CMS has proposed a new prospective payment system (PPS) for facilities that provide dialysis services to Medicare beneficiaries who have end-stage renal disease (ESRD). The proposed PPS provides a single bundled payment to dialysis facilities that would cover the items and services used in providing outpatient dialysis services, including dialysis treatment, prescription drugs and clinical laboratory tests. The new payment system - required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) - is designed to improve the efficiency of care while promoting high quality services.

Under the proposed rule, CMS would establish a base bundled payment rate of $198.64 for all of the services related to a dialysis session, including the services in the current composite rate as well as items, including oral drugs, that are billed separately. The proposed base rate was derived from 2007 claims data for both composite rate and separately billable services and updated to reflect projected 2011 prices. It would also be adjusted for case-mix factors such as the patient's age, gender, body size and time on dialysis. A special case-mix adjustment would apply to pediatric patients. Additional adjustments to the payment rate would be made for specific conditions, or comorbidities, that have a significant impact on a course of treatment.

ESRD is the only category for Medicare eligibility that is based on a specific diagnosis, without regard to the age of the patient. Patients diagnosed with ESRD must rely on dialysis or receive a kidney transplant for survival. ESRD services are furnished on an outpatient basis in independent or hospital-based dialysis facilities. Currently, Medicare pays for certain dialysis services under a partial bundled rate, known as the composite rate. Payments for these composite rate services represent about 60 percent of total Medicare payments to ESRD facilities. The remainder of Medicare spending for dialysis services is for separately billed items such as drugs, but may also include laboratory services, supplies and blood products.

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