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ESRD Prospective Payment System (PPS) Overview

ESRD Prospective Payment System (PPS) Base Rate

ESRD Prospective Payment System (ESRD PPS) – Section 153(b) of Pub. L. 110-275, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended section 1881(b) of the Social Security Act to require the implementation of an ESRD bundled payment system effective January 1, 2011. Under MIPPA, the ESRD PPS replaced the previous basic case-mix adjusted composite payment system and the methodologies for the reimbursement of separately billable outpatient ESRD-related items and services. The ESRD PPS provides a case-mix adjusted single payment to ESRD facilities for renal dialysis services provided in an ESRD facility or in a beneficiary’s home.

Renal dialysis services are all items and services used to furnish outpatient maintenance dialysis in the ESRD facility or in a patient’s home.

Renal dialysis services include but are not limited to:

  • All items and services included under the composite rate as of December 31, 2010;
  • Erythropoiesis stimulating agents (ESAs) and their oral or other forms of administration that are for renal dialysis services;
  • Injectable drugs and biologicals and their oral or other forms of administration that are for renal dialysis services;
  • Oral or other forms of non-injectable drugs and biologicals that are renal dialysis services;
  • Diagnostic laboratory tests that are renal dialysis services;
  • Home and self-dialysis training; and
  • All supplies, equipment, and support services necessary for the effective performance of a patient’s dialysis furnished in the ESRD facility or in a patient’s home.

Per Treatment Basis

Under the ESRD PPS payment is made on a per treatment basis. The ESRD PPS base rate is the per treatment unit of payment that applies to both adult and pediatric patients.  ESRD facilities furnishing dialysis treatments in-facility and in a patient’s home, regardless of modality, are paid for up to 3 treatments per week, unless there is medical justification for more than 3 weekly treatments.  Meaning, ESRD facilities furnishing dialysis in-facility or in a patient’s home, regardless of modality, are paid for a maximum of 13 treatments during a 30 day month and 14 treatments during a 31 day month unless there is medical justification for additional treatments.

Market Basket Update

CMS updates on an annual basis, the ESRD PPS base rate by the ESRD bundled market basket percentage increase factor minus a productivity adjustment factor.

ESRD PPS Case-Mix Adjustments

The ESRD PPS includes patient-level adjustments (also known as the case-mix adjustments), facility-level adjustments, and training adjustments, as well as an outlier payment. Under the ESRD PPS, the beneficiary co-insurance amount is 20 percent of the total ESRD PPS payment, after the deductible.

Patient-level case-mix adjustments

The ESRD PPS base rate is adjusted for characteristics of both adult and pediatric patients to account for case-mix variability. The adult case-mix adjusters include variables (age, body surface area (BSA), and low body mass index (BMI)) that have been part of the basic case-mix adjusted composite rate payment system. In addition, the ESRD PPS includes adult case-mix adjustments for six co-morbidity categories (three acute and three chronic) as well as the onset of renal dialysis. Pediatric patient-level adjusters consist of combinations of two age categories and two dialysis modalities.

Onset of Dialysis

An ESRD facility may only receive the onset of dialysis adjustment for adult Medicare ESRD beneficiaries. The onset period is defined as the initial 120 days of outpatient maintenance dialysis, which is designated by the first date regular chronic dialysis began as reported on the CMS Form 2728. The onset of dialysis adjustment factor is a multiplier used in the calculation of the ESRD PPS per treatment payment amount for dialysis furnished in either an ESRD facility or home setting.

Facility-level adjustments

There are two facility-level adjustments in the ESRD PPS. The first adjustment accounts for ESRD facilities furnishing a low-volume of dialysis treatments. The second adjustment reflects urban and rural differences in area wage levels using an area wage index developed from Core Based Statistical Areas (CBSAs).

Training Add-on

The training add-on payment is computed by using the national average hourly wage for nurses from the Bureau of Labor Statistics. The payment accounts for nursing time for each training treatment that is furnished and is adjusted by the geographic area wage index. The training add-on payment applies to both peritoneal dialysis and hemodialysis training treatments. This amount will be added to the ESRD PPS payment, each time a training treatment is provided by the Medicare certified training ESRD facility.

Outlier Policy

The ESRD PPS provides additional payment for high cost outliers due to unusual variations in the type or amount of medically necessary care when applicable. Outlier payments are based on a comparison of the predicted Medicare allowable payment (MAP) per treatment to actual incurred expenditure per treatment for services which were or would have been considered separately billable prior to the implementation of the ESRD PPS. ESRD outlier services include:

  • Renal dialysis services that include drugs and biologicals that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B;
  • Renal dialysis services that include  laboratory tests that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B;
  • Medical or surgical supplies used to administer a renal dialysis service drugs that were or would have been, prior to January 1, 2011, separately billable under Medicare Part B; and
  • Renal dialysis services that were or would have been, prior to January 1, 2011, separately billable under Part D. Implementation of ESRD-related oral-only drugs, that is oral drugs that do not have an injectable equivalent, has been delayed until January 1, 2024.

The list of ESRD-related outlier services may be found at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Outlier_Services.html.

Consolidated Billing

The ESRD PPS implemented consolidated billing requirements for limited ESRD-related Part B items and services. Certain  laboratory services that are a renal dialysis service, limited drugs and biologicals, equipment, and supplies are subject to consolidated billing and no longer separately payable when provided to ESRD beneficiaries by providers other than the ESRD facility. The list of drugs and biologicals used for the ESRD PPS consolidated billing may be viewed at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Consolidated_Billing.html. Note that this list is not an all-inclusive list and any renal dialysis service or item  is paid to the ESRD facility under the ESRD PPS.

Legislative Citations

Section 153(a) Public Law 110-275, the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA)(14)(A)(i) Subject to subparagraph (E), for services furnished on or after January 1, 2011, the Secretary shall implement a payment system under which a single payment is made under this title to a provider of services or a renal dialysis facility for renal dialysis services (as defined in subparagraph (B)) in lieu of any other payment (including a payment adjustment under paragraph (12)(B)(ii)) and for such services and items furnished pursuant to paragraph (4).