Coping Strategies for Dealing With the Release of Medicare Data

Patience and positivity stressed in dealing with reimbursement fallout

STUART MICHAELSON, CONTRIBUTING EDITOR

Millions of us can remember, as children, hanging onto a bad report card until the next day, so we could get a quick parental signature on the way out the door, to avoid the inevitable “What happened here?” or worse.

It may have seemed like that last month, when Medicare data hit computer screens and newspaper pages, revealing information on some 880,000 US healthcare providers. Ophthalmologists figured as the largest recipients of all Medicare payments to providers in 2012 — to the tune of 7%, or $5.6 billion.

However, as ophthalmologists, ophthalmic consultants, and leaders of professional societies have conveyed, the report card — which also noted that ophthalmologists comprised nearly half of the top 100 physicians receiving the largest payments — was not bad; it was just misleading.

They note that the data lacked context on, among other things, these key facts:

• the ramifications of the high percentage (about two-thirds, on a per-capita basis) of Medicare beneficiaries who receive ophthalmology services;

• the mounting numbers of cases of age-related diseases such as AMD, cataracts, and glaucoma, as people live longer;

• massive overhead spurred by the high costs of technology, drugs, and staff;

• physicians having had no opportunity to review the Medicare data beforehand;

• the data reflecting gross, not net, revenue; and

• top practices drawing large numbers of patients.

A CAUTIONARY NOTE

Nevertheless, these thought leaders sound a cautionary note in confronting the Medicare data: Do not overreact, and do not go negative. “There is a saying in politics,” says Stephen C. Sheppard, managing principal, real estate and operations for the Consulting Group, LLC, of Springfield, MO. “If you are explaining, you are losing.”

Mr. Sheppard has advised his clients to say this: “We are pleased to be in a position where we are able to offer state-of-the-art vision care for a rapidly changing population. A lot of the effects you are seeing have resulted from rapid advances in technology and a dramatic improvement in the quality of care for surgical patients from where it was 15 or 20 years ago. The cost of technology for cataract surgery and retinal disease has raised the cost of providing care but has dramatically improved the outcomes.”

New York ophthalmologist Nathan Radcliffe, MD, explains further, “It takes a lot of outlay of capital to maintain a practice, and one reimbursement not paid wipes out profits for the next 20 cases.”

PLETHORA OF ISSUES RAISED

Other factors outside the lines of the CMS data include the following.

Economic Benefits

An AMA-commissioned economic impact analysis reported that US physicians produced $1.6 trillion in direct and indirect economic activity in 2012, and they supported an average of more than 13 jobs apiece.

Each physician supported nearly $2.2 million in economic output and more than $1 million in wages and benefits, according to the report, written by IMS Health in Alexandria, VA. In short, the CMS data do not consider overhead or societal benefits.

Flawed Data

The Medicare data are riddled with errors, some due to doctors filling out wrong specialties, as well as missing records and outdated data. The AMA and the American College of Physicians also issued criticisms, noting errors, the lack of quality measurements, the number of services, and cost-benefit measurements.

Complex Patients, High-level Care

The ASRS issued a statement cautioning patients not to make treatment calls based solely on the CMS data. For instance, the physician should note that the complexity of diabetes patients whom retina specialists typically see is greater than that of diabetes patients who visit comprehensive ophthalmologists.

In addition, retina specialists use advanced, sophisticated technology for diagnostic testing and treatment, we well as expensive pharmacologic agents.

An Older Patient Base

The AAO issued a statement pointing out that the “significant” portion of Medicare Part B payments to ophthalmologists is due to the frequency of age-related eye diseases among patients 65 years and older, as well as the costs of overhead, staff, technology, and drugs. The American Society of Cataract and Refractive Surgery (ASCRS) noted that more than 3.3 million cataract surgeries are performed in the United States annually.

Overall Compensation

A Medscape report indicated that ophthalmologists, with an average annual income of $291,000, rank 10th among specialties (exceeded by orthopedics at $413,000 and cardiologists at $351,000, among others). Additionally, they are ranked 19th — with dermatologists at the top — in considering themselves fairly compensated.

