Calendar Year 2023 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) Final Rule (CMS-1768-F)

On October 31, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule updating payment rates and policies under the end-stage renal disease (ESRD) Prospective Payment System (PPS) for renal dialysis services furnished to Medicare beneficiaries on or after January 1, 2023. This rule also updates the Acute Kidney Injury (AKI) dialysis payment rate for renal dialysis services furnished by ESRD facilities for calendar year (CY) 2023. In addition, the rule updates requirements for the ESRD Quality Incentive Program (QIP) and summarizes comments received in response to requests for information on topics that are relevant to the ESRD QIP. CMS is finalizing refinements to the ESRD Treatment Choices Model in this rule.

In order to explore options regarding payment under the ESRD PPS, the CY 2023 ESRD PPS proposed rule included requests for information regarding (1) a potential add-on payment adjustment for certain new renal dialysis drugs and biological products and (2) health equity issues under the ESRD PPS, with a focus on pediatric dialysis payment. There is a summary of the comments received in response to these requests for information in this CY 2023 ESRD PPS final rule, and CMS appreciates the input from everyone who submitted responses. The responses to the requests for information will help CMS identify ways to align resource use with payment and ensure that Medicare beneficiaries with ESRD have continued access to technologies that can improve health outcomes and quality of life.

This final rule also finalizes a change to the definition of “oral-only drug” beginning January 1, 2025, along with a clarification of the descriptions of the ESRD PPS functional categories. These changes will help ensure that CMS policies are appropriately supporting innovation for new drugs that are truly innovative and not simply minor variations of existing drugs.

This rule also addresses final determinations for three transitional add-on payment adjustments for new and innovative equipment and supplies (TPNIES) applications and finalizes a change to the ESRD PPS outlier methodology for calculating the fixed-dollar loss (FDL) amounts for adult patients, a rebasing and revision of the ESRD Bundled (ESRDB) market basket, an update to the labor-related share, an increase to the wage index floor, a permanent 5% cap on decreases to the ESRD PPS wage index, and routine updates to the ESRD PPS base rate, wage index, outlier policy, and TPNIES offset amount.

The ESRD PPS provides a bundled, per-treatment payment to ESRD facilities that includes all renal dialysis services furnished for outpatient maintenance dialysis, including drugs and biological products (with the exception of oral-only ESRD drugs until 2025). Additionally, the bundled payment includes all other renal dialysis items and services that were formerly separately payable under previous payment methodologies. The bundled payment is case- mix adjusted for a number of factors relating to patient characteristics. There are also facility- level adjustments for ESRD facilities that have a low patient volume, for facilities in rural areas, and for the wage index. When applicable, the bundled payment also includes a training add-on payment adjustment for home and self-dialysis modalities, an outlier payment for high-cost patients, and add-on payment adjustments for certain drugs, equipment, and supplies.

Updates to the ESRD PPS for CY 2023

Under the ESRD PPS for CY 2023, Medicare expects to pay $7.9 billion to approximately 7,800 ESRD facilities for furnishing renal dialysis services. The CY 2023 ESRD PPS base rate is $265.57, which is an increase of $7.67 from the current base rate of $257.90. This amount reflects a productivity-adjusted market basket increase as required by section 1881(b)(14)(F)(i)(I) of the Social Security Act (the Act) (3.0%) and application of the wage index budget-neutrality adjustment factor (0.999730).

CMS projects that the updates for CY 2023 will increase the total payments to all ESRD facilities by 3.1% compared with CY 2022. For hospital-based ESRD facilities, CMS projects an increase in total payments of 3.1%, and for freestanding facilities, CMS projects an increase in total payments of 3.0%.

Rebasing and revision of the End-Stage Renal Disease Bundled (ESRDB) market basket for CY 2023: CMS is finalizing our proposal to rebase and revise the ESRDB market basket to a 2020 base year using data from the Medicare Cost Report and other publicly available data. We periodically rebase the CMS market baskets in order to reflect more up-to-date cost structures. The main impact from rebasing the ESRDB market basket is a relative increase in compensation costs and a relative decrease in all other costs, particularly drug costs. In addition, CMS is updating the labor-related share, as it is based on the labor-related cost share weights in the ESRDB market basket. The final CY 2023 labor-related share is 55.2% based on the 2020-based ESRDB market basket weights.

