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Rule2023-23915

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

November 6, 2023

Effective

January 1, 2024

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This final rule updates and revises the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year (CY) 2024. This rule also updates the payment rate for renal dialysis services furnished by an ESRD facility to individuals with acute kidney injury (AKI). In addition, this final rule updates requirements for the ESRD Quality Incentive Program and the ESRD Treatment Choices Model.

Full Text

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[Federal Register Volume 88, Number 213 (Monday, November 6, 2023)]
[Rules and Regulations]
[Pages 76344-76507]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-23915]

[[Page 76343]]

Vol. 88

Monday,

No. 213

November 6, 2023

Part III

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; Final Rule

Federal Register / Vol. 88 , No. 213 / Monday, November 6, 2023 /
Rules and Regulations

[[Page 76344]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 512

[CMS-1782-F]
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: Final rule.

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SUMMARY: This final rule updates and revises the End-Stage Renal
Disease (ESRD) Prospective Payment System (PPS) for calendar year (CY)
2024. This rule also updates the payment rate for renal dialysis
services furnished by an ESRD facility to individuals with acute kidney
injury (AKI). In addition, this final rule updates requirements for the
ESRD Quality Incentive Program and the ESRD Treatment Choices Model.

DATES: These regulations are effective on January 1, 2024.

FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#d09583829480b1a9bdb5bea490b3bda3feb8b8a3feb7bfa6">[email&#160;protected]</a>, for issues related to the ESRD PPS and
coverage and payment for renal dialysis services furnished to
individuals with AKI.
<a href="/cdn-cgi/l/email-protection#afeafcfdebeedfdfc3c6cccedbc6c0c1dcefccc2dc81c7c7dc81c8c0d9">[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).
<a href="/cdn-cgi/l/email-protection#c08593928491899080a3adb3eea8a8b3eea7afb6">[email&#160;protected]</a>, for issues related to the ESRD Quality
Incentive Program (QIP).
<a href="/cdn-cgi/l/email-protection#93d6c7d0bed0dededad3f0fee0bdfbfbe0bdf4fce5">[email&#160;protected]</a>, for issues related to the ESRD Treatment
Choices (ETC) Model.

SUPPLEMENTARY INFORMATION:
Current Procedural Terminology (CPT) Copyright Notice: Throughout
this final 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, Public Comments, and
Responses to the Comments on the CY 2024 ESRD PPS
C. Transitional Add-On Payment Adjustment for New and Innovative
Equipment and Supplies (TPNIES) Clarifications 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 CY 2024
III. Calendar Year (CY) 2024 Payment for Renal Dialysis Services
Furnished to Individuals With Acute Kidney Injury (AKI)
A. Background
B. Summary of the Proposed Provisions, Public Comments, and
Responses to Comments on CY 2024 Payment for Renal Dialysis Services
Furnished to Individuals With AKI
C. Annual Payment Rate Update for CY 2024
IV. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
A. Background
B. Updates to the Regulation Text for the ESRD QIP
C. Updates to the Requirements Beginning With the PY 2026 ESRD
QIP
D. 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, Public Comments, and
Responses to Comments on the ETC Model
VI. Collection of Information Requirements
VII. 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
I. Congressional Review Act
VIII. Files Available to the Public via the Internet

I. Executive Summary

A. Purpose

This rule finalizes changes related 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 rule finalizes policies that reflect
our commitment to achieving equity in health care for our beneficiaries
by supporting our ability to assess whether, and to what extent, our
programs and policies perpetuate or exacerbate systemic barriers to
opportunities and benefits for underserved communities. Our policy
objectives include commitment to advancing health equity, which stands
as the first pillar of the Centers for Medicare & Medicaid Services
(CMS) Strategic Plan,\1\ and reflect the goals of the Administration,
as stated in the President's 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 the calendar year (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, 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 final
rule, we continue to address health equity for beneficiaries with ESRD
who are 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

[[Page 76345]]

opportunity to participate in aspects of economic, social, and civic
life.\4\ Specifically, in the CY 2024 ESRD PPS proposed rule (88 FR
42431), we requested information regarding a potential payment
adjustment for geographically isolated and rural ESRD facilities,
proposed additional payment for the subgroup of Pediatric ESRD Patients
(as defined in 42 CFR 413.171), and proposed policies to further 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. As discussed in sections II.B.1.g and
II.B.1.j of this final rule, we are now finalizing the proposed payment
adjustment for Pediatric ESRD Patients and policies to improve the
measurement of individual resource use. Additionally, we are adding
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 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 final rule updates 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 final rule updates 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 final rule finalizes several updates for the ESRD QIP, including:
(1) updates that will begin with Payment Year (PY) 2026, including one
new quality measure, modifications to two current measures, and the
removal of two measures; (2) the addition of two new measures beginning
with PY 2027; (3) 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; and (4) the codification of our previously finalized measure
selection, retention, and removal policies.
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 final rule, we are
finalizing a modification to our regulations at 42 CFR 512.390 to
acknowledge the availability of administrative review of targeted
review requests. This change will 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> Update to the ESRD PPS base rate for CY 2024: The final CY
2024 ESRD PPS base rate is $271.02, an increase from the CY 2023 ESRD
PPS base rate of $265.57. This amount reflects the application of the
combined wage index and transitional pediatric ESRD add-on payment
adjustment (TPEAPA) budget-neutrality adjustment factor (0.999534) and
a productivity-adjusted market basket percentage increase of 2.1
percent as required by section 1881(b)(14)(F)(i)(I) of the Act,
equaling $271.02 (($265.57 x 0.999534) x 1.021 = $271.02).
<bullet> 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 updating the wage index values based on the latest
available data.
<bullet> Annual update to the outlier policy: We are updating the
outlier policy based on the most current data. Accordingly, we are
updating the Medicare allowable payment (MAP) amounts for adult and
pediatric patients for CY 2024 using the latest available CY 2022
claims data. We are updating the ESRD outlier services fixed dollar
loss (FDL) amount for pediatric patients using the latest available CY
2022 claims data and updating the FDL amount for adult patients using
the latest available claims data from CY 2020, CY 2021, and CY 2022.
For pediatric beneficiaries, the final FDL amount will decrease from
$23.29 to $11.32, and the MAP amount will decrease from $25.59 to
$23.36, as compared to CY 2023 values. For adult beneficiaries, the
final FDL amount will decrease from $73.19 to $71.76, and the MAP
amount will decrease from $39.62 to $36.28. The 1.0 percent target for
outlier payments was not achieved in CY 2022. Outlier payments
represented approximately 0.8 percent of total

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Medicare payments rather than 1.0 percent.
<bullet> Update to the offset amount for the transitional add-on
payment adjustment for new and innovative equipment and supplies
(TPNIES) for CY 2024: The final CY 2024 average per treatment offset
amount for the TPNIES for capital-related assets that are home dialysis
machines is $10.00. This offset amount reflects the application of the
ESRD Bundled (ESRDB) productivity-adjusted market basket update of 2.1
percent ($9.79 x 1.021 = $10.00). There are no capital-related assets
set to receive the TPNIES in CY 2024 for which this offset will apply.
<bullet> Clarifications to the TPNIES eligibility criteria: We are
finalizing certain clarifications regarding our evaluation of the
TPNIES eligibility criteria under Sec. 413.236(b).
<bullet> TPNIES application received for CY 2024: In this final
rule, we announce our determination on the one TPNIES application under
consideration for the TPNIES for CY 2024 payment.
<bullet> Modifications to the administrative process for the low-
volume payment adjustment (LVPA): We are finalizing exceptions to the
current LVPA attestation process for ESRD facilities that are affected
by disasters and other emergencies. These exceptions will allow ESRD
facilities to close and reopen in response to a disaster or other
emergency and still receive the LVPA. Additionally, the exceptions will
allow an ESRD facility to receive the LVPA even if it exceeds the LVPA
treatment volume threshold if its treatment counts increase due to
treating additional patients displaced by a disaster or emergency.
<bullet> Policy to measure patient-level utilization: We are
finalizing a requirement for 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, effective
January 1, 2025. This will serve to provide more data to better inform
CMS's pursuit of equitable payment policies in the future.
<bullet> Transitional Pediatric ESRD Add-on Payment Adjustment
(TPEAPA): We are finalizing the establishment of a new budget neutral
add-on payment adjustment of 30 percent of the per treatment payment
amount for renal dialysis services furnished to Pediatric ESRD Patients
effective January 1, 2024, for CYs 2024, 2025, and 2026. This will
serve to bring Medicare payments for renal dialysis services furnished
to pediatric patients more in line with their estimated relative costs
for the next 3 years until further collection and analysis of cost
report data can be conducted.
<bullet> Add-on payment adjustment following the end of the
transitional drug add-on payment adjustment (TDAPA) period: We are
finalizing 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 call the post-
TDAPA add-on payment adjustment. This payment adjustment will be case-
mix adjusted and set at 65 percent of expenditure levels for the given
renal dialysis drug or biological product. The post-TDAPA add-on
payment adjustment will be applied to all ESRD PPS payments and paid
for 3 years.
<bullet> Reporting of discarded billing units of certain renal
dialysis drugs and biological products paid for under the ESRD PPS: We
are finalizing a new policy to require the use of the JW or JZ modifier
on claims to track discarded amounts of single-dose container and
single-use package renal dialysis drugs and biological products paid
for under the ESRD PPS, effective January 1, 2025.
2. Payment for Renal Dialysis Services Furnished to Individuals With
AKI
We are updating the AKI payment rate for CY 2024. The final CY 2024
payment rate is $271.02, which is the same as the base rate finalized
for the ESRD PPS for CY 2024.
3. ESRD QIP
We are finalizing several updates for the ESRD QIP. Beginning with
PY 2026, we are adding the Facility Commitment to Health Equity
reporting measure to the ESRD QIP measure set, modifying 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), removing the Ultrafiltration
Rate reporting measure and the Standardized Fistula Rate clinical
measure, and updating the Clinical Depression Screening and Follow-Up
measure's scoring methodology and converting that measure to a clinical
measure. Beginning with PY 2027, we are adding the Screening for Social
Drivers of Health reporting measure and the Screen Positive Rate for
Social Drivers of Health reporting measure to the ESRD QIP measure set.
In addition, we are revising the codified definition of ``minimum total
performance score'' and codifying our previously finalized measure
selection, retention, and removal policies.
4. ETC Model
We are finalizing a modification to 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 VII.D.5 of this final rule, we set forth a detailed
analysis of the impacts that the finalized changes will have on
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
The impact table in section VII.D.5.a of this final rule displays
the estimated change in Medicare payments to ESRD facilities in CY 2024
compared to estimated Medicare payments in CY 2023. The overall impact
of the CY 2024 changes is projected to be a 2.1 percent increase in
Medicare payments. Hospital-based ESRD facilities have an estimated 3.1
percent increase in Medicare payments compared with freestanding ESRD
facilities with an estimated 2.0 percent increase. We estimate that the
aggregate ESRD PPS expenditures will increase by approximately $190
million in CY 2024 compared to CY 2023. This reflects an increase of
approximately $180 million from the payment rate update and the final
post-TDAPA add-on payment adjustment and approximately $10 million in
estimated TDAPA payment amounts for Korsuva[supreg] and Jesduvroq
(daprodustat), as further described in the following paragraphs.
Because of the projected 2.1 percent overall payment increase, we
estimate there will be an increase in beneficiary coinsurance payments
of 2.1 percent in CY 2024, which translates to approximately $40
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 final rule, the TPNIES payment
period for the Tablo[supreg] System ends on December 31, 2023. As
discussed in section II.E of this final rule, the TDAPA

[[Page 76347]]

payment period for Korsuva[supreg] (difelikefalin) will continue
through March 31, 2024, and for Jesduvroq, will continue throughout
2024. As described in section VII.D.5 of this final rule, we estimate
that the overall TDAPA payment amounts in CY 2024 will be approximately
$13.3 million, of which, approximately $2.7 million will be attributed
to beneficiary coinsurance amounts. We note that these expenditures are
estimated in addition to the overall $180 million increase described in
the preceding paragraphs and are not fully represented in the detailed
impact analysis shown in Table 24.
Lastly as discussed in section II.B.1.i of this final rule, we are
finalizing a non-budget-neutral payment adjustment for certain new
renal dialysis drugs and biological products after the TDAPA period
ends, starting in CY 2024. The structure of the post-TDAPA add-on
payment adjustment for a new renal dialysis drug or biological product
will be based on the case-mix adjusted average per-treatment
expenditure for such drug or biological product. We will apply a 65
percent risk-sharing adjustment to the calculated payment amount for
the post-TDAPA add-on payment adjustment. We are finalizing a 3-year
period following TDAPA during which the drug or biological product
would be included in the post-TDAPA add-on payment adjustment. During
this period, the renal dialysis drug or biological product would be
considered for outlier payments, if it meets the definition of an ESRD
outlier service. The first drug that will meet these criteria in CY
2024 will be Korsuva[supreg], which fits into the existing ESRD PPS
functional category for antipruritic drugs and biological products. The
post-TDAPA add-on payment adjustment calculated for Korsuva[supreg]
will be $0.2493.
2. Impacts of the Final Payment Rate for Renal Dialysis Services
Furnished to Individuals With AKI
The impact table in section VII.D.5.c of this final rule displays
the estimated change in Medicare payments to ESRD facilities for renal
dialysis services furnished to individuals with AKI compared to
estimated Medicare payments for such services in CY 2023. The overall
impact of the CY 2024 changes is projected to be a 2.0 percent increase
in Medicare payments for individuals with AKI. Hospital-based ESRD
facilities have an estimated 2.1 percent increase in Medicare payments
compared with freestanding ESRD facilities that have an estimated 2.0
percent increase. The overall impact reflects the effects of the final
Medicare payment rate update and final CY 2024 ESRD PPS wage index. We
estimate that the aggregate Medicare payments made to ESRD facilities
for renal dialysis services furnished to individuals with AKI, at the
final CY 2024 ESRD PPS base rate, will increase by $1 million in CY
2024 compared to CY 2023.
3. Impacts of the Final Changes to the ESRD QIP
We estimate that the overall economic impact of the PY 2026 ESRD
QIP will be approximately $136.9 million. The $136.9 million estimate
for PY 2026 includes $120.9 million in costs associated with the
collection of information requirements and approximately $16 million in
payment reductions across all facilities. We also estimate that the
overall economic impact of the PY 2027 ESRD QIP will be approximately
$144.3 million. The $144.3 million estimate for PY 2027 includes $130.5
million in costs associated with the collection of information
requirements and approximately $13.8 million in payment reductions
across all facilities.
4. Impacts of the Final Changes to the ETC Model
The impact estimate in section VII.D.5.d of this final 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 final rule. We estimate that the ETC
Model will result in $28 million in net savings over the 6.5-year
duration of the ETC Model. We also estimate that the changes in this
final rule will 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
expect there will be minimal additional burden associated with the
administrative review policy we are finalizing.

