Letter from Kidney Care Partners (of which ANNA is a member) to Centers for Medicare and Medicaid Services regarding revisions to payment policies under the Physician Fee Schedule for Calendar Year 2005; Proposed Rule; CMS-1429-P

September 24, 2004


The Honorable Mark McClellan


Centers for Medicare and Medicaid Services

Room 445-G

Hubert H. Humphrey Building

200 Independence Avenue, SW

Washington, DC  20201 

Re:       Comments on Revisions to Payment Policies under the Physician Fee Schedule for Calendar Year 2005; Proposed Rule; CMS-1429-P

Dear Administrator McClellan:

Kidney Care Partners (KCP) is pleased to have the opportunity to provide the Centers for Medicare and Medicaid Services (CMS) with comments about the Proposed Rule for the Calendar Year 2005 Physician Fee Schedule (Proposed Rule).[1]  KCP is an alliance of members of the kidney care community that works with renal patient advocates, dialysis care professionals, providers, and suppliers to improve the quality of care of individuals with irreversible kidney failure, known as End Stage Renal Disease (ESRD).[2] 

In brief, our comments address the provisions of the Proposed Rule that directly impact the renal community and implement the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).  To summarize, KCP believes:

  • CMS Appropriately Increases the Composite Rate Based Upon the Requirements of MMA;
  • CMS Miscalculates the Add-On to the Composite Rate;
  • CMS Should Delay Implementation of the Basic Case-Mix Adjusted PPS;
  • CMS Should Consider Adjusting the Geographic Wage Index;
  • CMS Should Revise Its Reimbursement Policy for Facilities with Exceptions To Comply with Congressional Intent; and
  • Although CMS Proposes Needed Changes to Help Nephrologists Manage Their Patients, the Agency Should Allow Nephrologists to Bill for Venous Mapping.

I.         Section 623:   CMS Appropriately Increases the Composite Rate Based Upon the Requirements of MMA

KCP members are pleased with the implementation of the 1.6 percent increase in the December 31, 2004, composite rate consistent with the requirements of MMA § 623. 

This increase is critically important to KCP members.  The ESRD composite rate remains the only Medicare prospective payment system (PPS) without an annual update mechanism to adjust for changes in input prices and inflation.  Over the years, dialysis providers have relied on increasing efficiencies to continue to provide quality care and improved treatment outcomes without an annual update in the composite rate.  This progress can no longer be sustained.  The lack of an annual update presents a special challenge to dialysis providers.  Overall labor rates, for example, went up seven percent between 2000 and 2001, according to MedPAC’s 2003 report.  Nursing salaries rose, on average, from $23,140 to $31,720 between 1992 and 2002, an increase of 27 percent, according to the U.S. Bureau of Labor Statistics.  Dialysis centers cannot afford to compete for nurses and other professionals with health care providers that have PPS mechanisms with annual update formulas. To ensure that ESRD patients continue to have access to high quality care, the composite rate must be adjusted annually to cover dialysis providers’ real costs.  Given the critical need for the increase, it is essential that the agency correctly calculate the increase on the appropriate basis – the composite rate as of December 31, 2004.

The KCP members hope the increase will serve as a first step toward future modernization efforts, including a more institutionalized process that will recognize increases in the costs of providing care to seriously ill patients.  We look forward to working with the agency to develop an annual update mechanism to ensure that the composite rate accurately reflects the cost of providing high-quality care to Medicare beneficiaries. 

II.        Section 303:   CMS Miscalculates the Add-On to the Composite Rate

A.        CMS Inappropriately Establishes a Single Add-On Adjustment that Fails to Recognize the Real Differences between the Costs of Hospital-Based and Independent Facilities

CMS should not apply a single add-on adjustment for hospital-based and independent facilities.  The proposal to distribute drug margin attributable to and derived solely from free-standing dialysis facilities to hospital-based facilities is seriously flawed.  Congress required the agency to establish the drug margin add-on payment to the composite rate to address concerns expressed by independent dialysis facilities that changes in the Part B reimbursement methodology for separately billed drugs would destabilize the free-standing renal community.  A single add-on adjustment fails to recognize the significantly different reimbursement environment between hospital-based and independent facilities and Congress’s intent to hold independent facilities harmless from drug payment reform changes that do not affect the hospital-based dialysis sector in the same material way.

