Bundling Decision Deadline

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You may not be aware that the dialysis providers will have a one-time option to choose how fast to switch over to being reimbursed based on the new bundle. Not making an informed decision could hurt your bottom line.

What and When?

These are the questions commonly faced by every healthcare professional on a day-to-day basis. However, when faced with a monumental change away from a well-established ESRD payment system, the question “When do I have to do whatever it is that I have to do” becomes all the more challenging. For monumental change, the “whatevers” are unique transition steps and cannot be modeled on the prior year’s goals and objectives. Moreover, the Medicare reimbursement protocol is by far the dominant financial driver of dialysis facilities, so missing something can have severe consequences.

This article gives advance notice of one of the key decision deadlines that has been proposed by CMS with respect to the new ESRD bundle. The final rule for the new ESRD reimbursement methodology will probably embody most, if not all, of the dates contained in the proposed rule and this article. Nonetheless, it is advisable to stay tuned to the final rule for the final word with respect to deadlines.

In terms of payment amount, there will be a four-year phase-in of the new bundled rates. During the phase-in period, those units that have not elected to be paid at 100 percent of the new rate, will receive a “blended rate.” Phased-in rates are not new in terms of payment system implementation. APC’s (ambulatory payment classifications) were phased in, as were several other major changes to Medicare payment methodology for hospitals and clinics.

The rationale for a transition period is to avoid radical drops in revenue for those providers who, for a variety of reasons, may be negatively affected or irreparably harmed by the newer system if not given sufficient time to adapt.

The blended rate, in essence, phases in the new payment amounts so that initially only a small portion of facility payment is based on the newer system. The proposed phase-in period starts Jan. 1, 2011, and ends Jan. 1, 2014, by which time all dialysis facilities nationally will be paid per the bundled rate.

For the first year, starting Jan. 1, 2011, the blend will be 25 percent of the payment you “would have received” if the payment was entirely based on the new rates. Also during the first year, 75 percent of your payment will be exactly the same as you “would have received” using the presently in-force, case-mix system. In the second year, 2012, 50 percent of the payment will be the new bundled rate, and in 2013, 75 percent of the total payment will be based on the bundled rate.

Theoretically, for a variety of reasons, some units may be substantially more profitable under the new blended rate. Should the financial managers of a dialysis facility have the good fortune to know that the new, fully bundled payment rate is a better deal than the present case-mix payment, then they can choose to have 100 percent of payment based on the new system rather than the default, which is a phased-in “blended rate”.

“...the Act permits an ESRD facility to make a one-time election to be excluded from the transition from the current basic case-mix adjusted composite payment system, with its payment amount for renal dialysis services based entirely on the payment amount under the ESRD PPS.”

The one-time election date needs to be indelibly etched in the minds of senior management.

Per the Act (as opposed to the proposed rule resulting from the Act), if a facility chooses to be reimbursed initially at 100 percent of the new bundled payment rate: “This election must be made prior to January 1, 2011.” However, a careful reading of the rule (as opposed to the Act) shows that CMS has moved this date forward:

“We therefore are further proposing that those ESRD facilities that fail to affirmatively make an election by November 1, 2010, would be paid based on the blended amount under the transition.”

And, as I read the regulations, the choice will last for the duration of the phase-in with no second bites at the apple.

To make the right choice, facilities need to do comprehensive analysis, comparing equalized versions of the new and old payment rates. By equalized versions it is meant that adjustments should be made to factor in variations in payment form, i.e., what is being paid for, so that a correct comparison can be made. To ensure a fully vetted decision, this analysis should be finished and reviewed well in advance of the final date for electing to be paid at 100 percent of the new bundle rate.

In closing, two points to keep in mind: The dates presented may change since they are per the proposed regulations, not the final rule.

Also, the payment amount is being phased in, not the payment procedure. So from the start of the phase-in period, those items previously provided under Part D by pharmacies or paid separately to labs, will be the responsibility of the facility to provide, either directly, or under arrangement, and Medicare payment will be made directly to the facility.

“Therefore, because ESRD facilities would receive an all-inclusive payment during the transition for all renal dialysis services and home dialysis items and services, other entities, such as Method II DME suppliers, laboratories, and Part D plans would no longer bill Medicare beginning January 1, 2011. To the extent these entities furnish items or services to ESRD patients, the entities would need to seek payments from the patient's ESRD facility.”

So, what are your feelings about the new ESRD bundle phase-in? As always, feel free to drop me a line at jahern@ahernconsulting.com and let me know what you think. RBT


With offices located in Chicago and Washington, D.C., Jack Ahern provides cutting edge financial and management consulting services to major academic medical centers, large national dialysis organizations, independently owned dialysis facilities, nephrology groups, as well as to legislators, institutional investors, pharmaceutical companies and medical device manufactures. He and has a MBA from the University of Chicago, and several undergraduate degrees in the physical sciences from Dalhousie University. He can be reached at (312) 997-2177, ext. 701.
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