Press release




Improvements in how Medicare pays kidney dialysis centers could more efficiently deliver services to Medicare beneficiaries with end stage renal disease (ESRD), according to a report to Congress by the Centers for Medicare & Medicaid Services (CMS).


“The analysis lays a solid foundation to implement a more accurate payment system, which would benefit these patients,” said CMS Acting Administrator Kerry Weems.  “We are currently 60 percent of the way to a proven prospective payment system for ESRD.”


Medicare currently uses prospective systems to pay for Medicare-covered services in a variety of settings, including inpatient hospitals, long-term care hospitals, inpatient rehabilitation hospitals and inpatient psychiatric facilities, as well as services delivered by home health agencies.


The report, required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), describes the steps to be taken by Congress to implement a fully bundled prospective payment system (PPS) for dialysis services.


These services are furnished on an outpatient basis in freestanding and hospital-based dialysis facilities.  Currently, Medicare pays for certain dialysis services under a partial bundled rate, referred to as the composite rate.  Payments for these composite rate services represent about 60 percent of total Medicare payments to ESRD facilities.  The remaining 40 percent of Medicare spending for dialysis services is for separately billed items such as drugs, but may also include laboratory services, supplies and blood products.


The report discusses establishing a base treatment payment rate for the services related to a dialysis session, including the services in the current composite rate as well as items that are billed separately.  The base rate would be adjusted for case mix factors such as the patient’s age, gender, height and weight and how long they have been on dialysis.


By accounting for more characteristics of patients, the report says, payments would be targeted to those facilities with the most costly patients.


The report also identifies a number of specific conditions, or comorbidities, for ESRD patients that would also result in adjustments to the base rate. In addition, an outlier policy may be used to allow for the resources involved with particularly expensive cases.  Base rates could also be adjusted for various factors such as wage differences across geographic areas.


The President’s budget for fiscal year 2009 contains a legislative proposal to implement a fully bundled ESRD PPS beginning Jan. 1, 2011.  This will provide CMS with time to update the case-mix adjustors using the most recent data available, go through the required notice and comment rulemaking process, allow the agency to update its systems infrastructure, and conduct provider and beneficiary education about the new payment system.


The Medicare Payment Advisory Commission and the Government Accountability Office have recommended a fully bundled PPS for improving how ESRD facilities are paid. The system would bundle payment for services currently under the dialysis composite rate with those for separately payable items and services into a single payment rate.


“A fully bundled prospective payment system would have a number of advantages over the current system,” said Weems.  “As with any prospective payment system, a fully bundled rate creates incentives to furnish dialysis services efficiently.  In addition, a fully bundled ESRD PPS would give facilities the opportunity to improve clinical outcomes, enhance the quality of care furnished to beneficiaries and eliminate incentives for overusing separately billed items.”


           The report also describes the quality initiatives already under way in Medicare.  These initiatives focus on patients and the care they get from their facilities. Medicare has established performance expectations for facilities and encourages patients to participate in their care plan and treatment.  Medicare also updates vital process measures on to promote patient well being and continuous quality improvement.


“The impact of the payment system on the care available to beneficiaries cannot be underestimated,” said CMS Chief Medical Officer and Director for its Office of Clinical Standards & Quality, Barry M. Straube M.D.  “As a nephrologist, I understand that a key element of successful, high quality care is the ability of the dialysis facility to direct its limited resources to those patients who are most in need of care. By proposing a restructured payment system that recognizes the variation in needs among beneficiaries, CMS is equipping facilities with the ability to do just that.”


The only category for Medicare eligibility that is based on a specific diagnosis, without regard to the age of the patient, is ESRD.  In 2006, there were about 4,700 facilities furnishing outpatient dialysis services to an estimated 315,000 Medicare dialysis patients, at a total cost of $8.1 billion for dialysis and ESRD-related drugs.


           The full Report to Congress can be viewed on the CMS Web site at: