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July 13, 2004
Vol. 1, No. 21
Weekly news and analysis
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| EXEC CORNER |
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Presidential hopeful John Kerry (D-MA) supports legalizing drugs from Canada, and he wants Medicare to negotiate large discounts from drug companies for beneficiaries, similar to Medicaid's 20% discounts and the Veterans Administration's (VA) 40% discounts. Medicare accounts for 40% of sales in the U.S. drug market, so deep discounts would hurt drugmakers' research dollars, a pharma industry spokesperson said.
Paul Ginsberg, the president of the Center for Studying Health System Change in Washington, says Kerry's "ambitious bill avoids the pitfalls of Clinton," whose 1993 proposals caused many workers to fear they would lose employer-based insurance to a government plan, according to a Knight Ridder report. "It's a safe estimate that Senator Kerry's program will cost over $1 trillion," says Megan Hauck, Bush's assistant policy director. She says Bush, through the Medicare reforms, is already implementing many of the cost-saving moves, such as disease management, that Kerry advocates.
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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 |
| CMS plans to announce 2005 payment changes this summer. The changes will revise the Medicare hospital outpatient prospective payment system. CMS will also update payment rates used under the skilled nursing facility payment system. Updates will incorporate all changes from section 511 of the Medicare-reform law. This section calls for an adjustment to resource utilization groups for skilled nursing residents with acquired immune deficiency syndrome (AIDS). CMS will increase the per diem payment for services to these patients by 128%. The hike takes effect for services delivered starting October 1. This change incorporates increased costs associated with the care of AIDS patients.
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© 2004 HCPro, Inc. |
Chronic care pilot in jeopardy, contractors say
The pilot program that is designed to launch Medicare into an era of saving money and helping those with chronic diseases live better is in jeopardy just four weeks before bids are due from contractors, sources say.
Several companies interested in being contractors for the three-year pilot say it will fail unless the Centers for Medicare and Medicaid Services (CMS) reduces some of the financial risk for bidders-the companies that will manage the chronic care program via education, cost-saving measures, and other programs to help providers educate the chronic disease population. One actuary told Medicare Reform Advisor July 12 that the financial risk is too high, and that her client-one she described as a "top-tier contractor"-may not dive in as first thought." Several companies interested in bidding are calling on CMS to reconsider the following from the agency's request for proposal:
Awardees will be required to establish a system to compensate Medicare (up to 100% of the applicant's chronic care improvement fees) in the event that they fail to achieve their performance guarantees
Under one scenario, a contractor that falls short of savings would have to pay CMS back its entire administrative budget, or $25 million for serving 20,000 patients (overall budget $75 million). "If CMS is serious about rolling this program out nationally-if they're serious about chronic care-then they'll design some business case rules to allow us to move forward," says the head of an industry consulting firm that works with contractors on bid submissions. The consultant asked not to be named until the bid process closes.
"CMS has not predetermined the performance standards or fee risk levels applicants must accept," an agency spokesman said July 9. "The maximum risk to the awardees [the contractors] will be the amount paid to them in chronic care improvement program fees." See this week's "Study" for CMS' complete response.
In 2007, CMS says it will hire an independent company to assess the pilot's financial success. If contractors hit their performance mark, they will be favored in the national roll-out. "But there are serious consequences if they don't, since CMS factors 'past performance' heavily when assigning contracts," the consultant says. "Contractors don't have a problem with performance-based contracts, but the risk is too high here. They'd risk losing future government contracting."
Originally, managed-care companies, insurers, integrated delivery systems, even large hospital networks were expected to bid to be the chronic care service providers (see "Study" for details). But with actuary data in hand, it's possible several key players won't bid August 6. What that will mean for the program remains anyone's guess.
According to several sources, demand-management companies lobbied Congress for the performance requirement provision in the Medicare-reform law.
| MEDICAREMURMURS |
- Proposed rule changes to the inpatient prospective payment system will make it difficult for most long-term care hospitals located inside a hospital facility to continue. The proposal would limit referrals from a host hospital to 25% of a long-term care hospital's admissions-far below the current referral rate, according to the American Hospital Association. The group has asked the Centers for Medicare & Medicaid Services (CMS) to withdraw its proposals and maintain existing provisions on this issue.
- There will be separate payment to hospital outpatient care units for drugs that cost more than $50 per encounter, according to a provision in the reform law. Contact the editor for details.
- State pharmaceutical assistance programs (SPAPs) will split $125 million in grants for fiscal years 2005 and 2006, said HHS Secretary Tommy Thompson, who made the announcement as part of a new commission that will study ways to ease the transition of low-income Medicare beneficiaries from state-sponsored programs to the new drug benefit. States with qualifying programs may use the grant funds to educate their enrollees about the Part D drug benefit. Only state programs that provide financial assistance for drug purchases, not those that only provide discount cards or referral services, are eligible for the grants. SPAPs have until August 9 to submit grant applications. CMS will award grants by September 30. Submit applications to Larry Reed, Centers for Medicare & Medicaid Services, Medicaid Pharmacy Team, 7500 Security Blvd., Mailstop S2-01-16, Baltimore, MD 21244.
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Five questions pharmcos should ask to reach docs
Manufacturers should ask and evaluate the following to help them in their strategic marketing efforts as Medicare moves closer to the drug benefit:
- At what site of service do you believe that your drug or technology will be concentrated in two years? In five years?
- What additional value can you bring to the provider?
- Can you help the provider see more patients? If so, how?
- Can you reduce the cost of administration?
- Can you help add new revenues?
