End-Stage Renal Disease: CMS Should Monitor Effect of Bundled Payment on Home Dialysis Utilization Rates
Published: 2009-05-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Medicare covers dialysis--a process that removes excess fluids and toxins from the bloodstream--for most individuals with end-stage renal disease (ESRD), a condition of permanent kidney failure. Most patients with ESRD receive dialysis in a facility, while some patients with ESRD are trained to self-perform dialysis in their homes. The Centers for Medicare & Medicaid Services (CMS)--the agency that administers the Medicare program--has taken steps to encourage home dialysis and is in the process of changing the way it pays for dialysis services. Effective 2011, CMS will pay for dialysis services using an expanded bundled payment. The Tax Relief and Health Care Act of 2006 required GAO to report on the costs of home dialysis treatments and training. GAO examined (1) the extent to which the costs of home dialysis differ from the costs of dialysis received in a facility, and (2) CMS's plans to account for home dialysis costs in the expanded bundled payment. GAO obtained information from CMS, the U.S. Renal Data System, ESRD experts, and self-reported cost information from six dialysis providers.
section_title: What GAO Found
paragraphs: The self-reported cost information GAO obtained from dialysis providers--including a large chain provider, small nonprofit providers, and a hospital-based provider--indicated variation in the costs to provide home dialysis when compared with costs to provide dialysis in their facility. The six dialysis providers reported lower costs per treatment to provide home dialysis than to provide dialysis at a facility, though the amount by which home dialysis costs were lower varied widely among the providers. Because patients who dialyze at home typically receive dialysis treatments more than three times per week, some providers' costs to provide home dialysis on a weekly basis can be higher than their costs to provide dialysis at a facility. However, other dialysis providers reported lower costs per week to provide home dialysis compared with dialysis provided in a facility. Additionally, several dialysis providers indicated that, for home dialysis patients, the costs of a dialysis treatment with a training session were significantly higher than the costs of a dialysis treatment without a training session. At the time of GAO's review CMS officials said they are considering factoring the costs of home dialysis treatments and training into the expanded bundled payment, but the details for the expanded bundled payment are still under development and subject to change. CMS officials told GAO that the expanded bundled payment would create incentives for providers to offer home dialysis instead of dialysis at a facility, because although some costs associated with home dialysis may be higher for providers, other efficiencies will offset those costs. For example, although supply costs may be higher for home dialysis, other costs of providing home dialysis--such as drugs, staff, and overhead--will be lower, and thus, in CMS's view, will encourage providers to offer home dialysis. However, concerns have been raised that the way that CMS is considering accounting for the costs of home dialysis in the expanded bundled payment might not encourage providers to offer home dialysis, as CMS expects. For example, some dialysis providers raised concerns that because home dialysis generally consists of more than three dialysis treatments per week--which may result in higher weekly costs to provide home dialysis compared with dialysis received in a facility--providers may not be encouraged to offer home dialysis. CMS officials indicated that CMS intends to assess the effect of the expanded bundled payment on home dialysis utilization rates, but CMS has not established formal plans to monitor this effect.

section_title: Letter
paragraphs: End-stage renal disease (ESRD) is a chronic illness characterized by  permanent kidney failure. Regardless of age, most individuals with ESRD  are eligible for Medicare coverage. Individuals with ESRD can receive a  kidney transplant or undergo dialysis—a process that removes wastes and  fluid from the body to replace kidney functioning. In 2006, about   70 percent of patients with ESRD underwent dialysis and Medicare was  the primary payer for approximately 84 percent of dialysis patients  nationwide. In 2005, Medicare spending on dialysis and dialysis-related  drugs totaled about $7.9 billion.
Individuals with ESRD may receive dialysis treatments in a dialysis facility  or be trained to perform dialysis treatments at home. Patients who  receive dialysis at a facility receive hemodialysis, a process where blood is  allowed to flow, a few ounces at a time, through a special filter that  removes wastes and extra fluids and then returns the blood to the body.  Patients who conduct dialysis at home perform either home hemodialysis  or peritoneal dialysis—which uses the individual’s own peritoneal  membrane, located within the abdomen, as the filter for screening toxins  from the body. Figure 1 describes the two types of dialysis.
