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Proposed Rule2023-13748

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

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Published

June 30, 2023

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

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

Full Text

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[Federal Register Volume 88, Number 125 (Friday, June 30, 2023)]
[Proposed Rules]
[Pages 42430-42544]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-13748]

[[Page 42429]]

Vol. 88

Friday,

No. 125

June 30, 2023

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 413 and 512

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

Federal Register / Vol. 88 , No. 125 / Friday, June 30, 2023 /
Proposed Rules

[[Page 42430]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 512

[CMS-1782-P]
RIN 0938-AV05

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

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

ACTION: Proposed rule.

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

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

ADDRESSES: In commenting, please refer to file code CMS-1782-P.
Comments, including mass comment submissions, must be submitted in one
of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1782-P, P.O. Box 8010,
Baltimore, MD 21244-8010. Please allow sufficient time for mailed
comments to be received before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1782-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#f3b6a0a1b7a3928a9e969d87b3909e80dd9b9b80dd949c85">[email&#160;protected]</a>, for issues related to the ESRD PPS and
coverage and payment for renal dialysis services furnished to
individuals with acute kidney injury (AKI).
<a href="/cdn-cgi/l/email-protection#296c7a7b6d68595945404a485d4046475a694a445a0741415a074e465f">[email&#160;protected]</a>, for issues related to applications
for the Transitional Drug Add-on Payment Adjustment (TDAPA) or
Transitional Add-On Payment Adjustment for New and Innovative Equipment
and Supplies (TPNIES).
Delia Houseal, (410) 786-2724, for issues related to the ESRD
Quality Incentive Program (QIP). <a href="/cdn-cgi/l/email-protection#c98c9d8ae48a84848089aaa4bae7a1a1bae7aea6bf">[email&#160;protected]</a>, for issues
related to the ESRD Treatment Choices (ETC) Model.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the individual will take actions to harm the individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Current Procedural Terminology (CPT) Copyright Notice: Throughout
this proposed rule, we use CPT[supreg] codes and descriptions to refer
to a variety of services. We note that CPT[supreg] codes and
descriptions are copyright 2020 American Medical Association (AMA). All
Rights Reserved. CPT[supreg] is a registered trademark of the AMA.
Applicable Federal Acquisition Regulations (FAR) and Defense Federal
Acquisition Regulations (DFAR) apply.

Table of Contents

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

I. Executive Summary
A. Purpose
B. Summary of the Major Provisions
C. Summary of Cost and Benefits
II. Calendar Year (CY) 2024 End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS)
A. Background
B. Provisions of the Proposed Rule
C. Transitional Add-On Payment Adjustment for New and Innovative
Equipment and Supplies (TPNIES) Proposals and Application for CY
2024 Payment
D. Continuation of Approved Transitional Add-On Payment
Adjustments for New and Innovative Equipment and Supplies for CY
2024
E. Continuation of Approved Transitional Drug Add-On Payment
Adjustments for New Renal Dialysis Drugs or Biological Products for
CY 2024
III. Calendar Year (CY) 2024 Payment for Renal Dialysis Services
Furnished to Individuals With Acute Kidney Injury (AKI)
A. Background
B. Proposed Annual Payment Rate Update for CY 2024
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
A. Background
B. Proposals To Update the Regulation Text for the ESRD QIP
C. Proposed Updates to Requirements Beginning With the PY 2026
ESRD QIP
D. Proposed Updates to the Requirements Beginning With the PY
2027 ESRD QIP
V. End-Stage Renal Disease Treatment Choices (ETC) Model
A. Background
B. Summary of the Proposed Provisions to the ETC Model
VI. Collection of Information Requirements
VII. Response to Comments
VIII. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Analysis
D. Detailed Economic Analysis
E. Accounting Statement
F. Regulatory Flexibility Act Analysis (RFA)
G. Unfunded Mandates Reform Act Analysis (UMRA)
H. Federalism
IX. Files Available to the Public

I. Executive Summary

A. Purpose

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

[[Page 42431]]

policies perpetuate or exacerbate systemic barriers to opportunities
and benefits for underserved communities. Our policy objectives include
its commitment to advancing health equity, which stands as the first
pillar of the CMS Strategic Plan,\1\ and reflect the goals of the
Biden-Harris Administration, as stated in Executive Order 13985.\2\ We
define health equity as the attainment of the highest level of health
for all people, where everyone has a fair and just opportunity to
attain their optimal health regardless of race, ethnicity, disability,
sexual orientation, gender identity, socioeconomic status, geography,
preferred language, or other factors that affect access to care and
health outcomes.'' \3\ In our CY 2023 ESRD PPS final rule, we noted
that, when compared with all Medicare fee-for-service (FFS)
beneficiaries, Medicare FFS beneficiaries receiving dialysis are
disproportionately young, male, and African-American, have disabilities
and low income as measured by eligibility for both Medicare and
Medicaid (dual eligible status), and reside in an urban setting (87 FR
67183). In this proposed rule, we continue to address health equity for
beneficiaries with ESRD who are also members of underserved
communities, including but not limited to those living in rural
communities, those who have disabilities, and racial and ethnic
minorities. The term underserved communities refers to populations
sharing a particular characteristic, including geographic communities
that have been systematically denied a full opportunity to participate
in aspects of economic, social, and civic life.\4\ Specifically, in
this proposed rule, we are requesting information regarding a potential
payment adjustment for geographically isolated and rural ESRD
facilities, proposing additional payment for the subgroup of Pediatric
ESRD Patients (as defined in 42 CFR 413.171), and furthering our
efforts to determine if payment to ESRD facilities treating patients
with co-morbidities such as sickle cell anemia is aligned with resource
use by such ESRD facilities. Additionally, we are proposing to add
three new measures to the ESRD QIP measure set that are aimed at
promoting health equity for ESRD patients, including by enabling ESRD
facilities to identify gaps experienced by their patient populations.
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\1\ Centers for Medicare & Medicaid Services (2022). Health
Equity. Available at: <a href="https://www.cms.gov/pillar/health-equity">https://www.cms.gov/pillar/health-equity</a>.
\2\ 86 FR 7009 (January 25, 2021). <a href="https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government">https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government</a>.
\3\ Centers for Medicare & Medicaid Services (2022). Health
Equity. Available at: <a href="https://www.cms.gov/pillar/health-equity">https://www.cms.gov/pillar/health-equity</a>.
\4\ 86 FR 7009 (January 25, 2021). <a href="https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government">https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government</a>.
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1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
On January 1, 2011, we implemented the ESRD PPS, a case-mix
adjusted, bundled PPS for renal dialysis services furnished by ESRD
facilities as required by section 1881(b)(14) of the Social Security
Act (the Act), as added by section 153(b) of the Medicare Improvements
for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275).
Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA,
and amended by section 3401(h) of the Patient Protection and Affordable
Care Act (the Affordable Care Act) (Pub. L. 111-148), established that
beginning calendar year (CY) 2012, and each subsequent year, the
Secretary of the Department of Health and Human Services (the
Secretary) shall annually increase payment amounts by an ESRD market
basket percentage increase, reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. This proposed
rule would update the ESRD PPS for CY 2024.
2. Coverage and Payment for Renal Dialysis Services Furnished to
Individuals With Acute Kidney Injury (AKI)
On June 29, 2015, the President signed the Trade Preferences
Extension Act of 2015 (TPEA) (Pub. L. 114-27). Section 808(a) of the
TPEA amended section 1861(s)(2)(F) of the Act to provide coverage for
renal dialysis services furnished on or after January 1, 2017, by a
renal dialysis facility or a provider of services paid under section
1881(b)(14) of the Act to an individual with AKI. Section 808(b) of the
TPEA amended section 1834 of the Act by adding a new subsection (r)
that provides for payment for renal dialysis services furnished by
renal dialysis facilities or providers of services paid under section
1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base
rate beginning January 1, 2017. This proposed rule would update the AKI
payment rate for CY 2024.
3. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is
authorized by section 1881(h) of the Act. The Program establishes
incentives for facilities to achieve high quality performance on
measures with the goal of improving outcomes for ESRD beneficiaries.
This proposed rule proposes several updates for the ESRD QIP,
including: a revision to the regulatory definition of ``minimum total
performance score'' that more accurately captures how we calculate the
median of national ESRD facility performance on reporting measures; the
codification of our previously finalized measure selection, retention,
and removal policies; updates that would begin with Payment Year (PY)
2026, including one new measure, modifications to two current measures,
and the removal of two measures; and the addition of two new measures
beginning with PY 2027.
4. End-Stage Renal Disease Treatment Choices (ETC) Model
The ETC Model is a mandatory Medicare payment model tested under
section 1115A of the Act. The ETC Model is operated by the Center for
Medicare and Medicaid Innovation (Innovation Center), and tests the use
of payment adjustments to encourage greater utilization of home
dialysis and kidney transplants, to preserve or enhance the quality of
care furnished to Medicare beneficiaries while reducing Medicare
expenditures.
The ETC Model was finalized as part of a final rule published in
the Federal Register on September 29, 2020, titled ``Medicare Program:
Specialty Care Models to Improve Quality of Care and Reduce
Expenditures'' (85 FR 61114), referred to herein as the ``Specialty
Care Models final rule.'' We revised and updated certain ETC Model
policies in the CY 2022 ESRD PPS final rule (86 FR 61874), and the CY
2023 ESRD PPS final rule (87 FR 67136). In this rule, we are proposing
to revise our regulations at 42 CFR 512.390 to acknowledge the
availability of administrative review of targeted review requests. This
change would provide ETC Participants with information about the
availability of administrative review if an ETC Participant wishes to
seek additional review of its targeted review request.

B. Summary of the Major Provisions

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

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and a proposed productivity-adjusted market basket percentage increase
of 1.7 percent as required by section 1881(b)(14)(F)(i)(I) of the Act,
equaling $269.99 (($265.57 x 0.999652) x 1.017 = $269.99).
<bullet> Proposed annual update to the wage index: We adjust wage
indices on an annual basis using the most current hospital wage data
and the latest core-based statistical area (CBSA) delineations to
account for differing wage levels in areas in which ESRD facilities are
located. For CY 2024, we are proposing to update the wage index values
based on the latest available data.
<bullet> Proposed annual update to the outlier policy: We are
proposing to update the outlier policy based on the most current data.
Accordingly, we are proposing to update the Medicare allowable payment
(MAP) amounts for adult and pediatric patients for CY 2024 using the
latest available CY 2022 claims data. We are proposing to update the
ESRD outlier services fixed dollar loss (FDL) amount for pediatric
patients using the latest available CY 2022 claims data, and update the
FDL amount for adult patients using the latest available claims data
from CY 2020, CY 2021, and CY 2022. For pediatric beneficiaries, the
proposed FDL amount would decrease from $23.29 to $13.71, and the
proposed MAP amount would decrease from $25.59 to $24.53, as compared
to CY 2023 values. For adult beneficiaries, the proposed FDL amount
would increase from $73.19 to $78.21, and the proposed MAP amount would
decrease from $39.62 to $38.58. The 1.0 percent target for outlier
payments was not achieved in CY 2022. Outlier payments represented
approximately 0.9 percent of total Medicare payments rather than 1.0
percent.
<bullet> Proposed update to the offset amount for the transitional
add-on payment adjustment for new and innovative equipment and supplies
(TPNIES) for CY 2024: The proposed CY 2024 average per treatment offset
amount for the TPNIES for capital-related assets that are home dialysis
machines is $9.96. This offset amount would reflect the application of
the proposed ESRD Bundled (ESRDB) market basket update of 1.7 percent
($9.79 x 1.017 = $9.96). There are no capital-related assets set to
receive the TPNIES in CY 2024 for which this offset would apply.
<bullet> Proposed clarifications to the TPNIES eligibility
criteria: We are proposing certain clarifications regarding our
evaluation of the TPNIES eligibility criteria under Sec. 413.236(b).
<bullet> TPNIES application received for CY 2024: This proposed
rule presents a summary of the one CY 2024 TPNIES application that we
received by the February 1, 2023 deadline. This rule also presents our
preliminary analysis of the applicant's claims related to substantial
clinical improvement (SCI) and other eligibility criteria for the
TPNIES.
<bullet> Proposed modifications to the administrative process for
the low-volume payment adjustment (LVPA): We are proposing to create an
exception to the current LVPA attestation process for ESRD facilities
that are affected by disasters and other emergencies. This exception
would allow ESRD facilities to close and reopen in response to a
disaster or other emergency and still receive the LVPA. Additionally,
it would allow an ESRD facility to receive the LVPA even if it exceeds
the LVPA threshold if its treatment counts increase due to treating
additional patients displaced by a disaster or emergency.
<bullet> Proposed policy to measure patient-level utilization: We
are proposing to require ESRD facilities to report the time on machine
(that is, the amount of time that a beneficiary spends receiving an in-
center hemodialysis treatment) on claims. We are seeking comment on the
proposed effective date of January 1, 2025, given the operational
changes needed.
<bullet> Proposed Transitional Pediatric ESRD Add-on Payment
Adjustment (TPEAPA): We are proposing to establish and apply a new add-
on payment adjustment of 30 percent of the per treatment payment amount
to all renal dialysis services furnished to Pediatric ESRD Patients
effective January 1, 2024, for CYs 2024, 2025, and 2026. This would
serve to bring Medicare payments for renal dialysis services furnished
to pediatric patients more in line with their estimated relative costs
for the next three years until further collection and analysis of cost
report data can be conducted.
<bullet> Proposed add-on payment adjustment for after the end of
the transitional drug add-on payment adjustment (TDAPA) period: We are
proposing a new add-on payment adjustment for certain new renal
dialysis drugs and biological products in existing ESRD PPS functional
categories after the end of the TDAPA period, which we would call the
post-TDAPA payment adjustment. This payment adjustment would be case-
mix adjusted and set at 65 percent of expenditure levels for the given
renal dialysis drug or biological product. The post-TDAPA payment
adjustment would be applied to all ESRD PPS payments and paid for 3
years.
<bullet> Proposed policy to require reporting of discarded billing
units of certain renal dialysis drugs and biological products paid for
under the ESRD PPS: We are proposing a new policy to require the use of
the JW or JZ modifier on claims to track discarded amounts of single-
vial and single-package renal dialysis drugs and biological products
paid for under the ESRD PPS.
2. Payment for Renal Dialysis Services Furnished to Individuals With
AKI
We are proposing to update the AKI payment rate for CY 2024. The
proposed CY 2024 payment rate is $269.99, which is the same as the ESRD
PPS base rate proposed for CY 2024.
3. ESRD QIP
We are proposing several updates for the ESRD QIP. We are proposing
to codified the definition of ``minimum total performance score'' and
to codify our previously finalized measure selection, retention, and
removal policies. Beginning with PY 2026, we are proposing to add the
Facility Commitment to Health Equity reporting measure to the ESRD QIP
measure set, modify the COVID-19 Vaccination Coverage Among Healthcare
Personnel (HCP) reporting measure to align with updated measure
specifications developed by the Centers for Disease Control and
Prevention (CDC), remove the Ultrafiltration Rate reporting measure and
the Standardized Fistula Rate clinical measure, and update the Clinical
Depression Screening and Follow-Up measure's scoring methodology and
convert that measure to a clinical measure. Beginning with PY 2027, we
are proposing to add the Social Drivers of Health reporting measure and
the Screen Positive Rate for Social Drivers of Health reporting measure
to the ESRD QIP measure set.
4. ETC Model
We are proposing to revise our regulations at Sec. 512.390 to
acknowledge the ability of the CMS Administrator to review the results
of ETC Participants' targeted review requests.

C. Summary of Costs and Benefits

In section VIII.D.5 of this proposed rule, we set forth a detailed
analysis of the impacts that the proposed changes would have on
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Proposed ESRD PPS
The impact table in section VIII.D.5.a of this proposed rule
displays the estimated change in Medicare payments to ESRD facilities
in CY 2024 compared

[[Page 42433]]

to estimated Medicare payments in CY 2023. The overall impact of the CY
2024 changes is projected to be a 1.6 percent increase in Medicare
payments. Hospital-based ESRD facilities have an estimated 2.6 percent
increase in Medicare payments compared with freestanding ESRD
facilities with an estimated 1.6 percent increase. We estimate that the
aggregate ESRD PPS expenditures would increase by approximately $130
million in CY 2024 compared to CY 2023. This reflects a $140 million
increase from the proposed payment rate update, including approximately
$1.7 million in estimated TDAPA payment amounts, as further described
in the next paragraph, as well as the proposed post-TDAPA payment
amount. We estimate a $10 million decrease from the proposed outlier
payment update. Because of the projected 1.6 percent overall payment
increase, we estimate there would be an increase in beneficiary
coinsurance payments of 1.6 percent in CY 2024, which translates to
approximately $30 million.
Section 1881(b)(14)(D)(iv) of the Act provides that the ESRD PPS
may include such other payment adjustments as the Secretary determines
appropriate. Under this authority, CMS implemented Sec. 413.234 to
establish the TDAPA, a transitional drug add-on payment adjustment for
certain new renal dialysis drugs and biological products and Sec.
413.236 to establish the TPNIES, a transitional add-on payment
adjustment for certain new and innovative equipment and supplies. The
TDAPA and the TPNIES are not budget neutral.
As discussed in section II.D of this proposed rule, the TPNIES
payment period for the Tablo[supreg] System ends on December 31, 2023.
As discussed in section II.E of this proposed rule, the TDAPA payment
period for KORSUVATM (difelikefalin) would continue in CY
2024. We estimate that the overall TDAPA payment amounts in CY 2024
would be approximately $1.7 million, of which, approximately $345,000
would be attributed to beneficiary coinsurance amounts.
2. Impacts of the Proposed Payment for Renal Dialysis Services
Furnished to Individuals With AKI
The impact table in section VIII.D.5.c of this proposed rule
displays the estimated CY 2024 Medicare payments for renal dialysis
services furnished to individuals with AKI compared to estimated
Medicare payments for renal dialysis services furnished to individuals
with AKI in CY 2023. The overall impact of the CY 2024 changes is
projected to be a 1.6 percent increase in Medicare payments for
individuals with AKI. Hospital-based ESRD facilities would have an
estimated 1.8 percent increase in Medicare payments compared with
freestanding ESRD facilities that would have an estimated 1.6 percent
increase. The overall impact reflects the effects of the proposed
Medicare payment rate update and proposed CY 2024 wage index. We
estimate that the aggregate Medicare payments made to ESRD facilities
for renal dialysis services furnished to patients with AKI, at the
proposed CY 2024 ESRD PPS base rate, would increase by $1 million in CY
2024 compared to CY 2023.
3. Impacts of the Proposed Changes to the ESRD QIP
We estimate that the overall economic impact of the PY 2026 ESRD
QIP would be approximately $141.1 million as a result of the policies
we have previously finalized and the proposals in this proposed rule.
The $141.1 million estimate for PY 2026 includes $121.1 million in
costs associated with the collection of information requirements and
approximately $20 million in payment reductions across all facilities.
We also estimate that the overall economic impact of the PY 2027 ESRD
QIP would be approximately $148 million as a result of the policies we
have previously finalized and the proposals in this proposed rule. The
$148 million estimate for PY 2027 includes $130.7 million in costs
associated with the collection of information requirements and
approximately $17.3 million in payment reductions across all
facilities.
4. Impacts of the Proposed Changes to the ETC Model
The impact estimate in section VIII.D.5.d of this proposed rule
describes the estimated change in anticipated Medicare program savings
arising from the ETC Model over the duration of the ETC Model as a
result of the changes in this proposed rule. We estimate that the ETC
Model would result in $28 million in net savings over the 6.5 year
duration of the ETC Model. We also estimate that the changes proposed
in this proposed rule would produce no change in net savings for the
ETC Model. As the ETC Model targeted review process has already been
finalized in the Specialty Care Models final rule and ETC Participants
are not required to seek administrative review of targeted review
determinations, we believe there would be minimal additional burden
associated with our proposal.

