3/5/2016. Tc 99m Healthcare Economics for Radiopharmacists. Payment options to promote stable and secure Tc 99m supply are constrained by

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1 Disclaimer Healthcare Economics for Radiopharmacists Understanding the Radiopharmaceutical Supply Problem APhA 2016 Daniel J. Duvall, MD Chief Medical Officer CPI U.S. Representative to High Level Group on the Security of Supply of Medical Radio isotopes 7 March 2016 This presentation is designed to be both convey CMS policy and illustrate principles used in that policy development which may further an understanding of healthcare reimbursement factors that influence Mo 99 economic analyses. Policy statements and CMS data references are therefore cited; additional discussion expressed herein does not necessarily represent the views or opinions of CMS or the Federal government. 1. Hospitals are reimbursed for radio pharmaceuticals by a. A single payer system that pays cost plus profit for the radio isotope pharmaceutical bundle. b. A Medicare defined system where all payers base payments on Medicare OPPS packaged payments. c. A three payer system in which Medicare, Medicaid and Blue Cross each establish a single reimbursement rate. d. A many payer system in which reimbursement is made through a variety of typically bundled payments. 2. The Q9969 add on pay is designed to cover the cost of a. All pharmacy costs associated with implementing a new processing and billing system for LEU sourced. b. All hospital costs for acquired from alternate (non reactor) sources. c. Additional production (irradiation and processing) costs associated with LEU conversion and full cost recovery. d. Only the added cost of transport from LEUsource suppliers. Radio isotopes and Health Insurance Mo 99/ Marketplace Payment options to promote stable and secure supply are constrained by The marketplace, including free market economics Statute Consistency in policy, reimbursement and administration Inconsistency across payers 1

2 How Does the Get Paid by the Provider? Distribution of Predominantly FFS Medicare Scans by Place of Service 2014 Procedures by Place of Service 2,500,000 2,000,000 1,500,000 Office Inpatient Hospital 1,000,000 Outpatient Hospital 500,000 NM Cardiac NM Procedure Source: FFS Medicare Physician s Data, excludes certain high percentage non Tc procedures. Invoice Model 55 How Does the Provider Get Paid by the? Constraints may exist, such as long term contracts or negotiated per dose pricing Single Model Payment Must Cover Cost Single Model Complexities Model: 50% Increase in Mo 99 Costs (LEU, FCR, ORC) Cost: Generator/n Cost: Kit/n Cost: Prep, OH, Delivery : R10 Pass Through R30 RadioPharm Pass Through Must is Relative Single is Relative RadioPharm Hospital Single may vary by province, region Single may reimburse hospital not pharmacy Cost pressure on pharmacy Minimize cost, maximize revenue Costs are unknown (limited disclosure) Costs may vary by region, supplier Payment schedule may be locked in Cost pressures in supply chain: Accept reduced profit Reduce OH Reduce drug cost Reduce cost (efficiency, negotiation) 2

3 U.S. Marketplace Current Reimbursement Mechanisms (Medicare FFS) OPPS: 1 Office: s MA: 2000 Plans Medicaid: 100+ s Commercial: Contracts Healthcare Coverage Source Medicare OPPS Medicare Office Medicare C Medicaid Military/VA Commercial Private Pay U.S. Census Bureau, Health Insurance Coverage in the United States: 2013, Updated with Medicare Fast Facts Data discrepancies exist. Medicare IP: DRG bundle Single MS DRG payment is made for the entire facility cost of admission Prospective payment based on average charges converted to costs. With few exceptions, all services are packaged. Medicare OP Hosp OPPS: APC bundle, LEU add on Single APC payment is made for the entire facility cost of the procedure Prospective payment based on average charges converted to costs. Diagnostic radiopharmaceuticals are packaged. Transitional pass through payments may be available for new expensive agents (42 CFR ). Medicare OP Office MPFS: Invoice, AWP Single payment is made for the facility cost plus the professional fee while a separate single payment is made for the radionuclide plus any pharmaceutical moiety Radiopharmaceutical payment may be based on invoice or based on 95% AWP, depending on the methodology used by the contractor (carrier) in Payment reflects invoice cost or AWP estimation of cost to physician (price). Cost to physician would include plus pharmaceutical or kit plus preparation and delivery, and is then adjusted to reflect pharmacy business decisions (e.g. profit) Is Typically Packaged Current Reimbursement (Beyond FFS Medicare) Medicare Advantage Reimbursement 1,945 contracted MA plans (2015) Capitated reimbursement by CMS Variable (commercial) reimbursement to facilities Medicaid Reimbursement Arm s Length Reimbursement Block grant Variable percent of expenses carried by federal government 50 States plus DC plus territories One or more payers per state Typically have multiple large capitated MCOs Typically many small capitated payers (e.g. PACE) Variable (commercial) reimbursement to facilities MA and Medicaid Have Delegated s Current Reimbursement (Beyond CMS) Commercial/MA/Medicaid: APC, APG, DRG bundles Invoice Percent (up to 100%) of Charges Fee schedules (AWP, ASP, Medicare, Negotiated) Captive and Capitated Private Pay Percent (typically 100%) of Charges Charity and Loss Invoice Model 50% of Charges Model

