Dialysis Medicare Margins Tightening

Medicare margins for dialysis clinics fell for all providers in 2010, but they were much tighter for rural clinics and clinics not affiliated with DaVita or Fresenius.

The new numbers came out of the Dec. 15 Medicare Payment Advisory Commission (MedPAC) where the commission also voted for a 1 percent increase in dialysis reimbursement for 2013, according to a Modern Healthcare report.

At the meeting, MedPAC analyst Nancy Ray reported on some of the latest numbers to help the committee assess the payment adequacy of outpatient dialysis services.

Click HERE to access the entire slide presentation.

Slide 15 of the presentation showed the Medicare margins for 2010, which was the last year before the bundled payment was implemented for dialysis reimbursement.

In 2009, the Medicare margin for all dialysis facilities was 3.1 percent. The Medicare margin for clinics affiliated with the two largest chains—DaVita and Fresenius—was 4.4 percent that year, whereas the margin for all other clinics was 0.3 percent. In addition, the Medicare margin for urban clinics was 4.1 percent in 2009 and -1.4 percent in rural clinics.

Last year, MedPAC projected the Medicare margin for all dialysis providers is expected to be 1.3 percent in 2011, which is the first full year of the new dialysis bundled payment system.

It's clear from the 2010 numbers that volume and size are favored by Medicare reimbursement. The 2010 margins and 2011's predictions are especially troublesome for anyone not affiliated with the big-two dialysis providers. Question is, will this be sustainable for smaller providers over the next few years and what strategies will need to be implemented to counteract these trends?