End-Stage Renal Disease: CMS Should Monitor Access to and Quality of Dialysis Care Promptly after Implementation of New Bundled Payment System
Released: 2010-04-30T00:00:00

Letter

Background

ESRD is a condition of permanent kidney failure. Treatment options include kidney transplantation and maintenance 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 dialysis services. During hemodialysis, a machine pumps blood through an artificial kidney, called a hemodialyzer, and returns the cleansed blood to the body. In order to receive hemodialysis treatment, patients must have a vascular access, which is a site on the body where blood is removed and returned during dialysis.

One of the complications of ESRD is anemia, a condition in which an insufficient number of red blood cells is available to carry oxygen throughout the body. A diagnosis of anemia is determined through a measurement of the level of hemoglobin in the blood. To treat anemia, providers may administer ESAs intravenously in conjunction with IV iron.28,,29 30 Another complication of ESRD is hyperparathyroidism, which can result from a deficiency of vitamin D. Hyperparathyroidism is typically diagnosed based on the level of parathyroid hormone (PTH) in the blood and can lead to elevated phosphorus levels and low calcium levels in the blood as well as softening of the bones. The treatment of hyperparathyroidism includes the administration of IV vitamin D and oral drugs such as phosphate binders and calcimimetics.

There are two types of ESAs—epoetin alfa (brand name Epogen®) and darbepoetin alfa (brand name Aranesp®). In 2007, Epogen accounted for about 92 percent of Medicare expenditures on ESAs. Of the approximately $2.2 billion in Medicare expenditures on injectable ESRD drugs in 2007, about 75 percent was spent on ESAs.

Although iron is most commonly administered intravenously, it can also be given orally.

Over the last several years, researchers and clinicians have debated how to best manage anemia in chronic kidney disease patients, including those with ESRD. Some studies have concluded that using ESAs to achieve higher-than-recommended hemoglobin targets does not reduce, and may sometimes result in, adverse cardiovascular events. See Tilman B. Drueke et al., “Normalization of Hemoglobin Level in Patients with Chronic Kidney Disease and Anemia,” The New England Journal of Medicine, vol. 355, no. 20 (2006), and Ajay K. Singh et al., “Correction of Anemia with Epoetin Alfa in Chronic Kidney Disease,” The New England Journal of Medicine, vol. 355, no. 20 (2006). Based on the results of these studies and other safety concerns, the Food and Drug Administration (FDA) issued a “black box” warning and required labeling changes for ESAs in 2007. FDA recently announced that all patients receiving ESAs must be provided a medication guide that explains the potential for adverse events while using these products. In the case of ESAs, the medication guides warn of “potential death or other serious side effects.” Other researchers have suggested that variability in dosing of ESAs across dialysis facilities treating similar patients may be evidence that some utilization of these drugs is not clinically appropriate. See Mae Thamer et al., “Dialysis Facility Ownership and Epoetin Dosing in Patients Receiving Hemodialysis,” The Journal of the American Medical Association, vol. 297, no. 15 (2007).

New Bundled Payment System for Dialysis Care

In September 2009, CMS issued its proposed rule for the design of the new bundled payment system for dialysis care, which is required by law for services furnished on or after January 1, 2011. CMS proposed that under the new bundled payment system, Medicare would continue paying dialysis facilities a bundled payment per dialysis treatment for up to three treatments per week as it does under the current system. However, unlike the current payment system, the new bundled payment would cover ESRD drugs and other separately billable services (for example, laboratory tests related to ESRD treatment) in addition to dialysis services currently covered under the composite rate. Under CMS’s proposed rule, the ESRD drugs covered under the new bundled payment would include injectable ESRD drugs as well as oral ESRD drugs, such as calcimimetics, that are currently covered under Medicare Part D.

Accounting for Beneficiary Cost Differences under Medicare Bundled Payment Systems

Bundled payment systems in Medicare typically include a case-mix adjustment and may also use an outlier policy to account for differences in the cost of beneficiaries’ care. In general, a case-mix adjustment varies payments based on factors associated with beneficiaries’ expected costs of care. As a result, a case-mix adjustment typically increases bundled payments for providers who treat high-cost beneficiaries. In addition, some bundled payment systems under Medicare use an outlier policy to partially offset providers’ financial losses for treating beneficiaries whose costs of care substantially exceed what would be expected. To reduce these financial losses, an outlier policy involves making provider payments in addition to the case-mix adjusted bundled rate for these high-cost beneficiaries.

The accuracy with which bundled payments are adjusted to account for differences in beneficiaries’ expected costs of care may affect beneficiaries’ access to and quality of care. In prior work, we and others have stated that if a bundled payment system’s case-mix adjustment is not designed adequately, then payments may be too low for certain groups of beneficiaries. Further, providers could respond to these inadequate payments by choosing not to treat or inappropriately limiting care for these groups, which could adversely affect these beneficiaries’ access to and quality of care. We and others have noted that underpaying for care, which could result from an inadequate case-mix adjustment, may result in care of poor quality. In particular, poor quality of care could occur under bundled payment systems if, for example, providers furnish inadequate doses of drugs in an effort to minimize cost. Beneficiaries w above average costs of care may be particularly vulnerable because providers who treat these beneficiaries face the potential of financial losses on these patients if the bundled payments are not adjusted appropriately to take these above average costs into account.