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) (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 (Affordable Care Act)
(Pub. L. 111-148), established that beginning with CY 2012, and each
subsequent year, the Secretary shall annually increase payment amounts
by an ESRD market basket percentage increase reduced by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act.
Section 632 of the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240) included several provisions that apply to the ESRD
PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act,
which required the Secretary, by comparing per patient utilization data
from 2007 with such data from 2012, to reduce the single payment for
renal dialysis services furnished on or after January 1, 2014, to
reflect the Secretary's estimate of the change in the utilization of
ESRD-related drugs and biologicals (excluding oral-only ESRD-related
drugs). Consistent with this requirement, in the CY 2014 ESRD PPS final
rule, we finalized $29.93 as the total drug utilization reduction and
finalized a policy to implement the amount over a 3- to 4-year
transition period (78 FR 72161 through 72170).
Section 632(b) of ATRA prohibited the Secretary from paying for
oral-only ESRD-related drugs and biologicals under the ESRD PPS prior
to January 1, 2016. Section 632(c) of ATRA required the Secretary, by
no later than January 1, 2016, to analyze the case-mix payment
adjustments under section 1881(b)(14)(D)(i) of the Act and make
appropriate revisions to those adjustments.
On April 1, 2014, the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. 113-93) was enacted. Section 217 of PAMA included
several provisions that apply to the ESRD PPS. Specifically, sections
217(b)(1) and (2) of PAMA amended sections 1881(b)(14)(F) and (I) of
the Act and replaced the drug utilization adjustment that was finalized
in the CY 2014 ESRD PPS final rule (78 FR 72161 through 72170) with
specific provisions that dictated the market basket update for CY 2015
(0.0 percent) and how the market basket percentage increase should be
reduced in CY 2016 through CY 2018.
Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA to
provide that the Secretary may not pay for oral-only ESRD-related drugs
under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) of PAMA
further amended section 632(b)(1) of ATRA by

[[Page 76348]]

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.
Most recently, 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 ESRD Bundled
(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, Public Comments, and Response to
the Comments on the CY 2024 ESRD PPS

The proposed rule, titled ``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'' (88 FR 42430 through 42544), referred to
herein as the ``CY 2024 ESRD PPS proposed rule,'' appeared in the
Federal Register on June 30, 2023, with a comment period that ended on
August 25, 2023. In that rule, we proposed to make a number of annual
updates for CY 2024, including updates to the ESRD PPS base rate, wage
index, outlier policy, and the offset amount for the TPNIES. We also
proposed two new exceptions to the LVPA eligibility requirements for
ESRD facilities impacted by a disaster or other emergency, a new add-on
payment adjustment for pediatric ESRD patients, a new add-on payment
adjustment for certain new drugs and biological products after the
TDAPA period ends, a new reporting requirement for discarded billing
units of certain renal dialysis drugs or biological products, and a new
reporting requirement for time on machine data for in-center
hemodialysis treatments. We proposed clarifications regarding our
evaluation of the TPNIES eligibility criteria under Sec. 413.236(b)
and included a summary of the one CY 2024 TPNIES application that we
received by the February 1, 2023 deadline with our preliminary analysis
of the applicant's claims related to substantial clinical improvement
and other eligibility criteria for the TPNIES. In addition, the
proposed rule included a request for information regarding potential
changes to the LVPA and a potential new payment adjustment for
geographic isolation.
We received 344 public comments on our ESRD PPS proposals,
including comments from kidney and dialysis organizations, such as
large and small dialysis organizations; for-profit and non-profit ESRD
facilities; ESRD networks; and a dialysis coalition. We also received
comments from patients; healthcare providers for adult and pediatric
ESRD beneficiaries; home renal dialysis services and advocacy
organizations; provider and legal advocacy organizations;
administrators and insurance groups; a non-profit dialysis association,
a professional association, and alliances for kidney care and home
dialysis stakeholders; drug and device manufacturers; health care
systems; a health care consultant; and the Medicare Payment Advisory
Commission (MedPAC).
We received comments related to issues that we either did not
discuss in the CY 2024 ESRD PPS proposed rule or that we discussed for
the purpose of background or context, but for which we did not propose
changes in the rule. These include, for example, concerns regarding
staff training, education for kidney disease patients, access to
innovation for Medicare Advantage

[[Page 76349]]

beneficiaries, transportation for ESRD patients, nutrition for ESRD
patients, and telehealth. We also received several comments on Medicare
coverage for certain Humanitarian Use Devices. We are not providing
detailed responses to those comments in this final rule because they
are out of the scope of the CY 2024 ESRD PPS proposed rule. We thank
the commenters for their input and will consider the recommendations in
potential future rulemaking.
We received numerous comments on the potential inclusion of oral-
only drugs into the ESRD PPS bundled payment beginning January 1, 2025.
As noted in the CY 2023 ESRD PPS final rule (87 FR 67180), we expect
that the only oral-only drugs and biological products that would be
included in the ESRD bundled payment in CY 2025 are phosphate binders.
Commenters expressed concerns on potential access and health equity
issues, which could result from including oral-only drugs and
biological products in the ESRD PPS bundled payment. Some commenters
also expressed additional concerns associated with the potential
inclusion of oral-only drugs and biological products in the ESRD PPS
bundled payment, such as concerns about the following: the
administrative burden of managing a patient's dosage and combination of
phosphate lowering drugs; administration of the prescription insofar as
patients think they must go to the ESRD facility to obtain the
phosphate binders; confusion for patients, in that some patients think
the phosphate lowering drugs would only be dispensed at the ESRD
facility, and since the drugs must be taken with food, they would not
be able to take the drugs because eating during dialysis is not
allowed, or they must go to the ESRD facility to get the phosphate
binders even when they do not have a dialysis treatment; innovation of
new oral-only drugs and biological products, such as phosphate lowering
therapies, would be unavailable because of the cost of the new drugs or
biological products; and the definition of oral-only drugs and
biological products for phosphate lowering agents until an intravenous
or injectable equivalent of the drug is available. We thank the
commenters for their insight regarding the potential inclusion of oral-
only drugs and biological products in the ESRD PPS bundled payment
beginning in CY 2025; however, we did not make any proposals related to
the potential inclusion of oral-only drugs and biological products in
the ESRD PPS bundled payment in CY 2025 in the CY 2024 ESRD PPS
proposed rule. We will take commenters' insight, concerns, and
recommendations into consideration for future rulemaking on this topic.
Additionally, we received some comments from commenters including
ESRD patients and caregivers which contained details of quality-of-care
concerns or adverse quality events for which the commenters had first-
hand experience. We address these comments as they concern the
proposals in the CY 2024 ESRD PPS proposed rule, but we wish to note
that any serious adverse quality events can be reported to the CMS
ombudsman. Information on beneficiary rights and how to report quality
events can be found at <a href="https://www.cms.gov/center/special-topic/ombudsman/medicare-beneficiary-ombudsman-home">https://www.cms.gov/center/special-topic/ombudsman/medicare-beneficiary-ombudsman-home</a>.
In this final rule, we provide a summary of each proposed
provision, a summary of the public comments received and our responses
to them, and the policies we are finalizing for the CY 2024 ESRD PPS.
1. CY 2024 ESRD PPS Update
a. CY 2024 ESRD Bundled (ESRDB) Market Basket Percentage Increase;
Productivity Adjustment; and Labor-Related Share
(1) Background
In accordance with section 1881(b)(14)(F)(i) of the Act, as added
by section 153(b) of MIPPA and amended by section 3401(h) of the
Affordable Care Act, beginning in 2012, the ESRD PPS payment amounts
are required to be annually increased by an ESRD market basket
percentage increase and reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. The application
of the productivity adjustment may result in the increase factor being
less than 0.0 for a year and may result in payment rates for a year
being less than the payment rates for the preceding year. Section
1881(b)(14)(F)(i) of the Act also provides that the market basket
increase factor should reflect the changes over time in the prices of
an appropriate mix of goods and services included in renal dialysis
services.
As required under section 1881(b)(14)(F)(i) of the Act, CMS
developed an all-inclusive ESRD Bundled (ESRDB) input price index using
CY 2008 as the base year (75 FR 49151 through 49162). We subsequently
revised and rebased the ESRDB input price index to a base year of CY
2012 in the CY 2015 ESRD PPS final rule (79 FR 66129 through 66136). In
the CY 2019 ESRD PPS final rule (83 FR 56951 through 56964), we
finalized a rebased ESRDB input price index to reflect a CY 2016 base
year. In the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154),
we finalized a revised and rebased ESRDB input price index to reflect a
CY 2020 base year.
Although ``market basket'' technically describes the mix of goods
and services used for ESRD treatment, this term is also commonly used
to denote the input price index (that is, cost categories, their
respective weights, and price proxies combined) derived from a market
basket. Accordingly, the term ``ESRDB market basket,'' as used in this
document, refers to the ESRDB input price index.
The ESRDB market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time are not measured.
(2) CY 2024 ESRD Market Basket Update
We proposed 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 proposed 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 the CY 2024 ESRD PPS proposed rule (88 FR 42435 through
42436), we proposed 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) 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
was 2.0 percent. We also proposed that if more recent data became
available after the publication of the CY 2024 ESRD PPS 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 this final rule.

[[Page 76350]]

(b) 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
fiscal year (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 United States 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 CMS's 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) was 0.3 percentage point. Furthermore,
we proposed that if more recent data became available after the
publication of the CY 2024 ESRD PPS proposed rule and before the
publication of this 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 this final rule.
(c) CY 2024 Market Basket Update
In accordance with section 1881(b)(14)(F)(i) of the Act, we
proposed to base the CY 2024 market basket percentage increase on IGI's
first quarter 2023 forecast of the 2020-based ESRDB market basket. We
proposed 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
was 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 proposed that if more recent data
became available after the publication of the CY 2024 ESRD PPS 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 invited public comment on our proposals for the CY 2024 ESRDB
market basket update and productivity adjustment. Approximately 150
commenters, including large dialysis organizations (LDOs); provider
advocacy organizations; nonprofit dialysis associations; a coalition of
dialysis organizations; a network of dialysis organizations;
professional organizations and several ESRD facilities, commented on
the proposed CY 2024 ESRDB market basket update. The following is a
summary of the public comments received on these proposals and our
responses.
Comment: Commenters generally supported increasing the ESRD PPS
base rate and the utilization of the most recent data available (for
example, a more recent estimate of the market basket and/or
productivity adjustment) to determine the final CY 2024 ESRD PPS
update. MedPAC recommended that the ESRD PPS base rate increase for CY
2024 should be updated by the amount determined under current law, and
commented that analysis reported in the March 2023 Report to the
Congress: Medicare Payment Policy \6\ concluded that this increase is
warranted based on its analysis of payment adequacy (which includes an
assessment of beneficiary access, supply and capacity of facilities,
facilities' access to capital, quality, and financial indicators for
the sector). Many commenters expressed concern that the CY 2024 payment
update does not adequately factor in the effects of many challenges
faced by ESRD facilities, such as the impact of the COVID-19 public
health emergency (PHE), inflationary pressure, higher patient acuity,
Federal budget sequestration, increasing labor costs due to labor
shortages, and other increased costs, such as personal protective
equipment (PPE), drugs, and supplies. Several commenters also asserted
that during the last two ESRD PPS rulemaking cycles the ESRDB market
basket updates have not kept pace with the market basket increases for
other Medicare providers, such as hospitals and Skilled Nursing
Facilities (SNFs). Commenters additionally noted that the proposed CY
2024 ESRDB market basket increase was lower than certain other
estimates of overall inflation and healthcare-specific inflation. One
commenter stated that since the ESRD PPS' inception, the annual updates
in several years have fallen far below other measures, such as general
inflation or health care inflation as measured by the Consumer Price
Index (CPI).
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\6\ <a href="https://www.medpac.gov/wp-content/uploads/2023/03/Mar23_MedPAC_Report_To_Congress_v2_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2023/03/Mar23_MedPAC_Report_To_Congress_v2_SEC.pdf</a>.
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Response: We are required to update ESRD PPS payments annually by
the market basket update adjusted for productivity, as directed by
section 1881(b)(14)(F)(i) of the Act. Specifically, section
1881(b)(14)(F)(i)(I) of the Act states that the increase factor shall
be based on an ESRD market basket percentage increase for a bundled
payment system for renal dialysis services that reflects changes over
time in the prices of an appropriate mix of goods and services included
in renal dialysis services. We believe the increase in the 2020-based
ESRDB market basket adequately reflects the average change in the price
of goods and services ESRD facilities purchase to provide ESRD medical
services and is technically appropriate to use as the ESRD payment
update factor. The ESRDB market basket is a fixed-weight, Laspeyres-
type index that measures price changes over time and would not reflect
increases in costs associated with changes in the volume or intensity
of

