On Nov. 1, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that will increase payments to end-stage renal disease (ESRD) facilities in calendar year 2025. The ESRD prospective payment system (PPS) final rule also includes updates to the wage index calculations, changes to outlier payments and the definition of outlier services, updates to the list of oral-only drugs and biologics included in the ESRD PPS payment bundle, changes to the low-volume payment adjustment (LVPA) eligibility criteria, coverage for in-home dialysis services for beneficiaries with acute kidney injury (AKI), and modifications to the ESRD quality incentive program (QIP) and ESRD treatment choices (ETC) model.
Pursuant to the ESRD final rule, the 2024 ESRD PPS base rate of $271.02 will increase by $2.80 to $273.82 in 2025. CMS projects that, as a result of this update to the base rate, payments to free-standing ESRD facilities and hospital-based ESRD facilities will increase by 2.6% and 4.5%, respectively, from 2024 to 2025, and total ESRD facility Medicare spending in 2025 will increase by 2.7% over 2024. The 2025 per-treatment payment rate for home dialysis provided to individuals with AKI will also be $273.82, as adjusted by the facility’s wage index, and will include home and self-dialysis training add-on payments.
ESRD Wage Index
Historically, CMS has used a hospital-wage index, derived from hospital cost report data, to adjust ESRD PPS payments to account for difference in wages based on a facility’s geographic location. For many years, freestanding facilities noted that these adjustments do not actually account for local wage changes. Under the ESRD final rule, CMS implements a new ESRD PPS-specific wage index that combines data from the Bureau of Labor Statistics Occupational Employment & Wage Statistics program and freestanding ESRD facility cost reports. While these changes address some of these concerns, the ESRD final rule does not address other concerns raised by commenters in response to CMS’ proposed ESRD rule for 2025, such as creating competitive wage issues in areas where there are wage index differences across adjacent local areas. For 2025, CMS will continue to use the same labor-related share (i.e., 55.2%), 0.6 wage index floor, and 5% cap on wage-index decreases that it used in 2024.
Changes to Outlier Payments
The fixed dollar loss (FDL) amount will increase from $11.32 to $234.26 for pediatric beneficiaries and decrease from $71.76 to $45.41 for adult beneficiaries. Medicare-allowable payment (MAP) amounts will increase from $23.36 to $59.60 for pediatric beneficiaries and decrease from $36.28 to $31.02 for adult beneficiaries in 2025. The FDL amount is added to a patient’s predicted MAP to create a benchmark that is compared to a patient’s actual imputed MAP, such as a measure of incurred dialysis costs eligible for outlier treatment, to determine whether a facility is eligible for an outlier payment (i.e., a payment to cover excess costs incurred by a facility). CMS noted that the significant increase in the FDL and MAP for pediatric beneficiaries is a result of the inclusion of costly composite rate drugs and biological products in the ESRD PPS payment bundle.
Expansion of Outlier Services
The ESRD final rule revises the definition of ESRD outlier services to include renal dialysis drugs and biological products that would have been included in the composite rate prior to the establishment of the ESRD PPS. This is a significant departure from the original intent of the outlier policy to limit outlier payments to drugs that were or would have been separately billable prior to 2011. Under the new definition, composite rate drugs and biologics that are eligible for post-transitional drug add-on payment adjustments (TDAPA) will also be covered as outlier services after the end of the three-year post-TDAPA adjustment period, regardless of whether they are substitutes for composite rate drugs or biologic products. CMS hypothesizes that adding dialysis drugs and biologics that previously were included in the composite rate to outlier services will protect drug and biologic access for certain beneficiaries, such as pediatric patients, who require higher utilization of these products.
Two-Tiered Low Volume Payment Adjustment (LVPA)
In the 2024 ESRD PPS final rule, CMS created exceptions for certain low-volume ESRD facilities to maintain their LVPA if the facility and its patient treatment count were affected by disasters or emergencies. In the ESRD final rule, CMS modified LVPA eligibility criteria by creating two LVPA tiers. A facility that furnishes less than 3,000 treatments per cost-reporting year will receive a 28.9% LVPA upward adjustment to the ESRD PPS base rate, and a facility that furnishes between 3,000 and 3,999 treatments per cost-reporting year will receive an 18.3% LVPA upward adjustment. Treatment counts are based on the median count of a facility over the past three cost-reporting years.
Oral-Only Drugs and Biologics in the ESRD PPS Bundled Payment
Beginning on Jan. 1, 2025, after many years of delay, renal dialysis drugs and biological products available only in an oral form will be included in the ESRD PPS bundled payment. CMS expects that incorporating oral-only drugs and biologics into the ESRD PPS bundle will increase spending for phosphate binders to $870 million in 2025 under the ESRD PPS program, leading to a $690 million decrease in spending under Medicare Part D for relevant ESRD beneficiaries.
For injectable and other equivalent phosphate binders approved prior to Jan. 1, 2025, CMS will pay the TDAPA based on 100% of the average sales price (ASP), increased by a fixed amount of $36.41 for incremental costs such as dispensing and storage of phosphate binders, which will be added to any monthly claim for which there is a TDAPA payment for phosphate binders. The TDAPA increase for phosphate binders will last for two years and is intended to increase the TDAPA amount by the monthly weighted average of 6% of ASP. For nonphosphate binder drugs and biologics, CMS will not follow the same process that it used to incorporate phosphate binders into the ESRD PPS. Accordingly, manufacturers of nonphosphate binder drugs and biologics will need to apply for a healthcare common procedure coding system code and TDAPA.
Quality Incentive Program (QIP)
Starting in payment year 2027, the current Kt/V dialysis adequacy comprehensive clinical measure will be replaced with a Kt/V dialysis adequacy measure topic comprised of four individual Kt/V measures: adult hemodialysis, adult peritoneal dialysis, pediatric hemodialysis and pediatric peritoneal dialysis. The total weight of the measure topic will remain limited to 11% of the total performance score (TPS), which is the weight of the current measure.
CMS will also remove the National Healthcare Safety Network (NHSN) dialysis event reporting measure from the QIP, beginning payment year 2027. However, facilities will still be required to fully comply with the NHSN dialysis event protocol and report all dialysis event data for the NHSN bloodstream infection clinical measure.
ETC Model
The ESRD final rule updates the definition of “ESRD beneficiary” at 42 C.F.R. § 512.310 to address concerns regarding erroneous ETC model attribution resulting from the use of ICD-10 code T86.12, which may have identified beneficiaries with delayed graft function as having a transplant failure. The existing definition includes ESRD beneficiaries in the ETC model if the beneficiary has a non-AKI dialysis or monthly capitation payment (MCP) claim less than 12 months after the beneficiary’s latest transplant date and has a kidney transplant failure diagnosis code documented on any Medicare claim. The diagnosis code requirement will be removed and replaced with new criteria to ensure that only eligible beneficiaries who received kidney transplants that failed within 12 months of receipt are attributed to the ETC model. (The new criteria require (i) two or more MCP claims in the 180 days following the transplant; (ii) 24 or more maintenance dialysis treatments at any time after 180 days following transplant; or (iii) indication of a transplant failure after the beneficiary’s date of transplant based on data from the Scientific Registry of Transplant Recipients.)
Additional information regarding the ESRD final rule can be found in the CMS ESRD Final Rule Fact Sheet.