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

A. Background

1. Statutory Background
On January 1, 2011, CMS implemented the ESRD PPS, a case-mix
adjusted bundled PPS for renal dialysis services furnished by ESRD
facilities, as required by section 1881(b)(14) of the Act, as added by
section 153(b) of the Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA). Section 1881(b)(14)(F) of the Act, as added by
section 153(b) of MIPPA and amended by section 3401(h) of the Patient
Protection and Affordable Care Act (the Affordable Care Act),
established that beginning with CY 2012, and each subsequent year, the
Secretary shall annually increase payment amounts by an ESRD market
basket percentage increase reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act.
Section 632 of the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240) included several provisions that apply to the ESRD
PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act,
which required the Secretary, by comparing per patient utilization data
from 2007 with such data from 2012, to reduce the single payment for
renal dialysis services furnished on or after January 1, 2014, to
reflect the Secretary's estimate of the change in the utilization of
ESRD-related drugs and biologicals (excluding oral-only ESRD-related
drugs). Consistent with this requirement, in the CY 2014 ESRD PPS final
rule, we finalized $29.93 as the total drug utilization reduction and
finalized a policy to implement the amount over a 3- to 4-year
transition period (78 FR 72161 through 72170).
Section 632(b) of ATRA prohibited the Secretary from paying for
oral-only ESRD-related drugs and biologicals under the ESRD PPS prior
to January 1, 2016. Section 632(c) of ATRA required the Secretary, by
no later than January 1, 2016, to analyze the case-mix payment
adjustments under section 1881(b)(14)(D)(i) of the Act and make
appropriate revisions to those adjustments.
On April 1, 2014, the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. 113-93) was enacted. Section 217 of PAMA included
several provisions that apply to the ESRD PPS. Specifically, sections
217(b)(1) and (2) of PAMA amended sections 1881(b)(14)(F) and (I) of
the Act and replaced the drug utilization adjustment that was finalized
in the CY 2014 ESRD

[[Page 42434]]

PPS final rule (78 FR 72161 through 72170) with specific provisions
that dictated the market basket update for CY 2015 (0.0 percent) and
how the market basket percentage increase should be reduced in CY 2016
through CY 2018.
Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA to
provide that the Secretary may not pay for oral-only ESRD-related drugs
under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) of PAMA
further amended section 632(b)(1) of ATRA by requiring that in
establishing payment for oral-only drugs under the ESRD PPS, the
Secretary must use data from the most recent year available. Section
217(c) of PAMA provided that as part of the CY 2016 ESRD PPS
rulemaking, the Secretary shall establish a process for (1) determining
when a product is no longer an oral-only drug; and (2) including new
injectable and intravenous products into the ESRD PPS bundled payment.
Section 204 of the Stephen Beck, Jr., Achieving a Better Life
Experience Act of 2014 (ABLE) (Pub. L. 113-295) amended section
632(b)(1) of ATRA, as amended by section 217(a)(1) of PAMA, to provide
that payment for oral-only renal dialysis drugs and biological products
cannot be made under the ESRD PPS bundled payment prior to January 1,
2025.
2. System for Payment of Renal Dialysis Services
Under the ESRD PPS, a single per-treatment payment is made to an
ESRD facility for all the renal dialysis services defined in section
1881(b)(14)(B) of the Act and furnished to individuals for the
treatment of ESRD in the ESRD facility or in a patient's home. We have
codified our definition of renal dialysis services at Sec. 413.171,
which is in 42 CFR part 413, subpart H, along with other ESRD PPS
payment policies. The ESRD PPS base rate is adjusted for
characteristics of both adult and pediatric patients and accounts for
patient case-mix variability. The adult case-mix adjusters include five
categories of age, body surface area, low body mass index, onset of
dialysis, and four comorbidity categories (that is, pericarditis,
gastrointestinal tract bleeding, hereditary hemolytic or sickle cell
anemia, myelodysplastic syndrome). A different set of case-mix
adjusters are applied for the pediatric population. Pediatric patient-
level adjusters include two age categories (under age 13, or age 13 to
17) and two dialysis modalities (that is, peritoneal or hemodialysis)
(Sec. 413.235(a) and (b)).
The ESRD PPS provides for three facility-level adjustments. The
first payment adjustment accounts for ESRD facilities furnishing a low
volume of dialysis treatments (Sec. 413.232). The second payment
adjustment reflects differences in area wage levels developed from
core-based statistical areas (CBSAs) (Sec. 413.231). The third payment
adjustment accounts for ESRD facilities furnishing renal dialysis
services in a rural area (Sec. 413.233).
There are four additional payment adjustments under the ESRD PPS.
The ESRD PPS provides adjustments, when applicable, for: (1) a training
add-on for home and self-dialysis modalities (Sec. 413.235(c)); (2) an
additional payment for high cost outliers due to unusual variations in
the type or amount of medically necessary care (Sec. 413.237); (3) a
TDAPA for certain new renal dialysis drugs and biological products
(Sec. 413.234(c)); and (4) a TPNIES for certain new and innovative
renal dialysis equipment and supplies (Sec. 413.236(d)).
3. Updates to the ESRD PPS
Policy changes to the ESRD PPS are proposed and finalized annually
in the Federal Register. The CY 2011 ESRD PPS final rule was published
on August 12, 2010, in the Federal Register (75 FR 49030 through
49214). That rule implemented the ESRD PPS beginning on January 1,
2011, in accordance with section 1881(b)(14) of the Act, as added by
section 153(b) of MIPPA, over a 4-year transition period. Since the
implementation of the ESRD PPS, we have published annual rules to make
routine updates, policy changes, and clarifications.
We published a final rule, which appeared in the November 7, 2022,
issue of the Federal Register, titled ``Medicare Program; End-Stage
Renal Disease Prospective Payment System, Payment for Renal Dialysis
Services Furnished to Individuals With Acute Kidney Injury, and End-
Stage Renal Disease Quality Incentive Program, and End-Stage Renal
Disease Treatment Choices Model,'' referred to herein as the ``CY 2023
ESRD PPS final rule.'' In that rule, we updated the ESRD PPS base rate,
wage index, and outlier policy for CY 2023. We also finalized changes
that included rebasing and revising the ESRDB market basket to reflect
a 2020 base year, refining the methodology for outlier calculations,
implementing a wage index floor of 0.600, implementing a permanent 5
percent cap on year-over-year wage index decreases for ESRD facilities,
and modifying the definition of ``oral-only drug.'' For further
detailed information regarding these updates, see 87 FR 67136.

B. Provisions of the Proposed Rule

1. Proposed CY 2024 ESRD PPS Update
a. Proposed CY 2024 ESRD Bundled (ESRDB) Market Basket Percentage
Increase; Productivity Adjustment; and Labor-Related Share
(1) Background
In accordance with section 1881(b)(14)(F)(i) of the Act, as added
by section 153(b) of MIPPA and amended by section 3401(h) of the
Affordable Care Act, beginning in 2012, the ESRD PPS payment amounts
are required to be annually increased by an ESRD market basket
percentage increase and reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. The application
of the productivity adjustment may result in the increase factor being
less than 0.0 for a year and may result in payment rates for a year
being less than the payment rates for the preceding year. Section
1881(b)(14)(F)(i) of the Act also provides that the market basket
increase factor should reflect the changes over time in the prices of
an appropriate mix of goods and services included in renal dialysis
services.
As required under section 1881(b)(14)(F)(i) of the Act, CMS
developed an all-inclusive ESRD Bundled (ESRDB) input price index using
CY 2008 as the base year (75 FR 49151 through 49162). We subsequently
revised and rebased the ESRDB input price index to a base year of CY
2012 in the CY 2015 ESRD PPS final rule (79 FR 66129 through 66136). In
the CY 2019 ESRD PPS final rule (83 FR 56951 through 56964), we
finalized a rebased ESRDB input price index to reflect a CY 2016 base
year. In the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154),
we finalized a revised and rebased ESRDB input price index to reflect a
CY 2020 base year.
Although ``market basket'' technically describes the mix of goods
and services used for ESRD treatment, this term is also commonly used
to denote the input price index (that is, cost categories, their
respective weights, and price proxies combined) derived from a market
basket. Accordingly, the term ``ESRDB market basket,'' as used in this
document, refers to the ESRDB input price index.
The ESRDB market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the

[[Page 42435]]

quantity or mix of goods and services (that is, intensity) purchased
over time are not measured.
(2) Proposed CY 2024 ESRD Market Basket Update
We propose to use the 2020-based ESRDB market basket as finalized
in the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154) to
compute the proposed CY 2024 ESRDB market basket percentage increase
based on the best available data. Consistent with historical practice,
we propose to estimate the ESRDB market basket percentage increase
based on IHS Global Inc.'s (IGI) forecast using the most recently
available data at the time of rulemaking. IGI is a nationally
recognized economic and financial forecasting firm with which CMS
contracts to forecast the components of the market baskets. As
discussed in section II.B.1.a.(2)(c), we are proposing to calculate the
market basket update for CY 2024 based on the proposed market basket
percentage increase and the proposed productivity adjustment, following
our longstanding methodology.
(a) Proposed CY 2024 Market Basket Percentage Increase
Based on IGI's first quarter 2023 forecast of the 2020-based ESRDB
market basket, the proposed CY 2024 market basket percentage increase
is 2.0 percent. We also propose that if more recent data become
available after the publication of this proposed rule and before the
publication of the final rule (for example, a more recent estimate of
the market basket percentage increase), we would use such data, if
appropriate, to determine the CY 2024 market basket percentage increase
in the final rule.
(b) Proposed Productivity Adjustment
Under section 1881(b)(14)(F)(i) of the Act, as amended by section
3401(h) of the Affordable Care Act, for CY 2012 and each subsequent
year, the ESRDB market basket percentage increase shall be reduced by
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II)
of the Act. The statute defines the productivity adjustment to be equal
to the 10-year moving average of changes in annual economy-wide,
private nonfarm business multifactor productivity (MFP) (as projected
by the Secretary for the 10-year period ending with the applicable FY,
year, cost reporting period, or other annual period) (the
``productivity adjustment'').
The Bureau of Labor Statistics (BLS) publishes the official
measures of productivity for the U.S. economy. As we noted in the CY
2023 ESRD PPS final rule (87 FR 67155), the productivity measure
referenced in section 1886(b)(3)(B)(xi)(II) of the Act previously was
published by BLS as private nonfarm business MFP. Beginning with the
November 18, 2021, release of productivity data, BLS replaced the term
``multifactor productivity'' with ``total factor productivity'' (TFP).
BLS noted that this is a change in terminology only and will not affect
the data or methodology.\5\ As a result of the BLS name change, the
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the
Act is now published by BLS as private nonfarm business TFP; however,
as mentioned previously, the data and methods are unchanged. We
referred readers to <a href="https://www.bls.gov/productivity/">https://www.bls.gov/productivity/</a> for the BLS
historical published TFP data. A complete description of IGI's TFP
projection methodology is available on the CMS website at <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch">https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch</a>. In addition, in
the CY 2022 ESRD PPS final rule (86 FR 61879), we noted that effective
for CY 2022 and future years, we will be changing the name of this
adjustment to refer to it as the productivity adjustment rather than
the MFP adjustment. We stated this was not a change in policy, as we
will continue to use the same methodology for deriving the adjustment
and rely on the same underlying data.
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\5\ Total Factor Productivity in Major Industries--2020.
Available at: <a href="https://www.bls.gov/news.release/prod5.nr0.htm">https://www.bls.gov/news.release/prod5.nr0.htm</a>.
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Based on IGI's first quarter 2023 forecast, the proposed
productivity adjustment for CY 2024 (the 10-year moving average of TFP
for the period ending CY 2024) is 0.3 percentage point. Furthermore, we
propose that if more recent data become available after the publication
of this proposed rule and before the publication of the final rule (for
example, a more recent estimate of the productivity adjustment), we
would use such data, if appropriate, to determine the CY 2024
productivity adjustment in the final rule.
(c) Proposed CY 2024 Market Basket Update
In accordance with section 1881(b)(14)(F)(i) of the Act, we propose
to base the CY 2024 market basket percentage increase on IGI's first
quarter 2023 forecast of the 2020-based ESRDB market basket. We propose
to then reduce this percentage increase by the estimated productivity
adjustment for CY 2024 based on IGI's first quarter 2023 forecast.
Therefore, the proposed CY 2024 ESRDB market basket update is equal to
1.7 percent (2.0 percent market basket percentage increase reduced by a
0.3 percentage point productivity adjustment). Furthermore, as noted
previously, we propose that if more recent data become available after
the publication of this proposed rule and before the publication of the
final rule (for example, a more recent estimate of the market basket
and/or productivity adjustment), we would use such data, if
appropriate, to determine the CY 2024 market basket percentage increase
and productivity adjustment in the final rule.
We note that, as discussed in the CY 2023 ESRD PPS final rule (87
FR 67157), many commenters requested that CMS apply a forecast error
payment adjustment to the ESRD PPS base rate to support ESRD facilities
during the inflationary period occurring at that time, particularly
accounting for what commenters stated was an error in the forecasted
payment updates for CYs 2021 and 2022. In response to those comments,
we reminded readers that ESRDB market basket updates are set
prospectively, which means that the update relies on a mix of both
historical data for part of the period for which the update is
calculated, and forecasted data for the remainder. We explained that
while there is no precedent to adjust for market basket forecast error
in the annual ESRD PPS update, the forecast error for a market basket
update is calculated as the actual market basket increase for a given
year less the forecasted market basket increase.\6\ We also explained
that due to the uncertainty regarding future price trends, forecast
errors can be both positive and negative. For example, the CY 2017
ESRDB forecast error was -0.8 percentage point, while the CY 2021 ESRDB
forecast error was +1.2 percentage point. At the time of the CY 2023
ESRD PPS final rule, CY 2022 historical data was not yet available to
calculate a forecast error for CY 2022; however, based on the latest
available historical data for CY 2022, we calculate that the CY 2022
ESRDB forecast error was +2.7 percentage point.
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\6\ FAQ--Market Basket Definitions and General Information.
Available at: <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/MedicareProgramRatesStats/Downloads/info.pdf">https://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/MedicareProgramRatesStats/Downloads/info.pdf</a>.
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As we discussed in the CY 2023 ESRD PPS final rule (87 FR 67156),
we recognized that recent higher inflationary trends impacted the
outlook for price growth over the next several

[[Page 42436]]

quarters. For that CY 2023 ESRD PPS final rule, we used an updated
forecast of the price proxies underlying the market basket that
incorporated more recent historical data and reflected a revised
outlook regarding the U.S. economy and expected price inflation for CY
2023 for ESRD facilities. We explained that predictability in Medicare
payments is important to enable ESRD facilities to budget and plan
their operations, and that forecast error calculations are
unpredictable (87 FR 67517). Historically, the positive differences
between the actual and forecasted market basket increase in prior years
have offset negative differences over time. Therefore, in accordance
with our longstanding ESRDB market basket update methodology, we are
not proposing to apply a forecast error adjustment to the ESRDB market
basket update for CY 2024.
(d) Labor-Related Share
We define the labor-related share as those expenses that are labor-
intensive and vary with, or are influenced by, the local labor market.
The labor-related share of a market basket is determined by identifying
the national average proportion of operating costs that are related to,
influenced by, or vary with the local labor market. For the CY 2024
ESRD PPS payment update, we are proposing to continue using a labor-
related share of 55.2 percent, which was finalized in the CY 2023 ESRD
PPS final rule (87 FR 67153 through 67154).
b. Proposed CY 2024 ESRD PPS Wage Indices
(1) Background
Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD
PPS may include a geographic wage index payment adjustment, such as the
index referred to in section 1881(b)(12)(D) of the Act, as the
Secretary determines to be appropriate. In the CY 2011 ESRD PPS final
rule (75 FR 49200), we finalized an adjustment for wages at Sec.
413.231. Specifically, CMS adjusts the labor-related portion of the
ESRD PPS base rate to account for geographic differences in the area
wage levels using an appropriate wage index, which reflects the
relative level of hospital wages and wage-related costs in the
geographic area in which the ESRD facility is located. We use the
Office of Management and Budget's (OMB's) CBSA-based geographic area
designations to define urban and rural areas and their corresponding
wage index values (75 FR 49117). OMB publishes bulletins regarding CBSA
changes, including changes to CBSA numbers and titles. The bulletins
are available online at <a href="https://www.whitehouse.gov/omb/information-for-agencies/bulletins/">https://www.whitehouse.gov/omb/information-for-agencies/bulletins/</a>.
We have also adopted methodologies for calculating wage index
values for ESRD facilities that are located in urban and rural areas
where there is no hospital data. For a full discussion, see the CY 2011
and CY 2012 ESRD PPS final rules at 75 FR 49116 through 49117 and 76 FR
70239 through 70241, respectively. For urban areas with no hospital
data, we compute the average wage index value of all urban areas within
the State to serve as a reasonable proxy for the wage index of that
urban CBSA, that is, we use that value as the wage index. For rural
areas with no hospital data, we compute the wage index using the
average wage index values from all contiguous CBSAs to represent a
reasonable proxy for that rural area. We applied the statewide urban
average based on the average of all urban areas within the State to
Hinesville-Fort Stewart, Georgia (78 FR 72173), and we applied the wage
index for Guam to American Samoa and the Northern Mariana Islands (78
FR 72172).
Under Sec. 413.231(d), a wage index floor value of 0.6000 is
applied under the ESRD PPS as a substitute wage index for areas with
very low wage index values, as finalized in the CY 2023 ESRD PPS final
rule (87 FR 67161). Currently, all areas with wage index values that
fall below the floor are located in Puerto Rico and the US Virgin
Islands. However, the wage index floor value is applicable for any area
that may fall below the floor. A further description of the history of
the wage index floor under the ESRD PPS can be found in the CY 2019
ESRD PPS final rule (83 FR 56964 through 56967) and the CY 2023 ESRD
PPS final rule (87 FR 67161).
An ESRD facility's wage index is applied to the labor-related share
of the ESRD PPS base rate. In the CY 2023 ESRD PPS final rule (87 FR
67153), we finalized a labor-related share of 55.2 percent. In the CY
2021 ESRD PPS final rule (85 FR 71436), we updated the OMB delineations
as described in the September 14, 2018 OMB Bulletin No. 18-04,
beginning with the CY 2021 ESRD PPS wage index. In that same rule, we
finalized the application of a 5 percent cap on any decrease in an ESRD
facility's wage index from the ESRD facility's wage index from the
prior CY. We finalized that the transition would be phased in over 2
years, such that the reduction in an ESRD facility's wage index would
be capped at 5 percent in CY 2021, and no cap would be applied to the
reduction in the wage index for the second year, CY 2022. In the CY
2023 ESRD PPS final rule (87 FR 67161), we finalized a permanent policy
under Sec. 413.231(c) to apply a 5 percent cap on any decrease in an
ESRD facility's wage index from the ESRD facility's wage index from the
prior CY. For CY 2024, as discussed in section II.B.1.a.(2)(d) of this
proposed rule, the labor-related share to which the wage index would be
applied is 55.2 percent.
(2) Proposed CY 2024 ESRD PPS Wage Index
For CY 2024, we propose to update the wage indices to account for
updated wage levels in areas in which ESRD facilities are located using
our existing methodology. We propose to use the most recent pre-floor,
pre-reclassified hospital wage data collected annually under the
inpatient PPS. The ESRD PPS wage index values are calculated without
regard to geographic reclassifications authorized under sections
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data
that are unadjusted for occupational mix. For CY 2024, the updated wage
data are for hospital cost reporting periods beginning on or after
October 1, 2019, and before October 1, 2020 (Fiscal Year (FY) 2020 cost
report data).
For CY 2024, we propose to update the ESRD PPS wage index to use
the most recent hospital wage data. We propose that if more recent data
become available after the publication of this proposed rule and before
the publication of the final rule (for example, a more recent estimate
of the wage index), we would use such data, if appropriate, to
determine the CY 2024 ESRD PPS wage index in the final rule. The
proposed CY 2024 ESRD PPS wage index is set forth in Addendum A and is
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices</a>. Addendum A provides a crosswalk
between the CY 2023 wage index and the proposed CY 2024 wage index.
Addendum B provides an ESRD facility level impact analysis. Addendum B
is available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices</a>.

