David Eagle, MD
As recently as the late 1990s, a practice could charge enough for chemotherapy drugs that it could easily afford to treat patients who had Medicare coverage and no additional insurance. Today, that is often no longer the case. "It's just gotten worse, little by little, over time," said David Eagle, MD, of Lake Norman Oncology in Huntersville and Mooresville, North Carolina. "Some patients have medicare only and we're underwater on the drugs, and the patients have really hard times affording that 20% co-pay responsibility. Sometimes with Medicare and the coinsurance we're still underwater on Medicare drugs. That can happen with some private plans too." Payment rates for Medicaid patients have deteriorated to the point that the practice loses money on at least half of the drugs provided to them, Eagle said.
Table. Outpatient Centers Capture Increasing Share of Chemotherapy Infusion Market
Among oncology providers, the recent shift in chemotherapy siting has been dramatic. In 2004, private practices accounted for more than 80% of Medicare spending for chemotherapy infusion, but by 2014 the practices made up less than 60%, according to a Milliman study commissioned by the Community Oncology Alliance (COA).1
The change was even more stark among commercial payers, who previously paid 90% of chemotherapy claims to private practices; now, that amount totals less than 50% of claims.
Once a highly profitable, primary form of revenue for independent practices, infusion income was curtailed by the Medicare Modernization Act of 2003, which limited the amount practices can charge for drugs to 6% over average sales price (ASP). Some practices pay less than ASP for drugs and earn a bigger margin, but some—particularly smaller practices with less power to negotiate drug costs—inevitably pay more than ASP. Medicare reduced payments by another 2% following congressionally mandated sequester cuts in 2013, slicing practice revenues even thinner.
Jeff Vacirca, MD, COA’s board president and CEO of New York Cancer and Blood Specialists in East Setauket, said his practice earns about a 3% margin on drugs after a distributor takes a fee, and that doesn’t account for inventory management, bad debt—including unpaid Medicare bills—waste disposal, management, and other costs. Drug manufacturers also regularly hike their prices and it takes Medicare months to adjust its payments accordingly. “We’re seeing price increases and bad debt and all the associated practice expenses. It’s a losing situation,” Vacirca said.
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