End Stage Renal Disease (ESRD) Prospective Payment System (PPS)

In the CY 2016 ESRD PPS final rule , CMS updated regulations at §413.174(f)(6) to incorporate ESRD drugs and biological products with only an oral form into the ESRD PPS bundled payment beginning January 1, 2025. See a summary of information (PDF) to operationalize the inclusion of oral-only renal dialysis service drugs and biological products effective January 1, 2025.

Expansion of the Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES)

CMS is expanding eligibility for the TPNIES to include certain capital-related assets that are home dialysis machines when used in the home for a single patient. As with other renal dialysis equipment and supplies potentially eligible for the TPNIES, CMS would evaluate the application to determine whether the home dialysis machine represents an advance that substantially improves, relative to renal dialysis services previously available, the diagnosis or treatment of Medicare beneficiaries, and meets the other requirements under § 413.236(b). CMS is finalizing additional steps the Medicare Administrative Contractors (MACs) would follow to establish the basis payment of the TPNIES for these home dialysis machines. CMS would pay 65 percent of the MAC-determined pre-adjusted reduced by an average per treatment offset amount of $9.32 for 2 calendar years. CMS is finalizing that after the 2-year TPNIES period ends, the home dialysis machines would not become eligible outlier services and no change would be made to the ESRD PPS base rate.

Adjustments to Dialysis Facility Claims Involving TPNIES CRA

In August 2022, CMS addressed an error in the programming for the 2022 Pricer for the End Stage Renal Disease (ESRD) Prospective Payment System (PPS). The ESRD Pricer software was not including the equipment off-set in the calculation for the transitional add-on payment adjustment for new and innovative equipment and supplies (TPNIES) capital related assets (CRA), as required by regulation. As a result, a corrected ESRD Pricer was deployed on August 15, 2022. The Medicare Administrative Contractors (MACs) will be automatically adjusting the related ESRD claims. Approximately 150 paid claims are expected to be adjusted. Please contact the appropriate MAC(s) for further questions regarding these claim adjustments.

ESRD PPS Basics

Section 1881(b)(14) of the Social Security Act requires a bundled PPS for renal dialysis services furnished to Medicare beneficiaries for the treatment of ESRD effective January 1, 2011. The ESRD PPS provides a patient-level and facility-level adjusted per treatment (dialysis) payment to ESRD facilities for renal dialysis services provided in an ESRD facility or in a beneficiary’s home. The bundled per treatment payment includes drugs, laboratory services, supplies and capital-related costs related to furnishing maintenance dialysis. The ESRD PPS provides a training add-on for home and self-dialysis modalities and additional payment for high cost outliers when there are unusual variations in the type or amount of specific medically necessary care, when applicable.

Under the ESRD PPS, there is a drug designation process to determine whether a newly marketed and available injectable or intravenous drug or biological is or is not included for in the ESRD PPS bundle amount. In addition, as part of the drug designation process, CMS determines when an oral-only renal dialysis service drug or biological is no longer oral-only.

The ESRD PPS provides the Transitional Drug Add-on Payment Adjustment (TDAPA) for new renal dialysis drugs and biological products that qualify under 42 CFR § 413.234. The ESRD PPS also provides the Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES) for new and innovative renal dialysis equipment and supplies that qualify under 42 CFR § 413.236.

The sections below provide information on:

Renal Dialysis Services

Renal dialysis services are all items and services used to furnish outpatient maintenance dialysis in the ESRD facility or in a patient’s home.

Renal dialysis services include but are not limited to:

• All items and services included under the composite rate as of December 31, 2010;
• Erythropoiesis stimulating agents (ESAs) and their oral or other forms of administration that are for the treatment of ESRD;
• Injectable drugs and biologicals and their oral or other forms of administration that are for the treatment of ESRD;
• Oral or other forms of non-injectable drugs and biologicals that are for the treatment of ESRD;
• Diagnostic laboratory tests that are for the treatment of ESRD;
• Home and self-dialysis training; and
• All supplies, equipment, and self-dialysis support services necessary for the effective performance of a patient’s dialysis furnished in the ESRD facility or in a patient’s home.
  • Support services may include:
    • visits by trained hospital or dialysis facility workers to check on the patient’s self-dialysis, to help in emergencies when needed, and to check dialysis equipment and water supply;
    • Monitoring access and related declotting or referring the patient; or
    • Direct nursing services include registered nurses, licensed practical nurses, technicians, social workers, and dietitian.

