAS data to the 2012 “Administrative & General” cost weight to yield the more detailed 2012 cost weights. This is similar to the methodology we used to break the 2008-based Administrative & General Costs into more detail for the ESRDB market basket as detailed in the CY 2011 ESRD final rule (75 FR 49154 through 49159). For more information on the SAS data, see

http://www.census.gov/services/sas/about_the_surveys.html

.

We proposed to include a total of 20 detailed cost categories in the CY 2012-based ESRDB market basket, which is four more cost categories than the CY 2008-based ESRDB market basket. In addition, we proposed to further decompose both the Wages and Salaries and Employee Benefits cost categories into four more detailed cost categories reflecting the occupational mix of full time equivalents (FTEs) at ESRD facilities. The four detailed occupational categories are: (1) Health-related workers; (2) Management workers; (3) Administrative workers; and (4) Service workers. Having more detailed cost categories for these compensation costs enables them to be proxied more precisely. We also proposed to collapse the Professional Fees and All Other Services cost categories into single categories rather than splitting those categories into Labor-Related and Non-Labor-Related Services. In addition, we proposed to revise our labels for All Other Materials to Medical Materials and Supplies, Laboratories to Lab Services, and All Other Labor-Related/Non Labor-Related to All Other Goods and Services.

i. Cost Category Weights

Using Worksheets A and B from the CY 2012 Medicare cost reports, we computed cost shares for nine major expenditure categories: Wages and Salaries, Employee Benefits, Pharmaceuticals, Supplies, Lab Services, Administrative and General (A&G), Housekeeping and Operations, Capital-Related Building & Equipment, and Capital-Related Machinery. Edits were applied to include only cost reports that had total costs greater than zero. In order to reduce potential distortions from outliers in the calculation of the cost weights for the major expenditure categories, cost values for each category less than the 5th percentile or greater than the 95th percentile were excluded from the computations. The resulting data set included information from approximately 4,700 independent ESRD facilities' cost reports from an available pool of 5,333 cost reports. Expenditures for the nine cost categories as a proportion of total expenditures can be found in the CY 2015 Proposed Rule (79 FR 40217).

Some costs are reported on the Medicare cost report but are not included in the ESRD bundled payment. For example, we removed the expenses related to vaccine costs from total expenditures since these are excluded from the ESRD bundled payment, but reported on the Medicare cost report.

We also proposed to expand the expenditure categories developed from the Medicare cost reports to allow for more detailed expenditure decomposition. To expand these cost categories, SAS data were used because the Medicare Cost Reports do not collect detailed information on the items of interest. Those categories include: Benefits for all employees, professional fees, telephone, utilities, and all other goods and services. We chose to separately break out these categories to more accurately reflect ESRD facility costs. For a detailed description of how the costs were further refined to yield the proposed 2012-based ESRDB cost weights please see (79 FR 40217 through 40221).

Table 1 lists all of the cost categories and cost weights in the CY 2012-based ESRDB market basket compared to the cost categories and cost weights in the CY 2008-based ESRDB market basket.

Table 1—Comparison of the CY 2012-Based ESRDB Market Basket Cost Categories & Weights and the CY 2008-Based ESRDB Market Basket Cost Catagories & Weights

2008 Cost category

2008 Cost weight

(percent)

2012 Cost weight

(percent)

2012 Cost category

Total

100.000

100.000

Total.

Compensation

33.509

42.497

Compensation.

Wages and Salaries

26.755

33.650

Wages and Salaries.

Employee Benefits

6.754

8.847

Employee Benefits.

Utilities

1.264

1.839

Utilities.

Electricity

0.621

0.973

Electricity.

Natural Gas

0.127

0.101

Natural Gas.

Water and Sewerage

0.516

0.765

Water and Sewerage.

All Other Materials

39.765

28.139

Medical Materials and Supplies.

Pharmaceuticals

25.052

16.510

Pharmaceuticals.

Supplies

9.216

10.097

Supplies.

Lab Services

5.497

1.532

Lab Services.

All Other Services

15.929

15.277

All Other Goods and Services.

Telephone

0.597

0.468

Telephone Service.

Housekeeping and Operations

2.029

3.785

Housekeeping and Operations.

Labor-Related Services

2.768

Prof. Fees: Labor-related

1.549

0.617

Professional Fees (Labor-related and NonLabor-related services).

All Other Labor-related

1.219

NonLabor-Related Services

10.535

10.407

All Other Goods and Services

Prof. Fees: Nonlabor-related

0.224

All Other Nonlabor-related

10.311

Capital Costs

9.533

12.248

Capital Costs.

Capital Related-Building and Equipment

7.459

8.378

Capital Related-Building and Equipment.

Capital Related-Machinery

2.074

3.870

Capital Related-Machinery.

Note: Totals may not sum to 100.000 percent due to rounding

ii. Price Proxies for the CY 2012 ESRDB Market Basket

For each cost category in the CY 2012-based ESRDB market basket, we selected the most appropriate wage and price proxies that measure the rate of price change for each expenditure category. An explanation of our rationale for the proposed price proxies used for each cost category can be found in the proposed rule (79 FR 40221 through 40224). With the exception of the pharmaceuticals cost category, all of the price proxies we proposed to use for each cost category weight are the same in this final rule. We based the price proxies on Bureau of Labor Statistics (BLS) data and grouped them into one of the following BLS categories:

•

Employment Cost Indexes.

Employment Cost Indexes (ECIs) measure the rate of change in employment wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes and strictly measure the change in wage rates and employee benefits per hour.

•

Producer Price Indexes.

Producer Price Indexes (PPIs) measure price changes for goods sold in other than retail markets. PPIs are used when the purchases of goods or services are made at the wholesale level.

•

Consumer Price Indexes.

Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by consumers. CPIs are only used when the purchases are similar to those of retail consumers rather than purchases at the wholesale level, or if no appropriate PPIs were available.

We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance:

•

Reliability.

Reliability indicates that the index is based on valid statistical methods and has low sampling variability. Widely accepted statistical methods ensure that the data were collected and aggregated in a way that can be replicated. Low sampling variability is desirable because it indicates that the sample reflects the typical members of the population.

•

Timeliness.

Timeliness implies that the proxy is published regularly, preferably at least once a quarter. We believe that using proxies that are published regularly (at least quarterly, whenever possible) helps to ensure that we are using the most recent data available to update the market basket.

•

Availability.

Availability means that the proxy is publicly available. We prefer that our proxies are publicly available because this ensures that the market basket updates are as transparent to the public as possible.

•

Relevance.

Relevance means that the proxy is applicable and representative of the cost category weight to which it is applied.

Pharmaceuticals

In the CY 2015 proposed rule, we proposed to change the price proxy used for the pharmaceuticals cost category from the one used for the 2008-based ESRDB market basket—the PPI: Pharmaceuticals for Human Use, Prescription (79 FR 40223). We referenced a recent Health and Human Services Office of the Inspector General (OIG) report titled “Update: Medicare Payment for End Stage Renal Disease Drugs” which recommended that CMS consider updating the ESRD payment bundle using a factor that takes into account drug acquisition costs. CMS had responded to this recommendation by stating that we would consider these findings in the continual evaluation of the ESRD market basket, particularly during the next rebasing and revising of the market basket index.

1

1

http://oig.hhs.gov/oei/reports/oei-03-12-00550.asp

Drug acquisition cost data is not publicly available, nor are the methods used to determine it transparent, and, therefore, wouldn't meet our price proxy criteria of relevance, reliability, transparency, and public availability. However, after considering several viable options that do meet the criteria we proposed to use the PPI: Vitamin, Nutrient, and Hematinic Preparations (BLS series code #WPU063807).

Based on public comments and, for the reasons articulated below in comments and responses, we have decided to finalize a price proxy blend as the price proxy for the pharmaceutical cost category. The blend we are using is 22 percent PPI: Vitamin, Nutrient, and Hematinic Preparations (BLS series code #WPU063807) and 78 percent PPI: Biological Products, Human Use (BLS series code #WPU063719). Table 2 lists all price proxies for the revised and rebased ESRDB market basket.

Table 2—Price Proxies for the CY 2012-Based ESRDB Market Basket

Cost category

Price proxy

Cost weight

(percent)

Compensation

42.497

Wages and Salaries

33.650

Health-related Wages

ECI—Wages & Salaries—Hospital (Civilian)

26.920

Management Wages

ECI—Wages & Salaries—Management, Business, and Financial (Private)

2.356

Administrative Wages

ECI—Wages & Salaries—Office and Administrative Support (Private)

2.356

Service Wages

ECI—Wages & Salaries—Service Occupations (Private)

2.019

Employee Benefits

8.847

Health-related Benefits

ECI—Benefits—Hospital (Civilian)

7.078

Management Benefits

ECI—Benefits—Management, Business, and Financial (Private)

0.619

Administrative Benefits

ECI—Benefits—Office and Administrative Support (Private)

0.619

Service Benefits

ECI—Benefits—Service Occupations (Private)

0.531

Utilities

1.839

Electricity

PPI—Commercial Electric Power

0.973

Natural Gas

PPI—Commercial Natural Gas

0.101

Water and Sewerage

CPI—Water and Sewerage Maintenance

0.765

Medical Materials and Supplies

28.139

Pharmaceuticals

Blend of PPI Biological Products for Human Use and PPI—Vitamin, Nutrient, and Hematinic Preparations

16.510

Supplies

PPI—Surgical and Medical Instruments

10.097

Lab Services

PPI—Medical Laboratories

1.532

All Other Goods and Services

15.277

Telephone Service

CPI—Telephone Services

0.468

Housekeeping and Operations

PPI—Cleaning and Building Maintenance Services

3.785

Professional Fees

ECI—Compensation—Professional and Related Occupations (Private)

0.617

All Other Goods and Services

PPI—Finished Goods less Foods and Energy

10.407

Capital Costs

12.248

Capital Related Building and Equipment

PPI—Lessors of Nonresidential Buildings

8.378

Capital Related Machinery

PPI—Electrical Machinery and Equipment

3.870

Total

100.000

Note: Totals may not sum to 100.000 percent due to rounding.

iii. 2012-Based ESRDB Market Basket Updates Compared to 2008-Based ESRDB Market Basket Updates

Beginning with the CY 2015 ESRD PPS update, we proposed to adopt the CY 2012-based ESRDB market basket as the appropriate market basket of goods and services for the ESRD PPS.

