By Bill Peckham
The Medicare Payment Advisory Commission met today. RenalWEB linked to a Kaiser Network Report that MedPAC has voted to recommend a 1% increase in the dialysis composite rate. The full transcript of the meeting will be available next week, a nine slide Power Point (PDF link) was posted that presents some data.
Slide #9 shows Medicare margin in 2007 varies across provider types. The two large dialysis organizations (LDOs) took in 68% of Medicare spending, and they achieved a 6.9% margin. The 32% of Medicare spending that went to all the other dialysis providers, the small dialysis organizations (SDOs), generated almost no margin. MedPAC reckons SDO's achieved a .2% margin providing care to Medicare beneficiaries.
This isn't a surprise. The National Renal Administrators Association released SDO cost data last November that showed the significant purchasing advantages enjoyed by the LDOs.
Slide #8 shows Medicare margin for composite rate services and dialysis drugs for 2005-07 and 2009 projected. For the industry the Medicare margin in 2007 was 4.8%. Slide 9 shows that this 4.8% margin is the weighted average of the 6.9% LDO margin and the .2% SDO margin.
MedPac projects the overall Medicare margin in 2009 for the industry to be 1.2% Assuming the relative profitability of SDOs and LDOs is about the same in 2009 as it was in 2007 we can infer the projected profit margins for 2009 for LDOs will be about 3.3%, while the projected margin for SDOs will be -3.4%. (see FOLLOWUP/CORRECTION)
In 2009 MedPac projects that Medicare will pay small dialysis organizations $96.60 for every $100 worth of care the SDOs deliver. If Congress acts on MedPAC's recommended 1% composite rate increase, in 2009 Medicare will be paying $97.56 for every $100 of care provided by SDOs. This is not in the interest of Medicare beneficiaries, Medicare should pay SDOs fairly without unduly compensating the LDOs. HR6331 provides for composite rate adjuster for unit size, this adjuster should be defined based on provider size.
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