Skip to Main Content
Title
CMS Finalizes Policies and Payment Rates for End-Stage Renal Disease Prospective Payment System for CY 2014
For Immediate Release
Friday, November 22, 2013
Contact
press@cms.hhs.gov

CMS Finalizes Policies and Payment Rates for End-Stage Renal Disease Prospective Payment System for CY 2014

OVERVIEW:  On November 22, 2013, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that will update payment policies and rates under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for renal dialysis services furnished to beneficiaries on or after January 1, 2014.  This final rule implements a provision in the American Taxpayer Relief Act of 2012 that reduces payments to account for changes in the utilization of ESRD-related drugs and biologicals.  The final rule provides for a multi-year phase-in of this adjustment to mitigate its impact on providers.   

ESRD PPS BACKGROUND:  Section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended the Social Security Act to require CMS to implement a fully bundled PPS for renal dialysis services furnished to Medicare beneficiaries for the treatment of ESRD effective January 1, 2011.  The ESRD PPS replaced a payment methodology that provided a composite rate payment for routine dialysis items and services, with separate payment for other ESRD-related items and services, such as drugs and biologicals that were not included in the composite rate.  The bundled payment under the ESRD PPS includes all renal dialysis services furnished for outpatient maintenance dialysis, including ESRD-related drugs and biologicals (with the exception of oral-only ESRD drugs, which will be included after 2016) and other ESRD-related items and services that were formerly separately payable under the previous payment methodologies.  The bundled payment rate is adjusted for patient case-mix characteristics, such as body weight and co-morbidities.  There are additional adjustments for ESRD facilities that have a low patient volume and for facilities that offer home dialysis training.  For high-cost patients, an ESRD facility may be eligible for outlier payments.

While the ESRD PPS was effective for renal dialysis services furnished on or after January 1, 2011, the statute provided for a 4-year transition period.  During the transition, ESRD facility payment rates were based on a blend of the composite rate methodology and the new PPS rate for those ESRD facilities that did not elect to be paid 100 percent under the ESRD PPS starting on January 1, 2011.  CY 2014 is the final year of the 4-year transition period.  In this year, all ESRD facilities must be paid 100 percent of the ESRD PPS rate for renal dialysis services furnished on or after January 1, 2014.

FINAL CHANGES TO THE ESRD PPS FOR CY 2014:

CY 2014 Payment Rates for the ESRD PPS:  CMS finalized a CY 2014, ESRD bundled market basket minus multi-factor productivity (MFP) increase factor of 2.8 percent.  This update reflects the CY 2014 market basket increase of 3.2 percent minus the current forecast of the MFP adjustment of 0.4 percent.  All estimates are based on IHS Global Insight Inc.’s third-quarter 2013 forecast, with historical data through the second quarter of 2013.

In addition to the payment update, CMS is also applying a proposed wage index budget-neutrality adjustment factor of 1.000454.

Final Adjustment to the ESRD PPS Base Rate to Reflect Change in Utilization of ESRD-Related Drugs and Biologicals required by the American Taxpayer Relief Act of 2012:  On December 7, 2012, the Government Accountability Office (GAO) issued a report that discussed the decline in utilization of ESRD-related drugs and biologicals since the implementation of the ESRD PPS.  Following that report, Congress enacted section 632(a) of the American Taxpayer Relief Act of 2012 (ATRA), which requires the Secretary to make reductions to the ESRD PPS base rate to reflect the Secretary’s estimate of the change in the utilization of ESRD-related drugs and biologicals by comparing per patient utilization data from 2007 with such data from 2012.  This provision further requires that in making the adjustment, CMS take into account the most recently available data on Average Sale Prices (ASP) and changes in prices for drugs and biologicals reflected in the ESRD market basket.  Therefore, for the proposed rule, CMS analyzed the utilization of ESRD-related drugs and biologicals and any oral forms of these drugs and biologicals (except ESRD oral-only drugs) that are currently in the bundle, such as erythropoiesis stimulating agents (ESAs), for CY 2007 and compared it with such data from CY 2012.  

CMS’s analysis showed an average payment per treatment of $83.76 for drugs and biologicals based on the 2007 claims and $51.42 for drugs and biologicals based on the 2012 claims.  CMS finalized the methodology for calculating the amount of the drug utilization adjustment and computed a final adjustment amount of $29.93.  In response to comments, CMS is implementing a 3- to 4-year transition of the drug utilization reduction by offsetting the reduction by the payment update, that is the ESRD bundled market basket minus productivity increase factor, and other impacts (such as the outlier or training add-on, if applicable) to create an overall zero percent impact for all ESRD facilities from the previous year’s payments for CYs 2014 and 2015.  The transition may not exceed 4 years.   

For CY 2014, this approach results in a reduction to the base rate of $8.16, yielding a CY 2014 ESRD PPS base rate of $239.02.  This reflects the CY 2013 ESRD PPS base rate of $240.36 adjusted by the ESRDB market basket minus productivity increase factor of 2.8 percent, the wage index budget neutrality factor of 1.000454, and the home dialysis training add-on budget neutrality adjustment factor of 0.999912 to get $247.18 ($240.36*1.028*1.000454*0.99912=$247.18).  This amount is then reduced by the amount by the drug utilization reduction of $8.16 to get $239.02 ($247.18-$8.16=$239.02) as the final CY 2014 ESRD PPS base rate.

For CY 2016, we will evaluate how to apply the balance of the reduction when we conduct an analysis of the case-mix adjustments, required by section 632(c) of ATRA, and implement the inclusion of oral-only ESRD-related drugs and biologicals, after 2016 as required by section 632(b) of ATRA.  At that time, this evaluation will assist us in determining if we should apply the balance of the reduction in CY 2016 or provide one additional transition year so that the entire amount is applied to the base rate no later than CY 2017.

