Dialysis Care's Tangled Web

Thank you to PrawfsBlawg for the opportunity to guest blog this month. 

Christmas Day was the perfect day for the New York Times to publish its article on interesting goings on at The American Kidney Fund, one of the largest charities in the United States. Why? Well, Christmas Day is usually a slow news day and even trying to understand how dialysis care is funded for Americans is a slow read. It may be that all health insurance topics that span government-funded insurance as well as commercial insurance in the U.S. are a slow read. This is because our health insurance systems are complex but also because our health insurance systems are under-discussed.

Here, I am aiming for the fast read on the issues underlying  reports of recently issued subpoenas from the Justice Department to our two largest dialysis chains, Fresenius and DaVita. 

Renal failure patients have been  a special disease group under Medicare since 1972, when Congress extended Medicare coverage  to people of any age with kidney failure. The "kidney entitlement" (as it is sometimes known)  is distinctive in this regard. The story of the movement of dialysis from experimental to medical treatment, the rise of the dialysis industry,  and the sympathetic face of end stage renal failure patients all played a role in the dance of this legislation.  Indeed, a dialysis machine was reportedly brought to a Congressional hearing, though the account that a patient was actually dialyzed before members of Congress may be the stuff of urban legend. The early 1970's was also a time of  hope for comprehensive national health care reform, with the kidney entitlement seen by some as a stop-gap measure, not as an exercise in exceptionalism.   For all these reasons -- and more -- we saw the development of the extension of Medicare  coverage for dialysis to a disease group that included many who would formerly have been outside of the Medicare tent.

Dialysis evolved as did the dialysis industry. The nonprofit American Kidney Fund, from modest beginnings as a fundraising drive for a bankrupt dialysis patient, grew into a reportedly  majority dialysis industry funded charity whose premium support program allowed the American Kidney Fund, federal health care fraud and abuse law notwithstanding, to expand the relationship between the dialysis industry and the charity through collection and distribution of funds in the form of health insurance premium payment, including Medicare and commercial insurance premium payment for end renal failure patients. 

In health care delivery, payer mix is all. A health care delivery entity's business model necessarily revolves around a favorable payer mix. Fresnius and DaVita, for example,  were reported to receive $300,000 per patient per year from the Oregon state insurance pool for a year of dialysis treatment in 2011 as compared with the $82,000 they were reportedly able to bill Medicare in the same year. Now, allegations have been made that the American Kidney Fund excludes applicants from health care entities that do not contribute to the Fund, though this would be an apparent violation of the terms under which the premium support program was found not to violate health care fraud and abuse law.

In addition, litigation by United Health tips us off to the fact that the dialysis industry may  -- in light of the extraordinary reimbursement differentials -- have decided that the best use of premium support funds was to enroll  renal failure patients in commercial insurance. In addition, it has historically been the policy of the American Kidney Fund to terminate all premium support if a patient pursues transplant and dialysis terminates.

 

In this tangled story of dialysis treatment we have the larger American health care system's incentives written on a grain of sand: each insurer determined to push risk and cost on its competitors; each provider entity determined to retain its market share and maximize reimbursement rates; and a charity program perhaps operating as a demand-enhancement reimbursement maintenance control center.