Oncologists worry about cuts in Medicare cancer pay

Plans to reform reimbursement rates for chemotherapy drugs could threaten patient access.

By Markian Hawryluk, amednews staff. July 7, 2003.

Washington -- Dave Johnson, MD, has seen cancer care from all sides. He is deputy director of Vanderbilt-Ingram Cancer Center in Nashville, Tenn. His mother died from cancer, and his brother-in-law travels from Ohio to the center for cancer treatments. And he himself is a cancer survivor.

Now Dr. Johnson is worried that potential changes in the way Medicare pays for chemotherapy might jeopardize the standard of treatment and threaten access to care for thousands of patients.

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Medicare now overpays physicians for the cancer drugs they buy, but it vastly underpays them for the practice expenses they incur when delivering the drugs. Lawmakers have been eyeing reductions in Part B payments for those drugs for years for the savings such a move would generate.

At press time, both the House and Senate had begun debate over Medicare reform bills that would use those savings to fund an outpatient prescription drug benefit and increase payments to physicians. But oncologists and their supporters say those bills would devastate cancer care.

"There is no question we need to fix the way we pay for cancer care. And we have to add a prescription drug benefit to Medicare," said Rep. Lois Capps (D, Calif.). "But we should not put the cost of such a benefit on the backs of struggling cancer patients."

The House Ways and Means Committee passed a bill that would take oncologists out of the drug purchasing loop. Specialty pharmacies would bid to provide chemotherapy drugs for Part B procedures and be responsible for collecting co-payments from patients. The drugs would be delivered to physicians in time to administer them to patients.

One House bill would cut Medicare Part B payments for cancer care by 30% in the next four years.

To offset physicians' lost revenue from the drug overpayments, practice expenses for oncologists would be increased 83%. Nevertheless, the bill would cut overall Medicare Part B payments for cancer care by 30% over the next four years.

Oncologists warn that moving to the "just-in-time" delivery method in the House bill would be fraught with complications. Chemotherapy patients often need last-minute changes to their drug regimens, and the bill would preclude physicians from stockpiling drugs to accommodate such changes.

Larry Norton, MD, past president of the American Society of Clinical Oncologists and a researcher at the Memorial Sloan-Kettering Cancer Center, said the proposed competitive bidding model doesn't account for problems, such as delays in getting drugs from a third party or last-minute changes requiring a reordering of drugs.

"I've changed chemotherapy with the needle in the arm of the patient," Dr. Norton said.

The bill passed by the House Energy and Commerce Committee would give physicians the option of purchasing the drugs themselves and receiving 112% of a benchmark price designed to more accurately reflect physicians' acquisition costs. This would boost payments to physicians over the next 10 years by $240 million on top of a $190 million increase in practice expense payments.

"This results in nearly a tripling of the oncologists' practice expense [payments]," said the panel's chair, Billy Tauzin (R, La.).

Meanwhile, the Senate is considering a Medicare bill that would reduce payments for chemotherapy drugs and add about $250 million to oncologists' practice expense payments.

Physician opposition

ASCO and other oncologist groups declined to back any of the bills. Even if the measures paid them accurately for their acquisition costs, they maintain, they would still be underpaid for the practice expenses.

"The true cost of a drug is not the raw acquisition price, just like the cost of delivering a steak in restaurant is not the cost of the meat," said Steve Coplon, CEO of West Clinic, a large cancer practice in Memphis, Tenn.

80% of cancer care is in the physician's office.

The Community Oncology Alliance recently completed a study saying that oncology practices were underreimbursed by $718 million for their essential services and received a $570 million cross-subsidy from the drugs.

Coplon also said Medicare had failed to recognize the cost savings community oncology practices have provided as care has moved out of high-cost hospitals.

"The Medicare program, which was created in the mid-'60s, was built primarily around delivering cancer care in the hospital inpatient setting, and they never did come up with a valid formula to address that care has shifted," he said. "Now 80% of the care is in the physician's office."

Oncologists warn that the bills would hit hardest in rural areas, where cancer treatment is often provided by satellite offices of hospital-based cancer centers. Those centers get Medicare payments under hospital payment systems, while the satellites generally rely on the complex Part B system targeted by the bills.

"If this bill goes into effect, those sites are in jeopardy," said John Rainey, MD, an oncologist with Lafayette (La.) General Medical Center, which has opened four satellite offices to treat patients up to 80 miles away. "It won't be me, it will be the patients that can't come. I went into this business to take care of patients, and I can't do that if this bill goes through."

Dr. Johnson agrees. His cancer center would be unable to handle the flood of patients if its satellite offices closed.

"Technically, the [drug payment system] doesn't affect me or my income," he said. "But clearly I'm worried about this because if this were to go through, our business would explode because Medicare patients are going to be sent to us. And I don't know how we will take care of them."

Dr. Johnson said doctors in a large practice in his community with a dozen satellite facilities in small towns have said that if the legislation goes through without changes, they will shut down those offices.

Oncologists and cancer groups are now pushing lawmakers to adopt a bill introduced by Capps, Rep. Charles Norwood, DDS (R, Ga.) and Sen. Sam Brownback (R, Kan.).

That measure would shift payments for drugs and practice expenses but maintain current overall levels of Medicare spending for cancer care so that oncologists wouldn't lose out.

The final call likely will be made by a conference committee, a group of congressional negotiators who would iron out differences in the House and Senate bills if they pass.

"We're somewhat optimistic that we are going to get this done in the Senate," Brownback said. "We hope to get it included on the House side as well. That will make the conference a much easier process."