Based on the IHS Global Insight, Inc. (IGI) first quarter 2014 forecast with history through the fourth quarter of 2013, the proposed CY 2012-based ESRDB market basket for CY 2015 was 2.0 percent while the proposed CY 2008-based ESRDB market basket for CY 2015 was 2.7 percent.

Table 3 compares the proposed CY 2012-based ESRDB market basket and the CY 2008-based ESRDB market basket percent changes. For the historical period between CY 2011 and CY 2013, the average difference between the two market baskets was −1.8 percentage points. This is primarily the result of the proposed lower pharmaceutical cost share weight combined with the proposed revised price proxy for the pharmaceutical cost category. For the CY 2014 and CY 2015 forecasts, the differences in the market basket forecasts are mainly driven by the same factors as in the historical period.

Table 3—Proposed CY 2012-Based ESRDB Market Basket and CY 2008 Based ESRDB Market Basket, Percent Changes: 2011-2015

Calendar year (CY)

Proposed CY

2012-based

ESRDB

market basket

CY 2008-based

ESRDB market basket

Historical data:

CY 2011

1.2

2.8

CY 2012

1.4

3.4

CY 2013

1.1

3.0

Average CY 2011-2013

1.3

3.1

Forecast:

CY 2014

1.8

2.3

CY 2015

2.0

2.7

Source: IHS Global Insight, Inc. 1st quarter 2014 forecast with historical data through 4th quarter 2013.

b. Proposed ESRDB Market Basket Update, Adjusted for Multifactor Productivity for CY 2015

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. For CY 2015, section 1881(b)(14)(F)(i)(III) of the Act, as added by section 217(b)(2) of PAMA, requires the Secretary to implement a 0.0 percent ESRDB market basket increase to the ESRD PPS base rate. In addition, we interpret the reference to “[n]otwithstanding subclause (III)” that was added to amended section 1881(b)(14)(F)(i)(III) of the Act as precluding the application of the multi-factor productivity (MFP) adjustment in 2015. As a result of these provisions, the proposed CY 2015 ESRD market basket increase was 0.0 percent. We note that the proposed 2012-based ESRDB market basket update less the productivity adjustment for CY 2015 would have been 1.6 percent, or 2.0 percent less 0.4 percentage point, based

on IGI's 1st quarter 2014 forecast of the ESRDB market basket and MFP.

c. Labor-Related Share

We define the labor-related share (LRS) as those expenses that are labor-intensive and vary with, or are influenced by, the local labor market. The labor-related share of a market basket is determined by identifying the national average proportion of operating costs that are related to, influenced by, or vary with the local labor market. The labor-related share is typically the sum of Wages and Salaries, Benefits, Professional Fees, Labor-related Services, and a portion of the Capital share from a given market basket.

We proposed to use the 2012-based ESRDB market basket cost weights to determine the labor-related share for ESRD facilities of 50.673 percent, as shown in Table 4 below. These figures represent the sum of Wages and Salaries, Benefits, Housekeeping and Operations, 87 percent of the weight for Professional Fees (details discussed below), and 46 percent of the weight for Capital-related Building and Equipment expenses (details discussed below). We note that this is a similar methodology used to compute the labor-related share used from CY 2011 through CY 2014.

Table 4—CY 2015 Labor-Related Share and CY 2014 ESRDB Labor-Related Share

Cost category

Proposed

CY 2015 ESRDB

labor-related

share

(percent)

CY 2014

ESRDB labor-

related share

(percent)

Wages

33.650

26.755

Benefits

8.847

6.754

Housekeeping and operations

3.785

2.029

Professional fees (labor-related)

0.537

2.768

Capital labor-related

3.854

3.431

Total

50.673

41.737

The labor-related share for Professional Fees (87 percent) reflects the proportion of ESRD facilities' professional fees expenses that we believe vary with local labor market. We conducted a survey of ESRD facilities in 2008 to better understand the proportion of contracted professional services that ESRD facilities typically purchase outside of their local labor market. These purchased professional services include functions such as accounting and auditing, management consulting, engineering, and legal services. Based on the survey results, we determined that, on average, 87 percent of professional services are purchased from local firms and 13 percent are purchased from businesses located outside of the ESRD facility's local labor market. Thus, we proposed to include 87 percent of the cost weight for Professional Fees in the labor-related share, the same percentage as used in prior years.

The labor-related share for capital-related expenses (46 percent of ESRD facilities' adjusted Capital-related Building and Equipment expenses) reflects the proportion of ESRD facilities' capital-related expenses that we believe varies with local labor market wages. Capital-related expenses are affected in some proportion by variations in local labor market costs (such as construction worker wages) that are reflected in the price of the capital asset. However, many other inputs that determine capital costs are not related to local labor market costs, such as interest rates. The 46-percent figure is based on regressions run for the inpatient hospital capital PPS in 1991 (56 FR 43375). We use a similar methodology to calculate capital-related expenses for the labor-related shares for rehabilitation facilities (70 FR 30233), psychiatric facilities, long-term care facilities, and skilled nursing facilities (66 FR 39585).

d. Responses to Comments on Proposed Market Basket Rebasing & Revision

Comment:

Many commenters support rebasing the ESRDB market basket using the most current and accurate data that are available. Most commenters stated that an updated base year allows the market basket to better reflect the relative costs of running an ESRD facility under the PPS and accurately captures the decline in dialysis drug use that has occurred since 2008 (the base year of the current market basket).

Response:

We thank the commenters who supported the rebasing of the ESRDB market basket to reflect cost data for 2012. The 2012 MCR data is the first year of data available under the bundled PPS system and reflects the changes to the relative costs associated with furnishing ESRD treatments. We agree that the decline in dialysis drug use since 2008 and its subsequent impact on the relative costs of other goods and services is an important update to consider when estimating price pressures faced by providers.

Comment:

Several commenters requested that CMS delay the market basket rebasing until CY2016 so that the rebasing weights could be based on 2012 audited cost report data instead of the proposed unaudited reports. One commenter claimed that audits have historically shown that facilities' cost reports have included unallowable costs that either overstate or understate provider costs. They believe these errors could change the results of the cost share weights derived from the market basket data.

Response:

We disagree with the commenters that the market basket rebasing should be delayed until CY 2016 in order to use audited cost report data rather than the unaudited reports. First, the audits will begin in fiscal year 2015 and the processing and analysis of the audited data could take several years to complete and therefore would not be available to use for the CY 2016 updates. Additionally, although the audits might lead to different cost levels reported by some providers, we don't believe that different levels would result in substantial variation in the relative cost share weights derived from the unaudited data since the cost weights are based on shares of the total rather than on levels. Additionally the weights are derived from all providers and therefore for a change to appear in the market basket cost shares the misreporting would have to be prevalent across a significant percentage of providers. Therefore, we do not agree the upcoming audits are a reason to delay the update to the market basket weights for CY 2015. We believe the use of the 2012 Medicare Cost Report data to be a technical improvement to the use of the 2008 ESRD relative cost shares.

Comment:

One commenter believes that rebasing the market basket goes against the intent of PAMA since the rebasing will result in decreased payments to some providers and increased payments to others. They believe that PAMA was passed to mitigate the adjustment to ESRD bundled payments for all dialysis facilities by dictating a market basket update for CY 2015 through 2018.

Response:

The CY 2015 ESRD PPS update will be 0.0 percent as mandated by PAMA. For CY 2016 through CY 2018, PAMA mandates a reduction to the market basket increase to the ESRD PPS payment updates. PAMA did not specify what the annual updates would be for those years. It is critical that CMS estimate an appropriate market basket increase that reflects the inputs used to furnish ESRD treatments in order for the legislatively required reductions to be applied in CYs 2016 through 2018.

Comment:

One commenter believes that the difference in the market basket rate using the 2008 data versus the 2012 data is significant. They compared rules where market basket rebasings have been proposed and finalized for other providers such as hospital and home health and found that the rebasings did not result in significant changes in current or historical market basket updates.

Response:

We agree with the commenter that the rebasing of other market baskets has not, historically, resulted in significant changes to the market basket update rate. However, between 2008 and 2012 the dialysis market experienced considerable changes. Most notable was the change in the relative cost of pharmaceuticals; specifically, the cost category weight dropped from 25.052 percent to 16.510 percent, due largely to decreases in drug utilization. In addition, we updated the price proxy associated with the pharmaceutical cost category based in part on the recommendation of a Health and Human Services Office of the Inspector General (OIG) report titled “Update: Medicare Payment for End Stage Renal Disease Drugs.” The combined changes to the pharmaceutical cost weight and the update of the pharmaceutical price proxy are the primary drivers of the changes to the market basket updates. For CY 2015, we note that the changes to the cost share weights from 2008 to 2012 account for about 50 percent of the difference while the change to the price proxy, as finalized, accounts for the other 50 percent of the difference.

