2
Paying for Patient Care in Clinical Trials

The lion's share of funding to carry out clinical trials comes from two main sources: the federal government and private industry. In general, trial budgets cover the costs of setting up and managing the trial, recruiting participants, and collecting and analyzing data. Some money is included to cover special tests and procedures, but this varies. There is an expectation in most cases—more prominent for government-sponsored trials—that at least some, and in many cases most, costs of "routine patient care" will be paid for through the usual mechanism, health insurance.

The Health Care Financing Administration (HCFA) has maintained that some patient care in clinical trials is not reimbursable under Medicare. But HCFA has not issued an explicit policy setting out exactly what should and should not be reimbursed, which has led to varying interpretations of HCFA's intent by its fiscal intermediaries and carriers who process claims, as well as by providers submitting claims.

A large proportion of patient care provided in clinical trials is routine—are that would be eligible for reimbursement if delivered outside of a trial. Although the evidence is limited, it appears that claims for much of this care are submitted to HCFA (and other insurers, for non-Medicare patients) without specifying that the patient is in a clinical trial, and they are paid in the normal course of business by HCFA's contractors.

There is, however, one type of trial for which HCFA has issued explicit guidance: routine care in trials involving certain investigational medical devices became eligible for reimbursement under Medicare in 1995. Other public and private third-party payers have also entered into explicit agreements with the National Institutes of Health (NIH) to provide payment for patient care in selected clinical trials. In some cases payment is limited to routine care, and in others it includes paying for the investigational intervention itself.



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Extending Medicare Reimbursement in Clinical Trials 2 Paying for Patient Care in Clinical Trials The lion's share of funding to carry out clinical trials comes from two main sources: the federal government and private industry. In general, trial budgets cover the costs of setting up and managing the trial, recruiting participants, and collecting and analyzing data. Some money is included to cover special tests and procedures, but this varies. There is an expectation in most cases—more prominent for government-sponsored trials—that at least some, and in many cases most, costs of "routine patient care" will be paid for through the usual mechanism, health insurance. The Health Care Financing Administration (HCFA) has maintained that some patient care in clinical trials is not reimbursable under Medicare. But HCFA has not issued an explicit policy setting out exactly what should and should not be reimbursed, which has led to varying interpretations of HCFA's intent by its fiscal intermediaries and carriers who process claims, as well as by providers submitting claims. A large proportion of patient care provided in clinical trials is routine—are that would be eligible for reimbursement if delivered outside of a trial. Although the evidence is limited, it appears that claims for much of this care are submitted to HCFA (and other insurers, for non-Medicare patients) without specifying that the patient is in a clinical trial, and they are paid in the normal course of business by HCFA's contractors. There is, however, one type of trial for which HCFA has issued explicit guidance: routine care in trials involving certain investigational medical devices became eligible for reimbursement under Medicare in 1995. Other public and private third-party payers have also entered into explicit agreements with the National Institutes of Health (NIH) to provide payment for patient care in selected clinical trials. In some cases payment is limited to routine care, and in others it includes paying for the investigational intervention itself.

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Extending Medicare Reimbursement in Clinical Trials Clearly, official policy and common practice and understanding do not always match in reimbursement for patient care costs in clinical trials. In this chapter, we have pieced together as complete a picture as possible of how, and the extent to which, the costs of treating people in clinical trials are actually covered. CURRENT MEDICARE REIMBURSEMENT RULES RELATING TO INVESTIGATIONAL MEDICAL SERVICES AND CLINICAL TRIALS The legislation establishing the Medicare program states: Notwithstanding any other provisions of this title, no payment may be made for items or services which are not reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member. Since the inception of the Medicare program in the mid-1960s, the phrase "reasonable and necessary" has guided Medicare reimbursement. Although little explicit policy has ever been issued on the topic, this clause has been the basis for excluding reimbursement for services in clinical trials. This Medicare interpretation has historical roots in the private insurance sector, whose policies in the 1960s and still, in 1999, exclude coverage of services in clinical trials (GAO, 1999). Most private insurance plans have excluded coverage of services in clinical trials on the basis that the treatment is "experimental" or "investigational,'' although the language does not explicitly mention clinical trials (GAO, 1999).* However, Medical Directors report that they often approve payment for care in clinical trials on a case-by-case basis. In addition, private insurers have been involved in supporting specific trials (e.g., the Blue Cross/Blue Shield Associa *    The language regarding experimental and investigational treatment in most health insurance contracts is similar to the following, which is taken from a current Group Service Agreement of CIGNA Health care of New York, Inc.: "By way of example, but not limitation, the following are specifically excluded services and benefits: "Medical, surgical or other health care procedures and treatments which are experimental or investigational, as determined by the HEALTH PLAN Medical Director in accordance with consensus derived from peer review medical and scientific literature and the practice of the national medical community, including (1) any procedures or treatments which are not recognized as conforming to accepted medical practice; (2) any procedures or treatments in which the scientific assessment of the technique, or its application for a particular condition, has not been completed or its effectiveness has not been established; and (3) any procedures or treatments for which the required approval of a government agency has not been granted at the time the services are rendered." GAO (1999) confirmed in interviews with health plan Medical Directors that this language is interpreted to exclude routine care in clinical trials.

