[Federal Register Volume 62, Number 158 (Friday, August 15, 1997)]
[Rules and Regulations]
[Pages 43657-43674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21444]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 412, 413, and 414
[BPD-763-F]
RIN 0938-AG20
Medicare Program; End-Stage Renal Disease (ESRD) Payment
Exception Requests and Organ Procurement Costs
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
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SUMMARY: These final regulations specify the criteria HCFA uses to
determine if a facility that furnishes dialysis services to Medicare
patients with end-stage renal disease (ESRD) qualifies for a higher
payment under an exception to its prospectively determined payment rate
and the procedures HCFA uses to evaluate ESRD payment exception
requests. These regulations also revise the way HCFA computes
acquisition costs for organs that are transplanted into Medicare
beneficiaries.
EFFECTIVE DATE: September 15, 1997.
FOR FURTHER INFORMATION CONTACT: Michael Powell, (410) 786-4557.
SUPPLEMENTARY INFORMATION:
I. Background
Under sections 1881(b)(2) and (b)(7) of the Social Security Act
(the Act), a facility that furnishes dialysis services to Medicare
patients with ESRD is paid a prospectively determined rate for each
dialysis treatment furnished. This rate is a composite that includes
all costs associated with furnishing dialysis services except for the
costs of physician services and certain laboratory tests and drugs that
are billed separately. The composite rate may be adjusted periodically
to reflect actual facility costs.
When a facility's costs are higher than the prospectively
determined rate, we may, under certain conditions, grant the facility
an exception to its composite rate and set a higher prospective rate.
The facility must show, on the basis of projected cost and utilization
trends, that it will have an allowable cost per treatment higher than
its prospective payment rate and that the excess costs are attributable
to one or more specific circumstances. These conditions are specified
in existing regulations at 42 CFR 413.170 and are discussed in greater
detail in Chapter 27 of the Medicare Provider Reimbursement Manual
(PRM) (HCFA Pub. 15-1).
A facility may incur excess costs when it furnishes dialysis
services to a patient population with a greater than average number of
pediatric patients or patients with other medical conditions, such as
those with heart disease or unstable medical conditions, who require
special equipment, procedures, supplies, or staff trained in treating
these patients. This is referred to as ``atypical'' service intensity
(or patient mix). A facility may also incur increased costs when it is
the only supplier of dialysis services in its geographical area and its
patients are unable to obtain dialysis services elsewhere without
considerable hardship (an isolated essential facility).
Increased training costs may also be associated with a facility's
self-dialysis training program. A facility may train patients to
perform self-dialysis with little or no professional assistance in the
facility or at home. It may also train other individuals to assist
patients in performing self-dialysis or home dialysis. A facility that
has training costs greater than its composite training rate may apply
for an exception, but must prove that the costs are reasonable and
allowable.
Typically, a patient undergoes dialysis three times a week. A
facility may furnish a substantial number of treatments to patients who
dialyze less frequently than three times a week. As a result, the
facility typically has higher per treatment costs because the
treatments involve increased labor or supplies. When this occurs, a
facility may apply for an exception to the composite rate.
On several occasions, we have denied exception requests based on
application of the criteria contained in the PRM, and the facilities
have appealed the denials. Subsequently, some denials have been
overturned by the Provider Reimbursement Review Board (PRRB) because
the PRRB is not bound by the guidelines in the PRM. Therefore, we
believe it is necessary to codify in regulations the specific
requirements for determining exceptions.
II. Provisions of the Proposed Rule
On August 26, 1994, we published in the Federal Register (59 FR
44097) a proposed rule that specified the conditions (previously
contained in the PRM) that a facility furnishing dialysis services to
patients with ESRD must meet in order to qualify for a higher payment
under an exception to the prospectively determined payment rate. The
proposed rule also contained the criteria that we would use to evaluate
whether the facility meets the conditions.
We also proposed to revise 42 CFR Part 413, Subpart H, Payment for
ESRD Services. Currently, all of the Medicare payment rules for covered
outpatient maintenance dialysis treatments can be found in
Sec. 413.170. We proposed to reorganize the content of Subpart H and
divide existing Sec. 413.170 into several smaller sections so that
readers can more easily locate specific topics. The table outlining
this change is shown below.
------------------------------------------------------------------------
New section Old section
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413.170 Scope.......................... 413.170(a)
413.172 Principles of prospective 413.170(b)
payment.
413.174 Prospective rates for hospital- 413.170(c)
based and independent ESRD facilities.
413.176 Amount of payments............. 413.170(d)
413.178 Bad debts...................... 413.170(e)
413.180 Procedures for requesting 413.170(f)
exceptions to payment rates.
413.182 Criteria for approval of 413.170(g)
exception requests.
413.184 Payment exception: Atypical 413.170(g)(1)
service intensity (patient mix).
413.186 Payment exception: Isolated 413.170(g)(2)
essential facility.
[[Page 43658]]
413.188 Payment exception: 413.170(g)(4)
Extraordinary circumstances.
413.190 Payment exception: Self- 413.170(g)(5)
dialysis training costs.
413.192 Payment exception: Frequency of 413.170(g)(6)
dialysis.
413.194 Appeals........................ 413.170(h)
413.196 Notification of changes in rate- 413.170(i)
setting methodologies and payment rates.
413.198 Recordkeeping and cost 413.174
reporting requirements for outpatient
maintenance dialysis.
413.200 Payment of independent organ 413.178
procurement organizations and
histocompatibility laboratories.
413.202 Organ procurement organization 413.179
(OPO) cost for kidneys sent to foreign
countries or transplanted in patients
other than Medicare beneficiaries.
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III. Analysis of and Responses to Public Comments
In response to the August 26, 1994 proposed rule, we received nine
timely items of correspondence. The specific comments and our responses
are set forth below following each section describing the specific
provisions of the proposed rule. The sections generally follow the
order of the discussed topics in the proposed rule, with the exception
of the section entitled Bad debts that appears last.
A. General
Comment: One commenter suggested that we update the composite rate
on a regularly scheduled basis, as is done for the hospital inpatient
prospective payment system rates, home health agency rates, hospice
rates, and resource-based relative value scale rates.
Response: Under section 4201 of the Omnibus Budget Reconciliation
Act of 1990 (OBRA '90), Public Law 101-508, from January 1, 1991,
onward, Congress has set the composite rates for payment for ESRD
services furnished to Medicare beneficiaries. Any change would require
legislative action. Thus, we have no discretion in this regard.
B. Procedures for Requesting Exceptions to Payment Rates (Sec. 413.180)
We proposed to redesignate the content of Sec. 413.170(f),
Procedures for requesting exceptions to payment rates, as new
Sec. 413.180. In Sec. 413.180(d), we proposed to specify that a
facility requesting an exception to its payment rate must do so within
180 days of:
The effective date of its new composite payment rate(s);
The effective date that HCFA opens the exceptions process;
or
The date on which an extraordinary cost-increasing event,
as described in proposed Secs. 413.182(c) and 413.188.
In Sec. 413.180(f)(5), we proposed to require that the facility
applying for an exception request compare its most recently completed
cost report with those of prior years. Such comparisons may reveal
significant changes that may indicate errors or problems with the cost
or statistical data and, thus, the need for us to more intensively
review the applicable area. Any changes to cost or statistical data
(for example, number of treatments) must be explained and the
explanation included with the documentation supporting the exception
request.
We also proposed in Sec. 413.180(f) and Sec. 413.182 to require
that ESRD facilities provide documentation showing that their excessive
costs are specifically or directly attributable to one or more of the
exception criteria. As an example, for an atypical service intensity
request, the facility should be able to document the excessive costs of
furnishing care to patients with severe medical conditions. After
submitting evidence that it treats these patients, the facility should
submit records to show that a more experienced and better trained
nursing staff is required to treat these patients and/or additional
nursing staff time is needed. An example of the type of records that a
provider should submit to document its higher nursing costs could
consist of staffing schedules indicating staff and patients per shift.
The facility could indicate (on the schedules) the patients with other
medical conditions that were treated and the more experienced or
additional staff needed to treat them. The monthly staffing schedules
should represent 12 months and coincide with the actual cost reporting
period of the cost report submitted with the exception request.
In Sec. 413.180 (g) and (h), we proposed to codify in regulations
the requirement under section 1881(b)(7) of the Act that specifies that
unless we disapprove a composite rate exception request within 60
working days after it is filed with an intermediary, the exception is
deemed approved. We require that intermediaries review and process all
exception requests within 15 working days, and we process the
exceptions within 45 working days.
Comment: One commenter suggested that we set three levels of
documentation for exception requests in order to reduce the amount of
work involved in both the preparation and review of an exception
request. These three levels of documentation would include new
requests, renewal of an existing request with significant changes, and
renewal of an existing request with no significant changes,
respectively. The first level (new requests) would incorporate the
standard currently required for all exception requests. The second
level (renewal of an existing request) would require sufficient
documentation to justify any additional amounts over the amount
previously granted by HCFA but would not require documentation for
previously justified exceptions. The third level (renewal of an
existing request with no significant changes) would require only the
submission of basic data and a facility certification to demonstrate
that the situation has not changed.
Response: We do not agree with the commenter that the exceptions
process should be established at three different levels. Given the
limited timeframe allowed by the Act to approve or deny an exception
(60 working days), we do not believe it would be feasible to sort
through three levels of requests and address the specific issues
associated with each level. Moreover, because of the volume of
exceptions we receive during each exception window, we are unable to
maintain exception documentation on past windows in-house, but must
store these files at the Federal Records Center. Retrieving records
could significantly lengthen the time we would need to review a
request.
However, we agree with the commenter that requiring facilities to
file new exception requests each time a cycle is opened may be overly
burdensome for those facilities where no significant changes have
occurred from the previous exception cycle. Therefore, we are providing
(at Sec. 413.180(e)) a mechanism for a facility to request retention of
its current exception rate. This option is only available to those
facilities that can demonstrate that the circumstances under which
their current exception rates were granted still apply.
Historically, these providers have been required to prepare new
exception request submissions for each exception
[[Page 43659]]
cycle. Almost all pediatric hospitals furnishing dialysis services that
apply for exceptions are granted them, and the same is true for many
isolated essential facilities. To ease the repetitive filing burden
(and cost) for these types of facilities, we are providing for the
continuation of prior exception amounts for qualifying facilities.
Also, this provision would eliminate uncertainties concerning future
payment rates.
We note that during an earlier exception cycle that opened March 1,
1991 and closed August 27, 1991, we allowed renal facilities a similar
option of continuing to receive the exception payment rates approved
during the preceding exception cycle (December 1, 1989 to May 29,
1990).
For each exception cycle, servicing intermediaries will inform all
facilities by letter, 30 days prior to the effective date of a new
exception cycle, that they can request exception payment rates approved
during the preceding exception cycle. The facilities must then file a
request with their servicing intermediary during the 30 days prior to
the opening of the next exception cycle. This request should consist of
a letter to the facility's servicing intermediary requesting the
continuation of its previously approved exception amount. While no
specific documentation is required with this request, the facility
should provide enough information to adequately demonstrate that the
circumstances under which the previous exception was granted have not
changed. For example, for all exception requests facilities should
document that its cost per treatment is higher than its composite
payment rate, or if a facility is an isolated essential facility, it
should specify that no new facilities have been established nearby.
This request must be filed with the intermediary before the beginning
of the exception cycle. The document must be delivered during the
intermediary's regular business hours. Delivery of the request must be
accomplished through a method that documents the time and date of
receipt. A postmark or other similar mark does not serve as
documentation of the time and date of receipt.
The intermediary will determine whether the renal facility still
meets the exception criteria, that is, that the circumstances under
which the exception was granted still exist. The intermediary will be
required to make a determination on these requests within 10 working
days and notify the provider and HCFA. If the intermediary determines
that the renal facility meets the exception criteria, the approved
exception amount would be equal to the previously approved rate, and
payment at this approved rate would continue. In cases where an
exception cycle is opened because a rate increase has been approved by
Congress, a facility that chooses to retain its exception rate would do
so in lieu of any update to its composite payment rate(s).
