A Question of Survival October 7, 2013 UCI Professor Kamyar Kalantar-Zadeh discusses how the proposed CMS cuts affect independent dialysis organizations By Alicia Canales RBT: What are some ways the proposed CMS cuts will affect independent dialysis clinics versus the larger, corporate ones? Kalantar-Zadeh: Injectable medications used in dialysis patents are relatively expensive, and one of them is called Epogen™, which is for anemia management; nephrologists administer it to almost all dialysis patients; its cost is a part of the bundled payment. That means the government gives us, for instance, $250 per hemodialysis treatment to cover everything related to dialysis therapy including the cost of injectable medications and their oral equivalents such as oral calcitriol. Amgen, the manufacturer of Epogen has recently increased the price of Epogen by 5 percent. This price does not affect large organizations because they likely have a contract with Amgen that protects them against any price increase for the next several years. Independent dialysis clinics that are not a member of any large dialysis chains do not qualify for any of those incentives or mass purchase discounts or special rates by such pharmaceutical companies. Hence, we cannot save funds here as large dialysis chains may be able to do. Therefore the usual margin of profitability in an independent—also called orphan—dialysis clinic is 0 to 10 percent if not indeed negative, and I say 0 to 10 percent, while many independent clinics do not make any profit because they are already in red. If we soon face the upcoming 9.6 percent CMS cuts for dialysis therapy bundled payment, that means an independent dialysis clinic, which is spending $5 to $6 million a year and is collecting $5 to $6 million a year that is essentially running the finances even, or barely even to survive, would be 10 percent in red, so negative balance. So, half a million to $600,000 suddenly will disappear as a results of the imminent CMS cuts so that essentially means independent dialysis clinics have practically no chance to survive. That will be the end of the independent dialysis sector as we know it in this country. This will essentially be the consequence of what the government will have created—a situation that in the end may be more in the interest of large and small dialysis chains while hurting the independent or orphan clinics. Large dialysis chain may start to consolidate and try to purchase all these small, orphaned or independent dialysis clinics, probably at even lower prices than the current fair market value. RBT: If these larger corporations bought the independent clinics, would the workers at the independent clinics be out of a job? Or would they work for the large corporation? Kalantar-Zadeh: Thats also another important issue. There are patients who have been receiving dialysis treatment in this independent dialysis clinics for years or decades. Now these dialysis clinics have to face either full shut-down or they may or may not have been given the option to be a part of those larger or smaller dialysis organizations. This means that the fate of the independent dialysis clinics and their patients is quite unclear. Whats going to happen to these patients if a dialysis clinics shuts down as a result of CMS cuts? ... Even though dialysis companies have grown substantially over past 10 years, their future is not clear either if these 10 percent CMS cuts are implemented. But the worse situation is the future of the independent dialysis clinics which comprise 25 to 30 percent of the entire 6,000 dialysis clinics in the country. Will they resist shut down or consolidation in the dialysis companies? No doubt that many such dialysis clinics prefer to maintain their independence status. ... But whos going to support and protect them? Of course, in the past when similar hardships happened, almost every year, a number of orphan dialysis clinics had to sell themselves to a dialysis chain. But now we are talking about either mass shut-down phenomenon or mass transition and transaction. And whats going to happen to dialysis patients and dialysis staff in these clinics? This is essentially an uncharted territory, maybe even dark for dialysis patients in this country, at least not a very bright future in my opinion, so I hope I am wrong. RBT: Why are they really resisting becoming a part of the larger corporations? Kalantar-Zadeh: There are many reasons to remain independent. It could be when a big company becomes your employer then they dictate what terms they have. Sometimes it is for greater good, but probably not all the time... But this time, in under this 10 percent CMS cut were talking about, the entire structure of dialysis companies and dialysis sector in the United States, chain or independent alike, may undergo overhaul. Hence, I think its better for us if the government is more patient focused, although there are implications for dialysis clinics staff as well. Were talking about half a million people on dialysis in this country, and these half a million patients— until now—had the more flexible option of considering independent dialysis clinics versus clinics of the dialysis companies. If there are very few or none independent dialysis clinics in the future as a results of the 10 percent CMS cut, your choices are limited as a patient. Imagine you want to go to a fast food restaurant and until now you didnt have to go to McDonalds or Burger King because you wanted to go to just an independent and single burger place and this was your option and your choice. Now your favorite burger restaurant says that Sorry, the new 10 percent reduction rule by the government doesnt allow us to survive. Theyre going to close. Or virtually every single independent burger restaurants including the one you use to go to every now and then is going to be a McDonalds or Burger King. Theres no more burger restaurant above or beyond these burger chains. RBT: So how will that affect the patients who regularly go to the independent clinics? Kalantar-Zadeh:... I believe the ratio of patients to staff is the lowest among independent dialysis clinics, or number of dialysis patient to independent dialysis clinic is lower in these dialysis clinics than most of those run by the small or large chains. In dialysis chains, they essentially want to be efficient and profitable; this per se is not a negative feature. So they have more dialysis patients inside each clinic compared to independent dialysis clinics which have less patients per unit, right? Do you see that point in my open letter to the CMS?