Doctors squeezed by pay cuts for Part B drugs

Washington -- Medicare's two-year-old reimbursement system for drugs administered in the doctor's office has saved the government money but has forced physicians to find ways to make up for lower payments, according to a recent Medicare Payment Advisory Commission report.

Since 2005, Medicare has paid for the relatively few drugs covered under Part B at 106% of their average sales prices. Before that, reimbursement for the cost of the drugs was based on average wholesale prices, which were often significantly higher than the amounts physicians paid to obtain them from manufacturers.

Doctors typically used the additional dollars gained under the old system to make up for historically low reimbursements for the separate cost of administering the drugs to patients.

Since the change to the new system, Medicare has spent less on chemotherapy and other Part B drugs. Even after accounting for increases in volume and transitions from older drugs to newer and more-expensive therapies, total spending on drugs alone dropped from $10.9 billion in 2004 to $10.1 billion in 2005, MedPAC said.

But MedPAC also noted that payments for administering the drugs increased when drug reimbursements dropped. Also, doctors have increased the volume of evaluation and management services, tests and other procedures they provide along with the medications. Despite spending less on drugs, Medicare in 2005 spent more on total charges to urologists, rheumatologists, infectious disease specialists and medical oncologists -- the four specialties surveyed by MedPAC.

Physicians have responded to decreased payments by making practice changes to reduce the cost of providing drugs in-office, MedPAC found. Some have reduced or realigned staff, and some oncology practices reported closing satellite offices to cut overhead. Certain larger practices hired pharmacists or other personnel to negotiate lower rates from drugmakers.

The changes have not been enough for practices to stay in the black on every drug purchase, MedPAC said.

"Most physicians have told us that they can still buy most drugs at the Medicare payment level, but all report that margins are slim and there are some drugs they cannot purchase at the payment rate," the report states.

Concerns about access, quality

Some doctors have begun directing patients to hospitals for their medications or are no longer offering certain drugs. However, the commission did not find evidence that access or the quality of care has suffered as a result.

But MedPAC conceded that measures for gauging quality in this area are inadequate. In addition, some indications point to physicians having significantly reduced the amount of Part B drugs that they prescribed since the payment changes began.

Urologists, for instance, provided 16% fewer Part B drugs to Medicare beneficiaries in 2005 than they did in 2004. MedPAC traced the reduction to fewer patients receiving hormone treatments for prostate cancer.

The commission did not conclude whether the hormone treatment change was attributable largely to physicians discouraged by the reduced payments or to unrelated medical reasons, such as heightened concerns about the therapy's risks. Nevertheless, the report notes that reimbursement for the hormone treatment most commonly billed by urologists dropped by nearly half the year that the decline in claims occurred.

The average sales price system is not the only factor here. Urologists report that they are hit twice on payments for the hormones because many Medicare carriers also have policies refusing to pay for the treatment when a less-expensive therapy is available. "Least-costly-alternative policies can lead to treatment choices based on cost, rather than what is most clinically appropriate," the American Assn. of Clinical Urologists said in a recent letter to MedPAC.

Physicians who want to avoid the entire process of finding the lowest prices for Part B drugs on their own can get all of their medications through Medicare's competitive acquisition program. Under CAP, doctors receive all their needed drugs from a vendor chosen by the government and only need to bill Medicare for administering the medications.

Doctors told MedPAC that they have avoided the program because of the requirement to keep special inventory lists of the drugs and to return shipments that the patient does not use right away.