Cost, Quality, and Value: The Changing Political Economy of Dialysis Care
Jonathan Himmelfarb*,
Arnold Berns,
Lynda Szczech and
Donald Wesson
* Maine Medical Center, Division of Nephrology, Portland, Maine; St. Francis Hospital, Evanston, Illinois; Duke University Medical Center, Durham, North Carolina; Texas A & M Health Science Center College of Medicine, Temple, Texas
Correspondence: Dr. Jonathan Himmelfarb, Maine Medical Center, Division of Nephrology, 22 Bramhall Street, Portland, ME 04102. Phone: 207-662-2417; Fax: 207-662-6306; E-mail: himmej{at}mmc.org
"One of the essential qualities of the clinician is interestin humanity, for the secret of the care of the patient is caringfor the patient." —Frances Weld Peabody, MD (1881 to 1927)1
Clinical nephrology, perhaps more than any other medical subspecialty,has been shaped by a single medical procedure, namely the provisionof dialysis. Several medical historians and students of theESRD program in the United States have commented extensivelyon how legacies associated with Medicare's funding of ESRD havehelped frame policy choices made by Congress, Medicare, andthe nephrology community.2 Nephrology care as it exists todayis a direct result of Congress's establishing the Medicare entitlementfor treatment of individuals with ESRD in 1972.3 It is interestingthat congressional consent to this provision was partly predicatedon a 1967 Gottschalk Committee report, which estimated an incidenceof approximately 40 cases of ESRD per million persons per year,or roughly 12% of the current actual rate. The Gottschalk Committeeestimates were based on the assumption that the treated ESRDpopulation would be limited to individuals who were 14 to 45yr of age and free of comorbid conditions.4Table 1 describesmany of the important landmark events that have shaped social,ethical, and economic relationships among dialysis patients,nephrologists, dialysis providers, and third-party payers. Rettigand Sadler5 recounted the following events and trends that wereset in motion by the landmark 1972 Congressional action:
Preservationof equity of access to a life-preserving therapy
The near-immediaterelaxation of stringency for patient selectionfor dialysiscare
A geometric expansion in the incidence and prevalenceof treatedpatients with ESRD
Steadily increasing costs toMedicare for the ESRD program
Rise of a proprietary, outpatient-based,for-profit dialysisprovider industry
Rise in costs and profitsassociated with injectable pharmaceuticalsas part of the dialysisprocedure
Attempts at cost containment by Medicare throughlack of adjustmentfor inflation in payments for dialysis care,resulting in diminishedreimbursement in constant dollars
Systematiccost shifting from Medicare to private insurance
The political economy of care for dialysis patients is alsocertainly not immune to the global concerns in US health caredelivery; indeed, the contrary is true. Historically, the ESRDProgram has been a model for innovative health care policy,as a result in part of the readily tracked population of patients,the high associated costs of the program, the wealth of dataavailable from databases such as the US Renal Data System, andthe inherent high level of morbidity and mortality in the patientpopulation, which makes delivery of high-quality care compulsory.Overall, the secular trends in the economics of dialysis confirmsteady decrease in reimbursement per treatment in constant dollars,whereas the providers have succeeded in preserving profits largelyas a result of increased productivity, shift in professionalmix favoring less expensive labor, use of cheaper disposablesincluding reprocessing of dialyzers, and increased revenuesfrom injectable medications that are administered at the timeof dialysis. Nonetheless, there is an overall increase in costto the system as a result of geometric expansion in the numberof treated patients (Figure 1).
Figure 1. (A) Trends in the number of treated ESRD patients. (B) Trends in total direct Medicare spending for dialysis services. (C) Trends in average Medicare payment per dialysis treatment in real and constant (inflation-adjusted) dollars. (D) Trends in Medicare spending for dialysis injectables. Source for A, B, and D: 2006 United States Renal Data System Annual Data Report. Source for C: Kidney Failure in the Federal Government and gross domestic product inflation data from the US Department of Commerce: Bureau of Economic Analysis, courtesy Elliott Sloan.
In the United States and other nations, the care of dialysispatients is a component of a societal debate because harsh economicrealities intersect with the needs of a vulnerable and growingpatient population. Currently, the US health care system ison a dangerous and unsustainable path that has been describedas a "toxic combination of high cost, uneven quality, frequenterrors, and limited access to care."6 Per capita health carecosts and the compound annual growth rate for health care expendituresin the United States are far higher than most Westernized countries.Despite high expenditures, the proportion of US patients whodo not get treatment or medication because of cost is also high;as a result, there is a large gap between recommended appropriatecare and delivered care for many common medical problems.7 Surprisingly,these data often indicate an inverse relationship between Medicarespending and quality of delivered care.8 Recognized shortcomingsin the US health care system have led to calls to transformhealth care by focusing on simultaneously enhancing qualityand controlling costs so as to increase value for patients.How best to increase value for patients, defined as health outcomesper dollar of cost expended, will likely be the dominant factorin a changing health care environment.
