On October 27, the Centers for Medicare & Medicaid Services (CMS) issued the End-Stage Renal Disease (ESRD) Prospective Payment System final rule for calendar year (CY) 2024. See the fact sheet here. This rule finalizes the following changes:

• Increases ESRD payment rates by 2.1 percent,
• Finalizes a new transitional add-on pediatric ESRD dialysis payment adjustment,
• Finalizes a payment adjustment for certain new renal dialysis drugs and biological products after the Transitional Drug Add-on Payment Adjustment (TDAPA),
• Makes several changes to the ESRD Quality Incentive Program, and
• Makes additional changes to the ESRD Treatment Choices Model.

This rule is scheduled to be published in the Federal Register on November 6, 2023 and is effective January 1, 2024.

CMS ESTIMATES $190 MILLION PAYMENT INCREASE TO ESRD FACILITIES IN CY 2024

The ESRD Prospective Payment System (PPS) provides a single case-mix adjusted payment to ESRD facilities for renal dialysis services provided in an ESRD facility or in a Medicare beneficiary’s home. This bundled payment includes most drugs, services, supplies, and capital-related costs related to maintenance dialysis services. CMS adjusts ESRD PPS facility rates for geographic, low-volume service delivery, and other factors. CMS also provides additional ESRD PPS payment adjustments for the following:[1]

• Training add-on for home and self-dialysis modalities,
• Outlier payments for high-cost cases due to differences in the type or amount of medically necessary care,
• TDAPA for certain new renal dialysis drugs and biological products, and
• TDAPA for New and Innovative Equipment and Supplies (TPNIES) for certain new and innovative renal dialysis supplies and equipment.

For CY 2024, CMS finalizes a 2.1 percent increase in payments to ESRD facilities relative to CY 2023. This is more than the proposed 1.6 percent increase. For hospital-based facilities, CMS estimates a 3.1 (compared to the proposed 2.6) percent increase relative to CY 2023. CMS estimates that the Medicare program will pay $6.7 billion to ESRD facilities for furnishing renal dialysis services in CY 2024. This reflects a projected 4.3 percent decrease in Medicare fee-for-service ESRD enrollment.

For CY 2024, CMS finalizes a base rate of $ 271.02, which is a $5.45 increase to the CY 2023 finalized base rate of $265.57. This reflects CMS’s wage index budget neutrality adjustment (1.000031), a transitional pediatric ESRD add-on payment budget-neutrality adjustment factor of 0.999503, and a productivity-adjusted market basket update factor of 1.021.

CMS uses fiscal year 2024 hospital wage index data to update the ESRD wage index for CY 2024. CMS applies the wage index floor of 0.6000 and year-to-year five percent cap on wage index decreases, as finalized in CY 2023.

Further, CMS updates the outlier policy, pediatric patient fixed-dollar loss (FDL) amounts, and Medicare allowable payment (MAP) amounts using available 2022 claims data. CMS uses CYs 2020, 2021, and 2022 claims available data to update the FDL amount for adult patients. CMS finalizes updates to outlier payment amounts for CY 2024, as outlined in Tables 1 and 2 below.[2]

Table 1. Outlier Payment Changes for Pediatric Beneficiaries in CY 2024

	Final 2024 Amount	Proposed 2024 Amount	Final 2023 Amount
FDL	$11.32	$13.71	$23.29
MAP	$23.36	$24.53	$25.59

 

Table 2. Outlier Payment Changes for Adult Beneficiaries in CY 2024

	Final 2024 Amount	Proposed 2024 Amount	Final 2023 Amount
FDL	$71.76	$78.21	$73.19
MAP	$36.28	$38.58	$39.62

 

CMS’s AKI Payment Rate Mirrors ESRD Base Rate

Since CY 2017, Medicare provides coverage for renal dialysis services provided to individuals with acute kidney injury (AKI). CMS finalizes an updated payment rate of $271.02 for AKI payment in CY 2024, which mirrors the base rate for the ESRD PPS. For CY 2024, CMS estimates a 2.0 percent increase in payments to ESRD facilities for services provided to patients with AKI, relative to CY 2023. For hospital-based facilities, CMS estimates a 2.1 percent increase relative to CY 2023.CMS expects aggregate payments to ESRD facilities for renal dialysis services provided to AKI patients to increase by $1 million in CY 2024, relative to CY 2023.

CMS FINALIZES NEW DATA REQUIREMENTS ON ESRD PPS CLAIMS

CMS will require ESRD facilities to report the amount of time that a beneficiary spends receiving an in-center hemodialysis treatment (known as “time on machine”) on claims starting in 2025. CMS’s goal is to collect more data to better understand the alignment of resource use with payment to support equitable payment policies through adjustment factors in the future. Additionally, CMS will require reporting of discarded amounts of certain renal dialysis drugs and biological products from single-dose containers and single-use packages through the use of JW or JZ modifiers on claims, also effective 2025.

