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Proposed Rule2025-12368

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

July 2, 2025

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This proposed rule would update and revise the End-Stage Renal Disease (ESRD) Prospective Payment System for calendar year 2026. This rule also proposes to update the payment rate for renal dialysis services furnished by an ESRD facility to individuals with acute kidney injury. In addition, this rule proposes to update requirements for the ESRD Quality Incentive Program and to terminate and modify requirements for the ESRD Treatment Choices Model.

Full Text

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<title>Federal Register, Volume 90 Issue 125 (Wednesday, July 2, 2025)</title>
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[Federal Register Volume 90, Number 125 (Wednesday, July 2, 2025)]
[Proposed Rules]
[Pages 29342-29391]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-12368]

[[Page 29341]]

Vol. 90

Wednesday,

No. 125

July 2, 2025

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; Proposed Rule

Federal Register / Vol. 90 , No. 125 / Wednesday, July 2, 2025 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 512

[CMS-1830-P]
RIN 0938-AV52

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

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update and revise the End-Stage Renal
Disease (ESRD) Prospective Payment System for calendar year 2026. This
rule also proposes to update the payment rate for renal dialysis
services furnished by an ESRD facility to individuals with acute kidney
injury. In addition, this rule proposes to update requirements for the
ESRD Quality Incentive Program and to terminate and modify requirements
for the ESRD Treatment Choices Model.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by August 29, 2025.

ADDRESSES: In commenting, please refer to file code CMS-1830-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1830-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1830-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#490c1a1b0d192830242c273d092a243a6721213a672e263f">[email&#160;protected]</a> or Abigail Ryan 410-786-4343 for issues
related to the ESRD Prospective Payment System (PPS) and coverage and
payment for renal dialysis services furnished to individuals with acute
kidney injury (AKI).
<a href="/cdn-cgi/l/email-protection#8dc8dedfc9ccfdfde1e4eeecf9e4e2e3fecdeee0fea3e5e5fea3eae2fb">[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#1a5f49485e4b534a5a79776934727269347d756c">[email&#160;protected]</a>, for issues related to the ESRD Quality
Incentive Program (QIP).
<a href="/cdn-cgi/l/email-protection#581d0c1b751b151511183b352b7630302b763f372e">[email&#160;protected]</a>, for issues related to the ESRD Treatment
Choices (ETC) Model.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Current Procedural Terminology (CPT) Copyright Notice: Throughout
this proposed rule, we use CPT[supreg] codes and descriptions to refer
to a variety of services. We note that CPT[supreg] codes and
descriptions are copyright 2020 American Medical Association (AMA). All
Rights Reserved. CPT[supreg] is a registered trademark of the AMA.
Applicable Federal Acquisition Regulations (FAR) and Defense Federal
Acquisition Regulations (DFAR) apply.
Deregulation Request for Information (RFI):
On January 31, 2025, President Trump issued Executive Order (E.O.)
14192 ``Unleashing Prosperity Through Deregulation,'' which states the
Administration policy to significantly reduce the private expenditures
required to comply with Federal regulations to secure America's
economic prosperity and national security and the highest possible
quality of life for each citizen. We would like public input on
approaches and opportunities to streamline regulations and reduce
administrative burdens on providers, suppliers, beneficiaries, and
other interested parties participating in the Medicare program. CMS has
made available an RFI at <a href="https://www.cms.gov/medicare-regulatory-relief-rfi">https://www.cms.gov/medicare-regulatory-relief-rfi</a>. Please submit all comments in response to this RFI through
the provided weblink.

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) 2026 End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS)
A. Background
B. Proposed Provisions of the CY 2026 ESRD PPS
C. Transitional Add-On Payment Adjustment for New and Innovative
Equipment and Supplies (TPNIES)
D. Continuation of Approved Transitional Add-On Payment
Adjustments for New and Innovative Equipment and Supplies for CY
2026
E. Continuation of Approved Transitional Drug Add-On Payment
Adjustments for CY 2026
III. CY 2026 Payment for Renal Dialysis Services Furnished to
Individuals With AKI
A. Background
B. Proposed Annual Payment Rate for 2026
IV. Proposed Updates to the End-Stage Renal Disease Quality
Incentive Program (ESRD QIP)
A. Background
B. Proposed Updates to Requirements Beginning With the Payment
Year (PY) 2027 ESRD QIP
C. Proposed Updates to Requirements Beginning With the PY 2028
ESRD QIP
D. Requests for Information (RFIs) on Topics Relevant to ESRD
QIP
V. End-Stage Renal Disease Treatment Choices (ETC) Model
A. Background
B. Provisions of the Proposed Rule
VI. Collection of Information Requirements
A. ESRD QIP--Wage Estimates
B. Estimated Burden Associated With the Data Validation
Requirements for PY 2028

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C. Estimated EQRS Reporting Requirements for PY 2027 and PY 2028
D. ESRD Treatment Choices Model
VII. Response to Comments
VIII. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact Analysis
C. Detailed Economic Analysis
D. Accounting Statement
E. Regulatory Flexibility Act (RFA)
F. Unfunded Mandates Reform Act (UMRA)
G. Federalism
H. E.O. 14192, ``Unleashing Prosperity Through Deregulation''
IX. Files Available to the Public via the Internet

I. Executive Summary

A. Purpose

This rule proposes 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.
1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
On January 1, 2011, we implemented the ESRD PPS, a case-mix
adjusted, bundled PPS for renal dialysis services furnished by ESRD
facilities as required by section 1881(b)(14) of the Social Security
Act (the Act), as added by section 153(b) of the Medicare Improvements
for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275).
Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA,
and amended by section 3401(h) of the Patient Protection and Affordable
Care Act (the Affordable Care Act) (Pub. L. 111-148), established that
beginning calendar year (CY) 2012, and each subsequent year, the
Secretary of the Department of Health and Human Services (the
Secretary) shall annually increase payment amounts by an ESRD market
basket percentage increase, reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. This rule
proposes updates to the ESRD PPS for CY 2026. This rule also proposes
to modify the eligibility timeframe for the transitional drug add-on
payment adjustment (TDAPA) and to establish a new payment adjustment
for ESRD facilities in certain non-contiguous states and territories to
promote efficient allocation of payments.
2. Coverage and Payment for Renal Dialysis Services Furnished to
Individuals With Acute Kidney Injury (AKI)
On June 29, 2015, the President signed the Trade Preferences
Extension Act of 2015 (TPEA) (Pub. L. 114-27). Section 808(a) of the
TPEA amended section 1861(s)(2)(F) of the Act to provide coverage for
renal dialysis services furnished on or after January 1, 2017, by a
renal dialysis facility or a provider of services paid under section
1881(b)(14) of the Act to an individual with AKI. Section 808(b) of the
TPEA amended section 1834 of the Act by adding a new subsection (r)
that provides for payment for renal dialysis services furnished by
renal dialysis facilities or providers of services paid under section
1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base
rate beginning January 1, 2017. This proposed rule proposes to update
the AKI dialysis payment rate for CY 2026.
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.
Beginning with PY 2027, this proposed rule proposes to remove the
Facility Commitment to Health Equity reporting measure, the Screening
for Social Drivers of Health reporting measure, and the Screen Positive
Rate for Social Drivers of Health reporting measure from the ESRD QIP
measure set. In addition, this proposed rule proposes to update the In-
Center Hemodialysis Consumer Assessment of Healthcare Providers and
Systems (ICH CAHPS) clinical measure beginning with PY 2028. Finally,
this proposed rule requests public comment on several topics relevant
to the ESRD QIP.
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). The ETC Model
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.'' Subsequently, the ETC Model has
been updated four times in the annual ESRD PPS final rules for calendar
year (CY) 2022 (86 FR 61874), CY 2023 (87 FR 67136), CY 2024 (88 FR
76344), and CY 2025 (89 FR 89084).
Per model evaluation reports, ETC Model performance since 2021 has
continued to show that the model is not having a statistically
significant impact on the use of home dialysis modalities, transplant
waitlisting, and living donor transplantation. In this rule, we are
proposing to terminate the ETC Model as of December 31, 2025 and also
to modify the duration during which CMS will apply payment adjustments
described in 42 CFR part 512, subpart C for a specific time period.

B. Summary of the Major Provisions

1. ESRD PPS
<bullet> Proposed update to the ESRD PPS base rate for CY 2026: The
proposed CY 2026 ESRD PPS base rate is $281.06, an increase from the CY
2025 ESRD PPS base rate of $273.82. This proposed amount reflects the
application of the wage index budget neutrality adjustment factor
(1.00872), the budget neutrality factor for the proposed non-contiguous
areas payment adjustment (NAPA) (0.99859) as discussed in section
II.B.8. of this proposed rule, and a proposed ESRD Bundled (ESRDB)
market basket update of 1.9 percent as required by section
1881(b)(14)(F)(i)(I) of the Act, equaling $281.06 (($273.82 x 1.00872 x
0.99859) x 1.019 = $281.06).
<bullet> Proposed annual update to the wage index: We adjust the
ESRD PPS wage index on an annual basis using the most current mean
hourly wage data for occupations related to the furnishing of renal
dialysis services from the Bureau of Labor Statistics (BLS)
Occupational Employment and Wage Statistics (OEWS) program and
occupational mix data from the most recent full CY of freestanding ESRD
facility Medicare cost reports. This wage index uses the latest core-
based statistical area (CBSA) delineations to account for differing
wage levels in areas in which ESRD facilities are located. For CY 2026,
we are proposing updates to the wage index based on this methodology
and the latest available data.
<bullet> Proposed annual update to the outlier policy: We are
proposing to update the outlier policy based on the most current data
and established

[[Page 29344]]

methodology. Accordingly, we are proposing to update the Medicare
allowable payment (MAP) amounts for adult and pediatric patients for CY
2026 using the latest available CY 2024 claims data. We are proposing
to update the ESRD outlier services fixed dollar loss (FDL) amount for
pediatric patients using the latest available CY 2024 claims data and
to update the FDL amount for adult patients using the latest available
claims data from CY 2022, CY 2023, and CY 2024. For pediatric
beneficiaries, the FDL amount would decrease from $234.26 to $148.38,
and the MAP amount would decrease from $59.60 to $44.09, as compared to
CY 2025 values. For adult beneficiaries, the FDL amount would decrease
from $45.41 to $12.74, and the MAP amount would decrease from $31.02 to
$22.07. The 1.0 percent target for outlier payments was not achieved in
CY 2024, as outlier payments represented approximately 0.8 percent of
total Medicare payments.
<bullet> Proposed update to the offset amount for the transitional
add-on payment adjustment for new and innovative equipment and supplies
(TPNIES) for CY 2026: The proposed CY 2026 average per treatment offset
amount for the TPNIES for capital-related assets that are home dialysis
machines is $10.41. This proposed offset amount reflects the
application of the proposed ESRDB market basket update of 1.9 percent
($10.22 x 1.019 = $10.41). There are no capital-related assets set to
receive the TPNIES in CY 2026 for which this offset would apply.
<bullet> Proposed update to the post-TDAPA add-on payment
adjustment amounts: We calculate the post-TDAPA add-on payment
adjustment in accordance with 42 CFR 413.234(g). The proposed post-
TDAPA add-on payment adjustment amount for Korsuva[supreg] is $0.2633
per treatment, which would be included in the calculation of the total
post-TDAPA add-on payment adjustment for each quarter in CY 2026. The
proposed post-TDAPA add-on payment adjustment amount for
DefenCath[supreg] is $1.4780 per treatment, which would be included in
the calculation for the third and fourth quarter of CY 2026.
<bullet> Proposed update to the timeframe for TDAPA eligibility: We
are proposing to modify the timeframe for TDAPA eligibility to provide
that a new renal dialysis drug or biological product must have been
approved by the Food and Drug Administration (FDA) within the past 3
years at the time of submission of the TDAPA application. This would be
consistent with the timeframe used for TPNIES eligibility. This
proposed eligibility timeframe would apply for all new drugs and
biological products for which a TDAPA application is submitted on or
after January 1, 2028.
<bullet> Proposed non-contiguous areas payment adjustment (NAPA):
We are proposing a new payment adjustment for ESRD facilities in
certain high-cost, non-contiguous states and territories to account for
certain non-labor costs which are not captured in the ESRD PPS wage
index. As proposed, this payment adjustment would apply to ESRD PPS
claims submitted by ESRD facilities in Alaska, Hawaii, and the U.S.
Pacific Territories of Guam, American Samoa, and the Northern Mariana
Islands. We are also proposing that the NAPA would be budget neutral
and a corresponding budget neutrality factor of 0.99859 would be
applied to the CY 2026 ESRD PPS base rate.
2. Payment for Renal Dialysis Services Furnished to Individuals With
AKI
<bullet> Proposed update to the dialysis payment rate for
individuals with AKI: We are proposing an update to the AKI dialysis
payment rate for CY 2026. The proposed CY 2026 payment rate is $281.06,
which is the same as the proposed CY 2026 ESRD PPS base rate.
3. ESRD QIP
We are proposing to remove the Facility Commitment to Health Equity
reporting measure beginning with PY 2027, the Screening for Social
Drivers of Health reporting measure beginning with PY 2027, and the
Screen Positive Rate for Social Drivers of Health reporting measure
beginning with PY 2027. Beginning with PY 2028, we are proposing to
update the ICH CAHPS clinical measure. We are proposing to reduce the
length of the ICH CAHPS Survey by removing 23 questions which we have
identified as appropriate for removal. We are also including requests
for information (RFIs) on several topics relevant to the ESRD QIP. We
are requesting information on the current state of health information
technology (IT) use in dialysis facilities, including electronic health
records, to further ongoing CMS efforts to facilitate successful
adoption and integration of Fast Healthcare Interoperability
Resources[supreg] (FHIR[supreg]) and FHIR-based technologies and
standardized data for patient assessment instruments. We are also
requesting feedback on potential measurement concepts that could be
developed into ESRD QIP measures in the future, such as measures of
interoperability, well-being, nutrition, and physical activity.
4. ETC Model
We are proposing to terminate the ETC Model and modify the duration
during which CMS would apply the payment adjustments described in 42
CFR part 512, subpart C to claims with claim service dates beginning on
or after January 1, 2021, and ending on or before December 31, 2025. We
discuss our reasons for proposing to terminate the model and the
changes to the regulation required to implement the proposed
termination.

C. Summary of Costs and Benefits

In section VIII.C.5. of this proposed rule, we set forth a detailed
analysis of the impacts that the proposed changes would have on
affected entities and beneficiaries. Table 1 summarizes the impacts of
each proposed provision in this CY 2026 ESRD PPS proposed rule.

Table 1--Estimated Total Costs/Transfers
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Proposals Estimated total costs/transfers
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Proposed CY 2026 ESRD PPS The overall economic impact of this
updates. proposed rule is an estimated increase
of approximately $160 million in
aggregate payments to ESRD facilities in
CY 2026. This includes estimated
expenditures of approximately $27
million associated with the post-TDAPA
add-on payment adjustment.
Proposed CY 2026 AKI dialysis We estimate that the aggregate Medicare
payment rate update. payments made to ESRD facilities for
renal dialysis services furnished to
individuals with AKI, at the proposed CY
2026 ESRD PPS base rate, would increase
by $1 million.
Proposed PY 2027 and PY 2028 We estimate that, as a result of
QIP updates. previously finalized policies and
changes to the ESRD QIP that we are
proposing, the overall economic impact
of the PY 2027 ESRD QIP would be
approximately $146.8 million. We
estimate that, as a result of previously
finalized policies and changes to the
ESRD QIP that we are proposing, the
overall economic impact of the PY 2028
ESRD QIP would be approximately $143.1
million.
Proposed ETC Model We estimate that, as a result of the
termination. termination of the ETC Model, as
proposed in this rule, the net Federal
impact would be approximately $1 million
in savings.
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1. Impacts of the Proposed Updates to the ESRD PPS
The impact table in section VIII.C.5.a. of this proposed rule
displays the estimated change in Medicare payments to ESRD facilities
in CY 2026 compared to estimated Medicare payments in CY 2025. The
overall impact of the proposed CY 2026 payment changes, if finalized,
is projected to be a 1.9 percent increase in Medicare payments.
Hospital-based ESRD facilities would have an estimated 1.5 percent
increase in Medicare payments compared with freestanding ESRD
facilities with an estimated 1.9 percent increase. We estimate that the
aggregate Medicare payments under the ESRD PPS would increase by
approximately $160 million in CY 2026 compared to CY 2025 as a result
of the proposed payment policies in this rule. Because of the projected
1.9 percent overall payment increase, we estimate there would be an
increase in beneficiary coinsurance payments of 1.9 percent in CY 2026,
which translates to approximately $30 million. For CY 2026, we estimate
total payments associated with the post-TDAPA add-on payment adjustment
would be $27.6 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, Sec. 413.236
to establish the TPNIES, a transitional add-on payment adjustment for
certain new and innovative equipment and supplies, and Sec. 413.234(g)
to establish the post-TDAPA add-on payment adjustment. The TDAPA, the
TPNIES, and the post-TDAPA add-on payment adjustment are not budget
neutral.
As discussed in section II.D. of this proposed rule, because we did
not receive any applications for the TPNIES in CY 2025, no new items
were approved for the TPNIES for CY 2025 (89 FR 89162). Therefore,
there are no continuing TPNIES payments for CY 2026. In addition, since
we did not receive any applications for the TPNIES for CY 2026, there
will be no new TPNIES payments for CY 2026. As discussed in section
II.E. of this proposed rule, the TDAPA payment periods for
DefenCath[supreg], Vafseo[supreg], and the oral-only phosphate binders
sevelamer carbonate, sevelamer hydrochloride, sucroferric oxyhydroxide,
lanthanum carbonate, ferric citrate, and calcium acetate will continue
into CY 2026. As described in section VIII.C.5.b. of this proposed
rule, we estimate that the combined total TDAPA payment amounts for
these drugs in CY 2026 would be approximately $480 million, of which,
$100 million would be attributed to beneficiary coinsurance amounts.
2. Impacts of the Proposed Payment Rate for Renal Dialysis Services
Furnished to Individuals With AKI
The impact table in section VIII.C.5.c. of this proposed 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 2025. The
overall impact of the proposed CY 2026 changes is projected to be a 1.8
percent increase in Medicare payments for individuals with AKI.
Hospital-based ESRD facilities would have an estimated 1.6 percent
increase in Medicare payments compared with freestanding ESRD
facilities that would have an estimated 1.8 percent increase. The
overall impact reflects the effects of the proposed Medicare ESRD PPS
payment rate update and the proposed CY 2026 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
proposed CY 2026 ESRD PPS base rate, would increase by $1 million in CY
2026 compared to CY 2025.
3. Impacts of the PY 2027 and PY 2028 ESRD QIP
We estimate that, as a result of previously finalized policies and
changes to the ESRD QIP that we are proposing, the overall economic
impact of the PY 2027 ESRD QIP would be approximately $146.8 million.
The $146.8 million estimate for PY 2027 includes $124.7 million in
costs associated with the collection of information requirements and
approximately $22.1 million in payment reductions across all
facilities. We estimate that, as a result of previously finalized
policies and changes to the ESRD QIP that we are proposing, the overall
economic impact of the PY 2028 ESRD QIP would be approximately $143.1
million. The $143.1 million estimate for PY 2028 includes $124.7
million in costs associated with the collection of information
requirements and approximately $18.4 million in payment reductions
across all facilities.
4. Impacts of the Proposed Termination of the ETC Model
We estimate that, as a result of the termination of the ETC Model,
as proposed in this rule, the net Federal impact would be approximately
$1 million in savings.

