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Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations

Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations. Annotated ASN 2011 Presentation. Fredric Finkelstein, MD Alan Kliger, MD Hospital of St. Raphael Yale University New Haven, CT. John Kochevar, PhD Mark Stephens Kochevar Research Associates.

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Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations

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  1. Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations Annotated ASN 2011 Presentation Fredric Finkelstein, MD Alan Kliger, MD Hospital of St. Raphael Yale University New Haven, CT John Kochevar, PhD Mark Stephens Kochevar Research Associates

  2. Purpose • To determine : • The financial impact of the PPS on small dialysis organizations. • The consequences of gains/losses for treatment practices, facility sale or closure.

  3. Background • Facility patient costs and outcomes vary widely. • Variations are due to patient and facility characteristics, geography, facility efficiency, etc. • We focused on which facilities might gain or lose income, which patients were most costly, and what strategies were being considered to maintain financial solvency

  4. Background Detailed analysis of the CMS Facility Impact file showed high variation in PPS payments. The top quintile of income losing facilities will lose much more than 2% income.

  5. Methods Sample • Quota sample of SDOs selected by region, size, urbanicity (rural, suburban, urban), chain status, % minority in zip code. • Randomly selected within cells. • Final sample: 41 Facilities, 3039 patients. Interviews • Four interviews each facility: facility characteristics, treatment practices, financials, plans for changes. Patient Data • Form 2728. Comorbidity check list, 2009 treatments, payments, EPO, Hgb, hospitalizations for 2009.

  6. Methods Calculations • Calculated PPS payments for 2011 and subtracted from 2009 payments, up-dated for inflation. Cautions • Under-represents facilities in South, those at high risk. • The number of SDO facilities has declined since 2009.

  7. Payment Reductions Facilities in our sample were projected to lose more than the CMS average. CMS Projected Income ReductionPresent Study Sample Income Reduction 2007 Data ¹2009 Data • 4951 Facilities: - 2.0% • Top Quintile: -12.0% • Income reductions higher: LDOs South Minority areas ¹ Final Rule, Table 35 • 41 facilities: - 5.1% • Top Quintile: - 15.3% • Income reductions higher: • Rural • Northeast Many facilities in our sample reported cutting ESA use in 2009.

  8. Payment Reductions For 38 Facilities in Present Study Impact File (2007)- $ 338,016 (-0.4%) Our Calculations (2009)- $3,885,676 (-4.9%) We double checked our calculation model and compared it to a similar model created for the NRAA. The payment reductions reported in the Impact file were not predictive of our sample’s reductions or others.

  9. Income Reductions Per Patient, Per Treatment Facilities will lose income on a small portion of patients. Average Annual Payments Per Patient CR/SB Payments $26,930 PPS Payments $25,422 Difference -$ 1,508 Average Income Gain/Loss/Tx Total N=3039 -$15 Quintiles 1 -$102 2 -$ 30 3 -$ 2 4 $ 21 5 $ 54

  10. Patient Average Income Gains/Losses Per Treatment By Quintile Characteristics not in the PPS accounted for large income gains and losses.

  11. Characteristics of Patients with Highest Income Losses Per Treatment Characteristics combined produced even higher income losses. -$18 -$18 -$24 -$26 AVERAGE INCOME LOSS PER TREATMENT

  12. Comorbidities and ESA Use The PPS failed to include ESA related comorbidities.

  13. Multiple Comorbidities and ESA Use The PPS case mix adjustors do not pay more for multiple comorbidities. Facilities with sicker patients lost more money and it was not only because of ESA use.

  14. Facility Loss /Gain Analysis Losses/Gains are due to an interaction of patient burden and facility practices. Average Loss / Gain/ Tx by Facility Note: All differences were statistically significant.

  15. ESAs – Average Payments and Costs PPS Bundle ESA Payment /Tx (2011) Base Rate $53 With Adjustments $57 Average ESA /Tx Costs - Cost Reports 2009 LDOs $65 MDOs $54 SDOs $41 Average ESA/Tx Reimbursements 2009 Sample SDOs $51 All costs / reimbursements adjusted to 2011 for inflation.

  16. Financial Health Will reduced Medicare revenues drive SDOs out of business? Wide variation in % Medicare treatments Average % Medicare treatments 73% Range 40-95% Multiple sources of income, all in flux Medicare, Medicaid, HMOs, PPO, Copays, Nursing homes Individual units have different revenue and cost profiles. No clear patterns emerged. Some units can survive a 5% cut in Medicare revenue. Others will be in trouble and require subsidies, staff cuts or closure.

  17. Responses to the Bundle: Positives Final interviews with clinicians and financial managers. • No salary reductions • No further staff reductions, including nursing, social work, and dietary support • No reductions in time spent with patients • No change in dialysis time • No facilities were considering immediate closure. Nearly total agreement:

  18. Responses to the Bundle: Negatives Cost shifting and selectivity • Likely more selective in admissions (40%) with admission of fewer charity cases (47%) and fewer non-compliant cases (45%). • Likely more patients refused by other facilities (63%). • Likely more patients remain in local hospitals (37%). • Likely reduction in lab tests (80%). • Likely reduction in equipment spending (65%).

  19. Responses: Practice Changes • Likely to change anemia protocol (90%) and to lower hemoglobin target (75%). • Likely to change to subcutaneous EPO (68%). • Likely to send more patients for transfusions (55%) • More likely to send patients to hospital if they require costly medications (50%).

  20. Response: Reevaluation of Practice Patterns • Likely reducing EPO will lead to more patients below Hgb 10 (65%). • But, impression is that reducing EPO and lowering Hgb target will not have negative impact on quality of life (65%), overall health (50%), and mortality of patients (80%)_ • Likely to increase use of cinacalcet(86%) and calcitriol(78%) and decrease use of paracalcitol(75%). • Likely to increase home dialysis use (60%) but anticipate slow increase • Likely to work with other physicians to improve pre dialysis care (74%).

  21. PPS Challenges for SDOs • The PPS is likely to cut payments more than 2%, much more for rural and minority facilities. • Outlier payments and case mix adjustors do not work as planned. • Facilities are cutting and shifting costs but this will not solve the problem of high cost patients. • Few expect to close this year, but they are vulnerable to additional cuts in private insurance and Medicaid. • The potential risk for patients and the health care delivery system needs to be more closely examined.

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