Statement of Peter Blitzer, M.D., President, Association of Freestanding Radiation Oncology Centers

My name is Dr. Peter Blitzer, and I am the President of the Association of Freestanding Radiation Oncology Centers (AFROC).  We are a national association representing over 150 freestanding radiation oncology centers throughout the country, dedicated to the conduct of high quality radiation oncology services in non-hospital settings.  On behalf of our members, I would like to thank Chairman Nancy Johnson, Ranking Member Pete Stark, and the entire Ways & Means Health Subcommittee for allowing AFROC to submit this testimony concerning the issue of the Medicare program’s use of average wholesale price (AWP) in determining reimbursement rates for prescription drugs, particularly as it relates to the field of medical oncology.

AFROC is concerned that certain proposals in Congress aimed at revising Medicare reimbursement rates for practice expenses associated with the administration of oncology drugs by medical oncologists may have an unintended and disproportionate impact on radiation oncology services provided in freestanding centers to cancer patients.  We request that, in implementing and enacting legislation aimed at changing current reimbursement policies in this area, Congress include appropriate statutory language to ensure that radiation oncology and other highly capital intensive services are not subjected to unintended consequences that may arise from the effort to ensure appropriate payment for medical oncology services.

Medicare payments for practice expenses associated with the provision of radiation oncology, medical oncology, and other highly resource intensive services (“technical component services” [1]) are reimbursed under the Physician Fee Schedule and are subject to a special payment methodology – the “zero work pool” (ZWP) methodology.  The ZWP methodology essentially groups all technical component and certain other services into the same “pool” for Medicare payment purposes.  Due to the structure of the overall “pool” of services, should Congress seek to modify the reimbursement methodologies for some of the services in the “pool” (e.g., chemotherapy administration), such a modification could potentially have an unintended impact on other ZWP services (e.g., radiation oncology technical component services).

A case in point is this year’s Medicare payment levels for ZWP services, which were reduced by approximately 4% as a result of relatively minor adjustments in the “mix” of services in the pool.  Because of this reduction, budget neutrality adjustments, and the 5.4% reduction in the Medicare conversion factor, Medicare payment for radiation oncology technical component services was reduced by a devastating 9%-12% this year.  AFROC has been working with the Centers for Medicare & Medicaid Services to ensure that any future adjustments to the utilization “mix” in the ZWP do not result in further unintended payment reductions for technical component services.

It is our understanding that Congress is currently considering modifying the Medicare payment methodology for reimbursing medical oncologists and others for drugs furnished “incident to” physician services.  In conjunction with its consideration of this issue, it is also our understanding that Congress is considering whether medical oncologists who administer oncology drugs in their offices are appropriately reimbursed for their practice expenses.  Indeed, proposals already have been made to significantly modify the methodology used to determine payment for medical oncologist’s practice expenses. 

AFROC is not in a position to comment on Medicare payment for oncology drugs or the cost of administering these drugs.  However, AFROC is concerned that if chemotherapy administration services are removed from the ZWP methodology or if other steps are taken to establish a special payment methodology for these services, there may be a significant, unintended and disproportionate impact on radiation oncology and other services that remain in the ZWP. 

As freestanding radiation oncology centers have already discovered this year, even relatively minor adjustments in the “mix” of ZWP services can dramatically affect Medicare payment levels for all services in the pool.  Since chemotherapy administration services are among the most frequently performed services in the pool, any adjustment to the payment methodology applicable to these services may have an extraordinary impact on radiation oncology and other ZWP services, unless CMS is directed to implement any modifications in the payment methodology applicable to chemotherapy administration in a manner that does not have a disproportionate impact on ZWP services.

To that end, AFROC requests that if Congress pursues legislation aimed at addressing the practice expenses of medical oncologists for the administration of oncology drugs, it do so in a manner that does not disproportionately affect radiation oncology or other ZWP services.  In the event that such legislation is pursued, AFROC would welcome the opportunity to work with you to craft appropriate statutory language that meets the goals of your policy objectives while guarding against any unintended consequences that may arise.

[1]“Technical component services” are comprised of the provision of facilities, equipment, supplies, and non-physician personnel.  These services differ from “professional component services,” which are primarily comprised of physician work.