If the facility does not continue to meet the exception criteria,
the intermediary will notify the facility that, effective with the
opening of the new exception cycle, the currently approved exception
rate will expire and the current composite rate will go into effect. If
this facility still believes it is entitled to an exception during this
exception cycle, it can file a complete exception request during the
remainder of the 180-day cycle.
If a renal facility does not request retention of its previously
approved exception rate but still wishes an exception, the facility
would be required to submit a new request during the new exception
cycle. However, the approval of an exception does not assure that the
amount would be equal to or higher than the currently approved
exception amount. Furthermore, if the facility fails to adequately
justify its exception request in accordance with the regulations and
program instructions, its exception request could be denied.
Comment: One commenter suggested that we add an inflation factor to
the approved rate in the second and third year during which an
exception has been granted.
Response: A facility requesting approval of an exception to its
composite rate must request a higher payment rate based on its
projected budget estimate(s). Therefore, an approved exception rate
based on projected costs would already include the inflation factor.
The projected budget estimate(s) should cover the period to which the
exception rate is to apply.
Comment: Several commenters suggested that we should establish
regularly scheduled intervals or effective dates for the opening of the
exceptions process to avoid placing an administrative burden on the
provider, the intermediary, and HCFA.
Response: Currently, the exceptions process is opened each time
there is a legislative change in the composite payment rate. In
addition, because of the lack of any updates to the composite rates in
recent years, we have opened the exceptions process three times without
issuing new rates, most recently from November 1, 1993 through April
29, 1994. Only Congress has the authority to issue new rates. Deciding
whether to issue new rates has been driven by several factors, such as:
(a) A review of updated ESRD audited cost and statistical data; (b) an
analysis of the general growth and mix of the ESRD population in renal
dialysis facilities, and (c) Congressional concerns with payment rates.
Therefore, if new prospective payment rates are not issued by Congress,
we will continue to determine when to open the exceptions process.
Comment: One commenter suggested that when we open the exceptions
process all facilities should be eligible to apply for an exception,
rather than the limited group of facilities specified in the proposed
rule.
Response: In the preamble of the proposed rule, we stated that we
had opened the exceptions process in situations where there had not
been a rate change, permitting facilities that had received partial
approvals, new facilities, or facilities that had been previously
denied exceptions the chance to file for an exception. We did not mean
to imply that the exceptions process is only open to these facilities.
Whenever we have opened the exceptions window, all facilities have been
permitted to apply for an exception, regardless of previous
circumstances. However, it is only when the exception window is open
that a facility may seek an exception. Likewise, a facility wishing to
retain its previously approved exception rate may only do so during the
30-day period prior to the opening of an exception cycle. We have added
a sentence to Sec. 413.180(b) to clarify this requirement.
Comment: One commenter pointed out that Sec. 413.180(f)(5), which
requires the facility to provide a comparative analysis of its costs in
the most recent cost reporting period and prior years, does not specify
the number of prior years' data required. The commenter believed that
in order to avoid arbitrarily denying an exception request that did not
contain enough comparative years, we should specify the number of years
required.
Response: We agree with the commenter and have included language in
Sec. 413.180(f)(5) to state that the materials submitted to us must
include a comparative analysis of the facility's costs in its most
recently completed cost report with reported costs from (at least 2)
prior years.
Comment: One commenter recommended that the regulation should
specify the intermediary's review responsibilities during the 15
working days it has to make a recommendation to HCFA. Another commenter
stated that the
[[Page 43660]]
intermediary's determinations regarding ``completeness'' invite
subjective interpretations. Both commenters suggested the
intermediary's 15 working day timeframe should be extended.
Response: The specific review responsibilities for intermediaries
are detailed in Chapter 27 of the PRM. These responsibilities include:
(a) Reviewing for completeness and accuracy the exception request, the
cost report, the facility's projected costs, and any other
documentation submitted by the facility to support its exception; (b)
maintaining a composite rate exception log; (c) developing the content
of the letter used to return an exception request to the facility; and
(d) determining whether the facility's costs are reasonable and
allowable. The intermediary makes the determination with respect to
``completeness,'' and, if the renal facility fails to submit the
documentation required by Chapter 27 of the PRM, the exception request
is returned to the facility. Rather than specify the intermediary's
responsibilities in the regulation, we believe the PRM is the
appropriate place to do so. Because of the statutory deadline (section
1881(b)(7) of the Act) that an exception request is deemed approved
unless we disapprove it within 60 working days, and the volume of
exceptions received during an exceptions window, we believe the present
timeframes (15 working days for the intermediary and 45 working days
for HCFA) for processing exceptions should be maintained in order to
ensure that all exceptions are processed timely.
Comment: One commenter was concerned about the implications of
proposed Sec. 413.180(l). The commenter stated that this section
implies that the facility must submit an entirely new exception request
if the first request (or any subsequent request) is denied.
Furthermore, the commenter believed that facilities should be able to
send all additional data or clarifications directly to HCFA. The
commenter asserted that filing an entirely new request was unnecessary.
Response: As explained above, the intermediary has 15 working days
to review the exception request for completeness and accuracy, and, if
the exception request is denied because the ESRD facility did not
submit the required documentation, the intermediary returns the
exception request with a letter. Presently, the instructions in the PRM
require that the entire exception request be returned when an exception
is denied, and a new request must be submitted with the missing
documentation.
We agree with the commenter that, in this situation, the submission
of an entirely new exception request is not necessary. We have revised
the instructions in the PRM to indicate that the denial letter from the
intermediary to the ESRD facility will include a list of missing or
inadequate documentation and the intermediary will request only the
submission of the missing or corrected information. However, we do not
agree with the suggestion that the ESRD facility should provide the
additional information directly to HCFA. Because of the volume of
exceptions received during an exception window, administratively it
will be more efficient to have each servicing intermediary track the
exceptions processed through its office and review the new information
submitted by the ESRD facility. The intermediary will then forward the
exceptions to us in accordance with Chapter 27 of the PRM.
Comment: One commenter suggested that because of the significant
data gathering and analysis required for an exception, it should be
understandable that some data elements are missed or that additional
support or clarification may be required by the intermediary. The
commenter suggested that providers should be permitted to submit this
additional documentation after the 180-day period without an immediate
exception denial. Furthermore, rate increases should be approved
retroactively to the date that all detailed information is received.
Response: We disagree with the commenter. An ESRD facility that
files its exception request promptly at the opening of a 180-day
exception period and has its exception denied would have an additional
opportunity to submit a new request before the exception period closes.
If a facility chooses instead to file an exception request at or near
the end of the 180-day exception period and it is not filed with all
required documentation, we do not believe that it is unfair to deny the
exception request. Facilities must accept the risk associated with
filing their exception requests at the last minute. Since the composite
rate system is a prospective payment system, we believe that it would
be inconsistent to grant exceptions retroactively based on the
subsequent receipt of information.
C. Criteria for Approval of Exception Requests (Sec. 413.182)
We proposed to redesignate the contents of Sec. 413.170(g),
Criteria for approval of exception requests, as Sec. 413.182. In this
section, we listed the criteria that may be the basis of a rate
exception. These criteria are: atypical service intensity (patient mix)
(new Sec. 413.184); isolated essential facility (new Sec. 413.186);
extraordinary circumstances (new Sec. 413.188); self-dialysis training
costs (new Sec. 413.190); and frequency of dialysis (new Sec. 413.192).
We received no comments on this listing. Comments on the criteria
themselves are discussed in the appropriate sections below.
D. Payment Exception: Atypical Service Intensity (Patient Mix)
(Sec. 413.184)
In the proposed rule, we specified the documentation required of a
facility requesting a rate exception based on patient mix.
In Sec. 413.184(b)(1), we proposed to require that a facility
submit a list of all outpatient dialysis patients (including all home
patients) treated during the most recently completed fiscal or calendar
year showing:
Patients who received transplants, including the date of
the transplant;
Patients awaiting a transplant who are medically able,
have given consent, and are on an active transplant list, as well as
projected transplants;
Home patients;
In-facility patients, staff-assisted or self-dialysis;
Individual patient diagnoses;
Diabetic patients;
Patients isolated because of a contagious disease;
Age of patients;
Mortality rate, by age and diagnosis;
Number of patient transfers, reasons for transfers, and
any related information; and
Total number of hospital admissions for the facility's
ESRD patients, including reason and length of stay for each admission.
When adjudicating exception requests to determine if a substantial
proportion of the facility's outpatient maintenance dialysis treatments
involves more intense dialysis services and special dialysis
procedures, we will compare the above data submitted by providers to
data contained in our Patient Profile Tables. The information in the
Tables is developed annually and represents information on persons with
ESRD covered by Medicare.
In Sec. 413.184(b)(2)(i), we proposed to require that a facility
submit the following documentation on costs of nursing personnel
(registered nurses (RNs), licensed practical nurses (LPNs), technicians
and aides) incurred during the most recently completed fiscal or
calendar year cost report showing:
Amount of remuneration of each employee;
Number of personnel;
[[Page 43661]]
Amount of time spent in the dialysis unit; and
Staff-to-patient ratio based on total hours, with an
analysis of productive and nonproductive hours.
The facility must demonstrate that its nursing personnel costs have
been allocated properly between each mode of care, and that the
additional nursing hours per treatment are not the result of an excess
number of employees in the outpatient maintenance renal dialysis
department. Normally, we use staff-to-patient ratios to determine
whether there is an excess number of employees assigned to a facility's
dialysis department; however, we also may consider staffing schedules.
Thus, an example of the type of records that a provider should submit
to document its higher nursing costs could consist of staffing
schedules, indicating staff and patients per shift. The facility could
indicate on the schedules the patients with other medical conditions
that were treated and the more experienced or additional staff needed
to treat them.
When adjudicating exception requests, we will utilize the above
data to determine if the facility's patients received significantly
more nursing hours per treatment than patients would receive in other
facilities and whether the facility's higher per treatment costs were
necessitated by the special needs of the patients.
Proposed Sec. 413.184(b)(2)(ii) included the requirement that a
facility submit documentation on supply costs incurred during the most
recently completed fiscal or calendar year cost report showing--
By modality, a complete list of supplies used routinely in
a dialysis treatment;
The make and model number and component cost of each
dialyzer; and
That the supplies are prudently purchased (for example,
the facility uses bulk purchase discounts when available).
The facility must demonstrate that excess supply cost per treatment
is caused by the special needs of the patients and is not the result of
inefficiency.
When adjudicating exception requests, we will utilize the above
data to determine if the facility's patients received supplies that are
medically necessary to meet their special medical needs.
Comment: One commenter believed it is an unreasonable burden to
require facilities to submit 12 months of staffing schedules, since
these schedules are not normally kept as permanent files and a facility
might not be able to anticipate the opening of an exception window. The
commenter suggested that 3 to 6 months of staffing schedules would be
more than reasonable to sufficiently document a facility's normal
staffing ratios.
Response: Staffing schedules were only mentioned in the proposed
rule as an example of the type of records a provider could submit to
document its higher nursing costs and/or to demonstrate that there is
not an excessive number of employees assigned to a facility's dialysis
department. These schedules are basic source documents representing
services rendered, and we believe that renal dialysis facilities
maintain these schedules. We continue to believe that it is not
unreasonable for a facility to submit 12 months of staffing schedules
in support of its higher nursing costs. Regardless of the nature of the
supporting documentation submitted, the facility must ensure that the
data adequately substantiate its higher labor costs for the entire cost
reporting year.
Comment: One commenter wanted the meaning of ``productive and
nonproductive hours'' clarified. The commenter was confused as to where
activities such as educational meetings, lunch breaks, paperwork, and
charting fit into the documentation of staff costs.