Value of Services

Spending $5,000 on bilateral cataract surgery provides more than $100,000 in financial return on investment (ROI) to patients, Medicare, Medicaid, private payers, and the economy. Caregiver costs drop, more people can still work, the risk of depression declines, and in-home injuries and nursing home admissions decrease.¹

DISSECTING THE VALUE OF CARE

As Gary C. Brown, MD, chief medical officer and codirector of the Center for Value-Based Medicine in Flourtown, PA, explains, cataract surgery for one eye produces a 20.8% value gain or improvement in quality of life throughout the remainder of the patient’s life, with bilateral surgery producing a 36.2% gain.²

For glaucoma, treatment with timolol, has shown a value gain of around 20%. Further, glaucoma therapy, over 21 years at $7,500 in Medicare-approved, direct medical reimbursements, produces more than $470,000 in savings back to society.³

For cataract surgery, $2,653 in reimbursements brings a return to society of $121,198 over 13 years or more than a 4,500% ROI.⁴

Of greatest interest to retina subspecialists, however, treatment for wet AMD treatment costs less than $50,000 but provides a value of $280,000 to society. Specifically, treatment with ranibizumab (Lucentis, Genentech, South San Francisco, CA) provides a 28% value gain.⁴

THE LUCENTIS FACTOR

Ranibizumab has recently drawn criticism because of its cost: approximately $2,000 per treatment compared with bevacizumab (Avastin, Genentech), the cancer drug that is not FDA-approved for wet AMD, at $50 per injection.

While the New York Times and other media outlets have reported on physicians getting frequent flyer miles by buying ranibizumab with credit cards, Dr. Brown notes that his practice was had hired 10 people just to handle reimbursement issues for bill for ranibizumab.

Michael Repka, MD, medical director for governmental affairs and Medicare data spokesman for the AAO, calls the credit card story “sensationalist.”

Genentech issued a statement that it “agrees with the American Academy of Ophthalmology (AAO) and the American Society of Retina Specialists (ASRS) that treatment decisions are not to be based on the physician reimbursement information contained in this database.”

The statement continued, “We also agree with retina specialists and the ophthalmology community that physicians should have the ability to prescribe the medicine they think is right for their patients. Having a choice of medicines to treat any disease or condition provides the best environment to provide quality patient care, something Genentech and the physician community take very seriously.”

Anti-VEGF Drugs Under the Microscope

Andrew P. Schachat, MD, vice chair for clinical affairs at the Cole Eye Center Institute of the Cleveland Clinic, uses bevacizumab “based mainly on cost; it seems to be very comparable, if not practically identical in outcomes to [ranibizumab].”

Cost issues aside, Dr. Brown says, “The impact on society for these treatments is huge. What is really significant is that these patients would otherwise not be able to pay their bills, drive, or get to doctors, and they would lose their independence and privacy.”

Then, there is the issue — raised in some coverage of the Medicare data — of whether doctors should profit from drugs they administer. Mr. Sheppard and Kevin J. Corcoran, president of Corcoran Consulting Group, question the very premise.

Mr. Sheppard calls it “a red herring that the small administrative markup actually produces profits.” Mr. Corcoran, who works in his firm’s San Bernardino, CA, office, adds, “For an ophthalmologist, there’s no meaningful amount of profit in drugs. Medicare pays an administrative 6% fee above the average selling price of the drugs, for handling, processing, and record keeping. That is $6 to buy $100 in drugs. Is that a profit? Not really; it is simply a pass-through. If a Medicare beneficiary gets an injection and doesn’t pay the copayment, the doctor has a bad debt of $400 that eats up the administrative fee very fast!”

‘INCOME IS INFLATED’

“Many ophthalmologists rely solely on CMS for income,” says Nancey McCann, director of government relations for ASCRS. Retina subspecialists in particular might be advised to tell patients that the “cost of the service includes Medicare Part B drugs that are administered in a physician’s office and other supply costs,” she says. The CMS data do not separate out that data, “so the income is inflated,” she adds.

Stepping back from getting “down in the weeds,” as he calls it, Mr. Sheppard sees a future in which “the tidal wave of Baby Boomers will put pressure on the [healthcare] system, which will become much less efficient and much less effective. What I see missing in the dialogue is any long-term view of societal demographics, rather than budget cycles.”

The release of Medicare data may spur further fallout from the Affordable Care Act, Mr. Sheppard notes. “Developing large risk-sharing pools, like accountable care organizations, may work fairly well for primary care; however, specialty care tends to be acute and episodic. Thus, to utilize patient-based funding for specialty care will require a built-in ‘fudge factor,’ like in the construction business. If you insist on using a ‘guaranteed-maximum-price’ contract instead of a ‘cost-plus’ contract, general contractors will build in a margin to protect their profitability.”

Adds Dr. Schachat, “I think the public reasonably has a very high appetite for health care. People want more care than they want to pay for. New treatments often are only a small amount better than old ones yet may be much more costly. Although I am not thrilled with this recent data release from Medicare, in many ways, it is easier dealing with Medicare than piecemeal with 100-plus other separate payers.” RP

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