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CMS Releases Cy 2023 End-Stage Renal Disease Prospective Payment System Proposed Rule


On June 21, 2022, the Centers for Medicare & Medicaid Services (CMS) released the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) Calendar Year (CY) 2023 Proposed Rule (CMS1768-P). The proposed rule includes changes to the base payment rate, updates to the ESRD Quality Incentive Program (QIP) and changes to the ESRD Treatment Choices (ETC) Model. It also contains several requests for information (RFIs) and considers applications for the Transitional Add-On Payment for New and Innovative Equipment and Supplies (TPNIES) for three products.

The proposed rule generally builds upon policies finalized in last year’s ESRD payment rule that sought to improve health equity and enhance access to treatment options, including home dialysis. If finalized, the changes in the proposed rule would take effect January 1, 2023. Comments on the proposed rule are due by August 22, 2022.

Key Takeaways

CMS proposes to update the ESRD PPS base rate, wage index and outlier policy for CY 2023. CMS also proposes to add the word “functional” to the definition of “oral-only drug” beginning January 1, 2025, and to clarify the functional category definitions.

CMS proposes several updates to the ESRD QIP, including suppression of certain measures for payment year 2023 and updates for subsequent payment years. CMS also seeks input on potentially adding quality measures for home dialysis, expanding reporting programs to better understand healthcare disparities, and including two social drivers of health screening measures.

CMS proposes modifications to the ETC Model, such as updates to the Performance Payment Adjustment (PPA) achievement scoring methodology beginning in performance year 5 and clarifications to the requirements for qualified staff to furnish and bill kidney disease patient education services under the ETC Model’s Medicare program waivers. CMS also communicates its intent to publish participant-level performance information.

CMS is considering three products for the TPNIES payment adjustment: a monitoring system for peritoneal dialysis, a post-dialysis compression sleeve and a dialyzer.

The proposed rule includes RFIs that solicit input on a potential add-on payment adjustment for certain new renal dialysis drugs and biological products, and on health equity issues with a focus on pediatric patients.

Read on for a summary of the key provisions in the proposed rule.

  • The proposed rule text is available here.

  • The CMS fact sheet is available here.

ESRD Prospective Payment System

The ESRD PPS provides a bundled, per-treatment payment to ESRD facilities that includes all renal dialysis services furnished for outpatient maintenance dialysis, including drugs and biological products (except for oral-only ESRD drugs until 2025). The bundled payment rate is case-mix adjusted to account for patient characteristics. Additional adjustments to the base payment rate include facility-level adjustments for certain ESRD facilities; wage index adjustments; and, when applicable, training add-on payment adjustments for home and self-dialysis modalities, an outlier payment adjustment for high-cost patients, and add-on payment adjustments for certain drugs, equipment and supplies.

Base Rate

CMS proposes to pay a CY 2023 ESRD base payment rate of $264.09 (an increase of $6.19 from the final CY 2022 base payment rate of $257.90). Medicare expects to pay $8.2 billion to approximately 7,800 ESRD facilities. CMS projects that these updates will increase total payments to freestanding facilities by 3.1% and to hospital-based ESRD facilities by 3.7%.

Wage Index

CMS proposes an update to the ESRD PPS wage index based on the US Office of Management and Budget delineations with a two-year transition period. CMS proposes an increase in the wage index floor from 0.5 to 0.6, as well as a permanent 5% cap on decreases in the wage index beginning in CY 2023. The proposal to cap decreases on the wage index reflects similar policies in other payment rules, including rules for hospice and inpatient rehabilitation facilities, to provide more stability in payments from year to year.

Outlier Policy

CMS proposes updates to the outlier payment policy, the outlier services fixed-dollar loss (FDL) amounts and the Medicare allowable payment amount (MAP). The proposed FDL amount (which determines the outlier threshold) for pediatric patients would decrease from $26.02 to $21.51, and the MAP amount would decrease from $27.15 to $25.62. For adult patients, the proposed FDL amount would decrease from $75.39 to $40.75, and the MAP amount would decrease from $42.75 to $36.85.

Other Proposed Changes

CMS proposes a change to the definition of oral-only drugs to include the word “functional,” effective January 1, 2025. Under the proposed definition, an oral-only drug would be a drug or biological product with no injectable functional equivalent or other non-oral form of administration. CMS also proposes clarifications to the ESRD PPS functional categories to reflect current policies.

ESRD Quality Incentive Program

Under the ESRD QIP, CMS assesses the performance of ESRD facilities on quality measures specified for the payment year (PY), applies a payment reduction to each facility that does not meet a minimum total performance score, and publicly reports the results. CMS proposes several changes to the QIP as follows.

