The Office of the Inspector General (OIG) concluded recently that Medicare overpaid providers last year for medications by $110 million because of a calculation error. Practice Manager Insider editorial board member Patricia P. Falconer, MBA, analyzed the effect of Medicare’s alleged error on oncology practices. She found that, using the OIG’s equation, Medicare underpaid oncology providers by $2.5 million.
The OIG recently reported that the method used to calculate the volume-weighted average sales price (ASP) for Medicare Part B prescription drugs does not yield the same result as the method specified in the law. Overall, the discrepancy has led to Medicare overpaying providers by $115 million in 2005. The incorrect method also led to Medicare underpaying providers by $5 million, according to an OIG report.
The OIG reviewed Centers for Medicare & Medicaid Services (CMS) calculations for 459 Healthcare Common Procedure Coding System (HCPCS) codes. The report’s appendices show the HCPCS codes for which CMS overpaid, underpaid, and paid appropriately, according to the OIG. “Many of the codes evaluated by the OIG are for drugs used regularly by oncology practices,” said Practice Manager Insider editorial board member Elaine L. Towle, CMPE. However, most overpayments affected specialties other than oncology and hematology, Falconer explained. Check the report to see if your practice uses these codes.
Specifically, applying OIG’s calculation to the oncology-related codes for which CMS overpaid would reduce total provider payments by roughly $589,000 for 2005, Falconer said. Applying OIG’s calculation to the cancer-related codes for which CMS underpaid would increase total provider payments by about $3.1 million, she said. Therefore, oncology practices would have received an additional $2,511,000 last year if the OIG formula had been used to calculate ASPs. “The OIG methodology favors community-based cancer centers,” concluded Falconer, president of Health Options in Los Altos, CA. An upcoming Practice Manager Insider post will detail the oncology medications affected.
Be prepared for the OIG’s revised calculation method to become the new CMS calculation, advised Practice Manager Insider editorial board member Larry A. Oday. “It is noteworthy that CMS did not dispute the OIG's findings. CMS is not hesitant to disagree with OIG on these types of things when it feels it is in the right. Consequently, I would expect to see CMS adopt this new formula in the upcoming annual rulemaking,” said Oday, who is also a partner at Vinson & Elkins in Washington, DC.
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