Medicare Program; End-Stage Renal Disease Prospective Payment System, Payment for Renal Dialysis Services Furnished to Individuals With Acute Kidney Injury, End-Stage Renal Disease Quality Incentive Program, and End-Stage Renal Disease Treatment Choices Model

Federal RegisterJun 30, 2023

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 512

[CMS-1782-P]

RIN 0938-AV05

Medicare Program; End-Stage Renal Disease Prospective Payment System, Payment for Renal Dialysis Services Furnished to Individuals With Acute Kidney Injury, End-Stage Renal Disease Quality Incentive Program, and End-Stage Renal Disease Treatment Choices Model

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would update and revise the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year 2024. This rule also proposes to update the payment rate for renal dialysis services furnished by an ESRD facility to individuals with acute kidney injury. This rule also includes requests for information regarding potential changes to the low-volume payment adjustment under the ESRD PPS. In addition, this proposed rule would update requirements for the ESRD Quality Incentive Program and the ESRD Treatment Choices Model.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, by August 25, 2023.

ADDRESSES:

In commenting, please refer to file code CMS-1782-P. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

https://www.regulations.gov.

Follow the “Submit a comment” instructions.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1782-P, P.O. Box 8010, Baltimore, MD 21244-8010. Please allow sufficient time for mailed comments to be received before the close of the comment period.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1782-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

ESRDPayment@cms.hhs.gov

, for issues related to the ESRD PPS and coverage and payment for renal dialysis services furnished to individuals with acute kidney injury (AKI).

ESRDApplications@cms.hhs.gov

, for issues related to applications for the Transitional Drug Add-on Payment Adjustment (TDAPA) or Transitional Add-On Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES).

Delia Houseal, (410) 786-2724, for issues related to the ESRD Quality Incentive Program (QIP).

ETC-CMMI@cms.hhs.gov

, for issues related to the ESRD Treatment Choices (ETC) Model.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:

https://www.regulations.gov

. Follow the search instructions on that website to view public comments. CMS will not post on

Regulations.gov

public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Current Procedural Terminology (CPT) Copyright Notice:

Throughout this proposed rule, we use CPT® codes and descriptions to refer to a variety of services. We note that CPT® codes and descriptions are copyright 2020 American Medical Association (AMA). All Rights Reserved. CPT® is a registered trademark of the AMA. Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

Table of Contents

To assist readers in referencing sections contained in this preamble, we are providing a Table of Contents.

I. Executive Summary

A. Purpose

B. Summary of the Major Provisions

C. Summary of Cost and Benefits

II. Calendar Year (CY) 2024 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

A. Background

B. Provisions of the Proposed Rule

C. Transitional Add-On Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES) Proposals and Application for CY 2024 Payment

D. Continuation of Approved Transitional Add-On Payment Adjustments for New and Innovative Equipment and Supplies for CY 2024

E. Continuation of Approved Transitional Drug Add-On Payment Adjustments for New Renal Dialysis Drugs or Biological Products for CY 2024

III. Calendar Year (CY) 2024 Payment for Renal Dialysis Services Furnished to Individuals With Acute Kidney Injury (AKI)

A. Background

B. Proposed Annual Payment Rate Update for CY 2024

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

A. Background

B. Proposals To Update the Regulation Text for the ESRD QIP

C. Proposed Updates to Requirements Beginning With the PY 2026 ESRD QIP

D. Proposed Updates to the Requirements Beginning With the PY 2027 ESRD QIP

V. End-Stage Renal Disease Treatment Choices (ETC) Model

A. Background

B. Summary of the Proposed Provisions to the ETC Model

VI. Collection of Information Requirements

VII. Response to Comments

VIII. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Impact Analysis

D. Detailed Economic Analysis

E. Accounting Statement

F. Regulatory Flexibility Act Analysis (RFA)

G. Unfunded Mandates Reform Act Analysis (UMRA)

H. Federalism

IX. Files Available to the Public

I. Executive Summary

A. Purpose

This proposed rule proposes updates to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS), payment for renal dialysis services furnished to individuals with acute kidney injury (AKI), the ESRD Quality Incentive Program (QIP), and the ESRD Treatment Choices (ETC) Model. Additionally, this proposed rule proposes policies that reflect our commitment to achieving equity in health care for our beneficiaries by supporting our ability to assess whether, and to what extent, our programs and

policies perpetuate or exacerbate systemic barriers to opportunities and benefits for underserved communities. Our policy objectives include its commitment to advancing health equity, which stands as the first pillar of the CMS Strategic Plan,

and reflect the goals of the Biden-Harris Administration, as stated in Executive Order 13985.

We define health equity as the attainment of the highest level of health for all people, where everyone has a fair and just opportunity to attain their optimal health regardless of race, ethnicity, disability, sexual orientation, gender identity, socioeconomic status, geography, preferred language, or other factors that affect access to care and health outcomes.”

In our CY 2023 ESRD PPS final rule, we noted that, when compared with all Medicare fee-for-service (FFS) beneficiaries, Medicare FFS beneficiaries receiving dialysis are disproportionately young, male, and African-American, have disabilities and low income as measured by eligibility for both Medicare and Medicaid (dual eligible status), and reside in an urban setting (87 FR 67183). In this proposed rule, we continue to address health equity for beneficiaries with ESRD who are also members of underserved communities, including but not limited to those living in rural communities, those who have disabilities, and racial and ethnic minorities. The term underserved communities refers to populations sharing a particular characteristic, including geographic communities that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life.

Specifically, in this proposed rule, we are requesting information regarding a potential payment adjustment for geographically isolated and rural ESRD facilities, proposing additional payment for the subgroup of Pediatric ESRD Patients (as defined in 42 CFR 413.171), and furthering our efforts to determine if payment to ESRD facilities treating patients with co-morbidities such as sickle cell anemia is aligned with resource use by such ESRD facilities. Additionally, we are proposing to add three new measures to the ESRD QIP measure set that are aimed at promoting health equity for ESRD patients, including by enabling ESRD facilities to identify gaps experienced by their patient populations.

Centers for Medicare & Medicaid Services (2022). Health Equity. Available at:

https://www.cms.gov/pillar/health-equity

86 FR 7009 (January 25, 2021).

https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government

Centers for Medicare & Medicaid Services (2022). Health Equity. Available at:

https://www.cms.gov/pillar/health-equity

86 FR 7009 (January 25, 2021).

https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government

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

On January 1, 2011, we implemented the ESRD PPS, a case-mix adjusted, bundled PPS for renal dialysis services furnished by ESRD facilities as required by section 1881(b)(14) of the Social Security Act (the Act), as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275). Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA, and amended by section 3401(h) of the Patient Protection and Affordable Care Act (the Affordable Care Act) (Pub. L. 111-148), established that beginning calendar year (CY) 2012, and each subsequent year, the Secretary of the Department of Health and Human Services (the Secretary) shall annually increase payment amounts by an ESRD market basket percentage increase, reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. This proposed rule would update the ESRD PPS for CY 2024.

2. Coverage and Payment for Renal Dialysis Services Furnished to Individuals With Acute Kidney Injury (AKI)

On June 29, 2015, the President signed the Trade Preferences Extension Act of 2015 (TPEA) (Pub. L. 114-27). Section 808(a) of the TPEA amended section 1861(s)(2)(F) of the Act to provide coverage for renal dialysis services furnished on or after January 1, 2017, by a renal dialysis facility or a provider of services paid under section 1881(b)(14) of the Act to an individual with AKI. Section 808(b) of the TPEA amended section 1834 of the Act by adding a new subsection (r) that provides for payment for renal dialysis services furnished by renal dialysis facilities or providers of services paid under section 1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base rate beginning January 1, 2017. This proposed rule would update the AKI payment rate for CY 2024.

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

The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is authorized by section 1881(h) of the Act. The Program establishes incentives for facilities to achieve high quality performance on measures with the goal of improving outcomes for ESRD beneficiaries. This proposed rule proposes several updates for the ESRD QIP, including: a revision to the regulatory definition of “minimum total performance score” that more accurately captures how we calculate the median of national ESRD facility performance on reporting measures; the codification of our previously finalized measure selection, retention, and removal policies; updates that would begin with Payment Year (PY) 2026, including one new measure, modifications to two current measures, and the removal of two measures; and the addition of two new measures beginning with PY 2027.

4. End-Stage Renal Disease Treatment Choices (ETC) Model

The ETC Model is a mandatory Medicare payment model tested under section 1115A of the Act. The ETC Model is operated by the Center for Medicare and Medicaid Innovation (Innovation Center), and tests the use of payment adjustments to encourage greater utilization of home dialysis and kidney transplants, to preserve or enhance the quality of care furnished to Medicare beneficiaries while reducing Medicare expenditures.

The ETC Model was finalized as part of a final rule published in the

Federal Register

on September 29, 2020, titled “Medicare Program: Specialty Care Models to Improve Quality of Care and Reduce Expenditures” (85 FR 61114), referred to herein as the “Specialty Care Models final rule.” We revised and updated certain ETC Model policies in the CY 2022 ESRD PPS final rule (86 FR 61874), and the CY 2023 ESRD PPS final rule (87 FR 67136). In this rule, we are proposing to revise our regulations at 42 CFR 512.390 to acknowledge the availability of administrative review of targeted review requests. This change would provide ETC Participants with information about the availability of administrative review if an ETC Participant wishes to seek additional review of its targeted review request.

B. Summary of the Major Provisions

1. ESRD PPS

•

Proposed update to the ESRD PPS base rate for CY 2024:

The proposed CY 2024 ESRD PPS base rate is $269.99, an increase from the CY 2023 ESRD PPS base rate of $265.57. This proposed amount reflects the application of the proposed combined wage index and transitional pediatric ESRD add-on payment adjustment (TPEAPA) budget-neutrality adjustment factor (0.999652)

and a proposed productivity-adjusted market basket percentage increase of 1.7 percent as required by section 1881(b)(14)(F)(i)(I) of the Act, equaling $269.99 (($265.57 × 0.999652) × 1.017 = $269.99).

•

Proposed annual update to the wage index:

We adjust wage indices on an annual basis using the most current hospital wage data and the latest core-based statistical area (CBSA) delineations to account for differing wage levels in areas in which ESRD facilities are located. For CY 2024, we are proposing to update the wage index values based on the latest available data.

•

Proposed annual update to the outlier policy:

We are proposing to update the outlier policy based on the most current data. Accordingly, we are proposing to update the Medicare allowable payment (MAP) amounts for adult and pediatric patients for CY 2024 using the latest available CY 2022 claims data. We are proposing to update the ESRD outlier services fixed dollar loss (FDL) amount for pediatric patients using the latest available CY 2022 claims data, and update the FDL amount for adult patients using the latest available claims data from CY 2020, CY 2021, and CY 2022. For pediatric beneficiaries, the proposed FDL amount would decrease from $23.29 to $13.71, and the proposed MAP amount would decrease from $25.59 to $24.53, as compared to CY 2023 values. For adult beneficiaries, the proposed FDL amount would increase from $73.19 to $78.21, and the proposed MAP amount would decrease from $39.62 to $38.58. The 1.0 percent target for outlier payments was not achieved in CY 2022. Outlier payments represented approximately 0.9 percent of total Medicare payments rather than 1.0 percent.

•

Proposed update to the offset amount for the transitional add-on payment adjustment for new and innovative equipment and supplies (TPNIES) for CY 2024:

The proposed CY 2024 average per treatment offset amount for the TPNIES for capital-related assets that are home dialysis machines is $9.96. This offset amount would reflect the application of the proposed ESRD Bundled (ESRDB) market basket update of 1.7 percent ($9.79 × 1.017 = $9.96). There are no capital-related assets set to receive the TPNIES in CY 2024 for which this offset would apply.

•

Proposed clarifications to the TPNIES eligibility criteria:

We are proposing certain clarifications regarding our evaluation of the TPNIES eligibility criteria under § 413.236(b).

•

TPNIES application received for CY 2024:

This proposed rule presents a summary of the one CY 2024 TPNIES application that we received by the February 1, 2023 deadline. This rule also presents our preliminary analysis of the applicant's claims related to substantial clinical improvement (SCI) and other eligibility criteria for the TPNIES.

•

Proposed modifications to the administrative process for the low-volume payment adjustment (LVPA):

We are proposing to create an exception to the current LVPA attestation process for ESRD facilities that are affected by disasters and other emergencies. This exception would allow ESRD facilities to close and reopen in response to a disaster or other emergency and still receive the LVPA. Additionally, it would allow an ESRD facility to receive the LVPA even if it exceeds the LVPA threshold if its treatment counts increase due to treating additional patients displaced by a disaster or emergency.

•

Proposed policy to measure patient-level utilization:

We are proposing to require ESRD facilities to report the time on machine (that is, the amount of time that a beneficiary spends receiving an in-center hemodialysis treatment) on claims. We are seeking comment on the proposed effective date of January 1, 2025, given the operational changes needed.

•

Proposed Transitional Pediatric ESRD Add-on Payment Adjustment (TPEAPA):

We are proposing to establish and apply a new add-on payment adjustment of 30 percent of the per treatment payment amount to all renal dialysis services furnished to Pediatric ESRD Patients effective January 1, 2024, for CYs 2024, 2025, and 2026. This would serve to bring Medicare payments for renal dialysis services furnished to pediatric patients more in line with their estimated relative costs for the next three years until further collection and analysis of cost report data can be conducted.

•

Proposed add-on payment adjustment for after the end of the transitional drug add-on payment adjustment (TDAPA) period:

We are proposing a new add-on payment adjustment for certain new renal dialysis drugs and biological products in existing ESRD PPS functional categories after the end of the TDAPA period, which we would call the post-TDAPA payment adjustment. This payment adjustment would be case-mix adjusted and set at 65 percent of expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA payment adjustment would be applied to all ESRD PPS payments and paid for 3 years.

•

Proposed policy to require reporting of discarded billing units of certain renal dialysis drugs and biological products paid for under the ESRD PPS:

We are proposing a new policy to require the use of the JW or JZ modifier on claims to track discarded amounts of single-vial and single-package renal dialysis drugs and biological products paid for under the ESRD PPS.

2. Payment for Renal Dialysis Services Furnished to Individuals With AKI

We are proposing to update the AKI payment rate for CY 2024. The proposed CY 2024 payment rate is $269.99, which is the same as the ESRD PPS base rate proposed for CY 2024.

3. ESRD QIP

We are proposing several updates for the ESRD QIP. We are proposing to codified the definition of “minimum total performance score” and to codify our previously finalized measure selection, retention, and removal policies. Beginning with PY 2026, we are proposing to add the Facility Commitment to Health Equity reporting measure to the ESRD QIP measure set, modify the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) reporting measure to align with updated measure specifications developed by the Centers for Disease Control and Prevention (CDC), remove the Ultrafiltration Rate reporting measure and the Standardized Fistula Rate clinical measure, and update the Clinical Depression Screening and Follow-Up measure's scoring methodology and convert that measure to a clinical measure. Beginning with PY 2027, we are proposing to add the Social Drivers of Health reporting measure and the Screen Positive Rate for Social Drivers of Health reporting measure to the ESRD QIP measure set.

4. ETC Model

We are proposing to revise our regulations at § 512.390 to acknowledge the ability of the CMS Administrator to review the results of ETC Participants' targeted review requests.

