The 2009 Proposed Rule for Prospective ESRD Payment: Perspectives From a Large Dialysis Organization

Abstract

On September 15, 2009, the Centers for Medicare & Medicaid Services (CMS) released the proposed rules of coverage for the new prospective payment system governing reimbursement for end-stage renal disease.1Centers for Medicare & Medicaid ServicesEnd-stage renal disease prospective payment system proposed rules.Fed Regist. 2009; 74: 49922-50102Google Scholar There are numerous implications for the forthcoming changes in coverage; some are common to the entire kidney community while some are unique to specific segments. We discuss here the implications of the changes for patients and dialysis facilities. It is tempting to focus on the potential negative impact of this new payment system, but that would ignore the opportunities these changes represent. A useful rubric for understanding the potential impact of the expanded bundle is a SWOT analysis, in which the associated strengths, weaknesses, opportunities, and threats can be explored (Box 1).Box 1SWOT Analysis of the Proposed Prospective Payment System for DialysisTabled 1StrengthsWeaknesses•Equal payment for hemodialysis and peritoneal dialysis•Payment per treatment•Reasonable outlier payment•Ability to comment and influence final rules•18 case-mix adjusters; limited data availability•3% phase in reduction•Oral drugs (binders and calcimimetics) in the bundle•Inclusion of all laboratory tests ordered by MCP (monthly capitation payment) physicians•No pilot of impactOpportunitiesThreats•Improve/re-engineer practice•Improve cost-effectiveness•Begin preparing for changes now•Influence/improve final rules•Community alignment•Worsening patient outcomes•Underfunding may drive facility closures•Decreased incentives for new productsAbbreviation: SWOT, strengths, weaknesses, opportunities, threats. Open table in a new tab Tabled 1StrengthsWeaknesses•Equal payment for hemodialysis and peritoneal dialysis•Payment per treatment•Reasonable outlier payment•Ability to comment and influence final rules•18 case-mix adjusters; limited data availability•3% phase in reduction•Oral drugs (binders and calcimimetics) in the bundle•Inclusion of all laboratory tests ordered by MCP (monthly capitation payment) physicians•No pilot of impactOpportunitiesThreats•Improve/re-engineer practice•Improve cost-effectiveness•Begin preparing for changes now•Influence/improve final rules•Community alignment•Worsening patient outcomes•Underfunding may drive facility closures•Decreased incentives for new productsAbbreviation: SWOT, strengths, weaknesses, opportunities, threats. Open table in a new tab Abbreviation: SWOT, strengths, weaknesses, opportunities, threats. In many ways, CMS responded to community feedback in the design of the proposed rules. First, in-center hemodialysis and peritoneal dialysis will receive equivalent reimbursement. For years, the United States has lagged behind the rest of the world in home dialysis, despite significant advantages for patients who use this modality. The elimination of a separate payment schedule has the potential to allow more patients to be treated with peritoneal dialysis and other home therapies. Next, the payment system will be per treatment, not per month, aligning it with care delivery and current accounting systems and averting incremental administrative burden and confusion. The proposed outlier payment is consistent with other Medicare systems, and is largely reasonable. Perhaps most importantly, CMS is inviting comment and has shown a willingness to respond to community feedback. CMS has added 15 new case-mix adjusters (CMAs) to the existing 3. The majority of these CMAs are comorbid conditions identified through the 2728 Medical Evidence Form and hospital and other Medicare claims. CMS released a file with the projected case mix for each US dialysis unit.2Centers for Medicare & Medicaid ServicesCalendar year 2010 ESRD PPS proposed rule provider level impact file, September 2009.http://www.cms.hhs.gov/ESRDPayment/PAY/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1228517&intNumPerPage=10Google Scholar Ongoing research at DaVita appears unable to replicate the magnitude of these case-mix adjusters, likely because dialysis units do not have access to the extensive claims data CMS used to generate them.3Mayne T.J. Burgess M. Weldom J. Finding the case mix adjusters in the CMS proposed bundle.Nephrol News Issues. 2009; 10: 34-38Google Scholar This is concerning because CMS reduced the base payment by 22% to offset the costs of these case-mix adjusters, all of which increase Medicare payment. If dialysis units cannot match the CMS adjusters, more than a billion dollars could be removed from the system. In addition, CMS published results of an analysis to determine which clinics would opt into or phase in the new payment system, in large part based on these case-mix adjusters.2Centers for Medicare & Medicaid ServicesCalendar year 2010 ESRD PPS proposed rule provider level impact file, September 2009.http://www.cms.hhs.gov/ESRDPayment/PAY/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1228517&intNumPerPage=10Google Scholar In their analysis, CMS assumed that facilities would be able to ascertain all case-mix adjusters, and that units paid more under the phase-in conditions would choose to phase in, and those paid more under the opt-in scenario would choose to opt in. This selective phase in would result in an increase in Medicare spending, and in anticipation, CMS applied a 3% “transition budget-neutrality adjustment factor to all payments.”1Centers for Medicare & Medicaid ServicesEnd-stage renal disease prospective payment system proposed rules.Fed Regist. 2009; 74: 49922-50102Google Scholar(p429) In short, in 2011 all treatments will be taxed 3% to pay for the incremental costs of selective phase in. A DaVita study has shown that, even using extensive electronic and paper chart review, it is not possible to ascertain all the case-mix adjusters identified by CMS.3Mayne T.J. Burgess M. Weldom J. Finding the case mix adjusters in the CMS proposed bundle.Nephrol News Issues. 2009; 10: 34-38Google Scholar As a result, the majority of units will be paid less under the new payment system than projected, and will choose to phase in, not opt in. The 3% “transition budget-neutrality adjustment factor” is only budget neutral if units can identify the same case-mix adjusters that CMS used in its analysis, otherwise, few units will opt in, and the 3% tax will not be neutral but will reduce dialysis payments. It is also concerning that oral (or Medicare Part D) drugs were included in the proposed bundle starting on January 1, 2011, despite CMS' acknowledgement that the proposed $14 per treatment was an underestimate of true costs and that they were unable to calculate case-mix adjustment for oral drugs.1Centers for Medicare & Medicaid ServicesEnd-stage renal disease prospective payment system proposed rules.Fed Regist. 