title: The initial impact of Medicare's new prospective payment system for kidney dialysis.
abstract: BACKGROUND
  Medicare implemented a new prospective payment system (PPS) on January 1, 2011. This PPS covers an expanded bundle of services, including services previously paid on a fee-for-service basis. The objectives of the new PPS include more efficient decisions about treatment service combinations and modality choice.
  
  
  METHODS
  Primary data for this study are Medicare claims files for all dialysis patients for whom Medicare is the primary payer. We compare use of key injectable medications under the bundled PPS to use when those drugs were separately billable and examine variability across providers. We also compare each patient's dialysis modality before and after the PPS.
  
  
  RESULTS
  Use of relatively expensive drugs, including erythropoiesis-stimulating agents, declined substantially after institution of the new PPS, whereas use of iron products, often therapeutic substitutes for erythropoiesis-stimulating agents, increased. Less expensive vitamin D products were substituted for more expensive types. Drug spending overall decreased by ∼$25 per session, or about 5 times the mandated reduction in the base payment rate of ∼$5. Use of peritoneal dialysis increased in 2011 after being nearly flat in the years prior to the PPS, with the increase concentrated in patients in their first or second year of dialysis. Home hemodialysis continued to increase as a percentage of total dialysis services, but at a rate similar to the pre-PPS trend.
  
  
  CONCLUSIONS
  The expanded bundle dialysis PPS provided incentives for the use of lower cost therapies. These incentives seem to have motivated dialysis providers to move toward lower cost methods of care in both their use of drugs and choice of modalities.
authors.affiliation: School of Public Health, Health Management and Policy, University of Michigan, Ann Arbor, MI. Electronic address: rhirth@umich.edu.
authors.forename: Richard A
authors.initials: RA
authors.lastname: Hirth
authors.forename: Marc N
authors.initials: MN
authors.lastname: Turenne
authors.forename: John R C
authors.initials: JR
authors.lastname: Wheeler
authors.forename: Tammie A
authors.initials: TA
authors.lastname: Nahra
authors.forename: Kathryn K
authors.initials: KK
authors.lastname: Sleeman
authors.forename: Wei
authors.initials: W
authors.lastname: Zhang
authors.forename: Joseph A
authors.initials: JA
authors.lastname: Messana
mesh_terms: D003365:Costs and Cost Analysis; D006801:Humans; D006278:Medicare; D011445:Prospective Payment System; D006435:Renal Dialysis / Q000191:economics*; D014481:United States
keywords: Dialysis; bundled payment; cost; medications; prospective payment