A single add-on adjustment contradicts Congressional intent.  Congress has consistently recognized that there are differences between hospital-based and independent facilities by setting different payment methodologies for these different types of facilities.  Congress required CMS to establish a different composite rate for hospital-based facilities than for independent facilities.  The Social Security Act (SSA) requires that the composite rate differentiate between hospital-based facilities and other renal dialysis facilities.  SSA § 1881(b)(7).  CMS recognizes this in its regulations.  42 C.F.R. § 413.174(a)(1).  Historically, this mandate has led CMS to set the composite rate for hospital-based facilities significantly higher than that for independent facilities to reflect presumed higher costs in hospital-based facilities that may have existed many years ago.  For example, the hospital-based rate is approximately $132.41, while the amount for independent facilities $128.35.  Although historically true, there is no statutory or regulatory requirement that the hospital-based facility composite rate actually be higher than the one for independent facilities.  There is no support for the assumption that hospital-based facilities treat sicker patients than independent facilities.

Similarly, Medicare relies on different reimbursement methodologies for separately billed drugs for the different facility types.  Prior to 2004, Medicare reimbursed independent facilities for these drugs using the lesser of the actual charge or 95 percent AWP.  42 C.F.R. §§ 405.701 & 413.174.  For calendar year 2004, Medicare will continue to pay the lesser of actual charge or 95 percent AWP.  Id. § 414.707(a)(2)(iv).  In stark contrast, Medicare reimburses hospitals on a reasonable cost basis.  Id. § 413.174.  Related to this difference is the fact that hospital-based dialysis facilities do not file a separate cost report.  Rather, they report costs on the hospital’s overall cost report.  This reporting difference makes it difficult to allocate and isolate the actual cost of dialysis in the hospital setting. 

The difference in reimbursement methodology has led to significant differences in the payments facilities receive.  MedPAC has consistently recognized that Medicare’s payments to independent facilities for separately billed drugs “are subsidizing the lower payment margins under the composite rate.”  MedPAC, Report to Congress 102 (March 2002); see also MedPAC, Report to Congress 123 (March 2003). 

Congress was well aware of the problem independent facilities face because of the inadequacy of the composite rate resulting in the need to cross-subsidize costs from separately billed drug payments.  When it decided to change how Medicare reimburses for Part B drugs, Congress understood that it would negatively alter the payments to independent facilities for separately billed drugs, placing those facilities at risk of being reimbursed at less than their total costs for providing services to patients with ESRD.

In this context, Congress mandated that CMS provide an add-on payment to the composite rate that would essentially hold independent facilities harmless from any decrease in payments for separately billed drugs.  MMA § 623.  This language, which came from the Senate bill, was meant to ensure that there would be no change in the aggregate payments to independent facilities, as the summary of the Senate version of the bill in the Conference Report indicates:

The composite rate for dialysis services furnished during 2004 would be increased by an amount to ensure that the sum of the total amount of the composite rate payments plus the payments that are billed separately for drugs and biologicals (but not EPO) would equal the composite rate payments plus payments made for separately billed drugs and biologicals (not including EPO) as if the drug pricing provisions of this legislation were not enacted.

H. Rpt. 108-391 684 (2003).  The description of the conference agreement acknowledges the inclusion of the Senate language by noting that the overall spending for ESRD services should result in the same amount as if the previous system remained in place in 2005. Id. at 685.

            The hold-harmless provision is clearly meant to protect independent facilities from facing changes in payment that would result in reimbursement amounts less than their costs.  Congress knew when it reformed payments for drugs and biologicals that are not paid on a cost or prospective payment basis that it would also be changing how Medicare reimburses independent facilities for separately billed drugs.  Even MedPAC has recognized as much in its most recent report by stating that the MMA reflects the concerns it has repeatedly expressed to Congress that “Medicare’s policies do not appropriately pay for outpatient dialysis services.”  MedPAC Report to Congress 160 (March 2004). 

The hold-harmless language only makes sense if applied to take account of the different economic situations in which hospital-based and independent facilities find themselves.  Simply put, the changes to 85 percent AWP or less do not affect hospital-based facilities, which are reimbursed based on a reasonable cost basis.  Therefore, it is inconsistent with Congressional intent to establish a single add-on rate that is applied to both hospital-based and independent facilities. 

            Given the differences between hospital-based and independent facilities recognized by Congress and MedPAC, CMS should apply the add-on adjustment, derived from independent facilities’ acquisition cost data, to independent facilities only.  CMS estimates that, if calculated separately, the add-on adjustment for hospital-based facilities would be 2.7 percent, while it would be 12.8 percent for independent facilities.  The difference in percentages clearly demonstrates the effects of the different underlying reimbursement methodologies. Hospital-based facilities provide high-quality care to patients with ESRD and deserve to be adequately reimbursed; however to combine these percentages into a single adjustment ignores the real differences that Congress has consistently recognized.  By using a single add-on, CMS would be transferring part of the payments that previously went to independent facilities to hospital-based facilities.   This exacerbates the very problem Congress sought to avoid.

