Fact Sheets

MEDICARE PROPOSALS TO UPDATE POLICIES AND PAYMENT RATES FOR END-STAGE RENAL DISEASE PROSPECTIVE PAYMENT SYSTEM FOR CY 2013

OVERVIEW:  On July 2, 2012, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would 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 Jan. 1, 2013.   The proposed rule also proposes changes to the ESRD Quality Incentive Program (QIP) that provides payment incentives to dialysis facilities to improve the quality of dialysis care.  Under the QIP, facilities that do not achieve a high enough total performance score with respect to quality measures established in regulation receive a reduction in their payment rates under the ESRD PPS.

In addition, the proposed rule proposes to codify in regulations reductions in bad debt payments for all Medicare providers eligible for bad debt reimbursement that were mandated by the Middle Class Tax Extension and Job Creation Act of 2012.

This Fact Sheet addresses general provisions of the ESRD PPS in the proposed rule.  The QIP is discussed in a separate fact sheet also issued today.

BACKGROUND:  The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required CMS to implement a fully bundled PPS for renal dialysis services furnished to Medicare beneficiaries effective Jan. 1, 2011.  The ESRD PPS replaced a payment methodology which provided for payment of a composite rate for a defined set of dialysis services, plus separate payment for ESRD-related services that were not included in the composite rate.  Under the ESRD PPS, Medicare makes a single prospectively determined payment to ESRD facilities for all renal dialysis services furnished for outpatient maintenance dialysis, including ESRD- related drugs and biologicals (with the exception of certain oral drugs until 2014) and other ESRD-related items and services that were formerly separately payable under the previous payment methodologies.  The bundled payment rate is adjusted for a number of factors relating to patient characteristics.  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.

The statute required Medicare to implement the ESRD PPS for dialysis services furnished on or after Jan. 1, 2011, but provided for a four-year transition period during which dialysis facilities would be paid a blended rate based on the composite-rate methodology and the new PPS.  However, the statute allowed dialysis facilities to make a one-time election to forego the transition and receive payment entirely under the ESRD PPS.  More than 87 percent of facilities elected to be paid entirely under the ESRD PPS.  For those facilities that are being paid under a blended rate, CY 2013 is the final year of the transition.  The proposed blended rate for CY 2013 is 75 percent of the ESRD PPS and 25 percent of the composite payment rate.

PROPOSED CHANGES TO THE ESRD PPS FOR CY 2013:

Updated Payment Rates for the ESRD PPS and the Composite Rate Portion of the Blended Payment: CMS projects that the 2013 ESRDB market basket update will be 3.2 percent, although this may change in the final rule based on more recent data.  CMS also projects that the multi-factor productivity (MFP) adjustment as required by statute for CY 2013 will be 0.7 percent.  Therefore, CMS is projecting an update of 2.5 percent to the ESRD PPS base rate in CY 2013.  After applying a proposed wage index budget-neutrality adjustment factor of 1.000826, the resulting proposed base rate for the ESRD PPS is $240.88.

The 2.5 percent update would also apply to the composite rate portion of the blended payment for facilities that are in the transition period. After applying the 2.5 percent update, the resulting proposed composite base rate is $145.49.

Outlier Policy:  Under the ESRD PPS, ESRD facilities may qualify for outlier payments when the costs of furnishing outlier services to an individual patient exceed the predicted outlier services amount by a certain threshold.  For CY 2013, CMS proposes to use 2011 claims data to update the outlier services’ fixed-dollar loss and Medicare Allowable Payment (MAP) amounts.  As a result, CMS is proposing to reduce the fixed-dollar loss amount for pediatric patients from $71.64 to $50.15 and the MAP amount to from $45.44 to $43.63.  For adult patients, CMS is proposing to reduce the fixed-dollar loss amount from $141.21 to $113.35 and the MAP amount from $78.00 to $61.06.  These reductions mean that more cases may qualify for outlier payments.

Transition Budget Neutrality Adjustment:  For CY 2013, CMS is proposing to apply the transition budget neutrality adjustment methodology used in CY 2011, yielding a 0 percent transition budget neutrality adjustment for both the blended payments and the payments under the 100 percent ESRD PPS for CY 2013. 

Update to the Composite Rate Drug Add-On for CY 2013:  For CY 2013, CMS proposes to apply the current methodology to compute the drug add-on payment for the composite rate portion of the blended payment during the transition, resulting in a 0 percent update.  Because the ESRD bundled rate (ESRDB) market basket minus productivity that is applied to the composite rate increases the composite rate, the add-on adjustment of 14.3 percent is reduced to 14.0 percent to maintain the drug add-on at $20.33.

Wage Index and Wage Index Floor:  For CY 2013, CMS is not proposing any changes to the methodology for the wage index nor the application of the wage index budget-neutrality adjustment factor.  For CY 2013, CMS proposes to continue to gradually decrease the wage index floor under the composite rate payment system and under the ESRD PPS by 0.05.  Therefore, CMS proposes to reduce the wage index floor from 0.55 to 0.50.  As indicated above, the proposed wage index budget neutrality adjustment is 1.000826 for the ESRD PPS and for the ESRD PPS portion of the blended payments, and the proposed wage index budget-neutrality adjustment factor for the composite portion of the ESRD PPS blended payment is 1.001538.

Impact Analysis:  CMS projects that the proposed updates for CY 2013 would increase total payments to all dialysis facilities by 3.1 percent over CY 2012.  For hospital-based ESRD facilities, CMS projects an increase in total payments of 3.7 percent, while for freestanding facilities, the projected increase in total payments would be 3.0 percent.  CMS also projects that urban ESRD facilities will receive an estimated increase in payments of 3.1 percent while rural facilities will receive a 3.0 percent increase.  CMS projects that dialysis facilities in Puerto Rico and the Virgin Islands will receive a 0.4 percent increase in estimated payments. 

Bad Debt:  CMS is proposing to codify the provisions of section 3201 of the Middle Class Tax Extension and Job Creation Act of 2012 (Pub. L. No. 112-96) that requires reductions in bad debt reimbursement to all providers eligible to receive bad debt reimbursement; these provisions are specifically prescribed by Congress and thus, are generally self-implementing. 

The proposed rule will appear in the July 11, 2012, Federal Register. CMS will accept comments on the proposed rule until Aug. 31, 2012, and will respond to comments in the final ESRD PPS rule for CY 2013.

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

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