Government

Drug pay rule might hurt Medicare access

Oncologists worry that medication costs will outweigh increases to their reimbursements.

By Markian Hawryluk — Posted Jan. 26, 2004

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Washington -- The Bush administration has put into black and white the rules governing 2004 Medicare payments to physicians. But the regulations have oncologists and other physicians treating cancer patients seeing red.

The regulations, issued Dec. 31, 2003, implement payment provisions from the Medicare Prescription Drug Improvement and Modernization Act signed into law late last year. They include a 1.5% update of the physician fee schedule and increases in payments for the work portion of the fee schedule in geographic areas below the national average.

The Centers for Medicare & Medicaid Services also extended until Feb. 17 the deadline for doctors to decide whether to participate in Medicare.

"This will give physicians who have been discouraged by repeated news of Medicare payment cuts time to review this better news and make their participation decisions based on it," said AMA President Donald J. Palmisano, MD.

But Dr. Palmisano also expressed trepidation about payment reforms for prescription drugs provided as part of an office visit. Physicians treating cancer patients have come to rely on overpayments for the drugs to make up for low reimbursement for the expense of administering them.

"Although some of the cuts in drug reimbursement will be offset with increased payments for administering the drugs, overall payments for these services are scheduled to fall significantly, especially after 2004," he said. That has left physicians who provide chemotherapy particularly worried.

Until this year, Medicare paid for physician-administered drugs, mostly chemotherapy treatments, at 95% of the average wholesale price. But government studies found that these prices were often manipulated by drug companies to increase reimbursements to doctors to boost sales.

This year, payments for these drugs will be reduced to 85% of last April's average wholesale price. Payments for new drugs; blood clotting factors; and pneumonia, influenza and hepatitis B vaccines will continue to be 95% of the average wholesale price. Reimbursement for a handful of drugs identified as very overpriced in studies by the General Accounting Office or the Health and Human Services Office of Inspector General will drop to as little as 80% of the average wholesale price.

Then in 2005, payments will be set at 106% of the average sales price, a calculation designed to reflect the true average price paid for the drugs. Physicians also will have the option of providing drugs supplied by a contractor as part of a yet-to-be-established competitive bidding program.

The new rule includes a congressionally mandated increase in practice expense payments to physicians -- primarily oncologists and hematologists -- who will be affected most by the payment reforms. The boost in practice expense reimbursement is sufficient to ensure access to chemotherapy services, and the drug payment changes ultimately will reduce costs, say congressional staff members who drafted the revisions.

Overall, oncologists' revenue from drug reimbursements will fall by $510 million in 2004, and practice expense payments will increase by the same amount, CMS estimated. But those numbers represent nationwide totals, and some physicians will do better than others next year.

"Some practices will have to cut back on the number of Medicare patients they can treat or stop treating Medicare patients altogether," said Margaret Tempero, MD, president of the American Society of Clinical Oncology. "For some patients, treatment will be delayed, if it can be done at all."

Bo Gamble, practice administrator for the Southeastern Medical Oncology Center in Goldsboro, N.C., said he expected the changes to produce a $100,000 shortfall this year from Medicare and another $150,000 if private insurers follow suit. That may derail plans to hire another physician. The center now has four doctors treating 145 patients a day, many of them indigent.

The center has a full-time patient advocate who works with drug companies to try to get the drugs given to indigent patients replaced at no cost. "But we don't turn anybody away no matter what," Gamble said.

The center has refinanced its debt, is considering new lab equipment that could help increase revenue and will not replace employees when they leave. The staff also might have to make choices about which treatment options are affordable.

"There will be occasions where, given two different regimens of therapy, if one is a money loser, we may not use it," Gamble said. That might help the center survive 2004, but he is unsure about 2005. The staff has been unable to get responses from drug manufacturers on what their average sales prices may be.

"We took it on the chin now, so if we can hold our ground and not take any more cuts, hopefully we'll survive," Gamble said.

Barbara McAneny, MD, an oncologist from Albuquerque, N.M., said she was considering whether she could continue to treat Medicare patients.

She has selected a number of patients with common diseases and will track the overhead costs associated with treating them in January and February. By April 1, the practice will decide whether it will have to send Medicare patients to hospital outpatient departments. Her practice already refers patients with no medigap coverage.

"Patients with cancer and no medigap are the poorest of the poor. They have no money, and they can't pay [the co-payment]," she said. "And I can't afford, when you have an expensive drug, to pay 20% of that as a donation."

Dr. McAneny said the outlook for 2005 is even worse. "We won't be treating people on Medicare in the office at that point," she predicted.

Oncologists are holding out hope that Congress may increase next year's payments. The drug payment provisions were among the most controversial portions of the Medicare debate last year. But Dr. McAneny believes that, even with action, the cuts might have a long-lasting impact.

"If little practices close, their oncology nurses aren't going to sit on a shelf waiting for people to say, 'We made a mistake,' " she said. "So particularly in the smaller practices, once you lose that infrastructure of being able to do outpatient therapy, it will take years to rebuild it."

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ADDITIONAL INFORMATION

Change in the works

New Medicare regulations implement payment reforms for Part B drugs provided as part of a physician visit. The rules will:

  • Reduce pay for most drugs to 85% of the average wholesale price in 2004.
  • Maintain pay for blood-clotting factors, vaccines and new products at 95% of the average wholesale price.
  • Cut pay further for drugs found to be extremely overpriced in 2004.
  • Change reimbursement to 106% of the average sales price or to a system of competitive bidding in 2005.
  • Increase practice expense pay to oncologists and hematologists by 32% in 2004 and 3% in 2005.

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