R e C o M M e n D A t I o n 6 The Congress should eliminate the update to the outpatient dialysis payment rate for calendar year 2016. COMMISSIONER VOTES: YES 17 • NO 0 • NOT VOTING 0 • ABSENT 0
6 C H A p t e R outpatient dialysis services Chapter summary In this chapter Outpatient dialysis services are used to treat the majority of individuals with • Are Medicare payments end-stage renal disease (ESRD). In 2013, about 376,000 beneficiaries with adequate in 2015? ESRD on dialysis were covered under fee-for-service (FFS) Medicare and received dialysis from about 6,000 dialysis facilities. For most facilities, • How should Medicare 2013 was the third year that Medicare paid them using a new prospective payments change in 2016? payment system (PPS) that includes in the payment bundle certain dialysis drugs and ESRD-related clinical laboratory tests for which facilities and clinical laboratories previously received separate payments. In 2013, Medicare expenditures for outpatient dialysis services in the new payment bundle, including newly bundled items and services, were $11 billion, a 3 percent increase compared with 2012. Assessment of payment adequacy Our payment adequacy indicators for outpatient dialysis services are generally positive. Beneficiaries’ access to care—Measures on the capacity and supply of providers, beneficiaries’ ability to obtain care, and changes in the volume of services suggest payments are adequate. • Capacity and supply of providers—Dialysis facilities appear to have the capacity to meet demand. Growth in the number of dialysis treatment R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 139
stations has generally kept pace with growth in the number of dialysis beneficiaries. • Volume of services—Between 2012 and 2013, the number of FFS dialysis beneficiaries and dialysis treatments each grew by 2 percent. At the same time, the per treatment use of most dialysis injectable drugs, including erythropoiesis- stimulating agents (ESAs) that are used in anemia management, continued to decline but at a lower rate than between 2011 and 2012. The new dialysis PPS created an incentive for providers to be more judicious about their provision of dialysis drugs. Quality of care—Using CMS data, we looked at changes in quality indicators between 2010 and 2013. Rates of emergency department use remained relatively constant, while rates of mortality and hospitalization declined. With regard to anemia management, negative cardiovascular outcomes associated with high ESA use have declined. There is increased use (from 8 percent of beneficiaries to 10 percent) of home dialysis, which is associated with improved patient satisfaction and quality of life. Providers’ access to capital—Information from investment analysts suggests that access to capital for dialysis providers continues to be adequate. The number of facilities, particularly for-profit facilities, continues to increase. Medicare payments and providers’ costs—Our analysis of Medicare payments and costs is based on 2012 and 2013 claims and cost report data submitted to CMS by freestanding dialysis facilities. During this period, cost per treatment increased by 1 percent, while Medicare payment per treatment increased by about 1.5 percent. Taking into account the sequester, we estimate that the aggregate Medicare margin was 4.3 percent in 2013, and the projected Medicare margin is 2.4 percent in 2015. The evidence suggests that payments are adequate; the Commission judges that outpatient dialysis facilities can continue to provide beneficiaries with appropriate access to care with no update to the base payment rate in 2016. ■ 140 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
Dialysis treatment choices Dialysis replaces the filtering function of the independently in the patient’s home or workplace five kidneys when they fail. The two types of to seven days a week. During treatments, a cleansing dialysis—hemodialysis and peritoneal dialysis fluid (dialysate) is infused into the patient’s abdomen (PD)—remove waste products from the bloodstream through a catheter. This infusion process (an exchange) differently. Within these two types of dialysis, patients is done either manually (continuous ambulatory may select various protocols. peritoneal dialysis) or using a machine (continuous cycler-assisted peritoneal dialysis). Most dialysis patients travel to a treatment facility to undergo hemodialysis three times per week, although Each dialysis method has advantages and patients can also undergo hemodialysis at home. disadvantages—no one method is best for everyone. Hemodialysis uses an artificial membrane encased in a People choose a particular dialysis method for many dialyzer to filter the patient’s blood. Because of recent reasons, including quality of life, patients’ awareness of clinical findings, there is increased interest in more different treatment methods and personal preferences, frequent hemodialysis, administered five or more times and physician training and recommendations. The per week while the patient sleeps, and short (two to use of home dialysis has grown modestly since 2009, three hours per treatment) daily dialysis administered a trend that has continued under the new PPS. Some during the day. New research also has increased interest patients switch methods when their conditions or needs in the use of “every-other-day” hemodialysis; reducing change. Although most patients still undergo in-center the two-day gap in thrice-weekly hemodialysis may be dialysis, home dialysis remains a viable option for linked to improved outcomes. most patients because of advantages such as increased patient satisfaction, better health-related quality of life, PD, the most common form of home dialysis, uses and fewer transportation challenges compared with in- the lining of the abdomen (peritoneum) as a filter to center dialysis. ■ clear wastes and extra fluid and is usually performed a prospective payment system (PPS) that includes in Background the payment bundle dialysis drugs, for which facilities previously received separate payments, and services End-stage renal disease (ESRD) is the last stage of for which other Medicare providers (such as clinical chronic kidney disease and is characterized by permanent laboratories) previously received separate payments.3 irreversible kidney failure. Patients with ESRD include In 2013, Medicare Part B expenditures for outpatient those who are treated with dialysis—a process that dialysis services included in the payment bundle were removes wastes and fluid from the body—and those who $11 billion. In addition, Part D payments for dialysis have a functioning kidney transplant. Because of the drugs—calcimimetics and phosphate binders—that will limited number of kidneys available for transplantation be included in the PPS payment bundle in 2025 totaled $1 and variation in patients’ suitability for transplantation, 70 billion in 2012 (the most recent data available). percent of ESRD patients undergo maintenance dialysis (see the text box). Patients receive additional items and Characteristics of fee-for-service dialysis services related to their dialysis treatments, including beneficiaries, 2013 dialysis drugs to treat conditions such as anemia and bone Although Medicare generally does not provide disease- disease resulting from the loss of kidney function.1 specific entitlement, the 1972 amendments to the Social In 2013, about 376,000 ESRD beneficiaries on dialysis Security Act extended Medicare benefits to people with were covered under fee-for-service (FFS) Medicare and ESRD, including those under age 65. To qualify for the received dialysis from about 6,000 dialysis facilities.2 ESRD program, an individual must be fully or currently Since 2011, Medicare has been paying facilities using insured under the Social Security or Railroad Retirement program, entitled to benefits (i.e., has met the required R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 141