[[Page 42437]]

c. Proposed CY 2024 Update to the Outlier Policy
(1) Background
Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS
include a payment adjustment for high cost outliers due to unusual
variations in the type or amount of medically necessary care, including
variability in the amount of erythropoiesis stimulating agents (ESAs)
necessary for anemia management. Some examples of the patient
conditions that may be reflective of higher facility costs when
furnishing dialysis care would be frailty and obesity. A patient's
specific medical condition, such as secondary hyperparathyroidism, may
result in higher per treatment costs. The ESRD PPS recognizes that some
patients require high cost care, and we have codified the outlier
policy and our methodology for calculating outlier payments at Sec.
413.237.
Section 413.237(a)(1) enumerates the following items and services
that are eligible for outlier payments as ESRD outlier services: (i)
Renal dialysis drugs and biological products that were or would have
been, prior to January 1, 2011, separately billable under Medicare Part
B; (ii) renal dialysis laboratory tests that were or would have been,
prior to January 1, 2011, separately billable under Medicare Part B;
(iii) renal dialysis medical/surgical supplies, including syringes,
used to administer renal dialysis drugs and biological products that
were or would have been, prior to January 1, 2011, separately billable
under Medicare Part B; (iv) renal dialysis drugs and biological
products that were or would have been, prior to January 1, 2011,
covered under Medicare Part D, including renal dialysis oral-only drugs
effective January 1, 2025; and (v) renal dialysis equipment and
supplies, except for capital-related assets that are home dialysis
machines (as defined in Sec. 413.236(a)(2)), that receive the
transitional add-on payment adjustment as specified in Sec. 413.236
after the payment period has ended.\7\
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\7\ Under Sec. 413.237(a)(1)(vi), as of January 1, 2012, the
laboratory tests that comprise the Automated Multi-Channel Chemistry
panel are excluded from the definition of outlier services.
---------------------------------------------------------------------------

In the CY 2011 ESRD PPS final rule (75 FR 49142), CMS stated that
for purposes of determining whether an ESRD facility would be eligible
for an outlier payment, it would be necessary for the ESRD facility to
identify the actual ESRD outlier services furnished to the patient by
line item (that is, date of service) on the monthly claim. Renal
dialysis drugs, laboratory tests, and medical/surgical supplies that
are recognized as ESRD outlier services were specified in Transmittal
2134, dated January 14, 2011.\8\ We use administrative issuances and
guidance to continually update the renal dialysis service items
available for outlier payment via our quarterly update CMS Change
Requests, when applicable. For example, we use these issuances to
identify renal dialysis oral drugs that were or would have been covered
under Part D prior to 2011 to provide unit prices for determining the
imputed MAP amounts. In addition, we use these issuances to update the
list of ESRD outlier services by adding or removing items and services
that we determined, based our monitoring efforts, are either
incorrectly included or missing from the list.
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\8\ Transmittal 2033 issued August 20, 2010, was rescinded and
replaced by Transmittal 2094, dated November 17, 2010. Transmittal
2094 identified additional drugs and laboratory tests that may also
be eligible for ESRD outlier payment. Transmittal 2094 was rescinded
and replaced by Transmittal 2134, dated January 14, 2011, which
included one technical correction. <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2134CP.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2134CP.pdf</a>.
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Under Sec. 413.237, an ESRD facility is eligible for an outlier
payment if its imputed (that is, calculated) MAP amount per treatment
for ESRD outlier services exceeds a threshold. The MAP amount
represents the average estimated expenditure per treatment for services
that were or would have been considered separately billable services
prior to January 1, 2011. The threshold is equal to the ESRD facility's
predicted MAP amount per treatment plus the FDL amount. As described in
the following paragraphs, the ESRD facility's predicted MAP amount is
the national adjusted average ESRD outlier services MAP amount per
treatment, further adjusted for case-mix and facility characteristics
applicable to the claim. We use the term ``national adjusted average''
in this section of this proposed rule to more clearly distinguish the
calculation of the average ESRD outlier services MAP amount per
treatment from the calculation of the predicted MAP amount for a claim.
The average ESRD outlier services MAP amount per treatment is based on
utilization from all ESRD facilities, whereas the calculation of the
predicted MAP amount for a claim is based on the individual ESRD
facility and patient characteristics of the monthly claim. In
accordance with Sec. 413.237(c), ESRD facilities are paid 80 percent
of the per treatment amount by which the imputed MAP amount for outlier
services (that is, the actual incurred amount) exceeds this threshold.
ESRD facilities are eligible to receive outlier payments for treating
both adult and pediatric dialysis patients.
In the CY 2011 ESRD PPS final rule and codified in Sec.
413.220(b)(4), using 2007 data, we established the outlier percentage,
which is used to reduce the per treatment ESRD PPS base rate to account
for the proportion of the estimated total Medicare payments under the
ESRD PPS that are outlier payments, at 1.0 percent of total payments
(75 FR 49142 through 49143). We also established the FDL amounts that
are added to the predicted outlier services MAP amounts. The outlier
services MAP amounts and FDL amounts are different for adult and
pediatric patients due to differences in the utilization of separately
billable services among adult and pediatric patients (75 FR 49140). As
we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 through
49139), the predicted outlier services MAP amounts for a patient are
determined by multiplying the adjusted average outlier services MAP
amount by the product of the patient-specific case-mix adjusters
applicable using the outlier services payment multipliers developed
from the regression analysis used to compute the payment adjustments.
In the CY 2023 ESRD PPS final rule, we finalized an update to the
outlier methodology to better target 1.0 percent of total Medicare
payments (87 FR 67170 through 67177). We finalized that we would
continue to follow our established methodology for the calculation of
the adult and pediatric MAP amounts, but we would prospectively
calculate the adult FDL amounts based on the historical trend in FDL
amounts that would have achieved the 1.0 percent outlier target in the
3 most recent available data years.
(2) CY 2024 Update to the Outlier Services MAP Amounts and FDL Amounts
For CY 2024, we are proposing to update the MAP amounts for adult
and pediatric patients using the latest available CY 2022 claims data.
We are proposing to update the ESRD outlier services FDL amount for
pediatric patients using the latest available CY 2022 claims data, and
to update the ESRD outlier services FDL amount for adult patients using
the latest available claims data from CY 2020, CY 2021 and CY 2022, in
accordance with the methodology finalized in the CY 2023 ESRD PPS final
rule (87 FR 67170 through 67174). CY 2022 claims data showed outlier
payments represented

[[Page 42438]]

approximately 0.9 percent of total Medicare payments (87 FR 67172).
The impact of this proposed update is shown in Table 1, which
compares the outlier services MAP amounts and FDL amounts used for the
outlier policy in CY 2023 with the updated proposed estimates for this
proposed rule. The estimates for the proposed CY 2024 MAP amounts,
which are included in Column II of Table 1, were inflation adjusted to
reflect projected 2024 prices for ESRD outlier services.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP30JN23.000

BILLING CODE 4120-01-C
As demonstrated in Table 1, the estimated FDL per treatment that
determines the CY 2024 outlier threshold amount for adults (Column II;
$78.21) is higher than that used for the CY 2023 outlier policy (Column
I; $73.19). The higher threshold is accompanied by a decrease in the
adjusted average MAP for outlier services from $39.62 to $38.58. For
pediatric patients, there is a decrease in the FDL amount from $23.29
to $13.71. There is a corresponding decrease in the adjusted average
MAP for outlier services among pediatric patients, from $25.59 to
$24.53.
We estimate that the percentage of patient months qualifying for
outlier payments in CY 2024 would be 5.10 percent for adult patients
and 20.20 percent for pediatric patients, based on the 2022 claims data
and methodology finalized in the CY 2023 ESRD PPS final rule. The
outlier MAP and FDL amounts continue to be lower for pediatric patients
than adults due to the continued lower use of outlier services
(primarily reflecting lower use of ESAs and other injectable drugs).
(3) Outlier Percentage
In the CY 2011 ESRD PPS final rule (75 FR 49081) and under Sec.
413.220(b)(4), we reduced the per treatment base rate by 1 percent to
account for the proportion of the estimated total payments under the
ESRD PPS that are outlier payments as described in Sec. 413.237. In
the 2023 ESRD PPS final rule, we finalized a change to the outlier
methodology to better achieve this 1 percent targeted (87 FR 67170
through 67174). Based on the CY 2022 claims, outlier payments
represented approximately 0.9 percent of total payments, which is below
the 1 percent target due to declines in the use of outlier services.
However, this is significantly closer to the 1 percent target than the
outlier payments based on CY 2021 claims, which represented
approximately 0.5 percent of total payments. We believe the update to
the outlier MAP and FDL amounts for CY 2024 would increase payments for
ESRD beneficiaries requiring higher resource utilization. This would
move us even closer to meeting our 1 percent outlier policy goal,
because we would be using more current data for computing the MAP and
FDL amounts, which is more reflective of current outlier services
utilization rates. We also note that the proposed recalibration of the
FDL amounts would result in no change in payments to ESRD facilities
for beneficiaries with renal dialysis items and services that are not
eligible for outlier payments.
d. Proposed Impacts to the CY 2024 ESRD PPS Base Rate
(1) ESRD PPS Base Rate
In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), CMS
established the methodology for calculating the ESRD PPS per-treatment
base rate, that is, the ESRD PPS base rate, and calculating the per
treatment payment amount, which are codified at Sec. Sec. 413.220 and
413.230. The CY 2011

[[Page 42439]]

ESRD PPS final rule also provides a detailed discussion of the
methodology used to calculate the ESRD PPS base rate and the
computation of factors used to adjust the ESRD PPS base rate for
projected outlier payments and budget neutrality in accordance with
sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act,
respectively. Specifically, the ESRD PPS base rate was developed from
CY 2007 claims (that is, the lowest per patient utilization year as
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011,
and represented the average per treatment MAP for composite rate and
separately billable services. In accordance with section 1881(b)(14)(D)
of the Act and our regulation at Sec. 413.230, the per-treatment
payment amount is the sum of the ESRD PPS base rate, adjusted for the
patient specific case-mix adjustments, applicable facility adjustments,
geographic differences in area wage levels using an area wage index,
and any applicable outlier payment, training adjustment add-on, TDAPA,
and TPNIES.
(2) Annual Payment Rate Update for CY 2024
We are proposing an ESRD PPS base rate for CY 2024 of $269.99. This
proposed update reflects several factors, described in more detail as
follows:
Wage Index Budget-Neutrality Adjustment Factor: We compute a wage
index budget-neutrality adjustment factor that is applied to the ESRD
PPS base rate. For CY 2024, we are not proposing any changes to the
methodology used to calculate this factor, which is described in detail
in the CY 2014 ESRD PPS final rule (78 FR 72174). We computed the
proposed CY 2024 wage index budget-neutrality adjustment factor using
treatment counts from the 2022 claims and facility-specific CY 2023
payment rates to estimate the total dollar amount that each ESRD
facility would have received in CY 2023. The total of these payments
became the target amount of expenditures for all ESRD facilities for CY
2024. Next, we computed the estimated dollar amount that would have
been paid for the same ESRD facilities using the proposed CY 2024 ESRD
PPS wage index and proposed labor-related share for CY 2024. As
discussed in section II.B.1.b of this proposed rule, the proposed ESRD
PPS wage index for CY 2024 includes an update to the most recent
hospital wage data and continued use of the 2018 OMB delineations. The
total of these payments becomes the new CY 2024 amount of wage-adjusted
expenditures for all ESRD facilities. The wage index budget-neutrality
factor is calculated as the target amount divided by the new CY 2024
amount. When we multiplied the wage index budget-neutrality factor by
the applicable CY 2024 estimated payments, aggregate Medicare payments
to ESRD facilities would remain budget-neutral when compared to the
target amount of expenditures. That is, the wage index budget-
neutrality adjustment factor ensures that wage index adjustments do not
increase or decrease aggregate Medicare payments with respect to
changes in wage index updates. The proposed CY 2024 wage index budget-
neutrality adjustment factor is 1.000120. This CY 2024 proposed wage
index budget-neutrality adjustment factor reflects the impact of all
wage index policy changes, including the proposed CY 2024 ESRD PPS wage
index and labor-related share.
Proposed TPEAPA Budget-Neutrality Adjustment Factor: As explained
in section II.B.1.g.(4) of this proposed rule, we are proposing a new,
budget-neutral transitional add-on payment adjustment for pediatric
ESRD renal dialysis services, which we would call the TPEAPA. The
proposed CY 2024 budget-neutrality adjustment factor for the TPEAPA is
0.999532. The proposed methodology for deriving the budget-neutrality
adjustment factor for the TPEAPA is discussed in detail in section
II.B.1.g.(4).
Combined Wage Index and TPEAPA Budget-Neutrality Adjustment Factor:
For purposes of calculating the ESRD PPS base rate for CY 2024, we are
proposing to use one combined budget-neutrality adjustment factor that
would include both the proposed wage index budget-neutrality adjustment
factor and the proposed TPEAPA budget-neutrality adjustment factor. The
proposed CY 2024 combined wage index and TPEAPA budget neutrality
factor is 0.999652 (1.000120 x 0.999532). This application would yield
a proposed CY 2024 ESRD PPS base rate of $265.48 prior to the
application of the proposed CY 2024 market basket update percentage
($265.57 x 0.999652 = $265.48).
Market Basket Update: Section 1881(b)(14)(F)(i)(I) of the Act
provides that, beginning in 2012, the ESRD PPS payment amounts are
required to be annually increased by the ESRD market basket percentage
increase. As discussed previously in section II.B.1.a.(2)(a) of this
proposed rule, the latest CY 2024 projection of the ESRDB market basket
percentage increase is 2.0 percent. In CY 2024, this amount must be
reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act, as required by section
1881(b)(14)(F)(i)(II) of the Act. As discussed previously in section
II.B.1.a.(2)(b) of this proposed rule, the latest CY 2024 projection of
the proposed productivity adjustment is 0.3 percentage point, thus
yielding a proposed CY 2024 ESRD market basket update of 1.7 percent
for CY 2024. Therefore, the proposed CY 2024 ESRD PPS base rate is
$269.99 (($265.57 x 0.999652) x 1.017 = $269.99).
e. Update to the Average per Treatment Offset Amount for Home Dialysis
Machines
In the CY 2021 ESRD PPS final rule (85 FR 71427), we expanded
eligibility for the TPNIES under Sec. 413.236 to include certain
capital-related assets that are home dialysis machines when used in the
home for a single patient. To establish the TPNIES basis of payment for
these items, we finalized the additional steps that the Medicare
Administrative Contractors (MACs) must follow to calculate a pre-
adjusted per treatment amount, using the prices they establish under
Sec. 413.236(e) for a capital-related asset that is a home dialysis
machine, as well as the methodology that CMS uses to calculate the
average per treatment offset amount for home dialysis machines that is
used in the MACs' calculation, to account for the cost of the home
dialysis machine that is already in the ESRD PPS base rate. For
purposes of this proposed rule, we will refer to this as the ``TPNIES
offset amount.''
The methodology for calculating the TPNIES offset amount is set
forth in Sec. 413.236(f)(3). Section 413.236(f)(3)(v) states that
effective January 1, 2022, CMS annually updates the amount determined
in Sec. 413.236(f)(3)(iv) by the ESRD bundled market basket percentage
increase factor minus the productivity adjustment factor. The TPNIES
for capital-related assets that are home dialysis machines is based on
65 percent of the MAC-determined pre-adjusted per treatment amount,
reduced by the TPNIES offset amount, and is paid for 2 calendar years.
There are currently no capital-related assets that are home
dialysis machines set to receive TPNIES for CY 2024 as the TPNIES
payment period for the Tablo[supreg] System ends on December 31, 2023,
and the only TPNIES application for CY 2024 is not for a home dialysis
machine. However, as required by Sec. 413.236(f)(3)(v), we are
proposing to update the TPNIES offset amount annually according to the
methodology described above.
The proposed CY 2024 TPNIES offset amount for capital-related
assets that are home dialysis machines is $9.96. As

