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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 413 and 414 [CMS-1526-P] RIN 0938-AR55 Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

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

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. E.S.T on August 30, 2013.

ADDRESSES:

In commenting, please refer to file code CMS-1526-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov . Follow the “Submit a comment” instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1526-P, P.O

f four ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov . Follow the “Submit a comment” instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1526-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-1526-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period: 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, call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members

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, call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.

Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS. Stephanie Frilling, (410) 786-4507, for issues related to the ESRD PPS wage index, home dialysis training, and the delay in payment for oral-only drugs under the ESRD PPS. Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market basket. Anita Segar, (410) 786-4614, for issues related to the ESRD QIP. Sandhya Gilkerson, (410) 786-4085, for issues related to the clarification of the grandfathering provision related to the 3-year MLR for DME. Anita Greenberg (410) 786-4601, for issues related to the clarification of the definition of routinely purchased DME. Christopher Molling (410) 786-6399, for issues related to DMEPOS technical amendments and corrections. Hafsa Vahora, (410) 786-7899, for issues related to the implementation of budget neutral fee schedules for splints and casts, and IOLs inserted in a physician's office.

SUPPLEMENTARY INFORMATION:

related to the implementation of budget neutral fee schedules for splints and casts, and IOLs inserted in a physician's office.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov . Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/ .

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

In the past, a majority of the Addenda referred to throughout the preamble of our proposed and final rules were available in the Federal Register . However, the Addenda of the annual proposed and final rules will no longer be available in the Federal Register . Instead, these Addenda to the annual proposed and final rules will be available only through the Internet on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp

ister . However, the Addenda of the annual proposed and final rules will no longer be available in the Federal Register . Instead, these Addenda to the annual proposed and final rules will be available only through the Internet on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp . Readers who experience any problems accessing any of the Addenda to the proposed and final rules of the ESRD PPS that are posted on the CMS Web site identified

Table of Contents

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

I. Executive Summary A. Purpose 1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) 2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) 3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) B. Summary of the Major Provisions 1. ESRD PPS 2. ESRD QIP 3. DMEPOS C. Summary of Costs and Benefits 1. Impacts of the Proposed ESRD PPS 2. Impacts for ESRD QIP 3. Impacts for DMEPOS II. Calendar Year (CY) 2013 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) B. Routine Updates and Proposed Policy Changes to the CY 2014 ESRD PPS 1. Composite Rate Portion of the ESRD PPS Blended Payment 2. ESRD PPS Base Rate a. Proposed Adjustment to the ESRD PPS Base Rate to Reflect Change in Utilization of ESRD-Related Drugs and Biologicals i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate ii. Determining Utilization of ESRD-Related Drugs and Biologicals iii. Pricing of ESRD-Related Drugs and Biologicals iv. Calculation of the Amount of the Per Treatment Reduction v. Comparison of ASP versus PPI 3. ESRD Bundled Market Basket a

nt to the ESRD PPS Base Rate to Reflect Change in Utilization of ESRD-Related Drugs and Biologicals i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate ii. Determining Utilization of ESRD-Related Drugs and Biologicals iii. Pricing of ESRD-Related Drugs and Biologicals iv. Calculation of the Amount of the Per Treatment Reduction v. Comparison of ASP versus PPI 3. ESRD Bundled Market Basket a. Overview and Background b. Proposed Market Basket Update Increase Factor and Labor-related Share for ESRD Facilities for CY 2014 c. Proposed Productivity Adjustment d. Calculation of the ESRDB Market Basket Update, Adjusted for Multifactor Productivity for CY 2014 4. The Proposed CY 2014 Wage Index a. Payment Under the ESRD PPS for Facilities Located in Guam, American Samoa, and the Northern Mariana Islands and Proposed Wage Index Value for Guam b. Proposed Policies for Areas with No Wage Data c. Proposed Reduction to the ESRD Wage Index Floor d. Proposed Wage Index Budget-Neutrality Adjustment 5. Application of the International Classification of Diseases (ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code 6. Proposed Revisions to the Outlier Policy a. Impact of Proposed Changes to the Outlier Policy b. Outlier Policy Percentage C. Discussion of Self-Dialysis and Home Dialysis Training Add On Adjustment and Request for Public Comments a. Medicare Policy for Self-Dialysis Training, Home Dialysis Training, and Retraining b. Payment Methodology D. Delay of Payment for Oral-Only Drugs Under the ESRD PPS III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) A. Background B. Considerations in Updating and Expanding Quality Measures under the ESRD QIP for PY 2016 and Subsequent PYs 1. Value-Based Purchasing (VBP) Overview 2. Brief Overview of Proposed PY 2016 Measures 3. Measures Application Partnership Review C

ent Methodology D. Delay of Payment for Oral-Only Drugs Under the ESRD PPS III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) A. Background B. Considerations in Updating and Expanding Quality Measures under the ESRD QIP for PY 2016 and Subsequent PYs 1. Value-Based Purchasing (VBP) Overview 2. Brief Overview of Proposed PY 2016 Measures 3. Measures Application Partnership Review C. Proposed Measures for the PY 2016 ESRD QIP and Subsequent PYs of the ESRD QIP 1. PY 2015 Measures Continuing in PY 2016 and Future Payment Years 2. Proposal to Expand One PY 2015 Measure and Revise Two PY 2015 Measures for PY 2016 and Subsequent Payment Years a. Proposed Expanded ICH CAHPS Reporting Measure b. Proposed Revised Mineral Metabolism Reporting Measure c. Proposed Revised Anemia Management Reporting Measure 3. New Measures Proposed for PY 2016 and Subsequent Payment Years of the ESRD QIP a. Proposed Clinical Anemia Management Measure and Anemia Management Clinical Measure Topic i. Anemia Management: Hgb > 12 ii. Anemia of Chronic Kidney Disease: Patient Informed Consent for Anemia Treatment b. Hypercalcemia c. Use of Iron Therapy for Pediatric Patients Reporting Measure d. NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical Measure e. Comorbidity Reporting Measure 4. Other Measures under Development 5. Proposed Scoring for the PY 2016 ESRD QIP and Future Payment Years 6. Proposed Performance Period for the PY 2016 ESRD QIP 7. Proposed Performance Standards for the PY 2016 ESRD QIP and Future Payment Years a. Proposed Clinical Measure Performance Standards b. Estimated Performance Standards for Proposed Clinical Measures c. Proposed Performance Standards for Reporting Measures 8. Proposed Scoring for the PY 2016 ESRD QIP Proposed Measures a. Proposals for Scoring Facility Performance on Clinical Measures Based on Achievement b. Proposals for Scoring Facility Performance on Clinical Measures Based on Improvement c. Proposals for Calculating Facility Performance on Reporting Measures 9

for Proposed Clinical Measures c. Proposed Performance Standards for Reporting Measures 8. Proposed Scoring for the PY 2016 ESRD QIP Proposed Measures a. Proposals for Scoring Facility Performance on Clinical Measures Based on Achievement b. Proposals for Scoring Facility Performance on Clinical Measures Based on Improvement c. Proposals for Calculating Facility Performance on Reporting Measures 9. Proposals for Weighting the PY 2016 ESRD QIP Measures and Calculating the PY 2016 ESRD QIP Total Performance Score a. Weighting Individual Measures to Compute Measure Topic Scores for the Kt/V Dialysis Adequacy measure topic, the Vascular Access Type measure topic, and the Anemia Management Clinical measure topic b. Proposal for Weighting the Total Performance Score c. Examples of the Proposed PY 2016 ESRD QIP Scoring Methodology 10. Proposed Minimum Data for Scoring Measures for the PY 2016 ESRD QIP and Future Payment Years 11. Proposed Payment Reductions for the PY 2016 ESRD QIP and Future Payment Years 12. Data Validation 13. Proposals for Scoring Facilities Whose Ownership has Changed 14. Proposals for Public Reporting Requirements IV. Clarification of the Definition of Routinely Purchased Durable Medical Equipment (DME) A. Background 1. Background for DME 2. Medicare Guidance and Rulemaking Regarding Definition of Routinely Purchased DME 3. Payment for Inexpensive or Routinely Purchased Items and Capped Rental Items B. Current Issues C. Classification of Items under the Existing Regulations and Definition of Routinely Purchased Equipment V. Clarification of the 3-year Minimum Lifetime Requirement (MLR) for DME A. Background B. Current Issues C. Scope of the 3-Year MLR VI. Implementation of Budget-Neutral Fee Schedules for Splints, Casts and Intraocular Lenses (IOLs) A. Background 1. Payment Under Reasonable Charges 2. Payment Under Fee Schedules B. Provisions of the Proposed Regulations VII. DMEPOS Technical Amendments and Corrections A. Background B. Proposed Technical Amendments and Corrections VIII

E A. Background B. Current Issues C. Scope of the 3-Year MLR VI. Implementation of Budget-Neutral Fee Schedules for Splints, Casts and Intraocular Lenses (IOLs) A. Background 1. Payment Under Reasonable Charges 2. Payment Under Fee Schedules B. Provisions of the Proposed Regulations VII. DMEPOS Technical Amendments and Corrections A. Background B. Proposed Technical Amendments and Corrections VIII. Collection of Information Requirements A. Legislative Requirement for Solicitation of Comments B. Requirements in Regulation Text C. Additional Information Collection Requirements 1. ESRD QIP a. Proposed Expanded ICH CAHPS Reporting Measure for PY 2016 and Future Payment Years of the ESRD QIP b. Proposed Data Validation Requirements for the PY 2016 ESRD QIP 2. Clarification of the Definition of Routinely Purchased Durable Medical Equipment 3. Clarification of the 3-year Minimum Lifetime Requirement for DME 4. Implementation of Budget-Neutral Fee Schedules for Splints, Casts and Intraocular Lenses IX. Response to Comments X. Economic Analyses A. Regulatory Impact Analysis 1. Introduction 2. Statement of Need 3. Overall Impact B. Detailed Economic Analysis 1. CY 2014 End-Stage Renal Disease Prospective Payment System a. Effects on ESRD Facilities b. Effects on Other Providers c. Effects on the Medicare Program d. Effects on Medicare Beneficiaries e. Alternatives Considered 2. End-Stage Renal Disease Quality Incentive Program a. Effects of the PY 2016 ESRD QIP b. Alternatives Considered for the PY 2016 ESRD QIP 3. DMEPOS Provisions a. Effects of the Implementation of Fee Schedules for Splints, Casts and IOLs b. Clarification of the 3-year MLR c. Definition of Routinely Purchased DME C. Accounting Statement. XI. Regulatory Flexibility Act Analysis XII. Unfunded Mandates Reform Act Analysis XIII. Federalism Analysis XIV. Congressional Review Act XV

RD QIP b. Alternatives Considered for the PY 2016 ESRD QIP 3. DMEPOS Provisions a. Effects of the Implementation of Fee Schedules for Splints, Casts and IOLs b. Clarification of the 3-year MLR c. Definition of Routinely Purchased DME C. Accounting Statement. XI. Regulatory Flexibility Act Analysis XII. Unfunded Mandates Reform Act Analysis XIII. Federalism Analysis XIV. Congressional Review Act XV. Files Available to the Public via the Internet Regulations Text Acronyms

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

AHRQ Agency for Healthcare Research and Quality ASP Average Sales Price BLS Bureau of Labor Statistics CBSA Core based statistical area CCN CMS Certification Number CDC Centers for Disease Control and Prevention CKD Chronic Kidney Disease CY Calendar Year DFC Dialysis Facility Compare DME Durable Medical Equipment DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and Supplies ESA Erythropoiesis stimulating agent ESRD End-Stage Renal Disease ESRDB End-Stage Renal Disease bundled ESRD PPS End-Stage Renal Disease Prospective Payment System FDA Food and Drug Administration GEM General Equivalence Mappings HAIs Healthcare-Acquired Infections HCPCS Healthcare Common Procedure Coding System HHS Department of Health and Human Services ICD International Classification of Diseases ICD-9-CM International Classification of Disease, 9th Revision, Clinical Modification ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems IGI IHS Global Insight IOLs Intraocular Lenses IPPS Inpatient Prospective Payment System MAP Medicare Allowable Payment MFP Multifactor Productivity MLR Minimum Lifetime Requirement NHSN National Health Safety Network NQF National Quality Forum OMB Office of Management and Budget PFS Physician Fee Schedule QIP Quality Incentive Program SHR Standardized Hospitalization Ratio Admissions SMR Standardized Mortality Ratio TPS Total Per

cular Lenses IPPS Inpatient Prospective Payment System MAP Medicare Allowable Payment MFP Multifactor Productivity MLR Minimum Lifetime Requirement NHSN National Health Safety Network NQF National Quality Forum OMB Office of Management and Budget PFS Physician Fee Schedule QIP Quality Incentive Program SHR Standardized Hospitalization Ratio Admissions SMR Standardized Mortality Ratio TPS Total Performance Score VBP Value Based Purchasing I. Executive Summary

A. Purpose

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

On January 1, 2011, we implemented the ESRD PPS, a case-mix adjusted bundled prospective payment system for renal dialysis services furnished by ESRD facilities. Effective January 1, 2014, the transition to the ESRD PPS will conclude and all Medicare ESRD facilities will be paid 100 percent under the ESRD PPS. This rule proposes to update and make revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2014. In accordance with section 1881(b)(14) of the Social Security Act (the Act), as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Public Law 110-275), and section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act (ACA) (Pub. L. 111-148), established that beginning CY 2012, and each subsequent year, the Secretary shall reduce the market basket increase factor by a productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

In addition, section 1881(b)(14)(I) of the Act, as added by section 632(a) of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) requires the Secretary, by comparing per patient utilization from 2007 with such data from 2012, to reduce the single payment amount to reflect the Secretary's estimate of the change in the utilization of ESRD-related drugs and biologicals

I) of the Act.