were enrolled in MA plans. In 2000, the Commission t A B L e recommended that the Congress lift the prohibition on 6–1 FFs dialysis beneficiaries are disproportionately younger, male, ESRD beneficiaries enrolling in MA (Medicare Payment and African American compared with Advisory Commission 2000). all Medicare FFs beneficiaries, 2013 In 2013, a majority of FFS dialysis beneficiaries were percent of FFs: enrolled in Part D or had other sources of creditable drug Dialysis All coverage: 81 percent of FFS dialysis beneficiaries were beneficiaries beneficiaries enrolled in Medicare’s Part D program, and 4 percent received drug coverage through a retiree drug plan or other Age source of creditable coverage. In 2013, about 70 percent of Under 45 years 12% 4% FFS dialysis beneficiaries with Part D coverage received 45–64 years 38 14 the low-income subsidy, and about 15 percent of FFS 65–74 years 26 46 dialysis beneficiaries in 2013 had no Part D coverage or 75–84 years 18 24 85+ years 7 12 coverage less generous than Part D’s standard benefit. Sex Compared with all Medicare FFS beneficiaries, FFS Male 55 46 dialysis beneficiaries are disproportionately young, Female 45 54 male, and African American (Table 6-1). In 2013, 76 percent of FFS dialysis beneficiaries were less than 75 Race years old, 55 percent were male, and 36 percent were White 49 82 African American 36 10 African American. By comparison, of all FFS Medicare All others 15 8 beneficiaries, 64 percent were less than 75 years old, 46 percent were male, and 10 percent were African Residence, by type of county American. A greater share of dialysis beneficiaries reside Urban 82 78 in urban areas compared with all FFS beneficiaries Rural micropolitan 11 13 (82 percent vs. 78 percent, respectively). In 2013, FFS Rural, adjacent to urban 5 6 dialysis beneficiaries were more likely to be dually Rural, not adjacent to urban 3 4 eligible for Medicaid and Medicare compared with all Frontier 1 1 Medicare FFS beneficiaries (48 percent vs. 19 percent, Note: FFS (fee-for-service). Urban counties contain a cluster of 50,000 or more respectively, data not shown). people, rural micropolitan counties contain a cluster of 10,000 to 50,000 people, rural adjacent counties are adjacent to urban areas and without Between 2002 and 2012 (most recent data available), the a city of at least 10,000 people, and rural nonadjacent counties are not adjacent to an urban area and do not have a city with at least 10,000 adjusted rate (or incidence) of new ESRD cases (which people. Frontier counties have six or fewer people per square mile. Totals includes patients of all types of health coverage who may not sum to 100 percent due to rounding. initiate dialysis or receive a kidney transplant) decreased Source: Data compiled by MedPAC from 2013 claims submitted by dialysis by 0.7 percent per year, from 378 per million people to facilities to CMS and the 2013 CMS denominator file. 353 per million people (United States Renal Data System 2014). Since 2009, the adjusted rate of new ESRD cases has declined by 2 percent per year. This decline is seen work credits) under the Social Security or Railroad across all races and ethnicities (White, African American, Retirement program, or be the spouse or dependent child Asian Americans, Native American, and Hispanic) and of an eligible beneficiary. all age groups.4 In 2013, we estimate that approximately 82,000 FFS dialysis beneficiaries were new to dialysis, Most dialysis beneficiaries have FFS coverage. and nearly half (46 percent) were under age 65 and thus The statute prohibits enrollment of individuals with entitled to Medicare based on ESRD (with or without ESRD in Medicare Advantage (MA) plans. However, disability).5 beneficiaries who were enrolled in a managed care plan before an ESRD diagnosis can remain in the plan Better primary care management of the risk factors for after they are diagnosed. In 2013, about 14 percent of kidney disease—particularly hypertension and diabetes, ESRD beneficiaries were enrolled in MA plans; by which together account for 7 of 10 new cases of ESRD— comparison, about 28 percent of all Medicare beneficiaries can help prevent or delay the illness’s onset. Although risk- 142 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
factor control for hypertension and diabetes has improved Under the outpatient dialysis PPS, the unit of payment for all racial and ethnic groups in Medicare, disparities is a single dialysis treatment, and the base payment rate remain between African Americans and other racial is adjusted for patient-level characteristics—age, body groups. The Commission has long argued that primary measurement characteristics, onset of dialysis, and six care providers are undervalued in Medicare’s fee schedule acute and chronic comorbidities—and facility-level and has made recommendations to support primary care. factors—low treatment volume and local input prices.7 Medicare pays facilities furnishing dialysis treatments in- since 2011, CMs has paid most dialysis facility or in a patient’s home for up to three treatments facilities under the new dialysis pps per week, unless there is documented medical justification To treat ESRD, dialysis beneficiaries receive care from for more than three weekly treatments. In addition, in two principal groups of providers: (1) the clinicians 2014, the ESRD Quality Incentive Program held facilities (typically nephrologists) who prescribe and manage the responsible for the quality of care they provide, using four provision of dialysis and establish the beneficiary’s plan clinical measures and three reporting measures. Up to 2 of care, and (2) facilities that provide dialysis treatments percent of a facility’s payment is linked to these quality in a dialysis center or that support and supervise the care measures. The Commission’s Payment Basics provides of beneficiaries on home dialysis. Medicare uses different more information about Medicare’s method of paying for methods to pay for ESRD clinician and facility services. outpatient dialysis services (available at http://medpac.gov/ Clinicians receive a monthly capitated payment established documents/payment-basics/outpatient-dialysis-services- in the Part B physician fee schedule for outpatient dialysis- payment-system.pdf?sfvrsn=0). related management services, which varies based on the number of visits per month, the beneficiary’s age, and Effective 2014, the American Taxpayer Relief Act (ATRA) whether the beneficiary receives dialysis in a facility or at of 2012 mandated the rebasing (in effect, reducing) of the home. While this chapter focuses on Medicare’s payments base payment rate to account for the decline in dialysis to facilities, it is important to recognize that facilities and drug use under the new PPS. Based on the statutory and clinicians collaborate to care for dialysis beneficiaries. regulatory changes summarized in the text box (p. 144), One acknowledgment of the need for collaboration is the 2014 base prospective payment rate was $239.02 per Medicare’s ESRD Comprehensive Care Initiative, which treatment. is a shared savings program involving facilities and nephrologists and is expected to begin in 2015. Are Medicare payments adequate in To improve provider efficiency, in 2011 Medicare began a new PPS for outpatient dialysis services that expanded 2015? the payment bundle to include dialysis drugs, laboratory tests, and other ESRD items and services that were To address whether payments for 2015 are adequate to previously separately billable.6 In addition, beginning cover the costs that efficient providers incur and how much in 2012, outpatient dialysis payments are linked to the providers’ costs should change in the update year (2016), we quality of care that dialysis facilities provide. These examine several indicators