PRESS RELEASE - from the Renal Leadership Council, August 13, 2001
Contact: Gwen Gampel
(202) 544-6264"At a minimum Medicare reimbursement for dialysis treatments should be increased by 2.9% in 2002 to cover inflationary costs," according to Abt Associates which conducted a detailed analysis of dialysis provider costs and Medicare revenue for 1999 and 2000. The study entitled, "Updating the 2002 composite Rate for Dialysis Treatments", concluded that, "without an adjustment to the composite rate, patient access to care in areas with above average proportions of Medicare patients will be threatened."
Medicare currently provides "composite rate" reimbursement to some 3,600 free-standing and hospital-based dialysis facilities providing renal replacement therapy to approximately 300,000 Medicare beneficiaries with End-Stage Renal Disease (ESRD) throughout the U.S. Without kidney transplantation or dialysis treatments, to clean the blood of toxins, ESRD is invariably fatal.
Kent Thiry, CEO of DaVita, and Chairman of the Renal Leadership Council said, "Dialysis providers welcome the results of the study as it clearly demonstrates that dialysis facilities require an inflation increase for 2002 from Medicare." Thiry went on to say that, "The Renal Leadership Council was extremely frustrated by this year's Medicare Payment Advisory Commission's flawed assessment that Medicare reimbursement for dialysis treatments should remain unchanged". However, he said, "He understood that MedPAC decided to conduct a broader analysis than they usually do and staff simply did not have enough time or have access to some key data to do as thorough an analysis as Abt Associates."
Thiry said, "Like other health care services, dialysis facilities are facing labor shortages, rising wages, fuel costs and product costs. Facilities must receive adequate reimbursement to continue providing Medicare beneficiaries the quality of care they deserve."
"Dialysis provider reimbursement is the only Medicare reimbursement that does not include an annual update formula," Thiry said. "As a result, Thiry continued, "while hospitals are slated to receive a 2.75% increase and other providers will receive on average 2.5% increases in their Medicare reimbursement in 2002, dialysis providers will receive no increase without Congressional action this year."
Abt Associates' findings contradict the Medicare Payment Advisory Commission's (MedPAC) analyses and recommendation. Specifically, while MedPAC considered all of the Medicare revenue from the composite rate and separately billable drugs, the Abt report found the commission did not take into consideration the most recent increases in labor, capital, drug acquisition, and overhead costs of providing dialysis treatments and ancillary drugs. This combined with the fact that the commission omitted from their analysis legitimate costs related to bad debt and medical directors fees led them to the wrong conclusion about dialysis providers' margins.
Abt concluded that:
- Even restricting the analysis to allowable Medicare costs, in 2000, the cost of providing composite rate services exceeded the average Medicare composite rate payment by almost $8.00 a treatment, a 7% shortfall. (The average composite rate payment per treatment is $128.)
- Contrary to MedPAC's findings, the profits made on separately billable items were not large enough to cover the increasing losses incurred on composite rate services.
- While the number of patients treated by the largest dialysis companies has increased in recent years, this type of consolidation actually indicates falling profit margins, not increased profits as MedPAC assumes.
- Productivity changes are unlikely to affect provider costs in 2002, contrary to MedPAC's unsubstantiated projection of further productivity gains.
In summary, Abt concluded, "Failure to increase Medicare reimbursement to dialysis facilities to cover annual inflationary costs may make it difficult for dialysis providers to continue to maintain or improve the quality of dialysis services. Further, inadequate Medicare reimbursement may threaten patient access to care, particularly in small rural or urban facilities that have above average costs."
The Abt Associates study is based on the most current, actual data from the six largest providers of dialysis services and several smaller providers which together deliver nearly 70% of all the dialysis care for Medicare ESRD beneficiaries in this country. The study was commissioned by some of the leading renal community organizations including the Renal Leadership Council, which includes 4 of the largest dialysis providers, Fresenius Medical Care, the National Kidney Foundation, the National Renal Administrators Association and the American Nephrology Nurses' Association.