Case-Mix Adjustment for an Expanded Renal Prospective Payment System

Abstract

Medicare is considering an expansion of the bundle of dialysis-related services to be paid on a prospective basis. Exploratory models were developed to assess the potential limitations of case-mix adjustment for such an expansion. A broad set of patient characteristics explained 11.8% of the variation in Medicare allowable charges per dialysis session. Although adding recent hematocrit values or prior health care utilization to the model did increase explanatory power, it could also create adverse incentives. Projected gains or losses relative to prevailing fee-for-service payments, assuming no change in practice patterns, were significant for some individual providers. However, systematic gains or losses for different classes of providers were modest. Medicare's current payment methodology for outpatient, dialysis-related care is a blend of prospective and fee-for-service approaches. Medicare pays a predetermined composite rate for a specified set of services comprising the basic dialysis treatment. The composite rate is an example of a prospective payment system (PPS) under which providers receive a flat rate for a bundle of services. Generally in a PPS, payments vary across providers and patients as a result of only predetermined adjustments that account for factors such as local wage rates and patient characteristics related to the cost of care but beyond the provider's control. However, the composite rate bundle is far from all-inclusive. Therefore, the dialysis payment system retains a significant element of fee-for-service payment, as dialysis facilities and other providers bill separately for services not covered by the composite rate, primarily injectable medications and laboratory tests.The Medicare Modernization Act of 2003 mandates that the Centers for Medicare and Medicaid Services (CMS) study the possibility of expanding the scope of prospective renal care payment to include many or all of the dialysis-related services now billed on a fee-for-service basis. This legislation requires CMS to conduct a demonstration project and to submit a report to Congress regarding policy options for such an expanded bundle.Of separately billable services, erythropoietin (EPO), iron, and vitamin D comprise 95% of Medicare Allowable Charges (MAC) submitted by dialysis facilities. MAC represent the sum of the Medicare payment for a service and the amount for which the patient or the patient's secondary insurer is responsible. As is the case in any PPS, variation in patients' needs for care may create financial risk for providers and compromise access to care for more costly patients. To mitigate these concerns, casemix adjustment increases payments to facilities treating more costly patients. If unacceptable risk remains after the implementation of a feasible casemix adjustment system, policy makers may seek to supplement case-mix adjustment with additional

Variant hemoglobin phenotypes may account for differential erythropoiesis-stimulating agent dosing in African-American hemodialysis patients

“…29,30 In its current iteration, the following patient and facility level characteristics will be used to calculate payments—age, body mass index, body surface area, and size of dialysis organization. Race/ethnicity has not been incorporated as one of the adjustment variables, although models using the planned bundling system predict higher costs for African-American patients, driven largely by higher costs for ESAs.…”

Provider Monitoring and Pay‐for‐Performance When Multiple Providers Affect Outcomes: An Application to Renal Dialysis

“…We expect that resource use and outcomes are influenced by observed and unobserved patient characteristics. Based on prior research, we identified a set of potential case mix adjusters (Hirth et al 2003(Hirth et al , 2007Wheeler et al 2006). Given that each dialysis patient has an ongoing relationship with both a dialysis facility and a nephrologist, we also expect that utilization of services and clinical outcomes could be independently influenced by facility and physician.…”

The Role of Medical Directors in Dialysis Facilities Series Editor: Robert A. Gutman: How Dialysis Is Paid For: What the Dialysis Medical Director Should Know, and Why

“…The most basic bundle would include the common ESRD drugs and the laboratory tests used to manage them. Three drugs (EPO, iron, and vitamin D) account for 95% of the services not currently included in the Medicare CR (17). The use of this core of drugs and related labs is variable from patient to patient and from dialysis to dialysis.…”

“…The amount of EPO required by patients is associated with their years on dialysis, race, other medical problems, recent hospitalizations, baseline hematocrit and various demographic values. Models based on that core of variables can predict approximately 15% of the variation in EPO cost (17). More complicated models that include historical EPO dose and an index of dose-response to EPO can predict 70% of the variation in EPO cost.…”