medical equipment


New CMS regulations for ESRD and Durable Medical Equipment

Final rule includes updates to competitive bidding process

The rule finalizes a restructuring of payments for kidney dialysis and makes changes intended to encourage the use of innovative drug therapies. The final rule also updates the fee schedule for durable medical equipment, which is particularly important given that CMS expects a temporary gap period in the entire competitive bidding program for durable medical equipment to run from January 1, 2019, through December 31, 2020.

November 14, 2018 | Health care

On November 14, 2018, the Centers for Medicare and Medicaid Services published a final rule on the End-Stage Renal Disease Prospective Payment System (ESRD PPS) for 2019, Durable Medical Equipment (DME), Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) and related programs.

The final rule makes technical adjustments to the bundled payment for the ESRD PPS and finalizes policies aimed at easing the clinician burden under the ESRD Quality Incentive Program. In addition, the final rule makes updates to the fee schedule for DME for the first year of an expected two-year temporary gap period in the competitive bidding program for DME.

Highlights of key finalized policies are provided below:

End-stage renal disease (ESRD)

The statute requires that ESRD dialysis payments are structured under a Prospective Payment System (PPS). CMS finalized the ESRD PPS base rate for 2019 at $235.27, an increase of $2.90 from the 2018 base rate. The adjustment takes into account a 1.3 percent productivity-adjusted market basket increase that is then adjusted downwards by wage indices and a budget-neutrality coefficient.

For patients with Acute Kidney Injury (AKI), the dialysis payment rate for 2019 payment rate also is $235.27.

Changes to outlier payment policy

The final rule rebases outlier payment levels based on 2017 claims data. Outlier payments for 2018 represented 0.8 percent of overall ESRD payments, less than the target rate of 1 percent. The use of claims data is projected to meet the 1 percent target for a 20 percent increase in overall outlier payments made in 2019.

The 2019 Fixed-Dollar Loss (FDL) amount to qualify for an outlier payment for pediatric beneficiaries will increase from $47.79 to $57.14, and the Medicare Allowable Payment (MAP) amount will decrease from $37.31 to $35.18. For adults, the final FDL amount will decrease from $77.54 to $65.11, and the MAP amount decreases from $42.41 to $38.51.

Transitional Drug Add-on Payment Adjustment (TDAPA) expansion

Beginning on January 1, 2020, CMS will allow all new renal dialysis drugs and biological products approved by the Food and Drug Administration to be eligible for TDAPA on or after that date, regardless of whether they fit into an existing ESRD PPS functional category. The rule change is intended to encourage competition and innovation in provider use of TDAPA drugs.

Comorbidity adjustment burden reduction

As part of CMS’ larger efforts towards burden reduction, the final rule states that CMS will now rely on International Classification of Diseases (ICD) documentation protocols for purposes of the comorbidity adjustment. The current system requires ESRD facilities to document results from certain diagnostic tests in order to qualify for the payment adjustment.

ESRD quality incentive program (QIP)

The ESRD QIP is organized around measures in four domains:

  • Patient & Family Engagement
  • Care Coordination
  • Clinical Care
  • Safety

In line with other recent rulemaking and the general movement towards burden reduction, CMS finalized a proposal to remove four performance measures for 2019, affecting payment adjustments for the 2021 payment year.

CMS also finalized the addition of two measures for the 2020 performance year, which will affect payment adjustments for 2022.

The Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) and fee schedule payment rules.

The final rule implements statutory requirements under the 21st Century Cures Act that requires CMS to take into account various factors when making any adjustments to the fee schedule amounts starting on January 1, 2019. The factors stakeholder input, the highest bid by a winning supplier in a Competitive Bidding Area (CBA), and a comparison of three factors in relation to non-CBAs and CBAs:

  • The average travel distance and cost associated with furnishing items and services in the area
  • The average volume of items and services furnished by suppliers in the area
  • The number of suppliers in the area

Additionally, the final rule makes a number of technical changes to the CBP bidding and pricing methodologies, with the intent of bringing market forces to bear, and streamlining the bidding process.

Updates to the fee schedule are particularly important in this final rule because current contracts for the DMEPOS CBP will expire December 31, 2018, and the process for recompeting these contracts with suppliers under DMEPOS CBP has not been initiated. As a result, CMS expects a temporary gap period in the DMEPOS CBP to run from January 1, 2019, through December 31, 2020.

Of particular note, the bidding process will center on pricing for a lead item in a bidding category, as opposed to the current system of weighing all items within a category. The definition of a lead item is revised to refer to ‘the item in a product category with multiple items with the highest total nationwide Medicare allowed charges of any item in the product category prior to each competition.”

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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Anne Phelps

Deloitte Risk and Financial Advisory
US Health Care Regulatory leader
Deloitte & Touche LLP


Daniel Esquibel
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Deloitte Risk and Financial Advisory
Deloitte & Touche LLP


Ethan Joselow

Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

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