Dialysis Unplugged: Bundling of Dialysis Services

COMMENTARY - Dr. Ajay K. Singh

Bundling of ESRD services was implemented nearly a year ago. I am sure that like me you’ve been thinking about how this might be impacting patients receiving dialysis, and how the major providers of dialysis in the United States are faring.

Even potentially subtle changes in policy can have far-reaching consequences for patients. For example, when I was a dialysis medical director the corporate folks in the dialysis chain decided to switch INR monitoring for patients on dialysis to the hospital. What appeared to be a pretty straightforward issue had marked impact on patient’s quality of life. Patient’s were asked to have blood draws in the hospital laboratory rather than while they were on dialysis. This meant additional sticks. Not a problem... unless you are a patient! In many dialysis patients venous access is almost as precious as life itself and it became a challenging and painful issue for these patients. In addition, of course, accessing a peripheral vein on a weekly basis is using up valuable venous access for future access placements. A small change in policy had a quality of life impact and potential implications for dialysis access in the future.

In discussing the potential down-sides of bundling, Dr. Suchi Anand asks: “patients who have a tendency to be ESA resistant, or don’t have a good working access and therefore struggle to achieve their prescribed URR, will be much less attractive to the dialysis unit. Will the trade off from reducing ESA use be more blood transfusions? Will the dialysis unit send a patient with a fever and a tunneled catheter to the ER instead of drawing blood cultures and giving antibiotics that could cut into their “bundle”?

Likewise, Dr. Nate Hellman asks “Will patients still have access to important drugs and breakthroughs? Some have even suggested that a bundling policy might discourage some dialysis centers from taking African-American patients, who tend to have higher Epogen requirements, and therefore lead to racial discrimination; medically complex patients might also fall into the category of an "undesirable dialysis patient" from a cost perspective”.

Mr. Kevin Ellich was recently interviewed (The Wall Street Transcript October 6, 2011) on this topic.  Mr. Ellich Principal and Senior Research Analyst at Piper Jaffray & Co., covers health care.

Mr. Ellich: There's really only two companies in this group [in the dialysis industry], DaVita (DVA) and Fresenius Medical Care (FMS). Combined they have about two-thirds of the industry market share. Medicare changed the payment system for the dialysis providers, going from a la carte payment system where they would pay for the treatment and then there would be separate payments for the drugs and other services needed to treat patients.

At the beginning of 2011, Medicare shifted to a bundled payment system, which included a 2% rate reduction, but providers became incentivized to provide more efficient care to patients rather than being paid on a cost-plus basis. Dialysis is a very unique benefit, since Medicare picks up coverage for all patients after 33 months regardless of age. Typically, Medicare is only for seniors.

So while we had this big reimbursement change to a bundled payment that was implemented at the beginning of this year, the providers are actually doing pretty well. They've become more efficient with their use of renal pharmaceuticals, and I think they're managing through the transition pretty well. I also think the bundled payment system that was implemented for dialysis could set the stage for bundled payments for other parts of the health care sector.

So it appears that the dialysis providers have figured out how to prosper in this new dialysis reimbursement era. On it's face, this is fantastic. The government (Medicare) has succeeded in applying a 2% reduction in the composite rate and dialysis providers have figured out ways to make it work. On the other hand, this news could be quite sobering because it might involve some “cutting of corners” like the INR example. This could impact patient quality of life and/or outcomes. The key question is: has the dialysis industry “become more efficient with their use of renal pharmaceuticals”, or are key services or tests or medications being under-utilized?

And, oh by the way, I don't think monitoring the hemoglobin and URR, as part of CMS's QIP, are going to be sufficient to monitor the potential corner-cutting that may be happening. Certainly, the QIP s currently structured, would not detect a move from dialysis-unit-based to hospital-based INR monitoring, or administration of antibiotics, or drawing of blood cultures. There may also be reduced utilization of medications that are not being monitored by the QIP - for example, vitamin D analogues.

To understand how broad the effects of bundling could be on dialysis care it is worth a deep dive into what’s covered now in the bundled payments. An article by Dr. John Sargent published in Renal Business Today is worth a read, as is the paper by Winkelmayer and Chertow in AJKD earlier this year (1). Some key key points from Sargent’s article are:

• There will be a base rate for each facility, resulting from the standard base rate ($229.63/Treatment) modified by a wage factor (applied to the labor component of the standard base rate.)
• This reimbursement level will cover treatment, IV medications, some oral medications with IV equivalents, and all ESRD lab tests.
• There are patient-specific factors that will modify the standard base rate to result in the patient base rate (hereafter referred to as the “base rate”). These are the patient’s age and body size, as represented by body mass index (BMI) and body surface area (BSA)—factors used for the current “case-mix” modifiers to the composite rate.
• There are other factors, each of which can cause an adjustment to the base rate and increase the reimbursement rate for a patient.
• Onset adjustment: for a new ESRD patient the base rate will be adjusted by 51 percent during the first 120 calendar days of treatment (as determined by completion of the 2728 form). Note that the Medicare eligibility rules apply. A patient, not covered by Medicare prior to the onset of ESRD, has a 90-day waiting period before Medicare coverage starts. 
• There are six co-morbidities that will adjust payments. Three are chronic conditions, and three are acute. Each of these must be documented in the medical record. The chronic co-morbidities are effective throughout the patient’s dialysis course. The acute co-morbidities carry an increased level of payment for the month of diagnosis and the three subsequent months.
• There are add-on fees for training a patient for home dialysis, either PD or hemodialysis.
• There is partial additional compensation for a patient for whom average treatment costs during a month are excessive. These are outlier payments.
• On the facility level there is an adjustment of nearly 20 percent for clinics considered low volume (< 4,000 treatments per year).
• There are special reimbursement rules for pediatric patients; the other adjusters described above don’t apply. Note that the per treatment amount that results from the adjustments is the Medicare allowed amount so that CMS will be paying 80 percent of that amount with the patient or a secondary payor liable for the remaining 20 percent. The issue of secondary payors covering this residual 20 percent is seen as problematic by many in the industry and will likely be a work in progress subsequent to the implementation of the bundle.

Table 1: What is now covered in the Bundle (Adapted from Winkelmayer and Chertow, Ref 1) 

What was covered	Basic dialysis services (includes labor, supplies, equipment) Injectable medications and their oral equivalents
What’ s new
	ESAs and Intravenous iron supplements
	Intravenous vitamin D and its analogues
	Other injectable medications for ESRD care (eg, alteplase, vancomycin, daptomycin, levocarnitine)
	Oral equivalents of injectable medications (eg, oral vitamin D analogues, iron supplements), whether available currently or in the future
	Oral dialysis-specific medications (eg, oral phosphate binders, calcimimetics) (deferred until 2014)
	Laboratory tests for routine and ESRD-specific care

Bottom line – In addition to changes in ESA dose and other "renal pharmaceuticals", we need to carefully track what changes have been instituted by dialysis chains as a part of their management of the bundled rate and ask how this may impact patient quality of life and potentially outcomes.

References

1. Winkelmayer WC, Chertow GM. The 2011 ESRD prospective payment system: an uncontrolled experiment. Am J Kidney Dis. 2011 Apr;57(4):542-6. Epub 2011 Feb 17. PubMed PMID: 21333428.