According to the United States Renal Data System (USRDS)—a national  data system that collects, analyzes, and distributes information about  ESRD in the United States—use of peritoneal dialysis peaked in the mid- 1990s—reaching about 14.4 percent of the dialysis population—but has  since declined. Utilization of home hemodialysis declined steadily from  1985 to 2002, when the home hemodialysis population began to increase.  In 2006, of the 355,000 individuals with ESRD nationwide who received  dialysis treatments—including both patients who were covered by  Medicare and patients who had other insurance coverage—approximately  92 percent received dialysis in a facility, while about 7.4 percent   performed peritoneal dialysis at home, and 0.7 percent performed home  hemodialysis.
The Centers for Medicare & Medicaid Services (CMS)—the agency that  administers the Medicare program—has made an effort to promote home  dialysis, whenever clinically appropriate. In April 2008, CMS issued a final  rule establishing new conditions of coverage for Medicare dialysis  facilities. It requires such facilities to inform patients about the options of  home and facility dialysis treatments, and the patients’ care team—which  includes the patients, their physician, and nurses—to identify a plan for  each patient’s home dialysis treatments or explain why the patient is not a  candidate for home dialysis. According to CMS, one of the goals of the rule  is to foster patient independence by encouraging ESRD patients to receive  dialysis at home. Some medical experts and dialysis providers have  estimated that anywhere from less than 10 percent to up to 50 percent of  all patients who receive dialysis nationwide could be good candidates for  home dialysis.
As CMS takes steps to promote home dialysis, the agency also is required  by law to change the way Medicare pays for dialysis and other ESRD  services. Currently, Medicare pays dialysis providers a prospective  payment—known as a composite rate—for three dialysis treatments per  week, whether the treatment is provided at home or in a facility. The  composite rate covers a partial bundle of dialysis services, including items  associated with dialysis treatments, such as certain tests, drugs, and  supplies that are frequently used during dialysis. In addition to the  composite rate, providers can also receive additional Medicare  reimbursements for separately billable ESRD services, which include  other injectable drugs (such as Epogen, vitamin D, and iron), laboratory  tests, supplies, and blood products that are often used during the course of  dialysis. Providers can also receive additional Medicare reimbursements  for training patients to dialyze at home.
The Medicare Improvements for Patients and Providers Act of 2008  (MIPPA) requires CMS to implement a new, expanded bundled payment  for dialysis services by January 1, 2011. MIPPA requires that the  expanded bundled payment for ESRD services include a payment for  providing both composite rate services and separately billable services.  This would include the costs of providing home dialysis.
As we have previously reported, an expanded bundled payment for ESRD  services should promote efficient care delivery, as providers retain the  difference if Medicare’s payment exceeds the costs they incur to provide  dialysis services. We also reported that an expanded bundled payment  would afford clinicians more flexibility in decision making because  incentives to provide a particular drug or treatment would be reduced.  According to the Secretary of the Department of Health and Human  Services’ (HHS) 2008 Report to Congress that outlined CMS’s proposed  design for the expanded bundled payment for ESRD services, the new  payment is intended to eliminate incentives for providers to overutilize  certain services that are separately billable, to target higher payments to  providers that treat more costly patients, and to create incentives for  efficiencies.
The Tax Relief and Health Care Act of 2006 required us to review and  report on the costs associated with providing home hemodialysis and  patient training for home hemodialysis and peritoneal dialysis. Several  congressional committees also asked us to review the implications of the  expanded bundled payment for home dialysis. For our review, we  examined (1) the extent to which the costs of home dialysis differ from the  costs of dialysis provided in a facility, and (2) CMS’s plans to account for  home dialysis costs in the expanded bundled payment for ESRD services.
