The sign on the door says UPMC Hillman Cancer Center, but as of June 1, the Shadyside cancer treatment facility became an outpatient clinic of Oakland’s Magee-Womens Hospital.
It’s an accounting move that UPMC hopes will save the health network millions of dollars a year on therapeutic cancer drugs, because Magee is able to order those drugs at a special discount, thanks to a federal program.
UPMC Passavant’s cancer program, physically based in McCandless, is also being “transferred”— in a paperwork sense, not a geographic one — to Magee’s stewardship, according to a UPMC spokeswoman.
Most Magee clinics can purchase drugs at a discount through what’s known as the “340B window” (as in, section 340B of the Public Health Service Act, approved in 1992). Congress approved the program more than two decades ago to help clinics that serve impoverished, uninsured and at-risk populations to buy drugs at a cheaper rate.
But the program has come under fire in recent years, mostly by pharmaceutical companies that say the discounts are being used — and abused — by big hospital chains, rather than serving free-standing outpatient clinics that specialize in treating the uninsured.
Savvy hospitals can buy up clinics that have such privileges built in, or move existing clinics from one parent hospital to another in order to get better drug prices, even if the patient population served by the clinic doesn’t change and even though those populations usually have commercial or government insurance.
UPMC spokeswoman Jennifer Yates said the accounting maneuver makes sense, financially.
“For us, this was cost-saving measure” that will save more than $10 million a year, she said. “This is something done industrywide, at hospitals across the country.” That includes Highmark’s Allegheny Health Network, which utilizes 340B discounts at West Penn Allegheny Cancer Institute, an outpatient clinic at Erie’s Saint Vincent Hospital, and the Positive Health AIDS clinic at AGH.
Cancer and chemotherapeutic drugs are hugely expensive. In 2012, of the 12 new cancer treatments approved by the U.S. Food and Drug Administration, 11 cost more than $100,000 for a year of treatment.
The savings that UPMC generates from its accounting changes, Ms. Yates said, would not necessarily be passed on to patients, but “will help us fund our reinvestment into research and cancer care.”
That may be true, but that’s not the original intent of the 340B program, said Rena M. Conti, assistant professor of health policy and economics at the University of Chicago.
She has been researching 340B use at oncology clinics (and other clinics that use high-priced injectable drugs), and she will be discussing that research this week in Washington, D.C., at a conference focused on overhauling 340B reform.
“We’re seeing this all over. There appears to be an acceleration in affiliations” between such clinics and institutions that have 340B discount privileges, Ms. Conti said.
The clinics and their affiliated hospitals cans save up to 50 percent off of the wholesale price of drugs. It’s a major discount over the typical manufacturer’s price and a substantial discount over the price a hospital or group-purchaser might pay.
The problem, Ms. Conti said, is that “patients and insures don’t really share in the discount.”
Her research also shows when hospitals pair with clinics in order to spread their 340B buying privileges across a wider patient base, the affiliated clinics end up serving a more affluent, better insured population than the originating hospital.
In other words, the exact opposite effect of what the 340B program was created to do, Ms. Conti said. Instead of providing cheaper medicine to needy patients, “The entire purpose of the affiliation to is to gain access to the deep discounts that the program provides.”
Hospitals say they need the discounts, particularly given intense cost pressures from insurers and the Affordable Care Act. Moreover, money saved on drugs at certain clinics — even if those clinics do not serve the poor — allows hospitals to spend more on charity and indigent care systemwide.
For UPMC rival Highmark, though, the shift looks to be less about drug costs than it is about the new outpatient designation.
UPMC will be able to receive more money from insurer Highmark because different hospitals can command different prices, based on the type of patients and populations they see. Magee is a specialty women’s hospital and thus can receive higher payments from Highmark, by way of the payment schedule that the two companies adhere to.
The shift represents another flare-up of a long-standing feud between the two health care giants. Highmark says that UPMC has for years been shifting procedures to Magee-Womens Hospital to secure higher reimbursements.
Highmark is UPMC’s largest non-government insurance partner, responsible for about 20 percent of UPMC’s patient revenue.
UPMC is “channeling orthopedic, bariatric and now medical oncology [treatments] to” Magee, said Highmark spokesman Aaron Billger. “It’s increasing the cost of care for consumers. ... It’s millions of dollars more.”
But UPMC says that such shifts are routine and happen at hospital systems everywhere. UPMC noted in the past that it had also shifted many procedures from more expensive hospitals to lower-reimbursement facilities, including the transfer of some open-heart and liver procedures from UPMC Presbyterian to UPMC Passavant, gynecology-oncology procedures from Magee to Passavant, and thoracic services from UPMC Shadyside to UPMC St. Margaret.
The paperwork shift also aggravates the ongoing rift between Highmark, the region’s largest private insurer, and UPMC, its biggest hospital network, over cancer and oncology services. In April, Highmark announced that it would no longer be paying certain facility fee “markups” when it comes to cancer care provided in a hospital outpatient center, rather than in a doctor’s office.
Medicare rules allow health networks to claim much higher office reimbursement fees when services are provided in hospital outpatient clinic, rather than a physician’s clinic.
Highmark said the clinic markups — most of them coming from UPMC, the area’s largest oncology provider — were costing the health insurer $200 million a year. UPMC called Highmark’s refusal to pay those bills “an egregious contract violation.”
Bill Toland: firstname.lastname@example.org or 412-263-2625.