Medicare Programs; End-Stage Renal Disease Prospective Payment System
Federal RegisterSep 29, 2009
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 413 and 414
[CMS-1418-P]
RIN 0938-AP57
Medicare Programs; End-Stage Renal Disease Prospective Payment System
AGENCY:
Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION:
Proposed rule.
SUMMARY:
This proposed rule would implement a case-mix adjusted bundled prospective payment system (PPS) for Medicare outpatient end-stage renal disease (ESRD) dialysis facilities beginning January 1, 2011, in compliance with the statutory requirement of the Medicare Improvements for Patients and Providers Act (MIPPA), enacted July 15, 2008. The proposed ESRD PPS would replace the current basic case-mix adjusted composite payment system and the methodologies for the reimbursement of separately billable outpatient ESRD services.
DATES:
To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on November 16, 2009.
ADDRESSES:
In commenting, please refer to file code CMS-1418-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one of the ways listed):
1.
Electronically.
You may submit electronic comments on this regulation to
http://www.regulations.gov.
Follow the instructions under the “More Search Options” tab.
2.
By regular mail.
You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-
1418
-P, P.O. Box 8010, Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
By express or overnight mail.
You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-
1418
-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4.
By hand or courier.
If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
Submission of comments on paperwork requirements.
You may submit comments on this document's paperwork requirements by following the instructions at the end of the “Collection of Information Requirements” section in this document.
For information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION
section.
FOR FURTHER INFORMATION CONTACT:
William Cymer, (410) 786-4533. Lynn Riley, (410) 786-1286, (ESRD Quality Incentive Program.)
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:
http://www.regulations.gov.
Follow the search instructions on that Web site to view public comments.
Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.
Table of Contents
I. Background
A. Origins of the Composite Payment System
B. Statutory Authority for a Bundled ESRD PPS
1. BIPA
2. MMA
3. The Basic Case-Mix Adjustment
4. MIPPA
II. Overview of the Proposed ESRD PPS
III. The Proposed ESRD PPS Bundle
A. Composite Rate Services
B. ESAs and Their Oral Forms
C. Other Drugs and Biologicals and Their Oral Equivalents
D. Diagnostic Laboratory Tests and Other Items and Services
E. Home Dialysis Patients (Method I and II) and Self Dialysis Training
1. Payment for Home Dialysis
a. Method I—The Composite Rate
b. Method II—Dealing Directly With Suppliers
2. Self Dialysis Training
F. Physician Services
IV. Unit of Payment
A. Administrative Complexity Due to Phase-In
B. Administrative Complexity Due to Interruptions in Service
C. No Incentive To Discourage Skipped Treatments
V. Data Sources
A. Patient Claims Data
B. Medicare Cost Reports
C. Patient Claim and Cost Report Summary Data 2004-2006
D. Data for the Case-Mix Analyses, 2004-2006
E. Prescription Drug Event Data CY 2007
VI. Analytical Approach
VII. Development of Budget-Neutral ESRD Bundled Base Rate
A. Calculation of the CY 2007 Unadjusted Rate per Treatment
B. Determining the Update Factors for the Budget-Neutrality Calculation
C. Standardization Adjustment
D. Calculation of the Budget-Neutrality Adjustment
a. Outlier Adjustment
b. 98 Percent Budget Neutrality Adjustment
E. Calculation of Transition Budget-Neutrality Adjustment
VIII. Cost Regression Used To Develop Proposed Payment Adjustment Factors
A. Proposed Regression Analysis
1. Dependent Variables
a. Average Cost per Treatment for Composite Rate Services
b. Average Medicare Allowable Payment (MAP) for Separately Billable Services
2. Independent Variables
a. Control Variables
b. Proposed Case-Mix Adjustment Variables
B. Proposed Patient-Level Adjustments
1. Patient Age
2. Patient Sex
3. Body Surface Area and Body Mass Index
a. Body Surface Area
b. Body Mass Index
4. Onset of Dialysis (New Patient Adjustment)
5. Co-morbidities
6. Race/Ethnicity
a. REMIS Data Analysis
b. EBD Data Analysis
c. Concerns With Available Race/Ethnicity Data
d. CMS Initiative To Evaluate Healthcare Disparities Based on Race and Ethnicity
7. Modality
C. Proposed Facility-Level Adjustments
1. Wage Index
2. Low-Volume Adjustment
a. Statutory Authority
b. Defining a Low-Volume Facility
c. Defining the Percent of Increase
3. Alaska/Hawaii Facilities
4. Rural
5. Site Neutral ESRD PPS Rate
D. Determination of ESRD PPS Payment Adjusters
IX. Pediatric Patients
A. Current System
B. Selection of a Pediatric Composite Rate Payment Adjustment
C. Selection of a Pediatric Separately Billable Payment Adjustment
D. A Combined Composite Rate and Separately Billable Payment Model for Pediatric Patients
X. Other Proposed Adjustments
A. Outlier Policy
1. Eligibility for Outlier Payment
a. ESRD Outlier Services
b. Predicted ESRD Outlier Services MAP Amounts
c. Estimating the Imputed ESRD Outlier Services MAP Amounts
i. Data Used To Estimate Imputed ESRD Outlier Services MAP Amounts
ii. Determining Imputed per Treatment ESRD Outlier Services MAP Amount
d. Outlier Percentage and Fixed Dollar Loss Amounts
2. Outlier Payments
3. Hypothetical Outlier Payment Examples
4. Application of Outlier Policy During the Transition and in Relation to the ESA Monitoring Policy
XI. Comprehensive Payment Model Examples
XII. ESRD Market Basket
A. Background
B. Cost Category Weights
C. Price Proxies
D. ESRD Bundled Market Basket Increases
E. ESRD Bundled Labor-Related Share
XIII. Proposed Implementation of the ESRD PPS
A. Transition Period
1. New ESRD Facilities
2. Limitation on Beneficiary Charges Under the Proposed ESRD PPS and Beneficiary Deductible and Coinsurance Obligations
B. Claims Processing
1. Consolidated Billing
a. Laboratory Tests
b. Drugs and Biologicals
c. Home Dialysis
2. Expansion of the Data Elements Reported on Claims
C. Operational Issues Surrounding Payment for Self Administered ESRD-related Drugs and Biologicals
XIV. Evaluation of Existing Policies and Other Issues
A. Exceptions Under the Case-Mix Adjusted Composite Payment System
B. Erythropoiesis Stimulating Agent (ESAs) Monitoring Policy
C. ESRD Facility Network Deduction
D. Bad Debt
E. Limitation on Review
F. 50 Percent Rule Utilized in Laboratory Payments
G. Medicare as a Secondary Payer
XV. Quality Incentives in the End-Stage Renal Disease (ESRD) Program
XVI. Collection of Information Requirements
XVII. Regulatory Impact Analysis
A. Overall Impact
B. Anticipated Effects
1. Effects on ESRD Facilities
2. Effects on Other Providers
3. Effects on the Medicare & Medicaid Programs
4. Effects on Medicare Beneficiaries
C. Alternatives Considered
D. Accounting Statement and Table
E. Conclusion
Regulations Text
Addenda
Acronyms
Because of the many terms to which we refer by acronym in this proposed rule, we are listing the acronyms used and their corresponding meanings in alphabetical order below:
Act The Social Security Act
BIPA Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Benefits Improvement and Protection Act of 2000 (Pub. L. 106-554)
BMI Body mass index
BN Budget neutrality
BSA Body surface area
CBSA Core-Based Statistical Area
CDC Centers for Disease Control and Prevention
CFR Code of Federal Regulations
CMS Centers for Medicare & Medicaid Services
CPM Clinical performance measure
CR Composite rate
CROWN Consolidated Renal Operations in a Web-Enabled Network
CY Calendar year
DME Durable medical equipment
EDB Enrollment Data Base
EPO Epoetin alfa
ESA Erythropoiesis stimulating agent
ESRD End stage renal disease
FI Fiscal intermediary
FY Fiscal year
GAO Government Accountability Office
HD Hemodialysis
IHS Indian Health Service
Kt/V A measure of dialysis adequacy where K is dialyzer clearance, t is dialysis time, and V is total body water volume
LDO Large dialysis organization
MAC Medicare Administrative Contractor
MAP Medicare allowable payment
MCP Monthly capitation payment
MedPAC Medicare Payment Advisory Commission
MIPPA Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173)
MSA Metropolitan Statistical Area
NEC Not elsewhere classified
NIH National Institutes of Health
NOS Not otherwise specified
NQF National Quality Forum
OMB Office of Management and Budget
OSCAR Online State Certification and Reporting System
PD Peritoneal dialysis
PFS Physician fee schedule
PPS Prospective payment system
PDE Prescription drug event
PVD Peripheral vascular disease
REMIS Renal Management Information System
RRB Railroad Retirement Board
RRT Renal replacement therapy
SB Separately billable
SIMS ESRD Standard Information Management System
SSA Social Security Administration
UM-KECC University of Michigan, Kidney Epidemiology & Cost Center
URR Urea reduction ratio
I. Background
A. Origins of the Composite Payment System
Section 299I of the Social Security Amendments of 1972, Public Law 92-603, established the end-stage renal disease (ESRD) program under Medicare. That law extended Medicare coverage to individuals regardless of age who have permanent kidney failure, requiring either dialysis or kidney transplantation to maintain life, and meet certain other eligibility criteria. On July 1, 1973, the Medicare program extended benefits to about 11,000 beneficiaries with ESRD. In calendar year 1974, the program paid benefits of about $229 million for dialysis, transplant, and other services. By 1979, the number of beneficiaries had grown to 42,500, with payments reaching $985 million.
Because of concern over the rapid escalation in expenditures for the ESRD program, the Congress enacted legislation in 1978 (Pub. L. 95-292, “ESRD Program Amendments of 1978”), which amended title XVIII of the Social Security Act (the Act) to add new section 1881, which governs Medicare payment for ESRD benefits. In particular, section 1881(b)(2)(B) of the Act directed us to publish regulations establishing methods and procedures to determine the costs incurred by ESRD providers and renal dialysis facilities in
furnishing covered services to individuals with ESRD, and to determine, on a cost-related or other equitable and economically efficient basis, payment amounts for part B services furnished by such providers and facilities to individuals with ESRD. Section 1881(b)(2)(B) of the Act also provided that we establish a prospective reimbursement method for those services with incentives for encouraging facilities to be more efficient and provide cost-effective care.
The enactment of the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, resulted in a further directive for implementing changes to the ESRD payment system. Section 2145 of Public Law 97-35 amended section 1881 of the Act by requiring the Secretary to provide by regulation a method for determining prospectively the amounts of payments for dialysis services furnished by providers of services and renal dialysis facilities to individuals in a facility, and to such individuals at home. In particular, the law required that such method be based on a single composite weighted formula (“composite rate”) (which takes into account the mix of patients who receive services at a facility or at home and the relative costs for furnishing such services) for hospital-based facilities and such a single composite rate for other renal dialysis facilities, or that payment be based on such other method or combination of methods which differentiate between hospital-based and other renal dialysis facilities, and which would more effectively encourage more efficient delivery of dialysis services and would provide greater incentives for increased use of home dialysis.
As a result of these statutory requirements, on February 12, 1982, we published a proposed rule on reimbursement for outpatient dialysis services (47 FR 6556) to implement section 1881 of the Act, as amended by section 2145 of Public Law 97-35. The regulations provided that each facility would receive a payment rate per dialysis treatment (“composite rate”), that is adjusted for geographic differences in area wage levels for the treatment furnished in the facility or at home. We refer to the methodology for payment of outpatient maintenance dialysis services on a per-treatment basis as the “composite payment system”.
Final regulations implementing the composite payment system were published on May 11, 1983 (48 FR 21254). The initial payment rates, which were developed from Medicare cost reports for fiscal years ending in 1977, 1978, and 1979, were established at $127 per treatment for independent facilities and $131 for hospital-based facilities. The composite payment system was effective August 1, 1983. It was limited to payments for the costs incurred by dialysis facilities furnishing outpatient maintenance dialysis, including some routinely provided drugs, laboratory tests, and supplies, whether furnished by hospital-based and independent facilities in a facility or at home. We established separate rates for hospital-based and independent dialysis facilities, and provided a process under which facilities with costs in excess of their payment rates could seek exceptions to those rates under specified circumstances.
With regard to home dialysis, this system was the basis for reimbursing home dialysis furnished by hospital-based and independent facilities (“Method I”). (The other is “Method II,” under which the beneficiary works directly with a durable medical equipment supplier to obtain the supplies and equipment needed.) For further information on the distinctions between Method I and Method II, see section III.E of this proposed rule.
The composite payment system implemented in 1983 was relatively comprehensive with respect to the renal dialysis services included as part of the composite payment bundle. However, a substantial portion of expenditures for renal dialysis services are excluded from the composite payment system and reimbursed in accordance with the respective fee schedules or other payment methodologies. For example, payment for erythropoiesis stimulating agents (ESAs) such as epoetin alfa (EPO, for example, Epogen®) and darbepoetin alfa (ARANESP®) used to treat anemia, and vitamin D analogues (paracalcitol, doxercalciferol, calcitriol), is made outside of the composite payment system as separately billable services. These separately billable services currently comprise about 40 percent of total spending for outpatient maintenance dialysis. The present payment for outpatient maintenance dialysis under Medicare represents a mix of prospective payment, fee-for-service, and other payment rules.
Subsequent inflation increases to the composite payment system applied only in response to specific statutory directives. For example, between 1983 and 2001, the payment rates were increased only three times. A $1.00 increase per treatment was effective January 1, 1991 as a result of the enactment of the Omnibus Budget Reconciliation Act of 1990, Public Law 101-508. The rates were not revised again until the enactment of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, Public Law 106-113, which increased the payments by 1.2 percent effective January 1, 2000 and January 1, 2001, respectively.
During the last few years, policymakers and other interested parties, including the Medicare Payment Advisory Commission (MedPac) and the Government Accountability Office (GAO), have examined the Medicare outpatient maintenance dialysis payment system and suggested a bundled prospective payment approach. See
Medicare Payment Advisory Commission (MedPAC): Report to the Congress: Medicare Payment Policy,
March 2001, March 2005, and March 2007, and GAO Report GAO-07-77,
End Stage Renal Disease: Bundling Medicare's Payment for Drugs with Payment for All ESRD Services Would Promote Efficiency and Clinical Flexibility,
November 2006. We believe that a fully bundled PPS would combine composite rate dialysis services with separately billable services under a single payment, adjusted to reflect patient differences in resource needs or case-mix. As in any PPS, dialysis facilities would keep the difference if Medicare payments exceeded costs for the bundled services, and would be liable for the difference if costs exceeded Medicare payments.
Aside from resulting in a single comprehensive payment for all services included in the bundle, we believe a bundled ESRD PPS would have several objectives. These include eliminating incentives to overuse profitable separately billable drugs, particularly EPO, the targeting of greater payments to ESRD facilities with more costly patients to promote both equitable payment and access to services, and the promotion of operational efficiency. Because of the increased flexibility a bundled PPS would provide in the delivery of outpatient maintenance dialysis services, we believe that it could also increase desirable clinical outcomes, resulting in an enhanced quality of care.
B. Statutory Authority for a Bundled ESRD PPS
1. BIPA
The Congress has twice required studies on the bundling of additional services into the composite payment system. In section 422(c)(2) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), Public Law 106-554, the Congress required the Secretary
to issue a report on a bundled system that would include separately billable drugs and clinical laboratory services routinely used in furnishing dialysis. The Secretary submitted this report,
Toward a Bundled Outpatient Medicare End Stage Renal Disease Prospective Payment System,
to Congress in May 2003. That report contained three major findings that would form the basis for the subsequent development of a bundled ESRD PPS:
1. Currently available administrative data are adequate for proceeding with the development of an expanded outpatient ESRD PPS.