The potential unintended effects of bundled payment systems on beneficiaries have led us and others to note that access to and quality under various Medicare bundled payment systems should be monitored. For example, in 1999, we noted that monitoring access to care would be necessary under Medicare’s bundled payment system for skilled nursing care to ensure that Medicare beneficiaries continued to have access to medically necessary services. Similarly, in its 2006 report, the HHS Office of Inspector General stressed the importance of monitoring quality under the bundled payment system for home health care. Our work and work by others has also noted the importance of monitoring the effect of Medicare bundled payment systems on various groups of beneficiaries. Specifically, in 2000 we and the Medicare Payment Advisory Commission (MedPAC) reported on the bundled payment system for home health care and recommended that the delivery of these services be monitored across groups of beneficiaries, such as those whose care is more costly than average. Furthermore, a study on the bundled payment system for inpatient rehabilitation services affirmed the importance of monitoring access to care for various groups of beneficiaries.

Certain Groups of Beneficiaries, Including African Americans and Those with Medicaid Coverage, Had Above Average Expenditures for Injectable ESRD Drugs in 2007

Monthly Medicare expenditures per beneficiary for injectable ESRD drugs in 2007 were above average for certain demographic groups, and African Americans and persons with Medicaid coverage were among the groups for which this difference was largest. In particular, Medicare expenditures on injectable ESRD drugs in 2007 were $782 per African American beneficiary per month—about 13 percent more than the $693 spent for all Medicare beneficiaries on dialysis (see fig. 1). The above average spending per African American beneficiary was due primarily to higher spending on ESAs and IV vitamin D. Monthly Medicare spending per African American beneficiary on ESAs was about 10 percent higher than the average across all beneficiaries on dialysis, and spending on IV vitamin D was about 38 percent higher than average. Average monthly Medicare expenditures per beneficiary for other racial groups were below the average for all beneficiaries on dialysis in 2007. As a result, average monthly expenditures for African Americans were about 41 to 42 percent higher than spending for beneficiaries who classified themselves as American Indian/Alaskan Native or Asian or Pacific Islander and about 21 percent higher than for expenditures for White beneficiaries.

Average monthly expenditures per beneficiary for injectable ESRD drugs were also above average for beneficiaries enrolled in both Medicare and Medicaid. Specifically, average monthly expenditures per beneficiary enrolled in Medicare and Medicaid were $735 in 2007, which was about 6 percent higher than the $693 spent across all beneficiaries on dialysis and about 12 percent higher than the $659 for Medicare beneficiaries who were not in Medicaid. This difference was mainly due to above average expenditures on ESAs and IV vitamin D for beneficiaries enrolled in both Medicare and Medicaid. For beneficiaries with both Medicare and Medicaid coverage, expenditures on ESAs were about 6 percent higher than the average for all beneficiaries in 2007, while expenditures on IV vitamin D were about 11 percent higher than average.

Monthly Medicare expenditures per beneficiary for adults age 20 to 64 were generally higher than the average for all Medicare beneficiaries on dialysis. Most notably, Medicare spending per beneficiary age 20 to 44 was about 9 percent more than the monthly average for all Medicare beneficiaries on dialysis (see fig. 2). Monthly Medicare expenditures per beneficiary age 20 to 44 were also higher when compared to those of other age groups, in particular beneficiaries age 19 and under or age 75 and older. The higher-than-average spending for beneficiaries age 20 to 44 was driven primarily by above average expenditures on ESAs and IV vitamin D. Specifically, Medicare spending on ESAs per beneficiary age 20 to 44 was about 9 percent higher than the average across all beneficiaries on dialysis in 2007. Similarly, Medicare spending on IV vitamin D per beneficiary age 20 to 44 was about 12 percent higher than the average for all beneficiaries.

Monthly expenditures per beneficiary in 2007 for females, non-Hispanic beneficiaries, and urban residents also exceeded the average for all beneficiaries on dialysis, but to a lesser extent than for African Americans and beneficiaries in both Medicare and Medicaid. For example, female beneficiaries had average monthly expenditures of $715, which was about 3 percent higher than the monthly average across all Medicare beneficiaries on dialysis and about 6 percent higher than monthly expenditures per male beneficiary. Similarly, the $708 that Medicare spent per month on non-Hispanic beneficiaries was about 2 percent higher than the average across all beneficiaries on dialysis and about 19 percent higher than the average for Hispanic beneficiaries.

For more detailed information on Medicare expenditures for injectable ESRD drugs, by demographic characteristics, see appendix III.

A Majority of Selected Clinicians and Researchers Identified Primarily Clinical Factors as Likely to Result in Above Average Doses of Injectable ESRD Drugs

While we report that certain demographic groups were associated with above average Medicare expenditures for injectable ESRD drugs in 2007, we did not identify the factors that led to these differences in expenditures across groups of beneficiaries. However, we collected information from nephrology clinicians and ESRD researchers on the factors they consider likely to result in above average doses of injectable drugs—ESAs, IV iron, and IV vitamin D.

A majority of the 73 clinicians and researchers who completed our Web- based data collection instrument identified clinical factors, rather than demographic characteristics, as likely to result in above average doses of injectable ESRD drugs. Specifically, at least 50 percent of these experts identified 14 such factors, including chronic blood loss, low iron stores, and recent hospitalization, as likely to result in above average doses of ESAs (see table 1). Further, a majority of the clinicians and researchers who completed our data collection instrument indicated that demographic factors were not likely to result in above average doses of ESAs. Specifically, at least 50 percent of these experts identified 16 of the 17 demographic factors, such as age, race, and socioeconomic status, as not likely to result in above average doses of ESAs (see app. IV for detailed results). These results are consistent with information from our structured interviews with nephrology clinicians, who indicated that they consider clinical factors, rather than demographic characteristics, when making dosing decisions for ESAs and other injectable ESRD drugs.

