FHA Comments: Part B Drug Payment Model

FHA Comments: Part B Drug Payment Model

May 9, 2016

Page 3

Submitted electronically

May 9, 2016

Andy Slavitt, Acting Administrator

Centers for Medicare & Medicaid Services

Hubert H. Humphrey Building

200 Independence Avenue, S.W., Room 445-G

Washington, D.C. 20201

Subject: CMS-1670-P; Medicare Program; Part B Drug Payment Model, Proposed Rule (Vol. 81, No. 48, March 11, 2016)

Dear Acting Administrator Slavitt:

On behalf of our more than 200 hospital and health system members, the Florida Hospital Association (FHA) appreciates the opportunity to provide comments on the Centers for Medicare & Medicaid Services’ (CMS) proposed rule that would test new mandatory Medicare payment models for covered Part B prescription drugs provided in physician offices, hospital outpatient departments and certain drugs furnished through durable medical equipment (DME). The FHA supports finding ways to rein in the increasing cost of drug prices, but believes that it is critical that any proposed solutions do not unfairly penalize our members.

Medicare Part B includes a limited drug benefit encompassing drugs and biologicals that fall into three general categories: drugs furnished incident to a physician’s service, drugs administered via a covered item of DME, and other drugs specified by statute. In most cases, Medicare pays for drugs that are administered in a physician’s office or the hospital outpatient department at average sales price (ASP) plus a statutorily mandated six percent add-on.

CMS proposes two phases for the Medicare Part B Drug Payment model. In phase one, CMS proposes implementing a variation to the add-on component of the Part B drug payment methodology in different geographic areas of the country. Specifically, CMS proposes using ASP+2.5 percent plus a flat fee of $16.80. In phase two, CMS proposes to implement value-based purchasing (VBP) in conjunction with the phase I variation of the ASP add-on payment amount for drugs paid under Part B. Phase II would use tools currently employed by commercial health plans, pharmacy benefit managers, hospitals and other entities that manage health benefits and drug utilization. Specifically, CMS proposes applying one or more tools - such as indication-based pricing, reference pricing and clinical decision support tools - to Part B drugs, and testing whether this affects expenditures and outcomes.

FHA appreciates the important attention given to the growing national crisis of rising drug prices and its impact on both spending in the Medicare program and on beneficiary out-of-pocket costs. However, we are very concerned that the planned demonstration will have unintended consequences - namely, incentivizing inappropriate shifts in care settings for beneficiaries and

overpaying for low-cost drugs. Further, we do not believe CMS has provided sufficient evidence to support such a significant change in payment policy. We urge CMS to provide evidence supporting the policy’s ability to significantly impact the rising costs of drugs and quality of care for beneficiaries, before it begins to scale this program at a national level.

In summary, FHA urges CMS to scale back its planned approach. More specifically, FHA recommends that:

·  Hospital outpatient departments be excluded from this demonstration: The CMS proposal appears to assume that changing the payment to hospitals and other providers will change physicians’ prescribing behavior. Hospitals have little influence in directing physicians in their clinical decision-making at the bedside and we do not believe that there is evidence that physicians in hospitals consider profitability over clinical effectiveness. We urge CMS to exclude hospital outpatient departments from the Part B payment model.

·  CMS scale back the size and scope of phase one and limit the number of participants in the program, until it is able to definitively demonstrate improved clinical outcomes and reduced costs directly resulting from these payment policies: In addition, CMS should consider eliminating certain drug classes from the demonstration, including all cancer drugs. FHA understands that CMS needs a significant sample to test the model, but we do not believe there is sufficient empirical evidence to support the current proposed policy change at the national level. We believe the redistribution for certain drug classes is so significant that it will cause inappropriate shifts in care settings. At a minimum, CMS should reconsider a phase one start date no earlier than January 1, 2017. Providers need time to prepare for such a shift in payment of Part B drugs, and would not be ready before the start of the calendar year.

·  Propose Phase II through Notice and Comment: FHA is very concerned about the lack of detail about the elements of phase two and we are disappointed that CMS has proposed a sub-regulatory process for implementation of the VBP tools. We strongly urge CMS to engage in notice and comment for each of the proposed tools to gather additional input and subsequently respond. Such a process could begin as early as the CY2017 physician fee schedule proposed rule, with implementation slated for January 1, 2018.

Unfortunately, the impact will be felt disproportionately by those hospitals providing critical services to medically-complex patients who may not otherwise have access to these services.

Estimated Change in Medicare Payments – Outpatient Drugs
Current Methodology compared to Phase 1 for Part B Drug Payment Model
Drug Class / Phase 1 Proposed Model
Dollar Impact / Percent Change
for Florida
Hematology/Oncology / ($129,526,000) / -2.2
Ophthalmology / ($6,872,100) / -1.8
Rheumatology / ($12,700,700) / -2.6
Medical Oncology / ($39,026,200) / -2.5
Internal Medicine / ($22,125,400) / -1.9
Neurology / ($15,756,600) / -2.6
Hematology / ($2,884,700) / -2.2

Analyses from both FHA and CMS show the dramatic impact this proposal will have on various drug classes (see table above). In addition, our analysis shows that CMS will inevitably pay more

for certain low-cost drugs, potentially incentivizing overuse of those drugs. One of the overall tenets of any payment policy is payment accuracy.

In addition to the lower costs of reimbursement, CMS proposes that hospitals adopt a policy in which hospitals that wish to receive the flat fee must update their billing systems on a quarterly basis, in order to provide the appropriate G-code to the claim for reimbursement. FHA continues to be concerned with CMS continually asking providers to update their internal systems, when CMS has all the information to pay claims correctly if it proceeded in updating its own internal systems. Adding G-codes to Medicare claims is an administratively burdensome and costly process for hospitals as it requires both personnel and information technology resources that should be directed to care at the bedside, rather than the billing office.

FHA appreciates the opportunity to comment on the proposed Part B drug payment rule. If you have any questions, please do not hesitate to contact me at or (407) 841-6230.

Sincerely,

Kathy Reep

Vice President/Financial Services