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Fine Print of Budget Deal Doesn't Bode Well for SGR Overhaul

Tony Berberabe, MPH and Mary K. Caffrey
Published: Thursday, Dec 19, 2013

Mr. Ted Okon

Ted Okon

The tiny “raise” touted in the latest temporary fix to Medicare’s Sustainable Growth Rate (SGR), which was wrapped inside the bipartisan budget deal headed to President Obama’s desk, is anything but good news for oncologists, according to experts from two major medical associations.

In fact, according to Ted Okon, executive director of the Community Oncology Alliance (COA), Congress sent signals that chemotherapy administration is going to continue its march into the hospital setting, leaving community oncologists and private-practice physicians out in the cold.

Early news reports on the latest SGR legislation, known as a “patch,” touted a purported 0.5% increase in Medicare rates for the first quarter of 2014. But beyond that headline, the real news is less rosy: The SGR stopgap, designed to forestall cuts above 20% to make up for years of shortfalls, includes a provision to keep in place—possibly until 2021—the 2% cuts to Medicare’s reimbursement of physicians for patient care and buy-and-bill medication services that were imposed earlier this year due to the sequester.

The Senate approved the overall budget package December 18 with a 64-36 vote, following a lopsided House vote of 332-94 the week prior.

The votes translate into bad news for community oncologists, according to Okon of COA, a lobbying group for oncologists in community practices. “On January 1, the Centers for Medicare & Medicaid Services will pay less for chemotherapy administration—about 7.4% less,” Okon said. “Eventually, CMS will pay 10% less to administer chemotherapy drugs with no cost-base justification.”

The latest 3-month fix, following 12 years’ worth of stopgap measures to avoid catastrophic cuts to Medicare rates, is designed to let Congress finish designing a plan to permanently eliminate and replace SGR. Critics of SGR call it a flawed instrument that has never kept pace with the true cost of administering care. Congress has vowed to use SGR reform to move Medicare away from a fee-for-service reimbursement model to one that rewards quality care, but many details have yet to be worked out. Left unresolved is how the bill will be funded; that duty will fall to House and Senate appropriators.

Although the military, programs for the needy such as Head Start and Meals on Wheels, and the Transportation Security Administration will benefit from the budget deal, noticeably missing is specific funding for individual federal agencies and programs, including the National Institutes of Health (NIH), a critical source of research funding for oncologists, hematologists, and other cancer researchers. It’s unlikely that NIH funding will return to pre-sequestration levels, according to a statement from the American Society of Hematologists (ASH).

Dr. Alan Lichtin

Alan Lichtin, MD

“The passage of the bill is good news for the nation, with no looming government shutdown, but the demands of the sequester and constraints on NIH funding remain,” said Alan Lichtin, MD, chair of Government Affairs at ASH. Lichtin added that the institution where he works as a hematologist, the Cleveland Clinic, “is not immune to budget constraints [and] has experienced more voluntary retirements. With reimbursement rates going down, Cleveland Clinic has not been able to expand many of its research programs.”

The budget deal is disappointing to groups that embraced aspects of an earlier bipartisan plan for SGR reform, drafted by Congress and unveiled on October 30, but now being revised. The day before that announcement, Okon spoke at a Chicago conference, Value-Based Oncology Management, and outlined the “destructive” effects that current Medicare reimbursement policies have had on community clinics.

Since 2005, after Congress altered Medicare cancer drug-reimbursement formulas—tying them to average sales price instead of average wholesale price—Okon said 288 clinics have closed, and 469 have been acquired or have a physicians’ services agreement with a hospital. “The community share of oncology patients is declining,” Okon told the gathering. “More and more I hear physicians say, ‘I give up.’ These are well-run practices.”

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