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Author Topic:   CMS Proposes Reimbursement Changes for ESRD for 2005
Gary Peterson
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posted 07-28-2004 06:42 AM     Click Here to See the Profile for Gary Peterson   Click Here to Email Gary Peterson     Edit/Delete Message   Reply w/Quote
December 30, 2004 - Sweeping changes in Medicare reimbursement for dialysis services will take effect on January 1, 2005. Kathleen Smith, who is the American Nephrology Nurses Association (ANNA) State Health Policy Consultant, has summarized the coming payment changes on the ANNA web site.
"Sweeping Dialysis Reimbursement Changes Effective January 2005" - ANNA web page

November 23, 2004 - The Centers for Medicare and Medicaid Services (CMS) has published three Program Memorandums on the new ESRD composite payment rates and case-mix adjustments:

New ESRD Composite Payment Rates Effective January 1, 2005 (Medicare Benefit Policy) Transmittal 126 - 23-page pdf file
"SUMMARY OF CHANGES: Section 623 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, includes major provisions which affect the development of revised end stage renal disease composite payment rates effective for services furnished on or after January 1, 2005. The statute mandates that the current composite payment rates be increased by 1.6 percent for dialysis treatments furnished on or after January 1, 2005. The statute further mandates that the composite payment rates as increased by the 1.6 percent, must also include a drug add-on adjustment in the amount of 8.7 percent for the difference between the payment amounts for separately billable drugs and biologicals and their acquisition costs, as determined by Inspector General reports."

New ESRD Composite Payment Rates Effective January 1, 2005 - (Medical Claims Processing) Transmittal 373 - 41-page pdf file

"SUMMARY OF CHANGES: Section 623 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), includes major provisions which affect the development of revised end stage renal disease composite payment rates effective for services furnished on or after January 1, 2005. The statute mandates that the current composite payment rates be increased by 1.6 percent for dialysis treatments furnished on or after January 1, 2005. The statute further mandates that the composite payment rates as increased by the 1.6 percent, must also include a drug add-on adjustment in the amount of 8.7 percent for the difference between the payment amounts for separately billable drugs and biologicals and their acquisition costs, as determined by Inspector General reports."

New Case-Mix Adjusted End Stage Renal Disease (ESRD) Composite Payment Rates and New Composite Rates and New Composite Rate Exceptions Window for Pediatric ESRD Facilities (Medicare Claims Processing) Transmittal 370 - 24-page pdf file

"SUMMARY OF CHANGES: In accordance with Section 1881(b)(12)(A) of the Act, as added by section 623(d)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), "The Secretary shall establish a basic case-mix adjusted prospective payment system for dialysis services furnished by providers of services and renal dialysis facilities in a year to individuals in a facility and to individuals at home. The case-mix under the system would be for a limited number of patient characteristics." Use of a case-mix measure permits targeting of greater payments to facilities that treat more costly resource-intensive patients. In summary we are using a limited number of characteristics that do explain variation in reported costs for composite rate services consistent with the legislative requirement. The current composite payment rates will be adjusted for individual patient characteristics and budget neutrality for services furnished on or after April 1, 2005."


November 17, 2004 - Gambro has completed a preliminary analysis of Medicare's 2005 Physician Fee Schedule Final Rule and is estimating the financial impact from the new rule to be run rate neutral to the company when including the 1.6 percent composite rate increase. However, at this time the full impact including the case-mix and budget neutrality adjustment is still unknown. This statement might also be changed due to effects in the company's environments, outside the company's control. Press release from Gambro.

Fresenius Medical Care AG, the world's biggest provider of kidney dialysis, advanced after it was upgraded by Landesbank Rheinland Pfalz. Story from Bloomberg. (link is no longer available)

November 16, 2004 - The 2005 Medicare physician fee schedule has been published in the Federal Register. It is available as a 681-page pdf file.

DATES: Effective Date: These regulations are effective on January 1, 2005.

Applicability Date: Section 623 of the MMA (Renal Dialysis Services), that is, the case-mix portion of the revised composite payment methodology and the budget neutrality adjustment required by the MMA, is applicable on April 1, 2005.

Comment Date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 3, 2005.


Earlier this month, the Renal Physicians Association (RPA) released a preliminary overview of the reimbursement changes in the 2005 Medicare Fee Schedule Final Rule. 2-page pdf from from RPA.

November 5, 2004 - In late July of this year, the Centers for Medicare and Medicaid Services (CMS) proposed several changes in reimbursement for the end-stage renal disease (ESRD) program. The most dramatic change was the proposal to begin reimbursing ESRD-related drugs based on acquisition prices, rather than average wholesale prices. Many small dialysis providers, drug companies, and several key congressional groups and members objected to this and other proposed changes. This week, responding to pressure from these groups, CMS significantly increased the 2005 drug reimbursement in its final ruling. Both independent and hospital-based facilities will receive an 8.7 percent increase in their composite payment rate, in addition to a 1.6 percent update for services.

In a press release, CMS stated:

"The rule also changes how Medicare pays for services to beneficiaries with end-stage renal disease (ESRD). It eliminates the cross-subsidy in payments for drugs used in ESRD treatment so Medicare’s payment reflects the acquisition costs of the drugs, while increasing payment rates for ESRD providers by the amount of the drug cross-subsidy. The payment rates for ESRD facilities will for the first time be adjusted to reflect the higher costs of treating some patients, such as those with extremely low body mass indices. Payment rates will also be adjusted for factors such as age and body surface area.

