The Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 requires the Center for Medicare and Medicaid Services (CMS) to develop and begin implementation of a bundled payment system for patients with end-stage renal disease (ESRD) by 2011.

Under MIPPA, the definition of “renal dialysis services” includes: “(i) items and services included in the composite rate for renal dialysis services as of December 31, 2010; (ii) erythropoiesis stimulating agents and any oral form of such agents that are furnished to individuals for the treatment of end stage renal disease;  (iii) other drugs and biologicals that are furnished to individuals for the treatment of end stage renal disease and for which payment was (before the application of this paragraph) made separately under this title, and any oral equivalent form of such drug or biological; and (iv) diagnostic laboratory tests and other items and services not described in clause (i) that are furnished to individuals for the treatment of end stage renal disease.” Provisions (i) and (iv) are the areas of concern in the discussion that follows.

In anticipation of publication by CMS of proposed regulations to implement the revised ESRD payment system, some dialysis providers, including small dialysis organizations (SDOs) and large dialysis organizations (LDOs), are asking questions with respect to lab tests, including: Which lab tests will CMS include in the ESRD bundled payment: all tests or a defined list of tests? Will such tests be included at all order frequencies or at specified frequencies? What is the methodology CMS will use to capture lab tests for inclusion in the ESRD bundle? Will the lab payment be calculated accurately and priced sufficiently to ensure that dialysis providers are able to deliver appropriate levels of treatment to patients with ESRD?

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While these questions are of concern to all dialysis providers, SDOs and dialysis facilities that do not have an integrated clinical laboratory are particularly concerned that the calculated price for inclusion in an expanded lab bundle might not be adequate to cover their costs for lab tests ordered by physicians for the treatment of ESRD beneficiaries.

The current ESRD composite payment made to dialysis facilities includes certain chemistry, hematology, and coagulation lab tests at specified frequencies (per treatment, weekly, and monthly). When ordered more often than the frequency specified in the composite rate, these tests may be separately billable to Medicare Part B on a fee-for-service (FFS) basis if medical justification (other than a diagnosis of renal failure) is provided and in accordance with other Medicare billing rules specific to lab tests for ESRD beneficiaries.

Additional lab tests are ordered on a regular basis through the dialysis facility for the majority of patients with ESRD to monitor and treat common comorbid conditions of ESRD. Such tests are separately billed to Medicare by the performing laboratory in accordance with applicable local and national coverage determinations. Most dialysis facilities contract with a dialysis specialty laboratory to perform lab services.

As mandated, Medicare’s new ESRD bundled payment will include clinical laboratory tests that are currently included in the composite rate and those that are “furnished for the treatment of ESRD.”  

While CMS has not yet indicated the extent of lab tests to be included in an expanded ESRD bundle, the list probably will not include lab tests at specified frequencies.

One of the goals of a prospective payment system (PPS) is to reduce the administrative burden of submission of claims by providers and processing by Medicare Contractors. The change from an FFS system to a PPS presents opportunities for dialysis providers, SDOs, and LDOs alike, to be more efficient in furnishing services. Larger PPS facilites  will have greater opportunities to find such efficiencies. 

Lab tests that are clearly “furnished to individuals for the treatment of end stage renal disease” include chemistris to monitor dialysis adequacy, assay to evaluate anemia management (iron, iron-binding capacity, ferritin, hemoglobin, hematocrit), tests related to mineral metabolism (calcium, phosphorus, parathyroid hormone), coagulation determinations (prothrombin time, partial thromboplastin time), and hepatitis tests.

Additional tests that could arguably relate to the treatment of ESRD may include those related to cardiovascular disease (cholesterol, triglycerides, HDL, LDL, C-reactive protein), diabetes (glucose, hemoglobin A1c), and microbiology.

Some providers might reason that a lab test should be included in the ESRD bundle if it is: (1) clearly related to the treatment of ESRD or a common comorbid condition of ESRD, or (2) if the test is ordered routinely or commonly for a high percentage of ESRD beneficiaries. Alternatively, tests excluded from the ESRD bundle might be defined as (1) those not related to the treatment of ESRD, or (2) those ordered infrequently or for a small percentage of ESRD beneficiaries.

Of additional concern is how CMS plans to address some of the commonly performed lab tests for ESRD beneficiaries when those tests are ordered by non-dialysis providers in the course of treatment for other medical conditions.  

Whether CMS elects to define the phrase “furnished for the treatment of ESRD” broadly or narrowly, accurate pricing of the lab bundle will be important to all dialysis providers. The methodology by which CMS will capture lab tests for ESRD beneficiaries is not yet clear, although the likely scenario is that CMS will include tests ordered by physicians receiving the Monthly Capitated Payment as identified by their Unique Physician Identification Number.

In making payment estimations for “renal dialysis services” in the ESRD bundle, MIPPA requires that CMS base its figures on utilization data from 2007, 2008, or 2009, whichever has the lowest per patient utilization. The 2009 data likely will not be fully available for analysis by the time CMS issues its final rule on the ESRD bundle. Payment rates under the Clinical Lab Fee Schedule were increased by 4.5% in 2009 after a five-year Consumer Price Index (CPI) freeze.

If CMS bases its pricing on lab utilization data from 2007 or 2008, the 2009 increase should be factored into the calculated payment. Dialysis providers should also be aware that at the present time, Medicare beneficiaries do not have a co-payment for lab tests that are billed under Medicare Part B.

When more labs are included in the expanded bundle paid under Part A, ESRD beneficiaries will be responsible for a larger co-payment for this expanded bundle. 

Under a PPS for ESRD, dialysis providers have a number of opportunities to educate physicians on the revised payment system and to develop policies that will realize these efficiencies. The use of standing orders for lab tests might be limited to the minimum, routine tests that most or all ESRD beneficiaries should receive. 

Additional tests should be ordered based on individual medical necessity and in consideration of carefully developed and approved algorithms. Providers might choose to develop formularies and policies based on established best practices to carefully define available tests and the specific conditions under which additional testing is medically justified. 

MIPPA contains a Quality Incentive provision that will permit CMS to reduce payment to the dialysis facility by up to 2% for a provider of services or a renal dialysis facility that does not meet set measures (yet to be developed). Management of anemia and dialysis adequacy is mandated under MIPPA, and the Secretary of Health and Human Services has discretion in developing additional quality measures, including iron management and mineral metabolism.

The dialysis laboratory industry has studied the bias and inter-laboratory variability of test results that may be due to differences in instrumentation, reagents and assays, and calibration. These variabilities should be taken into consideration by CMS as quality measures are developed to avoid penalizing a dialysis facility for failing to meet certain measures based, in part, on the instrumentation used by its laboratory. 

Most of the issues raised here will be addressed in the proposed rule expected to be published by CMS sometime this summer. Stakeholders will have at least 60 days to provide formal comments to CMS on the proposed regulations. Interested parties should take the opportunity to express their support of certain provisions, where indicated, and their objections and alternative recommendations to provisions with which they have concern.  

Ms. O’Keefe is Vice President of Regulatory Government Affairs for Fresenius Medical Care North America and Ms. Brennan is Executive Director of National Accounts for Spectra Laboratories.