Facing the fallout of Medicare’s flawed release

How to put the payment data into its proper context.

By Stuart Michaelson, Contributing Editor

In explaining how ophthalmologists should respond to questions about how much they receive in Medicare payments, ophthalmology practice consultant Stephen C. Sheppard recalls an expression used in political circles: “If you are explaining, you are losing.”

When Medicare released payment information on 880,000 health-care providers, ophthalmologists may have felt like they had a lot of explaining to do. The specialty was the largest recipient of all Medicare payments to providers in 2012 — to the tune of 7%, or $5.6 billion. News reports also noted ophthalmologists comprised nearly half of the top 100 physicians receiving payments.

However, as ophthalmologists, consultants and leaders of professional societies convey, that data was not bad; it was just misleading. Here, they help put the Medicare data into context.

Key facts overlooked

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

• A high percentage of Medicare beneficiaries receive ophthalmology services. About two-thirds of all Medicare recipients visit ophthalmology practices.

• The aging population has fueled the growing incidence of age-related eye diseases.

• To keep pace with the high costs of technology, emerging drugs and staffing, ophthalmologists incur a high practice overhead.

What’s more, they note that physicians did not have a chance to review the Medicare data before its released and the data itself reflects gross, not net, revenues.

The AMA and the American College of Physicians also issued criticisms of the data, noting errors in how the information was reported to Medicare. Some doctors filled out the wrong specialties in their reports.

The data itself lacks any quality or cost-effectiveness measurements. Information about the number of services or procedures a provider performed is missing. Records were missing, and some of the data used to calculate payments was outdated. Physicians in multi-doctor practices may have had income from other doctors attributed to them.

WHAT TO SAY TO PATIENTS

Nevertheless, these thought leaders sound a cautionary note in confronting the Medicare data: Do not overreact, and do not go negative.

This is what Mr. Sheppard, managing principal for the Consulting Group LLC, of Springfield, Mo., has advised his clients to say: “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.”

MAKING THE CASE FOR OPHTHALMOLOGY

Economic impact of physicians

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

Aging population

The AAO issued a statement pointing out that the “significant” portion of Medicare Part B payments to ophthalmologists are 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. ASCRS noted that more than 3.3 million cataract surgeries are performed in the United States annually, the vast majority of them for Medicare beneficiaries.

Ophthalmologists not highest paid

A Medscape report indicated that ophthalmologists, with an average annual income of $291,000, rank 11th among specialties (exceeded by orthopedics at $413,000 and cardiologists at $351,000, among others). Additionally, ophthalmologists rank 19th — with dermatologists at the top — in considering themselves fairly compensated.

Value of ophthalmology services

The expense of $5,000 on bilateral cataract surgery provides more than $100,000 in financial return on investment (ROI) to patients, payers, and the economy, according to a 2007 study out of Wilmer Eye Institute in Baltimore.¹ For these patients, caregiver costs drop, more 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 co-director 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, medical therapy has shown a value gain of around 20%. Further, glaucoma therapy, at a cost of $7,500 over 21 years in Medicare costs, produces more than $470,000 in savings back to society.³

For unilateral 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 Treatment for wet AMD costs less than $50,000 but provides a value of $280,000 to society. Specifically, treatment with ranibizumab (Lucentis, Genentech, South San Francisco, Calf.) provides a 28% value gain.⁴

The New York Times and other media outlets have reported on physicians getting frequent flyer miles for charging purchases of drugs and supplies on their credit cards — reports that Michael Repka, MD, medical director for governmental affairs and Medicare data spokesman for the AAO, calls “sensationalist.”

AMD treatments

The preponderance of ophthalmologists among Medicare’s top payees can be attributed to the high cost of anti-VEGF drugs for treating wet AMD. Many of the top ophthalmologists on Medicare’s list are retina specialists.

Media reports have zeroed in on Lucentis. It costs approximately $2,000 per treatment, whereas Avastin (bevacizumab, Genentech), a cancer drug that many retina specialists use off-label for AMD, costs $50 per injection.

Physicians who use Lucentis note the liability issues involved with using drugs off-label when an FDA-approved drug is available. And while some in the mainstream media have questioned why Genentech does not seek FDA approval of Avastin for AMD, the process would take years and ultimately drive up the price of the drug to cover the costs.

Genentech issued a statement that it “agrees with the American Academy of Ophthalmology (AAO) and the American Society of Retina Specialists (ASCRS) 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 scrutinized

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

Costs 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.”

Profits a ‘red herring’

Consultants question the premise that some media outlets have raised about doctors profiting from the drugs they administer. Mr. Sheppard calls it “a red herring that the small administrative markup actually produces profits.”

“For an ophthalmologist, there’s no meaningful amount of profit in drugs,” Kevin J. Corcoran, president of Corcoran Consulting Group, San Bernardino, Calif., says: “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!”

PUTTING INCOME IN CONTEXT

Inflated numbers

“Many ophthalmologists rely solely on CMS for income,” says Nancey McCann, director of government relations for ASCRS. “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 [health-care] 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.”

A boost for ACOs?

The release of the Medicare data may spur the growth of accountable care organizations (ACOs), 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,” he says. “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,” he adds. OM

Editor’s note: Executive Editor Rich Kirkner contributed to this article.

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