American Journal of Kidney Diseases
Volume 57, Issue 4 , Pages 542-546, April 2011

The 2011 ESRD Prospective Payment System: An Uncontrolled Experiment

  • Wolfgang C. Winkelmayer, MD, ScD

      Affiliations

    • Corresponding Author InformationAddress correspondence to Wolfgang C. Winkelmayer, MD, MPH, ScD, Division of Nephrology, Stanford University School of Medicine, 780 Welch Rd, Ste 106, Palo Alto, CA 94304
    • ,
  • Glenn M. Chertow, MD, MPH

Stanford University School of Medicine, Palo Alto, California

published online 18 February 2011.

Article Outline

 

On August 12, 2010, the US Centers for Medicare & Medicaid Services (CMS) published the final rule for the end-stage renal disease (ESRD) prospective payment system (PPS), an expanded capitated payment scheme for an array of dialysis-related services that took effect on January 1, 2011.1 Largely unnoticed by the larger medical community, the PPS has the potential to generate dramatic shifts in the care of patients with ESRD and to disrupt access to some dialysis services. Whether adoption of the PPS will favorably or unfavorably affect outcomes is unknown.

In 1972, Medicare was mandated to pay for the treatment of patients with irreversible kidney failure, the first covered benefit afforded to persons who were not necessarily elderly or disabled. A decade later, the composite rate payment system, a limited bundle payment system, was established. This limited bundle included the provision of outpatient maintenance dialysis, including some routinely provided drugs, such as heparin, laboratory tests, and supplies. The composite rate payment system added case-mix adjusters in 2005, providing modest differentials in payment for care of patients of various ages and body sizes without expanding the scope of the services covered.

Payment originally was set at $127 per treatment for independent facilities and $131 for hospital-based facilities, adjusted for a geographic wage index. Only marginal increases to the composite rate subsequently were implemented, totaling <3% during the next nearly 2 decades. As a result, dialysis facilities were not only incentivized to increase efficiency, but also to discover and exploit alternative revenue streams. The most important source of additional revenues (and profits) was the administration of injectable medications, which are reimbursed separately by Medicare. Providers were allowed to keep the difference between Medicare reimbursement and their acquisition costs. Subsequently, use of erythropoiesis-stimulating agents (ESAs), vitamin D analogues, and intravenous iron soared.2 In an attempt to rein in “profiteering,” margins off injectable drugs were curbed at 6% above the average sales price in 2004. In 2007, Medicare paid almost $2.7 billion for these medications, which accounted for approximately 11% of total costs of the ESRD program ($23.9 billion).3 The ESRD program, while providing dialysis and related care to ∼0.5% of Medicare beneficiaries, accounts for ∼6% of Medicare expenditures.

The Medicare Improvements for Patients and Providers Act (MIPPA), enacted July 15, 2008, required the CMS to address cost and overuse in the ESRD program within the context of a statutory requirement for an expanded bundle of ESRD-related services.4 In addition to services currently covered by the composite rate, the expanded bundle will include 5 classes of injectable medications and their oral counterparts and all dialysis-relevant laboratory testing (Table 1). In addition to changes in payment policy, a final rule on an ESRD Quality Incentive Program (QIP) has been issued. Effective January 1, 2012, it will assess adherence using 2 metrics related to management of anemia and one related to provision of “adequate” dialysis.5

Table 1. Reimbursement Changes in the Medicare ESRD Program
Composite Rate until 12/31/2010Prospective Payment System as of 1/1/2011
Basic dialysis services (includes labor, supplies, equipment)IncludedIncluded
Injectable medications and their oral equivalentsa
Erythropoiesis-stimulating agentsSeparately billedIncluded
Intravenous iron supplementsSeparately billedIncluded
Intravenous vitamin D and its analoguesSeparately billedIncluded
Other injectable medications for ESRD care (eg, alteplase, vancomycin, daptomycin, levocarnitine)Separately billedIncluded
Oral equivalents of injectable medications (eg, oral vitamin D analogues, iron supplements), whether available currently or in the futureReimbursed through Medicare Part DIncluded
Oral dialysis-specific medications (eg, oral phosphate binders, calcimimetics)Reimbursed through Medicare Part DInclusion deferred until January 1, 2014
Laboratory tests for routine and ESRD-specific careSeparately billed (by either ESRD facility or third-party laboratory)Included
Laboratory tests for non–ESRD-specific care, ordered by nephrologist in her/his function as PCPSeparately billed (by either ESRD facility or third-party laboratory)Separately billed (by either ESRD facility or third-party laboratory)
Physician paymentsSeparately billedSeparately billed
Payment adjustment (patient factors)Age, BSA, low BMI (<18.5 kg/m2)Same as present, with addition of: pericarditis (acute), bacterial pneumonia (acute), GI tract bleeding with hemorrhage (acute), hemolytic anemia with sickle cell anemia (chronic), myelodysplastic syndrome (chronic), monoclonal gammopathy (chronic); time since initiation of dialysis (≤90 vs >90 d)