The literature we reviewed on the use of ESAs provides some explanation for how clinical factors impact the dose of this drug. For example, chronic blood loss is a common occurrence among hemodialysis patients. Blood loss can increase a person’s ESA requirements by reducing the level of iron in the blood. Sources of blood loss include blood lost during the hemodialysis process, regular blood draws for laboratory testing, and gastrointestinal bleeding. As another example, the clinical literature describes how recent hospitalizations relate to ESA use. Studies demonstrate that hospitalized ESRD patients usually experience a decline in hemoglobin levels, which worsens anemia and increases posthospitalization ESA requirements. The literature offers multiple explanations for this decline in hemoglobin levels. For example, hospitalized ESRD patients commonly experience infection, inflammation, and iron deficiency. All of these conditions can contribute to increased ESA requirements. Additionally, the literature explains the effect of dialysis catheters on the use of ESAs. According to published research, the use of dialysis catheters compared to other forms of vascular access makes ESRD patients more prone to infection and inflammation, which increase ESA requirements.

As with ESAs, a majority of clinicians and researchers who completed our data collection instrument identified clinical factors, such as chronic blood loss and low iron stores, as likely to result in above average doses of IV iron (see table 2). These individuals identified six clinical factors as likely to result in above average doses of IV iron. Five of these six clinical factors overlap with the clinical factors identified for ESAs. Moreover, at least 50 percent of clinicians and researchers who completed our data collection instrument identified demographic factors, such as age, race and residential location, as not likely to result in an above average dose of IV iron (see app. IV for detailed results).

Also similar to ESAs, the literature on the use of IV iron provides some context for the clinical factors that are likely to result in above average doses of IV iron. For example, chronic blood loss can result in iron deficiency and increase a person’s IV iron requirement. Sources of blood loss leading to increased IV iron requirements include blood retention in the dialyzer tubing, blood testing, and gastrointestinal bleeding. Also, the literature explains that the state of having low iron stores is more common in patients on dialysis for less than 6 months than those on dialysis for longer amounts of time.

As table 3 shows, a majority of the clinicians and researchers who completed our data collection instrument identified two clinical factors— hyperparathyroidism and a lack of predialysis care—and one demographic factor—low socioeconomic status—as likely to result in higher-than- average doses of IV vitamin D (see app. IV for detailed results). Hyperparathyroidism is present in almost all ESRD patients and develops early in the course of chronic kidney disease. In fact, research shows that PTH levels start to increase early in the course of chronic kidney disease and can lead to the development of hyperparathyroidism. In addition, new ESRD patients who have not received predialysis care from a nephrologist may be at greater risk of health complications. According to the clinical literature, new ESRD patients may begin dialysis treatment without receiving predialysis care from a nephrologist because they face barriers to receiving care. One such barrier is low socioeconomic status. Specifically, the literature shows that low socioeconomic status may be associated with limited access to health care services.

CMS Proposed Several Case-Mix Adjustment Factors and an Outlier Policy to Address Cost Differences among Beneficiaries

Issued in September 2009, CMS’s proposed rule for the new bundled payment system for dialysis care identified several clinical and demographic factors that the agency proposed to use in the case-mix adjustment model required by MIPPA. The case-mix adjustment factors that CMS proposed include age, sex, body surface area, body mass index, length of time on dialysis, and comorbid conditions. CMS and UM- KECC studied the relationship between these proposed factors and the cost of dialysis care and used the results to determine how to adjust payments under the new bundled payment system. For example, based CMS’s proposed case-mix adjustment, the bundled payment for a beneficiary who has been on dialysis for fewer than 4 months would be 47 percent higher than the payment for the same beneficiary on dialysis for more than 4 months.

CMS used the criteria listed be factors. Specifically, a factor low to select potential case-mix adjustment had to have a statistically significant relationship with beneficiaries of dialysis care that was large enough to result in meaningful difference in payments to providers, could not introduc poor quality care, e incentives for providers to furnish inappropriate or must be measured based on objective guidelin es, and must be based on reliable data.

CMS considered some factors as potential case-mix adjusters but did not propose them because they did not meet CMS’s criteria. One example of a factor that CMS considered but did not propose as a potential case-mix adjuster is congestive heart failure. CMS officials stated that they did not propose this factor in part because of the lack of clear and objective guidelines for diagnosing this condition. As another example, a beneficiary’s prior ESA use was not proposed as a case-mix adjuster because, according to CMS officials, this factor would introduce inappropriate incentives for providers. Specifically, they concluded that if the extent of prior ESA use were a case-mix adjustment factor, a provide r would have the incentive to increase a beneficiary’s ESA dose to obta higher Medicare payments under the new bundled payment system.

CMS also considered including race and ethnicity in the proposed case- mix adjustment model, but chose not to include these factors. CMS invited public comment on this decision, noting that an adjustment based on race and ethnicity may be warranted. One of the reasons CMS cited in its proposed rule for not including race and ethnicity in the proposed model was the lack of objective guidelines for classifying beneficiaries’ race or ethnicity. This absence of objective guidelines implies that there is likely to be an inconsistency across individuals in how they classify themselves into racial or ethnic categories. CMS also noted that its concerns with th e quality of data on race and ethnicity made it difficult to propose these variables as case-mix adjusters. One quality issue that CMS cited is the inconsistency over time in how Medicare data on race and ethnicity collected for one of its two sources of this information—the Renal were Management Information System (REMIS) database. Additionally, CMS cited studies indicating that information on race and ethnicity from Medicare’s second source of these data—the Medicare Enrollment Database (EDB)—may be inaccurate. These studies found that the EDB may not accurately identify beneficiaries’ race and ethnicity, particularly for beneficiaries in smaller minority groups, such as Asians and Hispanics.

