Medicare Chemotherapy Payments: New Drug and Administration Fees
Are Closer to Providers' Costs (01-DEC-04, GAO-05-142R).
The Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA) required the Secretary of the Department of
Health and Human Services to change the payment rates for
chemotherapy-related drugs and chemotherapy administration
services. These changes followed reports that Medicare payments
for chemotherapy-related drugs were much higher than physicians'
costs to acquire them, and oncologists' assertions that drug
overpayments were needed to compensate for inadequate payments
for chemotherapy administration services. In addition, the
Centers for Medicare & Medicaid Services (CMS) made changes in
billing rules for chemotherapy administration services. However,
oncologists have been concerned that even with these changes,
Medicare payments may not cover the costs of providing
chemotherapy services in 2005. To respond to a Congressional
request that we review the adequacy of Medicare payments for
chemotherapy-related drugs and chemotherapy administration
services in 2004 and 2005, we assessed the changes in these
payments and compared the payments to the estimated costs of
providing these services.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-142R
ACCNO: A14119
TITLE: Medicare Chemotherapy Payments: New Drug and
Administration Fees Are Closer to Providers' Costs
DATE: 12/01/2004
SUBJECT: Administrative costs
Cost analysis
Financial analysis
Health care programs
Medical fees
Medical services rates
Payments
Pharmacological research
Physicians
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GAO-05-142R
* To assess changes in Medicare payments for chemotherapy-related drugs
an\d administration services, we estimated payments and compared
payments t\o estimated costs of these services. Following is a
description of the \methodology we used, including how we
* Selection of Drugs Billed by Oncologists to Medicare
* Payments and Costs for 16 Drugs
* Payments and Costs for All Drugs
* Selection of Chemotherapy Administration Services Billed by
Oncologists
* Practice Expense Payments for Chemotherapy Administration Services
* Data Reliability
* Input from External Stakeholders
United States Government Accountability Office Washington, DC 20548
December 1, 2004
The Honorable Joe Barton
Chairman
Committee on Energy and Commerce
House of Representatives
Subject: Medicare Chemotherapy Payments: New Drug and Administration Fees
Are Closer to Providers' Costs
Dear Mr. Chairman:
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA) 1 required the Secretary of the Department of Health and Human
Services to change the payment rates for chemotherapy-related drugs and
chemotherapy administration services. These changes followed reports that
Medicare payments for chemotherapy-related drugs were much higher than
physicians' costs to acquire them, and oncologists' assertions that drug
overpayments were needed to compensate for inadequate payments for
chemotherapy administration services. 2 In addition, the Centers for
Medicare & Medicaid Services (CMS) made changes in billing rules for
chemotherapy administration services. 3 However, oncologists have been
concerned that even with these changes, Medicare payments may not cover
the costs of providing chemotherapy services in 2005. To respond to your
request that we review the adequacy of Medicare payments for
chemotherapy-related drugs and chemotherapy administration services in
2004 and 2005, we assessed the changes in these payments and compared the
payments to the estimated costs of providing these services.
To estimate payments and costs for chemotherapy-related drugs, we selected
16 drugs billed by oncologists to Medicare that represented three quarters
of Medicare
1
Pub. L. No. 108-173, S:303, 117 Stat. 2066, 2233.
2
See GAO, Medicare: Payments for Covered Outpatient Drugs Exceed Providers'
Cost, GAO-01-1118 (Washington, D.C.: Sept. 21, 2001).
3
For example, prior to 2004, oncologists were allowed to bill for the
administration of only one chemotherapy drug per day by injection,
referred to as "push technique," regardless of the actual number of drugs
administered. MMA required CMS to evaluate this policy and make changes as
appropriate. CMS now allows oncologists to bill for each additional drug
administered by push technique. See, Medicare Program; Changes to Medicare
Payment for Drugs and Physician Fee Schedule Payments for Calendar Year
2004, 69 Fed. Reg. 1084 (2004) (to be codified at 42 C.F.R. parts 405 and
414).
