Sequester Forcing Chemo Treatments into Hospitals Costing Taxpayers More in the End
Published Online: August 20, 2013
Stanton R. Mehr
The federal sequester trims Medicare payments for cancer patients receiving chemotherapy in doctors’ offices in an effort to save the government money. Instead, it will end up costing more in the long run, according to the president of the American Society of Clinical Oncology (ASCO).
ASCO President Clifford A. Hudis, MD, said most community-based oncology practices that operate under the “buy-and-bill” system, in which providers purchase chemotherapy drugs for longer accept Medicare patients. Hudis pointed out that the results of this survey should be interpreted with caution, as it was voluntary in nature (ie, selection bias may be an issue).
The results of a separate survey of 326 practices by the Community Oncology Alliance do support ASCO’s findings, however. In addition, one-fifth of practices reported that they have reduced administrative staff, and two-fifths expected that they would do so should the cuts remain in effect through midsummer. Interestingly, 14% of practices surveyed indicated that they are now considering renewed discussions with hospitals to form closer relationships, including being acquired by them.
Effect on Clinical Trials
Intensive clinical research continues to be a force behind advances in cancer treatment. Sequestration seems to be affecting oncology clinical research at the national level and local level. As part of sequestration, the National Institutes of Health (NIH) took on-site treatment and then bill Medicare, cannot afford to absorb the cuts imposed under the Budget Control Act of 2011, popularly known as the “sequester.” So, Hudis and others told Evidence-Based Oncology, these providers have been forced to refer patients seeking certain chemotherapy treatments to hospitals, where reimbursements—and costs to Medicare—are greater. It is not yet known how much this practice is costing the federal government.
“This is one of the true disappointments of the whole sequester—it’s converting lower total costs associated with physician office care into higher costs incurred at the hospital-based setting,” Hudis said. “It’s going to significantly increase the cost of delivering the same care while making it frequently less convenient.”
“It’s quite an amazing paradox,” he said.
Since the financial sequester took effect in April, medical providers, patients, and health plan administrators have worked to adjust to both immediate and long-term implications. The picture in cancer care has many aspects: There are effects on patients undergoing care, and there are effects on research into new treatments for future patients. While other areas of the federal government sustained deeper cuts by the Budget Control Act, Medicare payment cuts were limited to 2%. This applies to payments to Medicare Advantage plans and providers while also affecting physicians who purchase part B medications, administer them onsite, and seek reimbursement from Medicare (referred to as “buy-and-bill”). A 2% cut may not sound like much, but it is having alarming effects.
The already-slight margins on office-based infusible products means that oncology practices are making extremely difficult decisions regarding whether to continue providing infused chemotherapy to their patients. For some, the choice involves whether to continue treating these patients or lose money on their medications. “If we treated the patients receiving the most expensive drugs, we’d be out of business in 6 months to a year,” according to Jeff Vacirca, chief executive of North Shore Hematology Oncology Associates in New York.1 He told the Washington Post, “The drugs we’re going to lose money on, we’re not going to administer right now,” noting that Medicare beneficiaries comprised more than half of his practice.
The result, according to Hudis and other clinicians, is that patients are being directed to hospitals or clinics to receive the treatments, with the result being greater expense to Medicare. A study by Milliman, the actuarial consulting firm, estimates that chemotherapy given in a hospital costs on average $6500 more annually than chemotherapy provided in a community-based location.2
Furthermore, the question arises as to whether hospitals can handle the increased load: In 2011, Milliman found that 33% of patients were receiving their chemotherapy in a hospital setting. This may actually be exacerbating a trend toward administering chemotherapy in hospital-based outpatient centers. A study of fee-for-service Medicare data found that this shift has been continuing since the implementation of average sales price (ASP) pricing.br /> Preliminary results from a study by the Moran Company revealed that in 2005, fully 87% were receiving chemotherapy in physician offices compared with just 13% in hospital settings.3
William T. McGivney, PhD, principal of McGivney Global Advisors, stated, “Sometimes, federal government policies are ‘misdirected.’ The sequestration cuts in reimbursement for oncologic drugs and biologics (therapeutic and supportive care) fall into a new category of ‘undirected misdirection.’ ” McGivney, the former CEO of the National Comprehensive Cancer Network (NCCN), added, “Gaps in current federal reimbursement levels for oncologic agents have been amplified by the sequestration cuts, and this, in turn, has exacerbated an already difficult situation into one that jeopardizes patient access.”
The Numbers Game
When clinics and physicians purchase chemotherapies for administration at their facilities, they had been receiving reimbursement of the ASP of the agent plus 6%. According to ASCO, the sequestration has reduced this reimbursement effectively to ASP plus 4.3%. This change is enough to erase their small margins and put their practices into the red, especially when purchasing expensive infusible products. This is driving oncologists and their practice administrators to advise patients that they are no longer providing chemotherapy at their offices.
A survey of 500 oncologists by ASCO revealed that close to one-half were “no longer able to continue caring for Medicare patients unless they had supplemental insurance.”4 The survey, completed in May 2013, also specified that 50% of practices were reportedly sending their Medicare patients who need chemotherapy to hospital outpatient infusion centers (Table). A total of 14% reported that they no longer accept Medicare patients. Hudis pointed out that the results of this survey should be interpreted with caution, as it was voluntary in nature (ie, selection bias may be an issue).
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