Response: The term ``productive hours'' means the amount of paid
nursing staff time spent on direct (hands-on) patient care and any
hours explicitly connected to patient care, such as charting. All other
paid nursing staff time, such as training, education, management,
holidays, vacations, sick time, and lunch breaks, is considered
``nonproductive hours''.
Comment: One commenter believed that serving an atypical patient
population could result in cost increases in areas beyond staff and
supplies. Specifically, patients with severe cardiac complications
might require additional monitoring equipment, and patients with
communicable respiratory diseases (such as tuberculosis) might require
special ventilation systems. The commenter recommended that documented
overhead costs should be included in the calculation of a higher
exception rate.
Response: We agree with the commenter and have in the past approved
exception amounts for overhead costs related to (a) special equipment
necessary for the care of patients with other medical conditions, and
(b) isolation areas required for the care of hepatitis or other
patients where the facility can show that isolation is necessary. For
these costs to be considered under this set of exception criteria,
documentation must be submitted demonstrating the basis of the higher
costs and the incremental impact on per treatment costs. The
documentation must also explain how these costs relate to the atypical
patient mix exception criteria. We have added Sec. 413.184(b)(2)(iii)
to state that the facility must submit documentation on overhead costs
incurred during the most recently completed cost reporting year
showing--
The basis of the higher overhead costs;
The impact on the specific cost components; and
The effect on per treatment costs.
Comment: One commenter suggested that we should publish a complete,
detailed list of supplies used in the typical dialysis treatment,
including the cost of those supplies and the volume of each that is
used per treatment. The commenter recommended that the listing should
be in the same format as we require the facilities to use. The
commenter also stated that we must publish the components of the
composite rate in order to allow appropriate comparisons, including the
costs, staffing ratios, and employee mix (that is, anything that we
deem to be essential in order to make the comparison).
Response: When evaluating the reasonableness of a facility's
component costs shown in its exception request, we use national data
and general program statistics. Chapter 27 of the PRM includes our
median cost per treatment data as follows:
------------------------------------------------------------------------
Cost component Amount
------------------------------------------------------------------------
Salaries...................................................... $40.00
Supplies...................................................... 33.00
Overhead, excluding employee benefits......................... 47.00
Overhead, including employee benefits......................... 54.00
Employee benefits............................................. 7.00
Laboratory.................................................... 3.00
------------------------------------------------------------------------
We do not maintain detailed breakdowns of the above cost
components. The cost components were derived from audited cost reports
of hospital-based and independent renal dialysis facilities. Therefore,
it would be difficult for us to publish an accurate list of these
components to use as comparisons.
Comment: One commenter stated that where a provider had
demonstrated that higher nursing staff costs are necessary to care for
the sicker patients being treated, we should also recognize the higher
amount of administrative and general (A & G) costs that will be
allocated through the step-down process on the hospital's cost report.
The
[[Page 43662]]
commenter also stated that since Medicare cost reporting policy
recognizes ``accumulated cost'' as a fair and accurate basis for
allocating A & G costs for cost reporting purposes, we must consider
these allocated A & G costs when adjudicating ESRD exception requests.
Response: As stated in the proposed rule, the accounting protocol
used for cost reporting is separate and distinct from identifying the
actual A & G costs that are directly attributable to higher nursing
staff costs. For a hospital-based facility, if the direct cost of
nursing staff salaries in the dialysis department increased, the A & G
allocated to that department would automatically increase. This is the
result of the hospital cost reporting accounting protocol, which
requires A & G costs to be allocated on the basis of the accumulated
costs of the other departments. Since the total A & G costs represent
costs allocated to the dialysis department, they do not accurately
reflect the actual A & G costs incurred as a result of the additional
nursing staff salary costs.
In accordance with Sec. 413.180(f)(3), a facility must submit
materials that show that the elements of excessive costs are
specifically attributable to one or more of the conditions specified by
the exception criteria set forth in Sec. 413.182. According to
Sec. 413.182, HCFA may approve exceptions to an ESRD facility's
prospective payment rate if the facility demonstrates with convincing
objective evidence that its total per treatment costs are reasonable
and allowable under the relevant cost reimbursement principles of Part
413 and its per treatment costs, in excess of its payment rate, are
directly attributable to any of the exception criteria.
Our regulations do not require that the same principles of cost
allocations and cost apportionment be used to determine which costs, in
excess of the payment rate, are directly attributable to the exception
criteria. Moreover, a provider that is granted an exception is not
automatically entitled to the same payment it would have received under
cost reimbursement. The excess costs must be directly attributable to
the exception criteria.
E. Payment Exception: Isolated Essential Facility (Sec. 413.186)
We proposed to include the requirements of existing
Sec. 413.170(g)(2) as new Sec. 413.186, and add documentation
requirements for facilities that apply for a payment rate exception
based on being an isolated essential facility.
1. Isolated Facility
To be considered isolated, a facility must document that it is
located outside an established Metropolitan Statistical Area (MSA) and
provides dialysis to a permanent patient population as opposed to a
transient patient population.
2. Essential Facility
To be considered essential, the facility must document that a
substantial number of its patients cannot obtain dialysis services
elsewhere without substantial additional hardship and the additional
hardship the patients will incur, generally, will be in travel time and
cost.
3. Cost Per Treatment
The facility must document that its cost per treatment is
reasonable and explain how the facility's cost per treatment in excess
of its composite rate relates to the isolated essential facility
criteria. For example, if a facility incurs higher supply costs, it
must identify the additional costs incurred on a per treatment basis
and then relate that additional cost per treatment to the exception
criteria.
4. Additional Information
The facility must also furnish, in a format that concisely explains
the facility's cost and patient data to support its request, the
following information:
A list of current and requested payment rates for each
modality.
An explanation of how the facility's costs in excess of
its composite rate payment are attributable to the isolated essential
facility criteria.
An explanation of any unusual geographic conditions in the
area surrounding the facility.
A copy of the latest filed cost report and a budget
estimate for the next 12 months on cost report forms.
An explanation of unusual costs reported on the facility's
actual or budgeted cost reports and any significant changes in budgeted
costs and data compared to actual costs and data reported on the latest
filed cost report.
The name, location of, and distance to the nearest ESRD
facility.
A list of patients, treatment modality, commuting
distance, and commuting time to the current and next to nearest ESRD
facility.
The historical and projected patient-to-staff ratios and
number of machines used for maintenance dialysis treatments.
A computation of the facility's treatment capacity,
computed by dividing the maintenance treatments actually furnished by
the total maintenance treatments that could have been furnished (in
other words, total stations multiplied by the number of hours of
operation divided by the average length of dialysis) for the year.
The geographic boundaries and population size of the
facility's service area.
Comment: One commenter sought an explanation of the basis for the
existing volume of treatment criterion (redesignated
Sec. 413.186(b)(3)). The commenter also recommended the establishment
of a guideline for the necessary size of a facility's permanent patient
population and a guideline related to a facility's minimum utilization
rate.
Response: Facilities applying for an isolated essential facility
exception are required to submit information with respect to the volume
of treatments in order to permit comparisons with similar facilities
and to determine a facility's treatment capacity. We will review the
issue of developing guidelines for permanent patient population size
and minimum utilization rates to determine whether it is appropriate to
establish national guidelines.
Comment: One commenter requested that we clarify the language in
Sec. 413.186(b)(4) pertaining to usage of the facility ``by area
residents other than the applying facility's patients.''
Response: We have revised Sec. 413.186(b)(4) to specify that in
determining whether a facility qualifies for an exception based on its
being an isolated essential facility, we will consider the extent to
which dialysis facilities (other than the applying facility's patients)
are used by area residents.
Comment: One commenter suggested that a facility could be located
in an MSA but still be the only supplier of dialysis in its
geographical area. The commenter recommended that Sec. 413.186(c)(1) be
revised to prevent an otherwise ``isolated'' and ``essential'' facility
from being automatically denied because it is located in an MSA.
Response: We agree with the commenter that it is possible that an
``isolated'' facility might be located in an MSA but still qualify for
an exception based on all other criteria specified in this section. We
are aware of several unique situations in this country where only one
dialysis facility is located in a particular area that is considered an
MSA. In these situations, given the characteristics associated with
most MSAs, we look more closely at whether these facilities are truly
[[Page 43663]]
isolated (for example, increased availability of mass transportation,
better road conditions, and stronger commuting patterns).
Further, we are aware that sole community hospitals (SCHs) and
isolated essential facilities are defined utilizing different criteria.
SCHs and isolated essential facilities render distinct care, with SCHs
responsible for normal inpatient hospital stays, and isolated essential
facilities responsible for routine outpatient maintenance dialysis that
can be provided by a hospital-based or independent dialysis facility.
Also, SCHs are defined under 42 CFR Part 412--Prospective Payment
Systems for Inpatient Hospital Services, and isolated essential
facilities are defined under 42 CFR Part 413, subpart H--Payment for
End-Stage Renal Disease Services. However, in one criterion, location
in an MSA, the definitions are similar. Within this definition, an SCH
located in an MSA is automatically disqualified from being designated
as an SCH. Because of the differences between isolated essential
facilities and SCHs and the fact that several isolated essential
facilities are unique (as explained above) we are changing the
definition for isolated essential facilities located in an MSA.
Therefore, we are revising Sec. 413.186(c)(1) to state that to be
considered isolated, we would generally require the facility to
document that it is located outside an established MSA.
F. Payment Exception: Extraordinary Circumstances (Sec. 413.188)
We proposed to redesignate existing Sec. 413.170(g)(4) as
Sec. 413.188.
We received no comments on this proposed change.
G. Payment Exception: Self-Dialysis Training Costs (Sec. 413.190)
We proposed to repeat the content of existing Sec. 413.170(g)(5) in
new Sec. 413.190(a) and to specify the documentation that we would
require of a facility requesting a rate exception under this provision.
We proposed to require that a facility justify its exception request by
separately identifying those elements contributing to its costs in
excess of the composite training rate. In adjudicating these exception
requests, we would consider the facility's total costs, cost finding,
and apportionment, including its allocation methodology, to determine
if costs are properly reported by treatment modality. Exception
requests for a higher training rate will be granted only with respect
to those cost components relating to training such as technical staff,
medical supplies, and the special costs of education (manuals and
education materials). Overhead and other indirect costs do not
generally form a basis for granting an exception for purposes of self-
dialysis training costs.
Under Sec. 413.190(e), we proposed that the facility must provide
the following information to support its exception request:
A copy of the facility's training program.
Computation of the facility's cost per treatment for
maintenance and training sessions, including an explanation of the cost
difference between the two modalities.
Class size and patients' training schedules.
Number of training sessions required, by treatment
modality, to train patients.
Number of patients trained for the current year and the
prior 2 years on a monthly basis.
Projection for the next 12 months of future training
candidates.
Number and qualifications of staff at training sessions.
Proposed Sec. 413.190(f) provided that an ESRD facility may bill
Medicare for a dialysis training session only when a patient receives a
dialysis treatment (which normally is three times a week). If an ESRD
facility elects to train all its patients using a particular modality
more often than during each dialysis treatment and, as a result, the
number of actual training sessions exceeds the billable limit, the
facility may request a composite rate adjustment limited to the lesser
of the facility's projected training cost per treatment or calculate
the cost per treatment using the minimum and maximum training sessions
discussed below.
An ESRD facility may bill a maximum of 25 training sessions per
patient for hemodialysis training and 15 training sessions for
continuous cycling peritoneal dialysis (CCPD) and continuous ambulatory
peritoneal dialysis (CAPD) training. To ensure adequate patient
training, we presume a minimum number of training sessions per patient
in calculating exception rates, 15 for hemodialysis and 5 for CAPD and
CCPD, where the renal facility's actual experience is less than the
minimum number of training sessions.
To justify an accelerated training exception request, the proposed
rule required that an ESRD facility document that all training sessions
provided under a particular modality are to be provided during the
shorter but more condensed period. The facility must submit with the
exception request a list of patients, by modality, trained during the
most recent cost report period. The list must include each
beneficiary's name, age, and training status (completed, not completed,
being retrained, or in the process of being trained). The total
treatments from the patient list must agree with the total treatments
reported on the cost report filed with the request. We proposed to deny
any exception request that a facility submits without the above
documentation.
