Robert Badal, Cofounder & Chief Revenue Officer, Strive Health
On May 22, 2020, CMS issued a final rule that implements significant changes for Medicare Advantage (MA) organizations. These changes address multiple provider types but include particularly interesting implications for kidney care. When considered strategically, the changes create a clear pathway for MA organizations to improve beneficiary access and quality, while dramatically reducing their dialysis costs and seeing potential savings in the millions of dollars.
Dialysis Is a Significant and Rapidly Growing Portion of MA Spend
Individuals with End Stage Renal Disease (ESRD) have an advanced state of kidney disease, in which they require ongoing dialysis or a kidney transplant to stay alive. The majority of individuals with ESRD receive dialysis treatments three times per week in outpatient clinics.
ESRD beneficiaries represent a large and disproportionate share of MA medical spend, with dialysis costs making up a significant portion. While ESRD beneficiaries represent only 0.65% of MA enrollees, they represent about 5% of all MA spend. More than 30% of ESRD spend comes from outpatient dialysis services.
The current makeup of ESRD spend is significant, and the number of ESRD members in MA plans will grow rapidly as a result of recent policy changes. Currently any individual with ESRD is eligible for Medicare, but only select individuals with ESRD are eligible for MA (i.e., members who enrolled in MA before an ESRD diagnosis can remain enrolled, but individuals with existing ESRD cannot newly enroll in MA). However, the recent 21st Century Cures Act introduces the ability for ESRD beneficiaries to enroll in MA plans, regardless of previous coverage, beginning in plan year 2021. Early estimates suggest this could cause MA plans’ ESRD spend and dialysis spend to jump by over 3x in the coming years.
The single largest value opportunity for MA plans is to identify and manage pre-ESRD members to prevent the progression of kidney disease and avoid dialysis altogether. This can have significant impacts on member outcomes, member experience, and health plan costs. Strive Health develops purpose-built technology and analytics to predict progression and deploys care teams to reduce pre-ESRD inpatient costs, delay dialysis, and avoid costly unplanned dialysis starts. However, even with superb upstream management, some progression to ESRD will always be inevitable – and for members who do progress to ESRD, the new network adequacy rules create an even stronger ability for health plans to manage care appropriately.
Home Dialysis Significantly Lowers Costs And Improves Member Outcomes
In its final rule announced on May 22, CMS removed “outpatient dialysis” as a facility specialty type that is subject to stringent network adequacy standards. Now, instead of meeting time and distance standards for dialysis services, MA plans can more flexibly contract high-quality networks, ensure appropriate access and availability to dialysis services, and attest to CMS that they have developed and appropriate and adequate dialysis network.
CMS intends for this change to create more freedom for MA plans to contract with home dialysis providers. Currently, less than 13% of dialysis is delivered in the home, even though home dialysis modalities, such as peritoneal dialysis and home hemodialysis, have well-documented clinical, cost, and lifestyle benefits. To put this into perspective, many countries in Europe see roughly 50% of individuals with ESRD dialyzing at home, and in Hong Kong more than 80% of individuals with ESRD dialyze at home. There are a number of reasons for the U.S.’s general under-penetration of home dialysis, but network adequacy constraints have certainly been a contributing factor.
The shift of incentives toward home dialysis is in line with a broader CMS movement that was spurred by a 2019 Executive Order to launch the Advancing American Kidney Health initiative. The initiative takes sweeping steps to improve kidney care, expand treatment options, and reduce healthcare costs for beneficiaries with kidney disease, and one of its three major goals is to have 80 percent of new ESRD beneficiaries receive dialysis treatments at home or receive a transplant by 2025. The new network adequacy rule provides MA plans with greater flexibility to contract with home dialysis providers and support these broader goals around home dialysis adoption.
Greater flexibility to contract with home dialysis providers also gives MA organizations greater opportunities to improve member outcomes, while reducing their dialysis spend. The operating cost structure for delivering home dialysis is significantly lower than that of outpatient in-center dialysis, which is capital-intensive and involves high facility and staffing costs. Some estimates suggest the cost of delivering home dialysis is less than 50% of the cost of outpatient in-center dialysis. Additionally, home dialysis has been shown to result in lower hospitalization rates and overall lower medical spend for ESRD beneficiaries, which means there are new opportunities for MA plans to lower non-dialysis medical spending as well.