[[Page 76351]]

input goods and services. As such, the ESRDB market basket update would
reflect the prospective price pressures described by the commenters
(such as wage growth or higher energy prices) but would not inherently
reflect other factors that might increase the level of costs, such as
the quantity of labor used or any shifts between contract workers and
staffed employees. We note that cost changes (that is, the product of
price and quantities) would only be reflected when a market basket is
rebased, and the base year weights are updated to a more recent time
period. We finalized the 2020-based ESRDB market basket in the CY 2023
ESRD PPS final rule (87 FR 67141), and therefore, any change in the
cost structure for ESRD facilities that occurred between 2016 and 2020
is now reflected in the cost weights for the 2020-based ESRDB market
basket, which was the most recent fully complete cost data available at
the time of rulemaking. We will continue to monitor the cost share
weights and, if technically appropriate, consider rebasing the ESRDB
market basket more frequently than usual should the cost weights change
significantly. Any proposal to rebase the ESRDB market basket would
occur through notice-and-comment rulemaking. The final CY 2024 ESRDB
market basket update reflects the most recent available data regarding
prices of labor used to provide renal dialysis services. As set forth
later in section II.B.1.a.(2)(c) of this final rule, the final
productivity-adjusted CY 2024 ESRDB market basket update is 2.1
percent, representing a ESRDB market basket increase of 2.4 percent
reduced by a productivity adjustment of 0.3 percent. We note that the
final CY 2024 ESRDB market basket update is 0.4 percentage points
higher than the proposed CY 2024 ESRDB market basket update. We
recognize that this 2.1 percent productivity-adjusted ESRDB market
basket update may still be lower than some commenters believe is
appropriate; however, it reflects the most recent available data
regarding expected price inflation for inputs required to provide renal
dialysis services based on CMS's longstanding methodology.
We acknowledge commenters' claims that the CY 2024 ESRD PPS
proposed market basket increase is less than increases for other
Medicare payment systems, including the Inpatient Prospective Payment
System (IPPS) and the Hospital Outpatient Prospective Payment System
(OPPS). In response to these concerns, we note that one cause of these
differences is that the mix of inputs used to provide renal dialysis
services is different from those used for other services captured by
other CMS market baskets. For example, the ESRDB market basket labor
cost weights (reflecting those cost weights that use an Employment Cost
Index (ECI) as price proxy) are generally lower than the labor cost
weights in other CMS PPS market baskets, and the pharmaceuticals and
medical supply cost weights in the ESRDB market basket (which is based
on the ESRD Medicare cost report (Form CMS-265-11)) are higher than the
pharmaceuticals and medical supply cost weights in other CMS PPS market
baskets.\7\ The weighting together of these different mixes of inputs
can appropriately result in differential rates of increase for various
market baskets. Additionally, we acknowledge that many measures of
inflation are higher than both the proposed 1.7 percent and the final
2.1 percent productivity-adjusted ESRDB market basket update for CY
2024. We note that some of the measures of inflation that commenters
referenced in their comments are either measures of past inflation or
measures of current inflation. The ESRDB market basket update is based
on a forecast for the changes in input prices as measured by the ESRDB
market basket for CY 2024, and not a measure of inflation during CY
2023. Under section 1881(b)(14)(F)(i) of the Act, the annual market
basket update reflects the changes over time in the prices of an
appropriate mix of goods and services included in renal dialysis
services. We believe that this is a more accurate estimate of the
changes in input prices faced by ESRD facilities than less specific
measures such as overall inflation or inflation across the entire
healthcare sector. Additionally, concerns raised by commenters that the
ESRDB market basket updates have been lower than general inflation or
healthcare inflation measures are not relevant comparisons, because the
law requires that the increase be based on an index that measures input
price pressures for providing renal dialysis services. We acknowledge
that many patients, ESRD facilities, and other health care providers
believe that rising prices are a major concern in providing high
quality care; however, we project that growth in input prices for renal
dialysis services will slow in CY 2024 relative to CY 2023, which is
reflected in the productivity-adjusted ESRDB market basket update of
2.1 percent.
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\7\ Public data can be found at <a href="https://www.bls.gov/eci/home.htm">https://www.bls.gov/eci/home.htm</a>
and <a href="https://www.cms.gov/data-research/statistics-trends-and-reports/cost-reports">https://www.cms.gov/data-research/statistics-trends-and-reports/cost-reports</a>.
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Comment: Several commenters indicated a belief that the ESRDB
market basket update would have an impact on quality of care provided
by ESRD facilities. Other commenters indicated that they believe the
current quality of care that ESRD PPS beneficiaries receive is too low,
and used this belief as justification for either supporting or opposing
the ESRDB market basket update.
Response: We appreciate commenters' insight into the quality of
care which Medicare beneficiaries receive at ESRD facilities. Medicare
beneficiaries have a right to safe, appropriate, and quality health
services. For ESRD facilities, the Federal health and safety
requirements are codified at 42 CFR part 494. To determine if a
facility meets ESRD conditions for coverage, the State survey agency
(SA), or a CMS-approved national accrediting organization (AO),
performs an on-site survey of the facility. After the initial approval,
dialysis facilities have routine onsite surveys to monitor compliance
with the Federal requirements. If a dialysis facility is found to be
deficient in one or more of the standards in the conditions for
coverage, it may participate in, or be covered under, the Medicare
program only if the dialysis facility has submitted an acceptable plan
of correction for achieving compliance within a reasonable period of
time acceptable to CMS. In the case of an immediate jeopardy situation
(that is, a situation in which the facility's non-compliance with one
or more Medicare conditions for coverage has caused, or is likely to
cause, serious injury, harm, impairment, or death to a patient), we may
require a shorter time period for achieving compliance.
When poor quality or unsafe health care is furnished by any type of
Medicare-certified provider or supplier, a complaint may be filed by
anyone, including patients, family members, or staff. Dialysis facility
complaints relating to improper care, unsafe conditions, and quality of
care may be filed with the State Health Department or the ESRD
Network.\8\
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\8\ <a href="https://www.cms.gov/training-education/open-door-forums/end-stage-renal-disease-clinical-laboratories-esrd/network">https://www.cms.gov/training-education/open-door-forums/end-stage-renal-disease-clinical-laboratories-esrd/network</a>.
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CMS has an established complaint process to protect all patients
from abuse, neglect, exploitation, and inadequate care and supervision.
The goal of the complaints process is to establish a system that will
assist in promoting and protecting the health and safety of all
patients receiving health services in a Medicare-certified facility.
The procedures for handling complaints

[[Page 76352]]

are outlined in Chapter 5 of the State Operations Manual,\9\ and they
are followed when complaints and reported incidents, including
referrals from the public or other Federal entities, involve Medicare-
certified providers/suppliers. The evaluation, investigation, and
resolution of complaints are critical certification activities. CMS and
the SAs, or AOs, are responsible for ensuring that participating
providers/suppliers of healthcare services continually meet Federal
requirements. This requires that the SA, or AO, promptly reviews
complaints/incidents, conducts unannounced onsite investigations of
reports alleged noncompliance, and informs the CMS locations any time a
facility is found to be out of compliance with the applicable
certification requirements. We believe the resources provided by the
ESRD PPS are appropriate to enable ESRD facilities to comply with the
requirements and procedures described above.
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\9\ <a href="https://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/downloads/som107c05pdf.pdf">https://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/downloads/som107c05pdf.pdf</a>.
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Comment: One ESRD patient stated that ESRD facilities were already
being paid too much and that the quality of care provided by ESRD
facilities was insufficient given the payment amount.
Response: We appreciate the comments on Medicare payment amounts to
ESRD facilities. As stated previously, we are required to update ESRD
PPS bundled payments by the market basket update adjusted for
productivity under section 1881(b)(14)(F)(i) of the Act, which states
that the Secretary shall annually increase payment amounts by an ESRD
market basket percentage increase that reflects changes over time in
the prices of an appropriate mix of goods and services included in
renal dialysis services. As such, we believe that the final CY 2024
ESRDB market basket update is appropriate. We note that MedPAC states
that payment rates are adequate for the ESRD facilities. In addition,
regarding the commenter's belief that ESRD facilities are being paid
too much, and the concerns the commenter noted citing specific quality
of care issues for ESRD patients, we note that, as described earlier in
this section, CMS is actively engaged in efforts to ensure Medicare
ESRD beneficiaries receive quality care. Additionally, the ESRD QIP
actively monitors and adjusts payments to facilities under the ESRD PPS
based on their performance on several quality measures.
Comment: Several commenters, including a coalition of dialysis
organizations, stated that ESRD facilities face relatively small profit
margins when caring for Medicare beneficiaries and indicated that they
believe the ESRDB market basket increase amount would lead to lower
standards of care in CY 2024 and that to prevent this, CMS should
consider increasing payments by a larger amount. One ESRD patient
characterized the proposed CY 2024 ESRDB market basket update as being
insufficient for the extent of the financial impact of recent
inflationary events. Numerous commenters stated that a larger payment
rate increase would allow ESRD facilities to hire more staff and
increase the quality of care. Some commenters suggested that CMS
reevaluate the proposed market basket update and instead increase ESRD
PPS payments by a larger amount.
Response: We understand that commenters are concerned about the
profit margins for ESRD facilities. As stated previously, we believe
that the final CY 2024 ESRDB market basket update reflects the most
recent available data regarding the input prices required to provide
renal dialysis services. We did not propose any additional increases to
the ESRD PPS base rate to improve ESRD facility margins or otherwise
account for factors that commenters believe are not adequately
represented in the market basket update methodology, and we are not
finalizing any such increases. We will continue to monitor the adequacy
of the ESRD PPS payment amount and will consider these comments in
potential future rulemaking. In addition, as described earlier in this
section, CMS is actively engaged in efforts to ensure Medicare ESRD
beneficiaries receive quality care.
Comment: Several commenters, including a provider advocacy
organization, noted that the ESRD PPS payment rate update would have
implications for Medicare Advantage payment rates. Many of these
commenters expressed that the proposed ESRDB market basket update of
1.7 percent would lead to lower payments from Medicare Advantage.
Response: We understand that some commenters are concerned about
the impact that the proposed CY 2024 ESRDB market basket update would
have on rates for other payors, including Medicare Advantage. However,
we are required to update the ESRD PPS bundled payment by the market
basket update adjusted for productivity under section 1881(b)(14)(F)(i)
of the Act, which states that the Secretary shall annually increase
payment amounts by an ESRD market basket percentage increase that
reflects changes over time in the prices of an appropriate mix of goods
and services included in renal dialysis services. This update is not
intended to account for or direct the business practices of other
payors. We note that the final productivity-adjusted CY 2024 ESRDB
market basket update is 2.1 percent, which represents an increase to
the proposed productivity-adjusted CY 2024 ESRDB market basket update
of 1.7 percent, and we anticipate that the increase alleviates some of
the commenters' concerns. We did not propose to make any additional
methodological changes to the market basket update or ESRD PPS base
rate to account for other payors and are not finalizing any additional
methodological changes on this topic.
Comment: We received numerous other comments on potential
implications of the proposed CY 2024 ESRDB market basket update.
Several commenters claimed the proposed CY 2024 ESRD PPS base rate
update would have a negative impact on other factors including, but not
limited to, wait times for dialysis appointments, access to innovative
treatments for ESRD patients, ESRD treatments for nursing home
patients, ESRD treatments for the elderly, Medicare Part A payments,
and hospitalizations for ESRD PPS patients.
Response: We recognize that commenters are concerned about the
impact that the magnitude of the CY 2024 ESRDB market basket update has
on ESRD facilities' ability to provide quality renal dialysis services.
As stated previously, the final CY 2024 ESRDB market basket update
reflects the most recent available data regarding prices for inputs
used to provide renal dialysis services. We recognize that payment
policy within the ESRD PPS can affect the quality and accessibility of
renal dialysis services; however, the CY 2024 ESRDB market basket
update adequately reflects the average change in the price of goods and
services ESRD facilities purchase to provide renal dialysis services,
so we do not agree with commenters' claims that the ESRDB market basket
update would have a negative impact on these other factors. We did not
propose any changes to the existing ESRDB market basket update
methodology in the CY 2024 ESRD PPS proposed rule and are not
finalizing any such methodological changes in this rule. We appreciate
the insight of commenters into the implications of the ESRDB market
basket update and will keep these implications in mind in future
rulemaking.
Comment: Several commenters questioned CMS's longstanding market
basket methodology. Commenters expressed concern over the accuracy of
the forecast underlying the proposed

