Oncology care costs continueto be a target in federal budget and Medicare debates

Significant policy and practice challenges to the oncology communitywill likely occur this year as the U.S. Congress wrestles with theever-deepening federal deficit and soaring health care costs. Medicarespending—bearing a large burden of the ever-rising costcurve—is under intense scrutiny by lawmakers, many of whomview the federal program as a prime target for budget cuts.

Oncology care costs, in particular, continue to be front and center indiscussions about federal spending cuts.

“Change is coming, and if oncologists are not part of thesolution, change will be forced upon us,” said ASCO ImmediatePast President Sandra M. Swain, MD, FACP. “We face a uniqueopportunity at this moment in our profession’s history toshape the future of Medicare, reward high-quality care, and stemsoaring health care costs—if we face and address the toughrealities before us.”

Howwe got here
The need to change the system for reimbursing Medicare providers isoccurring against the backdrop of an unsustainable national debt,nearing $17 trillion and growing at a rate of $3.83 billion per day.Driving this trend are health care costs that have increased at agreater rate than the economy’s growth as a whole for 31 ofthe past 40 years. Medicare spending, specifically, is a majorcontributing factor in deficit projections. Although cancer care costsrepresent just 5% of total health care costs, these expenses are thefastest growing, rising 15% to 18% annually.

In addition to an aging U.S. population at greater risk for developingcancer (more than 60% of malignancies occur in Medicare beneficiaries),new health care technologies, oncology drugs, and increases inintensive services are contributing to rising costs. Of the top 10Medicare physician-administered drug expenditures, for example, eightare for cancer treatment.

For the most part, potential savings will come on the backs of healthcare providers. However, payers and providers are not the only ones whobear the burden of rising costs: costs are being passed on to patientsthrough multiple means such as increasing premiums, deductibles,co-pays, co-insurance, prior authorizations, and tiered formularies.The cost of cancer diagnosis and treatment, even for patients withinsurance, can lead to treatment delays, noncompliance, exhaustion ofsavings, and personal bankruptcy. In fact, medical expenses are theleading cause of personal bankruptcy.

The issue of physician payment reform currently is a high priority onCapitol Hill, with significant potential for Congressional action torepeal the long-criticized and deeply flawed sustainable growth rate(SGR) formula. Policymakers have also focused attention on chemotherapyreimbursement, with multiple proposals for modifying or reducingpayments under the current average sales price (ASP) plus 6% formula.(The sequester cuts, which started on April 1, 2013, effectivelyreduced this formula to ASP plus 4.3%.) Congress has called uponphysicians to assume a leadership role in suggesting innovative paymentmodels, signaling high interest in payment for quality, efficientresource utilization, and use of prospective or otherwise fixedpayments for specified care.

“There has never been a more important time for individualoncologists to have their voices heard,” Dr. Swain said.“The first step is to become informed and then to getinvolved.”

Sustainablegrowth rate: An unsustainable formula
Amid the many federal budget issues challenging medicine today, none isthornier than the SGR formula which perennially threatens Medicarepatients’ access to critical health care and the viability ofphysician practices across the United States. In oncology, theturbulence and uncertainty caused by this issue has been acute.

Congress established the SGR formula in an effort to impose fiscaldiscipline and control rising costs in the federal health careinsurance program that covers approximately 40 million older Americansand eight million younger people with disabilities. This unique systemof determining physician reimbursement rates, however, has not achievedthe desired result, due largely to causes beyond health careproviders’ control—including advances in andavailability of life-saving technologies and the increasing costs ofdrugs.

With the latest “SGR patch,” which delayed for oneyear the scheduled 26.5% cut to Medicare physician payments as part ofthe American Taxpayer Relief Act of 2012, there is a growingrecognition that this system is broken and that corrective action mustbe taken to ensure Medicare’s future solvency.

“The SGR formula poses an unacceptable threat to patientswith cancer and the doctors who care for them,” Dr. Swainsaid. “Doctors cannot continue to ride this payment rollercoaster, which only serves to undermine patients’ confidencein Medicare when they should be focusing on getting the best carepossible.”

