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MedPAC report to Congress is provided by LegisLink, a service of US Oncology.
In January 2006, the Medicare Payment Advisory Commission (MedPAC) reported to Congress on the Effects of Medicare Payment Changes on Oncology Services. While MedPAC references limitations in its ability to collect data on certain aspects of the study, many of MedPAC's findings serve to underscore the need for a permanent and adequate reimbursement structure that will enable community cancer care to provide Medicare beneficiaries with high-quality, cost-effective cancer care services close to home.
Impact of MMA Only Partially Observed
MedPAC readily acknowledges it has been unable to evaluate the actual impact of the recent Medicare payments changes because:
* the changes mandated by MMA are only partially implemented;
* the 2004 and 2005 drug administration transitional factors and the 2005 symptom management demonstration project make comparison of trends between 2003, 2004 and 2005 difficult;
* the partial year 2005 analysis covered a period during which CMS made an adjustment in the way rebates are factored into the calculation of ASP;
* the information obtained during MedPac site visits is not necessarily generalizable; and
* the perspectives of beneficiaries and providers have not been separately validated
Even with these factors obscuring the impact, the MedPAC report:
* confirms the Q-1-2005 OIG report, which found that, during the first half of 2005, practices could buy most drugs at prices below the Medicare payment rate. The MedPac report notes that a second OIG report is warranted, one that includes the full first year of implementation. The OIG has announced an audit of oncology practice drug acquisition costs in their 2006 work plan. This conclusion assumes that these practices are able to collect the full Medicare allowable amount (80% from Medicare, 20% from the beneficiary or the beneficiary?s secondary insurance carrier).
* appears to infer the adequacy of drug administration payment amounts based on:
o Consistent trends in Medicare program spending across all geographic areas,
o No evidence of access problems (although the analysis identifies a trend in referral of beneficiaries without secondary insurance coverage to hospital outpatient departments for chemotherapy),
o Volume and spending trends for the period 2003-2005, which appear to align with growth in the number of Medicare beneficiaries who are cancer patients and trends in the evolution of treatment standards to include the newer, more effective (and more expensive) targeted therapies.?
* noted a narrowing of the range of discounts offered to purchasers. This trend, along with consistent decreases in ASPs throughout the program?s first year, the anticipated periodic drug price increases by manufacturers for brand drugs during 2006 and the continuing, up to two-quarter delay in ASP updates by CMS, does not bode well for providers? ability to continue purchasing drugs at less than Medicare reimbursement rates over the long run.
Community Oncology Practices Respond During 2004-2005
In response to the partial implementation of the Medicare payment changes, MedPAC reports significant changes have occurred in community oncology practices:
* Drug purchasing - practices changed their drug purchasing activities and spent more time and effort shopping for lower priced drugs and appear to be making decisions on certain drugs based solely on acquisition price;
* Drug inventories - practices kept smaller inventories of drugs on hand which allowed them to respond more quickly to changes in drug prices; and
* Reduced costs and improved efficiencies - practices lowered costs by changing their mix of employees (i.e., cutting back hours, using less expensive staff), reducing health and pension benefits for employees, outsourcing certain tasks like coding to free up clinicians? time and hiring pharmacists to oversee the purchase and mixing of drugs.?
As noted above, MedPAC found that, due to the high and unlimited cost sharing required for Medicare beneficiaries in Part B and the lack of payments to physicians for bad debt, increasing numbers of Medicare patients without supplemental insurance are being sent to hospital outpatient departments for chemotherapy. Physicians reported they may have to close satellite clinics due to Medicare payment changes, which will further exacerbate access issues particularly for rural beneficiaries. Moreover, some practices reported instances in which "a beneficiary refused treatment because she did not want to travel to a hospital or leave her family with debts caused by her out-of-pocket liability (Id., p.13.).
Drug Cost Pressures Evident When Evaluating Weighted Utilization Trends
MedPAC reports that most oncologists could purchase most drugs at a rate below the reimbursement level but also recognizes every practice contacted was unable to purchase some drugs below reimbursement.?