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Extending Medicare Reimbursement in Clinical Trials tion was instrumental in initiating a trial of high-dose chemotherapy with bone marrow transplant rescue for women with advanced breast cancer). Despite the lack of an explicit policy excluding reimbursement for routine care in clinical trials, HCFA has provided clear signals of its intent with regard to reimbursement in events of recent years. First are the events surrounding the 1995 change in policy for reimbursement of services to Medicare beneficiaries in some medical device trials. In 1993, HCFA asked the Office of the Inspector General (OIG) of the Department of Health and Human Services (DHHS) to investigate whether hospitals were billing Medicare "improperly for millions of dollars worth of surgical procedures involving unapproved medical devices," specifically, investigational pacemakers, defibrillators, and other cardiac devices in clinical trials. In a 1996 hearing of the Subcommittee on Investigations of the Senate Committee on Governmental Affairs, an official of the OIG reported their finding that most of the 130 hospitals they investigated had, in fact, improperly billed Medicare for implanting investigational devices. The Inspector General urged HCFA to recover these "overpayments" from the hospitals (Hartwig, 1996). What might not be clear from the OIG account is that it was not only payment for the investigational devices themselves, but for the implantation procedures, as illustrated by comments of others, including at least one HCFA official.* *    This point was made clearly by a HCFA official testifying at the same hearing (Ault, 1996), who stated: Medicare's program instructions on medical devices, which were governing until November 1, 1995, were added to the Medicare Hospital Manual, the Carrier Manual, and the Intermediary Manual in 1986. These instructions stated clearly that "medical devices which have not been approved for marketing by the FDA are considered investigational by Medicare and are not reasonable and necessary." The instructions went on to explain that payment would not be made either for the devices or the procedures and services performed using the devices. Additional instructions in these manuals dealing more generally with all noncovered services also state that any services related to a noncovered service are excluded from coverage. I would like to emphasize that HCFA was clear from the start about its policy regarding both coverage of investigational devices as well as any related services. To provide an example of how the policy was designed to work—if a hospital admission was solely for the purpose of implanting an investigational device, no payment would be made for the hospital stay. On the other hand, if a patient was admitted for chest pain, but it was decided during the visit to implant an investigational device, Medicare would pay for a medical admission recognizing the chest pain, but Medicare would not pay the much higher rate applicable to a surgical stay. No payment would be made for services associated with the surgical procedure to implant the investigational device. The official also made clear in his testimony that Medicare would have paid for patients in the trials to have the standard device implanted. He said, "We believe that in almost every instance in which an investigational device was provided, hospitals instead could have furnished an approved device, legally billed Medicare for it, and received

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Extending Medicare Reimbursement in Clinical Trials By the time of the hearing, HCFA had already changed its policy to allow reimbursement for patients in certain trials involving investigational devices (see below), but not for trials of other types of interventions. The clearest indication that routine patient care still is not considered reimbursable in trials other than those involving devices is found in a 1997 report by the General Accounting Office (GAO, 1997) on reimbursement by HCFA for Medicare beneficiaries in cancer clinical trials. GAO found that reimbursement was, indeed, occurring without HCFA's knowledge (the specific findings are presented later in this chapter). In responding to GAO's draft report, HCFA reported that their actuaries had "nearly doubled their estimates of the extent to which Medicare mistakenly reimburses claims for routine patient care costs. Under HCFA's current policy, any reimbursement for care associated with a cancer clinical trial would be made in error" (GAO, 1997).* HCFA has not issued any new language to change clinical trial reimbursement policy since the 1995 change for trials of medical devices, and no HCFA statements contradictory to what is presented here were found in the course of this study. Exceptions: Paying Patient Care Costs in Clinical Trials Under Medicare HCFA can and does make explicit exceptions to its general prohibition against paying for patient care costs in clinical trials. The most far-reaching exception is payment for routine care in a large number of medical device trials conducted under FDA-approved Investigational Device Exemption (IDE) protocols. In addition to medical devices, HCFA has reimbursed for other investigational treatments in specific instances referred to as "coverage with conditions." Reimbursement for Participants in Clinical Trials Involving Devices Under Medicare Until 1995, HCFA considered patient care in all trials of unapproved devices to be ineligible for reimbursement under Medicare, as described earlier. This ineligibility extended to trials of approved devices being tested for new uses, even though the same "off label" use would have been reimbursed for patients not in trials. The OIG investigation and its threat of severe economic penalties led hospitals to cease (or at least consider ceasing) participation in device trials. The manufacturers claimed that they were financially incapable of sup     payment. The choice they made, however, was to bill improperly for devices that were part of a clinical trial and therefore not covered." *   HCFA's initial estimate was that 25% of Part B claims and 10% of Part A claims for clinical trials were being reimbursed; the revised estimates were 50% and 15%, respectively.

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Extending Medicare Reimbursement in Clinical Trials porting the routine patient care costs associated with these trials. The result was an attempt to determine whether it was feasible to extend Medicare coverage to at least some investigational devices while maintaining safe medical care. In 1995, HCFA's and FDA's interagency agreement changed the reimbursement picture. Device trials under IDEs are now divided into two categories by FDA. Category A involves "experimental," first-of-a-kind devices for which the underlying risk of the device type has not been established for any use. Category B (see Table 2-1) involves "investigational" but not "experimental" devices. These are refinements of approved devices or replications of approved devices by a different manufacturer. Thus, the underlying questions of safety and effectiveness have been answered. A trial is therefore carried out to determine any incremental risks or benefits of the new device, or in some cases, simply to obtain approval for marketing. Category A trials continue to be excluded from reimbursement, but category B trials may be eligible for reimbursement. Of the 1,600 IDE trials ongoing (with 250 new ones each year), 96 percent have been placed in category B and 4 percent in category A. The manufacturers sponsoring trials and the institutions participating in them are responsible for filing paperwork with HCFA and the appropriate Medicare carriers before patients are enrolled. Reimbursement claims for patients who subsequently enter trials are identified by the IDE number assigned by FDA. Although all category B devices may be eligible for reimbursement, it is not necessarily granted. Decisions not to reimburse for a device can be made at two levels: at HCFA Central Office and at the carrier or fiscal intermediary level. First, HCFA retains the right to declare a specific trial ineligible for coverage, in which case it may issue a policy directive to its carriers and intermediaries informing them of the exclusion. A recent instance involved transmyocardial revascularization using a laser that is approved for other indications. In this case, the evidence for effectiveness was lacking. Medicare carriers and fiscal intermediaries may exercise their authority to decline reimbursement for particular patients on the basis of "medical necessity." They do not have the authority to countermand a decision by the HCFA Central Office, but they can determine that a particular patient is not eligible for the treatment under Medicare rules. According to a sample of carrier and fiscal intermediary Medical Directors interviewed for this report, they exercise this authority to greater and lesser degrees, with some never refusing reimbursement and others doing so occasionally. It appears that, overall, the 1995 change in reimbursement rules for devices under IDEs has had the intended effect: treatment of nearly all Medicare patients in eligible trials involving category B devices is reimbursed in a satisfactory manner.

