• MedPAC Recommends 2.65% Payment Increase to Dialysis Providers
  • March 22, 2006 | Author: W. Kenneth Marlow
  • Law Firm: Waller Lansden Dortch & Davis, LLP - Nashville Office
  • For the fifth year in a row, the Medicare Payment Advisory Commission (MedPAC) has recommended increasing the composite rate that Medicare pays for dialysis services furnished to end-stage renal disease (ESRD) patients covered by Medicare. Specifically, in its annual report to Congress, MedPAC recommends that Congress update the composite rate in calendar year 2007 by the ESRD market basket index less half of MedPAC's expectation for productivity growth in the industry. Should this recommendation be accepted by Congress, it will result in a net increase of 2.65 percent in the composite rate for 2007. This recommendation was driven, in part, by the fact that Medicare margins for dialysis providers have decreased as a result of changes to how Medicare reimburses dialysis providers for separately billable injectable drugs mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA).

    Although this composite rate increase, when coupled with the 1.6 percent increase to the composite rate for 2006 under the Deficit Reduction Act of 2005, is welcomed by the dialysis industry, the industry continues to suffer from a lack of an annual update for dialysis reimbursement. Unlike most other provider categories, dialysis providers do not automatically receive annual payment updates from Medicare. Although MedPAC has recommended in the past that this situation be remedied, no action has yet been taken by Congress to provide for automatic annual Medicare payment updates for dialysis providers. This lack of an annual update means that the dialysis industry must annually seek payment updates directly from Congress. This approach is costly, often ineffective, and rarely results in reimbursement payment increases that logically correspond to the costs of providing dialysis care to patients. This is particularly problematic for the dialysis industry given that 93 percent of dialysis patients are covered by Medicare and the industry asserts that Medicare payment rates do not cover the cost of furnishing dialysis to beneficiaries.

    MedPAC also recommends that the separate payment rates for freestanding dialysis providers and hospital-based dialysis providers be eliminated. This differential, which is mandated by the Omnibus Budget Reconciliation Act of 1981, currently means that hospital-based dialysis providers receive $4 more on average than freestanding facilities for composite rate services. In MedPAC's opinion, this differential is inconsistent with MedPAC's general philosophy of paying providers for efficient service, regardless of the care setting. With this in mind, MedPAC also recommends that Congress combine the base composite rate and the add-on adjustment for dialysis providers.

    Although these recommendations appear acceptable to the dialysis industry as a whole, these changes could affect an individual provider's reimbursement. Further, in testimony before Congress regarding these recommendations, Kent Thiry, Chief Executive Officer, DaVita Inc. and Immediate Past Chair, Renal Leadership Council, cautioned Congress that combining the base composite rate and the add-on adjustment must not result in a loss of the add-on adjustment being annually indexed to account for increases in drug spending as required by the MMA.

    MedPAC's report to Congress addressed other issues that did not rise to the level of recommendations. For instance, MedPAC found that vascular access and nutritional care are clinical areas that require quality improvement. MedPAC suggested that one way to encourage improvement in these areas is by including vascular access and nutritional management services in the composite payment bundle. MedPAC recommended that the Secretary review the current medications, services and equipment included in the composite bundling payment and consider adjustments based upon current clinical practice. The annual report also considered what factors may be influencing the use of peritoneal or hemodialysis at home, including Medicare coverage and payment policies. Although no recommendations were made, MedPAC indicated that it would continue to monitor developments with respect to home dialysis.