[[Page 76353]]

market basket update for CY 2024, including that CMS's use of the IGI
forecast for determining the market basket update does not capture the
specialized nature of ESRD facility costs. A few commenters requested
that CMS reexamine the forecasting approach or consider other methods
and data sources to calculate the final rule market basket update that
better reflect the rapidly increasing input prices and costs facing
ESRD facilities. Other commenters indicated that they believed that it
is inappropriate to continue to use the same mix of goods and services
that were used at the inception of the ESRD PPS in the CY 2011 ESRD PPS
final rule. One ESRD facility suggested that, because there has been
significant variation between the forecasted and actual ESRDB market
basket price growth, CMS should evaluate whether the market basket
methodology is inherently flawed. Several commenters believed that a
retrospective adjustment to the base rate to account for past
differences between the ESRDB market basket update for a given year and
what the ESRDB market basket update would have been for that year based
on the actual changes in prices, known as a forecast error adjustment,
could alleviate some of the perceived flaws in the market basket update
methodology.
Response: We thank commenters for providing these comments on the
ESRDB market basket update methodology. In response to the commenters'
request that we reexamine the current forecasting approach for
determining the ESRDB market basket update, we provide the following
information. IGI is a nationally recognized economic and financial
forecasting firm with which CMS contracts to forecast the price proxies
used in the market baskets. At the time of the CY 2024 ESRD PPS
proposed rule, based on the IGI first quarter 2023 forecast with
historical data through the fourth quarter of 2022, the 2020-based
ESRDB market basket update was forecasted to be 2.0 percent for CY
2024, reflecting forecasted compensation price growth of 3.7 percent
(by comparison, compensation price growth in the ESRDB market basket
averaged 2.6 percent from 2013 to 2022). In the CY 2024 ESRD PPS
proposed rule, we proposed that if more recent data became available,
we would use such data, if appropriate, to derive the final CY 2024
ESRDB market basket update for the final rule. For this final rule, we
now have an updated forecast of the price proxies underlying the market
basket that incorporates more recent historical data and reflects a
revised outlook regarding the U.S. economy and expected price inflation
for CY 2024. Based on IGI's third quarter 2023 forecast with historical
data through the second quarter of 2023, we are projecting a CY 2024
ESRDB market basket update of 2.4 percent (reflecting forecasted
compensation price growth of 4.1 percent) and a productivity adjustment
of 0.3 percentage point. Therefore, for CY 2024 a final ESRDB
productivity-adjusted market basket update of 2.1 percent (2.4 percent
less 0.3 percentage point) will be applicable, compared to the 1.7
percent productivity-adjusted market basket update that was proposed.
We note that section 1881(b)(14)(F)(i) of the Act states that the
Secretary shall annually increase payment amounts by an ESRD market
basket percentage increase that reflects changes over time in the
prices of an appropriate mix of goods and services included in renal
dialysis services. We believe that the current market basket update
methodology as finalized in the CY 2011 ESRD PPS final rule (75 FR
49151 through 49162), and most recently updated in the CY 2023 ESRD PPS
final rule (87 FR 67141 through 67157) to reflect a 2020 base year,
fulfills this statutory requirement. We support the continued use of
the current mix of goods and services to provide continuity to the
financial impacts of the ESRD PPS payment policy, and we note that the
weighting for this mix of goods and services is updated periodically
through rebasing. However, we will consider the commenter's suggestion
regarding the use of different methods or other data sources for the
ESRDB market basket for future rulemaking. We discuss the commenters'
request for a forecast error adjustment below. We did not propose any
methodological changes to the ESRDB market basket update methodology
for CY 2024, and we are finalizing the continued use of the ESRDB
market basket methodology as finalized in the CY 2023 ESRD PPS final
rule (87 FR 67141 through 67157). We do not believe that the ESRDB
market basket update is inherently flawed because the forecast errors
for CYs 2021 and 2022 were higher-than-normal due to the high inflation
during the COVID-19 PHE, which we discuss further in section
II.B.1.a.(2)(d) of this final rule. We will continue to monitor the
performance of the ESRDB market basket update, and we will keep these
comments on the market basket methodology in mind for future
rulemaking. We note that CMS engages with the public, including the
dialysis industry and associations, routinely throughout the year in
our continuing efforts to align payment with resource utilization. We
welcome continuing dialogue on the topic of improving the market basket
update methodology, and other topics pertinent to the ESRD PPS, toward
the common goal of improving care for ESRD patients.
Comment: Some commenters provided information on additional rising
costs faced by ESRD facilities that the commenters believed were not
adequately captured in the proposed CY 2024 ESRDB market basket update.
These additional costs included the following: costs associated with
compliance with additional regulations regarding infection control;
costs related to supply chain problems; rising costs for certain
supplies; and cost related to changes in labor, such as additional pay
for traveling nurses or contract nurses.
Response: We appreciate the insight into changing costs that ESRD
facilities face. As stated previously, the final CY 2024 ESRDB market
basket update reflects the most recent available data regarding prices
for inputs used to provide renal dialysis services. These costs which
commenters listed are included in the ESRDB and so the change in their
prices would be included in the CY 2024 ESRDB market basket update. If
the rising costs the commenters' mentioned are due to an increase in
quantity of the good purchased, rather than an increase in price, we
note that such cost changes would only be reflected when a market
basket is rebased, and the base year weights are updated to a more
recent time period. We finalized the 2020-based ESRDB market basket in
the CY 2023 ESRD PPS final rule (87 FR 67141); therefore, any change in
the cost structure for ESRD facilities that occurred between 2016 and
2020 is now reflected in the cost weights for the 2020-based ESRDB
market basket, which was the most recent fully complete cost data
available at the time of rulemaking. We believe that it is technically
appropriate to use the 2020-based ESRDB market basket for the CY 2024
ESRDB market basket update.
Comment: One commenter asserted that experience over the past few
years has indicated that the ESRD PPS methodology is unable to reflect
short-term and long-term impacts of an economic shock, such as the
COVID-19 PHE. The commenter noted that although CMS offers detailed
explanations of the market basket's construction and issues data
through its website, the dialysis provider community still has little
insight into the factors contributing to annual

[[Page 76354]]

payment updates that the commenter believes consistently fail to
reflect increases in the cost of care delivery. The commenter urged CMS
to engage in a formal dialogue with the kidney care community outside
of the annual rulemaking process to better identify the methodology's
limitations and inform development of improvements. The commenter also
requested that IGI have representation and participation in this
dialogue.
Response: We appreciate the commenter's concerns regarding the
market basket methodology. Our longstanding ESRDB market basket update
methodology sets rates prospectively on an annual basis. We acknowledge
that over the course of a year, short term changes in economic
conditions can lead to uncertainty, which may be exacerbated by
economic shocks. Because the ESRD PPS base rate is updated annually,
the purpose of the ESRDB market basket update is to account for the
change in price of the ESRDB from year to year, not necessarily to
capture the effect of shorter term fluctuations of prices. That short
term fluctuations are not addressed by the ESRDB market basket update
is a consequence of the annual nature of the update as required by
section 1881(b)(14)(F) of the Act. We believe the ESRDB market basket
update appropriately captures the change in the price of goods and
services over time in the long term. Some commenters have suggested a
forecast error adjustment as a way to mitigate the impact of these
short-term uncertainties, which we discuss in further detail in section
II.B.1.a.(2)(d) of this final rule. CMS will continue to engage with
the public regarding ways to ensure the Medicare ESRD PPS payments are
appropriate and that the market basket price proxies and base year
weights are accurate.
Comment: We received several comments, including from a patient
organization, stating that the proposed ESRDB market basket update
would not sufficiently support innovation.
Response: We note that ESRD PPS policies to encourage the
adaptation of new innovations, such as the TDAPA and TPNIES, are add-on
payment adjustments to the base rate, and although there is only one
ESRD PPS bundled payment, these adjustments are not a part of the ESRDB
and therefore, are not included in the ESRD PPS base rate or the ESRDB
market basket update. This is similarly true for the post-TDAPA add-on
payment adjustment that we are finalizing in this rule, which is
described in further detail in section II.B.1.i of this final rule.
These add-on payment adjustments are actively supporting the adoption
of certain new and innovative drugs, biological products, equipment and
supplies by ESRD facilities, by providing additional payment to offset
the additional cost of those drugs, biological products, equipment and
supplies. We did not propose any changes to the ESRDB market basket
update methodology to account for innovation within the ESRD PPS and
are not finalizing any such changes in this final rule. We will
consider these comments on supporting innovation and access to
innovative products in potential future rulemaking.
Comment: We received approximately 90 comments related to the
nature of labor costs at ESRD facilities, including comments from large
dialysis organizations, advocacy organizations, ESRD facilities,
providers, and a coalition of dialysis organizations. Commenters
generally stated that labor costs at ESRD facilities are increasing,
which is driving overall cost increases at ESRD facilities, and that
the proposed ESRDB market basket update was insufficient to cover these
increased labor costs. Many of the commenters cited that the growth in
their labor costs has outpaced the ESRDB market basket updates or the
growth of the market basket compensation cost category in the ESRDB
market basket. Additionally, some commenters noted that labor costs
were rising across the healthcare sector, which the commenters asserted
was not appropriately reflected in the ESRDB market basket update.
Commenters described other barriers to hiring and maintaining staff
including, but not limited to, burnout, lack of resources, inability to
match competitive pay, and long travel times for staff. A coalition of
dialysis organizations commented that it was increasingly difficult for
ESRD facilities to hire new staff while competing with other health
care providers with more resources and non-healthcare employers. They
stated that this was leading to some ESRD facilities having to turn
away patients or being unable to continue operations. One LDO noted
that staffing concerns are leading to ESRD facilities using a higher
percentage of more-expensive contract labor and that contract labor
wages and benefits make up 1.9 percent and 0.5 percent of the 2020-
based ESRDB, respectively. Some commenters highlighted the COVID-19 PHE
as a significant factor in the workforce shortage that ESRD facilities
face; however, some commenters indicated that they believe this
workforce shortage has been in progress for a long time.
Some ESRD facilities and LDOs included various additional
information or data on the extent to which their labor costs have
increased over the past few years. Several commenters, including an LDO
and a non-profit dialysis organization, referenced an analysis that
showed labor costs grew at a compound average growth rate of 6.96
percent from 2018 to 2022, whereas the proxy for labor used in the
ESRDB market basket update methodology grew at a compound average
growth rate of 3.15 percent from 2018 to Q1 2022. One provider advocacy
organization commented that its analysis found that direct patient care
labor costs per dialysis treatment increased by 18.9 percent from 2017
to 2022.
Commenters also stated that the increasing labor costs were
resulting in staffing concerns at ESRD facilities. Some of these
comments highlighted access issues arising from fewer available
dialysis sessions. Some comments referenced quality issues related to
the burden placed on workers at ESRD facilities by low staffing and the
limited training of staff at ESRD facilities due to high turnover. Many
of these comments came from ESRD patients, caretakers and patient
advocates and included the commenters' personal experience on the
issues related to receiving care at ESRD facilities (for example,
difficulty finding appointments, having to travel significant distances
to get care, and how low staffing at ESRD facilities has impacted their
care). Other commenters conveyed their concern about inadequate
staffing and related many incidents of significant adverse events and
sub-standard quality care, which they attributed to low staffing. A
kidney disease patient organization included multiple testimonials from
ESRD patients regarding their issues in trying to locate dialysis
treatments.
Some commenters highlighted the impact that staffing shortages had
on home dialysis. Several patients expressed a willingness and desire
for self-dialysis training, but stated they were unable to receive
self-dialysis dialysis training due to staff shortages at their
clinics.
Response: We thank commenters for their insight into labor supply
and labor costs at ESRD facilities, and we recognize that labor costs
are a driving factor in cost increases at ESRD facilities. We
acknowledge that CY 2022 price growth for the 2016-based ESRDB market
basket was higher (5.1 percent) than was forecasted at the time of the
CY 2022 ESRD PPS final rule (2.4 percent). We note that the lower
projected CY 2024 ESRDB market basket percent increase (2.4 percent)
relative to the observed CY 2022 historical increase, as well as the
forecasted CY

[[Page 76355]]

