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COMPETITIVE ACQUISITION PROGRAM UPDATE Comments on the Proposed Rule The Medicare Competitive Acquisition Program (CAP) mandated by the Medicare Modernization Act of 2003 (MMA) is scheduled to begin January 1, 2006. The proposed rule was published March 4, 2005, and the comment period on the proposed rule for the CAP ended April 26, 2005. These comments are available at: http://www.cms.hhs.gov/regulations/ecomments/default.asp. CMS Publishes Interim Final Rule In response to comments received on the proposed rule the Centers for Medicare and Medicaid Services (CMS) published an interim final rule titled: Medicare Program; Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B in the Federal Register Vol. 70, No. 128 Wednesday, July 6, 2005. This interim final rule addresses the comments submitted by potential vendors, professional organizations, specialty societies, pharmaceutical manufacturers, physicians and other interested parties and is another step toward implementation of the CAP program. Comments will be accepted until September 6, and bidding by potential vendors will begin on July 6, with bids due to CMS by 5:00 P.M., August 5. Program Details Competitive Acquisition Areas:
Drugs: There will be one broad category of CAP drugs encompassing most of the drugs now administered “incident to” in the oncology clinic.
CAP drug pricing will be included in the Average Sales Price (ASP) calculation. This has wide implications for physicians who don’t participate in the CAP. If pricing offered by manufacturers to the CAP vendor is less than the physician cost the ASP will decrease in proportion to the volume of drug sold at the CAP price. When a non-CAP physician reports that their cost of a drug included in the CAP is more than Medicare’s reimbursement (ASP + 6%) CMS is certain to respond that the physician has the option to participate in the CAP program. They will not be inclined to make any pricing adjustments for the non-CAP physician. However, under the current rule physicians can enroll in CAP only during the yearly open election period of October 1 - November 15. Process for Obtaining Drugs: The practice can place an order by telephone as long as it is followed up by a written order that includes:
Subsequent orders for a particular patient may not require all of the above information. Claims Processing:
CMS will not provide a management fee to physicians as compensation for the additional administrative burden of participating in the CAP. Their rationalization is that the decreased financial burden of carrying the drug cost along with the decreased administrative burden of billing and collecting for the drugs offsets any additional administrative burden of CAP participation. Unused & Wasted Drugs: CMS states that they will defer to state laws and regulations as well as manufacturer requirements with regard to “reusing” unused drugs and/or drugs that are left over. The CAP vendor retains liability for unused or wasted drug. The CAP vendor is responsible for any unused/wasted drug that requires disposal. The physician is responsible for appropriately packing the drug. This is not to include routine disposal of drugs mixed in IV bags or other supplies used in the administration of the drug product. Drug Delivery: Vendors must ship drugs within two days of the drug order; emergency orders will be delivered within one day. The physician may use his/her stock to be re-supplied by the vendor when immediate treatment is necessary (certain requirements must be met). CAP vendors must ship drugs in unopened manufacturers packaging, with the exception of packaging consisting of multiple individual units of the drug. In these cases individual vials must be unopened.
The only exception occurs when the beneficiary does not pay his/her cost-share. The CAP vendor does have the right to refuse to make further shipments of the beneficiary's drug when the coinsurance has not been paid within 45 days of the postmark date of the CAP vendors billing. If the beneficiary requests financial assistance the vendor must allow for an additional 15 days before they can refuse to ship more drug. Additional Information The list of CAP vendors, the specific NDC numbers they will be providing
and the participating CAP physician election agreement will be posted
by October 1, 2005 on the CAP web-page at: http://www.cms.hhs.gov/providers/drugs/compbid
Physicians may sign-up to participate in the CAP during the election period
which runs from October 1, 2005 – November 15, 2005.
