CMS published a final rule on November 9, 2012 that updates the Medicare end-stage renal disease (ESRD) PPS for CY 2013 and codifies certain statutory reduction in Medicare bad debt reimbursement.

• With regard to the ESRD provisions, the final rule provides for a 2.3% increase in the ESRD PPS base rate in CY 2013, which is derived from 2.9% market basket update that is partially offset by a -0.6% multi-factor productivity adjustment under the ACA. After applying a wage index budget-neutrality adjustment factor, the 2013 base rate for the ESRD PPS is $240.36, and the composite base rate for facilities in the ESRD PPS transition period is $145.20. The rule also reduces the outlier threshold (allowing more cases to qualify for outlier payments), maintains the composite rate drug add-on at $20.33, and reduces the wage index floor. Because CMS claims analyses show that ESRD facilities are continuing to report composite rate drugs on ESRD claims, CMS reiterates that any item or service included in the composite rate should not be identified on ESRD claims (an AY modifier can be appended to claims for drugs and laboratory tests that are not ESRD-related to allow for separate payment). CMS is continuing to monitor claims submission and CMS “may consider eliminating the AY modifier in future rulemaking" if CMS believes that "the AY modifier is not being used for the purpose intended.” The rule also makes changes to the ESRD Quality Incentive Program (QIP), which adjusts payments to dialysis facilities based on their performance on quality measures. Among other things, the rule adds new measures, expands the scope of certain existing measures, establishes measure performance standards, and adopts scoring and payment reduction methodologies.
• As part of the rule, CMS also is codifying provisions of section 3201 of the Middle Class Tax Extension and Job Creation Act of 2012 that require reductions in bad debt reimbursement to all providers, suppliers, and other entities eligible to receive bad debt reimbursement. CMS notes that the bad debt provisions are specifically prescribed by statute and thus are self-implementing (except for certain technical corrections). The bad debt rules are applicable for cost reporting periods beginning October 1, 2012. CMS estimates that there will be a $10.9 billion savings to Medicare over 10 years resulting from the self-implementing reductions in bad debt reimbursement, while a provision removing the ESRD bad debt provisions will result in a cost to the Medicare program of $170 million over 10 years.