C. Summary of Costs and Benefits

In section VIII.D.5 of this proposed rule, we set forth a detailed analysis of the impacts that the proposed changes would have on affected entities and beneficiaries. The impacts include the following:

1. Impacts of the Proposed ESRD PPS

The impact table in section VIII.D.5.a of this proposed rule displays the estimated change in Medicare payments to ESRD facilities in CY 2024 compared

to estimated Medicare payments in CY 2023. The overall impact of the CY 2024 changes is projected to be a 1.6 percent increase in Medicare payments. Hospital-based ESRD facilities have an estimated 2.6 percent increase in Medicare payments compared with freestanding ESRD facilities with an estimated 1.6 percent increase. We estimate that the aggregate ESRD PPS expenditures would increase by approximately $130 million in CY 2024 compared to CY 2023. This reflects a $140 million increase from the proposed payment rate update, including approximately $1.7 million in estimated TDAPA payment amounts, as further described in the next paragraph, as well as the proposed post-TDAPA payment amount. We estimate a $10 million decrease from the proposed outlier payment update. Because of the projected 1.6 percent overall payment increase, we estimate there would be an increase in beneficiary coinsurance payments of 1.6 percent in CY 2024, which translates to approximately $30 million.

Section 1881(b)(14)(D)(iv) of the Act provides that the ESRD PPS may include such other payment adjustments as the Secretary determines appropriate. Under this authority, CMS implemented § 413.234 to establish the TDAPA, a transitional drug add-on payment adjustment for certain new renal dialysis drugs and biological products and § 413.236 to establish the TPNIES, a transitional add-on payment adjustment for certain new and innovative equipment and supplies. The TDAPA and the TPNIES are not budget neutral.

As discussed in section II.D of this proposed rule, the TPNIES payment period for the Tablo® System ends on December 31, 2023. As discussed in section II.E of this proposed rule, the TDAPA payment period for KORSUVA

(difelikefalin) would continue in CY 2024. We estimate that the overall TDAPA payment amounts in CY 2024 would be approximately $1.7 million, of which, approximately $345,000 would be attributed to beneficiary coinsurance amounts.

2. Impacts of the Proposed Payment for Renal Dialysis Services Furnished to Individuals With AKI

The impact table in section VIII.D.5.c of this proposed rule displays the estimated CY 2024 Medicare payments for renal dialysis services furnished to individuals with AKI compared to estimated Medicare payments for renal dialysis services furnished to individuals with AKI in CY 2023. The overall impact of the CY 2024 changes is projected to be a 1.6 percent increase in Medicare payments for individuals with AKI. Hospital-based ESRD facilities would have an estimated 1.8 percent increase in Medicare payments compared with freestanding ESRD facilities that would have an estimated 1.6 percent increase. The overall impact reflects the effects of the proposed Medicare payment rate update and proposed CY 2024 wage index. We estimate that the aggregate Medicare payments made to ESRD facilities for renal dialysis services furnished to patients with AKI, at the proposed CY 2024 ESRD PPS base rate, would increase by $1 million in CY 2024 compared to CY 2023.

3. Impacts of the Proposed Changes to the ESRD QIP

We estimate that the overall economic impact of the PY 2026 ESRD QIP would be approximately $141.1 million as a result of the policies we have previously finalized and the proposals in this proposed rule. The $141.1 million estimate for PY 2026 includes $121.1 million in costs associated with the collection of information requirements and approximately $20 million in payment reductions across all facilities. We also estimate that the overall economic impact of the PY 2027 ESRD QIP would be approximately $148 million as a result of the policies we have previously finalized and the proposals in this proposed rule. The $148 million estimate for PY 2027 includes $130.7 million in costs associated with the collection of information requirements and approximately $17.3 million in payment reductions across all facilities.

4. Impacts of the Proposed Changes to the ETC Model

The impact estimate in section VIII.D.5.d of this proposed rule describes the estimated change in anticipated Medicare program savings arising from the ETC Model over the duration of the ETC Model as a result of the changes in this proposed rule. We estimate that the ETC Model would result in $28 million in net savings over the 6.5 year duration of the ETC Model. We also estimate that the changes proposed in this proposed rule would produce no change in net savings for the ETC Model. As the ETC Model targeted review process has already been finalized in the Specialty Care Models final rule and ETC Participants are not required to seek administrative review of targeted review determinations, we believe there would be minimal additional burden associated with our proposal.

II. Calendar Year (CY) 2024 End Stage Renal Disease (ESRD) Prospective Payment System (PPS)

A. Background

1. Statutory Background

On January 1, 2011, CMS implemented the ESRD PPS, a case-mix adjusted bundled PPS for renal dialysis services furnished by ESRD facilities, as required by section 1881(b)(14) of the Act, as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Patient Protection and Affordable Care Act (the Affordable Care Act), established that beginning with CY 2012, and each subsequent year, the Secretary shall annually increase payment amounts by an ESRD market basket percentage increase reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

Section 632 of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) included several provisions that apply to the ESRD PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act, which required the Secretary, by comparing per patient utilization data from 2007 with such data from 2012, to reduce the single payment for renal dialysis services furnished on or after January 1, 2014, to reflect the Secretary's estimate of the change in the utilization of ESRD-related drugs and biologicals (excluding oral-only ESRD-related drugs). Consistent with this requirement, in the CY 2014 ESRD PPS final rule, we finalized $29.93 as the total drug utilization reduction and finalized a policy to implement the amount over a 3- to 4-year transition period (78 FR 72161 through 72170).

Section 632(b) of ATRA prohibited the Secretary from paying for oral-only ESRD-related drugs and biologicals under the ESRD PPS prior to January 1, 2016. Section 632(c) of ATRA required the Secretary, by no later than January 1, 2016, to analyze the case-mix payment adjustments under section 1881(b)(14)(D)(i) of the Act and make appropriate revisions to those adjustments.

On April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) was enacted. Section 217 of PAMA included several provisions that apply to the ESRD PPS. Specifically, sections 217(b)(1) and (2) of PAMA amended sections 1881(b)(14)(F) and (I) of the Act and replaced the drug utilization adjustment that was finalized in the CY 2014 ESRD

PPS final rule (78 FR 72161 through 72170) with specific provisions that dictated the market basket update for CY 2015 (0.0 percent) and how the market basket percentage increase should be reduced in CY 2016 through CY 2018.

Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA to provide that the Secretary may not pay for oral-only ESRD-related drugs under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) of PAMA further amended section 632(b)(1) of ATRA by requiring that in establishing payment for oral-only drugs under the ESRD PPS, the Secretary must use data from the most recent year available. Section 217(c) of PAMA provided that as part of the CY 2016 ESRD PPS rulemaking, the Secretary shall establish a process for (1) determining when a product is no longer an oral-only drug; and (2) including new injectable and intravenous products into the ESRD PPS bundled payment.

Section 204 of the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE) (Pub. L. 113-295) amended section 632(b)(1) of ATRA, as amended by section 217(a)(1) of PAMA, to provide that payment for oral-only renal dialysis drugs and biological products cannot be made under the ESRD PPS bundled payment prior to January 1, 2025.

2. System for Payment of Renal Dialysis Services

Under the ESRD PPS, a single per-treatment payment is made to an ESRD facility for all the renal dialysis services defined in section 1881(b)(14)(B) of the Act and furnished to individuals for the treatment of ESRD in the ESRD facility or in a patient's home. We have codified our definition of renal dialysis services at § 413.171, which is in 42 CFR part 413, subpart H, along with other ESRD PPS payment policies. The ESRD PPS base rate is adjusted for characteristics of both adult and pediatric patients and accounts for patient case-mix variability. The adult case-mix adjusters include five categories of age, body surface area, low body mass index, onset of dialysis, and four comorbidity categories (that is, pericarditis, gastrointestinal tract bleeding, hereditary hemolytic or sickle cell anemia, myelodysplastic syndrome). A different set of case-mix adjusters are applied for the pediatric population. Pediatric patient-level adjusters include two age categories (under age 13, or age 13 to 17) and two dialysis modalities (that is, peritoneal or hemodialysis) (§ 413.235(a) and (b)).

The ESRD PPS provides for three facility-level adjustments. The first payment adjustment accounts for ESRD facilities furnishing a low volume of dialysis treatments (§ 413.232). The second payment adjustment reflects differences in area wage levels developed from core-based statistical areas (CBSAs) (§ 413.231). The third payment adjustment accounts for ESRD facilities furnishing renal dialysis services in a rural area (§ 413.233).

There are four additional payment adjustments under the ESRD PPS. The ESRD PPS provides adjustments, when applicable, for: (1) a training add-on for home and self-dialysis modalities (§ 413.235(c)); (2) an additional payment for high cost outliers due to unusual variations in the type or amount of medically necessary care (§ 413.237); (3) a TDAPA for certain new renal dialysis drugs and biological products (§ 413.234(c)); and (4) a TPNIES for certain new and innovative renal dialysis equipment and supplies (§ 413.236(d)).

3. Updates to the ESRD PPS

Policy changes to the ESRD PPS are proposed and finalized annually in the

Federal Register

. The CY 2011 ESRD PPS final rule was published on August 12, 2010, in the

Federal Register

(75 FR 49030 through 49214). That rule implemented the ESRD PPS beginning on January 1, 2011, in accordance with section 1881(b)(14) of the Act, as added by section 153(b) of MIPPA, over a 4-year transition period. Since the implementation of the ESRD PPS, we have published annual rules to make routine updates, policy changes, and clarifications.

We published a final rule, which appeared in the November 7, 2022, issue of the

Federal Register

, titled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Payment for Renal Dialysis Services Furnished to Individuals With Acute Kidney Injury, and End-Stage Renal Disease Quality Incentive Program, and End-Stage Renal Disease Treatment Choices Model,” referred to herein as the “CY 2023 ESRD PPS final rule.” In that rule, we updated the ESRD PPS base rate, wage index, and outlier policy for CY 2023. We also finalized changes that included rebasing and revising the ESRDB market basket to reflect a 2020 base year, refining the methodology for outlier calculations, implementing a wage index floor of 0.600, implementing a permanent 5 percent cap on year-over-year wage index decreases for ESRD facilities, and modifying the definition of “oral-only drug.” For further detailed information regarding these updates, see 87 FR 67136.

B. Provisions of the Proposed Rule

1. Proposed CY 2024 ESRD PPS Update

a. Proposed CY 2024 ESRD Bundled (ESRDB) Market Basket Percentage Increase; Productivity Adjustment; and Labor-Related Share

(1) Background

In accordance with section 1881(b)(14)(F)(i) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act, beginning in 2012, the ESRD PPS payment amounts are required to be annually increased by an ESRD market basket percentage increase and reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The application of the productivity adjustment may result in the increase factor being less than 0.0 for a year and may result in payment rates for a year being less than the payment rates for the preceding year. Section 1881(b)(14)(F)(i) of the Act 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 included in renal dialysis services.

As required under section 1881(b)(14)(F)(i) of the Act, CMS developed an all-inclusive ESRD Bundled (ESRDB) input price index using CY 2008 as the base year (75 FR 49151 through 49162). We subsequently revised and rebased the ESRDB input price index to a base year of CY 2012 in the CY 2015 ESRD PPS final rule (79 FR 66129 through 66136). In the CY 2019 ESRD PPS final rule (83 FR 56951 through 56964), we finalized a rebased ESRDB input price index to reflect a CY 2016 base year. In the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154), we finalized a revised and rebased ESRDB input price index to reflect a CY 2020 base year.

Although “market basket” technically describes the mix of goods and services used for ESRD treatment, this term is also commonly used to denote the input price index (that is, cost categories, their respective weights, and price proxies combined) derived from a market basket. Accordingly, the term “ESRDB market basket,” as used in this document, refers to the ESRDB input price index.

The ESRDB market basket is a fixed-weight, Laspeyres-type price index. A Laspeyres-type price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the

quantity or mix of goods and services (that is, intensity) purchased over time are not measured.

(2) Proposed CY 2024 ESRD Market Basket Update

We propose to use the 2020-based ESRDB market basket as finalized in the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154) to compute the proposed CY 2024 ESRDB market basket percentage increase based on the best available data. Consistent with historical practice, we propose to estimate the ESRDB market basket percentage increase based on IHS Global Inc.'s (IGI) forecast using the most recently available data at the time of rulemaking. IGI is a nationally recognized economic and financial forecasting firm with which CMS contracts to forecast the components of the market baskets. As discussed in section II.B.1.a.(2)(c), we are proposing to calculate the market basket update for CY 2024 based on the proposed market basket percentage increase and the proposed productivity adjustment, following our longstanding methodology.

(a) Proposed CY 2024 Market Basket Percentage Increase

Based on IGI's first quarter 2023 forecast of the 2020-based ESRDB market basket, the proposed CY 2024 market basket percentage increase is 2.0 percent. We also propose that if more recent data become available after the publication of this proposed rule and before the publication of the final rule (for example, a more recent estimate of the market basket percentage increase), we would use such data, if appropriate, to determine the CY 2024 market basket percentage increase in the final rule.

(b) Proposed Productivity Adjustment

Under section 1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the Affordable Care Act, for CY 2012 and each subsequent year, the ESRDB market basket percentage increase shall be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable FY, year, cost reporting period, or other annual period) (the “productivity adjustment”).

The Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the U.S. economy. As we noted in the CY 2023 ESRD PPS final rule (87 FR 67155), the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act previously was published by BLS as private nonfarm business MFP. Beginning with the November 18, 2021, release of productivity data, BLS replaced the term “multifactor productivity” with “total factor productivity” (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology.

As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private nonfarm business TFP; however, as mentioned previously, the data and methods are unchanged. We referred readers to

https://www.bls.gov/productivity/

for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch

. In addition, in the CY 2022 ESRD PPS final rule (86 FR 61879), we noted that effective for CY 2022 and future years, we will be changing the name of this adjustment to refer to it as the productivity adjustment rather than the MFP adjustment. We stated this was not a change in policy, as we will continue to use the same methodology for deriving the adjustment and rely on the same underlying data.

Total Factor Productivity in Major Industries—2020. Available at:

https://www.bls.gov/news.release/prod5.nr0.htm

Based on IGI's first quarter 2023 forecast, the proposed productivity adjustment for CY 2024 (the 10-year moving average of TFP for the period ending CY 2024) is 0.3 percentage point. Furthermore, we propose that if more recent data become available after the publication of this proposed rule and before the publication of the final rule (for example, a more recent estimate of the productivity adjustment), we would use such data, if appropriate, to determine the CY 2024 productivity adjustment in the final rule.

In accordance with section 1881(b)(14)(F)(i) of the Act, we propose to base the CY 2024 market basket percentage increase on IGI's first quarter 2023 forecast of the 2020-based ESRDB market basket. We propose to then reduce this percentage increase by the estimated productivity adjustment for CY 2024 based on IGI's first quarter 2023 forecast. Therefore, the proposed CY 2024 ESRDB market basket update is equal to 1.7 percent (2.0 percent market basket percentage increase reduced by a 0.3 percentage point productivity adjustment). Furthermore, as noted previously, we propose that if more recent data become available after the publication of this proposed rule and before the publication of the final rule (for example, a more recent estimate of the market basket and/or productivity adjustment), we would use such data, if appropriate, to determine the CY 2024 market basket percentage increase and productivity adjustment in the final rule.

