Att E4_Dialysis Facilities_Dialysis Event

Vol. 80

Friday,

No. 215

November 6, 2015

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services
42 CFR Part 413
Medicare Program; End-Stage Renal Disease Prospective Payment
System, and Quality Incentive Program; Final Rule

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68968

Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Part 413
[CMS–1628–F]
RIN 0938–AS48

Medicare Program; End-Stage Renal
Disease Prospective Payment System,
and Quality Incentive Program
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule.
AGENCY:

This rule updates and makes
revisions to the End-Stage Renal Disease
(ESRD) Prospective Payment System
(PPS) for calendar year (CY) 2016. This
rule is necessary to ensure that ESRD
facilities receive accurate Medicare
payment amounts for furnishing
outpatient maintenance dialysis
treatments during calendar year 2016.
This rule will also set forth
requirements for the ESRD Quality
Incentive Program (QIP), including for
PYs 2017 through 2019.
DATES: Effective Date: These regulations
are effective on January 1, 2016.
FOR FURTHER INFORMATION CONTACT:
CMS ESRD [email protected], for
issues related to the ESRD PPS payment
provisions. Heidi Oumarou, (410) 786–
7342, for issues related to the ESRD PPS
Market Basket Update. Tamyra Garcia,
(410) 786–0856, for issues related to the
ESRD QIP.
SUPPLEMENTARY INFORMATION:
SUMMARY:

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/.

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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)
B. Summary of the Major Provisions
1. ESRD PPS

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2. ESRD QIP
C. Summary of Cost and Benefits
1. Impacts of the Final ESRD PPS
2. Impacts of the Final ESRD QIP
II. Calendar Year (CY) 2016 End-Stage Renal
Disease (ESRD) Prospective Payment
System (PPS)
A. Background on the End-Stage Renal
Disease (ESRD) Prospective Payment
System (PPS)
1. System for Payment of Renal Dialysis
Services
2. Updates to the ESRD PPS
B. Summary of the Proposed Provisions,
Public Comments, and Responses to
Comments on the CY 2016 ESRD PPS
Proposed Rule
1. Analysis and Revision of the Payment
Adjustments Under the ESRD PPS
a. Development and Implementation of the
ESRD PPS Payment Adjustments
b. Regression Model Used To Develop
Payment Adjustment Factors
i. Regression Analysis
ii. Dependent Variables
(1) Average Cost per Treatment for
Composite Rate Services
(2) Average Medicare Allowable Payment
(MAP) for Previously Separately Billable
Services
iii. Independent Variables
iv. Control Variables
c. Analysis and Revision of the Payment
Adjustments
i. Adult Case-Mix Payment Adjustments
(1) Patient Age
(2) Body Surface Area (BSA) and Body
Mass Index (BMI)
(3) Comorbidities
(4) Onset of Dialysis
d. Refinement of Facility-Level
Adjustments
i. Low-Volume Payment Adjustment
ii. CY 2016 Proposals for the Low-Volume
Payment Adjustment (LVPA)
(1) Background
(2) The United States Government
Accountability Office Study on the
LVPA
(3) Addressing GAO’s Recommendations
(4) Elimination of the Grandfathering
Provision
(5) Geographic Proximity Mileage Criterion
iii. Geographic Payment Adjustment for
ESRD Facilities Located in Rural Areas
(1) Background
(2) Determining a Facility-Level Payment
Adjustment for ESRD Facilities Located
in Rural Areas Beginning in CY 2016
(3) Further Investigation Into Targeting
High-Cost Rural ESRD Facilities
e. Refinement of the Case-Mix Adjustments
for Pediatric Patients
f. The Home and Self-Dialysis Training
Add-on Payment Adjustment
2. Final CY 2016 ESRD PPS Update
a. ESRD Bundled Market Basket
i. Overview and Background
ii. Market Basket Update Increase Factor
and Labor-Related Share for ESRD
Facilities for CY 2016
iii. Productivity Adjustment
iv. Calculation of the ESRDB Market Basket
Update, Adjusted for Multifactor
Productivity for CY 2016
b. The Final CY 2016 ESRD PPS Wage
Indices

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i. Annual Update of the Wage Index
ii. Implementation of New Labor Market
Delineations
c. CY 2016 Update to the Outlier Policy
i. CY 2016 Update to the Outlier Services
MAP Amounts and Fixed-Dollar Loss
Amounts
ii. Outlier Policy Percentage
d. Annual Updates and Policy Changes to
the CY 2016 ESRD PPS
i. ESRD PPS Base Rate
ii. Annual Payment Rate Update for CY
2016
3. Section 217(c) of PAMA and the ESRD
PPS Drug Designation Process
a. Background
b. Final Drug Designation Process
i. Inclusion of New Injectable and
Intravenous Products in the ESRD PPS
Bundled Payment
ii. Transitional Drug Add-On Payment
Adjustment
iii. Determination of When an Oral-Only
Renal Dialysis Service Drug Is No Longer
Oral-Only
4. Delay of Payment for Oral-Only Renal
Dialysis Services
5. Reporting Medical Director Fees on
ESRD Facility Cost Reports
C. Clarifications Regarding the ESRD PPS
1. Laboratory Renal Dialysis Services
2. Renal Dialysis Service Drugs and
Biologicals
a. 2014 Part D Call Letter Follow-up
b. Oral or Other Forms of Renal Dialysis
Injectable Drugs and Biologicals
c. Reporting of Composite Rate Drugs
III. End-Stage Renal Disease (ESRD) Quality
Incentive Program (QIP) for Payment
Year (PY) 2019
A. Background
B. Summary of the Proposed Provisions,
Public Comments, and Responses to
Comments on the End-Stage Renal
Disease (ESRD) Quality Incentive
Program (QIP) for Payment Year (PY)
2019 Proposed Rule
C. Clarification of ESRD QIP Terminology:
‘‘CMS Certification Number (CCN) Open
Date’’
D. Use of the Hypercalcemia Measure as a
Measure Specific to the Conditions
Treated With Oral-Only Drugs
E. Sub-Regulatory Measure Maintenance in
the ESRD QIP
F. Revision to the Requirements for the PY
2017 ESRD QIP
1. Modifying the Small Facility Adjuster
(SFA) Calculation for All Clinical
Measures Beginning with the PY 2017
ESRD QIP
2. Reinstating Qualifying Patient
Attestations for the ICH CAHPS Clinical
Measure
G. Requirements for the PY 2018 ESRD QIP
1. Performance Standards, Achievement
Thresholds, and Benchmarks for the
Clinical Measures Finalized for the PY
2018 ESRD QIP
2. Modification to Scoring Facility
Performance on the Pain Assessment and
Follow-Up Reporting Measure
3. Payment Reductions for the PY 2018
ESRD QIP
4. Data Validation
H. Requirements for the PY 2019 ESRD QIP

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
1. Replacement of the Four Measures
Currently in the Dialysis Adequacy
Clinical Measure Topic Beginning With
the PY 2019 Program Year
2. Measures for the PY 2019 ESRD QIP
a. PY 2018 Measures Continuing for PY
2019 and Future Payment Years
b. New Dialysis Adequacy Clinical
Measure Beginning With the PY 2019
ESRD QIP
c. New Reporting Measures Beginning
With the PY 2019 ESRD QIP
i. Ultrafiltration Rate Reporting Measure
ii. Full-Season Influenza Vaccination
Reporting Measure
3. Performance Period for the PY 2019
ESRD QIP
4. Performance Standards, Achievement
Thresholds, and Benchmarks for the PY
2019 ESRD QIP
a. Performance Standards, Achievement
Thresholds, and Benchmarks for the
Clinical Measures in the PY 2019 ESRD
QIP
b. Estimated Performance Standards,
Achievement Thresholds, and
Benchmarks for the Clinical Measures
Proposed for the PY 2019 ESRD QIP
c. Performance Standards for the PY 2019
Reporting Measures
5. Scoring the PY 2019 ESRD QIP
a. Scoring Facility Performance on Clinical
Measures Based on Achievement
b. Scoring Facility Performance on Clinical
Measures Based on Improvement
c. Scoring the ICH CAHPS Clinical
Measure
d. Calculating Facility Performance on
Reporting Measures
6. Weighting the Clinical Measure Domain
and Total Performance Score
i. Weighting the Clinical Measure Domain
for PY 2019
ii. Weighting the Total Performance Score
7. Minimum Data for Scoring Measures for
the PY 2019 ESRD QIP
8. Payment Reductions for the PY 2019
ESRD QIP
I. Future Achievement Threshold Policy
Under Consideration
J. Monitoring Access to Dialysis Facilities
IV. Advancing Health Information Exchange
V. Collection of Information Requirements
VI. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impact
B. Detailed Economic Analysis
1. CY 2016 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
1. CY 2016 End-Stage Renal Disease
2. CY End-Stage Renal Disease Quality
Incentive Program
C. Accounting Statement
VII. Regulatory Flexibility Act Analysis
VIII. Unfunded Mandates Reform Act
Analysis
IX. Federalism Analysis
X. Congressional Review Act
XI. Files Available to the Public via the
Internet

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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:
ABLE The Achieving a Better Life
Experience Act of 2014
AHRQ Agency for Healthcare Research and
Quality
AMCC Automated Multi-Channel
Chemistry
ANOVA Analysis of Variance
ARM Adjusted Ranking Metric
ASP Average Sales Price
ATRA The American Taxpayer Relief Act of
2012
BCMA Basic Case-Mix Adjustment
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
BMI Body Mass Index
BSA Body Surface Area
BSI Bloodstream Infection
CB Consolidated Billing
CBSA Core based statistical area
CCN CMS Certification Number
CDC Centers for Disease Control and
Prevention
CKD Chronic Kidney Disease
CLABSI Central Line Access Bloodstream
Infections
CFR Code of Federal Regulations
CIP Core Indicators Project
CMS Centers for Medicare & Medicaid
Services
CPM Clinical Performance Measure
CPT Current Procedural Terminology
CROWNWeb Consolidated Renal
Operations in a Web-Enabled Network
CY Calendar Year
DFC Dialysis Facility Compare
DFR Dialysis Facility Report
ESA Erythropoiesis stimulating agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease bundled
ESRD PPS End-Stage Renal Disease
Prospective Payment System
ESRD QIP End-Stage Renal Disease Quality
Incentive Program
FDA Food and Drug Administration
HCP Healthcare Personnel
HD Hemodialysis
HHD Home Hemodialysis
HAIs Healthcare-Acquired Infections
HCPCS Healthcare Common Procedure
Coding System
HCFA Health Care Financing
Administration
HHS Department of Health and Human
Services
ICD International Classification of Diseases
ICD–9–CM International Classification of
Disease, 9th Revision, Clinical
Modification
ICD–10–CM International Classification of
Disease, 10th Revision, Clinical
Modification
ICH CAHPS In-Center Hemodialysis
Consumer Assessment of Healthcare
Providers and Systems
IGI IHS Global Insight
IIC Inflation-indexed charge
IPPS Inpatient Prospective Payment System
IUR Inter-unit reliability

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KDIGO Kidney Disease: Improving Global
Outcomes
KDOQI Kidney Disease Outcome Quality
Initiative
Kt/V A measure of dialysis adequacy where
K is dialyzer clearance, t is dialysis time,
and V is total body water volume
LDO Large Dialysis Organization
MAC Medicare Administrative Contractor
MAP Medicare Allowable Payment
MCP Monthly Capitation Payment
MDO Medium Dialysis Organization
MFP Multifactor Productivity
MIPPA Medicare Improvements for Patients
and Providers Act of 2008 (Pub. L. 110–
275)
MMA Medicare Prescription Drug,
Improvement and Modernization Act of
2003
MMEA Medicare and Medicaid Extenders
Act of 2010 Pub. L. 111–309
MSA Metropolitan statistical areas
NAMES National Association of Medical
Equipment Suppliers
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
OBRA Omnibus Budget Reconciliation Act
OMB Office of Management and Budget
PAMA Protecting Access to Medicare Act of
2014
PC Product category
PD Peritoneal Dialysis
PEN Parenteral and Enteral nutrition
PFS Physician Fee Schedule
PPI Producer Price Index
PPS Prospective Payment System
PSR Performance Score Report
PY Payment Year
QIP Quality Incentive Program
RCE Reasonable Compensation Equivalent
REMIS Renal Management Information
System
RFA Regulatory Flexibility Act
SBA Small Business Administration
SFA Small Facility Adjuster
SIMS Standard Information Management
System
SRR Standardized Readmission Ratio
SSA Social Security Administration
STrR Standardized Transfusion Ratio
The Act Social Security Act
The Affordable Care Act The Patient
Protection and Affordable Care Act
The Secretary Secretary of the Department
of Health and Human Services
TPS Total Performance Score
URR Urea reduction ratio
VAT Vascular Access Type
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 End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS), a
case-mix adjusted, bundled prospective
payment system for renal dialysis
services furnished by ESRD facilities.

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

This final rule will update and revise
the ESRD PPS for calendar year (CY)
2016. Section 1881(b)(14) of the Social
Security Act (the Act), as added by
section 153(b) of the Medicare
Improvements for Patients and
Providers Act of 2008 (MIPPA) (Public
Law 110–275), and section
1881(b)(14)(F) of the Act, as added by
section 153(b) of MIPPA and amended
by section 3401(h) of the Affordable
Care Act Public Law 111–148),
established that beginning CY 2012, and
each subsequent year, the Secretary of
the Department of Health and Human
Services (the Secretary) shall annually
increase payment amounts by an ESRD
market basket increase factor, reduced
by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act.
Section 632 of the American Taxpayer
Relief Act of 2012 (ATRA) (Pub. L 112–
240) included several provisions that
apply to the ESRD PPS. Section 632(a)
of ATRA added section 1881(b)(14)(I) to
the Act, which required the Secretary,
by comparing per patient utilization
data from 2007 with such data from
2011, to reduce the single payment
amount to reflect the Secretary’s
estimate of the utilization of ESRDrelated drugs and biologicals. We
finalized the amount of the drug
utilization adjustment pursuant to this
section in the CY 2014 ESRD PPS final
rule with a 3- to 4-year transition (78 FR
72161 through 72170). Section 632(b) of
ATRA prohibited the Secretary from
paying for oral-only ESRD-related drugs
and biologicals under the ESRD PPS
before January 1, 2016. Section 632(c) of
ATRA requires the Secretary, by no later
than January 1, 2016, to analyze the
case-mix payment adjustments under
section 1881(b)(14)(D)(i) of the Act and
make appropriate revisions to those
adjustments.
On April 1, 2014, the Congress
enacted the Protecting Access to
Medicare Act of 2014 (PAMA) (Pub. L.
113–93). Section 217 of PAMA includes
several provisions that apply to the
ESRD PPS. Specifically, sections
217(b)(1) and (2) of PAMA amend
sections 1881(b)(14)(F) and (I) of the
Act. We interpreted the amendments to
sections 1881(b)(14)(F) and (I) as
replacing the drug utilization
adjustment that was finalized in the CY
2014 ESRD PPS final rule with specific
provisions that dictate the market basket
update for CY 2015 (0.0 percent) and
how it will be reduced in CYs 2016
through 2018. Section 217(a)(1) of
PAMA amended section 632(b)(1) of
ATRA to provide that the Secretary may
not pay for oral-only drugs and
biologicals used for the treatment of

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ESRD under the ESRD PPS prior to
January 1, 2024. Section 217(c) of
PAMA provides that, as part of the CY
2016 ESRD PPS rulemaking, the
Secretary shall establish a process for (1)
determining when a product is no
longer an oral-only drug; and (2)
including new injectable and
intravenous products into the ESRD PPS
bundled payment.
On December 19, 2014, the President
signed the Stephen Beck, Jr., Achieving
a Better Life Experience Act of 2014
(ABLE) (Pub. L. 113–295). Section 204
of ABLE amended section 632(b)(1) of
ATRA, as amended by section 217(a)(1)
of PAMA, to provide that payment for
oral-only renal dialysis services cannot
be made under the ESRD PPS bundled
payment prior to January 1, 2025.
2. End-Stage Renal Disease (ESRD)
Quality Incentive Program (QIP)
This rule also finalizes to set forth
requirements for the ESRD QIP,
including for payment years (PYs) 2017,
2018, and 2019. The program is
authorized under section 1881(h) of the
Social Security Act (the Act). The ESRD
QIP is the most recent step in fostering
improved patient outcomes by
establishing incentives for dialysis
facilities to meet or exceed performance
standards established by CMS.
B. Summary of the Major Provisions
1. ESRD PPS
• ESRD PPS refinement: In
accordance with section 632(c) of
ATRA, we analyzed the case-mix
payment adjustments under the ESRD
PPS using more recent data. For this
final rule, we have revised the
adjustments by changing the adjustment
payment amounts based on our updated
regression analysis using CYs 2012 and
2013 ESRD claims and cost report data.
In addition, we will remove two
comorbidity category payment
adjustments (bacterial pneumonia and
monoclonal gammopathy). Because we
conducted an updated regression
analysis to enable us to analyze and
revise the case-mix payment
adjustments, this final rule also revises
the low-volume payment adjustment
(LVPA) and implements a new rural
adjustment based on that regression
analysis. We are finalizing new patient
and facility-level adjustment factors.
This final rule also revises the
geographic proximity eligibility
criterion for the LVPA and removes
grandfathering from the criteria for the
adjustment.
• Drug designation process: In
accordance with section 217(c) of
PAMA, this final rule will implement a

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drug designation process for: (1)
Determining when a product is no
longer an oral-only drug and (2)
including new injectable and
intravenous renal dialysis service drugs
and biologicals into the bundled
payment under the ESRD PPS.
• Update to the ESRD PPS base rate
for CY 2016: The final CY 2016 ESRD
PPS base rate is $230.39. This amount
reflects a reduced market basket
increase as required by section
1881(b)(14)(F)(i)(I) (0.15 percent),
application of the wage index budgetneutrality adjustment factor (1.000495),
and a refinement budget-neutrality
adjustment factor (0.960319). The final
CY 2016 ESRD PPS base rate is $230.39
($239.43 x 1.000495 x 1.0015 x 0.960319
= $230.39).
• Annual update to the wage index
and wage index floor: We adjust wage
indices on an annual basis using the
most current hospital wage data and the
latest core-based statistical area (CBSA)
delineations to account for differing
wage levels in areas in which ESRD
facilities are located. For CY 2016, we
will complete our 2-year transition to
both the updated CBSA delineations
and the labor-related share to which the
wage index is applied (50.673 percent).
In addition, we computed a wage index
budget-neutrality adjustment factor of
1.000495 which is applied to the ESRD
PPS base rate. We are finalizing the
continuation of the application of the
current wage index floor (0.4000) to
areas with wage index values below the
floor.
• Update to the outlier policy: We are
updating the outlier policy using the
most current data. Specifically, 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 2016 using 2014 claims
data. Based on the use of more current
data, the fixed-dollar loss amount for
pediatric beneficiaries increases from
$54.35 to $62.19 and the MAP amount
decreases from $43.57 to $39.20, as
compared to CY 2015 values. For adult
beneficiaries, the fixed-dollar loss
amount increases from $86.19 to $86.97
and the MAP amount decreases from
$51.29 to $50.81. The 1.0 percent target
for outlier payments was not achieved
in CY 2014 (0.8 percent rather than 1.0
percent). We believe using CY 2014
claims data to update the outlier MAP
and fixed dollar loss amounts for CY
2016 will increase payments for ESRD
beneficiaries requiring higher resource
utilization in accordance with a 1.0
percent outlier percentage.

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2. ESRD QIP
This rule sets forth requirements for
the ESRD QIP, including for payment
years (PYs) 2017, 2018 and 2019.
• PY 2019 Measure Set: For PY 2019
and future payment years, we are
removing four clinical measures—(1)
Hemodialysis Adequacy: Minimum
delivered hemodialysis dose; (2)
Peritoneal Dialysis Adequacy: Delivered
dose above minimum; (3) Pediatric
Hemodialysis Adequacy: Minimum
spKt/V; and (4) Pediatric Peritoneal
Dialysis Adequacy—because a more
broadly applicable measure for the topic
has become available. We are replacing
these measures with a single
comprehensive Dialysis Adequacy
clinical measure.
• Reinstating the In-Center
Hemodialysis Consumer Assessment of
Healthcare Providers (ICH CAHPS)
Attestation: Beginning with PY 2017, we
are reinstating the ICH CAHPS
attestation in Consolidated Renal
Operations in a Web-Enabled Network
(CROWNWeb) previously adopted in
the CY 2014 ESRD PPS final rule (78 FR
72220 through 72222) using the
eligibility criteria finalized in the CY
2015 ESRD PPS final rule (79 FR 66169).
This will allow facilities to attest in
CROWNWeb that they did not treat
enough eligible patients during the
eligibility period to receive a score on
the ICH CAHPS measure and thereby
avoid receiving a score for this measure.
• Revising the Small Facility
Adjuster: Beginning with the PY 2017
ESRD QIP, we are revising the Small
Facility Adjuster (SFA) such that it does
not rely upon a pooled within-facility
standard error. The revised SFA
preserves the intent of the adjuster to
include as many facilities in the ESRD
QIP as possible while ensuring that the
measure scores are reliable.
C. Summary of Costs and Benefits
In section VI of this final rule, we set
forth a detailed analysis of the impacts
that the changes will have on affected
entities and beneficiaries. The impacts
include the following:

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1. Impacts of the Final ESRD PPS
The impact chart in section VI of this
final rule displays the estimated change
in payments to ESRD facilities in CY
2016 compared to estimated payments
in CY 2015. The overall impact of the
CY 2016 changes is projected to be a 0.2
percent increase in payments. Hospitalbased ESRD facilities and freestanding
facilities both have an estimated 0.2
percent increase in payments.
We estimate that the aggregate ESRD
PPS expenditures will increase by

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approximately $10 million from CY
2015 to CY 2016 which reflects the
payment rate update. As a result of the
projected 0.2 percent overall payment
increase, we estimate that there will be
an increase in beneficiary co-insurance
payments of 0.2 percent in CY 2016,
which translates to approximately $0
million due to rounding.
2. Impacts of the Final ESRD QIP
The overall economic impact of the
ESRD QIP is an estimated $11.8 million
in PY 2018 and $15.5 million in PY
2019. In PY 2018, we expect the costs
associated with the collection of
information requirements for the data
validation studies to be approximately
$21 thousand for all ESRD facilities,
totaling an overall impact of
approximately $11.8 million as a result
of the PY 2018 ESRD QIP.1 In PY 2019,
we expect the overall impact to be
approximately $15.5 million.
The ESRD QIP will continue to
incentivize facilities to provide highquality care to beneficiaries.
II. Calendar Year (CY) 2016 End-Stage
Renal Disease (ESRD) Prospective
Payment System (PPS)
A. Background on the End-Stage Renal
Disease (ESRD) Prospective Payment
System (PPS)
On January 1, 2011, we implemented
the end-stage renal disease (ESRD)
prospective payment system (PPS), a
case-mix adjusted bundled PPS for renal
dialysis services furnished by ESRD
facilities based on the requirements of
section 1881(b)(14) of the Social
Security Act (the Act), as added by
section 153(b) of the Medicare
Improvements for Patients and
Providers Act of 2008 (MIPPA) (Pub. L.
110–275). Section 1881(b)(14)(F) of the
Act, as added by section 153(b) of
MIPPA and amended by section 3401(h)
of the Patient Protection and Affordable
Care Act (the Affordable Care Act) (Pub.
L. 111–148), established that beginning
calendar year (CY) 2012, and each
subsequent year, the Secretary of the
Department of Health and Human
Services (the Secretary) shall annually
increase payment amounts by an ESRD
market basket increase factor, reduced
by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act.
1 We note that the aggregate impact of the PY
2018 ESRD QIP was included in the CY 2015 ESRD
PPS final rule (79 FR 66256 through 66258). The
previously finalized aggregate impact of $11.8
million reflects the PY 2018 estimated payment
reductions and the collection of information
requirements for the NHSN Healthcare Personnel
Influenza Vaccination reporting measure.

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Section 632 of the American Taxpayer
Relief Act of 2012 (ATRA) (Pub. L. 112–
240) included several provisions that
apply to the ESRD PPS. Section 632(a)
of ATRA added section 1881(b)(14)(I) to
the Act, which required the Secretary,
by comparing per patient utilization
data from 2007 with such data from
2012, to reduce the single payment for
renal dialysis services furnished on or
after January 1, 2014 to reflect the
Secretary’s estimate of the change in the
utilization of ESRD-related drugs and
biologicals (excluding oral-only ESRDrelated drugs). Consistent with this
requirement, in the CY 2014 ESRD PPS
final rule we finalized $29.93 as the
total drug utilization reduction and
finalized a policy to implement the
amount over a 3- to 4-year transition
period (78 FR 72161 through 72170).
Section 632(b) of ATRA prohibited
the Secretary from paying for oral-only
ESRD-related drugs and biologicals
under the ESRD PPS prior to January 1,
2016. And section 632(c) of ATRA
requires the Secretary, by no later than
January 1, 2016, to analyze the case-mix
payment adjustments under section
1881(b)(14)(D)(i) of the Act and make
appropriate revisions to those
adjustments.
On April 1, 2014, the Congress
enacted the Protecting Access to
Medicare Act of 2014 (PAMA) (Pub.
L.113–93). Section 217 of PAMA
included several provisions that apply
to the ESRD PPS. Specifically, sections
217(b)(1) and (2) of PAMA amended
sections 1881(b)(14)(F) and (I) of the Act
and replaced the drug utilization
adjustment that was finalized in the CY
2014 ESRD PPS final rule (78 FR 72161
through 72170) with specific provisions
that dictated the market basket update
for CY 2015 (0.0 percent) and how the
market basket should be reduced in CYs
2016 through CY 2018.
Section 217(a)(1) of PAMA amended
section 632(b)(1) of ATRA to provide
that the Secretary may not pay for oralonly ESRD-related drugs under the
ESRD PPS prior to January 1, 2024.
Section 217(a)(2) further amended
section 632(b)(1) of ATRA by requiring
that in establishing payment for oralonly drugs under the ESRD PPS, we
must use data from the most recent year
available. Section 217(c) of PAMA
provided that as part of the CY 2016
ESRD PPS rulemaking, the Secretary
shall establish a process for (1)
determining when a product is no
longer an oral-only drug; and (2)
including new injectable and
intravenous products into the ESRD PPS
bundled payment.
Finally, section 212 of PAMA
provided that the Secretary may not

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adopt the International Classification of
Disease 10th Revision, Clinical
Modification (ICD–10–CM) code sets
prior to October 1, 2015. HHS published
a final rule on August 4, 2014 that
adopted October 1, 2015 as the new
ICD–10–CM compliance date, and
required the use of International
Classification of Disease, 9th Revision,
Clinical Modification (ICD–9–CM)
through September 30, 2015 (79 FR
45128).
On December 19, 2014, the President
signed the Stephen Beck, Jr., Achieving
a Better Life Experience Act of 2014
(ABLE) (Pub. L. 113–295). Section 204
of ABLE amended section 632(b)(1) of
ATRA, as amended by section 217(a)(1)
of PAMA, to provide that payment for
oral-only renal dialysis services cannot
be made under the ESRD PPS bundled
payment prior to January 1, 2025.
1. System for Payment of Renal Dialysis
Services
Under the ESRD PPS, a single, pertreatment payment is made to an ESRD
facility for all of the renal dialysis
services defined in section
1881(b)(14)(B) of the Act and furnished
to individuals for the treatment of ESRD
in the ESRD facility or in a patient’s
home. We have codified our definitions
of renal dialysis services at 42 CFR
413.171 and other payment policies are
included in regulations at subpart H of
42 CFR part 413. The ESRD PPS base
rate is adjusted for characteristics of
both adult and pediatric patients and
account for patient case-mix variability.
The adult case-mix adjusters include
five categories of age, body surface area
(BSA), low body mass index (BMI),
onset of dialysis, six co-morbidity
categories, and pediatric patient-level
adjusters consisting of two age
categories and dialysis modalities (42
CFR 413.235(a) and(b)).
In addition, the ESRD PPS provides
for two facility-level adjustments. The
first payment adjustment accounts for
ESRD facilities furnishing a low volume
of dialysis treatments (42 CFR 413.232).
The second adjustment reflects
differences in area wage levels
developed from Core Based Statistical
Areas (CBSAs) (42 CFR 413.231).
The ESRD PPS allows for a training
add-on payment adjustment for home
dialysis modalities (42 CFR 413.235(c)).
Lastly, the ESRD PPS provides
additional payment for high cost
outliers due to unusual variations in the
type or amount of medically necessary
care when applicable (42 CFR 413.237).
2. Updates to the ESRD PPS
Updates and policy changes to the
ESRD PPS are proposed and finalized

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annually in the Federal Register. The
CY 2011 ESRD PPS final rule was
published on August 12, 2010 in the
Federal Register (75 FR 49030 through
49214). That rule implemented the
ESRD PPS beginning on January 1, 2011
in accordance with section 1881(b)(14)
of the Act, as added by section 153(b)
of MIPPA, over a 4-year transition
period. Since the implementation of the
ESRD PPS we have published annual
rules to make routine updates, policy
changes, and clarifications.
On November 6, 2014, we published
in the Federal Register a final rule (79
FR 66120 through 66265) titled, ‘‘EndStage Renal Disease Prospective
Payment System, Quality Incentive
Program, and Durable Medical
Equipment, Prosthetics, Orthotics, and
Supplies’’ (hereinafter referred to as the
CY 2015 ESRD PPS final rule). In that
final rule, we made a number of routine
updates to the ESRD PPS for CY 2015,
completed a rebasing and revision of the
ESRD bundled market basket,
implemented a 2-year of transition for
the revised labor-related share and a 2year transition of the new Core-Based
Statistical Area (CBSA) delineations,
and made policy changes and
clarifications. For a summary of the
provisions in that final rule, we refer
readers to the CY 2016 ESRD PPS
proposed rule at 80 FR 37813 (July 1,
2015).
B. Summary of the Proposed Provisions,
Public Comments, and Responses to
Comments on the CY 2016 ESRD PPS
Proposed Rule
The proposed rule, titled ‘‘Medicare
Program; End-Stage Renal Disease
Prospective Payment System, and
Quality Incentive Program’’ (80 FR
37807 through 37860), (hereinafter
referred to as the CY 2016 ESRD PPS
proposed rule), was published in the
Federal Register on July 1, 2015, with
a comment period that ended on August
25, 2015. In that proposed rule, for the
ESRD PPS, we proposed to (1) make a
number of routine updates for CY 2016,
(2) implement the statutory provisions
set forth in ATRA and PAMA, and (3)
clarified policies for reporting renal
dialysis services on the ESRD facility
claim. We received 233 public
comments on our proposals, including
comments from: ESRD facilities,
national renal groups, nephrologists and
patient organizations, patients and care
partners, manufacturers, health care
systems, and nurses. Of those
comments, 67 were related to the
provisions in the proposed rule. As part
of the comments received, there was a
write-in campaign from 200 individuals
that addressed home dialysis training.

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We also received comments that
pertained to topics that were outside of
the scope of this rule, for example,
network fees and Part D payment
determinations.
In this final rule, we provide a
summary of each proposed provision, a
summary of the public comments
received and our responses to them, and
the policies we are finalizing for the CY
2016 ESRD PPS. Comments related to
the paperwork burden are addressed in
the ‘‘Collection of Information
Requirements’’ section in this final rule.
Comments related to the impact analysis
are addressed in the ‘‘Economic
Analyses’’ section in this final rule.
1. Analysis and Revision of the Payment
Adjustments Under the ESRD PPS
a. Development and Implementation of
the ESRD PPS Payment Adjustments
Section 153(b) of MIPPA amended
section 1881(b) of the Act to require the
Secretary to implement the ESRD PPS
effective January 1, 2011. Section
1881(b)(14)(D)(i) requires the ESRD PPS
to include a payment adjustment based
on case-mix that may take into account
patient weight, body mass index (BMI),
comorbidities, length of time on
dialysis, age, race, ethnicity, and other
appropriate factors. Section
1881(b)(14)(D)(ii) through (iv) provide
that the ESRD PPS must also include an
outlier payment adjustment and a lowvolume payment adjustment, and may
include such other payment
adjustments as the Secretary determines
appropriate.
In response to the MIPPA
amendments to section 1881(b)
requiring the new bundled ESRD PPS,
we published the proposed ESRD PPS
design and implementation strategy in
the Federal Register on September 29,
2009 (74 FR 49922).
In that rule (75 FR 49033) we noted
that section 623(f)(1) The Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA),
Public Law 108–173, required the
Secretary to submit to the Congress a
report detailing the elements and
features for the design and the
implementation of the ESRD PPS. To
meet this mandate we worked with the
University of Michigan—Kidney
Epidemiology and Cost Center (UM–
KECC) in developing the ESRD PPS and
used their report that provided their
findings and recommendations
submitted to CMS in February 2008,
titled, End-Stage Renal Disease Payment
System: Results of Research on CaseMix Adjustment for an Expanded
Bundle (herein referred to as Technical
Report) as the basis for the Secretary’s

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February 2008 Report to Congress, A
Design for a Bundled End Stage Renal
Disease Prospective Payment System.
These reports can be found on the CMS
Web site at https://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ESRDpayment/educational_
resources.html.
We received over 1400 comments
from dialysis facilities, Medicare
beneficiaries, physician groups, and
other stakeholders in response to the
proposed rule. In consideration of these
comments, we finalized the case-mix
and facility-level adjustments for the
ESRD PPS in the CY 2011 ESRD PPS
final rule (75 FR 49030). For a complete
discussion of public comments and the
finalized payment policies for the ESRD
PPS, we refer the reader to the CY 2011
ESRD PPS final rule (75 FR 49030
through 49214).
b. Regression Model Used To Develop
Payment Adjustment Factors

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i. Regression Analysis
In the CY 2011 ESRD PPS final rule
(75 FR 49083), we discuss the twoequation methodology used to develop
the adjustment factors that would be
applied to the base rate to calculate each
patient’s case-mix adjusted payment per
treatment. The two-equation approach
used to develop the ESRD PPS included
a facility-based regression model for
services historically paid for under the
composite rate as indicated in ESRD
facility cost reports, and a patientmonth-level regression model for
services historically billed separately.
The models used for the 2011 final rule
were based on 3 years of data (CYs 2006
through 2008).
Section 632(c) of the American
Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 11–240) requires the Secretary,
by no later than January 1, 2016, to
conduct an analysis of the case-mix
payment adjustments being used under
section 1881(b)(14)(D)(i) of the Act and
to make appropriate revisions to such
case-mix payment adjustments. In the
proposed rule (80 FR 37814) we
explained that while section 632(c) of
ATRA only requires us to analyze and
make appropriate revisions to the casemix payment adjustments, we
performed a regression analysis that
updated all of the payment multipliers
including the low-volume payment
adjustment. Also, as discussed in more
detail in section II B.d.iii of this final
rule, we analyzed rural areas as a
payment variable in our regression
analysis and proposed to implement a
new adjustment for this facility
characteristic.

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For purposes of analyzing and
proposing revisions to the payment
adjusters included in the proposed rule,
we updated the two-equation
methodology using CY 2012 and 2013
Medicare cost report and claims data.
Data from CYs 2012 and 2013 is the
most recently available information that
we had to implement the refinement of
the ESRD PPS in CY 2016 as required
by section 632(c) of ATRA. Generally,
we would have used 3 years of data as
we did when we established the existing
case-mix adjusters. However, 2011 was
the first year under the new bundled
payment system. The revised FDA black
box warning for erythropoiesisstimulating agents (ESAs) was also
issued during 2011. These two factors
may have been associated with changing
practice patterns during 2011. Updating
the regression analysis using the most
recent claims and cost report data
allows the case-mix adjustment model
to reflect practice patterns that have
prevailed under the incentives of the
expanded bundled payment system.
Therefore, we used CYs 2012 and 2013
data for the refinements to the case-mix
systems.
In the proposed rule (80 FR 37817
through 37818 and 37821 through
37823, respectively), we proposed to
reduce the number of comorbidity
categories to which payment adjusters
apply and implement an adjustment for
rural facilities. Our rationale for
proposing to eliminate two of the
comorbidity categories for which we
will make payment adjustments is
discussed in section II B.1.c.i of this
final rule. The measures of resource use,
specified as the dependent variables for
developing the payment model in each
of the two equations are explained
below.
ii. Dependent Variables
(1) Average Cost per Treatment for
Composite Rate Services
For purposes of the proposed rule, we
measured resource use, for example,
time on a dialysis machine for the
maintenance dialysis services included
in the bundle of composite rate services,
using only ESRD facility data obtained
from the Medicare cost reports for
freestanding ESRD facilities and
hospital-based ESRD facilities. We used
facility level data because no data are
available at the patient-level that reflect
variation in resources costs for
providing composite rate services. In
addition, cost report data is the only
data that we have available that reports
facility costs and is certified by the
facility as being accurate. The average
composite rate cost per treatment for

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68973

each ESRD facility was calculated by
dividing the total reported allowable
costs for composite rate services for cost
reporting periods ending in CYs 2012
and 2013 (Worksheet B, column 11A,
lines 8–17 on CMS–265–11; Worksheet
I–2, column 11, lines 2–11 on CMS–
2552–10) by the total number of dialysis
treatments (Worksheet C, column 1,
lines 8–17 on CMS 265–11; Worksheet
I–4, column 1, lines 1–10 on CMS–
2552–10). CAPD and CCPD patient
weeks were multiplied by 3 to obtain
the number of HD-equivalent
treatments. We note that our
computation of the total composite rate
costs included in this per treatment
calculation includes costs incurred for
training expenses, as well as all costs
incurred by ESRD facilities for home
dialysis patients.
The resulting cost per treatment was
adjusted to eliminate the effects of
varying wage levels among the areas in
which ESRD facilities are located using
the ESRD PPS CY 2015 wage indices
and the new CBSA delineations which
were discussed in the CY 2015 ESRD
PPS final rule, as well as the estimated
labor-related share of costs from the
composite rate market basket. This was
done so that the relationship of the
studied variables on dialysis facility
costs would not be confounded by
differences in wage levels.
The proportion of composite rate
costs determined to be labor-related
(53.711 percent of each ESRD facility’s
composite rate cost per treatment) was
divided by the ESRD wage index to
control for area wage differences. No
floor or ceiling was imposed on the
wage index values used to deflate the
composite rate costs per treatment in
order to give the full effect to the
removal of actual differences in area
wage levels from the data. We applied
a natural log transformation to the wagedeflated composite rate costs per
treatment to better satisfy the statistical
assumptions of the regression model,
and to maintain consistency with
existing case-mix adjustment methods,
in which a multiplicative payment
adjuster is applied for each case-mix
variable.
As with other health care cost data,
the cost distribution for resource/
dialyzing composite rate services was
skewed (due to a relatively small
fraction of observations accounting for a
disproportionate fraction of costs). Cost
per treatment values which were
determined to be unusually high or low
in accordance with predetermined
statistical criteria were excluded from
further analysis. (For an explanation of
the statistical outer fence methodology
used to identify unusually high and low

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composite rate costs per treatment, see
pages 45 through 48 of the Secretary’s
February 2008 Report to Congress, A
Design for a Bundled End Stage Renal
Disease Prospective Payment System.
This document is available on the CMS
Web site at the following link: http://
www.cms.gov/Medicare/End-StageRenal-Disease/ESRDGeneral
Information/downloads/ESRDReportTo
Congress.pdf.
(2) Average Medicare Allowable
Payment (MAP) for Previously
Separately Billable Services
For purposes of the proposed rule,
resource use for separately billable
items and services used for the
treatment of ESRD was measured at the
patient-level using the utilization data
on the Medicare claims by quarter for
CYs 2012 and 2013 and average sales
prices plus 6 percent of the drug or
biological, if applicable, for each
quarter. This time period corresponded
to the most recent 2 years of Medicare
cost report data that were available to
measure resource use for composite rate
services, such as time dialyzing.
Measures of resource use included the
following separately billable services:
injectable drugs billed by ESRD
facilities, including ESAs; laboratory
services provided to ESRD patients,
billed by freestanding laboratory
suppliers and ordered by physicians
who receive monthly capitation
payments for treating ESRD patients, or
billed by ESRD facilities; and other
services billed by ESRD facilities.

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iii. Independent Variables
Two types of independent or
predictor variables were included in the
composite rate and separately billable
regression equations—case-mix
payment variables and control variables.
Case-mix payment variables were
included as factors that may be used to
adjust payments in either the composite
rate or in the separately billable
equation. Control variables, which
generally represent characteristics of
ESRD facilities such as size, type of
ownership, facility type (whether
hospital-based or freestanding), were
specifically included to obtain accurate
estimates of the payment impact of the
potential payment variables in each
equation. In the absence of using control
variables in each regression equation,
the relationship between the payment
variables and measures of resource use
may be biased because of correlations
between facility and patient
characteristics.

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iv. Control Variables
Several control variables were
included in the regression analysis.
They were: (1) renal dialysis facility
type (hospital-based versus freestanding
facility); (2) facility size (4,000 dialysis
treatments or fewer, but not eligible for
the low-volume payment adjustment,
4,000 to 4,999, 5,000 to 9999, and
10,000 or more dialysis treatments); (3)
type of ownership (independent, large
dialysis organization, regional chain,
unknown); (4) calendar year (2012 and
2013); and (5) home dialysis training
treatments, in which the proportion of
training treatments furnished by each
dialysis facility is specified. The use of
training treatments as a control was
done in order to remove any
confounding cost effects of training on
other independent variables included in
the payment model, particularly the
onset of dialysis within 4-months
variable.
The comments we received on the
refinement regression methodology and
our responses are set forth below:
Comment: We received several
comments from dialysis associations
and MedPAC questioning the validity
and the stability of the current ESRD
PPS payment model, that is, the twoequation regression analysis and the
proposed refinements, pointing to
concerns with the underlying data and
statistical methodology. Some
commenters made suggestions for future
improvements. For example,
commenters suggested that we use a
one-equation model while others
requested that we update the twoequation model, but retain certain
multipliers from the 2011 payment
model.
Response: We thoroughly reviewed
these comments in consultation with
our research team and other internal
experts. We examined the outcomes of
the current ESRD PPS specifically
looking at access and quality of the PPS.
Based on our comprehensive monitoring
of health outcomes and access under the
ESRD PPS, we believe the current
payment model has been successful in
allocating payments across facilities and
patients while supporting access and
quality. While we recognize there can be
theoretically optimal approaches to
addressing payment model design, the
availability of data is often an important
factor in the approach ultimately
undertaken. This is true with the ESRD
PPS and the use of a two-equation
model that relies on both claims and
cost report data, as other payment
systems do under Medicare.
Section 632(c) of ATRA requires the
Secretary, by no later than January 1,

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2016, to analyze the case-mix payment
adjustments under section
1881(b)(14)(D)(i) of the Act and make
appropriate revisions to those
adjustments. Given the incentives
inherent with moving to a bundled PPS
and resulting changes in facility cost
structure, it is appropriate to review the
payment model and consider changes to
support accurate payments and
continued access for Medicare
beneficiaries.
Both at the time the CY 2016 ESRD
PPS proposed rule was published and
after consideration of the public
comments, we believed and continue to
believe that our two-equation regression
analysis is the most appropriate
methodology that uses the most recently
available data to develop the most
accurate patient- and facility-level
payment adjustments that reflect cost
variation for ESRD facilities. We note
that the analytical results underlying the
proposed refinements are similar to past
payment analyses associated with the
development and implementation of the
ESRD PPS and have thus been stable
over time.
For example, no variables were
determined to be no longer statistically
significant and overall there were
minimal variations in adjustment factors
that resulted from the refinement.
Therefore, we believe the current model,
including the proposed refinements, is
reliable. The only modifications to the
list of payment adjusters were the
addition of a rural adjustment and the
elimination of two comorbidities based
on administrative burden.
Throughout the comments and
responses within this section, we
provide details regarding the model in
response to the criticisms submitted by
stakeholders to illustrate our position
that this refinement was best
accomplished by updating the twoequation regression analysis finalized in
the CY 2011 ESRD PPS final rule. We
believe that moving forward with an
updated model aligns with our goals for
the ESRD PPS in establishing accurate
payments and safeguarding access for
Medicare beneficiaries. As noted above,
we modeled the ESRD PPS using
methodologies that have been tested
since the Basic Case-Mix Adjusted
(BCMA) composite rate payment system
and in using the most recently available
data, we made our best estimate for
predicting the payment variables that
best reflect cost variation among ESRD
facilities for furnishing renal dialysis
services to a vulnerable population of
patients. As we noted above, this
refinement uses data that illustrates a
fully bundled prospective payment
system and reflects the practice patterns

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under such environment. We believe
that it would not be appropriate to both
perpetuate certain payment adjusters
into the future that were developed
using pre-PPS data and update the other
adjusters using ESRD claims data and
cost reports from 2012 and 2013. By
using the proposed two-equation model
we will better target payments to those
patient- and facility-level characteristics
that are necessary for patients to receive
access to quality care.
We appreciate the suggestions of the
commenters for improvements in the
model and will continue to examine this
critical area of the Medicare program.
Comment: Commenters contended
that the proposed rule did not include
the entire specification of the twoequation regression analysis. The
commenters requested that CMS release
the data reports that support the
proposed changes for both the facilityand patient-based regressions, including
those for the control variables. In
addition, commenters said CMS should
explain the calculation of the weights
used to combine factors from each
regression. Several organizations
commented that without data,
descriptions, and explanations with
regard to the proposed modifications to
the ESRD PPS, it is difficult to provide
a complete analysis and offer the most
constructive comments possible. They
explained that if this information was
made available, then it would be
possible for others in the community to
replicate our model.
Response: As we stated above, section
632(c) of ATRA directed us to analyze
and make appropriate revisions to the
case-mix payment adjustments being
used under section 1881(b)(14)(D)(i) of
the Act. Because these adjustments were
calculated using the two-equation
payment model that was finalized in the
CY 2011 ESRD PPS final rule, we
believe it was appropriate to revise the
adjustments using the same
methodology. We accomplished this
task through analysis of the model with
updated claims and cost report data
from 2012 and 2013. These comments
pertain more to the initial design of the
system for the 2011 implementation.
Therefore, because the details of the
elements and features for the design and
the implementation of the ESRD PPS
were made available at that time and are
still available to this day, we referenced
the CY 2011 ESRD PPS final rule for all
the information and on the design.
As we stated above, in the CY 2011
ESRD PPS final rule (75 FR 49033) we
noted that we worked with UM–KECC
in developing the ESRD PPS and used
their report that provided their findings
and recommendations submitted to

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CMS in February 2008, titled, End-Stage
Renal Disease Payment System: Results
of Research on Case-Mix Adjustment for
an Expanded Bundle (herein referred to
as Technical Report) as the basis for the
Secretary’s February 2008 Report to
Congress, A Design for a Bundled End
Stage Renal Disease Prospective
Payment System. Since both of these
reports and the CY 2011 ESRD PPS
preamble language for the proposed and
final rules are readily available and
extensively detail the methodology for
the two-equation regression analysis
that applies to the current model, we
believe that this information when
combined with the information in the
proposed rule and the claims and cost
reports for 2012 through 2013 would
allow an accurate replication. As stated
above, both reports were available on
the web at the time the CY 2016 ESRD
PPS proposed rule was published at the
following hyperlink: https://www.cms.
gov/Medicare/End-Stage-Renal-Disease/
ESRDGeneralInformation/downloads/
ESRDReportToCongress.pdf for the
Secretary’s February 2008 Report to
Congress along with UM–KECC’s
Technical Report located at http://www.
kecc.sph.umich.edu/sites/default/files/
attachments/publications/UM_KECC_
ESRD_Bundle_Report.pdf. We note that
while UM–KECC’s link to the Technical
Report has changed since the issuance
of the CY 2011 ESRD PPS final rule,
their Web site provides assistance for
locating the file. These reports and other
resource materials regarding the ESRD
PPS can be found on the CMS Web site
at https://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ESRDpayment/educational_
resources.html.We also note that we are
developing an updated Technical
Report that will reflect the CY 2016
refinements and will notify stakeholders
when it is available.
Comment: MedPAC expressed
concern about continuing to use a twoequation model to estimate the ESRD
PPS adjustment factors. They indicated
that the costs associated with separately
billable services may be included in the
cost centers that are used to derive the
dependent variable (composite rate cost
per treatment) for the facility level
regression. They specifically noted that
renal dialysis supplies could be double
counted in this way. They noted that the
dependent variable for the patient-level
regression is the payment per treatment
for separately billable services. MedPAC
further explained that to combine
facility- and patient-based estimates for
a given variable, CMS weights each
estimate by the proportion of cost or
payment represented by the dependent

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variable in each regression, and then
multiplies the two weighted estimates
together to produce a final adjustment
factor. They stated that if separately
billable services are included in the
dependent variable for both regressions,
the weights will not distinguish the
relative cost or payment addressed by
each regression.
In addition, MedPAC expressed
concern that multiplying factors from
the facility-level and patient-level
regressions may diminish the accuracy
of the combined factors. MedPAC
indicated that the distribution of
average treatment cost across facilities is
quite likely different than the
distribution of payments for separately
billable services across patients, and
combining the two factors estimated
based on unrelated distributions may
not accurately reflect cost variation for
the payment unit, a dialysis treatment.
Another commenter similarly stated that
the combination of coefficients from the
two regressions into a single adjuster is
problematic. This commenter noted that
the weighting CMS used to calculate the
adjuster values is not described, but that
it would be incorrect to assume that the
distributions for the two regressions are
the same. MedPAC contended that if the
distributions are not the same, then the
accuracy of the resulting adjuster will be
compromised.
MedPAC suggests that CMS develop
payment adjustment factors using a oneequation methodology that accounts for
variation in the cost of providing the
full PPS payment bundle as a solution
to the issues they have identified. They
indicate that it may not be feasible to
develop such a methodology for CY
2016, but expect to see such a change
in a future revision.
Response: MedPAC has recognized
the necessity of multi-equation models
in other Medicare payment systems.
Specifically, Medicare’s home health
PPS uses a 4-equation model in order to
appropriately reflect resource use and
align this use with payment. However,
we understand the appeal of the oneequation model in terms of simplicity.
For example, the Inpatient Prospective
Payment System (IPPS) relies on
patient-level cost information using
facility-level charges reported on claims
adjusted by a cost-to-charge ratio
derived from the cost report. The ESRD
PPS is not currently able to utilize a
one-equation method because ESRD
facilities do not report charges
associated with the components of
dialysis treatment costs that vary across
patients, such as time on machine. In
other words, patient-level claims
provide line item detail on the use of
the formerly separately billable (SB)

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services, but do not provide any
information regarding variation across
patients in the use of the formerly
composite rate (CR) services. In
addition, we believe that capturing the
resource cost for furnishing renal
dialysis services is complex since
Medicare has historically paid a base
rate (that is, composite rate payment) to
account for those costs which were
never itemized on a claim but were
reported through the cost report. We
believe that the current ESRD PPS
model captures this complexity through
the analysis of data on case-mix and
control variables gleaned from both cost
reports and claims.
We note that in the analyses
completed for the CY 2011 ESRD PPS
proposed rule, we tested various oneequation approaches to estimate
accurate adjusters and found that such
facility-level estimates did not yield
reliable and precise estimates for the
relationships of uncommon patient
characteristics (such as comorbidities)
or uncommon treatment types (such as
home dialysis training treatments) and
CR costs. The one-equation model had
low statistical power, that is, minimal
ability to effectively explain variation in
cost, especially for uncommon
conditions as noted above. Adjusters for
factors such as uncommon
comorbidities could be reliably
developed in the patient-level SB
model, but not in the facility-level CR
model. case-mix Ultimately, having
charges or line item utilization data that
vary meaningfully with resource use at
the patient level would allow for the
estimation of a valid, one-equation
model. The only feasible one-equation
option using currently available data
would be at the facility level, which
would make no use of available
information from claims on the patientlevel variation in SB costs and sacrifice
the ability to derive any reliable
adjustment for comorbidities, and
commenters from the SDOs have
supported the retention of the comorbid
payment adjustments. Therefore, we
believe developing a charge structure
that could enable us to utilize a oneequation model may be worth exploring
in the future, but for the data that
currently exists, the two-equation model
is valid, stable and retains its predictive
value.
In summary, we appreciate the
commenters’ suggestions and will
consider various options for a oneequation model in the future. For the
reasons given above, and based on the
data we currently have available to us,
we believe the two-equation model is
valid and is an appropriate method to
revise the values of the adjusters.

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We appreciate the recommendations
and suggestions of the commenters and
will consider soliciting ideas from our
stakeholders to assist us in gathering the
necessary data to consider a valid oneequation model as a valid ESRD PPS
payment option in the future.
In regards to MedPAC’s concerns
about how the costs of separately
billable services may be included in the
cost centers that are used to derive the
dependent variable for composite rate
cost per treatment, we believe that the
potential magnitude of double-counting
certain costs such as dialysis supplies in
both equations is minimal. We provide
instructions to the ESRD facilities not to
report items and services on their claims
that are considered in the composite
rate. Since we analyze claims data each
year for rulemaking, we are aware of
what ESRD facilities are reporting on
claims with respect to utilization of
renal dialysis services. Over the years,
we have found that those costs
associated with composite rate services
was near zero. ESRD facilities have
historically not reported supplies on
their claims. We only allow two
supplies to count toward the outlier
payment: A4657 syringe, with or
without needle, each of which covers
the injection administration-supply
charge (includes the cost of alcohol
swab, syringe, and gloves) and A4913
miscellaneous dialysis supplies, not
otherwise specified, which covers the
intravenous administration-supply
charge (includes the cost of intravenous
solution administration set, alcohol
swab, syringe, and gloves). Therefore,
we only expect to see these two supplies
reported on the claim because prior to
the implementation of the PPS they
were separately payable when they were
used in the administration of
intravenous drugs during dialysis and it
would be appropriate for their inclusion
in both models. Also, the costs
associated with these items are minimal.
Approximately $17,000 of supply costs
were reported in 2014 claims based on
the June 2015 claims file, which
included approximately 4 million
claims with a total Medicare payment of
approximately $9 billion. Therefore,
even if 100 percent of these costs were
also reported as CR costs on the cost
reports, the consequent double-counting
would have a negligible impact on
estimated cost per treatment, and will
not have the effect with which MedPAC
is concerned, namely, accurately
distinguishing the relative cost or
payment addressed by each regression.
In regards to MedPAC’s and other
commenters’ concerns about how
multiplying factors from the two
equations could diminish the accuracy

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of the combined factors, we believe the
impact of this concern is also minimal.
The method of combination, weighting
the CR or SB equation’s multiplier by
the share of total per treatment costs, is
unchanged from when the ESRD PPS
was first implemented in 2011. The only
change is that the weight assigned to the
SB equation has declined due to
changes in practice patterns following
the implementation of the ESRD PPS
(primarily reductions in use of
previously separately-billed drugs); the
share of per treatment costs attributed to
SB services declined from 32.1 percent
in the 2011 payment model to 19.2
percent in the 2016 payment model.
Therefore, the CR analysis estimates the
facility-level relationship between casemix measures aggregated across patients
and average cost per treatment for
composite rate services. The facilitylevel model has been successfully used
to estimate statistically significant
relationships between a number of casemix characteristics measured at the
facility level and average cost per
treatment at the facility level since the
BCMA composite rate payment system
was implemented in 2004. As noted
above, the facility-level model has not
allowed us to estimate accurate payment
adjustments for uncommon conditions
such as the comorbidities that are
included in the patient level SB model
or the effects of uncommon treatment
types such as home dialysis training.
Therefore, we have refrained from
estimating such payment adjusters from
a facility-level model.
Comment: MedPAC also noted that
through the various revisions of the twoequation model the reference group for
the age adjustment shifted from ages 45–
59 in the CY 2011 ESRD PPS proposed
rule to ages 60–69 in the CY 2011 ESRD
PPS final rule, and to ages 70–79 for the
CY 2016 ESRD PPS proposed rule.
MedPAC indicated that they would
expect that the relative cost of dialysis
across age categories to remain
relatively stable over time and
expressed concern that such shifts could
indicate that the estimated factors are
highly sensitive to the model’s
specification and that the model lacks
robustness. They further stated that the
two-equation approach might contribute
to the shifting in reference groups
through the various revisions to the
model.
Response: We do not believe the
change is as significant as MedPAC has
expressed as there was very little
variation in the age coefficients between
the 2011 model and the 2016 model.
Furthermore, in the 2011 model, the 70–
79 age category only had costs 1.1
percent higher than the reference group

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of 60–69. Historically, we have had
narrowly defined age categories. In the
analyses for both payment year 2011
and payment year 2016, the highest
costs were observed for the youngest
adult age group (ages 18–44), and there
were relatively smaller differences in
cost across the middle age categories.
We expected some variation in the 2016
multipliers as a result of updated claims
and cost report data since they were first
derived in 2011. The final 2011
regression analysis used 2006, 2007 and
2008 claims and cost report information
while the 2016 regression analysis used
2012 and 2013 claims and cost report
information. Considering the significant
changes that have occurred in the
practice patterns of ESRD facilities, such
as the significant reduction in the use of
ESAs and other renal dialysis services,
the minimal overall change in the
coefficients appears to indicate that the
model is stable. We believe this result
confirms the ability of the two-equation
methodology to appropriately recognize
the costs for providing renal dialysis
services in an ESRD facility. For these
reasons, we do not believe the change in
the age reference group over time
indicates a problem with the regression
model.
Comment: MedPAC expressed
concern that using unaudited cost
reports could pose a threat to the
validity of the payment adjustment
factors since historically facilities’ cost
reports have included costs that
Medicare does not allow. They noted
that PAMA funded CMS to audit a
representative sample of ESRD facility
cost reports beginning in 2014. They
indicated that they knew the audits
have not been completed at the time of
this final rule but would be interested
in learning if there are any differences
in the payment adjustment factors that
are derived from pre- versus postaudited data.
With respect to the use of hospitalbased cost reports to derive the payment
adjustment factors, MedPAC expressed
that there is no guarantee of consistency
in the methods used to allocate hospital
costs to dialysis departments and to
dialysis cost categories. They noted that
CMS has said that expense data for
hospital-based cost reports reflect the
allocation of overhead over the entire
institution, and that the expenses of
each hospital-based component may be
skewed. MedPAC further noted that for
these reasons, the inclusion of hospitalbased cost reports likely increases
statistical noise in the two-equation
regression methodology.
Response: As for the use of unaudited
cost report data, we used the best
available data for this refinement. We do

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not expect to have results from audits of
ESRD cost reports required by section
217(e) of PAMA for some time. We
believe this refinement is necessary
because it reflects costs and practice
patterns under the ESRD PPS. In
addition, section 632(c) of ATRA
requires us to analyze and make
appropriate revisions to the case-mix
payment adjustments by not later than
January 1, 2016, and therefore, we
cannot wait until after cost reports have
been audited to revise the case-mix
adjustments. After analyzing the
adjustments, we believe the revisions
we are adopting are appropriate and
necessary to reflect the drop in the use
of ESAs and other renal dialysis drugs.
With regard to the use of hospitalbased cost reports, we agree that the
issue of allocation of costs to the
dialysis unit is unique to hospital-based
cost reports. As part of the cost
reporting process, hospitals can allocate
costs to hospital-based dialysis
facilities. There may be variation among
hospitals regarding the methodology of
cost allocation, with some hospitals
under-allocating and others overallocating costs to hospital-based
dialysis facilities. The model does
include an indicator of hospital-based
status as a control variable. This will
capture differences between hospitalbased and freestanding facilities on
average. Our preference is to include
hospital-based facilities, while
acknowledging concerns about the data,
in order to represent the cost experience
of all providers. We believe the
concerns about the data would be more
salient if the data were being used to set
the base rate rather than being used only
to determine the relative costliness of
different case-mix factors. Also, we note
that the freestanding cost reports were
available before the hospital-based cost
reports, so preliminary analyses did not
include hospital-based cost reports.
When the hospital-based cost reports
were added, the payment multipliers
did not change substantially, suggesting
that the decision to include or exclude
hospital-based reports will not have a
significant impact. Including them
reflects our preference that the data
used to determine payment adjusters is
as broadly reflective of the patients and
facilities being paid under the ESRD
PPS as possible.
Comment: MedPAC expressed
concern that data from 2012 may not
reflect current practice patterns
particularly with the use of renal
dialysis drugs and biologicals because
drug use has continued to decline in
recent years. MedPAC suggested that we
use data from 2013 and beyond to
update the payment adjusters since they

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believe that using only 2013 data would
ensure better accuracy of the payment
adjusters.
Response: The 2011 model was based
on 3 years of data and we wanted to
maintain that approach for the
refinement. However, for the 2016
payment year, we did not use 1 year
(2011) of data due to concerns similar to
those raised by MedPAC. However
eliminating an additional year, 2012, of
data would decrease the accuracy of the
CR model due to the decrease in the
amount of data available to estimate the
statistical relationships between casemix and cost. Specifically, the sample
size would be halved. For this reason,
we did not adopt this suggestion and
retained CY 2012 data in the regression
analyses.
As we stated above, we brought the
commenter’s criticisms to our experts in
order to ensure commenter’s concerns
were addressed. Their opinion was that
dropping 2012 for the SB model only
would still result in an accurate SB
model due to the large sample size since
this is a patient-level model, but then
would be inconsistent with the timing
of the data used in the CR model. As a
result of these discussions, we continue
to believe that the refinement for CY
2016 is appropriate because (1) we used
year as a control variable in the
regression model; therefore, any
differences in average cost across the 2
years is accounted for, and (2) we are
using the model to estimate the
multiplicative adjusters, not the base
rate. MedPAC’s main concern appears to
be with changes in average treatment
patterns between 2012 and 2013, not
with changes in the relative costs
associated with different patient
characteristics, and the multiplicative
adjusters reflect relative costs.
Comment: Several dialysis
organizations pointed out that variation
in the average facility cost per treatment
derived from cost reports is not directly
associated with variation in patient
characteristics and because of this, the
variable concepts for the payment
adjustments cannot be measured by the
cost report data. One large dialysis
organization (LDO) stated they are very
concerned that CMS believes it is
appropriate to use ‘‘total facility cost’’
derived from the ESRD cost reports for
the development of patient-level
adjuster values. The LDO stated that the
overall cost report data cannot be
directly linked to any specific patient
characteristic and that these data only
provide information on total costs to
operate a facility, which are generally a
reflection of the number of patients the
facility serves, management capabilities,
and geographic location, not specific

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patient characteristics. The commenters
believe analysis of facility cost reports
does not yield conclusive observations
regarding individual patient
characteristics. They recommend that
CMS refrain from using cost report data
to develop patient-level adjusters
because they believe cost reports are
only reliable for determining facility
characteristics for use in developing the
facility-level adjusters, such as the lowvolume adjuster.
Response: We believe that the twoequation regression methodology is
appropriate and has successfully
estimated statistically significant
patient- and facility-level payment
adjusters. Below we provide an
explanation as to how the two equations
work together to derive the payment
adjusters.
Within the cost report, we start with
using the worksheet level detailed data
and the total cost per treatment that is
reported. Then we construct the average
cost per treatment for each ESRD
facility. At this point, we recognize that
corporate costs may not be allocated to
facilities in a uniform fashion across
dialysis organizations. This variation in
cost accounting creates unwanted
variation in the cost report data. The
control variables discussed below help
account for these cost variations.
Next, we attach the distribution of
patient characteristics at the facilitylevel to the cost at the facility-level. For
example, for age, we would take the
percentage of patients in each of the age
categories at the facility level and attach
that to the facility’s average cost. There
is one observation per facility, not one
per patient. Stated differently, it is not
the facility characteristic that is being
attached to the patient, but rather the
average case-mix characteristic being
attached to the facility. Specifically, the
observation is a facility year. The
dependent variable is the average cost
per treatment across all the treatments
provided by that facility in that year.
The case-mix factors that are being used
to develop multipliers are also
aggregated at the facility level from
claims. For example, for BSA, it is the
average BSA for all the patients treated
at the facility during the year. The
model evaluates whether facilities that
have a disproportionate share of a
certain characteristic (for example, high
BSA) have higher/lower costs than
facilities that have a smaller share of
patients with those characteristics. For
several of these characteristics,
variations across facilities in the average
values across all of their patients do
predict CR costs.
We believe that this method along
with the control variables described

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below allows us to distinguish variation
in cost per treatment in the cost reports
from variation arising from treatment
volume and corporate policies. We note
that differences in cost related to certain
facility-level (aggregate) case-mix factors
(patient age and body size) have been
statistically estimated in the models that
underlie the BCMA composite rate
payment system implemented in 2004,
the ESRD PPS implemented in 2011,
and the CY 2016 ESRD PPS proposed
rule. All of these models use the same
basic methodology and have not come
under this level of scrutiny in the past,
which could indicate that it was
accepted by the dialysis industry as an
appropriate method for estimating cost
variation.
The facility control variables of
volume and ownership-related
differences serve as proxies for the
factors raised by the commenters. As
proxies, they serve to not only adjust
out their correlation with reported cost
per treatment, but also ensure that the
multipliers for the patient
characteristics are not biased. The goal
is to eliminate bias occurring by any
existing correlations between patient
characteristics and the control variables.
For example, it is expected, due to sheer
volume, that the LDOs have greater
buying and negotiating power for drugs
and supplies than a SDO or
independent dialysis organization, but
we do not have access to that
information for our analysis in the
model. For precisely this reason, we use
control variables such as ownership
because we do not have access to
proprietary measures for factors such as
purchasing policies raised by the
commenter.
Comment: Several LDOs and a
national association of ESRD
stakeholders expressed concern that
CMS and its contractor used statistical
methodologies and identified adjuster
variables in a manner that cannot
produce valid or reliable adjuster
values. One commenter stated that
statistical methods are only valid if the
data to which they are applied are a fit
to the methods. The commenter further
explained that statistical methods
applied to data that do not meet the
requirements for reliability and validity
will produce results that are not
accurate, may not be meaningful, and
can be volatile from year to year. This
commenter claimed that the
fundamental requirements of a
regression model were not met in the
analyses used to design the ESRD PPS
payment adjusters. The commenter
further stated that to produce valid and
reliable results, a regression analysis
must be based on a sound research

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design and must adequately address the
assumptions made by the mathematical
properties of the regression analysis.
They then provided the major
assumptions that they claim underlie
regression methods and noted that these
assumptions are not valid for the CY
2016 proposed rule adjusters.
We address each core assumption that
the commenter referred to in the next
four comments and responses. Our
general response is below.
Response: We acknowledge that the
concerns raised about the regression
model are reasonable concerns to have
about any regression model. However,
we disagree with the notion that the
existence of these concerns implies that
the analyses ‘‘violate the core
assumptions for a valid analysis.’’ No
regression model using real data
conforms perfectly to the textbook
ideals of a model that includes every
potentially relevant variable, each of
which is measured perfectly and
perfectly represents the concept it is
trying to measure, and is uncorrelated
with any other variable of interest. We
acknowledge that our regression
analysis has limitations with regard to
issues such as data availability, as does
every regression model. We have
provided responses to the wide variety
of criticisms regarding the regression
approach, data, etc., and we believe
these responses support a model that is
valid and stable. We believe we have
selected an approach that mitigates such
concerns as much as is feasible, and
yields valid results, and that the model
we are using most accurately aligns
payment with resource use and
accounts for both case-mix and facility
adjustments in the most accurate way
possible for a real-life scenario.
Comment: Commenters stated that the
two-equation regression analysis used to
produce the adjustor values is not
correctly specified and stated that
correct specification requires that all
variables be statistically significant or
theoretically related to the dependent
variable in the regression model.
Commenters further explained that
correct specification requires that all
variables that could predict change in
the dependent variable (that is, the cost
per treatment in the first equation, cost
of separately billed items in the second
equation) were included in the model.
The commenters also stated that correct
specifications require that the
coefficients of the independent variables
(the value assigned to the adjuster as a
result of the regression) are assumed to
not change during the period of
analysis. They contend that if a
regression model is not correctly
specified, the results will be biased and

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will not reflect an accurate impact of the
independent variables on the dependent
variable.
The commenter noted that the process
for selecting variables and evaluating
them for inclusion in the two-equation
regression analysis was not
comprehensive and there is reason to
believe that the variables selected were
not those that drive cost variation. The
commenters indicated that the methods
that CMS and its contractor used appear
to produce results that cannot be
directly linked to costs of providing
dialysis care and are not directly linked
to analysis of underlying patient clinical
characteristics. Specifically, the
commenters have indicated to us that
our model is not capturing those
characteristics that they see as having an
effect on their cost, namely the
ambulatory status and cognitive abilities
of the very young and the elderly;
cardiovascular instability or diabetesrelated limb amputations; and, the extra
time, supplies, and infection risk of
central venous catheters. One dialysis
organization provided the following list
of drivers of variation in patient
treatment costs, some of which overlap
with the other commenter’s list: use of
central venous catheters, frailty, obesity,
ambulatory status, cognitive
capabilities, characteristics, conditions,
and illness or race or ethnicity that are
associated with an increased need for
ESAs or vitamin D, chronic
inflammation (difficult to define by
specific disease), infection, chronic
gastrointestinal bleeding, and
myelodysplasias. They also claim that
no independent research is referenced
to support the use of those variables that
are included.
Response: We believe that the
commenter is referring to the reasoning
and testing of different variables that
were or were not included in the twoequation regression analysis used for the
CY 2011 ESRD PPS final rule. The basic
modeling approach for the ESRD PPS
has been subjected to extensive
development and testing for over a
decade. Using cost report data, the
composite rate equation development
dates back to the work supporting the
BCMA composite rate payment system
implemented in 2004. In the
development of the final rule for the
2011 implementation of the ESRD PPS,
the two-equation approach was
extensively tested and documented (in
the Technical Report), along with
testing many variables. We agree that
many of the suggested payment
variables may have an impact on
treatment costs; however, adopting
these suggestions would require
additional reporting by ESRD facilities

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as to patient diagnoses or conditions.
With regard to the cost drivers
associated with race and ethnicity,
which are related to an increased need
for ESAs, we note that renal dialysis
service drugs and biologicals are eligible
outlier services, and as such, the outlier
policy could pick up part of the cost of
increased use of ESA and Vitamin D.
We discuss race and ethnicity in the CY
2011 ESRD PPS final rule (75 FR 49108
through 49115) and provide detail on
why we did not finalize those
characteristics as payment adjustments.
The refinements focused on using
more recent data, which reflect changes
in practices and incentives under the
ESRD PPS. We believe that the
information that the commenter is
referring to with respect to testing
variables is available in the Technical
Report developed by UM–KECC. In
addition, we have provided theoretical
reasons why the chosen variables could
influence patients’ care requirements
throughout the CY 2011 and 2016 ESRD
PPS final rule’s preamble language
where we discuss the analytical work
behind each adjustment factor, which is
also available in the Technical Report.
We note that all of the adjusters have
demonstrated statistical relationships to
the dependent variables (average cost
per treatment for composite rate services
and the average Medicare Allowable
Payment (MAP) for previously
separately billable services) as
evidenced by the results of the model.
All patient-level variables (age,
comorbidities, body surface area/body
mass index, onset of dialysis) have been
reviewed by expert clinicians and all
facility-level variables (low-volume
payment adjustment and rural
adjustment) have been reviewed by
health economists. These subject matter
experts have opined that the twoequation model is statistically sound
and appropriate for estimating cost
variation for ESRD facilities. We
appreciate the examples commenters
provided that communicated to us the
characteristics they consider to be
related to increase in cost in furnishing
dialysis. In order to capture most of the
characteristics that were provided by
commenters (for example, ambulatory
status or cognitive function), we would
need to develop ways for the
information to be submitted. We will
keep these comments in mind for future
refinements.
As we discuss above, the primary
purpose of the refinement was to test
the assumption that the values had not
changed since 2006 through 2008, and
to refine the payment model to account
for any changes that had occurred.
Therefore, we developed adjusters using

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more recent data that were derived
under the current payment system
rather than continuing to use payment
adjusters derived in the past. In
addition, we analyzed rural areas and
are finalizing a rural payment
adjustment which is discussed in
section II.B.1.d.iii.
Because we used updated data, we
would expect the coefficients to have
changed between 2006 through 2008
(the time period over which the current
model was estimated) and 2012 through
2013 (the time period over which the
proposed model was estimated). In fact,
while the exact multipliers have
changed overall slightly, the basic
relationships (for example, U-shaped
effect of age, higher costs soon after
ESRD incidence) have been quite stable.
With respect to referencing independent
research to support the use of the
variables in the model, the 2008 Report
to Congress or Technical Report cite
what was available in the literature at
the time.
We do not have any reason to expect
that the coefficients changed between
2012 and 2013. As noted by MedPAC,
practices were still changing somewhat,
but it is not clear that this would
necessarily create any meaningful bias
in the coefficients. As noted in response
to MedPAC’s comment above, the model
controlled for year (that is, adjusted for
the mean difference between the 2
years) therefore any difference in
average costs across the 2 years is
accounted for. Notably, when the model
is estimated on a single year of data, the
multipliers do not change appreciably.
However, the preference is for using 2
years of data because doing so stabilizes
the estimates for the facility-level
composite rate model.
Comment: The next core assumption
that the commenter expressed concern
about was regarding the independence
of observations. Specifically, the
commenter stated that in a correctly
specified regression model, the
observations are uncorrelated with each
other, which means that all treatments
are assumed to be independent of each
other. The commenter stated that in the
ESRD context, treatments occur in a
sequence linked to an individual patient
such that treatment cost for one
treatment may be related to prior
treatment, the duration between
treatments, events that interrupt
treatments, such as hospitalization, and
the patient’s health status at the time of
treatment. Therefore, treatments are not
independent of each other and thus the
assumption is not valid under the ESRD
PPS model. The commenter specifically
indicated that if CMS and their
contractors used the ordinary least

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squares test, the results of treatments
not being independent of each other
will be that it is no longer possible to
trust significant tests. In addition, the
commenter stated that if observations
are, in fact, related as is the case with
dialysis treatments, then this correlation
between observations should be
modeled in the regression using
generalized least squares (another test
used during the development of a
model). The commenter claimed that
they found no documentation to suggest
that this method was used.
Response: It is our understanding
from the comment that the commenter
believed the unit of analysis (or
observation as they labeled the term) in
the model was a dialysis treatment.
However, the unit of analysis for the
two-equation regression analysis is not
observed treatments (for example, a full
year patient on thrice weekly dialysis
could contribute up to 156 observations
to the model each year), rather, it is each
patient-month level. Specifically, the SB
models are estimated at the patientmonth level, not the treatment level.
Therefore, there is a separate
observation for each patient month,
rather than for each treatment. In prior
analyses, using 3 years of patient-month
level data from 2006 through 2008, the
effect of the correlation within patients
was tested and it did not impact results.
In addition, the primary concern from
correlated (or clustered) observations is
that the standard errors would be
underestimated, not that the coefficients
would be biased. The SB models have
a very large number of observations and
consequently almost all payment
variables (and all that have large
multipliers) are not of marginal
statistical significance. Therefore, we
believe that our unit of analysis, the
patient-month, does not violate a core
assumption of a valid analysis. A more
detailed discussion on the unit of
analysis, that is, patient-month, for the
ESRD PPS model is available in the
Technical Report beginning on page 39.
Comment: The next core assumption
that commenters expressed concern
about was regarding random error.
Specifically, the commenter stated that
a correctly specified regression assumes
that there is not random error built into
the independent variables. The
commenters claimed that there is
considerable error in the cost report data
used and, as a result, the payment
adjustments are biased and do not
reflect the effect of the independent
variable on the dependent variable. The
commenter further explained that there
are large amounts of missing data in the
fields that are rolled up into the total
cost field used in the analysis. In

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addition, the commenter stated that
CMS has not disclosed how it handled
trimming data for unbelievable values
and other types of error. Lastly, the
commenter indicated that hospital cost
reports are frequently highly
inconsistent with freestanding facility
cost reports and are often missing, or
have large amounts of missing data. The
commenter stated that without
addressing the known level of error in
the data source, the assumption that the
data are error free is violated. However,
the commenter noted that the claims
data used may meet the condition for
this assumption.
Response: Our understanding of the
comment is that the commenter believes
that the independent variables are
derived from the cost report. While we
link patient characteristics to the cost at
the facility level using cost report data
(as we discuss above), the independent
variables that are used as payment
adjusters are derived primarily from
claims for patient characteristics and
other CMS data sources for facility
characteristics (for example, size, lowvolume status, rural status,
organizational characteristics). We
believe that the commenter’s concern
about accuracy is about the cost per
treatment measure derived from the cost
reports for use in the composite rate
equation. That is, the error to which
they refer is on the dependent variable
(average cost per treatment for
composite rate services), not on the
independent (or predictor) variables
(case-mix and control variables) as they
state.
We note that classical measurement
error (that is, when a variable of
interest—either an explanatory or
dependent variable—has some
measurement error independent of its
value) on independent variables can
bias coefficients (typically downward,
implying that estimates of the effect
would be conservative). For example,
classical measurement error on a low
BMI could bias the coefficient
downward, resulting in an
underestimation of the additional
resource use needed by the thin, frail
patient. On the other hand, classical
measurement error on the dependent
variable affects the precision of the
estimates of the coefficients on the
independent variables due to the extra
‘‘noise’’ in the data, but does not bias
the coefficients. Further, one reason for
including a number of facility-level
control variables in the model is to
control for some of the facility or
organizational factors that might
contribute to variation in cost per
treatment that arises for factors other
than variation in patient characteristics.