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Extending Medicare Reimbursement in Clinical Trials TABLE 2-1. Criteria for Categorization of Investigational Devicesa Under HCFA/FDA Interagency Agreement Category A: Experimental Subcategory 1 Class III devicesb of a type for which no marketing application has been approved for any indication or use 2 Class III devices that would otherwise be in category B but have undergone significant modification for a new indication or use Category B: Nonexperimental/Investigational Subcategory 1 Devices, regardless of classification, under investigation to establish substantial equivalence to a predicate device (one that is or could be legally marketed) 2 Class III devices whose technological characteristics and indications are comparable to an approved device 3 Class III devices with technological ("generational") advances compared to an approved device 4 Class III devices comparable to an approved device (no significant modifications) but under investigation for a new indication 5 Class III devices on the market before the current regulatory requirements (1976) but now under investigation 6 Devices not posing significant risks (Class I or II) for which an IDE is required a "Note: Some investigational devices may exhibit unique characteristics or raise safety concerns that make additional consideration necessary. For these devices, HCFA and FDA will agree on the additional criteria to be used. FDA will then use these criteria to assign the device to a category. As experience is gained in the categorization process, this attachment may be modified." b Devices are classified by their inherent risks and benefits based on the level of control necessary to assure safety and effectiveness. Class I devices present minimal potential for harm to the user and are subject to only "general controls" (e.g., proper registration and labeling and good manufacturing practices). Class II are those for which general controls alone are insufficient to assure safety and effectiveness, so they are also subject to special controls, which may include special labeling requirements, guidance documents, mandatory performance standards, and postmarket surveillance. Class III is the most stringent regulatory category, including devices for which safety and effectiveness cannot be ensured solely through general or special controls. Class III devices usually support or sustain human life, are of substantial importance in preventing impairment of human health, or present a potential, unreasonable risk of illness or injury. They require premarket approval, which may include evidence from clinical trials. SOURCE: HCFA/FDA, 1995.

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Extending Medicare Reimbursement in Clinical Trials Coverage with Conditions In certain cases, HCFA has concluded that investigational treatments do meet the test of being "reasonable and necessary" when provided according to certain specifications. An early example of this, starting in 1986, is coverage of the costs of heart transplants only in specific "centers of excellence" according to an approved protocol, and only for patients meeting specified criteria (Evans, 1992). The most prominent current example is a randomized trial of lung volume reduction surgery (LVRS), a relatively new procedure intended to improve lung function and relieve debilitating symptoms for emphysema patients. By 1995, LVRS was diffusing rapidly—and claims for reimbursement were being submitted to Medicare—despite the lack of evidence from clinical trials that it was an effective treatment. Unanswered questions remained about risk, appropriate selection of patients for surgery, differences in surgical techniques, and qualifications of physicians performing the surgery. In a 1996 report to HCFA, the Agency for Health Care Policy and Research (AHCPR) concluded that there was insufficient evidence to determine the effectiveness of LVRS (Holohan and Handelsman, 1996). They recommended that HCFA help answer the question of effectiveness by funding the patient care costs for Medicare participants enrolled in a randomized trial of the procedure. HCFA went to the National Heart, Lung and Blood Institute (NHLBI) to develop a study protocol and fund the research portion of what is now the multicenter National Emphysema Treatment Trial. In addition, AHCPR is funding a study of the cost-effectiveness of LVRS as a component of the trial. In this case, no reimbursement is allowed for LVRS for Medicare beneficiaries outside the trial. A determination about effectiveness and appropriate indications (and therefore, Medicare coverage) will be made when the trial is completed (DeParle, 1998). Simultaneous pancreas-kidney transplants for certain patients with diabetes and end-stage renal disease is another surgical procedure for which insufficient evidence is available to make a general decision about its risks and benefits. Based on an AHCPR recommendation, HCFA is collaborating with the National Institute on Diabetes, Digestive and Kidney Diseases (NIDDK) to provide reimbursement for patients with certain indications who receive their transplants at specific high-volume institutions (in this case, performing at least 30 such procedures per year). The participating transplant centers must also provide data on patients to the NIDDK-supported International Pancreas and Islet Transplant Registry (DeParle, 1998). Authority of ProPAC to Fund Clinical Trials Congress at one time recognized the Medicare Program's legitimate interest in collecting information on the safety and effectiveness of new and existing medical services to aid in deciding about whether coverage is warranted. In 1983 amendments to the Medicare section of the Social Security Act, Congress

