Government

OIG: Medicare pays doctors enough for cancer drugs

Oncologists, however, say continuing payment problems force them to recover their costs through private-pay patients.

By David Glendinning — Posted Sept. 17, 2007

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At least on paper, Medicare appears to pay most doctors enough to buy chemotherapy drugs and other physician-administered cancer medications for their patients, according to an August report by the Dept. of Health and Human Services Office of Inspector General. Whether the program is paying them enough to administer the care, however, is far less clear, OIG said.

Investigators compared what 12 practices paid for cancer drugs from April through June 2005 with the Medicare reimbursement they received for the medication. OIG found that nine out of the 12 were able to buy more than half their drugs at prices at or below what Medicare paid.

At the beginning of 2005, the Centers for Medicare & Medicaid Services started paying for physician-administered drugs according to a new formula. Before then, reimbursements were based on average wholesale prices, a system that lawmakers and the Bush administration said was leading to large overpayments to physicians for drug purchases.

Medicare now pays 106% of each drug's average sales price, a typically lower figure determined by data provided to CMS by drug manufacturers.

The program also phased in a new system to pay doctors for administering Part B drugs, which is handled separately from reimbursement for medication costs. Physicians had complained that the rates were much too low, and the reforms generally boosted the amount paid for drug administration.

But OIG was unable to determine how well the new administrative payments are covering practice costs. Only one of the 12 practices included on its Medicare drug claims the optional procedural codes that estimated whether the rates were high enough to pay for the time and resources required to inject the cancer drugs. The OIG did not evaluate the adequacy of this tracking procedure or the sufficiency of the administrative reimbursement for the practice.

"Federal regulations and guidance do not require physician practices to track the costs of resources used to provide drug administration services," the OIG report states. "However, without procedures for tracking these costs by procedure code, the 11 practices could not determine whether Medicare reimbursement for each code was sufficient to cover the costs of providing the services."

Oncologists complained that the OIG study is outdated and not nearly as far reaching as it should have been.

Looking at statistics for only 12 practices and about 15 cancer drugs fails to give an adequate picture of the state of medical oncology under Medicare and the financial stresses physicians face, said Frederick M. Schnell, MD, president of the Community Oncology Alliance. Moreover, the report covers costs from only the early part of 2005. Since then, more than 400 price adjustments to cancer treatments have occurred.

"To base future decisions on historical ... costs is simply absurd," Dr. Schnell said.

Coming up short

Oncologists are reporting that Medicare is still coming up short in terms of covering the costs of administering the drugs, despite the payment changes that boosted those rates. Even though the OIG and other independent oversight entities, such as the Government Accountability Office, say that Medicare is paying enough to purchase the drugs, physicians say the system often doesn't work as well as it appears on paper.

CMS expects that the additional 6% payment for cancer drugs and other Part B medications will be enough to cover storage, quality control and disposal costs, said Therese M. Mulvey, MD, an oncologist in Quincy, Mass. But this doesn't leave much wiggle room, because medications can be opened accidentally, expire or otherwise not end up going toward patient care, she said.

In addition, some drug purchases will end up being more expensive than what Medicare pays for them through the average sales price-based system. Dr. Mulvey's practice typically finds that it pays more than the program budgets for about five or six of the 50 to 80 medication types that it orders in a given month.

When inadequate administration payments are thrown into the mix, practices find that they are running negative margins for their entire Medicare business. Physicians report that cross-subsidization is still occurring as a result.

"The payments that we get from our private patients pay for our Medicare patients," Dr. Mulvey said. "Any practice that is honest about it will tell you the same thing."

The OIG in its report suggests the federal government would better be able to gauge how well Medicare pays for administrative costs if more practices included cost information on their Medicare claims. But this recommendation implies that sufficient procedure codes exist for practices to make such a complicated calculation in the first place, Dr. Schnell said.

"Clearly, these results speak volumes about the critical need for new codes for medical oncology in order that clinics may be properly reimbursed for their costs in connection with the care of cancer patients and the concomitant drug therapy, thereby allowing practices the ability to accurately track expenses versus reimbursements," he said.

Many administrative costs, such as pharmacy management, patient support services and nursing services, are not recognized by CMS as stand-alone reimbursable costs, he said.

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ADDITIONAL INFORMATION

But is it really enough?

The HHS Office of Inspector General determined how much 12 physician practices paid for 15 Medicare cancer drugs over three months in 2005. The OIG found that nine of them were able to cover the total cost of the purchases using Medicare payments for more than half of the selected drugs.

Practice Drugs purchased At/below Medicare rate
1 12 10 (83.33%)
2 6 5 (83.33%)
3 15 12 (80.00%)
4 14 11 (78.57%)
5 14 11 (78.57%)
6 9 7 (77.78%)
7 10 7 (70.00%)
8 13 9 (69.23%)
9 12 8 (66.67%)
10 6 3 (50.00%)
11 9 4 (44.44%)
12 9 4 (44.44%)

Source: HHS Office of Inspector General

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External links

"Review of Selected Physician Practices' Procedures for Tracking Drug Administration Costs and Ability to Purchase Cancer Drugs at or Below Medicare Reimbursement Rates," Dept. of Health and Human Services Office of Inspector General, in pdf (link)

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