Wage Index Changes: The ESRD PPS uses the latest core-based statistical area (CBSA) delineations and the latest available “pre-reclassified” hospital wage data collected under the Hospital Inpatient Prospective Payment System. The wage index is applied to the labor-related share of the payment rate to account for differing wage levels in areas in which ESRD facilities are located.

Beginning CY 2023, CMS is increasing the wage index floor from 0.5 to 0.6. Additionally, CMS is establishing a permanent policy to apply a permanent 5% cap on decreases in the ESRD PPS wage index beginning CY 2023. Specifically, CMS is finalizing its proposal that an ESRD facility’s wage index for CY 2023 will not be less than 95% of its final wage index for CY 2022, and that for subsequent years, a facility’s wage index will not be less than 95% of its wage index calculated in the prior CY.

Updates to the Outlier Policy: CMS annually updates the outlier policy using the most current data. CMS is updating the Medicare allowable payment (MAP) amounts for adult and pediatric patients for CY 2023, using 2021 claims data. CMS is updating the ESRD outlier services FDL amount for pediatric patients using the latest available CY 2021 claims. Additionally, CMS is making refinements to its methodology for calculating the FDL amount for adults to use the latest available claims data from CY 2019, CY 2020, and CY 2021, in order to more effectively target 1.0% of total ESRD PPS payments. Based on the latest available data, the FDL amount for pediatric beneficiaries will decrease from $26.02 to $23.29, and the Medicare allowable payment (MAP) amount will decrease from $27.15 to $25.59, as compared to CY 2022 values. For adult beneficiaries, based on the latest data and finalized methodology, the FDL amount will decrease from $75.39 to $73.19, and the MAP amount will decrease from $42.75 to $39.62.

Change to Definition of Oral-only Drug: CMS is finalizing our proposal to include the word “functional” in the definition of oral-only drug at 42 C.F.R. § 413.234(a), effective January 1, 2025. Specifically, under the revised definition, an oral-only drug is a drug or biological product with no injectable functional equivalent or other form of administration other than an oral form.

Clarification to the ESRD PPS Functional Category Descriptions: CMS is finalizing revisions to clarify the descriptions of the ESRD PPS functional categories to ensure they reflect current policies.

Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES) Applications: The three products under consideration for the TPNIES for CY 2023, a monitoring system for peritoneal dialysis, a post-dialysis compression sleeve, and a dialyzer, did not meet the eligibility criteria at 42 C.F.R. § 413.236(b). These products will not receive the TPNIES in CY 2023. 

Changes to the Payment for Renal Dialysis Services Furnished to Individuals with Acute Kidney Injury: As required by section 1834(r) of the Act, CMS is updating the AKI dialysis payment rate for CY 2023 to equal the CY 2023 ESRD PPS base rate and to apply the CY 2023 wage index. The CY 2023 AKI payment rate is $265.57.

Changes to the End-Stage Renal Disease Quality Incentive Program (ESRD QIP)

The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is authorized by section 1881(h) of the Act. Under the program, CMS assesses the total performance of each facility on quality measures specified for a payment year, applies a payment reduction based on a sliding scale to each facility that does not meet a minimum total performance score (TPS), and publicly reports the results.

Finalized Policies for Payment Year 2023:

• CMS is finalizing its proposal to collect data on all ESRD QIP measures, while pausing the use of certain measure data for scoring and payment adjustment purposes in the PY 2023 ESRD QIP, because CMS has determined that circumstances caused by the Public Health Emergency (PHE) for the coronavirus disease 2019 (COVID-19) pandemic have significantly affected the validity and reliability of certain measure data and the resulting performance scores if they included such data. This policy is intended to ensure that the program does not penalize facilities based on circumstances caused by the PHE for COVID-19 that the measures were not designed to accommodate. Specifically, CMS is finalizing its proposals to pause the Standardized Hospitalization Ratio (SHR) clinical measure, the Standardized Readmission Ratio (SRR) clinical measure, the In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) clinical measure, the Long-Term Catheter Rate clinical measure, the Percentage of Prevalent Patients Waitlisted (PPPW) clinical measure, and the Kt/V Dialysis Adequacy Comprehensive clinical measure. Although CMS did not propose to pause the Standardized Fistula Rate clinical measure, CMS agreed with commenters and is finalizing that this measure will also be paused for PY 2023. Although CMS will not score the paused measures for PY 2023, CMS will still provide confidential feedback reports to facilities on their measure rates on these as well as all other PY 2023 measures to ensure that they are made aware of the changes in performance rates that have been observed. CMS will also publicly report data on the paused measures with appropriate caveats noting the limitations of the data related to the PHE for COVID-19.
• CMS is finalizing its proposal to use CY 2019 data to calculate PY 2023 performance standards in place of the CY 2020 data CMS had previously finalized. CMS finalized this change due to concerns that it would be difficult for CMS to calculate the performance standards using CY 2020 data, due to the impact of CY 2020 data that are excluded from the ESRD QIP for scoring purposes under the nationwide Extraordinary Circumstance Exception that CMS granted in response to the PHE.

