On December 2, 2013, the Federal Register published CMS’s Final Rule regarding the prospective payment system (PPS) for End-Stage Renal Disease (ESRD). Most provisions are effective on January 1, 2014, with limited exceptions that go into effect on April 1, 2014. Highlights are discussed below.

ESRD PPS:

• The Final Rule updated the ESRD PPS base rate to $239.02 for calendar year (CY) 2014, which represents a decrease from the CY 2013 base rate of $240.36. CMS did not, however, implement the much more drastic reduction it had proposed to a rate of $216.95.  CMS is continuing to study how best to implement the Congressional direction to adjust ESRD rates to reflect the reduction in the use of drugs since 2007.
• The Final Rule adjusted the outlier service fixed-dollar amount for adult and pediatric ESRD patients. For pediatric patients, the fixed-dollar loss amount increased from $47.32 to $54.01 and the adjusted average outlier services Medicare Allowable Payments (MAPs) decreased from $41.39 to $40.49.  For adult beneficiaries, the fixed-dollar loss amount decreased from $110.22 to $98.67 and the adjusted average outlier services MAP amount decreased from $59.42 to $50.25.
• The Final Rule also discusses the application of ICD-10-CM Diagnoses codes to the comorbidity payment adjustment codes.  Effective October 1, 2014, CMS will implement the tenth revision of the ICD coding scheme. Accordingly, the Final Rule provides a crosswalk from ICD-9-CM to ICD-10-CM for codes that are subject to the comorbidity payment adjustment.
• CMS estimates that the ESRD PPS Final Rule will not result in any overall change in total payments to ESRD facilities, although hospital-based facilities will see a 0.8% increase in payments. The lack of an increase in aggregate ESRD PPS expenditures reflects a $240 million increase from the payment rate update, a $30 million increase due to updates to the outlier threshold amounts, a $20 million increase due to the change in the blend of payments, and a $290 million decrease in expenditures specifically related to the drug utilization adjustment.  The proposed rule submitted by CMS this past July would have resulted in a reduction in payments to ESRD facilities in CY 2014 of approximately $970 million.

ESRD Quality Incentive Program (QIP):

• The Final Rule also implemented requirements for the ESRD QIP. Among other things, CMS added, revised, and expanded measures for the ESRD QIP.
• CMS established CY 2014 as the performance period for QIP payment year 2016.
• For the ESRD QIP, CMS expects that in payment year 2016, total payments will be reduced by approximately $15.1 million.

Durable Medical Equipment, Prosthetics, Orthotics, and Supplies:

• The Final Rule provided clarification on the definition of routinely purchased durable medical equipment (DME) and on the grandfathering provision of the DME three-year minimum lifetime requirement. CMS noted that the health care industry and beneficiaries have come to rely on items that qualified as DME prior to January 1, 2012 regardless of whether those items met the three-year minimum lifetime requirement set forth in section 414.202. Accordingly, CMS will not reopen those prior decisions and reclassify the equipment in light of the new three-year standard.
• CMS also implemented budget-neutral fee schedules for splints and casts and intraocular lenses inserted in a physician's office.

To view the final rule, click here.

Reporter, Isabella Edmundson, Atlanta, +1 404 572 3527, iedmundson@kslaw.com.