Smoke and mirrors: What is really behind protests over the ESRD bundle payment cut?

As a home dialysis patient, I visit my clinic every month to see my nephrologist and care team. I had such a visit last week and before I left, my social worker came to see me. After we talked, she put a letter in front of me and asked me if I would sign it.

Poster-patients It was entitled “Protect dialysis treatments,” and was obviously a letter intended for Congressional representatives, although it did not list them by name. Essentially, it said that I rely on dialysis to remain alive and that the proposed 12% cut by the Centers for Medicare & Medicaid Services to the ESRD bundled payment would threaten my ability to receive my treatment. After saying I wouldn’t sign it, I was asked if I was absolutely sure. I said I was.

It’s amazing what the renal provider community can do when they put their minds to it. In this case, it is about protecting money—their money. This effort to get patients involved in a letter writing campaign—hundreds of these form letters have already been sent to Congress with the help of the provider community—has to do more with the bottom line than patient care. Patients should not be used as pawns in a series of scare tactics to protest a change in a payment dispute between a payer and a provider of services. The industry relies heavily on Medicare to operate its clinics, but that’s no excuse to leverage its position by hiding behind dialysis patient chairs and using us to stop a pay cut. In my view, it is unconscionable.

“We were alarmed…”
Astute chief financial officers of dialysis companies large and small must have known this day was coming. CMS’ proposed 12% cut in the ESRD bundled payment rate––actually, a 9.4% reduction after CMS added in a 2.6% increase after its annual market basket review of operational costs––is not based on an arbitrary review. The Medicare Improvements for Patients and Providers Act of 2008 instructed CMS to use 2007 data to build the ESRD bundled payment model, so the agency did what it was told to do. That was the most complete data available at the time.

Being pre-bundle, ESAs were still separately billable and profitable for dialysis clinics. The damaging CHOIR and CREATE studies were published in late 2006, but the debate over the results stalled any real change in dosing patterns. And the FDA black box warning changes issued in March 2007 about minimizing the use of ESAs did not lead to a major drop in dose, according to a recent study.¹ So, as a baseline year to determine payment for ESA use, 2007 was a positive for providers dealing with the bundle––particularly if CMS didn’t make any subsequent updates.

The proposed 12% cut came about after a Government Accountability Office report, released in December of last year, questioned whether CMS should have been doing exactly that: making adjustments to the injectable drug payment as dialysis clinics started ratcheting down ESA doses shortly after the bundle took effect. In essence, CMS was paying clinics for using high doses of ESAs at the same time as providers were cutting back use of the drug to save money.

That, said the GAO, cost Medicare between $660–$880 million in excess payments. “Although MIPPA did not explicitly authorize CMS to further recalculate this rate—referred to as rebasing the payment rate—to account for changes over time in the utilization of dialysis and related items and services, such as ESRD drugs, beginning in 2012 CMS [was] required to annually increase the bundled payment amount to account for changes in the prices of bundled items and services and for changes in productivity.”

And CMS did make adjustments for changes in productivity, giving dialysis providers an increase in the base rate over the last two years: 2.1% in 2012, and 2.3% in 2013, and, as proposed, a 2.6% increase for 2014.

So as of today, here is the scenario I see:

CMS is paying dialysis providers for injectable drugs (GAO says 73% of that is ESA use) based on much higher dosing patterns from 2007, as they were instructed to do by Congress.
Dialysis providers have collected those payments for the last 2 ½ years, while ratcheting down ESA use. Among patients receiving intravenous epoetin, mean prescribed dose has decreased by 33% since the bundled payment system was put in place in January 2011, according to data from the Dialysis Outcomes Practice Patterns Study’s Dialysis Practice Monitor.
Dialysis providers have been issued two increases to the base composite rate, and a third is on its way for 2014.

So Congress, in a twisted way, perpetuated use of ESAs as a “profit center” for dialysis clinics within the bundle, and CMS added fuel to the flames by not adjusting the payment. And now, the renal community has been able to get patients and 200 members of Congress––who approved the American Taxpayer Relief Act of 2012 authorizing CMS to make a payment cut in the first place––to criticize the agency for the size of the reduction.