Comment:

One commenter requested clarification on several of the cost category calculations based on MCR data. First, the commenter requested we review the “Administrative and General” (A&G) and “Wages & Salaries” cost categories. The commenter specifically requested that CMS clarify the source of the percentage of non-direct wages associated with A&G that are obtained from Sheet A of the MCR as well as verify the method used on worksheet B to estimate total costs for each cost center. Second, the commenter requested that CMS clarify whether estimated salary costs for capital-related machinery were reallocated to salaries or if they were not.

Response:

Below we clarify the calculation of the Wages & Salaries cost share methodology as well as the method for inclusion of the Capital-Related Machinery cost center into the moveable capital cost share weight.

To capture the salary costs associated with non-direct patient care cost centers, we calculated salary percentages for non-direct patient care from worksheet A of the MCR. The estimated ratios were calculated as the ratio of salary costs (worksheet A, columns 1 & 2) to total costs (worksheet A, column 4). The ratios were calculated for seven distinct cost centers: `Operations & Maintenance' combined with `Machinery & Rental & Maintenance' (line 3 & 6), Housekeeping (line 4), EH&W Benefits for Direct Pt. Care (line 8), Supplies (line 9), Laboratory (line 10), Administrative & General (line 11), and Drugs (line 12). Each of the ratios for the seven cost centers was applied to the corresponding reimbursable costs center totals as reported on worksheet B. The worksheet B totals were based on the sum of reimbursable costs reported on lines 8-17. We did not use line 18, the subtotal line, as the commenter presumes. For example, the salary percentage for supplies (as measured by line 9 on worksheet A) was applied to the total expenses for the supply cost center (the sum of costs reported on worksheet B, column 7, lines 8-17).

Regarding the calculation of costs associated with `Machinery & Rental & Maintenance', the estimated salary ratio for this category was calculated jointly with the ratio for `Operations & Maintenance' expenses. Therefore the same ratio was applied to `Operations & Maintenance' and `Machinery & Rental & Maintenance'. This ratio was applied to the total of worksheet B, column 4, lines 8-17. The salaries associated with the `Machinery & Rental & Maintenance' costs were added to `Total Salaries'. The remaining costs reported in worksheet B column 4, line 8-17 were considered moveable capital-related expenses (excluding salaries). We believe, the commenter's confusion was the result of the estimated salary share for the capital `Machinery & Rental & Maintenance' costs being combined with the operation and maintenance costs before being added to salaries rather than being added separately. We hope this clarifies that the salary portion of `Machinery & Rental & Maintenance' costs follows the same method as all other cost centers.

Comment:

One commenter requested CMS revisit the allocation of laboratory costs from A&G once some of the providers have re-filed their cost reports. The commenter recommends that CMS not allocate A&G to the laboratory cost center and apply the lab price proxy only to directly reported lab costs. They note that allocating A&G to laboratory costs would overstate the proportion of lab costs based upon their understanding as to how some providers will allocate these costs once they re-file the cost reports.

Response:

The lab costs included in the lab category in the rebased and revised ESRDB market basket do not include any allocation of administrative and general (A&G) costs. The costs are calculated based on lab expenses reported on Medicare Cost Report, worksheet B, lines 8-17, and column 8. We did not allocate any A&G costs to the lab category for the 2012 cost shares.

Comment:

One commenter noted that what goes into each of the provided categories is not standardized. They believe that CMS should use consistent information from all providers to ensure the accuracy of the data. They note that smaller dialysis facilities, especially those in rural areas, will likely struggle to collect the information required to be reported on the MCR.

Response:

We are sensitive to all reasonable cost report data being included in the calculation of the market basket cost share weights. We perform various trimming techniques to estimate the variability in the cost share weight results. Trimming the data removes providers that may have misreported costs or are extreme outliers. We analyze the results of the cost share weights for various samples of providers to ensure reasonability of the overall cost share weights. We also compare the results to other publicly available data sources for reasonableness of results. Our trimming methods rely on relative share outliers rather than dollar level outliers. Therefore, smaller dialysis facilities are subject to similar criteria as larger facilities to be included or excluded based on trimming methods. For example, we would exclude a provider in a 5 percent trim if the cost weight for

the wages and salaries was plus or minus 2 standard deviations from the mean cost weight of all providers for wages and salaries. If costs are significantly misreported we are unable to use the data, as submitted. It is the facility's responsibility to work with the MACs to ensure proper reporting.

Comment:

One commenter is concerned with CMS re-apportioning certain costs and increasing the labor-related share of the ESRD PPS base rate. The commenter notes that they have one of the lowest CBSA wage indexes in the continental United States and are therefore impacted adversely when the labor-related share increases. Their concern is based on CMS's reliance upon assumptions to re-apportion certain costs. The commenter believes these cost assumptions may not accurately reflect the percentage of the ESRD PPS base rate impacted by the wage rate. The commenter recommends that CMS determine how it may best collect specific data on the labor-related cost categories where CMS currently relies on assumptions.

Response:

We believe the assumptions that we have made in determining the labor-related share are reasonable and follow a similar methodology and assumptions used in other CMS PPS payment systems. The commenter's recommendation to review how we may gather detailed information on the ESRD PPS's labor-related cost categories is helpful in identifying future research opportunities. As part of CMS's ongoing efforts to update and refine the Medicare Cost Reports we can explore the opportunities for collecting more specific information. Beyond the Medicare Cost Reports, we can explore conducting new surveys that would help determine the costs that are influenced or vary with the local labor market, although these are subject to resource availability and approval through OMB's standard survey and auditing process (see “Standards and Guidelines for Statistical Surveys”

http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/statpolicy/standards_stat_surveys.pdf

and “Guidance on Agency Survey and Statistical Information Collections”

http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/pmc_survey_guidance_2006.pdf

).

Comment:

Many commenters disagreed with the proposed price proxy for the drug cost category in the ESRDB market basket. They requested we reconsider the proposed proxy and use either a more appropriate index: The PPI Biological Products, Human Use (PPI-BPHU), or a composite proxy that would better reflect the costs of drugs and biologicals that are included in the ESRD bundle. Some commenters noted that ESAs account for over 80 percent of drug expenses and noted they are supplied by a sole source manufacturer that routinely imposes product price increases on facilities. Some commenters further point out that since ESAs are fully represented in, the PPI-BPHU, it is more relevant than the PPI Vitamin, Nutrient, & Hematinic Preparations (PPI-VNHP). Some commenters agreed that the PPI-Pharmaceutical for Human Use, Prescription (PPI-RX) is likely not the most appropriate proxy since it does not track well with the acquisition costs for ESRD drugs, as documented by the OIG study. Another commenter notes that the drugs in the PPI-VHNP include non-prescription (over-the-counter) medicines.

Response:

Given concerns raised by commenters and further analysis into the appropriateness of the proposed price proxy, we agree with the commenters that the proposed PPI-VNHP suffers some shortcomings that can be mitigated if we were to use the PPI -BPHU. Most importantly, the PPI-BPHU measures the price change of drugs that are prescriptions, and ESAs would be captured within this index if they are included in the PPI sample (although, because the PPI relies on confidentiality with respect to the companies and drugs/biologicals included in the sample, we do not know if these drugs are indeed reflected in this price index). However, we believe the PPI-BPHU is an appropriate proxy to use because although ESAs may be a small part of the fuller category of biological products, we can examine whether the price increases for the ESA drugs are similar to the drugs included in the PPI-BPHU. We did this by comparing the historical price changes in the PPI-BPHU and the ASP for ESAs and found the cumulative growth to be consistent over several years. We will continue to monitor the trends in the prices for ESA drugs as measured by other price data sources to ensure that the PPI-BPHU is still an appropriate price proxy.

On the other hand, since the non-ESA drugs used in the treatment of ESRD are mainly vitamins and nutrients, we believe that the PPI-VNHP is the best available proxy for these types of drugs. While this index does include over-the-counter drugs as well as prescription drugs, a comparison of trends in the prices for non-ESA drugs shows growth to the proposed PPI-VNHP.

Therefore we think it is appropriate to use both the PPI-VNHP and the PPI-BPHU, and we will proxy the price change for drugs included in the ESRD bundle by a blended drug price proxy with 78 percent of the index measured by the PPI-BPHU and 22 percent of the index measured by the PPI-VNHP. The shares within the blend are based on the 2012 ESRD Part B spending for ESA and non-ESA drugs included in the bundle. ESA drugs are those considered as a form of epoeitin alpha while the non-ESA drugs are the remaining drugs specified in the ESRD bundle.

Comment:

One commenter claims that the OIG criticism of the current index as the drug price proxy—the PPI Pharmaceuticals for Human Use, Prescription—was based on a retrospective analysis of drugs price trends during a narrow 3-year window at a significant time of transition in the ESRD marketplace. They claim that if the OIG looked at a broader window of time (for example, 2003-2012), it would likely show that the PPI for prescription drugs has more closely tracked to cost changes for most drugs within the ESRD PPS. They note the OIG raised concerns with the use of the PPI-RX prior to the implementation of the ESRD PPS and CMS did not concur with the recommendation at that time and they noted that the OIGs figures were not suitable for inferring future price trends. The commenter recommends that CMS continue to use the PPI-RX as the proxy.

