On March 8, 2016 the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule to test new payment models for medications covered under Medicare Part B. You can read the Rule text here. The proposed model will shift payment from the current Average Sales Price (ASP) +6% to ASP+2.5% plus a nominal fee ($16.80). CMS expects this model will achieve the following:

  • “[I]mprove how Medicare Part B pays for prescription drugs and supports physicians and other clinicians in delivering higher quality care.”
  • “Drive the prescribing of the most effective drugs and… reward positive patient outcomes.”
  • “[H]elp Medicare beneficiaries get the right medications and right care while supporting physicians in the process.” – Andy Slavitt, CMS Acting Administrator
  • “[I]mprove Medicare beneficiaries’ care by aligning incentives to reward value and the most successful patient outcomes.” – Dr. Patrick Conway, CMS Chief Medical Officer & CMMI Deputy Administrator for Innovation and Quality


Providers who offer these medications in their office-settings (Infusion Centers) purchase them from a vendor, administer the prepared meds to a patient, and then bill the entire treatment to a health plan or Medicare/Medicaid. This is commonly referred to as the “Buy&Bill” process. For Medicare, payments for the medication portion of the treatment are paid using an ASP (Average Sales Price) formula. An additional +6% add on payment is built into the formula (reduced to +4.3% under sequestration) in order to compensate the physician for costs associated with acquiring, storing, and properly preparing the medication. Due to the inadequate reimbursement for the administration service codes, providers have come to rely on the drug margin to cover the additional costs of acquiring and administering the medication as well as the indirect costs of coordinating patient care.

Contrary to CMS belief, providers are not profiting lucratively from caring for Medicare beneficiaries. Due to the flaws in the design of the ASP formula, (the formula includes non-provider fees, and rebates for health plans and distributors) many providers are buying these medications and administering them at break-even or with only a 1-2% margin.

The CMS/CMMI proposed rule would have reduced the medication payment formula to ASP+2.5% which would result in a ASP+0.9% actual payment under sequestration. This dramatic reduction of payment for Part B medications would have imparted significant financial challenges and inhibited the providers ability to care for these patients in their office settings (Infusion Centers).


  • CMS/CMMI estimates of any potential cost-savings associated with the proposed model were based on the assumption that Medicare beneficiaries would NOT shift to higher-cost sites of care. (Hospitals)
  • CMS/CMMI had clearly not considered, evaluated, or estimated the potential financial impact of a substantial portion of this patient population shifting to local Hospitals.
  • In most areas of the country, the only hospitals willing to administer expensive medications are non-profit, 340B qualified facilities.

The proposed payment model would have produced significant financial strain on the office-based Infusion Center delivery channel and restricted patient access to the medications they need. No responsible provider would risk the financial ruin of their practice to treat Medicare beneficiaries with IV/injectable medications in their office. NICA found no evidence that CMS considered, evaluated, or estimated the number of providers that would cease infusion services for Medicare beneficiaries in their practice as a result of the proposed payment model.

The stated goal of the CMS payment model was to “encourage better care, smarter spending, and healthier people”.  This proposed rule would have restricted hundreds of thousands of vulnerable Medicare beneficiaries’ access to the only medication (i.e., “the right medication and right care”) that effectively manages their condition. Our hospital systems are not currently equipped to provide the kind of access and care needed for the millions of patients who require these biologic and specialty medications.

By proposing this rule as a “demonstration project” CMS is operating in direct conflict to their goals and undermining the care of the patients and beneficiaries they are charged to provide care for.


The NICA, along with our membership and advocacy partners, is sending letters to leadership at the U.S. Department of Health & Human Services, the Centers for Medicare & Medicaid Services (CMS) and the Center for Medicare & Medicaid Innovation (CMMI). We are working directly with members of Congress to develop a position in opposition of the proposed model. We have developed a coalition letter for physicians, nurses and provider/advocacy groups to join and express their opposition to the proposed model. We have also prepared online advocacy campaigns to help stakeholders who wish to contact their Congressmen and Congressional Committee members to express their opposition to this Medicare experiment.

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