That’s called good lobbying.

If CMS had taken action at the end of 2011 and 2012 to adjust the injectable drug component of the bundled payment model, which MIPPA gave them the authority to do, and still offer the market basket-based increases to the base rate, we might not be hearing providers screaming today about closing dialysis clinics and the ESA payment rate would reflect the true utilization by providers.

Where has all that money gone?

Despite those extra dollars funneled down to dialysis providers, many still complain of thin profit margins. Some of that money, they say, has helped to pay for unfunded mandates, like implementing CROWNWeb and its myriad reporting requirements, and for collecting data for the Quality Incentive Program. The recent 5% increase in the cost of Epogen has also had an impact. Those costs are real, especially for the small independent providers and medium-sized dialysis organizations.

But is that worth putting patient faces on ads and threatening to shut down clinics—before even sitting down with CMS to negotiate a compromise? Facing cuts they basically brought upon themselves, dialysis providers and advocacy groups, including patient organizations dependent on industry funding, are saying that patient care will suffer, that dialysis centers may close, and that staff will be reduced. In fact, they are saying that life-saving therapy is at risk.

Build it, buy it…and build some more
If a business has thin profit margins, it doesn’t seem to make sense to expand. As the renal community is threatening to close clinics because of the bundled payment cut, they are also making announcements of new ones opening. DaVita has also made heavy investment in buying clinics overseas over the last two years and, of course, recently bought Healthcare Partners with $3.66 billion in cash and 9.38 million DaVita common shares.

In 2012-2013, the nation’s 10 largest dialysis providers, as ranked by NN&I each year, added 298 clinics, either via new construction or acquisition/consolidation. That was a big jump from 214 clinics added by this group in 2011-2012 and remains the largest growth in clinic ownership among the 10 largest providers over the last five years.

That expansion seems out of sorts with the declining growth in the patient population. At the end of 2010, U.S. Renal Data System data showed the number of new patients starting therapy on hemodialysis declined for the first time in more than three decades.

Specifically, according to the USRDS’ 2012 Annual Data Report: “…The total treated ESRD population [at the end of 2010] thus rose to 593,086 — growth of 4% from 2009, which is the smallest increase in 30 years. The rate of prevalent ESRD cases reached 1,752 per million population, an increase of 1.1% from 2009, and also the slowest growth in the last three decades.”

So why is an industry that complains about thin profit margins spending millions of dollars on building or acquiring clinics or other providers during a period when growth in new patients on dialysis is at its lowest in three decades? Again, is money going toward the bottom line, or patient care? Has the provider community been using profits to build or buy more bricks and mortar, and finding out the patients are coming?

EPO is the first to go

I believe what has brought on the bundle payment cut is similar to a confluence of circumstances — almost like a perfect storm, with dialysis patients the only ones in the water. The cutback on using injectable drugs was predictable. I remember speaking at the CMS Town Hall Meeting in October 2009 that underutilization of pharmaceuticals would be an unintended consequence of the bundle. More specifically I was concerned patients would suffer because of the fear if any money was taken out of the system that it would be taken out of patient care. And, our track record for dialysis patient care is less than stellar.

Compared to the rest of the industrialized world, we could be doing a lot better.

Our mortality rate is the highest among developed countries.
Home dialysis — the therapy I have chosen — is only being used by roughly 10% of patients in the United States, one of the lowest percentage penetration among developed countries. Ironically, 90% of nephrologists in the United States say in polls that they would pick home dialysis for themselves if they had to be on dialysis. It’s not clear to me why you would choose a superior modality for yourself but not recommend it to your patients.
There is no serious attempt at rehabilitation of individuals once they go on dialysis. Unemployment between the prime working ages of 18-54 is 80%.² A new study out this week shows that ESRD patients who are unemployed are less likely to be referred for a transplant. So the industry’s lack of interest in helping patients return to the workforce also clearly impacts their chances of getting a new kidney.
For-profit dialysis providers, which make up the bulk of the industry, offer inferior care. In the article, “Patient care staffing levels and facility characteristics in U.S. hemodialysis facilities” published in June in the American Journal of Kidney Diseases, researchers noted that “ratios of RNs and LPNs to patients were 35% (P < 0.001) and 42% (P < 0.001) lower, respectively, but the PCT to patient ratio was 16% (P < 0.001) higher in for-profit than nonprofit facilities (rate ratios of 0.65 [95% CI, 0.63-0.68], 0.58 [95% CI, 0.51-0.65], and 1.16 [95% CI, 1.12-1.19], respectively).³
We also learned from the Agency in Health Care Research and Quality in December 2011 that, “Compared with the nonprofit chain, mortality risk was 19% higher at one for-profit chain and 24% higher at a second for profit-chain. Overall, patients from for-profit facilities, regardless of chain status, had a 13% higher risk of mortality than non-profit facilities.”

