Payment reform needed in certain areas

AIDS, chemo, GHD top list

Three clinical areas stand out among recent studies urging better reimbursement policies and more payment advocacy on the part of physicians: AIDS, cancer, and growth hormone deficiency (GHD). Here are specifics regarding thorny payment issues in these three clinical areas:

AIDS. Off-label drug use is widespread for AIDS patients, according to a survey conducted by Carol L. Brosgart, MD, a physician at Alta Bates Medical Center in Berkeley, CA.1 Off-label drug use refers to the practice of prescribing drugs that are federally approved for another use.

Brosgart and a team of six other physicians and statisticians in both San Francisco and Columbus, OH, sent the survey to 1,530 primary care providers with HIV patients; 387 surveys (32%) were returned, reflecting care for 1,148 HIV patients. Here are highlights of the findings:

— 81% of HIV patients received at least one drug off-label;

— 40% of HIV patients reported that all their drug therapy was off-label;

— most off-label drug use was for treatment and prevention of HIV-related opportunistic infections, which frequently represented the community standard of practice (e.g., trimethoprim/ sulfamethoxazole for prevention of Pneumocystis carinii pneumonia) or the de facto standard of practice when no licensed therapies were available (e.g., drugs for treatment of Mycobacterium avium complex);

— more than 75% of off-label usage was cited in at least one of the three authoritative compendia.

In fact, the use of drugs for off-label indications in HIV care may be even more prevalent than the survey shows because of the researchers’ reliance on cross-checking drugs in the drug compendia, the authors say. There can be time lags between the release of off-label drugs and their publication in the compendia. This is a common trend, not only among AIDS patients but also in cancer care, experts say.

While off-label use of drugs is not necessarily harmful to patients, the pitfalls in payment for them create financial hardships and barriers to access to care, says Brosgart. The prevalence of off-label drug use in routine clinical practice, and the development of newer and more costly drugs for treatment of HIV and its complications, require an explicit national reimbursement policy for off-label uses of prescription drugs, she argues. This will ensure appropriate therapies are made available to those with insurance in a rational, consistent way.

• Growth hormone deficiency (GHD). Drug therapy for GHD is so costly that typically the drug manufacturers who make it ensure it is affordable to patients, or else they provide it for free. "The cost is frightfully expensive — $20,000 to $40,000 a year," says John Kirkland, MD, a pediatrician at the Baylor College of Medicine in Houston and an expert in growth hormone deficiency (GHD).

"People give drug companies a hard time, but in this situation both Genentech and Lilly have established a safety net to protect children. I myself have a number of patients [with GHD], but essentially they get financial help." Typically, drug companies prorate their charge to the family based on ability to pay.

"Overall, I’m not aware of a single patient in my group who has had problems having or getting growth hormone therapy," says Kirkland. "The physicians have to spend a considerable amount of time writing letters to get insurance companies to pay for it," but their advocacy pays off.

Diagnosis often not reimbursed

The more critical problem Kirkland encounters is payment for physician diagnosis of GHD, not the drug itself. Currently, payment levels for GHD diagnosis are scattered across the board. The lack of consistent payment policies among insurers makes it tough to know how to bill.

To get a handle on diagnosis charges, Kirkland and colleagues conducted a survey of six institutions, five of which replied.2 The survey requested information on two basic payment areas:

— physician charges for an initial examination and follow-up visits;

— charges for GH testing, including equipment, supplies, nursing charges, and facility fees, as well as physician charges for attendance and interpretation.

Overall, Kirkland found payments varied widely in both areas. (The chart on p. 21 summarizes Kirkland’s findings.) For example, physician charges for the clinical examination of a child suspected to have GHD ranged from $335 to $537, with a mean of $453. Charges for growth hormone testing ranged from $793 to $1,545, with a mean of $1,266. Total charges ranged from $1,221 to $2,025, with a mean of $1,719.

Clearly, charges and actual payments can be quite different, Kirkland points out. But his survey gives him the best picture he can get of appropriate charges. He can’t confer with other physicians about fees because of federal antitrust restrictions. Now it’s up to insurers, he says, to make public what they’re paying so physicians can know what constitutes a fair charge — either in a managed care or fee-for-service insurance arrangement.

"It is likely that the health care insurance industry has financial information, because it frequently reduces payments on the basis of percentiles of other physician and clinic charges," Kirkland wrote in survey analysis. "The physicians in this study noted significantly reduced payments by third-party payers."

Because payments for GHD diagnosis and treatment can be insufficient, often physicians admit patients into hospitals, where payment is certain, says Kirkland. "There are different situations," he says. "At the five medical centers we looked at, some don’t have an outpatient facility where they can do testing. All of us like to do it on an outpatient basis, but in many situations insurance companies have been reluctant to pay for outpatient testing, so doctors are left with no choice."

Cancer chemotherapy. HCFA’s payment policies for cancer chemotherapy in the private office setting are widely known not to reflect costs or work involved, argues Dale H. Cowan, MD, JD, an oncologist in Independence, OH.

"As a consequence of this underpayment and the progressively decreasing amounts paid, non-institution-based oncologists are, to an increasing extent, referring patients to hospital outpatient departments for treatment," he wrote in a study of Medicare’s chemo payments.3 This increases costs unnecessarily and risks injury to patients, he argues. The net effect, according to data provided to Cowan by community hospitals, is that the average $200 cost of administering chemo therapy (not counting the drug itself) in a physician’s office is doubled or tripled for the same treatment in a hospital outpatient setting.

The history of chemotherapy payment is extremely convoluted, as Cowan explains. Here is how it has shaped up since 1991:

— Prior to adoption of Medicare’s Resource Based Relative Value Scale (RBRVS), Medicare payment reflected a locality’s specific preferences and payment history. Payments reflected only physician work, and they varied from $28.10 in Oregon to $139.60 in Kentucky for CPT code 96410, a one-hour infusion. The national average was $58.78.

— Part B carriers that paid relatively low rates for services described by CPT codes compensated for that by reimbursing the cost of the drugs at relatively inflated rates, Cowan says. In states where physician work was better-paid, carriers paid less for the drugs.

— When RBRVS was adopted, the variance caused flawed weight projections and created a great deal of havoc among physicians who started noticing big changes, Cowan says. For example, in Ohio, RBRVS payment decreased from $124 in 1991 to $58.13 in 1995. By year-end 1996, Cowan expects the drop to average an additional 15%.

— When RBRVS went into effect, HCFA no longer paid for supplies separately. Instead, each RBRVS payment is designed to factor in the costs of supplies. But the costs of supplies for chemo therapy can vary from $5 to $40 depending on the treatment and the state, because of the wide variances in insurer payment practices prior to RBRVS in 1992.

— Altogether, the net effect was a decrease the average chemotherapy payment rates from $155.51 in 1991 to $67.04 in 1996. Actual costs vary from $80 to $110 per hour, Cowan says.

The best resolution, argues Cowan, is for HCFA to revisit oncology codes and enable payment to physicians to be fair enough to encourage in-office chemo administration, which he says would reduce Medicare’s expenditures and enhance patient safety.


1. Kirkland J, Paul Saenger P, macGillvray M, et al. Physician and clinic charges for diagnosing growth hormone deficiency. J Pediatr 1996; 128:S61-62.

2. Brosgart C, Mitchell T, Charlebois E, et al. Off-label drug use in human immunodeficiency virus disease. J Acquir Immune Defic Syndr Hum Retrovirol 1996; 12:56-62.

3. Cowan D. The effect of Medicare reimbursement policies on the cost and setting of cancer chemotherapy. Cancer Invest 1996; 14:184-186.