a

GAO

United States General Accounting Office

Report to Congressional Committees

June 2004 MEDICARE DIALYSIS 

FACILITIES

Beneficiary Access 

Stable and Problems 

in Payment System 

Being Addressed

GAO-04-450
www.gao.gov/cgi-bin/getrpt?GAO-04-450.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact A. Bruce 

Steinwald at (202) 512-7119. 

Highlights of GAO-04-450, a report to 

congressional committees 

June 2004

MEDICARE DIALYSIS FACILITIES

Beneficiary Access Stable and Problems 

in Payment System Being Addressed 

GAO found that from December 31, 1998, through December 31, 2001, the 

total number of dialysis facilities nationwide increased at about the same 

rate as the Medicare dialysis population, 16 and 15 percent, respectively, and 

the total number of stations (that is, treatment areas and equipment, 

including dialysis machines, needed to dialyze the patient) increased by over 

24 percent, a rate greater than the growth in the Medicare dialysis 

population. The dialysis industry opened facilities in more counties across 

the country, although facilities were more likely to be available to 

beneficiaries in urban counties than in rural counties. In addition, while 

almost all facilities provided in-facility hemodialysis, fewer facilities 

provided home dialysis. 

GAO estimates that total payments to freestanding dialysis facilities 

exceeded providers’ allowable costs by 3 percent in 2001. Although 

payments were higher than costs overall, payments did not meet costs for 

small facilities. In addition, composite rate payments, intended to cover the 

costs of dialysis services associated with a treatment, including nursing, 

supplies, social services, and certain laboratory tests, were 11 percent less 

than the costs of providing those services, while payments for separately 

billed drugs, drugs not included in the composite rate, exceeded the costs of 

those services by 16 percent. Because of this imbalance, providers have an 

incentive to maximize the use of profitable separately billed drugs to 

compensate for inadequate payments under the composite rate. 

CMS generally agreed with GAO’s findings. The agency noted that it has 

been working to redesign the payment system since 2000. Under the 

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

(MMA), the Secretary of Health and Human Services is required to develop a 

report by October 1, 2005 detailing the elements and features necessary in 

the design and implementation of a broader payment system that includes 

separately billed drugs. MMA also requires the Secretary to conduct a 3-year 

demonstration project, beginning January 1, 2006, that uses a broader 

payment system incorporating patient characteristics identified in the report.

Medicare covers about 90 percent 

of patients with end-stage renal 

disease (ESRD), the permanent 

loss of kidney function. Most 

ESRD patients receive regular 

hemodialysis treatments, a process 

that removes toxins from the 

blood, at a dialysis facility. A small 

percentage dialyzes- at home. 

From 1991 through 2001, the ESRD 

patient population more than 

doubled, from about 201,000 to 

406,000. As the need for services 

grows, so do concerns about 

beneficiary access to and Medicare 

payment for dialysis services. The 

Medicare, Medicaid, and SCHIP 

Benefits Improvement and 

Protection Act of 2000 directed 

GAO to study beneficiaries’ access 

to dialysis services. In this report, 

GAO (1) assessed the supply of 

dialysis facilities and the services 

they provide, overall and relative to 

beneficiary residence, and 

(2) assessed the extent to which 

Medicare payments for dialysis 

services are adequate and the 

methodology is appropriate. 

 

In order to assess the supply of 

dialysis facilities, GAO used 

Facility Surveys collected by the 

Centers for Medicare & Medicaid 

Services (CMS) and outpatient 

claims, the bills submitted to 

Medicare by providers of certain 

outpatient services from 1998 

through 2001. To assess the 

adequacy of Medicare payment and 

the appropriateness of the payment 

methodology, GAO used 2001 

Medicare cost reports and 

outpatient claims submitted by 

freestanding dialysis facilities. 
Page i GAO-04-450 Medicare Payment for Dialysis Services 

Letter 1

Results in Brief 4

Background 5

Dialysis Facilities Increased at Same Rate as Beneficiary 

Population, but Supply Varied Geographically and by Treatment 

Method 11

Total Medicare Payments to Freestanding Dialysis Facilities 

Exceeded Costs, but Current Payment Methodology Is Not 

Appropriate 20

Daily Hemodialysis Appears Promising, but Rigorous Data Are 

Lacking 25

Concluding Observations 27

Agency and External Reviewer Comments and Our Evaluation 28

Appendix I Scope and Methodology 34 

Appendix II Comments from the Centers for Medicare & Medicaid 

Services 38 

Appendix III GAO Contact and Staff Acknowledgments 40 

GAO Contact 40

Acknowledgments 40

Tables 

Table 1: Freestanding Dialysis Facility Adjusted Payment-to-Cost 

Ratios for Composite Rate Services and Separately Billed 

Drugs, Overall and by Size, 2001 22

Table 2: Freestanding Dialysis Facility Unadjusted Payment-to-Cost 

Ratios for Composite Rate Services, 1998-2001 23

Table 3: Most Frequent Items Billed Separately in Association with 

Hemodialysis, 2001 24

Contents 
Page ii GAO-04-450 Medicare Payment for Dialysis Services 

Figures 

Figure 1: Dialysis Facilities by County, 1998-2001 12

Figure 2: Percentage of Beneficiaries on Dialysis Who Reside in 

Counties with at Least One Facility, 1998-2001 13

Figure 3: Average Number of Facilities Available per County, by 

Location, 1998-2001 14

Figure 4: Average Number of Stations Available per County, by 

Location, 1998-2001 15

Figure 5: Percentage of Beneficiaries on Dialysis Who Had a 

Treatment Method Available in Their Counties, 1998-2001 17

Figure 6: Average Number of Facilities Available per County, by 

Treatment Method, 1998-2001 18

Figure 7: Percentage of Beneficiaries on Dialysis in Rural Counties 

Who Had a Treatment Method Available in Their 

Counties, 1998-2001 19
Page iii GAO-04-450 Medicare Payment for Dialysis Services 

Abbreviations 

AAKP American Association of Kidney Patients 

AWP average wholesale price 

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 

 Protection Act of 2000 

CMS Centers for Medicare & Medicaid Services 

DCI Dialysis Clinic, Inc. 

EPO epoetin 

ESRD end-stage renal disease 

FMC Fresenius Medical Care 

HCFA Health Care Financing Administration 

HHS Department of Health and Human Services 

MedPAC Medicare Payment Advisory Commission 

MMA Medicare Prescription Drug, Improvement, and 

 Modernization Act of 2003 

NIH National Institutes of Health 

NRAA National Renal Administrators Association 

PD peritoneal dialysis 

RLC Renal Leadership Council 

RPA Renal Physicians Association 

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Page 1 GAO-04-450 Medicare Payment for Dialysis Services 

June 25, 2004 

Congressional Committees 

Medicare covers approximately 90 percent of all individuals who have endstage renal disease (ESRD), the permanent loss of kidney function, and 

treatment of the disease results in substantial costs to the Medicare 

program. In 2001, Medicare spent an average of approximately $46,600 on 

services for each beneficiary with ESRD, while the average per-beneficiary 

spending across the entire Medicare population was about $6,200. ESRDrelated expenditures have increased rapidly and are expected to continue 

to increase. From 1991 through 2001, the number of individuals with ESRD 

more than doubled, increasing from about 201,000 to 406,000. During the 

same time, while total Medicare expenditures increased by 108 percent, 

ESRD program expenditures increased by 166 percent, to almost 

$15.4 billion in 2001. The ESRD population is projected to reach 

approximately 650,000 by 2010.1

Although some receive kidney transplants, most individuals with ESRD 

depend on regular treatments of dialysis, a process in which excess fluids 

and wastes are removed from the blood.2

 In 2001, about 90 percent of all 

dialysis patients underwent hemodialysis, typically three times per week, 

at one of almost 4,000 outpatient renal dialysis facilities nationwide.3

 In 

that same year, less than 1 percent of hemodialysis patients dialyzed at 

home, and nearly all peritoneal dialysis (PD) patients dialyzed at home.4

Nationwide, about 200 hemodialysis patients dialyze five to seven times 

per week, known as daily hemodialysis, which is thought by some 

clinicians to improve patient outcomes. 

 1

See J.L. Xue, et al., “Forecast of the Number of Patients with End-Stage Renal Disease in 

the United States to the Year 2010,” Journal of the American Society of Nephrology, vol. 12 

(2001): 2753-2758. 

2

Dialysis is administered either by a machine that filters blood through an artificial kidney 

(hemodialysis) or by filtering the blood through the lining of the patient’s abdominal area, 

called the peritoneal membrane (peritoneal dialysis). 

3

In this report, we refer to outpatient renal dialysis facilities as “dialysis facilities.” 

4

In this report, we use the term “hemodialysis” to refer to in-facility hemodialysis, and we 

use the term “home dialysis” to include both PD and home hemodialysis. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-450 Medicare Payment for Dialysis Services 

Dialysis facilities furnish services to patients through one of two methods: 

they provide hemodialysis and supplies and other support services in the 

facility, or they provide equipment, supplies, and support services to 

beneficiaries who dialyze at home. Regardless of whether a beneficiary 

dialyzes at home or in a facility, Medicare pays the facility a fixed, 

prospectively determined amount per treatment, known as the composite 

rate, generally for up to three dialysis treatments per week. The composite 

rate covers many commonly used services and items; certain other items, 

including some drugs and supplies, are paid for separately. Medicare 

adjusts the composite rate to account for variation in area wages; 

however, there is no adjustment for length of treatment, treatment 

method, or beneficiary condition. By paying facilities a fixed amount, 

Medicare seeks to encourage them to operate efficiently, as facilities 

retain the difference if their payments exceed their costs of providing 

necessary services. 