RECOMMENDATION:      CMS should implement Congress’s intent and provide the add-on adjustment to independent facilities.

            B.        The Calculation of the Add-On Factor Is Too Low

CMS should also increase the add-on percentage for very compelling policy and data-based reasons.  The agency set forth a single adjustment of 11.3 percent that would apply to both hospital-based and independent facilities.  Based upon analysis undertaken by The Moran Group [3], this number underestimates by as much as 9 percent the true difference between the payments for separately billed drugs (including erythropoietin) under the current system and the acquisition costs described by the Office of the Inspector General. 

To compute the add-on, CMS should have used actual 2002 ESRD drug spending amounts (obtainable from the Medicare 2002 Outpatient 5 Percent Standard Analytical File), rather than creating an imputed 2002 base derived from a pooled 10-quarter time series of data.  CMS’s base period assumption of drug spending is clearly lower than the actual 2002 utilization recorded in the 2002 Outpatient 5 Percent Standard Analytical File.  If the actual 2002 data were used, the estimate of overall drug spending would rise by $257 million, or 9 percent.  Assuming that the remainder of the CMS methodology is correct, the alternative base would result in a higher percentage for the single add-on adjustment, taking it from 11.3 percent to 12.3 percent.

KCP strongly urges CMS to use the data from the 2002 Outpatient 5 Percent Standard Analytical File to establish its base for calculating the add-on payment.  Not only will it provide a more accurate calculation, but it also will help ensure that Congress’s intent of holding facilities harmless from the changes to drug reimbursement methodology is fulfilled.

RECOMMENDATION:      CMS should rely upon actual 2002 drug claims data in its methodology for calculating the add-on adjustment.

C.        CMS Should Describe How It Will Update the Add-On Adjustment in the Final Rule Because the Proposed ASP-Based Payment System Is Not Sustainable without Update Mechanisms

A central feature of implementing the add-on adjustment is how CMS will update it, consistent with the statutory requirements.  Unfortunately, the Proposed Rule does not address this vital issue.  The proposed system for 2005 is not sustainable and will further exacerbate the losses sustained by providers in delivering dialysis care to Medicare beneficiaries.  CMS must provide information to the renal community about how the separately billed drug payments and add-on amounts will be updated before finalizing the rule.  Therefore, KCP strongly urges the agency to include a discussion and details of the update mechanism in the Final Rule and to provide interested parties with an opportunity to comment on it. 

Congress established an updating mechanism for the add-on payment in 2006 and beyond.  First, in 2006, Section 623 requires CMS to calculate the add-on payment by determining the difference between the payment amounts for separately billed drugs and biologicals using 95 percent AWP and the acquisition cost or ASP methodology for the drugs.  MMA § 623(d) (42 U.S.C. § 1395rr(b)(12)(C)(ii)).  In 2007, CMS must adjust the add-on so that it incorporates separately billed drugs and biologicals for which there were no billing codes prior to January 1, 2004.  MMA § 623(d) (42 U.S.C. § 1395rr(b)(12)(B)(ii)(B)).  In addition, CMS must increase the case-mix PPS amount by applying the estimated growth in expenditures of separately billed drugs to the add-on component and convert that amount to an applicable increase beginning in 2006 and continuing in subsequent years.  MMA § 623(d) (42 U.S.C. § 1395rr(b)(12)(F)).  Congress envisioned this system to hold facilities harmless for dynamic changes in drug costs, as evidenced by the November 20, 2003, scoring report of the Congressional Budget Office, which concluded that there would be no savings attributable to these provisions.  Based on a budget scoring analysis prepared for KCP by The Moran Company, it was estimated that using current methodology, without an appropriate update in place for 2006 and beyond, drug payments to providers (Medicare payments and beneficiary cost sharing) would be $ 855 million below acquisition costs over 2005 – 2014.  Net of patient cost sharing, this would produce savings to the Medicare program of approximately $ 615 million over this budget window

The way CMS implements the update will dramatically affect the quality of care for ESRD patients.  KCP strongly encourages CMS to present its implementation strategy in a timely manner and to ensure that it is consistent with the mandates of Section 623.  It is imperative that CMS include the mechanism in the Final Rule.  The agency should describe the data it will use to update the drug portion of the prospective payment based on changes in the estimated growth in separately billed drugs.  Additionally, this increase should be applied to reflect accurately any increases in acquisition cost. 

