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J Oncol Pract. 2005 May; 1(1): 20–22.
PMCID: PMC2793556

Assessing Changes in Hospital Outpatient Cancer Care

Hospital-based cancer centers continue to grapple with the evolving structure of Medicare reimbursement resulting from the implementation of the Hospital Outpatient Prospective Payment System (HOPPS). When HOPPS was created in 1999, it fixed reimbursement rates for procedures based on median costs. Drugs were also reimbursed on a theoretical median, but the math was based on cost-to-charge ratios, which led to estimates that were far off the mark. A temporary payment method was installed in 2004, based in part on average wholesale prices (AWPs). It expires at the end of this year. The Government Accountability Office is currently conducting a survey of hospital costs to arrive at a new set of estimates.

2006 Could Be “Devastating”

“The single greatest unknown for hospital centers is what drug reimbursement in 2006 will really look like,” said Teri U. Guidi, president of Oncology Management Consulting Group in Bucks County, Pennsylvania. Overall, changes in 2005 brought a modest decline in reimbursement. In 2006, according to Guidi, hospitals will follow physicians off the AWP road and down the path of acquisition-based pricing, which she believes could be devastating—especially since the Medicare Modernization Act has not built in a transitional increase in drug administration to soften the blow.

Guidi also believes that the relative absence of anxiety may be attributed to the fact that so many hospital infusion centers are small, with only three to five chairs. “Even the larger centers frequently don't show up on decision-makers' radar screens, because they account for a small proportion of a hospital's total business,” she said.

Nor do most hospital infusion centers have a large Medicare population, or a significant commercial payer population. “Most of those patients are being treated in the medical oncologists' offices,” said Guidi, noting that any site shifting would therefore make a big difference. The capacity of any given hospital may not be sufficient to accommodate more patients, and any hospital not doing a good job of managing revenue could suffer financially.

Reimbursement Changes Are Affecting Hospital Practice

Some centers are reportedly working with their physicians to reduce practice variances that increase the direct and indirect costs of running an infusion center. As pressures mount, Guidi expects to see more hospitals making hard decisions about providing very high-cost care items that are not sufficiently reimbursed. However, she has heard of only a few centers considering closure.

“The more common requests relative to planning for infusion that we have been receiving are for assistance in examining the whole business of infusion—practice and hospital. There is a lot of curiosity about options for new ways of structuring and working together—contractual relationships, joint ventures, variations on employment arrangements,” said Guidi.

The View From Evanston Northwestern Healthcare

Turning now to the perspective of a center, Journal of Oncology Practice (JOP) interviewed Leon H. Dragon, MD, of Evanston, Illinois Northwestern Healthcare's Kellogg Cancer Care Center. It is a multi-site, university-affiliated teaching hospital with outpatient cancer treatment facilities at three different locations. One administrative and medical staff covers all three hospitals, and there are approximately 2,400 new cases in the registry each year.

Dr. Dragon was quite frank about the challenges posed by the current reimbursement for outpatient chemotherapy services. “It creates such a narrow margin between the cost of providing services and the reimbursement, that one has to be almost perfect in resource utilization, and in operations, to come out even,” he said.

The Reality: Losing Money on Important Treatments

What is their solution? “We generally don't base treatment on optimizing revenue. Instead, evidence-based treatment continues to be the norm,” said Dr. Dragon. “That's the good news. The bad news is, there are some very important treatments on which we are losing money.” He cited the antiemetic ondansetron (Zofran) as a prime example.

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Leon H. Dragon, MD

“In general,” said Dr. Dragon, “You have to be very good at what you're doing, capturing charges, and not having much waste, because the markup is so small. The pharmacists really help us recognize these things. We are forced to do a good job with charge capture, and things like rounding doses, so we don't use something that creates a lot of wastage. We bill in the smallest billing unit, to ensure that we have billed correctly, and don't lose reimbursement.”

No Evidence Yet of Widespread Site Shifting

So far, Dr. Dragon has seen no evidence of private practices sending Medicare patients to his hospitals. “An effective outpatient private practice facility may not have very much margin, and there may be more risk, but most will still take care of Medicare patients—and I'm very familiar with that, having been a medical director of one before joining the hospital-based setting,” he said.

