CMS Announces New Prospective Payment System For End-Stage Renal Disease Facilities

CMS today issued a final rule that will change how Medicare pays for dialysis services for Medicare beneficiaries who have end-stage renal disease (ESRD).  CMS also issued a proposed rule that would establish a new quality incentive program (QIP) to promote high quality services in dialysis facilities by linking a facility’ s payments to performance standards.   The QIP is the first pay-for-performance program in a Medicare fee-for-service payment system. 

Both the new prospective payment system and the proposed QIP were required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  The law requires the ESRD PPS to pay dialysis facilities a single bundled rate for renal dialysis services and home dialysis, while the proposed QIP promotes quality of service furnished by these facilities by creating payment incentives for them to take steps to improve patient outcomes.  

Currently, Medicare pays for certain dialysis services under a partial bundled rate, referred to as the composite rate.  Payments for these composite rate services represent about 60 percent of total Medicare payments to ESRD facilities.  The remainder of Medicare spending for dialysis services is for separately billable items such as drugs, supplies and non-routine laboratory testing.   

The new ESRD PPS provides a single bundled case-mix adjusted payment to dialysis facilities for renal dialysis services such as dialysis treatments and supplies, certain ESRD-related drugs, and ESRD-related clinical laboratory tests beginning on Jan. 1, 2011.  Although CMS has determined that the definition of renal dialysis services includes ESRD-related oral drugs without injectable equivalents (or other forms of administration), CMS is delaying paying for those drugs under the ESRD PPS until Jan. 1, 2014. 

 The final rule sets a base payment rate of $229.63 for each dialysis treatment.  This payment rate includes payment for the services in the current composite rate, as well as most items and services that are currently paid separately.  The base rate was derived from 2007 claims data for both composite rate and separately billable services and updated to reflect projected 2011 prices. 

 The base payment rate would be adjusted for case-mix factors including patient’s age, body size, and time on dialysis.  By accounting for more characteristics of patients, the new PPS will target payments more appropriately, paying higher rates to those facilities with the most costly dialysis patients.    Separate case-mix adjustments will apply to pediatric patients.  In the final rule, CMS also adopts facility level adjustments including a geographic wage index and an adjustment for low-volume facilities that furnish fewer than 4,000 dialysis treatments and meet certain other criteria.   The final rule also includes an outlier payment policy that will pay facilities more for patients whose care is significantly more costly than the Medicare payment amount. 

In the ESRD PPS final rule, CMS also has reduced the number of case-mix co-morbidity adjustments.  In addition, at this time, CMS is not finalizing a case-mix payment adjustment based on the patient’s sex, race or ethnicity.  CMS has been reviewing and updating its processes for collecting and validating patient-level race and ethnicity data from dialysis facilities, which will ensure that CMS has the most accurate information possible for the races and ethnicities of all patients with ESRD.  As this work continues, CMS will assess whether this effort will position the Agency to incorporate such an adjuster for payment in the future.  CMS plans to continue studying the issue to ensure that all beneficiaries with ESRD have access to quality care, and in the meantime, plans to implement an active monitoring program to respond to concerns about disparities in access to care. 

In addition to finalizing the ESRD PPS payment policies and rates for calendar year 2011, CMS issued a proposed rule that would establish performance standards and a scoring methodology for the Quality Incentive Program required by MIPPA to ensure quality of care for patients with ESRD. 

In the ESRD PPS final rule, CMS adopted the three quality measures that will be used in the initial implementation of the QIP.  Two of these measures reflect whether patients are receiving appropriate treatment for anemia – that is, whether the amount of iron in the blood is neither too low, nor too high.   The third measure captures patients’ urea reduction ratio, which indicates how well dialysis treatments are removing wastes from patients’ bodies.   The law requires CMS to reduce the payment rates to a dialysis facility by up to 2.0 percent if that facility fails to meet or exceed the established performance scores with regard to performance standards established for each quality measure.  

Facilities failing to meet or exceed specified total performance scores will receive reduced reimbursement for dialysis services furnished on or after Jan. 1, 2012.  

The QIP proposed rule also discusses options for making individual facility performance scores available both to dialysis patients and to the general public as required by the law. 

CMS will accept comments on the QIP proposed rule until Sept. 24, 2010, and will respond to them in a final rule to be issued later this year. 

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