Physician Practice

CMS scuttles controversial proposed Part B drug payment model

Physician Practice Insider, December 27, 2016

After missing a proposed fall start date, CMS has announced last week that its Medicare Part B drug payment model from the Center for Medicare and Medicaid Innovation will not be going forward.

The agency proposed the model in March in an effort to stem rising prescription drug costs, but drew backlash from stakeholders who believed it would negatively impact certain specialties that rely on higher-priced drugs.

The proposed model involved two phases of testing. Currently, Medicare Part B pays physicians and hospital outpatient departments the average sale price of a specific prescribed drug plus a 6% add-on. CMS proposed in phase one to reduce the add-on payment to 2.5% for hospital outpatient departments and physicians participating in the test model. Instead of matching the average sale price of a specific drug, the agency would pay a flat fee of $16.80 per drug per day. The flat fee would be updated at the beginning of each year based on the percentage increase in the consumer price index for medical care for the most recent 12-month period.

Phase two, which the agency wanted to launch as soon as January 2017, would have added a set of value-based purchasing tools to the test, including:

  • Discounting or eliminating patient cost-shares
  • Setting benchmark standards for pricing of therapeutically similar drugs
  • Risk-sharing agreements between CMS and drug manufacturers that link patient outcomes with price adjustments


CMS is likely to continue looking at methods to curb rising Medicare prescription drug costs. According to the agency, in 2007, $3 billion in Part B payments were made for separately paid drugs in hospital outpatient settings, and in 2015 that amount more than doubled to $8 billion.

This article originally appeared on JustCoding.

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