Hospital-based dialysis programs are the primary developers of outreach facilities in the rural, underserved areas across the country.  A vast majority of these small outreach programs are set up as "satellite" dialysis clinics with a separate Medicare provider number, are required to file a separate Worksheet I schedule, and are often more than 25 miles away from the next nearest facility.

For the first three years of the ESRD bundled payment system, it appeared that the low volume payment adjustment (LVPA) was created for just such isolated facilities to help cover higher labor and general operational costs. Even with the LVPA, most of these rural facilities would operate at a slight loss or break even.   

A report released March 1, 2013 by the General Accountability Office raised questions about how the Centers for Medicare and Medicaid Services was qualifying dialysis facilities for the LVPA. "Nearly 30% of LVPA-eligible facilities were located within one mile of another facility in 2011, and about 54% were within five miles, indicating these facilities might not have been necessary for ensuring access to care," the GAO said. "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, the GAO said, gives dialysis facilities an adverse incentive to restrict providing services because these smaller facilities could lose a substantial amount of Medicare revenue over three years if they reach the treatment threshold. The GAO suggests Medicare use a tiered adjustment payment system that decreases as dialysis facility volume increases.

The report was the basis for a CMS-led webinar on April 24 on LVPA. During the webinar, CMS stated that hospital satellite facilities must aggregate their treatment counts with all other facilities owned by the same hospital to determine whether they qualify for the LVPA. In other words, the agency is trying to narrow the definition of clinics that qualify for the payment adjustment.

Devastating impact on hospitals
If all satellite dialysis clinics are required to aggregate with other dialysis facilities owned by the same hospital, the availability of the LVPA to these entities will largely disappear, except for those owned by the freestanding companies. Removing the LVPA for hospital providers, and recouping from all of these hospital-based programs since January 1, 2011, as the GAO report suggests in its recommendations to CMS, will spell financial disaster for these hospital-run programs that struggle to provide life sustaining services in vastly underserved areas.  

CMS presenters claimed during the webinar that the policy interpretation was similar to how prospective exception requests under the Isolated Essential Facility criteria were handled in the 1990s and 2000s, prior to the bundle. This was confusing, however, because IEFs were often granted for satellite provider numbers, and in fact, most IEF's were hospital satellite programs. They were viewed independently from other hospital-satellite programs as well as from the main hospital program owned by the same hospital. The exception rates granted were only applicable to that particular hospital satellite provider number.

To remove the LVPA for hospital-based satellite programs will create heavy financial losses for hospitals, which will undoubtedly need to close these outpatient dialysis units to mitigate the losses. This will be denying access to the care that the LVPA was set up to sustain.

The implications of the loss of the LVPA, which currently adds 18.9% to the composite rate payment for these facilities, compounded by the ongoing 2% sequestration cut, as well as a proposed 9.4% rebasing cut, will be vast, and will impact virtually every small rural program in the country. Hospitals will be forced to make difficult decisions regarding whether their facilities in these underserved communities can remain open following these severe reimbursement cuts.

Ironically, this interpretation does not negatively impact the LVPA paid to the large dialysis organizations (LDOs), despite the fact that those large organizations have much greater purchasing power than a regional hospital.  CMS views each freestanding facility as its own separate entity (with its own separate CMS-265 cost report), and is not requiring that they aggregate with any other facility in submitting their LVPA attestations. In recent reaction to the proposed bundled payment cut, one large provider said in fact that their rural facilities serving isolated communities would be the first to close.

One concession that CMS could make is to apply a 25-mile threshold to hospital satellites so that the small, rural, isolated facilities can avoid the devastating effects of a loss of their LVPA. Let us hope that CMS realizes that to virtually eliminate the LVPA for rural, isolated, hospital satellites is contrary to its original purpose.