WASHINGTON—Reimbursements for oncology practices have fallen sharply since 2003, and cash flow is becoming a major concern for community cancer clinics, according to two leaders in community oncology. Drawing on recent data as well as their own experience, Steve M. Coplon, MHA, chief executive officer of The West Clinic, Memphis, Tennessee, and Dawn Holcombe, MBA, executive director of the Connecticut Oncology Association, discussed the impact of the Medicare Modernization Act (MMA) at the first annual meeting of the Community Oncology Alliance.

"We're at war," Mr. Coplon said. He cited a recent PricewaterhouseCoopers report that has projected a decrease in oncology reimbursements of $15.7 billion over the next 10 years. This is four times higher than the $4.2 billion Congress intended when it passed the MMA.

The aim of the MMA was to lower Medicare payments for chemotherapy by changing the way oncologists charged for drugs. Under the old system, physicians charged Medicare the average wholesale price (AWP) of the drug, which was normally higher than the actual price the physician paid. The excess payment covered the cost of administering the chemotherapy in the doctor's office. "AWP was deliberately designed by Congress and CMS [Centers for Medicare & Medicaid Services] to provide a cross-subsidy for admitted under-reimbursement for professional services—it's in writing," Mr. Coplon said.

But in the late 1990s, more expensive drugs and the increasing use of multiple chemotherapy agents caused a jump in reimbursements, amounting to a 267% increase over a 5-year period. The result was a series of hearing and reports and, eventually, the MMA of 2003.

Under the new law, reimbursement changes have been phased in. Oncology practices were reimbursed at 85% of the AWP in 2004, plus, to mitigate losses from steep cuts, CMS added $500 million of billable revenue to cover the shortfall in practice expenses.

In 2005, the Medicare reimbursement formula was permanently changed to the average sales price (ASP) plus 6%, with about $300 million of potential revenue made available through the chemotherapy demonstration project.

The demonstration project allowed oncologists to bill Medicare for assessing the symptoms of pain, fatigue, and nausea, replacing some of the revenue lost and providing CMS with data on quality of care.