The nation's hospitals are bracing for a potential 5.7% decrease in Medicare reimbursement for outpatient procedures, including chemotherapy, which is administered in outpatient settings about 90% of the time.
In another attempt to salvage the beleaguered Medicare system, the Health Care Financing Administration is proposing the cutbacks as part of the "Prospective Payment System for Hospital Outpatient Services."
The new payment system (see News, August 4) would go into effect next year and HCFA, which administers Medicare for the nation's elderly, hopes it will hold down Medicare expenditures by 2002 in compliance with the 1997 Balanced Budget Act. Between 1996 and 2007, health care spending in the United States is expected to swell from $1 trillion to $2.1 trillion.
This latest effort to curb Medicare spending is a sign that "we have limited resources for unlimited needs," observed Leonard M. Fleck, Ph.D., professor of philosophy and medical ethics at Michigan State University, East Lansing, and former member of the Clinton Task Force on Health Care Reform.
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At issue is the way the payment system would group chemotherapeutic drugs and procedures into ambulatory payment classifications for reimbursement, rather than basing reimbursement on the cost of individual outpatient procedures. Cancer treatment drugs are classified in the new method under four ambulatory payment classifications, while chemotherapy administration is divided into three categories.
"Hospitals administering outpatient chemotherapy will go out of business" if the proposed Medicare rule is enacted, said Lee E. Mortenson, executive director, Association of Community Cancer Centers, Rockville, Md., whose organization represents 550 tertiary and community care hospitals and 35 group practices.
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Deborah Williams, associate director in the policy office of the American Hospital Association, agreed. "We have serious concerns about the proposal's effect on cancer hospitals," she said, adding that the "entire coding and structure needs to be revised completely."
By bundling services and procedures, HCFA did not include an ambulatory payment classification exclusively for supportive care drugs. According to Mortenson, that omission means HCFA's estimated 5.7% decrease to hospitals in Medicare payments is "just the tip of the iceberg." Supportive care drugs, he said, make up a third to a half of what hospitals spend on chemotherapy, and were not figured into HCFA's calculations. The result: these costs must be coded together with facility fees, supplies, chemotherapy administration, blood products, and outpatient visits.
Mortenson also pointed out that the drug data used to set ambulatory payment classifications were old, in some cases dating back to the mid-1990s, before several treatment and supportive drugs now used were available. This means recently patented agents are grouped with older generic cancer drugs, which cost far less.
Responding to such criticism, HCFA has noted that the Balanced Budget Act requires the establishment of a classification system for outpatient services covered by Medicare. According to a HCFA report, this grouping of procedures "is based on two premises: the procedures within each group must be similar clinically, and [they] must be similar in terms of resource costs."
On June 30, HCFA published revisions to the proposed rule that "corrected numerical values" used in the September document. While reimbursement figures were recalculated using data collected as recently as 1996, chemotherapy drug categories remain unchanged.
Based on an impact assessment conducted by ACCC and a consulting firm, Mortenson concluded that hospitals may face between "a 30% to 50% hit on chemotherapy, supportive care drugs, and chemotherapy administration."
Furthermore, as of 1996, more than 24 chemotherapy drugs have received new treatment indications after their marketplace debuts, according to ACCC research. Given that ambulatory payment classifications have not caught up with these developments, some drugs are not recognized by HCFA for all cancers they can treat. This has led some observers to conclude that there would be a disincentive for clinicians to prescribe these costlier drugs to their Medicare patients, despite the drugs' promise.
For physicians like Roger Lyons, M.D., a hematologist-oncologist in San Antonio, Tex., the ambulatory payment classifications put those who treat cancer patients in an awkward situation. "We are obligated to use expensive drugs to help our patients," said Lyons, whose practice is made up primarily of Medicare patients, because for many drugs, "there is simply no competition."
Frustrated by what is perceived as HCFA encroaching on the practice of medicine, many oncologists including Lyons have turned to professional organizations like the American Society of Clinical Oncology for help.
Laurie Lamar, a reimbursement specialist in ASCO's department of public policy said the group's members are wary of what could happen next. "It is feared that as an indirect result of the HCFA proposal [on hospitals]," Lamar said, "private insurers will not only follow HCFA's lead, but take the prospective payment system a step further by implementing a [similar] system for physician office procedures."
ASCO recommended that HCFA either keep the current payment system or use "the physician office payment system . . . for all chemotherapy-related drugs, including supportive [care] drugs." Under this system, Medicare pays physicians 80% of the cost, and the physicians in turn bill the patient for the remaining 20%.
Green Bill
Some organizations have opted to enlist the help of lawmakers in fighting the proposed Medicare rule.
After he was contacted by the Center for Patient Advocacy in McLean, Va., U.S. Rep. Gene Green (D-Tex.) introduced a bill still awaiting discussion on the House floor that would "exclude cancer treatment services from the prospective payment system for hospital outpatient department services under the Medicare program."
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For Mortenson, HCFA's ambulatory payment classifications would give Medicare patients with cancer a "false promise." Ironically, he said, "we pay for cancer research, but we won't pay for patients to receive its positive results."
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