[[Page 42440]]

discussed previously in section II.B.1.a.(2)(c) of this proposed rule,
the proposed CY 2024 ESRDB market basket update is 1.7 percent (2.0
percent ESRDB market basket percentage increase reduced by 0.3
percentage point productivity adjustment). Applying the proposed update
factor of 1.017 to the CY 2023 TPNIES offset amount results in the
proposed CY 2024 TPNIES offset amount of $9.96 ($9.79 x 1.017 = $9.96).
We are proposing to update this calculation to use the most recent data
available in the CY 2024 ESRD PPS final rule.
f. Proposed Refinement of the Low-Volume Payment Adjustment (LVPA)
(1) Background
Section 1881(b)(14)(D)(iii) of the Act provides that the ESRD PPS
shall include a payment adjustment that reflects the extent to which
costs incurred by low-volume facilities (as defined by the Secretary)
in furnishing renal dialysis services exceed the costs incurred by
other facilities in furnishing such services, and for payment for renal
dialysis services furnished on or after January 1, 2011, and before
January 1, 2014, such payment adjustment shall not be less than 10
percent. Therefore, the ESRD PPS provides a facility-level payment
adjustment to ESRD facilities that meet the definition of a low-volume
facility. In this section of the proposed rule, we discuss the low-
volume payment adjustment (LVPA) under the ESRD PPS, request
information from the public regarding the potential changes to LVPA
methodology and potentially creating a new geographic-based payment
adjustment in the future, and propose certain changes to the existing
administrative process for the LVPA.
The current amount of the LVPA is 23.9 percent. In the CY 2011 ESRD
PPS final rule (75 FR 49118 through 49125), we finalized the
methodology used to target the appropriate population of ESRD
facilities that were low-volume and to determine the treatment
threshold for those ESRD facilities identified. After consideration of
public comments, we established an 18.9 percent adjustment for ESRD
facilities that furnish less than 4,000 treatments annually and
indicated that this increase to the base rate would encourage small
ESRD facilities to continue providing access to care.
In the CY 2016 ESRD PPS proposed rule (80 FR 37819), we analyzed
ESRD facilities that met the definition of a low-volume facility under
Sec. 413.232(b) as part of the updated regression analysis and found
that the ESRD facilities still had higher costs compared to other ESRD
facilities. A regression analysis of CYs 2012 and 2013 low-volume
facility claims, and cost report data indicated a multiplier of 1.239
percent; therefore, we proposed an updated LVPA adjustment factor of
23.9 percent in the CY 2016 ESRD PPS proposed rule (80 FR 37819) and
finalized this policy in the CY 2016 ESRD PPS final rule (80 FR 69001).
In CY 2021, 366 ESRD facilities received the LVPA. Using the most
recent available data for CY 2022, the number of ESRD facilities
receiving the LVPA was 353.
(a) Current LVPA Methodology
Under Sec. 413.232(b), a low-volume facility is an ESRD facility
that, based on the submitted documentation: (1) furnished less than
4,000 treatments in each of the 3 cost reporting years (based on as-
filed or final settled 12-consecutive month costs reports, whichever is
most recent, except as specified in paragraph (g)(4)) preceding the
payment year; and (2) has not opened, closed, or received a new
provider number due to a change in ownership (except where the change
in ownership results in a change in facility type) in the 3 cost
reporting years (based on as-filed or final settled 12-consectuive
month cost reports, whichever is most recent) preceding the payment
year.
In addition, under Sec. 413.232(c), for purposes of determining
the number of treatments furnished by the ESRD facility, the number of
treatments considered furnished by the ESRD facility equals the
aggregate number of treatments furnished by the ESRD facility and the
number of treatments furnished by other ESRD facilities that are both
under common ownership with, and 5 road miles or less from, the ESRD
facility in question. In order to receive the LVPA, an ESRD facility
must submit a written attestation statement to its Medicare
Administrative Contractor (MAC) confirming that it meets all of the
requirements specified in Sec. 413.232 and qualifies as a low-volume
ESRD facility. For purposes of determining eligibility for the LVPA,
``treatments'' mean total hemodialysis equivalent treatments (Medicare
and non-Medicare). For peritoneal dialysis patients, one week of
peritoneal dialysis is considered equivalent to three hemodialysis
treatments (80 FR 68994). Section 413.232(e) generally imposes a yearly
November 1 deadline for attestation submissions unless extraordinary
circumstances justify an exception and specifies exceptions for certain
years where the deadline is in December or January. The November 1st
attestation timeframe provides 60 days for a MAC to verify that an ESRD
facility meets the LVPA eligibility criteria (76 FR 70236). The ESRD
facility would then receive the LVPA payment for all the Medicare-
eligible treatments in the payment year. Once an ESRD facility is
determined to be eligible for the LVPA, a 23.9 percent increase is
applied to the ESRD PPS base rate for all treatments furnished by the
ESRD facility (80 FR 69001).
In the CY 2021 ESRD PPS final rule (85 FR 71443), we finalized a
policy to allow ESRD facilities flexibility for LVPA eligibility due to
the COVID-19 Public Health Emergency (PHE). Under Sec. 413.232(g)(4),
for purposes of determining ESRD facilities' eligibility for payment
years 2021, 2022, and 2023, we will only consider total dialysis
treatments for any 6 months of their cost-reporting period ending in
2020. ESRD facilities that would not otherwise meet the number of
treatments criterion because of the COVID-19 PHE may attest that their
total dialysis treatments for those 6 months of their cost reporting
period ending in 2020 are less than 2,000. The attestation must further
include that although the total number of treatments furnished in the
entire year otherwise exceeded the LVPA threshold, the excess
treatments furnished were due to temporary patient shifting resulting
from the COVID-19 PHE. MACs will annualize the total dialysis
treatments for the total treatments reported in those 6 months by
multiplying by 2.
(b) Current Issues and Concerns From Interested Parties
Interested parties, including the Medicare Payment Advisory
Commission (MedPAC) and the Government Accountability Office (GAO),\9\
have recommended that we make refinements to the LVPA to better target
ESRD facilities that are critical to beneficiary access to dialysis
care in remote or isolated areas.\10\ These groups and other interested
parties have also have expressed concern that the strict treatment
count introduces a ``cliff-effect'' that may incentivize ESRD
facilities to restrict their patient caseload to remain below the 4,000
treatments per year for the LVPA threshold.\11\
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\9\ <a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf">https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf</a>.
\10\ <a href="https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf">https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf</a>.
\11\ <a href="https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf">https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf</a>.

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[[Page 42441]]

We considered several changes to the LVPA eligibility criteria to
address the concerns that GAO and MedPAC raised about targeting LVPA
payments to ESRD facilities that are necessary to protect access to
care and are not located near other ESRD facilities. Specifically,
these interested parties have requested that we take into consideration
the geographic isolation of an ESRD facility within the LVPA
methodology. Section 1881(b)(14)(D)(iii) of the Act requires that the
LVPA must reflect the extent to which costs incurred by low-volume
facilities (as defined by the Secretary) in furnishing renal dialysis
services exceed the costs incurred by other facilities in furnishing
such services. Our analysis has found that isolated low-volume
facilities do not face higher costs than other low-volume facilities.
Therefore, we do not believe that this requested change reconciles with
the central statutory requirements and limitations for the LVPA, and we
are considering alternative approaches, including potentially
addressing this issue through a new payment adjustment separate from
the LVPA based on section 1881(b)(14)(D)(iv) of the Act. Currently, we
are analyzing claims and cost data regarding dialysis treatment levels
and cost to inform options for potentially tailoring our methodology to
meet the requirements of the statute, while simultaneously collecting
additional data on geographic isolation of ESRD facilities. The ESRD
PPS has separate facility-level payment adjustments for low-volume
facilities, as set forth in 42 CFR 413.232, and facilities in rural
areas, as set forth in 42 CFR 413.233. To avoid overlap with these
existing facility-level adjustments, we are analyzing the impact of
potentially creating a new payment adjustment and considering
innovative methodological options, such as the local dialysis need
methodology on which we are requesting information in section
II.B.1.f.(2)(b) of this proposed rule.
In addition, we have heard from interested parties that the
eligibility criteria for the LVPA are very explicit and leave little
room for flexibility in certain circumstances (85 FR 71442). Some also
view the attestation process as burdensome to ESRD facilities and
believe it may discourage participation by small ESRD facilities with
limited resources that would otherwise qualify for the LVPA.\12\ Given
these concerns, we have considered alternative approaches to the LVPA
that would reduce burden, remove negative incentives that may result in
gaming, and better target ESRD facilities that are critical for
beneficiary access.
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\12\ <a href="https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf">https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf</a>.
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CMS's contractor has held three Technical Expert Panels (TEPs) to
discuss potential refinements to the ESRD PPS.\13\ During the 2018,
2019, and 2020 TEPs, panelists, including representatives from ESRD
facilities, independent researchers, patient advocates, and
representatives from professional associations and industry groups (86
FR 36397), discussed limitations of the current LVPA methodology and
potential alternatives. In the CY 2022 ESRD PPS proposed rule, we
included a request for information (RFI) to inform LVPA payment reform
(86 FR 36398 through 36399). All fourteen responses to the CY 2022 ESRD
PPS RFI for LVPA wrote in support of either eliminating or revising the
current LVPA or rural adjustment.\14\ One small dialysis organization
within a large non-profit health system responded that it is reliant
upon the LVPA and the rural adjustment and supports both adjustments,
albeit with modifications. MedPAC renewed its support for a new Low-
Volume and Isolated (LVI) adjustment with a three-tiered approach for
treatment thresholds, which would incorporate geographic isolation into
its methodology and may disincentivize gaming. MedPAC called upon CMS
to provide clear and timely criteria for ESRD facility eligibility and
ensure the LVPA methodology is transparent. In concurrence with MedPAC,
a coalition of dialysis organizations, three large dialysis
organizations (LDOs), a non-profit kidney organization, and a provider
advocacy coalition commented that the rural adjustment should be
eliminated and an LVI methodology should be adopted, as they considered
a methodology based upon census tracts to be both complicated and
lacking transparency. Numerous commenters wrote in support of a tiered
adjustment to mitigate the cliff effect and gaming. Commenters raised
concerns regarding the census tract methodology's reliance upon
`driving time' as a data measure, noting this presents legitimate
equity issues. Those who have relied upon both the LVPA and rural
payment adjustments to remain operational expressed opposition to
elimination of either adjustment. The materials from the TEPs and
summary reports can be found at <a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources">https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources</a>. For this
proposed rule, we considered the above-referenced input from interested
parties and subsequent data obtained to inform the RFIs below.
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\13\ <a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources">https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources</a>.
\14\ <a href="https://www.cms.gov/files/document/cy-2022-esrd-pps-rfi-summary-comments.pdf">https://www.cms.gov/files/document/cy-2022-esrd-pps-rfi-summary-comments.pdf</a>.
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(2) Requests for Information on Modification of LVPA Methodology and
Development of a New Payment Adjustment Based on Geographic Isolation
As discussed in the previous section, we recognize the importance
of revising the ESRD PPS LVPA adjustment methodology to ensure that
payments accurately reflect differences in cost and adequately target
low-volume facilities, and to strive for healthcare equity for ESRD
beneficiaries. The LVPA and rural adjusters currently result in
increased payments to some geographically isolated ESRD facilities, but
these adjusters do not specifically target geographically isolated ESRD
facilities. We noted several points of concern that interested parties
have raised in the past, as well as certain statutory limitations that
could apply to some of the methodological approaches suggested in the
past. We are seeking information from the public about potential
approaches to refine the ESRD PPS methodology, which we would take into
consideration for any potential changes to the LVPA in the future.
This section addresses several RFIs regarding the LVPA and a
potential new adjustment for geographically isolated ESRD facilities.
Upon reviewing the RFIs, respondents are encouraged to provide
complete, but concise responses. These RFIs are issued solely for
information and planning purposes; RFIs do not constitute a Request for
Proposal (RFP), application, proposal abstract, or quotation. The RFIs
do not commit the United States (U.S.) Government to contract for any
supplies or services or make a grant award. Further, we are not seeking
proposals through these RFIs and will not accept unsolicited proposals.
Responders are advised that the U.S. Government will not pay for any
information or administrative costs incurred in response to this RFI;
all costs associated with responding to these RFIs will be solely at
the interested party's expense. Failing to respond to either RFI will
not preclude participation in any future procurement, if conducted.
Please note that we will not respond to questions about the policy
issues raised in these RFIs. We may or may not choose to contact
individual responders. Such communications would only serve

[[Page 42442]]

to further clarify written responses. Contractor support personnel may
be used to review RFI responses. Responses to these RFIs are not offers
and cannot be accepted by the U.S. Government to form a binding
contract or issue a grant. Information obtained because of this RFI may
be used by the U.S. Government for program planning on a non-
attribution basis. Respondents should not include any information that
might be considered proprietary or confidential. All submissions become
U.S. Government property and will not be returned. We may publicly post
the comments received, or a summary thereof.
(a) Comment Solicitation for Modifications to LVPA Methodology
We are soliciting comment on potential changes to the LVPA
methodology, including maintaining a single threshold, establishing
LVPA tiers, and/or utilizing a continuous function. Any potential
refinements to the LVPA methodology that may result from our
consideration of these comments would be proposed through notice-and-
comment rulemaking in the future. We request that commenters keep in
mind that section 1881(b)(14)(D)(iii) of the Act requires the LVPA to
reflect the extent to which costs incurred by low-volume facilities in
furnishing renal dialysis services exceed the costs incurred by other
facilities in furnishing such services.
(i) Maintain a Single LVPA Threshold
As discussions about modifying the existing treatment threshold or
payment adjustment percentage have been ongoing since the beginning of
the multi-year LVPA reform efforts, we are soliciting comments on
maintaining a single threshold for the LVPA. ESRD facilities that fall
below the treatment threshold would continue to receive payment, and
payments would not be adjusted for those ESRD facilities above the
threshold. We are engaged in continuing monitoring efforts to align
resource use with payment. If we were to re-compute the LVPA percentage
amount using the latest available claims and cost report data and the
methodology established in the CY 2011 and CY 2016 ESRD PPS final rules
(75 FR 49118 through 49125 and 80 FR 69001), the current treatment
threshold of 4,000 treatments per year would correspond to a 17.6
percent payment adjustment. The 4,000-treatment threshold could be
maintained, or the treatment threshold could be recalibrated to
maintain the 23.9 percent payment adjustment. Maintaining a single
threshold would not address concerns regarding the potential for gaming
or remove what commenters call the payment cliff. Potential approaches
for a single LVPA threshold are outlined below in Table 2.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP30JN23.001

(ii) Establishment of Multiple LVPA Tiers
We are soliciting comment on creating a tiered payment adjustment
that would include multiple thresholds, with separate payment
adjustments calibrated so that ESRD facilities in tiers with the lowest
treatment volume would receive the highest payment adjustment, and vice
versa. MedPAC has previously recommended setting LVPA treatment
thresholds at fewer than 4,000 treatments, between 4,000 and 4,999
treatments, and between 5,000 and 6,000 treatments, with payment
adjustments calibrated so that ESRD facilities in tiers with the lowest
volume would receive the highest payment adjustment, and vice
versa.\15\ Establishing multiple thresholds, with a separate payment
adjustment for ESRD facilities under each threshold level, would reduce
the potential for gaming through reduction of the magnitude of the
payment cliff. Additionally, LVPA eligibility would be expanded to more
ESRD facilities. We are soliciting comments regarding establishment of
multiple thresholds, including up to an eight-tiered structure for the
LVPA. Tables 3 through 6 outline various methodological options. Tables
3 through 4 would establish larger adjustment factors on average than
the current methodology, but would require reductions to the ESRD PPS
base rate to maintain budget neutrality. Tables 5 through 6 show
adjustment factors which are scaled to maintain budget neutrality
within the LVPA, keeping the LVPA's budget at the same amount that
would occur under the current methodology without requiring reductions
to the ESRD PPS base rate. As illustrated below, scaling the adjusters
while maintaining budget neutrality within the LVPA results in lower
LVPA adjusters. For example, Tier 1 (less than 5,000 treatments) in the
Four-Tiered Model varies based on the approach to maintaining budget
neutrality, as the LVPA adjuster is 13.7 percent where budget
neutrality is maintained within the ESRD PPS (Table 3) and 5.8 percent
where budget neutrality is maintained within the LVPA (Table 5). For
comparison, the

[[Page 42443]]

Eight-Tiered Model shows that for Tier 1 (less than 1,000 treatments),
ESRD facilities would receive a 123 percent LVPA adjuster where budget
neutrality is maintained within the ESRD PPS (Table 4) and 40.5 percent
LVPA adjuster where budget neutrality is maintained within the LVPA
(Table 6).
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\15\ <a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf">https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf</a>.
[GRAPHIC] [TIFF OMITTED] TP30JN23.002

[GRAPHIC] [TIFF OMITTED] TP30JN23.003

[GRAPHIC] [TIFF OMITTED] TP30JN23.004

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[GRAPHIC] [TIFF OMITTED] TP30JN23.005

BILLING CODE 4120-01-C
(iii) Continuous Function
We are also soliciting comments on potentially establishing a
continuous function to adjust LVPA payments. Under this approach, ESRD
facilities with the lowest volume would receive the highest payment
adjustment, and the payment adjustment would decrease continuously as
volume increases. This could include calibration of the point at which
the payment adjustment becomes zero to correspond with the existing
4,000 treatment upper bound, or establishment of a new upper bound
based on a regression analysis. Establishment of a continuous function
has the potential to significantly reduce the potential for gaming by
eliminating payment cliffs entirely. Additionally, this would increase
payment for ESRD facilities with the lowest volume, therefore better
aligning payment with resource use. Furthermore, a continuous function
would potentially expand LVPA eligibility to the most ESRD facilities.
CMS is considering several approaches to modifying the LVPA to
address concerns about its incentive structure, treatment threshold,
and administrative burden, as expressed by interested parties
(including the GAO, MedPAC, and industry representatives). We are
issuing this RFI to seek feedback on the suggested changes to the LVPA,
as described above, and to solicit further input from interested
parties to inform future modifications to the methodology used to
determine the LVPA.
In particular, CMS seeks input and responses to the following
considerations, requests and questions:
<bullet> Regarding concerns about a payment cliff in the existing
LVPA, we are considering implementing payment tiers or a continuous
adjustment, based on treatment volume, in place of the current single
tiered adjustment.
++ Please comment on which payment structure would be more
appropriate: single threshold as currently employed, tiered structure,
or continuous function, and provide the reasoning behind your
recommendation.
++ Please also comment on which option would be most effective in
removing gaming incentives and which option would bring greater
congruency between cost of providing renal dialysis services and
payment.
<bullet> Using the alternative methodology described above, under a
tiered or continuous payment adjustment, the treatment threshold for
eligibility would be determined based on the median treatment count
among all ESRD facilities (approximately eight thousand treatments per
year). The resulting tiers and incremental payment adjustments between
tiers could follow several different configurations.
++ What factors should be evaluated to best determine the treatment
count threshold, as well as the tiering structure? Specifically,
comment on the treatment volume beneath which per-treatment costs begin
to increase.
++ Please enumerate any concerns you might have should the
implementation of a tiered or continuous adjustment result in an
expanded set of eligible ESRD facilities, and payment redistribution.
<bullet> Interested parties have voiced concern regarding the
administrative burden involved in the current LVPA attestation process.
As such, we are considering potentially decreasing the number of years
of attestation data needed to determine LVPA eligibility.
++ Please comment on the extent to which this change would
alleviate burden, and if there are other administrative changes that
could be made to simplify this process.
++ Please describe any anticipated effects of decreasing the amount
of treatment volume data used to determine LVPA eligibility.
++ Please describe the ways that simplifying the attestation
process could help ESRD facilities with fewer resources to promote
health equity by improving their ability to serve vulnerable and
underserved communities.
(b) Comment Solicitation on the Development of a New Payment Adjustment
Based on Geographic Isolation
CMS is striving to promote health equity by ensuring that ESRD
facilities, including both rural and low-volume facilities, are being
paid equitably for serving populations that are currently underserved.
We are therefore soliciting comments on potentially assisting
geographically isolated ESRD facilities and promoting access in these
areas, including labor force hiring and retention. We are considering
establishing a new payment adjustment that accounts for isolation,
rurality, and other geographical factors. We are also requesting
information on geographic isolation to determine if ESRD facilities
that are currently considered rural would benefit from a geographic
isolation adjustment. The new geographically based payment adjustment
may consider local dialysis

