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GAO: Medicare could save $880 million on dialysis payments

Changes in drug utilization for kidney failure patients prompted the watchdog agency to question bundled payment amounts.

By Charles Fiegl — Posted Dec. 26, 2012

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A Government Accountability Office report concluded that Medicare is overpaying for end-stage renal disease services, but organizations representing treatment facilities said the study did not account for all care provided to patients.

Medicare coverage is extended to all Americans with ESRD to pay the expensive costs of dialysis or kidney transplants. In 2011, 365,000 ESRD patients were covered by the national entitlement program.

GAO investigators reviewed Medicare payments to dialysis facilities since 2007, the year when care for patients first was bundled into lump-sum payments. The analysis focused on use of erythropoiesis-stimulating agents, and intravenous iron and vitamin D treatments — which accounted for about 96% of ESRD drug payments in 2010.

The utilization of drugs was about 23% lower in 2011 than it was in 2007, the Dec. 7 report said. Between $650 million and $880 million could have been saved if bundled payments were recalculated to reflect current usage rates.

“Furthermore, this estimate of potential savings could be larger in future years if the level of ESRD drug utilization at the end of 2011 declines further, as preliminary data suggest,” the report stated. “Rebasing the bundled payment rate to account for changes in ESRD drug utilization could help ensure that Medicare pays appropriately for dialysis services and also yield savings to Medicare.”

Those providing end-stage renal disease treatments said the GAO report was troubling. There is evidence that drug utilization has decreased, but there are also unfunded costs to health professionals that are not covered by the report, they said.

Furthermore, the Medicare Payment Advisory Commission has recommended increasing ESRD pay rates after studying payment adequacy. Any cuts would harm smaller dialysis organizations, or SDOs, in particular, as those groups tend to have smaller operating margins compared with larger ones, ESRD professionals said.

“Making cuts of the magnitude GAO is recommending would impose great financial strain on SDOs and could lead to fewer choices and access to care problems for patients,” said Katrina Russell, president of the National Renal Administrators Assn., based in Philadelphia.

Organizations representing nephrologists had reviewed the study before publication and shared concerns with GAO officials. Any calls for rebasing the bundled payment rates at this point are premature, said American Society of Nephrology President Bruce A. Molitoris, MD.

“We don’t have enough data to evaluate the impact of bundling,” Dr. Molitoris said. “To change it this early in the course would have unintended consequences.”

More input from patients, health professionals and the rest of the health care community is needed before any changes are made, he said.

The Washington-based advocacy group Dialysis Patient Citizens also cautioned the GAO and lawmakers not to act too hastily on the report’s findings. As noted in the report, the impact of the drug utilization reduction on patients is unclear, the group said in a statement.

The Dept. of Health and Human Services agreed with the GAO report’s recommendation that bundled payments should reflect data on utilization of services, but statute prevents the administration from changing how the payments are calculated. “We believe that such authority would help further ensure that payments are established accurately and support access to high-quality care for Medicare beneficiaries with ESRD,” HHS officials wrote in a Nov. 30 memo in response to a draft of the report.

Bundled pay rates for ESRD treatments were increased by 2.1% in 2012 and will rise 2.3% in 2013.

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