II. Calendar Year (CY) 2026 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 \1\ (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).
---------------------------------------------------------------------------

\1\ As discussed in the CY 2019 ESRD PPS final rule (83 FR
56922), we began using the term ``biological products'' instead of
``biologicals'' under the ESRD PPS to be consistent with FDA
nomenclature. We use the term ``biological products'' in this
proposed rule except when referencing specific language in the Act
or regulations.
---------------------------------------------------------------------------

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

[[Page 29346]]

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 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. Effective January 1, 2025, all oral-only renal dialysis drugs and
biological products are paid for under the ESRD PPS.
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 an individual 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, and
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)(1)).
The ESRD PPS provides for three facility-level adjustments. The
first payment adjustment accounts for ESRD facilities furnishing a low
volume of dialysis treatments, with two tiers such that smaller low
volume facilities receive a higher payment adjustment (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 six 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)); (4) a TPNIES for certain new and innovative renal
dialysis equipment and supplies (Sec. 413.236(d)); (5) a transitional
pediatric ESRD add-on payment adjustment (TPEAPA) of 30 percent of the
per-treatment payment amount for renal dialysis services furnished to
pediatric ESRD patients for CYs 2024 through 2026 (Sec.
413.235(b)(2)); and (6) a post-TDAPA add-on payment adjustment for
certain new renal dialysis drugs and biological products after the end
of the TDAPA period (Sec. 413.234(g)).
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 appeared in
the August 12, 2010, issue of 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 12, 2024, 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 2025 ESRD PPS final rule.'' In that rule (89 FR 89084 through
89213), we updated the ESRD PPS base rate, wage index, and outlier
policy for CY 2025 and we updated the CBSA delineations used for the
wage index according to Office of Management and Budget (OMB) Bulletin
No. 23-01. We also finalized a new ESRD PPS wage index methodology, a
phase out of the rural adjustment for ESRD facilities that were re-
designated from a rural to an urban area as a result of the new CBSA
delineations, an expansion of the ESRD PPS outlier list to include all
drugs and biological products that were formerly part of the composite
rate, an updated methodology for calculating certain inflation factors
used when determining the adult fixed dollar loss (FDL) amount, and an
update to the low-volume payment adjustment (LVPA) to include two tiers
such that ESRD facilities with fewer than 3000 treatments in 2 of the 3
preceding years would receive a higher LVPA payment. Additionally, in
the CY 2025 ESRD PPS final rule, we discussed the inclusion of oral-
only drugs into the ESRD PPS bundled payment and finalized monthly
TDAPA amounts for claims which utilize phosphate binders. For further
detailed information regarding these updates and policy changes, see 89
FR 89084.

B. Proposed Provisions of the CY 2026 ESRD PPS

1. Proposed CY 2026 ESRD Bundled (ESRDB) Market Basket Percentage
Increase; Productivity Adjustment; and Labor-Related Share
a. 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

[[Page 29347]]

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.
b. Proposed CY 2026 ESRD Market Basket Update
We are proposing 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 CY 2026 ESRDB market basket percentage increase
based on the best available data. Consistent with historical practice,
we propose to estimate the ESRDB market basket percentage increase
based on IHS Global Inc.'s (IGI) forecast using the most recently
available data at the time of rulemaking. IGI is a nationally
recognized economic and financial forecasting firm with which CMS
contracts to forecast the components of the market baskets. As
discussed in section II.B.1.b.(3). of this proposed rule, we are
calculating the proposed ESRDB market basket update for CY 2026 based
on the proposed ESRDB market basket percentage increase and the
proposed productivity adjustment, following our longstanding
methodology.
(1) Proposed CY 2026 ESRDB Market Basket Percentage Increase
Based on IGI's first quarter 2025 forecast of the 2020-based ESRDB
market basket, the proposed CY 2026 ESRDB market basket percentage
increase is 2.7 percent. We are proposing that if more recent data
become available after the publication of this proposed rule and before
the publication of the final rule (for example, a more recent estimate
of the market basket percentage increase), we would use such data, if
appropriate, to determine the CY 2026 ESRDB market basket percentage
increase in the final rule.
(2) Proposed CY 2026 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),
hereafter referred to as 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 would not
affect the data or methodology.\2\ 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 refer 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/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information">https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information</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 would be changing the
name of this adjustment to refer to it as the productivity adjustment
rather than the MFP adjustment.
---------------------------------------------------------------------------

\2\ 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>.
---------------------------------------------------------------------------

Based on IGI's first quarter 2025 forecast, the proposed
productivity adjustment for CY 2026 (the 10-year moving average growth
of TFP for the period ending CY 2026) is 0.8 percentage point.
Furthermore, we are proposing that if more recent data become available
after the publication of this proposed rule and before the publication
of the final rule (for example, a more recent estimate of the
productivity adjustment), we would use such data, if appropriate, to
determine the CY 2026 productivity adjustment in the final rule.
(3) Proposed CY 2026 ESRDB Market Basket Update
In accordance with section 1881(b)(14)(F)(i) of the Act, we are
proposing to base the CY 2026 ESRDB market basket percentage increase
on IGI's first quarter 2025 forecast of the 2020-based ESRDB market
basket. We propose to then reduce the ESRDB market basket percentage
increase by the proposed productivity adjustment for CY 2026 based on
IGI's first quarter 2025 forecast. Therefore, the proposed CY 2026
ESRDB market basket update is equal to 1.9 percent (proposed 2.7
percent ESRDB market basket percentage increase reduced by a proposed
0.8 percentage point productivity adjustment). Furthermore, as noted
previously, we are proposing that if more recent data become available
after the publication of this proposed rule and before the publication
of the final rule (for example, a more recent estimate of the market
basket percentage increase or

[[Page 29348]]

productivity adjustment), we would use such data, if appropriate, to
determine the CY 2026 ESRD market basket percentage increase and
productivity adjustment in the final rule.
(4) Proposed ESRD 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 2026
ESRD PPS payment update, we are proposing to continue using a labor-
related share of 55.2 percent, which was finalized in the CY 2023 ESRD
PPS final rule (87 FR 67153 through 67154).
2. Proposed CY 2026 ESRD PPS Wage Indices
a. 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, we established a policy to adjust 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. As
discussed in detail later in this section, we later implemented an ESRD
PPS specific wage index methodology in the CY 2025 ESRD PPS final rule
(89 FR 89108 through 89117). Under current policy, we use 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. We most recently updated the CBSA delineations in the CY 2025
ESRD PPS final rule (89 FR 89117) to the OMB delineations as described
in OMB Bulletin No. 23-01, beginning with the CY 2025 ESRD PPS wage
index.\3\
---------------------------------------------------------------------------

\3\ <a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>.
---------------------------------------------------------------------------

Under Sec. 413.231(d), a wage index floor value of 0.6000 is
applied under the ESRD PPS as a substitute wage index for areas with
very low wage index values, as finalized in the CY 2023 ESRD PPS final
rule (87 FR 67161). Currently, all areas with wage index values that
fall below the floor are located in Puerto Rico and the U.S. Virgin
Islands. However, the wage index floor value is applicable for any area
that may fall below the floor. A further description of the history of
the wage index floor under the ESRD PPS can be found in the CY 2019
ESRD PPS final rule (83 FR 56964 through 56967) and the CY 2023 ESRD
PPS final rule (87 FR 67161).
An ESRD facility's wage index is applied to the labor-related share
of the ESRD PPS base rate. In the CY 2023 ESRD PPS final rule (87 FR
67153), we finalized the use of a labor-related share of 55.2 percent.
In the CY 2021 ESRD PPS final rule (85 FR 71436), we finalized a
temporary policy which applied 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 2026, as discussed in section II.B.1.b.(4). of this
proposed rule, we are proposing that the labor-related share to which
the wage index would be applied is 55.2 percent.
In the CY 2011 ESRD PPS final rule (75 FR 49116) and the CY 2011
final rule on Payment Policies Under the Physician Fee Schedule (PFS)
and Other Revisions to Part B (75 FR 73486) we established an ESRD PPS
wage index methodology to use the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the hospital
inpatient prospective payment system (IPPS). The ESRD PPS wage index
values have historically been calculated without regard to geographic
reclassifications authorized for acute care hospitals under sections
1886(d)(8) and (d)(10) of the Act and utilized pre-floor hospital data
that are unadjusted for occupational mix. In the CY 2025 ESRD PPS final
rule (89 FR 89116) we finalized a new ESRD PPS wage index methodology
which uses mean hourly wage data from the Bureau of Labor Statistics
(BLS) Occupational Employment Wages & Statistics (OEWS). This wage data
is then weighted by a national ESRD facility occupational mix (NEFOM)
which is derived from full time equivalent (FTE) data from freestanding
ESRD facility cost report data. Treatment data from ESRD facility cost
reports is also used to weigh the mean hourly wage data when
aggregating the wage data at a CBSA level. As set forth in 42 CFR
413.196(d)(2), we update the ESRD PPS wage index using the most current
wage data for occupations related to the furnishing of renal dialysis
services from BLS and occupational mix data from the most recent full
CY of Medicare cost reports submitted in accordance with Sec.
413.198(b).
For a detailed explanation of the current ESRD PPS wage index
methodology, see the discussion in the CY 2025 ESRD PPS final rule (89
FR 89108 through 89117), and for a detailed explanation of the steps we
use to calculate the ESRD PPS wage index according to this methodology
see Addendum C on the CY 2025 ESRD PPS proposed rule available here:
<a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/end-stage-renal-disease-esrd/esrd-payment-regulations-and-notices/cms-1805-p">https://www.cms.gov/medicare/payment/prospective-payment-systems/end-stage-renal-disease-esrd/esrd-payment-regulations-and-notices/cms-1805-p</a>.
b. National ESRD Facility Occupational Mix
Table 2 presents the national ESRD facility occupational mix
(NEFOM) alongside the BLS occupation titles and codes for the
occupations related to the furnishing of renal dialysis services. We
note that we are presenting the NEFOM in this CY 2026 ESRD PPS proposed
rule to aid interested parties in their reconstruction of the proposed
ESRD PPS wage index, but the actual ESRD PPS wage index uses the total
FTEs for each occupation as described in the calculation in Addendum C
of the CY 2025 ESRD PPS proposed rule rather than the rounded
percentages presented in Table 2. This table is based on data from CY
2023 freestanding ESRD facility cost reports, although we note that the
NEFOM has not changed significantly from the NEFOM presented in the CY
2025 ESRD PPS final rule (89 FR 89101).

[[Page 29349]]

Table 2--Crosswalk of BLS Occupation Codes to ESRD Facility Cost Reports Occupation Classifications and the CY
2026 ESRD PPS Proposed Rule NEFOM
----------------------------------------------------------------------------------------------------------------
ESRD freestanding
Occupation facilities FTE
ESRD PPS colloquial name BLS occupation title code percentage
(rounded)
----------------------------------------------------------------------------------------------------------------
Registered Nurses (RN)...................... Registered Nurses.............. 29-1141 30.0
Licensed Practical Nurses (LPN)............. Licensed Practical and Licensed 29-2061 4.0
Vocational Nurses.
Nurse Aides................................. Nursing Assistants............. 31-1131 2.4
Technicians................................. Health Technologists and 29-2099 38.1
Technicians, All Other.
Social Workers.............................. Healthcare Social Workers...... 21-1022 4.7
Dietitians.................................. Dietitians and Nutritionists... 29-1031 4.5
Administrative Staff........................ Medical Secretaries and 43-6013 10.7
Administrative Assistants.
Management.................................. Medical and Health Services 11-9111 5.5
Managers.
----------------------------------------------------------------------------------------------------------------

c. Missing May 2024 BLS OEWS Data for Colorado
BLS reported data quality concerns for the May 2024 BLS OEWS
estimates for Colorado and did not include any areas of Colorado in
this release.\4\ Per Sec. 413.196(d)(2) we use the most current BLS
wage data for the occupations related to the furnishing of renal
dialysis services for our ESRD PPS wage index. In the CY 2025 ESRD PPS
final rule, we discussed a methodology for imputing missing data using
regression based on the most similar occupation to the occupation for
which there was missing data (89 FR 89100). We believe that this
methodology is generally most appropriate as it uses current OEWS data
to impute the missing estimates; however, that methodology would not be
as useful in this situation since the mean hourly wage estimates for
all occupations are missing for all 7 CBSAs and one rural area in
Colorado. In this instance we do not believe there is sufficient May
2024 OEWS data from which to impute the missing values. To address this
missing data, we are proposing to instead use the May 2023 BLS OEWS
means hourly wage estimates for the occupations in question and adjust
them to be comparable with 2024 wage values by multiplying the wage
estimates by an adjustment factor based on the average change in
national BLS OEWS wages for each occupation in the NEFOM. The
adjustment factors we have applied in our proposed CY 2026 ESRD PPS
wage index are the percent change of national average wage for the
occupation in question for 2024 compared to the national average wage
for that occupation for 2023 from the May 2024 and May 2023 OEWS,
respectively. This adjustment is necessary since the wage index is
relative and if wages are higher in 2024 relative to 2023, using the
unadjusted 2023 values might result in an inappropriately low wage
index value for Colorado. Alternatively, we could freeze the CY 2023
wage index values for Colorado, which would accomplish a similar
purpose, but we believe that our proposed methodology is most
consistent with the language at Sec. 413.196(d)(2) as we are using the
most current mean hourly wage data from the BLS OEWS for Colorado,
which is from the May 2023 OEWS. Should BLS release the May 2024 OEWS
estimates for Colorado before the publication of the ESRD PPS final
rule, we propose to use those estimates instead of the adjusted May
2023 OEWS estimates for the final CY 2026 ESRD PPS wage index. We
request comments on this proposed methodology to address missing
Colorado OEWS data.
---------------------------------------------------------------------------

\4\ All wage data for Colorado is missing in the 2024 OEWS
release due to concerns related to the quality of the data.
According to BLS, this concern was not with the OEWS survey results,
but rather with employment data from the Quarterly Census of
Employment and Wages (QCEW). OEWS uses QCEW employment data to
adjust estimates to represent all employment that is in scope for
the OEWS survey. For more information, see <a href="https://www.bls.gov/oes/notices/2024/colorado-data.htm">https://www.bls.gov/oes/notices/2024/colorado-data.htm</a>.
---------------------------------------------------------------------------

d. Proposed CY 2026 ESRD PPS Wage Index
For CY 2026, we are proposing to update the wage indices to account
for updated wage levels in areas in which ESRD facilities are located
using the ESRD PPS wage index methodology established in the CY 2025
ESRD PPS final rule (89 FR 89098 through 89107) and specified in Sec.
413.196(d)(2). We are proposing to use the most recent available BLS
OEWS mean hourly wage data for various occupations related to the
furnishing of renal dialysis services weighted by FTE data from CY 2023
freestanding ESRD facility cost reports. 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. For CY
2026, the updated wage data used in the analysis for this proposed rule
are from the April 2025 release of the BLS OEWS, which represents data
from six semiannual surveys spanning November 2021 through May 2024.\5\
---------------------------------------------------------------------------

\5\ <a href="https://www.bls.gov/news.release/pdf/ocwage.pdf">https://www.bls.gov/news.release/pdf/ocwage.pdf</a>.
---------------------------------------------------------------------------