For purposes of clarification, we have revised Sec. 413.190(f)(2)
to state that a facility may request an exception if the facility
elects to train its patients using a particular treatment modality more
often than during each dialysis treatment and, as a result, the number
of its billable training dialysis sessions is less than its actual
training sessions.
Comment: One commenter objected to the current criterion under
which a facility must train at least five patients per year in order to
qualify for a self-dialysis training exception. The commenter believed
that establishing a minimum number of patients trained may serve as a
disincentive for facilities to start a new home training program and
may conflict with the requirement of section 1881(b)(7) of the Act and
proposed Sec. 413.174(a)(3) states that our payment policies provide
incentives for increasing the use of home dialysis.
Response: This criterion was not addressed in the proposed rule.
However, we do use a minimum number of three patients per modality as a
qualifying criterion for a self-dialysis training exception. To
determine if a facility qualifies, we use each facility's average
number of patients trained for the 2 previous years (if 2 years are
available). We believe each facility must have a minimum number of
patients to ensure that it is operating an ongoing cost-effective
training program. Based on our experience and review of this subject we
determined the number to be three.
Comment: One commenter suggested that the overhead and physical
plant cost components represent real, necessary, and unavoidable
facility costs and should be included in the calculation of training
exception rates.
Response: In the proposed rule at Sec. 413.190(d), we stated that
the higher training costs do not generally include overhead and other
indirect costs. However, we agree with the commenter that it is
appropriate to include overhead and physical plant costs for exception
request purposes. Therefore, we have revised this section to state that
``the exception requests for higher training rates are limited to those
cost components relating to training such as
[[Page 43664]]
technical staff, medical supplies, and the special costs of education
(manuals and education materials). These requests may include overhead
and other indirect costs to the extent that these costs are directly
attributable to the additional training costs.''
Comment: One commenter stated that under proposed
Sec. 413.190(f)(1), accelerated training exceptions evidently are based
on training sessions for hemodialysis training, since hemodialysis is
normally furnished three times a week. The commenter believed the
regulations should also provide for exceptions for accelerated training
associated with CAPD or CCPD, which are typically daily treatment
modalities.
Response: The proposed rule may not have been clear with respect to
exceptions related to CAPD and CCPD training. Although CAPD and CCPD
are daily treatment modalities, ESRD facilities are paid for training
sessions based on the equivalent of three hemodialysis treatments a
week for each week that CAPD and CCPD treatments are provided.
Accordingly, we are revising Sec. 413.190(f)(1) to specify the basis
for payment of training sessions for CAPD and CCPD patients. Thus,
exceptions for accelerated training are considered for each modality
(including CAPD and CCPD) based on the number of actual training
sessions in excess of billable training sessions (three per week).
Comment: One commenter objected to our proposed requirement that
every training session for a particular modality be provided during the
shorter, but more condensed, training period.
Response: We have revised proposed Sec. 413.190(f)(5) to change the
requirement that ``all'' training sessions be provided on an
accelerated basis and are instead requiring that an ESRD facility must
show that ``a significant number of training sessions for a particular
modality are provided during a shorter, but more condensed, period.''
Based on our experience and review of this subject we determined that
80 percent represents a significant number of training sessions.
H. Payment Exception: Frequency of Dialysis (Sec. 413.192)
We proposed to redesignate Sec. 413.170(g)(6) as Sec. 413.192 and
add several new requirements as discussed below.
Existing Sec. 412.170(g)(6) specifies that, to qualify for an
exception to the prospective payment rate based on frequency of
dialysis, the facility must have a substantial portion of outpatient
maintenance dialysis treatments furnished to patients who dialyze less
frequently than three times per week. A facility that furnishes a
substantial portion of outpatient maintenance dialysis services to
patients who dialyze less frequently than three times per week
typically has higher costs per treatment because the treatments that
are furnished to these patients last longer and involve higher labor
and supply costs. For a facility to qualify as having a substantial
portion of outpatient maintenance dialysis treatments furnished to
patients who dialyze less frequently than three times per week, a
facility must be able to document that it has a decrease in treatments
in excess of 15 percent and cost increases due to frequency.
To document that it furnishes a substantial number of dialysis
treatments at a frequency of less than three times per week, we
proposed that a facility must submit a list of patients who received
outpatient dialysis treatments for the latest historical cost report
that is being filed with the request. The list must indicate--
Whether the patients are permanent, transient (vacationing
patients or frequently relocating patients), or temporary;
The medically prescribed frequency of dialysis; and
The number of dialysis treatments that each patient
received on a weekly and yearly basis and an explanation of any
discrepancy between that calculation and the number of treatments
reported on the facility's cost report.
We also proposed that the facility must submit a list of patients
used to project treatments. The list must indicate--
Whether the patients are permanent, transient, or
temporary;
The medically prescribed frequency of dialysis; and
The number of dialysis treatments that each patient is
projected to receive on a weekly and yearly basis, an explanation of
any discrepancy between that calculation and the number of treatments
reported on the facility's projected cost report, and an explanation
for any change between prior, actual, and projected data.
In order for us to determine if the facility meets the 15 percent
requirement discussed above, the following information must be
submitted:
A schedule showing the number of treatments to be
furnished twice a week and the number of treatments that would have
been furnished if each beneficiary were dialyzed three times a week,
including a computation of the facility's projected cost per treatment
using projected treatments based on the twice a week calculation and
the three times a week calculation.
A schedule showing the computation of the percentage
decrease in the number of treatments, which must be at least 15 percent
to be deemed substantial for approval of an exception.
We received no comments on these proposed provision.
I. Appeals (Sec. 413.194)
We proposed to redesignate existing Sec. 413.170(h) as
Sec. 413.194. In addition, we proposed to specify that exhaustion of
administrative remedies is a prerequisite for judicial review.
We did not receive any comments on these proposed changes.
J. Notification of Changes in Rate-Setting Methodologies and Payment
Rates (Sec. 413.196)
We proposed to redesignate existing Sec. 413.170(i) as Sec. 413.196
with only coding and editorial changes.
We did not receive any comments on these proposed changes.
K. Recordkeeping and Cost Reporting Requirements for Outpatient
Maintenance Dialysis (Sec. 413.198)
We proposed to redesignate existing Sec. 413.174 as Sec. 413.198.
We did not receive any comments on this proposed change.
L. Organ Acquisition Costs (Sec. 412.113)
Under Sec. 412.113, Medicare pays for kidney, heart, liver, and
lung acquisition costs incurred by transplant centers on a reasonable
cost basis. Currently, Medicare-certified transplant centers compute
Medicare acquisition costs for these organs on Supplemental Worksheet
D-6 of the Hospital Cost Report (Form HCFA-2552). The average
acquisition costs of hearts, livers, and lungs transplanted in patients
other than Medicare beneficiaries are deducted from the total
acquisition costs for all hearts, livers, and lungs. Medicare
reimburses the remaining balance as program costs for these organs.
Based on recent cost analyses, we are concerned about the high Medicare
costs associated with acquiring a small number of hearts, livers, and
lungs. As a result, we proposed to change the method of computing
heart, liver, and lung acquisition costs to determine more accurately
the costs of acquiring organs transplanted in Medicare recipients. The
method we proposed for computing acquisition costs for hearts, livers,
and lungs conforms to the method used for
[[Page 43665]]
kidney acquisition costs, which more accurately accounts for Medicare's
portion of such costs, including organ wastage. The formula for payment
for kidney acquisition is specified in existing Sec. 413.179. We also
proposed to revise the heading in paragraph (d) of this section by
replacing the terms ``heart, kidney, liver, and lung'' with ``organ''
and revising the cross-reference to indicate that ``organs are defined
in Sec. 486.302.''
In the August 26, 1994 proposed rule, we made the following
specific proposals:
1. Payment to Independent Organ Procurement Organizations (OPOs) and
Histocompatibility Laboratories
We proposed to redesignate existing Sec. 413.178 as Sec. 413.200.
In proposed Sec. 413.200(b), we revised the definition of
``freestanding'' to provide that an OPO or a histocompatibility
laboratory is freestanding unless it--
Is subject to the control of the hospital with regard to
the hiring, firing, training, and paying of employees; and
Is considered as a department of the hospital for
insurance purposes (including malpractice insurance, general liability
insurance, worker's compensation insurance, and employee retirement
insurance).
We also proposed to remove from the definition of ``freestanding''
the requirement that hospital-based OPOs service a single transplant
center. Section 4009(g) of the Omnibus Budget Reconciliation Act of
1987 (Public Law 100-203) required that OPOs be designated by Medicare
to include no more than one OPO per service area. As the certification
process limited only one OPO to an area and some of the OPOs were
hospital-based, limiting the OPO's responsibility to a single
transplant center became impractical. An OPO (whether independent or
hospital-based) is required to service all transplant centers in its
area. Accordingly, a hospital-based OPO may not necessarily service a
single transplant center.
We received no comments on this proposed revision.
2. OPO or Transplant Center Costs for Kidneys Sent to Foreign Countries
or Transplanted in Patients Other Than Medicare Beneficiaries
We proposed to redesignate existing Sec. 413.179 as Sec. 413.202
with the changes discussed below.
We proposed to expand the applicability of redesignated
Sec. 413.202 to include hearts, livers, and lungs by making it apply to
``organs'' instead of ``kidneys.'' We believed that this revision would
result in a more reasonable determination of Medicare heart, liver, and
lung acquisition costs because the formula for determining kidney
acquisition costs more fairly accounts for Medicare's portion of such
costs, including organ wastage. We cross referred Sec. 412.113 to
Sec. 413.202 to ensure proper cost determination.
Comment: Several commenters asserted that substituting the term
``organs'' for ``kidneys'' in redesignated Sec. 413.202 inappropriately
imposed the revised methodology for determining Medicare's share of
heart, liver, and lung acquisition costs on OPOs. They argued that OPOs
do not have the data necessary to allocate organs between Medicare and
non-Medicare patients.
Response: We agree with the commenters that substituting the term
``organs'' for ``kidneys'' would impose the revised methodology for
determining Medicare's share of heart, liver, and lung acquisition
costs on OPOs. Our intention in the proposed notice was to revise the
methodology for Medicare transplant centers, but the proposed revision
of redesignated Sec. 413.202 inadvertently applied to OPOs as well.
Therefore, we have returned to the original language in redesignated
Sec. 413.202 by resubstituting ``kidneys'' for ``organs'' and removing
any reference to transplant centers; however, this section is now only
applicable to OPOs. To account for all organs acquired by all
transplant centers, we have added Sec. 413.203. In addition, we have
specified that the term ``organs'' is defined in Sec. 486.302.
Comment: Several commenters suggested that the payment method that
we proposed to apply to heart, liver, and lung acquisition costs is not
always accurate. The number of Medicare beneficiaries awaiting kidneys
and receiving ancillary pretransplant services could be greater or less
than the percentage of Medicare beneficiaries ultimately receiving
transplants. The commenters suggested revising Supplemental Worksheet
D-6 (HCFA Form 2552), so that the kidney acquisition ancillary charges
can be segregated into two columns, one for Medicare beneficiary
services and another for the non-Medicare patients, thereby assuring
that the appropriate ancillary service costs for each payer group could
be accurately identified. The other direct kidney acquisition costs
such as the kidney itself, transportation costs, etc., flowing through
the step-down process could be determined based on the ratio of usable
kidneys transplanted into Medicare and non-Medicare patients. The
commenters believed that this approach would ensure that we would not
be in violation of the requirement under section 1861(v)(1)(A) of the
Act that the costs of services be borne by the appropriate payer.
Response: We will consider the suggested ancillary cost report
revisions during our next review of Supplemental Worksheet D-6.