We note that, as discussed in the CY 2023 ESRD PPS final rule (87 FR 67157), many commenters requested that CMS apply a forecast error payment adjustment to the ESRD PPS base rate to support ESRD facilities during the inflationary period occurring at that time, particularly accounting for what commenters stated was an error in the forecasted payment updates for CYs 2021 and 2022. In response to those comments, we reminded readers that ESRDB market basket updates are set prospectively, which means that the update relies on a mix of both historical data for part of the period for which the update is calculated, and forecasted data for the remainder. We explained that while there is no precedent to adjust for market basket forecast error in the annual ESRD PPS update, the forecast error for a market basket update is calculated as the actual market basket increase for a given year less the forecasted market basket increase.

We also explained that due to the uncertainty regarding future price trends, forecast errors can be both positive and negative. For example, the CY 2017 ESRDB forecast error was −0.8 percentage point, while the CY 2021 ESRDB forecast error was +1.2 percentage point. At the time of the CY 2023 ESRD PPS final rule, CY 2022 historical data was not yet available to calculate a forecast error for CY 2022; however, based on the latest available historical data for CY 2022, we calculate that the CY 2022 ESRDB forecast error was +2.7 percentage point.

FAQ—Market Basket Definitions and General Information. Available at:

https://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/MedicareProgramRatesStats/Downloads/info.pdf

As we discussed in the CY 2023 ESRD PPS final rule (87 FR 67156), we recognized that recent higher inflationary trends impacted the outlook for price growth over the next several

quarters. For that CY 2023 ESRD PPS final rule, we used an updated forecast of the price proxies underlying the market basket that incorporated more recent historical data and reflected a revised outlook regarding the U.S. economy and expected price inflation for CY 2023 for ESRD facilities. We explained that predictability in Medicare payments is important to enable ESRD facilities to budget and plan their operations, and that forecast error calculations are unpredictable (87 FR 67517). Historically, the positive differences between the actual and forecasted market basket increase in prior years have offset negative differences over time. Therefore, in accordance with our longstanding ESRDB market basket update methodology, we are not proposing to apply a forecast error adjustment to the ESRDB market basket update for CY 2024.

(d) Labor-Related Share

We define the labor-related share 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. For the CY 2024 ESRD PPS payment update, we are proposing to continue using a labor-related share of 55.2 percent, which was finalized in the CY 2023 ESRD PPS final rule (87 FR 67153 through 67154).

b. Proposed CY 2024 ESRD PPS Wage Indices

(1) 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, as the Secretary determines to be appropriate. In the CY 2011 ESRD PPS final rule (75 FR 49200), we finalized an adjustment for wages at § 413.231. Specifically, CMS adjusts the labor-related portion of the ESRD PPS base rate to account for geographic differences in the area wage levels using an appropriate wage index, which reflects the relative level of hospital wages and wage-related costs in the geographic area in which the ESRD facility is located. We use the Office of Management and Budget's (OMB's) CBSA-based geographic area designations to define urban and rural areas and their corresponding wage index values (75 FR 49117). OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles. The bulletins are available online at

https://www.whitehouse.gov/omb/information-for-agencies/bulletins/

We have also adopted methodologies for calculating wage index values for ESRD facilities that are located in urban and rural areas where there is no hospital data. For a full discussion, see the CY 2011 and CY 2012 ESRD PPS final rules at 75 FR 49116 through 49117 and 76 FR 70239 through 70241, respectively. For urban areas with no hospital data, we compute the average wage index value of all urban areas within the State to serve as a reasonable proxy for the wage index of that urban CBSA, that is, we use that value as the wage index. For rural areas with no hospital data, we compute the wage index using the average wage index values from all contiguous CBSAs to represent a reasonable proxy for that rural area. We applied the statewide urban average based on the average of all urban areas within the State to Hinesville-Fort Stewart, Georgia (78 FR 72173), and we applied the wage index for Guam to American Samoa and the Northern Mariana Islands (78 FR 72172).

Under § 413.231(d), a wage index floor value of 0.6000 is applied under the ESRD PPS as a substitute wage index for areas with very low wage index values, as finalized in the CY 2023 ESRD PPS final rule (87 FR 67161). Currently, all areas with wage index values that fall below the floor are located in Puerto Rico and the US Virgin Islands. However, the wage index floor value is applicable for any area that may fall below the floor. A further description of the history of the wage index floor under the ESRD PPS can be found in the CY 2019 ESRD PPS final rule (83 FR 56964 through 56967) and the CY 2023 ESRD PPS final rule (87 FR 67161).

An ESRD facility's wage index is applied to the labor-related share of the ESRD PPS base rate. In the CY 2023 ESRD PPS final rule (87 FR 67153), we finalized a labor-related share of 55.2 percent. In the CY 2021 ESRD PPS final rule (85 FR 71436), we updated the OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, beginning with the CY 2021 ESRD PPS wage index. In that same rule, we finalized the application of a 5 percent cap on any decrease in an ESRD facility's wage index from the ESRD facility's wage index from the prior CY. We finalized that the transition would be phased in over 2 years, such that the reduction in an ESRD facility's wage index would be capped at 5 percent in CY 2021, and no cap would be applied to the reduction in the wage index for the second year, CY 2022. In the CY 2023 ESRD PPS final rule (87 FR 67161), we finalized a permanent policy under § 413.231(c) to apply a 5 percent cap on any decrease in an ESRD facility's wage index from the ESRD facility's wage index from the prior CY. For CY 2024, as discussed in section II.B.1.a.(2)(d) of this proposed rule, the labor-related share to which the wage index would be applied is 55.2 percent.

(2) Proposed CY 2024 ESRD PPS Wage Index

For CY 2024, we propose to update the wage indices to account for updated wage levels in areas in which ESRD facilities are located using our existing methodology. We propose to use the most recent pre-floor, pre-reclassified hospital wage data collected annually under the inpatient PPS. The ESRD PPS wage index values are calculated without regard to geographic reclassifications authorized under sections 1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data that are unadjusted for occupational mix. For CY 2024, the updated wage data are for hospital cost reporting periods beginning on or after October 1, 2019, and before October 1, 2020 (Fiscal Year (FY) 2020 cost report data).

For CY 2024, we propose to update the ESRD PPS wage index to use the most recent hospital wage data. We propose that if more recent data become available after the publication of this proposed rule and before the publication of the final rule (for example, a more recent estimate of the wage index), we would use such data, if appropriate, to determine the CY 2024 ESRD PPS wage index in the final rule. The proposed CY 2024 ESRD PPS wage index is set forth in Addendum A and is available on the CMS website at

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

. Addendum A provides a crosswalk between the CY 2023 wage index and the proposed CY 2024 wage index. Addendum B provides an ESRD facility level impact analysis. Addendum B is available on the CMS website at

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

c. Proposed CY 2024 Update to the Outlier Policy

(1) Background

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. Some examples of the patient conditions that may be reflective of higher facility costs when furnishing dialysis care would be frailty and obesity. A patient's specific medical condition, such as secondary hyperparathyroidism, may result in higher per treatment costs. The ESRD PPS recognizes that some patients require high cost care, and we have codified the outlier policy and our methodology for calculating outlier payments at § 413.237.

Section 413.237(a)(1) enumerates the following items and services that are eligible for outlier payments as ESRD outlier services: (i) Renal dialysis drugs and biological products that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (ii) renal dialysis laboratory tests that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (iii) renal dialysis medical/surgical supplies, including syringes, used to administer renal dialysis drugs and biological products that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; (iv) renal dialysis drugs and biological products that were or would have been, prior to January 1, 2011, covered under Medicare Part D, including renal dialysis oral-only drugs effective January 1, 2025; and (v) renal dialysis equipment and supplies, except for capital-related assets that are home dialysis machines (as defined in § 413.236(a)(2)), that receive the transitional add-on payment adjustment as specified in § 413.236 after the payment period has ended.

Under § 413.237(a)(1)(vi), as of January 1, 2012, the laboratory tests that comprise the Automated Multi-Channel Chemistry panel are excluded from the definition of outlier services.

In the CY 2011 ESRD PPS final rule (75 FR 49142), CMS stated that for purposes of determining whether an ESRD facility would be eligible for an outlier payment, it would be necessary for the ESRD facility to identify the actual ESRD outlier services furnished to the patient by line item (that is, date of service) on the monthly claim. Renal dialysis drugs, laboratory tests, and medical/surgical supplies that are recognized as ESRD outlier services were specified in Transmittal 2134, dated January 14, 2011.

We use administrative issuances and guidance to continually update the renal dialysis service items available for outlier payment via our quarterly update CMS Change Requests, when applicable. For example, we use these issuances to identify renal dialysis oral drugs that were or would have been covered under Part D prior to 2011 to provide unit prices for determining the imputed MAP amounts. In addition, we use these issuances to update the list of ESRD outlier services by adding or removing items and services that we determined, based our monitoring efforts, are either incorrectly included or missing from the list.

Transmittal 2033 issued August 20, 2010, was rescinded and replaced by Transmittal 2094, dated November 17, 2010. Transmittal 2094 identified additional drugs and laboratory tests that may also be eligible for ESRD outlier payment. Transmittal 2094 was rescinded and replaced by Transmittal 2134, dated January 14, 2011, which included one technical correction.

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2134CP.pdf

Under § 413.237, an ESRD facility is eligible for an outlier payment if its imputed (that is, calculated) MAP amount per treatment for ESRD outlier services exceeds a threshold. The MAP amount represents the average estimated expenditure 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 MAP amount per treatment plus the FDL amount. As described in the following paragraphs, the ESRD facility's predicted MAP amount is the national adjusted average ESRD outlier services MAP amount per treatment, further adjusted for case-mix and facility characteristics applicable to the claim. We use the term “national adjusted average” in this section of this proposed rule to more clearly distinguish the calculation of the average ESRD outlier services MAP amount per treatment from the calculation of the predicted MAP amount for a claim. The average ESRD outlier services MAP amount per treatment is based on utilization from all ESRD facilities, whereas the calculation of the predicted MAP amount for a claim is based on the individual ESRD facility and patient characteristics of the monthly claim. In accordance with § 413.237(c), ESRD facilities are paid 80 percent of the per treatment amount by which the imputed MAP amount for outlier services (that is, the actual incurred amount) exceeds this threshold. ESRD facilities are eligible to receive outlier payments for treating both adult and pediatric dialysis patients.

In the CY 2011 ESRD PPS final rule and codified in § 413.220(b)(4), using 2007 data, we established the outlier percentage, which is used to reduce the per treatment ESRD PPS base rate to account for the proportion of the estimated total Medicare payments under the ESRD PPS that are outlier payments, at 1.0 percent of total payments (75 FR 49142 through 49143). We also established the FDL amounts that are added to the predicted outlier services MAP amounts. The outlier services MAP amounts and FDL amounts are different for adult and pediatric patients due to differences in the utilization of separately billable services among adult and pediatric patients (75 FR 49140). As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 through 49139), the predicted outlier services MAP amounts for a patient are determined by multiplying the adjusted average outlier services MAP amount by the product of the patient-specific case-mix adjusters applicable using the outlier services payment multipliers developed from the regression analysis used to compute the payment adjustments. In the CY 2023 ESRD PPS final rule, we finalized an update to the outlier methodology to better target 1.0 percent of total Medicare payments (87 FR 67170 through 67177). We finalized that we would continue to follow our established methodology for the calculation of the adult and pediatric MAP amounts, but we would prospectively calculate the adult FDL amounts based on the historical trend in FDL amounts that would have achieved the 1.0 percent outlier target in the 3 most recent available data years.

(2) CY 2024 Update to the Outlier Services MAP Amounts and FDL Amounts

For CY 2024, we are proposing to update the MAP amounts for adult and pediatric patients using the latest available CY 2022 claims data. We are proposing to update the ESRD outlier services FDL amount for pediatric patients using the latest available CY 2022 claims data, and to update the ESRD outlier services FDL amount for adult patients using the latest available claims data from CY 2020, CY 2021 and CY 2022, in accordance with the methodology finalized in the CY 2023 ESRD PPS final rule (87 FR 67170 through 67174). CY 2022 claims data showed outlier payments represented

approximately 0.9 percent of total Medicare payments (87 FR 67172).

The impact of this proposed update is shown in Table 1, which compares the outlier services MAP amounts and FDL amounts used for the outlier policy in CY 2023 with the updated proposed estimates for this proposed rule. The estimates for the proposed CY 2024 MAP amounts, which are included in Column II of Table 1, were inflation adjusted to reflect projected 2024 prices for ESRD outlier services.

BILLING CODE 4120-01-P

EP30JN23.000

BILLING CODE 4120-01-C

As demonstrated in Table 1, the estimated FDL per treatment that determines the CY 2024 outlier threshold amount for adults (Column II; $78.21) is higher than that used for the CY 2023 outlier policy (Column I; $73.19). The higher threshold is accompanied by a decrease in the adjusted average MAP for outlier services from $39.62 to $38.58. For pediatric patients, there is a decrease in the FDL amount from $23.29 to $13.71. There is a corresponding decrease in the adjusted average MAP for outlier services among pediatric patients, from $25.59 to $24.53.

We estimate that the percentage of patient months qualifying for outlier payments in CY 2024 would be 5.10 percent for adult patients and 20.20 percent for pediatric patients, based on the 2022 claims data and methodology finalized in the CY 2023 ESRD PPS final rule. The outlier MAP and FDL amounts continue to be lower for pediatric patients than adults due to the continued lower use of outlier services (primarily reflecting lower use of ESAs and other injectable drugs).

(3) Outlier Percentage

In the CY 2011 ESRD PPS final rule (75 FR 49081) and under § 413.220(b)(4), we reduced the per treatment base rate by 1 percent to account for the proportion of the estimated total payments under the ESRD PPS that are outlier payments as described in § 413.237. In the 2023 ESRD PPS final rule, we finalized a change to the outlier methodology to better achieve this 1 percent targeted (87 FR 67170 through 67174). Based on the CY 2022 claims, outlier payments represented approximately 0.9 percent of total payments, which is below the 1 percent target due to declines in the use of outlier services. However, this is significantly closer to the 1 percent target than the outlier payments based on CY 2021 claims, which represented approximately 0.5 percent of total payments. We believe the update to the outlier MAP and FDL amounts for CY 2024 would increase payments for ESRD beneficiaries requiring higher resource utilization. This would move us even closer to meeting our 1 percent outlier policy goal, because we would be using more current data for computing the MAP and FDL amounts, which is more reflective of current outlier services utilization rates. We also note that the proposed recalibration of the FDL amounts would result in no change in payments to ESRD facilities for beneficiaries with renal dialysis items and services that are not eligible for outlier payments.

d. Proposed Impacts to the CY 2024 ESRD PPS Base Rate

(1) ESRD PPS Base Rate

In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), CMS established the methodology for calculating the ESRD PPS per-treatment base rate, that is, the ESRD PPS base rate, and calculating the per treatment payment amount, which are codified 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 MAP for composite rate and separately billable services. In accordance with section 1881(b)(14)(D) of the Act and our regulation at § 413.230, the per-treatment payment amount is the sum of the ESRD PPS base rate, adjusted for the patient specific case-mix adjustments, applicable facility adjustments, geographic differences in area wage levels using an area wage index, and any applicable outlier payment, training adjustment add-on, TDAPA, and TPNIES.