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

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

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

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

B. Summary of the Major Provisions

1. ESRD PPS

• Update to the ESRD PPS base rate for CY 2014: For CY 2014, we propose an ESRD PPS base rate of $216.95

es for splints and casts as well as intraocular lenses (IOLs) inserted in a physician's office. Finally, this rule would make a few technical amendments and corrections to existing regulations related to payment for DMEPOS items and services.

B. Summary of the Major Provisions

1. ESRD PPS

• Update to the ESRD PPS base rate for CY 2014: For CY 2014, we propose an ESRD PPS base rate of $216.95. This amount reflects the application of the proposed ESRD bundled (ESRDB) market basket reduced by the productivity adjustment, or 2.5 percent, the wage index budget-neutrality adjustment factor of 1.000411, and the drug utilization adjustment to the CY 2013 ESRD PPS base rate of $240.36. The proposed CY 2014 ESRDB market basket increase factor is 2.9 percent. The current forecast of the proposed CY 2014 productivity adjustment is 0.4 percent. The proposed drug utilization adjustment factor to account for changes in utilization as required by section 1881(b)(14)(I) is −12 percent.

• Updates to the wage index and wage index floor: We adjust wage indices on an annual basis using the most current hospital wage data to account for differing wage levels in areas in which ESRD facilities are located. In CY 2014, we are not proposing any changes to the application of the wage index budget-neutrality adjustment factor and will continue to apply the budget-neutrality

• Update to the outlier policy: We are updating the outlier services fixed dollar loss amounts for adult and pediatric patients and Medicare Allowable Payments (MAPs) for adult patients for CY 2014 using 2012 claims data. Based on the use of more current data, the fixed-dollar loss amount for pediatric beneficiaries would increase from $47.32 to $54.23 and the MAP amount would remain $38.65 as compared to CY 2013 values. For adult beneficiaries, the fixed-dollar loss amount would decrease from $110.22 to $94.26 and the MAP amount would decrease from $61.38 to $52.45. The 1 percent target for outlier payments was not achieved in CY 2012

ore current data, the fixed-dollar loss amount for pediatric beneficiaries would increase from $47.32 to $54.23 and the MAP amount would remain $38.65 as compared to CY 2013 values. For adult beneficiaries, the fixed-dollar loss amount would decrease from $110.22 to $94.26 and the MAP amount would decrease from $61.38 to $52.45. The 1 percent target for outlier payments was not achieved in CY 2012. We believe using CY 2012 claims data to update the outlier MAP and fixed dollar loss amounts for CY 2014 will increase payments for ESRD beneficiaries requiring higher resource utilization in accordance with a 1 percent outlier percentage.

• Application of ICD-10-CM Diagnosis Codes to the comorbidity payment adjustment codes: Effective October 1, 2014, CMS will implement the 10th revision of the ICD coding scheme. We discuss and provide a crosswalk from ICD-9-CM to ICD-10-CM for codes that are subject to the comorbidity payment adjustment. We propose that all ICD-10-CM codes to which ICD-9-CM codes that are eligible for the comorbidity payment adjustment crosswalk will be eligible for the comorbidity payment adjustment with two exceptions.

2. ESRD QIP

This proposed rule proposes to implement requirements for the ESRD QIP. With respect to the PY 2016 ESRD QIP, we propose to continue some of the previous ESRD QIP measures, add new measures, and expand the scope of some of the existing measures to cover the measure topics as follows:

• To evaluate anemia management: ○ Hemoglobin Greater Than 12 g/dL, a clinical measure ○ Patient Informed Consent for Anemia Treatment, a clinical measure* ○ Anemia Management, a reporting measure † ○ Pediatric Iron Therapy, a reporting measure* • To evaluate dialysis adequacy: ○ A Kt/V measure for adult hemodialysis patients, a clinical measure ○ A Kt/V measure for adult peritoneal dialysis patients, a clinical measure ○ A Kt/V measure for pediatric hemodialysis patients, a clinical measure • To determine whether patients are treated using the most beneficial type of vascular access:

asure † ○ Pediatric Iron Therapy, a reporting measure* • To evaluate dialysis adequacy: ○ A Kt/V measure for adult hemodialysis patients, a clinical measure ○ A Kt/V measure for adult peritoneal dialysis patients, a clinical measure ○ A Kt/V measure for pediatric hemodialysis patients, a clinical measure • To determine whether patients are treated using the most beneficial type of vascular access: ○ An arteriovenous fistula measure, a clinical measure ○ A catheter measure, a clinical measure • To address effective bone mineral metabolism management: ○ Hypercalcemia, a clinical measure* ○ Mineral Metabolism, a reporting measure † • To address safety: ○ National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Outpatients, a clinical measure* • To assess patient experience: ○ ICH CAHPS survey reporting measure ‡ • To gather data regarding comorbidities: ○ Comorbidity, a reporting measure* * Denotes that this measure is new to the ESRD QIP. † Denotes that this measure is revised in the ESRD QIP. ‡ Denotes that this measure is expanded in the ESRD QIP. It also proposes to establish CY 2014 as the performance period for the PY 2016 ESRD QIP, establish performance standards for each measure, and adopt scoring and payment reduction methodologies that are similar to those finalized for the PY 2015 ESRD QIP.

3. DMEPOS

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

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

• Clarification of to the 3-year MLR and Related Grandfathering Policy: This rule would provide further clarification about how we would apply the 3-year minimum lifetime requirement (MLR) set forth at § 414.202, which must be satisfied for an item or device to be considered durable medical equipment.

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

C. Summary of Costs and Benefits

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

1. Impacts of the Proposed ESRD PPS

The impact chart in section X.B.1. of this proposed rule displays the estimated change in payments to ESRD facilities in CY 2014 compared to estimated payments in CY 2013. The overall impact of the CY 2014 changes is projected to be a 9.4 percent decrease in payments. Hospital-based ESRD facilities have an estimated 9.3 percent decrease in payments compared with freestanding facilities with an estimated 9.4 percent decrease

X.B.1. of this proposed rule displays the estimated change in payments to ESRD facilities in CY 2014 compared to estimated payments in CY 2013. The overall impact of the CY 2014 changes is projected to be a 9.4 percent decrease in payments. Hospital-based ESRD facilities have an estimated 9.3 percent decrease in payments compared with freestanding facilities with an estimated 9.4 percent decrease.

We estimate that the aggregate ESRD PPS expenditures would decrease by approximately $780 million from CY 2013 to CY 2014. This reflects a $210 million increase from the payment rate update, a $30 million increase due to the updates to the outlier threshold amounts, and a $1.02 billion decrease in expenditures specifically related to the −12 percent drug utilization adjustment required by section 1881(b)(14)(I). The estimated 9.4 percent overall payment decrease would result in a $190 million savings to beneficiaries.

2. Impacts for ESRD QIP

The overall economic impact of the proposed ESRD QIP is an estimated $26.4 million in PY 2016. In PY 2016, we expect the total payment reductions to be approximately $26.4 million, and the costs associated with the collection of information requirements for certain measures to be approximately $39.5 thousand. For PY 2017 and future payment years, we expect the costs associated with the collection of information requirements for the expanded ICH CAHPS measure in the proposed ESRD QIP to be approximately $9.7 million.

The ESRD QIP will continue to incentivize facilities to provide higher

3. Impacts for DMEPOS

The overall impact of the DMEPOS proposal to implement fee schedules for splints and casts and IOLs inserted in a physician's office is insignificant

ssociated with the collection of information requirements for the expanded ICH CAHPS measure in the proposed ESRD QIP to be approximately $9.7 million.

The ESRD QIP will continue to incentivize facilities to provide higher

3. Impacts for DMEPOS

The overall impact of the DMEPOS proposal to implement fee schedules for splints and casts and IOLs inserted in a physician's office is insignificant. The reasonable charge amounts that we propose to convert to fee schedule amounts would be budget neutral the first year and would be updated annually thereafter based on the consumer price index for all consumers (CPI-U) for the 12-month period ending June 30 of the previous year and, reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. For the 3-year MLR, we believe that a vast majority of the categories of items that were classified as DME before January 1, 2012, did function for 3 or more years (76 FR 70289). The 3-year MLR is designed to represent a minimum threshold for determination of durability for equipment that is consistent with the statutory DME payment provisions and applies on a prospective basis, effective January 1, 2012. CMS recognizes that the healthcare industry and beneficiaries have come to rely on items that have qualified as DME on or prior to January 1, 2012, regardless of whether those items met the 3-year MLR set forth at § 414.202. We note that given that reliance and consistent with the regulation at § 414.202, CMS will not reopen those prior decisions and reclassify the equipment in light of the new 3-year standard. We believe that continuing the Medicare coverage for all the items that qualified as DME on or prior to January 1, 2012, could avoid disrupting the continuity of care for the beneficiaries that received these items for medical treatment prior to January 1, 2012, without creating a significant fiscal impact on the Medicare Program

ns and reclassify the equipment in light of the new 3-year standard. We believe that continuing the Medicare coverage for all the items that qualified as DME on or prior to January 1, 2012, could avoid disrupting the continuity of care for the beneficiaries that received these items for medical treatment prior to January 1, 2012, without creating a significant fiscal impact on the Medicare Program.

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

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

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

On August 12, 2010, we published in the Federal Register a final rule (75 FR 49030 through 49214) titled, “End-Stage Renal Disease Prospective Payment System”, hereinafter referred to as the CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS final rule, we implemented a case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis services beginning January 1, 2011, in accordance with section 1881(b)(14) of the Act, as added by section 153(b) of MIPPA.

On November 10, 2011, we published in the Federal Register , a final rule (76 FR 70228 through 70316) titled, “Medicare Program; End-Stage Renal Disease Prospective Payment System and Quality Incentive Program; Ambulance Fee Schedule; Durable Medical Equipment; and Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies” (hereinafter referred to as the CY 2012 ESRD PPS final rule)

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

On November 9, 2012, we published in the Federal Register , a final rule (77 FR 67450 through 67531) titled, “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Bad Debt Reductions for All Medicare Providers” (hereinafter referred to as the CY 2013 ESRD PPS final rule). In that final rule, for the ESRD PPS, we made a number of routine updates for CY 2013, implemented the third year of the transition to the ESRD PPS, and made several policy changes and reiterations. In that rule, we finalized the following:

• An ESRD PPS base rate of $240.36 per treatment for renal dialysis services. The ESRD PPS base rate applies to the ESRD PPS portion of the blended payments during the transition and to the ESRD PPS payments. This amount reflected the CY 2013 ESRD bundled (ESRDB) market basket update of 2.9 percent minus a multifactor productivity adjustment of 0.6 percent, that is, a 2.3 percent increase. This amount also reflected the application of the wage index budget-neutrality adjustment of 1.000613.

ltifactor productivity adjustment of 0.6 percent, that is, a 2.3 percent increase. This amount also reflected the application of the wage index budget-neutrality adjustment of 1.000613.

• A composite base rate of $145.20 per treatment for renal dialysis services that is used in the composite rate portion of the ESRD PPS payment for ESRD facilities receiving blended payments during the transition. This amount reflected the application of the ESRDB market basket reduced by the multifactor productivity adjustment, or a 2.3 percent increase.

• A zero update to the drug add-on adjustment and maintaining the $20.33 per treatment drug add-on amount for the composite rate portion of the ESRD PPS blended payment. This resulted in a 14.0 percent drug add-on adjustment to the composite rate portion of the ESRD PPS blended payment.

• A 0.1 percent transition budget-neutrality adjustment factor.

• A 1.001141 wage index budget-neutrality adjustment factor for the composite portion of the ESRD PPS blended payment, which is applied to the wage index values.

• A 1.000613 wage index budget-neutrality adjustment factor for the ESRD PPS portion of the blended payment and for the ESRD PPS, which is applied to the ESRD PPS base rate.

• A 0.05 reduction to the wage index floor which resulted in a wage index floor of 0.500 under the ESRD PPS.

• A 0.501 wage index floor under the composite rate portion of the blended payment (1.500 × 1.001141 = 0.501).

• Revisions to the outlier policy. Specifically, for pediatric beneficiaries, a fixed-dollar loss amount of $47.32 and a Medicare Allowable Payment (MAP) amount of $41.39. For adult beneficiaries, a fixed-dollar loss amount of $110.22 and a MAP amount of $59.42.

