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March 23, 2004
Vol. 1, No. 6
Weekly news and analysis
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| MEDICARE MURMURS |
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Universal American Financial Corp. has signed a definitive contract to acquire Heritage Health, a privately owned managed-care company that operates Medicare Advantage plans in Texas, a Universal company official announced. The Advantage plans will be housed under the new Part C of the revamped Medicare program beginning in 2006. Heritage has 15,700 Medicare members.
In January, the Centers for Medicare & Medicaid Services (CMS) said it would raise payments to health insurers that offer Medicare Advantage plans by an average of 10.6%. As a result, insurers are required to enhance benefits. A survey by America's Health Insurance Plans (formerly the American Association of Health Plans-Health Insurance Association of America) found that plans representing more than 93% of the market want to use the money to lower premiums. A majority also are reducing copayments and deductibles.
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| LETTERS TO THE EDITOR |
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Send letters to bcote@hcpro.com. Include tips, ideas, questions, and problems related to Medicare reform. The editors reserve the right to edit letters for clarity. |
| DATEBOOK |
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April 2-CMS will hold a conference call for health care purchasers to discuss how drug importation could be conducted safely.
April 9-Experts will talk about an Office of Inspector General proposal that would exclude providers from Medicare for charging Medicare as little as 20% more than they charge other payers for certain services. To register for "Private Pay vs. Medicare Pricing," call 800/650-6787.
April 28-CMS holds an open forum for professional health care providers to discuss how drug importation might be conducted safely, and its impact on patients, medical costs and the development of new medicines. |
© 2004 HCPro, Inc. |
Congress may "tweak" drug benefit costs
A growing chorus of disgruntled Senate and House Democrats and fiscally conservative lawmakers are accusing the White House and former CMS Administrator Thomas Scully of hiding the true estimated costs of the prescription-drug benefit portion of the MMA when Congress voted to approve the measure in fall 2003. Medicare's head accountant, Richard Foster, told several members of the House and Senate last week that he was "muzzled." Foster says Scully threatened to fire him if he provided information to key congressional committees that put the actual costs of the Part D benefit into the $500 billion-$600 billion range over the next 10 years. Congress was assured by Scully and White House officials that the bill would cost under $400 billion when they voted on it in November 2003.
Several members of Congress, notably, Representative John Dingell (D-MI) and Senator Ron Wyden (D-OR) have already discussed the possibility of introducing bills to "tweak" the prescription-drug benefit in MMA so its costs would ultimately be lower for the government. These could take the form of provisions to allow CMS to use its collective weight of Medicare beneficiaries to bargain with drug makers for lower drug costs, to permit the import of cheaper drugs from Canada, or to create strict rules concerning states' use of Medicaid funds.
| Cancer docs start to reject Medicare patients |
Oncologists are starting to send warning letters to their cancer patients who are Medicare beneficiaries, warning them that under the Medicare Modernization Act (MMA), a change in Medicare reimbursement policies for chemotherapy will no longer make it profitable for them to inject life-saving drugs to fight cancer within the doctor's office setting. "I just won't be able to afford to treat Medicare patients anymore, and will have to refer them to a hospital in Albuquerque, even if it is hours away from the patient's home," one New Mexico oncologist told Medicare Reform Advisor. In the past, oncologists have benefited, even more than most medical specialists, by receiving higher reimbursements from Medicare for injectable cancer drugs than the deeply discounted rates (some as high as 86% off the "average wholesale price") that pharmaceutical manufacturers actually charge them for the drugs. The oncologists say that they need the high reimbursements to cover the costs of needles, medical supplies, and office staff to assist them, but Medicare officials claim that they have adjusted for this by raising payments to doctors for injecting drugs at the same time they lowered payments for the costs of the drugs themselves.
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Section 303 produces nine changes in payments
Payment limits increase April 1 for the following nine drugs. Section 303(b)(2) of the MMA allowed manufacturers to apply for exceptions for specific drugs by presenting evidence that the payment set by the MMA would be inadequate to cover physician costs. These new payment limits apply to claims for drugs and biologicals not paid on a cost or prospective-payment basis. They are in effect through December 31; on January 1, 2005, a new average sales price reimbursement system takes effect. Under the MMA, most drugs will be paid this year at 85% of their average wholesale price (AWP), down from 95%. Some drugs, however, including new drugs, continue to be paid at 95% of AWP, while others, for which there were actual data about sales prices, are paid at less than 85% of AWP.
The nine drugs are listed here with their respective healthcare common procedural coding system numbers and 2004 payment limits:
- J2353, Octreotide acetate injection-$77.14
- J3240, Thyrotropin injection-$585.65
- J3395, Verteporfin injection-$1,404.26
- J7320, Hylan G-F 20 injection-$204.03
- J7342, Metabolically active tissue-$14.42
- J9045, Carboplatin injection-$137.54
- J9201, Gemcitabine HCl-$111.33
- J9206, Irinotecan injection-$130.24
- Q3025, IM inj interferon beta 1-$80.22
Editor's note: This list includes drugs other than End-Stage Renal Disease (ESRD) drugs separately billed by independent ESRD facilities and drugs infused through durable medical equipment.
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CMS may audit specialty hospitals
CMS has the authority to check records to make sure specialty hospitals were in operation or under development before November 18, 2003, according to a MMA provision. CMS will consider whether hospitals
- completed architectural plans
- received funding
- met zoning requirements
- received the necessary approvals from appropriate state agencies
Hospitals in development or operating before the November cut-off are exempt from a moratorium on new specialty hospital development Congress enacted as part of the MMA. Under the moratorium, physicians cannot invest in and make referrals to certain specialty hospitals until June 8, 2005, and these hospitals may not bill Medicare or any other entity for services provided as a result of a prohibited referral.
