Chairman STARK. Dr. Owen.

STATEMENT

OF WILLIAM FRANKLIN OWEN, JR., M.D., ASSISTANT PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL

Dr. OWEN. Thank you. Good morning. I am Bill Owen. I am, as my colleague described it, an ivory tower academic physician who does practice in the trenches. End-stage renal disease is disproportionately a malady of racial minorities, especially of African-Americans. Despite comprising only 12 percent of the American population, in excess of 35 percent of the population with end-stage renal disease are African-Americans, the remaining 5 percent in that group being Latinos and Native Americans.

The incidence of end-stage renal disease among African-Americans is the highest of any racial group, being approximately fourfold greater than for whites. Further, renal disease has culminated in end-stage renal stage occurring at significant younger ages in minority Americans.

Despite the prevalence in the demographics of the incidence of end-stage renal disease among minorities, there is apparent unequal access to kidneys for transplantation. In 1989, for example, only 20 percent of the transplant population was African-American, with waiting times for organs that were twice that of white Americans. As these trends have continued, we have seen greater numbers of minorities on dialysis for longer periods of time than their white compatriots, and morbidity and mortality are increasingly linked to the quality of care that is provided by the nephrologists and by the dialysis facility providers.

It is in this spirit that I urge the subcommittee to avoid a shortsighted global financial restructuring of the end-stage renal disease program that may effect short-term savings, but will adversely influence the delivery of adequate and appropriate care for this vulnerable population.

In 1983 and again in 1986, substantial reductions were made in the level of reimbursement to dialysis facility providers. In parallel with these reductions, we saw a progressive deterioration in patient survival, ancillary services, increased patient morbidity and diminished patient morale. Annual patient mortality prior to 1984 was consistently less than 20 percent and increased to 24 percent by 1987, a value which is greater than twofold in excess of other industrialized nations with end-stage renal disease programs.

We also must interpret these findings as evidence that the quality of care under the end-stage renal disease program has been compromised by cost-containment efforts in the setting of rampant inflation in the medical sector. These cost-containment efforts include the use of less skilled and fewer dialysis care staff, fewer social workers and dieticians with abbreviated hours onsite, greatly shortened dialysis time and the reuse of single-use designated equipment.

However, for minority patients, the dialysis facility has a far greater role than simply to provide equipment and staff for the performance of dialysis. Many of our patients are financially, educationally and socially disadvantaged, and therefore, the nutritionists and social workers are critical allies in the provision of comprehen

sive support and care. The declining numbers of dialysis support personnel are finding themselves performing more crisis intervention and therefore less ongoing support.

Dialysis facilities that are financially unsound cannot expend funds on new equipment and medications that improve the quality of life and, by extrapolation, patient rehabilitation. In that minority patients are the most vulnerable of the end-stage renal disease population, adverse trends in this group heralds danger for the entire American nephrologic population. To execute alterations in the end-stage renal disease program that will effect enhanced cost-containment while augmenting patient survival, minimizing morbidity and intensifying their rehabilitation, legislation should be enacted. First of all, to provide a fair inflation-adjusted reimbursement schedule for the nephrologist and the dialysis facility operators; that, second, affords adequate reimbursement to the patient and to the facility for mandatory nephrologic-directed medications; and third, assures equal access to all treatment modalities, especially renal transplantation.

Initial realization of these goals can be achieved acutely by, first of all, extending the end-stage renal disease secondary payer period to 24 months or longer to appropriately increase cost-sharing with the patients' private insurers; second, defining a precise bundle of patient care services that are to be provided by the nephrologist and incorporating a global, all-inclusive capitation payment schedule; and third, folding the funds for erythropoietin into the composite reimbursement to the dialysis facility providers.

These proposed modifications in the structure of the end-stage renal disease program will immediately enhance the quality of life for its participants, especially those of color. The disproportionate number of minorities who are captive to dialysis look to you as a voice of advocacy where previously we have had none. I hope that you will advocate a plan of fairness, a plan of equity, as you review these critical issues.