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Extending Medicare Reimbursement in Clinical Trials created the independent Prospective Payment Assessment Commission (ProPAC) to advise HCFA about hospital payment under Medicare, but also to "identify medically appropriate patterns of health resources use" (42US Code, Sec. 1395ww(e)(6)(E)). ProPAC was also given authority to "carry out, or award grants or contracts for, original research and experimentation, including clinical research, where existing information is inadequate for the development of useful and valid guidelines by the Commission...." ProPAC never funded any clinical trials. Furthermore, in the Balanced Budget Act of 1997, ProPAC and the Physician Payment Review Commission (which advised on physician payment issues) were merged into the Medicare Payment Advisory Commission and language allowing ProPAC to fund research was eliminated. THE STATUS QUO IN REIMBURSEMENT There is relatively little information about how the costs of patient care in clinical trials are actually paid, and the extent to which insurers are paying these costs, either knowingly or unknowingly. What information is available suggests that a sizable proportion is paid for by insurers, including HCFA. This conclusion derives from: direct evidence from one study demonstrating that HCFA has paid unknowingly for most routine care of Medicare beneficiaries in certain cancer trials (GAO, 1997), evidence that, in the past (before the 1995 change in policy) HCFA unknowingly paid millions of dollars in reimbursement for Medicare beneficiaries in medical device trials (Hartwig, 1996), interviews with clinical trial investigators conducted for this study, in which they uniformly acknowledged submitting claims for reimbursement to HCFA and other insurers for routine patient care in trials and getting them paid, interviews with private-sector clinical trial sponsors conducted for this study who stated that, while they do cover the costs of "protocol-induced" services, in general they do not provide money to pay for routine patient care; they expect providers to bill insurers for those costs, deduction, given the lack of another obvious source of payment for most routine care in trials, and lack of evidence from any source that HCFA and other insurers are not reimbursing for this care. The evidence about payments by HCFA in pre-1995 medical device trials was presented earlier in this chapter. The other points are discussed in the sections that follow. Even though the committee has concluded that a great deal, possibly most, of patient care costs are already reimbursed by Medicare, it acknowledges that not all costs are reimbursed. Very little evidence is available about how

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Extending Medicare Reimbursement in Clinical Trials costs for claims that are denied (or never filed) are eventually paid. Some appear to be absorbed by providers and institutions involved with clinical trials, but at least in some cases, the participant may be left to pay the bill. The committee was presented with anecdotal evidence that participants are sometimes forced unexpectedly to pay large sums for care in clinical trials, although no systematically collected evidence on this could be found. In all that follows, what is missing is any reference to financial burdens on participants. The GAO Study: Medicare Reimbursement Denials in Cancer Clinical Trials In February 1997, Senators Mack and Rockefeller first introduced the "Medicare Cancer Clinical Trial Coverage Act" (S. 381), which would have established a demonstration project requiring HCFA to cover routine patient care costs for Medicare beneficiaries enrolled in trials sponsored by the National Cancer Institute (NCI). In order to gauge the potential impact of the legislation (which ultimately did not become law), the Senators asked the General Accounting Office (GAO) to estimate how often claims were denied by HCFA because the costs of treatment were incurred in clinical trials. The GAO selected a group of cancer trials from NCI's Physician Data Query (PDQ) database that were likely to include people over 65 (GAO, 1997). They focused on trials enrolling patients with cancer of the breast, colon, rectum, prostate, or lung, and limited these to phase 2 and 3 trials, which enroll more patients than do phase 1 trials. All physicians participating in these trials were contacted, and 186 (55 percent) of them responded. These physicians had enrolled 1,143 patients into the trials between March 1 and September 30, 1996, including 217 Medicare beneficiaries. (One physician reported automatically excluding Medicare beneficiaries from clinical trials because of concerns over reimbursement.) The Medicare carrier paid the claims in all but eight cases. Those eight had been treated by the same physician and, for seven of them, the claims denied were for chemotherapy and other drugs. In this study, when providers submitted claims for patients in cancer clinical trials (as long as that fact was not acknowledged), they were rarely denied. This is one small study, but it is the only one of its kind. How Clinical Trial Providers Recoup Patient Care Costs There are no published studies on how the costs of caring for patients in clinical trials are covered, although there is a widespread understanding that third-party payers do, indeed, pay for much of this care. The committee commissioned a small study to gather information on this question (Dobson and Sturm, 1999). The Lewin Group interviewed 12 individuals with experience organizing and conducting clinical trials, asking generally about how they

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Extending Medicare Reimbursement in Clinical Trials sought reimbursement for enrolled patients. (They did not request or receive billing or accounts data for specific trials.) In addition, the Lewin Group report summarized a survey of 17 oncology practices conducted for the American Society of Clinical Oncology (ASCO) concerning how they would seek reimbursement for patients treated in a hypothetical clinical trial protocol. The results of the interviews should be treated as glimpses into the subject of reimbursement for patients in clinical trials, not a comprehensive—or even representative—set of data. The individuals interviewed spoke only for themselves. The committee makes no claims of generalizability, but it is worth noting that the interviewees were speaking from direct, current experience. The results of both the interviews and the survey are presented without identifying the respondents. Those interviewed by the Lewin Group were: representatives of large pharmaceutical and medical device companies with experience sponsoring numerous clinical trials for the Medicare population; the director of a private research institute that serves as a site for several multisite clinical trials; the director of clinical research and the national director of clinical resources at a federal agency that sponsors clinical trials; the manager of cardiology trials at a major academic medical center (AMC); the director of a large clinical research center at a major AMC; the administrative manager of a general clinical research center (GCRC) at a major AMC; the director of a clinical research committee at a major AMC, who is also a former member of an Institutional Review Board. Findings from the interviews and the ASCO survey are reported from the perspectives of oncology, cardiology, NIH GCRCs, and the medical device and pharmaceutical industries. Oncology Oncologists commonly bill third-party payers for both investigational and routine patient care costs in clinical trials. One interviewee believes this is, at least in part, because the definition of what is "investigational" and what is "routine" is not clear for many types of cancer that generally defy treatment. For example, no standard treatment exists for advanced melanoma, so it is difficult to decide which services and tests are standard or routine treatment and which are investigational or research-related. Even though no standard currently exists, patients not enrolled in a clinical trial are still seen and treated by physicians prescribing their own idiosyncratic "routine" care that would be billed to third-party payers. In a sense, all treatments for these patients are investiga

