	Background

		End-Stage Renal Disease (ESRD)

Treatment options for individuals with ESRD include kidney transplants or  maintenance dialysis. LVPA Did Not Effectively Target Low-Volume Facilities That Appeared Necessary for Ensuring Access to Care and Had High Costs

Many of the 326 facilities eligible for the 2011 LVPA were located near  other facilities, indicating that they might not have been necessary for  ensuring access to care. Moreover, the design  of the LVPA provides facilities with an adverse incentive to restrict their  service provision to avoid reaching the 4,000 treatment threshold. Approximately  35 percent of the 326 LVPA-eligible facilities were located within 5 miles  of a high-volume facility.94 percent were located in urban areas, compared with 51 percent of all  LVPA-eligible facilities. Certain Ineligible Facilities Had Above-Average Costs and Appeared Necessary for Ensuring Access to Care; LVPA Design May Introduce Adverse Incentives

Compared with all freestanding facilities in our cost analysis, freestanding  LVPA-eligible facilities had substantially higher costs per dialysis  treatment in 2011, but other freestanding facilities that provided a  relatively low volume of treatments were ineligible for the LVPA, even  though they were isolated and incurred above-average costs, because  they exceeded the treatment threshold. CMS has implemented an adjustment in another payment system that  decreases as facility volume increases—an approach which, if applied to  the LVPA, could diminish the incentive for providers to limit service  provision by making the loss of potential revenue smaller for supplying  additional services. In addition, such an adjustment—referred to as a  tiered or phased-out adjustment—could more closely align the LVPA with  the decline in cost per treatment that occurs as volume increases. The  guidance that CMS issued for implementation of the regulatory  requirements was sometimes unclear and not always available when  needed, and the misunderstanding of LVPA eligibility likely was  exacerbated because CMS conducted limited monitoring of the Medicare  contractors’ administration of LVPA payments. Medicare Overpaid Facilities Ineligible for the 2011 LVPA by an Estimated $5.3 Million and Did Not Pay an Estimated $6.7 Million to Some Eligible Facilities, including Those That Did Not Request Payments

Medicare overpaid 83 dialysis facilities that were ineligible for the LVPA in  2011 by an estimated $5.3 million, which was nearly one-quarter of the  approximately $22.7 million in LVPA payments made that year. For example, the majority of the facilities that incorrectly received  the LVPA—54 of 83—were hospital-affiliated facilities that failed the  volume threshold. Much of the misunderstanding and resulting payment problems related to  eligibility were exacerbated by CMS’s limited monitoring of the Medicare  contractors and its consequent limited knowledge about implementation  of the LVPA. While CMS requested information about the 2011 LVPA  from Medicare contractors in October 2011 and again in July 2012, as of  January 2013, it had not yet verified whether the information it received  was complete or in a usable form. In particular, CMS still did not know  which facilities were eligible for the 2011 LVPA, which facilities had  attested to being eligible for the adjustment, nor which facilities received  the 2011 LVPA. To ensure that future LVPA payments are made only to eligible facilities  and to rectify past overpayments, we recommend that the Administrator  of CMS take the following four actions:  require Medicare contractors to promptly recoup 2011 LVPA  payments that were made in error;  investigate any errors that contributed to eligible facilities not  consistently receiving the 2011 LVPA and ensure that such errors are  corrected;  take steps to ensure that CMS regulations and guidance regarding the  LVPA are clear, timely, and effectively disseminated to both dialysis  facilities and Medicare contractors; and  improve the timeliness and efficacy of CMS’s monitoring regarding the  extent to which Medicare contractors are determining LVPA eligibility  correctly and promptly redetermining eligibility when all necessary  data become available. Our  recommendations—that CMS should (1) more effectively target facilities  necessary for ensuring access to care by considering restricting the LVPA  to low-volume facilities that are isolated and (2) reduce the incentive for  facilities to restrict their service provision by considering revisions such as  changing the LVPA to a tiered adjustment—outlined the factors CMS  should consider in improving the LVPA. We are sending copies of this report to the Secretary of Health and  Human Services.
Why GAO Did This Study

Medicare spent about $10.1 billion in 2011 on dialysis treatments and related items and services for about 365,000 beneficiaries with end-stage renal disease (ESRD). Most individuals with ESRD are eligible for Medicare. As required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS implemented the LVPA to compensate dialysis facilities that provided a low volume of dialysis treatments for the higher costs they incurred. MIPPA required GAO to study the LVPA; GAO examined (1) the extent to which the LVPA targeted low-volume, high-cost facilities that appeared necessary for ensuring access to care and (2) CMS's implementation of the LVPA, including the extent to which CMS paid the 2011 LVPA to facilities eligible to receive it. To do this work, GAO reviewed Medicare claims, facilities' annual reports of their costs, and data on dialysis facilities' location to identify and compare facilities that were eligible for the LVPA with those that received it.

What GAO Found

The low-volume payment adjustment (LVPA) did not effectively target low-volume facilities that had high costs and appeared necessary for ensuring access to care. Nearly 30 percent of LVPA-eligible facilities were located within 1 mile of another facility in 2011, and about 54 percent were within 5 miles, indicating these facilities might not have been necessary for ensuring access to care. Furthermore, in many cases, LVPA-eligible facilities were located near high-volume facilities. Among the freestanding facilities in GAO's analysis, LVPA-eligible facilities had substantially higher costs per dialysis treatment than the average facility ($272 compared with $235); however, so did other facilities that provided a relatively low volume of treatments (and were isolated) but were ineligible for the LVPA. The design of the LVPA gives facilities an adverse incentive to restrict service provision because facilities could lose a substantial amount of Medicare revenue over 3 years if they reach the treatment threshold. In another payment system, the Centers for Medicare & Medicaid Services (CMS) implemented a tiered adjustment that decreases as facility volume increases. Such an adjustment could diminish the incentive for dialysis facilities to limit service provision and also more closely align the LVPA with the decline in costs per treatment that occurs as volume increases.
Medicare overpaid an estimated $5.3 million in 2011 to dialysis facilities that were ineligible for the LVPA and did not pay an estimated $6.7 million that same year to facilities that were eligible. The payment problems occurred primarily because the guidance issued by CMS on facility eligibility was sometimes not clear or timely and CMS's monitoring of the LVPA was limited. For example, the majority of the ineligible facilities that received the LVPA were hospital-affiliated facilities that failed the volume requirement. Although CMS gave the Medicare contractors guidance for determining how to count treatments when facilities are affiliated with hospitals, the agency did not issue that guidance until July 2012. CMS has conducted limited monitoring of the LVPA, which has left CMS with incomplete information about LVPA administration and payments. For example, CMS was unaware as of January 2013 whether its contractors had recouped erroneous 2011 LVPA payments. In addition, CMS had requested information from its contractors about the implementation of the 2011 LVPA, such as which facilities were eligible for or had received the LVPA, but had not yet verified whether the information it received was complete or in a usable form. Without complete information about the administration of this payment adjustment, CMS is not in a position to ensure that the LVPA is reaching low-volume facilities as intended or that erroneous payments to ineligible facilities are recouped.

What GAO Recommends

To more effectively target the LVPA and ensure LVPA payment accuracy, GAO recommends that the Administrator of CMS consider restricting payments to low-volume facilities that are isolated; consider changing the LVPA to a tiered adjustment; recoup 2011 LVPA payments that the Medicare contractors made in error; improve monitoring of those contractors; and improve the clarity and timeliness of guidance. The Department of Health and Human Services, which oversees CMS, agreed with GAO's recommendations.