M. Payment for Erythropoietin/Epoietin (EPO) (Sec. 413.174(f))
Erythropoietin (EPO) is an anti-anemia drug given to dialysis
patients with a specified level of anemia. Payments to ESRD facilities
for EPO are based on increments of 1,000 unit doses, rounded to the
nearest 100 units. Section 13566 of the Omnibus Budget Reconciliation
Act of 1993 (Public Law 103-66) amended section 1881(b)(11)(B)(ii) of
the Act to reduce the maximum payment for EPO from $11 to $10 per 1,000
units. HCFA may adjust this amount, as appropriate, within stated
limits. Existing Sec. 413.170(c)(6)(iii)(B) provides for annual
publication of a Federal Register notice indicating whether an update
in the EPO payment amount is appropriate and requesting public comment.
We proposed to revise Sec. 413.174(f) to add the statutory reference
and to state that we would only publish a Federal Register notice
proposing a revision to the EPO payment amount when we determine that
an adjustment to the payment amount is necessary. We would no longer
publish an annual notice.
Comment: One commenter supported our proposal to eliminate the
requirement to publish an annual notice regarding EPO payment when
there is no payment change. However, the commenter objected to the
provision under proposed Sec. 413.174(f)(3)(iii) that limited any EPO
payment increases to the percentage increase in the implicit price
deflator for the gross national product. The commenter believed that
this provision is unfair to ESRD providers because the providers cannot
control the cost of EPO. The commenter noted that other drugs given to
dialysis patients are reimbursed based on acquisition costs or
wholesale prices, or both.
Response: Proposed Sec. 413.174(f)(3)(iii) is merely a
redesignation of existing Sec. 413.170(c)(6)(iii)(c). This provision is
mandated by section 1881(b)(11)(B)(ii)(II) of the Act, which gives the
Secretary authority to adjust the EPO payment rate (beginning in 1995),
but limits the amount of any payment increase. Since this requirement
is statutorily mandated, we do not have the authority to eliminate
[[Page 43666]]
this provision. However, in assessing the need for an adjustment to the
EPO payment rate, we would consider the actual costs incurred by ESRD
facilities for EPO. If we determined that the payment limit set by
statute is inadequate to ensure access to EPO by Medicare
beneficiaries, we would seek a legislative change.
N. Bad Debts (Sec. 413.178)
In the proposed rule, we proposed to redesignate existing
Sec. 413.178 as Sec. 413.200 and move the requirements of existing
Sec. 413.170(e) to new Sec. 413.178. New Sec. 413.178 will cover the
proceedings for payment and reimbursement of bad debts.
Comment: One commenter suggested that the language in proposed
Sec. 413.178, implies that ESRD facilities can be reimbursed for all
Medicare bad debts incurred for all covered services provided. The
commenter contended that past policy had allowed reimbursement for
Medicare bad debts incurred in the provision of ``composite rate''
dialysis services only. Therefore, the commenter recommended that the
wording be modified to clarify that only bad debts related to composite
rate services are subject to reimbursement.
Response: We have not made any changes to our existing bad debt
policy. Medicare bad debts for ESRD services (that is, services covered
under the composite rate) will continue to be determined by calculating
a facility's unrecovered reasonable costs, which represent the
difference between a facility's total Medicare revenues (including
beneficiaries' payments) and Medicare total reasonable costs. Payment
for allowable bad debts is limited to the lesser of the unrecovered
reasonable costs or the total of Medicare uncollectible deductibles and
coinsurance. An example can be found in chapter 27 of the PRM. We
reimburse each facility its allowable Medicare bad debts in a single
lump sum payment after the facility's cost reporting period ends. As
the commenter suggested, we have revised Sec. 413.178(c) to clarify,
consistent with our longstanding policy, that reimbursement for bad
debts is available only for covered services under the composite rate.
IV. Provisions of Final Regulations
As discussed above, we have considered the public comments received
on the August 26, 1994 proposed rule and we are adopting that rule as
final with the following modifications:
In Sec. 413.178(c), we state that a facility must request
payment for uncollectible deductible and coinsurance amounts owed by
beneficiaries by submitting an itemized list of all specific
uncollectable amounts related to covered services under the composite
rate.
We have added a sentence to Sec. 413.180(b) to clarify the
requirement that a facility wishing to retain its previously approved
exception rate may only do so during the 30-day period prior to the
opening of an exception cycle.
We have added Sec. 413.180(e) to state that a facility may
elect to retain its previously approved exception rate in lieu of any
composite rate increase or any other exception amount if--
(1) The conditions under which the exception was granted have not
changed;
(2) The facility files a request to retain the rate with its fiscal
intermediary during the 30-day period before the opening of an
exception cycle; and
(3) The request is approved by the fiscal intermediary.
We specify in Sec. 413.180(f)(5) that the facility must
compare its most recently completed cost report with cost reports from
``(at least 2)'' prior years.
We have added new Sec. 413.184(b)(2)(iii), stating that
the facility must submit documentation on overhead costs incurred
during the most recently completed fiscal or calendar year cost report
showing the basis of the higher overhead costs, the impact on the
specific cost components, and the effect on per treatment costs.
We have revised Sec. 413.186(b)(4) to clarify that in
determining whether a facility qualifies for an exception based on its
being an isolated essential facility, we consider other dialysis
facility usage by area residents (other than the applying facility's
patients).
We have revised Sec. 413.186(c)(1) to state that to be
considered isolated, ``generally'' a facility is located outside an
established MSA and provides dialysis to a permanent patient
population.
In Sec. 413.190(d), we have specified that an exception
request for a higher training rate may include overhead and other
indirect costs to the extent that these costs are directly attributable
to the additional training costs.
In Sec. 413.190(f)(1), we have added language to state
that although CCPD and CAPD are daily treatment modalities, ESRD
facilities are paid the equivalent of three hemodialysis training
treatments for each week that CAPD and CCPD training treatments are
provided.
We have revised Sec. 413.190(f)(2) to state that a
facility may request an exception if the facility elects to train its
patients using a particular treatment modality more often than during
each dialysis treatment and, as a result, the number of its billable
training dialysis sessions is less than its actual training sessions.
We have revised Sec. 413.190(f)(5) to state that, to
justify an accelerated training exception request, an ESRD facility
must document that a ``significant number of'' training sessions,
rather than ``all'' sessions for a particular modality are provided
during a shorter but more condensed period.
In redesignated Sec. 413.198, we have revised the cross-
references.
We have made several changes related to organ acquisition
costs.
+ In Sec. 412.113(d), we revised the paragraph heading, and
replaced the terms ``heart, kidney, liver, and lung'' with ``organ''.
We also revised the cross-reference to indicate that ``organs are
defined in Sec. 485.12''.
+ In Sec. 413.202, we revised the section title and made other
technical changes.
+ We added a new Sec. 413.203 that specifies the transplant
centers' costs for organs sent to foreign countries or transplanted in
patients other than Medicare beneficiaries.
We also have made minor technical changes to the
regulation text for readability and ease of use.
V. Impact Statement
HCFA has examined the impacts of this final rule as required by
Executive Order 12866 and the Regulatory Flexibility Act (Public Law
96-354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects; distributive impacts; and equity. The Regulatory Flexibility
Act requires agencies to analyze options for regulatory relief for
small businesses. For purposes of the RFA, States and individuals are
not considered small entities. We do consider all hospitals and ESRD
facilities as small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. Such
an analysis must conform to the provisions of section 604 of the RFA.
For purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 50 beds.
[[Page 43667]]
A. Payment Exception Requests
The purpose of this portion of this final rule is generally to
codify in regulations existing policy concerning an ESRD facility's
request for an exception to its prospectively determined payment rate.
This policy is contained in chapter 27 of the PRM. This final rule
affects all ESRD facilities, including hospital-based and freestanding,
that file a request for an ESRD exception.
Our records indicate that as of December 31, 1994, there were 2,526
renal dialysis facilities, all of which were eligible to file exception
requests. Of these, 377 or 15 percent of the facilities filed exception
requests during our most recent exception cycle, November 1, 1993 to
April 29, 1994. Of these requests, 293 facilities were granted
exceptions (mostly partially granted), and 84 were denied.
Currently, a facility whose request is granted only partially or is
denied an exception may appeal this determination to the PRRB. The PRRB
is bound by the statute and regulations but not by program
instructions; thus, it may come to a different conclusion than if it
followed program instructions. Codifying in regulations details now
found in the PRM instructions will bind the PRRB to more specific bases
for adjudicating an appeal of a partially denied or denied exception
request.
B. Organ Acquisition Costs
In 1994, there were 72 hospitals certified to perform heart
transplants, and 40 hospitals certified to perform liver transplants.
These hospitals constitute less than 2 percent of all Medicare-
participating hospitals. In 1994, there were 381 heart transplants and
283 liver transplants performed on Medicare beneficiaries. Although the
number of Medicare transplants represents 10 percent of the total
number of heart and liver transplants, a preliminary review of cost
report data indicates the average Medicare acquisition cost per heart
and liver is higher than the average non-Medicare acquisition cost. We
believe that the current method of cost reimbursement contains the
potential for transplant centers to include some non-Medicare costs in
the Medicare costs.
This final rule extends the formula used to compute kidney
acquisition costs to other organs, including hearts, livers, and lungs.
Acquisition costs will be based on the ratio of the number of usable
organs transplanted into Medicare beneficiaries to the total overall
number of usable organs. This ratio will not affect our obligation to
pay allowable organ acquisition costs, but will prevent Medicare from
bearing costs associated with non-Medicare procedures. Based on the
number of Medicare organ transplants, we anticipate annual Medicare
program savings associated with this provision of less than $5 million.
Facilities that have been correctly reporting non-Medicare acquisition
costs will not be affected by this rule. Facilities that have not will
find their Medicare payments reduced to better reflect Medicare's share
of allowable acquisition costs.
We are not preparing analyses for either the RFA or section 1102(b)
of the Act because we have determined and certify that this final rule
will not have a significant economic impact on a substantial number of
small entities or a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
final rule was not reviewed by the Office of Management and Budget.
VI. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, agencies are required to
provide 60-day notice in the Federal Register and solicit public
comments before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The information collection requirements (42 CFR 413.178, 413.180,
413.182, 413.184, 413.186, 413.188, 413.190, 413.192, and 413.194)
associated with requiring ESRD facilities to provide documentation for
payment exception requests are currently approved by OMB under 0938-
0296, HCFA-9044, that expires on May 31, 1998.
List of Subjects
42 CFR Part 412
Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 414
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements, Rural areas, X-rays.
42 CFR Chapter IV is amended as set forth below:
A. Part 412 is amended as follows:
PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES
1. The authority citation for part 412 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart H--Payments to Hospitals Under the Prospective Payment Systems
2. Section 412.113 is amended by revising paragraph (d) to read as
follows:
Sec. 412.113 Other payments.
* * * * *
(d) Organ acquisition. Payment for organ acquisition costs incurred
by hospitals with approved transplantation centers is made on a
reasonable cost basis. The term ``Organs'' is defined in Sec. 486.302
of this chapter.
B. Part 413 is amended as follows:
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES
1. The authority citation for part 413 continues to read as
follows:
Authority: Secs. 1102, 1861(v)(1)(a), and 1871 of the Social
Security Act as amended (42 U.S.C. 1302, 1395x(v)(1)(A), and
1395hh).
2. Subpart H is revised to read as follows:
[[Page 43668]]
Subpart H--Payment for End-Stage Renal Disease (ESRD) Services and
Organ Procurement Costs
Sec.
413.170 Scope.
413.172 Principles of prospective payment.
413.174 Prospective rates for hospital-based and independent ESRD
facilities.
413.176 Amount of payments.
413.178 Bad debts.
413.180 Procedures for requesting exceptions to payment rates.
413.182 Criteria for approval of exception requests.
413.184 Payment exception: Atypical service intensity (patient
mix).
