STATEMENT OF THE AMERICAN SOCIETY OF TRANSPLANT SURGEONS PRESENTED BY JAMES CERILLI, M.D. Mr. Chairman, I am James Cerilli, M.D., professor of surgery in the renal transplant program in the Department of Surgery of The Ohio State University, the immediate past president of the American Society of Transplant Surgeons, and recently appointed Chairman, Department of Surgery, Albany Medical Center, New York. We appreciate your invitation to the Society to participate in these hearings and we are anxious to be of assistance to the Committee as you consider the issues surrounding the recently proposed reimbursement regulations for renal dialysis services. My purpose today is two-fold. First, I want to call your attention to recent and dramatic advancements in renal transplantation which have not been widely reported. Second, I would like to share with you the reasons for our serious concern over the proposed dialysis reimbursement regulations and our recommendations for a more reasonable and cost-effective payment methodology for services to patients with renal disease. In many cases progress in medical care is not rapidly reported or fully understood. This is certainly the case in the field of renal transplantation. In a study of eight large university transplant centers conducted in 1979 by the Society, living related donor graft survival rates at one year were 75 percent and cadaveric graft survival rates were 55 to 60 percent. That means that not only was the patient alive but the transplanted kidney was performing satisfactorily. Mortality rates at one year were less than 10 percent for this severely ill population. Thus, the mortality rate, not only from surgery but all other factors is comparable to that of patients on dialysis. Even more recently, with the introduction of donor-specific transfusions, graft survival rates in patients receiving living related donor kidneys in such centers has increased to 95 percent while cadaveric graft survival rates have increased to between 65 and 75 percent. In such large academic medical centers mortality rates are well below 5 percent. In my own institution, mortality rates for non-diabetic patients under 55 on chronic dialysis actually exceeded the mortality rates for transplanted patients. We expect continuing progress through promising developments in research which are being transferred into clinical practice. Furthermore, renal transplantation is significantly less costly than any form of dialysis. The current cost of a renal transplant is approximately $20,000 to $25,000 during the first year and approximately $1,000 per year afterwards. In contrast the cost of chronic center hemodialysis plus hospitalization for complications averages about $28,000 annually. These savings figures do not include the effects of successful transplantation on the rehabilitation of ESRD patients. Studies at three university transplant centers reveal that approximately 75 to 80 percent of transplant patients return to an occupational activity equal to or exceeding that prior to their illness and thus reduce welfare and social security costs and increase tax revenues compared with those continuing on dialysis. According to a study published recently in The New England Journal of Medicine, less than one third of patients on chronic hemodialysis at Duke University Medical Center were able to maintain themselves independent of support. Because we are actively engaged in the medical management of renal disease patients, we are greatly concerned about what we believe to be the adverse impact of the proposed Health Care Financing Administration (HCFA) dialysis reimbursement rates. In our opinion this proposal is medically counter-productive and fiscally irresponsible. We strongly urge that the regulations be withdrawn and revised. Since the inception of the ESRD program a principal objective has been the promotion of transplantation for medically suitable patients. All of the renal networks and numerous government agencies and reports have endorsed goals related to the appropriate referral of patients for transplantation evaluation. Mr. Chairman, the proposed payment method will produce results which are the opposite of this objective. It will create an enormous financial disincentive for referral of patients to transplantation and will further promote the sequestration of patients in dialysis centers. The reasons for this are quite apparent. It takes effort and staff time to counsel patients and refer them for consideration for transplantation. There is to be no compensation for this effort. Rather, from the center's perspective if it is successful, it will result in a loss of revenues. In fact, while the proposed composite rates are intended to create incentives to promote home dialysis, it is more likely that the rate structure will prompt dialysis centers to "recruit" and maintain patients who are dialyzing at home. By enrolling and retaining such patients, centers (both hospital and free-standing) can alter their mix of patients and thereby improve their financial condition. It is generally recognized that the portion of renal disease patients on home dialysis include some of the most promising candidates for successful transplantation. Paying the same rate for in-facility and home dialysis means that this same group of patients will provide dialysis centers with reimbursement that is substantially above costs. It is unlikely, therefore, that referral to transplantation will be aggressively promoted. The "loss" of patients on home dialysis to transplantation would adversely impact on the financial condition of the center. The perverse incentives I have described do not strike me as sound public policy. We in the Society have been seeking various approaches for assuring that the reimbursement system for renal disease care does not bias the choice of therapy which is medically appropriate. We believe that the payment system for ESRD services should be based on the principle that patients should have an incentive to seek the most cost-effective therapy consistent with their medical condition. In order to establish such a payment system, all non-diabetic patients under the age of 50 upon achieving eligibility in the ESRD program should be presumed to be medically suitable for transplantation and referred for surgical consultation by their attending physician. In the case of this subset of renal patients, if the attending physician makes a determination that referral is not indicated because transplantation is not medically appropriate, the patient should be evaluated by the appropriate renal network review committee. The purpose of these