Sequester Cuts to Cancer Care May Cost Taxpayers More in the End

Stanton R. Mehr
Published Online: Monday, September 9, 2013
Clifford A. Hudis, MD

Clifford A. Hudis, MD

The federal sequester trims Medicare payments for cancer patients receiving chemotherapy in doctors’ offices in an effort to save the government money. Instead, it will end up costing more in the long run, according to the president of the American Society of Clinical Oncology (ASCO).

ASCO President Clifford A. Hudis, MD, said most community-based oncology practices that operate under the “buy-and-bill” system, in which providers purchase chemotherapy drugs for onsite treatment and then bill Medicare, cannot afford to absorb the cuts imposed under the Budget Control Act of 2011, popularly known as the “sequester.”

So, Hudis and others told Oncology & Biotech News, these providers have been forced to refer patients seeking certain chemotherapy treatments to hospitals, where reimbursements— and costs to Medicare—are greater. It is not yet known how much this practice is costing the federal government.

“This is one of the true disappointments of the whole sequester—it’s converting lower total costs associated with physician office care into higher costs incurred at the hospital-based setting,” Hudis said. “It’s going to significantly increase the cost of delivering the same care while making it frequently less convenient.”

“It’s quite an amazing paradox,” he said.

Since the financial sequester took effect in April, medical providers, patients, and health plan administrators have worked to adjust to both immediate and long-term implications. The picture in cancer care has many aspects: There are effects on patients undergoing care, and there are effects on research into new treatments for future patients.

While other areas of the federal government sustained deeper cuts by the Budget Control Act, Medicare payment cuts were limited to 2% (Figure). This applies to payments to Medicare Advantage plans and providers while also affecting physicians who purchase part B medications, administer them onsite, and seek reimbursement from Medicare (referred to as “buy-and-bill”). A 2% cut may not sound like much, but it is having alarming effects.

Figure. Estimated Impact of Sequestration on Medicare Spending for FY 2013

Estimated Impact of Sequestration on
Medicare Spending for FY 2013

Reprinted from the Kaiser Family Foundation

The already-slight margins on office-based infusible products means that oncology practices are making extremely difficult decisions regarding whether to continue providing infused chemotherapy to their patients. For some, the choice involves whether to continue treating these patients or lose money on their medications. “If we treated the patients receiving the most expensive drugs, we’d be out of business in 6 months to a year,” according to Jeff Vacirca, chief executive of North Shore Hematology Oncology Associates in New York.1 He told the Washington Post, “The drugs we’re going to lose money on, we’re not going to administer right now,” noting that Medicare beneficiaries comprised more than half of his practice.

The result, according to Hudis and other clinicians, is that patients are being directed to hospitals or clinics to receive the treatments, with the result being greater expense to Medicare. A study by Milliman, the actuarial consulting firm, estimates that chemotherapy given in a hospital costs on average $6500 more annually than chemotherapy provided in a community-based location.2

Furthermore, the question arises as to whether hospitals can handle the increased load: In 2011, Milliman found that 33% of patients were receiving their chemotherapy in a hospital setting. This may actually be exacerbating a trend toward administering chemotherapy in hospital-based outpatient centers. A study of fee-for-service Medicare data found that this shift has been continuing since the implementation of average sales price (ASP) pricing. Preliminary results from a study by the Moran Company revealed that in 2005, fully 87% were receiving chemotherapy in physician offices compared with just 13% in hospital settings.3

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