More than 10 years later, it is time to rethink the ESRD payment bundle
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“You can’t connect the dots looking forward; you can only connect them looking backwards.” – Apple founder Steve Jobs
The Medicare End-Stage Renal Disease program started 50 years ago with an amendment to the Social Security Act of 1972.
Coverage under Medicare was unique and gave hope to thousands of patients with end-stage kidney disease and an opportunity to live on dialysis or receive a kidney transplant without financial burden.
Based on the assumption that most patients on dialysis or after a successful kidney transplant would return to work, Congressional actuarial models predicted that the total spending on ESKD would not exceed $500 million a year by the 1990s. Currently, Medicare spends more than 7% of its budget on patients with ESRD, who represent approximately 1% of all Medicare beneficiaries.
Bundled payment
This unsustainable Medicare spending on patients with kidney disease forced Congress to seek alternate payment methodologies, which led to the first-of-its-kind Prospective Payment System (PPS). The PPS, which bundles treatment, drugs, lab tests and other services under one payment, was conceived and enacted as part of the Medicare Improvements for Patients and Providers Act in 2008. It was implemented in 2011 with the overwhelmingly enthusiastic support of the dialysis community.
So far, the ESRD-Prospective Payment System (ESRD-PPS) has lived up to its promise to control the spiraling cost of dialysis, especially the separately billable pharmacy and laboratory services. The base bundled payment rate has increased from $229.63 in 2011 to $257.90 in 2022, a mere 1.53%.
As we move into the second decade of the ESRD-PPS, it is time to examine ways to make this a better vehicle to improve care and control costs. Changes are needed to ensure patients have access to new and innovative drugs and technologies.
Functional categories
CMS introduced functional categories to direct reimbursement for various drugs and biologicals used during dialysis treatments. All drugs and biologicals used during dialysis and previously separately billed and reimbursed by CMS were classified into 11 functional categories. Any drug or class of drugs or biologicals fitting into one of these functional categories would not be eligible for additional payments outside the bundle.
These functional categories did not provide a mechanism to add funds to accommodate newer classes of drugs or technologies in the bundle. This concept of rigid functional categories created the need to add the Transitional Drug Add-on Payment Adjustment (TDAPA) and Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES).
How relevant are these functional categories? Even though Sensipar (cinacalcet, Amgen Inc.) was approved by the FDA in 2004, it was not widely used for treating secondary hyperparathyroidism in patients with ESRD until later. Sensipar was covered under Medicare part D and as an oral drug, it was not separately billable. With the introduction of Parsabiv (etelcalcetide, Amgen Inc.) an injectable calcimimetic, CMS created the concept of TDAPA and began to collect usage data in January 2018. Eventually, CMS added $9.94 to the bundle base rate to account for the additional cost of the drug and added calcimimetics to the functional category of bone and mineral metabolism.
There is an industry-wide notion now that the current reimbursement structure for newer drugs and technologies needs to be revised to accommodate novel drugs and technologies to be incorporated into the bundle.
Long-term coverage
While we applaud the effort by CMS to encourage new therapies through TDAPA and TPNIES, we remain skeptical about its ability to reach all patients on dialysis who need a new drug or technology. Will CMS add additional funds to the base rate for truly innovative drugs to improve patient well-being and quality of life as it did with calcimimetics? A case in point is difelikephalin, an innovative drug used for pruritus (CKD-aP), a condition traditionally treated with antihistamines that are already included in one functional category.
Even though CKD-aP is not histamine-mediated, most physicians have used these drugs for lack of a better alternative. Because the newer drug for CKD-aP is likely to be used less frequently than calcimimetics in patients on dialysis, we suggest that CMS adopt the rule that payment for a specific therapy should be made for the patient receiving the therapy and not averaged across all patients. CMS sought suggestions on this matter from stakeholders in a request for information during the 2023 rulemaking for the ESRD-PPS.
Do TDAPA and TPNIES provide a permanent solution to the problem of access to new drugs and technologies after the TDAPA and TPNIES period is over? Currently, Medicare will pay separately for the drug for 2 to 3 years at a discounted rate. Without additional funding, using the new drugs and technologies beyond the TDAPA and TPNIES periods is not sustainable, as dialysis facilities must bear the costs.
Stifled innovation
Under Medicare, innovations in other medical specialties, such as cancer and cardiology, can reach those who need them, unobstructed by a bundled payment system. In those cases, most new drugs and technologies are paid through Medicare Part B under the physician fee schedule or outpatient hospital PPS and Part D. Unfortunately, patients with ESRD are not able to access innovations in kidney care because the financial burden to make these treatments available falls on the shoulders of dialysis providers without adequate reimbursement.
If CMS does not want to fund the new and innovative drugs and technologies beyond the TDAPA and TPNIES period, access to these services for those who need them is unlikely to be sustainable.
Patients, dialysis providers and manufacturers deserve the clarity of a stable and predictable reimbursement system before a new drug or technology is available. The new drugs, devices and products currently in development to address significant issues with ESRD were not contemplated 15 years ago when the PPS was on the drawing board. Therefore, now is the appropriate time to redesign the reimbursement system to incentivize continued investment in innovation.
All drugs eligible for TDAPA should have both a short- and a separate long-term reimbursement mechanism regardless of its functional category in the bundle. While TDAPA was a novel concept, its use in practice has not incentivized dialysis providers to utilize novel products. They are reluctant to change treatment patterns and use a therapy whose reimbursement will expire after only 2 years. The add-on payment should follow the patient if the patient needs a particular drug, as opposed to spreading the cost over the entire dialysis population, many of whom do not require the medication. Such a policy would ensure patients who need the drug or technology receive it.
We believe innovation often leads to improved patient outcomes and fewer complications, hospitalizations, readmissions and deaths. We should work to fix a reimbursement methodology that stifles innovation and replace it with one that encourages innovation and provides access to much-needed medications and technologies for patients who are genuinely in need of these treatments to improve their conditions.
- References:
- Steve Jobs’ 14 most inspiring quotes. https://www.businessinsider.in/tech/steve-jobs-14-most-inspiring-quotes/slidelist/48046674.cms#:~:text=You%20can’t%20connect%20the,%2C%20life%2C%20karma%2C%20whatever. Accessed Jan. 14, 2023.
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- J. Ganesh Bhat, MD, FASN, is the founder and principal of Atlantic Dialysis Management Services LLC, and professor emeritus in the departments of medicine and physiology at Xavier University School of Medicine, Oranjestad, Aruba. He can be reached at jbhat@atlanticdialysis.com.
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