When doctors complain about proposed changes to health care reimbursement, do they speak for patients or their pocketbooks? As the recent debate over Medicare Part B shows, even with access to publicly available billing data, it’s hard to disentangle financial motivations from more altruistic ones.
Since 2005, Medicare Part B has paid for physician-administered drugs like infused chemotherapeutics by reimbursing 106% of the average selling price (ASP) – a formula commonly referred to as “ASP+6”. In order to reduce overall spending and the program’s apparent incentive for physicians to preferentially use high-priced drugs, CMS proposed a pilot program last year to test a new payment formula that would have reduced the 6% markup to 2.5%, but added a flat per-infusion payment – effectively rewarding doctors more for choosing cheaper drugs, and reducing their profit from expensive ones.
The plan to revamp Part B reimbursement was scrapped after many groups – including professional organizations representing cancer doctors – vigorously objected. Oncologists argued that there are few cases in which a cheap anti-cancer drug is therapeutically equivalent to a more expensive one, and that the proposed change would mainly harm oncologists’ ability to provide high-quality care.
These may be valid arguments, but it’s hard to disentangle oncologists’ clinical interests from their financial ones. Many economists might reasonably view cancer doctors who object to Part B reform as the physician manifestation of “Homo economicus,”<> acting solely to maximize their personal gain. Neeraj Sood at the University of Southern California summed up many observers’ knee-jerk response: “Doctors are human. The fact is, this [new proposed] model changes how much money they’ll make.”
But that raises a key question: how much do oncologists make from “ASP+6,” anyway? If cancer doctors rely on Part B profits for much of their income, then it’s more plausible to think that economic self-interest played a big role in their opposition to the pilot program – but if the proposed change to Part B would have had a minor impact on doctors’ take-home pay, then this trivial explanation is less compelling. Prior analyses have measured the relative decrease in profit the new formula would have engendered across all oncologists and for individual drugs, but they haven’t converted this percentage into actual dollars per doctor.
Methods: We downloaded the Physician and Other Supplier Public Use File (PUF) for calendar year 2014 from the CMS website, which contains Part B data for fee-for-service Medicare beneficiaries. We identified doctors classified as “Hematology/Oncology”, “Medical Oncology”, or “Gynecological/Oncology” (N=7,765), and analyzed the 4,658 who billed drug services under Part B. For each physician, we calculated Part B profit (i.e., excluding ASP) by multiplying total Part B drug billing by (0.043/1.043). (Although the current formula defines the mark-up as 6% above ASP, the effective percentage under the budget sequester is 4.3%.) Descriptive statistics were calculated in Excel.About the authors: Frank S. David, MD, PhD, is the founder and managing director of Pharmagellan, a biotech consultancy. He tweets about the drug and device industries, health care policy, and related issues at @Frank_S_David<>, and blogs at the Pharmagellan website and at Forbes.com. Andrew Matthews, MD, and Keshia Maughn, MPH, are an associate consultant and data scientist, respectively, at Pharmagellan.
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