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Extending Medicare Reimbursement in Clinical Trials tional, whether or not formally labeled as clinical research. Thus, in advanced melanoma trials, because no standard exists, oncologists generally classify some patient care costs as "routine" and seek reimbursement from insurers. Oncologists also sometimes submit claims to Medicare and other insurers for tests (e.g., liver function tests and computed tomography [CT] scans) done more frequently in clinical trials than they might otherwise be performed. They may also bill for components of complex treatments, such as bone marrow transplantation for unproven indications, without specifying the procedure itself. The ASCO survey presented 17 clinical oncology practices (12 group practices, 2 academic medical centers, and 2 managed care organizations) with a mock protocol for a phase 3 trial of a chemotherapy drug for prostate cancer. The mock protocol was designed to resemble a "typical" oncology trial and gave a detailed account of the trial background, the eligibility and exclusion criteria, and the schedule of required studies and tests. The tests and services included in this survey ranged from office visits and clinical labs to chest X-rays and CT scans. The oncology practices were then asked for which services/tests in this clinical trial they would "normally bill" an insurer, assuming first industry sponsorship and then NIH sponsorship. The responses indicate that oncologists in academic medical centers and group practices would bill for patient care services in both industry- and NIH-sponsored clinical trials for substantial portions of patient care costs. Claims would be submitted for nearly all office visits and clinical laboratory services, and for 50 to 70 percent of chest X-rays, CT scans, and bone scans. Cardiology Cardiologists commonly bill insurers for routine patient care costs in clinical trials. In at least some sites, however, costs for procedures mandated by the protocol but not necessarily required for standard patient treatment ("protocolinduced costs") are not submitted for reimbursement and are usually covered by research dollars. In clinical trials comparing two standard treatments for coronary artery disease, such as percutaneous transluminal coronary angioplasty (PTCA) and pharmacological therapies, both treatments would be reimbursable by most third-party payers outside the scope of a trial. Therefore, routine patient care associated with both treatments is billed as though there were no clinical trial. The investigators interviewed stated that to cover trial costs, physicians seek insurer reimbursement for some patient care costs, and also cross-subsidize from other sources of revenue. In this case, other sources of revenue might include enrolling in better-funded industry-sponsored trials or affiliating with organizations that bring in money from clinical care.

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Extending Medicare Reimbursement in Clinical Trials payment is $750 per patient versus $2,500 per patient for industry-sponsored trials. Pharmaceutical sponsors usually cover costs for all procedures, both routine and investigational, required by the protocol. Routine costs not required by the protocol are commonly billed to third-party payers and are paid by the pharmaceutical sponsor only if reimbursement is denied by the insurer (this varies from company to company). In a real example of an industry-sponsored clinical trial, a drug is tested to treat benign prostate disease and lower urinary tract symptoms. In this case, surgery is the standard treatment the patient would have received outside of the trial. Costs associated with the standard surgery in the comparison arm of the study are billed to a third-party payer, while all experimental costs for patient care and additional procedures required by the protocol are borne by the company. Treatment of Clinical Trial Claims by Medicare Fiscal Intermediaries and Carriers To find out how Medicare policy on clinical trials is implemented, the Institute of Medicine (IOM) project staff conducted semistructured telephone interviews with several Medical Directors of Medicare fiscal intermediaries and carriers around the country. HCFA, in its Medicare manuals, regulations, and other types of specific written guidance, sets the rules for reimbursement of medical services for Medicare beneficiaries. But the day-to-day decisions about reimbursement for hospital and physician services are made by Medicare fiscal intermediaries and carriers, acting as agents for Medicare Parts A and B, respectively. Because HCFA does not issue specific guidance on each and every service, these insurers have a certain amount of discretion to determine what will and will not be paid for, based on their understanding of the Medicare rules. In the case of clinical trials, fiscal intermediary and carrier Medical Directors in different parts of the country share a general understanding that at least some services—including possibly some entire episodes of care—are excluded from Medicare reimbursement because they do not meet the "reasonable and necessary" criteria. However, the Medical Directors vary in their interpretation of what they would and would not consider covered in the context of clinical trials. The information reported here derives from discussions of hypothetical claims situations and not an analysis of actual reimbursement decisions. In conversations with Medical Directors, there was a general recognition that providers submit claims for beneficiaries in clinical trials, most of which do not specify (through coding conventions) that the individual was in a trial. The Medical Directors all believed such claims to be relatively few. Occasionally, claims are submitted that raise the possibility that the patient is in an investigational protocol; for example, if an administered drug is unnamed or designated as unapproved; if the claim is for the administration of chemotherapy, but there is no drug charge; or if a medication is paired with an

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Extending Medicare Reimbursement in Clinical Trials unusual diagnosis. These cases might be investigated and the fact of a clinical trial uncovered. No Medical Directors said they would flatly deny reimbursement for any and all patients in clinical trials, but their thresholds between reimbursement and no reimbursement varied. Several hypothetical scenarios were discussed, eliciting a range of responses, summarized in the next section. It should be noted that these are responses that would be made if the Medical Director was aware that treatment had been given in the context of a trial, which, according to those interviewed, would be the exception rather than the rule. All Clinical Trials Except Those Involving Devices Randomized clinical trial comparing two or more standard treatments. There was total agreement that it was appropriate to reimburse for routine care of all Medicare patients enrolled. Source of trial sponsorship would not affect the decision. Randomized clinical trial comparing standard treatment with an investigational treatment. Most would reimburse for routine care of patients receiving standard treatment but not the investigational arm (some, however, would provide some reimbursement for standard elements of the investigational treatment). One Medical Director would decline payment for all aspects of both the investigational and control arm of such a trial. Phase 1 and 2 cancer clinical trials. Responses ranged from blanket denial of all claims to full reimbursement if drugs were approved and accepted off-label for the indication. Acceptance for off-label use would be based on listing in standard compendia. If a trial involved both approved and unapproved drugs, some would reimburse for treatment with approved drugs but not unapproved ones, and others would reimburse nothing for the treatment episode. Clinical Trials Involving Devices Medical Directors shared the understanding that devices classified by FDA as "category A" were not eligible for reimbursement, but that those in "category B" were eligible, subject to carriers' discretion. Instances were also cited in which HCFA had issued directives that procedures involving certain category B devices not be reimbursed (e.g., laser transmyocardial revascularization), and these directives were routinely followed by carriers. The Medical Directors were asked whether they distinguished among the subclasses of category B devices, but otherwise were not presented with scenarios. As with non-device trials, there was some variation in how Medicare reimbursement requirements were interpreted.