2. Case-mix adjustment is potentially feasible based on available clinical information for ESRD patients in order to pay facilities appropriately for treating more costly resource intensive patients.
3. Current quality review initiatives provide a basis for monitoring the impact of a bundled ESRD PPS after implementation, to ensure quality of care does not deteriorate in response to the system's efficiency incentives.
The Secretary's May 2003 report contained recommendations and conclusions drawn from research, which CMS had initiated on its own prior to the enactment of the law. In September 2000, the Kidney Epidemiology and Cost Center of the University of Michigan (UM-KECC) was awarded a multi-phased research contract. That research led to UM-KECC's August 2002 report,
An Expanded Medicare Outpatient End Stage Renal Disease Prospective Payment System, Phase I Report.
This report provided useful information on many of the issues that would need to be addressed before a bundled ESRD PPS could be implemented, and formed the foundation for the Secretary's May 2003 report.
2. MMA
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108-173, also required the Secretary to submit to the Congress a report detailing the elements and features for the design and implementation of a bundled ESRD PPS. Section 623(f)(1) of the MMA specified that such a system should include the bundling of separately billed drugs, clinical laboratory tests, and other items “to the maximum extent feasible”. That section also required the report to include a description of the methodology to be used to establish payment rates and that the report, detailing the design of an appropriate bundled payment system, be submitted to the Congress by October 1, 2005. Section 623(e) of the MMA also required a demonstration project testing the feasibility of using a fully bundled case-mix adjusted ESRD PPS.
In addition to requiring a report on a bundled ESRD PPS, section 623 of the MMA amended section 1881(b) of the Act, by requiring significant revisions to the composite payment system. Specifically, section 623 of the MMA required:
• An increase of 1.6 percent to the composite payment rates effective January 1, 2005.
• An add-on to composite rate payments to account for the difference in payments for separately billable drugs based on a revised drug pricing methodology compared to the previous method.
• A “basic” case-mix adjustment to an ESRD facility's composite payment rate reflecting a “limited number of patient characteristics.”
• That total payments under the basic case-mix adjusted composite payment system be budget neutral.
• An annual increase to the basic case mix adjusted payment amounts based on projected growth in expenditures for separately billed drugs (the “growth update”).
• That payment rates be adjusted by a geographic index, as determined appropriate by the Secretary (and phased-in to the extent such index differed from the previous payment system).
• Reinstatement of the composite rate exceptions process, eliminated for most dialysis facilities beginning December 31, 2000 under BIPA, for ESRD pediatric facilities, effective October 1, 2002.
On August 5, 2004 and November 15, 2004, we published a proposed rule and final rule (69 FR 47487 through 47730 and 69 FR 66235 through 66915), respectively, implementing the provisions affecting the composite payment system effective January 1, 2005, as set forth in section 623 of the MMA. We refer to the modified composite payment system as the “basic case-mix adjusted composite payment system”. The development and application of the basic case-mix adjustments, using regression based adjustment factors for the patient variables of age, body surface area, and low body mass index, are explained in each of those rules. (For more information, we refer readers to 69 FR 47529 and 69 FR 66323, respectively.) The product of the specific adjusters for each patient, multiplied by the otherwise applicable composite payment rate, yielded the basic case-mix adjustment required by the MMA. The basic case-mix adjusted composite payment system was effective April 1, 2005, and was derived from UM-KECC's research summarized in its report,
Methodology for Developing a Basic Case-Mix Adjustment for the Medicare ESRD Prospective Payment System
(May 19, 2004 report and April 1, 2005 addendum).
Subsequent to our implementation of the MMA requirements discussed above, UM-KECC continued its research to develop a case-mix adjusted ESRD PPS that would combine composite rate and separately billable services. UM-KECC reported its findings and recommendations in a final report submitted to CMS in February 2008,
End Stage Renal Disease Payment System: Results of Research on Case-Mix Adjustment for an Expanded Bundle.
That report is available on the Internet at:
http://www.sph.umich.edu/kecc/assets/documents/UM-KECC_Expanded_ESRD_Bundle.pdf.
Individuals requiring special assistive technology may contact CMS at 410-786-4533 between the hours of 8:30 a.m. and 5 p.m. e.d.t. for assistance. UM-KECC's final report formed the basis for the Secretary's February 2008 Report to Congress,
A Design for a Bundled End Stage Renal Disease Prospective Payment System,
mandated under section 623(f)(1) of the MMA.
The aspects of the basic case-mix adjusted composite payment system implemented as a result of section 1881(b)(12) of the Act, as added by section 623(d)(1) of the MMA, are important because they provide a foundation for the development of the case-mix adjusted bundled ESRD PPS required under Public Law 110-275, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Accordingly, we briefly describe below the basic case-mix adjustment under the current composite payment system before turning to the relevant provisions of MIPPA and the development of the proposed ESRD PPS.
3. The Basic Case-Mix Adjustment
Resources required to furnish routine dialysis such as staff and equipment time vary by patient. For example, all other things being equal, larger patients cost more to deliver the same dose of dialysis than do smaller patients. Also, severely debilitated or aged patients may require more staff time than do younger healthier patients. Because of the variation in resources required to furnish routine dialysis to individuals with varying patient characteristics, facilities that treat a greater than average proportion of resource-intensive patients could be economically disadvantaged if they are paid a rate
based on average resources. In addition, patients who are costlier than average to dialyze may face difficulties gaining access to care because a fixed composite payment rate could create a disincentive to treat such patients. The purpose of a case-mix adjustment based on patient characteristics is to make higher payments to ESRD facilities treating more resource-intensive patients, according to objective quantifiable criteria. Such an adjustment also would reduce the disincentives to treat or provide the optimal dose of dialysis to such patients.
The costs of providing the routine maintenance dialysis services that are paid under the composite rate are reported on the Medicare cost reports for hospital-based and independent ESRD facilities (Forms CMS 2552-96 and CMS 265-94, respectively). Patient-specific data related to the costs of furnishing composite rate services are not collected because these costs are included as part of the composite rate and are not separately billed. However, earlier UM-KECC research revealed considerable variability in costs and patient characteristics among dialysis facilities, and that several patient characteristics predicted facility costs. See Wolfe, R.
et al., An expanded Medicare outpatient end stage renal disease prospective payment system, Phase I report,
University of Michigan, Kidney Epidemiology and Cost Center, August 2002; Hirth, R.A.,
et al., Is case-mix adjustment necessary for an expanded dialysis bundle?
Health Care Financing Review, Summer 2003, 24, pp. 77-88;
Kidney Epidemiology and Cost Center: Methodology for developing a basic case-mix adjustment for the Medicare ESRD prospective payment system,
May 19, 2004 report and April 1, 2005 addendum, prepared under contract no. N-12004-11-504200 for the Centers for Medicare and Medicaid Services.
In order to determine a basic case-mix adjustment that could be applied to each ESRD facility's composite rate, UM-KECC further examined the relationship between facility-level costs for composite rate services based on the Medicare cost reports for hospital-based and independent facilities, and the average characteristics of patients treated by the facility. The research used data from Medicare cost reports for 3,254 independent and hospital-based ESRD facilities for 2000 to 2002, patient characteristics/co-morbidity data from CMS's Medical Evidence Form 2728 for 1995 through 2002, and Medicare claims for approximately 360,000 ESRD patients. See Hirth, R.A.,
et al., Economic impact of case-mix adjusting the dialysis composite rate,
Journal of the American Society of Nephrology, 16, 2005, pp. 1172-1176, and Wheeler, John R. C.,
et al., Understanding the basic case-mix adjustment for the composite rate,
American Journal of Kidney Diseases, 47, No. 4, April 2006, pp. 666-671. Based on standard techniques of multiple regression analysis, UM-KECC found that age and body size had significant relationships to composite rate costs. The body size variables were body surface area (BSA) and low body mass index (BMI), calculated based on a patient's height and weight.
A BMI less than 18.5 kg/m
2
is considered a clinical measure of underweight status and is an indicator of patients who are malnourished or suffering from co-morbidities such as wasting syndrome. BSA is closely associated with the duration and intensity of dialysis required to achieve targets for dialysis adequacy. Facilities with a larger proportion of patients with a greater than average BSA, or with a BMI lower than 18.5, were found to have greater composite rate costs. The research also revealed a U-shaped relationship between age and composite rate costs, with the youngest and oldest age groups incurring greater costs for composite rate services due to resource needs.
Although several co-morbidities were found to have statistically significant relationships to composite rate costs, CMS did not adopt them to develop the basic case-mix system mandated by the MMA for a number of reasons. For instance, the relationship of some co-morbidities to the composite rate costs was not stable over time. In addition, establishment of the diagnostic criteria used in connection with specific co-morbidities required further study.
A few findings were surprising. For example, several patient characteristics, notably type 1 or type 2 diabetes, which generally are important with regard to the etiology of ESRD, did not show statistically significant relationships to composite rate costs for renal dialysis services. While the result that facilities with the greatest number of oldest patients incurred greater composite rate costs was expected, the finding that facilities with a higher proportion of patients in the youngest age group (a group that excludes pediatric patients or those less than age 18) incurred greater composite rate costs as well, was unexpected.
The outcome of UM-KECC's research was a set of basic case-mix adjusters or multipliers for ESRD patients based on three variables. These variables were: (1) The patient's age (five groups), (2) BSA (a patient-specific value based on incremental differences from the national patient average), and (3) BMI category (two groups, value either less than, or equal to/greater than 18.5 kg/m
2
). CMS also developed a special adjuster for pediatric patients outside of UM-KECC's research methodology based on analysis of a sample of Medicare cost reports. The adjuster for each of these three variables is multiplied by the facility's composite rate to yield the current “basic” case-mix adjustment for each ESRD patient according to the specified patient characteristics.
These adjusters were as follows:
Age group
Composite rate multiplier
< 18
*1.62
18-44
1.223
45-59
1.055
60-69 (reference group)
1.000
70-79
1.094
80+
1.174
Body Surface Area (BSA):
(per 0.1m
2
change in BSA from national average of 1.84)
1.037
Low Body Mass Index (BMI):
(<18.5kg/m
2
)
1.112
* Developed by CMS. The age, BSA, and BMI multipliers do not apply under the basic case-mix adjustments for patients under age 18.
The above multipliers were derived from the coefficients of the regression model used to predict facility differences in composite rate costs based on UM-KECC's research. For example, the case-mix adjuster for a 47 year old ESRD patient who is underweight (BMI < 18.5 kg/m
2
) and has a BSA of 2.0 m
2
would be calculated as follows:
Age Adjuster
1.055
BSA Adjuster
1.037
(2.0-1.84)/0.1
= 1.060
Low BMI Adjuster
1.112
Case-Mix Adjuster
1.055 × 1.060 × 1.112 = 1.244
The resulting case-mix adjustment factor of 1.244 for this patient would be multiplied by the facility's otherwise applicable wage adjusted composite payment rate.
The basic case-mix adjustment mandated under the MMA only affects the composite rate. It does not reflect costs associated with separately billable services. Separately billable services, particularly injectable drugs, are a significant component of the total dialysis resources used for each patient. Prior to the enactment of MIPPA on July 15, 2008, however, CMS did not have authority to bundle those services into a case-mix adjusted PPS.
4. MIPPA
The implementation of the basic case-mix adjustments to the composite payment system effective April 1, 2005, and the Secretary's February 2008 Report to Congress, suggested that an expanded or bundled ESRD PPS which combined composite rate and separately billable services to yield case-mix adjusted payments was technically feasible. The report defined a payment bundle of dialysis-related services, described the methodology used to develop the regression based case-mix adjusters and the base period payment rates to which the case-mix adjusters would be applied, and discussed numerous other issues relevant to the bundling of outpatient dialysis services under a system of prospective payments. As a result of the July 15, 2008 enactment of MIPPA, section 153(b) of MIPPA amended section 1881(b) of the Act to require the implementation of an ESRD bundled payment system effective January 1, 2011 (herein referred to as the “ESRD PPS”). Consistent with the language under the statute, we will refer to hospital-based and independent renal dialysis facilities as “providers” and “facilities”, respectively, and when addressing both types of facilities, we will collectively refer to such entities as “ESRD facilities”, as set forth in proposed § 413.171. Section 153(b) of MIPPA specifies the following:
• The Secretary must 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, and for such services and items furnished for home dialysis and self-care home dialysis support services.
• A definition for the “renal dialysis services” that are included in the bundle.
• The estimated amount of total payments under the ESRD PPS for 2011 must be equal to 98 percent of the estimated total amount of payments for renal dialysis services paid under Medicare, including payments for drugs, that would have been made with regard to services in 2011 if the new system was not implemented. Such estimate must be made based on per patient utilization data from 2007, 2008, or 2009, whichever year has the lowest per patient utilization.
• The ESRD PPS must include adjustments for case-mix variables, high cost outlier payments, and low-volume facilities and provide for a four-year transition (phase-in) period, with all facilities transitioned into the bundled ESRD PPS on January 1, 2014. ESRD facilities may make a one-time election before January 1, 2011, to be paid under the ESRD PPS and not go through the transition period.
• The ESRD PPS may include other payment adjustments, as the Secretary determines appropriate, including the use of a geographic index, and potential adjustments for pediatric patients and rural dialysis centers, and may provide for a unit of payment as the Secretary specifies (for example, per treatment or per unit of time).
• The ESRD PPS payment amounts must be annually increased by an ESRD bundled market basket beginning in 2012, and during the transition.
• Section 623(e) of the MMA, which requires a demonstration project of the use of a case-mix adjusted bundled ESRD PPS, be repealed.
Section 153(a)(1) of MIPPA also requires that the composite payment rates be increased by 1.0 percent effective for services furnished on or after January 1, 2009, and before January 1, 2010, and increased by 1.0 percent for services furnished on or after January 1, 2010. In addition, section 153(a)(2) of MIPPA requires that the payment rate for dialysis services furnished on or after January 1, 2009, by ESRD providers of services, be the same as the payment rate for such services furnished by renal dialysis facilities. On November 19, 2008, we published the CY 2009 Physician Fee Schedule final rule (73 FR 69754), implementing the site neutral composite rate for ESRD facilities, and the CY 2009 1.0 percent increase to the composite rate. We expect to publish the CY 2010 1.0 percent increase to the composite rate in the CY 2010 Physician Fee Schedule final rule.
In the following sections of this notice of proposed rulemaking, we describe the ESRD PPS we are proposing to implement effective January 1, 2011, in compliance with the statutory requirements of MIPPA.
II. Overview of the Proposed ESRD PPS
This proposed rule would implement a case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis patients beginning January 1, 2011, in accordance with the statutory provisions set forth in section 153(b) of MIPPA. We propose to implement this new system as described in proposed § 413.172 and § 413.215. The proposed ESRD PPS would replace the current basic case-mix adjusted composite payment system and methodologies for the reimbursement of separately billable outpatient ESRD services. Specifically, we propose that the ESRD PPS would combine payments for composite rate and separately billable services into a single base rate of $198.64 developed from CY 2007 claims data. Under the proposed rule, the base rate would be subsequently adjusted using patient-specific case-mix adjustment factors developed from separate equations for composite rate and separately billable services. The case-mix adjusters would include variables for age, body surface area (BSA), low body mass index (BMI), gender, eleven co-morbidity categories, and the onset of renal dialysis. These proposed adjustment factors were developed using standard techniques of multiple regression to yield case-mix adjusted payments per treatment. The per treatment payment amounts would also be adjusted to reflect urban and rural differences in area wage levels using an area wage index developed from Core Based Statistical Areas (CBSAs definitions). The proposed rule also provides that ESRD facilities treating patients with unusually high resource requirements as measured through their utilization of identified services beyond a specified threshold would be entitled to outlier payments, that is, additional payments beyond the otherwise applicable case-mix adjusted bundled prospective payment amount. The proposed ESRD PPS also provides for special adjustments for pediatric patients and for facilities treating a low volume of ESRD patients, as well as a 4-year transition (phase-in) period under which facilities would receive a blend of payments under the prior case-mix adjusted composite payment system and the new ESRD PPS.
