Shaping the Future of the Dialysis Industry Payment Structure. Capital Markets Day
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1 Shaping the Future of the Dialysis Industry Payment Structure Implications for Integrated Disease Management and Bundled Payment Approach Robert Farrell Capital Markets Day September 20-21, 2007
2 Agenda 1. Cost of Care for ESRD Patients 2. Statistics 3. Renal Disease Management: Demo Project US 4. Renal Disease Management: Demo Project UK 5. Conclusion Page 184
3 Cost of Care for ESRD Patients ESRD Demo Project Member Total Annual Cost $72,000 (2006 Financial Data) Dialysis (38.5%) 31% 40% 6% 4% 4% 4% 8% 3% Hospital (31.3%) Hospital OutPatient (5.8%) Nephrology (3.8%) Surgery (4.3%) Specialty (4.5%) Lab/Path/Rad (3.5%) Home Health/DME/Ambulance/Other (8.2%) Page 185
4 Agenda 1. Cost of Care for ESRD Patients 2. Statistics 3. Renal Disease Management: Demo Project US 4. Renal Disease Management: Demo Project UK 5. Conclusion Page 186
5 Statistics: Adjusted Hazard Ratio of Death, Cardiovascular Event and Hospitalization among 1,120,295 Kaiser Permanente members according to estimated GFR* Risk of Mortality and Hospitalization Increasing with Reduced Kidney Function *Adjusted for age, sex, income, education, dialysis, prior CHD, CHF, stroke, TIA, PVD, DM, HT, dyslipidaemia, cancer, albumin <35, dementia, chronic liver disease, chronic lung disease, proteinuria, prior hospitalisations, published in New England Journal, 2004 Page 187
6 Statistics: Estimated Prevalence of Complications Related to CKD According to the Estimated GFR in the General Population Stevens et al. N Engl J Med 2006 Page 188
7 Statistics: Chronic Kidney Disease (CKD) The majority of patients with CKD 3-4 will die of cardiovascular disease before they get to dialysis About 10% of patients with CKD progress to ESRD 30-50% of patients start dialysis with < 3 months nephrology care. They have: Higher morbidity and mortality Higher hospitalization rates Page 189
8 Statistics: Summary High co-morbidity in ESRD population Cardiovascular disease Diabetes Vascular access complications Inflammation / Infection Malnutrition Case management approach needed, but fragmented reimbursement system at odds Page 190
9 Agenda 1. Cost of Care for ESRD Patients 2. Statistics 3. Renal Disease Management: Demo Project US 4. Renal Disease Management: Demo Project UK 5. Conclusion Page 191
10 CMS ESRD Demo Project Four year project (2006 through 2009) Operated as a Medicare Advantage Health Plan Objective is to improve ESRD patient outcomes and reduce total patient care costs to Medicare Risk adjusted payment system (per co-morbidities) Fresenius Medical Care Health Plan (FMCHP) utilized a hybrid private fee for service Medicare Advanced Plan Model Plan did not include Part D Benefit (Patients enrolled in stand-alone Prescription Drug Plan [Part D]) Page 192
11 CMS ESRD Demo Project: FMCHP Patient Benefits Additional to Medicare Fee for Service Care manager and Disease Management Modest dental and vision benefits No co-payment on diabetic testing supplies Nutritional supplements Transportation benefit for Vascular Access procedure Page 193
12 CMS ESRD Demo Project: Results to Date Enrollment reached 550 patients by year end 2006 and 900 patients by midyear 2007 (10 markets) Medical loss ratio of approximately 89% achieved Quality indicators surpassed national averages and generally met improvement targets Approximately 50% of patients qualified and received nutritional support Hospital admissions below USRDS historical levels and averaged 1.5 admission per patient per year (PPPY) for first eighteen months of the demo project Page 194
13 CMS ESRD Demo Project: Patient Hospital Admissions Decrease versus USRDS 2004 (USRDS 2004 Admission Rate of 2.02 PPPY) USRDS = United States Renal Data System Page 195
14 CMS ESRD Demo Project: Quality Targets Achieved QIP Calculations for the Period July Dec 2006 Jan June 2007 QIP: Quality Improvement Payment Page 196
15 Agenda 1. Cost of Care for ESRD Patients 2. Statistics 3. Renal Disease Management: Demo Project US 4. Renal Disease Management: Demo Project UK 5. Conclusion Page 197
16 UK CKD Demo Project Overview / Objectives Project duration from 2005 through mid 2006 Demo Site West Lincolnshire Primary Care Trust Identify patients with CKD (in Primary Care Practices) Implement a nurse led, Primary Care based Disease Management program Risk assess all CKD Stage 4 and 5 patients Reduce unplanned hospitalization Improve Vascular Access at dialysis commencement Improve vaccination uptake Page 198
17 UK CKD Demo Project Results Reduced Emergency Room attendances by 54% Reduced outpatient visits by 60% Reduced unplanned admissions by 64% Reduced days in hospital by 57% 89% of patients with falling Glomerular Filtrition Rate (GFR) improved Page 199
18 UK CKD Demo Project Results continued: Demo project was successful in terms of quality and economics: Increased patient identification 15 fold Reduced mortality from 21% to 10% Reduced crash landing from 38% to 25% Improved blood pressure control Improved cholesterol control Leading to 30% reduction in cardiovascular risk Page 200
19 Agenda 1. Cost of Care for ESRD Patients 2. Statistics 3. Renal Disease Management: Demo Project US 4. Renal Disease Management: Demo Project UK 5. Conclusion Page 201
20 Conclusion: Current Situation / Opportunity CKD patients are still largely inadequately managed Disease Management opportunity to: Identify CKD patients earlier in the disease path Improve outcomes, increase survival and provide better preparation for dialysis ESRD patient population has high co-morbidity Disease Management opportunity to: Improve patients outcomes by managing co-morbid conditions (case management approach) Reduce ESRD mortality Renal Disease Management can improve the organic dialysis patient growth rate Page 202
21 Conclusion: Potential Integrated Care Business Models Conversion of Demo Project Experience to a Special Needs Plan (SNP) SNP - Medicare Advantage Requires reauthorization of chronic SNP authority by Congress Current SNP Authority sunsets as of Dec 31, 2008 Will target dual patients (Medicare primary/ Medicaid secondary) Decision point for Fresenius Medical Care North America will be mid-late 2008 for implementation post demo project (2010) Provide DM Services to Medicare Fee for Service DM fees at risk against total cost savings to Medicare Share of cost savings between Fresenius Medical Care and Medicare Market size at 89% Medical Loss Ratio (MLR) on 300,000 Medicare ESRD Patients is approximately $2.5 billion Similar Models can be applied outside of US Page 203
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