required procedures is to provide Medicare with independent medical judgment concerning the reasonable and necessary care and therapy which should be covered by the program. Pending a decision by the patient and the availability of a suitable donor kidney, dialysis services would continue to be covered as under current policy for patients on the transplant list. Of course patients who are not found to be suitable for transplantation or who experience rejection of grafted kidneys would have payments for dialysis continued by Medicare. Medically suitable candidates for transplantation (as determined by a medical review panel) who choose not to seek transplantation should face some limit on the extent of coverage for dialysis services which would be covered by Medicare. The added cost of care resulting from an unwise patient choice should not be part of a reasonable cost or charge recognized by Medicare. We believe this approach to the evaluation, treatment, and reimbursement of patients suffering from end stage renal disease would be reasonable, fair and cost-effective. It would assure that all patients are evaluated on the basis of medically established criteria and counseled concerning the most appropriate form of therapy. It would extend current Medicare policy concerning payment for only reasonable and necessary medical services to the ESRD program. And, it would provide an incentive for patients to elect the most cost-effective form of therapy consistent with their medical condition. Unless we are willing to restructure the reimbursement system of the ESRD program we will continue to see an exploding growth in the expenditures for services to these patients. Promotion of cost-effective forms of kidney dialysis must not be at the expense of timely and appropriate referral for transplantation. Our proposal is not fully developed or set in concrete. We are anxious to work with you and your staff and others to refine it. To summarize, Mr. Chairman, we are convinced that the proposed dialysis reimbursement regulations will inhibit the referral of patients to transplantation. It will further exacerbate the sequestration of patients in chronic dialysis centers. We doubt also whether it will actually promote more home dialysis since the incentive is greater for centers to enroll patients who are already dialyzing at home than to take on the troublesome task of training new patients for home dialysis. Therefore, the proposed regulations should be withdrawn. Mr. Chairman, we want to thank you for this opportunity to participate in these hearings. I would be happy to respond to any questions you or other members may have. Hon. CHARLES B. RANGEL, AMERICAN SOCIETY OF TRANSPLANT SURGEONS, May 11, 1982. DEAR MR. CHAIRMAN: I thought it might be helpful to explain further one of my concerns related to a matter I alluded to in my testimony before your Oversight Committee in its hearings on the proposed reimbursement regulations for end-stage renal disease. My concern is that the proposed regulations which are intended to conserve funds do nothing-in fact are probably counter-productive to advance the change in treatment of renal patients which would, in my opinion, constitute the most effective way to reduce program costs and improve the quality of life of patients. I am referring to the desirability of sharply increasing the portion of patients who are treated by transplantation. A transplanted patient can be restored to a much more normal and productive life than can a patient on dialysis. There are a number of barriers in the way of this treatment change. It seems to me that one of the most significant barriers to it results from the fact that patients who suffer end-stage renal disease must immediately go on dialysis in order to sustain life. Thus, the initial treatment of such patients is likely to be in a facility providing dialysis and by a physician who specializes in caring for patients on dialysis. The patient whose life is sustained by dialysis and whose orientation to treatment is provided by facilities and physicians specializing in dialysis may not be fully exposed to the relative merits of alternative approaches. I believe that there are actions that Medicare can and should take to overcome this difficulty. Provisions can be added to the program to encourage referrals or to penalize with reduced reimbursement facilities or physicians supervising the care of renal patients who fail to refer appropriate patients to qualified surgeons to assess their suitability for transplantation. Another corrective step would be to assure that patients do not refuse to consider the possibility of surgery. A provision could be incorporated in the program similar to one which has been applied otherwise in the Social Security disability program. The disability program defines the circumstances under which disability benefits will not be continued where the disability is remediable. The law provides for suspension of disability benefits to enforce the acceptance of appropriate rehabilitation services. The disability provision has not been applied harshly but rather with recognition of the patient's rights and personal views. In fact, the provision takes into account psychological, religious and medical factors in its administration by the Social Security Administration. The regulations do permit exceptions to the policy when the prescribed care involves unusual or highly risky procedures. It is not clear whether kidney transplants are now included among the required remedies, but it is clear that they should be so classified. We believe a similar approach should be taken in applying Medicare rules related to the reasonableness of medical care provided under the ESRD program. I think the remediability provision that is applied in the case of disability beneficiaries has had the value that it requires the patient to consider carefully the possibility of remedy. In fact, as I previously mentioned, it is possible that this provision of disability law already applies to end-stage renal disease patients who are in receipt of disability benefits. In any event, reliance on the remediability policy of the disability program would help to establish the point in the mind of patients and the population generally that transplantation is, in the view of the government, the preferred treatment in the case of patients for whom it is appropriate. This policy is certainly consistent with exiting Medicare law which limits payments under the program to care which is found to be reasonable and necessary. Treating a patient in an excessively costly fashion and in a way that produces a lower quality