III. The Proposed ESRD PPS Bundle
Section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of MIPPA, specifies that the ESRD PPS must represent a single payment to ESRD facilities for “renal dialysis services” in lieu of any other payment, and home dialysis supplies, equipment, and support services furnished pursuant to section 1881(b)(4) of the Act. Section 1881(b)(14)(B) of the Act, which identifies the renal dialysis services that are to be included in the ESRD PPS payment bundle, provides the following:
* * * the term “renal dialysis services” includes—
(i) Items and services included in the composite rate for renal dialysis services as of December 31, 2010;
(ii) Erythropoiesis stimulating agents and any oral form of such agents that are furnished to individuals for the treatment of end stage renal disease;
(iii) Other drugs and biologicals that are furnished to individuals for the treatment of
end stage renal disease and for which payment was(before application of this [new ESRD PPS]) made separately under this title, and any oral equivalent form of such drug or biological; and
(iv) Diagnostic laboratory tests and other items and services not described in clause (i) that are furnished to individuals for the treatment of end stage renal disease.
The methodology, which we subsequently describe, for the development of the proposed ESRD PPS, generally identifies the renal dialysis services that we propose to include in the proposed payment bundle in accordance with our interpretation of the statute. We also discuss in more detail below the definition for renal dialysis services under section 1881(b)(14)(B) of the Act.
A. Composite Rate Services
Section 1881(b)(14)(B)(i) of the Act requires that the ESRD PPS payment bundle include composite rate services. As we indicated previously, the current case-mix adjusted composite payment system represents a limited PPS for a bundle of outpatient renal dialysis services that includes maintenance dialysis treatments and all associated services including historically defined dialysis-related drugs, laboratory tests, equipment, supplies, and staff time. It applies to Medicare beneficiaries receiving dialysis in ESRD facilities and to patients who have elected Method I home dialysis. (Under Method I, the ESRD facility with which the home patient is associated assumes responsibility for furnishing all home dialysis equipment, supplies, and home support services included in the provision of composite rate services. (See section 2740 of CMS Pub. 15-1.)) The ESRD facility receives reimbursement under the current case-mix adjusted composite payment system. For all other ESRD outpatient services not included in the composite payment rate under the current system, such items and services are billed separately in accordance with Medicare fee schedules and other payment methodologies under Part B and Part D. We propose to include in the proposed ESRD PPS those items and services included in the composite rate for renal dialysis services as of December 31, 2010, including self-dialysis training services, such as labor, supplies, and equipment(for greater detail, see discussion on self-dialysis training sessions in section E.2). Therefore, these costs for such composite rate services would be included in our computation of the proposed ESRD PPS base rate as explained in section VII. of this proposed rule. This not only would include payments for the costs of services directly related to dialysis, including payments for the costs of self-dialysis training sessions, but also payments authorized in accordance with the composite payment rate exception provisions set forth in 42 CFR 413.180 through 413.186. The costs for composite rate services are also included in our development of the composite rate regression model used to create the two equation patient specific case-mix adjusters that would be applied to the base rate. Composite rate services are defined in proposed § 413.171.
B. ESAs and Their Oral Forms
Section 1881(b)(14)(B)(ii) of the Act requires that ESAs and any oral form of such agents that are furnished to individuals for the treatment of ESRD be included in the ESRD PPS payment bundle. Epoetin alfa (EPO, for example, Epogen®) and darbepoetin (ARANESP®) are injectable ESAs, which are currently separately billable outside of the case-mix adjusted composite payment system. Payments for EPO® and ARANESP® would be included in the calculation of the proposed ESRD PPS base rate. These agents would also be included in the separately billable regression model used to create the two equation patient specific case-mix adjusters for the proposed ESRD PPS. We are currently unaware of any other injectable ESAs or oral forms of such ESAs used for the treatment of ESRD. However, should such agents become available subsequent to the implementation of the ESRD PPS on January 1, 2011, these agents would be considered renal dialysis services and subject to payment under the ESRD PPS. That is, consistent with the statute, we propose that no additional payment would be provided for such agents outside of the bundle of renal dialysis services included in the ESRD PPS. The inclusion of ESA's and their oral forms as renal dialysis services in the ESRD PPS payment bundle is set forth in proposed Medicare regulation 413.171.
C. Other Drugs and Biologicals and Their Oral Equivalents
Section 1881(b)(14)(B)(iii) of the Act specifies that other drugs and biologicals that were furnished to individuals for the treatment of ESRD and for which payment was made separately under this title, prior to the implementation of the ESRD PPS, and their oral equivalent forms, must be included in the ESRD PPS payment bundle. Given the reference to “this title,” we interpret clause (iii) as requiring the inclusion in the ESRD PPS payment bundle all drugs and biologicals that were separately billable prior to the implementation of MIPPA under title XVIII of the Act. Therefore, we believe the ESRD PPS payment bundle would include all drugs and biologicals formerly separately payable under Medicare Part B and Part D. We recognize that an alternative reading of the last part of clause (iii) with respect to the phrase “and any oral equivalent form of such drug or biological” could be interpreted to limit the scope of the drugs and biologicals included in the bundle to only oral versions of injectables (or other non-oral routes of administration). However, we believe that this reading of the statute is unduly constrained. Therefore, our view is that the intent of clause (iii) is to include all drugs and biologicals formerly payable under either Medicare Part B or Part D used to treat ESRD, regardless of the route of administration.
We believe that the exclusion of oral drugs and biologicals for which there is no injectable equivalent (or other non-oral form of administration) from the ESRD PPS would defeat one of the very purposes of the new system—the inclusion of all renal dialysis services furnished to ESRD patients in a comprehensive payment bundle to which a reasonable payment amount can be attached empirically. In addition, the exclusion of oral drugs and biologicals for which there is no injectable (or other non-oral) version does not make sense from a payment policy perspective. Such a policy would result in the gradual growth of excluded services from the ESRD PPS payment bundle, and the progressive erosion of the payment system, as new oral-only drugs and biologicals for the treatment of ESRD emerge. Moreover, we believe the inclusion of such drugs and biologicals is supportable under clause (iv). That is, we believe the language under clause (iv) addressing “other items and services not covered in clause (i),” provides sufficient authority to include all drugs and biologicals, including oral-only drugs and biologicals, used to treat ESRD in the ESRD PPS payment bundle. Therefore, we are proposing that drugs and biologicals used to treat ESRD that were separately payable prior to January 1, 2011, be included as part of the proposed ESRD PPS payment bundle. Accordingly, we propose to include such drugs and biologicals in the development of the proposed patient-specific case-mix adjusters and in the calculation of the proposed ESRD base rate to which the adjusters would be
applied. We identified specific National Drug Codes (NDCs) for drugs and biologicals previously payable under part D that we propose to include in the payment bundle. However, we propose that the ESRD PPS will apply, regardless of the emergence of new drugs or biologicals, or different NDCs for the classes of drugs and biologicals included in the ESRD PPS bundle. Finally, section 1881(b)(14)(B) of the Act specifically excludes vaccines from the payment bundle and, therefore, vaccines will not be included in the proposed ESRD PPS. We are seeking comments on our proposals above.
We have found that eleven drugs and biologicals accounted for 99.7 percent of the payments under Part B for all injectable drugs and biologicals that were furnished to outpatient ESRD patients in CY 2007. These drugs and biologicals are epoetin alfa (EPO®), darbepoetin alfa (ARANESP®), calcitriol, doxercalciferol, paracalcitol, iron sucrose, sodium ferric gluconate, levocarnitine, alteplase recombinant, vancomycin, and daptomycin. These drugs and biologicals, as well as the others comprising 0.3 percent of the total payments for drugs and biologicals under Part B in CY 2007, would be included in the proposed ESRD PPS payment bundle. Of the top eleven injectable drugs and biologicals, several have oral versions. For example, levocarnitine, and the vitamin D analogues calcitriol, doxercalciferol, and paricalcitol are also available in oral form. The oral versions of these drugs are currently covered under Medicare Part D. Other drugs used to treat ESRD are available only in oral form and are currently payable under Part D. These include cinacalcet hydrochloride, lanthanum carbonate, calcium acetate, sevelamer hydrochloride, and sevelamer carbonate. Consistent with our interpretation of section 1881(b)(14)(B)(iii) of the Act, we propose that payments for all drugs and biologicals furnished to ESRD patients and separately billable prior to January 1, 2011, would be included under the proposed ESRD PPS payment bundle as renal dialysis services. Under this proposal, separate billing for these services would be prohibited. The proposed ESRD PPS methodology, both with respect to the computation of the case-mix adjusters and the calculation of the proposed ESRD base rate to which the adjusters would be applied, includes payments for these services. The inclusion of other drugs and biologicals and their oral equivalents as renal dialysis services in the ESRD PPS payment bundle is set forth in proposed § 413.171.
D. Diagnostic Laboratory Tests and Other Items and Services
Section 1881(b)(14)(B)(iv) of the Act requires that diagnostic laboratory tests not included under the composite payment rate (that is, currently separately billable laboratory tests) must be included as part of the ESRD PPS payment bundle. We propose to define such laboratory tests as laboratory tests that are separately billed by ESRD facilities as of December 31, 2010, and laboratory tests ordered by a physician who receives monthly capitation payments (MCPs) for treating ESRD patients that are separately billed by independent laboratories. Because many of the same diagnostic laboratory tests can be performed for both ESRD and non-ESRD patients, we believe that this approach for including laboratory services appropriately captures tests for inclusion in the payment bundle. We propose that payments for these laboratory services would be included in the development of the proposed patient-specific case-mix adjusters and in the proposed ESRD base rate to which the adjusters would be applied.
Section 1881(b)(14)(B)(iv) of the Act also requires that the ESRD PPS payment bundle include “other items and services not described in clause (i)”. We believe that this language can be reasonably interpreted to include other separately billable items and services used in the treatment of ESRD, such as supplies. Examples of such items and services would include, but not be limited to, items such as syringes, specialized tubing, as well as blood and blood products, which facilities may furnish during the dialysis treatment. We also believe that the language also can be interpreted to include the cost of other self-dialysis training services in the ESRD PPS (for further detail on self-dialysis training, see section E.2. below). We propose that such items and services be included in the ESRD PPS bundle. The inclusion of diagnostic laboratory tests and other items and services as renal dialysis services in the ESRD PPS payment bundle is set forth in proposed § 413.171.
E. Home Dialysis Patients (Method I and II) and Self-Dialysis Training
Section 1881(b)(4) of the Act authorizes the Secretary to make payment to providers of services and renal dialysis facilities, and to suppliers of home dialysis supplies and equipment, for the cost of home dialysis supplies and equipment and self-care home dialysis support services furnished to patients for self-care home dialysis. As a result of section 153(b) of MIPPA, as explained above, section 1881(b)(14)(A)(i) of the Act requires the Secretary to implement a payment system under which a single payment is made under this title to an ESRD facility for renal dialysis services and for such services and items furnished pursuant to section 1881(b)(4) of the Act. As we explained above, we also believe that self-dialysis training services would be considered renal dialysis services as defined in section 1881(b)(14)(B) of the Act. As a result, we are proposing that the costs of home dialysis services furnished to both Method I and Method II home dialysis patients under the current basic case-mix adjusted payment system, as well as self-dialysis training services, must be combined into a single payment under the proposed ESRD PPS.
1. Payment for Home Dialysis
Currently, Hemodialysis, Continuous Cycling Peritoneal Dialysis (CCPD), Intermittent Peritoneal Dialysis (IPD) and Continuous Ambulatory Peritoneal Dialysis (CAPD) treatment modalities may be performed at home by appropriately trained patients. Medicare beneficiaries dialyzing at home must complete a Medicare Beneficiary Form (CMS-382) selecting between two methods of payment (Method I or Method II) as described below.
a. Method I—The Composite Rate
If a Medicare home dialysis patient chooses Method I, the ESRD facility with which the patient is associated must assume responsibility for providing all home dialysis equipment and supplies as well as providing home support services and receives the composite payment rate for such services. Support services needed to furnish home dialysis services include, but are not limited to: (1) Periodic monitoring of a patient's adaptation to home dialysis and performance of dialysis; (2) visits by trained technical personnel made in accordance with a plan prepared by a professional team; (3) unscheduled visits on an as needed basis; and (4) providing, installing, repairing, testing, and maintaining home dialysis equipment including appropriate water testing and treatment. For these services, the ESRD facility receives, in accordance with § 414.330(a), the same Medicare dialysis payment rate as it would receive for an in-facility patient under the basic case-mix adjusted composite payment system. Under Method I, the ESRD facility bills the Medicare Administrative Contractor/Fiscal
Intermediary (MAC/FI) and the beneficiary is responsible for paying the Medicare Part B deductible and the 20 percent coinsurance on the Medicare rate to the facility.
b. Method II—Dealing Directly With Suppliers
In accordance with regulations at § 414.330(a)(2), a Medicare ESRD beneficiary can elect to obtain home dialysis equipment and supplies from a supplier, that is not a Medicare approved dialysis facility (Method II). If a beneficiary elects Method II, the beneficiary will deal directly with a single Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) supplier to secure the necessary supplies and equipment to dialyze at home. The selected DMEPOS supplier (not a dialysis facility) must accept assignment and bills the Durable Medical Equipment Medicare Administrative Contractor (DME MAC). The beneficiary is financially responsible to the supplier for any unmet Medicare Part B deductible and for the 20 percent Medicare Part B coinsurance requirement. The amount of Medicare payment under Method II for home dialysis equipment and supplies may not exceed $1,974.25 per month for CCPD and $1,490.85 per month (57 FR 54186, published November 17, 1992) for all other modalities of home dialysis.
For each beneficiary it serves, the supplier is required to maintain a written agreement with an approved ESRD facility to provide backup and support services. An ESRD facility that has a written agreement to supply backup and support services bills the MAC/FI for services provided under the agreement. Under Method II, an ESRD facility may be paid up to $121.15 (57 FR 54186, published November 17, 1992) per month for home dialysis support services, such as arranging for the provision of all ESRD related laboratory tests and billing for the laboratory tests that are included in the composite payment rate. An ESRD facility may not be paid for home dialysis equipment or supplies under Method II.
Based on 2004-2006 data, only 3.1 percent of renal facilities report support service costs furnished to Medicare Method II home dialysis patients. The data also show that the number of Method II patients is small and has significantly declined over the study period (that is, 2004-2006) as shown below.
Patients
Year
5289
2004
4465
2005
2635
2006
We are proposing that payment for all home dialysis services excluding physicians' services (See section III.F. below regarding the exclusion of physicians' services) would be included in the bundled payment to the ESRD facility, under the proposed ESRD PPS.
In addition, as we indicated, section 1881(b)(14)(A)(i) of the Act requires that a single payment for renal dialysis services and items and services under section 1881(b)(4) be made to an ESRD facility. Therefore, since we are proposing that the costs of home dialysis services furnished under Method I and Method II (see section V Data Sources), regardless of home treatment modality, would be included in the proposed ESRD PPS, we also are proposing that the Method II home dialysis approach in its present form would no longer exist under the proposed ESRD PPS. With regard to payment limits for home dialysis services, in accordance with 6203(b) of Public Law 101-239, we published a final rule on November 17, 1992 implementing (57 FR 54179), Medicare program payment changes for home dialysis. In section 413.330(c), we set payment limits on what Medicare would pay for home dialysis supplies, equipment, and home support services as explained above. Accordingly, effective January 1, 2011, we propose to revise § 414.330 to reflect that payment as established in section 1881(b)(14) of the Act will be the basis for home dialysis supplies, equipment, and home support services and therefore, Medicare would pay for home dialysis equipment, supplies and support services only under the prospective payment rate established in proposed 413.210 and payment limits previously established for such would no longer apply. We also note, that this proposal would not eliminate Method I in its present form. Therefore, effective January 1, 2011, a supplier could only furnish, under an arrangement with the ESRD facility, home dialysis equipment and supplies to a Medicare home dialysis beneficiary, and then the supplier would need to look to the ESRD facility for payment. We believe that this would reduce the administrative burden of maintaining two payment methods for home dialysis patients, since we believe that section 1881(b)(14)(A)(i) requires that all Medicare home dialysis patients would be paid under the ESRD PPS. We invite public comments on this proposal.