For CY 2026, we propose to update the ESRD PPS wage index to use
the most recent available BLS OEWS wage data. We are proposing that if
more recent data become available after the analysis performed for the
publication of this proposed rule and before the publication of the
final rule (for example, an update to the May 2024 BLS OEWS mean hourly
wage data or more complete CY 2023 cost report data), we would use such
data, if appropriate, to determine the CY 2026 ESRD PPS wage index in
the final rule. The proposed CY 2026 ESRD PPS wage index is set forth
in Addendum A and provides a crosswalk between the CY 2025 wage index
and the proposed CY 2026 wage index. Addendum B provides an ESRD
facility level impact analysis. Both Addendum A and Addendum B are
available on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices</a>.
3. Proposed CY 2026 Update to the Outlier Policy
a. 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

[[Page 29350]]

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:
<bullet> Renal dialysis drugs and biological products that were or
would have been, prior to January 1, 2011, separately billable under
Medicare Part B.
<bullet> Renal dialysis laboratory tests that were or would have
been, prior to January 1, 2011, separately billable under Medicare Part
B.
<bullet> 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.
<bullet> 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.
<bullet> 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.\6\
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\6\ 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.
---------------------------------------------------------------------------

<bullet> Renal dialysis drugs and biological products that are
Composite Rate Services as defined in Sec. 413.171.
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.\7\ 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 (CRs), when applicable. For example, we use these issuances to
identify renal dialysis oral drugs that were or would have been covered
under Part D prior to 2011 to provide unit prices for determining the
imputed MAP amounts. In addition, we use these issuances to update the
list of ESRD outlier services by adding or removing items and services
that we determined, based on our monitoring efforts, are either
incorrectly included or missing from the list.
---------------------------------------------------------------------------

\7\ 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 PPS 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. In past years, the MAP
amount has reflected 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 per treatment plus the fixed dollar
loss (FDL) amount. As described in the following paragraphs, the ESRD
facility's predicted MAP amount is the national adjusted average ESRD
outlier services MAP amount per treatment, further adjusted for case-
mix and facility characteristics applicable to the claim. We use the
term ``national adjusted average'' in this section of this proposed
rule to more clearly distinguish the calculation of the average ESRD
outlier services MAP amount per treatment from the calculation of the
predicted MAP amount for a claim. The average ESRD outlier services MAP
amount per treatment is based on utilization from all ESRD facilities,
whereas the calculation of the predicted MAP amount for a claim is
based on the individual ESRD facility and patient characteristics of
the monthly claim. In accordance with Sec. 413.237(c), ESRD facilities
are paid 80 percent of the per treatment amount by which the imputed
MAP amount for outlier services (that is, the actual incurred amount)
exceeds this threshold. ESRD facilities are eligible to receive outlier
payments for treating both adult and pediatric dialysis patients.
In the CY 2011 ESRD PPS final rule and codified in Sec.
413.220(b)(4), using 2007 data, we established the outlier percentage--
which is used to reduce the per treatment ESRD PPS base rate to account
for the proportion of the estimated total Medicare payments under the
ESRD PPS that are outlier payments--at 1.0 percent of total payments
(75 FR 49142 through 49143). We also established the FDL amounts that
are added to the predicted outlier services MAP amounts. The outlier
services MAP amounts and FDL amounts are different for adult and
pediatric patients due to differences in the utilization of separately
billable services among adult and pediatric patients (75 FR 49140). As
we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 through
49139), the predicted outlier services MAP amounts for a patient are
determined by multiplying the adjusted average outlier services MAP
amount by the product of the patient-specific case-mix adjusters
applicable using the outlier services payment multipliers developed
from the regression analysis used to compute the payment adjustments.
In the CY 2023 ESRD PPS final rule, we finalized an update to the
outlier methodology to better target 1.0 percent of total Medicare
payments (87 FR 67170 through 67177). We explained that for several
years, outlier payments had consistently landed below the target of 1.0
percent of total ESRD PPS payments (87 FR 67169). Commenters raised
concerns that the methodology we used to calculate the outlier payment
adjustment since CY 2011 results in underpayment to ESRD facilities, as
the base rate has been reduced by 1.0 percent since the establishment
of the ESRD PPS to balance the outlier payment (85 FR 71409, 71438
through 71439; 84 FR 60705 through 60706; 83 FR 56969). In response to
these concerns, beginning with CY 2023, we began calculating 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. We stated in the CY 2023 ESRD PPS final rule that
we would continue to calculate the adult and pediatric MAP amounts for
CY2023 and subsequent years following our established methodology. In
that same CY 2023 ESRD PPS final rule, we provided a detailed
discussion of the methodology we use to calculate the MAP amounts and
FDL amounts (87 FR 67167 through 67169).
Lastly, in the CY 2025 ESRD PPS final rule we finalized several
methodological and policy changes to the ESRD PPS outlier policy to
address concerns that interested parties have raised in recent years.
First, we finalized an expansion of the definition of ESRD outlier
services in Sec. 413.237(a)(1) to include drugs and biological
products that are Composite Rate Services as defined in Sec. 413.171
(89 FR 89126). Second, we finalized a policy to include the case-

[[Page 29351]]

mix adjusted post-TDAPA add-on payment adjustment amount in the
calculation of the MAP amounts when applicable (89 FR89127). Lastly, we
finalized changes to the inflation factors for outlier eligible drugs
and biological products, laboratory tests, and supplies. For ESRD
outlier drugs and biological products, we use the projected inflation
factor for ESRD outlier services that are drugs and biological products
derived from the historical trend in average sales price (ASP) prices
and utilization for ESRD outlier drugs (89 FR 89127 through 89130). For
ESRD outlier laboratory tests and supplies, we use the growth in the
producer price index (PPI) Industry for Medical and Diagnostic
Laboratories and the PPI Commodity for Surgical and Medical
Instruments, respectively (89 FR 89129 through 89130).
b. Proposed CY 2026 Update to the Outlier Services MAP Amounts and FDL
Amounts
For CY 2026, we are proposing to update the MAP amounts for adult
and pediatric patients using the latest available CY 2024 claims data.
We are proposing to update the ESRD outlier services FDL amount for
pediatric patients using the latest available CY 2024 claims data, and
to update the ESRD outlier services FDL amount for adult patients using
the latest available claims data from CY 2022, CY 2023, and CY 2024, in
accordance with the methodology finalized in the CY 2023 ESRD PPS final
rule (87 FR 67170 through 67174) and including the changes finalized in
the CY 2025 ESRD PPS final rule (89 FR 89108 through 89130). The latest
available CY 2024 claims data show that outlier payments represented
approximately 0.8 percent of total Medicare payments. We are proposing
to update these values with the latest available data, if appropriate,
in the final rule.
The impact of this proposed update is shown in Table 3, which
compares the outlier services MAP amounts and FDL amounts used for the
outlier policy in CY 2025 with the updated estimates for this proposed
rule for CY 2026. The estimates for the proposed CY 2026 MAP amounts,
as shown in column II of Table 3, were inflation adjusted to reflect
projected 2026 prices for ESRD outlier services.

Table 3--Proposed Outlier Policy: Impact of Updated Data for the Outlier Policy
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column I Final outlier policy for CY 2025 Column II Proposed outlier policy for CY
(based on 2023 data, price inflated to 2026 (based on 2024 data, price
2025) * inflated to 2026) **
------------------------------------------------------------------------------------
Age <18 Age >=18 Age <18 Age >=18
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per treatment.................. $58.30 $32.40 $43.92 $23.11
Adjustments:
Standardization for outlier services........................... 1.0432 0.9768 1.0244 0.9745
MIPPA reduction................................................ 0.98 0.98 0.98 0.98
Adjusted average outlier services MAP amount................... $59.60 $31.02 $44.09 $22.07
Fixed-dollar loss amount that is added to the predicted MAP to $234.26 $45.41 $148.38 $12.74
determine the outlier threshold...............................
Patient-month-facilities qualifying for outlier payment........ 6.09% 7.05% 7.05% 14.16%
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Column I was obtained from column II of Table 7 from the CY 2025 ESRD PPS final rule (89 FR 89130).
** The FDL amount for adults incorporates retrospective adult FDL amounts calculated using data from CYs 2022, 2023, and 2024.

As demonstrated in Table 3, the proposed FDL amount per treatment
amount that determines the CY 2026 outlier threshold amount for adults
(column II; $12.74) is lower than that used for the CY 2025 outlier
policy (column I; $45.41). The lower threshold amount is accompanied by
a decrease in the adjusted average MAP for outlier services from $31.02
to $22.07. For pediatric patients, there is a decrease in the FDL
amount from $234.26 to $148.38. There is a corresponding decrease in
the adjusted average MAP for outlier services among pediatric patients,
from $59.60 to $44.09. We note that the decrease in the projected MAP
and FDL amounts for both adult and pediatric patients is due, in part,
to the application of the ESRD PPS drug inflation factor following the
methodology finalized in the CY 2025 ESRD PPS final rule (89 FR 89127
through 89130), which resulted in a lower inflation factor than would
typically occur under the prior methodology. However, as discussed in
that rule, we believe this methodology is more appropriate for the ESRD
PPS as it more accurately captures trends in the prices and utilization
of ESRD PPS outlier services drugs and biological products.
We estimate that the percentage of patient months qualifying for
outlier payments in CY 2026 would be 14.16 percent for adult patients
and 7.05 percent for pediatric patients, based on the 2024 claims data.
c. 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 1.0 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 1.0 percent target (87 FR 67170
through 67174). Based on the preliminary CY 2024 claims, outlier
payments represented approximately 0.8 percent of total payments, which
is slightly below the 1.0 percent target.
4. Proposed Impacts to the CY 2026 ESRD PPS Base Rate
a. Proposed 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

[[Page 29352]]

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, the TDAPA, the
TPNIES, the post-TDAPA add-on payment adjustment, and the TPEAPA for
CYs 2024, 2025 and 2026.
b. Proposed Annual Payment Rate Update for CY 2026
We are proposing an ESRD PPS base rate for CY 2026 of $281.06. This
would be approximately a 2.6 percent increase from the CY 2025 ESRD PPS
base rate of $273.82. This proposed update reflects several factors,
described in more detail as follows:
Wage Index Budget Neutrality Adjustment Factor: We compute a wage
index budget neutrality adjustment factor that is applied to the ESRD
PPS base rate. For CY 2026, we are not proposing any changes to the
methodology used to calculate this factor, which is described in detail
in the CY 2014 ESRD PPS final rule (78 FR 72174). We computed the
proposed CY 2026 wage index budget neutrality adjustment factor using
treatment counts from the 2024 claims and facility-specific CY 2025
payment rates to estimate the total dollar amount that each ESRD
facility would have received in CY 2025. The total of these payments
became the target amount of expenditures for all ESRD facilities for CY
2026. Next, we computed the estimated dollar amount that would have
been paid for the same ESRD facilities using the proposed CY 2026 ESRD
PPS wage index and proposed labor-related share for CY 2026. The total
of these payments becomes the new CY 2026 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 2026
amount. When we multiplied the wage index budget neutrality factor by
the applicable CY 2026 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 the wage index updates and
revisions do not increase or decrease aggregate Medicare payments. The
proposed CY 2026 wage index budget neutrality adjustment factor is
1.00872. As we are not proposing any changes to our established ESRD
PPS wage index policy, this proposed CY 2026 wage index budget
neutrality adjustment factor reflects the impact of all established
wage index policies, including the ESRD PPS wage index methodology
based on BLS OEWS and freestanding ESRD facility cost report FTE data,
the 5 percent cap on year-to-year decreases in wage index values, the 3
-year rural phase-out for ESRD facilities in currently-rural CBSAs that
became urban under the new delineations adopted in CY 2025, and the
labor-related share. We discussed in the CY 2025 ESRD PPS final rule
(89 FR 89131) that the impact of the application of the 5 percent cap
on wage index decreases had a sizable impact on the budget neutrality
factor for CY 2025 due to the new wage index methodology implemented in
that year. That is, because a substantial number of ESRD facilities
would have experienced a greater than 5 percent decrease in their wage
index value as a result of the new wage index methodology, the budget
neutrality adjustment factor needed to offset the effect of limiting
those decreases to 5 percent had a larger magnitude impact on the ESRD
PPS base rate than we expect it would be in a typical year. However,
for CY 2026 the continued application of our established 5 percent cap
policy would result in a proposed wage-index budget neutrality factor
above 1, meaning the proposed ESRD PPS base rate would increase as a
result of its application. This is because the average wage index value
is decreasing as, generally, ESRD facilities that received the 5
percent cap in CY 2025 are set to receive a lower wage index for CY
2026. We note that the proposed CY 2026 wage index budget neutrality
factor does not include any impacts associated with the TPEAPA, as was
the case with the 2024's combined wage index-TPEAPA budget neutrality
finalized factor for CY 2024. This is consistent with how we have
historically applied budget neutrality for case-mix adjusters,
including pediatric case-mix adjusters. We do not routinely apply a
budget neutrality factor to account for changes in overall payment
associated with changes in patient case-mix in years in which we do not
propose any changes to the case-mix adjustment amount. Although the
TPEAPA was established under the authority in section
1881(b)(14)(D)(iv) of the Act, which does not require budget
neutrality, we stated in the CY 2024 ESRD PPS final rule that we were
implementing the TPEAPA in a budget neutral manner because it was
similar to the pediatric case-mix adjusters, and it accounts for costs
which would have been included in the cost reports used in the analysis
conducted when we created the ESRD PPS bundled payment in the CY 2011
ESRD PPS final rule (88 FR 76378). Because the adjustment to maintain
budget neutrality associated with the TPEAPA was accounted for in the
CY 2024 combined wage index and TPEAPA budget neutrality factor, and we
are not proposing any changes to the TPEAPA amount, it would not be
appropriate to apply a budget neutrality factor for the TPEAPA for CY
2026.
Proposed NAPA Budget Neutrality Factor: As discussed in section
II.B.8. of this proposed rule, under the authority granted by section
1881(b)(14)(D)(iv) of the Act, we are proposing a new facility-level
payment adjustment for ESRD facilities in Alaska, Hawaii, and certain
U.S. Pacific Territories,\8\ which we refer to in this proposed rule as
the proposed non-contiguous areas payment adjustment (NAPA). As
proposed, this payment adjustment would apply to ESRD PPS claims for
treatments at ESRD facilities in Alaska, Hawaii, Guam, American Samoa,
and the Northern Mariana Islands. This payment adjustment would be
capped at 25 percent and would be applied to the non-labor-related
share of the ESRD PPS base rate, which is 44.8 percent. We are
proposing that this payment adjustment would be budget neutral and
would result in a proposed NAPA budget neutrality factor of 0.99859.
---------------------------------------------------------------------------

\8\ See section II.B.8.b of this proposed rule for a discussion
of which U.S. Pacific Territories we considered for this proposal.
---------------------------------------------------------------------------

Proposed 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 in section II.B.1.b.(1). of this proposed rule,
the latest CY 2026 projection of the ESRDB market basket percentage
increase is 2.7 percent. In CY 2026, 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
previously discussed in section II.B.1.b.(2). of this proposed rule,
the latest CY 2026 projection of the productivity adjustment is 0.8
percentage point, thus yielding a proposed CY 2026 ESRDB market basket
update of 1.9 percent for CY 2026. Therefore, the proposed CY 2026 ESRD
PPS base rate is $281.06 (($273.82 x 1.00872 x 0.99859) x 1.019 =
$281.06). As discussed in section II.B.1.b. of this proposed rule, we
are proposing that if more recent data become available after the
publication of this proposed rule