In addition to a case-mix adjustment model, CMS proposed using an outlier policy, as required by MIPPA, to increase payments to providers when they treat beneficiaries whose costs of dialysis care substantially exceed what would be expected. CMS proposed identifying these high- cost beneficiaries based on their cost of outlier services, which CMS defines as ESRD services that are separately billable under the current payment system for dialysis care, such as injectable ESRD drugs. The agency has noted that it is primarily the variation in the cost of outlier services that poses a financial risk to providers and that could therefore adversely affect beneficiaries’ access to and quality of dialysis care. Furthermore, according to CMS officials, the agency collects beneficiary- level data on the use of outlier services but not on those covered under the composite rate, such as the dialysis procedure. Such data would be necessary to identify beneficiaries with higher-than-expected costs for dialysis care overall. Based on CMS’s proposed outlier policy, providers could receive outlier payments when they treat beneficiaries whose costs for injectable ESRD drugs and other outlier services exceed a certain threshold.

The case-mix adjustment and outlier policy may need to be recalibrated periodically. The specific parameters of these payment mechanisms initially will be based on patterns of utilization, and therefore spending, that existed before the new bundled payment system was implemented. The bundling of payments changes financial incentives for providers and is intended to encourage the efficient provision of care. To the extent that providers change how they practice after the new payment system is implemented, in response to the financial incentives of the new bundled payment system to provide dialysis care more efficiently or other factors, the parameters of the case-mix adjustment and outlier policy could become less accurate over time. As a result, CMS officials stated that they may recalibrate these payment mechanisms using data collected after implementation of the new bundled payment system. However, CMS officials noted that they had not established a time frame for this recalibration.

CMS’s Preliminary Monitoring Plans Build on Existing Initiatives, but Whether CMS Will Monitor Quality of and Access to Care for Groups of Beneficiaries Is Unclear

CMS officials told us that their preliminary plans for monitoring the effects of the new bundled payment system on beneficiaries include three current CMS initiatives that focus on monitoring the quality of dialysis care (see table 4). In comments on a draft of this report, CMS reported that it plans to have a comprehensive monitoring strategy in place when the new bundled payment system is implemented on January 1, 2011. One of the three key initiatives in CMS’s preliminary monitoring plans is its network of 18 private organizations—called ESRD networks. Each network is charged with monitoring and promoting the quality of dialysis care in a geographic area, which generally covers one or more states. The networks’ monitoring responsibilities include analyzing facility-level data on quality measures to identify facilities that need assistance with quality improvement. The networks are also responsible for evaluating and addressing patient complaints. The second quality monitoring initiative that CMS plans to rely on is the Clinical Performance Measures (CPM) project. Under this project, CMS has monitored quality by collecting and analyzing data on dialysis quality measures for a nationally representative sample of beneficiaries on dialysis. CMS has used these data to report annually on comparisons of the quality of dialysis care across the country and across groups of beneficiaries. The third initiative involves monitoring the quality of individual dialysis facilities by ensuring that they comply with Medicare’s conditions for coverage that a facility must fulfill in order to receive Medicare payment for dialysis care. One of these conditions requires that a dialysis facility develop and implement a program to monitor and improve the quality of services it provides. CMS requires that this plan include the collection and monitoring of data on patient satisfaction with care and the adequacy of dialysis, among other measures.

In addition to the monitoring initiatives described above, CMS has or is developing two other quality initiatives focused primarily on promoting the quality of dialysis care rather than monitoring. The first of these initiatives that CMS plans to continue under the new bundled payment system is Dialysis Facility Compare, which is a tool on the Medicare program’s Web site that allows users to compare dialysis facilities based on measures of the quality of dialysis care. By making public each facility’s quality information, Dialysis Facility Compare gives facilities the incentive to improve the quality of care they furnish. CMS is developing the second of these initiatives—a quality incentive program (QIP)—which is required by MIPPA to be implemented beginning January 1, 2012. Under the QIP, Medicare is required to reduce payments to dialysis providers by up to 2 percent if the dialysis care they furnish does not meet a total performance score based on quality standards established by CMS. CMS proposed using indicators of dialysis adequacy and anemia management to measure quality under the QIP. By linking a portion of provider payments to measures of dialysis adequacy and anemia management, the QIP would give providers a financial incentive to improve these aspects of dialysis care. However, the QIP would not address other aspects of dialysis care, such as mineral metabolism, which is related to the use of IV vitamin D, unless CMS incorporated additional measures into the program.

We and others have noted the importance of monitoring quality of and access to care under bundled payment systems to help ensure that beneficiaries receive appropriate care. Although CMS intends to monitor quality under the new bundled payment system, the extent to which CMS will conduct such monitoring for various groups of beneficiaries is uncertain. CMS officials told us that it was too early in the process of developing a monitoring plan to address how they might monitor various groups of beneficiaries. CMS is developing the capacity to monitor the quality of dialysis care for groups of beneficiaries, such as those with above average costs of care. Specifically, CMS is implementing a new database called the Consolidated Renal Operations in a Web-Enabled Network (CROWNWeb), which is designed to collect CPM data as well as other clinical and demographic information for all beneficiaries with ESRD. However, because CMS is still developing its monitoring plans, it is uncertain to what extent CMS will use these data to monitor the quality of dialysis care for various groups of beneficiaries under the new bundled payment system.

While CMS has initiatives it plans to use to monitor the quality of dialysis care beneficiaries receive under the new bundled payment system, these initiatives involve systematic monitoring of only one measure of beneficiaries’ access to such care. Specifically, CMS systematically monitors the extent to which beneficiaries are discharged involuntarily from facilities by requiring the networks to track these beneficiaries. To improve the networks’ ability to track these beneficiaries, CMS is developing a database designed to allow the networks to track the number of involuntary discharges based on beneficiary characteristics, such as age, race, and ethnicity. However, according to CMS officials, the agency does not systematically monitor other measures of access to dialysis care, such as the use of dialysis services.