The composite rate has not been regularly updated, and is less than $4 

higher today than when it was implemented in 1983. Despite the lack of a 

regular update, the dialysis industry has remained profitable over the years 

by increasing productivity and efficiency. In recent reports, the Medicare 

Payment Advisory Commission (MedPAC)5

 has found that overall facility 

profits have steadily declined even though Medicare payments for 

separately billed drugs have exceeded facility costs. MedPAC has also 

found that the composite rate is covering progressively less of the costs of 

composite rate services.6

 Representatives of the dialysis industry have 

stated that Medicare payments are inadequate overall, and that these low 

payments are resulting in facility closures in certain geographic areas and 

may eventually lead to decreased access for beneficiaries nationwide. In 

2000, the Medicare, Medicaid, and SCHIP Benefits Improvement and 

Protection Act of 2000 (BIPA) required the Secretary of the Department of 

Health and Human Services (HHS) to develop a payment system that 

includes clinical laboratory tests and drugs that are routinely used but 

billed separately.7

 With the enactment of the Medicare Prescription Drug, 

 5

MedPAC is an independent federal body, established by the Balanced Budget Act of 1997, 

that advises the Congress on issues affecting the Medicare program. See Pub. L. No. 105-33, 

§ 4022, 111 Stat. 251, 350. 

6

Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment 

Policy (Washington D.C.: March 2001, March 2002, and March 2003). 

7

Pub. L. No. 106-554, App. F, § 422(c)(1), 114 Stat. 2763, 2763A-517. 
Page 3 GAO-04-450 Medicare Payment for Dialysis Services 

Improvement, and Modernization Act of 2003 (MMA), the Secretary of 

HHS was required to continue development of a broader payment system.8

BIPA directed us to examine Medicare beneficiaries’ access to dialysis 

services.9

 As agreed with the committees of jurisdiction, we (1) assessed 

the supply of dialysis facilities and the services they provide, both overall 

and relative to beneficiary residence; (2) assessed the extent to which 

Medicare payments for dialysis services are adequate and the payment 

methodology is appropriate; and (3) reviewed whether increased use of 

daily hemodialysis can improve patient care. 

In order to measure the supply of dialysis facilities, we used the 1998 

through 2002 Facility Survey files, which include information on the 

number of hemodialysis stations and the services provided at each 

facility.10 These surveys are administered to all dialysis facilities, hospitalbased and freestanding, by the Centers for Medicare & Medicaid Services 

(CMS), the agency responsible for managing Medicare.11 To identify 

beneficiaries on dialysis and their residence, we analyzed the 1998 through 

2001 Medicare outpatient claims, the bills submitted by providers of 

certain outpatient services to receive Medicare payment. These claims 

were the most recent data available at the time of our analysis. We 

assessed the reliability of the facility survey and claims data and found 

them suitable for our purposes. 

To assess the adequacy of Medicare payment and the appropriateness of 

the payment methodology, we analyzed Medicare freestanding dialysis 

facility cost reports from 1998 through 2001 and Medicare outpatient 

claims data from 2000 and 2001. We performed this analysis in aggregate 

for all freestanding facilities and for different sizes of facilities, with size 

defined using the total number of treatments provided at a facility. The 

Medicare payment methodology is the same for freestanding and hospitalbased dialysis facilities, but we did not analyze cost reports or claims for 

 8

See Pub. L. No. 108-173, § 623, 117 Stat. 2066, 2312-17. 

9

Pub. L. No. 106-554, App. F, § 422(d), 114 Stat. 2763, 2763A-517. 

10A station is typically defined as the treatment area and equipment, including the dialysis 

machine, needed to dialyze the patient. 

11In July 2001, the agency’s name was changed from the Health Care Financing 

Administration (HCFA) to CMS. In this report, we refer to the agency as HCFA when 

discussing actions it took or was required to take under that name. 
Page 4 GAO-04-450 Medicare Payment for Dialysis Services 

hospital-based facilities because their reported costs are affected by 

decisions in allocating costs between the hospital and the dialysis facility. 

In 2001, about 84 percent of all dialysis facilities nationwide were 

freestanding. We assessed the reliability of the cost report and claims data. 

We excluded cost reports that had questionable data or that did not cover 

at least 300 days. We found the remaining cost reports and the claims data 

suitable for our purposes. We interviewed patient advocate organizations, 

clinicians, manufacturers of dialysis equipment, and representatives of the 

dialysis industry, and made site visits to three dialysis facilities. 

In order to review daily hemodialysis, we surveyed the relevant scientific 

literature, interviewed physicians who provide daily hemodialysis, and 

visited a dialysis facility providing daily hemodialysis. Appendix I contains 

a more complete description of our methodology. We conducted our work 

from July 2002 through June 2004 in accordance with generally accepted 

government auditing standards. 

From December 31, 1998, through December 31, 2001, the total number of 

dialysis facilities nationwide increased at about the same rate as the 

Medicare dialysis population, 16 and 15 percent, respectively. Over the 

same period, the total number of stations increased by over 24 percent, a 

rate greater than the growth in the Medicare dialysis population. The 

dialysis industry opened facilities in more counties across the country, 

although a greater number of facilities were available to beneficiaries in 

urban counties than in rural counties. 12 In addition, while almost all 

facilities provided hemodialysis, fewer facilities provided home dialysis. 

In 2001, we estimate that overall Medicare payments to freestanding 

dialysis facilities exceeded their Medicare-allowable costs, that is, their 

reasonable costs for services directly related to medical care for 

beneficiaries, by 3 percent. However, payments were less than costs for 

small facilities. While we estimate that composite rate payments were 11 

percent lower than the costs of providing composite rate services, 

payments for separately billed drugs were 16 percent higher than the costs 

of those drugs. Because of this imbalance, providers have an incentive to 

 12We defined a county as urban if it was in a metropolitan statistical area and as rural if it 

was outside a metropolitan statistical area, as determined by the Office of Management and 

Budget. 

Results in Brief 
Page 5 GAO-04-450 Medicare Payment for Dialysis Services 

maximize the use of profitable separately billed drugs to compensate for 

inadequate payments under the composite rate. 

Daily hemodialysis appears promising for improving patient outcomes. 

However, studies on the subject are limited in size and scope. Definitive 

conclusions on the extent to which daily hemodialysis improves patient 

care cannot be determined from the existing data. 

In commenting on a draft of this report, CMS generally agreed with our 

findings and our conclusion that all outpatient dialysis services should be 

bundled into a single prospective payment amount based on facilities’ 

allowable costs. Although in the draft report we had also recommended 

that CMS redesign the prospective payment system for dialysis facilities to 

bundle the costs of services, including separately billed drugs, into one 

payment amount, in its comments CMS noted that it would not have the 

statutory authority to implement such a system. CMS also noted that MMA 

requires the Secretary of HHS to report to the Congress by October 1, 

2005, on the elements and features necessary in the design and 

implementation of a broader prospective payment system. The Secretary is 

also required to conduct a 3-year demonstration project, beginning 

January 1, 2006, that uses a payment system incorporating patient 

characteristics identified in the report. As a result, we deleted the 

recommendation in the draft report. 

Individuals with ESRD are eligible for Medicare benefits regardless of 

their age.13 In 2001, Medicare covered about 90 percent of the 406,000 

individuals with the disease. ESRD occurs when an individual’s kidneys 

have regressed to less than 10 percent of normal baseline function. 

Without functioning kidneys, excess wastes and fluids in the body rise to 

dangerous levels, and certain hormones are no longer produced. The lack 

of one such hormone, erythropoietin, results in anemia, a condition in 

which an insufficient number of red blood cells are available to carry 

oxygen throughout the body. Diabetes and hypertension are the two 

principal causes of ESRD. 

 13Generally, to be eligible for benefits under Medicare, a person with ESRD must be 

(1) entitled to a monthly insurance benefit under Title II of the Social Security Act (or an 

annuity under the Railroad Retirement Act), (2) fully or currently insured under Social 

Security, or (3) the spouse or dependent child of a person who meets at least one of the 

first two requirements. 42 U.S.C. § 426-1(2000). 

Background 
Page 6 GAO-04-450 Medicare Payment for Dialysis Services 

The ESRD population has grown steadily over the years and is expected to 

continue to increase. From 1991 through 2001, the total number of 

individuals with ESRD increased from about 201,000 to 406,000, with an 

average annual growth rate of 7 percent. While the growth rate declined to 

about 5 percent in the late 1990s as a result of better preventive 

treatments, experts believe this decline to be temporary. Increases in the 

African-American and Hispanic populations, which have particularly high 

rates of diabetes, are expected to overwhelm this trend and lead to even 

greater growth rates in the future.14

In order to survive, individuals with ESRD require kidney transplantation 

or dialysis, a process in which excess fluids and wastes are removed from 

the blood. In 2001, about 292,000, or 72 percent, of all individuals with 

ESRD underwent dialysis, while the remaining 28 percent, or about 

114,000 individuals, were transplant recipients. Transplantation is not a 

practical option for most individuals with ESRD because suitable donated 

organs are scarce. Also, many individuals are older and less healthy by the 

time they develop irreversible kidney failure, making them medically 

unsuitable for transplant. From 1991 through 2001, the total number of 

dialysis patients increased at an average annual growth rate of about 7 

percent, the same as the ESRD population overall. 

