Pharmaceuticals Under the Medicare Prospective Payment System. Tracy J. Mayne Senior Director Health Economics & Med Informatics DaVita Inc.

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1 Pharmaceuticals Under the Medicare Prospective Payment System Tracy J. Mayne Senior Director Health Economics & Med Informatics DaVita Inc.

2 This is One Step in the Evolution of Dialysis Reimbursement 6 Composite Rate updates Bun ndle Glob bal Cap SSA Medicare dialysis coverage Composite rate for dialysis services EPOGEN approved HMA-PM HMA-PM revised Medicare Modernization Act EMP EMP revised EMP revised MIPPA Proposed rules Final rules

2003 2004 2005 2006 2007 2008 2009 20100 ndle 20111 Glob bal Cap SSA Medicare dialysis coverage Composite rate for dialysis

3 What s going into the new bundle? Old Treatment Cost (includes CR Labs) IV Drugs Oral Vit. D Non CR Labs New ESRD Bundled Services

4 Current and Bundled Medicare Payment Systems 2010 Structure Composite Rate x ($135) Area wage adjuster on 53.71% x Case mix Adjusters N=3 Drug Add on Payment (14.8%) ESRD Network deduction 50 DIALYSIS PAYMENT 0.80 Training + + = DIALYSIS sessions ($12 or $20) 2011 Structure Base payment $ Area wage adjuster on 41.37% Case mix adjusters N=10 x x + ESRD Quality Training DIALYSIS Network Outlier incentive + sessions = PAYMENT ($33.44) deduction Payment adjustment % Projected 2011 payment $ Anticipated x positive effects adjuster x Outlier payment adjuster 0.99 x Phase in adjuster x Congressional 2% reduction adjuster 0.98

37% Case mix adjusters N=10 x x + ESRD Quality Training DIALYSIS Network Outlier incentive + sessions = PAYMENT ($33.44) deduction Payment adjustment 0.

5 Base Payment $225 $7.48 $5.72 $9.64 $0.04 Dialysis support services $200 $0.06 Ultrafiltration $175 $150 $50.83 $0.43 $0.92 $7.48 $0.01 DME and supplies Dialysis facility supplies & IV fluids Laboratory tests Oral Levocarnitine $125 $0.42 $0.09 Oral Vit D Levocarnitine $100 $75 $ $0.12 $0.72 $5.72 $9.64 Antibiotics Alteplase Injectable iron Injectable Vit D Drugs are more than 1/3 of the bundle $50 $50.83 $ ESA Composite rate services $25 $- Total: $ per Tx (includes reduction for transition adjuster)

09 Oral Vit D Levocarnitine $100 $75 $145.99 $0.12 $0.72 $5.72 $9.

6 Part D (Oral) Medications Vitamin D Analogues Calcitriol Paracalcitol (Zemplar) Doxercalciferol (Hectorol) Cellular Management Levocarnitine Iron

7 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 in these categories is not ESRD-related and, separate payment would be made. p. 114

claim (by using a modifier) that a drug or biological in these

8 Some Drugs were Specifically Excluded

9 All Antibiotics Administered in a Unit are Fair Game Except 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 and separate payment would not be made. p Therefore, we included all antibiotics, with the exception of antivirals, 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

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

10 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. p117

furnished by an ESRD facility for ESRD-related conditions, the drug or biological

11 Phosphate binders, Calcimimetics and Other Drugs in 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

with how we interpret and define services under Medicare which supports

12 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 and meet the definition, iti such services would be considered d renal dialysis i services and bundled under the ESRD PPS. p 76

in the future and meet the definition, iti such services would be

13 CMS Expects Medicaid and Private Insurers to Work Through Drug Co-pay Issues We 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 ESRD 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 obligations under the new payment system. P Separately billables are not subject to bad debt provision

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

14 Two Options for Delivery: On Site Pharmacy or Network Agreement OPTION 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 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 pharmacy. p362.

comply with state pharmacy licensure requirements.

15 Example of New York State requirements 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.

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

16 Adherence is Critical In 2011 suboptimal adherence will underfund future patients

17 Payment will be reduced in many ways Mandated 2% reduction 3.1% Phase-in adjuster 5.9% Case mix offset 1% Outliers

18 Outlier payment reduces loss, Click to edit Master title style does not eliminate it Based only on currently separately billables (e.g., labs, injectables, etc.) (MAP (($82.78 * CMA) + $155.44)) * * 0.80 Medicare Allowable Payment Outlier eligible portion of base rate Case mix adjuster Donut hole Transition adjustment Medicare portion Loss for every dollar paid above MAP Underestimation = loss Complete loss 20% loss

19 What Click to is edit the Master cumulative title style effect? 2% Congressionally mandated Up to 3.1% Unrecooped phase in ~3% Unrecooped CMA 1%+ Unrecooped outliers >$30/Tx Payment Gap

20 Quality Click to edit Incentive Master title Program style Starting in 2012, up to 2% hold back if quality measures not met: Percent of hemoglobin measures below 10 g/dl Percent of hemoglobin measures above 12 g/dl Percent of URRs >65% New measures will be added in 2013 and beyond: Bone and mineral kt/v QoL?

measures below 10 g/dl Percent of hemoglobin measures above 12 g/dl Percent

21 Improved Click to edit Adherence Master title Leads styleto Better Outcomes There was a positive and statistically significant relationship between proportion of patients enrolled in pharmacy management and clinic-level DQI & MBD scores, and percent of patients in KDOQI range for P and PTH.

22 Click to edit Master title style Key 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 the co-pay issues (no bad debt provision) You need to figure out delivery for oral vitamin i D NOW, and other orals down the road Quality must be maintained i in the face of decreased d funding

23 Click to edit Master title style How do you contain cost AND maintain good outcomes?

24 Click to edit Master title style The Recipe Peritoneal dialysis for all appropriate patients Get the catheters out! Lower antibiotics Lower 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!

25 Remember This is a blip in the history of dialysis reimbursement. The big bundle is coming.

26 Questions?

Bundling and the QIP. Jay B. Wish, MD NKF of Illinois 15 th Annual Interdisciplinary Nephrology Conference October 24, 2014

Bundling and the QIP. Jay B. Wish, MD NKF of Illinois 15 th Annual Interdisciplinary Nephrology Conference October 24, 2014 Bundling and the QIP Jay B. Wish, MD NKF of Illinois 15 th Annual Interdisciplinary Nephrology Conference October 24, 2014 Who Pays for Chronic Dialysis? Short answer you (the taxpayer) do Legislative