2023 ESRDB market basket increase of 3.1 percent, reflect the
expectation that wage and price pressures will lessen in CY 2024
compared to recent years. As described previously, the ESRDB market
basket measures price changes (including changes in the prices for
wages and salaries and benefits) over time and would not reflect
increases in costs associated with changes in the volume or intensity
of input goods and services until the market basket is rebased. An
ESRD-specific compensation price index is unavailable; therefore, we
use a composite wage and benefit index of various Employment Cost
Indices (ECIs) reflecting the occupational mix of full-time equivalents
(FTE) data from ESRD Medicare Cost reports and ECIs from BLS (87 FR
67147). Health-related occupations account for 79 percent of the 2020-
based ESRDB compensation cost weight and are proxied by the ECI for All
Civilian Workers in Hospitals, reflecting similar medical occupations
used in ESRD facilities (particularly nurses) and their associated
price growth. As discussed in the CY 2023 ESRD PPS final rule, we
believe the composite weighted index for wages and salaries and
benefits to be a reasonable proxy for the compensation component of the
ESRDB market basket. We note that section 1881(b)(14)(F)(i) of the Act
states that the Secretary shall annually increase payment amounts by an
ESRD market basket percentage increase that reflects changes over time
in the prices of an appropriate mix of goods and services included in
renal dialysis services. While labor is included in the mix of goods
and services in the ESRD PPS bundled payment, the annual market basket
increase accounts for more than the price change for labor. As such, it
is possible for the market basket increase to be less than the increase
in the price of labor if the other goods and services included in the
ESRDB do not experience as large of a price increase. Our analysis of
the data used to determine the ESRDB market basket forecast indicates
that this dynamic is reflected in the market basket increases for the
past few years. For example, in 2021 the overall market basket forecast
was an increase of 1.9 percent, but the labor portion of the ESRDB
market basket was forecasted to increase by 2.5 percent. We recognize
commenters' view that the proposed ESRDB market basket increase for CY
2024 was less than ESRD facilities' reported labor increases. However,
if, as commenters have stated, labor is the driving factor for the
increase in costs for ESRD facilities, it would be expected that the
labor percentage increase would be greater than the overall ESRDB
market basket percentage increase. This is because the ESRDB market
basket increase is a weighted average of the changes in prices for the
ESRDB market basket. Labor is only one part of the ESRDB market basket,
and commenters have indicated that other components of the ESRDB market
basket have not experienced the same growth in price as labor. We
believe the 2020-based ESRDB market basket increase adequately reflects
the average change in the price of goods and services ESRD facilities
purchase to provide renal dialysis services, including labor, and is
technically appropriate to use as the ESRD PPS payment update factor.
The ESRDB market basket update will reflect the expected prospective
price pressures described by the commenters as increasing during a high
inflation period (such as faster wage growth or higher energy prices)
but inherently will not reflect other factors that might increase the
level of costs, such as the quantity of labor used. Therefore, the
final CY 2024 ESRDB market basket update reflects the most recent
available data regarding both prices and the items and services used to
provide renal dialysis services.
We thank commenters for including detailed information and data on
the changes to labor costs that ESRD facilities face. We agree that
during the COVID-19 PHE, labor costs increased more than normal.
According to our analysis, the ESRDB market basket compensation price
growth was forecasted to increase a cumulative 18.9 percent from CY
2017 to CY 2022. This is the same as the figure which one commenter
described as being the change in direct labor costs over that time. We
recognize that some comments indicated that ESRD facilities experienced
larger or smaller changes in labor costs than this over that time. We
note that the ESRDB market basket does not measure each individual ESRD
facility's own experience, but instead the ESRDB market basket cost
weights reflect the experience of the average ESRD facility. Therefore,
if one area of the country experienced an increase in labor costs at a
higher rate than other areas of the country, that would not be wholly
captured in the annual update. Instead, the relative difference in
labor cost growth should be captured in changes to the wage index for
that ESRD facility. However, we recognize that our wage index
methodology uses historical data instead of a forecast and as such
takes longer to update in response to periods of large change.
We appreciate comments from ESRD patients which highlighted their
experiences at ESRD facilities. We are concerned by the comments which
indicate access and quality concerns at ESRD facilities related to
staffing issues. We note that Sec. 494.180(b) requires that an ESRD
facility have an adequate number of qualified and trained staff;
however, the governing body of the facility has a measure of discretion
when determining staffing. The ESRD PPS provides a bundled payment that
encompasses all renal dialysis services, including labor. We recognize
that staffing shortages can pose a difficulty to ESRD patients who
desire training for self-dialysis. We note that the ESRD PPS includes
an add-on payment adjustment for self-dialysis training (42 CFR
413.235(c); 81 FR 77851 to 77856). We appreciate the comments regarding
these staffing issues and will consider them for potential future
rulemaking.
Comment: One commenter encouraged CMS to explore other changes to
the composition of the market basket to better capture evolving
dynamics in the labor force. The commenter provided as an example that
the ECI may no longer accurately capture the changing composition and
cost structure of the hospital labor market given the large increases
in short-term contract labor use and its growing costs.
Several commenters expressed concern that not all the ESRDB market
basket price proxies, particularly the labor-related price proxies,
accurately reflect ESRD facilities' faster than expected cost growth.
One commenter noted that for healthcare providers across all sectors,
the impact of the tight labor market (both in the healthcare sector and
general economy overall) has forced ESRD facilities to rely more
heavily on contracted labor. The commenter further pointed out that
under the 2020-based ESRDB market basket, contract labor wages and
benefits have 1.9 percent and 0.5 percent weights, respectively;
however, the commenter expressed concern that these weights were
derived by assuming that ESRD facilities use the same labor amount and
mix as they did more than a decade ago, which does not reflect the
current environment in which dialysis providers deliver care. They
stated that use of the U.S. Census Bureau's Services Annual Survey
(SAS) data may not reflect staffing ratio or minimum wage requirements
adopted by State and municipal governments since 2012, the recent
years' shift in labor mix, unanticipated increase in compensation

[[Page 76356]]

expenses, or the COVID-19 PHE's overall impact on the healthcare labor
force.
A few commenters stated that certain market basket components rely,
to some extent, on severely lagged data, which during times of unusual
circumstances, could limit a forecast model's ability to capture
economic shocks and the subsequent impact on health care providers'
costs. The commenters stated, for example, the BLS's ECI price proxies
generally hold the employment mix constant for several years. They
stated that the ECI's weights reflected the 2012 occupational mix until
recently (the December 2022 BLS release updated the data to reflect
2021 employment weights). The commenters noted that since ECI
employment weights are held constant for a period this would introduce
inaccuracies into the market basket updates. They stated that since the
ECI 2012 weights were used for the price proxies in the ESRDB market
basket through the CY 2022 rulemaking cycles it could have resulted in
errors in the ESRDB market basket update.
Response: We appreciate the commenters' concerns about the
composition of the ESRDB market basket and whether the price proxies
used in the market basket are accurately capturing the price pressures
experienced by ESRD facilities.
The commenters are correct that the ECI data are based on fixed
occupational weights; however, we believe these indexes continue to be
technically appropriate measures of pure compensation inflation to be
used in the ESRDB market basket. Because the market baskets are
intended to measure price changes over time, and not changes in costs
that also reflect quantity and intensity changes, the fixed
occupational distribution of the ECI is appropriate. BLS periodically
updates these distributions (in the January 2023 release of December
2022 ECI data they introduced updated 2021 fixed employment weights,
replacing the 2012 weights used through September 2022). Additionally,
the observed ECI for Wages and Salaries for All Civilian workers in
Hospitals (which accounts for 29 percent of the 2020-based ESRDB market
basket) data has reflected recent wage ``price'' pressures as growth in
2021 and 2022 accelerated relative to 2020. The projection of the ECI
also considers anticipated wage pressures due to various economic and
industry-specific factors; the hospital ECI is projected to grow faster
in 2023 compared to the historical average growth in the series,
particularly prior to 2021. We note that when developing its forecast
for the ECI for All Civilian Workers in Hospitals, IGI considers
overall labor market conditions (including rise in contract labor
employment due to tight labor market conditions) as well as trends in
contract labor wages, which both have an impact on wage pressures for
workers employed directly by the hospital. We also acknowledge the
commenters' concerns that the ECI only reflects employed labor costs;
however, we note that the alternative publicly available average hourly
earnings series also does not include contract labor costs.
Additionally, we analyzed the FTE data reported on the Medicare cost
reports and found that the share of contract labor FTEs is about 2
percent of all FTEs and has remained relatively constant in 2021 and
2022. We will continue to monitor the cost report data as it is
received to ensure that the ECI series used to proxy ESRD labor
categories continues to offer the most appropriate price proxies for
measuring compensation price growth in ESRD facilities.
Lastly, we acknowledge commenters' concern that the contract labor
cost weight in the ESRDB market basket relies on 2012 SAS data
published by the United States Census Bureau inflated to 2020-dollar
values as the basis for the contract labor cost weight. We proposed and
finalized the methodology for deriving the compensation cost share
weights in the CY 2023 ESRD PPS rulemaking cycle (87 FR 67141 through
67157). Because the Medicare cost report data does not capture the
specific costs for contract labor, we therefore must rely on other data
sources to estimate the share of contract labor costs that are reported
within Administrative and General costs on the cost reports. We have
not identified any other data source that provides specific contract
labor costs for ESRD facilities.
Final Rule Action: After consideration of the comments received, we
are finalizing a CY 2024 ESRDB productivity-adjusted market basket
increase of 2.1 percent based on the most recent data available. As
noted previously, based on the more recent data available for this CY
2024 ESRD PPS final rule (that is, IGI's third quarter 2023 forecast of
the 2020-based ESRDB market basket with historical data through the
second quarter of 2023), the CY 2024 ESRDB market basket update is 2.4
percent. Based on the more recent data available from IGI's third
quarter 2023 forecast, the current estimate of the productivity
adjustment for CY 2024 is 0.3 percentage point. Therefore, the current
estimate of the CY 2024 ESRD productivity-adjusted market basket
increase factor is equal to 2.1 percent (that is, the 2.4 percent
market basket update reduced by the 0.3 percentage point productivity
adjustment).
(d) Requests for a Forecast Error Payment Adjustment
In the CY 2024 ESRD PPS proposed rule (88 FR 42435), we discussed
that 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, meaning 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.\10\ 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 points. 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 now calculate that the CY 2022 ESRDB forecast
error was +2.7 percentage points.
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\10\ FAQ--Market Basket Definitions and General Information.
Available at: <a href="https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/info.pdf">https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/info.pdf</a>.
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We further noted that, in the CY 2023 ESRD PPS final rule (87 FR
67156), we recognized that recent higher inflationary trends impacted
the outlook for price growth over the next several quarters. For that
CY 2023 ESRD PPS final rule, we used an updated forecast of the price
proxies underlying the market basket that incorporated more recent
historical data and reflected a revised outlook regarding the U.S.
economy and expected price inflation for CY 2023 for ESRD facilities.
We explained that predictability in

[[Page 76357]]

Medicare payments is important to enable ESRD facilities to budget and
plan their operations, and that forecast errors are unpredictable (87
FR 67517). Prior to the COVID-19 PHE period, the positive differences
between the actual and forecasted market basket increase in prior years
have offset negative differences over time. Therefore, we stated in the
CY 2024 ESRD PPS proposed rule that, in accordance with our
longstanding ESRDB market basket update methodology, we would not
propose to apply a forecast error adjustment to the ESRDB market basket
update for CY 2024.
Comment: We received approximately 30 comments related to CMS's
decision not to propose a forecast error adjustment for CY 2024. These
commenters, including a coalition of dialysis providers, several LDOs,
and numerous provider and patient advocacy organizations, requested
that CMS reevaluate and implement a payment adjustment to account for
past forecast errors. Many commenters requested that CMS apply a
forecast error adjustment to the ESRD PPS payment update for CY 2024.
Some specific suggestions for payment adjustments included: a CY 2024
adjustment of 10 to 20 percent per discharge; an adjustment for the
``underpayment'' of ESRD facilities since 2020; and/or the adoption a
forecast error adjustment like the one used in the SNF PPS. Several
commenters stated that absent a forecast error adjustment they may be
forced to close some of their ESRD facilities, particularly those
facilities located in areas with vulnerable populations.
The commenters stated that the forecast error was driven mainly by
unforeseen increased costs for labor (including a higher reliance on
contract labor staff), equipment, and medical supplies (including PPE
and pharmaceuticals), which resulted in increased costs to provide care
to ESRD beneficiaries that were never properly reimbursed under the
Medicare ESRD PPS payments. Commenters stated that while the growth in
these costs has begun to stabilize somewhat in 2023, they continue to
be substantially higher than pre-pandemic levels. Commenters also
pointed out that while high wage inflation and labor shortages affect
all health care providers, dialysis providers are particularly
vulnerable because there is not variation in types of services
performed or billed and due to the less variable payer mix that relies
more on Medicare and Medicaid payment than other health care provider
types.
One commenter noted that while other health care providers have
experienced similar forecast errors in CY 2022 and CY 2023, the current
cumulative underpayment error for the ESRD PPS exceeds the errors in
other payment systems such as IPPS, home health, and long-term care
hospitals.
Some commenters acknowledged that since the market basket updates
are set prospectively, they are inherently imperfect, and forecast
errors from year to year may occur in either a positive or negative
direction. However, several commenters noted that in the case of the
ESRDB market basket these differences have not offset one another over
time. The commenters stated a belief that the magnitude of the errors
in 2021 and 2022, which they state resulted from a flawed methodology
that failed to accurately forecast higher than normal inflation, are
highly unlikely to even out over time unless there is a similar, fast
moving deflationary event resulting in the same magnitude in the
forecast.
Many commenters requested CMS establish a payment adjustment
modeled after the forecast error adjustment for payments to SNFs that
was established in 2004 (68 FR 46057). These commenters responded to
CMS's view that historical negative forecast errors are offset by
positive errors by noting that over the past few years the forecast
errors have been predominantly positive, at 1.2 percent and 2.7 percent
in CYs 2021 and 2022 respectively. As such, the ESRD PPS base rate is
lower than it would have been if the forecasts had been accurate. Many
of these commenters supported a forecast error adjustment methodology
that would, like the SNF adjustment of 2004, only be applied if the
error is larger than a certain threshold. Multiple commenters supported
a threshold of 0.5 percentage point for this adjustment. Many
commenters compared the state of SNF payment in 2004 and of the ESRD
PPS today, emphasizing the similarities in the amount by which the
recent market basket updates had been incorrect, the source of the
error mainly attributable to unexpectedly large increases in the costs
of labor, and certain similar statutory language describing the SNF PPS
and the ESRD PPS. A coalition of dialysis organizations suggested that
for the CY 2024 ESRD PPS final rule CMS should adjust the ESRD PPS base
rate by the cumulative forecast error since 2019 but added that they
would also approve of adjusting the ESRD PPS base rate by the
cumulative forecast error since the inception of the ESRD PPS in 2011.
Some commenters, including an LDO, suggested in lieu of a permanent
forecast error adjustment policy for ESRDs, CMS could apply a one-time
positive adjustment to the ESRD PPS base rate to account for the
forecast error in recent years, with commenters suggesting it be
applied to the ESRD PPS base rate in a non-budget neutral manner. Some
commenters, including an LDO, recognized that CMS's view that the
market basket errors could balance out over time could be true for
small variations; however, the commenters stated that it would not hold
true for periods of significant missed forecasts due to periods of
rapid change, for example during the COVID-19 PHE. Generally,
commenters stated that they agreed with CMS on the importance of
predictability for payments but stated that payment accuracy was more
important, so a forecast error payment adjustment would be useful as it
would improve payment accuracy.
Some comments included additional information on what commenters
stated could happen with or without a forecast error adjustment. One
LDO commented that their analysis indicated that the under-forecast
would lead to a total of $1.8 billion in underpayments between CY 2021
to 2027. One patient-led dialysis organization recommended an
``Essential Worker Safety Catch'' to revise past updates to ensure
labor is adequately compensated. A provider advocacy organization
questioned CMS's use of 2020-cost reports in determining payment for CY
2024, saying it was outdated and inaccurate. One ESRD facility
commented that given the size of recent errors, they believed it was
likely that errors would continue to increase and potentially become
larger in the future.
Response: While the projected ESRDB market basket updates for CY
2021 and CY 2022 were under-forecast (that is, actual increases were
greater than forecasted), as is the preliminary CY 2023 forecast error,
this was largely due to unanticipated inflationary and labor market
pressures as the economy emerged from the COVID-19 PHE. An analysis of
the forecast error of the ESRDB market basket over a longer period
shows the forecast error has been both positive and negative. We
recognize that the COVID-19 PHE and high inflationary environment have
had an adverse impact on costs for ESRD facilities. Due to ESRD
payments being set prospectively, we rely on a projection of the ESRDB
market basket that reflects both historical and forecasted trends. Due
to the uncertainty regarding future price trends, the difference
between the projected and actual market basket increases can be both
positive and negative. We note that from CY 2012 to CY 2020, the only
year in which the forecast error of the ESRDB

