Mandatory Kidney Care Model Introduces Financial Incentives and Risks

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The ESRD Treatment Choice model demonstrates an increased focus on improving health outcomes for Medicare patients receiving dialysis by realigning incentives to favor the adoption of home dialysis and increasing the rate at which patients receive kidney transplants. This mandatory model could lead to significant disruption for stakeholders in the coming years. Understanding the risk and opportunities associated with this model will be critical for patients, providers, and manufacturers alike.
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On September 19, the Centers for Medicare & Medicaid Services (CMS) released the long-anticipated final rule to implement the End-Stage Renal Disease (ESRD) Treatment Choices (ETC) model. First proposed as part of the Trump Administration’s “Advancing American Kidney Health” executive order, the ETC model creates financial incentives for dialysis facilities and nephrologists to drive home dialysis utilization and kidney transplants. The 2019 executive order specifically outlined goals to increase the number of ESRD patients receiving home dialysis or receiving a kidney transplant to 80%, and this model’s design is intended to drive these changes in treatment patterns.

Model Overview

The ETC model is controversial due to its mandatory nature. For all dialysis facilities and managing clinicians (i.e., providers, typically nephrologists, who bill Medicare for the monthly capitated payment for dialysis patient management) in randomly selected geographies, these providers are required to participate in the model and be at risk for payment adjustments based on performance. The CMS selected 95 Hospital Referral Regions that represent about 30% of all dialysis facilities and managing clinicians in the US. The final rule reduced the number of regions from the proposed 50% to the final 30%.

For model participants in the selected geographies, the CMS will make payment adjustments to (1) the ESRD Prospective Payment System (PPS) base rate for dialysis facilities and (2) the monthly capitation payment billed for managing the dialysis patient. The CMS will utilize 2 discrete payment adjustments over the course of this model, which will run from January 2021 through the end of June 2027.

Payment adjustments will only be made to model participants’ reimbursement for Medicare fee-for-service beneficiaries, thus excluding beneficiaries enrolled in Medicare advantage. The CMS also excludes certain categories of patients from participating in the model, including those receiving dialysis for acute kidney injury, those with a dementia diagnosis, and those residing in or receiving dialysis in a skilled nursing facility.

As part of the model, the CMS will waive a number of the requirements of the existing but under-utilized Kidney Disease Education benefit, including expanding the type of nonphysician providers (e.g., dieticians, social workers) who can provide these educational sessions. The CMS will also expand the patient population eligible to receive this benefit for model participants beyond the present limitation of patients with Stage 4 chronic kidney disease (CKD) to support the goal of best patient-centered care and outcomes.

ETC Model Payment Adjustments

The 2 ETC model payment adjustments will be applied in distinct manners. For dialysis facilities, payment adjustments will be made to the per-patient, per-treatment ESRD PPS payment rate; for managing clinicians, payment adjustments will be made to the rate associated with the billed monthly capitated payment rate. Additional details regarding these payment adjustments include:

  • Home Dialysis Payment Adjustment (HDPA): Uniformly positive adjustment for claims for home dialysis (and related services) for the first 3 years. The magnitude of this upward adjustment reduces each year (from +3% to +1%).
  • Performance Payment Adjustment (PPA): Positive or negative adjustments to facilities and managing clinicians based on participant home dialysis rate performance and transplant rate performance. Each rate is measured as the better of (1) achievement against non-ETC model region benchmark and (2) improvement against the provider’s own historic benchmark. The CMS will utilize a scoring methodology to assign a practice a modality performance score (MPS) based on their home dialysis and transplant rate performance in terms of achievement and improvement. The provider’s MPS will be between 0 and 6 points, which crosswalk to corresponding payment adjustment between July 2022 and June 2027. It is important to note the performance is strictly focused on achievement and improvement across the home dialysis and transplant rates; performance is not based on quality or clinical outcomes in this payment methodology.
Figure 1. Implementation and Potential Payment Adjustments for the HDPA and the Facility and Managing Clinician PPAs
Figure 1. Implementation and Potential Payment Adjustments for the HDPA and the Facility and Managing Clinician PPAs

Note: MPS = 2 × (higher of home dialysis rate achievement or improvement score) + (higher of transplant rate achievement or improvement score)

Reactions and Next Steps

Unsurprisingly, the ETC model has generated a wide range of responses from the kidney care community. The National Kidney Foundation and the American Society of Nephrologists have both maintained support for the ETC model given the model’s emphasis on expanded access to alternative modalities for renal replacement therapy and increased focus on transplantations. Both organizations identified specific aspects of the ETC model that they think should be improved, such as reducing the magnitude of the PPA, adding requirements to facilitate early identification and diagnosis of CKD, and allowing physicians not selected for the model to join on a voluntary basis. The patient group Dialysis Patient Citizens has expressed support for the objectives of the ETC model but opposes the methodology and implementation of the model. The group expressed concerns that the ETC model does not coordinate program design across payers and does not provide incentives that are sufficiently large to motivate a behavioral response that would lead to improved patient outcomes.

Avalere is working closely to assess the impacts of ongoing policy and market developments like the ETC model, as well as the specific challenges the ongoing COVID-19 public health emergency presents dialysis and CKD patients and providers. Avalere has deep expertise across a wide range of issues central to the evolving kidney care market, including reimbursement considerations for dialysis treatment, federal- and state-level policy developments impacting providers and patients, and the development and implementation of innovative delivery and payment models. Our expertise is backed by in-house access to the 100% sample of Medicare Parts A, B, and D data via a research-focused data use agreement with the CMS and a robust sample of commercial, Medicare Advantage, and managed Medicaid lives through the Inovalon MORE2 Registry®. Avalere uses these data to inform our strategic support for clients across the complex kidney care financing and delivery system.

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