[[Page 42445]]

need (LDN), as explained later in this section, instead of basing
payment strictly upon a rural designation, as set forth in Sec. Sec.
413.233 and 413.231(b)(2). We considered changes to the eligibility
criteria to address the concerns that GAO and MedPAC raised about
targeting LVPA payments to ESRD facilities that are not located near
other ESRD facilities that are necessary to protect access to care. As
noted above, under section 1881(b)(14)(D)(iii) of the Act, the LVPA
must reflect the extent to which costs incurred by low-volume
facilities (as defined by the Secretary) in furnishing renal dialysis
services exceed the costs incurred by other facilities in furnishing
such services. Our preliminary analysis found that, in general, low-
volume facilities that are rural, isolated, or located in low-demand
areas did not have higher costs than low-volume ESRD facilities
overall. Therefore, certain changes that interested parties have
suggested would not comport with the statutory requirements and
limitations for the LVPA. We are soliciting comments on potential
methodologies for creating a separate payment adjustment that could
potentially address GAO and MedPAC's concerns, relying upon the
authority under section 1881(b)(14)(D)(iv) of the Act, which states
that the ESRD PPS may include such other payment adjustments as the
Secretary determines appropriate.
During the 2020 ESRD PPS TEP, panelists discussed the alternatives
to the current LVPA set forth below.\16\ One methodology involved
utilization of census tracts to identify geographic areas with low
demand, which suggested increased beneficiary access by incentivizing
dialysis organizations to continue operating ESRD facilities in
otherwise non-viable locations. An advantage to this approach would be
identifying geographical areas, specifically census tracts, with low
demand for dialysis. The TEP participants discussed that the
identification of low demand for dialysis would improve targeting to
ESRD facilities that are in isolated areas that ESRD beneficiaries
travel far to access. Additionally, this would incentivize ESRD
facilities to locate in underserved areas that are isolated and rural,
promoting access to care for these disadvantaged populations. This
methodology aligns with the methodology presented in the TEPs and in
the CY 2022 ESRD PPS proposed rule (86 FR 36396 through 36399).
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\16\ <a href="https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-presentation-december-2020.pdf">https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-presentation-december-2020.pdf</a>.
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CMS's preliminary analysis has shown that models based on this
local dialysis need (LDN) methodology would often result in the ESRD
facilities receiving the LDN payment adjustment (that is, ESRD
facilities in geographic areas with low LDN) being the only dialysis
provider for a number of miles. Additionally, our analysis shows that
ESRD facilities receiving the LDN payment adjustment often would be
located in a census tract that intersects with areas designated as
Health Professional Shortage Areas (HPSAs). The methodology would
involve dividing the U.S. into geographic areas based on a reasonable
assessment of ESRD beneficiaries' ability or willingness to travel.
Regarding interested parties' concerns that previous measures for
travel time relied upon beneficiaries' access to a private vehicle
(which many beneficiaries may lack), in collaboration with our data
contractor, CMS has performed additional analysis regarding the travel
time metric to include realized travel time between ESRD facilities and
population centers of census tracts, instead of ESRD facilities and
patient address. Sensitivity checks have shown that the exact location
of patients with ESRD is not essential for accurately determining the
LDN of census tracts. Latent demand is then calculated by counting the
number of beneficiaries with ESRD near each ESRD facility. ``Near'' is
defined by driving time to ESRD facilities. Latent demand is calculated
by multiplying the number of beneficiaries near an ESRD facility by
average number of treatments for ESRD beneficiaries. The threshold is
then applied by determining the threshold of adjusted latent demand.
That is, those ESRD facilities, which fall below the threshold are
eligible.
We are considering approaches to implementing an additional payment
adjustment for ESRD facilities operating in areas with low LDN/demand.
The purpose of this RFI is to seek feedback on the approach described
above and to solicit information from interested parties to inform the
approach taken to implement this adjustment. Any new payment adjustment
of this nature would be proposed through future notice-and-comment
rulemaking.
In particular, we seek responses to the following questions.
<bullet> What factors should be considered in formulating a payment
adjustment for ESRD facilities in isolated geographical areas or areas
for which there is a low need for renal dialysis services?
<bullet> What are the best ways to incentivize renal dialysis
service provision in isolated geographic areas?
<bullet> Our analysis of the LDN methodology has shown that low LDN
census tracts intersect with areas designated as HPSAs. What impact
would a payment adjustment based on geographic isolation have on the
ability of ESRD facilities in isolated areas to recruit and retain
health care professionals?
<bullet> Please comment on the appropriateness of maintaining the
rural facility adjustment under Sec. 413.233, if we were to establish
an LDN payment adjustment in conjunction with a modified LVPA.
<bullet> Please comment on the relationship between geographic
isolation and cost. Please provide any data that could further inform
CMS's understanding of the relationship between geographic isolation
and cost for low volume facilities.
<bullet> Please comment on the appropriateness of utilizing driving
time between current beneficiary address and treatment location as the
appropriate metric for travel time.
<bullet> Are there ways in which the suggested methodology for this
potential payment adjustment could fail in targeting isolated ESRD
facilities, or ESRD facilities in areas with low LDN?
<bullet> Are there ways in which the determination of LDN might be
subject to gaming?
<bullet> Would a payment adjustment for ESRD facilities in areas
with low LDN improve health equity? Are there specific recommendations
to change the LDN methodology described above to promote quality access
to care for all ESRD beneficiaries?
<bullet> Please comment on the favorability of CMS's implementation
of a new payment adjustment for ESRD facilities in areas with low LDN
as described above.
<bullet> Are there any other considerations we should keep in mind
when considering proposing a new payment adjustment based on an LDN
methodology?
(3) Proposal for an Exception to the Current LVPA Attestation Process
for Disasters and Other Emergencies
Under our current regulations at 42 CFR 413.232(b), a low-volume
facility is an ESRD facility that, based on the submitted
documentation--(1) furnished less than 4,000 treatments in each of the
3 cost reporting years (based on as-filed or final settled 12-
consecutive month cost reports, whichever is most recent, except as
specified in Sec. 413.232(g)(4)) preceding

[[Page 42446]]

the payment year; and (2) has not opened, closed, or received a new
provider number due to a change in ownership (except where the change
in ownership results in a change in facility type) in the 3 cost
reporting years (based on as-filed or final settled 12-consecutive
month cost reports, whichever is most recent) preceding the payment
year. When we first established these requirements in the CY 2011 ESRD
PPS final rule, we explained that looking across data for three years
provided us with a sufficient information to view consistency in
business operations (79 FR 49123). In the CY 2019 ESRD PPS final rule
(83 FR 56949) and the CY 2021 ESRD PPS proposed rule (85 FR 42165), we
acknowledged commenters' concerns that the eligibility criteria in the
LVPA regulations are very explicit and leave little room for
flexibility during disasters or other emergency situations like the
COVID-19 PHE. Commenters have emphasized that low-volume facilities
rely on the LVPA, and that loss of the payment adjustment could result
in beneficiary access issues.
As discussed in the CY 2021 ESRD PPS proposed rule (85 FR 42165),
the COVID-19 PHE caused ESRD facilities to have to shift patients among
ESRD facilities in order to provide uninterrupted care to their
Medicare ESRD population. In some cases, this patient shifting
increased dialysis treatments at some low-volume ESRD facilities,
putting the ESRD facility temporarily over the LVPA treatment
threshold. This increase in dialysis treatments, resulting from the
PHE, disqualified some ESRD facilities that would have otherwise
received the LVPA of 23.9 percent per treatment. In the CY 2021 ESRD
PPS final rule (85 FR 71485), we established a policy that ESRD
facilities would be held harmless from increases in treatment counts
due to temporary patient shifting because of the PHE. To be held
harmless, ESRD facilities must follow the attestation process for the
exception set forth in Sec. 413.232(g)(4) and are expected to provide
supporting documentation to the MACs upon request. Interested parties
have expressed support for CMS's swift response to the COVID-19 PHE's
impact on ESRD facilities, with an association of dialysis providers
stating that holding harmless LVPA status for these ESRD facilities
will better ensure that ESRD patients can continue to access the life-
sustaining dialysis treatment they need, particularly in rural and
underserved areas where low-volume facilities heavily depend on the
LVPA to remain open and provide treatment for patients.
We recognize there could be future circumstances, potentially
similar to the circumstances of the COVID-19 PHE, in which it would be
appropriate to provide flexibilities with respect to certain LVPA
requirements. Commenters have previously expressed concerns about the
strict attestation requirements for ESRD facilities to remain eligible
for the LVPA, particularly when faced with a disaster or other
emergency, such as a local or national emergency, natural disaster,
catastrophic event, or public health emergency. We recognize that
during disasters or other emergencies, low-volume facilities could be
forced to close, or could experience increases in their treatment
counts if they treat patients who are displaced from a nearby ESRD
facility that is impacted by such an event. For example, in August of
2021, an ESRD facility in Louisiana sustained significant damage as a
result of Hurricane Ida, which required the ESRD facility to close for
repairs and temporarily stop furnishing renal dialysis services. The
ESRD facility served a rural community and for over 10 years received
the LVPA due to the low number of dialysis treatments it furnished each
year. This ESRD facility sought recourse to maintain its eligibility
for the LVPA when it resumed operations following the required repairs
to the ESRD facility, however, recourse was unavailable due to the
limitations set forth in 42 CFR 413.232(b). When we established the
LVPA in the CY 2011 ESRD PPS final rule, we stated that we believed the
LVPA should encourage small ESRD facilities to continue to provide
access to care to an ESRD patient population where providing that care
would otherwise be problematic (75 FR 49118). Given that these
requirements for low-volume facilities were created to protect access
to care for the vulnerable patient population that these ESRD
facilities serve, adding certain flexibilities during disasters or
other emergencies would promote our commitment to ensuring access to
care for ESRD patients.
(a) Proposed Changes to the LVPA
We are proposing to make two changes to the LVPA regulation at
Sec. 413.232 to allow for more administrative flexibilities during
disasters or other emergencies. First, we are proposing to create a new
exception to the attestation process for disasters and other
emergencies. Second, we are proposing to establish a process that would
allow low-volume facilities to close and reopen in response to a
disaster or other emergency and still receive the LVPA. CMS would
assess whether a particular situation is a disaster or other emergency
based on the totality of the circumstances that could result in
disruption of or inability to furnish renal dialysis services at one or
more ESRD facilities, thus affecting the ESRD facility's or facilities'
ability to qualify for the LVPA. For purposes of this proposal,
disasters or other emergencies would include, but not be limited to,
the below examples:
<bullet> A public health emergency declared by the Secretary due to
a significant outbreak of infectious disease or bioterrorist attacks.
<bullet> Natural disasters including winter storms, floods,
tornados, hurricanes, wildfires, earthquakes, or any combination
thereof.\17\
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\17\ <a href="https://www.dhs.gov/natural-disasters">https://www.dhs.gov/natural-disasters</a>.
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<bullet> Catastrophic events outside of an ESRD facility's control
that disrupt operations and result in an ESRD facility's closure, for
example, loss of operations or patient shifting due to a local
emergency such as fire, floods, earthquakes, or tornadoes, or
<bullet> Other disaster or emergency conditions under which a
waiver could be granted pursuant to section 1135 of the Act.
CMS believes these proposed policy changes could help displaced
ESRD patients maintain access to renal dialysis services by preventing
ESRD facilities from permanently closing due to the loss of their LVPA.
It is important that ESRD facilities that are receiving the LVPA are
able to maintain LVPA eligibility despite the impacts caused by a
disaster or other emergency. The proposed policy could potentially
protect other ESRD facilities that need to maintain the LVPA in order
to remain open from potentially losing their LVPA by exceeding the
treatment threshold because they accepted displaced patients. We do not
want the fear of losing the LVPA due to increased treatments exceeding
the threshold to disincentivize ESRD facilities from accepting patients
from other ESRD facilities experiencing a disaster or other emergency.
It is also important that ESRD facilities that are forced to close due
to a disaster or other emergency are able to maintain their LVPA
eligibility upon reopening to ensure continued access in areas that
otherwise may lack sufficient ESRD facilities. The policy could also
help those ESRD facilities affected by the disaster or other emergency
potentially resume operations and avoid permanent closure if they would
be allowed to receive the

[[Page 42447]]

LVPA upon reopening despite the closure or disruption of operations.
(i) Proposed Exception to the LVPA Treatment Threshold for ESRD
Facilities That Accept Patients From an ESRD Facility Affected by a
Disaster or Other Emergency
We are proposing to create an exception to the LVPA treatment
threshold requirements set forth in 42 CFR 413.232(b)(1) under a new
provision in Sec. 413.232(g)(5), which would allow an ESRD facility to
receive the LVPA even if it exceeds the LVPA threshold if its treatment
counts increase due to treating additional patients displaced by a
disaster or other emergency. Qualification for the proposed exception
would require an ESRD facility to absorb those displaced patients from
an outside or adjacent ESRD facility that experienced a temporary
closure or operational disruption (such as a water shut off). If an
ESRD facility accepts the patients of the ESRD facility affected by the
disaster or other emergency, causing that ESRD facility to meet or
exceed the 4,000-treatment count for all dialysis patients, it would
attest to its MAC that it furnished treatments equal to or in excess of
4,000 in the cost reporting year due to temporary patient-shifting as a
result of the closure or operational disruption of an ESRD facility due
to a disaster or other emergency. We are proposing to define temporary
patient-shifting in the context of the LVPA in the ESRD PPS as
providing renal dialysis services to one or more patient(s) at any time
through the end of the calendar year following the 12-month period
beginning when an ESRD facility first begins providing renal dialysis
services to the displaced patient(s). The ESRD facility would be
required to request this exception from CMS by writing to the ESRD
Payment Mailbox <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="3d786e6f796d7c64707873697d5e504e1355554e135a524b">[email&#160;protected]</a> no later than the annual
attestation deadline of November 1st. CMS would review the exception
request within 30 days to determine if the ESRD facility qualifies for
the exception. If approved by CMS, the ESRD facility would be paid the
LVPA for Medicare beneficiaries for up to the first 4,000 dialysis
treatments in the payment year in which the temporary patient-shifting
occurred. Under this proposed exception, the ESRD facility would be
held harmless for meeting or exceeding the 4,000 dialysis treatment
threshold during one or more cost reporting years within the 3-year
lookback for LVPA eligibility as long as their 4,000 dialysis treatment
threshold was exceeded as a result of temporary patient-shifting from
the ESRD facility that experienced the disaster or other emergency. If
CMS does not approve the request, CMS would notify the ESRD facility
and the MAC, and the ESRD facility would be disqualified from receiving
the LVPA until it meets all the LVPA criteria (including the 3-year
lookback). Under this proposal, the ESRD facility receiving this
exception must maintain documentation of the number of displaced
patients treated and information about the ESRD facility or facilities
that previously treated those patients and closed or experienced an
operational disruption due to a disaster or other emergency and must
provide such documentation to CMS and the MAC upon request. The ESRD
facility requesting this exception would have to repeat the process for
requesting an exception for each cost reporting year in which its
treatment volume meets or exceeds 4,000 due to temporary patient-
shifting from the ESRD facility that experienced the disaster or other
emergency. Additionally, the ESRD facility requesting this exception
would have to follow the attestation process as described at Sec.
413.232(e) for the two payment years following the last cost reporting
year in which its treatment volume meets or exceeds 4,000 due to
treating displaced patients from the ESRD facility that experienced the
disaster or other emergency and attest that the ESRD facility meets the
criterion established at Sec. 413.232.
As an example: If a disaster occurs on June 1, 2024, which results
in ESRD facility X's closure or operational disruption resulting in
ESRD facility Y (an existing low-volume facility) treating additional
patients from ESRD facility X that puts ESRD facility Y's total renal
dialysis treatments for cost reporting year 2024 over the 4,000
treatment threshold, ESRD facility Y would be required to request an
exception to Sec. 413.232(b)(1) from CMS by November 1, 2024 in order
to continue receiving the LVPA. Since ESRD facility Y began treating
the displaced patients in CY 2024, the window for temporary patient
shifting would extend until December 31, 2025. To be approved for the
exception under the new provision in Sec. 413.232(g)(5), CMS would
determine that ESRD facility Y furnished treatments equal to or in
excess of 4,000 in the cost reporting year due to temporary patient-
shifting as a result of the closure or operational disruption of ESRD
facility X resulting from a disaster or other emergency. Should the
exception be approved by CMS, ESRD facility Y would receive the LVPA
for up to the first 4,000 treatments it furnished in 2024.
Additionally, ESRD facility Y would not be disqualified from receiving
the LVPA for PY 2025 and PY 2026 due to exceeding the treatment volume
threshold in cost reporting year 2024, assuming the temporary patient-
shifting from ESRD facility X occurred only in cost reporting year
2024. For PY 2025 and PY 2026 ESRD facility Y would have to attest that
it meets all the criterion for the LVPA because it furnished treatments
equal to or in excess of 4,000 in the cost reporting year due to
temporary patient-shifting as a result of the closure or operational
disruption of an ESRD facility resulting from a disaster or other
emergency and received an exception for cost reporting year 2024. This
would be the same attestation process as if ESRD facility Y did not
furnish any excess treatments and was attesting that it continued to
meet the criteria for the LVPA for those payment years. If the closure
or operational disruption of ESRD facility X causes the treatment
volume for ESRD facility Y to meet or exceed the 4,000 dialysis
treatment threshold in cost reporting year 2025, ESRD facility Y would
have to submit another request for an exception by November 1, 2025.
Should this exception be approved, ESRD facility Y would receive the
LVPA for up to the first 4,000 treatments it furnished in cost
reporting year 2025 and would not be disqualified from receiving the
LVPA for payment year 2026 and payment year 2027 due to exceeding the
treatment volume threshold in cost reporting year 2024 and cost
reporting year 2025. If ESRD facility Y continued to treat displaced
patients from ESRD facility X in cost reporting year CY 2026, it would
only be considered temporary patient-shifting if ESRD facility Y
treated those patients before January 1 2026, and if patients treated
after January 1 2026 cause ESRD facility Y to exceed the 4,000-
treatment volume threshold in cost reporting year 2026 then the ESRD
facility would be disqualified from receiving the LVPA under Sec.
413.232(b)(1). Under this example, ESRD facility Y would still have to
meet the other eligibility requirements to receive the LVPA in any PY
in which the ESRD facility would receive the LVPA.
(ii) Proposed Exception to the LVPA Closure Provision for ESRD
Facilities Affected by a Disaster or Other Emergency
In addition to proposing an exception to the treatment threshold
requirement under Sec. 413.232(b)(1) and (g)(5), we are proposing an
exception under

[[Page 42448]]

