Proposed Updates to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for CY 2025

On June 27, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update payment rates and policies for renal dialysis services for Medicare beneficiaries.

The updates, effective from Jan. 1, 2025, include changes to the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS), with most notable adjustments being made to support acute kidney injury (AKI) dialysis payment rates, as well as the operationalization of oral-only drug inclusion in the ESRD PPS.

Here are some key highlights from the proposed rule:

1. ESRD PPS Base Rate Increase: Understanding that this population continues to rise in number, as does the corresponding cost of care, CMS is preparing for another year of influx. CMS has projected that for the 2025 calendar year (CY), Medicare will be paying $7.2 billion to approximately 7,700 ESRD facilities for renal dialysis services. CMS proposes increasing the ESRD PPS base rate to $273.20, up by $2.18 from the current $271.02. Total payments to all ESRD facilities are projected to rise by approximately 2.2 percent. Specifically, hospital-based ESRD facilities will see a 3.9-percent increase, and freestanding facilities will see a 2.1-percent increase.
2. Wage Index Changes: CMS proposes using a new methodology for the ESRD PPS-specific wage index that would be used to adjust ESRD PPS payment for geographic differences in area wages. By combining data from the Bureau of Labor Statistics and freestanding ESRD facility cost reports, CMS hopes to replace the existing hospital wage index values in this payment methodology.
3. Outlier Policy Updates: CMS proposes to expand the existing list of ESRD outlier services to include more drugs and biological products that traditionally have been included in the composite rate prior to establishment of the ESRD PPS. CMS is also proposing some slight technical adjustments in methodologies for calculating fixed-dollar loss (FDL) and Medicare allowable payment (MAP) amounts. For CY 2025, the FDL amount for pediatric beneficiaries would increase, while the amount for adults would decrease.
4. Low-Volume Payment Adjustment (LVPA): CMS is proposing to modify the LVPA policy to create a two-tiered system, in efforts to better align payment methodology with resource utilization. The two-tiered system designates that facilities with fewer than 3,000 treatments will receive a 28.3-percent adjustment, and those with 3,000 to 3,999 treatments will receive an 18.0-percent adjustment. Tiering is based on the median treatment count over the prior three years.
5. Inclusion of Oral-Only Drugs: CMS will include oral-only renal dialysis drugs in the ESRD PPS bundled payment, starting Jan. 1, 2025. This is expected to increase access to these drugs, particularly benefiting those without Medicare Part D coverage.

Updates for AKI Dialysis: CMS proposes extending Medicare payment for home dialysis for AKI patients, allowing them more choices in their treatment. ESRD facilities will be able to bill for home and self-dialysis training for AKI patients. The proposed payment rate is set to be equal to in-center dialysis treatment.

The provision for AKI dialysis treatment in ESRD facilities was first released in CY 2017; however, in-home treatment was excluded due to the nature of AKI typically being of a short duration, and the work for set-up and training raised concerns at that time. However, since 2020, there have been significant efforts to promote home peritoneal and hemodialysis for patients, rather than in-center.

Currently, CMS feels there is enough data to expand this to AKI patients. The expansion of ESRD facility conditions for coverage to include home dialysis for AKI is an intentional approach to increase home dialysis access and utilization, while also promoting greater opportunities to increase AKI treatment and management in the outpatient setting. 

The proposed rule by CMS introduces several updates aimed at improving payment rates and policies under the ESRD PPS for CY 2025. Key proposals include increasing the base payment rate, revising the wage index methodology, updating outlier policies, and extending Medicare payments to home dialysis for AKI patients.

These changes reflect CMS’s commitment to enhancing patient care, expanding access to essential medications, and ensuring that payment adjustments align with the resource use of low-volume facilities.

Programming note:

Listen to Tiffany Ferguson report this story live during today’s Talk Ten Tuesday, 10 Eastern, with Chuck Buck and Dr. Erica Remer.