To examine the extent to which the costs of home dialysis differ from the  costs to provide dialysis in a facility, we conducted interviews with  officials from 12 dialysis providers, including large chain providers, small  nonprofit providers, and a hospital-based provider. Additionally, we  obtained self-reported cost information from 6 of the 12 dialysis providers  we interviewed that offered both home and facility dialysis. The 6  providers shared with us annual cost information (which ranged from  August 2006 to June 2008), including their average cost per treatment and  total annual costs for specific cost categories associated with providing  dialysis services (such as supplies, overhead, equipment, drugs,  laboratory, staff, and administrative costs). In total, we obtained cost  information from the providers on the costs for dialysis services provided  in nearly 1,600 facilities to approximately 130,000 dialysis patients,  including almost 11,000 peritoneal dialysis patients and over 850 home  hemodialysis patients. We reviewed the cost information each provider  sent to us if the provider had 20 or more patients on either home  hemodialysis or peritoneal dialysis and calculated the percentage  difference in average self-reported costs between home dialysis and  dialysis provided in a facility (or chain of facilities). We also used the  cost information reported to us to calculate the providers’ weekly costs providing home dialysis and dialysis in a facility. We regard the cost  information reported to us as testimonial and we did not independently  assess the accuracy of that information. We identify the cost information  as self-reported throughout this report, and we did not aggregate or  average the self-reported costs across different providers. We also  conducted interviews with representatives from the Medicare Payment  Advisory Commission (MedPAC) and professional organizations, and we  conducted site visits to two dialysis facilities that offered both home  dialysis and dialysis in a facility. In addition, to obtain information on the  costs of home dialysis, we examined over 30 articles about the costs of  home dialysis published between 2002 and 2008, obtained through a  MEDLINE literature search or recommended by representatives we  interviewed.
To examine CMS’s plans to account for the costs of home dialysis in the  expanded bundled payment, we reviewed the Secretary of HHS’s 2008  Report to Congress on the Proposed Design for a Bundled ESRD  Prospective Payment System and conducted interviews with CMS officials.  We also conducted interviews with CMS’s contractor, the University of  Michigan Kidney Epidemiology and Cost Center (UM-KECC), dialysis  facilities, dialysis equipment suppliers, and medical experts on home  dialysis. We also interviewed dialysis providers to learn their views on  home dialysis issues that CMS should consider when developing the  expanded bundled payment for ESRD services. Appendix I provides more  detailed information on our methodology. We conducted our work from  October 2008 through May 2009, in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to provide a  reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Individuals diagnosed with ESRD may be influenced by a variety of factors  when choosing the type of dialysis to receive. One factor that may  influence the individual’s choice of dialysis is the individual’s awareness  about the different types of dialysis available. For example, some  individuals may not be aware that peritoneal dialysis is an option to  replace kidney functioning and, as a result, would not choose to undergo  peritoneal dialysis. The individual’s choice of which dialysis to perform  can also be influenced by the type of dialysis that the individual’s  physician recommends and if the individual has a partner to assist with  dialysis treatments. Additionally, some individuals may have physical  conditions that prevent them from self-performing dialysis—such as vision  problems or dexterity issues. The individual’s choice may also be  influenced by how quickly the dialysis treatments need to begin—as  individuals who need to urgently start dialysis may not have time to be  trained in conducting dialysis at home.
Hemodialysis conducted in a facility typically consists of three dialysis  treatments per week. Peritoneal dialysis is conducted daily. Recent  technological changes in hemodialysis equipment have occurred, making it  easier for hemodialysis to be done more frequently. For example, a new  hemodialysis machine—designed for use at home—requires patients to  dialyze five to seven times per week and is reported by some dialysis  providers to be more user-friendly than traditional dialysis machines. As a  result, most home hemodialysis patients dialyze five to seven times per  week.
Data from USRDS show that, compared to patients who dialyzed in a  facility, in 2006, home dialysis patients were more likely to be younger,  white, located in rural areas, employed, and have employer or group  health insurance coverage, and were less likely to be Hispanic. USRDS  data for 2006 also indicate that patients who received home dialysis may  be healthier than patients who dialyzed in a facility. Home dialysis patients  were more likely to be on the wait-list for a kidney transplant (which  requires a certain level of health status) and had lower rates of diabetes  and hypertension as the primary disease that caused their ESRD compared  with patients who received dialysis in a facility.
