In September, CMS Administrator Seema Verma, MPH, described the giant footprint her agency has in the US healthcare system as the nation’s largest insurer. “Everything we do has a large effect on every American,” she told an audience at a September conference. “In every action we take, we examine the impact it will have on the entire healthcare system.”
Few healthcare stakeholders would argue her first point. On the second one, many physicians, especially oncologists, would disagree. Oncologists hear the frustration from patients about what they pay out of pocket for cutting-edge therapies. They know a transition away from old reimbursement models is inevitable, and many are working to adapt. But in court filings, in regulatory comments, and in responses to ever-changing payment rules, oncologists are sounding the alarm: Many say government efforts to rein in Medicare spending will squeeze their margins and push more practices out of existence, instead of taking on the costs of drugs or the byzantine system that rewards pharmacy middlemen.
“For long-term success, Medicare must change course and develop payment policies to support, rather than weaken, the provision of cancer care in the United States,” American Society of Clinical Oncology (ASCO) president Monica M. Bertagnolli, MD, FACS, FASCO, wrote in a September letter that accompanied a regulatory comment to CMS. “We urge CMS to refrain from finalizing any proposals that would result in any cuts in payments for cancer services and to work collaboratively with ASCO to implement global payment reforms, including the development and implementation of new [alternative payment models] that are widely available to all cancer professionals.”1
That last part is the rub: As Bertagnolli’s statement attests, CMS, on one hand, asks oncologists to move toward quality-based models that demand more risk, but at the same time it seeks to disrupt payment streams that practices need to make the transition. Reimbursement challenges and shrinking payments from Medicare are happening at a time when clinical breakthroughs give oncologists new opportunities to extend life. Oncologists who took part in a panel discussion hosted in June by The American Journal of Managed Care®
) said that although the transition to value-based reimbursement is the right thing to do, many practices that were already efficient saw red ink during the first year of Medicare’s Oncology Care Model (OCM), a 5-year alternative payment model set to run through 2021.2,3
“We are in the midst of a perfect storm, in which there is a constant down pressure on reimbursement while oncologists are being asked to immerse themselves in genomics, become effective stewards of emerging therapeutics, and magically lead efforts to control anticancer pricing,” said Joseph Alvarnas, MD, a hematologist/oncologist who is vice president of government affairs and senior medical director for employer strategy at City of Hope in Duarte, California, and editor-in-chief for Evidence- Based OncologyTM
). “There is much talk about a move toward reimbursement based on the value of healthcare without clear evidence that there is a consistent, coherent model for what that is and little evidence that economic incentives are being realigned to support these activities.”
For the OCM in particular, there’s a difference between the financial challenges of the model and what it has done for patients, said Jeffrey F. Patton, MD, CEO of Tennessee Oncology, and Aaron Lyss, who is the practice’s director of value-based care, in an interview with EBO. “We’re very happy with the program in general,” Patton said. “CMS has been very open to feedback, and it’s working out to the point that we would not consider pulling out,” he said. Tennessee Oncology has produced savings in the area of post–acute emergency readmissions, and the navigator and palliative care programs have been huge successes. Relative to other government agencies, Patton and Lyss have found the Center for Medicare and Medicaid Innovation (CMMI) within CMS to be responsive.
“The big problem is the drugs,” Patton said. And that’s not all CMMI’s fault. The model started just as new, expensive immunotherapies and a new class of breast cancer drugs—the CDK4/6 inhibitors—were being approved and reaching patients. Given that the pricing elements of the model were necessarily retrospective, “The timing was about as bad as it could have been,” Patton said.
CMS has acknowledged that pursuing high-cost therapies is a balancing act for the 179 practices and 13 payers taking part in this payment model, but that’s by design.3
At the June policy summit of the National Comprehensive Cancer Network (NCCN), Ron Kline, MD, said that if figuring out how to pay for innovation in cancer care was easy, it would have happened already. “We know it’s hard. We know it’s going to take a while,” said Kline, medical officer in the Patient Care Models Group for CMMI.4
But data produced by the Community Oncology Alliance (COA) suggest that some members don’t have time to wait. COA’s annual Practice Impact Report, released in April, found that 1653 practices have closed, merged, or reported financial problems over the past decade.5
The COA report cited the “push and pull” of recent healthcare policy, as well as the effects of the ongoing federal sequester and the 340B drug discount program, which CMS has taken steps to reform.
Proposals for Medicare Part B Draw Fire
On May 11, 2018, President Donald Trump presented a blueprint that offered more than 4 dozen ideas for trimming out-of-pocket costs for prescription drugs, but the document did not recommend direct negotiations between Medicare and pharmaceutical companies, something Trump called for as a candidate. Instead, the blueprint proposed merging Medicare Part B, which pays for office-administered drugs, like chemotherapy, and Medicare Part D, which pays for prescription drugs patients take at home.6
This proposal and others have alarmed ASCO and COA, who say the plans being discussed could undermine quality care and harm patients.7-9
However, COA has endorsed steps to rein in rebating practices by pharmacy benefit managers (PBMs).10
Since Trump’s proposal, oncology groups have responded to federal actions past and present:
- In May, COA sued in US District Court, seeking to end application of the 2% federal sequester to Medicare Part B drugs, which COA argues have cost practices $78 million.11 (See Cover.)