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Extending Medicare Reimbursement in Clinical Trials The Medical Directors believe they are generally more aware of patients treated under IDEs than in other types of clinical trials because of the specific payment rules for device trials. In practice, some virtually never deny a reimbursement claim for a category B device (except in the case of explicit HCFA guidance against reimbursement). At the other extreme, one Medical Director reported denying 10–20 such claims per month. Those denials are based on a determination that the device was not "medically necessary" for those patients. General Observations The rules about reimbursement for treatment in clinical trials under Medicare are open to interpretation, but to no greater degree than other reimbursement situations, according to the Medical Directors interviewed. They stressed that HCFA does not provide specific, detailed guidance for each hypothetical situation. The vast majority of claims are routine, however, and require no special attention. Claims involving clinical trials are a tiny fraction of the claims flowing through these offices, and even among claims requiring individual decisions, they do not appear to be a major problem for Medical Directors. According to those interviewed, although fiscal intermediaries and carriers retain substantial discretion over reimbursement decisions, these decisions have become more uniform over time, for several reasons. One reason is that the number of fiscal intermediaries and carriers has been steadily reduced since the inception of Medicare, with larger and larger areas covered by each one. In addition, there is increased consultation and collaboration among these entities, and reimbursement criteria and decisions are a frequent source of discussion. Medical Directors also noted the inconsistency that sometimes occurs when reimbursement is provided for use of an inpatient drug for an off-label indication outside of a clinical trial, while the same claim would be denied if the treatment were given in a clinical trial. The same might be true of new or modified procedures that might not be fully detailed in a routine claim but would be obvious and not reimbursable if part of a clinical trial. PROGRAMS AND PROPOSALS FOR REIMBURSING PATIENT CARE COSTS IN CLINICAL TRIALS Since the mid-1990s, various agreements have been struck and legislation introduced to pay for some patient care costs in some clinical trials. Each of the arrangements included here was considered by the committee in its deliberations, although the reimbursement recommendations proposed in this report differ in significant ways from those described.

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Extending Medicare Reimbursement in Clinical Trials DoD/NCI Agreement In January 1996, the Department of Defense (DoD) began a 3-year demonstration project to pay medical costs for cancer patients who enrolled in phase 2 or 3 NCI-sponsored cancer treatment trials (DoD/NCI, 1996). All services associated with treatment in the trial are paid for, including: diagnostic testing and evaluation required to determine whether a patient meets the eligibility criteria, chemotherapeutic agents, except investigational agents, treatment of complications, and follow-up and testing after active treatment period. As of April 1999, 206 patients had participated in this program during its first 2 1/2 years (out of about 11,760 TRICARE-eligible patients diagnosed with cancer each year). More than half (113) had breast cancer, and the rest had a variety of other cancers. Roughly two-thirds were in phase 2 trials and one-third in phase 3 trials. Information about specific treatments was not available for the entire participating group, but during the initial year and a half of the program, when the first 125 were treated, 91 patients had entered trials that included bone marrow transplantation (73 for solid tumors and 18 for hematologic malignancies). It appears that the DoD benefit was seen as a means to enter trials with treatment including bone marrow transplantation, which, for the solid tumors, would have been some form of high-dose therapy with autologous bone marrow rescue. Most patients were in phase 2 trials, so entry would not have required randomization, which might have meant accepting standard treatment without a bone marrow transplant. No economic analyses were completed to determine the cost of this program because of the small numbers of participants and the skewed distribution toward bone marrow transplantation (Szymanski, 1999). The demonstration project with NCI has been extended in time and expanded in 1999 to include coverage of patient care costs in cancer prevention trials (DoD 1999). NCI has requested coverage of phase 1 trials as well, but DoD has decided not to include them at this time. DoD has also considered expanding coverage to NIH-sponsored trials for medical conditions other than cancer but has not yet done so. VA/NCI Agreement The Department of Veterans Affairs (VA) and NCI signed a 3-year agreement in January 1997 under which VA agreed to pay for medical care in NCI-sponsored clinical trials for veterans in the VA health care system (VA/NCI, 1997). The agreement provides for payment in trials at VA medical centers and at non-VA sites, but in practice, VA has limited coverage to NCI-sponsored

