Fact Sheets

MEDICARE PROPOSES REVISIONS TO THE END-STAGE RENAL DISEASE PROSPECTIVE PAYMENT SYSTEM

OVERVIEW:    On July 1, 2011, 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.  If adopted, such proposals would apply to dialysis services furnished to beneficiaries on or after January 1, 2012.   The proposed rule also includes proposed changes to the ESRD Quality Incentive Program (QIP), under which payments to dialysis facilities are reduced if they do not achieve a high enough total performance score based on their performance with respect to measures that assess the quality of dialysis care.   The QIP is discussed in a separate fact sheet also issued today.

In addition, the proposed rule would revise the Medicare ambulance fee schedule regulations to conform to statutory changes, and would modify the definition of durable medical equipment (DME).

BACKGROUND:  The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required CMS to develop a new, fully bundled PPS for renal dialysis services furnished to Medicare beneficiaries on or after January 1, 2011.   Under the new payment system, Medicare makes a single prospectively determined payment to the dialysis facility that pays for all items and services furnished during a dialysis session, including ESRD drugs (with the exception of certain oral drugs until 2014) and other items and services that were separately payable under the previous payment methodology.  The bundled payment rate is adjusted for a number of factors, including case-mix (e.g., adjustments based on certain patient characteristics such as for patients newly diagnosed with ESRD and patients with certain comorbidities) and geographic wage differences.  There are additional adjustments for facilities that have a low patient volume, and for home dialysis training.  For very high-cost patients, a facility may be eligible for outlier payments.

MIPPA further required CMS to allow facilities to elect whether to be paid entirely under the new bundled payment system beginning on January 1, 2011 or receive a blended payment comprised of the old system (which consists of the basic case-mix adjusted composite payment rate, drug-add-on amount, and former separately billable items and services) and the new ESRD PPS during a four-year transition.   In CY 2011, approximately 92 percent of dialysis facilities are receiving payment entirely under the ESRD PPS.

PROPOSED CHANGES TO THE ESRD PPS FOR 2012:

ESRD PPS Outlier Policy:  Under the ESRD PPS, Medicare makes additional payments, called outlier payments, to dialysis facilities, when the costs of the treatment for a patient exceed a specified threshold.  In the ESRD PPS final rule for 2011, CMS provided a list of drugs that met the definition of ESRD outlier services.    Given that this list may be difficult to keep up-to-date, and that the regulation makes clear the types of drugs that constitute ESRD outlier services, CMS is proposing to eliminate the issuance of this list. 

Under the ESRD PPS outlier policy, CMS retained from the prior payment system the “50 percent rule,” under which certain combinations of laboratory tests, called test panels, were previously considered  and paid as part of the composite rate, depending on whether 50 percent of the tests in the panel  were composite rate tests. CMS is now proposing to eliminate the 50 percent rule and exclude all panel tests from the definition of ESRD outlier services and the outlier computation.

CMS is also proposing to exclude certain drugs that prevent clotting during a dialysis session in computing whether a facility is entitled to outlier payments, but to include certain drugs used for anemia management (for example, testosterone and anabolic steroids) in the computation.

Low-Volume Policy Clarifications:  To be eligible for the low-volume adjustment, an ESRD facility must meet certain requirements and provide an attestation of eligibility to the Medicare contractor responsible for processing the facility’s claims.  The proposed rule would clarify that the payment year for the low-volume adjustment is the ESRD PPS payment year (that is, the calendar year from January 1 through December 31), and that the facility’s eligibility for the low volume adjustment would be determined based on the facility’s 3 cost reporting periods (which may differ from the payment year) preceding the payment year. The proposed rule would clarify that for CY 2012 and beyond, the deadline for a facility to provide an attestation of eligibility to the Medicare contractor is November 1 prior to the payment year.

ESRD Market Basket and Productivity Adjustment:  CMS is proposing to use the CY 2008 ESRD bundled market basket (ESRDB) minus productivity adjustment to update payments to ESRD facilities for CY 2012.   In accordance with section 1881(b)(14)(F) of the Social Security Act, the market basket update will be used to update the ESRD PPS base rate, as well as the composite rate portion of the blended payment during the transition.   The proposed CY 2012 ESRDB market basket update is projected to be 3.0 percent, adjusted by a productivity adjustment factor, currently projected to be 1.2 percent, resulting in a projected update of 1.8 percent for CY 2012.

Revised Body Surface (BSA) Area National Average:  CMS is proposing to use the latest national average (1.87) as the reference point for computing the BSA for both the ESRD PPS and the composite rate portion of the blended payment for facilities in transition to the PPS.   Using this national average would result in a slightly lower BSA value which may result in a lower payment adjustment.   However, CMS’s proposal to use the latest national average would avoid the application of two BSA national averages when computing the BSA case-mix adjustment for a patient receiving treatments in a renal dialysis facility that receives blended payments under the transition.

Second Part of the Transition Budget Neutrality Adjustment:  CMS is proposing a 0 percent transition budget-neutrality adjustment (the second part of the adjustment) for CY 2012.

Drug Add-on under the Composite Rate:  Drug Add-on for the Composite Rate:  For the composite rate portion of the blended payment during the transition for CY 2012, CMS is proposing, based on the same methodology that CMS used for CY 2011, but relying on more recent drug data, a 0 update to the drug add-on. 

Wage Index:  CMS is proposing to update the wage index values according to the methodology used for 2011, but to use more recent wage data.  CMS is proposing to establish a wage index budget-neutrality adjustment of 1.001126 under the ESRD PPS that would be applied to the ESRD PPS base rate.  For facilities in transition to the PPS, CMS is proposing to apply a wage index budget-neutrality adjustment factor of 1.002096 to the wage index values.   CMS is also proposing to reduce the wage index floor for ESRD facilities by 0.5 percent for 2012, as part of a transition to eliminate the floor in 2014.

Updated Payment Rates for the ESRD PPS and the Composite Rate Portion of the Blended Payment:  Applying the wage index budget neutrality adjustment factor and the market basket minus productivity adjustment to the CY 2011 base rate, results in a proposed CY 2012 ESRD PPS adjusted base rate of $234.02.

CMS is proposing to also add the CY 2011 Part D per treatment payment amount of $0.49 (the first part of the transition budget-neutrality adjustment) to the CY 2012 composite rate portion of the blended rate in order to update the Part D amount.  The addition of the $0.49 Part D payment amount (the first part of the transition budget-neutrality adjustment) to the CY 2011 composite rate portion of the blended rate and then updating by applying the ESRDB market basket minus productivity adjustment, results in a proposed CY 2012 composite rate of $141.52 for those facilities that would be paid the blended rate during the second year of the transition.

Transition Period:  As required by MIPPA, the proposed rule would continue the second year of the four year phase-in (transition).   For CY 2012, transition blended payments would consist of 50 percent based on the prior basic case-mix adjusted composite payment system and items and services separately paid under part B, and 50 percent based on the ESRD PPS payment amount.

PROPOSALS AFFECTING PAYMENT SYSTEMS OTHER THAN THE ESRD PPS

Ambulance Fee Schedule:  The proposed rule would revise the ambulance fee schedule regulations to conform to the requirements of section of 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA), which are scheduled to expire on December 31, 2011.

Durable Medical Equipment

CMS is proposing to require that an item of medical equipment have a minimum lifetime of three years to meet the durability criteria for DME. This proposal would clarify the definition of durability, and make the coding and coverage decision making process more efficient.

CMS will accept comments on the proposed rule until Aug. 30, 2011, and will respond to them in a final rule to be issued by Nov. 1, 2011. 

For more information, please see:

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