On June 24, 2026, CMS released its proposed reimbursement and policy updates for renal dialysis services furnished to Medicare beneficiaries under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) in 2027. If finalized, the proposed rates and policies would take effect January 1.
Overall, the rule represents a relatively flat update and underscores CMS’ continued focus on dialysis margins despite the broader inflationary cost environment in the United States. The proposal includes a modest estimated payment increase of approximately 1.1%, with a new base rate of $299.55 per treatment. Notably, this increase falls below the already modest annual updates over the past five years, which have generally averaged between 2.2% and 2.5%.
In addition to the limited reimbursement growth, the agency’s proposed policy changes would further increase cost risk within the ESRD PPS bundled payment. These include continued expansion of the bundle, updates to value-based purchasing through ESRD Quality Incentive Program (QIP) performance measures, and ongoing site-of-care shifts toward home dialysis.
How Is CMS Expanding the ESRD PPS Drug Bundling Policy?
CMS proposes to finalize incorporating phosphate binders into the ESRD PPS bundle, which would eliminate separate reimbursement for a key ESRD drug class and further advance its long-term strategy of expanding bundled dialysis payments. As a result, providers would assume greater drug cost risk within a fixed reimbursement framework, increasing pressure to manage costs and improve operational efficiency.
This would complete a process the agency initiated on January 1, 2025, when it incorporated oral-only renal dialysis drugs into the ESRD PPS framework and placed phosphate binders into a transitional drug add-on payment adjustment (TDAPA) period. At the time, CMS indicated that phosphate binders would receive separate payment for at least two years before further rulemaking to modify the ESRD PPS base rate and permanently account for their costs in the bundle.
CMS also proposes a quality measure focused on phosphorus control to align reimbursement risk with performance expectations related to patient outcomes. The reimbursement impact would depend heavily on whether a dialysis provider can keep its all-in phosphate binder cost below the $15.96 embedded payment amount, given that $15.96 of the proposed $17.84 ESRD PPS base rate increase is designated for incorporating phosphate binders into the ESRD PPS base rate.
Providers with strong pharmacy contracting, formulary management, and dispensing infrastructure may be able to manage the change. However, providers with higher-cost drug mixes or inefficient distribution models could experience significant margin erosion.
How Does the ESRD PPS Market Basket Rebasing Affect Providers?
CMS proposes rebasing the market basket to 2024. This is a technical recalibration that resets the cost assumptions underlying ESRD reimbursement using a 2024 base year. The proposal would redistribute reimbursement and increase providers’ exposure to cost variation. It also reinforces CMS’ ongoing emphasis on efficiency, expanded bundling, and site-of-care transformation.
To understand the impact of the rebasing, providers should consider how it may interact with other policies in the proposed rule. For example:
- It may amplify the financial impact of incorporating phosphate binders into the ESRD PPS bundle by integrating updated drug cost assumptions into the payment methodology.
- It may strengthen CMS’ focus on home dialysis if 2024 cost data continue to reflect lower costs for home-based modalities compared to in-center treatment.
- Updates to the labor-related share could shift reimbursement across markets based on differences in underlying labor costs.
The proposed methodology could create challenges for several provider segments. Hospital-based providers may face added pressure due to higher overhead, administrative expenses, wage structures, and reduced operational flexibility. Small, independent, and rural providers may also be vulnerable given their limited scale, reduced purchasing power, higher fixed costs per treatment, and greater reliance on external pharmacy channels.
Providers serving high-acuity patients with elevated drug utilization could face additional financial risk if bundled payments don’t fully capture the costs of more complex cases. Likewise, providers operating in high-cost labor markets or with operational inefficiencies may experience increased margin pressure. Accountable care organization (ACO) participants may also see modest cost increases without corresponding increases in benchmark amounts.
How Does the ESRD PPS Rule Reinforce CMS’ Focus on Home Dialysis?
CMS proposes a significant increase in the home and self-dialysis training add-on payment, increasing compensation for providers that train patients to dialyze at home. The agency also continues to emphasize reimbursement mechanisms that reward more efficient, lower-cost care settings, which could further favor home dialysis if the rebased 2024 cost data demonstrate lower costs relative to in-center treatment.
How Forvis Mazars Can Help With ESRD Reimbursement
Our team has extensive experience helping hospitals navigate evolving reimbursement models, including expanded bundling methodologies, changing efficiency expectations, and quality-based reimbursement structures. If you have any questions or would like assistance strategizing for the proposed ESRD payment and policy updates, please reach out to a professional at Forvis Mazars today.