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Seuli Bose-Brill, MD; Matthew Kretovics, MPH; Taylor Ballenger, BS; Gabriella Modan, PhD; Albert Lai, PhD; Lindsay Belanger, MPH; Stephen Koesters, MD; Taylor Pressler-Vydra, MS; and Celia Wills, PhD, RN
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Effects of Physician Payment Reform on Provision of Home Dialysis
Kevin F. Erickson, MD, MS; Wolfgang C. Winkelmayer, MD, ScD; Glenn M. Chertow, MD, MPH; and Jay Bhattacharya, MD, PhD

Effects of Physician Payment Reform on Provision of Home Dialysis

Kevin F. Erickson, MD, MS; Wolfgang C. Winkelmayer, MD, ScD; Glenn M. Chertow, MD, MPH; and Jay Bhattacharya, MD, PhD
The Medicare programís transition in 2004 to tiered fee-for-service physician reimbursement for dialysis care had the unintended consequence of reducing use of home dialysis.
We used our logistic regression estimates to determine the effect of physician reimbursement reform on the absolute probability of home dialysis use. For each patient in the relevant cohort, we calculated 4 predicted probabilities of home dialysis use assuming they were in each comparison group both before and after the policy. We used these predicted probabilities to calculate a DID estimate of the policy effect for each patient (see eAppendix). We averaged the individual policy effect estimates over all patients, and used the delta method to calculate standard errors and 95% CIs around average predicted probability estimates.

In a secondary analysis, we explored how different patients were affected by the policy. We separated selected categories of patients by dialysis facility size comparison group. For each patient category, we determined the unadjusted change in the proportion of patients assigned to home dialysis following payment reform stratified by dialysis facility size.

The cohort of patients with traditional Medicare and Medicare Advantage (Insurance Coverage cohort) included 241,111 patients. Before payment reform, 18,754 (16.5%) and 94,615 (83.5%) of patients had Medicare Advantage and traditional Medicare, respectively, compared with 22,473 (17.6%) and 105,269 (82.4%) after the reform. Among patients with traditional Medicare, 5.8% and 5.0% of patients were assigned to home dialysis before and after payment reform, respectively. Corresponding figures for patients with Medicare Advantage were 4.5% and 4.3%. Patient characteristics were similar across insurance categories, except more patients with Medicare Advantage were Hispanic and fewer lived in rural areas and small towns (Table 1).

The cohort of patients with traditional Medicare or waiting for Medicare coverage (non-HMO Medicare cohort) included 389,526 patients. Before payment reform, 19,685 (10.8%) and 163,415 (89.2%) of patients lived in areas with smaller and larger facilities, respectively, compared with 21,840 (10.6%) and 184,586 (89.4%) after the reform. Among patients living in areas with smaller facility sizes, 6.7% were assigned to home dialysis both prior to and following payment reform. Among patients living in areas with larger facility sizes, 6.5% were assigned to home dialysis prior to payment reform compared with 5.5% following payment reform. There were no significant differences in comorbidities among patients receiving dialysis in areas with different facility sizes, whereas more whites and American Indians lived in areas with smaller facilities and more blacks and Hispanics lived in areas with larger facilities. Smaller facilities were more likely to be in rural areas and small towns (Table 2).

Applying a DID regression model, patients with traditional Medicare coverage (who were affected by the policy) experienced a 12% (95% CI, 2%-21%) reduction in the odds of home dialysis following payment reform compared with patients with Medicare Advantage (who were not affected by the policy) (eAppendix Table 3). This corresponds to a 0.7% (95% CI, 0.2%-1.1%; P = .003) reduction in the average absolute probability of home dialysis use following payment reform among patients with traditional Medicare compared with patients with Medicare Advantage (Table 3).

Patients living in areas with larger dialysis facilities (where physicians could increase revenues from in-center dialysis at lower cost) experienced a 16% reduction in the odds of provision of home dialysis (95% CI, 8%-22%) compared with patients living in areas with smaller facilities (where it was less lucrative to visit patients receiving in-center dialysis) (eAppendix Table 4). This corresponds to a 0.9% (95% CI 0.5%-1.4%; P <.001) reduction in the average absolute probability of home dialysis use following payment reform among patients living in areas with larger facilities compared with patients living in areas with smaller facilities (Table 3). Figure 1 illustrates the unadjusted change in modality choice among patients residing in areas with different dialysis facility sizes. There was no significant effect of the policy in our analysis of population density.

Nearly all patient groups living in areas with larger facilities were less likely to receive home dialysis following physician payment reform. Among patients living in areas with smaller facilities, women, whites, patients with hemoglobin >10.5 g/dL, and immobile patients appeared more likely to receive home dialysis following payment reform (Figure 2).

We found that the 2004 Medicare reform to physician in-center hemodialysis visit payments led to a reduction in the use of home dialysis. Patients who were most affected by the policy, either because they were insured by traditional Medicare or because they lived in areas where physicians could increase in-center hemodialysis revenues at lower cost, experienced nearly a 1% absolute reduction in the probability of receiving home dialysis compared with patients who were unaffected (or less affected) by the policy. More specifically, approximately 8 of every 1000 patients initiating dialysis who were affected by the policy received in-center hemodialysis rather than home dialysis as a result of the policy. The payment policy appeared to have influenced dialysis modality choice for nearly all patient groups, regardless of sex, race, ethnicity, or overall health.

