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New COVID-19 Treatment Add-On Increases Payment Relative to NTAP

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Summary

Avalere analysis finds hospitals would receive higher additional payments from Medicare through the New COVID-19 Treatment Add-on Payment (NCTAP) compared to the New Technology Add-on Payment (NTAP).

Background

Last fall, the Centers for Medicare and Medicaid Services (CMS), the Department of the Treasury, and the Department of Labor released a tri-agency interim final rule (IFC) with request for comments due January 4, 2021, titled, “Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency.” This fourth IFC included a provision for an NCTAP specific to COVID-19 cases for the duration of public health emergency. The NCTAP represents a new mechanism for providing incremental reimbursement for novel inpatient therapeutics.  Traditionally, the NTAP has served this role. The goal of the NCTAP is to mitigate potential financial disincentives for hospitals to provide new COVID-19 treatments to patients.

The NCTAP differs from the existing NTAP in several ways, including the technology eligibility criteria and the payment formula (Table 1). The NCTAP became available immediately beginning on the publication date of the IFC (November 2, 2020). For a hospitalization to qualify for an NCTAP, the treatment used during the hospitalization must be approved by the Food and Drug Administration (FDA) or have an emergency use authorization (EUA) with an indication for the treatment of COVID-19, the hospitalization must be eligible for the 20% increase in Medicare Severity Diagnosis-Related Group (MS-DRG) payment per the Coronavirus Aid, Relief, and Economic Security (CARES) Act (including documentation of a positive COVID-19 laboratory test), and the cost of the hospitalization must exceed the MS-DRG payment. In contrast, a hospitalization is eligible for an NTAP if the treatment used during the hospitalization has been approved through the Medicare program’s annual NTAP application process. New treatments are approved for an NTAP if they are not substantially similar to existing technologies and meet criteria related to cost and clinical improvement. The NCTAP removes potential delays and barriers due to the annual NTAP application cycle and specific technology qualifying criteria, to allow hospitals to receive add-on payments for COVID-19 treatments.

Additionally, the amount of the add-on payment under NCTAP differs from NTAP. NCTAP is the lesser of: (1) 65% of the operating outlier threshold for the claim; or (2) 65% of the amount by which the costs of the case exceed the standard MS-DRG payment, including the additional 20% adjustment. NTAP is the lesser of: (1) 65% of the costs of the new technology; or (2) 65% of the amount by which the costs of the case exceed the standard MS-DRG payment. Of note, NCTAP amount is paid in addition to the outlier amount whereas NTAP lowers the outlier amount a hospital can receive for a case.

Avalere simulated payments under NCTAP and NTAP for Medicare COVID-19 hospitalizations in 2020 to learn more about the potential financial impact on hospitals providing COVID-19 treatments. The analysis assumed that each hospitalization included in the analysis received an FDA-authorized COVID-19 treatment, such as Veklury® (remdesivir) or convalescent plasma.

Table 1. Differences Between NCTAP and NTAP
NCTAP NTAP
Eligibility Criteria A hospitalization qualifies for NCTAP if (1) a technology is used that has FDA approval or an EUA with an indication for the treatment of COVID-19; (2) the hospitalization is eligible for the 20% increase in MS-DRG payment per the CARES Act, including the hospital documenting a positive COVID-19 laboratory test; and (3) the cost of the hospitalization exceeds the MS-DRG payment. A hospitalization qualifies for NTAP if CMS has determined that it meets the following criteria as part of the annual NTAP application process: (1) the technology is new and not substantially similar to existing technologies; (2) the technology is high cost; and (3) the technology demonstrates a substantial clinical improvement over the standard of care.
Payment Formula The lesser of 65% of the operating outlier threshold for the claim or 65% of the amount by which the cost of the hospitalization exceeds the standard MS-DRG payment, including the additional 20% adjustment for COVID-19 cases per the CARES Act. The lesser of 65% of the costs of the new technology or 65% of the amount by which the cost of the hospitalization exceeds the standard MS-DRG payment.

