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Medicare Cuts: What’s Coming for Community Oncology

September 2012, Vol 2, No 5
Sydney Abbott, JD
Policy Coordinator, Association of Community Cancer Centers

Many people talk about the ever-changing landscape of healthcare—and this is true now more than ever. In the months to come, the sustainable growth rate (SGR), several Centers for Medicare & Medicaid Services (CMS) rules, federal debt negotiations, and sequestration are likely to come together to have an impact on physicians’ ability to provide care for Medicare beneficiaries. But how, specifically, will these factors affect community oncology?

?The Sustainable Growth Rate

?The SGR is a method used by CMS to control Medicare spending that is designed to ensure that the annual increase in spending per Medicare beneficiary does not exceed growth in gross domestic product. Each year in its physician fee schedule (PFS) rule, CMS includes a conversion factor that will change the payments for physician services for the next year to match the target SGR. The conversion factor for 2013 is proposed to reduce physician reimbursement by more than 27%. In past years, to avoid such enormous cuts, Congress had stepped in with a temporary suspension, or “doc fix.”

?Most members of Congress today agree that the SGR formula is fundamentally flawed. However, given the current Congress’s hyperpartisan environment and no-spending mentality, a long-term solution to fix the SGR formula is not expected; the cost to repeal the SGR is estimated at more than $300 billion. So, although repeal is probably out of the question in the short-term, once again the expectation this year is that Congress will step in with another short-term “doc fix” to prevent the 27% cut to Medicare reimbursement. Does this mean that oncology is safe from cuts in 2013? Not exactly.

?CMS Rules

?CMS recently released the 2013 proposed PFS and the hospital outpatient prospective payment system (OPPS) rules. Procedures require CMS to issue these proposed rules, followed by a 60-day public comment period, before the agency releases the final Medicare reimbursement rules for the upcoming calendar year. Each year, groups such as the Association of Community Cancer Centers (ACCC) submit comments to CMS on the proposed Medicare rules.

?As mentioned earlier, in the 2013 PFS, CMS is proposing to reduce the conversion factor to $24.7124, thereby reducing physician payment rates in 2013 by 27.4%. Assuming that Con­gress once again enacts a “doc fix,” proposals under the 2013 PFS would reduce reimbursement to hematology/oncology providers by 1%, although the bulk of the cuts affect radiation oncology and stem from the reduction in reimbursement for intensity-modulated radiation therapy and stereotactic body radiation therapy, as well as the expansion of the multiple procedure payment rate.

?In the proposed OPPS rule, CMS suggests abandoning its policy of setting reimbursement on the basis of claims data for separately paid drugs and biologics without pass-through status. Instead, CMS is proposing to reimburse these drugs at the average sales price (ASP) + 6% for 2013, which is the rate required by the Social Security Act when data on drug acquisition costs are not available. (In 2012, these drugs are reimbursed at ASP + 4%.)

?Debt Negotiations and Sequestration

?You probably remember the con­gressional bickering related to the national debt that took place last year. A debt Super Committee was formed to find a solution to our country’s debt crisis, but not many people were surprised when the committee could not agree on a solution. Because no resolution was reached, an automatic sequestration, or re­duction, of domestic spending was set into action. Cuts to defense spending and healthcare will start in January 2013.

?This means that unless Congress acts before the end of December 2012, Medicare reimbursement will be cut by 2% across the board. Unlike the SGR cut, Congress is not expected to immediately reverse this. This cut has the potential to dramatically impact community oncology, particularly in cancer centers with a high proportion of Medicare beneficiaries.

?Tying It All Together

?So, what do all these figures and percentages mean for a community oncology practice or cancer center? CMS proposes an ASP + 6% reimbursement rate for all drugs, but the SGR will reduce reimbursement by 27.4%, then sequestration will take 2% off of all Medicare reimbursement across the board. Help!

?The good news is that we can expect Congress to step in with another short-term “doc fix” to avoid the 27.4% cuts to the SGR. The bad news is that sequestration means that Medicare reimbursement will be cut by 2% across the board. Under the sequester, providers will bill everything—the cost of the drug, the drug overhead, evaluation and management codes, and all other services—to Medicare as they normally would; all reimbursement costs will be calculated, and CMS will then take the total reimbursement amount and reduce it by 2%. That will be the final reimbursement amount sent to providers.

?The SGR, the rules, and sequestration may each have a negative impact on reimbursement. Taken together, these cuts will make it extraordinarily difficult for providers to continue to deliver the best care for the growing Medicare population. Today, it is more important than ever for the oncology community to work together to educate our elected officials and regulatory bodies on these issues.

?The ACCC’s comments on the proposed PFS and OPPS rules, along with other information on these important issues, are available at As always, the ACCC will keep members up to date on the most current topics in cancer care.

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