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Rate increase, higher drug payments should improve Medicare margins for dialysis providers by 2020
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Medicare profit margins for dialysis providers will still be less than break-even, but continued increases in the bundled payment rate and a new method of paying for dialysis drugs taking effect next year will narrow the loss, according to a review by the Medicare Payment Advisory Commission.
The independent panel advises Congress on issues affecting the Medicare program, making payment recommendations and assessing access to care and quality of care.
In a presentation to commission members on Jan. 17, principal policy analyst Nancy Ray, MS, and senior analyst Andy Johnson, PhD, said 2017 payment claims indicated that the dialysis provider industry treated 394,000 patients and Medicare spent $11.4 billion treating those patients on dialysis that year.
Both independent and large dialysis providers, led by Fresenius Kidney Care and DaVita Kidney Care, have adequate resources for expansion in the near future. More than 7,000 outpatient dialysis clinics provided treatments in the United States in 2017 – an increase of 250 facilities, or about 3%, from the previous year – while the community saw less than a 1% increase in new patients starting on dialysis. “Our estimate is that there were few facility closures in 2016, and the few beneficiaries affected were able to obtain care elsewhere,” Ray said.
That year, Medicare fee-for-service payments accounted for approximately 45% of revenues for dialysis providers, based on a review of cost reports and Securities and Exchange Commission filings. The rest came from commercial health plans.
Between 2012 and 2017, the specialty saw “positive trends” in a steady decrease in mortality, hospital admissions and re-admissions, and there was a higher percentage of patients doing home dialysis. Ray said, “On the other hand, the percent of dialysis beneficiaries with at least on (emergency department) visit has increased” during that same time period, she said.
Based on cost reports, dialysis providers made a 17% profit margin in 2017, the analysts reported. For Medicare alone, however, the profit margin was -1.1%. Rural facilities have the most difficulty breaking even on Medicare rates; their profit margin was -5.5% compared to 0.4% for urban clinics.
That should improve this year, Ray and Johnson reported, with an increase in net Medicare payments to dialysis providers of 1.3% compared to 0.3% in 2018. For calendar year 2020, that net Medicare payment is expected to increase another 1.9%, they said. As a result, overall Medicare margins for dialysis providers would go from -1.1% in 2017 to -0.4% in 2019, they estimated. In addition, CMS will start paying for newly approved dialysis drugs under its transitional drug add-on payment adjustment (TDAPA), which establishes payment for all new dialysis drugs beginning Jan. 1, 2020. Under the TDAPA process, categories of conditions that a new injectable or IV drug could treat are established. If a new drug falls into one of the categories, it is included in the payment bundle. If the new IV or injectable drug is used to treat or manage a condition for which there is not an ESRD PPS category, the new drug is assessed for eligibility for TDAPA, and a separate payment is set for outside the bundle.
“We expect this will increase Medicare payments to dialysis facilities,” Ray told the commissioners. – by Mark E. Neumann
References:
www.medpac.gov/-public-meetings