STATEMENT OF WILLIAM F. OWEN, JR., M.D.
ASSISTANT PROFESSOR OF MEDICINE

HARVARD MEDICAL SCHOOL

Introduction

As this Subcommittee considers the reform of our troubled and often inequitable health care system, I strongly urge that Medicare's unique, disease-targeted End Stage Renal Disease (ESRD) Program be maintained in its current form, but be strengthened by a financial restructuring. The Program's total annual cost of $6.6 billion (1991) poses an obvious singular target for cost savings. However, I have grave concerns for the influence of further rate reductions on the morbidity, rehabilitation potential, and mortality of dialysis patients, especially for the very large number of uniquely vulnerable minority patients. It is in this spirit that I urge this Subcommittee to recognize that for 20 years, this public entitlement has been a successful, albeit imperfect archetype of impartial health care.

As I assess the End Stage Renal Disease Program from my perspectives as an African-American academic nephrologist, I find that it has been exemplary of the aims for which it was championed at its inception in 1972 by Representative Wilbur D. Mills (D-Ark.) and Senator Vance Hartke (DInd.). Because of a scarcity in treatment resources and a general lack of insurance coverage for this treatment modality before 1973, remarkable inequity in access to this modality was evident, the dialysis population was disproportionately composed of young, white males that were highly educated, married, and wealthy. However, as a direct outcome of the End Stage Renal Disease Program, life-saving nephrologic care is now available to virtually every American. However, in my more critical roles as both the Medical Director and as an active, practicing nephrologist in two large and demographically contrasting outpatient dialysis facilities--one that is suburban and serves predominantly an upper middle class, educated white population, and the other a unique inner city facility that serves a financially disadvantaged minority population--I am acutely aware of the expanding deficiencies within this Program. Although neither patient population can tolerate a "cost savings" global financial restructuring of the End Stage Renal Disease Program, my minority patients are particularly susceptible to legislative actions that adversely influence the delivery of adequate and appropriate care.

To execute alterations in the End Stage Renal Disease Program that will effect enhanced cost containment, while augmenting patient survival, minimizing patient morbidity, and intensifying their rehabilitation potential, legislation should be enacted that: (1) provides a fair inflationadjusted reimbursement schedule for the nephrologists and the facility operators; (2) affords adequate reimbursements to the patients and the facility for mandatory nephrologic-directed medications; and (3) assures equal access to all treatment modalities, especially renal transplantation. Initial realization of these goals can be achieved acutely by: (1) extending the End Stage Renal Disease Secondary Payer Period to 24 months or longer, to appropriately increase cost sharing by the patients' private insurers; (2) defining the bundle of patient care services that are to be provided by the nephrologists and incorporating a global (all-inclusive) monthly capitation payment schedule for these services; and (3) folding the funds for erythropoietin into the composite reimbursement to the dialysis facility operators. These proposed modifications in the structure of the End Stage Renal Disease Program will immediately enhance the quality of life for all its participants, especially for those of color.

America's ESRD Program as a Paradigm for Health Care Reform

The End Stage Renal Disease Program has been remarkably successful in several areas that are laudable goals for any model health care program The End Stage Renal Disease Program is: (1) virtually universal and relatively comprehensive; (2) functions coherently for the patients; (3) quality of patient care is closely monitored and continuous improvements implemented; (4) it is structured to contain costs; and (5) the Program is paid for fairly Approximately 93% of all patients with end stage renal disease is eligible for Medicare coverage of their nephrologic care. The remaining few patients who are not insured can obtain additional funding for nephrologic care through the Veterans Administration, the Indian Health Service, and state Medicaid programs. An attestation to the success of the universal and comprehensive design and penetration of the End Stage Renal Disease Program is the lack of correlation between personal income and mortality secondary to renal failure. Unlike most other "metaphor(s) for modern technological medicine,"