- In August, ASCO voiced opposition to a plan by CMS to allow Medicare Advantage plans to employ step therapy across Medicare Part B and Part D, which oncologists said could cause cancer to progress if patients cannot immediately access an appropriate therapy.12
- In September, ASCO and other physician groups filed regulatory comments protesting CMS’ proposal to collapse multiple Medicare rate tiers for evaluation and management into just 2 tiers. Physician groups could cause financial harm for practices; ASCO additionally opposed a plan to cut by half an add-on charge for Medicare Part B.1,13
As part of its regulatory comment, ASCO called on CMS to allow more flexibility with payment models beyond the OCM that began last year. ASCO developed the Patient-Centered Oncology Payment (PCOP) Model14
to qualify as an Advanced Alternative Payment Model under the Medicare Access and CHIP Reauthorization Act,15
but it remains unapproved. COA has worked with the Commission on Cancer to launch the Oncology Medical Home recognition process, which seeks to reward practices that deliver efficient, measurable, evidence-based care.16
HHS Secretary Alex Azar, JD, explained the rationale for the step therapy plan this way: “By allowing Medicare Advantage plans to negotiate for physician-administered drugs, like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use.”17
Patton agreed that merging Medicare Part B and Part D would be “disaster,” as would be collapsing the E/M tiers. COA executive director Ted Okon, MBA, took special aim at the administration’s plan for step therapy, including ideas for patients to be encouraged to use less expensive treatments with rewards programs, such as gift cards. “Does CMS truly believe that Medicare seniors will be enticed away from their physician-recommended treatment with the promise of a $50 Amazon gift card?” he asked. “Allowing middlemen to profit [from] denying cancer patients needed medications is immoral and cruel.”18
Factoring in Rising Prices for Cancer Therapies
The OCM does try to account for innovation and high-cost drugs. The episode-based reimbursement model includes both a trend factor and a novel therapy adjustment:
- The trend factor accounts for the model’s reliance on historical prices as oncology practices continue to see new therapies introduced at higher prices. This factor compares OCM participants with nonparticipants and it examines how costs are changing for each group. The trend factor allows CMS to look at specific attributes in the claims data—such as age, gender, and type of cancer—and make adjustments at the practice level based on the claims mix. Prices are also factored by hospital referral region to account for geographic differences.
- The novel therapy adjustment, an element of the trend factor, works similarly. This measure seeks to avoid penalizing early adopters of new cancer treatments. Practices benefit if they end up treating more than the anticipated number of patients with a certain cancer or more patients than would be expected to use a newly approved treatment. Prices for novel therapies inside the OCM are compared with prices outside the OCM: Practices within the OCM are paid in full to the point that they match what is being spent across the country, and then they are paid 80% of the remaining target price.
Participants in the AJMC®
panel discussion questioned whether the novel therapy adjustment adequately compensates OCM participants.2
“For an academic medical center, we use a lot of the drugs as they come out, if not before [in clinical trials] the approval. So, one of the things we expected was that we would probably get that back,” said Mark Liu, MHA, director of strategic initiatives for the Mount Sinai Health System. “We did get some adjustment, but not nearly as much as we would have expected.”
In the interview, Patton agreed with the panel participants that, “As early adopters of novel therapies, in the current system we are penalized by the novel therapy adjustment,” since it stops paying at 80% of the target price. Innovative practices are never going to withhold the best therapy for cost reasons, Patton said, but there is a penalty.
The Challenge of CAR T-Cell Therapy
A session of the NCCN summit, Paying for Innovation, asked how oncologists could continue to offer game-changing treatments, like chimeric antigen receptor (CAR) T-cell therapy, if payers cannot figure out how to fund them.4
CAR T-cell therapy offers a textbook case, because Novartis initially reached a value-based payment agreement with CMS when the first therapy, tisagenlecleucel (Kymriah), was approved. But then CMS changed course and launched a national coverage analysis for the therapies, in response to a request from UnitedHealthcare.19
The August 22, 2018, meeting of the Medicare Evidence Development and Coverage Advisory Committee endorsed 4 tools to measure patient-reported outcomes (PROs), as part of the national coverage determination for CAR T-cell therapy pricing. A Novartis representative said the process could lead to a slowdown in access to CAR T-cell therapy and asked that the process be withdrawn. Others asked whether PROs could be applicable to CAR T-cell therapy, which is known to have side effects that include cytokine release syndrome.19
Because of the unique administration requirements of CAR T-cell therapy—each treatment must be manufactured individually from a patient’s cells—it is only administered at select centers. Leaders from cancer centers who attended the NCCN summit and those who spoke earlier this year with EBO
said the enormous financial risk demands intense involvement from senior officials at institutions. Tisagenlecleucel has a list price of $475,000, and the second approved therapy, axicabtagene ciloleucel (Yescarta), lists at $373,000; with the cost of adminis- tration and treatment of side effects, some estimates put the full cost of a treatment at $1 million. But unlike earlier therapies that could shrink tumors or delay disease progression, CAR T-cell therapies offer the promise of curing disease.