payments to oncologists for drugs in 2003. We used 2003 utilization data,
CMS's published payment rates for 2003 and 2004, and its preliminary 2005
payment rates. We compared the estimated payments in 2004 and 2005 with
oncologists' estimated costs for acquiring these drugs based on drug price
data compiled by a private vendor. 4 We estimated payments and costs for
all drugs billed by oncologists to Medicare based upon the relationship
between payments and costs for the 16 drugs. 5 To estimate payment changes
for chemotherapy administration services, we reviewed all 22 major
chemotherapy administration and related services. We estimated payments
for these services using 2003 utilization data, CMS's published physician
fees for 2003 and 2004, and estimates of inflation-adjusted 2005 fees. We
estimated oncologists' costs of providing these services by using the
methodology and data used by CMS to develop its own estimates of
oncologists' practice expense costs for purposes of setting payment rates.
6 CMS's cost estimates are based, in part, upon hourly expense estimates
from a survey of oncology practices conducted by the American Society of
Clinical Oncology (ASCO). We developed alternate cost estimates by
removing high-cost outliers from the ASCO survey data. We then compared
the relationship between Medicare payments to oncologists and these two
estimates of costs for chemotherapy administration services to the
relationship between payments and costs for all services provided by all
physicians. We conducted our work from March through November 2004 in
accordance with generally accepted government auditing standards. (See
encl. I for a description of our scope and methodology.)
In summary, we estimate that Medicare payments for drugs billed by
oncologists in 2004 and 2005 will decline relative to 2003, while still
exceeding physicians' costs for acquiring these drugs, and payments for
chemotherapy administration services will increase substantially. Medicare
payment rates for the 16 drugs we studied will exceed oncologists'
estimated costs for acquiring these drugs by 22 percent in 2004 and 6
percent in 2005. (See encl. II for our estimates of the payment-to-cost
ratios for these drugs in 2004 and 2005.) Assuming the same relationship
between payments and costs for all drugs billed by oncologists, we
estimate that total Medicare drug payments to oncologists will exceed
costs by $790 million in 2004 and $202 million in 2005. (See encl. III for
our estimates of the payments and costs for all drugs billed by
4
Acquisition cost estimates were based on drug price data obtained from IMS
Health, a firm that maintains sales data obtained from approximately 100
drug manufacturers and 274 drug wholesalers in the United States. The data
we obtained represent national average prices to clinics, including sales
to oncology clinics. IMS data are collected from sales invoices and do not
include off-invoice discounts or rebates, and thus may overstate the
amount clinics actually paid for drugs.
5
The 16 drugs studied included brand name and generic drugs and
chemotherapy and other related drugs (such as drugs used to treat the side
effects of chemotherapy) and represented 75 percent of Medicare payments
to oncologists for drugs in 2003.
6
The practice expense component is one of three components of the Medicare
physician fee schedule. The practice expense component reflects the costs
incurred by physicians in operating their practices, such as nurses'
salaries, office space, and equipment; the physician work component
provides payment for the physician resources required to provide a
service, including time and intensity of effort; and the malpractice
component provides payments for the costs of obtaining malpractice
insurance.
oncologists to Medicare.) Regarding chemotherapy administration services,
we estimate that fees for almost every service will increase in both 2004
and 2005 relative to 2003, in some cases in excess of 300 percent. (See
encl. IV for our estimates of the changes in fees for these services
between 2003 and 2005.) We estimate that total payments to oncologists for
these services will be 130 percent higher in 2005 than they were in 2003,
assuming no change in utilization. These estimates do not reflect Medicare
billing changes that CMS announced on November 15, 2004. 7 In its comments
on a draft of this report, CMS estimated that these changes will further
increase Medicare payments to oncologists for chemotherapy administration
in 2005. For example, CMS estimated that payments will increase 5 percent
due to revised and added billing codes and 15 percent due to a nationwide
demonstration project related to the care and assessment of cancer
patients. (See encl. V for our estimates of the change in total payments
to oncologists for these services between 2003 and 2005.) Further, we
estimate that in 2004 Medicare practice expense payments will cover
between 24 and 70 percent more of oncologists' practice expense costs than
will Medicare payments for all services to all specialties. Though lower
in 2005, we estimate that practice expense payments in that year will
cover nearly as much or more of oncologists' costs than will payments for
all services to all specialties. (See encl. VI for our estimate of the
relative share of oncologists' practice expense costs covered for
chemotherapy administration services compared with the relative share for
all services provided by all specialties.)