* So then its similar to schools. Imagine you want to send you children to school where there is a lower rate of student to teacher and now those schools dont exist anymore because they went to out of business so now you dont have that option either. RBT: Going with your school metaphor, when there tends to be more students to teachers, sometimes people say teachers dont have the time to spend with each individual student. Would that be the case as well? Kalantar-Zadeh : Yes, indeed. The staff to patient ratio goes up, goes down, I mean things change, for instance the patient numbers may go down or up. And this is how it is run in any dialysis clinic no matter chain or independent. Im not criticizing dialysis chains for having a different patient to staff ratio. Im just saying this is their model because they want to be efficient. They may make profit two to three times more compared to independent dialysis, but this does not necessarily mean better or worse patient outcome. An independent dialysis clinic usually doesnt make much money, maybe a narrow margin or even zero margin, some are even in negative balance and are kept alive by incentives from their parent hospitals and health groups, right? So when these places have survived because they are part of the hospital system or part of health system and thats how they have survived as the last ones of their kind, The upcoming 10 percent CMS cuts essentially means 10 percent drop in their annual collection and they dont even make 10 percent in their margin to begin with. As an independent dialysis clinic you will not have that option to consider this 10 percent cut; maybe only dialysis chains can survive the 10 percent drop in revenue but barely any orphan dialysis center. RBT: I read in an article that the Kidney Care Partners chairman said there is special concern for ESRD patients in inner city and rural areas concerning the cuts. Do you know why that would be? Kalantar-Zadeh : I personally dont know why these two areas mostly, I would say the negative impact will be universal, rural, suburban, urban, and from independent sector to dialysis chains, all will hurt. But let me tell you my understanding. In the city, its usually highly dense. If the dialysis chains have the majority of intercity dialysis clinics, while there are also some of those independent dialysis clinics, lets say in downtown LA there are 30 dialysis clinics and out of these 30, 10 of them are independent and 20 of them belong to the chains, right? If half of these 10 independent units, say five of them, partially or completely close, say as of three months from now, then where are the people of the closed units are going to go intercity? Now their choice is limited by 15 percent. Then in rural areas, when theres only one dialysis clinic, say in the entire area between Monterey and San Jose, lets say theres only five or 10 dialysis clinics and most of them are independent clinics. If some of them are going to close, then the next dialysis place could be another 50 miles of extra drive. Thats why maybe these two areas, intercity and rural, are more vulnerable, and in fact, if you ask me, I would say the rural areas are even more vulnerable than urban areas, because if one dialysis clinic shuts down, then suddenly the only place the patient had is gone and the next place is 50 to 100 miles away. RBT: Is there anything independent clinics can prepare for now or can do now in case these cuts are approved? Kalantar-Zadeh : It will be essentially a question of survival. Right now people are still hoping something happens, some revision of the CMS cuts, even though theres only three months left. But when it happens, then essentially it could happen within a matter of a few months that suddenly 100 to 200 dialysis clinics are forced to shut down, mostly independent clinics I think. And in the proceeding six to 12 months, even more shutdowns, this is what I envision, then in the next 12 to 24 months, one-third to half of all independent dialysis clinics may gradually show the closing trends or may be taken over by dialysis chains probably at purchase prices lower than current fair market value. Let me give you an example. Its not about selling your clinic to dialysis chains, there is nothing bad about this, its about the hospital-system based clinics that may have no choice but to sell its dialysis to a dialysis company or to shut down. The sell to a dialysis chain is a process that may take one to three years for a relatively bureaucratic hospital system. When they consider the sell, they are still losing money because they cannot expedite this complicated financial and administrative transaction, so theyre going to have to close the dialysis clinic as the most efficient way to stop hemorrhage....So who is the ultimate loser here? Its the patients. The hospital says, Look I havent been making money and now Im going to lose 10 percent, do I have time to sell anything to a dialysis company? Its a one to three year negotiation process, so lets close the dialysis unit, shut it down. Suddenly 200 patients have no place to go. Where are they going to go? Here, there, then more dialysis clinics are going to close, so thats why I said the ultimate victims will be the dialysis patients. RBT: You wrote that you asked the government to protect the independent dialysis clinics.* Do you have any suggestions for them on what you would do to protect the clinics? Kalantar-Zadeh : Theres a variety of ways to do that. They have to come up with different rates for independent dialysis clinics, they have to offer incentives to dialysis centers to remain independent. That should be something protected by Medicare and the government...There are already some adjustments in place, but those adjustments are minimal in the bundling payment. These adjustments, and some limited incentives and different bundle rates offer some degree of protection, but there is an urgent need to differentiate additional ways to protect these clinics against CMS cuts and against the rise of prices of injectable medications, dialysis machines and dialysis techniques, that usually cost more for independent dialysis clinics as compared to dialysis chains....There should be effective ways by the government to incentivize or protect them against price rise and such existential crisis. RBT: What do you think will be the biggest problem independent dialysis clinic patients will face if the cuts are approved? Transportation? New prices? Kalantar-Zadeh: I think an important one is the loss of current convenience and the choice that the dialysis patients have. Right now when there are more dialysis clinics, dialysis patients can choose to go to the one that is closest to them, right? When there are competing dialysis clinics, the patients can sometimes choose between two or three clinics. They can choose the one with the best services. That is great. But can this system survive when the 10 percent CMS cuts happen? RBT: Do you think it would be better for these cuts, if they are approved, to be gradually applied over time or implemented right away? Kalantar-Zadeh: Its a difficult question....No matter how sudden or slow and gradual cuts, either way there are going to be negative consequences and causalities. If it happens abruptly, then theres going to be of course tight time for adjustment. If it happens gradually, then in the anticipation of what will be happening, the dialysis clinics still may start cutting services to their patients or may still close. Either way dialysis patients will be the ultimate victims. *Kalantar wrote an open letter to CMS, the media and nephrology professional societies regarding the imminent CMS reimbursement
Posted on: Fri, 29 Nov 2013 21:51:03 +0000
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