[[Page 76358]]

market basket update exceeded the 0.5 percentage point threshold in
absolute terms (which is applicable for the SNF PPS forecast error
adjustment) was CY 2017. The forecasted CY 2017 ESRDB market basket
update was 0.8 percentage point higher than the actual CY 2017
percentage increase of the 2012-based ESRDB market basket based on
historical data. We also acknowledge that the ESRDB market basket
forecast errors for CY 2021 (1.2 percentage points) and CY 2022 (2.7
percentage points) exceeded the 0.5 percentage point threshold where
the forecasted ESRDB market basket updates were lower than the actual
percentage increases based on historical data. These recent forecast
errors were largely a function of uncertainty in the overall economy
and the health sector specifically due to the nature of the COVID-19
PHE and the unforeseen rapidly accelerating inflationary environment.
Rapid increase in costs during the COVID-19 PHE has led to a positive
forecast error for every Medicare PPS.
The data on which the final CY 2024 ESRDB market basket update is
based is the most recent available data. We note that the 2020 cost
report data was used for rebasing the market basket as finalized in the
CY 2023 ESRD PPS final rule (87 FR 67141 through 67154), and at the
time of CY 2023 rulemaking the 2020 cost report data was the most
recent year of complete cost report data available to develop the ESRDB
market basket cost weights. The ESRDB market basket cost weights do not
change from year to year since it is a fixed-weight Laspeyres index;
therefore, for CY 2024, we use the most recent available forecast of
the price proxies to estimate the growth in the input prices of this
mix of goods and services for providing renal dialysis services for the
coming year. The most recent forecast of the price proxies in the ESRDB
market basket for this final rule is the IGI third quarter 2023
forecast with historical data through the second quarter of 2023. This
is the established methodology as finalized in the CY 2011 ESRD PPS
final rule (75 FR 49151 through 49162). Therefore, while the weighting
of the various goods and services that make up the ESRDB market basket
did utilize 2020 data for rebasing, it is inaccurate to characterize
the CY 2024 market basket increase as being based on 2020 data
generally. We do not agree with the commenter that stated a belief that
because forecast errors have been greater in recent years it is likely
that forecast errors will be larger in the future. As we have
indicated, the larger-than-normal forecast errors in CY 2021 and CY
2022 were largely due to unanticipated inflationary and labor market
pressures as the economy emerged from the COVID-19 PHE, which we do not
anticipate will continue in CY 2024. Our preliminary estimates of the
CY 2023 ESRD PPS forecast error indicate that it was smaller than the
forecast errors in CY 2022 and CY 2021.
For these reasons, after evaluating the historical performance of
the ESRDB market basket and the financial environment unique to ESRD
facilities, we do not believe it is appropriate to include adjustments
to the ESRDB market basket update for future years based on the
difference between the actual and forecasted ESRDB market basket
increase in prior years. However, we will continue to monitor the
overall performance of the ESRDB market basket update, including
analyzing the change in the price of labor inputs for ESRD facilities
over time. We will take commenters' concerns into consideration for
potential future rulemaking.
Comment: One LDO commented that they believe that CMS has a
statutory obligation to implement a forecast error adjustment under
section 1881(b)(14)(F)(i) of the Act, which states that the Secretary
shall annually increase payment amounts by an ESRD market basket
percentage increase for a bundled payment system for renal dialysis
services that reflects changes over time in the prices of an
appropriate mix of goods and services included in renal dialysis
services. The commenter acknowledged that forecasting prices is
inherent in a PPS but indicated that they believe that the current
methodology fails to annually capture the changes over time in the
price of providing renal dialysis services. The commenter stated that
correcting for prior and future forecast errors is a step CMS can
easily implement to ensure the ESRD PPS payment, and future market
basket update factors, reflect the prices of delivering renal dialysis
services. The commenter noted that in 2004 when CMS implemented a
forecast error adjustment in the payment system for SNFs it was based
on very similar statutory language and was implemented under what the
commenter stated were ``virtually identical'' circumstances to the ESRD
PPS today.
Response: We thank the commenter for sharing their view on this
issue; however, we do not agree that CMS's position regarding an ESRD
PPS forecast error payment adjustment conflicts with any statutory
requirements for the ESRD PPS. We appreciate the commenter's
interpretation of the circumstances involved in the implementation of
the forecast error adjustment for SNF payment; however, we disagree
with the claim that the circumstance was virtually identical to the
ESRD PPS today. While the cumulative under-forecast of the SNF market
basket increases in 2004 was based on a rapid increase in the price of
labor, it was not due to a PHE as occurred with the ESRD PPS's under-
forecast in recent years. Additionally, it was an issue which only SNFs
were experiencing, unlike the current ESRD PPS environment where
multiple Medicare payment systems have faced similar forecast errors.
We note that when CMS finalized a forecast error adjustment for the SNF
payment system, we concluded that a forecast error adjustment was
appropriate for payment accuracy for SNFs; not that it was required
under the statute (68 FR 46057). For these reasons, we do not agree
with the commenter's stated belief that a forecast error adjustment
would be required to fulfill the ESRD PPS statutory requirements, and,
at this time, for the reasons discussed previously, we do not believe
that a forecast error payment adjustment would be appropriate for the
ESRD PPS.
Final Rule Action: After consideration of the comments we received,
we are finalizing a CY 2024 ESRDB productivity-adjusted market basket
increase of 2.1 percent based on the most recent data available. As
noted previously, based on the more recent data available for this CY
2024 ESRD PPS final rule (that is, IGI's third quarter 2023 forecast of
the 2020-based ESRDB market basket with historical data through the
second quarter of 2023), the CY 2024 ESRDB market basket update is 2.4
percent. Based on the more recent data available from IGI's third
quarter 2023 forecast, the current estimate of the productivity
adjustment for CY 2024 is 0.3 percentage point. Therefore, the current
estimate of the CY 2024 ESRD productivity-adjusted market basket
increase factor is equal to 2.1 percent (2.4 percent market basket
update reduced by 0.3 percentage point productivity adjustment). We are
finalizing our proposal to determine the CY 2024 ESRDB market basket
update for the final rule without an adjustment to account for past
forecast errors. Additionally, we did not propose and are not
finalizing any methodology for a forecast error payment adjustment. We
will continue to monitor the performance of the ESRDB market basket
forecasts and will consider the information provided by commenters for
potential future rulemaking.

[[Page 76359]]

(e) 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 proposed 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).
Comment: We received three comments which acknowledged our proposal
to use the labor-related share of 55.2 percent as finalized in the CY
2023 ESRD PPS final rule. Additionally, one LDO commented on the
weights attributed to contract labor and benefits in the 2020-based
ESRDB market basket, indicating that they thought that these areas were
under-represented in the 2020-based ESRDB market basket. This LDO
recognized that CMS did not propose any changes to the labor-related
share from CY 2023. One provider advocacy organization suggested CMS
utilize a different labor-related share for ESRD facilities with low
wage index values, noting that for facilities with low wage index
values, labor likely relates to a smaller share of total costs.
Response: We thank commenters for reviewing the proposed labor-
related share. We appreciate the comment on the weights of contract
labor in the 2020-based ESRDB market basket. As stated in section
II.B.1.a.(2)(c) of this final rule, changes in both the cost and
quantity of an input are reflected when the ESRDB market basket is
rebased, and the base year weights are updated to a more recent time
period. We finalized the 2020-based ESRDB market basket in the CY 2023
ESRD PPS final rule (87 FR 67141), and, therefore, any change in the
cost structure for ESRD facilities that occurred between 2016 and 2020
is now reflected in the cost weights for the 2020-based ESRDB market
basket, which was the most recent fully complete cost data available at
the time of rulemaking. Our monitoring indicates that the 2020-based
ESRDB market basket is still appropriate for determining the cost
weights for inputs for providing renal dialysis services. Therefore,
following the methodology finalized in the CY 2011 ESRD PPS final rule
(75 FR 49116), we consider the labor related components of the ESRDB
market basket to be an appropriate basis for the labor-related share
for the CY 2024 ESRD PPS payments. We will continue to monitor the cost
share weights and, if technically appropriate, consider rebasing the
ESRDB market basket more frequently than usual should the cost weights
change significantly. We appreciate the suggestion to use a different
labor-related share for low wage index ESRD facilities. We did not
propose any methodological changes to the application of the labor-
related share, such as using a different labor-related share for
different ESRD facilities, but we will consider this comment in
potential future rulemaking.
Comment: One commenter expressed appreciation that the labor-
related share of the ESRD PPS increased from 52.3 percent to 55.2
percent in CY 2023 and stated that they believe this is a consistent
trend with the ESRD PPS, for which CMS has increased the labor-related
share of the market basket over the lifetime of the PPS. The commenter
opined that increasing the labor-related share of the market basket,
while positive, does not fully address the steep rising costs of labor
needed to deliver care to Medicare beneficiaries with ESRD, since it
only alters the percentage of ESRD PPS payments allocated to labor as
compared with other inputs required for renal dialysis services but
does not deliver more resources through the ESRD PPS to cover the
rising costs of care associated with the increases in the cost of
labor.
Response: The purpose of the labor-related share is to reflect the
proportion of the national ESRD PPS base payment rate that is adjusted
by the wage index. CMS adjusts the labor-related portion of the 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. Therefore, we include a cost category in
the labor-related share if the costs are labor intensive and vary with
the local labor market. We note that the historical increase to the
labor-related share is based on the increase to the labor-related cost-
weights in the ESRDB market basket.
As acknowledged by the commenter, the purpose of the labor-related
share is to allocate ESRD payment between labor-related costs and non-
labor costs. The labor-related share is not meant to increase payments
overall for the rising cost of labor.
Final Rule Action: We are finalizing our proposal to use the labor-
related share of 55.2 percent, as finalized in the CY 2023 ESRD PPS
final rule, for CY 2024 ESRD PPS payments.
b. 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 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 in Puerto Rico and the U.S. Virgin Islands.
However, the wage index floor value is applicable for any area that may
fall

[[Page 76360]]