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Extending Medicare Reimbursement in Clinical Trials trials at its own facilities (exceptions could still be made, e.g., in the case of a rare tumor for which no trials are ongoing at VA facilities). A direct per-case reimbursement arrangement was set up for VA physicians to encourage increased participation. VA-eligible individuals may enter trials in cancer prevention, diagnosis, and treatment, including all phases of trials. All services required by the trials are paid for by VA, which is consistent with their provision of all necessary medical care at no cost to beneficiaries. As of early 1999, VA was not tracking either the number of individuals enrolled through this agreement, or the costs of treatment for patients enrolled in trials. AAHP/NIH Agreement The American Association of Health Plans (AAHP) is a trade organization comprising more than 1,000 managed care health plans of all types, with combined coverage of more than 100 million people. In December 1998, AAHP signed an agreement with NIH designed to increase participation of member plan enrollees in NIH-sponsored trials (AAHP, 1998). AAHP will encourage plans to reimburse the costs of routine patient care for people enrolled in trials, up to about the same amount they would reimburse for the costs of standard treatment outside a trial. For trials in which treatment is substantially more expensive than standard care, plans will be encouraged to work with NIH to determine the best sources for covering additional costs. The agreement also includes provisions for monitoring the impact of new reimbursement provisions and for research on the role of clinical trials in health care. AAHP member plans are all independent and not obligated to change their policy regarding clinical trials. No reports on implementation of the agreement are yet available. UnitedHealth Group UnitedHealth Group (UHG), a large managed care provider, began in January 1999 offering reimbursement for participants in certain cancer trials conducted under the auspices of the NCI-sponsored Coalition of National Cancer Cooperative Groups. According to the UHG Medical Director, "UHG grants an exception to the 'investigational' clause for any health plan member who enrolls in one of the Coalition's multicenter trials" (Newcomer, 1999). During the first 8 months of the program, few individuals took advantage of the benefit—fewer than 10 UHG patients entered eligible trials (Newcomer, 1999).

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Extending Medicare Reimbursement in Clinical Trials State Laws Several states have enacted laws that require private insurers (i.e., not HCFA) to reimburse the costs of routine patient care in certain types of clinical trials. Rhode Island has the oldest law, requiring insurers to cover the patient care costs for beneficiaries enrolled in NIH-sponsored cancer clinical trials. Beginning in 1991, patients in phase 3 and 4 trials were eligible. Coverage was extended subsequently to phase 2 trials. The law has no reporting requirements, and the state has not kept track of how many clinical trial participants have been in trials and had their care reimbursed as a result of the law. In January 1999, a Maryland law went into effect providing reimbursement of costs in all phases of cancer trials, as well as phase 2, 3, and 4 trials for "any other life-threatening condition" sponsored by major government agencies or by industry, under an FDA-approved Investigational New Drug Exemption (IND). Patients must be treated in an institution with a "multiple project assurance contract," which currently limits treatment in the state to the University of Maryland and Johns Hopkins University hospitals. The Maryland law also requires an annual report on the patients in clinical trials covered during the previous year, to be prepared by the state insurance commissioner based on information provided by the insurers. In addition, the commissioner is required to create a Workgroup on Insurance Coverage for Patient Care Cost in Clinical Trials, which is charged with, at a minimum, developing methodology to assess the economic and clinical impact of coverage under the law. A Virginia law requiring reimbursement for treatment in cancer clinical trials took effect in July 1999. Eligibility by sponsor and host institution is similar to the Maryland law. A Georgia law went into effect on July 1, 1998 requiring insurers to reimburse routine medical costs for children treated in phase 2 and 3 clinical trials. No information is currently available on the results of any of these state programs. Selected Proposed National Legislation Legislation has been proposed in the current and previous Congresses to provide reimbursement for routine patient care costs for Medicare beneficiaries enrolled in cancer clinical trials of varying sponsorship, and for coverage of routine patient care for nonelderly individuals with private insurance enrolled in clinical trials for serious and life-threatening medical conditions. The major bill aimed at Medicare is called the "Medicare Cancer Clinical Trial Coverage Act" and has been introduced several times, including the current congressional session. This bill proposes covering "routine patient care costs" in cancer trials sponsored by NIH, VA, DoD, industry (for trials under INDs or IDEs), and other NIH-supported private institutions. The bill defines

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Extending Medicare Reimbursement in Clinical Trials the covered costs to be limited to those covered by Medicare under standard treatment conditions (i.e., outside of clinical trials). Provisions for some clinical trial coverage by private insurers have been included in all recent versions of the "Patients' Bill of Rights." The bill passed by the House of Representatives in October 1999 would cover routine patient care in government-sponsored trials for "life-threatening or serious illness for which no standard treatment is effective" (H.R. 358). The bill passed by the Senate in July 1999 (S. 240) contains a narrower provision, including only clinical trials for cancer treatment. The bills also require the Secretary of HHS to carry out a formal rulemaking process to develop "standards relating to the coverage of routine patient costs'' for clinical trial participants. This would involve appointment of a committee and facilitator who would report on what the standards should be. APPENDIX: A PRIMER ON MEDICARE Title XVIII of the Social Security Act, entitled "Health Insurance for the Aged and Disabled"—commonly known as Medicare—provides health insurance for people in the United States who: are at least 65 years old, are disabled, or have permanent kidney failure. When first passed in 1965, Medicare covered only people 65 and older. The other groups became eligible as a result of legislation in 1973. The Medicare program now covers 95 percent of the aged population, plus many persons who are on Social Security because of disability. In 1997, about 38 million enrollees were covered, and benefit payments averaged about $6,300 per enrollee. Total disbursements were $214 billion. The two main parts of Medicare are "Part A"—Hospital Insurance, which covers most inpatient care—and "Part B"—Supplementary Medical Insurance, which mainly covers physician fees and outpatient care. Most people pay no premiums for Part A because they have earned the right to coverage through working. Premiums are charged for Part B, amounting to 25 percent of the average expenditure for beneficiaries. The Benefits Part A Covered Services Inpatient hospital care in a semiprivate room, meals, regular nursing services, operating and recovery room, intensive care, inpatient prescription drugs,

