Patient Selection in the ESRD Managed Care Demonstration

Article excerpt

INTRODUCTION

The notion of preferable or favorable patient selection into Medicare HMOs is not new. Indeed, abundant evidence accumulated over the past two decades has helped illuminate the phenomenon whereby those Medicare beneficiaries who choose to enroll or stay in HMOs are, on average, younger, healthier, and less costly to treat than beneficiaries who remain in the traditional Medicare FFS sector (Greenwald et al., 2000; Call et al., 2001; Call et al., 1999; Riley et al., 1996; Maciejewski et al., 2001; Lichtenstein et al., 1991; Hellinger et al., 2000; Eggers and Prichoda, 1982; Riley, Rabey, and Kasper, 1989). The issue of patient selection, either favorable or unfavorable, has critical implications for the accuracy of payment methods because capitated payments to Medicare HMOs are largely based on average expenditures under FFS (Greenwald, Levy, and Ingber, 2000). From a budgetary perspective, favorable selection means that HMOs enroll beneficiaries whose expected costs are lower than the costs of beneficiaries who remain in the FFS sector (Call et al., 1999). From an analytic perspective, it is crucial to control for differences in health status when comparing outcomes (such as mortality or quality of life) of HMO and FFS patients.

Previous studies conducted to assess selection effects in Medicare HMOs have, by and large, focused on the Medicare population as a whole. CMS' ESRD demonstration offered an opportunity to scrutinize selection issues among a chronically ill and inherently cosily population. It is of considerable interest to know whether the selection biases seen in the general population hold true in a population with a substantial burden of illness; that is, do the healthier chronically ill enroll at higher rates in Medicare HMOs than the sicker chronically ill? Understanding selection as it pertains to chronically ill populations will be especially important as risk-adjusted payment methods are devised for such populations and the ESRD population in particular.

Under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Medicare ESRD beneficiaries are not permitted to enroll in HMOs unless they were enrolled in an HMO prior to the onset of ESRD. To test the notion of whether this enrollment ban is justified, Congress required CMS to conduct a managed care demonstration for ESRD patients. The intent was to see whether extension of an integrated system of care to ESRD beneficiaries was operationally feasible, efficient, and able to produce outcomes comparable to the current FFS system.

The Medicare ESRD demonstration started at three sites across the country: Health Options, Inc. (HOI), a subsidiary of Blue Cross[R]/Blue Shield[R] of Florida, based in Miami, Florida; Kaiser Permanente Southern California Region (Kaiser), based in Los Angeles, California; and Xantus Health Care Corporation, based in Nashville, Tennessee. The demonstration was initiated in September 1996 and the sites began enrolling patients in 1998. Only the Kaiser (California) and HOI (Florida) sites remained operational for the duration of the demonstration, which stopped enrolling new patients in early 2001. By that time, Kaiser had enrolled a total of 1,649 beneficiaries and HOI had enrolled a total of 967 beneficiaries (including, for both sites, those who later disenrolled or died).

The two fully participating demonstration plans were based on different models of care. The Kaiser demonstration plan was a closed-practice plan for specialist and inpatient care. At the outset, the majority of outpatient dialysis services were provided under fee-based provider contracts, although over the course of the demonstration, Kaiser built or acquired its own dialysis centers. Although Kaiser had an extensive network of community nephrologists and centers participating in the demonstration, some patients were required to switch nephrologists and dialysis centers and all were required to use Kaiser-owned hospitals. …