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)(e) of this
final rule, the labor-related share to which the wage index will be
applied is 55.2 percent.
(2) CY 2024 ESRD PPS Wage Index
For CY 2024, we proposed to update the wage indices to account for
updated wage levels in areas in which ESRD facilities are located using
our existing methodology. We proposed 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 (FY 2020 cost report data).
For CY 2024, we proposed to update the ESRD PPS wage index to use
the most recent hospital wage data. We proposed that if more recent
data become available after the publication of the 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.
We received several comments on our proposal to update the ESRD PPS
wage index. The comments and our responses are set forth below.
Comment: We received several comments on CMS's proposal to use the
most recent wage index data in the CY 2024 ESRD PPS final rule.
Commenters were generally supportive of the use of more recent data.
Additionally, several commenters reiterated support for the 5 percent
cap on wage index decreases that we finalized in the CY 2023 ESRD PPS
final rule (87 FR 67161).
Response: We thank the commenters for their support on the use of
more recent data and for the policy to cap wage index decreases.
Comment: One ESRD facility expressed concerns that the ESRD PPS
wage index does not reflect the realities that it faces and,
specifically, does not accurately reflect the increase in its cost of
labor over the past few years.
Response: We appreciate the concerns that the commenter raised;
however, we did not propose to change the wage index methodology for CY
2024 and are not finalizing any changes to that methodology in this
final rule. The wage data used to construct the ESRD PPS wage index are
updated annually, based on the most current data available, and are
based on OMB's CBSA delineations when applying the rural definitions
and corresponding wage index values. As discussed in CY 2011 ESRD PPS
final rule (75 FR 49200), the wage index reflects the relative level of
hospital wages and wage-related costs in the geographic area in which
the ESRD facility is located. Because the wage index is scaled relative
to the national average, it does not reflect changes over time to the
cost of labor. Rather, the market basket increase accounts for national
trends, including inflation. As discussed in the CY 2024 ESRD PPS
proposed rule (88 FR 42435), we proposed to increase the ESRD PPS base
rate for CY 2024 by the market basket increase factor in accordance
with section 1881(b)(14)(F)(i) of the Act, which provides that the
market basket increase factor should reflect the changes over time in
the prices of an appropriate mix of goods and services that reflect the
costs of furnishing renal dialysis services. As discussed in section
II.B.1.a.(2).(c) of this final rule, the final productivity-adjusted
market basket update for CY 2024 is 2.1 percent based on the latest
available data. We note that this final update is 0.4 percentage point
higher than the proposed update and reflects a revised outlook
regarding the U.S. economy and expected price inflation for CY 2024 for
ESRD facilities. We believe the final productivity-adjusted market
basket update will address some of the commenter's concerns regarding
rising wages due to inflation.
Comment: Several commenters, including MedPAC, a coalition of
dialysis organizations and an LDO, suggested that CMS reevaluate the
wage index methodology for the ESRD PPS. MedPAC recommended we
establish an ESRD PPS wage index for all ESRD facilities using wage
data that represents all employers and industry-specific occupational
weights, rather than the hospital wage data currently used. Two ESRD
facilities and a provider advocacy organization requested CMS use the
floors and reclassifications that IPPS uses for their wage index. Some
of these commenters additionally indicated a belief that this change
would help ESRD facilities compete with hospitals for labor.
Response: We appreciate the suggestions from commenters on how to
improve the ESRD PPS wage index methodology. The use of hospital wage
data for the ESRD PPS wage index is set forth in Sec. Sec.
413.196(d)(2) and 413.231(a). As we previously discussed in the CY 2011
ESRD PPS proposed rule (74 FR 49968), the ESRD PPS wage index uses the
same wage index values used in the basic case-mix adjusted composite
payment system, which 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. The application of the pre-floor, pre-
reclassification hospital wage index for the ESRD case-mix adjusted
composite payment system is further discussed in the CY 2009 Physician
Fee Schedule (PFS) final rule (73 FR 69726, 69758) and the CY 2007 PFS
final rule (71 FR 69624, 69685). We did not propose changes to the ESRD
PPS wage index methodology for CY 2024, and we are not finalizing any
changes to that methodology in this final rule.
As discussed in the CY 2023 ESRD PPS final rule (87 FR 67160), the
wage index is intended to be a relative measure of the value of labor
in prescribed labor market areas. There is a variety of reasons why our
longstanding ESRD PPS wage index policy has not applied the same floors
or reclassifications as applied under the IPPS, which we note, are not
applied to the ESRD PPS wage index by statute (sections 1881(b)(12)(D)
& (b)(14)(D)(iv)(II) of the Act). For example, applying
reclassifications to the ESRD PPS wage index would

[[Page 76361]]

significantly increase administrative burden, both for ESRD facilities
and for CMS, that would be associated with ESRD facilities
reclassifying from one CBSA to another, and it would significantly
increase the complexity of the methodology.
Furthermore, because floors and reclassifications would be applied
budget-neutrally under the wage index, these policies would increase
the wage index for some ESRD facilities while reducing ESRD PPS
payments for all other ESRD facilities, which would upset the long-
settled expectations with which ESRD facilities across the country have
been operating. For example, under the IPPS rural floor policy, section
4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) provides
that, for discharges on or after October 1, 1997, the area wage index
applicable to any hospital that is located in an urban area of a State
may not be less than the area wage index applicable to hospitals
located in rural areas in that State. Applying the IPPS rural floor to
the ESRD PPS wage index would result in increasing the wage index for
any ESRD facilities located in an urban area whose wage index is less
than the rural wage index for that State. As we discussed in the CY
2023 ESRD PPS final rule (87 FR 67164 through 67165) with respect to
the increase to the ESRD PPS wage index floor in that year, a higher
wage index floor will slightly decrease the ESRD PPS base rate for all
ESRD facilities due to the application of the budget neutrality factor.
Given that increasing the wage index floor results in a proportional
decrease in the base rate for all ESRD facilities, we established a
wage index floor value that strikes a balance between providing
increased payment to areas for which labor costs are higher than the
current wage index for the relevant CBSAs indicates, while maintaining
the accuracy of payments under the ESRD PPS and minimizing the overall
impact to all ESRD facilities.
For these reasons, we believe that the ESRD PPS wage index is the
most appropriate data to use for estimating the variation in wage
levels across the country. However, we will take these comments into
consideration to potentially inform future rulemaking.
Comment: A non-profit health insurance organization commented that
they believed a wage index floor of 0.7000 was justified and suggested
CMS reevaluate the current wage index floor of 0.6000. The commenter
indicated that CMS would find it appropriate to raise the wage index
floor to 0.7000.
Response: We appreciate the suggestion and will consider it for
potential future rulemaking. We did not propose any change to the
current wage index floor of 0.6000 specified in Sec. 413.231(d) and
are not finalizing any changes to that floor in this final rule.
Final Rule Action: We are finalizing our proposal to update the
ESRD PPS wage index for CY 2024 to use the most recent hospital wage
data, as proposed. The final CY 2024 ESRD PPS wage index is set forth
in Addendum A and is available on CMS's 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 CY 2024 wage index.
Addendum B provides an ESRD facility level impact analysis. Addendum B
is available on CMS's 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>.
c. 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 are 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.\11\
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\11\ 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.
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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.\12\ 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 Medicare 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.
---------------------------------------------------------------------------

\12\ 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

[[Page 76362]]

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 final rule
for clarity, to 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 proposed to update the MAP amounts for adult and
pediatric patients using the latest available CY 2022 claims data. We
proposed to update the ESRD outlier services FDL amount for pediatric
patients using the latest available CY 2022 claims data, and to update
the ESRD outlier services FDL amount for adult patients using the
latest available claims data from CY 2020, CY 2021, and CY 2022, in
accordance with the methodology finalized in the CY 2023 ESRD PPS final
rule (87 FR 67170 through 67174). CY 2022 claims data showed outlier
payments represented approximately 0.8 percent of total Medicare
payments (88 FR 42432 and 42438).
The impact of this final 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 estimates for this final rule. The
estimates for the 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

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[GRAPHIC] [TIFF OMITTED] TR06NO23.003

As demonstrated in Table 1, the estimated FDL per treatment that
determines the CY 2024 outlier threshold amount for adults (Column II;
$71.76) is lower than that used for the CY 2023 outlier policy (Column
I; $73.19). The lower threshold is accompanied by a decrease in the
adjusted average MAP for outlier services from $39.62 to $36.28. For
pediatric patients, there is a decrease in the FDL amount from $23.29
to $11.32. There is a corresponding decrease in the adjusted average
MAP for outlier services among pediatric patients, from $25.59 to
$23.36.
We estimate that the percentage of patient months qualifying for
outlier payments in CY 2024 would be 4.87 percent for adult patients
and 20.86 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 target (87 FR 67170
through 67174). We stated in the CY 2024 ESRD PPS proposed rule that,
based on the CY 2022 claims, outlier payments represented approximately
0.9 percent of total payments. Based on more complete CY 2022 claims
data, this figure has been updated to 0.8 percent for this final rule,
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. In the CY 2024
ESRD PPS proposed rule, we noted that 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 noted 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.
The comments and our responses to the comments on our proposed
updates to the outlier policy are set forth below.
Comment: We received several comments on CMS's proposals to update
the FDL and MAP amounts for CY 2024. Commenters were generally
supportive of the use of more recent data to determine the CY 2024 ESRD
PPS final MAP and FDL amounts. Several commenters stated that they
appreciated that the methodological changes CMS made to the outlier
policy in the CY 2023 ESRD PPS final rule resulted in the total
percentage of payments for outliers being closer to the 1 percent
target than ever before. However, some commenters noted that the ESRD
PPS base rate is reduced on the assumption that 1 percent of total
payments will be attributable to outlier payments, and if the actual
percentage is less than 1 percent it means that total payments to ESRD
facilities are less than they should be. Commenters suggested that CMS
should implement a policy to recompense ESRD facilities for

[[Page 76364]]

underpayment when total outlier payments are less than 1 percent of
total ESRD PPS payments. One commenter recommended CMS reduce the
outlier target to 0.5 percent of total payments.
Response: We appreciate the support for the proposed use of more
recent data to update the MAP and FDL amounts for the outlier policy
and the thoughtful suggestions provided by commenters. We acknowledge
that, even with annually adjusting the MAP and FDL amounts to reflect
the most recent utilization and costs of ESRD PPS eligible outlier
services according to the updated outlier methodology finalized in the
CY 2023 ESRD PPS final rule, total outlier payments have not yet
reached the 1 percent target. However, the performance of the outlier
payments has improved significantly due to the modification to the
outlier methodology finalized in CY 2023 ESRD PPS final rule, as
outlier payments represented 0.8 percent of the total payments in CY
2022. We appreciate the comments suggesting solutions for refining the
outlier policy methodology, for example, reducing the outlier
percentage, as defined at Sec. 413.220(b)(4), to less than 1 percent
or establishing a mechanism that pays back ESRD facilities those
allocated outlier amounts that were not paid out in the projected year.
We did not propose any modifications to the ESRD PPS outlier policy for
CY 2024 codified at Sec. 413.220, and we are not finalizing any
changes to the methodology in this final rule. We will consider the
commenters' suggestions regarding changes in methodology in potential
future rulemaking.
Final Rule Action: After considering the public comments, we are
finalizing the updated outlier thresholds for CY 2024 displayed in
Column II of Table 1 of this final rule based on the most current data.
d. 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 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
In the CY 2024 ESRD PPS proposed rule, we proposed an ESRD PPS base
rate for CY 2024 of $269.99 (88 FR 42432). We are finalizing an ESRD
PPS base rate for CY 2024 of $271.02. This 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 did not propose and are not finalizing
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 final 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 final
CY 2024 ESRD PPS wage index and final labor-related share for CY 2024.
As discussed in section II.B.1.b of this final rule, the 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 final CY 2024 wage index budget-neutrality
adjustment factor is 1.000031. This CY 2024 wage index budget-
neutrality adjustment factor reflects the impact of all wage index
policy changes, including the final CY 2024 ESRD PPS wage index and
labor-related share.
TPEAPA Budget-Neutrality Adjustment Factor: As explained in section
II.B.1.g.(7) of this final rule, we are finalizing a new, budget-
neutral transitional add-on payment adjustment for pediatric ESRD renal
dialysis services, which we call the TPEAPA. The final CY 2024 budget-
neutrality adjustment factor for the TPEAPA is 0.999503. The budget-
neutrality adjustment factor for the TPEAPA is discussed in section
II.B.1.g of this final rule.
Combined Wage Index and TPEAPA Budget-Neutrality Adjustment Factor:
For purposes of calculating the ESRD PPS base rate for CY 2024, we are
using one combined budget-neutrality adjustment factor includes both
the wage index budget-neutrality adjustment factor and the TPEAPA
budget-neutrality adjustment factor. The CY 2024 combined wage index
and TPEAPA budget neutrality factor is 0.999534 (1.000031 x 0.999503).
This application would yield a CY 2024 ESRD PPS base rate of $265.48
prior to the application of the CY 2024 market basket update percentage
($265.57 x 0.999534 = $265.45).
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 an ESRD market basket percentage
increase. As discussed previously in section II.B.1.a.(2)(a) of this
final rule, the latest CY 2024 projection of the ESRDB market basket
percentage increase is 2.4 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 final rule, the latest CY 2024 projection of
the productivity adjustment is 0.3 percentage point, thus yielding a CY
2024 productivity-adjusted ESRDB market basket update of 2.1 percent
for

[[Page 76365]]

