Dive Brief:

• CMS has named Outset Medical's Tablo portable hemodialysis system as the first device to receive an add-on payment under a recently enacted end-stage renal disease (ESRD) program.
• Outset Medical secured the payment after persuading CMS its dialysis machine is a "substantial clinical improvement" over the incumbent home-use hemodialysis product sold by NxStage Medical, a subsidiary of Fresenius Medical Care. 
• CMS disclosed its decision days after detailing an initiative to reduce healthcare disparities by improving access to care for Medicare patients with ESRD. The changes include updates to a payment model to reward improvements in lower-income beneficiaries.

Dive Insight:

CMS rejected an application for Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES) from Outset Medical one year ago, in part on the grounds that the cartridge covered by the filing was approved too long ago to meet its newness criteria. The scheme gives manufacturers of new, innovative ESRD devices a chance to have CMS pay 65% of a treatment amount determined by Medicare Administrative Contractors for two years. 

With CMS also rejecting a Baxter application in 2020, no companies received TPNIES support at the first attempt. Undeterred, Outset Medical filed again, this time seeking TPNIES support for a system that received FDA marketing authorization in March 2020 and therefore met the newness criteria. 

CMS was initially skeptical about whether the Tablo hemodialysis system met the substantial clinical improvement criteria. In a proposed rule published over the summer, CMS expressed uncertainty about whether the studies presented by Outset Medical showed Tablo "represents an advance that substantially improves the treatment of Medicare beneficiaries compared to renal dialysis services previously available." 

The question centered on whether Tablo improves substantially on NxStage System One, the only other mobile hemodialysis machine approved for home use. Fresenius, which owns NxStage, weighed in during the comment period, voicing agreement with CMS concerns and warning that "granting a TPNIES on such scant evidence of clinical improvement would be a poor precedent to set for future TPNIES applications." 

However, after reviewing the feedback, CMS concluded the concerns it raised in the proposed rule had been "sufficiently addressed," pointing to the provision of new evidence that Tablo increases adherence to dialysis treatment and retention to home therapy as an example of why it had changed its position.

The impact of TPNIES on the prospects of Tablo is unclear. Management at Outset Medical, which went public last year, has called the scheme a "potential tailwind" without quantifying the expected impact. Outset's most recent public forecasts do not incorporate the impact of TPNIES.

CMS also used the final rule to firm up changes to its ESRD Quality Incentive Program and ESRD Treatment Choices (ETC) Model, as well as to update its ESRD Prospective Payment System rates. 

In discussing the changes, CMS identified the new ETC Model as an example of how it is working to meet the health equity goals of the Biden administration. There are now incentives for sites that significantly improve the home dialysis rate and kidney transplant rate for lower-income beneficiaries.

Disadvantaged people with Medicare have higher rates of ESRD, are more likely to experience higher hospital readmissions as well as receive in-center hemodialysis versus home dialysis, according to the CMS Office of Minority Health.