The Proposed Medicare Physician Fee Schedule (PFS) Rule for Calendar Year (CY) 2011 was placed on display at the Federal Register on June 25, 2010. The proposed rule includes annual updates to the relative weights of physician services, a variety of Medicare Part B policy updates and the implementation of key provisions in the Affordable Care Act (ACA) of 2010. The proposed rule was published in the July 13, 2010 Federal Register, the comment period closed on August 24, 2010 and the final rule is expected to be issued by November 1, 2010.
This newsletter is the first in a two-part series in which we will summarize the highlights of the proposed rule as well as the most recent legislative updates affecting physician payment for Medicare services.
AN UNTENABLE FORMULA
Still, it takes an act of Congress to modify or change the formula used to set physician payments and Congress has yet to resolve the issue of the flawed SGR formula that has resulted in scheduled cuts to physician payments for the last nine years. Instead, Congress has reacted to temporarily stop the cuts each year since 2003. However, these temporary fixes only delay the cuts resulting in an ever-larger cut looming the following year.
In 2010, Congress acted four times to delay cuts to physician payments:
In the 2011 proposed rule the Centers for Medicare and Medicaid Services (CMS) estimates the 21.3% SGR reduction carried over from 2010 (due to the temporary fixes) combined with the estimated scheduled SGR cut of 6.1% for 2011 will result in a cut in reimbursement of approximately 28% in 2011.
The current 2010 Medicare conversion factor (CF) is $36.8729 and without further Congressional action CMS reports in their preliminary analysis an estimated 2011 conversion factor of $26.6574.
Figure 1 illustrates the Medicare conversion factor history for the last ten years and the projected 2011 CF.
CONTINUED TRANSITION TO REVISED PRACTICE EXPENSE RVUs
Both the American Society of Clinical Oncology (ASCO) and the Association of Community Cancer Centers (ACCC) comment on the proposed continued transition to the revised PE RVUs based on the AMA PPIS data. ASCO calls for CMS to reverse its policy to phase in use of the PPIS data. ASCO states that although CMS uses the Gallup data for medical oncologists rather than the PPIS data, the use of the PPIS data for other specialties likely overstates their expenses making it more difficult for oncology practices to receive fair and adequate reimbursement for expenses they incur in providing patient care. ACCC also requests that CMS not continue with the transition to the AMA PPIS data, which they say will result in decreases in payment for drug administration services and may ultimately result in reduced patient access to oncology services.
CMS is proposing to rebase the MEI using calendar year 2006 physician cost expense data, the most current cost data available. CMS says this change will modify the weights attributed to physician time and practice expenses resulting in an increase in RVUs for services with higher practice expenses and a decrease in RVUs for services with more physician time and lower practice expenses. CMS estimates that the proposed rebasing and revision of the MEI will result in a 1% increase in Medicare reimbursement for medical oncology.
Nevertheless, these changes must be budget neutral and CMS is proposing to achieve budget neutrality by adjusting the CF by 7.9% rather than applying a budget neutrality adjuster to the work RVUs.
CMS is also proposing to remove all costs related to drug expenses citing the fact that drugs are not paid for under the physician fee schedule (PFS) and are not included in the definition of ‘‘physicians’ services’’ for purposes of the SGR formula. This follows CMS’ decision in the 2010 final rule to remove physician-administered drugs from the SGR formula.
Finally, CMS proposes to convene a technical advisory panel later this year to review all aspects of the MEI, including the inputs, input weights, price measurement proxies, and productivity adjustment.
In their comments to CMS, ASCO and ACCC are supportive of CMS’ MEI proposals. However, the Medical Group Management Association (MGMA), the American Medical Association (AMA), and the American Society of Hematology (ASH), while supportive of the need to revise and rebase the MEI, call on CMS to postpone discretionary changes that would further reduce the conversion factor until the technical advisory panel is formed and the SGR issue is resolved.
ASH reminds CMS of the following impending SGR issues:
In their comments, ASH states that the combination of the massive impending CF reductions from the flawed SGR formula combined with the 7.9% reduction proposed to maintain budget neutrality would result in an approximate 38% reduction in the CF.
CY 2011 PFS PROPOSED RULE TOTAL ALLOWED CHARGE ESTIMATED IMPACT FOR RVU, MPPR,
According to CMS projections the combined impact to hematology/oncology, based on the proposed 2011 PFS changes, would be a 1% decrease overall in 2011 and an overall 4% decrease in 2013. These figures do not include the impact of the scheduled negative updates to the conversion factor that are the result of the flawed SGR formula.