In 2001, most dialysis patients received services from one of almost 4,000 

hospital-based or freestanding dialysis facilities located in the 50 states 

and the District of Columbia. These facilities provide hemodialysis, as well 

as drugs and related clinical and support services for patients who dialyze 

at home or in a facility. In addition, some facilities provide training for 

home dialysis and may furnish the equipment and supplies necessary for 

home dialysis treatment.15 In 1973, when Medicare benefits were extended 

to individuals with ESRD, the majority of dialysis facilities were owned 

and operated by hospitals. By 2001, however, almost 84 percent of all 

dialysis facilities nationwide were freestanding. In addition, for-profit 

dialysis facility chains have represented an increasing share of the market. 

By 2001, the four largest for-profit chains accounted for about two-thirds 

 14See Xue, et al., “Forecast of the Number of Patients with End-Stage Renal Disease in the 

United States to the Year 2010.” 

15Instead of receiving equipment and supplies from a facility, beneficiaries may choose to 

order them through a supplier. Beneficiaries choosing this option still receive the ancillary 

clinical and social services from a facility. 

ESRD Population Growth 

Renal Dialysis Treatment 
Page 7 GAO-04-450 Medicare Payment for Dialysis Services 

of all freestanding facilities, and they provided treatment to about twothirds of all dialysis patients. 

Dialysis can be administered using two methods: hemodialysis and PD. 

During hemodialysis, a dialysis machine pumps blood through an artificial 

kidney, called a hemodialyzer, and returns the cleansed blood to the body. 

Hemodialysis is usually administered three times a week at a dialysis 

facility, although patients may choose to undergo hemodialysis at home 

with the assistance of a caregiver. In-facility hemodialysis has become the 

dominant treatment method since the introduction of dialysis in the 1960s. 

In 2001, about 90 percent of all dialysis patients underwent in-facility 

hemodialysis, and less than 1 percent underwent hemodialysis at home. 

In PD, the peritoneal membrane, which surrounds a patient’s abdomen, 

acts as a natural blood filter, thus eliminating the need for blood to leave 

the body and filter through a machine. Patients remove the wastes and 

excess fluids from their abdomen manually throughout the day, or a 

machine automates the process while they sleep at night. Unlike 

hemodialysis, these patients generally dialyze at home. PD became an 

alternative to hemodialysis in the 1970s, and utilization peaked in the early 

1990s, when more than 15 percent of all dialysis patients used this 

treatment method. By 2001, however, utilization had declined to about 8 

percent of the dialysis population. 

Hemodialysis performed five to seven times per week, referred to as “daily 

hemodialysis,” more closely approximates the body’s continuous cleansing 

of the blood than the conventional regimen of three hemodialysis 

treatments per week. Between dialysis treatments, excess wastes and 

fluids build up in the patient’s blood, and many dialysis patients 

experience side effects such as hypertension, anemia, and low energy 

levels, which may adversely affect their clinical outcomes and quality of 

life. Because of these side effects, dialysis patients have high rates of 

hospitalization and often take several medications. Daily hemodialysis can 

take place either at home or in a facility, and proponents have asserted 

that it leads to improved quality of life, fewer hospitalizations, reduced use 

of medications, and overall cost savings to Medicare. 

Since 1983, Medicare has paid dialysis facilities a composite rate for each 

dialysis treatment it administers, generally up to a maximum of three 

treatments per beneficiary per week. The composite rate is a prospectively 

determined payment amount designed to cover the cost of services 

associated with a single dialysis treatment, including nursing and other 

Medicare Payment 
Page 8 GAO-04-450 Medicare Payment for Dialysis Services 

clinical services, social services, supplies, equipment, and certain 

laboratory tests and drugs.16 Because the composite rate is prospectively 

determined, providers receive a fixed payment regardless of how much the 

services actually cost them to deliver. The initial fixed payment amount 

was derived from the median costs of providing medical services to 

beneficiaries across a sample of dialysis facilities. A prospective payment 

methodology encourages providers to control the costs and utilization of 

the services they provide, as they retain any difference between the 

payment and their costs. 

In 1972, 40 percent of all dialysis patients underwent hemodialysis at 

home. In 1981, the Congress passed legislation establishing a new system 

for the payment of outpatient dialysis services for Medicare beneficiaries. 

The changes were designed to reduce program costs by encouraging home 

dialysis rather than in-facility dialysis. Under the system, a single 

prospectively determined rate was implemented for home and in-facility 

dialysis.17 However, the percentage of patients who undergo dialysis at 

home has declined since 1983, the year the composite rate was 

implemented. In 1983, the proportion of dialysis patients dialyzing at 

home, whether with hemodialysis or PD, was 12 percent. By December 31, 

2001, less than 9 percent of dialysis patients dialyzed at home. 

The composite rate has changed minimally since 1983, when the rate 

averaged about $131 for hospital-based facilities and $127 for freestanding 

facilities. The Congress passed legislation that decreased the rate by $2 in 

1986 and increased it in 1991, 2000, and 200118 to about $135 for hospitalbased facilities and $131 for freestanding facilities. From its 

implementation in 1983 through the end of 2003, the real dollar value of 

the composite rate declined by about 65 percent. The dialysis industry 

remained profitable under this relatively flat payment by increasing 

efficiency and productivity. However, industry representatives state that 

efficiency or productivity improvements can no longer make up for the 

 16Facilities receive a supplemental payment for training beneficiaries on home 

hemodialysis or PD. The facility receives a composite rate payment for the dialysis services 

and an additional amount for costs associated with training, such as the instruction 

beneficiaries receive from facility staff while dialyzing. 

17Pub. L. No. 97-35, § 2145, 95 Stat. 357, 799-800. See H. Conf. Rep. No. 97-208, at 948-9 

(1981). 

18MMA increases the composite rate by 1.6 percent for services furnished on or after 

January 1, 2005. See Pub. L. No. 108-173, § 623(a), 117 Stat. 2066, 2315. 
Page 9 GAO-04-450 Medicare Payment for Dialysis Services 

lack of payment increases. They also state that although the number of 

dialysis facilities has been increasing throughout the last decade, declining 

profits may reverse that trend and eventually lead to decreased access for 

Medicare beneficiaries. 

While the composite rate was intended to pay for all services associated 

with dialysis treatment, Medicare pays separately for certain drugs and 

laboratory tests that have become routine treatments since 1983. These 

drugs include, but are not limited to, epoetin (EPO), vitamin D, and iron. 

Medicare’s payment for EPO, a bioengineered protein that substitutes for 

erythropoietin and is used to treat anemia, is statutorily set at $10 for 

every 1,000 units administered;19 all other separately billed drugs are paid 

at 95 percent of their average wholesale price (AWP).20 The Medicare 

composite rate includes payment for 16 laboratory tests deemed to be 

routine for dialysis patients. For any of the approximately 1,350 other 

laboratory tests that beneficiaries may receive, payment is made under a 

fee schedule to the clinical laboratory that performs the test. 

Although facilities are paid under a prospective payment system, CMS 

requires them to complete annual cost reports that are consistent with 

Medicare cost principles. These reports include cost information for 

separately billed drugs as well as items paid through the composite rate. 

Medicare cost principles were designed to ensure that Medicare pays for 

the expenses related to medical care for beneficiaries, and that those costs 

are reasonable and allowable.21 The agency periodically audits cost reports 

to remove unreasonable and nonallowable costs and, in the past, has 

calculated the difference between facility costs as reported on the cost 

reports and their allowable costs, referred to as an audit adjustment. The 

 1942 U.S.C. § 1395rr (b)(11)(B)(ii)(2000). While the Secretary of HHS is authorized to adjust 

this payment, it has remained the same since 1994. 

20MMA changed Medicare’s payment formula for drugs. In general, payments for outpatient 

drugs furnished in 2004 will equal 85 percent of AWP. Separately billed drugs furnished in 

connection with dialysis services will continue to be paid at 95 percent of AWP in 2004. See 

Pub. L. No. 108-173, § 303(b), 117 Stat. 2066, 2238. 

21An example of a nonallowable Medicare cost is the cost of transporting beneficiaries to 

and from a dialysis facility, because transportation is not directly related to medical care. 

The salary of a facility administrator is an example of a cost that is allowable but, 

depending upon the salary amount, may not be reasonable. For example, in most instances, 

the Medicare compensation for a facility administrator may not exceed $90,000. If a facility 

claims $100,000 as compensation, Medicare would consider $10,000 of the amount as an 

unreasonable cost, unless the facility can justify a compensation rate over the $90,000 limit. 
Page 10 GAO-04-450 Medicare Payment for Dialysis Services 

Balanced Budget Act of 1997 required the agency to audit dialysis facility 

cost reports, beginning in 1996, at least once every 3 years.22

In recent years, the Congress has moved toward a broader payment 

bundle for dialysis services. In 2000, BIPA required the Secretary of HHS 

to develop a payment system that includes clinical laboratory tests and 

drugs that are routinely used, but are currently billed separately from 

dialysis treatment.23 BIPA also required the Secretary to submit a report 

and recommendations on this system to the Congress. CMS issued the 

report in 2003, concluding that currently available data appear sufficient to 

expand the payment bundle to include those services.24 In December 2003, 

MMA mandated that effective January 1, 2005, a payment system be 

implemented combining the composite rate payment with the amount by 

which payments for separately billed drugs exceed their acquisition costs. 

