Drug pay cut could disrupt cancer care

A projected 15% average reduction in Medicare cancer drug reimbursement rates next year is a larger drop than doctors expected.

By David Glendinning — Posted Oct. 18, 2004

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Washington -- Therese Mulvey, MD, worries that she'll have to make tough choices about how her patients will get their cancer therapy.

Absent congressional action before year's end to shore up Medicare payments for some of the most widely prescribed outpatient cancer drugs, Dr. Mulvey's large oncology practice in Dorchester and Quincy, Mass., could begin shifting some patients to local hospitals for treatment, she predicted.

Dr. Mulvey isn't the only one facing hard decisions. Changes starting next year in Medicare reimbursement for drugs administered in doctors' offices might make it financially unfeasible for oncologists nationwide to continue providing chemotherapy in that setting, said the American Society of Clinical Oncology. A major shift in cancer care from the office, where 80% of cancer patients receive treatment, to the hospital could be in the making.

Physicians considering such a move worry about an accompanying host of patient-safety and quality-of-care issues, Dr. Mulvey said.

"A lot of the safety checks when you administer chemotherapy are done by the nurses," she explained. "If the nurses are not accustomed to the drugs and cannot anticipate side effects before they occur, or don't know what side effects to even look for, that concerns me."

Medicare beneficiaries who must begin forgoing the clinic setting for their care might seek treatment at hospitals that are overwhelmed by the influx of unfamiliar types of patients, she predicted. These facilities' inexperience with cancer cases could lead to delays in care and added administrative burdens for everyone involved.

Dr. Mulvey stressed that oncologists and hospitals have pledged to preserve adequate access to care no matter what Medicare pays for drugs. Some practices would face an easier transition than others. Her practice, for example, is affiliated with two local community hospitals that already dispense chemotherapy and a third that has committed to building up the infrastructure to do so.

Nevertheless, hospitals are wary about the future of Medicare payments and the prospect of rate reductions on the inpatient side starting in 2006, Dr. Mulvey said. Absorbing an unprecedented number of cancer patients could be feasible in the short run but could prove problematic if overall margins start shrinking.

Physician concerns about the adequacy of next year's Medicare Part B payments for cancer drugs have been brewing for more than a year, but a recent analysis from ASCO demonstrates that practices could be in line for an even bigger hit than previously thought.

The group commissioned a survey to determine what nearly 100 community oncology clinics paid for some of the top cancer drugs in the first quarter of 2004, using the results to project what doctors likely will pay in the first quarter of 2005. Comparing the results to the new Medicare reimbursement scheme ushered in by last year's program reforms and laid out in a proposed physician payment rule released in July, the society found that a significant number of the clinics will be unable to cover their costs for several of the drugs.

Moreover, ASCO notes, the responses indicate that the total reduction in Medicare drug payments will average 15% in 2005, not 8%, as projected by the Centers for Medicare & Medicaid Services.

"These data provide compelling nationwide and local insight as to the impact of the impending Medicare cuts on the U.S. community cancer care system," said Joseph Bailes, MD, a Houston oncologist.

The report exacerbates concern over the payment change. Doctors had been reimbursed based on the average wholesale price of the drugs. These rates were often well above actual costs, but physicians relied on the overpayments to offset underpayment for administering the medications.

Starting in January, physicians will be paid based on the typically lower average sales prices. Meanwhile, a temporary increase in practice expense payments to make up for the drug reimbursement cut will be scaled back significantly.

As a result, ASCO is calling for the establishment of a cancer drug payment floor in 2005 and 2006 equal to current Medicare rates, after which impact studies required by the reform act will determine whether the new pricing system is adequate.

Until then, the oncology lobby contends, physicians will face difficulty in maintaining their current level of care for seniors and in enrolling patients in clinical cancer trials.

The American Medical Association suggests in its comments on the proposed payment rule that CMS has hamstrung doctors by releasing only a partial list of Part B rates for physician-administered drugs.

"As it now stands, physicians will have only one short month to get ready for the large-scale payment and revenue changes that will be imposed in the final rule issued on or about Nov. 1," the AMA states. "They will have had no opportunity to offer meaningful comments on either the proposed [average sales prices] or the proposed drug administration prices. It would not be surprising if many decide not to initiate office-based drugs for new Medicare patients since, once begun, it would be difficult to withdraw this service."

Help on the way?

Oncologists are holding out hope for the 108th Congress to approve the two-year floor on Medicare cancer drug payments before adjourning. Rep. Charles Norwood, DDS (R, Ga.), and a bipartisan group of 22 cosponsors have introduced a bill that would codify the ASCO request.

Congressional aides were predicting at press time that House leaders would be unable to bring Dr. Norwood's bill to the floor before a planned recess aimed at allowing members to finish campaigning. In addition, they said, a focus on appropriations legislation during any lame-duck session will make it difficult for measures other than spending bills to receive a vote in both chambers.

Meanwhile, CMS Administrator Mark McClellan, MD, PhD, intimated that a nonlegislative solution could be coming from the agency via the final physician payment rule or separate guidance.

The ASCO survey "showed a lot of variation in what physicians' offices are paying for the drugs, and the results are not clearly related to the practices being low-volume or high-volume," Dr. McClellan said. "We are looking to see what else we can do to identify lower-priced drugs that they can purchase."

Dr. Mulvey said the cancer care community would welcome a move to reduce this variation. "The pricing of pharmaceutical drugs is an arcane and convoluted system, at best," she said. "I would very much love to see some sort of homogeneity or smoothing out of the system."

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Coming up short

Projected Medicare reimbursement in 2005 for some cancer drugs will not even be enough to cover many oncologists' costs. Here is the percentage of practices anticipated to pay more for specific medications than Medicare reimburses them.

Medication Practices that
may pay more
Epoetin 73%
Pamidronate 70%
Irinotecan 56%
Gemcitabine 53%
Trastuzumab 36%
Docataxel 32%
Carboplatin 31%
Vinorelbine 23%
Topotecan 20%
Darbepoetin 17%
Rh o(D) immune globulin 16%
Zoledronic acid 6%
Pegfilgrastim 6%
Paclitaxel 5%
Rituximab 3%
Filgrastim 3%

Source: American Society of Clinical Oncology survey of 93 cancer care practices, September

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