Medicare Compliance & Reimbursement

A new four-year Medicare demonstration program offers end-stage renal disease providers two reimbursement options designed to rationalize payments and promote disease management through the uniquely close relationship ESRD providers have with dialysis patients, Centers for Medicare & Medicaid Services Administrator Tom Scully told reporters at a May 29 briefing.

Medicare spends $16 billion on the 350,000 ESRD patients who qualify for benefits regardless of age and who typically come in three times a week for dialysis sessions of up to five hours each. The core payment of about $125 per treatment does not cover their costs of about $141 per treatment, Scully said, but CMS overpays dialysis clinics for ancillary services such as drugs and vitamins.

On net, ESRD providers had a 1.4 percent margin in 2000, which represents the sort of low-margin return that is appropriate for government health care programs, according to Scully. But he said that it makes no sense to underpay in one area while overpaying in another.

The new demo "will be especially appropriate for dialysis providers and disease management organizations," and will also be open to Medicare+Choice organizations and integrated health systems, says CMS. A notice soliciting applications will appear in the June 4 Federal Register, with applications due Aug. 28.

Participants will choose between two new reimbursement models: a fee-for-service option offering a single bundled payment covering both core treatment costs and ancillary services, and a managed care option under which participants, perhaps partnering with an insurer, would provide all Medicare services for dialysis patients in return for risk adjusted capitated payments.

Scully said he knew of no other part of the health care system where patients routinely see providers three times a week, so it makes sense to use the clinics to coordinate care for their patients, some of the sickest and most complex Medicare beneficiaries, with multiple comorbidities. He and other agency officials said the demonstration could save money for Medicare by eliminating duplication of services and giving ESRD providers an incentive to reduce unnecessary hospitalizations.

Scully said any danger that the new bundled payments would encourage providers to skimp on services or shun sicker patients would be ameliorated by risk-adjustment, minority outreach requirements, and reporting requirements for quality measures such as hematocrit levels.