(2) Annual Payment Rate Update for CY 2024

We are proposing an ESRD PPS base rate for CY 2024 of $269.99. This proposed update reflects several factors, described in more detail as follows:

Wage Index Budget-Neutrality Adjustment Factor:

We compute a wage index budget-neutrality adjustment factor that is applied to the ESRD PPS base rate. For CY 2024, we are not proposing any changes to the methodology used to calculate this factor, which is described in detail in the CY 2014 ESRD PPS final rule (78 FR 72174). We computed the proposed CY 2024 wage index budget-neutrality adjustment factor using treatment counts from the 2022 claims and facility-specific CY 2023 payment rates to estimate the total dollar amount that each ESRD facility would have received in CY 2023. The total of these payments became the target amount of expenditures for all ESRD facilities for CY 2024. Next, we computed the estimated dollar amount that would have been paid for the same ESRD facilities using the proposed CY 2024 ESRD PPS wage index and proposed labor-related share for CY 2024. As discussed in section II.B.1.b of this proposed rule, the proposed ESRD PPS wage index for CY 2024 includes an update to the most recent hospital wage data and continued use of the 2018 OMB delineations. The total of these payments becomes the new CY 2024 amount of wage-adjusted expenditures for all ESRD facilities. The wage index budget-neutrality factor is calculated as the target amount divided by the new CY 2024 amount. When we multiplied the wage index budget-neutrality factor by the applicable CY 2024 estimated payments, aggregate Medicare payments to ESRD facilities would remain budget-neutral when compared to the target amount of expenditures. That is, the wage index budget-neutrality adjustment factor ensures that wage index adjustments do not increase or decrease aggregate Medicare payments with respect to changes in wage index updates. The proposed CY 2024 wage index budget-neutrality adjustment factor is 1.000120. This CY 2024 proposed wage index budget-neutrality adjustment factor reflects the impact of all wage index policy changes, including the proposed CY 2024 ESRD PPS wage index and labor-related share.

Proposed TPEAPA Budget-Neutrality Adjustment Factor:

As explained in section II.B.1.g.(4) of this proposed rule, we are proposing a new, budget-neutral transitional add-on payment adjustment for pediatric ESRD renal dialysis services, which we would call the TPEAPA. The proposed CY 2024 budget-neutrality adjustment factor for the TPEAPA is 0.999532. The proposed methodology for deriving the budget-neutrality adjustment factor for the TPEAPA is discussed in detail in section II.B.1.g.(4).

Combined Wage Index and TPEAPA Budget-Neutrality Adjustment Factor:

For purposes of calculating the ESRD PPS base rate for CY 2024, we are proposing to use one combined budget-neutrality adjustment factor that would include both the proposed wage index budget-neutrality adjustment factor and the proposed TPEAPA budget-neutrality adjustment factor. The proposed CY 2024 combined wage index and TPEAPA budget neutrality factor is 0.999652 (1.000120 × 0.999532). This application would yield a proposed CY 2024 ESRD PPS base rate of $265.48 prior to the application of the proposed CY 2024 market basket update percentage ($265.57 × 0.999652 = $265.48).

Market Basket Update:

Section 1881(b)(14)(F)(i)(I) of the Act provides that, beginning in 2012, the ESRD PPS payment amounts are required to be annually increased by the ESRD market basket percentage increase. As discussed previously in section II.B.1.a.(2)(a) of this proposed rule, the latest CY 2024 projection of the ESRDB market basket percentage increase is 2.0 percent. In CY 2024, this amount must be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act, as required by section 1881(b)(14)(F)(i)(II) of the Act. As discussed previously in section II.B.1.a.(2)(b) of this proposed rule, the latest CY 2024 projection of the proposed productivity adjustment is 0.3 percentage point, thus yielding a proposed CY 2024 ESRD market basket update of 1.7 percent for CY 2024. Therefore, the proposed CY 2024 ESRD PPS base rate is $269.99 (($265.57 × 0.999652) × 1.017 = $269.99).

e. Update to the Average per Treatment Offset Amount for Home Dialysis Machines

In the CY 2021 ESRD PPS final rule (85 FR 71427), we expanded eligibility for the TPNIES under § 413.236 to include certain capital-related assets that are home dialysis machines when used in the home for a single patient. To establish the TPNIES basis of payment for these items, we finalized the additional steps that the Medicare Administrative Contractors (MACs) must follow to calculate a pre-adjusted per treatment amount, using the prices they establish under § 413.236(e) for a capital-related asset that is a home dialysis machine, as well as the methodology that CMS uses to calculate the average per treatment offset amount for home dialysis machines that is used in the MACs' calculation, to account for the cost of the home dialysis machine that is already in the ESRD PPS base rate. For purposes of this proposed rule, we will refer to this as the “TPNIES offset amount.”

The methodology for calculating the TPNIES offset amount is set forth in § 413.236(f)(3). Section 413.236(f)(3)(v) states that effective January 1, 2022, CMS annually updates the amount determined in § 413.236(f)(3)(iv) by the ESRD bundled market basket percentage increase factor minus the productivity adjustment factor. The TPNIES for capital-related assets that are home dialysis machines is based on 65 percent of the MAC-determined pre-adjusted per treatment amount, reduced by the TPNIES offset amount, and is paid for 2 calendar years.

There are currently no capital-related assets that are home dialysis machines set to receive TPNIES for CY 2024 as the TPNIES payment period for the Tablo® System ends on December 31, 2023, and the only TPNIES application for CY 2024 is not for a home dialysis machine. However, as required by § 413.236(f)(3)(v), we are proposing to update the TPNIES offset amount annually according to the methodology described above.

The proposed CY 2024 TPNIES offset amount for capital-related assets that are home dialysis machines is $9.96. As

discussed previously in section II.B.1.a.(2)(c) of this proposed rule, the proposed CY 2024 ESRDB market basket update is 1.7 percent (2.0 percent ESRDB market basket percentage increase reduced by 0.3 percentage point productivity adjustment). Applying the proposed update factor of 1.017 to the CY 2023 TPNIES offset amount results in the proposed CY 2024 TPNIES offset amount of $9.96 ($9.79 × 1.017 = $9.96). We are proposing to update this calculation to use the most recent data available in the CY 2024 ESRD PPS final rule.

f. Proposed Refinement of the Low-Volume Payment Adjustment (LVPA)

(1) Background

Section 1881(b)(14)(D)(iii) of the Act provides that the ESRD PPS shall include a payment adjustment that reflects the extent to which costs incurred by low-volume facilities (as defined by the Secretary) in furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such services, and for payment for renal dialysis services furnished on or after January 1, 2011, and before January 1, 2014, such payment adjustment shall not be less than 10 percent. Therefore, the ESRD PPS provides a facility-level payment adjustment to ESRD facilities that meet the definition of a low-volume facility. In this section of the proposed rule, we discuss the low-volume payment adjustment (LVPA) under the ESRD PPS, request information from the public regarding the potential changes to LVPA methodology and potentially creating a new geographic-based payment adjustment in the future, and propose certain changes to the existing administrative process for the LVPA.

The current amount of the LVPA is 23.9 percent. In the CY 2011 ESRD PPS final rule (75 FR 49118 through 49125), we finalized the methodology used to target the appropriate population of ESRD facilities that were low-volume and to determine the treatment threshold for those ESRD facilities identified. After consideration of public comments, we established an 18.9 percent adjustment for ESRD facilities that furnish less than 4,000 treatments annually and indicated that this increase to the base rate would encourage small ESRD facilities to continue providing access to care.

In the CY 2016 ESRD PPS proposed rule (80 FR 37819), we analyzed ESRD facilities that met the definition of a low-volume facility under § 413.232(b) as part of the updated regression analysis and found that the ESRD facilities still had higher costs compared to other ESRD facilities. A regression analysis of CYs 2012 and 2013 low-volume facility claims, and cost report data indicated a multiplier of 1.239 percent; therefore, we proposed an updated LVPA adjustment factor of 23.9 percent in the CY 2016 ESRD PPS proposed rule (80 FR 37819) and finalized this policy in the CY 2016 ESRD PPS final rule (80 FR 69001). In CY 2021, 366 ESRD facilities received the LVPA. Using the most recent available data for CY 2022, the number of ESRD facilities receiving the LVPA was 353.

(a) Current LVPA Methodology

Under § 413.232(b), a low-volume facility is an ESRD facility that, based on the submitted documentation: (1) furnished less than 4,000 treatments in each of the 3 cost reporting years (based on as-filed or final settled 12-consecutive month costs reports, whichever is most recent, except as specified in paragraph (g)(4)) preceding the payment year; and (2) has not opened, closed, or received a new provider number due to a change in ownership (except where the change in ownership results in a change in facility type) in the 3 cost reporting years (based on as-filed or final settled 12-consectuive month cost reports, whichever is most recent) preceding the payment year.

In addition, under § 413.232(c), for purposes of determining the number of treatments furnished by the ESRD facility, the number of treatments considered furnished by the ESRD facility equals the aggregate number of treatments furnished by the ESRD facility and the number of treatments furnished by other ESRD facilities that are both under common ownership with, and 5 road miles or less from, the ESRD facility in question. In order to receive the LVPA, an ESRD facility must submit a written attestation statement to its Medicare Administrative Contractor (MAC) confirming that it meets all of the requirements specified in § 413.232 and qualifies as a low-volume ESRD facility. For purposes of determining eligibility for the LVPA, “treatments” mean total hemodialysis equivalent treatments (Medicare and non-Medicare). For peritoneal dialysis patients, one week of peritoneal dialysis is considered equivalent to three hemodialysis treatments (80 FR 68994). Section 413.232(e) generally imposes a yearly November 1 deadline for attestation submissions unless extraordinary circumstances justify an exception and specifies exceptions for certain years where the deadline is in December or January. The November 1st attestation timeframe provides 60 days for a MAC to verify that an ESRD facility meets the LVPA eligibility criteria (76 FR 70236). The ESRD facility would then receive the LVPA payment for all the Medicare-eligible treatments in the payment year. Once an ESRD facility is determined to be eligible for the LVPA, a 23.9 percent increase is applied to the ESRD PPS base rate for all treatments furnished by the ESRD facility (80 FR 69001).

In the CY 2021 ESRD PPS final rule (85 FR 71443), we finalized a policy to allow ESRD facilities flexibility for LVPA eligibility due to the COVID-19 Public Health Emergency (PHE). Under § 413.232(g)(4), for purposes of determining ESRD facilities' eligibility for payment years 2021, 2022, and 2023, we will only consider total dialysis treatments for any 6 months of their cost-reporting period ending in 2020. ESRD facilities that would not otherwise meet the number of treatments criterion because of the COVID-19 PHE may attest that their total dialysis treatments for those 6 months of their cost reporting period ending in 2020 are less than 2,000. The attestation must further include that although the total number of treatments furnished in the entire year otherwise exceeded the LVPA threshold, the excess treatments furnished were due to temporary patient shifting resulting from the COVID-19 PHE. MACs will annualize the total dialysis treatments for the total treatments reported in those 6 months by multiplying by 2.

(b) Current Issues and Concerns From Interested Parties

Interested parties, including the Medicare Payment Advisory Commission (MedPAC) and the Government Accountability Office (GAO),

have recommended that we make refinements to the LVPA to better target ESRD facilities that are critical to beneficiary access to dialysis care in remote or isolated areas.

These groups and other interested parties have also have expressed concern that the strict treatment count introduces a “cliff-effect” that may incentivize ESRD facilities to restrict their patient caseload to remain below the 4,000 treatments per year for the LVPA threshold.

https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf

https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf

We considered several changes to the LVPA eligibility criteria to address the concerns that GAO and MedPAC raised about targeting LVPA payments to ESRD facilities that are necessary to protect access to care and are not located near other ESRD facilities. Specifically, these interested parties have requested that we take into consideration the geographic isolation of an ESRD facility within the LVPA methodology. Section 1881(b)(14)(D)(iii) of the Act requires that the LVPA must reflect the extent to which costs incurred by low-volume facilities (as defined by the Secretary) in furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such services. Our analysis has found that isolated low-volume facilities do not face higher costs than other low-volume facilities. Therefore, we do not believe that this requested change reconciles with the central statutory requirements and limitations for the LVPA, and we are considering alternative approaches, including potentially addressing this issue through a new payment adjustment separate from the LVPA based on section 1881(b)(14)(D)(iv) of the Act. Currently, we are analyzing claims and cost data regarding dialysis treatment levels and cost to inform options for potentially tailoring our methodology to meet the requirements of the statute, while simultaneously collecting additional data on geographic isolation of ESRD facilities. The ESRD PPS has separate facility-level payment adjustments for low-volume facilities, as set forth in 42 CFR 413.232, and facilities in rural areas, as set forth in 42 CFR 413.233. To avoid overlap with these existing facility-level adjustments, we are analyzing the impact of potentially creating a new payment adjustment and considering innovative methodological options, such as the local dialysis need methodology on which we are requesting information in section II.B.1.f.(2)(b) of this proposed rule.

In addition, we have heard from interested parties that the eligibility criteria for the LVPA are very explicit and leave little room for flexibility in certain circumstances (85 FR 71442). Some also view the attestation process as burdensome to ESRD facilities and believe it may discourage participation by small ESRD facilities with limited resources that would otherwise qualify for the LVPA.

Given these concerns, we have considered alternative approaches to the LVPA that would reduce burden, remove negative incentives that may result in gaming, and better target ESRD facilities that are critical for beneficiary access.

https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf

CMS's contractor has held three Technical Expert Panels (TEPs) to discuss potential refinements to the ESRD PPS.

During the 2018, 2019, and 2020 TEPs, panelists, including representatives from ESRD facilities, independent researchers, patient advocates, and representatives from professional associations and industry groups (86 FR 36397), discussed limitations of the current LVPA methodology and potential alternatives. In the CY 2022 ESRD PPS proposed rule, we included a request for information (RFI) to inform LVPA payment reform (86 FR 36398 through 36399). All fourteen responses to the CY 2022 ESRD PPS RFI for LVPA wrote in support of either eliminating or revising the current LVPA or rural adjustment.

One small dialysis organization within a large non-profit health system responded that it is reliant upon the LVPA and the rural adjustment and supports both adjustments, albeit with modifications. MedPAC renewed its support for a new Low-Volume and Isolated (LVI) adjustment with a three-tiered approach for treatment thresholds, which would incorporate geographic isolation into its methodology and may disincentivize gaming. MedPAC called upon CMS to provide clear and timely criteria for ESRD facility eligibility and ensure the LVPA methodology is transparent. In concurrence with MedPAC, a coalition of dialysis organizations, three large dialysis organizations (LDOs), a non-profit kidney organization, and a provider advocacy coalition commented that the rural adjustment should be eliminated and an LVI methodology should be adopted, as they considered a methodology based upon census tracts to be both complicated and lacking transparency. Numerous commenters wrote in support of a tiered adjustment to mitigate the cliff effect and gaming. Commenters raised concerns regarding the census tract methodology's reliance upon `driving time' as a data measure, noting this presents legitimate equity issues. Those who have relied upon both the LVPA and rural payment adjustments to remain operational expressed opposition to elimination of either adjustment. The materials from the TEPs and summary reports can be found at

https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources

. For this proposed rule, we considered the above-referenced input from interested parties and subsequent data obtained to inform the RFIs below.

https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources

https://www.cms.gov/files/document/cy-2022-esrd-pps-rfi-summary-comments.pdf

(2) Requests for Information on Modification of LVPA Methodology and Development of a New Payment Adjustment Based on Geographic Isolation

As discussed in the previous section, we recognize the importance of revising the ESRD PPS LVPA adjustment methodology to ensure that payments accurately reflect differences in cost and adequately target low-volume facilities, and to strive for healthcare equity for ESRD beneficiaries. The LVPA and rural adjusters currently result in increased payments to some geographically isolated ESRD facilities, but these adjusters do not specifically target geographically isolated ESRD facilities. We noted several points of concern that interested parties have raised in the past, as well as certain statutory limitations that could apply to some of the methodological approaches suggested in the past. We are seeking information from the public about potential approaches to refine the ESRD PPS methodology, which we would take into consideration for any potential changes to the LVPA in the future.