REIMBURSEMENT FOR DRUGS AND BIOLOGICS
The proposed 2011 PFS contains several proposals pertaining to the reimbursement for covered Part B drugs including:
WAMP, AMP & ASP
The MMA defines an ASP as a manufacturer’s sales of a drug to all purchasers in the United States in a calendar quarter divided by the total number of units of the drug sold by the manufacturer in that same quarter. The ASP calculation is net of most discounts including volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than Medicaid rebates). Under the ASP methodology, drug manufacturers submit quarterly drug pricing data to CMS.
The Secretary of Health and Human Services (HHS) has the authority to disregard the ASP for a drug or biological under two circumstances:
In July 2010, the OIG published their sixteenth report comparing ASPs to AMPs. In their latest report, as in each of their previous reports, the OIG identifies the drugs for which the ASP exceeds the AMP by more than 5% and the estimated program savings that could be realized by lowering their reimbursement to 103% of AMP.
To date, CMS has yet to act on the OIG’s recommendations for lowering drug reimbursement for the drugs identified in OIG reports as meeting the 5% threshold. While acknowledging the Secretary’s authority to adjust ASP payment limits based on the OIG’s pricing comparisons, CMS has stated the need for a better understanding for the fluctuating differences between ASPs and AMPs as well as the need to proceed cautiously to avoid unattended consequences.
In the 2011 proposed rule, CMS states their intention to maintain the 5% threshold for AMP/WAMP comparisons and to address the issue of temporary fluctuations in market prices that may be corrected in a subsequent quarter.
CMS proposes that 103% of AMP be substituted for 106% of ASP when the comparison of ASP to AMP exceeds the 5% threshold for two consecutive quarters, or three of the previous four quarters, and 103% of AMP is less than 106% of ASP during the quarter in which AMP would apply. Additionally, CMS proposes the substitution of AMP for ASP be limited to those drugs with ASP and AMP comparisons based on the same set of National Drug Codes (NDCs).
Finally, CMS states the price substitution policy will not occur before the preliminary injunction, issued on December 19, 2007, prohibiting CMS from publicly disclosing AMP data is modified.
In their comments to CMS ASCO requests CMS delay implementation of a policy to substitute an alternate to 106% of ASP for Part B physician administered drugs. ASCO reports that many physician practices are currently unable to purchase a number of oncology drugs at 106% of ASP and any policy that lowers reimbursement levels for these drugs is likely to result in increased access issues for Medicare patients in need of chemotherapy services. ASCO urges CMS to delay implementation of any price substitutions until recent changes to AMP are fully implemented and any potential impacts on access to cancer drugs are studied and understood.
“Carry-Over” & Partial Quarter ASP
CMS proposes to limit the use of the carry-over ASP to those cases where missing data results in a 10% or greater change in the ASP payment limit compared to the previous quarter.
CMS is not proposing a change to their policy for new single-source and multi-source drugs lacking sufficient price data during an initial period. CMS reports they will continue their policy of pricing new single source drugs at WAC for the first quarter (unless the date of the first sale is on the first day of the quarter) and to add new NDCs for multi-source drugs and product line expansions of single-source drugs to the ASP calculation as these products are reported.
CMS defines a biosimilar biological product as “A biological product approved under an abbreviated application for a license of a biological product that relies in part on data or information in an application for another biological product licensed under section 351 of the Public Health Service Act (PHSA) as defined at section 1847A(c)(6)(H) of the Act.”
Sections 7001-7003 of the Patient Protection and Affordable Care Act (ACA) amended the Public Health Service Act (PHS Act) creating an abbreviated approval pathway for biological products that are demonstrated to be “highly similar” (biosimilar) to or “interchangeable” with an FDA-approved biological product and granting the Food and Drug Administration (FDA) the authority to approve biosimilars. These new statutory provisions in the ACA are referred to as the Biologics Price Competition and Innovation Act of 2009 (BPCI Act).
The 2011 PFS proposed rule implements the reimbursement rate for biosimilars legislated in the ACA. The reimbursement rate for biosimilars would be:
If ASP data is not available the payment will be determined based on the WAC or the methodologies in effect on November 1, 2003. If no manufacturer data is collected, prices will be determined by local contractors using any available pricing information, including provider invoices.
Intentional overfill occurs when manufacturers include a small amount of drug over the labeled amount, in order to compensate for loss of drug that may occur during proper preparation and administration of the drug.
Manufacturers report ASP data to CMS based on defined reporting data elements including “volume per item” which CMS defines as “the amount in one item.” In order to ensure that overfill is not reported in the ASP data supplied by manufacturers, CMS proposes to update its regulations to clarify that the amount in one item is defined as “the amount of product in the vial or other container as indicated on the FDA-approved label.”
