[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR413.174]

[Page 650-651]
 
                         TITLE 42--PUBLIC HEALTH
 
                    CHAPTER IV--CENTERS FOR MEDICARE
                          & MEDICAID SERVICES,
                        DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES
 
 PART 413_PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
 
Subpart H_Payment for End-Stage Renal Disease (ESRD) Services and Organ 
                            Procurement Costs
 
Sec. 413.174  Prospective rates for hospital-based and independent ESRD 
facilities.

    (a) Establishment of rates. CMS 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, CMS 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, 
CMS determines that a facility is hospital-based if the--

[[Page 651]]

    (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, CMS 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 CMS determines.
    (3) CMS 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 CMS, 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 CMS determines that an adjustment to the payment amount is 
necessary, CMS 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, CMS makes an additional 
payment for certain drugs furnished to ESRD patients by a Medicare-
approved ESRD facility. CMS makes this payment directly to the ESRD 
facility. The facility must accept the allowance determined by CMS as 
payment in full. Payment for these drugs is made as follows:
    (1) Hospital-based facilities. CMS makes payments in accordance with 
the cost reimbursement rules set forth in this part.
    (2) Independent facilities. CMS 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.