CMS Gives CAR T Payments Short-term Boost, Adjusts Hospital Wage Index

CMS finalized a proposal to increase the marginal rate of technology add-on payments for chimeric antigen receptor (CAR) T-cell therapies from 50% to 65%, but only for 2 years, raising questions about what happens next.

The new rule affects CAR T and other high-cost therapies. “The increased payment from 50% to 65% will promote patient access and reduce uncertainty that innovators face about Medicare payment for new medical technologies,” CMS said in a release.

Also Friday, CMS finalized Medicare payment policies for rural and urban hospitals for fiscal year 2020 by changing the Medicare inpatient hospital wage index. The wage index is an adjustment to inpatient payment rates to account for local differences in wages. CMS is increasing the wage index for rural hospitals and said it was doing so in a budget-neutral manner. The final rule will increase the wage index for hospitals with a wage index value below the 25th percentile, which are typically rural hospitals.

"These hospitals' wage indexes will be increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals," CMS said. The budget neutrality adjustment will be applied across all Inpatient Prospective Payment System hospitals, rather than a decrease to the wage index for hospitals above the 75th percentile (typically urban hospitals), as was initially proposed.

CMS Administrator Seema Verma gave the example of a hospital in a low-wage rural community, which could receive a Medicare payment of about $4000 for treating a patient with pneumonia, while an urban hospital (which pays higher wages) could receive a payment of nearly $6000 for the same case. CMS said the change will assist rural and other low-wage hospitals in attracting and maintaining a highly skilled workforce, which it said will strengthen competition and lead to greater patient choice.

In its statement, CMS noted that rural areas are seeing hospitals close at an alarming rate, saying there have been more than 100 hospital closures since 2010.

A recent analysis by the Pittsburgh Morning-Sun and its parent, Gatehouse Media, however, found that states that refused to expand Medicaid as allowed under the Affordable Care Act (ACA) are more likely to have closed hospitals. Those states account for 77 of the 106 closures; they also have a greater percentage of money losing facilities and lower collective profit margins.

While Medicaid expansion may not have saved every hospital, the billions of dollars that might have flowed to these rural areas would have covered those who have no insurance and more than likely, a larger rate of chronic, costly, unaddressed health conditions, experts said in the report. The Trump administration has been opposed to Medicaid expansion and to the ACA generally.

The American Hospital Association (AHA) said the changes caused them to be “concerned that CMS did not include our recommendation that the proposed area wage index policy designed to help certain low-wage rural hospitals be non—budget neutral.”

“While we support improving the wage index values for many struggling rural hospitals, this should not be done by penalizing all hospitals, especially when Medicare already pays far less than the cost of providing care. That’s why we strongly urged the agency to use its existing statutory authority to increase the wage index in a non—budget neutral manner," said Tom Nickels, AHA’s executive vice president, in a statement.

Nickels also said that while AHA is pleased that CMS increased the new technology add-on payment rate, it called the policy “much needed short-term relief” and said “further solutions must be put forth to address the long-term sustainability of providing these expensive therapies.”

Cancer centers have said that administering CAR T costs at least $393,000 just for the customized cell-based treatment alone, and that does not include other costs, such as a possible stay in the intensive care unit for severe complications. The change means hospitals will be reimbursed about $240,000 for the cancer treatment for Medicare patients with lymphoma, up from $186,500.

Some commenters on the CAR T rule were hoping for Medicare reimbursement of up to 100% of the cost of the therapy; one commenter likened it to the cost of organ transplants, which are also low-volume, high-cost procedures.

In addition, CMS will make available $8.35 billion in disproportionate share hospital (DSH) payments, an increase of $78 million over last year, and will use 2015 cost data to determine how the DSH payments are doled out in 2020. DSH payments protect against the expense of treating patients (who may be uninsured or underinsured) who cannot pay their bills.

CMS also updated payment policies for medical devices that meet the FDA’s Breakthrough Devices designation; they would no longer be required to demonstrate evidence of “substantial clinical improvement” to qualify for new technology add-on payments. The eased criteria and alternative new technology add-on payment pathway also apply to new antimicrobial drugs.

The new rules take effect October 1.