In March, the Centers for Medicare & Medicaid Services (CMS) announced a proposed rule to test new models to improve Medicare Part B physician reimbursements for prescription drugs.1 According to CMS, the rule will test different physician incentives that would, in theory, encourage the prescription of the most effective drugs and reward positive patient outcomes.
Medicare Part B covers prescription drugs that are administered in a physician’s office or hospital outpatient department. Under the current system, physicians are reimbursed at a rate of 106 percent of the average sales price (ASP) of a drug – 100 percent of the ASP plus a 6 percent add-on.
The proposed rule would change this payment to 102.5 percent of the ASP plus a flat fee payment of $16.80 per drug per day – an amount CMS calculated to be budget neutral in aggregate – to see if this reimbursement rate changes prescribing behavior and leads to improved quality and value.
“This change in Medicare Part B is being applied in a desperate attempt by Medicare to address the issue of cost without addressing the issue of the cost of pharmaceuticals,” Joseph Alvarnas, MD, director of value-based analytics at City of Hope in Duarte, California, told ASH Clinical News. “Unfortunately, it is an instance where the solution does not address the actual problem, but addresses the part of the problem that is easiest to touch upon.”
Enter the Testing Phase
The proposed policy, which will run for five years, mandates participation and will be conducted in two phases.
The first phase, beginning in fall 2016, will randomly assign each of the 7,000 “primary-care service areas,” which are clusters of zip codes based on patterns of Medicare Part B primary-care services, into two groups.2 One group will continue to receive payment under the existing policy; the other will be reimbursed at the new rate.
In the second phase, which will begin in 2017, CMS will test several new payment policies that could deviate from the current ASP policy. To evaluate these new tools, the groups tested in phase one will be further sub-divided into four groups: the 106 percent ASP group with or without value-based purchasing tools, and the 102.5 percent ASP plus $16.80 group with or without value-based purchasing tools. There are six alternative approaches being proposed:
- Improving incentives for best clinical care
- Discounting or eliminating patient cost-sharing
- Providing feedback on prescribing patterns and online decision support tools
- Indications-based pricing
- Reference pricing
- Risk-sharing agreements based on outcomes
“The tools that are being proposed under phase two – those designed to ensure that patients are receiving the best, most effective care and outcomes – don’t exist yet,” Dr. Alvarnas said. “They are proposing the wholesale implementation of a system, and the second part of the deployment is essentially predicated upon magic.”
ASH recently posted an online analysis about this “radical experiment,” pointing out that this new system will reimburse for inexpensive drugs that cost less than $480 at a higher rate and payment than expensive drugs.3 See the TABLE for an illustrative example of how this new proposed rule would affect payments.2
“Because hematologists are more likely to provide expensive infused drugs than many other specialties, the overall effect of such a proposal would be a reduction in payments,” according to the analysis on the ASH website. “For physicians that prescribe many low-cost drugs, such as primary-care physicians, overall payments would increase.”
Dr. Alvarnas is concerned that this model has the potential to subvert good clinical judgment.
“What we had before was a system of reimbursement that creates economic incentives, such that physicians can reasonably deliver medications that they feel are most appropriate to the patient,” Dr. Alvarnas said. For example, if a physician has the choice to treat a patient with acute myeloid leukemia with a very old, relatively inexpensive drug or a medication that is very expensive to stock, the system reduces the incentives for giving the more expensive drug, even though it may be preferable in terms of clinical outcomes.
Hematologists Weigh In
“This is a major policy shift for Medicare,” the analysis for ASH continued. “Reducing the payment made for infused drugs is likely to have a significant effect on the viability of hematology practices, particularly those that remain in a private practice environment.”
Dr. Alvarnas faults the new proposed rule for overlooking the work that hematologists and oncologists have been doing in this arena. “Across the United States there are many creative cancer-care and hematology-care delivery systems that have really innovative physicians,” Dr. Alvarnas said. “What CMS has done here is bypass a wealth of expertise and innovation and come up with a global system that turns a blind eye to the potential for a smart solution in this country.”
In an era where hematologists and oncologists must consider biologic, genetic, genomic, and proteomic data in the treatment of very rare diseases, current billing codes also fail to capture the complexity of managing these patients, Dr. Alvarnas added. “I worry about patients suffering as a result of lack of due diligence before rolling out this system.”
CMS is accepting public comment on the proposed rule through May 9, 2016.
- Centers for Medicare & Medicaid Services. CMS proposes to test new Medicare Part B prescription drug models to improve quality of care and deliver better value for Medicare beneficiaries. Accessed April 11, 2016 from https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-03-08.html.
- Centers for Medicare & Medicaid Services. Fact Sheet: CMS proposes to test new Medicare Part B prescription drug models to improve quality of care and deliver better value for Medicare beneficiaries. Accessed April 11, 2016 from https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-03-08.html.
- American Society of Hematology. Medicare Proposes Radical Experiment in Drug Payment Policy. Accessed April 11, 2016 from http://www.hematology.org/Advocacy/Policy-News/2016/5197.aspx.
|TABLE. How the Proposed Medicare Part B Drug Payment Model Will Change Drug Payments|
|ASP per Drug||Current Add On Payment Rate (6% ASP)||Proposed Add On Payment Rate (2.5% ASP + $16.80)||Current Add On Payment Rate as a Percentage of ASP||Proposed Add On Payment Rate as a Percentage of ASP|
|ASP = average sales price
Source: CMS Fact Sheet, March 8, 2016.