E3 – Avalere Insights on Recent CMS Proposed Payment Rules: ESRD PPS and Quality Incentive Program

  • This page as PDF


Tune in to hear the final episode in our 3-part series that focuses on CMS’s most recent proposed payment rules. In episode 3, we’ll be focusing on the End Stage Renal Disease (ESRD) Prospective Payment System, with a focus on proposed payment changes for innovative drugs, supplies, and equipment and updates to the Quality Incentive Program (QIP).
Please note: This is an archived post. Some of the information and data discussed in this article may be out of date. It is preserved here for historical reference but should not be used as the basis for business decisions. Please see our main Insights section for more recent posts.
“CMS is really trying to push innovation, so it will be up to manufacturers to try to work around, monitor, and potentially use these changes to their advantage.” Zach Levine


Mark Gooding , Managing Director, Market Access & Reimbursement

Mark Gooding provides strategic guidance to life sciences clients on policy developments and reimbursement considerations.

Emily Belowich , Associate Principal, Market Access & Reimbursement

Emily Belowich supports clients across the healthcare system seeking to optimize payment and care-delivery strategies as they adapt their business models toward value-based environments.

Zach Levine , Senior Associate, Commercialization & Regulatory Strategy

Zach Levine supports clients in market access, product commercialization, and reimbursement strategy.

This interview was originally published as a podcast. The audio is no longer available, but you can read the transcript below. For updates on our newly released content, visit our Insight Subscription page.

Explore Other Interviews in This Series

E1 – Avalere Insights on Recent CMS Proposed Payment Rules: OPPS

E2 – Avalere Insights on Recent CMS Proposed Payment Rules: MPFS


Mark: Hello and welcome to the third installment of Avalere’s podcast series on Medicare’s proposed payment system rules for 2020. My name is Mark Gooding and I am an Associate Principal in Avalere’s Commercialization and Regulatory Strategy team. Today, I’m joined by my colleagues Zach Levine and Emily Belowich to discuss the Calendar Year 2020 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) Proposed Rule.

Specifically, we are going to discuss a couple primary topics: 1) updates to the PPS and 2) updates to the Quality Incentive Program (QIP).

Let’s start with the Prospective Payment System. Can you tell us a bit about changes that were proposed regarding the PPS Base Rate?

Zach: Sure, Mark. Happy to do so. CMS proposes to increase the ESRD PPS base rate in calendar year 2020 to $240.27, which is a $5.00 upward adjustment from last year. CMS proposes the same increase for renal dialysis services furnished by ESRD facilities with Advanced Kidney Injury (AKI). In addition to the base rate changes, CMS proposes modest adjustments to the ESRD market basket, wage indices, and outlier policies that factor into the PPS.

Mark: Okay, sounds pretty standard. I understand the Trump administration has really emphasized the need for innovation in the kidney care space – is there anything in the proposed rule that speaks to those initiatives?

Zach: Indeed; glad you asked! There were actually a few other notable changes to the ESRD payment system for new products. But let’s break these proposals down into two groups. The first set of proposals focus on a number of refinements to the transitional drug add-on payment adjustment, or “TDAPA” For reference, TDAPA was established effective January 2018 to provide add-on payment for a minimum of two years for products that are not yet included in the bundle  In last year’s rulemaking cycle, CMS expanded eligibility for TDAPA for all new ESRD drugs. However, in this year’s proposed rule, CMS is walking back this eligibility and proposes to only provide TDAPA for products which are truly “innovative,” closing off TDAPA for products such as generics.

In addition, CMS confirms that it will continue to pay the TDAPA for calcimimetics, a certain class of ESRD drugs. for a third year in CY2020. However, they are changing the payment rate for these products from ASP + 6% to just 100% of ASP. CMS also proposes to condition the receipt of TDAPA on the availability of ASP data, which will hopefully discourage manufacturers withholding sales data from CMS

Mark: Interesting – so it sounds like there’s a lot happening on the TDAPA front! You mentioned there was a second set of potential payment adjustments for new technologies. What else is happening here?

Zach: Absolutely. CMS is introducing – for the first time – a new transitional add-on payment adjustment for new and innovative equipment and supplies (or, TPNIES) under the PPS. In introducing this new add-on payment, CMS proposes to include renal dialysis equipment and supplies for this payment adjustment if they meet the following criteria: are FDA approved on or after January 1, 2020; are commercially available; have a HCPCS coding application submitted to CMS; and they meet the substantial clinical improvement criteria which is specified under the IPPS

Mark: So, we’ve got some potential clarification on the existing payment adjustment for innovative drugs and a new payment adjustment for supplies and equipment. I’m curious what you think this means for stakeholders or particularly manufacturers in the space?

Zach: On the TDAPA front, as I was saying earlier, these proposed changes would narrow eligibility for this payment adjustment to only those products which are truly innovative in the eyes of CMS. CMS has continued to refine and provide clarification on eligibility and payment for TDAPA as new products have come to the market, so we will likely need additional clarification in the upcoming rulemaking cycle given the number of products that will be entering the kidney care space in the next two-to-three years.

In terms of the adjustment for new and innovative equipment and supplies, it’s fair to say that this demonstrates the administration’s continued push for innovation, especially in the renal dialysis space, which hasn’t really seen much innovation in the past 10-20 years or so.