[[Page 29353]]

and before the publication of the final rule (for example, a more
recent estimate of the market basket percentage increase or
productivity adjustment), we would use such data, if appropriate, to
determine the CY 2026 ESRDB market basket update in the final rule.
We invite public comment on our proposed CY 2026 ESRD PPS base
rate.
5. Proposed Update to the Average per Treatment Offset Amount for Home
Dialysis Machines
In the CY 2021 ESRD PPS final rule (85 FR 71427), we expanded
eligibility for the TPNIES under Sec. 413.236 to include certain
capital-related assets that are home dialysis machines when used in the
home for a single patient. To establish the TPNIES basis of payment for
these items, we finalized the additional steps that the Medicare
Administrative Contractors (MACs) must follow to calculate a pre-
adjusted per treatment amount, using the prices they establish under
Sec. 413.236(e) for a capital-related asset that is a home dialysis
machine, as well as the methodology that CMS uses to calculate the
average per treatment offset amount for home dialysis machines that is
used in the MACs' calculation, to account for the cost of the home
dialysis machine that is already in the ESRD PPS base rate. For
purposes of this proposed rule, we 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 ESRDB market basket update. 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.
There are currently no capital-related assets that are home
dialysis machines set to receive TPNIES for CY 2026, as the TPNIES
payment period for the Tablo[supreg] System ended on December 31, 2023,
and there are no TPNIES applications for CY 2026. However, as required
by Sec. 413.236(f)(3)(v), we are proposing to update the TPNIES offset
amount annually according to the methodology described previously.
We are proposing a CY 2026 TPNIES offset amount for capital-related
assets that are home dialysis machines of $10.41, based on the proposed
CY 2026 ESRDB market basket update of 1.9 percent (proposed 2.7 percent
ESRDB market basket percentage increase reduced by the proposed 0.8
percentage point productivity adjustment). Applying the proposed ESRDB
market basket update factor of 1.019 to the CY 2025 offset amount
results in the proposed CY 2026 offset amount of $10.41 ($10.22 x 1.019
= $10.41). We request public comments on our proposal to update the
TPNIES offset for capital-related assets for CY 2026.
6. Proposed Post-TDAPA Add-On Payment Adjustment Updates
In the CY 2024 ESRD PPS final rule we finalized an add-on payment
adjustment for certain new renal dialysis drugs and biological
products, which would be applied for 3 years after the end of the TDAPA
period (88 FR 76388 through 76397). This adjustment, known as the post-
TDAPA add-on payment adjustment, is adjusted by the patient-level case-
mix adjusters and is applied to every ESRD PPS claim. In that final
rule we also clarified that for each year of the post-TDAPA period we
would update the post-TDAPA add-on payment adjustment amounts based on
utilization and ASP of the drug or biological product. The post-TDAPA
add-on payment amounts are calculated based on the methodology codified
at Sec. 413.234(g), which is the total drug expenditure divided by the
total ESRD PPS treatments multiplied by the case mix standardization
for the time period and the 0.65 risk sharing factor, and the ESRDB
pharmaceutical price proxy for the payment year (88 FR 76396). In the
CY 2025 ESRD PPS final rule (89 FR 89136) we finalized our proposal to
publish the post-TDAPA add-on payment adjustment amount after the final
rule in certain circumstances to ensure that the post-TDAPA add-on
payment adjustment amount can be calculated using 12 months of
utilization data.
For CY 2025 there is one drug, Korsuva[supreg] (difelikefalin),
included in the calculation of the post-TDAPA add-on payment adjustment
for each of the four calendar quarters and one drug, Jesduvroq[supreg],
included in the calculation for only the fourth calendar quarter. In
the CY 2025 ESRD PPS final rule (89 FR 89135), we finalized that the
post-TDAPA add-on payment adjustment amount for Korsuva[supreg] would
be $0.4601 for CY 2025; this figure was updated to $0.4684 in
transmittal 13245, which was a correction to CR 13865 after a review
found a small error in the calculation of this figure. At the time of
rulemaking, we did not have sufficient data to finalize a post-TDAPA
add-on payment adjustment amount for Jesduvroq[supreg] for CY 2025, so,
consistent with our policy finalized in the CY 2025 ESRD PPS final rule
(89 FR 89136), we published the final post-TDAPA amount for
Jesduvroq[supreg] in transmittal 13245.
a. CY 2026 Post-TDAPA Add-On Payment Adjustment Amounts
For CY 2026, we will have three drugs which are in the 3-year
period following the end of their TDAPA period and are potentially
eligible to be included in the calculation of the post-TDAPA add-on
payment adjustment. 42 CFR 413.234(c)(3) states that should CMS not
receive the latest full calendar quarter of ASP data for a drug or
biological product during the TDAPA or post-TDAPA period, we will not
pay any post-TDAPA add-on payment adjustment for such product in any
future year. The third quarter of 2025 reflecting quarter 1, 2025 sales
would be the latest quarter of ASP data at the time of rulemaking for
this proposed rule. As CMS has not received ASP data for quarter 3,
2025, which reflects sales for quarter 1, 2025 for Jesduvroq[supreg],
we are not proposing to include Jesduvroq[supreg] in the calculation of
the post-TDAPA add-on payment adjustment for CY 2026 or any future
years. Therefore, conditional upon the continued receipt of the latest
full calendar quarter of ASP data for the renal dialysis drugs
discussed later in this document, we are anticipating that there would
be two drugs included in the calculation of the post-TDAPA add-on
payment adjustment for CY 2026.
The post-TDAPA add-on payment adjustment period for one of these
drugs, Korsuva[supreg], began on April 1, 2024, so, conditional upon
the continued receipt of the latest full calendar quarter of ASP data
as described in Sec. 413.234(c)(3), Korsuva[supreg] will be included
in the calculation for the post-TDAPA add-on payment adjustment for the
entirety of CY 2026. The other drug, DefenCath[supreg], began its TDAPA
period on July 1, 2024, so it will be included in the post-TDAPA add-on
payment adjustment calculation for quarters 3 and 4 of CY 2026,
conditional upon the continued receipt of the latest full calendar
quarter of ASP data.
For this proposed rule we are presenting the proposed post-TDAPA
add-on payment adjustment amounts for Korsuva[supreg] based on the most
recently available full year of utilization data at this time. We are
unable to present an estimate of the post-TDAPA add-on payment
adjustment amount for DefenCath[supreg] at this time using a full year
of utilization data, however we have included a proposed post-TDAPA
amount based on the first 6 months of DefenCath[supreg] utilization.
Consistent with the methodology finalized in the CY 2024 ESRD PPS final
rule (88 FR 76388 through 76389), we are proposing to

[[Page 29354]]

update these calculations with the most recent available utilization
and pricing data in the final rule. Table 4 shows the proposed post-
TDAPA add-on payment adjustment amounts for each quarter of CY 2026.
The proposed post-TDAPA add-on payment adjustment amount for
Korsuva[supreg] is $0.2633 and the proposed post-TDAPA add-on payment
adjustment amount for DefenCath[supreg] is $1.4780. At the time of the
development of this proposed rule we do not anticipate that there will
be any drugs or biological products which would be included in the
post-TDAPA add-on payment adjustment calculation for any quarter of CY
2026 which would lack 12 months of utilization data at the time of
final rulemaking.

Table 4--Proposed Post-TDAPA Add-On Payment Adjustment Amounts for CY 2026 by Quarter
----------------------------------------------------------------------------------------------------------------
Total proposed post-
Quarter Proposed add-on amount Proposed add-on amount TDAPA add-on payment
for Korsuva[supreg] for DefenCath[supreg] * adjustment amount
----------------------------------------------------------------------------------------------------------------
Q1 (January-March)............. $0.2633 $0 $0.2633
Q2 (April-June)................ 0.2633 0 0.2633
Q3 (July-September)............ 0.2633 1.4780 1.7413
Q4 (October-December).......... 0.2633 1.4780 1.7413
----------------------------------------------------------------------------------------------------------------
* This figure does not reflect a full year's utilization data; however, we anticipate that by the time of the
publication of the final rule we will have a full year's utilization data for DefenCath[supreg].

We note that changes in post-TDAPA add-on payment adjustment
amounts from year-to-year, or from the proposed rule to the final rule,
are driven by changes in utilization and price for the drug or
biological product in question. We invite public comments on our
proposed CY 2026 post-TDAPA add-on payment adjustment amounts.
b. Proposed Technical Correction to 42 CFR 413.234(g)(5)
We are proposing to modify the language at Sec. 413.234(g)(5) to
fix a typographical error in the spelling of the word ``adjusted''. We
welcome public comments on this proposed change or any other areas
where the regulatory language should be corrected.
7. Proposed Changes to the TDAPA Eligibility Criteria
a. Background on the TDAPA
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 (IV) products into the ESRD
PPS bundled payment. Therefore, in the CY 2016 ESRD PPS final rule (80
FR 69013 through 69027), we finalized a process that allowed us to
recognize when an oral-only renal dialysis service drug or biological
product is no longer oral-only, and a process to include new injectable
and IV products into the ESRD PPS bundled payment, and when
appropriate, modify the ESRD PPS payment amount.
The processes we finalized in the CY 2016 ESRD PPS final rule are
based on whether a drug or biological product fits within one of eleven
ESRD PPS functional categories. These ESRD PPS functional categories,
which were first established in the CY 2011 ESRD PPS final rule,
represent all of the drugs and biological products included in the ESRD
PPS bundled payment, as well as those receiving the transitional drug
add-on payment adjustment (TDAPA) (80 FR 69013 through 69027). As we
established in the CY 2011 ESRD PPS final rule, categorizing drugs and
biological products on the basis of drug action allows us to determine
which categories (and therefore, the drugs and biological products
within the categories) would be considered used for the treatment of
ESRD (75 FR 49047). We grouped the injectable and IV drugs and
biological products into functional categories based on their action
(80 FR 69014). This was done for the purpose of adding new drugs or
biological products with the same functions to the ESRD PPS bundled
payment as expeditiously as possible after the drugs become
commercially available so that beneficiaries have access to them. We
finalized the definition of an ESRD PPS functional category in our
regulations at Sec. [thinsp]413.234(a) as a distinct grouping of drugs
or biologicals, as determined by CMS, whose end action effect is the
treatment or management of a condition or conditions associated with
ESRD.
In the CY 2016 ESRD PPS final rule, we established a requirement at
Sec. [thinsp]413.234(b)(2) that, if a new injectable or IV product is
used to treat or manage a condition for which there is not an ESRD PPS
functional category, the new injectable or IV product is not considered
included in the ESRD PPS bundled payment and the following steps occur.
First, an existing ESRD PPS functional category is revised or a new
ESRD PPS functional category is added for the condition that the new
injectable or IV product is used to treat or manage. Next, the new
injectable or IV product is paid for using the transitional drug add-on
payment adjustment (TDAPA) described in Sec. [thinsp]413.234(c). Then,
the new injectable or IV product is added to the ESRD PPS bundled
payment following payment of the TDAPA.
We finalized in the CY 2016 ESRD PPS final rule that the TDAPA
provides additional payment for certain new drugs and biological
products. Under Sec. 413.234(c), the TDAPA is based on pricing
methodologies under section 1847A of the Act and is paid until
sufficient claims data for rate setting analysis for the new injectable
or IV product are available, but not for less than two years. During
the time a new injectable or IV product is eligible for the TDAPA, it
is not eligible as an outlier service. Following payment of the TDAPA,
the ESRD PPS base rate would be modified, if appropriate, to account
for the new injectable or intravenous product in the ESRD PPS bundled
payment.
In the CY 2019 ESRD PPS final rule (83 FR 56927 through 56949), CMS
expanded the TDAPA to all new renal dialysis drugs and biological
products, not just those in new ESRD PPS functional categories. For new
renal dialysis drugs or biological products that do not fall within an
ESRD PPS functional category, we specified that the ESRD PPS base rate
would not be modified after the two-year TDAPA period (83 FR 56943),
but, as consistent with the existing outlier policy, the drug or
biological product would be eligible for outlier payment unless it is a
composite rate drug. In this rule, we modified the definition of ``new
renal dialysis drug or biological product'' at 413.234(a) to specify
that the drug or biological product must be approved by the FDA on or
after January 1, 2020. We also changed the basis of payment for

[[Page 29355]]

the TDAPA from pricing methodologies under section 1847A of the Act
(which includes 106 percent of ASP) to 100 percent of ASP and updated
the definitions of ``new renal dialysis drug or biological product''
and ``oral-only drugs'' under Sec. 413.234(a).
In the CY 2020 ESRD PPS final rule (84 FR 60653 through 60681), CMS
finalized the exclusion of generic drugs and certain NDA types from
TDAPA eligibility to distinguish innovative from non-innovative renal
dialysis drugs and biological products. As codified at Sec.
413.234(e)(1) through Sec. 413.234(e)(7), NDA Type 3, 5, 7 or 8, Type
3 in combination with Type 2 or Type 4, or Type 5 in combination with
Type 2, or Type 9 when the ``parent NDA'' is a Type 3, 5, 7 or 8, are
excluded from TDAPA eligibility. Additionally, we finalized a policy to
use Wholesale Acquisition Cost (WAC) if ASP data is not available, and
if WAC is not available, to then use invoice pricing. We also finalized
a policy to no longer apply the TDAPA for a new renal dialysis drug or
biological product if CMS does not receive a full calendar quarter of
ASP data within 30 days of the last day of the 3rd calendar quarter
after we begin applying the TDAPA for that product or if CMS does not
receive the latest full calendar quarter of ASP data for the product
beginning no later than 2-calendar quarters after CMS determines that
the latest full calendar quarter of ASP data is not available.
The CY 2020 ESRD PPS final rule also established the transitional
payment for new and innovative equipment and supplies (TPNIES), a non-
budget neutral add-on payment adjustment for certain new and innovative
equipment and supplies (84 FR 60681 through 60699). TPNIES is codified
at Sec. 413.236. When the TPNIES was established, the eligibility
criteria at Sec. 413.236(b)(2) defined ``new'' as receiving FDA
marketing authorization on or after January 1, 2020. In the CY 2021
ESRD PPS final rule we modified the TPNIES eligibility criteria to
reflect the definition of ``new'' to mean within 3 years beginning on
the date of FDA marketing authorization (85 FR 71410 through 71414). In
the CY 2024 ESRD PPS final rule, we revised Sec. 413.236(b)(2) to
further clarify that an equipment or supply for which a complete
application has been submitted to CMS under Sec. 413.236(c) within 3
years of the date of the FDA marketing authorization would be
considered new (88 FR 71414 through 76415).
In both the CY 2019 and CY 2020 ESRD PPS final rules (83 FR 56927
through 56949; 84 FR 60653 through 60681), CMS explained that the aim
of the TDAPA is to help ESRD facilities incorporate into their business
model new drugs and biological products that fall within existing ESRD
PPS functional categories by providing additional payments. We further
explained that the TDAPA aims to promote competition among the products
within the ESRD PPS functional categories and focus Medicare resources
on products that are innovative. For new renal dialysis drugs and
biological products that do not fall within an existing ESRD PPS
functional category, we clarified that the TDAPA could be a pathway
toward a potential base rate modification, if appropriate.
b. Proposed Modification to the Eligibility Timeframe for the TDAPA
In the CY 2019 ESRD PPS final rule, we explained that the main
goals of the TDAPA are to promote the incorporation of new renal
dialysis service drugs and biological products into the ESRD PPS
bundled payment and to focus Medicare resources on new and innovative
products (84 FR 60653). Under the current regulations, any renal
dialysis drug or biological product that receives FDA approval on or
after January 1, 2020, would be considered ``new'' under Sec.
413.234(a) and would be eligible for the TDAPA if it meets the other
criteria and is not excluded from TDAPA payment under Sec. 413.234(e).
When we finalized Sec. 413.234(a) in the CY 2019 ESRD PPS final rule
(83 FR 56932), we stated that we believed it was appropriate at that
time to consider renal dialysis drugs and biological products to be
considered new if they were approved after January 1, 2020. However,
because the regulatory definition for ``new renal dialysis drug or
biological product'' includes a specific date on which a drug or
biological product may start to be considered new but does not specify
a date when it is no longer considered new, the current regulatory
definition of a new renal dialysis drug or biological product could
apply to drugs with FDA approval dates that are increasingly old. For
example, for CY 2026 and future years, a renal dialysis drug or
biological product approved by FDA in 2020 would be over 5 years old.
As the TDAPA currently has no other time-dependent eligibility
requirements, that would mean there is the potential for increasingly
older drugs to be eligible for and receive the TDAPA. As discussed in
the CY 2019 ESRD PPS final rule, CMS grouped drugs and biological
products into functional categories based on their action for the
purpose of adding new drugs or biological products with the same
functions to the ESRD PPS bundled payment as expeditiously as possible
after the drugs become commercially available so that beneficiaries
have access to them (83 FR 56928). When CMS finalized the expansion of
the TDAPA to all new renal dialysis drugs and biological products later
in that same rule, one of the main goals was improving beneficiary
access to new and innovative products. At the time of the TDAPA
expansion, the January 1, 2020, timeframe for the regulatory definition
of ``new renal dialysis drug or biological product'' aligned with this
goal of TDAPA. However, we do not believe the original intention of
this requirement was to ensure that renal dialysis drugs and biological
products approved on or after January 1, 2020, would continue to be
eligible for the TDAPA in perpetuity after their FDA approval. As noted
previously, for the TPNIES, Sec. 413.236(b)(2) provides that an
equipment or supply for which a complete application has been submitted
to CMS under Sec. 413.236(c) within 3 years of the date of the FDA
marketing authorization is considered new. In the CY 2021 ESRD PPS
final rule, when CMS changed the TPNIES eligibility criteria set forth
at Sec. 413.236(b)(2), we stated that we did not believe newness
should be tied to the effective date of the TPNIES, and that a three-
year eligibility window would be consistent with the timeframe for the
new-technology add-on payment (NTAP) under the IPPS (85 FR 71411
through 71412). Regarding the NTAP, Sec. 412.87(b)(2) notes that a
medical service or technology may be considered new within two to three
years after it is released onto the open market. Consistent with the
views that CMS expressed regarding the TPNIES eligibility timeframe in
the CY 2021 ESRD PPS final rule, we believe that the continued use of
the January 1, 2020, date for the TDAPA would allow for some renal
dialysis drugs and biological products to potentially qualify for the
TDAPA well after they are already established, which would conflict
with CMS' original intention for the TDAPA: to provide additional
support to ESRD facilities during the uptake period for innovative
drugs and biological products and help incorporate them into their
business model (84 FR 60663).
We are proposing to modify the language of Sec. 413.234 to reflect
that a TDAPA application must be submitted within 3 years of FDA
approval for a new renal dialysis drug or biological product to be
eligible for the TDAPA. We are also proposing to restructure the