Agency and External Reviewer Comments and Our Evaluation
We received comments on a draft of this report from CMS and ASCO. CMS
agreed with our findings, and commented that recently announced Medicare
billing changes related to chemotherapy administration services that are
not reflected in our analyses will further boost payments to oncologists
in 2005. We have acknowledged these changes in the report. (See encl. VII
for a copy of CMS's comments.)
ASCO cited concerns with our cost estimates for chemotherapy-related drugs
and the practice expenses associated with providing chemotherapy services.
It also provided technical comments, which we incorporated as appropriate.
Regarding drug costs, ASCO characterized as too high our estimate that
Medicare payments to oncologists will exceed acquisition costs by an
average of 6 percent in 2005. ASCO cited its own survey with 140 responses
that found Medicare payments would exceed costs by about 4 percent in that
year. In addition, ASCO commented that our reporting of average
acquisition costs for drugs ignores the implications of the variation in
actual acquisition costs incurred by individual clinics.
To estimate drug acquisition costs, we obtained average prices charged to
clinics, including oncology clinics, from a database representing actual
sales by about 100 drug manufacturers and 274 drug wholesalers in the
United States. Nearly 20,000 individual transactions from this database
were used to estimate costs for the 16 drugs we reviewed. We believe these
data provide a more comprehensive
Medicare Program; Revisions to Payment Policies Under the Physician Fee
Schedule for Calendar Year 2005, 69 Fed. Reg. 66236 (2004) (to be codified
at various parts in 42 C.F.R).
representation of clinics' costs for acquiring chemotherapy and related
drugs than a survey with 140 voluntary respondents. We noted in the draft
report that the acquisition cost estimates we present are an average, and
that actual acquisition costs for individual clinics can vary. We also
noted that, for most of the drugs we studied, 85 percent of the drugs
purchased from wholesalers were acquired for less than the proposed
Medicare payment rates for 2005. Among the remaining wholesaler purchases,
most were acquired for only slightly more (5 percent or less) than the
proposed payment rates. The significance of these higher payments is
diminished by two factors. First, our cost estimates are conservative.
They do not include offinvoice discounts or rebates providers may receive.
Had we included such discounts and rebates, payments would likely exceed
costs by more than we estimated and an even higher proportion of purchases
would have been made at less than the proposed 2005 payment rates. Second,
the purchases included in our data were made in 2004, when Medicare
payment rates were significantly higher. The lower expected payment rates
in 2005 may provide an incentive for clinics to negotiate lower drug
prices, and in its comments on a draft of this report, CMS noted that it
would work with oncology practices to obtain the most favorable drug
prices.
Regarding our estimates of the practice expense costs associated with
providing chemotherapy administration services, ASCO asserted that the use
of CMS's fee schedule methodology to estimate costs is not valid. Although
it acknowledged that no other source of cost data exists, ASCO commented
that indirect costs were underrepresented for chemotherapy administration
services that did not have a physician work component. In addition, ASCO
commented that our comparison of the share of oncologists' practice
expense costs covered by Medicare relative to all services for all
specialties is misleading because other specialties derive a larger share
of their revenues from payments for the physician work component than do
oncologists, and thus have the ability to recoup losses on practice
expenses from these payments.
Absent other available data to estimate the costs associated with
chemotherapy administration services, we used CMS's fee schedule
methodology. The cost data used to develop the fee schedule have been
refined in recent years with ASCO's involvement, and all chemotherapy
administration services now include a physician work component. In
addition, new billing codes announced by CMS on November 15, 2004, will
also include a physician work component. Finally, although the share of
revenues to oncologists for physician work may continue to be lower than
the share for other specialties, this reflects the lower share of
physician work associated with chemotherapy administration services than
with other services provided by other specialties.
We will send copies of this report to relevant congressional committees
and other interested members. We will make copies available to others upon
request. The
report is also available at no charge on GAO's Web site at
http://www.gao.gov. If you
or your staff have any questions regarding this report, please call me at
(202) 512-7119
or Randy DiRosa at (312) 220-7671. Gerardine Brennan, Iola D'Souza, and
Corey
Houchins-Witt were major contributors to this report.
