How New Rules for 2018 Will Impact Clinical Pathways

Clinical pathways have historically focused solely on clinical issues. However, as they are increasingly being used by payers and at-risk providers, they have begun including financial and accountable outcome measures. These financial considerations include site of care and use of generics, especially biosimiliars. As we go into 2018, these issues are expected to undergo major changes as a result of legislation and regulations coming out of Washington. 

Many changes will be led by the new Secretary of Health and Human Services (HHS), Alex Azar II, JD. Mr Azar is a former Eli Lilly executive, where is served for 10 years, so he is coming into this position with a strong pharmaceutical industry background. Prior to his employment with Eli Lilly, he served in HHS under President George W Bush for a total of 6 years, as deputy secretary and general counsel.

In the past, Mr Azar has been considered a champion of value-based contracting, specifically in the areas of advanced value-based contracting through the removal of regulatory and legislative barriers. He has also worked to reduce the burden on patients by redirecting drug rebates to offset cost sharing at the point-of-sale, rather than the current practice of using rebates to simply lower premiums. These type of arrangements could influence a health system–specific clinical pathway. Beyond his involvement as Secretary of HHS, he will be stepping into the changes already proposed for the 340B Drug Pricing Program.1

340B Reforms

The 340B Drug Pricing Program is a federal project that requires pharmaceutical companies to provide steep discounts to hospitals and clinics that serve high volumes of low-income patients. Recently the Centers for Medicare & Medicaid Services (CMS) released a final rule that cuts Medicare payments for hospitals enrolled in the program from their current rate of reimburse (average sales price [ASP] + 6%) to ASP -22.5%—a difference of 28.5%, or reduction of about $1.6 billion.2

These deep cuts will impact about 40% of hospitals in the United States who currently purchase pharmaceuticals through the 340B program. Because of these cuts, hospitals represented by the American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, and others are filing suit, arguing that the agency lacks the authority to slash the payments and that the rule undermines the intent Congress had when creating the program.3

Some have suggested these cuts will be a tremendous benefit for patients who will see a reduction in their copayments. Although the actual price of drugs will not be lower under the rule, patients will save an estimated $320 million a year on copayments.4 Medicare patients typically are responsible for a percentage of coinsurance on their prescriptions. The lowered Medicare reimbursement means that an enrollee’s coinsurance would be lower at 340B hospitals, because Medicare would pay hospitals less for the drug. In one example the administration provided, if Medicare reimburses a participating hospital $2000 a month for an individual drug, a beneficiary would save over $100 on their out-of-pocket share. This could be incorporated into clinical pathways to promote most cost-effective treatment site for patients.


As HHS Secreatry, Alex Azar would also be responsible for the Merit-Based Incentive Payment System (MIPS) for physician payment and bonuses.5 This system may have issues moving forward as the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare policy, has come out strongly against MIPS. Specifically, MedPAC is recommending that Congress not move forward on MIPS and its reporting requirements.6

MedPAC recommends that a voluntary value program is created that would have CMS assessing performance using a set of population-based measures comparable to those in the advanced alternative payment model of the Medicare Access and CHIP Reauthorization Act. Under this recommended option, physicians would have a portion of the fee scheduled payments withheld, such as 2%. Clinicians would elect to be measured with other clinicians in a sufficiently large entity to be eligible for value payment, join an alternative payment model (APM), or do nothing and lose the withheld amount. Entities would then collectively measure on population-based measures that assess clinical quality, patient experience and value, in an assessment similar to APMs.

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