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The commenters assert that they have
data that demonstrate the factors, such
as profit status and dialysis organization
affiliation have no impact on composite
rate cost per treatment on the cost
report. This evidence was not presented
in the comment and we would find it
helpful to have this data shared with us.
While they assert that factors such as
financial policies and negotiated
medication prices do matter, these are
precisely the factors that would vary
across organizations. We use the
differences such as affiliation and
hospital-based status between large,
medium, and small dialysis
organizations as proxies to capture these
differences. Unless a mechanism is
developed to require that all dialysis
organizations share information such as
their acquisition costs for dialyzers and
negotiated medication prices with CMS,
which they may consider proprietary, it
would not be possible to adjust directly
for those items in the model.
Comment: The last core assumption
that commenters expressed concern
about was correlation of variables.
Specifically, commenters stated that the
independent variables should not be
correlated with each other. The
commenters find that there is
considerable correlation among the
independent variables which reduces
the accuracy of the adjustment factor. A
medium dialysis organization (MDO)
commented that use of the BMI and
BSA is a concern as they are both
variables for the same patient
characteristic and essentially cancel
each other out. They stated that
preferably, these variables should not be
used as the independent variables for
the case-mix adjusters.
Response: It is correct that correlation
between variables makes it more
difficult to statistically distinguish their
independent effects on the dependent
variable, but only very high correlations
necessarily render it impossible. As long
as the variables have some
independence from each other (one does
not precisely predict the other), it may
still be possible to estimate their
separate associations with outcomes.
With respect to BSA and low BMI,
these variables represent different
characteristics that have individual
effects on cost. In particular, BSA
(which is a continuous variable that
increases as the patient’s body size
rises) is empirically associated with
higher composite rate costs. The fact
that larger patients on average generate
higher composite rate costs may reflect
the longer dialysis time which is
required to effectively dialyze larger
patients. In contrast, the low BMI
categorical variable identifies

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particularly frail patients, that is, those
with BMI less than 18.5. This measure
of frailty is empirically associated with
higher separately billable costs. These
very frail patients require more
expensive drug therapies.
While BSA is negatively correlated
with low BMI, the correlation is not
perfect. BSA and the low-BMI indicator
variables measure related, but different
concepts and complement each other
(that is, small and frail are not the
same). The low-BMI multiplier helps
avoid the potential of payments not
reflecting the higher costs of caring for
frail patients. Therefore, elimination of
the low-BMI adjuster could reduce frail
patients’ access to care by encouraging
perverse incentives in facilities, who
may try to avoid such patients if their
costs are not reflected in the payment
system. If there was only a BSA
adjustment, then the heavier
beneficiaries requiring more dialysis
time would be accounted for by the
facilities receiving the additional
payment, with the lighter weight
beneficiaries not receiving as much, to
the detriment of those at the lowest end
of the scale, the thin and frail. In other
words, having the low-BMI adjustment
in opposite direction of the BSA
adjustment for small, frail patients is the
intended effect. Dropping the low-BMI
adjuster could place frail patients at
increased risk of being denied access to
care if there is only a downward
adjustment for small BSA.
Further, we note that even if BSA and
BMI are strongly correlated when
measured as continuous variables (a
variable that can take any value between
two numbers), this is not how they
appear in the model. Only BSA is
entered continuously. BMI is entered as
a discrete indicator variable for being
below the accepted cutoff indicating
potential undernourishment/frailty,
which is at the extreme of the
distribution. The correlation between
that discrete indicator of an extreme
value for BMI and the entire continuous
range of BSA is not exceptionally high.
In short, these two variables
complement one another in the payment
model since low-BMI is a proxy for frail
and malnourished patients and BSA is
a proxy for time on machine and other
high resource use. Similarly, while there
is some correlation between rural status
and low-volume status, the other
specific instance of co-linearity raised
by the commenters, those are both
dichotomous indicators and there are
substantial numbers of facilities having
each of the four possible combinations
of the two variables. If there were no
low-volume, non-rural facilities, and no
non-low-volume rural facilities, it

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would be impossible to statistically
distinguish the low-volume effect from
a rural effect, but in fact many such
facilities exist. We discuss BSA and low
BMI and facility-level adjustments in
greater depth in section II.B.1.c.2 of this
final rule.
Comment: Commenters stated that
because the adjuster variables explain
less than 10 percent of the variation in
cost, the model should have been
reevaluated before being proposed. They
explained that the R-squared results for
the proposed adjusters were not
provided, despite being requested.
Response: Because the model is
estimated as two equations at different
units of analysis (facility and patientyear), there is not a single, accepted
method of calculating a combined Rsquared. R-squared values have been
provided for each equation. The
coefficient of determination, denoted R2
or r2, is a number that indicates how
well data fit a statistical model—
sometimes simply a line or a curve. An
R2 of 1 indicates that the regression line
perfectly fits the data, while an R2 of 0
indicates that the line does not fit the
data at all. This latter can be because the
data is utterly non-linear, or because it
is random. It is a statistic used in the
context of statistical models whose main
purpose is either the prediction of
future outcomes or the testing of
hypotheses, on the basis of other related
information. It provides a measure of
how well observed outcomes are
replicated by the model, as the
proportion of total variation of outcomes
explained by the model. Obviously,
higher R-squared values are preferred,
as this would reflect greater ability to
predict cost. However, many case-mix
adjustment models do not achieve high
R-squared values because medical costs
inherently have a large random
component. We disagree with the
commenter’s suggestion that a model
must explain 10 percent of the variation,
and have had our experts concur with
the validity of the two-equation model.
There was no concurrence among the
experts regarding a 10 percent statistical
cutoff rule for variance explanation in a
model.
What is more significant is that the
payment adjusters have a statistically
significant effect on costs, and that that
effect is meaningful in magnitude (that
is, large enough that failure to account
for it would results in payments
substantially below costs). If the model
demonstrates that there are
characteristics of individual patients
that are systematically and meaningfully
related to costs, adjusting payments for
those characteristics can be important
independent of the model’s overall R-

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squared, regardless of whether the
overall R-squared is high, medium or
low. It is important that adjustments be
made for the organizations that care for
a disproportionate share of resourceintensive patients, particularly if those
organizations do not have many dialysis
units across which they can diversify
that risk to receive payment that reflects
the characteristics of their patients that
are related to cost of care. Equally
important is the prevention of access to
care problems for patients with those
characteristics. Failure to provide
adjustments could result in access
problems, such as incentives for cherrypicking, and these issues could occur
regardless of the size of the dialysis
organization.
Comment: Commenters had specific
concerns about how variables were
chosen for the two-equation regression
analysis and expressed concern that
exaggerated statistical significance of
variables based on a universe, not a
sample, has resulted in adjusters with
questionable statistical or clinical
significance. The commenter expressed
concern that the large number of
facilities and treatments used in the two
regressions has resulted in exaggerated
statistical significance of coefficients.
They further explained that this is
because coefficients become more
statistically significant as the size of a
sample increases and statistical
significance is most useful to evaluate
selection of variables when actual
samples are being used. The commenter
claimed that CMS uses as much of the
universe as it can, rather than having
statistically sampled the universe. They
stated that the result of this is statistical
significance as used by CMS no longer
has the meaning it does with actual
samples. The commenter pointed to the
2008 Report to Congress and stated that
the age categories 45 to 59 and 70 to 79
were not significant at the .05 level.
They indicated that given the large
sample size, if age were an independent
driver of cost, they would expect a
greater level of significance. The
commenter noted that none of these
specifications were disclosed for the
updated regressions used to estimate the
proposed 2016 payment adjusters.
Response: In the work leading to the
CY 2011 ESRD PPS payment rule, this
issue was addressed. One variable
selection criterion was that a
comorbidity would be considered for a
payment adjustment if its relationship
to cost was both statistically and
economically significant. As noted by
the commenter, even a very small
multiplier could be statistically
significant due to the large sample. All
of the proposed comorbidity adjusters

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have economically meaningful
multipliers.
As noted by the commenter, the
interpretation of statistical significance
changes when the data include a
universe rather than a random sample.
Essentially, when the universe is used,
the coefficients can be interpreted as
being perfectly accurate (they perfectly
reflect the universe, because they are
derived from the universe). However,
statistical significance remains relevant
for two reasons. First, it is a tool to
assess the closeness of the relationship
between the predictors and outcomes.
Second, and more importantly, even a
near universe of claims from a given
time period represents a sample of time
periods (for example, 2012 and 2013
claims are being used to project
relationships in 2016). The commenter’s
solution, to use less data than are
available in order to estimate the
relationships, sacrifices precision in the
estimates. As noted at the beginning of
this response, we prefer to use all the
data and assess whether the
relationships have sufficient economic
size to potentially warrant adjustment.
For example, a comorbidity could be
associated with a trivial 0.1 percent
increase in costs that could nonetheless
be statistically significant due to the
very large sample size. Such a
comorbidity would not have been
chosen for inclusion in the payment
model.
Comment: Commenters stated that
because of the poor fit of the model to
appropriate data, the high level of
correlation among the adjuster variables,
and the many violations of assumptions
required for valid regression, they do
not believe that this regression model
can be fixed. Due to these concerns
about the methodology and based upon
their clinical experience, they
recommend that we retain the current
(CY 2015) age adjuster and payment
multipliers rather than adopt the
proposed modifications; retain the CY
2015 low-BMI adjuster to address
underweight patients and establish a
high BMI adjuster to address overweight
patients tied to the NIH guidelines for
defining overweight patients using BMI
rather than applying the BSA
adjustment; retain and recalculate the
onset of dialysis adjustment; remove all
comorbidities adjustments; and retain
the LVPA modifications and develop a
two-tiered LVPA in place of the rural
adjustment. Several commenters
proposed estimating new multipliers for
some factors (for example, onset of
dialysis, obesity, two-tiered rural
adjustment) while retaining some
current adjusters.

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One LDO’s overall concern is that any
adjuster must be clinically relevant and
serve the purpose of ensuring that the
ESRD PPS does not discriminate against
high-cost patients. They believe that
several of the adjusters as currently
structured do not meet this end goal.
They requested that we eliminate a
number of adjusters for CY 2016
(comorbidities, age, and body mass
index (BMI)/body surface area (BSA)) in
their current constructs because they are
not based on clinical data, are executed
ineffectively or inaccurately, or they do
not represent actual incremental facility
costs. They believe that absent the
ability to put needed changes in place
for CY 2016, elimination of these
adjustments during the upcoming year
will provide CMS the time needed for
re-analysis of the true impact. The LDO
states that a 1-year hiatus for all
adjustments with the exception of the
onset of dialysis and low-volume
adjusters (as defined in 2015), true
drivers of incremental costs, will allow
the Agency to take the necessary time to
implement improvements that reflect
the current dialysis unit cost reality.
Response: We continue to believe that
moving forward with an updated model
aligns with our goals for the prospective
payment system in establishing accurate
payments and safeguarding access for
Medicare beneficiaries. As noted above,
we modeled the ESRD PPS using
methodologies that have been tested
since the Basic Case-Mix Adjusted
(BCMA) composite rate payment system
and in using the most recently available
data, we made our best estimate for
predicting the payment variables that
best reflect cost variation among ESRD
facilities for furnishing renal dialysis
services to a vulnerable population of
patients. This refinement uses data that
illustrates a fully bundled prospective
payment system and reflects the
practice patterns under such
environment. We believe that it would
not be appropriate to both perpetuate
certain payment adjusters into the
future that were developed using prePPS data and update the other adjusters
using ESRD claims data and cost reports
from 2012 and 2013.
While we appreciate the suggestions
from commenters, we are unsure how
the new adjusters would be estimated
using the commenter’s proposals. They
did not specify whether we would force
the retained CY 2015 multipliers to take
on their old values when estimating the
new model or allow the retained
variables to take on the new values they
have using the updated model, but only
use new values for the other factors. We
believe the proposed approach of
blending in some unspecified way

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multipliers derived from different time
periods and different statistical models
into a single payment system would not
provide a meaningful empirical basis for
the payment model.
Comment: A national association of
kidney patients expressed concern that
because of the data sources such as
unaudited cost reports and the twoequation methodology used (as
discussed throughout the comments and
responses above), the payment for the
patient-level adjusters are not serving
the policy intention of protecting access
to care for beneficiaries who are
perceived to be more costly. The
association’s health professional
membership, which includes
nephrologists, nurses, advanced
practitioners, dietitians, and social
workers have stated that while age is not
always a predictor of costs, it is a
legitimate proxy for higher costs
associated with older patients.
Similarly, underweight patients and
overweight patents also contribute to
increased costs to the dialysis facility.
However, the rationale for these higher
costs is not necessarily always reflected
in claims data and dialysis facility cost
reports because patients, that is, the
overweight, the frail and the aged, are
not distinct categories in the cost reports
or the claims, and typically require
more staff time devoted to them.
Response: We agree with the
commenter that there are relationships
of cost to age and body size. The age,
BSA, and low-BMI adjustments in the
CY 2016 ESRD PPS proposed rule
incorporate those adjustments based on
what can be statistically estimated from
facility-level data on dialysis costs and
patient-level data on costs of formerly
separately billable items. These
obviously and necessarily represent
average relationships, while, as the
commenter notes, for example, age is
associated with cost but not necessarily
for every patient. We believe that the
age adjustments may serve to capture
cost variation that is not captured by the
other adjustments. As mentioned in a
previous response, we would ideally
like to have cost data at the patient-level
rather than the facility-level, but data
limitations preclude us from estimating
that relationship at the patient-level.
Rather, the estimated relationship is
between average patient characteristics
(for example, percentage in each age
group, average BSA, percentage at onset
of ESRD) and average cost at the facility.
Failure to adjust for these empirically
derived relationships between case-mix
and costs provides facilities with an
incentive to cherry pick patients with
low cost characteristics and avoid
patients with high cost characteristics.

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Comment: A patient group noted that
in proposing the new age adjusters,
CMS engaged in data dredging, the
practice of analyzing large volumes of
data to seek statistically significant
relationships, without being guided by
any hypothesis or explicit theory about
behavior.
Response: The original modeling
effort to establish the 2011 payment
adjusters for the bundled ESRD PPS
examined a large number of
comorbidities and patient
characteristics that could be related to
costs. The examination was broad as the
impact on cost could theoretically occur
through several channels, both direct
(for example, more staff effort in the
dialysis unit) and indirect (for example,
patients with certain conditions are
more likely to be hospitalized or
otherwise skip treatments, which could
increase costs per treatment delivered
due to greater unanticipated holes in
facilities’ schedules, as well as other
research published by the contractor in
conjunction with this project that
identified that hospitalized patients
used more injectables per treatment on
an outpatient basis, presumably making
up for smaller or missed doses away
from the facility). As described in the
2008 Report to Congress and Technical
Report, other criteria were applied to
guard against data dredging. Notably,
comorbidities with a very small
relationship to cost could still be
statistically significant in the SB model
due to high degree of statistical
precision allowed by the very large
sample size; such variables were
excluded as payment adjusters. They
were deliberately excluded to avoid
data dredging.
Comment: A patient group
commented that the methodology has
taken the characteristics of groups of
patients at the facility-level to make
inferences about individual patients.
They indicate that it appears this was
done solely by reason of the
convenience of having cost data
available at the facility-level, but not at
the patient-level.
Response: This is an inherent
limitation of the currently available
data, not a choice made for
convenience. If we had access to cost
information at the patient-level for
formerly CR services, we would have
estimated that model at the patient level
rather than at the facility level. As we
discuss above, such information is
unavailable, primarily because ESRD
facilities do not report their actual
charges or resource costs for various
renal dialysis services formerly paid
under the composite rate on their
claims, and facilities do not report

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charges for cost-relevant elements of the
dialysis treatment, such as their charges
for the dialysis filter which would
reflect their policies regarding reuse of
dialysis filters and other supplies. If the
ESRD facilities reported charges in a
way that was sensitive to variations in
actual resource used across their
individual patients, we could use
reported charges adjusted by the cost-tocharge ratio developed from cost reports
to estimate their cost for the ESRD PPS
bundle of services. Such an analysis
would infer the effect of patient
characteristics on costs based on how
facility average cost per treatment varies
with the average characteristics of
patients within the facility. This is an
acknowledged limitation, but it arises
by necessity given the nature of the
available data.
Comment: A professional organization
commented with the hypothesis that in
the current time of decreased ESA use,
the original set of conditions, such as
age, comorbidities, BSA/BMI and onset
of dialysis, likely has less influence on
overall dialysis facility expenses. They
commented similarly that it is possible
that certain high risk patients, who
previously made relatively minor
contributions to overall costs, now have
a larger cost impact and provided the
example of patients with mental illness,
lower socioeconomic status, and fewer
resources available at home, which may
contribute in different ways to higher
resource consumption and expenditures
for delivery of dialysis care.
Additionally, patients initiating dialysis
in the hospital with multiple medical
comorbidities and complex disease
states also can require more resources in
order to coordinate care. The complex
interactions among multiple
comorbidities and social circumstances
are not captured through current risk
assessment tools.
Additionally, the organization points
out that the focus of the current casemix regression models ignores several
other important dialysis facility costs
and could limit access to care. The
organization stated that when patients
(either due to non-adherence, mental
illness, social stress, frequent
hospitalization due to severity of their
illness or other identifiable but
unadjusted-for causes) are either unable
to or refuse to attend outpatient dialysis
treatments, facilities do not receive
payment. The fixed costs borne by the
facility for a patient missing dialysis
treatment as well as the opportunity
costs associated with the lost revenues
that could have been collected by a
facility if a different patient who would
not have missed dialysis had instead

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been dialyzed are not captured in the
case-mix adjustments.
To maximize access to care for high
risk patients, the organization urged
CMS to explore methods of case-mix
adjustment that further refine
characterizing high risk patients. They
also suggest that the costs associated
with meeting more recent QIP goals in
high-risk patients as well as the cost of
potential QIP penalties in patients for
whom facilities are unable to improve
QIP-related metrics despite appropriate
efforts to do so are currently not
reflected in the case-mix adjustments.
They urged consideration of these costs
in order to ensure access to care among
high-risk patients and urged CMS to
actively monitor whether dialysis
facilities decline to care for higher risk
patients.
Response: While it may be true to
some extent that in the current time of
decreased ESA use, the original set of
conditions has less influence on overall
dialysis facility expenses, all of the
ESRD PPS payment adjusters continue
to be predictive of higher costs.
However, the overall multipliers reflect
the decreased use of injectable
medications through the weighting of
the separately billable equation. While
we are unsure about what risk
assessment tools the commenter is
referring to, we agree that the current
model does not capture the conditions
suggested by the commenter primarily
because conditions that may lead to
missed treatments are not captured on
ESRD facility claims or in cost report
information, the two sources of data
currently available for use in the
regression analysis. In addition, ESRD
facilities have reported significant
problems in obtaining diagnostic
information for the comorbidity
adjustments as discussed in section II of
this final rule, and would likely have
similar problems in obtaining the
information suggested. However, some
of the adjusters in the model (for
example, onset, age) are likely related to
missed treatments, and their multipliers
will partially reflect the effect of missed
treatments on costs.
For future refinement, we are willing
to explore what information would have
to be reported by ESRD facilities in their
claims in order to assess the impact of
commenters’ suggested factors on the
regression. With respect to the comment
regarding consideration of costs that are
associated with meeting QIP goals in
high-risk patients, it would not be
appropriate to include the cost of QIP
penalties in the case-mix adjustments.
However, as we stated above, we would
be interested in obtaining more
information from ESRD facilities on

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those specific characteristics mentioned
in the comment so that we could
analyze the information for future
refinements.
Comment: One commenter requested
that CMS only provide adjusters that
protect patient access.
Response: The most recent regression
analysis confirms that the payment
adjusters implemented in 2011 continue
to be indicators of high cost patients.
For this reason, we continue to believe
that the case-mix and facility
adjustments are necessary to protect
access to renal dialysis services for high
cost patients. All of our adjusters were
developed to serve as patient protectors.
The patient adjusters (case-mix)
recognize the higher costs associated
with dialyzing/treating patients with comorbid conditions that facilities may
not be willing to otherwise treat because
of the monetary loss. The facility-level
adjusters protect patient access by
providing additional monies to facilities
in more economically or geographically
restricted areas that encourage their
opening and operating to serve those
beneficiaries who may not otherwise
have access.
For the reasons described above, we
continue to believe that the twoequation regression methodology is
sound and that it confirms the
continued relevance and significance of
the case-mix and other adjustments.
More importantly, finalizing the
regression methodology is appropriate
so that future payments reflect the
bundled environment under the ESRD
PPS with the associated drop in the
utilization of ESAs, other renal dialysis
service drugs and laboratory testing.
Accordingly, we are finalizing the use of
the two-equation regression
methodology to update the payment
adjustments as proposed.
c. Analysis and Revision of the Payment
Adjustments
As required by section 632(c) of
ATRA, we have analyzed and are
finalizing revisions to the case-mix
payment adjustments below. We are
also finalizing revisions to the facilitylevel adjustments for uniformity as
described below.
i. Adult Case-Mix Payment Adjustments
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1) Patient Age
Section 1881(b)(14)(D)(i) of the Act
requires that the ESRD PPS include a
payment adjustment based on case-mix
that may take into account a patient’s
age. In the CY 2011 ESRD PPS final rule
(75 FR 49088), we noted that the basic
case-mix adjusted composite rate
payment system in effect from CYs 2005

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through 2010 included payment
adjustments for age based on five age
groups. Our analysis for the CY 2011
ESRD PPS final rule demonstrated a
significant relationship between
composite rate and separately billable
costs and patient age, with a U-shaped
relationship between age and cost where
the youngest and oldest age groups
showed the highest costs. As a result of
this analysis, we established five age
groups and identified the payment
multipliers through regression analysis.
We established age group 60 to 69 as the
reference group (the group with the
lowest cost per treatment) and the
payment multipliers reflect the increase
in facility costs for each age group
compared to the reference age group.
We established the group with the
lowest cost per treatment as the
reference group in order to avoid age
adjustments with negative multipliers.
We proposed and finalized payment
adjustment multipliers for five age
groups; ages 18 to 44; 45 to 59; 60 to 69;
70 to 79; and 80 and older. We also
finalized pediatric payment adjustments
for age, which are discussed in section
II.B.1.e. of this final rule.
Commenters and stakeholders were
largely supportive of a case-mix
adjustment for age when the ESRD PPS
was implemented. We noted in our CY
2011 ESRD PPS final rule (75 FR 49088)
that several commenters stated that age
is an objective and easily collected
variable, demonstrably related to cost,
and that continuing to collect age data
would not be burdensome or require
systems changes. In addition, a few
commenters requested that CMS
consider an additional adjustment for
patient frailty and/or advanced age (75
FR 49089). In the CY 2011 ESRD PPS
final rule, we responded to these
comments by noting that we included
an age adjustment for patients 80 years
of age or older, but that advanced age
and frailty did not result in the
identification of additional age groups
for the application of case-mix
adjustments based on age. In addition,
we noted that the analysis did not
identify a separate variable for patient
frailty, as this would be very difficult to
quantify.
As we discuss in the CY 2016 ESRD
PPS proposed rule (80 FR 37815), the
analysis we conducted to determine
whether to revise the case-mix payment
variable of patient age demonstrates the
same U-shaped relationship between
facility costs and patient age as the
analysis we conducted when the ESRD
PPS was implemented, however, the
reference group has changed to age
group 70 to 79, and we note
significantly higher costs for older

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patients. For this final rule, we continue
to believe that the regression analysis
performed on CY 2012 through 2013
Medicare cost reports and claims has
appropriately recognized increased
facility costs when caring for patients 80
years old or older, and that this
adjustment accounts for increased
frailty in the aged. Age may serve as a
proxy for several characteristics that
cannot be easily measured and entered
directly into the model. For example,
younger patients may be more costly
due to greater likelihood of skipped
treatments, HIV infection, or drug
dependence, while older patients might
be more expensive due to greater
likelihood of cognitive impairment or
functional/mobility limitations.
The public comments we received on
the proposed age adjustments and our
responses are presented below.
Comment: MedPAC commented that
through various revisions to the model,
the empirically-determined lowest-cost
reference group shifted from ages 45–59
in the CY 2011 ESRD PPS proposed
rule, to ages 60 to 69 in the CY 2011
ESRD PPS final rule, and to 70–79 in the
CY 2016 ESRD PPS proposed rule. They
would expect that the relative cost of
dialysis treatment across age categories
would remain relatively stable over
time. They expressed concern that such
shifts indicate that the estimated factors
are highly sensitive to the model’s
specification and that the model lacks
robustness. They indicated that the twoequation approach might contribute to
these results.
Response: As we explained
previously, we do not agree with
MedPAC. In both models using 5 age
groups, costs followed a U-shaped
pattern with age, with highest costs
occurring in the 18 to 44 group, the
second highest costs occurring in the
80+ group, and the lowest costs in the
three middle groups. The only
qualitative changes are that the U-shape
is now a bit more pronounced (higher
multipliers for the youngest and oldest
group), and among the three middle
groups, the lowest cost group shifted
from 60 to 69 to 70 to 79. Notably, the
cost difference between the three
middle age groups in the original 2006
through 2008 model was very small, so
the shift from one of those categories
being singled out as the lowest cost
(reference) group rather than another is
not very meaningful. In other words, the
middle groups were so close to each
other in cost in the 2006 through 2008
model that having a different one of the
middle groups being the lowest cost
group in the 2012 through 2013 data is
not surprising and does not indicate
flaws in the model. Only small changes

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in the data and the relationships
between age and cost would be needed
to cause such a change.
Comment: Two national dialysis
organizations noted that the proposed
change in the age adjustments is $7.47
per treatment to $19.36 per treatment,
but that they are unable to identify any
correlation that justifies a 159 percent
increase for the age adjustments. They
stated that the age adjuster randomizes
payment, rather than targeting payments
to patients with specific characteristics
associated with higher costs. They
recommended that we defer the change
in the age adjustment and retain CY
2015 weights and values. An LDO, in
analyzing its facility data, cannot
validate a direct relationship between
patient’s age and cost of care. They do
not believe it is appropriate to move
forward with what they contend are
arbitrary adjustments that they believe
are not based upon analysis of specific
clinical patient characteristics.
Response: As we explained
previously, the current CY 2015 age
values were derived from the same
methodology applied to the refinement
analysis but are based on pre-PPS data.
Using updated data confirmed that age
correlates with differences in resource
use and that the age adjustments are not
arbitrary. Rather, we believe the age
adjustments reflect differences in health
status that are not otherwise reflected in
the ESRD PPS payment adjustments and
support facilities treating patients in the
youngest and oldest age categories who
have higher per treatment costs on
average. We believe retaining the
current age values would not be
appropriate because we have updated
data available for analysis that reflects
the changes in practice patterns that
have occurred under the ESRD PPS.
Additionally, we continue to believe the
age adjustments are appropriate and do
not believe they randomize payment.
Rather they target payments primarily to
the two highest cost categories: ages 18
to 44 and age 80 or older.
While we are uncertain as to how the
commenter calculated an increase in the
age adjustments of $7.47 per treatment
to $19.36 per treatment, as we
mentioned in the previous section, the
payment multipliers were derived using
an analysis that attached the
distribution of patient characteristics at
the facility-level to the cost at the
facility-level. For example, for age, we
would take the percentage of patients in
each of the age categories at the facilitylevel and attach that to the facilities’
average cost. Therefore, the payment
multipliers represent empirical
relationships derived from the national
ESRD facility data, and target payment

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for patients in the various age groups
according to their resource use and cost.
Thus, we believe the multipliers are
appropriate and not arbitrary.
Comment: An organization of home
dialysis patients, a nonprofit dialysis
organization, and an organization
representing small and medium dialysis
facilities expressed concern that the 11
percent age adjuster increase of $24.58
for patients 80 years and older may have
the unintended effect of reducing the
use of medical management of their
kidney disease instead of dialysis. They
are concerned that there will be an
incentive to dialyze elderly people and
not fully explore all options for treating
their kidney disease. Commenters also
noted that medical management of care
may be the best option for the end of life
care. They requested that CMS return
the dollars withheld for this age
category to the base rate to help provide
the best care to all patients. An
organization of nonprofit SDOs agreed
and suggested that the increased cost of
care for this age group may be due to
patients who are not good candidates for
dialysis who would benefit from
medical management instead of dialysis
to treat their kidney disease.
Response: We believe it vitally
important for all chronic kidney disease
patients to receive kidney disease
education services as described in
section 1861(ggg)(1) of the Act to
discuss all treatment options, including
medical management of their kidney
disease with their nephrologist so that
the patients have complete information
about their treatment options. Decisions
about whether to continue medical
management of patients’ kidney disease
or to begin dialysis once the patients’
condition has reached Stage V (ESRD)
are made by the patient and their
nephrologist. We do not believe that the
best approach to accomplish the goal of
ensuring appropriate management of
elderly patients’ kidney disease is to
remove the age adjustments and to
increase the base payment paid for all
dialysis treatments. We are concerned
that this approach, which would not
recognize the full cost of caring for
patients 80 years and older, could create
access problems for those patients for
whom dialysis is the best treatment
option.
Comment: A national kidney
association commented that their health
professional membership, which
includes nephrologists, nurses,
advanced practitioners, dietitians, and
social workers, have stated that while
age is not always a predictor of costs, it
is a legitimate proxy for higher costs
associated with older patients. They
pointed out that older patients are more

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68985

susceptible to falls, requiring greater
facility staff assistance to obtain their
weights and assist them in and out of
the dialysis chair. Commenters
explained that elderly patients are also
more likely to have a catheter, which
increases the risk of bloodstream
infections requiring antibiotics, blood
cultures, and more frequent
hospitalizations. They also tend to have
more comorbid conditions, which could
require frequent adjustments in the
dialysis prescription and closer
surveillance of the multitude of
medication they may be on. Given this,
it does not make sense that the age
group of 70 to 79 would not have a
payment adjustment while the 60 to 69
year old population would have a 7
percent payment adjustment.
Another organization commented that
there should be an adjustment for
patients aged 70 to 79 and that failure
to adjust payments for patients in this
age group implies that these patients
require fewer services than those in the
other age groups. They recommended
that CMS provide more information
about this counter-intuitive effect. An
SDO questioned what has changed since
implementation of the ESRD PPS in
2011 that would have resulted in such
a shift in the reference group. An
organization of nonprofit SDOs agreed
and indicated that, as MedPAC suggests,
it may be the result of the two-equation
regression methodology or other factors
in the model. The organization stated
that the better course at this time is to
leave the reference group unchanged
pending further analysis and urged CMS
to do so. Two nursing associations
urged CMS to maintain the current
reference group (ages 60 to 69) because
in their experience, patients in the 70 to
79 age group often have greater needs
and suffer more complications than
younger adults.
Response: We agree with the
comment that age is a legitimate proxy
for higher costs associated with older
patients that are not otherwise reflected
in the model. As stated previously, we
established a reference group that
reflects the age group with the lowest
cost per treatment and compared the
cost per treatment for all other age
groups to the reference group so that all
the other adjustments for age would be
increases in payment. In the regression
analysis, we determined that the age
group 70 to 79 is the group with the
lowest cost per treatment on average,
despite the fact that some patients in the
group may have greater needs and high
cost per treatment. With regard to the
question about what changed since
implementation of the ESRD PPS that
would explain the shift in the age

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reference group, we reiterate that, over
time, there has been limited cost
variation across the middle age
categories and the change in the
reference group does not indicate a flaw
in the methodology.
Comment: An MDO questioned the
payment multipliers for age for the
outlier adjustment, which they believe
were different from the payment
multipliers when the original bundle
was finalized. They indicated the
multipliers were not listed in the CY
2016 ESRD PPS proposed rule, asked if
the multipliers changed due to the
regression, asked when the multipliers
would be available, and questioned
whether they would have an
opportunity to comment before they are
finalized.
Response: We believe that the
commenter is referring to the
coefficients that are derived from the
separately billable model, which are
used in determining outlier eligibility.
Specifically, as discussed in the
Medicare Benefit Policy Manual (Pub.
100–02, Chapter 11, section 60.D), the
outlier payment computations use the
case-mix adjusters for separately billable
services to predict the per treatment
MAP amount for outlier services. We
provided the separately billable
multipliers in the CY 2016 ESRD PPS
proposed rule in Table 4 titled, CY 2016
PROPOSED ADULT CASE-MIX AND
FACILITY-LEVEL PAYMENT
ADJUSTMENTS (80 FR 37823) for the
adults and in Table 5, titled, CY 2016
PROPOSED PEDIATRIC CASE–MIX
PAYMENT ADJUSTMENTS (80 FR
37824) for pediatric patients. These
multipliers have not changed and are
reprinted in this final rule in Table 4
titled, CY 2016 ADULT CASE-MIX AND
FACILITY-LEVEL PAYMENT
ADJUSTMENTS for the adults and in
Table 5 titled, CY 2016 PEDIATRIC
CASE-MIX PAYMENT ADJUSTMENTS.
The outlier policy is described in detail
in section II.B.2.c. of this final rule.
After consideration of the comments,
effective January 1, 2016, we are
adopting the proposed age payment
multipliers provided in Table 1 of the
CY ESRD PPS proposed rule (80 FR
37815) and reproduced below in Table
1.

TABLE 1—CY 2016 FINAL PAYMENT
MULTIPLIERS FOR AGE
Age
18–44
45–59
60–69
70–79

....................................
....................................
....................................
....................................

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Final payment
multipliers
1.257
1.068
1.070
1.000

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TABLE 1—CY 2016 FINAL PAYMENT
MULTIPLIERS FOR AGE—Continued
Final payment
multipliers

Age
80 + ......................................

1.109

2) Body Surface Area (BSA) and Body
Mass Index (BMI)
Section 1881(b)(14)(D)(i) of the Act
requires that the ESRD PPS include a
payment adjustment based on case-mix
that may take into account patient
weight, body mass index (BMI), and
other appropriate factors. Through the
use of claims data, we evaluated the
patient characteristics of height and
weight and established two
measurements for body size when the
ESRD PPS was implemented: Body
surface area (BSA) and BMI. In our
analysis for the CY 2011 ESRD PPS final
rule, we found that the BSA of larger
patients and low BMI (< 18.5 kg/m2) for
malnourished patients were
independent variables in the regression
analysis that predicted variations in
payments for renal dialysis services. As
such, we finalized two separate
payment adjustments for body size in
our CY 2011 ESRD PPS final rule (75 FR
49089 through 49090).
Commenters were supportive of BSA
and BMI payment adjustments in 2011,
noting that body size was a payment
adjustment under the composite rate
payment system, and that ESRD
facilities would be able to capture this
information on the claim form without
any additional burden. A few
commenters expressed concern
regarding pre- versus post-dialysis
weight. In response to these comments
we clarified that a patient’s weight
should be taken after the last dialysis
treatment of the month, as directed in
the Medicare Claims Processing Manual,
Pub. 100–04, Chapter 8, Section 50.3.
For the CY 2016 ESRD PPS proposed
rule, we analyzed both BSA and low
BMI (<18.5kg/m2) individually as part
of the regression analysis and found that
both body size measures are strong
predictors of variation in payments for
ESRD patients.
Body Surface Area (BSA)
Since CY 2005, Medicare payment for
renal dialysis services has included a
payment adjustment for BSA. The
current payment adjustment under the
ESRD PPS is l.020, which implies a 2.0
percent elevated cost for every 0.1 m2
increase in BSA compared to the
national average BSA of ESRD patients.
The increased costs suggest that there
are longer treatment times and
additional resources for larger patients.

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Including the BSA variable improved
the model’s ability to predict ESRD
facility costs compared to using BMI or
weight alone.
In the CY 2011 ESRD PPS proposed
rule (74 FR 49951), we discussed how
we adopted the DuBois and DuBois
formula to establish an ESRD patient’s
BSA because this formula was the most
widely known and accepted. That is, a
patient’s BSA equals their Weight 0.425*
Height 0.725* 0.007184, where weight is
in kilograms and height is in
centimeters. (DuBois D. and DuBois, EF.
‘‘A Formula to Estimate the
Approximate Surface Area if Height and
Weight be Known’’: Arch. Int. Med.
1916 17:863–71.) Once the patient’s
BSA is determined, the payment
methodology compares the patient’s
BSA with the national average BSA of
ESRD beneficiaries and computes the
patient-level payment adjustment using
the average cost increase for changes in
BSA (per 0.1 m 2).
In developing the BSA payment
adjustment under the ESRD PPS, we
explored several options for setting the
reference values for the BSA (74 FR
49951). We examined the distributions
for both the midpoint of the BSA and
the count of dialysis patients by age,
body surface and low BMI. Based on
that analysis, in our CY 2012 ESRD PPS
final rule (76 FR 70244) we set the
reference point at a BSA of 1.87 which
is the Medicare ESRD patient national
average BSA. Setting the reference point
at the average BSA reflects the
relationship of a specific patient’s BSA
to the average BSA of all ESRD patients.
As a result, some payment adjusters
would be greater than 1.0 and some
would be less than 1.0. In this way, we
were able to minimize the magnitude of
the budget-neutrality offset to the ESRD
PPS base rate. (For more information on
this discussion, we refer readers to the
CY 2005 Physician Fee Schedule final
rule (69 FR 66239, 66328 through
66329) and the CY 2011 ESRD PPS
proposed rule (74 FR 49951)). The BSA
factor is defined as an exponent equal
to the value of the patient’s BSA minus
the reference BSA of 1.87 divided by
0.1.
In the CY 2012 ESRD PPS final rule
(76 FR 70245) and the CY 2013 ESRD
PPS proposed rule (77 FR 40957), we
stated our intent to review claims data
from CY 2012 and every 5 years
thereafter to determine if any
adjustment to the national average BSA
of Medicare ESRD beneficiaries is
required. Although the CY 2012 claims
showed an increase in the national
average BSA, we did not implement an
update in the CY 2013 ESRD PPS rule.
Rather, in light of the requirement in

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section 632(c) of ATRA that we analyze
and make appropriate revisions to the
ESRD PPS case-mix adjustments for CY
2016, we decided to incorporate the
new national average BSA into the
overall refinement of our payment
adjustments that we are making as a
result of that requirement.
In accordance with our commitment
to update the Medicare national average
BSA and because of the statutory
requirement to analyze and make
appropriate revisions to the case-mix
payment adjustments for CY 2016, in
the CY 2016 ESRD PPS proposed rule
(80 FR 37816) we proposed to update
the BSA Medicare national average from
1.87 m2 to 1.90 m2 for CY 2016 to reflect
the new Medicare ESRD national
average BSA. The average is based on an
analysis of the patient height and weight
information reported on ESRD facility
claims in CY 2013. We note that this
average is an increase of 1.6 percent
over the Medicare ESRD national
average BSA of 1.87 m2 used to compute
the payment adjustment when the ESRD
PPS was implemented in CY 2011.
Based upon the regression analysis for
CY 2016 using the DuBois and DuBois
formula for computing a patient’s BSA
and the updated Medicare national
average BSA of 1.90 m2, we proposed
that the BSA payment adjustment
would be 1.032 and the BSA payment
adjustment would be based on the
following formula:
1.032((Patient’s BSA ¥1.90)/0.1).
Low-Body Mass Index (BMI)
The basic case-mix adjusted
composite rate payment system in effect
from CYs 2005 through 2010 and the
current ESRD PPS include a payment
adjustment for low BMI. In order to be
consistent with other Department of
Health and Human Services
components (that is, Centers for Disease
Control and Prevention and National
Institutes for Health), we defined low
BMI as less than 18.5 kg/m2. The
regression indicated that patients who
are underweight consume more
resources than other patients. The
current payment adjustment for low
BMI under the ESRD PPS is 1.025.
Based on the regression analysis
conducted for the proposed rule, we
continue to find low BMI to be a strong
predictor of cost variation among ESRD
patients. We proposed a payment
adjustment of 1.017, reflective of the
regression analysis based upon CY 2012
and 2013 Medicare cost report and
claims data.
The comments we received and our
responses are presented below.
Comment: MedPAC pointed out that
in considering both body size

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adjustments, for patients with low BMI,
the ESRD PPS applies an adjustment
factor that increases payment by 2.5
percent; however, those patients tend to
have BSA values less than the average,
for which the ESRD applies an
adjustment factor that decreases
payment. They expressed concern that
CMS has not stated exactly how each
variable is incorporated in the
regression models and that the proposed
adjustment factors do not accurately
account for the inherent correlation
between patient BMI and BSA. They
point out that the BSA is empirically
estimated only in the facility-based
regression, while the low-BMI
adjustment factor is estimated only in
the patient-based regression. MedPAC
contends that this specification does not
address the joint effect of patient BSA
and BMI in each regression.
MedPAC conducted a regression in
which they defined the dependent
variable as the average cost per
treatment (for services included in the
PPS payment bundle), included the
same independent and control variables
as the CMS model and specified a set of
BSA variables to take into account the
distribution of BSA values at each
facility. This approach allowed them to
assess the joint effect of low BMI and
BSA. With this specification, they found
that the low BMI factor is statistically
significant and increases payment by
enough to offset reductions in payment
resulting from low BSA. To account for
this correlation, MedPAC recommended
that CMS refine the low BMI and BSA
adjustment to reflect the factors’ joint
effect on facility costs. One method they
suggested could be to continue applying
the same adjustment for BSA when
patient BMI values are 18.5 kg/m2 or
greater, but for BMI values less than
18.5 kg/m2, apply a single adjustment
factor that takes into account the joint
effect of patient BSA and low BMI.
Their analysis suggests that a joint BSA
and low BMI adjustment factor would
be about 1.02 to 1.03.
Response: As we explained in the
previous section, the BSA and low-BMI
variables represent different
characteristics that have individual
effects on cost. In particular, BSA
(which is a continuous variable that
increases as the patient’s body size
rises) is empirically associated with
higher composite rate costs. The low
BMI categorical variable identifies
particularly frail patients, that is, those
with BMI less than 18.5 kg/m2 and is
empirically associated with higher
separately billable costs because these
very frail patients require more
expensive drug therapies. Because of the
continued importance of both body size

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adjustments to account for the costs
associated with overweight and
underweight patients, we appreciate the
modeling that MedPAC conducted,
which retains both body size adjusters.
The proposed example from MedPAC
is not substantially different from the
current model. The payment multipliers
take account the joint effect of BSA and
BMI: One effect for those with low BMI
(BSA effect * 1.017) and one effect for
those without a low BMI (BSA effect).
Their proposal is essentially two
continuous effects which start at
differing cost averages (as indicated by
the presence or absence of low BMI
which moves the average costs up by
1.017). The ultimate effect is very
similar to our model. We will, however,
consider this approach for future
refinement.
Comment: National dialysis
organizations and two nursing
associations also pointed out that a
patient with a low BMI frequently has
a negative BSA, eliminating the benefit
of the low BMI adjustment for that
patient. A national association of kidney
patients and a nonprofit dialysis
organization agreed and referred to an
analysis that concluded that the BSA
adjuster is canceling out the BMI
adjuster in most cases for underweight
patients. The commenters’ healthcare
professionals attest that both
underweight and overweight patients
require additional staff time devoted to
their care and overweight patients may
require the facility to provide additional
equipment. To ensure that the patient
level adjusters are achieving the
intended policy purpose of protecting
these seemingly more costly patients
from adverse selection, the commenters
recommend maintaining the current
(2015) age adjuster, eliminating the BSA
adjuster, and applying a BMI adjuster
only for underweight patients, adding a
BMI adjuster for overweight patients
(using the National Institutes of Health
definition) for 2016, and working with
the kidney community to develop new
data sources for patient characteristics
from which appropriate age and weight
adjusters could be calculated in future
years.
Response: We agree with the
commenters that both underweight and
overweight patients require additional
resources devoted to their care. Also,
the commenters are correct that the BSA
adjustment would be negative for frail
patients and the low-BMI adjustment
counteracts this effect. While BSA is
negatively correlated with low BMI, the
correlation is not perfect. The low BMI
adjustment does not just counteract the
negative BSA adjustment. Rather, where
a patient’s BMI is under the threshold

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of 18.5 kg/m2, the combined effect of the
low BMI and the BSA adjustment is an
increase in payment for frail patients.
We discuss the interaction between the
BSA and low BMI variable in section
II.B.1.
The suggestion that we retain
elements from the current model, such
as the current (2015) age adjusters, and
adopt new measures based on the
updated regression using ESRD PPS
data, would not be appropriate. We
must either retain the current case-mix
adjustments in their entirety or adopt
the proposed adjustment multipliers
derived from the updated regression
analysis; adopting a mixture of
adjustments from different regression
analyses would remove the empirical
basis of the payment system. We are
unable to consider a new BMI-based
adjustor for overweight patients for
implementation in CY 2016. We would
first need to consider the various
options suggested, decide on a
methodology, run the regression
analysis using the new adjustor, and
obtain public comments. We will
consider this approach for future
refinement of the ESRD PPS.
Comment: A large dialysis
organization suggested that CMS
eliminate the BSA adjuster for 2016 and
beyond. They recommend that CMS
retain the BMI adjuster, but only with
modifications so that it addresses both
underweight and overweight patients.
This could be achieved by establishing
a threshold for overweight patients and
using the existing dollars from the BSA
adjuster pool to fund this new category.
Alternatively, the organization provides
a proposal on how to possibly combine
the two adjusters into one based on BMI
and ensure differential reimbursement
for overweight and underweight
patients. The alternative BMI adjuster
would be based on the number of cubed
deviations (deviation equal to two
points in BMI) from the average dialysis
patient BMI (∼28.9 kg/m2). The LDO’s
proposed formula for a patient’s BMI
adjuster would be as follows:
BMI adjustor = 1.00007 ([Patient

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BMI¥Average BMI]/2) 3

Using this method, the LDO stated
that the new BMI adjuster would
maintain budget neutrality and, most
importantly from its point of view, align
more closely with the policy objectives
than using the proposed threshold
methodology. The commenter indicated
that applying a BMI threshold is
somewhat arbitrary and would result in
drastically different reimbursement for
patients who have very similar BMI
(that is, a patient with BMI of 25 kg/m2
would receive incremental

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reimbursement but a patient with BMI
of 24.9 kg/m2 would not). The
commenter noted that presumably, costs
and reimbursement should be quite
similar for patients with numerically
close BMI scores.
Response: We selected BSA and low
BMI because they improve the model’s
ability to predict costs compared to
using BMI or weight alone. We provided
the BSA adjustment as a proxy for time
on the dialysis machine and additional
staff or supply resources for overweight
patients. As noted in the previous
response, we are unable to implement a
high-BMI adjustment in CY 2016. With
regard to the suggestion that we fund
this new BMI-based adjustment and
achieve budget neutrality by using the
payments currently paid through the
BSA adjustment, we would instead need
to estimate a regression model with the
new specification and determine the
budget-neutrality factor needed to fund
the adjuster.
In the current model, the BSA
adjustment is unique as it is
standardized to the mean, and therefore
does not contribute to the overall
budget-neutrality factor (that is, the
multiplier is 1.0 on average, with larger
patients adjusted upward and smaller
patients adjusted downward. For all
other case-mix adjusters, the value of
1.0 is assigned to the lowest cost group,
and all adjustments are upward, which
is what necessitates the budgetneutrality factor. Alternative approaches
to accounting for body size might be
explored for future payment years. If
such an alternative retained the
property of the BSA adjustment in
which the average multiplier is
standardized to 1.0, it would not require
a budget-neutrality adjustment.
We do not understand the example
provided to illustrate the commenter’s
view that applying a BMI threshold is
somewhat arbitrary and would result in
drastically different reimbursement for
patients who have very similar BMI. In
the example, a patient with a BMI of
24.9 kg/m2 is compared to a patient
with a BMI of 25 kg/m2. As the BMI
adjuster is not applied unless the
patient has a BMI of 18.5 kg/m2, we note
that neither of the patients in the
example would receive the low-BMI
adjustment.
Comment: An organization of
nonprofit SDOs asked CMS to address
the potential interaction of the two
related but separate adjustment factors
addressing body size. They suggested
that we create a floor below which a
negative BSA adjustment would not
apply to avoid interaction with the BMI
adjustment. Specifically, they
recommended that the BSA adjustor not

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be applied to a patient with a BMI of
less than 18.5 kg/m.
Response: The regression model
assumes that the low-BMI adjuster is
tempered by the BSA adjustment. As a
result, if we were to adopt the
commenter’s suggestion to remove the
interaction between the two variables by
creating a floor for the BSA at the lowBMI level, the proposed low-BMI
adjuster would be too high and would
need to be recalculated.
Comment: An MDO noted that the
payment multiplier for low-BMI
dropped from 1.025 to 1.017 and asked
why we feel the adjustment warrants a
decrease and what the regression
showed that prompted us to propose
this change. They pointed out that
patients with a low BMI need more care,
so they should continue to receive the
higher adjustment amount.
Response: The updated regression
analysis is based on ESRD PPS data and
reflects reduced utilization of ESAs and
other renal dialysis service drugs,
biologicals, and laboratory testing. The
decrease in separately billable services
resulted in a decrease in the weight
applied to the separately billable
multipliers in the calculation of the
payment multipliers. The actual
multiplier for low BMI rose slightly
from 1.078 in the analysis for CY 2011
to 1.090 in the analysis for the CY 2016.
Therefore, the decline in the overall
payment multiplier for low BMI noted
by the commenter arose entirely from
the lower overall weight attached to SB
services given their substantial decline
following the implementation of the
expanded bundled payment system.
Comment: A professional association
requested that CMS clearly define the
methodology for calculating BMI and
BSA. For example, for PD patients, they
asked whether the weight measured
when the patient has an empty
peritoneal cavity or a full peritoneal
cavity. The association notes this is
particularly relevant for those patients
who have high volume dwells at all
times, as the full volume could
theoretically be subtracted from the
weight to derive a value that more
closely approximates body weight.
Similarly, for hemodialysis, the
association requests that CMS define
when weight is assessed in regard to
dialysis schedule.
Response: The Medicare Claims
Processing Manual (Pub. 100–4, Chapter
8, section 50.3) states that the weight of
the patient should be measured after the
last dialysis session of the month and is
reported in kilograms. Additionally, the
Medicare Benefit Policy Manual (Pub.
100–02, Chapter 11, section 60.A.3)
states that although height and weight

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are taken at intervals throughout any
given month of dialysis treatment, the
measurements for the purpose of
payment must be taken as follows: The
dry weight of the patient is measured
and recorded in kilograms immediately
following the last dialysis session of the
month. For PD patients, dry weight
occurs when the patient has an empty
peritoneal cavity, which can be obtained
by subtracting the remaining volume
from the patient’s weight. We will
consider the commenter’s suggestion in
future revisions to those manuals.
After consideration of the public
comments, effective January 1, 2016, we
are adopting the proposed payment
multipliers for the BSA (1.032) and lowBMI (1.017) payment adjustments which
are included in Table 4 of this final rule.
We are also updating the average
Medicare ESRD patient national average
weight used in the BSA formula to
1.90 m2.
(3) Comorbidities
Section 1881(b)(14)(D)(i) of the Act
requires that the ESRD PPS include a
payment adjustment based on case-mix
that may take into account patient
comorbidities. In our CY 2011 ESRD
PPS proposed and final rules (74 FR
49952 through 49961 and 75 FR 49094
through 49108, respectively), we
described the proposed and finalized
comorbidity payment adjustors under
the ESRD PPS. Our analysis found that
certain comorbidity categories are
predictors of variation in costs for ESRD
patients and, as such, we proposed the
following comorbidity categories as
payment adjustors: Cardiac arrest;
pericarditis; alcohol or drug

dependence; positive HIV status or
AIDS; gastrointestinal tract bleeding;
cancer (excluding non-melanoma skin
cancer); septicemia/shock; bacterial
pneumonia and other pneumonias/
opportunistic infections; monoclonal
gammopathy; myelodysplastic
syndrome; hereditary hemolytic or
sickle cell anemias; and hepatitis B (74
FR 49954).
While all of the proposed comorbidity
categories demonstrated a statistically
significant relationship with additional
cost in the payment model, the various
issues and concerns raised in the public
comments regarding the proposed
categories caused us to do further
evaluations. Specifically, we created
exclusion criteria that assisted in
deciding which categories would be
recognized for the payment adjustment.
As discussed in the CY 2011 ESRD PPS
final rule (75 FR 49095) we further
evaluated the comorbidity categories
with regard to—(1) inability to create
accurate clinical definitions; (2)
potential for adverse incentives
regarding care; and (3) potential for
ESRD facilities to directly influence the
prevalence of the comorbidity either by
altering dialysis care or diagnostic
testing patterns, or liberalizing the
diagnostic criteria. As a result of this
evaluation, we finalized 6 comorbid
patient conditions eligible for additional
payment under the ESRD PPS (75 FR
49099 through 49100): pericarditis,
bacterial pneumonia, gastrointestinal
tract bleeding with hemorrhage,
hereditary hemolytic or sickle cell
anemias, myelodysplastic syndrome,
and monoclonal gammopathy.

68989

Many stakeholders have criticized the
comorbidity payment adjustments
available under the ESRD PPS. Through
industry public comments and
stakeholder meetings we have become
aware of the perceived documentation
burden placed upon facilities in their
effort to obtain discharge information
from hospitals or other providers or
diagnostic information from physicians
and other practitioners necessary to
substantiate the comorbidity on the
facility claim form. Public comments
have suggested that we remove all
comorbidity payment adjustments from
the payment system and return any
allocated monies to the base rate. Other
commenters have indicated that patient
privacy laws have also limited the
ability of facilities to obtain the
diagnosis documentation necessary in
order to append the appropriate
International Classification of Diseases
code on the claim form.
Acute Comorbidity Categories
There are three acute comorbidity
categories (pericarditis, bacterial
pneumonia, and gastrointestinal tract
bleeding with hemorrhage) finalized in
the CY 2011 ESRD PPS final rule (75 FR
49100) due to predicted short term
increased facility costs when furnishing
dialysis services. Specifically, the costs
were identified with increased
utilization of ESAs and other services.
The payment adjustments are applied to
the ESRD PPS base rate for 4 months
following an appropriate diagnosis
reported on the facility monthly claim.
In the CY 2011 ESRD PPS final rule, we
finalized payment variables as indicated
in Table 2 below.

TABLE 2—ACUTE COMORBIDITY CATEGORIES RECOGNIZED FOR A PAYMENT ADJUSTMENT UNDER THE ESRD PPS
CY 2011
Payment
multiplier

Acute comorbidity category

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Pericarditis ...............................................................................................................................................................
Bacterial Pneumonia ................................................................................................................................................
Gastrointestinal Tract Bleeding w/Hemorrhage .......................................................................................................

In the CY 2016 ESRD PPS proposed
rule (80 FR 37817), we explain that
analysis of CYs 2012 and 2013 claims
data for the regression analysis
continues to demonstrate significant
facility resources when furnishing
dialysis services to ESRD patients with
these acute comorbidities. However, in
accordance with section 632(c) of ATRA
and in response to stakeholders’ public
comments and requests for the
elimination of all of the comorbid
payment adjustments, we have
compared the frequency of how often

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these conditions were indicated on the
facility monthly bill type with how
often a corroborating claim in another
Medicare setting is identified in a 4month look back period. We were
unable to corroborate the diagnoses of
bacterial pneumonia on ESRD facility
claims with the presence of a diagnosis
on claims from other Medicare settings,
leading us to the conclusion that this
comorbidity is significantly underreported by ESRD facilities.
In order for the bacterial pneumonia
comorbid payment adjustment to apply,

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1.114
1.135
1.183

CY 2016
Payment
multiplier
1.040
1.082

we require three specific sources of
documentation: an X-ray, a sputum
culture, and a provider assessment.
Since 2011, facilities have expressed
concern regarding these documentation
requirements. Specifically, facilities cite
a documentation burden in that they are
unable to obtain hospital or other
discharge information for the patients in
their care, and are therefore unable to
submit the diagnosis on the claim form
necessary to receive a payment
adjustment. In addition, stakeholders
have indicated that our requirements are

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out of step with the assessments used by
many physicians and Medicare
providers to make the diagnosis. For
example, many providers will diagnose
bacterial pneumonia simply by patient
assessment and would not consider the
X-ray or the sputum culture necessary to
their diagnosis.
Because in the opinion of
stakeholders, the ESRD PPS comorbidity
payment adjustments often go unpaid,
facilities have encouraged CMS to
eliminate these adjustments through the
authority granted in section 632(c) of
ATRA. However, we find that all of the
acute comorbid payment adjustors
continue to be strong predictors of cost
variation among ESRD patients based on
the updated regression analysis.
Accordingly, we continue to believe it is
appropriate to apply a comorbidity
payment adjustment for the acute

comorbidities of pericarditis and
gastrointestinal tract bleeding with
hemorrhage. However, in consideration
of stakeholder concerns about the
burden associated with meeting the
documentation requirements for
bacterial pneumonia, we proposed to
eliminate the case-mix payment
adjustment for the comorbidity category
of bacterial pneumonia beginning in CY
2016. Based upon the regression
analysis of CY 2012 through 2013
Medicare claims and cost report data,
where comorbidities are measured only
on ESRD facility claims, the proposed
payment adjustment for pericarditis
would be 1.040 and the adjustment for
gastrointestinal tract bleeding with
hemorrhage would be 1.082.
Chronic Comorbidity Categories
There are three chronic comorbidity
categories (hereditary hemolytic and

sickle cell anemias, myelodysplastic
syndrome, and monoclonal
gammopathy), which were finalized as
payment adjustors in the CY 2011 ESRD
PPS final rule (75 FR 49100) due to a
demonstrated prediction of increased
facility costs when furnishing dialysis
services. In addition, these conditions
have demonstrated a persistent effect on
costs over time; that is, once the
condition is diagnosed for a patient, the
condition is likely to persist. For this
reason, the payment adjustments are
paid continuously when an appropriate
diagnosis code is reported on the
facility’s monthly claim. In the CY 2011
ESRD PPS final rule, we finalized
payment variables as indicated in Table
3 below for chronic comorbidities,
effective January 1, 2011.

TABLE 3—CHRONIC COMORBIDITY CATEGORIES RECOGNIZED FOR A PAYMENT ADJUSTMENT UNDER THE ESRD PPS
CY 2011
payment
multiplier

Chronic comorbidity category

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Hereditary Hemolytic or Sickle Cell Anemias ..........................................................................................................
Myelodysplastic Syndrome ......................................................................................................................................
Monoclonal Gammopathy ........................................................................................................................................

In the CY 2016 ESRD PPS proposed
rule (80 FR 37818), we explain that
analysis of CY 2012 through 2013
claims and cost report data for the
purposes of regression analysis has
continued to demonstrate that
significant facility resources are used
when furnishing dialysis services to
ESRD patients with these chronic
comorbidities. However, in accordance
with section 632(c) of ATRA and in
response to stakeholders’ public
comments and requests for the
elimination of all of the comorbid
payment adjustments, we compared the
frequency of how often these conditions
were reported on the facility monthly
bills with how often a corroborating
claim is reported in another Medicare
setting in a 12-month look back period.
This analysis demonstrated significant
differences in the reporting of
monoclonal gammopathy by ESRD
facilities and in other treatment settings.
In order for the monoclonal
gammopathy comorbidity payment
adjustment to apply, Medicare requires
a positive serum test and a bone marrow
biopsy test. We believe that billing
inconsistency may result from the
variation in diagnostic assessment for
the condition. We believe that some
facilities may report the diagnosis based
upon only the positive serum test, and

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forgo the bone marrow biopsy, while
other facilities may view the bone
marrow biopsy as excessive for what is
often an asymptomatic condition and
forgo the payment adjustment
altogether.
CMS has historically required the
bone marrow biopsy for confirmation of
a diagnosis of monoclonal gammopathy
because often it is a laboratory-defined
disorder, where the disease has no
symptoms but where the patient is
identified to be at considerable risk for
the development of multiple myeloma.
Because many ESRD patients suffer
from anemic conditions due to their
dialysis, they can test false positive for
monoclonal gammopathy. We
considered modifying our
documentation policies for requiring the
bone marrow biopsy when making the
payment adjustment. However, we are
concerned that we will be unable to
confirm the diagnosis without a bone
marrow test.
Based on the regression analysis
conducted using CY 2012 and 2013
ESRD PPS claims and cost report data,
we find that all of the chronic comorbid
payment adjustors continue to be strong
predictors of cost variation among ESRD
patients and accordingly, we proposed
to continue to make a payment
adjustment for the chronic comorbid

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1.072
1.099
1.024

CY 2016
payment
multiplier
1.192
1.095

conditions of hereditary hemolytic and
sickle cell anemias and myelodysplastic
syndrome. However, in consideration of
stakeholders’ concerns about the
excessive burden of meeting the
documentation requirements for
monoclonal gammopathy, due to
variation in patient assessment, we
proposed to eliminate the case-mix
payment adjustment for the comorbid
condition of monoclonal gammopathy
beginning in CY 2016. Based upon the
regression analysis of CY 2012 through
2013 ESRD facility claims and cost
report data, the updated payment
adjustment for hereditary hemolytic and
sickle cell anemias would be 1.192 and
for myelodysplastic syndrome the
payment adjustment would be 1.095.
The comments we received and our
responses are set forth below:
Comment: MedPAC expressed
support for the proposal to eliminate
bacterial pneumonia and monoclonal
gammopathy as payment adjustments
under the ESRD PPS. In addition, they
recommend that CMS consider
removing all comorbidity payment
adjustments because they may result in
undue burden on patients required to
undergo additional diagnostic
procedures, are poorly identified on
dialysis claims, and reflect only
differences in the cost of separately

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billable services. They note that to the
extent that these conditions result in
high costs, these costs are addressed
through the outlier policy.
Many national dialysis organizations
representing small, medium and large
dialysis organizations, nursing
associations, and a professional
association also supported our proposal
to eliminate two of the comorbidity
category adjustments. Several
organizations pointed out that
comorbidities such as these are not
generally diagnosed in the ESRD facility
or by physicians associated with the
facility. Regardless of the fact that
comorbid conditions may be indicative
of higher patient ESA utilization and
thus higher ESRD treatment costs, the
commenters claim that the policy
rationale of these adjusters is not being
met. Due to the burdensome
requirements related to documentation
and diagnosis coding requirements
needed for clinical comorbidity
adjustments, dialysis providers are not
able to receive this adjustment for many
patients’ comorbidities because of
incomplete patient medical histories, as
well as a lack of availability of specialty
and primary care health records.
The national dialysis organizations
agreed with MedPAC’s assertion that the
outlier payment policy is sufficient for
the purpose of reimbursing dialysis
providers for treating patients with
pericarditis, gastrointestinal bleeding,
hereditary, hemolytic, or sickle cell
anemia, and myelodysplastic syndrome.
For these reasons, they recommended
that we eliminate all of the remaining
comorbidity adjustments and rely upon
the outlier policy to fine-tune the
payment to facilities caring for the small
number of beneficiaries who may incur
higher costs due to comorbidities.
Several other organizations
representing mostly SDOs and
independent ESRD facilities commented
that the frequency of reporting of codes
for the comorbidity adjustments remains
significantly below CMS’s estimates
because dialysis facilities continue to
face challenges in getting the required
documentation in order to report
specific diagnosis codes and obtain the
comorbidity payment adjustments. The
organization states that there are many
dialysis patients who have GI bleeding
and are even hospitalized multiple
times without there ever being a
confirmed diagnosis by their GI
specialist. Yet, the dialysis unit bears
the burden of the higher costs associated
with this condition. An MDO
commented that a more fair and
reasonable change to the comorbid
condition payment multipliers would be
to either change or decrease the

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documentation requirements for
bacterial pneumonia and monoclonal
gammopathy so more providers qualify
for the adjustments. Another
organization of SDOs agreed, noting
similar problems with obtaining the
required documentation for the GI
bleeding with hemorrhage comorbidity
and suggested that CMS exercise its
discretion to further limit, if not
withdraw completely, the comorbidities
included in the current case-mix
adjustments.
Response: In response to the
suggestion that we change or decrease
the documentation requirements for
bacterial pneumonia and monoclonal
gammopathy rather than remove the
comorbidity categories, we believe
removing these comorbidities is more
appropriate. As we stated in the CY
2016 ESRD PPS proposed rule (80 FR
37817), in order for the bacterial
pneumonia comorbid payment
adjustment to apply, we require three
specific sources of documentation: An
x-ray, a sputum culture, and a provider
assessment. Due to the variation in
diagnostic assessment, we find that the
condition is underreported on facility
claims and that we are unable to
confirm a positive diagnosis without the
additional burden of documenting an Xray or sputum culture.
For monoclonal gammopathy, in the
CY 2016 ESRD PPS proposed rule (80
FR 37818), we stated that CMS has
historically required documentation of a
bone marrow biopsy to confirm a
diagnosis of monoclonal gammopathy
because often it is a laboratory-defined
disorder, where the disease has no
symptoms but where the patient is
identified to be at considerable risk for
the development of multiple myeloma.
Because many ESRD patients suffer
from anemic conditions due to their
dialysis, they can test false positive for
monoclonal gammopathy. We
considered modifying our
documentation policies for requiring the
bone marrow biopsy when making the
payment adjustment. However, we are
concerned that we will be unable to
confirm the diagnosis without a bone
marrow test. Based on our concern
regarding the variation in diagnostic
testing, we proposed to delete
monoclonal gammopathy as a payment
adjustment. Because of the patient and
facility burden associated with these
conditions, we continue to believe it is
appropriate to delete bacterial
pneumonia and monoclonal
gammopathy as payment adjustments
under the ESRD PPS.
With regard to the problems
organizations described in obtaining the
documentation needed to report a

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68991

comorbidity, we did not intend that
ESRD facilities would actually order
additional tests or procedures in order
to document a comorbidity. Rather, our
assumption was that the patient’s
nephrologist or primary care physician
would be aware if their patient had any
of the two chronic conditions and
would provide the documentation. If
there is nothing in the medical record,
then the facility would be unable to
claim a comorbidity adjustment for that
patient and would have to seek payment
through the outlier mechanism.
With regard to the acute comorbidity
categories, we do not understand how
ESRD facilities are unable to obtain
confirmatory documentation for most
ESRD patients with gastrointestinal tract
bleeding with hemorrhage and
pericarditis. Considering the ICD–10–
CM codes that are available for reporting
these conditions under the ESRD PPS,
we believe in most cases these patients
would be evaluated and treated in an
acute care setting such as an emergency
room or hospital and, as a result, it
should not be burdensome or difficult
for ESRD facilities to obtain the
documentation. We believe that if a
patient has one of the comorbidities, a
physician must have done a clinical
work up to make the diagnosis.
Diagnoses are based on clinical signs
and symptoms as well as diagnostic
tests and these findings are included in
the medical record.
Obtaining the medical documentation
necessary to obtain payments for the
comorbidities we proposed to retain
should not be complicated or
burdensome; and is important for care
coordination purposes. Once the patient
signs a medical release form (which
could be done while the patient is in the
dialysis facility) and it is faxed to either
the hospital or the physician office, the
records should be released. In situations
where the patient’s medical record is
incomplete so the ESRD facility is
unable to obtain the documentation
needed to report the comorbidity
diagnosis, we would expect the facility
to include the cost for all outlier-eligible
services on the claim and qualify for an
outlier payment when the cost exceeds
the outlier fixed dollar loss threshold.
This approach supports access to
dialysis for high cost patients. We will
continue to monitor the extent to which
the comorbidities are reported for future
refinement.
MedPAC also made a comment
regarding the comorbidity payment
adjustment reflecting only differences in
the cost of separately billable services.
We note that accurate multipliers for
uncommon conditions could not be
derived from the facility-level model. If

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we were to use the facility-level model
and link those comorbidities with
composite rate costs in addition to
drugs, we would not have been able to
detect that with any reasonable level of
statistical precision. Therefore, we
believe that it is appropriate to derive
the comorbidity payment adjustments
from the separately billable model.
With regard to the comments
concerning the comorbidity payment
adjustment not being paid out as we had
anticipated in CY 2011, we note that
prior to the implementation of the
expanded bundle in 2011, comorbidities
were rarely reported on dialysis claims.
Therefore, the 2011 model predicted the
prevalence of comorbidity adjusters
using Medicare claims from other
settings (except for laboratory claims).
That predicted prevalence was used in
the calculation of the case-mix
adjustment budget-neutrality factor.
Actual reporting on dialysis claims
during the first year of the expanded
bundle fell short of the levels expected
based on diagnoses reported on claims
from other care settings. It was not
known at that time whether such
underreporting would become
persistent or if reporting would rise as
providers became more familiar with
the requirements of the new payment
system. Since there are now several
years of data that have demonstrated
continued reporting below expected
levels, we have come to agree with the
comment that the comorbidities are less
frequently documented on ESRD facility
claims compared to the reporting on
claims in other care settings. However,
rather than eliminate the comorbidities
as several commenters suggest, we have
revised the predicted prevalence of
comorbidity adjusters in our calculation
of the refinement budget-neutrality
adjustment factor to be based on actual
reporting in the dialysis setting.
Specifically, the 2016 model refinement
is based on comorbidities identified for
payment on dialysis claims only, that is,
for this final rule we have reset our
assumptions to reflect the actual
prevalence of the comorbidity adjusters
in the ESRD population. The budgetneutrality adjustment accounts for the
elimination of monoclonal gammopathy
and bacterial pneumonia as well as the
actual prevalence of reported
comorbidities on dialysis claims.
We anticipate going forward, the
reduction in the base rate to fund
comorbidity adjusters will be in balance
with actual payments made for those
adjusters. This is demonstrated by
comparing the amount of the estimate of
the direct reduction in the base rate due
to the comorbidities provided in column
3 of Table 4, which shows the value for

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the CY 2011 model, with that in column
7 of Table 4, which shows the value for
the CY 2016 model. Specifically, if all
other variables are held constant, in the
CY 2011 model 0.8 percent of the base
rate was held to fund the comorbidity
payment adjustments, whereas in the
CY 2016 model 0.1 percent of the base
rate will be held to fund the
comorbidity payment adjustments.
We agree with MedPAC and other
commenters that in the absence of casemix adjusters for comorbidities, it
would be more likely that facilities
would receive outlier payments.
However, this would only partially
compensate facilities for the higher
costs associated with the comorbidity. If
the costs for these patients are higher
but do not reach the outlier fixed dollar
loss threshold, facilities would not
receive outlier compensation. Even if
the outlier threshold is met, facilities
would only receive compensation for
costs above the threshold. Therefore, we
believe it is appropriate to retain four of
the comorbidity payment adjusters in
order to ensure that ESRD facilities
receive additional payment for these
costly patients and preserve access to
care for patients with these conditions.
Comment: A large health plan
requested that we reconsider our
proposal to delete the comorbidity
category of bacterial pneumonia. They
pointed out that when a patient has
bacterial pneumonia, additional costs
are incurred by ESRD facilities for
antibiotic treatment, pulmonary
destabilization secondary to pneumonia,
and tests such as X-rays for fluid
buildup. The plan encouraged us to
provide adequate reimbursement for
this condition.
Response: Under the ESRD PPS, ESRD
facilities are responsible only for
furnishing renal dialysis services, which
are defined in 42 CFR 413.171. Payment
adjustments are made to ESRD facilities
for comorbidities to reflect the increased
utilization and cost of ESAs and other
renal dialysis services drugs and
laboratory testing furnished to patients
with these comorbidities. The ESRD
facilities are not responsible for the
costs related to treatment of the
comorbidity, such as antibiotic
treatment and x-rays in the case of
bacterial pneumonia, but rather only for
the cost of the renal dialysis services
they are required to furnish.
Comment: An MDO disagreed with
the decrease in the payment multipliers
for pericarditis (from 1.114 to 1.040) and
gastrointestinal bleeding (from 1.183 to
1.082) and stated that removing an
entire payment multiplier for a
comorbid condition and also decreasing
the others will be detrimental to

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providers. They noted that the other
comorbidity payment multipliers for
hereditary hemolytic or sickle cell
anemia (from 1.072 to 1.192) and
mylodysplastic syndrome (from 1.099 to
1.095) appear to be acceptable.
Response: The reduction in the
payment multipliers for many of the
adjustments under the ESRD PPS is due
to the decrease in utilization of renal
dialysis service drugs and biologicals,
especially ESAs reflected in the updated
regression analysis. In light of the
reduction in utilization and facility
costs for renal dialysis service drugs and
biologicals, the new payment
multipliers reflect facility cost on
average and therefore should not be
detrimental to ESRD facilities.
After consideration of public
comments, effective January 1, 2016, we
are adopting the proposed comorbidity
category payment multipliers provided
in Table 2 for the acute comorbidity
categories of pericarditis and
gastrointestinal tract bleeding with
hemorrhage and Table 3 for the chronic
comorbidity categories of hereditary
hemolytic or sickle cell anemias and
myelodysplastic syndrome of the CY
2016 ESRD PPS proposed rule (80 FR
37817 and 80 FR 37818, respectively) as
final. The multipliersare presented
below in Table 4. We are also finalizing
removal of monoclonal gammopathy
and bacterial pneumonia from the
comorbidities eligible for payment
adjustments.
(4) Onset of Dialysis
Section 1881(b)(14)(D)(i) of the Act
required the ESRD PPS to include a
payment adjustment based on case-mix
that may take into account a patient’s
length of time on dialysis. For the CY
2011 ESRD PPS final rule (75 FR 49090),
we analyzed the length of time
beneficiaries have been receiving
dialysis and found that patients who are
in their first 4 months of dialysis have
higher costs and noted that there was a
drop in the separately billable payment
amounts after the first 4 months of
dialysis. Based upon this analysis, we
proposed and finalized the definition of
onset of dialysis as beginning on the
first date of reported dialysis on CMS
Form 2728 through the first 4 months a
patient is receiving dialysis. We
finalized a 1.510 onset of dialysis
payment adjustment for both home and
in-facility patients (75 FR 49092). In
addition, we acknowledged that there
may be patients whose first 4 months of
dialysis occur when they are in the
coordination of benefits period and not
yet eligible for the Medicare ESRD
benefit. We explained that in these
circumstances, no onset of dialysis

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adjustment would be made (75 FR
49090).
Most commenters supported
inclusion of an onset of dialysis patientlevel adjustment and noted that the
higher costs for new patients are due to
the stabilization of the health status of
the patient and dialysis training.
Because the Medicare onset of dialysis
payment adjustment reflects the costs
associated with all of the renal dialysis
services furnished to a Medicare
beneficiary in the first 4 months of
dialysis, additional payment
adjustments are not made for
comorbidities or training during the
months in which the onset of dialysis
payment adjustment is made. We
discussed and finalized this payment
adjustment in the CY 2011 ESRD PPS
final rule (75 FR 49092 through 49094).
Based on the regression analysis
conducted for the refinement, we found
that the onset of dialysis continues to be
a strong predictor of cost variation
among ESRD patients and proposed an
updated payment adjustment of 1.327.
The comments we received and our
responses are set forth below:
Comment: One large health plan
expressed concern about the drop in the
onset of dialysis payment multiplier.
They stated that new patients require a
significant amount of resources as many
have been hospitalized, and require
frequent medication adjustments, higher
dosing regimens of ESAs and more
frequent lab testing. They recommend
we review the analysis to ensure
adequate payment is made for new
patients. Another organization noted
that CMS did not offer a rationale for the
reduction of the multiplier for onset of
dialysis. They are concerned that the
practical effect of the proposal to lower
the multiplier would be lower payments
for the treatment of patients in this
critical stage. They requested that we

reevaluate this proposal and make its
policy rationales for any changes
available to the dialysis community.
Response: The proposed onset of
dialysis payment adjustment was
derived from a regression analysis of CY
2012 and 2013 claims and cost report
data and reflects decreased use of renal
dialysis service drugs and laboratory
testing, particularly ESAs. We believe it
is important for Medicare payment to
reflect the changes in practice that have
occurred with implementation of the
bundled payment system in 2011 and
believe that the proposed revised
adjuster value captures the cost of the
onset of dialysis under the ESRD PPS.
Comment: A dialysis supply
manufacturer was also concerned about
the reduction in the onset of dialysis
payment adjustment and the
unintended effect it could have on
training for home hemodialysis (HHD).
This is because when an ESRD facility
is receiving the onset of dialysis
adjustment for a patient, training add-on
payments are not made. Thus, the
commenter is concerned that a reduced
onset of dialysis adjustment factor may
lead to less HHD training.
Response: For HHD, most of the
reported training treatments occur after
the first four months when the onset of
dialysis adjustment no longer applies;
83 percent of Medicare HHD training
treatments occur after the first four
months (based on 2014 claims). Data in
the June 2014 claims indicates 492
patient months where the patient
qualified for the onset of dialysis
adjustment and was in HHD training.
That number would equate to
approximately 50 to 100 patients in a
year and represents 0.24 percent of all
patients months qualifying for the onset
of dialysis adjustment (that total is
202,687).

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It appears to be common for patients
do in-facility hemodialysis first (with
the facility receiving the onset of
dialysis adjustment), and then the
patient receives HHD training (with the
facility receiving the training
adjustment). The reasons for this could
be legitimate, such as a patient not
receiving modality education before
starting, so the decision to do HHD is
made after starting in-facility.
Sometimes patients decide to do HHD
before needing dialysis, but when they
start, they are too uremic to do training,
and so a period of in-facility
hemodialysis to attain stability comes
first, and then training follows. Less
legitimate would be if facilities are
focused on the payments rather than the
patient. Then they simply have the
patient do in-center HD first, collect the
onset adjustment, and then train them
on HHD. They get both payments. In the
scenario where a patient both identifies
that they want to do HHD, and are well
enough to start off right away with
training, we believe they have had better
than average pre-ESRD care and/or are
healthier than the average patient
starting HHD, and so may not have the
same costs during the four-month onset
of dialysis period as the average onset
patient (for example, starting with an
AVF, better anemia management, etc).
After consideration of the public
comments, effective January 1, 2016, we
are adopting the proposed payment
multiplier of 1.327 for the onset of
dialysis adjustment. The finalized
payment adjustment is in Table 4 below.
In summary, we are finalizing the
adult case-mix payment adjustments as
provided in Table 4 below. In addition,
this table also reflects the facility-level
payment adjustments addressed in the
next section.

TABLE 4—CY 2016 ADULT CASE-MIX AND FACILITY-LEVEL PAYMENT ADJUSTMENTS

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Variable

EB multipliers
for CY2011

Estimate of
the direct
reduction in
base rate due
to this factor,
for CY2011
(%)

CR multipliers
for CY2016

SB multipliers
for CY2016

EB multipliers
for CY2016

1.171
1.013
1.000
1.011
1.016
1.020
1.025

........................
........................
3.1
........................
........................
0.0
0.1

1.308
1.084
1.086
1.000
1.145
1.039
1.000

1.044
1.000
1.005
1.000
0.961
1.000
1.090

1.257
1.068
1.070
1.000
1.109
1.032
1.017

0.000
0.058

1.510
1.189

2.5
0.3

1.307
1.368

1.409
0.955

1.327
1.239

1.307
0.410

1.114

0.0

1.000

1.209

1.040

0.005

Age:
18–44 ................................................
45–59 ................................................
60–69 ................................................
70–79 ................................................
80+ ....................................................
Body surface area (per 0.1 m2) ...............
Underweight (BMI <18.5) .........................
Time since onset of renal dialysis <4
months ..................................................
Facility low volume status ........................
Comorbidities:
Pericarditis (acute) ............................

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Estimate of
the direct
reduction in
base rate due
to this factor,
for CY2016
(%)

8.400

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TABLE 4—CY 2016 ADULT CASE-MIX AND FACILITY-LEVEL PAYMENT ADJUSTMENTS—Continued

Variable

Gastro-intestinal
tract
bleeding
(acute) ...........................................
Bacterial pneumonia (acute) .............
Hereditary hemolytic or sickle cell
anemia (chronic) ...........................
Myelodysplastic syndrome (chronic)
Monoclonal gammopathy (chronic) ..
Rural .........................................................

EB multipliers
for CY2011

Estimate of
the direct
reduction in
base rate due
to this factor,
for CY2011
(%)

1.183
1.135
1.072
1.099
1.024
........................

d. Refinement of Facility-Level
Adjustments

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i. Low-Volume Payment Adjustment
Section 1881(b)(14)(D)(iii) of the Act
requires a payment adjustment that
reflects the extent to which costs
incurred by low-volume facilities (as
defined by the Secretary) in furnishing
renal dialysis services exceed the costs
incurred by other facilities in furnishing
such services, and for payment for renal
dialysis services furnished on or after
January 1, 2011, and before January 1,
2014, such payment adjustment shall
not be less than 10 percent. As required
by this provision, the ESRD PPS
provides a facility-level payment
adjustment to ESRD facilities that meet
the definition of a low-volume facility.
A background discussion on the lowvolume payment adjustment (LVPA)
and a proposal regarding the LVPA
eligibility criteria is provided below.
The current amount of the LVPA is
18.9 percent. In the CY 2011 ESRD PPS
final rule (75 FR 49125), we indicated
that this increase to the base rate is an
appropriate adjustment that will
encourage small facilities to continue to
provide access to care. With regard to
the magnitude of the payment
adjustment for low-volume facilities, we
stated that it is more appropriate to use
the regression-driven adjustment rather
than the 10 percent minimum
adjustment mentioned in the statute
because it is based on empirical
evidence and allows us to implement a
payment adjustment that is a more
accurate depiction of higher costs.
For the CY 2016 ESRD PPS proposed
rule (80 FR 37819), we analyzed those
ESRD facilities that met the definition of
a low-volume facility as specified in 42
CFR 413.232(b) as part of the updated
regression analysis. We found that the
cost per treatment for these facilities is
still high compared to other facilities.
With regard to the magnitude of the

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CR multipliers
for CY2016

SB multipliers
for CY2016

EB multipliers
for CY2016

Estimate of
the direct
reduction in
base rate due
to this factor,
for CY2016
(%)

0.2
0.3

1.000

1.426

1.082

0.040

0.1
0.2
0.0
........................

