Recent/upcoming developments… CMS has issued the CY26 End-Stage Renal Disease (ESRD or dialysis) final rule.  Under the rule, CMS will increase the dialysis base rate to $281.71, increasing aggregate payments to dialysis facilities by approximately 2.2% compared to CY25.  For hospital-based dialysis facilities, CMS projects an increase in total payments of 1.5%, and for freestanding facilities, CMS projects an increase of 2.2%.

Our outlook… In general, the final ESRD rule is a net positive for dialysis providers considering the payment update (higher than the 1.9% update contained in the proposed rule).  Beyond the rate update, the final rule is largely positive, as it removes various measures from the ESSRD Quality Improvement Program (mostly measures around health equity and social drivers of health), shortens the In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) survey, provides an incremental facility-level payment adjustment for ESRD facilities in Alaska, Hawaii, and the U.S. Pacific Territories.  As we see it, the only potential negative in the final rule is the elimination of the ESRD Treatment Choices Model, which sought to encourage in-home dialysis treatment.  The model, first started in 2021, provided additional payment to selected facilities and clinicians for supporting beneficiaries dialyzing at home.  According to CMS, the model has failed to show positive results around home dialysis and transplant waitlisting or the expenditure savings.  For providers participating in the model, its elimination is a negative from the standpoint of both revenue (loss of incremental payment, which was, on average ~9% higher compared to the non-model population) and operations (facilities made investments to expand in-home options).

Watch for these developments… As we get deeper into 2026 and CMS moves toward initiating the rulemaking process for the CY27 ESRD regulations, we are watching for indications from the administration that the remaining CMMI model around dialysis – the Kidney Care Choices (KCC) Model – is also under consideration for elimination.  KCC, while touted by the administration for its improvements in rates of homes dialysis and preemptive/living donor transplants, has increased costs to the Medicare Program over the non-model population (in the model recent evaluation year, 2023, by just over $300m).  This administration is making a point to end models early when there is evidence of lackluster results and criticism of KCC in the CY27 proposed rule would suggest that model may also be due for an early ending (it is currently set to expire at the close of 2027).