CMS Proposes Update to ESRD Composite Rate and Revisions to Physician MCP

July 30, 2010

On July 13, 2010, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would make several changes to the current composite rate system of reimbursement for end-stage renal disease (ESRD) facilities. Some changes were also made to the Monthly Capitation Payment for physician services to ESRD patients. The changes were contained in the annual update proposed rule for “Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011.” Following is a brief analysis of those changes.

I. New ESRD Blended Payment Rate

Beginning on Jan. 1, 2011, providers will see the first signs of implementation of the ESRD bundled prospective payment system (PPS). The ESRD PPS will replace the familiar composite payment system that has been in place since 1983 and the basic case-mix adjusted composite payment system that has been in place since 2005. It also marks the beginning of a four-year transition period during which Medicare will pay a blended rate for ESRD services. If they so choose, providers may opt out of the transition period and immediately begin receiving payments under the ESRD PPS.

During the first year of the transition period, the blended rate will be based on 75 percent of the old basic case-mix adjusted composite payment system rate and 25 percent of the new ESRD PPS rate. Since the blended rate will include a portion of the ESRD basic case-mix adjusted composite payment system rate, CMS is proposing to update those rates accordingly. The overall net effect on the composite payment system rate will be an average increase of 2.2 percent for all providers. Independent ESRD facilities will see an average increase of approximately 2.2 percent, while hospital-based facilities will see an average increase of approximately 2.1 percent. Although the market basket component will receive a 2.5 percent increase, the drug add-on component will not be increased. As a result, the overall increase for all providers will be slightly lower than 2.5 percent.

Following is a brief summary of the key rate changes for the composite payment system portion of the new blended rate:

  1. The composite rate portion of the blended payment amount will be increased by 2.5 percent to a national average of $138.53.
  2. An update to wage index adjustment.
  3. The drug add-on rate will not be updated and will remain at $20.33 per treatment.
  4. The ESRD wage index floor will be reduced from .6500 to .600.

II. One Percent Incentive Payment for Quality Reporting

In 2007, CMS implemented the Physician Quality Reporting Initiative (PQRI), which provides an incentive payment to eligible providers who furnish certain quality data to CMS. In 2011, providers will continue to be eligible for a 1 percent incentive payment for participating in the PQRI. Incentive payments were previously only authorized through 2010. This proposed rule would extend eligibility for those payments through 2014. For years 2012 through 2014, providers will be eligible for a .5 percent incentive payment. Beginning in 2015, providers will be penalized for not submitting quality data.

III. One Visit Per Month Required for Home Dialysis

For home dialysis monthly capitation payment (MCP) services, CMS is proposing to require at least one in-person, face-to-face encounter with the physician or practitioner per month. This requirement, if made final, would be effective Jan. 1, 2011. In its commentary, CMS states that this is generally consistent with the current standards of medical practice and will help ensure appropriate, high quality medical care for home dialysis patients.

The proposed rule includes a detailed breakdown of how each component of the updated payment rates was determined by CMS. The proposed rule also includes a brief overview and history of the various payment system changes for ESRD providers over the last 10 years. This can be a useful resource to understand the evolution of the ESRD payment system over the last decade.

CMS expects the final rule to be published later this summer.