413.186 Payment exception: Isolated essential facility.
413.188 Payment exception: Extraordinary circumstances.
413.190 Payment exception: Self-dialysis training costs.
413.192 Payment exception: Frequency of dialysis.
413.194 Appeals.
413.196 Notification of changes in rate-setting methodologies and
payment rates.
413.198 Recordkeeping and cost reporting requirements for
outpatient maintenance dialysis.
413.200 Payment of independent organ procurement organizations and
histocompatibility laboratories.
413.202 Organ procurement organization (OPO) cost for kidneys sent
to foreign countries or transplanted in patients other than Medicare
beneficiaries.
413.203 Transplant center costs for organs sent to foreign
countries or transplanted in patients other than Medicare
beneficiaries.
Sec. 413.170 Scope.
This subpart implements sections 1881 (b)(2) and (b)(7) of the Act
by--
(a) Setting forth the principles and authorities under which HCFA
is authorized to establish a prospective payment system for outpatient
maintenance dialysis furnished in or under the supervision of an ESRD
facility approved under subpart U of part 405 of this chapter (referred
to as ``facility'' in this section). For purposes of this section and
Sec. 413.172 through Sec. 413.198, ``outpatient maintenance dialysis''
means outpatient dialysis, home dialysis, self-dialysis, and home
dialysis training, as defined in Sec. 405.2102 (f)(2)(ii), (f)(2)(iii),
and (f)(3) of this chapter, and includes all items and services
specified in Secs. 410.50 and 410.52 of this chapter.
(b) Providing procedures and criteria under which a facility may
receive an exception to the prospective payment rates; and
(c) Establishing procedures that a facility must follow to appeal
its payment amount under the prospective payment system.
Sec. 413.172 Principles of prospective payment.
(a) Payments for outpatient maintenance dialysis are based on rates
set prospectively by HCFA.
(b) All approved ESRD facilities must accept the prospective
payment rates established by HCFA as payment in full for covered
outpatient maintenance dialysis.
(c) HCFA publishes the methodology used to establish payment rates
and the changes specified in Sec. 413.196(b) in the Federal Register.
Sec. 413.174 Prospective rates for hospital-based and independent ESRD
facilities.
(a) Establishment of rates. HCFA establishes prospective payment
rates for ESRD facilities using a methodology that--
(1) Differentiates between hospital-based facilities and
independent ESRD facilities;
(2) Effectively encourages efficient delivery of dialysis services;
and
(3) Provides incentives for increasing the use of home dialysis.
(b) Determination of independent facility. For purposes of rate-
setting and payment under this section, HCFA considers any facility
that does not meet all of the criteria of a hospital-based facility to
be an independent facility. A determination under this paragraph (b) is
an initial determination under Sec. 498.3 of this chapter.
(c) Determination of hospital-based facility. A determination under
this paragraph (c) is an initial determination under Sec. 498.3 of this
chapter. For purposes of rate-setting and payment under this section,
HCFA determines that a facility is hospital-based if the--
(1) Facility and hospital are subject to the bylaws and operating
decisions of a common governing board. This governing board, which has
final administrative responsibility, approves all personnel actions,
appoints medical staff, and carries out similar management functions;
(2) Facility's director or administrator is under the supervision
of the hospital's chief executive officer and reports through him or
her to the governing board;
(3) Facility personnel policies and practices conform to those of
the hospital;
(4) Administrative functions of the facility (for example, records,
billing, laundry, housekeeping, and purchasing) are integrated with
those of the hospital; and
(5) Facility and hospital are financially integrated, as evidenced
by the cost report, which reflects allocation of overhead to the
facility through the required step-down methodology.
(d) Nondetermination of hospital-based facility. In determining
whether a facility is hospital-based, HCFA does not consider--
(1) An agreement between a facility and a hospital concerning
patient referral;
(2) A shared service arrangement between a facility and a hospital;
or
(3) The physical location of a facility on the premises of a
hospital.
(e) Add-on amounts. If all the physicians furnishing services to
patients in an ESRD facility elect the initial method of payment (as
described in Sec. 414.313(c) of this chapter), the prospective rate (as
described in paragraph (a) of this section) paid to that facility is
increased by an add-on amount as described in Sec. 414.313.
(f) Erythropoietin/Epoietin (EPO). (1) When EPO is furnished to an
ESRD patient by a Medicare-approved ESRD facility or a supplier of home
dialysis equipment and supplies, payment is based on the amount
specified in paragraph (f)(3) of this section.
(2) The payment is made only on an assignment basis, that is,
directly to the facility or supplier, which must accept, as payment in
full, the amount that HCFA determines.
(3) HCFA determines the payment amount in accordance with the
following rules:
(i) The amount is prospectively determined, as specified in section
1881(b)(11)(B)(ii) of the Act, reviewed and adjusted by HCFA, as
necessary, and paid to hospital-based and independent dialysis
facilities and to suppliers of home dialysis equipment and supplies,
regardless of the location of the facility, supplier, or patient.
(ii) If HCFA determines that an adjustment to the payment amount is
necessary, HCFA publishes a Federal Register notice proposing a
revision to the EPO payment amount and requesting public comment.
(iii) Any increase in this amount for a year does not exceed the
percentage increase (if any) in the implicit price deflator for gross
national product (as published by the Department of Commerce) for the
second quarter of the preceding year over the implicit price deflator
for the second quarter of the second preceding year.
(iv) The Medicare payment amount is subject to the Part B
deductible and coinsurance.
(g) Additional payment for certain drugs. In addition to the
prospective payment described in this section, HCFA makes an additional
payment for certain drugs furnished to ESRD patients by a Medicare-
approved ESRD facility. HCFA makes this payment
[[Page 43669]]
directly to the ESRD facility. The facility must accept the allowance
determined by HCFA as payment in full. Payment for these drugs is made
as follows:
(1) Hospital-based facilities. HCFA makes payments in accordance
with the cost reimbursement rules set forth in this part.
(2) Independent facilities. HCFA makes payment in accordance with
the methodology set forth in Sec. 405.517 of this chapter for paying
for drugs that are not paid on a cost or prospective payment basis.
Sec. 413.176 Amount of payments.
(a) If the beneficiary has incurred the full deductible applicable
under Part B of Medicare before the dialysis treatment, the
intermediary pays the facility 80 percent of its prospective payment
rate.
(b) If the beneficiary has not incurred the full deductible
applicable under Part B of Medicare before the dialysis treatment, the
intermediary subtracts the amount applicable to the deductible from the
facility's prospective rate and pays the facility 80 percent of the
remainder, if any.
Sec. 413.178 Bad debts.
(a) HCFA will reimburse each facility its allowable Medicare bad
debts, as defined in Sec. 413.80(b), up to the facility's costs, as
determined under Medicare principles, in a single lump sum payment at
the end of the facility's cost reporting period.
(b) A facility must attempt to collect deductible and coinsurance
amounts owed by beneficiaries before requesting reimbursement from HCFA
for uncollectible amounts. Section 413.80 specifies the collection
efforts facilities must make.
(c) A facility must request payment for uncollectible deductible
and coinsurance amounts owed by beneficiaries by submitting an itemized
list that specifically enumerates all uncollectable amounts related to
covered services under the composite rate.
Sec. 413.180 Procedures for requesting exceptions to payment rates.
(a) Outpatient maintenance dialysis payments. All payments for
outpatient maintenance dialysis furnished at or by facilities are made
on the basis of prospective payment rates.
(b) Criteria for requesting an exception. If a facility projects on
the basis of prior year costs and utilization trends that it will have
an allowable cost per treatment higher than its prospective rate set
under Sec. 413.174, and if these excess costs are attributable to one
or more of the factors in Sec. 413.182, the facility may request, in
accordance with paragraph (d) of this section, that HCFA approve an
exception to that rate and set a higher prospective payment rate.
However, a facility may only request an exception or seek to retain its
previously approved exception rate when authorized under the conditions
specified in paragraphs (d) and (e) of this section.
(c) Application of deductible and coinsurance. The higher payment
rate is subject to the application of deductible and coinsurance in
accordance with Sec. 413.176.
(d) Payment rate exception request. A facility must request an
exception to its payment rate within 180 days of--
(1) The effective date of its new composite payment rate(s);
(2) The effective date that HCFA opens the exceptions process; or
(3) The date on which an extraordinary cost-increasing event
occurs, as specified (or provided for) in Secs. 413.182(c) and 413.188.
(e) Criteria for retaining a previously approved exception rate. A
facility may elect to retain its previously approved exception rate in
lieu of any composite rate increase or any other exception amount if--
(1) The conditions under which the exception was granted have not
changed;
(2) The facility files a request to retain the rate with its fiscal
intermediary during the 30-day period before the opening of an
exception cycle; and
(3) The request is approved by the fiscal intermediary.
(f) Documentation for a payment rate exception request. If the
facility is requesting an exception to its payment rate, it must submit
to HCFA its most recently completed cost report as required under
Sec. 413.198 and whatever statistics, data, and budgetary projections
as determined by HCFA to be needed to adjudicate each type of
exception. HCFA may audit any cost report or other information
submitted. The materials submitted to HCFA must--
(1) Separately identify elements of cost contributing to costs per
treatment in excess of the facility's payment rate;
(2) Show that the facility's costs, including those costs that are
not directly attributable to the exception criteria, are allowable and
reasonable under the reasonable cost principles set forth in this part;
(3) Show that the elements of excessive cost are specifically
attributable to one or more conditions specified in Sec. 413.182;
(4) Specify the amount of additional payment per treatment the
facility believes is required for it to recover its justifiable excess
costs; and
(5) Specify that the facility has compared its most recently
completed cost report with cost reports from (at least 2) prior years.
The facility must explain any material statistical data or cost
changes, or both, and include an explanation with the documentation
supporting the exception request.
(g) Completion of requirements and criteria. The facility must
demonstrate to HCFA's satisfaction that the requirements of this
section and the criteria in Sec. 413.182 are fully met. The burden of
proof is on the facility to show that one or more of the criteria are
met and that the excessive costs are justifiable under the reasonable
cost principles set forth in this part.
(h) Approval of an exception request. An exception request is
deemed approved unless it is disapproved within 60 working days after
it is filed with its intermediary.
(i) Determination of an exception request. In determining the
facility's payment rate under the exception process, HCFA excludes all
costs that are not reasonable or allowable under the reasonable cost
principles set forth in this part.
(j) Period of approval: Payment exception request. Except for
exceptions approved under Secs. 413.180(e), 413.180(k), 413.182(c), and
413.188, a prospective exception payment rate approved by HCFA applies
for the period from the date the complete exception request was filed
with its intermediary until the earlier of the--
(1) Date the circumstances justifying the exception rate no longer
exist; or
(2) End of the period during which the announced rate was to apply.
(k) Period of approval: Payment exception request under
Secs. 413.182(c) and 413.188. A prospective exception payment rate
approved by HCFA under Secs. 413.182(c) and 413.188 applies from the
date of the extraordinary event until the end of the period during
which the prospective announced rate was to apply, unless HCFA
determines that another date is more appropriate. If HCFA does not
extend the exception period and the facility believes that it continues
to require an exception to its rate, the facility must reapply in
accordance with the procedures in this section.
(l) Denial of an exception request. HCFA denies exception requests
submitted without the documentation specified in Sec. 413.182 and the
applicable regulations cited there.
[[Page 43670]]
(m) Criteria for refiling a denied exception request. A facility
that has been denied an exception request during the 180 days may file
another exception request if all required documentation is filed with
the intermediary by the 180th day.
Sec. 413.182 Criteria for approval of exception requests.
HCFA may approve exceptions to an ESRD facility's prospective
payment rate if the facility demonstrates, by convincing objective
evidence, that its total per treatment costs are reasonable and
allowable under the relevant cost reimbursement principles of part 413
and that its per treatment costs in excess of its payment rate are
directly attributable to any of the following criteria:
(a) Atypical service intensity (patient mix), as specified in
Sec. 413.184.