Note: Payment adjustment based on provider factors; not shown. The 5 classes of injectable medications to be covered by the prospective payment system as of January 1, 2011, include1: (1) drugs used in the management of vascular access (including heparin to maintain vascular access and dialyzer patency during hemodialysis and thrombolytic agents used to dissolve blood clots and fibrin strands in hemodialysis and peritoneal dialysis catheters); (2) drugs used for the management of anemia, including erythropoiesis-stimulating agents and intravenous iron formulations; (3) antimicrobial agents used to treat vascular and peritoneal access and other infections; (4) agents used in the management of bone and mineral metabolism (eg, intravenous vitamin D analogues); and (5) other agents used to treat selected “cellular management” conditions associated with ESRD (eg, levocarnitine).

Abbreviations: BMI, body mass index; BSA, body surface area; ESRD, end-stage renal disease; GI, gastrointestinal; PCP, primary care physician.

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Anticipated Changes in Access to Dialysis Care 

Current case-mix adjusters generally provide higher reimbursement for patients at the extremes of age and body size (Table 1). Whereas these factors may influence facility practice patterns, other clinical factors may be more likely to influence provider incentives to attract or turn away selected patients. Because ESAs account for a large fraction of costs that previously were ex-bundle and are now in-bundle, patients with ESA resistance will prove far more costly in the new expanded bundle era. Patients with malignancy, other chronic inflammatory diseases, recent infection, refractory secondary hyperparathyroidism (SHPT), and/or indwelling vascular catheters may prove less “attractive” to facilities from an expense perspective. Of note, all 6 patient-level comorbidity adjusters (Table 1) are associated with ESA resistance.

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Potential to Aggravate Inequities 

Many commentators of the proposed rule were concerned that implementation would disproportionately affect minority patients and those of lower socioeconomic status, thus aggravating geographic and other inequities.6 Of note, race was not adopted as a payment modifier despite having been a significant determinant of costs in regression models used to formulate the policy. Generally, blacks have more severe anemia and SHPT than whites and other races/ethnicities and require higher ESA doses to maintain similar hemoglobin concentrations. Women also tend to have lower hemoglobin concentrations and generally are smaller. In other words, as providers attempt to maximize revenues and minimize expenses, selected demographic factors may influence access to dialysis care, with black women potentially particularly vulnerable to cherry-picking behaviors. The impending PPS also has the potential to disrupt access to ESRD services in more remote areas or areas in which higher cost patients are concentrated (eg, inner cities). Independent and/or smaller facilities may be forced to close or be acquired by larger chains, leading to further market consolidation, potentially limiting patient and physician choice.

Other patient groups also may be shunned from facilities, depending on which quality indicators ultimately are adopted. If the fraction of patients reaching a particular threshold of dialysis adequacy is required to avoid a 2% payment withhold, patients without an arteriovenous fistula or graft may be discouraged from entering a facility. If providers are not responsible for costs associated with repeated or prolonged hospitalization, they may obligate or otherwise encourage patients to secure a permanent vascular access before being accepted for outpatient care. Like other potential downstream consequences of the expanded bundle, such a requirement could sharply increase overall ESRD program costs because hospitalization may be extended to accommodate vascular access surgery or hospital-based facilities may be asked to retain patients longer before transitioning them to community-based facilities. These behaviors may be influenced by external factors unrelated to dialysis care, but related to facility capacity and level of competition among providers in the local region.

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Anticipated Changes in the Provision of Dialysis 

Providers will have a strong incentive to direct patients toward home dialysis services, including peritoneal dialysis and home hemodialysis, certainly desirable in light of the underuse of these modalities. With respect to in-center hemodialysis (which accounts for >90% of dialysis care in the United States), bureaucratic barriers will persist to make more frequent hemodialysis (≥4 times/wk) difficult to justify despite recent data indicating better outcomes from more frequent dialysis.7 To the extent that quality targets are related to Kt/Vurea, incentives will remain to maximize urea removal and minimize expenses in achieving that goal.

