Fact Sheets

CMS Updates Policies and Payment Rates for End-Stage Renal Disease Facilities for CY 2015 and Implementation of Competitive Bidding-Based Prices for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies

CMS Updates Policies and Payment Rates for End-Stage Renal Disease Facilities for CY 2015 and Implementation of Competitive Bidding-Based Prices for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies

Overview  On October 31, 2014, 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, 2015.  This rule also introduces new quality and performance measures to improve the quality of care by outpatient dialysis facilities treating patients with end-stage renal disease and implements the Affordable Care Act mandate to use competitive bidding rates for durable medical equipment (DME). 

The ESRD and DME final rule is one of several rules for calendar year 2015 that reflect a broader Administration-wide strategy to deliver better care at lower cost by finding better ways to deliver care, pay providers, and use information.  Provisions in these rules are helping to move our health care system to one that values quality over quantity and focuses on reforms such as measuring for better health outcomes, focusing on disease prevention, helping patients live successfully at home, helping manage and improve chronic diseases and fostering a more efficient and coordinated health care systems.

The ESRD and DME rule also finalizes changes to the ESRD Quality Incentive Program (QIP) for payment year (PY) 2017 and PY 2018 under which payment incentives are applied to dialysis facilities to improve the quality of dialysis care.  Under the ESRD QIP, facilities that do not achieve a minimum total performance score with respect to quality measures established in regulation receive a reduction in their payment rates under the ESRD PPS.  This rule also addresses issues related to the coverage and payment of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  The final rule sets forth the methodology for adjusting the DMEPOS fee schedule payment amounts using information from the Medicare DMEPOS Competitive Bidding Program (CBP); establishes alternative payment rules for certain DMEPOS items for phase-in under the Medicare DMEPOS CBP; and clarifies the statutory Medicare hearing aid coverage exclusion by specifying devices not subject to the hearing aid exclusion.  CMS has made a number of changes to these policies to reflect comments received on the proposed rule.

This Fact Sheet addresses the general payment provisions of the ESRD PPS for CY 2015 and the issues related to DMEPOS in the final rule.  A separate fact sheet addressing the quality provisions of the ESRD PPS for calendar year (CY) 2015 can be found here:  http://www.cms.gov/Newsroom/Newsroom-Center.html

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 bundled payment under the ESRD PPS includes all renal dialysis services furnished for outpatient maintenance dialysis, including drugs and biologicals (with the exception of oral-only ESRD drugs until 2024 as required by section 217(a)(1) of the Protecting Access to Medicare Act of 2014 (PAMA)) and other renal dialysis items and services that were formerly separately payable under the previous payment methodologies.  The bundled payment rate is case-mix adjusted for a number of factors relating to patient characteristics. There are also 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.  Under the ESRD PPS for CY 2015, Medicare expects to pay approximately $9.0 billion a year to 6,096 ESRD facilities for the costs associated with furnishing chronic maintenance dialysis services. 

PAYMENT CHANGES TO THE ESRD PPS FOR CY 2015:

Updated Payment Rates for the ESRD PPS:  CMS projects that the ESRD bundled (ESRDB) market basket adjusted for multifactor productivity (MFP) update would have been 1.6 percent (2.1 percent ESRDB market basket update less 0.5 percent MFP adjustment).  However, section 217(b) of PAMA requires the CY 2015 ESRD payment update to be 0.0 percent.  In addition, CMS will apply a wage index budget-neutrality adjustment factor of 1.001729, resulting in a CY 2015 ESRD PPS base rate of $239.43.

Updated ESRD Bundled Market Basket Adjusted for MFP:  CMS finalized rebasing and revising the ESRD bundled market basket for 2015.  Rebasing involves using the most recent year of available data, 2012, to reflect the input costs of ESRD facilities under the bundled system compared to 2008 data used for the current market basket.  The major revisions to the market basket include changing the price measure for pharmaceuticals from a more general index (PPI Pharmaceuticals for Human Use, Prescription) to a blend of two indices, (78% PPI Biological Products, Human Use and 22% PPI Vitamin, Nutrient, & Hematinic Preparations).   The revision also refines the price measure used for compensation costs to better reflect the occupational mix in the ESRD setting.  As a result of the update to the cost weights from 2008 to 2012, the labor-related share is about 9 percent higher, driven mainly by a drop in the drug cost share due to declines in drug utilization and a subsequent rise in the compensation cost share.

Labor-Related Share:  In CY 2015, based on updated data to the cost weights, CMS will revise the labor-related share from 41.737 to 50.673 percent. To mitigate any negative payment impact on rural or other ESRD facilities in low wage areas, CMS is implementing a 2-year transition of the labor-related share.  Under the transition, payments will be based on 50% of the old labor-related share and 50% of the new labor-related share in CY 2015, and 100% on the new labor-related share in CY 2016.  Thus, the labor-related share for CY 2015 is 46.205 percent and for CY 2016 is 50.673 percent.  The labor-related share will remain 50.673 percent until such time in the future the labor-related share is again updated.   

Outlier Policy:  Under the ESRD PPS, ESRD facilities may qualify for outlier payments for high cost patients.  For CY 2015, CMS will use CY 2013 claims data to update the outlier services’ fixed-dollar loss and Medicare Allowable Payment (MAP) amounts.  As a result, CMS will update the fixed-dollar loss amount for pediatric patients from $54.01 to $54.35, and the MAP amount will increase from $40.49 to $43.57.  For adult patients, CMS will update the fixed-dollar loss amount from $98.67 to $86.19 and increase the MAP amount from $50.25 to $51.29.  CMS believes this update to the outlier MAP and fixed dollar loss amounts for CY 2015 will increase payments to ESRD facilities for ESRD beneficiaries requiring higher resource utilization in accordance with a 1 percent outlier policy.

