March 2, 2004 - The Medicare Payment Advisory Commission (MedPAC) recommendation report to Congress has been released.

Here is 25-page Section 3E (pdf) on Outpatient Dialysis Services.

MedPAC's recommendations to Congress regarding dialysis:

• 3E-1 The Congress should maintain current law and update the composite rate by 1.6 percent for 2005.
  
  
• 3E-2 The Congress should establish a quality incentive payment policy for physicians and facilities providing outpatient dialysis services.
  

January 26, 2004 - The transcript of the January 14th meeting of the Medicare Payment Advisory Commission (MedPAC) is now available on-line.

MedPAC approved three recommendations to Congress concerning ESRD at this meeting:

• reaffirmed the Congressionally mandated 1.6% increase in the ESRD composite rate for 2005
  
  
• recommended that Congress establish a quality incentive prospective payment for outpatient dialysis facilities and the nephrology Medicare capitated payment (MCP).
  
  
• repeated their recommendation that Congress allow all ESRD Medicare benefitiaries to enroll in Medicare+ Choice plans.

MedPAC also said they will begin reviewing the entire ESRD program within Medicare, not just the dialysis portion.

Dialysis services: assessing payment adequacy and updating payments - 23-page meeting transcript (pdf) and pre-meeting brief (pdf)

December 11, 2003 - The transcript of the December 4th meeting of the Medicare Payment Advisory Commission (MedPAC) is now available on-line. The meeting began with a discussion of outpatient dialysis payments. 31-page transcript in pdf format.

December 1, 2003 - The Medicare Payment Advisory Commission (MedPAC) is tentatively scheduled to begin its next meetings at 10 a.m. on December 4, and at 8 a.m. on December 5. Notice in Federal Register.

Topics for discussion include: quality of care; payment adequacy analyses for hospitals, physicians, outpatient dialysis, ambulatory surgical centers, home health, and skilled nursing facility; and Medicare+Choice.


November 21, 2003 - The Medicare Payment Advisory Commission (MedPAC) has released its report to Congress entitled:

"Modernizing the Outpatient Dialysis Payment System" - pdf document

Executive Summary

"Medicare�s policies do not appropriately pay for outpatient dialysis services because neither payments for services in the payment bundle nor payments for certain services outside the payment bundle accurately reflect facilities� expected costs. In March 2001, MedPAC recommended that the outpatient dialysis payment system be modernized so that Medicare could better achieve its objectives of providing incentives for controlling costs and promoting access to quality services. The important design questions that will need to be addressed as the outpatient dialysis payment system is modernized are:

• What services should be included in an expanded bundle? Along with widely used injectable drugs and laboratory services that are currently excluded from the bundle, the Secretary should consider including other services needed by end-stage renal disease patients, such as vascular access monitoring services, nutritional management, and Medicare-covered preventive services.
  
  
• Should the unit of payment for the facility remain a single dialysis session? Changing the unit of payment to either a week or a month might give providers more flexibility in furnishing care and better enable Medicare to include in the broader bundle services that are not always furnished during each session.
  
  
• What factors should be used to adjust payments? The Secretary should adjust payments for dialysis method, dialysis dose and the frequency that dialysis is furnished, and patient case mix. Doing so will better ensure that payments reflect efficient providers� costs and will reduce the incentive that providers may have to select less costly patients.
  
  
• What issues need to be considered when setting and updating the base payment rate? MedPAC suggests that the Secretary use audited cost report data to ensure that only Medicare-allowable costs are included in the calculations when setting the base payment rate. The Secretary also will need to address how a broader payment bundle will be updated to account for changes in the cost of services and how they are delivered.
  
  
• What steps need to be taken to ensure quality? We commend the past and current efforts of the Centers for Medicare & Medicaid Services to monitor, report on, and improve the quality of dialysis care. It will be critical for the Secretary to continue these efforts and to develop new measures that monitor the use of services included in a broader payment. In addition, linking providers� payments to quality may also promote the delivery of clinically appropriate care for the services included in an expanded bundle. The Secretary should also monitor patient satisfaction with care and other access indicators to determine whether patients face obstacles in obtaining needed care.

