BACKGROUND AND OBJECTIVES: Peritoneal dialysis (PD) for ESKD is associated with similar mortality, higher quality of life, and lower costs compared with hemodialysis (HD), but has historically been underused. We assessed the effect of the 2011 Medicare prospective payment system (PPS) for dialysis on PD initiation, modality switches, and stable PD use. DESIGN, SETTING, PARTICIPANTS, & MEASUREMENTS: Using US Renal Data System and Medicare data, we identified all United States patients with ESKD initiating dialysis before (2006-2010) and after (2011-2013) PPS implementation, and observed their modality for up to 2 years after dialysis initiation. Using logistic regression models, we examined the associations between PPS and early PD experience (any PD 1-90 days after initiation), late PD use (any PD 91-730 days after initiation), and modality switches (PD-to-HD or HD-to-PD 91-730 days after initiation). We adjusted for patient, dialysis facility, and regional characteristics. RESULTS: Overall, 619,126 patients with incident ESKD received dialysis at Medicare-certified facilities, 2006-2013. Observed early PD experience increased from 9.4% before PPS to 12.6% after PPS. Observed late PD use increased from 12.1% to 16.1%. In adjusted analyses, PPS was associated with increased early PD experience (odds ratio [OR], 1.51; 95% confidence interval [95% CI], 1.47 to 1.55; P<0.001) and late PD use (OR, 1.47; 95% CI, 1.45 to 1.50; P<0.001). In subgroup analyses, late PD use increased in part due to an increase in HD-to-PD switches among those without early PD experience (OR, 1.59; 95% CI, 1.52 to 1.66; P<0.001) and a decrease in PD-to-HD switches among those with early PD experience (OR, 0.92; 95% CI, 0.87 to 0.98; P=0.004). CONCLUSIONS: More patients started, stayed on, and switched to PD after dialysis payment reform. This occurred without a substantial increase in transfers to HD.