Financial Implications of Choice of Dialysis Type of the Revised Medicare Payment System: An Economic Analysis

Background: In 2011, the Medicare Improvements for Patients and Providers Act replaced the case-mix-adjusted composite payment system for Medicare outpatient dialysis facilities with a bundled end-stage renal disease prospective payment system (PPS). We assessed the economic implications for modality choice of the revised Medicare payment system. Study Design: Microeconomic analyses. Setting & Population: Patients eligible for dialysis in the United States. Model, Perspective, & Timeframe: The perspective of this analysis is that of a financial administrator of a representative dialysis center in the United States. Data were obtained from the Medicare Payment Advisory Commission, the US Renal Data System, the DOPPS (Dialysis Outcomes and Practice Patterns Study) Practice Monitor, the US Bureau of Labor Statistics, and Medicare fee schedules. Interventions: Recently implemented end-stage renal disease PPS versus the prior case-mix composite payment system. Outcomes: Medicare payment per month, center fixed and variable costs per month, net difference in revenue and variable costs (direct contribution), and net difference in revenue and total costs (operating margin). Results: The direct contribution and operating margin for in-center hemodialysis and peritoneal dialysis are expected to be positive under the new bundled PPS. For Medicare fiscal intermediaries/administrators, paid treatments for home hemodialysis vary from 3.2 to more than 4.8 per week. The direct contribution and operating margin are expected to be negative for home hemodialysis if the number of paid treatments is similar between in-center and home hemodialysis; they are almost identical when the number of paid treatments increases for home hemodialysis by approximately 1 per week. Limitations: Experience across centers and intermediaries/administrators may vary. Sensitivity analyses were conducted to assess the robustness of findings and determine which variables most influenced results. Conclusions: The new bundled PPS created a financial incentive for increased use of peritoneal dialysis. Use of home hemodialysis may be influenced by number of paid treatments per week. Am J Kidney Dis. 60(2):280-287. (C) 2012 by the National Kidney Foundation, Inc.