The Medicare Modernization Act: One step forward or two steps back?

1. The Medicare Modernization Act: One step forward or two steps back? Allen R. Nissenson MD Professor of Medicine Director, Dialysis Program David Geffen School of Medicine at UCLA Los Angeles, CA Thomas Golper MD Professor of Medicine Vanderbilt University Medical Center Medical Director Medical Specialties Patient Care Center Nashville, TN

2. The Medicare Modernization Act • The Medicare Modernization Act (MMA) -- an act mainly known for its payment for medications for Medicare beneficiaries -- was passed at the end of 2003. • It affects the pricing and reimbursement of drugs in both hospitals and dialysis facilities. Thomas Golper MD

3. Dialysis units and injectable drugs • Historically, dialysis facilities have a major fraction of their treatment margins come from injectable drugs (erythropoietic substances, iron supplements, vitamin D analogs, carnitine). • With the MMA they will be reimbursed at a much lower rate for these drugs. • The dialysis unit now gets paid a composite rate covering the actual treatment for each patient and a separate payment for injectable drugs. Thomas Golper MD Allen Nissenson MD

4. Can dialysis units survive financially only on the composite rate? • Dialysis units survive on: • Non-Medicare payers who are charged higher fees. • Profits from injectable drugs. • With this change on payment of injectable drugs, facilities with a large number in noncommercial patients will struggle. • Especially in underserved areas, rural areas, inner cities where few have insurance … • Will affect access to care for patients. Allen Nissenson MD

5. Cutting costs • There are currently no rigid rules at the national level regarding dialysis unit staff. • “Amputations” • As revenue shrinks, the unit first cuts social workers, then dieticians, nurses, and patient care technicians. • Two thirds of the cost in a unit relates to staff; the remaining third covers supplies and equipment. • Cutting costs for either staff (fewer staff, hiring those with less training) or supplies (reuse of dialyzers, prolonged use of outdated equipment) is not desirable. Thomas Golper MD Allen Nissenson MD

6. Impact of case-mixed adjustment on the composite rate payment • Some patients cost more to dialyze. • The current strategy balances out expensive vs less-expensive patients within a unit. • Case-mixed adjustment or differential payment: higher payment for those whose dialysis is more expensive and vice versa. • Must first determine the most expensive patients to dialyze. Thomas Golper MD Allen Nissenson MD

7. Drawbacks of case-mixed adjustment • Should balance out for large units with a broad distribution of patients, but smaller units will likely experience a detrimental effect: • Particularly in units with a large number of patients in the mid-range of cost • The major drawback is our ability to identify the patient characteristics that really influence cost. Thomas Golper MD Allen Nissenson MD

8. A study for case-mixed adjustment • One very rigorous analysis was done by a very credible group on behalf of CMS. • Drawback: the study relied on Medicare cost reports, which are: • required by Medicare, and • have a number of constraints built in which don’t really reflect the actual costs but rather reflect rigid Medicare rules • The analysis was based on “flawed data.” Allen Nissenson MD

9. What about big corporations? • Impact on large units is neutral -- some corporations run hundreds or thousands of units each: • eg, Frenesius and DaVita/Gambro • It will all equal itself out and not create any adverse effects: • Their small units may lose a huge amount of money and larger ones will win some. • They will need to redistribute funds within the company, which is very difficult. Allen Nissenson MD

10. Was it the right decision? • We have urged CMS to reconsider and to re-examine the methodology and go back to the basics: • What are we trying to accomplish? • How can that best be accomplished? • This will need to be monitored very closely and modified if the adverse effects we suspect actually do occur. Allen Nissenson MD

11. Was it the right decision? (cont.) • Theoretically the methodology is sound, but practically speaking there are problems: • Fiscal intermediaries who received the demographic data didn't know how to handle it. • Some payments were held up this year simply because the bill was too confusing. • We had urged CMS to conduct a pilot project, a demonstration project that CMS chose not to do. Thomas Golper MD

12. One step forward or two steps back? • The old payment system had its flaws but all facilities adapted to it over 20 years, then CMS changed the system overnight. • This kind of change may work in industry sectors but not in healthcare. • CMS must be reminded that, when dealing with very sick patients, abrupt changes in reimbursement can have devastating short-term effects on patient outcomes. • Changes in payment systems should be proven to bring about better patient care before being implemented on a large scale. Allen Nissenson MD