More changes have occurred in the End-Stage Renal Disease Program in the last three years than perhaps its 30-year history. Certainly, technology has advanced over the last four decades. Consolidation in the 1990s and early 2000s took out many of the smaller players, or the bigger dialysis providers who didn’t have a good management team. But the way that Medicare payment policy for the dialysis provider community has changed — and the way it will continue to evolve through the end of this decade — will be significant.

Is the field set?

This year’s annual survey of the 10 largest dialysis providers (data as of May 2013) shows moderate growth among dialysis providers. Large dialysis providers Fresenius and DaVita went down from double-digit growth in 2011-2012 to single digit growth. American Renal Associates continued its healthy march forward in 2012-2013, moving from 100 clinics two years ago to 136 this year. DSI Renal also ended its shedding of clinics and added 116 new patients this year. Overall, market share increased about 6.2% during 2012- 2013 — slightly less than the 6.6% in the 2011-2012 period. Thus, while new patient starts each year increases between 3%-4%, the 10 largest providers are grabbing a consistent portion of those patients. Mergers and sizable acquisitions have slowed down—partially because there may be an endpoint in mergers. A large provider buying a mid-sized dialysis provider with clinics concentrated in a particular part of the country creates a potential monopoly in market share.

Figure 1

If the 10 largest dialysis providers continue in their current state, the Centers for Medicare & Medicaid Services may have a healthy-sized class for the Comprehensive ESRD Care demonstration. May 15 was the deadline to submit letters of intent, and all but one provider — Innovative Dialysis Systems — in our annual ranking said they submitted one (with the minimum number of patients down to 350 patients per CMS-designated service area, several providers submitted proposals for multiple ESRD Seamless Care Organizations). The letter is nonbinding; there is no obligation to participate.

On July 1, all final applications were due from dialysis providers and their partners. The ACO demonstration requires a three-year commitment from the ESRD Seamless Care Organizations — the groups of clinic, physicians, and other partners that apply.

Tough times ahead

Thanks to health care reform and sequestration, the ESRD payment bundle faces its toughest test this year. The question isn’t whether the bundle will be reduced, but by how much. Right now, the renal community will likely lose millions in payment for dialysis drugs (those paid for inside the bundle). While the cost of drugs may go up for now — Amgen just hit providers with a 5% increase in May — more anemia products hitting the U.S. market in 2014-15 will help bring back a competitive atmosphere.

Figure 2

Payment changes influence behavior

Many argue that medicine is controlled by changes in payment. Since Medicare covers more than 90% of the 450,000 individuals with kidney disease, providers watch closely when CMS makes policy changes. Will that make in-center nocturnal hemodialysis, home HD, or peritoneal dialysis more advantageous? Time will tell.

Figure 3

View the profiles of the 10 largest dialysis providers.