Further, the currently proposed ASP-3 percent “proxy” for the drug acquisition costs of dialysis facilities is not sustainable.  First, it is based on a methodology that understates the true aggregate costs incurred by independent dialysis facilities associated with acquiring drugs.  Second, the dynamic drug pricing changes that are occurring and will continue to occur under the broader Medicare Part B ASP-based drug payment reforms make projections based on an ASP-3% system unreliable.   There is no basis for assuming that the acquisition cost relationships in the base snapshot taken by the OIG will continue to be reflective of the drug acquisition costs to be faced by facilities in 2005.  Implicit in the budget neutrality concept is the expectation that CMS will reasonably project these payments to be made in 2005 and adopt a final drug margin add-on and drug payment approach that will fairly compensate facilities, and for that matter, not introduce distortions into the broader Part B drug payment reforms enacted by the Congress.  More positively, CMS acknowledged this challenge in the preamble, although the option was not reflected in the actual proposal, by stating: An alternative approach would be to use the 2003 acquisition prices from the OIG report, calculate the aggregate difference between such prices and payments for drugs under the AWP system, update this difference to 2005 and then apply the budget neutrality adjustment. 

To ensure a sustainable system over the long-term, it is imperative that CMS describe more fully how it proposes to account for the changes that will occur in the drug acquisition costs facilities will face. Therefore, we feel very strongly that CMS must comply with the provisions governing acquisition costs and budget neutrality requirements by 1) updating the add-on payment on a regular basis so as to take reasonable account of these market dynamics, as well as the effects of broader Part B payment reform, 2) and do so in a manner consistent with the concepts and objectives evidenced in Section 1847A of the Social Security Act. 

RECOMMENDATION:      CMS should propose and allow comment on its plan to implement the update to the drug component, which must include a mechanism to reflect changes in acquisition costs, in the Final Rule. 

III.      Section 623:   CMS Should Delay Implementation of the Case-Mix Adjusted PPS

Section 623(d)(1) of the MMA establishes a basic case-mix adjusted PPS.  The case-mix approach proposed under the system is for a very limited number of patient characteristics.  KCP members are extremely concerned about the proposed system.  While we recognize that the agency may feel compelled by the statutory text to implement it by January 1, 2005, the agency has the discretion to delay implementation until it has developed a system that works and does not place dialysis patients at risk by implementation of an inadequate and perhaps even unsound (certainly untested) case-mix methodology that could significantly redistribute Medicare financing  in questionable ways.  Indeed, while KCP members conceptually endorse sound, risk-adjusted payments, there are reasons to believe implementation of this particular model could generate the unintended result of being less than budget neutral, i.e. removing significant financing from the ESRD system over several years.

A.        CMS Has Discretion to Delay Implementation of the Case-Mix Adjusted PPS

Even though the statute indicates that the case-mix system should be in place by January 1, 2005, KCP strongly urges CMS to follow the path it has taken when developing other prospective payment systems to ensure that the system is accurate, predictive, and does not threaten quality of care.  Specifically, the agency delayed implementation of the Hospital Outpatient PPS, as well as the Home Health PPS and the Skilled Nursing Facility PPS.  When establishing these systems, CMS recognized the need for additional time beyond that allocated by Congress to ensure the development of an appropriate case-mix methodology that accurately predicted resource needs.  The delay also provided the agency with more time to collect data and prepare each health care sector for implementation.  Consistent with this historical approach, CMS should take the time it needs to get the system right.  As described in detail below, if CMS were to implement the system as proposed, it would fail to meet the needs of the renal community because it is based upon an inaccurate methodology, is currently administratively infeasible to implement, and would negatively impact resources, thus jeopardizing patient care.

RECOMMENDATION:      CMS should exercise its discretionary authority to delay implementation of the case-mix adjusted PPS until it can significantly improve the methodological and operational aspects of the system.

B.        The Proposed Case-Mix Methodology Is Flawed Because Its Adjustors Are Not Accurate

To establish the case-mix system, CMS proposes adjustments based upon the patient characteristics of gender and age and the patient comorbidities of peripheral vascular disease (PVD) and Acquired Immune Deficiency Syndrome (AIDS).  KCP is concerned that these adjustors do not accurately predict cost variation among facilities. 

CMS proposes adjustments based on gender and age.  Noting that age and sex are routinely used in other risk adjustment schemas, CMS proposes to establish three age-based categories (under 65, 65-79, and over 80).  Citing a report from the Kidney Epidemiology and Cost Center (KECC),[4] the preamble states that facilities treating patients in the younger and older categories have higher costs.  CMS also proposes to include two comorbidity adjustors:  PVD and AIDS. 