[[Page 29356]]

section to consolidate the TDAPA eligibility requirements in a new
paragraph (c)(5) in Sec. 413.234, since currently some TDAPA
eligibility requirements are included in the definition of ``new renal
dialysis drug or biological product'' and the requirement to submit a
TDAPA application is not explicitly stated in the regulations. We note
that we use the definition of ``new renal dialysis drug or biological
product'' for the general drug designation process at Sec. 413.234(b),
so we believe it would be more appropriate to move the specific TDAPA
eligibility requirements to Sec. 413.234(c). When considering a
potential timeframe for TDAPA eligibility, we believe it is important
to consider the time and expense it takes for a drug to come to market
to ensure that drug manufacturers have enough time to establish
infrastructure to adequately produce and distribute the drug. Giving
manufacturers sufficient time to plan the rollout of a new renal
dialysis drug or biological product would help ensure that it is made
available to ESRD facilities, and therefore ESRD patients, during the
TDAPA period. We are proposing a 3 -year timeframe for TDAPA
eligibility as we believe three years strikes a balance between
allowing drug manufacturers flexibility in the timing of the rollout
for their new renal dialysis drugs and biological products and ensuring
the TDAPA is only available for drugs and biological products that are
new to the renal dialysis market. We note that three years is generally
consistent with how ``new'' is defined at Sec. 412.87(b)(2) for the
NTAP and at Sec. 413.236(b)(2) for the TPNIES, as mentioned
previously. Because three years is the timeframe we currently use for
assessing whether renal dialysis equipment and supplies are ``new'' for
purposes of the TPNIES; this proposed change would also standardize the
eligibility timeframe across both the TDAPA and the TPNIES under the
ESRD PPS. We believe this proposed change aligns with the TDAPA goals
to support innovation by providing additional payment to help ESRD
facilities make appropriate changes in their businesses to adopt new
drugs and biological products, incorporate these new drugs and
biological products into their beneficiaries' care plans, potentially
promote competition among drugs and biological products within the ESRD
PPS functional categories, and focus Medicare resources on products
that are innovative (83 FR 56935; 84 FR 60654 through 60665). To
implement this change, we propose the following changes: (1) to add a
new paragraph Sec. 413.234(c)(5) which would include the eligibility
requirements specific to TDAPA; (2) to revise the definition of ``new
renal dialysis drug or biological product'' to remove the eligibility
requirements for TDAPA related to having a HCPCS level II application;
and (3) to revise the language at Sec. 413.234(b)(1)(ii) and Sec.
413.234(b)(2)(ii) to reference this new paragraph (c)(5). We are not
proposing to remove the commercial eligibility requirement from the
definition of ``new renal dialysis drug or biological product'' as that
would have implications on the ESRD PPS drug designation process and
the post-TDAPA add-on payment adjustment, which is not our intention.
We note that a drug or biological product must meet the definition of
``new renal dialysis drug or biological product'' to be eligible for
the TDAPA, and that the intention of proposing to move the eligibility
requirements specific to TDAPA to the new paragraph is to make it
clearer which requirements relate to the TDAPA, and which requirements
relate to the definition of ``new renal dialysis drug or biological
product.''
We propose that this new paragraph, Sec. 413.234(c)(5), would
specify the current eligibility criteria and the proposed TDAPA
eligibility timeframe for new renal dialysis drugs or biological
products that have submitted TDAPA applications either within three
years of FDA approval or prior to January 1, 2028. This paragraph would
include the requirement that an application be submitted for the TDAPA,
which reflects current policy but is not currently specified in the
regulation.
We are proposing the 3-year timeframe for TDAPA eligibility would
apply for renal dialysis drugs and biological products for which a
TDAPA application is submitted on or after January 1, 2028. We are
proposing this later implementation date as we recognize that there may
be renal dialysis drugs or biological products which were approved by
the FDA on or after January 1, 2020, and before January 1, 2023, but
for which a TDAPA application has not yet been submitted due to the
established eligibility criteria in Sec. 413.234(a), although we note
that we have not identified any such drugs or biological products. If
we were to finalize this policy effective January 1, 2026, any such
renal dialysis drugs and biological products would no longer be
eligible for the TDAPA because they would no longer be within the
three-year window of FDA approval. Our experience has been that
manufacturers generally apply for the TDAPA within the first few months
after receiving FDA approval for their products; therefore, we believe
that any renal dialysis drugs or biological products approved by the
FDA between January 1, 2020, and January 1, 2023, for which a TDAPA
application has not yet been submitted would be limited. However, it is
not our intention with this proposed policy to prevent existing renal
dialysis drugs or biological products which would be eligible for the
TDAPA under the current eligibility requirements from receiving the
TDAPA. Our proposed changes to Sec. 413.234, specifically our proposed
addition of Sec. 413.234(c)(5)(ii), as discussed previously, provides
that the three-year window would begin to apply for applications
received on or after January 1, 2028. This would provide ample time for
any manufacturer of a renal dialysis drug or biological product that
received FDA approval between January 1, 2020, and January 1, 2025, to
apply for the TDAPA. We note that any drug or biological product which
was approved by the FDA more than three years prior to January 1, 2028,
should submit their application for the TDAPA prior to January 1, 2028.
If this condition and the other requirements are met, such drugs or
biological products would still receive a full two-year TDAPA period as
specified at Sec. 413.234(c)(1) or a full period of at least two years
as specified at Sec. 413.234(c)(2). Renal dialysis drugs and
biological products that CMS previously approved for the TDAPA and were
paid for using the TDAPA period prior to January 1, 2028, would not be
affected by this proposed change. We also note that our proposed change
to the TDAPA eligibility timeframe would apply to all new renal
dialysis drugs and biological products that are potentially eligible
for the TDAPA in the future, including those that fall into existing
ESRD PPS functional categories, and those that would fall into new
functional categories.
Table 5 presents hypothetical situations in which renal dialysis
drugs and biological products that received FDA approval before and
after January 1, 2025, would or would not be eligible for the TDAPA
under the proposed changes to the TDAPA eligibility criteria. CMS
reiterates that renal dialysis drugs and biological products that CMS
previously approved for the TDAPA and that were paid for using the
TDAPA period prior to January 1, 2028, would not be affected by this
proposed change. As noted previously, if a renal dialysis drug or
biological product that received FDA approval more than three years
prior to January 1, 2028, submits

[[Page 29357]]

a TDAPA application prior to January 1, 2028, the TDAPA would still be
paid for a full two-year period as specified at Sec. 413.234(c)(1) or
a full period of at least two years as specified at Sec.
413.234(c)(2), provided all other applicable requirements in Sec.
413.234 are met.

Table 5--Hypothetical TDAPA-Eligibility Scenarios Under the Proposed
Changes to the TDAPA Eligibility Criteria
------------------------------------------------------------------------
Hypothetical new renal Hypothetical TDAPA TDAPA eligibility
dialysis drug or biological application under the proposed
product FDA approval date submission date changes
------------------------------------------------------------------------
January 10, 2020............ December 10, 2027... Eligible.
January 10, 2020............ January 2, 2028..... Not Eligible.
January 20, 2025............ January 19, 2028.... Eligible.
January 20, 2025............ January 21, 2028.... Not Eligible.
------------------------------------------------------------------------

We are soliciting comments on all aspects of this proposal,
including the proposed 3-year eligibility window, our proposal to apply
this change to new renal dialysis drugs and biological products in both
existing and new ESRD PPS functional categories, and the proposed CY
2028 implementation date of the policy. Additionally, we are soliciting
comments on the TDAPA eligibility requirements more broadly and welcome
any suggestions on how our TDAPA policies could be improved in future
rulemaking.
8. Proposed Payment Adjustment for ESRD Facilities in Certain Non-
Contiguous States and Territories
a. Background
As set forth in Sec. 413.230, the ESRD PPS per treatment payment
amount is calculated as the sum of the ESRD PPS base rate, the wage
index for the ESRD facility and various patient-level and facility-
level payment adjustments, and any applicable outlier payments and add-
on payment adjustments which are described previously in this proposed
rule. The ESRD PPS wage index is intended to reflect the relative cost
of the labor utilized for renal dialysis services in the geographic
area in which an ESRD facility is located and is applied to the labor-
related share of the ESRD PPS base rate, as defined at Sec. 413.231.
In the CY 2025 ESRD PPS final rule, we finalized a new methodology for
determining the wage index value for an ESRD facility (89 FR 89116).
This methodology uses data from the Bureau of Labor Statistics (BLS)
Occupational Employment and Wage Statistics (OEWS), weighted according
to an occupational mix derived from freestanding ESRD facility cost
reports, to better estimate the actual labor costs ESRD facilities
incur when furnishing renal dialysis services. A summary of this
methodology is available in section II.B.2. of this proposed rule. The
ESRD PPS wage index and the other payment adjustments, which include
case-mix adjusters, facility level adjustments and add-on payment
adjustments, serve to better align relative ESRD PPS payments with
relative resource use. These payment adjustments are generally
established under section 1881(b)(14)(D) of the Act, which lists
several payment adjustments that the Secretary is required or
authorized to include in the ESRD PPS.
In the CY 2025 ESRD PPS proposed rule, we discussed the impacts of
the proposed new ESRD PPS wage index methodology in more detail (89 FR
55778 through 55780). Specifically, we discussed the regional impact of
the then-proposed methodology. We stated that as this methodology
better estimates the wage costs for ESRD facilities, and we believed
the regional impacts of the new methodology are generally appropriate
as they align wage-adjusted payments with relative labor costs. We
requested public comment on the regional implications of the proposed
policy. As a part of this request for public comment, we highlighted
the potential impacts for the U.S. Pacific Territories, which were
larger in magnitude compared to most other regions. In response, we
received two comments that expressed concerns specifically with the
impact of the wage index proposal on the U.S. Pacific Territories, one
of which was a letter from interested parties representing Guam,
American Samoa, and the Northern Mariana Islands (89 FR 89114). These
comments expressed specific concern with the projected payment decrease
for these territories associated with the proposed policy and noted
that these isolated island territories had higher costs than other
regions for certain goods and services.
The letter from the interested parties representing Guam, American
Samoa, and the Northern Mariana Islands also built upon concerns raised
by multiple commenters, including MedPAC in its June 2020 Report to
Congress,\9\ reiterating that the current ESRD PPS payment adjustments,
including the LVPA, do not accurately target remote or isolated
facilities. We note that past commenters have used differing
definitions of these terms. The interested parties requested CMS to
consider factors that are unique to small island economies such as air
freight shipping, greater utility costs, difficulty recruiting and
retaining qualified healthcare professionals, and lack of economies of
scale when compared to larger ESRD facilities located in the contiguous
U.S. Those parties requested that the Secretary establish a new payment
adjustment for the U.S. Pacific Territories, outside of the LVPA, to
account for the higher cost of providing renal dialysis services in
some of the most remote areas of our country. In the CY 2025 ESRD PPS
final rule, we responded to these comments by acknowledging that these
remote territories may have some higher costs, but noted that most of
the goods and services these comments cited were generally not labor-
related and therefore, it would be inappropriate to consider them in
constructing a wage index value for the region (89 FR 89114 through
89115). While we did make changes to the LVPA in the CY 2025 ESRD PPS
final rule, we did not discuss or finalize any change which would
address higher costs in remote areas during the CY 2025 rulemaking
cycle. As we explained in the CY 2024 ESRD PPS proposed rule (88 FR
42441), our analysis has not found higher costs associated with low-
volume facilities in remote areas (including areas in the contiguous
U.S.), although we note that the analysis referenced in that rule used
a metric for isolation based on distance to the nearest ESRD facility
and did not consider remote states or territories separately.
---------------------------------------------------------------------------

\9\ <a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_reporttocongress_sec.pdf">https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_reporttocongress_sec.pdf</a>.

---------------------------------------------------------------------------

[[Page 29358]]

b. Estimating the Extent to Which ESRD Facilities in Non-Contiguous
Areas Face Higher Non-Labor Costs Than ESRD Facilities Located in the
Contiguous U.S.
As noted in the CY 2025 ESRD PPS final rule, we believe that the
new ESRD PPS wage index methodology better estimates the relative labor
costs faced by ESRD facilities, and any changes in payment associated
with the new wage index methodology were generally appropriate (89 FR
89108 through 89117). However, we recognize the possibility that an
ESRD facility could have certain unrecognized costs which are not
accounted for by any of the existing payment adjustments under the ESRD
PPS. As a result of the comments on the CY 2025 ESRD PPS proposed rule,
we have conducted an analysis of non-labor costs in certain remote
areas of the United States. We included Alaska, Hawaii, Puerto Rico,
and the U.S. Virgin Islands in this analysis in addition to Guam,
American Samoa, and the Northern Mariana Islands so that we could
evaluate any potential higher non-labor costs in other non-contiguous
areas relative to the contiguous U.S. We evaluated all of the non-
contiguous areas as the higher non-labor costs mentioned by commenters
could have been experienced in other non-contiguous areas outside of
just the U.S. Pacific Territories. We note that when we refer to ``U.S.
Pacific Territories'' in the context of this proposed rule, we are
specifically discussing the three permanently inhabited U.S.
Territories in the Pacific region surveyed by the Census Bureau's
Island Areas Census \10\ and served by the Office of the Insular
Affairs,\11\ which are Guam, American Samoa and the Northern Mariana
Islands. None of the other U.S. Territories located in the Pacific
region have Medicare-certified ESRD facilities and, as such, were not
considered for the purposes of this analysis. Should an ESRD facility
open in another U.S. Pacific Territory we would consider whether it
would be appropriate to extend any existing geographic payment
adjustments that apply to other U.S. Pacific Territories, such as the
payment adjustment proposed in section II.B.7.c of this proposed rule
(should that payment adjustment be finalized), to such territory in
future rulemaking.
---------------------------------------------------------------------------

\10\ <a href="https://www.census.gov/programs-surveys/decennial-census/decade/2020/planning-management/release/2020-island-areas-data-products.html">https://www.census.gov/programs-surveys/decennial-census/decade/2020/planning-management/release/2020-island-areas-data-products.html</a>.
\11\ <a href="https://www.doi.gov/oia/islands">https://www.doi.gov/oia/islands</a>.
---------------------------------------------------------------------------

To estimate the extent to which ESRD facilities in certain remote
areas face higher costs after accounting for the ESRD PPS wage index,
we focused the analysis on the &portion of the costs faced by ESRD
facilities that are non-labor related. This analysis used data from
freestanding and hospital-based ESRD facility cost reports from cost
reporting years beginning between January 1, 2020, and December 31,
2022. For the purpose of this analysis, the non-labor costs associated
with furnishing renal dialysis services include the non-salary costs
associated with capital, administration, drugs, supplies and laboratory
tests from Medicare cost reports.\12\ We recognize that some parts of
these cost categories could overlap with cost categories included in
the labor-related share; for example, capital costs include both the
materials and labor involved in constructing buildings. However, given
the limitation of cost report data available for this analysis, we
believe including these non-direct labor costs provided a more accurate
result.
---------------------------------------------------------------------------

\12\ Cost data from freestanding ESRD facility cost reports
(form CMS 265-11) are from Worksheet B, lines 8 through 17.02,
columns 3, 4, 7, 8, 9, 11, 12, 13. Cost data from hospital-based
ESRD facility cost reports (form CMS 2552-10) are from Worksheet I-
2, lines 2 through 11.01, columns 1, 2, 6, 7, 8, & 10, and lines 14
through 16, column 6.
---------------------------------------------------------------------------

The analysis conducted was a logarithmic regression which used
facility-level average non-labor cost per treatment as the dependent
variable. As cost report data includes both Medicare and non-Medicare
dialysis treatments and costs, this analysis also encompasses all
treatments furnished by ESRD facilities. We controlled for various
facility-level characteristics including log quadratic facility
treatment volume, rurality, wage index value, ownership-type, percent
of treatments which are Medicare treatments, percent of treatments
which are home dialysis treatments, average case-mix adjustment
multiplier for Medicare treatments, an indicator for whether the
facility furnished more than 20 percent of its treatments to pediatric
patients, and indicators for cost report year. The treatment variables
were a variety of indicators for non-contiguous geographic areas
including Alaska, Hawaii, Guam, American Samoa, the Northern Mariana
Islands, Puerto Rico, and the U.S. Virgin Islands. To avoid issues with
small sample size, we combined the U.S. Pacific Territories of Guam,
American Samoa, and the Northern Mariana Islands in one group and the
U.S. Caribbean Territories of Puerto Rico and the U.S. Virgin Islands
into another group. We believe that these groupings are reasonable due
to the similar nature of the territories within each group in terms of
their geographic isolation. To avoid undue influence of very large and
small ESRD facilities, we removed data from ESRD facilities in the top
and bottom 2.5 percent of cost per treatment and facility size. The
regression yielded the relative cost for each state or group of
territories when compared to the contiguous United States. The results
of the regression are presented in Table 6.

Table 6--Non-Labor Costs for Certain Non-Contiguous Areas Relative to the Contiguous U.S.
----------------------------------------------------------------------------------------------------------------
Relative non-
Number of Regression Standard labor cost to
State or group of territories ESRD result deviation contiguous US
facilities (%)
----------------------------------------------------------------------------------------------------------------
Alaska.......................................... 9 0.490 0.071 56
Hawaii.......................................... 41 0.205 0.032 21
Guam, Northern Mariana Islands, American Samoa.. 11 0.294 0.054 31
Puerto Rico, U.S. Virgin Islands................ 54 * -0.052 0.035 -5
----------------------------------------------------------------------------------------------------------------
* Note: this relative cost factor was found to be statistically non-significant for this group.