Limited evidence suggests and several dialysis provider officials and  medical experts we interviewed believe that home dialysis results in better  clinical outcomes for individuals with ESRD. These better clinical  outcomes include better control over fluid levels, less need for dialysis  drugs, fewer hospitalizations, and better quality of life. Improved clinical  outcomes may be due to the features of home dialysis that its supporters  believe more closely mimic natural kidney functioning—home dialysis can  be done more frequently with less time between treatments, for longer  periods of time than dialysis received in a facility, three times a week.  Perhaps as a result of this more frequent dialysis, USRDS reported that the  overall Medicare costs for peritoneal dialysis patients—including  hospitalization costs as well as costs for dialysis services—were about   26 percent less than the total Medicare costs for hemodialysis patients in  2006. Similarly, a Medicare health maintenance organization (HMO)  reported to us that moving some of its patients from facility hemodialysis  to home hemodialysis has substantially reduced hospitalizations, and  overall health costs, for those patients. That HMO has also published a  study documenting relatively low hospitalization rates for its home  hemodialysis patients.
However, in general, it is challenging to determine the causes of  differences in clinical outcomes between patients who receive dialysis at  home versus in a facility because—as we previously noted—the  characteristics of patients who dialyze at home are different than those  who dialyze in a facility. The National Institutes of Health (NIH) is  conducting randomized clinical trials that are intended to provide  information on the clinical outcomes associated with more frequent  dialysis received in a facility compared to dialysis received three times a  week in a facility, and with home nocturnal hemodialysis compared to  three times weekly home hemodialysis. Results from the NIH trials are  expected to be available in 2010.
section_title: Selected Dialysis Providers Reported Wide Variation in the Costs of Providing Dialysis at Home Compared to Facility Dialysis
paragraphs: The self-reported cost information we obtained from the six dialysis  providers indicated variation in the cost to provide home dialysis when  compared with dialysis provided in a facility. The six dialysis providers  reported lower costs per treatment to provide home dialysis than to  provide dialysis at a facility, though the amount by which home dialysis  costs were lower varied widely among the providers. Because patients  who dialyze at home typically receive dialysis treatments more than three  times per week, some providers’ costs to provide home dialysis on a  weekly basis can be higher than their costs to provide dialysis at a facility.  However, other dialysis providers reported lower costs per week to  provide home dialysis compared with dialysis provided in a facility.  Additionally, several dialysis providers indicated that, for home dialysis  patients, the costs of a dialysis treatment with a training session were  significantly higher than the costs of a dialysis treatment without a training  session.
subsections: section_title: Six Dialysis Providers Reported a Range of Lower Costs per Treatment for Home Dialysis When Compared with the Costs per Treatment for Dialysis Provided in a Facility
paragraphs: The self-reported cost information that we obtained from six dialysis  providers indicated that the average costs per treatment for home dialysis  were lower than the average costs per treatment for dialysis provided in a  facility. However, there was a wide range among the dialysis providers in  terms of how much lower the average costs per treatment for home  dialysis were than dialysis provided in a facility. For home hemodialysis,  dialysis providers reported to us that their average costs per treatment  were 17 to 50 percent lower than the average costs per treatment for  dialysis provided in a facility. For peritoneal dialysis, dialysis providers  reported to us that their average costs per treatment were 48 to 68 percent  lower than the average costs per treatment for hemodialysis provided in a  facility.
The average costs per treatment that the dialysis providers reported to us  include costs for certain items associated with providing dialysis services,  including supplies, equipment, drugs, overhead, and staff. Officials from  dialysis providers indicated to us that supply costs are higher for home  dialysis compared with dialysis provided in a facility. One reason that  supply costs for home dialysis patients are higher is because certain  supplies that can be reused for patients who receive dialysis in a facility  often cannot be reused by home patients. For example, patients who  receive dialysis in a facility can reuse their own dialyzer—the artificial  kidney used to filter the blood during hemodialysis—because the facility is  able to sterilize the dialyzer between dialysis treatments. Patients who  dialyze at home need to use dialyzers that are intended for one-time use,  which results in higher supply costs. In contrast, other cost items (such as  drugs and staff) were reported to be lower for home dialysis than for  dialysis provided in a facility. For example, after home dialysis patients  have been trained to conduct dialysis, there are lower staffing costs  associated with home dialysis because patients require less staffing  resources—as the patients (or their caregiver) are performing the dialysis  treatments at home that are performed by staff for dialysis provided in a  facility. Table 1 provides one dialysis provider’s self-reported average  costs per treatment in 2008 for hemodialysis provided in a facility  compared to hemodialysis provided at home, which indicates that the  supply costs are higher for home hemodialysis while the other items are  lower for home hemodialysis compared with hemodialysis provided in a  facility.