2. Self-Dialysis Training
Currently, Medicare covers home hemodialysis training and two forms of PD training programs. Home dialysis and self-dialysis can only be performed after an ESRD patient has completed an appropriate course of training. The scope of training services that a certified facility provides to ESRD patients is described in § 494.100(a). Medicare pays the ESRD facility its case-mix adjusted composite rate plus $12 per training treatment for CAPD and $20 per training treatment for CCPD. For hemodialysis training, Medicare pays the ESRD facility its case-mix adjusted composite rate plus $20 per training treatment (Medicare Claims Processing Manual, Chapter 8, Outpatient ESRD Hospitals, Independent Facility, and Physician/Supplier Claims, Section 50.8, Training and Retraining). We point out that effective January 1, 2011, under the proposed ESRD PPS, ESRD facilities would no longer receive an add-on of $12 for CAPD and $20 for hemodialysis and CCPD to the otherwise applicable payment amount per treatment for the costs of training. In addition, ESRD facility training expenses are included in the base period payment rate to which the combined rate and payment multiplier in the proposed two-equation model is applied.
As we indicated, section 1881(b)(14)(B) of the Act, as added by section 153(b) of MIPPA, specifies the renal dialysis services that must be included in the ESRD PPS. Since self-dialysis training is used to train patients for the treatment modality of home dialysis with little or no help, we believe that these services would be considered “renal dialysis services.” As we indicated above, services related to self-training would meet the definition under clauses (i) and (iv) of section 1881(b)(14)(B) of the Act. As such, we propose to include the cost of self-dialysis training in the proposed ESRD PPS. We evaluated the current training cost reported by ESRD facilities (see section V Data Sources) to train ESRD patients for home dialysis. Training costs have been included in the composite rate payment adjusters in the proposed ESRD PPS. In section VIII.A. of this proposed rule, we point out that total composite rate costs included in the per treatment calculation include costs incurred for training expenses, as well as all home dialysis costs. We used the ESRD facilities cost reports to identify provider costs for training rather than payments. Therefore, in this proposed rule we propose to include
these costs in the composite rate portion of the two-equation ESRD PPS model described in section VI of this proposed rule. We believe that including training and home dialysis costs in the ESRD PPS would provide increased flexibility to dialysis centers for greater use of less costly PD and alternative treatment regimens such as nocturnal dialysis, home hemodialysis using compact portable dialysis machines, and shorter but more frequent dialysis sessions. For these reasons, we are proposing to include training and home dialysis costs in the proposed ESRD PPS, as set forth in proposed § 413.217. Training costs were included in the calculation of the composite rate costs used to develop the regression-based adjustment factors for the composite rate portion of the two-equation model described in section VIII. In addition, the base rate to which the patient-specific case-mix adjustment factors are applied includes payments to ESRD facilities for training expenses. Because we are proposing that training costs under the ESRD PPS would be treated no differently than any other overhead expense, an explicit adjustment to the bundled payment amount for HD and PD training expenditures would not be necessary. We are seeking comments on our proposal to include home dialysis training services in the proposed ESRD PPS.
F. Physicians' Services
Section 1881(b)(14)(A)(i), as added by MIPPA, states as follows in pertinent part:
“* * * the Secretary shall implement a payment system under which a single payment is made under this title to a provider of services or a renal dialysis facility for renal dialysis services (as defined in subparagraph (B)) in lieu of any other payment * * * and for such services and items furnished pursuant to [section 1881(b)(4)].”
We believe this provision generally governs payment to ESRD facilities. With regard to physicians' services related to renal dialysis, such services are addressed in section 1881(b)(3) of the Act. At this time, we do not intend to significantly modify payment for physicians' services. Any changes with regard to the payment for physicians' services related to renal dialysis would be addressed in future rulemaking. Therefore, the scope of this proposed rule generally will be limited to payment for home dialysis and renal dialysis services furnished by ESRD facilities.
IV. Unit of Payment
Under section 1881(b)(14)(C) of the Act, as added by section 153(b) of MIPPA, the ESRD PPS may provide for payment on the basis of renal dialysis services furnished during a week, or month, or such other appropriate unit of payment as the Secretary specifies. Approximately 92 percent of ESRD beneficiaries requiring outpatient dialysis undergo hemodialysis (HD), usually furnished in a facility. A small but increasing number of patients perform HD at home. The most typical schedule is 3 treatments per week, with each treatment averaging 3 to 4 hours. The remaining 8 percent of patients use peritoneal dialysis (PD). PD is usually done at home, with or without machine assistance. Unlike HD, which involves the circulation of the patient's blood and filtration of toxins using an artificial kidney machine, PD removes blood toxins through the draining of the dialysate from the lining of the abdomen or peritoneum several times a day. A form of PD, sometimes referred to as continuous cycling PD, is done with machine assistance while the patient sleeps, either at home or in specially designated areas at the ESRD facility.
Since the inception of the composite payment system in 1983, ESRD facilities have been reimbursed the applicable payment per treatment, with a maximum of 3 treatments for each full week a patient undergoes outpatient dialysis, unless additional treatments are justified by medical necessity. The 3-times weekly payment approach has applied regardless of whether the mode of dialysis is HD or PD. For example, an ESRD facility's payment for a Method I home patient on PD for 21 days would be equal to 21/7 × 3 or 9 times the composite rate per treatment.
Both the Secretary's May 2003 and February 2008 reports on the development of a bundled ESRD PPS discussed the limitations of the per treatment method of payment under the composite payment system. For example, some have charged that the composite payment system's 3 times weekly payment structure, regardless of dialysis modality, has discouraged innovative treatment approaches that could lead to better clinical outcomes and an enhanced quality of life for patients. We believe that the argument is two-fold. First, the reliance on separately billable services as a source of revenue growth for ESRD facilities has potentially impeded the greater use of less costly PD (which typically uses fewer separately billable drugs and less provider and facility overhead expense). Second, others argue that constraining payment based on number of treatments may reduce the use of alternative treatment regimens such as increased frequency nocturnal dialysis, home HD using compact portable dialysis machines, and shorter but more frequent dialysis sessions (for example, 1.5 to 2 hours, five or six days per week).
These critics have maintained that combining composite rate and separately billable services during a specified interval of time would provide ESRD facilities the financing flexibility to use whatever forms of dialysis were in the best interests of the patient. Because ESRD facilities generally submit to Medicare a bill for all outpatient dialysis services furnished to a patient during the month, an ESRD PPS based on monthly payments was suggested as an alternative in the Secretary's February 2008 Report to Congress. As we indicated above, section 1881(b)(14)(C) of the Act, as added by section 153(b) of MIPPA, gives the Secretary the discretion to establish an ESRD PPS based on an interval of time, or other appropriate unit of payment. In this notice we are proposing to establish an ESRD PPS which relies on a per treatment unit of payment. We propose to continue the present per treatment basis of payment in which ESRD facilities would be paid for up to three treatments per week, unless medical necessity justified more than three weekly treatments. ESRD facilities treating patients on PD or home HD would also receive payments for up to three treatments for each week of dialysis, unless medical necessity justified the furnishing of additional treatments. Our reasons for continuing the present per treatment method of payment under the proposed ESRD PPS are set forth below.
A. Administrative Complexity Due to Phase-In
Section 1881(b)(14)(E)(i) of the Act provides for a 4-year phase-in (transition), in equal increments for the implementation of the ESRD PPS. That is, the payments beginning January 1, 2011, must consist of a blend of the payment amounts under the new system and the prior payment rates in the following proportions:
Effective
New PPS
(percent)
Prior
payment amounts
(percent)
1/1/2011
25
75
1/1/2012
50
50
1/1/2013
75
25
1/1/2014
100
0
Although ESRD facilities could elect to be excluded from the phase-in, in accordance with section 1881(b)(14)(E)(ii) of the Act, application of the phase-in under a monthly ESRD PPS would mean that a portion of each ESRD facility's total payments, would be based on a monthly payment methodology, while a portion would be based on the current per treatment system. We believe that combining a monthly ESRD PPS with the current per treatment methodology during the transition period would unduly complicate billing and increase the likelihood of payment errors and processing delays.
B. Administrative Complexity Due to Interruptions in Service
A monthly payment approach under the ESRD PPS likely would not pose a problem for patients who receive their dialysis treatments at a single ESRD facility throughout the month with no interruptions in service. However, we note that this situation applies to about 81 percent of patient months. Approximately 19 percent of outpatient dialysis patients incur an interruption of service or receive their treatments at more than one facility during a month. The combination of intervening events in the available data for CYs 2004-2006 is shown in Table 1.
BILLING CODE 4120-01-P
EP29SE09.000
BILLING CODE 4120-01-C
To properly account for events which interrupt a patient's outpatient dialysis, the days associated with these intervening events would have to be tracked and counted so that a pro rata reduction to the otherwise applicable monthly payment amount could be determined. This becomes especially cumbersome if a patient receives treatments at more than one facility and an interruption in service occurs (for example, due to hospitalization). Although Table 1 reveals that this circumstance occurs in less than 1 percent of patient months, the administrative complexity involved in monitoring events, which cause an interruption in the patient's normal schedule of receiving dialysis treatments, particularly where multiple
facilities are involved, would be considerable.
Table 1 shows that for CY 2006, 79.05 percent of patient months did not involve an intervening event and did not include transfer to another facility. These patient months, when included with CY 2006 events that also account for an interruption of dialysis due to hospitalization, start of dialysis later in the month, or death/withdrawal from dialysis, account for 94.09 percent of CY 2006 patient months. One option that we considered for the approximately 15 percent of patient months in which a patient did not undergo a full month of dialysis due to hospitalization, onset of dialysis later in the month, or death/withdrawal from dialysis, was applying a prorated monthly payment rate to cover these situations, and reverting to a per treatment payment methodology for all other situations. However, we believe that this approach would be too administratively complex. For example, under this approach a facility could find that some of its patients would be paid a full monthly ESRD PPS rate, those with an interruption in service would be paid a prorated monthly rate, and others would be paid based on a per treatment method.
C. No Incentive To Discourage Skipped Treatments
A monthly ESRD PPS would afford facilities the maximum degree of clinical flexibility in treating patients. Facilities could provide whatever mode and frequency of dialysis, were in the best interests of the patient. However, under a monthly ESRD PPS, we believe that facilities may make less of an effort to discourage patients from skipping treatments. Because facilities do not receive reimbursement for skipped sessions under the current per treatment payment system, we are very concerned that a monthly ESRD PPS would provide no incentives for discouraging skipped treatments. Therefore, implementation of a monthly ESRD PPS would require either a stringent monitoring system to ensure the skipping of treatments does not become a byproduct of the new PPS's incentives, or require that a minimum number of treatments must be furnished to each patient in a month to ensure quality of care does not deteriorate. Both options would undercut two of the principles, which are part of the foundation of the new ESRD PPS, administrative simplicity and clinical flexibility.
Given the difficulties of implementing a monthly ESRD PPS during a transition period in which a per treatment methodology applies, we are proposing to continue the present per treatment payment methodology in connection with the proposed ESRD PPS, as set forth in proposed § 413.215. We may reconsider this decision after the transition period has ended. Some of the factors that we may evaluate at that time are whether the ESRD PPS has resulted in improved clinical outcomes, the degree to which facilities have increased the utilization of other modes of dialysis such as home PD, and whether interested stakeholders at that time would favor a monthly or other per unit of time payment methodology. We especially encourage comments from the industry and from organizations representing dialysis patients on our proposal to continue the per treatment methodology under the proposed ESRD PPS. In the following sections, we describe the data sources and analytical techniques used to develop the proposed per treatment ESRD PPS.
V. Data Sources
As discussed above, section 1881(b)(14)(B) of the Act, as added by section 153(b) of MIPPA, defines the renal dialysis services that must be included in the ESRD PPS. Based on our interpretation of the statute, we are proposing to construct the payment bundle using the following Medicare cost and payment information:
• Composite rate services as measured using composite rate costs as calculated from the Medicare cost reports;
• Drugs and biologicals (for example, injectables) that are separately billed by ESRD facilities on Medicare outpatient institutional claims;
• Drugs and biologicals (for example, oral) used to treat ESRD patients obtained from claims submitted by Part D stand-alone prescription drug plans;
• Laboratory tests that are separately billed by ESRD facilities on Medicare outpatient institutional claims;
• Laboratory tests ordered by a physician who receives MCPs for treating ESRD patients that are separately billed by independent laboratories;
• Other items and services separately billed by ESRD facilities that are used in conjunction with injectable medications or laboratory tests, such as blood products, syringes, and other dialysis supplies that are billed on Medicare outpatient institutional claims.
While cost information for composite rate services is available from the Medicare cost reports, the cost report does not contain information on the costs of the separately billable categories of services noted above. Accordingly, the methodology described in this notice of proposed rulemaking applicable to separately billable services relies on separately billable payment information from Medicare claims.
The descriptive statistics, case-mix model, and other analyses presented in this proposed rule are based primarily on CMS claims files for Medicare ESRD patients, and the Medicare cost reports for hospital-based ESRD outpatient dialysis providers and independent ESRD facilities. Resource utilization for separately billable services was based on patient-level Medicare outpatient claims for CYs 2004 through 2006. Since composite rate cost information is available only at the facility level, resource utilization for composite rate services was measured using the Medicare cost reports for each outpatient dialysis provider and facility (that is, hospital-based and independent facility). For the case-mix model for the proposed ESRD PPS, we relied on Medicare claims and cost reports for CY 2004 through CY 2006, because those years represented the latest most complete data available for the preparation of this proposed rule.
With regard to the budget neutrality requirement under section 1881(b)(14)(A)(ii) of the Act, which requires that the estimated total amount of payments for 2011 for renal dialysis services be equal to 98 percent of the estimated total amount of payments for renal dialysis services, that would have been made for services furnished in 2011 if the ESRD PPS had not been implemented, we are required to use per patient utilization data from 2007, 2008, or 2009, whichever has the lowest per patient utilization. To comply with this provision of the statute, we plan to evaluate available claims for Medicare ESRD beneficiaries for CYs 2007, 2008, and 2009 to determine which year resulted in the lowest average payment amount per treatment. Because the lowest payment amount per treatment would reflect the lowest utilization of outpatient ESRD services among patients absent evidence that per unit prices for those services declined, we believe that selection of the CY with the lowest payment per treatment for calculation of the ESRD base rate would comply with section 1881(b)(14)(A)(ii) of the Act.
Currently, the latest payment information from Medicare claims that is available in sufficient time for the preparation of this proposed rule is for CY 2007. Cost report information subsequent to CY 2006, and Medicare claims data subsequent to CY 2007, could not be evaluated given the necessary lead time required to prepare this proposed rule. We plan to examine
available Medicare cost report information for CYs subsequent to 2006 in developing the case-mix adjusters to ensure use of the latest available data, and available payment data from Medicare claims for CY 2008 and CY 2009 to comply with the lowest per patient utilization requirement of section 1881(b)(14)(a)(ii) of the Act, in preparing the final rule. Any later payment data used in developing the ESRD PPS published in the final rule, would be updated in accordance with the methodology explained elsewhere in this proposed rule. (See Section VII., Development of Budget-Neutral ESRD Bundled Base Rate.)