A threshold concern of KCP members is that the Proposed Rule does not contain sufficient information to permit a full evaluation of the analysis upon which CMS relied when selecting these adjustors for the case-mix system.  Given the importance of the analysis to the final policy, CMS should ensure that everyone interested in the regulations has access to the data needed to evaluate it independently.

The importance of providing the public with access to the underlying analysis is augmented by CMS’s own admission that it does not have adequate data to evaluate fully all comorbidities.  In fact, it remains uncertain whether the agency currently has sufficient data to examine the comorbidities that it did.  For example, using data reported on either Form 2728 or from Medicare claims data for the previous three years, the KECC reported that the estimate of the incidence of PVD ranged from 58.6 percent to 70.2 percent of ESRD patients, depending on the type and location of facility.  The estimate for AIDS incidence ranged from 1.3 percent to 4.4 percent. 

As part of its consideration of the Proposed Rule, The Moran Group noted that data describing patient level cost is not available from current sources, which would make it difficult for the agency to impute these costs in a meaningful way.  To establish the limited patient characteristics for the basic case-mix adjusted PPS, the preamble indicates that CMS relied upon Medicare claims history files and CMS Form 2728.  Use of these data is problematic because they are non-contemporaneous data sources.  The Moran Company also noted that conducting the regression analysis using facility-level average costs per treatment from cost reports rather than using patient-specific data is problematic and could seriously undermine any conclusions drawn from the information.  Given these problems, it would seem more prudent for CMS to have first developed mechanisms to collect the necessary data upon which to base its analysis, to validate these data, and to work collaboratively with dialysis centers on this process.   

Even if CMS had had the appropriate data upon which to rely, the predictive value of the adjustors selected is questionable.  For example, KECC’s analysis shows that the PVD and AIDS adjustors are not statistically significant for 2002, but rather gained in significance only when three years of data are pooled.  Based on the adjusted R-squared values, it appears that the control variables (variables not included as case-mix adjustors)[5] account for more of the variance in facility costs than the case-mix variables (e.g., 32.4 percent as opposed to 0.6 percent) during the 2000-2002 pooled time period.  

In addition, KECC’s analysis demonstrates that application of the comorbidity adjustors to the composite rate does not result in substantial improvement in predictive value when evaluating adjustments using the 2000-2002 facility cost data.  When the percent change due to the proposed implementation of the case-mix adjusted composite rate payments is calculated for 2000-2002, assuming complete reporting of PVD and AIDS status, none of the facility types would experience more than a 1.0 percent increase or decrease in their composite rate payment.  According to KECC’s analysis, independent facilities would experience a 0.14 percent increase and hospital-based facilities would experience a 0.29 percent increase in their composite rate payments.  This analysis implies that the system would not function as it should, raising concerns about the potential negative impact of the proposed system on quality of care.  Implementation of a system that inaccurately predicts the resources needed for patient care could adversely impact quality of care for this vulnerable population group.

RECOMMENDATION:      CMS should delay implementation of the case-mix adjusted PPS system until a statistically valid system is developed that accurately aligns treatment costs with patient demographic and clinical characteristics.   

C.        Implementation of the Case-Mix System Should Be Delayed Because It Would Be Administratively Infeasible to Implement at this Time

In addition to the issues raised by the data and lack of predictability of the selected adjustors, implementation in 2005 is also problematic because of the lack of administrative resources available to ensure its appropriate application. 

First, current ESRD claims data and 2782 forms do not include sufficient information to implement either the PVD or AIDS adjustors.  The claims data contain primarily the patient’s principal diagnosis.  Because facilities do not regularly collect these data, there will be a substantial cost associated with the required changes in coding, billing, and claims submission processes if this system were to be implemented.

Second, even if CMS immediately modified the cost reports, it would be unlikely that providers would know whether their patients have PVD or AIDS.  Currently, there is substantial disagreement as to how to define PVD.  To determine whether their actual records correspond to CMS estimates for PVD, KCP members examined their patient files.  They concluded that the rates of PVD were substantially lower than the CMS estimates.  Until the renal community can agree upon a definition, it will be administratively impossible to implement PVD as a predictive adjustor.

The administrative problems associated with AIDS are even more troubling.  Generally speaking, dialysis facilities, nephrologists, and other health care professionals within the renal community do not know whether a patient has been diagnosed with AIDS.  Rather than ask, they rely upon dialysis center precautions outlined by the CDC to avoid exposing themselves and other patients to the disease.  Knowing a patient’s AIDS status is simply not necessary to providing him/her with dialysis treatments. 