Table 2 provides another dialysis provider’s self-reported average costs  per treatment in 2006 for hemodialysis provided in a facility compared to  peritoneal dialysis provided at home. The provider reported that its supply  costs were higher for peritoneal dialysis provided at home, while the other  items were lower for peritoneal dialysis compared with hemodialysis  provided in a facility.
section_title: Some Dialysis Providers Reported Higher Costs per Week for Home Dialysis Compared to Dialysis Provided in a Facility, While Other Dialysis Providers Reported Lower Costs per Week for Home Dialysis
paragraphs: All six dialysis providers in our review reported lower average costs per  treatment for home dialysis when compared to dialysis provided in a  facility; however, some dialysis providers reported higher costs per week  for home dialysis compared with dialysis provided in a facility, while  others reported lower costs per week for home dialysis. For home  hemodialysis, three of the five dialysis providers included in our review  reported higher costs per week for providing home hemodialysis  compared with the costs per week of providing dialysis in a facility.  Officials from these three dialysis providers indicated that the costs per  week for patients who dialyze at home were higher because these patients  typically dialyze more frequently than three times per week. Home  hemodialysis is often performed five to seven times per week. For  example, using one provider’s self-reported average costs per treatment  from table 1, the average costs per treatment for home hemodialysis were  lower ($133 per treatment) compared with dialysis provided in a facility  ($243 per treatment); however, for patients who received six dialysis  treatments per week, the provider’s weekly costs for home hemodialysis  were higher ($798 for six treatments during the week) compared with  dialysis provided in a facility ($729 for three treatments per week). The  other two providers reported lower costs per week for home hemodialysis  compared with dialysis provided in a facility. However, one of these  providers indicated that their home hemodialysis patients only dialyze  three times per week, which is not more frequent than patients who  dialyze in a facility.
Providers also reported varying costs per week for peritoneal dialysis  compared to dialysis provided in a facility. Of the five dialysis providers in  our review, two providers indicated that their costs per week for  providing peritoneal dialysis were higher than the weekly costs of  providing dialysis in a facility. In contrast, three of the five dialysis  providers in our review indicated that the costs per week of providing  peritoneal dialysis were lower than the weekly costs of providing dialysis  in a facility. Using one provider’s self-reported average costs per treatment  from table 2, the average costs per treatment for peritoneal dialysis were  lower ($94 per treatment) compared with dialysis provided in a facility  ($251 per treatment) and the weekly costs of peritoneal dialysis were also  lower ($658 for 7 days of peritoneal dialysis during the week) compared  with dialysis provided in a facility ($753 for three treatments per week).  Based on self-reported cost information from dialysis providers, the costs  per week of providing peritoneal dialysis were lower than the costs of  providing hemodialysis in a facility, in part, because costs for drugs, staff,  and overhead were lower for peritoneal dialysis patients.
As indicated by the dialysis providers’ self-reported cost information, the  higher weekly costs of home dialysis for some providers may be due—in  part—to the increased frequency of dialysis. For hemodialysis, this is  consistent with a 2001 MedPAC report, which estimated that the weekly  costs to provide hemodialysis more than three times a week were 15 to   20 percent higher than the weekly costs to provide hemodialysis three  times per week.
section_title: Several Dialysis Providers Reported That Training Costs for Home Dialysis Patients Are Significant
paragraphs: According to dialysis providers, the costs of training patients to dialyze at  home can be significant. These costs are exclusively for home dialysis  patients as patients who receive dialysis in a facility do not need to be  trained. Dialysis providers reported to us that the costs of training patients  to dialyze at home are significant because it typically takes 3 to 6 weeks,  with up to 5 training sessions a week, to train a patient to perform home  hemodialysis (approximately 15 to 30 sessions) and 1 to 2 weeks  (approximately 5 to 10 sessions) to train a patient to perform peritoneal  dialysis. In addition, training sessions are costly because they require the  dedicated attention of one nurse for each training session. Table 3 shows  an example of one dialysis provider’s self-reported average costs for a  home hemodialysis training session (which includes a dialysis treatment)  compared with the average costs of a home hemodialysis treatment  session during 2008.