This section addresses several RFIs regarding the LVPA and a potential new adjustment for geographically isolated ESRD facilities. Upon reviewing the RFIs, respondents are encouraged to provide complete, but concise responses. These RFIs are issued solely for information and planning purposes; RFIs do not constitute a Request for Proposal (RFP), application, proposal abstract, or quotation. The RFIs do not commit the United States (U.S.) Government to contract for any supplies or services or make a grant award. Further, we are not seeking proposals through these RFIs and will not accept unsolicited proposals. Responders are advised that the U.S. Government will not pay for any information or administrative costs incurred in response to this RFI; all costs associated with responding to these RFIs will be solely at the interested party's expense. Failing to respond to either RFI will not preclude participation in any future procurement, if conducted.

Please note that we will not respond to questions about the policy issues raised in these RFIs. We may or may not choose to contact individual responders. Such communications would only serve

to further clarify written responses. Contractor support personnel may be used to review RFI responses. Responses to these RFIs are not offers and cannot be accepted by the U.S. Government to form a binding contract or issue a grant. Information obtained because of this RFI may be used by the U.S. Government for program planning on a non-attribution basis. Respondents should not include any information that might be considered proprietary or confidential. All submissions become U.S. Government property and will not be returned. We may publicly post the comments received, or a summary thereof.

(a) Comment Solicitation for Modifications to LVPA Methodology

We are soliciting comment on potential changes to the LVPA methodology, including maintaining a single threshold, establishing LVPA tiers, and/or utilizing a continuous function. Any potential refinements to the LVPA methodology that may result from our consideration of these comments would be proposed through notice-and-comment rulemaking in the future. We request that commenters keep in mind that section 1881(b)(14)(D)(iii) of the Act requires the LVPA to reflect the extent to which costs incurred by low-volume facilities in furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such services.

(i) Maintain a Single LVPA Threshold

As discussions about modifying the existing treatment threshold or payment adjustment percentage have been ongoing since the beginning of the multi-year LVPA reform efforts, we are soliciting comments on maintaining a single threshold for the LVPA. ESRD facilities that fall below the treatment threshold would continue to receive payment, and payments would not be adjusted for those ESRD facilities above the threshold. We are engaged in continuing monitoring efforts to align resource use with payment. If we were to re-compute the LVPA percentage amount using the latest available claims and cost report data and the methodology established in the CY 2011 and CY 2016 ESRD PPS final rules (75 FR 49118 through 49125 and 80 FR 69001), the current treatment threshold of 4,000 treatments per year would correspond to a 17.6 percent payment adjustment. The 4,000-treatment threshold could be maintained, or the treatment threshold could be recalibrated to maintain the 23.9 percent payment adjustment. Maintaining a single threshold would not address concerns regarding the potential for gaming or remove what commenters call the payment cliff. Potential approaches for a single LVPA threshold are outlined below in Table 2.

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(ii) Establishment of Multiple LVPA Tiers

We are soliciting comment on creating a tiered payment adjustment that would include multiple thresholds, with separate payment adjustments calibrated so that ESRD facilities in tiers with the lowest treatment volume would receive the highest payment adjustment, and vice versa. MedPAC has previously recommended setting LVPA treatment thresholds at fewer than 4,000 treatments, between 4,000 and 4,999 treatments, and between 5,000 and 6,000 treatments, with payment adjustments calibrated so that ESRD facilities in tiers with the lowest volume would receive the highest payment adjustment, and vice versa.

Establishing multiple thresholds, with a separate payment adjustment for ESRD facilities under each threshold level, would reduce the potential for gaming through reduction of the magnitude of the payment cliff. Additionally, LVPA eligibility would be expanded to more ESRD facilities. We are soliciting comments regarding establishment of multiple thresholds, including up to an eight-tiered structure for the LVPA. Tables 3 through 6 outline various methodological options. Tables 3 through 4 would establish larger adjustment factors on average than the current methodology, but would require reductions to the ESRD PPS base rate to maintain budget neutrality. Tables 5 through 6 show adjustment factors which are scaled to maintain budget neutrality within the LVPA, keeping the LVPA's budget at the same amount that would occur under the current methodology without requiring reductions to the ESRD PPS base rate. As illustrated below, scaling the adjusters while maintaining budget neutrality within the LVPA results in lower LVPA adjusters. For example, Tier 1 (less than 5,000 treatments) in the Four-Tiered Model varies based on the approach to maintaining budget neutrality, as the LVPA adjuster is 13.7 percent where budget neutrality is maintained within the ESRD PPS (Table 3) and 5.8 percent where budget neutrality is maintained within the LVPA (Table 5). For comparison, the

Eight-Tiered Model shows that for Tier 1 (less than 1,000 treatments), ESRD facilities would receive a 123 percent LVPA adjuster where budget neutrality is maintained within the ESRD PPS (Table 4) and 40.5 percent LVPA adjuster where budget neutrality is maintained within the LVPA (Table 6).

https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf

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(iii) Continuous Function

We are also soliciting comments on potentially establishing a continuous function to adjust LVPA payments. Under this approach, ESRD facilities with the lowest volume would receive the highest payment adjustment, and the payment adjustment would decrease continuously as volume increases. This could include calibration of the point at which the payment adjustment becomes zero to correspond with the existing 4,000 treatment upper bound, or establishment of a new upper bound based on a regression analysis. Establishment of a continuous function has the potential to significantly reduce the potential for gaming by eliminating payment cliffs entirely. Additionally, this would increase payment for ESRD facilities with the lowest volume, therefore better aligning payment with resource use. Furthermore, a continuous function would potentially expand LVPA eligibility to the most ESRD facilities.

CMS is considering several approaches to modifying the LVPA to address concerns about its incentive structure, treatment threshold, and administrative burden, as expressed by interested parties (including the GAO, MedPAC, and industry representatives). We are issuing this RFI to seek feedback on the suggested changes to the LVPA, as described above, and to solicit further input from interested parties to inform future modifications to the methodology used to determine the LVPA.

In particular, CMS seeks input and responses to the following considerations, requests and questions:

• Regarding concerns about a payment cliff in the existing LVPA, we are considering implementing payment tiers or a continuous adjustment, based on treatment volume, in place of the current single tiered adjustment.

++ Please comment on which payment structure would be more appropriate: single threshold as currently employed, tiered structure, or continuous function, and provide the reasoning behind your recommendation.

++ Please also comment on which option would be most effective in removing gaming incentives and which option would bring greater congruency between cost of providing renal dialysis services and payment.

• Using the alternative methodology described above, under a tiered or continuous payment adjustment, the treatment threshold for eligibility would be determined based on the median treatment count among all ESRD facilities (approximately eight thousand treatments per year). The resulting tiers and incremental payment adjustments between tiers could follow several different configurations.

++ What factors should be evaluated to best determine the treatment count threshold, as well as the tiering structure? Specifically, comment on the treatment volume beneath which per-treatment costs begin to increase.

++ Please enumerate any concerns you might have should the implementation of a tiered or continuous adjustment result in an expanded set of eligible ESRD facilities, and payment redistribution.

• Interested parties have voiced concern regarding the administrative burden involved in the current LVPA attestation process. As such, we are considering potentially decreasing the number of years of attestation data needed to determine LVPA eligibility.

++ Please comment on the extent to which this change would alleviate burden, and if there are other administrative changes that could be made to simplify this process.

++ Please describe any anticipated effects of decreasing the amount of treatment volume data used to determine LVPA eligibility.

++ Please describe the ways that simplifying the attestation process could help ESRD facilities with fewer resources to promote health equity by improving their ability to serve vulnerable and underserved communities.

(b) Comment Solicitation on the Development of a New Payment Adjustment Based on Geographic Isolation

CMS is striving to promote health equity by ensuring that ESRD facilities, including both rural and low-volume facilities, are being paid equitably for serving populations that are currently underserved. We are therefore soliciting comments on potentially assisting geographically isolated ESRD facilities and promoting access in these areas, including labor force hiring and retention. We are considering establishing a new payment adjustment that accounts for isolation, rurality, and other geographical factors. We are also requesting information on geographic isolation to determine if ESRD facilities that are currently considered rural would benefit from a geographic isolation adjustment. The new geographically based payment adjustment may consider local dialysis

need (LDN), as explained later in this section, instead of basing payment strictly upon a rural designation, as set forth in §§ 413.233 and 413.231(b)(2). We considered changes to the eligibility criteria to address the concerns that GAO and MedPAC raised about targeting LVPA payments to ESRD facilities that are not located near other ESRD facilities that are necessary to protect access to care. As noted above, under section 1881(b)(14)(D)(iii) of the Act, the LVPA must reflect the extent to which costs incurred by low-volume facilities (as defined by the Secretary) in furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such services. Our preliminary analysis found that, in general, low-volume facilities that are rural, isolated, or located in low-demand areas

did not

have higher costs than low-volume ESRD facilities overall. Therefore, certain changes that interested parties have suggested would not comport with the statutory requirements and limitations for the LVPA. We are soliciting comments on potential methodologies for creating a separate payment adjustment that could potentially address GAO and MedPAC's concerns, relying upon the authority under section 1881(b)(14)(D)(iv) of the Act, which states that the ESRD PPS may include such other payment adjustments as the Secretary determines appropriate.

During the 2020 ESRD PPS TEP, panelists discussed the alternatives to the current LVPA set forth below.

One methodology involved utilization of census tracts to identify geographic areas with low demand, which suggested increased beneficiary access by incentivizing dialysis organizations to continue operating ESRD facilities in otherwise non-viable locations. An advantage to this approach would be identifying geographical areas, specifically census tracts, with low demand for dialysis. The TEP participants discussed that the identification of low demand for dialysis would improve targeting to ESRD facilities that are in isolated areas that ESRD beneficiaries travel far to access. Additionally, this would incentivize ESRD facilities to locate in underserved areas that are isolated and rural, promoting access to care for these disadvantaged populations. This methodology aligns with the methodology presented in the TEPs and in the CY 2022 ESRD PPS proposed rule (86 FR 36396 through 36399).

https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-presentation-december-2020.pdf.

CMS's preliminary analysis has shown that models based on this local dialysis need (LDN) methodology would often result in the ESRD facilities receiving the LDN payment adjustment (that is, ESRD facilities in geographic areas with low LDN) being the only dialysis provider for a number of miles. Additionally, our analysis shows that ESRD facilities receiving the LDN payment adjustment often would be located in a census tract that intersects with areas designated as Health Professional Shortage Areas (HPSAs). The methodology would involve dividing the U.S. into geographic areas based on a reasonable assessment of ESRD beneficiaries' ability or willingness to travel. Regarding interested parties' concerns that previous measures for travel time relied upon beneficiaries' access to a private vehicle (which many beneficiaries may lack), in collaboration with our data contractor, CMS has performed additional analysis regarding the travel time metric to include realized travel time between ESRD facilities and population centers of census tracts, instead of ESRD facilities and patient address. Sensitivity checks have shown that the exact location of patients with ESRD is not essential for accurately determining the LDN of census tracts. Latent demand is then calculated by counting the number of beneficiaries with ESRD near each ESRD facility. “Near” is defined by driving time to ESRD facilities. Latent demand is calculated by multiplying the number of beneficiaries near an ESRD facility by average number of treatments for ESRD beneficiaries. The threshold is then applied by determining the threshold of adjusted latent demand. That is, those ESRD facilities, which fall below the threshold are eligible.

We are considering approaches to implementing an additional payment adjustment for ESRD facilities operating in areas with low LDN/demand. The purpose of this RFI is to seek feedback on the approach described above and to solicit information from interested parties to inform the approach taken to implement this adjustment. Any new payment adjustment of this nature would be proposed through future notice-and-comment rulemaking.

In particular, we seek responses to the following questions.

• What factors should be considered in formulating a payment adjustment for ESRD facilities in isolated geographical areas or areas for which there is a low need for renal dialysis services?

• What are the best ways to incentivize renal dialysis service provision in isolated geographic areas?

• Our analysis of the LDN methodology has shown that low LDN census tracts intersect with areas designated as HPSAs. What impact would a payment adjustment based on geographic isolation have on the ability of ESRD facilities in isolated areas to recruit and retain health care professionals?

• Please comment on the appropriateness of maintaining the rural facility adjustment under § 413.233, if we were to establish an LDN payment adjustment in conjunction with a modified LVPA.

• Please comment on the relationship between geographic isolation and cost. Please provide any data that could further inform CMS's understanding of the relationship between geographic isolation and cost for low volume facilities.

• Please comment on the appropriateness of utilizing driving time between current beneficiary address and treatment location as the appropriate metric for travel time.

• Are there ways in which the suggested methodology for this potential payment adjustment could fail in targeting isolated ESRD facilities, or ESRD facilities in areas with low LDN?

• Are there ways in which the determination of LDN might be subject to gaming?

• Would a payment adjustment for ESRD facilities in areas with low LDN improve health equity? Are there specific recommendations to change the LDN methodology described above to promote quality access to care for all ESRD beneficiaries?

• Please comment on the favorability of CMS's implementation of a new payment adjustment for ESRD facilities in areas with low LDN as described above.

• Are there any other considerations we should keep in mind when considering proposing a new payment adjustment based on an LDN methodology?

(3) Proposal for an Exception to the Current LVPA Attestation Process for Disasters and Other Emergencies

Under our current regulations at 42 CFR 413.232(b), a low-volume facility is an ESRD facility that, based on the submitted documentation—(1) furnished less than 4,000 treatments in each of the 3 cost reporting years (based on as-filed or final settled 12-consecutive month cost reports, whichever is most recent, except as specified in § 413.232(g)(4)) preceding

the payment year; and (2) has not opened, closed, or received a new provider number due to a change in ownership (except where the change in ownership results in a change in facility type) in the 3 cost reporting years (based on as-filed or final settled 12-consecutive month cost reports, whichever is most recent) preceding the payment year. When we first established these requirements in the CY 2011 ESRD PPS final rule, we explained that looking across data for three years provided us with a sufficient information to view consistency in business operations (79 FR 49123). In the CY 2019 ESRD PPS final rule (83 FR 56949) and the CY 2021 ESRD PPS proposed rule (85 FR 42165), we acknowledged commenters' concerns that the eligibility criteria in the LVPA regulations are very explicit and leave little room for flexibility during disasters or other emergency situations like the COVID-19 PHE. Commenters have emphasized that low-volume facilities rely on the LVPA, and that loss of the payment adjustment could result in beneficiary access issues.