• Eliminating the restriction on daptomycin to allow ESRD facilities to receive separate payment by appending the AY modifier on the claim for daptomycin when the diagnosis reported on the claim indicates the drug was used to treat a non-ESRD related condition

care Allowable Payment (MAP) amount of $41.39. For adult beneficiaries, a fixed-dollar loss amount of $110.22 and a MAP amount of $59.42.

• Excluding alteplase and other thrombolytics from separate payment for the composite rate portion of blended payments during the remainder of the transition.

• Use of the Average Sales Price (ASP) methodology, including any modifications finalized in the Physician Fee Schedule (PFS) final rules, to compute outlier MAP amounts, the drug add-on, and any other policy that requires the use of payment amounts for drugs and biologicals that would be separately paid absent the ESRD PPS and for the composite rate portion of the blended payment during the transition.

Finally, in the CY 2013 ESRD PPS final rule, we reiterated policies regarding the following billing practices because we believed that ESRD facilities may be billing renal dialysis services for separate payment:

• Any item or service included in the composite rate should not be identified on ESRD claims.

• An AY modifier can be appended to claims for drugs and laboratory tests that are not ESRD-related to allow for separate payment. The AY modifier should not be used for renal dialysis services and we have monitoring efforts in place to analyze billing trends.

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

1. Composite Rate Portion of the ESRD PPS Blended Payment

rends.

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

1. Composite Rate Portion of the ESRD PPS Blended Payment

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

2. ESRD PPS Base Rate

In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we discussed the development of the ESRD PPS per treatment base rate that is codified in the Medicare regulations at § 413.220 and § 413.230. The CY 2011 ESRD PPS final rule also provides a detailed discussion of the methodology used to calculate the ESRD PPS base rate and the computation of factors used to adjust the ESRD PPS base rate for projected outlier payments and budget-neutrality in accordance with sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, respectively

S base rate of $246.37 ($240.36 × 1.025 = $246.37).

In addition, as discussed in section II.B.4.d. of this proposed rule, for CY 2014 we are applying the wage index budget-neutrality adjustment factor of 1.000411 to the CY 2014 ESRD PPS base rate (that is, $246.37), yielding a proposed CY 2014 ESRD PPS wage-index budget-neutrality adjusted base rate of $246.47 ($246.37 × 1.000411 = $246.47).

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

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

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

014 ESRD PPS Base Rate

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

rs that were used to calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per treatment, which are the standardization, outlier, and the 98 percent budget-neutrality adjustments. A detailed explanation of these adjustment factors is provided in the CY 2011 ESRD PPS final rule (75 FR 49081 through 49082). We propose to reduce the CY 2014 ESRD PPS base rate by the resulting amount.

ii. Determining Utilization of ESRD-Related Drugs and Biologicals

Section 1881(b)(14)(I) requires the single payment amount to be reduced by an amount that “reflects the Secretary's estimate of the change in utilization of drugs and biologicals described in clauses (ii), (iii), and (iv) of subparagraph (B) (other than oral-only Federal Register on August 12, 2010 (75 FR 49030))”. As we mentioned above, for purposes of this analysis, we view utilization of drugs and biologicals as units of a drug or biological furnished to a patient per treatment. ESRD facilities report this information on claims. To calculate this adjustment, we analyzed the utilization of erythropoiesis stimulating agents (ESAs) and any oral forms of such agents furnished to individuals for the treatment of ESRD. We also analyzed the utilization of other injectable drugs and biologicals (such as iron sucrose and doxercalciferol) and any oral equivalent form of such drug or biological furnished to individuals for the treatment of ESRD that were included in the expanded bundle of services covered by the ESRD PPS. We did not include diagnostic laboratory tests or other items and services in the comparison analysis because section 1811(b)(14)(I) only refers to estimating the change in utilization of drugs and biologicals.

1811(b)(14)(I) only refers to estimating the change in utilization of drugs and biologicals.

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

For the CY 2012 utilization data for ESRD-related drugs and biologicals, we propose to use the latest available claims data based on the CY 2012 ESRD facility claims updated through December 31, 2012 (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of December 31, 2012). For the CY 2014 ESRD PPS final rule, we will use the CY 2012 claims file updated through June 30, 2013, (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013) to calculate 2012 utilization

, paid, and passed to the National Claims History File as of December 31, 2012). For the CY 2014 ESRD PPS final rule, we will use the CY 2012 claims file updated through June 30, 2013, (that is, claims with dates of service from January 1 through December 31, 2012, that were received, processed, paid, and passed to the National Claims History File as of June 30, 2013) to calculate 2012 utilization. We solicit comments on the proposed use of 2007 and 2012 claims data to capture the utilization of ESRD-related drugs and biologicals in those years.

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

iii

e that the inclusion of utilization of drugs and biologicals furnished in CY 2007 at these facilities will have a significant impact on the amount of the adjustment. We solicit comments on the proposal to include data on the utilization of drugs and biologicals furnished in ESRD facilities located in the Pacific Rim when comparing utilization of drugs and biologicals in CY 2007 with CY 2012.

iii. Pricing of ESRD-Related Drugs and Biologicals

As we stated above, we are proposing to price ESRD-related drugs and biologicals to CY 2014 to allow for an accurate comparison between utilization of those drugs and biologicals furnished in CY 2007 with utilization in CY 2012. In order to price ESRD-related drugs and biologicals based on CY 2014 prices, we started with CY 2011 prices as established and published in the CY 2011 ESRD PPS final rule.

During the development of the ESRD PPS base rate, we included the MAP amounts for ESRD-related drugs and biologicals that were, prior to January 1, 2011, separately paid under Part B. For setting the CY 2011 ESRD PPS base rate, for Part B separately billable drugs, we used the first two quarters of ASP+6 and then used the Producer Price Index (PPI) to inflate the prices to CY 2011 (75 FR 49079). We also included the MAP amounts for the ESRD-related oral-equivalent drugs and biologicals that were, prior to January 1, 2011, separately paid under Part D (75 FR 49080). For setting the CY 2011 ESRD PPS base rate for these drugs, we used the growth rates for overall prescription drug prices that were used in the National Health Expenditure Projections (NHE) for updating prices for former Part D drugs to CY 2011 from CY 2007.

ealth Expenditure Projections (NHE) for updating prices for former Part D drugs to CY 2011 from CY 2007.

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

sed factor of 1.000411. Therefore, we propose to use a total growth update factor of 7.3 percent (1.021*1.023*1.025*1.001520*1.000613*1.000411 = 1.073) to inflate prices for ESRD-related drugs and biologicals from CY 2011 levels to CY 2014 levels. We solicit comments on the use of the ESRDB market basket percentage increase factor to inflate prices for drugs and biologicals to CY 2014 levels.

iv. Calculation of the Amount of the per Treatment Reduction

We applied the 2014 prices to the CY 2007 and CY 2012 drug and biological utilization data to calculate aggregate amounts for each year. For drugs and biologicals for which we have utilization data for CY 2012, but that were not present on CY 2007 claims, we priced these drugs using the ASP+6 percent price for 2012, which is an average of the four quarter prices, and inflated it using the CY 2013 and the CY 2014 proposed ESRDB market basket, productivity, and wage index budget neutrality adjustment factors. While most of these drugs had minimal utilization, we note that Feraheme was the only significant exception. Specifically, Feraheme was not available until January 2010 and once the drug was available, the use of the drug rose to the top 12th drug furnished to ESRD beneficiaries. Next, we divided each year's estimated aggregate amount for drugs and biologicals by that year's count of treatments furnished to Medicare beneficiaries to get an average payment per treatment for the year. This resulted in a per treatment amount for drugs and biologicals of $83.76 in 2007 and a per treatment amount for drugs and biologicals of $51.42 in 2012. We then subtracted the average payment per treatment for CY 2012 from the average amount per treatment for CY 2007 to get a total of $32.34 ($83.76−$51.42 = $32.34). We then reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustments to get a total of $29.52 ($32.34 × .9407 × .99 × .98 = $29.52)

tment amount for drugs and biologicals of $51.42 in 2012. We then subtracted the average payment per treatment for CY 2012 from the average amount per treatment for CY 2007 to get a total of $32.34 ($83.76−$51.42 = $32.34). We then reduced this amount by the standardization, the outlier, and the 98 percent budget neutrality adjustments to get a total of $29.52 ($32.34 × .9407 × .99 × .98 = $29.52). We would apply these adjustments before reducing the base rate because the base rate was reduced by these adjustments when it was first established, and the reduction should be adjusted in the same way to make the two figures comparable. We would then reduce the CY 2014 proposed base rate of $246.47 by $29.52, resulting in the CY 2014 proposed base rate of $216.95. A reduction of $29.52 from the proposed CY 2014 ESRD PPS base rate results in a 12 percent reduction in Medicare payments. We solicit comments on the proposed methodology for the reduction to the ESRD PPS base rate to reflect the change in the utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012.

While we propose to implement the full reduction in CY 2014, we note that we are also concerned that this one-time reduction to the ESRD PPS base rate could be a significant reduction to ESRD facilities for the year and potentially impact beneficiary access to care. Therefore, we are soliciting comments on a potential transition or phase-in period of the 12 percent reduction and the number of years for such transition or phase-in period.

v. Comparison of ASP Versus PPI

Versus PPI

Section 1881(b)(14)(I) requires the Secretary to “take into account the most recently available data on average sales prices and changes in prices for drugs and biologicals reflected in the ESRDB market basket percentage increase factor” in making the reduction to the ESRD PPS base rate to reflect the change in utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012. While we could have chosen to inflate prices for drugs and biologicals to 2014 levels with more recently available ASP data, we believe using a growth based on the ESRDB market basket is more appropriate because it reflects what Medicare is required to pay for the drugs and biologicals through the ESRD PPS base rate. We performed an alternative analysis using prices based on the first quarter 2013 ASP+6 percent prices and the National Drug Code (NDC) prices published on the CMS Web site located at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Outlier_Services.html that are used for outlier calculations, and the PPI to project to CY 2014. The results are minimally different (a difference of $29.40 versus $29.52), and we believe that the ESRDB market basket approach is a more appropriate measure of how Medicare pays for these drugs under the ESRD PPS.

We are soliciting comments on the potential use of ASP instead of the ESRDB market basket to inflate drug prices to 2014 levels for purposes of the drug utilization adjustment.

3. ESRD Bundled Market Basket

a. Overview and Background

verview and Background

In accordance with section 1881(b)(14)(F)(i) of the Act, as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act, beginning in 2012, the ESRD payment amounts are required to be annually increased by an ESRD market basket increase factor that is reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The application of the productivity adjustment described may result in the increase factor being less than 0.0 for a year and may result in payment rates for a year being less than the payment rates for the preceding year. The statute also provides that the market basket increase factor should reflect the changes over time in the prices of an appropriate mix of goods and services used to furnish renal dialysis services.

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

As required under section 1881(b)(14)(F)(i) of the Act, CMS developed an all-inclusive ESRDB input price index (75 FR 49151 through 49162). Although “market basket” technically describes the mix of goods and services used for ESRD treatment, this term is also commonly used to denote the input price index (that is, cost categories, their respective weights, and price proxies combined) derived from a market basket. Accordingly, the term “ESRDB market basket,” as used in this document, refers to the ESRDB input price index.

For this proposed rule, we propose to use the same methodology and the CY 2008-based ESRDB market basket described in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2014 ESRDB market basket increase factor and labor-related share based on the best available data. Consistent with historical practice, we estimate the ESRDB market basket update based on IHS Global Insight (IGI), Inc.'s forecast using the most recently available data

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

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

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

c. Proposed Productivity Adjustment

Under section 1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the Affordable Care Act, for CY 2012 and each subsequent year, the ESRD market basket percentage increase factor shall be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide private nonfarm business http://www.bls.gov/mfp to obtain the BLS historical published MFP data.

CMS notes that the proposed and final methodology for calculating and applying the MFP adjustment to the ESRD payment update is similar to the methodology used in other payment systems, as required by section 3401 of the Affordable Care Act.

The projection of MFP is currently produced by IGI

y-wide private nonfarm business http://www.bls.gov/mfp to obtain the BLS historical published MFP data.

The projection of MFP is currently produced by IGI. The details regarding the methodology for forecasting MFP and how it is applied to the market basket were finalized in the CY 2012 ESRD PPS final rule (76 FR 70232 through 70234). Using this method and the IGI forecast for the first quarter of 2013 of the 10-year moving average of MFP, the proposed CY 2014 MFP factor is 0.4 percent.

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

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

Thus, in accordance with section 1881(b)(14)(F)(i) of the Act, the proposed ESRDB market basket percentage increase factor for CY 2014 is based on the 1st quarter 2013 forecast of the CY 2008-based ESRDB market basket, which is estimated to be 2.9 percent. This market basket percentage is then reduced by the MFP adjustment (the 10-year moving average of MFP for the period ending CY 2014) of 0.4 percent, which is based on IGI's 1st quarter 2013 forecast. The resulting proposed MFP-adjusted ESRDB market basket update for CY 2014 is equal to 2.5 percent, or 2.9 percent less 0.4 percentage point

ESRDB market basket, which is estimated to be 2.9 percent. This market basket percentage is then reduced by the MFP adjustment (the 10-year moving average of MFP for the period ending CY 2014) of 0.4 percent, which is based on IGI's 1st quarter 2013 forecast. The resulting proposed MFP-adjusted ESRDB market basket update for CY 2014 is equal to 2.5 percent, or 2.9 percent less 0.4 percentage point. If more recent data is subsequently available (for example, a more recent estimate of the market basket or MFP adjustment), we will use such data, if appropriate, to determine the CY 2014 market basket update and MFP adjustment in the CY 2014 ESRD PPS final rule.