section_title: CMS Is Considering Factoring Current Home Dialysis Costs into the Expanded Bundled Payment, but Concerns Have Been Raised That Home Dialysis May Not Be Encouraged as CMS Expects
paragraphs: At the time of our review CMS officials indicated that they are considering  factoring the costs of home dialysis treatments and training into the  expanded bundled payment, but the details for the expanded bundled  payment are still under development. CMS officials told us that the  expanded bundled payment could create incentives for providers to offer  home dialysis instead of dialysis in a facility, because although some costs  associated with home dialysis may be higher for providers, other  efficiencies will offset those costs. However, concerns have been raised  that the way in which the expanded bundled payment may account for  home dialysis costs might not encourage providers to offer home dialysis,  as CMS expects. CMS officials indicated that it intends to assess the effect  of the expanded bundled payment on home dialysis utilization rates, but  CMS has not established formal plans to monitor this utilization.
subsections: section_title: CMS Is Considering Factoring Home Dialysis Costs into Calculation of Expanded Bundled Payment
paragraphs: In order to fulfill the requirements of MIPPA, CMS is developing an  expanded bundled payment for ESRD services. Beginning in 2011,  Medicare will pay for dialysis services using an expanded bundled  payment, which will include both services currently paid under the  composite rate and services that are separately billable. Although the  details of the expanded bundled payment are still under development and  subject to change, at the time of our review CMS officials said they were  considering giving providers the same payment regardless of whether the  dialysis treatments are provided in the patient’s home or at a facility. They  noted that a base payment for dialysis services—based on several  factors—could be calculated by totaling providers’ costs, including costs  for home hemodialysis, peritoneal dialysis, and dialysis in a facility.
CMS officials and an official from UM-KECC, the contractor assisting CMS  with developing the expanded bundled payment, told us that they will  obtain cost information from cost reports that dialysis providers are  required to submit to CMS and from Medicare claims for separately  billable ESRD-related services. Since dialysis providers submit cost  reports to CMS, which include the costs of home dialysis, CMS officials  told us that the costs associated with home dialysis could be factored into  the development of the expanded bundled payment.
CMS officials told us that when implemented, the expanded bundled  payment could create incentives for providers to offer home dialysis. CMS  officials explained that while some costs associated with home dialysis  may be higher for providers (such as supplies), these costs will be offset  by efficiencies created by lower cost categories for such items as drugs,  staff, and overhead expenses. However, CMS officials said they have not  conducted an analysis to determine whether these cost assumptions are  accurate.
section_title: Concerns Have Been Raised That the Way CMS Is Considering Accounting for Home Dialysis Costs in the Expanded Bundled Payment May Not Encourage Home Dialysis as CMS Expects
paragraphs: Some home dialysis providers and officials we interviewed have raised  concerns that the way that CMS is considering accounting for the costs of  home dialysis may not encourage use of home dialysis. In particular,  concerns have been raised that the cost information CMS and its  contractor are using to develop the expanded bundled payment may not  account for all of the costs associated with providing home dialysis. For  example, one analysis of CMS cost reports found that some providers only  report cost information to CMS for the three treatments per week for  which Medicare reimburses, even though some home dialysis patients  receive more frequent treatments. Also, USRDS officials reported to us  that the claims information CMS is using to develop its expanded bundled  payment does not always reliably distinguish between the costs for  separately billable items and services for home hemodialysis and facility  hemodialysis.
Concerns have also been raised that the expanded bundled payment might  not encourage providers to offer home dialysis depending on how home  dialysis training costs are accounted for in the bundled payment. At the  time of our review, CMS officials noted that they are considering factoring  providers’ costs associated with training patients to dialyze at home into  the expanded bundled payment rather than providing a separate,  additional payment for training patients to dialyze at home. As we noted  previously, some providers reported significant up-front costs to start a  patient on home dialysis, in part because training for home dialysis  requires one nurse to train one patient.
Moreover, some home dialysis providers are also concerned that providers  will not have an incentive to provide home dialysis if the expanded  bundled payment restricts reimbursement to three dialysis treatments per  week. Indeed, under the current partially bundled payment system, we  found that some home dialysis providers now have been granted medical  necessity exceptions to receive Medicare reimbursements for additional  dialysis treatments beyond three per week. CMS officials told us that  they are unlikely to allow these additional reimbursements under the  expanded bundled payment system.