Proposals for PY 2023

CMS proposes to collect and publicly report all ESRD QIP measures while pausing the use of certain measures for scoring and payment adjustment purposes in PY 2023. This policy is intended to ensure that facilities are not penalized for disruptions caused by the COVID-19 pandemic. CMS proposes to pause the following measures:

  • Standardized Hospitalization Ratio (SHR) clinical measure

  • Standardized Readmission Ratio (SRR) clinical measure

  • In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems clinical measure • Long-Term Catheter Rate clinical measure

  • Percentage of Prevalent Patients Waitlisted clinical measure

  • Kt/V Dialysis Adequacy Comprehensive clinical measure

While these paused measures would not affect payments for PY 2023, CMS would still collect and publish data on the measures (with appropriate caveats noting the data limitations due to COVID-19), and CMS would still provide confidential feedback reports to facilities on their measure rates on all measures.

CMS also proposes to use pre-pandemic data from CY 2019 as the baseline for the PY 2023 ESRD QIP. For PY 2023, the performance period is CY 2021, and the baseline period was set to be CY 2020. Previously, however, CMS excluded data from the first and second quarters of CY 2020 from ESRD QIP scoring purposes, and CMS is now concerned that it would be difficult to assess PY 2023 performance standards using a baseline period that only has partial-year data.

Proposals for PY 2024

CMS proposes to express the SHR and SRR clinical measure results as rates beginning with the PY 2024 ESRD QIP. CMS believes that expressing results on these measures as rates will be more intuitive and will help providers and patients better understand performance.

Proposals for PYs 2025 and 2026

The proposed rule includes several changes that would take effect in PYs 2025 and 2026:

  • Beginning with PY 2025, CMS proposes to add the COVID-19 Vaccination Coverage among Healthcare Personnel measure to the ESRD QIP measure set as a reporting measure.

  • CMS proposes to convert the Standardized Transfusion Ratio (STrR) reporting measure to a clinical measure beginning with PY 2025 and proposes to express the measure as a rate (to align with technical updates to the SHR and SRR clinical measures.) CMS proposes to update the scoring methodology for the STrR clinical measure so that facilities that meet previously finalized minimum data and eligibility requirements would receive a score on the STrR clinical measure based on the actual clinical values reported by the facility, rather than the successful reporting of the data.

  • CMS proposes to convert the Hypercalcemia clinical measure to a reporting measure beginning with PY 2025 and plans to explore possible replacement measures that would be more clinically meaningful. CMS also proposes to update the measure’s scoring methodology so that facilities that meet previously finalized minimum data and eligibility requirements would receive a score on the Hypercalcemia reporting measure based on the successful reporting of the data, rather than actual clinical values reported by the facility.

  • CMS proposes to modify the technical measure specifications for the SHR and the SRR clinical measures to include a covariate adjustment for patient history of COVID-19 in the 12 months prior to measure eligibility, to adequately capture the continuing effects of COVID-19 in the patient case-mix.

  • CMS proposes to create a new domain for reporting measures and to re-weight current domains beginning with PY 2025. In addition to the four existing domains (Patient and Family Engagement, Care Coordination, Clinical Care and Safety), CMS proposes to create a Reporting Measure domain, which would include the four current reporting measures in the ESRD QIP measure set, the proposed COVID-19 Vaccination Coverage among Healthcare Personnel reporting measure and the proposed Hypercalcemia reporting measure. CMS proposes to update the domain and individual measure weights accordingly to accommodate the new Reporting Measure domain.

ESRD Treatment Choices Model

The ETC Model began January 1, 2021, and payment adjustments will end in June 2027. The proposed rule includes several modifications to the ETC Model.

Performance Payment Adjustment Achievement Benchmarking Methodology

Last year’s rule increased achievement benchmarks by 10% over rates observed in Comparison Geographic Areas every two model years, beginning in model year 3 (2022), and finalized proposals to stratify achievement benchmarks based on the proportion of attributed beneficiaries who are dually eligible for Medicare and Medicaid or receive the Low Income Subsidy during the model year. This stratification was an effort to recognize that beneficiaries with lower socioeconomic status have lower rates of home dialysis and transplant than those with higher socioeconomic status. Based on subsequent analysis, however, CMS found that this stratification increased the likelihood that the lowest benchmark could be set at a home dialysis rate or transplant rate of zero, counter to the intention of the provision.

This year, CMS proposes to update the PPA achievement methodology beginning in measurement year 5, which initiates on January 1, 2023. CMS proposes to add a requirement to specify that an ETC participant’s aggregation group must have a home dialysis rate or a transplant rate greater than zero to receive an achievement score for that rate. The proposed update creates upward or downward performance-based adjustment on dialysis and dialysis-related claims with claim service dates between July 1, 2022, and June 30, 2027. The PPA amount will depend on the ETC participant’s performance on the ETC Model’s home dialysis rate and transplant rate among the beneficiaries attributed to the ETC participant.

Kidney Disease Patient Education Services

CMS previously waived certain requirements for kidney disease patient education services because such services were billed infrequently. CMS also permitted an ETC participant to reduce or waive the 20% coinsurance requirement for kidney disease patient education services furnished on or after January 1, 2022, if several conditions are satisfied, including a requirement that the individual or entity that furnished the services be qualified staff and not be leased from or otherwise provided by an ESRD facility or related entity. This requirement does not apply if the ETC participant does not reduce or waive the beneficiary’s coinsurance obligation for such services.