More accurate payments means that providers of ESRD care will be paid more fairly for the treatments required for the different types of patients, providing better financial incentives for appropriate care. In this final rule, both independent and hospital-based facilities will receive an 8.7 percent increase in their composite payment rate, in addition to a 1.6 percent update for services under the proposal.

The final rule also establishes a payment for supplying immunotherapy drugs to transplant patients, in conjunction with Medicare’s previous implementation of more accurate payment for immunotherapy drugs. In response to comments, CMS will pay a dispensing fee of $50 for a new transplant patient and $24 for a transplant patient who has already been undergoing post-transplant therapy."

Here is a summary of the major changes and revisions included in the physician fee schedule. Summary from Kaiser Network.

The changes appeared in the document, "Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005" - overview page from CMS. The entire document is an 842-page pdf file.

The references to dialysis and ESRD appear throughout the document:

  • III. H. Section 623-Payment for Renal Dialysis Services - pages 399-474 of the pdf file. RenalWEB has converted this to a 35-page WORD™ document.

  • IV. C. Payments for Physicians and Practitioners Managing Patients on Dialysis - pages 587-601 of the pdf file. RenalWEB has converted this to a 7-page WORD document.

  • Effects on Medicare Program of Section 623 - pages 765-775 of the pdf file

  • Effects on Medicare Program of Payments for Physicians and Practitioners Managing Patients of Dialysis - page 779 of the pdf file

  • Telehealth services - pages 811-812 of the pdf file

  • Effects on Medicare Program of Telehealth Services - page 817 of the pdf file

  • Payment for Drugs and Biologicals in 2005 - pages 819-825 of the pdf file

  • Information on immunosuppressive drugs - pages 358-371 of the pdf file. RenalWEB has converted this to a 6-page WORD document.

The stock prices of Amgen and the large dialysis providers also rose on the day (Nov. 3) that the CMS rule was released and Bush won a second term.

November 3, 2004 - The Centers for Medicare & Medicaid Services (CMS) today issued Medicare’s final rule for physician payment for 2005.


The final rule will be published in the November 15th Federal Register and will become effective January 1, 2005. An 872-page (pdf) display copy is now available on-line.

October 12, 2004 - Several comments/letters from members of Congress have been sent in the last week to the Centers for Medicare and Medicaid Services (CMS) concerning CMS's proposed changes to ESRD drug reimbursement policies:

  • Letter from the Kidney Caucus to CMS Administrator McClellan - 670K pdf document
  • Letter from the Black Caucus to CMS Administrator McClellan - 37K pdf document
  • Letter from the Hispanic Caucus to CMS Administrator McClellan - 97K pdf document
  • Letter from Ways & Means Health Subcommittee Chairman to CMS Administrator McClellan - 60K pdf document
  • Letter from 54 senators to CMS Administrator McClellan - 1.5MB pdf document

August 30, 2004 - The ESRD Network of Texas as posted a web page on the proposed venous mapping rule that was introduced by the Centers for Medicare and Medicaid Services (CMS) in its proposed Physician Fee Schedule for 2005. The comment period ends on September 24.

"Comments for Venous Mapping Proposed Rule" - pdf document from ESRD Network #14.

July 28, 2004 - The Centers for Medicare and Medicaid Services (CMS) is the largest payer for dialysis (end-stage renal disease) patient care in the United States. Yesterday, CMS released its proposed Physician Fee Schedule for 2005. This document also contained several important end-stage renal disease (ESRD) reimbursement changes that CMS wants to implement in 2005. These include:

  • Composite rate increase
  • Average sales price payment for ESRD drugs and new put-backs onto the composite rate
  • New basic case-mix payment system
  • G-code tweaks for nephrologists
  • Payment for venous mapping

The proposed 2005 Physician Fee Schedule (PFS) is a huge 469-page WORD document that can be downloaded from this CMS web page. The sections with implications for ESRD reimbursement are spread throughout the document. As a service to our readers, RenalWEB has isolated the sections of the document that apply to dialysis/ESRD:

  • Section 623 covers the composite rate increase, average sales price reimbursement for ESRD drugs and the new case-mix system.

  • Changes incorporating telemedicine into the G-codes for nephologist reimbursement

  • Venous mapping - 2-page document explaining the proposed coverage

CMS outlines the proposed reimbursement changes in this text from Section 623:

"We are proposing changes affecting payments to ESRD facilities that result from enactment of the MMA and would be effective January 1, 2005. Section 1881(b) of the Act, as amended by section 623 of the MMA, directed the Secretary to revise the current composite rate payment system. The statute has several major provisions that require the development of revised composite payment rates, as follows:
  • An update of 1.6 percent.
  • An add-on to the composite rate for the difference between current payments for separately billable drugs and biologicals and payments based on the revised drug pricing methodology using acquisition costs.
  • Case-mix adjustments for a limited number of patient characteristics.
  • Application of a budget neutrality adjustment. The statute also allows the Secretary to adjust the payment rates by a geographic index as the Secretary determines to be appropriate which would be phased-in over a multiyear period.

By January 1, 2005, we plan to implement the proposed revisions affecting the composite payment rate which would include the following:

  • An increase of 1.6 percent to the basic composite payment rate.
  • Proposed revisions to the pricing of separately billable drugs and biologicals.
  • A drug add-on to the composite rate to reflect the difference between current payments for separately billable drugs and biologicals, and payment based on the revised drug pricing methodology using acquisition costs.

We propose to implement the patient characteristics adjustments and the related budget neutrality adjustments by April 1, 2005. (See detailed discussion later in this section.)"


Comments on the proposed changes can be filed on-line via this CMS web page.


[This message has been edited by Gary Peterson (edited 12-30-2004).]

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