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Payment Change Is Causing Shift in Where Some Seniors Get Pharmaceutical Treatment

By John Reichard, CQ HealthBeat Editor

OCTOBER 6, 2006 -- The Medicare Payment Advisory Commission (MedPAC) said Friday that a new Medicare payment system for drugs traditionally administered by doctors in their offices is in some cases causing them to refer patients elsewhere for treatment. The impact of the shift on the quality of care patients receive is unknown because of a lack of data on the issue, according to a commission study.

Under the 2003 Medicare overhaul law (PL 108-173), drugs including chemotherapy products and other powerful infusion drugs administered in the doctor's office came under a new reimbursement system pegged to actual sales prices (ASP) rather than to inflated wholesale prices, the basis of the previous system.

The shift to the new "ASP" system means doctors are reimbursed less for the purchase of the so-called Part B drugs but they now receive higher payments for administering the products. But doctors warned the change could undermine quality of care because administration fees wouldn't be high enough to make up for their revenue loss from switching to average sales prices.

Congress ordered MedPAC to study the impact of the new payments on access to care, quality of care, and physicians' offices. The data released Friday will be part of a study MedPAC must submit to Congress January 1. The study addresses drugs administered by urologists, rheumatologists, and infectious disease specialists.

MedPAC submitted a separate study a year ago dealing with oncology drugs, which found that the ASP system hasn't caused access problems but may in some cases be leading to more costly hospital-based care.

The new data shows that most physicians can buy most drugs at the Medicare payment rates but that all of the doctors contacted for the study said there were some drugs they could not buy at the Medicare rate.

The data showed "small shifts in the location of treatment," a MedPAC staffer told a meeting of the commission Friday. While a majority of beneficiaries continued to be treated in the doctor's office, "many practices sent some beneficiaries to hospital outpatient centers," the staffer said. "Less frequently, beneficiaries were sent to hospital inpatient settings, skilled nursing facilities, and long-term care hospitals," she added.

Doctors said the patients most likely to be shifted to other locations were those lacking insurance coverage supplementing their Medicare coverage. The absence of that coverage leaves doctors more at risk of not collecting co-payments from patients, doctors say. Under the old system, doctors said they were more willing to take on such patients because of the higher payments they received for their drug purchases under the wholesale price system.

Other beneficiaries most likely to be referred elsewhere were those needing costly drugs or biological products and beneficiaries who also had Medicaid coverage, according to the new MedPAC data.

Doctors interviewed by MedPAC rated the referrals as a negative for patients, saying they were at less risk of infection if they received treatment in the physician's office as opposed to a hospital or other facility. But doctors who practiced in hospital outpatient centers thought the care was similar, the MedPAC staffer said. There is a lack of data to judge whether the quality of care has been affected, the staffer said.

Staff said the commission may want to consider refinements to the ASP system to ensure payment rates are accurate. Rates could in some cases be lower than the prices doctors pay for drugs because of the time lag between the filing of price data and the setting of Medicare payment rates, the staff analysis said. But commissioners expressed concern that more frequent rate adjustments would encourage manufacturers to raise prices faster.

Another reason for gaps between the reported ASPs used to set Medicare payment rates for a drug and the price paid by the doctor for the product relates to discounts. The ASP might include discounts that are not passed on to physicians. The ASP also may not include charges that physicians pay such as wholesale markups and state and local taxes.

Commissioner William Scanlan noted that such factors explain why the ASP system includes an additional percentage add-on that is included in the Medicare payment rate as a "cushion" on top of the ASP. "I really think that in order to feel comfortable about making changes here we need a lot more information," he said. No other commissioner disagreed with that assessment.

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