of life than is possible does not seem reasonable and necessary. We believe that if the incentives for transplantation and proper information to patients and the general public are developed, additional donation of organs would also be encouraged. We would suggest strong action to maintain the standards of transplantation at the level of the many highly qualified centers that now exist so that the patients provided transplants would be assured that the potential success of transplantation is at the maximum rate. This combination of actions could be far more beneficial to the ESRD program than the proposed dialysis reimbursement rates. Sincerely, JAMES CERILLI, M.D., Chairman RANGEL. Are you saying you do not want to encourage too much home dialysis because among those people would be included a lot of good candidates for transplantation? Dr. CERILLI. Yes. The patients who are good for home dialysis are usually also excellent transplant candidates. Chairman RANGEL. So you do not want them at home because you do not believe that people will refer them to the surgeons? Dr. CERILLI. What I am saying is there will be a financial reason not to put them into transplantation. Chairman RANGEL. So doctors will decide what is in the best interest of the patient based upon how many dollars they are going to get? Dr. CERILLI. That is part of the issue, and also the financial solvency of individual units. Chairman RANGEL. And you are further saying, after a group of doctors get together and find out what is best for the patient and they conclude it is transplantation and the patient says, you may be right but I do not want to go that route, they should be penalized financially? Dr. CERILLI. I am saying they should have a limitation on how long the medicare program, which is charged with providing reasonable and necessary care-they should have a limit on the longevity of the medicare coverage. Chairman RANGEL. What did I say that you differ with? Dr. CERILLI. Nothing. [Laughter.] Not a thing. But I am saying, until there is a stimulus originating from the patient to seek cost effective forms of therapy, it will be extremely difficult to accomplish that goal. Chairman RANGEL. Thank you. The next panel will be: Dr. Constantine Hampers, chairman of the board, National Medical Care, Inc., Boston; Robert Green, chairman of the board, Community Psychiatric Centers, San Francisco; and Dr. Christopher Blagg, director, Northwest Kidney Center, Seattle, Wash. Your full statements will appear in the record. Hi. Good to see you again. Dr. BLAGG. Hi. Chairman RANGEL. When you had me out there in Seattle telling me about home dialysis, you did not tell me there were all these problems with home dialysis. Dr. BLAGG. I knew other people would tell you about the problems. [Laughter.] Chairman RANGEL. Dr. Hampers? STATEMENT OF TIMOTHY I. MCFEELEY, VICE PRESIDENT AND CORPORATION COUNSEL, NATIONAL MEDICAL CARE, INC. Mr. McFEELEY. My name is Tim McFeeley. Dr. Hampers has asked me to give the statement for National Medical Care, Inc. this afternoon. Chairman Rangel, as I said, my name is Timothy McFeeley and I am here today to present the views of National Medicare Care, Inc. I serve as vice president and corporation counsel. We appreciate this opportunity—— Chairman RANGEL. Mr. McFeeley, you have a rather lengthy statement. Mr. McFEELEY. I do not intend to read the full statement. Chairman RANGEL. I want you to know that the full statement will appear in the record. Mr. McFEELEY. We believe the Government should pay a single rate for the same service, with adjustments for area wage differentials. Clearly, the burden of proof is upon those who contend that a hospital should be paid more than an independent facility in the same county for an identical service. The data produced at a recent hearing of the House Subcommittee on Intergovernmental Relations and Human Services to the effect that the frequency of hospitalization may be lower for patients of independent centers than hospital-based dialysis centers does not sustain the burden. Higher hospital rates are predictable for hospital-based patients not because they are sicker than their counterparts in the free-standing facilities, but because of physician convenience, institutional pressure and inadequate dialysis, particularly among CAPD patients, most of whom are hospitalbased patients. We concur with the Department's statements on 6564 of the NPRM to the effect that there is no justification for hospitals to pay more for supplies than independent facilities and that there are no data that support the claim that hospital patients require a higher degree of care than patients of free-standing centers. The inability of the Department to hold the line on patient exception requests and to prevent the kidney program from sliding into the wasteful cost-reimbursed quagmire has resulted in justifiable public and congressional concern. In this program exceptions do not prove the rule; exceptions are the rule. The Government and coinsurers are paying hospitals on the average more than $174 for a dialysis service the independents provide for $138. That is a difference of over $36 a treatment or $139 million this year. The Department's proposal to set a rate nearly identical for both hospitals and independents and to restrict exceptions to the exceptional is rational and cost efficient. We also believe by setting an adequate single rate program costs can be cut by $75 to $90 million. Believing that home dialysis is less costly than in-center dialysis, Congress has directed HHS to devise a composite rate providing a financial incentive for the facility to send patients home. We accept this composite methodology, provided that the data used in setting the composite rate, both with respect to relative costs and with respect to relative percentages of the use of each mode of therapy are accurate. In addition, the home rate should be standardized. It is absurd to suggest that medicare pay more for patient Jones dialyzing at home in apartment 2A than for patient Smith in apartment 2B because Jones is a hospital-based patient. We believe the composite methodology will not increase the use of home care and predictions by HHS that 30 to 40 percent of all U.S. dialysis patients could be treated at home are insupportable, especially in light of the dismal CAPD results which I will discuss in a moment. The cost of home dialysis would be equal to or greater than the cost of efficient in-center care if we added the cost of a paid assistant and increased hospitalization associated with home care. When HHS compares $97 with $126, it is not comparing home care versus |