Along with these steps to modernize the payment system, MedPAC believes that the payment rate for home dialysis supplies received by DME suppliers should reflect efficient suppliers� costs. Currently, suppliers are paid up to 30 percent more than dialysis facilities for furnishing one form of home dialysis (continuous cycling peritoneal dialysis). There is no evidence to suggest that in this instance suppliers incur higher costs. Consequently, we recommend that the Congress should give the Secretary the discretion to modify the home dialysis payment rates for suppliers so that payment can better reflect the costs of efficient suppliers. This recommendation is consistent with the Commission�s belief that payments for services furnished in different settings should not create financial incentives that inappropriately affect decisions about where care is provided."

Recommendation: The Congress should give the Secretary the discretion to modify the home dialysis payment rates for DME suppliers�the method II rates�so that payment can better reflect the costs of efficient suppliers.

September 25, 2003 - The Medicare Payment Advisory Commission (MedPAC) met on September 11th to discuss outpatient dialysis payment issues. Documents regarding that discussion are now on-line:

• Brief (pdf)
  
  
  
• Transcript (pdf)

September 2, 2003 - The Medicare Payment Advisory Commission (MedPAC) will hold its next public meeting on Thursday, September 11, 2003, and Friday, September 12, 2003, at the Ronald Reagan Building, International Trade Center, 1300 Pennsylvania Avenue, NW., Washington, DC.

The meeting is tentatively scheduled to begin at 10 a.m. on September 11, and at 9 a.m. on September 12. Topics for discussion include outpatient dialysis payment issues. Notice from the Federal Register.

The Medicare Payment Advisory Commission (MedPAC web site) is an independent federal body that advises the U.S. Congress on issues affecting the Medicare program. The Commission's 17 members, who bring diverse expertise in the financing and delivery of health services, meet publicly to discuss policy issues and formulate recommendations to the Congress on improving Medicare policies.

June 17, 2003 - In its latest report to Congress, the Medicare Payment Advisory Commission (MedPAC) said that CMS should test ways to link reimbursements to quality of care. Reinforcing a message delivered repeatedly by CMS Administrator Tom Scully, MedPAC said providers that deliver the best care for the lowest cost should be rewarded with higher payments. Press release from MedPAC (pdf).

Chapter 6 (pdf) of this report, Quality of dialysis care and providers� cost, addresses paying for outpatient dialysis services. The chapter concludes with these Implications and Next Steps:

"Our analysis shows that the quality of dialysis care is not linked to the cost per treatment for composite rate services. This finding suggests that providers are not stinting on furnishing composite rate services. The lack of a relationship between dialysis quality and composite rate costs also suggests that many dialysis providers have responded to the economic incentives created by Medicare�s prospective payment system and reporting system by improving productivity without compromising quality. The opposite interpretation � that all facilities are stinting on composite rate services � is less likely given the substantial and clinically significant improvement in hemodialysis adequacy and anemia status since 1993.

Considering both costs for furnishing dialysis and injectable drugs together, we find that beneficiaries� outcomes are poorer for facilities with higher than average costs. One interpretation is that, since these drugs are paid on a per dose basis, some providers may not furnish these drugs as efficiently as if they were paid for prospectively. The profitability of injectable drugs subsidizes the lower margins under the composite rate and may provide incentives for their overuse, to the extent possible, by certain providers. Spending varies widely for injectable dialysis drugs by Medicare; for instance, in 2000, per patient per month spending for intravenous iron and vitamin D analogues varied by a factor of two between freestanding dialysis facilities based on their chain affiliation and profit status (USRDS 2002).

Alternatively, this finding may suggest that higher-cost facilities may be furnishing care to more medically complex beneficiaries. As noted earlier, providers have the incentive to furnish as many of these drugs as the severity of the patient warrants since these injectable drugs are paid on a per dose basis. Our model, however, adjusts outcomes for medical complexity by including information about beneficiaries� demographic characteristics, duration of dialysis, 16 comorbidities, and functional status. However, there may be some unresolved case-mix differences. Either interpretation supports previous MedPAC recommendations:

As discussed in Chapter 7, the Commission believes it is important for Medicare to explore the use of nonfinancial and financial incentives to improve quality of care. To date, Medicare has only used nonfinancial incentives, particularly public disclosure of quality of care information, to improve quality in both the traditional Medicare program and Medicare+Choice. Currently, the payments providers receive for the higher-quality are they produce are no higher than they ould be for lower-quality care. Having a set of credible, broadly understood, and accepted measures of quality is a critical component of designing incentives. Based on these criteria, implementing both on financial and financial incentives for dialysis providers is more feasible than for others. As mentioned earlier, CMS measures and publishes information on dialysis quality nationally and for individual facilities.