We used several data sources for evaluating the patient and facility characteristics that were also used with the case-mix analyses. Patient demographic information was obtained from the Renal Management Information System (REMIS)/Consolidated Renal Operations in a Web-Enabled Network (CROWN), and the ESRD Standard Information Management System (SIMS). These data sources include the Medical Evidence Report Form (Form 2728), which is completed at the onset of renal replacement therapy (RRT), which is either dialysis or transplantation to sustain life at the onset of kidney failure. Patient body size measures were developed from the height and weight values reported on the Form 2728. Beginning April 1, 2005, these values were obtained from the patient claims for outpatient dialysis. Patient co-morbidities were measured using the Form 2728, supplemented with diagnoses reported on Medicare hospital inpatient, skilled nursing facility, hospital outpatient, hospice, home health agency, and physician claims. The claims diagnoses were used to identify co-morbidities that were not abstracted using the Form 2728, and to capture changes in patient condition subsequent to the onset of kidney failure. Because diagnoses reported on laboratory claims may represent a suspected condition subject to testing rather than an established diagnosis, laboratory claims were not used to identify co-morbidities in the case-mix models.
We measured dialysis facility characteristics using a combination of SIMS (ownership type and geographic location), the Medicare cost reports (facility size), the Online State Certification and Reporting System or OSCAR (hospital affiliation for satellite units), and other available information (for example, identifying facilities with composite payment rate exceptions).
A. Patient Claims Data
The outpatient facility paid claims file is the primary source of information for payments ESRD facilities receive for the treatment of ESRD patients. The “type 72X” bills provided the detailed data for dialysis payments. The claims files used for the analyses in this proposed rule are based on patients with at least one claims record for dialysis. We used carrier claims and durable medical equipment claims to track dialysis-related payments to other providers such as independent laboratories.
The case-mix models were based on claims from CYs 2004, 2005, and 2006. These were the most complete CY records available for use with the Medicare cost reports from the same periods to develop the payment methodology, given the lead time necessary for the preparation of this proposed rule. We plan to use available CY data subsequent to 2006 data in developing the payment methodology in connection with the final rule. The number of Medicare claims, patients, dialysis sessions, and ESRD facilities represented in the source claims data are shown in Table 2. We have also provided the same information for CY 2003 for comparison purposes.
Table 2—Medicare Dialysis Patients, Treatments, ESRD Facilities, and Claims by Year, 2003-2007
2003
2004
2005
2006
2007
Medicare Dialysis Patients
1
298,617
308,561
318,531
324,836
328,841
Hemodialysis Equivalent Dialysis Treatments
2,3
32,692,581
34,088,570
35,097,820
35,948,738
36,667,669
ESRD Facilities
4,365
4,523
4,668
4,810
4,955
Patient Month Claims
2,830,215
2,934,505
3,037,965
3,095,996
3,155,553
1
Includes home dialysis patients for whom payments were made under Method II.
2
Hemodialysis-equivalent treatments were capped at 20 per month. The number of dialysis treatments for Method II patients was estimated using the average number of hemodialysis-equivalent treatments per month reported for Method I peritoneal dialysis patients during that year (which ranged from 12.50 to 12.66 during 2003-07).
3
Includes PD in which one week of PD is considered equivalent to 3 HD treatments.
B. Medicare Cost Reports
We obtained facility-level cost and treatment data from the CMS Medicare Hospital Cost Report (Form CMS 2552-96) and the CMS Medicare Independent Renal Dialysis Facility Cost Report (Form CMS 265-94). The number of available cost reports for CYs 2004 through 2006 that contained necessary cost and treatment data for purposes of the composite rate cost analyses are shown in Table 3.
Table 3—Available Cost Reports by ESRD Facility Type, 2003-2006
1
ESRD facility type
2003
2004
2005
2006
Facilities (Independent)
3,689
3,852
4,025
4,140
Providers (Hospital Based)
455
451
448
433
Total
4,144
4,303
4,471
4,573
1
Based on the June 2008 quarterly update of HCRIS. Includes cost reports with composite rate cost and treatment fields greater than 0.
For most ESRD facilities, a single cost report encompassed the entire calendar year. For FY cost reports that spanned two CYs, we used a weighted average based on the proportion falling in each CY.
C. Patient Claim and Cost Report Summary Data, 2004-2006
The case-mix models were based on data sets that linked claims and cost
report records for each year from CY 2004 through CY 2006. The claims data for patients treated in hospital satellite facilities were matched to the parent hospital using OSCAR, since cost reports are only submitted by the parent facility. Table 4 shows the resulting analysis files that included both claims and cost report data for measuring separately billable and composite rate resource utilization.
Table 4—Medicare Dialysis Patients, Treatments, ESRD Facilities, and Claims for Patients and Facilities With Measured Costs per Treatment, by Year, 2004-2006
1
2004
2005
2006
Medicare Dialysis Patients
301,625
311,787
317,734
Hemodialysis Equivalent Dialysis Treatments
33,056,812
34,062,969
34,963,270
ESRD Facilities
4,228
4,376
4,489
Patient Month Claims
2,732,001
2,826,580
2,897,424
1
Includes patient months and ESRD facilities with Medicare hemodialysis-equivalent treatments >0 from the outpatient dialysis facility claims and measured composite rate costs from the cost reports.
D. Data for the Case-Mix Analyses, 2004-2006
The case-mix analyses required data for several patient and facility characteristics. After the exclusion of statistical outliers or otherwise unusable records, the data shown in Table 4 were reduced to yield the data set used in the primary analyses for both composite rate and separately billable services. Table 5 summarizes these records.
Table 5—Medicare Dialysis Patients, Treatments, ESRD Facilities, and Claims Final Analysis Sample by Year, 2004-2006
1
2004
2005
2006
Pooled,
2004-2006
Medicare Dialysis Patients
290,102
298,314
303,967
453,789
Hemodialysis Equivalent Dialysis Treatments
31,450,123
32,303,018
33,148,355
96,901,496
ESRD Facilities
3,794
3,948
4,072
4,250
Patient Month Claims
2,604,033
2,685,413
2,751,735
8,041,181
1
Based on the sample of dialysis patients and ESRD facilities included in the case-mix analyses for both composite rate and separately billable services.
The primary case-mix analyses relied on pooled data from CY 2004 through CY 2006, which included a total of 8,041,181 Medicare ESRD patient months. The case-mix analyses included 95.4 percent of patients with Medicare outpatient dialysis claims during CYs 2004-2006. Over the 3-year period, the case-mix analyses included data for 453,789 Medicare ESRD patients treated in 4,250 ESRD facilities.
E. Prescription Drug Event Data, CY 2007
We obtained the total CY 2007 payments for Medicare Part D drugs from Part D claims submitted by prescription drug plans (drugs formerly covered under Part D prior to the ESRD PPS). The claims were restricted to Part D claims submitted on behalf of Medicare ESRD beneficiaries with valid type 72X claims in CY 2007 and Part D coverage. We used claims for the following classes of drugs to calculate the estimated Part D payments for drugs used to treat ESRD (formerly covered under Part D) for inclusion in the ESRD PPS payment bundle:
Drug class
Ingredient name
Vitamin D analogue
Calcitriol.
Paracalcitol.
Doxercalciferol.
Calcimimetic
Cinacalcet hydrochloride.
Oral phosphate binder
Lanthanum carbonate.
Calcium acetate.
Sevelamer hydrochloride.
Sevelamer carbonate.
The National Drug Codes (NDCs) used to identify the above drugs in the Part D claims are shown below in Table 6.
Table 6—List of National Drug Codes Used To Identify Former Part D Drugs for the ESRD PPS
Ingredient name
NDC
Strength
Trade name
Drug Class: Vitamin D Analogues
Calcitriol
260530051
0.25 MCG
Calcitriol Capsules.
540007
0.25 MCG
Calcitriol Capsules.
930657
0.25 MCG
Calcitriol Capsules.
930658
0.5 MCG
Calcitriol Capsules.
1791578
0.25 MG
Calcitriol Capsules.
1791603
0.5 MCG
Calcitriol Capsules.
4800657
0.25 MCG
Calcitriol Capsules.
4800658
0.5 MCG
Calcitriol Capsules.
110140011
0.25 MCG
Calcitriol Capsules.
142880007
0.25 MCG
Calcitriol Capsules.
178560007
0.25 MCG
Calcitriol Capsules.
548684584
0.25 MCG
Calcitriol Capsules.
551548251
0.25 MCG
Calcitriol Capsules.
647250048
0.25 MG
Calcitriol Capsules.
647250049
0.5 MG
Calcitriol Capsules.
543120
1 MCG/ML
Calcitriol Oral Solution.
682589030
0.5 MCG
Calcitriol Capsules.
548683461
0.25 MCG
Rocaltrol Capsules.
604910562
0.5 MCG
Rocaltrol Capsules.
49115
1 MCG/ML
Rocaltrol Oral Solution.
Paricalcitol
744314
2 MCG
Zemplar Capsules.
744315
4 MCG
744317
1 MCG
110140056
2 MCG
110140057
4 MCG
242360664
1 MCG
511294272
1 MCG
551540001
1 MCG
551546971
1 MCG
Doxercalciferol
110140017
0.5 MCG
Hectorol Capsules.
110140018
2.5 MCG
511293550
2.5 MCG
584680120
0.5 MCG
584680122
584680121
2.5 MCG
Drug Class: Calcimimetic
Cinacalcet Hydrochloride
682589225
30 MG
Cinacalcet HCL Tablet.
632850074
66 MG
Sensipak Tablets.
1791845
30 MG
Sensipar Tablets.
548685616
30 MG
Sensipar Tablets.
555130073
33 MG
Sensipar Tablets.
555130074
66 MG
Sensipar Tablets.
555130075
99 MG
Sensipar Tablets.
632850073
30 MG
Sensipar Tablets.
632850075
K99 MG
Sensipar Tablets.
Drug Class: Oral Phosphate Binder
Lanthanum Carbonate
540920252
500 MG
Fosrenol Chewable Tablets.
540920253
750 MG
540920254
1000 MG
635520250
750 MG
635520251
1000 MG
635520252
500 MG
Calcium Acetate
540026
667 MG
Calcium Acetate Capsules.
142880954
667 MG
Calcium Acetate Capsules.
597306402
667 MG
PhosLo Gelcaps.
1791371
667 MG
PhosLo Tablets.
1791934
PhosLo Tablets.
522680200
667 MG
PhosLo Tablets.
548683460
667 MG
PhosLo Tablets.
548685691
PhosLo Tablets.
647250260
667 MG
PhosLo Tablets.
Sevelamer Hydrochloride
178560020
400 MG
Crenagel Tablets.
260530308
800 MG
Renagel Tablet.
260530394
400 MG
Renagel Tablet.
6155613
800 MG
Renagel Tablets.
178560021
800 MG
Renagel Tablets.
242360660
400 MG
Renagel Tablets.
511293461
800 MG
Renagel Tablets.
548685615
800 MG
Renagel Tablets.
551549726
400 MG
Renagel Tablets.
551549727
800 MG
Renagel Tablets.
580160778
800 MG
Renagel Tablets.
584680020
400 MG
Renagel Tablets.
584680021
800 MG
Renagel Tablets.
613920721
400 MG
Renagel Tablets.
647250284
400 MG
Renagel Tablets.
647250285
800 MG
Renagel Tablets.
654970020
400 MG
Renagel Tablets.
654970021
800 MG
Renagel Tablets.
675440656
800 MG
Renagel Tablets.
682990002
400 MG
Renagel Tablets.
682990021
800 MG
Renagel Tablets.
584680130
800 MG
Renvela Tablets.
711144207
403 MG
Sevelamer Hydrochloride Capsules.
68258-9013
800 MG
Sevelamer Hydrochloride Tablets.
68258-9070
400 MG
Sevelamer Hydrochloride Tablets.
Sevelamer Carbonate
68299-0130
800 MG
Renvela Tablets.
Table 7 shows the number of Medicare ESRD beneficiaries for which valid type 72X claims were filed in CY 2007, number of ESRD beneficiaries with Part D drug coverage from PDP plans, and number of beneficiaries with Part D claims for the above oral drugs. CY 2006 data are shown for comparison purposes only, as they were not used to calculate the ESRD base rate.
Table 7—Medicare Dialysis Patients With Payments for Part D Drugs, 2006 and 2007
2006
Patients
%
2007
Patients
%
ESRD patients with Medicare payments on outpatient dialysis facility claims *
324,836
328,841
ESRD patients with Medicare payments on outpatient dialysis facility claims and any payment for Part D drugs
207,035
63.74
219,451
66.73
ESRD patients with Medicare payments on outpatient dialysis facility claims and any payment for Part D drugs included in the ESRD PPS **
159,570
49.12
175,132
53.26
** Includes “type 72X” outpatient institutional claims.
** Includes Vitamin D Analogs (Calcitriol, Paracalcitol, and Doxercalciferol), Calcimimetics (Cinacalcet Hydrochloride), and Oral Phosphate Binders (Lanthanum Carbonate, Calcium Acetate, Sevelamer Hydrochloride, and Sevelamer Carbonate).
VI. Analytical Approach
In this proposed rule, we are presenting a case-mix model that UM-KECC has developed using standard techniques of multivariate regression. In multivariate or multiple regression, a set of independent or predictor variables are tested to determine the extent they can predict or “explain” the variation in a related dependent or predicted variable. The unit of analysis in such models is important because the level at which resource use can be measured differs for composite rate and separately billable services. We can measure separately billable services for individual patients using the payment information obtained from Medicare claims. However, the available measure of resource use for composite rate services consists of costs from the Medicare cost reports. These costs do not distinguish patient-specific differences within ESRD facilities, because they combine treatment costs for all ESRD patients.
In the Secretary's February 2008 report to Congress, we described two approaches for developing the case-mix models using multivariate regression. Under the first approach, referred to as the one-equation model, composite rate costs and separately billable payments for all patients treated in each ESRD facility are added together. When the result is divided by the number of corresponding ESRD treatments, the predicted or dependent variable of bundled services reflects a facility-level model of combined composite rate and separately billable services. This approach has the relative simplicity of having the case-mix adjustments based on a single statistical model estimated at the facility level.
The other approach, which we refer to as the two-equation model, relies on two separate regression equations, one to predict variation in composite rate costs at the facility level, and the other to predict variation in separately billable payments at the patient level. This approach has the advantage of measuring patient-level variation in the utilization of separately billable services available from the Medicare claims. It also permits combining separate composite rate and separately billable regression equations into a single payment equation.
The case-mix model, which we have adopted in developing the proposed ESRD PPS, is based on the two-equation model. The basis for our selection of the two-equation model was set forth in the Secretary's February 2008 report to Congress:
In an extensive series of analyses, UM-KECC determined that application of the one-equation bundled PPS model (that is, a facility-level model) yielded very different regression coefficients for a number of potential case-mix adjusters compared to the two-equation bundled PPS model. These differences were attributed to the correlation between the tested case-mix variables and unobserved facility characteristics. UM-KECC concluded that a patient-level model would have the advantage of reducing potential bias related to unobserved facility characteristics, would result in more precise coefficient estimates, and yield greater stability in these estimates over time. A patient-level model for the separately billable services can be combined with a facility-level model for composite rate services to yield a single payment equation.
This is the approach adopted to develop the case-mix adjusters for the ESRD PPS described in this proposed rule.
For those interested, a more extensive and detailed mathematical explanation of the two-equation model used to develop the case-mix adjusters is contained in UM-KECC's February 2008 report,
End Stage Renal Disease Payment System: Results of Research on
Case-Mix Adjustment for an Expanded Bundle
(see pp. 38-44 and Technical Appendix C).