Sec. 413.232(g)(6) that would allow an ESRD facility to still receive
the LVPA if it temporarily closes. That is, if an ESRD facility
temporarily ceases to operate and the patients must go to another ESRD
facility to receive renal dialysis services due to a disaster or other
emergency, and the ESRD facility subsequently reopens, we are proposing
to create an exception to the requirement in Sec. 413.232(b)(2) that
an ESRD facility ``has not opened, closed, or received a new provider
number'' in the 3 cost reporting years preceding the payment year. If
an ESRD facility is affected by a disaster or other emergency and the
ESRD facility is forced to close and re-open later, the ESRD facility
would need to request an exception from CMS in writing at the ESRD
Payment Mailbox at <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="5d180e0f190d1c04101813091d3e302e7335352e733a322b">[email&#160;protected]</a> within 60 days of the
closure and inform the MAC of the request. CMS would review the request
within 30 days of receipt and either approve the request based on a
determination that the ESRD facility closed or experienced an
operational disruption due to a disaster or other emergency, or deny
the request, and would inform both the ESRD facility and the MAC of its
decision.
Upon reopening and providing renal dialysis services, the ESRD
facility would be required notify CMS and the MAC in writing within 30
days of its reopening. CMS would acknowledge receipt of the written
notification within 30 days. If the exception is approved and CMS is
duly informed of the ESRD facility's reopening, the ESRD facility would
remain eligible for the LVPA and the MAC would process payment
accordingly. In order to continue receiving the LVPA the ESRD facility
would still have to meet all the other eligibility requirements for the
LVPA. The exception to Sec. 413.232(b)(2) would be applicable for a
period of 2 cost reporting years following the date of closure of the
ESRD facility. After the 2 cost reporting year period the ESRD facility
would follow the normal attestation process for the LVPA specified in
paragraphs (e) and (g) of Sec. 413.232. The ESRD facility would be
required to maintain documentation regarding its closure, and to
provide such supporting documentation to CMS and/or the MAC upon
request.
For example, if a disaster occurs on June 1, 2024, which results in
an ESRD facility experiencing a closure, the ESRD facility would
request an exception to Sec. 413.232(b)(2) from CMS within 60 days of
June 1, 2024 (that is, on or before July 31, 2024). CMS would review
the request and notify the ESRD facility and the MAC within 30 days if
the exception is approved or denied. If the ESRD facility then reopens
on September 1, 2024, the ESRD facility would notify CMS and the MAC in
writing within 30 days of reopening (that is, on or before October 1,
2024). CMS would notify the ESRD facility and the MAC of its receipt of
the reopening notification within 30 days. If the exception was
approved by CMS, the ESRD facility would remain eligible for the LVPA
for the rest of payment year 2024 and for the entirety of payment year
2025 and payment year 2026, provided the ESRD facility continues to
meet the other eligibility requirements for the LVPA.
(4) Proposed Technical Correction to 42 CFR 413.232(g)
We are proposing a technical correction at Sec. 413.232(g) to
replace ``their'' with ``its,'' to clarify the regulation language.
g. Proposed Transitional Pediatric ESRD Add-On Payment Adjustment for
Pediatric Patients With ESRD Receiving Renal Dialysis Services
(1) Background
Section 1881(b)(14)(D)(iv)(I) of the Act provides that the ESRD PPS
may include such payment adjustments as the Secretary determines
appropriate, including a payment adjustment for pediatric providers of
services and renal dialysis facilities. Determining such a payment
adjustment has been historically difficult due to the consistent lack
of data. The Medicare pediatric ESRD patient population receiving
dialysis is small compared to the adult ESRD population, representing
approximately 0.14 percent of the total ESRD patient population in
2022. In the past, CMS has considered various different payment
adjustments for pediatric patients with ESRD, including different
Medicare payments by sex or comorbidities (74 FR 49984 through 49986).
However, many of these considered adjustments were not used as we were
unable to get acceptable precision due to the small sample size of
pediatric patients with ESRD.
Prior to the establishment of the ESRD PPS, payment for pediatric
ESRD dialysis services was generally the same rate as adult ESRD
dialysis, unless the ESRD facility qualified for an exception to the
composite rate. Section 1881(b)(7) of the Act stated that, subject to
section 422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (Pub. L. 106-554) (BIPA), the
Secretary shall provide for exceptions as may be warranted by unusual
circumstances (including the special circumstances of sole facilities
located in isolated, rural areas and of pediatric facilities). During
this time period, CMS received many comments and concerns regarding the
payment rate for renal dialysis services furnished to pediatric
patients with ESRD. Section 623(b) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Pub. L. 108-173) later
amended section 422(a)(2) of BIPA to provide that any pediatric ESRD
facility would be eligible for an exception to the composite rate,
effective October 1, 2002. This statute defined pediatric ESRD
facilities as facilities with at least 50 percent patients under the
age of 18. This enabled pediatric ESRD facilities to obtain payments
that specifically recognized the higher cost associated with treating
these patients (69 FR 47530).
We finalized a basic case-mix adjustment to the composite payment
rate in the CY 2005 Physician Fee Schedule (PFS) final rule published
on November 15, 2004 (69 FR 66327). This included a 62 percent
pediatric payment increase (that is, an adjustment factor of 1.62)
applied to the composite payment rate per treatment for any facility
when furnishing outpatient dialysis services to pediatric patients with
ESRD. This factor was derived from the average exception amounts for 20
ESRD facilities that had received exceptions for pediatric patients.
This was intended to be a temporary measure, which would be eliminated
once we developed the case-mix methodology that would apply for the
ESRD PPS bundled payment. The use of this methodology allowed CMS to
provide additional payment for the pediatric ESRD population under the
composite rate in a data-driven manner to account for the higher costs
pediatric patients faced (69 FR 66327).
Section 153(b) of MIPPA added section 1881(b)(14) of the Act, which
required CMS to implement an ESRD bundled PPS beginning January 1,
2011, under which a single payment for renal dialysis services is made
in lieu of any other payment. Renal dialysis services generally include
items and services included in the composite rate for renal dialysis
services as of December 31, 2010 and services furnished to individuals
for treatment of ESRD, which were formerly separately billable,
including drugs and biological products and laboratory tests. In the CY
2011 ESRD PPS proposed rule, we proposed a single composite rate
modifier of 1.199 for all Pediatric ESRD Patients receiving dialysis
(74 FR 49982 through 49983). A ``Pediatric ESRD Patient'' is defined as
an individual less than 18 years of age

[[Page 42449]]

who is receiving renal dialysis services. 42 CFR 413.171. We also
proposed an eight-group system for separately billable renal dialysis
services furnished to Pediatric ESRD Patients with two subdivisions for
each of the following factors: age (under 13, 13 to 17), modality
(hemodialysis, peritoneal dialysis) and number of comorbidities (none,
one or more) (74 FR 49983 through 49987). The CY 2011 ESRD PPS proposed
rule then calculated an ``expanded bundle'' modifier, which combined
the composite rate and separately billable modifiers for each of the
eight groups (74 FR 44987). These expanded bundle modifiers were the
proposed pediatric patient-specific case-mix adjustment factors that
would be applied to the base rate under the ESRD PPS. These modifiers
were based on a regression of costs for all renal dialysis services
furnished to Pediatric ESRD Patients. Comments on this proposed rule
indicated that many interested parties felt the expanded bundle
modifier was insufficient (75 FR 49128). In the CY 2011 ESRD PPS final
rule, we responded to those comments by implementing the first
iteration of the current four-group system for both the expanded bundle
and the separately billable services. This methodology was data driven,
but unlike the simple regression for composite rate costs, allowed for
different Medicare payment amounts based on two sets of two
characteristics: age of the patient (under 13 or 13 to 17) and modality
of the treatment (hemodialysis or peritoneal dialysis). Additionally,
this methodology used the same groups for the expanded bundle and
separately billable modifiers (75 FR 49134).
We codified the Pediatric ESRD Patient payment adjustment in Sec.
413.235(b), which states that CMS adjusts the per treatment base rate
for pediatric patients in accordance with section 1881(b)(14)(D)(iv)(I)
of the Act, to account for patient age and treatment modality. These
multipliers were updated in the CY 2016 ESRD PPS final rule using the
same methodology (80 FR 69001 through 69002). The current expanded
bundle case mix adjusters are presented below in Table 7.
[GRAPHIC] [TIFF OMITTED] TP30JN23.006

Despite these changes intended to improve payment accuracy for
renal dialysis services furnished to Pediatric ESRD Patients, we
continue to receive comments and concerns from interested parties that
the payment amounts for renal dialysis services furnished to Pediatric
ESRD Patients are too low. In addition to comments received through the
annual ESRD PPS rulemaking, we have also solicited comments from
interested parties on several occasions. During the December 2020 TEP,
we queried a panel of experts on how to improve payment for pediatric
dialysis care under the ESRD PPS. Panelists \18\ generally preferred
creating more refined case-mix adjusters over creating an entirely new
pediatric ESRD PPS, citing the costs of creating an entirely new system
both on CMS and the ESRD facilities and the need for new legislation to
be able to increase payment through a separate pediatric ESRD PPS.
Panelists also pointed to labor costs as a major reason for higher
costs among pediatric dialysis clinics, because these patients need
more nursing attention and specialized pediatric nutritionists.
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\18\ <a href="https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf">https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf</a>.
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In the CY 2023 ESRD PPS proposed rule (87 FR 38529), we issued a
request for information regarding health equity for pediatric patients
with ESRD. Many commenters asserted that Medicare payments for
Pediatric ESRD Patients are too low and that the ESRD PPS bundled
payment does not target the unique issues facing ESRD facilities
furnishing renal dialysis services to Pediatric ESRD Patients.
We are committed to improving health equity for Pediatric ESRD
Patients receiving renal dialysis services by improving payment equity
through more efficient Medicare payments. Ensuring Medicare payments
are appropriate and reflect costs for renal dialysis services furnished
to Pediatric ESRD Patients would allow more ESRD facilities to provide
quality care to this vulnerable population. The main barrier to payment
equity is the lack of sufficient data to determine the relative costs
associated with furnishing renal dialysis services to Pediatric ESRD
Patients. To improve payment rate accuracy for Pediatric ESRD Patients,
CMS has issued changes to the cost reports for both freestanding ESRD
facilities and hospital-based ESRD facilities effective January 1,
2023.19 20 21 These changes include separate categories for
labor and supplies used in furnishing renal dialysis services to
Pediatric ESRD Patients. These updates are intended to provide data for
CMS to more comprehensively estimate the additional costs associated
with furnishing renal dialysis services to Pediatric ESRD Patients.
However, we estimate it would take approximately 3 years to obtain and
analyze the granular data provided by the stratified cost reports data
from these changes that we need in order to consider proposing a more
finely-tuned payment adjustment.
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\19\ <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r7p242">https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r7p242</a>.
\20\ <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i">https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i</a>.
\21\ 87 FR 26760 (May 5, 2022). <a href="https://www.federalregister.gov/documents/2022/05/05/2022-09581/agency-information-collection-activities-submission-for-omb-review-comment-request">https://www.federalregister.gov/documents/2022/05/05/2022-09581/agency-information-collection-activities-submission-for-omb-review-comment-request</a>.
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(2) Proposed Alternative Methodology for Estimating Relative Costs for
Furnishing Renal Dialysis Services to Pediatric ESRD Patients
As noted previously, payment accuracy has been historically
difficult for pediatric ESRD dialysis because of the small sample size
of Pediatric ESRD Patients receiving renal dialysis services paid for
under the ESRD PPS. Pediatric ESRD dialysis treatments are also
furnished differently from adult ESRD dialysis treatments in several
crucial ways. For example, pediatric ESRD facilities are more likely to
be hospital-based and, on average, have lower treatment volume and are
located in higher wage index areas. These

[[Page 42450]]

systematic differences in treatment, when combined with the small
sample size, make it very difficult to obtain low variance estimates of
the differences in costs between pediatric and adult ESRD dialysis
patients. Even if simple cost models show statistically significant
estimates, it is possible that the systematic differences between
pediatric and adult ESRD facilities can bias these estimates. Obtaining
a reliable estimate of the additional costs that Pediatric ESRD
Patients incur would allow us to create a payment adjustment to bring
relative Medicare payments more in line with relative costs.
One can account for this bias by selecting a specific sample of
ESRD facilities that have similar characteristics except for proportion
of dialysis treatments furnished to Pediatric ESRD Patients. This would
help to show the additional costs of furnishing dialysis to Pediatric
ESRD Patients based on the variation in costs across the ESRD
facilities. To achieve this, we would use propensity score matching
(PSM).
PSM is a technique that uses regression analysis to account for
systematic differences between two populations to isolate the effects
of a single variable, in this case percentage of Pediatric ESRD
Patients. The PSM regression includes a wide range of ESRD facility-
level characteristics including facility type, size, geographic
location, and the pediatric ESRD dialysis population nearby the ESRD
facility in order to make a propensity score. This propensity score
represents the probability that a given ESRD facility treats a high
volume of Pediatric ESRD Patients given its facility-level
characteristics.
Once the propensity score for each ESRD facility is determined,
each ESRD facility with a significant percentage of Pediatric ESRD
Patients (high-pediatric) is matched with the ESRD facility without a
significant percentage of Pediatric ESRD Patients (low-pediatric) with
the most similar propensity score. We can then compare the relative
per-treatment costs of those ESRD facilities to estimate the additional
costs an ESRD facility faces when it furnishes renal dialysis services
to a higher proportion of Pediatric ESRD Patients, controlling for some
important facility-level characteristics. The dependent variable of
this regression is the log of the cost per treatment for the ESRD
facility. The independent variables are the percent of dialysis
treatments that are furnished to Pediatric ESRD Patients, the log of
the facility size, the type of ESRD facility (hospital based,
children's hospital based or freestanding), the log of the wage index
for the ESRD facility and the year for the cost report data. The
regression equation for cost per treatment given a certain percentage
of dialysis treatments furnished to Pediatric ESRD Patients is:
[GRAPHIC] [TIFF OMITTED] TP30JN23.007

This cost regression should be unbiased due to the use of PSM.
However, PSM also requires a reduction in sample size, because there
are relatively few ESRD facilities with a significant number of
treatments furnished to Pediatric ESRD Patients that could be matched
using PSM. This smaller sample size inherently results in an increase
in margin of error. We believe this is a necessary tradeoff because a
biased estimate cannot be relied upon, but we must be cautious while
using high-error estimates. The final result of this regression is that
ESRD facilities that solely serve Pediatric ESRD Patients incur costs
that are 40 percent higher per patient for furnishing renal dialysis
services than similar ESRD facilities that serve no Pediatric ESRD
Patients. The confidence interval of this estimate is 20 percent to 60
percent. Therefore, on average, furnishing renal dialysis services to a
Pediatric ESRD Patient costs 40 percent more than furnishing renal
dialysis services to an adult patient with ESRD.
(3) Current Medicare Payments for Renal Dialysis Services Furnished to
Pediatric ESRD Patients
The ESRD PPS already accounts for some of the higher costs that
ESRD facilities incur while furnishing renal dialysis services to
Pediatric ESRD Patients through the case-mix adjusters. Because the
analysis described above uses cost report data, it does not incorporate
either the current case-mix adjusters or payment rates for Pediatric
ESRD Patients receiving renal dialysis services. Our most recent
estimates show that payments for dialysis treatments furnished to
Pediatric ESRD Patients were approximately 10 percent higher than for
adult patients with ESRD in CY 2022.
We are striving for payment accuracy, which is achieved when
relative Medicare payments are proportional to relative costs. There
are several ways we could adjust ESRD PPS payments to achieve payment
accuracy, including calculating the unaccounted-for cost differential,
which is the amount by which ESRD PPS payments for pediatric ESRD renal
dialysis services must be increased to achieve payment accuracy. We
could do this by reducing the cost differential estimate of 40 percent
by a factor 1.1 to account for the current payment differential of 10
percent. This would yield an unaccounted-for cost differential of
approximately 30 percent (1.4 divided by 1.1 is 1.27 which we are
rounding to 1.3). This is a reasonable estimate of the additional labor
and supply costs, which are not accounted for by the current case-mix
adjusters, incurred by ESRD facilities furnishing renal dialysis
services to Pediatric ESRD Patients.
(4) Proposed Transitional Pediatric ESRD Add-On Payment Adjustment
Despite the high margin of error of the cost regression using PSM,
we believe that 30 percent cost is the most reasonable estimate of the
unaccounted-for costs incurred in treating Pediatric ESRD Patients
compared to adult ESRD patients. Creating a new add-on payment
adjustment using this figure would provide pediatric ESRD facilities
with Medicare payments proportional to their estimated costs for a
temporary period while we collect additional data. However, due to the
high margin of error of the model, increasing Medicare payments to ESRD
facilities such that payments are 40 percent higher for Pediatric ESRD
Patients compared to all patients would risk making payments higher
than appropriate. When we conduct the analysis with the more
comprehensive cost report data provided by the cost report changes
implemented for CY 2023, we might find that our analysis overestimated
the cost of furnishing renal dialysis services to Pediatric ESRD
Patients (that is, that the additional 30 percent payment adjustment
was too large). If we finalize this transitional add-on payment
adjustment for Pediatric ESRD Patients as proposed, pediatric ESRD
facilities should be prepared for the possibility that the payment rate
for Pediatric ESRD Patients could decrease in the future, should that
be indicated by future data

[[Page 42451]]

analysis and finalized through notice-and-comment rulemaking. One
alternative would be for CMS to propose a smaller, more cautious add-on
payment adjustment based on the 20 percent lower bound of the
confidence interval, leading to an additional 10 percent transitional
add-on payment adjustment after accounting for the current payment
rate. This option would still represent a significant increase in
Medicare payments to ESRD facilities for Pediatric ESRD Patients
without much risk of making payments higher than appropriate. However,
this alternative option may lead to underpayment to ESRD facilities
serving Pediatric ESRD Patients, which is contrary to our goal of
aligning resource use with payment. We are seeking comment on the most
appropriate amount for the proposed transitional add-on payment
adjustment.
We are proposing a new transitional add-on payment adjustment of 30
percent (adjustment factor of 1.3) for dialysis treatments furnished to
Pediatric ESRD Patients for 3 calendar years, effective January 1,
2024. Based on the time lag for cost report data, 3 years should allow
for enough time for CMS to get more detailed data from the changes to
the cost reports described above. After that period, we would evaluate
the more comprehensive cost report data from the first year of cost
reporting periods beginning on or after January 1, 2023, to refine our
methodology for determining the payment rate for pediatric ESRD
dialysis. As proposed, this would be a separate, additional add-on
payment adjustment of 30 percent of the per treatment payment amount
under Sec. 413.230, which reflects the other patient and facility
level adjustments. This adjustment would not be part of the case-mix
adjusters. This payment adjustment would only apply to the ESRD bundled
payment and not to any outlier adjustments. Due to the multiplicative
nature of the case-mix adjusters it would function similarly to a 30
percent increase to the expanded bundle case-mix adjusters. For the
purpose of comparison, the effective case-mix adjusters are presented
below in Table 8.
[GRAPHIC] [TIFF OMITTED] TP30JN23.008

The exact magnitude of the increase in payment would vary based on
the age of the patient and the wage index of a given area; we estimate
approximately $80 for (hemodialysis-equivalent) peritoneal dialysis
treatments and $100 for hemodialysis treatments. This would represent a
substantial increase in payment for renal dialysis services furnished
to Pediatric ESRD Patients, and would account for the extra costs that
this population incurs temporarily until additional cost data is
available. This payment adjustment would apply for all dialysis
treatments furnished to ESRD patients under the age of 18, not solely
treatments furnished in pediatric ESRD facilities. This is warranted
because many of the additional costs related to the treatment of
Pediatric ESRD Patients are not specific to treatments furnished in
pediatric ESRD facilities.
We are proposing to call this the Transitional Pediatric ESRD Add-
on Payment Adjustment (TPEAPA) and make this adjustment budget neutral.
In general, add-on payment adjustments under section 1881(b)(14)(D)(iv)
of the Act are not statutorily required to be budget neutral under the
ESRD PPS, but we believe in this instance that budget neutrality is
appropriate, due to the manner in which this adjustment is derived.
Other non-budget neutral add-on payment adjustments that we have
established under this authority generally account for costs that were
not used for the construction of the ESRD PPS bundled payment, such as
the TDAPA for calcimimetics (80 FR 69013 through 69027). We have also
established certain non-budget neutral add-on payment adjustments for
items or services that were not commonplace, and therefore not
adequately represented in cost reports, such as home dialysis training
(75 FR 49063). However, we have implemented other payment adjustments
under this authority in a budget neutral manner; for example, the
changes to the wage index in the CY 2023 ESRD PPS final rule were
implemented in a budget neutral manner as they represented a shifting
of cost allocations, rather than new costs not originally included in
the ESRD PPS bundled payment (87 FR 67157). This proposed TPEAPA is
primarily for costs that would have been included in the cost reports
used in the analysis conducted when we created the ESRD PPS bundled
payment in the CY 2011 ESRD PPS final rule. As explained above, the
methodology used both in that analysis, and when updating the case-mix
adjusters, attributed pediatric ESRD renal dialysis services costs to
the general population. Therefore, we believe it would be appropriate
to reduce the ESRD PPS base rate to account for the new allocation of
costs. Furthermore, any changes to the case-mix adjustments are
required by section 1881(b)(14)(A)(ii) of the Act to be budget neutral,
which means that any future modifications to the pediatric case-mix
adjusters would be budget neutral. The budget neutrality adjustment
factor for this proposed TPEAPA consisting of 30 percent of the per
treatment payment amount would be 0.999532. Applying this budget
neutrality factor to the ESRD PPS base rate would reduce the ESRD PPS
base rate by an estimated $0.12. Under the alternative proposed 10
percent TPEAPA discussed previously in this section of the proposed
rule, the budget neutrality factor adjustment would be 0.999847.
Applying this