Director, Health Care-Medicare Payment Issues
Enclosures - 7
Scope and Methodology
To assess changes in Medicare payments for chemotherapy-related drugs and
administration services, we estimated payments and compared payments to
estimated costs of these services. Following is a description of the
methodology we used, including how we selected the drugs and services
studied, estimated payments and costs, assessed the reliability of the
data used, and obtained input from external stakeholders.
Selection of Drugs Billed by Oncologists to Medicare
We analyzed 2003 Medicare utilization data 1 for drugs using the
Healthcare Common Procedure Coding System (HCPCS) drug-pricing background
file. 2 We reviewed 16 drugs that represented 75 percent of Medicare
payments to oncologists for physicianadministered drugs, and included both
generic and brand name drugs and chemotherapy and other related drugs,
such as those used to treat the side effects of chemotherapy. (See table
1.)
Table 1: Prescription Drugs Codes
HCPCS codea Product name
J0640 Leucovorin calcium, 50 mg
J0880 Darbepoetin alfa, 5 mcg
J1441 Filgrastim (G-CSF), 480 mcg
J1626 Granisetron hydrochloride, 100 mcg
J2405 Ondansetron hydrochloride, 1 mg
J2430 Pamidronate disodium, 30 mg
J2505 Pegfilgrastim, 6 mg
J3487 Zoledronic acid, 1 mg
J9045 Carboplatin, 50 mg
J9170 Docetaxel, 20 mg
J9201 Gemcitabine HCl, 200 mg
J9206 Irinotecan hydrochloride, 20 mg
J9265 Paclitaxel, 30 mg
J9310 Rituximab, 100 mg
J9355 Trastuzumab, 10 mg
Q0136 Epoetin alpha, (Non-ESRD), 1000 units
Source: GAO analysis of Medicare-covered drugs.
aDownloaded from www.cms.hhs.gov/providers/drugs/ May 14, 2004.
1
We obtained utilization data from the Medicare Part B Extract and Summary
System (BESS). CMS considered the BESS data used in this report to be 96
percent complete so we adjusted them to estimate total utilization for the
year.
2
To identify the HCPCS codes to study we used the HCPCS drug-pricing
background file for other than end-stage renal disease (ESRD) or durable
medical equipment (DME) infusion-commonly referred to as the NDC to HCPCS
crosswalk file (downloaded from www.cms.hhs.gov/providers/drugs/ May 14,
2004).
Payments and Costs for 16 Drugs
To calculate payments to oncologists for these 16 drugs, we used
Medicare's 2003 utilization data, 2003 and 2004 published payment rates,
and 2005 estimated payment rates. 3 We estimated drug acquisition costs in
2004 based on price data for March 2004 that we obtained from IMS Health.
4 To estimate costs in 2005 we updated the 2004 estimates by the National
Health Expenditure price growth factor for prescription drugs between 2004
and 2005 (3.39 percent). We calculated payment-to-cost ratios for each of
these 16 drugs for 2004 and 2005. We also calculated an aggregate average
payment-to-cost ratio for both years.
Payments and Costs for All Drugs
To estimate total payments for all drugs billed by oncologists to Medicare
in 2004, we multiplied 2003 utilization data by the 2004 published payment
rates for all drugs billed by oncologists. 5 To estimate total payments in
2005, we adjusted 2004 total payments by the percent difference in
payments between 2004 and 2005 for the 16 drugs in our study. 6 To
estimate total costs for all drugs billed by oncologists to Medicare in
2004 and 2005, we applied the payment-to-cost ratio for the 16 drugs to
the estimate of total payments for all drugs in each year.
Selection of Chemotherapy Administration Services Billed by Oncologists
We reviewed all 22 major service codes related to chemotherapy
administration, including injection codes that are often used in
conjunction with chemotherapy. 7 (See table 2.)
3
Medicare payments for drugs in 2005 will be based on the average sales
price (ASP). We used CMS's preliminary estimates of ASP based on first
quarter 2004 manufacturer submissions to estimate payment rates for drugs
in 2005.
