 Understanding
Medicare Reimbursement for Cancer Care
The Background
Twenty years ago,
chemotherapy for cancer was provided in the hospital. Over the next
several years, community cancer centers began providing chemotherapy in
outpatient offices. This evolution benefited patients by reducing their
travel (the patient can see the physician at the same visit; the office
is closer to home than the large cancer center), improving continuity of
care (the same chemotherapy nurses see the patients at each visit), and
improving supportive care (social workers, nutritionists, pharmacists
and psychologists on site).
However, Medicare
reimbursement rules did not keep pace with these changes. Physicians
received reimbursement the same way hospitals were traditionally
reimbursed at 95% of the Average Wholesale Price (AWP), a price provided
by pharmaceutical companies to various publications. As a result,
physicians giving chemotherapy in their offices sometimes were
reimbursed more than they paid for the chemotherapy drug. This money
was used to pay for the special equipment and infusion suites,
chemotherapy nurses to administer chemotherapy, overhead, and waste that
inevitably occurs with chemotherapy administration. Medicare does not
reimburse for these services and expenses (often referred to as “service
expenses”).
The Fix
In 2003, with the
passage of the Medicare Modernization Act (MMA), Congress did away with
reimbursement based on AWP (Average Wholesale Price). For 2004,
reimbursement was 85% of AWP. At the same time, practice expense
reimbursement increased. Beginning January 1, 2005, reimbursement for
chemotherapy will be based on the Average Sales Price (ASP) of
chemotherapy drugs (ASP + 6%). At the same time, service reimbursement
will decrease.
The Problems
Most of the problems
center around ASP (Average Sales Price—the new reimbursement method) as
a poor standard for reimbursement.
ASP, as defined in the
MMA, is compiled by the Centers for Medicare and Medicaid (CMS) from
pharmaceutical companies who report the average price at which they sell
drugs in a particular quarter. This is a poor indicator of the prices
that physicians pay for several reasons:
-
Pharmaceutical companies sell drugs to wholesalers and
other large purchasers who in turn sell drugs to physicians.
Physicians that are small buyers of chemotherapy drugs pay an even
higher cost than large buyers. So ASP is not representative of the
price actually paid by physicians for chemotherapy.
-
Because of the process for compiling ASP, there is a
lag of two quarters from the time ASP is compiled to when it is used
for reimbursement. For example, reimbursement in January 2005 (1st
Quarter 2005) will be based on data compiled in the 3rd
Quarter of 2004. This results in reimbursement that is unrelated to
current prices of chemotherapy.
-
ASP will vary from quarter to quarter. While this
doesn’t seem problematic, it is difficult for oncology practices to
project and plan for these changes. In order to stay in business and
keep treating patients, oncology clinics (like any business) must be
able to project expenses and income.
-
Reimbursement at ASP + 6% does not cover the cost an
oncology clinic incurs for chemotherapy drugs. These drugs most be
stored carefully and require special handling and equipment. Many
physicians employ a pharmacist for this task. In order to mix
chemotherapy, a practice must invest in a special mixing hood to
protect employees from toxic chemotherapy. All oncology practices
must “waste” some portion of chemotherapy, for instance, when a
patient is unable to receive chemotherapy on short notice because of
toxicity, a change in dose, or illness.
-
Finally, CMS has just released the first (incomplete)
calculations for ASP (based on data from 1st Quarter
2004). Since this system has never been used before and tested in
real practice, no one knows how it will work. Implementing this
untested approach is a dangerous gamble to take with cancer care in
our country.
Also beginning January
1, 2005, services reimbursement again decreases, further decreasing
overall reimbursement to oncology physicians.
The Implications
CMS estimates that
cancer care reimbursement will decrease by at least $500 million. COA
estimates that reimbursement will decrease by at least $900 million
(based on market estimates for drugs not included in CMS estimates).
Either way, community cancer clinics will face a substantial decrease in
revenue. Since expenses will not change, these cuts are magnified.
Like any business, oncology practices cannot continue to operate when
expenses exceed revenue. The likely implications include:
-
Medicare patients will receive chemotherapy in the
hospital. Hospitals do provide chemotherapy infusion, but will be
unable to handle a large influx of new patients in a short timeframe
(January 2005). This will lead to increased waiting time before
chemotherapy can be given, increased travel time for weakened patients
and decreased continuity of care (an indicator of quality of care).
Rural patients will bear the brunt of this change, as their travel
time will increase and their access to care will decrease
disproportionaltely.
-
Private insurers may also follow suit leading to the
same issues on an even larger scale.
The Solutions
-
Hold off on implementing an unknown, untested new
methodology for reimbursement and freeze reimbursement at 2004 rates.
-
Proceed with analysis of the new reimbursement scheme
as directed by Congress in the MMA to include complete information for
all chemotherapy drugs and a baseline.
By waiting for a more complete understanding
of the implication of new reimbursement methods, we can prevent a
dangerous decrease in access to cancer care in America.
Back to
.
Last updated: 3.9.05 |