According to CMS, these specialty hospitals are primarily or exclusively engaged in the care and treatment of patients who have cardiac or orthopedic conditions, who receive surgical procedures, and who receive any other specialized type of services that CMS may designate.
How to seek an advisory opinion
If your facility is not sure whether it meets specialty-hospital requirements, send CMS a request for an advisory opinion at www.cms.gov. Specialty hospitals that had Medicare-provider agreements in effect as of November 18, 2003 are in the clear; they do not need to request a CMS determination.
Five hospital types are exempt from this moratorium: psychiatric, rehabilitation, children's, long-term care, and certain cancer hospitals that are not paid under the inpatient hospital prospective-payment system.
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Criteria for specialty hospital investments
Specialty hospitals can qualify for an exemption from the Medicare reform law's moratorium if they meet the following criteria:
- The number of their physician investors has not increased since November 18
- Specialized services furnished by the hospital has not changed since that date
- Any increase in the number of beds has occurred only on the hospital's main campus
- Bed count as of November 18 was not higher than five, or 50% of the beds in the hospital, whichever is greater
A physician may invest in and refer to one of these grandfathered hospitals. However, an existing specialty hospital would not receive the exemption if after November 18, 2003, the number of physician investors or the type of specialized services it offers has changed, or if the hospital's bed size increased beyond the five-bed/50% threshold. In this case, its physician investors cannot refer to the hospital and the hospital cannot submit claims for any prohibited referrals through June 8, 2005.
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Pharma exec calls for national free medicine clearinghouse
Plans are underway to establish the National Charitable Medicines Foundation, which would offer low-income seniors a single clearinghouse to apply for free and low-cost medicine. Schering-Plough Corporation President Fred Hassan is seeking an independent council to head the group. "We need a single point of entry, a kind of eligibility clearinghouse," he says. "It would be one-stop shopping." The foundation would house all pharmaceutical-assistance programs. Drug companies must currently run separate programs with different application and renewal procedures. Hassan says his idea would simplify the clutter and beef up access without raising antitrust concerns with the government. Some of Hassan's peers say the national foundation would ease burdens on volunteer clinic workers who spend a great deal of time on patient-assistance details. "My hope is that this foundation would encourage generic manufacturers to begin providing free drugs, too." Hassan says his proposal is only part of a larger effort calling for better access to healthcare coverage to the uninsured without regard to health risk.
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Institutional pharmacy business poised for growth
Several companies that supply drugs to institutionalized seniors are poised to capitalize on the reform provisions in the MMA:
- Omnicare, the PharMerica Division of AmerisourceBergenCorp, with 300,000 beds, and NeighborCare Inc., with 250,000 beds are the industry leaders. About 42% of the industry is still small regional operations with fewer than 2,500 beds, according to a report from analyst Frank Morgan of Jefferies & Co.
- Frontrunner Omnicare added 285,000 beds and more than $1 billion in incremental revenue over the past two years. Since 1988, it's made 100 acquisitions worth more than $1.9 billion. For now, it's difficult to gauge the potential impact of the law, Morgan wrote. That's why the Department of Health and Human Services will study the law's effect on nursing-home residents, who are major users of the services provided by these three companies.
- Currently, Omnicare leads the field in institutional pharmaceutical services, with more than one million beds in the United States, or 36% of the total, from 178 locations in 47 states.
Several analysts predict that more federal money will be available for prescriptions needed by institutionalized seniors.
Medicaid uncertainty
No one knows how Medicare's new drug benefits will fit with current Medicaid drug benefits for low-income seniors. For example, Medicaid payments account for 47% of Omnicare's sales-easily its top revenue source. The rest is split among Medicare, private insurers, personal payers, and income from consulting services and supplies.
Increased drug consumption by seniors in institutions, rising occupancy, and drug price increases will produce revenue growth near the 10% mark in the institutional pharmacy business, some analysts project. Morgan estimates the U.S. market in this category, once worth $10.5 billion in 2002, could grow to $56 billion by 2020.
To respond, a senior Omnicare official says the company plans to establish a business to handle and distribute drugs that must be injected or infused instead of those taken orally.
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How to handle upsurge in head CT scan denials
See below for a reference in the Medicare Modernization Act
Several hospitals are reporting an upsurge in denials for computed tomography (CT) scans of the head. Emergency doctors are ordering these CT scans when patients present with headaches or after a fall. "They want to rule out an internal injury, an internal bleed," says Leanne Starkovich, a registered health information technician with the Adventist Health System. When the CT comes back negative, the diagnosis is contusion of the head, but "we're getting a lot of denials for that because that diagnosis doesn't meet medical necessity requirements."
If this is happening at your hospital, contact your fiscal intermediary or carrier. Under the old Medicare rules, the payer would deny the claim if the study showed that the patient was not bleeding. A data quality coordinator for a hospital in the southwest says EDs should consider these scans as regularly covered. "In the old days, these tests were going in the uncovered column, [but] that doesn't need to happen anymore," says the coordinator.
For the first time, payers must decide whether the item or service ordered by the ED physician is reasonable or necessary based on the same information that the ED physician has at the time of treatment-information such as presenting symptoms and complaints.
From a practical standpoint, hospital EDs should work closely with their fiscal intermediaries to make sure they are both are on the same page. Also, hold inservices with your physicians, medical record reviewers, and coders so each group understands the new rule.
Legal reference
Section 944, EMTALA Improvements, Medicare Prescription Drug Improvement and Modernization Act of 2003. E-mail the editor for the exact language in the legislation and help with questions or specific situations you'd like investigated.
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Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com |
