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ACTIVASE HOSPITAL REIMBURSEMENT ADD-ON EXPECTED FROM NEW JERSEY COMMISSION IN AUGUST; ADD-ON COULD PROVIDE UP TO $ 6.3 MIL. FOR TPA REIMBURSEMENT IN 1988

Executive Summary

Reimbursement for New Jersey patients receiving Genentech's Activase (tissue plasminogen activator) during 1988 will include an add-on for the clot-dissolving drug under a payment revision expected to be adopted by the state's Hospital Rate-Setting Commission this coming August. As now planned, insurers would reimburse the full cost of the drug, up to a ceiling of $ 2,300-which is about what Genentech now charges for Activase. The increase could add as much as $ 6.3 mil. into the hospital reimbursement system, according to state estimates. The state projects that 2,767 treatments could be provided in one year. Hospitals would have to document that they provided TPA to specific patients. The commission is scheduled to meet next month to review the proposed payment increase, developed by the Department of Health, which oversees the commission. New Jersey has an all-payor system and a Medicare waiver; thus, the increase would apply to every insurer. New Jersey's consideration of TPA began before Medicare's decision last March not to provide any special treatment for the drug. Last fall, New Jersey Health Commissioner Molly Coye asked hospitals to identify their most severe funding problems and TPA emerged as a priority item. The commissioner's Cardiac Advisory Committee subsequently agreed that TPA warranted added monies. In contrast, the Health Care Financing Administration decided that "circumstances" involving Activase were not "so unique as to justify some special accommodation" ("The Pink Sheet" April 4, p.3). In reaching its decision, HCFA rejected a recommendation from the Prospective Payment Advisory Committee (ProPAC) in January. The Medicare advisory committee had suggested that $ 40 mil. be added to the prospective payment system hospital payment update factor to account for the cost of the drug ("The Pink Sheet" Jan. 18, p. 3). Instead, HCFA decided to reflect TPA use in medical reimbursements through the system of annual DRG recalibrations. New Jersey's purview for setting rates includes Medicare patients, due to the state's Medicare waiver. New Jersey's rate-setting reimbursement system pre-dated the federal prospective payment system; the state was exempted from the federal medicare program. However, New Jersey is still subject to a requirement that total Medicare reimbursements under the state's diagnosis-related group system may not exceed what would have been spent under the federal DRGs. The infusion of money for TPA may be a one-time effort. The state anticipates that future TPA costs will be reflected in a mechanism for adjusting payment levels for new technologies, New Jersey officials said. The state presently is developing revisions to its technology adjustment factor, which is used to determine reimbursement amounts. However, the health department and rate commission believe TPA costs are sufficient to justify an immediate increase for 1988, the officials added. The New Jersey Hospital Association is backing the state's effort to improve the technology adjustment factor. Cost problems are not limited to TPA, an association staffer said. For example, the expense of nonionic contrast media used in radiologic procedures also is not met by the state payment rates, he maintained.

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