1.000
1.000

1.999
1.494

1.192
1.095

0.022
0.028

1.015

0.978

1.008

0.118

payment adjustment for low-volume
facilities, we continue to believe that it
is appropriate to use the regressiondriven adjustment because it is based on
empirical evidence and allows us to
implement a payment adjustment that is
a more accurate depiction of higher
costs. In the proposed rule, we stated
that the regression analysis of CY 2012
and 2013 low-volume facility claims
and cost report data indicated a
payment multiplier of 1.239 percent.
Accordingly, we proposed an updated
LVPA adjustment factor of 23.9 percent
for CY 2016 and future years.
ii. CY 2016 Proposals for the LowVolume Payment Adjustment (LVPA)
(1) Background
As required by section
1881(b)(14)(D)(iii) of the Act, the ESRD
PPS provides a facility-level payment
adjustment of 18.9 percent to ESRD
facilities that meet the definition of a
low-volume facility. Under 42 CFR
413.232(b), a low-volume facility is an
ESRD facility that, based on the
documentation submitted pursuant to
42 CFR 413.232(h): (1) Furnished less
than 4,000 treatments in each of the 3
cost reporting years (based on as-filed or
final settled 12-consecutive month cost
reports, whichever is most recent)
preceding the payment year; and (2) Has
not opened, closed, or received a new
provider number due to a change in
ownership in the 3 cost reporting years
(based on as-filed or final settled 12consecutive month cost reports,
whichever is most recent) preceding the
payment year. Under 42 CFR 413.232(c),
for purposes of determining the number
of treatments furnished by the ESRD
facility, the number of treatments
considered furnished by the ESRD
facility equals the aggregate number of
treatments furnished by the ESRD
facility and the number of treatments
furnished by other ESRD facilities that
are both under common ownership and

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25 road miles or less from the ESRD
facility in question. Our regulation at 42
CFR 413.232(d) exempts facilities that
were in existence and Medicarecertified prior to January 1, 2011 from
the 25-mile geographic proximity
criterion, thereby grandfathering them
into the LVPA.
For purposes of determining
eligibility for the LVPA, ‘‘treatments’’
means total hemodialysis (HD)
equivalent treatments (Medicare and
non-Medicare). For peritoneal dialysis
(PD) patients, one week of PD is
considered equivalent to 3 HD
treatments. In the CY 2012 ESRD PPS
final rule (76 FR 70236), we clarified
that we base eligibility on the three
years preceding the payment year and
those years are based on cost reporting
periods. We further clarified that the
ESRD facility’s cost reports for the
periods ending in the three years
preceding the payment year must report
costs for 12-consecutive months (76 FR
70237).
In the CY 2015 ESRD PPS final rule
(79 FR 66152 through 66153), we
clarified that hospital-based ESRD
facilities’ eligibility for the LVPA should
be determined at an individual facility
level and their total treatment counts
should not be aggregated with other
ESRD facilities that are affiliated with
the hospital unless the affiliated
facilities are commonly owned and
within 25 miles of each other.
Therefore, the MAC can consider other
supporting data in addition to the total
treatments reported in each of the 12consecutive month cost reports, such as
the individual facility’s total treatment
counts, to verify the number of
treatments that were furnished by the
individual hospital-based facility that is
seeking the adjustment.
In the CY 2015 ESRD PPS final rule
(79 FR 66153), with regards to the cost
reporting periods used for eligibility, we
clarified that when there is a change of

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ownership that does not result in a new
Medicare Provider Transaction Access
Number but creates two non-standard
cost reporting periods (that is, periods
that are shorter or longer than 12
months) the MAC is either to add the
two non-standard cost reporting periods
together where combined they would
equal 12-consecutive months or prorate
the data when they would exceed 12consecutive months to determine the
total treatments furnished for a full 12month cost reporting period as if there
had not been a CHOW.
In order to receive the LVPA under
the ESRD PPS, an ESRD facility must
submit a written attestation statement to
its MAC confirming that it meets all of
the requirements specified at 42 CFR
413.232 and qualifies as a low-volume
ESRD facility. In the CY 2012 ESRD PPS
final rule (76 FR 70236), we finalized a
yearly November 1 deadline for
attestation submission and we revised
the regulation at § 413.232(f) to reflect
this date. We noted that this timeframe
provides 60 days for a MAC to verify
that an ESRD facility meets the LVPA
eligibility criteria. In the CY 2015 ESRD
PPS final rule (79 FR 66153 through
66154), we amended § 413.232(f) to
accommodate the timing of the policy
clarifications finalized for that rule.
Specifically, we extended the deadline
for the CY 2015 LVPA attestations until
December 31, 2014 to allow ESRD
facilities time to assess their eligibility
based on the policy clarifications for
prior years under the ESRD PPS and
apply for the LVPA for CY 2015. Further
information regarding the
administration of the LVPA is provided
in the Medicare Benefit Policy Manual,
CMS Pub. 100–02, Chapter 11, section
60.B.1.
2) The United States Government
Accountability Office Study on the
LVPA
In the CY 2015 ESRD PPS final rule
(79 FR 66151 through 66152), we
discussed the study that the United
States Government Accountability
Office (the GAO) conducted on the
LVPA. We also provided a summary of
the GAO’s main findings and
recommendations. We stated that the
GAO found that many of the facilities
eligible for the LVPA were located near
other facilities, indicating that they may
not have been necessary to ensure
sufficient access to dialysis care. They
also identified certain facilities with
relatively low volume that were not
eligible for the LVPA, but had aboveaverage costs and appeared to be
necessary for ensuring access to care.
Lastly, the GAO stated the design of the
LVPA provides facilities with an

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adverse incentive to restrict their service
provision to avoid reaching the 4,000
treatment threshold.
In the conclusion of their study, the
GAO provided the Congress with the
following recommendations: (1) To
more effectively target facilities
necessary for ensuring access to care,
the Administrator of CMS should
consider restricting the LVPA to lowvolume facilities that are isolated; (2) To
reduce the incentive for facilities to
restrict their service provision to avoid
reaching the LVPA treatment threshold,
the Administrator of CMS should
consider revisions such as changing the
LVPA to a tiered adjustment; (3) To
ensure that future LVPA payments are
made only to eligible facilities and to
rectify past overpayments, the
Administrator of CMS should take the
following four actions: (i) require
Medicare contractors to promptly
recoup 2011 LVPA payments that were
made in error; (ii) investigate any errors
that contributed to eligible facilities not
consistently receiving the 2011 LVPA
and ensure that such errors are
corrected; (iii) take steps to ensure that
CMS regulations and guidance regarding
the LVPA are clear, timely, and
effectively disseminated to both dialysis
facilities and Medicare contractors; and
(iv) improve the timeliness and efficacy
of CMS’s monitoring regarding the
extent to which Medicare contractors
are determining LVPA eligibility
correctly and promptly re-determining
eligibility when all necessary data
become available.
As we explained in the CY 2015 ESRD
PPS final rule (79 FR 66152), we
concurred with the need to ensure that
the LVPA is targeted effectively at lowvolume high-cost facilities in areas
where beneficiaries may lack dialysis
care options. We also agreed to take
action to ensure appropriate payment is
made in the following ways: (1)
evaluating our policy guidance and
contractor instructions to ensure
appropriate application of the LVPA; (2)
using multiple methods of
communication to MACs and ESRD
facilities to deliver clear and timely
guidance; and (3) improving our
monitoring of MACs and considering
measures that can provide specific
expectations.
3) Addressing GAO’s Recommendations
As discussed above, in the CY 2015
ESRD PPS final rule (79 FR 66152), we
made two clarifications of the LVPA
eligibility criteria that were responsive
to stakeholder concerns and GAO’s
concern that the LVPA should
effectively target low-volume, high-cost
facilities. However, we explained that

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68995

we did not make changes to the
adjustment factor or significant changes
to the eligibility criteria because of the
interaction of the LVPA with other
payment adjustments under the ESRD
PPS. Instead, we stated that in
accordance with section 632(c) of
ATRA, for CY 2016 we would assess
facility-level adjustments and address
necessary LVPA policy changes when
we would use updated data in a
regression analysis similar to the
analysis that is discussed in the CY
2011 ESRD PPS final rule (75 FR 49083).
For CY 2016, because we are refining
the ESRD PPS, we reviewed the LVPA
eligibility criteria and proposed changes
that we believe address the GAO
recommendation to effectively target the
LVPA to ESRD facilities necessary for
ensuring access to care.
4) Elimination of the Grandfathering
Provision
In the CY 2011 ESRD PPS final rule
(75 FR 49118 through 49119), we
expressed concern about potential
misuse of the LVPA. Specifically, our
concern was that the LVPA could
incentivize dialysis companies to
establish small ESRD facilities in close
geographic proximity to other ESRD
facilities in order to obtain the LVPA,
thereby leading to unnecessary
inefficiencies. To address this concern,
we finalized that for the purposes of
determining the number of treatments
under the definition of a low-volume
facility, the number of treatments
considered furnished by the ESRD
facility would be equal to the aggregate
number of treatments furnished by the
ESRD facility and other ESRD facilities
that are both: (i) Under common
ownership with; and (ii) 25 road miles
or less from the ESRD facility in
question. However, we finalized the
grandfathering of those commonly
owned ESRD facilities that were
certified for Medicare participation on
or before December 31, 2010, thereby
exempting them from the geographic
proximity restriction.
We established the grandfathering
policy in 2011 in an effort to support
low-volume facilities and avoid
disruptions in access to essential renal
dialysis services while the ESRD PPS
was being implemented. However, now
that the ESRD PPS transition is over and
facilities have adjusted to the ESRD PPS
payments and incentives, we believe it
is appropriate to eliminate the
grandfathering provision. Because we
are doing a refinement of the payment
adjustments under the ESRD PPS for CY
2016, the timing is appropriate for
eliminating the grandfathering policy so
that this change can be assessed along

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with other proposed changes to the
ESRD PPS resulting from the regression
analysis.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37820), we proposed that for
the purposes of determining the number
of treatments under the definition of a
low-volume facility, beginning in CY
2016, the number of treatments
considered furnished by any ESRD
facility regardless of when it came into
existence and was Medicare certified
would be equal to the aggregate number
of treatments actually furnished by the
ESRD facility and the number of
treatments furnished by other ESRD
facilities that are both: (i) Under
common ownership with; and (ii) 5 road
miles or less from the ESRD facility in
question. The proposed 5 road mile
geographic proximity mileage criterion
is discussed below. We proposed to
amend the regulation text by removing
paragraph (d) in 42 CFR 413.232 to
reflect that the geographic proximity
provision described in paragraph (c) and
discussed below is applicable to any
ESRD facility that is Medicare certified
to furnish outpatient maintenance
dialysis. We solicited comment on the
proposed change to remove the
grandfathering provision by deleting
paragraph (d) from our regulation at 42
CFR 413.232.
5) Geographic Proximity Mileage
Criterion
In GAO’s report, they stated that the
LVPA did not effectively target lowvolume facilities that had high costs and
appeared necessary for ensuring access
to care. The GAO stated that nearly 30
percent of LVPA-eligible facilities were
located within 1 mile of another facility
in 2011, and about 54 percent were
within 5 miles, which indicated to them
that these facilities might not have been
necessary for ensuring access to care.
Furthermore, the GAO indicated that in
many cases, the LVPA-eligible facilities
were located near high-volume
facilities. The GAO explained in the
report that providers that furnish a low
volume of services may incur higher
costs of care because they cannot
achieve the economies of scale that are
possible for larger providers. They also
stated that low-volume providers in
areas where other care options are
limited may warrant higher payments
because, if Medicare’s payment methods
did not account for these providers’
higher cost of care, beneficiary access to
care could be reduced if these providers
were unable to continue operating. They
further explained that in contrast, lowvolume providers that are in close
proximity to other providers may not
warrant an adjustment because

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beneficiaries have other care options
nearby.
We agree with the GAO’s assertion
that it may not be appropriate to provide
additional payment to an ESRD facility
that is located in close proximity to
another ESRD facility when the facilities
are commonly owned. The purpose of
the LVPA is to recognize high cost, lowvolume facilities that are unable to
achieve the economies of scale that are
possible for larger providers such as
large dialysis organizations (LDO) and
medium dialysis organizations (MDO).
In addition, we note that under the
current LVPA eligibility criteria,
approximately half of low-volume
facilities are LDO and MDO facilities
that have the support of their parent
companies in controlling their cost of
care.
In the proposed rule (80 FR 37821),
we explained that we analyzed the
ESRD facilities receiving payment under
Medicare for furnishing renal dialysis
services in CY 2013 for purposes of
simulating different eligibility scenarios
for the LVPA. The CY 2013 claims and
cost report data was the best data
available. We stated in the proposed
rule that the CY 2014 cost reports would
be available later in the year. For this
final rule we still do not have complete
cost report data for CY 2014 and
therefore could not update our analysis.
For the analysis we simulated the
MAC’s verification process in order to
determine LVPA eligibility. Our
analysis considered the treatment
counts on cost reporting periods ending
in 2010 through 2012, the
corresponding CY 2013 LVPA eligibility
criteria defined at 42 CFR 413.232, and
the location of low-volume facilities to
assess the impact of various potential
geographic proximity criteria. Because
we used the CY 2013 claims and
attestations, our analysis did not match
the facilities currently receiving the
LVPA because we were unable to
analyze 2014 cost reports of LVPA
facilities at that time. However, this
analysis allowed us to test various
geographic proximity mileage amounts
to determine whether facilities eligible
for the LVPA in 2013 would continue to
be eligible for the LVPA as well as
allowing us to determine the existence
of any other ESRD facilities in those
areas.
Initially, we applied the low-volume
eligibility criteria (without
grandfathering) and the current 25 road
mile criterion and categorized facilities
by urban/rural location, type of
ownership, and other factors, and
determined that out of the total of 434
low-volume facilities, 38 percent of
LVPA facilities would lose low-volume

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status, including 19 percent in rural
areas. For those determined to meet the
LVPA criteria, we also assessed the
extent to which there were other ESRD
facilities (in the same chain or other
chain), located within 5 road miles and
10 road miles from the LVPA facilities.
Based on our concern that too many
rural and independent facilities would
lose low-volume status if we used the 25
road mile geographic proximity
criterion, we then analyzed 1 road mile,
5 road miles, 10 road miles, 15 road
miles, and 20 road miles in order to
determine a mileage criterion that
protected rural facilities while
supporting access to renal dialysis
services in rural areas. We believe that
ESRD facilities located in rural areas are
necessary for access to care and we
would not want to limit LVPA eligibility
for rural providers.
Based on this analysis, we proposed
to reduce the geographic proximity
criterion from 25 road miles to 5 road
miles because our analysis showed that
no rural facilities would lose LVPA
eligibility due to the proposed 5 road
mile geographic proximity criterion.
This policy would discourage ESRD
organizations from inefficiently
operating two ESRD facilities within
close proximity of each other. This
policy would also allow ESRD facilities
that are commonly owned to be
considered individually when they are
more than 5 miles from another facility
that is under common ownership. We
proposed to amend the regulation text
by revising paragraph (c)(2) in 42 CFR
413.232 to reflect the change in the
mileage for the geographic proximity
provision. We solicited comments on
the proposed change to 42 CFR
413.232(c)(2). We note that our analysis
indicated that approximately 30
facilities that are part of LDOs and
MDOs would lose the LVPA due to the
5 mile proximity change and the
elimination of grandfathering, which
caused many facilities to exceed 4000
treatments. For this reason, we stated
that we considered whether a transition
would be appropriate and requested
public comments.
iii. Geographic Payment Adjustment for
ESRD Facilities Located in Rural Areas
1) Background
Section 1881(b)(14)(D)(iv)(III) of the
Act provides that the ESRD PPS may
include such payment adjustments as
the Secretary determines appropriate,
such as a payment adjustment for ESRD
facilities located in rural areas.
Accordingly, in the CY 2011 ESRD PPS
proposed rule we analyzed rural status
as part of the regression analysis used to

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develop the payment adjustments under
the ESRD PPS. In the CY 2011 ESRD
PPS proposed rule (74 FR 49978), we
discuss our analysis of rural status as
part of the regression analysis and
explained that to decrease distortion
among independent variables, rural
facilities were considered control
variables rather than payment variables.
We indicated that based on our impact
analysis, rural facilities would be
adequately reimbursed under the
proposed ESRD PPS. Therefore, we did
not propose a facility-level adjustment
based on rural location and we invited
public comments on our proposal.
In the CY 2011 ESRD PPS final rule
(75 FR 49125 through 49126), we
addressed commenters’ concerns
regarding not having a facility-level
adjustment based on rural location.
Some of the commenters provided an
explanation of the unique situations that
exist for rural areas and the associated
costs. Specifically, the commenters
identified several factors that contribute
to higher costs including higher
recruitment costs to secure qualified
staff; a limited ability to offset costs
through economies of scale; and
decreased negotiating power in
contractual arrangements for
medications, laboratory services, and
equipment maintenance. The
commenters were concerned about a
negative impact on beneficiary access to
care that may result from insufficient
payment to cover these costs. In
addition, the commenters further noted
that rural ESRD facilities have lower
revenues because they serve a smaller
volume of patients of which a larger
proportion are indigent and lack
insurance, and a smaller proportion
have higher paying private insurance.
In response to the comments
discussed above, we indicated that
according to our impact analysis for the
CY 2011 ESRD PPS final rule, rural
facilities, as a group, were projected to
receive less of a reduction in payments
as a result of implementation of the
ESRD PPS than urban facilities and
many other subgroups of ESRD facilities
and, therefore, we did not implement a
facility-level payment adjustment that is
based on rural location. However, we
stated our intention to monitor how
rural ESRD facilities fared under the
ESRD PPS and consider other options if
access to renal dialysis services in rural
areas is compromised under the ESRD
PPS.
2) Determining a Facility-Level Payment
Adjustment for ESRD Facilities Located
in Rural Areas Beginning in CY 2016
Since implementing the ESRD PPS,
we have heard from industry

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stakeholders that rural facilities
continue to have the unique difficulties
described above when furnishing renal
dialysis services that cause low to
negative Medicare margins. Because we
are committed to promoting beneficiary
access to renal dialysis services,
especially in rural areas, we analyzed
rural location as a payment variable in
the regression analysis conducted for
the CY 2016 ESRD PPS proposed rule.
Including rural areas as a payment
variable in the regression analysis
showed that this facility characteristic
was a significant predictor of higher
costs among ESRD facilities and we
proposed a payment multiplier of 1.008.
The adjustment would be applied to the
ESRD PPS base rate for all ESRD
facilities that are located in a rural area.
In the CY 2011 ESRD PPS final rule (75
FR 49126), we finalized the definition of
rural areas in 42 CFR 413.231(b)(2) as
any area outside an urban area. We
defined urban area in 42 CFR
413.231(b)(1) as a Metropolitan
Statistical Area or a Metropolitan
division (in the case where Metropolitan
Statistical Area is divided into
Metropolitan Divisions). We proposed
to add a new section to our regulations
at § 413.233 to provide that the base rate
will be adjusted for facilities that are
located in rural areas, as defined in
§ 413.231(b)(2).
The rural facility adjustment would
also apply in situations where a facility
is eligible to receive the low-volume
payment adjustment. In other words, a
facility could be eligible to receive both
the rural and low-volume payment
adjustments. Low-volume and rural
areas are two independent variables in
the regression analysis. The low-volume
variable measures costs facilities incur
as a result of furnishing a small number
of treatments whereas the rural area
variable measures the costs associated
with locality. The regression analysis
indicated that being in a rural area—
regardless of treatments furnished—
explains an increase in costs for
furnishing dialysis compared to urban
areas. Since low-volume and rural areas
are independent variables in the
regression, we believe that a lowvolume facility located in a rural area
would be eligible for both adjustments.
We believe that while the magnitude of
the payment multiplier is small, rural
facilities would still benefit from the
adjustment. Therefore, we proposed a
1.008 facility-level payment multiplier
under the ESRD PPS for rural areas and
solicited comment on this proposal.

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(3) Further Investigation Into Targeting
High-Cost Rural ESRD Facilities
Section 3127 of the Patient Protection
and Affordable Care Act of 2010 (the
Affordable Care Act) required that the
Medicare Payment Advisory
Commission (MedPAC) study and report
to Congress on: (1) Adjustments in
payments to providers of services and
suppliers that furnish items and services
in rural areas; (2) access by Medicare
beneficiaries’ to items and services in
rural areas; (3) the adequacy of
payments to providers of services and
suppliers that furnish items and services
in rural areas; and (4) the quality of care
furnished in rural areas. The report
required by section 3127(b) of the
Affordable Care Act was published in
the MedPAC June 2012 Report to
Congress: Medicare and the Health Care
Delivery System (hereinafter referred to
as June 2012 Report to Congress), which
is available at http://www.medpac.gov/
documents/reports/jun12_
entirereport.pdf. In addition to the
findings presented on each of the four
topics, this report presented a set of
principles designed to guide
expectations and policies with respect
to rural access, quality, and payments
for all sectors, which can be used to
guide Medicare payment policy. For
purposes of the proposed rule, we were
most interested in the principles of
payment adequacy and special
payments to rural providers.
In the June 2012 Report to Congress,
MedPAC explained that providers in
rural areas often have a low volume of
patients and in some cases, this lack of
scale increases costs and puts the
provider at risk of closure. MedPAC
stated that to maintain access in these
cases, Medicare may need to make
higher payments to low-volume
providers that cannot achieve the
economies of scale available to urban
providers. However, they explained that
low volume alone is not a sufficient
measure to assess whether higher
payments are warranted and that
Medicare should not pay higher rates to
two competing low-volume providers in
close proximity. They stated that these
payments may deter small neighboring
providers from consolidating care in one
facility, which results in poorly targeted
payments and can contribute to poorer
outcomes for the types of care where
there is a volume-outcome relationship.
MedPAC further explained that to target
special payments when warranted,
Medicare should direct these payments
to providers that are uniquely essential
for maintaining access to care in a given
community. The payments need to be

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structured in a way that encourages
efficient delivery of healthcare services.
MedPAC presented three principles
guiding special payments that will
allow beneficiaries’ needs to be met
efficiently: (1) Payments should be
targeted toward low-volume isolated
providers—that is, providers that have
low patient volume and are at a distance
from other providers. Distance is
required because supporting two
neighboring providers who both struggle
with low-volume can discourage
mergers that could lead to lower cost
and higher quality care; (2) the
magnitude of special rural payment
adjustments should be empirically
justified, that is, the payments should
increase to the extent that factors
beyond the providers’ control increase
their costs; and (3) rural payment
adjustments should be designed in ways
that encourage cost control on the part
of providers.
We were interested in the information
that MedPAC provided in their report
regarding services furnished to
Medicare beneficiaries in rural areas.
We believe that the adjustment that we
proposed, which we arrived at through
a regression analysis, is consistent with
principle two above, which states that
the magnitude of special rural payment
adjustments should be empirically
justified. We considered alternatives to
deriving the adjustment from the
regression analysis in an effort to
increase the value of the adjustment. For
example, we could establish a larger
adjustment independent of the
regression and offset it by a reduction to
the base rate. We also considered
analyzing different subsets of rural areas
and designating those areas as the
payment variable in our model. Because
we were able to determine through the
regression analysis that rural location is
a predictor of cost variation among
ESRD facilities, we are planning to
analyze the facilities that are located in
rural areas to see if there are subsets of
rural providers that experience higher
costs. We are also planning to explore
potential policies to target areas that are
isolated or identify where there is a
need for health care services, such as,
for example, the frontier counties (that
is, counties with a population density of
six or fewer people per square mile) and
we would also consider the use of
Health Professional Shortage Area
(HPSA) designations managed by the
Health Resources and Services
Administration (HRSA). Information
regarding HPSAs can be found on the
HRSA Web site: http://bhpr.hrsa.gov/
shortage/hpsas/designationcriteria/.
We believe that this type of analysis
would be consistent with the June 2012

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Report to Congress’s principle that
special payments should target the lowvolume facilities that are isolated. We
solicited comments on establishing a
larger payment adjustment outside of
the regression analysis. We noted that
such an adjustment would need to be
offset by a further reduction to the base
rate. For example, we could compare
the average cost per treatment reported
on the cost report of ESRD facilities
located in rural areas with ESRD
facilities located in urban areas and
develop a methodology to derive the
magnitude of the adjustment. In
addition, we solicited comments on
targeting subsets of rural areas for
purposes of using those facilities located
in those areas for analysis as payment
variables in the regression analysis used
to develop the payment multipliers for
the refinement for CY 2016.
As most of the commenters combined
their views on the low-volume and rural
adjustments, we present these
comments and responses followed by
specific comments and responses on
each adjustment.
Comment: MedPAC expressed
concern that neither the low-volume
adjustment nor the rural adjustment
targets facilities that are critical to
beneficiary access. They recommend a
single adjustment that targets lowvolume isolated providers in place of
the two separate adjustments we
proposed. In addition, MedPAC
expressed support for the GAO
recommendation that we avoid giving
facilities an incentive to limit services to
avoid reaching the low volume
treatment threshold (the so-called cliff
effect). They suggest that a payment
approach that decreases the payment
adjustment as facility volume increases
might reduce this incentive.
Several dialysis organizations and a
national patient organization
recommended that we rely upon a twotiered low-volume adjuster policy with
the current LVPA (as modified by CMS
in the proposed rule) as tier 1. Rather
than adopting a rural adjuster and using
the dollars allocated for the rural
adjuster, CMS could create a second
low-volume adjustment. The tier-2
adjustment would apply to rural
facilities that furnish between 4001–
6000 treatments per year. Other
professional associations expressed
support for this tiered approach.
One organization suggested that CMS
consider using a tiered LVPA that
would pay higher for rural facilities that
are also low-volume, while still
applying an adjustment (although of a
lesser amount) to low-volume facilities
that may be in closer proximity to other
commonly owned dialysis facilities.

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Since rural status for facilities may be
associated with higher costs
independent of the number of
treatments they provide, CMS should
consider adding a tier of the LVPA that
would provide a payment adjustment
for a higher range of treatments
delivered for facilities with a rural
designation. A simplified example of
this tiered approach may look like the
following:
1. Rural + <4,000 treatments 75 percent
of the LVPA adjuster value
2. Rural + 4,001¥6,000 treatments 50
percent of the LVPA adjuster value
3. <4,000 treatments 25 percent of the
LVPA adjuster value
They noted that the geographic
proximity rules may still be necessary
with this approach, which could serve
as an interim solution until such a time
that CMS is able to conduct further
analysis to better identify facilities that
are geographically isolated.
Another organization suggested that
CMS expand the low-volume adjuster to
include a second tier for facility volume
rather than applying a rural adjuster that
is less representative of real facility
costs. Their proposed second tier,
medium volume classification would
include those facilities administering
between 4,001 and 7,000 treatments
annually. They indicated that these
facilities, in aggregate, have lower
margins than rural facilities. Combining
the dollars from the proposed rural
adjuster and the increase in the current
low-volume adjuster would result in a
new adjuster of approximately 1.025 for
all treatments at medium volume
facilities. They indicate that
reimbursement based on volume is
superior to reimbursement based on
geography due to proper alignment with
the costs of care.
Response: We appreciate the useful
suggestions for refining the LVPA from
the commenters. However, significant
changes to the eligibility criteria would
need to be proposed to provide the
opportunity for public input. We believe
that the proposed policy changes
represent improvement in the targeting
of the payment adjustment. We will
certainly consider these suggestions for
future refinement as our analyses of
low-volume and rural ESRD facilities
continue.
Comment: An LDO organization
commented that, in their experience, the
primary challenge facing rural facilities
is access to more patients and that most
LVPA facilities are rural. However, rural
facilities with a high volume of patients
may be financially viable. In their view,
rural and low-volume are not
necessarily independent variables.

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Another LDO commented that the
proposed rural adjustment is
inappropriate because it would be
applied to all facilities at the same rate
regardless of need. In their experience
operating numerous rural facilities, they
note that size is the driving factor in
total facility cost rather than geographic
location of the facility. Their analysis
showed that high-volume rural facilities
performed similarly to urban facilities
with comparable data.
Response: As we explained above,
low volume and rural areas are two
independent variables in the regression
analysis. The low-volume variable
measures costs facilities incur as a result
of furnishing a small number of
treatments whereas the rural area
variable measures the costs associated
with locality. Consistent with the
comment from the LDO, CMS’ analysis
found that low volume is associated
with higher cost for both urban and
rural facilities. CMS analysis also found
that being in a rural area, regardless of
the number of treatments furnished,
explains an increase in costs for
furnishing dialysis compared to urban
areas. With regard to the commenter’s
impression that LVPA facilities are
mostly rural, we note that in our
analysis of CY 2014 claims data for the
419 facilities receiving the LVPA, the
distribution is 227 urban and 192 rural.
Comment: An organization
representing small and medium dialysis
facilities and a large health plan
expressed support for the update to the
LVPA adjustment and appreciated our
efforts to address the inherently high
cost of low volume and rural facilities.
They noted that while some facilities
would lose the adjustment under the
proposed changes, many of the facilities
gaining the adjustment are independent,
hospital-based, or part of a small
dialysis organization. They believe this
is an appropriate targeting of the LVPA
and agree with the proposed changes.
A patient group also expressed
support for the proposed changes to the
LVPA and the proposed rural
adjustment because they believe these
adjustments will maintain payment
levels at roughly their current levels.
They also described the current lack of
access to dialysis services in
International Falls, Minnesota. While
they indicate that resources have been
found to fund startup costs, the
commenter was disheartened that the
Medicare payment apparently does not
suffice to attract a for-profit LDO, as
those organizations have greater access
to capital and economy of scale in
purchasing and other overhead costs.
The commenters stated that CMS must
remain vigilant to ensure that Medicare

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payments are sufficient to support the
nationwide kidney care infrastructure
that Congress intended Medicare
coverage of ESRD to foster.
An organization representing small
and medium dialysis facilities applauds
CMS for proposing a rural adjustment.
Although they agree with MedPAC that
low-volume ESRD facilities that are
necessary to maintain beneficiary access
to care should receive enhanced
payment, they disagree with MedPAC’s
recommendation to remove the rural
adjustment. They noted several issues
that create special circumstances for
rural facilities, including increased
salary and benefit costs and the costs
associated with water quality issues and
serving the needs of patients in remote
areas.
Response: We thank these
commenters for their support of the
LVPA changes and the rural adjustment.
With regard to the point that CMS must
ensure that Medicare payments are
sufficient to support the nationwide
kidney care infrastructure, we believe
the ESRD PPS is based on a sound and
stable methodology, that the base rate
covers dialysis treatment costs on
average and that the outlier policy
provides additional payment and
ensures access for high-cost patients.
Comment: An organization
representing small and medium dialysis
facilities recommended that we make
the rural adjustment an add-on payment
rather than a multiplier of the base rate
to allow rural facilities to realize the
true value of the adjuster, and not
subject them to a lower adjustment due
to the effects of the rural wage index on
the base rate.
Response: The model we have
developed and implemented for the
ESRD PPS in 2011 is multiplicative and
as a result, an additive adjuster cannot
be directly estimated from the model.
That is, the regression was set up to
produce multiplicative factors and as a
result cannot produce an additive
adjustment for one variable. However, if
the extra resources required by patients
receiving a case-mix adjustment
partially involve labor, it is not clear
why a multiplicative adjustment would
not be appropriate because the added
labor effort incurred by facilities in
lower wage areas would also be paid at
the lower wage. The rationale for the
additive training adjuster in 2011 was
that training treatments are such a small
share of the total that a reliable adjuster
could not be estimated from the model
and, therefore, external assumptions
about training costs were used to derive
the additive adjustment. However, the
rural multiplier can and should be
estimated from the model, and serves to

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68999

account for factors increasing costs in
rural areas, after accounting for the wage
index.
Comment: An organization urged
CMS to establish a process for facilities
to find resolution when their MACs
have incorrect data. For example, some
facilities may be eligible for the rural
adjuster, but may not be receiving it due
to incorrect data at the MAC. In these
circumstances, the organization believes
facilities should be able to appeal
directly to CMS to ensure the MAC’s
data is correct and the facility is
receiving the payment it is entitled to.
Response: We agree facilities should
receive the low volume and the rural
adjustments if they are eligible. The
commenter did not provide specific
examples of the types of data issues they
were experiencing, however, we note
that in order to receive the LVPA, MACs
verify that the facilities’ total treatments
reported on their cost reports are under
4,000 and that the other LVPA criteria
are met. Rural status is more
straightforward to establish, but in both
cases the MAC has to enter correct
information in the Outpatient Provider
Specific File (OPSF) so that the payment
adjustments are applied to the claim.
For this reason, we are planning to send
out sub-regulatory guidance about the
importance of keeping the information
in the OPSF up-to-date and to address
issues regarding incorrect data for the
LVPA and rural adjustments.
Comment: A national patient
organization also expressed concern that
even with the proposed changes to the
LVPA, the incentive still remains for
facilities that have common ownership
to maintain low-volume status while
having two or more facilities serving in
close proximity to a facility that has
different ownership. For example, two
facilities under common ownership
could sit 10 miles from one another, but
on either side of a facility that has
different ownership causing all three
facilities to potentially be low-volume
facilities.
Response: The proposed LVPA
adjustment is the first step toward
improving the eligibility for payment.
Our goal with this proposal was to
minimize the impact on rural facilities.
We have and are continuing to perform
additional analysis in order to better
target benefit distribution to those
facilities serving the access needs of
those in remote locations.
Comment: An SDO expressed support
for the GAO’s finding that too many
closely located facilities are receiving
the LVPA, stating that the focus needs
to be placed on ensuring access to care.
Consequently, they fully support the
elimination of the grandfathering

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provision. However, they recommend
that we maintain the current geographic
mileage proximity criterion of 25 road
miles. Other organizations indicated
that the rural payment adjustment
should only be available to a clinic if
there is not any outpatient dialysis
clinic within five miles of the clinic.
Response: We appreciate the
commenter’s support of the removal of
the grandfathering provision. The five
mile geographic mileage proximity
criterion was chosen for two reasons: (1)
It eliminated the LVPA adjustment for
those commonly-owned facilities with
several facilities within a five mile
radius with treatment counts just under
4000, and (2) it spared the impact on the
rural facilities with geographic and
topographical challenges. We plan on
examining the impact of a future
geographic facility adjustment
applicable to all facilities, not just those
that are commonly-owned.
Comment: An MDO also pointed out
that under provider enrollment
instructions a change of ownership
(CHOW) typically occurs when a
Medicare provider has been purchased
or leased by another organization. The
CHOW results in the transfer of the old
owner’s Medicare Identification Number
and provider agreement (including any
outstanding Medicare debt of the old
owner) to the new owner. The
regulatory citation for CHOWs can be
found at 42 CFR 489.18. If the purchaser
(or lessee) elects not to accept a transfer
of the provider agreement, then the old
agreement should be terminated and the
purchaser or lessee is considered a new
applicant. The commenter points out
that the instructions fail to account for
the rare instances when a provider does
accept the agreement but ownership
changed from hospital-based to
independent, requiring a new provider
number in the independent ESRD
facility range of provider numbers. The
commenter asked that CMS consider
providers in these situations eligible for
the LVPA for CY 2016 and future years
and perhaps retroactively as well.
Response: We appreciate the
commenter pointing out this scenario
and we will examine options for
addressing this concern.
Comment: An organization of
nonprofit SDOs expressed support for
the proposed change to the geographic
proximity criterion and for the increase
in the LVPA multiplier in recognition of
the higher costs borne by low-volume
facilities. However, they noted CMS
could improve its proposal by providing
that continuation of LVPA status be
based on a three year rolling average,
rather than the current one-year
eligibility period, reducing the incentive

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to hold down the number of patients
served in any given year for fear of
exceeding the cap.
Response: We appreciate the
commenter’s support of the proposed
change for the LVPA adjustment. We
will consider the suggestion of a threeyear rolling average for eligibility for the
LVPA for future rulemaking.
Comment: Two nonprofit dialysis
organizations expressed support for the
rural adjustment and recommend the
following conditions: (1) The rural
adjustment should only be available for
clinics that are not receiving the LVPA,
that is, once a facility that benefits from
the rural adjustment satisfies the LVPA
criteria, it should have to choose which
to forego; and (2) The rural adjustment
should not be available to a clinic that
provided more than 6000 treatments or
7000 treatments in the prior calendar
year. An SDO also expressed support for
the rural adjustment, but suggested that
we consider limiting the rural
adjustment to only those facilities
located in a medically underserved area.
Response: As we explained above, the
low-volume variable measures costs
facilities incur as a result of furnishing
a small number of treatments, whereas
the rural area variable measures the
costs associated with locality. The
regression analysis indicated that being
in a rural area, regardless of the number
of treatments furnished, explains an
increase in costs for furnishing dialysis
compared to urban areas. Because lowvolume and rural areas are independent
variables in the regression, we believe
that a low-volume facility located in a
rural area would be eligible for both
adjustments due to their high costs
associated with both their location and
their low patient volume.
Comment: A professional association
also supports the rural adjustment, but
notes that the proposed multiplier of
1.008 seems to be based on limited data.
They expressed concern about the lack
of accounting for SRR and other QIP
measures. An SDO disagreed with our
proposal to increase the LVPA
multiplier from 18.9 percent to 23.9
percent and urged CMS to allocate the
additional funds to the rural facility
adjustment. They believe that based on
the GAO study, it would appear that
some LVPA funds could be allocated to
funding the rural adjustment rather than
further decreasing the base rate to fund
the increase.
Response: The rural adjuster was
based on the same data as the other
adjusters. We are not aware of
additional, national data that could be
used to establish an adjuster. It is not
clear why and how SRR and other QIP

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measures should be used as payment
adjusters.
With respect to the commenters
concern regarding the increase in the
magnitude of the LVPA, CMS analyses
found that both low volume facilities
and rural facilities have higher costs
than average, with the magnitudes
reflected in the payment adjusters. A
targeted reallocation of funds from
facilities that could be eligible for the
LVPA to rural facilities would not
reflect estimates of the separate effect of
rural location and low-volume on the
cost of providing dialysis care.
Comment: In response to CMS
requests for comments regarding
developing a subset of rural providers to
potentially establish a high payment
adjustment, a professional association
recommends that CMS postpone this
measure until additional data can be
generated. Another industry stakeholder
recommended that we focus the rural
adjuster on a smaller subset of rural
facilities and provide them with a
higher adjustment. They suggested we
consider an approach based on
population density that is similar to
how CMS defines super rural.
Response: As we explain above, we
are very interested in analyzing subsets
of rural providers, such as facilities
located in HPSA and frontier areas in
order to better target facilities necessary
to ensure access to care.
Comment: An MDO questioned how
rural status is defined for the purpose of
obtaining the rural adjustment. They
asked if a facility would be considered
rural where it is assigned a rural CBSA
code—one with a 2 digit State CBSA—
as opposed to the 5-digit urban CBSA
code. An LDO indicated that the
definition of rural, ‘‘not in an urban
area,’’ is not suitable for use in a
payment adjuster as it is too broad and
does not address the specific issue.
Response: The rural adjustment
would be paid to facilities that are not
in a CBSA, that is, facilities that are
assigned a two-digit State code. As we
continue our analysis of subsets of rural
providers, we will update the definition
in 42 CFR 413.231.
Comment: Several professional
associations recommended a transition
period prior to implementation of the
new geographic proximity criterion for
the 30 facilities that will lose the LVPA.
One association strongly recommends
that CMS work closely with the parent
networks to evaluate the impact of any
closures on patient access to care.
Response: We do not anticipate that
facilities will close because the LVPA
will target facilities with truly high costs
because of low patient volume. Analysis
of the 2013 return code data shows that

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3 facilities would be expected to receive
the LVPA that were not previously
grandfathered, and of these 3, none are
expected to lose their LVPA adjustment.
Of the 392 facilities that were
grandfathered in 2013, 121(78 urban
and 43 rural) are expected to lose the
LVPA adjustment using the new LVPA
eligibility criteria. Of the 43 rural
facilities, all of them are expected to
lose their LVPA eligibility because their
treatment counts exceeded the 4000
treatment limit. None are expected to
lose it due to the 5-mile geographic
eligibility criterion. Of the 78 urban
facilities that are expected to lose their
LVPA adjustment, 45 have treatment
counts that exceed the 4000 treatment
limit, and 33 do not meet the 5-mile
radius criterion.
Of note, there is at least one other
dialysis facility within 5 miles for each
one of the 33 dialysis facilities expected
to lose their LVPA eligibility due to the
5-mile radius. Of the 33 facilities, 30 are
LDOs and 27 out of the 33 facilities have
multiple facilities within the 5 mile
radius (two or more alternative
facilities). Based on this analysis, we are
not implementing a transition for
facilities that will lose LVPA status at
this time.
The LVPA adjustment was
implemented to ensure facility
availability for ESRD patients. Those
facilities that are providing lower levels
of treatments in a given year are
supplemented with this adjustment to
ensure their business survival and the
continued availability of their services
to the patients they serve. We believe
we have made significant progress in
targeting this population of dialysis
facilities.
In summary, with respect to the
LVPA, we are finalizing the proposed
revisions to the eligibility criteria, that
is, the removal of grandfathering and
change in the geographic proximity
criterion. Specifically, for the purposes
of determining the number of treatments
under the definition of a low-volume
facility, beginning CY2016, the number
of treatments considered furnished by
any ESRD facility regardless of when it
came into existence and was Medicare
certified will be equal to the aggregate
number of treatments actually furnished
by the ESRD facility and the number of
treatments furnished by other ESRD
facilities that are both: (i) Under
common ownership with; and (ii) 5 road
miles or less from the ESRD facility in
question. We are finalizing this
provision by amending the regulation
text by removing paragraph (d) in
§ 413.232, and revising the geographic
proximity provision described in
paragraph (c). ESRD facilities that meet

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the LVPA eligibility criteria at § 413.232
are eligible for the 23.9 percent increase
to their ESRD PPS base rate as
illustrated on Table 4.
We would like to note that we
inadvertently failed to propose changes
to the regulation text that pertains to the
attestation deadline, in order to
accommodate the timing of the policy
changes finalized in this rule.
Specifically, we are finalizing the
extension of the attestation deadline for
the CY 2016 LVPA attestations until
December 31, 2015 to allow ESRD
facilities time to assess their eligibility
based on the policy changes to the
LVPA for CY 2016 and, if appropriate,
submit an attestation. Therefore, we are
finalizing a revision to the newly
redesignated § 413.232(e) to reflect this
date.
In addition, we are finalizing the
implementation of a rural payment
adjustment of 0.8 percent. Specifically,
this payment adjustment would be
applied to the ESRD PPS base rate for
all ESRD facilities that are located in a
rural area. We are also finalizing the
addition of § 413.233 to the regulation
text to reflect this new adjustment.
e. Refinement of the Case-Mix
Adjustments for Pediatric Patients
Section 1881(b)(14)(A)(i) of the Act
requires the Secretary to implement a
payment system under which a single
payment is made for renal dialysis
services. This provision does not
distinguish between services furnished
to adult and pediatric patients.
Therefore, we developed a methodology
that used the ESRD PPS base rate for
pediatric patients and finalized
pediatric payment adjusters in our CY
2011 ESRD PPS final rule at 75 FR
49131 through 49134. Specifically, the
methodology for calculating the
pediatric payment adjusters reflects
case-mix adjustments for age and
modality. We noted in our CY 2011
ESRD PPS final rule that the payment
adjustments applicable to composite
rate services for pediatric patients were
obtained from the facility level model of
composite rate costs for patients less
than 18 years of age and yielded a
regression-based multiplier of 1.199.
However, based upon public comments
received expressing concern that the
payment multiplier was inadequate for
pediatric care, we revised our
methodology and we finalized pediatric
payment adjusters that reflected the
overall difference in average payments
per treatment between pediatric and
adult dialysis patients for composite
rate (CR) services and separately billable
(SB) items in CY 2007 based on the 872

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69001

pediatric dialysis patients reflected in
the data.
We indicated in the CY 2011 ESRD
PPS final rule (75 FR 49131 through
49134), that the average CY 2007
Medicare Allowable Payment (MAP) for
composite rate services for pediatric
dialysis patients was $216.46, compared
to $156.12 for adult patients. The
difference in composite rate payment is
reflected in the overall adjustment for
pediatric patients as calculated using
the variables of (1) age less than 13
years, or 13 through 17 years; (2)
dialysis modality, that is, peritoneal
dialysis (PD) or hemodialysis (HD).
While the composite rate MAP for
pediatric patients was higher than that
for adult patients ($216.46 versus
$156.12), the separately billable MAP
was lower for pediatric patients ($48.09
versus $83.27), in CY 2007. There are
fewer separately billable items in the
pediatric model, largely because of the
predominance of the PD modality for
younger patients and the smaller body
size of pediatric patients. The overall
difference in the CY 2007 MAP between
adult and pediatric dialysis patients was
computed at 10.5 percent or $216.46 +
$48.09 = $264.55 and $156.12 + $83.27
= $239.39. $264.55/$239.39 = 1.105.
For CY 2016, we explained in the CY
2016 ESRD PPS proposed rule (80 FR
37823), that for purposes of regression
analysis, we did not propose any
changes to the formula used to establish
the pediatric payment multipliers and
will continue to apply the computations
of MultEB = P * C * (WCR + WSB *
MultSB),where P is the ratio of the
average MAP per session for pediatric
patients to the average MAP per session
for adult patients as shown below, C is
the average payment multiplier for adult
patients (1.1151), WCR (0.798) and WSB
(0.202) are the proportion of MAP for
CR and SB services, respectively, among
pediatric patients, and MultSB
represents the SB model multipliers. We
are using updated values for P, C, WCR,
and WSB along with the updated SB
multipliers to calculate the updated EB
multipliers. The overall difference in
the CY 2013 MAP between adult and
pediatric dialysis patients was
computed at 8.2 percent (P = $283.42/
$ 261.91 = 1.082).
The regression analysis for a new
pediatric payment model for Medicare
pediatric ESRD patients for CY 2016
will use the same methodology that was
used for the CY2011 ESRD PPS final
rule, except for the use of more recent
data years (2012 through 2013) and in
the method of obtaining payment data.
Specifically, we used the projected total
expanded bundle MAP based on 2013
claims to calculate the ratio of pediatric

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total MAP per session to adult total
MAP per session. The projected MAP
was calculated by pricing out utilization
of SBs based on line items in the claims,
rather than using actual payments from

the claims as in the pre-2011 data.
These adjustment factors reflected a
proposed 8.21 percent increase to
account for the overall difference in
average payments per treatment for

pediatric patients. For this final rule, we
did not make changes to the pediatric
model and are therefore finalizing the
updated pediatric SB and EB multipliers
as shown below in Table 5.

TABLE 5—CY 2016 PEDIATRIC CASE-MIX PAYMENT ADJUSTMENTS
Patient characteristics

CY 2016 final rule
(based on 2012 and 2013 data)

Cell
Age

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1
2
3
4

............................................
............................................
............................................
............................................

<13 ........................................
<13 ........................................
13–17 ....................................
13–17 ....................................

The comments we received and our
responses are set forth below.
Comment: Two professional
associations support the 8 percent
increase in the pediatric case-mix
adjusters, however, they expressed
concern that it is inadequate to cover
the actual cost of dialyzing children.
They suggested that ongoing updates to
the pediatric case-mix adjusters are
warranted because without adequate
reimbursement, it becomes difficult for
facilities to maintain the specially
trained staff to deliver quality care to
pediatric patients. They state that our
mutual goal should be to ensure that
reimbursement is commensurate with
actual cost so that pediatric facilities
can continue to provide high quality
care. They requested that CMS allow
pediatric facilities to apply for an
exception to the ESRD composite rate as
it has in the past when a facility‘s cost
reports showed that the actual cost per
treatment was higher than the
composite rate.
Response: We agree with the
commenters that the ESRD pediatric
patient population is unique because it
represents a very small percentage of the
overall dialysis population but has high
utilization of renal dialysis services that
are not as prevalent in the adult
population. While our goal is to align
reimbursement with costs, we continue
to believe that our methodology
described above will provide sufficient
payment to ESRD facilities that treat
pediatric ESRD patients as we discuss in
the CY 2011 ESRD PPS final rule (75 FR
49128 through 49134). In addition, we
have an existing outlier policy that can
be utilized in the event the cost of a
pediatric patient is excessive.
With regard to the request that we
provide an exceptions process such as
the one we provided under the
composite rate payment system, under

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Modality

Jkt 238001

PD
HD
PD
HD

Population (%)

.........................................
.........................................
.........................................
.........................................

which Medicare paid a composite rate
based on an individual facility’s cost per
treatment, we do not have the statutory
authority to pay a different base rate
from that applied to other ESRD
facilities. Section 1881(b)(14)(A)(i)
requires the Secretary to implement a
payment system under which a single
payment is made to a provider of
services or renal dialysis facility for
renal dialysis services in lieu of any
other payment. We do not believe the
statute gives us authority to utilize an
exceptions process under the ESRD PPS.
As we indicated in the CY 2011 ESRD
PPS final rule (75 FR 49178), pursuant
to section 1881(b)(14) of the Act, we
created an ESRD prospective payment
system in lieu of payments under
previous ESRD payment systems. Given
that these payment exceptions pertained
to the prior composite rate payment
systems under sections 1881(b)(7)
and(b)(12) of the Act, we do not believe
that such exceptions would carry
forward or be appropriate under the
ESRD PPS. Because the ESRD PPS
transition has concluded, no portion of
the ESRD PPS payments are based on
the composite rate, and as a result, it is
not appropriate to resume composite
rate exception payments.
Comment: One organization urged
CMS to continue to reevaluate and
regularly update the pediatric payment
adjuster by utilizing the most recent
data from Medicare cost reports and
CROWNWeb.
Response: We agree it is important
that the ESRD PPS payment adjustments
are updated and refined so that the
system reflects current clinical practice.
Although we do not reevaluate and
update the payment multipliers each
year, we assess the impact of the
changes we make to the ESRD PPS by
simulating payments using the most
recent year of ESRD facility claims and

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27.62
19.23
20.19
32.96

Separately
billable
multiplier
0.410
1.406
0.569
1.494

Expanded
bundle
payment
multiplier
1.063
1.306
1.102
1.327

estimating the impact on facilities. For
ESRD facilities that treat pediatric
patients, we estimate the impact
separately for facilities that treat less
than 2 percent, between 2 and 19
percent, between 20 and 49 percent, and
over 50 percent and publish the impacts
in the annual ESRD PPS proposed and
final rules.
f. The Home and Self-Dialysis Training
Add-On Payment Adjustment
We received many comments from
patients, patient advocacy groups, a
dialysis supply manufacturer, national
dialysis associations, and ESRD
facilities concerning the adequacy of the
home and self-dialysis training add-on
payment adjustment. Although we did
not make any proposals regarding the
training add-on payment, we are
addressing the commenters’ concerns
here.
Comment: Many commenters
expressed concern about the adequacy
of payment to ESRD facilities for
training home and self-dialysis patients.
Specifically, commenters expressed
concern that the combination of
inadequate payment and increasing
costs to provide education for home
therapies, especially home hemodialysis
(HHD), could prevent patients from
choosing home dialysis. Commenters
asked us to consider changes to the
training add-on payment adjustment,
explaining that nursing time and quality
training are essential to ensure patients
are successful in taking care of
themselves at home. The commenter
asked CMS to ensure that the training
add-on payment adjustment accurately
reflects costs and sufficient staff time to
thoroughly train patients and families,
limiting the number of patients who
return to receiving in-facility dialysis.
Two other patient advocacy
organizations reiterated their support for

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expanded patient access to home
dialysis, pointing out that the
percentage of patients using HHD
remains low at just under 2 percent. The
organizations noted that the upfront
costs of beginning a home program may
be one barrier to growth. They
encouraged CMS to monitor patient
access to home dialysis and ensure that
the payment for home training covers
the costs of the nursing time involved.
They also expressed concern that any
necessary increases to the training addon payment adjustment should not
come at the expense of funds from the
ESRD PPS base rate, which those
organizations believe are necessary to
care for patients who chose to receive
dialysis in-center.
A dialysis supply manufacturer
provided an analysis indicating that
adequate reimbursement of HHD
training costs would require an
additional $240 per treatment for each
of the 25 training treatments allowed.
They explained that 5 hours of one-onone nursing time per HHD training
treatment was necessary, rather than the
1.5 hours per treatment paid for by the
current home dialysis training add-on
payment adjustment. The $240 per
treatment for each of the 25 training
treatments allowed would compensate
ESRD facilities for 5 hours of one-onone nursing time per HHD training
treatment.
A national dialysis association noted
that their respective ESRD facilities do
not observe an access barrier to HHD
and indicated that they are not turning
eligible patients or beneficiaries away
from this modality. They stated that the
ESRD PPS provides modality choice for
beneficiaries that meet the clinical and
practical requirements to dialyze at
home. They noted that for many
beneficiaries home dialysis is not a
feasible option. The commenter noted
that the beneficiary’s home needs to be
large enough to accommodate the
equipment and supplies and be
sufficiently sanitary to deliver dialysis
that would otherwise be furnished
under highly regulated conditions (that
is, in-facility). In addition, while noting
the unique challenges for both
beneficiaries and providers, the
commenter stated that some HHD
machines are designed in such a way
that the patient must dialyze more
frequently than the three time per week
schedule that has been the standard for
achieving adequate therapy results. The
commenter urged CMS and those in the
kidney community to view home
dialysis holistically and in the context
of the broader ESRD PPS. The
commenter suggested that if CMS
wished to support home dialysis

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beneficiaries, then CMS should look at
ways to restore funds to the ESRD PPS
base rate for the care of all patients.
Response: We appreciate the
commenters’ suggestions regarding the
evaluation of the home and self-dialysis
training add-on payment adjustment.
Access to care and the well-being of
Medicare beneficiaries has always been
our primary concern, and we agree that
HHD is an important treatment option
for patients that can appropriately use
this modality. Additionally, we
recognize the point raised by
commenters that home dialysis is not a
feasible option for all patients.
Home and self-dialysis training are
programs that educate ESRD patients
and/or other individuals to assist the
patient in performing self-dialysis or
home dialysis with little or no
professional assistance. In the context of
this response, since the commenters are
specifically discussing training for
hemodialysis to be completed by a
patient and/or caregiver in the home, we
refer to the add-on as the home dialysis
training add-on adjustment. Under our
current policy, ESRD facilities are
entitled to bill a maximum of 25
training sessions per patient for HHD
training. This provides ESRD facilities
with payment for 37.5 total hours of
training (that is, $1,881.00) for this
dialysis modality through the home
dialysis training add-on payment
adjustment in addition to the training
costs that are included in the ESRD PPS
bundled payment rate. We believe this
provides an adequate opportunity for
training of ESRD beneficiaries. In fact,
as we note below, the use of home
dialysis has increased in the ESRD
population since the implementation of
the ESRD PPS.
While we have heard from the
commenters that we should increase the
home dialysis training add-on payment
adjustment so that more ESRD patients
can receive the benefit of HHD, we have
also heard from LDOs that the current
training add-on is sufficient. In addition
to these differing viewpoints, we’ve also
received information in public
comments that indicate a wide variance
in training times and the duration of
training sessions. While we have heard
different things from stakeholders about
whether or not the home dialysis
training add-on payment adjustment is
adequate, we are not in a position this
year to address the commenters’
concerns. We are, however, committed
to conducting further analysis of the
home dialysis training add-on payment
adjustment and will consider making
appropriate changes to the adjustment
in future rulemaking.

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69003

As described below, the regulatory
history of the training add-on payment
adjustment demonstrates recognition of
the importance of preserving access to
all modalities of dialysis treatment and
a commitment to adequate payment for
home hemodialysis. Beginning in the
mid-1980s, we paid for home or selfdialysis training through a training addon payment of $20 per treatment for 25
HHD treatments, $20 per treatment for
15 CCPD treatments, and $12 per
treatment for 15 CAPD treatments. In
the CY 2011 ESRD PPS proposed rule,
we proposed that the cost for all home
dialysis services would be included in
the bundled payment (74 FR 49930). We
noted that because we were proposing
that training costs under the ESRD PPS
would be treated no differently than any
other overhead expense, an explicit
adjustment to the bundled payment
amount for HD and PD training
expenditures would not be necessary
(74 FR 49931). We also explained in the
proposed rule that we were proposing
modality neutral payments, because PD,
the predominant modality for home
dialysis at that time, is less costly than
HD, and we believed that estimating a
prospective rate that is higher for PD
than it would otherwise be would
encourage home dialysis for PD patients
(74 FR 49967).
In the CY 2011 ESRD PPS final rule,
we explained that we received
comments encouraging us to consider
utilizing an add-on payment adjustment
to pay for the costs of home dialysis
training. In response to those comments,
we explained that although we were
continuing to include training payments
in computing the ESRD PPS base rate,
we agreed with commenters that we
should treat training as an adjustment
under the ESRD PPS. Thus, we finalized
the home dialysis training add-on
payment adjustment of $33.44 per
treatment as an additional payment
made under the ESRD PPS when oneon-one home dialysis training is
furnished by a nurse for either
hemodialysis or peritoneal dialysis
training and retraining (75 FR 49063).
We chose to calculate a home dialysis
training add-on payment adjustment
based on one hour of nursing time
because it was similar to the existing
training add-on payments under the
basic case-mix payment system (75 FR
49062). The amount we finalized for the
adjustment—$33.44 per training
treatment—was updated from the
previous adjustment amount of $20 per
hour and was based on the national
average hourly wage for nurses from
Bureau of Labor Statistics data updated
to 2011 (75 FR 49063). We noted that

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because 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. Based
on the amount of the home dialysis
training add-on payment adjustment
that was finalized in 2011, facilities that
furnished 25 HHD training treatments
would receive around $500 in the form
of home dialysis training add-on
adjustment payments in addition to the
dollars included in the base rate to
account for training costs.
We clarified our policy on payment
for home dialysis training again in the
CY 2013 ESRD PPS final rule in which
we stated that training costs are
included in the ESRD PPS base rate,
however, we also provide an add-on
adjustment for each training treatment
furnished by a Medicare-certified home
dialysis training facility (77 FR 67468).
As such, we explained that it is not the
intent of the add-on treatment to
reimburse a facility for all of the training
costs furnished during training
treatments. Rather, the single ESRD PPS
base rate, all applicable case-mix and
facility-level adjustments, as well as the
add-on payment should be considered
the Medicare payment for each training
treatment and not the training add-on
payment alone. We noted that the fact
that the add-on payment for training
accounts for one hour of training time
per treatment is not intended to imply
that it only takes one hour per training
session to properly educate a
beneficiary to perform home dialysis.
Then in the CY 2014 ESRD PPS final
rule (78 FR 72183), we concluded in
response to public comments that the
training add-on, which represented 1
hour of nursing time, did not adequately
represent the staff time required to
ensure that a patient is able to perform
home dialysis safely. We had received
numerous comments on the home
dialysis training add-on payment
adjustment raising concerns about
access to home dialysis and identifying
training elements that were not
contemplated in 2011, such as selfcannulation and certain aspects of
operating an HHD machine. As a result,
we recomputed the add-on based upon
1.5 hours of nursing time per training
treatment, which amounted to a 50
percent payment increase of $16.72 per
training treatment in addition to the
training treatment costs included in the
base rate. Therefore, the add-on
payment rose from $33.44 to $50.16. We
noted that the finalized per training
treatment add-on payment amount of
$50.16 was in line with the costs
reported on the 2010 ESRD facility cost
reports, which indicated an average

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facility training cost of $53.00 per
training treatment.
Thus, as stated above, current policies
allows ESRD facilities to bill a
maximum of 25 training sessions per
patient for HHD training. This provides
ESRD facilities with payment for 37.5
total hours of training (that is,
$1,881.00) for this dialysis modality
through the home dialysis training addon payment adjustment in addition to
the training costs that are included in
the ESRD PPS bundled payment rate.
We believe this provides an adequate
opportunity for training of ESRD
beneficiaries.
While we have heard from the
commenters that we should increase the
add-on so that more ESRD patients can
receive the benefit of HHD, we have also
heard from LDOs that the current
training add-on is sufficient. In addition
to these differing viewpoints, we’ve also
received information in public
comments that indicate a wide variance
in training times and the duration of
training sessions. In the CY 2014 ESRD
PPS final rule, we noted that patient and
caregiver commenters indicated a
training time for home dialysis training
of 2 to 6 weeks in length, with face-toface nursing time of 2 to 6 hours per
training day (78 FR 72184). Commenters
also acknowledged that many of the
training days took place in the training
facility, in a group setting, and not in
the patient’s home. In addition, some
commenters reported that nursing staff
were not present for the final week of
training, as the patient had achieved
total independent self-care (78 FR
72185). We explained that while we
believed that an increase in the amount
of the home dialysis training add-on
payment was appropriate, we were
concerned that training services
furnished to Medicare beneficiaries
appeared inconsistent across training
facilities.
Access to care and the well-being of
Medicare beneficiaries has always been
our primary concern, and we agree that
HHD is an important treatment option
for patients that can appropriately use
this modality. As reflected through the
past policies of continuing increased
reimbursement through the base rate
and the add-on adjustments, we believe
we have enhanced, not prevented,
access to HHD. In fact, patient use of
this treatment modality has increased
since the introduction of the ESRD PPS
in 2011, according to our monitoring
data. We monitor the utilization of
home dialysis and provide a quarterly
public use file with this information,
which is available on the CMS Web site
at https://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/

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ESRDpayment/Spotlight.html. Given the
widely varying information we’ve
received about utilization of home
dialysis services as well as the differing
perspectives on the adequacy of the
home dialysis training adjustment, we
are committed to conducting further
analysis of the this adjustment and will
consider making appropriate changes to
the adjustment in future rulemaking.
2. Final CY 2016 ESRD PPS Update
a. ESRD Bundled Market Basket
i. Overview and Background
In accordance with section
1881(b)(14)(F)(i) of the Act, as added by
section 153(b) of MIPPA and amended
by section 3401(h) of the Affordable
Care Act, beginning in 2012, the ESRD
payment amounts are required to be
annually increased by an ESRD market
basket increase factor that is reduced by
the productivity adjustment described
in section 1886(b)(3)(B)(xi)(II) of the
Act. The application of the productivity
adjustment 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.
Section 1881(b)(14)(F)(i)(I) of the Act,
as added by section 217(b)(2)(A) of
PAMA, provides that in order to
accomplish the purposes of
subparagraph (I) with respect to 2016,
2017, and 2018, after determining the
market basket percentage increase factor
for each of 2016, 2017, and 2018, the
Secretary shall reduce such increase
factor by 1.25 percentage points for each
of 2016 and 2017 and by 1 percentage
point for 2018. Accordingly, for CY
2016, we will reduce the final amount
of the market basket percentage increase
factor by 1.25 percent as required by
section 1881(b)(14)(F)(i)(I) of the Act,
and will further reduce it by the
productivity adjustment.
ii. Market Basket Update Increase Factor
and Labor-Related Share for ESRD
Facilities for CY 2016
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) and subsequently revised and
rebased the ESRDB input price index in
the CY 2015 ESRD final rule (79 FR
66129 through 66136). Although
‘‘market basket’’ technically describes
the mix of goods and services used for
ESRD treatment, this term is also

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commonly used to denote the input
price index (that is, cost categories, their
respective weights, and price proxies
combined) derived from a market
basket. Accordingly, the term ‘‘ESRDB
market basket,’’ as used in this
document, refers to the ESRDB input
price index.
We proposed to use the CY 2012based ESRDB market basket to compute
the CY 2016 ESRDB market basket
increase factor and labor-related share.
We proposed an ESRDB market basket
update of 2.0 percent, based on the IHS
Global Insight 1st quarter 2015 forecast
(with historical data through the 4th
quarter of 2014). Also, as required by
section 1881(b)(14)(F)(I)(i) of the Act as
amended by section 217(b)(2)(A) of
PAMA, we proposed to reduce the
amount of the market basket increase
factor by 1.25 percent, resulting in a
proposed CY 2016 ESRDB market basket
percentage increase factor of 0.75
percent.
For the CY 2016 ESRD payment
update, we proposed to continue using
a labor-related share of 50.673 percent
for the ESRD PPS payment, which was
finalized in the CY 2015 ESRD final rule
(79 FR 66136). We implemented the
new labor-related share using a 2-year
transition of 46.205 percent for CY 2015
and 50.673 percent for CY 2016 (79 FR
66142).
We did not receive any comments on
our proposed market basket update.
Therefore, based on the most recent
forecast available, we are finalizing a CY
2016 ESRDB market basket update of 1.8
percent, based on the IHS Global Insight
3rd quarter 2015 forecast (with
historical data through the 2nd quarter
2015). We are also further reducing the
1.8 percent ESRDB market basket
update by 1.25 percent as required by
section 217(b)(2)(A) of PAMA. Therefore
the CY 2016 market basket percentage
increase factor is 0.55 percent.
iii. Productivity Adjustment
The productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act defines the productivity
adjustment as equal to the 10-year
moving average of changes in annual
economy-wide private nonfarm business
MFP (as projected by the Secretary for
the 10-year period ending with the
applicable fiscal year, year, cost
reporting period, or other annual
period) (the ‘‘MFP adjustment’’).
The Bureau of Labor Statistics (BLS)
is the agency that publishes the official
measure of private nonfarm business
MFP. Please see http://www.bls.gov/mfp
to obtain the BLS historical published
MFP data. MFP is derived by
subtracting the contribution of labor and

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capital input growth from output
growth. The projections of the
components of MFP are currently
produced by IGI. As described in the CY
2012 ESRD PPS final rule (76 FR 40503
through 40504), to generate a forecast of
MFP, IGI replicates the MFP measure
calculated by the BLS using a series of
proxy variables derived from IGI’s U.S.
macroeconomic models. In the CY 2012
ESRD PPS final rule, we identified each
of the major MFP component series
employed by the BLS to measure MFP
as well as provided the corresponding
concepts determined to be the best
available proxies for the BLS series.
We proposed that beginning in CY
2016, the MFP adjustment is calculated
using a revised series developed by IGI
to proxy the aggregate capital inputs (for
details see 80 FR 37825). To summarize
the proposed change, IGI has replaced
the Real Effective Capital Stock used for
Full Employment GDP with a forecast of
BLS aggregate capital inputs recently
developed by IGI using a regression
model. This series provides a better fit
to the BLS capital inputs, as measured
by the differences between the actual
BLS capital input growth rates and the
estimated model growth rates over the
historical time period. Therefore, we
proposed to use IGI’s most recent
forecast of the BLS capital inputs series
in the MFP calculations beginning with
the CY 2016 rulemaking cycle. A
complete description of the MFP
projection methodology is available on
our Web site at http://www.cms.gov/
Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/
MedicareProgramRatesStats/
MarketBasketResearch.html. We also
proposed that in the future, when IGI
makes changes to the MFP
methodology, we will announce them
on our Web site rather than in the
annual rulemaking.
The proposed CY 2016 MFP
adjustment was 0.6 percent based on
IGI’s 1st quarter 2015 forecast (with
historical data through the 4th quarter
2014). We invited comments on the
MFP proposal.
Comment: One commenter stated that,
using IGI’s first quarter 2015 forecast,
the MFP adjustment for CY 2016 (the 10
year moving average of MFP for the
period ending CY 2016) is projected to
be 0.6 percent. The commenter asked
what other firms suggest for projected
MFP and why are we basing the MFP
solely on a single quarter’s forecast.
Response: IHS Global Insight (IGI),
Inc. is a nationally recognized economic
and financial forecasting firm that
contracts with CMS to forecast the
components of the market baskets and
multifactor productivity (MFP). We do

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not purchase additional forecasts of
MFP or other economic series from
separate consulting firms.
The MFP adjustment is based on the
40 quarter (or 10-year) moving average
of changes in economy-wide private
non-farm MFP. Section
1886(b)(3)(B)(xi)(II) of the Act defines
the productivity adjustment to be
aligned with the 10-year period ending
with the applicable FY, year, cost
reporting period, or other annual
period). Therefore, the commenter is
incorrect that the MFP is based solely
on a single quarter’s forecast because, in
actuality, the MFP adjustment reflects
40 quarters worth of data through the
4th quarter of 2016.
We did not receive any comments
related to our proposal to change the
capital input series in the MFP formula.
Therefore, based on the most recent
forecast available, we are finalizing a CY
2016 MFP adjustment of 0.4 percent,
based on the IHS Global Insight 3rd
quarter 2015 forecast (this reflects
historical MFP data through 2014).
iv. Calculation of the ESRDB Market
Basket Update, Adjusted for Multifactor
Productivity for CY 2016
As required by section 1881(b)(14)(F)
of the Act, which requires the ESRD PPS
to be updated by the market basket
reduced by the MFP adjustment, as well
as section 1881(b)(14)(F)(i)(I) of the Act,
as amended by section 217(b)(2)(A)(ii)
of PAMA, which requires a 1.25
percentage point reduction to the
ESRDB market basket increase factor,
the proposed CY 2016 ESRD market
basket increase was 0.15 percent (2.0
percent market basket update less 1.25
percent PAMA reduction, less 0.6
percentage point MFP update). We also
noted that if more recent data is
subsequently available we would use
such data to determine the final CY
2016 market basket update and MFP
adjustment in the ESRD PPS final rule.
Therefore, using the most recent data
available, the final CY 2016 ESRDB
market basket less MFP update is 0.15
percent. This is based on a 1.8 percent
market basket update, less a 1.25
percent adjustment as required by
section 1881(b)(14)(F)(i)(I) of the Act, as
amended by section 217(b)(2)(A)(ii) of
PAMA, and further reduced by a 0.4
percent MFP update. The CY 2016
ESRDB market basket update and MFP
adjustment are based on the IHS Global
Insight 3rd quarter 2015 forecast with
historical data through the 2nd quarter
2015.

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b. The Final CY 2016 ESRD PPS Wage
Indices
i. Annual Update of the 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, as the Secretary determines to
be appropriate. In the CY 2011 ESRD
PPS final rule (75 FR 49117), we
finalized the use of the Office of
Management and Budget’s (OMB) CoreBased Statistical Areas (CBSAs)-based
geographic area designations to define
urban and rural areas and their
corresponding wage index values.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37825), we stated that we
would 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. Specifically, we are updating
the wage indices for CY 2016 to account
for updated wage levels in areas in
which ESRD facilities are located. We
use the most recent pre-floor, prereclassified hospital wage data collected
annually under the inpatient
prospective payment system. 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 final CY 2016 wage index values for
urban areas are listed in Addendum A
(Wage Indices for Urban Areas) and the
final CY 2016 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-ServicePayment/ESRDpayment/End-StageRenal-Disease-ESRD-PaymentRegulations-and-Notices.html.
In the CY 2011 and CY 2012 ESRD
PPS final rules (75 FR 49116 through
49117 and 76 FR 70239 through 70241,
respectively), 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.
For CY 2016, we are applying this
criteria to American Samoa and the

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Northern Mariana Islands, where we
apply the wage index for Guam as
established in the CY 2014 ESRD PPS
final rule (78 FR 72172) (0.9611), and
Hinesville-Fort Stewart, Georgia, where
we apply the statewide urban average
based on the average of all urban areas
within the state (78 FR 72173) (0.8666).
We note that if hospital data becomes
available for these areas, we will use
that data for the appropriate CBSAs
instead of the proxy.
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 ESRD PPS
transition. In the CY 2012 ESRD PPS
final rule (76 FR 70241), we finalized
the 0.05 reduction to the wage index
floor for CYs 2012 and 2013, resulting
in a wage index floor of 0.5500 and
0.5000, respectively. We continued to
apply and to reduce the wage index
floor by 0.05 in the CY 2013 ESRD PPS
final rule (77 FR 67459 through 67461).
Although our intention initially was 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), in the CY 2014 ESRD
PPS final rule (78 FR 72173), we
continued to apply the wage index floor
and continued to reduce the floor by
0.05 per year for CY 2014 and for CY
2015.
For CY 2016, we proposed to continue
to apply the CY 2015 wage index floor,
that is, 0.4000, to areas with wage index
values below the floor but we did not
propose to reduce the wage index floor
for CY 2016. Our review of the wage
indices show that CBSAs in Puerto Rico
continue to be the only areas with wage
index values that would benefit from a
wage index floor because they are so
low. Therefore, we believe that we need
more time to study the wage indices that
are reported for Puerto Rico to assess the
appropriateness of discontinuing the
wage index floor and leave it at 0.4000.
Because the wage index floor is only
applicable to a small number of CBSAs,
the impact to the base rate through the
wage index budget-neutrality factor is
insignificant. To the extent other
geographical areas fall below the floor in
CY 2016 or beyond, we believe they
should have the benefit of the 0.4000
wage index floor as well. We will
continue to review wage index values
and the appropriateness of a wage index
floor in the future.

