Demystifying the bundle
It’s 2010 and the renal community is gearing up for one of the
biggest changes to occur in the dialysis industry in more than
25 years. On Jan. 1, 2011, Medicare’s current payment system
for outpatient End Stage Renal Disease (ESRD) dialysis
facilities gets replaced with a new prospective payment
system, more commonly known as “the bundle.” The bundle
will provide a fixed-rate payment to dialysis facilities for
virtually all ESRD-related healthcare expenses including
treatment, drugs and laboratory tests.
An underlying reason for the change to a bundled payment
system is to improve efficiencies in health care and increase
the quality of care provided to patients with ESRD. Today,
Medicare pays dialysis facilities a composite rate that is a
lump-sum payment. When the composite rate was first put into
place, it covered the majority of services and items needed to
treat Medicare patients with ESRD. Since then, more drugs, lab services and other items have
become available. These items are not covered in the composite rate and are billed separately to
the government. Separately billed items now represent a significant portion of government
spending on health care for ESRD patients on Medicare.
Although the final description of the new bundled payment system is not available until mid-
2010, the renal community has a sense of what will likely be included. In September, the Centers
for Medicare and Medicaid Services (CMS) issued a 500-page proposed rule outlining the new
bundled payment system and inviting public comment. In the proposed regulation, CMS
estimated that the payment for a “relatively healthy ESRD patient with no co-morbidities” will be
approximately $232 per dialysis treatment. CMS also estimated that payments could be
significantly lower or higher than this average based on a specific patient’s profile. Regardless of
the actual payment amount for an individual patient, under the proposed system, Medicare’s
fixed-rate payment to dialysis facilities will cover virtually all ESRD-related healthcare expenses
including treatment, drugs and laboratory tests. In other words, the composite rate and the
currently separately-billed items will be bundled together under one per treatment rate.
“The reality is there are pros and cons to the proposed bundled system,” said Rice Powell, Chief
Executive Officer of Fresenius Medical Care North America (FMCNA). “But overall, we believe
FMCNA is in a good position to be successful under a bundled payment. A number of
opportunities come from our vertical integration where we offer not only the entire product
spectrum in the dialysis sector but also high-quality treatment in dialysis clinics worldwide.”
The renal community had until mid-December to submit comments on the proposed rule to CMS
before the final rule is released sometime in mid-2010. To that end, the FMCNA Government
Affairs department collaborated with key representatives from Fresenius Medical Services (FMS)
and Renal Therapies Group (RTG) to gather feedback on the impact of the proposed bundle.
Together, they developed specific suggestions on how the new bundled payment system could
work more effectively for both patients and providers. FMCNA submitted these comments to
CMS prior to the deadline.
“With the bundle, we cannot focus on one FMCNA revenue stream without considering the
impact on the others,” said Powell. “We need to extend our thinking and collaboration beyond
functional and organizational boundaries. No matter what part of the business you’re in—
treatment, pharmaceuticals, laboratory services—we all share a common purpose as FMCNA
employees. It’s critical to operate in a manner that is in the best interest of the overall company
without focusing only on what works best for individual functional areas or business units.”
“The bundle’s impact will be industry-wide, and will not be limited to just FMCNA,” said Robert
Sepucha, Senior Vice President, Government Affairs. “Certainly, one of the biggest challenges
for everyone in the dialysis industry comes from the fact that the law requires the bundle to take 2
percent out of the Medicare payment system.” Based on projected 2010 Medicare payments, that
means the dialysis industry will need to find roughly $200 million in savings to remain
economically neutral under the new payment system. “Some of this can be achieved by
increasing operational efficiencies to a higher level,” said Sepucha.
In addition to improving efficiencies, quality is important, too. There is a quality requirement in
the bundle that becomes effective in 2012 that allows the government to withhold up to 2 percent
of Medicare payment for a facility’s failure to meet established quality measures for anemia
management and Urea Reduction Rate. For the first time, money will be taken away for not
meeting certain quality standards.
“The perception of how we as an organization bring value to the industry is probably going to
change with the implementation of the bundle,” said Powell. “Each of our functional
organizations and business units needs to keep an eye on the value we provide to our customers.
Our customers may have different needs in the changing environment. Deeply understanding
customer needs and ensuring all of our organizations are delivering superior value is critical.”
In addition, there are payment adjustments in the proposed bundled payment system including a
case/mix adjustment, facility adjustments and an adjustment for inflation. The case/mix
adjustment is a calculation that allows dialysis facilities to get additional compensation for
patients that require more resources. So if a patient has a high body mass, for example, the
adjusters help cover the costs. There are also facility adjustments that reflect the extent to which
costs incurred by low-volume facilities exceed the costs incurred by other facilities. Finally, the
bundle includes an adjustment to help offset inflation.
“The bundle gives us more flexibility in terms of how we run our business. This is an opportunity
to step back and take a closer look at how we can achieve efficiencies and seize new
opportunities while still maintaining our core commitment to quality. It’s a rare opportunity given
how quickly the industry and our business are moving forward,” said Sepucha.
Although the bundle is effective in 2011, providers can make a one-time election in 2010 to either
fully opt-in to the new bundled payment system, or to phase-in to the bundle over a period of four
years.
“We are in the midst of defining our bundle strategy based on the information in the proposed
bundled payment system as it stands today,” said Sepucha. “Once we have the final rule, we’ll
have a more concrete view on its impact and we will be able to finalize and execute our
implementation plans.”
This article is a reprint from the Winter 2009-2010 issue of the Messenger. The Messenger is published by
Fresenius Medical Care North America by Employee Communications for internal use only, and is not
intended for dissemination to the general public. The publication and all of its contents are the property of
Fresenius Medical Care North America. No part of this publication can be used without the consent of
Fresenius Medical Care North America.
© 2010 Fresenius Medical Care North America. All rights reserved.
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