Regulatory Policy

Ensure Payments Reflect the True Cost of High-Quality Care

In order to ensure continued access to high-quality kidney care, it is essential for policymakers to design systems that reflect the true cost of care and incentivize providers to further enhance the quality of treatment and patient health outcomes.

KCP seeks to ensure that Medicare funding, which covers treatments for approximately 80 percent of dialysis patients, adequately covers the cost of providing care.

Unfortunately, current Medicare payments do not cover cost of care and, over the last 3 years, dialysis facility revenue has been relatively flat while costs have increased. In its most recent Report to the Congress, MedPAC estimated that the margin between reimbursement and cost of care is 0.5 percent. As slim as this estimate is, the real margin is likely several percentage points negative if actual revenue reductions, such as the Network Fee that reduces each payment by $0.50, and the substantial amount of unrecovered bad debt were accounted for. Highlighting the severity of inadequate reimbursements, the Moran Company analyzed CMS data and estimated that 55 percent of facilities have negative margins, as their revenues do not cover the cost of providing services.

Clearly, the economics are unstable, and patient choice and innovation are stifled as a result. KCP continues to work with Centers for Medicare & Medicaid Services to support fair reimbursements through the PPS. This includes advocating that patient adjusters be based on the right drivers of costs, recalculating the standardization factor used by CMS to calibrate the PPS, and ensuring that all costs (including Network Fee and bad debt) are incorporated into reimbursement rates so that they actually reflect the true cost of care.