[[Page 42452]]

budget neutrality factor to the ESRD PPS base rate would reduce the
ESRD PPS base rate by an estimated $0.04.
To establish this new TPEAPA, we are proposing to amend Sec.
413.235 by splitting current paragraph (b) into paragraphs (b)(1) and
(2). Paragraph (b)(1) would set forth the established age and modality
of treatment case mix adjustment methodology as currently stated in
paragraph (b). Paragraph (b)(2) would state that beginning January 1,
2024, we would provide a per-treatment transitional add-on payment
adjustment of 30 percent of the per treatment payment amount under
Sec. 413.230 for renal dialysis services furnished to Pediatric ESRD
Patients during calendar years 2024, 2025, and 2026. We are also
proposing to revise the current language of Sec. 413.235(b) to use the
term ``Pediatric ESRD Patients,'' which is defined at Sec. 413.171, to
improve clarity for this section.
(5) Costs and Benefits for a Proposed Transitional Pediatric ESRD Add-
On Payment Adjustment (TPEAPA)
We believe that CMS could better align the resource use of
pediatric ESRD renal dialysis services with payment. Our analysis using
the methodology outlined above has found that Pediatric ESRD Patients
receiving renal dialysis services have an estimated 40 percent higher
costs than adult patients and that the current payment adjusters
account for 10 percent higher costs. Implementing a transitional 30
percent add-on payment adjustment for renal dialysis services furnished
to Pediatric ESRD Patients would improve payment equity for these
patients by increasing payments to more closely align with the
estimated costs of treatment. A 30 percent increase in ESRD PPS
payments for pediatric ESRD renal dialysis services would represent
approximately $80 to $100 per pediatric ESRD dialysis treatment,
although the exact magnitude of the increase would depend on age,
modality and the wage index of the area. This payment increase would
have beneficial health equity impacts on this population by improving
access to care and quality of care. Some ESRD facilities may not be
able to absorb the additional expense of the Pediatric ESRD Patient
population. Patients may need to travel to a limited number of
primarily hospital-based ESRD facilities where pediatric ESRD dialysis
is performed. As a result, this population may be underserved and
disadvantaged with respect to access to ESRD care. Additional payment
to those ESRD facilities treating Pediatric ESRD Patients would thereby
benefit this potentially underserved and disadvantaged population of
Pediatric ESRD patients. Additionally, this would have a beneficial
financial impact on the ESRD facilities, both pediatric and non-
pediatric, that serve this pediatric population.
We are proposing that this payment adjustment be budget neutral,
which would lead to an estimated decrease of $0.12 to the ESRD PPS base
rate, corresponding to a budget neutrality factor of 0.99954. This
relatively small adjustment would represent less than a twentieth of a
percent of the total ESRD PPS base rate. However, we recognize that any
decrease in the base rate would represent a monetary loss to ESRD
facilities. As stated above, our analysis indicates that this proposed
transfer would be reasonable given the likelihood that the methodology
used in the case-mix adjusters attributed some pediatric costs to the
general population. However, should future analysis of the stratified
pediatric cost data indicate that pediatric ESRD renal dialysis
services costs are less than 40 percent higher than adult costs, this
proposed budget neutral decrease (if finalized as proposed) would mean
that the treatments for adult patients with ESRD were slightly
underpaid during this proposed 3-year period. In either case there
would be a risk of underpayment for one group of patients. We believe
that using the mean estimate of the analysis would provide us with the
best approach for achieving payment accuracy while we collect
additional data. Additionally, the health equity implications of
potentially underpaying for Pediatric ESRD Patients receiving dialysis
by 20 percent would be significantly higher than the implications of
potentially underpaying for adult patients by a less than 0.1 percent.
In CY 2021 there were 116 ESRD facilities that furnished more than 2
percent of their dialysis treatments to Pediatric ESRD Patients, out of
7882 total ESRD facilities. These ESRD facilities are a relatively
small group, but they are critical for the care of Pediatric ESRD
Patients. For these reasons, we believe that the expected benefits for
the proposed TPEAPA would outweigh the costs.
(6) Request for Comments on This Proposal
We believe that providing this proposed 30 percent TPEAPA for
calendar years 2024, 2025, and 2026 would be the best approach for
improving payment accuracy until more precise data is available.
However, we acknowledge that in any case there is a risk of making
payments which are higher or lower than appropriate. We are seeking
comment on this proposal for an additional 30 percent payment
adjustment for renal dialysis services furnished to Pediatric ESRD
Patients for 3 calendar years, effective January 1, 2024, and on any
alternative add-on payment adjustment amounts, including the 10 percent
payment adjustment discussed earlier in this section of the proposed
rule.
h. Proposed Reporting Policy for Unused and Discarded Amounts of Renal
Dialysis Drugs and Biological Products Paid for Under the ESRD PPS
(1) Background
As discussed in the CY 2023 PFS final rule (87 FR 69710), many
drugs and biological products that are payable under Medicare Part B
are dosed in a variable manner such that the entire amount identified
on the vial or package is not administered to the patient. For example,
many drugs are dosed based on the patient's body weight or body surface
area (BSA). Often, these drugs are available only in single-dose
containers. As stated in U.S. Food and Drug Administration (FDA)
guidance for industry,\22\ a single-dose container is designed for use
with a single patient as a single injection or infusion. The labeling
for a drug packaged in a single-dose container typically includes
statements instructing users to discard unused portions. When the
labeling instructs a health care provider to discard the amount of drug
that was unused (that is, the discarded amount) from a single-dose
container or other single-use package of a drug after administering a
dose to a Medicare beneficiary, the program provides payment for the
unused and discarded amount, as well as the dose administered, up to
the amount of the drug indicated on the vial or package labeling. On a
Medicare Part B claim, the JW modifier (drug amount discarded/not
administered to any patient) is a Healthcare Common Procedure Coding
System (HCPCS) Level II modifier used to report the amount of a drug
that is discarded and eligible for payment.
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\22\ <a href="https://www.fda.gov/media/117883/download">https://www.fda.gov/media/117883/download</a>.
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Beginning on January 1, 2017, CMS revised the Medicare Part B JW
modifier policy to require the uniform use of the modifier for all
claims for separately payable drugs with discarded drug amounts from
single-dose containers or single-use packages payable under Part B, in
order to more effectively identify and monitor billing and payment for

[[Page 42453]]

discarded amounts of drugs.23 24 The policy does not apply
to drugs that are not separately payable, such as packaged hospital
outpatient prospective payment system (OPPS) drugs or those
administered in federally qualified health centers (FQHCs) or rural
health clinics (RHCs).
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\23\ CR6603: <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R3538CP.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R3538CP.pdf</a>.
\24\ MLN Matters[supreg] Number MM9603: <a href="https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9603.pdf">https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9603.pdf</a>.
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In the CY 2023 PFS final rule (87 FR 69718 through 69719), we
codified our existing policy as discussed in the prior paragraph in
Chapter 17 of the Medicare Claims Processing Manual, and required that
billing providers report the JW modifier for all separately payable
drugs with discarded drug amounts from single-dose containers or
single-use packages payable under Part B, beginning January 1, 2023.
These changes were promulgated in connection with the implementation of
the discarded drug refund program under section 90004 of the
Infrastructure Investment and Jobs Act (Pub. L. 117-9, November 15,
2021). In that same CY 2023 PFS final rule (87 FR 69722), we responded
to commenters who requested we exempt drugs paid for under the ESRD PPS
bundled payment from the discarded drug refund policy. One commenter
expressed concern regarding how implementation of the discarded drug
refund might inadvertently impact ESRD products, including those used
by home dialysis patients (for example, Extraneal, a peritoneal
dialysis solution). In response to those comments, we clarified that
units for drugs that are packaged under the Medicare ESRD PPS were not
subject to the JW modifier policy or the discarded drug refund.
In the same CY 2023 PFS final rule, CMS also finalized a proposal
to require billing providers to report the JZ modifier for all such
drugs with no discarded drug amounts, beginning no later than July 1,
2023. Specifically, as discussed in the CY 2023 PFS proposed rule (87
FR 46058), we proposed to require the use of a separate modifier, the
JZ modifier, to attest that there were no discarded amounts. We stated
that to align with the JW modifier policy, the JZ modifier would be
required when there are no discarded amounts from single-dose
containers or single-use packages payable under Part B for which the JW
modifier would be required if there were discarded amounts. Table 9
below provides additional information about these modifiers.
[GRAPHIC] [TIFF OMITTED] TP30JN23.009

We explained that on all claims for single-dose containers or
single-use packages payable under Part B, either the JW modifier would
be used (on a separate line) to identify any discarded amounts or the
JZ modifier (on the claim line with the administered amount) would be
present to attest that there were no discarded amounts. We noted that
we believed the JZ modifier requirement would not increase burden on
the provider, because under the current JW modifier policy, the
provider already needs to determine whether or not there are any
discarded units from a single-dose container or single-use package,
record discarded amounts in the patient medical record, and specify
administered and discarded amounts on the claim form. We finalized the
JZ modifier requirement in the CY 2023 PFS final rule. Lastly, we noted
in the CY 2023 PFS final rule that we would begin claims edits for both
the JW and JZ modifier beginning October 1, 2023 (87 FR 69179).
Additional details can be found in Chapter 17 of the Medicare Claims
Processing Manual and the JW/JZ modifier frequently asked questions
(FAQ) document.\25\
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\25\ <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/JW-Modifier-FAQs.pdf">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/JW-Modifier-FAQs.pdf</a>.
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(2) Current Reporting of the JW Modifier Under the ESRD PPS
As discussed in the previous section, the Medicare Part B JW
modifier policy generally does not apply to drugs that are not
separately payable. The ESRD PPS statute generally requires a single
bundled payment for renal dialysis services. Specifically, section
1881(b)(14)(A)(i) requires the Secretary to implement a payment system
under which a single payment is made to a provider of services or a
renal dialysis facility for renal dialysis services in lieu of any
other payment. The only exception is for oral-only drugs, as defined at
Sec. 413.234(a), which are currently paid separately under Medicare
Part D. Section 204 of ABLE amended section 632(b)(1) of ATRA, as
amended by section 217(a)(1) of PAMA, to provide that payment for oral-
only renal dialysis drugs and biological products cannot be made under
the ESRD PPS bundled payment prior to January 1, 2025. We note that
although the ESRD PPS includes certain add-on payment adjustments such
as the TDAPA and TPNIES, these are adjustments to the ESRD PPS base
rate and therefore part of the single payment made under the ESRD PPS;
these payment adjustments are not separate payments. For example, as
described in our TDAPA implementation guidance issued August 4, 2017,
and updated January 10, 2018, available on the CMS website at <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R1999OTN.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R1999OTN.pdf</a>, the methodology used to calculate the per
treatment payment amount incorporates the cost of the drugs that are
paid for using the TDAPA.
Although renal dialysis drugs and biological products paid for
under the ESRD PPS are not considered ``separately billable'' and are
not subject to the general Part B JW modifier policy discussed in the
prior paragraph, CMS has previously issued guidance on the use of the
JW modifier on ESRD PPS claims for certain circumstances. Chapter 8,
section 60.4.5.1 of the

[[Page 42454]]

Medicare Claims Processing Manual pertains to self-administered
supplies of ESAs.\26\ Under current guidance, when billing for
discarded amounts of drugs in accordance with the policy in chapter 17
of this manual, section 40.1, the provider must bill for discarded
amounts on a separate line item with the modifier JW. The line item
date of service should be the date of the last covered administration
according to the plan of care or, if the patient dies, use the date of
death. More specifically, in Chapter 17, section 40.1 of the Medicare
Claims Processing Manual,\27\ we state that multi-use vials are not
subject to payment for discarded amounts of drug or biological
products, with the exception of self-administered ESAs by Method I home
dialysis patients, for whom an ESRD facility furnishes and bills for
renal dialysis services.\28\ Current guidance in Chapter 17, section
40.1 of the Medicare Claims Processing Manual states that the ESRD
facility must bill the program using the JW modifier for the amount of
ESAs appropriately discarded if the home dialysis patient must discard
a portion of the ESA supply due to expiration of a vial, because of
interruption in the patient's plan of care, or unused ESAs on hand
after a patient's death. We note that separate payment is not made for
ESAs under the ESRD PPS; however, ESAs are eligible for outlier
payments when the criteria in Sec. 413.237 are met.
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\26\ <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c08.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c08.pdf</a>.
\27\ <a href="https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c17.pdf">https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c17.pdf</a>.
\28\ Prior to the ESRD PPS, a Medicare ESRD beneficiary could
elect to obtain home dialysis equipment and supplies from a supplier
that was not a Medicare approved dialysis facility. This was
referred to as Method II home dialysis. In the CY 2011 ESRD PPS
final rule (75 FR 49061), we stated that all costs associated with
home dialysis services (both Method I and Method II) are included in
the composite portion of the two equation model, and we stated that
effective January 1, 2011, all home ESRD patients would be
considered Method I home patients and all Medicare payments for home
dialysis services would be made to the ESRD facility.
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Most recently, the March 15, 2022 Change Request \29\ that
established the TDAPA for Korsuva\TM\ (difelikefalin), instructs
facilities to use the JW modifier to report the amount of difelikefalin
that is discarded and eligible for payment under the ESRD PPS. We note
that based on the latest available data, nearly 40 percent of the TDAPA
expenditures for those drugs that were reported in 2022 represented
discarded amounts reported using the JW modifier. This represents
approximately $1.3 million in TDAPA expenditures for discarded amounts
of difelikefalin. Overall, our analysis of Medicare claims data from
2017 to 2021 finds that approximately 2 percent of ESRD PPS claims
indicate discarded or unused portions of drugs or biological products
through use of the JW modifier. From 2017 to 2021, we estimate that the
total amount of unused product billed from 2017 to 2021 and paid for
under the ESRD PPS is approximately $22 million.
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\29\ <a href="https://www.cms.gov/files/document/r11295CP.pdf">https://www.cms.gov/files/document/r11295CP.pdf</a>.
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Under our current policy, we do not reduce the single payment under
the ESRD PPS for any discarded amounts of renal dialysis drugs or
biological products that are reported with the JW modifier.
Furthermore, when calculating any adjustments to the ESRD PPS base rate
for the TDAPA or outlier payments, we include all units of renal
dialysis drugs and biological products billed on the claim for which an
adjustment is made, including any discarded amounts of such drugs and
biological products. Additionally, we have previously established in
the CY 2012 ESRD PPS final rule (76 FR 70243 through 70244) that ESRD
facilities may only report units and charges for drugs and biological
products actually purchased and may not bill for overfill units of
drugs and biological products which exceed the amount indicated on the
vial or package labeling. Additionally, we explained that consistent
with prior rulemaking, under our authority in section
1881(b)(14)(D)(ii) of the Act, we were adopting the average sales price
(ASP) policy on overfill for purposes of calculating the outlier
payment. That is, we adopted a policy to exclude overfill units of
drugs and biological products which exceed the amount indicated on the
vial or package labeling from consideration for the purposes of
calculating outlier payments. We stated we believe the use of the ASP
policy for purposes of calculating the outlier payment is appropriate
because we believe overfill does not represent a cost to the ESRD
facility; thus, overfill should not factor into our determination of
outlier payments.
In summary, our longstanding policy for payment under the ESRD PPS,
including the calculation of the TDAPA and outlier payment adjustments,
includes payment for units of renal dialysis drugs and biological
products billed with the JW modifier, but does not allow payment for
overfill units. That is, the current ESRD PPS payment policy is
consistent with the broader Medicare Part B policy to pay for the
unused and discarded amount, as well as the dose administered, up to
the amount of the drug indicated on the vial or package labeling.
(3) Proposed ESRD PPS Policy for Reporting of Discarded Amounts of
Renal Dialysis Drugs and Biological Products
As discussed in section II.B.1.j of this proposed rule, we are
undertaking analysis of ESRD PPS claims and cost report data in order
to better understand the patient-specific costs associated with
furnishing renal dialysis services to Medicare beneficiaries. We
believe that in order to most appropriately consider potential
refinements to the ESRD PPS case-mix adjustments in the future, it is
important to understand and have consistent data about the costs
associated with the quantities of the renal dialysis drugs and
biological products that are actually used by ESRD beneficiaries. This
is consistent with our longstanding policy principles, which are
reflected by our policy for billing for unused amounts of renal
dialysis drugs and biological products under the ESRD PPS. In the CY
2016 ESRD PPS final rule (80 FR 69033), we discussed our existing
policy since the inception of the ESRD PPS that all renal dialysis
service drugs and biological products 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.
We stated that ESRD 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. We noted that any billing system changes to effectuate this
change needed to be made as soon as possible, as this requirement had
been in effect since the ESRD PPS began in 2011. This policy is also
discussed in the Medicare Benefits Policy Manual, Pub. 100-02, Chapter
11, section 20.3.C.
Consistent with our longstanding billing policies for unused
amounts of drugs and biological products and consistent with the
requirements for the uniform use of the JW modifier for all claims for
separately payable drugs under Part B since 2017, in order to more
effectively identify and monitor billing and payment for discarded
amounts of drugs, we are proposing to require ESRD facilities to report
accurate and consistent data about discarded amounts of single-dose
renal dialysis drugs and biological products paid under the ESRD PPS.
Further, section 1881(b)(2)(B) of the Act requires the Secretary to
prescribe in regulations