4. The Proposed CY 2014 Wage Index

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

OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles

floor during the transition; and the policies for areas with no hospital data. The CBSA-based geographic area designations were originally described in OMB bulletin 03-04, issued June 6, 2003. This bulletin, as well as subsequent bulletins, is available online at http://www.whitehouse,gov/omb/bulletins.

OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles. In accordance with our established methodology, we have historically adopted any CBSA changes that are published in the OMB bulletin that corresponds with the IPPS hospital wage index. For FY 2014, we use the FY 2013 pre-floor, pre-reclassified hospital wage index to adjust the ESRD PPS payments. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which establishes revised delineations of statistical areas based on OMB standards published in the Federal Register on June 28, 2010 and 2010 Census Bureau data. Because the FY 2013 pre-floor, pre-reclassified hospital wage index was finalized prior to the issuance of this Bulletin, the FY 2013 pre-floor, pre-reclassified hospital wage index does not reflect OMB's new area delineations based on the 2010 Census and, thus, the FY 2014 ESRD PPS wage index will not reflect the OMB changes. As stated in the FY 2014 IPPS/LTCH PPS proposed rule, CMS intends to propose changes to the hospital wage index based on this OMB Bulletin in the FY 2015 IPPS/LTCH PPS proposed rule (78 FR 27486 (May 10, 2013)). Therefore, we anticipate that the OMB Bulletin changes will be reflected in the FY 2015 hospital wage index. Because we base the ESRD PPS wage index on the hospital wage index from the prior year, we anticipate that the OMB Bulletin changes would be reflected in the CY 2015 ESRD PPS wage index.

For CY 2014, we will continue to use the same methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR 49117), for determining the wage indices for ESRD facilities in CY 2014

2015 hospital wage index. Because we base the ESRD PPS wage index on the hospital wage index from the prior year, we anticipate that the OMB Bulletin changes would be reflected in the CY 2015 ESRD PPS wage index.

For CY 2014, we will continue to use the same methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR 49117), for determining the wage indices for ESRD facilities in CY 2014. Specifically, we propose to adjust wage indices for CY 2014 to account for annually updated wage levels in areas in which ESRD facilities are located. We propose to use the most recent, FY 2014 inpatient prospective payment system (IPPS) pre-floor, pre-reclassified hospital wage index. The ESRD PPS wage index values are calculated without regard to geographic reclassifications authorized under section 1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data that are unadjusted for occupational mix. The proposed CY 2014 wage index values for urban areas are listed in Addendum A (Wage Indices for Urban Areas) and the proposed CY 2014 wage index values for rural areas are listed in Addendum B (Wage Indices for Rural Areas). Addenda A and B are located on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.

In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a policy to use the labor-related share of 41.737 for the ESRD PPS portion of the payment. For the CY 2014 ESRD PPS we are not proposing any changes to the labor-related share of 41.737. Because all providers that elected to participate in the transition are entering their fourth year of the transition and will begin being paid 100 percent under the ESRD PPS, the 53.711 labor-related share that was applied to the composite rate portion of the blended payment is no longer applicable

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

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

It came to our attention after the ESRD PPS was implemented that ESRD facilities located in the United States Territories of Guam, American Samoa and the Northern Mariana Islands (the Pacific Rim) have been paid on the basis of reasonable costs and charges, rather than under the ESRD PPS. Because section 1881(b)(14)(A)(i) of the Act requires the Secretary to implement a payment system under which a single payment is made to a renal dialysis facility for renal dialysis services in lieu of any other payment for services furnished on or after January 1, 2011, ESRD facilities located in the Pacific Rim must be paid under the ESRD PPS and will be paid under this system beginning for services furnished on or after January 1, 2014. In order to pay these facilities under the ESRD PPS, we must identify an appropriate wage index value for these areas as required under § 413.231 of the regulations

her payment for services furnished on or after January 1, 2011, ESRD facilities located in the Pacific Rim must be paid under the ESRD PPS and will be paid under this system beginning for services furnished on or after January 1, 2014. In order to pay these facilities under the ESRD PPS, we must identify an appropriate wage index value for these areas as required under § 413.231 of the regulations. We propose to use the current value calculated under the existing methodology, that is, the pre-floor, pre-reclassification, hospital wage data that is unadjusted for occupational mix for the island of Guam of 0.9611, which is displayed in Addendum B (Wage Indices for Rural Areas). In addition, the most recent proposed FY 2014 IPPS pre-floor, pre-reclassified hospital wage data does not include wage data for American Samoa and the Northern Mariana Islands. Accordingly, we propose below to apply the wage index value for Guam to facilities located in American Samoa and the Northern Mariana Islands.

b. Proposed Policies for Areas with No Wage Data

In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the use of the CBSA-based geographic area designations to define urban/rural areas and corresponding wage index values for the ESRD PPS. In that final rule (75 FR 49116 through 49117), we also discussed and finalized the methodologies we use to calculate wage index values for ESRD facilities that are located in urban and rural areas where there is no hospital data. For urban areas with no hospital data, we compute the average wage index value of all urban areas within the State and use that value as the wage index. For rural areas with no hospital data, we compute the wage index using the average wage index values from all contiguous CBSAs to represent a reasonable proxy for that rural area

re located in urban and rural areas where there is no hospital data. For urban areas with no hospital data, we compute the average wage index value of all urban areas within the State and use that value as the wage index. For rural areas with no hospital data, we compute the wage index using the average wage index values from all contiguous CBSAs to represent a reasonable proxy for that rural area.

In the case of American Samoa and the Northern Mariana Islands, we believe that Guam represents a reasonable proxy because the islands are located within the Pacific Rim and share a common status as United States Territories. In addition, the Northern Mariana Islands and American Samoa are rural areas with no hospital data. Therefore, we will use our established methodology to compute an appropriate wage index using the average wage index values from contiguous CBSAs, to represent a reasonable proxy. While we appreciate that the islands of the Pacific Rim are not actually contiguous, we believe that same principle applies here, and that Guam is a reasonable proxy for American Samoa and the Northern Marianas. We note that if hospital data becomes available for any of the islands of the Pacific Rim we will use that data for the appropriate CBSA's instead of the proxy. As discussed previously, the current wage index value using the existing methodology for Guam is 0.9611. Therefore, for CY 2014, we propose to apply this wage index value of 0.9611 to ESRD facilities located in America Samoa and the Northern Mariana Islands, which we are including in Addendum B.

For CY 2014, the only urban area without wage index data is Hinesville-Fort Stewart, GA. As we discussed in our CY 2013 ESRD PPS (77 FR 67459), we will continue to use the statewide urban average based on the average of all urban areas within the state for urban areas without hospital data. For CY 2014 the wage index value for CBSA #11 (Georgia) is 0.7482 and this is included in Addendum A

um B.

c. Proposed Reduction to the ESRD Wage Index Floor

A wage index floor value has been used in lieu of the calculated wage index values below the floor in making payment for renal dialysis services under the ESRD PPS. In the CY 2011 ESRD PPS final rule (75 FR 49116 through 49117), we finalized that we would continue to reduce the wage index floor by 0.05 for each of the remaining years of the transition. We further specified in the CY 2012 ESRD PPS (76 FR 70241) that we finalized the 0.05 reduction to the wage index floor for CYs 2012 and 2013, resulting in a wage index floor of 0.550 and 0.500, respectively.

Our intention has been to provide a wage index floor only through the 4-year transition to 100 percent implementation of the ERSD PPS (75 FR 49116 through 49117; 76 FR 70240 through 70241). Most recently, in the CY 2013 ESRD PPS final rule (77 FR 67459 through 67461), we discussed the elimination of the wage index floor beginning in CY 2014, noting that we would propose a new methodology in CY 2014 to address wages in rural Puerto Rico because we would no longer be applying a wage index floor. The CY 2014 wage index values for both urban and rural Puerto Rico remain below the finalized CY 2013 ESRD PPS wage index floor of 0.500 (77 FR 67459), however, and we believe that both rural and urban facilities in Puerto Rico would benefit from continuing the gradual reduction of the floor

in CY 2014 to address wages in rural Puerto Rico because we would no longer be applying a wage index floor. The CY 2014 wage index values for both urban and rural Puerto Rico remain below the finalized CY 2013 ESRD PPS wage index floor of 0.500 (77 FR 67459), however, and we believe that both rural and urban facilities in Puerto Rico would benefit from continuing the gradual reduction of the floor. We believe that continuing the wage index floor for CY 2014 and CY 2015 will allow renal dialysis facilities located in Puerto Rico the benefit afforded to other geographical areas in the fifty states of a gradual and systematic elimination of the wage index floor. Therefore, for CY 2014 and for CY 2015, we propose to continue to apply the wage index floor to areas with wage indexes below the floor. For CY 2014, Puerto Rico is the only area with a wage index value below the proposed floor; however, to the extent that other geographical areas fall below the floor in CY 2015 or beyond we believe they should have the benefit of a gradual reduction in the floor as well. We will continue to review wage index values and the appropriateness of a wage index floor in the future.

For CY 2014 and CY 2015, we also propose to continue our policy of gradually reducing the wage index floor by 0.05 per year. Specifically, we propose a wage index floor value of 0.45 for CY 2014 and a wage index floor value of 0.40 for CY 2015. We believe that continuing our policy of applying a wage index floor for an additional two years would allow Puerto Rico to benefit from the anticipated and predictable phase out of the wage index floor. While we would not expect to continue this policy past CY 2015, we will review the appropriateness of a wage index floor for CY 2016 at that time.

d. Proposed Wage Index Budget-Neutrality Adjustment

Section 1881(b)(14)(D)(iv)(II) of the Act gives us broad discretion to implement payment adjustments to the ESRD PPS, including an adjustment of the ESRD PPS by a geographic index

wage index floor. While we would not expect to continue this policy past CY 2015, we will review the appropriateness of a wage index floor for CY 2016 at that time.

d. Proposed Wage Index Budget-Neutrality Adjustment

Section 1881(b)(14)(D)(iv)(II) of the Act gives us broad discretion to implement payment adjustments to the ESRD PPS, including an adjustment of the ESRD PPS by a geographic index. Section 1881(b)(14)(D)(iv)(II) specifically refers to section 1881(b)(12)(D) as an example of such a geographic index, and in the CY 2011

For CY 2014, we are not proposing any changes to the methodology, but we note that we will no longer compute a budget neutrality adjustment factor for the composite rate portion of the ESRD PPS blended payment because all facilities will be paid 100 percent under the ESRD PPS in CY 2014. For ease of reference, we explain the methodology for computing the budget-neutrality adjustment factor here. For the CY 2014 wage index budget-neutrality adjustment factor, we use the fiscal year (FY) 2014 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data to compute the wage index values, 2012 outpatient claims (paid and processed as of December 31, 2012), and geographic location information for each facility, which may be found through Dialysis Facility Compare. Dialysis Facility Compare (DFC) can be found at the DFC Web page on the CMS Web site at http://www.medicare.gov/dialysisfacilitycompare/ . The FY 2014 hospital wage index data for each urban and rural locale by CBSA may also be accessed on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/WIFN/list.asp . The wage index data are located in the section entitled, “FY 2014 Proposed Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by CBSA”

for each urban and rural locale by CBSA may also be accessed on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/WIFN/list.asp . The wage index data are located in the section entitled, “FY 2014 Proposed Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by CBSA”.

We computed the proposed CY 2014 wage index budget-neutrality adjustment factor using treatment counts from the 2012 claims and facility-specific CY 2013 payment rates to estimate the total dollar amount that each ESRD facility would have received in CY 2013. The total of these payments became the target amount of expenditures for all ESRD facilities for CY 2014. Next, we computed the estimated dollar amount that would have been paid for the same ESRD facilities using the proposed ESRD wage index for CY 2014. The total of these payments becomes the new CY 2014 amount of wage-adjusted expenditures for all ESRD facilities. The wage index budget-neutrality factor is calculated as the target amount divided by the new CY 2014 amount. When we multiplied the wage index budget-neutrality factor by the applicable CY 2014 estimated payments, aggregate payments to ESRD facilities would remain budget-neutral when compared to the target amount of expenditures. That is, the wage index budget-neutrality adjustment factor ensures that wage index adjustments do not increase or decrease aggregate Medicare payments with respect to changes in wage index updates. Therefore, we are proposing a wage index budget-neutrality adjustment factor of 1.000411, which would be computed in ESRD PPS base rate payment methodology when making payment for renal dialysis services in CY 2014.

index budget-neutrality adjustment factor ensures that wage index adjustments do not increase or decrease aggregate Medicare payments with respect to changes in wage index updates. Therefore, we are proposing a wage index budget-neutrality adjustment factor of 1.000411, which would be computed in ESRD PPS base rate payment methodology when making payment for renal dialysis services in CY 2014.