Although CMS’s monitoring initiatives do not generally focus on beneficiaries’ access to dialysis care, CMS has the data sources necessary to conduct more comprehensive monitoring of access for various groups of beneficiaries, including those with above average costs of care. In particular, one data source that CMS has available to monitor access to dialysis care is the information it generates on the characteristics of beneficiaries receiving care in dialysis facilities. This facility-level information—the Dialysis Facility Report—is compiled by UM-KECC in part from Medicare claims and the REMIS database. CMS could use these data, in addition to information it has on which facilities open or close during a given year, to compare the characteristics of beneficiaries in these facilities. This information could indicate whether facility openings and closures affect the availability of dialysis facilities for certain groups of beneficiaries more than others.

CMS also has the data necessary to monitor other measures of access to care, such as changes in the use of dialysis services and shifts in the site of dialysis care. CMS collects data on the use of Medicare-covered services, such as ESRD drugs, through the process of paying claims for these services. In addition, the CROWNWeb database will contain beneficiary- level data on demographic and clinical characteristics. CMS could use these data sources to identify groups of beneficiaries whose service use is higher than average and who therefore may have above average costs of dialysis care. CMS could then use these data to monitor the use of dialysis services for groups of beneficiaries with above average costs of care. Changes in the use of dialysis services could indicate how the new bundled payment system may have affected beneficiaries’ access to these services. For example, if the use of a given dialysis-related drug declined over time for certain groups of beneficiaries but not for others, then this could prompt an assessment of whether this reduction was appropriate and whether the payment system may have caused this difference. CMS could also monitor the extent to which beneficiaries receive emergency dialysis in hospitals rather than outpatient dialysis facilities as an indicator of access to dialysis care. An increase in hospital admissions for emergency dialysis services for certain groups of beneficiaries could indicate that these groups are having difficulty gaining admission to outpatient dialysis facilities.

Conclusions

The new bundled payment system for dialysis care—required to be implemented for services furnished on or after January 1, 2011—has the potential to improve the efficiency of care delivery, in part by reducing the financial incentive to use more injectable ESRD drugs than are necessary. However, if this new payment system causes providers to consistently experience financial losses when treating beneficiaries with above average costs, then some beneficiaries could face problems accessing dialysis care or with the quality of that care. Groups of beneficiaries with above average costs of dialysis care, whether related to clinical or demographic factors, may be more vulnerable to these types of problems. Therefore it will be important for CMS to monitor the effect of the new bundled payment system on the access to and quality of dialysis care for these beneficiaries—which is consistent with previous work on the need for such monitoring under other bundled payment systems in Medicare. Furthermore, early identification of any adverse effects of the payment system on beneficiaries will be crucial because their need for life- sustaining dialysis makes them particularly sensitive to disruptions in dialysis care.

CMS recognizes the importance of monitoring the effect of its new bundled payment system on beneficiaries and is developing plans for these efforts. In commenting on a draft of this report, CMS stated that it plans to have a comprehensive monitoring strategy in place when the new bundled payment system is implemented on January 1, 2011. However, because CMS’s monitoring plans are preliminary, the extent to which CMS intends to monitor quality for various groups of beneficiaries, such as those with above average costs of care, is unclear. Furthermore, while CMS’s preliminary plans for monitoring under the new bundled payment system contain initiatives designed to monitor the quality of dialysis care, these plans involve very limited monitoring of access to these services. CMS has or is developing the tools it could use to monitor access to and quality of dialysis care for various groups of beneficiaries, including those with above average costs of dialysis care. Specifically, CMS currently collects data on the use of injectable ESRD drugs and other Medicare services that could be used to monitor access to these services. CMS is also developing a data system that will contain quality measures for each beneficiary with ESRD. CMS could draw on this capacity as it plans and conducts its monitoring efforts. Moreover, CMS could use information from these efforts to help refine the payment system over time.

Recommendation for Executive Action

To help ensure that changes in Medicare payment methods for dialysis care do not adversely affect beneficiaries, we recommend that the Administrator of CMS monitor the access to and quality of dialysis care for groups of beneficiaries, particularly those with above average costs of dialysis care, under the new bundled payment system. Such monitoring should begin as soon as possible once the new bundled payment system is implemented and be used to inform potential refinements to the payment system.

Agency and Industry Comments and Our Evaluation

We received written comments on a draft version of this report from CMS and oral comments on the draft report from representatives from dialysis facility organizations and from a nephrologist specialty association.

Comments from CMS

In written comments on a draft of this report, CMS agreed with our recommendation and noted that it is planning to actively monitor the effects of the new bundled payment system on all ESRD beneficiaries, including those with above average costs. CMS noted that it plans to have a comprehensive monitoring strategy in place when the payment system is implemented on January 1, 2011. In particular, CMS plans to use its existing data sources to examine overall trends in care delivery and quality to help the agency ensure that beneficiaries continue to receive quality care under the new payment system. CMS stated that it would use its existing infrastructure, including the ESRD networks, for quality oversight in the ESRD facilities. Furthermore, CMS indicated that it plans to use information from these monitoring activities for potential refinements to the new bundled payment system and the QIP.

CMS noted that our statement that the agency’s preliminary plans involve limited monitoring of access to dialysis care did not reflect the agency’s current planning efforts because our assessment was based on interviews conducted prior to the publication of the ESRD proposed rule, which occurred on September 29, 2009. However, we spoke with CMS officials in December 2009 to review our evidence and findings regarding the agency’s preliminary monitoring plans, and at that time, agency officials told us that our information was accurate.