As discussed in the CY 2021 ESRD PPS proposed rule (85 FR 42165), the COVID-19 PHE caused ESRD facilities to have to shift patients among ESRD facilities in order to provide uninterrupted care to their Medicare ESRD population. In some cases, this patient shifting increased dialysis treatments at some low-volume ESRD facilities, putting the ESRD facility temporarily over the LVPA treatment threshold. This increase in dialysis treatments, resulting from the PHE, disqualified some ESRD facilities that would have otherwise received the LVPA of 23.9 percent per treatment. In the CY 2021 ESRD PPS final rule (85 FR 71485), we established a policy that ESRD facilities would be held harmless from increases in treatment counts due to temporary patient shifting because of the PHE. To be held harmless, ESRD facilities must follow the attestation process for the exception set forth in § 413.232(g)(4) and are expected to provide supporting documentation to the MACs upon request. Interested parties have expressed support for CMS's swift response to the COVID-19 PHE's impact on ESRD facilities, with an association of dialysis providers stating that holding harmless LVPA status for these ESRD facilities will better ensure that ESRD patients can continue to access the life-sustaining dialysis treatment they need, particularly in rural and underserved areas where low-volume facilities heavily depend on the LVPA to remain open and provide treatment for patients.

We recognize there could be future circumstances, potentially similar to the circumstances of the COVID-19 PHE, in which it would be appropriate to provide flexibilities with respect to certain LVPA requirements. Commenters have previously expressed concerns about the strict attestation requirements for ESRD facilities to remain eligible for the LVPA, particularly when faced with a disaster or other emergency, such as a local or national emergency, natural disaster, catastrophic event, or public health emergency. We recognize that during disasters or other emergencies, low-volume facilities could be forced to close, or could experience increases in their treatment counts if they treat patients who are displaced from a nearby ESRD facility that is impacted by such an event. For example, in August of 2021, an ESRD facility in Louisiana sustained significant damage as a result of Hurricane Ida, which required the ESRD facility to close for repairs and temporarily stop furnishing renal dialysis services. The ESRD facility served a rural community and for over 10 years received the LVPA due to the low number of dialysis treatments it furnished each year. This ESRD facility sought recourse to maintain its eligibility for the LVPA when it resumed operations following the required repairs to the ESRD facility, however, recourse was unavailable due to the limitations set forth in 42 CFR 413.232(b). When we established the LVPA in the CY 2011 ESRD PPS final rule, we stated that we believed the LVPA should encourage small ESRD facilities to continue to provide access to care to an ESRD patient population where providing that care would otherwise be problematic (75 FR 49118). Given that these requirements for low-volume facilities were created to protect access to care for the vulnerable patient population that these ESRD facilities serve, adding certain flexibilities during disasters or other emergencies would promote our commitment to ensuring access to care for ESRD patients.

(a) Proposed Changes to the LVPA

We are proposing to make two changes to the LVPA regulation at § 413.232 to allow for more administrative flexibilities during disasters or other emergencies. First, we are proposing to create a new exception to the attestation process for disasters and other emergencies. Second, we are proposing to establish a process that would allow low-volume facilities to close and reopen in response to a disaster or other emergency and still receive the LVPA. CMS would assess whether a particular situation is a disaster or other emergency based on the totality of the circumstances that could result in disruption of or inability to furnish renal dialysis services at one or more ESRD facilities, thus affecting the ESRD facility's or facilities' ability to qualify for the LVPA. For purposes of this proposal, disasters or other emergencies would include, but not be limited to, the below examples:

• A public health emergency declared by the Secretary due to a significant outbreak of infectious disease or bioterrorist attacks.

• Natural disasters including winter storms, floods, tornados, hurricanes, wildfires, earthquakes, or any combination thereof.

https://www.dhs.gov/natural-disasters.

• Catastrophic events outside of an ESRD facility's control that disrupt operations and result in an ESRD facility's closure, for example, loss of operations or patient shifting due to a local emergency such as fire, floods, earthquakes, or tornadoes, or

• Other disaster or emergency conditions under which a waiver could be granted pursuant to section 1135 of the Act.

CMS believes these proposed policy changes could help displaced ESRD patients maintain access to renal dialysis services by preventing ESRD facilities from permanently closing due to the loss of their LVPA. It is important that ESRD facilities that are receiving the LVPA are able to maintain LVPA eligibility despite the impacts caused by a disaster or other emergency. The proposed policy could potentially protect other ESRD facilities that need to maintain the LVPA in order to remain open from potentially losing their LVPA by exceeding the treatment threshold because they accepted displaced patients. We do not want the fear of losing the LVPA due to increased treatments exceeding the threshold to disincentivize ESRD facilities from accepting patients from other ESRD facilities experiencing a disaster or other emergency. It is also important that ESRD facilities that are forced to close due to a disaster or other emergency are able to maintain their LVPA eligibility upon reopening to ensure continued access in areas that otherwise may lack sufficient ESRD facilities. The policy could also help those ESRD facilities affected by the disaster or other emergency potentially resume operations and avoid permanent closure if they would be allowed to receive the

LVPA upon reopening despite the closure or disruption of operations.

(i) Proposed Exception to the LVPA Treatment Threshold for ESRD Facilities That Accept Patients From an ESRD Facility Affected by a Disaster or Other Emergency

We are proposing to create an exception to the LVPA treatment threshold requirements set forth in 42 CFR 413.232(b)(1) under a new provision in § 413.232(g)(5), which would allow an ESRD facility to receive the LVPA even if it exceeds the LVPA threshold if its treatment counts increase due to treating additional patients displaced by a disaster or other emergency. Qualification for the proposed exception would require an ESRD facility to absorb those displaced patients from an outside or adjacent ESRD facility that experienced a temporary closure or operational disruption (such as a water shut off). If an ESRD facility accepts the patients of the ESRD facility affected by the disaster or other emergency, causing that ESRD facility to meet or exceed the 4,000-treatment count for all dialysis patients, it would attest to its MAC that it furnished treatments equal to or in excess of 4,000 in the cost reporting year due to temporary patient-shifting as a result of the closure or operational disruption of an ESRD facility due to a disaster or other emergency. We are proposing to define temporary patient-shifting in the context of the LVPA in the ESRD PPS as providing renal dialysis services to one or more patient(s) at any time through the end of the calendar year following the 12-month period beginning when an ESRD facility first begins providing renal dialysis services to the displaced patient(s). The ESRD facility would be required to request this exception from CMS by writing to the ESRD Payment Mailbox

ESRDPAYMENT@cms.hhs.gov

no later than the annual attestation deadline of November 1st. CMS would review the exception request within 30 days to determine if the ESRD facility qualifies for the exception. If approved by CMS, the ESRD facility would be paid the LVPA for Medicare beneficiaries for up to the first 4,000 dialysis treatments in the payment year in which the temporary patient-shifting occurred. Under this proposed exception, the ESRD facility would be held harmless for meeting or exceeding the 4,000 dialysis treatment threshold during one or more cost reporting years within the 3-year lookback for LVPA eligibility as long as their 4,000 dialysis treatment threshold was exceeded as a result of temporary patient-shifting from the ESRD facility that experienced the disaster or other emergency. If CMS does not approve the request, CMS would notify the ESRD facility and the MAC, and the ESRD facility would be disqualified from receiving the LVPA until it meets all the LVPA criteria (including the 3-year lookback). Under this proposal, the ESRD facility receiving this exception must maintain documentation of the number of displaced patients treated and information about the ESRD facility or facilities that previously treated those patients and closed or experienced an operational disruption due to a disaster or other emergency and must provide such documentation to CMS and the MAC upon request. The ESRD facility requesting this exception would have to repeat the process for requesting an exception for each cost reporting year in which its treatment volume meets or exceeds 4,000 due to temporary patient-shifting from the ESRD facility that experienced the disaster or other emergency. Additionally, the ESRD facility requesting this exception would have to follow the attestation process as described at § 413.232(e) for the two payment years following the last cost reporting year in which its treatment volume meets or exceeds 4,000 due to treating displaced patients from the ESRD facility that experienced the disaster or other emergency and attest that the ESRD facility meets the criterion established at § 413.232.

As an example: If a disaster occurs on June 1, 2024, which results in ESRD facility X's closure or operational disruption resulting in ESRD facility Y (an existing low-volume facility) treating additional patients from ESRD facility X that puts ESRD facility Y's total renal dialysis treatments for cost reporting year 2024 over the 4,000 treatment threshold, ESRD facility Y would be required to request an exception to § 413.232(b)(1) from CMS by November 1, 2024 in order to continue receiving the LVPA. Since ESRD facility Y began treating the displaced patients in CY 2024, the window for temporary patient shifting would extend until December 31, 2025. To be approved for the exception under the new provision in § 413.232(g)(5), CMS would determine that ESRD facility Y furnished treatments equal to or in excess of 4,000 in the cost reporting year due to temporary patient-shifting as a result of the closure or operational disruption of ESRD facility X resulting from a disaster or other emergency. Should the exception be approved by CMS, ESRD facility Y would receive the LVPA for up to the first 4,000 treatments it furnished in 2024. Additionally, ESRD facility Y would not be disqualified from receiving the LVPA for PY 2025 and PY 2026 due to exceeding the treatment volume threshold in cost reporting year 2024, assuming the temporary patient-shifting from ESRD facility X occurred only in cost reporting year 2024. For PY 2025 and PY 2026 ESRD facility Y would have to attest that it meets all the criterion for the LVPA because it furnished treatments equal to or in excess of 4,000 in the cost reporting year due to temporary patient-shifting as a result of the closure or operational disruption of an ESRD facility resulting from a disaster or other emergency and received an exception for cost reporting year 2024. This would be the same attestation process as if ESRD facility Y did not furnish any excess treatments and was attesting that it continued to meet the criteria for the LVPA for those payment years. If the closure or operational disruption of ESRD facility X causes the treatment volume for ESRD facility Y to meet or exceed the 4,000 dialysis treatment threshold in cost reporting year 2025, ESRD facility Y would have to submit another request for an exception by November 1, 2025. Should this exception be approved, ESRD facility Y would receive the LVPA for up to the first 4,000 treatments it furnished in cost reporting year 2025 and would not be disqualified from receiving the LVPA for payment year 2026 and payment year 2027 due to exceeding the treatment volume threshold in cost reporting year 2024 and cost reporting year 2025. If ESRD facility Y continued to treat displaced patients from ESRD facility X in cost reporting year CY 2026, it would only be considered temporary patient-shifting if ESRD facility Y treated those patients before January 1 2026, and if patients treated after January 1 2026 cause ESRD facility Y to exceed the 4,000-treatment volume threshold in cost reporting year 2026 then the ESRD facility would be disqualified from receiving the LVPA under § 413.232(b)(1). Under this example, ESRD facility Y would still have to meet the other eligibility requirements to receive the LVPA in any PY in which the ESRD facility would receive the LVPA.

(ii) Proposed Exception to the LVPA Closure Provision for ESRD Facilities Affected by a Disaster or Other Emergency

In addition to proposing an exception to the treatment threshold requirement under § 413.232(b)(1) and (g)(5), we are proposing an exception under

§ 413.232(g)(6) that would allow an ESRD facility to still receive the LVPA if it temporarily closes. That is, if an ESRD facility temporarily ceases to operate and the patients must go to another ESRD facility to receive renal dialysis services due to a disaster or other emergency, and the ESRD facility subsequently reopens, we are proposing to create an exception to the requirement in § 413.232(b)(2) that an ESRD facility “has not opened, closed, or received a new provider number” in the 3 cost reporting years preceding the payment year. If an ESRD facility is affected by a disaster or other emergency and the ESRD facility is forced to close and re-open later, the ESRD facility would need to request an exception from CMS in writing at the ESRD Payment Mailbox at

ESRDPAYMENT@cms.hhs.gov

within 60 days of the closure and inform the MAC of the request. CMS would review the request within 30 days of receipt and either approve the request based on a determination that the ESRD facility closed or experienced an operational disruption due to a disaster or other emergency, or deny the request, and would inform both the ESRD facility and the MAC of its decision.

Upon reopening and providing renal dialysis services, the ESRD facility would be required notify CMS and the MAC in writing within 30 days of its reopening. CMS would acknowledge receipt of the written notification within 30 days. If the exception is approved and CMS is duly informed of the ESRD facility's reopening, the ESRD facility would remain eligible for the LVPA and the MAC would process payment accordingly. In order to continue receiving the LVPA the ESRD facility would still have to meet all the other eligibility requirements for the LVPA. The exception to § 413.232(b)(2) would be applicable for a period of 2 cost reporting years following the date of closure of the ESRD facility. After the 2 cost reporting year period the ESRD facility would follow the normal attestation process for the LVPA specified in paragraphs (e) and (g) of § 413.232. The ESRD facility would be required to maintain documentation regarding its closure, and to provide such supporting documentation to CMS and/or the MAC upon request.

For example, if a disaster occurs on June 1, 2024, which results in an ESRD facility experiencing a closure, the ESRD facility would request an exception to § 413.232(b)(2) from CMS within 60 days of June 1, 2024 (that is, on or before July 31, 2024). CMS would review the request and notify the ESRD facility and the MAC within 30 days if the exception is approved or denied. If the ESRD facility then reopens on September 1, 2024, the ESRD facility would notify CMS and the MAC in writing within 30 days of reopening (that is, on or before October 1, 2024). CMS would notify the ESRD facility and the MAC of its receipt of the reopening notification within 30 days. If the exception was approved by CMS, the ESRD facility would remain eligible for the LVPA for the rest of payment year 2024 and for the entirety of payment year 2025 and payment year 2026, provided the ESRD facility continues to meet the other eligibility requirements for the LVPA.

(4) Proposed Technical Correction to 42 CFR 413.232(g)

We are proposing a technical correction at § 413.232(g) to replace “their” with “its,” to clarify the regulation language.

g. Proposed Transitional Pediatric ESRD Add-On Payment Adjustment for Pediatric Patients With ESRD Receiving Renal Dialysis Services

(1) Background

Section 1881(b)(14)(D)(iv)(I) of the Act provides that the ESRD PPS may include such payment adjustments as the Secretary determines appropriate, including a payment adjustment for pediatric providers of services and renal dialysis facilities. Determining such a payment adjustment has been historically difficult due to the consistent lack of data. The Medicare pediatric ESRD patient population receiving dialysis is small compared to the adult ESRD population, representing approximately 0.14 percent of the total ESRD patient population in 2022. In the past, CMS has considered various different payment adjustments for pediatric patients with ESRD, including different Medicare payments by sex or comorbidities (74 FR 49984 through 49986). However, many of these considered adjustments were not used as we were unable to get acceptable precision due to the small sample size of pediatric patients with ESRD.

Prior to the establishment of the ESRD PPS, payment for pediatric ESRD dialysis services was generally the same rate as adult ESRD dialysis, unless the ESRD facility qualified for an exception to the composite rate. Section 1881(b)(7) of the Act stated that, subject to section 422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106-554) (BIPA), the Secretary shall provide for exceptions as may be warranted by unusual circumstances (including the special circumstances of sole facilities located in isolated, rural areas and of pediatric facilities). During this time period, CMS received many comments and concerns regarding the payment rate for renal dialysis services furnished to pediatric patients with ESRD. Section 623(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) later amended section 422(a)(2) of BIPA to provide that any pediatric ESRD facility would be eligible for an exception to the composite rate, effective October 1, 2002. This statute defined pediatric ESRD facilities as facilities with at least 50 percent patients under the age of 18. This enabled pediatric ESRD facilities to obtain payments that specifically recognized the higher cost associated with treating these patients (69 FR 47530).