(b) Isolated essential facility, as specified in Sec. 413.186.
(c) Extraordinary circumstances, as specified in Sec. 413.188.
(d) Self-dialysis training costs, as specified in Sec. 413.190.
(e) Frequency of dialysis, as specified in Sec. 413.192.
Sec. 413.184 Payment exception: Atypical service intensity (patient
mix).
(a) To qualify for an exception to the prospective payment rate
based on atypical service intensity (patient mix)--
(1) A facility must demonstrate that a substantial proportion of
the facility's outpatient maintenance dialysis treatments involve
atypically intense dialysis services, special dialysis procedures, or
supplies that are medically necessary to meet special medical needs of
the facility's patients. Examples that may qualify under this criterion
are more intense dialysis services that are medically necessary for
patients such as--
(i) Patients who have been referred from other facilities on a
temporary basis for more intense care during a period of medical
instability and who return to the original facility after
stabilization;
(ii) Pediatric patients who require a significantly higher staff-
to-patient ratio than typical adult patients; or
(iii) Patients with medical conditions that are not commonly
treated by ESRD facilities and that complicate the dialysis procedure.
(2) The facility must demonstrate clearly that these services,
procedures, or supplies and its per treatment costs are prudent and
reasonable when compared to those of facilities with a similar patient
mix.
(3) A facility must demonstrate that--
(i) Its nursing personnel costs have been allocated properly
between each mode of care; and
(ii) The additional nursing hours per treatment are not the result
of an excess number of employees.
(b) Documentation. (1) A facility must submit a listing of all
outpatient dialysis patients (including all home patients) treated
during the most recently completed fiscal or calendar year showing--
(i) Patients who received transplants, including the date of
transplant;
(ii) Patients awaiting a transplant who are medically able, have
given consent, and are on an active transplant list, and projected
transplants;
(iii) Home patients;
(iv) In-facility patients, staff-assisted, or self-dialysis;
(v) Individual patient diagnosis;
(vi) Diabetic patients;
(vii) Patients isolated because of contagious disease;
(viii) Age of patients;
(ix) Mortality rate, by age and diagnosis;
(x) Number of patient transfers, reasons for transfers, and any
related information; and
(xi) Total number of hospital admissions for the facility's
patients, reason for, and length of stay of each session.
(2) The facility also must--
(i) Submit documentation on costs of nursing personnel (registered
nurses, licensed practical nurses, technicians, and aides) incurred
during the most recently completed fiscal year cost report showing--
(A) Amount each employee was paid;
(B) Number of personnel;
(C) Amount of time spent in the dialysis unit; and
(D) Staff-to-patient ratio based on total hours, with an analysis
of productive and nonproductive hours.
(ii) Submit documentation on supply costs incurred during the most
recently completed fiscal or calendar year cost report showing--
(A) By modality, a complete list of supplies used routinely in a
dialysis treatment;
(B) The make and model number of each dialyzer and its component
cost; and
(C) That supplies are prudently purchased (for example, that bulk
discounts are used when available).
(iii) Submit documentation on overhead costs incurred during the
most recently completed fiscal or calendar year cost reporting year
showing--
(A) The basis of the higher overhead costs;
(B) The impact on the specific cost components; and
(C) The effect on per treatment costs.
Sec. 413.186 Payment exception: Isolated essential facility.
(a) Qualifications. To qualify for an exception to the prospective
payment rate based on being an isolated essential facility--
(1) The facility must be the only supplier of dialysis in its
geographical area;
(2) The facility's patients must be unable to obtain dialysis
services elsewhere without substantial additional hardship; and
(3) The facility's excess costs must be justifiable.
(b) Criteria for determining qualifications. In determining whether
a facility qualifies for an exception based on its being an isolated
essential facility, HCFA considers--
(1) Local, permanent residential population density;
(2) Typical local commuting distances from medical services;
(3) Volume of treatments; and
(4) The extent that other dialysis facilities are used by area
residents (other than the applying facility's patients).
(c) Documentation. (1) Isolated. Generally, to be considered
isolated, the facility must document that it is located outside an
established Metropolitan Statistical Area and provides dialysis to a
permanent patient population, as opposed to a transient patient
population.
(2) Essential. To be considered essential, the facility must
document--
(i) That a substantial number of its patients cannot obtain
dialysis services elsewhere without additional hardship; and
(ii) The additional hardship the patients will incur in travel time
and cost.
(3) Cost per treatment. The facility must--
(i) Document that its cost per treatment is reasonable; and
(ii) Explain how the facility's cost per treatment in excess of its
composite rate relates to the isolated essential facility criteria
specified in paragraph (b) of this section.
(4) Additional information. The facility must also furnish the
following information in a format that concisely explains the
facility's cost and patient data to support its request:
(i) A list of current and requested payment rates for each
modality.
(ii) An explanation of how the facility's costs in excess of its
composite rate payment are attributable to its being an isolated
essential facility.
[[Page 43671]]
(iii) An explanation of any unusual geographic conditions in the
area surrounding the facility.
(iv) A copy of the latest filed cost report and a budget estimate
for the next 12 months prepared on cost report forms.
(v) An explanation of unusual costs reported on the facility's
actual or budgeted cost reports and any significant changes in budgeted
costs and data compared to actual costs and data reported on the latest
filed cost report.
(vi) The name, location of, and distance to the nearest renal
dialysis facility.
(vii) A list of patients by modality showing commuting distance and
time to the current and the next nearest renal dialysis facility.
(viii) The historical and projected patient-to-staff ratios and
number of machines used for maintenance dialysis treatments.
(ix) A computation showing the facility's treatment capacity,
arrived at by taking the total stations multiplied by the number of
hours of operation for the year divided by the average length of a
dialysis treatment.
(x) The geographic boundaries and population size of the facility's
service area.
Sec. 413.188 Payment exception: Extraordinary circumstances.
(a) To qualify for an exception to the prospective payment rate
based on extraordinary circumstances, the facility must substantiate
that it incurs excess costs beyond its control due to a fire,
earthquake, flood, or other natural disaster.
(b) HCFA will not grant an exception based on increased costs if a
facility has chosen not to--
(1) Maintain adequate insurance protection against such losses
(through the purchase of insurance, the maintenance of a self-insurance
program, or other equivalent alternative); or
(2) File a claim for losses covered by insurance or utilize its
self-insurance program.
Sec. 413.190 Payment exception: Self-dialysis training costs.
(a) Qualifications. To qualify for an exception to the prospective
payment rate based on self-dialysis training costs, the facility must
establish that it incurs per treatment costs for furnishing self-
dialysis and home dialysis training that exceed the facility's payment
rate for such training sessions.
(b) Justification. To justify its exception request, a facility
must--
(1) Separately identify those elements contributing to its costs in
excess of the composite training rate; and
(2) Demonstrate that its per treatment costs are reasonable and
allowable.
(c) Criteria for determining proper cost reporting. HCFA considers
the facility's total costs, cost finding and apportionment, including
its allocation of costs, to determine if costs are properly reported by
treatment modality.
(d) Limitation of exception requests. Exception requests for a
higher training rate are limited to those cost components relating to
training such as technical staff, medical supplies, and the special
costs of education (manuals and education materials). These requests
may include overhead and other indirect costs to the extent that these
costs are directly attributable to the additional training costs.
(e) Documentation. The facility must provide the following
information to support its exception request:
(1) A copy of the facility's training program.
(2) Computation of the facility's cost per treatment for
maintenance sessions and training sessions including an explanation of
the cost difference between the two modalities.
(3) Class size and patients' training schedules.
(4) Number of training sessions required, by treatment modality, to
train patients.
(5) Number of patients trained for the current year and the prior 2
years on a monthly basis.
(6) Projection for the next 12 months of future training
candidates.
(7) The number and qualifications of staff at training sessions.
(f) Accelerated training exception. (1) An ESRD facility may bill
Medicare for a dialysis training session only when a patient receives a
dialysis treatment (normally three times a week for hemodialysis).
Continuous cycling peritoneal dialysis (CCPD) and continuous ambulatory
peritoneal dialysis (CAPD) are daily treatment modalities; ESRD
facilities are paid the equivalent of three hemodialysis treatments for
each week that CCPD and CAPD treatments are provided.
(2) If an ESRD facility elects to train all its patients using a
particular treatment modality more often than during each dialysis
treatment and, as a result, the number of billable training dialysis
sessions is less than the number of actual training sessions, the
facility may request a composite rate exception, limited to the lesser
of the--
(i) Facility's projected training cost per treatment; or
(ii) Cost per treatment the facility would have received in
training a patient if it had trained patients only during a dialysis
treatment, that is, three times per week.
(3) An ESRD facility may bill a maximum of 25 training sessions per
patient for hemodialysis training and 15 sessions for CCPD and CAPD
training.
(4) In computing the payment amount under an accelerated training
exception, HCFA uses a minimum number of training sessions per patient
(15 for hemodialysis and 5 for CAPD and CCPD) when the facility
actually provides fewer than the minimum number of training sessions.
(5) To justify an accelerated training exception request, an ESRD
facility must document that a significant number of training sessions
for a particular modality are provided during a shorter but more
condensed period.
(6) The facility must submit with the exception request a list of
patients, by modality, trained during the most recent cost report
period. The list must include each beneficiary's--
(i) Name;
(ii) Age; and
(iii) Training status (completed, not completed, being retrained,
or in the process of being trained).
(7) The total treatments from the patient list must be the same as
the total treatments reported on the cost report filed with the
request.
Sec. 413.192 Payment exception: Frequency of dialysis.
(a) Qualification. To qualify for an exception to the prospective
payment rate based on frequency of dialysis, the facility must
establish that it has a substantial portion of outpatient maintenance
dialysis treatments furnished to patients who dialyze less frequently
than three times per week.
(b) Definition. For purposes of this section, ``substantial'' means
the number of treatments furnished by the facility is at least 15
percent lower than the number would be if all patients dialyzed three
times a week.
(c) Limitation for per treatment payment rates. Per treatment
payment rates granted under this exception may not exceed the amount
that produces weekly payments per patient equal to three times the
facility's prospective composite rate, exclusive of any exception
amounts.
(d) Documentation. To document that an ESRD facility furnishes a
substantial number of dialysis treatments at a frequency less than
three times per week per patient, the facility must submit the
following information:
(1) A list of patients receiving outpatient dialysis treatments for
the
[[Page 43672]]
cost report that is filed with the request. The list must indicate--
(i) Whether the patients are permanent, transient, or temporary;
(ii) The medically prescribed frequency of dialysis; and
(iii) The number of dialysis treatments that each patient received
on a weekly and yearly basis and an explanation of any discrepancy
between that calculation and the number of treatments reported on the
facility's cost report.
(2) A list of patients used to project treatments. The list must
indicate--
(i) Whether the patients are permanent, transient, or temporary;
(ii) The medically prescribed frequency of dialysis;
(iii) The number of dialysis treatments that each patient is
projected to receive on a weekly and yearly basis, an explanation of
any discrepancy between that calculation and the number of treatments
reported on the facility's projected cost report, and an explanation
for any change among prior, actual, and projected data.
(3) A schedule showing the number of treatments to be furnished
twice a week and the number of treatments that would have been
furnished if each patient were dialyzed three times a week.
(4) A computation of the facility's projected costs per treatment
using the--
(i) Projected number of treatments furnished twice a week; and
(ii) Number of treatments if patients dialyze three times a week.
(5) A schedule showing the computation of the percentage decrease
in the number of treatments.
Sec. 413.194 Appeals.
(a) Appeals under section 1878 of the Act. (1) A facility that
disputes the amount of its allowable Medicare bad debts reimbursed by
HCFA under Sec. 413.178 may request review by the intermediary or the
Provider Reimbursement Review Board (PRRB) in accordance with subpart R
of part 405 of this chapter.
(2) A facility must request and obtain a final agency decision
prior to seeking judicial review of a dispute regarding the amount of
allowable Medicare bad debts.
