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Morningstar | Trump Administration Proposes Changes to Dialysis Reimbursement

On July 10, President Donald Trump signed an executive order focused on improving kidney health for Americans. In tandem, the Centers for Medicare and Medicaid Services proposed four new payment models that will govern dialysis reimbursement through mid-2026. Three of the programs are voluntary and are effectively an extension and expansion of the existing Comprehensive ESRD Care Model that was set to run through 2020. More importantly, the mandatory ESRD Treatment Choices Model, or ETC, brings a sweeping incentive program that intends to cover half of all Medicare-enrolled ESRD beneficiaries beginning Jan. 1, 2020. This demonstration program doesn't alter our narrow moat ratings for DaVita or Fresenius Medical Care, and we don't foresee major adjustments to our fair value estimates as we parse the long-term implications of the proposed changes.

The ETC program creates financial incentives for dialysis facilities and practicing clinicians to either prescribe home dialysis or facilitate an organ transplant. The first three years of the program will include a low-single-digit percentage increase to the reimbursement rate paid by Medicare for each home therapy session, which will be phased out over time and replaced with a two-sided risk program. Starting in 2021, participating facilities and clinicians will see either a positive or negative payment adjustment tied to a scoring system that encourages the utilization of home therapy and bettering transplant rates. Two scales will be used for measuring improvement--participants will be evaluated relative to either the baseline rates established for each specific entity or to benchmark rates in comparison geographic areas.

Aside from payment reform, Trump's order also aims at working down the list of nearly 95,000 people awaiting a kidney transplant. By better compensating living donors and improving organ utilization, the administration hopes to nearly double the availability of kidneys between now and 2030.

For a deeper analysis of the economics of home dialysis therapy, please see our report, "Attractive Home Dialysis Economics Support Providers' Moats."