CMS officials indicated that, after the expanded bundled payment system  has been implemented, they plan to assess its effect on home dialysis  utilization rates and, if necessary, adjust the expanded bundled payment  accordingly. However, CMS officials said that no formal plan to assess the  bundled payment system’s effect on home dialysis utilization rates has  been established.
section_title: Conclusions
paragraphs: Some dialysis experts and officials from dialysis providers have estimated  that anywhere from less than 10 percent to up to 50 percent of patients  could be good candidates to perform dialysis at home—higher than the  current home dialysis utilization rate of about 8 percent. In its April 2008  final rule, CMS took steps to encourage home dialysis for appropriate  patients, including requiring that patients be informed of all types of  dialysis treatments (including home dialysis). CMS officials told us that  they believe that home dialysis could be encouraged under the  forthcoming expanded bundled payment if providers receive the same  reimbursement under the expanded bundled payment for dialysis provided  in a facility or at home, because the reduced costs of home dialysis for  drugs and staff would make home dialysis less costly to provide than  dialysis in a facility. However, CMS has not independently verified if these  assumptions are correct. Additionally, some home dialysis providers and  officials we interviewed raised concerns about whether a bundled  payment would encourage home dialysis, including concerns that the  sources of cost information used to calculate the expanded bundled  payment rate may not include all of the costs of providing home dialysis,  such as the up-front costs associated with training patients to conduct  home dialysis, and its increased frequency. Furthermore, although CMS  has said it plans to monitor the effect of the expanded bundled payment  system on utilization of home dialysis, it has not specified how this will be  done. For these reasons, we believe that the effect of the expanded  bundled payment system on home dialysis utilization rates is uncertain  and that it is important to monitor its effect on the utilization of home  dialysis.
section_title: Recommendation for Executive Action
paragraphs: To determine the effect of the expanded bundled payment system on  home dialysis utilization rates, CMS should establish and implement a  formal plan to monitor the expanded bundled payment system’s effect on  home dialysis utilization rates to determine whether home dialysis  utilization rates have increased as CMS expects.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, CMS concurred with our  recommendation to establish and implement a formal plan to monitor the  expanded bundled payment system’s effect on home dialysis utilization  rates. CMS agreed with the need to establish a monitoring plan under the  expanded bundled payment system and expects to establish a formal plan  after it has promulgated the final rule associated with the ESRD bundled  payment system. CMS also commented that our draft report implied that  final decisions have been reached by CMS and the Secretary of HHS  regarding the details of the expanded bundled payment system. We revised  our draft report to clarify that the details of the expanded bundled  payment are tentative and still subject to change.
CMS also provided a few additional comments. First, CMS noted that one  dialysis provider that operates multiple dialysis facilities has recently  trained patients to conduct and self-perform hemodialysis in a dialysis  facility. We added a reference to this option for dialysis treatment in the  report. CMS requested that we clarify information in reference to a  MedPAC report on the costs of frequent home dialysis. We made changes  as appropriate. Additionally, CMS stated that Medicare claims submitted  by dialysis facilities do distinguish home hemodialysis from facility  hemodialysis. However, we confirmed with USRDS officials that the  claims information does not always reliably make this distinction for  separately billable items and services and we clarified this in the report.  Finally, CMS noted that when dialysis providers have presented  information to CMS regarding the percentage of patients who would be  good candidates for home dialysis, these percentages are usually closer to  10 to 15 percent of all dialysis patients. However, medical experts and  dialysis providers we interviewed indicated a range of less than 10 percent  to up to 50 percent of all dialysis patients could be good candidates for  home dialysis, although many of the experts and providers we interviewed  estimated that from 15 to 35 percent of all dialysis patients would be good  candidates for home dialysis. We have clarified this in the report. CMS’s  written comments are reprinted in appendix II.
We are sending copies of this report to the Administrator of CMS. In  addition, the report is available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-7114 or kohnl@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: This report examines (1) the extent to which the costs of home dialysis  differ from the costs of dialysis provided in a facility, and (2) the Centers  for Medicare & Medicaid Services’ (CMS) plans to account for home  dialysis costs in the expanded bundled payment for end-stage renal  disease (ESRD) services.
