UNM braces for Medicare change
Cancer center would lose $9.2M annually through rule’s drug reimbursement rate cuts
University of New Mexico officials say a planned change to Medicare payments could have a devastating impact on the UNM Comprehensive Cancer Center, eliminating more than $9 million in annual revenue — or nearly 10 percent of its total budget.
A federal rule finalized Nov. 1 and scheduled to take effect Jan. 1 would dramatically reduce drug reimbursement rates for hospitals in the “340B Drug Pricing Program.” The program allows qualified hospitals like UNM to buy drugs from the manufacturers at significant discount, while still getting Medicare Part B reimbursements at 6 percent above the average sales price. It’s a system designed to help certain institutions “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” according to its online description. Only some institutions benefit, including those treating a high volume of low-income patients or those operating in under-
served or rural areas.
The change will hit 15 hospitals around the state, according to information compiled by the New Mexico Hospital Association. UNM will sustain the biggest loss according to the estimates, but it will also cost others, including Presbyterian, Christus St. Vincent Regional Medical Center in Santa Fe and Nor-Lea in Lovington.
The new policy would cut the reimbursement rate for drugs bought under 340B to 22.5 percent below the average sales price, erasing the cushion UNM says it uses to cover uncompensated care, fund research and support outreach.
Rough estimates pin the total statewide impact at more than $23 million, according to NMHA figures.
It has stoked alarm around UNM, with Dr. Cheryl Willman, the cancer center’s director and CEO, describing it as “devastating.” It could force programmatic cuts that might put at risk UNM’s designation as just one of 49 National Cancer Institute “comprehensive cancer centers” in the nation, she said.
“Our patients will always come first — that’s who we are as a center — so we’re going to do everything to preserve our patient care programs, but that means we might have to make cuts in our research, our education and training, to our community outreach missions, and those are also what make us an NCI Comprehensive Cancer Center,” she said.
UNM estimates the change will reduce annual revenue by $14 million across its health system, with the bulk — at least $9.2 million — occurring at the cancer center, said Dr. Michael Richards, the system’s vice chancellor for clinical affairs. The change would disproportionately hit institutions like the cancer center, because they use some of the most expensive drugs and treat a relatively high concentration of Medicare patients, Richards said during a UNM Regents Health Sciences Center committee meeting last week.
Presbyterian Healthcare officials are also concerned, saying “the savings achieved by (340B) allow us to ease access to care for more patients and enable us to provide more comprehensive services,” according to a statement from Sandy Podley, Presbyterian Delivery System’s senior vice president of operations. Presbyterian would take an estimated $4 million hit under the change.
The Centers for Medicare & Medicaid touted the rule change as a way for Medicare beneficiaries to benefit from the discounts hospitals get on drugs, according to a news release. CMS will use the estimated $1.6 billion it saves in drug reimbursements to cover an increase in payments to all hospitals that perform certain covered outpatient services.
But even though UNM will benefit from that boost in clinical care pay, Richards said it would likely amount to less than $1 million — not nearly enough to offset the corresponding losses.
National hospital associations are challenging the rule in court, but if it occurs “it would be an overnight, immediate loss of a huge part of the net margin of the Cancer Center,” Dr. Paul Roth, chancellor of UNM’s Health Sciences Center, said at the meeting.
The losses amount to nearly 10 percent of the cancer center’s approximately $100 million annual budget. Willman noted that it will not affect all hospitals equally as some are exempted from Medicare reimbursement changes, which she said “further magnifies the disparities” for patients based on where they live.
National organizations like the Association of American Cancer Institutes have come out against the change, writing in a letter to Congressional leaders that it “threatens to derail access to lifesaving treatments and therapies, especially for uninsured and underserved patients.”
Several entities, including the American Hospital Association and Association of American Medical Colleges have filed a federal lawsuit, arguing that the change is unlawful and a decision the U.S. Department of Health and Human Services Secretary is not authorized to make.
The New Mexico Hospital Association has shared its impact estimates with the AHA for use in a “friend of the court” brief to accompany the lawsuit, said NMHA Executive Director Jeff Dye.
A hearing is set in District of Columbia District Court on Dec. 21.