End-Stage Renal Disease: CMS Should Assess Adequacy of Payment When Certain Oral Drugs Are Included and Ensure Availability of Quality Monitoring Data
Published: 2011-03-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: For most individuals with end-stage renal disease (ESRD), Medicare purchases a bundle of dialysis-related services using a single payment. In 2014, the Centers for Medicare & Medicaid Services (CMS) plans to include in this bundled payment "oral-only" ESRD drugs used to treat mineral and bone disorder. Currently, Medicare generally pays for these drugs only if the beneficiary has Part D prescription drug coverage. This report (1) describes the rationales for including oral-only ESRD drugs in the bundled payment, (2) examines dialysis organizations' recent experience providing oral-only ESRD drugs and their future ability to provide these drugs, (3) examines the data sources that CMS could use to account for oral-only ESRD drugs in the bundled payment, and (4) examines CMS's ability to monitor treatment of mineral and bone disorder. GAO interviewed CMS officials, experts in mineral and bone disorder, and representatives of 4 large and 16 small dialysis organizations. GAO also reviewed ESRD payment regulations, related reports, clinical guidelines, and state pharmacy licensure requirements in 10 selected states.
section_title: What GAO Found
paragraphs: There are three key reasons for including oral-only ESRD drugs in the bundled payment for dialysis care. First, including these drugs could promote more efficient dialysis care, because organizations that provide this care receive a fixed payment and gain financially to the extent they reduce their costs for the items and services included in the bundle. Second, including the oral-only ESRD drugs could promote clinically appropriate care. Currently, dialysis organizations gain financially if beneficiaries receive oral-only ESRD drugs instead of drugs that are in the bundle because this reduces costs without reducing the payment these organizations receive. Including oral-only ESRD drugs in the bundle would remove financial incentives under the payment system to use certain drugs over others. Finally, including oral-only ESRD drugs in the bundled payment could improve access to these drugs for certain beneficiaries, such as those who currently lack separate prescription drug coverage for these drugs. Three of the 4 large dialysis organizations interviewed by GAO reported that they provided oral-only ESRD drugs to some of the beneficiaries they served in 2010. In contrast, all of the 16 small dialysis organizations that GAO interviewed reported that they did not provide these drugs in 2010. Regardless of their recent experience providing oral-only ESRD drugs, the large and small organizations GAO interviewed identified issues that could affect their ability to provide these drugs in 2014. For example, most organizations expressed concern about whether the bundled payment for dialysis care would adequately cover the costs of providing oral-only ESRD drugs. To account for oral-only ESRD drugs in the payment bundle in 2014, CMS officials noted that they would be limited to using data on payments for these drugs under Medicare Part D. However, these data may understate the costs that dialysis organizations would incur to provide these drugs, in part, because Medicare currently pays for these drugs primarily for those beneficiaries with Part D coverage. Although CMS does not know whether the bundled payment in 2014 will be sufficient to cover the costs that efficient dialysis organizations would incur to provide the entire bundle of dialysis-related items and services, a potential underestimate of the total cost to provide oral-only ESRD drugs raises questions about payment adequacy beginning in 2014. GAO and others have stated that inadequate payments could lead to access and quality of care issues for beneficiaries on dialysis. CMS is developing new, consensus-based measures that it could use to monitor treatment of mineral and bone disorder. CMS is also developing a new Web-based system to collect data for such measures. However, full implementation of this new system has been delayed repeatedly, and dialysis organizations and others GAO interviewed expressed concern about the reliability of data collected using this system. Recognizing the importance of timely and reliable quality monitoring under bundled payment systems, CMS officials told GAO that they intend to collect data using an alternative mechanism in 2011.
section_title: What GAO Recommends
paragraphs: GAO recommends that CMS assess payment adequacy when oral-only ESRD drugs are included in the bundled payment and ensure availability of reliable data for monitoring treatment of mineral and bone disorder. CMS agreed with GAO's recommendations.

section_title: Letter
paragraphs: Regardless of age, most individuals with end-stage renal disease (ESRD), a  condition of permanent kidney failure, are eligible for health care coverage  under Medicare. Since the implementation of Medicare’s ESRD benefit in  1973, hundreds of thousands of lives have been extended through  Medicare-covered dialysis treatment—a process that removes excess  fluids and toxins from the bloodstream. According to the Centers for  Medicare & Medicaid Services (CMS), the agency within the Department  of Health and Human Services that administers Medicare, in 2007,  Medicare spent about $9.2 billion on dialysis treatment and related items  and services for approximately 329,000 beneficiaries on dialysis.
Medicare pays dialysis organizations a single rate for providing dialysis  treatment and certain related items and services, which is a common form  of Medicare payment known as bundling. Medicare pays the bundled rate  per dialysis treatment—generally for three treatments per week. Effective  January 1, 2011, the bundled payment for dialysis care expanded to  include payment for some additional items and services. As a result, the  bundled payment covers the following under Medicare Part B: (1) dialysis  treatment and associated routine services, such as nursing, equipment,  supplies, and ESRD-related laboratory tests; (2) injectable drugs used to  treat complications related to ESRD; and (3) oral ESRD drugs that have  injectable equivalents.
This payment change was consistent with our previous recommendation  that the bundled payment for dialysis care be expanded to include all  ESRD services in order to improve efficiency and remove financial  incentives to provide more injectable ESRD drugs than necessary.  However in a subsequent report, we noted that bundled payment systems  may give providers an incentive to underserve the most costly  beneficiaries to avoid financial losses. We emphasized that beneficiaries  on dialysis are particularly vulnerable to any disruptions in care because  of their need for life-sustaining dialysis. As a result, we recommended that  CMS monitor access to and quality of dialysis care to identify any adverse  effects of this payment system change on beneficiaries.
The current Medicare bundled payment for dialysis care covers most, but  not all, of the items and services typically provided to dialysis patients. In  particular, this bundled payment does not include oral ESRD drugs that do  not have injectable equivalents, which consist of two classes of drugs— calcimimetics and phosphate binders—and are used to treat a  complication of ESRD known as mineral and bone disorder. CMS plans to  include oral-only ESRD drugs in the bundled payment for dialysis care  beginning in 2014. At that time, dialysis organizations will be  responsible for providing these drugs to beneficiaries.