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

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

To develop the comorbidity payment adjustment, we used a stepwise regression model to analyze comorbidity data and found that certain comorbidities are predictors of variation in payments for ESRD patients. Details on the development of the comorbidity categories eligible for the comorbidity payment adjustment, including an explanation of the stepwise regression model that we used to analyze comorbidity data, is discussed in the CY 2011 ESRD PPS final rule (75 FR 49094 through 49108)

alyze comorbidity data and found that certain comorbidities are predictors of variation in payments for ESRD patients. Details on the development of the comorbidity categories eligible for the comorbidity payment adjustment, including an explanation of the stepwise regression model that we used to analyze comorbidity data, is discussed in the CY 2011 ESRD PPS final rule (75 FR 49094 through 49108). We analyzed the comorbidity categories and excluded those categories from the comorbidity payment adjustment that met any of three exclusion criteria (75 FR 49095 through 49100): (1) Inability to create accurate clinical definitions; (2) potential for adverse incentives regarding care; and (3) potential for ESRD facilities to directly influence the prevalence of the co-morbidity either by altering dialysis care, changing diagnostic testing patterns, or liberalizing the diagnostic criteria.

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

CY 2011 ESRD PPS final rule as Table E: ICD-9-CM Codes Recognized for a Comorbidity Payment Adjustment (75 FR 49211).

In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that the ICD-9-CM codes eligible for the comorbidity payment adjustment are subject to the annual ICD-9-CM coding updates that occur in the hospital inpatient PPS final rule and are effective October 1st of every year. We explained that any updates to the ICD-9-CM codes that affect the categories of comorbidities and the diagnoses within the comorbidity categories that are eligible for the comorbidity payment adjustment would be communicated to ESRD facilities through sub-regulatory guidance. Accordingly, Change Request (CR) 7476, Transmittal 2255, entitled, “Quarterly Update to the End-Stage Renal Disease Prospective Payment System, was issued on July 15, 2011 to update the ICD-9-CM codes eligible for the comorbidity payment adjustment in accordance with the annual ICD-9-CM update effective October 1, 2011. This CR can be found on the CMS Web site at the following link: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2255CP.pdf . There have not been updates to the ICD-9-CM codes eligible for the comorbidity

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

osswalk from ICD-9-CM to ICD-10-CM codes for the purpose of determining eligibility for the comorbidity payment adjustment.

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

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

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

Table 1 lists all the instances in which one ICD-9-CM code crosswalks to one ICD-10-CM code. We propose that all of those ICD-10-CM codes will be subject to the comorbidity payment adjustment with the exception of K52.81 Eosinophilic gastritis or gastroenteritis. Currently, 535.71 Eosinophilic gastritis with hemorrhage is one of 40 ICD-9-CM diagnosis codes under the acute comorbidity category of Gastrointestinal (GI) Bleeding

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

or adverse incentives in ESRD care. Accordingly, we propose to exclude ICD-10-CM code K52.81 Eosinophilic gastritis or gastroenteritis from eligibility for the comorbidity payment adjustment because the code descriptor does not indicate the diagnosis of a hemorrhage. We propose that all of the other ICD-10-CM codes listed in the Table 1 below will be eligible for the comorbidity payment adjustment.

Table 1—One ICD-9-CM Code Crosswalks to One ICD-10-CM Code ICD-9 Descriptor ICD-10 Descriptor Gastrointestinal Bleeding 530.21 Ulcer of esophagus with bleeding K22.11 Ulcer of esophagus with bleeding 535.71 Eosinophilic gastritis, with hemorrhage K52.81 Eosinophilic gastritis or gastroenteritis 537.83 Angiodysplasia of stomach and duodenum with hemorrhage K31.811 Angiodysplasia of stomach and duodenum with bleeding 569.85 Angiodysplasia of intestine with hemorrhage K55.21 Angiodysplasia of colon with hemorrhage Bacterial Pneumonia 003.22 Salmonella pneumonia A02.22 Salmonella pneumonia 482.0 Pneumonia due to Klebsiella pneumonia J15.0 Pneumonia due to Klebsiella pneumoniae 482.1 Pneumonia due to Pseudomonas J15.1 Pneumonia due to Pseudomonas 482.2 Pneumonia due to Hemophilus influenzae [H. influenzae] J14 Pneumonia due to Hemophilus influenzae 482.32 Pneumonia due to Streptococcus, group B J15.3 Pneumonia due to streptococcus, group B 482.40 Pneumonia due to Staphylococcus, unspecified J15.20 Pneumonia due to staphylococcus, unspecified 482.41 Methicillin susceptible pneumonia due to Staphylococcus aureus J15.211 Pneumonia due to Methicillin susceptible Staphylococcus aureus 482.42 Methicillin resistant pneumonia due to Staphylococcus aureus J15.212 Pneumonia due to Methicillin resistant Staphylococcus aureus 482.49 Other Staphylococcus pneumonia J15.29 Pneumonia due to other staphylococcus 482.82 Pneumonia due to escherichia coli [E

41 Methicillin susceptible pneumonia due to Staphylococcus aureus J15.211 Pneumonia due to Methicillin susceptible Staphylococcus aureus 482.42 Methicillin resistant pneumonia due to Staphylococcus aureus J15.212 Pneumonia due to Methicillin resistant Staphylococcus aureus 482.49 Other Staphylococcus pneumonia J15.29 Pneumonia due to other staphylococcus 482.82 Pneumonia due to escherichia coli [E. coli] J15.5 Pneumonia due to Escherichia coli 482.83 Pneumonia due to other gram-negative bacteria J15.6 Pneumonia due to other aerobic Gram-negative bacteria 482.84 Pneumonia due to Legionnaires' disease A48.1 Legionnaires' disease 507.0 Pneumonitis due to inhalation of food or vomitus J69.0 Pneumonitis due to inhalation of food and vomit 507.8 Pneumonitis due to other solids and liquids J69.8 Pneumonitis due to inhalation of other solids and liquids 510.0 Empyema with fistula J86.0 Pyothorax with fistula 510.9 Empyema without mention of fistula J86.9 Pyothorax without fistula Pericarditis 420.91 Acute idiopathic pericarditis I30.0 Acute nonspecific idiopathic pericarditis Hereditary Hemolytic and Sickle Cell Anemia 282.0 Hereditary spherocytosis D58.0 Hereditary spherocytosis 282.1 Hereditary elliptocytosis D58.1 Hereditary elliptocytosis 282.41 Sickle-cell thalassemia without crisis D57.40 Sickle-cell thalassemia without crisis 282.43 Alpha thalassemia D56.0 Alpha thalassemia 282.44 Beta thalassemia D56.1 Beta thalassemia 282.45 Delta-beta thalassemia D56.2 Delta-beta thalassemia 282.46 Thalassemia minor D56.3 Thalassemia minor 282.47 Hemoglobin E-beta thalassemia D56.5 Hemoglobin E-beta thalassemia 282.49 Other thalassemia D56.8 Other thalassemias 282.61 Hb-SS disease without crisis D57.1 Sickle-cell disease without crisis 282.63 Sickle-cell/Hb-C disease without crisis D57.20 Sickle-cell/Hb-C disease without crisis 282.68 Other sickle-cell disease without crisis D57.80 Other sickle-cell disorders without crisis Myelodysplastic Syndrome 238.7 Essential thrombocythemia D47.3 Essential (hemorrhagic) thrombocythemia 23

D56.8 Other thalassemias 282.61 Hb-SS disease without crisis D57.1 Sickle-cell disease without crisis 282.63 Sickle-cell/Hb-C disease without crisis D57.20 Sickle-cell/Hb-C disease without crisis 282.68 Other sickle-cell disease without crisis D57.80 Other sickle-cell disorders without crisis Myelodysplastic Syndrome 238.7 Essential thrombocythemia D47.3 Essential (hemorrhagic) thrombocythemia 238.73 High grade myelodysplastic syndrome lesions D46.22 Refractory anemia with excess of blasts 2 238.74 Myelodysplastic syndrome with 5q deletion D46.C Myelodysplastic syndrome with isolated del(5q) chromosomal abnormality 238.76 Myelofibrosis with myeloid metaplasia D47.1 Chronic myeloproliferative disease b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes

Table 2 lists all of the instances in which one ICD-9-CM code crosswalks to multiple ICD-10-CM codes. In those instances, we propose that all the crosswalked ICD-10-CM codes will be subject to the comorbidity payment adjustment, with the exception of D89.2 Hypergammaglobulinemia, unspecified. ICD-9-CM code 273.1 Monoclonal paraproteinemia is the only ICD-9-CM code eligible for the comorbidity payment adjustment under the chronic comorbidity category of Monoclonal gammopathy. ICD-9-CM code 273.1 Monoclonal paraproteinemia crosswalks to two ICD-10-CM codes: D47.2 Monoclonal gammopathy and D89.2 Hypergammaglobulinemia, unspecified. We analyzed both of these ICD-10-CM codes and determined that D47.2 Monoclonal gammopathy should be eligible for the comorbidity payment adjustment because, like ICD-9-CM code 273.1 Monoclonal paraproteinemia, it indicates that there is an excessive amount of a single monoclonal gammaglobulin. When we analyzed the comorbidity category for the CY 2011 ESRD PPS final rule, single monoclonal gammaglobulin was shown to have an association with higher erythropoiesis stimulating agent (ESA) usage, thereby resulting in higher costs to dialysis facilities

se, like ICD-9-CM code 273.1 Monoclonal paraproteinemia, it indicates that there is an excessive amount of a single monoclonal gammaglobulin. When we analyzed the comorbidity category for the CY 2011 ESRD PPS final rule, single monoclonal gammaglobulin was shown to have an association with higher erythropoiesis stimulating agent (ESA) usage, thereby resulting in higher costs to dialysis facilities. After clinical evaluation of D89.2 Hypergammaglobulinemia, unspecified, however, we determined that this ICD-10-CM code should not be eligible for the comorbidity payment adjustment because D89.2 Hypergammaglobulinemia, unspecified indicates only that 1 or more immunoglobulins are elevated, but does not identify which immunoglobulin(s) are elevated. We believe that the lack of specificity of this particular code results in an inability to create an accurate clinical definition, which is the first of the three exclusion criteria. Accordingly, we propose that D89.2 Hypergammaglobulinemia, unspecified will not be eligible for the comorbidity payment adjustment. We propose that all of the other ICD-10-CM codes listed in Table 2 below will be eligible for the comorbidity payment adjustment.

Table 2—One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes ICD-9 Descriptor ICD-10 Descriptor Gastrointestinal Bleeding 562 Diverticulosis of small intestine with hemorrhage K57.11 Diverticulosis of small intestine without perforation or abscess with bleeding. K57.51 Diverticulosis of both small and large intestine without perforation or abscess with bleeding. 562.03 Diverticulitis of small intestine with hemorrhage K57.01 Diverticulitis of small intestine with perforation and abscess with bleeding. K57.13 Diverticulitis of small intestine without perforation or abscess with bleeding. K57.41 Diverticulitis of both small and large intestine with perforation and abscess with bleeding. K57.53 Diverticulitis of both small and large intestine without perforation or abscess with bleeding

l intestine with hemorrhage K57.01 Diverticulitis of small intestine with perforation and abscess with bleeding. K57.13 Diverticulitis of small intestine without perforation or abscess with bleeding. K57.41 Diverticulitis of both small and large intestine with perforation and abscess with bleeding. K57.53 Diverticulitis of both small and large intestine without perforation or abscess with bleeding. 562.12 Diverticulosis of colon with hemorrhage K57.31 Diverticulosis of large intestine without perforation or abscess with bleeding. K57.91 Diverticulosis of intestine, part unspecified, without perforation or abscess with bleeding. K57.51 Diverticulosis of both small and large intestine without perforation or abscess with bleeding. 562.13 Diverticulitis of colon with hemorrhage K57.21 Diverticulitis of large intestine with perforation and abscess with bleeding. K57.33 Diverticulitis of large intestine without perforation or abscess with bleeding. K57.41 Diverticulitis of both small and large intestine with perforation and abscess with bleeding. K57.53 Diverticulitis of both small and large intestine without perforation or abscess with bleeding. Bacterial Pneumonia 513.0 Abscess of lung J85.0 Gangrene and necrosis of lung. J85.1 Abscess of lung with pneumonia. J85.2 Abscess of lung without pneumonia. Pericarditis 420.0 Acute pericarditis in diseases classified elsewhere A18.84 Tuberculosis of heart. I32 Pericarditis in diseases classified elsewhere. M32.12 Pericarditis in systemic lupus erythematosus. 420.90 Acute pericarditis, unspecified I30.1 Infective pericarditis. I30.9 Acute pericarditis, unspecified. 420.99 Other acute pericarditis I30.8 Other forms of acute pericarditis. I30.9 Acute pericarditis, unspecified. Hereditary Hemolytic and sickle cell anemia 282.2 Anemias due to disorders of glutathione metabolism D55.0 Anemia due to glucose-6-phosphate dehydrogenase [G6PD] deficiency. D55.1 Anemia due to other disorders of glutathione metabolism

