May 21, 2001

NRAA Fighting for Composite Rate Increase

Message from Gwen Gampel, NRAA Government Relations Consultant

The National Renal Administrators Association (NRAA web site) has joined with the Renal Leadership Council and others to hire Abt Associates (Abt web site)(link is no longer available) to refute the Medicare Payment Advisory Commission's (MedPAC) recommendation that Medicare should not increase the composite rate for 2002. (see story below)

We are urging all NRAA members to send their 1999 and 2000 cost reports to Abt to provide the data that will be needed to convince Congress that Medicare should increase the composite rate by at least 2.6% to cover inflationary costs for the 2002 composite rate.

Please contact Alan White at 617/349-2489 and he will send you a confidentiality agreement to ensure that your 1999 and 2000 cost report information will be kept in the strictest of confidence.

Fresenius, DaVita, Gambro, Renal Care Group, Inc., National Nephrology Associates, and Dialysis Clinic Inc. will be sending in their cost report data and it would be helpful to have small provider cost reports included in the study. The NRAA urges everyone to participate where possible.

Thank you.

(End of message from Gwen Gampel.)

May 16, 2001 - Gail Wilensky, chair of the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues such as dialysis reimbursement rates, is being replaced over concerns about her "substantial investments" in health care companies.

Three new members have been appointed to MedPAC: Sheila Burke, undersecretary of the Smithsonian Institution and chief of staff to former Sen. Bob Dole (R-Kan.); Allen Feezor, health benefits administrator of the California Public Employees' Retirement System; and Ralph Muller, president of the University of Chicago Hospitals and Health System. (web link is no longer available)

In addition, the following MedPAC members have been reappointed: Joseph P. Newhouse, Ph.D., John D. MacArthur Professor of Health Policy and Management, Harvard University; Alice F. Rosenblatt, Chief Actuary and Senior Vice President, Merger and Acquisition Integration Team, Wellpoint Health Networks; and John W. Rowe, M.D., President and Chief Executive Officer, Aetna US Healthcare.

In January of this year, MedPAC recommended no increase in the composite rate payments for dialysis in 2002.

With MedPAC not recommending an increase in the composite rate for dialysis treatments for 2002, dialysis units in California will have to absorb huge increases in electricity costs. Utility costs typically make up 1-2% of a hospital's operating budget.

January 29, 2001

No Composite Rate Increase Recommended for 2002 by MedPAC

by Gwen Gampel, NRAA Government Relations Consultant

(What follows is a portion of the Legislation Report that first appeared in the January issue of the National Renal Administrators Association's (NRAA) President's Letter. For information on joining the NRAA and receiving complete print and electronic versions of up-to-the-minute and in-depth reports on all ESRD issues, visit the NRAA web site.)

January 29, 2001 - In very discouraging news for dialysis facilities, the Medicare Payment Advisory Commission (MedPAC) agreed to recommend no increase in the composite rate payments in 2002 and accepted the December proposed ESRD-related recommendations basically unamended. These final recommendations will appear in a March Report to the Congress. (link is no longer available)

Composite Rate Increase: The Commission recommended that the composite rate should remain unchanged for 2002. MedPAC based this recommendation on the following factors:

* Market Basket: MedPAC estimates that the price dialysis facilities will pay for composite rate service inputs will increase 2.6% in 2001 to 2002.

* Productivity Improvements: MedPAC believes dialysis facilities will continue to make improvements in productivity, which they translate as meaning lowering costs.

* Technological Advances: MedPAC believes dialysis facilities will continue to adopt technological advancements at the current rate and therefore there is no need for an increase in the composite rate.

* Market Conditions: MedPAC�s analysis found that the number of dialysis facilities had continued to grow and the industry has continued to consolidate with more for-profit providers, which they translate as meaning the industry is still profitable and does not need a rate increase. This line of argument that new facilities are still being opened and therefore the industry must be profitable has hindered our ability to gain rate increases for years!