Response:

At the time of the implementation of the ESRD market basket, we proposed and finalized the use of the PPI-RX since it is the proxy used in other CMS market baskets to proxy drug price growth and it would be representative of the average prescription drug price increase for the overall prescription drug market. However, analysis of the pricing trends of the drugs used in furnishing ESRD care (either the acquisition costs collected by OIG or by ASP data as collected by CMS) show relatively flat price growth over the 2008-2014 period (when taken on average) while the PPI RX has grown at a much faster rate. Additionally, there are a limited number of drugs included in the ESRD bundle and those drugs are mainly defined as biological products which are not captured in the PPI-RX. Therefore, as explained in the proposed rule, we do not believe that the PPI-RX should continue to be used in the ESRDB market basket.

Comment:

One commenter recommended that the pharmaceutical price proxy changes be suspended and CMS follow the OIG recommendation to determine how drug acquisition costs may be taken into consideration when updating the ESRD PPS base rate.

Response:

The direct use of drug acquisition costs in the ESRD market basket is not possible, as noted in our response to the OIG recommendation: “We will consider these findings in our continual evaluation of the ESRD market basket, particularly during the next rebasing and revising of the index. As we have done for all of the market baskets developed by CMS, we will base the decision on which price proxy is used on four criteria: reliability, timeliness, availability, and relevance. We will be evaluating alternative data sources and methods to determine if we can improve the relevance of the ESRD drug price proxy while not sacrificing on the other three requirements. For instance, the data used in the OIG analysis is based on acquisition cost data, which is not data that is readily available in a public or timely manner. Additionally, the ESRD annual market basket updates are based on a projection and any price proxy ultimately will need to be forecasted. The more restrictive or specific a price series, the more difficult it can be to accurately forecast future price movements. Finally, the price proxy should also reflect price trends associated with an efficient market; therefore, to the extent market inefficiencies exist, there would be concerns with using direct cost or price data.”

2

2

https://oig.hhs.gov/oei/reports/oei-03-12-00550.pdf

, Appendix D.

Comment:

Several commenters relayed the concern that CMS is making changes to the market basket that exacerbate the payment problems particularly for rural and low volume facilities while not contemporaneously addressing other changes to the ESRD payment. Other commenters support the proposed revised labor-related share as it reflects the proportionate decline over the past three years in EPO utilization. They recognize the impact on nonprofit and small providers with wage adjustors less than 1.0, and therefore support a 2-year transition for labor changes and updated CBSAs.

Response:

We believe that the proposed 2012-based ESRDB market basket is a technical improvement to the 2008-based ESRDB market basket and therefore should be implemented in CY 2015. A transition policy, for the revised labor-related share, was proposed and finalized that will help to mitigate the impact to providers for any given year.

e. Final ESRDB Market Basket and Labor-Related Share

In summary, we are finalizing the rebasing and revision of the ESRDB market basket effective for CY 2015. The cost share weights will be based on the 2012 cost shares detailed in the proposed rule (79 FR 40217 through 40221) and presented in this final rule. We are also finalizing a labor-related share of 50.673 percent as detailed in the proposed rule (79 FR 40225 through 40226) and presented in this final rule.

We are finalizing all price proxies, as proposed, with the exception of the price proxy for the pharmaceutical cost category. As detailed in our response to comments, we believe that the

PPI-VNHP suffers some shortcomings that can be mitigated with the use of the PPI-BPHU, particularly for the ESA drugs. We will, however, continue to monitor the trends in the prices for ESA drugs as measured by other price data sources to ensure that the PPI-BPHU is still an appropriate price proxy given the unique market conditions related to the manufacturing and production of these types of drugs. On the other hand we will use the PPI-VNHP for the remaining drugs included in the ESRDB market basket. While this index does include over-the-counter drugs as well as prescription drugs, a comparison of trends in the prices for non-ESA drugs shows growth similar to the PPI-VNHP. Therefore, we are finalizing a blend of the PPI Biological Products, Human Use (PPI-BPHU) and the PPI Vitamin, Nutrient, & Hematinic Preparations (PPI-VNHP). The weights within the blend are based on 2012 estimated ESRD Part B spending for the drugs used in the bundle, which results in a split of 78 percent for ESAs (proxied by the PPI-BPHU) and 22 percent for non-ESAs (proxied by the PPI-VNHP).

Section 1881(b)(14)(F)(i)(III) of the Act, as added by section 217(b)(2) of PAMA requires a 0.0 percent market basket less productivity update for CY 2015. We are therefore finalizing 0.0 percent as the ESRDB market basket update less productivity adjustment for CY 2015. In the absence of PAMA, the CY2015 ESRDB market basket update less productivity would be 1.6 percent (2.1 percent market basket update less 0.5 percent MFP adjustment), based on the IHS Global Insight, Inc. (IGI) third quarter 2014 forecast with historical data through the second quarter of 2014. Table 5 compares the update of the proposed market basket to the final market basket; the only difference between the two arises from the change to the pharmaceutical price proxy.

Table 5—Final CY 2012-Based ESRDB and Proposed CY 2012-Based ESRDB Market Basket, Percent Changes: 2011-2015

Calendar Year (CY)

Final CY 2012-

based ESRDB

market basket

Final CY 2012-

based ESRDB

market basket

Historical data:

2011

1.2

1.7

2012

1.4

1.5

2013

1.1

1.4

Average CY 2011-2013

1.2

1.5

Forecast:

2014

1.4

1.6

2015

2.0

2.1

Source: IHS Global Insight, Inc. 3rd quarter 2014 forecast with historical data through 2nd quarter 2014.

3. The CY 2015 ESRD PPS Wage Indices

a. Background

Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD PPS may include a geographic wage index payment adjustment, such as the index referred to in section 1881(b)(12)(D) of the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized for the ESRD PPS the use of the Office of Management and Budget's (OMB) Core-Based Statistical Areas (CBSAs)-based geographic area designations described in OMB bulletin 03-04, issued June 6,

2003 as the basis for revising the urban and rural areas and their corresponding wage index values. This bulletin, as well as subsequent bulletins, is available online at

http://www.whitehouse.gov/omb/bulletins_index2003-2005.

We also finalized that we would use the urban and rural definitions used for the Medicare IPPS but without regard to geographic reclassification authorized under sections 1886(d)(8) and (d)(10) of the Act. In the CY 2012 ESRD PPS final rule (76 FR 70239), 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.

b. Implementation of New Labor Market Delineations

OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles. In accordance with our established methodology, we have historically adopted via rulemaking CBSA changes that are published in the latest OMB bulletin. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at

http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-;01.pdf.

According to OMB, “[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010, in the

Federal Register

(75 FR 37246 through 37252) and Census Bureau data.” In this CY 2015 ESRD PPS final rule, when referencing the new OMB geographic boundaries of statistical areas, we are using the term “delineations” rather than the term “definitions” that we have used in the past, consistent with OMB's use of the terms (75 FR 37249). 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 needed to 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 and, thus, did not implement changes to the hospital wage index for FY 2014 based on these new CBSA delineations. Likewise, for the same reasons, the CY 2014 ESRD PPS wage index (based upon the pre-floor, pre-reclassified hospital wage data, which is unadjusted for occupational mix) also did not reflect the new CBSA delineations. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963), we finalized the implementation of the new CBSA delineations as described in the February 28, 2013 OMB Bulletin No. 13-01, beginning with the FY 2015 IPPS wage index. Similarly, in this CY 2015 ESRD PPS final rule, we are finalizing the new CBSA delineations as described in the February 28, 2013 OMB Bulletin No. 13-01, beginning with the CY 2015 ESRD PPS wage index. We believe that the most current CBSA delineations accurately reflect the local economies and wage levels of the areas where facilities are located, and we believe that it is important for the ESRD PPS to use the latest CBSA delineations available in order to maintain an up-to-date payment system that accurately reflects the reality of populations shifts and labor market conditions. We have reviewed our findings and impacts relating to the new CBSA delineations using the most recent data available at the time of this final rule, and have concluded that there is no compelling reason to further delay the implementation of the CBSA delineations as set forth in OMB Bulletin 13-01.

In order to implement these changes for the ESRD PPS, it is necessary to identify the new labor market area delineation for each county and facility in the country. For example, there would be new CBSAs, urban counties that would become rural, rural counties that would become urban, and existing CBSAs that would be split apart. Because the wage index of urban areas is typically higher than that of rural areas, ESRD facilities currently located in rural counties that will become urban, beginning January 1, 2015, will generally experience an increase in their wage index values. We identified approximately 100 counties and 110 facilities that will move from rural to urban status when we adopt the new CBSA delineations beginning in CY 2015. Table 6: (CY 2015 Rural to Urban CBSA Crosswalk) shows the CBSA delineations for CY 2014 and the rural wage index values for CY 2015 based on those delineations, compared to the final CBSA delineations for CY 2015 and the urban wage index values for CY 2015 based on the new delineations, and the percentage change in these values for those counties that will change from rural to urban when we adopt the new CBSA delineations. Approximately 100 facilities will experience an increase in their wage index values.

