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. 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.) 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

Summary: 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. 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. 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.