We break down the FY19 1,883-page proposed rule from CMS on IPPS and LTCH.

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Apr. 27, 2018


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Overview of IPPS: 1,883 Pages if You’re Not Into the Brevity Thing


On Tuesday, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule for the fiscal year (FY) 2019 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Prospective Payment System. The proposed rule reflects common themes of the Trump Administration, including price transparency and relief from excessive regulation. We highlight the proposed IPPS changes below.

Payment Rates
CMS projects a total increase in IPPS payments of 3.4%, which includes the following adjustments:

  • Projected hospital market basket update of 2.8%
  • Productivity reduction of 0.8%
  • Proposed 0.5% increase required by legislation
  • Affordable Care Act (ACA) reduction of 0.75%
  • Proposed changes in uncompensated care payments, capital payments, and changes to low-volume hospital payments providing a 1.3% increase

CMS projects that total Medicare spending on inpatient hospital services, including capital, will increase by about $4 billion in FY 2019, a bump up from the $2.4 billion increase in 2018.

Chimeric Antigen Receptor (CAR) T-Cell Therapy
CMS received many inquiries regarding payment of CAR T-cell therapy under the IPPS. There are 2 CAR T-cell therapies approved by the Food and Drug Administration (FDA), KYMRIAH (tisagenlecleucel), manufactured by Novartis, and YESCARTA (axicabtagene ciloleucel), manufactured by Kite Pharma (Gilead).

Both manufacturers have submitted applications for new technology add-on payments (NTAPs) for FY 2019. In their application, Novartis indicated that 95% of their diffuse large B-cell lymphoma (DLBCL) patient population will be captured by 2 Medicare Severity Diagnosis-Related Groups (MS-DRGs):

  • 846: Chemotherapy w/o acute leukemia as secondary diagnosis with major comorbid condition (MCC), with a national average payment amount of $13,073.72
  • 847: Chemotherapy w/o acute leukemia as secondary diagnosis with comorbid condition (CC), $6,930.37

In their NTAP application, Kite indicated that 76% of their DLBCL patient population will be captured by 3 MS-DRGs:

  • 823: Lymphoma and nonacute leukemia with other procedure with MCC, $23,705.05
  • 840: Lymphoma and nonacute leukemia with MCC, $16,931.87
  • 841: Lymphoma and nonacute leukemia with CC, $8,910.32

CMS has proposed to assign KYMRIAH and YESCARTA therapies to MS-DRG 016 (autologous bone marrow transplant with CC/MCC), which has a national average payment amount of $35,429. The agency is also proposing to rename the MS-DRG as “autologous bone marrow transplant with CC/MCC or T-cell immunotherapy.”

CMS recognized that the combination of the NTAPs, the extremely high cost of the CAR T-cell therapy drugs, and the potential for volume increases over time present “unique challenges” with respect to the MS-DRG assignment for procedures involving CAR T-cell therapy. Therefore, the agency is inviting comment on its proposal and alternative approaches, such as:

  • Creating a new MS-DRG for procedures involving CAR T-cell therapy, thus precluding the need for an NTAP
  • Using a cost-to-charge ratio (CCR) of 1.0 for charges associated with the CAR T-cell therapies, “given that many public inquirers believed that hospitals would be unlikely to set charges different from the costs for KYMRIAH and YESCARTA”
  • CMS is interested in how these payment alternatives would affect access to care and how they affect incentives to encourage lower drug prices, which is “a high priority for [the Trump] Administration.”

Proposed Add-On Payments for New Services and Technologies for FY 2019
CMS is considering the following medical services or technologies for NTAP in FY 2019:

Price Transparency
Under current law, hospitals are required to establish and make public a list of their standard charges. To encourage price transparency by improving public accessibility of charge information, CMS is updating its guidelines to require hospitals to make public a list of their standard charges online.

CMS is seeking information from the public regarding barriers that prevent providers from informing patients of their out-of-pocket (OOP) costs, what changes are needed to support greater transparency around patient obligations for their OOP costs, what can be done to better inform patients of these obligations, and what role providers should play in this initiative. CMS is also considering making information regarding hospital noncompliance with the requirements public and intends to consider additional enforcement mechanisms in future rulemaking.

Quality Measures
CMS would remove 19 measures from the quality programs and will de-duplicate another 21 measures, while adopting 1 claims-based readmissions measure. The agency indicated that the reduction in the number of measures was arrived at after a “careful and holistic review” of all quality measures. Measures were proposed for removal if they were duplicative, “topped out” (meaning that the overwhelming majority of providers are performing highly on them), or excessively burdensome to report.