Table 6—CY 2015 Rural to Urban CBSA Crosswalk

County name

State

ESRD PPS CY 2014

CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Final ESRD PPS CY 2015

CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Change in value

(percent)

BALDWIN

AL

01

RURAL

0.6963

19300

URBAN

0.7248

4.09%

PICKENS

AL

01

RURAL

0.6963

46220

URBAN

0.8337

19.73

COCHISE

AZ

03

RURAL

0.9125

43420

URBAN

0.8937

−2.06

LITTLE RIVER

AR

04

RURAL

0.7311

45500

URBAN

0.7362

0.70

WINDHAM

CT

07

RURAL

1.1251

49340

URBAN

1.1493

2.15

SUSSEX

DE

08

RURAL

1.0261

41540

URBAN

0.9289

−9.47

CITRUS

FL

10

RURAL

0.8006

26140

URBAN

0.7625

−4.76

GULF

FL

10

RURAL

0.8006

37460

URBAN

0.7906

−1.25

HIGHLANDS

FL

10

RURAL

0.8006

42700

URBAN

0.7982

−0.30

SUMTER

FL

10

RURAL

0.8006

45540

URBAN

0.8095

1.11

WALTON

FL

10

RURAL

0.8006

18880

URBAN

0.8156

1.87

LINCOLN

GA

11

RURAL

0.7425

12260

URBAN

0.9225

24.24

MORGAN

GA

11

RURAL

0.7425

12060

URBAN

0.9369

26.18

PEACH

GA

11

RURAL

0.7425

47580

URBAN

0.7542

1.58

PULASKI

GA

11

RURAL

0.7425

47580

URBAN

0.7542

1.58

KALAWAO

HI

12

RURAL

1.0741

27980

URBAN

1.0561

−1.68

MAUI

HI

12

RURAL

1.0741

27980

URBAN

1.0561

−1.68

BUTTE

ID

13

RURAL

0.7398

26820

URBAN

0.8933

20.75

DE WITT

IL

14

RURAL

0.8362

14010

URBAN

0.9165

9.60

JACKSON

IL

14

RURAL

0.8362

16060

URBAN

0.8324

−0.45

WILLIAMSON

IL

14

RURAL

0.8362

16060

URBAN

0.8324

−0.45

SCOTT

IN

15

RURAL

0.8416

31140

URBAN

0.8605

2.25

UNION

IN

15

RURAL

0.8416

17140

URBAN

0.9473

12.56

PLYMOUTH

IA

16

RURAL

0.8451

43580

URBAN

0.8915

5.49

KINGMAN

KS

17

RURAL

0.7806

48620

URBAN

0.8472

8.53

ALLEN

KY

18

RURAL

0.7744

14540

URBAN

0.8410

8.60

BUTLER

KY

18

RURAL

0.7744

14540

URBAN

0.8410

8.60

ACADIA

LA

19

RURAL

0.7580

29180

URBAN

0.7869

3.81

IBERIA

LA

19

RURAL

0.7580

29180

URBAN

0.7869

3.81

ST. JAMES

LA

19

RURAL

0.7580

35380

URBAN

0.8821

16.37

TANGIPAHOA

LA

19

RURAL

0.7580

25220

URBAN

0.9452

24.70

VERMILION

LA

19

RURAL

0.7580

29180

URBAN

0.7869

3.81

WEBSTER

LA

19

RURAL

0.7580

43340

URBAN

0.8325

9.83

ST. MARYS

MD

21

RURAL

0.8554

15680

URBAN

0.8593

0.46

WORCESTER

MD

21

RURAL

0.8554

41540

URBAN

0.9289

8.59

MIDLAND

MI

23

RURAL

0.8207

33220

URBAN

0.7935

−3.31

MONTCALM

MI

23

RURAL

0.8207

24340

URBAN

0.8799

7.21

FILLMORE

MN

24

RURAL

0.9124

40340

URBAN

1.1398

24.92

LE SUEUR

MN

24

RURAL

0.9124

33460

URBAN

1.1196

22.71

MILLE LACS

MN

24

RURAL

0.9124

33460

URBAN

1.1196

22.71

SIBLEY

MN

24

RURAL

0.9124

33460

URBAN

1.1196

22.71

BENTON

MS

25

RURAL

0.7589

32820

URBAN

0.8991

18.47

YAZOO

MS

25

RURAL

0.7589

27140

URBAN

0.7891

3.98

GOLDEN VALLEY

MT

27

RURAL

0.9024

13740

URBAN

0.8686

−3.75

HALL

NE

28

RURAL

0.8924

24260

URBAN

0.9219

3.31

HAMILTON

NE

28

RURAL

0.8924

24260

URBAN

0.9219

3.31

HOWARD

NE

28

RURAL

0.8924

24260

URBAN

0.9219

3.31

MERRICK

NE

28

RURAL

0.8924

24260

URBAN

0.9219

3.31

JEFFERSON

NY

33

RURAL

0.8208

48060

URBAN

0.8386

2.17

YATES

NY

33

RURAL

0.8208

40380

URBAN

0.8750

6.60

CRAVEN

NC

34

RURAL

0.7995

35100

URBAN

0.8994

12.50

DAVIDSON

NC

34

RURAL

0.7995

49180

URBAN

0.8679

8.56

GATES

NC

34

RURAL

0.7995

47260

URBAN

0.9223

15.36

IREDELL

NC

34

RURAL

0.7995

16740

URBAN

0.9073

13.48

JONES

NC

34

RURAL

0.7995

35100

URBAN

0.8994

12.50

LINCOLN

NC

34

RURAL

0.7995

16740

URBAN

0.9073

13.48

PAMLICO

NC

34

RURAL

0.7995

35100

URBAN

0.8994

12.50

ROWAN

NC

34

RURAL

0.7995

16740

URBAN

0.9073

13.48

OLIVER

ND

35

RURAL

0.7099

13900

URBAN

0.7216

1.65

SIOUX

ND

35

RURAL

0.7099

13900

URBAN

0.7216

1.65

HOCKING

OH

36

RURAL

0.8329

18140

URBAN

0.9539

14.53

PERRY

OH

36

RURAL

0.8329

18140

URBAN

0.9539

14.53

COTTON

OK

37

RURAL

0.7799

30020

URBAN

0.7918

1.53

JOSEPHINE

OR

38

RURAL

1.0083

24420

URBAN

1.0086

0.03

LINN

OR

38

RURAL

1.0083

10540

URBAN

1.0879

7.89

ADAMS

PA

39

RURAL

0.8719

23900

URBAN

1.0104

15.88

COLUMBIA

PA

39

RURAL

0.8719

14100

URBAN

0.9347

7.20

FRANKLIN

PA

39

RURAL

0.8719

16540

URBAN

1.0957

25.67

MONROE

PA

39

RURAL

0.8719

20700

URBAN

0.9372

7.49

MONTOUR

PA

39

RURAL

0.8719

14100

URBAN

0.9347

7.20

UTUADO

PR

40

RURAL

0.4000

10380

URBAN

0.4000

0.00

BEAUFORT

SC

42

RURAL

0.8374

25940

URBAN

0.8708

3.99

CHESTER

SC

42

RURAL

0.8374

16740

URBAN

0.9073

8.35

JASPER

SC

42

RURAL

0.8374

25940

URBAN

0.8708

3.99

LANCASTER

SC

42

RURAL

0.8374

16740

URBAN

0.9073

8.35

UNION

SC

42

RURAL

0.8374

43900

URBAN

0.8277

−1.16

CUSTER

SD

43

RURAL

0.8312

39660

URBAN

0.8989

8.14

CAMPBELL

TN

44

RURAL

0.7365

28940

URBAN

0.7015

−4.75

CROCKETT

TN

44

RURAL

0.7365

27180

URBAN

0.7747

5.19

MAURY

TN

44

RURAL

0.7365

34980

URBAN

0.8969

21.78

MORGAN

TN

44

RURAL

0.7365

28940

URBAN

0.7015

−4.75

ROANE

TN

44

RURAL

0.7365

28940

URBAN

0.7015

−4.75

FALLS

TX

45

RURAL

0.7855

47380

URBAN

0.8137

3.59

HOOD

TX

45

RURAL

0.7855

23104

URBAN

0.9386

19.49

HUDSPETH

TX

45

RURAL

0.7855

21340

URBAN

0.8139

3.62

LYNN

TX

45

RURAL

0.7855

31180

URBAN

0.8830

12.41

MARTIN

TX

45

RURAL

0.7855

33260

URBAN

0.8940

13.81

NEWTON

TX

45

RURAL

0.7855

13140

URBAN

0.8508

8.31

OLDHAM

TX

45

RURAL

0.7855

11100

URBAN

0.8277

5.37

SOMERVELL

TX

45

RURAL

0.7855

23104

URBAN

0.9386

19.49

BOX ELDER

UT

46

RURAL

0.8891

36260

URBAN

0.9225

3.76

AUGUSTA

VA

49

RURAL

0.7674

44420

URBAN

0.8326

8.50

BUCKINGHAM

VA

49

RURAL

0.7674

16820

URBAN

0.9053

17.97

CULPEPER

VA

49

RURAL

0.7674

47894

URBAN

1.0403

35.56

FLOYD

VA

49

RURAL

0.7674

13980

URBAN

0.8473

10.41

RAPPAHANNOCK

VA

49

RURAL

0.7674

47894

URBAN

1.0403

35.56

STAUNTON CITY

VA

49

RURAL

0.7674

44420

URBAN

0.8326

8.50

WAYNESBORO CITY

VA

49

RURAL

0.7674

44420

URBAN

0.8326

8.50

COLUMBIA

WA

50

RURAL

1.0892

47460

URBAN

1.0934

0.39

PEND OREILLE

WA

50

RURAL

1.0892

44060

URBAN

1.1425

4.89

STEVENS

WA

50

RURAL

1.0892

44060

URBAN

1.1425

4.89

WALLA WALLA

WA

50

RURAL

1.0892

47460

URBAN

1.0934

0.39

FAYETTE

WV

51

RURAL

0.7410

13220

URBAN

0.8024

8.29

RALEIGH

WV

51

RURAL

0.7410

13220

URBAN

0.8024

8.29

GREEN

WI

52

RURAL

0.9041

31540

URBAN

1.1130

23.11

The wage index values of rural areas are typically lower than that of urban areas. Therefore, ESRD facilities located in a county that is currently designated as urban under the ESRD PPS wage index that will become rural when we adopt the new CBSA delineations may experience a decrease in their wage index values. We identified approximately 35 counties and 30 ESRD facilities that will move from urban to rural status when we adopt the new CBSA delineations beginning in CY 2015. Table 7: (CY 2015 Urban to Rural CBSA Crosswalk) shows the CBSA delineations for CY 2014 and the urban wage index values for CY 2015 based on those delineations, compared with the CBSA delineations and wage index values for CY 2015 based on those delineations, and the percentage change in these values for those counties that would change from urban to rural, beginning in CY 2015, when we adopt the new CBSA delineations. We expect that when we adopt the new CBSA delineations illustrated in Table 7 below, approximately 30 facilities will experience a decrease in their wage index values.