Skeptics of the new rule claim it may negatively impact access for members who dialyze in the outpatient setting, but this argument appears unfounded. Existing MA members with ESRD will maintain access to their dialysis provider, whether their provider is contracted or not, and continuity of care requirements ensure that dialysis providers will continue treatments and not displace the member. Even as such, we have talked to dozens of payors about the new rule, and the consensus has been a member-centric view of the changes. In fact, many payors are planning to keep their par networks completely unchanged.
“The new rule means MA organizations can significantly reduce their contracted dialysis rates and overall medical spend when they contract with dialysis companies that a) focus on home modalities, and b) share economics with payors equitably,” said Tom Kelly, Senior Healthcare Advisor and former senior executive at DaVita and Aetna.
Strive works with MA organizations across the U.S. to develop innovative arrangements that focus on home dialysis. Strive solutions not only deliver high quality home dialysis services at equitable reimbursement rates but also remove barriers for members who are preparing for dialysis and enable them to choose home modalities when appropriate. “We expect the new CMS rules to only accelerate MA organizations’ demand for new solutions like these,” said Kelly.
Large Dialysis Organizations Have Less Negotiating Power
In addition to creating opportunities in home dialysis, CMS commented that its intention for removing outpatient dialysis from network adequacy standards is to encourage greater competition in dialysis, which will eventually lead to lower costs for MA beneficiaries without compromising their access or quality of care.
Under the prior rule, adequacy across an entire network hinged on the presence of an outpatient dialysis facility within a specified geography. This played to the advantage of large dialysis organizations that specialize in building and managing outpatient dialysis facilities, which require significant capital and can take years to establish.
Consolidation among large dialysis providers compound the leverage effect. Combined, DaVita and Fresenius control more than two-thirds of the kidney dialysis market, with the largest share of their revenues and profits coming from their outpatient in-center dialysis clinics.
Under the new CMS rule, instead of needing outpatient dialysis facilities to meet time and distance standards, MA plans build high-quality networks with appropriate access and attest to CMS that their network provides appropriate access and availability to dialysis services. Access to outpatient dialysis will likely be needed to appropriately make the attestation. However, it is now anticipated that MA plans will be able to negotiate with large dialysis organizations from a much better position than before. This is further supported by new market entrants in the kidney care market, such as Strive, who have the capital and expertise to launch and operate home and in-center dialysis facilities.
Strive has created a Dialysis Network Adequacy Planning ToolTM, an analytical tool that illustrates counties in MA service areas where members have only one outpatient dialysis provider to choose. The tool helps MA organization leaders visualize the impact of the CMS rule change in specific geographies and pinpoint opportunities. Enter your email address to receive the Dialysis Network Adequacy Planning ToolTM.
The Stage Is Set for Narrow, High Quality Networks to Be Scaled Through Technology
As another part of the final rule, CMS will now provide MA plans with a 10% credit towards the percentage of beneficiaries that must reside within required time and distance standards, if the plan contracts with telehealth providers in certain specialties.
While MA plans may be able to benefit from this somewhat in the short term, it is the direction that CMS is signaling through this change that could be very interesting in the future – especially as it relates to dialysis services. The new rule effectively means that MA plans need fewer specialty service providers in network, when providers who are in network are equipped with telehealth capabilities. A similar rule change could be on the horizon for dialysis facilities, particularly if home dialysis penetration grows as CMS intends it to.
In the near term, MA organizations can use the latest rule change to focus their networks on high-quality specialty providers that are able to scale through technology. Contracting with telehealth-enabled providers is a start, but the more meaningful change will come through deeper partnerships with providers who have technology in their DNA. If similar rule changes do come to dialysis, innovative providers will be able to deploy technology-enabled dialysis care, capture operational efficiencies, and achieve high-quality beneficiary outcomes at scale, all while lowering the cost structure and sharing cost savings equitably with payors.
New CMS rule changes will have significant implications for the way MA organizations contract for kidney care, and if MA plans approach these changes strategically, they can drive meaningful savings in dialysis costs and improvements in member care. Greater flexibility to contract with home dialysis providers, less leverage from large dialysis organizations, and greater incentives to contract with tech-enabled providers have the potential to reshape the landscape of kidney care and its place within MA.
To help MA organization leaders begin to navigate these changes, Strive created a Dialysis Network Adequacy Planning ToolTM. This tool illustrates counties in a plan’s service area where members have only one choice in outpatient dialysis provider. Email us at email@example.com or enter your email address to receive the Dialysis Network Adequacy Planning ToolTM.