Pharmaceuticals Under theMedicare Prospective Payment System

Tracy J. MayneSenior Director

Health Economics & Med InformaticsDaVita Inc.

This is One Step in the Evolution of Dialysis ReimbursementDialysis Reimbursement

6 Composite Rate updates

2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 bal

p

6 Composite Rate updates

1972

1973

1974

1975

1976

1977

1978

1979

1980

198

1982

1983

1984

1985

1986

1987

1988

1989

1990

199

1992

1993

1994

1995

1996

1997

1998

1999

2000

200

200 2

2003

2004

2005

2006

2007

2008

2009

2010

2011

ndle

Glo

bC

ap

SSAMedicare dialysis

coverage

Composite rate for dialysis services

EPOGEN approved

HMA-PM

HMA-PMrevised

EMP

EMP revised

Medicare Modernization

Act

Bun

revisedEMP

revised

MIPPA

Proposed rules

Final rules

What’s going into the new bundle?

IV Drugs Oral Vit. D

Old Treatment Cost

(includes CR Labs)Non CR Labs

O (includes CR Labs)

ESRD Bundled Services

New

N

Current and BundledMedicare Payment SystemsMedicare Payment Systems

DrugDrug

2010 Structure

ESRDESRD DIALYSISCompositeRate($135)

CompositeRate($135)

xDrug

Add‐onPayment(14.8%)

DrugAdd‐onPayment(14.8%)

xArea wage adjuster  on 53.71%

Area wage adjuster  on 53.71%

Case‐mixAdjusters

N=3

Case‐mixAdjusters

N=3

ESRD Network deduction

50¢

ESRD Network deduction

50¢

+ − =DIALYSIS PAYMENT × 0.80

Training sessions

($12 or $20)

Training sessions

($12 or $20)+

DIALYSIS PAYMENT

Base t

Base t

Area wage dj t

Area wage dj t

Case mix dj tCase mix dj t

Quality incentive Quality incentive 

ESRD Network ESRD 

Network  Outlier Outlier x x +

2011 Structure

Training i

Training i+ PAYMENT 

× 0.80− =payment

$222.51payment$222.51

adjuster on 41.37%adjuster on 41.37%

adjustersN=10

adjustersN=10

adjustment0 – 2%

adjustment0 – 2%

deduction50¢

deduction50¢

PaymentPaymentx x +−sessions($33.44)sessions($33.44)

+

Phase inPhase inProjected 2011

Projected 2011

Anticipated positive

Anticipated positive Outlier Outlier  Congressional Congressional 

Phase in adjuster0.969

Phase in adjuster0.969

x2011 payment$251.60

2011 payment$251.60

xpositive effectsadjuster 0.941

positive effectsadjuster 0.941

paymentadjuster 0.99

paymentadjuster 0.99

2% reductionadjuster 0.98

2% reductionadjuster 0.98

x x

Base PaymentBase Payment

$5.72 $7.48

$225

Dialysis support services$0.04

$50.83

$9.64

$175

$200 Ultrafiltration

DME and supplies

Dialysis facility supplies & IV fluids

Laboratory tests

$0.06

$0.43

$0.92

$7 48

$125

$150 Laboratory tests

Oral Levocarnitine

Oral Vit D

Levocarnitine

$7.48

$0.01

$0.42

$0.09

$145.99 $75

$100 Antibiotics

Alteplase

Injectable iron

Injectable Vit D

$0.12

$0.72

$5.72

$9.64

Drugs are more than 1/3 of the bundle

$25

$50 ESA

Composite rate services

$50.83

$145.99

Total: $222.51 per Tx (includes reduction for transition adjuster)

$-

Part D (Oral) Medications

Vitamin D Analogues

CalcitriolParacalcitol (Zemplar)Doxercalciferol (Hectorol)

Cellular Managementg

Levocarnitine

Iron

Other Drugs in the Bundle

“… these drugs are presumed to be renal dialysis services unless the ESRD facility indicates on the claim (by using a modifier) that a drug or biological infacility indicates on the claim (by using a modifier) that a drug or biological in these categories is not ESRD-related and, separate payment would be made.” p. 114

Some Drugs were Specifically Excluded

All Antibiotics Administered in a Unit are Fair Game… Except Oral VancomycinExcept Oral Vancomycin

“Therefore, if any other anti-infective (including oral or other forms used as a substitute for an injectable anti-infective) is used for vascular access infections or peritonitis, the drug would be a renal dialysis service andseparate payment would not be made.” p. 113.separate payment would not be made. p. 113.

“Therefore, we included all antibiotics, with the exception of antivirals, that were on the 2007 ESRD claims into the ESRD bundled base rate ”that were on the 2007 ESRD claims, into the ESRD bundled base rate. p 124

“… we did not include the non-injectable form of vancomycin because we believe that the oral or other forms of these anti-infectives are not used for ESRD-related access infections.” p 126-127

Cardiac Drugs Furnished in Unit are Fair Game

“However, to the extent that that any cardiac drug or biological (including anti-hypertensive drugs and biologicals) are furnished by an ESRD facility for ESRD-related conditions, the drug or biological would be considered a renal dialysis service and separate payment will not be made ” p 117renal dialysis service and separate payment will not be made. p 117

Phosphate binders, Calcimimetics and Other Drugs in the Bundle in 2014in the Bundle in 2014

“Thus, we are interpreting the use of the word services in clause (iv) consistent with how we interpret and define services under Medicare which supports including other oral only drugs not specified in the preceding clauses in the Bundle…” p 56

New Dialysis Biologics & Orals Will Go into the Bundle

“To the extent new renal dialysis items or services come onto the market in the future d t th d fi iti h i ld b id d “ l di l i i ”and meet the definition, such services would be considered “renal dialysis services”

and bundled under the ESRD PPS.” p 76

CMS Expects Medicaid and Private Insurers to Work Through Drug Co-pay IssuesWork Through Drug Co-pay Issues

“We would expect that the shift in coverage for oral drugs formerly Part D to Part BWe would expect that the shift in coverage for oral drugs formerly Part D to Part B will result in drug plans and insurers modifying the scope of their drug coverage, formularies, premiums, and benefits to reflect this shift in coverage, in a competitive environment to maintain and attract beneficiaries.