Mark: That certainly seems to be the case, and probably something we want to keep our eyes on, given the amount of changes we’ve seen in the TDAPA over the years. Anything else we need to be aware of in this proposed rule?

Zach: Sure, there are a couple of other changes that are important to note. For one, CMS is soliciting comments on which renal dialysis services may have a humanitarian use device designation under Medicare. In addition, CMS is proposing to discontinue the ESA Monitoring Policy, which was originally implemented to control utilization of ESAs in the ESRD population.

Mark: Okay, now let’s switch over to the Quality Incentive Program – or “QIP”. Emily, I know you and your practice focus a lot on the quality measures space. Can you tell me a little bit about the history of QIP and the intent behind the design of the program?

Emily: Sure, I’m happy to. The Quality Incentive Program, otherwise known as QIP, was launched in 2012 by the Centers for Medicare & Medicaid Services for End Stage Renal Disease (ESRD) to promote high-quality services in outpatient dialysis facilities treating patients with ESRD.

Before I jump into QIP itself, I think it’s important to acquaint our listeners with the context of how ESRD care is financed overall, since the way in which this care is paid for actually sets itself apart from a lot of other medical conditions.

For some high-level historical context: In 1972, Medicare benefits were extended to cover the medical costs for individuals suffering from permanent kidney failure also known as end-stage renal disease (ESRD). There is no cure for patients with ESRD, but it is a chronically managed condition that can be managed in one of two ways: either through dialysis or a kidney transplant. To this day, kidney failure is one of only two medical conditions that gives people the option to enroll in Medicare without a two-year waiting period, regardless of age.

Mark: That’s helpful background to hear about where ESRD fits into CMS’ national quality agenda.  Zach spoke to the Administration’s priorities earlier regarding kidney care, and I understand there’s a big buzz right now as to how this fits into the quality space. Can you shed some light on what has been happening recently?

Emily: Absolutely, as mentioned, the QIP’s main focus is trying to improve the overall experience for patients on dialysis. We’re hearing an increased preference for dialysis to take place in the home, yet fewer than 12% of individuals who require dialysis in the US do receive it in this setting. The disparity between the preferences of dialysis patients and the actual provision of their care has driven some major players to become more involved in delivery of home dialysis.

In addition to patient preferences, it’s also important to note that chronic kidney disease is an expensive condition – the US Government spends roughly $114 million to treat chronic kidney disease and ESRD. A growing body of evidence suggests that home dialysis is more cost-effective than hospital- or clinic-based dialysis, while outcome data has demonstrated that home dialysis is as safe and effective as clinic-based care. To decrease spending, the Administration put out an executive order in July that encourages modernizing American kidney care by moving patients away from in-center dialysis. In response to the CMS proposal, companies such as Baxter, DaVita, CVS and Fresenius have announced plans for enhancing home dialysis options.

Mark: Thanks, Emily. It sounds like there’s a lot happening to make patients more comfortable and to decrease the costs of that treatment. In doing so, I would imagine there are some proposed changes on the horizon about the way in which we are collecting data in upcoming years. Can you talk more about that?

Emily: Yes, for sure, and you’re absolutely right. The specific technical changes in the QIP Proposed Rule speak to exactly that.  The rule proposes changes to the baseline and performance periods, and all this really means is that CMS is trying to provide clear guidance to the public on these policies for upcoming payment years.

Mark: That’s good to know. What about any proposed updates around measures?

Glad you asked. Just for context, there are 14 measures in the ESRD QIP Measure Set. There was nothing really major that came out of this proposed rule, except for refinements to two of the measures.  CMS proposed some changing the Standardized Transfusion Ratio (STrR) Clinical Measure from a clinical measure to a reporting measure, based on concerns regarding the validity of this measure.

There was also a proposed change to update the scoring methodology for the National Healthcare Safety Network (NHSN) Dialysis Event reporting measure. The NHSN is a surveillance system that allows facilities to track infections. These resources are critical for tracking and preventing infections and for evaluating the effectiveness of a specific infection prevention effort.

Mark: Awesome, that’s a lot to digest there. Thinking broadly, there’s a lot happening in the kidney care space, specifically as it relates to ESRD. Emily, you mentioned the executive order earlier this summer and Zach, you mentioned the Administration’s priorities around this space by incentivizing innovation. I’m just curious if the two of you have any main takeaways about how this proposed rule fits into that broader swirl of changes being driven by this Administration.

Zach, anything from the payment front that you want to highlight? Emily, how about from the quality side?

Zach: Yes, great question. I think on the payment side, manufacturers should be paying special attention to the changes to TDAPA. CMS, as you said, is really trying to push innovation in this space, so it will be up to manufacturers to try to work around these changes, monitor them, and potentially to use them to their advantage in trying to bring innovation to this space that so desperately needs it.

Emily: Yes, definitely. As mentioned, in the ESRD QIP Measure Set, the measures are being refined, and CMS expects more facilities will be subject to downward adjustment in the upcoming payment years. Facilities are already facing thin margins, and are dealing with uncertainty around home-based dialysis. It’s just something to be aware of, and stakeholders who are tuning in should continue to track/monitor weighting formulas as it relates to weighting formulas for the ESRD QIP Measure Set.

From beginning to end, our team synergy
produces measurable results. Let's work together.

Sign up to receive more insights about Value-Based Care
Please enter your email address to be notified when new Value-Based Care insights are published.

Back To Top