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ii. Implementation of New Labor Market
Delineations
As noted earlier in this section, in the
CY 2011 ESRD PPS final rule (75 FR
49117), we finalized for the ESRD PPS
the use of the CBSA-based geographic
area designations described in OMB
bulletin 03–04, issued June 6, 2003, as
the basis for revising the urban and rural
areas and their corresponding wage
index values. This bulletin, as well as
subsequent bulletins, is available online
at http://www.whitehouse.gov/omb/
bulletins_index2003±2005.
OMB publishes bulletins regarding
CBSA changes, including changes to
CBSA numbers and titles. In accordance
with our established methodology, we
have historically adopted via
rulemaking CBSA changes that are
published in the latest OMB bulletin.
On February 28, 2013, OMB issued
OMB Bulletin No. 13–01, which
established revised delineations for
Metropolitan Statistical Areas,
Micropolitan Statistical Areas, and
Combined Statistical Areas, and
provided guidance on the use of the
delineations of these statistical areas. A
copy of this bulletin may be obtained at
http://www.whitehouse.gov/sites/
default/files/omb/bulletins/2013/b-1301.pdf. According to OMB, ‘‘[t]his
bulletin provides the delineations of all
Metropolitan Statistical Areas,
Metropolitan Divisions, Micropolitan
Statistical Areas, Combined Statistical
Areas, and New England City and Town
Areas in the United States and Puerto
Rico based on the standards published
on June 28, 2010, in the Federal
Register (75 FR 37246 through 37252)
and Census Bureau data.’’ When
referencing the new OMB geographic
boundaries of statistical areas, we use
the term ‘‘delineations’’ rather than the
term ‘‘definitions’’ that we have used in
the past, consistent with OMB’s use of
the terms (75 FR 37249). Because the
bulletin was not issued until February
28, 2013, with supporting data not
available until later, and because the
changes made by the bulletin and their
ramifications needed to be extensively
reviewed and verified, we were unable
to undertake such a lengthy process
before publication of the FY 2014 IPPS/
LTCH PPS proposed rule and, thus, did
not implement changes to the hospital
wage index for FY 2014 based on these
new CBSA delineations.
For the same reasons, the CY 2014
ESRD PPS wage index (based upon the
pre-floor, pre-reclassified hospital wage
data, which is unadjusted for
occupational mix) also did not reflect
the new CBSA delineations. In the FY
2015 IPPS/LTCH PPS final rule, we

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implemented the new CBSA
delineations as described in the
February 28, 2013 OMB Bulletin No.
13–01, beginning with the FY 2015 IPPS
wage index (79 FR 49951 through
49963). Similarly, in the CY 2015 ESRD
PPS final rule (79 FR 66137 through
66142), we implemented the new CBSA
delineations as described in the
February 28, 2013 OMB Bulletin No.
13–01, beginning with the CY 2015
ESRD PPS wage index.
In order to implement these changes
for the ESRD PPS, we identified the new
labor market area delineation for each
county and facility in the country and
determined that there would be new
CBSAs, urban counties that would
become rural, rural counties that would
become urban, and existing CBSAs that
would be split apart. In the CY 2015
final rule (79 FR 66137 and 66138), we
provided tables that showed the CBSA
delineations and wage index values for
CY 2014 and the CY 2015 CBSA
delineations, wage index values, and the
percentage change in these values for
those counties that changed from rural
to urban, from urban to rural, and from
one urban area to another and also
showed the changes to the statewide
rural wage index.
While we believe that the new CBSA
delineations result in wage index values
that are more representative of the
actual costs of labor in a given area, we
recognized that use of the new CBSA
delineations results in reduced
payments to some facilities. For this
reason, we implemented the new CBSA
delineations using a 2-year transition
with a 50/50 blended wage index value
for all facilities in CY 2015 and 100
percent of the wage index based on the
new CBSA delineations in CY 2016.
Therefore, for CY 2016, we are
completing the transition and will apply
100 percent of the wage index based on
the new CBSA delineations and the
most recent hospital wage data.
A facility’s wage index is applied to
the labor-related share of the ESRD PPS
base rate. In the CY 2011 ESRD PPS
final rule (75 FR 49117), we finalized a
policy to use the labor-related share of
41.737 percent for the ESRD PPS which
was based on the ESRDB market basket
finalized in that rule. In the CY 2015
ESRD PPS final rule (79 FR 66136), we
finalized a new labor-related share of
50.673 percent, which was based on the
rebased and revised ESRDB market
basket finalized in that rule, and
transitioned the new labor-related share
over a 2-year period. For CY 2015, the
labor-related share is based 50 percent
on the old labor-related share and 50
percent on the new labor-related share,
and the labor-related share in CY 2016

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is based 100 percent on the new laborrelated share.
The comments we received on wage
index issues and our responses are set
forth below.
Comment: A large health plan
requested that we develop a wage index
specific to ESRD facilities. They pointed
out that ESRD staffing is inherently
different than hospital staffing and that
tying the ESRD wage index to hospital
wage and staffing patterns does not
reflect the true costs of operating an
ESRD facility.
Response: We are unable to
implement a wage index based on ESRD
wage data for CY 2016 as we did not
propose to make this change and we do
not have sufficient data on ESRD facility
wages at this time. In future refinements
to the ESRD PPS we will certainly
consider the feasibility of this
recommendation. However, we note that
efforts to develop provider-specific
wage indices for other Medicare
providers have been unsuccessful from
both CMS’ and the providers’
viewpoints. As a result, we do not
intend to consider an ESRD-specific
wage index until we can demonstrate
that such an index would be more
reflective of the wages and salaries paid,
that it would significantly improve our
ability to determine payment for ESRD
facilities, and that we can justify the
resources required to collect the data, as
well as the increased burden on
providers.
Comment: An organization
representing small and medium dialysis
facilities urged CMS to examine the
impact of the wage index on the casemix adjusters and their value to dialysis
facilities. For facilities located in areas
where the wage index is below one, the
practical effect of the wage index is a
lower base rate. In addition, because the
case-mix adjusters are calculated as
multipliers to the base rate, facilities
located in areas where the wage index
is below one are receiving less value
from the adjusters. Thus, the low wage
area facilities are hit twice for the lower
wage index. If CMS increases the weight
of the case-mix adjusters in the payment
formula, the disparities between high
wage area and low wage area facilities
is further exacerbated.
Response: The case-mix adjusters are
estimated controlling for the urban
versus rural location of the facilities
where labor costs play a significant role
in the cost. The case- mix adjusters in
the CR part of the model reflect the costs
of providing basic dialysis services to
patients. These costs, which are largely
labor costs, are expected to be lower for
facilities in areas with low wage indices.
Therefore, it is appropriate that the

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incremental cost of caring for a patient
in the young or very old age category
should be proportionately smaller in
areas with lower wages. The case-mix
adjusters, other than age, apply mainly
in the SB equation part of the model.
The SB part of the model is not adjusted
for wages.
As to the concern that rural facilities
are not receiving the full case-mix
adjustments, we understand the
commenter’s concern and intend to
continue to examine the impact of the
wage index on the case-mix adjusters
and the payments made to ESRD
facilities, particularly facilities located
in areas where the wage index is below
one.
Comment: A national dialysis
organization expressed support for the
wage index proposals and the continued
application of the wage index floor
where applicable. An organization
representing small and medium dialysis
facilities asked CMS to implement a
freeze in the wage floor to prevent
further hardship for rural facilities.
A health plan commented that the
proposed 4 percent decrease to the base
rate due to refinement will be
detrimental to ESRD facilities located in
Puerto Rico and urged CMS to reestablish a fair and meaningful wage
index floor to substitute for the low
wage index values that result from
hospital wage data reported in Puerto
Rico.
The commenter provided several
alternative wage indexes for Puerto Rico
for the CY 2016 ESRD PPS final rule: (1)
Apply our policies for areas that do not
have reliable hospital data, and apply
the wage index for Guam as we did in
implementing the ESRD PPS in the
Northern Marianas and American
Samoa, (2) use the U.S. Virgin Islands as
a proxy for Puerto Rico given the
geographic proximity and its ‘‘nonmainland’’ or ‘‘island’’ nature, or (3) reestablish the wage index floor in effect
in 2010 when Puerto Rico became the
only wage areas subject to the floor, that
is, 0.65. Finally, the commenter requests
that we delay the increase in the laborrelated share to which to the wage index
is applied for facilities in Puerto Rico
because increases in the labor-related
share lowers payments for low wage
index areas.
Response: For CY 2016, we proposed
to continue to apply the CY 2015 wage
index floor, that is, 0.4000, to areas with
wage index values below the floor,
rather than reduce the floor by 0.05 as
we have done over the last 10 years. We
stated that we need more time to study
the wage indices that are reported for
Puerto Rico to assess the
appropriateness of discontinuing the

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wage index floor. The commenter has
provided useful suggestions that we
plan to consider in proposing updates to
the wage index policies under the ESRD
PPS for CY 2017, so that we may review
all options in the future rulemaking,
which will allow for public comments.
With regard to delaying
implementation of the labor-related
share for facilities in Puerto Rico, we
believe it is important that we apply the
labor-related share derived from the
latest update to the ESRDB market
basket. We do not believe it would be
appropriate to delay implementation
longer or to apply the new labor-related
share in a non-uniform manner. In
addition, a change to the labor-related
share does not address the primary issue
the commenter identified, which is the
comparatively lower wages reported by
hospitals in Puerto Rico. For these
reasons, we are not making any changes
to the labor-related share finalized in
the CY 2015 ESRD PPS final rule.
Comment: An MDO requested that we
provide them the wage index in an
Excel format so that they have access to
the county names.
Response: We provide a file that
includes the county names with each
rule that is issued. The link to the ESRD
PPS rules Web page is https://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ESRDpayment/
End-Stage-Renal-Disease-ESRDPayment-Regulations-and-Notices.html.
The file with county names was
available when the CY 2016 ESRD PPS
proposed rule was published.
After considering the public
comments submitted, we are finalizing
the CY 2016 wage index policies as
proposed and implementing the CBSA
designations based on the latest hospital
wage data. In addition, we are
maintaining a wage index floor of
0.4000 and continuing our current
policies for wage areas with no hospital
data.
c. CY 2016 Update to the Outlier Policy
Section 1881(b)(14)(D)(ii) of the Act
requires that the ESRD PPS include a
payment adjustment for high cost
outliers due to unusual variations in the
type or amount of medically necessary
care, including variability in the amount
of erythropoiesis stimulating agents
(ESAs) necessary for anemia
management. Some examples of the
patient conditions that may be reflective
of higher facility costs when furnishing
dialysis care would be frailty, obesity,
comorbidities such as cancer, and
possibly race and gender. The ESRD
PPS recognizes high cost patients, and
we have codified the outlier policy in
our regulations at 42 CFR 413.237,

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which provide that ESRD outlier
services are the following items and
services that are included in the ESRD
PPS bundle: (i) ESRD-related drugs and
biologicals that were or would have
been, prior to January 1, 2011,
separately billable under Medicare Part
B; (ii) ESRD-related laboratory tests that
were or would have been, prior to
January 1, 2011, separately billable
under Medicare Part B; (iii) medical/
surgical supplies, including syringes,
used to administer ESRD-related drugs,
that were or would have been, prior to
January 1, 2011, separately billable
under Medicare Part B; and (iv) renal
dialysis service drugs that were or
would have been, prior to January 1,
2011, covered under Medicare Part D,
excluding oral-only drugs used in the
treatment of ESRD.
In the CY 2011 ESRD PPS final rule
(75 FR 49142), we stated that for
purposes of determining whether an
ESRD facility would be eligible for an
outlier payment, it would be necessary
for the facility to identify the actual
ESRD outlier services furnished to the
patient by line item on the monthly
claim. Renal dialysis service drugs,
laboratory tests, and medical/surgical
supplies that are recognized as outlier
services were originally specified in
Attachment 3 of Change Request 7064,
Transmittal 2033 issued August 20,
2010, rescinded and replaced by
Transmittal 2094, dated November 17,
2010. Transmittal 2094 identified
additional drugs and laboratory tests
that may also be eligible for ESRD
outlier payment. Transmittal 2094 was
rescinded and replaced by Transmittal
2134, dated January 14, 2011, which
was issued to correct the subject on the
Transmittal page and made no other
changes.
Furthermore, we use administrative
issuances and guidance to continually
update the renal dialysis service items
available for outlier payment via our
quarterly update CMS Change Requests,
when applicable. We use this separate
guidance to identify renal dialysis
service drugs which were or would have
been covered under Part D for outlier
eligibility purposes and in order to
provide unit prices for calculating
imputed outlier services. In addition,
we also identify through our monitoring
efforts items and services that are either
incorrectly being identified as eligible
outlier services or any new items and
services that may require an update to
the list of renal dialysis items and
services that qualify as outlier services,
which are made through administrative
issuances.
Our regulations at 42 CFR 413.237
specify the methodology used to

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calculate outlier payments. An ESRD
facility is eligible for an outlier payment
if its actual or imputed MAP amount per
treatment for ESRD outlier services
exceeds a threshold. The MAP amount
represents the average incurred amount
per treatment for services that were or
would have been considered separately
billable services prior to January 1,
2011. The threshold is equal to the
ESRD facility’s predicted ESRD outlier
services MAP amount per treatment
(which is case-mix adjusted) plus the
fixed-dollar loss amount. In accordance
with § 413.237(c) of the regulations,
facilities are paid 80 percent of the per
treatment amount by which the imputed
MAP amount for outlier services (that is,
the actual incurred amount) exceeds
this threshold. ESRD facilities are
eligible to receive outlier payments for
treating both adult and pediatric
dialysis patients.
In the CY 2011 ESRD PPS final rule,
using 2007 data, we established the
outlier percentage at 1.0 percent of total
payments (75 FR 49142 through 49143).
We also established the fixed-dollar loss
amounts that are added to the predicted
outlier services MAP amounts. The
outlier services MAP amounts and
fixed-dollar loss amounts are different
for adult and pediatric patients due to
differences in the utilization of
separately billable services among adult
and pediatric patients (75 FR 49140). As
we explained in the CY 2011 ESRD PPS
final rule (75 FR 49138 through 49139),
the predicted outlier services MAP
amounts for a patient are determined by
multiplying the adjusted average outlier
services MAP amount by the product of
the patient-specific case-mix adjusters
applicable using the outlier services
payment multipliers developed from the
regression analysis to compute the
payment adjustments.
For the CY 2016 outlier policy, we
proposed to use the existing
methodology for determining outlier
payments by applying outlier services
payment multipliers that resulted from
the updated regression analyses. The
updated outlier services payment
multipliers are represented by the
updated separately billable payment
multipliers presented in Table 7 for
patients age 18 years and older. We used
these updated outlier services payment
multipliers to calculate the predicted
outlier service MAP amounts and
projected outlier payments for CY 2016.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37827), we proposed that
the outlier services MAP amounts and
fixed-dollar loss amounts would be
derived from claims data from CY 2014.
Because we believe that any
adjustments made to the MAP amounts

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under the ESRD PPS should be based
upon the most recent data year available
in order to best predict any future
outlier payments, we proposed that the
outlier thresholds for CY 2016 would be
based on utilization of renal dialysis
items and services furnished under the
ESRD PPS in CY 2014. We stated that

the utilization of ESAs and other outlier
services have continued to decline
under the ESRD PPS, and that we have
lowered the MAP amounts and fixeddollar loss amounts every year under
the ESRD PPS. However, we believe for
the first time since the implementation
of the ESRD PPS that data for CY 2014

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reflects relatively stable ESA use. We
have included Table 6 below to
demonstrate the leveling off of the
decline in ESA utilization.

TABLE 6—TOTAL MEDICARE ESA UTILIZATION IN THE ESRD POPULATION

Total ESA Utilization:
Epogen (x100,000) ...........................
Darbepoetin (x100,000) ....................
ESA Utilization per Session:
Epogen ..............................................
Darbepoetin ......................................
1 2014

2014 1

2009

2010

2011

2012

2013

2,083,893
533

2,075,217
496

1,655,778
379

1,319,383
280

1,262,186
242

1,143,405
291

5,404
1.38

5,171
1.24

3,995
0.91

3,078
0.65

2,895
0.55

2,858
0.73

based on December 2014 claims.

i. CY 2016 Update to the Outlier
Services MAP Amounts and FixedDollar Loss Amounts
For CY 2016, we did not propose any
changes to the methodology used to
compute the MAP or fixed-dollar loss
amounts. Rather, the proposed rule
updated the outlier services MAP

amounts and fixed-dollar loss amounts
to reflect the utilization of outlier
services reported on 2014 claims using
the December 2014 claims file. For this
final rule, the outlier services MAP
amounts and fixed dollar loss amounts
were updated using the 2014 claims
from the June 2015 claims file. The
impact of this update is shown in Table

7, which compares the outlier services
MAP amounts and fixed-dollar loss
amounts used for the outlier policy in
CY 2015 with the updated estimates for
this rule. The estimates for the final CY
2016 outlier policy, which are included
in Column II of Table 7, were inflation
adjusted to reflect projected 2016 prices
for outlier services.

TABLE 7—OUTLIER POLICY: IMPACT OF USING UPDATED DATA TO DEFINE THE OUTLIER POLICY
Column I
Final outlier policy for CY 2015
(based on 2013 data price
inflated to 2015) *
Age <18

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Average outlier services MAP amount per treatment .....................................
Adjustments:
Standardization for outlier services ..........................................................
MIPPA reduction .......................................................................................
Adjusted average outlier services MAP amount ......................................
Fixed-dollar loss amount that is added to the predicted MAP to determine
the outlier threshold .....................................................................................
Patient months qualifying for outlier payment .................................................

As demonstrated in Table 7, the
estimated fixed-dollar loss amount per
treatment that determines the CY 2016
outlier threshold amount for adults
(Column II; $86.97) is slightly higher
than that used for the CY 2015 outlier
policy (Column I; $86.19). The lower
threshold is accompanied by a decline
in the adjusted average MAP for outlier
services from $51.29 to $50.81. For
pediatric patients, the fixed dollar loss
increased from $54.35 to $62.19.
Likewise, the adjusted average MAP for
outlier services fell from $43.57 to
$39.20.
We estimate that the percentage of
patient months qualifying for outlier
payments in CY 2016 will be 6.5 percent
for adult patients and 5.8 percent for
pediatric patients, based on the 2014

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Age >= 18

$40.20

$53.29

1.1145
0.98
$43.57

0.9878
0.98
$51.29

0.9951
0.98
$39.20

0.9729
0.98
$50.81

$54.35
6.3%

$86.19
6.3%

$62.19
5.8%

$86.97
6.5%

In the CY 2011 ESRD PPS final rule
(75 FR 49081), in accordance with 42
CFR 413.220(b)(4), we reduced the per
treatment base rate by 1 percent to
account for the proportion of the
estimated total payments under the
ESRD PPS that are outlier payments.
Based on the 2014 claims from the June
2015 claims file, outlier payments
represent approximately 0.8 percent of
total payments, slightly below the 1
percent target due to small declines in

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Age <18

$52.98

ii. Outlier Policy Percentage

Frm 00043

Age >= 18

$39.89

claims data. The pediatric outlier MAP
and fixed-dollar loss amounts continue
to be lower for pediatric patients than
adults due to the lower use of outlier
services (ESAs and other injectable
drugs) in the pediatric population.

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Column II
Final outlier policy for CY 2016
(based on 2014 data price
inflated to 2016) *

the use of outlier services. Recalibration
of the thresholds using 2014 data is
expected to result in aggregate outlier
payments close to the 1 percent target in
CY 2016. We believe the update to the
outlier MAP and fixed-dollar loss
amounts for CY 2016 will increase
payments for ESRD beneficiaries
requiring higher resource utilization and
move us closer to meeting our 1 percent
outlier target. We note that the
recalibration of the fixed-dollar loss
amounts that are being finalized in this
rule will result in no change in
payments to ESRD facilities for
beneficiaries with renal dialysis items
and services that are not eligible for
outlier payments, but will increase
payments to ESRD facilities for
beneficiaries with renal dialysis items

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and services that are eligible for outlier
payments. Therefore, beneficiary coinsurance obligations would also
increase for renal dialysis services
eligible for outlier payments.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37828), we noted that many
industry stakeholder associations and
renal facilities have expressed
disappointment that the outlier target
percentage has not been achieved under
the ESRD PPS and have asked that CMS
eliminate the outlier policy. We further
stated that with regard to the suggestion
that we eliminate the outlier adjustment
altogether, under section
1881(b)(14)(D)(ii) of the Act, the ESRD
PPS must include a payment adjustment
for high cost outliers due to unusual
variations in the type or amount of
medically necessary care, including
variations in the amount of ESAs
necessary for anemia management. We
believe that the ESRD PPS is required to
include an outlier adjustment in order
to comply with section
1881(b)(14)(D)(ii) of the Act.
In addition, we believe that the ESRD
PPS base rate captures the cost for the
average renal patient, and to the extent
data analysis continues to show that
certain patients, including certain racial
and ethnic groups, receive more ESAs
than the average ESRD patient, we
believe an outlier policy, even a small
one, is an important payment
adjustment to provide under the ESRD
PPS. We did not propose to modify the
1 percent outlier percentage for CY 2016
because we believe that the regression
analysis continues to demonstrate high
cost patients and that the elimination of
the comorbidity categories of bacterial
pneumonia and monoclonal
gammopathy and other regression
updates would assist facilities in
receiving outlier payments in CY 2016
that are 1.0 percent of total ESRD PPS
payments.
In the proposed rule (80 FR 37829),
we further stated that we understand the
industry’s frustration that payments
under the outlier policy have not
reached 1.0 percent of total ESRD PPS
payments since the implementation of
the payment system. As we explained in
the CY 2014 ESRD PPS final rule (78 FR
72165), each year we simulate payments
under the ESRD PPS in order to set the
outlier fixed-dollar loss and MAP
amounts for adult and pediatric patients
to try to achieve the 1.0 percent outlier
policy. We would not increase the base
rate to account for years where outlier
payments were less than 1.0 percent of
total ESRD PPS payments, nor would
we reduce the base rate if the outlier
payments exceed 1 percent of total
ESRD PPS payments.

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We believe the 1.0 percent outlier
percentage has not been reached under
the payment system due to the
significant drop, over 25 percent, in the
utilization of high cost drugs such as
Epogen since the implementation of the
payment system. In other words, the
shortfall in outlier payments is likely to
arise precisely because facilities are
incurring lower costs than they did in
the historical data used to set the base
rate. However, we have learned in our
discussions with ESRD facilities that
some facilities might not report outlier
services on the ESRD facility monthly
claim form as they do not believe that
they will reach the outlier threshold. We
issued sub-regulatory guidance for CY
2015 that instructs ESRD facilities to
include all composite rate drugs and
biologicals furnished to the beneficiary
on the monthly claim form (Change
Request 8978, issued December 2, 2014).
In CY 2015 ESRD PPS final rule (79 FR
66149 through 66150), we discussed the
drug categories that we consider to be
used for the treatment of ESRD with the
expectation that all of those drugs and
biologicals would be reported on the
claim. In addition to this guidance, we
also have included a clarification for
how facilities are to report laboratory
services and drugs and biologicals on
the monthly claim form. We believe
these steps will lead to an increase in
outlier payments in CY 2016.
The comments we received on the
outlier policy update for CY 2016 and
our responses are set forth below.
Comment: An organization
representing small and medium dialysis
facilities stated that if CMS is unable to
distribute the entire one percent of the
holdback, the amount of the outlier
holdback should be lowered. An
organization of nonprofit SDOs agreed,
indicating that the outlier factor should
be reduced to 0.5 percent, which is
closer to the actual rate of outlier
payments that have been made since
2011. A nonprofit dialysis organization
would prefer that the outlier provision
be removed from the bundled payment
system, but at a minimum, the outlier
target percentage should be reduced
from 1.0 percent to 0.5 percent. A large
national dialysis organization expressed
support for the outlier policy as an
alternative to the comorbidity
adjustments. A professional association
also expressed support for the outlier
policy.
An MDO pointed out that the ESRD
PPS paid 0.9 percent of the 1.0 percent
outlier target and asked what the dollar
amount difference was and how many
Medicare claims in 2014 received an
outlier payment. They commented that
this amount could be added back to the

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base rate for CY 2016 because they
believe the fact that the full outlier
holdback was not paid out means ESRD
facilities essentially lost out on this
money. A professional association
supports the concept of an outlier policy
to sufficiently reimburse dialysis
facilities for high-cost patients.
However, they are concerned that the
current policy is flawed based on the
low percentage of facilities that qualify
for outlier payments. They suggest one
of two options to ensure disbursement
of this withholding: (1) An annual
adjustment of the threshold for outlier
payments to fully expend the
withholding; or (2) an annual
adjustment of the withholding based on
the running average of the expenditure
from the prior 3 years, with the total
withholding not to exceed 1.0 percent.
Another organization urged CMS to
examine whether outlier payments are
being received by the facilities that truly
need them.
Response: We appreciate the
commenters’ support for the outlier
policy. As we explained in the proposed
rule and above, our analysis of ESRD
PPS claims show that outlier payments
reached 0.8 percent of the 1.0 percent
outlier target in 2014. Specifically,
outlier payments were made for 185,293
patient months, totaling $71,325,656
($89,157,069 when including patient or
secondary insurer obligations). For these
patient months, outlier payments
represented 16.2 percent of total
Medicare payments. 5,992 facilities
received at least one outlier payment.
Twenty percent of outlier payments in
dollars were received by independent
facilities and another 13 percent were
received by facilities that were part of a
multi-facility organization other than
the three largest chains. Outlier
payments are particularly important for
small dialysis organizations and
independent dialysis facilities because
they often lack the volume of patients
necessary to offset the high cost of
certain patients. With regard to the
comment that the outlier policy is
flawed based on the low percentage of
facilities that qualify for outlier
payments, we note that 94 percent of
facilities received outlier payments.
Further, the 1.0 percent outlier target is
small compared to outlier policies in
other Medicare payment systems and
was not designed to cover a large
number of claims. As indicated in Table
7, we estimate that the percentage of
patient months qualifying for outlier
payments in CY 2016 will be 6.5 percent
for adult patients and 5.8 percent for
pediatric patients, based on the 2014
claims data.

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We acknowledge that the 1.0 percent
target has not been achieved since 2011
primarily because our annual update of
the fixed-dollar loss amounts and MAP
amounts could not keep up with the
continued decline in the use of outlier
services (primarily ESAs). That is,
facilities incurred lower costs than
anticipated, and those savings accrued
to facilities more than offsetting the
extent to which the consequent outlier
payments fell short of the 1.0 percent
target. However, as we stated in the
proposed rule and above, we now
believe that decline is leveling off,
which will make our projections of
outlier payments more accurate. In
addition, because we are deleting two
comorbidity category adjustments
(bacterial pneumonia and monoclonal
gammopathy) for CY 2016, we believe it
is important to maintain the current 1.0
percent outlier policy. By doing so, the
ESRD PPS protects patient access by
providing additional payment for
patients whose care requires more
outlier services than the average patient.
With regard to the suggestion that we
annually adjust the withholding based
on the running average of the
expenditure from the prior three years,
with the total withholding not to exceed
1.0 percent, as we explain above, each
year we simulate payments under the
ESRD PPS in order to set the outlier
fixed-dollar loss and MAP amounts for
adult and pediatric patients to try to
achieve the 1.0 percent outlier policy.
We would not increase the base rate to
account for years where outlier
payments were less than 1.0 percent of
total ESRD PPS payments and, more
importantly we would not reduce the
base rate if the outlier payments exceed
1.0 percent of total ESRD PPS payments.
Rather than increasing and decreasing
the base rate, we re-estimate the fixeddollar loss threshold and MAP amounts
so that outlier payments in the
following year are 1.0 percent of total
ESRD PPS payments. This is the
approach used in other Medicare
payment systems that include an outlier
policy, such as the Inpatient Psychiatric
Facility PPS. As we have done since
2011, we will continue to monitor
outlier payments and assess annually
the extent to which adjustments need to
be made in the fixed-dollar loss and
MAP amounts in order to achieve
outlier payments that are 1.0 percent of
total ESRD PPS payments.
d. Annual Updates and Policy Changes
to the CY 2016 ESRD PPS
i. ESRD PPS Base Rate
In the CY 2011 ESRD PPS final rule
(75 FR 49071 through 49083), we

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discussed the implementation 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, outlier
payments, and geographic wage index
budget neutrality in accordance with
sections 1881(b)(14)(D)(ii) and
1881(b)(14)(A)(ii) of the Act,
respectively. Specifically, the ESRD PPS
base rate was developed from CY 2007
claims, that is, the lowest per patient
utilization year from the 2006 through
2008 time period, as required by section
1881(b)(14)(A)(ii) of the Act, updated to
CY 2011, and represented the average
per treatment MAP for renal dialysis
services. The payment system is
updated annually by the ESRDB market
basket less the productivity adjustment
which is discussed in section II.B.2.of
this final rule.
ii. Annual Payment Rate Update for CY
2016
We proposed an ESRD PPS base rate
for CY 2016 of $230.20. This update
reflected several factors, described in
more detail below.
Market Basket Increase: Section
1881(b)(14)(F)(i)(I) of the Act provides
that, beginning in 2012, the ESRD PPS
payment amounts are required to be
annually increased by the ESRD market
basket percentage increase factor. The
latest CY 2016 projection for the ESRDB
market basket was 2.0 percent. In CY
2016, this amount must be reduced by
1.25 percentage points as required by
section 1881(b)(14)(F)(i)(I), as amended
by section 217(b)(2)(A) of PAMA, which
is calculated as 2.0¥1.25 = 0.75. This
amount is then further reduced by the
productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) of the Act as
required by section 1881(b)(14)(F)(i)(II)
of the Act. The proposed multi-factor
productivity adjustment for the CY 2016
proposed rule was 0.6, yielding a
proposed update to the base rate of 0.15
percent for CY 2016 (0.75¥0.6 = 0.15
percent).
Wage Index Budget-Neutrality
Adjustment Factor: We compute a wage
index budget-neutrality adjustment
factor that is applied to the ESRD PPS
base rate. For CY 2016, we did not
propose any changes to the
methodology used to calculate this
factor, which is described in detail in
CY 2014 ESRD PPS final rule (78 FR
72174). The CY 2016 proposed wage
index budget-neutrality adjustment
factor was 1.000332.

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69011

Refinement Budget-Neutrality
Adjustment Factor: In order to
implement the refinement in a budgetneutral manner, we proposed to adjust
the ESRD PPS base rate by a budgetneutrality adjustment factor. In CY
2011, we standardized the base rate to
account for the overall effects of the
ESRD PPS adjustment factors by making
a 5.93 percent reduction to the base rate.
To account for the overall effects of the
refinement (that is, to not increase
Medicare spending), we proposed a
negative 4 percent adjustment (that is, a
factor of 0.959703) to the ESRD PPS
base rate to account for the additional
dollars paid to facilities through the
payment adjustments. While the pertreatment base rate would be reduced,
we believe that this refinement
improves payment accuracy and we
would expect payments to be better
targeted to those characteristics that
increase costs for facilities. Notably, a
significant portion of the downward
effect on the base rate is due to the
higher payments resulting from changes
in the age adjustments. However other
changes, such as using the prevalence of
comorbidities on the ESRD facility
claim, has an upward effect on the
refinement budget-neutrality adjustment
factor.
In summary, we proposed a CY 2016
ESRD PPS base rate of $230.20. This
reflects a market basket increase of 0.15
percent, the CY 2016 wage index
budget-neutrality adjustment factor of
1.000332, and the refinement budgetneutrality adjustment of 0.959703.
The comments and our responses are
set forth below.
Comment: Several dialysis
organizations recommended that the
standardization factor applied to the
base rate be updated annually to reflect
the actual prevalence of the payment
adjustors. The organizations pointed out
that between 2011 and 2014, the ESRD
PPS underpaid providers by more than
$844 million relative to CMS’
projections in the ESRD PPS final rules
for those years. They stated that the
underpayments are the direct result of
CMS’ policies and methodological flaws
in calculating the payment adjusters and
the outlier pool.
An organization representing small
and medium dialysis facilities
sponsored an analysis that found that
from 2012 to 2013, providers were
underpaid by an estimated $33 million,
or $.019 per treatment because the
actual prevalence of the case-mix
adjusters did not align with CMS’
assumptions. The organization pointed
out that the estimates of the prevalence
of comorbid conditions in the 2016
refinement is well below the estimate

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made in 2011. A nonprofit dialysis
organization pointed out that because of
the burden associated with comorbidity
adjustments, providers are not able to
report comorbidities to the extent
predicted by CMS. As a result, CMS is
paying less per treatment than
anticipated. They urged CMS to update
the standardization factor. The
organizations stated that since the
original base rate was set assuming a
much higher prevalence of these
conditions, it would appear that the
ESRD PPS did not achieve budget
neutrality with the prior payment
system. The organization believes CMS
should re-estimate the original
standardization factor to account for the
lower prevalence of the comorbidity
adjustments and use this base rate as the
starting point for any changes in 2016.
This will ensure that overall budget
neutrality is ensured within the ESRD
PPS and prevent CMS from locking in
the underpayments from the last several
years into perpetuity. Going forward,
they urged CMS to monitor the impact
of the case-mix adjusters to ensure that
actual prevalence of the adjusters is
keeping pace with the original estimates
and that the expected levels of payment
are being realized.
Response: The refinement budgetneutrality adjustment supplements the
standardization factor. This is because
the value of the adjusters following the
2016 refinement has increased. As such,
it would be inappropriate to recalibrate
the standardization adjustment because
the value of this adjustment together
with the 4 percent refinement budgetneutrality adjustment is equal to the
updated adjuster values calculated
using updated data. The 4 percent
increase, primarily the result of the
updated age adjusters, is expected to be
paid out to ESRD facilities because they
are based on information required to be
included on every claim (the patients’
birth date) and therefore, there is no
documentation burden.
With respect to the suggestion that we
update the budget-neutrality adjustment
factor annually to reflect the actual
prevalence of the payment adjustors, we
do not believe this is the best approach.
We would not want to increase or
decrease the base rate based on the
prevalence of the payment adjusters in
one year. Instead, as we have done since
2011, we intend to monitor the
prevalence of the case-mix adjusters to
ensure that actual prevalence of the
adjusters is keeping pace with the
original estimates.
Comment: Several dialysis
organizations commented that they are
deeply concerned by the reduction of
the base rate for CY 2016. They

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indicated that the proposed rule does
not contain sufficient information to
determine the relationship between the
standardization factor applied to the
base rate in 2011 and the refinement
budget-neutrality adjustment factor. For
example, they note it is not possible
from the preamble to determine whether
the contractor used the actual frequency
of adjusters applied to the 2013 claims
to derive a standardization factor that is
the sum of the previous standardization
factor and the refinement budgetneutrality adjustment factor. The
indicated that it appears that the
significant reduction in the base rate is
due to the inappropriate increase in the
age adjuster. They request that we
recompute the standardization factor
and refinement budget-neutrality
adjustment factor based on their
recommended changes in the model and
provide sufficient information in the
final rule to allow stakeholders to
understand the interaction of the two
budget-neutrality factors.
Response: As discussed above, the
refinement budget-neutrality adjustment
accounts for the increase in the value of
the adjusters above the value already
accounted for by the standardization
adjustment. Thus, the total value of the
revised adjusters is represented by the
standardization factor plus the
refinement budget-neutrality
adjustment. In other words, the
standardization adjustment reflected the
adjuster values as calculated in 2011
and when we used updated data to
calculate the values for 2016, we needed
to determine the extent to which the
new values diverged from the values
that were accounted for in the
standardization adjustment when the
ESRD PPS was implemented. Because
the values increased in the refinement,
we needed a further reduction to the
base rate in addition to the
standardization adjustment, which was
applied in the form of the refinement
budget-neutrality adjustment.
In terms of the commenters’ point
about the age adjustment, as discussed
above, we believe the methodology for
our regression was sound and we do not
believe the increased value of the age
adjusters is inappropriate. Moreover, we
believe the increased value of the age
adjusters is beneficial to ESRD facilities
because they will always be paid out.
This is because patient age is already
captured on ESRD facility claims. As
long as the patient is in one of the age
categories for which we have a payment
adjustment, the ESRD facility will
always receive the adjustment without
any added burden to document the
patient’s age.

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We used the data from CY 2012 and
CY 2013 to set the adjustment factors
and then applied those factors to the CY
2014 claims to determine the budgetneutrality factor associated with this
refinement. The final refinement
budget-neutrality adjustment factor is
not the sum of the standardization factor
computed for the CY 2011 rule and the
budget-neutrality factor associated with
the refinement. Rather, we used the
CY2014 claims to estimate payments
under the PPS for CY2016 both when
applying the original payment
adjustment factors that have been used
since CY2011 and when applying the
modified payment adjustment factors
that were developed for this refinement.
The refinement budget-neutrality factor
was then calculated as the ratio of these
two total estimated payment amounts.
Note that neither of these total estimated
payment amounts included the
estimated outlier payments because they
are added separately in determining the
total payment for each claim.
The calculation described above
resulted in a factor of 0.959703 that was
applied as a reduction to the base rate
amount in the proposed rule due to the
overall larger payment adjustments to be
made under the PPS due to the
proposed refinement. The commenter is
correct that this reduction in the base
rate resulted primarily from the change
in the age multipliers estimated using
2012 through 2013 data compared to
those estimated for the 2011 model
using 2006 through 2008 data. Concerns
about the age multipliers are addressed
in responses to other comments in
section II.B.1.c.i of this final rule.
Notably, the prevalence of comorbidities
for this refinement was assessed based
only on comorbidities reported on
CY2014 dialysis facility claims for
payment as case-mix adjusters. This
decreased the estimated prevalence of
those case-mix adjusters relative to the
process used for the CY2011 final rule,
which based prevalence estimates on
multiple claims types from other
providers.
Comorbidities represent less of the
total value of the adjusters than they did
before the refinement and age represents
much more of the value of the adjusters
than they did before the refinement. We
believe this will be a positive change for
facilities because the age adjustment
should pay out in full without any
added documentation burden. When
repeating the calculation described
above with updated CY2014 claims
data, we are finalizing an updated
refinement budget-neutrality factor of
0.960319.
With regard to the reduction to the
base rate for CY 2016, the refinement

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modeling which relies on ESRD facility
claims and cost reports shifts the
emphasis away from comorbidities
(which proved difficult for facilities to
obtain and now have less of an impact
on the refinement budget-neutrality
adjustment factor) to the age
adjustments, which should be paid out.
While the base rate has been further
reduced by 4 percent to account for the
increased value of the payment
adjusters following the refinement,
maintaining five age categories makes it
more likely that ESRD facilities will
receive sufficient payment to offset the
reduction to the base rate.
Comment: An MDO stated that they
do not support the refinement budgetneutrality adjustment factor because it is
forcing the base rate to be less than it
could be. They indicated that the base
rate should not be decreasing on an
annual basis. An organization
representing small and medium dialysis
facilities commented that it is necessary
and appropriate for the ESRD PPS to
contain case-mix adjustments, however,
the proposal to reduce the base rate to
allow for the increased value of some
case-mix adjusters will create greater
payment risk for dialysis facilities and
add further complexity to an already
complicated payment system. The
organization suggests that rather than
increasing the value of the case-mix
adjusters, CMS should increase the
value of the base rate. Ensuring an
adequate base rate will minimize loss in
payment to providers due to flaws in the
case-mix adjustment formula. An SDO
recommended that CMS avoid placing
so much emphasis on payment adjusters
that the ESRD PPS base rate is reduced
to $230.20.
Response: The refinement budgetneutrality adjustment factor is applied
to pay for the increased value of the
payment adjustments provided under
the ESRD PPS following our updated
regression analysis. In complying with
the ATRA requirement to revise the
case-mix adjustments in CY 2016, we
had to apply a refinement budgetneutrality factor so that the refinement
did not increase Medicare spending. We
believe, however, that the adjustment
values are more accurate and will be
paid out more easily and therefore,
although the base rate is reduced, ESRD
facilities should receive additional
payments through the payment
adjustments. With regard to the
comment that the base rate should not
be decreasing on an annual basis, the
reductions to the base rate were
required by section 1881(b)(14)(F)(i)(I)
of the Act, as amended by section
217(b)(2)(A) of PAMA) and are applied
in lieu of the drug utilization

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adjustment implemented in the CY 2014
ESRD PPS final rule (78 FR 72161).
In summary, for CY 2016 we are
finalizing a base rate of $230.39. For this
rule, the latest projection for the ESRDB
market is 1.8 percent. As we stated
above, in accordance with section
1881(b)(14)(F)(i)(I) of the Act, for CY
2016 this amount is reduced by 1.25
percent, which is calculated as
1.8¥1.25 = 0.55. This amount is further
reduced by the final CY 2016
multifactor productivity adjustment of
0.4, thus yielding a final update to the
base rate of 0.15 percent for CY 2016
(0.55¥0.4 = 0.15). Therefore, the CY
2015 ESRD PPS base rate of $239.43 is
updated to $239.79 ($239.43 × 1.0015 =
$239.79). Next, we applied the final
wage index budget-neutrality
adjustment factor of 1.000495 to yield a
wage-adjusted base rate of $239.91
($239.79 × 1.000495 = $239.91). Our last
step in setting the base rate for CY 2016
is to apply the refinement budgetneutrality adjustment factor of 0.960319.
The final CY 2016 ESRD PPS base rate
is $230.39 ($239.91 × 0.960319 =
$230.39).
3. Section 217(c) of PAMA and the
ESRD PPS Drug Designation Process
As part of the CY 2016 ESRD PPS
rulemaking, section 217(c) of PAMA
requires the Secretary to implement a
drug designation process for—
(1) Determining when a product is no
longer an oral-only drug; and
(2) Including new injectable and
intravenous products into the bundled
payment under such system.
In accordance with section 217(c) of
PAMA, we proposed a process that
would allow us to recognize when an
oral-only renal dialysis service drug or
biological is no longer oral only and to
include new injectable and intravenous
products into the ESRD PPS bundled
payment, and, when appropriate, to
modify the ESRD PPS payment amount
to reflect the costs of furnishing a new
injectable or intravenous renal dialysis
service drug or biological that is not
bundled in the ESRD PPS payment
amount. We believe that this process,
which we refer to as the drug
designation process under the ESRD
PPS, will provide a systematic method
for including new injectable and
intravenous drugs and biologicals that
are designated as renal dialysis services
in the ESRD PPS bundled payment.
a. Background
Section 1881(b)(14)(A)(i) of the Act
requires the Secretary to implement the
ESRD PPS, under which a single
payment is made to a provider of
services or a renal dialysis facility for

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renal dialysis services in lieu of any
other payment. The renal dialysis
services that are included in the ESRD
PPS bundle are described in section
1881(b)(14)(B) of the Act and include: (i)
items and services included in the
composite rate for renal dialysis services
as of December 31, 2010; (ii)
erythropoiesis stimulating agents (ESAs)
and any oral form of such agents that are
furnished to individuals for the
treatment of ESRD; (iii) other drugs and
biologicals that are furnished to
individuals for the treatment of ESRD
and for which payment was made
separately under Title XVIII of the Act,
and any oral equivalent form of such
drug or biological; and (iv) diagnostic
laboratory tests and other items and
services not described in clause (i) that
are furnished to individuals for the
treatment of ESRD.
We implemented the ESRD PPS in the
CY 2011 ESRD PPS final rule (75 FR
49030 through 49214) and codified the
definition of renal dialysis services at 42
CFR 413.171. In addition to former
composite rate items and services and
ESAs, we defined renal dialysis services
at 42 CFR 413.171 as including other
drugs and biologicals 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).
In the CY 2011 ESRD PPS final rule (75
FR 49037 through 49053), we discussed
the other drugs and biologicals
referenced in paragraph (3) of the
definition ‘‘Renal dialysis services’’ at
42 CFR 413.171 and finalized how they
were included in the ESRD PPS. We
explained that we interpreted clause
(iii) as encompassing not only injectable
drugs and biologicals (other than ESAs)
used for the treatment of ESRD, but also
all non-injectable drugs furnished under
Title XVIII of the Act (75 FR 49039).
Under this interpretation, the any oral
equivalent form of such drug or
biological language pertains to the oral
versions of injectable drugs other than
ESAs. In addition, as we discussed in
section II.B.4 of the final rule (75 FR
49040), we concluded that, to the extent
oral-only drugs and biologicals that are
used for the treatment of ESRD do not
fall within clause (iii) of the statutory
definition of renal dialysis services,
such drugs would fall under clause (iv).
In the CY 2011 ESRD PPS final rule
(75 FR 49044 through 49053), we
explained that to identify drugs and
biologicals that are used for the
treatment of ESRD and therefore meet
the definition of renal dialysis services
that would be included in the ESRD PPS
base rate, we performed an extensive

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analysis of Medicare payments for Part
B drugs and biologicals billed on ESRD
claims and evaluated each drug and
biologicals to identify its category by
indication or mode of action. We also
explained that categorizing drugs and
biological on the basis of drug action
would allow us to determine which
categories (and therefore, the drugs and
biologicals within the categories) would
be considered used for the treatment of
ESRD (75 FR 49047).
Using this approach, in our CY 2011
ESRD PPS final rule we established
categories of drugs and biologicals that
are not considered used for the
treatment of ESRD (75 FR 49049–
49051), categories of drugs and
biologicals that are always considered
used for the treatment of ESRD, and
categories of drugs and biologicals that
may be used for the treatment of ESRD
but are also commonly used to treat
other conditions. Those drugs and
biologicals that were identified as not
used for the treatment of ESRD were not
considered renal dialysis services and
were not included in computing the
base rate. The categories of drugs and
biologicals that were always considered
used for the treatment of ESRD were
identified as access management,
anemia management, anti-infectives
(specifically vancomycin and
daptomycin used to treat access site
infections), bone and mineral
metabolism, and cellular management
(75 FR 49050). As we noted in the CY
2016 ESRD PPS proposed rule (80 FR
37830), we removed anti-infectives from
the list of categories of drugs and
biologicals that are included in the
ESRD PPS base rate and not separately
payable in the CY 2015 ESRD PPS final
rule (79 FR 66149 through 66150). The
categories of drugs that were always
considered used for the treatment of
ESRD have otherwise remained
unchanged since we finalized them in
the CY 2011 ESRD PPS final rule. The
current categories of drugs that are
included in the ESRD PPS base rate and
that may be used for the treatment of
ESRD but are also commonly used to
treat other conditions are antiemetics,
anti-infectives, antipruritics,
anxiolytics, drugs used for excess fluid
management, drugs used for fluid and
electrolyte management including
volume expanders, and pain
management (analgesics) (79 FR 66150).
In the CY 2011 ESRD PPS final rule
(75 FR 49050), we explained that for
those categories of drugs and biologicals
that are always considered used for the
treatment of ESRD we used the
payments for the drugs included in the
category in computing the ESRD PPS
base rate, that is, the injectable forms

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(previously covered under Part B) and
oral or other forms of administration
(covered under Part D). For purposes of
the inclusion of payments related to the
oral or other forms of administration for
those drugs that are always considered
used for the treatment of ESRD, we
stated that based on our determination
at the time of the final rule, there were
oral or other forms of injectable drugs
only for the bone and mineral
metabolism and cellular management
categories. Therefore, we included the
payments under Part D for oral vitamin
D (calcitrol, doxercalcitrol and
paracalcitrol) and oral levocarnitine in
our computation of the base rate (75 FR
49042).
In response to a commenter’s request
to provide a specific list of ESRD-only
drugs in the CY 2011 ESRD PPS final
rule, we explained that we chose to
identify ESRD drugs and biologicals by
category rather than in a specific list
because using categories of drugs and
biologicals allows us to respond to
changes in drug therapies over time
based upon many factors including new
developments, evidence-based
medicine, and patient outcomes (75 FR
49050). By categorizing drugs and
biologicals based on drug action, we can
account for other drugs and biologicals
that may be used for those same actions
in the future under the ESRD PPS. We
further explained that, while we have
included drugs and biologicals used in
2007 in the final ESRD base rate, we
recognize that these may change.
Because there are many drugs and
biologicals that have many uses and
because new drugs and biologicals are
being developed, we stated that we did
not believe that a drug-specific list
would be beneficial (75 FR 49050).
Rather than specifying the specific
drugs and biologicals used for the
treatment of ESRD, we identified drugs
and biologicals based on the mechanism
of action. We stated that we did not
finalize a specific list of the drugs and
biologicals because we did not want to
inadvertently exclude drugs that may be
substitutes for drugs identified and we
wanted the ability to reflect new drugs
and biologicals as they become
available. We did, however, provide a
list of the specific Part B drugs and
biologicals that were included in the
proposed and final ESRD PPS base rate
in Table C in the Appendix to the CY
2011 ESRD PPS final rule (75 FR 49205
through 49209) and a list of the former
Part D drugs that were bundled in the
ESRD PPS in Table D in the Appendix
to that rule (75 FR 49210). We
emphasized that drugs or biologicals
furnished for the purpose of access
management, anemia management,

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vascular access or peritonitis, cellular
management and bone and mineral
metabolism will be considered a renal
dialysis service under the ESRD PPS
and will not be eligible for separate
payment. We also noted that any ESRD
drugs or biologicals developed in the
future that are administered by a route
of administration other than injection or
oral would be considered renal dialysis
services and would be in the ESRD PPS
bundled base rate. We also stated that
any drug or biological used as a
substitute for a drug or biological that
was included in the ESRD PPS bundled
base rate would also be a renal dialysis
service and would not be eligible for
separate payment (75 FR 49050).
In the CY 2011 ESRD PPS final rule
(75 FR 49050 through 49051), we
explained that for categories of drugs
and biologicals that may be used for the
treatment of ESRD but are also
commonly used to treat other
conditions, we used the payments made
under Part B in 2007 for these drugs in
computing the ESRD PPS base rate,
which only included payments made for
the injectable forms of the drugs. We
excluded the Part D payments for the
oral (or other form of administration)
substitutes for the drugs and biologicals
described above because they were not
furnished or billed by ESRD facilities or
furnished in conjunction with dialysis
treatments (75 FR 49051). For those
reasons, we presumed that these drugs
and biologicals that were paid under
Part D were prescribed for reasons other
than for the treatment of ESRD.
However, we noted that if these drugs
and biologicals currently paid under
Part D are furnished by an ESRD facility
for the treatment of ESRD, they would
be considered renal dialysis services
and we would not provide separate
payment.
In the CY 2011 ESRD PPS final rule
(75 FR 49075), we included in Table 19
the Medicare allowable payments for all
of the components of the ESRD PPS base
rate for CY 2007 inflated to CY 2009,
including payments for drugs and
biologicals and the amount each
contributed to the base rate, except for
the oral-only renal dialysis drugs where
payment under the ESRD PPS has been
delayed. In the CY 2016 ESRD PPS
proposed rule (80 FR 37832), we
reiterated that we grouped the injectable
and intravenous drugs and biologicals
by action, or more specifically, into
functional categories for the purpose of
adding new drugs or biologicals with
the same functions to the ESRD PPS
bundled payment as expeditiously as
possible after the drugs become
commercially available so that
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also stated that in past rules we referred
to these categories as drug categories but
we believe the term functional
categories is more precise and better
reflects how we have used the
categories. We discuss the proposal and
the finalized definition of this term in
42 CFR 413.234(a) later in this
discussion.
In the proposed rule (80 FR 37833),
we explained that since the ESRD PPS
CY 2011 final rule was published, the
base rate has been updated by the
ESRDB market basket, discussed in
section II.B.2. of this final rule, which
reflects changes in the drug price
indices. In addition, we stated that we
designated several new drugs and
biologicals as renal dialysis services
because they fit within the functional
categories captured in the base rate and
no adjustment to the base rate has been
made, consistent with the CY 2011
ESRD PPS final rule. We proposed that
this approach of considering drugs and
biologicals as included in the ESRD PPS
base rate if they fit within one of our
functional categories would continue as
part of the drug designation process
described below.
b. Final Drug Designation Process
i. Inclusion of New Injectable and
Intravenous Products in the ESRD PPS
Bundled Payment
In the CY 2016 ESRD PPS proposed
rule (80 FR 37831), in accordance with
section 217(c)(2) of PAMA, we proposed
to include new injectable and
intravenous products in the ESRD PPS
bundled payment by first determining
whether the new injectable or
intravenous products are reflected
currently in the ESRD PPS. We
proposed to make this determination by
assessing whether the product can be
used to treat or manage a condition for
which there is an ESRD PPS functional
category. We stated that under our
proposed regulation at 42 CFR
413.234(b)(1), if the new injectable or

intravenous product can be used to treat
or manage a condition for which there
is an ESRD PPS functional category, the
new injectable or intravenous product
would be considered reflected in the
ESRD PPS bundled payment and no
separate payment would be available.
Specifically, any new drug, biosimilar,
or biologic that fits into one of the ESRD
functional categories would be
considered to be included in the ESRD
PPS. We stated that these drugs and
biologicals would count toward the
calculation of an outlier payment. In the
calculation of the outlier payment, we
price drugs using the ASP pricing
methodology, which is generally ASP+6
percent. We believe that this step in our
process codifies in regulation our
existing policy of using the functional
categories to add drugs to the bundled
payment, which we finalized in the CY
2011 ESRD PPS final rule (75 FR 49047
through 49052).
Also, we proposed that if the new
injectable or intravenous product is
used to treat or manage a condition for
which there is not an ESRD PPS
functional category, the new injectable
or intravenous product would not be
considered included in the ESRD PPS
bundled payment, and we proposed to
take the following steps as described in
our proposed regulation at
§ 413.234(b)(2): (i) Revise an existing
ESRD PPS functional category or add a
new ESRD PPS functional category for
the condition that the new injectable or
intravenous product is used to treat or
manage; (ii) pay for the new injectable
or intravenous product using the
transitional drug add-on payment
adjustment discussed below; and (iii)
add the new injectable or intravenous
product to the ESRD PPS bundled
payment following payment of the
transitional drug add-on payment
adjustment.
For purposes of the drug designation
process, we proposed to define a new
injectable or intravenous product in our
regulation at § 413.234(a) as an

69015

injectable or intravenous product that is
approved by the Food and Drug
Administration (FDA) under section 505
of the Federal Food, Drug, and Cosmetic
Act or section 351 of the Public Health
Service Act, commercially available,
assigned a Healthcare Common
Procedure Coding System (HCPCS)
code, and designated by CMS as a renal
dialysis service under § 413.171. In the
proposed rule (80 FR 37832), we
explained that following FDA approval,
injectable or intravenous drugs then go
through a process to establish a billing
code, specifically a HCPCS code.
Information regarding the HCPCS
process is available on the CMS Web
site at https://www.cms.gov/medicare/
coding/MedHCPCSGenInfo/
Application_Form_and_
Instructions.html. We stated that we
would designate injectable and
intravenous products as renal dialysis
services under the ESRD PPS by
analyzing the information in the FDAapproved labeling, the HCPCS
application information, including
studies submitted as part of these two
standardized processes. We indicated
that a change request would be issued
that will provide notice that the drug is
included in the ESRD PPS bundle and
is available for use, allowing patients to
have access to the new drug.
We proposed to codify the term ESRD
PPS functional category at § 413.234(a)
as a distinct grouping of drugs and
biologicals, as determined by CMS,
whose end action effect is the treatment
or management of a condition or
conditions associated with ESRD. We
explained that we would codify this
definition in regulation text to formalize
the approach we adopted in CY 2011
because the drug designation process is
dependent on the functional categories.
In the proposed rule (80 FR 37832), we
listed the 11 functional categories that
are used to treat or manage conditions
associated with ESRD, which are
displayed in Table 8A below.

TABLE 8A—ESRD PPS FUNCTIONAL CATEGORIES
Category

Rationale for association

Access Management ......................

Drugs used to ensure access by removing clots from grafts, reverse anticoagulation if too much medication
is given, and provide anesthetic for access placement.
Drugs used to stimulate red blood cell production and/or treat or prevent anemia. This category includes
ESAs as well as iron.
Drugs used to prevent/treat bone disease secondary to dialysis. This category includes phosphate binders
and calcimimetics.
Drugs used for deficiencies of naturally occurring substances needed for cellular management. This category includes levocarnitine.
Used to prevent or treat nausea and vomiting secondary to dialysis. Excludes antiemetics used in conjunction with chemotherapy as these are covered under a separate benefit category.
Used to treat infections. May include antibacterial and antifungal drugs.
Drugs in this classification have multiple clinical indications and are included for their action to treat itching
secondary to dialysis.

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Anemia Management ......................
Bone and Mineral Metabolism ........
Cellular Management ......................
Antiemetic .......................................
Anti-infectives ..................................
Antipruritic .......................................

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TABLE 8A—ESRD PPS FUNCTIONAL CATEGORIES—Continued
Category

Rationale for association

Anxiolytic .........................................

Drugs in this classification have multiple actions but are included for the treatment of restless leg syndrome secondary to dialysis.
Drug/fluids used to treat fluid excess/overload.
Intravenous drugs/fluids used to treat fluid and electrolyte needs.

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Excess Fluid Management .............
Fluid and Electrolyte Management
Including Volume Expanders.
Pain Management ...........................

Drugs used to treat graft site pain and to treat pain medication overdose.

We proposed to determine whether a
new injectable or intravenous product
falls into one of our existing functional
categories by assessing whether the
product is used to treat or manage the
condition for which we have created a
category. We believe that this approach
to determining whether a new drug falls
into one of our existing drug categories
is consistent with the policy we
finalized in the CY 2011 ESRD PPS final
rule (75 FR 49047 through 49052).
The comments we received and our
responses are below.
Comment: A national organization of
dialysis organizations, an organization
of kidney care providers, manufacturers,
and patient advocates, and an LDO
commented that CMS does not have the
statutory authority to add new renal
dialysis services to the ESRD PPS
bundle. The commenters believe that
section 217(c) of PAMA only permits
CMS to develop a process for adding
new drugs to the bundle, which they
contend is fundamentally different than
permitting CMS to actually add new
drugs to the bundle. One commenter
stated that, in contradicting the plain
meaning of section 217(c)(2) of PAMA,
the proposed rule renders it
meaningless.
One commenter asserted that section
217(c)(2) of PAMA cannot be read in
isolation of section 1881(b)(14)(B) of the
Act as the sole authority to add new
drugs to the bundle; rather, section
217(c)(2) must be read in concert with
section 1881(b)(14)(B), which does not
permit new injectable or intravenous
drugs to be added to the bundle. Other
commenters stated that CMS seems to
assume, incorrectly, that the existing
statutory definition of renal dialysis
services can accommodate new
injectable or intravenous drugs. A
number of commenters echoed this
contention, asserting that the text,
structure, and purpose of section
1881(b)(14)(B) of the Act show clear
congressional intent not to allow CMS
to add new injectable or intravenous
drugs into any of the four articulated
categories of renal dialysis services. The
commenters explained that PAMA did
not amend the definition of renal
dialysis services in section

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1881(b)(14)(B) of the Act, and therefore
CMS is not authorized to add new ESRD
drugs to the ESRD PPS bundled
payment. Specifically, section
1881(b)(14)(B)(i) includes only items
and services being paid for under the
previous composite rate payment
system as of December 31, 2010. They
further explained that section
1881(b)(14)(B)(ii) refers only to ESAs
and any oral form of ESAs furnished for
ESRD treatment, and the plain language
of this provision excludes non-ESAs.
With respect to section
1881(b)(14)(B)(iii), the commenters
stated that this category excludes new
injectable or intravenous drugs because,
even if a new injectable or intravenous
drug is being furnished to individuals
for the treatment of ESRD, it would not
have been separately paid for under the
Act prior to January 1, 2011, and
therefore, for CMS to read section
1881(b)(14)(B)(iv) as allowing the
addition of new injectable or
intravenous products to the bundle,
renders category (iii) meaningless. Some
commenters stated that section
1881(b)(14)(B) of the Act is clear and
unambiguous. Another commenter
stated that the proposed process violates
step one under Chevron v. NRDC, 467
U.S. 837 (1984) because the statute’s
language is clear and unambiguous.
Response: We believe we have the
authority to add new renal dialysis
services to the bundle under both
sections 1881(b)(14)(B) of the Act and
217(c)(2) of PAMA. First, we read
section 1881(b)(14)(B)(iii) as requiring
the inclusion of a specific category of
drugs in the bundle—that is, drugs and
biologicals, including those with only
an oral form, furnished to individuals
for the treatment of ESRD and for which
separate payment was made prior to
January 1, 2011. We also read section
1881(b)(14)(B)(iv) as specifying a
different category of items that must be
included in the bundle—that is, items
and services, which includes drugs and
biologicals, not specified by sections
1881(b)(14)(B)(i), (ii), or (iii). Second,
we read the language of section
217(c)(2) of PAMA—‘‘the Secretary of
Health and Human Services . . . shall
establish a process for . . . including

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new injectable and intravenous
products into the bundled payment
system’’—as more than a directive to
simply develop an inoperative scheme.
We believe the provision requires us to
both define and implement a drug
designation process for including new
injectable and intravenous products into
the bundle.
Comment: As several commenters
noted that the Administrative Procedure
Act (APA) precludes CMS from
assuming that new injectable or
intravenous drugs can constitute renal
dialysis services because the application
of that assumption constitutes CMS
adopting a policy without going through
notice- and -comment rulemaking.
Several commenters further indicated
that all new drugs should be added to
the bundle only through notice-andcomment rulemaking. Specifically,
when CMS is determining that a drug or
biological (whether it is substantially
the same as a drug or biological
currently in the bundle or not) should
be added to the bundle, all data should
be presented and the process should be
complete and transparent to allow
interested stakeholders to evaluate the
proposals before they are finalized.
While they acknowledge that there
would be a gap between launch of the
new product and publication of a
proposed and final rule, they strongly
recommend that CMS use an interim
rulemaking process or guidance to allow
the product to be paid for separately
outside the bundle until the rulemaking
process can be completed. They do not
believe such substantive changes in
policy and payment rates should be
adopted through sub-regulatory
guidance. Other commenters pointed
out that the proposed rule does not
specify any public process for adding a
new drug to an existing category or
creating a new category, which is
problematic given that serious APA
concerns are raised if a regulated party
is not given an opportunity to comment
on a policy that affects settled legal
rights.
A national dialysis organization
strongly urged CMS to adopt the same
process for all new drugs and
biologicals unless they are substantially

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the same as drugs or biologicals
currently paid for under the ESRD PPS
payment rate. For new drugs or
biologicals that are substantially the
same as drugs or biologicals currently
paid under the ESRD PPS, the
organization supported incorporating
them into the PPS on a case-by-case
basis using notice-and-comment
rulemaking and foregoing the transition
period if it can be shown that the PPS
rate is adequate to cover the cost of the
drug or biological. If the rate is
inadequate to cover the cost of the new
drug, the transitional drug add-on
payment adjustment should apply.
Finally, another commenter stated
that the proposed rule does not specify
any public process for adding a new
drug to an existing category or creating
a new category, which the commenter
believes raises serious APA concerns.
They urged CMS to utilize notice-andcomment rulemaking to add new drugs
to the ESRD PPS.
Response: As stated above, the
functional categories and our process for
adding new drugs to the bundled
payment when they fit into those
functional categories was adopted in
response to public comments in the CY
2011 ESRD PPS final rule and has been
our policy since the inception of the
ESRD PPS. We’ve added new drugs to
the ESRD PPS bundled payment
consistent with this policy in the years
since the ESRD PPS was implemented
and announced those additions using
change requests. These decisions have
not been controversial because the drugs
were substantially the same as other
drugs in the functional category.
However, in response to commenters’
request for the opportunity to provide
input for determinations in the future
that may be controversial, we will
consider in future rulemaking
establishing an informal process for
obtaining public input when new
injectable or intravenous products are
added to an existing functional category.
We do not believe it is necessary to
add injectable and intravenous products
to the bundled payment using noticeand-comment rulemaking because we
have already included dollars in the
base rate to account for products used
to treat or manage conditions associated
with ESRD for which we have adopted
functional categories—consistent with
the process we adopted through noticeand-comment rulemaking—and we
believe that new drugs used to treat or
manage the same conditions will be
adequately accounted for by those
categories. We also believe that our
process of reviewing the FDA labeling
data and information, reviewing the
information presented for obtaining a

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HCPCS code, and CMS internal medical
review following the announcement of
the FDA and HCPCS decision, allows
new drugs to be added to the bundled
payment as quickly as possible, whereas
subjecting these additions to notice-andcomment rulemaking would
significantly delay inclusion of new
drugs in the PPS, even though there are
already dollars in the base rate to
account for those products and the
process for adding these products to the
bundle has been in place since 2011.
For new renal dialysis service drugs or
biologicals that do not fit within one of
our existing categories, however, we
will revise or adopt a new functional
category, pay a transitional add-on
payment adjustment for the new
product, and make any necessary
changes to the base rate to account for
the new product, and all of those steps
will be subject to notice-and-comment
rulemaking.
Comment: An LDO objected to the
proposed definition of functional
category as a distinct grouping of drugs
and biologicals, as determined by CMS,
whose end action effect is the treatment
or management of a condition or
conditions associated with ESRD. They
believe the definition expands the
statutory definition of renal dialysis
services by implying that the categories
now may include any drugs associated
with ESRD, without regard to whether
those drugs are actually essential to the
delivery of maintenance dialysis. A
national dialysis organization requested
that CMS affirmatively state that the
bundled drugs must be renal dialysis
services for the treatment of ESRD and
connected to/contemporaneous with the
dialysis procedure. The commenters
suggested changes to the descriptions of
some of the functional categories to
more precisely define the drugs that
would fit into the categories. In
particular, the commenters suggested
changes to the anti-infective, pain
management, and anxiolytic functional
categories to better describe how each of
the categories relate to the treatment of
ESRD in accordance with the statute.
The organization suggested that
language be removed from the
description of the antiemetic functional
category to eliminate drugs used to treat
nausea caused by the use of oral-only
drugs because these drugs are paid
outside the bundle and are covered
under a separate benefit category.
An organization of home dialysis
patients also requested that CMS put a
policy in place to ensure that the drugs
included in the bundle relate to dialysis
care only and not overall care. The
commenter gave the example of when
oral-only transplant medications would

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be added to the bundle. They noted that
some patients need to stay on their
transplant medications even when the
kidney no longer functions well because
the drugs help prevent rejection of the
kidney and the increase of more
antibodies. The commenter stated that
they understand the need to control
costs, but they believed the proposed
drug designation process was excessive
and could hinder innovation and
prevent new treatment options from
entering the marketplace.
Response: We did not intend to
expand the functional categories beyond
the drugs and biologicals used in the
treatment of ESRD, and we do not
believe our definition of ESRD PPS
functional category in the regulations at
42 CFR 413.234 does that. With regard
to limiting renal dialysis services to
those that are essential to the delivery
of maintenance dialysis, we note that
we believe the drugs that are and will
be included in the ESRD PPS bundled
payment are limited to those that are
essential to the delivery of maintenance
dialysis. In particular, we believe all
drugs that fit into our existing
functional categories (which have been
revised slightly as described below) are
essential to the delivery of maintenance
dialysis because they are necessary to
treat or manage conditions associated
with the beneficiary’s ESRD, and thus,
they enable the beneficiary to remain
sufficiently healthy to continue
receiving maintenance dialysis.
With regard to the concern about
bundling oral-only transplant
medications into the ESRD PPS, we note
that immunosuppressive drugs are
covered under Part B under a separate
benefit category and those drugs do not
fit into the functional categories under
the ESRD PPS.
Regarding the commenter’s concerns
about overly broad definitions for the
anti-infective, pain management, and
anxiolytic categories, we note that we
moved the anti-infective functional
group from the always used for the
treatment of ESRD list to the may be
used for the treatment of ESRD list for
precisely the reasons given by the
commenter. We recognize that there
could be medical situations in which
the beneficiary requires an anti-infective
that has nothing to do with ESRD and
access site infections or peritonitis.
Therefore, when ESRD facilities furnish
drugs or biologicals that are identified
on Table 8B as those that may be used
for the treatment of ESRD (for example,
the pain management and anxiolytic
functional categories) for reasons other
than the treatment of ESRD, they can
receive separate payment for the drug
when it is reported with the AY

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modifier on the claim. Appending the
AY modifier to the line item drug or
biological on the claim is an attestation
that the item or service is not being
furnished for the treatment of ESRD.
We have carefully reviewed the
commenters’ recommendations
regarding narrowing the functional

categories to describe how the category
relates to the treatment of ESRD. Many
of the commenters’ recommendations
are consistent with how we believe the
categories should be defined and help to
ensure that the drugs that fall into them
are those that are essential for the

delivery of maintenance dialysis.
Therefore, we are adopting several of
them. The final functional categories as
revised with suggestions from
commenters are included in Table 8B,
with the commenters’ suggestions
italicized.

TABLE 8B—ESRD PPS FUNCTIONAL CATEGORIES
Category

Rationale for association
DRUGS ALWAYS CONSIDERED USED FOR THE TREATMENT OF ESRD

Access Management ......................
Anemia Management ......................
Bone and Mineral Metabolism ........
Cellular Management ......................

Drugs used to ensure access by removing clots from grafts, reverse anticoagulation if too much medication
is given, and provide anesthetic for access placement.
Drugs used to stimulate red blood cell production and/or treat or prevent anemia. This category includes
ESAs as well as iron.
Drugs used to prevent/treat bone disease secondary to dialysis. This category includes phosphate binders
and calcimimetics.
Drugs used for deficiencies of naturally occurring substances needed for cellular management. This category includes levocarnitine.
DRUGS THAT MAY BE USED FOR THE TREATMENT OF ESRD

Antiemetic .......................................
Anti-infectives ..................................
Antipruritic .......................................
Anxiolytic .........................................

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Excess Fluid Management .............
Fluid and Electrolyte Management
Including Volume Expanders.
Pain Management ...........................

Used to prevent or treat nausea and vomiting related to dialysis. Excludes antiemetics used for purposes
unrelated to dialysis, such as those used in conjunction with chemotherapy as these are covered under
a separate benefit category.
Used to treat vascular access-related and peritonitis infections. May include antibacterial and antifungal
drugs.
Drugs in this classification have multiple clinical indications. Use within an ESRD functional category includes treatment for itching related to dialysis.
Drugs in this classification have multiple actions. Use within an ESRD functional category include treatment of restless leg syndrome related to dialysis.
Drug/fluids used to treat fluid excess/overload.
Intravenous drugs/fluids used to treat fluid and electrolyte needs.
Drugs used to treat vascular access site pain and to treat pain medication overdose, when the overdose is
related to medication provided to treat vascular access site pain.

We did not incorporate the
commenters’ recommended language
that would remove from the antiemetic
functional category drugs used to treat
nausea resulting from oral-only drugs
that are currently paid for outside the
bundle. The commenter’s rationale was
that the oral-only drugs are covered
under a separate benefit category. We
believe, however, that if the oral-only
drugs are being given for the treatment
of ESRD and they cause nausea, then the
drug used for treatment of that nausea
falls within the antiemetic functional
group covered by the ESRD PPS.
Specifically, if drugs are used to treat
nausea caused by the oral-only drugs
designated as renal dialysis services
(calcimimetics and phosphate binders),
then the drug used for the treatment of
the nausea falls within the functional
group covered by the ESRD PPS.
However, when other Part D oral-only
drugs are prescribed to treat non-ESRD
conditions and those drugs cause
nausea, then the drugs used to treat the
nausea would also be separately
covered.

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Finally, with respect to the comment
that the drug designation process would
hinder innovation, we note that for
novel drugs that are used to treat or
manage a condition for which we do not
have a functional category, we will
revise an existing category or adopt a
new category to cover the drug and pay
a transitional drug add-on payment
adjustment for at least 2 years. For drugs
that are used to treat or manage a
condition for which we have a
functional category, we note that we
have not encountered high cost drugs
that we believe would not be accounted
for by the existing functional categories.
We do, however, appreciate the
commenters’ concerns and we
anticipate addressing the possibility of
the unique situations they have
identified in future rulemaking.
Comment: One national dialysis
organization stated that adding new
drugs or biologicals to existing
functional categories presumes that
CMS can exercise clinical judgment as
to what drugs will be related to the
treatment of ESRD before the majority of

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clinical professionals have had the
opportunity to use them.
Response: We define a new injectable
or intravenous product in our regulation
at § 413.234(a) as an injectable or
intravenous product that is approved by
the FDA under section 505 of the
Federal Food, Drug, and Cosmetic Act
or section 351 of the Public Health
Service Act, commercially available,
assigned a Healthcare Common
Procedure Coding System (HCPCS)
code, and designated by CMS as a renal
dialysis service under § 413.171. In the
proposed rule (80 FR 37832), we
explained that following the clinical
trials intended to support FDA
approval, and after FDA approves the
drugs for use in ESRD patients,
injectable or intravenous drugs then go
through a process to establish a billing
code, that is, the HCPCS code process.
The HCPCS process involves the input
of physicians and stakeholders.
Additionally, if a drug will be used for
both the treatment of ESRD and for the
treatment of non-ESRD conditions, it
would receive two HCPCS codes. We
stated that we would designate

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injectable and intravenous products as
renal dialysis services under the ESRD
PPS by analyzing the information in the
FDA-approved labeling, the HCPCS
application information, and a review
by CMS medical officers and medical
personnel, in addition to reviewing
clinical studies submitted. In all three of
these steps, physicians assist in the
determination as to whether a new drug
is a renal dialysis service as well as
whether the new drug fits into one of
the functional categories. We believe the
information provided for the FDA
approval, HCPCS coding process, and
the CMS internal review by medical
professionals will provide sufficient
information over a period of time for
CMS to determine the following: (1)
Whether a product is a new injectable
or intravenous drug; (2) whether the
drug is a renal dialysis service; and (3)
whether the drug fits into an existing
functional category. If a new drug is not
considered to be a renal dialysis service,
then it will not be a part of the ESRD
PPS bundle.
Comment: One professional
association suggested that when new
agents are newly introduced and have a
role either similar to or identical to
existing agents and are not associated
with better outcomes, they should be
included in the current PPS without
additional payment.
Response: We agree with the
commenter’s suggestion for adding new
drugs whose role is either similar or
identical to existing agents to the
existing functional categories. We
believe that the drug designation
process finalized at 42 CFR 413.234
addresses the commenter’s concern.
Comment: A large dialysis
organization commented that the
proposal does not conform to the PAMA
directive to establish a process for
including new injectable and
intravenous products into the ESRD PPS
bundled payment, but instead
established a regulatory process for
including only new functional
categories of drugs within the ESRD PPS
bundled payment. Only if a new drug
also represents a new functional
category would the proposed
transitional drug add-on payment
adjustment apply. The organization
believes the proposed rule requires an
extremely broad notion of functional
categories of drugs included in the
ESRD PPS that expands the ESRD PPS
in a manner outside of the statutory
construct. With respect to the process
for including new injectable or
intravenous drugs into the PPS and the
use of the functional categories of ESRD
drugs and biologicals, commenters
expressed concern about the overly

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broad definitions of the functional
categories and the proposal to categorize
injectable and intravenous drugs and
biologicals as within the bundle if they
seem to fit into one of the functional
categories. The commenters stated that
it is even more concerning that new
categories will be added if the current
broadly-defined categories do not
incorporate new injectable or
intravenous drugs or biologicals. The
organization believes that these policy
choices would result in no such drug or
biological being defined as new, which
is inconsistent with the congressional
interest in establishing a process for
including new injectable and
intravenous products into the bundled
payment.
A dialysis organization and a
professional association asked that CMS
consider a pass-through payment for all
new drugs that are considered truly
new. They recommend a rate of 106
percent of ASP, minus the portion of the
ESRD PPS base rate that CMS
determines is attributable to the
category of drugs that corresponds to a
truly new drug.
Response: In accordance with section
217(c) of PAMA, we proposed a process
that would allow us to include new
injectable and intravenous products into
the ESRD PPS bundled payment, and,
when appropriate, to modify the ESRD
PPS payment amount to reflect the costs
of furnishing a new injectable or
intravenous renal dialysis service drug
or biological that is not bundled in the
ESRD PPS payment amount. We believe
the proposal conforms to the PAMA
directive to establish a process for
including new injectable and
intravenous products into the ESRD PPS
bundled payment. The commenter
seems to be concerned not with the
process of adding new drugs to existing
functional categories as described in the
CY 2011 final rule, but with payment of
those new injectable and intravenous
drugs that fit into the functional
categories. As indicated in the CY 2011
final rule, the current ESRD PPS has
dollars built into the base rate for drugs
within the functional categories. If a
new drug is available, a determination
is made as to whether it is a renal
dialysis service drug. This is determined
through reviewing the publiclyavailable data and information
underlying the FDA approval process,
approved labeling, and the information
provided during the HCPCS review
process and following an internal CMS
medical review process. Next, a
determination is made as to whether the
drug fits into one of the functional
categories. The proposed transitional
drug add-on payment adjustment is only

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made for new injectable and
intravenous drugs used for the treatment
of ESRD for which there is no current
functional category because we’ve
included dollars in the base rate to
account for drugs used to treat or
manage conditions associated with
ESRD for which we have a functional
category. However, as there is nothing
in the base rate to account for drugs in
a new functional group, those drugs
would be paid using the pricing
methodologies specified under section
1847A of the Act (which could include
ASP + 6 percent) for a minimum of 2
years. With respect to the commenters’
concern that the functional categories
are too broad, we note that we adopted
several of the commenters’ suggested
changes to the descriptions of the
functional categories above.
Comment: An LDO and a drug
manufacturer stated that the ESRD
statute requires budget neutrality apply
only in 2011; they do not believe the
Congress intended for CMS to add new
items or services to the bundle without
increasing the overall Medicare
spending for ESRD. In other words, the
Congress has not required CMS to
reduce spending on currently bundled
items and services when it adds new
items or services to the bundle. A
national dialysis organization indicated
that CMS must ensure that limited
conceptual views of budget neutrality
will not jeopardize good policy
decisions and ensure that
reimbursement resources are adequate
to provide necessary products and
services to beneficiaries.
Response: We agree with the
commenter with respect to new drugs
that do not fit within one of the
functional categories. Where
appropriate, dollars will be added to the
base rate to account for those drugs that
fall within the new functional categories
and this would increase ESRD
expenditures. However, for drugs that
are used to treat or manage conditions
associated with ESRD for which we
have existing functional categories, we
do not believe it would be appropriate
to increase Medicare expenditures by
providing additional payment beyond
the ESRD PPS base rate. We note that
the ESRD bundled (ESRDB) market
basket updates the PPS base rate
annually for input price changes for
providing renal dialysis services as
specified by the bundle. The ESRDB
market basket update accounts for price
changes of the drugs and biologicals that
are reflected in the ESRD PPS base rate.
For example, the market basket includes
price indices, published by the Bureau
of Labor Statistics, such as the PPI
Biological Products for Human Use and

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the PPI Vitamin, Nutrient, and
Hematinic Preparations. The ESRDB
market basket is discussed in section
II.B.2 of this final rule and the cost
weight and price proxies are discussed
in detail in the CY 2015 final rule 79 FR
66129 through 66133. We appreciate the
commenters’ concerns regarding the
cost of new drugs that fall within the
existing functional categories and we
anticipate addressing the possibility of
the unique situations they have
identified in future rulemaking.
Comment: For new drugs, one
organization proposes a different
process adapted largely from the
hospital OPPS mechanism for
incorporating new drugs into its
ambulatory payment classification
(APC) system, which is a reasonable and
known method to incorporate new
drugs into an existing PPS. The OPPS
mechanism provides additional
payment (pass-through payment) for a
limited time period (2 to 3 years) to
account for the cost of new drugs before
the cost is able to be fully reflected in
the applicable APC. Two drug industry
groups and three drug manufacturers
commented that the proposed eligibility
criteria for obtaining the transitional
drug add-on payment are overly
restrictive and will prevent this policy
from motivating the provision of highquality, efficient, and effective care.
They agree that we should decouple the
transitional drug add-on from the
functional categories and provide the
additional payment for all new
injectable and intravenous drugs and
biologicals and oral equivalents for 2 to
3 years, similar to the IPPS or the OPPS.
A professional association recommends
that when a new product for dialysis
care becomes available, new money
should be allocated to pay for the new
product.
One of the drug manufacturers
believes that these new renal dialysis
service drugs should meet similar
newness criteria as those that CMS
applies in the IPPS for the New
Technology Add-On Payment. Under
that program, a specific medical service
or technology is considered new for
purposes of new technology add-on
payments until such time as Medicare
data are available to fully reflect the cost
of the technology and the system is
recalibrated.
Response: If a new drug is determined
to be a renal dialysis service and it does
not fit into a current functional category,
then no dollars have been included in
the base rate for the functional category.
A new functional category will be
proposed through notice-and-comment
rulemaking and the drug will be paid for
using a transitional drug-add on

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payment adjustment for at least 2 years
while utilization data are collected. We
understand the commenters’
recommendation that CMS should make
pass-through payments for all new
drugs, including both those that fit into
current functional groups and those that
do not in a manner similar to the OPPS
pass-through payments process. We
note that while the OPPS pass-through
policy provides additional payment for
new drugs, those payments are made in
a budget-neutral manner. If we were to
provide additional payment for new
drugs that fit into an existing functional
category, we would similarly want to
make such a policy budget-neutral
because we have already accounted for
those drugs in the PPS base rate. We
believe our process is preferable because
it would not involve reducing the base
rate to fund additional payments for
new drugs that fit into an existing
functional category.
Under the new technology add-on
payment (NTAP) policy, additional
payments may be made for cases that
involve new technologies or medical
services that have been approved for
special add-on payments. To qualify, a
new technology or medical service must
demonstrate that it is a substantial
clinical improvement over technologies
or services otherwise available, and that,
absent an add-on payment, it would be
inadequately paid under the regular
DRG payment. Importantly, not all new
technologies or medical services for
which an application is submitted to
CMS are determined to be eligible for
the NTAP.
We believe the drug designation
process will allow us to pay the
transitional drug add-on payment
adjustment for more new products than
if we utilized a policy similar to the
NTAP. This is because under our drug
designation process, all new injectable
and intravenous renal dialysis service
products that do not fit into an existing
functional category will be paid for
using the transitional drug add-on
payment adjustment for a minimum of
2 years and the products will not need
to meet clinical improvement or cost
criteria. In addition, the transitional
drug add-on payment adjustment is
calculated using the pricing
methodologies specified in section
1847A of the Act. We believe payment
for these drugs using those pricing
methodologies will capture the cost of
expensive new injectable or intravenous
products and be consistent with how
drugs and biologicals are paid under
Part B.
Comment: A large dialysis
organization stated that defining new
drugs requires special consideration of

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cost. They suggested that rather than
comparing the cost of the new drug to
the ESRD PPS base rate, we should
compare it to the cost of the existing
drugs in the same CMS-defined ‘‘mode
of action’’ category. In such a case, a
drug might qualify for payment of the
transitional drug add-on payment
adjustment on the basis that its cost per
unit or dosage exceeds a specified
percentage (for example 150 percent) of
the average cost per unit or dosage of
the top three most common drugs in the
same category (based on utilization
data). This comparison would
demonstrate that the amount allocated
to that category in the ESRD PPS base
rate is insufficient to cover the cost of
the new drug. An LDO stated that by
failing to account for the costs of new
drugs that enter the market, the
proposed rule represents a severe
departure from the fundamental cost
basis of the ESRD PPS. An organization
representing small and medium dialysis
facilities and an MDO expressed
concern that many drugs would be
automatically included in the bundle
without any evaluation of the drug’s
cost or whether it should be considered
the standard of care for dialysis patients.
A drug manufacturer believes the
transitional drug add-on payment
adjustment should apply to all new
drugs and, in particular, drugs
designated as priorities by the FDA
under the Generating Antibiotics
Incentives Now (GAIN) Act or the
Qualified Infectious Disease Product
(QIDP) Act, not just those drugs that are
used to treat or manage a condition for
which we have not adopted a functional
category, in order to promote access to
new therapies and encourage innovation
in ESRD care. They pointed out that the
functional categories are very
comprehensive and capture every
known condition related to ESRD. They
indicated that under the proposed
approach CMS would make no
additional payment regardless of
whether the drug has a novel
mechanism of action, new FDA
approval, or other distinguishing
characteristics. The commenter believes
the CMS proposal sends conflicting
messages to manufacturers about the
importance of developing new
treatments for this underserved patient
population.
An organization of nonprofit SDOs
commented that CMS should provide
additional payment for drugs and
biologicals that would fall within an
existing functional category that
represent a significant clinical
improvement and may warrant a higher
payment. The commenter noted that
utilizing the outlier policy to address

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these high costs ultimately comes at the
expense of the bundled base rate and
would not cover the full cost of the new
drug or biologic.
Response: We appreciate the
commenters’ suggestion to compare the
cost of new drugs to the cost of existing
drugs in the same functional categories
and to utilize the transitional drug addon payment adjustment for all new
drugs. Our intent in adopting the
functional categories in the CY 2011
ESRD PPS final rule was to be as
comprehensive as possible with regard
to the drugs used in the treatment of
ESRD at the time the rule was written.
We are concerned that comparing the
cost of new drugs and biologicals to the
existing drugs in a category would
impact drug manufacturers’ drug pricing
strategy and marketing and lead to
higher prices for all new drugs. Because
our intent is to better align ESRD PPS
payment with resource utilization,
including the utilization of new drugs
that would fit into the current
functional groups and those that would
fit into a new functional category, we
will consider in future rulemaking how
to address these unique situations. The
commenters’ suggestions, including a
review of the drugs designated as
priorities by the FDA under the
Generating Antibiotics Incentives Now
(GAIN) Act or the Qualified Infectious
Disease Product (QIDP) Act, are the type
of input we would seek from
stakeholders if such a process were to be
implemented. In future rulemaking, we
plan to address these unique situations
by considering ESRD facility resource
use, supporting novel therapies for
ESRD patients, and balancing the risk of
including new drugs for both CMS and
the dialysis facilities.
We agree with the commenter who
noted that while the outlier policy was
included to mitigate the risk of high-cost
patients, by design, it would not cover
the full cost of a new drug or biologic
because outlier payments are made only
for costs above the fixed dollar loss
ratio. In response to the concern that
drugs would be automatically included
in the bundle without any evaluation of
whether they should be included in a
dialysis patient’s standard of care, we
note that a new drug that would
potentially be considered a renal
dialysis service drug would only be
included in a current functional
category if the FDA indicated the drug
was for treatment of ESRD patients, it
obtained a HCPCS code, and a review
performed by CMS medical officers and
subject matter experts confirms that the
new drug is a renal dialysis service and
covered under a current functional
category. This review will take into

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account reports of efficacy, adverse
events and utilization patterns. Also, we
note that the inclusion of a new drug in
the ESRD PPS bundled payment does
not require that it be prescribed to a
particular beneficiary. Rather, the
patient and their nephrologist should
determine the patient’s plan of care.
With regard to the comment that CMS
would make no additional payment in
the future for any new drugs, we do not
believe this will be the case. Since
publication of the CY 2011 ESRD PPS
final rule, CMS has been introduced to
novel therapies and drugs that are under
development that would require new
functional categories. As a result, the
drug designation process was designed
to address potential new therapies that
would necessitate additional payment,
at least temporarily in the form of a
transitional drug add-on payment
adjustment, and perhaps permanently in
the form of a change to the base rate.
Comment: A national dialysis
organization with the support of other
dialysis organizations provided an
example of the process they are
recommending using with an antiinfective as the new drug in the
example. The commenter indicated that
the determinations in each step of the
process would be made through noticeand-comment rulemaking with CMS
providing sufficient data to allow
interested stakeholders to fully evaluate
the proposals.
Step 1: Determine if the injectable or
intravenous drug/biological is
substantially the same as a drug/
biological that is related to the
treatment of ESRD and currently within
the ESRD PPS. In the example provided,
the anti-infective would likely be used
to treat vascular access-related
infections. If the anti-infective is
substantially the same as drugs
currently used to treat infections related
to a patient’s catheter (for example),
then it would be added to the bundle.
If, however, the ESRD PPS rate is likely
insufficient to cover the cost of
providing the drug it should be
evaluated through a transition period.
Step 2: Determine the utilization and
cost of the injectable and intravenous
drug/biological before incorporating it
into the bundle. In the example, if the
new anti-infective is not substantially
the same as an existing drug in the
bundle, CMS would establish a 2–3 year
transition period during which facilities
would be paid separately for the drug at
ASP+6 percent under Part B and not as
an ESRD service.
Step 3: Determine if the injectable and
intravenous drug/biological is a renal
dialysis service. Based upon the
information collected during the

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transition period, CMS through noticeand-comment rulemaking would
determine whether the item is a renal
dialysis service. If so, CMS would value
the Part B and beneficiary costs of the
item (determined at the time the item is
added to the bundle) and add that
amount to the base rate without
applying the budget neutrality
construct.
Another drug manufacturer
commented that CMS did not provide
enough information about how the cost
for new drugs would be incorporated.
Several commenters similarly
commented that when trying to
determine whether an injectable or
intravenous drug or biological should be
added to the bundle, CMS will need to
determine whether it is substantially the
same as other drugs or biologicals
currently in the bundle. Commenters
supported incorporating new drugs or
biologicals that are substantially the
same as drugs or biologicals currently
paid under the ESRD PPS into the
bundled payment on a case-by-case
basis, foregoing the transition period if
it can be shown that the PPS base rate
is adequate to cover the cost of the drug
or biological. However, commenters
stated that if the rate is inadequate to
cover the cost of the new drug, the
transitional drug add-on payment
adjustment should apply to the PPS
payment. Commenters noted that it
would not be appropriate to add such
drugs and biologicals to the bundle
without first learning about their
utilization patterns or costs and without
adjusting the payment rate in a nonbudget-neutral manner.
A national dialysis patient advocacy
organization explained that if new
products are immediately added to the
bundle without additional payment it
would curtail innovation in treatments
for people on dialysis. They believe
clinicians should have the ability to
evaluate the appropriate use of a new
product and its effect on patient
outcomes and that the proposed rule did
not allow for this. The commenter
explained that Kidney Disease
Improving Global Outcomes (KDIGO)
and Kidney Disease Outcomes Quality
Initiative (KDOQI) guidelines are often
updated when evidence of improved
therapies on patient outcomes are made
available and that this rigorous and
evidence-based process is extremely
important in guiding widespread
treatment decisions in nephrology. The
commenter expressed concern that
under the proposed rule, reimbursement
and contracting arrangements could
instead dictate utilization of a product
before real world evidence on patient
outcomes is ever generated.