CMS FINALIZES A TRANSITIONAL PEDIATRIC ESRD ADD-ON PAYMENT ADJUSTMENT FOR PEDIATRIC ESRD PATIENTS

To improve access to and quality of care for the pediatric ESRD population, CMS finalized a Transitional Pediatric ESRD Add-on Payment Adjustment (TPEAPA) for dialysis treatments provided to Pediatric ESRD Patients. The adjustment will be set at 30 percent of the per-treatment amount (adjustment factor of 1.3) and will be effective starting January 1, 2024, for a period of 3 calendar years.

The purpose of this adjustment is to account for the extra costs incurred by the pediatric ESRD population and to financially benefit ESRD facilities struggling to cover the additional costs associated with this population. The adjustment is based on an analysis which estimated that pediatric ESRD patients have approximately 40 percent higher costs than adult patients, while current payment adjusters account for only 10 percent higher costs.

This payment adjustment is budget neutral and will result in a budget-neutrality adjustment factor of 0.999503, which will mean an estimated decrease of $0.14, to the ESRD PPS base rate for CY 2024. While this policy results in a decrease of the base rate, CMS notes the health equity implications of underpaying for pediatric ESRD patients. CMS expects that the TPEAPA will provide more accurate payment for pediatric ESRD patients.

CMS FINALIZES CLARIFICATIONS REGARDING TRANSITIONAL ADD-ON PAYMENT ADJUSTMENT FOR NEW AND INNOVATIVE EQUIPMENT AND SUPPLIES

In the CY 2020 ESRD PPS final rule, CMS introduced a transitional add-on payment adjustment for new and innovative equipment and supplies (TPNIES) under the ESRD PPS. This adjustment was established to support the use of beneficiary access to these new technologies in ESRD facilities. Current eligibility requirements for the TPNIES are outlined in 42 CFR §413.236(b). The following criteria must be met to qualify for TPNIES: [3]

1. The equipment or supply must be designated as a renal dialysis service by CMS,
2. It must be new, meaning it is within three years from the date of Food and Drug Administration (FDA) marketing authorization,
3. The item must be commercially available by January 1 of the relevant calendar year when the payment adjustment would take effect,
4. A complete HCPCS Level II code application must be submitted in accordance with the coding procedures specified on the CMS website, meeting the biannual Coding Cycle 2 deadline for DMEPOS items and services,
5. The equipment or supply must be innovative, meeting specified criteria,[4] and
6. The equipment should not be a capital-related asset, except for capital-related assets that are home dialysis machines.

CMS clarifies the sequential analysis of the six eligibility criteria for TPNIES. Once an item fails to meet one of the eligibility criteria, it will be deemed ineligible for the TPNIES. The analysis in the ESRD PPS final rule each year will focus on the criterion that is not met and any preceding criteria that have been fulfilled. The remaining criteria will not be included in the analysis presented in the final rule. This policy will take effect on January 1, 2024, and apply to the analysis of TPNIES applications for CY 2025 payment.

Additionally, CMS finalizes two proposals that aim to clarify two aspects of the TPNIES newness criterion for eligibility. First, CMS finalizes its proposal specifying that the applicant has 3 years from the date of FDA marketing authorization to apply for the TPNIES, based on the submission date of the application. This clarification ensures clarity regarding the 3-year newness period without changing the existing policy. Second, CMS clarifies that equipment or supplies with FDA Exempt status would not meet the newness criterion and, therefore, would not be eligible for the TPNIES. Devices with FDA Exempt status, primarily Class I and some Class II devices, are exempt from premarket notification requirements but still must comply with regulatory controls for safety and effectiveness. The TPNIES policy is limited to items that have received FDA marketing authorization.

ONLY APPLICANT FOR TPNIES DOES NOT MEET ELIGIBLITY CRITERIA

CMS solicited feedback on one TPNIES application received from Pain Care Labs,™ for their product, Buzzy® Pro, for CY 2024. Buzzy® Pro is a specific model of the Buzzy® device, which is designed to alleviate pain caused by needle procedures and provide temporary relief for minor injuries. CMS determined that the Buzzy® Pro did not sufficiently meet all eligibility criteria to qualify for the TPNIES for CY 2024. The applicant may be eligible to apply for TPNIES in future years.

