Rebasing the Medicare payment for dialysis: rationale, challenges, and opportunities

Abstract

After Medicare's implementation of the bundled payment for dialysis in 2011, there has been a predictable decrease in the use of intravenous drugs included in the bundle. The change in use of erythropoiesis-stimulating agents, which decreased by 37% between 2007, when its allowance in the bundle was calculated, and 2012, was because of both changes in the Food and Drug Administration labeling for erythropoiesis-stimulating agents in 2011 and cost-containment efforts at the facility level. Legislation in 2012 required Medicare to decrease (rebase) the bundled payment for dialysis in 2014 to reflect this decrease in intravenous drug use, which amounted to a cut of 12% or $30 per treatment. Medicare subsequently decided to phase in this decrease in payment over several years to offset the increase in dialysis payment that would otherwise have occurred with inflation. A 3% reduction from the rebasing would offset an approximately 3% increase in the market basket that determines a facility's costs for 2014 and 2015. Legislation in March of 2014 provides that the rebasing will result in a 1.25% decrease in the market basket adjustment in 2016 and 2017 and a 1% decrease in the market basket adjustment in 2018 for an aggregate rebasing of 9.5% spread over 5 years. Adjusting to this payment decrease in inflation-adjusted dollars will be challenging for many dialysis providers in an industry that operates at an average 3%-4% margin. Closure of facilities, decreases in services, and increased consolidation of the industry are possible scenarios. Newer models of reimbursement, such as ESRD seamless care organizations, offer dialysis providers the opportunity to align incentives between themselves, nephrologists, hospitals, and other health care providers, potentially improving outcomes and saving money, which will be shared between Medicare and the participating providers.