[Solved] healthcare financing and value


More than 700, 000 Americans have End Stage Renal Disease (ESRD), which is the last stage of highly destructive and long-term kidney disease. Every year on average 124, 000 new cases on ESRD are reported in the United States.(1, 2) ESRD usually occurs due to complications of different comorbidities and existing conditions. Due to these complications, patients with ESRD are more frequently admitted and readmitted to the hospitals, and more often visit emergency departments. On average ESRD patients are admitted to the hospital once a year, and more than one third of these hospitalizations are followed by a readmission within 30 days after the discharge. (2) All these admissions place a significant burden on the health care budget, particularly impacting Medicare which is the main payer of for more than 70% of ESRD patients. Between 2015-2016 ESRD patients represented less than 1% of Medicare beneficiaries, and accounted approximately 7% of total Medicare fee-for-service spending (over $35.4 billion). In 2016, ESRD spending per person per year (PPPY) increased by 2.5%, and for HD care by 1.02%.(4)

Patients with ESRD have to receive life sustaining hemodialysis (HD) treatment a few times weekly that dramatically increases the cost of their care. On average the cost of caring for ESRD patients is higher than the costs of caring other Medicare patients, and this cost increases annualy. (3, 4) In 2011 Centers for Medicare and Medicaid Services (CMS) implemented prospective payment system (PPS) for HD for the patients with ESRD. (5, 6) PPS provides bundled payment for dialysis treatment, dialysis related labs tests, drugs, supplies and capital costs for dialysis maintenance. (6)

ESRD patients often have to visit various health care providers and follow different treatment plans due to their complex health problems, all of which can be challenging for them if care is not well-coordinated, and may contribute to high health care expenditures for this population group.

Comprehensive End Stage Renal Disease (ESRD) Care- payment Model

In October 2015, the Centers for Medicare and Medicaid Services (CMS) implemented the Comprehensive ESRD Care (CEC) Model to provide better care for ESRD beneficiaries and control the cost of care. The aim of this model is to incentivize providers for improving care coordination for this population group and creating patient-centered, cost-effective and high-quality care, which will ultimately improve health outcomes of ESRD beneficiaries.(2, 3, 7)

Dialysis facilities, nephrologists, and other providers may establish partnership under CEC model and operate as ESRD seamless care organizations (ESCOs), that are a type of accountable care organizations (ACOs). ESCOs agree to take financial responsibility both for the quality of care and overall Medicare Part A and Part B spending of their ESRD beneficiaries (not just for spending on dialysis services), They are responsible for coordinating care and attempting to reduce the overall Medicare care cost for their ESRD beneficiaries. These organizations will receive incentives by CMS if they meet their spending and quality benchmarks.(8)

The patients included in this CEC model are Medicare fee-for-service beneficiaries with ESRD who receive HD, are at least 18 years of age, reside in the US and are not associated with another ACO and are not a recipient of a kidney transplant in the last 12 months, and most importantly, have Medicare as the primary payer.(2, 9)

ESCOs must have a minimum of 350 Medicare fee-for-service beneficiaries and must be led by professionals experienced in providing care to ESRD beneficiaries. ESCOs include dialysis centers that are the part of large dialysis organizations (LDOs) that own 200 and more dialysis centers, and dialysis centers of small dialysis organizations (non-LDOs). Since the launch of the program, 13 ESCOs joined the program, 12 of which partner with LDOs, later in 2018 they expanded up to 37 ESCOs, 33 of which are within LDOs. (3, 6, 10)

The model is planned for three years, however CMS and ESCO can extend it for another two years upon their agreement based on ESCO’s performance. (9, 11)

Beneficiaries are assigned to a particular ESCO when they first time visit to that ESCO (“first touch” approach). CMS then prospectively matches that beneficiary to that facility unless the beneficiary loses eligibility to the ESCO, including stopping dialysis treatment, joining to other insurance program, receiving a kidney transplant. (2, 9, 10)

Providers of these ESCOs bill Medicare for fee-for-service payments, and at the end of the year, after comparing their actual expenditures with their savings, become eligible either for shared savings payments, if their savings exceed the expenditures or shared loss penalties, if their expenditures exceed the spending target. Dialyses centers from LDOs share two- sided risk – meaning that share in both savings and losses. ESCOs from non-LDOs only face one-sided risk: they may qualify to share in savings but are not mandated to share in losses.(2, 9)

