WASHINGTON, D.C. (June 29, 2016)—On June 24, CMS issued a proposed rule that would update 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 January 1, 2017. This rule also proposes new quality measures to improve the quality of care by dialysis facilities treating patients with end-stage renal disease.

The ESRD PPS proposed rule is one of several rules for calendar year 2017 that reflect a broader Administration-wide strategy to deliver better care at lower cost by finding better ways to deliver care, pay providers, and use information. Provisions in these rules are helping to move our health care system to one that values quality over quantity and focuses on achieving better health outcomes, preventing disease, helping patients live successfully at home, helping manage and improve chronic diseases, and fostering a more efficient and coordinated health care system.

This rule also implements the Trade Preferences Extension Act of 2015 provisions regarding the coverage and payment of renal dialysis services furnished by ESRD facilities to individuals with acute kidney injury.

In addition, the ESRD PPS proposed rule proposes changes to the ESRD Quality Incentive Program (QIP), including for payment years (PYs) 2018, 2019, and 2020, under which payment incentives are made to dialysis facilities to improve the quality of care that they provide. Under the ESRD QIP, facilities that do not achieve a minimum Total Performance Score (TPS) with respect to quality measures receive a reduction in their payment rates under the ESRD PPS.

This rule also addresses issues related to the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) Competitive Bidding Program (CBP).

CMS is proposing to require bidding entities to obtain and provide proof of a bid surety bond for each competitive bidding area (CBA) in which the entity submits its bid(s), in accordance with Section 1847(a)(1)(G) of the Social Security Act, as added by section 522(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

The rule also proposes revisions to the existing state licensure requirement at §414.414(b)(3), and proposes to expand suppliers’ appeal rights in the event that CMS takes one or more of the breach of contract actions specified in §414.422(g)(2).

Finally, the proposed rule would change the methodologies for adjusting DMEPOS fee schedule amounts using information from the DMEPOS Competitive Bidding and for establishing single payment amounts under the Competitive Bidding Programs for certain groups of similar items (e.g., various types of walkers) with different features (e.g., walkers with wheels versus walkers without wheels). Changes are also proposed to the methodology for establishing bid limits for items under the DMEPOS Competitive Bidding Program.

Changes to the ESRD PPS for CY 2017:
ESRD PPS Background: Section 153(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended the Social Security Act to require CMS to implement a bundled PPS for renal dialysis services furnished to Medicare beneficiaries for the treatment of ESRD effective January 1, 2011. The bundled payment under the ESRD PPS includes all renal dialysis services furnished for outpatient maintenance dialysis, including drugs and biologicals (with the exception of oral-only ESRD drugs until 2025) and other renal dialysis items and services that were formerly separately payable under the previous payment methodologies. The bundled payment rate is case-mix adjusted for a number of factors relating to patient characteristics. There are also facility-level adjustments for ESRD facilities that have a low patient volume or rural locality, and for wage index. An ESRD facility may be eligible for outlier payments for high-cost patients. Under the ESRD PPS for CY 2017, Medicare expects to pay approximately $9.0 billion to approximately 6,000 ESRD facilities for the costs associated with furnishing chronic maintenance dialysis services.

Update to the ESRD PPS Base Rate: The proposed CY 2017 ESRD PPS base rate is $231.04. This amount reflects a reduced market basket increase as required by section 1881(b)(14)(F)(i)(I) of the Act (0.35 percent), application of the wage index budget-neutrality adjustment factor (0.999552), as well as the application of the home and self-dialysis training budget-neutrality adjustment factor (0.999729). The proposed CY 2017 ESRD PPS base rate is an increase of $0.65 from the CY 2016 base rate of $230.39 x 1.0035 = $231.20; $231.20 x 0.999552 = $231.10; $231.10 x 0.999729 = $231.04.

Annual Update to the Wage Index and Wage Index Floor: The ESRD wage indices are adjusted on an annual basis using the most current hospital wage data and the latest Core-Based Statistical Area (CBSA) delineations to account for differing wage levels in areas in which ESRD facilities are located. For CY 2017, CMS is not proposing any changes to the application of the wage index floor, and we propose to continue to apply the current wage index floor (0.4000) to areas with wage index values below the floor.