pericarditis. I30.9 Acute pericarditis, unspecified. 420.99 Other acute pericarditis I30.8 Other forms of acute pericarditis. I30.9 Acute pericarditis, unspecified. Hereditary Hemolytic and sickle cell anemia 282.2 Anemias due to disorders of glutathione metabolism D55.0 Anemia due to glucose-6-phosphate dehydrogenase [G6PD] deficiency. D55.1 Anemia due to other disorders of glutathione metabolism. 282.3 Other hemolytic anemias due to enzyme deficiency D55.2 Anemia due to disorders of glycolytic enzymes. D55.3 Anemia due to disorders of nucleotide metabolism. D55.8 Other anemias due to enzyme disorders. D55.9 Anemia due to enzyme disorder, unspecified. 282.42 Sickle-cell thalassemia with crisis D57.411 Sickle-cell thalassemia with acute chest syndrome. D57.412 Sickle-cell thalassemia with splenic sequestration. D57.419 Sickle-cell thalassemia with crisis, unspecified. 282.62 Hb-SS disease with crisis D57.00 Hb-SS disease with crisis, unspecified. D57.01 Hb-SS disease with acute chest syndrome. D57.02 Hb-SS disease with splenic sequestration. 282.64 Sickle-cell/Hb-C disease with crisis D57.211 Sickle-cell/Hb-C disease with acute chest syndrome. D57.212 Sickle-cell/Hb-C disease with splenic sequestration. D57.219 Sickle-cell/Hb-C disease with crisis, unspecified. 282.69 Other sickle-cell disease with crisis D57.811 Other sickle-cell disorders with acute chest syndrome. D57.812 Other sickle-cell disorders with splenic sequestration. D57.819 Other sickle-cell disorders with crisis, unspecified. Monoclonal Gammopathy 273.1 Monoclonal paraproteinemia D47.2 Monoclonal gammopathy. D89.2 Hypergammaglobulinemia, unspecified. Myelodysplastic Syndrome 238.72 Low grade myelodysplastic syndrome lesions D46.0 Refractory anemia without ring sideroblasts, so stated. D46.1 Refractory anemia with ring sideroblasts. D46.20 Refractory anemia with excess of blasts, unspecified. D46.21 Refractory anemia with excess of blasts 1. D46.4 Refractory anemia, unspecified. D46.A Refractory cytopenia with multilineage dysplasia

nspecified. Myelodysplastic Syndrome 238.72 Low grade myelodysplastic syndrome lesions D46.0 Refractory anemia without ring sideroblasts, so stated. D46.1 Refractory anemia with ring sideroblasts. D46.20 Refractory anemia with excess of blasts, unspecified. D46.21 Refractory anemia with excess of blasts 1. D46.4 Refractory anemia, unspecified. D46.A Refractory cytopenia with multilineage dysplasia. D46.B Refractory cytopenia with multilineage dysplasia and ring sideroblasts. 238.75 Myelodysplastic syndrome, unspecified D46.9 Myelodysplastic syndrome, unspecified. D46.Z Other myelodysplastic syndromes. c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code

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

Table 3—Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code ICD-9 Descriptor ICD-10 Descriptor Gastrointestinal Bleeding 533.20 Acute peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction K27.2 Acute peptic ulcer, site unspecified, with both hemorrhage and perforation. 533.21 Acute peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction 533.40 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, without mention of obstruction K27.4 Chronic or unspecified peptic ulcer, site unspecified, with hemorrhage. 533.41 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, with obstruction 533.60 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction K27.6 Chronic or unspecified peptic ulcer, site unspecified, with both hemorrhage and perforation

K27.4 Chronic or unspecified peptic ulcer, site unspecified, with hemorrhage. 533.41 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, with obstruction 533.60 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction K27.6 Chronic or unspecified peptic ulcer, site unspecified, with both hemorrhage and perforation. 533.61 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction 534.00 Acute gastrojejunal ulcer with hemorrhage, without mention of obstruction K28.0 Acute gastrojejunal ulcer with hemorrhage. 534.01 Acute gastrojejunal ulcer, with hemorrhage, with obstruction 534.20 Acute gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction K28.2 Acute gastrojejunal ulcer with both hemorrhage and perforation. 534.21 Acute gastrojejunal ulcer with hemorrhage and perforation, with obstruction 534.40 Chronic or unspecified gastrojejunal ulcer with hemorrhage, without mention of obstruction K28.4 Chronic or unspecified gastrojejunal ulcer with hemorrhage. 534.41 Chronic or unspecified gastrojejunal ulcer, with hemorrhage, with obstruction 534.60 Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction K28.6 Chronic or unspecified gastrojejunal ulcer with both hemorrhage and perforation. 534.61 Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, with obstruction Bacterial Pneumonia 482.30 Pneumonia due to Streptococcus, unspecified J15.4 Pneumonia due to other streptococci. 482.31 Pneumonia due to Streptococcus, group A 482.39 Pneumonia due to other Streptococcus 482.81 Pneumonia due to anaerobes J15.8 Pneumonia due to other specified bacteria

perforation. 534.61 Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, with obstruction Bacterial Pneumonia 482.30 Pneumonia due to Streptococcus, unspecified J15.4 Pneumonia due to other streptococci. 482.31 Pneumonia due to Streptococcus, group A 482.39 Pneumonia due to other Streptococcus 482.81 Pneumonia due to anaerobes J15.8 Pneumonia due to other specified bacteria. 482.89 Pneumonia due to other specified bacteria In summary, based on our clinical evaluation of the ICD-10-CM codes to which the eligible ICD-9-CM codes crosswalk, we propose that both D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic gastritis or gastroenteritis would not be eligible for the comorbidity payment adjustment. We propose that all other ICD-10-CM codes to which eligible ICD-9-CM codes crosswalk that are listed in the Tables above will be eligible for the comorbidity payment adjustment effective October 1, 2014. We are soliciting comments on the ICD-10-CM codes that we propose to exclude and those we propose will be eligible for the comorbidity payment adjustment.

6. Proposed Revisions to the Outlier Policy

Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS include a payment adjustment for high cost outliers due to unusual variations in the type or amount of medically necessary care, including variability in the amount of erythropoiesis stimulating agents (ESAs) necessary for anemia management. Our regulations at 42 CFR

hropoiesis stimulating agents (ESAs) necessary for anemia management. Our regulations at 42 CFR

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

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

Our regulations at 42 CFR § 413.237(a)(2) through (a)(6), (b), and (c) specify the methodology used to calculate outlier payments

ng efforts, items and services that are incorrectly being identified as eligible outlier services in the claims data. Any updates to the list of renal dialysis items and services that qualify as outlier services are made through administrative issuances, if necessary.

Our regulations at 42 CFR § 413.237(a)(2) through (a)(6), (b), and (c) specify the methodology used to calculate outlier payments. An ESRD facility is eligible for an outlier payment if its actual or imputed Medicare Allowable Payment (MAP) amount per treatment for ESRD outlier services exceeds a threshold. The MAP amount represents the average incurred amount per treatment for services that were or would have been considered separately billable services prior to January 1, 2011. The threshold is equal to the ESRD facility's predicted ESRD outlier services MAP amount per treatment (which is case-mix adjusted) plus the fixed dollar loss amount. In accordance with § 413.237(c) of the regulations, facilities are paid 80 percent of the per treatment amount by which the imputed MAP amount for outlier services (that is, the actual incurred amount) exceeds this threshold. ESRD facilities are eligible to receive outlier payments for treating both adult and pediatric dialysis patients.

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

1.0 percent of total payments (75 FR 49142 through 49143). We also established the fixed dollar loss amounts that are added to the predicted outlier services MAP amounts. The outlier services MAP amounts and fixed dollar loss amounts are different for adult and pediatric patients due to differences in the utilization of separately billable services among adult and pediatric patients (75 FR 49140).

As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 49139), the predicted outlier services MAP amounts for a patient are determined by multiplying the adjusted average outlier services MAP amount by the product of the patient-specific case-mix adjusters applicable using the outlier services payment multipliers developed from the regression analysis to compute the payment adjustments. The average outlier services MAP amount per treatment for CY 2011 was based on payment amounts reported on 2007 claims and adjusted to reflect projected prices for 2011. For CY 2012, the outlier services MAP amounts and fixed dollar loss amounts were based on 2010 data (76 FR 70250). Thus, for CYs 2011 and 2012, the MAP and fixed dollar loss amounts were computed based on pre-ESRD PPS claims data and utilization. For CY 2013, the outlier services MAP amounts and fixed dollar loss amounts were based on 2011 data (77 FR 67464). Therefore, the outlier thresholds for CY 2013 were based on utilization of ESRD-related items and services furnished under the ESRD PPS. Because of the lower utilization of epoetin and other outlier services in CY 2011, we lowered the MAP amounts and fixed dollar loss amounts for both adult and pediatric patients for CY 2013 to allow for an increase in payments for ESRD beneficiaries requiring higher resources.

a. Impact of Proposed Changes to the Outlier Policy

For CY 2014, we are not proposing any changes to the methodology used to compute the MAP or fixed dollar loss amounts

er outlier services in CY 2011, we lowered the MAP amounts and fixed dollar loss amounts for both adult and pediatric patients for CY 2013 to allow for an increase in payments for ESRD beneficiaries requiring higher resources.

a. Impact of Proposed Changes to the Outlier Policy

For CY 2014, we are not proposing any changes to the methodology used to compute the MAP or fixed dollar loss amounts. Rather, in this proposed rule, we are updating the outlier services MAP amounts and fixed dollar loss amounts to reflect the utilization of outlier services reported on the 2012 claims using the December 2012 claims file. Accordingly, for CY 2014, the MAP and fixed dollar loss amounts are based on the ESRD PPS claims and utilization. The impact of this update is shown in Table 4, which compares the outlier services MAP amounts and fixed dollar loss amounts used for the outlier policy in CY 2013 with the updated estimates for this proposed rule. The estimates for the proposed outlier CY 2014 outlier policy, which are included in Column II of Table 4, were inflation-adjusted to reflect projected 2014 prices for outlier services.

Table 4—Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy Column I Final outlier policy for CY2013 (based on 2011 data price inflated to 2013) * Age <18 Age >= 18 Column II Proposed outlier policy for CY2014 (based on 2012 data price inflated to 2014) * Age <18 Age >= 18 Average outlier services MAP amount per treatment 1 $38.65 $61.38 $38.65 $52.45 Adjustments Standardization for outlier services 2 1.0927 0.9878 1.0960 0.9893 MIPPA reduction 0.98 0.98 0.98 0.98 Adjusted average outlier services MAP amount 3 $41.39 $59.42 $41.51 $50.85 Fixed dollar loss amount that is added to the predicted MAP to determine the outlier threshold 4 $47.32 $110.22 $54.23 $94.26 Patient months qualifying for outlier payment 7.6% 5.1% 6.2% 5.1% * The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated prices for outlier services (that is, 201

outlier services MAP amount 3 $41.39 $59.42 $41.51 $50.85 Fixed dollar loss amount that is added to the predicted MAP to determine the outlier threshold 4 $47.32 $110.22 $54.23 $94.26 Patient months qualifying for outlier payment 7.6% 5.1% 6.2% 5.1% * The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated prices for outlier services (that is, 2013 prices in Column I and projected 2014 prices in Column II). 1 Excludes patients for whom not all data were available to calculate projected payments under an expanded bundle. The outlier services MAP amounts are based on 2012 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims monitoring policy were applied. 2 Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing case mix adjusters for adult and pediatric patient groups. 3 This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP for each patient. 4 The fixed dollar loss amounts were calculated using 2012 data to yield total outlier payments that represent 1% of total projected payments for the ESRD PPS. As seen in Table 4, the estimated fixed dollar loss amount that determines the 2014 outlier threshold amount for adults (Column II) is lower than that used for the 2013 outlier policy (Column I). The estimated fixed dollar loss amount that determines the 2014 outlier threshold amount for pediatric patients (Column II) is higher than that used for the 2013 outlier policy (Column I). The main reason for the reduction for adult patients is that the lower utilization of epoetin and other outlier services continued to decline during the second year of the PPS

the 2013 outlier policy (Column I). The estimated fixed dollar loss amount that determines the 2014 outlier threshold amount for pediatric patients (Column II) is higher than that used for the 2013 outlier policy (Column I). The main reason for the reduction for adult patients is that the lower utilization of epoetin and other outlier services continued to decline during the second year of the PPS. This can be seen by comparing the outlier service MAP amount per treatment for adult patients in Column I ($61.38, which is based on 2011 data) with that amount in Column II ($52.45, which is based on 2012 data).