of payment adequacy. We assess changes, mandated by the Medicare Improvements for beneficiaries’ access to care by examining the treatment Patients and Providers Act of 2008 (MIPPA), were based capacity of dialysis providers and changes over time in the on the Commission’s recommendation to modernize the volume of services provided, quality of care, providers’ outpatient dialysis payment system (Medicare Payment access to capital, and the relationship between Medicare’s Advisory Commission 2001). We contended that Medicare payments and providers’ costs. Most of our payment could provide incentives for the efficient delivery of adequacy indicators for dialysis services are positive: quality care by broadening the payment bundle (to include • Provider capacity is sufficient. commonly furnished drugs and services that providers formerly billed separately) and by linking payment to • Volume growth as measured by the number of dialysis quality. The new PPS is designed to create incentives for treatments has kept pace with growth in the number of facilities to provide services more efficiently by reducing beneficiaries. incentives inherent in the former payment method to overuse drugs. • Some quality measures show improvement. R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 143
Rebasing the outpatient dialysis payment rate Effective 2014, the American Taxpayer Relief Act prices) to reflect observed changes in drug utilization. (ATRA) of 2012 mandated that the Secretary The agency announced that it would phase-in the rebase the base payment rate to reflect the drug utilization adjustment over a three- to four-year reduction in the use of dialysis drugs between 2007 period. The first-year (2014) drug utilization adjustment and 2012. CMS determined that the base payment (reduction) was $8.16 (3.3 percent) per treatment.8 ■ rate should be reduced by $29.93 (in 2014 estimated • Provider access to capital is sufficient. areas was generally consistent with where FFS dialysis beneficiaries lived. • The 2013 Medicare outpatient dialysis margin is estimated at 4.3 percent, and the projected 2015 Two large dialysis organizations dominate the dialysis Medicare margin is 2.4 percent. industry, which has seen significant consolidation during the past decade.9 In 2013, the two largest dialysis Beneficiaries’ access to care: Indicators organizations (LDOs) accounted for about 70 percent of continue to be favorable all facilities and 75 percent of all Medicare treatments. Our analysis of access indicators—including the capacity Between 2011 and 2013, both LDOs acquired existing of providers to meet beneficiary demand and changes in dialysis facilities. Smaller chains have also consolidated. the volume of services—shows that beneficiaries’ access For example, in August 2013, U.S. Renal Care doubled to care remains favorable. its patient population (to about 14,000) after it completed the acquisition of Ambulatory Services of America, Capacity has kept pace with patient demand which, in 2007 and 2011, had acquired two dialysis chains (Innovative Dialysis and Renal CarePartners, Growth in the number of dialysis facilities and treatment respectively). stations alongside growth in the number of dialysis beneficiaries suggests that between 2008 and 2013, In addition to operating most dialysis facilities, the two provider capacity kept up with demand for care. During large organizations are each vertically integrated. One that period, the number of facilities increased annually by manufactures and distributes renal-related pharmaceutical 3 percent; facilities’ capacity to provide care—as measured products (e.g., phosphate binders), is the leading supplier by dialysis treatment stations—also grew 3 percent annually of dialysis products (such as hemodialysis machines and (Table 6-2). Capacity at facilities that were freestanding dialyzers) to other dialysis companies, and operates a and for profit each grew by 4 percent annually. By company that focuses on the clinical development of new contrast, capacity at facilities that were hospital based and renal therapies. Both organizations operate an ESRD- nonprofit decreased annually (–4 percent and –2 percent, related laboratory, a pharmacy, and one or more centers respectively). Capacity at urban facilities grew at 4 percent that provide vascular access services; they provide ESRD- per year while capacity at rural facilities grew at 3 percent related disease management services; and they operate per year. Trends in supply between 2012 and 2013 were dialysis facilities internationally. Both organizations generally similar to those between 2008 and 2013. have, in recent years, acquired physician groups. In 2012, DaVita acquired HealthCare Partners, a large providers of outpatient dialysis services operator of medical groups and physician networks; in In 2013, there were roughly 6,000 dialysis facilities in the 2014, Fresenius acquired or purchased majority stakes in United States. Since the late 1980s, for-profit, freestanding multiple health care–related companies. facilities have provided the majority of dialysis treatments (Rettig and Levinsky 1991). In 2013, freestanding type of facilities that closed and their effect on facilities furnished 93 percent of FFS treatments, and for- beneficiaries’ access to care profit facilities furnished about 89 percent (Table 6-2). In Each year, we assess what types of facilities closed and 2013, the capacity of facilities located in urban and rural whether certain groups of Medicare dialysis beneficiaries 144 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
t A B L e 6–2 Increasing number and capacity of freestanding, for-profit, and large dialysis organizations 2013 Average annual percent change total number of number of number total Mean facilities stations of FFs number total number treatments of number of of 2008– 2012– 2008– 2012– (in millions) facilities stations stations 2013 2013 2013 2013 All 44.0 6,000 106,500 18 3% 3% 3% 3% percent of total Freestanding 93% 92% 94% 18 4 4 4 4 Hospital based 7 8 6 14 –4 –4 –4 –5 Urban 84 79 83 19 3 4 4 3 Rural 16 21 17 15 2 2 3 3 For profit 89 86 87 18 4 4 4 4 Nonprofit 11 14 13 17 –3 –1 –2 –1 Two largest dialysis organizations 75 71 71 18 6 4 6 4 All others 25 29 29 17 –3 1 –2 1 Note: FFS (fee-for-service). Source: Compiled by MedPAC from the 2008, 2012, and 2013 Dialysis Compare database from CMS and 2013 claims submitted by freestanding and hospital-based dialysis facilities to CMS. are disproportionately affected by facility closures. Using closed were in rural areas. However, between 2012 and facilities’ claims submitted to CMS and CMS’s Dialysis 2013, the total number of rural facilities increased by 2 Compare database and Provider of Services file, we percent (Table 6-2). compare the characteristics of beneficiaries treated by facilities that closed in 2012 with those in facilities that About 2,600 dialysis beneficiaries were affected by facility provided dialysis in 2012 and 2013. closures in 2012. Our analysis found that racial minority groups and poorer patients (as measured by Medicaid On net, between 2012 and 2013, the number of dialysis eligibility) were not disproportionately affected by these treatment stations—a measure of providers’ capacity— closures. Beneficiary groups who were disproportionately increased by 3 percent. Compared with facilities that affected included patients who were White and older. treated beneficiaries in both years, facilities that closed in Our analysis of 2012 and 2013 claims data suggests that 2012 (about 40 facilities) were more likely to be hospital beneficiaries affected by these closures obtained care at based and nonprofit, which is consistent with long-term other facilities. trends in supply of dialysis providers (Table 6-2). Volume of services Measured by the number of dialysis treatment stations, To assess changes in the volume of dialysis services, closed facilities (which averaged 15 stations) were smaller we examined recent trends in the number of dialysis than facilities open in 2012 and 2013 (which averaged 18 treatments provided to beneficiaries and in the use of stations). Compared with the distribution of facilities in injectable drugs administered during dialysis. business both years, a greater proportion of facilities that R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 145