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Anticipated Changes in the Provision of ESRD-Related Drugs 

The greatest changes in prescription drug use in patients on dialysis therapy will relate to provision of ESAs. Before 2011, providers were rewarded for using maximal reimbursed ESA doses, targeting hemoglobin concentrations of 11-13 g/dL until 2007 and 10-12 g/dL since then. Ironically, until recently, Medicare's own Dialysis Facility Compare website highlighted each facility's quality performance, noting in each case the fraction of facility patients with hemoglobin concentrations ≥11.0 g/dL. Owing to variability in response and difficulty maintaining hemoglobin concentrations within a narrow range, providers were reimbursed even when patients veered above the upper end of the hemoglobin target range. As a result, mean hemoglobin concentrations were >11.5 g/dL during 2007, with relatively wide variation in ESA use among dialysis providers.8 With providers responsible for ESA expenses after January 2011, ESAs will (overnight) change from profit center to loss leader.

After January 2011, we anticipate significant decreases in ESA use, with hemoglobin concentrations shifting from the upper (12 g/dL) to the lower (10 g/dL) end of the target range, with more excursions below than above the target. Some providers may choose to administer ESAs by the subcutaneous than intravenous route because clinical trials have suggested that a substantial decrease in dose can be achieved while maintaining similar hemoglobin concentrations.9 Providers will redouble their efforts to ensure adequate iron stores and will liberalize decision rules for the provision of intravenous iron. Recent studies have shown that even in the absence of iron deficiency, supplementation with intravenous iron can result in higher hemoglobin concentrations, a strategy that will be justified by the lower cost of iron preparations and renewed concerns regarding the safety of ESAs.10 Some providers may adopt other strategies to promote higher hemoglobin concentrations using alternative lower cost agents, such as intravenous ascorbic acid or anabolic steroids.11, 12 Finally, dialysis providers may use their arrangements with nephrologists to incentivize increased use of ESAs and iron supplements before the initiation of dialysis therapy, for which such therapy is still subject to fee-for-service payment. Thus, although dialysis providers may incur fewer expenses related to the treatment of anemia in incident patients, some expenses could be shifted to other payers.

We anticipate a virtual cessation of use of intravenous vitamin D analogues (calcitriol, doxercalciferol, and paracalcitol), which will be included in the bundled payment, in favor of less costly oral alternatives (generic oral cholecalciferol, ergocalciferol, and calcitriol). Although some published studies suggest that parathyroid hormone concentrations can be decreased more effectively using intravenous vitamin D analogues,13, 14 oral agents are predominantly used in most other countries. Providers will justify less intensive use of vitamin D analogues given the paucity of evidence that tight control of SHPT is beneficial, along with recently published practice guidelines broadening the target parathyroid hormone level range from ∼150-300 pg/mL to 2-9 times the laboratory upper limit of the reference range (∼130-585 pg/mL).15 Levocarnitine may completely evaporate from dialysis facility formularies given its considerable expense and limited evidence on which to justify its use.16

Parenteral antibiotics commonly are prescribed to treat dialysis access–related and other infections. For patients on peritoneal dialysis therapy, it is unlikely that practices will change, in part because clearance of antibiotics is so inefficient. In contrast, management of vascular access–related and other infections in patients on hemodialysis therapy could change considerably in that providers may encourage management of hemodialysis-related infections in the hospital.

Although it originally was proposed that oral-only ESRD drugs, which in 2007 cost Medicare $450 million, be included in the PPS, their inclusion was deferred. Smaller units and chains may not be in the position to fulfill the pharmacy function for oral drugs or to be at a disadvantage in negotiating prices with drug manufacturers. Thus, oral-only ESRD drugs will continue to be reimbursed through Medicare Part D until January 2014. The main effect of delayed inclusion of oral-only ESRD drugs will be felt in the area of bone and mineral metabolism. Providers will have an incentive to decrease expenses related to vitamin D analogues, whether intravenous or oral formulations, in favor of “out-of-bundle” prescription of the oral-only cinacalcet, a costly calcimimetic agent. The incentive for providers to use less expensive phosphate binders, such as calcium carbonate, rather than sevelamer or lanthanum carbonate also will be deferred.17

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Anticipated Changes in the Use of Laboratory Tests 

Monthly laboratory testing is engrained in dialysis practice and is unlikely to change. Tests ordered more frequently for “optimization” of injectable drug prescription (eg, hemoglobin, calcium, and phosphate) will be minimized. Extra tests will be reserved for patients in whom selected laboratory parameters were below or near the threshold for a “quality withhold,” depending on future components of the QIP.

