CMS Fact Sheet for the New Dialysis Bundle

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Editor’s Note: The final bundling rule is quite large, so the Centers for Medicare & Medicaid Services released the fact sheet below on July 26  to help boil down the 923-page PDF into talking points to help the renal community start digesting the why’s and how’s of the new payment system. You can read the entire final rule HERE.

OVERVIEW

The Centers for Medicare & Medicaid Services (CMS) issued a final rule on July 23, 2010 that creates a new bundled prospective payment system (PPS) for facilities that furnish renal dialysis services and home dialysis to Medicare beneficiaries with End-Stage Renal Disease (ESRD).  Under the new ESRD PPS, CMS will make a single bundled payment to the dialysis facility for each dialysis treatment that will cover all renal dialysis services and home dialysis.  The new bundled payment system will be effective for dialysis treatments furnished to beneficiaries on or after Jan. 1, 2011.  It replaces the current system which pays facilities a composite rate for a defined set of items and services, while paying separately for drugs, laboratory tests, or other services that are not included in the composite rate. 

At the same time, CMS issued a proposed rule that would create a new Quality Incentive Program (QIP) for dialysis services that will link a facility’s payment to how well it meets the QIP performance standards.  The QIP, which is the first pay-for-performance program in a Medicare fee-for-service payment system, will affect payments for dialysis services beginning on or after Jan. 1, 2012.  The QIP is discussed in a separate fact sheet also issued today.

BACKGROUND

Medicare makes payments for dialysis services to approximately 600 hospital-based and 4,300 independent ESRD facilities.  Currently, Medicare makes a composite rate payment to ESRD facilities for furnishing outpatient maintenance dialysis in the facility or in the beneficiary’s home.  The composite rate payment covers dialysis treatment costs and certain routinely furnished ESRD-related drugs, laboratory tests, and supplies.  The composite rate is adjusted by a drug add-on payment that accounts for changes in the drug pricing methodology that occurred in 2005, and by basic case-mix adjustment factors including age and body size.  A special adjustment is applied for services to pediatric patients.  In addition, the composite rate is adjusted for geographic differences in costs using a wage index.  For 2010, the unadjusted composite rate is $135.15 and the drug add-on payment is $20.33.

The composite rate does not include a number of other ESRD-related items and services, particularly injectable drugs, such as erythropoietin (EPO) to treat ESRD-associated anemia, iron sucrose, vitamin D, and non-routine laboratory tests. These items and services are currently paid separately under Medicare.  Over time, payments for separately billed items and services have increased dramatically.  In 2007 (the base utilization year used by CMS to determine the new ESRD PPS payment rates), Medicare paid approximately $9.2 billion for dialysis and related services, of which about $5.7 billion, or 62 percent, was paid under the composite rate, while about $3.5 billion, or 38 percent, was paid for separately billable ESRD-related items and services, including injectable drugs, non-routine laboratory tests, supplies and services for home dialysis patients who deal directly with a durable medical equipment supplier, and ESRD-related drugs that are currently covered under Part D. 

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended the Social Security Act to require CMS to develop a new, fully bundled prospective payment system for renal dialysis services to replace the existing composite rate payment methodology.  MIPPA also mandated that the estimated total amount of payments for renal dialysis services for 2011 be 98 percent of the estimated total amount of payments that would have been made in 2011 if the ESRD PPS had not been implemented.  MIPPA also required that CMS develop and implement a QIP to improve the quality of care facilities provide to dialysis patients.  Beginning for services on or after Jan. 1, 2012, facilities that failed to meet the QIP performance standards would have their payments reduced.

The law further required CMS to phase in the new bundled payment system over a four-year period.  However, facilities will be given the opportunity to choose to be paid entirely under the new payment system beginning on January 1, 2011.

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