We finalized a basic case-mix adjustment to the composite payment rate in the CY 2005 Physician Fee Schedule (PFS) final rule published on November 15, 2004 (69 FR 66327). This included a 62 percent pediatric payment increase (that is, an adjustment factor of 1.62) applied to the composite payment rate per treatment for any facility when furnishing outpatient dialysis services to pediatric patients with ESRD. This factor was derived from the average exception amounts for 20 ESRD facilities that had received exceptions for pediatric patients. This was intended to be a temporary measure, which would be eliminated once we developed the case-mix methodology that would apply for the ESRD PPS bundled payment. The use of this methodology allowed CMS to provide additional payment for the pediatric ESRD population under the composite rate in a data-driven manner to account for the higher costs pediatric patients faced (69 FR 66327).

Section 153(b) of MIPPA added section 1881(b)(14) of the Act, which required CMS to implement an ESRD bundled PPS beginning January 1, 2011, under which a single payment for renal dialysis services is made in lieu of any other payment. Renal dialysis services generally include items and services included in the composite rate for renal dialysis services as of December 31, 2010 and services furnished to individuals for treatment of ESRD, which were formerly separately billable, including drugs and biological products and laboratory tests. In the CY 2011 ESRD PPS proposed rule, we proposed a single composite rate modifier of 1.199 for all Pediatric ESRD Patients receiving dialysis (74 FR 49982 through 49983). A “Pediatric ESRD Patient” is defined as an individual less than 18 years of age

who is receiving renal dialysis services. 42 CFR 413.171. We also proposed an eight-group system for separately billable renal dialysis services furnished to Pediatric ESRD Patients with two subdivisions for each of the following factors: age (under 13, 13 to 17), modality (hemodialysis, peritoneal dialysis) and number of comorbidities (none, one or more) (74 FR 49983 through 49987). The CY 2011 ESRD PPS proposed rule then calculated an “expanded bundle” modifier, which combined the composite rate and separately billable modifiers for each of the eight groups (74 FR 44987). These expanded bundle modifiers were the proposed pediatric patient-specific case-mix adjustment factors that would be applied to the base rate under the ESRD PPS. These modifiers were based on a regression of costs for all renal dialysis services furnished to Pediatric ESRD Patients. Comments on this proposed rule indicated that many interested parties felt the expanded bundle modifier was insufficient (75 FR 49128). In the CY 2011 ESRD PPS final rule, we responded to those comments by implementing the first iteration of the current four-group system for both the expanded bundle and the separately billable services. This methodology was data driven, but unlike the simple regression for composite rate costs, allowed for different Medicare payment amounts based on two sets of two characteristics: age of the patient (under 13 or 13 to 17) and modality of the treatment (hemodialysis or peritoneal dialysis). Additionally, this methodology used the same groups for the expanded bundle and separately billable modifiers (75 FR 49134).

We codified the Pediatric ESRD Patient payment adjustment in § 413.235(b), which states that CMS adjusts the per treatment base rate for pediatric patients in accordance with section 1881(b)(14)(D)(iv)(I) of the Act, to account for patient age and treatment modality. These multipliers were updated in the CY 2016 ESRD PPS final rule using the same methodology (80 FR 69001 through 69002). The current expanded bundle case mix adjusters are presented below in Table 7.

EP30JN23.006

Despite these changes intended to improve payment accuracy for renal dialysis services furnished to Pediatric ESRD Patients, we continue to receive comments and concerns from interested parties that the payment amounts for renal dialysis services furnished to Pediatric ESRD Patients are too low. In addition to comments received through the annual ESRD PPS rulemaking, we have also solicited comments from interested parties on several occasions. During the December 2020 TEP, we queried a panel of experts on how to improve payment for pediatric dialysis care under the ESRD PPS. Panelists

generally preferred creating more refined case-mix adjusters over creating an entirely new pediatric ESRD PPS, citing the costs of creating an entirely new system both on CMS and the ESRD facilities and the need for new legislation to be able to increase payment through a separate pediatric ESRD PPS. Panelists also pointed to labor costs as a major reason for higher costs among pediatric dialysis clinics, because these patients need more nursing attention and specialized pediatric nutritionists.

https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf

In the CY 2023 ESRD PPS proposed rule (87 FR 38529), we issued a request for information regarding health equity for pediatric patients with ESRD. Many commenters asserted that Medicare payments for Pediatric ESRD Patients are too low and that the ESRD PPS bundled payment does not target the unique issues facing ESRD facilities furnishing renal dialysis services to Pediatric ESRD Patients.

We are committed to improving health equity for Pediatric ESRD Patients receiving renal dialysis services by improving payment equity through more efficient Medicare payments. Ensuring Medicare payments are appropriate and reflect costs for renal dialysis services furnished to Pediatric ESRD Patients would allow more ESRD facilities to provide quality care to this vulnerable population. The main barrier to payment equity is the lack of sufficient data to determine the relative costs associated with furnishing renal dialysis services to Pediatric ESRD Patients. To improve payment rate accuracy for Pediatric ESRD Patients, CMS has issued changes to the cost reports for both freestanding ESRD facilities and hospital-based ESRD facilities effective January 1, 2023.

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These changes include separate categories for labor and supplies used in furnishing renal dialysis services to Pediatric ESRD Patients. These updates are intended to provide data for CMS to more comprehensively estimate the additional costs associated with furnishing renal dialysis services to Pediatric ESRD Patients. However, we estimate it would take approximately 3 years to obtain and analyze the granular data provided by the stratified cost reports data from these changes that we need in order to consider proposing a more finely-tuned payment adjustment.

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r7p242

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i

87 FR 26760 (May 5, 2022).

https://www.federalregister.gov/documents/2022/05/05/2022-09581/agency-information-collection-activities-submission-for-omb-review-comment-request

(2) Proposed Alternative Methodology for Estimating Relative Costs for Furnishing Renal Dialysis Services to Pediatric ESRD Patients

As noted previously, payment accuracy has been historically difficult for pediatric ESRD dialysis because of the small sample size of Pediatric ESRD Patients receiving renal dialysis services paid for under the ESRD PPS. Pediatric ESRD dialysis treatments are also furnished differently from adult ESRD dialysis treatments in several crucial ways. For example, pediatric ESRD facilities are more likely to be hospital-based and, on average, have lower treatment volume and are located in higher wage index areas. These

systematic differences in treatment, when combined with the small sample size, make it very difficult to obtain low variance estimates of the differences in costs between pediatric and adult ESRD dialysis patients. Even if simple cost models show statistically significant estimates, it is possible that the systematic differences between pediatric and adult ESRD facilities can bias these estimates. Obtaining a reliable estimate of the additional costs that Pediatric ESRD Patients incur would allow us to create a payment adjustment to bring relative Medicare payments more in line with relative costs.

One can account for this bias by selecting a specific sample of ESRD facilities that have similar characteristics except for proportion of dialysis treatments furnished to Pediatric ESRD Patients. This would help to show the additional costs of furnishing dialysis to Pediatric ESRD Patients based on the variation in costs across the ESRD facilities. To achieve this, we would use propensity score matching (PSM).

PSM is a technique that uses regression analysis to account for systematic differences between two populations to isolate the effects of a single variable, in this case percentage of Pediatric ESRD Patients. The PSM regression includes a wide range of ESRD facility-level characteristics including facility type, size, geographic location, and the pediatric ESRD dialysis population nearby the ESRD facility in order to make a propensity score. This propensity score represents the probability that a given ESRD facility treats a high volume of Pediatric ESRD Patients given its facility-level characteristics.

Once the propensity score for each ESRD facility is determined, each ESRD facility with a significant percentage of Pediatric ESRD Patients (high-pediatric) is matched with the ESRD facility without a significant percentage of Pediatric ESRD Patients (low-pediatric) with the most similar propensity score. We can then compare the relative per-treatment costs of those ESRD facilities to estimate the additional costs an ESRD facility faces when it furnishes renal dialysis services to a higher proportion of Pediatric ESRD Patients, controlling for some important facility-level characteristics. The dependent variable of this regression is the log of the cost per treatment for the ESRD facility. The independent variables are the percent of dialysis treatments that are furnished to Pediatric ESRD Patients, the log of the facility size, the type of ESRD facility (hospital based, children's hospital based or freestanding), the log of the wage index for the ESRD facility and the year for the cost report data. The regression equation for cost per treatment given a certain percentage of dialysis treatments furnished to Pediatric ESRD Patients is:

EP30JN23.007

This cost regression should be unbiased due to the use of PSM. However, PSM also requires a reduction in sample size, because there are relatively few ESRD facilities with a significant number of treatments furnished to Pediatric ESRD Patients that could be matched using PSM. This smaller sample size inherently results in an increase in margin of error. We believe this is a necessary tradeoff because a biased estimate cannot be relied upon, but we must be cautious while using high-error estimates. The final result of this regression is that ESRD facilities that solely serve Pediatric ESRD Patients incur costs that are 40 percent higher per patient for furnishing renal dialysis services than similar ESRD facilities that serve no Pediatric ESRD Patients. The confidence interval of this estimate is 20 percent to 60 percent. Therefore, on average, furnishing renal dialysis services to a Pediatric ESRD Patient costs 40 percent more than furnishing renal dialysis services to an adult patient with ESRD.

(3) Current Medicare Payments for Renal Dialysis Services Furnished to Pediatric ESRD Patients

The ESRD PPS already accounts for some of the higher costs that ESRD facilities incur while furnishing renal dialysis services to Pediatric ESRD Patients through the case-mix adjusters. Because the analysis described above uses cost report data, it does not incorporate either the current case-mix adjusters or payment rates for Pediatric ESRD Patients receiving renal dialysis services. Our most recent estimates show that payments for dialysis treatments furnished to Pediatric ESRD Patients were approximately 10 percent higher than for adult patients with ESRD in CY 2022.

We are striving for payment accuracy, which is achieved when relative Medicare payments are proportional to relative costs. There are several ways we could adjust ESRD PPS payments to achieve payment accuracy, including calculating the unaccounted-for cost differential, which is the amount by which ESRD PPS payments for pediatric ESRD renal dialysis services must be increased to achieve payment accuracy. We could do this by reducing the cost differential estimate of 40 percent by a factor 1.1 to account for the current payment differential of 10 percent. This would yield an unaccounted-for cost differential of approximately 30 percent (1.4 divided by 1.1 is 1.27 which we are rounding to 1.3). This is a reasonable estimate of the additional labor and supply costs, which are not accounted for by the current case-mix adjusters, incurred by ESRD facilities furnishing renal dialysis services to Pediatric ESRD Patients.

(4) Proposed Transitional Pediatric ESRD Add-On Payment Adjustment

Despite the high margin of error of the cost regression using PSM, we believe that 30 percent cost is the most reasonable estimate of the unaccounted-for costs incurred in treating Pediatric ESRD Patients compared to adult ESRD patients. Creating a new add-on payment adjustment using this figure would provide pediatric ESRD facilities with Medicare payments proportional to their estimated costs for a temporary period while we collect additional data. However, due to the high margin of error of the model, increasing Medicare payments to ESRD facilities such that payments are 40 percent higher for Pediatric ESRD Patients compared to all patients would risk making payments higher than appropriate. When we conduct the analysis with the more comprehensive cost report data provided by the cost report changes implemented for CY 2023, we might find that our analysis overestimated the cost of furnishing renal dialysis services to Pediatric ESRD Patients (that is, that the additional 30 percent payment adjustment was too large). If we finalize this transitional add-on payment adjustment for Pediatric ESRD Patients as proposed, pediatric ESRD facilities should be prepared for the possibility that the payment rate for Pediatric ESRD Patients could decrease in the future, should that be indicated by future data

analysis and finalized through notice-and-comment rulemaking. One alternative would be for CMS to propose a smaller, more cautious add-on payment adjustment based on the 20 percent lower bound of the confidence interval, leading to an additional 10 percent transitional add-on payment adjustment after accounting for the current payment rate. This option would still represent a significant increase in Medicare payments to ESRD facilities for Pediatric ESRD Patients without much risk of making payments higher than appropriate. However, this alternative option may lead to underpayment to ESRD facilities serving Pediatric ESRD Patients, which is contrary to our goal of aligning resource use with payment. We are seeking comment on the most appropriate amount for the proposed transitional add-on payment adjustment.

We are proposing a new transitional add-on payment adjustment of 30 percent (adjustment factor of 1.3) for dialysis treatments furnished to Pediatric ESRD Patients for 3 calendar years, effective January 1, 2024. Based on the time lag for cost report data, 3 years should allow for enough time for CMS to get more detailed data from the changes to the cost reports described above. After that period, we would evaluate the more comprehensive cost report data from the first year of cost reporting periods beginning on or after January 1, 2023, to refine our methodology for determining the payment rate for pediatric ESRD dialysis. As proposed, this would be a separate, additional add-on payment adjustment of 30 percent of the per treatment payment amount under § 413.230, which reflects the other patient and facility level adjustments. This adjustment would not be part of the case-mix adjusters. This payment adjustment would only apply to the ESRD bundled payment and not to any outlier adjustments. Due to the multiplicative nature of the case-mix adjusters it would function similarly to a 30 percent increase to the expanded bundle case-mix adjusters. For the purpose of comparison, the effective case-mix adjusters are presented below in Table 8.

EP30JN23.008

The exact magnitude of the increase in payment would vary based on the age of the patient and the wage index of a given area; we estimate approximately $80 for (hemodialysis-equivalent) peritoneal dialysis treatments and $100 for hemodialysis treatments. This would represent a substantial increase in payment for renal dialysis services furnished to Pediatric ESRD Patients, and would account for the extra costs that this population incurs temporarily until additional cost data is available. This payment adjustment would apply for all dialysis treatments furnished to ESRD patients under the age of 18, not solely treatments furnished in pediatric ESRD facilities. This is warranted because many of the additional costs related to the treatment of Pediatric ESRD Patients are not specific to treatments furnished in pediatric ESRD facilities.

We are proposing to call this the Transitional Pediatric ESRD Add-on Payment Adjustment (TPEAPA) and make this adjustment budget neutral. In general, add-on payment adjustments under section 1881(b)(14)(D)(iv) of the Act are not statutorily required to be budget neutral under the ESRD PPS, but we believe in this instance that budget neutrality is appropriate, due to the manner in which this adjustment is derived. Other non-budget neutral add-on payment adjustments that we have established under this authority generally account for costs that were not used for the construction of the ESRD PPS bundled payment, such as the TDAPA for calcimimetics (80 FR 69013 through 69027). We have also established certain non-budget neutral add-on payment adjustments for items or services that were not commonplace, and therefore not adequately represented in cost reports, such as home dialysis training (75 FR 49063). However, we have implemented other payment adjustments under this authority in a budget neutral manner; for example, the changes to the wage index in the CY 2023 ESRD PPS final rule were implemented in a budget neutral manner as they represented a shifting of cost allocations, rather than new costs not originally included in the ESRD PPS bundled payment (87 FR 67157). This proposed TPEAPA is primarily for costs that would have been included in the cost reports used in the analysis conducted when we created the ESRD PPS bundled payment in the CY 2011 ESRD PPS final rule. As explained above, the methodology used both in that analysis, and when updating the case-mix adjusters, attributed pediatric ESRD renal dialysis services costs to the general population. Therefore, we believe it would be appropriate to reduce the ESRD PPS base rate to account for the new allocation of costs. Furthermore, any changes to the case-mix adjustments are required by section 1881(b)(14)(A)(ii) of the Act to be budget neutral, which means that any future modifications to the pediatric case-mix adjusters would be budget neutral. The budget neutrality adjustment factor for this proposed TPEAPA consisting of 30 percent of the per treatment payment amount would be 0.999532. Applying this budget neutrality factor to the ESRD PPS base rate would reduce the ESRD PPS base rate by an estimated $0.12. Under the alternative proposed 10 percent TPEAPA discussed previously in this section of the proposed rule, the budget neutrality factor adjustment would be 0.999847. Applying this

budget neutrality factor to the ESRD PPS base rate would reduce the ESRD PPS base rate by an estimated $0.04.

