Hospital Association of Pennsylvania > Advocacy > Federal Advocacy > Part B Proposed Rule Comment Letter


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HAP Comments about Part B Drug Payment Model Proposed Rule

May 9, 2016

Acting Administrator Andrew Slavitt
The Centers for Medicare & Medicaid Services
Department of Health and Human Services
Room 445-G, Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, DC 20201

RE: CMS-1670-P, Part B Drug Payment Model, Proposed Rule

Dear Acting Administrator Slavitt:

On behalf of The Hospital & Healthsystem Association of Pennsylvania (HAP), which represents approximately 240 member institutions, we appreciate the opportunity to comment regarding the proposed Part B Drug Payment Model.

CMS has proposed a two phase mandatory nationwide model designed to address the rising costs of Part B spending that are attributed to drugs which currently are paid at average sales price (ASP) +6 percent, as mandated by law.

Pennsylvania hospitals are significantly impacted by the skyrocketing cost of prescription drugs. HAP appreciates CMS’ effort to address the issue of drug prices, but expresses concern that the proposed model will not meaningfully address drug costs.

HAP urges CMS to consider a more limited and targeted model. Only after results are evaluated should there be consideration about whether expansion is warranted.

Based on preliminary analysis, Pennsylvania hospitals stand to see a minimum of a 2.3 percent reduction in payment as a result of the proposed model, with the majority of the impact on hematology/oncology drugs.

HAP’s concerns:

  1. The proposed rule relies on flawed assumptions.
    The CMS proposal assumes that changing the payment to hospitals and other providers will change physicians’ prescribing behavior. The rule seeks to eliminate financial incentives for providers to prescribe more expensive drugs. However, physicians choose drugs based about what they believe to be the best clinical course of treatment for individual patients. As currently structured, the proposed model can overpay for inexpensive drugs (for example, ASP +$16.80 for a drug that costs $10) and underpay for expensive drugs.
    Also problematic is that for many diseases and conditions, the drugs available for treatment do not include a less expensive alternative. Therefore, the model underpays for a drug that is needed by the patient and would have an adverse impact on access to clinically-effective drugs for some patients.
    CMS’ assumption about behavior change also overlooks the fact that under the outpatient prospective payment system, the majority of drugs that cost less than $95.00 per day are packaged and do not receive separate payment. As a result, the assumed benefits to prescribe low-cost drugs, as well as the premise upon which the experiment is designed, do not apply for hospitals.
    Additionally, for some diseases costly diagnostic and genetic testing is needed to determine the exact drug regimen that will be most beneficial to the patient and monitoring is needed as the drug is administered. This type testing and support can only be found in hospital outpatient departments which the data show will be particularly hard hit if the rule is finalized as proposed.

  2. Hospital Payments Will Be Cut
    The proposed rule represents a significant payment cut to hospitals, including those that serve the most vulnerable patients. As the June 2015 MedPAC report showed, from 2003 through 2013 (the most current data available), Medicare hospital outpatient margins have been negative. On average, Medicare pays less than 90 cents for every dollar hospitals spend caring for Medicare beneficiaries in the outpatient setting. These margins include savings/benefits from the 340B program. The Part B drug proposal will further reduce Medicare reimbursement for outpatient services and hurt hospitals that are providing services that cannot be found elsewhere. An Avalere analysis of the impact of the proposed rule found that hospital outpatient departments are projected to lose the most revenue as a result of the changes, accounting for 60 percent of the payment reductions under the new model.

  3. Payment Redistribution Unrelated to Physician Prescribing Behavior
    CMS projects that one of the effects of this proposal will be redistributing payment from some physician specialties to others. Specifically, this proposal redistributes payment for Part B drugs from ophthalmologists, oncologists, and rheumatologists to family practice, orthopedic surgery, and internal medicine. Such a redistribution suggests that the financial impact of the experiment is mostly driven by the patient population served by different physician specialties, which is unrelated to physician prescribing behavior. For example, a large proportion of patients cared for by primary care physicians require low-cost drugs, such as antibiotics or IV fluids, which leads to financial gains under the proposed formula. On the other hand, oncologists and rheumatologists tend to treat more critically ill and complex patients that require newer, first-in-class, more expensive drugs, and as a result, would suffer financial loss under the model for providing the best care to patients.

  4. Inability to Accurately Measure Effectiveness of Existing Programs
    This program should not be layered on top of previously existing models such as the Medicare Shared Savings Program (MSSP), Bundled Payments for Care Improvement (BPCI), and the Oncology Care Model (OCM).
    Each of these programs already has established benchmarks and quality measures that are tied to financial incentives. To suddenly impose another demonstration in addition to those that are on-going will introduce a confounding factor that weakens the assessment of individual programs. Even if and when a reconciliation methodology is finalized, the program overlap and corresponding methodology would introduce further unnecessary complexity into the Medicare payment system.
    The potential adverse effects of the Part B Drug Payment model on other CMS models is especially pronounced in the case of OCM. Part B drug payments account for approximately 80 percent of oncology practice Medicare Fee-for-Service revenue. OCM participants have been planning for implementation since March 2015, and will begin accepting risk for their Medicare patients around July 1, 2016. Upon the request of CMS, these participants completed financial planning to demonstrate their ability to generate Medicare savings and internal savings under OCM given the payment methodology and their necessary resource investments. The underlying assumptions of these projections are based on the current Medicare Part B payment system. Dramatically and hastily altering Medicare Part B methodology would not only negate the extensive financial planning of OCM participants, but also potentially hinder providers’ ability to succeed under OCM.

  5. Aggressive Timeline and Lack of Specificity On Value-Based Purchasing (VBP)
    CMS is proposing an overly aggressive implementation timeline. Of particular concern is that Phase 2 is likely to begin even before providers and suppliers have adapted to Phase 1, and prior to an evaluation of the impact of Phase 1. Furthermore, the rule also does not give any detailed information about the VBP tools that will be used. As with all quality programs, there is a need for specificity about the tools, including evidence that they are effective, and a comment period regarding these tools is needed to allow stakeholders to provide feedback. CMS should not consider beginning Phase 2 prior to an evaluation of Phase 1 and also should look to lessons learned from other payment models.

HAP’s Recommended Approach

HAP suggests that CMS begin with a smaller, voluntary model that is limited to treatments for which it is possible to identify classes of drugs that have alternatives that are equally clinically effective and available at lower prices. If an evaluation of this demonstration shows a positive effect on prescribing behavior, then CMS could consider taking the lessons learned and propose an expansion as part of rulemaking. This approach would also allow CMS to further assess VBP tools that should be considered for testing.

Finally, CMS should invest resources to convene experts to identify clinical pathways that reduce prescribing variability, maintain or improve quality of care, and reduce costs of care. This information could be shared with providers and implemented in future programs.

HAP appreciates the opportunity to submit these comments regarding the proposed Part B Drug Payment Model. If you have any questions regarding HAP’s comments, please feel free to contact me at (717) 561-5325.



Jeffrey W. Bechtel Jr, JD
Senior VIce President, Health Economics and Policy

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