CMS commented that our report suggests that clinical factors, rather than demographic characteristics, are more likely to relate to higher doses of injectable ESRD drugs, resulting in above average expenditures for certain groups of beneficiaries. CMS also noted that the case-mix adjustment model is designed to predict dialysis facility costs and be used in making payments to such facilities based on information they are able to provide on claims. CMS further noted that demographic and other factors had been determined to be statistically significant in predicting facility costs. The results of our study indicate that while Medicare expenditures on injectable ESRD drugs were related to beneficiaries’ demographic characteristics, a majority of clinicians and researchers from whom we obtained input noted that these characteristics by themselves generally were not likely to result in higher doses of injectable ESRD drugs. However, we do not draw any conclusions regarding the relative importance of demographic or clinical characteristics in predicting dialysis facility costs for the purposes of a case-mix adjustment model and payment system. Evaluating the appropriateness of CMS’s proposed case- mix adjustment factors was beyond the scope of this study. CMS provided technical comments, which we incorporated as appropriate. We have reprinted CMS’s letter in appendix V.

Comments from Industry Representatives

We invited representatives of both large and small dialysis facility organizations and a nephrologist specialty association to review and provide oral comments on the draft report. The groups represented were the Kidney Care Council (KCC), the National Renal Administrators Association (NRAA), and the Renal Physicians Association (RPA). The three groups generally agreed with our message and recommendation to CMS. Their comments focused on three areas: the data and populations analyzed in the report, our findings related to beneficiaries’ demographic characteristics and clinical conditions, and the nature and timeliness of CMS’s monitoring plans. Industry representatives also provided technical comments, which we incorporated as appropriate.

First, representatives from each of the organizations commented on the scope of the report by raising potential issues with the data and populations we analyzed. RPA representatives noted that our data on Medicare expenditures for injectable ESRD drugs, which were based on USRDS data for 2007, may not represent current trends in utilization and expenditures. They asserted that prescribing patterns for injectable ESRD drugs may have changed since 2007 and that this may have been due in part to safety concerns associated with ESA use. In addition, representatives from both KCC and NRAA stated that the report did not sufficiently examine the socioeconomic status of ESRD beneficiaries, including how beneficiaries with both Medicare and Medicaid coverage would fare under the new bundled payment system. An NRAA representative also noted that our report did not examine data on the poorest ESRD beneficiaries who have Medicaid coverage but do not qualify for Medicare coverage. In addition, KCC representatives noted that the report did not provide enough information on Part D drugs, which CMS proposed to cover under the new bundled payment system. Moreover, RPA representatives noted that there is a great deal of anxiety in the provider community about whether the bundled payment will be sufficient to cover the cost of these drugs.

In our report, we analyzed USRDS data on Medicare expenditures for injectable ESRD drugs and demographic characteristics such as age, sex, race, and Medicaid status for 2007 because these were the most recent data available. Moreover, our analysis of data from 2003 through 2006 indicated that the results based on 2007 data were consistent with data from the previous 4 years. We acknowledge, however, that the safety concerns about ESAs could have influenced prescribing practices and that such changes could affect the relationship between expenditures on injectable ESRD drugs and demographic characteristics and have added some detail to the report on these issues. We examined beneficiaries covered by both Medicare and Medicaid because detailed information on beneficiaries’ socioeconomic status is not available. We did not examine data on beneficiaries without Medicare coverage because they are not included in the data CMS used to develop the new bundled payment system. We agree that Part D drugs will be important under the new bundled payment system. However, data on the use of these drugs, which according to CMS constituted about 14 percent of Medicare expenditures on all ESRD drugs in 2007, were not available.

Second, industry representatives commented on our findings related to beneficiaries’ demographic characteristics and clinical conditions. Representatives from KCC pointed out that our findings on the relationship between Medicare expenditures on injectable ESRD drugs and beneficiaries’ demographic characteristics were consistent with published research on this topic and noted that these relationships are driven by underlying clinical factors. However, RPA representatives noted that the report did not address the reason for these observed relationships. In addition, representatives from KCC and RPA agreed with our finding that clinicians do not take beneficiaries’ demographic characteristics into account when making dosing decisions. However, KCC representatives noted that there was an apparent disconnect between the results of our first and second findings. In order to facilitate interpretation of these results, KCC representatives suggested that we include in the report a copy of the instrument used to collect information from clinicians and researchers on the factors that are likely or not likely to result in above average doses of injectable ESRD drugs.

We did not address the extent to which the relationships between Medicare expenditures on injectable ESRD drugs and beneficiaries’ demographic characteristics were driven by underlying clinical factors because doing so was beyond the scope of our study. We did, however, obtain input from clinicians and ESRD researchers to gain insight into the factors that may affect the dose of these drugs for dialysis patients. We agree with KCC’s suggestion and have included the structured data collection instrument in appendix II.

Finally, representatives from all three organizations agreed that it will be important to monitor the effects of the new bundled payment system on beneficiaries but expressed concern about how CMS would conduct such monitoring. Representatives from NRAA stressed the need to identify vulnerable populations, such as those with high costs of dialysis care, as part of the monitoring process. However, NRAA and RPA representatives questioned how CMS would identify these populations through its monitoring activities. In addition, KCC representatives expressed concern about the timeliness of CMS’s monitoring activities, noting that data from CMS on the provision of dialysis care can have a long lag time, which makes the information less relevant. Representatives from all three organizations expressed concerns related to CROWNWeb implementation. Specifically, both NRAA and RPA representatives noted that they view CROWNWeb as a potentially useful tool for CMS monitoring activities, but are concerned about when it would be fully implemented. NRAA representatives noted that challenges remain to making the database operational. Furthermore, representatives from KCC cautioned that if data in CROWNWeb are not collected in a consistent way across dialysis facilities, the information from this database could be unreliable.