CY 2024. Therefore, the final CY 2024 ESRD PPS base rate is $271.02
(($265.57 x 0.999534) x 1.021 = $271.02).
The comments and our responses to the comments on our proposed
updates to the ESRD PPS base rate are set forth below.
Comment: We received several comments which characterized the
proposed CY 2024 ESRD PPS base rate as too low. Some of these
commenters requested that CMS increase the base rate. The reasoning for
this requested increase varied by commenter. Some commenters wanted an
increase to account for recent under-forecasts, whereas other
commenters wanted an increase to allow facilities to provide an
increased quality of care.
Response: The CY 2024 ESRD PPS base rate is derived from the CY
2023 ESRD PPS base rate, the CY 2024 ESRDB market basket update, and
the CY 2024 combined wage index-TPEAPA budget neutrality factor. In
accordance with section 1881(b)(14)(F) of the Act, the primary factor
in determining the ESRD PPS base rate increase from one year to the
next is the ESRDB market basket update. We believe the final CY 2024
ESRDB market basket update reflects the most recent available data
regarding the forecasted prices of labor used to provide renal dialysis
services. We discuss the CY 2024 ESRDB market basket update in more
detail in section II.B.1.a of this final rule, with detailed responses
to comments on the magnitude of the productivity-adjusted ESRDB market
basket increase in section II.B.1.a.(2)(c) of this final rule and
detailed responses to comments on previous forecast errors for the
ESRDB market basket update in section II.B.1.a.(2)(d) of this final
rule. We appreciate the concerns of the commenters, but we did not
propose any new payment adjustments to the base rate based on those
concerns. We will continue to monitor the adequacy of the ESRD PPS
payment and will consider these commenters' insights for future
rulemaking.
Final Rule Action: We are finalizing a CY 2024 ESRD PPS base rate
of $271.02. This amount reflects the combined CY 2024 wage index-TPEAPA
budget-neutrality adjustment factor of 0.999534, and the CY 2024 ESRD
PPS productivity-adjusted market basket update of 2.1 percent.
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 final rule, we 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 CYs.
As we discussed in the CY 2024 ESRD PPS proposed rule (88 FR
42432), there are currently no capital-related assets that are home
dialysis machines set to receive TPNIES for CY2024, 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 proposed to
update the TPNIES offset amount annually according to the methodology
described previously.
We proposed a CY 2024 TPNIES offset amount for capital-related
assets that are home dialysis machines of $9.96, based on the proposed
CY 2024 ESRDB productivity-adjusted market basket update of 1.7 percent
(2.0 percent market basket percentage increase reduced by 0.3
percentage point productivity adjustment). We explained in the CY 2024
ESRD PPS proposed rule that applying the proposed update factor of
1.017 to the CY 2023 offset amount resulted in the proposed CY 2024
offset amount of $9.96 ($9.79 x 1.017 = $9.96). We proposed to update
this calculation to use the most recent data available in the CY 2024
ESRD PPS final rule.
We received three comments on this proposal to update the TPNIES
offset amount for capital related assets that are home dialysis
machines, including comments from an LDO and a device manufacturer. The
comments and our responses to the comments on the proposed update to
the TPNIES offset amount are set forth below.
Comment: A device manufacturer requested that CMS remove the TPNIES
offset for capital-related assets that are home dialysis machines. The
commenter and two others indicated that they believe that the TPNIES
offset, combined with the 65 percent reduction for risk sharing, are
leading to capital-related assets that are home dialysis machines being
undervalued. An LDO agreed that the TPNIES for capital-related assets
that are home dialysis machines should be offset by an amount currently
in the base rate.
Response: We appreciate the commenters' insight into the impacts of
the TPNIES offset for capital-related assets that are home dialysis
machines. We did not propose any methodological changes for this TPNIES
offset amount set forth at Sec. 413.236(f), and we are not finalizing
any changes. We will consider the commenters' concerns for potential
future rulemaking.
Final Rule Action: We are finalizing our proposal to calculate the
CY 2024 TPNIES offset amount using the most recent data available. The
CY 2023 TPNIES offset amount for capital-related equipment that are
home dialysis machines used in the home is $9.79. As discussed
previously in section II.B.1.a.(2)(c) of this final rule, the final CY
2024 ESRDB productivity-adjusted market basket update is 2.1 percent
(2.4 percent market basket percentage increase reduced by 0.3 percent
productivity adjustment). Applying the update factor of 1.021 to the CY
2023 TPNIES offset amount results in a final CY 2024 TPNIES offset
amount of $10.00 ($9.79 x 1.021).
f. 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

[[Page 76366]]

that meet the definition of a low-volume facility. In this section of
the final rule, we discuss the low volume-payment adjustment (LVPA)
under the ESRD PPS.
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 ESRD PPS 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 these 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. To receive the LVPA, an ESRD facility must submit
a written attestation statement to its Medicare Administrative
Contractor (MAC) confirming that it meets all 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 is considered
equivalent to three hemodialysis treatments (80 FR 68994). Section
413.232(e) generally imposes a yearly November 1st 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 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 MedPAC and the Government
Accountability Office (GAO),\13\ 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.\14\ 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 4,000 treatments per year to meet the LVPA
threshold.\15\
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\13\ <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>.
\14\ <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>.
\15\ <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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(2) Requests for Information on Modification of LVPA Methodology and
Development of a New Payment Adjustment Based on Geographic Isolation
In the CY 2024 ESRD PPS proposed rule (88 FR 42440 through 42441),
we explained that 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 solicited
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.
(a) Comment Solicitation for Modifications to LVPA Methodology
In the CY 2024 ESRD PPS proposed rule, we solicited comments on

[[Page 76367]]

potential changes to the LVPA methodology (88 FR 42441 through 42444),
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 requested 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 solicited 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 stated that we were engaged in continuing monitoring
efforts to align resource use with payment. As noted in the CY 2024
ESRD PPS proposed rule (88 FR 42442), 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 in Table
2.
[GRAPHIC] [TIFF OMITTED] TR06NO23.004

(ii) Establishment of Multiple LVPA Tiers
We solicited comments 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.\16\ 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 solicited comments regarding the establishment of
multiple thresholds, including up to an eight-tiered structure for the
LVPA. Tables 3 through 6 outline various methodological options. Tables
3 and 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 and 6 show adjustment
factors which are scaled to maintain budget neutrality within the LVPA,
keeping the LVPA's budget at the same amount that would occur under the
current methodology without requiring reductions to the ESRD PPS base
rate. As illustrated below, scaling the adjusters while maintaining
budget neutrality within the LVPA results in lower LVPA adjusters. For
example, Tier 1 (less than 5,000 treatments) in the Four-Tiered Model
varies based on the approach to maintaining budget neutrality, as the
LVPA adjuster is 13.7 percent where budget neutrality is maintained
within the ESRD PPS (Table 3) and 5.8 percent where budget neutrality
is maintained within the LVPA (Table 5). For comparison, the Eight-
Tiered Model shows that for Tier 1 (less than 1,000 treatments), ESRD
facilities would receive a 123 percent LVPA adjuster where budget
neutrality is maintained within the ESRD PPS (Table 4) and 40.5 percent
LVPA adjuster where budget neutrality is maintained within the LVPA
(Table 6).
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\16\ <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>.

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[[Page 76368]]

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[[Page 76369]]

[GRAPHIC] [TIFF OMITTED] TR06NO23.008

(iii) Continuous Function
We also solicited comments on potentially establishing a continuous
function to adjust LVPA payments. Under this approach, ESRD facilities
with the lowest treatment 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.
In the CY 2024 ESRD PPS proposed rule, we noted that we are
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 issued this RFI to
seek feedback on the suggested changes to the LVPA, as described
previously, and to solicit further input from interested parties to
inform future modifications to the methodology used to determine the
LVPA.
CMS welcomed 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.
++ 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.
++ 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 previously,
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.
++ 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.
++ 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.
++ Describe any anticipated effects of decreasing the amount of
treatment volume data used to determine LVPA eligibility.
++ 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.
Therefore, in the CY 2024 ESRD PPS proposed rule (88 FR 42444 through
42445), we solicited comments on potentially assisting geographically
isolated ESRD facilities and promoting access in these areas, including
labor force hiring and retention. We stated that we considered
establishing a new payment adjustment that accounts for isolation,
rurality, and other geographical factors. We also requested information
on geographic isolation to determine if ESRD facilities that are

[[Page 76370]]

currently considered rural would benefit from a geographic isolation
adjustment. The new geographically based payment adjustment may
consider local dialysis need (LDN), as explained later in this section,
instead of basing payment strictly upon a rural designation, as set
forth in 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 previously, 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. We explained that 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 solicited 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.
We solicited responses to the following questions.
++ What factors should be considered in formulating a payment
adjustment for ESRD facilities in isolated geographical areas or areas
for which there is a low need for renal dialysis services?
++ What are the best ways to incentivize renal dialysis service
provision in isolated geographic areas?
++ Our analysis of the LDN methodology has shown that low LDN
census tracts intersect with areas designated as Health Professional
Shortage Areas. 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?
++ 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.
++ 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.
++ Comment on the appropriateness of utilizing driving time between
current beneficiary address and treatment location as the appropriate
metric for travel time.
++ Are there ways in which the suggested methodology for this
potential payment adjustment could fail in targeting isolated ESRD
facilities, or ESRD facilities in areas with low LDN?
++ Are there ways in which the determination of LDN might be
subject to gaming?
++ Would a payment adjustment for ESRD facilities in areas with low
LDN improve health equity? Are there specific recommendations to change
the LDN methodology described above to promote quality access to care
for all ESRD beneficiaries?
++ Comment on the favorability of CMS's implementation of a new
payment adjustment for ESRD facilities in areas with low LDN as
described above.
++ Are there any other considerations we should keep in mind when
considering proposing a new payment adjustment based on an LDN
methodology?
(c) Summary of Request for Information on Potential Modification to
LVPA Methodology and Information Received From Commenters
As discussed above, in the CY 2024 ESRD PPS proposed rule (88 FR
42430), we sought comment on several approaches to modifying the LVPA
to address concerns about its incentive structure, treatment threshold,
and administrative burden. We issued an RFI to seek feedback from the
public on potential changes to the LVPA methodology, including
maintaining a single threshold, establishing LVPA tiers, and/or
utilizing a continuous function to ensure that payments accurately
reflect differences in cost and adequately target low-volume
facilities. We also solicited comments on the establishment of an add-
on payment adjustment for geographic isolation of ESRD facilities. We
asked commenters whether a payment adjustment for geographic isolation
of ESRD facilities in areas with low local dialysis need would improve
health equity.
We received 23 public comments in response to our RFI, including
from large, small, and non-profit dialysis organizations; an advocacy
organization; a coalition of dialysis organizations; a large non-profit
health system; and MedPAC. A high-level description of these comments
is included in the following subsections of this CY 2024 ESRD PPS final
rule.
We thank the commenters for their detailed and thoughtful comments.
While we will not respond to these comments in this CY 2024 ESRD PPS
final rule, we intend to take them into consideration for future
rulemaking and future policy development. We will provide more detailed
information about the commenters' recommendations in a future posting
on CMS's website located at the following link: <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>.
(i) Responses on Criteria for Receiving LVPA Status
We received a wide range of responses to the RFI. Many commenters
supported MedPAC's proposal of implementing a two-tier low-volume and
isolated (LVI) adjustment in place of the LVPA so that facilities can
expand services to meet patient needs without substantial payment
decreases while limiting administrative burden. Some commenters
supported maintaining a single threshold with varying recommendations
for adjusted treatment counts. Other commenters supported establishing
varying numbers of tiers at varying treatment counts. Some commenters
also supported establishing a continuous function as described in the
CY 2024 ESRD PPS proposed rule. Many comments included general concerns
regarding the administrative burden and transparency of the various
methodologies described. While we are not providing a detailed response
to these comments in this final rule, we thank the commenters for their
input and will consider the recommendations in potential future
rulemaking.
(ii) Responses on the Local Dialysis Need (LDN) Methodology
Commenters generally believed that the LDN methodology was overly
complicated and lacked transparency. Several commenters expressed
renewed support for incorporating geographic isolation directly into
the LVPA formula, using a methodology such as the LVI adjustment that
MedPAC suggested. While we are not providing a detailed response to
these comments in this final rule, we thank the commenters for their
input and will consider the recommendations in potential future
rulemaking.

[[Page 76371]]

(3) Exception to the Current LVPA Attestation Process for Disasters and
Other Emergencies
Under our current regulations at 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 cost reports, whichever is most recent, except as specified in
Sec. 413.232(g)(4)) preceding the payment year; and (2) has not
opened, closed, or received a new provider number due to a change in
ownership (except where the change in ownership results in a change in
facility type) in the 3 cost reporting years (based on as-filed or
final settled 12 consecutive month cost reports, whichever is most
recent) preceding the payment year. When we first established these
requirements in the CY 2011 ESRD PPS final rule, we explained that
looking across data for three years provided us with 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 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 COVID-19 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 COVID-19 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.
In the CY 2024 ESRD PPS proposed rule, we stated that we recognize
there could be future circumstances, potentially like the circumstances
of the COVID-19 PHE, in which it would be appropriate to provide
flexibilities with respect to certain LVPA requirements (88 FR 42446).
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 noted 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 because 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 Sec. 413.232(b).
We explained that 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, we noted, adding
certain flexibilities during disasters or other emergencies would
promote our commitment to ensuring access to care for ESRD patients.
(a) Changes to the LVPA
We proposed 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 proposed to create a new exception to
the attestation process for disasters and other emergencies. Second, we
proposed 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 or facilities' ability to qualify for the
LVPA. For purposes of the 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.
<bullet> Other disasters or emergency conditions under which a
waiver could be granted pursuant to section 1135 of the Act.
We stated that these 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 can
maintain LVPA eligibility despite the impacts caused by a disaster or
other emergency. This policy could potentially protect other ESRD
facilities that need to maintain the LVPA to remain open from
potentially losing their LVPA by exceeding the treatment threshold
because they accepted displaced patients. We noted that 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

[[Page 76372]]

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 can maintain their LVPA eligibility upon
reopening to ensure continued access in areas that otherwise may lack
sufficient ESRD facilities. This policy could also help those ESRD
facilities affected by the disaster or other emergency potentially
resume operations and avoid permanent closure if they would be allowed
to receive the LVPA upon reopening despite the closure or disruption of
operations.
(i) Exception to the LVPA Treatment Threshold for ESRD Facilities That
Accept Patients From an ESRD Facility Affected by a Disaster or Other
Emergency
We proposed in the CY 2024 ESRD PPS proposed rule to create an
exception to the LVPA treatment threshold requirements set forth in
Sec. 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 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 proposed 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
CY 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="480d1b1a0c180911050d061c082b253b6620203b662f273e">[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 exception, the ESRD
facility would be held harmless for meeting or exceeding the 4,000-
treatment threshold during one or more cost reporting years within the
3-year lookback for LVPA eligibility as long as their 4,000-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). The ESRD facility receiving this exception must maintain
d

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