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Statement of Need: Section 1881(b)(1) of the Social Security Act stipulates that payment is made to individuals, providers of services, and renal dialysis facilities that meet the requirements for institutional dialysis services and supplies that are determined by the Secretary. These requirements are the end-stage renal disease (ESRD) conditions for coverage. ^POur decision to propose major changes to the existing conditions is based on several considerations. Revising the ESRD requirements is part of HCFA's effort to move toward a patient outcome-based system that focuses on quality assessment and performance improvement. We believe that revising the conditions will encourage improved outcomes of care for beneficiaries. The ESRD conditions for coverage have not been comprehensively revised since their inception in 1976. The existing requirements emphasize the policies and procedures that must be in place to support good patient care, and they focus on a facility's capacity to furnish care rather than on the actual provision of quality care to patients and the outcomes of that care. ^PDuring the 1980's and early 1990's major changes took place in the delivery of services to dialysis patients, and these advances are not reflected in the existing requirements. Thus we have concluded that significant revisions to the conditions for coverage for ESRD facilities are essential. The regulation would have an emphasis on the patient's total experience with dialysis. The proposed changes, which were undertaken in a collaborative effort with the renal community, reflect improvements in standard care practices, the use of more advanced technology and equipment, and, most notably, the adoption of quantifiable performance measures that are viewed in the renal community to be related, at least in part, to the quality of care provided to dialysis patients. ^PFollowing publication of the proposed rule, we will consult further with the industry.

Summary of the Legal Basis: Section 1881(b)(1) of the Act authorizes the Secretary to prescribe health and safety requirements (known as conditions for coverage) that a facility providing dialysis and transplantation services to dialysis patients must meet to qualify for Medicare reimbursement. In addition, section 1881(c) of the Act establishes ESRD network areas and network organizations to assure that dialysis patients are provided appropriate care. The requirements from section 1881(b) and (c) are implemented in regulations at 42 CFR part 405, subpart U, Conditions for Coverage for ESRD Facilities. ^PSection 1138(b)(1)(D) of the Act requires hospitals to be members and abide by the rules and requirements of the Organ Procurement and Transplant Network. Section 1861(s)(2)(F) of the Act describes "medical and other health services" covered under Medicare to include home dialysis supplies and equipment, self-care home dialysis support services, and institutional dialysis services and supplies, and section 1862(a) of the Act specifies the exclusions from coverage. ^PSection 1869(e)(9) of the Act requires hospitals to meet such other requirements as the Secretary finds necessary in the interest of health and safety of individuals who are furnished services in the institution.

Alternatives: In the past, HCFA has revised sections of the ESRD regulations. However, we have determined that a complete and thorough revision would be a more effective mechanism for developing a comprehensive approach to quality care for the dialysis patient. In addition, this approach provides greater potential for successful implementation. Another option is to update the current regulations and maintain the process-oriented standards without focusing on patient outcome. However, for the reasons discussed, we believe it is important to move forward with a proposed regulation that is patient-centered and intended to stimulate improvements in processes and outcomes of care.

Anticipated Costs and Benefits: The purpose of this proposed rule is to ensure that ESRD beneficiaries are receiving quality care dialysis and transplantation. We believe that revised regulations are necessary to ensure that all facilities are using the most effective technology and equipment. The primary benefit of updating the conditions for coverage is the development of performance expectations for the facility that would result in the comprehensive, integrated care and outcomes the patient needs and wants. As a result, the beneficiaries would receive an improved quality of care. The revised regulations would also address the issue of adequacy of dialysis, which would have a significant impact on ensuring that patients are not being under-dialysised. ^PItems that have the potential to affect the cost of the ESRD program include data gathering, infection control, and achieving the specified outcome measure. However, at this time the cost or savings to the Medicare program have not yet been established, but costs should not be significant.

Risks: If the ESRD conditions are not updated, our regulations will not reflect new developments in the industry, thereby denying the improved protections to patients' health care that would result from this proposed rule.