Table 7—CY 2015 Urban to Rural CBSA Crosswalk

County name

State

ESRD PPS CY 2014 CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Final ESRD PPS CY 2015 CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Change in value

(percent)

FRANKLIN

AR

22900

URBAN

0.7593

04

RURAL

0.7311

−3.71

POWER

ID

38540

URBAN

0.9672

13

RURAL

0.7398

−23.51

FRANKLIN

IN

17140

URBAN

0.9473

15

RURAL

0.8416

−11.16

GIBSON

IN

21780

URBAN

0.8537

15

RURAL

0.8416

−1.42

GREENE

IN

14020

URBAN

0.9062

15

RURAL

0.8416

−7.13

TIPTON

IN

29020

URBAN

0.8990

15

RURAL

0.8416

−6.38

FRANKLIN

KS

28140

URBAN

0.9419

17

RURAL

0.7779

−17.41

GEARY

KS

31740

URBAN

0.8406

17

RURAL

0.7779

−7.46

NELSON

KY

31140

URBAN

0.8593

18

RURAL

0.7748

−9.83

WEBSTER

KY

21780

URBAN

0.8537

18

RURAL

0.7748

−9.24

FRANKLIN

MA

44140

URBAN

1.0271

22

RURAL

1.1553

12.48

IONIA

MI

24340

URBAN

0.8965

23

RURAL

0.8288

−7.55

NEWAYGO

MI

24340

URBAN

0.8965

23

RURAL

0.8288

−7.55

GEORGE

MS

37700

URBAN

0.7396

25

RURAL

0.7570

2.35

STONE

MS

25060

URBAN

0.8179

25

RURAL

0.7570

−7.45

CRAWFORD

MO

41180

URBAN

0.9366

26

RURAL

0.7725

−17.52

HOWARD

MO

17860

URBAN

0.8319

26

RURAL

0.7725

−7.14

WASHINGTON

MO

41180

URBAN

0.9366

26

RURAL

0.7725

−17.52

ANSON

NC

16740

URBAN

0.9230

34

RURAL

0.7899

−14.42

GREENE

NC

24780

URBAN

0.9371

34

RURAL

0.7899

−15.71

ERIE

OH

41780

URBAN

0.7784

36

RURAL

0.8348

7.25

OTTAWA

OH

45780

URBAN

0.9129

36

RURAL

0.8348

−8.56

PREBLE

OH

19380

URBAN

0.8938

36

RURAL

0.8348

−6.60

WASHINGTON

OH

37620

URBAN

0.8186

36

RURAL

0.8348

1.98

STEWART

TN

17300

URBAN

0.7526

44

RURAL

0.7277

−3.31

CALHOUN

TX

47020

URBAN

0.8473

45

RURAL

0.7847

−7.39

DELTA

TX

19124

URBAN

0.9703

45

RURAL

0.7847

−19.13

SAN JACINTO

TX

26420

URBAN

0.9734

45

RURAL

0.7847

−19.39

SUMMIT

UT

41620

URBAN

0.9512

46

RURAL

0.9005

−5.33

CUMBERLAND

VA

40060

URBAN

0.9625

49

RURAL

0.7554

−21.52

DANVILLE CITY

VA

19260

URBAN

0.7963

49

RURAL

0.7554

−5.14

KING AND QUEEN

VA

40060

URBAN

0.9625

49

RURAL

0.7554

−21.52

LOUISA

VA

40060

URBAN

0.9625

49

RURAL

0.7554

−21.52

PITTSYLVANIA

VA

19260

URBAN

0.7963

49

RURAL

0.7554

−5.14

SURRY

VA

47260

URBAN

0.9223

49

RURAL

0.7554

−18.10

MORGAN

WV

25180

URBAN

0.9080

51

RURAL

0.7274

−19.89

PLEASANTS

WV

37620

URBAN

0.8186

51

RURAL

0.7274

−11.14

We note that facilities in some urban CBSAs will experience a change in their wage index values even though they remain urban because an urban CBSA's boundaries and/or the counties included in that CBSA could change. Table 8 (CY 2015 Urban to a Different Urban CBSA Crosswalk) shows those counties that experienced a change in their wage index value when the CBSA delineations for CY 2014 and urban wage index values for CY 2015 based on those delineations, compared with the CBSA delineations and urban wage index values for CY 2015 based on those delineations, and the percentage change in these values for counties that will remain urban even though the CBSA boundaries and/or counties included in that CBSA will change.

Table 8—CY 2015 Urban to a Different Urban CBSA Crosswalk

County name

State

ESRD PPS CY 2014 CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Final ESRD PPS CY 2015 CBSA delineations

CBSA

Urban/Rural

Wage Index Value

Change in value

(percent)

FLAGLER

FL

37380

URBAN

0.8462

19660

URBAN

0.8376

−1.02

DE KALB

IL

16974

URBAN

1.0412

20994

URBAN

1.0299

−1.09

KANE

IL

16974

URBAN

1.0412

20994

URBAN

1.0299

−1.09

MADISON

IN

11300

URBAN

1.0078

26900

URBAN

1.0133

0.55

MEADE

KY

31140

URBAN

0.8593

21060

URBAN

0.7701

−10.38

ESSEX

MA

37764

URBAN

1.0769

15764

URBAN

1.1159

3.62

OTTAWA

MI

26100

URBAN

0.8136

24340

URBAN

0.8799

8.15

JACKSON

MS

37700

URBAN

0.7396

25060

URBAN

0.7896

6.76

BERGEN

NJ

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

HUDSON

NJ

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

MIDDLESEX

NJ

20764

URBAN

1.0989

35614

URBAN

1.2837

16.82

MONMOUTH

NJ

20764

URBAN

1.0989

35614

URBAN

1.2837

16.82

OCEAN

NJ

20764

URBAN

1.0989

35614

URBAN

1.2837

16.82

PASSAIC

NJ

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

SOMERSET

NJ

20764

URBAN

1.0989

35084

URBAN

1.1233

2.22

BRONX

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

DUTCHESS

NY

39100

URBAN

1.1533

20524

URBAN

1.1345

−1.63

KINGS

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

NEW YORK

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

ORANGE

NY

39100

URBAN

1.1533

35614

URBAN

1.2837

11.31

PUTNAM

NY

35644

URBAN

1.3110

20524

URBAN

1.1345

−13.46

QUEENS

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

RICHMOND

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

ROCKLAND

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

WESTCHESTER

NY

35644

URBAN

1.3110

35614

URBAN

1.2837

−2.08

BRUNSWICK

NC

48900

URBAN

0.8867

34820

URBAN

0.8620

−2.79

BUCKS

PA

37964

URBAN

1.0837

33874

URBAN

1.0157

−6.27

CHESTER

PA

37964

URBAN

1.0837

33874

URBAN

1.0157

−6.27

MONTGOMERY

PA

37964

URBAN

1.0837

33874

URBAN

1.0157

−6.27

ARECIBO

PR

41980

URBAN

0.4449

11640

URBAN

0.4213

−5.30

CAMUY

PR

41980

URBAN

0.4449

11640

URBAN

0.4213

−5.30

CEIBA

PR

21940

URBAN

0.4000

41980

URBAN

0.4438

10.95

FAJARDO

PR

21940

URBAN

0.4000

41980

URBAN

0.4438

10.95

GUANICA

PR

49500

URBAN

0.4000

38660

URBAN

0.4154

3.85

GUAYANILLA

PR

49500

URBAN

0.4000

38660

URBAN

0.4154

3.85

HATILLO

PR

41980

URBAN

0.4449

11640

URBAN

0.4213

−5.30

LUQUILLO

PR

21940

URBAN

0.4000

41980

URBAN

0.4438

10.95

PENUELAS

PR

49500

URBAN

0.4000

38660

URBAN

0.4154

3.85

QUEBRADILLAS

PR

41980

URBAN

0.4449

11640

URBAN

0.4213

−5.30

YAUCO

PR

49500

URBAN

0.4000

38660

URBAN

0.4154

3.85

ANDERSON

SC

11340

URBAN

0.8744

24860

URBAN

0.9161

4.77

GRAINGER

TN

34100

URBAN

0.6983

28940

URBAN

0.7015

0.46

LINCOLN

WV

16620

URBAN

0.7988

26580

URBAN

0.8846

10.74

PUTNAM

WV

16620

URBAN

0.7988

26580

URBAN

0.8846

10.74

Likewise, ESRD facilities currently located in a rural area may remain rural under the new CBSA delineations but experience a change in their rural wage index value due to implementation of the new CBSA delineations. Table 9 (CY 2015 Changes to the Statewide Rural Wage Index Crosswalk) shows the CBSA delineations for CY 2014 and the rural statewide wage index values for CY 2015, compared with the rural statewide wage index values for CY 2015, and the percentage change in these values.