Update to the Outlier Policy: Consistent with the proposal to annually update the outlier policy using the most current data, CMS is proposing to update the outlier services fixed dollar loss amounts for adult and pediatric patients and Medicare Allowable Payments (MAP) for adult patients for CY 2017 using 2015 claims data. Based on the use of more current data, the fixed-dollar loss amount for pediatric beneficiaries would increase from $62.19 to $67.44 and the MAP amount would increase from $39.20 to $39.92, as compared to CY 2016 values. For adult beneficiaries, the fixed-dollar loss amount would decrease from $86.97 to $83.00 and the MAP amount would decrease from $50.81 to $47.26. In CY 2015, outlier payments were 0.9 percent of total ESRD PPS payment, that is, slightly less than the 1.0 percent target for outlier payments. Using CY 2015 claims data to update the outlier MAP and fixed dollar loss amounts for CY 2017 will increase outlier payments for ESRD beneficiaries requiring higher resource utilization.

Impact Analysis: CMS projects that the updates for CY 2017 will increase the total payments to all ESRD facilities by 0.5 percent compared with CY 2016. For hospital-based ESRD facilities, CMS projects an increase in total payments of 0.7 percent, while for freestanding facilities, the projected increase in total payments will be 0.5 percent

Home and Self-Dialysis Training Add-on Payment Adjustment: CMS is proposing to increase the total number of hours of training by a registered nurse for peritoneal dialysis (PD) and hemodialysis (HD) that is accounted for by the home and self-dialysis training add-on payment adjustment. The current home and self-dialysis training add-on is $50.16, which reflects 1.5 hours of nurse training. CMS is proposing to calculate the increase based on the average treatment times and weights for each modality. We propose to use these as proxies for the total time spent by nurses training beneficiaries for home or self-dialysis, with the assumed hourly wage for a nurse providing dialysis training for 2017 being $35.93. Under this proposal, CMS would increase the hours of nurse training time to 2.66 hours, which would result in a home and self-dialysis training add-on payment adjustment of $95.57.

Payment for Hemodialysis When More than Three Treatments are Furnished per Week: CMS is proposing an equivalency payment for HD when more than three treatments are furnished per week, similar to what is applied to PD. Specifically, to calculate the total weekly amount that would be paid for three HD treatments per week and divide that weekly number by the number of treatments furnished in a week when more than three treatments per week are furnished.

Coverage and Payment for Renal Dialysis Services Furnished to Individuals with Acute Kidney Injury (AKI):
In accordance with sections 1861(s)(2)(F) and 1834(r) of the Act, as amended by sections 808(a) and 808(b), respectively, of the Trade Preferences Extension Act (TPEA), CMS will provide coverage and payment for renal dialysis services furnished on or after January 1, 2017 by an ESRD facility to an individual with AKI. Under the law, payment will be in the amount of the ESRD PPS base rate, as adjusted by the wage index. The Secretary has discretion to apply other adjustment factors utilized under the ESRD PPS, however CMS is not proposing any other adjustments at this time. CMS is proposing that drugs, biologicals, laboratory services, and supplies furnished to beneficiaries with AKI that are not considered to be renal dialysis services but that are that are related to the dialysis as a result of their AKI would be separately payable.

Changes to the ESRD QIP 
ESRD QIP Background: Section 153(c) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended the Social Security Act to require CMS to establish an ESRD QIP that selects measures, establishes performance standards, specifies a performance period for each payment year (PY), assesses the total performance of each facility, applies an appropriate payment reduction to each facility that does not meet a minimum TPS, and publicly reports the results. The ESRD QIP is intended to promote high-quality care by dialysis facilities treating beneficiaries with ESRD. This program changes the way CMS pays for the treatment of ESRD patients by linking a portion of payment directly to facilities’ performance on quality measures. The ESRD QIP will reduce payments by up to two percent to ESRD facilities that do not meet or exceed a minimum TPS.

Changes to the PY 2018 ESRD QIP: The PY 2018 ESRD QIP measure set, last updated as part of the CY 2016 ESRD PPS Final Rule (80 FR 68968 – 69077), contains eight clinical measures and three reporting measures encompassing anemia management, dialysis adequacy, vascular access type, patient experience of care, infections, hospital readmissions, and mineral metabolism management.

