Cancer clinics are turning away thousands of Medicare patients. Blame the sequester.

April 3, 2013
Dr. Ralph V. Boccia, of The Center for Cancer and Blood Disorders, runs a cancer clinic that is in danger of losing funding due to the sequester cuts. (Sarah L. Voisin/The Washington Post)
Ralph V. Boccia of the Center for Cancer and Blood Disorders runs a cancer clinic that is in danger of losing funding due to the sequester cuts. (Sarah L. Voisin/The Washington Post)

Cancer clinics across the country have begun turning away thousands of Medicare patients, blaming the sequester budget cuts.

Oncologists say the reduced funding, which took effect for Medicare on April 1, makes it impossible to administer expensive chemotherapy drugs while staying afloat financially.

Patients at these clinics would need to seek treatment elsewhere, such as at hospitals that might not have the capacity to accommodate them.

“If we treated the patients receiving the most expensive drugs, we’d be out of business in six months to a year,” said Jeff Vacirca, chief executive of North Shore Hematology Oncology Associates in New York. “The drugs we’re going to lose money on we’re not going to administer right now.”

After an emergency meeting Tuesday, Vacirca’s clinics decided that they would no longer see one-third of their 16,000 Medicare patients.

“A lot of us are in disbelief that this is happening,” he said. “It’s a choice between seeing these patients and staying in business.”

Some who have been pushing the federal government to spend less on health care say this is not the right approach.

“I don't think there was an intention to disrupt care or move it into a more expensive setting,” said Cathy Schoen, senior vice president of the Commonwealth Fund, which recently released a plan for cutting $2 trillion in health spending. “If that’s the case, we’re being  penny-wise and a pound-foolish with these cuts.”

Legislators meant to partially shield Medicare from the automatic budget cuts triggered by the sequester, limiting the program to a 2 percent reduction — a fraction of the cuts seen by other federal programs.

But oncologists say the cut is unexpectedly damaging for cancer patients because of the way those treatments are covered.

Medications for seniors are usually covered under the optional Medicare Part D, which includes private insurance. But because cancer drugs must be administered by a physician, they are among a handful of pharmaceuticals paid for by Part B, which covers doctor visits and is subject to the sequester cut.

The federal government typically pays community oncologists for the average sales price of a chemotherapy drug, plus 6 percent to cover the cost of storing and administering the medication.

Since oncologists cannot change the drug prices, they argue that the entire 2 percent cut will have to come out of that 6 percent overhead. That would make it more akin to a double-digit pay cut.

“If you get cut on the service side, you can either absorb it or make do with fewer nurses,” said Ted Okon, director of the Community Oncology Alliance, which advocates for hundreds of cancer clinics nationwide. “This is a drug that we’re purchasing. The costs don’t change and you can’t do without it. There isn’t really wiggle room.”

Okon’s group has sent letters to legislators urging them to exempt cancer drugs from the sequester or, as a back-up, only shave 2 percent off the money they receive to administer the medications.

Doctors at the Charleston Cancer Center in South Carolina began informing patients weeks ago that, due to the sequester cuts, they would soon need to seek treatment elsewhere.

“We don't sugar-coat things, we’re cancer doctors,” Charles Holladay, a doctor at the clinic, said. “We tell them that if we don’t go this course, it’s just a matter of time before we go out of business.”

Cancer patients turned away from local oncology clinics may seek care at hospitals, which also deliver chemotherapy treatments.

The care will likely be more expensive: One study from actuarial firm Milliman found that chemotherapy delivered in a hospital setting costs the federal government an average of $6,500 more annually than care delivered in a community clinic.

Those costs can trickle down to patients, who are responsible for picking up a certain amount of the medical bills. Milliman found that Medicare patients ended up with an average of $650 more in out-of-pocket costs when they were seen only in a hospital setting.

It is still unclear whether hospitals have the capacity to absorb these patients. The same Milliman report found that the majority of Medicare patients — 66 percent — receive treatment in a community oncology clinic, instead of a hospital.

Non-profit hospitals will likely have an easier time bearing the brunt of the sequester cuts. A federal program known as 340B requires pharmaceutical companies to give double-digit discounts to hospitals that treat low-income and uninsured patients.

Eastern Connecticut Health Network began preparing for additional volume after a local oncology practice sent out notice that it would stop seeing certain cancer patients.

“What we’re trying to do in the hospital is prepare for this,” ECHN spokesman Eric Berthel said. “We’re making sure we have access to the pharmaceutical companies and that we have appropriate staff on hand. We’re hoping the oncology practice will be successful in renegotiating this. It’s so fresh, so we’re pretty unsure.”

Some cancer clinics are counting on the federal government to provide relief, and continuing to see patients they expect to lose money on.

“We’re hoping that something will change, as legislators see the impact of this,” Ralph Boccia, director of the Center for Cancer and Blood Disorders in Bethesda, Md., said. “I don’t think we could keep going, without a change, for more than a couple of months.”

An analysis prepared by his clinic estimates that, if the full 2 percent cut takes effect, between 50 and 70 percent of the drugs it administers would become money losers.

Boccia estimates that 55 percent of his patients are covered by Medicare, making any changes to reimbursement rates difficult to weather.

“When I look at the numbers, they don’t add up,” he said. “Business 101 says we can’t stay open if we don’t cover our costs.”

Further reading

- Sarah Kliff's health-reform watch columns.

- 21 graphs that show Americans health-care prices are ludicrous.

Absolutely everything you need to know about the sequester in one FAQ.

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