Table 9—CY 2015 Changes to the Statewide Rural Wage Index CrosswaLK

State

ESRD PPS CY 2014

CBSA delineations

CBSA

Urban/Rural

Wage index value

Final ESRD PPS CY 2015

CBSA delineations

CBSA

Urban/Rural

Wage index value

Change in value

(percent)

AL

39

RURAL

0.8719

39

RURAL

0.8083

−7.3

AZ

19

RURAL

0.7580

19

RURAL

0.7108

−6.2

CT

51

RURAL

0.7410

51

RURAL

0.7274

−1.8

FL

49

RURAL

0.7674

10

RURAL

0.8371

9.1

GA

38

RURAL

1.0083

38

RURAL

0.9949

−1.3

HI

34

RURAL

0.7995

34

RURAL

0.7899

−1.2

IL

44

RURAL

0.7365

44

RURAL

0.7277

−1.2

KS

01

RURAL

0.6963

01

RURAL

0.6914

−0.7

KY

28

RURAL

0.8924

28

RURAL

0.8877

−0.5

LA

17

RURAL

0.7806

17

RURAL

0.7779

−0.3

MD

25

RURAL

0.7589

25

RURAL

0.7570

−0.3

MI

33

RURAL

0.8208

33

RURAL

0.8192

−0.2

MS

50

RURAL

1.0892

50

RURAL

1.0877

−0.1

NC

45

RURAL

0.7855

45

RURAL

0.7847

−0.1

NE

18

RURAL

0.7744

18

RURAL

0.7748

0.1

NY

14

RURAL

0.8362

14

RURAL

0.8369

0.1

OH

11

RURAL

0.7425

11

RURAL

0.7439

0.2

OR

36

RURAL

0.8329

36

RURAL

0.8348

0.2

PA

07

RURAL

1.1251

07

RURAL

1.1295

0.4

TN

52

RURAL

0.9041

52

RURAL

0.9087

0.5

TX

23

RURAL

0.8207

23

RURAL

0.8288

1.0

UT

03

RURAL

0.9125

03

RURAL

0.9219

1.0

VA

12

RURAL

1.0741

12

RURAL

1.0872

1.2

WA

46

RURAL

0.8891

46

RURAL

0.9005

1.3

WI

21

RURAL

0.8554

21

RURAL

0.8746

2.2

WV

10

RURAL

0.8006

10

RURAL

0.8371

4.6

While we believe that the new CBSA delineations will result in wage index values that are more representative of the actual costs of labor in a given area, we also recognize that use of the new CBSA delineations will result in reduced payments to some facilities. In particular, approximately 30 facilities would experience reduced payments when we adopt the new CBSA delineations. At the same time, use of the new CBSA delineations will result in increased payments for approximately 100 facilities, while the majority of facilities would experience

no change in payments due to the implementation of the new CBSA delineations. We are finalizing the implementation the new CBSA delineations, as proposed, using a 2-year transition with a 50/50 blended wage index value for all facilities in CY 2015 and 100 percent of the wage index based on the new CBSA delineations in CY 2016.

Comment:

Commenters largely agreed with the implementation of the new CBSAs and thanked CMS for offsetting any negative impacts with a 2-year transition. A few commenters expressed concerns for low wage areas and for areas where hospital wage data is not available, and where proxies are used to establish an areas wage index. Another commenter requested reclassification to address the Wheeling WV-OH wage index, as well as, other areas with very low wage indices. The commenter also suggested that we apply the rural floor policy that applies in the IPPS under which an urban area with a wage index below the statewide rural average would be paid the statewide rural average wage index value.

Response:

We thank the commenters for their support and are finalizing the CY 2015 ESRD PPS wage indexes as proposed. We agree that some areas of the country will continue to have low wage values, despite the annual updated hospital wage data and the finalized new CBSA delineations. However, the purpose of updating the ESRD PPS wage indexes as part of our annual update is based upon the premise that our wage index value should reflect the costs of furnishing renal dialysis services in the area where those services are provided

In addition, the ESRD PPS uses “pre-floor” and “pre re-classified” hospital wage data in computing the wage indexes used in the ESRD PPS. That is, the ESRD PPS uses IPPS wage data that has not been adjusted based on hospital reclassifications or application of the IPPS rural floor policy. Because we do not collect ESRD facility wage data, we rely upon IPPS hospital wage data as the best wage proxy for ESRD facilities. We believe the IPPS hospital wage data most closely reflects the costs of furnishing renal dialysis services in an area and it is the most accurate and up-to-date wage data. We understand that many rural areas generally have lower wage values than urban areas, and that in some cases rural facilities may have to compete with urban areas for staffing. In addition, a few areas do not have a hospital upon which to base a wage index and we apply a proxy wage index value as described in the CY 2014 ESRD PPS final rule (78 FR 72172). For these reasons, we plan to evaluate the effect of the IPPS rural floor policy, the wage index floor, and other wage index-related policies under the ESRD PPS.

c. Transition Period

We considered having no transition period and fully implementing the new CBSA delineations beginning in CY 2015, which would mean that all facilities would have payments based on the new delineations starting on January 1, 2015. However, because more facilities would have increased rather than decreased payments beginning in CY 2015, and because the overall amount of ESRD payments would increase slightly due to the new CBSA delineations, the wage index budget-neutrality factor would be higher. This higher factor would reduce the ESRD PPS per treatment base rate for all facilities paid under the ESRD PPS, despite the fact that the majority of ESRD facilities are unaffected by the new CBSA delineations. We believe that it would be appropriate to provide for a transition period to mitigate any resulting short-term instability of a lower ESRD PPS base rate as well as any negative impacts to facilities that experience reduced payments.

Comment:

Generally, commenters were supportive of our proposed transition to implement the new CBSA delineations and our CY 2015 wage indices. Many commenters agreed that the transition approach allowed all facilities the ability to adjust to their new status, without lowering the overall base rate for all providers. A few commenters noted that a longer transition period would be helpful for rural providers.

Response:

We thank the commenters for their support and agree that the transition period allows all facilities to adjust to their new CBSA status. We continue to believe that the transition period is sufficient to mitigate the economic impact for ESRD facilities as the impact analysis demonstrates an impact of less than 1 percent.

Therefore, we are finalizing a 2-year transition blended wage index for all facilities. Facilities would receive 50 percent of their CY 2015 wage index value based on the CBSA delineations for CY 2014 and 50 percent of their CY 2015 wage index value based on the new CBSA delineations. This results in an average of the two values. A facility's CY 2016 wage index values will be based 100 percent on the new CBSA delineations. We believe a 2-year transition strikes an appropriate balance between ensuring that ESRD PPS payments are as accurate and stable as possible while giving facilities time to adjust to the new CBSA delineations.

In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a policy to use the labor-related share of 41.737 percent for the ESRD PPS. For the CY 2015 ESRD PPS, we are finalizing a labor-related share of 50.673 percent, which we are implementing with a 2-year transition of 46.205 percent for CY 2015 and 50.673 percent for CY 2016. For a complete discussion of the changes in the CY 2015 ESRD PPS market basket and labor-related share, as well as the transition of the labor-related share. See section II.C of this final rule.

Comment:

One commenter encouraged CMS to explore alternative payment mechanisms for small rural providers. Whereas a standard payment rate that is adjusted based on the national labor-related share may work for providers with moderate to high patient volumes, the same does not hold true for small rural providers. Small providers have a different cost structure than larger counterparts. Specifically, small rural providers incur a higher share of non-labor costs than the national average. For example, a small facility with 20 patients may only need part-time employees. The small rural town may not have potential employees with the appropriate skill set who are willing to work part time. As a result, the ESRD facility will pay significant amounts for mileage and lodging for employees to travel from other sites, or the facility may hire contracted labor. The commenter encouraged CMS to evaluate the labor versus non-labor costs for small rural facilities compared to the national average and propose payment adjustments to address inequalities.

Response:

We thank the commenters for their concern for rural facilities and appreciate the suggestions for alternative payment mechanisms for small rural ESRD facilities. We plan to consider these comments as part of the ESRD PPS refinement in CY 2016.

4. CY 2015 Update to the Outlier Policy

Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS include a payment adjustment for high cost outliers due to unusual variations in the type or amount of medically necessary care, including variability in the amount of erythropoiesis stimulating agents (ESAs) necessary for anemia management. Our regulations at 42 CFR 413.237(a)(1) provide that ESRD outlier services are the following items and services that are included in the ESRD PPS bundle: (i) ESRD-related drugs and biologicals that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-related laboratory tests that were or would have been, prior to

January 1, 2011, separately billable under Medicare Part B; (iii) medical/surgical supplies, including syringes, used to administer ESRD-related drugs, that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; and (iv) renal dialysis service drugs that were or would have been, prior to January 1, 2011, covered under Medicare Part D, excluding ESRD-related oral-only drugs.

In the CY 2011 ESRD PPS final rule (75 FR 49142), we stated that for purposes of determining whether an ESRD facility would be eligible for an outlier payment, it would be necessary for the facility to identify the actual ESRD outlier services furnished to the patient by line item on the monthly claim. Renal dialysis drugs, laboratory tests, and medical/surgical supplies that we would recognize as outlier services were specified in Attachment 3 of Change Request 7064, Transmittal 2033 issued August 20, 2010, rescinded and replaced by Transmittal 2094, dated November 17, 2010. With respect to the outlier policy, Transmittal 2094 identified additional drugs and laboratory tests that may be eligible for ESRD outlier payment. Transmittal 2094 was rescinded and replaced by Transmittal 2134, dated January 14, 2011, which was issued to correct the subject on the Transmittal page and made no other changes.