The Patient Protection and Affordable Care Act (PPACA) requires us to  examine issues associated with including oral-only ESRD drugs in  Medicare’s bundled payment for dialysis care. As discussed with the  committees of jurisdiction, this report: (1) describes the rationales for  including oral-only ESRD drugs in the bundled payment for dialysis care,  (2) examines dialysis organizations’ recent experience with providing oral- only ESRD drugs and their ability to provide these drugs under the  bundled payment system, (3) examines the data sources that CMS could  use to account for oral-only ESRD drugs in the bundled payment system,  and (4) examines CMS’s ability to monitor treatment of mineral and bone  disorder under the bundled payment system.
To describe the rationales for including oral-only ESRD drugs in the  bundled payment for dialysis care, we conducted interviews with CMS  officials responsible for the design of the payment system as well as  experts on treatment of mineral and bone disorder. In addition, we  reviewed CMS’s recently published proposed and final rules for the  current bundled payment system in order to understand the payment  system’s design. We also reviewed related reports by the Medicare  Payment Advisory Commission (MedPAC) and others as well as the  clinical literature on dialysis and oral-only ESRD drugs.
To examine dialysis organizations’ recent experience with providing oral- only ESRD drugs and their ability to provide these drugs under the  bundled payment system, we conducted semistructured interviews with  representatives from 20 dialysis organizations—4 large and 16 small  organizations. We selected the 4 large dialysis organizations because they  owned the largest number of dialysis facilities nationwide. At the time of  our study, these large dialysis organizations reported that they owned  about 150 to 1,750 dialysis facilities and served about 12,400 to 130,500  dialysis patients. In addition, 3 of these organizations collectively owned  about 61 percent of dialysis facilities and served about 63 percent of  dialysis patients in 2008. We randomly selected the 16 small dialysis  organizations from 10 states: California, Florida, Georgia, Illinois, New  York, North Dakota, Ohio, Pennsylvania, Texas, and Utah. These 10  states were located in all four census regions and accounted for about 50  percent of all beneficiaries on dialysis as of December 31, 2008. We  selected the 16 small dialysis organizations based on data from Medi Dialysis Facility Compare database.  Each of these 16 small dialysis  organizations contained 1 to 112 dialysis facilities and served 23 to about  6,200 dialysis patients. We selected at least 2 small dialysis organizations  from each of the 5 largest states in our review and 1 small organization  from each of the other 5 states in our review. Seven of the 16 small dialys organizations were hospital-based and 10 of these 16 small organizations  owned at least 1 facility in an urban area. The 16 small dialysis  organizations in our review did not constitute a representative samp le.
Because dialysis organizations likely would need to comply with state  pharmacy licensure requirements to directly provide oral-only ESRD  drugs, we reviewed these requirements in each of the 10 states we select and interviewed state officials responsible for compliance with these  requirements. We also conducted interviews with representatives of  professional organizations and beneficiary advocacy organizations.
To examine the data sources that CMS could use to account for oral-only  ESRD drugs in the bundled payment system, we conducted interviews  with CMS officials responsible for designing this payment system. We also  reviewed provisions of the Medicare Improvements for Patients and  Providers Act of 2008 (MIPPA), which requires the implementation of the  current bundled payment system, as well as CMS’s proposed and final  rules for this payment system. As part of this review, we analyzed the  potential implications that these data sources could have on the extent to  which payments will be adequate when CMS expands the bundled  payment to include oral-only ESRD drugs.
To examine CMS’s ability to monitor treatment of mineral and bone  disorder under the bundled payment system, we reviewed relevant  documentation from CMS and clinical practice guidelines for care related  to the treatment of mineral and bone disorder. In addition, we conducted  interviews with CMS officials responsible for the quality monitoring of  dialysis care; nephrology clinicians with expertise in the treatment of  mineral and bone disorder, including individuals who helped develop  quality measures and guidelines for the treatment of this condition;  representatives of dialysis organizations; and officials from organizations  that represent nephrology clinicians, researchers, and beneficiaries on  dialysis.
We conducted this performance audit from July 2010 through March 2011  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: Treatment options for ESRD include kidney transplantation and dialysis.  Kidney transplants are not a practical option on a wide scale, as suitable  donated organs are scarce. In contrast, dialysis is the treatment used by  most beneficiaries with ESRD. Hemodialysis, the most common form of  dialysis, is generally administered three times a week at facilities that  provide these services. During hemodialysis, a machine pumps blood  through an artificial kidney and returns the cleansed blood to the body.
One common complication of ESRD is mineral and bone disorder, which  can result in a variety of negative clinical conditions in ESRD patients,  including weak and brittle bones and cardiovascular disease. Because  mineral and bone disorder is associated with abnormal calcium,  phosphorus, and parathyroid hormone (PTH) levels in the blood,  treatment of mineral and bone disorder typically involves monitoring the  levels of these substances in the blood and providing a combination of  medications to control these levels. The medications that are generally  provided to treat mineral and bone disorder are vitamin D, calcimimetics,  and phosphate binders. Vitamin D and calcimimetics are used to help  maintain normal levels of calcium and PTH, while phosphate binders are  used to reduce excessive phosphorus levels. Vitamin D is generally  administered intravenously, although a small number of patients—usually  those who receive dialysis in their home—are treated with the oral form of  the drug. Calcimimetics and phosphate binders are available only in oral  form.
Under the bundled payment system for dialysis care, dialysis organizations  are responsible for providing injectable ESRD drugs as well as oral ESRD  drugs with injectable equivalents. Dialysis organization personnel  typically administer injectable ESRD drugs to beneficiaries when they  come in for their dialysis treatments. In contrast, dialysis organization  personnel generally are not licensed to dispense oral ESRD drugs with  injectable equivalents. As a result, dialysis organizations may operate or  contract with a community or mail-order pharmacy to provide these drugs  to beneficiaries. Because dialysis organizations are not currently  responsible for providing oral-only ESRD drugs under the bundled  payment system for dialysis care, beneficiaries typically have coverage for  these drugs through other sources, such as Medicare Part D prescription  drug plans (PDP) and employer- or union-sponsored drug plans.
subsections: section_title: Medicare Payment for Dialysis Care
paragraphs: CMS implemented the bundled payment system for Medicare-covered  dialysis care in 1983. CMS has also developed bundled payment systems  for other Medicare-covered services in several settings, including inpatient  hospitals, skilled nursing facilities, and home health agencies. When  implementing a bundled payment system, CMS may determine what  services will be covered under the bundle and what the payment rate to  providers will be for those services. This rate is generally designed to  cover the costs that an efficient provider would incur to provide the  bundled services.
