GAO Report on ESA Utilization Stirs Controversy, Uncertainty

The recently released Government Accountability Office (GAO) report, “End-Stage Renal Disease: Reduction in Drug Utilization Suggests Bundled Payment is Too High,” has generated controversy within the kidney community.

Focused on erythropoiesis-stimulating agent (ESA) utilization, the report comes at a time when a potential rebasing of the bundled payment rate is already creating uncertainty and concern. The report introduces additional controversy by recommending reducing that payment rate quickly and dramatically.

As the Medicare ESRD Prospective Payment System—more commonly known as “the bundle”—and the Quality Incentive Program (QIP) enter their third year of operation, rebasing the bundle is a front-and-center issue for the nephrology community. At press time, it was not entirely clear which part of the federal government—Congress or the Centers for Medicare & Medicaid Services (CMS)—will drive that process, or when. It remains to be seen to what extent CMS’s slated 2014 addition of oral-only drugs to the bundle, recommendations from government entities such as the GAO and the Medicare Payment Advisory Commission (MedPAC), or congressional efforts to find big-ticket savings, or some combination thereof, could influence a potential rebasing in 2013.

CMS implemented the new bundled payment system and the QIP—the first-ever mandatory value-based purchasing program in Medicare—in 2011. The transition to the new system will be completed on January 1, 2014, when the bundle will be expanded to include payment for certain “oral-only” drugs that do not have injectable equivalents, which are currently covered under Medicare Part D. In theory, next January’s deadline means that the methodology for calculating the base payment rate should be adjusted and a new bundled payment value set to account for these additional drugs before 2014 begins.

To date, however, CMS has not determined the methodology it will use to incorporate oral-only drugs into the bundled payment, and it is unclear whether the agency has the legal authority to do so. The December GAO report highlighted CMS’s statement that they “did not have immediate plans to rebase the rate and that the statute does not provide CMS with explicit authority to do so.” Although the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) did not explicitly authorize CMS to rebase the payment rate to account for changes over time in the utilization of dialysis and related items and services, such as ESRD drugs, it did not explicitly prohibit CMS from doing so.

MIPPA does require CMS to update the payment amount to account for changes in the prices of items and services already included in the bundle and for changes in productivity. CMS increased the rate by 2.1 percent in 2012 and recently announced its intention to increase it by 2.3 percent in 2013.

Who actually has the authority to order a rebasing of the bundle is not the only debatable issue. Generating considerable controversy are GAO’s finding that ESRD drug utilization in 2011 was about 23 percent lower than in 2007, and its recommendation that Congress should “consider requiring the Secretary of HHS [Department of Health and Human Services, which includes CMS] to rebase the ESRD bundled payment rate as soon as possible and on a periodic basis thereafter, using the most current available data.”

GAO posited that Medicare payments for dialysis services would have been about $650 million lower in 2011 if the bundled payment amount reflected average ESRD drug utilization in that year (rather than utilization in 2007, the year used for calculating the current bundled payment rate). GAO stated “our findings suggest that the current bundled payment rate is excessive given recent changes in ESRD drug utilization.”

The GAO report was narrowly focused, examining just one aspect of care—anemia management—rather than the complete scope of products and services that go into providing dialysis that the bundle encompasses.

“By examining only one component of care, the GAO report completely ignored the many other components that are necessary to deliver the highest quality care for dialysis patients,” said Robert Sepucha, senior vice president for policy and business development at Fresenius Medical Care North America. He added the report “also failed to take into account that the true cost of a given component has two variables: price and utilization. In focusing solely on declining utilization without any regard to the rising costs of ESAs, the report provided an incomplete and ultimately inaccurate view of the bundle.”

The finding that ESRD drug utilization has declined in the past 5 years is not new. Several studies—including those from the Dialysis Outpatient Practice Monitor System (DOPPS) and the United States Renal Data Service (USRDS)—have recently found that ESRD drug utilization, particularly ESA use, has declined since 2007. MedPAC also reported in December 2012 that ESA use had declined in recent years. Nonetheless, MedPAC, which assessed ESAs as well as many other components of dialysis care, concluded that the payment system is too new to consider rebasing at this time.