Finalized Policies for Payment Year 2024:

• CMS will begin expressing the Standardized Hospitalization Ratio (SHR) clinical measure and Standardized Readmission Ratio (SRR) clinical measure results as rates beginning with the PY 2024 ESRD QIP. CMS believes that expressing these measure results as rates will help providers and patients better understand a facility’s performance on the measures and will be more intuitive for a facility to track its performance from year to year.

Finalized Policies for Payment Years 2025 and 2026:

• CMS is finalizing the adoption of the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure in the PY 2025 ESRD QIP measure set as a reporting measure. This measure will assess the percentage of healthcare personnel employed at the facility who receive a complete COVID-19 vaccination course. CMS is finalizing quarterly reporting deadlines for the ESRD QIP and a 12-month performance period. Under this policy, facilities will report the measure through the Centers for Disease Control and Prevention’s National Healthcare Safety Network (NHSN) web-based surveillance system beginning in CY 2023.
• CMS is modifying the technical measure specifications for the SHR and the SRR clinical measures to include a covariate adjustment for patient history of COVID-19 in the 12 months prior to measure eligibility.
• CMS is finalizing its proposal to convert the Standardized Transfusion Ratio (STrR) reporting measure to a clinical measure beginning in PY 2025. CMS believes that previous validity concerns have been adequately examined and addressed, and the finalized STrR clinical measure will more closely align with National Quality Forum (NQF) measure specifications. In addition to converting the STrR reporting measure to a clinical measure, CMS is also finalizing updates to the scoring methodology for the STrR clinical measure so that facilities that meet previously finalized minimum data and eligibility requirements will receive a score on the STrR clinical measure based on the actual clinical values reported by the facility, rather than the successful reporting of the data. Consistent with the technical updates to the SHR clinical measure and the SRR clinical measure, the STrR clinical measure results will be expressed as a rate beginning in PY 2025.
• CMS is finalizing its proposal to convert the Hypercalcemia clinical measure to a reporting measure beginning in PY 2025. CMS is converting the Hypercalcemia clinical measure to a reporting measure while it explores possible replacement measures that would be more clinically meaningful for purposes of quality improvement. CMS is also updating the scoring methodology so that facilities that meet previously finalized minimum data and eligibility requirements will receive a score on the Hypercalcemia reporting measure based on the successful reporting of the data rather than the actual clinical values reported by the facility.
• CMS is finalizing its proposal to create a new domain for reporting measures and re-weight the current measure domains beginning with PY 2025. Currently, ESRD QIP measures are weighted and distributed across four measure domains: Patient & Family Engagement, Care Coordination, Clinical Care, and Safety. Based on changes to the measure set since PY 2021, CMS has reassessed the impact of the ESRD QIP measure domains and domain weights on TPSs and believes it is necessary to increase incentives for improving performance by increasing the weights on measures where there is the most room for improvement, such as measures that assess patient clinical outcomes. Therefore, CMS is finalizing the creation of a new Reporting Measure Domain, which will include the four current reporting measures in the ESRD QIP measure set, as well as the finalized COVID-19 Vaccination Coverage among HCP reporting measure and the finalized Hypercalcemia reporting measure. CMS is also finalizing its proposal to update the domain weights and individual measure weights in the Care Coordination Domain, Clinical Care Domain, and Safety Domain accordingly to accommodate the new Reporting Measure Domain and individual reporting measures therein. CMS did not propose any changes to the Patient & Family Engagement Domain, which will continue to be weighted at 15% of a facility’s TPS. As the ESRD QIP measure set has evolved over the years, CMS believes this will help to address concerns regarding the impact of individual measure performance on a facility’s TPS, while also further incentivizing improvement on clinical measures.

