On November 1, 2011, CMS released a final rule (Final Rule) that revises the end-stage renal disease (ESRD) prospective payment system (PPS) for ESRD providers for CY 2012, establishes additional requirements for the ESRD Quality Incentive Program (QIP) for payment years (PY) 2013 and 2014, revises the ambulance provider fee schedule, revises the definition of durable medical equipment (DME) and implements Section 154 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) regarding durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers.

With respect to ESRD providers, MIPPA replaced the prior case-mix adjusted composite payment system and reimbursement of separately billable outpatient ESRD services with the ESRD PPS.  To ease the transition, MIPPA also provided for a 4-year transition period during which ESRD facilities will receive a blended payment of the prior case-mix adjustment and the PPS.  During the 4-year transition period, CMS is required to increase the blended rate by an ESRD market basket update which must also be offset by a productivity adjustment.  In the Final Rule, CMS adopts a 3 percent market basket increase as well as a 0.9 percent productivity adjustment for a net 2.1 percent increase in CY 2012.

MIPPA also required the implementation of the ESRD QIP.  Under the QIP, CMS is required to establish performance measures for quality and methodologies for scoring ESRD providers against such performance measures.  Payments will be reduced to ESRD providers that fail to meet CMS’s established performance measures.  PY 2012 beginning January 1, 2012, is the first year that payments will be reduced under the QIP.  In the Final Rule, CMS revises its performance standards and its scoring method for PYs 2013 and 2014.  PY 2013 begins on January 1, 2013, and PY 2014 begins on January 1, 2014.  For example, CMS will use two measures to grade ESRD facility performance in PY 2013, but in PY 2014, CMS will use three clinical measures and three reporting measures.

With respect to the ambulance fee schedule, the Final Rule implements statutory changes contained in the Medicare and Medicaid Extenders Act of 2010.

Finally, the Final Rule revises the definition of “durable medical equipment” (DME) by requiring that an item or device must meet a 3-year minimum lifetime requirement in order to be considered “durable.” CMS sought to revise the definition of DME to include such a period of time as current regulations and program materials do not provide guidance regarding the period of time that equipment must function in order to be considered “durable.” 

The Final Rule is effective January 1, 2012.  Click here to view CMS’s display copy of the Final Rule.