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Response: We appreciate the
commenters’ input into the process of
determining whether a drug is a renal
dialysis service, and if so, whether it fits
into one of the current functional
categories. The focus of the commenter’s
suggested three steps seems to be on
payment, with the determination of
whether a new drug warrants additional
payment depending on a determination
of whether a new drug is substantially
the same as an existing drug. It is
unclear to us, however, whether
substantially the same means that the
new drug has been classified as a
generic for an existing drug; that it acts
on the same biochemical pathways as a
drug currently in the bundle; that there
is the same interaction of the drug with
its receptors at a molecular level as a
drug in the category; or that the new
drug does not cost substantially the
same as another drug currently in the
category. It is unclear what the
commenter means when they use the
phrase substantially the same to
describe a new drug. Nonetheless, we
believe the process we proposed is
preferable to processes that would use
any of the possible substantially the
same scenarios described above because
we already have dollars in the base rate
for drugs in the current functional
categories. As we stated previously, we
believe that if we adopted the
commenter’s recommendation, we
would encourage over-pricing of all new
intravenous and injectable drugs. The
current functional categories include
drugs that have demonstrated efficacy as
renal dialysis services in the treatment
of ESRD. As CMS does not dictate
utilization of a drug, the addition of new
drugs and biologics to the functional
groups is to provide choice to the
dialysis suppliers and availability of
new products to the beneficiaries. We
will monitor changes in utilization of
those new drugs by the medical
community. Inclusion of a drug in the
bundle does not require that
nephrologists prescribe it.
If the drug does not fall within one of
the functional categories, then a
determination will be made as to
whether the drug is a renal dialysis
service, and a new functional category
will be proposed through notice-andcomment rulemaking. A transitional
drug add-on payment will be made for
a minimum of 2 years. During that time
utilization data will be gathered. At the
end of that time, the drug will be
included within its new functional
category and the base rate may or may
not be modified to account for the cost
of the drug, depending upon what the
utilization data show.

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With respect to what seem to be
commenters’ specific concerns that
certain high cost new drugs may not be
adequately accounted for in the ESRD
PPS base rate, we note that we
anticipate making further proposals
related to the drug designation process
to address these unique situations in
future rulemaking.
Comment: A national dialysis
organization stated that the market
basket is an inflationary, not a
reimbursement, mechanism. They
expressed concern that adjustments to
the market basket may have significant
time lag between product approval and
inclusion in the market basket. They
further explained that categories of drug
entrants may not match the current
price proxies utilized in the ESRD PPS,
requiring future revaluation.
Response: The market basket adjusts
payments for inflation on a yearly basis.
We agree that there may be a lag
between costs for items included in the
ESRDB market basket cost weights and
costs for newly added or excluded
expenses in the ESRD treatment bundle.
We note that any CMS PPS payment,
updated by a market basket, faces the
same potential lag. The data used to
construct cost weights for the ESRD
providers is based on Medicare Cost
Reports which are only available with a
lag. Additionally, CMS has found that
the cost weights for a market basket do
not change significantly from year to
year. As we have in the past, we will
continue to evaluate the ESRD cost
share weights on a regular basis and
propose changes to the market basket
should data indicate a substantial shift
in relative cost weights in providing
ESRD bundled services.
Comment: An organization of home
dialysis patients commented that the
functional categories defined for
dialysis medication are too broad and
could prevent people on dialysis from
receiving needed care and be
detrimental to innovation. The
commenter stated that in the future
there could be a new medication to help
with fluid management but patients
would be shut out of ever having the
option for a new fluid management
therapy. An LDO stated that, if
implemented, the proposed process
could jeopardize patient access to drugs
that are clinically superior to existing
drugs in the same functional category.
An organization of home dialysis
patients is hopeful that there are a
number of therapies that will offer
choice and better care to people who
have an illness. One new area of care is
in the form of biologics. In order to
incentivize new medications to come to
market, the home dialysis patient

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organization asked that CMS provide
additional payment for new drugs that
fit into the functional categories in order
to incentivize new medications to come
to market and to ensure they have the
opportunity for better care, choices and
treatment.
Response: There seem to be two
concerns expressed by the commenters.
The first is that the broad nature of the
functional categories will sweep new
drugs into the functional categories and
beneficiaries will not have access to the
drugs because the dialysis organizations
will choose not to use the new drugs,
whether because of contractual
obligations, affiliation with drug
manufacturers, or lack of additional
dollars in the base rate. The second
concern seems to stem from the first in
that the organizations will not use the
new drugs because they would not be
separately paid for using the new drugs.
Therefore, ESRD patients will not have
access to the new drugs.
To address the first issue, the primary
intent of the proposed approach is to
provide timely patient access to new
drugs for the treatment of ESRD. This
includes availability of both new drugs
that fit into an existing functional
category and drugs for which there is no
current functional category. The second
issue is a matter of reimbursement. As
indicated in the CY 2011 final rule, the
current ESRD PPS has dollars built into
the base rate for the drugs in the
functional categories. After a new drug
is approved by the FDA and assigned a
HCPCS code, CMS makes a
determination as to whether it is a renal
dialysis drug. If we determine that the
drug is a renal dialysis service drug,
then we are not permitted to pay for the
drug outside the ESRD PPS bundle.
We appreciate the concerns expressed
by the organization of home dialysis
patients regarding biologics. The
biologics currently included in the
ESRD PPS bundled payment are ESAs,
which are defined as renal dialysis
services in section 1881(b)(14)(B)(ii) of
the Act. When a new biologic other than
an ESA becomes available, we will treat
it as we do any other new drug.
Specifically, we will evaluate whether it
is a renal dialysis service and if it is,
whether it fits into a current functional
category.
In response to stakeholder concerns
regarding the availability and increased
cost of new drugs, we recognize that
newer drugs may be more costly;
however, the new drug may replace the
functional use of one or more drugs
within one or several functional
categories. Nonetheless, we understand
commenters’ concerns about the
potential cost of new drugs that fall into

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existing categories and we will consider
these unique situations in future
rulemaking.
Comment: A product manufacturer
pointed out that under the proposal,
new products would qualify as outlier
services, and if we fail to allow separate
payment at launch, there would be no
ASP upon which to base an outlier
payment. They recommend that we
consider how to avoid jeopardizing
beneficiary access by implementing an
outlier payment based on wholesale
acquisition cost (WAC) or another
readily available price.
Response: We agree with the
commenter that in the event we do not
establish an ASP, WAC could be used.
We consider WAC pricing to be a part
of the pricing methodologies specified
in section 1847A of the Act, and we
would use the methodologies available
to us under that authority in order to
accurately determine a price for the
calculation of outlier payments for new
injectable and intravenous drugs that fit
into one of the existing the functional
categories.
ii. Transitional Drug Add-On Payment
Adjustment
In the proposed rule (80 FR 37832),
we explained that we anticipate that
there may be new drugs that do not fall
within the existing ESRD PPS functional
categories and therefore, are not
reflected in the ESRD PPS bundled
payment. Where a new injectable or
intravenous product is used to treat or
manage a condition for which there is
not a functional category, we proposed
to pay for the new injectable or
intravenous product using a transitional
drug add-on payment adjustment under
the authority of section
1881(b)(14)(D)(iv) of the Act. We
proposed that the transitional drug addon payment adjustment would be based
on the ASP pricing methodology and
would be paid until we have collected
sufficient claims data for rate setting for
the new injectable or intravenous
product, but not for less than 2 years.
We explained that a 2-year timeframe is
necessary for adequate data collection,
rate-setting and regulation development.
We further explained that 2 years is
necessary for rulemaking purposes
because it is a year-long process that
involves developing policies based on
data, proposing those policies, allowing
for public comment, finalizing the
proposed rule, and allowing for a period
of time before the rule becomes
effective. We stated that the minimum
2-year period would also allow 1 year
for payment of the adjustment to be paid
before the beginning of a rulemaking
cycle in which we could propose to add

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the drug to the bundled payment. For
these reasons, we believed that 2 years
was the minimum amount of time
necessary to pay the adjustment and we
proposed the regulation text for the
transitional drug add-on payment
adjustment at § 413.234(c).
In the proposed rule (80 FR 37832),
we explained that paying a transitional
drug add-on payment adjustment for
new injectable and intravenous
products would allow us to analyze
price and utilization data for both the
injectable and, if applicable, any oral or
other forms of the drug in order to pay
for the drugs under the ESRD PPS. We
proposed that when a facility furnishes
the new injectable drug they would
report the drug to Medicare on the
monthly facility bill and would append
a CMS payment modifier that would
instruct our claims processing systems
to include a payment amount that
equals the Part B drug payment amount,
which is derived using the
methodologies specified under section
1847A of the Act, which can include
ASP + 6 percent pricing. We further
explained that this payment approach is
consistent with the policy we finalized
in the CY 2013 ESRD PPS final rule (77
FR 67463), which states that we would
use the ASP methodology, including
any modifications finalized in the
Physician Fee Schedule (PFS) final
rules, to compute outlier MAP amounts,
the drug add-on(formerly paid under the
composite rate and no longer paid as
part of the ESRD PPS), and any other
policy that requires the use of payment
amounts for drugs and biologicals that
would be separately paid absent the
ESRD PPS. We explained in the
proposed rule that we would issue subregulatory billing and payment guidance
along with the payment modifier in
conjunction with our final rule
guidance. Then, under the regulations at
§ 413.234(c), following payment of the
transitional drug add-on payment
adjustment, we would modify the ESRD
PPS base rate, if appropriate, to account
for the new injectable or intravenous
product.
In the proposed rule (80 FR 37833),
we noted that outlier payments would
not be available for new injectable or
intravenous products during the time in
which these products are paid for using
the new transitional drug add-on
payment adjustment. We explained that
while a new injectable drug or
biological being paid using the
transitional drug-add would otherwise
be considered an outlier service because
the drug or biological would have been
considered separately billable prior to
the implementation of the ESRD PPS,
we do not believe that it would be

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appropriate to include the payment
amount for the new drug or biological
in the outlier calculation during this
interim transition period. This is
because during the interim period we
would be making a payment for the
specific drug in addition to the base
rate, whereas outlier services have been
incorporated into the base rate. For
example, we have included the MAP
amount for EPO in the base rate and it
qualifies as an outlier. We noted that
when the product is reflected in the
base rate after payment of the
transitional drug add-on payment
adjustment, it would be considered
eligible for outlier payments discussed
in section II.B.2.c of this rule.
Comment: During the time in which
a drug is paid for using the transitional
drug add-on payment adjustment (2–3
years), a commenter stated that CMS
would need to determine how dialysis
facilities report new drug cost data. For
example, CMS would need to determine
whether it is appropriate to create a
specific data element within the dialysis
facility cost report to capture the cost of
the eligible new drugs during the
transition period and whether such data
should be reported without any artificial
cost limitations (otherwise imposed in
the cost-reporting process) to ensure
that, where appropriate, the true drug
costs are reflected within the ESRD PPS
base rate when the transition period
ends. The commenter explained that
based on the utilization data collected
during the transition period, CMS
would consider the prevalence of a new
drug as a measure of whether it is
essential for the delivery of dialysis
(that is, an ESRD-related drug) or
whether it should remain separately
billable.
For example, if the utilization data
show that a new drug is furnished to a
majority of ESRD patients, then it would
be considered ESRD-related, and the
ESRD PPS base rate would be adjusted
accordingly; conversely, if the data
show that less than a majority of
patients received the drug, then it
would remain separately billable
following the transition period. For
drugs to be incorporated into the ESRD
PPS, CMS should clarify how it will
analyze the cost data and track cost
following the transition period to ensure
that the calculation used was accurate
or whether revisions are required.
They also recommended that CMS
work with stakeholders to develop a
similar process so that transitional drug
add-on payments are available until the
ESRD bundle is appropriately
recalibrated to accommodate the new
class of products. They also
recommended that we adopt a process

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for determining when a drug is so costly
that the ESRD PPS payment would be
considered inadequate.
Response: We appreciate the
suggestions for revisions to the ESRD
cost report and the recommendation for
capturing utilization data for new
injectable and intravenous drugs used
for the treatment of ESRD, and we will
review the possibility of
operationalizing these suggestions in the
future. We recognize the importance of
making new therapies available to ESRD
patients and because of this, we will
include new drugs that are determined
to be renal dialysis services and fit into
current functional groups. We plan to
track utilization of all new renal dialysis
service drugs, including those currently
in the functional categories, those newly
added to the functional categories, and
those drugs that are candidates to be
included in newly-created functional
categories. We have heard from patients
that they want to have access to new
therapies and drugs. Through section
1881(b)(14)(A)(i) of the Act, the
Congress requires the Secretary to
implement the ESRD PPS, under which
a single payment is made to a provider
of services for renal dialysis services in
lieu of any other payment. The renal
dialysis services that are included in the
ESRD PPS bundle are described in
section 1881(b)(14)(B) of the Act and
include other items and services
furnished to individuals for the
treatment of ESRD. The statutory
definition of renal dialysis services is
not limited to those services furnished
to the majority of ESRD patients. Drugs
that were separately billable were
included in the ESRD PPS base rate, and
the in CY 2011 final rule, those drugs
were placed into categories. If renal
dialysis service drugs fit into those
functional categories, then they are
included. This gives the patients access
to those new drugs that fit into the
functional categories. With regard to the
recommendation that we adopt a
process for determining when a drug is
so costly that the ESRD PPS payment
would be considered inadequate, we are
concerned that establishing such a
process for these drugs would lead to
overpricing of drugs. We do, however,
understand commenters’ concerns and
will consider addressing this issue in
future rulemaking.
Comment: Some dialysis
organizations are most concerned that a
drug may be added to a functional
category even if there is no competition
for the new drugs in a given functional
category. When there is no competition
for a given drug, the commenters believe
facilities are vulnerable to increased
cost.

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Response: We believe the commenter
is referring to a new drug in a new
functional category with no other drug
in the category, leading to pricing
vulnerability for the dialysis facilities. If
the commenter is referring to what
occurred with Epogen, with pricing
being high due to a monopoly and lack
of market competition, it may be that
there will be only one drug in a new
functional category for several years. All
of the drugs in the current functional
categories are populated by drugs that
function well for the current ESRD
population. The inclusion of the new
drugs in these functional categories
provides access for the beneficiaries to
new renal dialysis services, including
the drugs for the treatment of ESRD.
When there is a new drug that does not
fit into the current functional categories,
a minimum of 2 years of utilization data
is required before we will assess
whether a functional category should be
created through notice-and-comment
rulemaking, as well as how to add the
drug to the ESRD base rate. We believe
it is in the best interest of the ESRD
beneficiary to make these drugs
available to them. We appreciate the
commenter sharing their concern with
us about competition within the
functional categories.
Comment: A commenter expressed
support for the use of the ASP pricing
methodology for the transitional drug
add-on payment adjustment for new
drugs and biologicals that do not fall
within the existing ESRD PPS functional
categories. However, an organization
representing small and medium dialysis
facilities and an MDO are concerned
that the proposed transitional add-on
payment is calculated based on ASP,
which has been shown not to be truly
reflective of the actual cost of the drug.
One organization pointed out that often
there is a data lag between ASP and the
actual cost of the drugs and as a result,
the transitional add-on payment may
not reflect the actual cost of the drug. A
drug manufacturer recommended that
the transitional drug add-on payment
adjustment be set at ASP + 6 percent
and the period of transition be set at 3
years.
Response: The ASP + 6 percent
pricing methodology is a part of the
pricing methodologies specified in
section 1847A of the Act, which also
include some wholesale acquisition cost
(WAC) pricing during the first quarter of
sales. We agree with the commenters
that ASP + 6 percent pricing may not
always be the most appropriate way to
calculate the transitional drug add-on
payment adjustment. Accordingly, we
are revising the regulation text at
413.234(c)(1) to refer to the pricing

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methodologies under section 1847A of
the Act, rather than ASP pricing
methodology, because these
methodologies include ASP, WAC, and
Average Wholesale Pricing. Information
regarding the pricing methodologies
specified in 1847A of the Act can be
found in Publication 100–04, Chapter
17—Drugs and Biologicals, section
20.1— MMA Drug Pricing—Average
Sales Price.
After consideration of the public
comments, we are finalizing the drug
designation process and the
corresponding regulation text at 42 CFR
413.234.
iii. Determination of When an Oral-Only
Renal Dialysis Service Drug Is No
Longer Oral-Only
Section 217(c)(1) of PAMA requires us
to adopt a process for determining when
oral-only drugs are no longer oral-only.
In our CY 2011 ESRD PPS final rule (75
FR 49038 through 49039), we described
oral-only drugs as those that have no
injectable equivalent or other form of
administration. In the proposed rule (80
FR 37833), we proposed to define the
term oral-only drug as part of our drug
designation process in our regulations at
42 CFR 413.234(a). For CY 2016, and in
accordance with section 217(c)(1) of
PAMA, we proposed that an oral-only
drug would no longer be considered
oral-only if an injectable or other form
of administration of the oral-only drug
is approved by the FDA. We proposed
to codify this process in our regulations
at 42 CFR 413.234(d). In addition, we
noted that the FDA posted lists of all
drug dosages and forms of
administration that are approved for use
in the United States. For example, one
of these lists can be viewed at http://
www.fda.gov/drugs/
developmentapprovalprocess/forms
submissionrequirements/electronic
submissions/datastandardsmanual
monographs/ucm071666.
A link for the drug and biologic
approval and investigational new drug
activity reports can be found at the
following link: http://www.fda.gov/
Drugs/DevelopmentApprovalProcess/
HowDrugsareDevelopedandApproved/
DrugandBiologicApprovalReports/
default.htm.
In the CY 2011 ESRD PPS proposed
and final rules (74 FR 49929 and 75 FR
49038), we noted that the only oral-only
drugs and biologicals that we identified
were phosphate binders and
calcimimetics, which fall into the bone
and mineral metabolism category. We
defined these oral-only drugs as renal
dialysis services in our regulations at
§ 413.171 (75 FR 49044), delayed the
Medicare Part B payment for these oral-

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
only drugs until CY 2014 at
§ 413.174(f)(6), and continued to pay for
them under Medicare Part D.
In the proposed rule (80 FR 37833),
we explained that under our proposed
drug designation process at
§ 413.234(b)(1), if injectable or
intravenous forms of phosphate binders
or calcimimetics are approved by the
FDA, these drugs would be considered
reflected in the ESRD PPS bundled
payment because these drugs are
included in an existing functional
category so no additional payment
would be available for inclusion of these
drugs.
However, we recognized the
uniqueness of these drugs and we
proposed not to apply this process to
injectable or intravenous forms of
phosphate binders and calcimimetics
when they are approved because
payment for the oral forms of these
drugs was delayed and dollars were
never included in the base rate to
account for these drugs. As we
discussed above, we determined in CY
2011 that both classes of drugs
(phosphate binders and calcimimetics)
were furnished for the treatment of
ESRD and are therefore renal dialysis
services. In addition, in the proposed
rule we explained that we had
utilization data for both classes of drugs
because the oral versions existed at that
time. However, for reasons discussed in
the CY 2011 ESRD PPS final rule (75 FR
49043 through 49044), we chose to
delay their inclusion in the ESRD PPS
bundled payment.
Therefore, in the proposed rule, we
proposed that when a non-oral version
of a phosphate binder or calcimimetic is
approved by the FDA, we would
include the oral and any non-oral
version of the drug in the ESRD PPS
bundled payment. Specifically, we
proposed that we would develop a
computation for the inclusion of the oral
and non-oral forms of the phosphate
binder or calcimimetic so that the drug
could be appropriately reflected in the
ESRD PPS base rate. We explained that
we would not take this approach for any
subsequent drugs that are approved by
the FDA and fall within the bone and
mineral metabolism functional category
(or any other functional categories)
because we did not delay payment for
any other drugs or biologicals for which
we had 2007 utilization data when the
ESRD PPS was implemented in CY 2011
and, therefore, we believe the other
functional categories appropriately
reflect renal dialysis service drugs and
biologicals.
Comment: A drug manufacturer
expressed concern that the proposal did
not address the computation or timing

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for adding the oral-only drugs into the
bundled payment once an injectable or
intravenous version is approved for use.
The commenter assumes this process
would be done through notice and
comment rulemaking and urged CMS to
specify this fact in the final rule. They
pointed out the new drugs come on to
the market throughout the year, which
may or may not comport with the
annual rulemaking cycle for the ESRD
PPS.
Response: We intend to use noticeand-comment rulemaking to include the
oral and non-oral forms of calcimimetics
and phosphate binders in the ESRD PPS
bundled payment after the payment of
the transitional drug add-on payment
adjustment. We will pay for
calcimimetics and phosphate binders
when those drugs are no longer oralonly drugs, that is, FDA approved and
have an HCPCS code, using a
transitional drug add-on payment
adjustment calculated based on the
payment methodologies in section
1847A of the Act. Once the injectable
version is approved and has an HCPCS
code we will issue a change request to
provide notice that the injectable is
available. Therefore, both the injectable
and oral form will be paid under the
ESRD PPS bundled payment using that
adjustment. However, we note, any
other new injectable or intravenous drug
or biological will be assessed as to
whether it fits into one of the functional
categories. Injectable and intravenous
drugs that fit into a functional category
will not go through notice-and-comment
rulemaking. Rather, they will be added
to the functional categories, and thus
the ESRD PPS, using a subregulatory
process.
Comment: One of the drug
manufacturers recommended that in the
case of oral equivalents, that first in
class drugs receive the full transitional
drug add-on payment adjustment, with
stepped down payments for new drugs
in the same class entering the market
during the transitional payment period
for the first in class product.
One commenter stated that regardless
of the method CMS uses to add these
oral-only drugs to the ESRD PPS base
rate, their inclusion should result in an
increase in the base rate. They believe
that PAMA’s requirement to update
payment rates using data from the most
recent year available applies
notwithstanding the budget neutrality
adjustment that applied when the ESRD
PPS was implemented in 2011.
Response: It is unclear whether the
drug manufacturer is referring to the
oral form of existing oral-only drugs, or
oral equivalents of drugs for which there
are other types of administration. Oral

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69025

equivalents of drugs with another form
of administration, as well as oral-only
drugs other than calcimimetics and
phosphate binders, will be subject to the
drug designation process. However, for
phosphate binders and calcimimetics—
for which there is a functional
category—but no money is in the base
rate—we will utilize the transitional
drug add-on payment adjustment to
collect utilization data before adding
this drug to the ESRD PPS base rate.
Once money has been included in the
base rate for an injectable or intravenous
calcimimetic and phosphate binder in
the bone and mineral metabolism
functional category, any future
injectable or intravenous drugs in this
category will be added directly to the
functional category and, thus, the
bundled payment.
Comment: With regard to the
definition of when an oral-only drug is
no longer considered oral-only, two
drug manufacturers expressed concern
that the proposed regulatory text does
not include an FDA reference as the
standard for determining whether the
FDA has approved another form of
administration for a specific drug. They
note that CMS provided a hyperlink in
the proposed rule, but unfortunately,
the link did not work. They
recommended that we clarify in 42 CFR
413.234(d) whether we will specifically
rely on the FDA publication ‘‘Approved
Drug Products with Therapeutic
Equivalence Evaluations’’ (commonly
known as the FDA Orange Book) for
determining whether an oral drug has
an injectable or non-oral form and is no
longer in the oral-only category and
should be included in the ESRD PPS
payment. They point out that the FDA
Orange Book identifies all drug products
(including dosage forms, routes of
administration, etc.) approved by the
FDA. To help define terms used in these
resources, they suggested we cite an upto-date FDA Web site or resource that
includes standards for identifying all
drug dosage forms and routes of
administration that are approved for
use. If CMS is not using the FDA Orange
Book, the commenters indicated that
CMS should be specific in how it will
determine whether a non-oral form of
the oral-only drug exists.
A patient organization advocates that
before oral-only drugs are incorporated
into the bundle, certain measures must
be in place to ensure that drugs are
appropriate for patients and that costs
for the drugs are accurately calculated
and paid for. Two pharmaceutical
manufacturers recommended that, to
avoid confusion, CMS should clarify in
the regulation text that CMS will
exclude a drug that meets the definition

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of an oral-only drug and has no
injectable or other form of
administration.
Response: We thank the commenters
for making us aware of the non-working
link and have corrected that link in this
final rule. The publication titled
‘‘Approved Drug Products with
Therapeutic Equivalence Evaluations’’
(commonly known as the Orange Book)
identifies drug products approved on
the basis of safety and effectiveness by
the Food and Drug Administration
(FDA) under the Federal Food, Drug,
and Cosmetic Act (the Act). The
‘‘Orange Book Search’’ was added to the
FDA Web site October 31, 1997. We will
utilize the Orange Book to assist us in
determining whether an injectable or
other form of administration of an oralonly drug has been approved by the
FDA. When an oral-only drug already
determined to be a renal dialysis service
is formulated for injectable or
intravenous use it will no longer be
considered an oral-only drug. The new
injectable or intravenous form of the
oral-only drug will be assessed as to
whether it fits into one of the functional
groups. If it does not fit into the current
functional groups, a new functional
group will be proposed through noticeand-comment rulemaking. Other than
oral drugs included in the ESRD PPS
bundle that were composite rate drugs,
if there is no injectable or intravenous
form of an oral-only drug used for the
treatment of ESRD, then it is not
considered a part of the ESRD PPS
bundle, and is paid for separately.
Regarding the costs for the drugs being
accurately calculated and paid for, we
appreciate the commenter’s concerns
and anticipate addressing the possibility
of these unique situations in future
rulemaking.
Regarding the recommendation that
CMS should clarify in the regulation
text that CMS will exclude a drug that
meets the definition of an oral-only drug
and has no injectable or other form of
administration, we note that the
Congress excluded oral-only drugs from
the ESRD PPS payment bundle.
Payments for oral-only ESRD drugs are
not included under the ESRD PPS until
2024 as required by section 632(b)(1) of
ATRA, as amended by section 217(a) of
PAMA. Section 204 of ABLE further
amended section 632(b)(1) of ATRA to
provide that payment for oral-only
ESRD drugs cannot be made under the
ESRD PPS prior to January 1, 2025.
Comment: A national dialysis
organization, LDOs, and a professional
association stated that when an
injectable or intravenous calcimimetic
has been approved by the FDA and
becomes available, many factors will

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need to be assessed, including clinical
guidelines and indications, which may
vary between injectable or intravenous
and oral products; utilization and costs
per treatment; and range of dosing. One
LDO believes that there is insufficient
information available regarding the
future injectable or intravenous and oral
products upon which to base sound
payment policy. They pointed out that
the oral calcimimetics are used by onethird of their patients. That sizeable
population combined with the
significant cost of the drug makes it
unlikely that the current outlier policy
would be sufficient to address
utilization differences in patient
population among facilities. They
requested that CMS allow the injectable
or intravenous equivalent of oral
Sensipar to remain outside of the
bundle for a transition period. Data
collected from this period can guide the
formation of reimbursement policy to
ensure that beneficiaries have proper
access to the therapy, that is, injectable,
intravenous, or oral, which is best for
them according to the severity of their
secondary hyperparathyroidism.
A national dialysis organization
recommends that at the end of a 2-year
transition period, CMS would value the
cost of the injectable or intravenous
calcimimetic under Part B, including
beneficiary costs, and add that amount
to the base rate, if utilization warrants
the costs to be spread across all patients.
Relying upon the Part D spending data
alone would assume that oral drug
spending is the same as it would be for
an injectable or intravenous, but very
little is known about how the drug will
be used in the ESRD population. Some
commenters are requesting a 2-year
delay in incorporating payment for
calcimimetics under the ESRD PPS. In
addition, they expressed concern that
spending for calcimimetics under Part D
does not represent all the utilization and
dollars because some ESRD patients
have no drug plan or are subject to the
Part D ‘‘donut hole’’ due to cost. The
organization expects that migration of
payment from Part D to Part B will
increase utilization among this group.
The organization pointed out that
including calcimimetics under the
ESRD PPS will increase Part B
expenditures and that the ESRD PPS
cannot absorb the cost of calcimimetics
without a substantial increase to the
base rate. Another large stakeholder
supports a transitional payment for
injectable or intravenous versions of
phosphate binders and calcimimetics
because the bundled payment could be
improperly inflated by a higher costing
injectable or intravenous version that is

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only benefitting a subset of patients, but
all patients would be subjected to a
higher coinsurance. Conversely, there
could be superior benefit of the
injectable or intravenous version that
renders the utilization of the oral
versions lower.
A drug manufacturer asked how CMS
would determine the cost associated
with a new drug if there is no utilization
data, what sources of data CMS would
use to measure utilization of an oral
drug by beneficiaries not enrolled in
Part D and whether payment rates could
be adjusted mid-year to provide timely
payment for new drugs upon approval
or launch. They expressed concern that
not having utilization for the 30 percent
of beneficiaries without Part D coverage
will likely result in an inappropriate
payment amount. The manufacturer also
expressed concern that payments for
new injectable or intravenous versions
of oral-only drugs will also be
inaccurate if the amount is based solely
on Part D data. The manufacturer
recommended that CMS conduct
analyses to determine the adherence
rate for the oral-only products using Part
D claims to measure the medication
possession ratio (MPR) and, assuming
2100 percent adherence under Part B,
estimate the gap that needs to be
accounted for in the payment
computation. MPR has been shown to
be a useful metric in measuring patient
adherence.
A professional association agrees with
paying ASP+6percent for injectable or
intravenous treatments for bone and
mineral disorders until the utilization of
the new product is sufficiently mature
to be subsumed into the PPS with
accurate cost and use data.
Another commenter was also
concerned about the timing of the rollout of the injectable or intravenous
phosphate binders and calcimimetics
with the annual rulemaking cycle for
the ESRD PPS. They are concerned
about the ability for dialysis facilities to
adopt a new non-oral calcimimetic or
phosphate binder if there is no
opportunity for payment until the next
calendar year.
Response: We thank the commenters
for their input regarding the process for
including calcimimetics and phosphate
binders in the ESRD PPS bundled
payment. We agree with the industry
that injectable or intravenous phosphate
binders and calcimimetics that come on
the market in the future could have
different clinical indications, utilization
patterns, and costs than the oral-only
versions and we believe it is appropriate
to pay for these drugs using the
transitional drug add-on payment
adjustment for a minimum of 2 years.

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Once the injectable or intravenous
phosphate binder or calcimimetic are
FDA approved and have a HCPCS code,
we will issue a change request (as stated
above) to pay for all forms of the
phosphate binder or calcimimetic using
a transitional drug add-on payment
based on the payment methodologies
under section 1847A of the Act, which
could include ASP+6 percent, for a
period of at least 2 years. This will
allow us to collect data reflecting
current utilization of both the oral and
injectable or intravenous forms of the
drugs, as well as payment patterns and
beneficiary co-pays before we add these
drugs to the ESRD PPS bundle. During
this period we will not pay outlier
payments for these drugs. At the end of
the 2 or more years, the methodology for
including the phosphate binders and
calcimimetics into the ESRD PPS
bundled payment will be adopted
through notice-and-comment
rulemaking.
Regarding the drug manufacturer’s
recommendation that CMS conduct
analyses to determine the adherence
rate for the oral-only products using Part
D claims to measure the medication
possession ratio (MPR) because MPR
has been shown to be a useful metric in
measuring patient adherence, we will
rely on utilization data from the dialysis
facilities, which are required to report
all separately billable drugs.
We appreciate the support of the
professional association for the use of
the ASP pricing methodology for the
transitional drug add-on payment
adjustment and the minimum 2-year
timeframe for payment of the
adjustment, which we also agree is
necessary to collect utilization data for
these drugs.
After consideration of public
comments, we are finalizing the
definition of oral-only drug at
413.234(a), which provides that an oralonly drug is a drug or biological with no
injectable equivalent or other form of
administration other than an oral form.
We are also finalizing our process at 42
CFR 413.234(d) for determining that an
oral only drug is no longer considered
oral-only when a non-oral version of the
oral-only drug is approved by the FDA.
We will include the oral and any nonoral version of the drug in the ESRD PPS
bundled payment when it is no longer
considered an oral-only drug under this
regulation. For at least 2 years we will
pay for the existing oral-only drugs—
phosphate binders and calcimimetics—
using the transitional drug add-on
payment adjustment, which will be
calculated based on the payment
methodologies under section 1847A of
the Act. We will add the oral and non-

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oral forms of the phosphate binders and
calcimimetics to the ESRD PPS bundled
payment through notice-and-comment
rulemaking. For future oral-only drugs
for which a non-oral form of
administration comes on the market, we
will apply our drug designation process
as we would for all other new drugs.
4. Delay of Payment for Oral-Only Renal
Dialysis Services
As we discussed in the CY 2014 ESRD
PPS final rule (78 FR 72185 through
72186) and again in the CY 2015 ESRD
PPS final rule (79 FR 66147 through
66148), 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 provider of
services or a renal dialysis facility for
renal dialysis services in lieu of any
other payment. Section 1881(b)(14)(B) of
the Act defines renal dialysis services,
and subclause (iii) of such 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 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 used for the treatment of
ESRD (other than ESAs and any oral
form of ESAs, which are included under
clause (ii) of section 1881(b)(14)(B) of
the Act), but also all oral drugs and
biologicals used for the treatment of
ESRD and furnished under title XVIII of
the Act. We also concluded that, to the
extent oral-only drugs or biologicals
used for the treatment of ESRD do not
fall within clause (iii) of section
1881(b)(14)(B), such drugs or biologicals
would fall under clause (iv) of such
section, and constitute other items and
services used for the treatment of ESRD
that are not described in clause (i) of
section 1881(b)(14)(B).
We finalized and promulgated the
payment policies for oral-only renal
dialysis service drugs or biologicals in
the CY 2011 ESRD PPS final rule (75 FR
49038 through 49053), where we
defined renal dialysis services at 42 CFR
413.171 as including other drugs and
biologicals that are furnished to
individuals for the treatment of ESRD
and for which payment was made
separately prior to January 1, 2011
under Title XVIII of the Act, including
drugs and biologicals with only an oral
form. Although we included oral-only
renal dialysis service drugs and
biologicals in the definition of renal
dialysis services in the CY 2011 ESRD
PPS final rule (75 FR 49044), we also
finalized a policy to delay payment for

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69027

these drugs under the PPS until January
1, 2014. We stated that there were
certain advantages to delaying the
implementation of payment for oralonly drugs and biologicals, including
allowing ESRD facilities additional time
to make operational changes and
logistical arrangements in order to
furnish oral-only renal dialysis service
drugs and biologicals to their patients.
Accordingly, we codified the delay in
payment for oral-only renal dialysis
service drugs and biologicals at 42 CFR
413.174(f)(6), and provided 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, ATRA was
enacted. Section 632(b) of ATRA
precluded the Secretary from
implementing the policy under 42 CFR
413.176(f)(6) relating to oral-only renal
dialysis service drugs and biologicals
prior to January 1, 2016. Accordingly, in
the CY 2014 ESRD PPS final rule (78 FR
72185 through 72186), we delayed
payment for oral-only renal dialysis
service drugs and biologicals under the
ESRD PPS until January 1, 2016. We
implemented this delay by revising the
effective date at § 413.174(f)(6) for
providing payment for oral-only renal
dialysis service drugs under the ESRD
PPS from January 1, 2014 to January 1,
2016. In addition, we changed the date
when oral-only renal dialysis service
drugs and biologicals would be eligible
for outlier services under the outlier
policy described in § 413.237(a)(1)(iv)
from January 1, 2014 to January 1, 2016.
On April 1, 2014, PAMA was enacted.
Section 217(a)(1) of PAMA amended
section 632(b)(1) of ATRA, which now
precludes the Secretary from
implementing the policy under 42 CFR
413.174(f)(6) relating to oral-only renal
dialysis service drugs and biologicals
prior to January 1, 2024. We
implemented this delay in the CY 2015
ESRD PPS final rule (79 FR 66262) by
modifying the effective date for
providing payment for oral-only renal
dialysis service drugs and biologicals
under the ESRD PPS at § 413.174(f)(6)
from January 1, 2016 to January 1, 2024.
We also changed the date in
§ 413.237(a)(1)(iv) regarding outlier
payments for oral-only renal dialysis
service drugs made under the ESRD PPS
from January 1, 2016 to January 1, 2024.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37834) we stated that on
December 19, 2014, section 204 of ABLE
was enacted, which delays the inclusion
of renal dialysis service oral-only drugs
and biologicals under the ESRD PPS
until 2025. It amended section 632(b)(1)

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of ATRA, as amended by section
217(a)(1) of PAMA by striking ‘‘2024’’
and inserting ‘‘2025.’’ We explained that
as we did in the CY 2014 ESRD PPS
final rule (78 FR 72186) and the CY
2015 ESRD PPS final rule (79 FR 66148)
referenced above, we proposed to
implement this delay by modifying the
effective date for providing payment for
oral-only renal dialysis service drugs
and biologicals under the ESRD PPS at
42 CFR 413.174(f)(6) from January 1,
2024 to January 1, 2025. In addition, we
proposed to change the date in
§ 413.237(a)(1)(iv) regarding outlier
payments for oral-only renal dialysis
service drugs made under the ESRD PPS
from January 1, 2024 to January 1,
2025.We stated that we continue to
believe that oral-only renal dialysis
service drugs and biologicals are an
essential part of the ESRD PPS bundle
and should be paid for under the ESRD
PPS.
We did not receive any comments on
implementing the delay by modifying
the effective date for providing payment
for oral-only renal dialysis service drugs
and biologicals under the ESRD PPS at
42 CFR 413.174(f)(6) from January 1,
2024 to January 1, 2025. In addition we
did not receive comments on the change
to the date in § 413.237(a)(1)(iv)
regarding outlier payments for oral-only
renal dialysis service drugs made under
the ESRD PPS from January 1, 2024 to
January 1, 2025. Therefore, we are
finalizing the language at 42 CFR
413.174(f)(6) and § 413.237(a)(1)(iv) as
proposed.
5. Reporting Medical Director Fees on
ESRD Facility Cost Reports
In the 1980s, following audits by the
Office of the Inspector General and the
Medicare administrative contractors
(MACs) that revealed instances in which
independent facilities compensated
their medical directors and
administrators excessively, CMS set
limits for reasonable compensation
when reporting medical director fees on
ESRD facility cost reports. End-Stage
Renal Disease Program; Prospective
Reimbursement for Dialysis Services
and Approval of Special Purpose Renal
Dialysis Facilities, 48 FR 21254, 21261
through 21262 (May 11, 1983); EndStage Renal Disease Program: Composite
Rates and Methodology for Determining
the Rates, 51 FR 29404, 29407 (Aug. 15,
1986). In Transmittal 12, issued in July
1989, of the Provider Reimbursement
Manual Part I, Chapter 27, titled,
‘‘Reimbursement for ESRD and
Transplant Services,’’ CMS adopted a
policy for reporting allowable
compensation for physician owners and
medical directors of ESRD facilities and

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set a limit at the Reasonable
Compensation Equivalent (RCE) limit of
the specialty of internal medicine for a
metropolitan area of greater than one
million people.
In the Provider Reimbursement
Manual Part I, Chapter 27—Outpatient
Maintenance Dialysis Services, 2723—
Responsibility of Intermediaries, we
explain that the intermediary reviews
facility cost reports to ensure that the
compensation paid to medical directors
does not exceed the RCE limit. The RCE
limit for a board-certified physician of
internal medicine has been updated
over the interim years. The most recent
update to the RCE limit was finalized in
the FY 2015 IPPS final rule published
on August 22, 2014 (79 FR 50157
through 50162). In that rule, CMS
finalized an RCE limit of $197,500 per
year beginning in CY 2015 for a boardcertified physician of internal medicine.
The requirements for medical
directors of ESRD facilities are
discussed in the Conditions for
Coverage for ESRD facilities, which
were updated in 2008 to reflect
advances in dialysis technology and
standard care practices since the
requirements were last revised in their
entirety in 1976. Conditions for
Coverage for ESRD Facilities, 73 FR
20470 (April 15, 2008). With the update
to the Conditions for Coverage, all
Medicare-certified ESRD facilities are
required to have a medical director who
is responsible for the delivery of patient
care and outcomes in the facility as
codified in 42 CFR part 494, titled
Conditions for Coverage for End-Stage
Renal Disease Facilities. We discuss the
qualifications of an ESRD facility
medical director in 42 CFR 494.140(a),
titled Standard: Medical director, where
we require that a medical director must
be a board-certified physician in
internal medicine or pediatrics by a
professional board and have completed
a board-approved training program in
nephrology with at least 12 months of
experience providing care to patients
receiving dialysis, but if such a
physician is not available, another
physician may direct the facility, subject
to the approval of the Secretary.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37834), we explained that
the RCE limit of $197,500 per year for
a board-certified physician of internal
medicine may be less than the expense
a facility incurs if they employ a boardcertified nephrologist as their medical
director.In that rule, we stated that we
could appreciate that the reasonable
compensation limits are generally used
when determining payment for
providers that are reimbursed on a
reasonable cost basis; they typically are

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not used in prospective payment
systems, like the ESRD PPS, that update
payment rates using market basket
methodologies. We further stated that
we believe the application of the RCE
limit is no longer relevant now that 100
percent of ESRD facilities are paid
under the ESRD PPS beginning in CY
2014.
Therefore, we proposed that
beginning in CY 2016 we would
eliminate the RCE limit for reporting an
ESRD facility’s medical director fees on
ESRD facility cost reports. We noted
that the elimination of the RCE limit
does not supersede or alter in any way
the reporting guidance furnished in the
Provider Reimbursement Manual, Part
2, Chapter 42, sections 4210, 4210.1 and
4210.2. In addition, we stated that we
will continue to apply the ESRD facilityspecific policy under which the time
spent by a physician in an ESRD facility
on administrative duties is limited to 25
percent per facility unless
documentation is furnished supporting
the claim. In addition, if an individual
provides services to more than one
dialysis facility, the individual’s time
must be prorated among the different
facilities and may not exceed 100
percent.
The comments and our responses are
set forth below.
Comment: Several national dialysis
organizations expressed support for the
CMS proposal to eliminate limits on
medical director fees reported on cost
reports. The commenters requested that
we apply this policy change to the 2015
cost reports.
Response: We thank the commenters
for their support of the proposal to
eliminate the limit for medical director
fees on the ESRD facility cost report.
This policy change is effective January
1, 2016 for CY 2016. Since the policy is
effective for CY 2016, we are not able to
apply this policy to cost reports before
the effective date and therefore it will
not be applicable to the CY 2015 cost
reports.
Comment: MedPAC urged CMS to
maintain a limit for reporting an ESRD
facility’s medical director fees on ESRD
facility cost reports. They believe the
current RCE limit on the medical
director compensation creates pressure
on facilities to constrain their
compensation costs and make better use
of beneficiaries’ and taxpayers’
resources. In addition, eliminating the
RCE limit may decrease some facilities’
negotiating leverage with prospective
medical directors, which in turn, will
lead to increased compensation costs.
The commenter explained that as
providers’ costs increase, all other
things being equal, the resulting

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
Medicare margin will decrease.
MedPAC suggested that, as an
alternative to the current RCE limit or
no compensation limit, that we adopt a
limit used by other Executive branch
agencies such as the Title 38 Physician
and Dentist Pay under which pay table
2 includes nephrology as a covered
clinical specialty and the pay range for
the most senior management level is
$140,000 to $250,000.
Response: We do not believe that
perpetuating a limit for the medical
director fee is appropriate for the
reasons that we discuss above,
including that ESRD facilities are no
longer reimbursed on a cost basis. This
policy change will not affect the ESRD
PPS annual update or increase Medicare
spending. In addition, MACs perform a
general reasonableness evaluation of a
person’s compensation by comparing it
with the compensation paid to other
individuals in similar circumstance. We
believe that the elimination of the limit
will more accurately represent facility
costs on the cost report that is used for
margin analysis or refinements to the
payment system.
Based on the comments that we
received, we are finalizing that
beginning in CY 2016 we are
eliminating the RCE limit for reporting
an ESRD facility’s medical director fees
on ESRD facility cost reports.

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C. Clarifications Regarding the ESRD
PPS
1. Laboratory Renal Dialysis Services
Section 1881(b)(14)(B)(iv) of the Act
requires diagnostic laboratory tests not
included under the composite payment
rate (that is, laboratory services
separately paid prior to January 1, 2011)
to be included as part of the ESRD PPS
payment bundle. In the CY 2011 ESRD
PPS final rule (75 FR 49053), we defined
renal dialysis services at 42 CFR
413.171 to include items and services
included in the composite payment rate
for renal dialysis services as of
December 31, 2010 and diagnostic
laboratory tests and other items and
services not included in the composite
rate that are furnished to individuals for
the treatment of ESRD. The composite
payment rate covered routine items and
services furnished to ESRD beneficiaries
for outpatient maintenance dialysis,
including some laboratory tests. We
finalized a policy to include in the
definition of laboratory tests under 42
CFR 413.171(4) those laboratory tests
that were separately billed by ESRD
facilities as of December 31, 2010 and
laboratory tests ordered by a physician
who receives monthly capitation
payments (MCPs) for treating ESRD

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patients that were separately billed by
independent laboratories (75 FR 49055).
We determined the average Medicare
Allowable Payment (MAP) amount was
$8.40, as listed on Table 19 titled,
‘‘Average Medicare Allowable Payments
for composite rate and separately
billable services, 2007, with adjustment
for price inflation to 2009’’ (75 FR
49075). This amount included the
laboratory tests that were already
included under the composite rate, as
well as laboratory tests billed separately
by ESRD facilities (that is, all laboratory
services paid on the 72X claim
furnished in CY 2007) and laboratory
tests that were ordered by Monthly
Capitation Payment (MCP) practitioners
that were separately billed by
independent labs in CY 2007.
Through the comments we received
on the CY 2011 ESRD PPS proposed
rule, we learned that holding the ESRD
facilities responsible for any laboratory
test that is furnished in the ESRD
facility or ordered by an MCP could
have unintended consequences to
patients (75 FR 49054). In particular,
commenters noted that in many
instances the MCP physician is the
ESRD patient’s primary care physician
and often orders laboratory tests that are
unrelated to the patient’s ESRD. These
commenters raised concerns that
requiring ESRD facilities to pay for these
tests would result in large numbers of
tests that are unrelated to ESRD being
included in the ESRD bundle. We
agreed with commenters that it would
be in the best interest of the
beneficiaries for an ESRD facility to
draw blood for laboratory tests that are
not for the treatment of ESRD during the
dialysis session.
Commenters also requested that we
produce a list of the ESRD-related
laboratory tests that are included in the
ESRD PPS bundle (75 FR 49054). We
received several laboratory service lists
from the commenters that they
considered to be generally furnished for
the treatment of ESRD. While there was
agreement for many of the laboratory
services, the lists were inconsistent and
lacked stakeholder consensus. When
Medicare provides a payment for a
benefit that is based on a bundle of
items and services, CMS establishes
claims processing edits that prevent
payment in other settings for items and
services that are identified as being
accounted for in the bundled payment.
Therefore, we needed to develop a list
of ESRD-related laboratory tests to
implement claims processing edits that
prevent payment in other settings for
items and services that are identified as
renal dialysis services to ensure that
payment is not made to independent

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69029

laboratories for ESRD-related laboratory
tests. Under the ESRD PPS we call these
edits consolidated billing (CB)
requirements.
We performed a clinical review of the
lists provided by the industry and the
laboratory tests reported in the claims
data to determine which laboratory tests
are routinely furnished to ESRD
beneficiaries for the treatment of ESRD.
Our clinical review resulted in Table F
in the Addendum of the CY 2011 ESRD
PPS final rule as the list of laboratory
tests that are subject to the ESRD PPS
CB requirements (75 FR 49213). We
acknowledged in that rule that the list
of laboratory tests displayed in Table F
is not an all-inclusive list and we
recognized that there are other
laboratory tests that may be furnished
for the treatment of ESRD (75 FR 49169).
We stated in the Medicare Benefit
Policy Manual, Pub. 100–02, Chapter
11, section 20.2, that the determination
of whether a laboratory test is ESRDrelated is a clinical decision for the
ESRD patient’s ordering practitioner. If
a laboratory test is ordered for the
treatment of ESRD, then the laboratory
test is not paid separately.
Due to the commenters’ concerns that
ESRD beneficiaries should be able to
have blood drawn for non-ESRD-related
laboratory tests in the ESRD facility, we
created a methodology for allowing
ESRD facilities to receive separate
payment when a laboratory service is
furnished for reasons other than for the
treatment of ESRD (75 FR 49054). We
created CB requirements using a
modifier to allow independent
laboratories, hospital-based laboratories,
or ESRD facilities (with the appropriate
clinical laboratory certification in
accordance with the Clinical Laboratory
Improvement Amendments), to receive
separate payment. This modifier, which
is called the AY modifier, serves as an
attestation that the item or service is
medically necessary for the patient but
is not being used for the treatment of
ESRD.
In the CY 2016 ESRD PPS proposed
rule (80 FR 37835), we explained that
following publication of the CY 2011
ESRD PPS final rule, we had received
numerous inquiries regarding Table F
(75 FR 49213). Stakeholders have
communicated to us that having a list of
laboratory services that is not allinclusive is confusing because there is
no definitive guidance on which
laboratory tests are included in, and
excluded from, the ESRD PPS. They
further stated that leaving the
determination of when a laboratory test
is ordered for the treatment of ESRD to
the practitioner creates inconsistent
billing practices and potential overuse

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

of the AY modifier. Stakeholders stated
that practitioners can have different
positions on when a laboratory test is
being ordered for the treatment of ESRD.
For example, some practitioners may
believe that laboratory tests ordered
commonly for diabetes could be
considered as for the treatment of ESRD
because in certain situations a patient’s
ESRD is a macrovascular complication
of the diabetes. Commenters believe
these varying perspectives among
practitioners can translate into
inconsistent billing practices.
In the proposed rule (80 FR 37835
through 37836), we also explained that
stakeholders have expressed concern
about potential overuse of the AY
modifier because they are aware that
CMS monitors the claims data for trends
and behaviors. The industry’s position
is that if there is a laboratory service
that is subject to the CB requirements,
it is because CMS has determined that
test to be routinely furnished for the
treatment of ESRD and if certain tests
are frequently reported with the AY
modifier, then those laboratories or
ESRD facilities could appear to be
inappropriately billing Medicare.
In the proposed rule (80 FR 37836) we
explained that while we recognize
stakeholders’ concerns, for CY 2016, we
did not make a proposal to change the
laboratory services policy and reiterated
that any laboratory test furnished to an
ESRD beneficiary for the treatment of
ESRD is considered to be a renal
dialysis service and is not payable
outside of the ESRD PPS. We explained
that we continue to believe that it is
necessary to use a list of laboratory
services that are routinely furnished for
the treatment of ESRD for enforcing the
CB requirements. In addition, we
continue to believe it is convenient for
ESRD beneficiaries to have their blood
drawn at the time of dialysis for
laboratory testing for reasons other than
for the treatment of ESRD.
In the proposed rule (80 FR 37836) we
stated that we have included
appropriate payments into the base rate
to account for any laboratory test that a
practitioner determines to be used for
the treatment of ESRD. We explained
that it is important that medical
necessity be the reason for how items
and services are reported to Medicare.
When services are reported
appropriately, payments are made
appropriately out of the Trust Fund and
ESRD beneficiaries are not unfairly
inconvenienced by constraints placed
upon them because a certain laboratory
test is or is not included in the ESRD
PPS. Therefore, in order to maintain
practitioner flexibility for ordering tests
believed to be medically necessary for

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the treatment of ESRD, and have those
tests included and paid under the ESRD
PPS, we did not make a proposal to
adopt a specific list of laboratory
services that are always considered
furnished for the treatment of ESRD.
We solicited comment on the current
list of laboratory services that is used for
the ESRD PPS CB requirements to
determine if there is consensus among
stakeholders regarding whether the list
includes those laboratory tests that are
routinely furnished for the treatment of
ESRD. Table 9is the list of laboratory
tests that is used for the CB
requirements. We explained in the
proposed rule (80 FR 37836) that we
agree with the stakeholders that there
can be different interpretations among
practitioners as to what is considered to
be furnished for the treatment of ESRD
and that there can be some views that
are more conservative than others.
Furthermore it is the patient’s ordering
practitioner who makes the clinical
determination of whether a laboratory
test is for the treatment of ESRD.
We did not receive comments from
stakeholders indicating if the list of
laboratory services used for CB
requirements are or are not routinely
furnished for the treatment of ESRD.
In the proposed rule (80 FR 37836),
we stated that in the context of the
clarification, we proposed to remove the
lipid panel from the CB list. As we
stated in the CY 2013 ESRD PPS final
rule (77 FR 67470), it was our
understanding that the lipid panel was
routinely used for the treatment of
ESRD. We explained that because some
forms of dialysis, particularly peritoneal
dialysis, are associated with increased
cholesterol and triglyceride levels, a
lipid profile laboratory test to assess
these levels would be considered
furnished for the treatment of ESRD. In
the CY 2016 proposed rule (80 FR
37836) we indicated that since the CY
2013 final rule was published we have
learned from stakeholders that the lipid
panel is mostly used to monitor cardiac
conditions and is not routinely
furnished for the treatment of ESRD.
We explained that we believed that
the proposal to remove the lipid panel
was consistent with the clarification
provided in that rule that laboratory
services included in Table 9and subject
to ESRD consolidated billing are those
that are routinely furnished for the
treatment of ESRD but that may
occasionally be used to treat non-ESRDrelated conditions. In contrast, the lipid
profile laboratory test is not routinely
used for the treatment of ESRD. We
solicited comments on this proposal and
received several comments as set forth
below.

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Comment: Many stakeholders (an
LDO, two national dialysis
organizations, an organization
representing small and medium dialysis
facilities, and a nonprofit dialysis
organization, and two professional
associations)expressed support for the
proposed elimination of the lipid panel
from the consolidated billing list.
Response: We appreciate the
commenters support. We are finalizing
the removal of the lipid panel from the
ESRD PPS consolidated billing list and
we will issue subregulatory guidance to
that effect. However, we note that even
though lipid panels are being removed
from the ESRD PPS consolidated billing
list, if an ESRD patient’s ordering
practitioner orders a lipid panel for the
treatment of ESRD then it should not be
billed separately.

TABLE 9—LABORATORY SERVICES
SUBJECT TO ESRD CONSOLIDATED
BILLING
Short description
Basic Metabolic Panel (Calcium, ionized) ....................
Basic Metabolic Panel (Calcium, total) ........................
Electrolyte Panel ...................
Comprehensive Metabolic
Panel .................................
Lipid Panel 1 ..........................
Renal Function Panel ...........
Hepatic Function Panel ........
Assay of serum albumin .......
Assay of aluminum ...............
Vitamin d, 25 hydroxy ...........
Assay of calcium ..................
Assay of calcium, Ionized .....
Assay, blood carbon dioxide
Assay of carnitine .................
Assay of blood chloride ........
Assay of creatinine ...............
Assay of urine creatinine ......
Creatinine clearance test ......
Vitamin B–12 ........................
Vit d 1, 25-dihydroxy ............
Assay of erythropoietin .........
Assay of ferritin .....................
Blood folic acid serum ..........
Assay of iron .........................
Iron binding test ....................
Assay of magnesium ............
Assay of parathormone ........
Assay alkaline phosphatase
Assay of phosphorus ............
Assay of serum potassium ...
Assay of prealbumin .............
Assay of protein, serum .......
Assay of protein by other
source ...............................
Assay of serum sodium ........
Assay of transferrin ..............
Assay of urea nitrogen .........
Assay of urine/urea-n ...........
Urea-N clearance test ..........
Hematocrit ............................
Hemoglobin ...........................

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CPT/HCPCS
80047
80048
80051
80053
80061
80069
80076
82040
82108
82306
82310
82330
82374
82379
82435
82565
82570
82575
82607
82652
82668
82728
82746
83540
83550
83735
83970
84075
84100
84132
84134
84155
84157
84295
84466
84520
84540
84545
85014
85018

Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
specifically excluded from the ESRD
TABLE 9—LABORATORY SERVICES
SUBJECT TO ESRD CONSOLIDATED PPS, these tests would be separately
billable. In the CY 2011 ESRD PPS final
BILLING—Continued

rule, we discuss when certain drugs and
biologicals would not be considered for
the treatment of ESRD. Specifically,
Complete (cbc), automated
Table 10, which appeared as Table 3—
(HgB, Hct, RBC, WBC,
ESRD Drug Category Excluded from the
and Platelet count) and
Final ESRD PPS Base Rate in the CY
automated differential
2011 ESRD PPS final rule (75 FR 49049)
WBC count ........................
85025 lists the drug categories that were
Complete (cbc), automated
excluded from the ESRD PPS and the
(HgB, Hct, RBC, WBC,
and Platelet count) ............
85027 rationale for their exclusion. In the
Automated rbc count ............
85041 proposed rule, we clarified that
Manual reticulocyte count .....
85044 laboratory services furnished to monitor
Automated reticulocyte count
85045 the medication levels or effects of drugs
Reticyte/hgb concentrate ......
85046 and biologicals that fall in those
Automated leukocyte count ..
85048 categories would not be considered to
Hep b core antibody, total ....
86704 be furnished for the treatment of ESRD.
Hep b core antibody, igm .....
86705
We solicited comment on this
Hep b surface antibody ........
86706
Blood culture for bacteria .....
87040 clarification and a summary of those
Culture, bacteria, other .........
87070 comments are set forth below.
Comment: Several organizations
Culture bacteri aerobic othr ..
87071
Culture bacteria anaerobic ...
87073 expressed support for the clarification of
Cultr bacteria, except blood
87075 linking coverage of laboratory testing
Culture anaerobe ident, each
87076 under the ESRD PPS to the drugs and
Culture aerobic identify .........
87077 biologicals considered to be renal
Culture screen only ..............
87081 dialysis services. They indicated that
Hepatitis b surface ag, eia ...
87340 they support the clarifications that a
CBC/diff wbc w/o platelet .....
G0306
laboratory test that is performed to
CBC without platelet .............
G0307
monitor the levels or effects of any of
1 Effective January 1, 2016, this laboratory
the drugs that CMS has specifically
service is no longer subject to the ESRD PPS excluded from the ESRD PPS will be
consolidated billing requirements.
separately billable and not be
In the proposed rule (80 FR 37836),
considered to be furnished for the
we explained that although we did not
treatment of ESRD.
propose to change our policy related to
Response: We appreciate the
payment for ESRD-related laboratory
commenters support and will update
services under the ESRD PPS, we did
our subregulatory guidance with this
clarify that to the extent a laboratory test clarification.
is performed to monitor the levels or
Comment: One health plan requested
effects of any of the drugs that we have
that we also remove Vitamin D/Hydroxy
Short description

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69031

lab service (CPT 82306) as this lab is not
routinely or consistently provided to
ESRD patients and not necessary for the
treatment of ESRD. Stakeholders stated
that considering any laboratory test
furnished to an ESRD beneficiary for the
treatment of ESRD to be a renal dialysis
service and therefore not payable
outside of the ESRD PPS is imprecise
and harms all parties involved—
including dialysis facilities,
independent laboratories, and
patients—by guaranteeing widespread
inconsistent billing practices and
unpredictable medical review outcomes,
and by ignoring the fundamental
principles of consolidated billing and
the PPS methodology, which depend on
predictability to enable efficient cost
management. Instead they recommend
that CMS adopt an objective standard,
such as clearly stating that laboratory
tests included in the consolidated
billing list constitutes an all-inclusive
list of laboratory tests included in the
ESRD PPS.
Response: We plan to reassess the
laboratory services policies under the
ESRD PPS, including whether to
establish an all-inclusive list of
laboratory tests, in light of the
clarification of our policy that links
laboratory tests under the ESRD PPS
with renal dialysis service drugs. With
regard to the specific suggestion that we
remove Vitamin D/Hydroxy laboratory
service, we will address this suggestion
in future guidance once we assess the
extent to which the laboratory test is
used and whether it is related to renal
dialysis service drugs.

TABLE 10—ESRD DRUG CATEGORIES EXCLUDED FROM THE FINAL ESRD PPS BASE RATE
Drug category

Rationale for exclusion

Anticoagulant ............................................................................
Antidiuretic ................................................................................
Antiepileptic ..............................................................................
Anti-inflammatory ......................................................................

Drugs labeled for non-renal dialysis conditions and not for vascular access.
Used to prevent fluid loss.
Used to prevent seizures.
May be used to treat kidney disease (glomerulonephritis) and other inflammatory
conditions.
Used to treat psychosis.
Used to treat viral conditions such as shingles.
Includes oral, parenteral and infusions. Cancer drugs are covered under a separate benefit category.
Drugs that manage blood pressure and cardiac conditions.
Used to replace synovial fluid in a joint space.
Drugs that cause blood to clot after anti-coagulant overdose or factor VII deficiency.
Used after chemotherapy treatment.
Used for endocrine/metabolic disorders such as thyroid or endocrine deficiency,
hypoglycemia, and hyperglycemia.
Androgens were used prior to the development of ESAs for anemia management
and currently are not recommended practice. Also used for hypogonadism and
erectile dysfunction.
Used to treat gastrointestinal conditions such as ulcers and gallbladder disease.
Anti-rejection drugs covered under a separate benefit category.
Used to treat migraine headaches and symptoms.
Used to treat muscular disorders such as prevent muscle spasms, relax muscles,
improve muscle tone as in myasthenia gravis, relax muscles for intubation and
induce uterine contractions.

Antipsychotic ............................................................................
Antiviral .....................................................................................
Cancer management ................................................................
Cardiac management ...............................................................
Cartilage ...................................................................................
Coagulants ...............................................................................

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Cytoprotective agents ...............................................................
Endocrine/metabolic management ...........................................
Erectile dysfunction management ............................................
Gastrointestinal management ..................................................
Immune system management ..................................................
Migraine management ..............................................................
Musculoskeletal management ..................................................

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TABLE 10—ESRD DRUG CATEGORIES EXCLUDED FROM THE FINAL ESRD PPS BASE RATE—Continued
Drug category

Rationale for exclusion

Pharmacy handling for oral anti-cancer, anti-emetics and
immunosuppressant drugs.
Pulmonary system management ..............................................
Radiopharmaceutical procedures .............................................
Unclassified drugs ....................................................................
Vaccines ...................................................................................

2. Renal Dialysis Service Drugs and
Biologicals

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a. 2014 Part D Call Letter Follow-Up
In the proposed rule (80 FR 37837),
we explained that last year we received
public comments that expressed
concern that the 2014 Part D Call Letter
provision for prior authorization for
drug categories that may be used for
ESRD as well as other conditions
resulted in Part D plan sponsors
inappropriately refusing to cover oral
drugs that are not renal dialysis
services. Specifically, they noted that
beneficiaries had difficulties obtaining
necessary medications such as oral
antibiotics prescribed for pneumonia
and that the 2014 Part D Call Letter
provision led to confusion for Part D
plan sponsors and delays in
beneficiaries obtaining essential
medications at the pharmacy.
In response to the comments, we
explained that the guidance in the 2014
Part D Call Letter was issued in
response to increases in billing under
Part D for drugs that may be prescribed
for renal dialysis services but may also
be prescribed for other conditions. The
guidance strongly encouraged Part D
sponsors to place beneficiary-level prior
authorization edits on all drugs in the
seven categories identified in the CY
2011 ESRD PPS final rule as drugs that
may be used for dialysis and nondialysis purposes (75 FR 49051). These
include: antiemetics, anti-infectives,
anti-pruritics, anxiolytics, drugs used
for excess fluid management, drugs used
for fluid and electrolyte management
including volume expanders, and drugs
used for pain management (analgesics).
We indicated in the CY 2015 ESRD PPS
final rule (79 FR 66151) that we were
considering various alternatives for
dealing with this issue, as it has always
been our intention to eliminate or
minimize disruptions or delays in ESRD
beneficiaries receiving essential
medications and that we planned to
issue further guidance to address the
issue.
In the Health Plan Management
System memo issued on November 14,

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Not a function performed by an ESRD facility.
Used for respiratory/lung conditions such as opening airways and newborn
apnea.
Includes contrasts and procedure preparation.
Should only be used for drugs that do not have a HCPCS code and therefore
cannot be identified.
Covered under a separate benefit category.

2014, we encouraged sponsors to
remove the beneficiary-level prior
authorization (PA) edits on these drugs.
When claims are submitted to Part D for
drugs in the seven categories, we expect
that they are not being used for the
treatment of ESRD and, therefore, may
be coverable under
Part D. We also expect that Medicare
ESRD facilities will continue to provide
all of the medications used for the
treatment of ESRD, including drugs in
the seven categories. We will continue
to monitor the utilization of renal
dialysis drugs and biologicals under
Part B and Part D.
b. Oral or Other Forms of Renal Dialysis
Injectable Drugs and Biologicals
The ESRD PPS includes certain drugs
and biologicals that were previously
paid under Part D. Oral or other forms
of injectable drugs and biologicals used
for the treatment of ESRD, for example,
vitamin D analogs, levocarnitine,
antibiotics or any other oral or other
form of a renal dialysis injectable drug
or biological are also included in the
ESRD PPS and may not be separately
paid. These drugs are included in the
ESRD PPS payment because the
payments made for both the injectable
and oral forms were included in the
ESRD PPS base rate. As discussed in
section II.B.4.of this final rule,
implementation of oral-only drugs used
in the treatment of ESRD (that is, drugs
with no injectable equivalent) under the
ESRD PPS payment has been delayed
until 2025.
In the CY 2011 ESRD PPS final rule
(75 FR 49172), we stated that ESRD
facilities are required to record the
quantity of oral medications provided
for the monthly billing period. In
addition, ESRD facilities would submit
claims for oral drugs only after having
received an invoice of payment. We
indicated that we would address
recording of drugs on an ESRD claim in
future guidance. We included this
requirement because renal dialysis
drugs and biologicals that were paid
separately prior to the ESRD PPS, as
many of these oral medications were,

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are eligible outlier items and services. If
an ESRD facility were to report a 90-day
supply of a drug on a monthly claim,
the claim could receive an outlier
payment erroneously.
On June 7, 2013, we issued an update
to the Medicare Benefits Policy Manual,
Pub. 100–02, Chapter 11 to reflect
implementation of the ESRD PPS in
Change Request 8261.In section 20.3.C
of the updated Medicare Benefits Policy
Manual, we stated that for ESRD-related
oral or other forms of drugs that are
filled at the pharmacy for home use,
ESRD facilities should report one line
item per prescription, but only for the
quantity of the drug expected to be
taken during the claim billing period.
Example: A prescription for oral vitamin
D was ordered for one pill to be taken 3 times
daily for a period of 45 days. The patient
began taking the medication on April 15,
2011. On the April claim, the ESRD facility
would report the appropriate National Drug
Code (NDC) code for the drug with the
quantity 45 (15 days × 3 pills per day). The
remaining pills which would be taken in May
would appear on the May claim for a
quantity of 90 (30 days × 3 pills per day).
Prescriptions for a 3 month supply of the
drug would never be reported on a single
claim. Only the amount expected to be taken
during the month would be reported on that
month’s claim.

In February 2015, we were informed
by one of the large dialysis
organizations that they, and many other
ESRD chain organizations, are out of
compliance with the requirement that
only the quantity of the drug expected
to be taken during the claim billing
period should be indicated on the ESRD
monthly claim. They indicated that
some facilities are incorrectly reporting
units that reflect a 60-day or 90-day
prescription while other facilities are
not reporting the oral drugs prescribed.
The reason given for these reporting
errors is the lack of prescription
processing information. Specifically,
while the facilities know when the
pharmacy fills the prescription, they do
not know when the patient picks up the
drug from the pharmacy and begins to
take the drug.

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Due to this confusion and lack of
compliance, we are reiterating our
current policy that all renal dialysis
service drugs and biologicals prescribed
for ESRD patients, including the oral
forms of renal dialysis injectable drugs,
must be reported by ESRD facilities and
the units reported on the monthly claim
must reflect the amount expected to be
taken during that month. The facilities
should use the best information they
have in determining the amount
expected to be taken in a given month,
including fill information from the
pharmacy and the patient’s plan of care.
Any billing system changes to effectuate
this change must be made as soon as
possible as this requirement has been in
effect since the ESRD PPS began in
2011. We are analyzing ESRD facility
claims data to determine the extent of
the reporting error and may take
additional actions in the future.

We received the following comment
on the clarification which is described
below.
Comment: A patient advocacy group
requested that CMS change its
requirement that the monthly claim
submitted by ESRD facilities only report
the ESRD-related oral drugs expected to
be taken during the month. They believe
it is burdensome to ESRD facilities to
compute the amount of pills prescribed
to a patient within the claim period,
especially for smaller facilities, whose
limited resources make this type of data
manipulation more arduous. They noted
that this requirement diverts resources
away from patient care.
Response: Unfortunately, we are
unable to revise the billing requirements
as the commenter suggests. ESRD
facilities submit a monthly bill, which
needs to include only the items and
services utilized during the month.
Under the outlier policy, we sum the

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MAP amounts for the outlier services on
the claim to assess whether that amount
exceeds the predicted outlier services
MAP amount plus the fixed dollar loss
amount. If an ESRD facility were to
report a 90-day supply of a drug on a
monthly claim, the claim could receive
an outlier payment erroneously.
c. Reporting of Composite Rate Drugs
As we indicate in the Medicare
Claims Processing Manual, Pub. 100–04,
Chapter 8, section 50.3, as revised by
Change Request 8978, issued December
2, 2014, in an effort to enhance the
ESRD claims data for possible future
refinements to the ESRD PPS, CMS
announced that ESRD facilities should
begin reporting composite rate drugs on
their monthly claims. Specifically,
ESRD facilities should only report the
composite rate drugs identified on the
consolidated billing drug list and
provided below in Table 11.

TABLE 11—COMPOSITE RATE DRUGS AND BIOLOGICALS
Composite Rate Drugs and Biologicals ....

A4802
J0670
J1200
J1205
J1240
J1940
J2001
J2150
J2720
J2795
J3410
J3480
Q0163

The ESRD PPS payment policy
remains the same for composite rate
drugs, therefore, no separate payment is
made and these drugs will not be
designated as eligible outlier services.
This information will provide CMS with
the full scope of renal dialysis services
which may better target outlier services
to the most costly patients. We did not
receive any comments on the
clarification of reporting composite rate
drugs and biologicals.
III. End-Stage Renal Disease (ESRD)
Quality Incentive Program (QIP) for
Payment Year

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A. Background
For more than 30 years, monitoring
the quality of care provided by dialysis
facilities to patients with end-stage renal
disease (ESRD) 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

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INJ PROTAMINE SULFATE
INJ MEPIVACAINE HYDROCHLORIDE
INJ DIPHENHYDRAMINE HCL
INJ CHLOROTHIAZIDE SODIUM
INJ DIMENHYDRINATE
INJ FUROSEMIDE
INJ LIDOCAINE HCL FOR INTRAVENOUS INFUSION, 10 MG
INJ MANNITOL
INJ PROTAMINE SULFATE
INJ ROPIVACAINE HYDROCHLORIDE
INJ HYDROXYZINE HCL
INJ. POTASSIUM CHLORIDE, PER 2 MEQ.
DIPHENHYDRAMINE HYDROCHLORIDE

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 the Medicare
Improvements for Patients and
Providers Act (MIPPA).
Section 1881(h) of the Act requires
the Secretary to establish an ESRD QIP
by (1) selecting measures; (2)
establishing the performance standards
that apply to the individual measures;
(3) specifying a performance period
with respect to a year; (4) 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 (5) applying an appropriate
payment reduction to facilities that do
not meet or exceed the established Total
Performance Score (TPS). This final rule
discusses each of these elements and
our policies for their application to PY
2017, PY 2018, PY 2019, and future
years of the ESRD QIP.

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We received comments about general
policies and principles of the ESRD QIP.
The comments and our responses are set
forth below.
Comment: Two commenters argued
that ESRD QIP standards often prevent
improved patient outcomes by being a
roadblock to the conduct of clinical
trials which, commenters argued, are
critically important in the quest for
advancement of quality care for patients
with ESRD. They added that exemption
from certain performance standards
and/or quality measures should be
available for those patients who are
involved in clinical trials, particularly
when they involve evidence gathering to
promote improved patient outcomes.
One commenter specifically
recommended that any patients entered
into such a trial be exempted from the
vascular access measure topic, which
assesses the percentage of patients with
catheters versus the percentage of
patients with fistulas so that their
providers can participate in the trial

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without fear of being penalized under
the ESRD QIP.
Response: We thank commenters for
their recommendation and will consider
the appropriateness of the ESRD QIP
requirements for participation and
exceptions thereto for future years of the
program.
Comment: A few commenters
expressed concerns with the way CMS
releases ESRD QIP data. One commenter
requested that CMS make all data used
in developing proposed rules available
at the time the proposed rule is
published and another expressed
concerns with the format and timing of
data releases.
Response: We seek to be as
transparent as possible and have
released all analyses that we took into
consideration in the development of the
proposed rule. In addition, we
published a public use data file at the
same time as the proposed rule for the
ESRD QIP that contains the facility-level
data used to calculate the performance
standards, achievement thresholds, and
benchmarks we proposed for the
program. These public use files are
available at: https://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/08_
ReportandCert.html. Furthermore, in
response to comments received during
the notice-and-comment process, we
have conducted additional analyses and
are describing those results in this final
rule and on the CMS Web site, as well
as making the details of these additional
analyses available at: https://www.cms.
gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/
ESRDQIP/061_Technical
Specifications.html.
Comment: Commenters recommended
that CMS focus on stabilizing the
existing policies and measures in the
ESRD QIP before adopting any new
measures. They expressed concern that
constantly increasing the measure set’s
size and complexity gives facilities little
time to implement new policies and
procedures for data collection and
reporting while also providing high
quality care on a daily basis. One
commenter argued that as the number of
measures increases, so too do costs to
providers and to CMS. They stated that
the QIP should strive to include, to the
extent feasible, those measures which
address multiple domains of CMS’s
value-based purchasing programs and
are not duplicative.
Response: Although we recognize that
adopting more measures in the ESRD
QIP increases costs to facilities as well
as to CMS, we believe these increased
costs are outweighed by the benefits to
patients of incentivizing quality care in

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the domains that the measures cover.
We agree that adopting measures that
span multiple domains, such as the SRR
clinical measure, allows us to address
multiple aspects of quality, reduces the
total number of measures in the ESRD
QIP, and presents less burden for
facilities than adopting multiple
measures that each address a single
domain. Going forward, we will
continue to strive to ensure that the
ESRD QIP measure set is as
parsimonious as possible.
Comment: One commenter requested
information regarding the claims that
we used to calculate facility
performance on the dialysis adequacy
clinical measures for the PY 2016 ESRD
QIP.
Response: For PY 2016, CY 2014
Medicare outpatient dialysis claims (bill
type 72) were used to calculate the
dialysis adequacy measures. These
claims data were extracted from CMS
systems on April 24, 2015 and included
all fully adjudicated claims submitted
by facilities that were in final action
status 2 as of that date.
Comment: One commenter requested
clarification on how the ESRD QIP
accounts for patients who switch
modality mid-month for measures
collected using CROWNWeb.
Response: For PY 2016 there was no
distinction made between hemodialysis
and peritoneal dialysis patients with
regard to the serum calcium and serum
phosphorus values reported in
CROWNWeb, which is consistent with
the specifications for the Hypercalcemia
clinical measure. All clinical values
submitted under either modality were
reviewed and the last clinical value
submitted for each month was used for
the calculation of the Hypercalcemia
measure. The Mineral Metabolism
reporting measure considers the
aggregate modality during a month, as
defined by the patient’s Medicare
claims, to determine patient eligibility
for the month. If the aggregate modality
is in-center hemodialysis and the
patient was not treated at least seven
times during the month and then
changes modality to peritoneal dialysis
to home hemodialysis, the patients
would be excluded. However, if the
patient switches from in-center
hemodialysis to peritoneal dialysis or
home hemodialysis and the aggregate
modality is either home hemodialysis or
peritoneal dialysis, the patient would be
included in the measure. Regardless of
the modality listed on a patient’s claims,
2 A claim is considered to be in final action status
when it reflects services billed by the facility for
facility costs, has been processed by the Medicare
Administrative Contractor, has been resubmitted
and corrected if necessary, and has been finalized.