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Extending Medicare Reimbursement in Clinical Trials laboratory tests, X-rays, psychiatric hospital, inpatient rehabilitation, long-term care hospitalization, and other services and supplies are covered. Part A does not cover physician services, which are covered under Part B. Beneficiaries pay a deductible ($764 in 1998) and nothing more for the first 60 days of inpatient hospital care each year. Starting at 60 days, there is a daily copayment through 90 days, after which Medicare coverage either ends or the beneficiary may use "lifetime reserve days," which require a copayment. Skilled nursing facility (SNF) care within 30 days (generally) of a hospitalization that lasts at least three days is covered. Covered services are similar to those for inpatient hospital care, but also include rehabilitation and appliances. Up to 100 days are allowed per episode of care, with full coverage for the first 20 days and a daily copayment after that. Home Health Agency (HHA) care is covered for home-bound beneficiaries who need intermittent or part-time skilled nursing or certain other therapy or rehabilitation care, according to a plan of treatment (and periodic review) prepared by a physician. (The few beneficiaries with no Part A insurance receive HHA coverage under Part B.) Some medical supplies and durable medical equipment are also covered. Full-time nursing care, food, blood, and drugs are not covered services. HHA care has no duration limitations, no copayment, and no deductible. Beneficiaries pay a 20 percent coinsurance for durable medical equipment. (Between 1998 and 2003, a portion of HHA care will be transferred to Part B for payment.) Hospice care is available to beneficiaries with a life expectancy of six months or less who elect to forgo further potentially curative medical treatment, and receive only hospice care. Such care includes pain relief, supportive medical and social services, physical therapy, nursing services, and symptom management for a terminal illness. There is no deductible for hospice care, but beneficiaries pay a very small coinsurance amount for drugs and for inpatient respite care. Part B Covered Services physician services (in both hospital and nonhospital settings), clinical laboratory and diagnostic tests, durable medical equipment and most supplies, diagnostic tests, ambulance services, flu vaccinations, prescription drugs that cannot be self-administered, certain self-administered anticancer drugs, and blood not supplied as part of inpatient hospital care.

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Extending Medicare Reimbursement in Clinical Trials Beneficiaries pay an annual deductible, monthly premiums, and coinsurance for services (usually 20 percent of the Medicare allowed charges). There is a separate deductible for blood. For end-stage renal disease patients, Medicare covers kidney dialysis and physician charges related to kidney transplants and follow-up care. Medicare+Choice Under Medicare+Choice, beneficiaries may opt for a capitated health plan instead of the traditional fee-for-service program. These plans must provide all standard Medicare benefits, but may offer additional benefits. Services not Covered Some health care Services are not provided as a basic benefit under any part of Medicare (although some or all may be included in managed care plans). These include long-term nursing care or custodial care, most dental care, certain other health care needs (e.g., dentures, eyeglasses, hearing aids), and most prescription drugs. Organization of Care and Payments to Health Care Providers Most Medicare beneficiaries get care in the "traditional" fee-for-service environment—they go to doctors and institutions of their choosing, Medicare pays the government's share, and, if required, the beneficiary pays his or her share. Physicians are paid the lesser of either the submitted charges or a fee schedule based on a "relative value scale." Fee schedules also govern payment for durable medical equipment and clinical laboratory services. Historically, various hospital outpatient, SNF, and HHA services have been paid through a somewhat complicated mix of systems, but prospective payment systems are being phased in for these services, as directed by the Balanced Budget Act of 1997. Under Medicare+Choice, prepaid managed care plans operate much like managed care in the private insurance market. Medicare pays a set amount for each person enrolled, and the plan is responsible for coordinating all services for the beneficiary. With some exceptions, the beneficiary is limited to a certain set of physicians and must abide by certain rules that may restrict choice (e.g., requiring referral from a primary care provider to see a specialist). In order to at

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Extending Medicare Reimbursement in Clinical Trials tract enrollees, most managed care plans offer benefits not covered under fee-for-service Medicare (e.g., coverage of most Medicare cost-sharing, expanded preventive care, prescription drugs, eyeglasses, dental care, or hearing aids). Payments to the Medicare+Choice plans are based on a blend of local and national capitated rates, and vary based on characteristics of the enrolled population. Medicare Financing All financial operations for Medicare are handled through two trust funds, one for Part A and one for Part B. The trust funds are maintained as special accounts in the U.S. Treasury and are credited with all income receipts and charged with all Medicare expenditures for benefits and administration costs. Extra funds not needed for the payment of costs are invested in special Treasury Securities. Most of the money to fund Part A comes from a mandatory payroll deduction for almost all U.S. workers. These contributions pay the expenses of current beneficiaries and serve to qualify those contributing for benefits when they become eligible for Medicare. Part B is funded by beneficiary premiums, which are set to cover 25 percent of average per capita Medicare expenditures. Nearly all the rest comes from general U.S. Treasury funds (i.e., tax revenues). Medicare Claims Processing Medicare claims are processed regionally by private insurance companies under contract to HCFA. "Fiscal intermediaries" process Part A claims, and "carriers" process claims for part B. They apply the Medicare coverage rules to determine the appropriateness of claims and issue payments to providers for the government. Peer Review Organizations Each state has a HCFA-funded Peer Review Organization (PRO), consisting of health care practitioners who evaluate the general quality of care provided to Medicare beneficiaries and carry out programs to improve the quality of services. PROs are also a contact point for beneficiaries who have complaints about their care and may run programs to educate beneficiaries about the program and their rights and responsibilities.

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Extending Medicare Reimbursement in Clinical Trials Medicare Administration HCFA, within DHHS, has primary responsibility for Medicare, including formulation of reimbursement and coverage policy and guidelines, but other entities have specific roles to play. The Social Security Administration determines an individual's initial Medicare entitlement and maintains the Medicare master beneficiary record. A Board of Trustees, with two appointed public members and four exofficio members, oversees the financial operations of the Medicare trust funds. The Secretary of the Treasury is the managing trustee. The board reports on the status and operation of the Medicare trust funds to Congress each year. State agencies (usually state Health Departments under agreements with HCFA) help DHHS survey, inspect, and certify health care facilities or institutions that participate in the Medicare program. SOURCE: Adapted from "Medicare: A Brief Summary," available at www.hcfa.gov/medieare/ormedmed.htm#medicare.