access to dialytic care in the United States is not compromised by poverty. However, an unfortunate reality of the heavy use of medical care by end stage renal disease patients is that their average annual cost sharing amount with Medicare is approximately $4,000 -- a substantial burden for the poor of any race or ethnic group. Although 80% of the costs of either dialysis or transplantation are covered, Medicare does not provide reimbursement for either the expense of transportation to and from dialysis, or the costs of the mandatory medications that supplement the dialysis treatments. The latter is a particularly critical issue for patients who undergo renal transplantation, since reimbursement for immunosuppressive medications ceases after the first 18 months of transplantation. For example, cyclosporine A, a critical and obligatory long term medication for renal transplant recipients is >$10,000 annually.

Despite this major financial deficiency, most patients feel that in comparison to private insurance, the End Stage Renal Disease Program is a coherent system. Enrollment is simple and straightforward. After demonstration of medical necessity and eligibility, the provider and the patient submit a single form to the Health Care Financing Administration, and the bundle of benefits is implemented by Medicare after 18 months if the patient has been previously ineligible. These patient benefits are clearly outlined to the patient and the health care provider, and their successful implementation is externally monitored. Lastly, the level of health care delivery to the end-stage renal disease patient is basic and uniform. In the words of the implementing law, every patient should receive a "regular course of dialysis or kidney transplantation to maintain life.”

This simple stated objective of the End Stage Renal Program has been costly to achieve, but American society resists limiting expenditures that compromise access to therapies that are medically appropriate and that are life-sustaining. This tacit policy is reflected in the increment in the number of participants in the End Stage Renal Disease Program and in its costs. At the inception of this Program, it was extrapolated that the number of beneficiaries would be only 90,000 instead of the actual 165,000 patients. The incident treatment rates for end stage renal disease in the United States is almost 4 times greater than for similarly industrialized European countries and twice that in Canada. Approximately 40% of the recipients in the United States are at least 65 years old. Viewed in a short-sighted financial sense alone, this 0.08 percent of the American population accounts for 0.8% of our total health care expenditure.

Yet, despite the appropriate unwillingness of the health care community and the American public to achieve cost savings by the inadequate funding of such life-sustaining technologies, unprecedented cost controls have been achieved within the End Stage Renal Disease Program. The monopsonist framework of the End Stage Renal Disease Program encourages competition, but attempts to ensure and implement continuous quality patient care. This objective is pursued both locally and nationally. For example, on a contractual basis with the Health Care Financing Administration, the regional End Stage Renal Disease Networks have established uniform, minimal objective standards for appropriate nephrologic health care. The Medical Review Boards of these Networks routinely inspect dialysis facilities, offer corrective advice in the case of medical deficiencies, sponsor educational programs for the providers and patients, and intervene in response to patient complaints. In addition, the Networks routinely publish health care data for "consumers" within the End Stage Renal Disease Program. The United States Renal Data System annually provides nationally derived information on the incidence, prevalence, morbidity, and mortality of end stage renal disease to patients and health care providers. Lastly, the active, working interaction between the End Stage Renal Disease Networks, the Health Care Financing Administration, and nephrology professional organizations such as the Renal Physicians Association, American Society of Nephrology, National Kidney Foundation, American Nephrology Nurses Association, permits an unprecedented level of interaction and cooperation between the patient, the provider, and the regulators.

In its unique and powerful role as the major "buyer of dialysis services," the Medicare has exhibited an unprecedented capacity to control its cost per patient. The reimbursement rate to the dialysis facility operators for outpatient dialysis in 1974 was $138 per treatment, and this amount was reduced to $125 in 1989. The analysis of the End Stage Renal Disease Program performed by the Institute of Medicine found that after adjustment for inflation, the 1989 reimbursement rate was only approximately $54 in 1974 dollars. From 1989 to the present, the Consumer Price Index for Medical Care has increased from 149 to 186, but reimbursement to the dialysis provider has remained unchanged in current dollars. Cost containment steps initiated by the dialysis facilities in