End-Stage Renal Disease Fraud

Contact Form - Your First Step

When Medicare published its proposed rule on reimbursement for outpatient dialysis services (47 FR 6556), back in 1982, the regulations provided that each facility would receive a payment rate per dialysis treatment (“composite rate”), that is adjusted for geographic differences in area wage levels for the treatment furnished in the facility or at home.

Aside from resulting in a single comprehensive payment for all services included in the bundle, the Centers for Medicare and Medicaid Services (CMS) believed the ESRD PPS would meet several objectives. These include reducing incentives to overuse profitable separately billable drugs, particularly recombinant human erythropoietin (EPO), the targeting of greater payments to ESRD facilities with more costly patients to promote both equitable payment and access to services, and the promotion of outpatient efficiency. Because of the increased flexibility a bundled PPS would provide in the delivery of outpatient maintenance dialysis services, CMS believed that it could also increase desirable clinical outcomes, resulting in an enhanced quality of care.

Because of the extended weekly encounter time for an ESRD patient with his or her dialysis facility, additional health care services, including traditional primary care services, may be rendered by a nephrologist during visits to the ESRD unit for standing dialysis treatments. For example, a common clinical dilemma faced by nephrologists is the determination of whether a skin infection, common in dialysis patients, is related to the dialysis treatment (since large needles puncture the skin to establish access to the blood stream), or is totally unrelated.This presents an opportunity to increase reimbursements, and, if unnecessary or otherwise inappropriate, could be Medicare fraud.

The End-Stage Renal Disease (ESRD) entitlement has been the only condition-specific entitlement in the Medicare program; thus, whether aging into the entitlement or gaining coverage through under-65 SSA disability, no other disease or condition automatically provides Medicare coverage except ESRD. Since its inception to the present, the program has grown to cover more than 400,000 beneficiaries at a cost to Medicare of about $30 billion annually.  (Approximately 20% of ESRD patients are covered through commercial plans.)  Thus, this 0.7% of Medicare beneficiaries consumes 6% of Medicare’s annual pay-out.

This cost trend has concerned Congress for many years.  A significant step toward controlling the trend became effective January 2011, with the “bundled” payment transition for a costly component of treatments, the drug erythropoietin, or EPO.

The Centers for Medicare and Medicaid Services (CMS) released the Final ESRD Prospective Payment System (PPS) Rule in 2010. Under the new “bundled” payment system, effective January 1, 2011, Medicare changed reimbursement to a single payment that covers all renal dialysis services—including drugs and diagnostic laboratory tests—to dialysis facilities for each dialysis treatment.

With this new reimbursement methodology, the opportunity for Medicare fraud creep in case mix indexing arises.  This is analogous to “case mix creep” in billing for Home Health visits, where the illness burden of beneficiaries is significantly over-reported, given the incentive for improved payments. The opportunity for fraud with this new ESRD reimbursement program also includes inappropriate use of erythropoiesis stimulating agents for patient red blood cell counts (a component of billing which enables reimbursement); and billing for erythropoiesis stimulating agents based on false acquisition costs.