Despite benefits from the ESRD bundle, stopping the payment 'leakage' is a priority

SEATTLE – It remains unclear what the Centers for Medicare & Medicaid Services will do next month with its proposed ESRD bundled payment cut. The agency faces pressure from more than 400 comments to its proposed rule, most of them focusing on the ESRD payment issue (other proposed changes include how payments for home dialysis training will be made, as well as new measures for the ESRD Quality Incentive Program for 2014). Some members of Congress, which mandated that CMS make the cut based on the reduced amount of injectable drugs being used by dialysis providers, have been lobbied by the dialysis industry to back track and tell the agency to reduce the proposed 9.4% cut.

(Renal administrators debate options on payment cut)

But while the cut could be bad news for the dialysis industry, dialysis providers have also seen some benefits related to the initiation of the Prospective Payment System since it became effective in 2011.

CMS now conducts an annual market basket review of the base composite rate. This was a major victory for the industry, which for years pointed out to CMS and Congress that it was the only Medicare-qualified health care service provider that did not have a yearly automatic review of the cost of care. Each year, the renal industry had to lobby Congress for a composite rate increase. The annual review eliminates that. CMS has approved market basket increases to the base rate (see table provided by Avalere Health) for the last two years, and a third one—for 2.6% — is proposed for 2014 to offset the proposed cut.
Next year marks the first year that all dialysis clinics will be paid under the bundled payment system. CMS offered providers a transition period over the last three years for clinics that weren’t prepared.
As part of the American Taxpayer Relief Act, Congress agreed to delay by two years placing oral drugs into the ESRD bundle. That gives time for CMS to gather more data on the true cost for these drugs (the agency has proposed a $14 add-on payment per treatment; providers and stakeholder groups valued the drugs in a wide range from $45-$100 per treatment). CMS will be evaluating the Medicare Prescription Drug Plan Finder and other potential data sources to determined a revised payment.

That moved the date for inclusion of oral drugs into the bundle to 2016, and there are some indications that the decision could be delayed further if more generics of commonly used oral drugs for dialysis patients become available.

Estimated average Medicare per treatment payment rates (2011-2014)

Provider type	# Providers	CY 2011	CY 2012	CY 2013	CY 2014E	% Change (2013-2014)
LDO	3,670	$244.90	$251.00	$254.90	$230.90	-9.4%
Regional	1,167	$249.30	$254.40	$257.90	$233.50	-9.4%
Independent	278	$249.20	$256.00	$260.40	$235.50	-9.5%
Hospital	445	$251.70	$255.80	$263.30	$238.50	-9.4%
Unknown	1	$247.30	$254.60	$257.60	$232.70	-9.6%
Total	5,560	$246.70	$252.50	$256.40	$232.20	-9.4%

Source: Avalere Health

'Leaking' money
But the dialysis industry has other opportunities to help offset the proposed payment cut, according to speakers at the annual National Renal Administrators Association conference held here this past weekend. CMS offers facilities the opportunity to charge the agency more money for more complicated patients via case mix adjusters and the bundle’s outlier payment formula. But this money is often left on the table and never claimed by the industry. It’s something called bundle “leakage,” and it is money that is technically in the bundled payment but which dialysis clinics tend to leave behind.

Thus, if the base rate per treatment would be reduced by $23.41, from $240.36 to $216.95, as proposed by CMS, clinics could partially make up the shortfall by stopping the leaks and getting paid for patients with more complex conditions.

Not so easy.

Find the patients
The problem, dialysis providers say, is that both options require an extensive paper trail, often working with uncooperative hospitals to document the condition, or are for conditions that clinics do not see consistently among their patients. The industry has lobbied CMS and Congress about this problem, and a report is due by the Government Accountability Office as part of American Taxpayer Reform Act to look more closely at the case mix adjustors and make recommendations on whether the process should change. “Basically CMS is keeping more money because we cannot find these patients” with the payment adjusters, said Avalere Health’s Eric Hammelman, who gave a talk on the bundle at the meeting.

In its comments to CMS on the proposed rule, the NRAA suggested a couple of ideas to send more dollars to facilities:

Outlier policy. “NRAA supports continuation of the outlier policy using a calculation that results in the full 1% being distributed to providers with eligible outlier treatments. An alternative policy would be to decrease the holdback to 0.5 to make certain the entire holdback is paid back out to providers.”
Co-morbid conditions adjustment. “The NRAA is encouraging the Agency to work with NRAA and other stakeholders in the community to develop alternative and easier ways to make patient level adjustments for the costliest patients. While a new system is being developed, NRAA urges the Agency to drop the acute comorbid conditions and add those payments to the base rate.” Those acute comorbid conditions include bacterial pneumonia, gastrointestinal bleeding, and pericarditis. But the chronic comorbid adjustors are equally hard to document: hereditary hemolytic and sickle cell anemia, monoclonal gammopathy (in the absence of multiple myeloma), and myelodysplastic syndrome.

The hope is the GAO report may shed some light on the adjustors and stop the “leak” in the ESRD bundle. -by Mark Neumann