As required by MIPPA, in January 2011, CMS made the most substantial  change in Medicare’s bundled payment for dialysis care since this bundled  payment system was implemented in 1983—expanding the bundled  payment to cover additional items and services. The bundled payment will  be expanded further in 2014.
Prior to 2011, Medicare’s bundled payment covered dialysis treatment  and certain associated items and services under Part B. This bundled  payment did not cover all dialysis-related items and services. Specifically,  Medicare paid separately under Part B for injectable ESRD drugs. In  addition, for beneficiaries who were enrolled in Medicare Part D PDPs,  Medicare covered oral ESRD drugs under Part D.
For 2011 through 2013, the bundled payment for dialysis care was  expanded to cover, under Part B, additional dialysis-related items and  services such as injectable ESRD drugs and oral ESRD drugs with  injectable equivalents. Medicare continues to cover oral-only ESRD  drugs under Part D.
Beginning in 2014, the bundled payment will be expanded again—this  time to include coverage for oral-only ESRD drugs. As a result, Medicare  will begin paying for these drugs with the bundled payment under Part B  rather than covering them under Part D. (See fig. 1 for a summary of  changes over time in Medicare’s payment methods for dialysis and related  items and services.)
section_title: Monitoring the Quality of Dialysis Care
paragraphs: In response to a provision in the Balanced Budget Act of 1997, which  required CMS to develop a method to measure and report on the quality of  dialysis care provided under the Medicare program, CMS developed the  ESRD Clinical Performance Measures (CPM) Project. Through the CPM  Project, CMS develops quality measures for monitoring various aspects of  dialysis care and collects data to support these quality measures. From  1999 through 2008, CMS’s CPM Project collected data to support its quality  measures annually using a random national sample of beneficiaries and a  paper data collection form completed by dialysis facilities. However,  because CMS’s CPM Project collected data for only a national sample of  beneficiaries, CMS was limited to using these data to monitor the quality  of dialysis care at the national level and not the facility level.
Due in part to the limited amount of data that CMS could collect through  the paper data collection form, CMS has been developing a new Web- based data collection system—referred to as the Consolidated Renal  Operations in a Web-Enabled Network (CROWNWeb). CROWNWeb is  designed to collect data for all Medicare beneficiaries receiving dialysis  care, rather than for a sample of beneficiaries, and to allow CMS to  monitor the quality of dialysis care at both the national level and the  facility level. In general, CMS plans for facilities that are part of large  dialysis organizations participating in Medicare to transmit data for their  patients from the organization’s data management system to CROWNWeb  using an automated process—referred to as “batch” submission. In  contrast, CMS plans for facilities that are part of small dialysis  organizations participating in Medicare to submit data for their patients to  CROWNWeb by manually entering data via the Web.
section_title: Including Oral-Only ESRD Drugs in the Bundled Payment Could Promote Efficiency, Clinically Appropriate Care, and Access to These Drugs
paragraphs: There are three key reasons for including oral-only ESRD drugs in the  bundled payment for dialysis care: to encourage more efficient care, to  encourage more clinically appropriate care, and to increase access to  these drugs for certain beneficiaries. As we and others have noted,  bundling payments for items and services related to dialysis care is  designed to give dialysis organizations an incentive to provide care more  efficiently because organizations retain the difference if Medicare’s  bundled payment exceeds the cost of providing such items and services.  Therefore, including oral-only ESRD drugs in the bundled payment for  dialysis care could introduce an incentive for organizations to select the  oral-only ESRD drugs and associated doses that lead to efficient dialysis  care in order to increase the amount of money they retain from the  bundled payment.
Including oral-only ESRD drugs in the bundled payment for dialysis care  could also promote clinically appropriate care by removing the financial  incentive to use these drugs instead of drugs currently included in the  bundled payment. Specifically, dialysis organizations are not responsible  for the cost of phosphate binders and calcimimetics because these drugs  currently are not included in the bundled payment for dialysis care. As a  result, dialysis organizations gain financially if beneficiaries receive these  drugs to treat mineral and bone disorder instead of drugs included in the  bundled payment, such as vitamin D, even though doing so may not always  represent the most clinically appropriate care. For example, two experts  on treatment of mineral and bone disorder who we interviewed noted that  this financial incentive under the current bundled payment system could  lead to increased use of calcimimetics and decreased use of vitamin D to  control beneficiaries’ PTH levels. Although calcimimetics can be effective  at lowering PTH levels, these drugs may not be appropriate for all  beneficiaries and could result in adverse side effects for some  beneficiaries.
Finally, including oral-only ESRD drugs in the bundled payment for  dialysis care could improve access to these drugs for certain beneficiaries,  including beneficiaries who do not currently have prescription drug  coverage and beneficiaries with Part D prescription drug coverage whose  annual drug costs are within a certain range. Approximately 17 percent of  all Medicare beneficiaries on dialysis did not have any prescription drug  coverage in 2007. Studies have shown that, due to the higher out-of- pocket drug costs they incur, individuals who lack prescription drug  coverage are less likely to use prescription drugs than individuals with  drug coverage. Furthermore, beneficiaries on dialysis with standard drug  coverage through Part D may be subject to increased cost sharing for oral- only ESRD drugs when these beneficiaries’ total annual spending on all  prescription drugs falls between $2,840 and $6,448—a coverage gap  sometimes called the “doughnut hole.” However, when oral-only ESRD  drugs are included in the bundled payment, all beneficiaries on dialysis  will be eligible for coverage for these drugs under Medicare Part B, and  will not be subject to the Medicare Part D coverage gap for these drugs.