In Table 3 of the report, MedPAC provides a list of 39 drugs and notes that data from the OIG report and CMS reimbursement rates indicates that in the first quarter of 2005 practices could purchase 35 of 39 of these drugs at less than the Medicare reimbursement rate. However, it is interesting to note that even under the MedPAC and OIG calculations:
* In Q1, 24 of these 39 drugs are either reimbursed at less than the acquisition cost or otherwise available for purchase with a margin of 6% or less; and?
* In Q4, nine of the 39 drugs are reimbursed at less than the OIG-reported acquisition cost and an additional 17 are reimbursed with a margin of 6% or less.
Furthermore, MedPAC?s table appears to assume that these 39 drugs are equally represented in a practice's drug mix. As shown on the attached version of MedPAC?s Table 3 produced by US Oncology, when actual utilization by Medicare beneficiaries is factored in:
* the number one drug is reimbursed at 0.2% over cost; and?
* another three of the top six drugs are reimbursed at less than cost; and?
* the 39 drugs on the list are collectively reimbursed at approximately 2.9% over cost.?
As the same table indicates, the number of drugs that are reimbursed at or above acquisition cost falls precipitously when factoring in average practice bad debt. In fact, when it is assumed that 75% of patient co-insurance is collected:
* the top six drugs, 8 of the top 10 drugs, 11 of the top 15 drugs and 24 of the 39 drugs are reimbursed below cost;
* another seven of the 39 drugs are reimbursed at a margin of 6% or less; and
* the 39 drugs on the list are collectively reimbursed at approximately 2.2% below cost.
Looking to 2006 and Beyond
Even with $200 million provided through the symptom management demonstration project and the 3% transitional drug administration payment in 2005, community cancer care providers were forced to make significant changes in the way they do business in order to continue to serve Medicare beneficiaries. Many of these changes require significant up-front investments, in both capital as well as human resources, such as the conversion to Electronic Medical Record (EMR) systems from today?s antiquated and inefficient paper based medical records. It will be problematical for oncology practices to embrace this essential, technological evolution given the reimbursement pressures they face in 2006. Community based oncology groups have worked hard over the past 24 months to eliminate operational inefficiencies, and similar one-time ?pick-ups? will not be available to practices in 2006 as they face these daunting challenges:
* Drug administration codes cover less than actual costs - US Oncology estimates that the 2006 drug administration codes themselves will at best cover only 60% of the full costs associated with providing these services, even assuming 100% collection of the allowable amount on drug administration services. The transitional drug administration payment has been phased out for 2006 and while the new demonstration project for 2006 is welcomed by the cancer care community, it is temporary and only increases reimbursement for drug administration to approximately 67% of costs;
* Providers face losses when administering an increasing number of essential chemotherapy drugs - After factoring for drug administration loss, ASP erosion due to inclusion of the 2% prompt pay discount to distributors (which is typically not shared with their physician purchasers) and the up to two-quarter lag in ASP calculations which costs practices 1-2% in unreimbursed drug costs, an astoundingly high percentage of protocols actually impose a loss on the physician. Physicians will often be forced to choose between multiple regimens that will be reimbursed at less than the actual costs of providing them to the patient.
* Medicare makes no payments to physicians for Medicare bad debt - Despite the significant losses that will be incurred by all oncologists in 2006, as MedPAC notes, Medicare pays approximately 70% of hospital bad debt but no such payments are made to physician offices.
The cancer care community and Medicare beneficiaries with cancer deserve a system with permanence and predictability. The promise of the Medicare Modernization Act of 2003 was for a balanced reform process to be completed prior to the end of 2006 when the MMA-established budget neutrality waiver sunsets. Congress established its intent that this balanced reform would ensure adequate reimbursement of all allowable costs, but this goal remains unrealized. As a result, US Oncology is continuing to undertake advocacy initiatives designed to achieve adequate coverage of all allowable costs and strengthen community-based cancer care delivery to insure that neither access to care nor the quality of care received is compromised for the millions of Americans depending on the continuing vitality of the community based cancer care delivery system.
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