CMS’s Innovation Center Announces New Initiative on Comprehensive ESRD Care

by King & Spalding

On February 4, 2013, CMS’s Innovation Center announced a new initiative to test a payment and service delivery model for beneficiaries with end-stage renal disease (ESRD).  The initiative, named Comprehensive ESRD Care (CEC), calls for the creation of ESRD Seamless Care Organizations, or ESCOs—entities consisting of dialysis facilities, nephrologists and at least one other Medicare supplier or provider.  Interested applicants are required to file non-binding letters of intent by March 15, 2013.  Applications to participate in the model are due May 1, 2013.

In announcing the initiative, CMS noted that ESRD beneficiaries constitute 1.3 percent of Medicare beneficiaries, but account for an estimated 7.5 percent of Medicare spending, totaling over $200 million in 2010.  It is generally acknowledged that ESRD beneficiaries often have disease complications and multiple co-morbidities that lead to high rates of hospital admission and readmission as compared to the rest of the Medicare population.  The purpose of the CEC initiative, according to CMS, is to improve outcomes while lowering the total per capita Medicare expenditure for ESRD beneficiaries.  Specifically, the CEC initiative will test whether financial incentives through shared savings among dialysis facilities, nephrologists and other Medicare providers, organized together in one legal entity, will lead to collaborative and comprehensive efforts to address the healthcare needs of ESRD beneficiaries.  The initiative will test whether the financial risk arrangements, with guaranteed discounts to the Medicare program, will improve disease management, clinical outcomes (such as transplantation rates and disease complications), and beneficiary quality of life, functioning status and care transitions while reducing emergency department usage and hospital admissions and readmissions.

The Innovation Center held an open door forum on February 5, 2013 to provide more details about the CEC initiative.  A slide deck from the open door forum is available here.  Parties interested in participating in the CEC initiative must create an ESCO, composed of at least a dialysis facility and a nephrologist (or nephrology group practice) as co-owner participants, plus one other Medicare provider or supplier (including physicians, but not DME or ambulance suppliers).  ESCOs must be created as separate legal entities, and they must have a minimum of 500 ESRD beneficiaries matched to the ESCO in order to be selected to participate in the initiative.  The creation of an ESCO as a legal entity is not required prior to the filing of a letter of intent (due March 15, 2013) nor prior to being selected as an applicant, although 50 percent of the proposed ESCO participants must be identified in the letter of intent and 100 percent must be identified in the application. 

ESCOs will be eligible to share in savings to the Medicare program, but will also be expected to share in losses as well.  Savings (or losses) will be calculated by the creation of an expenditure baseline from Medicare Part A and Part B fee-for-service expenditures for beneficiaries matched to the ESCO for the three-year period preceding the performance period.  This baseline will be compared yearly with the ESCO’s actual performance year average per capita expenditures to calculate Medicare savings (or losses) in which the ESCO will share.  ESCOs must agree to participate in the program for at least three years. 

Reporter, Mark Polston, Washington, D.C., +1 202 626 5540,  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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