Currently, the Centers for Medicare & Medicaid Services (CMS) pays for outpatient hemodialysis services administered to end-stage renal disease patients through a two-tiered per treatment payment system. First, maintenance dialysis services, such as labor, routine supplies and selected routine laboratory tests are paid through a partially bundled case mix adjusted composite rate. Secondly, “separately billable” injectable drugs such as erythropoietin-stimulating agents (ESAs) and non-routine laboratory services are payable under fee-for-service rules by their respective intermediaries and carriers.
The Medicare Modernization Act of 2003 (MMA) required CMS to design and implement an expanded prospective payment system (PPS) that would bundle all ESRD services, including the “separately billable” injectable drugs and all laboratory services. The MMA also mandated that the Secretary of Health and Human Services present a report to Congress setting forth its recommendations for the design and implementation of the fully bundled ESRD PPS.
In February 2008, the Secretary of Health and Human Services presented its report to Congress. The report recommended a bundled ESRD PPS with a base per treatment rate of $234.66 (in 2006 dollars) for all current composite rate and “separately billable” services. The report also recommended that the base rate have a facility level adjustment for wage index and patient level adjustments for age, gender (female), body surface area, low body mass index, duration of renal replacement therapy, and 12 co-morbidities.
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) passed by Congress set forth a four-year phase in period of the bundled ESRD PPS beginning in 2011, which included composite rate services and the “separately billable” drugs and lab tests. MIPPA also provided for a 1 percent composite rate increase in 2009 and 2010 with an annual update beginning in 2012.
Much has been written regarding the positive and negative impact that the bundled ESRD PPS will have on the dialysis industry and how large dialysis organizations (LDOs) and independent physician and hospital-owned clinics (SDOs) are positioned to compete in this new landscape. However, there has not been much discussion about medium sized dialysis organizations (MDOs) that specialize in joint ventures with physicians in a bundled PPS environment.
What is the role of dialysis joint ventures in a fully bundled ESRD PPS environment? Are there advantages inherent in the joint venture business model for operating profitably within a cost based system while still delivering quality care?
When everything becomes a cost, dialysis joint ventures between MDOs, physicians and/or hospitals will be the key vehicle that will allow physicians, hospitals and patients to maintain CHOICES regarding the delivery and receipt of quality care. This point is magnified when one takes into account the continued consolidation of the dialysis industry and the LDOs aggressive movement towards complete vertical and horizontal integration.