4
IMS Health maintains sales data obtained from approximately 100 drug
manufacturers and 274 drug wholesalers in the United States. IMS data are
collected from sales invoices and do not include offinvoice discounts or
rebates, and thus may overstate the amount clinics actually pay for drugs.
The IMS data represent national average prices for clinics, which would
include sales to oncology clinics. Though the actual costs may vary by
purchaser, we found most of the purchase prices included in the IMS data
were lower than the preliminary Medicare payment rates in 2005. For 13 of
the 16 drugs we studied, about 85 percent of all purchase prices charged
by wholesalers were lower than the preliminary Medicare payment rates for
2005. An additional 9 percent of these purchase prices were at or no more
than 5 percent higher than the preliminary 2005 Medicare payment rates.
CMS officials told us that the remaining 3 drugs we studied are among
those for which the agency is closely examining transaction cost data
supplied by drug manufacturers to ensure that the final 2005 payment rates
accurately reflect the ASPs.
5
To estimate 2004 payments for drugs that have not yet been assigned a
specific HCPCS code, commonly referred to as unclassified drugs, we
adjusted 2003 total payments for these drugs by the percent change in
payments for all other drugs billed by oncologists between 2003 and 2004.
6
Our estimate of total payments in 2005 assumes that payments for all drugs
will be based on the new ASP payment formula. However, drugs that are new
to the market will not initially have ASP data available and may be paid
by Medicare at higher rates.
7
These codes represented over 99 percent of the chemotherapy administration
services billed to Medicare by oncologists in 2003.
Table 2: Chemotherapy administration services
HCPCS codea Description
90780 IV infusion therapy, 1 hour
90781 IV infusion, additional hour
90782 Injection, subcutaneous/intramuscular
90784 Injection, intravenous
90788 Injection of antibiotic
96400 Chemotherapy, subcutaneous/intramuscular
96405 Intralesional chemotherapy administration
96406 Intralesional chemotherapy administration
96408 Chemotherapy, push technique
96410 Chemotherapy, infusion method
96412 Chemotherapy, infusion method add-on
96414 Chemotherapy infusion method add-on
96420 Chemotherapy, push technique
96422 Chemotherapy, infusion method
96423 Chemotherapy, infusion method add-on
96425 Chemotherapy, infusion method
96440 Chemotherapy, intracavitary
96445 Chemotherapy, intracavitary
96450 Chemotherapy, into central nervous system
96520 Port pump refill & maintenance
96530 System pump refill & maintenance
96542 Chemotherapy injection
Source: GAO analysis of chemotherapy administration service codes.
aObtained from the 2004 Medicare physician fee schedule.
Practice Expense Payments for Chemotherapy Administration Services
We estimated 2003 Medicare total practice expense payments to oncologists
for chemotherapy administration services based on 2003 utilization data.
For the 2004 and 2005 estimates, we adjusted 2003 utilization data to
account for administration of multiple drugs on the same day by push
technique, which oncologists were allowed to bill beginning in 2004. 8 We
used CMS's estimate that for each day of chemotherapy, at least one
additional drug is administered half the time. We estimated total practice
expense payments in 2004 using the adjusted 2003 utilization data and 2004
fees. For 2005, we used the adjusted 2003 utilization data and proposed
2005 fees, updated by CMS's 1.5 percent estimate for inflation.
Chemotherapy drugs may be administered by infusion or by slowly injecting
the drug directly into either the patient or an intravenous bag containing
other drugs or saline solution. The method of slow injection is referred
to as push technique.
