Pediatric practitioners feeling the squeeze

January 2007

Infectious Diseases in Children convened this round table in October during the American Academy of Pediatrics meeting in Atlanta. Chief Medical Editor Philip A. Brunell, MD, moderated the discussion. Part one of the round table is presented here. Part two will be presented in the February issue.

PHILIP BRUNELL, MD: Physicians have to pay out a lot of money to serve their patients. I’ve spoken to two members from industry that had some interesting solutions. One was to extend the period of payment to physicians to 90 days rather than 30 days. One of the things that Stan [Block] has pointed out in the past is that some practitioners have stopped vaccinating with some of these vaccines because they just don’t see enough patients, particularly family practitioners in rural areas, to justify stocking them. So these children either go without immunization or else they go to public facilities. I would like to ask Stan Block to discuss it from a practitioner’s standpoint.

STAN L. BLOCK, MD: I’m in rural Kentucky where our town’s population is about 8,000 and our county [population] is about 40,000. I do full-time pediatric practice, but 50% of my practice is general pediatric patient care and the other 50% of my practice is doing research and writing. I see as many patients as my partners. We are now experiencing a nightmarish issue with the vaccines and their costs.

I calculated the cost for a year, currently. We now have Menactra [meningococcal polysaccharide diphtheria toxoid conjugate vaccine, Sanofi Pasteur] and TDaP [combined tetanus, diphtheria and pertussis vaccine, Boostrix, Glaxo-SmithKline; Adacel, Sanofi Pasteur]. We’ve got three shots of Gardasil or human papillomavirus vaccine [Merck], and then we also have now three doses of RotaTeq [rotavirus vaccine, Merck]. Each of these are brand new to our schedule. Then we also have MMRV [measles-mumps-rubella-varicella, Merck] vaccine, which the insurers were giving us a reimbursement grief about. So, we had to outlay a lot of cash. I calculated that as a six-physician pediatric practice with one nurse practitioner, we’re spending almost $1 million a year on vaccines.

So, the issue becomes, which in rural Kentucky is not an uncommon issue, if you have a freezer breakdown, ie, lightening or ice storms which are notorious in our area, you’re doomed. What if the temperature in the refrigerator somehow rises or drops for a while – what do you do – toss it all? You’re talking about probably per month $100,000 to $125,000 worth of vaccines or more stored in your refrigerator/freezer. So we’ve got an additional cost medico economically, which is insurance for the vaccines.

Almost every pediatric practitioner who has a major inventory of vaccines is going to have to buy a back-up generator these days because we can’t afford to lose the volume of vaccines. One accident to the insured storage and we won’t be able to afford the insurance ever again. It’s a real nightmare.

RICHARD LANDER, MD: It is a huge issue, as Stan said, but there are things that pediatricians are trying to do to protect themselves, like getting the generator. People are putting alarms right into the refrigerator so if there’s any rise in temperature, it’s hooked into their alarm system and there are security people who will let them know what’s going on.

The vaccine cost is absolutely outrageous. There is much more to the cost than simply purchasing the vaccines, though. And that’s not even talking about the different CPT coding for the administration as well as for the vaccine itself.

Recently a physician who has a 20-person practice calculated that they would spend $2 million on Gardasil to be able to give it to everyone in the age range who needed it. If they don’t generate $2,010,000 back, he’s lost money because it wasn’t just the outlay for the purchase of the vaccine. There was the refrigerator, the utilization of space by that refrigerator, the cost of the generator, the cost of the security system, and then everything else that goes into giving the vaccine. The AAP has come out with a business case for pricing vaccines. They talk about the average wholesale price [AWP] and average sale price [ASP]. What we are saying is that the range to break even above the actual cost is anywhere from 17% to 28%. Managed care companies are not giving you that and certainly vaccines have become, at this point in time, the major issue between pediatricians and managed care. The line has been drawn in the sand, and many pediatricians have said, ‘I can’t keep losing money. This is it. You give this to me or,’ as Stan said, ‘I’m not going to purchase it. I can’t give it. It’s a problem.’

