Medicare Spent $8.6 billion on Dialysis in 2007

Medicare Spent $8.6 billion on Dialysis in 2007
Copyright 2009 by Virgo Publishing.
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Posted on: 03/03/2009

WASHINGTON— Medicare spending for dialysis and dialysis drugs reached $8.6 billion in 2007, an increase of 2 percent over 2006, according to a recent government report.

In 2007, the average Medicare dialysis payment was $155 per treatment and each dialysis drug payment averaged $75, according to the Medicare Payment Advisory Commission’s March report to Congress. Medicare spending—for composite rate services and dialysis drugs—averaged about $26,000 per patient in 2007.

About half of the new ESRD patients to Medicare in 2007 were under 65, and that same year there were about 113,000 new dialysis patients, according to the report. More than 330,000 dialysis patients were covered by Medicare at approximately 4,900 facilities in 2007.

The cost per dialysis treatment rose 3.3 percent each year between 2000 and 2007, according to the MedPAC report. The largest factor in the rising costs was due to general and administrative costs, such as legal and accounting services, recordkeeping, data processing, utilities and malpractice premiums.

In 2007, these costs accounted for approximately 30 percent of the total cost per treatment. Capital, labor and other direct medical costs accounted for 19 percent, 41 percent and 11 percent, respectively, of the total cost per treatment in 2007.

In addition, the 2007 Medicare margin was 4.8 percent for composite rate services and dialysis drugs in freestanding facilities. The two largest chains—DaVita and Fresenius—had a much higher margin than other freestanding dialysis providers: 6.9 percent vs. 0.2 percent. Taking into account increases in the composite rate and drug add-on payment, MedPAC projects that the Medicare margin for all providers in 2009 will be 1.2 percent.

For the annual report, Congress called on MedPAC to determine whether 2009 payments can cover the costs for “efficient” dialysis providers and how much payments should change in 2010.

As expected, MedPAC recommended that Congress update the dialysis composite rate by 1 percent for 2010, according to their report. However, the Medicare Improvements for Patients and Providers Act, passed in 2008, already called for a 1 percent increase for the dialysis composite rate in 2010.

MedPAC’s rationale for the 1 percent increase: “The growth in the number of dialysis facilities and treatment stations has kept pace with the growth in the number of dialysis patients, suggesting continued access to care for most dialysis beneficiaries.”

The composite rate paid for each treatment includes dialysis and routine services—such as nursing, supplies, equipment and certain laboratory tests. The “separately billable” payment includes injectable drugs and certain laboratory tests that are not routine or weren’t available when Medicare created the composite rate in 1983—such drugs include epoetin, injectable vitamin D and injectable iron. In 2011, a new bundled payment will combine the composite rate with separately billable payments.

The use of dialysis drugs increased between 2004 and 2007, but at a slower rate than in the past because of statutory and regulatory changes—including the Medicare Prescription Drug, Improvement and Modernization Act of 2003—that lowered payment for most of them, according to MedPAC.

The MedPAC report also said that some measures of quality of care are improving, such as use of fistulas and anemia control. However, the commission said quality improvements are still needed. “For example, the proportion of dialysis patients registered for the kidney transplant waiting list does not meet the goal set forth by the Centers for Disease Control and Prevention Healthy People 2010,” according to the report.

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