According to statements from CMS, the 2004 physician payment reform was designed to align economic incentives and improve the quality of dialysis care.27 In the discourse leading up to the policy’s enactment, there was no mention of how the reform might influence dialysis modality decisions. Since the policy was enacted, some physicians have expressed concern that it created a financial incentive to place some patients on in-center hemodialysis rather than home hemodialysis or peritoneal dialysis.28 However, surveys of nephrologists in the United States suggest that economic factors do not play an important role in dialysis modality selection.11,15 Our findings indicate that economic incentives have had a substantial effect on physicians’ decisions regarding dialysis modality, and that payment reform had the unintended consequence of leading fewer patients to home dialysis. Since the choice of dialysis modality is central to patients’ quality of life, independence, and healthcare costs, a reduction in the use of home dialysis can be seen as a failure of the policy.8,29,30 Recently, reform to Medicare dialysis facility reimbursement (the 2011 ESRD Prospective Payment System) encouraged greater use of home dialysis, and this has coincided with a trend back toward greater use of peritoneal dialysis.14

P4P initiatives have been proposed as a solution to problems in healthcare by encouraging the delivery of high-value care.31,32 Small trials and demonstration projects suggest that P4P initiatives may lead to high-quality care33,34; yet, the overall efficacy of P4P programs remains uncertain, and a number of studies have demonstrated important unintended consequences.35 Due to mandates from the Affordable Care Act, CMS is expanding the scope of its P4P initiative on a national scale, with a program directed at physician payments, called the Physician Value-based Payment Modifier.36 The recent repeal of Medicare’s Sustainable Growth Rate formula calls for additional programs directed at physician payment.2 Because it was, in part, designed to improve the quality of care, the 2004 physician payment reform is an early example of a national P4P program directed at physician behavior. Despite evidence that more frequent hemodialysis visits are associated with some favorable health outcomes,37-40 policy analyses have failed to demonstrate any benefit and suggest that increased visits increase healthcare costs.41,42

Our findings appear to contrast with physician surveys indicating that economic factors do not influence dialysis modality decisions; however, these seemingly disparate findings can be reconciled. For a given physician, or group of physicians practicing in geographic proximity, the net financial reward from in-center versus home dialysis is a function of facility size and insurance composition (ie, the fraction of patients with traditional Medicare versus Medicare Advantage) among other factors. To the extent that dialysis facility characteristics and patients with Medicare Advantage are clustered geographically, regional differences in practice patterns may reflect underlying economic incentives, even if individual physicians do not base their dialysis modality recommendations on economic grounds.


This study has several limitations. Although we use “control” groups for comparison and multivariable adjustment to reduce the potential for bias, we cannot fully exclude the possibility that unobserved factors differentially affected changes in modality choice across comparison groups. For example, unobserved changes over time in patients’ suitability for home dialysis, willingness to administer dialysis at home, or preparation for dialysis that differentially affected 1 comparison group could lead to bias. Additionally, the relative financial gain for physicians of in-center versus home dialysis care may have influenced dialysis modality decisions for some patients receiving Medicare Advantage through a “spillover” effect, leading us to underestimate the effect of payment reform. Finally, small variation in visit frequency associated with geographic density may have prevented us from observing significant effects of this factor on dialysis modality choice.

We found that national physician payment reform enacted by CMS in 2004 in an effort to encourage more frequent face-to-face dialysis visits and improve the quality of care resulted in an unintended consequence of relatively fewer patients choosing home dialysis. The tiered fee-for-service payment system enacted in 2004 continues to govern physician reimbursement for in-center hemodialysis care and, consequently, may continue to discourage home dialysis use in certain patient populations. These findings highlight both an area of policy failure and the importance of considering unintended consequences of future efforts to reform physician payment.


This work was conducted under a data use agreement between Dr Winkelmayer and the National Institute for Diabetes and Digestive and Kidney Diseases (NIDDK). An NIDDK officer reviewed the manuscript and approved it for submission. The data reported here have been supplied by the United States Renal Data System. The interpretation and reporting of these data are the responsibility of the authors and in no way should be seen as an official policy or interpretation of the US government.

Author Affiliations: Section of Nephrology, Baylor College of Medicine (KFE, WCW), Houston, TX; Center for Innovations in Quality, Effectiveness, and Safety, Baylor College of Medicine (KFE), Houston TX; Baker Institute for Public Policy, Rice University (KFE), Houston TX; Division of Nephrology, Department of Medicine, Stanford University School of Medicine (GMC), Palo Alto, CA; Department of Medicine, Center for Primary Care and Outcomes Research, Stanford University School of Medicine (JB), Stanford, CA

Source of Funding: Grant number F32 HS019178 from Agency for Health Research and Quality; grant number DK085446 from the National Institute of Diabetes and Digestive and Kidney Diseases; WCW receives research and salary support through the endowed Gordon A. Cain Chair in Nephrology at Baylor College of Medicine. JB would like to thank the National Institute on Aging for support for his work on this paper (R37 150127-5054662-0002).

Author Disclosures: Dr Chertow is a board member for Satellite Healthcare, which is a medium-sized nonprofit dialysis provider that provides in-center and home hemodialysis therapies; changes in the use of home versus in-center hemodialysis that might result from policies enacted in response to these findings could affect revenues received by Satellite Healthcare. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (KFE, JB, GMC); acquisition of data (KFE, WCW); analysis and interpretation of data (KFE, WCW, JB, GMC); drafting of the manuscript (KFE); critical revision of the manuscript for important intellectual content (KFE, WCW, JB, GMC); statistical analysis (KFE, JB); obtaining funding (KFE, WCW); administrative, technical, or logistic support (JB); and supervision (WCW, JB, GMC).

Address correspondence to: Kevin F. Erickson, MD, MS, Center for Innovations in Quality, Effectiveness, and Safety, Baylor College of Medicine, 2002 Holcombe Blvd, Mail Code 152, Houston, TX 77030. E-mail:

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