The financial impact of 2012's quality incentive program

Abstract

Now that the dialysis industry has been able to get acquainted with the first phase of the new bundled prospective payment system (PPS), it is time to prepare for the next phase of implementation, the quality incentive program (QIP). After a brief review of the PPS, specifics of the 2012 QIP will be presented, and, using historical performance projections, I will discuss the possible impact of the 2012 QIP on the hemodialysis industry.

H.R. 6331, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) mandated that the Centers for Medicare & Medicaid Services (CMS) implement a bundled rate payment system to replace the historical fee-for-service payment system.1 Instead of the government paying separately for the individual components of a dialysis treatment, reimbursement will be a flat rate based on several patient metrics and a geographic wage component to account for cost of living variances. The positive financial incentives for providing more profitable drugs and services in the old fee-for-service model are now reversed, with all intravenous drugs now included, or “bundled,” into a single payment. Bundling has led to an expected decrease in drug utilization, particularly the most expensive injectable drug, erythropoietin (EPO). In the last year, Fresenius Medical Services has experienced over a 20% decline in EPO usage. With both the Government Accountability Office (GAO) and CMS having concerns with patients obtaining less medication and subsequently developing severe anemia, CMS proposed a QIP that incorporates penalties for poor anemia management.

Beginning January 1, 2012, the first mandated QIP will impact dialysis facilities based on three quality metrics. All facilities that treat Medicare patients must obtain 2% or less of patients with average hemoglobin levels <10 g/dL, 26% or less of patients with average hemoglobin levels >12 g/dL, and 96% or more of patients with average urea reduction ratio (URR) of >65%. Failure to meet these goals will result in a facility payment withhold for the subsequent year.2 The three metrics (Hgb < 10, Hgb > 12, and URR > 65%) will have weightings of 50%, 25%, and 25%, respectively.2 A greater weighting was given to Hgb < 10 to help ensure that patients will not be given too little EPO, which places the patient at risk for needing blood transfusions. For each 1% worse than the national average, the respective quality metric will lose one point out of ten.2 Ultimately, summing the score for all three metrics leads to a score out of a possible thirty, which will determine if the facility will receive a 0-2% Medicare payment penalty (in half percent increments).2 Based on the historical performances of dialysis facilities from 2007 utilizing the new scoring system, it is possible to estimate the projected financial impacts of the proposed QIPs on the industry and individual facilities for 2012.

Using the most recent dialysis facility compare data provided by CMS, one can estimate a financial loss of about $55.5M in 2012.3 (Please be aware that drug utilization, facilities, patients, and patient outcomes have most assuredly changed since 2007, so these numbers are our best estimates at this moment.) This was forecasted by estimating 2012's industry average expected bundled rate of $267 revenue per treatment, a 1.9% increase from CMS's recently released 2012 End-Stage Renal Disease (ESRD) Proposed Rule over 2011's estimated $264 revenue per treatment with 0.0% transition adjuster reduction, and multiplied by 144 expected hemodialysis treatments per patient per year.

Lastly, each facility's corresponding QIP penalty and patient volumes were included. (This includes CMS's allowed three-quarter year add-back of the 3.1% transition adjuster starting April 1, 2011 from CMS's reported 2010 proposed bundle rule data showing $256 industry average revenue per treatment rate.) Of the 4,713 facilities reporting all three quality metrics in 2007, this analysis suggests an average $12,000 reduction in Medicare payments per facility. Since 46.1% of facilities would have received no penalty based on their metrics, for those facilities that actually qualified for a reduction, the average penalty is closer to a $22,000 reduction in Medicare payments per facility. Alternatively, this equates to an overall $1.45 per patient per treatment reduction in Medicare payments over all facilities or a $2.65 reduction per patient per treatment penalty for the 53.9% of facilities that will actually qualify for a QIP penalty. Table I further breaks out the number of dollars, patients, and facilities that are tied to each penalty group.

As expected, the higher the percent QIP penalty, the lower the number of patients, treatments, and facilities in each penalty category; also, the higher the percent QIP penalty, the larger the financial penalty with the exception of the giant 0.5% penalty group.

The two largest providers, DaVita and Fresenius Medical Care (FMC), are responsible for less than half of the total QIP penalty, at approximately $26.5M, but represent over half of the industry's Medicare patients, with approximately 146,000 patients. This means that the QIP may put an increased burden on those smaller or individually owned facilities that cannot obtain large company efficiencies. Smaller providers absorbing a disproportionate negative financial bundle impact could lead to further and accelerated consolidation in the dialysis industry.

Further analysis of the facilities by each specific metric demonstrates that the Hgb < 10 is the largest contributor to the QIP penalty estimate based on the 2007 data (Table II). This is not surprising, as CMS doubled the weighting of the Hgb < 10 (50%) with respect to the Hgb > 12 (25%) and URR > 65 (25%) metrics. Table III expresses what would happen if all three quality metrics were weighted equally (33% each).

Even with equal weighting of all three metrics, the Hgb < 10 metric remains the greatest contributor to the projected penalty. With CMS weighting the severe anemia metric more aggressively, this might be an effort to minimize costly blood transfusions.

On the high hematocrit side of the penalty range, Hgb > 12, the bundle's impact of curtailing the use of ESAs by 20% is additive to the financial savings already afforded by promoting an additional penalty. This inherent double penalty due to the bundle and QIP should be reconsidered.

Fortunately, CMS has stated that they will be open minded in regard to adding to or modifying the QIP in 2013 and 2014. In CMS's 2012 ESRD Proposed Rule, CMS outlines the potential QIP for 2013 and 2014, with some major changes. In 2013, the QIP will remove the Hgb < 10 metric completely and weight the remaining two, Hgb > 12 and URR > 65, at 50% each based on 2011 facility performance.4 Removal of this metric was primarily because of CMS's inability to find a comfortable lower bound that was safe for all patients. While I agree with this stance, it seems that it would also be hard to justify an upper bound Hgb > 12 using the same logic; different patients have different needs. CMS has acknowledged this and is asking for public feedback on the Hgb > 12 metric for 2013.

The most dramatic change to the QIP will happen in 2014. The potential metrics released in the 2012 proposed rule for 2014's QIP may include a Kt/V metric, vascular access metrics, standardized hospitalization ratio (SHR) admission metric, a patient well-being metric, a bone mineral metabolism metric, blood stream infection metric, iron metric, and potentially others.4 Unfortunately, we will have to wait for future rulings and data on what new quality metrics CMS will actually pick to see what the financial impacts may be.

The dialysis industry has enjoyed a high degree of government collaboration, which no other industry has achieved. While we have some basic outlines on what to expect in 2013 and 2014, future QIPs could see additional, fewer, or changed quality metrics depending on its success or failure in promoting quality in 2012 and future years. Whether QIP is perfect or not, hopefully we can learn from it through experience and improve upon it, thus improving patients' lives and health. Given the uncertainty about the 2014's QIP, my recommendation is to do what most, if not all, physicians already do: what is in the best interest of the patient. That way, if CMS chooses to add another quality metric, you will have the best chance for coming out ahead.