section_title: Most Large Dialysis Organizations Provided Oral-Only ESRD Drugs to Some Beneficiaries in 2010; Both Large and Small Organizations Identified Potential Issues with Providing These Drugs in 2014
paragraphs: Three of the 4 large dialysis organizations in our review reported that they  provided oral-only ESRD drugs to some of the Medicare beneficiaries they  served in 2010. In contrast, all 16 of the small dialysis organizations in our  review reported that they did not provide these drugs to beneficiaries in  2010. Regardless of their experience with providing these drugs to  beneficiaries, the large and small dialysis organizations in our review  identified several issues that could affect their ability to provide these  drugs to beneficiaries in 2014.
subsections: section_title: Three Large Dialysis Organizations Provided Oral-Only ESRD Drugs to Some Beneficiaries in 2010, While Small Organizations We Interviewed Did Not Provide These Drugs
paragraphs: The four large dialysis organizations in our review generally had some  experience with providing oral-only ESRD drugs to Medicare beneficiaries.  Specifically, three of the large dialysis organizations in our review  reported that they provided oral drugs, including oral-only ESRD drugs, to  some of their patients in 2010. Representatives from these three large  dialysis organizations explained that their organizations operated  community or mail-order pharmacies and provided oral drugs to about 2 to  22 percent of their patients, including some Medicare beneficiaries who  were enrolled in a Part D PDP. For example, representatives from one of  these large dialysis organizations noted that their organization operated a  mail-order pharmacy and provided oral drugs to about 26,000 of its 120,000  patients. These representatives told us that their dialysis organization’s  pharmacy typically mailed oral drugs to patients either at their homes or at  dialysis facilities. The representatives also said that their dialysis  organization’s pharmacy promoted and monitored patients’ adherence to  their prescriptions by, among other things, sending reminders to patients  when their prescriptions needed to be refilled and notifying clinicians  when patients did not fill their prescriptions on schedule.
In contrast to most of the large dialysis organizations in our review, all 16  of the small dialysis organizations in our review reported that they did not  provide oral-only ESRD drugs to Medicare beneficiaries in 2010. The  National Renal Administrators Association (NRAA), a nonprofit  organization that represents small dialysis organizations throughout the  United States, also told us that small dialysis organizations generally did  not provide oral-only ESRD drugs or any other oral drugs in 2010.  However, small dialysis organizations—including those in our review— may have recently gained some experience with providing oral ESRD  drugs that have injectable equivalents. Since January 2011, under the  bundled payment system for dialysis care, all dialysis organizations—large  and small—are responsible for providing oral ESRD drugs that have  injectable equivalents to all of the Medicare beneficiaries they serve who  need these drugs. However, the small dialysis organizations in our review  generally noted that less than 2 percent of their patients had prescriptions  for oral ESRD drugs that have injectable equivalents, while most of their  patients had prescriptions for oral-only ESRD drugs.
In addition to having different experiences with providing oral-only ESRD  drugs to Medicare beneficiaries in 2010, the large and small dialysis  organizations in our review generally reported that they were at different  stages of planning for providing these drugs to beneficiaries in 2014.  Specifically, the same 3 large dialysis organizations that provided oral-only  ESRD drugs to some beneficiaries in 2010 reported that they had started  planning for providing these drugs in 2014. Representatives from 2 of these  3 large dialysis organizations reported that their organizations planned to  use their own mail-order pharmacies to provide these drugs to  beneficiaries in 2014. The third large dialysis organization was still  considering whether to use its own mail-order pharmacy or to contract  with another mail-order pharmacy to provide these drugs to beneficiaries  in 2014. In contrast, representatives from only 1 of the 16 small dialysis  organizations in our review reported that their organization had plans for  providing oral-only ESRD drugs to beneficiaries in 2014. Specifically,  representatives from a small hospital-based dialysis organization reported  that their organization planned to use the hospital’s pharmacy to provide  oral-only ESRD drugs to beneficiaries.
section_title: Both Large and Small Dialysis Organizations Identified Several Issues That Could Affect Their Ability to Provide Oral- Only ESRD Drugs in 2014
paragraphs: Both the large and small dialysis organizations in our review identified  several issues that could affect their ability to provide oral-only ESRD  drugs in 2014. One issue that both the large and small dialysis  organizations in our review generally expressed concern about was the  uncertainty surrounding Medicare’s bundled payment amount for dialysis  care. Specifically, 3 of the 4 large dialysis organizations and 11 of the 16  small dialysis organizations in our review noted that they were concerned  about the extent to which the bundled payment for dialysis care would  cover their costs of obtaining oral-only ESRD drugs and providing these  drugs to beneficiaries. For example, representatives from 2 of the 20  dialysis organizations in our review indicated that, if the bundled payment  amount for dialysis care was inadequate, beneficiaries might not receive  certain high-cost oral-only ESRD drugs—even if these drugs were the most  clinically effective. Additionally, experts on mineral and bone disorder  noted that, to minimize costs, dialysis organizations could choose to  increase their provision of calcium-based phosphate binders, which tend  to be relatively inexpensive. However, the use of calcium-based phosphate  binders could increase beneficiaries’ blood calcium levels, which could  have adverse clinical effects. Furthermore, representatives from 2 of the  small dialysis organizations in our review noted that the weaker  purchasing power of small dialysis organizations relative to that of large  dialysis organizations would make it difficult for them to negotiate  competitive prices for oral-only ESRD drugs with drug manufacturers and  pharmacies.
In addition to their concerns about payment adequacy, all 4 of the large  dialysis organizations in our review told us that complying with different  state pharmacy licensure requirements in multiple states could pose  challenges. Similarly, 9 of the 16 small dialysis organizations in our review  noted that the need to comply with these requirements would make it  difficult for them to operate their own pharmacies. These requirements  generally pertain to staffing, drug storage, security, and delivery. For  example, all 10 states we selected for our review required that  1.  a pharmacist be in charge of a pharmacy;  2.  a pharmacist supervise drug dispensing at a pharmacy;  3.  a pharmacy meet drug storage standards, such as securely storing  drugs in a designated space; and  4.  a pharmacy follow security procedures, such as restricting access to a  pharmacy when a pharmacist is off duty.