ESCO’s shared savings or losses are calculated based on a comparison of their spending benchmark to their actual Medicare Part A and B expenditures for their eligible patients in a given year. In the first year the benchmark is estimated based on historical Medicare Parts A and B expenditures incurred for beneficiaries who would have been attributed to the ESCO. The national data is used to calculate the benchmark for the subsequent years. Savings are adjusted based on broad quality measure domains. Each quality domain has its assigned weight.(2, 3)

In the first year LDO ESCOs receive up to 70% of their savings, if their expenditures are below the spending benchmark, or pay back 70%, if they exceed the spending target. In the Year 2 and 3 this percentage is slightly higher: 75%. Both savings and losses are capped: 10% in Year 1 and 2, 15% in Year 3. (2, 3)

When Non-LDO ESCOs expenditures do not exceed their spending annual target, they receive up to 50% of their generated savings, up to a cap of 5% of the estimated benchmark.(2, 3)

In addition, ESCOs must meet a certain total quality score to qualify for shared savings payments in each participating year. This score is used to determine ESCOs eligibility for shared savings and the size of the shared savings payment. If ESCOs do not receive the necessary level of the quality score, they may be terminated from the program. ESCO quality measure domains include: Preventive health; Chronic disease management; Care Coordination/Patient Safety; Patient/Caregiver Experience; Patient Quality of Life.(2, 3, 7)

In summary, this model incentivizes ESCOs to reduce total spending of Medicare fee-for-service ESRD beneficiaries to generate shared savings payment, as well as meet certain quality and performance standards, to receive and maximize the size of these savings payments.

The objective of this paper is to discuss how the incentives created by the model will impact cost and quality from the perspective of five specific stakeholders, including dialysis facilities owned by LDOs and non-LDOs, nephrologists of LDOs and non-LDOs, and ESRD patients.

Dialysis Facilities Owned by LDOs

Dialysis facilities owned by large LDOs that are eligible to receive shared savings payments as well as shared losses, have higher overall levels of risk compared with their smaller counterparts, however they have more resources to control costs and improve quality.(10)

The first-year evaluation of the program by the Lewin group showed that participating ESCOs (most of them were LDOs) signed-up for the program due to the potential for financial gains, but generally expected the magnitude of any gains to be modest. ESCO participants emphasized the importance to build good relationships between dialysis providers and nephrologists and developing or strengthening relationships with other providers to better coordinate the care and improve the quality. (12)

ESCOs within LDOs spent more resources to improve the infrastructure in their facilities to achieve the model requirements, including enhancing IT system, improving care protocols, staff training to improve care coordination, which are important factors to reduce cost and improve quality. Since the model does not pay the facilities prospectively, this restricts the ESCOs to actively make more investments (due to unintended consequences) to improve care quality and coordination which in long term will help them to lower care costs and gain savings from the model.

ESCOs within LDOs ESCOs have larger network of providers outside their organization that ultimately helps them better coordinate the care. Some LDOs established formal financial risk sharing with those providers to motivate them for better care coordination. (10, 12)

Dialysis Facilities Owned by Non-LDOs

Non-LDOs with fewer than 200 dialysis facilities, independent dialysis facilities, and hospital-based dialysis facilities have better “risk” protection, since they will be able to receive shared savings payments, but will not be liable for payment of shared losses, since” these facilities have more limited resources to better coordinate care, reduce care costs and improve quality. This factor made non-LDOs to hold signing- up for this model in the first year of its implementation, confirming this idea that non-LDOs tend to operate more in volume based and not the value-based principle to ensure their sustainability in the market. In addition, ESCOs under non-LDOs have limited resources to improve their infrastructure and enhance their network for better care coordination. That is why CMS has recently introduced an amendment that non-LDOs can consolidate to increase their pool of ESRD beneficiaries in order to have more opportunities to save costs. (10, 12)

Nephrologists of Dialysis Facilities Owned by LDOs

Nephrologists are considered as primary care providers in ESCOs and make an integral role this model implementation. These nephrologists are incentivized the most to lower the care costs and improve the quality. It can be stated that sometimes the nephrologists can find a way to improve the income without improving the quality, such as advising more conservative care to the patients to avoid hospitalizations or sending dialysis patients to hospice care etc. However, CMS claims that they developed many checks and balances to ensure that “improving and not denying the care remains the ultimate goal of the model”. In addition, non-owner dialysis facilities nephrologists have vague understanding and interests to redesign the care to meet the model goals that creates barriers during the model implementation impacting care coordination and quality.(5, 9, 10, 12)

