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Slashing Medicare Reimbursements Curbs Treatment Overuse

Jeff Elliott, for HealthLeaders Media, November 10, 2010

For purposes of the research, patients were categorized based on the characteristics of their condition and whether the treatment they received was considered as appropriate, discretionary or potentially inappropriate. Given the high number of "inappropriate" cases identified, questions regarding the financial benefits for placing a patient on ADT arose.

Prior to the cuts, Medicare reimbursement for ADT was set at 95 percent of the average wholesale price of the drug with the average practice securing the drug for 82 percent of the average wholesale price, creating significant margins for many providers. At its peak, 500,000 men were receiving the therapy, which accounted for more than $1 billion in Medicare expenditures.

"There is very good evidence that a lot of practices profited very well from the use of ADT, Gilbert explained.  "Almost 40 percent of income in some cases came from the use of this drug."

The study's authors believe there is a larger message in the research of how healthcare policy can address overutilization of healthcare services. "A reduction in very lucrative reimbursement practices for services that have mixed applications can reduce unnecessary use without reducing effective use in cases that are warranted," said Gilbert.

He noted that with even cuts in reimbursement, there was no substantial reduction in the number of cases in which the drug was given in appropriate cases. "But there was a substantial reduction—approximately 30 percent—in cases where there was concern that the drug might be overused." Gilbert said.

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