How does the OCM handle CAR T-cell therapy, which had not been approved when the model began in 2016? OCM participants can still receive the $160 monthly payment for each patient, but the total cost of care is not counted within the performance element. In August, CMS finalized rules that included an extra $72 million for CAR T-cell payments for 2019, based on increased Medicare technology add-on payments and a higher diagnostic-related group weighting, similar to transplants. But experts who spoke with EBO
say under the current reimbursement structure, institutions will lose money on this treatment process.19
“With the current CMS reimbursement models for both the [Prospective Payment System (PPS)] and PPS-exempt centers, those who provide inpatient CAR T-cell treatments to patients assume enormous financial risks around the product acquisition costs and are at further risk for losses related to the clinical care of patients following the infusion of the products,” Alvarnas said.
Moving to Two-Sided Risk
Verma stirred debate with an August 9, 2018, post on the Health Affairs blog, when she wrote that accountable care organizations (ACOs) that only accept 1-sided risk are not saving Medicare enough money and proposed rules will push ACOs into 2-sided risk more quickly.20
Many disagree, as expressed by Kip Sullivan, JD, who chairs the policy advisory committee for Healthcare for All - Minnesota. Sullivan said Verma’s own numbers show that the difference between ACOs taking 1-sided or 2-sided risk have been so small they matter little within the context of what Medicare spends.21
Oncologists who spoke with EBO took exception to Verma’s remarks in late July at the Commonwealth Club in California, where she implied that doctors are part of the problem in the high cost of prescription drugs in Medicare Part B. “Today, Medicare is a price taker in our Part B program, we don’t negotiate, and manufacturers can charge whatever they want. And Medicare incentivizes them to charge more, because doctors that prescribe their drugs are paid on a percentage of the cost of the drug,” Verma said. “So, the more the drug costs, the more the doctor gets. This is another example of misaligned financial incentives in Medicare that are driving up costs.”22
The underlying assumption, that health systems aren’t trying hard enough, falls apart when experts report on the complexity of CMS programs and the OCM, in particular. Darcie Hurteau and Alyssa Dahl of DataGen, writing earlier this year in EBO
, said CMS’ initial release of OCM reconciliation data revealed administrative headaches that could make a move to 2-sided risk burdensome. DataGen and others had to tell CMS about errors in an
initial data, and CMS had to send the data a second time. Hurteau and Dahl also reported that some providers received far less from the novel therapy adjustment than they had anticipated. Other participants were pleasantly surprised. However, Hurteau and Dahl wrote that it’s already time for those who didn’t see savings to start thinking about downside risk, even though they won’t have to decide until the middle of 2019.23
The first evaluation report on OCM is expected before the end of 2018, according to a calendar outlined by CMS officials. Bruce Feinberg, DO, of Cardinal Specialty Solutions, and Bruce Gould, MD, of Northwest Georgia Oncology Centers, who also took part in the AJMC®
panel discussion, said there are many financial details that need to be worked out, including implementation of the 13-point care plan from the Institute of Medicine. The plan requires practices to discuss treatment goals, develop a treatment plan that anticipates response to treatment, assess psychosocial needs, and develop a survivorship plan.2,23
Lyss said that although CMMI is more flexible relative to other government agencies, it still must move more quickly to keep pace with the science. He and Patton agreed that the “cliff” will come when it’s time for practices to decide whether to move to 2-sided risk. They agreed that the challenges with the novel therapy adjustment are fixable, and CMMI will have to fix them—because it’s not in the agency’s interest for practices to drop out of
the program. Lyss said there are some examples of models in the commercial sector that could offer a guide for where CMMI should go. There’s no single right way to account for rapidly rising drug costs, he said. “It’s far from a settled issue,” he added, and Medicare’s population is older with more comorbidities. But the commercial sector does offer ideas.
If practices use innovative therapies, Lyss said, “they are going to be more expensive, and we’ve got to find a way to account for that.”
“We appreciate CMS’ stated efforts in wanting to move toward value-based care delivery,” Alvarnas said. “In order to get to this aspirational state, we need to have robust engagement between CMS and the key stakeholders in the cancer care domain to ensure that value-based care ensures that patients and families receive the care they need without unnecessary delays, excessive patient-borne costs, or unsustainable payments to physicians and healthcare systems.”
With reporting by Allison Inserro and Samantha DiGrande.