News You Can Use – Legislative & Reimbursement Updates for 2004

Susan Granucci
Healthcare Reimbursement Specialist
snucci@aol.com

Keeping abreast of all of the legislative and reimbursement changes, especially at year end, is almost an impossible task, even for those who are involved on a daily basis. The following are highlights of some of the more important pieces of healthcare legislation and key 2004 Medicare reimbursement rate and policy changes for chemotherapy and radiation oncology, intended to help sidestep the minefields awaiting oncology programs in the coming year(s).

Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (DIMA)

Cost to Taxpayers of $395 Billion Over 10 Years

Title D (Medicare Part D) -
Prescription Drug Coverage Highlights

• Full coverage effective 2006, but beginning April 2004, a prescription drug discount card will be available that will cut prescription costs up to 25%

• Guaranteed to all seniors, but voluntary

• Provides extra help to low-income seniors

• If income is below $12,123 (individuals) or $16,362 (couple), there is no monthly premium, no deductible, and costs are $2 for generic or $5 for other prescription drugs

• Premiums average $35 per month, $250 annual deductible, and catastrophic coverage after $3,600 in annual out-of-pocket drug costs

• Seniors may choose service from any pharmacy
  Source: Mailing from Rep. Heather Wilson, R-NM, 12/2003

Medicare Advantage Program
Replaces Medicare + Choice

• Starting in 2004, all plans will be reimbursed no less than the rate for traditional Medicare fee-for-service amounts.

• Starting in 2010, a six year demonstration project will permit Medicare beneficiaries in six cities to choose from traditional Medicare or from at least two other private insurers.

Provider Funding

• Hospitals are to receive full marketbasket update for FY 2004 – 2007. The inpatient PPS rate increase is 3.4% for 2004.

• Quality of care data must be submitted to Medicare, or the hospital will be penalized by 0.4%.

• Physician payments will increase “not less than” 1.5% in 2004 and 2005 (over-riding the 4.5% reduction planned in the physician final rule of 11/7/2003). The new 2004 conversion factor is 37.3374.

• Areas with the geographic payment adjustment below 1.0 will be increased to 1.0 from 2004 through 2006.

• Bonuses of 5% are to be paid for 3 years to physicians in shortage areas.

• Durable Medical Equipment rates are to be frozen from 2004 through 2006, and competitive bidding for the largest metropolitan statistical areas to begin in 2007.

Deductibles

• In 2004, the Part B deductible remains $100, Part A increases to $876 from $812 for a hospital inpatient stay.

• In 2005, the Part B deductible will increase to $110, and thereafter will increase by average beneficiary spending rate increases. Beginning in 2007 (with a five-year phase in period), premiums will be determined based on income. In 2012, individuals earning over $200,000 or families over $400,000 will be required to pay 80% of the Part B premium rather than the current 25%.

Tax Deductions

• Health Savings Accounts (HSA) will permit up to $4,500 tax-deductible contributions to an HSA with a high deductible ($2,000) insurance policy.

• Employers will receive up to $1,330 tax-free for each retiree provided prescription drug coverage.

Source: HFMA Highlights 12/22/03 and
Commerce Clearing House Summary, 12/9/2003

Drugs (legislation found under heading of “combating waste, fraud, and abuse”)

Major new reimbursement methodologies for both hospitals and physicians will significantly reduce revenues.

Table 1

Medicare Final Rules – Federal Registers 11/7/03 for Hospital Outpatient and Physician Fee Schedule

Drug Administration Coding

• Major changes proposed for hospital coding were not adopted in the final rule, but one code was deleted (Q0085).

• Physician work values are increased for all administration codes, and a 32% transitional adjustment will be added for 2004. A 3% transitional increase is scheduled for 2005.

• Minimal [nursing] visit 99211 can no longer be billed with chemotherapy administration on the same patient, same day. This represents a major change for many physician office practices.
  

Table 2

Table 3

New Drug Coverage for Hospital Medicare Outpatients (Charge Master Updates Needed for the Following which were not allowed or coded differently in 2003)

Table 4

Table 5

Table 6

Financial Impact Analysis of New Drug Rates

Oncology Alliance estimates Part B losses to physician or free-standing clinics at $165 million in 2004, and $1 billion in 2005. Cancer Consultants, an internet information site, has provided via a cancerrx.info newsflash, additional insight. Their estimates are $1 billion per year for 10 years in decreased revenues. The recurring theme in Medicare’s reform act (HR-1) is the impetus towards privatization. The plans for future distribution of drugs through a specialty pharmacy are designed to create market forces to drive down prices, which is good. However, many oncologists who were surveyed appear to be not inclined to use specialty pharmacies. In any event, the next two years will be transformational in the business of oncology.

Under the average sales price methodology, 50% of sales will be higher and 50% will be lower than the ASP payment rate. Those who are not prudent buyers will lose money and may opt to discontinue practice, thus causing the average sales price to ratchet down. Under this scenario, many physicians will shift care back to hospitals. Those who continue office treatments will need to be both aggressive and creative to control costs and increase revenues. Conversely, the same may be said of hospital chemotherapy programs as well.

Radiation Therapy

As most have already heard, the overall fee reductions by Medicare for radiation therapy are significant for 2004 hospital outpatients. The following is a side-by-side comparison of hospital and physician national average fees for 2004 for the most frequently billed codes.

Table 7

The hospital reduction of 29% for high volume, complex daily treatment delivery will have the greatest negative impact overall, and financial planners need to begin preparing for the consequences. HDR reimbursement is down 31%, and other hospital rates for brachytherapy codes 77763-77777 are reduced 80%.

Other changes affecting radiation policies and charge masters:

Codes G0256 and G0261 have been deleted, and prostate seed implant codes are reverting to 7777x implant + 55859 cath/needle placement + C code for seeds. Reinstated codes: C1718 per I-125 seed at $37.34 (need to bill each seed), and C1720 for Palladium 103 at $44.67.

Evaluation and Management Fee Updates

In Table 8, hospital outpatient technical payments are limited to three reimbursement rates, regardless of the CPT status of new, established or consultative visit.

Table 8

Professional reimbursements reflect five code levels each for new patients, established patients, and outpatient consolations.

Table 9

Final Rule 2004 Medicare Inpatient PPS (Fed Register 8/1/2003)

Inpatient DRG 492 is to be assigned with ICD procedure code 00.15 for patients hospitalized for High Dose Interleukin 2 therapy for end stage renal cell or melanoma chemotherapy.

New Grants Web Site

For those who are interested, go to http://grants.gov/ for a new comprehensive web site by HHS, listing information to find and apply for all federal grant programs.

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