* Composite Rate: The composite rate was increased by 1.2% in 2000 and will increase 2.4% in 2001. Some commissioners actually believe these rate increases were too generous!

* Payment to Cost Ratio: As we had heard MedPAC�s analysis of the Medicare payment to cost ratio did not look simply at composite rate payments to costs, but instead they included payments for EPO and other separately billable outpatient prescription drugs as well as composite rate payments. This analysis found that the payment to cost ratio, which includes EPO and other billable prescription drugs, is 1.08 (i.e. meaning an 8% profit margin). The payment to cost ratio without EPO and other separately billable prescription drugs is .98 based on 1999 data.

MedPAC staff did present several caveats to using the payment to cost ratio that includes EPO and other separately billable prescription drugs including (1) the analysis was limited to Medicare allowable costs; (2) dialysis facilities can claim bad debt from the composite rate but not for EPO or prescription drugs; (3) the composite rate bundle created by using 1978-79 data did not include labor costs for separately billable drugs; (4) costs for separately billable drugs did increase in 2000; and (5) the analysis did not include the 1.2% increase for 2000 and the 2.4% increase for 2001.

The commissioners decided to disregard all of the above caveats and factors and instead decided that no inflation update was necessary and recommended a zero increase in the composite rate for 2002. The commissioners said they were uneasy about recommending a rate increase based on this new payment to cost analysis but said they will review this issue again next year. During the discussion of the recommendation for a composite rate increase, commissioners, including Chair Gail Wilensky, kept mentioning the expanding market and the expansion of for-profit companies in the market as a proxy for the current composite rate being adequate.

Obviously we will have to better educate the commissioners for next year�s recommendations. Despite a zero recommendation, the NRAA plans to seek a composite rate increase for 2002 and will join with other renal organizations to educate the Congress on a need for a rate increase, as the MedPAC analysis was very flawed.

Other Recommendations: The commission accepted all of the proposed recommendations from the December meeting (despite lobbying efforts). They made minor changes to recommendation 1 and accepted the other three recommendations without any discussion.

1. The Congress should instruct the Secretary to broaden the composite rate payment bundle to include frequently used services currently excluded from it. The continued emphasis on quality monitoring and quality improvement is critical to ensure that patients continue to have access to high‑quality care. The Secretary should continue efforts to measure and monitor the quality of dialysis care.

2. The Congress should instruct the Secretary to evaluate whether the composite rate�s unit of payment - a single dialysis session - should be revised to better reflect the way dialysis is furnished.

3. The Congress should instruct the Secretary to revise the outpatient dialysis payment system so it accounts for factors that affect providers� costs to deliver high quality clinical care, including dialysis modality, dose, frequence, and patient acuity.

4. The Congress should instruct the Secretary to develop a wage index based on market wage rates for occupations typically used in furnishing dialysis.

(End of Gwen Gampel's report. The current issue of the NRAA President's Letter also has detailed information on government issues, legislation outlooks, Stark II, diabetes management training, and much more.)

You can view a transcript of the January 12, 2001 MedPAC meeting. It is a PDF file. See pages 27-50. (web link is no longer available)

The transcripts only record the words spoken during the meeting. The voting is apparently done with raised hands, which is not reported!!!

_____________________________________________

(previous information)

March 26, 2001 - Hope springs eternal. Here is an article from Modern Healthcare entitled, "Hanging on, reaching out: American Hospital Association pushes to boost Medicare payments by another $17 billion". (link is no longer available)

February 13, 2001 - With MedPAC recommending no increase in the composite rate for dialysis for 2002, dialysis administrators will have difficulty convincing legislators of the need for increased funding. Here are two related articles on this issue:

"Hospitals latching onto new issues to justify bids for federal dollars", article from Modern Healthcare. (link is no longer available)

"Bush's Tax Cut Could Leave Little Money for Health Care Spending". Various viewpoints from the:

Pittsburg Post-Gazette

Fort Worth Star Telegram (web link is no longer available)

[This message has been edited by Gary Peterson (edited 01-20-2003).]