Medicare and Beneficiaries Could Save Millions If Dialysis Payments Were Adjusted for Anemia Management Drug Utilization

Using our sample results, we estimated that Medicare and beneficiaries could have saved $510 million for the erythropoiesis-stimulating agents (ESA) Epogen and Aranesp and $19 million for the iron supplements Venofer and Ferrlecit during calendar year (CY) 2011 if the end-stage renal disease (ESRD) base rate had been adjusted to reflect current utilization of anemia management drugs. In addition, through our analysis of the CY 2011 sample items, we identified limitations that the Centers for Medicare & Medicaid Services (CMS) should consider when it relies on ESRD claims data for program oversight. These limitations include inaccuracies in the quantities of drugs claimed and the inability to determine the extent of drug waste or overfill usage.

Almost all people with ESRD have anemia. The ESA drugs Epogen and Aranesp and the iron supplements Venofer and Ferrlecit were the most commonly prescribed anemia management drugs in CY 2011. CMS developed the ESRD prospective payment system (PPS) base rate using CY 2007 utilization and payment data for ESAs and iron supplements.

Before January 1, 2011, dialysis facilities billed Medicare separately for Epogen, Aranesp, Venofer, and Ferrlecit, and Medicare made separate payments for them. However, as of that date, these anemia management drugs are now included in the PPS payment bundle, and Medicare no longer reimburses dialysis facilities for them separately. To comply with statutory requirements, CMS used CY 2007 claims and cost report data for ESAs and iron supplements to calculate the base rate for that payment bundle. As in any PPS, those providing the services-in this report, dialysis facilities-keep the difference if Medicare payments exceed costs for bundled services, and they are liable for the difference if the costs exceed Medicare payments.

The objective of this review was to determine the potential cost savings to Medicare and beneficiaries of adjusting the ESRD base rate to reflect CY 2011 utilization of anemia management drugs. This objective did not require that we determine dialysis facilities' acquisition costs for anemia management drugs. The Office of Inspector General is conducting a separate evaluation of acquisition costs for ESRD drugs included in the PPS payment bundle.

We recommended that CMS (1) adjust the bundled base rate to realize program savings associated with decreased utilization of ESAs and iron supplements, (2) remind dialysis facilities of the importance of claims accuracy, and (3) develop new policies, procedures, or other guidance for recording drug waste and overfill on ESRD claims. CMS concurred with our recommendations.