2009; 74: 49922-50102Google Scholar(pp91,111-113) It is our opinion that it would be in patients' and providers' best interest if inclusion of orals drugs was delayed until CMS could adequately assess their true costs and factors associated with higher utilization. Similarly, the inclusion of all laboratory tests ordered by a physician providing dialysis services in the bundle has several weaknesses. First, dialysis physicians order tests for other physicians (eg, the nephrologist orders an INR [international normalized ratio] for a cardiologist), which promotes continuity of care and also saves vascular access from being used for nondialysis blood draws. Such practices will likely have to cease. Second, the $8.74 per treatment for laboratory tests will not adequately cover all possible tests. Third, CMS proposes to subject end-stage renal disease laboratory services to coinsurance, which is not a requirement in any other Medicare payment system. In sum, we feel that a defined set of dialysis-specific laboratory tests would be a preferable solution. Furthermore, Congress originally mandated a demonstration project to evaluate the impact of this system on patient care and outcomes before the new system was implemented universally. We continue to maintain that this would have been a preferable course of action. Evolution progresses more quickly in the face of rapid environmental change. The new bundled payment system will foster innovation in dialysis practices, providing the opportunity to re-engineer and improve patient care. For example, there remain many unanswered questions about optimal anemia management practices. The same can be said of bone and mineral metabolism, and the best combination of vitamin D, binders, and calcimimetics. The use of catheters in the United States exceeds their use in the rest of the world, in part reflecting suboptimal predialysis care. Changing incentives will support cost-effective advances in these areas and more. We believe that large dialysis organizations are uniquely positioned to nurture quality improvement. By leveraging extensive databases, DaVita will conduct observational studies to generate hypotheses concerning practice change. Those hypotheses can then be tested in serial pilot studies, and best practices subsequently rolled out in time to address new payment realities. Publications can then disseminate innovation throughout the nephrology community. However, before these opportunities can be realized, the community must address some of the emerging threats in the proposed rules. CMS extended the deadline for comments to December 16, 2009, and we hope that all affected parties have participated in this dialogue. A final opportunity exists in the form of community alignment in its response to CMS. If the community is able to reach consensus on key issues, to speak with one voice, it will be possible to correct the weaknesses in the current rules, and to minimize potential threats. Such unity can only benefit patients in the form of improved care and outcomes. The threats in the proposed rules flow from a common source, namely, underfunding. If CMS does not adequately fund the base payment and oral drugs (should they elect to retain oral drugs in the bundle), patients will suffer. This will not be the result of nefarious intent or behavior on the part of dialysis providers, physicians, or CMS, but the unintended consequence of the implementation of a very complex, but flawed, policy. A unit whose payments drop precipitously in the first months of 2011 will be faced with draconian choices: reduce health care resource use or risk going out of business, compromise patient outcomes or stop providing dialysis services. Both small and large dialysis organizations are vulnerable to the effects of underfunding, and no amount of innovation will counter its negative effects. The threat of poor outcomes and loss of access to care will not be randomly distributed across the nation. Patients in rural areas, where care is more dispersed, will be most vulnerable to reduced access. Patients from a clinic that closes in Manhattan can be far more easily absorbed by surrounding units than one that closes in rural Montana. We are also concerned that African Americans may be disproportionately affected, should the bundle be inadequately funded. An extensive literature has shown that African Americans require more erythropoietin to reach equivalent hemoglobin levels as whites, and higher vitamin D to attain equivalent parathyroid hormone levels. Catheter use also is higher in African Americans, and is associated with a plethora of negative outcomes. CMS elected not to include race as a case-mix adjuster. We believe that this is a mistake and has the potential to reverse decades of progress which have narrowed the gap for African Americans in potentially important dialysis measures, including hemoglobin levels, catheter rates, and parathyroid hormone levels. Lastly, the proposed payment change has the potential to create economic disincentives for new products and therapies to be introduced into the dialysis space. Drug and device companies will be loathe to invest in technical innovation in a zero-sum market. In the first half of 2010, CMS will release the final rules of coverage for dialysis. Between now and then, the nephrology community has the opportunity to influence CMS to improve the proposed rules. There can be no greater cause than ensuring that dialysis care is adequately funded under the expanded bundle, and the community appears to be united in this cause. With adequate funding, there will be opportunity not just for innovation, but to leapfrog improvements in care and outcomes. Increases in the use of peritoneal dialysis, improvements in anemia management, and better treatment of bone and mineral disorders will be just a few of the advances we can expect to occur. Conversely, without adequate funding, national outcomes and access to care will decline, and these effects could be more pronounced in rural areas and in units serving greater numbers of African American patients. We anticipate that CMS will respond rationally to the feedback of the community and address the weaknesses outlined here. Should this happen, we may well see US outcomes meet, or even exceed, those currently enjoyed in Europe, Japan, and other countries across the globe. Dr Nissenson is Chief Medical Officer, Dr Mayne is Senior Director in Health Economics and Informatics in Clinical Research, and Dr Krishnan is Vice President in Clinical Research at DaVita, Inc. Financial Disclosure: Dr Nissenson has served as chair of the Scientific Advisory Board for AMAG Pharmaceuticals, Inc. Drs Mayne and Krishnan declare that they have no relevant financial interests.