BLOCK: Another problem is that our office has a 20% adolescent population. So that means we have a large volume of patients from age 9 to 22 that are flooding into the office to catch up with Gardasil, Menactra and TDaP. You can’t catch them.

It seems like every visit now we have to tell every patient they need a vaccine or two or three when they are adolescents. Every visit the girls especially seem to need an additional something (HPV vaccine status) to keep track of, besides their “bad habits,” risky behavior, grades, sexuality, mood and home life.

The cost for HPV going from age 9 to age 22 in girls in our practice is probably going to raise the annual cost to about $1.5 million a year for a while just to play catch up.

So, right now, we can’t jump on the bandwagon to get everybody vaccinated because we can’t afford to. We can’t keep that much stock. It’s a three or four month dollar float. I have to pay for vaccines upfront. Then I have several months before I’ll ever recoup my costs because of billing issues. So for three to four months, we’re in the hole. I mean we’re talking about maybe $50,000 to $100,000 if we actually did what we’re supposed to be doing. It’s a medical economic nightmare right now. And if you add the push to acquire an electronic medical record system, which we just did, we may have actually one-third the previous income for more than six months.

WALTER ORENSTEIN, MD: This whole issue is getting a lot of attention not only within the AAP but also from the National Vaccine Advisory Committee (NVAC).

NVAC has established a working group to try and deal with some of these problems. They are addressing a range of issues from the initial upfront costs of purchasing an inventory, management and storage of vaccine supplies, and assuring adequate reimbursement for vaccines and their administration. Another critical problem in immunization financing is the safety net, assuring vaccines are available to all children at public clinics if there is inadequate support for delivery in the medical home. Children traditionally served by public clinics who are not eligible for the Vaccines for Children (VFC) Entitlement Fund, such as children with insurance whose insurance does not cover immunization (underinsured), have traditionally relied on federal funds from the (section) 317 discretionary grant program, appropriated each year by Congress, or state funds. However, those discretionary funds have not kept up with new vaccine recommendations and children in many states, ineligible for VFC, cannot get those vaccines anywhere. In addition, children with insurance but large deductibles may have difficulties in accessing vaccines in both private and public settings. If there are increases in families with consumer-driven policies that do not cover preventive services, this problem may only get worse.

Given our current climate, the financing problem may not be solved with a single solution. Instead, it may need to be resolved incrementally. For example, regarding upfront purchase of an inventory of a newly recommended vaccine, it may be in the manufacturers’ interest to advance vaccines based on past usage and receive payment when the inventory is used and a new order is placed. This would eliminate the need for major advanced funding by pediatric practices before they can get reimbursed for administered vaccine.

LANDER: But the billing doesn’t help you because of the delay. When the new vaccine comes out, it can take up to 90 days for the managed care people to load into their system and then to pay for it. Then of course you’ve got the whole conflict of what are they paying you because, again, if they are paying you at cost, you’re losing money.

A lot of them were based on the average wholesale price. So, for instance, the AWP on a product might be $100, yet the average sale price may be $90 or $88. What a lot of the managed care companies are now doing is saying, ‘OK, we’ll pay AWP, but minus 10%.’ What the AAP is really saying is that’s not sufficient. Even AWP is not right because we’re still losing money and, as Walter said, that separates the whole issue of the vaccine administration fee. The vaccine administration fee is a service. You want to get paid for your service, and you want to get paid for the product. Those are two separate issues and many managed care companies will state, ‘I know I’m paying you cost for your vaccine, but look what I’m paying you for your administration fee.’ But they can’t do that. It doesn’t go into one basket. They’re two distinct entities because, again, it’s a service and it’s a product. It’s a constant battle with the managed care people to recognize that they’re not doing us any favors by throwing in the vaccine administration fee. As physicians, we live and die by CPT coding. If we don’t use CPT coding correctly, we can be accused of fraud. Managed care companies are under no obligation to accept CPT coding so they can do whatever they want with it.

ORENSTEIN: I think it’s important to point out that one of the reasons vaccines are special and different is that when a child is vaccinated for most of the vaccine-preventable diseases, we’re not only vaccinating that child but also we’re vaccinating the community as well.

