CMS implemented the Low Volume Payment Adjustment (LVPA) to compensate dialysis facilities that provided a low volume of dialysis treatments, had high costs, and appeared necessary for ensuring access to care. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required the Government Accountability Office (GAO) to study the LVPA. On March 1, 2013, the GAO published their findings. They looked at:

  • the extent to which the LVPA targeted low-volume, high-cost facilities that appeared necessary for ensuring access to care
  • CMS' implementation of the LVPA, including the extent to which CMS paid the 2011 LVPA to facilities eligible to receive it. To do this work, GAO reviewed Medicare claims, facilities' annual reports of their costs, and data on dialysis facilities' location to identify and compare facilities that were eligible for the LVPA with those that received it. 1

GAO findings

The GAO reported the LVPA did not effectively target low-volume facilities that had high costs and appeared necessary for ensuring access to care. Nearly 30% of LVPA-eligible facilities were located within one mile of another facility in 2011, and about 54% were within 5 miles, indicating these facilities might not have been necessary for ensuring access to care. Furthermore, in many cases, LVPA-eligible facilities were located near high-volume facilities.

Among the freestanding facilities in GAO’s analysis, LVPA-eligible facilities had substantially higher costs per dialysis treatment than the average facility ($272 compared with $235); however, so did other facilities that provided a relatively low volume of treatments (and were isolated) but were ineligible for the LVPA. The design of the LVPA gives facilities an adverse incentive to restrict service provision because facilities could lose a substantial amount of Medicare revenue over 3 years if they reach the treatment threshold.

Medicare overpaid an estimated $5.3 million in 2011 to dialysis facilities that were ineligible for the LVPA and did not pay an estimated $6.7 million that same year to facilities that were eligible. The payment problems occurred primarily because the guidance issued by CMS on facility eligibility was sometimes not clear or timely and CMS’s monitoring of the LVPA was limited. For example, the majority of the ineligible facilities that received the LVPA were hospital-affiliated facilities that failed the volume requirement. According to the findings “hospital-affiliated facilities do not file individual cost reports, rather, their treatments are included in their parent hospital’s cost report as part of the total treatments provided by all facilities affiliated with the hospital.” According to CMS officials, cost reports are the only source of the total dialysis treatments provided by ESRD facilities

As a result of the GAO study, the addition of the following language to the CMS reimbursement manual (reference Transmittal 177 released December 13, 2013) effectively eliminated hospital-based satellite facilities from eligibility under the LVPA.

Determining low-volume eligibility in hospitals with multiple subunits and satellites

A hospital may be affiliated with multiple hospital-based ESRD facilities. In addition, an individual hospital-based ESRD facility may have several locations that are subsumed under it, billing under the same ESRD facility provider number.

Verification of an ESRD facility’s low-volume status is based on the FI’s or A/B MAC’s review of the total treatment count on an ESRD facility’s (or a hospital’s) cost report. In the situation where a hospital has multiple locations of a hospital-based ESRD facility under its governing body, the aggregate cost and treatment data of all of the locations (not just the treatment count of one of the subunits or satellite entities) are reported on the hospital’s cost report (I series) and it is this information that the FIs or A/B MACs are required to review to make their determination. The FIs or A/B MACs are not required to consider specific worksheets created by providers.

Over this past year, hospitals that have lost their LVPA have made a case to CMS as follows:

  • Under V751 of the revised CMS ESRD Conditions for Coverage, which went into effect April of 2008, the “terminology related to ownership” states: “Hospital-based” means owned and operated by and located in a hospital. A facility physically located inside a hospital but owned by another entity, such as a dialysis corporation, would not be considered “hospital-based.”
  • “Satellite facility” means owned and operated by a hospital but located away from the central hospital campus. A satellite facility is surveyed separately and has its own CMS certification number (CCN).

