Black Friday Price Drop!!!- for Drug Payments??

Does 2020 have more surprises for us? Well, CMS released an Interim Final Rule published in the November 27, 2020 issue of the Federal Register that will potentially decrease payment for fifty expensive drugs provided in hospital outpatient departments and physician offices starting January 1, 2021 (“Most Favored Nation (MFN) Model”). Although a similar advance notice of proposed rulemaking (ANPRM) (83 FR 54546) was issued in October 2018, this Final Rule has significant logistical differences from the original proposal, including specific instructions on claims billing.

What We Know

Who is impacted?

1. All beneficiaries enrolled in Medicare Part B who have Medicare as a primary payer and are not covered under Medicare Advantage or another group health plan are included and receive an MFN Model Drug from an MFN provider. Providers are generally those who submit a claim for a separately payable drug under Part B that is an MFN Model drug, e.g. physician offices,  outpatient hospital departments (including on- or off- campus provider-based departments) and Ambulatory Surgery Centers. 
2. This rule does not apply to Critical Access Hospitals, certain Children’s Hospitals, Rural Health Clinics, Federally Qualified Health Centers, and certain Cancer Hospitals.  Hospitals who receive payment on a fully capitated or global budget basis will be excluded for first and second quarter of performance year 1.

What drugs are impacted?

Medicare has identified the Top 50 single-source Part B drugs with the highest annual 2019 spend by HCPCS code (with a few exceptions) that will be subject to “Most Favored Nation” (MFN)” Model pricing starting January 1, 2021. A list of the 50 HCPCS impacted for January 1, 2021 is here:  Table 2: Performance Year 1 MFN Model Drug HCPCS Codes List with Top Billing Specialties.  

How will the drugs be paid?

1. The model will be phased in over 7 years, with Year 1 paying for these drugs with a 75% ASP reimbursement and 25% MFN pricing. The MFN pricing is the lowest per capita Gross Domestic Product-adjusted (GDP-adjusted) price of any non-U.S. member country of the Organisation for Economic Co-operation and Development (OECD) with a GDP per capita that is at least sixty percent of the U.S. GDP per capita, based on available data. 
2. If the applicable ASP is less than the MFN Price, the MFN Price will be established as equal to the ASP. (Note: this is the ASP (average sales price), not the ASP+6% amount as published in the current ASP pricing files, and Addendum B).
3. 340B purchased drugs will be paid the lower of: 1) proposed reimbursement in Hospital Outpatient Prospective Payment System (OPPS) Final Rule (which has not been released as of today, 11/30), or 2) the (ASP+MFN blended payment) + add-on payment. 340B purchased drugs will be eligible for the add-on payment regardless of which payment methodology is used.

What about the add-on payment?

1. Medicare will pay an “add-on payment” in the amount of$148.73per “dose”. A dose is defined as a line item for that HCPCS code by Date of Service and does not include lines that report waste with a JW modifier. A new HCPCS code has been assigned: “M1145-MFN drug add-on, per dose” to compensate for the overhead and handling of the products. MFN participants will need to ensure that they submit an appropriate charge for the add-on payment since Medicare allows the lesser of the applicable payment amount or the billed amount. (Providers who bill less than the $148.73 per dose, will receive the lower amount as payment). The MFN add-on payment will be adjusted each quarter for inflation.
2. This HCPCS code, M1145must be added as a single line item per claim, and all “doses” of MFN-designated drugs totaled so that the billed units of M1145 is equal to the total doses of all MFN-designated drugs billed on the claim. 
3. There will be no co-pays or deductibles for the beneficiary for the add-on payment, but co-pays and deductibles will continue to apply for the base drug payment. 

What about drugs on the FDA drug shortage list?

Drugs listed on the FDA listing of drug shortages will revert back to ASP+6% reimbursement on the first day of the next quarter in which they appear on the drug shortage list. (This initial list does not contain IVIG products since two products are currently on the drug shortage list). However, in the future, products in drug shortage will not be removed from the list, but will temporarily be reimbursed at the ASP rate (+ the add-on payment) until the shortage is resolved. These changes will occur on a quarterly basis.

How will the drug list and payment rates be updated each quarter?

CMS will add drugs to the list annually, but does not anticipate removing drugs, except only rarely. Under very limited circumstances, drugs may be removed from the list on a quarterly basis. According to the rule, MFN Model payment amounts and other information and materials will be posted at https://innovation.cms.gov/innovation-models/most-favored-nation-model in advance of each calendar quarter.

How will CMS monitor the impact of the Model?