Drugs that are currently paid separately will continue to be paid outside 

this system. This system must adjust for certain beneficiary characteristics 

and geographic differences in cost.25 In addition, the Secretary is required 

to submit a report to the Congress by October 1, 2005, that details the 

elements and features for the design and implementation of a bundled 

payment system including certain drugs that are currently billed 

separately. The Secretary is then required to establish a 3-year 

demonstration project, beginning January 1, 2006, using a payment system 

that accounts for patient characteristics identified in the report. 

 22Pub. L. No. 105-33, § 4558(a), 111 Stat. 251, 463. 

23Pub. L. No. 106-554, App. F, § 422(c)(1), 114 Stat. 2763A-517. 

24U.S. Department of Health and Human Services, Toward a Bundled Outpatient Medicare 

End-Stage Renal Disease Prospective Payment System (Baltimore, Md.: 2003). 

25Pub. L. No. 108-173, § 623(d), 117 Stat. 2066, 2313-14. 
Page 11 GAO-04-450 Medicare Payment for Dialysis Services 

From 1998 through 2001, the total number of hospital-based and 

freestanding dialysis facilities increased at about the same rate as the 

Medicare dialysis population, and the total number of dialysis stations, or 

treatment areas devoted to providing dialysis to patients, increased at a 

greater rate than the Medicare dialysis population. The dialysis industry 

opened facilities in more counties across the country, although the 

number of facilities available to beneficiaries living in urban counties was 

greater than in rural counties. In addition, while almost all facilities 

provided hemodialysis, fewer facilities provided home dialysis. 

Based on our analysis of the CMS Facility Survey files, the total number of 

hospital-based and freestanding dialysis facilities increased from 3,415 to 

3,960, or about 16 percent, from December 31, 1998, through December 31, 

2001. Over the same period, the number of ESRD beneficiaries on dialysis 

increased about 15 percent. While the annual growth in facilities slowed 

each year, this occurred primarily because of a decrease in new facilities, 

not because of an increase in closures. From 1998 through 2001, the 

number of facilities closing each year amounted to less than 1 percent of 

those that were operating at the end of that year. 

Because facilities vary in size, a more specific indicator of their capacity to 

provide hemodialysis is the number of dialysis stations in use at dialysis 

facilities. From December 31, 1998, through December 31, 2001, we 

estimate that the number of stations increased by over 24 percent, from 

about 53,100 to about 66,100, exceeding the growth rate of the dialysis 

population. The annual growth rate of stations was over 10 percent in 

2001, much higher than the 5 percent growth rate of the Medicare dialysis 

population in that year. 

In addition, the dialysis industry expanded services to a larger portion of 

the country. The percentage of counties that had at least one dialysis 

facility increased from 41 to 47 percent, so that a total of 1,466 counties26

had at least one dialysis facility in 2001 (see fig. 1). While another 1,599 

counties had at least one beneficiary on dialysis but no facility in 2001, 

most of these counties were adjacent to at least one other county that had 

a dialysis facility. Of the counties that were not adjacent to another county 

 26In 2001, there were a total of 3,140 counties in the 50 states. In addition, we include the 

District of Columbia as a county. 

Dialysis Facilities 

Increased at Same 

Rate as Beneficiary 

Population, but 

Supply Varied 

Geographically and by 

Treatment Method 

Growth in Number of 

Dialysis Facilities Kept 

Pace with Growth in 

Beneficiary Population 
Page 12 GAO-04-450 Medicare Payment for Dialysis Services 

with a facility, many were concentrated in areas of the West and Midwest. 

Beneficiaries living in these counties either traveled to another facility or 

dialyzed at home. 

Figure 1: Dialysis Facilities by County, 1998-2001 

The supply of facilities in counties with beneficiaries on dialysis has 

remained stable. The percentage of beneficiaries on dialysis who resided 

in counties with at least one facility increased from 89 to 91 percent from 

1998 through 2001. In addition, the average number of facilities per county, 

weighted by the number of beneficiaries in each county, increased from 11 

to 12 from 1998 through 2001, as did the weighted average number of 

stations, which rose from 201 to 234. 

Facilities in 1998 and 2001

No facilities in 1998, facilities in 2001

Facilities in 1998, no facilities in 2001

No facilities in 1998 or 2001

Source: GAO analysis of CMS data.
Page 13 GAO-04-450 Medicare Payment for Dialysis Services 

While overall beneficiary access to dialysis facilities remained stable, more 

facilities are available to beneficiaries on dialysis who reside in urban 

counties than to beneficiaries on dialysis in rural counties. From 1998 

through 2001, the percentage of urban beneficiaries with at least one 

facility in their counties increased slightly from 97 to 98 percent, while the 

percentage of rural beneficiaries with at least one facility in their counties 

increased, but remained much lower, from 61 to 67 percent (see fig. 2). 

Figure 2: Percentage of Beneficiaries on Dialysis Who Reside in Counties with at 

Least One Facility, 1998-2001 

Furthermore, beneficiaries on dialysis residing in urban counties had more 

dialysis facilities available in their counties. From 1998 through 2001, the 

average number of facilities per urban county, weighted by the number of 

beneficiaries in each county, increased from 14 to 15 (see fig. 3), and the 

weighted average number of stations increased from 252 to 296 (see fig. 4). 

From 1998 through 2001, the weighted average number of facilities per 

rural county remained at 1, although the weighted average number of 

stations increased from 10 to 13. 

More Dialysis Facilities 

Available in Urban 

Counties Than in Rural 

Counties 

97 97 97 98

61

64 66 67

0

20

40

60

80

100

1998 1999 2000 2001

Percentage

Urban

Rural

Source: GAO analysis of CMS data.
Page 14 GAO-04-450 Medicare Payment for Dialysis Services 

Figure 3: Average Number of Facilities Available per County, by Location, 1998-

2001 

Note: Averages are weighted by the number of beneficiaries in each county. 

1998 1999 2000 2001

Number of facilities

Urban

Rural

Source: GAO analysis of CMS data.

0

5

10

15

20

14 14

15 15

1 1 1 1
Page 15 GAO-04-450 Medicare Payment for Dialysis Services 

Figure 4: Average Number of Stations Available per County, by Location, 1998-2001 

Note: Averages are weighted by the number of beneficiaries in each county. 

Across rural areas, substantial variation may exist in the supply of dialysis 

facilities. For example, 73 percent of beneficiaries on dialysis in Florida’s 

33 rural counties had at least one facility in their counties in 2001, while 

only 39 percent of beneficiaries on dialysis in Michigan’s 58 rural counties 

had at least one facility in their counties. Although such differences could 

potentially be explained by differences in the geographic size of rural 

counties, rural counties in both Michigan and Florida average roughly 695 

square miles. 

The number of dialysis facilities may be lower or nonexistent in certain 

geographic locations for certain reasons. The population of beneficiaries 

on dialysis is relatively small, and it may not be financially feasible to 

operate facilities in areas that do not have a sufficient number of 

beneficiaries needing dialysis. For example, while nearly 73 percent of 

counties were designated as rural in 2001, only 22 percent of beneficiaries 

on dialysis lived in those counties; about half of all rural counties were 

home to 15 or fewer beneficiaries on dialysis. Also, many industry 

representatives we interviewed stated that it was difficult to recruit and 

retain nurses to staff facilities. Shortages of nurses can hamper the 

1998 1999 2000 2001

Number of stations

Urban

Rural

Source: GAO analysis of CMS data.

0

50

100

150

200

250

300

350

252

264 270

296

10 11 12 13
Page 16 GAO-04-450 Medicare Payment for Dialysis Services 

industry’s ability to open facilities or keep facilities sufficiently staffed in 

certain geographic areas. 

Dialysis facilities provided in-facility hemodialysis almost universally, but 

the number of facilities providing home dialysis (PD and home 

hemodialysis) was much lower and declining. According to our analysis of 

the CMS Facility Survey files, 98 percent of dialysis facilities provided 

hemodialysis each year from 1998 through 2001. Over the same period, the 

percentage of dialysis facilities providing PD decreased from 46 to 40 

percent, and the percentage of dialysis facilities providing home 

hemodialysis decreased from 10 to 8 percent. 

Beneficiaries on dialysis also had more facilities available in their counties 

that provided hemodialysis than home dialysis.27 The percentage of 

beneficiaries on dialysis who had a facility providing hemodialysis in their 

counties increased from 89 to 91 percent from 1998 through 2001 (see fig. 

5). In contrast, the percentage of beneficiaries on dialysis who had a 

facility providing PD in their counties slightly decreased, from 76 to 75 

percent, and the percentage of beneficiaries on dialysis who had a facility 

providing home hemodialysis in their counties declined from 47 to 45 

percent. From 1998 through 2001, the average number of facilities 

providing hemodialysis per county, weighted by the number of 

beneficiaries in each county, increased slightly from 10 to 12 (see fig. 6). 

Over the same period, the weighted average number of facilities providing 

PD per county fell from 6 to 5, and on average, only 1 facility per county 

provided home hemodialysis. 

 27Proximity to a facility is somewhat less critical for beneficiaries who perform home 

dialysis because they are not required to regularly visit a facility for dialysis treatments. 