The proposed rule, which was accompanied by a press release and a fact sheet, will be published in the May 7 issue of the Federal Register. The comment period is 60 days. The proposed changes, which would apply to approximately 3,330 acute care hospitals and approximately 420 long-term care hospitals, would affect discharges occurring on or after October 1, 2018.


Strikes and Gutters, Ups and Downs: State Drug Pricing Laws a New Reality


Gridlock at the federal level, coupled with the public demand for action, is compelling many states to act on drug-pricing legislation. The premise for these laws is that by mandating that pharmaceutical manufacturers disclose drug-pricing information (either at launch or whenever increases occur), states will be better able to manage healthcare costs and consumers will have lower out-of-pocket costs for drugs.

Xcenda has been tracking the legislation and helping others understand the implications of state transparency efforts, as well as other legislation affecting access to innovation, including step therapy. With the recent ruling overturning the legislation in Maryland, we thought we would bring you an update on state legislation on drug-pricing transparency.


Legislative Bytes

  • Rep. Carolyn Maloney (D-NY) sent a letter to the Joint Economic Committee requesting a hearing on anti-competitive practices in the prescription drug market.
  • Waiting for the Trump Administration’s drug price transparency announcement? Us too. It was postponed from April 26 and is currently potentially slated for May 8.
  • The House of Representatives continues to work on opioid legislation. Over 60 bills are with the Energy and Commerce Committee and leadership hopes to have a floor vote on opioid legislation by Memorial Day.

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If There Was a Perfect Solution, We’d Have Found It by Now: CMMI RFI Comments


This week, CMS released comments submitted by patients, clinicians, innovators, and others in response to its Center for Medicare and Medicaid Innovation’s (CMMI’s) New Direction Request for Information (RFI) issued last fall. CMS released the RFI to gather ideas on ways for CMMI to promote patient-centered care and test market-driven reforms.

CMMI received over 1,000 responses to the RFI, summarized in a spreadsheet on its website. Responses centered on a number of areas including increased physician accountability for patient outcomes, improved patient choice and transparency, realigned incentives for the benefit of the patient, and a focus on chronically ill patients.

Informed in part by the RFI, CMMI is developing a model in direct provider contracting. They announced this week that they will be soliciting feedback, due May 25, on the creation of a program that allows providers to contract directly with patients for care. The effort would apply to Original Medicare, Medicare Advantage, Medicaid, and the Children's Health Insurance Program.

It is clear that CMS has plans to continue to evaluate different concepts guided by these RFIs as they target their goals to decrease cost and increase quality of care. As demonstrations and models are proposed, it is critical for stakeholders to consider implications and continue to engage and provide feedback to CMMI.


Snipping MIPS: AMA Wants to Nip Reporting Period


The American Medical Association (AMA) has called for a substantially reduced reporting period for Medicare’s Merit-Based Incentive Payment System (MIPS), based on claims that the current, full-year reporting period is administratively burdensome to medical practices. The burden appears to have been exacerbated by the fact that, in this first year of the program, doctors were not adequately informed of their eligibility and thus delayed in complying with its reporting requirements.

The program has also come under fire by other organizations for negatively affecting patient care and for incorporating invalid evaluative measures. A 2016 Health Affairs study of physicians in 4 major fields (cardiology, orthopedics, primary care, and multispecialty practices that include primary care) found practices in these fields spend 785 hours per year per physician on quality measure reporting programs. The American College of Physicians stated practices spend approximately $40,000/year per physician to report on performance and also claimed MIPS has a net negative effect on patient care.

There might be some change on the horizon. Consistent with the Trump Administration’s goal of reducing administrative burden, CMS has invited physicians to participate in a study to assess the burden of reporting under MIPS, and it is reported to be investigating the possibility of removing barriers to reporting quality measures and launching additional alternative payment models.


Reading the Fine Print: Short-Term, Limited-Duration Health Insurance


Earlier this week, the Henry J. Kaiser Family Foundation (KFF) released an issue brief on short-term, limited-duration (STLD) health insurance. With the ACA’s individual mandate repealed late last year, and President Trump’s executive order to expand short-term health policies, KFF explored how STLDs differ from ACA-compliant individual health policies:

Due to these coverage limitations and disparities, KFF found that the cheapest STLD policy’s premium was priced 20% less than the lowest-cost, ACA-compliant bronze plan in the same coverage area. Yet, nearly 30% to 60% of short-term policies listed on eHealth and Agile Health Insurance, the 2 online insurance marketplaces that KFF researched, did not offer many of the essential health benefits (eg, mental health services, outpatient prescription drugs, and substance abuse). Only 5 states with comprehensive laws regulating short-term plans do not offer STLD policies. Of the remaining 45 states that do offer short-term products, those plans that cover any of the basic health benefits impose limitations and exclusions that make such benefits virtually inaccessible.