Our report recommends that CMS monitor the effect of the new payment system on beneficiaries, such as those who are vulnerable to adverse effects of the payment system because of their above average costs of dialysis care. We also point out in the report that it will be important for CMS to draw on data sources it has or is developing to identify and monitor access to and quality of dialysis care for such groups of beneficiaries. We agree with KCC representatives that CMS’s monitoring activities should be timely so that any problems resulting from the new payment system can be addressed as soon as possible after implementation. Our recommendation to CMS emphasizes the need for timely monitoring, particularly given the sensitivity of the dialysis population to potential disruptions in access to and quality of care. We also reported that CROWNWeb is a key element in CMS’s preliminary plans for its monitoring approach, and agree that it is important for CMS to develop reliable data and ensure that such data are available to use as soon as possible after the bundled payment system is implemented.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this letter. At that time, we will send copies of this report to the appropriate congressional committees and other interested parties. The report will also be 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 VI.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) provide information on Medicare expenditures for injectable end-stage renal disease (ESRD) drugs, by beneficiaries’ demographic characteristics; (2) identify the factors that clinicians and researchers indicate are likely to result in a higher-than-average dose of injectable drugs for a dialysis patient; (3) describe the Centers for Medicare & Medicaid Services’ (CMS) approach for addressing differences among beneficiaries in the cost of dialysis care under the new bundled payment system for these services; and (4) examine CMS’s plans for monitoring the effects of the new bundled payment system on beneficiaries.

To provide information on Medicare expenditures for injectable ESRD drugs, by beneficiaries’ demographic characteristics, we analyzed the most recent available data from a national data system containing information on beneficiaries with ESRD. Specifically, we obtained data from the United States Renal Data System (USRDS) on monthly Medicare expenditures per beneficiary on dialysis in 2007 for injectable ESRD drugs. We focused our analysis on erythropoiesis stimulating agents (ESA), intravenous (IV) iron, and IV vitamin D because these three types of drugs accounted for about 98 percent of the approximately $2.2 billion in Medicare expenditures on injectable ESRD drugs in 2007. We analyzed data for 326,899 Medicare beneficiaries on dialysis in 2007. The data we analyzed did not contain all of the 413,540 beneficiaries on dialysis in 2007 because we excluded beneficiaries (1) who were in Medicare managed care plans, (2) for whom Medicare was not the primary payer, or (3) for whom no claims for Medicare services provided in 2007 were submitted.

We analyzed monthly Medicare expenditures per beneficiary in 2007 on ESAs, IV iron, and IV vitamin D across the following demographic characteristics available through the USRDS database: age, sex, race, ethnicity, urban/rural residential location, and whether a beneficiary was enrolled in Medicaid. Additionally, we analyzed USRDS data for 2003 through 2006 to determine whether the results for 2007 were consistent in prior years. We did not address in our expenditure analysis the extent to which the relationships we presented between demographic characteristics and Medicare expenditures reflected underlying clinical or other factors. Data on monthly Medicare expenditures per beneficiary were based on Medicare claims. The expenditure amounts that we presented did not include beneficiary cost sharing. Monthly Medicare expenditures per beneficiary were calculated by dividing Medicare expenditures for a given drug by the number of months beneficiaries were on dialysis in 2007.

USRDS data on demographic characteristics—with the exception of Medicaid enrollment status—were drawn primarily from CMS’s Renal Management Information System (REMIS) database. Dialysis providers collected these data using a standardized form called the Medical Evidence Form. We used these data to present results on monthly Medicare expenditures on injectable ESRD drugs across the following age categories: 0-19, 20-44, 45-54, 55-64, 65-74, and 75 and older. We selected these age categories to capture the pediatric population (i.e., age 19 and under) and to make the number of beneficiaries within each of the remaining categories similar. The USRDS data we analyzed on race and ethnicity are based on subjective determinations of beneficiaries’ racial and ethnic identity. In addition, these data were collected using different racial and ethnic categories depending on which version of the Medical Evidence Form was used. Figure 3 demonstrates how the racial and ethnic categories on the different versions of the Medical Evidence Form link to the categories we used in this report. A beneficiary’s residence was classified as urban if it was in an area with at least 500 people per square mile, and all other areas were considered rural. Finally, USRDS data on Medicaid enrollment status were drawn from the Medicare Enrollment Database. We used beneficiaries’ Medicaid enrollment status as an indicator of their socioeconomic status because beneficiaries’ income and asset levels determine their eligibility for Medicaid, which provides financial assistance with the cost of medical care.

We assessed the reliability of data from the USRDS by interviewing officials responsible for producing these data, reviewing relevant documentation, comparing the results to published sources, and examining the data for obvious errors. Although we report that CMS has concerns about using data on race and ethnicity for the purposes of adjusting bundled payments, we determined that data on these characteristics as well as other USRDS data that we used were sufficiently reliable for the descriptive analytical purposes of our study.

To identify the factors that clinicians and researchers indicate are likely to result in a higher-than-average dose of injectable ESRD drugs (specifically, ESAs, IV iron, and IV vitamin D) for a dialysis patient, we developed a structured data collection approach that included interviews with relevant industry groups, clinicians, and researchers with expertise in ESRD as well as the administration of a Web-based data collection instrument to selected nephrology clinicians and ESRD researchers (see app. II for the data collection instrument). To develop this instrument and provide context for our findings, we conducted 20 structured interviews with representatives of large and small dialysis organizations and dialysis- related professional organizations, nephrology clinicians, and researchers with expertise in ESRD and also reviewed the clinical literature related to the use of the three types of drugs. We asked each interviewee about the beneficiary characteristics associated with high or low use of these drugs. We summarized the information obtained from these interviews and used it to develop the lists of clinical factors used for our data collection instrument. The demographic factors listed on the data collection instrument were those we examined in our analysis of Medicare expenditures on injectable ESRD drugs. We pretested the data collection instrument with nephrologists and revised it based on comments we received.