    The ESRD PPS makes payment on a per treatment basis. The ESRD PPS per treatment amount is the same for all ESRD beneficiaries including adult patients aged 18 + and pediatric patients aged 17 and under.

    ESRD facilities furnishing dialysis treatments in facility and in a patient’s home, regardless of modality, receives payment for up to three hemodialysis treatments per week, unless there is medical justification for more than three weekly treatments.

    Under the ESRD PPS, the beneficiary co­-insurance amount is 20 percent of the Medicare-approved amount for each dialysis treatment given in a dialysis facility or at home (including any applicable adjustment, outlier or add on amount), after the deductible.

    The Centers for Medicare and Medicaid Services (CMS) updates the per treatment payment amount annually by:

    • The ESRD bundled market basket minus a productivity adjustment;
    • The most current wage index budget neutrality adjustment factor; and
    • Any other applicable budget neutrality adjustment factor.

    The ESRD bundled market basket percentage increase factor minus a productivity adjustment factor updates the ESRD PPS base rate (per treatment payment) annually The market basket takes into account the increased costs of goods and services and reflects input price inflation facing providers in the provision of medical services.

    Patient-­Level Case­-mix Adjustments

    Characteristics of both adult and pediatric patients account for case­-mix variability and adjust the ESRD PPS base rate. The adult case-­mix adjusters include age, body surface area, low body mass index, four comorbidity categories (two acute and two chronic), and the onset of renal dialysis. Pediatric patient-­level adjusters consist of combinations of two age categories and two dialysis modalities.

    Facility-­Level Adjustments

    There are three facility­-level adjustments under the ESRD PPS. The low-volume payment adjustment accounts for ESRD facilities furnishing a low­-volume of dialysis treatments. The geographic wage index adjustment reflects urban and rural differences in area wage levels using an area wage index developed from Core Based Statistical Areas (CBSAs). The rural payment adjustment is available for ESRD facilities located in rural CBSAs.

    Training Add­-on Payment Adjustment

    CMS computes the training add­-on payment adjustment by using the national average hourly wage for nurses from the Bureau of Labor Statistics. The payment accounts for nursing time for each training treatment that is furnished and adjusted by the geographic area wage index. The training add­-on payment adjustment is available for adult and pediatric beneficiaries and applies to both peritoneal dialysis and hemodialysis training treatments.

    Outlier Policy

    The ESRD PPS provides additional payment for high cost outliers when there are unusual variations in the type or amount of medically necessary care. View the list of renal dialysis services that are included as outlier services.

    Transitional Drug Add-on Payment Amount

    As established in 42 CFR § 413.234 a new injectable or intravenous drug or biological used for the treatment of ESRD for which there is no current functional category and therefore is not considered accounted for in the ESRD PPS base rate is paid using a Transitional Drug Add-on Payment Adjustment (TDAPA). CMS bases the TDAPA on payment methodologies under section 1847A and would continue for a period of 2 years.

    Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies

    As established in 42 CFR § 413.236 certain new and innovative renal dialysis equipment or supplies furnished by ESRD facilities are paid using a Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES). The TPNIES will be based on 65 percent of the price established by the Medicare Administrative Contractors, using the information from the invoice and other relevant sources of information. CMS will pay the TPNIES for 2 calendar years, after which the equipment or supply will qualify as an outlier service and no change to the ESRD PPS base rate will be made.

    Consolidated Billing Requirements

    The ESRD PPS implemented consolidated billing requirements for limited Part B items and services included in the ESRD facility’s bundled payment. Certain laboratory services, drugs and biologicals, equipment, and supplies are subject to consolidated billing and are no longer separately payable when provided to ESRD beneficiaries by providers other than the ESRD facility.