New York Times
POSTED: 1:30 a.m. HST, Aug 29, 2013
WASHINGTON » Eight months ago, Congress ordered the Obama administration to eliminate a stark example of federal government waste: more than $500 million a year in excessive drug payments being sent to dialysis clinics nationwide.
But in a demonstration of just how hard it is to curb spending in Washington, more than 100 of the same members of Congress who voted in January to impose the cut are trying to push the Obama administration to reverse it or water it down.
The conflicting message is due in part to the lobbying muscle of an industry dominated by two companies — DaVita HealthCare Partners of Denver and Fresenius, based in Germany — both of which have seen their bottom lines improve since 2011 when the federal government started making the excessive payments.
While most of Washington has been on vacation, industry lobbyists aligned with nonprofit groups that in many cases they helped set up or finance have orchestrated a textbook campaign to protect the payments. They argue that the potential cut of $29.52 per patient visit from the previously planned $246 reimbursement for next year would force them to close or curtail services at some of the more than 5,000 dialysis centers nationwide.
At issue is how the government reimburses dialysis clinics. Until 2011, the government paid clinics for each dosage of an anti-anemia drug administered, a practice that led to concern that clinics were overusing the drug. But after adopting a flat fee for dialysis, the use of the drug plunged, while the dialysis companies' earnings margins rose. That prompted Congress to order a cut in the drug fee.
Some outside experts say the industry is effectively enlisting patients and members of Congress as a lobbying tool to protect their payments. The real problem, they say, is that the industry continues to open or acquire clinics even as growth in the number of patients on dialysis has slowed.
"Patients should not be used as pawns in a series of scare tactics to protest a change in a payment," said Richard Berkowitz of Skokie, Ill., who said he was repeatedly pressured when he recently visited his dialysis clinic to sign a petition protesting the cuts, even though he routinely does dialysis on his own at home.
The industry — which lists dozens of lobbyists including former Rep. Earl Pomeroy, D-N.D., and Thomas A. Scully, who ran the Medicare program from 2001 to 2004 — has proved its clout in Washington before. It persuaded Congress to pass legislation that as of 2011 allowed the industry to receive an annual adjustment in its reimbursement rate, which it will get in the coming year. That will slightly reduce the impact of the other proposed cut.
The federal government for decades has covered the cost of what is called end-stage kidney disease, the only chronic disease that has this automatic coverage. The benefit has cost the government more than $32.9 billion a year, the biggest part of it for dialysis. The result is that about 90 percent of the dialysis patients served by a company like DaVita rely at least in part on federal insurance.
Company officials say the drug payments should be maintained because they help the companies with other costs not sufficiently covered by the federal reimbursements.
"We have carried a lot of centers that lose money overall, but if they cut reimbursement it becomes impossible to do that everywhere," DaVita spokesman Skip Thurman said.
Industry lobbyists have met this summer with dozens of members of Congress and their staffs, while others have reached out to top White House officials, including Chris Dawe, a senior policy adviser for health care, to urge them to pressure the Department of Health and Human Services and its Medicare division to back down on the planned cut.
They enlisted employees at clinics nationwide to join in. They brought retired professional basketball star Alonzo Mourning, who has kidney disease, and other kidney care patients, to Capitol Hill for meetings. They set up campaigns on Facebook, Twitter and Instagram and encouraged lawmakers to visit dialysis clinics in their home districts — with cameras and local reporters in tow.
DaVita alone says it has generated 80,000 letters protesting the proposed cuts, with more such appeals pouring in before a public comment period ends Friday.
The full-court press has energized Congress. A broad coalition, including conservative Republicans and liberal Democrats and many in between, has joined the industry appeal, with 205 members of the House signing a letter this month to the Medicare administrator asking her to reconsider the proposed cut. Half of those signers voted in favor of the cut in January.
"Such a cut would put many dialysis providers out of business," said Rep. Ben Ray Lujan, D-N.M., who backed the legislation imposing the cut and then was among the lead signers of a letter urging the administration to reconsider.
Opposition in Congress has been led by lawmakers who are among the top recipients of campaign contributions from the industry, including Reps. John Lewis, D-Ga., and John M. Shimkus, R-Ill., as well as Lujan.
Overall, the industry has donated at least $8 million to lawmakers and their causes since 2009, nearly evenly split between Democrats and Republicans, according to the data from the Center for Responsive Politics, making it a big player among interest groups.
The multibillion-dollar dialysis industry has been accused by medical researchers and former employees of putting a higher priority on profits than on care before, giving patients for many years excessive doses of the expensive anti-anemia drug Epogen to collect higher reimbursements — allegations the companies have strongly disputed.
The excessive payments to the companies since 2011 came about, in fact, as the federal government tried to create a single bundled payment for each patient visit. The idea was to eliminate the incentive to prescribe excessive doses of Epogen, which medical research showed was harming patients.
With the profit incentive gone, use of Epogen dropped even more than the federal government expected. So the amount of money set aside in the new bundle exceeded the cost of the drugs, two federal audits in the past year have shown.
The industry, as a result, has collected an extra $530 million to $880 million a year in federal payments since 2011, compared with the actual use of Epogen and other dialysis drugs. That is the windfall that Congress ordered Health and Human Services to eliminate in January.
The major companies have benefited significantly, and their earnings have risen since 2011. Warren Buffett's company, Berkshire Hathaway, recently moved to buy a larger share of DaVita, whose chief executive, Kent J. Thiry, is among the top paid in the United States, earning $26.8 million last year, a 53 percent jump from 2011.
Industry lobbyists and company executives acknowledged in interviews this month that the federal government might be paying them more than is necessary to cover the cost of the drugs they use on dialysis patients.
In their presentations on Capitol Hill and to the Obama administration, the companies have argued that the cutbacks would hit clinics in rural areas and in poor sections of major cities hardest — as those facilities typically already have lower profit margins.
Diane Wish, the chief executive of a small, Ohio-based nonprofit chain called Centers for Dialysis Care, said she was convinced that the cuts would hit her company hard.
"Part of me is afraid until patients start dying, no one is going to believe that we can't make it on this amount of money," she said.
Officials at Health and Human Services, which must issue a final rule by Nov. 1, have remained largely silent, saying only that they are listening to the protests.
"We do our best to address the concerns raised," a spokeswoman said in a statement.