CMS also states that when providers purchase a drug/biological the purchase price is based on the labeled amount and does not include overfill or “excess or free product.” Citing longstanding Medicare policy, and referencing Medicare Benefit Policy Manual (Publication #100–02), Chapter 15, Sections 50.3, 60.1.A, CMS says payment cannot be made for services or supplies that do not represent a cost to the physician or entity billing for the services or supplies. CMS further states, “Claims for drugs and biologicals that do not represent a cost to the provider are not reimbursable, and providers who submit such claims may be subject to scrutiny and follow up action by CMS, its contractors, and OIG.”
Therefore, CMS is proposing to update its regulations to clarify that “payment for amounts of free product, or product in excess of the amount reflected on the FDA-approved label, will not be made under Medicare.” CMS also clarifies the prohibition of billing for overfill which includes overfill pooled from more than one container.
In their comments to CMS ASCO recommends that CMS revise the language describing their proposed regulatory safeguards regarding the use of overfill to “eliminate ambiguity and promote clear understanding with the provider community.”
ACCC provides lengthy comments on the issue of overfill supporting the CMS proposal to clarify that overfill should not be included in the calculation of ASP and calling for CMS to continue to allow providers to bill for overfill.
Both the American Hospital Association (AHA) and ACCC contend that the provider does indeed incur the cost of the overfill. ACCC states, “When a physician purchases a vial or container of product, he or she purchases the entire vial or container of product, including the amount of drug on the label, the vial or syringe in which the drug is packaged, any diluent needed to reconstitute the product and any intentional overfill included to ensure that the drug is prepared and administered properly.”
In almost identical language the AHA and ACCC argue that any prohibition on billing for overfill would constitute a new policy and they urge CMS, if they determine to finalize the overfill policy, to apply and enforce the restriction of billing for overfill prospectively only and that it only apply in the physician office setting and not in the hospital or other provider settings.
Nevertheless, Medicare’s current policy on billing for discarded drug is in keeping with CMS’ stated policy and proposed clarification regarding billing for overfill. The Medicare Claims Processing Manual, Chapter 17, Section 40 - Discarded Drugs and Biologicals states, “When a physician, hospital or other provider or supplier must discard the remainder of a single use vial or other single use package after administering a dose/quantity of the drug or biological to a Medicare patient, the program provides payment for the amount of drug or biological discarded as well as the dose administered, up to the amount of the drug or biological as indicated on the vial or package label.”
CALCULATING PAYMENT FOR PHYSICIAN SERVICES
There are three key factors in the formula used to determine Medicare payment for physician services paid under the Medicare Physician Fee Schedule (PFS):
To calculate the payment for physician services, the components of the fee schedule, physician work (Work) practice expense (PE), and malpractice (MP) relative value units (RVUs) are adjusted by a geographic practice cost index (GPCI). The GPCIs reflect the relative costs of physician work, PE, and MP expense in an area compared to the national average costs for each of these components.
RVUs are then converted to dollar amounts by multiplying the total RVU by the Conversion Factor (CF), which is calculated by CMS’ office of the Actuary (OACT).
The general formula for calculating the Medicare payment amount can be expressed as:
Timely Filing LimitsUnder the Patient Protection and Affordable Care Act (now called the ACA) the statutory timely filing deadline for all Medicare fee-for-services claims has been reduced to one year effective for claims furnished on or after January 1, 2010. In the proposed 2011 PFS CMS lists the following changes to the timely filing limits for Medicare Part A and B claims:
The ACA also provides the Secretary the authority to create exceptions to the timely filing period. In addition to the timely filing exception provided due to an error or misrepresentation by CMS, which is limited to 4 years from the date of service, CMS is proposing to create two additional exceptions.
First, they propose creating an exception for situations where a beneficiary becomes retroactively entitled to Medicare benefits, but was not entitled at the time the services were furnished. This exception would allow providers to file claims after the timely filing limit has expired when CMS or their contractors determine that both of the following conditions have been met:
Once determined that both of the conditions have been met the timely filing period will be extended through the last day of the 6th calendar month following the month in which the beneficiary received notification of the retroactive Medicare entitlement to or before the date of the furnished service.
The second proposed exception would allow providers to file claims after the time limit for filing claims has expired in limited dual eligible Medicare/ Medicaid beneficiary situations. To qualify for this exception CMS or their contractors must determine that all of the following conditions have been met:
If the three conditions above are met and the State Medicaid agency recovers their incorrect payment 11 months or more after the date of service an exception to the timely filing rule would be necessary as the provider would not have enough time to file a claim with Medicare before the 1 year timely filing limit would kick in. Therefore, an exception to the timely filing limit would be made allowing the provider to file a claim through the last day of the 6th calendar month following the month in which the Medicaid agency recovered the Medicaid payment.
ABOUT THE EDITOR
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