Representatives from the 3 large dialysis organizations that operated  pharmacies in 2010 said that providing oral-only ESRD drugs to all of the  Medicare beneficiaries they will serve in 2014 would be challenging. These  representatives noted that complying with drug delivery requirements  would be challenging because certain states prohibited particular drug  delivery methods. For example, officials from the Board of Pharmacy in 2  states—Georgia and Ohio—told us that their states generally prohibited  pharmacies in their states from mailing drugs to beneficiaries at dialysis  facilities. Representatives from 1 of these 3 large dialysis organizations  also noted that, although their dialysis organization operated a pharmacy,  the pharmacy served only about 2 percent of the dialysis organization’s  current patients and served patients in only 1 of the 27 states in which the  dialysis organization operated. As a result, this dialysis organization would  need to comply with the pharmacy licensure requirements of the other 26  states to provide oral-only ESRD drugs to the Medicare beneficiaries it will  serve in these states. Furthermore, representatives from 9 of the small  dialysis organizations in our review indicated that state pharmacy  licensure requirements would make it difficult to operate their own  pharmacies. Some of the representatives from these small dialysis  organizations indicated that it would be more feasible for their dialysis  organizations to contract with community or mail-order pharmacies to  provide oral-only ESRD drugs to Medicare beneficiaries.
Another potential issue raised by all 4 of the large dialysis organizations  and 11 of the 16 small dialysis organizations in our review was related to  the need for additional resources to implement organizational changes  associated with providing oral-only ESRD drugs to Medicare beneficiaries.  Specifically, representatives from 1 of the large dialysis organizations and  5 of the small dialysis organizations in our review noted that their  organizations may need to hire or train staff to, among other things, assist  with the distribution of oral-only ESRD drugs to beneficiaries or monitor  beneficiaries’ adherence to their prescriptions for these drugs.  Additionally, representatives from all 4 of the large dialysis organizations  and 3 of the 16 small dialysis organizations in our review indicated that  their organizations may need to develop new systems for various  purposes, such as billing or monitoring beneficiary adherence to  prescriptions.
Finally, some of the large and small dialysis organizations in our review  identified other issues that could affect their ability to provide oral-only  ESRD drugs to Medicare beneficiaries. For example, 2 of the 4 large  dialysis organizations and 1 of the 16 small dialysis organizations in our  review expressed concern that including oral-only ESRD drugs in the  bundled payment for dialysis care could lead to additional fragmentation  of care because beneficiaries would receive prescription drug coverage  from multiple, unconnected sources. Representatives from these dialysis  organizations noted that, if beneficiaries obtain their oral-only ESRD drugs  from their dialysis organizations but obtain their other prescription drugs  from another source such as their Medicare Part D PDPs, then their PDPs  could lack information on the oral-only ESRD drugs that these  beneficiaries take. These representatives expressed concern that this lack  of information could impair the ability of PDPs to identify potential  negative drug interactions.
section_title: CMS Is Limited to Using Part D Data to Account for Oral-Only ESRD Drugs in the Bundled Payment; These Data May Understate Dialysis Organizations’ Costs
paragraphs: According to CMS officials, CMS is limited to using data on payments  under Medicare’s Part D program to account for oral-only ESRD drugs in  the bundled payment. In particular, CMS officials stated that federal law  limits the agency to using data on payments under Medicare for dialysis  and related items and services such as oral-only ESRD drugs in 2007, 2008,  or 2009 to calculate the bundled payment for dialysis care. In addition,  federal law limits the estimated total payments that CMS may use when  implementing the new bundled payment system in 2011 to 98 percent of  what total payments under Medicare would have been if the previous  system had remained in place. CMS officials told us that they had  identified two potential sources of data on payments under Medicare for  oral-only ESRD drugs that they could use to account for these drugs in the  bundled payment—payments for these drugs under Medicare’s Part D and  Retiree Drug Subsidy programs. Part D payment data represent PDP  payments to pharmacies for each medication provided to beneficiaries,  and these data also include information on beneficiary cost-sharing and  the amounts beneficiaries paid for drugs while they were in the coverage  gap. Retiree Drug Subsidy data represent the total amounts that Medicare  paid to groups such as employers or unions to subsidize the drug coverage  of Medicare beneficiaries in these groups. However, CMS officials stated  that it would not be feasible to use Retiree Drug Subsidy data because  these data do not indicate which payments were for oral-only ESRD drugs  for beneficiaries on dialysis.
Although CMS is limited to using data on payments under Part D for oral- only ESRD drugs to account for oral-only ESRD drugs in the bundled  payment, certain aspects of these data suggest that the data on total  payments under Part D for 2007 through 2009 may understate the costs  that dialysis organizations would incur to provide these drugs. Specifically:    Part D data for 2007 through 2009 accounted for only about two- thirds of beneficiaries on dialysis. In 2007, for example, Part D  payments for oral-only ESRD drugs for beneficiaries on dialysis with Part  D coverage totaled about $445 million; however, this amount did not  include payments for oral-only ESRD drugs for the approximately one- third of beneficiaries on dialysis who lacked Part D coverage. Because it is  unclear whether or to what extent beneficiaries with and without Part D  coverage are comparable in their utilization of oral-only ESRD drugs, using  Part D data to account for beneficiaries without Part D coverage presents  challenges. If the two groups of beneficiaries were comparable in their  utilization of oral-only ESRD drugs, total spending on these drugs for all  beneficiaries on dialysis—including the approximately one-third of  beneficiaries without Part D coverage—could have been an estimated   $216 million higher in 2007.
Part D drug coverage in 2007 through 2009 generally was less  comprehensive than the coverage that dialysis organizations will  be required to provide. Most stand-alone Part D PDPs during this time  did not cover drugs when beneficiaries’ annual drug costs were in the  coverage gap. However, beginning in 2014, dialysis organizations will be  responsible for covering the cost of oral-only ESRD drugs for beneficiaries  on dialysis. Moreover, some studies suggest that more comprehensive  coverage of oral-only ESRD drugs, which dialysis organizations will be  required to provide, could lead to greater use of and adherence to  prescriptions for these drugs. As a result, beneficiaries’ use of oral-only  ESRD drugs, and therefore dialysis organizations’ costs of providing these  drugs, could be higher than the historical Part D data indicate.
Part D data reflect payment rates that may be lower than dialysis  organizations’ costs. Part D data reflect payment rates that PDPs  negotiated with drug manufacturers and pharmacies. Because PDPs  generally have larger numbers of beneficiaries than dialysis organizations  and are providing a wider range of drugs, these plans may be able to  negotiate larger volume discounts for purchasing oral-only ESRD drugs.  Furthermore, these Part D data do not account for PDPs’ administrative  costs of providing prescription drugs, including oral-only ESRD drugs.