As to the future, he is less certain. “I think there is going to be a movement by some practitioners to send at least some Medicare patients to the hospital. Ethically, though, this really is a challenge. You have people in the practice that you're committed to taking care of, and then you send them to the hospital for treatment—while other patients remain in the office? For most physicians that would be a tremendous conflict,” he said.

Harvard's Beth Israel Deaconess

Michael Goldstein, MD, is currently a member of the Harvard Medical Faculty Physicians and practices at Harvard's Beth Israel Deaconess Hospital. He spent the first 30 years of his professional life affiliated with an academic institution, but running a community-based private office. Two years ago, he moved to Deaconess, the hospital he has always been affiliated with, and is now academic full time.

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Michael Goldstein, MD

“I see a patient, I fill out a bill slip with the level of service performed and the diagnosis, and that's the last I see of it. I haven't the faintest idea about the level of payment,” he said.

When queried about site shifting of patients from community-based practices to hospitals, Dr. Goldstein said he thinks that is possible. Whether or not it makes financial sense is another story. “It's impossible to tell under the present system whether or not it is more cost-effective to deliver care in a hospital setting or a community-based setting,” said Dr. Goldstein. “While community practices are paid for each CPT® code submitted, hospitals are still being paid one global fee, as they were when the Q-code was used for billing. Therefore, it is still extremely difficult to compare charges and reimbursements in the two settings.”

CMS has stated as policy that there should be no financial incentive for site of service, regardless of whether the site is an office or a hospital.

“I assume, but do not know for sure, that CMS is collecting the CPT® data from hospitals, so that in the future they can institute a payment scheme similar to the one in use by community practices,” said Dr. Goldstein. “Until such time, we are left with a system whereby both community practices and hospital outpatient departments bill by CPT® code, but only the community practices are paid by CPT® codes.”

No Change in Referral Patterns at the University of Michigan Health System

Finally, we consulted JOP Editor and Medical Director at the University of Michigan Comprehensive Cancer Center, Douglas W. Blayney.

“In Michigan we haven't seen shifts in the site of service. At the University, we're all hospitalbased anyway, and there's really no opportunity for us to see that internally. But we haven't seen our referring docs change their referral patterns. At least not yet,” he said.

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Douglas W. Blayney, MD

As for the adequacy of reimbursement, Dr. Blayney was more cautious. “I think the jury's out on that.”

What Cancer Care Means to the Hospital

Oncology consultant Teri Guidi advises hospitals to quantify what cancer care in its entirety means to the hospital.

“It reaches far beyond infusion, and while the term ‘loss leader’ has faded from common use, that may be just what the infusion center is. Better to know it in advance and to justify losses with ‘downstream revenue,’ where possible, than to risk knee-jerk reactions that will harm patients by further restricting access to care,” Guidi concludes.

How to Continue to Treat Patients Effectively in a Changing Environment

Looking forward, she emphasizes the need for infusion center administrators to get the attention of senior management and clearly communicate the issues. Enlisting the support of a respected physician may help convince management of the importance and urgency of the issues. She also suggests managing the business closely, working with purchasing, pharmacy, accounting, and other resources, and outlining all possible scenarios.

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Teri Guidi

“Ask questions like, will referral patterns for infusion change? What if they do? How can you work together with the officebased oncologists to have flexible plans in place? Do you have the systems and processes in place to take on more volume, if necessary?” said Guidi.

Billing and Coding Under the HOPPS

In general, hospitals code outpatient services using CPT® codes. As an exception, CMS established four Q-codes for drug administration services some years ago so that there would be a single code for each encounter (no hourly infusion codes or multiple procedures). Fiscal intermediaries convert CPT® and Q-codes to Ambulatory Payment Classifications (APCs) and make payment.

Beginning in 2005, hospitals must code drug administration services using CPT® codes. Tables 1 and 2 show the crosswalks between CPT® codes and APCs.

Table 1.
Crosswalk from CPT® Codes for Drug Administration to APCs
Table 2.
Drug Administration Services Reported Using CPT Codes and Corresponding APCs

Articles from Journal of Oncology Practice are provided here courtesy of American Society of Clinical Oncology