Source: Kevin Patterson, a partner at Medical Marketing Economics in Oxford, MS. Patterson predicts small physician practices will be purchased by local hospitals due to the reform law.
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Drug giant hoping to stave off reimportation law
In an effort to preempt legislation that would set price controls on medications in the United States and legalize drug imports from Canada, Pfizer announced a program on July 8 to help the uninsured. "Drug manufacturers are trying to stave off drug reimportation legislation, spending millions on lobbying and expanding free or low-cost drug programs for the working poor and uninsured," an industry spokesperson said.
Pfizer officials say the company plans to offer discounts of 15%-37% to an estimated 43 million uninsured U.S. residents. In other tactics, some U.S. drug companies are withholding drugs from Canadian pharmacies that fill U.S. prescriptions. Eli Lilly and GlaxoSmith Kline are restricting supplies, according to the Canadian International Pharmacy Association, which represents 45 pharmacies and supports drug reimportation. Supplies of Lipitor, a cholesterol-lowering medicine used by 11 million Americans this year, have been restricted, the association reports.
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Former OIG director warns about unreimbursable care rules
Hospitals seeking a piece of the $1 billion pie for care they give to undocumented aliens must make sure that they don't ask patients questions about national origin until after complying with the Emergency Medical Treatment and Labor Act's (EMTALA) inpatient protocol, says James Kopf, former director of the criminal investigations division at the Office of Inspector General. There's incentive for providers to commit billing fraud under this new reimbursement option in the Medicare law, Kopf adds. An EMTALA advisory group will meet twice this year and most hospitals want them to address these issues.
"I can see the difficulty in verifying the number of undocumented immigrants a hospital has treated. A hospital in a border state may claim to have treated 150 undocumented immigrants in a week. Maybe they did treat that number or maybe they are inflating the number to make up for other out-of pocket expenses. If accurate records are not kept by the hospitals, they [will] become very vulnerable to government scrutiny."
Kopf, now president of Healthcare Oversight in New York, urges providers to include questions of nationality on existing intake forms. "This should not be a separate list; make it part of a checklist the administrator uses in the emergency department."
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Sea change in pharma marketing?
Drug giant Schering-Plough no longer allows sales representatives or marketing staff any input over its clinical trials, doctor education, or medical consulting, according to a company spokesperson. New leadership direction has changed polices in response to a wave of federal and state investigations of all big pharmaceutical companies. For example, Schering-Plough now gives free drugs to clinical trial participants, whereas it used to bill them or insurers. Sales representatives had input into that process before Fred Hassan took over as Schering's chief executive officer in 2003, according to the company's senior vice president for compliance.
That's no longer the case, the compliance official says, though he thinks sales staff at other firms still give grants and pseudo-consulting agreements to high prescribers. In March, Hassan told Medicare Reform Advisor that 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. "We need a single point of entry, a kind of eligibility clearinghouse," Hassan said. "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 said his idea would simplify the clutter and beef up access without raising antitrust concerns with the government. Some of Hassan's peers recently said the national foundation would ease burdens on volunteer clinic workers who spend a great deal of time on patient-assistance details. "M! y hope is that this foundation would encourage generic manufacturers to begin providing free drugs, too," Hassan said.
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CMS' response to contractors concerned about risk
Interest in the chronic care improvement program is high, as more than 700 individuals participated in the bidders' conference earlier this year. The deadline to submit proposals to serve as contractors is August 6.
"We are receiving many inquiries from interested parties," a CMS spokesman said last week in response to questions from Medicare Reform Advisor about the government's commitment to the program.
"As specified in its solicitation to potential contractors, CMS set the minimum savings expectation for each program at 5% net savings to Medicare over three years," the spokesman said. "CMS will compare an intervention group's Medicare claims costs and chronic care program fees to Medicare claims costs for the control group in each region. The maximum risk to awardees will be the amount paid to them in chronic care improvement fees.
"Other than the minimum savings expectation, CMS has not predetermined the performance standards or fee risk levels applicants must accept," the spokesperson said. "CMS has asked that applicants propose the performance guarantees and fee risk they will assume related to Medicare savings, clinical quality improvement, and beneficiary and provider satisfaction. Furthermore, CMS has not required that performance standards and fee risk be the same across awardees, since we recognize that their programs and the populations they serve will differ."
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Charity care legislation, suits put focus on hospital collection
A new Illinois law would force the state's hospitals to wait 70 days before filing suit or using other collection methods against uninsured patients with unpaid medical bills. Lawmakers in other states are introducing similar legislation, and hospitals in eight states face class-action suits for allegedly overcharging indigent patients. Medicare's reform law includes several provisions on this issue, including health savings accounts (HSAs).
People may use HSAs during retirement to pay for retiree healthcare, Medicare expenses, and prescription drugs. People may draw on these accounts to pay for retiree healthcare once they reach Medicare-eligibility age. But until savings accounts become the norm, charity care problems will be a fixture in healthcare.
TIP: If a hospital does not want to collect a Medicare patient's deductible and coinsurance regardless of the person's income, it may write off the uncollected debt as "charity care" or as a "courtesy allowance," but Medicare will not reimburse these amounts. Hospitals may provide relief to Medicare beneficiaries who cannot afford to pay their hospital bills by waiving all or part of a Medicare cost-sharing amount, as long as the waiver is not advertised, not routine, and made after there has been a good-faith determination of financial need, or failure of reasonable collection efforts. Advertising these waivers may implicate the anti-kickback statute and the civil monetary penalties provision.
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Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com |
