Medicare is using one of its biggest hammers to try to fix the dialysis system: how providers are paid

Chronic kidney disease, already a problem affecting millions of Americans, is only expected to become more prevalent as the country ages. For those with end-stage disease, a transplant is the ideal treatment, but dialysis is their reality. Hundreds of thousands of Americans flock to clinics three times a week to have their blood filtered through — in the absence of a functioning kidney — a machine.

As a medical treatment, dialysis is a stopgap measure that fails to fix a chronic problem (average life expectancy on dialysis is five to 10 years). As an industry, dialysis has significant flaws, including a lag in home dialysis use. Critics argue dialysis clinics have for decades shirked a responsibility to help patients get on the kidney transplant waitlist and receive organs from living donors — the gold standard. 

Now federal health officials are trying to fix those problems with a big policy experiment, using one of their biggest hammers: how dialysis providers are paid. 

The new End-Stage Renal Disease Treatment Choices (ETC) model is the largest such experiment in the history of American health care, signaling to some a more aggressive federal approach to improving dialysis. This program, unlike previous voluntary ones, mandates about 30% of dialysis providers in the country participate, and the other 70% are used as a control group. 

It’s an exciting pilot to researchers like Adam Wilk, who published an investigation on the ETC model in JAMA Network Open last month. 

“In some ways, it looks a lot more like what a lot of people in my line of work do: randomized controlled trials,” said Wilk, a health economist and health services researcher at Emory University’s Rollins School of Public Health in Atlanta. 

But randomization, a critical step in any trial of this kind, isn’t foolproof, and Wilk found substantial difference.

While the rate of home dialysis use has improved — from 6.8% in 2009 to 12.6% a decade later — the U.S. still falls far behind some other countries. Within that disparity, there is another: People who identify as Black or Hispanic have lower rates of use of home dialysis, studies have found.

Historically, the way the system was set up in the United States, there was a stronger financial incentive for providers to prioritize in-center dialysis instead of home dialysis — seeing patients in the clinic made more money. Now, federal health officials have found home dialysis is more affordable for the health care system than brick-and-mortar dialysis facilities, so Medicare has an interest in making it more popular.  

Lingering questions about how well patients did on home dialysis compared to in-center treatments have also been answered. Studies suggest patients perform just as well on home dialysis as they do with in-center treatment, and some even show patients on home dialysis fare better and receive transplants more quickly than their peers who report to the clinic. 

Not only has home dialysis been deemed safe for many patients, but it can boost quality of life by offering patients the flexibility to schedule treatments whenever they want. Still, other patients like the compartmentalization that in-center dialysis offers them (medical care stays at the clinic, and home is for other pursuits). Patient advocates say the important piece is making sure everyone on dialysis is told about their options for care, whether it’s home dialysis or pursuing a kidney transplant. 

In 2008, federal health officials released a new set of rules every dialysis center in the nation had to follow in order to receive Medicare dollars. Those new guidelines finally forced dialysis and transplant centers to start communicating. But even today, nearly 15 years after that decree, patients are often left to connect the dots of their care. There are significant problems in ensuring dialysis facilities help patients get transplants, said Teri Browne, a University of South Carolina researcher whose work focuses on racial disparities in kidney transplant access in the Southeast United States. 

Through her research as part of the Southeastern Kidney Transplant Coalition, Browne has interviewed dozens of dialysis patients, most of them African American, about their experiences. What she has heard, over and over again, is that patients are interested in getting a kidney transplant but aren’t given the adequate information (or didn’t remember receiving information) in order to actually pursue a transplant. Even though dialysis facilities were required to educate patients about transplant options, the Medicare mandate had “no teeth” to enforce the rule, Browne said. Some dialysis facilities still report no patients on the transplant waitlist, and none or very few interested in receiving a new kidney — a fact that tells her dialysis providers are still not doing enough to help patients navigate the system, she said. 

