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Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations Fredric Finkelstein, MD Alan Kliger, MD Hospital of St.

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Presentation on theme: "Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations Fredric Finkelstein, MD Alan Kliger, MD Hospital of St."— Presentation transcript:

1 Implications of The Medicare Prospective Payment System (PPS) for Small Dialysis Organizations Fredric Finkelstein, MD Alan Kliger, MD Hospital of St. Raphael Yale University New Haven, CT John Kochevar, PhD Mark Stephens Kochevar Research Associates Annotated ASN 2011 Presentation

2 Purpose To determine : The financial impact of the PPS on small dialysis organizations. The consequences of gains/losses for treatment practices, facility sale or closure.

3 Background Facility patient costs and outcomes vary widely. Variations are due to patient and facility characteristics, geography, facility efficiency, etc. We focused on which facilities might gain or lose income, which patients were most costly, and what strategies were being considered to maintain financial solvency

4 Background Detailed analysis of the CMS Facility Impact file showed high variation in PPS payments. The top quintile of income losing facilities will lose much more than 2% income.

5 Methods Sample Quota sample of SDOs selected by region, size, urbanicity (rural, suburban, urban), chain status, % minority in zip code. Randomly selected within cells. Final sample: 41 Facilities, 3039 patients. Interviews Four interviews each facility: facility characteristics, treatment practices, financials, plans for changes. Patient Data Form Comorbidity check list, 2009 treatments, payments, EPO, Hgb, hospitalizations for 2009.

6 Methods Calculations Calculated PPS payments for 2011 and subtracted from 2009 payments, up-dated for inflation. Cautions Under-represents facilities in South, those at high risk. The number of SDO facilities has declined since 2009.

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8 CMS Projected Income Reduction Present Study Sample Income Reduction 2007 Data ¹ 2009 Data 4951 Facilities: - 2.0% Top Quintile: -12.0% Income reductions higher: LDOs South Minority areas ¹ Final Rule, Table 35 Payment Reductions 41 facilities: - 5.1% Top Quintile: % Income reductions higher: Rural Northeast Facilities in our sample were projected to lose more than the CMS average. Many facilities in our sample reported cutting ESA use in 2009.

9 Payment Reductions For 38 Facilities in Present Study Impact File (2007) - $ 338,016 (-0.4%) Our Calculations (2009)- $3,885,676 (-4.9%) We double checked our calculation model and compared it to a similar model created for the NRAA. The payment reductions reported in the Impact file were not predictive of our sample’s reductions or others.

10 Average Income Gain/Loss/Tx Total N=3039 -$15 Quintiles 1-$102 2-$ 30 3-$ 2 4 $ 21 5 $ 54 Average Annual Payments Per Patient CR/SB Payments $26,930 PPS Payments $25,422 Difference -$ 1,508 Income Reductions Per Patient, Per Treatment Facilities will lose income on a small portion of patients.

11 Patient Average Income Gains/Losses Per Treatment By Quintile Income Losses/Gains by Quintile N607 Biggest Reductions 608 Biggest Gains Avg $ Change in Income per Tx - $ $ $1.81$21.04$54.46 % Died %14.6%14.1%10.9% % Black38.4%30.8%27.1%26.8%24.1% % Rural14.5%10.2%8.2% 11.0% % New to Dialysis9.1%8.4%9.9%17.1%46.9% Characteristics not in the PPS accounted for large income gains and losses.

12 Characteristics of Patients with Highest Income Losses Per Treatment AVERAGE INCOME LOSS PER TREATMENT -$18 -$24 -$26 Characteristics combined produced even higher income losses.

13 Comorbidities and ESA Use ComorbidityPPS AdjustorsRelated to ESA Use p < 0.05 HIVX Hemolytic/Sickle Cell AnemiasXX CancerX DiabetesX Peripheral Vascular DiseaseX SHPTX PneumoniaXX SepticemiaX GI BleedXX Inability to AmbulateX Inability to TransferX Need assistance with ADLX The PPS failed to include ESA related comorbidities.

14 Multiple Comorbidities and ESA Use Number of Comorbidities Total Patient N ESA $/Tx$51.$47. $49.$50.$60. ESA Units/Tx (000) Gain/Loss /Tx$15$3.8$7.6$12$17$30 The PPS case mix adjustors do not pay more for multiple comorbidities. Facilities with sicker patients lost more money and it was not only because of ESA use.

15 Facility Loss /Gain Analysis < -$26-$25 to - $20-$19 to -$9-$8 to +$.24>$ 0.25 Facility N88988 Patient N % Patients losing > $500037%23%17%13%7% Av. ESA Annual Costs$6660$6160$5080$3780$4510 Av. Hgb % Black45%38%19%12%36% % 4+ Comorbidities33%23%35%20% % New to Dialysis15%18%19%21%17% Losses/Gains are due to an interaction of patient burden and facility practices. Average Loss / Gain/ Tx by Facility Note: All differences were statistically significant.

16 ESAs – Average Payments and Costs PPS Bundle ESA Payment /Tx (2011) Base Rate$53 With Adjustments$57 Average ESA /Tx Costs - Cost Reports 2009 LDOs$65 MDOs$54 SDOs$41 Average ESA/Tx Reimbursements 2009 Sample SDOs$51 All costs / reimbursements adjusted to 2011 for inflation.

17 Financial Health Will reduced Medicare revenues drive SDOs out of business? Wide variation in % Medicare treatments Average % Medicare treatments 73% Range40-95% Multiple sources of income, all in flux Medicare, Medicaid, HMOs, PPO, Copays, Nursing homes Individual units have different revenue and cost profiles. No clear patterns emerged. Some units can survive a 5% cut in Medicare revenue. Others will be in trouble and require subsidies, staff cuts or closure.

18 Responses to the Bundle: Positives No salary reductions No further staff reductions, including nursing, social work, and dietary support No reductions in time spent with patients No change in dialysis time No facilities were considering immediate closure. Final interviews with clinicians and financial managers. Nearly total agreement:

19 Likely more selective in admissions (40%) with admission of fewer charity cases (47%) and fewer non-compliant cases (45%). Likely more patients refused by other facilities (63%). Likely more patients remain in local hospitals (37%). Likely reduction in lab tests (80%). Likely reduction in equipment spending (65%). Responses to the Bundle: Negatives Cost shifting and selectivity

20 Responses: Practice Changes Likely to change anemia protocol (90%) and to lower hemoglobin target (75%). Likely to change to subcutaneous EPO (68%). Likely to send more patients for transfusions ( 55% ) More likely to send patients to hospital if they require costly medications ( 50% ).

21 Response : Reevaluation of Practice Patterns Likely reducing EPO will lead to more patients below Hgb 10 (65%). But, impression is that reducing EPO and lowering Hgb target will not have negative impact on quality of life (65%), overall health (50%), and mortality of patients (80%)_ Likely to increase use of cinacalcet (86%) and calcitriol (78%) and decrease use of paracalcitol (75%). Likely to increase home dialysis use (60%) but anticipate slow increase Likely to work with other physicians to improve pre dialysis care (74%).

22 PPS Challenges for SDOs The PPS is likely to cut payments more than 2%, much more for rural and minority facilities. Outlier payments and case mix adjustors do not work as planned. Facilities are cutting and shifting costs but this will not solve the problem of high cost patients. Few expect to close this year, but they are vulnerable to additional cuts in private insurance and Medicaid. The potential risk for patients and the health care delivery system needs to be more closely examined.


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