CMS FINALIZES ADD-ON PAYMENT ADJUSTMENT FOR CERTAIN RENAL DIALYSIS DRUGS AND BIOLOGICALS

The TDAPA is a payment adjustment made under the ESRD PPS for certain new renal dialysis drugs and biological products. For drugs and biological products in existing ESRD functional categories, the TDAPA is paid for a 2-year period. Taking into account comments received in both the CY 2024 ESRD PPS proposed rule and the request for information included in the CY 2023 ESRD PPS proposed rule, CMS finalizes its proposal for a new add-on payment adjustment for certain new renal dialysis drugs and biological products after the end of the TDAPA period, which would be called the post-TDAPA payment adjustment. The payment adjustment would be case-mix adjusted and set at 65 percent of estimated expenditure levels for the given renal dialysis drug or biological product in the prior year. The post-TDAPA payment adjustment will be applied to all ESRD PPS payments and paid for 3 years.

The first drug that will meet these criteria in CY 2024 will be Korsuva® (difelikefalin), which fits into the existing ESRD PPS functional category for antipruritic drugs and biological products. The post-TDAPA add-on payment adjustment will begin April 1, 2024 and will be $0.2493.

CMS estimates that the overall TDAPA payment amounts in CY 2024 will be approximately $13.3 million. Of these payments, approximately $2.7 million would be attributed to beneficiary coinsurance amounts.

CMS FINALIZES EXCEPTION TO THE LOW-VOLUME PAYMENT ADJUSTMENT ATTESTATION PROCESS

CMS is finalizing changes to the low-volume payment adjustment (LVPA) methodology for CY 2024. In response to a disaster or emergency, CMS will permit an exception to the LVPA attestation process that would enable ESRD facilities to temporarily close and reopen. CMS will also provide the LVPA to facilities treating patients displaced by an emergency even when exceeding the low-volume threshold.

The current LVPA amount is 23.9 percent. This was finalized in the CY 2016 ESRD PPS final rule[5] in response to an analysis finding that low-volume ESRD facilities had higher costs relative to other ESRD facilities. However, the Government Accountability Office, the Medicare Payment Advisory Commission, and industry stakeholders have voiced concerns about the LVPA’s incentive structure, treatment threshold, administrative burden, and strict eligibility criteria. In response to these concerns, CMS requested feedback in the proposed rule on potential changes to the LVPA methodology and a potential adjustment accounting for isolation, rurality, and geographic factors. CMS will use these comments to inform future policy development.

CMS FINALIZES QUALITY PERFORMANCE CHANGES, INCLUDING THE ADDITION OF HEALTH EQUITY MEASURES

Under the ESRD Quality Incentive Program (QIP), CMS assesses the total performance of each facility on measures specified for a payment year and applies an appropriate payment reduction to each facility that does not meet a minimum total performance score (mTPS).

In the CY 2019 ESRD PPS final rule, CMS codified the term “minimum total performance score.” CMS finalized its proposal to update the mTPS definition to more accurately capture how CMS calculates the median of national ESRD facility performance on reporting measures. The median of national ESRD facility performance on the ESRD QIP reporting measures is calculated using the most recently available data prior to the applicable performance period, rather than from a “baseline period” as previously codified. CMS also finalized its proposal to set a proxy median at zero if there is insufficient data available to calculate a median for new measures, until sufficient data is available.

To simplify the ability of interested parties to find certain policies and better align ESRD QIP regulations with codified regulations for other quality reporting programs, CMS finalized its proposal to codify policies finalized in prior years related to measure adoption, retention, and removal.

Finalized Proposals for Payment Year 2026

CMS finalizes the following proposals for Payment Year 2026:

• add the Facility Commitment to Health Equity reporting measure to the ESRD QIP, which measures an ESRD facility’s commitment to health equity based on its answers to five equity related attestation-based questions. This measure was first adopted for use in the Hospital Inpatient Quality Reporting Program and aims to promote health equity and support ESRD facilities in identifying health disparities,
• update the COVID-19 Vaccination Coverage Rate Among Healthcare Personnel (HCP) reporting measure to align with updated CDC measure specifications,
• convert the Clinical Depression Screening and Follow-Up reporting measure to a clinical measure and update the scoring methodology to be more closely aligned with current clinical guidelines, and
• remove the Ultrafiltration reporting measure and Standardized Fistula Rate clinical measure from the ESRD QIP.