To establish this new TPEAPA, we are proposing to amend § 413.235 by splitting current paragraph (b) into paragraphs (b)(1) and (2). Paragraph (b)(1) would set forth the established age and modality of treatment case mix adjustment methodology as currently stated in paragraph (b). Paragraph (b)(2) would state that beginning January 1, 2024, we would provide a per-treatment transitional add-on payment adjustment of 30 percent of the per treatment payment amount under § 413.230 for renal dialysis services furnished to Pediatric ESRD Patients during calendar years 2024, 2025, and 2026. We are also proposing to revise the current language of § 413.235(b) to use the term “Pediatric ESRD Patients,” which is defined at § 413.171, to improve clarity for this section.

(5) Costs and Benefits for a Proposed Transitional Pediatric ESRD Add-On Payment Adjustment (TPEAPA)

We believe that CMS could better align the resource use of pediatric ESRD renal dialysis services with payment. Our analysis using the methodology outlined above has found that Pediatric ESRD Patients receiving renal dialysis services have an estimated 40 percent higher costs than adult patients and that the current payment adjusters account for 10 percent higher costs. Implementing a transitional 30 percent add-on payment adjustment for renal dialysis services furnished to Pediatric ESRD Patients would improve payment equity for these patients by increasing payments to more closely align with the estimated costs of treatment. A 30 percent increase in ESRD PPS payments for pediatric ESRD renal dialysis services would represent approximately $80 to $100 per pediatric ESRD dialysis treatment, although the exact magnitude of the increase would depend on age, modality and the wage index of the area. This payment increase would have beneficial health equity impacts on this population by improving access to care and quality of care. Some ESRD facilities may not be able to absorb the additional expense of the Pediatric ESRD Patient population. Patients may need to travel to a limited number of primarily hospital-based ESRD facilities where pediatric ESRD dialysis is performed. As a result, this population may be underserved and disadvantaged with respect to access to ESRD care. Additional payment to those ESRD facilities treating Pediatric ESRD Patients would thereby benefit this potentially underserved and disadvantaged population of Pediatric ESRD patients. Additionally, this would have a beneficial financial impact on the ESRD facilities, both pediatric and non-pediatric, that serve this pediatric population.

We are proposing that this payment adjustment be budget neutral, which would lead to an estimated decrease of $0.12 to the ESRD PPS base rate, corresponding to a budget neutrality factor of 0.99954. This relatively small adjustment would represent less than a twentieth of a percent of the total ESRD PPS base rate. However, we recognize that any decrease in the base rate would represent a monetary loss to ESRD facilities. As stated above, our analysis indicates that this proposed transfer would be reasonable given the likelihood that the methodology used in the case-mix adjusters attributed some pediatric costs to the general population. However, should future analysis of the stratified pediatric cost data indicate that pediatric ESRD renal dialysis services costs are less than 40 percent higher than adult costs, this proposed budget neutral decrease (if finalized as proposed) would mean that the treatments for adult patients with ESRD were slightly underpaid during this proposed 3-year period. In either case there would be a risk of underpayment for one group of patients. We believe that using the mean estimate of the analysis would provide us with the best approach for achieving payment accuracy while we collect additional data. Additionally, the health equity implications of potentially underpaying for Pediatric ESRD Patients receiving dialysis by 20 percent would be significantly higher than the implications of potentially underpaying for adult patients by a less than 0.1 percent. In CY 2021 there were 116 ESRD facilities that furnished more than 2 percent of their dialysis treatments to Pediatric ESRD Patients, out of 7882 total ESRD facilities. These ESRD facilities are a relatively small group, but they are critical for the care of Pediatric ESRD Patients. For these reasons, we believe that the expected benefits for the proposed TPEAPA would outweigh the costs.

(6) Request for Comments on This Proposal

We believe that providing this proposed 30 percent TPEAPA for calendar years 2024, 2025, and 2026 would be the best approach for improving payment accuracy until more precise data is available. However, we acknowledge that in any case there is a risk of making payments which are higher or lower than appropriate. We are seeking comment on this proposal for an additional 30 percent payment adjustment for renal dialysis services furnished to Pediatric ESRD Patients for 3 calendar years, effective January 1, 2024, and on any alternative add-on payment adjustment amounts, including the 10 percent payment adjustment discussed earlier in this section of the proposed rule.

h. Proposed Reporting Policy for Unused and Discarded Amounts of Renal Dialysis Drugs and Biological Products Paid for Under the ESRD PPS

(1) Background

As discussed in the CY 2023 PFS final rule (87 FR 69710), many drugs and biological products that are payable under Medicare Part B are dosed in a variable manner such that the entire amount identified on the vial or package is not administered to the patient. For example, many drugs are dosed based on the patient's body weight or body surface area (BSA). Often, these drugs are available only in single-dose containers. As stated in U.S. Food and Drug Administration (FDA) guidance for industry,

a single-dose container is designed for use with a single patient as a single injection or infusion. The labeling for a drug packaged in a single-dose container typically includes statements instructing users to discard unused portions. When the labeling instructs a health care provider to discard the amount of drug that was unused (that is, the discarded amount) from a single-dose container or other single-use package of a drug after administering a dose to a Medicare beneficiary, the program provides payment for the unused and discarded amount, as well as the dose administered, up to the amount of the drug indicated on the vial or package labeling. On a Medicare Part B claim, the JW modifier (drug amount discarded/not administered to any patient) is a Healthcare Common Procedure Coding System (HCPCS) Level II modifier used to report the amount of a drug that is discarded and eligible for payment.

https://www.fda.gov/media/117883/download

Beginning on January 1, 2017, CMS revised the Medicare Part B JW modifier policy to require the uniform use of the modifier for all claims for separately payable drugs with discarded drug amounts from single-dose containers or single-use packages payable under Part B, in order to more effectively identify and monitor billing and payment for

discarded amounts of drugs.

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The policy does not apply to drugs that are not separately payable, such as packaged hospital outpatient prospective payment system (OPPS) drugs or those administered in federally qualified health centers (FQHCs) or rural health clinics (RHCs).

CR6603:

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R3538CP.pdf.

MLN Matters® Number MM9603:

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9603.pdf.

In the CY 2023 PFS final rule (87 FR 69718 through 69719), we codified our existing policy as discussed in the prior paragraph in Chapter 17 of the Medicare Claims Processing Manual, and required that billing providers report the JW modifier for all separately payable drugs with discarded drug amounts from single-dose containers or single-use packages payable under Part B, beginning January 1, 2023. These changes were promulgated in connection with the implementation of the discarded drug refund program under section 90004 of the Infrastructure Investment and Jobs Act (Pub. L. 117-9, November 15, 2021). In that same CY 2023 PFS final rule (87 FR 69722), we responded to commenters who requested we exempt drugs paid for under the ESRD PPS bundled payment from the discarded drug refund policy. One commenter expressed concern regarding how implementation of the discarded drug refund might inadvertently impact ESRD products, including those used by home dialysis patients (for example, Extraneal, a peritoneal dialysis solution). In response to those comments, we clarified that units for drugs that are packaged under the Medicare ESRD PPS were not subject to the JW modifier policy or the discarded drug refund.

In the same CY 2023 PFS final rule, CMS also finalized a proposal to require billing providers to report the JZ modifier for all such drugs with no discarded drug amounts, beginning no later than July 1, 2023. Specifically, as discussed in the CY 2023 PFS proposed rule (87 FR 46058), we proposed to require the use of a separate modifier, the JZ modifier, to attest that there were no discarded amounts. We stated that to align with the JW modifier policy, the JZ modifier would be required when there are no discarded amounts from single-dose containers or single-use packages payable under Part B for which the JW modifier would be required if there were discarded amounts. Table 9 below provides additional information about these modifiers.

EP30JN23.009

We explained that on all claims for single-dose containers or single-use packages payable under Part B, either the JW modifier would be used (on a separate line) to identify any discarded amounts or the JZ modifier (on the claim line with the administered amount) would be present to attest that there were no discarded amounts. We noted that we believed the JZ modifier requirement would not increase burden on the provider, because under the current JW modifier policy, the provider already needs to determine whether or not there are any discarded units from a single-dose container or single-use package, record discarded amounts in the patient medical record, and specify administered and discarded amounts on the claim form. We finalized the JZ modifier requirement in the CY 2023 PFS final rule. Lastly, we noted in the CY 2023 PFS final rule that we would begin claims edits for both the JW and JZ modifier beginning October 1, 2023 (87 FR 69179). Additional details can be found in Chapter 17 of the Medicare Claims Processing Manual and the JW/JZ modifier frequently asked questions (FAQ) document.

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/JW-Modifier-FAQs.pdf

(2) Current Reporting of the JW Modifier Under the ESRD PPS

As discussed in the previous section, the Medicare Part B JW modifier policy generally does not apply to drugs that are not separately payable. The ESRD PPS statute generally requires a single bundled payment for renal dialysis services. Specifically, section 1881(b)(14)(A)(i) requires the Secretary to implement a payment system under which a single payment is made to a provider of services or a renal dialysis facility for renal dialysis services in lieu of any other payment. The only exception is for oral-only drugs, as defined at § 413.234(a), which are currently paid separately under Medicare Part D. Section 204 of ABLE amended section 632(b)(1) of ATRA, as amended by section 217(a)(1) of PAMA, to provide that payment for oral-only renal dialysis drugs and biological products cannot be made under the ESRD PPS bundled payment prior to January 1, 2025. We note that although the ESRD PPS includes certain add-on payment adjustments such as the TDAPA and TPNIES, these are adjustments to the ESRD PPS base rate and therefore part of the single payment made under the ESRD PPS; these payment adjustments are not separate payments. For example, as described in our TDAPA implementation guidance issued August 4, 2017, and updated January 10, 2018, available on the CMS website at

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R1999OTN.pdf

, the methodology used to calculate the per treatment payment amount incorporates the cost of the drugs that are paid for using the TDAPA.

Although renal dialysis drugs and biological products paid for under the ESRD PPS are not considered “separately billable” and are not subject to the general Part B JW modifier policy discussed in the prior paragraph, CMS has previously issued guidance on the use of the JW modifier on ESRD PPS claims for certain circumstances. Chapter 8, section 60.4.5.1 of the

Medicare Claims Processing Manual pertains to self-administered supplies of ESAs.

Under current guidance, when billing for discarded amounts of drugs in accordance with the policy in chapter 17 of this manual, section 40.1, the provider must bill for discarded amounts on a separate line item with the modifier JW. The line item date of service should be the date of the last covered administration according to the plan of care or, if the patient dies, use the date of death. More specifically, in Chapter 17, section 40.1 of the Medicare Claims Processing Manual,

we state that multi-use vials are not subject to payment for discarded amounts of drug or biological products, with the exception of self-administered ESAs by Method I home dialysis patients, for whom an ESRD facility furnishes and bills for renal dialysis services.

Current guidance in Chapter 17, section 40.1 of the Medicare Claims Processing Manual states that the ESRD facility must bill the program using the JW modifier for the amount of ESAs appropriately discarded if the home dialysis patient must discard a portion of the ESA supply due to expiration of a vial, because of interruption in the patient's plan of care, or unused ESAs on hand after a patient's death. We note that separate payment is not made for ESAs under the ESRD PPS; however, ESAs are eligible for outlier payments when the criteria in § 413.237 are met.

https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c08.pdf

https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c17.pdf

Prior to the ESRD PPS, a Medicare ESRD beneficiary could elect to obtain home dialysis equipment and supplies from a supplier that was not a Medicare approved dialysis facility. This was referred to as Method II home dialysis. In the CY 2011 ESRD PPS final rule (75 FR 49061), we stated that all costs associated with home dialysis services (both Method I and Method II) are included in the composite portion of the two equation model, and we stated that effective January 1, 2011, all home ESRD patients would be considered Method I home patients and all Medicare payments for home dialysis services would be made to the ESRD facility.

Most recently, the March 15, 2022 Change Request

that established the TDAPA for Korsuva

(difelikefalin), instructs facilities to use the JW modifier to report the amount of difelikefalin that is discarded and eligible for payment under the ESRD PPS. We note that based on the latest available data, nearly 40 percent of the TDAPA expenditures for those drugs that were reported in 2022 represented discarded amounts reported using the JW modifier. This represents approximately $1.3 million in TDAPA expenditures for discarded amounts of difelikefalin. Overall, our analysis of Medicare claims data from 2017 to 2021 finds that approximately 2 percent of ESRD PPS claims indicate discarded or unused portions of drugs or biological products through use of the JW modifier. From 2017 to 2021, we estimate that the total amount of unused product billed from 2017 to 2021 and paid for under the ESRD PPS is approximately $22 million.

https://www.cms.gov/files/document/r11295CP.pdf.

Under our current policy, we do not reduce the single payment under the ESRD PPS for any discarded amounts of renal dialysis drugs or biological products that are reported with the JW modifier. Furthermore, when calculating any adjustments to the ESRD PPS base rate for the TDAPA or outlier payments, we include all units of renal dialysis drugs and biological products billed on the claim for which an adjustment is made, including any discarded amounts of such drugs and biological products. Additionally, we have previously established in the CY 2012 ESRD PPS final rule (76 FR 70243 through 70244) that ESRD facilities may only report units and charges for drugs and biological products actually purchased and may not bill for overfill units of drugs and biological products which exceed the amount indicated on the vial or package labeling. Additionally, we explained that consistent with prior rulemaking, under our authority in section 1881(b)(14)(D)(ii) of the Act, we were adopting the average sales price (ASP) policy on overfill for purposes of calculating the outlier payment. That is, we adopted a policy to exclude overfill units of drugs and biological products which exceed the amount indicated on the vial or package labeling from consideration for the purposes of calculating outlier payments. We stated we believe the use of the ASP policy for purposes of calculating the outlier payment is appropriate because we believe overfill does not represent a cost to the ESRD facility; thus, overfill should not factor into our determination of outlier payments.

In summary, our longstanding policy for payment under the ESRD PPS, including the calculation of the TDAPA and outlier payment adjustments, includes payment for units of renal dialysis drugs and biological products billed with the JW modifier, but does not allow payment for overfill units. That is, the current ESRD PPS payment policy is consistent with the broader Medicare Part B policy to pay for the unused and discarded amount, as well as the dose administered, up to the amount of the drug indicated on the vial or package labeling.

(3) Proposed ESRD PPS Policy for Reporting of Disca

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