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any serum phosphorus value reported as
either a peritoneal dialysis or home
hemodialysis in CROWNWeb would
count as an eligible serum phosphorus
value, but if a patient switched
modalities during the month, it could
impact their eligibility for that month.
The Pain Assessment and Follow-Up
and Screening for Clinical Depression
and Follow-Up Reporting Measures,
which are also collected using
CROWNWeb, do not account for a
patient’s treatment modality in their
scoring calculations.
Comment: One commenter requested
that only Medicare-based measure data
be used to calculate performance scores
impacting Medicare payments.
Response: Although payment
reductions under the ESRD QIP are
made to a facility’s Medicare ESRD
reimbursement amounts, in order to
properly assess whether Medicare
beneficiaries are receiving the same
quality of care as other patients, we
believe it is appropriate to collect,
where possible, all-patient data.
Comment: One commenter urged
CMS to create more alignment among its
quality programs. The goals of the ESRD
QIP, DFC, and the Conditions for
Coverage are all designed to ensure the
best possible outcomes for patients but
when the programs do not align, the
commenter argued, facilities are
confused and are not as well equipped
to meet the demands of the separate
programs.
Response: We agree with the goal of
creating more alignment among CMS’s
quality programs. As stated previously
in the CY 2015 final rule with comment
period (79 FR 66162), the goals of the
ESRD QIP closely align with the goals
of the CMS Quality Strategy (the
CMSQS), which all CMS quality
improvement efforts are structured
around, including DFC and the ESRD
Conditions for Coverage. The CMSQS is
designed to guide the activities of
various components throughout the
Agency and is aligned with the
Department of Health and Human
Services’ (HHS’) National Quality
Strategy (the NQS). The six goals of the
CMSQS—(1) Make care safer by
reducing harm caused in the delivery of
care; (2) strengthen person and family
engagement as partners in their care; (3)
promote effective communication and
coordination of care; (4) promote
effective prevention and treatment of
chronic disease; (5) work with
communities to promote best practices
of healthy living; and (6) make care
affordable—are organized around NQS’s
three broad aims of Better Care;
Affordable Care; and Healthy People,
Healthy Communities and drive and

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orient all of CCSQ’s quality
improvement programs, including the

ESRD QIP, insofar as these aims align
with the statutory goals of the program.
The strategic vision of the ESRD QIP
is to adopt measures that address each

69035

of these goals. The following table
illustrates the program’s efforts to
implement this strategic vision:

TABLE 12—CMSQS GOAL AND ESRD QIP MEASURE ALIGNMENT
CMSQS goal

Measure

Promote effective prevention and treatment of chronic disease ..........................

Strengthen person and family engagement as partners in their care ..................
Promote effective communication and coordination of care .................................
Make care safer by reducing harm caused in the delivery of care ......................

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Work with communities to promote best practices of healthy living .....................
Making care affordable ..........................................................................................

As the table above illustrates, the
ESRD QIP has not adopted measures for
the following quality goals:
• Work with communities to promote
the best practices of healthy living.
• Making care affordable.
We will evaluate these remaining
goals, particularly the goal of making
care affordable, to assess their
appropriateness as policy goals for the
ESRD QIP. In addition to evaluating the
ESRD QIP measure set in terms of how
well it addresses legislative mandates,
NQS and CMSQS goals, we are also
evaluating how well the measure set
addresses policy priorities that
stakeholders have brought to our
attention. We continue to engage both
external and internal stakeholders on a
regular basis, to communicate the
strategic vision of the program as well
as to engage in dialogue useful to the
development and implementation of
policy that will effectively create
improvements in the quality of care
provided to ESRD beneficiaries.
Comment: One commenter requested
that CMS provide a clear definition of
when patients are no longer considered
ESRD and are therefore excluded from
measure calculations.
Response: For claims-based measures,
if a facility submits a Medicare
outpatient dialysis facility claim (bill
type 72) for treatment provided to a
patient, then the patient is considered to
be on chronic dialysis. Patients are not
included in a claims-based measure
calculation for a month if a claim is not
submitted for the patient for treatment
received that month.
For the SRR and STrR measures,
details regarding the determination of a

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Dialysis Adequacy.
Vascular Access Type Measure Topic:
Fistula.
Catheter for at Least 90 Days.
Mineral Metabolism Reporting.
Anemia Management Reporting.
Hypercalcemia.
Standardized Transfusion Ratio.
Screening for Depression and Follow Up reporting.
Pain Assessment and Follow-Up reporting.
ICH CAHPS Reporting (PY 2017) and clinical (PY 2018).
Standardized Readmissions Ratio.
NHSN Bloodstream Infection in Hemodialysis Outpatients.
NHSN Healthcare Personnel Influenza Vaccination reporting.
None.
None.

patient’s time on dialysis and patient
attribution to a facility can be found in
the ‘‘Report for the Standardized
Readmission Ratio’’ and ‘‘Report for the
Standardized Transfusion Ratio’’,
respectively (https://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/
Downloads/MeasureMethodology
ReportfortheProposedSRRMeasure.pdf;
https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/
MeasureMethodologyReportforthe
ProposedSTrRMeasure.pdf). Finally, for
CROWNWeb measures, if a patient is
admitted to the facility during the
month, the patient is considered to be
eligible for the measure calculation until
the patient is discharged. Depending on
the measure, a patient may be required
to be admitted to the facility for the
entire reporting month in order to be
included in that patient-month. We
encourage commenters to review the
measure specifications available on the
CMS Web site for more information
(http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_Technical
Specifications.html).
Comment: Several commenters
recommended that CMS work with the
kidney community to establish a
patient-centric vision for quality that
aims to decrease mortality, decrease
hospitalizations, increase patient
satisfaction, and improve patient
experience with care.
Response: We thank the commenters
for their recommendation and support
of collaboration between CMS and the
ESRD community. We note that the

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ESRD QIP maintains measures that aim
to decrease hospitalizations (the
Standardized Readmission Ratio clinical
measure) and increase patient
satisfaction and experience with care
(the ICH CAHPS clinical measure), and
Dialysis Facility Compare maintains a
Standardized Mortality Ratio measure.
As such, we continue to engage both
internal and external stakeholders on a
regular basis, to communicate the
strategic vision of the Program as well
as to engage in dialogue useful to the
development and implementation of
policy that will effectively create
improvements in the quality of care
provided to ESRD patients.
Comment: One commenter
recommended that CMS consider
adopting the following major tenets: (1)
Continued transparency and
collaboration in measure development
and specifications; (2) parsimony in the
QIP and other programs that
comparatively assess quality of care
performance; (3) avoidance of incentives
that may undermine the delivery of
individualized patient care to obtain a
more favorable QIP score; and (4)
recognizing promptly when a measure is
topped out, either clinically or
statistically, to avoid unintended
consequences, including loss of the
ability to individualize care, pressure to
provide care that may not be in the best
interests of an individual patient and/or
diverting attention from other measures
that may be better targets for quality
improvement.
Response: We thank the commenter
for its recommendations and we agree
with the general principles expressed.
We also already consider these tenets in

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the development and refinement of the
ESRD QIP. We seek to collaborate with
measure developers on measures and
specifications and we continue to seek
ways to increase transparency. One
example of this is the Measures Manual,
currently in development and discussed
more fully below, which will compile
the technical measure specifications of
ESRD QIP and Dialysis Facility
Compare measures in a single resource
that is easy to use. We are also
developing a mechanism that will allow
stakeholders to recommend refinements
to ESRD QIP measures based on their
clinical experience.
We also seek parsimony in the QIP
and other programs that comparatively
assess quality of care. We continue to
assess the negative unintended
consequences of measures and policies
maintained by the ESRD QIP through
efforts such as the Access to Care study
in an effort to incentivize the delivery
of individualized patient care, and will
continue to do so. Finally, in the CY
2015 ESRD PPS final rule with comment
period (79 FR 66171 through 66174), we
developed a set of statistical criteria for
determining when a measure is ‘‘topped
out’’ and may therefore be eligible for
removal from the ESRD QIP. We look
forward to continued collaboration with
the ESRD community to achieve each of
these goals.
Comment: One commenter
emphasized the importance of ensuring
that all patients are educated about their
treatment options and where to get
them, and recommended that CMS
require the use of a values-based,
patient-centered dialysis decision aid
for patients. The commenter explained
that such a tool would ensure patients
have the opportunity to match their
values to the varying treatment options
and choose a treatment that is a good fit
for their lifestyles and preferences.
Response: We agree that it is
important for patients to be educated
about their treatment options and where
various treatments may be available.
Dialysis treatment is a highly
individualized process of care; we
therefore strongly encourage
nephrologists and dialysis facilities to
discuss treatment options with their
patients on an ongoing basis to account
for changes in the patient’s health and
experience with dialysis treatment.
Comment: One commenter urged
CMS to consider adopting a bifurcated
quality reporting and value based
purchasing program for ESRD similar to
those we have implemented for the
Hospital VBP and Hospital Inpatient
Quality Reporting Programs.
Response: We thank commenters for
their recommendation and note that we

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currently adopt some ESRD QIP
measures as reporting measures prior to
assessing performance on those
measures as clinical measures.
B. Summary of the Proposed Provisions,
Public Comments, and Responses to
Comments on the End-Stage Renal
Disease (ESRD) Quality Incentive
Program (QIP) for Payment Year (PY)
2019 Proposed Rule
The proposed rule, titled ‘‘Medicare
Program; End-Stage Renal Disease
Prospective Payment System, and
Quality Incentive Program’’ (80 FR
37807 through 37860), (hereinafter
referred to as the CY 2016 ESRD PPS
proposed rule), was published in the
Federal Register on July 1, 2015, with
a comment period that ended on August
25, 2015. In that proposed rule, for the
ESRD PPS, we proposed routine updates
to the End-Stage Renal Disease Quality
Incentive Program, proposed to adopt
new measures the PY 2019 ESRD QIP
measure set, and proposed to revise the
small facility adjuster (SFA) used in
facility scoring for the program. We
received approximately 37 public
comments on our proposals, including
comments from: ESRD facilities,
national renal groups, nephrologists and
patient organizations, patients and care
partners, manufactures, health care
systems, and nurses.
In this final rule, we provide a
summary of each proposed provision, a
summary of the public comments
received and our responses to them, and
the policies we are finalizing for the
ESRD QIP. Comments related to the
paperwork burden are addressed in the
‘‘Collection of Information
Requirements’’ section in this final rule.
Comments related to the impact analysis
are addressed in the ‘‘Economic
Analyses’’ section in this final rule.
C. Clarification of ESRD QIP
Terminology: ``CMS Certification
Number (CCN) Open Date''
Some stakeholders have expressed
confusion about the use of the term
‘‘CMS Certification Number (CCN) Open
Date’’ under the ESRD QIP (for example,
see 79 FR 66186). We interpret this term
to mean the ‘‘Medicare effective date’’
under 42 CFR 489.13, which governs
when the facility can begin to receive
Medicare reimbursement for ESRD
services under the ESRD PPS. Thus, a
facility is eligible, with respect to a
particular payment year, to receive
scores on individual measures and
participate in general in the ESRD QIP
based on the facility’s CCN Open Date
(that is, Medicare effective date).

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We received comments on this
clarification. The comments and our
responses are set forth below.
Comment: Many commenters
supported our clarification of the term,
‘‘CMS Certification Number (CCN) Open
Date,’’ and appreciated this clarification.
One commenter added that once a
facility is eligible to receive payment
under the ESRD PPS, it should also be
eligible to participate in the ESRD QIP.
Response: We thank the commenters
for their support and are pleased that
this clarification will reduce confusion
for facilities moving forward. We note
that facility eligibility to receive
payment under the ESRD PPS is also
keyed to a facility’s CCN Open Date;
therefore, facilities are eligible to receive
payment under the ESRD PPS at the
same time as they become eligible to
participate in the ESRD QIP.
D. Use of the Hypercalcemia Measure as
a Measure Specific to the Conditions
Treated with Oral-Only Drugs
Section 217(d) of the Protecting
Access to Medicare Act of 2014 (PAMA)
(Pub. L. 113–93), enacted on April 1,
2014, amends section 1881(h)(2) of the
Act to require the Secretary to adopt
measures in the ESRD QIP (outcomes
based, to the extent feasible) that are
specific to the conditions treated with
oral-only drugs for 2016 and subsequent
years. We stated in the CY 2015 ESRD
PPS final rule (79 FR 66168–69) that we
believed the Hypercalcemia clinical
measure, which was adopted beginning
with the PY 2016 program meets this
new statutory requirement;
nevertheless, we also recognized that,
consistent with PAMA, we could adopt
measures as late as for CY 2016, which
would be included in the PY 2018 ESRD
QIP. We also stated that we would take
into account comments on whether the
Hypercalcemia clinical measure can be
appropriately characterized as a
measure specific to the conditions
treated with oral-only drugs.
Although section 1881(h)(2)(E)(i) does
not define the term ‘‘oral-only drugs,’’
we have previously interpreted that
term to mean ‘‘drugs for which there is
no injectable equivalent or other form of
administration’’ (75 FR 49038). We have
also previously identified calcimimetics
and phosphate binders as two types of
‘‘oral-only drugs’’ (75 FR 49044).
We are currently aware of three
conditions that are treated with
calcimimetics and phosphate binders:
Secondary Hyperparathyroidism,
Tertiary Hyperparathyroidism, and
Hypercalcemia. Hypercalcemia is a
condition that results when the entry of
calcium into the blood exceeds the
excretion of calcium into the urine or

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deposition in bone; the condition may
be caused by a number of other
conditions, including
hyperparathyroidism. Although
multiple treatment options are available
for patients with early forms of
hypercalcemia, calcimimetics are
frequently prescribed for those patients
who develop hypercalcemia secondary
to tertiary hyperparathyroidism, in
order to most easily control the patients’
serum calcium levels. Because
hypercalcemia is a condition that is
frequently treated with calcimimetics,
and because calcimimetics are oral-only
drugs, we believe that the current
Hypercalcemia clinical measure (NQF
#1454) meets the requirement that the
ESRD QIP measure set include for 2016
and subsequent years measures that are
specific to the conditions treated with
oral-only drugs.
We acknowledge that the
Hypercalcemia clinical measure is not
an outcome-based measure, and we
have considered the possibility of
adopting outcome-based measures that
are specific to the conditions treated
with oral-only drugs. However, we are
currently not aware of any outcomebased measures that would satisfy this
requirement. We welcomed comments
on whether such outcome-based
measures are either ready for
implementation now or are being
developed, and we intend to consider
the feasibility of developing such a
measure in the future.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Many commenters did not
support use of the Hypercalcemia
clinical measure to satisfy the
requirements of PAMA. Some
commenters stated that CMS’s rationale
for using this measure is that
calcimimetics are oral-only agents
commonly used to treat hypercalcemia.
The commenters argued however, that
only 1⁄3 of ESRD patients are prescribed
a calcimimetic, and noted that, while it
is true that the pharmacologic
mechanism of calcimimetics results in
lower serum calcium, they are not in
fact FDA-approved to treat
hypercalcemia in patients with
secondary hyperparathyroidism. The
commenters maintained that
hypercalcemia in ESRD patients is
commonly due to the receipt of Vitamin
D analogs, which are not oral-only
agents. Commenters also noted that the
treatment of hypercalcemia commonly
includes reducing or discontinuing
vitamin D analogs in addition to
decreasing the dialysate calcium
concentration. One commenter did not
support CMS’ position that the

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Hypercalcemia clinical measure meets
the requirements of PAMA because the
measure only assesses calcium lab
values, which are not the most accurate
indicator of care for patients prescribed
oral-only drugs. Another commenter
argued that the Hypercalcemia clinical
measure does not satisfy the
requirements of PAMA because
hypercalcemia may be treated with
drugs other than oral-only drugs,
including bisphosphonates, IV fluids
and diuretics.
Response: We thank the commenters
for their comments. We note that the
KDIGO clinical practice guidelines
recommend maintenance of CKD 3–5D
patient’s serum calcium in the normal
range. This was recognized by the C–
TEP members that developed the
Hypercalcemia clinical measure in 2010
and other clinical experts (NQF
subcommittee and 2013 C–TEP) who
reviewed that measure and agreed with
the basic justification for the measure
that some treatments used to treat
hyperparathyroidism have been shown
to cause hypercalcemia. Furthermore,
clinical concerns about the use of
calcium-containing phosphorus binders
have been raised by some in the dialysis
community related to risk for
hypercalcemia and calcium-related
vascular mineralization. Hypercalcemia
is seen as a potentially dangerous
consequence of such treatments, based
on a growing laboratory experimental
literature and clinical paradigm that
points to vascular calcification as an
emerging non-traditional risk factor for
vascular disease in this population. This
emerging paradigm and concerns about
unintended consequences of use of
vitamin D sterols to treat
hyperparathyroidism are reflected in the
KDIGO guideline that specifically
recommends reduction or
discontinuation of vitamin D therapy in
patients who develop hypercalcemia.
The alternative to use of vitamin D
sterols for treatment of
hyperparathyroidism is cinacalcet, a
calcimimetic agent approved for
treatment of secondary
hyperparathyroidism. As noted in the
package insert for cinacalcet, lower
serum calcium and even hypocalcemia
have been noted with cinacalcet use,
demonstrating the complex interplay
between alternative drugs used to treat
hyperparathyroidism and
hyperphosphatemia, and the role of
these drugs in the development and
treatment of hypercalcemia and
hyperparathyroidism.
In addition, although we agree that
hypercalcemia may also be treated with
drugs that are not oral-only drugs,
including bisphosphonates, IV fluids

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69037

and diuretics, we do not interpret
section 217(d) of PAMA as requiring the
Secretary to adopt measures which are
specific to the conditions treated only
with oral-only drugs. Because
hypercalcemia can be treated with
calcimimetics, an oral-only drug, we
continue to believe that the
hypercalcemia clinical measure satisfies
the requirements of PAMA.
We also note that limitations in
available evidence have, thus far,
prevented us from developing measures
that might address oral-only
medications that are more broadly used
in the ESRD dialysis population. In
2010, a Technical Expert Panel
discussed the possibility of developing
measures for phosphorous, but was
unable to come to a consensus regarding
a phosphorus measure that assesses
appropriate levels of phosphorous due
to a lack of evidence supporting a
clinical threshold. A process measure
was developed and originally endorsed
by the NQF in 2007, and is the measure
on which the current Mineral
Metabolism reporting measure is based.
However, as explained below, we
believe that the Mineral Metabolism
measure is limited because it only
assesses the reporting of phosphorus
values, rather than assessing
performance based on the values
themselves. In addition, the Mineral
Metabolism reporting measure does not
meet the requirements of PAMA
because this measure, as adopted for the
ESRD QIP, is not NQF-endorsed or
adopted by another consensus-based
entity with expertise in kidney disease.
In 2011, NQF reviewed one measure
with an upper limit
(hyperphosphatemia) and one measure
with a lower limit (hypophosphatemia),
but did not endorse either measure. A
recent 2013 Technical Expert Panel
recommended the development of a
reporting measure for PTH. However,
the panel concluded that there was
insufficient evidence to develop a
clinical intermediate outcome measure
with a target PTH value. We are
unaware of more recent evidence
suggesting that a new measure meeting
the requirements of PAMA will be
available in the near future, but are
interested in discussing any such
evidence with stakeholders.
As the state of clinical evidence
evolves to support additional, more
comprehensive measures of mineral
bone disease, we look forward to
continued consultation with the dialysis
community.
Comment: A number of commenters
did not support the use of the
Hypercalcemia clinical measure to
satisfy the requirements of PAMA based

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on belief that the measure does not
provide value to the patient, relate to
the provision of quality care, or
adequately reflect the complexity of
bone and mineral disorders. They also
noted that the NQF Renal Steering
Committee initially recommended
against endorsement for the
Hypercalcemia clinical measure during
its May, 2015 meeting. Several
commenters also encouraged CMS to
work with experts in the kidney
community to develop a composite
measure evaluating phosphorus,
calcium, and parathyroid hormone
levels because such a measure would be
more likely to improve patient outcomes
than multiple individual measures.
Specifically, they recommended that
CMS convene a TEP to develop a
measure, which can be submitted for
endorsement by NQF, and which would
satisfy the statutory and regulatory
requirements. Other commenters
recommended the adoption of
individual measures on serum
phosphorus management,
hyperphosphatemia, and medication
reconciliation.
Response: Although the
Hypercalcemia clinical measure does
not assess all of the hormone levels
mentioned by the commenters, we
believe this measure assesses an
important aspect of ESRD patients’ care
because abnormalities of bone mineral
metabolism are exceedingly common
and contribute significantly to
morbidity and mortality in patients with
advanced chronic kidney disease. We
also believe that the measure relates to
the provision of quality care furnished
to patients by facilities because issues
related to bone mineral metabolism
have serious health consequences for
patients with ESRD. As discussed
above, we would welcome the
opportunity to work with stakeholders
to develop a more comprehensive
measure that meets the requirements of
PAMA.
Comment: One commenter did not
support the use of the Hypercalcemia
clinical measure to satisfy the
requirements of PAMA because they
believe that an isolated metric to avoid
hypercalcemia could have the
unintended consequence of leading to a
decrease in utilization of vitamin D
analogs and calcium-containing
phosphate binders, which might result
in worsening the incidence of
hyperparathyroidism and
hyperphosphatemia in ESRD patients.
Response: We agree that it would be
beneficial to adopt a more
comprehensive mineral bone disease
measure, but as explained above, we are

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currently unaware of any measure on
this topic.
Comment: One commenter
recommended CMS convene a
Technical Expert Panel on oral-only
drugs to spur development of a more
appropriate measure on this topic.
Response: We thank the commenter
for its recommendation, and we intend
to examine opportunities to convene a
TEP specific to conditions treated using
oral-only drugs.
Comment: One commenter
recommended that CMS use the current
Mineral Metabolism reporting measure
to satisfy the requirements of PAMA
because hypercalcemia is an incomplete
proxy for monitoring conditions
currently treated with oral-only drugs.
The commenter further noted that a
larger proportion of ESRD patients are
treated with oral phosphate binder
therapy for hyperphosphatemia than
with calcimimetics for hypercalcemia.
Response: We note that the Mineral
Metabolism reporting measure assesses
facilities reporting phosphorous values,
not the values themselves. Furthermore,
previous attempts to develop measures
for phosphorous in 2010 and 2011 were
unsuccessful because consensus was not
reached regarding an appropriate level
of phosphorous due to lack of clinical
evidence. We therefore believe that the
Hypercalcemia clinical measure is a
superior measure of bone mineral
metabolism at this time. In addition, the
Mineral Metabolism reporting measure
does not meet the requirements of
PAMA because this measure, as adopted
for the ESRD QIP, is not NQF-endorsed
or adopted by another consensus-based
entity with expertise in kidney disease.
E. Sub-Regulatory Measure Maintenance
in the ESRD QIP
In the CY 2013 ESRD PPS final rule,
we finalized our policy to use a subregulatory process to make nonsubstantive updates to measures (77 FR
67477). We currently make available the
technical specifications for ESRD QIP
measures at http://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_
TechnicalSpecifications.html but are in
the process of drafting a CMS ESRD
Measures Manual which will include
not only the ESRD QIP measure
specifications, but also technical
information on quality indicators that
facilities report for other CMS ESRD
programs. We expect to release the first
version of the CMS ESRD Measures
Manual in the near future at the
following web address: http://www.cms.
gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/
ESRDQIP/index.html. The manual will

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be released before the beginning of the
applicable performance period,
preferably at least 6 months in advance.
We believe that this update frequency
will be sufficient to provide facilities
with information needed to incorporate
these updates into their ESRD data
collection activities. We note that this
policy is consistent with our policy for
updating the CMS National Hospital
Inpatient Quality Measures
Specifications Manual, which is posted
on the QualityNet Web site
(www.qualitynet.org).
We welcomed recommendations from
the public on technical updates to ESRD
QIP measures. We will consider the
appropriateness of all
recommendations, notify those who
submit recommendations as to whether
we accept the recommendation, and
incorporate accepted recommendations
in a future release of the CMS ESRD
Measure Manual. At present, we intend
to use JIRA, a web-based collaboration
platform maintained by the Office of the
National Coordinator for Health
Information Technology, to receive,
consider, and respond to
recommendations for non-substantive
measure changes. Further information
about how to use the JIRA tool to make
such recommendations will be
published in an upcoming CROWN
Memo and will be posted to http://www.
cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/
ESRDQIP/index.html.
The comments and our responses are
set forth below.
Comment: Many commenters
supported CMS’s development of an
ESRD Measures Manual as an important
step in increasing transparency and
understanding of the ESRD measures.
They also supported our intended use of
the JIRA system to accept feedback and
suggestions from stakeholders and also
recommended that CMS include contact
information for Agency staff so that
dialysis providers have a point-ofcontact within the Agency who can
answer questions regarding the
interpretation of measures. One
commenter added that the Manual
should not replace traditional noticeand-comment rulemaking with respect
to measure details, but should instead
serve as a document for aggregating
technical specifications and
implementation rules for all ESRD
quality measures. One commenter
recommended that CMS make the
measure micro-specifications and other
technical information part of the
rulemaking process to ensure
commenters fully understand measure
proposals.

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Response: We thank commenters for
their support and we agree that the
ESRD Measures Manual is an important
step in increasing transparency and
understanding of the ESRD measures as
they are currently specified for use in
the ESRD QIP and/or DFC. Although we
intend to use JIRA as the sole means by
which stakeholders communicate with
us regarding the measures (outside of
the rulemaking process), we will seek to
ensure this process is as transparent as
possible. The Manual will gather in one
resource all measure specifications,
including what we refer to as microspecifications (additional technical
details regarding the complexities of
calculating measure scores), that are
currently made available through
separate resources. The Measures
Manual will create an additional vehicle
for communication and discussion of
measure specifications, but will not
replace the traditional notice-andcomment rulemaking process, or our
policy to use rulemaking to adopt
substantive updates to measures. Rather,
the Measures Manual will be used to
implement technical updates to
measures, many of which can be
suggested by stakeholders through JIRA.
Consistent with our current policy, we
will also provide notice of technical
updates through CROWN Memos and
other means of communication.
Comment: One commenter
specifically requested that CMS make
available additional detail about the
STrR measure’s technical specifications
in the ESRD Measures Manual, along
with detailed flowcharts or computer
codes so that the public can replicate
the mathematics used, and asked that
these be provided prior to adopting any
measures in future years of the QIP.
Response: The upcoming Measures
Manual will include all necessary
information to calculate measure scores
for all clinical measures, including the
STrR clinical measure. We encourage
stakeholders to review and submit
comments on the Measures Manual in
order to ensure its responsiveness to
stakeholder needs.

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F. Revision to the Requirements for the
PY 2017 ESRD QIP
1. Modifying the Small Facility Adjuster
(SFA) Calculation for All Clinical
Measures Beginning With the PY 2017
ESRD QIP
In the CY 2013 ESRD PPS final rule
we adopted a scoring adjustment for
facilities with relatively small numbers
of patients, called the small facility
adjuster, which aims to ensure that any
error in measure rates due to a small
number of cases will not adversely

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affect facility payment (77 FR 67511).
Since we first implemented the
methodology to implement the small
facility adjuster, we have encountered
two issues related to basing the
adjustment on the within-facility
standard error. First, facility scores for
some of the outcome measures adopted
in the ESRD QIP, such as the National
Healthcare Safety Network (NHSN)
Bloodstream Infection (BSI) clinical
measure, do not approximate a normal
or ‘‘bell-shaped’’ distribution. In such
cases, the within-facility standard error
does not necessarily capture the spread
of the data as it would if facility scores
were normally distributed. Second,
facilities and other stakeholders have
commented that it is difficult for them
to independently calculate pooled
within-facility standard errors because
doing so requires data for all patientmonths across all facilities, which
makes the small facility adjuster
unnecessarily opaque. For these
reasons, we have developed an equation
for determining the small facility
adjuster that does not rely upon a
within-facility standard error, but
nonetheless preserves the intent of the
adjuster to include as many facilities in
the ESRP QIP as possible while ensuring
that the measure scores are reliable.
Therefore, beginning with the PY
2017 ESRD QIP, we proposed to use the
following methodology to determine the
small facility adjustment:
• For the ith facility, suppose the
facility’s original measure rate is pi and
the number of patients (or other unit
used to establish data minimums for the
measure. For example, index discharges
for the Standardized Readmission Ratio
clinical measure) at the ith facility is ni.
• Where the number of eligible
patients (or other appropriate unit)
needed to receive a score on a measure
is L and the upper threshold for
applying the small facility adjuster is C,
the ith facility will be eligible for the
adjustment when L ≤ ni ≥ C.
Accordingly, L and C set the upper and
lower thresholds of eligible patients (or
other appropriate unit) a facility needs
to have in order to be considered for a
small facility adjustment; consistent
with previously finalized policies,
facilities with fewer than L eligible
patients (or other appropriate unit) for a
measure will not receive a score on that
measure, and facilities with more than
C eligible patients (or other appropriate
unit) for a measure will not receive an
adjustment for that measure.
• Assuming L ≤ ni < C, let wi = n,
where ni is the number of patients (or
other appropriate unit) at the ith facility
and C is the upper thresholds of eligible
patients (or other appropriate unit) a

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69039

facility needs to have in order to be
considered for a small facility
adjustment. This calculation will
produce the facility’s weighting
coefficient for a given clinical measure,
wi, which provides a metric for
assessing the uncertainty due to small
facility sizes.
• For measures where higher scores
are better (for example, the Vascular
Access Type (VAT): Fistula clinical
measure and the Dialysis Adequacy
clinical measures), a small facility’s
adjusted performance rates (ti) will be
pegged to the national mean
performance rate (P) as follows:
Æ If pi < P, then ti = wi * pi + (1 ¥
wi * P,
Æ If pi is greater than or equal to P,
the facility will not receive an
adjustment.
• For measures where lower scores
are better (for example, VAT: Catheter,
NHSN BSI, Hypercalcemia,
Standardized Readmission Ratio (SRR),
and Standardized Transfusion Ratio
(STrR) clinical measures), a small
facility’s adjusted performance rates (ti)
will be pegged to the national mean
performance rate (P) as follows:
Æ If pi > P, then ti = wi * pi + (1 ¥
wi * P
Æ If pi is less than or equal to P, then
the facility will not receive an
adjustment
• For the standardized ratio
measures, such as the SRR and STrR
clinical measures, the national mean
measure rate (that is, P) is set to 1.
We note that the equation ti = wi * pi
+ (1 ¥ wi) * P is designed to ‘‘shrink’’
the facility mean toward the national
mean, and that reflects the degree of
confidence in the estimation of the
facility mean, because it depends on
facility size. Some research has shown
that this type of ‘‘shrinkage estimator’’
equation gives a small mean squared
error (that is, the combination of bias
and variance) if the national mean truly
reflects the performance of a small
facility, which was the intention of the
equation.3
To assess the impact of the proposed
small facility adjuster, we conducted an
impact analysis of this proposed
methodology on individual measure
scores and facility TPSs, using the final
dataset used to calculate PY 2015 ESRD
QIP scores. The full results of this
analysis can be found at https://
www.cms.gov/Medicare/Quality3 Efron B, Morris C. Empirical Bayes on vector
observations: An extension of Stein’s method.
Biometrika, 59(2):335–347. Ahmed SE., Khan SM.
Improved estimation of the Poisson parameter.
Statistica, anno LIII n.2, 268–286, 1993. Ahmed SE.
Combining Poisson means. Communications in
Statistics: Theory and Methods, 20, 771–789, 1991.

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Initiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/
Small-Facility-Adjustment-Proposal-forthe-ESRD-QIP.pdf. Table 13 summarizes

these results, presenting changes in
measure scores observed after applying
the proposed small facility adjuster, as
compared to measure scores calculated

with the existing small facility adjuster.
For the purposes of this analysis and for
all of the measures, L was set to 11 and
C was set to 26.

TABLE 13—IMPACT OF PROPOSED SMALL FACILITY ADJUSTER ON INDIVIDUAL MEASURE SCORES, USING THE FINAL
DATASET FOR THE PY 2015 ESRD QIP
# facilities
received SFA
in PY 2015

Measure

National mean
in the
performance
period
(CY 2013)

# facilities
receiving SFA
under new
method

# facilities with score
change due to new SFA
method N (% out of scored
facilities)

# facilities with
higher score
under new
SFA method

# facilities with
lower score
under new
SFA method

Hgb > 12 .............................
Fistula .................................
Catheter ..............................
HD Kt/V ...............................
Ped HD Kt/V .......................
PD Kt/V ...............................

1,253
938
826
588
11
787

0.4%
64.1%
11.7%
91.1%
80.1%
76.4%

63
391
352
173
1
192

32 out of 5,513 (0.6) ...........
341 out of 5,547 (6.1) .........
301 out of 5,562 (5.4) .........
248 out of 5,641 (4.4) .........
8 out of 11 (72.7) ................
400 out of 1,203 (33.3) .......

32
66
65
22
0
62

0
275
236
226
8
338

TPS .....................................
Reduction ............................

........................
........................

........................
........................

........................
........................

513 out of 5,650 (9.1) .........
43 out of 5,650 (0.8) ...........

96
23

417
20

As the results in Table 13 indicate,
fewer facilities received an adjustment
under the proposed small facility
adjuster methodology, because small
facilities with performance rates above
the national mean do not receive an
adjustment. However, those facilities
that did receive an adjustment generally
received a larger adjustment under the
proposed methodology. For example, of
the 43 facilities that received a different

payment reduction under the proposed
small facility adjuster, 23 (53 percent)
received a lower payment reduction.
We also assessed the impact of the
proposed small facility adjuster on the
distribution of payment reductions,
using the final dataset used to calculate
PY 2015 ESRD QIP payment reductions.
The full results of this analysis can be
found at https://www.cms.gov/
Medicare/Quality-Initiatives-Patient-

Assessment-Instruments/ESRDQIP/
Downloads/Small-Facility-AdjustmentProposal-for-the-ESRD-QIP.pdf. Table
14 below compares the distribution of
payment reductions using the existing
small facility adjuster to the distribution
of payment reductions using the
proposed small facility adjuster. For the
purposes of this analysis and for all of
the measures, L was set to 11 and C was
set to 26.

TABLE 14—COMPARISON OF THE DISTRIBUTION OF PAYMENT REDUCTIONS DETERMINED WITH THE EXISTING AND
PROPOSED SMALL FACILITY ADJUSTER, USING THE FINAL DATASET FOR THE PY 2015 ESRD QIP
Payment reduction distribution in PY 2015
using the existing SFA
Payment reduction

Number of facilities

0.0
0.5
1.0
1.5
2.0

Estimated payment reduction distribution in PY 2015
using the new SFA

Percent of facilities

5,307
242
41
23
378

Payment reduction

93.93
4.28
0.73
0.41
0.65

Number of facilities

0.0
0.5
1.0
1.5
2.0

Percent of facilities

5,296
255
45
26
28

93.73
4.51
0.80
0.46
0.50

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Note: This table excludes 488 facilities that did not receive a score because they did not have enough data to receive a TPS.

These results suggest that a similar
number of facilities would receive a
payment reduction under the proposed
small facility adjuster methodology. A
total of 343 (6.1 percent) facilities would
receive a payment reduction with the
existing small facility adjuster; under
the proposed small facility adjuster
methodology, a total of 354 (6.3 percent)
facilities would have received a
payment reduction. Based on the results
of these analyses, we believe that the
proposed small facility adjuster does not
systematically alter the distribution of
measure scores, TPSs, and payment
reductions, as compared to the existing
small facility adjuster. Coupled with the
benefits of removing the within-facility

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standard error variable from the existing
adjuster (discussed above), this leads us
to believe that the benefits of the
proposed adjuster outweigh the benefits
of the existing adjuster. We therefore
proposed to modify the methodology for
determining the small facility
adjustment as explained above.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Several commenters
supported the overall objectives of the
proposed small facility adjuster
modification, but expressed concern
with the proposed methodology and its
alignment with the intended purpose of
the SFA. These commenters were

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primarily concerned that too few
facilities would receive an adjustment
under the proposed SFA and
recommended that CMS consider an
SFA formula that more closely
approximates the current SFA’s effect
on measure scores. One commenter
asserted that because small facilities
with performance rates above the
national mean will not receive an
adjustment under the proposed small
facility adjuster calculation, they will
experience the SFA as a performance
reduction, when compared to the
current SFA, which goes against the
goals of the SFA generally.
Another commenter conducted a
detailed analysis of the proposed SFA

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69041

using data from Dialysis Facility
Compare and found that, of the 3,598
facilities in DFC, 480 met the following
two criteria: (1) A facility sample size
between 11 and 25, and (2) their unadjusted performance rate was above the
national median, for at least one
measure. Additionally, this commenter
found that 266 facilities met these
criteria for at least two measures,
meaning they would have received an
adjustment under the current SFA but
would no longer receive one under the
proposed SFA. This commenter also
analyzed the average magnitude that the
proposed SFA would have on facilities’
scores and found that for the fistula
measure, for example, the current SFA
adjusts performance up by an average of
2.9 percent for small facilities, whereas
the proposed SFA increases

performance only by an average of 1.1
percent. The commenter found similar
results for other measures, and therefore
urged CMS to adopt an SFA formula
which more closely approximates the
current SFA’s impact on measure
scores.
One commenter offered an alternative
to the proposed Small Facility Adjuster,
which was also supported by several
other commenters who reviewed the
alternative calculation. This alternative
Small Facility Adjuster is expressed as
follows:
• For the ith facility, suppose the
facility’s original measure rate is pi and
the number of patients (or other unit
used to establish data minimums for the
measure; for example, index discharges
for the Standardized Readmission Ratio
clinical measure) at the ith facility is ni.

• Where the number of eligible
patients (or other appropriate unit)
needed to receive a score on a measure
is L and the upper threshold for
applying the small facility adjuster is C,
the ith facility will be eligible for the
adjustment when L ≤ ni < C.
Accordingly, L and C set the upper and
lower thresholds of eligible patients (or
other appropriate unit) a facility needs
to have in order to be considered for a
small facility adjustment; consistent
with previously finalized policies,
facilities with fewer than L eligible
patients (or other appropriate unit) for a
measure will not receive a score on that
measure, and facilities with more than
C eligible patients (or other appropriate
unit) for a measure will not receive an
adjustment for that measure.

• For measures where higher scores
are better (for example, the Vascular
Access Type (VAT): Fistula clinical
measure and the Dialysis Adequacy
clinical measures), a small facility’s
adjusted performance rates (ti) will be
pegged to the benchmark, or 90th
percentile of national facility
performance on a measure (B) as
follows:
Æ If pi < B, then ti = wi * pi + (1 ¥
wi * B,
Æ If pi is greater than or equal to , the
facility will not receive an adjustment.
• For measures where lower scores
are better (for example, VAT: Catheter,
NHSN BSI, Hypercalcemia,
Standardized Readmission Ratio (SRR),
and Standardized Transfusion Ratio
(STrR) clinical measures), a small
facility’s adjusted performance rates (ti)
will be pegged to the benchmark, or
90th percentile of national facility
performance on a measure (B) as
follows:
Æ If pi > B, then ti = wi * pi + (1 ¥
wi * B

Æ If pi is less than or equal to B, then
the facility will not receive an
adjustment
• For the standardized ratio
measures, such as the SRR and STrR
clinical measures, the national mean
measure rate (that is, B) is set to 1.
As with the proposed SFA, the
alternative SFA formula suggested by
the commenter does not assume a bellshaped distribution, nor does it require
the calculation of a pooled withinfacility standard error. The commenter
asserted that only difference between its
alternative SFA calculation and the
proposed SFA is that the proposed SFA
uses the 50th percentile of national
facility performance, whereas the
commenter’s alternative SFA uses the
90th percentile (that is, the benchmark)
of national facility performance, to
determine which small facilities should
receive an adjustment. The commenter
argued that using the 90th percentile of
facility performance to determine which
facilities will receive an adjustment
provides some positive adjustment for
all small facilities which may have been

adversely affected by one or two
challenging patients. The adjustment
would be larger for worse performers
and for smaller facilities and the
magnitude of the adjustment under this
alternative SFA would be similar to that
of the current SFA.
Response: We agree that the
alternative SFA suggested by a
commenter and the proposed SFA
accomplish very similar goals using
virtually identical methodologies. Like
the proposed SFA, the alternative SFA
does not assume a bell-shaped
distribution, nor does it require the
calculation of pooled within-facility
standard errors required in the current
SFA. We therefore believe that, like the
proposed SFA, facilities should be able
to replicate this alternative SFA formula
more easily than the current SFA, which
requires the calculation of pooled
within-facility standard errors. We also
agree that the alternative SFA provides
some positive adjustment for a greater
number of small facilities that may be
adversely affected by a small number of
outlier patients than the proposed SFA,

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as well as provides a greater adjustment
for smaller facilities and those who
appear to be ‘‘worse’’ performers based
on their measure scores. We believe this
particular aspect of the alternative
SFA—that it provides adjustments
across the range of facility performance,
as opposed to only adjusting the scores
of below-average performers—addresses
the primary concern raised by
commenters that the application of the
proposed SFA did not have the same
magnitude of impact on facility scores
as the current SFA.
For these reasons, we are finalizing
the SFA suggested by a commenter and
described above for PY 2017 and future
payment years of the ESRD QIP.
Specifically, we are adopting the 90th
percentile of facility performance as the
measure score threshold for facility
eligibility for the small facility adjuster
instead of the proposed 50th percentile
of facility performance. Under this
methodology, facilities treating between
11 and 25 patients and scoring below
the benchmark (that is, the 90th
percentile of national facility
performance) for a measure will receive
an adjustment to their measure scores
using the calculation provided above.
Comment: One commenter requested
that CMS conduct a new analysis of the
proposed small facility adjuster as
applied to the proposed combined
dialysis adequacy measure as the
analysis provided in the proposed rule
is based on the individual dialysis
adequacy measures previously used in
the QIP.
Response: We have conducted the
analysis as requested, but have
substituted the alternative small facility
adjuster described above, which we are
adopting for PY 2017 and future
payment years, for the small facility
adjuster proposed in the CY 2016 ESRD
PPS proposed rule. The results of this
analysis are available below using data
from CY 2014.
Table 15 demonstrates the impact of
the small facility adjuster we are
finalizing on the PY 2018 ESRD QIP
measure set, which includes all four
dialysis adequacy measures, and Table
16 demonstrates the impact of the small
facility adjuster on the measure set with
the single comprehensive Dialysis
Adequacy measure.

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TABLE 15—ESTIMATED NUMBER OF
FACILITIES RECEIVING A PAYMENT
REDUCTION FOR PY 2018 BASED
ON THE SMALL FACILITY ADJUSTER
BEING FINALIZED (PY 17 THROUGH
19 SFA)
Reduction
(%)

Estimated
number of
facilities
receiving a
reduction

0 ................
0.5 .............
1.0 .............
1.5 .............
2.0 .............

4889
817
263
57
11

(%) of
facilities
receiving a
reduction
80.98
13.53
4.36
0.94
0.18

Note: This table excludes 296 facilities that
did not receive a score because they did not
have enough data to receive a TPS.

TABLE 16—ESTIMATED NUMBER OF
FACILITIES RECEIVING A PAYMENT
REDUCTION SCALE FOR PY 2019
BASED ON THE ALTERNATIVE SMALL
FACILITY
ADJUSTER
(PY
17
THROUGH 19 SFA)
Reduction
(%)

Estimated
number of
facilities
receiving a
reduction

0 ................
0.5 .............
1.0 .............
1.5 .............
2.0 .............

4618
976
366
69
17

(%) of
facilities
receiving a
reduction
76.38
16.14
6.05
1.14
0.28

Note: This table excludes 287 facilities that
did not receive a score because they did not
have enough data to receive a TPS.

As demonstrated in the analyses
above, using the PY 2018 measure set
and the small facility adjuster suggested
by a commenter on the PY 2018
measure set, approximately 18.1 percent
of facilities would receive a reduction.
By contrast, under the PY 2019 measure
set and using this small facility adjuster,
approximately 23.62 percent of facilities
would receive a payment reduction.
While this analysis reflects a small
increase in the number of facilities
receiving a reduction between PY 2018
and PY 2019, we believe this increase is
likely the result of more facilities being
eligible to receive a score on the single
comprehensive Dialysis Adequacy
clinical measure than on the four
individual dialysis adequacy measures,
as well as a decrease in the number of
facilities qualifying for an adjustment on
this measure for PY 2019.
Comment: One commenter expressed
concerns that the proposed SFA is less
transparent than the current small
facility adjuster. The commenter stated
that the complicated formula makes it

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difficult to tell if the adjuster is
achieving its desired outcome and may
prove difficult for small facilities to
replicate without additional resources.
The commenter stated that it is difficult
to determine whether small facilities are
receiving lower scores because of their
low patient volume, as opposed to their
quality of care. The commenter stated
that the SFA formula should be easy to
use and its impact on small facilities
should be easy to replicate and
understand.
Response: We believe that the
proposed SFA is more transparent than
the current SFA, because facilities are
able to calculate the proposed SFA
using data available to the facility,
which facilities cannot do for the
current SFA. However, as explained
above, we are finalizing an alternative
SFA suggested by a commenter, which
we also believe will be easier to
replicate than the current SFA.
Comment: One commenter expressed
concerns that a smaller percentage
adjustment was applied to facilities for
PY 2016 than the commenter believed
was going to be applied based on the
example calculation provided in the CY
2014 ESRD PPS final rule with comment
period.
Response: The SFA calculation for PY
2016 was implemented as finalized, and
although the actual size of the
adjustments was different than the
estimated size of the adjustments that
we set forth in the CY 2014 ESRD final
rule with comment period, the estimates
in that final rule were intended to be for
illustrative purposes only.
For these reasons, we are finalizing
the alternative SFA suggested by a
commenter and described above, under
which facilities treating between 11 and
25 patients and scoring below the
benchmark for a clinical measure (that
is, the 90th percentile of national
facility performance) will receive an
adjustment to their measure scores
using the calculation provided above.
2. Reinstating Qualifying Patient
Attestations for the ICH CAHPS Clinical
Measure
In the CY 2015 ESRD PPS final rule,
we finalized our proposal to remove the
case minimum attestation for the ICH
CAHPS reporting measure due to
facility confusion regarding the
attestation process (79 FR 66185). We
further finalized that we would
determine facility eligibility for the ICH
CAHPS reporting measure based on
available data submitted via
CROWNWeb, Medicare claims, and
other CMS administrative data sources.
Following the publication of that rule
we have determined that we do not have

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
reliable data sources for determining
some of the patient-level exclusions. For
example, we have been unable to locate
a reliable data source for determining
whether a patient is receiving hospice
care or is residing in an institution such
as a prison or a jail.
Although some facilities may be
experiencing issues related to the
attestation process (for example, during
the preview period, we have
encountered numerous instances where
facilities have either attested
inappropriately or have failed to attest
in a timely fashion), we believe that
facilities are generally able to determine
whether their patients meet one or more
of the exclusion criteria for the measure.
For this reason, we believe that having
facilities attest that they are ineligible
for the measure will result in more
accurate measure scores, as compared to
using unreliable data sources to
determine whether facilities treated the
requisite number of eligible patients
during the eligibility period, (defined as
the calendar year immediately
preceding the performance period).
Because we have no reason to believe
that reliable data sources for some of the
patient-level exclusions for the ICH
CAHPS clinical measure will become
available in the near term, and because
the PY 2017 ICH CAHPS reporting
measure and the PY 2018 ICH CAHPS
clinical measure employ the same
exclusion criteria, we proposed to
reinstate the attestation process we
previously adopted in the CY 2014
ESRD PPS final rule (78 FR 72220
through 72222) beginning with the PY
2017 program year. However, we are
now proposing to have facilities attest
on the basis of the eligibility criteria
finalized in the CY 2015 ESRD PPS final
rule (79 FR 66169 through 66170).
Accordingly, facilities seeking to avoid
scoring on the ICH CAHPS measure due
to ineligibility must attest in
CROWNWeb by January 31 of the year
immediately following the performance
period (for example, January 31, 2017,
for the PY 2018 ESRD QIP) that they did
not treat enough eligible patients during
the eligibility period to receive a score
on the ICH CAHPS measure. Facilities
that submit attestations regarding the
number of eligible patients treated at the
facility during the eligibility period by
the applicable deadline will not receive
a score on the ICH CAHPS clinical
measure for that program year. Facilities

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that do not submit such attestations will
be eligible to receive a score on the
measure. However, even if a facility is
eligible to receive a score on the
measure because it has treated at least
30 survey-eligible patients during the
eligibility period (defined as the
calendar year before the performance
period), the facility will still not receive
a score on the measure if it cannot
collect at least 30 survey completes
during the performance period. Facility
attestations are limited to the number of
eligible patients treated at the facility
during the eligibility period, and are not
intended to capture the number of
completed surveys at a facility during
the performance period. The ESRD QIP
system will determine how many
completed surveys a facility received
during the performance period. We are
not proposing to change any of the other
data minimum requirements for the PY
2017 ICH CAHPS reporting measure, or
for the ICH CAHPS clinical measure in
PY 2018 and future payment years. To
reduce confusion, we will release a
CROWN Memo detailing how facilities
are expected to attest.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Many commenters
supported the proposal to reinstate
qualifying patient attestations for the
ICH CAHPS measure. One commenter
additionally recommended that CMS
establish a process for facilities to
confirm that the attestation has been
received and that CMS delay the
measure’s conversion to a clinical
measure until the appropriate facility
exclusion data is available.
Response: We thank commenters for
their support. We agree that it would be
ideal if facilities could confirm that
their attestation has been received, and
we will consider the feasibility of
implementing such a process in the
future.
Comment: One commenter did not
support CMS’ proposal to reinstate the
qualifying patient attestations for the
ICH CAHPS measure because the
process is challenging for smaller
facilities to understand. The commenter
recommended that CMS adopt ICH
CAHPS patient attestations forms
similar to the Home Health Care CAHPS
Survey Participant Exemption Request
form.
Response: The reinstated attestation
for the ICH CAHPS measure is

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69043

unchanged from that previously
adopted in the CY 2014 ESRD PPS final
rule with comment period (78 FR 72220
through 72222); we therefore believe
that facilities have had sufficient
experience with the attestation process
and exclusion criteria to justify
reinstating the attestation in order to
ensure more accurate measure scores for
facilities. In order to ease any residual
confusion regarding the reinstated ICH
CAHPS qualifying patient attestation,
we will release a CROWN Memo
detailing how facilities are expected to
attest and the exclusion criteria for the
ICH CAHPS measure prior to the
attestation deadline for PY 2017. For
future years of the ESRD QIP, we will
consider the feasibility of adopting ICH
CAHPS patient exemption request form
similar to the Home Health Care CAHPS
Survey Participant Exemption Request
form.
For the reasons discussed above, we
are finalizing our proposal to reinstate
the qualifying patient attestations for the
ICH CAHPS measure beginning with the
PY 2017 ESRD QIP.
G. Requirements for the PY 2018 ESRD
QIP
1. Performance Standards, Achievement
Thresholds, and Benchmarks for the
Clinical Measures Finalized for the PY
2018 ESRD QIP
In the CY 2015 ESRD PPS final rule,
we stated that we would publish values
for the PY 2018 clinical measures, using
data from CY 2014 and the first portion
of CY 2015, in the CY 2016 ESRD PPS
final rule (79 FR 66209). Upon
publication of the CY 2016 ESRD PPS
proposed rule, we did not have the
necessary data to assign numerical
values to the proposed performance
standards, achievement thresholds, and
benchmarks for the clinical measures,
because we did not yet have complete
data from CY 2014. Since that time, we
have collected the data needed to
calculate finalized performance
standards for the PY 2018 ESRD QIP.
For all of the clinical measures,
including the SRR clinical measure, this
data comes from the period of January
through December 2014. Table 17 lists
the finalized numerical values for all of
the finalized PY 2018 ESRD QIP clinical
measures except the ICH CAHPS
clinical measure.

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

TABLE 17—ESTIMATED NUMERICAL VALUES FOR THE PERFORMANCE STANDARDS FOR THE PY 2018 ESRD QIP CLINICAL
MEASURES USING THE MOST RECENTLY AVAILABLE DATA
Measure

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Vascular Access Type:
%Fistula .....................................................
%Catheter ..................................................
Kt/V:
Adult Hemodialysis ....................................
Adult Peritoneal Dialysis ............................
Pediatric Hemodialysis ..............................
Pediatric Peritoneal Dialysis ......................
Hypercalcemia ..................................................
NHSN Bloodstream Infection SIR ....................
Standardized Readmission Ratio .....................
Standardized Transfusion Ratio .......................
ICH CAHPS ......................................................

We believe that the ESRD QIP should
not have lower performance standards
than in previous years. Accordingly, if
the final numerical value for a
performance standard, achievement
threshold, and/or benchmark is worse
than it was for that measure in the PY
2017 ESRD QIP, then we proposed to
substitute the PY 2017 performance
standard, achievement threshold, and/or
benchmark for that measure.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: One commenter supported
the estimated performance standard,
achievement threshold, and benchmark
for the ICH CAHPS clinical measure for
the PY 2018 ESRD QIP.
Response: We thank the commenter
for its support.
Comment: Several commenters
supported CMS’s proposal, for PY 2018,
to set the Performance Standard,
Achievement Threshold and Benchmark
at the 50th, 15th, and 90th percentiles
respectively, for the Clinical Measures
finalized for the PY 2018 ESRD QIP,
particularly where those values are
higher than the current PY 2017 values.
Response: We thank the commenters
for their support. For this reason, we
will finalize our proposal to utilize
performance standards from the
previous year if they are higher than
those of the next year. Accordingly, we
are substituting the PY 2017
performance standards, achievement
thresholds, and benchmarks for the
Adult Hemodialysis Adequacy,
Pediatric Hemodialysis Adequacy, and
SRR clinical measures for the PY 2018
values for these measures.
Comment: One commenter expressed
support for CMS’s policy to maintain a
previous year’s benchmark if it is worse
than it was for the measure in the
previous year, but suggested that if data

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Achievement threshold

Benchmark

53.51% ...................................
16.79% ...................................

79.60% ...................................
2.59% .....................................

65.94%.
8.80%.

91.08% ...................................
75.42% ...................................
84.16% ...................................
43.22% ...................................
3.92% .....................................
1.812 .......................................
0.996 .......................................
1.470 .......................................
50th percentile of eligible facilities’ performance during
CY 2015.

99.35% ...................................
97.06% ...................................
99.06% ...................................
88.39% ...................................
0.00% .....................................
0 ..............................................
0.555 .......................................
0.431 .......................................
15th percentile of eligible facilities’ performance during
CY 2015.

96.89%.
89.47%.
94.44%.
72.60%.
1.19%
0.861
0.996
0.923
90th percentile of eligible facilities’ performance during
CY 2015.

shows that performance is not as strong
for a particular measure, then there may
be an issue with the measure itself. The
commenter recommended that rather
than using prior benchmark data, CMS
should consider the root cause of why
performance isn’t improving for those
measures.
Response: We continue to believe that
using prior benchmark data helps drive
quality improvement for facilities and
encourages them to conduct their own
quality improvement initiatives. When
we encounter measures with data
showing that performance is
consistently poor or otherwise failing to
improve meaningfully over time, we
look into the root cause and the reasons
performance is not improving. We have
done this for the measures currently
included in the QIP and, where
appropriate, are using prior
benchmarks. In addition, we have
analyzed the performance gaps between
CY 2013 and CY 2014 for measures
where we are substituting the PY 2017
performance standards, and have not
identified any underlying issues with
those measures. We will continue to
monitor measure performance data in
future years of the program.
Comment: One commenter requested
that CMS reevaluate the PY 2018
performance standards for the NHSN
BSI, SRR, and STrR clinical measures
because their estimated values are all
below 1.0, meaning facility performance
falling within the range of expected
events may generate lower QIP scores.
The commenter expressed concern that
this scoring issue could misrepresent
performance by facilities on these
measures. Another commenter did not
support the estimated performance
standards for the SRR or STrR clinical
measures because they seem
unattainable given facilities’ experience
with the NHSN BSI clinical measure.

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Performance standard

Response: We thank the commenters
for their comments. We note, however,
that the curve for the NHSN BSI clinical
measure as seen in the PY 2016 ESRD
QIP is skewed due to an additional
policy impacting this measure, under
which facilities that fail to report a full
12 months of data for the measure
automatically receive a score of zero on
the measure. We have not implemented
a corresponding policy for the SRR or
STrR clinical measures; therefore, we
have no reason to believe scores on
these measures will be impacted in this
way. In addition, the performance
standards for the PY 2018 ESRD QIP are
only used to determine the minimum
TPS for a given year of the ESRD QIP.
The median performance rates for the
SRR, STrR, and NHSN BSI clinical
measures were determined to be 0.998,
0.923, and 0.862 for SRR, STrR,
respectively, for the PY 2018 ESRD QIP.
The minimum TPS was determined to
be the same when these values were set
to 1.0. Therefore, use of the calculated
median rather than 1.0 has no impact on
facility-level QIP scores.
We further disagree that the estimated
performance standards for the SRR or
STrR clinical measures are unattainable.
First, we note that the performance
standards for these measures are set at
the 50th percentile of facility
performance, meaning that 50 percent of
facilities achieve or surpass this
standard. These measures are
standardized ratios of performance,
evaluating facilities’ actual performance
against their expected performance.
Therefore, each facility’s score on these
measures will be reflective of the
facility’s particular patient mix and
other adjustments. In addition, the
achievement threshold, benchmark and
performance standard for those
measures are determined using the same
standards as those for all of the other

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clinical measure, which are intended to
incentivize quality improvements while
also accounting for individual facilities’
past performance on the measure. We
therefore believe it is appropriate to
maintain uniform performance
standard, achievement threshold, and
benchmark policies across the ESRD
QIP clinical measures.
Comment: One commenter
recommended that CMS avoid
implementing measures without
numerical values for performance
standards because it creates a moving
target for quality improvement.
Specifically, the commenter expressed
concern about the proposed
performance standard, achievement
threshold, and benchmark for the PY
2018 ICH CAHPS clinical measure
because performance data is not
available to estimate a numerical value
for these elements, and recommended
that CMS revert the ICH CAHPS
measure to a reporting measure. The
commenter asserted that numerical
performance standards inform facility
decision-making in how to address
patient concerns and improve patient
experience ratings.
Response: We thank commenter for its
recommendation and note that, in
general, we seek to avoid implementing
measures without numerical values for
their performance standard,

achievement threshold, and benchmark.
In the CY 2016 ESRD PPS proposed
rule, we used the most recently
available data and provided numerical
values for all clinical measures except
the ICH CAHPS clinical measure (80 FR
37842). For the ICH CAHPS clinical
measure, CY 2015 is the first year for
which we will have data. Accordingly,
we will propose numerical values for
the performance standard, achievement
threshold, and benchmark once we have
collected the data for CY 2015 and
conducted the necessary analyses.
Comment: One commenter
recommended that CMS maintain
consistency in the ESRD QIP
performance period and performance
standard methodology, and encouraged
CMS to finalize performance periods
and standards in a timely manner.
Response: We agree that maintaining
consistency in the ESRD QIP
performance periods and performance
standards is important because it
simplifies the administrative burden
associated with participating in the
ESRD QIP and aids facilities in
understanding the requirements of the
program. We note that the performance
period for the majority of measures in
the ESRD QIP aligns with the calendar
year, and only deviates in the case of the
NHSN HCP Influenza Vaccination
reporting measure, for which the

performance period generally aligns
with the influenza season. Additionally,
we appreciate that facilities want to
learn as soon as possible what the ESRD
QIP measure set and performance
standards will be for a given year of the
program. Numerical performance
standards for the ESRD QIP measure set
are calculated using the most recent
data available for those measures in
advance of the applicable performance
period. We understand that this process
results in facilities only receiving the
finalized numerical performance
standards two months before the
beginning performance period; however,
we believe this process is necessary in
order to ensure that we set accurate
performance standards for use in
scoring facility performance on the
ESRD QIP measure set for a given year.
For the reasons discussed above, for
PY 2018, we are finalizing that we will
use the performance standards in Table
17 above.

We have since determined that this
calculation may unduly penalize
facilities that treat no eligible patients in
one of the two six-month periods
evaluated under this measure; under
this calculation, those facilities would
have a ‘‘0’’ for the applicable period’s
data, in effect giving the facility half of
its score on the remaining 6-month
period as a measure score. In order to
avoid such an undue impact on facility
scores, we proposed that, beginning
with the PY 2018 ESRD QIP, if a facility
treats no eligible patients in one of the
two 6-month periods, then that facility’s
score will be based solely on the
percentage of eligible patients treated in
the other six-month period for whom
the facility reports one of six conditions.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Several commenters
supported the proposal to modify the

Pain Assessment and Follow-Up
reporting measure scoring methodology.
Response: We thank the commenters
for their support.
Comment: Some commenters
requested additional clarification
regarding the reasons for the proposed
modification to scoring facility
performance on the Pain Assessment
and Follow-Up reporting measure as
well as information about how the
modifications will be operationalized.
Response: Under the previously
finalized calculation for scoring facility
performance on the Pain Assessment
and Follow-Up reporting measure,
facilities may have been unduly
penalized for treating no eligible
patients during one of the two 6-month
periods that together make-up the
performance period. The proposed
modification is an alteration to the
scoring methodology for the Pain
Assessment and Follow-Up reporting

measure, and therefore does not impact
facilities’ requirements under the
measure.
For example, if a facility had zero
eligible patients in the first 6-month
period, then treated eligible patients in
the second 6 months, the facility would
automatically receive no greater than 5
points for the measure. We did not fully
anticipate that such a scenario could
arise, and it is one which we wish to
avoid. Therefore, under the proposed
calculation modification, facilities that
only treat eligible patients in one of two
the 6-month periods will be scored only
on the percentage of eligible patients
treated during that 6-month period.
Comment: One commenter requested
clarification from CMS regarding the
proposed modification to the Pain
Assessment and Follow-Up reporting
measure because it is unclear how the
six-month periods relate to the measure
attestations. The commenter further

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2. Modification to Scoring Facility
Performance on the Pain Assessment
and Follow-Up Reporting Measure
In the CY 2015 ESRD PPS final rule,
we finalized the following calculation
for scoring facility performance on the
Pain Assessment and Follow-Up
reporting measure under the PY 2018
ESRD QIP (79 FR 66211):

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recommended implementing the same
proposed modification for the Screening
for Clinical Depression and Follow-Up
reporting measure.
Response: In order to comply with the
requirements of the Pain Assessment &
Follow-Up Measure, facilities must
report one of six conditions in
CROWNWeb once every six months per
performance period for every qualifying
patient, meaning that facilities will
provide two separate rounds of
attestations for this measure. Conditions
covering the first six months of the
performance period must be reported in
CROWNWeb before August 1 of the
performance period, and conditions
covering the second 6 months of the
performance period must be reported in
CROWNWeb before February 1 of the
year directly following the performance
period (79 FR 66203 through 66204).
We did not propose to implement a
corresponding modification for the
Screening for Clinical Depression and
Follow-Up reporting measure because
facilities are only required to report one
of the six conditions listed in
CROWNWeb once per performance
period (that is, once per calendar year)
under this measure (79 FR 66200).
Because reporting for the Screening for
Clinical Depression and Follow-Up
reporting measure occurs once per
performance period, and not twice for
the performance period (once every 6
months), there will not be instances
where a facility is eligible for scoring
based on one part of the performance
period but not the other. Therefore,
there is no need to change the scoring
methodology for the Screening for
Clinical Depression and Follow-Up
reporting measure.
For the reasons discussed above, we
are finalizing as proposed the modified
methodology for scoring facility
performance on the Pain Assessment
and Follow-Up reporting measure
beginning with the PY 2018 ESRD QIP.
3. Payment Reductions for the PY 2018
ESRD QIP
Section 1881(h)(3)(A)(ii) of the Act
requires the Secretary to ensure that the
application of the ESRD QIP scoring
methodology results in an appropriate
distribution of payment reductions
across facilities, such that facilities
achieving the lowest TPSs receive the
largest payment reductions. In the CY
2015 ESRD PPS final rule, we finalized
our proposal for calculating the
minimum TPS for PY 2018 and future
payment years (79 FR 66221 through
66222). Under our current policy, a
facility will not receive a payment
reduction if it achieves a minimum TPS
that is equal to or greater than the total

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of the points it would have received if:
(i) It performs at the performance
standard for each clinical measure; and
(ii) it receives the number of points for
each reporting measure that corresponds
to the 50th percentile of facility
performance on each of the PY 2016
reporting measures (79 FR 66221). We
proposed to clarify how we will account
for measures in the minimum TPS when
we lack the baseline data necessary to
calculate a numerical performance
standard before the beginning of the
performance period (per criterion (i)
above), because we inadvertently
omitted this detail in the CY 2015 ESRD
PPS final rule. Specifically, we propose,
for the PY 2018 ESRD QIP, to add the
following criterion previously adopted
for the PY 2017 program (79 FR 66187):
‘‘it received zero points for each clinical
measure that does not have a numerical
value for the performance standard
established through rulemaking before
the beginning of the PY 2018
performance period.’’ Under this
proposal, for PY 2018, a facility will not
receive a payment reduction if it
achieves a minimum TPS that is equal
to or greater than the total of the points
it would have received if: (i) It performs
at the performance standard for each
clinical measure; (ii) it received zero
points for each clinical measure that
does not have a numerical value for the
performance standard established
through rulemaking before the
beginning of the PY 2018 performance
period; and (iii) it receives the number
of points for each reporting measure that
corresponds to the 50th percentile of
facility performance on each of the PY
2016 reporting measures.
We were unable to calculate a
minimum TPS for PY 2018 in the CY
2015 ESRD PPS final rule because we
were not yet able to calculate the
performance standards for each of the
clinical measures. We therefore stated
that we would publish the minimum
TPS for the PY 2018 ESRD QIP in the
CY 2016 ESRD PPS final rule (79 FR
66222).
Based on the estimated performance
standards listed above, we estimated
that a facility must meet or exceed a
minimum TPS of 39 for PY 2018. For all
of the clinical measures except the SRR,
STrR, and ICH CAHPS clinical
measures, these data come from CY
2014. The data for the SRR and STrR
clinical measures come from CY 2013
Medicare claims. For the ICH CAHPS
clinical measure, we set the
performance standard to zero for the
purposes of determining this minimum
TPS, because we are not able to
establish a numerical value for the
performance standard through the

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rulemaking process before the beginning
of the PY 2018 performance period. We
proposed that a facility failing to meet
the minimum TPS, as established in the
CY 2016 ESRD PPS final rule, will
receive a payment reduction based on
the estimated TPS ranges indicated in
Table 18 below.

TABLE 18—ESTIMATED PAYMENT REDUCTION SCALE FOR PY 2018
BASED ON DATA AVAILABLE AT PUBLICATION OF THE PROPOSED RULE
Total performance score
100—39 ................................
38—29 ..................................
28—19 ..................................
18—9 ....................................
8—0 ......................................

Reduction
(%)
0.0
0.5
1.0
1.5
2.0

We sought comments on these
proposals. The comments and our
responses are set forth below.
Comment: Several commenters
supported CMS’ proposal to continue,
for PY 2018, the same policy used in PY
2017 for determining payment
reductions, including the process for
setting the minimum TPS. One
commenter urged CMS to maintain
consistency in its payment reduction
methodology for future years of the
ESRD QIP, because this would allow
beneficiaries to better compare facility
performance over time.
Response: We thank the commenters
for their support.
Comment: One commenter expressed
concern about the estimated minimum
TPS for PY 2018, and requested that
CMS provide clarification on how the
mTPS was calculated. Specifically,
commenter is concerned that we
proposed to lower the minimum TPS for
PY 2018 from 60 (the mTPS for PY
2017) to 39. The commenter stated that
this proposal was confusing in light of
CMS’s request for comments on
potentially raising the performance
threshold to the 25th percentile.
Response: We have recalculated the
minimum TPS for PY 2018 for all
measures using updated data, including
data for the NHSN BSI clinical measure,
which we lacked at the time of the
proposed rule’s publication. Using this
data, we have determined that the
updated minimum TPS for PY 2018 is
49. Facilities failing to meet this
minimum TPS will receive a payment
reduction based on the updated TPS
ranges indicated in Table 19, below.

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We have also provided two sets of
TABLE 19—PAYMENT REDUCTION
SCALE FOR PY 2018 BASED ON THE tables below detailing how the
MOST RECENTLY AVAILABLE DATA minimum TPS was calculated for the PY
2018 ESRD QIP. Table 20 provides the
FROM CY 2014—Continued

TABLE 19—PAYMENT REDUCTION
SCALE FOR PY 2018 BASED ON THE
MOST RECENTLY AVAILABLE DATA
FROM CY 2014
Total performance score

Reduction
(%)

100–49 ..................................
48–39 ....................................
38–29 ....................................

0.0
0.5
1.0

measure score calculations used for the
updated minimum TPS. Table 21
provides the total performance score
calculations used to determine the
1.5
minimum TPS in the proposed rule.

Reduction
(%)

Total performance score
28–19 ....................................
18–0 ......................................

2.0

TABLE 20—MINIMUM TPS MEASURE SCORE CALCULATION FOR PY 2018 USING MOST RECENTLY AVAILABLE DATA
Median score
for measure
topics

Measure

Measure topic
weight score
(= median
score * measure weight)

Measure
weight
(%)

CLINICAL MEASURES
Clinical Care Subdomain .............................................................................................................
Kt/V (4 combined measures) ................................................................................................
VAT (2 combined measures) ...............................................................................................
Hypercalcemia ......................................................................................................................
STRR ....................................................................................................................................
Patient and Family Engagement/Care Coordination Subdomain ...............................................
SRR ......................................................................................................................................
ICH CAHPS ..........................................................................................................................
Safety Subdomain ................................................................................................................
NHSN ....................................................................................................................................

........................
6
6
7
5
........................
4
0
........................
5

50
18
18
7
7
30
10
20
20
20

........................
1.08
1.08
0.49
0.35
........................
0.4
0
........................
1

Clinical Subtotal .............................................................................................................

........................

........................

4.4

Mineral Metabolism ......................................................................................................................
Anemia Management ...................................................................................................................
Pain ..............................................................................................................................................
Depression ...................................................................................................................................
NHSN HCP ..................................................................................................................................

9
10
10
10
10

20
20
20
20
20

0.18
0.20
0.20
0.20
0.20

Reporting Subtotal ................................................................................................................

........................

........................

9.8

REPORTING MEASURES

TABLE 21—TOTAL PERFORMANCE SCORE CALCULATION USED TO DETERMINE THE PY 2018 MINIMUM TPS

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Clinical Subtotal ...............................................................................................
Reporting Subtotal ...........................................................................................
TPS (Clinical + Reporting Subtotals) ...............................................................
TPS (rounded) .................................................................................................

We note that our minimum TPS
policy is independent from the
achievement threshold as used in the
ESRD QIP scoring policy, and that these
policies serve different the purposes in
scoring facility performance in the
ESRD QIP. The minimum TPS
establishes the TPS a facility must
achieve in order to avoid receiving a
payment reduction for the applicable
payment year of the ESRD QIP, and
serves as the basis for the PY’s payment
reduction scale. The achievement
threshold, on the other hand, is set at

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Measure topic
weight score
(from previous
table)

Clinical and
reporting
weights
(percent)

Clinical and
reporting subscores (=
measure topic
score * weight)

Final scores
(= clinical and
reporting subscores * 10)

4.4
9.75
........................
........................

90
10
........................
........................

3.96
0.975
4.96
........................

39.6
9.8
49.4
49

the 15th percentile of national
performance and is used to score facility
performance on individual clinical
measures for a given year of the
program. We therefore believe these
separate policies provide distinct
incentives for quality improvement
among dialysis facilities. We are also
continuing to look for ways to further
incentivize quality improvement, one of
which would be to increase the
achievement threshold from the 15th to
the 25th percentile.

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Comment: One commenter urged
CMS to monitor the implementation and
impact of the QIP scoring model on the
standardized ratio measures because
they are fundamentally different than
the other QIP clinical measures in terms
of how they are calculated and the level
of control dialysis facilities have on the
results. The commenter pointed out that
the QIP scoring model was originally
designed for ‘‘rates of compliance’’
measures and is concerned about how
these measures will influence QIP
results given that the results are

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reported categorically (i.e. ‘‘worse/better
than expected’’ or ‘‘as expected.’’)
Response: We acknowledge that the
standardized ratio measures differ from
other ESRD QIP clinical measures.
However, we lack reason to believe that
the current ESRD QIP scoring
methodology is insufficient or
inappropriate for calculating facility
performance on the ESRD QIP measures
when the standardized ratio measures
are included in a facility’s score. In
addition, we note that other value-based
purchasing programs, such as the
Hospital Value-Based Purchasing
Program, score standardized ratio
measures. We will continue to monitor
the implementation and impact of these
measures in future years of the ESRD
QIP to determine if further modification
to the ESRD QIP scoring methodology is
necessary.
For the reasons discussed above, we
are finalizing the revised minimum TPS
policy for PY 2018 as proposed. We are
also finalizing the updated mTPS and
payment reduction scale for PY 2018 as
discussed above.
4. Data Validation
One of the critical elements of the
ESRD QIP’s success is ensuring that the
data submitted to calculate measure
scores and TPSs are accurate. We began
a pilot data-validation program in CY
2013 for the ESRD QIP, and procured
the services of a data-validation
contractor that was tasked with
validating a national sample of facilities’
records as reported to CROWNWeb. For
validation of CY 2014 data, our first
priority was to develop a methodology
for validating data submitted to
CROWNWeb under the pilot datavalidation program. That methodology
was fully developed and adopted
through the rulemaking process. For the
PY 2016 ESRD QIP (78 FR 72223
through 72224), we finalized a
requirement to sample approximately 10
records from 300 randomly selected
facilities; these facilities had 60 days to
comply once they received requests for
records. We continued this pilot for the
PY 2017 ESRD QIP, and proposed to
continue doing so for the PY 2018 ESRD
QIP. Under this continued validation
study, we will sample the same number
of records (approximately 10 per
facility) from the same number of
facilities (that is, 300) during CY 2016.
If a facility is randomly selected to
participate in the pilot validation study
but does not provide us with the
requisite medical records within 60
days of receiving a request, then we
proposed to deduct 10 points from the
facility’s TPS. Once we have developed
and adopted a methodology for

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validating the CROWNWeb data, we
intend to consider whether payment
reductions under the ESRD QIP should
be based, in part, on whether a facility
has met our standards for data
validation.
In the CY 2015 ESRD PPS final rule,
we also finalized that there will be a
feasibility study for validating data
reported to CDC’s NHSN Dialysis Event
Module for the NHSN Bloodstream
Infection clinical measure. HealthcareAcquired Infections (HAI) are relatively
rare, and we finalized that the feasibility
study would target records with a higher
probability of including a dialysis event,
because this would enrich the
validation sample while reducing the
burden on facilities. For PY 2018, we
proposed to use the same methodology
that was discussed in the CY 2015 ESRD
QIP final rule (79 FR 66187). This
methodology resembles the
methodology we use in the Hospital
Inpatient Quality Reporting Program to
validate the central line-associated
bloodstream infection measure, the
catheter-associated urinary tract
infection measure, and the surgical site
infection measure (77 FR 53539 through
53553). For the PY 2018 ESRD QIP, we
proposed to randomly select nine
facilities to participate in the feasibility
study for data reported in CY 2016. A
CMS contractor will send these facilities
quarterly requests for lists of candidate
dialysis events (for example, all positive
blood cultures drawn from its patients
during the quarter, including any
positive blood cultures that were
collected from the facility’s patients on
the day of, or the day following, their
admission to a hospital). Facilities will
have 60 days to respond to quarterly
requests for lists of positive blood
cultures and other candidate events. A
CMS contractor will then determine
when a positive blood culture or other
‘‘candidate dialysis event’’ is
appropriate for further validation. With
input from CDC, the CMS contractor
will utilize a methodology for
identifying and requesting the candidate
dialysis events other than positive blood
cultures. The contractor will analyze the
records of patients who had candidate
events in order to determine whether
the facility reported dialysis events for
those patients in accordance with the
NHSN Dialysis Event Protocol. If the
contractor determines that additional
medical records are needed from a
facility to validate whether the facility
accurately reported the dialysis events,
then the contractor will send a request
for additional information to the facility,
and the facility will have 60 days from
the date of the letter to respond to the

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request. Overall, we estimate that, on
average, quarterly lists will include two
positive blood cultures per facility, but
we recognize these estimates may vary
considerably from facility to facility. If
a facility is randomly selected to
participate in the feasibility study but
does not provide CMS with the requisite
lists of positive blood cultures or the
requisite medical records within 60
days of receiving a request, then we
proposed to deduct 10 points from the
facility’s TPS.
We sought comments on these
proposals. The comments and our
responses are set forth below.
Comment: Several commenters
requested that CMS conduct a more
robust validation study for NHSN BSI,
examining both the completeness of BSI
data collection and the accuracy of the
data collected. They argued that
selecting such a small number of
facilities to participate in the study may
be inadequate to validate the data
reported to the NHSN Dialysis Event
Module and recommended that CMS
reconsider the proposed sample size to
include more facilities, ideally at least 5
percent of facilities. One commenter
offered specific suggestions for
increasing the size of the validation
study. Specifically, the commenter
recommended that CMS evaluate underreporting, access type errors, application
of the NHSN criteria, accessibility of
reports of positive blood cultures from
inpatient facilities to outpatient dialysis
facilities, and the accuracy of manualvs. electronically-submitted data. The
commenter urged CMS to ensure that
both small and large dialysis facilities,
hospital-based centers and for-profit
centers are included. Additionally, the
commenter recommended that CMS
validate data from facilities that use
paper medical records and from
facilities that use electronic medical
records. Some commenters argued that
the targeting of the validation study is
too narrowly focused on patients with
positive blood cultures and feel that the
study should be expanded beyond those
patients with positive blood cultures.
They also argued that the validation
study should look at instances where a
facility reports no positive blood
cultures, which is likely the result of
intentional or accidental underreporting. One commenter specifically
recommended that CMS review the
CDC-funded data validation project for
dialysis events performed by the
Tennessee Health Department and fund
state health departments for on-site data
validation and examination of
vaccination rate reporting.
Response: We thank commenters for
their recommendations about ways to

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improve the NHSN BSI validation
study. As noted in the CY 2015 ESRD
PPS final rule with comment period (79
FR 66188), we believe it is important to
demonstrate the study’s feasibility and
further develop the study’s methodology
before expanding the study to include
more facilities. For future years of the
program, we will consider increasing
the size of the validation study to
include a greater number of facilities.
However, we currently include a wide
variety of types of facilities, both small
and large, hospital-based and for-profit,
etc. in our study. In addition, the
validation study is not currently limited
to events collected in the dialysis
facility, as one commenter suggested; it
also includes positive blood cultures
collected or identified at hospitals. We
look forward to continuing to refine this
study to ensure that we are collecting as
much reliable and useful data about
bloodstream infections as possible.
Comment: Numerous commenters did
not support CMS’s proposal to deduct
10 points from a facility’s TPS if they
are selected to participate in a data
validation study and fail to provide
CMS with the requested data within the
allotted time because 10 points can have
such a significant impact on selected
facilities’ TPSs and because the
Conditions for Coverage already require
that facilities comply with data
validation requests. Several commenters
expressed concerns that this 10-point
deduction for non-compliance could
mislead beneficiaries on the quality of
care delivered by the facility and argued
that there is no evidence that facilities
are noncompliant with requests for this
data. Commenters argued that failing to
supply CMS with this data does not
measure the quality of care provided by
the facility. Additionally, commenters
stated that facilities should not be
penalized without having the
opportunity to dispute the
noncompliance allegations and to make
any needed corrections as appropriate.
Response: We appreciate commenters’
concerns about the impact of a 10-point
reduction to a facility’s TPS based on
noncompliance with the data request.
We also recognize that the ESRD
Conditions for Coverage already require
facilities to comply with these requests
for medical records, and we are not
aware of any evidence suggesting that
they are not already doing so.
Nevertheless, we continue to believe
that assessing penalties on a facility’s
TPS is the surest way to ensure that
facilities provide the medical records
needed to complete the studies. This is
because facilities are not typically
surveyed for compliance with the
Conditions for Coverage every year, so

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deducting points from a facility’s TPS
provides a more certain process for
penalizing noncompliance with the
requirements of the validation studies.
As stated in the CY 2015 ESRD PPS
final rule with comment period, our
policy to deduct points from a facility’s
TPS is consistent with section
1881(h)(3)(A)(i) of the Act, because it is
part of our methodology for assessing
the total performance of each provider
of services and renal dialysis facility
based on the performance standards
with respect to the measures selected
(79 FR 66189). The main purpose of
these studies is to assess whether
facilities are reporting accurate data,
and we have determined that review of
medical records is integral to that
determination. We will consider the
feasibility of implementing a method for
facilities to dispute the noncompliance
allegations and to make any needed
corrections for future years of the ESRD
QIP.
Comment: One commenter requested
that CMS publish the results of the
ongoing CROWNWeb validation study
as well as a timeline for the expected
release of such results.
Response: We anticipate releasing the
results of this study in the near future,
and are aiming for publication by
December 2015.
Comment: One commenter expressed
concerns with the proposed 60-day
compliance requirement for the NHSN
BSI measure, and suggested that a 90day period would be more appropriate.
Response: We disagree that the 60-day
timeframe is too short for facilities to
respond to requests to validate medical
records, because facilities should have
these records on hand, and sampled
facilities will only be required to submit
a small number of medical records for
the NHSN Bloodstream Infection study.
Comment: A few commenters raised
concerns that the data validation study
appears to be an audit of facility data to
confirm the accuracy of the data
reported and that therefore it is
important to ensure that there are
processes in place to address disputes
which may arise and to protect facilities
so that they have the opportunity to
appeal both at the contractor and at
higher levels of review if necessary.
Response: As stated previously in the
CY 2015 final rule with comment period
(79 FR 66188), we agree that one of the
purposes of the validation pilot is to
identify instances in which facilities are
reporting invalid data to CROWNWeb.
However, we do not believe it is
appropriate to designate the validation
study as an ‘‘audit’’ of facility data,
because the ultimate objective of the
study is to improve the validity of data

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reported to CROWNWeb, rather than to
penalize facilities for reporting invalid
data. We further note that we did not
propose to penalize facilities for
reporting invalid data; if and when we
propose to do so in future rulemaking,
we will consider implementing an
appeal process facilities can use to
contest CMS determinations that invalid
data was reported to CROWNWeb.
Comment: One commenter
encouraged CMS to suspend the
validation study and the resulting
payment penalties in favor of working
directly with facilities that appear to
have data submission problems to help
them identify workable solutions which
can be remedied. In this way, accurate
data submission will be encouraged
rather than penalizing facilities as much
for not submitting data as they would be
penalized for not providing quality
patient care. Another commenter argued
that, given that CMS is conducting a
feasibility study of a validation
methodology, those facilities chosen
should not be penalized with a
deduction in their TPS as a result of
non-compliance. The commenter
recommended that the penalty be
delayed until a full validation study is
in place.
Response: We thank the commenter
for its recommendation. However,
before we can undertake a workintensive and highly individualized
remediation effort such as that
described by the commenter, we must
develop a more fulsome understanding
of the issues impacting facility data
reporting. We believe the current data
validation studies are a first and critical
step toward developing this
understanding. In the interim, we urge
facilities experiencing issues with data
submission to contact the CROWNWeb
and/or NHSN Help Desks for support.
We also note that the current data
validation studies do not penalize
facilities for reporting incorrect or
invalid data; the 10-point TPS reduction
is keyed to non-compliance with only
the submission of data needed for the
studies themselves. We also disagree
that the penalty for non-compliance
with the feasibility study of our
proposed validation methodology
should be delayed until a full validation
is in place. Facility compliance is
essential to the success of the feasibility
study, and we wish to provide a strong
incentive for facilities to transmit the
requested medical records needed to
validate the NHSN data. Most
importantly, however, this feasibility
study will provide the basis for a more
comprehensive validation study that we
hope to begin in the near future.

