Sweeping Dialysis Reimbursement Changes Effective January 2005 (Health Policy Update, ANNA Update, January/February 2005)

Sweeping Dialysis Reimbursement Changes Effective January 2005

On November 15, the Centers for Medicare and Medicaid Services (CMS - the agency within the Department of Health and Human Services responsible for managing the federal healthcare programs) published the Final Rule implementing the dialysis payment section of the Medicare Modernization Act (MMA) of 2003. The effective date of the Rule is January 1, 2005, except as noted later in this article. It is the most sweeping change in reimbursement for dialysis since the composite rate was implemented, over two decades ago.

The Final Rule implements the 1.6% increase to the composite rate for 2005 that Congress legislated in the MMA. Before adjustment, this means that independent facilities will receive $128.35 and hospital-based facilities will receive $132.41.

The law significantly revised the payment methodology for separately billable medications. For 2005, Medicare will pay for the top 10 dialysis-related drugs at an Average Acquisition Payment (AAP) amount. All other drugs will be reimbursed at Average Sales Price plus 6%, consistent with other providers in Medicare.

Because EPO and other drug reimbursement was changed by the law to "acquisition cost," there will be a drug "add-back" payment along with the composite rate. This drug payment is related to the margin between the current drug acquisition costs and Medicare reimbursement for those drugs. This add-back amount will be 8.7% of the composite rate.

In mid-2005 CMS will publish a rule that will reveal how Medicare will pay for separately billable medications in 2006 and how the drug add-back payment will be updated, based on increases in drug utilization.

Even though the majority of drug margin was in the independent facilities (because hospitals were reimbursed differently for drugs), for technical reasons CMS decided to take the aggregate drug margin and spread it across all dialysis facilities, including hospital-based facilities. Based upon this methodology, CMS estimated that $1.41/treatment of the historical drug margin in independent facilities was shifted to hospital-based facilities. Given CMS' own estimation, this means independent facilities will not net the full 1.6% increase. In fact, overall, CMS estimates that independent facilities will experience only a 0.4% increase in their payment, while hospital-based facilities will experience a 6.6% increase.

The law also requires the composite rate to be case-mix adjusted based on a number of patient characteristics. This change will be effective on April 1, 2005. This means the composite rate will vary by patient, depending on these characteristics. The adjustment factors are age and body mass index (BMI) and body surface area (BSA). Beginning in January, providers will be adding height and weight information on the claim forms so CMS can begin to calculate BMI and BSA for application of these risk adjusters.

Because the drug add-back and the case-mix adjustment are required by the law to be budget neutral - that is, not cost the Medicare program any more or less than the previous payment system -- there is a budget neutrality adjustment that will be implemented with the case mix in April 2005. The budget neutrality adjustment factor is .9116. If CMS' estimate of the prevalence of these factors in the dialysis population is not correct (and there is no way to evaluate that at this time), this could result in further degradation of the dialysis payment.

The MMA called for the outdated geographic wage indices in the composite rate to be updated. CMS has declined to make the adjustments at this time, which the agency feels is within their legal authority to do, and noted that any revision would be phased in over several years, as the law required.

With regard to exception rates, facilities paid exception rates for treatments will have to decide whether to continue with that payment or to switch to the new composite rate payment structure (including the drug add-back) outlined above. Facilities with home training exceptions only will transition to the new payment system but will be able to retain the exception payment rate for home dialysis training.

No one knows better than nurses how payment drives practice. The effects of these changes may well be visible in independent dialysis facilities almost immediately. The relief providers were expecting from Medicare payment rates that do not cover the cost of providing dialysis will not be experienced as anticipated.

ANNA will continue to work as a member of the Kidney Care Partners coalition toward an annual update for the composite rate, but given the President's commitment to reduce the deficit by 50% in 5 years, it will be a difficult legislative environment for any initiatives that cost federal money.

There were a number of nephrologist payment changes in the rule, some of which have implications for advanced practice nurses.

Addition of G-code visits 2-4 to the Medicare telehealth benefit. CMS retained the proposal to include ESRD-related services as part of Medicare telehealth services. Although the clinical examination of the vascular access site must still be furnished face-to-face by a physician or non-physician practitioner (NPP - Medicare language for advanced practice nurses or physician's assistants), an interactive telecommunications system may be used for providing additional visits required under the 2 to 3 visit monthly capitation payment (MCP) code and the 4 or more visit MCP code. The agency also clarified that the MCP physician may use another physician (or NPP) to provide some of the visits during the month as long as the non-MCP physician has a relationship with the billing physician (e.g., is a partner, an employee of the group practice, or an employee of the MCP physician). Responding to comments that CMS should permit the use of e-mail and telephone conferencing, the agency noted that such forms of communication do not come within the definition of an interactive telecommunication system for purposes of reimbursement under the telehealth benefit. CMS requested "specific data on best practice methods for furnishing ESRD-related services as telehealth services."

Venous mapping. CMS agreed to expand the proposed venous mapping G-code to include clinicians, other than the operating surgeon, who provide care to ESRD patients, and revised the payment for the code.

Administration of Part B covered drugs in the MD office setting. CMS established new CPT codes for drug administration, one of which is "non-chemotherapy therapeutic/diagnostic injections and infusions other than hydration." It is assumed that drugs administered in the nephrologist's office would fall into this category.

Non-MCP physicians providing services in the observational setting. The rule allows ESRD-related visits to patients by the MCP physician or practitioner in the observational setting to be counted for purposes of billing the MCP codes. It clarified that a physician or practitioner who is not part of the MCP practice team can bill the appropriate observation codes that accurately describe the service (CPT codes 99217-99220), and to reserve 90935 for use with inpatients or outpatient dialysis services for non-ESRD patients.

Partial month payment scenarios. The rule adds patients who have a permanent change in the MCP physician to the previous list of eligible partial month payment scenarios (including transient patients, home patients, and patients who are hospitalized, transplanted, or who expire in the course of the month). This change is consistent with the changes that were outlined in the September one-time notification (OTN) from CMS addressing partial month payment scenarios.

2005 conversion factor. The 2005 conversion factor (that reflects increases or decreases in Medicare physician reimbursement) will be $37.8975. This is a 1.5% increase over CY2004, as was mandated in the MMA.

For services commonly provided by nephrologists, the national median reimbursement will be: 4 or more visits/month - $307.72; 2-3 visits/month - $256.19; 1 visit/month - $204.64; hemodialysis, single evaluation - $73.14.

Kathleen Smith, BSN, RN, CNN
ANNA State Health Policy Consultant