Medicare Compliance & Reimbursement

Find out what the 6 new experimental models will look like.

You may soon see radical changes to the way Medicare pays for prescription drugs administered in physician offices and hospital outpatient departments. But time will tell if the Centers for Medicare & Medicaid Services (CMS) takes heed of industry stakeholders’ outcries against the proposed changes.

CMS Wants You to Change Your Part B Prescribing

Initially released as an accidental notice to Medicare contractors in February, CMS issued the official two-part proposal for the Medicare Part B Drug Payment Model on March 8. Included in this list, CMS released a proposed rule to test new models to improve how Medicare Part B pays for prescription drugs.

Purpose: The model would test new ways to support clinicians’ selection of Part B-covered drugs (cancer medications, injectables like antibiotics, eye care treatments, or other drugs administered in a physician’s office or hospital outpatient department) that is right for their patients. Specifically, the model aims to test various incentives to accomplish two things:

1. Drive the prescribing of the most effective drugs; and
2. Test new payment approaches to reward positive patient outcomes.

CMS wants to eliminate certain incentives that work against selecting high-performing drugs and replace them with positive incentives, including reducing or eliminating patient cost-sharing to improve patients’ access and appropriate use of effective drugs.

For instance, “physicians often can choose among several drugs to treat a patient, and the current Medicare Part B drug payment methodology can penalize doctors for selecting lower-cost drugs, even when these drugs are as good or better for patients based on the evidence,” CMS says.

Get Ready for 6 New Test Models

The proposed rule aims to test the following six alternative approaches for Part B drugs:

1. Improving incentives for best clinical care. The proposed model would test whether changing the add-on payment from 6 percent to 2.5 percent plus a flat fee payment of $16.80 per drug per day would change prescribing incentives and lead to improved quality and value.
2. Discounting or eliminating patient cost-sharing. This proposed test would reduce or eliminate cost-sharing for patients to improve Medicare beneficiaries’ access to and appropriate use of effective drugs.
3. Examining prescribing patterns and online decision-support tools. This test would create evidence-based clinical decision support tools as a resource for providers and suppliers focused on safe and appropriate use for selected drugs and indications.
4. Indications-based pricing. The proposed test would vary the payment for a drug based on its clinical effectiveness for different indications.
5. Reference pricing. This proposed model would test the practice of setting a standard payment rate, or benchmark, for a group of therapeutically similar drug products.
6. Risk-sharing agreements based on outcomes. This test would allow CMS to enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments.

“These proposals would allow us to test different ways to help Medicare beneficiaries get the right medications and the right care while supporting physicians in the process,” CMS Acting Administrator Andy Slavitt said in the March 8 statement. “This is consistent with our focus on testing value-based care models like we have been doing with physicians and hospitals” in accountable care organizations (ACOs).

The shift from the 6-percent add-on to the 2.5-percent add-on payment plus the flat fee would start in late 2016. At the beginning of each year, CMS would update the flat fee by the percentage increase in the consumer price index for healthcare for the most recent 12 months. CMS would add the other value-based pricing strategies no sooner than 2017, according to the American Hospital Association.

But Not Everyone is Happy

Although the proposed rule is simply suggesting trying out a variety of test models, many industry stakeholders are already upset about potentially changing the current Medicare Part B prescription drug payment model.

On March 9, the Community Oncology Alliance (COA) sent a letter to Slavitt and HHS Secretary Sylvia Burwell that blasted the model. “The CMS Medicare Part B Drug Payment Model is an inappropriate, potentially dangerous, and perverse experiment on the cancer care of seniors who are covered by Medicare,” the letter stated.

What’s more: Along with COA, more than 115 organizations representing patients, providers, advocates, and others joined together in asking CMS not to implement the model.

“It is an understatement to say that this latest CMS initiative is misguided and a perilous cancer care policy,” said COA executive director Ted Okon. “It will only serve to accelerate the consolidation of cancer care into the more expensive hospital setting and undermine physician-patient collaboration on the treatment of cancer. I thought we were at war on cancer, not cancer care.”

Rush job? COA also contends that the proposed rule “was rushed through review without physician or patient input” and “lays out an experiment, not based on quality metrics, that is simply intended to decrease the cost of drugs purchased under the Medicare Part B program.” The COA also charged that the proposed rule “intends to drive the selection of cancer drugs towards the CMS definition of ‘value,’ rather than the most appropriate treatment determined by oncologists in close collaboration with their patients.”

“Proposing sweeping changes to Medicare Part B drug reimbursement without thoughtful consideration and stakeholder input is not the right approach and puts Medicare patients who rely on these medicines at risk,” warned Allyson Funk of the Pharmaceutical Research and Manufacturers of America (PhRMA) in an emailed statement. “The current Medicare Part B drug payment methodology is an effective, market-based pricing mechanism that works to control costs.”

“Part B medicines represent a small and stable share of overall Part B spending, and price growth for Part B drugs is below overall medical inflation,” Funk added. Also, CMS itself has acknowledged competitive market forces, and HHS recently announced that it has met its goal of tying 30 percent of Medicare payments to alternative payment models (APMs) like ACOs.

CMS is accepting comments on the proposed rule until May 9. You can view the proposed rule at http://federalregister.gov/a/2016-05459. Also, a fact sheet on the proposed rule is available at www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-03-08.html.