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Comment: One commenter expressed
concerns that obtaining only positive
blood culture data may not lead to
comprehensive validation of data
reported to NHSN and recommended
that IV antimicrobial start and pus,
redness or increased swelling at the
vascular access site should also be
considered.
Response: We will take this
recommendation into consideration as
we continue to refine the NHSN data
validation feasibility study.
Comment: One commenter supported
the quarterly collection of NHSN BSI
data and stated that such a requirement
is not a burdensome task for facilities,
especially when the expectation is
clearly articulated in advance.
Response: We agree that the quarterly
collection of NHSN BSI data is not a
burdensome task for facilities.
For these reasons, we are finalizing, as
proposed, the continuation of the
CROWNWeb pilot data validation and
the feasibility study for the validating
data reported to CDC’s NHSN Dialysis
Event Module for the NHSN
Bloodstream Infection clinical measure.

H. Requirements for the PY 2019 ESRD
QIP
1. Replacement of the Four Measures
Currently in the Dialysis Adequacy
Clinical Measure Topic Beginning With
the PY 2019 Program Year
We consider a quality measure for
removal or replacement if: (1) Measure
performance among the majority of
ESRD facilities is so high and unvarying
that meaningful distinctions in
improvements or performance can no
longer be made (in other words, the
measure is topped-out); (2) performance
or improvement on a measure does not
result in better or the intended patient
outcomes; (3) a measure no longer aligns
with current clinical guidelines or
practice; (4) a more broadly applicable
(across settings, populations, or
conditions) measure for the topic
becomes available; (5) a measure that is
more proximal in time to desired patient
outcomes for the particular topic
becomes available; (6) a measure that is
more strongly associated with desired
patient outcomes for the particular topic
becomes available; or (7) collection or
public reporting of a measure leads to
negative or unintended consequences

(77 FR 67475). In the CY 2015 ESRD
PPS final rule, we adopted statistical
criteria for determining whether a
clinical measure is topped out, and also
adopted a policy under which we could
retain an otherwise topped-out measure
if we determined that its continued
inclusion in the ESRD QIP measure
would address the unique needs of a
specific subset of the ESRD population
(79 FR 66172 through 66174).
Subsequent to the publication of the
CY 2015 ESRD PPS final rule, we
evaluated the finalized PY 2018 ESRD
QIP measures against all of these
criteria. We determined that none of
these measures met criterion (1), (2), (3),
(5), (6), or (7). As part of this evaluation
for criterion one, we performed a
statistical analysis of the PY 2018
measures to determine whether any
measures were ‘‘topped out.’’ The full
results of this analysis can be found at
https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/
Topped-Out-Analysis-of-ESRD-QIPClinical-Measures-for-PY-2018.pdf and
a summary of our topped-out analysis
results appears in Table 22 below.

TABLE 22—PY 2018 CLINICAL MEASURES USING CROWNWEB AND MEDICARE CLAIMS DATA
Measure

N

Adult HD Kt/V .........................
Pediatric HD Kt/V ...................
Adult PD Kt/V .........................
Pediatric PD Kt/V ...................
VAT: Fistula 2 .........................
VAT: Catheter 3 ......................
Hypercalcemia 2 .....................

75th percentile

90th percentile

97.0
94.4
94.4
88.4
73.3
5.4
0.33

98.3
96.9
97.1
88.4
79.7
2.7
0.0

5,822
7
1,287
3
5,763
5,744
6,042

Std. error
0.09
13.4
0.45
13.9
0.15
0.10
0.03

Statistically
indistinguishable

Truncated CV

No .............
Yes ...........
No .............
Yes ...........
No .............
No .............
No .............

0.03
0.23
0.10
N/A 1
0.14
<0.01
<0.01

TCV< 0.10
Yes.
No.
No.
N/A. 1
No.
Yes.
Yes.

1 Insufficient
2 Medicare

data.
claims data from CY 2014 were used in these calculations.
data from CY 2014 was used in this calculation.

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3 CROWNWeb

As the information presented in Table
22 indicates, none of these clinical
measures are currently topped-out in
the ESRD QIP. We note that only three
facilities had 11 or more qualifying
patients for the Pediatric Peritoneal
Dialysis Adequacy clinical measure,
resulting in insufficient data available to
calculate a truncated coefficient of
variation. However, because the
Pediatric Peritoneal Dialysis Adequacy
clinical measure addresses the unique
needs of the pediatric population, we
are not proposing to remove the
measure at this time. Accordingly, we
are not proposing to remove any of these
measures from the ESRD QIP.
Beginning with the PY 2019 ESRD
QIP, we proposed to replace the four
measures in the Kt/V Dialysis Adequacy

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measure topic—(1) Hemodialysis
Adequacy: Minimum delivered
hemodialysis dose; (2) Peritoneal
Dialysis Adequacy: Delivered dose
above minimum; (3) Pediatric
Hemodialysis Adequacy: Minimum
spKt/V; and (4) Pediatric Peritoneal
Dialysis Adequacy—with a single more
broadly applicable measure for the
topic. The new measure, Delivered Dose
of Dialysis above Minimum—Composite
Score clinical measure (‘‘Dialysis
Adequacy clinical measure’’) (Measure
Applications Partnership #X3717) 4, is a
4 Although we correctly identified the name of
the proposed measure and the specifications for
that measure in the proposed rule, we inadvertently
misidentified the MAP ID number as X3717. The
correct MAP ID number for the proposed measure
is X2051. See https://www.qualityforum.org/map/.
The description of the measure can be found under

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single comprehensive measure of
dialysis adequacy assessing the
percentage of all patient-months, for
both pediatric and adult patients, whose
average delivered dose of dialysis
(either hemodialysis or peritoneal
dialysis) met the specified Kt/V
threshold during the performance
period. As discussed in more detail
below, this measure’s specifications
allow the measure to capture a greater
number of patients, particularly
pediatric hemodialysis and peritoneal
dialysis patients, than the four
individual dialysis adequacy measures,
and will result in a larger and broader
collection of data from patients whose
the title ‘‘Spreadsheet of MAP 2015 Final
Recommendations.’’

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dialysis adequacy is assessed under the
ESRD QIP. The measure assesses the
adequacy of dialysis using the same
thresholds applied to those patients by
the existing dialysis adequacy measures,
as described below. For these reasons,
we believe the new dialysis adequacy
measure meets criterion four above. We
therefore proposed to remove the four
individual measures within the Kt/V
Dialysis Adequacy Measure Topic, as
well as the measure topic itself, and to
replace those measures with a single
Dialysis Adequacy clinical measure
beginning with the PY 2019 ESRD QIP.
However, if based on public comments,
we do not finalize our proposal to adopt
the Dialysis Adequacy clinical measure,
then we would not finalize this proposal
to remove these measures and the
Dialysis Adequacy measure topic.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Several commenters
supported CMS’s continued efforts to
examine dialysis adequacy in the ESRD
QIP as well as the proposal to remove
the four separate dialysis adequacy
clinical measures and replace them with
a single comprehensive dialysis
adequacy clinical measure because this
single measure will capture a greater
number of patients and make it less
likely for one patient at a smaller facility
to skew the facility’s results on a
measure.
Response: We thank the commenters
for their support.
Comment: Once commenter expressed
concerns about the fact that CMS
removed the dialysis adequacy measure
from the PQRS because it is ‘‘topped
out.’’ The commenter fears that
including the measure in one quality
reporting program and not in another
sends a mixed message. Furthermore,
the commenter argued that there should
be common goals among all providers,
facilities and physicians alike, in order
to deliver high quality patient outcomes.
Response: We acknowledge that, in
the CY 2016 PFS proposed rule, CMS
proposed to remove the Adult Kidney
Disease: Hemodialysis Adequacy: Solute
measure due to this measure
representing a clinical concept that does
not add clinical value to PQRS, and
because eligible professionals
consistently meet performance on this
measure with performance rates close to
100 percent, suggesting that there is no
gap in care (80 FR 41861). However,
quality measures may be topped-out in
one program and not in another because
the goals, patient populations, and
clinical concerns addressed in these
programs are often quite different.
While the PQRS Adult Kidney Disease

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measure is similar to the ESRD QIP
measure, the PQRS measure is specified
at the eligible professional level,
assessing the care that each eligible
professional is providing to his or her
patients. In contrast, the ESRD QIP
measure is specified for use at the
facility level and therefore reflects the
ESRD QIP’s focus on ensuring that
facilities, as a whole, provide quality
care to all patients. In addition, the
PQRS measure assesses only the care
provided to adult hemodialysis patients,
whereas the ESRD QIP measure assesses
the care provided to adult and pediatric
patients on either hemodialysis or
peritoneal dialysis.
2. Measures for the PY 2019 ESRD QIP
We received a number of comments
regarding the ESRD QIP measure set
generally and the direction of future
measure development and adoption for
the program.
Comment: One commenter urged
CMS to adopt more clinical riskadjusted measures that capture the
effective management of dialysis
patients, such as the Standardized
Hospitalization Ratio (SHR) or the
Standardized Mortality Ratio (SMR).
The commenter added that the agency
previously considered, but did not
adopt, the SHR measure for the PY 2014
ESRD QIP and believes that these
measures should be considered for
future payment years.
Response: We are continuing to
develop additional appropriate clinical
risk-adjusted measures to include in the
ESRD QIP’s measure set, and invite the
ESRD community to work with us to
identify such measures for future
payment years.
Comment: Several commenters
criticized the ESRD QIP’s current
measure set for several reasons: first,
they believe that the measures focus
predominantly on in-center
hemodialysis patients without
examining the unique circumstances of
home hemodialysis patients; second,
they would like CMS to implement
more pediatric ESRD quality measures
in the ESRD QIP; third, commenters
would like CMS to adopt more
evidence-based measures that promote
the delivery of high-quality care and
improved patient outcomes; and finally,
commenters would like CMS to
consider more patient-reported
outcomes.
Some of the specific measures
commenters would like to see are: (1)
Measures that account for the unique
circumstances of patients on home
hemodialysis; (2) a reporting measure
assessing whether the patient ‘‘has a
voice’’ during dialysis treatment, under

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which a patient would be asked about
their experience on dialysis
immediately following each treatment
(commenters stated that these
conversations might help facilities to
better understand the patient’s concerns
about his or her particular treatment and
any possible need for adjustments based
on patient preference); (3) a measure
establishing a minimal standard for
anemia management because current
evidence regarding the reduction of ESA
use does not evaluate whether this
decline is consistent with good patient
care, particularly for home hemodialysis
patients who are only seen in the
dialysis facility setting once per month;
(4) a measure of the percent of patients
at a clinic who are using a home dialysis
option; (5) a Patient Informed Consent
for Anemia Treatment clinical measure
that includes quality of life data; (6) a
measure examining the percentage of
incident patients, those who are initially
starting hemodialysis or peritoneal
dialysis for the first time with AVF,
arteriovenous graft, and PD catheters; (7)
a measure examining the percentage of
prevalent patients, those patients
already on dialysis and who have
working vascular or PD access
excluding central venous catheters; (8) a
measure on Cramping and Washed-Out
feeling; (9) a measure on Healthy Days
at home; (10) a measure on Advanced
Directives in patients with ESRD. One
commenter noted that the two
recommended catheter measures listed
above (#6 and 7) are important because
catheter use continues to be very high
among prevalent ESRD patients, despite
the improved clinical outcomes
associated with arteriovenous access,
and argued that these recommended
measures could decrease catheter use
among ESRD patients.
Response: We thank the commenters
for their recommendations, and will
take these measure topics into
consideration as we continue to develop
the ESRD QIP measure set for future
years of the program. We note that
because the home hemodialysis,
peritoneal dialysis and pediatric
dialysis patient populations remain
relatively small, establishing facilitylevel measures specific to these
populations present substantial
challenges. Specifically, there is a lack
of clinical evidence available to set
performance standards because there are
relatively few home hemodialysis,
peritoneal dialysis and pediatric
dialysis patients, compared to in-center
hemodialysis patients. In addition,
small patient populations within
individual facilities may result in
measure reliability issues, which will

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need to be addressed before the measure
can be operationalized in the ESRD QIP.
Comment: One commenter requested
that CMS develop a validated
experience instrument for assessing the
home dialysis population because home
hemodialysis patients constitute 10
percent of the ESRD population and are
currently excluded from the ICH CAHPS
clinical measure, the only patient
experience measure in the ESRD QIP.
Response: We appreciate the
commenter’s interest in ensuring that
home dialysis patients are appropriately
included in the ESRD QIP. While we are
aware of interest in an experience of
care survey, such as the Consumer
Assessment of Healthcare Providers and
Systems (CAHPS) surveys, for home
dialysis patients, we do not have
immediate plans to extend the types of
patients covered by our experience of
care surveys in this area, due to resource
constraints and questions regarding the
feasibility of expanding the current
survey to include home hemodialysis
patients. As we continue with the initial
implementation and public reporting for
the In-Center Hemodialysis CAHPS
Survey, we will consider ways to
capture these patients in the ESRD QIP,
including developing measures that
would assess their quality of care.
Comment: One commenter supported
the adoption of measures on
bloodstream infection levels in ESRD
patients, and recommended that CMS be
mindful of the fact that the pediatric
patient population may be
disproportionately at risk for
bloodstream infections.
Response: We will continue to take
the unique needs and characteristics of
the pediatric patient population into

consideration in future measure
development efforts.
Comment: One commenter suggested
that CMS convene a Technical Expert
Panel to develop a measure capturing
patient education. The commenter
further recommended that a good first
step would be to compile educationrelated responses to the CAHPS survey
(specifically questions 26, 27 and 30).
Response: We thank the commenter
for the suggestion to develop a measure
on patient education. We are
considering a variety of measure
development activities for the coming
years, and will take this suggestion into
consideration.
Comment: One commenter supported
CMS’s decision not to include
hospitalizations and mortality in the
ESRD QIP’s measure set because of a
belief that such measures are
inappropriate in a pay-for-performance
program while the impact of sociodemographic status on their rates is still
being fully debated. Additionally, the
commenter added that if these measures
are adopted in future years of the QIP,
facilities should be compared to peers
serving similar socio-demographic
populations.
Response: We appreciate the
commenter’s support and will consider
the recommendation in the event that
the SMR and SHR measures are
considered for adoption in future years
of the QIP.
Comment: One commenter expressed
concern about the number of measures
included in the QIP that are not NQFendorsed.
Response: We agree that in general it
is best for the ESRD QIP to adopt
measures that are NQF-endorsed. Where

it is feasible and practicable to adopt an
NQF-endorsed measure, we do so.
However, in instances where a measure
has not been NQF-endorsed for a topic
that we feel is of importance for the
clinical care and outcomes of patients
with ESRD, or where we feel a nonendorsed measure is superior to an
NQF-endorsed measure on the same
topic, we believe it is appropriate to
adopt a non-endorsed measure. In
proposing to adopt non-endorsed
measures, we give due consideration to
NQF-endorsed measures, as well as
those adopted by other consensus
organizations.
a. PY 2018 Measures Continuing for PY
2019 and Future Payment Years
We previously finalized 16 measures
in the CY 2015 ESRD PPS final rule for
the PY 2018 ESRD QIP, and these
measures are summarized in Table 23
below. In accordance with our policy to
continue using measures unless we
propose to remove or replace them, (77
FR 67477), we stated in the proposed
rule that we would continue to use 12
of these measures in the PY 2019 ESRD
QIP. We also proposed to remove four
clinical measures—(1) Hemodialysis
Adequacy: Minimum delivered
hemodialysis dose; (2) Peritoneal
Dialysis Adequacy: Delivered dose
above minimum; (3) Pediatric
Hemodialysis Adequacy: Minimum
spKt/V; and (4) Pediatric Peritoneal
Dialysis Adequacy—and replace them
with a single, comprehensive clinical
measure covering the patient
populations previously captured by
these four individual clinical measures.

TABLE 23—PY 2018 ESRD QIP MEASURES BEING CONTINUED IN PY 2019
NQF #

Measure Title and Description

0257 ........................

Vascular Access Type: AV Fistula, a clinical measure.
Percentage of patient-months on hemodialysis during the last hemodialysis treatment of the month using an autogenous
AV fistula with two needles.
Vascular Access Type: Catheter ≥ 90 days, a clinical measure.
Percentage of patient-months for patients on hemodialysis during the last hemodialysis treatment of month with a catheter
continuously for 90 days or longer prior to the last hemodialysis session.
National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Patients, a clinical measure.
Number of hemodialysis outpatients with positive blood cultures per 100 hemodialysis patient-months.
Hypercalcemia, a clinical measure.
Proportion of patient-months with 3-month rolling average of total uncorrected serum calcium greater than 10.2 mg/dL.
Standardized Readmission Ratio, a clinical measure.
Standardized hospital readmissions ratio of the number of observed unplanned readmissions to the number of expected
unplanned readmissions.
Standardized Transfusion Ratio, a clinical measure.
Risk-adjusted standardized transfusion ratio for all adult Medicare patients.
In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) Survey Administration, a clinical measure.
Facility administers, using a third-party CMS-approved vendor, the ICH CAHPS survey in accordance with survey specifications and submits survey results to CMS.
Mineral Metabolism Reporting, a reporting measure.
Number of months for which facility reports serum phosphorus or serum plasma for each Medicare patient.

0256 ........................

N/A1 ........................
1454 ........................

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2496 ........................

N/A ..........................
0258 ........................

N/A 2 ........................

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69053

TABLE 23—PY 2018 ESRD QIP MEASURES BEING CONTINUED IN PY 2019—Continued
NQF #

Measure Title and Description

N/A ..........................

Anemia Management Reporting, a reporting measure.
Number of months for which facility reports ESA dosage (as applicable) and hemoglobin/hematocrit for each Medicare patient.
Pain Assessment and Follow-Up, a reporting measure.
Facility reports in CROWNWeb one of six conditions for each qualifying patient once before August 1 of the performance
period and once before February 1 of the year following the performance period.
Clinical Depression Screening and Follow-Up, a reporting measure.
Facility reports in CROWNWeb one of six conditions for each qualifying patient once before February 1 of the year following the performance period.
NHSN Healthcare Personnel Influenza Vaccination, a reporting measure.
Facility submits Healthcare Personnel Influenza Vaccination Summary Report to CDC’s NHSN system, according to the
specifications of the Healthcare Personnel Safety Component Protocol, by May 15 of the performance period.

N/A 3 ........................
N/A 4 ........................
N/A 5 ........................

1 We

note
note
note
4 We note
5 We note
2 We

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3 We

that
that
that
that
that

this
this
this
this
this

measure
measure
measure
measure
measure

is
is
is
is
is

based
based
based
based
based

upon
upon
upon
upon
upon

a current NQF-endorsed bloodstream infection measure (NQF#1460).
a current NQF-endorsed serum phosphorus measure (NQF #0255).
a current NQF-endorsed pain assessment and follow-up measure (NQF #0420).
a current NQF-endorsed clinical depression screening and follow-up measure (NQF #0418).
an NQF-endorsed HCP influenza vaccination measure (NQF #0431).

We received comments on PY 2018
Measures Continuing for PY 2019 and
future years. The comments and our
responses are set forth below.
Comment: A number of commenters
expressed views on measures which
were previously adopted in the ESRD
QIP. Some commenters were supportive
of previously adopted measures, and
some recommended changing measure
specifications for some measures. Other
commenters requested that CMS
consider removing previously added
measures from the ESRD QIP,
specifically, the NHSN BSI clinical
measure, the SRR clinical measure, the
STrR clinical measure, the ICH CAHPS
clinical measure, the NHSN HCP
Influenza Vaccination reporting
measure, the Screening for Clinical
Depression and Follow-Up reporting
measure, and the Pain Assessment and
Follow-Up reporting measure, because a
number of these measures are under
review at NQF, are inappropriate for
facilities due to concerns about measure
reliability or validity, or are too
burdensome for facilities.
Response: We thank the commenters
for their suggestions. At this time, we
are not removing or modifying any of
the measures suggested by commenters.
We did not propose to remove any
measures from the ESRD QIP in the CY
2016 ESRD PPS proposed rule. Further,
there is no evidence that continued use
of the measures as specified raises
patient safety concerns that would
require immediate removal of the
measures based on the process finalized
in the CY 2013 ESRD PPS final rule
with comment period (77 FR 67475).
However, we will take these suggestions
into consideration in future years using
the measure removal criteria we
finalized in the CY 2013 ESRD PPS final
rule with comment period (77 FR

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67475) and further clarified in the CY
2015 ESRD PPS final rule with comment
period (79 FR 66171 through 66174). We
continue to believe there is value in
collecting and reporting these measures
at this time.
Comment: Numerous commenters
requested that CMS modify the SRR
clinical measure’s exclusion criteria to
reflect the measure as recently modified
and endorsed at NQF under the AllCause Admissions and Readmissions
Measures project. Specifically,
commenters requested that CMS
incorporate an exclusion for patients
who are readmitted to a hospital within
the first one-to-three days following
their hospital discharge.
Response: The SRR clinical measure
was submitted for review as part of the
NQF’s All-Cause Admissions and
Readmissions Measures project, during
which the Steering Committee, NQF
members, and the public discussed the
appropriateness of including patients
who are readmitted to a hospital within
three days of discharge in the measure.
In the CY 2015 ESRD PPS final rule
with comment period, we expressed our
initial belief that these patients should
be included in the SRR measure because
this three-day readmission timeframe
represents an opportunity for quality
improvement (79 FR 66177). However,
following detailed discussions at NQF,
we now believe that excluding
readmissions within the first three days
of discharge is critical in order to avoid
holding facilities accountable for events
largely beyond their control. These
readmissions are likely to occur during
the period when the dialysis facility
may not have had an opportunity to see
the patient for treatment, and, at
present, facilities do not systematically
receive data about their patients from
the hospital when they are readmitted,

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thus limiting the facilities’ ability to
engage in quality improvement for this
specific subpopulation at this time. As
stated in the CY 2014 ESRD PPS final
rule with comment period, we believe it
is important to have in place a process
which allows the ESRD QIP to
incorporate non-substantive updates to
a measure, in order to ensure that
measures adopted for the ESRD QIP
remain up-to-date and clinically
relevant (77 FR 67476–67477). We
believe that excluding readmissions
within the first three days of discharge
constitutes a non-substantive technical
update to the measure; for these reasons,
beginning with PY 2017, we are making
this technical update to the SRR clinical
measure and are adopting this
exclusion. We will exclude
readmissions within the first 1–3 days
of an initial discharge from the SRR
clinical measure. The SRR clinical
measure specifications, as well as the
SRR measure methodology report, are
both available at: https://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_
TechnicalSpecifications.html and
https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/
MeasureMethodologyReportforthe
ProposedSRRMeasure.pdf, respectively.
b. Dialysis Adequacy Clinical Measure
Beginning With the PY 2019 ESRD QIP
Section 1881(h)(2)(A)(i) of the Act
states that the ESRD QIP measure set
must include measures on ‘‘dialysis
adequacy.’’ Kt/V is a widely accepted
measure of dialysis adequacy in the
ESRD community. It is a measure of
small solute (urea) removal from the
body, is relatively simple to measure
and report, and is associated with
survival among dialysis patients. While

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the current dialysis adequacy measures
have allowed us to capture a greater
proportion of the ESRD population than
previously accounted for under the URR
Hemodialysis Adequacy clinical
measure, the specifications for these
measures still result in the exclusion of
some patients from the measures. For
example, the Pediatric Hemodialysis
Adequacy clinical measure’s
specifications have limited the number
of pediatric patients included in the
ESRD QIP because very few facilities (10
facilities, based on CY 2013 data) were
eligible to receive a score on the
measure. We are therefore proposing to
adopt a single comprehensive Dialysis
Adequacy clinical measure under the
authority of section 1881(h)(2)(A)(i) of
the Act.
The Measure Applications
Partnership conditionally supported the
proposed Dialysis Adequacy clinical
measure in its 2015 Pre-Rulemaking
Report, noting that this measure meets
critical program objectives to include
more outcome measures and measures
applicable to the pediatric population in
the set.5
The Dialysis Adequacy clinical
measure assesses the percentage of all
patient-months for both adult and
pediatric patients whose average
delivered dose of dialysis (either
hemodialysis or peritoneal dialysis) met
the specified threshold during the
performance period. A primary
difference between the single
comprehensive Dialysis Adequacy
clinical measure and the four previously
finalized dialysis adequacy clinical
measures is how facility eligibility for
the measure is determined. Under the
four previously finalized dialysis
adequacy clinical measures, facility
eligibility was determined based on the
number of qualifying patients treated for
each individual measure (for example,
the number of qualifying adult
hemodialysis patients for the
Hemodialysis Adequacy: Minimum
Delivered Hemodialysis Dose clinical
measure). As a result, a facility had to
treat at least 11 qualifying patients for
each of these measures in order to
receive a score on that measure. By
contrast, a facility’s eligibility to receive
a score on the proposed Dialysis
Adequacy clinical measure, which
includes both adults and children, and
both hemodialysis and peritoneal
dialysis modalities, is determined based
on the total number of qualifying
patients treated at a facility. As a result,
5 https://www.qualityforum.org/map/. This report
can be found at the preceding Web site under the
title ``Spreadsheet of MAP 2015 Final
Recommendations.''

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a facility that would not be eligible to
receive a score on one or more of our
current dialysis adequacy clinical
measures because it did not meet the
case minimum for one or more of those
measures would be eligible to receive a
score on the proposed dialysis adequacy
measure if it had at least 11 total
qualifying patients, defined as adults
and pediatric patients receiving either
hemodialysis or peritoneal dialysis.
Therefore, we anticipate that adopting
the single comprehensive Dialysis
Adequacy clinical measure will allow
us to evaluate the care provided to a
greater proportion of ESRD patients,
particularly pediatric ESRD patients.
We proposed that patients’ dialysis
adequacy would be assessed based on
the following Kt/V thresholds
previously assessed under the
individual dialysis adequacy clinical
measures:
• For hemodialysis patients, all ages:
spKt/V ≥ 1.2 (calculated from the last
measurement of the month)
• For pediatric (age < 18 years)
peritoneal dialysis patients: Kt/V urea ≥
1.8 (dialytic + residual, measured
within the past six months)
• For adult (age ≥ 18 years) peritoneal
dialysis patients: Kt/V urea ≥ 1.7
(dialytic + residual, measured within
the past four months)
These thresholds reflect the best
evidence-based minimum threshold for
adequate dialysis for the described
patient groups and are consistent with
dialysis adequacy measures previously
implemented in the QIP. Patient
eligibility for inclusion in the measure
would be determined on a patientmonth level, based on the patient’s age,
treatment modality type, whether a
patient has been on dialysis for 90 days
or more, and the number of
hemodialysis treatments the patient
receives per week. All eligible patientmonths at a facility would be counted
toward the denominator. Eligible patient
months where the patient met the
specific dialysis adequacy threshold
would be counted toward the
numerator. Technical specifications for
the Dialysis Adequacy clinical measure
can be found at http://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_
TechnicalSpecifications.html.
We sought comments on our proposal
to adopt this measure beginning with
the PY 2019 ESRD QIP. The comments
and our responses are set forth below.
Comment: A number of commenters
supported the comprehensive Dialysis
Adequacy clinical measure because
adopting the single measure in place of
the four individual measures would
reduce the dilution of measure scores in

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the ESRD QIP and simplify the ESRD
QIP measure set.
Response: We thank the commenters
for their support.
Comment: One commenter expressed
concerns with removing the current
indicators for dialysis adequacy because
of the possibility this will lead to
inaccurate reporting. The commenter
argued that removing the Pre/post
dialysis urea nitrogen, Pre/post dialysis
weight, and duration of treatment will
enable the facility to report adequacy
based on inaccurate blood draws, access
recirculation, etc., thereby increasing
the likelihood of better outcomes for the
facility. Because Kt/V is a calculated
outcome, the commenter urged CMS to
consider having the CROWNWeb
database calculate the actual Kt/V using
the already available information, which
could potentially eliminate the tweaking
of data currently being submitted.
Response: The proposed Dialysis
Adequacy clinical measure uses the
same data submission requirements
previously used for the four individual
dialysis adequacy clinical measures,
and is therefore not subject to the
concerns raised. Furthermore, facilities
have never been required to report pre/
post dialysis urea nitrogen, pre/post
dialysis weight or duration of treatment
in the QIP.
Comment: One commenter urged
CMS to consider patients who transfer
from one modality to another to be new
patients in that modality for adequacy
scoring. The commenter explained that
when a patient transitions from
hemodialysis to peritoneal dialysis, the
peritoneal dialysis scoring methodology
assumes there is a peritoneal dialysis
Kt/V reading within the last 4 months,
without recognition that the patient has
recently transitioned to this modality.
The commenter argued that, as a result
of this scoring methodology, dialysis
facilities are forced to attempt to
immediately conduct a peritoneal
dialysis adequacy test, without a
sufficient stabilization period in the
new treatment modality.
Response: Under the single
comprehensive Dialysis Adequacy
clinical measure, if a patient changes
from hemodialysis to peritoneal dialysis
during a month, the patient would be
included in both the HD and PD Kt/V
measure calculations. The 2006 KDOQI
Clinical Practice Guidelines for
peritoneal dialysis adequacy (Guideline
2.1.2) state ‘‘the total solute clearance
(residual kidney and peritoneal, in
terms of Kt/V) should be measured
within the first month after initiating
dialysis therapy and at least once every
4 months thereafter.’’ While this
measure is consistent with the

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guideline, we acknowledge that a
patient may be included in the
peritoneal dialysis Kt/V measure
calculation in the same month their
modality changed to peritoneal dialysis,
and that peritoneal dialysis clearance is
typically not measured right away or
even in the same month as the
peritoneal dialysis catheter insertion, as
the peritoneal membrane is in a state of
flux and its membrane transport
characteristics are unstable for a few
weeks. We therefore use the data
reported in conjunction with Medicare
dialysis facility claims value code D5:
Result of last Kt/V reading and
occurrence code 51: Date of last Kt/V
reading, to determine whether the
patient was on peritoneal dialysis or
hemodialysis, and whether they
switched modalities during the
reporting month. The claims reporting
instructions indicate that for peritoneal
dialysis patients this should be within
the last 4 months of the claim date of
service. All monthly claims with valid
peritoneal dialysis Kt/V values will be
used in the calculation.
Comment: One commenter expressed
concern that benchmarking all facilities
treating any pediatric patients against
those treating larger volumes of

pediatric patients under the
comprehensive Kt/V Dialysis Adequacy
clinical measure may skew the results
for ESRD facilities treating smaller
numbers of pediatric ESRD patients
because these facilities are less familiar
with how to best manage dialysis
treatments for pediatric patients.
Response: Performance on the
Dialysis Adequacy clinical measure is
based on the total number of qualifying
patients—adult and pediatric, and
hemodialysis and peritoneal dialysis
modalities—treated at the facility, and
the number of those patients meeting
the applicable Kt/V threshold.
Therefore, under this measure, facilities
are assessed on the clinical care
provided to all qualifying patients, and
performance across facilities is based on
the same holistic view of clinical care.
As a result, facilities’ management of a
specific subgroup will not be compared
directly to that of other facilities. We
believe this measure therefore properly
incentivizes facilities to properly
manage the care of all patients,
including pediatric patients, seen at the
facility.
Comment: One commenter noted that
when this measure was reviewed by the
Measure Applications Partnership, it

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was characterized by CMS as a
composite measure; however, the
proposed measure as described appears
to be a pooled measure with a different
set of evaluation criteria.
Response: We acknowledge that there
might have been some confusion
surrounding our use of the term
‘‘composite’’ in the title of the proposed
measure, especially because we are now
aware that the NQF uses a specific set
of criterion to determine whether a
measure is a composite for endorsement
purposes. However, the measure
specifications presented in the CY 2016
ESRD PPS proposed rule are identical to
those submitted for review by the
Measure Applications Partnership, and
the calculation methodology uses a
pooled approach. We have developed
the following table comparing the
specifications of the Delivered Dose of
Dialysis above Minimum—Composite
Score measure submitted to the Measure
Applications Partnership and the
Dialysis Adequacy clinical measure,
which we have renamed in full as
Delivered Dose of Dialysis above
Minimum.

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TABLE 24—COMPARISON OF DELIVERED DOSE OF DIALYSIS ABOVE MINIMUM—COMPOSITE SCORE MEASURE AND
PROPOSED DIALYSIS ADEQUACY CLINICAL MEASURE SPECIFICATIONS
Specification
component

Delivered dose of dialysis above minimum—composite
score 6

Proposed dialysis adequacy clinical measure 7

Numerator ........

Number of patient months in the denominator whose delivered dose of dialysis met the specified thresholds. The
thresholds are as follows:
• Hemodialysis (all ages): Kt/V >= 1.2.
• Peritoneal dialysis (pediatric): Kt/V >= 1.8 (within past 6
months).
• Peritoneal dialysis (adult): Kt/V >= 1.7 (within past 4
months).

Denominator .....

To be included in the denominator for a particular month, patients need to meet the following requirements that month:
• Peritoneal dialysis patients: All peritoneal dialysis patients
who have been on dialysis for at least 90 days.
• Hemodialysis patients: Pediatric (<18 years old) in-center
HD patients who have been on dialysis for 90 days or more
and dialyzing thrice weekly, adult >=18 years old) patients
who have been on dialysis for 90 days or more and
dialyzing thrice weekly.

Number of patient months in the denominator whose delivered dose of dialysis met the specified thresholds. The
ranges are as follows:
• Hemodialysis (all ages): Kt/V >= 1.2 (calculated from the
last measurement of the month).
• Peritoneal dialysis (pediatric): Kt/V >= 1.8 (dialytic + residual, measured within the past 6 months).
• Peritoneal dialysis (adult): Kt/V >= 1.7 (dialytic + residual,
measures within the past 4 months).
• All adult hemodialysis patients who received dialysis greater than two and less than four times a week (adults, ≥18
years) and all pediatric in-center hemodialysis patients who
received dialysis greater than 2 and less than five times a
week (pediatric, <18 years), and did not indicate frequent
dialysis.
• All patients (both HD and PD) who are assigned to the facility for the entire month, and have had ESRD for 90 days
or more.

Comment: One commenter expressed
concern about the proposed Dialysis
Adequacy measure because smaller
facilities that would not have had 11
patients in any given dialysis adequacy
category under the four individual
measures may now be included in the
6 Specifications for the Delivered Dose of Dialysis
above Minimum—Composite Score measure
reviewed by the Measure Applications Partnership
are available at https://www.qualityforum.org/map/
under the document titled ``Spreadsheet of MAP
2015 Final Recommendations.''

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combined measure. Additionally, the
commenter recommended that CMS
convene a TEP to discuss additional
ways in which CMS can include more
patients and facilities in the QIP
generally.
7 Specifications for the Dialysis Adequacy clinical
measure proposed in the CY 2016 ESRD PPS
proposed rule are available at https://www.cms.gov/
Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/Proposed-PY2019-measure-specs_6-24-15.pdf.

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Response: We proposed to adopt this
measure, in part, because we wanted to
be able to assess dialysis adequacy in a
greater percentage of ESRD patients. We
will take the recommendation to
convene a TEP in order to explore
additional ways to include more ESRD
patients in the ESRD QIP into
consideration.

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Comment: A few commenters
requested that CMS retain the seventreatment per month exclusion from the
previous dialysis adequacy measures
because facilities rarely collect Kt/V for
transient patients. One commenter
further requested that CMS allow
facilities to submit Kt/V collected from
an outside source for these patients.
Another commenter recommended that
CMS define the minimum number of
treatment days under the care of a
facility for peritoneal dialysis patients
when calculating the current peritoneal
dialysis adequacy clinical measures,
and recommended a threshold of
approximately 14 peritoneal dialysis
treatment days.
Response: The measure specifications
for the proposed Dialysis Adequacy
clinical measure exclude from the
denominator ‘‘all patients who were not
assigned to the facility for the entire
month,’’ which will have effect of
excluding all peritoneal dialysis
patients who are treated less than seven
times per month and all peritoneal
dialysis patients who are not assigned to
the facility for the entire month.
Comment: One commenter requested
that CMS provide additional
information regarding the benchmarks
and achievement thresholds for the
comprehensive Dialysis Adequacy
clinical measure, citing concerns that
these values may be difficult to
determine because the Kt/V thresholds
for the measures within the
comprehensive Dialysis Adequacy
clinical measure vary across patient age
and treatment modality.
Response: Facility performance on the
measure will be evaluated in much the
same way as facility performance on the
dialysis adequacy measure topic that
was part of the QIP for three payment
years. Kt/V values for a particular
patient month will be compared to the
threshold for the given modality and
patient age, and assigned to numerators
and denominators as appropriate. Much
like the previously finalized Dialysis
Adequacy Measure Topic, numerators
and denominators for the four subgroupings of age and modality will be
aggregated together and weighted
according to the number of patient
months represented.
Comment: Some commenters
requested that CMS modify the
comprehensive Dialysis Adequacy
clinical measure’s hemodialysis
threshold to account for the higher Kt/
V values for nocturnal dialysis patients.
Response: The previously
implemented dialysis adequacy
measures did not distinguish between
types of hemodialysis patients, other
than to identify frequency of treatment

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on a weekly basis, nor was this
recommended by Technical Expert
Panels convened for the purpose of
developing the proposed comprehensive
dialysis adequacy measure. As always,
we continue an ongoing measure
maintenance cycle where these and
other recommendations may be
considered within the context of
available data and existing clinical
evidence.
Comment: Several commenters did
not support the proposed
comprehensive Dialysis Adequacy
clinical measure because the measure
pools the scores from the four dialysis
populations, despite the vast differences
between these groups, which make it
difficult to accurately assess a facility’s
quality under the proposed measure.
Some of these commenters expressed
concerns that the pooled approach may
obscure differences in quality of care for
pediatric patients, peritoneal dialysis
patients, and home hemodialysis
patients. Commenters also stated that
the effect of one or two outliers may
distort the overall quality of care
provided at facilities with a small
number of patients.
Response: The Dialysis Adequacy
Clinical Measure is does not clinically
co-mingle peritoneal dialysis and
hemodialysis modalities. Peritoneal
dialysis patients are assessed based on
clinical standards appropriate for these
patients, while hemodialysis patients
are assessed based on clinical standards
appropriate for them. We understand
that patient groups that comprise a
smaller percentage of a facility’s total
population will have less impact on the
facility’s performance score for the
Dialysis Adequacy clinical measure;
however, failure to incorporate
pediatric, peritoneal, and home dialysis
patients into the four individual dialysis
adequacy measures due to reporting
requirements significantly limits the
ability to evaluate facility performance
for those subgroups. We also note that
individual-level data remains available
upon request for all QIP measures
following calculation of measure scores
for a given payment year of the ESRD
QIP, should facilities wish to investigate
their internal performance while
reviewing their Preview Performance
Score Report for that year. More
granular detail is also available via the
annually published Dialysis Facility
Reports and the Dialysis Facility
Compare tool. Clinically, the proposed
measure assesses each patient on
clinically appropriate standards, and the
measure addresses whether each patient
has received adequate dialysis based on
that individual’s needs. As a result, the
performance rate is a description of the

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rate at which a facility is adequately
meeting the dialysis needs of its
patients, regardless of their age and
modality. We therefore believe that any
potential for the proposed measure to
‘‘mask’’ facility performance for smaller
segments of its population is
outweighed by the benefit of including
these patients in the measure
population.
Comment: Commenters expressed
concerns about the Dialysis Adequacy
clinical measure because of the
concerns raised during the NQF Renal
Standing Committee. Specifically, the
commenters do not support the measure
because the NQF recommended against
endorsement.
Response: While the NQF Renal
Standing Committee has not yet issued
its final report, we understand that the
Committee’s current recommendation is
against endorsement for this measure,
because the Committee determined that
measure failed the NQF’s Importance to
Measure and Report criterion.
Specifically, the NQF Renal Standing
Committee expressed concerns about
the strength of evidence supporting the
pediatric hemodialysis and peritoneal
dialysis Kt/V thresholds established
under this measure. However, we
continue to believe that including
pediatric patients in assessments of
dialysis adequacy is critical, because
these patients constitute a unique
subpopulation of ESRD patients and are
often excluded from other ESRD QIP
quality measures. Very few facilities
treating pediatric patients qualify to
receive a score under the current
Pediatric Hemodialysis Adequacy and
Pediatric Peritoneal Dialysis Adequacy
clinical measures, and adopting the
single, comprehensive Dialysis
Adequacy clinical measure will allow
us to capture the quality of care
provided to a greater proportion of
pediatric patients nationally.
Comment: One commenter did not
support adoption of the comprehensive
Dialysis Adequacy clinical measure
because it includes pediatric patients
receiving dialysis three and four times
a week when the evidence for the
measure is based on patients receiving
treatments three times a week.
Response: The 2010 TEP that
recommended this measure originally
specified the measure to include
pediatric patients on dialysis 3 or 4
times per week, based in part on
analyses showing that 4 times per week
hemodialysis was observed in
approximately 5.6 percent of pediatric
patient weeks, and nearly 90 percent of
pediatric patient weeks reflected either
3 or 4 times per week hemodialysis
(based on 2007 Medicare claims data).

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Given that this was a significant
proportion of patients, the TEP
concluded that these patients should all
be included in this measure. While the
Delivered Dose of Dialysis above
Minimum measure under review by the
NQF Renal Standing Committee has
revised its measure specifications to
capture only pediatric hemodialysis
patients dialyzing three times per week,
we believe it is important to capture as
many pediatric patients as possible in
the ESRD QIP. There are currently very
few measures that focus on the care
provided to pediatric ESRD patients,
and excluding pediatric hemodialysis
patients dialyzing four times per week
from the Dialysis Adequacy clinical
measure would exclude those patients
from all dialysis adequacy assessment.
In addition, we believe that collecting
data on the quality of care provided to
pediatric hemodialysis patients can
influence the standard of care provided
by all facilities that treat pediatric
patients. For these reasons, we are
including pediatric hemodialysis
patients who dialyze three or four times
per week in the Dialysis Adequacy
clinical measure.
Comment: Several commenters
recommended that CMS adopt
modifications for the upper Kt/V
threshold recommended by the NQF
Renal Standing Committee; specifically,
removing the upper Kt/V threshold
exclusion due to insufficient evidence
supporting the selected values. One
commenter argued that the evidencebased threshold should be the only
value in the specifications, and the
handling of anomalous data should be
addressed by measure implementation
and operationalization guidance so that
patients with spurious Kt/V values are
excluded from the measure calculations.
Response: The proposed Dialysis
Adequacy clinical measure does not
include upper thresholds for patients’
Kt/V (https://www.cms.gov/Medicare/
Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/Downloads/
Proposed-PY±2019-measure-specs_6-2415.pdf), and the Dialysis Adequacy
measure under review by the NQF Renal
Standing Committee was also revised to
remove these upper thresholds.
Comment: One commenter requested
that CMS provide additional details
about the technical specifications for the
comprehensive Dialysis Adequacy
clinical measure in the ESRD Measures
Manual.
Response: We intend to incorporate
the Dialysis Adequacy clinical measure
into the CMS ESRD Measures Manual
before the beginning of the measure’s
performance period in CY 2017. The
Measures Manual, will provide detailed

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measure specifications for all measures
used in the ESRD QIP and other CMS
ESRD programs, such as Dialysis
Facility Compare, and will be updated
in the future as new measures are
implemented, such as the
comprehensive Dialysis Adequacy
clinical measure.
Comment: One commenter
recommended that CMS include
residual renal function in dose
calculations for hemodialysis patients
only if the urine collection used to
measure it was performed within the
last 90 days.
Response: The current dialysis
adequacy measures do not currently
include residual renal function as part
of the NQF endorsed specifications, and
the proposed measure retains this form.
In addition, the Technical Expert Panels
convened for the purpose of developing
these measures have not recommended
the inclusion of residual renal function
to date. As always, we maintain an
ongoing measure maintenance cycle
where these and other recommendations
may be considered within the context of
available data and existing clinical
evidence.
Comment: One commenter expressed
concern about the impact of peritoneal
dialysis patients’ noncompliance with
treatment protocols on facility
performance. Specifically, the
commenter recommended that facilities
should either receive credit for their
efforts to get peritoneal dialysis patients
to visit the facility in a given month, or
that noncompliant peritoneal dialysis
patients should be excluded from the
facilities’ measure scores.
Response: Our quality measures do
not currently assess patient compliance
directly, as currently available data
sources are unable to capture the
information. Moreover, while we
recognize that some patients may follow
a course of treatment less assiduously
than others, we believe it remains the
facility’s responsibility to continue
reaching out to these patients for the
purpose improving their quality of care.
For these reasons, we are finalizing
the single comprehensive Dialysis
Adequacy clinical measure as proposed,
beginning in PY 2019.
c. Reporting Measures Proposed,
Beginning with the PY 2019 ESRD QIP
i. Proposed Ultrafiltration Rate
Reporting Measure
The ultrafiltration rate measures the
rapidity with which fluid (ml) is
removed at dialysis per unit (kg) body
weight in unit (hour) time. A patient’s
ultrafiltration rate is under the control
of the dialysis facility and is monitored

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throughout a patient’s hemodialysis
session. Studies suggest that higher
ultrafiltration rates are associated with
higher mortality and higher odds of an
‘‘unstable’’ dialysis session,8 and that
rapid rates of fluid removal during
dialysis can precipitate events such as
intradialytic hypotension, subclinical
yet significantly decreased organ
perfusion, and in some cases myocardial
damage and heart failure.
Section 1881(h)(2)(A)(iv) gives the
Secretary authority to adopt other
measures for the ESRD QIP that cover a
wide variety of topics. Section
1881(h)(2)(B)(ii) of the Act states that
‘‘In the case of a specified area or
medical topic determined appropriate
by the Secretary for which a feasible and
practical measure has not been endorsed
by the entity with a contract under
section 1890(a) of Act [in this case
NQF], the Secretary may specify a
measure that is not so endorsed so long
as due consideration is given to
measures that have been endorsed or
adopted by a consensus organization
identified by the Secretary.’’ We have
given due consideration to endorsed
measures, as well as those adopted by
a consensus organization. Because no
NQF-endorsed measures or measures
adopted by a consensus organization on
ultrafiltration rates currently exist, we
proposed to adopt the Ultrafiltration
Rate reporting measure under the
authority of section 1881(h)(2)(B)(ii) of
the Act.
We proposed to adopt a measure that
is based on Measure Applications
Partnership #XAHMH, ‘‘Ultrafiltration
Rate Greater than 13 ml/kg/hr’’
(‘‘Ultrafiltration Rate measure’’). This
measure assesses the percentage of
patient-months for patients with an
ultrafiltration rate greater than 13 ml/kg/
hr. The Measure Applications
Partnership expressed conditional
support for the Ultrafiltration Rate
measure, noting it would ‘‘consider the
measure for inclusion in the program
once it has been reviewed for
endorsement.’’ The measure upon
which our proposed measure is based is
currently under review for endorsement
by NQF; however, we believe the
8 Flythe SE., Kimmel SE., Brunelli SM. Rapid
fluid removal during dialysis is associated with
cardiovascular morbidity and mortality. Kidney
International (2011) Jan; 79(2):250–7. Flythe JE,
Curhan GC, Brunelli SM. Disentangling the
ultrafiltration rate—mortality association: The
respective roles of session length and weight gain.
Clin J Am Soc Nephrol. 2013 Jul;8(7):1151–61.
Movilli, E et al. ‘‘Association between high
ultrafiltration rates and mortality in uraemic
patients on regular hemodialysis. A 5-year
prospective observational multicenter study.’’
Nephrology Dialysis Transplantation 22.12(2007):
3547–3552.

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measure is ready for adoption because it
has been fully tested for reliability and
addresses a critical aspect of patients’
clinical care not currently addressed by
the ESRD QIP measure set.
For PY 2019 and future payment
years, we proposed that facilities must
report an ultrafiltration rate for each
qualifying patient at least once per
month in CROWNWeb. Qualifying
patients for this proposed measure are
defined as patients 18 years of age or
older, on hemodialysis, and who are
assigned to the same facility for at least
the full calendar month (for example, if
a patient is admitted to a facility during
the middle of a month, the facility will
not be required to report for that patient
for that month). We further proposed
that facilities will be granted a one
month period following the calendar
month to enter this data. For example,
we would require a facility to report
ultrafiltration rates for January 2017 on
or before February 28, 2017. Facilities
would be scored on whether they
successfully report the required data
within the timeframe provided, not on
the values reported. Technical
specifications for the Ultrafiltration Rate
reporting measure can be found at
http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_
TechnicalSpecifications.html.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: While several commenters
supported the proposal to adopt the
Ultrafiltration Rate reporting measure or
the concept of an ultrafiltration rate
measure in the ESRD QIP, many
commenters did not support the specific
measure proposed. Some commenters
stated that ultrafiltration rates are highly
variable even within individual
patients, and it is unclear whether the
proposed measure can influence quality
of care without impacting the clinical
judgment of ESRD providers. Many
commenters also stated that the
proposed measure is subject to
‘‘gaming’’ concerns because it relies on
a single data point per month, as
opposed to other ultrafiltration rate
measures, such as NQF #2701,
Avoidance of Utilization of High
Ultrafiltration rate (≥13 ml/kg/hr),
which uses an average across all dialysis
treatments provided over the course of
a week to determine a patient’s average
ultrafiltration rate. These commenters
further argued that the proposed
Ultrafiltration Rate reporting measure’s
lack of any exclusion criteria or data
collection regarding patients with longer
time on dialysis also hampers the
proposed measure’s ability to evaluate

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the quality of care provided to ESRD
patients.
Response: We appreciate the many
comments we received on the
Ultrafiltration Rate reporting measure.
As a result of the significant concerns
expressed about the measure, we have
decided not to finalize the measure at
this time. We will consider alternate
approaches to collecting patient
ultrafiltration rate data in the future.
For these reasons, we are not
finalizing the proposed Ultrafiltration
Rate reporting measure for the ESRD
QIP.
ii. Proposed Full-Season Influenza
Vaccination Reporting Measure
According to the Centers for Disease
Control and Prevention (CDC), seasonal
influenza, which occurs between
October and March/April of the
following year, is associated with
approximately 20,000 deaths 9 and
226,000 hospitalizations annually.10
While overall rates of influenza
infection are highest among children,
rates of serious illness and mortality are
highest among adults aged 65 years or
older, children aged two or younger,
and immunocompromised patients such
as patients with ESRD. Observational
data have found associations between
influenza vaccination and reduced
mortality and hospitalization in this
patient population. Specifically,
multiple studies have found that
vaccinated patients have significantly
lower odds of all-cause mortality and
modestly lower odds of all-cause
hospitalization compared to
unvaccinated patients.11 However,
influenza vaccination rates in the ESRD
population have historically been lower
than the Healthy People 2020 goal of 70
percent of both pediatric and adult
populations in the United States,12 with
recent reports from the U.S. Renal Data
System and Dialysis Facility Reports
showing vaccination rates of 67 percent
9 Centers for Disease Control and Prevention
(CDC). Estimates of Deaths Associated with
Seasonal Influenza—United States, 1976–2007.
MMWR (2010) 59:33. Available at: http://
www.cdc.gov/mmwr/preview/mmwrhtml/
mm5933a1.htm.
10 Centers for Disease Control and Prevention
(CDC). Prevention and Control of Influenza with
Vaccines: Recommendations of the Advisory
Committee on Immunization Practices (ACIP).
MMWR2010a;59(RR–8):1–62.
11 Bond TC, Spaulding AC, Krisher J, et al.
Mortality of dialysis patients according to influenza
and pneumococcal vaccination status. Am J Kidney
Dis. 2012;60:959–65; Gilbertson DT, Unruh M,
McBean AM, et al. Influenza vaccine delivery and
effectiveness in end-stage renal disease. Kidney Int.
2003;63:738–43.
12 http://www.healthypeople.gov/2020/topicsobjectives/topic/immunization-and-infectiousdiseases/objectives (Healthy People 2020 IID–12.11
and IID–12.12).

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and 68 percent, respectively, among
ESRD patients for the 2011–2012
season.13 Based on these findings, we
believe that encouraging closer
evaluation of patients’ influenza
vaccination status in the dialysis facility
will increase the number of patients
with ESRD who receive an influenza
vaccination and increase influenza
vaccination rates in this population,
which will in turn improve patient
health and well-being.
We proposed to use a measure that is
based on ‘‘ESRD Vaccination—FullSeason Influenza Vaccination’’ (Measure
Applications Partnership #XDEFM).
This measure assesses the percentage of
ESRD patients ≥ 6 months of age on
October 1 and on chronic dialysis ≥ 30
days in a facility at any point between
October 1 and March 31 who either: (1)
Received an influenza vaccination; (2)
were offered but declined the
vaccination; or (3) were determined to
have a medical contraindication. The
Measure Applications Partnership
conditionally supported the use of the
ESRD Vaccination—Full-Season
Influenza Vaccination measure in the
ESRD QIP in its January 2014 PreRulemaking Report because ‘‘influenza
vaccination is very important for
dialysis patients.’’ Nevertheless, the
Measure Applications Partnership
declined to give the measure full
support because it was not sure that the
measure was more suitable to drive
improvement than NQF #0226:
‘‘Influenza Immunization in the ESRD
Population (Facility Level)’’. We have
reviewed the measure specifications for
NQF #0226 and determined that it is not
appropriate to use as the basis for a
reporting measure because the
denominator statement of NQF #0226
excludes all patients for whom data
during the flu season is incomplete,
potentially excluding patients who died
from influenza, but might not have died
if they had received an influenza
vaccination. We therefore believe it is
more appropriate to adopt a reporting
measure based on the ESRD
Vaccination—Full-Season Influenza
Vaccination measure (Measure
Applications Partnership #XDEFM)
because this measure includes patients
who died from influenza, but might not
have died if they had received an
influenza vaccination, and we believe it
is important to include such patients in
an influenza immunization clinical
measure for the ESRD QIP, should we
13 US Renal Data System, USRDS 2014 Annual
Data Report: An overview of the epidemiology of
kidney disease in the United States. National
Institutes of Health, National Institute of Diabetes
and Digestive and Kidney Diseases, Bethesda, MD,
2014.

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propose to adopt such a measure in the
future.
For these reasons, we proposed to
adopt a reporting measure based on
‘‘ESRD Vaccination—Full-Season
Influenza Vaccination’’ (‘‘Full-Season
Influenza Vaccination reporting
measure’’) so that we can collect data
that we can use in the future to calculate
both achievement and improvement
scores, should we propose to adopt a
clinical version of this measure in future
rulemaking.
Section 1881(h)(2)(B)(ii) of the Act
states that ‘‘In the case of a specified
area or medical topic determined
appropriate by the Secretary for which
a feasible and practical measure has not
been endorsed by the entity with a
contract under section 1890(a) of the
Act [in this case NQF], the Secretary
may specify a measure that is not so
endorsed as long as due consideration is
given to measures that have been
endorsed or adopted by a consensus
organization identified by the
Secretary.’’ Because we have given due
consideration to endorsed measures, as
well as those adopted by a consensus
organization, and determined it is not
practical or feasible to adopt those
measures in the ESRD QIP, we proposed
to adopt the Full-Season Influenza
Vaccination reporting measure under
the authority of section 1881(h)(2)(B)(ii)
of the Act.
For PY 2019 and future payment
years, we proposed that facilities must
report one of the following conditions in
CROWNWeb once per performance
period, for each qualifying patient
(defined below):
1. If the patient received an influenza
vaccination:
a. Influenza Vaccination Date
b. Where Influenza Vaccination
Received: (1) Documented at facility; (2)
Documented outside facility; or (3)
Patient self-reported outside facility
2. If the patient did not receive an
influenza vaccination:
a. Reason:
i. Already vaccinated this flu season
ii. Medical Reason: Allergic or
adverse reaction
iii. Other medical reason
iv. Declined
v. Other reason
We note that while facilities are
expected to retain patient influenza
immunization documentation for their
own records, facilities are not required
to supply this documentation to CMS
under the Full-Season Influenza
Vaccination reporting measure.
For this measure, a qualifying patient
would be defined as a patient aged six
months or older as of October 1 who has
been on chronic dialysis for 30 or more

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days in a facility at any point between
October 1 and March 31. This measure
would include in-center hemodialysis,
peritoneal dialysis, and home dialysis
patients. This proposed measure would
capture the same data described in
‘‘ESRD Vaccination—Full-Season
Influenza Vaccination’’, but we would
require that facilities report the data on
or before May 15 following the
performance period for that year. We
believe this reporting deadline will
ensure that facilities have sufficient
time to collect and enter data for all
qualifying patients following the
influenza season, and aligns this
reporting effort with that of the NHSN
Healthcare Personnel Influenza
Vaccination reporting measure finalized
in the CY 2015 ESRD PPS final rule for
PY 2018 (79 FR 66206 through 66208).
Second, we proposed to score facilities
based on whether they successfully
report the data, and not based on the
measure results. Technical
specifications for the Full-Season
Influenza Vaccination reporting
measure can be found at http://
www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_
TechnicalSpecifications.html.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: While several commenters
supported the proposal to adopt the
Full-Season Influenza Vaccination
reporting measure or the concept of a
patient-level influenza vaccination
measure in the ESRD QIP, many
commenters did not support the specific
measure proposed. A number of these
commenters recommended that CMS
adopt a reporting measure that aligns
more closely with NQF #0226: Influenza
Immunization in the ESRD Population,
arguing that the NQF-endorsed measure
would better encourage timely
vaccination of patients with ESRD and
avoid penalizing facilities for patients
who die but for whom time remained to
meet the measure specifications. Some
commenters also expressed concern
about the conditions provided for
reporting in CROWNWeb because their
apparent overlap may result in
inaccurate reporting, and other
commenters recommended alternative
conditions to capture instances such as
hospitalized patients. Many commenters
also stated that the proposed measure’s
timeline does not properly account for
the reality that the influenza vaccination
often becomes available before October
1, and may therefore result in
unintended negative consequences for
facilities that vaccinate patients before
the performance period begins. Other

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commenters strongly recommended
CMS use the NHSN system instead of
CROWNWeb to collect patient influenza
immunization data because facilities
already use NHSN for other data
reporting and adding the proposed
measure to NHSN would provide
reporting consistency, as well as allow
a larger proportion of the ESRD
community to access data reported for
the measure while simplifying the
requirements for ESRD facilities.
Response: We appreciate the many
comments we received on the FullSeason Influenza Vaccination reporting
measure. As a result of the significant
concerns expressed about the measure,
we have decided not to finalize the
measure at this time. We will consider
alternative methods of collecting these
important patient care data in the
future.
For these reasons, we are not
finalizing the proposed Full-Season
Influenza Vaccination reporting
measure for the ESRD QIP.
3. Performance Period for the PY 2019
ESRD QIP
Section 1881(h)(4)(D) of the Act
requires the Secretary to establish the
performance period with respect to a
payment year, and that the performance
period occur prior to the beginning of
such year. We proposed to establish CY
2017 as the performance period for the
PY 2019 ESRD QIP for all but the
influenza vaccination measures because
it is consistent with the performance
period we have historically used for
these measures and accounts for
seasonal variations that might affect a
facility’s measure score. We proposed
that the performance period for both the
NHSN Healthcare Personnel Influenza
Vaccination reporting measure and the
proposed Full-Season Influenza
Vaccination reporting measure will be
from October 1, 2016 through March 31,
2017, because this period spans the
length of the 2016–2017 influenza
season.
We sought comments on these
proposals. The comments and our
responses are set forth below.
Comment: Several commenters
supported the proposed performance
period for the PY 2019 ESRD QIP.
Response: We thank the commenters
for their support.
Comment: Two commenters
recommended that the performance
period for both Influenza Vaccination
measures be changed to encompass the
earliest possible date that the influenza
vaccine may be available in a given
calendar year. They argued that
operationally, facilities begin to
vaccinate patients as soon as the vaccine

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is available, which could be as early as
August. This would be consistent with
the CDC’s NHSN Flu Vaccine Protocol
which encompasses ‘‘the time from
when the vaccine became available
through March 31 of the following
year.’’
Response: We thank the commenters
for their comments, and note that, as
discussed above, we are not finalizing
the Full-Season Influenza Vaccination
reporting measure at this time. We note,
however, that the performance period
for the NHSN Healthcare Personnel
Influenza Vaccination reporting
measure does not restrict facilities to
reporting only vaccinations received
after October 1; instead, it establishes
the period for which the facility must
report HCP vaccination status. As a
result, we encourage facilities to report
vaccination statuses for all HCPs
working at the facility and were
vaccinated both before and after October
1.
Comment: One commenter expressed
concerns that small providers who
manually submit data are unduly
burdened by the requirements of the
ESRD QIP and expressed that with
varied performance periods among
quality measures, these requirements
become very time consuming and
burdensome.
Response: For all but one measure in
the ESRD QIP, we have used the
calendar year as the performance
period. The remaining measure, the
NHSN HCP Influenza Vaccination
reporting measure, uses a performance
period of October 1 of the preceding
year through March 31 of the following
year to reflect the length and timing of
the applicable influenza season. We
believe this differing performance
period is necessary to ensure the timely
administration and monitoring of
influenza vaccinations, and is not
unduly burdensome on facilities.
For these reasons, we are finalizing
the PY 2019 performance periods as
proposed.
4. Performance Standards, Achievement
Thresholds, and Benchmarks for the PY
2019 ESRD QIP
Section 1881(h)(4)(A) of the Act
provides that ‘‘the Secretary shall
establish performance standards with
respect to measures selected . . . for a
performance period with respect to a
year.’’ Section 1881(h)(4)(B) of the Act
further provides that the ‘‘performance
standards . . . shall include levels of
achievement and improvement, as
determined appropriate by the
Secretary.’’ We use the performance
standards to establish the minimum
score a facility must achieve to avoid a

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Medicare payment reduction. We use
achievement thresholds and
benchmarks to calculate scores on the
clinical measures.
a. Proposed Performance Standards,
Achievement Thresholds, and
Benchmarks for the Clinical Measures in
the PY 2019 ESRD QIP
For the same reasons stated in the CY
2013 ESRD PPS final rule (77 FR 67500
through 76502), we proposed for PY
2019 to set the performance standards,
achievement thresholds, and
benchmarks for the clinical measures at
the 50th, 15th, and 90th percentile,
respectively, of national performance in
CY 2015, because this will give us
enough time to calculate and assign
numerical values to the proposed
performance standards for the PY 2019
program prior to the beginning of the
performance period. We continue to
believe these standards will provide an
incentive for facilities to continuously
improve their performance, while not
reducing incentives to facilities that
score at or above the national
performance rate for the clinical
measures.
We sought comments on these
proposals. The comments and our
responses are set forth below.
Comments: Many commenters
supported the proposed performance
standards, achievement thresholds, and
benchmarks for the PY 2019 ESRD QIP
being set at the 50th, 15th and 90th
percentiles respectively.
Response: We thank the commenters
for their support.
For these reasons, we are finalizing
the PY 2019 performance standards,
achievement thresholds, and
benchmarks as proposed.
b. Estimated Performance Standards,
Achievement Thresholds, and
Benchmarks for the Clinical Measures
Proposed for the PY 2019 ESRD QIP
At this time, we do not have the
necessary data to assign numerical
values to the proposed performance
standards for the clinical measures,
because we do not yet have data from
CY 2015 or the first portion of CY 2016.
We will publish values for the clinical
measures, using data from CY 2015 and
the first portion of CY 2016, in the CY
2017 ESRD PPS final rule.
c. Performance Standards for the PY
2019 Reporting Measures
In the CY 2014 ESRD PPS Final Rule,
we finalized performance standards for
the Anemia Management and Mineral
Metabolism reporting measures (78 FR
72213). In the CY 2015 ESRD PPS Final
Rule, we finalized our proposal to

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modify the measure specifications for
the Mineral Metabolism reporting
measure to allow facilities to report
either serum phosphorus data or plasma
phosphorus data for the Mineral
Metabolism reporting measure (79 FR
66191). We did not propose any changes
to these policies for the PY 2019 ESRD
QIP.
In the CY 2015 ESRD PPS Final Rule,
we finalized performance standards for
the Screening for Clinical Depression
and Follow-Up, Pain Assessment and
Follow-Up, and NHSN Healthcare
Provider Influenza Vaccination
reporting measures (79 FR 66209). We
did not propose any changes to these
policies.
For the Ultrafiltration Rate reporting
measure, we proposed to set the
performance standard as successfully
reporting an ultrafiltration rate for each
qualifying patient in CROWNWeb on a
monthly basis, for each month of the
reporting period.
For the Full-Season Influenza
Vaccination reporting measure, we
proposed to set the performance
standard as successfully reporting one
of the above-listed vaccination statuses
for each qualifying patient in
CROWNWeb on or before May 15th of
the performance period.
We sought comments on these
proposals. We did not receive comments
on these proposals, and are therefore
finalizing them as proposed for all
measures except the Ultrafiltration Rate
reporting measure and the Full-Season
Influenza Vaccination reporting
measure, which we are not finalizing.
5. Scoring the PY 2019 ESRD QIP
a. Scoring Facility Performance on
Clinical Measures Based on
Achievement
In the CY 2014 ESRD PPS Final Rule,
we finalized a policy for scoring
performance on clinical measures based
on achievement (78 FR 72215). Under
this methodology, facilities receive
points along an achievement range
based on their performance during the
performance period for each measure,
which we define as a scale between the
achievement threshold and the
benchmark. In determining a facility’s
achievement score for each clinical
measure under the PY 2019 ESRD QIP,
we proposed to continue using this
methodology for all clinical measures
except the ICH CAHPS clinical measure.
The facility’s achievement score would
be calculated by comparing its
performance on the measure during CY
2017 (the proposed performance period)
to the achievement threshold and
benchmark (the 15th and 90th

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percentiles of national performance on
the measure in CY 2015).
b. Scoring Facility Performance on
Clinical Measures Based on
Improvement
In the CY 2014 ESRD PPS Final Rule,
we finalized a policy for scoring
performance on clinical measures based
on improvement (78 FR 72215 through
72216). In determining a facility’s
improvement score for each measure
under the PY 2019 ESRD QIP, we
proposed to continue using this
methodology for all clinical measures
except the ICH CAHPS clinical measure.
Under this methodology, facilities
receive points along an improvement
range, defined as a scale running
between the improvement threshold and
the benchmark. We proposed to define
the improvement threshold as the
facility’s performance on the measure
during CY 2016. The facility’s
improvement score would be calculated
by comparing its performance on the
measure during CY 2017 (the proposed
performance period) to the
improvement threshold and benchmark.
We sought comment on these
proposals. The comments and our
responses are set forth below.
Comment: One commenter supported
the proposal for scoring the PY 2019
ESRD QIP measures.
Response: We thank the commenter
for its support.
Comment: Some commenters
expressed concerns about the ESRD QIP
scoring methodology. One commenter
argued that the scoring methodology is
too complex, such that facilities are not
afforded the opportunity to make
immediate adjustments to care when
minimum scores are not met. Another
commenter noted that small and
medium-sized facilities with limited
resources find the increasingly
complicated formulas difficult to
understand, and occasionally have to
contract with outside firms to
understand how proposed changes will
affect them, predict how they will
perform, and their results.
Response: The ESRD QIP scoring
methodology is designed to make
facility measure scores and TPSs as fair
as possible, given the wide range of
facility sizes and populations across the
country, and we believe that attempting
to further simplify the methodology may
result in unfair scoring for facilities. In
an effort to help facilities better
understand the ESRD QIP’s scoring
methodology, we provide multiple
resources that further elucidate the
methodology, including calculation
examples in preamble text, National
Provider Calls, and the Preview

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Performance Score Report. We
encourage facilities experiencing
difficulty in understanding the ESRD
QIP’s scoring methodology to contact
the program for assistance.
We also understand that the current
scoring methodology does not allow
facilities to calculate their current
performance scores in real time for use
in their quality improvement efforts. We
are looking into opportunities to allow
facilities this level of interaction with
their ESRD QIP data, but are currently
unable to do so due to claims processing
timelines and system limitations.
Comment: Commenter expressed
concern that that the current ESRD QIP
scoring methodology is unfair to smaller
facilities because when a small facility
and a large facility provide the same
quality of care to patients, the lower
census facility will lose a higher
proportion of points in the calculation.
Commenter argued that, as a result of
this calculation and weighting issue, it
is inappropriate to compare small
facilities’ performance to large facilities’
performance.
Response: We acknowledge that the
current scoring methodology may result
in a small number of outlier patients
unduly impacting the facility’s score. In
order to alleviate the potential negative
impact of a small number of patients on
small facilities’ scores, we have adopted
the Small Facility Adjuster, which
provides a positive adjustment to
eligible small facilities’ measure scores.
We believe this adjustment is sufficient
to counteract the negative effects of a
small patient census on facility scores,
but will continue to assess the
appropriateness of additional measures
to ensure accuracy in measure scoring
for small facilities.
For these reasons, we are finalizing
the achievement and improvement
scoring methodologies for clinical
measures in the PY 2019 ESRD QIP as
proposed.
c. Scoring the ICH CAHPS Clinical
Measure
In the CY 2015 ESRD PPS final rule,
we finalized a policy for scoring
performance on the ICH CAHPS clinical
measure based on both achievement and
improvement (79 FR 66209 through
66210). Under this methodology,
facilities will receive an achievement
score and an improvement score for
each of the three composite measures
and three global ratings in the ICH
CAHPS survey instrument. A facility’s
ICH CAHPS score will be based on the
higher of the facility’s achievement or
improvement score for each of the
composite measures and global ratings,
and the resulting scores on each of the

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composite measures and global ratings
will be averaged together to yield an
overall score on the ICH CAHPS clinical
measure. For PY 2019, the facility’s
achievement score would be calculated
by comparing where its performance on
each of the three composite measures
and three global ratings during CY 2017
falls relative to the achievement
threshold and benchmark for that
measure and rating based on CY 2015
data. The facility’s improvement score
would be calculated by comparing its
performance on each of the three
composite measures and three global
ratings during CY 2017 to its
performance rates on these items during
CY 2016.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: One commenter supported
the proposed methodology for scoring
the ICH CAHPS clinical measure.
Response: We thank the commenter
for its support.
Comment: One commenter expressed
concerns about the length of time it is
taking for the ICH CAHPS measure to
become a clinical performance measure
in the QIP.
Response: The ICH CAHPS was first
incorporated into the ESRD QIP
measure set as a reporting measure for
PY 2014; performance on this reporting
measure has been included in facility
Total Performance Scores for the past
three years of the program, and will
continue through PY 2017. With each
year, we have continued to develop the
baseline data and facility experience
necessary to implement a clinical
measure on ICH CAHPS performance.
We agree that the ICH CAHPS clinical
measure finalized for PY 2018 will have
a greater impact on clinical practice by
holding facilities accountable for their
actual performance. As discussed in the
CY 2015 ESRD PPS final rule with
comment period (79 FR 66198), we
believe this gradual ramp-up of the ICH
CAHPS measure was necessary to
ensure facilities are sufficiently versed
in the survey administration process to
be reliably evaluated on the measure
beginning with performance in CY 2016.
Comment: One commenter urged
CMS to consider breaking out questions
10 and 12 from the ICH CAHPS survey
into separate measures for scoring and
reporting. (‘‘Did the dialysis center staff
listen carefully to you?’’ and ‘‘Did the
dialysis center staff show respect for
what you had to say?’’).
Response: The current ICH CAHPS
survey is divided into two categories,
global ratings and composite measures.
Questions 10 and 12 are currently part
of the Quality of Dialysis Center Care

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and Operations Composite measure,
which integrates answers from a total of
17 individual survey items, all related to
the care provided by the dialysis center
and to dialysis center operations. We
believe this composite measure, which
examines the complete ICH CAHPS
survey, appropriately addresses a broad
range of concerns, and is therefore more
reflective of the full care experience of
patients at a facility, than a measure
would be if it looked at one single
question from the survey. However, we
encourage individual facilities to
monitor responses to individual items
as part of their efforts to identify
opportunities for quality improvement.
Comment: One commenter requested
that CMS further clarify how the scores
from each of the two survey
administrations will be used in scoring
the ICH CAHPS clinical measure.

Response: Under the ICH CAHPS
clinical measure, eligible facilities will
perform two survey administrations per
year, one in the spring and one in the
fall. At the conclusion of each of these
survey administrations, composite
scores and global ratings will be
calculated for each survey. The results
will then be averaged across the two
surveys for the year, and the resulting
averages will be used in the calculation
of both achievement and improvement
scores.
For these reasons, we are finalizing
the scoring methodology for the ICH
CAHPS clinical measure as proposed for
the PY 2019 program.

In the CY 2013 ESRD PPS final rule,
we finalized policies for scoring

performance on the Anemia
Management and Mineral Metabolism
reporting measures in the ESRD QIP (77
FR 67506). We did not propose any
changes to these policies for the PY
2019 ESRD QIP.
In the CY 2015 ESRD PPS final rule,
we finalized policies for scoring
performance on the Clinical Depression
Screening and Follow-Up, Pain
Assessment and Follow-Up, and NHSN
Healthcare Provider Influenza
Vaccination reporting measures (79 FR
66210 through 66211). We did not
propose any changes to these policies.
With respect to the Ultrafiltration Rate
reporting measure, we proposed to score
facilities with a CCN Open Date before
July 1, 2017 using the same formula
previously finalized for the Mineral
Metabolism and Anemia Management
reporting measures (77 FR 67506):

As with the Anemia Management and
Mineral Metabolism reporting measures,
we would round the result of this
formula (with half rounded up) to
generate a measure score from 0–10.

