Compare your costs with ASP and Medicare allowable

September 1, 2007

The price of oncology medications is skyrocketing, and reimbursement rates for these agents are often inadequate. This situation may be hurting your medical practice more than you realize. You need to determine what you are paying for your oncology drugs, as compared to the Average Sales Price (ASP) and to the Medicare allowable for these drugs.

The price of oncology medications is skyrocketing, and reimbursement rates for these agents are often inadequate. This situation may be hurting your medical practice more than you realize. You need to determine what you are paying for your oncology drugs, as compared to the Average Sales Price (ASP) and to the Medicare allowable for these drugs.

Why smaller practices are suffering

Within our client base, we are finding that several small oncology/hematology practices and solo practitioners are ending up in the red relative to their oncology drugs. Here are some of the factors influencing this situation:

• Smaller practices and solo practitioners don't have the purchasing power of larger practices. Therefore, they pay higher drug prices.

As an example, the average solo practitioner in the United States can typically purchase drugs at ASP plus 3%. This indicates that some entities are purchasing drugs below ASP.

• The Medicare allowable for these drugs is ASP plus 6%. Medicare's payment is 80% of the allowable. While this may seem to come out in your favor, many times it does not, and you end up paying for your patients' drugs.

• The drug cost that isn't covered by Medicare is covered by either secondary insurance or paid by the patient himself. Medicare estimates that 80% of patients have secondary insurance. Our experience at Neltner Billing shows otherwise. Your mix of Medicare patients will impact your collections.

Facts on Drug Costs

We have found within several solo practices:

• The cost of 25% of their oncology drugs exceeds the Medicare allowable (puts them in the red).

• The cost of 40% of their oncology drugs is less than the Medicare allowable but is greater than the ASP (can put them in the red).

• The cost of 35% of their drugs is below ASP. (Many older oncology drugs fall into this category.)

Compiling Data

Is ASP plus 6% a reasonable number for Medicare to be using relative to drug reimbursement? Is it enough to cover your time and resources for drug inventory management and waste disposal? Probably not. I would like to ask you to help us decide what the right number is by filling out the form below. (You can also go online at www.neltnerbilling.com/pdf/news5/ASP_table.pdf to print out the form.)

Using the table of common oncology drugs provided, please compare the Medicare allowable cost of each drug to the cost you are actually paying. We've left an empty column on the right side to enable you to enter your own practice information. Don't forget to apply rebates and discounts to your costs.

Please send us your completed table anonymously via fax to Neltner Billing at 859-363-4986.

Our goal is to compile data from several practices across the country and present this to Medicare in order to get a fair and realistic reimbursement for medical oncology and hematology.