CMS does not know whether the payment amount for the entire bundle of  items and services, including oral-only ESRD drugs, will be adequate—that  is, whether it will cover the costs incurred by an efficient dialysis  organization to supply oral-only ESRD drugs in addition to the range of  other items and services included in the bundle. However, the possibility  that Part D data may understate the costs of providing oral-only ESRD  drugs raises questions about the adequacy of the overall bundled payment  rate. We and others have noted that inadequate payments under bundled  payment systems could impair the ability of providers such as dialysis  organizations to furnish beneficiaries with access to high-quality care.  CMS officials stated that they had not yet determined what the bundled  payment rate will be when oral-only ESRD drugs are included, because  CMS was focused on implementing the current payment system for  dialysis care. As a result, CMS does not know whether or the extent to  which the bundled payment rate will be adequate when, beginning in 2014,  CMS includes oral-only ESRD drugs in the bundled payment for dialysis  care.
section_title: CMS Is Developing New Quality Measures Related to Mineral and Bone Disorder; However, CMS’s System for Collecting Data for Its Quality Measures Has Been Delayed
paragraphs: CMS is currently developing new quality measures for monitoring  treatment of mineral and bone disorder in order to identify measures for  which a consensus target level can be proposed based on the clinical  evidence available. CMS is also developing a new data collection system,  called CROWNWeb, which the agency plans to use to collect data to  support these new measures. However, due to repeated implementation  delays and data reliability issues associated with CROWNWeb, it is  uncertain when CMS will be able to rely on CROWNWeb to collect data for  these measures.
subsections: section_title: CMS Is Developing New Quality Measures Related to Mineral and Bone Disorder
paragraphs: CMS is developing new quality measures related to treatment of mineral  and bone disorder in order to identify measures for which a consensus  target level can be proposed based on the clinical evidence available.  CMS’s current quality measures use target levels for serum calcium and  serum phosphorus that are based on clinical guidelines recommended by  the 2003 Kidney Disease Outcomes Quality Initiative (K/DOQI) Clinical  Practice Guidelines for Bone Metabolism and Disease in Chronic Kidney  Disease. However, more recent clinical guidelines issued in 2009 state  that there is insufficient clinical evidence to support target levels for  serum calcium and serum phosphorus, such as those recommended by the  K/DOQI guidelines. Furthermore, four of the five experts we interviewed  also noted that there is a lack of clinical evidence to support target levels  for these indicators.
CMS’s current quality measures for monitoring treatment of mineral and  bone disorder are:  1.  The percentage of patients in a dialysis facility with serum calcium  measured at least once within the month.  2.  The percentage of patients in a dialysis facility with serum phosphorus  measured at least once within the month.  3.  The percentage of patients in a dialysis facility with mean serum  calcium between 8.4 and 10.2 milligrams per deciliter (mg/dL).  4.  The percentage of patients in a dialysis facility with mean serum  phosphorus between 3.5 and 5.5 mg/dL.
CMS does not currently have a quality measure related to PTH; however,  all of the experts we interviewed noted that PTH is an important indicator  for monitoring treatment of mineral and bone disorder.
As part of its efforts to develop new quality measures, CMS recently  submitted two new mineral and bone disorder measures, in addition to  measures related to other aspects of dialysis care, to an independent  consensus-building body known as the National Quality Forum (NQF).  NQF evaluates quality measures to determine which ones should be  endorsed—that is, recognized—as national standards. The measures  related to treatment of mineral and bone disorder that CMS submitted to  NQF are:  1.  The percentage of patients in a dialysis facility with a 3-month rolling  average of total uncorrected serum calcium greater than 10.2 mg/dL.  2.  The percentage of patients in a dialysis facility with a 3-month rolling  average of serum phosphorus less than 2.5 mg/dL.
In January 2011, the NQF ESRD Steering Committee recommended that  the measure related to serum calcium continue through the consensus  development process toward possible endorsement by NQF but did not  recommend that the measure related to serum phosphorus continue  through this process. A final decision on whether NQF will endorse these  and other quality measures is scheduled for June 2011. Once this process  is complete, CMS plans to decide how it will incorporate any NQF- endorsed quality measures into its quality monitoring activities.
section_title: CMS’s System for Collecting Data for Its Quality Measures Has Been Delayed
paragraphs: Due in part to repeated implementation delays, it is uncertain when CMS  will be able to rely on CROWNWeb to collect the data it needs to support  its quality measures related to treatment of mineral and bone disorder, as  well as other aspects of dialysis care. Beginning in 2009, CMS stopped  collecting data via a paper data collection form for the quality measures  included in the CPM Project because CMS intended to begin collecting  data for these measures from all dialysis facilities in CROWNWeb in  February 2009. However, CMS officials told us that full, national  implementation of CROWNWeb was delayed because a contractor tasked  with designing and implementing CROWNWeb performed poorly. CMS  officials told us that CMS hired a new contractor in September 2009 and  scheduled full implementation of CROWNWeb for December 2009.  According to CMS officials, full implementation of CROWNWeb was  delayed again because CMS needed to update CROWNWeb to address  security requirements for federal data systems. Due in part to these  delays, CMS modified the implementation of CROWNWeb to a “phase-in”  approach whereby the number of facilities submitting data to CROWNWeb  increases in phases until full implementation is achieved. Specifically,  about 180 dialysis facilities currently submit data to CROWNWeb, and  CMS planned to begin collecting data from all dialysis facilities— approximately 5,600—in June 2011. However, due to continued  implementation challenges, CMS recently delayed the full, national  implementation of CROWNWeb until February 2012.
In addition to concerns about implementation delays, dialysis  organizations and others we spoke with expressed concern about the  reliability of the data in CROWNWeb. For example, 9 of the 20 dialysis  organizations we interviewed expressed concern about the reliability of  manually entered data and CMS noted that there is a data error rate of  over 20 percent for data submitted to CROWNWeb via the batch  submission process in the current phase of CROWNWeb implementation.  According to CMS officials, CMS has contracted with two vendors that are  responsible for evaluating the accuracy and reliability of data in  CROWNWeb. However, the results of this evaluation will not be available  until CROWNWeb is fully implemented.