4 Full Charges with Markup AWP/ASP* Model R65 R65 55 T1 T2 4 5 T3 2 5 yrs (100%) T1 T2 R52 T3 *AWP=Average Wholesale Price ASP=Average Sales Price APC Packaging APC/APG* Model Radio Pharm Tests s IV Scan 1. Packaging B B B A B B A A 2. Grouping 3. Averaging R / *APC=Ambulatory Payment Classification T1 T2 s T1 T2 18 T3 3 5 yrs (100%) T1 R1200+R10 T2 R1202+/ T3 R1205++/ Other Costs 3300 Marketing 4715 Other Savings 2700 T2 Charges Reduced To Costs APG=Ambulatory Payment Group R1400? R1202 R1000? DRG, Capitated and Captive Models *DRG=Diagnostic Related Group R / T1 T2 s T1 T2 18 mos DRG T1 R3000 T2 R3000++/ Other Costs Marketing 015 Other Savings 9000 T2 R2700? R3001 R3300? Capitated: T1 R242/mon (T2 R242/mon) Captive: R0 Mo 99 Cost ~60% Gen Mfc Mo 99 Cost Increase Pharm Hospital 200 doses From 10 Ci Gen R66 R44 R R52+10 R110 R R0 R1200 R3005 R1200 R3005 R40 R0 Is reimbursement adequate? Reimbursement (R) sample for cases across all payers Office R52 R72 R47 R40 R59 Ordering MD: No Impact Patient:

5 M0 99 Market Response Take Home Lessons Proc Accounting Grade Price X FCR 2250 Y FCR( ) 1500 Z Lowball 00 Gen Mfc OH Mo 99 Cost Time Push Price Gen Contract Year Yr 1 Yr 2 α 3000 β 2000 γ 2500 Pharm OH Mo 99 Cost Elu on Efficiency Prep Cost/Time Push Price Phar Contract Year Yr 1 Yr 2 Yr 3 A 45 B 55 C 60 D 40 HOSP Hosp OH Cost Dose Admin Cost Push Price Market Pressure Overrides Reimbursement Rate No single reimbursement rate Supply sensitive; demand relatively price insensitive Economics: Market forces are integral to the supply chain Reimbursement Proposals: What drives cost and who benefits? Radiopharmaceutical is NOT the radioisotope How to drive reimbursement UP the supply change? by itself is small cost and clinically irrelevant OPPS NM Payment Trends over Time OPPS Add On Payment $1, OPPS Procedure Payment Trends Promote Security of Supply in the Face of Asymmetric Increases in Cost of Irradiation and Processing due to LEU Conversion and Full Cost Recovery $1, $ $ $ $ $ Add on Reimbursement Policy Add on Reimbursement Policy Policy Provide a $10 per dose payment to hospitals reimbursed under OPPS to cover the incremental cost of Tc 99 produced from non HEU sources using Full Cost Recovery (for doses that are at least 95% non HEU sourced.) Public Request Remove barriers to non HEU/FCR adoption if increased costs of non HEU/FCR sources exceed current payment levels Authority other adjustments as determined to be necessary to ensure equitable payments [to hospitals under OPPS] in accordance with section 1833(t)(2)(E) of the Social Security Act. Policy addressed in the 2013 Hospital OPPS Final Rule, FR vol.77 pp , 15 November 2012 Rationale for Policy Limited to OPPS Limited statutory authority Equitable payments for hospitals disproportionately hit by higher cost Reflect only cost differentials, not distribution, pharmaceutical, procedure, contracting or transition costs Minimized administrative burden Non HEU sources as proxy for FCR Single payment for unadulterated (95%) dose 5

6 Non HEU Add on Policy Challenges Statutory Limitations Market Significance and Administrative Burden Business Sensitive Data Anti trust Concerns Data Variability Basis for Add on Pricing Supply Chain Cost Accounting Principles Subsystem 1: Model Generator Cost/Ci of Mo 99 Model volume: flow of units (Ci of Mo 99) Superimpose cost per unit (Ci) Subsystem 2: Model Dose Cost/mCi Mo Tc dissociation at pharmacy Elution frequency Wastage Per dose (mci of ) variability Cost Model Invalid Costs Excluded Transitional costs, non incremental costs $10/dose is $2000/200 dose generator Add on Timing 2013 Payment Instituted 2018 Expected Sundown Transitional add on during non HEU conversion Payment Execution identifies LEU sourced dose Hospital submits Q9969 HCPCS code on claim Medicare remits $8, beneficiary liable for $2 (statutory cost sharing) Upstream Impact Analysis (Assessment) Signaling: Market will bear added costs of LEU and FCR is a commodity (supply) within the healthcare market Impact prices do not correlate with reimbursement Each step of the supply chain is subject to market forces to maximize reimbursement, maximize profit and minimize costs. Such forces pass increased cost downstream; they do not pass increased reimbursement upstream 1. Hospitals are reimbursed for radio pharmaceuticals by a. A single payer system that pays cost plus profit for the radio isotope pharmaceutical bundle. b. A Medicare defined system where all payers base payments on Medicare OPPS packaged payments. c. A three payer system in which Medicare, Medicaid and Blue Cross each establish a single reimbursement rate. d. A many payer system in which reimbursement is made through a variety of typically bundled payments. 2. The Q9969 add on pay is designed to cover the cost of a. All pharmacy costs associated with implementing a new processing and billing system for LEU sourced. b. All hospital costs for acquired from alternate (non reactor) sources. c. Additional production (irradiation and processing) costs associated with LEU conversion and full cost recovery. d. Only the added cost of transport from LEUsource suppliers. 6

7 Questions? Daniel Duvall, MD Chief Medical Officer, CPI