The first column in Table 6 lists the states or groups of
territories which we analyzed in reference to the contiguous U.S. The
second column lists the number of freestanding and hospital-based ESRD
facilities in each of those non-contiguous areas. The third and fourth
columns show the coefficients of the logarithmic regression and the

[[Page 29359]]

standard deviations of the coefficients, respectively. The final column
shows the relative non-labor costs for each non-contiguous area derived
from this regression. As this was a logarithmic regression, the natural
logarithm used in the regression model is a tool to make the data more
amenable to linear analysis. After obtaining the regression
coefficients, the exponential function with base e (mathematical
constant) is used to interpret and predict values on the original
scale. This analysis shows that ESRD facilities in Alaska, Hawaii, and
the U.S. Pacific Territories each have higher non-labor costs than ESRD
facilities in the contiguous U.S. after controlling for the ESRD
facility characteristics described previously. ESRD facilities in
Puerto Rico and the U.S. Virgin Islands did not demonstrate higher non-
labor costs compared to ESRD facilities in the contiguous U.S. Alaska
had the highest non-labor costs at 56 percent higher relative to the
contiguous U.S., followed by the U.S. Pacific Territories at 31 percent
higher, and Hawaii at 21 percent higher. This logarithmic regression
analysis had an adjusted R-squared value of 0.473, which indicates that
the analyzed variables (including the constants) account for 47.3
percent of the variation in the mean non-labor costs per treatment. The
p-values for the regression result for Alaska, Hawaii and the U.S.
Pacific Territories were each significant at the one percent level,
which means there is a less than one percent chance that the results of
the regression were due to random variation. Based on these results, we
believe there is reasonable evidence that ESRD facilities in these non-
contiguous areas face higher non-labor costs compared to ESRD
facilities in the contiguous U.S. after controlling for the ESRD
facility characteristics described previously. As noted in the footnote
on Table 6, the regression result for the U.S. Caribbean Territories of
Puerto Rico and the U.S. Virgin Islands is relatively close to zero and
was not significant; so, although it is negative (indicating lower non-
labor costs compared to ESRD facilities in the contiguous U.S. after
controlling for the ESRD facility characteristics described previously)
we cannot be confident that these ESRD facilities have lower average
non-labor costs based on this analysis alone.
c. Proposal for a Non-Contiguous Area Payment Adjustment (NAPA)
As discussed previously, we have found that ESRD facilities in
certain remote non-contiguous geographic areas have some higher non-
labor costs when compared to the contiguous United States. Currently,
these higher non-labor costs are generally not accounted for by the
ESRD PPS, with some exceptions. The LVPA likely covers some of the non-
labor costs associated with being in a non-contiguous area, as some of
the additional costs in these areas are likely due to higher costs for
certain goods, which, as defined in section 1881(b)(14)(D)(iii) of the
Act, the LVPA is intended to help mitigate through additional payment.
However, our review has not found substantial overlap between non-
contiguous areas and low-volume facilities as defined at Sec.
413.232(b). Additionally, the rural facility adjustment likely accounts
for some of the higher costs for these remote areas, although the
magnitude of the rural facility adjustment is much smaller than the
LVPA, so it cannot account for all of the aforementioned higher non-
labor costs.
Under the authority of section 1881(b)(14)(D)(iv) of the Act, we
are proposing a new facility-level payment adjustment for ESRD
facilities in Alaska, Hawaii, and the U.S. Pacific Territories, which,
as described previously, were found to have higher non-labor costs when
compared to ESRD facilities in the contiguous U.S. We refer to this
proposed payment adjustment as the non-contiguous areas payment
adjustment (NAPA) in this CY 2026 ESRD PPS proposed rule. The NAPA
would apply only to the non-labor portion of the ESRD PPS base rate,
which is 44.8 percent. As proposed, the magnitude of this proposed NAPA
would be dependent on which of the non-contiguous remote areas a given
ESRD facility is located in. We are also proposing for the NAPA to be
applied budget-neutrally, consistent with the longstanding framework
within the ESRD PPS to apply any payment adjustment that accounts for
costs which were originally included in the analysis used for the CY
2011 ESRD PPS final rule in a budget-neutral manner (88 FR 42451). We
are proposing that the NAPA would apply to all ESRD PPS claims for
renal dialysis services furnished by ESRD facilities in these non-
contiguous areas, including treatments furnished at home and to
pediatric ESRD beneficiaries, as we have no evidence to indicate these
higher non-labor costs would be unique to adult or in-center ESRD
treatments.
When developing the methodology for calculating the proposed NAPA,
we considered the results of our analysis as outlined in Table 6. We
also considered the potential impact to the proposed ESRD PPS base
rate, since we are proposing for this proposed payment adjustment to be
applied budget-neutrally, as noted in the prior paragraph. We
considered applying the adjustment factors (calculated as 1 +
percentages in Table 6) to the non-labor-related portion of the base
rate for treatments provided in Alaska, Hawaii, and the U.S. Pacific
Territories, which we estimate would require a reduction to the ESRD
PPS base rate of approximately 0.2 percent, or $0.47. Given the
potential impact to ESRD facilities across the country, we believe it
would be appropriate to consider policies that would lessen the
potential base rate reduction associated with the proposed NAPA.
We considered policies that have historically been applied in other
Medicare payment systems which apply a geographical adjustment for non-
labor costs. The IPPS has a Cost-of-Living Adjustment (COLA) for Alaska
and Hawaii which is an upwards adjustment factor that applies to the
non-labor-related portion of the standardized amount for hospitals and
is capped at 25 percent (89 FR 69964, 77 FR 53700 through 53701). We
believe that a functionally similar cap would be appropriate for the
proposed NAPA for several reasons. First, given the small number of
ESRD facilities included in this regression analysis, there is inherent
uncertainty in the result of the regression analysis. Additionally,
applying a cap to the proposed NAPA would minimize the financial impact
to ESRD facilities located in the contiguous U.S. while providing a
substantial upward adjustment for ESRD facilities located in Alaska,
Hawaii, and the U.S. Pacific Territories, which our analysis
demonstrates have significantly higher non-labor costs compared to the
contiguous U.S. We examined multiple different data points when
determining what level of cap would be the most appropriate for the
proposed NAPA, and while there is no one superior methodology from
which to derive a cap for the proposed NAPA, as it is intended to
account for non-labor costs, we believe it would be appropriate to
consider such a payment adjustment in reference to the impact of the
ESRD PPS wage index. Specifically, we believe that the impact of the
NAPA on non-labor costs should not exceed the impact of the wage index
on labor-related costs. Although the wage index and the NAPA account
for different types of costs, they both intend to account for the
variation in costs based on geographic factors. Additionally,
interested parties' concerns about the finalized wage index changes in
the CY 2025 ESRD PPS final rule prompted our

[[Page 29360]]

analysis of non-labor costs in non-contiguous areas. We believe the
former ESRD PPS wage index methodology for the U.S. Pacific Territories
was providing additional payment for ESRD facilities in these areas
above the amount that is attributable to labor costs in these areas,
while the ESRD PPS in general did not account for those areas'
relatively higher non-labor costs. Therefore, this higher labor-related
payment was potentially compensating for the higher non-labor costs
that ESRD facilities in these areas faced. A reasonable upward bound
for NAPA would be to align the maximum payment increase under NAPA to
be approximately equal to that of the higher wage index values. To
avoid undue influence of outliers, we considered a potential NAPA cap
based on the 95th percentile of wage index values, which is based on
the CY 2026 proposed ESRD PPS wage index is 1.209945. Because the non-
labor-related share is slightly smaller than the labor-related share to
which the wage index applies, a NAPA value that equals the payment
impact of this wage index value is 1.258682.\13\ For simplicity, we are
rounding this value to 25 percent which is also consistent with the
IPPS COLA cap previously discussed.
---------------------------------------------------------------------------

\13\ This is calculated by comparing payment using a wage index
value of 1.209945 and a NAPA factor of 1 to payments using a wage
index value of 1 and a NAPA factor of x: Base rate*0.552*1.209945 +
Base rate*0.448*1 = Base rate*0.552*1 + Base rate*0.448*x. We note
that in this formula the base rate is equally applied to every term
and cancels out, so the derived x=1.258682 is not dependent on the
ESRD PPS base rate value.
---------------------------------------------------------------------------

In comparison to the uncapped NAPA, if we were to apply a 25
percent cap to the NAPA, we estimate the required reduction to the base
rate would be notably less at approximately 0.1 percent, or $0.35. We
believe this more moderate reduction to the ESRD PPS base rate would
better allow ESRD facilities in contiguous areas to continue to provide
high-quality care while better aligning payments to ESRD facilities in
non-contiguous areas with their relatively higher non-labor costs.
Therefore, under the proposed NAPA, ESRD facilities in these
selected geographies would receive up to a 25 percent increase to the
non-labor portion of the ESRD PPS bundled payment as determined by the
latest available analysis. We believe implementing such a payment
adjustment with a 25 percent cap would strike an appropriate balance
between increasing payments to areas for which we have evidence of
relatively higher non-labor costs and mitigating the impact of this
payment adjustment on ESRD facilities located in the contiguous U.S.
and the Caribbean territories of Puerto Rico and the U.S. Virgin
Islands. In addition, we believe the proposed capped NAPA is
appropriate due to the potential for overlap with the other payment
adjustments, such as the LVPA, that could account for other costs faced
by ESRD facilities in high-cost non-contiguous states and territories.
Table 7 summarizes the proposed NAPA factors effective for CY 2026. The
budget neutrality factor for this proposed NAPA is 0.99859. We intend
to review these adjustment factors and consider whether the proposed
NAPA (if finalized) remains appropriate when we propose to update the
labor-related share of the ESRDB market basket. If applicable, CMS
would propose any changes to the NAPA methodology or adjustment factors
in future notice-and-comment rulemaking.

Table 7--Proposed NAPA Factors for CY 2026
------------------------------------------------------------------------
Proposed NAPA
State or group of territories factor
------------------------------------------------------------------------
Alaska.................................................. 1.25
Hawaii.................................................. 1.21
Guam, Northern Mariana Islands, American Samoa.......... 1.25
------------------------------------------------------------------------

To implement this proposed new payment adjustment, we are proposing
to rename 42 CFR 413.233 from ``Rural facility adjustment'' to
``Additional facility-level adjustments.'' We are also proposing to
designate a new paragraph (a) to include the current language of Sec.
413.233. We are further proposing to add paragraph (b) to read ``CMS
adjusts the non-labor-related portion of the base rate for facilities
in Alaska, Hawaii, Guam, American Samoa, and the Northern Mariana
Islands''. Lastly, we are proposing to modify Sec. 413.230(a) to
include Sec. 413.233 in the list of facility-level adjustments.
We believe that this proposed new payment adjustment would better
align payment with resource use in these non-contiguous remote
geographic areas. We are requesting comment on this proposal, including
the magnitude of the proposed adjustment, implementing the proposed
NAPA with a 25 percent cap on the adjustment factors, the budget
neutrality of the proposal, the proposed application of NAPA to
payments for Pediatric ESRD Patients as defined in Sec. 413.171, the
proposed application of NAPA to payment for home dialysis treatments,
and the proposed changes to Sec. Sec. 413.230(a) and 413.233.

C. Transitional Add-On Payment Adjustment for New and Innovative
Equipment and Supplies (TPNIES)

In the CY 2020 ESRD PPS final rule (84 FR 60681 through 60698), we
established the transitional add-on payment adjustment for new and
innovative equipment and supplies (TPNIES) under the ESRD PPS, under
the authority of section 1881(b)(14)(D)(iv) of the Act, to support ESRD
facility use and beneficiary access to these new items.
We added Sec. 413.236 to establish the eligibility criteria and
payment policies for the TPNIES. Under current Sec. 413.236(b), CMS
provides for a TPNIES to an ESRD facility for furnishing a covered
equipment or supply only if the item: (1) has been designated by CMS as
a renal dialysis service under Sec. 413.171; (2) is new, meaning a
complete application has been submitted to CMS under Sec. 413.236(c)
within 3 years of the date of the FDA marketing authorization; (3) is
commercially available by January 1 of the particular CY, meaning the
year in which the payment adjustment would take effect; (4) has a
complete HCPCS Level II code application submitted, in accordance with
the HCPCS Level II coding procedures on the CMS website, by the HCPCS
Level II code application deadline for biannual Coding Cycle 2 for non-
drug and non-biological items, supplies, and services as specified in
the HCPCS Level II coding guidance on the CMS website prior to the
particular CY; (5) is innovative, meaning it meets the criteria
specified in Sec. 412.87(b)(1); and (6) is not a capital-related
asset, except for capital-related assets that are home dialysis
machines. For additional background on the TPNIES, we refer readers to
the CY 2024 ESRD PPS final rule (88 FR 76410 through 76412).
As indicated in Sec. 413.236(c) CMS includes the summary of each
TPNIES application and our analysis of the eligibility criteria for
each application in the annual ESRD PPS proposed rule and announces the
results in the annual ESRD PPS final rule. Because we did not receive
any applications for the TPNIES for CY 2026, we have not included any
TPNIES application summaries, CMS analyses, or results in this proposed
rule.

D. Continuation of Approved Transitional Add-On Payment Adjustments for
New and Innovative Equipment and Supplies for CY 2026

In this section of the proposed rule, we identify any items
previously approved for the TPNIES and for which

[[Page 29361]]

payment is continuing for CY 2026. As described in the CY 2025 ESRD PPS
final rule, no new items were approved for the TPNIES for CY 2025 (89
FR 89162 through 89163). As such there are no items previously approved
for the TPNIES for which payment is continuing in CY 2026.

E. Continuation of Approved Transitional Drug Add-On Payment
Adjustments for CY 2026

Under Sec. 413.234(c)(1), a new renal dialysis drug or biological
product that is considered included in the ESRD PPS base rate is paid
the TDAPA for 2 years. In April 2024, CMS approved DefenCath[supreg]
(taurolidine and heparin sodium) for the TDAPA under the ESRD PPS,
effective July 1, 2024. Implementation instructions are specified in
CMS Transmittal 12628, dated May 9, 2024, and available at <a href="https://www.cms.gov/files/document/r12628CP.pdf">https://www.cms.gov/files/document/r12628CP.pdf</a>.
In October 2024, CMS approved Vafseo[supreg] (vadadustat) for the
TDAPA under the ESRD PPS, effective January 1, 2025. In addition, the
following oral-only phosphate binders were also approved for the TDAPA
under the ESRD PPS effective January 1, 2025: sevelamer carbonate,
sevelamer hydrochloride, sucroferric oxyhydroxide, lanthanum carbonate,
ferric citrate, and calcium acetate. These drugs were not considered
included in the ESRD PPS bundled payment and were paid separately
beginning in CY 2011 (75 FR 49037 through 49053). In the CY 2023 ESRD
PPS final rule, we stated that if no other injectable equivalent (or
other form of administration) of phosphate binders is approved by the
FDA prior to January 1, 2025, we would pay for these drugs using the
TDAPA under the ESRD PPS for at least 2 years beginning January 1, 2025
(87 FR 67180).
The implementation instructions for drugs with a TDAPA effective
date of January 1, 2025, were specified in CMS Transmittal 12962 dated
November 14, 2024, and available at <a href="https://www.cms.gov/files/document/r12962bp.pdf">https://www.cms.gov/files/document/r12962bp.pdf</a>. This Change Request was subsequently rescinded and
replaced by Transmittal 12999, dated December 12, 2024, and available
at <a href="https://www.cms.gov/files/document/r12999bp.pdf">https://www.cms.gov/files/document/r12999bp.pdf</a>.
Table 8 identifies the two new renal dialysis drugs for which the
TDAPA payment period as specified in Sec. 413.234(c)(1) would continue
in CY 2026: DefenCath[supreg] (taurolidine and heparin sodium) and
Vafseo[supreg] (vadadustat). In addition, while the phosphate binders
are not new renal dialysis drugs or biological products as specified in
Sec. 413.234(c)(1), the TDAPA payment period for sevelamer carbonate,
sevelamer hydrochloride, sucroferric oxyhydroxide, lanthanum carbonate,
ferric citrate, and calcium acetate would also continue in CY 2026. As
noted previously, we would pay for the oral only phosphate binders
using the TDAPA under the ESRD PPS for at least 2 years. Table 8 also
identifies the products' HCPCS coding information as well as the
payment adjustment effective dates and available end dates.