Practice Expense Costs for Chemotherapy Administration Services
In the absence of reliable data on oncologists' practice expense costs of
providing chemotherapy administration services, we used CMS's practice
expense methodology and the data it used to estimate costs in 2004. 9 We
first estimated the total costs oncologists incur in operating their
practices as the product of their hourly practice expenses and total time
spent by oncologists treating Medicare patients. The hourly practice
expenses were based on survey data from the American Society of Clinical
Oncology (ASCO). 10 Oncologist time was the total physician time
associated with each service provided by oncologists to Medicare patients,
based on 2003 Medicare utilization data. Our physician time estimate
includes the time associated with any evaluation and management service
provided on the same day as a chemotherapy service. 11
Based on CMS's methodology, we estimated the costs of individual services
and adjusted the cost estimate of each service so that their sum matched
the total cost estimates. We then multiplied these per-service costs by
2003 utilization. We adjusted the costs for inflation in each year from
2003 to 2005 using the Medicare Economic Index. 12
We calculated practice expense payment-to-cost ratios with two cost
estimates: costs including all respondents to the ASCO survey, and costs
excluding certain outliers. For the latter scenario, we removed survey
respondents that were identified as highcost outliers by the contractor
CMS engaged to analyze the practice expense data submitted by ASCO. 13
Finally, we compared payments and estimated costs for chemotherapy
administration services and payments and estimated costs for all services
provided by all specialties.
9
For a description of CMS's practice expense methodology, see GAO, Medicare
Physician Fee Schedule: Practice Expense Payments to Oncologists Indicate
Need for Overall Refinements, GAO-02-53 (Washington, D.C.: Oct. 31, 2001).
The data CMS used to calculate practice expenses in 2004 included hourly
practice expenses and practice expense inputs, Medicare utilization data
from 19972002, and physician and clinical staff time (downloaded from
http://www.cms.hhs.gov/physician/pfs/default.asp in 2004).
10
ASCO gathered its own data on oncologists' practice expenses in 2002, and
submitted the data to CMS to use in developing Medicare fees for
oncologists. CMS used these data to calculate 2004 fees.
11
We did not include any additional physician time associated with the
chemotherapy administration services.
12
The Medicare Economic Index measures inflation in physician practice costs
and general wage levels.
13
CMS's contractor estimated that oncologists' hourly practice expenses were
$189 including all respondents and about $140 if practices with hourly
expenses equal to or above the 90th percentile were removed from the
survey data. See The Lewin Group, Recommendations Regarding Supplemental
Practice Expense Data Submitted for 2003 (Falls Church, Va.: 2002).
Data Reliability
We assessed the reliability of the published drug payment rates, physician
fee schedules, preliminary 2005 drug payment rates, drug-pricing
background file, and the data used in the practice expense methodology by
reviewing existing information about the data and interviewing agency
officials knowledgeable about the data. We assessed the reliability of the
BESS and IMS data by performing electronic testing of required data
elements, reviewing existing information about the data, and interviewing
agency officials and IMS representatives knowledgeable about the data. We
determined that the data were sufficiently reliable for this analysis.
Input from External Stakeholders
Throughout this process we held discussions with officials at CMS, the
Department of Health and Human Services Office of Inspector General, and
the Medicare Payment Advisory Commission to clarify our understanding of
the data and of the methodologies used. We also interviewed
representatives from ASCO and the Association of Community Cancer Centers
to obtain their views on the issues examined.
We conducted our work from March through November 2004 in accordance with
generally accepted government auditing standards.