Who Will Participate in CAP? Physicians Surveys and questionnaires regarding physician interest in participation in the CAP show that the majority of physicians report they are not likely to participate in the program. In April, the Association of Community Cancer Centers (ACCC) surveyed physicians on their level of interest in CAP. The survey reports that of the 227 respondents 52% responded that they were “definitely not” likely to participate while 3% reported that the likelihood of their participation was a “definite yes” and approximately one-quarter responded that they were either “undecided” or “needed more information”. However, when asked under which circumstance they would consider CAP participation over 50% reported that if their acquisition cost of the drugs was lower than or equal to ASP + 6% they would consider obtaining their drugs through a CAP vendor. To read the ACCC survey results go to: http://www.accc-cancer.org/newsletters/accc/cap%20apr05_results.pdf Vendors Oplinc has had the opportunity to speak with several potential CAP vendors regarding the CAP program. Many of the issues raised by the potential CAP vendors echoed the concerns and issues facing oncologists today. CAP as written also contains some requirements that increase the financial risk for CAP vendors. Under the ASP model physicians have the ability to evaluate and control financial risk associated with treating Medicare patients. Financial counseling provided before the start of treatment allows for the identification of patients who will have significant out-of-pocket expenses and those whose treatments may not be covered by Medicare due to medical necessity. The decision as to whether or not to accept the financial risk can then be made. CAP vendors do not have the ability to accurately evaluate the financial risk of participation in the CAP nor do they have the ability to control the risk once they are in the program. They also have limited ability to end the risk, since their contract is for three years. While there is a provision allowing the CAP vendor to withdraw from the program if they can prove financial hardship it requires a minimum six-month notice, meaning they must give notice by June 30 in order to withdraw on December 31st of that year. Potential vendors have offered several optional models for the CAP that would decrease the vendor’s financial risk including:
In the interim final rule CMS declined to make any of the above changes proposed by potential CAP vendors. There is speculation that unless there are some substantial changes to the program those entities that are most qualified to participate in the CAP as vendors will not be interested in bidding for the Medicare contract. For vendors the CAP as described in the interim final rule represents a high risk low return venture.
Evaluating CAP Participation
Information to gather now: The percentage of your patients on treatment who would be affected by CAP: (Medicare Fee-For-Service, do not include Medicare Advantage patients). Determine the percentage of your cost and revenue that would be impacted by participation in CAP. If you have a very low number of Medicare patients you might find the administrative burden/cost of participating in the CAP outweighs any advantages. Top regimens used for those Medicare patients: Are the drugs most frequently used by this patient population those drugs that represent a revenue loss at ASP + 6%? Be sure to include all rebates and discounts from manufacturers, distributors and GPOs when comparing acquisition cost to reimbursement. Will the drugs on those regimens be available through the CAP vendor? A complete list of drugs included in the CAP begins on page 455 of the CAP Interim Final Rule and is also available on the Oplinc website: www.Oplinc.com How will your contracts with pharmaceutical manufacturers and distributors/ GPOs be affected? Identify Medicare drug volume for all CAP drugs, and reduce purchases for those drugs by that amount to determine how your contracts and rebates with pharmaceutical manufacturers, distributors and/or GPOs that are based on volume or market-share will be impacted. For example, your distributor/GPO might offer a quarterly rebate on purchases structured like the example below: Purchases of $300,000 per quarter = 1% rebate If drugs purchased under CAP are removed from your total volume calculation is the loss of revenue through rebates and volume discounts greater than the savings achieved through CAP participation? If you outsource your billing how will CAP participation affect your contract? Typically billing companies charge a percentage of collections, if you participate in the CAP program your collections will go down as you will no longer be collecting for those drugs included in CAP for Medicare patients. However, the drugs would still need to be reported on the claim form as well as other information necessary to process the claim. Billing companies may want to renegotiate the contract based on the reduction in collections and the increase in information that must be reported with the claim for drug administrations. To what degree could technology currently in place in your office automate or streamline the transfer of information necessary for drug ordering and claims submission under CAP? Can your practice management system, electronic medical record or drug inventory cabinet generate a document (electronic or hard-copy) that will contain all the necessary information for ordering drugs through the CAP vendor? Do you regularly generate a treatment order form (either electronically or hard-copy) for each new treatment or when treatment changes? Are practice efficiencies, effective claims and collections procedures in place? Participation in CAP requires that providers file claims for drug administration with the information on the drugs administered within fourteen days. If your practice is currently unable to file claims in this time frame you might find it difficult to comply with the billing requirements of CAP. Is your billing software program capable of storing and transmitting multiple prescription numbers? As a CAP provider, you are required to appeal drug administration denials. Do you currently have an effective and efficient system and processes for handling denied claims? Which staff member(s) will perform additional administrative duties for CAP? Participation in the CAP will require significant changes in drug ordering, receipt, storage (whether a separate physical inventory or electronic inventory) and disposal. CAP drugs will likely be ordered and received on a daily basis as opposed to the 1- 2 weekly shipments most practices receive. CAP drugs must be accounted for in a separate inventory, resulting in additional staff time necessary for both ordering and stocking drugs. Finally, CAP drugs must be delivered to the location at which they will be administered. Practices with satellite offices will have to have someone at the site to receive the CAP drug shipments when they arrive. CMS denied the vendors the ability to perform admixture services, requiring them to ship drugs in unopened manufacturers’ packaging. The CAP vendor is financially responsible for handling wasted/unused drug that must be returned. Is the CAP vendor offering other valuable services? CMS is not limiting the CAP vendor’s ability to offer other services to physicians electing them as their CAP vendor as long as it does not violate any Federal or State Law. In response to the question of whether a CAP physician can enter into an agreement with the CAP vendor to purchase drugs for their non-Medicare patients CMS replies: This interim final rule does not prohibit approved CAP vendors and
physicians from entering into a contract or agreement governing their
arrangements for the provision of CAP drugs or other items or services.