drugs.10 We also examined changes in the use of drugs F I g u R e between 2010, the year before the start of the new PPS, 6–1 growth in the number of FIGURE FFs dialysis treatments and FF Gr s owth in dialysis facilities.... and 2013. 6-1 dialysis beneficiaries, 2011–2013 The new PPS increased the incentive for providers to be 44.5 380,000 more judicious in providing dialysis drugs since they are included in the payment bundle. Under the prior payment 44.0 method, dialysis drugs were paid according to the number 375,000 of units of the drug administered—in other words, the 43.5 more units of a drug provided, the higher the Medicare payment. 43.0 370,000 Between 2007 and 2013, the use of most dialysis drugs 42.5 declined. During this period, use of eight drugs declined while three increased (ferumoxytol was not marketed in 42.0 365,000 the United States in 2007) (Table 6-3). Per treatment dose Number of FFS dialysis treatments (in millions) of both ESAs declined—erythropoietin by 47 percent and 41.5 FFS dialysis beneﬁciaries darbepoetin alfa by 63 percent. FFS dialysis treatments Number of FFS dialysis beneficiaries 41.0 360,000 However, most of the decline in the use of dialysis drugs 2011 2012 2013 has occurred since 2010. For example, between 2010 and 2013, the mean per treatment units of both ESAs Note: FFS (fee-for-service). declined—erythropoietin by 44 percent and darbepoetin Source: MedPAC analysis of 2011–2013 claims submitted by dialysis facilities to alfa by 55 percent. For ESAs, some of this decline may CMS. also have stemmed from clinical evidence showing that higher doses of these drugs led to increased risk of morbidity and mortality, which resulted in the Food and Drug Administration changing the ESA label in 2011. trends in number of dialysis treatments provided Between 2012 and 2013, total dialysis treatments grew at an In addition, usage data suggest that the new PPS increased Note: Note and Source in InDesign. average annual rate that kept pace with the average annual competition between the two principal vitamin D agents. growth in the number of total FFS dialysis beneficiaries— Under the new PPS (between 2010 and 2013), per about 2 percent (Figure 6-1). By contrast, between 2011 treatment use of paricalcitol, the more costly vitamin D and 2013, the annual growth in total treatments slightly drug (according to Medicare average sales price data), outpaced the annual growth in the number of FFS dialysis declined while per treatment use of doxercalciferol, the beneficiaries (2.4 percent per year vs. 1.7 percent per year Notes about this graph: , less costly vitamin D drug, increased (Table 6-3). respectively). The greater treatment growth (compared with • I did this all manually
, since it has two axes. To measure changes in the use by drug class, we took beneficiary growth) between 2011 and 2013 is associated the number of units of a drug provided and multiplied with an increase in the number of dialysis treatments per it by the 2014 Medicare price (based on the average of beneficiary during this period (from about 115 dialysis each products’ quarterly average sales price).11 On a per treatments per beneficiary per year to 117 treatments per treatment basis, dialysis drug use was 45 percent lower beneficiary per year, data not shown). in 2013 than in 2007. By drug class, on a per treatment use of most dialysis drugs has declined under the basis between 2007 and 2013, the use of ESAs, injectable new outpatient dialysis pps Because CMS based the iron agents, vitamin D agents, and antibiotics and all other per treatment bundled payment rate in the new PPS on drugs declined by 49 percent, 12 percent, 20 percent, and 2007 use data, we examined changes between 2007 and 79 percent respectively (Figure 6-2, p. 148). 2013 (the most current year for which complete data are available) in the use per treatment for the leading 12 Quality of care: the impact of the new pps dialysis drugs and aggregated them into 4 therapeutic This year’s quality analysis focuses on changes in quality classes—erythropoiesis-stimulating agents (ESAs), iron indicators since CMS implemented the new payment agents, vitamin D agents, and antibiotics and all other method and, except where indicated, uses CMS’s monthly 146 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
t A B L e 6–3 use per treatment of dialysis drugs has declined under the new outpatient dialysis pps Mean units per treatment* Aggregate percent change Dialysis drug 2007 2010 2013 2007–2010 2010–2013 2012–2013 ESAs Erythropoietin 5,532 5,214 2,917 –6% –44% –6% Darbepoetin alfa 1.52 1.26 0.56 –17 –55 –15 Iron agents Sodium ferric gluconate 0.39 0.15 0.14 –62 –3 –16 Iron sucrose 12.3 16.0 12.6 30 –21 –1 Ferumoxytol** N/A 0.8 0.024 N/A –97 10 Vitamin D agents Paricalcitol 2.3 2.3 1.4 –2 –40 –5 Doxercalciferol 0.8 0.9 1.2 8 38 –0.2 Calcitriol 0.16 0.13 0.05 –17 –63 –18 Antibiotics Daptomycin 0.097 0.217 0.155 123 –29 –10 Vancomycin 0.029 0.024 0.019 –18 –22 –13 Other drugs Levocarnitine 0.017 0.010 0.003 –43 –68 –17 Alteplase 0.023 0.020 0.003 –12 –85 –59 Note: PPS (prospective payment system), ESA (erythropoiesis-stimulating agent), N/A (not available). Individual units per treatment are rounded; the aggregate percent change is calculated using unrounded units per treatment.
*Each drug is reported using its own drug units.
**Drug use not available because drug not marketed in the United States in 2007, 2008, and 2009. Source: MedPAC and Acumen analysis of 2007–2013 claims submitted by dialysis facilities to CMS. monitoring data (Centers for Medicare & Medicaid Quality under the new pps Services 2013). From 2010 to 2013, monthly mortality Figure 6-3 (p. 148) presents changes in key patient and hospitalization rates modestly declined; emergency outcomes between 2010 and 2013; during this period, the department use remained relatively unchanged. Regarding proportion of dialysis beneficiaries who: anemia management, negative cardiovascular outcomes associated with high ESA use generally declined. During • died declined from an average of 1.7 percent per this period, use of home dialysis, which is associated with month to 1.5 percent per month. improved patient satisfaction and quality of life, modestly increased. • used the emergency department remained steady, averaging between 10.5 percent per month and 10.8 In assessing quality, we also examine the multiple factors percent per month. that affect access to kidney transplantation. This procedure is widely regarded as a better ESRD treatment option • were hospitalized declined each year from an than dialysis in terms of patients’ clinical and quality of average of 14.3 percent per month to 12.8 percent, life outcomes, and demand far outstrips supply. We also respectively. This finding is consistent with the trend discuss CMS’s new payment model, which is designed of declining inpatient admissions for all Medicare FFS to improve the health outcomes of dialysis beneficiaries beneficiaries during this period. while lowering their total Medicare Part A and Part B per capita spending. R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 147
F IFIGUR g u R E e Title here X-X 6–2 Dialysis drug utilization, overall and by drug class, 2007–2013 90 ESAs 80 Vitamin D agents 70 Iron agents 60 Antibiotics and all other dialysis drugs 50 40 30 20 Per treatment use (in 2014 dollars) 10 0 2007 2008 2009 2010 2011 2012 2013 Note: ESA (erythropoiesis-stimulating agent). Per treatment use is estimated for each drug by dividing total units of that drug by total dialysis treatments and multiplying by the average of 2014 quarterly average sales prices. ESAs include erythropoietin and darbepoetin; vitamin D agents include calcitriol, doxercalciferol, and paricalcitol; iron agents include iron sucrose, sodium ferric gluconate, and ferumoxytol; antibiotics and all other drugs include daptomycin, vancomycin, levocarnitine, and alteplase. Source: MedPAC analysis of 2007–2013 claims submitted by dialysis facilities to CMS and CMS’s 2014 quarterly average sales price files. FIGURE Overall Medicare and 6-3 • experienced a vascular access complication on F I g u R e Medicare inpatient margins hemodialysis declined from an average of 15.4 percent 6–3 Changes in key outcomes for dialysis beneficiaries, 2010–2013 per month to 14.7 percent per month. 18 Beneficiaries’ fluid management is related to f 18 actors such Vascular access complications 16 as the adequacy of the dialysis procedure and dietary 16