Although hospitals have been instructed by the FIs or A/B MACs to aggregate cost and treatment data of all outpatient dialysis locations under the hospital’s cost report (one Worksheet I series), freestanding outpatient dialysis providers with more than one outpatient dialysis unit, for example within a 60 mile radius, are required to file separate Medicare Cost Reports under each facility’s individual CMS certification number (CCN).

Financial impact to hospital satellite outpatient dialysis facilities

Hospitals with satellite facilities which were previously approved to receive the LVPA have lost approximately $42 per treatment effective January 1, 2014. CMS intended the LVPA to encourage small ESRD facilities to continue operating in areas where beneficiary access might be jeopardized if such facilities closed.

The LVPA helped low volume dialysis providers offset higher costs associated with operating in rural communities including:

  • The need to staff with a minimum number of clinical staff to safely provide dialysis treatments and who are resistant to flex down in hours as patient visits flex down
  • Paid time off (PTO) coverage. In larger facilities, there is staff available to cover PTO. However, in small rural dialysis facilities there are less staff members available to cover PTO. For example a 48-station facility would employ 24 clinical staff that would participate in the coverage for staff on PTO; while an 8-station dialysis unit would only employ three clinical staff who would not be able to sufficiently cover extended PTO. As a result the rural dialysis unit would have the added expense of contracting through an outside agency for dialysis staff.  
  • Multiple facilities owned by a common hospital do not gain economies of scale on equipment and supply pricing, compared to Medium Size Dialysis Organization's or Large Dialysis Organization's (LDO), therefore the cost of equipment, medical supplies, and pharmaceuticals are higher than the LDOs who have facilities that qualify for the LVPA.

As noted earlier, LDOs will qualify for the LVPA because their costs are filed on a CMS-265 cost report.

Patient access to care

Hospital-based satellite outpatient dialysis facilities are typically supported by community-based hospitals in rural settings and provide access to care for both Chronic Kidney Disease and End Stage Renal Disease patients since nephrologists supervising the care of the ESRD patients in satellite dialysis facilities will also provide a clinic for CKD patients.

Hospitals with a $42 per treatment decrease in the ESRD Prospective Payment System (PPS) for their satellite facility reimbursement are now losing significant dollars. For example, for a program with 3,500 treatments in a year, the loss in reimbursement is approximately $147,000 assuming the patients have a secondary payer.  

Hospitals with satellite facilities which lost their LVPA have seriously considered whether they could afford to continue to lose money in their satellite programs while they just break even with their main campus hospital program.  The closing of the satellite dialysis facilities would impact the access of services to both ESRD and CKD patients.

Based on numerous concerns from hospital-based providers and the patients they serve, CMS published the following in the 2014 Proposed Rule:

"We are clarifying that MACs may consider other supporting data, such as a hospital-based facility’s total treatment count, along with the facility’s cost reports and attestation, to verify it meets the low-volume eligibility criteria provided at 42 CFR §413.232(b). The attestation should continue to be configured around the parent hospital’s cost reports, that is, it should be for the same fiscal periods. The MAC can consider other supporting data in addition to the total treatments reported in each of the 12-consecutive month cost reports, such as the individual facility’s total treatment counts, rather than the hospital’s cost report alone, to verify the number of treatments that were furnished by the individual hospital-based facility that is seeking the adjustment. Consistent with this policy clarification, hospital-based ESRD facilities’ eligibility for the LVPA should be determined at an individual facility level and their total CMS-1614-P 107 treatment counts should not be aggregated with other ESRD facilities that are affiliated with the hospital unless the affiliated facilities are commonly owned and within 25 miles.”

Victory for the small providers

This clarification effectively restores the LVPA for these small, community-based hospital programs with satellite outreach programs, and maintains access to care for patients in remote areas served by these special providers. On behalf of the patients in these rural areas, thank you to CMS for listening and adjusting this language.



END-STAGE RENAL DISEASE: CMS Should Improve Design and Strengthen Monitoring of Low-Volume Adjustment, GAO-13-287: Published: Mar 1, 2013. Publicly Released: Mar 1, 2013