II. Development of ESRD PPS Base Rate
The patient-specific case-mix adjustments developed from the two-equation regression model for composite rate and separately billable services, which we have described in section VIII. of this proposed rule, would be applied to a base payment rate per treatment (“base rate”). The base rate would also be adjusted to reflect ESRD facility differences in area wage levels using a proposed wage index as described in section VIII.C. In this section, we describe the calculation of the proposed ESRD base rate, as set forth in proposed § 413.220, and the computation of the reduction factors used to adjust the 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. The base rate presented in this proposed rule, and defined in proposed § 413.171, was calculated entirely from CY 2007 Medicare claims data. The proposed base rate, which represents the average Medicare allowable payment (MAP) for composite rate and separately billable services, was developed from CY 2007 claims data. We used claims data for CY 2007 in connection with the preparation of this proposed rule because such data were the latest available. We expect to have claims data for CY 2008 and partial claims information for CY 2009 in connection with our preparation of the final rule. Comparing per treatment payment amounts developed from available claims data for CYs 2007, 2008, and 2009 would permit a determination as to which year resulted in the “lowest per patient utilization” of dialysis services as required in accordance with section 1881(b)(14)(A)(ii) of the Act. The components of the proposed base rate based on CY 2007 claims data and the methodology used to project the base rate to CY 2011 (the first year of the ESRD PPS), are described below.
A. Calculation of the CY 2007 Unadjusted Rate per Treatment
Sections 1881(b)(14)(A)(i) and 1881(b)(14)(B) of the Act, as added by MIPPA, specify the renal dialysis services, and other items and services, which must be included in the payment bundle of the ESRD PPS. Table 8 shows the payments for the various components which comprise the renal dialysis services which we propose to include in our development of the base rate using available CY 2007 claims data, in accordance with our interpretation of the statute. We first describe each of the components of the ESRD PPS payment bundle included in the CY 2007 unadjusted rate per treatment. Thereafter, we describe the adjustments used to calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per treatment.
BILLING CODE 4120-01-P
EP29SE09.001
BILLING CODE 4120-01-C
1. Composite Rate Services
The first component of the ESRD PPS payment bundle shown in Table 8 is “Outpatient dialysis and other composite rate services”. This line item refers to total CY 2007 payments for composite rate services as obtained from ESRD facility claims (bill type 72X claims). This total includes all composite rate payments to ESRD facilities, including exception payments made in accordance with § 413.182 through § 413.186. Claims from ESRD facilities that did not have a valid county code, such that the relevant CBSA-based wage index (see section VIII.C.) could not be determined, were excluded. In addition, claims for patients with a missing birth date, which is necessary in order to calculate the basic case-mix adjustment under the composite payment system, were also excluded.
2. Dialysis Support Services
We computed a total amount for the next component of the ESRD PPS payment bundle shown in Table 8, “Dialysis support services”. This total represents total payments for support services furnished to Method II home dialysis patients, and reported under subcategory 5 of revenue codes 082X through 085X on the type 72X claims.
3. Part B Drugs and Biologicals
The next component of the ESRD PPS bundle shown in Table 8 is “Part B drugs and biologicals”. We found that total payments for the top 11 Part B drugs and biologicals reported on the type 72X claims, accounted for 99.7 percent of total spending for Part B drugs. Monthly payments for Epogen were capped to reflect no more than 30,000 units per treatment, as amounts in excess of this value were considered clinically implausible.
4. Laboratory tests
Another component of the ESRD PPS bundle shown in Table 8 is “Laboratory tests billed by dialysis facilities or ordered by physicians receiving monthly capitation payments for treating ESRD patients”. Payments for laboratory tests represent the total amount paid to dialysis facilities for outpatient laboratory tests billed on the type 72X claims, as well as payments for laboratory tests ordered by physicians receiving MCP amounts and billed on carrier claims. We identified laboratory tests ordered by physicians receiving MCP using the list of physicians for CY 2006, which was the latest available list at the time of this proposed rule. The estimates for total laboratory payments will be updated using the list of CY 2007 MCP physicians in connection with the publication of the final rule.
5. DME Supplies and Equipment
“DME supplies and equipment” is another component of the ESRD PPS payment bundle. Payments for these items and services were obtained from the CMS 1500 claims for Method II home patients.
6. Supplies and Other Services Billed by Dialysis Facilities
This category of the ESRD PPS payment bundle primarily includes payments for syringes used in the administration of intravenous drugs during the provision of outpatient dialysis. These supplies and services were billed by the dialysis facilities on the type 72X claims.
7. Former Part D Drugs
This amount represents total payments on behalf of the ESRD beneficiaries with Part D coverage in CY 2007 for Part D drugs and biologicals which we consider furnished for the treatment of ESRD. These drugs and biologicals, which are identified by class below, were obtained from CY 2007 Part D claims submitted on behalf of the Medicare ESRD beneficiaries with valid type 72X claims in CY 2007 with Part D coverage, using the NDC codes for the following drugs and biologicals:
Vitamin D Analogues
Calcitriol
Paracalcitol
Doxercalciferol
Calcimimetic
Cinacalcet hydrochloride
Oral phosphate binder
Lanthanum carbonate
Calcium acetate
Sevelamer hydrochloride
Sevelamer carbonate
The NDC codes used to identify the above drugs and biologicals are shown in the Appendix in Table C.
The number of Medicare ESRD beneficiaries for which valid type 72X claims were filed in CY 2007, number of ESRD beneficiaries with Part D drug coverage, and number of beneficiaries with Part D claims for the specified drugs and biologicals noted above, are shown in Table 9. CY 2006 data are also shown in Table 9 for comparison purposes.
Table 9—Medicare Dialysis Patients With Payments for Part D Drugs, 2006 and 2007
2006
Patients
%
2007
Patients
%
ESRD patients with Medicare payments on outpatient dialysis facility claims *
324,836
328,841
ESRD patients with Medicare payments on outpatient dialysis facility claims and any payment for Part D drugs
207,035
63.74
219,451
66.73
ESRD patients with Medicare payments on outpatient dialysis facility claims and any payment for Part D drugs included in the ESRD PPS **
159,570
49.12
175,132
53.26
* Includes “type 72X” outpatient institutional claims.
** Includes Vitamin D Analogs (Calcitriol, Paracalcitol, and Doxercalciferol), Calcimimetics (Cinacalcet Hydrochloride), and Oral Phosphate Binders (Lanthanum Carbonate, Calcium Acetate, Sevelamer Hydrochloride, and Sevelamer Carbonate).
The payment total for former Part D drugs includes payments by Medicare prescription drug plans, and all payments made by or on behalf of ESRD beneficiaries for the specified drugs. As noted in Table 9, the payment total for former Part D drugs only includes data for the 66.73 percent of ESRD beneficiaries who were enrolled in Part D. As a result, we do not have patient-specific information on the cost of drugs (part D equivalent drugs) for the remaining third of ESRD beneficiaries who do not have Part D coverage. To the extent these beneficiaries have drug coverage through their employer or other insurance, we do not have access to specific usage or payment information for these medications. Nonetheless, when the ESRD PPS is implemented January 1, 2011, former
Part D drugs would become renal dialysis services in accordance with section 1881(b)(14)(ii)(B) of the Act. As such, ESRD facilities would be responsible for providing ESRD-related oral drugs formerly covered under Part D to their patients.
We are considering use of a proxy to capture the costs associated with ESRD-related drugs for those patients without Part D coverage. One possible approach would be for us to include payments under the Retiree Drug Subsidy (RDS) program which is described below. We believe that as the RDS payments could be made for ESRD-related drugs under title XVIII of the Act, use of RDS data would be consistent with section 1881(b)(14)(A)(ii) which requires that in implementing the ESRD PPS, the Secretary must ensure that the estimated total amount of payments under this title for 2011 for renal dialysis services equals 98 percent of the estimated total amount of payments that would have been made under this title if the ESRD PPS were not implemented.
The RDS program was enacted in December 2003 by section 101 of the MMA. The program, which was effective January 1, 2006, was designed to support existing retiree benefit arrangements by providing subsidy payments to plan sponsors (that is, employers and unions). Subsidy payments to qualifying drug plan sponsors (for example, employers, unions) equal 28 percent of each qualifying retiree's allowable costs for prescription drugs otherwise covered by Medicare Part D, that are attributable to such drug costs between an applicable cost threshold and cost limit. For plan years ending in 2007, the applicable cost threshold is $265 and the cost limit is $5350.
Based on CMS' Office of the Actuary's most recent CY 2007, we provided subsidy payments totaling $3.8 billion on behalf of 7.0 million beneficiaries. Plans submit aggregate qualifying cost data and a list of eligible beneficiaries. We could determine the number of ESRD qualifying covered retirees under the RDS as a percentage of all qualifying covered retirees under RDS. We could further estimate the ESRD-related percentage of the $3.8 billion in subsidy payments and add this amount to the estimated aggregate payments in 2007. We note that since we do not receive patient-specific information on drug usage under the RDS program, it would not be possible to capture the effect of these drugs on the patient and facility-level adjustment factors. We refer readers to 42 CFR § 423.880 through § 423.894 for more information on the RDS provisions. We invite public comment on this approach and other possible approaches to enable us to capture drug payment information for all Medicare ESRD patients.
8. Total MAP
The total MAP amount represents the total payments made in CY 2007 for the composite rate and separately billable categories described above (that is, the sum of the payments for the items and services described in 1. through 7.) We propose to use the total MAP amount as the ESRD PPS base rate amount.
9. Total Medicare Hemodialysis-Equivalent Sessions
In order to calculate the proposed ESRD PPS base rate per treatment, it was necessary to divide the total MAP amount described above by the number of Medicare HD-equivalent sessions. The number of Medicare HD-equivalent sessions represents the total Medicare treatments for outpatient dialysis as reported on the type 72X claims submitted by dialysis facilities. PD patient weeks were converted to HD-equivalent sessions. For this purpose one week of PD was considered equivalent to three HD treatments. Accordingly, a patient on PD for 21 days would have (21/7) x 3 or 9 HD-equivalent sessions. In determining the total number of Medicare treatments, the number of HD-equivalent sessions were capped at 20 per patient per month. We propose to use the total number of CY 2007 Medicare HD-equivalent dialysis sessions, 36,523,791, to calculate the ESRD PPS base rate.
10. Average MAP per Treatment
We divided the total MAP in item 8, $9,239,987,362, by the total Medicare hemodialysis-equivalent sessions in item 9, 36,523,791, to yield an unadjusted rate per treatment for renal dialysis services in CY 2007. This unadjusted rate per treatment is $252.99. We propose to update this per treatment amount to reflect CY 2011 prices, and to standardize it to eliminate the effects of the case-mix and wage index adjustments in order to ensure duplicate payments do not occur under the ESRD PPS through the subsequent introduction of these variables in the payment formula. We also propose to further reduce the projected CY 2011 payment rate for estimated outlier payments, and the budget neutrality offset as set forth in sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, respectively. This is the proposed amount per treatment that would be multiplied under the ESRD PPS to reflect patient-specific differences in case-mix, and other adjustments as set forth in section 1881(b)(14)(D) of the Act. We refer to this projected CY 2011 payment rate, after application of the standardization, outlier, and budget neutrality offsets, as the ESRD PPS base rate. The proposed definition of the base rate is set forth in proposed § 413.171. Our proposed methodology for calculating the base rate to reflect the standardization, outlier, and budget neutrality reductions is explained in the sections that follow.
B. Determining the Update Factors for the Budget-Neutrality Calculation
In order to estimate payments under the current payment system for each facility in CY 2011, the first year of the ESRD PPS, the components of the CY 2007 unadjusted per treatment rate were updated to reflect estimated 2011 prices, using the methodology as described in greater detail below. It is necessary to estimate 2011 payments under the current ESRD payment system (including all separately billable items) for each facility in order to meet the statutory budget-neutrality requirement for the ESRD PPS. Section 1881(b)(14)(A)(ii) of the Act requires that the ESRD PPS payment system be 98 percent budget neutral in 2011. In other words, the estimated total amount of payments under the ESRD PPS in 2011, including any payment adjustments, must equal 98 percent of the estimated total amount of payments for renal dialysis services that would have been made with respect to services in 2011 if the ESRD PPS system had not been implemented. Therefore, we must first estimate what ESRD facilities would have been paid under the current system in CY 2011, by updating the 2007 payments to reflect 2011 prices. We then divide the total estimated CY 2011 payments by the number of CY 2007 treatments to determine the CY 2011 average payment per treatment. We do not make adjustments for future changes in treatments as this would require us to make assumptions about patient specific characteristics. If we were to project CY 2011 treatments we would increase the current basic case-mix adjusted composite payments by the same amount. This would in effect have no impact on the calculation of the per treatment amount. This CY 2011 unadjusted per treatment payment amount becomes the basis for meeting the budget neutrality requirement. Below we describe the update factors used to estimate CY 2011 payments for each component.
1. Composite Rate Services
In order to update the basic case-mix adjusted composite payments to 2011,
we began with the CY 2009 base composite rate ($133.81) and the CY 2009 drug add-on percentage of 15.2 percent. In accordance with section 153(a) of MIPPA and 1881(b)(14) of the Act, we updated the composite rate by 1.0 percent for CY 2010 and by the estimated ESRD bundled market basket percentage increase minus 1 percentage point (1.5 percent) for CY 2011 resulting in a 2011 composite rate of $137.18. A full description of the ESRD bundled (ESRDB) market basket is presented in section XII. of this proposed rule. We are proposing to use this base composite rate for CY 2011, which includes ESRD bundled market basket minus 1 percentage point, to update the CY 2010 composite rate for purposes of establishing the ESRD PPS base rate, given that we interpret section 1881(b)(14)(F)(ii) to require us to update the composite rate portion of the blend by the market basket percentage minus 1.0 percentage point in all years of the transition (which includes CY 2011). Therefore, using the market basket in this way would be a consistent approach. As described in section XII. of this preamble, we are proposing a market basket increase of 2.5 percent for CY 2011. Therefore, we are proposing a 1.5 percent update to the composite rate for CY 2011, resulting in a CY 2011 composite rate of $137.18 ($135.15 * 1.015). We note that the drug add-on percentage is reduced from 15.2 to 14.8 as a result of the increases to the composite rate in CYs 2010 and 2011. Since the drug add-on is calculated as percentage of the base composite rate, the drug add-on percentage decreases with increases in the composite rate. The CY 2009 Physician Fee Schedule final rule provides details on why increases to the base composite rate require decreases to the drug add-on percentage to ensure that the total drug add-on dollar amount remains the same (73 FR 69755). We intend to update the drug add-on, if necessary, for the ESRD PPS final rule.
We used the applicable facility-level and patient-level basic case-mix adjustments from the CY 2007 claims to re-compute payment using the applicable basic case-mix adjustments applied to a 100 percent CBSA wage-adjusted composite rate using the most recently available ESRD wage index, which is the CY 2009 final rule ESRD wage index with a 0.60 floor. We did this to use the most recent wage indexes available in estimating 2011 payments. The other components of the bundle, which are discussed below do not have payments which are computed with wage indexes. We used a 0.60 floor because we anticipate that floor will be in effect in CY 2011. We have been reducing the wage index floor by .05 every year and we expect to continue this policy. (More information on CBSAs and the wage index floor is presented in section VIII.C.1 of this proposed rule).
In addition, payment rates to facilities that have chosen to retain their exceptions under the basic case-mix composite payment system are not updated because, once approved, the exception amounts were fixed payment amounts, and hence the 2007 amounts represent the 2011 amounts. See the CY 2005 PFS final rule for a discussion regarding the application of statutory increases to exception amounts (69 FR 66332).
2. Self-Dialysis Support Services for Method II Patients
The allowance per month under Method II for home dialysis support services may not exceed $121.15 per month for all forms of dialysis. Since home dialysis support services for Method II patients are subject to a monthly capitation payment that is not increased, the CY 2007 amounts represent the CY 2011 amounts.