For pediatric patients, there was no change in the overall average outlier service MAP amount between 2011 and 2012 ($38.65 per treatment in both Columns I and II). In addition, there was a greater tendency in 2012 for a relatively small percentage of pediatric patients to account for a disproportionate share of the total outlier service MAP amounts. The one percent target for outlier payments is therefore expected to be achieved based on a smaller percentage of pediatric outlier cases using 2012 data compared to 2011 data (6.2 percent of pediatric patient months are expected to qualify for outlier payments rather than 7.6 percent). These patterns led to the estimated fixed dollar loss amount for pediatric patients being higher for the outlier policy for CY 2014 compared to the outlier policy for CY 2013. Generally, there is a relatively higher likelihood for pediatric patients that the outlier threshold may be adjusted to reflect changes in the distribution of outlier service MAP amounts. This is due to the much smaller overall number of pediatric patients compared to adult patients, and therefore to the fact that the outlier threshold for pediatric patients is calculated based on data for a much smaller number of pediatric patients compared to adult patients

c patients that the outlier threshold may be adjusted to reflect changes in the distribution of outlier service MAP amounts. This is due to the much smaller overall number of pediatric patients compared to adult patients, and therefore to the fact that the outlier threshold for pediatric patients is calculated based on data for a much smaller number of pediatric patients compared to adult patients.

We propose to update the fixed dollar loss amounts that are added to the predicted MAP amounts per treatment to determine the outlier thresholds for CY 2014 from $110.22 to $94.26 for adult patients and from $47.32 to $54.23 for pediatric patients compared with CY 2013 amounts. We estimate that the percentage of patient months qualifying for outlier payments under the current policy will be 5.1 percent and 6.2 percent for adult and pediatric patients, respectively, based on the 2012 data. The pediatric outlier MAP and fixed dollar loss amounts continue to be lower for pediatric patients than adults due to the continued lower use of outlier services (primarily reflecting lower use of epoetin and other injectable drugs).

b. Outlier Policy Percentage

42 CFR 413.220(b)(4) stipulates that the per treatment base rate is reduced by 1 percent to account for the proportion of the estimated total payments under the ESRD PPS that are outlier payments. Based on the 2012 claims, outlier payments represented approximately 0.2 percent of total payments, again falling short of the 1 percent target due to the continuing decline in use of outlier services. Use of 2012 data to recalibrate the thresholds, which reflect lower utilization of EPO and other outlier services, is expected to result in aggregate outlier payments close to the 1 percent target in CY 2014. We believe the proposed update to the outlier MAP and fixed dollar loss amounts for CY 2014 will increase payments for ESRD beneficiaries requiring higher resource utilization and come closer to meeting our 1 percent outlier policy

sholds, which reflect lower utilization of EPO and other outlier services, is expected to result in aggregate outlier payments close to the 1 percent target in CY 2014. We believe the proposed update to the outlier MAP and fixed dollar loss amounts for CY 2014 will increase payments for ESRD beneficiaries requiring higher resource utilization and come closer to meeting our 1 percent outlier policy.

We note that recalibration of the fixed dollar loss amounts in this proposed rule for CY 2014 outlier payments results in no change in payments to ESRD facilities for beneficiaries with renal dialysis items and services that are not eligible for outlier payments, but increases payments to providers for beneficiaries with renal dialysis items and services that are eligible for outlier payments. Therefore, beneficiary co-insurance obligations would also increase for renal dialysis services eligible for outlier payments.

C. Discussion of Self-Dialysis and Home Dialysis Training Add-on Adjustment and Request for Public Comments

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

The existing Medicare policy for furnishing self-dialysis training, home dialysis training, and retraining was finalized in our CY 2011 ESRD PPS final rule (75 FR 49062 through 49064) and further discussed in the Medicare Benefits Policy Manual, (Publication 100-02, Chapter 11). Self-dialysis or home dialysis can only be performed http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/GuidanceforLawsAndRegulations/Dialysis.html .

42 CFR 494.70 (Condition: Patients' rights) requires that facilities inform patients (or their representatives) of their rights and responsibilities when they begin their treatment and protect and provide for the exercise of those rights. Our regulation at 42 CFR § 494.70(7) requires a facility to inform patients about all treatment modalities' and settings, including but not limited to transplantation, home dialysis modalities, and in-facility hemodialysis

ilities inform patients (or their representatives) of their rights and responsibilities when they begin their treatment and protect and provide for the exercise of those rights. Our regulation at 42 CFR § 494.70(7) requires a facility to inform patients about all treatment modalities' and settings, including but not limited to transplantation, home dialysis modalities, and in-facility hemodialysis. This includes the patient's right to receive resource materials for dialysis modalities not offered by the facility. We expect that all ESRD facilities comply with this regulation and furnish resource information on home hemodialysis, even if this modality is not offered by the facility. When ESRD facilities are certified for home dialysis training we expect the facility to provide training throughout the self-dialysis or home dialysis experience (42 CFR 494.100). Self-dialysis or home dialysis training services and supplies may include but are not limited to personnel services; dialysis supplies, parenteral items used in dialysis, written training manuals and materials, and ESRD-related items and services.

We discuss Medicare's training policies in Table 5 (Medicare's Self or Home Training by Modality) for the following dialysis modalities:

• Home Hemodialysis Training

• Intermittent Peritoneal Dialysis Training

• Continuous Ambulatory Peritoneal Dialysis Training

• Continuous Cycling Peritoneal Dialysis Training

We would expect that patients who elect self-dialysis or home dialysis training will be good candidates for these modalities and that they will be successful in completing the method of training

ialysis modalities:

• Home Hemodialysis Training

• Intermittent Peritoneal Dialysis Training

• Continuous Ambulatory Peritoneal Dialysis Training

• Continuous Cycling Peritoneal Dialysis Training

We would expect that patients who elect self-dialysis or home dialysis training will be good candidates for these modalities and that they will be successful in completing the method of training. This includes compliance with patient assessments as described in 42 CFR 494.80(a)(9) “Evaluation of the patient's abilities, interests, preferences, and goals, including the desired level of participation in the dialysis care process; the preferred modality (hemodialysis or peritoneal dialysis), and setting (for example, home dialysis), and the patients expectations of care outcomes.” Table 5—Medicare's Self or Home Training by Modality Home Hemodialysis (HHD) Training HHD training is generally furnished in 4 weeks. Medicare will pay the ESRD facility for up to 25 HHD training sessions. In some HHD programs, the dialysis caregiver is trained to perform the dialysis treatment in its entirety and the patient plays a secondary role. In other programs, the patient performs most of the treatment and is only aided by a helper. Intermittent Peritoneal Dialysis (IPD) Training IPD training is generally furnished in 4 weeks. Medicare will pay the ESRD facility for up to 15 PD training sessions. In the IPD program, the patient's caregiver is usually trained to carry out the dialysis care. The patient plays a minimal role, as most are unable to perform self-care dialysis because of other debilitating conditions. Continuous Ambulatory Peritoneal Dialysis (CAPD) Training CAPD training is generally furnished in 2 weeks. Medicare will pay the ESRD facility for up to 15 PD training sessions. In CAPD programs both the patient and the caregiver are trained. Continuous Cycling Peritoneal Dialysis (CCPD) Training CCPD training is generally furnished in 2 weeks. Medicare will pay the ESRD facility for up to 15 PD training sessions

atory Peritoneal Dialysis (CAPD) Training CAPD training is generally furnished in 2 weeks. Medicare will pay the ESRD facility for up to 15 PD training sessions. In CAPD programs both the patient and the caregiver are trained. Continuous Cycling Peritoneal Dialysis (CCPD) Training CCPD training is generally furnished in 2 weeks. Medicare will pay the ESRD facility for up to 15 PD training sessions. In CCPD programs both the patient and the caregiver are trained. b. Payment Methodology

In our CY 2011 ESRD PPS final rule (75 FR 49062 through 49064), we stated that the ESRD PPS base rate alone does not account for the staffing costs associated with training treatments furnished by a registered nurse. Thus, we finalized the training add-on payment adjustment, to be added on to the ESRD PPS base rate, when one-on-one self or home dialysis training is furnished by a nurse, working for a Medicare-certified training facility, to a Medicare beneficiary for either hemodialysis or the peritoneal dialysis training modalities listed above. Likewise, we noted in our CY 2012 ESRD PPS final rule (76 FR 70252), that “ESRD facilities receive a per-treatment payment that accounts for case-mix, geographic location, low-volume, and outlier payment regardless [of whether] the patient receives dialysis at home or in the facility, plus the training add-on[,]” if applicable.

The add-on payment adjustment is also for retraining sessions after a patient or caregiver has completed the initial training program and if the patient continues to be an appropriate candidate for self or home dialysis modalities. We would expect that most Medicare beneficiaries receive retraining sessions when they receive new equipment, have a change in caregiver, or modality change. The ESRD facility may not bill Medicare for retraining services when they install home dialysis equipment or furnish monitoring services

program and if the patient continues to be an appropriate candidate for self or home dialysis modalities. We would expect that most Medicare beneficiaries receive retraining sessions when they receive new equipment, have a change in caregiver, or modality change. The ESRD facility may not bill Medicare for retraining services when they install home dialysis equipment or furnish monitoring services. For example, an ESRD facility nurse may not bill for retraining sessions when they update a home dialysis patient's treatment record, order monthly supplies, or instruct the patient on the use of a new medication for the treatment of infection. When retraining sessions are furnished to a patient or caregiver, there is an expectation that the patient or caregiver is already knowledgeable of the elements of home dialysis, and if additional training is being done for a change of equipment or a change in modality, fewer sessions would be necessary because of the transferability of certain basic skills for home dialysis.

We discuss our policy for retraining sessions in the Medicare Benefit Policy Manual, Publication 100-02, Chapter 11. If a Medicare beneficiary exceeds the maximum amount of training sessions based upon their modality, and, if they continue to be a good candidate for home modalities, additional training sessions or retraining sessions may be paid by Medicare with medical justification. In such cases, the ESRD facility must indicate the medical justification on the claim for the training or retraining session submitted for payment. Because the requirement of medical justification is specific to the patient's training needs, circumstances (such as a change in caregiver), or condition (change in modality), we

equirement of medical justification is specific to the patient's training needs, circumstances (such as a change in caregiver), or condition (change in modality), we

For CY 2011, we finalized the amount for the training add-on adjustment at $33.44 per treatment, and noted that this amount would be added to the ESRD PPS base rate payment when a training treatment is furnished by the ESRD facility. In addition, we noted that because the training add-on adjustment is directly related to nursing salaries and that nursing salaries differ greatly based on geographic location, we would adjust the training add-on payment by the geographic area wage index applicable to the ESRD facility. (For further discussions on wage indexes, please see section II.B.4. of this proposed rule.) When home dialysis training sessions are furnished to a Medicare beneficiary by a Medicare-certified training facility, Medicare will make the ESRD PPS computed base rate payment with all applicable adjustments, and then the separate add-on payment for self or home dialysis training.

In our CY 2013 ESRD final rule (77 FR 67468 through 67469), we addressed comments on Medicare's self and home dialysis training policies under the ESRD PPS. In that final rule, we stated that commenters were concerned that the payment for home dialysis training is insufficient and does not reflect the true costs of training and that they indicated various ranges of time required for home training in terms of time per day and number of training sessions. At that time, we responded to those comments by confirming that CMS will continue to monitor and analyze trends in home dialysis training, but that we believe our payment methodology is adequate for ESRD facilities furnishing training services.

In this proposed rule we are seeking comments on the costs associated with furnishing self or home dialysis training. We request comments on the elements of PD vs

ime, we responded to those comments by confirming that CMS will continue to monitor and analyze trends in home dialysis training, but that we believe our payment methodology is adequate for ESRD facilities furnishing training services.

In this proposed rule we are seeking comments on the costs associated with furnishing self or home dialysis training. We request comments on the elements of PD vs. HHD training sessions, specifically the costs of furnishing such training, the appropriate number of training sessions, and the duration of the training sessions. Lastly, we are also seeking comments on a “holdback” payment methodology, which we discussed in the CY 2011 ESRD PPS final rule (75 FR 49063). Under this methodology, a portion of the training payments would be withheld from the ESRD facility until the ESRD patient demonstrates that they have successfully transitioned to a home modality. Specifically, we are seeking comments on the length of time necessary for a successful transition to a home dialysis modality and the percentage of the payment that should be held back.

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

ay of Payment for Oral-Only Drugs Under the ESRD PPS

Section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), requires the Secretary to implement a payment system under which a single payment is made to a provider of services or a renal dialysis facility for “renal dialysis services” in lieu of any other payment. Section 1881(b)(14)(B) defines renal dialysis services, and subclause (iii) of that section states that these services include “other drugs and biologicals that are furnished to individuals for the treatment of ESRD and for which payment was (before the application of this paragraph) made separately under this title, and any oral equivalent form of such drug or biological[.]” We interpreted this provision as including not only injectable drugs and biologicals (other than ESAs, which are included under clause (ii)) used for the treatment of ESRD, but also all non-injectable drugs furnished under Title XVIII. We also concluded that, to the extent ESRD-related oral-only drugs do not fall within clause (iii) of the statutory definition of renal dialysis services, such drugs would fall under clause (iv), and constitute other items and services used for the treatment of ESRD that are not described in clause (i). Accordingly, we defined “renal dialysis services” at 42 CFR 413.174 as including, among other things, “[o]ther items and services that are furnished to individuals for the treatment of ESRD and for which payment was (prior to January 1, 2011) made separately under title XVIII of the Act (including drugs and biologicals with only an oral form).” Although oral-only drugs are included in the definition of renal dialysis services, in the CY 2011 ESRD PPS final rule, we also finalized a policy to delay payment for these drugs under the PPS until January 1, 2014 (75 FR 49044)

tment of ESRD and for which payment was (prior to January 1, 2011) made separately under title XVIII of the Act (including drugs and biologicals with only an oral form).” Although oral-only drugs are included in the definition of renal dialysis services, in the CY 2011 ESRD PPS final rule, we also finalized a policy to delay payment for these drugs under the PPS until January 1, 2014 (75 FR 49044). We stated that there were certain advantages to delaying the implementation of payment for oral-only drugs, including allowing ESRD facilities additional time to make operational changes and logistical arrangements in order to furnish oral-only ESRD-related drugs and biologicals to their patients. Accordingly, 42 CFR 413.174(f)(6) provides that payment to an ESRD facility for renal dialysis service drugs and biologicals with only an oral form is incorporated into the PPS payment rates effective January 1, 2014.

