On Friday, the Centers for Medicare and Medicaid released the proposed CY 2017 payment update for End Stage Renal Dialysis Services (ESRD). They propose to increase the CY 2016 base treatment rate from $230.39 to $231.04. This $0.65 increase is estimated by CMS to increase Medicare reimbursement to ESRD providers by about $50 million in CY 2017.
The more interesting feature of the annual payment update release is a significant increase in the in-home treatment training add-on payment (from $50.16 to $95.57) that patient advocates and device manufacturers like NXTM have sought since 2011. Also of interest is the expansion of the ESRD benefit to include patients suffering from Acute Kidney Injury. Finally, CMS is changing reporting arrangements so dialysis providers can bill for patients receiving dialysis more than the maximum three times per week by pro-rating the base amount accordingly.
In-home Training Treatment Add-on Payment. The big news in the CY 2017 ESRD payment update is the proposed increase in the add-on payment for training of patients and their families during in-home dialysis treatment. CMS is proposing this add-on payment be increased from $50.16 to $95.57. So, in-home dialysis that includes training will be reimbursed at the proposed base rate of $231.04 plus the training add-on payment of $95.57 plus other patient and facility level adjustments, as appropriate. CMS reimburses for 15 training treatments for peritoneal dialysis and 25 training treatments for hemodialysis.
The increase in the add-on payment for in-home dialysis training represents a victory for patients and in-home dialysis equipment manufacturers who have argued for an increase since 2011. In the CY 2014 payment update, CMS responded by increasing the training add-on from $33.44 to $50.16. That increase was not sufficient in the eyes of many patients and their advocates. Last year, a letter writing campaign was organized – by whom is not clear – in support of an increase. Virtually all the 268 comment letters submitted regarding the CY 2016 ESRD payment update were from patients asking CMS to consider a change. Since an increase in the add-on payment was not part of the CY 2016 proposal CMS did not include it in last year’s final payment update but pledged to consider it in the future which they have now done.
In-home dialysis is a small part of the dialysis market. In the CY 2017 proposed rule, CMS indicates that in 2014, they paid for in-home training (and the associated dialysis session) for 12,800 peritoneal dialysis patients and 2,400 hemodialysis patients or about 4 percent of all Medicare dialysis beneficiaries. Of the 6,500 dialysis facilities in the Medicare program, only about 1,900 offer in home training for hemodialysis. CMS does not report the number of facilities offering in-home training for peritoneal dialysis.
According to CMS, large dialysis organizations (read: DVA, FMS, ARA, Renal Care Group and U.S. Renal Care) have indicated that the training add-on payment is sufficient. This assertion may reflect the LDOs view that, given their cost structure, the payment is sufficient. It may also indicate that these large organizations seek to protect their mostly clinic-based business model. Although the point of in-home dialysis is convenience and privacy, the result is lower cost to Medicare as patients and their families provide the necessary care in lieu of a paid provider like a dialysis clinic.
In any event, the largest of the LDOs do offer in-home training treatments for hemodialysis at a rate higher than the national figure. About 28 percent of all ESRD facilities in the Medicare program offer in-home training for hemodialysis. CMS does not provide data on peritoneal dialysis in-home treatment training. Table 1 breaks down availability of in-home training for hemodialysis by LDO.
Table 1. Availability of In-home Hemodialysis Training by Large Dialysis Organization
Source: CMS
The in-home training treatment add-on payment will be implemented on a budget neutral basis, meaning CMS intends to pay all ESRD providers the same amount as it would have had the add-on payment not been increased. The result of imposing budget neutrality is that the base per-treatment payment must be adjusted downward slightly (see payment update analysis below). In order for dialysis providers to capture the reimbursement dollars that will shift to the in-home training treatment add-on, they must offer more in-home training for patients and their families.
Potentially, the biggest winners for an increase in the in-home training add-on payment are the device manufacturers like NxStage Medical, Inc. (NXTM) which manufactures portable hemodialysis machines for a variety of settings but primarily suited for the home.
As a caveat, CMS notes in their proposal that they are setting the add-on payment for in-home training without a lot of data. Over the next few years, CMS will be implementing changes to the cost reporting system so they have better information to use in considering another change to the in-home training treatment add-on payment. The result could be an increase or a decrease in the payment. Since, the $95.57 add-on payment is based almost exclusively on the national median hourly wage for Registered Nurses and does not consider other costs associated with a home visit like fuel or mileage, we would expect better data collection to argue against any decrease in the future.
Expansion of Dialysis Benefit to Acute Kidney Injury Patients. Incrementally – albeit modestly – positive for ESRD providers is the expansion of coverage to include patients with Acute Kidney Injury (AKI) in the dialysis benefit. AKI patients, whom CMS estimates at about 8,500, heretofore have received dialysis through hospital outpatient departments. A change in the law in 2015 made them eligible for dialysis treatments at a dialysis facility like those owned by DVA.
AKI patients typically need dialysis for a short period of time relative to an ESRD patient while they recover from their kidney injury. For these patients, dialysis is also largely curative. Due to these unique characteristics, CMS is proposing that they pay for all dialysis treatments prescribed even when they exceed the three times a week maximum applied to ESRD patient. The payment rate for an AKI dialysis treatment will be the ESRD base rate as determined each year by CMS.
Hemodialysis Payment Equivalency. For CY 2017 – with most operational elements of the proposal delayed until July 1, 2017- CMS is proposing to calculate a per treatment payment for hemodialysis when it exceeds the maximum three times per week. CMS is proposing that ESRD providers prorate the total three times a week payment amount across the number of sessions prescribed by the physician. Using this math, ESRD providers would then bill for the number of treatments delivered even when it exceeded the three times a week maximum imposed by Medicare rules.
Although this billing change would not result in additional reimbursement, it does mean billing will actually reflect services delivered. Heretofore, the Medicare Administrative Contractors which handle all the billing for CMS, have not permitted the ESRD providers to submit bills for more than three treatments per week (13 or 14 per month) except in a limited number of cases. This change acknowledges certain technological and medical advances that have led to dialysis prescriptions for more frequent but shorter treatment sessions.
CY 2017 Base Payment Rate. The per treatment base rate is set to increase by $0.65 in CY 2017. This increase is accounted for by a 2.1 percent increase in the market basket adjustment, less a 1.25 percent decrease mandated by the Protecting Access to Medicare Act, less a 0.5 percent decrease for the Multifactor Productivity Adjustment, less a 0.0448 percent wage index budget neutrality factor and less a 0.0271 percent in-home training budget neutrality factor. Table 2 illustrates the components of the rate setting for CY 2017.
Table 2: Proposed CY 2017 ESRD Base Rate
Source: CMS
Taking all adjustments into account, payments to ESRD providers should increase about $50 million in CY 2017, according to CMS. After several years of near zero payment increases, the CY 2017 update is a positive development for ESRD providers