Oncology Reimbursement Past, Present and Future

1. Oncology ReimbursementPast, Present and Future Association ofNorthern California Oncologists Medical Oncology Associationof Southern California

2. Welcome & Introduction Peter Paul Yu, MDANCO PresidentSteven Tucker, MDMOASC President

3. Forthcoming ANCO Events • ANCO Audio Conference:Managed Care Contracting in an ASP WorldWednesday, July 13th, 12PM • ANCO 2005 Annual MeetingTenaya Lodge at YosemiteOctober 14-16th

4. Acknowledgment of Support SponsorsAMGEN • APP/Abraxis OncologyBayer Oncology/Onyx Pharmaceuticals • Berlex LaboratoriesGenentech BioOncologyInternational Oncology Network/Oncology Supply • MGI PharmaMillennium • Novartis OncologyOncology Therapeutics Network/Onmark ExhibtorsAstraZeneca • biogenIDEC • Bristol-Myers Squibb Oncology Celgene • Enzon Pharmaceuticals • Lilly Oncology National Oncology Alliance OrthoBiotech/Tibotec Therapeutics • OSI Pharmaceuticals Pfizer Oncology • Sanofi Aventis OncologySchering-Plough Oncology • US Oncology

5. Oncology ReimbursementPast, Present and Future Dean Gesme MD FACP FACPEPast Chair, ASCO Clinical Practice CommitteePast Chair, National Coalition for Cancer SurvivorshipManaging Partner, Iowa Cancer Care

6. Do something every day that scares you! Eleanor Roosevelt

7. Ground Rules All Theories are wrong but some are useful.

8. Doctors are men who prescribe medicine of which they know little, to cure diseases of which they know less, to human being of which they know nothing.Voltaire 1694-1778

9. What Health Professionals and Patients Want Quality Care

10. What Payers Want Cost Control

11. Value = Quality Price ValueEquation

12. Everywhere the old order changes, and happy are those who can change with it Sir William Osler

13. System Change • Transactional • Transformational

14. Transactional Change -- incremental -- negotiated -- political -- imposed

15. Transformational Change -- altered paradigm -- shift in values -- reform in beliefs

16. Cost Control is Transactional Quality Improvement is Transformational

17. “Transformed means that when times are tough, we invest more in quality” Charles Buck – retired GE executive

18. Transformational Change Process Vision Strategy Trust Tactics Tests/Trials Implementation

19. Physicians and Trust • Only the best and brightest are chosen • Thus, you are the best • Others may not be as good • Thus, others may make mistakes • You will be responsible for all mistakes affecting your patients • Therefore, others can not be trusted • Teams include others and therefore can not be trusted

20. Transformational Change Vision Strategy Trust Tactics Tests/Trials Implementation

21. What We Say We Want • Patient-centric care • Pay for Performance • Improved Quality • Improved Outcomes

22. What We Will Pay For • Process-centric care • Pay for procedures • Piecework mentality • Identical Pay for Best or Worst Care

23. All theories are wrong but some are useful

24. Oncology Reimbursement • History • Current Situation • Future Possibilities

25. History Surgery - 1809 first elective surgery - 1867 antisepsis --- Lister - 1890 Halsted radical mastectomy - 1896 oophorectomy for breast cancer - 1913 American Society for Control of Cancer - 1936 Women’s Field Army - 1945 American Cancer Society founded

26. “There must be a final limit to the development of manipulative surgery, the knife cannot always have fresh fields for conquest and although methods of practice may be modified and varied and even improved to some extent, it must be within a certain limit. That this limit has nearly, if not quite, been reached will appear evident if we reflect on the great achievements of modern operative surgery. Very little remains for the boldest to develop or the most dexterous to perform.” Sir John Erichsen Lancet 1873

27. Surgery • Endoscopies • Laparoscopies • Sentinel node evaluations • Stereotactic procedures • Enhanced diagnostics – CT, MRI, PET, Ultrasound • RFA, cryoablative procedures • Nanotechnologies • Transplantation

28. Radiation Therapy • 3D computerized treatment planning • IMRT • Dynamic dose delivery techniques • Continuous RT • Stereotactic Radiosurgery • Intracavitary brachytherapies • Radioimmunoconjugates

29. Pay Per Procedure • New procedures priced liberally • Procedure becomes quicker, safer, and simpler with time • Eventually, commoditization occurs and price falls • Procedure replaced by new technology and again priced liberally at first

30. Chemotherapy Reimbursement • HISTORY - 1946 Nitrogen mustard - 1953 Aminopterin - 1960s alkylators and antibiotics - 1970s platinum compounds, BMTs - 1980s taxanes, biotherapies, ABMT - 1990s growth factors, anti-emetics - 2000 targeted therapies