With respect to the Full-Season
Influenza Immunization reporting
measure, we proposed to score facilities
with a CCN Open Date before January 1,
2017 based on the proportion of eligible

patients for which the facility
successfully submits one of the
vaccination status indicators listed
above by the May 15, 2017 deadline
using the following formula:

We sought comments on these
proposals. The comments and our
responses are set forth below.
Comment: One commenter expressed
concern about how CMS would account
for patients who are no longer in the
facility when the vaccination reporting
is due for the Full-Season Influenza
Vaccination reporting measure.
Response: We thank the commenter
for its comment. However, we are not
finalizing the Full-Season Influenza
Vaccination reporting measure at this
time.
For these reasons, we are finalizing
the scoring methodologies for all
reporting measures except the
Ultrafiltration Rate reporting measure
and the Full-Season Influenza

Vaccination reporting measure, which
we are not finalizing.

experience facilities have had with the
measures; and (3) how well the
measures align with CMS’ highest
priorities for quality improvement for
patients with ESRD.
In the same rule, we finalized the
Dialysis Adequacy measure topic and
Vascular Access Type measure topic’s
weights for PY 2018 at 18 percent of a
facility’s Clinical Measure Domain score
because facilities have substantially
more experience with the Dialysis
Adequacy measure topic as compared to
the other measures in the Clinical Care
subdomain (79 FR 66214).
Beginning in PY 2019, we proposed to
remove the Dialysis Adequacy measure
topic and replace it with the Dialysis
Adequacy clinical measure. Because
this proposed measure is a composite of

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d. Calculating Facility Performance on
Reporting Measures

6. Weighting the Clinical Measure
Domain and Total Performance Score
i. Weighting the Clinical Measure
Domain for PY 2019
In the CY 2015 ESRD PPS final rule,
we finalized policies regarding the
criteria we would use to assign weights
to measures in a facility’s Clinical
Measure Domain score (79 FR 66214
through 66216). Specifically, we stated
that in deciding how to weight measures
and measure topics within the Clinical
Measure Domain, we would take into
consideration: (1) The number of
measures and measure topics in a
proposed subdomain; (2) how much

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
also urged CMS to consult with the
dialysis community when determining
measure weights for the ESRD QIP.
Response: We agree with the
commenter that these criteria
encompass important considerations for
evaluating measures. As stated in the
CY 2015 ESRD PPS final rule with
comment period (79 FR 66216), we take
these criteria into account when making
decisions about whether to adopt a
measure in the ESRD QIP, because it
would be inappropriate to adopt a
measure that did not meet these criteria.
Based on this understanding, we
developed the three criterion discussed
above for determining subdomain
weighting within the Clinical Measure
Domain (80 FR 37849). We believe these
criteria account for the programmatic
and operational concerns associated
with scoring facilities on ESRD QIP
while also reflecting our focus on
TABLE 25—PROPOSED CLINICAL
MEASURE DOMAIN WEIGHTING FOR improving the quality of care provided
to ESRD patients. This analysis also
THE PY 2019 ESRD QIP
implicitly includes a review of the
strength of the clinical evidence
Measure
weight
in
Measures/Measure topics the clinical meas- supporting the measure, the opportunity
by subdomain
ure domain score for improvement among facilities, and
the clinical significance of the measure
Safety Subdomain ........
20%
because these issues are inextricably
NHSN Bloodstream
linked with an assessment of the
Infection measure
20% measure’s appropriateness and
Patient and Family Enimportance of measurement within the
gagement/Care CoESRD QIP. Because the additional
ordination Subcriteria recommended by the commenter
domain .......................
30%
are used as a threshold for adopting
ICH CAHPS measure ........................
20% ESRD QIP measures and are subSRR measure ..........
10% components of the three previously
Clinical Care Subfinalized measure weighting criteria, we
domain .......................
50%
do not believe it would be appropriate
STrR measure .........
7% to also factor these criteria into
Dialysis Adequacy
decisions about how much weight to
measure ...............
18%
give measures in a facility’s Clinical
Vascular Access
Domain Score.
Type measure
In addition, we currently give the
topic .....................
18%
industry an opportunity to provide
Hypercalcemia
measure ...............
7% input into the ESRD QIP measure and
domain weights by proposing a
We sought comments on this proposal weighting scheme each year and
responding to comments received.
for weighting a facility’s Clinical
Comment: One commenter expressed
Measure Domain score. The comments
concerns with the proposed changes to
and our responses are set forth below.
the measure domain weights because
Comment: Two commenters
ICH CAHPS clinical measure scores will
supported the proposed measure
be paired with a readmission penalty.
weights within the clinical measure
The commenter stated that ICH CAHPS
domain, as well as the proposal to
scores should stand alone in their own
weight the clinical measure domain at
Patient Experience domain in order to
90 percent of a facility’s TPS.
Response: We thank the commenters
avoid denigrating the importance of the
for their support.
patient feedback survey.
Comment: One commenter
Response: As discussed in the CY
recommended that CMS adopt three
2015 ESRD PPS final rule with comment
additional criteria for determining
period, we combined the NQS goals of
appropriate weights for clinical
Care Coordination and Patient- and
measures within the clinical measure
Caregiver-Centered Experience of care
domain: (1) Strength of evidence; (2)
into one subdomain because we believe
opportunity for improvement; and (3)
the two goals complement one another
clinical significance. The commenter
(79 FR 66214). ‘‘Care Coordination’’

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the measures previously included in the
Dialysis Adequacy measure topic, with
the same Kt/V thresholds currently used
for those measures, we believe that
facilities are already familiar with the
concepts underlying this proposed
measure and that the measure should be
weighted at 18 percent of a facility’s
Clinical Measure Domain score. We are
not proposing any further changes to the
weighting for the remaining clinical
measures and measure topics within the
Clinical Measure Domain because the
previously finalized weights are aligned
with the criteria used to establish
measure and measure topic weights. For
these reasons, we proposed to use the
following weighting system in Table 25
below for calculating a facility’s Clinical
Measure Domain score beginning in PY
2019.

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refers to the NQS goal of promoting
effective communication and
coordination of care, while ‘‘Patientand Caregiver-Centered Experience of
Care’’ refers to the NQS goal of ensuring
that each patient and family is engaged
as a partner in care. In order to engage
patients and families as partners, we
believe that effective communication
and coordination of care must coexist,
and that patient and family engagement
cannot occur independently of effective
communication and care coordination.
We therefore believe it is appropriate to
combine measures of care coordination
with those of patient and family
engagement for the purposes of
calculating a facility’s clinical measure
domain score.
In addition, we note that the SRR
clinical measure receives substantially
less weight than the ICH CAHPS clinical
measure in the Patient and Family
Engagement/Care Coordination
subdomain. The SRR clinical measure is
weighted at 10 percent of a facility’s
clinical measure domain score, whereas
the ICH CAHPS clinical measure is
weighted at 20 percent of a facility’s
clinical measure domain score, making
the ICH CAHPS clinical measure’s
weight one of the largest components of
a facility’s clinical measure domain
score. We therefore believe that
including both of these measures in a
single subdomain does not denigrate the
importance of the ICH CAHPS survey.
We will continue to assess the
appropriateness of this subdomain
combination as the ICH CAHPS and
SRR clinical measures are implemented
in the ESRD QIP.
Comment: Two commenters did not
support the proposed weighting of the
clinical measure domain, arguing that
the Vascular Access Type measures and
Dialysis Adequacy measure should be
weighted higher than the NHSN BSI
clinical measure due to issues
associated with implementing and
scoring the NHSN BSI clinical measure.
Additionally, they argued that because
Vascular Access Type is the measure
that is most actionable for facilities, it
should be weighted greater than other
measures.
Response: We thank the commenters
for their recommendation regarding the
weighting of the NHSN BSI clinical
measure versus the Vascular Access
Type measure topic and Dialysis
Adequacy measure. However, we
believe the technical issues associated
with implementation of the NHSN BSI
clinical measure noted by the
commenters are now resolved and
should not impact future payment years.
We do not believe that increasing the
weight of the Vascular Access Type

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

measure topic and Dialysis Adequacy
clinical measure is appropriate at this
time. As stated in the CY 2015 ESRD
PPS final rule with comment period (79
FR 66215 through 66216), improving
patient safety and reducing bloodstream
infections in patients with ESRD is one
of our highest priorities, and facilities
have a good deal of experience with the
NHSN BSI clinical measure. As a result,
the NHSN BSI clinical measure is
weighted at 20 percent of a facility’s
TPS, the highest allocation provided to
measures within the clinical measure
domain. However, we also note that the
Vascular Access Type measure topic
and Dialysis Adequacy clinical measure
are also highly weighted within the
Clinical Measure Domain at 18 percent
of the Clinical Measure Domain each, to
reflect the fact that facilities have
substantially more experience with this
measure and measure topic than the
other measures in the Clinical Care
subdomain. We therefore believe that
the weight assigned to these measures
within the Clinical Measure Domain is
appropriate for the PY 2019 ESRD QIP.
We will continue to assess the
appropriateness of this weighting
allocation for future years of the
Program.
Comment: Two commenters urged
CMS to place more emphasis on safety
in dialysis facilities by increasing the
weight of the Safety Subdomain. One
commenter requested that CMS assign
greater weight to the Safety Subdomain
because patient safety is more aligned
with facility quality initiatives and can
be more readily controlled by facility
staff.
Response: We agree that improving
patient safety is of the utmost
importance in the ESRD community;
however, this is only one of the criteria
established for determining the weight
of subdomains within the Clinical
Measure Domain. The Safety
Subdomain contains only one measure,
the NHSN BSI clinical measure, and the
NHSN BSI clinical measure is weighted
at 20 percent of the Clinical Measure
Domain score, which is the highest
weighting allocation for a single
measure under the Clinical Measure
Domain. Reallocating weight from the
Patient and Family Engagement/Care
Coordination and Clinical Care
subdomains to further increase the
Safety subdomain’s prominence in the
Clinical Measure Domain is
inappropriate because doing so would
diminish the remaining measures’
importance in facility score, and would
not accurately reflect our measure
weighting prioritization criteria. We
therefore believe the Safety subdomain’s
current weight is appropriate at this

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time. We will continue to assess the
appropriateness of this weighting
allocation for future years of the
program.
Comment: One commenter did not
support weighting the ICH CAHPS
clinical measure at 20 percent of the
Clinical Measure Domain because of the
burden it imposes on small facilities;
the difficulty in implementing changes
based on survey results before the next
semiannual survey is performed; and
the survey fatigue it causes patients,
which may in turn impact patient
responses.
Response: While we understand that
the ICH CAHPS survey may be
burdensome for facilities, we believe
that measuring patient experience can
lead to quality improvement, which
may in turn lead to better outcomes. In
addition, the ICH CAHPS survey
supports the National Quality Forum’s
strategy priorities of Effective
Communication and Care Coordination
and Person and Family-Centered Care,
as well as the Institute of Medicine’s six
specific aims for improvement.
Furthermore, we note that the case
minimum for the ICH CAHPS clinical
measure is 30 qualifying patients in the
year preceding the performance period.
This case minimum is much higher than
the 11 qualifying patient minimum used
for the majority of the ESRD QIP clinical
measures. We believe these thresholds
help to decrease the burden on small
facilities by exempting from the
measure those facilities that do not
regularly treat enough qualifying
patients, and further avoids unduly
impacting small facilities’ scores by also
exempting otherwise eligible small
facilities who do not receive enough
completed surveys during the
performance period.
Comment: One commenter supported
the proposal for weighting the Clinical
Measure Domain and the Total
Performance Score.
Response: We thank the commenter
for its support.
Comment: One commenter expressed
concern that the Clinical Measure
Domain weighting policy places smaller
facilities at a disadvantage in scoring.
The commenter noted that when a larger
facility and a small facility provide
comparable care to patients for a given
measure but the small facility is not
eligible to receive a score on that
measure because it has too few patients,
the reallocated measure weight may
cause the small facility to lose points
from its TPS. The commenter requested
that CMS calculate facilities’ TPS based
on the facilities’ performance on the
ESRD QIP measures, regardless of
facility size and avoid adjusting

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measure weighting when the facility is
not eligible for some measure due to low
facility volume.
Response: We thank the commenter
for sharing its concerns. However, we
believe scoring facilities on measures for
which they treat a very small number of
patients (i.e., fewer than 11 qualifying
patients) may raise greater concerns
than reallocating measure weights,
because the effect of a single outlier on
facility measure scores increases as the
patient census decreases. Therefore,
while some small facilities may benefit
from receiving a score based on
performance for their small patient
population, others may receive far lower
measure scores that are not reflective of
the quality of care provided to all
patients at the facility. We therefore
believe it is most appropriate to
continue reallocating measure weights
across the measures for which a facility
is eligible to receive a score if a facility
is not eligible to receive a score on one
or more measures.
For these reasons, we are finalizing
the weighting for the Clinical Measure
Domain as proposed for the PY 2019
ESRD QIP.
ii. Weighting the Total Performance
Score
We continue to believe that while the
reporting measures are valuable, the
clinical measures evaluate actual patient
care and therefore justify a higher
combined weight (78 FR 72217). We did
not propose to change our policy,
finalized in the CY 2015 ESRD PPS final
rule (79 FR 66219), under which clinical
measures will be weighted as finalized
for the Clinical Domain score, and the
Clinical Domain score will comprise 90
percent of a facility’s TPS, with the
reporting measures weighted equally to
form the remaining 10 percent of a
facility’s TPS. We also did not propose
any changes to the policy that facilities
must be eligible to receive a score on at
least one reporting measure and at least
one clinical measure to be eligible to
receive a TPS, or the policy that a
facility’s TPS will be rounded to the
nearest integer, with half of an integer
being rounded up.
The comments and our responses are
set forth below.
Comment: One commenter did not
support weighting the Clinical Measure
Domain at 90 percent of a facility’s TPS
and having reporting measures comprise
the remaining 10 percent because it
does not adequately incentivize
reporting for the increasing number of
reporting measures in the ESRD QIP.
The commenter recommended that CMS
weight the clinical and reporting

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
measures at 80 percent and 20 percent
of a facility’s TPS, respectively.
Response: We thank the commenter
for its suggestion, and agree that
reporting is an important component of
quality improvement efforts. We also
acknowledge that weighting the
reporting measures to comprise 10
percent of a facility’s TPS results in
each individual reporting measure
carrying less weight in the facility’s
overall score; however, we disagree that
this allocation does not adequately
incentivize the reporting measures. We
continue to believe that clinical
measures should carry substantially
more weight than reporting measures in
a facility’s TPS because clinical
measures score providers and facilities
based upon actual outcomes, providing
a direct assessment of the quality of care
a facility provides, relative to either the
facility’s past performance or standards
of care nationwide. Reporting measures,
on the other hand, create an incentive
for facilities to monitor significant
indicators of health and illness, help
facilities become familiar with CMS
data systems, and allow the ESRD QIP
to collect the robust clinical data needed
to establish performance standards for
clinical measures. We do not believe
that facilities are failing to report data
for the ESRD QIP reporting measures
based on the fact that their reporting
measure scores will have less of an
impact on their TPSs than their Clinical
Measure Domain scores. For example,
for the Anemia Management and
Mineral Metabolism reporting measures,
the median of national facility
performance is 10 points, meaning that
the vast majority of facilities are
reporting all required data under these
measures. We therefore believe the
current weighting scheme is
appropriate. We will continue to
evaluate the appropriateness of this
weighting for future years of the ESRD
QIP.
For these reasons, we are finalizing
the total performance score weighting
for the PY 2019 ESRD QIP.

7. Minimum Data for Scoring Measures
for the PY 2019 ESRD QIP
Our policy is to score facilities on
clinical and reporting measures for
which they have a minimum number of
qualifying patients during the
performance period. With the exception
of the Standardized Readmission Ratio,
Standardized Transfusion Ratio, and
ICH CAHPS clinical measures, a facility
must treat at least 11 qualifying cases
during the performance period in order
to be scored on a clinical or reporting
measure. A facility must have at least 11
index discharges to be eligible to receive
a score on the SRR clinical measure and
10 patient-years at risk to be eligible to
receive a score on the STrR clinical
measure. In order to receive a score on
the ICH CAHPS clinical measure, a
facility must have treated at least 30
survey-eligible patients during the
eligibility period and receive 30
completed surveys during the
performance period. We did not propose
to change these minimum data policies
for the measures that we proposed to
continue including in the PY 2019
ESRD QIP measure set.
For the proposed Dialysis Adequacy
clinical measure, we proposed that
facilities with at least 11 qualifying
patients will receive a score on the
measure. We believe that maintaining a
case minimum of 11 for this measure
adequately addresses both the privacy
and reliability concerns previously
discussed in the CY 2013 ESRD PPS
final rule (77 FR 67510 through 67512),
and aligns with the case minimum
policy for the previously finalized
clinical process measures.
For the proposed Ultrafiltration Rate
and Full-Season Influenza reporting
measures, we also proposed that
facilities with at least 11 qualifying
patients will receive a score on the
measure. We believe that setting the
case minimum at 11 for these reporting
measures strikes the appropriate balance
between the need to maximize data
collection and the need to not unduly

69065

burden or penalize small facilities. We
further believe that setting the case
minimum at 11 is appropriate because
this aligns with case minimum policy
for the vast majority of the reporting
measures in the ESRD QIP.
Under our current policy, we begin
counting the number of months for
which a facility is open on the first day
of the month after the facility’s CCN
Open Date. Only facilities with a CCN
Open Date before July 1, 2017 would be
eligible to be scored on the Anemia
Management, Mineral Metabolism, Pain
Assessment and Follow-Up, Clinical
Depression Screening and Follow-Up
reporting measures, and only facilities
with a CCN Open Date before January 1,
2017 would be eligible to be scored on
the NHSN Bloodstream Infection
clinical measure, ICH CAHPS clinical
measure, and NHSN Healthcare
Personnel (HCP) Influenza Vaccination
reporting measure. Consistent with our
policy regarding the NHSN HCP
Influenza Vaccination reporting
measure, we proposed that facilities
with a CCN Open Date after January 1,
2017 would not be eligible to receive a
score on the Full-Season Influenza
Vaccination reporting measure because
these facilities might have difficulty
reporting the data by the proposed
reporting deadline of May 15, 2017. We
further proposed that, consistent with
our CCN Open Date policy for other
reporting measures, facilities with a
CCN Open Date after July 1, 2017,
would not be eligible to receive a score
on the Ultrafiltration Rate reporting
measure because of the difficulties these
facilities may face in meeting the
requirements of this measure due to the
short period of time left in the
performance period. Table 26 displays
the proposed patient minimum
requirements for each of the measures,
as well as the proposed CCN Open Dates
after which a facility would not be
eligible to receive a score on a reporting
measure.

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TABLE 26—PROPOSED MINIMUM DATA REQUIREMENTS FOR THE PY 2019 ESRD QIP
Measure

Minimum data requirements

CCN open date

Dialysis Adequacy (Clinical) .................
Vascular Access Type: Catheter (Clinical).
Vascular Access Type: Fistula (Clinical).
Hypercalcemia (Clinical) ......................
NHSN Bloodstream Infection (Clinical)
SRR (Clinical) .......................................
STrR (Clinical) ......................................

11 qualifying patients ..........................
11 qualifying patients ..........................

N/A ..........................................
N/A ..........................................

11–25 qualifying patients.
11–25 qualifying patients.

11 qualifying patients ..........................

N/A ..........................................

11–25 qualifying patients.

11
11
11
10

N/A ..........................................
Before January 1, 2017 ..........
N/A ..........................................
N/A ..........................................

11–25
11–25
11–41
10–21

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qualifying patients ..........................
qualifying patients ..........................
index discharges ...........................
patient-years at risk .......................

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qualifying patients.
qualifying patients.
index discharges.
patient-years at risk.

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
TABLE 26—PROPOSED MINIMUM DATA REQUIREMENTS FOR THE PY 2019 ESRD QIP—Continued
Measure

Minimum data requirements

CCN open date

ICH CAHPS (Clinical) ..........................

Facilities with 30 or more survey-eligible patients during the calendar
year preceding the performance period must submit survey results. Facilities will not receive a score if
they do not obtain a total of at least
30 completed surveys during the
performance period.
11 qualifying patients ..........................
11 qualifying patients ..........................
11 qualifying patients ..........................

Before January 1, 2017 ..........

N/A.

Before July 1, 2017 ................
Before July 1, 2017 ................
Before July 1, 2017 ................

N/A.
N/A.
N/A.

11 qualifying patients ..........................

Before July 1, 2017 ................

N/A.

N/A ......................................................

Before January 1, 2017 ..........

N/A.

11 qualifying patients ..........................
11 qualifying patients ..........................

Before July 1, 2017 ................
Before January 1, 2017 ..........

N/A.
N/A.

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Anemia Management (Reporting) ........
Mineral Metabolism (Reporting) ...........
Depression Screening and Follow-Up
(Reporting).
Pain Assessment and Follow-Up (Reporting).
NHSN HCP Influenza Vaccination (Reporting).
Ultrafiltration Rate (Reporting) .............
Full-Season Influenza Vaccination (Reporting).

The comments and our responses are
set forth below.
Comment: One commenter requested
that CMS revert to the minimum data
proposal for the Anemia Management
and Mineral Metabolism reporting
measure as finalized in the PY 2016
ESRD PPS final rule.
Response: In the CY 2015 ESRD PPS
final rule with comment period, we
finalized our policy to set the case
minimum for the Anemia Management
and Mineral Metabolism reporting
measures at 11 qualifying patients for
PY 2017 and future payment years (79
FR 66185). We continue to believe that
this case minimum strikes the
appropriate balance between the need to
maximize data collection and the need
to not unduly penalize small facilities
that are unable, for legitimate reasons, to
meet the reporting requirements
previously established for these
measures (78 FR 72197 through 72199
and 72220 through 72221).
Comment: One commenter
acknowledged that the small number of
pediatric ESRD patients often results in
facilities not being scored on the
pediatric dialysis adequacy measures,
but noted that CMS’ minimum sample
size for the measures is based on CMS’
policies related to compliance with the
HIPAA Privacy Regulations, not quality
performance policies. Another
commenter opposed the minimum data
requirements for the proposed Dialysis
Adequacy Measure because, if the
individual measures are combined,
facilities previously excluded for having
too few patients, may now be included
in the measure, potentially causing
privacy concerns.
Response: Given the ESRD QIP’s
potential to encourage quality

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improvement, our goal is to ensure the
full participation of as many facilities as
possible in the program. While patient
privacy concerns are one of a number of
considerations we take into account
when establishing case minimums for
measures, we believe that ensuring
measure and measure score reliability is
vital for quality improvement. As a
general principle, reliability improves
with increasing case size; that is, the
reliability of a measure or score
describes numerically to what extent
that measure or score assesses the actual
differences in performance among
facilities as opposed to the random
variation within facilities (77 FR 67510).
Our current policy is that a facility must
treat at least 11 qualifying patients
during the performance period in order
to be scored on a clinical measure (77
FR 67510 through 67511). This case
minimum of 11 patients ensures that the
Dialysis Adequacy clinical measure
scores meet our standards for measure
reliability. We do not believe a case
minimum of 11 for the Dialysis
Adequacy clinical measure raises
privacy concerns, because we do not
intend to publish age- or modalityspecific performance rates at this time.
As a result, patients treated at a facility
should not be individually identifiable
within the facility’s Dialysis Adequacy
clinical measure score reflecting the
care provided to all eligible patients at
the facility.
Comment: One commenter
recommended that CMS grant facilities
that receive a CCN during the
performance period a grace period of 90
days following receipt of their CCN
before being scored based on data
reported to CROWNWeb because the
CROWNWeb registration process is

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difficult for new users and may
therefore hinder new facilities’ ability to
submit data by the deadlines established
for the ESRD QIP. In the alternative, the
commenter recommended granting new
facilities an additional 90 days to
submit their first three months’ data in
CROWNWeb in order to ensure the
submitted data is correct.
Response: We appreciate the
commenter’s concerns about the
difficulties new facilities face when
meeting the requirements of the ESRD
QIP. It is because of these concerns that
facilities with CCN open dates after July
1 of the performance period are
excluded from the reporting measures
and are therefore not eligible to receive
a TPS for that program year. However,
we disagree that new facilities should be
given an additional ‘‘grace period’’ of 90
days for data submission to
CROWNWeb. First, we note that
facilities can gain access to CROWNWeb
in order to submit patient data in
advance of receiving their CCN, and we
encourage new facilities to contact their
ESRD Network regarding this process
while awaiting receipt of their CCN. In
addition, the CROWNWeb system is not
configured to allow ad hoc extensions or
suspensions of clinical months for
individual facilities. We also believe
that financial incentives provide the
strongest incentive to improve the
quality of care provided to patients with
ESRD. For these reasons, we do not
believe providing new facilities with an
extension of time to begin submitting
data to CROWNWeb is appropriate at
this time.
Comment: One commenter
recommended that CMS determine
facility eligibility for a given measure
based on patient census for both clinical

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and reporting measures on a monthly
basis rather than for the entire
performance period.
Response: We believe that
determining facility eligibility on a
monthly basis rather than using the
current methodology would have two
negative impacts on the ESRD QIP and,
by extension, the ESRD population.
First, determining eligibility on a
monthly basis would likely reduce the
number of facilities eligible to receive a
score on a measure by excluding
facilities that would receive scores
under the current methodology. For
example, monthly eligibility
determinations would systematically
exclude months in which facilities do
not treat enough eligible patients,
instead of basing eligibility for the
measure on the total number of eligible
patients treated throughout the
performance period. Monthly eligibility
determinations would also effectively
exclude all patients treated at a facility
during a month in which the facility is
not eligible to receive a score from the
ESRD QIP, which runs contrary to the
ESRD QIP’s goal of ensuring quality of
care for all ESRD patients. Second,
determining facility eligibility on a
monthly basis would require extensive
and complicated modifications to the
current measure scoring methodologies
in order to ensure measure and measure
score reliability. For example, some
clinical measures require multiple
months of claims in order to score
facility performance on the measure; it
is unclear how the commenter’s
recommended methodology would
account for months during that range in
which the facility did not treat enough
qualifying cases. In addition, for
instances where a facility would only be
eligible for a number of months during
the performance period, as opposed to
the entire performance period, the
resulting measure score may
inaccurately reflect the quality of care
provided at the facility. For these
reasons, we believe that determining
facility eligibility using the entire
performance period is the most
appropriate policy for the ESRD QIP.
Comment: One commenter
recommended that CMS implement a
patient-month threshold for facility
eligibility for the NHSN BSI clinical
measure.
Response: Currently, eligibility for the
NHSN BSI clinical measure is
determined based on the number of
qualifying patients treated during the
performance period. We continue to
believe this threshold is appropriate for
the NHSN BSI clinical measure because
it aligns this measure with the
remaining clinical measures in the

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ESRD QIP, and ensures that the measure
captures a larger proportion of dialysis
patients than it may otherwise capture.
Comment: One commenter supports
the proposed minimum data for scoring
measures.
Response: We thank the commenter
for its support.
Comment: Two commenters
recommended that CMS increase the
minimum number of cases from 11 to 26
to avoid anomalous results and to align
with the policies used by commercial
and managed care value-based
purchasing programs. One of the
commenters noted that these plans rely
upon a minimum of 26 cases and
recommended that the ESRD QIP align
its minimum data requirements with
these plans.
Response: We recognize that measures
using a case minimum of 11 could
potentially be less reliable than
measures using a case minimum of 26.
However, we continue to believe that it
is essential to score facilities with
between 11 and 25 qualifying cases on
the applicable ESRD QIP measures,
because increasing the minimum
number of cases to 26 would result in
the exclusion of hundreds of facilities
from the ESRD QIP. Based on data from
CY 2013, applying a 26-patient case
minimum to all the PY 2017 clinical
measures would result in the exclusion
of 562 facilities from the ESRD QIP, or
9.2 percent of facilities nationwide (79
FR 66185). Given the inherent tradeoff
between a modest decline in measure
reliability and including these facilities
in the ESRD QIP, we believe that on
balance it is more important to include
these facilities. We also note that the
ESRD QIP maintains the SFA in order
to ensure that any error in measure rates
due to a small number of cases will not
adversely affect facility payment.
Comment: One commenter supported
CMS’s decision to exclude facilities
with a CCN Open Date after January 1,
2017 for the Full-Season Influenza
Vaccination reporting measure.
Response: We thank the commenter
for its support. We note that, based on
comments received, we have decided
not to finalize the Full-Season Influenza
Vaccination reporting measure at this
time.
Comment: One commenter supported
CMS’ proposal to exclude facilities with
a CCN Open Date after July 1, 2017 from
scoring for the Ultrafiltration Rate
reporting measure.
Response: We thank the commenter
for its support. We note that, based on
comments received, we have decided
not to finalize the Ultrafiltration Rate
reporting measure at this time.

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For these reasons, we are finalizing
the minimum data policies for PY 2019
as proposed, with the exception of the
Ultrafiltration Rate and Full-Season
Influenza Vaccination reporting
measure minimum data policies, which
we are not finalizing at this time.
8. Payment Reductions for the PY 2019
ESRD QIP
Section 1881(h)(3)(A)(ii) of the Act
requires the Secretary to ensure that the
application of the scoring methodology
results in an appropriate distribution of
payment reductions across facilities,
such that facilities achieving the lowest
TPSs receive the largest payment
reductions. We proposed that, for the
PY 2019 ESRD QIP, a facility will not
receive a payment reduction if it
achieves a minimum TPS that is equal
to or greater than the total of the points
it would have received if:
• It performed at the performance
standard for each clinical measure; and
• It received the number of points for
each reporting measure that corresponds
to the 50th percentile of facility
performance on each of the PY 2017
reporting measures.
We did not propose a policy regarding
the inclusion of measures for which we
are not able to establish a numerical
value for the performance standard
through the rulemaking process before
the beginning of the performance period
in the PY 2019 minimum TPS. We did
not propose such a policy because no
measures in the proposed PY 2019
measure set meet this criterion.
However, we stated that should we
choose to adopt a clinical measure in
future rulemaking without the baseline
data required to calculate a performance
standard before the beginning of the
performance period, we will propose a
criterion accounting for that measure in
the minimum TPS for the applicable
payment year at that time.
The PY 2017 program is the most
recent year for which we will have
calculated final measure scores before
the beginning of the proposed
performance period for PY 2019 (that is,
CY 2017). Because we have not yet
calculated final measure scores, we are
unable to determine the 50th percentile
of facility performance on the PY 2017
reporting measures. We will publish
that value in the CY 2017 ESRD PPS
final rule once we have calculated final
measure scores for the PY 2017
program.
Section 1881(h)(3)(A)(ii) of the Act
requires that facilities achieving the
lowest TPSs receive the largest payment
reductions. In the CY 2014 ESRD PPS
final rule (78 FR 72223 through 72224),
we finalized a payment reduction scale

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for PY 2016 and future payment years:
for every 10 points a facility falls below
the minimum TPS, the facility would
receive an additional 0.5 percent
reduction on its ESRD PPS payments for
PY 2016 and future payment years, with
a maximum reduction of 2.0 percent.
We did not propose any changes to this
policy for the PY 2019 ESRD QIP.
Because we are not yet able to
calculate the performance standards for
each of the clinical measures, we are
also not able to calculate a proposed
minimum TPS at this time. We will
publish the minimum TPS, based on
data from CY 2015 and the first part of
CY 2016, in the CY 2017 ESRD PPS final
rule.
We sought comments on this
proposal. The comments and our
responses are set forth below.
Comment: Two commenters
supported the proposed payment
reductions for the PY 2019 ESRD QIP.
Response: We thank the commenters
for their support.
For these reasons, we are finalizing
the payment reduction policies for the
PY 2019 ESRD QIP as proposed.
I. Future Achievement Threshold Policy
under Consideration
Under our current methodology, we
set performance standards, achievement
thresholds, and benchmarks for the
clinical measures at the 50th, 15th, and
90th percentiles, respectively, of
national performance on the measure
during the baseline period (77 FR 67500
through 67502). As we continue to
refine the ESRD QIP’s policies, we are
evaluating different methods of ensuring
that facilities strive for continuous
improvement in their delivery of care to
patients with ESRD. For future
rulemaking, we are considering
increasing the achievement threshold
from the 15th percentile to the 25th
percentile of national performance
during the baseline period. We believe
this increase in the achievement
threshold will add additional incentives
for facilities to improve performance,
thereby improving patient outcomes and
quality of care. We have analyzed the
impact of this policy change on facility
payment reductions using the same data
used to calculate the PY 2018 minimum
TPS. The full results of this analysis can
be found at https://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/
Downloads/Achievement-ThresholdAnalysis-using-PY-2015-Results.pdf.
We invited comment on this policy
that we are considering for adoption in
the ESRD QIP in the future. The
comments and our responses are set
forth below.

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Comment: Many commenters
expressed significant concerns with the
future achievement threshold policy
under consideration. Specifically,
commenters are concerned that the
increasing use of measures outside the
dialysis facility’s control, combined
with a higher achievement threshold,
will result in too many facilities being
penalized. Additionally, one commenter
described a need, within the ESRD
community, to redistribute money
currently retained by CMS through the
PPS bundle and ESRD QIP payment
reductions within the ESRD community
to ensure that the quality of patient care
improves continuously. One commenter
also pointed out that there has been
consistent improvement in the
numerical values associated with the
achievement threshold, suggesting that
lower performers have plenty of
motivation for improvement, argued
that the current achievement threshold
policy is already driving improvement
among dialysis facilities across all
measures, and requested that CMS
publish the data used in consideration
of inviting comment on this potential
future policy proposal. One commenter
also expressed concerns that with the
new standardized ratio measures being
included in the QIP, there may be
unexpected effects in QIP scoring.
Because decisions to admit patients and
transfuse them are generally not made
by the dialysis facility, the commenter
argued, facilities have little ability to
drive improvement or to control how
their quality efforts affect patient
outcomes. The commenter therefore
argued that CMS should wait to see how
the current QIP scoring affects those
facilities before adding additional
uncertainty for them by increasing the
achievement threshold.
Response: We thank the commenters
for sharing their concerns regarding a
potential future policy proposal under
consideration that would increase the
achievement threshold from the 15th
percentile to the 25th percentile of
national performance during the
baseline period. We will take these
comments into consideration as we
further consider whether to propose to
adopt a higher achievement threshold in
the future.
J. Monitoring Access to Dialysis
Facilities
In the CY 2015 ESRD PPS final rule,
we finalized our commitment to
conduct a study to determine the impact
of adopting the Standardized
Readmission Ratio (SRR) and
Standardized Transfusion Ratio clinical
measures on access to care, and stated
that we would make further details

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about the study and its methodology
available to the public for review (79 FR
66189). We stated that we intended to
publish the methodology for this study
in the second half of the year, and
encouraged all interested parties to
review this methodology and submit
any comments using the process
outlined on the Web page.
We received comments on this issue.
The comments and our responses are set
forth below.
Comment: Many commenters
supported CMS’s intent to conduct a
study on the impact of adopting the SRR
and STrR clinical measures on patient
access to care. One commenter
recommended that CMS also evaluate
the combined effects of socioeconomic
status and patient demographics to
determine if these attributes influence
facility performance on those two
measures. Several commenters
recommended that CMS exclude these
measures from the ESRD QIP until the
access to care study results have been
thoroughly reviewed and analyzed, or at
the very least that CMS delay
implementation of the measures until
the results of the study are available.
Response: We thank the commenters
for their support of the upcoming access
to care study, and will take their
recommendations regarding the
structure and content of the study into
account as we continue to develop the
study methodology. We note, however,
that the purpose of this study is to
assess the impact of the SRR and STrR
clinical measures on access to care for
dialysis patients. If these measures are
removed from the ESRD QIP or
suspended during the access to care
study, it would be very difficult for the
study to accurately assess their impact
on admission practices. Therefore, we
believe it is inappropriate to remove or
suspend the SRR and STrR clinical
measures while the access to care study
is ongoing.
Comment: Several commenters
supported CMS’s efforts to evaluate the
impact of the SRR and STrR measures
on access to care. Commenters
recommended that CMS evaluate the
effectiveness of the SRR and STrR
measures in measuring the actual care
provided in dialysis facilities and
commended CMS for allowing
stakeholders to comment on the study
methodology.
Response: We thank the commenters
for their support.
We thank commenters for providing
input regarding the Access to Care
Study methodology, which we intend to
publish prior to the end of CY 2015.

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IV. Advancing Health Information
Exchange
HHS has a number of initiatives
designed to improve health and health
care quality through the adoption of
health information technology and
nationwide health information
exchange. As discussed in the August
2013 Statement ‘‘Principles and
Strategies for Accelerating Health
Information Exchange’’ (available at
http://www.healthit.gov/sites/default/
files/
acceleratinghieprinciples_strategy.pdf),
HHS believes that all individuals, their
families, their healthcare and social
service providers, and payers should
have consistent and timely access to
electronic health information in a
standardized format that can be securely
exchanged between the patient,
providers, and others involved in the
individual’s care. Health information
technology (health IT) that facilitates the
secure, efficient and effective sharing
and use of electronic health-related
information when and where it is
needed is an important tool for settings
across the continuum of care, including
ESRD facilities.
The Office of the National
Coordinator for Health Information
Technology (ONC) has released a
document entitled ‘‘Connecting Health
and Care for the Nation: A Shared
Nationwide Interoperability Roadmap’’
(Roadmap)(available at https://
www.healthit.gov/sites/default/files/hieinteroperability/nationwideinteroperability-roadmap-final-version1.0.pdf). The Roadmap describes a
shared strategy for achieving nationwide
interoperability to enable a learning
health system by 2024. In the near term,
the Roadmap focuses on actions that
will enable a majority of individuals
and providers across the care
continuum to send, receive, find and
use priority data domains to improve
health care quality and outcomes by the
end of 2017. The Roadmap also
identifies four critical pathways that
health IT stakeholders should focus on
now in order to create a foundation for
long-term success: (1) Improve technical
standards and implementation guidance
for priority data domains and associated
elements; (2) rapidly shift and align
federal, state, and commercial payment
policies from fee-for-service to valuebased models to stimulate the demand
for interoperability; (3) clarify and align
federal and state privacy and security
requirements that enable
interoperability; and (4) align and
promote the use of consistent policies
and business practices that support
interoperability and address those that

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impede interoperability, in coordination
with stakeholders.
In addition, ONC has released the
draft version of the 2016 Interoperability
Standards Advisory (available at
https://www.healthit.gov/standardsadvisory/2016), which provides a list of
the best available standards and
implementation specifications to enable
priority health information exchange
functions. Providers, payers, and
vendors are encouraged to take these
‘‘best available standards’’ into account
as they implement interoperable health
information exchange across the
continuum of care.
We encourage stakeholders to utilize
health information exchange and
certified health IT to effectively and
efficiently help providers improve
internal care delivery practices, support
management of care across the
continuum, enable the reporting of
electronically specified clinical quality
measures, and improve efficiencies and
reduce unnecessary costs. As adoption
of certified health IT increases and
interoperability standards continue to
mature, HHS will seek to reinforce
standards through relevant policies and
programs.
V. Collection of Information
Requirements
A. Legislative Requirement for
Solicitation of Comments
Under the Paperwork Reduction Act
of 1995, we are required to provide 60day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
B. Requirements in Regulation Text
In sections II.B.1.d.ii, II.B.1.d.iii,
II.B.3, and II.B.4 of this final rule, we
made changes to regulatory text for the
ESRD PPS in CY 2016. However, the
changes that are being made do not
impose any new information collection
requirements.

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C. Additional Information Collection
Requirements
This final rule does not impose any
new information collection
requirements in the regulation text, as
specified above. However, this final rule
does make reference to several
associated information collections that
are not discussed in the regulation text
contained in this document. The
following is a discussion of these
information collections.
1. ESRD QIP
a. Wage Estimates
In previous rulemaking, we used the
mean hourly wage of a registered nurse
as the basis of the wage estimates for all
collection of information calculations in
the ESRD QIP (for example, 77 FR
67521). However, we believe that
reporting data for the ESRD QIP
measures can be accomplished by other
administrative staff within the dialysis
facility. The Bureau of Labor Statistics
(the Bureau) is ‘‘the principal Federal
agency responsible for measuring labor
market activity, working conditions, and
price changes in the economy.’’ 14
Acting as an independent agency, the
Bureau provides objective information
not only for the government, but also for
the public. The Bureau’s National
Occupational Employment and Wage
Estimate describes Medical Records and
Health Information Technicians as those
responsible for organizing and managing
health information data.15 Therefore, we
believe it is reasonable assume these
individuals would be tasked with
submitting measure data to CROWNWeb
rather than a Registered Nurse, whose
duties are centered on providing and
coordinating care for patients.16 The
mean hourly wage of a Medical Records
and Health Information Technician is
$18.68 per hour.17 Under OMB Circular
76–A, in calculating direct labor,
agencies should not only include
salaries and wages, but also ‘‘other
entitlements’’ such as fringe benefits.18
This Circular provides that the civilian
position full fringe benefit cost factor is
36.25 percent. Therefore, using these
assumptions, we estimate an hourly
labor cost of $25.45 as the basis of the
wage estimates for all collection of
14 http://www.bls.gov/bls/infohome.htm.
15 http://www.bls/gov/ooh/healthcare/medicalrecords-and-health-information-technicians.htm.
16 http://www.bls.gov/ooh/healthcare/registerednurses.htm.
17 http://www.bls.gov/ooh/healthcare/medicalrecords-and-health-information-technicians.html.
18 http://www.whitehouse.gov/omb/
circulars_a076_a76_incl_tech_correction.

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information calculations in the ESRD
QIP.
We did not receive comments on this
proposal, and are therefore finalizing
the change in wage estimates as
proposed.
b. Changes in Time Required to Submit
Data Based on Proposed Reporting
Requirements
In previous rulemaking, we estimated
that data entry associated with the ESRD
QIP took approximately 5 minutes per
data element to complete (for example,
77 FR 67521). However, a large number
of facilities now submit data using the
batch submission process, which allows
facilities to submit data extracted from
their internal Electronic Health Records
(EHRs) directly to CROWNWeb. Because
the batch submission process can be
automated with very little human
intervention, we believe the overall time
required to submit measure data using
CROWNWeb is substantially less than
previously estimated. We are therefore
revising our estimate to be 2.5 minutes
per data element submitted, a change of
¥2.5 minutes, which takes into account
the small percentage of data that is
manually reported, as well as the
human interventions required to modify
batch submission files such that they
meet CROWNWeb’s internal data
validation requirements.
We received comments on this
section. The comments and our
responses are set forth below.
Comment: One commenter expressed
concern about an under-estimate in the
proposed estimated time to complete
QIP data submission because they feel it
does not properly account for the needs
of smaller facilities without data
extraction tools. The commenter
explained that while larger facilities are
able to utilize data extraction tools that
minimize the time needed to submit
data, smaller facilities without these
capabilities must enter this data
manually on a monthly basis. The
commenter asserted that it takes an
estimated 20–30 minutes per patient per
month to enter this data for manual
entry facilities.
Response: We thank the commenter
for sharing their concerns regarding the
proposed estimated time to complete
QIP data submission. We understand
that the amount of time required to
enter data for a patient varies among
facilities based on a number of factors,
including the facility’s size, staffing, and
access to different technical support
tools, and took these concerns into
account when estimating the average
time needed to complete data entry
across all facilities. We also understand
that, because this is an estimated time

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per element across all facilities, some
facilities will require more time to
complete the required data submission,
and others will require less time.
However, we believe an estimate of 2.5
minutes per element is appropriate for
assessing the impact of ESRD QIP data
submission requirements on facilities
because it represents an average of the
time required across all facilities, and
therefore allows us to better assess
burden on a national level.
For these reasons, we are finalizing
the change in estimated time required to
submit data for the ESRD QIP as
proposed.
c. Data Validation Requirements for the
PY 2018 ESRD QIP
Section III.F.4 in this final rule
outlines our data validation proposals
for PY 2018. Specifically, we proposed
to randomly sample records from 300
facilities as part of our continuing pilot
data-validation program. Each sampled
facility will be required to produce
approximately 10 records, and the
sampled facilities will be reimbursed by
our validation contractor for the costs
associated with copying and mailing the
requested records. The burden
associated with these validation
requirements is the time and effort
necessary to submit the requested
records to a CMS contractor. We
estimate that it will take each facility
approximately 2.5 hours to comply with
this requirement. If 300 facilities are
asked to submit records, we estimate
that the total combined annual burden
for these facilities will be 750 hours
(300 facilities × 2.5 hours). Since we
anticipate that Medical Records and
Health Information Technicians or
similar administrative staff would
submit this data, we estimate that the
aggregate cost of the CROWNWeb data
validation would be $19,088 (750 hours
× $25.45/hour) total or $64 ($19,088/300
facilities) per facility in the sample. The
burden associated with these
requirements is captured in an
information collection request currently
available for review and comment, OMB
control number 0938–NEW.
Under the proposed continuation of
the feasibility study for validating data
reported to the NHSN Dialysis Event
Module, we proposed to randomly
select nine facilities to provide CMS
with a quarterly list of all positive blood
cultures drawn from their patients
during the quarter, including any
positive blood cultures collected on the
day of, or the day following, a facility
patient’s admission to a hospital. A
CMS contractor will review the lists to
determine if dialysis events for the
patients in question were accurately

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reported to the NHSN Dialysis Event
Module. If we determine that additional
medical records are needed to validate
dialysis events, facilities will be
required to provide those records within
60 days of a request for this information.
We estimate fewer than ten respondents
in a 12-month period; therefore, in
accordance with the implementing
regulations of the PRA at 44 U.S.C.
3502(3)(A)(i), the burden associated
with the aforementioned requirements
is exempt.
d. Proposed Ultrafiltration Rate
Reporting Measure
We proposed to include, beginning
with the PY 2019 ESRD QIP, a reporting
measure requiring facilities to report in
CROWNWeb an ultrafiltration rate at
least once per month for each qualifying
patient. However, as discussed in
section III.H.2.c.i above, and based on
comments received, we decided not to
finalize the Ultrafiltration Rate reporting
measure at this time. Therefore,
facilities will not be subject to
additional collection of information
requirements for this measure.
e. Proposed Full-Season Influenza
Vaccination Reporting Measure
In the CY 2016 ESRD PPS proposed
rule, we proposed to include, beginning
with the PY 2019 ESRD QIP, a measure
requiring facilities to report patient
influenza vaccination status annually
using the CROWNWeb system.
However, as discussed in section
III.H.2.c.ii above, based on comments
received, we decided not to finalize the
Full-Season Influenza Vaccination
reporting measure at this time.
Therefore, facilities will not be subject
to additional collection of information
requirements for this measure.
VI. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96–
354), section 1102(b) of the Social
Security Act, section 202 of the
Unfunded Mandates Reform Act of 1995
(March 22, 1995; Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999) and the Congressional
Review Act (5 U.S.C. 804(2).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory

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alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Section 3(f) of Executive Order
12866 defines a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule: (1) Having an annual
effect on the economy of $100 million
or more in any 1 year, or adversely and
materially affecting a sector of the
economy, productivity, competition,
jobs, the environment, public health or
safety, or state, local or tribal
governments or communities (also
referred to as economically significant);
(2) creating a serious inconsistency or
otherwise interfering with an action
taken or planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
A regulatory impact analysis (RIA)
must be prepared for major rules with
economically significant effects ($100
million or more in any 1 year). This rule
is not economically significant within
the meaning of section 3(f)(1) of the
Executive Order, since it does not meet
the $100 million threshold. However,
OMB has determined that the actions
are significant within the meaning of
section 3(f)(4) of the Executive Order.
Therefore, OMB has reviewed these
final regulations, and the Departments
have provided the following assessment
of their impact. We solicited comments
on the regulatory impact analysis
provided.

2. Statement of Need
This rule finalizes a number of
routine updates for renal dialysis
services and implements several policy
changes to the ESRD PPS in CY 2016.
The routine updates include: Wage
index values, wage index budgetneutrality adjustment factor, and outlier
payment threshold amounts. Other
policy changes include implementation
of section 1881(b)(14)(F)(i)(I), as
amended by section 217(b)(2) of PAMA,
which requires a 1.25 percent decrease
to the payment update as discussed in
section II.B.2. of this rule, the delay in
payment for oral-only drugs under the
ESRD PPS until January 1, 2025 as
required by section 204 of ABLE, the
implementation of a geographic facility
adjustment paid to rural facilities, and
the updated payment multipliers based
upon the regression analysis discussed
in section II.B.1.c. of this final rule.
Failure to publish this final rule would
result in ESRD facilities not receiving
appropriate payments in CY 2016.
This rule finalizes requirements for
the ESRD QIP, including the adoption of
a measure set for the PY 2019 program,
as directed by section 1881(h) of the
Act. Failure to finalize requirements for
the PY 2019 ESRD QIP would prevent
continuation of the ESRD QIP beyond
PY 2018. In addition, finalizing
requirements for the PY 2019 ESRD QIP
provides facilities with more time to
review and fully understand new
measures before their implementation in
the ESRD QIP.
3. Overall Impact
We estimate that the final revisions to
the ESRD PPS will result in an increase
of approximately $10 million in
payments to ESRD facilities in CY 2016,
which includes the amount associated
with updates to outlier threshold
amounts, updates to the wage index,

changes in the CBSA delineations,
changes in the labor-related share,
update to the payment rate and changes
involved with the refinement.
For PY 2018, we anticipate that the
new burdens associated with the
collection of information requirements
will be approximately $19 thousand,
totaling an overall impact of
approximately $11.8 million as a result
of the PY 2018 ESRD QIP.19 For PY
2019, we estimate that the payment
reductions will result in a total impact
of approximately $15.5 million across
all facilities.
B. Detailed Economic Analysis
1. CY 2016 End-Stage Renal Disease
Prospective Payment System
a. Effects on ESRD Facilities
To understand the impact of the
changes affecting payments to different
categories of ESRD facilities, it is
necessary to compare estimated
payments in CY 2015 to estimated
payments in CY 2016. To estimate the
impact among various types of ESRD
facilities, it is imperative that the
estimates of payments in CY 2015 and
CY 2016 contain similar inputs.
Therefore, we simulated payments only
for those ESRD facilities for which we
are able to calculate both current
payments and new payments.
For this final rule, we used the June
2015 update of CY 2014 National Claims
History file as a basis for Medicare
dialysis treatments and payments under
the ESRD PPS. We updated the 2014
claims to 2015 and 2016 using various
updates. The updates to the ESRD PPS
base rate are described in section
II.B.2.d. of this final rule. Table 27
shows the impact of the estimated CY
2016 ESRD payments compared to
estimated payments to ESRD facilities in
CY 2015.

TABLE 27—IMPACT OF FINAL CHANGES IN PAYMENTS TO ESRD FACILITIES FOR CY 2016 FINAL RULE
[Percent change in total payments to ESRD facilities (both program and beneficiaries)]

asabaliauskas on DSK5VPTVN1PROD with RULES

Facility type

Number of
facilities

Number of
treatments
(in millions)

Effect of 2016
changes in
outlier policy
(percent)

Effect of 2016
changes in
wage indexes,
CBSA designations and
labor share
(percent)

A

B

C

D

All Facilities ..................
Type
Freestanding .........
Hospital based ......

20:10 Nov 05, 2015

Effect of 2016
final refinement changes
to payment
rate
(percent)

Effect of total
2016 final
changes (refinement and
routine updates to the
payment rate)
(percent)

E

F

G

6,374

44.5

0.0

0.0

0.15

0.0

0.2

5,919
455

41.9
2.7

0.0
0.0

0.0
0.1

0.15
0.16

0.0
¥0.1

0.2
0.2

19 We note that the aggregate impact of the PY
2018 ESRD QIP was included in the CY 2015 ESRD
PPS final rule (79 FR 66256 through 66258). The

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Effect of 2016
changes in
payment rate
update
(percent)

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previously finalized aggregate impact of $11.8
million reflects the PY 2018 estimated payment
reductions and the collection of information

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requirements for the NHSN Healthcare Personnel
Influenza Vaccination reporting measure.

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TABLE 27—IMPACT OF FINAL CHANGES IN PAYMENTS TO ESRD FACILITIES FOR CY 2016 FINAL RULE—Continued
[Percent change in total payments to ESRD facilities (both program and beneficiaries)]

Facility type

Number of
facilities

Number of
treatments
(in millions)

Effect of 2016
changes in
outlier policy
(percent)

Effect of 2016
changes in
wage indexes,
CBSA designations and
labor share
(percent)

A

B

C

D

Ownership Type
Large dialysis organization ..........
Regional chain ......
Independent ..........
Hospital based 1 ....
Geographic Location
Rural .....................
Urban ....................
Census Region
East North Central
East South Central
Middle Atlantic ......
Mountain ...............
New England ........
Pacific 2 .................
Puerto Rico and
Virgin Islands .....
South Atlantic ........
West North Central
West South Central
Facility Size
Less than 4,000
treatments 3 .......
4,000 to 9,999
treatments .........
10,000 or more
treatments .........
Unknown ...............
Percentage of Pediatric
Patients
Less than 2% ........
Between 2% and
19% ...................
Between 20% and
49% ...................
More than 50% .....

Effect of 2016
changes in
payment rate
update
(percent)

Effect of 2016
final refinement changes
to payment
rate
(percent)

Effect of total
2016 final
changes (refinement and
routine updates to the
payment rate)
(percent)

E

F

G

4,446
957
594
377

31.5
6.8
4.0
2.2

0.0
0.0
0.0
0.0

¥0.1
0.2
0.1
0.0

0.15
0.15
0.15
0.16

0.1
¥0.3
¥0.1
0.3

0.2
0.1
0.2
0.4

1,259
5,115

6.6
37.9

0.0
0.0

¥1.2
0.2

0.15
0.15

0.9
¥0.1

¥0.1
0.2

1,049
523
687
365
182
778

6.5
3.3
5.4
2.2
1.4
6.2

0.0
0.0
0.0
0.0
0.0
0.0

¥0.2
¥1.2
0.8
¥0.3
0.9
1.7

0.15
0.15
0.15
0.15
0.15
0.15

0.2
0.7
¥0.3
¥0.1
¥0.6
¥0.8

0.1
¥0.2
0.7
¥0.2
0.5
1.1

47
1,414
466
863

0.3
10.3
2.3
6.5

0.0
0.0
0.0
0.0

¥3.9
¥0.5
¥0.8
¥0.8

0.15
0.15
0.15
0.15

¥0.2
0.3
0.2
0.2

¥3.8
0.1
¥0.4
¥0.3

1,416

3.4

0.0

¥0.3

0.15

0.4

0.3

2,346

12.2

0.0

¥0.4

0.15

0.0

¥0.1

2,596
16

29.0
0.0

0.0
0.0

0.2
¥0.3

0.15
0.14

¥0.1
0.0

0.3
¥0.1

6,264

44.1

0.0

0.0

0.15

0.0

0.2

42

0.4

0.0

0.1

0.15

0.3

0.6

13
55

0.0
0.1

0.0
¥0.1

¥0.1
¥0.2

0.15
0.15

0.6
0.6

0.7
0.5

1 Includes

hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
ESRD facilities located in the states in the Pacific region, including those located in Guam, American Samoa, and the Northern Mariana Islands.
3 Of the 1,416 ESRD facilities with less than 4,000 treatments, only 387 qualify for the low-volume adjustment. The low-volume adjustment is
mandated by Congress, and is not applied to pediatric patients. The impact to these low-volume facilities is a 6.9 percent increase in payments.
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

asabaliauskas on DSK5VPTVN1PROD with RULES

2 Includes

Column A of the impact table
indicates the number of ESRD facilities
for each impact category and column B
indicates the number of dialysis
treatments (in millions). The overall
effect of the final changes to the outlier
payment policy described in section
II.B.2.c. of this final rule is shown in
column C. For CY 2016, the impact on
all ESRD facilities as a result of the
changes to the outlier payment policy
will be a 0.0 percent increase in
estimated payments. Nearly all ESRD
facilities are anticipated to experience
no effect in their estimated CY 2016

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payments as a result of the final outlier
policy changes.
Column D shows the effect of the final
CY 2016 wage indices, and the final
year of the transitions for the
implementation of both the new CBSA
delineations and the labor-related share.
Facilities located in the census region of
Puerto Rico and the Virgin Islands
would receive a 3.9 percent decrease in
estimated payments in CY 2016. Since
most of the facilities in this category are
located in Puerto Rico, the decrease is
primarily due to the change in the laborrelated share. The other categories of

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types of facilities in the impact table
show changes in estimated payments
ranging from a 1.2 percent decrease to
a 1.7 percent increase due to these final
updates.
Column E shows the effect of the
ESRD PPS payment rate update of 0.15
percent, which reflects the final ESRDB
market basket percentage increase factor
for CY 2016 of 1.8 percent, the 1.25
percent reduction as required by the
section 1881(b)(14)(F)(i)(I) of the Act,
and the MFP adjustment of 0.4 percent.
Column F shows the effect of the
ESRD PPS refinement as discussed in

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
section II.B.1. While the overall
estimated impact of the refinement is
0.0 percent, the impact by categories
ranges from a 0.8 percent decrease to a
0.9 percent increase.
Column G reflects the overall impact
(that is, the effects of the final outlier
policy changes, the final wage index,
the effect of the change in CBSA
delineations, the effect of the change in
the labor-related share, the effect of the
payment rate update, and the effect of
the refinement). We expect that overall
ESRD facilities will experience a 0.2
percent increase in estimated payments
in 2016. ESRD facilities in Puerto Rico
and the Virgin Islands are expected to
receive a 3.8 percent decrease in their
estimated payments in CY 2016. This
larger decrease is primarily due to the
negative impact of the change in the
labor-related share. The other categories
of types of facilities in the impact table
show impacts ranging from a decrease of
0.4 percent to an increase of 1.1 percent
in their 2016 estimated payments.
b. Effects on Other Providers
Under the ESRD PPS, Medicare pays
ESRD facilities a single bundled
payment for renal dialysis services,
which may have been separately paid to
other providers, (for example,
laboratories, durable medical equipment
suppliers, and pharmacies) by Medicare
prior to the implementation of the ESRD
PPS. Therefore, in CY 2016, we estimate
that the final ESRD PPS will have zero
impact on these other providers.
c. Effects on the Medicare Program
We estimate that Medicare spending
(total Medicare program payments) for
ESRD facilities in CY 2016 will be
approximately $9.6 billion. This
estimate takes into account a projected
increase in fee-for-service Medicare

dialysis beneficiary enrollment of 1.4
percent in CY 2016.
d. Effects on Medicare Beneficiaries
Under the ESRD PPS, beneficiaries are
responsible for paying 20 percent of the
ESRD PPS payment amount. As a result
of the projected 0.2 percent overall
increase in the final ESRD PPS payment
amounts in CY 2016, we estimate that
there will be an increase in beneficiary
co-insurance payments of 0.2 percent in
CY 2016, which translates to
approximately $0 million due to
rounding.
e. Alternatives Considered
In section II.B.1.c.1. of this final rule,
we finalized the updated payment
multipliers for five age groups resulting
from our regression analysis. In section
II.B.2.d., we discuss and finalize a
refinement budget-neutrality adjustment
to account for the overall effects of the
refinement. We are finalizing a 4
percent reduction (that is, a factor of
.960319) to the ESRD PPS base rate to
account for the additional dollars paid
to facilities through the payment
adjustments. We indicated that a
significant portion of additional impact
of the adjusters on the base rate arises
from changes in the age adjustments. To
mitigate some of the reduction, we
considered reducing the number of age
categories to three and providing a
payment adjustment for only those
patients in the youngest (18–44) and
oldest (80+) age groups. We did not
adopt this approach because while it
would reduce the impact of the age
adjustments on the base rate, it would
also significantly reduce the explanatory
power of the system and reduce
payments to facilities with patients who
are between the ages of 44 through 79,
that is, approximately 75 percent of
patients.

69073

Also, in section II.B.1.d. of this final
rule, we finalized the eligibility criteria
for the low-volume payment adjustment
by excluding facilities of common
ownership that are located within 5
road miles off one another. We
considered a geographic proximity
criterion of 10 road miles; however, this
approach negatively impacted rural
facilities which are important to ensure
access to essential renal dialysis
services.
2. End-Stage Renal Disease Quality
Incentive Program
a. Effects of the PY 2019 ESRD QIP
The ESRD QIP provisions are
intended to prevent possible reductions
in the quality of ESRD dialysis facility
services provided to beneficiaries as a
result of payment changes under the
ESRD PPS. The methodology that we are
using to determine a facility’s TPS for
PY 2019 is described in section III.H.8
of this final rule. Any reductions in
ESRD PPS payments as a result of a
facility’s performance under the PY
2019 ESRD QIP would affect the
facility’s reimbursement rates in CY
2019.
We estimate that, of the total number
of dialysis facilities (including those not
receiving a TPS), approximately 23
percent or 1,405 of the facilities would
likely receive a payment reduction in
PY 2019. Facilities that do not receive
a TPS are not eligible for a payment
reduction.
In conducting our impact assessment,
we have assumed that there will be an
initial count of 6,264 dialysis facilities
paid under the ESRD PPS. Table 28
shows the overall estimated distribution
of payment reductions resulting from
the PY 2019 ESRD QIP.

TABLE 28—ESTIMATED DISTRIBUTION OF PY 2019 ESRD QIP PAYMENT REDUCTIONS
Percentage reduction

Frequency

0 .......................................................................................................................
0.5 ....................................................................................................................
1 .......................................................................................................................
1.5 ....................................................................................................................
2 .......................................................................................................................

Percent

4629
961
362
65
17

76.72
15.93
6.00
1.08
0.28

Cumulative
frequency
4629
5590
5952
6017
6034

Cumulative
percent
76.72
92.64
98.64
99.72
100.00

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Note: This table excludes 230 facilities that we estimate will not receive a payment reduction because they will not report enough data to receive a Total Performance Score.

To estimate whether or not a facility
would receive a payment reduction in
PY 2019, we scored each facility on

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achievement and improvement on
several measures we have previously
finalized and for which there were

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available data from CROWNWeb and
Medicare claims. Measures used for the
simulation are shown in Table 29.

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69074

Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
TABLE 29—DATA USED TO ESTIMATE PY 2019 ESRD QIP PAYMENT REDUCTIONS
Period of time used to calculate achievement
thresholds, performance standards, benchmarks, and improvement thresholds

Measure
Vascular Access Type
% Fistula .....................................................
% Catheter .................................................
Dialysis Adequacy .............................................
Hypercalcemia ...................................................
SRR ...................................................................
STrR ..................................................................
NHSN BSI ..........................................................

Jan
Jan
Jan
Jan
Jan
Jan
Jan

Clinical measure topic areas with less
than 11 cases for a facility were not
included in that facility’s Total
Performance Score. Each facility’s Total
Performance Score was compared to the
estimated minimum Total Performance
Score and the payment reduction table
found in section III.H.8 of this final rule.
Facility reporting measure scores were
estimated using available data from CY
2014. Facilities were required to have a
score on at least one clinical and one
reporting measure in order to receive a
Total Performance Score.
To estimate the total payment
reductions in PY 2019 for each facility
resulting from this final rule, we
multiplied the total Medicare payments
to the facility during the one year period

between January 2014 and December
2014 by the facility’s estimated payment
reduction percentage expected under
the ESRD QIP, yielding a total payment
reduction amount for each facility:
(Total ESRD payment in January 2014
through December 2014 times the
estimated payment reduction
percentage). For PY 2014, the total
payment reduction for the 1,405
facilities estimated to receive a
reduction is approximately $15.5
million ($15,470,309). As a result, we
estimate that ESRD facilities will
experience an aggregate impact of
approximately $15.5 million in PY
2019, as a result of the CY 2016 ESRD
PPS final rule with comment period.

2013–Dec
2013–Dec
2013–Dec
2013–Dec
2013–Dec
2013–Dec
2014–Dec

2013
2013
2013
2013
2013
2013
2014

.........................................
.........................................
.........................................
.........................................
.........................................
.........................................
.........................................

Performance period

Jan
Jan
Jan
Jan
Jan
Jan
Jan

2014–Dec
2014–Dec
2014–Dec
2014–Dec
2014–Dec
2014–Dec
2014–Dec

2014.
2014.
2014.
2014.
2014.
2014.
2014.

Table 30 below shows the estimated
impact of the finalized ESRD QIP
payment reductions to all ESRD
facilities for PY 2019. The table
estimates the distribution of ESRD
facilities by facility size (both among
facilities considered to be small entities
and by number of treatments per
facility), geography (both urban/rural
and by region), and by facility type
(hospital based/freestanding facilities).
Given that the time periods used for
these calculations will differ from those
we are proposing to use for the PY 2019
ESRD QIP, the actual impact of the PY
2019 ESRD QIP may vary significantly
from the values provided here.

TABLE 30—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES IN PY 2019

asabaliauskas on DSK5VPTVN1PROD with RULES

Number of
facilities

All Facilities ..............................................................
Facility Type:
Freestanding ............................................................
Hospital-based .........................................................
Ownership Type:
Large Dialysis ..........................................................
Regional Chain ........................................................
Independent .............................................................
Hospital-based (non-chain) ......................................
Facility Size:
Large Entities ...........................................................
Small Entities 1 .........................................................
Rural Status:
1) Yes .......................................................................
2) No ........................................................................
Census Region:
Northeast ..................................................................
Midwest ....................................................................
South ........................................................................
West .........................................................................
US Territories 2 .........................................................
Census Division:
East North Central ...................................................
East South Central ...................................................
Middle Atlantic ..........................................................
Mountain ..................................................................
New England ............................................................
Pacific .......................................................................
South Atlantic ...........................................................
West North Central ..................................................
West South Central ..................................................
US Territories 2 .........................................................
Facility Size (# of total treatments)
Less than 4,000 treatments .....................................

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Number of
treatments
2014
(in millions)

Number of
facilities with
QIP Score

Number of
facilities
expected to
receive a
payment reduction

Payment
reduction
(percent change
in total ESRD
payments)

6,264

40.0

6,023

1,313

¥0.15

5,812
452

37.7
2.3

5,625
398

1,215
98

¥0.15
¥0.23

4,380
926
584
374

28.5
6.0
3.6
1.9

4,271
891
536
325

870
196
165
82

¥0.13
¥0.15
¥0.26
¥0.24

5,306
958

34.5
5.5

5,162
861

1,066
247

¥0.13
¥0.25

1,332
4,932

6.5
33.5

1,257
4,766

194
1,119

¥0.10
¥0.16

861
1,490
2,744
1,112
57

6.2
7.9
18.1
7.5
0.4

832
1,392
2,658
1,088
53

199
336
602
150
26

¥0.17
¥0.17
¥0.15
¥0.09
¥0.44

1,036
518
680
359
182
760
1,386
455
841
47

5.8
3.0
4.9
2.0
1.3
5.6
9.3
2.1
5.8
0.3

966
502
662
350
170
745
1,340
426
816
46

272
83
168
48
31
104
352
64
167
24

¥0.20
¥0.11
¥0.18
¥0.08
¥0.12
¥0.09
¥0.18
¥0.09
¥0.13
¥0.48

1,305

3.5

1,202

220

¥0.15

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

69075

TABLE 30—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES IN PY 2019—Continued
Number of
facilities

4,000–9,999 treatments ...........................................
Over 10,000 treatments ...........................................
Unknown ..................................................................
1 Small

2,239
2,514
206

Number of
treatments
2014
(in millions)

Number of
facilities with
QIP Score

10.8
25.3
0.3

Number of
facilities
expected to
receive a
payment reduction

2,207
2,484
130

444
612
37

Payment
reduction
(percent change
in total ESRD
payments)
¥0.13
¥0.16
¥0.29

Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported status.
Puerto Rico and Virgin Islands.
on claims and CROWNWeb data through December 2014.

2 Includes

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3 Based

b. Alternatives Considered
In section III.G.2.c.ii of the CY 2016
ESRD PPS proposed rule, we proposed
to adopt the Full-Season Influenza
Vaccination reporting measure. Under
this proposed measure, data on patient
immunization status would be entered
into CROWNWeb for each qualifying
patient treated at the facility during the
performance period. We considered
proposing to collect patient
immunization data using the CDC’s
Surveillance for Dialysis Patient
Influenza Vaccination module within
the NHSN; however, the proposed
measure’s data sources are
administrative claims and ‘‘electronic
clinical data’’ which the Measure
Justification Form explains will be
collected via CROWNWeb (MAP
#XDEFM). Because the measure
specifications reviewed by the Measure
Applications Partnership do not include
NHSN as a data source for this measure,
we decided not to propose to use the
NHSN system to collect patient-level
influenza vaccination data for this
measure at this time.
We ultimately decided to have
facilities report data for this measure in
CROWNWeb rather than using an
alternative data source, for two main
reasons. First, the data elements needed
for this measure have already been
developed in CROWNWeb and will
appear in a new release soon. Second,
facilities are already familiar with the
use and functionality of CROWNWeb
because they are using it to report data
for other measures in the ESRD QIP, and
we believe that familiarity with
CROWNWeb will reduce the burden of
reporting data for the Full Season
Influenza reporting measure.
As discussed in section III.H.2.c.ii
above, based on comments received, we
decided not to finalize the Full-Season
Influenza Vaccination reporting
measure at this time.
C. Accounting Statement
As required by OMB Circular A–4
(available at http://www.whitehouse.
gov/omb/circulars_a004_a±4), in Table

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31 below, we have prepared an
accounting statement showing the
classification of the transfers and costs
associated with the various provisions
of this final rule.

entities include small businesses,
nonprofit organizations, and small
governmental jurisdictions.
Approximately 15 percent of ESRD
dialysis facilities are considered small
entities according to the Small Business
TABLE 31—ACCOUNTING STATEMENT: Administration’s (SBA) size standards,
CLASSIFICATION
OF
ESTIMATED which classifies small businesses as
those dialysis facilities having total
TRANSFERS AND COSTS/SAVINGS
revenues of less than $38.5 million in
any 1 year. Individuals and States are
ESRD PPS for CY 2016
not included in the definitions of a
Category
Transfers
small entity. For more information on
SBA’s size standards, see the Small
Annualized Monetized $10 million.
Transfers.
Business Administration’s Web site at
From Whom to Whom Federal government
http://www.sba.gov/content/smallto ESRD providers.
business-size-standards (Kidney
Dialysis Centers are listed as 621492
Category
Transfers
with a size standard of $38.5 million).
Increased Beneficiary $0 million.
We do not believe ESRD facilities are
Co-insurance Payoperated by small government entities
ments.
From Whom to Whom Beneficiaries to
such as counties or towns with
ESRD providers.
populations of 50,000 or less, and
therefore, they are not enumerated or
ESRD QIP for PY 2018 20
included in this estimated RFA analysis.
Category
Transfers
Individuals and States are not included
in the definition of a small entity.
Annualized Monetized $¥11.8 million.
For purposes of the RFA, we estimate
Transfers.
that approximately 15 percent of ESRD
Category
Costs
facilities are small entities as that term
is used in the RFA (which includes
Annualized Monetized $19 thousand.
small businesses, nonprofit
ESRD Provider
Costs.
organizations, and small governmental
jurisdictions). This amount is based on
ESRD QIP for PY 2019
the number of ESRD facilities shown in
Category
Transfers
the ownership category in Table 27.
Using the definitions in this ownership
Annualized Monetized $¥15.5 million.
category, we consider the 594 facilities
Transfers.
that are independent and the 377
From Whom to Whom Federal government
to ESRD providers. facilities that are shown as hospitalbased to be small entities. The ESRD
Category
Costs
facilities that are owned and operated
Annualized Monetized N/A.
by LDOs and regional chains would
ESRD Provider
have total revenues of more than $38.5
Costs.
million in any year when the total
revenues for all locations are combined
VII. Regulatory Flexibility Act Analysis
for each business (individual LDO or
The Regulatory Flexibility Act
regional chain), and are not, therefore,
(September 19, 1980, Pub. L. 96–354)
included as small entities.
(RFA) requires agencies to analyze
For the ESRD PPS updates finalized
options for regulatory relief of small
in this rule, a hospital-based ESRD
entities, if a rule has a significant impact facility (as defined by ownership type)
on a substantial number of small
is estimated to receive a 0.4 percent
entities. For purposes of the RFA, small increase in payments for CY 2016. An

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations

independent facility (as defined by
ownership type) is also estimated to
receive a 0.2 percent increase in
payments for CY 2016.
We estimate that of the 495 ESRD
facilities expected to receive a payment
reduction in the PY 2019 ESRD QIP, 84
are ESRD small entity facilities. We
present these findings in Table 27
(‘‘Estimated Distribution of PY 2019
ESRD QIP Payment Reductions’’) and
Table 28 (‘‘Impact of Proposed QIP
Payment Reductions to ESRD Facilities
for PY 2019’’) above. We estimate that
the payment reductions will average
approximately $7,797 per facility across
the 495 facilities receiving a payment
reduction, and $7,509 for each small
entity facility. Using our estimates of
facility performance, we also estimated
the impact of payment reductions on
ESRD small entity facilities by
comparing the total estimated payment
reductions for 958 small entity facilities
with the aggregate ESRD payments to all
small entity facilities. We estimate that
there are a total of 958 small entity
facilities, and that the aggregate ESRD
PPS payments to these facilities would
decrease 0.07 percent in PY 2019.
Therefore, the Secretary has
determined that this final rule will not
have a significant economic impact on
a substantial number of small entities.
We solicited comment on the RFA
analysis provided.
In addition, section 1102(b) of the
Social Security Act (the Act) requires us
to prepare a regulatory impact analysis
if a rule may have a significant impact
on the operations of a substantial
number of small rural hospitals. This
analysis must conform to the provisions
of section 604 of the RFA. For purposes
of section 1102(b) of the Act, we define
a small rural hospital as a hospital that
is located outside of a metropolitan
statistical area and has fewer than 100
beds. We do not believe this final rule
will have a significant impact on
operations of a substantial number of
small rural hospitals because most
dialysis facilities are freestanding.
While there are 139 rural hospital-based
dialysis facilities, we do not know how
many of them are based at hospitals
with fewer than 100 beds. However,
overall, the 139 rural hospital-based
dialysis facilities will experience an
estimated 1.1 percent decrease in
payments. As a result, this final rule is
not estimated to have a significant
impact on small rural hospitals.
Therefore, the Secretary has determined
that this final rule will not have a
significant impact on the operations of
a substantial number of small rural
hospitals.

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VIII. Unfunded Mandates Reform Act
Analysis

above should contact Michelle Cruse at
410–786–7540.

Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. In 2015, that is
approximately $144 million. This final
rule does not include any mandates that
will impose spending costs on State,
local, or Tribal governments in the
aggregate, or by the private sector, of
$144 million.

List of Subjects in 42 CFR Part 413
Health facilities, Kidney diseases,
Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR
chapter IV as follows:

IX. Federalism Analysis
Executive Order 13132 on Federalism
(August 4, 1999) establishes certain
requirements that an agency must meet
when it promulgates a final rule (and
subsequent final rule) that imposes
substantial direct requirement costs on
State and local governments, preempts
State law, or otherwise has Federalism
implications. We have reviewed this
final rule under the threshold criteria of
Executive Order 13132, Federalism, and
have determined that it will not have
substantial direct effects on the rights,
roles, and responsibilities of States,
local or Tribal governments.
X. Congressional Review Act
This final rule is subject to the
Congressional Review Act provisions of
the Small Business Regulatory
Enforcement Fairness Act of 1996 (5
U.S.C. 801 et seq.) and has been
transmitted to the Congress and the
Comptroller General for review.
In accordance with the provisions of
Executive Order 12866, this final rule
was reviewed by the Office of
Management and Budget.
XI. Files Available to the Public via the
Internet
In the past, a majority of the Addenda
referred to throughout the preamble of
our proposed and final rules were
available in the Federal Register.
However, the Addenda of the annual
proposed and final rules will no longer
be available in the Federal Register.
Instead, these Addenda to the annual
proposed and final rules will be
available only through the Internet on
the CMS Web site. The Addenda to the
End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS) rules
are available at: http://www.cms.gov/
ESRDPayment/PAY/list.asp. Readers
who experience any problems accessing
any of the Addenda to the proposed and
final rules of the ESRD PPS that are
posted on the CMS Web site identified

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PART 413—PRINCIPLES OF
REASONABLE COST
REIMBURSEMENT; PAYMENT FOR
END–STAGE RENAL DISEASE
SERVICES; OPTIONAL
PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED
NURSING FACILITIES
1. The authority citation for part 413
is revised to read as follows:

■

Authority: 42 U.S.C. 1302; 42 U.S.C.
1395d(d); 42 U.S.C. 1395f(b); 42 U.S.C.
1395g; 42 U.S.C. 1395l(a), (i), and (n); 42
U.S.C. 1395x(v); 42 U.S.C. 1395hh; 42 U.S.C.
1395rr; 42 U.S.C. 1395tt; 42 U.S.C. 1395ww;
sec. 124 of Pub. L. 106–113, 113 Stat. 1501A–
332; sec. 3201 of Pub. L. 112–96, 126 Stat.
156; sec. 632 of Pub. L. 112–240, 126 Stat.
2354; sec. 217 of Pub. L. 113–93, 129 Stat.
1040; and sec. 204 of Pub. L. 113–295, 128
Stat. 4010.

2. Section 413.174 is amended by
revising paragraph (f)(6) to read as
follows:

■

§ 413.174 Prospective rates for hospital
based and independent ESRD facilities.

*

*
*
*
*
(f) * * *
(6) Effective January 1, 2025, payment
to an ESRD facility for renal dialysis
service drugs and biologicals with only
an oral form furnished to ESRD patients
is incorporated within the prospective
payment system rates established by
CMS in § 413.230 and separate payment
will no longer be provided.
■ 3. Section 413.232 is amended by—
■ a. Revising paragraph (c)(2).
■ b. Removing paragraph (d).
■ c. Redesignating paragraphs (e), (f),
(g), and (h) as paragraphs (d), (e), (f), and
(g) respectively.
■ d. Revising newly redesignated
paragraph (e).
■ e. In newly redesignated paragraph (g)
introductory text, the reference
‘‘paragraph (f)’’ is removed and the
reference ‘‘paragraph (e)’’ is added in its
place.
■ f. In newly redesignated paragraph
(g)(1), the reference ‘‘paragraph (f)’’ is
removed and the reference ‘‘paragraph
(e)’’ is added in its place.
The revision reads as follows:
§ 413.232

*

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Federal Register / Vol. 80, No. 215 / Friday, November 6, 2015 / Rules and Regulations
(c) * * *
(2) Five (5) miles or less from the
ESRD facility in question.
*
*
*
*
*
(e) Except as provided in paragraph (f)
of this section, to receive the lowvolume adjustment an ESRD facility
must provide an attestation statement,
by November 1st of each year preceding
the payment year, to its Medicare
Administrative Contractor that the
facility meets all the criteria established
in this section, except that, for calendar
year 2012, the attestation must be
provided by January 3, 2012, for
calendar year 2015, the attestation must
be provided by December 31, 2014, and
for calendar year 2016, the attestation
must be provided by December 31,
2015.
*
*
*
*
*
■ 4. Add § 413.233 to read as follows:
§ 413.233

Rural facility adjustment.

CMS adjusts the base rate for facilities
in rural areas, as defined in
§ 413.231(b)(2).
■ 5. Add § 413.234 to read as follows:
§ 413.234.

Drug designation process.

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(a) Definitions. For purposes of this
section, the following definitions apply:
ESRD PPS functional category. A
distinct grouping of drugs or biologicals,
as determined by CMS, whose end
action effect is the treatment or
management of a condition or
conditions associated with ESRD.
New injectable or intravenous
product. An injectable or intravenous
product that is approved by the Food
and Drug Administration under section
505 of the Federal Food, Drug, and
Cosmetic Act or section 351 of the
Public Health Service Act, commercially
available, assigned a Healthcare
Common Procedure Coding System

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code, and designated by CMS as a renal
dialysis service under § 413.171.
Oral-only drug. A drug or biological
with no injectable equivalent or other
form of administration other than an
oral form.
(b) Drug designation process. Effective
January 1, 2016, new injectable or
intravenous products are included in
the ESRD PPS bundled payment using
the following drug designation process:
(1) If the new injectable or
intravenous product is used to treat or
manage a condition for which there is
an ESRD PPS functional category, the
new injectable or intravenous product is
considered included in the ESRD PPS
bundled payment and no separate
payment is available.
(2) If the new injectable or
intravenous product is used to treat or
manage a condition for which there is
not an ESRD PPS functional category,
the new injectable or intravenous
product is not considered included in
the ESRD PPS bundled payment and the
following steps occur:
(i) An existing ESRD PPS functional
category is revised or a new ESRD PPS
functional category is added for the
condition that the new injectable or
intravenous product is used to treat or
manage;
(ii) The new injectable or intravenous
product is paid for using the transitional
drug add-on payment adjustment
described in paragraph (c) of this
section; and
(iii) The new injectable or intravenous
product is added to the ESRD PPS
bundled payment following payment of
the transitional drug add-on payment
adjustment.
(c) Transitional drug add-on payment
adjustment. (1) A new injectable or
intravenous product that is not
considered included in the ESRD PPS
base rate is paid for using a transitional

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drug add-on payment adjustment,
which is based on pricing
methodologies under section 1847A of
the Social Security Act.
(2) The transitional drug add-on
payment adjustment is paid until
sufficient claims data for rate setting
analysis for the new injectable or
intravenous product is available, but not
for less than two years.
(3) Following payment of the
transitional drug add-on payment
adjustment the ESRD PPS base rate will
be modified, if appropriate, to account
for the new injectable or intravenous
product in the ESRD PPS bundled
payment.
(d) Oral-only drug determination. An
oral-only drug is no longer considered
oral-only if an injectable or other form
of administration of the oral-only drug
is approved by the Food and Drug
Administration.
■ 6. Section 413.237 is amended by
revising paragraph (a)(1)(iv) to read as
follows:
§ 413.237

Outliers.

(a) * * *
(1) * * *
(iv) Renal dialysis services drugs that
were or would have been, prior to
January 1, 2011, covered under
Medicare Part D, including ESRDrelated oral-only drugs effective January
1, 2025.
*
*
*
*
*
Dated: October 26, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Dated: October 27, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human
Services.
[FR Doc. 2015–27928 Filed 10–29–15; 4:15 pm]
BILLING CODE 4120–01–P

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