“MedPAC actually reviewed a more complete set of data for dialysis facilities than the GAO and is not recommending any of the dramatic cuts GAO is proposing,” said Katrina Russell, president of the National Renal Administrators Association (NRAA).

The reasons behind the decline in ESA use are complex and still not fully understood. “The cause of reduced ESA use is undoubtedly multifactorial,” observed ASN Public Policy Board Chair Thomas H. Hostetter, MD.

“In 2011, the Food and Drug Administration changed the ESA label, eliminating a safe lower target dose, and it appears that nephrologists acted accordingly by reducing ESA use,” Hostetter said. “Several studies showing the risk of targeting high hemoglobins in recent years also likely contributed to a decline in ESA use, and then you do have the bundled payment and the QIP. So it is very challenging, at least at the present time, to conclusively draw out what is really driving this reduction. Most important, it is still unclear what effect the reduction may have on long-term patient outcomes—beneficial, neutral, or harmful.”

Dialysis Patient Citizens (DPC) is urging caution in implementing the report’s conclusions, according to DPC Executive Director Hrant Jamgochian.

“As noted in the report, the patient impact of this decline is unclear,” Jamgochian said. “While early evidence suggests that the incidence of stroke and heart attacks has declined with decreasing ESA use, there has been an increase in blood transfusion rates, which can have adverse health effects on patients and can limit access to successful kidney transplants. Before knowing the full patient impact of these changes, we caution policymakers not to ask too hastily to reinforce this decreased utilization by adjusting reimbursement rates downward.”

NRAA’s Russell added that “making cuts of the magnitude GAO is recommending would impose great financial strain on small dialysis organizations and could lead to fewer choices and access to care problems for patients.”

While the nephrology community is in agreement that the exact causes of the decrease in ESA use and its effect on patients remain unknown, the notion that CMS may be paying for more ESRD drugs than are being used attracted the attention of some members of Congress, even ahead of the GAO report. The report’s release has likely increased the possibility that Congress would consider rebasing the bundle and claim any savings to help cover the cost of a year-end legislative package.

Given the vulnerable patient population the Medicare ESRD Program serves, there is considerable concern that legislative rebasing of the bundle—earlier than anticipated in the life cycle of the new payment system—could create serious unintended consequences for patients.

“The ESRD bundled payment system is new, complex, and still in the implementation phase, with many changes, including adding oral medications into the bundle in 2014, making it even more complex,” said Allen Nissenson, MD, chief medical officer at DaVita. “Complete, rigorous, and valid data are required to ensure that any adjustments to the payment system that are made in the future are justifiable, appropriate, and are in the best interests of patient clinical outcomes. Data meeting these requirements are not yet available.”

At press time, it remained possible that Congress could legislate a rebasing of the bundle and use the savings it prescribes as a budgetary offset as it attempts to address the fiscal cliff, the Sustainable Growth Rate, and other costly issues. Congress asked the Congressional Budget Office (CBO) to estimate how much savings could be obtained by rebasing the bundle at this time. CBO’s estimate will play a significant role in determining Congress’ appetite for pursuing rebasing, because the legislative branch is likely to focus on “big” savings rather than squander time and political capital negotiating smaller-ticket provisions.

“There is no question that Medicare’s reimbursement rate needs to accurately reflect the total cost of care,” said Fresenius’ Sepucha. “Should a rebasing occur, we believe the experts at CMS should lead the process so it is done thoughtfully and comprehensively. But that process should not be undertaken hastily, nor should it be done in a vacuum.”

Said Hostetter: “Any rebasing of the bundle needs to be thoughtful and transparent, examine every component of high-quality care, and provide opportunities for input from patients, health professionals, and other experts. ASN will continue to collaborate with other stakeholders in the nephrology community to advocate that any future rebasing be conducted through a CMS rulemaking process that meets these criteria. Rebasing the bundle in search of savings is not something that Congress should attempt based on one report that largely examined just one of the many, many components of care for our complex patients.”

January 2013 (Vol. 5, Number 1)