These ongoing changes in the health care industry are now convergingto frame the debate over the care of dialysis patients. In thisarticle, we discuss how trends toward payment for quality indialysis care, additional bundling of payments into the dialysiscomposite rate, consolidation of large dialysis provider organizations,the need for nephrologists to care for a large population withchronic kidney disease (CKD), and a worsening manpower shortagein nephrology all have the potential to affect dramaticallythe dialysis patient–nephrologist relationship. We discussthe need to preserve core values that are encompassed in thepatient–physician relationship.
An obvious approach to increasing value for patients who requiredialysis care is to pay physicians and providers more when ahigher quality of care is delivered, particularly if this resultsin better patient outcomes. The focus on improving quality hasbeen led by the Institute of Medicine, beginning with its 1991report on kidney failure.9 Payment for quality programs, alsoknown as pay for performance (P4P), are rapidly growing in theprivate sector.10 In the public sector, the Medicare PaymentAdvisory Commission has recommended linking payments to qualityof care in the dialysis setting, and the ESRD program is likelyto be an early P4P focus for the Centers for Medicare and MedicaidServices (CMS). The value; feasibility; pitfalls; and appropriaterisk-adjusted, standardized, evidence-based quality metricsfor a P4P program in dialysis care are being vigorously debatedwithin the nephrology community.11–13 Even though evidenceto support a linkage among development of clinical performancemeasures, P4P measures, and improved clinical outcomes is, atbest, modest,14,15 sufficient momentum has gathered that implementationof a P4P system in dialysis care is perhaps inevitable. Nonetheless,considerable challenges exist in developing payment systemsthat use validated measures of cost, quality, and outcomes whilealigning incentives for optimized patient care.
Perhaps the most important and contentious element of the currentP4P debate has to do with whether performance should be measuredusing process measures (e.g., adequacy of dialysis, achievingtarget hemoglobin) or outcome measures (e.g., hospitalization,mortality rates). Many have argued that payment for achievingprocess measures to physicians and providers is more fair, becausemedical decision making can have a more direct impact on processmeasures than patient outcomes. However, Porter and Teisberg6argued that a focus on process rather than outcome measuresinevitably results in creating systems that provide paymentfor compliance rather than performance. They provocatively statedthat the net result of payment for process measures will beto increase overall costs, discourage innovation in health caredelivery, and not add value for patients. It is likely thatat least initially, P4P systems in dialysis care will incorporatea mixture of process and outcome measures.
In the past decade, the landscape of the dialysis industry hasrapidly evolved as a result of the explosive growth and consolidationin the for-profit sector and a corresponding contraction ofmarket share for independent units (Table 2).16 With the completionof the DaVita acquisition of Gambro in 2005 and the Freseniusacquisition of Renal Care Group in 2006, the dialysis industryhas evolved into a classical oligopoly in which a few providersdeliver the majority of services. These two large dialysis organizationsnow have a national dialysis clinic market share of approximately70%.17 How this industry consolidation affects patient careand clinical practice will have an impact on the specialty ofnephrology in the United States for the foreseeable future.
Consolidation is certainly not unique to the dialysis sectorof the health care industry and is driven by universally applicableand compelling market forces. Indeed, dialysis industry consolidationwas predicted by Rettig and Sadler5 at the beginning of thedecade. The potent business and financial advantages that accrueas a result of consolidation in a market-based system includevolume-based cost efficiencies (often referred to economiesof scale), technical efficiencies,18 improved information andtracking systems, access to affordable capital, vertical integrationof service and product, the ability to offer attractive one-partnersolutions to payers, professional lay management, and many economiesof globalization. Consolidation allows dialysis providers tomaintain profit margins in the face of declining constant dollarreimbursement (Table 3).
Table 3. Medicare margin for dialysis care (includes composite rate services and dialysis drugs)a
Industry consolidation also offers demonstrable clinical advantages,including the potential for improved compliance with processand protocol, structured accountability, standardization ofcare across a large national system, robust quality improvement,and integrated information and reporting systems, all of whichcan translate into better care with improved outcomes. Selectedquality metrics, including adequacy of dialysis, anemia management,vascular access management, and prevalent mortality rates, allhave improved in the past decade.13,16,19 Recent data suggestthat a greater proportion of patients in for-profit dialysisunits meet benchmarks of care in anemia management, dialysisadequacy, and nutritional status, albeit with similar mortalityrisks.20 Although it has been suggested that it is the chainsthat deserve the credit for these improved outcomes,21 a morebalanced view is that improved outcomes are the result of theproductive synergy between structure and process. The structureis provided by the chains themselves with their many business,technical, and clinical advantages. Process incorporates algorithmsfor the delivery of care, using clinical and laboratory benchmarksestablished by the professional community of nephrologists,as enumerated in clinical practice guidelines, such as the KidneyDisease Outcomes Quality Initiative (KDOQI). This positive synergyand extensive cooperation between the professional and the corporatecommunities account for substantial patient benefits that havebeen realized in the past decade.