3. Part B Drugs and Biologicals
Under the current system, payments for ESRD drugs and biologicals under Part B are paid on average sales price plus 6 percent (ASP+6 percent) methodology. We reviewed ASP prices for four quarters of 2006, 2007, 2008 and two quarters of 2009 for the top eleven separately billable drugs. Given the variability shown in the prices over the last several years and the lack of a clear pattern, we propose to use the 2009 prices as proxy for 2011 values. At the time of the final rule, we will reevaluate this decision based on additional quarters of ASP drug pricing data. Thus, we used the growth from the average of the quarters for 2007 to the average of the two available quarters of 2009. For other ESRD-related Part B drugs, we used a weighted average of the top eleven Part B drugs to update those drug prices to 2011. Since the top eleven drugs represent 99.7 percent of total separately billable Part B drug payments, we believe that the overall weighted average was representative for the remaining 0.3 percent. See Table 10 for the growth factor that was applied to the 2007 drug payment levels.
Table 10
Drugs and biologicals
Price
updates
(percent)
EPO
1.7
Paricalcitol
−2.8
Sodium_ferric_glut
−0.5
Iron_sucrose
4.8
Levocarnitine
−19.0
Doxercalciferol
17.8
Calcitriol
−14.1
Vancomycin
−11.1
Alteplase
2.3
Aranesp
−8.2
Daptomycin
13.9
Other injectables
1.1
4. Laboratory Tests
We updated payments for laboratory tests paid through the laboratory fee schedule to 2011 using projected CPI-U increases and any legislative adjustments that would be applied to this fee schedule. This is the statutory update required for lab services. This amount totaled a growth of 5.1 percent from 2007 to 2011.
5. DME Supplies and Equipment
Since payments for supplies and equipment for Method II patients are subject to a monthly capitation payment that has not increased, the CY 2007 amount represents the 2011 amounts.
6. Supplies and Other Services
This category primarily includes the $0.50 administration fee for separately billable Part B drugs. Since this fee has not increased, there was no price update.
7. Former Part D Drugs
Former Part D drugs were updated by the growth rates for overall prescription drug prices that were used in the National Health Expenditure Projections. See
http://www.cms.hhs.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp#TopOfPage
for further reference on the National Health Expenditure Projections. Since we do not currently have enough data to establish a trend for Part D prices and since we use this price growth in the overall Part D projections, we believe it is an adequate proxy. This amount totaled a growth of 12.2 percent from 2007 to 2011.
Once we determined updated CY 2011 payments for each component of the items and services discussed above, we added the components together to determine each ESRD facility's total payments under the current payment system in CY 2011. These estimated total 2011 MAPs divided by the total 2007 Medicare HD-equivalent sessions
yield the unadjusted per treatment base rate for renal dialysis services in CY 2011 of $261.58.
We used $261.58 as the starting point for further adjustments in determining the proposed ESRD PPS per treatment base rate. The 2011 unadjusted average payment per treatment of $261.58 was then used in the payment model to estimate total payments under the proposed ESRD PPS in CY 2011. These CY 2011 ESRD PPS estimated payments were based on treatment data from the CY 2007 claims file.
C. Standardization Adjustment
CY 2011 payments under the proposed ESRD PPS were initially estimated without a budget-neutrality adjustment, using the unadjusted CY 2011 average payment per treatment amount of $261.58. We calculated the PPS payments using treatment counts from the 2007 claims file. The wage index and all applicable proposed patient-level and facility-level adjustments were applied to the unadjusted CY 2011 average payment per treatment to determine the estimated payment amount under the proposed ESRD PPS for each treatment and ESRD facility. We note that to simulate payments, we used the latest available final CY 2009 ESRD wage indexes, with no floor. While we anticipate a 0.60 floor for the ESRD wage index for the current basic case-mix composite payment system, we are proposing to eliminate the wage index floor for the ESRD wage index to be used for the proposed ESRD PPS in CY 2011 (see section VIII.C.1 for a detailed discussion of the ESRD wage index).
Next, we standardized the ESRD PPS payments in order to account for the overall positive effects of the proposed ESRD PPS case-mix patient and facility adjustment factors and wage indexes. We must standardize payments in order to ensure that total projected PPS payments are equal to the payments under the current basic case-mix adjusted composite payment system. In order to standardize the ESRD PPS payments, we compared the proposed ESRD PPS amounts calculated from the treatment counts in the 2007 claims file to the current system payments from the 2007 Medicare claims file updated to 2011 (as explained in greater detail in section VII.B. above). A standardization factor was calculated by dividing total estimated payments in 2011 under the current payment system by estimated payments under the proposed ESRD PPS in 2011. The standardization factor was calculated to be 0.7827, or a reduction of 21.73 percent. As a result, the CY 2011 unadjusted per treatment base rate of $261.58 was reduced by 21.73 percent to $204.74.
We are proposing that the base rate per treatment be further modified by the adjustments described below.
D. Calculation of the Budget-Neutrality Adjustments
a. Outlier Adjustment
Section 1881(b)(14)(D)(ii) of the Act provides that the ESRD PPS shall include a payment adjustment for high cost outliers due to unusual variations in the type or amount of medically necessary care, including variations in the amount of erythropoiesis-stimulating agents necessary for anemia management. We believe the payment adjustment under section 1881(b)(14)(D)(ii) of the Act for outlier cases should be applied in a budget neutral manner, as doing so will ensure that estimated total payments under the proposed ESRD PPS equals 98 percent of the estimated total amount of payments for renal dialysis services that would have been made with respect to services in 2011 if the ESRD PPS system had not been implemented.
To ensure that the proposed outlier policy under the ESRD PPS is budget neutral, we propose to reduce the base rate by the proposed outlier percentage, or 1 percent. Specifically, we propose to reduce the base rate from $204.74 to $202.69. We did this to account for the 1 percent of aggregate ESRD PPS payments estimated to be made as outlier payments. We then re-estimated the prospective payment amounts with the new reduced base rate of $202.69, allowing 1 percent of payments to be outliers. The appropriate outlier payment amount for each treatment was determined as described in greater detail in section X.A.2 of this proposed rule. The outlier amount was computed for all treatments, and the total outlier payment, across all treatment amounts was added to the prospective payment amount for all treatments.
In summary, we are proposing an outlier percentage of 1 percent; therefore, the proposed base rate per treatment must include a reduction of 1 percent. Thus the proposed standardized base rate of $204.74 was reduced by 1 percent to yield a proposed base rate of $202.69.
b. 98 Percent Budget Neutrality Adjustment
Section 1881(b)(14)(A)(ii) of the Act requires that the proposed ESRD PPS payment system be 98 percent budget neutral. In other words, the estimated total amount of payments under the ESRD PPS in 2011, including any payment adjustments, must equal 98 percent of the estimated total amount of payments for renal dialysis services that would have been made with respect to services in 2011 if the ESRD PPS had not been implemented. Therefore, we reduced the 2011 standardized base rate per treatment, which was already adjusted for 1 percent outlier payments, by an additional two percent, from $202.69, to yield a proposed base rate of $198.64.
To summarize, the proposed base rate per treatment with an outlier adjustment and budget neutrality was calculated to be $198.64. This amount includes a 21.73-percent reduction from $261.58 to account for standardization to the projected CY 2011 current system payment per treatment, a 1-percent reduction to account for proposed outlier payments, and a 2-percent reduction for the required 98-percent budget neutrality. The outlier policy we are proposing is set forth at proposed § 413.237.
E. Calculation of Transition Budget-Neutrality Adjustment
Section 1881(b)(14)(E)(i) of the Act requires the Secretary to provide “a four-year phase-in” of the payments under the ESRD PPS for renal dialysis services furnished on or after January 1, 2011, with payments under the ESRD PPS “fully implemented for renal dialysis services furnished on or after January 1, 2014.” Although the statute uses the term “phase-in,” for purposes of the proposed ESRD PPS, we will use the term “transition” to be consistent with other Medicare payment systems.
Section 1881(b)(14)(E)(ii) of the Act permits ESRD facilities to make a one-time election to be excluded from the transition. An ESRD facility that elects to be excluded from the transition receives payments for renal dialysis services provided on or after January 1, 2011 based on 100 percent of the payment rate under the ESRD PPS, rather than a blended payment based in part on the payment rate with regard to the current basic case-mix adjusted composite payment system and in part on the payment rate under the ESRD PPS. The implementation of the transition is discussed in section XIII.A of this proposed rule. The transition period policy is set forth in proposed § 413.239.
Section 1881(b)(14)(E)(iii) of the Act also requires that we make an adjustment to payments for renal dialysis services provided by ESRD facilities during the transition so that the estimated total amount of payments under the ESRD PPS, including payments under the transition, equals
the estimated total amount of payments that would otherwise occur under the ESRD PPS without such a transition. The transition budget neutrality adjustment would be comprised of two parts. First, we would make a payment adjustment under the basic case-mix adjusted composite payment system portion of the blended rate during the transition, in addition to computing a factor that would make the estimated total amount of payments under the ESRD PPS including payments under the transition equal the estimated total amount of payments that would otherwise occur without such a transition. We describe each part in detail in the paragraphs that follow.
First, to ensure that estimated total payments during the transition equal the estimated total amount of payments that would otherwise occur without such a transition, in addition to accounting for payments for composite rate services and items and services that are separately billable under Part B, it is necessary to reflect payments for ESRD-related Part D drugs that are currently separately payable under Title XVIII. Specifically, as we discussed in section III. of this proposed rule, section 1881(b)(14)(B) of the Act defines renal dialysis services to include, among other things, certain drugs and biologicals, including drugs and biologicals that were separately payable under Parts B and D. Under the current ESRD basic case-mix adjusted composite payment system, ESRD facilities generally do not furnish oral drugs and biologicals to their ESRD patients. ESRD patients currently acquire these drugs and biologicals either through Medicare Part D, private insurance, or independently.
As described in section III. of this proposed rule, we are proposing to include renal dialysis service drugs formerly covered under Part D under the proposed ESRD PPS. As a result, we are further proposing that ESRD facilities would be required to furnish these and any other self-administered ESRD-related drugs to beneficiaries either directly or under arrangement.
As further discussed in section VII. of this proposed rule, the cost of the drugs and biologicals currently separately payable under Part D that we propose to be designated as Part B renal dialysis services for purposes of the proposed ESRD PPS, would be reflected in the ESRD PPS portion of the blended payment. That is, once the ESRD PPS is implemented on January 1, 2011, ESRD-related Part D drugs would become Part B renal dialysis service drugs and would no longer be separately covered under Part D. This is due to section 1881(b)(14)(A)(1) of the Act, which specifies that after January 1, 2011, a single payment is made under title XVIII for renal dialysis services furnished by ESRD facilities in lieu of any other payment for such services, as well as the new statutory definition under section 1881(b)(14)(B) of the Act. In addition, we note that ESRD-related Part D drugs are not part of the basic case-mix adjusted composite payment system or otherwise covered under Part B (in contrast to other separately billable ESRD-related items and services). As a result, ESRD facilities that elect to go through the transition would have no mechanism by which to receive payment for former Part D drugs with regard to the basic case-mix adjusted composite payment system portion of the payment blend (though such services would be captured with regard to the portion of the blended payment for the ESRD PPS). Because ESRD-related Part D drug payments would not be included in the portion of the blend based on the basic case-mix adjusted composite payment system, payments to ESRD facilities that elect to go through the transition may be understated during the transition.
Additionally, as required by section 1881(b)(14)(A)(ii) of the Act and described in section VII.D.b of this preamble, the estimated total amount of payments under the proposed ESRD PPS in 2011, including any payment adjustments, must equal 98 percent of the estimated total amount of payments for renal dialysis services under title XVIII that would have been made with respect to services in 2011 if the ESRD PPS system had not been implemented. As we noted, Part D drugs are not part of the basic case-mix adjusted composite payment system or otherwise covered under part B as separately billable ESRD-related items or services. However, because the payments for the ESRD-related Part D drugs proposed for inclusion in the ESRD PPS were made under title XVIII, we are required to include such items in the 98 percent budget neutrality adjustment.
Thus, to be consistent with the 98 percent budget neutrality requirement and to make estimated payments during the transition equal payments without the transition, we propose to provide a $14.00 per treatment adjustment to the portion of the blend with regard to the basic case-mix adjusted composite payment system. This amount is based on the 2011 per treatment ESRD-related Part D drug payments included in the proposed ESRD PPS base rate. We first computed the 2007 per Part D payment per treatment described in section VII.A. We then updated this amount to 2011 by applying the 12.2 percent update factor described in section VII.B.
We further propose that the $14 per treatment adjustment that would be made to the portion of the blend with regard to the basic case-mix adjusted composite payment system would be made without regard to basic case-mix adjustments or wage index adjustments. This is because ESRD-related Part D drugs were not included in the development of the adjustments for the basic case-mix adjusted composite payment system.
We considered an alternative approach for meeting the statutory transition budget neutrality adjustment. Under this approach, we would exclude estimated payments for ESRD-related Part D drugs from the estimated 2011 payments related to the basic case-mix adjusted composite payment system. That is to say, we would not pay ESRD facilities for the ESRD-related Part D drug payment with regard to the basic case-mix adjusted composite payment system portion of the blended payment during the transition, and therefore, we estimate that ESRD facilities may receive smaller blended payment amounts during the transition. Excluding ESRD-related Part D drugs from the basic case-mix adjusted composite payment portion of the blended payment would likely lower blended payments under the transition and, as a result, we estimate that many more facilities would elect to be paid 100 percent of the ESRD PPS rather than electing to go through the transition. These facilities would have to give up their option to go through the transition in order to receive 100 percent ESRD PPS payments for ESRD-related Part D drugs. The transition provides a more gradual change to ESRD PPS for those facilities that would receive lower payments under the proposed ESRD PPS. We believe it is more equitable to provide a $14 per treatment adjustment the portion of the blend related to the basic case-mix adjusted composite payment system. In addition, we believe that the transition budget neutrality adjustment should not change facilities' incentives with respect to whether or not to opt out of the transition. This approach would change the incentives because excluding ESRD-related Part D drugs from portion of the blended payment related to the basic case-mix adjusted composite payment system might lower blended payments under the transition, thereby increasing the incentive to elect to be paid under 100 percent ESRD PPS. This approach also would skew the impact analysis because it compares payment amount related to the basic case-mix adjusted composite
payment system without Part D payments, while payments under the proposed ESRD PPS include payments for Part D drugs. For the impact analysis to accurately represent payments that are included in the proposed ESRD PPS and be consistent with the 98 percent budget neutrality requirement, we believe we need to include payments for ESRD-related Part D drugs in our estimate of what ESRD facilities would be paid in 2011 for both the basic case-mix adjusted composite payment system and the proposed ESRD PPS, had an ESRD PPS not been implemented. For these reasons we rejected this alternative.
Accordingly, in order to make ESRD PPS budget neutral during the transition with respect to ESRD-related Part D drugs, we propose to make a $14 per treatment adjustment to the portion of the blend related to the basic case-mix adjusted composite rate payment system.
The second part of the transition budget neutrality adjustment addresses the overall effect of the ESRD facilities' decision whether to be paid under the transition versus being paid under the ESRD PPS. In the absence of such an adjustment, total payments would be higher under the transition payment system (blended payment amount) than under a 100 percent fully implemented PPS payment system, as we presume that each provider would likely choose the option that is most beneficial to them. In other words, we believe ESRD facilities that estimate that their aggregate payments will be higher under the transition than under the ESRD PPS likely will elect to be paid under the transition. This in turn would increase the total payments paid by CMS, with total payments then likely to exceed the 98 percent budget neutrality target amount, as discussed in section VII.D.b of this proposed rule. We interpret this provision as requiring, during the first 3 years of the transition, a budget neutrality adjustment applied to all payments to ESRD facilities (both those paid under the transition and those electing to be paid under the ESRD PPS) to offset the additional payments to those ESRD facilities that elect to be paid a blended payment under the transition rather than to be paid based on 100 percent of the payment amount under the proposed ESRD PPS. Thus, we are proposing to create a transition budget neutrality adjustment factor to be applied to all payments to ESRD facilities during the transition. This transition budget neutrality adjustment factor is intended to make the estimated total payments under the transition equal our estimate of total payments under the ESRD PPS were there no transition.