management. Figure 6-4 shows that, between 2010 and 14 ED visit 2013, the percentage of dialysis benef 14 iciaries diagnosed 12 with congestive heart f 12 ailure or dehydration declined Hospitalized slightly while the percentage of beneficiaries diagnosed 10 10 with fluid overload increased slightly. Died 8 8 Vascular access complications Process and health outcome measures reflect the change Vascular access complications 6 Hospitalized 6 Hospitalized ED visit in anemia management under the new PPS. From 2010 to ED visit
experiencing outcome Died 2013: experiencing outcome 4 4 Died Percent of dialysis beneficiaries Percent of dialysis beneficiaries 2 • Median monthly hemoglobin le 2 vels fell from 11.4 g/dL to 10.6 g/dL in 2012 and 2013.12 Figure 6-5 0 0 shows that the proportion of dialysis beneficiaries January July January July January July January July January July January July January July January July 2010 2010 2011 2011 2012 2012 2013 2013 with higher hemoglobin le 2010 v 2010 els declined and the 2011 2011 2012 2012 2013 2013 proportion with lower hemoglobin levels increased (which is generally associated with lower ESA use). Note: Note: Note and Source are in InDesign. ED (emergency department). Data are compiled on a monthly basis by CMS. Source: Source: CMS’s end-stage renal disease prospective payment system overview of 2011–2013 claims-based monitoring program. 148 Outp Note:atient dialysis ser vices: A Note and Source in InDesign. ssessing payment adequacy and updating payments Notes about this graph: • Data is in the datasheet. Make updates in the datasheet. • I had to force return the items on the x-axis. They will reﬂow if I update the data. • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. • Use direct selection tool to select items for modiﬁcation. Otherwise if you use the black selection tool, they will reset to graph default when you change the data. • Use paragraph styles (and object styles) to format.
FIGURE Overall Medicare and 6-3 Figure 6-6 (p. 150) shows that between 2010 F I g u R e Medicare inpatient margins and 2013, the percentage of dialysis beneficiaries 6–4 Changes in fluid management, 2010–2013 diagnosed with kidney stones, fracture, or peptic ulcers 16 (outcome measures assessing bone and mineral disease 16
management) remained at about the same le Dehydration vel. 14 14 Figure 6-7 (p. 150) sho Fluid overload ws that from 2010 through 2013, 12 the share of beneficiaries dialyzing at home steadily 12
increased from a monthly a CHF verage of 8.3 percent to 10.1 10 CHF 10 percent, respectively. While we are encouraged by this CHF
Fluid overload Fluid overload 8 Dehydration modest increase, we are concerned that dif 8 ferences by race Dehydration
continue; African Americans are consistently less likely to 6 use home methods (data not sho 6 wn). experiencing outcome 4 experiencing outcome 4 Access to kidney transplantation Percent of dialysis beneficiaries Percent of dialysis beneficiaries 2 Kidney transplantation is widely re 2 garded as a better ESRD treatment option than dialysis in terms of patients’ 0 clinical and quality of life outcomes. Ho 0 wever, demand January July January July January July January July January July January July January July January July for kidney transplantation exceeds supply. Factors 2010 2010 2011 2011 2012 2012 2013 2013 2010 2010 2011 2011 2012 2012 2013 2013 that affect access to kidney transplantation include the clinical allocation process and donation rates; patients’ Note: CHF (congestive heart failure). Data are compiled on a monthly basis by health literacy, clinical characteristics, and preferences; CMS. the availability of patient educational efforts; clinician Source: CMS’s end-stage renal disease prospective payment system overview of referral for transplant evaluation at a transplant center; and 2011–2013 claims-based monitoring program. transplant center policies. Note: Note and Source in InDesign. FIGURE • The proportion of beneficiaries receiving blood Title here F I g u R x-x e transfusions increased from 2.7 percent to 3.4 percent 6–5 Changes in hemoglobin in 2012 and then leveled off to 3.2 percent in 2013.13 levels, 2010–2013 • The cumulative share of beneficiaries experiencing Notes about this graph: 80 2.5 negative cardiovascular outcomes—stroke, acute Hemoglobin level at or exceeding 12 g/dL myocardial infarction, and heart failure—associated • Data is in the datasheet. Make updates in the datasheet. 70 with higher ESA use generally declined. • I had to force retur
n the items on the x-axis. They will reﬂow if I update th Hemoglobin le 2.0 vel 10 g/dL- 12 g/dL 60 e data. As discussed in our June 2014 report, clinical process • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. 50 Hemoglobin level under 10 g/dL Hemoglobin level under 10 g/dL CHF measures (such as hemoglobin levels) may exacerbate the • Use direct selection tool to select items for modiﬁcation. Otherwise if you use the black selection tool, they will reset to gr 1.5 Hemoglobin level 10 g/dL–12 g/dL aph Fluid overload incentives in FFS to overprovide and overuse services, default when you change the data. 40 Hemoglobin level at or exceeding12 g/dL Dehydration including ESAs before 2011 (Medicare Payment Advisory 1.0 Commission 2014). In addition, some clinical process • Use paragraph styles (and object styles) to format. 30 measures may be only weakly correlated with better experiencing outcome 20 experiencing outcome health outcomes. A given hemoglobin level may reflect 0.5 Percent of dialysis beneficiaries Percent of dialysis beneficiaries adequate anemia management for one patient, whereas the 10 same level may lead to a different response in a different 0 0.0 patient. Focusing on clinical outcomes, such as rates of January July January July January July January July January 2010 Januar July 2010 y 2011 Januar July 2011 y 2012 Januar July 2012 July 2013 y 2013 stroke, may be a better indicator of anemia management 2010 2010 2011 2011 2012 2012 2013 2013 in the dialysis population. The Commission believes that Medicare should transition over the next decade to a Note: Data are compiled on a monthly basis. quality-measurement system that uses a small number of population-based outcome measures. Source: MedPAC analysis of 2010–2013 claims submitted by dialysis facilities. R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 149 Note: Note and Source in InDesign. Notes about this graph: • Data is in the datasheet. Make updates in the datasheet. • I had to force return the items on the x-axis. They will reﬂow if I update the data. • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. • Use direct selection tool to select items for modiﬁcation. Otherwise if you use the black selection tool, they will reset to graph default when you change the data. • Use paragraph styles (and object styles) to format.