Wage Index:  In CY 2015, there are no changes with the application of the wage index and CMS will continue to apply the wage index adjustment to the labor-related share portion of the base rate when making payments under the ESRD PPS.   However, CMS will update the Core Based Statistical Areas (CBSA) with the Office of Management and Budget (OMB) issued Bulletin No. 13-01 and 2010 US Census Data.  CMS will implement the new CBSA delineations with a transition to mitigate any negative impact on ESRD facilities that have low wage areas, specifically rural ESRD facilities.  Under the transition, payments will be based on 50% of the CY 2014 CBSA delineations and 50% of the CY 2015 CBSA delineations in CY 2015 and 100% of the CY 2015 CBSA delineations in CY 2016.

Impact Analysis:  CMS projects that the updates for CY 2015 will increase the total payments to all ESRD facilities by 0.3 percent compared with CY 2014.  For hospital-based ESRD facilities, CMS projects an increase in total payments of 0.5 percent, while for freestanding facilities; the projected increase in total payments will be 0.3 percent.  CMS also projects that urban ESRD facilities will receive an estimated increase in payments of 0.4 percent while rural facilities will receive a decrease of 0.5 percent.  CMS projects that ESRD facilities in Puerto Rico and the Virgin Islands will receive a 3.6 percent decrease in estimated payments.

Timing of the Application of ICD-10:  Section 212 of PAMA provides that the Secretary may not adopt ICD-10-CM prior to October 1, 2015.  Consistent with this provision, an August 4, 2014 HHS final rule delayed the transition from ICD-9-CM to ICD-10-CM until October 1, 2015 and required the continued use of ICD-9 through September 30, 2015.  Therefore, the ESRD PPS will continue to use ICD-9-CM through September 30, 2015, and will require the use of ICD-10-CM beginning October 1, 2015 for purposes of the co-morbidity payment adjustment.  For CY 2015, we are correcting several typographical errors and omissions in the ICD-9-CM to ICD-10-CM crosswalk tables that appeared in the CY 2014 ESRD PPS final rule.

Low Volume Payment Adjustment (LVPA):  In this rule, CMS is clarifying the eligibility criteria for the LVPA and amending the supporting regulations in the Code of Federal Regulations. 

Payment for Oral-only Drugs under the ESRD PPS:  Section 217(a)(1) of PAMA amended section 632(b)(1) of the American Taxpayer Relief Act of 2012, which now provides that the Secretary “may not implement the policy under section 413.174(f)(6) of title 42, Code of Federal Regulations (relating to oral-only ESRD-related drugs in the ESRD prospective payment system), prior to January 1, 2024.”  Accordingly, CMS finalized that payment for ESRD-related oral-only drugs will not be made under the ESRD PPS prior to January 1, 2024. 

CHANGES REGARDING DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES (DMEPOS) FOR CY 2015:

Defines the methodology for making national price adjustments based upon information gathered from the DMEPOS Competitive Bidding Program:   This rule defines methodologies to implement the use of information from the DMEPOS CBP to adjust the fee schedule amounts for DME in areas where competitive bidding programs (CBPs) are not implemented.  The major provisions in this regulation are:

• Adjust fee schedule amounts for items and services based on regional prices limited by a national ceiling (110% of the average of regional prices) and floor (90% of the average of regional prices)
• Adjust fee schedule amounts for non-contiguous areas based on the average of competitive bidding pricing from these areas or the national ceiling, whichever is higher.

The rule finalizes an expanded policy for rural payment by specifying that the national ceiling will be extended to any area outside an metropolitan statistical area (MSA) designated as a rural area, regardless of whether the state meets the definition of a rural state. 

Phase-in of special payment rules in a limited number of areas under the CBP for certain DME:  This rule finalizes a limited phase-in of continuous bundled monthly payments for the equipment, supplies, accessories and any necessary maintenance and repairs for standard power wheelchairs and continuous positive airway pressure (CPAP) devices furnished under the CBP in place of capped rental policies.   The specific details for phase-in of this special payment rule to competitive bidding areas will be addressed through guidance. 

Clarification of the statutory Medicare hearing aid coverage exclusion stipulated at Section 1862(a)(7) of the Act:  This rule codifies the Medicare policy guidance when a device  is not subject to the hearing aid exclusion.   The rule finalizes that certain auditory implants, including cochlear implants, brain stem implants, and osseointegrated implants, do not meet the definition of hearing aids that are excluded from coverage.

Update the definition of minimal self-adjustment of orthotics at 42 CFR §414.402:  This rule will not finalize an update to the regulation reflecting program guidance on what specialized training is needed to provide custom fitting services if providers are not certified orthotists.  Although the regulation is not being updated at this time, the program guidance still stands.

Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business:  This rule permits bifurcation of a competitive bidding contract under specific circumstances.  A competitive bidding contract cannot be sold or subdivided, so the entire competitive bidding contract, including all CBA and product categories must be included in any sale.  CMS may permit the transfer of a contract to an entity that merges with or acquires a competitive bidding contract supplier if the new owner assumes all rights, obligations, and liabilities of the competitive bidding contract.  This final rule would establish circumstances when we would allow subdividing a contract by allowing a contract supplier to sell a distinct company (e.g., an affiliate, subsidiary, sole proprietor, corporation, or partnership) which furnishes a specific PC or serves a specific CBA.  This change to the regulation will apply to all current and future rounds.

The final rule will be published in the November 6, 2014 Federal Register and can be downloaded from the Federal Register at: http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1.

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