Exploring the Kidney Care Environment, Part II: Policy and Payment Trends

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Tune into the second episode in the Avalere Health Essential Voice podcast miniseries focused on the evolving kidney care landscape. In this segment, our Market Access and Policy experts take a deeper dive into several of the policy and payment trends in the kidney disease space.
“As we see more of these patients move from fee-for-service to Medicare Advantage, there's going to be a lot of concerns from plans around the adequacy of payment for this population and the effect of care delivery to those patients, as well as the larger benefit structure that the plans are offering to all their beneficiaries” Matt Kazan, Principal


Emily Belowich , Associate Principal, Market Access & Reimbursement

Emily Belowich supports clients across the healthcare system seeking to optimize payment and care-delivery strategies as they adapt their business models toward value-based environments.

Jack Fagan , Consultant II, Market Access & Reimbursement

Jack supports clients with evidence-based research and analysis that spans healthcare sectors and stakeholders.

Matt Kazan , Managing Director, Policy

Matt Kazan advises health plans, life sciences clients, and patient organizations as they navigate the policy landscape, focusing on Medicare Part D and Medicare Advantage, and implementation of the Inflation Reduction Act.

This interview was originally published as a podcast. The audio is no longer available, but you can read the transcript below. For updates on our newly released content, visit our Insight Subscription page.


Emily: Hello, and welcome back to part 2 of our Kidney Care Outlook series. My name is Emily Belowich, and I’m a consultant in Avalere’s Market Access practice. I’m excited to be joined today by two of my colleagues—Matt Kazan, who is a Principal in our Policy practice, and Jack Fagan, a Senior Associate in our Market Access practice.

Our first episode set the stage for why we’re hearing more about kidney disease in the news. We talked about where it fits into healthcare reform and who the patients are, and introduced the Centers for Medicare and Medicaid Innovation (CMMI) payment models. We also talked at a high level about large dialysis organizations (LDOs) and touched on some of the newer players in this market, like kidney care specialty companies. I’m excited to do a deeper dive into some of these things today, particularly on some of the trends from a policy and payment perspective.

Matt, let’s start with you. Can you tell me a little bit more about the world of managed care in kidney disease? What are some of the recent changes that may or may not be impacting payers?

Matt: Thanks, Emily. This is an interesting space and one where there’s been, as you said, a lot of recent changes. Medicare is a big payer in the kidney space, but a lot of that has been on the fee-for-service side. There have been restrictions on patients with kidney failure to enroll in the managed care side of Medicare or Medicare Advantage (MA), but that has changed.

In 2016, Congress passed a law called the 21st Century Cures Act, which removed the prohibition of kidney failure patients from enrolling in any MA plan they want. This change went into effect in 2021.

We recently released some data that looked at how many of these patients did switch over from fee-for-service to MA in their very first opportunity to do so. The findings were really interesting. We found that just over 40,000 patients with kidney failure who were in fee-for-service in December of 2020 moved over to an MA plan the following month for plan year 2021. While 40,000 people doesn’t sound significant, this general subpopulation is relatively small, but the proportion of the patients with kidney failure now in MA is slightly over 30%. Before this change, we were right around 23%, so even in the first year, we saw a pretty substantial jump. I would expect to see that increase continue in the years to come.

Emily: Thanks so much for that background, Matt. It’s always interesting to hear about those trends toward MA, and the payment models trying to innovate reimbursement structures and delivery of care. We’ll talk about those in greater detail in the next episode, but I’d like to learn more about the shift to MA. What is the plan’s perspective? Is there anything that’s problematic about this new wave of patients that they’re taking on?

Matt: Plans are certainly focused on this population and this change. They are a highly complex patient population. ESRD is often linked to several comorbidities and is also a costly condition. The amount of spending for patients with ESRD is about 8 or 9 times the per-patient spending for those without kidney failure, so plans are certainly focused on it.

