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The 2009 Proposed Rule for Prospective ESRD Payment: Perspectives From a For-Profit Small Dialysis Organization

2010; Elsevier BV; Volume: 55; Issue: 2 Linguagem: Inglês

10.1053/j.ajkd.2009.12.009

1523-6838

J. Ganesh Bhat, Premila Bhat,

Organ Donation and Transplantation

According to the 2009 US Renal Data System Annual Data Report, large dialysis organizations (LDOs), specifically Fresenius Medical Care North America, DaVita Inc, and Dialysis Clinic Inc, provide dialysis services for approximately 65% of dialysis patients in the United States.1US Renal Data SystemUSRDS 2009 Annual Data Report: Atlas of Chronic Kidney Disease and End-Stage Renal Disease in the United States. National Institutes of Health, National Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, MA2009Google Scholar The remaining 35% of patients, approximately 135,000 individuals in all, receive dialysis at small regional chain operations, independent facilities, or hospital-based dialysis centers. Nearly 2,000 in number, these small dialysis organizations (SDOs) constitute a diverse group, which includes for-profit regional chains; independently owned and operated facilities, frequently with physician investment; not-for-profit entities; and a variety of hospital-operated centers. While these groups have diverse characteristics, they share common concerns regarding the imminent conversion to a “bundled” prospective payment system (PPS) proposed by the Centers for Medicare & Medicaid Services (CMS). Fundamental to these concerns is an imbalance between SDOs and LDOs with regard to the ability to spread risk over larger pools of patients, economies of scale, and legal obstacles barring organizational efficiencies such as establishment of pharmacies and laboratories. We believe that the proposed bundled PPS will place a substantial proportion of independent dialysis facilities at financial risk. As owners/operators of a for-profit small dialysis organization, we examined the impact of the proposed final rules on a single midsized dialysis facility affiliated with us in suburban New York State. Our initial report,2Bhat P. Sokolowski W. Bhat J.G. Projected impact of the proposed “bundled” ESRD payment on a small dialysis organization.Nephrol News Issues. 2009; 23 (48-52): 46PubMed Google Scholar based on the 2008 report to Congress from Secretary of Health and Human Services Michael Leavitt,3Leavitt M.O. US Department of Health and Human ServicesReport to congress: a design for a bundled end stage renal disease prospective payment system.http://www.cms.hhs.gov/ESRDGeneralInformation/Downloads/ESRDReportToCongress.pdfGoogle Scholar was modified to incorporate the proposed final rules released on September 15, 2009.4Centers for Medicare & Medicaid ServicesEnd-stage renal disease prospective payment system proposed rules.Fed Regist. 2009; 74: 49922-50102Google Scholar Data were collected retrospectively for 118 patients receiving dialysis treatments at the facility during calendar year 2006, for whom Medicare was the primary payer for dialysis services. This group represented more than 90% of patients who were treated at the facility. Data regarding clinical parameters and payment was retrieved from patient charts, billing and cost reports, and Medicare Form 2728. Since laboratory bills were submitted to CMS and collected by an independent laboratory, we did not have access to the actual laboratory cost data. Accordingly, laboratory services not included in the current composite rate were estimated to cost $82.50 per month. Because we did not have access to complete information regarding Medicare Part D medications prescribed and administered to patients by pharmacies, we assumed a cost of $14 per treatment for Part D medications. We believe that these are conservative estimates, and that actual costs for Part D medications and separately billable laboratory tests may be substantially higher in some cases. Clinical data were collected from patient charts by a registered nurse (an endeavor that took an average of 15 minutes per patient per month) to derive a monthly patient-specific case-mix adjuster (CMA). The geographic wage adjuster was then applied to 39.278% of the base rate per current CMS methodology and the resulting wage-adjusted base rate was multiplied by the patient-specific CMA to derive the estimated bundled payment. Based on our detailed chart review, we calculated a facility mean CMA of 1.175, which yielded a net decrease in facility revenue of $295,000 per year compared with the current composite rate–based payment. This runs counter to estimates published in the CMS facility-level impact file (the so-called flat file),5Centers for Medicare & Medicaid ServicesCalendar year 2001 proposed ESRD PPS facility 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 which incorporates all Medicare Claims data and shows a facility-mean CMA of 1.32, which would yield net positive revenue of about $59,000. Based on our experience, we