One alternative we considered was applying the budget neutrality adjustment factor to the 2011 ESRD PPS base rate only. However, we believe this approach would unfairly penalize those facilities that opt to be paid based on 100 percent of the payment amount under the ESRD PPS, as it would lower all of their payments. Those facilities that are paid on a blended payment methodology would only have 25 percent of their payment lowered in CY 2011, as only 25 percent of the blended payment is based on the payment amount under the proposed ESRD PPS. Thus, in effect, this approach would result in those facilities electing to be paid based on 100 percent of the payment rate under the ESRD PPS subsidizing those electing to be paid under the transition. In addition, we believe that the transition budget neutrality adjustment should not change facilities' incentives with respect to whether or not to opt out of the transition. This alternative would change the incentives by lowering payments under the ESRD PPS by a larger percentage than the blended payments under the transition, thereby increasing the incentive to elect to be paid under the transition. For these reasons we rejected this alternative.
Another alternative we considered was applying the adjustment only to the blended payments for facilities that elect to be paid under the transition. However, we believe that this approach would unfairly penalize those ESRD facilities that choose to be paid under the transition, as it would lower their payments but would not lower the payments to those facilities that elect to be paid based on 100 percent of the payment rate under the ESRD PPS. Similar to the alternative in the previous paragraph, this alternative would also affect ESRD facilities' incentives with respect to whether or not to opt out of the transition, and thus we also rejected this alternative.
We therefore propose to apply the transition budget neutrality adjustment factor to all ESRD payments, including the component of the blended rates based on the current basic case-mix adjusted composite payment system. We propose this approach, because we believe that it would not unfairly penalize one group, it would evenly distribute the effect of the transition budget neutrality adjustment, and it would not change ESRD facilities' incentives with respect to whether to opt out of the transition.
In calculating the transition budget neutrality adjustment factor, we propose to first determine the estimated increase in payments under the transition and then determine an offset factor. In order to do this, we must first make assumptions on which facilities would choose to opt out of the transition and be paid based on 100 percent of the payment rate under the ESRD PPS in 2011. In order to estimate which ESRD facilities will and will not elect to opt out of the transition, we are proposing to estimate aggregate payments for each ESRD facility under both the current basic case-mix adjusted composite payment system, including payments for separately billable services, and the proposed ESRD PPS (based on 100 percent of the payment amount under the ESRD PPS). We are assuming that facilities that would receive higher aggregate payments under the proposed ESRD PPS would elect to be paid based on 100 percent of the payment rates under the ESRD PPS. Conversely, ESRD facilities that would receive higher aggregate payments under the current basic case-mix adjusted composite payment system would elect to be paid the blended rate under the transition.
Based on this approach, we estimate that 36 percent of ESRD facilities will choose to be excluded from the transition and that 64 percent of ESRD facilities will choose to be paid the blended rate under the transition. Consequently, we estimate that during the first year of the transition, total payments to all ESRD facilities would exceed the estimated payments under the ESRD PPS in the absence of the transition. Thus, in order to maintain the 98 percent budget neutrality required by section 1881(b)(14)(E)(iii) of the Act during the initial year of the transition period, we are proposing to reduce all payments to ESRD facilities in CY 2011 by a factor that is equal to 1 minus the ratio of the estimated payments under the ESRD PPS were there no transition (that is, 98 percent of total estimated payments that would have been made under the current basic case-mix adjusted payment system) to the total estimated payments under the transition, or 3.0 percent. For 2011, application of this factor would result in a 3.0 percent reduction in all payments to ESRD facilities. We propose to apply this adjustment to both the blended payments made under the transition and payments made under the 100 percent ESRD PPS. We propose to calculate similar factors for CYs 2012 and 2013 that would allow a blended payment system to be budget neutral to a fully implemented 100 percent ESRD PPS.
We invite comments on the calculation and application of the
proposed two part transition budget neutrality adjustment factor.
VIII. Cost Regression Used To Develop Proposed Payment Adjustment Factors
A. Proposed Regression Analysis
1. Dependent Variables
The proposed two-equation regression approach used to develop the proposed ESRD PPS includes a facility-based regression model for composite rate service, and a patient-level regression model for separately billable services. The measures of resource use that were specified as the dependent variables in each of the two equations are explained below.
a. Average Cost per Treatment for Composite Rate Services
We measured resource use for the maintenance dialysis services included in the current bundle of composite rate services using ESRD facility data obtained from the Medicare cost reports for hospital-based ESRD providers and independent ESRD facilities. The average composite rate cost per treatment for each ESRD facility was calculated by dividing the total reported allowable costs for composite rate services for CYs 2004, 2005, and 2006 (Worksheet B, column 11, rows 7-16 on CMS 265-94; Worksheet I-2, column 11, rows 2-11 on CMS 2552-96) by the total number of dialysis treatments and Worksheet C, column 1, rows 1-10 on CMS 265-94; Worksheet I-4, column 1, rows 1-10 on CMS 2552-96). Continuous ambulatory peritoneal dialysis (CAPD) and continuous cycling peritoneal dialysis (CCPD) patient weeks were multiplied by 3 to obtain the number of hemodialysis equivalent treatments. We point out that our computation of the total composite rate costs included in this per treatment calculation includes costs incurred for training expenses, as well as all costs incurred by ESRD facilities for home dialysis patients. The resulting composite rate cost per treatment was adjusted to eliminate the effects of varying wage levels among the areas in which ESRD facilities are located using the CY 2009 ESRD wage index and the estimated labor-related share of costs from the composite rate market basket. The description of that labor-related share was contained in the Secretary's 2008 Report to Congress. That is, 53.711 percent of each ESRD facility's composite rate cost per treatment was divided by the ESRD wage index to control for area wage differences. No floor or ceiling was imposed on the wage index values used to deflate the composite rate costs per treatment. We applied a natural log transformation to the wage-deflated composite rate costs per treatment to better satisfy the statistical assumptions of the regression model, and to be consistent with existing methods of adjusting for case-mix, in which a multiplicative payment adjuster is applied for each case-mix variable. As with other health care cost data, there was skewness in the cost distribution for composite rate services in which a relatively small fraction of observations account for a disproportionate fraction of costs. Cost per treatment values which were determined to be unusually high or low in accordance with predetermined statistical criteria were excluded from further analysis. (For an explanation of the statistical methodology used to identify outlier composite rate costs per treatment, see pp 45-48 of UM-KECC's February 2008 report.)
b. Average Medicare Allowable Payment (MAP) for Separately Billable Services
Resource use for separately billable dialysis related services was measured at the patient level using the payment data on the Medicare claims for CYs 2004-2006. This time period corresponded to the most recent 3 years of Medicare cost report data that were available to measure resource use for composite rate services. Measures of resource use included the following separately billable services: injectable drugs billed by ESRD facilities, including ESAs; oral forms of ESAs and other oral drugs used to treat ESRD payable under Medicare part D; laboratory services provided to ESRD patients, billed by freestanding laboratory suppliers and ordered by physicians who receive monthly capitation payments for treating ESRD patients, or billed by ESRD facilities; other services billed by ESRD facilities, including support services for Method II home patients; medical equipment and supplies for Method II home patients billed by durable medical equipment suppliers.
We obtained Medicare claims data for separately billable services for CYs 2004-2006 for patient months in which outpatient dialysis was provided and Medicare was the primary payer. For oral drugs (formerly) covered under Medicare part D, we used CY 2007 claims data for ESRD beneficiaries with Medicare part D coverage. Measures of resource use were based on MAPs, which were calculated using the payment data on the claims. Currently, the only payment data available for Part D claims are for CYs 2006 and 2007. However, these data were not available in sufficient time to be included in the development of the proposed separately billable case-mix adjusters, given the lead time necessary for the preparation of the proposed rule. We expect that additional Part D claims data will be available for the preparation of the final rule. Therefore, we intend to include appropriate available payment data from Part D claims for CYs 2006 through 2008 in our development of the regression based case-mix adjusters for the overall payment model, and will address their inclusion in the final rule. Payments for Part D drugs were included in the proposed ESRD base rate, which relied on claims for CY 2007. See section VII.A.7.
Medicare payments were inflated by a factor of 1.25 for services that have a 20 percent patient coinsurance (for example, most injectable drugs) to yield the MAP. For laboratory tests that have no patient coinsurance obligation, the Medicare payment is identical to the MAP. As required under section 1881(b)(14)(B) of the Act, as added by section 153(b)(1) of MIPPA, vaccines are excluded from the ESRD PPS and therefore, were excluded from the computation of separately billable drugs. The MAP amounts do not include the annual part B payment deductible, which may apply to separately billable services because we were unable to determine whether the deductible amount was incurred in connection with another part B service. We point out that the part B payment deductible can apply in connection with any part B service, not just outpatient dialysis related services.
For the case-mix analyses, MAP values based on CY 2004 through 2006 claims were adjusted to approximate drug payments for the current year. In CY 2007 the top 11 separately billed Part B drugs accounted for approximately 99.8 percent of drug expenditures for Medicare ESRD beneficiaries. We repriced the MAPs for these drugs in 2004, 2005, and 2006 by using a ratio. That ratio was obtained by dividing the Medicare payment rate in the first quarter of 2008 by the Medicare payment rate in 2004, 2005, and 2006. This repricing was done for the following injectable drugs: epoetin alfa, darbepoetin alfa (ARANESP®), iron dextran, iron sucrose, sodium ferric gluconate, calcitriol, doxercalciferol, paracalcitol, levocarnitine, alteplase recombinant, and vancomycin. (Although iron dextran was among the top 11 drugs in CYs 2004-2006, it was superseded by daptomycin in CY 2007.) The resulting MAP closely reflects the current prices based on Medicare reimbursement rates. The ratios used to
adjust the MAPs for the 11 specified injectable drugs are shown in Table 11.
BILLING CODE 4120-01-P
EP29SE09.002
BILLING CODE 4120-01-C
The adjusted MAP values were standardized to reflect the number of Medicare outpatient dialysis treatments reported on the claims. This approach is consistent with the unit of payment under the current composite payment system. For patients who received PD during the month, the number of PD days reported on the claims was multiplied by
3/7
to obtain the number of HD-equivalent treatments. For example, 7 PD days were converted to 3 treatments since hemodialysis is typically performed 3 times per week. Monthly treatments reported on the claims were capped at 20 treatments in excess of this number were considered implausible. The average MAP per treatment for EPO was limited to no more than 30,000 units, since higher doses were considered clinically suspect or inappropriate. The ratio of the adjusted MAP values for separately billable services divided by the total number of treatments was used to calculate the average adjusted MAP per treatment. As with the analysis of composite rate services, we applied a natural log transformation to the values of the separately billable MAPs per treatment, with statistical outlier values excluded from further analysis employing the same criteria used to identify aberrant composite rate costs.
2. Independent Variables
Two major types of independent or predictor variables were included in the composite rate and separately billable regression equations—case-mix payment variables and control variables. Case-mix payment variables were included as factors that may be used to adjust payments in either the composite rate or the separately billable equation. Control variables, which generally represent characteristics of ESRD facilities such as size, type of ownership, facility type (whether hospital-based or independent), etc., were specifically included to obtain more accurate estimates of the payment impact of the potential payment variables in each equation. Control variables were excluded from consideration as actual payment adjusters because they represent facility characteristics rather than patient characteristics. In the absence of using control variables in each regression equation, the relationship between the payment variables and measures of resource use may be biased.
a. Control Variables
Seven control variables were included in the regression analysis. They were: (1) Renal dialysis facility type (hospital-
based versus independent facility); (2) facility size (<3,000 for less than three years, 3,000 to 5,000, 5,000-10,000, and >10,000 dialysis treatments); (3) type of ownership (independent, large dialysis organization, regional chain, unknown); (4) whether the ESRD facility received a composite rate payment exception between November 1993 and July 2001; (5) adequacy of dialysis, based on the percentage of patients having a urea reduction ratio (URR) <65 percent; (6) rural versus urban location; and (7) calendar year. Calendar years 2004, 2005, and 2006 were included as a control variable in analyses that pooled three years of data.
b. Proposed Case-Mix Adjustment Variables
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS include a payment adjustment based on case-mix, but gives the Secretary broad discretion with regard to the selection of patient-specific measures which would comprise the case-mix adjusters. As part of our case-mix analysis, we identified the same patient demographic variables used in connection with the basic case-mix adjusters under the current composite payment system: Age (five groups, excluding patients less than age 18), BSA, and low BMI (values less than 18.5 kg/m
2
). BSA was calculated as a function of height (H, in centimeters) and weight (W, in kilograms) using the following formula:
BSA = 0.007184 × H
(0.725)
× W
(0.425)
BMI values below 18.5 kg/m
2
were used to identify patients who were underweight. BSA and low BMI are currently used as part of the basic case-mix adjustment for the composite payment system.
The same set of independent variables was included in both the composite rate and separately billable regression equations. To define the independent variables for each equation, however, it was necessary to link patient and facility-level data. For example, measures for patient characteristics (for example, female gender) were included as potential payment variables in the facility level composite rate equation, while measures for facility characteristics (for example, hospital-based or independent facility) were included as control variables in the patient level separately billable equation. For the composite rate equation, we defined case-mix measures using data for all Medicare dialysis patients treated in each facility. Specifically, we determined the percentage of a facility's patients having each patient characteristic. For example, patient's sex was measured as the percentage of patients that were female. For the equation of the separately billable MAPs, we defined measures for facility characteristics using data for all facilities that treated each Medicare dialysis patient.
These patient and facility control variables were weighted to give greater emphasis to patient and facility observations that accounted for more of the care that was delivered, based on the number of dialysis treatments. For example, in defining facility-level case-mix measures, the characteristics of patients who were treated at the dialysis facility for twelve full months (for example, with 13 treatments each month), were given twelve times as much weight as the characteristics of patients who were treated at the facility for only one month (for example, with 13 treatments). Similarly, to define patient-level measures for the control variables, the characteristics of the facility that treated the patient for nine full months were given three times as much weight as the characteristics of the facility that treated the patient for the remaining three full months. The resulting case-mix variables were examined as potential payment variables in the composite rate equation (for example, percent female and average BSA among patients in each facility). This was the same approach used to define the basic case-mix measures under the composite payment system. The resulting facility variables were included as control variables in the separately billable equation (for example, percent of a patient's treatment furnished in a hospital-based facility). In the sections that follow, we describe how we considered and evaluated independent variables for use as potential case-mix adjusters in the proposed ESRD PPS to determine their relationship to composite rate costs and separately billable payments.
B. Proposed Patient-Level Adjustments
The following are the patient level adjustments we considered for the proposed ESRD PPS. The patient level adjustments that we are proposing are set forth at proposed § 413.235.
1. Patient Age
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS include a payment adjustment based on case-mix that may take into account a patient's age. Consequently, we analyzed age as part of the regression analysis and found that age is a strong predictor of variation in payments for ESRD patients. In addition, age is an objective measure and data on age are readily available.
As discussed previously in section I.B.3., the basic case-mix adjusted composite payment system currently in effect includes payment adjustments for age. As shown in Table 12 below, there are five age groupings and payment adjustment factors that describe the distribution of the patient population:
EP29SE09.086
As we found when we developed the current basic case-mix adjusted composite payment system, the regression analysis for the proposed ESRD PPS indicates that MAPs rise as a patient's age increases. We analyzed informat
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