Even dialysis centers that strive to help patients navigate the complicated transplant waitlist struggle with low staffing and high patient volumes, a crisis made worse by the Covid-19 pandemic. In national surveys, Browne and her colleagues found some nephrology social workers had more than 200 patients at a time. 

“We know that leaving the kidney disease health care system to its own devices, to do things by themselves for the good of patients, has just not worked. So if the major payer of kidney disease care is mandating improvements in the quality of care that would lead to better access and better equity in the system, hopefully that is going to be the lever that changes the system,” Browne said.

Medicare has long been the entity that covers the majority of health care related to end-stage renal disease, including dialysis. It has also been a leading engine of innovation in payment model reforms in chronic kidney disease, an illness that costs the health care system billions each year. 

Medicare is “the 800-pound gorilla in the room when it comes to paying for dialysis in the United States,” Wilk said. 

The ETC model is a two-part incentive system on top of the existing payment system. The first incentives, which rolled out in 2021, were focused on increasing home dialysis use exclusively — centers got a boost in payments for home dialysis use relative to in-center dialysis. The second part of the incentive is payment increases or decreases depending on how dialysis facilities perform in home dialysis, waitlisting patients for organ transplant, and living donor kidney transplantation rates, relative to control facilities. 

In other words, at the end of a year, does a dialysis facility have home dialysis rates and transplant rates that look good, relative to comparable facilities in the control regions? If they do, you get a payment boost. If your facility performs worse, you get a payment reduction. Facilities will receive an annual report card, notifying them of payment increases or reductions based on their performance the previous year. The first such notices went out earlier this summer. 

In forcing dialysis facilities to educate patients about their options, Medicare is moving toward a model of care that is more person-centered, said Rajnish Mehrotra, head of the division of nephrology at the University of Washington in Seattle. “I view this from a lens of patient empowerment. I think patients should choose the therapy that is best for them to have the life they want to live.”

The ETC model is slated to run through the middle of 2026. After that, it’s up to Medicare to decide whether the program continues or not. 

This pilot is historic and high-stakes, in many ways. In the past, payment reform efforts have been voluntary, and so the providers that chose to participate in them were often disproportionately likely to succeed, Wilk said. 

And as such an important pilot, the first place Wilk and his colleagues looked was the randomization — which facilities were enrolled in the ETC model, and which were not. 

Consider a jar filled with red balls and green balls. If someone randomly pulled out half of the balls, they could end up with only green balls or only red ones. It’s unlikely, but — barring any foul play — possible to only end up with one color. In that scenario, some methodologists say to shrug, accept that selection, and continue the experiment as normal: compare what happens to the selected balls and what happens to the group in the jar. But others argue there is a fundamental imbalance in the randomization, even if unintentional. 

Wilk and his colleagues found the treatment region facilities (the ones mandated to participate in the program) have disproportionately fewer patients on transplant waitlists and home dialysis than non-ETC facilities. These clinics now subjected to financial penalties also tend to be in low-income communities, which already have lower rates of home dialysis and transplant on average, other studies suggest. 

Their findings serve as a word of caution to whomever evaluates this Medicare program: They must know and account for various key differences between ETC and non-ETC dialysis facilities. “If the treated regions’ facilities actually do pretty well, if they boost transplant engagement by 10% and after a year, they end up looking exactly equal to what’s going on in the control facilities, then Medicare might consider the program a failure because it looks like nothing happened,” Wilk said. “We don’t want evaluators to make a mistake when looking at the results and failing to account for the fact that the treated regions’ facilities sort of started out at a disadvantage.”

Patients at ETC facilities were at a disadvantage to start. They had not only a 9% lower prevalence of receiving a kidney transplant from a living donor, but they also had a 4% lower prevalence of being put on the waitlist for transplant or doing peritoneal dialysis, a form of treatment that filters blood in the abdomen and can be done at home safely. Facilities enrolled in the ETC program were also more likely to be owned by one of the two dialysis giants than facilities in the control region, the Wilk paper found. 

The dialysis industry has consolidated over decades to become a for-profit duopoly: DaVita and Fresenius dominate the landscape.

