CMS Issues End-Stage Renal Disease Prospective Payment System Final Rule for 2024

November 6, 2023

On Oct. 27, 2023, 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 (CY) 2024. The ESRD prospective payment system (PPS) final rule also updates outlier policies and other payment adjustments, incorporates new treatment reporting requirements, and modifies certain aspects of the ESRD Quality Incentive Program (QIP) and the ESRD Treatment Choices (ETC) model.

Pursuant to the 2024 final rule, the CY 2023 ESRD PPS base rate of $265.57 will increase by $5.45 to $271.02 in CY 2024. CMS projects that payments to free-standing ESRD facilities and hospital-based ESRD facilities will increase by 2% and 3.1% respectively from CY 2023 to CY 2024, and total ESRD facility Medicare spending in 2024 will equal approximately $6.7 billion. In addition, the CY 2024 per-treatment payment rate for dialysis provided to individuals with acute kidney injury is $271.02, which will then be adjusted by the facility’s wage index.

The 2024 final rule did not significantly address industry participants’ long-standing concerns regarding significant increases in wage costs. Specifically, while the wage index for CY 2024 was updated using the data from the FY 2024 hospital wage index, the 2024 final rule did not change the calculation methodology for the wage index. Moreover, CMS is using the same labor-related share used in 2023 for CY 2024 (i.e., 55.2%). The 2024 final rule also maintains the 2023 ESRD PPS final rule’s 0.6 wage index floor and 5% permanent cap on any ESRD facility’s wage index decrease from its wage index in the prior year.

In addition, the fixed dollar loss (FDL) amount for pediatric beneficiaries will decrease from $23.29 to $11.32, while the FDL amount for adult beneficiaries will decrease from $73.19 to $71.76. The FDL amount is added to a patient’s predicted Medicare allowable payment (MAP) to create a benchmark that is compared to a patient’s actual imputed Medicare allowable payment (e.g., 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). The adjusted average MAP also decreased from $39.62 to $36.28. Accordingly, the MAP reduction and the FDL reduction for pediatric and adult beneficiaries will result in increased outlier payments. CMS made these changes in an effort to achieve its goal of causing outlier payments to constitute 1% of all ESRD payments. In CY 2022, CMS came close to achieving its goal, as all outlier payments represented 0.8% of total payments.

Currently, low-volume ESRD facilities that meet certain criteria are eligible for the low-volume payment adjustment (LVPA) and receive a 23.9% increase to the ESRD PPS base rate for all treatments at the facility. The 2024 final rule creates exceptions to LVPA requirements that permit LVPA ESRD facilities to (i) temporarily close and reopen due to a disaster or emergency; and (ii) exceed LVPA treatment count thresholds for patients displaced by a disaster or emergency and still be LVPA-eligible.

The 2024 final rule requires ESRD facilities, beginning Jan. 1, 2025, to record and report the amount of time in minutes that an in-center patient actively receives hemodialysis treatment (also known as “time on machine”). CMS intends to use this information to refine patient-level adjustment factors, such as age, body mass index and co-morbidities. Beginning Jan. 1, 2025, ESRD facilities must report, via ESRD PPS claims, the total number of billing units of any discarded renal dialysis drug or biological product from a single-dose container or single-use package and utilize the JZ modifier for all such drugs and biological products with no discarded amounts.

CMS also created new evaluation criteria under the Transitional Add-on-Payment Adjustment for the New and Innovative Equipment and Supplies (TPNIES) Program that will become effective Jan. 1, 2024. ESRD facilities that furnish products covered under TPNIES receive an add-on payment adjustment to facilitate beneficiary access to these products. Under the new evaluation criteria: (i) CMS will continue to review the TPNIES eligibility criteria sequentially, but no further analysis will be conducted after a product fails to meet any one of the six required criteria; (ii) CMS will consider a product as new if a complete application was submitted within three years from the date of the U.S. Food and Drug Administration (FDA) marketing authorization; and (iii) products with FDA exempt status that lack FDA marketing authorization will not meet the TPNIES newness criteria. (CMS received only one TPNIES application for CY 2024 for a vibration and ice pack device used to relieve pain associated with dialysis procedures that involve needles. This product did not meet the TPNIES eligibility criteria.)

Under the Transitional Add-on Payment Adjustment (TDAPA), CMS provides a payment adjustment for qualifying new renal dialysis drugs and biological products. Currently, the TDAPA adjustment lasts for two years. According to the 2024 final rule, a new post-TDAPA payment adjustment will be implemented that lasts for an additional three years after the initial two-year period ends. The post-TDAPA payment will be case-mix adjusted and set at 65% of expenditure levels for the applicable renal dialysis drug or biological product.

CMS revised the definition of Minimum Total Performance Score (mTPS), which CMS utilizes to reduce payments to low-performing ESRD facilities under the ESRD QIP. The definition was revised to clarify that a facility must perform at the median of national ESRD facility performance on all reporting measures, where the median is calculated using data from the most recently available year prior to the performance period. If there is an insufficient quantity of data available prior to the first performance period, CMS will set a proxy median of zero for the reporting measure until it has sufficient data.

Finally, the 2024 final rule modifies the ETC model to provide ETC participants with the right to request a review by the CMS administrator of a targeted review request determination if it is submitted within 15 calendar days of the targeted review request determination made by CMS. The CMS administrator must, within 45 days of the request, either decline to review the determination, render a final decision based on the review or take no action.

Additional information regarding the 2024 final rule, including proposed ESRD policies for PY 2026 and 2027, can be found in the CMS ESRD PPS Final Rule Fact Sheet.