Large Dialysis Facilities Bumped Prices for Major Medicare Advantage Plans

August 29, 2022 - Major Medicare Advantage plans paid a 27 percent higher cost for the median in-network outpatient dialysis treatment between 2016 and 2017, according to an article published in Health Affairs.

The researchers contrasted Medicare Advantage spending on outpatient dialysis with fee-for-service Medicare spending under the ESRD Prospective Payment System.

The data for the study comes from the Health Care Cost Institute and consolidates administrative claims data on outpatient dialysis claims from Aetna, Humana, and UnitedHealth Group from 2016 to 2017. The researchers noted that, altogether, these payers represent nearly half of the Medicare Advantage market. Claims for individuals enrolled in private fee-for-service Medicare Advantage plans were excluded.

The researchers also distinguished between the incident period—or the first 120 days of dialysis treatment—and the prevalent period—the days of treatment following the first 120 days.

The Medicare Advantage members that the researchers studied were mostly 65 years of age or older and over half were men. Members mostly went to in-network providers for treatment, especially if the members went to a large dialysis organization.

Costs were higher for Medicare Advantage plans at in-network larger dialysis treatment facilities. Medicare Advantage plans paid 131 percent of the cost that fee-for-service Medicare spent on in-network dialysis treatment from larger facilities. 

However, other in-network facilities also marked up their prices for Medicare Advantage plans. Regional chains charged Medicare Advantage plans 120 percent more than the fee-for-service Medicare price and independently-owned dialysis facilities charged Medicare Advantage plans 112 percent of the traditional Medicare cost.

Hospital-based facilities were the only in-network facilities that the study analyzed that cost less for Medicare Advantage plans than for fee-for-service Medicare. These in-network facilities charged Medicare Advantage plans 98 percent of what they charged fee-for-service Medicare Advantage.

In contrast, Medicare Advantage plans did not see a mark up at any of these facilities when the treatments were out-of-network. 

Overall, the median hemodialysis treatment cost for Medicare Advantage plans was 127 percent of the fee-for-service Medicare cost at $296. 

The median cost for in-network Medicare Advantage hemodialysis treatment was slightly higher than the median cost for Medicare Advantage hemodialysis treatment overall at $300. This was 129 percent of the fee-for-service Medicare cost. 

Prevalent hemodialysis treatments made up 85 percent of the in-network treatments and contributed to the higher cost of in-network hemodialysis. The median Medicare Advantage price for in-network prevalent hemodialysis treatment was 132 percent of the cost under fee-for-service Medicare at $301.

Incident hemodialysis treatment was more expensive for fee-for-service Medicare than prevalent hemodialysis treatment. The first 120 days of hemodialysis cost traditional Medicare 32.7 percent more than the subsequent days of treatment.

Meanwhile, in Medicare Advantage, there was only a four percent difference between the costs for incident and prevalent hemodialysis treatment.

Fee-for-service Medicare did not see major price differences between in- and out-of-network providers, unlike Medicare Advantage. In Medicare Advantage, the median out-of-network cost for hemodialysis treatment was $232—or 95 percent of the traditional Medicare cost.

“Our findings are in sharp contrast to those from nondialysis settings, where MA provider payments are similar to or lower than those for fee-for-service Medicare. We expect payment parity between Medicare Advantage and fee-for-service Medicare,” the researchers stated. “However, the highly consolidated dialysis industry has substantially increased bargaining power.”

They noted that large dialysis organizations provide more than three-quarters of all dialysis treatments, giving them significant leverage in price negotiations. Also, over a quarter of patients are in counties where large dialysis treatment centers have a monopoly or duopoly, limiting patients’ options.

The study adds to the growing recognition of unusual trends in dialysis costs.

Separate studies have shown that employer-sponsored health plans have even higher expenses for dialysis. Medicare costs for dialysis equaled less than one-sixth the cost of dialysis for employer-sponsored health plans.

Around a third of adults who began their dialysis treatments in an employer-sponsored group health plan switched to Medicare, according to a study published in JAMA Network Open. The study did not cite the reason why dialysis patients switched to Medicare coverage.

Shortly before this study was published, one of the biggest dialysis providers in the country—DaVita—lost its lawsuit against Marietta Memorial Hospital Employee Health Benefit Plan. The dialysis company alleged that the employer-sponsored health plan treated the dialysis providers as out-of-network in order to lower their reimbursement. The case went all the way to the Supreme Court.