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From Health Law Daily, October 30, 2017

Final ESRD PPS base rate lower than proposed

By Kayla R. Bryant, J.D.

CMS finalized the calendar year (CY) 2018 end-stage renal disease (ESRD) prospective payment system (PPS) base rate at $232.37, almost a full dollar lower than the proposed base rate of $233.31. In an advance release of a Final rule scheduled to publish in the Federal Register on November 1, 2017, CMS also expanded pricing options for drugs and biologics to all methodologies available under Sec. 1847A of the Social Security Act in order to allow for pricing of drugs and biologics that do not have an average sales price (ASP).

Rates. The base rate change between the Proposed and Final rules resulted from changes to the reduced market basket increase and application of the budget-neutrality adjustment factor (see ESRD PPS rate slightly increases, focus on quality through 2021, June 30, 2017). The reduced market basket increase, mandated by Sec. 3401(h) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), was proposed as 0.7 percent, but applied at 0.3 percent. The budget-neutrality factor was proposed at 1.000605, but applied at 1.000531.

Expenditures. The aggregate ESRD PPS expenditures are expected to increase by about $60 million for CY 2018, a reduction from the $100 million projection found in the Proposed rule. The decrease in the projection comes from the reduced base rate update factor. However, because the overall payment is projected to increase by 0.5 percent, CMS projects that beneficiary co-insurance payments will increase by about $10 million.

CMS’ finalized estimate of reimbursements paid to ESRD facilities for treatment provided to acute kidney injury (AKI) patients also varied drastically from the proposed estimate of $2 million. Based on facility claims data, the revised estimate is now $20 million.

Outlier drugs and biologics. An ESRD facility is eligible for an outlier payment for eligible drugs and biologics that were or would have been billable under Medicare Part B when treatment costs per beneficiary exceed an established amount. Previously, CMS based prices for drugs previously billable under Part B by the current ASP plus 6 percent. At the time, CMS justified this approach by noting that the data was updated quarterly and that this strategy was the basis for payment prior to the ESRD PPS. Concern later arose regarding beneficiary access to new products that did not have an ASP and therefore were not eligible for outlier payments.

In the Proposed rule, CMS proposed extending the use of all pricing methodologies under section 1847A for the purposes of the ESRD PPS outlier policies. In particular, CMS considers the wholesale acquisition cost (WAC) an appropriate pricing method when no ASP is available. Some commenters offered other alternative proposals, but CMS maintained its goal of ensuring that all eligible drugs and biologics are counted in the outlier calculation. Although ASP and WAC should allow for sufficient pricing for most eligible drugs and biologics, CMS noted that Medicare contractors are authorized to use invoice pricing whenever ASP and WAC data is unavailable. Because invoice pricing is "nearly universally available," and CMS believes that these three methodologies are sufficiently comprehensive, the agency is not finalizing its proposal to exclude certain drugs from the outlier calculation when pricing methodologies are not available.

Quality incentive program. The ESRD QIP reduces payments to facilities by up to 2 percent if facilities fail to meet or exceeded a minimum total performance score for a given year. CMS finalized various changes to the QIP, including changes to the payment year (PY) 2021 measure set as proposed in order to align measure specifications with the endorsement of the National Quality Forum (NQF). For PY 2021, the overall net reduction in payment to all facilities is expected to be $29 million under the QIP.

CMS finalized updates to the extraordinary circumstances exception (ECE), requiring facilities submit the request for the exception within 90 days following the date of the extraordinary event. Other changes to the ECE policy were finalized as proposed, such as allowing a facility to receive consideration for an ECE even if the facility remained open during the extraordinary circumstance.

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