CMS accomplished the positive trend in improving dialysis adequacy and anemia status since the mid-1990s without the use of financial incentives by Medicare. Rather, quality improvement efforts undertaken by providers and the end-stage renal disease (ESRD) networks and CMS�s efforts in measuring and reporting dialysis quality have influenced dialysis quality. Both nonfinancial and financial incentives, however, might be useful tools to improve other processes of dialysis care.

One area increasingly recognized as a critical component of care is the management of hemodialysis patients� vascular access. Vascular access care accounts for about 10 percent of Medicare spending for hemodialysis patients and is the second leading reason for hospitalization for these patients (USRDS 2002). In 1999, CMS began reporting on three measures of vascular access management in its Clinical Performance Measurement Project.12 This quality measure, however, is not publically reported for individual facilities by the agency. CMS data show that opportunities exist to enhance beneficiaries� quality of care by modifying vascular access practice patterns. For instance, only 30 percent of hemodialysis patients had arteriovenous fistulas, the vascular access type recommended in the clinical guidelines developed by the NKF, compared with 46 percent of patients with arteriovenous grafts and 24 percent with catheters (CMS 2002). In addition, only 47 percent of patients with an arteriovenous graft had the graft routinely monitored for the presence of stenosis.

Dialysis facilities, nephrologists, vascular surgeons, and radiologists together make decisions about beneficiaries� vascular access care. Publically reporting vascular access measures for individual facilities on CMS�s Dialysis Facility Compare website may be one way to improve the quality of vascular access care. Financial incentives also should be considered if public disclosure alone does not result in improvement.

Finally, there are other measures of dialysis quality in addition to the four measures used in this analysis. The NKF has developed clinical guidelines for vascular access management, adequacy of peritoneal dialysis, and nutrition management. CMS nationally reports these measures in its Clinical Performance Measurement Project. This study did not include the measures of vascular access management and peritoneal dialysis adequacy because of data reliability and availability issues. We did not include the measures of nutrition management because Medicare�s payment policies restrict the number of beneficiaries who qualify for nutritional interventions. We also did not assess the relationship between other outcomes of care�patient satisfaction and reasons for hospitalization�and providers� costs because of data availability issues. In the future, it may be fruitful to assess the relationship between these processes and outcomes of dialysis care and providers� costs."

Chapter 9 contains references to drugs in the dialysis outpatient setting.

"Report to the Congress: Variation and Innovation in Medicare" (June 2003) full report (pdf).

March 8, 2003 - On March 6, Larry C. Buckelew, President and Chief Executive Officer, Gambro Healthcare U.S., and Chairman, Renal Leadership Council, appeared before the Health Subcommittee of the House Ways and Means Committee. He testified on the Medicare Payment Advisory Commission's (MedPAC) Medicare provider payment recommendations for 2004.

Statement of Larry C. Buckelew - Testimony before the Subcommittee on Health of the House Committee on Ways and Means. An excerpt:

"I am here today to tell you about the renal care industry and the people we serve. I am also here to underscore the importance of enacting structural reforms to create an annual update mechanism for dialysis reimbursement to bring the composite rate in line with other Medicare prospective payment systems. This will level the playing field with other providers, allow us to continue improving quality of care for our patients and help mitigate the closing of dialysis facilities with disproportionately high percentages of Medicare patients."

Recommendations by MedPAC in their March 3rd report that most health providers in the Medicare program not receive a pay increase next year "touched off a round of outrage" at this House Ways and Means Health Subcommittee hearing. News summary from Kaiser Network.

Here is the subcommittee agenda and the statements presented at this meeting.

March 7, 2003 - The Medicare Payment Advisory Commission (MedPAC) made its report to Congress on March 3rd and recommended an update of 0.9% less than inflation for outpatient dialysis programs, citing expected improvements in productivity.

Recommendation: "The Congress should update the composite rate payment by the projected change in input prices, less 0.9 percent, for calendar year 2004."