Estimated Payment-to-Cost Ratios for 16 Drugs Billed to Medicare by Oncologists,
2004 and 2005
Estimated 2003 2004 2005
2003 Preliminary Estimated
Medicare Medicare Estimated Estimated Medicare Estimated payment
utilization Medicare payment acquisition payment-to-cost payment acquisition to-cost
by payment rate cost ratio d rate e cost ratio d
HCPCSa Product name b oncologistsc rate
J9265 Paclitaxel, 30 1,354,922 $164.08 $138.28 $21.73 6.36 $26.72 $22.47 1.19
mg
J9201 Gemcitabine 1,502,050 121.01 111.33 97.87 1.14 111.10 101.19 1.10
HCl, 200 mg
J9170 Docetaxel, 20 787,017 357.91 301.40 265.03 1.14 297.33 274.01 1.09
mg
J0640 Leucovorin 3,188,318 17.52 3.00 1.11 2.70 1.24 1.15 1.08
calcium, 50 mg
Filgrastim
J1441 (G-CSF), 480 227,206 314.07 267.79 248.35 1.08 276.09 256.77 1.08
mcg
J3487 Zoledronic 915,702 217.43 194.54 187.51 1.04 209.36 193.87 1.08
acid, 1 mg
J9045 Carboplatin, 1,603,935 148.75 135.15 121.55 1.11 136.24 125.67 1.08
50 mg
Irinotecan
J9206 hydrochloride, 1,095,571 151.81 130.24 116.97 1.11 128.06 120.94 1.06
20 mg
J9310 Rituximab, 100 1,087,326 475.00 438.38 412.82 1.06 453.24 426.81 1.06
mg
J9355 Trastuzumab, 1,472,565 54.95 52.01 48.05 1.08 52.56 49.68 1.06
10 mg
J0880 Darbepoetin 17,572,057 23.69 21.20 17.22 1.23 18.71 17.80 1.05
alfa, 5 mcg
J2505 Pegfilgrastim, 62,742 2,802.54 2,507.52 2,152.23 1.17 2,337.41 2,225.19 1.05
6 mg
Epoetin alpha,
Q0136 (Non-ESRD), 69,621,920 12.69 11.62 10.08 1.15 10.72 10.42 1.03
1000 units
Granisetron 0.94 f
J1626 hydrochloride, 3,914,089 18.54 15.62 6.80 2.30 6.64 7.03
100 mcg
Pamidronate 0.93 f
J2430 disodium, 30 392,618 265.87 237.88 71.25 3.34 68.24 73.67
mg
Ondansetron 0.91 f
J2405 hydrochloride, 5,541,236 6.09 5.58 4.35 1.28 4.08 4.50
1 mg
Total weighted average payment-to-cost ratio for 1.224 1.055
oncologists (based on 2003 utilization)
Source: GAO analysis of Medicare payment rates for 2003 and 2004,
estimated payment rates for 2005, and IMS physician acquisition cost data.
Note: Estimated acquisition cost data are based on price data obtained
from IMS Health. These data are collected from sales invoices and do not
include off-invoice discounts or rebates, and thus may overstate the
amount clinics actually pay for drugs.
aDownloaded from www.cms.hhs.gov/providers/drugs/ May 14, 2004.
b
These drugs represented 75 percent of Medicare payments to oncologists for
drugs in 2003, and include both generic and brand name drugs, as well as
chemotherapy and other related drugs.
cThe 2003 data used to estimate oncologists' utilization of drugs billed
to Medicare were based on Medicare billing data assumed to be 96 percent
complete. These data were adjusted to estimate 100 percent of billing for
the year.
d
Payment-to-cost ratios depict the relationship between payments and costs.
Ratios above one indicate payments exceed costs and ratios below one
indicate that costs exceed payments.
e
CMS's preliminary estimates of payment rates for drugs in 2005 were based
on manufacturers' first quarter 2004 ASP data submissions. Actual payments
beginning January 2005 will be based on third quarter 2004 ASP data
submissions.
fCMS officials told us that the agency is closely examining transaction
cost data supplied by manufacturers of the three drugs for which we
estimated payment-to-cost ratios of less than one to ensure the final
payment rates for 2005 accurately reflect the average sales prices for
these drugs. The low estimated payment rates for these drugs may be due to
discounts or rebates reflected in the ASP data that were not reflected in
the IMS data we used to estimate drug acquisition costs. Because discounts
and rebates are not included in the IMS data, acquisition cost estimates
based on these data may be overstated.
Estimated Payments and Costs for All Drugs Billed to Medicare by Oncologists,
2004 and 2005
Dollars in millions
Estimated
Estimated Difference between payment-to-cost
payments Estimated costs estimated payments and cost ratio a
2004 $4,315 $3,525 $790 1.224
2005 $3,847 $3,645 $202 1.055
Source: GAO analysis of Medicare payment rates for 2004, estimated payment
rates for 2005, and IMS physician acquisition cost data.
Note: Payment estimates are based on 2003 utilization data, which are
assumed to be 96 percent complete. We adjusted these data to estimate 100
percent of billing for the year.
a
Payment-to-cost ratios depict the relationship between payments and costs.
Ratios above one indicate payments exceed costs and ratios below one
indicate that costs exceed payments.