With their lower monthly premiums, enrollment in STLDs has grown after ACA market reform. Assuming that healthy individuals will opt for cheaper short-term policies, and low-income consumers will continue to receive subsidies, KFF argues that middle-class individuals interested in ACA-compliant plans will be adversely subject to higher premiums. KFF also concludes that the combined effect of repealing the individual mandate penalty and the Trump administration’s efforts to promote short-term products could further de-stabilize the ACA-compliant individual marketplace.


Well, That’s Just Your Opinion, Man: Ways to Manage Cost of Cancer Drugs


The Journal of the American Medical Association (JAMA) posted a viewpoint article written by Justin Bekelman and Steven Joffe outlining suggestions to control the growth in spending on cancer by limiting the use of targeted cancer agents.

Citing studies on pricing and effectiveness for agents such as neratinib, the authors state the continued use of "marginally effective drugs" is an unsustainable drain on the healthcare system.
The authors suggested the following steps to screen drugs for "meaningful clinical benefits" and to reduce cost:

  1. The FDA Should Define Minimum Clinically Meaningful Effect Sizes: Asking "what minimum effect size defines meaningful benefit," the authors assert that the FDA's guidance for cancer trial endpoints needs to clearly specify minimum effect sizes. They believe clarification on the issue would enable the FDA to set clear thresholds to define meaningful benefits and manufacturers to design trials to better support their claims.
  2. Medicare Should Negotiate for Targeted Cancer Drugs: Noting how Medicare, the largest buyer of cancer drugs, lacks authority to negotiate on price and implement utilization controls, a demonstration project is suggested to test out aspects of this approach.
  3. Guidelines Should Prioritize Drugs by Benefit and Price: Guidance prioritizing affordability should be available for comparable drugs. The authors propose that organizations, such as the American Society of Clinical Oncology and the National Comprehensive Cancer Network, further develop existing guidance to clearly rank drugs by effectiveness and cost.

This study shows how the evolution of value is playing out in the different stakeholder groups. While the authors point toward potential action by the FDA and Medicare, providers and payers are already asking these questions about treatment options. As a collection, the ideas presented are noteworthy because of where they were published—in the AMA’s journal—and the suggestions are definitively left-of-center. Probably not coincidentally, the current Administration has suggested an openness to some of these ideas and may announce new policy on these matters in the near future.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:


Amanda Forys Contributes Indication- and Reference-Based Pricing Insights in Biosimilar Development


Indication- and Reference-Based Pricing: A Positive for Biosimilar Manufacturers?

With biosimilar approvals expected to increase, reference-based pricing presents opportunities for the US biosimilar market. Amanda Forys, Senior Director of Reimbursement Strategy Insights, discusses how biosimilar manufacturers can stay on top of ever-changing pricing trends. Learn more


– Tweet from Deputy Secretary of Health and Human Services, Eric Hargan regarding his speech at the 2018 Health Datapalooza

25% and 20%


– 25% of speakers who testify at FDA advisory committee meetings had conflicts of interest, which were reported 20% of the time.

Source: “Conflicts of Interest of Public Speakers at Meetings of the Anesthetic and Analgesic Drug Products Advisory Committee,” JAMA Internal Medicine, April 23


2018 Asembia Specialty Pharmacy Summit

April 29–May 2 l Las Vegas, NV
Join AmerisourceBergen's Sr. Vice President of Strategy & Commercialization, Amy Grogg, and Xcenda's Vice President of Reimbursement & Policy Insights, Ana Stojanovska, at this year's Asembia Specialty Pharmacy Summit. Their panel titled, "Groundbreaking Therapies Create Groundbreaking Challenges: Innovating Commercialization for Advanced Therapies," will explore new approaches to commercialization for breakthrough therapies. Learn more


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Senior Director,
Health Policy

Scott Shields
Associate Director,
Health Policy



Amy Grogg, PharmD
Senior Vice President | Strategy & Commercialization | AmerisourceBergen Corporation

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Reimbursement & Policy Insights | Xcenda


Maureen Holmes | Stew Kaufman | Irene Sheynis | Scott Shields | Stephen Wilson


Kylie Matthews | Tia O'Brien | Ellen Olson


Apr. 27, 2018


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