(MedPAC's dialysis market basket projects that input prices will rise by 2.5 percent between 2003 and 2004. If this projection holds, a 1.6% increase in the composite rate would be recommended.)

"Assessing payment adequacy and updating payments for outpatient dialysis services" - 14-page report chapter from MedPAC (pdf format).

Here is the Table of content of the entire MedPAC report.

MedPAC also told Congress that "Medicare payments for hospital services are adequate as of fiscal year 2003," and it recommended an inpatient update of 0.4% less than inflation for 2004. News summary from AHA (American Hospital Association).

January 21, 2003 - At its January 15, 2003 meeting, the Medicare Payment Advisory Commission (MedPAC) voted to recommend that Congress increase the composite rate by 1.6% for calendar year 2004. News item from the National Renal Administrators Association (NRAA) web site. (link is no longer available)

Here is the transcript from the January 15th meeting. See pages 5-7 of the pdf file.

Here is the Nancy Ray's presentation handout from MedPAC's January 15 meeting. See pages 7-17 of the pdf file.

January 15, 2003 - The Medicare Payment Advisory Commission (MedPAC), which recommends changes in the composite rate for dialysis treatment reimbursement for Medicare patients, meets today to assess payment adequacy of outpatient dialysis services. Today's agenda is (meeting brief in pdf format):

Assessing payment adequacy and updating payments for outpatient dialysis services

ISSUE: Do we believe that Medicare�s payments for all services provided by outpatient dialysis facilities are adequate? What would be needed to account for anticipated increases in efficient providers� cost next year?

KEY POINTS: Staff conclude that total Medicare payments for dialysis services will be at least adequate in 2003 and that no adjustment for payment adequacy is needed as part of the 2004 update for dialysis services. For freestanding facilities, current payments for composite rate services and separately billable drugs combined exceeded costs by about 4 percentage points in 2001 and our best estimate of the payment-to-cost ratio for 2004 is that it will be no more than 3 percentage points lower than the 2001 level (reflecting 2002 and 2003 payment rules). Staff�s assessment of market indicators, including the growth in the capacity of providers to furnish dialysis and changes in the financial health of providers, suggest that aggregate Medicare payments appear to be sufficient relative to efficient providers� costs.

The Commission�s update framework accounts for expected cost changes in the coming year primarily through the forecast of input price inflation (the market basket). Based on our analysis of payment adequacy and expected cost changes in the coming year, staff propose that the Commission recommend that the Congress update the composite rate by the market basket less an adjustment for growth in multifactor productivity for calendar year 2004.

ACTION: Commissioners should discuss the tone, finding, and draft recommendation about updating the composite rate for 2004. The Commission�s recommendation about updating payments for dialysis services will be included in the March 2003 report.

STAFF CONTACT: Nancy Ray (202-220-3723).

January 3, 2003 - The Medicare Payment Advisory Commission (MedPAC), which recommends changes in the composite rate for dialysis treatment reimbursement for Medicare patients, met on December 12th. One discussion topic was entitled "Assessing payment adequacy and updating Medicare payments: Physician payments, outpatient dialysis services, ambulatory surgical centers".

Documents regarding that discussion are now available on-line:

• Brief (pdf) An excerpt:

  Assessing payment adequacy and updating payments for outpatient dialysis services
  
  ISSUE: Do we believe that Medicare�s payments for all services provided by outpatient dialysis facilities are adequate? What would be needed to account for anticipated increases in efficient providers� costs next year?
  
  KEY POINTS: At this meeting, staff will present information about the adequacy of current aggregate outpatient dialysis payments. We will assess payment adequacy by considering dialysis services and
  separately billable medications because both are important sources of payments and costs for dialysis providers. Information about market factors show that:

  
  
  • Providers� capacity to furnish dialysis services has steadily increased between 1993-2001.
    
    
  • The use of separately billable drugs administered during dialysis has increased throughout the 1990s and payments for these services represented about 40 percent of Medicare�s total payments to dialysis facilities in 2001.
    
    
  • Beneficiaries appear to be obtaining access to needed dialysis services. Quality of dialysis care, as measured by dialysis adequacy and patients� anemia status, continues to improve.