The annual last-minute Congressional patches have only worsened thebudget climate, increasing the federal deficit and injecting growinginstability into oncology practice and the larger practice environmentin which new Medicare patients often have difficulty securing physicianappointments. Additionally, for more than a decade, average paymentrates under the SGR have remained stagnant and today are barely higherthan 2001 levels.

“This vicious cycle that lands back on the nation’sbooks with compounding interest year after year must end,”said Jeffery C. Ward, MD, Immediate Past Chair of ASCO’sClinical Practice Committee. “We desperately need atransitional framework that eliminates the SGR and introduces a morerational, functional, and sustainable payment approach that providesstability and predictability for patients with cancer and theirdoctors. It’s time for Congress and the [presidential]administration to muster the political willto fix it.”

Calling for a phased approach, in April, ASCO provided comments on ajoint SGR reform proposal circulated by the House Ways and Means andEnergy and Commerce Committees.

Reimbursementof physician-administered drugs
Prior to the Medicare Modernization Act (MMA) of 2003, Medicarepayments for drugs administered in physicians’ offices werebased on the drug’s average wholesale price (AWP). Outof concern that Medicare was over-reimbursing practices for drugs, theMMA changed payments to 106% of the average sales price (ASP+6) fordrugs, which remains the current system for reimbursing physicians foroncology drugs—commonly referred to as “buy andbill.” The additional 6% was designed to absorb the drughandling, inventory, and overhead costs.

Medicare has largely failed to recognize or adequately compensatepatient-care planning, care coordination, andnon–face-to-face work. Most injectable oncology drugs arecharacterized as “physician-administered drugs” andare reimbursed under the medicalbenefit—as opposed to the pharmacy benefit—in manyinsurance plans. Under Medicare, these drugs are also known as“Part B” drugs, as they are covered by the MedicarePart B benefit, which pays for certain doctors’ services,outpatient care, medical supplies, and preventive services.

Oncology practices have been able to subsidize these and other practiceoperating expenses with margins made available as a result ofbuy-and-bill revenue. However, even with this margin, many practicesare unable to negotiate favorable terms for purchased drugs, payingmore than they are reimbursed by Medicare. This situation, referred toas “underwater drugs,” is occurring across practicesettings. A growing number of practices are finding they cannot affordthe substantial cash outlay this system requires.

Although it has been reported that up to 65% of an oncologypractice’s gross (not net) revenue is derived from thisbuy-and-bill system, chemotherapy also represents the most significantcost for a typical practice. Policymakers, however, tend to focus onthe 65% figure instead of the 6% margins, viewing the ASP+6 formula asa potential source for further budget savings. Many providers believethat a precipitous elimination of the buy-and-bill system—andthe subsidy it provides to patient services—would effectivelyshutter their practices. Remaining practices would have to stopproviding otherwise-unreimbursed services now offered to patients(e.g., comprehensive end-of-life counseling, nutritional counseling,and social work services).

“The current system puts a target on the back of medicaloncology, but the method under which physicians are reimbursed shouldnot be replaced without a concurrent, workable policychange,” said Dr. Ward. “Policies need to bepursued that move resources from drugs into patient services, but in away that adequately covers high-quality patient care.”

Chemotherapy drugs comprise the largest single expense for mostcommunity oncology practices. These costs include purchasing the drugs,special storage and inventory costs, safe handling, and specializedstaff to mix and administer the drugs as well as monitor the patientduring treatment. It has been estimated that Medicare pays only about70% of the total costs associated with administering chemotherapy.

“Oncology is different from other specialties in that manycancer treatments are administered in a physician’s office,yet oncologists play absolutely no role in setting the price ofdrugs,” said Dr. Ward. “Our practices are left toabsorb the high cost of drugs and struggle with a reimbursement systemthat does not recognize actual costs. ASP+6 is a failed businessmodel.”