However, parties to such arrangements must ensure that the arrangements
do not violate the physician self-referral (‘‘Stark’’)
prohibition (section 1877 of the Act), the Federal anti-kickback statute
(section 1128B(b) of the Act), or any other Federal or State law or regulation
governing billing or claims submission. For example, an agreement under
which the approved CAP vendor provides billing services to a physician
must comply with the Stark law, antikickback statute, and Medicare rules
regarding billing agents (§ 447.10). On the other hand, an approved
CAP vendor may not contract to furnish drugs at below market rates to
a physician or a group for their private pay patients in exchange for
the physician’s or group’s CAP business. Viable Alternative to “Buy and Bill” Needed The CAP as it is defined in the interim final rule is not particularly attractive to either physicians or potential vendors. However, as the margin between acquisition cost and Medicare reimbursement continues to shrink more physicians will be interested in an alternative to the current Medicare “buy and bill” program. A CAP designed in such a way as to remove all unnecessary administrative
burdens and to ensure prompt delivery of drugs while maintaining the physician’s
autonomy to order treatments based on the individual patients need would
provide a welcome alternative. LATE BREAKING NEWS! CMS Suspends CAP Vendor Bidding Process On Wednesday August 3, 2005 CMS posted a statement on their website announcing the suspension of the CAP vendor bidding process. CMS states that the suspension will allow for a more thorough review of public comments and provide them the opportunity to implement further clarifications to the bidding process. The article on CAP in this newsletter details vendor and physician concerns regarding the program. In their notice detailing the changes in the timeline for CAP and the suspension of the bidding process CMS identifies the goal to “improve the efficiency and attractiveness of the CAP…” The suspension of the bidding process means that all stakeholders have a real opportunity to impact the program and thus the level of participation by vendors and physicians. Read the section of this newsletter titled: Another Opportunity to Participate in the Process for details on how to comment on the interim final rule. The new projected implementation date for CAP is July 2006. Read the CMS announcement at: |
Another Opportunity to Participate in the Process! Read the interim final rule at: http://www.cms.hhs.gov/ The Interim Final Rule Medicare Program; Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B is open for public comment until 5 p.m. September 6, 2005. It is important to remember that all stakeholders will take this opportunity to comment in the hopes of influencing the direction of this program. The most effective comments are those that address specific issues identifying both flaws and opportunities for improving the program. When commenting, refer to file code CMS-1325-IFC To Comment Electronically: Attachments should be in Microsoft Word, WordPerfect, or Excel By Mail: Centers for Medicare & Medicaid Services NEW MEDICARE APPEALS PROCESS Appeals Restructuring Background CMS has been slowly introducing changes to the Medicare appeals process. Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) mandated a major restructuring of the Medicare appeals process. The major changes required under BIPA include:
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) also contains required changes to the appeals process including:
On March 1, 2005 CMS published the Interim Final Rule “Medicare Program: Changes to the Medicare Claims Appeal Procedures” This Interim Final Rule was published in the Federal Register Vol. 70, No. 44 on Tuesday March 8, 2005.
Important Changes Prior to the implementation of the changes mandated under BIPA and the MMA there was no definite time limit imposed on the adjudication of the Medicare claims appeal; the new appeals process limits the appeals adjudication process to 300 days. If the Medicare contractor does not issue a decision within the specified time limit for that level of the appeals process the party may request that the appeal be escalated to the next level of appeal. The first level of appeal was formerly called a review, the new name
for the first level of the appeals process is the “Redetermination.”