For-profit dialysis centers have a greater interest in taking action to reap financial gain, meaning the ETC model’s payment incentives and penalties could motivate the for-profit clinics in the program to change, Wilk said. 

But it also means these major corporations have leverage on both sides of the ETC trial, and could try to game the system by promoting transplants, waitlisting, and home dialysis “really, really hard in their ETC-assigned region facilities and not so hard in their control facilities,” Wilk said. “I don’t know to what extent there’s any reason to believe that they would be unscrupulous to that extent, but it’s something we should continue to watch,” Wilk said. 

DaVita, which serves about 200,000 patients in the U.S., has 1,100 facilities in the ETC program and 1,858 non-ETC facilities, and DaVita executives also noticed baseline differences between the groups, according to a spokesperson.

The company said in a statement: “Given our commitment to supporting the success of ETC Model, we’ve been direct in our feedback about some inherent flaws in its design. This includes that a provider like DaVita, which strives to provide consistent high quality care to patients in all of our centers regardless of ETC status, will be penalized because of the Model’s flaws. DaVita will continue to put our patients first, even if the model does not support such behavior.”

On June 1, DaVita learned 87% of its ETC facilities received “neutral or positive (received awards)” ratings from CMS.

There are two reasons these imbalances between the ETC groups might be present. One is simply randomness — the powers that be at Medicare drew more metaphorical red balls than green balls. There are 306 Hospital Referral Regions in the country, and only a third were assigned to try the ETC Model, so it’s reasonable that there are differences between the groups. The other possibility is that randomization was done improperly, but Wilk doesn’t buy that conspiracy. 

Federal officials have said they will account for differences at baseline between the two groups, but have not specified how they would do so. A CMS spokesperson told STAT the agency was aware of Wilk’s paper and the baseline differences, and that evaluations could help control for those differences down the road.

“Per standard analytic practice, we will incorporate adjustments into the evaluation as needed and appropriate. We continuously monitor the impact of our programs, including input from peer-reviewed research and other sources,” CMS said in a statement.

No matter what happened during randomization, skew at the start has potentially large implications in the long run. The ETC trial is historic, and singular in its potential as a “source of robust evidence on the impact of payment reforms on care outcomes,” Wilk and his colleagues wrote in their recent paper.

If the ETC model is found to work, it could become the go-to payment model. If it’s found to be unsuccessful, that’s also informative. It could fail because the financial incentives are insufficient to motivate change. Or facilities might become trapped in a cycle of payment deductions because of preexisting challenges. 

“Is that their fault? Or is it the fact that they’re working with a different population than the average [control facility] and it’s more difficult to improve on dialysis and transplant rates in those communities?” Wilk said.

Payment boosts and cuts could just be an inappropriate way to address the issues faced by underperforming centers, researchers told STAT. For example, patients in low-income households might not have reliable transportation to get to and from necessary appointments at a transplant center. Even if they are able to make appointments, patients still have to ace numerous medical and financial evaluations to see if they are “good candidates” for transplant. Many patients are uninsured or underinsured, and face significant social and economic barriers that put home dialysis and living donor transplantation out of reach. Or patients might just distrust the medical system in general (Browne’s research has shown some Black patients believe only wealthy, white people with a lot of education receive transplants). Those systemic hurdles are more than a single dialysis facility can fix. 

Some provisions in the ETC model, such as the Health Equity Incentive, aim to narrow disparities by awarding nephrology practices and dialysis facilities with extra points if they improve home dialysis and transplant rates among low-income patients. 

The equity incentive (which starts this year) is unique. “It is one of the first times that CMS is directly incentivizing narrowing health care disparities, so it’s definitely a step in the right direction,” said Sri Lekha Tummalapalli, a nephrologist and health services researcher at Weill Cornell Medicine in New York. If it’s successful, CMS is likely to use such an incentive in other models as it continues experimenting, she said.

This article was supported by a grant from Bloomberg Philanthropies.

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