Strict state confidentiality laws enforce the practice of not asking patients if they have AIDS.  According to a recent survey conducted by Professor Lawrence O. Gostin at Georgetown University Law Center on behalf of the Centers for Disease Control and Prevention (CDC), virtually all states have enacted statutes to protect the confidentiality of individuals with HIV/AIDS. [6]  At the time of the survey, thirty-eight states required a patient’s informed consent before his/her HIV/AIDS status could be disclosed.  For example, Massachusetts prohibited disclosure of HIV status without the patient’s written consent, and New York and New Jersey also had stringent prohibitions on disclosure.  Inappropriate disclosures subject the responsible party to criminal and/or civil penalties.  Even KECC, which undertook the research to assist CMS with identifying the adjustors, noted that state laws could negatively impact the reporting of AIDS status.  In its own analysis, it excluded seven to eight percent of the data in part because state confidentiality laws restricting the reporting of AIDS made the data unusable.

Having facilities report their AIDS data in the aggregate is not a viable solution either.  As the Federal Standards for Privacy of Individually Identifiable Health Information (the HIPAA Privacy Regulation) recognize, disclosing health information that contains only a few identifiers can often lead to the identity of the patient being disclosed, especially in areas with smaller populations.  Even if all identifiers are stripped, reporting that includes age, race/ethnicity, gender, and other factors used in “small cell size reporting” remains problematic.  For example, the Health Resources and Services Administration (HRSA) restricts reporting AIDS along with these factors on small cell reporting because of the risk of disclosure.  Given the fact that CMS’s proposed adjustors also include age and gender, the concerns raised by the HIPAA Privacy Regulation and the HRSA policy would exist with the case-mix reporting as well.

If providers are unable to report the characteristics of their unique patient profile, then the case-mix adjustors will not be accurate facility-specific measures but rather an approximation of their patient profile.  This alternative would expose providers to substantial fraud and abuse liability if they could not provide the proper documentation upon request to federal and/or state officials.

RECOMMENDATION:      CMS should refrain from relying on adjustors that cannot be easily known by providers.

D.        If Implemented as Proposed, the Case-Mix System Would Negatively Affect Resources Needed to Treat Patients

Because of the lack of predictability of the adjustors and the administrative difficulties associated with reporting them, implementing the case-mix system as proposed would contradict the desire of Congress to keep the system budget neutral.  Simply put, it would take away resources that would otherwise be directed toward patient care.  Consistent with the problems described above, a substantial number of providers would not be able to code for the comorbidity adjustors when submitting claims.  As a result, their reimbursement payments would be less than what they receive under the current system.  The Moran Group modeled the potential impact of PVD and AIDS coding issues on total ESRD reimbursements under three sets of assumptions.  



Assumed Percentages of the Population





Peripheral Vascular Disease




All other




Reimbursement Effect of Non-Coding





The effect of non-coding ranges from –0.77 percent to –1.6 percent, depending upon the incidence of PVD and AIDS.  As The Moran Group’s analysis shows, the administrative problems described above will lead to a system that actually decreases overall payments for ESRD.  This clearly contradicts Congress’s express intent that CMS design a system that is budget neutral and the CBO estimates that the case-mix system would not result in savings.  MMA § 623; CBO, November 20, 2003 Estimates of the MMA.

RECOMMENDATION:      CMS should rely upon the discretion it has used in the past to delay implementation of the case-mix adjusted PPS so that it can ensure that it has established the appropriate methodology, has the data it needs, and has worked collaboratively with the renal community on implementation.

IV.       Section 623:  CMS Should Adjust the Geographic Wage Index

KCP members strongly urge CMS to adjust the geographic wage index.  Unlike implementing the case-mix system, which requires complex methodological and administrative changes to the ESRD program, adjusting the geographic wage index is a much easier process.  CMS should act to solve this problem now.

The adjustment is necessary because the current geographic wage index is based on data that is twenty years old.  The adjustment would not only be based upon new data, but also incorporate the Office of Budget and Management (OMB) definitions of Metropolitan Statistical Areas (MSA), Combined Statistical Areas (CSAs), and “micropolitan.”  Congress recognized the need for such an update and directed CMS to adjust the geographic wage index.  MMA § 623(d).  Additionally, MedPAC has recommended that CMS update its information on wage rates in different markets by occupation and provider type.  MedPAC, Report to the Congress (March 2001).