31. Drug Reimbursement • 60s through early 80s – inpatient care – cost plus pricing • 80s-2005 – AWP pricing methodology -- evolution to outpatient care setting due to: - improved anti-emetic regimens - shorter drug infusions - availability of skilled oncology nurses - physician investment in infrastructure

32. Office Based Chemotherapy • 81.3% to 85.7% of chemotherapy given in office setting in 1990s according to National Centers for Health Statistics (CDC) • Patient preference in most situations • 98% office based chemotherapy in many practices • Skilled personnel, specialized facilities

33. Drug Reimbursement AWP pricing - simple, published reference - reproducible and verifiable - subject to manipulation leucovorin, lupron, generics - controversial - unsustainable

34. Oral Drugs • Levamisole --- inexpensive veterinary anti-helminthic product, repriced aggressively for adjuvant colorectal therapy. • Thalidomide --- banned in the 1960s. Used for ENL in 1970s and 1980s. Adapted and repriced in 2000. • Gleevec, Iressa, Tarceva

35. ASP Methodology • Untested • Fairness subject to question • Price to some will go up if it goes down to others • Average price not available to all • Congressionally mandated • Unsustainable • Some feel the result of ASP will be de facto drug price control

36. Drug Administration • CMS uses AMA CPT coding for reimbursing all physician services • Administration fees based on historical charges and “practice expense” before 2005 as no “physician work” considered • Practice expense defined using “top down” methodology ---average price per hour for each specialty rather than resource based

37. Drug Administration • Drug administration relative values supplemented in 2004 by 32% add-on mandated by MMA • ASCO and other surveys suggest that administration costs still severely undervalued even with the add-on in 2004 • 2005 add-on decreases to 3% • Temporary codes for Medicare only

38. Temporary Codes • New code for implanted port flush – minor effect financially • Add physician work component to admin codes – AMA RUC throws out physician survey data and uses lower values similar to 2004 • Unbundling of admin codes for 2005 – but practice expense recalculated to factor in unbundling • CMS mandates payments for physician time spent dealing with chemotherapy admin complications – but no new codes and no consideration of special resources • Treatment planning and services provided relative to chemo admin (patient teaching, phone calls, financial counseling, psychosocial support) not separately payable – AMA CPT Workgroup formed

39. Temporary Codes • 2005 temporary codes will be incorporated in AMA published codes in 2006 • Thus, 2005 will see private plans use different codes than Medicare • Confusing and complicated for patients, physicians and payers • Increased office overhead for billing

40. Americans always try to do the right thing, after they have tried every thing else. Winston Churchill

41. Demonstration Project • Patient-centric • Symptom management – quality of care • Fatigue, pain, nausea – simple scale with minimal documentation requirements • $130/patient/day for Medicare patients receiving parenteral drugs in office • Economically will restore 30% – 60% of overall reduction from 2004

42. MMA Changes for 2006 • Where will ASPs “land”? • Regression to the mean predicted for drug prices • 3% chemo administration add-on is eliminated • Competitive Acquisition Plan (MVI) – elective for practices, details uncertain • All drugs? Supportive care drugs? • Safety • Timeliness • Drug denials • Collection issues • Costs of administration for practices

43. The moral test of government is how it treats those who are in the dawn of life, the children, those who are in the twilight of life, the elderly, and those who are in the shadows of life – the sick, the needy and the handicapped. Hubert H. Humphrey

44. TheFuture

45. It’s difficult to make predictions, especially about the future. Y Berra, C Stengel, S Goldwyn, D Quayle, W Rogers, M Twain, V Gorge, G Marx, W Allen, and many others

46. The Future Transactional change OR Transformational change

47. Transactional Change • Increase efficiency --- CMS’ recommendation to physicians • IT/EMR – improved efficiency and ability to gather quality data, BUT who will pay for it – value equation does not favor this • Physician response – play by AMA/CMS rules ADD PROCEDURES • CT, MRI, PET, Labs, daily or weekly chemotherapy • Change patient mix – reduce indigent care, reduce Medicare exposure, refer poorly reimbursed cases to hospitals

48. When elephants dance, the chickens must be careful. Asian proverb

49. Transformational Change • Physicians paid for medical advice and care services • Reasonable and equitable payment for all expenses related to chemotherapy services and management • Commitment to Quality assessment and improvement • Trust and teamwork

50. Obstacles to Transformation • Lack of trust • CMS commitment to AMA CPT process • Limited ability of CMS to spend on transformational projects • Preoccupation with cost control • Private payers deferral to CMS payment methodologies • Lack of techniques to define quality