[[Page 42455]]

any methods and procedures to determine the costs incurred by ESRD
facilities in furnishing renal dialysis services to beneficiaries with
ESRD, and to determine payment amounts for part B services furnished by
such ESRD facilities.
Under our longstanding policy, payment is made under the ESRD PPS
bundled payment for discarded amounts of renal dialysis drugs and
biological products, and such discarded amounts are included in the
calculation of the ESRD PPS base rate and any applicable adjustments,
such as the TDAPA and the outlier adjustment. Therefore, consistent
with the current JW and JZ reporting requirements that were finalized
in the CY 2023 PFS final rule for separately payable Part B drugs, we
are proposing to require that beginning no later than January 1, 2024,
ESRD facilities must report information on ESRD PPS claims about the
total number of billing units of any discarded amount of a renal
dialysis drug or biological product from a single-dose container or
single-use package that is paid for under the ESRD PPS, using the JW
modifier (or any successor modifier that includes the same data). We
are also proposing that ESRD facilities must document any discarded
amounts in the beneficiary's medical record. Additionally, we are
proposing to require ESRD facilities to report the JZ modifier for all
such renal dialysis drugs and biological products with no discarded
amounts, beginning no later than January 1, 2024. We are proposing to
codify these reporting requirements in regulation at Sec.
413.198(b)(5) and (6).
Under this proposal, the amount of a renal dialysis drug or
biological product from a single-dose container or single-use package
that is administered would be billed on one line (reflected as billing
units in the unit field) and any discarded amounts would be billed on a
separate line with the JW modifier (reflected as billing units in the
unit field). If a renal dialysis drug or biological product from a
single-dose container or single-use package is administered and there
are no discarded amounts, then we are proposing that a single line
would be billed on the claim form with the JZ modifier and the billing
units in the unit field. Therefore, on all claims for renal dialysis
drugs and biological products from single-dose containers or single-use
packages payable under the ESRD PPS, we are proposing that either the
JW modifier would be used (on a separate line) to identify any
discarded amounts or the JZ modifier (on the claim line with the
administered amount) would be present to attest that there were no
discarded amounts. We are proposing that claims for renal dialysis
drugs and biological products from single-dose containers or single-use
packages that do not report either the JW or JZ modifier may be
returned as un-processable until claims are properly resubmitted.\30\
If this proposal is finalized, CMS would publish information about
which HCPCS codes would be identified as single-dose containers or
single-use package renal dialysis drugs and biological products subject
to required reporting of the JW or JZ modifier. We also would plan to
issue guidance regarding additional operational considerations and
billing instructions specific to the proposed reporting requirements
for these products, if finalized.
---------------------------------------------------------------------------

\30\ Under the basic requirements for all claims at Sec.
424.32(a)(1), a claim must be filed with the appropriate
intermediary or carrier on a form prescribed by CMS in accordance
with CMS instructions. Chapter 1 of the Medicare Claims Processing
Manual, section 70.2.3.1 states that submissions that are found to
be incomplete or invalid are returned to the provider (RTP).
---------------------------------------------------------------------------

We are clarifying that, under our proposal, ESRD facilities would
not be required to document in the beneficiary's medical record when
there are no discarded amounts. Lastly, we are reiterating that, as
discussed in the CY 2023 PFS final rule (87 FR 69722), units for renal
dialysis drugs and biological products that are bundled under the
Medicare ESRD PPS are not subject to the Medicare Part B discarded drug
refund program and would continue to be exempted from the Medicare Part
B discarded drug refund. We are also clarifying that for any oral-only
drugs, as defined in Sec. 413.234(a), to the extent that any such
drugs are produced in single-dose containers or single-use packaging,
this proposed reporting requirement would not apply until such drugs
are paid for under the ESRD PPS.
We believe that this proposed reporting requirement would enable
CMS to obtain more reliable information about the extent to which the
costs of providing renal dialysis drugs and biological products
represent amounts that beneficiaries use as well as amounts that are
discarded. We believe this is particularly important because under
Medicare Part B, beneficiaries are responsible for paying a 20 percent
coinsurance. As noted above, nearly 40 percent of TDAPA expenditures in
CY 2022 represented discarded amounts of renal dialysis drugs and
biological products. Medicare beneficiaries, therefore, paid
approximately $260,000 in copayments for these discarded amounts. While
this currently represents a small amount of payments overall, the cost
for discarded renal dialysis drugs and biological products is borne by
a very small population of beneficiaries. It is important for CMS to
understand the full scope of expenditures, including expenditures that
may be incurred by beneficiaries, for discarded amounts of renal
dialysis drugs and biological products in the future, which may be more
expensive or more widely used than the current drug that is being paid
for using the TDAPA under the ESRD PPS. Thus, we are not proposing in
this rule to alter payments to ESRD facilities based on the amounts of
discarded renal dialysis drugs and biological products reported, but
data collected through adoption of the JW and JZ modifier reporting
requirements discussed in this section may inform future payment
policies, which would be proposed through future notice and comment
rulemaking if appropriate.
Based on our analysis of ESRD PPS claims, as well as the billing
guidance in sections 8 and 17 of the Medicare Claims Processing Manual,
we believe the proposed JW modifier requirement reflects current
practices for ESRD facilities, and would not significantly increase
burden for ESRD facilities. Additionally, we believe the proposed JZ
modifier requirement would not increase burden on ESRD facilities,
because under the current guidance provided regarding use of the JW
modifier, the ESRD facility should already have processes in place in
order to determine, in the case of certain drugs and biological
products, whether or not there are any discarded units from a single-
dose container or single-use package, record discarded amounts in the
patient medical record, and specify administered and discarded amounts
on the claim form. Furthermore, we note that while renal dialysis drugs
and biological products that are paid under the ESRD PPS are not
considered separately payable, ESRD facilities are permitted to bill
and receive separate payment using the AY modifier for drugs and
biological products that are not related to the treatment of ESRD.
Although we have noted that renal dialysis drugs and biological
products paid under the ESRD PPS are not subject to the Medicare Part B
drug refund program or the current JW or JZ reporting requirements, any
separately payable drugs or biological products that ESRD facilities
bill for using the AY modifier would be subject to such policies under
Medicare Part B. Therefore, we believe that most ESRD facilities should
already be reporting the JW and JZ modifiers in

[[Page 42456]]

such circumstances, and would reasonably be able to report these
modifiers for renal dialysis drugs and biological products as well. We
welcome comments on this assumption and on these proposed JW and JZ
reporting requirements for the ESRD PPS.
i. Proposed New Add-On Payment Adjustment for Certain New Renal
Dialysis Drugs and Biological Products After the TDAPA Period Ends
(1) Background on the TDAPA
Section 217(c) of PAMA required the Secretary to establish a
process for including new injectable and intravenous (IV) products into
the ESRD PPS bundled payment as part of the CY 2016 ESRD PPS
rulemaking. Therefore, in the CY 2016 ESRD PPS final rule (80 FR 69013
through 69027), we finalized a process based on our longstanding drug
designation process that allowed us to include new injectable and
intravenous products into the ESRD PPS bundled payment and, when
appropriate, modify the ESRD PPS payment amount. We codified this
process in our regulations at 42 CFR 413.234. We finalized that the
process is dependent upon the ESRD PPS functional categories,
consistent with the drug designation process we have followed since the
implementation of the ESRD PPS in 2011. As we explained in the CY 2016
ESRD PPS final rule (80 FR 69014), when we implemented the ESRD PPS,
drugs and biological products were grouped into functional categories
based on their action. This was done to add new drugs or biological
products with the same functions to the ESRD PPS bundled payment as
expeditiously as possible after the drugs are commercially available so
beneficiaries have access to them. As we stated in the CY 2011 ESRD PPS
final rule, we did not specify all the drugs and biological products
within these categories, because we did not want to inadvertently
exclude drugs that may be substitutes for drugs we identified, and we
wanted the ability to reflect new drugs and biological products
developed or changes in standards of practice (75 FR 49052).
In the CY 2016 ESRD PPS final rule, we finalized the definition of
an ESRD PPS functional category in Sec. 413.234(a) as 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 (80 FR 69077). We finalized a policy in
the CY 2016 ESRD PPS final rule that if a new renal dialysis injectable
or IV product falls within an existing functional category, the new
injectable drug or IV product is considered included in the ESRD PPS
bundled payment and no separate payment is available. The new
injectable or IV product qualifies as an outlier service. We noted in
that rule that the ESRD bundled market basket update is used to
increase the ESRD PPS base rate annually and accounts for price changes
of the drugs and biological products. We also finalized in the CY 2016
ESRD PPS final rule that, if the new renal dialysis injectable or IV
product does not fall within an existing functional category, the new
injectable or IV product is not considered included in the ESRD PPS
bundled payment and the following steps occur. First, 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 IV
product is used to treat or manage. Next, the new injectable or IV
product is paid for using the TDAPA codified in Sec. 413.234(c).
Finally, the new injectable or IV product is added to the ESRD PPS
bundled payment following payment of the TDAPA.
In the CY 2016 ESRD PPS final rule, we finalized a policy in Sec.
413.234(c) to pay the TDAPA until sufficient claims data for rate
setting analysis for the new injectable or IV product are available,
but not for less than 2 years. The new injectable or IV product is not
eligible as an outlier service during the TDAPA period. We established
that following the TDAPA period, the ESRD PPS base rate will be
modified, if appropriate, to account for the new injectable or IV
product in the ESRD PPS bundled payment.
In the CYs 2019 and 2020 ESRD PPS final rules (83 FR 56927 through
56949 and 84 FR 60653 through 60677, respectively), we made several
revisions to the drug designation process regulations at Sec. 413.234.
In the CY 2019 ESRD PPS final rule, we revised the regulations at Sec.
413.234(a), (b), and (c) to reflect that the process applies for all
new renal dialysis drugs and biological products that are FDA approved
regardless of the form or route of administration. In addition, we
revised Sec. 413.234(b) and (c) to expand the TDAPA to all new renal
dialysis drugs and biological products, rather than just those in new
ESRD PPS functional categories. In the CY 2020 ESRD PPS final rule, we
revised Sec. 413.234(b) and added paragraph (e) to exclude from TDAPA
eligibility generic drugs approved by FDA under section 505(j) of the
Federal Food, Drug, and Cosmetic Act and drugs for which the new drug
application is classified by FDA as Type 3, 5, 7, or 8, Type 3 in
combination with Type 2 or Type 4, or Type 5 in combination with Type
2, or Type 9 when the ``parent NDA'' is a Type 3, 5, 7, or 8, effective
January 1, 2020.
Under our current TDAPA policy at Sec. 413.234(c), a new renal
dialysis drug or biological product that falls within an existing ESRD
PPS functional category is considered included in the ESRD PPS base
rate and is paid the TDAPA for 2 years. After the TDAPA period, the
ESRD PPS base rate will not be modified. If the new renal dialysis drug
or biological product does not fall within an existing ESRD PPS
functional category, it is not considered included in the ESRD PPS base
rate, and it will be paid the TDAPA until sufficient claims data for
rate setting analysis is available, but not for less than 2 years.
After the TDAPA period, the ESRD PPS base rate will be modified, if
appropriate, to account for the new renal dialysis drug or biological
product in the ESRD PPS bundled payment.
As discussed in the CY 2019 and CY 2020 ESRD PPS final rules, for
new renal dialysis drugs and biological products that fall into an
existing ESRD PPS functional category, the TDAPA helps ESRD facilities
to incorporate new drugs and biological products and make appropriate
changes in their businesses to adopt such products, provides additional
payments for such associated costs, and promotes competition among the
products within the ESRD PPS functional categories, while focusing
Medicare resources on products that are innovative (83 FR 56935; 84 FR
60654). For new renal dialysis drugs and biological products that do
not fall within an existing ESRD PPS functional category, the TDAPA is
a potential pathway toward a potential ESRD PPS base rate modification
(83 FR 56935). For the complete history of the TDAPA policy, including
the pricing methodology, please see the CY 2016 ESRD PPS final rule (80
FR 69023 through 69024), CY 2019 ESRD PPS final rule (83 FR 56932
through 56948), and CY 2020 ESRD PPS final rule (84 FR 60653 through
60681).
(2) Request for Information in the CY 2023 ESRD PPS Proposed Rule
In the CY 2023 ESRD PPS proposed rule (87 FR 38522 through 38523),
we summarized the concerns of interested parties and issued a request
for information about methods that could be used to develop an add-on
payment adjustment for certain new renal dialysis drugs and biological
products after the end of the TDAPA. We explained that since 2019,
dialysis associations and pharmaceutical

[[Page 42457]]

representatives have expressed concerns to CMS about payment following
the TDAPA period for new renal dialysis drugs and biological products
that are paid for using the TDAPA. We noted that these interested
parties have asserted that unless money is added to the ESRD PPS base
rate for these drugs and biological products, similar to what occurred
with calcimimetics (85 FR 71406 through 71410), then it is unlikely
that ESRD facilities would be able to sustain the expense of these
drugs and biological products when the TDAPA period ends. Further,
these interested parties cautioned that uncertainty about payment could
affect ESRD facility adoption of these drugs and biological products
during the TDAPA period. We noted that to date, calcimimetics are the
only renal dialysis drugs or biological products that have been paid
for using the TDAPA and incorporated into the ESRD PPS bundled payment
following the TDAPA payment period. We stated that there have been no
other renal dialysis drugs or biological products that have completed
their TDAPA payment period, and as a result, CMS does not yet have data
on other drugs or biological products in order to evaluate the specific
risks and access challenges that interested parties have raised.
We also discussed that, as mentioned in the CY 2019 (83 FR 56941)
and CY 2020 (84 FR 60672 and 60693) ESRD PPS final rules, many
commenters have suggested a rate-setting exercise at the end of the
TDAPA period for all new renal dialysis drugs and biological products.
We responded to those comments by noting that we do not believe adding
dollars to the ESRD PPS base rate would be appropriate for new drugs
that fall into the ESRD PPS functional categories, given that the
purpose of the TDAPA for these drugs is to help ESRD facilities
incorporate new drugs and biological products and make appropriate
changes in their businesses to adopt such products, provide additional
payments for such associated costs, and promote competition among the
products within the ESRD PPS functional categories. In addition, we
explained that the ESRD PPS base rate already includes money for renal
dialysis drugs and biological products that fall within an existing
ESRD PPS functional category. We stated that under a PPS, Medicare
makes payments based on a predetermined, fixed amount that reflects the
average patient, and that there would be patients whose treatment costs
at an ESRD facility would be more or less than the ESRD PPS payment
amount. We noted that a central objective of the ESRD PPS and of
prospective payment systems in general is for ESRD facilities to be
efficient in their resource use.
We also noted that price changes to the ESRD PPS bundled payment
are updated annually by the ESRDB market basket update, which includes
a pharmaceutical cost category weight. In addition, we explained that
our analysis of renal dialysis drugs and biological products paid for
under the ESRD PPS has found costs and utilization to have decreased
over time for some high volume formerly separately billable renal
dialysis drugs, relative to overall market basket growth. Therefore, we
stated that we believe that any potential methodology for an add-on
payment adjustment in these circumstances should adapt to changes in
price and utilization over time.
We noted that section 1881(b)(14)(D)(iv) of the Act provides that
the ESRD PPS may include such other payment adjustments as the
Secretary determines appropriate, such as a payment adjustment--(I) for
pediatric providers of services and renal dialysis facilities; (II) by
a geographic index, such as the index referred to in section
1881(b)(12)(D), as the Secretary determines to be appropriate; and
(III) for providers of services or renal dialysis facilities located in
rural areas. Regarding the patient access concerns that we discussed in
the CY 2023 ESRD PPS proposed rule, we stated that we were considering
whether it would be appropriate to establish an add-on payment
adjustment for certain renal dialysis drugs and biological products in
existing ESRD PPS functional categories after their TDAPA period ends.
We noted that any add-on payment adjustment would be subject to the
Medicare Part B beneficiary co-insurance payment under ESRD PPS.
In the CY 2023 ESRD PPS proposed rule, we presented four potential
methods that we were considering, which we noted could be used to
develop an add-on payment adjustment for these drugs and biological
products. We noted that the methods presented differed in terms of
which formerly separately billable renal dialysis drugs and biological
products would be considered for a potential add-on payment adjustment.
We further noted that under these potential options, we would apply a
reconciliation methodology only when an add-on payment adjustment would
align resource use with payment for a renal dialysis drug or biological
product in an existing ESRD PPS functional category. The four options
are summarized as follows:
<bullet> Reconcile the average expenditure per treatment of the
renal dialysis drug or biological product that was paid for using the
TDAPA with any reduction in the expenditure per treatment across all
other formerly separately billable renal dialysis drugs and biological
products. For example, if the reduction in the cost of all formerly
separately billable renal dialysis drugs and biological products per
treatment excluding the renal dialysis drug or biological product that
was paid for using the TDAPA is $5 and the cost per treatment of the
renal dialysis drug or biological product that was paid for using the
TDAPA is $10, the add-on payment adjustment per treatment would be $10
minus $5, which is $5. The reductions in formerly separately billable
renal dialysis drug and biological products expenditures per treatment
would be calculated by using the difference between these expenditures
in the most recent year with claims data available and these
expenditures in the current base year for the ESRDB market basket,
which is CY 2020. We provided the following example: If the rule year
for which we are calculating the add-on payment adjustment is CY 2023
and the base year for the ESRDB market basket is CY 2020, the reduction
in formerly separately billable renal dialysis drugs and biological
products expenditures would be the difference between these
expenditures in CY 2021 (the year with the most recent claims data) and
those in CY 2020.
<bullet> Reconcile the average expenditure per treatment for the
renal dialysis drug or biological product that was paid for using the
TDAPA with any reduction in expenditures for other formerly separately
billable renal dialysis drugs or biological products, where such
reduction can be empirically attributed to the renal dialysis drug or
biological product that was paid for using the TDAPA. For example, if
the utilization of the renal dialysis drug or biological product that
was paid for using the TDAPA was found to be statistically associated
with reduction in expenditure of one drug in an ESRD PPS functional
category amounting to $1 per treatment, and the cost per treatment of
the renal dialysis drug or biological product that was paid for using
the TDAPA is $10, the add-on payment adjustment per treatment would be
$10 minus $1, which is $9.
<bullet> Reconcile the average expenditure per treatment for the
renal dialysis drug or biological product that was paid for using the
TDAPA with any reduction in expenditures for other formerly separately
billable renal dialysis drugs that fall into one or more ESRD PPS

[[Page 42458]]

functional categories, where such expenditure reduction is data-driven,
based on end action effect, to be attributable to the renal dialysis
drug or biological product that was paid for using the TDAPA. Such a
data-driven determination would be made by CMS. For example, if the
cost per treatment of the renal dialysis drug or biological product
that was paid for using the TDAPA is $10 and the reduction in the
expenditure for other clinically related formerly separately billable
renal dialysis drugs is $0.50 per treatment, the add-on payment
adjustment would be $10 minus $0.50, which is $9.50.
<bullet> Only use the average expenditure per treatment of the
renal dialysis drug or biological product that was paid for using the
TDAPA. For example, if the per treatment cost of the renal dialysis
drug or biological product that was paid for using the TDAPA is $10,
this would be the amount of the add-on payment adjustment.
Following the discussion in the CY 2023 ESRD PPS proposed rule
about these potential methodologies, we issued a request for
information within that proposed rule (87 FR 38523) to seek feedback
from the public on the following questions.
<bullet> Is an add-on payment adjustment for certain renal dialysis
drugs and biological products in existing ESRD PPS functional
categories after the TDAPA period ends needed? If so, why? What
criteria should CMS establish to determine which renal dialysis drugs
or biological products would be included in the calculation for an add-
on payment adjustment after the TDAPA period ends?
<bullet> If an add-on payment adjustment for certain renal dialysis
drugs and biological products in existing ESRD PPS functional
categories after the TDAPA period is needed, are the methods discussed
in section II.D.4 of the CY 2023 ESRD PPS proposed rule sufficient to
address the add-on payment adjustment?
++ Which method would be most appropriate?
++ Are there changes to the methodologies that CMS should consider
to improve our ability to align payment for renal dialysis services
with resource utilization? Please provide as much detail as possible.
++ Are there other methodologies that CMS should consider? Please
provide as much detail as possible.
We noted that while we would not be responding to specific comments
submitted in response to this RFI, we intended to use this input to
inform future policy development. We stated that any potential payment

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