The payment system itself is different for patients with kidney failure in MA. Avalere has done some analysis around the adequacy of that payment system. We found that in many areas of the country, the payment rates to MA plans are actually lower than fee-for-service costs for that same population. We looked at large metro areas around the country and in 10 of the top 15 areas in terms of highest numbers of kidney failure patients, the MA payment rates are below fee-for-service costs, which could be a significant challenge for MA plans looking to design a benefit structure around these patients.

We also know from the Medicare Payment Advisory Commission (Medpac) that MA plans often pay rates higher than fee-for-service. So, plans in many areas of the country are essentially getting squeezed on both ends—the payment side as well as the cost side.

As we see more of these patients move from fee-for-service to MA, there’s going to be a lot of concerns from plans around the adequacy of payment for this population and the effect of care delivery to those patients, as well as the larger benefit structure that the plans are offering to all their beneficiaries. In many instances, if a plan is paid inadequately for ESRD patients, they will have to adjust their larger benefit package, say with supplemental benefits for all their enrollees, to make up for that difference.

These are some really important issues that plans are trying to grapple with as we live through this transition.

Emily: Thanks so much for that interesting perspective, Matt. I think that’s a natural segue for us to talk about where payers are going for assistance, because it’s clear that they’re going to be navigating some challenges in this new environment. Jack, can you talk about who is helping payers navigate some of these difficulties?

Jack: Absolutely. As we alluded to in the first episode, we’re seeing kidney care specialty companies like Somatus, Cricket, and Strive at the center of various quality improvement initiatives. Given their increasing liability in this space, payers have been interested in partnering with these entities as patients shift from traditional fee-for-service to MA. Payers are looking for ways to better manage these patients, offload risk, and ultimately reduce the overall cost of care.

These kidney care management companies are taking their own unique approaches to address care gaps and improve outcomes by using data analytics, care coordination, and disease management solutions. The focus is to better identify patients earlier in disease progression and prevent patients from crashing into dialysis. At a high level, the objectives of these organizations are centered around understanding delayed referral to a nephrologist, improving patient engagement and management through home visits and holistic approaches to care, and focusing on care coordination, recognizing that patients with CKD often have complex medical conditions. They also focus on increasing patient education to ensure that patients understand their treatment options, including the possibility of home-based dialysis and transplantation. It is also important to note that these organizations are likely to continue to evolve their capabilities over time as they learn which approaches were successful and which were not.

Emily: Thanks so much for that, Jack. It sounds like these organizations are aligned with the innovations happening in the market and at the policy level. Can you speak to what if any impact they’re having to date?

Jack: It’s hard to say, since many of these organizations are still relatively new. It will take some time to scale and gain market share. They’re all trying to find their footprint in the market, and they’re well-positioned to do so as care coordination continues to be a major focus for payers.

Emily: Thanks so much, Jack. One last question for both of you. What should we be tracking in the policy space for the remainder of 2022? Matt, I’ll start with you.

Matt: Well, first, on the payment rate issue, in CMS’s recent advance notice, while they didn’t propose changes to the payment methodology for ESRD patients in MA, they did acknowledge for the first time that they’re studying the issue. They put out some data on the potential impact of a change to the payment rate and they solicited comment from stakeholders on the direction that the agency should take. So, I think understanding where CMS is going to land on the payment rate issue, and if they do make major changes, that is the number one issue to watch in this space as it relates to MA.

The second issue is this continued trend around where these patients go in terms of MA, not only shifting from fee-for-service to MA, but which plans are patients with kidney failure more attracted to. Are there certain types of benefit structures that patients are more likely to enroll in versus others? This is important not only from a patient perspective and from a plan perspective, but also for other stakeholders who are involved in this space and want to understand the care patterns and potential challenges and opportunities that this patient population presents.

Jack: This is less of a policy initiative, but we will need to continue to look out for the kidney care specialty companies and track how they’re doing. It will be interesting to see which of these companies succeed in reducing costs by providing improved care to patients.

Emily: Thank you so much, Matt, and Jack. I really appreciate your time today. For those listening, stay tuned for the next episode as we do a deeper dive into the CMMI alternative payment models. Thanks for tuning in. If you want to learn more about our work, go to www.avalare.com.

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