Reimbursements for oncology practices have fallen sharply since 2003, and cash flow is becoming a major concern for community cancer clinics.
WASHINGTONReimbursements 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 servicesit'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.
This year, CMS initiated another voluntary demonstration project, which assesses different levels of evaluation and management (E&M) services. CMS estimates that the 2006 demonstration project will result in about $150 million in allowed charges for oncology services.
Nevertheless, oncologists are now often losing money on chemotherapy, Mr. Coplon said. "They overcorrected on the drugs and undercorrected on the services," he said. "The data are irrefutable."
A recent report by MedPAC provides data from which it can be deduced, Mr. Coplon said, that in the fourth quarter of last year, 25 of 39 drugs were under-reimbursed, based on the national average of ability of clinics to collect co-pays. According to the report, 34 of 39 drugs were under-reimbursed based on the ability to collect co-pays and other drug-related costs, Mr. Coplon said.
Reimbursements for specific chemotherapy regimens have fallen precipitately according to the MedPAC data, Mr. Coplon commented. For example, FOLFOX6 plus bevacizumab (Avastin) was reimbursed at 43.91% less than in 2004, trastuzumab (Herceptin) at 24.43% less, and paclitaxel with gemcitabine (Gemzar) at 26.96% less.
All of this means that profit margins are falling as well. At The West Clinic, Mr. Coplon noted, there are $4,000 regimens that net just $20 and $7,000 regimens that net $24. "Talking pure business," he said, "is that worth the risk? Does that reflect what we ought to be doing?" Some patients receiving such under-reimbursed regimens are now being sent to the hospital for their chemotherapy, he said.
Lower revenue translates into less working capital, with an 8% reduction in top line revenues resulting in a 32% reduction in working capital, Mr. Coplon said. This means less to spend on infrastructure, which is suffering. In addition, there are services that are not reimbursed at all, including pharmacy facilities, treatment planning, and supportive oncology, he said.
Looking ahead, the Connecticut Oncology Association's Dawn Holcombe agreed that cash flow would be a concern and that much needs to be done to boost reimbursements for professional services. Discussions with private payers and various pay-for-quality initiatives provide some basis for hope, she said, but community oncology practices will have to work aggressively to have their voices heard. "We have to elbow our way to the table," she said, "but there are still seats for us."
As oncology practices negotiate with payers for reimbursement for professional services, quality issues are going to be paramount. Pay-for-quality is now the major focus of many organizations dealing with medical reimbursement, Ms. Holcombe said, from CMS to the American Society of Clinical Oncology (ASCO) to the Community Oncology Alliance and Cancer Clinics of Excellence (a national network of community oncology practices for which Ms. Holcombe serves as vice president of payer relations and programs).
Pay-for-quality is physician and evidence driven, she emphasized, and will be an evolutionary process, with small steps essential at the beginning. For an individual practice, such steps include standardizing care and measuring outcomes to provide data to take to negotiations. Approaching a "reasonable payer" for a pilot project is a possible way to get started, she said.
"We need to know our own numbers. We have to start looking at ourselves from a whole new perspective," she said. That perspective includes an awareness of what comes under the term "disease management," she said. "Education, follow-up, phone access 24/7 . . . this is disease management; we've got to quantify it, we've got to package it."
As an example, Ms. Holcombe described a data collection program at a Michigan oncology practice that tracked the outcomes related to 320 calls from patients. Only three of those patients had to be hospitalized. "That's powerful data to give a payer," she said.
Other issues in negotiating with payers include the lack of a good Medicare model. Unfortunately, some private payers are beginning to follow Medicare's lead. "Our mantra should be 'Medicare changes are not ready for prime time,'" she said.
Another issue is distrust of oncologists among payers and concern about the allocation of scarce resources, she said. For example, oncology practices need to be prepared for insurers to question an expenditure of $25,000 for a month of cancer care that will extend life for just 30 days when, by comparison, $15,000 will obtain a cardiac stent for a college student who has a whole life ahead.
Nevertheless, there is some reason for optimism that reimbursement for professional services can be negotiated, Ms. Holcombe said. "I want to let you know that there are people out there who are going to be willing to work with us, but we have to step up to the plate and bring our information and our issues to the table . . . this is a huge window of opportunity," she said.