On January 3, 2013, Congress enacted the American Taxpayer Relief Act of 2012 (ATRA). Section 632(b) of ATRA states that the Secretary “may not implement the policy under section 413.176(f)(6) of title 42, Code of Federal Regulations (relating to oral-only ESRD-related drugs in the ESRD prospective payment system), prior to January 1, 2016.” Accordingly, payment for oral-only drugs will not be made under the ESRD PPS before January 1, 2016, instead of on January 1, 2014, which is the date originally finalized for payment of ESRD-related oral-only drugs under the ESRD PPS (75 FR 49044). We propose to pay for oral-only drugs consistent with section 632(b) of ATRA and implement this delay by revising the effective date for providing payment for oral-only ESRD-related drugs under the ESRD PPS at section 42 CFR 413.174(f)(6) from January 1, 2014 to January 1, 2016.

t this delay by revising the effective date for providing payment for oral-only ESRD-related drugs under the ESRD PPS at section 42 CFR 413.174(f)(6) from January 1, 2014 to January 1, 2016.

Because we propose that oral-only drugs will be included in the ESRD PPS starting in CY 2016, we also propose to change the reference to January 1, 2014 in section 42 CFR 413.237(a)(1)(iv) to January 1, 2016. In the CY 2011 ESRD PPS final rule (75 FR 49138), we defined outlier services as including oral-only drugs effective January 1, 2014. In addition to modifying the date on which oral-only drugs will be eligible for outlier payments, we also propose to clarify our regulation at 413.237(a)(1)(iv) by changing the word “excluding” to “including” to make clear that oral-only drugs are ESRD outlier services for purposes of the outlier policy effective January 1, 2016, consistent with the policy we established in the CY 2011 final rule (75 FR 49138).

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

A. Background

For more than 30 years, monitoring the quality of care provided to patients with end-stage renal disease (ESRD) by dialysis facilities has been an important component of the Medicare ESRD payment system. The ESRD quality incentive program (QIP) is the most recent step in fostering improved patient outcomes by establishing incentives for dialysis facilities to meet or exceed performance standards established by CMS. The ESRD QIP is authorized by section 1881(h) of the Social Security Act (the Act), which was added by section 153(c) of Medicare Improvements for Patients and Providers Act (MIPPA). CMS established the ESRD QIP for payment year (PY) 2012, the initial year of the program in which payment reductions Federal Register on August 12, 2010, and January 5, 2011 (75 FR 49030 and 76 FR 628, respectively). Subsequently, on November 10, 2011, CMS published a rule in the Federal Register outlining the PY 2013 and PY 2014 ESRD QIP requirements (76 FR 70228)

ients and Providers Act (MIPPA). CMS established the ESRD QIP for payment year (PY) 2012, the initial year of the program in which payment reductions Federal Register on August 12, 2010, and January 5, 2011 (75 FR 49030 and 76 FR 628, respectively). Subsequently, on November 10, 2011, CMS published a rule in the Federal Register outlining the PY 2013 and PY 2014 ESRD QIP requirements (76 FR 70228). On November 9, 2012, CMS published a rule in the Federal Register outlining the ESRD QIP requirements for PY 2015 and future payment years (77 FR 67450).

Section 1881(h) of the Act requires the Secretary to establish an ESRD QIP by (i) selecting measures; (ii) establishing the performance standards that apply to the individual measures; (iii) specifying a performance period with respect to a year; (iv) developing a methodology for assessing the total performance of each facility based on the performance standards with respect to the measures for a performance period; and (v) applying an appropriate payment reduction to facilities that do not meet or exceed the established Total Performance Score (TPS). This proposed rule discusses each of these elements and our proposals for their application to PY 2016 and future payment years of the ESRD QIP. As of January 1, 2014, ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands will be paid under the ESRD PPS. Under section 1881(h)(1)(A) of the Act, these facilities will receive a reduction to their ESRD PPS payments, beginning with January 1, 2014 dates of service, if they do not meet the requirements of the ESRD QIP.

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

1. Value-Based Purchasing (VBP) Overview

s in Updating and Expanding Quality Measures Under the ESRD QIP for PY 2016 and Subsequent PYs

1. Value-Based Purchasing (VBP) Overview

Throughout the past decade, Medicare has been transitioning from a program that pays for healthcare based on particular services furnished to a beneficiary to a program that ties payments to providers and suppliers based on the quality of services they deliver. By paying for the quality of care rather than quantity of care, we believe we are strengthening the healthcare system by focusing on better care and lower costs through improvement, prevention and population health, expanded healthcare coverage, and enterprise excellence—while also advancing the National Strategy for Quality Improvement in Health Care (National Quality Strategy). CMS is currently working to update a set of domains and specific measures of quality for our VBP programs, and to link the aims of the National Quality Strategy with our payment policies on a national scale. We are working in partnership with beneficiaries, providers, advocacy groups, the National Quality Forum (NQF), the Measures Application Partnership, operating divisions within the Department of Health and Human Services (HHS), and other stakeholders to develop new measures where gaps exist, refine measures requiring adjustment, and remove measures when appropriate. We are also collaborating with stakeholders to ensure that the ESRD QIP serves the needs of our beneficiaries and also advances the goals of the National Quality Strategy to coordinate healthcare delivery, reduce healthcare costs, enhance patient satisfaction, promote healthy communities, and increase patient safety. 1

1 2012 Annual Progress Report to Congress: National Strategy for Quality Improvement in Health Care, http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf .

We believe that the development of an ESRD QIP that is successful in supporting the delivery of high-quality healthcare services in dialysis facilities is paramount

action, promote healthy communities, and increase patient safety. 1

1 2012 Annual Progress Report to Congress: National Strategy for Quality Improvement in Health Care, http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf .

We believe that the development of an ESRD QIP that is successful in supporting the delivery of high-quality healthcare services in dialysis facilities is paramount. We seek to adopt measures for the ESRD QIP that promote better, safer, and more efficient care. Our measure development and selection activities for the ESRD QIP take into account national priorities such as those established by the National Priorities Partnership ( http://www.nationalprioritiespartnership.org/ ), HHS Strategic Plan ( http://www.hhs.gov/secretary/about/priorities/priorities.html ), the National Strategy for Quality Improvement in Healthcare ( http://www.healthcare.gov/center/reports/quality03212011a.html ), and the HHS National Action Plan to Prevent Healthcare Associated Infections (HAIs) ( http://www.hhs.gov/ash/initiatives/hai/esrd.html ). To the extent feasible and practicable, we have sought to adopt measures that have been endorsed by a national consensus organization, recommended by multi-stakeholder organizations, and developed with the input of providers, beneficiaries, and other stakeholders.

2. Brief Overview of Proposed PY 2016 Measures

For the PY 2016 ESRD QIP and future payment years, we are proposing a total of 14 measures. We believe that the PY 2016 ESRD QIP proposed measures promote high-quality care for patients with ESRD, and also strengthen the goals of the National Quality Strategy

ations, and developed with the input of providers, beneficiaries, and other stakeholders.

2. Brief Overview of Proposed PY 2016 Measures

• To evaluate anemia management: ○ Hemoglobin Greater Than 12 g/dL, a clinical measure ○ Patient Informed Consent for Anemia Treatment, a clinical measure* ○ Pediatric Iron Therapy, a reporting measure* ○ Anemia Management, a reporting measure (revised) • To evaluate dialysis adequacy: ○ A Kt/V measure for adult hemodialysis patients, a clinical measure ○ A Kt/V measure for adult peritoneal dialysis patients, a clinical measure ○ A Kt/V measure for pediatric hemodialysis patients, a clinical measure • To determine whether patients are treated using the most beneficial type of vascular access: ○ An arterial venous (AV) fistula measure, a clinical measure ○ A catheter measure, a clinical measure • To address effective bone mineral metabolism management: ○ Hypercalcemia, a clinical measure* ○ Mineral Metabolism, a reporting measure (revised) • To address patient safety: ○ National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Outpatients, a clinical measure* • To address patient-centered experience: ○ In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS), a reporting measure** • To gather data regarding comorbidities: ○ Comorbidity, a reporting measure* ** Indicates that the measure is new to the ESRD QIP.

*** Indicates that the measure is newly expanded or converted to a clinical measure in the ESRD QIP.

At this time, we are not proposing to adopt measures that address care coordination, efficiency, population and community health, or cost of care

porting measure** • To gather data regarding comorbidities: ○ Comorbidity, a reporting measure* ** Indicates that the measure is new to the ESRD QIP.

*** Indicates that the measure is newly expanded or converted to a clinical measure in the ESRD QIP.

At this time, we are not proposing to adopt measures that address care coordination, efficiency, population and community health, or cost of care. However, we are soliciting comments in this proposed rule on potential measures that would cover these areas. We welcome further comments on these and other potential measures for future program years.

3. Measures Application Partnership Review

Section 1890A(a)(1) of the Act, as added by section 3014(b) of the http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx ). As required by section 1890A(a)(4) of the Act, we considered these recommendations in selecting quality and efficiency measures for the ESRD QIP.

We publicly made available a number of measures in accordance with section 1890A(a)(2) of the Act, and these measures were reviewed by the Measures Application Partnership. Of these measures, a subset is related to a number of proposed new measures for the PY 2016 ESRD QIP (one each for anemia management, hypercalcemia, infection monitoring, comorbidity reporting, and ESA usage). The Measures Application Partnership supported the following:

• NQF-endorsed measure NQF #1454: Proportion of patients with hypercalcemia • NQF-endorsed measure NQF #1433: Use of Iron Therapy for Pediatric Patients (which forms the basis for the proposed Pediatric Iron Therapy reporting measure) • NQF-endorsed measure NQF #1460: National Healthcare Safety Network (NHSN) Bloodstream Infection Measure (which forms the basis for the proposed Bloodstream Infection in Hemodialysis Outpatients clinical measure) • NQF-endorsed measure NQF #0369: Dialysis Facility Risk-adjusted Standardized Mortality Ratio (the proposed Comorbidity reporting measure may assist in calculating performance on this measure, should

measure NQF #1460: National Healthcare Safety Network (NHSN) Bloodstream Infection Measure (which forms the basis for the proposed Bloodstream Infection in Hemodialysis Outpatients clinical measure) • NQF-endorsed measure NQF #0369: Dialysis Facility Risk-adjusted Standardized Mortality Ratio (the proposed Comorbidity reporting measure may assist in calculating performance on this measure, should we propose to adopt it in the future) The Measures Application Partnership supported the direction of the following measures: • NQF-endorsed measure NQF #1463: Standardized Hospitalization Ratio for Admissions (the proposed Comorbidity reporting measure may assist in calculating performance on this measure, should we propose to adopt it in the future) • Measures Application Partnership #2774: Blood Transfusion Appropriateness (which forms the basis for the Patient Informed Consent for Anemia Treatment clinical measure) We have taken comments from the Measures Application Partnership and the NQF into consideration for the PY 2016 ESRD QIP. In the measures section below, we further discuss these considerations, describe our proposals for the PY 2016 ESRD QIP, and provide rationale for why we believe it is appropriate to propose the measures at this time.

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

We previously finalized ten measures in the CY 2013 ESRD PPS final rule for the PY 2015 ESRD QIP and future PYs (77 FR 67471), and these measures are summarized in Table 6 below

our proposals for the PY 2016 ESRD QIP, and provide rationale for why we believe it is appropriate to propose the measures at this time.

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

We previously finalized ten measures in the CY 2013 ESRD PPS final rule for the PY 2015 ESRD QIP and future PYs (77 FR 67471), and these measures are summarized in Table 6 below. We are proposing to continue to use nine of the ten measures for the PY 2016 ESRD QIP and future payment years, modifying three of the measures as follows:

• ICH CAHPS (reporting measure): Expand

• Mineral Metabolism (reporting measure): Revise

• Anemia Management (reporting measure): Revise

For the PY 2016 ESRD QIP and future payment years, we are also proposing to add three new clinical measures (Patient Informed Consent for Anemia Treatment, Hypercalcemia, and NHSN Bloodstream Infection in Hemodialysis Outpatients), and two new reporting measures (Pediatric Iron Therapy, and Comorbidity). (See Table 7

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