Payment options: A physician-driven, quality-based solution
The current fee-for-service system (whereby physicians bill Medicarefor each specific service or item provided) is largely viewed by policyleadersand health care providers alike as unsustainable; any new reimbursementsystem will likely move towardone which rewards providers forhigh-quality and efficient resource use, and/or a prospective paymentapproach in which set payments will be provided in advance tophysicians for delivering a certain amount of services.

Under Medicare’s current system, oncologists are reimbursedfor:

• “evaluation andmanagement”(E&M) services whenseeing a patient for a visit;
• “chemotherapyadministration” for giving patientschemotherapy drugs or cancer supportive care drugs in thephysician’s office; and
• drugs provided in thephysician’s office.

ASCO, lawmakers, and administration health care officials are currentlyconsidering a range of payment optionsas alternatives to the current fee-for-service system. Options includebundled payments, episode-of-care payments, care coordination andchemotherapy management fees, patient-centered medical homes, andclinical pathways. Many of these payment approaches have existed foryears, used by different medical specialties and tested by differenthealth care organizations. Hospitals have long been paid under abundled system, for example, through the Diagnosis Related Group/DRGsystem; renal dialysis is also reimbursed through a bundle.

Under these alternative payment options, the incentive changes fromvolume-driven (providers get paid more for more patient treatment) tobudget-driven (providers get paid a lump sum, no matter how manyservices are provided). With this alternative approach, however,concerns rise over underutilization, which could be addressed through astrong quality reporting system that monitors and measures quality andensures that patients receive appropriate, evidence-base care for theirconditions.

ASCO asserts that any new payment model should be based on key tenets:

• Physicians play a leadershiprole in development and testing
• A reasonable transitionperiod protects patients and practices fromharmful disruption
• SGR is no longer the basisfor determining Medicare payment tophysicians
• Incentives supportachievable improvements in patient outcomes,quality, value, and efficiency
• The system fosters care thatis physician-defined and clinicallymeaningful for patients
• Medicare facilitateshigh-quality care for its beneficiaries withoutadding to the national deficit

Emerging science holds great promise for new and more effectivetherapies, but cancer is still an extremely complex and costlycollection of diseases. It occurs largely in our most vulnerablecitizens—elderly individuals. ASCO firmly believes that newpayment models for oncology must be tested to avoid unintendedconsequences. Advancing untested models of care could jeopardize notonly quality and access to care, but further erode the increasinglyfragile system that delivers oncology care today. Demonstrations ofpromising payment systems will allow for time to understand theirimpact and consequences.

“Despite a sense of urgency in Congress to do somethingquickly, [ASCO leaders] strongly believe that any changes to thecurrent reimbursement system must be phased in gradually,”said Dr. Ward. “We must identifyand shape alternative paymentmodels that are viable from an oncology perspective. Furthermore,physician practices of every size and specialty must be supported andencouraged to develop the needed infrastructure to be able to adopt themost appropriate model for their patients and their practice.”

Qualityin oncology care
Most private and public payment systems in the United States nowemphasize quantity over quality by reimbursing providers for individualprocedures and tests—another factor drivingrising health care costs—rather thanpaying a flat rate or reimbursing based on quality of care or evenpatient outcomes.

New payment models must foster improvements in the quality of patientcare and reductions in the rate of growth in costs. According to arecent Institute of Medicine report, newpayment models must include measurements of quality performanceand provide incentives that reward high-value care.

Health care payers, including Medicare, are moving in this direction,demanding greater accountability for costs and collecting data on howcosts relate to quality of patient care, through such programs as thePhysician Quality Reporting System (PQRS) and the new and evolving“value-based modifier” payment that will beadministered by the Centers for Medicare & Medicaid Services(CMS). The ultimate desired outcomes for effective quality reportingsystems will be the avoidance of suboptimal treatments, the eliminationof unnecessary testing, and decreases in cancer treatment costs throughreductions in drug expenditures, emergency department services, andunscheduled hospital admissions.

Congress took a critical first step toward a more robust qualitymonitoring system in cancer by including a provision in the AmericanTaxpayer Relief Act of 2012 (the so-called “fiscalcliff” deal) that allows physicians to satisfyfederal quality reporting requirements through clinical data registriesapproved by the U.S. Department of Health and Human Services (HHS).