CMS has not proposed any new clinical or reporting measures for the PY 2018 ESRD QIP in the CY 2017 ESRD PPS Proposed Rule. CMS nevertheless proposes two substantive changes to the Hypercalcemia clinical measure to ensure that the measure remains in alignment with the measure specifications endorsed by the National Quality Forum (NQF). These changes involve updating the measure’s technical specifications for PY 2018 and future years to include plasma as an acceptable substrate in addition to serum calcium, as well as changing the denominator definition to include patient-months in the denominator even in the event that a facility reported no calcium values during the three-month study period.

Changes to the PY 2019 ESRD QIP: The PY 2019 ESRD QIP measure set, also finalized in the CY 2016 ESRD PPS Final Rule, contains seven clinical measures and five reporting measures encompassing anemia management, dialysis adequacy, vascular access type, patient experience of care, infections, mineral metabolism management, safety, pain management, depression management, and hospital readmissions. This represents an evolution of the program to encompass more quality-of-life considerations.

CMS proposes to create a new Safety Measure Domain as a third category of measures for PY 2019. To do so, CMS proposes to reintroduce the Expanded National Healthcare Safety Network (NHSN) Dialysis Event reporting measure into the ESRD QIP measure set for PY 2019 and to combine this measure with the existing NHSN Bloodstream Infection (BSI) clinical measure in a new NHSN BSI measure topic, which will be the only measure topic in this new Safety Measure Domain. CMS wants to encourage facilities to provide full and accurate disclosure of dialysis-event data by combining the requirement that facilities report a full twelve months of data with its clinical evaluation of facility performance in reducing infections. For PY 2019, CMS proposes to apportion 75 percent of a facility’s TPS to the Clinical Measure Domain, 15 percent to the proposed Safety Measure Domain, and 10 percent to the Reporting Measure Domain.

Proposals for the PY 2020 ESRD QIP: The PY 2020 ESRD QIP measure set contains eight clinical measures and seven reporting measures encompassing anemia management, dialysis adequacy, vascular access type, patient experience of care, infections, mineral metabolism management, safety, pain management, depression management, and hospital readmissions.

For PY 2020, CMS proposes to apportion 80percent of a facility’s TPS to the Clinical Measure Domain, and 10 percent each to the Reporting Measure Domain and the Safety Measure Domain.

In addition to the clinical measures finalized for PY 2019, CMS proposes to add the Standardized Hospitalization Ratio (SHR) clinical measure. This addition reflects CMS’s priority to ensure that the ESRD QIP maintains the most broadly applicable clinical measures that capture the quality of care provided to as many beneficiaries with ESRD as possible.

In addition to the reporting measures previously finalized for use in the PY 2019 ESRD QIP, CMS proposes to adopt a new Ultrafiltration Rate reporting measure. CMS also proposes to replace the existing Mineral Metabolism reporting measure (calculated in part using claims data) with a new Serum Phosphorus reporting measure that uses CROWNWeb data.

Additional ESRD QIP Components: CMS proposes to continue CMS’s pilot program to validate data that facilities enter into CROWNWeb. The Proposed Rule also proposes to increase the size of the NHSN validation study and to revise the methodology to determine whether a facility reported dialysis events for patients in accordance with the NHSN Dialysis Event Protocol.

Changes to the DMEPOS Competitive Bidding Program:
BACKGROUND: Section 1847 of the Act, as amended by section 302(b)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108–173), requires the Secretary to establish and implement the DMEPOS CBP in areas throughout the United States. Under the program, DMEPOS suppliers compete to become Medicare contract suppliers by submitting bids to furnish certain items in CBAs. Section 522(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) (MACRA) now requires a bid surety bond and applicable state licensure for bidding entities.

Bid Surety Bond: The proposed rule requires bidding entities to obtain a bid surety bond from an authorized surety on the Department of the Treasury’s Listing of Certified Companies, for each CBA associated with their bid. CMS proposes that the bid surety bond, set at $100,000, indicate the CBA specific to that bond.

This rule also proposes forfeiture conditions for these bid surety bonds. In the event that a bidding entity does not accept a contract offer(s) when its composite bid is at or below the median composite bid rate for suppliers used in the calculation of the single payment amount(s), the bid surety bond(s) for the applicable CBA(s) will be forfeited and CMS will collect on the bid surety bond(s). In instances where the bidding entity does not meet the bid surety bond forfeiture conditions specified in the rule, the bid surety bond liability will be returned to the bidding entity within 90 days of the public announcement of the contract suppliers for the CBA.