FIGURE Title here the esRD Comprehensive Care Initiative F I g u R x-x e 6–6 Changes in bone and mineral disease The relatively high rates of emergency department visits, management outcomes, 2010–2013 hospital admissions, and hospital readmissions among 2.5 beneficiaries on dialysis suggest that further impro 2.5 vements in quality are needed and that some dialysis benef Peptic ulcer iciaries might benefit from better care coordination. Developed 2.0 under the authority of the Center for Medicare and Medicaid Kidney stones 2.0
Innovation, the ESRD Comprehensive Care Initiative is expected to be Fractur gin in 2015 and will test whether a ne e w 1.5 Fracture 1.5 CHF payment model implemented in FFS Medicare can impro Fluid overload ve Kidney stones the outcomes of dialysis beneficiaries as well as lo Dehydration wer Peptic ulcer 1.0 Medicare per capita spending for their care. Under this 1.0
five-year initiative, ESRD Seamless Care Organizations experiencing outcome (ESCOs), which will consist of at least one dialysis f experiencing outcome acility 0.5 and one nephrologist, will be held accountable for the 0.5
Percent of dialysis beneficiaries Percent of dialysis beneficiaries clinical and financial (Part A and Part B) outcomes of prospectively matched dialysis beneficiaries. ESCOs will 0.0 0.0 be held to either one-sided risk-based payment (if the January July January July January July January July January 2010 Januar July 2010 y 2011 Januar July 2011 y 2012 Januar July 2012 July 2013 y 2013 2010 2010 2011 2011 2012 2012 2013 2013 dialysis facility participating in the ESCO is not operated by an LDO) or two-sided risk-based payment (if the dialysis facility is affiliated with an LDO). The ESRD Note: Data are compiled on a monthly basis by CMS. Comprehensive Care Initiative uses an approach similar Source: CMS’s end-stage renal disease prospective payment system overview of to the Medicare Shared Savings Program to calculate the 2011–2013 claims-based monitoring program. historical expenditure baseline. CMS expects to award Note: Note and Source in InDesign. FIGURE African Americans are less likely than Whites to receive IPPS discharges F I g u R e 11-6 kidney transplants despite their fourfold greater likelihood 6–7 Increasing use of home of developing ESRD. According to Ephraim and dialysis, 2010–2013 colleagues, the lower rates of kidney transplantation for 12 African Americans are associated with multiple factors, including immunological incompatibility with deceased Notes about this graph:
10 donor kidneys, lower rates of referral for transplantation, • Data is in the datasheet. Make updates in the datasheet. lower rates of cadaver kidney donation, and lack of • I had to force return the items on the x-axis. They will reﬂow if I update th 8 e data. knowledge and suboptimal discussions about kidney transplantation among recipients, their families, and health • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. care providers (Ephraim et al. 2012). • Use direct selection tool to select items for modiﬁcation. Ot 6 herwise if you use the black selection tool, they will reset to graph default when you change the data. In 2010, to help inform beneficiaries diagnosed with on home dialysis 4 Stage IV chronic kidney disease (CKD) (the disease • Use paragraph styles (and object styles) to format. stage before ESRD) about managing CKD and related 2 comorbidities and their options for care, Medicare began Percent of dialysis beneficiaries paying for up to six kidney disease education (KDE) sessions per beneficiary. Fewer beneficiaries were 0 provided KDE services in 2013 than in 2011 and 2012— 2010 2011 2012 2013 3,600 beneficiaries in 2013 compared with about 4,200 beneficiaries in 2011 and 2012. Medicare KDE spending Note: Data represent yearly averages of data compiled by CMS on a monthly in 2013 was about $500,000.14 basis. Source: CMS’s end-stage renal disease prospective payment system overview of 2011–2013 claims-based monitoring program. 150 Outpatient dialysis ser vices: Assessing payment adequacy and updating Note: payments Note and Source in InDesign. Notes about this graph: • Data is in the datasheet. Make updates in the datasheet. • I had to force return the items on the x-axis. They will reﬂow if I update the data. • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. • Use direct selection tool to select items for modiﬁcation. Otherwise if you use the black selection tool, they will reset to graph default when you change the data. • Use paragraph styles (and object styles) to format.
between 10 and 15 ESCOs in 2015. The Commission has • Berkshire Hathaway continued its investment in said that if structured properly, a shared savings program— DaVita by purchasing 1.13 million shares in February in this case, for ESRD providers—could present an and an additional 944,000 shares in November. Such opportunity to correct some of the undesirable incentives an investment suggests the financial attractiveness of inherent in FFS payment and reward providers who are the company and the positive economics associated doing their part to control costs and improve quality. Online with provision of dialysis services. Appendix 6-A, available at http://www.medpac.gov, has • Several private equity and venture capital firms additional information about the ESRD Comprehensive provided growth financing ($20 million dollars) for Care Initiative. Pure Life Renal to launch and acquire dialysis centers. While ESCOs will enroll only dialysis beneficiaries, Pure Life Renal is a dialysis management company other accountable care organization models, such as that furnishes in-center, home-based, and acute those participating in the Medicare Shared Savings dialysis services. Program, might provide opportunities for beneficiaries • Dialysis Clinic Inc., the largest nonprofit dialysis with earlier stages of kidney disease to receive better care chain, acquired the Rubin Dialysis Center and entered coordination, particularly in the management of the kidney into a joint venture agreement with the Billings Clinic. disease risk factors discussed on p. 142. • NxStage, manufacturer of home hemodialysis providers’ access to capital: growth trends equipment, will develop new products for the suggest access is adequate peritoneal dialysis market. In addition, NxStage, Providers need access to capital to improve their which operates seven dialysis care centers, opened five equipment and open new facilities so they can additional centers. accommodate the growing number of patients requiring dialysis. The two largest dialysis organizations, as well as • Renal Ventures Management, which operates about 30 other renal companies, appeared to have adequate access dialysis centers, opened its first vascular access center to capital in 2014. For example, in 2014: in Louisiana. • Fresenius Medical Care announced it would invest up In public financial filings, the two largest dialysis to $140 million to open a new facility in Tennessee for organizations reported positive financial performance manufacturing dialysis-related products. for 2013, including strong treatment (volume) growth, productivity improvements, and cost control initiatives. • Fresenius Medical Care acquired or purchased For example, Fresenius Medical Care announced that majority stakes in (1) Sound Inpatient Physicians Inc., it expects to double its revenue between 2013 and 2020 a hospitalist management organization with 1,000 (Zumoff 2014). physicians who provide care in over 100 hospitals and post-acute care centers; (2) MedSpring Urgent Care Factors unrelated to Medicare’s payment policies Centers, which operates 18 centers in Illinois and could affect providers’ access to capital. For example, Texas; (3) National Cardiovascular Partners, which circumstances can occur within a sector that can provides endovascular, vascular, and cardiovascular discourage outside investment because of the actions of outpatient services and operates 21 outpatient vascular certain providers. In 2014, DaVita Healthcare Partners centers in 6 states in partnership with 200 physicians; Inc. paid $350 million to the federal government to and (4) Cogent Healthcare, which provides hospitalist resolve claims that it violated the False Claims Act by and intensivist services by 650 providers in more than paying physicians kickbacks to get patient referrals for 80 hospitals. its clinics and to reduce or eliminate competition from other dialysis centers. Under the settlement, DaVita • DaVita HealthCare Partners announced a joint venture entered into a Corporate Integrity Agreement with the with Colorado-based Centura Health, which operates Department of Health and Human Services Inspector 15 hospitals and is jointly owned by Englewood-based General that includes the appointment of an independent Catholic Health Initiatives, a not-for-profit health monitor to prospectively review DaVita’s arrangements system, and Adventist Health System, Altamonte with nephrologists and other health care providers for Springs, FL. compliance with the Anti-Kickback Statute. Despite this R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 151