KCP members suggest that CMS implement the adjustment as follows.  Within 180 days, the agency should report on the impact of implementing an adjusted geographic wage index and include a transition plan.  The adjusted index should apply the OMB definitions of MSAs, CSAs, and “micropolitan” to the dialysis community in a manner that is consistent with the agency’s methodology for hospitals.  The transition period should not exceed two years.

RECOMMENDATION:      CMS should update the geographic wage index for the ESRD applying the new OMB definitions and in a manner consistent with the intent of Congress and MedPAC’s recommendation.

V.        Section 623:   CMS Should Revise Its Reimbursement Policy for Facilities with Exceptions To Comply with Congressional Intent

KCP applauds CMS for maintaining the ESRD composite rate exception and is extremely pleased that Congress restored the exception for pediatric facilities.  We are concerned, however, that the agency proposes to require dialysis facilities with payment exceptions to choose between continuing to be paid at their exception rates and forfeiting their status by accepting the basic case-mix adjusted composite rate.  If they select the former, they will not receive the Section 623 adjustments, including the add-on payment.  69 Fed. Reg. at 47535.  This policy in effect eliminates the exception policy by forcing facilities to accept lower payments for separately billed drugs if they remain part of the exception payment system.  Therefore, KCP strongly urges CMS to permit facilities with exception rates to retain these rates and to receive the add-on adjustment to their payment so they too are held harmless from the changes to the reimbursement for separately billed drugs.

By not adjusting their exception rates to hold them harmless from changes to the Part B drug reimbursement methodology, CMS is thwarting Congress’s clear intent to protect these facilities.  Congress signaled its desire to protect these facilities originally in the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), Pub. Law. 106-544, Appendix F, § 422(a)(2).  The restoration of the pediatric facilities exception in the MMA demonstrates Congress’s desire to maintain the exception rates program as well.  MMA § 623(b).  Congress also sought in the MMA to protect all independent facilities from the negative reimbursement implications of changes to the Part B drug reimbursement methodology by establishing an add-on component to the new case-mix adjusted PPS.  MMA § 623(d)(12)(B)(ii). 

This language indicates that Congress clearly understands that some facilities will experience higher costs than others and that there should be exception rates for facilities that meet the requirements set forth by CMS.  The purpose of these exceptions is to allow facilities faced with legitimate utilization trends that result in higher allowable costs per treatment to receive payments that are greater than the composite rate.  To ignore the fact that the reimbursement methodology changes for separately billed drugs will lower the overall reimbursement for these facilities disregards Congressional intent.  CMS has discretion as to how it structures the exception rates.  SSA § 1881(b)(7).  We suggest it use this discretion to provide facilities with exception rates the same add-on adjustment that is part of the case-mix adjusted composite rate to ensure that Congress’s intent to hold dialysis facilities harmless from the Part B changes is fulfilled.

RECOMMENDATION:      CMS should provide facilities that receive exception rates with the same add-on adjustment that is part of the case-mix adjusted composite rate. 

VI.       Although CMS Proposes Needed Changes to Help Nephrologists Manage Their Patients, the Agency Should Allow Nephrologists to Bill for Venous Mapping

A.        CODING—TELEHEALTH:  CMS Should Maintain ESRD-Related Services as Part of Medicare’s Telehealth Services 

KCP members appreciate the expansion of Medicare’s telehealth services to include ESRD-related services with two or three visits per month and ESRD-related services with four or more visits per month.  This change will especially benefit patients who live in Health Professional Shortage Areas (HPSAs) and the nephrologists who care for them by providing an alternative means of visiting with them.  

RECOMMENDATION:      CMS should retain the revision to telehealth services in the Final Rule.

B.        CODING—VENOUS MAPPING:  CMS Should Allow Nephrologists to Bill for Venous Mapping and Revise the Proposed Rule so that the Appropriate Type of Codes Are Used 

KCP strongly supports CMS’s proposal to establish a new G-code for venous mapping for hemodialysis access placement.  However, we encourage the agency to make some important modifications to maximize the benefits of this change for patients.  

Venous mapping is critically important to patients since it ensures high quality dialysis.  In most cases, non-surgical specialists, not surgeons, perform venous mapping because they are on the frontline of care for dialysis patients.  As proposed, CMS would restrict the code to operating surgeons.  If maintained, the restriction would limit the ability of patients to receive this important service.  In addition, to maximize the effectiveness of this service, it is important that Medicare reimburse providers for it regardless of whether placement subsequently occurs.  The minimal costs of the procedure are outweighed by the potential savings that result from fewer hospitalizations and the improvement in quality of care. 