CMS has posted a Medicare Redetermination Request Form on their website
at: http://www.cms.hhs.gov While use of this form is not mandatory it is recommended. Under the new regulations the redetermination notice must be written in an understandable manner and must:
Effective March 8, 2005 providers participating with the Medicare program and accepting assignment on all services performed have the right to appeal the initial claim determination and any subsequent appeal decisions without having to obtain an “assignment of appeal rights” from the Medicare beneficiary. New Appeals Process and Timeline First Level of Appeal – Redetermination: If a party is dissatisfied with an Initial Determination of a claim they may request a Redetermination, the request must be filed within 120 days from receipt of the initial determination. Upon receipt of this request the Medicare contractor has 60 days to issue a decision. Note: See information above on use of CMS form 20027 for this first level of appeal. Second Level of Appeal - Reconsideration: If dissatisfied with the Redetermination, the party may request Reconsideration if filed within 180 days from the date of the redetermination. The QIC performs the reconsideration; they have 60 days from receipt of request for redetermination to issue a decision. Note: All relevant supporting documentation needs to be submitted with this request or it will not be allowed to be introduced later in the appeals process unless the party can show good cause for not submitting the documentation. Third Level of Appeal - Administrative Law Judge: If dissatisfied with the Reconsideration the party may request a hearing with an ALJ provided that the amount in controversy (AIC), is at least $100 and the request is received within 60 days of the reconsideration decision. The ALJ has 90 days from receipt of request for ALJ hearing to issue a decision. Fourth Level of Appeal - Medicare Appeals Council: If dissatisfied with the ALJ decision the party may request the MAC review the case if the request is filed within 60 days of the ALJ decision. The MAC has 90 days to issue a decision. Fifth Level of Appeal - Federal District Court: If dissatisfied with the MAC decision the party may file suit in federal district court providing that the amount in question is greater than or equal to $1000 and that the request is received within 60 days of the MAC decision.
More Information The Interim Final Rule eliminates telephone appeals effective January 1, 2006. CMS states that written appeals will facilitate the efficient and accurate handling of appeals. The reopening process can be used to handle many of the issues currently handled through the telephone appeals process. Minor errors and omissions can be corrected without having to initiate the appeals process. Clerical errors such as miscoded claims resulting in a denied claim may be handled through the reopening process.
PRIVATE PAYER DRUG REIMBURSEMENT
Average Wholesale Price Average Wholesale Price (AWP) represents the national average of list prices of a drug; this figure does not include the discounts given to large purchasers, rebates or contract pricing. AWP prices are published by third-parties including:
Each of these publishers may apply a different formula to determine AWP resulting in the differences in the reported AWP’s for a particular drug. Additionally, some private payers will establish their own AWP based on information provided to them through undisclosed third-parties who independently determine a drug’s AWP and sell this information to the payer. In response to the growing criticism of the AWP pricing methodology both Medi-Span and First Databank have recently announced changes to their drug pricing calculations. First Databank will phase out the Blue Book AWP and replace it with the Alternative Benchmark Price which will be based on the Wholesale Acquisition Cost (WAC) or if the WAC is unavailable the Direct Cost. Private Payers If you are negotiating contracts you will find that payers are increasingly moving towards an Average Sales Price (ASP) methodology. This is understandable when you consider the substantial negative press surrounding the practice of reimbursing Medicare drugs based on an AWP methodology. The alternative methods of determining average drug pricing listed above are untested and private payers are more likely to choose to follow the lead of CMS (Centers for Medicare and Medicaid Services) and ASP pricing than they are to invest in a new methodology of drug reimbursement. Although moving to a new drug payment methodology is not necessarily negative there are particular issues to consider when negotiating with a payer who is applying ASP to the reimbursement of drugs including:
Once implemented, the Medicare Competitive Acquisition Program (CAP) will affect the ASP formula as manufacturer pricing to the CAP vendors will be included. This will drive the ASP for a large number of drugs lower than current ASP levels. If the private payer bases drug reimbursement on Medicare’s ASP it may be impossible to obtain some drugs without incurring a financial loss. IMPORTANT NOTICE
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CAP
will be initiated on a national level requiring vendors to be able to
provide CAP drugs to all 50 states. CMS states that a single national
acquisition area will make the CAP program more attractive to vendors
and allow physicians equal access to this alternative to the “buy
and bill” method of drug acquisition.
The
vendor does not have the ability to refuse shipment of drug based on their
belief that the drug may not be reimbursed by Medicare. However, the vendor
may contact the ordering physician to discuss the order with the physician,
and if the physician does not change the order the vendor has the right
to seek an ABN from the patient. The vendor must send the drug regardless
of whether or not they are able to obtain a signed ABN from the patient.
The Medicare carrier (not the CAP vendor) will determine medical necessity.
If the claim for drug administration is denied the physician is required
to appeal. The vendor may also appeal the drug denial. 
If
CAP vendors are expected to make a profit based on the spread between
acquisition cost and Medicare reimbursement they are at a greater disadvantage
than physicians are today. They should be able to negotiate better pricing
on generics as they will effectively implement a “formulary”
for these drugs but these new discounted prices are currently to be included
in the ASP formula. This will eventually erode their margin just as physicians
find today’s rebates and discounts reflected in tomorrow’s
lower ASP. Single-source drugs are not likely to be a source of much pricing
flexibility as the CAP vendor does not currently have the ability to manage
formularies outside of the generics. 
Each
practice must determine whether participation in the CAP program is a
viable alternative for their practice. You should be prepared to evaluate
the program and to identify the likely positive and negative consequences
of participation.