CMS made minor changes to the Facility Commitment to Health Equity reporting measure from the proposed rule to the final rule. These changes, which were limited to domains 2 and 5 of the measure, can be seen in Table 14 of the final rule.[6]

CMS estimates that the overall economic impact of the PY 2026 ESRD QIP will be approximately $136.9 million, as opposed to the $141.1 million estimate in the proposed rule. A facility that achieves a TPS under 53 will incur a payment reduction based on the TPS score outlined in Table 3.[7]

Table 3. Finalized Payment Reduction Scale for PY 2026

Total Performance Score	Reduction (%)
100-53	0%
52-43	-0.5%
42-33	-1.0%
32-23	-1.5%
22-0	-2.0%

Finalized Proposals for Payment Year 2027

To promote health equity and support ESRD facilities in identifying health disparities, CMS finalizes the following proposals for Payment Year 2027:

• add the Screening for Social Drivers of Health reporting measure to the ESRD QIP measure set, which is based on the percentage of patients that are screened for certain health-related social needs (HRSN), and
• add the Screen Positive Rate for Social Drivers of Health reporting measure to the ESRD QIP measure set, which is based on the percent of patients who screen positive for certain HRSNs.

These measures were first adopted for use in the Hospital Inpatient Quality Reporting Program. CMS estimates that the overall economic impact of the finalized policies for PY 2027 will be approximately $144.3 million, ($130.5 million in information collection burden and $13.8 million in estimated payment reductions across all ESRD facilities).

CMS FINALIZES CHANGES TO THE ESRD TREATMENT CHOICES MODEL

The ESRD Treatment Choices (ETC) Model[8] is an alternative payment model for the care of patients with chronic kidney disease (CKD), finalized in 2020 as part of the final rule “Medicare Program; Specialty Care Models to Improve Quality of Care and Reduce Expenditures” published on September 29, 2020 (85 FR 61114). The model tests the use of payment adjustments to encourage kidney transplants and home hemodialysis. The aim of this model is to encourage providers to invest in care coordination programs that will increase patient choice, reduce Medicare expenditures, and improve outcomes. The ETC model went into effect on January 1, 2021, and is mandatory for dialysis facilities and managing clinicians in randomly selected geographic areas across all 50 states and D.C.

The ETC model includes two payment adjustments:

• Home Dialysis Payment Adjustment (HDPA) – an upward adjustment on certain payments made to participating ESRD facilities under the ESRD Prospective Payment System (PPS) on home dialysis claims, and an upward adjustment to the Monthly Capitation Payment (MCP) paid to participating Managing Clinicians on home dialysis-related claims.
• Performance Payment Adjustment (PPA) – a positive or negative adjustment on dialysis and dialysis-related Medicare payments, for both home dialysis and in-center dialysis. This adjustment is based on ESRD facilities’ and Managing Clinicians’ home dialysis rate and transplant rate, among attributed beneficiaries during the applicable measurement year (MY).

These adjustments are made to the adjusted ESRD PPS base rate for selected facilities and to the monthly capitation payment for selected managing clinicians. Greater positive and negative adjustments for model participants are phased in over the duration of the model.

CMS proposed several changes to the ETC Model for CY 2024. As background, in the Medicare Specialty Care Models to Improve Quality of Care and Reduce Expenditures final rule,[9] CMS established policies for targeted reviews of the calculation of the ETC Participant’s Modality Performance Score (MPS). ETC Participants have 90 days following the availability of the MPS to submit and target review request and CMS responds to each targeted review request within the 90-day time period. CMS finalized its proposal to specify that the CMS Administrator may review targeted review requests when administrative review is requested by ETC Participants within 15 calendar days of a targeted review request determination made by CMS.

CMS also finalized its proposal that, within 45 days of the date of the ETC Participant’s request for administrative review, the CMS Administrator may (1) decline to review the targeted review request of a CMS determination, (2) render a final decision based on the CMS Administrator’s review of the targeted review request determination, or (3) choose to take no action on the request for administrative review. Additionally, CMS finalized that in situations where CMS declines an ETC Participant’s request for administrative review where CMS does not take any action on the ETC Participant’s request for administrative review by the end of the 45-day period, the targeted review request determination made by the CMS Administrator will be considered final.

CMS received five comments in response to these proposals, all of which were supportive. CMS anticipates these changes will ensure accountability in CMS decisions and will also ensure ETC Participants are aware that administrative review is available to ETC Participants who wish to seek additional review of the results of a targeted review request.

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This Applied Policy® Summary was prepared by April Gutmann with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at agutmann@appliedpolicy.com or at (202) 558-5272.

[1] See page 16 of the unpublished rule.

[2] See page 8 of the unpublished rule.

[3] See 42 CFR § 413.171

[4] See 42 CFR § 412.87(b)(1)

[5] 80 FR 69001

[6] See page 290 of the unpublished rule.

[7] See page 333 of the unpublished rule.

[8] https://innovation.cms.gov/innovation-models/esrd-treatment-choices-model

[9] 85 FR 61114