Bidding entities that provide a falsified bid surety bond will be prohibited from participation in the DMEPOS CBP for the current round of competition in which they submitted a bid, as well as from the next round of competition. Bidding entities that provide a falsified bid surety bond will also be referred to the Office of Inspector General and Department of Justice for further investigation. The proposed rule also specifies that if CMS finds that a bidding entity has accepted a contract offer and then breached the contract in order to avoid bid surety bond forfeiture, the breach will result in termination of the contract and preclusion from participation in the next round of competition in the DMEPOS CBP.

State Licensure: This rule proposes to revise the regulation to align with section 1847(b)(2)(A) of the Act, as amended by section 522(b) of MACRA, to state that a contract will not be awarded to a bidding entity unless the entity meets applicable state licensure requirements. This does not reflect a change in policy as CMS already has a regulation in place that requires suppliers to meet applicable State licensure requirements.

Appeals Process for a Breach of Contract Action(s): This rule proposes to expand the CMS regulations by providing suppliers an appeals process for all breach of contract actions that CMS may take under the DMEPOS CBP, rather than just for contract termination actions. As a result, CMS will no longer be issuing a notice of termination, but rather a notice of breach of contract, which will include any breach of contract action(s) CMS intends to take. The proposed rule also removes certain breach of contract actions from §414.422(g)(2) and references to contract termination throughout §414.423.

Bid Limits: This rule proposes that bid limits for individual items for future rounds of competitions under the DMEPOS CBP would be based on the fee schedule rates for the items before they are adjusted based on competitive bidding information. This would avoid a downward trend where the new, lower bid limits apply to each subsequent round of bidding based on fee schedule rates adjusted using bidding information from the previous round. This would help to enhance the long term viability of the program and would allow suppliers to take into account both decreases and increases in costs in determining their bids, while ensuring that payments under the program do not exceed the amounts that would otherwise be paid had the DMEPOS CBP not been implemented.

Changes to the DMEPOS Competitive Bidding Program and Fee Schedule for Similar Items with Different Features:
CMS is proposing to revise inverted prices for similar items with different features under competitive bidding prior to adjusting fee schedule amounts paid in non-competitive bidding areas. This would be done using the weighted average of the prices for the similar items in a product category as the revised price for the items that would then be used to adjust the fee schedule amounts. CMS is also proposing to address situations where price inversions have occurred in the past under the bidding programs by adding an alternative “lead item” bidding methodology for future rounds of competitions. Under this method, a supplier would submit one bid for a combination of HCPCS codes for similar items with different features. The bid for these combination of HCPCS codes would be based on the lead item, which is the item with the most allowed services among the similar items. The payment rate for the lead item would be based on the median of the bids, while the payment rate for the other codes with different features would be based on a percentage of the rate set for the lead code based on the percentage difference in payment for the codes under the historic fee schedule rates.

The Comprehensive ESRD Care Model:
The Centers for Medicare & Medicaid Services (CMS) announced a Request for Applications (RFA) for the Comprehensive ESRD Care (CEC) Model. Applicants will have the opportunity to apply to join the Model starting in its second year, on January 1, 2017.

The CEC Model is designed to identify, test, and evaluate new ways to improve care for Medicare beneficiaries with End-Stage Renal Disease (ESRD). Through the CEC Model, CMS will partner with health care providers and suppliers to test the effectiveness of a new payment and service delivery model in providing beneficiaries with person-centered, high-quality care. Dialysis providers, nephrologists, and other providers form ESRD Seamless Care Organizations (ESCOs), which are responsible for coordinating care and improving health outcomes for aligned beneficiaries, and are eligible for shared savings when total cost of care is reduced and quality is improved.

The CEC Model currently has 13 ESCOs participating in the model, including 12 ESCOs from Large Dialysis Organizations (LDOs) and 1 from a non-Large Dialysis Organization (Non-LDO).

CMS is also soliciting stakeholder input on a number of other approaches to improving care for beneficiaries with chronic kidney disease and ESRD.

Visit cms.gov for more information.