Table 8--Continuation of Approved Transitional Drug Add-On Payment
Adjustments
------------------------------------------------------------------------
Payment
HCPCS code Long descriptor adjustment Payment adjustment
effective date end date
------------------------------------------------------------------------
J0911......... Instillation, 7/1/2024 6/30/2026.
taurolidine 1.35
mg and heparin
sodium 100 units
(central venous
catheter lock for
adult patients
receiving chronic
hemodialysis).
J0901......... Vadadustat, oral, 1 1/1/2025 12/31/2026.
mg (for ESRD on
dialysis).
J0601......... Sevelamer carbonate 1/1/2025 1/1/27 or until
(Renvela or sufficient claims
therapeutically data for rate
equivalent), oral, setting analysis
20 mg (for ESRD on is available.
dialysis).
J0602......... Sevelamer carbonate 1/1/2025 1/1/27 or until
(Renvela or sufficient claims
therapeutically data for rate
equivalent), oral, setting analysis
powder, 20 mg (for is available.
ESRD on dialysis).
J0603......... Sevelamer 1/1/2025 1/1/27 or until
hydrochloride sufficient claims
(Renagel or data for rate
therapeutically setting analysis
equivalent), oral, is available.
20 mg (for ESRD on
dialysis).
J0605......... Sucroferric 1/1/2025 1/1/27 or until
oxyhydroxide, sufficient claims
oral, 5 mg (for data for rate
ESRD on dialysis). setting analysis
is available.
J0607......... Lanthanum 1/1/2025 1/1/27 or until
carbonate, oral, 5 sufficient claims
mg (for ESRD on data for rate
dialysis). setting analysis
is available.
J0608......... Lanthanum 1/1/2025 1/1/27 or until
carbonate, oral, sufficient claims
powder, 5 mg, not data for rate
therapeutically setting analysis
equivalent to is available.
J0607 (for ESRD on
dialysis).
J0609......... Ferric citrate, 1/1/2025 1/1/27 or until
oral, 3 mg ferric sufficient claims
iron, (for ESRD on data for rate
dialysis). setting analysis
is available.
J0615......... Calcium acetate, 1/1/2025 1/1/27 or until
oral, 23 mg (for sufficient claims
ESRD on dialysis). data for rate
setting analysis
is available.
------------------------------------------------------------------------

III. CY 2026 Payment for Renal Dialysis Services Furnished to
Individuals With AKI

A. Background

The Trade Preferences Extension Act of 2015 (TPEA) (Pub. L. 114-27)
was enacted on June 29, 2015, and amended the Act to provide coverage
and payment for dialysis furnished by an ESRD facility to an individual
with AKI. Specifically, 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 subsection (r) to provide payment,
beginning January 1, 2017, 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, as adjusted by any applicable geographic adjustment applied under
section 1881(b)(14)(D)(iv)(II) of the Act and adjusted (on a budget
neutral basis for payments under section 1834(r) of the Act) by any
other adjustment factor under section 1881(b)(14)(D) of the Act that
the Secretary elects.
In the CY 2017 ESRD PPS final rule, we finalized several coverage
and payment policies to implement subsection (r) of section 1834 of the
Act and the amendments to section 1861(s)(2)(F) of the Act, including
the payment rate for AKI dialysis furnished by ESRD facilities (81 FR
77866 through 77872 and 77965). We interpret section 1834(r)(1) of the
Act as requiring the amount of payment for AKI dialysis services to be
the base rate for renal dialysis services determined for a year under
the ESRD PPS base rate as set forth in Sec. 413.220, updated by the

[[Page 29362]]

ESRDB market basket percentage increase factor minus a productivity
adjustment as set forth in Sec. 413.196(d)(1), adjusted for wages as
set forth in Sec. 413.231, and adjusted by any other amounts deemed
appropriate by the Secretary under Sec. 413.373. We codified this
policy in Sec. 413.372 (81 FR 77965). In the CY 2025 ESRD PPS final
rule we finalized a policy to allow for payment for home dialysis for
beneficiaries with AKI. Additionally, we extended the payment
adjustment for home and self-dialysis training to AKI dialysis payments
in a budget neutral manner and calculated a reduction to the AKI
dialysis payment rate which rounded to $0.00 (89 FR 89170).

B. Proposed Update of AKI Dialysis Payment

1. Proposed CY 2026 AKI Dialysis Payment Rate
The payment rate for AKI dialysis is the ESRD PPS base rate
determined for a year under section 1881(b)(14) of the Act, which is
the finalized ESRD PPS base rate, including the applicable annual
market basket update, geographic wage adjustments, and any other
amounts deemed appropriate by the Secretary, for such year. We note
that ESRD facilities could bill Medicare for non-renal dialysis items
and services and receive separate payment in addition to the payment
rate for AKI dialysis. As discussed in section II.B.4. of this proposed
rule, the proposed ESRD PPS base rate is $281.06, which reflects the
application of the proposed CY 2026 wage index budget neutrality
adjustment factor of 1.00872, the application of the proposed budget
neutrality factor for the proposed non-contiguous areas payment
adjustment(NAPA) of 0.99859 discussed in section II.B.8. of this
proposed rule, and the proposed CY 2026 ESRDB market basket percentage
increase of 2.7 percent reduced by the proposed productivity adjustment
of 0.8 percentage point, that is, 1.9 percent. Accordingly, we are
proposing a CY 2026 per treatment payment rate of $281.06 (($273.82 x
1.00872 x 0.99859) x 1.019 = $281.06) for renal dialysis services
furnished by ESRD facilities to individuals with AKI. As discussed in
section II.B.1. of this proposed rule, we are proposing that if more
recent data become available after the publishing of this proposed rule
and before the publishing of the final rule, we would use such data, if
appropriate, to determine the CY 2026 ESRDB market basket percentage
increase and productivity adjustment in the final rule.
2. Geographic Adjustment Factor
Under section 1834(r)(1) of the Act and regulations at Sec.
413.372, the amount of payment for AKI dialysis services is the base
rate for renal dialysis services determined for a year under section
1881(b)(14) of the Act (updated by the ESRDB market basket percentage
increase and reduced by the productivity adjustment), as adjusted by
any applicable geographic adjustment factor applied under section
1881(b)(14)(D)(iv)(II) of the Act. Accordingly, we apply the same wage
index under Sec. 413.231 that is used under the ESRD PPS. As discussed
in section II.B.2.a. of this proposed rule, the ESRD PPS wage index is
based on mean hourly wage data from the BLS OEWS weighted by FTE data
from freestanding ESRD facility cost reports. We finalized the new
methodology for determining the wage index value for an ESRD facility
in the CY 2025 ESRD PPS final rule, (89 FR 89116). Accordingly, we
applied the same wage index under Sec. 413.231 that is used under the
ESRD PPS to the AKI dialysis payment (89 FR 89167). We propose to
continue using this same methodology when adjusting AKI dialysis
payments to ESRD facilities, consistent with our historical practice of
using the ESRD PPS wage index for AKI dialysis payments. The AKI
dialysis payment rate is adjusted by the wage index for a particular
ESRD facility in the same way that the ESRD PPS base rate is adjusted
by the wage index for that ESRD facility (81 FR 77868). Specifically,
we apply the wage index to the labor-related share of the ESRD PPS base
rate that we utilize for AKI dialysis to compute the wage adjusted per-
treatment AKI dialysis payment rate. We also apply the wage index
policies regarding the 0.600 wage index floor (87 FR 67161 through
67166) and the 5 percent cap on wage index decreases (87 FR 67159
through 67161) to AKI dialysis payments to ESRD facilities. ESRD
facilities would utilize the same staff to provide renal dialysis
services to and educate beneficiaries with AKI as those beneficiaries
with ESRD. Therefore, utilizing the same wage index methodology would
be appropriate in accordance with Sec. 413.372, which addresses the
payment rate for AKI dialysis and refers to Sec. 413.231 for the wage
adjustment. As stated previously, we are proposing a CY 2026 AKI
dialysis payment rate of $281.06, adjusted by the ESRD facility's wage
index. As discussed in section II.B.2.c. of this proposed rule, we are
proposing that if more recent data become available after the
publishing of this proposed rule and before the publishing of the final
rule, we would use such data, if appropriate, to determine the CY 2026
update the ESRD PPS wage index.
3. Other Adjustments to the AKI Dialysis Payment Rate
Section 1834(r)(1) of the Act also provides that the payment rate
for AKI dialysis may be adjusted by the Secretary (on a budget neutral
basis for payments under section 1834(r)) by any other adjustment
factor under subparagraph (D) of section 1881(b)(14) of the Act. As
discussed in the CY 2025 ESRD PPS final rule, we have extended the home
and self-dialysis training add-on payment adjustment under the ESRD PPS
to AKI beneficiaries in a budget neutral way (89 FR 89170). We continue
to collect data on the uptake of home dialysis treatments for
beneficiaries with AKI. We are not proposing to reevaluate the budget
neutrality factor for CY 2026.
We considered implementing the proposed new ESRD PPS facility-level
payment adjustment for ESRD facilities in Alaska, Hawaii, and the U.S.
Pacific Territories, which we refer to in this proposed rule as the
non-contiguous areas payment adjustment (NAPA), for beneficiaries with
AKI. However, section 1834(r)(1) of the Act indicates that adjustments
to AKI dialysis payments, other than the ESRD PPS wage index, must be
made budget neutrally across AKI dialysis payments. We made a budget
neutral adjustment to the AKI dialysis payment rate to account for the
home and self-dialysis training payment adjustment in the CY 2025 ESRD
PPS final rule (89 FR 89170). We are in the process of evaluating the
effect of training adjustment on AKI dialysis payments. We do not
believe it would be appropriate to propose any additional updates to
the AKI dialysis payment rate at this time. However, we welcome
comments from interested parties on the potential for other geographic
payment adjustments to the AKI dialysis payment rate.

IV. Proposed Updates to the End-Stage Renal Disease Quality Incentive
Program (ESRD QIP)

A. Background

For a detailed discussion of the ESRD QIP's background and history,
including a description of the Program's authorizing statute and the
policies that we have adopted in previous final rules, we refer readers
to the citations provided at IV.A. of the CY 2024 ESRD PPS final rule
(88 FR 76433). We have also codified many of our policies for

[[Page 29363]]

the ESRD QIP at 42 CFR 413.177 and 413.178.

B. Proposed Updates to Requirements Beginning With the PY 2027 ESRD QIP

1. Proposed Removal of the Facility Commitment to Health Equity
Reporting Measure Beginning With the PY 2027 ESRD QIP
We refer readers to the CY 2024 ESRD PPS final rule where we
adopted the Facility Commitment to Health Equity reporting measure into
the ESRD QIP (88 FR 76437 through 76446). We propose to remove the
Facility Commitment to Health Equity measure beginning with the PY 2027
ESRD QIP. The perceived costs associated with achieving a high score on
the measure outweigh the benefit of its continued use in the program.
When adopted, we intended the collection of data described in the five
domains of this measure to provide individual dialysis facility
leadership with meaningful and actionable health data to drive quality
improvements to eliminate health disparities. Based on feedback
received from dialysis facilities as well as a continued focus on
clinical outcome measures, the burden of collecting data for this
measure may outweigh the benefits.
One of the goals of the ESRD QIP is to move forward in the least
burdensome manner possible, while maintaining a parsimonious set of the
most meaningful quality measures and continuing to incentivize
improvement in the quality of care provided to patients. Removing this
measure from the ESRD QIP is one way to accomplish this goal. Our
priority is a continued focus on measurable clinical outcomes as well
as identifying quality measures on the topics of prevention, nutrition,
and well-being. As such, we refer readers to our request for comment on
``Request for Information on Measure Concepts under Consideration for
Future Years'' in section IV.D.2. of this proposed rule. With the
entire set of measures, the ESRD QIP continues to incentivize the
improvement of dialysis care quality and health outcomes for all
patients through measurement and transparency. It may be costly for
dialysis facilities to continue reporting on the Facility Commitment to
Health Equity reporting measure and achieve high performance scores,
and removal of this measure would make room both in the program's
measure set to enhance the program's focus on other clinical outcomes
and for dialysis facility leadership to focus on other priority quality
and safety areas. Facilities that have already invested resources to
meet this measure's requirements will still find value in this proposal
through the reduction in reporting obligations if the measure is
eliminated. Facilities would continue to benefit from this reduced
administrative burden each year beginning with PY 2027, and the
cumulative effect of this benefit over time is likely to outweigh
resources expended in response to this measure.
We note that, since facilities have already submitted Facility
Commitment to Health Equity reporting measure data for PY 2026, such
measure data and scoring information will be available on the CMS
Provider Data Catalog (PDC) and will be used for PY 2026 payment
determinations. However, any Facility Commitment to Health Equity
reporting measure data received by CMS for PY 2027 would not be used
for public reporting or payment purposes. If finalized, facilities that
do not report to CMS their PY 2027 reporting period data for the
Facility Commitment to Health Equity reporting measure would not be
penalized for PY 2027 scoring or payment purposes due to this measure.
We invite public comment on our proposal to remove the Facility
Commitment to Health Equity reporting measure from the ESRD QIP
beginning with the PY 2027 ESRD QIP.
2. Proposed Removal of the Two Social Drivers of Health Reporting
Measures Beginning With the PY 2027 ESRD QIP
We propose to remove the two social drivers of health reporting
measures from the ESRD QIP beginning with the PY 2027 ESRD QIP:
Screening for Social Drivers of Health reporting measure (adopted at 88
FR 76466 through 76476); and Screen Positive Rate for Social Drivers of
Health reporting measure (adopted at 88 FR 76476 through 76480). For
further discussion of our previously established policies regarding
measure adoption, retention, and removal, we refer readers to the CY
2024 ESRD PPS final rule (88 FR 76434).
We propose to remove the Screening for Social Drivers of Health
reporting measure and the Screen Positive Rate for Social Drivers of
Health reporting measure beginning with the PY 2027 ESRD QIP, under
Sec. 413.178(c)(5)(i)(H), Measure Removal Factor 8, the costs
associated with the measure outweigh the benefit of its continued use
in the program. Although understanding the needs of patients receiving
dialysis therapy is important, we have heard from some facilities
concerned with the resources associated with screening patients via
manual processes, manually storing such data, training facility staff,
and altering workflows. Further, we note that these measures document
an administrative process and report aggregate level results, and do
not shed light on the extent to which providers are ultimately
connecting patients with resources or services and whether patients are
benefiting from these screenings. We have concluded that the costs of
the continued use of these measures in the ESRD QIP may outweigh the
benefits to providers and patients. Removal of these measures would
alleviate the burden on dialysis facilities to manually screen each
patient and submit data each reporting cycle, allowing dialysis
facilities to focus resources on other clinical outcomes. This will
also remove the patient burden associated with repeated Social Drivers
of Health screenings across multiple healthcare facilities. We refer
readers to our request for comment, ``Request for Information on
Measure Concepts under Consideration for Future Years'' in section
IV.D.2. of this proposed rule for more information regarding our areas
of focus for new measures. Facilities that have already invested
resources to meet these measures' requirements will still find value in
this proposal through the reduction in reporting obligations if the
measures are eliminated. Facilities would continue to benefit from this
reduced administrative burden each year beginning with PY 2027, and the
cumulative effect of this benefit over time is likely to outweigh
resources expended in response to this measure. With the entire set of
measures, the ESRD QIP continues to incentivize the improvement of
dialysis care quality and health outcomes for all patients through
measurement and transparency.
If finalized, facilities that do not report their PY 2027 measure
data for the Screening for Social Drivers of Health reporting measure
or the Screen Positive Rate for Social Drivers of Health reporting
measure would not be penalized for PY 2027 scoring or payment purposes.
In addition, any measure data received by CMS would not be used for
public reporting or payment purposes.
We invite public comment on our proposal to remove the Screening
for Social Drivers of Health reporting measure and the Screen Positive
Rate for Social Drivers of Health reporting measure from the ESRD QIP
beginning with the PY 2027 ESRD QIP.

C. Proposed Updates to Requirements Beginning With the PY 2028 ESRD QIP

1. PY 2028 ESRD QIP Measure Set
In this proposed rule, we are proposing to update the ICH CAHPS
clinical measure beginning with the PY

[[Page 29364]]

2028 measure set. Table 9 summarizes the previously finalized and
proposed updated measures that we would include in the PY 2028 ESRD QIP
measure set. The technical specifications for current measures that
would remain in the measure set for PY 2028 can be found in the CMS
ESRD Measures Manual for the 2025 Performance Period.\14\
---------------------------------------------------------------------------

\14\ <a href="https://www.cms.gov/files/document/esrd-measures-manual-v100.pdf">https://www.cms.gov/files/document/esrd-measures-manual-v100.pdf</a>.
\15\ In previous years, we referred to the consensus-based
entity by corporate name. We have updated this language to refer to
the consensus-based entity more generally.

Table 9--Previously Finalized and Proposed Updated Measures for the PY
2028 ESRD QIP Measure Set
------------------------------------------------------------------------
Consensus-based entity \15\
(CBE) # Measure title and description
------------------------------------------------------------------------
0258 *....................... In-Center Hemodialysis Consumer
Assessment of Healthcare Providers and
Systems (ICH CAHPS) Survey
Administration, a clinical measure.
Measure assesses patients' self-reported
experience of care through percentage of
patient responses to multiple survey
questions.
2496......................... Standardized Readmission Ratio (SRR), a
clinical measure.
Ratio of the number of observed unplanned
30-day hospital readmissions to the
number of expected unplanned 30-day
readmissions.
Based on CBE #2979........... Standardized Transfusion Ratio (STrR), a
clinical measure.
Ratio of the number of observed eligible
red blood cell transfusion events
occurring in patients dialyzing at a
facility to the number of eligible
transfusions that would be expected.
Based on CBE #0323, # 0321, (Kt/V) Dialysis Adequacy Measure Topic, a
2706, and #1423. clinical measure topic.
Four measures of dialysis adequacy where
K is dialyzer clearance, t is dialysis
time, and V is total body water volume.
The individual Kt/V measures would be
adult hemodialysis (HD) Kt/V, adult
peritoneal dialysis (PD) Kt/V, pediatric
HD Kt/V, and pediatric PD Kt/V.
2978......................... Hemodialysis Vascular Access: Long-Term
Catheter Rate clinical measure.
Measures the use of a catheter
continuously for 3 months or longer as
of the last hemodialysis treatment
session of the month.
1454......................... Hypercalcemia, a reporting measure.
Percentage of patient-months with total
uncorrected serum or plasma calcium lab
value reported in EQRS.
1463......................... Standardized Hospitalization Ratio (SHR),
a clinical measure.
Risk-adjusted SHR of the number of
observed hospitalizations to the number
of expected hospitalizations.
Based on CBE #0418........... Clinical Depression Screening and Follow-
Up, a clinical measure.
Facility reports in ESRD Quality
Reporting System (EQRS) one of four
conditions for each qualifying patient
treated during performance period.
Based on CBE #1460........... National Healthcare Safety Network (NHSN)
Bloodstream Infection (BSI) in
Hemodialysis Patients, a clinical
measure.
The Standardized Infection Ratio (SIR) of
BSIs will be calculated among patients
receiving hemodialysis at outpatient
hemodialysis centers.
N/A.......................... Percentage of Prevalent Patients
Waitlisted (PPPW), a clinical measure.
Percentage of patients at each facility
who were on the kidney or kidney-
pancreas transplant waitlist averaged
across patients prevalent on the last
day of each month during the performance
period.
2988......................... Medication Reconciliation for Patients
Receiving Care at Dialysis Facilities
(MedRec), a reporting measure.
Percentage of patient-months for which
medication reconciliation was performed
and documented by an eligible
professional.
3636......................... COVID-19 Vaccination Coverage Among
Healthcare Personnel (HCP), a reporting
measure.
Percentage of HCP who are up to date on
their COVID-19 vaccination.
------------------------------------------------------------------------
* We are proposing to update the ICH CAHPS clinical measure beginning
with PY 2028, as discussed in section IV.C.2. of this proposed rule.
** We are proposing to remove the Facility Commitment to Health Equity
reporting measure beginning with PY 2027, as discussed in section
IV.B.1. of this proposed rule.
*** We are proposing to remove the Screening for Social Drivers of
Health reporting measure and the Screen Positive Rate for Social
Drivers of Health reporting measure beginning with PY 2027, as
discussed in section IV.B.2. of this proposed rule.

