MedPAC Approves Recommendations on Part B Drug Payment and Site-Neutral Payment

WASHINGTON -- The Medicare Payment Advisory Commission (MedPAC) on Thursday approved draft recommendations on some Part B drug reimbursement and site-neutral payment issues for inclusion in its upcoming June report, but not without some disagreement.

The discussion about the proposals for Medicare Part B reimbursement, which covers drugs that clinicians buy ahead of time and dispense in their offices, proceeded fairly smoothly.

The draft recommendation, which was approved unanimously by the commission's 17 members, called for Congress to require the HHS secretary to cap payments for Part B drugs and biologics approved under FDA's accelerated approval program if postmarketing confirmatory trials aren't finished by the deadline set by FDA and the manufacturer, if the product's clinical benefits aren't confirmed in postmarketing trials, or if the product is covered under Medicare's "coverage with evidence development" policy.

The draft recommendation also called for Congress to let the HHS secretary cap Part B reimbursement for drugs approved via accelerated approval if "their price is excessive relative to the upper bound estimates of value."

MedPAC members also unanimously voted for three other draft recommendations asking Congress to allow the HHS secretary to:

• Set a single payment -- based on the average sales price (ASP) -- for Part B drugs and biologics with similar health effects
• Reduce the "add-on" payment -- an administration fee -- for expensive Part B drugs and biologics in which the fee is based on the ASP
• Eliminate add-on payments for Part B drugs and biologics that are based on wholesale acquisition costs

At the commission's March meeting, MedPAC members agreed that they would like to get rid of the current system, in which for most Part B drugs, doctors are paid an additional fee of 6% of the ASP to cover their administrative costs; concerns were expressed that this formula gives clinicians an incentive to prescribe a higher-priced drug. Commission staff proposed a three-part structure for dealing with this issue, in which clinicians would be paid, for example, an add-on fee of 6%, 3% + $24, or $220, whichever is less.

"I have experienced the perversion that [ASP + 6%] creates among clinicians, and I would love to get rid of it," commission member Greg Poulsen, MBA, of Intermountain Healthcare in Salt Lake City, said at the March meeting. Noting that more expensive drugs often have higher inventory and other costs associated with them than cheaper drugs, Poulsen said he'd prefer to offer only the percentage-plus-flat-fee alternative, but "if we decide not to go down that path, and stick with the language and the examples that we have, I would still say that's a big step in the right direction."

On Thursday, commissioners had little to say about the Part B draft recommendations before their unanimous votes, aside from suggesting wording changes. However, they were more vocal when it came to a draft recommendation on site-neutral Medicare payment for certain outpatient procedures and services, which said that "Congress should more closely align payment rates across ambulatory settings for selected services that are safe to provide in all settings and when doing so does not pose a risk to access."

During his presentation on the draft recommendation, MedPAC senior analyst Dan Zabinski, PhD, noted that of 169 outpatient payment classifications, the staff had identified 66 categories in which payments could be made neutral no matter where the service was delivered, whether in a physician's office, hospital outpatient department, or ambulatory surgery center. Often, payments are higher for services rendered in hospital outpatient departments, which have higher facility expenses.

For those 66 services and procedures, both Medicare and beneficiaries would pay less overall, but budget neutrality rules would mean that Medicare payments and beneficiary cost-sharing would have to increase for the other 103 payment groups to make up for it, he said. In all, about $7.7 billion would be moved from the 66 services and procedures to the other 103.

Zabinski emphasized that the payment changes likely wouldn't negatively affect rural beneficiaries, for several reasons: first, because the changes wouldn't affect critical access hospitals, which are paid under a different system; second, because other federal payment programs support rural providers like rural emergency hospitals and rural health clinics; and third, because concerns about specific rural providers could be addressed with policies targeted to help them.

But several commissioners disagreed. "I don't think that there's evidence to support that reducing payment to rural providers will not affect access," said Lynn Barr, MPH, of the Barr-Campbell Family Foundation in Incline Village, Nevada. "I think maternal health is a great example of where Medicaid -- not Medicare -- paid so little for maternal services that we've lost maternal services over much of rural [America] today. So we have evidence that by reducing payment, it will affect access."

Robert Cherry, MD, of UCLA Health in Los Angeles, had other concerns. "I continue to struggle with the draft language; I was hoping that the term 'safe and appropriate' could actually be utilized," he said, adding that he was worried about the policy's unintended consequences, "specifically with respect to the clinical safety of individual patients who may benefit for a more resource intensive setting such as a hospital outpatient department," adding that "safe and appropriate" would allow Medicare "to consider modifiers to established billing codes [in which] patient acuity requires greater resource intensity compared to healthier patients."

In the end, all the commissioners voted to approve the draft recommendation except for Cherry, who abstained. The commission meets again on Friday to discuss draft reports on telehealth and behavioral health.

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