Consolidation is not without its hazards and disadvantages,however.22 Problems that are intrinsic to any large corporateentity can include a large bureaucracy that by its very naturetends to react slowly to change, compartmentalization of personneland function with limited cross-talk, and centralization ofdecision making with inefficient and incomplete flow of informationdownstream from the board room to the clinic. As a result, clinicalnephrologists, many of whom now function in a dialysis-centeredpractice setting, may see themselves as a small cog in a bigmachine (not unlike Charlie Chaplin in the 1936 classic movieModern Times). With industry consolidation, multiple legitimatestakeholders with competing interests converge at the pointof care. Corporate leadership and management with fiduciaryresponsibilities to shareholders, shareholders with an expectationof fair return on their investment, patients with an entitledexpectation of the highest possible quality care, payers withan interest in cost containment, and the pharmaceutical andequipment industry all have a vested interest in the provisionof dialysis. At the nexus of these competing stakeholders arethe patient care providers—nephrologists, nurses, socialworkers, dieticians, and other members of the patient care team—whoare obligated by a moral, ethical, and social contract to providethe highest possible quality patient care on a day-to-day basis.
One of the more subtle risks of consolidation is the evolvingrelationship between the large dialysis organization and thenephrologist. The transition to corporate ownership of the vastmajority of dialysis units has virtually eliminated the modelof physician-owned dialysis units. Physician ownership of facilitiescombined with self-referral and care of patients presents potentialconflicts of interest, analogous to current concerns over physician-ownedspecialty hospitals.23,24 As medical directors of corporate-owneddialysis units, many nephrologists who function as medical directorsare now directly compensated by dialysis providers. Historically,nephrologists have usually had an arm's-length relationshipwith corporate providers, serving as independent contractorsrather than actual employees. However, in the current era ofmore extensive and aggressive consolidation, a new businessmodel has emerged with nephrologist as chain employee. Thisnew employment and practice model risks loss of professionalindependence and may present unavoidable conflicts of interestfor the nephrologist. As an employee, the nephrologist willdepend on the good will of the dialysis corporation for hisor her livelihood and the next contract renewal but must bewilling to advocate consistently for the best interests of hisor her patients.
Another form of "consolidation" that may have a further impacton dialysis patient care is the potential for bundling Medicare'spayment for drugs and other services with payment of all ESRDservices. Since 1983, Medicare has reimbursed dialysis providersthrough a composite rate that is designed to cover the costof services that are associated with a single dialysis treatment,including nursing and other clinical services, social services,supplies, equipment, and certain laboratory tests and drugs.Under the composite rate, dialysis providers receive a fixedpayment irrespective of the actual costs incurred in the deliveryof these services. The composite rate for routine dialysis-relatedservices was the first of Medicare's numerous payment systemsdesigned to set broadly a fixed prospective rate of reimbursementfor clinically related services. Currently, payment for certaindrugs and laboratory tests that have become a routine part ofthe care of dialysis patients since 1983 are covered separatelyby Medicare (Table 4).
Table 4. Separately billable injectable ESRD drugs used by dialysis facilities in 2005a
In recent years, the General Accounting Office, Medicare PaymentAdvisory Commission, and CMS all have recommended expandingthe bundled payment for dialysis services to include separatelybillable drugs and possibly other services.25 The Medicare ModernizationAct of 2003 requires CMS to design a system that would bundlepayment for drugs together with other ESRD services under asingle rate and to design a model demonstration project to testthe feasibility of further bundling for the ESRD program. TheGeneral Accounting Office and others have noted that a bundledrate could achieve efficiency and clinical flexibility by removingfinancial incentive for facilities to choose one treatment overanother25 and by removing potential incentives to overprescribedrugs during dialysis to increase profit margins. However, ifbundling is embraced, then steps must be taken to ensure thatcare will not be compromised for the sake of profit. In addition,the physician's medical fee should remain separate and distinctand not be folded into the larger facility reimbursement, onlyto be later redistributed by the dialysis provider to the physician.This is necessary to ensure that nephrologists be allowed toremain independent from the providers, because it is independentprofessional advocacy that allows for a bond of trust betweenthe patient and the doctor.