2. Proposal To Update the ICH CAHPS Clinical Measure Beginning With the
PY 2028 ESRD QIP
a. Background
Section 1881(h)(2)(A)(ii) of the Act states that the Secretary
shall specify, to the extent feasible, measures of patient
satisfaction. Patients with ESRD are a vulnerable population. They are
reliant on ESRD facilities for life-saving therapy, and they are often
reluctant to express concerns about the care they receive from a
variety of staff, both professional and non-professional. Patient-
centered experience is an important measure of the quality of patient
care, and it is a component of the CMS National Quality Strategy, which
emphasizes patient-centered care by rating patient experience as a
means for empowering patients and improving the quality of their care.
The ICH CAHPS Survey was developed to capture the experience of in-
center hemodialysis patients. The ICH CAHPS measure was one of the
foundational measures of the ESRD QIP measure set, initially as a
reporting measure (76 FR 70269 through 70270) and then as a clinical
measure beginning with PY 2018 (79 FR 66198 through 66200).
b. Proposed Survey and Measure Changes
ICH CAHPS Surveys are administered semiannually, and an eligible
facility's score on the ICH CAHPS clinical measure is currently based
on the three composite or multi-item measures (QDCCO, NCC, and
Providing Information to Patients [PIP]) and three global ratings
(ratings of nephrologists, dialysis center staff, and dialysis center),
all of which are equally weighted. In recent years, commenters have
expressed concerns that patients may experience survey fatigue related
to both the length of the survey and the frequency of being requested
to participate in the survey twice a year. In addition, survey response
rates continue to slowly decline, and it is believed that the length of
the survey could be a contributing factor.
To address these concerns, we conducted a number of activities
related to reducing the length of the current ICH CAHPS Survey. Based
on psychometric analyses, discussions with a Technical Expert Panel of
ESRD entities, survey experts, and large dialysis organizations, focus
groups with dialysis patients, and discussions with the CAHPS
Consortium, proposed revisions to the ICH CAHPS Survey used to
calculate performance on the ICH CAHPS clinical measure include:
<bullet> Removal of four questions, which are unnecessary for the
psychometric

[[Page 29365]]

function of the Quality of Dialysis Center Care and Operations (QDCCO)
multi-item measure:
++ Whether the dialysis center staff inserted needles with as
little pain as possible,
++ whether dialysis center staff talked to patients about what they
should eat and drink,
++ whether the dialysis center staff keep health information as
private as possible, and
++ whether the patient felt the staff cared about them ``as a
person.''
<bullet> Removal of all six questions that make up the
Nephrologists' Communication and Caring (NCC) multi-item measure.
<bullet> Removal of the nephrologist rating question.
Additionally, to reduce the length of the ICH CAHPS Survey, we
propose to update the ICH CAHPS Survey to include the following non-
measure changes:
<bullet> Removal of two core questions not currently used in public
reporting measures:
++ Whether the dialysis center staff asked about how kidney disease
affects other parts of patient's lives, and
++ whether patients made a complaint to Medicare or their State
agencies.
<bullet> Removal of nine questions from the About You section and
one question from the mail survey proxy series.
<bullet> Consolidation of the race and ethnicity questions into one
question, as per OMB Statistical Policy Directive No. 15
requirements.\16\
---------------------------------------------------------------------------

\16\ OMB, The 2024 Statistical Policy Directive No. 15, March
2024. Available at <a href="https://spd15revision.gov/content/spd15revision/en/2024-spd15.html">https://spd15revision.gov/content/spd15revision/en/2024-spd15.html</a>.
---------------------------------------------------------------------------

c. Pre-Rulemaking Review Process and Measure Endorsement
As required under section 1890A of the Act, the Secretary must
establish and follow a pre-rulemaking review process for selection of
quality and efficiency measures, including for the ESRD QIP. The pre-
rulemaking review process, which we refer to as Pre-Rulemaking Measure
Review (PRMR), includes a review of measures published on the publicly
available list of Measures Under Consideration by one of several
committees convened by the consensus-based entity (CBE), with whom we
contract in accordance with section 1890 of the Act, for the purpose of
providing interested parties' input to the Secretary on the selection
of quality and efficiency measures under consideration for use in
certain Medicare quality programs, including the ESRD QIP.
The revised ICH CAHPS Survey, including the revised QDCCO multi-
item measure, was submitted to the 2024 Measures Under Consideration
list (MUC2024-060) and underwent evaluation by the PRMR Hospital
Committee. The PRMR Hospital Committee recommended the ICH CAHPS survey
changes be implemented.\17\ The revised ICH CAHPS Survey was submitted
to the CBE for endorsement through the Spring 2025 Partnership for
Quality Measurement (PQM) Endorsement and Maintenance (E&M)
process.\18\ The E&M process ensures measures submitted for endorsement
are evidence-based, scientifically sound, safe and effective. The
current ICH CAHPS Survey measure was endorsed by the CBE in Spring
2019. Although section 1881(h)(2)(B)(i) of the Act generally requires
that measures specified by the Secretary for the ESRD QIP be endorsed
by the entity with a contract under section 1890(a) of the Act, section
1881(h)(2)(B)(ii) of the Act states that in the case of a specified
area or medical topic determined appropriate by the Secretary for which
a feasible and practical measure has not been endorsed by the entity
with a contract under section 1890(a) of the Act, the Secretary may
specify a measure that is not so endorsed as long as due consideration
is given to measures that have been endorsed or adopted by a consensus
organization identified by the Secretary. We have determined that the
updates to the ICH CAHPS clinical measure are appropriately specified,
and therefore the exception in section 1881(h)(2)(B)(ii) of the Act
applies. We note that the ICH CAHPS measure remains an endorsed
measure, and the updated ICH CAHPS measure, which only reduces the
number of questions in the ICH CAHPS Survey, has been submitted to the
CBE for endorsement. To ensure that the revised ICH CAHPS Survey is
reflected in the updated ICH CAHPS clinical measure beginning with PY
2028, we are proposing to implement the revised ICH CAHPS Survey
beginning with the CY 2026 Spring survey.
---------------------------------------------------------------------------

\17\ Partnership for Quality Measurement, PRMR 2024 MUC Final
Recommendations Spreadsheet. Available at <a href="https://p4qm.org/media/3891">https://p4qm.org/media/3891</a>.
\18\ Information about the Partnership for Quality Measurement
E&M process is available at <a href="https://p4qm.org/EM">https://p4qm.org/EM</a>.
---------------------------------------------------------------------------

d. Impact To Measure Calculation and Public Reporting
ICH CAHPS Survey measure scores are calculated based on two rolling
semiannual surveys and are published semiannually for all ICH
facilities that meet reporting criteria. With the proposed
implementation of the revised survey, we are proposing to calculate the
ICH CAHPS clinical measure based on the remaining multi-item measures--
the revised QDCCO and PIP--and the remaining global ratings of the
dialysis center staff and the dialysis center. In the calculation of
the ICH CAHPS clinical measure, we are proposing that all of the
measures, including the multi-item and global rating measures, would be
weighed equally. The ICH CAHPS clinical measure would continue to be
calculated using two rolling semiannual surveys and would be publicly
reported for all eligible facilities with 30 or more completed surveys
over the reporting period.
To determine what impact the changes to the survey measures would
have on public reporting, CMS considered the nature of the changes.
Psychometric and other analyses were performed on field test data and
no major impact was found. We anticipate that the first Care Compare
refresh in which publicly reported scores would be updated to include
two semiannual periods using the revised survey would be October 2027
(2026 Spring and 2026 Fall Surveys). Because the April 2027 refresh
would include a survey period that used the current survey (2025 Fall)
and a survey period that used the revised survey (2026 Spring), we
propose to reanalyze the 2025 Fall data without the NCC measure and
rating and without the 4 dropped QDCCO measure questions, then combine
the reanalyzed data with the 2026 Spring data for public reporting in
April 2027. Therefore, we would not miss a refresh for ICH CAHPS data.
e. Survey Administration Changes
No survey administration changes are proposed with the new survey.
f. Case-Mix and Mode Adjustments
Prior to public reporting, ICH CAHPS Survey scores are adjusted for
the effects of case-mix (patient-mix). Case-mix refers to
characteristics of the patient that are not under control of the
facility that may affect reports of in-center dialysis experiences.
Case-mix adjustment is performed within each semiannual survey period
after data cleaning. The current case-mix adjustment model includes the
following variables: overall health, overall mental health, heart
disease, deaf or serious difficulty hearing, blind or serious
difficulty seeing, difficulty dressing or bathing, age, sex, education,
does the patient speak a language other than English at home, whether
someone helped complete the survey, and total years on dialysis. The
model used and

[[Page 29366]]

adjustments are updated semiannually and are available on the ICH CAHPS
website at <a href="https://ichcahps.org/Portals/0/PublicReporting/ICHCAHPS_PublicRptCoeffOct2024.pdf">https://ichcahps.org/Portals/0/PublicReporting/ICHCAHPS_PublicRptCoeffOct2024.pdf</a>. Based on testing the revised survey
in a field test, CMS reviewed the variables included in the case-mix
adjustment models currently in use for the ICH CAHPS Survey to
determine if any changes needed to be introduced along with the revised
survey. Several questions that were included as original case-mix
adjusters showed little impact on survey responses, so the questions
were removed to shorten the survey instrument. Based on this and the
case-mix analysis of the field test data, we propose that the new case-
mix adjusters for the revised survey include overall health, overall
mental health, age, sex, education, language survey was conducted in,
whether someone helped complete the survey, total years on dialysis,
and whether diabetes was primary cause of ESRD.
We note that, in addition to the proposed updates to the ICH CAHPS
clinical measure in this proposed rule, we are also exploring
additional ways to improve the ICH CAHPS measure. We are currently
working on developing and testing a web with mail follow-up mode to
provide facilities with alternate methods of survey administration, and
we are also working on a modified survey to include questions that
address the experience of care for patients on home dialysis
modalities.
We welcome public comment on our proposal to update the ICH CAHPS
clinical measure for the PY 2028 ESRD QIP and subsequent years.
3. Performance Standards for the PY 2028 ESRD QIP
Section 1881(h)(4)(A) of the Act requires the Secretary to
establish performance standards with respect to the measures selected
for the ESRD QIP for a performance period with respect to a year. The
performance standards must include levels of achievement and
improvement, as determined appropriate by the Secretary, and must be
established prior to the beginning of the performance period for the
year involved, as required by sections 1881(h)(4)(B) and (C) of the
Act. We refer readers to the CY 2013 ESRD PPS final rule (76 FR 70277),
as well as Sec. 413.178(a)(1), (3), (7), and (12), for further
information related to performance standards.
We continue to believe that our current policy of 12-month
performance and baseline periods provide us sufficiently reliable
quality measure data for the ESRD QIP. Under this policy, we would
adopt CY 2026 as the performance period and CY 2024 as the baseline
period for the PY 2028 ESRD QIP. In this proposed rule, we are
estimating the performance standards for the PY 2028 clinical measures
in Table 10 using data from CY 2023, which are the most recent data
available. We intend to update these performance standards for all
measures, using CY 2024 data, in the CY 2026 ESRD PPS final rule.

Table 10--Performance Standards for the Previously Finalized and Proposed Updated ESRD QIP Clinical Measures for
PY 2028
----------------------------------------------------------------------------------------------------------------
Achievement
threshold (15th Median (50th Benchmark (90th
Measure percentile of percentile of percentile of
national national national
performance) performance) performance)
----------------------------------------------------------------------------------------------------------------
Vascular Access Type (VAT):
Long-Term Catheter Rate................... 18.35% 11.04% 4.69%
Kt/V Dialysis Adequacy Measure Topic:
Adult Hemodialysis (HD) Kt/V.............. 95.79% 98.34% 99.68%
Pediatric Hemodialysis (HD) Kt/V.......... 81.25% 92.37% 100.00%
Adult Peritoneal Dialysis (PD) Kt/V....... 87.34% 94.85% 99.04%
Pediatric Peritoneal Dialysis (PD) Kt/V... 66.49% 82.06% 95.18%
Standardized Readmission Ratio \a\........ 34.27 26.50 16.18
NHSN BSI.................................. 0.642 0.215 0
Standardized Hospitalization Ratio \b\.... 166.60 129.14 87.98
Standardized Transfusion Ratio \b\........ 48.29 26.19 8.46
PPPW...................................... 8.12% 16.73% 33.90%
Clinical Depression....................... 88.21% 94.34% 100.00%
ICH CAHPS: Quality of Dialysis Center Care 54.93% 63.89% 75.33%
and Operations *.........................
ICH CAHPS: Providing Information to 70.82% 77.29% 84.95%
Patients.................................
ICH CAHPS: Overall Rating of Dialysis 51.74% 64.96% 79.23%
Center Staff.............................
ICH CAHPS: Overall Rating of the Dialysis 54.88% 68.62% 83.27%
Facility.................................
----------------------------------------------------------------------------------------------------------------
* We are proposing to update the ICH CAHPS clinical measure beginning with PY 2028, as discussed in section
IV.C.2. of this proposed rule.
\a\ Rate calculated as a percentage of hospital discharges.
\b\ Rate per 100 patient-years.
Data sources: VAT measure: 2023 EQRS; SRR, SHR, STrR: 2023 Medicare claims; Kt/V: 2023 EQRS and 2023 Medicare
claims; NHSN: 2023 CDC; ICH CAHPS: CMS 2023; PPPW: 2023 EQRS and 2023 Organ Procurement and Transplantation
Network (OPTN); Clinical Depression: 2023 EQRS.

In addition, we summarize in Table 11 our requirements for
successful reporting on our previously finalized and proposed updated
reporting measures for the PY 2027 and PY 2028 ESRD QIP.

[[Page 29367]]

Table 11--Requirements for Successful Reporting of ESRD QIP Reporting Measures for PY 2027 and PY 2028
----------------------------------------------------------------------------------------------------------------
Measure Reporting frequency Data elements
----------------------------------------------------------------------------------------------------------------
MedRec................................... Monthly..................... <bullet> Date of the medication
reconciliation.
<bullet> Type of eligible professional
who completed the medication
reconciliation:
[cir] physician,
[cir] nurse,
[cir] advanced registered nurse
practitioner (ARNP),
[cir] physician assistant (PA),
[cir] pharmacist, or
[cir] pharmacy technician personnel.
<bullet> Name of eligible professional.
Hypercalcemia............................ Monthly..................... Total uncorrected serum or plasma
calcium lab values
COVID-19 Vaccination Coverage Among HCP.. At least one week of data Cumulative number of HCP eligible to
each month, submitted work in the facility for at least one
quarterly. day during the reporting period and
who are up to date on their COVID-19
vaccination.
----------------------------------------------------------------------------------------------------------------
* We are proposing to remove the Facility Commitment to Health Equity reporting measure beginning with PY 2027,
as discussed in section IV.B.1. of this proposed rule. We are also proposing to remove the Screening for
Social Drivers of Health reporting measure and the Screen Positive Rate for Social Drivers of Health reporting
measure beginning with PY 2027, as discussed in section IV.B.2. of this proposed rule.

4. Eligibility Requirements for the PY 2028 ESRD QIP
In this proposed rule, we are not proposing to update eligibility
requirements as part of our proposal to update the ICH CAHPS clinical
measure, as discussed in section IV.C.2. of this proposed rule. Our
previously finalized minimum eligibility requirements are described in
Table 12.

Table 12--Previously Finalized Eligibility Requirements for Scoring on ESRD QIP Measures Beginning With PY 2028
----------------------------------------------------------------------------------------------------------------
Small facility
Measure Minimum data requirements CCN open date adjuster
----------------------------------------------------------------------------------------------------------------
Kt/V Dialysis Adequacy Measure 11 qualifying patients..... N/A................... 11-25 qualifying
Topic: Adult HD Kt/V (Clinical). patients.
Kt/V Dialysis Adequacy Measure 11 qualifying patients..... N/A................... 11-25 qualifying
Topic: Pediatric HD Kt/V patients.
(Clinical).
Kt/V Dialysis Adequacy Measure 11 qualifying patients..... N/A................... 11-25 qualifying
Topic: Adult PD Kt/V (Clinical). patients.
Kt/V Dialysis Adequacy Measure 11 qualifying patients..... N/A................... 11-25 qualifying
Topic: Pediatric PD Kt/V patients.
(Clinical).
VAT: Long-term Catheter Rate 11 qualifying patients..... N/A..

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