Results

Based on the differing payment methodologies, Avalere estimated an average NTAP of $1,838 and an average NCTAP of $13,189 for COVID-19 hospitalizations meeting criteria for an add-on payment (37.5% of all COVID-19 hospitalizations included in the analysis). These payments would be in addition to the MS-DRG payment that includes a 20% add-on implemented by the CMS on April 1. Overall, an NTAP increases total payment to hospitals providing new COVID-19 treatments by 7%, whereas an NCTAP increase hospital payments by 40%, on average (Table 2).

Table 2. Estimated NTAP or NCTAP for Eligible COVID-19 Cases
Number of Cases Average Case Estimated Cost Average Case Total Payment Percent of Claims with NTAP/NCTAP Average NTAP Payment Average Percent Increase in Case Total Payment with NTAP Average NCTAP Payment Average Percent Increase in Case Total Payment with NCTAP
All Hospitals 5,770 $26,098 $25,721 37.5% $1,838 7.3% $13,189 40.2%
Urban/Rural Location
Large Urban 3,097 $27,615 $27,236 38.9% $1,845 7.1% $13,059 38.7%
Other Urban 2,432 $25,143 $24,314 36.7% $1,836 7.4% $13,609 42.2%
Rural 241 $16,227 $20,458 26.1% $1,714 7.6% $9,734 41.6%
Ownership
Proprietary 604 $26,775 $24,830 45.2% $1,801 7.2% $11,666 40.5%
Not-for-Profit 4,298 $24,725 $24,338 36.9% $1,829 7.6% $12,643 40.6%
Public 868 $32,422 $33,192 34.8% $1,912 5.4% $17,438 38.0%
Beds
<100 beds 422 $20,378 $19,928 36.0% $1,778 8.0% $12,298 45.5%
100–499 beds 3,779 $27,242 $26,327 38.9% $1,843 7.3% $13,406 40.1%
>500 beds 1,569 $24,879 $25,821 34.3% $1,841 7.0% $12,850 39.1%

In addition to examining the potential impact of these add-on payments to hospitals overall, Avalere examined the differential impacts by hospital characteristics and found that the average percent increase in total payment under NTAP versus NCTAP does not vary by hospital characteristics such as ownership, bed size, or geography. However, the percentage of hospitalizations estimated to be eligible for add-on payments based on the case cost exceeding MS-DRG payment does vary by these hospital characteristics. For example, 26% of COVID-19 cases in hospitals located in rural areas could be eligible for an add-on payment compared to nearly 39% of COVID-19 cases in hospitals located in large urban areas. Differences are also observed by ownership status, where close to 35% of COVID-19 cases in public hospitals could be eligible for an add-on payment compared to just over 45% of COVID-19 cases in proprietary hospitals. These patterns may reflect differences in severity of the COVID-19 cases treated at each hospital and resource availability, which impact hospitalization costs.

The significant difference between potential NTAP and NCTAP amounts signals that the NCTAP methodology, more so than NTAP, may incentivize hospitals to provide approved COVID-19 treatments as they are able to recover more of the hospitalization costs. This aligns with the Biden administration’s efforts to improve and expand access to care and treatments for COVID-19.

Funding for this research was provided by Gilead Sciences. Avalere retained full editorial control.

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Methodology

Avalere used Inovalon provider-sourced clearinghouse data, representing approximately 5–7% of the total Medicare fee-for-service (FFS) volume nationally, to examine hospitalizations for COVID-19 among Medicare FFS beneficiaries. Avalere identified hospitalizations between April 1 and September 30, 2020, using specific International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) diagnosis code for confirmed COVID-19 cases (U07.1) that went into effect on April 1, 2020 (n=5,770). Since treatment-specific ICD-10 procedure codes were not available for billing until August 1, for the purposes of this payment simulation analysis, Avalere assumed that all identified patients received COVID-19 treatment reflective of the Veklury® cost, with a maximum possible NTAP of $2,028, based on the publicly available pricing information. Medicare payment information for COVID-19 cases was taken from the remitted version of the claims. Costs of COVID-19 cases were estimated using hospital-reported claim charges and hospital specific cost-to-charge ratios calculated from the most recent complete Medicare cost report data available (FY 2018). Hospital ownership, bed size, and rural versus urban location were obtained from the cost reports, the CMS’s Provider Specific File, and the Inpatient Prospective Payment System Rule Impact File, respectively.

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