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President’s FY 2020 Budget Request Proposes to Eliminate Pass-Through Payments for New Drugs Administered During Surgery, Base MIPS Scores on Flawed Population Health Measures, and Modify Advanced APM Bonuses

On Monday, March 11, the Trump Administration released its Fiscal Year (FY) 2020 budget request to Congress, outlining its policy and spending priorities for the federal government, including the Department of Health and Human Services (HHS). The president’s annual budget proposal communicates the administration’s priorities for the year ahead, functioning as a blueprint to begin the budget process, but does not dictate the actual budget and funding levels. Congress makes the final determination for the budget and will allocate funding accordingly. As a reminder, this proposal has no force of law. With the House currently controlled by Democrats, it is unlikely that many of these proposals or funding levels will be enacted into law.

The budget proposal continues the administration’s focus on reducing prescription drug costs. As a potential strategy for reducing expenditures on drugs, the FY 2020 budget request includes the following legislative proposal to eliminate pass-through payments:

  • Eliminate Pass-Through Payments for Drugs, Biologicals, and Biosimilars. The Medicare Outpatient Prospective Payment System (OPPS) currently pays for a newly approved drug, biologic, or biosimilar at ASP plus 6% for three years when the cost exceeds a certain threshold. These payments are known as “pass-through payments.” Effective CY 2020, this proposal removes transitional pass-through payment for drugs, biologicals, and biosimilars from the OPPS. Eliminating pass-through payment for drugs, biologicals, and biosimilars will lower costs by making them eligible for the reduced 340B payment level, or immediate bundling under the OPPS, if applicable [$4.3 billion in Medicare savings over 10 years].

Congressional action would be necessary to implement this proposed change.

Potential Impact on Ophthalmology:

  • New drugs on the market that are administered during surgery would no longer be paid separately from the ASC or HOPD facility fee. Facilities would have to absorb the cost of the drug in the payment they receive for the surgery if the drug is bundled. This may limit Medicare beneficiaries’ access to new drugs if the cost of the drug is too high for the facility to afford as part of the facility fee.
  • Alternatively, drugs could be reimbursed at the lower 340B rate of average sales price (ASP) minus 22%. Facilities that provide a high volume of uncompensated care are eligible for the 340B program and purchase drugs from manufacturers at a discount, typically 25% to 50% below ASP. Previously, 340B facilities were reimbursed for the drugs at the higher ASP +6% rate, in an effort to make up for losses from uncompensated care elsewhere. However, CMS began reimbursing at the lower ASP minus 22% in 2018 to more closely match the price the facilities were paying for the drug.
  • In 2018, hospital groups sued CMS over the change in reimbursement and a judge ruled that CMS did not have the authority to reduce the reimbursement level in the 340B program. CMS is currently appealing that decision.

Additional Proposed Changes for HHS Budget:

MIPS and Advanced APMs – the budget proposal seeks to facilitate the move toward value-based payments.

  • Modify the MIPS program to focus on problematic claims-based population health measures. Effective in CY 2022, this proposal, similar to one made earlier by the Medicare Payment Advisory Commission (MedPAC), would alter MIPS by adopting a set of broader claims calculated population health measures and potentially eliminating all or some physician-reported quality measures. This would be problematic for ophthalmologists because these measures are primary care-based, use a flawed attribution methodology, and may not be risk adjusted.
  • Eliminate participation threshold levels in Advanced-APMs (A-APMs) and award the 5% bonus only on payments received through the A-APM instead of on all physician fee schedule payments. Currently, participants in A-APMs are awarded a 5% bonus on all physician fee schedule payments when they meet or exceed the designated thresholds. While this proposal would remove thresholds in A-APMS, participants would only receive a 5% bonus for patients seen through the A-APMs, therefore significantly reducing the bonus payment by not applying it to all physician fee schedule payments.

Reimbursement for Primary Care Services

  • Cut payment for specialty physicians to redistribute to primary care. This proposal reprioritizes payment for primary care by creating a risk-adjusted monthly Medicare Priority Care payment for providers who are eligible to bill for evaluation and management (E/M) services and who provide ongoing primary care to Medicare beneficiaries. The payment would be funded by a five percent annual reduction to the valuations of all non-E/M services and procedures under the Physician Fee Schedule.

Part B Drugs

  • Move certain drugs covered under Part B into Part D. This proposal has the potential to limit patient access to drugs administered in the office and the facility and could create additional administrative burdens on physician practices. Many Part B drugs are injected or infused intravenously and would not be appropriate for a patient to administer at home or obtain from a pharmacy before an office visit.
  • Limits the increase of the Average Sales Price (ASP) of a Part B Drug administered in the office to the to the Consumer Price Index for all Urban Consumers. CMS would pay the lesser of (1) the actual ASP +6% or (2) the inflation-adjusted ASP +6%, which could significantly reduce reimbursements for Part B drugs.

Prior Authorization

  • Expand the items that are subject to prior authorization in Medicare Part B. This proposal would further exacerbate current prior authorization issues that already delay important treatments for patients and increase administrative burdens in ophthalmic practices.

ASC and HOPDs 

  • Reduce payment for certain services, such as clinic visits, for off-campus hospital outpatient departments. The budget proposal would reimburse at the rate under the physician fee schedule for certain services, such as clinic visits, rather than the higher outpatient rate.
  • Implement a Value-Based Purchasing Program for HOPDs and ASCs. For CY 2021, the budget proposal includes a value-based purchasing program for HOPDs and ASCs modeled on the current hospital program. The program would link up to 2% of payments to quality and outcome measures.
  • Redesign outpatient hospital and ASC payment systems to make risk-adjusted payments. Currently, Medicare bases payments for services furnished at outpatient hospital and ambulatory surgical centers on the site of service. This proposal will risk-adjust payments to these facilities based on the severity of patients’ diagnoses. It seeks to promote site neutrality in payments for similar services and similar patient characteristics at these facilities.


  • Increased funding for oversight of 503B Outsourcing Facilities. The budget proposal includes increased funding for the FDA to oversee and inspect 503B outsourcing facilities and continue to develop the bulks list.

As noted above, none of these proposals has the force of law. Budget authority and spending levels must be set by Congress, and most of the proposals included would require additional legislative action. We will keep you updated.

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