To meet our objectives, we conducted interviews with representatives  from 12 dialysis providers—including large chain providers, small  nonprofit providers, and a hospital-based provider. Based on the officials’  self-reported estimates, these dialysis providers offered dialysis services to  approximately 68 percent of all dialysis patients—including an estimated  77 percent of peritoneal dialysis patients and roughly all home  hemodialysis patients.
To examine the extent to which the costs of home dialysis differ from the  costs of dialysis provided in a facility, we obtained cost information from   six dialysis providers that we interviewed—including average costs per  treatment reported in CMS’s renal facility cost reports for home dialysis  and dialysis provided in a facility. Additionally, we requested that the  dialysis providers include annual cost information for specific categories  of costs associated with providing dialysis. The cost categories that we  requested were supplies, overhead, equipment and maintenance, drugs,  laboratory tests, staff, and administrative costs. We included descriptions  of what services should be included in each cost category, basing the  descriptions on CMS definitions from the renal facility cost reports. The  average costs per treatment reported to us by the dialysis providers did  not include the costs of training patients to dialyze at home. At our  request, the dialysis providers gave us separate information on the costs of  training patients to conduct home dialysis.
Six of the 12 dialysis providers we interviewed shared with us cost  information for a 12-month period, which ranged from August 2006  through June 2008. In total, we obtained cost information from these 6  providers on the costs for dialysis services provided in nearly 1,600  facilities to approximately 130,000 dialysis patients, including almost  11,000 peritoneal dialysis patients and over 850 home hemodialysis  patients. We analyzed the cost information each provider sent to us if the  provider had 20 or more patients on either home hemodialysis or  peritoneal dialysis. Using this self-reported cost information from the  providers, we calculated the percentage difference in average costs per  treatment between dialysis provided at home and dialysis provided in a  facility (or chain of facilities). We also used the cost information reported  to us to calculate the providers’ weekly costs for providing home dialysis  and dialysis in a facility. To calculate the weekly costs of home dialysis  and dialysis provided in a facility, we multiplied the average cost per  treatment by the frequency of the specific type of dialysis.
We regard the cost information reported to us as testimonial and we did  not independently assess the accuracy of that information. We identify the  cost information as self-reported throughout the report, and we did not  aggregate or average the self-reported costs across providers.
We also conducted interviews with representatives from the Medicare  Payment Advisory Commission and professional organizations, including  the National Kidney Foundation, the Renal Physicians Association, the  National Renal Administrators Association, and the American Association  of Kidney Patients. We also conducted site visits to two dialysis facilities  that offered both home dialysis and dialysis in a facility to obtain  additional information on how patients are trained to conduct home  dialysis as well as obtain patients’ perspectives on factors associated with  performing home dialysis.
Additionally, to obtain information on the extent to which the costs of  home dialysis are different than the costs of dialysis provided in a facility,  we examined over 30 articles about the costs of home dialysis published  between 2002 and 2008, obtained through a MEDLINE literature search or  recommended by representatives we interviewed. We also examined over  27 articles about the clinical outcomes associated with home dialysis  published between 2002 and 2008, obtained through a MEDLINE literature  search.
To examine CMS’s plans to account for the costs of home dialysis in the  expanded bundled payment, we reviewed CMS’s proposed design for the  expanded bundled end-stage renal disease (ESRD) payment, outlined in  the Secretary of the Department of Health and Human Services’ 2008  Report to Congress on the Proposed Design for a Bundled ESRD  Prospective Payment System. Additionally, to obtain information on how  the costs of home dialysis would be included in the expanded bundled  payment, we conducted interviews with CMS and CMS’s contractor—the  University of Michigan Kidney Epidemiology and Cost Center. We also  conducted interviews with dialysis facilities’ officials, dialysis equipment  suppliers, and medical experts on home dialysis to obtain their perspective  on the expanded bundled payment.
We conducted our work from October 2008 through May 2009, in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Martin T. Gahart, Assistant  Director; George Bogart; Christie Enders; Krister Friday; and Hillary  Loeffler made key contributions to this report.