Medicare Physician Payment Rates for Chemotherapy Administration Services,
2003-2005
Estimated
2003 2004 2005 Percent
payment payment payment change
HCPCSa Description rates rates rates 2003-2005
96520 Port pump refill & $34.58 $205.52 $162.78 371%
maintenance
96423 Chemotherapy, infusion method 18.39 105.96 83.92 356%
add-on
96422 Chemotherapy, infusion method 47.45 268.11 212.35 348%
90782 Injection, 4.41 24.64 19.52 343%
subcutaneous/intramuscular
Chemotherapy, infusion method
96414 add-on, (prolonged) 51.50 269.59 213.52 315%
90788 Injection of antibiotic 4.78 22.18 17.57 268%
96425 Chemotherapy, infusion method 54.81 245.44 194.39 255%
96408 Chemotherapy, push technique 37.52 154.76 122.57 227%
96530 System pump refill and main 40.46 152.29 120.61 198%
96410 Chemotherapy, infusion method 59.22 217.35 172.14 191%
96420 Chemotherapy, push technique 48.19 150.81 119.45 148%
90780 IV infusion therapy, 1 hour 42.67 117.79 93.29 119%
90784 Injection, intravenous 18.39 49.78 39.42 114%
96400 Chemotherapy, 37.52 64.07 50.74 35%
subcutaneous/intramuscular
96405 Intralesional chemotherapy 81.66 107.91 109.53 34%
administration
90781 IV infusion, additional hour 21.70 33.02 26.16 21%
96406 Intralesional chemotherapy 123.60 146.36 148.56 20%
administration
96450 Chemotherapy, into central 303.48 346.49 351.69 16%
nervous system
96542 Chemotherapy injection 200.85 220.66 223.97 12%
96445 Chemotherapy, intracavitary 376.68 403.99 410.05 9%
96440 Chemotherapy, intracavitary 382.94 408.10 414.22 8%
96412 Chemotherapy, infusion method 44.14 48.30 38.26 -13%
add-on
Source: GAO analysis of Medicare payment rates in 2003 and 2004, and
estimated rates for 2005.
aObtained from the 2004 Medicare physician fee schedule.
Total Estimated Medicare Payments to Oncologists for Chemotherapy Administration
Services, 2003-2005
2003 estimated 2004 estimated 2005 estimated
payments payments payments Percent change
(millions) (millions) (millions)a 2003-2005
$302 $876 $694 130%
Source: GAO analysis of Medicare payment rates in 2003 and 2004, and
estimated rates for 2005.
Note: Payment estimates are based on 2003 utilization data, which are
assumed to be 96 percent complete. We adjusted these data to estimate 100
percent of billing for the year.
aThese estimates do not reflect Medicare billing changes that CMS
announced on November 15, 2004. In its comments on a draft of this report,
CMS estimated that these changes will increase Medicare payments to
oncologists for chemotherapy administration in 2005. For example, CMS
estimated that payments will increase 5 percent due to revised and added
billing codes and 15 percent due to a nationwide demonstration project
related to the care and assessment of cancer patients.
Total Estimated Medicare Practice Expense Payment-to-Cost Ratios for
Chemotherapy Administration Services Provided by Oncologists Relative to the
Average for All Services Provided by All Specialties, 2003-2005
2003 2004 2005
Payment-to-cost ratioa for chemotherapy administration
services
relative to the average of all services by all specialties
based on:
- Cost estimates including outliers b 0.51 1.24 0.97
- Cost estimates excluding outliers c 0.70 1.70 1.33
Source: GAO analysis of Medicare payment rates in 2003 and 2004, and
estimated rates for 2005.
a
Payment-to-cost ratios depict the relationship between payments and costs
for chemotherapy administration services relative to the average of
payments and costs for all services provided by all specialties. Ratios
above one indicate that payments for chemotherapy administration cover a
greater share of costs than the average for all services, and ratios below
one indicate that payments for chemotherapy administration cover a lower
share of costs than the average for all services.
bCost estimate based on ASCO's hourly estimate of $189.00.
cCost estimate based on CMS's contractor estimate of $139.52 per hour
after removing the high-cost outliers from ASCO's data.
Comments from the Centers for Medicare & Medicaid Services
(290365)
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