Nephrologists of Dialysis Facilities Owned by Non-LDOs

Nephrologists of dialysis facilities owned by non-LDOs have limited incentives as well as resources to lower cost and improve quality. In addition, they have less patient population and therefore less motivation to fulfill the model requirements for reducing care costs and improve quality. On the other hand, these nephrologists do not share financial risk for losses which makes them less vulnerable in case if they fail to lower costs and ensure quality. In addition, it can be assumed that these nephrologists have smaller ESRD beneficiaries and lower risks for having more patients with complications, and less risks for high costs of care.(5, 9, 10, 12)

Medicare 18+ Old Beneficiaries with ESRD

In general, the model is beneficial for ESRD beneficiaries providing them the opportunity to have better coordinated care, avoid hospital admissions and readmissions.

Those beneficiaries with more comorbidities may seem to benefit from the model more, since this model will help them have better coordinated care and better control of their complications.(10)

It seems that younger patients who become eligible for kidney transplantation may not benefit from the program, since they will lose their eligibility.

The first-year evaluation of the program by the Lewin group revealed that most beneficiaries had positive impressions of the care received but only vague knowledge of the CEC Model. The participants that had the most favorable impressions of ESCOs were generally new patients, patients with more comorbidities, and patients in need of support services. The quality of life indicators also improved for these beneficiaries, particularly the physical health domain. In addition, hospitalizations and readmissions due to ESRD related complications significantly reduced among these beneficiaries. These preliminary findings suggest that overall the model will help its beneficiaries receive better quality care, and avoid unnecessary hospital admissions and readmission, which are important indicators for reduced cost and increased quality of care.(5, 9, 10, 12)

However, there is a concern that ESCOs and nephrologists may preferentially push certain patients (with advance complications and frequent hospital readmissions risks) to conservative care or hospice in order to avoid hospitalizations costs to the ESCO.(5)


The CEC Model is designed to create incentives for dialysis facilities and nephrologists to coordinate care for Medicare beneficiaries with ESRD across settings by making the ESCO financially and clinically responsible for the delivered care. Overall, the first fifteen months under the CEC Model showed promising results, with lower spending and improvements on some utilization and quality measures, primarily in total hospitalizations and readmissions.

Evaluation of the program will help CMS objectively assess its strengths and weaknesses and develop strategies to continuously improve its efficiency, reduce the risks and ultimately expand the program across the country including the rural areas.


  1. United States Renal Data System. Chapter 1: Incidence, Prevalence, Patient Characteristics, and Treatment Modalities 2018. Available from: https://www.usrds.org/2018/view/Default.aspx
  2. Centers for Medicare and Mediaid Services. Comprehensive ESRD Care Model Available from: https://innovation.cms.gov/initiatives/comprehensive-ESRD-care/.
  3. Social and Scientific Systems, Inc. Examples of Health Care Payment Models Being Used in the Public and Private Sectors. 2016.
  4. United States Renal Data System. Chapter 9: Healthcare Expenditures for Persons with ESRD. Available from: https://www.usrds.org/2018/view/v2_09.aspx.
  5. Berns JS, Glickman JD, Reese PP. Dialysis Payment Model Reform: Managing Conflicts Between Profits and Patient Goals of Care Decision Making. Am J Kidney Dis. 2018;71(1):133-6.
  6. Centers for Medicare and Mediaid Services. End Stage Renal Disease (ESRD) Prospective Payment System (PPS). Available from: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/index.html?redirect=/ESRDPayment/30_Outlier_Services.asp.
  7. New Participants Join Several CMS Alternative Payment Models [press release]. Centers for Medicare and Mediaid Services. January 18, 2018.
  8. The Comprehensive ESRD Care Model: The First Disease-Specific ACO Program. [press release]. Omnicell, 2015.
  9. National Institute of Diabetes and Digestive and Kidney Diseases. Reports on End-Stage Renal Disease Care Model and Pediatric Kidney Disease. 2018. Available from: file:///C:/Users/alchadmin/Downloads/030918_kicc_meetingsummary-508%20(2).pdf
  10. The Lewin Group;. Comprehensive End­Stage Renal Disease Care (CEC) Model. Performance Year 1 Annual Evaluation Report. October, 2017. Available from: https://innovation.cms.gov/Files/reports/cec-annrpt-py1.pdf.
  11. Three new dialysis providers form ESCOs in renal ACO model [press release]. Nephrology News and Issues. January, 2018.
  12. Maddux FW, Ketchersid TL. The Journey to Full Health Care Responsibility for One ESCO Provider. Clin J Am Soc Nephrol. 2017;12(12):2050-2.

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