  
  ACTION: Commissioners should discuss the findings presented in the attached briefing materials. Specifically, Commissioners should discuss whether: 1) current base payment rates are adequate, and 2) whether the composite rate should be updated for 2004. The Commission�s recommendation about updating payments for dialysis services will be included in the March 2002 report.

  
  
  
• Transcript (pdf) See pages 14-24 of the document.

November 22, 2002 - The Medicare Payment Advisory Commission (MedPAC) met on November 7th to discuss a workplan for assessing the adequacy of outpatient dialysis payments. Documents regarding that discussion are now available on-line:

• Brief (pdf)
  
  
• Transcript (pdf)

June 10, 2002 - Comptroller General of the United States David M. Walker has appointed three new members and reappointed two members to the Medicare Payment Advisory Commission (MedPAC). Press release from the GAO.

The newly appointed members are:

• Nancy-Ann DeParle, J.D.
  
  
• David F. Durenberger, former U.S. Senator from Minnesota
  
  
• Nicholas J. Wolter, M.D.

Members reappointed are:

• Carol Raphael
  
  
• Mary K. Wakefield, Ph.D., R.N.

March 2, 2002 - The Medicare Payment Advisory Commission (MedPAC) yesterday sent its annual report on Medicare payment recommendations to Congress. The report follows up on actions MedPAC took in January, when it decided to recommend a 2.4% increase in the composite rate for 2003.

Here is the chapter of the MedPAC report dealing with outpatient dialysis services (pdf format). The chapter begins with this summary:

Current aggregate Medicare payments for outpatient dialysis services appear to be adequate. MedPAC's best estimate for 2002 is that payments for composite rate services and separately billable medications together exceed providers' costs by about 3 percentage points; however, neither payment for composite rate services nor payments for medications outside the payment bundle accurately reflect efficient providers' costs. Although composite rate payments did not cover the costs of providing dialysis services, payments for separately billable medications significantly exceeded providers' costs.

The entire MedPac report is available by clicking here.


December 21, 2001 - National Renal Administrator Association President Shelly Clark and the Renal Leadership Council's Howard Lewin testified during the public comment period at the end of the MedPAC Meeting last week. Their comments appear on pages 2-4 of this pdf file.

December 20, 2001 - The Medicare Payment Advisory Commission (MedPAC), which recommends changes in the composite rate for dialysis treatment reimbursement, met last week.

Part of the meeting agenda was dedicated to the topic of reimbursement for dialysis services: "Assessing payment adequacy and updating Medicare payments, continued: ESRD, physician payments". Here are the meeting topic:

• Transcript (all in pdf format)
  
  
• Handout - "Updating payment for outpatient dialysis services in 2003" (link is no longer available)
  
  
• Brief - "Updating payments for outpatient dialysis services in 2003"

Congress raised the composite rate by 1.2 percent in 2000 and by 2.4 percent in 2001. Current law does not include any increase in the composite rate for 2002 or 2003.

Medicare is the primary payer of dialysis services. About 91 percent of all patients are Medicare entitled. Medicare is the secondary payer for beneficiaries with employer group health coverage during the first 30 months of dialysis treatment.

Medicare pays dialysis facilities a prospective payment, the composite rate, for a bundle of dialysis treatment services which include nursing care, supplies and certain drugs and lab tests. The average composite rate is $128 per dialysis treatment.

Dialysis providers are also reimbursed for certain drugs that are not included in payment bundle. This includes EPO, intravenous iron, vitamin D, and injectable antibiotics. Providers get paid 95 percent of the average wholesale price (AWP).

Dialysis providers are reimbursed for some lab tests not included in the composite payment bundle.

It is generally accepted that dialysis facilities are underpaid for the composite rate services, but can make a profit on drugs not covered by the composite rate.

In August of this year, the Renal Leadership Council issued a press release (link is no longer available) stating:

"At a minimum Medicare reimbursement for dialysis treatments should be increased by 2.9% in 2002 to cover inflationary costs," according to Abt Associates which conducted a detailed analysis of dialysis provider costs and Medicare revenue for 1999 and 2000. The study entitled, "Updating the 2002 composite Rate for Dialysis Treatments", concluded that, "without an adjustment to the composite rate, patient access to care in areas with above average proportions of Medicare patients will be threatened."

[This message has been edited by Gary Peterson (edited 04-18-2004).]