With respect to patients dually eligible for Medicare and Medicaid with minimal prescription drug copayment amounts under Part D, we expect that the 20 percent coinsurance for renal dialysis services included in the payment bundle under the y p yESRD PPS will be covered by the beneficiary’s Medicaid benefit, just like other Part B coinsurance obligations. We will conduct outreach efforts to the States to ensure that States understand the changes due to the ESRD PPS, and their responsibility to process Medicare claims and determine their financial obligationsresponsibility to process Medicare claims and determine their financial obligations under the new payment system.” P 69-70

Separately billables are not subject to bad debt provision

Two Options for Delivery: O Sit Ph N t k A tOn Site Pharmacy or Network AgreementOPTION 1: On site pharmacy

“..in the case of any ESRD facility that would seek to furnish drugs directly by dispensing on-site, we would expect that such facility comply with state pharmacy licensure requirements ” p362

OPTION 1: On site pharmacy

pharmacy licensure requirements. p362

OPTION 2: Pharmacy network“As an alternative, we believe that many ESRD facilities would forego the process of becoming licensed as a pharmacy and instead, furnish renal dialysis service drugs formerly covered under Part D under arrangement with a licensed

OPTION 2: Pharmacy network

service drugs formerly covered under Part D under arrangement with a licensed pharmacy.” p362.

Example of New York State requirementsp q

• Compounding and dispensing area must be at least 100 sq feet • Entire pharmacy must be at least 300 sq feet • Each pharmacy must have a supervising pharmacist that works full time (at least 30

hours / week). No pharmacist can be a supervisor for more than one pharmacy. • There must be hot and cold running water • An external sign is required • Electronic prescriptions (including scanned or electronic faxes) must be printed and

maintained on the premises for a minimum of 5 years • Refrigerator is required • If pharmacy is located in another place of business, it must be partitioned off by 9’ 6”

high walls, or floor to ceiling walls if they are less than 9’6” tall. • Must provide written notice of availability of consult • If a prescriber approved drug was substituted, a written notice must be provided and

the pharmacist must make a reasonable attempt to reach the patient by phone to provide consult. The pharmacist must record the attempt to reach the patient.

Adherence is Critical

In 2011 suboptimal adherence suboptimal adherence

will underfund future patients

Payment will be reduced in many ways

%Mandated 2% reduction

3.1% Phase-in adjuster3.1% Phase in adjuster

5.9% Case mix offset

1% Outliers

Click to edit Master title styleOutlier payment reduces loss, does not eliminate itdoes not eliminate it

Based only on currently separately billables(e.g., labs, injectables, etc.)

(MAP – (($82.78 * CMA) + $155.44)) * 0.969 * 0.80Outlier eligible

portion of base rate

Medicare Allowable Payment

Donut hole Transition adjustment

Medicare portion

Case mix

adjuster

Loss for everydollar paid

Complete loss 20% lossUnderestimationdollar paid above MAP

=loss

Click to edit Master title styleWhat is the cumulative effect?

2% Congressionally mandatedUp to 3.1% Unrecooped phase in

~3% Unrecooped CMA1%+ Unrecooped outliers

>$30/Tx Payment Gap

Click to edit Master title styleQuality Incentive Programy g

Starting in 2012, up to 2% hold back if quality measures not met:

P f h l bi b l 10 /dL• Percent of hemoglobin measures below 10 g/dL• Percent of hemoglobin measures above 12 g/dL• Percent of URRs >65%Percent of URRs >65%

New measures will be added in 2013 and beyond:• Bone and mineral• kT/v• QoL?QoL?

Click to edit Master title styleImproved Adherence Leads to Better Outcomesp

“There was a positive and statistically significant relationship between proportion of patients enrolled inproportion of patients enrolled in pharmacy management and clinic-level DQI & MBD scores, and percent of patients in KDOQI range for P and PTH.”

Click to edit Master title styleKey takeaways

Oral vitamin D and levocarnitine are in the bundle now

Other drugs administered in the unit are subject to scrutiny (antibiotics, cardiovascular…)

Phosphate binders, calcimimetics and others added in 2014

CMS expects Medicaids and private insurers to figure out CMS expects Medicaids and private insurers to figure out the co-pay issues (no bad debt provision)

Y d t fi t d li f l it i D NOW You need to figure out delivery for oral vitamin D NOW, and other orals down the road

Q lit t b i t i d i th f f d d f di Quality must be maintained in the face of decreased funding

Click to edit Master title style

How do you contain costHow do you contain costAND maintain

good outcomes?

Click to edit Master title styleThe Recipe

Peritoneal dialysis for all appropriate patients Get the catheters out!− Lower antibiotics− Lower ESAsLower ESAs− Less time out of chair

One pharmacy provider Formulary Protocols and protocol adherence General

−Make a good phase in decision− Find the case mix adjusters

PREPARE! DON’T PANIC!

Remember…

This is a blip in the history of dialysis reimbursement.

Th ‘bi b dl ’ i iThe ‘big bundle’ is coming.

Q ti ?Questions?