An Experiment in Payments
On March 8, 2016 the Centers for Medicare & Medicaid (CMS) released a proposed rule which aims to test a payment design to reimburse for drugs covered under Medicare Part B.
Medicare Part B covers prescription drugs administered in a physician's office or hospital outpatient department.
Covered Part B drugs fall into three categories:
- Drugs furnished incident to a physician's service
- Drugs administered via a covered item of durable medical equipment
- Other drugs specified by statute, such as oral anti-emetics and certain oral cancer drugs
Currently, most Medicare Part B drugs are paid using the Average Sales Price (ASP) plus a statutorily mandated 6% add-on. According to CMS, this allegedly creates an incentive to prescribe more expensive drugs due to the higher payment amount.
Under the new model, starting in Phase I, Medicare Part B would pay the ASP plus an add-on of 2.5% and a flat fee of $16.80 per drug per day. Whether or not you are in a control group (ASP plus 6%) or in the ASP plus 2.5% (if that is where we end up) and a flat fee depends on your zip code and what Primary Care Service Area (PCSA") it falls into.
As proposed, the MECC will run for five years, with Phase II running the last three years. CMS proposes to introduce the new reimbursement program in select geographic areas in the fall of 2016. In Phase II, CMS will roll out drug programs with which they will test several other pricing methodologies.
Some of these tools are:
- Reference pricing
- Indication-based reference pricing
- Discounting or eliminating cost-sharing
- Decision support tools
- Outcome-based risk-sharing with pharmaceutical companies
10 Things You Need to Know
Now that you know the basics, here's some of the things Bobbi Buell, a nationally recognized expert in Oncology Reimbursement and our very own Principal for Provider Services & Reimbursement Information, speculates may be important in order to respond to the Proposed Rule by May 9, 2016. Keep in mind no one knows what this will look like in the Final Rule:
This Is Just a Proposal
The Proposed Rule is just that -- a proposal. According to Bobbi, “after thirty years of dealing with Medicare regulations, it is my experience that they up their aspirations in proposals in terms of cuts and/or infliction of pain”.
So, we might see ASP plus 3.0-3.5% in the Final Rule or, even more, interesting, CMS might fix the erroneous Prompt Pay discount as they mention it several times in this Proposal.
An Excuse to Cut Drug Pricing?
It seems like this demonstration is just an excuse to cut drug pricing. If you read all about Phase II, it sounds pretty vague and certainly not ready for 'prime time' by physicians and hospitals. While Phase II appears to be coming soon in the Transmittal, the Proposed Rule states that Phase II cannot commence any earlier than January 1, 2017. But, Phase I can extend throughout the life of the demonstration in various permutations. Hmmmm…
Don’t Expect This to Happen Before October
It’s unlikely we’ll see this before October. In the original transmittal, it seemed like CMS would be testing over the Summer and then implement Phase I in mid-Third Quarter. It appears that the soonest this would happen is October 1. That might be rough on hospitals, as their DRG rates and ICD-10 procedure code changes happen right then. Plus, we all will have new ICD-10 diagnosis codes on that date.
What You See Is Not What You Get
Sequestration kicks in for both drug payments---the ASP plus 2.5% and the $16.80 flat fee. You know the old expression--"what you see is what you get"? Not true in this case--the real rates are really and truly ASP plus .86% and $16.53. As you can see, the cut is most profound on the ASP rate; therefore, we do not want to give up that flat rate.
No Excuses (Unless You’re In The Big 11)
Almost nobody is excused. According to the proposal, Hospital Outpatient Departments are not excused, despite the title refers to Part B--hospital outpatient fees are reimbursed under Part B, but they are adjudicated by the Part A MAC (are you with me here?). Practices are not excused, even if you are on the the Oncology Care Model, Pioneer ACOs, or in Shared Savings Programs.
These Alternative Care Models may be excluded at some point, though. The proposal also mentions that small practices may be excluded, if there is a good case made for their not surviving drugs cuts--oh wait--didn't we show that already? Oh yeah, the eleven cancer hospitals are (as usual) exempt.
A Few Drug Exclusions
Some drugs are excluded, though. If the proposal is implemented, some drugs will not be involved in pricing changes. These include:
- Contractor-priced drugs, e.g. radio-pharmaceuticals and new drugs not on the NOC list
- Vaccines--flu shots, pneumococcal pneumonia, and Hepatitis B
- Drugs through Durable Medical Equipment
- Excluded (from the bundled rate) ESRD drugs
- Blood and Blood Products
- Products in shortage as listed by the FDA
- Maybe other products as listed by CMS quarterly
Say Hello To The Least Costly Alternative (a.k.a. Reference Pricing) Again
Some nasty old friends will be back in Phase II: Remember the Least Costly Alternative? Well, it is now called reference pricing. And, there may be differential pricing by drug by diagnosis, based upon 'effectiveness'. That is just crazy, but if it comes to pass, you had better code those drugs correctly--yikes!
Get Ready For Laborious Billing
Billing will be laborious. Oh yes, you might not know it, but, in the proposal on page 44, it clearly states that that CMS 'anticipates' you will have to bill a G-code to collect the flat per patient per drug fee. We do not know if there will be one G-code, a G-code for different types of drugs, or a new G-code for every drug. But, what is nuts is, if you have 4 drugs on a claim, you will have four (same or different) G-codes. That's the way it looks right now anyway.
Take A Look At The CAP Program
If you don't like it, how about the CAP Program? Just when Peter Bach comes out with an article on the massive amount of waste with Oncology and other specialty drugs (which he naturally blames on Single Dose vials, profit margins, the drug companies, and the usual suspects), CMS asks if maybe the CAP Program should be re-introduced--where waste is a real cost issue. For those of you using specialty pharmacies instead of "buying and billing", you might want to consider this option, rather than doing something that is (in my view) in conflict with Medicare regulations.
Run The Numbers
But, most importantly, to really know how this impacts your facility, you should run the numbers. ASCO has a model and COA has a model that you can find right here for a great price--free. Please contribute your numbers to your favorite organization for the common good, if you use one of these free models. One of our kind readers ran the numbers on the ASCO platform and they were not so terrible. Bear in mind that this is a five-physician group. Before sequestration, they made about $42,000 and, after the sequester, they lost about $24,000. This is not terrible--but remember--every practice is different and this totally depends upon what drugs you use.