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

Letter

Background

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.

Selected Dialysis Providers Reported Wide Variation in the Costs of Providing Dialysis at Home Compared to Facility Dialysis

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.

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

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.

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

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.

Several Dialysis Providers Reported That Training Costs for Home Dialysis Patients Are Significant

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.

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

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.

CMS Is Considering Factoring Home Dialysis Costs into Calculation of Expanded Bundled Payment

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.

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

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.

Conclusions

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.

Recommendation for Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Scope and Methodology

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.

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

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Acknowledgments

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.