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MedPAC Discusses Separately Payable Drugs in OPPS, ACOs, and Specialists in APMs

March 6, 2020

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Andrew Amari, Hospital Policy and Regulatory Specialist
Kate Ogden, Physician Payment & Quality Specialist
Phoebe Ramsey, Sr. Regulatory Analyst, Quality & Payment Policy

The Medicare Payment Advisory Commission (MedPAC) met March 5-6 to discuss separately payable drugs under the hospital outpatient payment system (OPPS), addressing vulnerabilities to the Medicare Shared Savings Program (MSSP) by improving benchmarks for accountable care organizations (ACOs), and specialists’ role in alternative payment models.

Separately Payable Drugs in the OPPS

MedPAC staff discussed payment for separately payable pass-through and non-pass-through drugs under the OPPS. Staff said that total spending on separately payable drugs rose from $5.1 billion to $12.9 billion between 2011 and 2018, citing the current criteria for identifying separately payable drugs as a potential cause.

To meet separately payable status under the OPPS, pass-through drugs must be new to the market and meet thresholds related to the service payment rate, while separately payable non-pass-through drugs must meet a cost-per-day threshold ($130 in 2020). Drugs that meet these criteria are paid separately from the packaged rate for the associated service.

The staff said that separately payable status in other areas of the OPPS, such as for pass-through status for devices, and in other payment systems, such as the new technology add-on payment (NTAP) under the inpatient prospective payment system (IPPS), require the device or item show clinical superiority to existing options in addition to certain cost thresholds; the OPPS system does not have this requirement.

To address increased spending on these drugs, the staff provided the Commissioners with several preliminary policy options to modify the current criteria for meeting separately payable status under the OPPS. The options included limiting separately payable status to nonancillary drugs, requiring all separately payable drugs be new to the market, modifying cost thresholds under the current policy, and requiring drugs show clinical improvement over drugs with similar therapeutic uses.

Commissioners expressed concern that current policy for determining separately payable drug status under the OPPS permits drugs that could reasonably be packaged to be paid separately, resulting in increased costs. Several commissioners said they wanted to encourage as much packaging as practical under the OPPS and expressed interest in modifying the policy to require any separately payable drug to show clinical improvement.

Commissioners cited the NTAP clinical improvement criteria under IPPS as a potential starting point. Commissioners plan to revisit this topic in future meetings and requested staff provide greater detail on potential policy options and specific examples to better understand the impact of modifying the current policy.

Addressing MSSP Vulnerabilities

MedPAC staff followed up on work from the January meeting [see Washington Highlights, Jan. 17, 2020] and presented two problems that may threaten MSSP savings: possible mismatches between baseline spending and performance year spending for MSSP ACOs and possible patient selection. To resolve these issues, Commissioners debated a draft recommendation that would have the program use the clinician National Provider Identifier (NPI) to create spending benchmarks and assess spending performance instead of using a tax identification number (TIN), as it currently does.

The staff presented additional research on how the current use of the TIN could result in a mismatch between historical baseline spending for the ACO and its performance year spending, which could result in artificial shared savings. This is because NPIs can assign their billing to multiple TINs. With a TIN-based calculation of spending, NPIs can shift higher-cost patients in the performance year to a TIN outside of the ACO. The staff shared evidence of potential selection against high-cost beneficiaries through shifting either their costs or their clinicians out of the ACO. This was demonstrated by a correlation between shared savings and favorable beneficiary selection, which even if not intentional is problematic to the integrity of the program and could be fixed by the proposal to calculate spending based on NPIs rather than TINs.

Commissioners supported the draft recommendation, but asked for more analysis on the administrative impacts of the recommendation. If the recommendation is approved at the April meeting, it will be included in the June 2020 Report to Congress. Commissioners are still considering the potential for a future recommendation to mandate prospective beneficiary assignment in the MSSP, which was not covered in greater detail in this session.

The Role of Specialists in APMs and ACOs

MedPAC staff also discussed the role of specialists in alternative payment models (APMs) and ACOs, noting that while specialists have opportunities to participate in APMs and ACOs, the structure of the model determines the role of the physicians. They also said limited evidence exists to suggest that ACOs with specialists are more likely to increase volume and spending. The staff interviewed and held focus groups with ACO leaders and physicians and reviewed an OIG report based on interviews with ACOs. They found that primary care physician-led ACOs are more selective about participating physicians compared with ACOs affiliated with health systems, which tend to include all employed physicians under a TIN, which led to more specialists in the group.

During discussion, commissioners said that finding ways to ensure that specialists are more engaged and integrated in an ACO or APM could be a way to address the possible increase in volume and spending. Commissioners said that ensuring all physicians in an ACO or APM understand their compensation model could address practice patterns in a model. Commissioners also discussed the possibly inherent tension between population health and episodic care models or bundles, noting that, oftentimes, population health is more complicated to address than episodic care. The Commission agreed that this was an area to explore further in the future.

Other topics discussed at the meeting included the Part D program and a report mandated by the 21st Century Cures Act on required changes to CMS’s Hierarchical Condition Categories risk adjustment model used in Medicare Advantage. That report will be included in the Commission’s June 2020 report to Congress.

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