Outlier Policy:  Under the ESRD PPS, ESRD facilities may qualify for outlier payments for high cost patients.  For CY 2014, CMS proposed to use CY 2012 claims data to update the outlier services’ fixed-dollar loss and Medicare Allowable Payment (MAP) amounts.  In order to maintain a 1.0 percent target for outlier payments, CMS finalized the CY 2014 fixed-dollar loss threshold amount for pediatric patients at $54.01, compared with CY 2013 at $47.32 to and the CY 2014 MAP amount of $40.49, compared with CY 2013 at $41.39.  For adult patients, the CY 2014 fixed-dollar loss threshold amount will be $98.67, compared to the CY 2013 amount of $110.22 and the CY 2014 MAP amount will be $50.25, compared to the CY 2013 amount of $59.42.  

Wage Index and Wage Index Floor:  In CY 2014, CMS finalized a wage index floor of 0.45 and in CY 2015 0.40.

The Pacific Rim Islands
Beginning in CY 2014, all ESRD facilities, including those located in the Pacific Rim, will be paid under the ESRD PPS.  For CY 2014, CMS finalized a wage index value of 0.9611 for all ESRD facilities located in the Pacific Rim, including Guam, American Samoa, and the Northern Mariana Islands.   

Home Dialysis Training Add-on Payment Adjustment
Under the ESRD PPS a wage-adjusted home dialysis training add-on payment adjustment is available for home and self-dialysis training treatments.  In CY 2011, CMS computed the fixed dollar add-on payment of $33.44, which accounts for 1 hour of nursing wages per training treatment.   

CMS solicited comments in the proposed rule about add-on payment for home dialysis training.  Based on comments received, beginning in CY 2014, CMS finalized an increase for home dialysis training to represent 1.5 hours of nursing time and a 50 percent increase to the home dialysis training add-on payment adjustment amount that is made for both PD and HHD training services. The adjustment amount will increase $16.72 per treatment, for a payment rate of $50.16.  

Impact Analysis:  
CMS projects that the estimated payments to ESRD facilities in CY 2014 will change by zero percent, compared with the estimated payments in CY 2013.  This reflects the effect of a 3.2 percent ESRD bundled market basket update, the ACA-required productivity adjustment of 0.4 percentage point, the ATRA-required drug utilization adjustment of -3.3 percent, a 0.4 percent overall estimated increase in outlier payment from the updates to the fixed dollar loss threshold and MAP amounts, and a 0.2 percent overall estimated increase in payments from the change in the blend of payments.

Hospital-based ESRD facilities have an estimated 0.8 percent increase in payments compared with independent facilities, which have an estimated 0.0 percent change.  Urban facilities are expected to do slightly better than rural facilities with a 0.0 percent change compared to a 0.1 percent decrease, respectively.  For Puerto Rico and the Virgin Islands, we expect a 2.1 percent decrease in estimated payment as a result of negative wage index values.

We estimate that there would be no change in aggregate ESRD PPS expenditures from CY 2013 to CY 2014 due to provisions in this regulation.  This reflects a $240 million increase from the payment rate update, a $30 million increase due to the updates to the outlier threshold amounts, a $20 million increase due to the change in the blend of payments and a $290 million decrease in expenditures specifically related to the -3.3 percent drug utilization adjustment.

Application of ICD-10-CM:  Effective October 1, 2014, CMS will implement the 10th revision of the ICD coding scheme.  CMS furnished a crosswalk from ICD-9-CM to ICD-10-CM for codes that are subject to the comorbidity payment adjustment, and finalized eligibility for the comorbidity payment adjustment for all ICD-10-CM codes to which eligible ICD-9-CM codes crosswalk with two exceptions:  D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic gastritis or gastroenteritis.

FINAL CHANGES REGARDING DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES (DMEPOS) FOR CY 2014:

Clarification of the grandfathering provision related to the 3-year Minimum Lifetime Requirement (MLR):  To assist in determining when an item is durable and can be classified as DME, CMS previously finalized a rule adding a 3-year minimum lifetime requirement (MLR) to the definition of DME for new items classified as DME after January 1, 2012, and grandfathered DME in existence as of that date to allow for continued coverage of equipment that has been covered under the Medicare benefit for many years to avoid disruption in the continuity of care for beneficiaries with a medical need for these items.   This final rule clarifies the 3-year MLR such that if an item covered as DME on or before January 1, 2012 (a grandfathered item) is modified (i.e., redesigned, upgraded or reengineered), so that the item no longer lasts for at least the same period of time it did as of January 1, 2012, then that modified product would be considered a new item and subject to the 3-year MLR.

Definition of routinely purchased DME:  This rule clarifies the definition of routinely purchased DME and reclassifies certain items of DME into the capped rental category.

Implementation of budget neutral fee schedules for splints and casts, and IOLs inserted in a physician’s office:  For CY 2014, we are finalizing the implementation of budget neutral fee schedule amounts for splints, casts, and IOLs inserted in a physician’s office.  The statute provides authority at section 1842(s) to implement fee schedule amounts for these items if they are established so that they are initially budget neutral.  In 2011, total allowed charges for splints and casts were $5.6 million, while total allowed charges for IOLs inserted in a physician’s office were $76 thousand.  This will eliminate the need to calculate reasonable charges on an annual basis, will lower administrative expenses, and help simplify the program.

The final rule will appear in the Dec. 2, 2013, Federal Register.

For more information, please see: http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1

For more information about the ESRD PPS and QIP, please see: https://www.cms.gov/Center/Special-Topic/End-Stage-Renal-Disease-ESRD-Center.html

###