Medicare creates a pay-for-performance system

Trying to curb costs for kidney-failure treatment

Medicare is best known as the health plan for people over 65. But any American with advanced kidney failure is eligible. This program costs the government about $9 billion every year. WHYY reports on the effort to cut costs:

Listen: [audio:091116tekidney.mp3]

For the first time, Medicare will reduce payments to dialysis centers that don’t offer high quality care. Clinics will have to track how well they filter patients’ blood, for example. Providers that don’t measure up could get a 2 percent pay cut.

Also, clinics will get a lump-sum payment. Right now, providers bill Medicare separately for supplies, medications and lab tests.

Lazarus: The government believes that if they bundle all of these together and give the provider and the doctor one single payment that we will manage those costs better.

Dr. J. Michael Lazarus is chief medical officer of Fresenius Medical Care North America, which operates dialysis centers around the country. Skeptics worry that providers will cut corners to keep their costs below the new rate, but Lazarus says that won’t happen.

Lazarus: I can’t cut back on patient services because if I don’t reach the outcomes then I get a penalty, and it does not make any sense for me to ruthlessly or inappropriately hold back services.

Medicare pays bills for nearly 330,000 patients with advanced kidney failure.

Experts say when the program began in the 70s, no one predicted how large it would become, or how expensive.

Costs rose quickly when treatments began to include high-priced, injectable drugs, such as synthetic hormones to prevent anemia.

Today, clinics get an add-on payment for providing those drugs. But soon, those costs will be rolled into the lump-sum rate. Dolph Chianchiano is with the National Kidney Foundation.

Chianchiano: The concern is that with the new system you’ve really created an incentive for under-treatment because the dollar amount would be the same no matter how much drug is being provided.

Policy experts say private health plans are watching Medicare’s changes closely. Those companies often set their prices based on Medicare policies.