Latest physician data spotlight how Medicare pays for drugs

Medicare paid out hundreds of millions of dollars to a small subset of physicians in 2013, but most of those payments to top Medicare billers covered the costs of drugs administered to patients in clinicians' offices.

The drug payment data highlight long-standing concerns about Medicare's system for paying doctors for drugs used in their offices and outpatient centers. But interpreting the data is complicated, because they lump together doctors who may be involved in questionable practices with productive physicians in narrow specialties that require intensive medication use.

The 100 top-billing Medicare doctors received more than $655 million from the program in 2013, according to a Modern Healthcare analysis of CMS' Medicare Part B data released last week. About 67% of that total, or $439 million, went toward Part B drugs administered in doctors' offices. Most of the highest-paid doctors were oncologists and ophthalmologists, who often use expensive drugs in their offices.

Drug costs accounted for only 12% of the $75 billion Medicare Part B paid to all 900,000 providers in 2013.

This is the second year the CMS has released Part B data on payments to individual physicians and other providers, after Dow Jones & Co. sued for the data and the Obama administration adopted a new healthcare transparency initiative.

In the latest data release, the CMS broke out payments for drugs versus payments for medical services, partly in response to the American Medical Association's complaint that last year's data release created a “misleading perception that drug reimbursement was physician income.”

Under Part B, Medicare reimburses physicians for drugs used in their offices and outpatient centers by paying for the drug's average sales price, plus 6% to cover overhead.

That guaranteed additional percentage for physicians has been criticized because it encourages them to buy the highest-cost drugs when cheaper drugs may be just as effective.

For instance, studies have shown that Medicare could have saved $18 billion over 10 years if doctors used the drug Avastin for macular degeneration instead of the more-expensive Lucentis.

“The incentives for physicians to use the more expensive drugs are very large,” said Paul Ginsburg, an economist and health policy expert at the University of Southern California. “These data will help show the lack of a system to attempt to contain costs for physician-administered drugs.”

One of the top-billing doctors in 2013 was Dr. Salomon Melgen, an ophthalmologist in West Palm Beach, Fla. He received $14.4 million from Medicare, the third-highest total for any physician. Close to 47% of that amount was for drugs. Melgen was indicted this year on several counts of Medicare fraud and false claims, and also was charged in a corruption case involving U.S. Sen. Robert Menendez (D-N.J.).

Dr. Asad Qamar, a cardiologist in Ocala, Fla., was the second-largest Part B recipient. He collected $16 million in 2013, nearly all for medical services. Qamar faces a federal lawsuit alleging that he and his medical group billed Medicare for unnecessary heart procedures. Qamar has called the claims “baseless.”

The CMS has said it closely tracks odd billing and prescribing patterns among physicians. Ge Bai, a healthcare accounting professor at Washington and Lee University, said publishing Medicare payment data adds another layer of fraud protection through transparency. If physicians know their Medicare compensation will be posted online, they “will become less likely to scam the system,” she said.

Dr. Neel Shah, founder of Costs of Care, a not-for-profit that helps physicians understand healthcare costs, said the data release will push providers to take a closer look at their payments and internal costs. “If you're three standard deviations away from someone, you have to be accountable for yourself,” he said.

Beyond payments to physicians, Medicare Part B also paid billions in total to laboratory companies. Millennium Health in San Diego received $211.3 million from Medicare in 2013, the most of any individual clinical lab site. But both Laboratory Corporation of America Holdings and Quest Diagnostics received higher total payments when their multiple locations were all considered.

—Data research by Art Golab