CMS officials told us that, due to the delays with the implementation of  CROWNWeb, from 2008 through 2010 data for quality measures related to  mineral and bone disorder and other aspects of dialysis care were  collected through a project—referred to as the Elab Project— administered by the ESRD Network Program. The ESRD Network  Program, which was established in 1978, consists of 18 ESRD Networks,  covering each U.S. state, territory, and the District of Columbia, which are  responsible for helping CMS monitor the quality of dialysis care provided  by dialysis facilities in their geographic area. Through the Elab Project,  the ESRD Networks collected data for nearly 100 percent of dialysis  patients in the United States in 2009, the most recent year for which data  are available. The ESRD Networks used these data to monitor the quality  of dialysis care at both the national level and the facility level. Given the  implementation challenges associated with CROWNWeb, CMS officials  noted that they plan to continue the Elab Project in 2011 and that it may be  necessary to continue this initiative in subsequent years.
section_title: Conclusions
paragraphs: Expanding the bundled payment for dialysis care to include oral-only  ESRD drugs has the potential to promote efficiency, clinically appropriate  care, and access to these drugs for the over 300,000 beneficiaries on  dialysis. However, Part D data, which CMS officials noted they were  limited to using to expand the bundled payment to include oral-only ESRD  drugs, may understate the costs that dialysis organizations would incur to  provide these drugs. This raises questions about whether, in its entirety,  the bundled payment for dialysis care will provide adequate payments for  dialysis organizations when, beginning in 2014, CMS uses the payment to  cover the provision of oral-only ESRD drugs, along with other services.
Because inadequate payments could impair the ability of dialysis  organizations to provide beneficiaries with access to high-quality dialysis  care, it will be important for CMS to know—before implementing this  payment change—whether or to what extent the bundled payment for  dialysis care will be adequate when the payment also includes oral-only  ESRD drugs.
In addition to the need to assess payment adequacy, the importance of  quality monitoring under bundled payment systems has been well  established to help ensure that any improvements in efficiency associated  with these payment systems are not realized by compromising the quality  of dialysis care for beneficiaries. Specifically, we emphasized in our March  2010 report the need for CMS to monitor beneficiaries’ quality of dialysis  care as soon as possible after the payment system for dialysis care was  implemented in January 2011. CMS recognizes the importance of  monitoring the quality of dialysis care, including treatment of mineral and  bone disorder, and the agency has conducted such monitoring for  decades. However, the substantial and repeated delays associated with  CROWNWeb, in addition to potential problems with data reliability  associated with that system, raise questions about when CMS will be able  to rely on the data collected in CROWNWeb to monitor the quality of  dialysis care. Due to significant recent changes in CMS’s method for  paying for dialysis care, it is imperative that CMS identify an alternate  source of data for quality monitoring until CROWNWeb is fully  operational. CMS officials recognize the need for an alternate data source  and intend to continue the Elab Project in 2011. These officials also  recognize that, given the uncertainties with CROWNWeb implementation,  it may be necessary to continue the Elab Project in future years.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that Medicare beneficiaries have access to high-quality  dialysis care, we recommend that the Administrator of CMS assess the  extent to which the bundled payment for dialysis care will be sufficient to  cover an efficient dialysis organization’s costs to provide such care when  the bundled payment expands to cover oral-only ESRD drugs. The  Administrator should conduct this assessment before implementing this  expanded bundled payment.
In order to ensure effective monitoring of treatment of mineral and bone  disorder, we recommend that the Administrator of CMS continue  collecting data for quality measures related to this condition from sources  such as the Elab Project until CROWNWeb is fully implemented and  concerns about its data reliability have been adequately addressed.
section_title: Agency and Other Comments and Our Evaluation
paragraphs: We received written comments on our draft report from the Department of  Health and Human Services on behalf of CMS. These comments are  reprinted in appendix I. We also obtained oral comments on our draft  report from groups representing ESRD patients, large and small dialysis  organizations, and nephrologists.
subsections: section_title: Comments from CMS
paragraphs: In written comments on a draft of this report, CMS agreed with both of our  recommendations. In response to our recommendation that CMS assess  the adequacy of the bundled payment when oral-only ESRD drugs are  included, CMS stated that it would carefully analyze data on the utilization  of these drugs before including them under the bundled payment. CMS  also noted that, before implementing this payment change, the agency  would allow for public comment through the rulemaking process and  would carefully examine any concerns expressed by the public to ensure  that beneficiaries continue to have access to needed medications.  Furthermore, CMS stated that it was confident that the additional amount  to be included in the ESRD prospective payment system to account for  oral-only ESRD drugs would be adequate to account for the average  patient’s oral drug needs. They noted that particular aspects of the  payment system are intended to account for the higher drug costs of some  patients. Consistent with our findings, CMS also noted that including oral- only ESRD drugs in the payment bundle would be advantageous because it  would allow for the selection of drugs that are in the best clinical interests  of the patients without regard to financial incentives.
With regard to our recommendation that CMS ensure the availability of  data for monitoring the treatment of mineral and bone disorder, CMS  noted that it plans to include measures related to mineral and bone  disorder in the ESRD Quality Incentive Program (QIP). Recognizing the  importance of collecting data on ESRD quality measures, CMS noted that  it has collected and used data through a number of quality initiatives over  the last two decades and currently collects such information through  multiple sources. In its comments CMS also explained that although the  agency plans to eventually collect patient-level quality data through  CROWNWeb and another mechanism developed in consultation with the  NRAA, the Elab Project will be funded for the year 2011. According to  CMS the agency plans to make continuing the project a funding priority  until other data sources are available, making the project redundant. CMS  emphasized that all of these data collection vehicles include clinical  indicators on mineral and bone metabolism. CMS also provided an  updated schedule for national CROWNWeb implementation and noted that  data validity and reliability issues will be addressed over this period. CMS  also provided technical comments which we incorporated as appropriate.
