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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Proposed Rules To the extent that the LVI
methodology captures more isolated and most often rural facilities, should a separate rural adjustment be maintained?
D. Calculation of the Case-Mix Adjustments
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1. Background on the Case-Mix Adjustments Section 1881b14Di of the Act mandates that the single payment system under the ESRD PPS
implemented by the Secretary shall include a payment adjustment based on case mix that may take into account patient weight, body mass index, comorbidities, length of time on dialysis, age, race, ethnicity, and other appropriate factors. The ESRD PPS
includes facility-level and patient-level adjustments to the base rate associated with resource utilization and the cost of providing dialysis treatment. The goal of case-mix adjustment is to ensure that payment for a dialysis treatment reflects expected resource use. Payment adjustments protect access to care for the most costly beneficiaries by mitigating financial disincentives to providing that care. The ESRD PPS is a case-mix adjusted, bundled payment model intended to reflect total treatment costs, which consist of formerly separately billable costs and composite rate costs 75 FR 49032. As required by section 1881b14 of the Act, formerly separately billable services were included in the ESRD PPS bundled payment, effective January 1, 2011.
Refinements to the current case-mix adjusters were implemented in the CY
2016 ESRD PPS final rule, effective January 1, 2016, and are currently in use.
2. Current Case-Mix Methodology The current model uses two equations, including a patient-level equation for formerly separately billable costs and a facility-level equation for composite rate costs 75 FR 49083
through 49127. Formerly separately billable services are itemized on the ESRD Facility claim, Type of Bill: 72x and include injectable drugs and their oral equivalents plus certain laboratory tests and supplies. Composite rate services, which are captured on the cost report, constitute approximately 90
percent of a treatments cost and include capital, labor, and administrative costs plus certain drugs, laboratory tests, and supplies 75 FR 49036; 84 FR 38396.
Final case-mix adjusters for adults are the weighted average of estimated coefficients from these two equations that is, patient level and facility level
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equations. Weights are the fraction of costs that are composite rate versus formerly separately billable. The regression equations and weighted averages are calculated using 2012
through 2013 claims and cost report data. Case-mix factors in the current model include age categories, body surface area BSA, low body mass index BMI indicator, onset status, and comorbidities that is, pericarditis, gastrointestinal tract bleeding, hereditary hemolytic or sickle cell anemia, and myelodysplastic syndrome 80 FR 68989 through 68992. Facility adjusters include wage index, low volume status, and rural status 80 FR
68972 and 69001.
3. Current Issues and Stakeholder Concerns Over the last several years, stakeholders have asked CMS to explore a refined case-mix adjustment model for the ESRD PPS, arguing that the existing case-mix adjustors may not correlate well with the current cost of dialysis treatment. They stated that:
The current adult case-mix adjustors were calculated using old data that is, 20122013 claims and cost report data;
current adjustors may not align with resource-intensive patient-level services such as isolation rooms, behavioral issues, or neurocognitive issues;
apportioned composite rate costs such as labor and capital related costs, from the cost reports, used in the casemix adjustment are currently only observable at the facility level and do not include patient or treatment level variations; and composite rate items are not individually collected on the claim, resulting in the payment not differentiating between the cost of hemodialysis verses peritoneal dialysis, which are affected by different labor and equipment costs.
Other stakeholders raised similar concerns during the TEP meetings.
Additionally, panel members questioned the magnitude/significance of age, BMI, and BSA coefficients; the validity of taking weighted average of estimates across the two equations when the joint distribution of composite rate and formerly separately billable costs is not accounted for in the case-mix; and logistical challenges in obtaining the accurate diagnosis and comorbidity data that it is not routinely reported in the 72x claims.

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In a comment letter to the Acting CMS
Administrator on July 29, 2016,294
MedPAC noted the current ESRD PPS
does not have patient-level variation of composite rate resource costs and suggested CMS move to a one-equation model that is, a patient-data focused model. MedPAC specifically stated that CMS should develop payment adjustment factors using a singleequation methodology that accounts for variation in the cost of providing the full PPS payment bundle. CMS is not currently able to implement this recommendation for the ESRD PPS
because we do not have data on the charges associated with the components of dialysis treatment costs that vary across patients in the use of the formerly composite rate services.
4. Suggestions for Allocating Composite Rate Costs CMS has been carefully studying MedPACs suggestion to base the ESRD
PPS on a one-equation model that is, a patient-data focused model. CMS has over the years publicly discussed potential changes with our stakeholders who support a patient-data focused model. For instance, during the 2018
and 2019 TEP meetings discussions included using time on machine to address allocation of composite rate costs, case mix, and patient level adjustments. Time on machine would not be used to directly adjust payment;
rather, it would be used to apportion composite rate costs such as labor and capital-related costs that are currently only observable at the facility level to the patient or treatment level for use in the case-mix adjustment. Data on the time on machine receiving dialysis would allow for a proportionately higher amount of composite rate costs to be allocated to patients with longer dialysis treatment times. During the December 2019 TEP, a panelist indicated that this option would reduce burden since dialysis treatment time that is, time on machine is automatically generated by the dialysis machine and easily entered into the patients medical record. Under this option, a single aggregate number would be reported on each claim. That number corresponds to the total number of minutes the beneficiary spent on dialysis during that claim period. A
panelist noted that reporting a single number would minimize provider burden. Panelists reached consensus that the reporting of actual time on 294 http medpac.gov/docs/default-source/
comment-letters/medpac-comment-on-cmss-/
proposed-rule-on-the-esrd-prospective-payment-/
system-and-the-dmepos-competiti.pdf?sfvrsn=0.

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