Through the data collection instrument, clinicians and researchers were asked to identify the clinical and demographic factors that are likely to result in a higher-than-average dose of ESAs, IV iron, or IV vitamin D for a dialysis patient. In addition, individuals who completed the data collection instrument had the option of writing in factors not already listed in the instrument. We analyzed results by calculating the percentage of the 73 clinicians and researchers who completed our data collection instrument who identified a given factor as being likely or not likely to result in a higher-than-average dose of each of the three types of ESRD drugs we examined. These results represent the views of the 73 clinicians and researchers and are not generalizable to a broader population.

We administered the Web-based data collection instrument to a select number of clinicians and researchers with expertise related to the factors that could impact the dose of injectable ESRD drugs. We selected these individuals in two ways. First, we obtained referrals from national, U.S.- based professional organizations that represent nephrology clinicians (i.e., nephrologists, nephrology nurses, nephrology physician assistants, and advanced practitioners specializing in nephrology) who evaluate and treat dialysis patients. We compiled an initial list of nephrology-related professional societies and associations based on our background research on ESRD. To identify additional organizations, we visited the Web site of each of these organizations and obtained a list of related organizations, if available. We selected eight organizations from these lists that met the above criteria. We asked each organization that we identified for referrals to up to 20 nephrology clinicians who have expertise related to factors that could impact the dose of ESAs, IV iron, or IV vitamin D for dialysis patients. We specified in our request that these individuals must (1) be nephrologists, nephrology nurses, physician assistants or advanced practitioners specializing in nephrology, or nephrology technicians/technologists; (2) evaluate and treat dialysis patients; and (3) reside in the United States. We also asked for referrals to major national societies or associations, other than the ones we already planned to contact, that are based in the United States and represent nephrology clinicians. If referrals to additional organizations were provided, we contacted these groups as described above and asked them for referrals to clinicians. We received referrals from the following seven organizations: American Academy of Nephrology Physicians Assistants American Nephrology Nurses’ Association American Society of Pediatric Nephrology The second way we identified clinicians and researchers was through the ESRD literature. Using multiple databases, including BIOSIS Previews®, Elsevier BIOBASE, MEDLINE, SciSearch®, EMBASE®, EMCare, and EMBASE AlertTM, we conducted a review of the literature published from 2004 through 2009 related to the use of ESAs, IV iron, and IV vitamin D to treat ESRD patients. We searched these databases for articles related to the dose of these drugs.

We administered the Web-based data collection instrument in August and September 2009. We sent the instrument to 131 clinicians and researchers—the 100 referrals we received from professional organizations and an additional 31 primary authors that we identified through the literature. We received 73 completed instruments.

To describe CMS’s approach for addressing differences among beneficiaries in the cost of dialysis care under the new bundled payment system for these services, we reviewed CMS’s proposed rule on the design of the new payment system. We also reviewed the Department of Health and Human Services’ report to Congress on the design of the new payment system as well as reports on this topic by the University of Michigan, Kidney Epidemiology and Cost Center (UM-KECC), which has assisted CMS with the payment system’s design. In addition, we interviewed CMS officials and representatives from UM-KECC. We also interviewed representatives of three non-Medicare payers of dialysis care—the Department of Veterans Affairs (VA) and two large health plans—to obtain contextual information about other bundled payment systems. Finally, to examine CMS’s plans for monitoring the effects of the new bundled payment system on beneficiaries’ access to and quality of dialysis care, we interviewed CMS officials and reviewed prior reports as well as CMS’s proposed rule on the design of the new bundled payment system.

Appendix II: GAO Data Collection Instrument on Dose of Dialysis-Related Drugs

Appendix III: Medicare Expenditures for Injectable ESRD Drugs by Demographic Characteristics

Table 5 presents detailed information on average monthly Medicare expenditures per beneficiary for injectable ESRD drugs in 2007, by beneficiaries’ demographic characteristics. These results are based on data for 326,899 Medicare beneficiaries on dialysis in 2007 from USRDS. See appendix I for additional detail on the methodology used to generate these results.

Appendix IV: Detailed Results from Data Collection Instrument on Dose of Dialysis- Related Drugs

This appendix contains additional information on the results of the data collection instrument we used to systematically collect information on the factors likely to result in a higher-than-average dose of three types of injectable dialysis-related drugs—ESAs, IV iron, and IV vitamin D (see app. II for the data collection instrument). Table 6 presents data on the factors identified by the 73 clinicians and researchers that are either likely or unlikely to result in higher-than-average doses of ESAs. Tables 7 and 8 present data on IV iron and IV vitamin D, respectively. Following these tables is a brief summary of the open-ended responses to the data collection instrument.

Summary of Open- Ended Responses

In addition to selecting from among the list of factors in the data collection instrument, individuals completing the instrument had the option of writing in factors not already listed that they considered as likely to result in above average doses of ESAs, IV iron, or IV vitamin D. Of the 73 clinicians and researchers who completed the data collection instrument, about 23 percent wrote in additional factors for ESAs, 19 percent wrote in such information for IV iron, and about 37 percent did so for IV vitamin D. Examples of additional factors provided by clinicians and researchers for ESAs and IV iron include nonadherence to diet, hyperparathyroidism, lack of predialysis care, and smoking. Examples of factors supplied for IV vitamin D include nonadherence to phosphate binders, nonadherence to diet, and recent hospitalization.

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

Appendix VI: GAO Contact and Staff Acknowledgments

Acknowledgments

In addition to the contact named above, Jessica Farb, Assistant Director; Amyre Barker; William Black; Manuel Buentello; Krister Friday; Rich Lipinski; and Jennifer Whitworth made key contributions to this report.