suspect that discrepancies between chart-review–based CMAs and the flat-file CMA will be a widespread problem for SDOs and LDOs, as most dialysis facilities have limited access to patients' medical and hospital records. Accordingly, miscoding, including both over- and undercoding of comorbid conditions, is likely, and it may not be possible to accurately base the one-time election to phase in bundled payment in 2011 on the flat file estimate. How can an SDO prepare to survive in this new era in end-stage renal disease (ESRD) payment? Critical elements will include harnessing the pharmacy and controlling laboratory costs. In the proposed final rules, CMS states that dialysis facilities are expected to provide pharmacy services for ESRD-related Medicare Part D drugs on site, in compliance with state pharmacy licensure requirements. Facilities may be forced to become de facto pharmacies, both acquiring ESRD-related medications from suppliers and dispensing them at the dialysis facility. Laws governing this process will vary by state, but many states will require licensure from state pharmacy boards to establish in-house pharmacies, and compliance with state regulations, potentially including hiring a licensed pharmacist, may make this choice prohibitively expensive. Notably, 16 states outright prohibit by law such arrangements. Other potential strategies for SDOs may include limiting medication formularies available to physicians with patients in the SDO as well as establishment of networks of independent facilities for purposes of negotiating with pharmacies. Currently, a small number of laboratory tests are included in the composite rate payment. All other laboratory tests are billed to CMS by independent laboratories. Under the proposed final rule, bills for all laboratory tests ordered by the dialysis facility and/or physician collecting the monthly capitation payment for the patient will have to be paid by the dialysis facility. Dialysis facilities will be required to have a billing system for these services and collect the copayments. In theory, nephrologists who also practice general internal medicine could be restricted from providing non–ESRD-related laboratory services to their ESRD patients as part of their ongoing care, as the current regulations do not account for this practice. While some larger dialysis facilities already have their own laboratories and will be able to better manage laboratory costs, smaller and physician-owned facilities may face financial and legal constraints preventing establishment of a laboratory. In some states, physician-owned dialysis facilities are currently prohibited from establishment of a laboratory by “anti-kickback” statutes. Since facilities have already received payment for laboratory services and there are no separate charges generated by the facility, there is no clear conflict of interest. Facilities in these states may wish to review their legal options. Our single dialysis facility case study demonstrates that (1) this facility will be at substantial financial risk under the proposed payment system; (2) this facility has insufficient information to make a one-time election to opt into the bundle fully; and (3) administrative burdens are substantial. The intent of bundling is to transfer financial risk from CMS to dialysis providers. Unfortunately, SDOs are at increased risk as compared with LDOs due to their small volumes of patients and treatments. A small number of very high-cost patients could have an enormous impact on an SDO's bottom line; furthermore, SDOs are disadvantaged in negotiating with vendors, including pharmacies and laboratories. Positive effects of the bundle might include increased efficiency and elimination of perverse incentives to overprescribe medications. Ultimately, some facilities will win and some will lose, yet any losing facility will be a strain to the entire ESRD program. A losing facility may close, restricting patient choices; it may be sold or taken over by an LDO, decreasing competition in an already contracted market; or it may resort to “cherry-picking” of patients or reducing quality of care and therapeutic options. A winning facility may adapt to the bundle by shifting responsibility for medical decisions away from physicians and advanced practitioners to the facility—an unprecedented intrusion of policymakers and for-profit enterprise into the physician-patient relationship. Dr J. Ganesh Bhat is owner and Principal of Atlantic Dialysis Management Services, LLC, and Dr Premila Bhat is Medical Director, Home Programs at Ridgewood Dialysis Center, an affiliate of Atlantic Dialysis Management Services, LLC. We would like to thank Tracy Mayne, PhD, and Matthew Gitlin, PharmD, for their assistance in programming the Excel-based model, and Wojciech Sokolowski, MD, for his help in collecting the data presented in this article. Financial Disclosure: Dr J. Ganesh Bhat is on the Speakers Bureau for Amgen and Genzyme. Dr Premila Bhat declares that she has no relevant financial interests.