It’s ironic that the renal community sees the Medicare dollar as inadequate to cover the cost of dialysis care, and has been caught in some cases (or at least settled…) on charges of gaming the system to make up for it, while others seem to find a good (legal) use for it.

A new study published in Health Affairs says that long-term care hospitals have found a window of lucrative Medicare payments for patients they treat and then discharge based on payment levels. The pattern found by researchers in the article was similar to what the Wall Street Journal found in a previous investigation on Medicare payments for these patients.

Here is how it works: Hospitals qualify for a lump sum payment for extended care if patients stay long enough past a threshold window that triggers the higher payment. Once they received that payment, hospitals would in many cases then discharge the patient. The timing of the discharges changed noticeably after 2002, when the lump sum-threshold payment system took effect.

There are approximately 400 long-term hospitals in the country, which focus on treating patients who need intense care for a prolonged period, the WSJ reported. These hospitals are paid under different rules than general hospitals.

The two largest specialty hospital chains, Kindred Healthcare and Select Medical Corp., declined to comment on the Health Affairs article, one hospital telling the WSJ that it discharged patients based on medical condition, not on the timing of reimbursement.

Fraud? Definitely abuse
The case has interesting parallels to the overpayments for IV drugs that the Centers for Medicare & Medicaid Services identified in the dialysis payment bundle two years ago. When it set the ESRD bundled payment rate, it used older cost reports that showed much higher dosing of anemia drugs—and much higher Medicare payments. So the bundled rate had an inflated payment for IV drugs when it took effect in 2011.

CMS told Congress and the dialysis provider community it was going to do the responsible thing and slash the bundled payment rate by 12% to make up for the overpayment.

As expected, the renal providers rallied about the impact the cut would have on a system that already had flaws (see our June cover story on case mix-adjusters). Even Congress thought it was excessive, and minimized the payment cuts.

In contrast, the CMS response to these hospitals chains gaming the threshold payment system has been tepid; they had no comment on the Health Affairs report, and told the WSJ back in March when the newspaper did its own investigation that it provides payments to health care providers ‘without intent on incentivizing care:

Most in the renal community would see that as an appropriate definition for our own ESRD Quality Incentive Program: it’s very clear that CMS does little to “incentivize” quality improvement with the QIP. In essence, if you meet the CMS performance standards, you preserve your bundled payment.

Paying our dues
The ESRD Program has always been under the microscope for Medicare payment abuse, mainly because over 90% of payments come from the federal coffers. The industry has paid out $1.45 billion since 2000 for fraud and abuse settlements, though most of those charges weren’t brought on by CMS investigations. In fact, part of the defense strategy for DaVita in its most recent$495 million settlement over claims it billed Medicare too much for dialysis drugs was that Medicare in fact declined to join the lawsuit.

We also have black and blue marks for abuse in the ambulance industry, an area of focus of the Office of Inspector General this year. These companies rake in millions of dollars by charging Medicare for ambulance rides for patients going to dialysis who can take a taxi or drive themselves. Yet there appears to be very little scrutiny on how these rides are ordered or who approves them. CMS was supposed to launch a pilot study last fall in three states that would require prior authorization of ambulance transport services before a contractor can bill Medicare. In 2011, ambulance transports to and from dialysis facilities accounted for nearly $700 million in Medicare spending, or approximately 13% of Medicare expenditures on ambulance services.

We’ll see if CMS addresses the exploitation by these hospital programs of procuring higher payments for little extra care.