change in total and per capita spending reflects (1) the 2.3 F I g u R e FIGURE Growth in dialysis facilities.... percent statutory update to the payment rate in 2013, (2) 6–8 Medicare FFs spending under X-X the new pps, 2011–2013 the 2 percent growth in the number of beneficiaries and treatments, and (3) the 2 percent sequester reduction of 29,500 11.2 Medicare’s payment to providers that began in April 2013. 11.0 part D spending for dialysis drugs 29,000 In 2012 (the most recent year data are available), Part D 10.8 spending for dialysis drugs that will, on January 1, 2025, be included in the PPS payment bundle, totaled $1 billion, 28,500 10.6 an increase of 22 percent compared with 2011. Medicare y (in dollars) spending for Part D dialysis drugs is not included in the Total Medicare 10.4 Commission’s analysis of Medicare’s payments and costs spending for dialysis facilities. Online Appendix 6-B, available at beneficiar 28,000 Medicare Total Medicare spending (in billions of dollars) Spending per FFS dialysis http://www.medpac.gov, provides additional analysis of 10.2 spending per trends in Part D dialysis drug spending between 2007 and beneﬁciary 2012. 27,500 10.0 2011 2012 2013 providers’ costs for outpatient dialysis services under the new pps Note: FFS (fee-for-service), PPS (prospective payment system). To assess the appropriateness of costs for dialysis Source: MedPAC analysis of 2011–2013 claims submitted by dialysis facilities to services paid for under the new PPS, we examine whether CMS. aggregate dialysis facility costs reflect costs that efficient providers would incur in furnishing high-quality care. For this analysis, we use 2012 and 2013 cost reports submitted recent settlement, in 2014 assessments, investor analysts to CMS by freestanding dialysis facilities. For those years, concluded that DaVita’s core dialysis segment continues to we look at the growth in the cost per treatment and how perform very well, and they anticipate solid growth in the Note: Note and Source in InDesign. total treatment volume affects that cost. dialysis sector. Cost growth under the new pps Between 2012 and 2013, These current trends in the growth of for-profit providers the cost per treatment rose by about 1 percent, from about and consolidation among dialysis providers suggest that $238 per treatment to $240 per treatment. Variation in the dialysis industry is an attractive business to for-profit cost growth across freestanding dialysis facilities shows providers and that efficiencies and economies of scale are Notes about this graph: that some facilities were able to hold their cost growth attained in providing dialysis care. • I did this all manually well belo , since it has two axes. w that of others. For example, between 2012 and 2013, per treatment costs decreased by 4 percent Medicare payments and providers’ costs for facilities in the 25th percentile of cost growth and Each year, we examine the relationship between increased by 4 percent for facilities in the 75th percentile. Medicare’s payments and providers’ costs as part of our assessment of payment adequacy. To make this Cost per treatment is correlated with facility service assessment, we reviewed Medicare expenditures for volume Cost per treatment is correlated with the total outpatient dialysis services in 2013 and examined trends in number of treatments a facility provides. For this spending under the new PPS. We also reviewed evidence analysis, we adjusted the cost per treatment to remove regarding providers’ costs under the new PPS. differences in the cost of labor across areas and included all treatments regardless of payer. Our analysis showed, Medicare payments for outpatient dialysis services in each year from 2011 through 2013, a statistically Between 2012 and 2013, total Medicare spending significant relationship between total treatments and cost increased by about 3 percent, from $10.7 billion to $11 per treatment (correlation coefficient equaled –0.5) (Figure billion, while per capita spending increased by 1 percent, 6-9). That is, the greater the facility’s service volume, the from about $28,900 to about $29,300 (Figure 6-8). The lower its costs per treatment. 152 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
FIGURE facilities (4.9 percent and 0.6 percent, respectively); F I g u R e Reduction in drug... 6-6 differences in total treatment volume reflect much of the 6–9 Higher volume dialysis facilities had lower cost per differences observed between urban and rural facilities. treatment, 2011–2013 Urban dialysis facilities are larger on average than rural facilities with respect to number of treatment stations and 340 Medicare treatments pro 2013 vided. In 2013, urban facilities 2011 320 2012 averaged 19 stations while rural facilities averaged 2013 15 stations; urban f 2012 acilities averaged 8,300 Medicare 300 treatments while rural facilities averaged 5,700 Medicare treatments. 2011 280 projecting the Medicare margin for 2015 260 On the basis of 2013 payment and cost data, provider cost growth between 2012 and 2013, and policy changes that 240 went into effect between 2013 (the year of our most recent margin estimates) and 2015, we project a 2.4 percent 220 aggregate Medicare margin for dialysis facilities in 2015. The policy changes that are included in this projection Adjusted median cost per treatment (in dollars) 200 include: <3,000 ≥30,000 • statutory updates of 2.8 percent in 2014 and 0 percent in 2015; 25,000–30,000 20,000–25,000 15,000–20,000 10,000–15,000 9,000–10,000 8,000–9,000 7,000–8,000 6,000–7,000 5,000–6,000 4,000–5,000 3,000–4,000 Number of dialysis treatments • other policy changes that resulted in increased payments in 2014 and 2015 of 0.6 percent and 0.3 Note: Cost per treatment is adjusted to remove differences in the cost of labor. Dialysis treatments include those paid for by all sources (not just Medicare- percent, respectively; paid treatments). Source: MedP Note: AC analysis of 2011–2013 cost repor Note and Source in InDesign. ts submitted by freestanding dialysis facilities to CMS and the end-stage renal disease wage index files. t A B L e 6–4 Medicare margin in 2013 varied by type of freestanding dialysis facility Medicare margin for freestanding facilities in 2013 The Commission assesses current payments and costs Notes about this graph: percent of for dialysis services for freestanding dialysis facilities freestanding Medicare dialysis by comparing Medicare’s payments with providers’ • Data is in the datasheet. Make updates in the datasheet. provider type margin facilities Medicare-allowable costs. The latest and most complete • I had to force retur