Number of Facilities 

Providing Home Dialysis 

Much Lower Than Number 

of Facilities Providing 

Hemodialysis 
Page 17 GAO-04-450 Medicare Payment for Dialysis Services 

Figure 5: Percentage of Beneficiaries on Dialysis Who Had a Treatment Method 

Available in Their Counties, 1998-2001 

89 90 90 91

76 76 76 75

47 45 44 45

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001

Percentage

Hemodialysis

PD

Home hemodialysis

Source: GAO analysis of CMS data.
Page 18 GAO-04-450 Medicare Payment for Dialysis Services 

Figure 6: Average Number of Facilities Available per County, by Treatment Method, 

1998-2001 

Note: Averages are weighted by the number of beneficiaries in each county. 

In rural counties, the number of facilities offering home dialysis remained 

low. From 1998 through 2001, the percentage of rural beneficiaries on 

dialysis with a facility providing hemodialysis in their counties increased 

from 61 to 67 percent (see fig. 7). In contrast, the percentage of rural 

beneficiaries on dialysis with a facility providing PD increased slightly 

from 27 to 28 percent, and the percentage of rural beneficiaries with a 

facility providing home hemodialysis increased from 3 to 4 percent. 

Beneficiaries on dialysis in rural counties had a weighted average of one 

facility providing hemodialysis per county and no facility providing PD or 

home hemodialysis. In addition, there were rural counties with 

beneficiaries on dialysis but no facilities. These beneficiaries dialyzed 

either in a neighboring county or at home. 

10

11 11

12

6 6 6

5

1 1 1 1

1998 1999 2000 2001

Number of facilities

Providing hemodialysis

Providing PD

Providing home hemodialysis

Source: GAO analysis of CMS data.

0

2

4

6

8

10

12

14
Page 19 GAO-04-450 Medicare Payment for Dialysis Services 

Figure 7: Percentage of Beneficiaries on Dialysis in Rural Counties Who Had a 

Treatment Method Available in Their Counties, 1998-2001 

The number of facilities providing home dialysis may have been low for 

several reasons. Some providers and nephrologists we interviewed stated 

that many physicians are either unfamiliar with home dialysis or believe 

that patients have better outcomes with in-facility hemodialysis. They also 

reported that home programs are often not financially feasible for facilities 

unless there is a substantial number of patients receiving the treatment 

method, because facilities must hire staff to train and manage the care of 

these patients. Some providers and nephrologists also stated that facilities 

have a financial disincentive to provide home dialysis, because greater 

utilization of PD may result in unused hemodialysis stations and may 

reduce the need for certain profitable drugs like EPO. They also reported 

that PD may be favorable for beneficiaries in rural areas, where facilities 

can be more distantly located. 

61

64 66 67

27 28 29 28

3 3 3 4

0

20

40

60

100

80

1998 1999 2000 2001

Percentage

Hemodialysis

PD

Home hemodialysis

Source: GAO analysis of CMS data.
Page 20 GAO-04-450 Medicare Payment for Dialysis Services 

We estimate that after adjusting to exclude nonallowable costs, total 

payments to freestanding dialysis facilities exceeded providers’ costs in 

2001. Although payments were higher than costs overall, payments to 

small facilities were lower than costs. In addition, while composite rate 

payments were well below the costs of those services, separately billed 

drug payments far exceeded the costs of those services. Because of this 

imbalance in the payment structure, providers have an incentive to 

maximize the use of profitable separately billed drugs to compensate for 

inadequate payments under the composite rate. 

We estimate that Medicare payments to freestanding dialysis facilities 

exceeded their Medicare-allowable costs by 3 percent, on average. In 

order to calculate this percentage, we used costs as reported on dialysis 

facilities’ cost reports and used an adjustment to exclude nonallowable 

costs. Before the adjustment, we estimate that on average, payments were 

1 percent below costs, a payment-to-cost ratio of 0.99,28 for composite rate 

services and separately billed drugs in 2001. Past agency audits have 

demonstrated that dialysis facilities have included nonallowable costs in 

their cost reports. The Health Care Financing Administration (HCFA) 

conducted audits of a random sample of 1988 and 1991 dialysis facility 

cost reports and found that providers’ allowable costs were about 90 

percent and 89 percent, respectively, of reported costs. HCFA also audited 

the 1996 reports but did not calculate a similar percentage of reported 

costs that were allowable.29 When MedPAC compared the 1996 cost 

reports before and after auditing, it found that the allowable cost per 

treatment for composite rate services and separately billed drugs for 

freestanding facilities was about 96 percent of the reported cost per 

treatment.30 Because providers have historically included nonallowable 

costs on their cost reports, we applied MedPAC’s adjustment, which is the 

most conservative and most recent adjustment, to our payment-to-cost 

ratio of 0.99 and derived an adjusted payment-to-cost ratio of 1.03 for 2001. 

 28A payment-to-cost ratio of 1.00 indicates that payments equal costs. A ratio above 1.00 

indicates that payments are greater than costs and below 1.00 indicates that payments are 

lower than costs. 

29CMS is currently auditing the 2001 cost reports and expects to complete this task in 2005. 

30Medicare Payment Advisory Commission, March 2003. 

Total Medicare 

Payments to 

Freestanding Dialysis 

Facilities Exceeded 

Costs, but Current 

Payment Methodology 

Is Not Appropriate 

Payments to Freestanding 

Facilities Generally 

Exceeded Allowable Costs, 

but Small Facilities Were 

an Exception 
Page 21 GAO-04-450 Medicare Payment for Dialysis Services 

Although we calculated an overall payment-to-cost ratio for 2001 only,31

MedPAC has reported a decrease in these ratios from 1.14 in 1996 to 1.0432

in 2001.33

Although payments exceeded costs overall in 2001, they did not exceed 

costs for all sizes of facilities. For example, payments were well below 

allowable costs for small facilities,34 with an adjusted payment-to-cost ratio 

of 0.91 (see table 1).35 Given the fixed costs a facility incurs in terms of 

staffing, equipment, supplies, and rent, revenue from the small patient 

base in these facilities may not be sufficient to meet costs. 

 31We were unable to determine a payment-to-cost ratio for the composite rate and 

separately billed drugs before 2001 because, prior to July 1, 2000, the Medicare outpatient 

claims data contained payment information for all services included on the claim but not 

for each individual service. 

32Our 2001 payment-to-cost ratio differs from MedPAC’s ratio because we used a more 

recent version of the 2001 cost report file. 

33Medicare Payment Advisory Commission, March 2003. 

34We defined the size of the facility based on the 25th and 75th percentiles of total dialysis 

treatments. Small facilities are those reporting a number of dialysis treatments less than 

the 25th percentile, medium facilities are those reporting a number of dialysis treatments 

greater than or equal to the 25th percentile and less than or equal to the 75th percentile, 

and large facilities are those reporting a number of treatments greater than the 75th 

percentile. 

35From the 1996 cost reports, MedPAC also calculated that the allowable cost per treatment 

for composite rate services and separately billed drugs for small and large freestanding 

facilities was 97 percent of the reported cost per treatment and for medium freestanding 

facilities was 96 percent of the reported cost per treatment. Our definition of size and 

MedPAC’s definition of size are the same. (Medicare Payment Advisory Commission, March 

2003.)
Page 22 GAO-04-450 Medicare Payment for Dialysis Services 

Table 1: Freestanding Dialysis Facility Adjusted Payment-to-Cost Ratios for 

Composite Rate Services and Separately Billed Drugs, Overall and by Size, 2001 

Facilities Overall payment-to-cost ratio

All 1.03

Small 0.91

Medium 1.02

Large 1.05

Source: GAO analysis of CMS data. 

Notes: Payment-to-cost ratios among facilities in the 50 states and the District of Columbia. Ratios 

are weighted by total Medicare payments received by each facility. A payment-to-cost ratio of 1.00 

indicates that payments equal costs. A ratio above 1.00 indicates that payments are greater than 

costs and below 1.00 indicates that payments are lower than costs. We defined the size of the facility 

based on the 25th and 75th percentiles of total dialysis treatments. Small facilities are those reporting 

a number of dialysis treatments less than the 25th percentile, medium facilities are those reporting a 

number of dialysis treatments greater than or equal to the 25th percentile and less than or equal to 

the 75th percentile, and large facilities are those reporting a number of treatments greater than the 

75th percentile. 

The Medicare payment methodology for dialysis services is not 

appropriate. In 2001, composite rate payments to freestanding facilities, 

intended to cover the costs of a variety of services associated with a 

dialysis treatment, such as nursing, supplies, social services, and certain 

laboratory tests, were well below the costs of those services. In addition, 

the composite rate does not include all the services beneficiaries on 

dialysis typically receive, and does not account for variation in service 

utilization and costs among beneficiaries. Separately billed drug payments, 

however, far exceeded the costs of those items. Because utilization of 

separately billed drugs is largely unconstrained,36 providers have an 

incentive to overutilize them to compensate for lower payments under the 

composite rate. In addition, composite rate payments for home dialysis 

treatments far exceeded the costs of those services, but payments for 

home dialysis training were well below the costs of those services. 

We estimate that from 1998 through 2001, composite rate payments were 

well below the costs of composite rate services. During these years, the 

 36While facilities must report specific clinical indicators in order to provide EPO to 

beneficiaries, other separately billed drugs are administered when they are deemed 

medically necessary by the physician. 