Change in ESRD QIP also influential
Patients have been harmed by the underutilization of ESAs, and CMS can be partly blamed by helping providers push the ESA dosing envelope. The clinical measure to track hemoglobins in the ESRD QIP only penalizes clinics if patients go over 12 g/dL; there is no penalty for hemoglobins under 10 g/dL. That’s just a green light to providers to underutilize. And why an upper limit? It makes no sense and is counterintuitive. Providers are not going to spend the money to keep hemoglobin levels that high. But clearly there is an incentive to lower hemoglobins: reduce costs. One documented impact of lower ESA use and subsequent lower hemoglobins is the increase in transfusions, now estimated at approximately 20%.⁴

CMS has floated a new quality measure developed by Arbor Research that would bring the hemoglobin “floor” back, and its proposed 2014 QIP includes a clinical measure requiring clinics to report more about how they are using ESAs. That’s a step in the right direction. We need to make sure that ESA dose isn’t being dictated by bottom line calculations, but by what is best for the patient.

Is there a level playing field?
One thing needed is to level the playing field between the better performing small dialysis organizations and medium dialysis organizations and the lower performing large dialysis organizations. It is the small dialysis organizations and medium dialysis organizations that will likely be impacted most by the proposed cut. I would urge CMS to look at finding some way there can be a differential built into the PPS to ensure the smaller dialysis centers can survive and not be gobbled up by the LDOs. We cannot afford to lose them.

The bottom line (for dialysis patients and providers) DaVita-poster
There has been a torrent of comments on social media regarding the proposed payment cut. I’ve never seen patients more engaged in an issue, as they are being told their lifeline therapy may be taken away. Patients are posting all over Facebook that they don’t want to die, including home dialyzors. I wish those home dialyzors would jump on a broader bandwagon and call on CMS to increase reimbursement for home hemodialysis training. Low home training reimbursement, particularly for home hemodialysis, is one barrier to growth in the United States.

The dialysis provider community is positioning the cuts as if they will affect future operations, including keeping centers open and maintaining staff levels. Nothing is said about increasing the utilization of medications to its appropriate levels, which was the cause of the proposed cuts in the first place. If the cuts are mitigated in any amount, the money should go back and reverse the care and service impacted in the past. Restore an appropriate level of ESAs and other biologicals. Reverse the trend of more dialysis patients requiring transfusions. Don’t play games with the fragility of dialysis patients’ lives. Let’s figure out the real impact of the cuts and sit down with CMS and negotiate a compromise. Scare tactics with patients at the center give the renal community a black eye. -by Richard Berkowitz

References
1. Thamer M., Zhang Y, Dejian L, Kshirsagar O, Cotter D. Influence of safety warnings on ESA prescribing among dialysis patients using an interrupted time series.
BMC Nephrology 2013, 14:172 doi:10.1186/1471-2369-14-172

2. Table 20 ESRD Network Program 2011 Summary Annual Report

3. Yoder LA, Xin W, Norris KC, Yan G. Patient care staffing levels and facility characteristics in U.S. hemodialysis facilities, Am J Kidney Dis. 2013 Jun 27. pii: S0272-6386(13)00830-5. doi: 10.1053/j.ajkd.2013.05.007, USRDS 2011

4. Sack K. Unintended consequences for dialysis patients as drug rule changes, NY Times, May 11, 2012