ASCO is working closely with HHS to provide input into the requirementsfor qualified clinical data registries, which may includeASCO’s Quality Oncology Practice Initiative (QOPI®;qopi.asco.org), an oncologist-led, practice-based quality improvementinitiative that promotes excellence in cancer care based on the latestscientific evidence.

“Any sustainable payment system must reward effective andaccountable health care for our patients,” Dr. Swain said.“We believe that QOPI provides an excellent framework fordemonstrating high-value, high-quality care for the people with cancerwe treat.”

ASCO was instrumental in achieving the clinical data registriesprovision, building on sustained efforts to educate Congress about theneed to connect quality measurement to physician payment reform.

Reformis coming
As possible reimbursement alternatives are considered throughout themedical community, one thing remains clear: Medicare payment reform iscoming. In his 2013 State of the Union Address, President Barack Obamatargeted Medicare reimbursement for cost savings and signaled a shiftaway from fee-for-service toward a system that rewards quality.Furthermore, President Obama’s proposed budget, released inApril, recommended an even steeper cut to the drug reimbursementformula than that currently being absorbed by oncology practices fromsequestration.

ASCO is examining Medicare payment models to determine how each mightbe implemented within diverse oncology practice settings and whetherthese payment alternatives are able to support delivery of high-qualitycancer care. Before pursuing or suggesting any new model, its fullimpact on the oncology community and patients with cancer must beunderstood.

“Cancer care occurs across a wide range of practice settingsand communities,” said Dr. Swain. “Every placewhere patients with cancer seek their care faces a unique set ofchallenges and opportunities. We must take the time to understand howthe different modelsaffect all the patients they serve.”

ASCO:A voice for the oncology community

For the past several years, ASCO has been working with Congressionallawmakers, White House administration officials, and others in thecancer community to improve the Medicare reimbursement system so thatevidence-based cancer care is available to all patients. Stepping upadvocacy efforts in 2013, ASCO is devoting considerable resources tohelp shape future reimbursement proposals.

Advocacy on Capitol Hill. During 2012, ASCO provided Congressionaltestimony and held numerous meetings with key Congressional lawmakersand their staffs to convey the importance of oncologist input intopayment reform options. Over the coming year, ASCO will intensify itsoutreach to Congress and enlist the support of ASCO members toparticipate in advocacy efforts.

Communications with ASCO members. In 2013, ASCO is ramping up membereducation and outreach activities (including a town hall forum at theAnnual Meeting), building on 2012 efforts that included focus groups,presentations to state oncology societies, and continuous electronicupdates to members.

Consensus-building with other groups. ASCO has been collaborating withother medical societies in calling on Congress to restructure howMedicare pays for health care and to reverse funding cuts. In 2013,ASCO will continue to seek input and consensus on any payment optionsthe Society may decide to support.

ASCO volunteer leadership engagement. With guidance from the ASCO Boardof Directors, the Society’s Clinical Practice Committee (CPC)has been playing a critical role in ASCO’s payment reformefforts. In consultation with leading experts, the CPC has beenanalyzing models and testing the feasibility of different paymentoptions to determine their viability. ASCO’s GovernmentRelations Committee has also played a key role in educating Members ofCongress on the need to ensure that individual oncology practices willbe able to continue administering high-quality, high-value patientcare. Other ASCO volunteers from the Quality of Care Committee, HealthDisparitiesCommittee, and the Cost of Cancer Care Task Force havesignificantly contributed to this effort.

“In addition to ensuring that every patient with cancer hasaccess to high-quality, high-value, evidence-based care, we want tomake sure that oncologists are prepared and in the best possibleposition for the changes that are coming,” said Dr. Swain.“It’s one of ASCO’s highestpriorities.”

Thisarticle is adapted from ASCO’s new four-part series onphysician payment reform. For more information, including the completeseries and a glossary of terms, visit asco.org/paymentreform.

By Mary Gleason Rappaport and Amanda Narod, ASCO Policy Communications