RECOMMENDATION:      CMS should modify the venous mapping policy to ensure that all patients can access this important procedure.

C.        MANAGING PATIENTS ON DIALYSIS:  As Proposed, CMS Should Maintain Its Commitment To Count Observational Visits as Visits for Purposes of Billing the Monthly Capitation Payment 

KCP members are pleased that CMS proposes to include the observation setting among the sites-of-service in which the G-code visits can be provided.  This change reflects the reality of how physicians care for their patients on dialysis.  However, it remains unclear how nephrologists from a different practice or location should bill for dialysis-related physician services provided to patients in the observation setting.  We suggest that these physicians or physician extenders be permitted to use CPT code 90935, hemodialysis, one evaluation, for these services. 

RECOMMENDATION:      CMS should retain this modification and clarify how nephrologists from different practices/locations can bill for these services. 

D.        MANAGING PATIENTS ON DIALYSIS:  It Is Appropriate for CMS To Change the Descriptions of Relevant G-codes To Account for Issues Related to Providing ESRD-Related Services to Transient Patients and for Partial Month Scenarios 

KCP supports CMS’s decision to revise the G-codes and address the gaps in payment for partial month payment scenarios.  This change will provide a consistent way to bill for transient patients, home patients, and those situations in which a patient is hospitalized, receives a transplant, or dies before a physician or physician extender could complete an assessment.  

We suggest that CMS also include all situations in which a nephrologist or physician extender performs a visit with a dialysis patient, regardless of the status of the complete assessment, so that physicians may be considered for reimbursement in these instances.  Although we appreciate that CMS seeks to ensure that every dialysis patient receives a complete assessment each month, there are more appropriate ways to encourage this practice than by prohibiting physicians from seeking reimbursement for providing specific services to patients and incurring practice expense and professional liability costs. 

Finally, we suggest that rather than identify patients as “transient,” CMS refer to them as “visiting.” This nomenclature avoids the pejorative connotations of the term “transient.”  Similarly, we suggest defining a “visiting patient” as “a patient receiving dialysis or renal-related care whose care is temporarily supervised (for less than one month’s time) by a physician who is not a member of the practice that usually charges under the MCP or G codes.”  

RECOMMENDATION:      CMS should slightly expand this modification to the G-codes and revise the language related transient patients. 

VII.     Conclusion

            KCP members sincerely appreciate your review of our concerns and look forward to working with the agency on implementing the MMA.  Please do not hesitate to contact Kathy Means at 202-457-6328 if you have questions regarding these comments. 


Kathleen E. Means


Kidney Care Partners


Attachment A – Kidney Care Partners Coalition Members



Abbott Laboratories

Aksys, Ltd.

American Kidney Fund

American Nephrology Nurses Association

American Regent, Inc.


Baxter Healthcare Corporation

Bone Care International

California Dialysis Council

Centers for Dialysis Care

DaVita, Inc.

Fresenius Medical Care North America

Gambro Healthcare/USA


Medical Education Institute

National Kidney Foundation

National Renal Administrators Association

Northwest Kidney Centers

Physicians Dialysis, Inc.

Renal Care Group

Renal Physicians Association

Renal Support Network

Satellite Health Care

Sigma-Tau Pharmaceuticals, Inc.

Watson Pharma, Inc.


[1] 69 Fed. Reg. 47488 (2004).

[2] A list of Kidney Care Partners coalition members is included in Attachment A.

[3]The Moran Group, Medicare Payment for Renal Dialysis Under Section 623 of the Medicare Modernization Act:  Evaluation of CMS’s Proposed Ratesetting Methodology, 19 (Sept. 2004). 

[4]Kidney Epidemiology and Cost Center, The University of Michigan, Methodology for Developing a Basic Case Mix Adjustment for the Medicare ESRD Prospective Payment System (2004).

[5]Control variables included:  skilled nursing facility wage index, a facility size variable, hospital-based vs. independent status, chain ownership for the six largest chains vs. smaller chains, and percent of Medicare patients with a urea reduction ratio greater than or equal to 65 percent.

[6]Lawrence O. Gostin, Zita Lazzarini, and Kathleen M. Flaherty, Legislative Survey of State Confidentiality Laws, with Special Emphasis on HIV and Immunization, Final Report presented to the U.S. Centers for Disease Control and Prevention (1996).

[7]Source:  The Moran Group, Medicare Payment for Renal Dialysis Under Section 623 of the Medicare Modernization Act:  Evaluation of CMS’s Proposed Ratesetting Methodology 19 (Sept. 2004).  Average Case Mix, All Facility Types using CMS Weights 1.1919.