Payments for Home Dialysis Much Higher Under Reasonable Charge Method

HRD-90-37: Published: Oct 24, 1989. Publicly Released: Nov 29, 1989.

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Pursuant to a congressional request, GAO reviewed the Medicare payments to a contractor for furnishing dialysis supplies and equipment to patients who dialyzed at home, focusing on: (1) how the contractor's Medicare payments compared to its cost of providing staff-assisted home dialysis; (2) how total Medicare payments for contractor patients compared with payments for other Florida patients; and (3) whether contractor patient demographic characteristics differed from those of other Florida dialysis patients.

GAO found that: (1) Medicare reimbursements accounted for 71 percent of the contractor's revenues; (2) Medicare did not authorize payment for home dialysis aides and the contractor had to cover those costs with the payments it received for home dialysis supplies and equipment to make a profit; (3) the contractor's cost averaged about $246 per treatment, which included $179 for direct patient care, $59 for office costs, and $8 for other costs, and $67 of the direct-care costs went to pay for dialysis aides; (4) the contractor billed Medicare $252 per treatment, of which the carrier paid $202 and the patient's insurance paid $50, which allowed the contractor to be paid for the aides' services; (5) in 1988, the carrier determined that monthly dialysis costs averaged about $856, but the contractor billed Medicare about $3,124 per month; (6) although the Health Care Financing Administration (HCFA) proposed regulations to establish a special reasonable charge payment limit equal to the national average composite rate multiplied by the average treatments per month, the two carriers that processed almost all of the home dialysis claims had not reduced their rates; (7) HCFA estimated that increases in home dialysis patients could increase program costs by an additional $600 million over 5 years; (8) total Medicare payments for contractor patients averaged 35 percent higher than those for facility patients; and (9) as of July 1988, Florida had 4,640 facility patients and 171 contractor patients.

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