Current Payment 

Methodology Is Not 

Appropriate 
Page 23 GAO-04-450 Medicare Payment for Dialysis Services 

unadjusted37 payment-to-cost ratio for composite rate services was below 

1.00 and steadily decreased every year, falling from 0.94 to 0.89 (see table 

2). 

Table 2: Freestanding Dialysis Facility Unadjusted Payment-to-Cost Ratios for 

Composite Rate Services, 1998-2001 

 1998 1999 2000 2001

Payment-to-cost ratio 0.94 0.93 0.91 0.89

Source: GAO analysis of CMS data. 

Notes: Payment-to-cost ratios among facilities in the 50 states and the District of Columbia. Ratios 

are weighted by total Medicare payments received by each facility. A payment-to-cost ratio of 1.00 

indicates that payments equal costs. A ratio above 1.00 indicates that payments are greater than 

costs and below 1.00 indicates that payments are lower than costs. 

Furthermore, the composite rate does not pay for all services routinely 

provided during a dialysis session. While the composite rate was designed 

to pay for services associated with a single dialysis session, certain items 

or services introduced since the creation of the rate are paid separately. 

We determined that three separately billed drugs, EPO, vitamin D, and 

iron, and drug-related supplies were provided to most dialysis 

beneficiaries and frequently accompanied hemodialysis treatments (see 

table 3). For example, 98 percent of beneficiaries received EPO in 2001 

and, on average, at every dialysis treatment. 

 37MedPAC’s adjustment to exclude nonallowable costs specifically applies to the combined 

costs of composite rate services and separately billed drugs. Therefore, we did not apply 

this adjustment to the payment-to-cost ratios for either the composite rate or separately 

billed drugs individually, and refer to those ratios as unadjusted. 
Page 24 GAO-04-450 Medicare Payment for Dialysis Services 

Table 3: Most Frequent Items Billed Separately in Association with Hemodialysis, 

2001 

Item 

Percentage of 

beneficiariesa

receiving item 

 Frequency of billing 

among beneficiaries 

receiving itemb, c

EPO 98 Every treatment 

Drug-related 

supplies 

84 Every 9th treatment 

Iron 79 Every 17th treatment 

Vitamin D 70 Every 9th treatment 

Hepatitis B 

vaccine 

25 Every 60th treatment 

Vancomycin 24 Every 50th treatment 

Levocarnitine 5 Every 12th treatment 

Source: GAO analysis of CMS data. 

a

Beneficiaries receiving in-facility hemodialysis. 

b

Medicare instructs providers to record each drug administration on the claim separately, and 

accordingly, we defined one administration of a drug as one record on the claim. Some providers may 

aggregate the units of several administrations as one record. To the extent this is the case, the billing 

frequencies for these specific drugs likely underestimate the actual administration frequencies. 

c

Per in-facility hemodialysis treatment. Beneficiaries typically receive 3 treatments per week, or about 

13 per month. 

The composite rate also does not adjust for factors that may affect the 

cost of providing dialysis services.38 Providers we interviewed told us that 

certain beneficiaries require more services than others because of the 

presence of conditions including diabetes, hypertension, vascular access 

problems,39 and other physical impairments. They stated that care for these 

beneficiaries may be more costly due to additional staff time, additional 

resources, or more frequent dialysis. There is currently no adjustment to 

the composite rate to account for variation in the costs of providing 

services to beneficiaries who consume more resources than average. 

While composite rate payments were well below costs, we estimate that 

payments for separately billed drugs far exceeded the costs of those drugs 

 38The only adjustment to the composite rate accounts for variation in area wages. 

39In order to filter a patient’s blood during hemodialysis, the vascular system, or 

bloodstream, must be accessed through a fistula, graft, or catheter. The access site must be 

continually maintained to help prevent complications, such as narrowing of the blood 

vessel or infection of the site. 
Page 25 GAO-04-450 Medicare Payment for Dialysis Services 

in 2001, with an unadjusted payment-to-cost ratio of 1.16. Because 

utilization of separately billed drugs is largely unconstrained and because 

payments for these items exceeded costs, providers have an incentive to 

overutilize them. Representatives from one of the largest chain providers 

and several nephrologists we interviewed reported that this incentive to 

overutilize exists because separately billed drug payments compensate for 

losses on composite rate services. However, several nephrologists and 

researchers we interviewed also reported that beneficiaries who undergo 

PD, or who otherwise dialyze more frequently than three times per week, 

have a reduced need for separately billed drugs. 

In addition to the imbalance in payment between composite rate services 

and separately billed drugs, an imbalance exists between payments for 

home dialysis treatments and home dialysis training. Two industry 

representatives and representatives of a patient advocacy organization we 

interviewed stated that Medicare payments for home dialysis training do 

not cover the costs of the service. We found that in 2001, the unadjusted 

payment-to-cost ratio for composite rate payments for home dialysis 

treatments was 1.11 and for home dialysis treatments and training 

combined was 1.04.40 The unadjusted payment-to-cost ratio for composite 

rate payments for home dialysis training alone was 0.38, indicating that 

payments were well below costs. A perception that facilities are losing 

money on the initial home dialysis training, even though payments are 

above costs for the training and treatment combined, may serve as a 

disincentive to offering the home dialysis treatment method. 

Daily hemodialysis, which is performed five to seven times per week, may 

improve patients’ clinical outcomes and quality of life because it more 

closely approximates the body’s continuous cleansing of the blood. The 

literature indicates that daily hemodialysis patients have a greater amount 

of toxin removed from their bodies, or a more adequate dialysis dosage, 

than conventional hemodialysis patients.41 Dialysis dosage is important 

because research suggests that inadequate dosage correlates with 

increased mortality. In addition, studies report that anemia and 

 40Providers’ separately billed drug costs are not reported by treatment method on the cost 

report, and therefore, we cannot calculate payment-to-cost ratios for the composite rate 

and separately billed drugs together by treatment method. 

41For example, see J. Traeger, et al., “Daily Versus Standard Hemodialysis: One Year 

Experience,” Artificial Organs, vol. 22, no. 7 (1998): 558-563. 

Daily Hemodialysis 

Appears Promising, 

but Rigorous Data Are 

Lacking 
Page 26 GAO-04-450 Medicare Payment for Dialysis Services 

malnutrition, two serious conditions associated with increased morbidity 

and mortality, improve with daily hemodialysis,42 as does patient quality of 

life.43 For example, patients on daily hemodialysis experience less fatigue 

and enjoy a wider range of dietary choices. Studies also report that 

patients on daily hemodialysis have a reduced need for medication, 

including EPO44 and drugs to control blood pressure,45 and a reduced 

number of hospitalizations.46

Although studies on daily hemodialysis report improvements in patient 

outcomes, these studies are limited in size and scope. The daily 

hemodialysis patient base is extremely small, given that few dialysis 

facilities provide the treatment, and those that do have few patients using 

it. Although no national data exist on the utilization of daily hemodialysis, 

nephrologists we spoke with who provide daily hemodialysis estimate that 

approximately 200 patients are undergoing the treatment nationwide. 

Published studies are principally nonrandomized and have small sample 

sizes, typically fewer than 25 patients, and therefore do not provide 

definitive evidence supporting the treatment. Specifically, studies do not 

evaluate whether observed improvements in mortality can be attributed to 

the treatment itself or to some other factor. To definitively assess the 

treatment, more rigorous data are needed. 

Dialyzing more frequently has drawbacks. Although patients may 

experience better outcomes, daily hemodialysis increases the number of 

times a patient connects to the hemodialysis machine, and may increase 

transportation costs if a patient chooses to dialyze at a facility rather than 

at home. Such increased burdens may outweigh the benefits for a 

 42For an example of improvements in anemia, see J.D. Woods, et al., “Clinical and 

Biochemical Correlates of Starting ‘Daily’ Hemodialysis,” Kidney International, vol. 55, no. 

6 (1999): 2467-2476. For an example of improvements in malnutrition, see R. Galland, et al., 

“Short Daily Hemodialysis Rapidly Improves Nutritional Status in Hemodialysis Patients,” 

Kidney International, vol. 60, no. 4 (2001): 1555-1560. 

43For example, see P.F. Vos, et al., “Clinical Outcome of Daily Dialysis,” American Journal 

of Kidney Diseases, vol. 37, no. 1, suppl. 2 (2001): S99-S102. 

44For example, see Vos, et al. 

45For example, see A. Pierratos, et al., “Nocturnal Hemodialysis: Three-Year Experience,” 

Journal of the American Society of Nephrology,” vol. 9, no. 5 (1998): 859-868. 

46For example, see R.S. Lockridge, Jr., et al., “Nightly Home Hemodialysis: Fifteen Months 

of Experience in Lynchburg, Virginia,” Home Hemodialysis International, vol. 3 (1999): 

23-28. 
Page 27 GAO-04-450 Medicare Payment for Dialysis Services 

significant number of patients. Even so, providers and nephrologists we 

interviewed estimated that anywhere from 10 to 50 percent of the dialysis 

population would choose to undergo daily hemodialysis. 

Several studies, each of which evaluated the costs of one to two facilities, 

have found that facility costs increase upon implementation of daily 

hemodialysis.47 Industry representatives reported that despite the possible 

benefits of daily hemodialysis, it is not currently financially feasible to 

offer it to a large number of Medicare beneficiaries because Medicare does 

not routinely pay for more than three dialysis treatments per week. 

However, if beneficiaries who undergo daily hemodialysis have a reduced 

need for other Medicare services, such as drugs and inpatient stays, the 

Medicare program may realize overall cost savings. 