CMS will be monitoring claims to determine if utilization has shifted to newer, more expensive drugs, or if beneficiary access to services changes adversely. CMS will be conducting beneficiary surveys to determine beneficiary satisfaction with the new model.

What information will manufacturers need from providers to adjust their ASP submissions?

Manufacturers must exclude MFN Model drug units furnished to MFN beneficiaries for which payment is allowed from their calculation of ASP (Average Sales Price). In order to determine the number of units to exclude, CMS anticipates that manufacturers may establish mechanisms to obtain such information, for example, manufacturers could require separate purchasing accounts, or reporting of information about units of MFN Model drugs furnished to MFN beneficiaries and for which payment was allowed.

SHOUT-OUTS

1. Pharmacyand Finance should review the list of 50 Most Favored Nation Model Drugs to determine utilization and calculate reimbursement changes when payment rates are posted in late December (presumably with new MFN Model tables on CMS website). Illustrative payment changes are available in Table 6 of the rule.
2. Pharmacyshould work with their Group Purchasing Organization (GPO) to determine if there are any anticipated decreases in contracted costs commensurate with decreased reimbursement for MFN Model drugs for Medicare beneficiaries effective January 1, 2021.
3. Pharmacyand Health-System Administration should dialogue with Medical Staff members to determine if some infusions may transition to hospital outpatient departments due to reimbursement shifts (Table 8 describes anticipated changes in revenue per Medical Staff Specialty).
4. Finance, Revenue Cycle and ITshould explore automating the process of adding the add-on payment HCPCS code M1145 to the claim with the correct number of billed units calculated using the total “doses” of MFN-designated drugs represented on the claim.
5. If automation is not feasible,Revenue Cycleshould stop every claim with an MFN-designated drug to have the M1145 billed units calculated and added manually to the claim.
6. Billersshould be educated that if a payer rejection results in an MFN-designated dose to be marked non-covered (e.g. for medical necessity), the biller must review the billed units for M1145 and adjust the billed units accordingly by removing the number of “doses” that were marked as non-covered.  If only the billed units of the drug are adjusted (e.g. an MUE lowers the billed units), the billed units of the add-on payment does not need to be adjusted as the payment is “per dose” regardless of the size of the dose. 
7. Finance, Revenue Cycle and ITshould explore how they will capture the billed units per HCPCS code and per manufacturer in order to provide the information to the manufacturer for ASP reporting.
8. ITwho loads CMS tables for modeling or expected payment should be aware that Addendum B payment rates will be overridden by MFN Model payment rates + add-on payments and MFN payment rates will be available on a separate CMS table.
9. Managed Care Contractingshould review any third-party payer contracts with statements that pay for outpatient drugs “like Medicare” or that use Medicare payment rates as a basis for their contract.

What we don’t know?

1. We don’t know when the actual rates will be posted for January 1, 2021 as the sources files of pricing from other countries has not yet been determined. According to the rule, MFN Model payment amounts and other information and materials will be posted athttps://innovation.cms.gov/innovation-models/most-favored-nation-modelin advance of each calendar quarter.
2. We presume that if a “dose” is split into two lines to report two different National Drug Code numbers (NDC) on a dual eligible patient for Medicaid, that the units of M1145 will be “1” for the dose, even though the dose will be reported on two separate lines with two different NDC numbers. An example would be for Rituximab (J9310) where both 100 mg and 500 mg vials are used to admix a single dose and each NDC is reported separately.
3. We don’t know if manufacturers will provide alternative costs for MFN Model drugs, and if the manufacturers will require providers to submit usage data to the manufacturers to adjust ASP reporting.
4. Although unlikely for this group of drugs, we presume that if a patient receives two doses in one outpatient visit for one date of service, that will be counted as “two doses”. However, there are no modifiers or any additional qualifiers that can be added to the claim to explain this anomaly.
5. We don’t know what notification process will be in place to notify providers that a drug has been placed on the FDA drug shortage list and therefore will revert back to ASP + add-on payment reimbursement.
6. Since the Outpatient Prospective Payment System (OPPS) is budget-neutral, it is unclear if the “savings” from the MFN Model for hospital outpatient departments will be redistributed as increased payments for other services. (as of 11/30/2020, the CY2021 OPPS Final Rule has not been posted).
7. It is unclear for recurring accounts with multiple dates of service, if multiple lines with HCPCS code M1145 will be permitted, calculated per date of service.

Comments are due to CMS by 5PM (Eastern) on January 26, 2021 with electronic submission instructions included in the Interim Final Rule.

Please check our website frequently for updates!