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CMS Issues Long Awaited Bundling Rule for Renal Dialysis Providers

Posted in Healthcare Services Investing

Yesterday, CMS issued a release regarding the much anticipated final rule laying out the new bundled prospective payment system (PPS) for renal dialysis facilities.  The rule itself was published on July 23, 2010.  Under the new  PPS, CMS will make a single bundled payment to the dialysis facility for each dialysis treatment that will cover all renal dialysis services and home dialysis commencing on January 1, 2011.  It replaces the current system which pays facilities a composite rate for a defined set of items and services, while paying separately for drugs, laboratory tests, or other services that are not included in the composite rate.   At the same time, CMS issued a proposed rule that would create a new Quality Incentive Program (QIP) for dialysis services that will link a facility’s payment to how well it meets the QIP performance standards, which will be discussed in a separate blog post.  
 
Currently
 and through the remainder of this year, Medicare makes a composite rate payment to ESRD facilities for furnishing outpatient maintenance dialysis in the facility or in the beneficiary’s home.  The composite rate payment covers dialysis treatment costs and certain routinely furnished ESRD-related drugs, laboratory tests, and supplies.  The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)   require CMS to develop a new, fully bundled prospective payment system for renal dialysis services to replace the existing composite rate payment methodology.

According to the CMS issuance, CMS received nearly 1500 public comments in response to the ESRD PPS proposed rule that appeared in the September 29, 2009 Federal Register.  Among the major concerns raised by the comments were the proposals surrounding payment for home dialysis training; inclusion of additional payment adjustments for patient characteristics in the payment methodology; and inclusion of former Part D prescription drugs related to ESRD treatment in the payment bundle.   In the final rule CMS: 
 
 1) Creates a home or self-care dialysis training payment adjustment specifically directed to patients trained by facilities certified to provide home dialysis training. 

 2)  Finalizes payment adjustments for dialysis treatments furnished to adults for patient age, body surface area, and body mass index, onset of dialysis, and certain co-morbidities, but does not finalize adjustments for the patient’s sex or the patient’s race or ethnicity. 

 3)   Finalizes a payment adjustment for dialysis treatments furnished to pediatric patients, based on patient age and dialysis modality, but not co-morbidities.  


 4)   Finalizes a definition for renal dialysis services that includes ESRD-related oral-only drugs, but postpones payment for such drugs under the ESRD PPS until Jan. 1, 2014.

We have discussed in prior posts that the new bundling reimbursement is likely to impact dialysis providers differently. Small dialysis organizations (SDOs) and large dialysis organizations (LDOs) will likely be impacted differently due to LDO purchasing and contracting power and, in some cases, vertical integration. Additionally, dialysis providers may be differentially impacted based on the dialysis modalities on which they focus (e.g. home or in-clinic peritoneal dialysis (PD) versus in-clinic hemodialysis and variations of these types) and/or based on geographic factors.

 

The new bundled payment system will be phased in over a four-year period beginning on January 1, 2011.  However, providers may choose to be paid entirely under the new payment system beginning on January 1, 2011.   Dialysis providers of all size, modality focus and patient population will now be assessing more fully the potential impact on their businesses and strategies for keeping costs low and quality high.

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