Relevant Tickers: DVA and FMS
Approximately 60 percent of ESRD treatments in the United States are performed by Davita Healthcare Partners, Inc. (DVA) and Fresenius Medical Care AG (FMS) The other 40 percent are performed by a large number of regional and local for-profit and non-profit providers. Medicare covers ESRD treatments regardless of the age of the patient. Dialysis providers are paid per treatment using a formula that adjusts the base rate for patient characteristics. This payment includes the dialysis procedure as well as supplies and drugs. The base rate does not include certain “oral only drugs.”
ESRD Reimbursement for CY 2017 and 2018 in under the control of the Protecting Access to Medicare Act (PAMA), a provision of which over-rode a poorly considered and un-vetted rebasing of the ESRD per-treatment payment amount that was included in the American Taxpayer Relief Act of 2012 (ATRA). Under PAMA, the annual ESRD Market Basket adjustment is reduced by 1.25 percent in CY 2017 and 1.00 percent in CY 2018. ESRD payments will return to the more normal formula of ESRD Market Basket less Multi-factor Productivity Adjustment in CY 2019.
The CY 2016 ESRD base, per treatment rate is $230.39 which is a result of a 1.8 percent ESRD Market Basket increase, less the PAMA imposed reduction of 1.25 percent, a multi-factor productivity reduction of 0.4 percent and a refinement budget neutrality reduction of 4.03 percent plus a wage index budget neutrality factor increase of 0.0495 percent.
The latest ESRD Market Basket adjustment will be released as part of the payment update. Unlike Market Basket indices for hospitals and other providers, the ESRD index is not as dependent on labor costs. Forecasts for the more labor dependent Market Basket indices have been jumping around a good bit lately due to historical labor costs, particularly in the last half of 2015. The last publicly available forecast indicates an ESRD Market Basket forecast of 2.1 percent. The forecast released with the rule should be pretty close to that figure.
Given an ESRD Market Basket increase of 2.1 percent and a wage index budget neutrality factor similar to last year’s, we anticipate that CMS will propose a 0.40 percent increase in the base rate for ESRD treatments. This rate reflects an ESRD Market Basket increase of 2.1 percent, less a multi-factor productivity reduction of 0.5 percent, less the PAMA-mandated reduction of 1.25 percent plus a wage index budget neutrality factor increase of 0.5 percent.
It was the ATRA that also required the CY 2016 refinement budget neutrality adjustment of 4.0 percent. This adjustment was meant to address changes in resource use that occur over time. The language of the law suggests this is a change mandated for CY 2016 and will not be repeated in CY 2017.
If all goes according to plan the CY 2017 ESRD base rate should be about $231.27 – not great but at least it represents an increase after last year’s payment cut.
Table 1: Estimated CY 2017 ESRD Base Rate
The proposed CY 2017 reimbursement update should be released in the next three to four weeks and will be finalized late Q3 or early Q4 2016. The proposal will include estimated impacts to providers and policy goals and changes, if any, under consideration. We will do a deeper dive on the proposal is released.