Research currently being conducted by the National Institutes of Health 

(NIH) may provide more rigorous data on daily hemodialysis, although it 

will not determine whether there is an overall cost savings to Medicare. 

With partial funding from CMS, NIH has funded four centers to test 

whether it is feasible to randomize a representative sample of patients into 

either conventional or daily hemodialysis. The trials will track a number of 

patient outcomes for at least 6 months, including anemia, nutritional 

status, blood pressure, medication use, and hospitalizations, but they are 

not designed to enroll enough patients to conclusively determine whether 

differences in mortality or hospitalizations are significant. Trial results, 

which will not be available until 2007, will determine whether NIH should 

continue with a large-scale trial that would measure the impact of more 

frequent dialysis on mortality or cardiovascular outcomes or both. 

From December 31, 1998, through December 31, 2001, beneficiary access 

to dialysis facilities and services appeared stable. The total number of 

dialysis facilities nationwide increased at about the same rate as the 

Medicare dialysis population, and the total number of stations nationwide 

increased at a faster rate than the Medicare dialysis population. Over the 

same period of time, the number of counties with at least one facility 

increased. 

 47For example, see P.E. Mohr, et al., “The Case for Daily Dialysis: Its Impact on Costs and 

Quality of Life,” American Journal of Kidney Diseases, vol. 37, no. 4 (2001): 777-789. 

Concluding 

Observations 
Page 28 GAO-04-450 Medicare Payment for Dialysis Services 

On average, Medicare payments to freestanding dialysis facilities for 

composite rate and separately billed services combined exceeded 

providers’ estimated allowable costs by 3 percent in 2001. However, 

composite rate payments were well below the costs of composite rate 

services, and separately billed drug payments far exceeded the costs of 

separately billed drugs. The current payment methodology gives providers 

an incentive to overutilize separately billed drugs in order to compensate 

for losses on composite rate services and does not account for possible 

cost differences in treating beneficiaries. A payment methodology that 

bundled the services a facility provides into a prospective payment 

amount would encourage providers to control the costs and utilization of 

these items, as they retain the difference if their payments exceed their 

costs of providing necessary services. A system that is based on allowable 

costs and accounts for possible cost differences in treating beneficiaries 

would ensure that Medicare pays appropriately for the efficient delivery of 

services. 

As required by law, CMS is currently designing a bundled prospective 

payment system. In 2003, CMS reported to the Congress that currently 

available data appear sufficient to expand the payment bundle to include 

drugs and other services currently paid separately. MMA requires the 

Secretary of HHS to issue a second report by October 1, 2005, that details 

the elements and features for the design and implementation of a bundled 

system, and then implement a 3-year demonstration project beginning 

January 1, 2006, that is based on that system. 

We received written comments on a draft of this report from CMS (see 

app. II). We also received technical comments from NIH, which we 

incorporated where appropriate, and oral comments from seven external 

reviewers. The external reviewers represented industry and patient 

organizations. They included the American Association of Kidney Patients 

(AAKP); the Renal Physicians Association (RPA); Dialysis Clinic, Inc. 

(DCI), the largest nonprofit dialysis chain; Fresenius Medical Care (FMC), 

the largest for-profit dialysis chain; the National Kidney Foundation, a 

foundation for the prevention and treatment of kidney disease; the 

National Renal Administrators Association (NRAA), which represents 

employees at dialysis facilities; and the Renal Leadership Council (RLC), 

an association representing the four largest for-profit dialysis facility 

chains. 

Agency and External 

Reviewer Comments 

and Our Evaluation 
Page 29 GAO-04-450 Medicare Payment for Dialysis Services 

In commenting on a draft of this report, CMS generally agreed with our 

findings and our conclusion that all outpatient dialysis services should be 

bundled into a single prospective payment amount based on facilities’ 

allowable costs. Although in the draft report we had also recommended 

that CMS redesign the prospective payment system for dialysis facilities to 

bundle the costs of services, including separately billed drugs, into one 

payment amount, in its comments CMS noted that it would not have the 

statutory authority to implement such a system. CMS also noted that MMA 

requires the Secretary of HHS to report to the Congress by October 1, 

2005, on the elements and features necessary in the design and 

implementation of a broader payment system. The Secretary is also 

required to conduct a 3-year demonstration project, beginning January 1, 

2006, using a payment system incorporating patient characteristics 

identified in the report. CMS also asked that we recognize its research on a 

bundled payment system that has been under way since October 2000. As 

a result of these comments, we deleted the recommendation in the draft 

report. In addition, although MMA was discussed in our draft report, we 

more prominently highlighted it and CMS’s research in the report. 

CMS also stated that while our findings on beneficiary access were 

reassuring, it is concerned that we did not specifically address access 

issues at the regional level. According to CMS, its staff has been told that 

hospitals in certain regions, such as New England and New York, are 

having difficulty discharging and placing ESRD patients in dialysis 

facilities in those areas. We acknowledged in the draft report that supply 

varied geographically and by treatment method. We based our findings on 

aggregate indicators, such as trends in numbers of stations and facilities 

relative to the beneficiary population, which all suggested that access had 

been stable from 1998 through 2001. We would not have been able to 

identify the extent to which supply has changed since 2001, as 2001 data 

were the most recent available at the time of our analysis. 

Comments from the industry representatives and patient organizations 

centered on three different areas: beneficiary access to dialysis, the data 

used in our analysis of Medicare payment adequacy, and the 

appropriateness of the current payment methodology. 

Many comments addressed our finding that beneficiary access to dialysis 

is stable. Five external reviewers stated that Medicare payments are 

currently inadequate, and due to inadequate payments, facilities are 

closing in areas where Medicare beneficiaries constitute a high percentage 

of dialysis patients. RPA specifically was concerned that facilities may try 

CMS Comments and Our 

Evaluation 

Industry and Patient 

Organization Comments 
Page 30 GAO-04-450 Medicare Payment for Dialysis Services 

to maximize their numbers of private-pay patients and minimize their 

numbers of Medicare beneficiaries in the future. Three external reviewers 

asserted that access is currently decreasing due to staffing shortages at 

available facilities, particularly with respect to nurses. These reviewers 

also stated that certain minority populations, such as Native Americans, 

and certain areas of the country, such as rural and inner city areas, are 

currently experiencing access problems. 

Several external reviewers commented on access issues specifically 

related to home dialysis. NRAA agreed with our finding that payment for 

home training is inadequate and therefore serves as a barrier to home 

dialysis. RPA agreed that one reason for low utilization of PD is that PD 

patients use less of the profitable separately billed drugs. AAKP provided 

the same assertion and added that the lack of training for nephrologists 

serves as a barrier to home dialysis. 

Industry representatives expressed concerns regarding our payment 

analysis, specifically the use of data from 2000 and 2001 and our 

application of an audit adjustment to facility cost data. DCI stated that 

facility costs have risen since 2001; therefore, our analysis does not reflect 

current conditions. FMC, RLC, and NRAA stated that using an audit 

adjustment based on 1996 cost reports does not result in an accurate 

assessment of costs; they asserted that the amount of nonallowable costs 

that facilities include on their cost reports has decreased since 1996. 

Several groups commented on the appropriateness of the current payment 

methodology. Two industry representatives, DCI and RLC, acknowledged 

that an incentive exists to overutilize separately billed drugs in order to 

compensate for losses on composite rate services, and the physician 

association, RPA, acknowledged that there is excessive use of these drugs. 

However, another industry group, NRAA, stated that our assertion that an 

incentive to overutilize exists was extreme. In addition, four external 

reviewers were concerned that bundling costs would create an incentive 

for facilities to either underserve beneficiaries or to accept only those 

beneficiaries who use relatively few resources. Four external reviewers 

were concerned that there would be no regular update to the payment rate 

if a bundled rate was established, which could limit access to new 

technology. 
Page 31 GAO-04-450 Medicare Payment for Dialysis Services 

Concerning the comments that access is decreasing overall, for certain 

regions and certain populations and for home dialysis, we acknowledged 

in the draft report that supply may vary geographically and by treatment 

method. However, also as noted in the draft report, we based our finding 

that beneficiary access to dialysis is stable on aggregate indicators, such as 

trends in numbers of stations and facilities relative to the beneficiary 

population. In particular, we noted that few facilities closed from 1998 

through 2001, with the number of facilities closing each year amounting to 

less than 1 percent of those operating at the end of the year. We were not 

able to analyze the adequacy of facility staffing due to a lack of adequate 

data. 

With respect to our adjustment of facility cost data, BIPA required that we 

use audited cost data when analyzing the adequacy of Medicare payment. 

Although CMS is currently auditing the 2001 cost reports, the agency’s last 

completed audit was of the 1996 cost reports. Given the increase in health 

care costs over time, we did not believe it was appropriate to assess the 

adequacy of Medicare payment using only 1996 cost reports. In order to 

satisfy the requirements of our mandate, we estimated the percentage of 

costs on the unaudited 2001 cost reports that were Medicare allowable. To 

do so, we relied on an audit adjustment calculated by MedPAC. MedPAC’s 

adjustment was based on the 1996 cost reports and was lower than the 

previous two audit adjustments calculated by HCFA in 1988 and 1991. We 

believe it is appropriate to apply MedPAC’s 1996 audit adjustment to 2001 

costs because it is the most recent of the last three audit adjustments. We 

also noted in the draft report that it is the most conservative of the three 

adjustments. 

