By Jack Ahern, MBA
Impact of Payment for Oral-Only Drugs
This month we delve into the U.S. Government Accountability Office's (GAO) concerns regarding the future of our end-stage renal disease (ESRD) payment system, adding perspective to our national discussion regarding health care reform in general, and dialysis payment in particular. I welcome your comments at jahern@ahernconsulting.com.
Per the GAO, the “present ESRD bundled payment does not include oral ESRD drugs that do not have injectable equivalents, which consist of two classes of drugs— calcimimetics and phosphate binders—and are used to treat a complication of ESRD known as mineral and bone disorder.”
At present, these classes of drugs, commonly referred to as “oral–only” drugs are paid separately, above and beyond the ESRD bundled payment. However, as of 2014, they will be included in the bundle, and the total payment amount will be adjusted upwards.
Per the GAO oral-only ESRD drugs accounted for about 4.8 percent of the approximately $9.2 billion in Medicare expenditures on dialysis care in 2007. Translating the 4.8 percent into its dollar equivalent of $386 million illustrates how much is at stake here, keeping in mind this is an annualized figure, so after 10 years the figure approaches the magnitude of $4 billion. Another rough calculations yield an annual average reimbursement amount in the range of $ 70,000 per facility per year.
Medicare’s Payment Philosophy
The unifying guiding principle for adjusting the bundle payment is that Medicare should pay the cost reasonably incurred by an efficient dialysis provider. The point of debate is, how much additional payment should be added to the bundle to accommodate the removal of line-item payment for calcimimetics and phosphate binders.
The implications of underpayment are significant, both in terms of access and quality of care. Adjustment to the bundled payment for oral-only drugs affects the overall margin of profitability for the entire treatment, impacting the long-term financial viability of dialysis facilities which are largely dependent on Medicare payment.
Concerns are raised regarding quality of care since there are several pharmacological options with respect to treating bone disorder, some of which are considered to be less costly in the short-term, but also considered by some to be less beneficial in the long-term.