n the items on the x-axis. They will reﬂow if I update the data. data available on payments and costs are from 2013. Our All 4.3% 100% • I had to manually draw tick marks and axis lines because they kept resetting when I changed any data. analysis includes only facilities that elected to be paid Urban 4.9 80 under the new PPS. • Use direct selection tool to select items for modiﬁcation. Otherwise if you use the black selection tool, they will reset to graph Rural 0.6 20 default when you change the data. For 2013, we estimate that the aggregate Medicare margin Two largest dialysis organizations 4.1 77 • Use paragraph styles (and object styles) to format. was 4.3 percent (Table 6-4). The distribution of margins All others 5.2 23 shows wide variation in performance among freestanding Treatment volume (quintile) facilities. In 2013, one-quarter of facilities had margins Lowest –12.3 20 at or below –6.5 percent, and one-quarter of facilities had Second –3.8 20 margins of at least 12.2 percent. Third 2.0 20 Fourth 6.0 20 Facility size accounted for the largest variation in Highest 9.7 20 freestanding dialysis facilities’ margins; facilities with greater total treatment volume had higher margins on Source: Compiled by MedPAC from 2013 cost report and outpatient claims average. Urban facilities had higher margins than rural submitted by facilities to CMS and the 2013 Dialysis Compare database. R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 153
• a 3.3 percent reduction in payments due to rebasing R e C o M M e n D A t I o n 6 the payment rate in 2014 to account for the reduction the Congress should eliminate the update to the outpatient in drug use under the new PPS; dialysis payment rate for calendar year 2016. • a reduction in payments due to the ESRD Quality R A t I o n A L e 6 Incentive Program (QIP) in 2014 and 2015 of 0.29 percent and 0.17 percent, respectively; and Most of our indicators of payment adequacy are positive, including beneficiaries’ access to care, the supply and • the sequester, which reduces Medicare’s program capacity of providers, volume of services, quality of payments to providers by 2 percent. care, and access to capital. Providers have become more efficient in the use of dialysis drugs under the new payment system. The Medicare margin was 4.3 percent in 2013 and is projected to be 2.4 percent in 2015. How should Medicare payments change in 2016? I M p L I C A t I o n s 6 The Protecting Access to Medicare Act of 2014 sets spending the update to the outpatient dialysis payment rate at the • In 2016, the statute sets the payment update at the market basket, less an adjustment for productivity and market basket, net of the productivity adjustment, 1.25 percentage points. Based on CMS’s latest forecast minus 1.25 percentage points. We expect that the of the ESRD market basket for calendar year 2016 (2.9 Commission’s recommendation would lower federal percent), the update to the 2016 payment rate would be program spending relative to the statutory update by 1.15 percent. In addition to this statutory provision, the between $50 million and $250 million over one year ESRD QIP is expected to decrease total payments by 0.17 and by less than $1 billion over five years. percent in 2016. Beneficiary and provider • This recommendation may increase the financial update recommendation pressure on providers but, overall, is expected The evidence on payment adequacy suggests that to have a minimal effect on reasonably efficient outpatient dialysis payments are adequate. It appears providers’ willingness and ability to care for Medicare that facilities have become more efficient under the beneficiaries. We do not anticipate any negative effects new payment method as measured by declining use of on beneficiary access to care. ■ injectable dialysis drugs between 2010 and 2013. 154 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments
endnotes 1 The term dialysis drugs refers to the medications used to treat 9 According to CMS’s Provider Reimbursement Manual, a ESRD. chain organization consists of a group of two or more health care facilities or at least one health care facility and any other 2 In this chapter, the term beneficiaries refers to individuals business or entity owned, leased, or, through any other device, covered by Medicare and patients refers to individuals who controlled by one organization (Centers for Medicare & may or may not be covered by Medicare. Medicaid Services 2012). 3 In this chapter, the term providers refers to freestanding and 10 These drug classes accounted for nearly all dialysis drug hospital-based dialysis facilities. Technically, under Medicare spending (about 97 percent) in 2010, the year before the start law, freestanding dialysis facilities are suppliers and hospital- of the new payment method. based dialysis facilities are providers. 11 Because units vary from drug to drug, we created a standard 4 Age groups are 19 years or younger, 20 to 44 years, 45 to 64 metric—the product of each drug’s unit per treatment and years, 65 to 74 years, and 75 years or older. 2014 average sales price—to measure changes in the use across all dialysis drugs. 5 For individuals entitled to Medicare based on ESRD, Medicare coverage does not begin until the fourth month 12 Anemia is measured by a blood test to check the level of after the start of dialysis, unless the individual had a kidney hemoglobin, the protein that carries oxygen in red blood cells. transplant or began training for self-care, including those dialyzing at home. 13 Blood transfusions are of concern to patients because they (1) carry a small risk of transmitting blood-borne infections to 6 In 2011, most dialysis facilities (about 93 percent) elected to the patient, (2) may cause some patients to develop a reaction, be paid under the new PPS instead of the four-year transition and (3) are costly and inconvenient to patients. Blood rate. transfusions are of particular concern for patients seeking kidney transplantation because they increase a patient’s 7 Medicare pays dialysis facilities for uncollected deductibles alloantigen sensitization, which can require a patient to wait to and coinsurance (bad debt). Medicare paid 100 percent of receive a transplant. allowable bad debt in fiscal year (FY) 2012, 88 percent in FY 2013, 76 percent in FY 2014, and will pay 65 percent in FY 14 KDE services were most frequently provided by 2015 and beyond. Before FY 2012, Medicare capped bad debt nephrologists, nurse practitioners, or physician assistants in reimbursement at a facility’s unrecovered costs. an office setting. MIPPA does not permit dialysis facilities to bill for KDE services. This analysis used 100 percent of 2011 8 In addition to implementing the 2014 drug utilization through 2013 carrier and outpatient claims submitted for KDE adjustment, CMS implemented the statutory update of the services. base payment rate (by the market basket less the productivity offset) and other positive (regulatory) policy changes. These statutory and regulatory changes resulted in an overall impact of 0 percent compared with total payments in 2013. R e p o r t t o t h e C o n g r e s s : M e d i c a r e P a y m e n t P o l i c y | M a r c h 2 0 1 5 155
References Centers for Medicare & Medicaid Services, Department of Health Medicare Payment Advisory Commission. 2001. Report to the and Human Services. 2013. End-stage renal disease prospective Congress: Medicare payment policy. Washington, DC: MedPAC. payment system: Overview of 2011–2013 claims-based monitoring program. Baltimore, MD: CMS. Medicare Payment Advisory Commission. 2000. Report to the Congress: Medicare payment policy. Washington, DC: MedPAC. Centers for Medicare & Medicaid Services, Department of Health and Human Services. 2012. Medicare provider reimbursement Rettig, R. A., and N. G. Levinsky. 1991. Kidney failure and the manual—Part 1. Chapter 21. Baltimore, MD: CMS. federal government. Washington, DC: National Academy of Sciences. Ephraim, P. L., N. R. Powe, H. Rabb, et al. 2012. The Providing Resources to Enhance African American Patients’ Readiness United States Renal Data System, National Institute of Diabetes to Make Decisions about Kidney Disease (PREPARED) study: and Digestive and Kidney Diseases. 2014. USRDS 2014 annual Protocol of a randomized controlled trial. BMC Nephrology 13: data report. Bethesda, MD: NIDDK. 135. Zumoff, R. 2014. Fresenius Medical Care said it expects revenue Medicare Payment Advisory Commission. 2014. Report to to nearly double by 2020. Nephrology News & Issues, April 4. the Congress: Medicare and the health care delivery system. Washington, DC: MedPAC. 156 Outpatient dialysis ser vices: Assessing payment adequacy and updating payments