(b) Other appeals. (1) A facility that has requested higher payment
per treatment in accordance with Sec. 413.180 may request review from
the intermediary or the PRRB if HCFA has denied the request in whole or
in part. In such a case, the procedure in subpart R of part 405 of this
chapter is followed to the extent that it is applicable.
(2) The PRRB has the authority to review the action taken by HCFA
on the facility's requests. However, the PRRB's decision is subject to
review by the Administrator under Sec. 405.1875 of this chapter.
(3) A facility must request and obtain a final agency decision, in
accordance with paragraph (b)(1) of this section, prior to seeking
judicial review of the denial, in whole or in part, of the exception
request.
(c) Procedure. (1) The facility must request review within 180 days
of the date of the decision on which review is sought.
(2) The facility may not submit to the reviewing entity, whether it
is the intermediary or the PRRB, any additional information or cost
data that had not been submitted to HCFA at the time HCFA evaluated the
exception request.
(d) Determining amount in controversy. For purposes of determining
PRRB jurisdiction under subpart R of part 405 of this chapter for the
appeals described in paragraph (b) of this section--
(1) The amount in controversy per treatment is determined by
subtracting the amount of program payment from the amount the facility
requested under Sec. 413.180; and
(2) The total amount in controversy is calculated by multiplying
the amount in controversy per treatment by the projected number of
treatments for the exception request period.
Sec. 413.196 Notification of changes in rate-setting methodologies and
payment rates.
(a) HCFA or the facility's intermediary notifies each facility of
changes in its payment rate. This notice includes changes in individual
facility payment rates resulting from corrections or revisions of
particular geographic labor cost adjustment factors.
(b) Changes in payment rates resulting from incorporation of
updated cost data or general revisions of geographic labor cost
adjustment factors are announced by notice published in the Federal
Register without opportunity for prior comment. Revisions of the rate-
setting methodology are published in the Federal Register in accordance
with the Department's established rulemaking procedures.
Sec. 413.198 Recordkeeping and cost reporting requirements for
outpatient maintenance dialysis.
(a) Purpose and Scope. This section implements section
1881(b)(2)(B)(i) of the Act by specifying recordkeeping and cost
reporting requirements for ESRD facilities approved under subpart U of
part 405 of this chapter. The records and reports will enable HCFA to
determine the costs incurred in furnishing outpatient maintenance
dialysis as defined in Sec. 413.170(a).
(b) Recordkeeping and reporting requirements. (1) Each facility
must keep adequate records and submit the appropriate HCFA-approved
cost report in accordance with Secs. 413.20 and 413.24, which provide
rules on financial data and reports, and adequate cost data and cost
finding, respectively.
(2) The cost reimbursement principles set forth in this part
(beginning with Sec. 413.134, Depreciation, and excluding the
principles listed in paragraph (b)(4) of this section), apply in the
determination and reporting of the allowable cost incurred in
furnishing outpatient maintenance dialysis treatments to patients
dialyzing in the facility, or incurred by the facility in furnishing
home dialysis service, supplies, and equipment.
(3) Allowable cost is the reasonable cost related to dialysis
treatments. Reasonable cost includes all necessary and proper expenses
incurred by the facility in furnishing the dialysis treatments, such as
administrative costs, maintenance costs, and premium payments for
employee health and pension plans. It includes both direct and indirect
costs and normal standby costs. Reasonable cost does not include costs
that--
(i) Are not related to patient care for outpatient maintenance
dialysis;
(ii) Are for services or items specifically not reimbursable under
the program;
(iii) Flow from the provision of luxury items or servicess (items
or services substantially in excess of or more expensive than those
generally considered necessary for the provision of needed health
services); or
(iv) Are found to be substantially out of line with other
institutions in the same area that are similar in size, scope of
services, utilization, and other relevant factors.
(4) The following principles of this part do not apply in
determining adjustments to allowable costs as reported by ESRD
facilities:
(i) Section 413.157, Return on equity capital of proprietary
providers;
(ii) Section 413.200, Reimbursement of OPAs and histocompatibility
laboratories;
(iii) Section 413.9, Cost related to patient care (except for the
principles stated in paragraph (b)(3) of this section); and
(iv) Sections 413.64, Payments to providers, and Secs. 413.13,
413.30, 413.35, 413.40, 413.74, and Secs. 415.55
[[Page 43673]]
through 415.70, Sec. 415.162, and Sec. 415.164 of this chapter,
Principles of reimbursement for services by hospital-based physicians.
Sec. 413.200 Payment of independent organ procurement organizations
and histocompatibility laboratories.
(a) Principle. Covered services furnished after September 30, 1978
by organ procurement organizations (OPOs) and histocompatibility
laboratories in connection with kidney acquisition and transplantation
will be reimbursed under the principles for determining reasonable cost
contained in this part. Services furnished by freestanding OPOs and
histocompatibility laboratories, that have an agreement with the
Secretary in accordance with paragraph (c) of this section, will be
reimbursed by making an interim payment to the transplant hospitals
using these services and by making a retroactive adjustment, directly
with the OPO or laboratory, based upon a cost report filed by the OPO
or laboratory. (The reasonable costs of services furnished by hospital
based OPOs or laboratories will be reimbursed in accordance with the
principles contained in Secs. 413.60 and 413.64.)
(b) Definitions. For purposes of this section:
Freestanding refers to an OPO or a histocompatibility laboratory
that is not--
(1) Subject to the control of the hospital with respect to the
hiring, firing, training, and paying of employees; and
(2) Considered as a department of the hospital for insurance
purposes (including malpractice insurance, general liability insurance,
worker's compensation insurance, and employee retirement insurance).
Histocompatibility laboratory means a laboratory meeting the
standards and providing the services for kidneys or other organs set
forth in Sec. 413.2171(d) of this chapter.
OPO means an organization defined in Sec. 486.302 of this chapter.
(c) Agreements with independent OPOs and laboratories. (1) Any
freestanding OPO or histocompatibility laboratory that wishes to have
the cost of its pretransplant services reimbursed under the Medicare
program must file an agreement with HCFA under which the OPO or
laboratory agrees--
(i) To file a cost report in accordance with Sec. 413.24(f) within
three months after the end of each fiscal year;
(ii) To permit HCFA to designate an intermediary to determine the
interim reimbursement rate payable to the transplant hospitals for
services provided by the OPO or laboratory and to make a determination
of reasonable cost based upon the cost report filed by the OPO or
laboratory;
(iii) To provide such budget or cost projection information as may
be required to establish an initial interim reimbursement rate;
(iv) To pay to HCFA amounts that have been paid by HCFA to
transplant hospitals and that are determined to be in excess of the
reasonable cost of the services provided by the OPO or laboratory; and
(v) Not to charge any individual for items or services for which
that individual is entitled to have payment made under section 1861 of
the Act.
(2) The initial cost report due from an OPO or laboratory is for
its first fiscal year during any portion of which it had an agreement
with the Secretary under paragraphs (c) (1) and (2) of this section.
The initial cost report covers only the period covered by the
agreement.
(d) Interim reimbursement. (1) Hospitals eligible to receive
Medicare reimbursement for renal transplantation will be paid for the
pretransplantation services of a freestanding OPO or histocompatibility
laboratory that has an agreement with the Secretary under paragraph (c)
of this section, on the basis of an interim rate established by an
intermediary for that OPO or laboratory.
(2) The interim rate will be based on the average cost per service
incurred by an OPO or laboratory, during its previous fiscal year,
associated with procuring a kidney for transplantation. This interim
rate may be adjusted if necessary for anticipated cost changes. If
there is not adequate cost data to determine the initial interim rate,
it will be determined according to the OPO's or laboratory's estimate
of its projected costs for the fiscal year.
(3) Payments made on the basis of the interim rate will be
reconciled directly with the OPO or laboratory after the close of its
fiscal year, in accordance with paragraph (e) of this section.
(4) Information on the interim rate for all freestanding OPOs and
histocompatibility laboratories shall be disseminated to all transplant
hospitals and intermediaries.
(e) Retroactive adjustment. (1) Cost reports. Information provided
in cost reports by freestanding OPOs and histocompatibility
laboratories must meet the requirements for cost data and cost finding
specified in paragraphs (a) through (e) of Sec. 413.24. These cost
reports must provide a complete accounting of the cost incurred by the
agency or laboratory in providing covered services, the total number of
Medicare beneficiaries who received those services, and any other data
necessary to enable the intermediary to make a determination of the
reasonable cost of covered services provided to Medicare beneficiaries.
(2) Audit and adjustment. A cost report submitted by a freestanding
OPO or histocompatibility laboratory will be reviewed by the
intermediary and a new interim reimbursement rate for the succeeding
fiscal year will be established based upon this review. A retroactive
adjustment in the amount paid under the interim rate will be made in
accordance with Sec. 413.64(f). If the determination of reasonable cost
reveals an overpayment or underpayment resulting from the interim
reimbursement rate paid to transplant hospitals, a lump sum adjustment
will be made directly between that intermediary and the OPO or
laboratory.
(f) For services furnished on or after April 1, 1988, no payment
may be made for services furnished by an OPO that does not meet the
requirements of part 485, subpart D of this chapter.
(g) Appeals. Any OPO or histocompatibility laboratory that
disagrees with an intermediary's cost determination under this section
is entitled to an intermediary hearing, in accordance with the
procedures contained in Secs. 405.1811 through 405.1833, if the amount
in controversy is $1,000 or more.
Sec. 413.202 Organ procurement organization (OPO) cost for kidneys
sent to foreign countries or transplanted in patients other than
Medicare beneficiaries.
An OPO's total costs for all kidneys is reduced by the costs
associated with procuring kidneys sent to foreign transplant centers or
transplanted in patients other than Medicare beneficiaries. OPOs, as
defined in Sec. 435.302 of this chapter, must separate costs for
procuring kidneys that are sent to foreign transplant centers and
kidneys transplanted in patients other than Medicare beneficiaries from
Medicare allowable costs prior to final settlement by the Medicare
fiscal intermediaries. Medicare costs are based on the ratio of the
number of usable kidneys transplanted into Medicare beneficiaries to
the total number of usable kidneys applied to reasonable costs. Certain
long-standing arrangements that existed before March 3, 1988 (for
example, an OPO that procures kidneys at a military transplant hospital
for transplant at that hospital), will be deemed to be Medicare kidneys
for cost reporting statistical purposes. The OPO must submit a request
to the
[[Page 43674]]
fiscal intermediary for review and approval of these arrangements.
Sec. 413.203 Transplant center costs for organs sent to foreign
countries or transplanted in patients other than Medicare
beneficiaries.
(a) A transplant center's total costs for all organs is reduced by
the costs associated with procuring organs sent to foreign transplant
centers or transplanted in patients other than Medicare beneficiaries.
Organs are defined in Sec. 486.302 (only covered organs will be paid
for on a reasonable cost basis).
(b) Transplant center hospitals must separate costs for procuring
organs that are sent to foreign transplant centers and organs
transplanted in patients other than Medicare beneficiaries from
Medicare allowable costs prior to final cost settlement by the Medicare
fiscal intermediaries.
(c) Medicare costs are based on the ratio of the number of usable
organs transplanted into Medicare beneficiaries to the total number of
usable organs applied to reasonable costs.
C. Part 414 is amended as follows:
PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
1. The authority citation for part 414 continues to read as
follows:
Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).
Subpart E--Determination of Reasonable Charges Under the ESRD
Program
Sec. 414.313 [Amended]
2. In Sec. 414.313(a), the reference ``in Sec. 413.170 of this
chapter'' is revised to read ``in part 413, subpart H of this
subchapter''.
Sec. 414.314 [Amended]
3. In Sec. 414.314(a)(5), the reference ``(Sec. 413.170)'' is
revised to read ``(part 413, subpart H of this subchapter)''.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: June 7, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 97-21444 Filed 8-14-97; 8:45 am]
BILLING CODE 4120-01-P