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Possible Influence on Dialysis Initiation Practices 

The optimal timing of initiation of dialysis therapy remains unknown. During the past 15 years, proponents of “timely” or early-start dialysis have effectively influenced practice, such that the mean estimated glomerular filtration rate at which dialysis therapy was initiated increased from ∼6 mL/min/1.73 m2 to >10 mL/min/1.73 m2. Included in the PPS is a 90-day payment adjuster, such that providers will be remunerated “time and a half” when caring for a patient new to dialysis therapy rather than an established patient. Despite recent clinical trial evidence suggesting that early-start dialysis may not be of benefit,18 the proposed incentive to care for new patients may prompt providers and physicians to initiate dialysis therapy in patients who may have been “on the fence” with respect to starting on clinical grounds.

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Rational Care or Rationing Care? 

In many ways, Medicare's new PPS will rationalize some elements of care for patients with ESRD. Overzealous use of ESAs and vitamin D analogues will cease and complications of overcorrection of anemia or SHPT will become less frequent. However, some providers may ration, restricting or discouraging access to drugs or other services that might protect patients from untoward complications. For example, if ESA use is curtailed, a higher fraction of patients on dialysis therapy are likely to receive blood transfusions and experience associated untoward complications. Among the most concerning, more frequent transfusion will increase immune sensitization,19 possibly decreasing the likelihood that a suitable donor kidney can be identified and therefore extending already lengthy waiting times for deceased donor kidney transplants. Moreover, even in eventual transplant recipients, sensitization can lead to accelerated transplant loss, decreasing the favorable effects of kidney transplant on individual patients and the ESRD program at large.20

In other cases, practice patterns may shift such that actual management strategies change little, but costs shift from the dialysis facility to the inpatient setting. Issues related to vascular access procedures and management of infections could shift away from the outpatient dialysis setting back to the hospital, where dialysis facilities and organizations are no longer held accountable for expenses.

Given increasing economic pressures, the PPS could fundamentally and permanently change the relationships between nephrologists and dialysis facility owners. Until now, incentives for dialysis facility owners, nephrologists, and patients generally were aligned (“more is better”), as in other fee-for-service environments. The PPS may place physicians in conflict with providers, where a dialysis facility owner, following financial incentives, may impose care pathways and limit exceptions for nephrologists who see the need to individualize the care of certain patients. Disruption of the previously harmonious physician–dialysis facility owner relationship could lead to a paradigm shift away from current practice models toward salaried nephrologists employed by dialysis providers, particularly if the provider market consolidates further.

Collateral damage from the PPS will be the much reduced incentive to innovate the way dialysis patients are being treated. Entrepreneurs will be unlikely to target the ESRD market for inventions or process improvements. Thus, the PPS could squelch innovation and stall or eliminate improvements to dialysis care, not solely in the United States, by far the largest dialysis market in the world, but in other countries as well.

The US Government Accountability Office has urged the CMS to closely monitor implementation of the PPS.20 Unfortunately, data collection through surveillance systems (eg, CROWNWeb) has not been broadly implemented, so that data for pre-PPS laboratories will be lacking. Widespread changes are underway, with a highly concentrated provider base and few metrics by which the downstream effects of changes in the provision of dialysis and related care can be evaluated. Patients on dialysis therapy are among the nation's most vulnerable citizens. Is it ethical to conduct this mandated experiment without informed consent and with no control group?

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Acknowledgements 

Financial Disclosure: Dr Winkelmayer has served as an advisor to Affymax, Amgen, Astellas/Fibrogen, Fresenius/Vifor, GlaxoSmithKline/Takeda and Sandoz/Hexal, and has received research support from Fibrogen. Dr Chertow serves on the Board of Directors of Satellite Healthcare and the Scientific Advisory Board of DaVita Clinical Research. He has also served as an advisor to Amgen, Inc.

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References 

  1. Department of Health and Human ServicesCenters for Medicare & Medicaid Services. Medicare Program; End-Stage Renal Disease Prospective Payment System. Fed Regist. 2010;75(155):49029–49214
  2. US Renal Data System. Clinical indicators and preventive health. In: USRDS 2009 Annual Data Report: Atlas of End-Stage Renal Disease and Chronic Kidney Disease in the United States. Bethesda, MD: National Institutes of Health, National Institute of Diabetes and Digestive and Kidney Diseases; 2009;p. 259–268
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  4. Medicare Improvements for Patients and Providers Act of 2008. Medicare, Provisions Relating to Part B, Other Payment and Coverage Improvements. Public L No. 110-275, §153(a) (2008).
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 Originally published online February 18, 2011.

 This article is part of a series in the April 2011 issue of AJKD that explores the 2011 final rule for the Medicare ESRD prospective payment system.

PII: S0272-6386(11)00041-2

doi:10.1053/j.ajkd.2011.01.013

American Journal of Kidney Diseases
Volume 57, Issue 4 , Pages 542-546, April 2011

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