Requests for Information: In this final rule, CMS also summarized public comments received in response to requests for information on the following topics relevant to the ESRD QIP:

• Quality Indicators for Home Dialysis Patients:

The final rule summarizes the comments CMS received in response to an RFI on potential indicators of quality for patients who receive dialysis at home in order to support the use of home dialysis for ESRD patients where it is appropriate. While home-based dialysis may not meet the needs of every patient, home dialysis has clear benefits for those who are suitable candidates. Often, it may be more convenient for many ESRD patients, and survivability rates for patients who receive home dialysis are comparable to those of transplant recipients and patients who receive in-center hemodialysis. Although some measures in the ESRD QIP apply to home dialysis facilities, certain measures do not apply to facilities that have high rates of home dialysis. Therefore, many of these facilities are eligible for fewer ESRD QIP measures than facilities that provide in-center hemodialysis only. As increasing numbers of ESRD patients use home dialysis therapies, CMS is interested in learning more about potential indicators of quality of care for home dialysis patients that are not currently being captured by the ESRD QIP.

• Principles for Measuring Healthcare Quality Disparities:
  • Consistent with Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities through the Federal Government,^[1] CMS’ Equity Plan for Improving Quality in Medicare,^[2] and CMS’ strategic pillar to advance equity,^[3] CMS is committed to addressing persistent inequities in health outcomes in the U.S. through improving data collection to better measure and analyze disparities across programs and policies. As health equity initiatives expand, it is important to model efforts off of existing best practices. In the proposed rule, CMS sought comment, via a request for information, on considerations that CMS can take into account when advancing the use of measurement and stratification as tools to address healthcare disparities and advance healthcare equity. CMS sought and received comment on key considerations in five specific areas that could inform our approach: identification of goals and approaches for measuring healthcare disparities and using measure stratification across CMS quality programs; guiding principles for selecting and prioritizing measures for disparity reporting across CMS quality programs; principles for social risk factor and demographic data selection and use; identification of meaningful performance differences; and guiding principles for reporting disparity results. CMS also sought and received comment on additional disparity measurement or stratification guidelines suitable for overarching consideration across quality programs. The final rule summarizes the comments CMS received on all of these issues.
• Potential Future Inclusion of Two Social Drivers of Health Measures:
  • CMS sought and received public comments on two potential social drivers of health screening measures. The Screening for Social Drivers of Health measure would assess whether facilities screen all patients that are 18 years or older for food insecurity, housing instability, transportation needs, utility difficulties, and interpersonal safety. The Screen Positive Rate for Social Drivers of Health measure would be complementary to the Screening for Social Drivers of Health measure. This measure would facilitate estimation of the impact of individual-level social risk factors and community-level conditions in which patients live when evaluating quality of care. Reporting the screen positive rate for each domain would inform actionable planning for dialysis facilities and within the ESRD QIP program. The final rule summarizes the comments CMS received on these measures.

Changes to the ESRD Treatment Choices Model

The ESRD Treatment Choices (ETC) Model is a mandatory payment model tested under the authority of section 1115A of the Act. Under the ETC Model, participating ESRD facilities and clinicians who manage dialysis patients (Managing Clinicians) receive positive or negative adjustments on certain claims for dialysis and dialysis-related services based on the home dialysis rate and transplant rate among their attributed beneficiaries. The ETC Model began January 1, 2021, and payment adjustments under the Model will end June 30, 2027.

The ETC Model includes two payment adjustments:

• The Home Dialysis Payment Adjustment (HDPA) is an upward adjustment on home dialysis and home dialysis-related claims with claim service dates between January 1, 2021 and December 31, 2023, the initial three years of the ETC Model.
• The Performance Payment Adjustment (PPA) creates upward or downward performance-based adjustment on dialysis and dialysis-related claims with claim service

dates between July 1, 2022 and June 30, 2027. The PPA amount will depend on the ETC Participant’s performance on the ETC Model’s home dialysis rate and transplant rate among the beneficiaries attributed to the ETC Participant.

In the CY 2023 ESRD PPS final rule, CMS is finalizing refinements to the ETC Model, including a change to the improvement scoring methodology, and a change to the requirements related to flexibilities regarding kidney disease patient education services under the ETC Model. CMS also discusses its intent to publish certain performance data. Learn more about the ETC Model here.

The final rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/2022-23778/medicare-program-end-stage-renal-disease-prospective-payment-system-payment-for-renal-dialysis