In the proposed rule, CMS proposes a similar requirement with respect to “clinical staff,” regardless of whether a participant waives the kidney disease patient education coinsurance obligation. CMS is also considering adding a requirement that kidney disease patient education content cannot market a specific ESRD facility to beneficiaries.

Publication of Participant Performance

CMS intends to publish participant-level, patient de-identified performance data and information. This information would include, for example, beneficiary months in home dialysis, self-dialysis or nocturnal dialysis; beneficiary months on the transplant waitlist; number of living donor transplants; and a list of ESRD facilities or managing clinicians. The information would be published on the ETC Model website.

Transitional Add-On Payment for New and Innovative Equipment and Supplies Applications

CMS established TPNIES to incentivize the creation and adoption of new and innovative kidney disease treatment products and services. Among other criteria, applicants must demonstrate that the product is a substantial clinical improvement compared to existing products. In the proposed rule, CMS considers TPNIES applications for three products: a monitoring system for peritoneal dialysis, a postdialysis compression sleeve and a dialyzer. CMS requests public comment on whether the products meet the TPNIES eligibility criteria. CMS will make a final determination on these applications in the final rule.

Requests for Information

The proposed rule includes several RFIs under the ESRD PPS. CMS is considering options regarding an add-on payment adjustment for certain renal dialysis drugs and biological products in existing ESRD PPS functional categories after the Transitional Drug Add-on Payment Adjustment period ends. CMS seeks comment on the necessity of this payment and on proposed payment methodologies. CMS also seeks input on improving the agency’s ability to detect and reduce health disparities for Medicare beneficiaries receiving renal dialysis services (with an emphasis on pediatric patients) via RFIs that address collecting actionable data.

The proposed rule also includes several RFIs relevant to the ESRD QIP, including the following.

Quality Indicators for Home Dialysis

As increasing numbers of ESRD patients use home dialysis therapies, CMS is interested in potential indicators of quality of care for home dialysis patients that are not currently being captured by the ESRD QIP. CMS seeks public comment on potential quality indicators to support the use of home dialysis for ESRD patients when appropriate.

Measuring Healthcare Quality Disparities

As in other proposed payment rules CMS has issued this year, the agency seeks public comment on how it can use measurement and stratification tools to address healthcare disparities and advance healthcare equity. CMS seeks comment on additional disparity measurement or stratification guidelines that would be suitable across CMS quality programs. Specifically, CMS seeks input in five areas:

  • Identification of goals and approaches for measuring healthcare disparities and using measure stratification across CMS quality programs

  • Guiding principles for selecting and prioritizing measures for disparity reporting across CMS quality programs

  • Principles for social risk factor and demographic data selection and use

  • Identification of meaningful performance differences

  • Guiding principles for reporting disparity results

Two Social Drivers of Health Measures

CMS seeks input on two potential social drivers of health screening measures. The proposed Screening for Social Drivers of Health measure would assess whether facilities screen all patients that are 18 years or older for food insecurity, housing instability, transportation needs, utility difficulties and interpersonal safety. The proposed Screen Positive Rate for Social Drivers of Health measure would be a complementary measure to assess the proportion of patients who screen positive in those healthrelated social needs domains.


Overall, the CY 2023 ESRD PPS proposed rule builds upon policies finalized in last year’s payment rule that sought to address continuing impacts of COVID-19 and to advance health equity. During the proposed rule’s comment period, stakeholders have the opportunity to provide input on PPS updates; ETC modifications; the agency’s measurement of and responses to health disparities; and potential quality, screening and additional measures to be included in the ESRD QIP. If finalized, the policies in the proposed rule would take effect January 1, 2023. Comments are due by August 22, 2022.

© 2022 McDermott Will & EmeryNational Law Review, Volume XII, Number 178

About this Author

Kristen O’Brien Healthcare Executive McDermott Consulting

Kristen O’Brien is an accomplished healthcare executive with a deep understanding of regulatory advocacy and healthcare policy efforts.

Kristen offers a strong background and a keen eye for solutions to barriers and challenges impacting healthcare clients. With more than 10 years of experience, her work focuses on implementing new laws through the rulemaking process, as well as working with relevant agency officials to develop and improve agency guidance.

Kristen recently served as Principal of the Health Industry Policy and Regulatory Practice Group at a law and lobbying...

Mara McDermott, McDermott Law Firm, Washington DC, HealthCare Law Executive

Mara is an accomplished health care executive with a deep understanding of federal health care law and policy, including delivery system reform, physician payment and Medicare payment models.

Most recently Mara served as the senior vice president of federal affairs at America’s Physician Groups (formerly the California Association of Physician Groups, CAPG), a professional association representing medical groups and independent practice associations practicing in capitated, coordinated care models. As head of the Washington, DC, office, Mara...

Lauren Knizner Health Care Consultant McDermott+

Lauren leverages her health-related legal background to advise clients on regulatory matters impacting the health care industry.

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Jennifer Ohn D.C. Policy Analyst McDermottPlus
Healthcare Policy Analyst

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