It was with great interest that I recently reviewed the Medicare Payment Advisory Commission’s March 2009 “Report to the Congress, Medicare Payment Policy.”
As per the inner cover of the report “The Medicare Payment Advisory Commission (MedPAC) is an independent congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare Program. In addition to advising the Congress on payments to health plans participating in the Medicare Advantage program and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare.”
MedPAC makes recommendations, Congress makes law, so obviously MedPAC’s recommendations are not legislative in nature. Nonetheless, MedPAC’s recommendations carry significant weight and provide both insight and guidance with respect to the future for renal providers.
Chapter 2C of the report, “Outpatient Dialysis Services” provides an overview of the clinical and payment basics as well as presenting industry trends with respect to growth, quality of care and payment. Unlike the cumbersome legalese of regulatory items such as the ESRD Conditions for Coverage, the MedPAC report is a very straightforward and even an enjoyable read. MedPAC’s report can be found online at www.medpac.gov.
Regarding ESRD payment, MedPAC’s March 2009 report contained only one recommendation: “The Congress should maintain current law and update the composite rate in calendar year 2010 by 1 percent.”
The rationale for this recommendation is clearly laid out: “Most of our indicators of payment adequacy are positive, including beneficiaries’ access to care, volume of services, quality of care, and access to capital. The Medicare margin decreased by about 1 percentage point between 2006 and 2007."
It should be noted that MedPAC stated that “The Medicare margin for composite rate services and dialysis drugs for freestanding facilities was 4.8 percent in 2007. The two largest dialysis chains (Fresenius and DaVita) realized a higher Medicare margin than other freestanding providers (6.9 percent vs. 0.2 percent). We (MedPAC) project the overall Medicare margin for freestanding dialysis facilities will be 1.2 percent in 2009.”
The difference between a Medicare margin of 6.9 percent for the two dominant LDOs and 0.2 percent for all other freestanding providers is worthy of serious consideration, especially if one accepts that this is not a temporary state of affairs.
MedPAC points out that “Between 2000 and 2007, the cost per treatment for composite rate services and drugs rose by 3.3 percent per year. The variation in cost growth across freestanding dialysis facilities shows that some facilities are able to hold their cost growth well below others.”
It should also be noted that MedPAC states it would have recommended a 2.5 percent increase in the composite rate based on the “current forecast of the ESRD market basket” but for factoring an efficiency gain offset of 1.3 percent based on a 10-year trend in the entire economy.