A discussion of the changing landscape of dialysis care needsto include physician workforce assessment. An Ad Hoc Committeeon Nephrology Manpower Needs, assembled in the mid-1990s, estimateda need to train between 202 and 661 additional nephrologistsper yr, depending on ESRD growth assumptions.26 These estimatesconservatively projected a gradual leveling out of the numberof needed new nephrologists, which in retrospect may be inaccurate(Table 5). Although the number of nephrologists who currentlyare being trained is not available, the number of trainees whoreceive initial board certification in nephrology is likelya good surrogate. Examination of these rates indicates thateach year, the number of certifying nephrologists consistentlyfalls short of the targeted goal. The net result is a cumulativedeficit (in addition to whatever deficit existed in 1997) ofan aggregate 1000 nephrologists. Although the projections andestimations to date have focused entirely on the number of patientsin the ESRD program, additional complexities must be broughtinto the scope of concern. The fastest growing group of patientswho are beginning dialysis are older than 65 yr. Given the growingcomorbidities of the ESRD population, projections for futureworkforce need should include adjustment for greater time perpatient to allow for the proper care of this increasingly complexpopulation. Primary care and care for non–dialysis-relatedproblems in many circumstances are also provided by nephrologists.
Furthermore, the focus on the CKD population and the mechanismto provide care for this group has received tremendous attentionsince the initial projections on the workforce deficit weremade. Estimates of the number of Americans who are living withCKD vary substantially. Analysis from the Second and Third NationalHealth and Nutrition Examination Surveys (NHANES II 1976 to1980 and NHANES III 1988 to 1994) reveals that the number ofadults who are aged 20 to 74 yr and have stage 3 to 4 CKD grewfrom 2.6 to 3.9 million, an increase in prevalence to 2460 per100,000.27 However, examination of NHANES data from 1999 to2000 suggests that the prevalence of CKD in the US populationis stabilizing.28 Since then, knowledge of the tremendous mortalityrate of these patients29 as well as a potential benefit to survivalthat is associated with earlier referral to a nephrologistshas resulted in an increased focus on access to care.30 Thispopulation is growing, is at high risk for mortality, may benefitfrom seeing a nephrologist sooner, and is the subject of muchdiscussion with respect to the logistics of the provision ofcare. To date, CKD care has not been included in a systematicassessment of the need for growth in the nephrology workforce.Similarly, the need for nephrologists to care for growing populationsof patients who have received kidney transplants or who experiencedacute kidney injury must be taken into account. With the numberof open positions for nephrologists already double the numberof nephrology fellows who are entering practice,31 new workforceassessments are urgently needed to reanalyze predictive models.Newer models of shared care within a team approach and use oftechnologies to allow a more efficient delivery of quality careshould be fostered, vetted, and rewarded on a national level.
PRESERVING THE NEPHROLOGIST–DIALYSIS PATIENT RELATIONSHIP
The doctor–patient relationship is the essence of thepractice of medicine, recognized as fundamental since the timeof Hippocrates. A century ago, William Osler taught, "The goodphysician treats the disease, but the great physician treatsthe patient who has the disease."32 Or, as noted by Carola Eisenberg,"The satisfaction of being able to relieve pain and restorefunction, the intellectual challenge of solving clinical problems,and the variety of human issues we confront in daily clinicalpractice will remain the essence of doctoring, whatever thechanges in the organizational and economic structure of medicine."33The rapid pace of political and economic change in health carehas the potential to alter dramatically the doctor–patientrelationship in the dialysis unit. If the nephrologist becomesconsumed with simply conforming to process and meeting laboratoryquality metrics and as physician autonomy and independence arecompromised through changing relationships with large dialysisorganizations, then there is a real danger that the nephrologistwill lose sight of the patient as an individual. As nephrologistsare pulled away from the care of dialysis patients and redirectedtoward the larger population with CKD, further pressure willbe placed on the doctor–dialysis patient relationship.
It is the essence and foundation of clinical medicine that thephysician act as the patient's advocate and in the patient'sbest interest at all times. The nephrologist should be the finalarbiter of the complex interaction among the corporate provider,statutory regulators, and the pharmaceutical companies as theyall relate directly to patient care. The physician and the patientcare team uniquely understand the concerns of the individualpatient and are aware of the day-to-day tangibles and intangiblesthat influence and determine the quality of life for the dialysispatient. It is essential that in the coming era, nephrologistsstrive vigorously to maintain the primacy of the physician–patientrelationship and maintain the integrity and credibility of thepatient-centered value system and therapeutic environment. Thisexpectation is the very foundation of trust between doctor anddialysis patient. To accomplish this, nephrologists must bewilling to play an active role in the redesign of care modelsand payment systems across the spectrum of kidney disease.
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Introduction
PAYMENT FOR QUALITY