section_title: Comments from Groups Representing the Dialysis Industry and Patients
paragraphs: In their oral comments to us regarding our draft report, representatives  from the American Association of Kidney Patients (AAKP), the American  Kidney Fund (AKF), the Kidney Care Council (KCC), the National Renal  Administrators Association (NRAA), and the Renal Physicians Association  (RPA) generally agreed with our message and recommendations to CMS.  The representatives generally noted that our draft report was well-written  and balanced and that they appreciated that we collected data and  perspectives from a variety of organizations. The groups also underscored  our findings related to dialysis organizations’ ability to provide oral-only  ESRD drugs. Specifically, representatives from all of the groups reiterated  some of the possible challenges we described in our draft report related to  providing these drugs, including the complexity of complying with state  pharmacy licensure requirements, the potential for fragmentation of care,  and the potential influence of the payment change on physician  prescribing behaviors for oral-only ESRD drugs. The groups representing  large and small dialysis providers also expressed unease about the  additional costs they will incur to provide these drugs. The five groups’  comments on our draft report generally focused on three areas of concern:  (1) the reasons for including oral-only ESRD drugs in the bundled payment  system, (2) the data CMS intends to use to account for oral-only ESRD  drugs in the bundled payment system, and (3) CMS’s ability to monitor the  quality of care provided to dialysis beneficiaries. Industry and patient  group representatives also provided technical comments, which we  incorporated as appropriate.
In commenting on our findings related to the reasons for including oral- only ESRD drugs in the bundled payment, representatives of RPA, NRAA,  and AKF expressed concern that potential increases in beneficiaries’ out- of-pocket costs for oral-only ESRD drugs could affect beneficiaries’ access  to these drugs when they are included in the bundled payment. For  example, representatives of RPA and NRAA commented that beneficiaries’  cost sharing for these drugs could be higher than it would be if the drugs  remained covered under Part D because the Part D coverage gap will be  reduced. In addition, representatives of AKF noted that some  beneficiaries currently receive financial assistance to help cover their out- of-pocket costs for Part D drugs and once oral-only ESRD drugs are  included in the Part B payment bundle, these beneficiaries will no longer  receive this assistance.
We did not assess the extent to which beneficiaries’ cost sharing will  change when oral-only ESRD drugs are included in the bundled payment  system because doing so was beyond the scope of our study. Although  beneficiaries’ out-of-pocket costs for drugs covered under Part D will  decrease once the Part D coverage gap is eliminated, beneficiaries will  continue to be responsible for cost sharing for Part D-covered drugs. As  noted in the preamble to the final rule for the design of the bundled  payment system for dialysis care, whether a particular beneficiary’s cost  sharing for oral-only ESRD drugs increases or decreases when these drugs  are included in the bundled payment will depend on his or her individual  circumstances. However, as we noted in the report, beneficiaries who  currently lack any prescription drug coverage could experience a  reduction in out-of-pocket costs related to oral-only ESRD drugs when  these drugs are included in the bundled payment.
In commenting on our findings related to the Part D data CMS intends to  use to account for oral-only ESRD drugs in the bundled payment for  dialysis care, representatives from RPA, NRAA, KCC, and AAKP restated  the potential limitations of these data that we identified in the draft report.  Representatives from RPA and NRAA commented that these data may not  reflect changes in treatment patterns since 2007. In addition,  representatives from KCC commented that MIPPA did not limit CMS to  using Part D data from 2007, 2008, or 2009 to account for oral-only ESRD  drugs in the bundled payment. KCC representatives also asserted that it  was not CMS’s position that MIPPA limited the agency to using these data  to expand the bundled payment to include oral-only ESRD drugs. They  noted further that in the proposed rule for the new payment system, CMS  calculated $14 per dialysis treatment to account for oral-only ESRD drugs  in the bundled payment amount. However, KCC’s estimate of the cost of  providing these drugs was $45 per treatment. KCC representatives  suggested that we note the true cost of providing oral-only ESRD drugs in  the report. Representatives of NRAA also commented that if the amount of  the bundled payment were not adequate, small dialysis organizations  could go out of business, which could create access problems for  beneficiaries.
In our draft report, we noted the potential limitations of Part D data and  recommended that CMS assess the extent to which the bundled payment  for dialysis care would be sufficient to cover an efficient dialysis  organization’s costs to provide these drugs. CMS asserted that MIPPA  limited the agency to using data on Medicare payments for oral-only ESRD  drugs in 2007, 2008, or 2009 to account for these drugs in the bundled  payment system. In addition, CMS officials also reiterated that they were  limited to using data from the Part D program. However, assessing the true  cost of providing oral-only ESRD drugs and CMS’s interpretation of MIPPA  was beyond the scope of our study. Of most concern is whether the  payment for the entire bundle of services will be adequate to cover the  costs of efficient dialysis organizations. We agree that if the bundled  payment is not adequate, access problems for beneficiaries could result. In  our report, we recommended that CMS assess the adequacy of the bundled  payment amount before expanding the bundled payment to include oral- only ESRD drugs.
Finally, in commenting on our findings related to CMS’s ability to monitor  the quality of care provided to dialysis beneficiaries under the bundled  payment system, representatives of RPA and AKF agreed with our finding  that there is not consensus around appropriate quality measures for  monitoring treatment of mineral and bone disorder. In addition,  representatives of RPA, KCC, and AAKP commented that the report  should place stronger emphasis on the CROWNWeb implementation  challenges and representatives of RPA and KCC underscored their  concerns about the reliability of the data in CROWNWeb.
In our draft report, we noted that CMS submitted two new quality  measures related to treatment of mineral and bone disorder to NQF in an  effort to identify measures for which a target level can be proposed based  on the clinical evidence available. Although the phosphorus measure  submitted by CMS has been rejected by NQF, the calcium measure  submitted by CMS was still under consideration when we conducted the  data collection for this report. In addition, we highlighted in our draft  report the challenges associated with CROWNWeb implementation— including repeated and significant delays with national implementation  and concerns about data reliability—and recommended that CMS continue  to collect data for quality measures related to treatment of mineral and  bone disorder from sources such as the Elab Project until CROWNWeb is  fully operational.
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 cosgrovej@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 who made major contributions to this report are  listed in appendix II.
section_title: Appendix I: Comments from the Department of Health and Human Services
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Jessica Farb, Assistant Director;  William Black; Manuel Buentello; Krister Friday; David Grossman; Aubrey  Naffis; and Jennifer Whitworth made key contributions to this report.