With respect to our conclusion that the current payment methodology is 

not appropriate, we acknowledge that a prospective payment could create 

an incentive to underserve beneficiaries, because providers retain the 

difference if their payments exceed their costs. However, this incentive 

exists under all prospective payment systems. If the bundled payment 

amount is based on facilities’ allowable costs of delivering services, and 

takes into account possible cost differences in treating beneficiaries, 

facilities will be financially better equipped to deliver the appropriate level 

of service to each beneficiary. 

Industry representatives and patient organizations also raised several 

issues that went beyond the scope of our report. These issues included 

whether Medicaid and physician payments are adequate and the Medicare 

definition of allowable costs. 

Our Evaluation of Industry 

and Patient Organization 

Comments 
Page 32 GAO-04-450 Medicare Payment for Dialysis Services 

Reviewers also made technical comments, which we incorporated where 

appropriate. 

We are sending copies of this report to the Administrator of CMS and 

appropriate congressional committees. The report is available at no charge 

on GAO’s Web site at http://www.gao.gov. We will also make copies 

available to others on request. 

If you or your staffs have any questions, please call me at (202) 512-7119. 

Another contact and key contributors to this report are listed in appendix 

III. 

A. Bruce Steinwald 

Director, Health Care—Economic 

 and Payment Issues 
Page 33 GAO-04-450 Medicare Payment for Dialysis Services 

List of Committees 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

The Honorable Joe L. Barton 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 
Appendix I: Scope and Methodology 

Page 34 GAO-04-450 Medicare Payment for Dialysis Services 

In conducting this study, we analyzed the Centers for Medicare & Medicaid 

Services (CMS) Facility Survey files, Medicare cost reports, and Medicare 

outpatient claims. We interviewed officials from CMS and the National 

Institute of Diabetes & Digestive & Kidney Diseases. We also interviewed 

representatives from the American Association of Kidney Patients, 

American Nephrology Nurses’ Association, Forum of End Stage Renal 

Disease (ESRD) Networks, National Kidney Foundation, National Renal 

Administrators Association, and Renal Physicians Association; 

representatives from five national dialysis facility chains, a national 

manufacturer of dialysis equipment, and several private health insurance 

companies; and nephrologists who provide daily hemodialysis. We 

conducted site visits at three dialysis facilities, one of which provides daily 

hemodialysis, and interviewed officials at these facilities. 

To analyze the supply of freestanding and hospital-based dialysis facilities, 

we used the Facility Survey files from 1998 through 2002, and to identify 

ESRD beneficiaries on dialysis, we used Medicare outpatient claims from 

1998 through 2001, the most recent years for which data were available at 

the time of our analysis. From the Facility Survey files, we identified all 

dialysis facilities operating the entire year, opening during the year, and 

closing during the year, and the number of stations at each facility.1

 We 

identified a facility as offering a treatment method if it provided at least 

one treatment or had at least one patient using that method. From the 

Medicare outpatient claims, we identified Medicare ESRD beneficiaries 

receiving dialysis each year, and their residence by ZIP code. We then 

calculated the number of dialysis facilities operating the entire year and 

the number of beneficiaries receiving dialysis for each county in the 50 

states and in the District of Columbia, which we considered a county. We 

determined the average number of facilities and stations in each county, 

weighted by the number of beneficiaries in each county. We defined a 

county as urban if it was in a metropolitan statistical area and as rural if it 

was outside a metropolitan statistical area, as determined by the Office of 

Management and Budget.2

 We assessed the reliability of the Facility Survey 

 1

Facilities indicate on their annual surveys whether they closed during the survey year. 

However, we found that many facilities that indicated they closed during the year then 

continued to operate in the next year. This discrepancy may occur for a variety of reasons, 

including when facilities indicate they are closing when they are actually changing 

ownership. We used the 2002 file to adjust the number of closings in 2001. 

2

For 1998 and 1999 analyses, we used metropolitan statistical area definitions as of June 30, 

1996, and for 2000 and 2001 analyses, we used metropolitan statistical area definitions as of 

June 30, 1999. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 35 GAO-04-450 Medicare Payment for Dialysis Services 

file and claims data by analyzing trends in the number of beneficiaries on 

dialysis and dialysis facilities over time and comparing these to trends 

reported by CMS. We determined that the data were reliable for our 

purposes. 

To calculate payment-to-cost ratios for composite rate services only, we 

used cost reports for freestanding renal dialysis facilities from 1998 

through 2001, the most recent data available. The Medicare payment 

methodology is the same for freestanding and hospital-based dialysis 

facilities, but we did not analyze cost reports or claims for hospital-based 

facilities because their reported costs are affected by decisions in 

allocating costs between the hospital and the dialysis facility. In 2001, 

about 84 percent of all dialysis facilities nationwide were freestanding. We 

first edited the cost reports to exclude those facilities located outside the 

50 states or the District of Columbia, those with cost reporting periods less 

than 300 days, and those that reported composite rates outside the range 

of possible rates from the Medicare program. We excluded 577 of the 2,983 

cost reports, or about 19 percent. From the remaining cost reports, we 

calculated each provider’s total Medicare payments and total reported 

costs. We calculated the proportion of total cost attributable to Medicare 

beneficiaries using the proportion of each facility’s treatments that was 

furnished to Medicare beneficiaries. We summed payments and costs 

across all providers to obtain payment-to-cost ratios from 1998 through 

2001 weighted by total Medicare payments received by each facility. 

Additionally, we stratified ratios by dialysis treatment method, as reported 

in the cost reports. We assessed the reliability of the cost report data by 

comparing our payment-to-cost ratios to those published by the Medicare 

Payment Advisory Commission. We determined that the data were reliable 

for our purposes. 

In order to calculate 2001 payment-to-cost ratios for overall costs, that is, 

composite rate services and separately billed drugs, we used 2001 cost 

reports for freestanding renal dialysis facilities and 2000 and 2001 

Medicare outpatient claims data.3

 We first edited the cost reports to 

exclude those facilities located outside the 50 states or the District of 

Columbia, those with cost reporting periods fewer than 300 days, and 

those that reported composite rates outside the range of possible rates 

 3

We did not include separately billed laboratory services in our payment-to-cost ratios 

because they are billed by the laboratory that performed the test, rather than by the dialysis 

facility. 
Appendix I: Scope and Methodology 

Page 36 GAO-04-450 Medicare Payment for Dialysis Services 

from the Medicare program. Payment information for individual drugs is 

not available on Medicare outpatient claims prior to July 1, 2000, and 

therefore we did not calculate these ratios for years prior to 2001.4

 We 

used the claims data to obtain payments for separately billed drugs, as 

they are not available in the cost reports. We obtained the total costs of 

separately billed drugs from the cost reports and calculated the proportion 

attributable to Medicare beneficiaries using the proportion of each 

facility’s treatments that was furnished to Medicare beneficiaries. We then 

added our previously calculated composite rate payments and costs and 

summed total payments and total costs for all providers to obtain an 

overall payment-to-cost ratio for 2001 weighted by total Medicare 

payments received by each facility. We stratified the ratios by size. We 

defined the size of the facility based on the 25th and 75th percentiles of 

total dialysis treatments each facility reported in its cost report. Small 

facilities are those reporting a number of dialysis treatments less than the 

25th percentile, medium facilities are those reporting a number of dialysis 

treatments greater than or equal to the 25th percentile and less than or 

equal to the 75th percentile, and large facilities are those reporting a 

number of treatments greater than the 75th percentile. We could not 

calculate these ratios by treatment method, as separately billed drug costs 

are not reported by treatment method on the cost report. 

In order to identify separately billed items or services frequently billed in 

association with in-facility hemodialysis, we used 2001 Medicare 

outpatient claims data. We limited our claims population to those that 

reported only in-facility hemodialysis and no other treatment method. We 

defined “frequently billed” as those separately billed services that were 

billed over 100,000 times annually. We excluded laboratory services 

because these are typically billed directly to Medicare by the laboratory, 

not by the dialysis facility. Medicare instructs providers to record each 

drug administration on the claim separately, and accordingly, we defined 

one administration of a drug as one record on the claim. It is possible, 

however, that some providers aggregate the units of several 

administrations. To the extent this is the case, the billing frequencies for 

these specific drugs likely underestimate the actual administration 

frequencies. 

 4

Prior to July 1, 2000, Medicare outpatient claim files provide the total payment for all 

services that a provider records on each claim, but not the individual payments for each 

service. 
Appendix I: Scope and Methodology 

Page 37 GAO-04-450 Medicare Payment for Dialysis Services 

To review cost and clinical data on daily hemodialysis, we examined 25 

articles obtained through a MEDLINE literature search for studies on daily 

hemodialysis published from 1998 through 2002. We examined an 

additional 11 articles referred to us during our interviews. 

We conducted our work from July 2002 through June 2004 in accordance 

with generally accepted government auditing standards. 
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 38 GAO-04-450 Medicare Payment for Dialysis Services 

Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 39 GAO-04-450 Medicare Payment for Dialysis Services 
Appendix III: GAO Contact and Staff 

Acknowledgments 

Page 40 GAO-04-450 Medicare Payment for Dialysis Services 

Nancy A. Edwards, (202) 512-3340 

Kevin J. Dietz, Joanna L. Hiatt, Maria Martino, and Yorick F. Uzes made 

major contributions to this report. 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Acknowledgments 

(290209) 
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