Under CMS’s proposed rule,  the ESRD drugs covered under the new bundled payment would include  injectable ESRD drugs as well as oral ESRD drugs, such as calcimimetics,  that are currently covered under Medicare Part D.

		Accounting for Beneficiary Cost Differences under Medicare Bundled Payment Systems

Bundled payment systems in Medicare typically include a case-mix  adjustment and may also use an outlier policy to account for differences in  the cost of beneficiaries’ care. In particular, Medicare expenditures  on injectable ESRD drugs in 2007 were $782 per African American  beneficiary per month—about 13 percent more than the $693 spent for all  Medicare beneficiaries on dialysis (see fig. Similarly, the $708 that Medicare spent  per month on non-Hispanic beneficiaries was about 2 percent higher than  the average across all beneficiaries on dialysis and about 19 percent higher  than the average for Hispanic beneficiaries. A Majority of Selected Clinicians and Researchers Identified Primarily Clinical Factors as Likely to Result in Above Average Doses of Injectable ESRD Drugs

While we report that certain demographic groups were associated with  above average Medicare expenditures for injectable ESRD drugs in 2007,  we did not identify the factors that led to these differences in expenditures  across groups of beneficiaries. However, we collected information from  nephrology clinicians and ESRD researchers on the factors they consider  likely to result in above average doses of injectable drugs—ESAs, IV iron,  and IV vitamin D.
A majority of the 73 clinicians and researchers who completed our Web- based data collection instrument identified clinical factors, rather than  demographic characteristics, as likely to result in above average doses of  injectable ESRD drugs. Specifically, at least 50 percent of these experts  identified 14 such factors, including chronic blood loss, low iron stores,  and recent hospitalization, as likely to result in above average doses of  ESAs (see table 1). In addition to a case-mix adjustment model, CMS proposed using an  outlier policy, as required by MIPPA, to increase payments to providers  when they treat beneficiaries whose costs of dialysis care substantially  exceed what would be expected. CMS’s Preliminary Monitoring Plans Build on Existing Initiatives, but Whether CMS Will Monitor Quality of and Access to Care for Groups of Beneficiaries Is Unclear

CMS officials told us that their preliminary plans for monitoring the effects  of the new bundled payment system on beneficiaries include three current  CMS initiatives that focus on monitoring the quality of dialysis care (see  table 4). We and others have noted the importance of monitoring quality of and  access to care under bundled payment systems to help ensure that  beneficiaries receive appropriate care. In commenting on a draft of this report, CMS stated that it plans to  have a comprehensive monitoring strategy in place when the new bundled  payment system is implemented on January 1, 2011. However, because  CMS’s monitoring plans are preliminary, the extent to which CMS intends  to monitor quality for various groups of beneficiaries, such as those with  above average costs of care, is unclear. Recommendation for Executive Action

To help ensure that changes in Medicare payment methods for dialysis  care do not adversely affect beneficiaries, we recommend that the  Administrator of CMS monitor the access to and quality of dialysis care for  groups of beneficiaries, particularly those with above average costs of  dialysis care, under the new bundled payment system. We have  reprinted CMS’s letter in appendix V.

		Comments from Industry Representatives

We invited representatives of both large and small dialysis facility  organizations and a nephrologist specialty association to review and  provide oral comments on the draft report. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) provide information on Medicare expenditures  for injectable end-stage renal disease (ESRD) drugs, by beneficiaries’  demographic characteristics; (2) identify the factors that clinicians and  researchers indicate are likely to result in a higher-than-average dose of  injectable drugs for a dialysis patient; (3) describe the Centers for  Medicare & Medicaid Services’ (CMS) approach for addressing differences  among beneficiaries in the cost of dialysis care under the new bundled  payment system for these services; and (4) examine CMS’s plans for  monitoring the effects of the new bundled payment system on  beneficiaries.
Why GAO Did This Study

Medicare covers dialysis for most individuals with end-stage renal disease (ESRD). Beginning in January 2011, the Centers for Medicare & Medicaid Services (CMS) is required to use a single payment to pay for dialysis and related services, which include injectable ESRD drugs. Questions have been raised about this new payment system's effects on the access to and quality of dialysis care for certain groups of beneficiaries, such as those who receive above average doses of injectable ESRD drugs. GAO examined (1) Medicare expenditures for injectable ESRD drugs, by demographic characteristics; (2) factors likely to result in above average doses of these drugs; (3) CMS's approach for addressing beneficiary differences in the cost of dialysis care under the new payment system; and (4) CMS's plans to monitor the new payment system's effects. GAO analyzed 2007 data--the most recent available--on Medicare ESRD expenditures and input from 73 nephrology clinicians and researchers collected using a Web-based data collection instrument. GAO also reviewed reports and CMS's proposed rule on the payment system's design and interviewed CMS officials.

What GAO Found

Certain demographic groups had above average Medicare expenditures for injectable ESRD drugs in 2007. For example, Medicare spent $782 per month on injectable ESRD drugs per African American beneficiary, which was about 13 percent more than the average across all beneficiaries on dialysis and was also higher than for other racial groups. Similarly, monthly Medicare spending per beneficiary with additional coverage through Medicaid was about 6 percent higher than the average across all beneficiaries on dialysis. Although GAO did not identify the factors that led to the differences described above, it did obtain information from 73 nephrology clinicians and researchers, selected through referrals from dialysis-related professional organizations and a literature review, on the factors that they consider likely to result in above average doses of injectable ESRD drugs. A majority of these experts identified primarily clinical factors as likely to result in above average doses of these drugs. For example, at least 50 percent of the 73 clinicians and researchers from whom GAO obtained information identified 14 factors (including chronic blood loss and low iron stores) as likely to result in above average doses of erythropoiesis stimulating agents, which accounted for about 75 percent of expenditures on injectable ESRD drugs in 2007. CMS's proposed design for the new payment system for dialysis care includes, as required by law, two payment mechanisms to address differences across beneficiaries in their costs of dialysis care. Under the first payment mechanism--a case-mix adjustment--CMS proposed to adjust payments based on characteristics such as age, sex, and certain clinical conditions that are associated with beneficiaries' costs of dialysis care. The second proposed payment mechanism--an outlier policy--involves making additional payments to providers when they treat patients whose costs of care are substantially higher than would be expected. CMS's preliminary plans for monitoring the effects of the new payment system build on existing initiatives, but it is unclear whether CMS will monitor the effects on the quality of and access to dialysis care for groups of beneficiaries. In prior work, GAO and others have emphasized the importance of monitoring both the quality of and access to care to ensure that Medicare payment system changes do not result in certain groups of beneficiaries experiencing poor care quality or problems accessing services. CMS intends to monitor the quality of dialysis care under the new payment system, but the extent to which CMS will conduct such monitoring for various groups of beneficiaries is currently unclear because CMS's plans are preliminary. Furthermore, CMS's preliminary plans for monitoring access to dialysis care are limited. However, CMS has stated that it will have a comprehensive monitoring strategy in place by January 2011. GAO obtained comments on a draft of this report from CMS and from industry groups representing both large and small dialysis providers and nephrologists.