In the CY 2012 ESRD PPS final rule (76 FR 70246), we eliminated the issuance of a specific list of eligible outlier service drugs which were or would have been separately billable under Medicare Part B prior to January 1, 2011. However, we use separate guidance to continue to identify renal dialysis service drugs which were or would have been covered under Part D for outlier eligibility purposes in order to provide unit prices for calculating imputed outlier services. We also can identify, through our monitoring efforts, items and services that are incorrectly being identified as eligible outlier services in the claims data. Information about these items and services and any updates to the list of renal dialysis items and services that qualify as outlier services are made through administrative issuances, if necessary.

Our regulations at § 413.237 specify the methodology used to calculate outlier payments. An ESRD facility is eligible for an outlier payment if its actual or imputed Medicare Allowable Payment (MAP) amount per treatment for ESRD outlier services exceeds a threshold. The MAP amount represents the average incurred amount per treatment for services that were or would have been considered separately billable services prior to January 1, 2011. The threshold is equal to the ESRD facility's predicted ESRD outlier services MAP amount per treatment (which is case-mix adjusted) plus the fixed-dollar loss amount. In accordance with § 413.237(c) of the regulations, facilities are paid 80 percent of the per treatment amount by which the imputed MAP amount for outlier services (that is, the actual incurred amount) exceeds this threshold. ESRD facilities are eligible to receive outlier payments for treating both adult and pediatric dialysis patients.

In the CY 2011 ESRD PPS final rule, using 2007 data, we established the outlier percentage at 1.0 percent of total payments (75 FR 49142 through 49143). We also established the fixed-dollar loss amounts that are added to the predicted outlier services MAP amounts. The outlier services MAP amounts and fixed-dollar loss amounts are different for adult and pediatric patients due to differences in the utilization of separately billable services among adult and pediatric patients (75 FR 49140).

As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 through 49139), the predicted outlier services MAP amounts for a patient are determined by multiplying the adjusted average outlier services MAP amount by the product of the patient-specific case-mix adjusters applicable using the outlier services payment multipliers developed from the regression analysis to compute the payment adjustments. For CY 2014, the outlier services MAP amounts and fixed-dollar loss amounts were based on 2012 data (78 FR 72180). Therefore, the outlier thresholds for CY 2014 were based on utilization of renal dialysis items and services furnished under the ESRD PPS. Because of the utilization of ESAs and other outlier services have continued to decline under the ESRD PPS, we lowered the MAP amounts and fixed-dollar loss amounts for CYs 2013 and 2014 to allow for an increase in payments for ESRD beneficiaries requiring higher resources.

a. CY 2015 Update to the Outlier Services MAP Amounts and Fixed-Dollar Loss Amounts

For CY 2015, we did not propose any changes to the methodology used to compute the MAP or fixed-dollar loss amounts. Rather, the proposed rule updated the outlier services MAP amounts and fixed-dollar loss amounts to reflect the utilization of outlier services reported on 2013 claims using the December 2013 claims file. For this final rule, the outlier services MAP amounts and fixed dollar loss amounts were updated using the 2013 claims from the June 2014 claims file. The impact of this update is shown in Table 10, which compares the outlier services MAP amounts and fixed-dollar loss amounts used for the outlier policy in CY 2014 with the updated estimates finalized in this rule. The estimates for the final CY 2015 outlier policy, which are included in Column II of Table 10, were inflation adjusted to reflect projected 2015 prices for outlier services.

Table 10—Outlier Policy: Impact of Using Updated Data to Define the Outlier Policy

Column I

Final outlier policy for CY 2014 (based on 2012 data price inflated to 2014) *

Age

< 18

Age

> = 18

Column II

Proposed outlier policy for CY 2015 (based on 2013 data price inflated to 2015) *

Age

< 18

Age

> = 18

Average outlier services MAP amount per treatment

1

$37.29

$51.97

$39.89

$52.98

Adjustments:

Standardization for outlier services

2

1.1079

0.9866

1.1145

0.9878

MIPPA reduction

0.98

0.98

0.98

0.98

Adjusted average outlier services MAP amount

3

$40.49

$50.25

$43.57

$51.29

Fixed-dollar loss amount that is added to the predicted MAP to determine the outlier threshold

4

$54.01

$98.67

$54.35

$86.19

Patient months qualifying for outlier payment

6.7%

5.3%

6.3%

6.3%

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated prices for outlier services (that is, 2014 prices in Column I and projected 2015 prices in Column II).

1

Excludes patients for whom not all data were available to calculate projected payments. The outlier services MAP amounts are based on 2013 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are in placeunder the ESA claims monitoring policy were applied.

2

Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing case mix adjusters for adult and pediatric patient groups.

3

This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP for each patient.

4

The fixed dollar loss amounts were calculated using 2013 data to yield total outlier payments that represent 1 percent of total projected payments for the ESRD PPS.

As demonstrated in Table 10, the estimated fixed-dollar loss amount that determines the CY 2015 outlier threshold amount for adults (Column II) is lower than that used for the CY 2014 outlier policy (Column I). The threshold is lower in spite of the fact that the average outlier services MAP per treatment has increased. Between 2012 and 2013, the variation in outlier services across patients declined among adults. The net result is an increase in the percentage of patient-months qualifying for outlier payment (6.3 percent based on 2013 data versus 5.3 percent based on 2012 data) but a decrease in the average outlier payment per case. The estimated fixed-dollar loss amount that determines the CY 2015 outlier threshold amount for pediatric patients (Column II) is slightly higher than that used for the CY 2014 outlier policy (Column I).

For pediatric patients, there was an increase in the overall average outlier service MAP amount between 2012 ($37.29 per treatment as shown in Column I) and 2013 ($40.05 per treatment, as shown in Column II). In addition, there was a continuing tendency in 2013 for a relatively small percentage of pediatric patients to account for a disproportionate share of the total outlier service MAP amounts. The 1 percent target for outlier payments is therefore expected to be achieved based on a smaller percentage of pediatric outlier cases using 2013 data compared to 2012 data (6.3 percent of pediatric patient months are expected to qualify for outlier payments rather than 6.7 percent). These patterns led to the estimated fixed-dollar loss amount for pediatric patients being slightly higher for the outlier policy for CY 2015 compared to the outlier policy for CY 2014.

The updated fixed-dollar loss amounts are added to the predicted MAP amounts per treatment, yielding the outlier thresholds for CY 2015 from $98.67 to $86.19 for adult patients and from $54.01 to $54.35 for pediatric patients compared with CY 2014 amounts. We estimate that the percentage of patient months qualifying for outlier payments under the current policy will be 6.3 percent for both adult and pediatric patients, based on the 2013 data. The pediatric outlier MAP and fixed-dollar loss amounts continue to be lower for pediatric patients than adults due to the continued lower use of outlier services (primarily reflecting lower use of ESAs and other injectable drugs).

b. Outlier Policy Percentage

42 CFR 413.220(b)(4) stipulates that the per treatment base rate is reduced by 1 percent to account for the proportion of the estimated total payments under the ESRD PPS that are outlier payments. Based on the 2013 claims, outlier payments represented approximately 0.5 percent of total payments, again falling short of the 1 percent target due to further declines in the use of outlier services. Recalibration of the thresholds, which use 2013 data, reflects the reduced variation in outlier services among adults, is expected to result in aggregate outlier payments close to the 1 percent target in CY 2015. We believe the update to the outlier MAP and fixed-dollar loss amounts for CY 2015 will increase payments for ESRD beneficiaries requiring higher resource utilization and move us closer to meeting our 1 percent outlier policy.

We note that recalibration of the fixed-dollar loss amounts in this final rule for CY 2015 outlier payments results in no change in payments to ESRD facilities for beneficiaries with renal dialysis items and services that are not eligible for outlier payments, but increases payments to ESRD facilities for beneficiaries with renal dialysis items and services that are eligible for outlier payments. Therefore, beneficiary co-insurance obligations would also increase for renal dialysis services eligible for outlier payments.

Comment:

All commenters expressed disappointment that the outlier target percentage has not been achieved under the ESRD PPS. Some commenters encouraged CMS to revise the target so that the adjustment would be more attainable for facilities. Other commenters requested that CMS eliminate the adjustment from the payment system altogether and return the 1 percent back to the base rate for CY 2015. One commenter suggested that CMS could annually update the amount withheld in the outlier pool based on actual use in the two prior years. Still other commenters encouraged CMS to return the outlier “pool” to facilities, as the adjustment erroneously lowered the base rate in prior years.

Response:

We thank the commenters for their suggestions in improving the ESRD PPS outlier policy. With regard to the comment that we eliminate the outlier adjustment altogether, we note that, under section 1881(b)(14)(D)(ii) of the Act, the ESRD PPS must “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.” Therefore, we would be unable to do so and comply with section 1881(b)(14)(D)(ii) of the Act. In addition, it is important to note that the ESRD PPS base rate captures the cost for the

average patient. To the extent data analysis continues to show that certain patients, including certain racial and ethnic groups, receive more ESAs than average, we believe an outlier policy, even a small one, is an important payment adjustment to provide under the ESRD PPS. Concerning comments that we modify the outlier payment adjustment, we did not propose to do so, therefore, we will not finalize such an adjustment. However, we will consider the commenters' suggestions as part of the refinement process that we will undertake in the CY 2016 ESRD PPS proposed and final rules.

We share the industry's frustration that payments under the outlier policy have not reached 1 percent of total ESRD PPS payments. However, the outlier policy is a target percentage rather than a “pool.” As we explained in the CY 2014 ESRD PPS final rule (78 FR 72165), each year we simulate payments under the ESRD PPS in order to set the outlier fixed

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