OVERVIEW: On Nov. 1, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates 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, 2012. The final rule also includes 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. In addition, the final rule revises the Medicare ambulance fee schedule regulations to conform to statutory changes, and modifies the definition of durable medical equipment (DME).
This Fact Sheet addresses general provisions in the final 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 develop a bundled PPS for renal dialysis services furnished to Medicare beneficiaries on or after Jan. 1, 2011. Under the new payment system, Medicare makes a single prospectively determined payment to the dialysis facility for all renal dialysis 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 formerly separately payable under the previous payment methodology. The bundled payment rate is adjusted for a number of factors, including patient case-mix (e.g., adjustments based on patient characteristics, such as patients newly diagnosed with ESRD and presence of 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.
Dialysis facilities were allowed to elect whether to be paid entirely under the bundled payment system beginning on Jan. 1, 2011, or receive a blended payment comprised of the previous system (which consists of the basic case-mix adjusted composite payment rate, drug-add-on amount, and payment for former separately billable items and services) during a four-year transition period. In CY 2011, approximately 87 percent of dialysis facilities elected to receive payments entirely under the ESRD PPS.
CHANGES TO THE ESRD PPS FOR CY 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 specific drugs that met the definition of ESRD outlier services. Given that this list may be difficult to keep current up-to-date, and that the regulation makes clear the types of drugs that constitute ESRD outlier services, CMS is eliminating the issuance of this specific drug list.
Under the ESRD PPS outlier policy in CY 2011, CMS retained from the prior payment system the “50 percent rule,” under which certain combinations of laboratory tests (Automated Multi-Channel Chemistry test panels), were previously considered and paid as part of the composite rate, depending on whether 50 percent or more of the tests in the panel were composite rate tests. CMS is now eliminating the 50 percent rule from the outlier policy and excluding all panel laboratory tests from the definition of ESRD outlier services and the outlier computation.
CMS is also excluding certain drugs that prevent clotting during a dialysis session in computing whether a facility is entitled to outlier payments, but is including other drugs such as those used for anemia management (for example, testosterone and anabolic steroids) in the computation of outlier payments.
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 final rule clarifies that the payment year for the low-volume adjustment is the ESRD PPS payment year (that is, the calendar year from Jan. 1 through Dec. 31). In addition, the facility’s eligibility for the low-volume adjustment is determined based on the facility’s three cost reporting periods preceding the payment year. The facility’s cost reporting periods may differ from the payment year. For CY 2013 and subsequent years, CMS is finalizing November 1st preceding the payment year as the deadline for a facility to provide an attestation of eligibility to the Medicare contractor. Because the CY 2012 ESRD PPS final rule was not published in time to allow ESRD facilities to submit an attestation of eligibility by Nov. 1, 2012, CMS is finalizing a deadline of Jan. 3, 2012, for payment year 2012.
ESRD Market Basket and Productivity Adjustment: CMS is adopting the CY 2008 ESRD bundled (ESRDB) market basket minus a 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 is used to update the ESRD PPS base rate, as well as the composite rate portion of the blended payment during the transition period. The CY 2012 ESRDB market basket update is 3.0 percent, adjusted by a productivity adjustment factor of 0.9 percent, which results in an update of 2.1 percent for CY 2012.
Revised Body Surface (BSA) Area National Average: CMS is finalizing use of 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 going through the transition. Using this national average will result in a slightly lower BSA value which may result in a lower payment adjustment. However, CMS’s decision to use the latest national average helps to 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.
Transition Budget Neutrality Adjustment: A zero percent transition budget-neutrality adjustment will be applied for CY 2012.
Drug Add-on under the Composite Rate: For the composite rate portion of the blended payment during the transition for CY 2012, based on the same methodology that CMS used for CY 2011, but relying on more recent drug data, CMS is finalizing a zero update to the drug add-on.
Wage Index: CMS is updating the wage index values according to the methodology used for 2011, but using more recent wage data. CMS is establishing a wage index budget-neutrality adjustment of 1.001520 under the ESRD PPS that will be applied to the ESRD PPS base rate. For facilities going through the transition, CMS is applying a wage index budget-neutrality adjustment factor of 1.002830 to the wage index values of the composite rate portion of the blended payment. CMS is also reducing the wage index floor by 0.05 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 ESRDB market basket minus productivity adjustment to the CY 2011 base rate, results in a CY 2012 ESRD PPS adjusted base rate of $234.81.
CMS is also adding the CY 2011 Part D per treatment payment amount of $0.49 for certain oral drugs included in the ESRD PPS 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 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 CY 2012 composite rate of $141.94 for those facilities that will be paid the blended rate during the second year of the transition.
Transition Period: The final rule implements the second year of the four year phase-in (or transition) period for the 13 percent of facilities that did not elect to be paid entirely under the ESRD PPS beginning in 2011. For CY 2012, payments during the transition period will consist of 50 percent based on the 
prior payment system (the basic case-mix adjusted composite rate, drug add-on, and items and services that were formerly separately paid under part B and certain drugs formerly covered under Part D), and 50 percent based on the ESRD PPS payment amount.
CHANGES TO PAYMENT SYSTEMS OTHER THAN THE ESRD PPS
Ambulance Fee Schedule: The final rule revises the ambulance fee schedule regulations to conform to the requirements of section 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA), which are scheduled to expire on Dec. 31, 2011.
Durable Medical Equipment: CMS is codifying the requirement that an item of medical equipment meet a minimum lifetime requirement (MLR) of three years to be considered durable for the purpose of determining if the item can be considered durable medical equipment (DME). This change will provide clarity regarding the definition of durability and will make the coding and coverage decision making process more efficient. This change does not affect items currently paid under Medicare’s DME benefit.
For more information about the final rule, please see: http://www.ofr.gov/OFRUpload/OFRData/2011-28606_PI.pdf . or
http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1
The final rule will be published in the Nov. 10, 2011, Federal Register.
For more information about the ESRD PPS and QIP, please see:
http://www.cms.gov/center/esrd.asp
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