Many people indirectly benefit from that vaccine because they are not exposed to disease. Thus, it’s in the interests of all of our society to try and solve the problem of financial barriers to access to vaccines and to assure that physicians can administer these vaccines to all children in need.

I’m on the financing working group with the National Vaccine Advisory Committee, and I was shocked by some data that an individual practice had put together in New York State looking at reimbursement rates by insurance company. I had no idea. It was all over the place. I had thought for some reason there was an industry standard.

ORENSTEIN: Part of the issue is whether we can develop some standards for minimum reimbursement rates.

Should the Centers for Medicare and Medicaid Services be tasked with developing those standards? For the Vaccines for Children program, which only covers vaccines and not the administration fee, perhaps we could enact legislation that would also cover the administration fee as part of the entitlement. Medicare covers both vaccine reimbursement and administration with influenza. Medicare has said influenza vaccine is cost saving to our program. They have taken aggressive steps, and they now reimburse influenza vaccine administration at roughly $18 a dose. That ought to be a reasonable standard. Some Medicaid vaccine administration reimbursements for childhood vaccines are as low as $2 per dose, an intolerable situation.

BLOCK: That’s the cost of the syringe and needle.

TOM SAARI, MD: I think the AAP really had their feet put to the fire last fall on the part of membership because of the issues you’ve just outlined.

The question was ultimately where we’re going with the immunization program from the perspective of the medical home. The AAP Executive Board created the Immunization Task Force panel that I served on in November of 2005. Of the many barriers affecting vaccine delivery in the private office setting that we were trying to address as a task force, we elected to limit our focus to the effect of vaccine costs, vaccine administration fees and vaccine supply as the most pressing problems for the pediatrician.

From the early 1990s until probably 1997 to 1998, we made a concerted effort nationally and regionally to get physicians who are not providing immunization services in their office to do so as a medical home concept, as a way to really begin integrating all the services that we believe a pediatrician should be providing to kids. I think we were very successful in getting physicians who were on the fringe at that time to become routine immunizers. For example we had certain areas in my state of Wisconsin where there were virtually no physicians giving immunizations. Mainly through the educational efforts of our state AAP chapter in partnership with the state health department, we convinced them that this was the thing to do. What we’re finding now is that many of those physicians who were on the fringe to begin with are starting to relinquish their responsibilities for immunizing because it’s become more of an issue for them financially and, frankly, not worth the hassle.

How are you going to identify that physician dropouts are becoming an issue down the road? If it’s based on falling immunization rates because physicians aren’t involved anymore, it will be too late to resurrect the office infrastructure needed to get back into the game. If that happens, we will have a huge problem on our hands because this country currently has a significantly less robust public health immunization delivery program compared with 15 years ago and will be unable to pick up the slack. So, I think the academy is very concerned about the whole area of vaccine delivery when they see their cherished concept of the medical home under this kind of stress. I think they are very worried that unless there are solutions found quickly, there is going to be the kind of fallout from this that will result in the return of some vaccine-preventable diseases. As a consequence, we’ve been holding stakeholder discussions with manufacturers, the insurance industry and allied health professional organizations.

We’ve joined with the American Medical Association as a collaborator in an immunization summit the AMA has been working on holding soon because they are very concerned that many of the same issues that we’re experiencing in pediatric vaccination are going to spillover into the adult vaccination program.

The pediatric experience is the canary in the coal mine from the AMA point of view as they’re trying to drum up more support among internists and family practitioners and obstetricians/gynecologists to vaccinate adults.

LANDER: Walt mentioned legislation. In New Jersey, we have a pediatric council from the state’s AAP. Every quarter we meet with the medical managed care directors.

We’ve also got people from the New Jersey Department of Health and the Department of Banking and Insurance, as well as Medicaid there. As effective as our council has been in addressing many health issues with our medical directors at these managed care organizations, we’ve hit a brick wall talking about vaccines being paid fairly. We now have legislators who are sponsoring a bill that will put a basement and a ceiling on percentages above average wholesale price that the managed care people will have to pay us. It would be nice if that was done nationally, not just for the VFC but for the private sector as well.

I think there are two other problems that are coming about. The CDHP, the consumer driven health plans, where the insurers have said, ‘You’ve got a high deductible and then we’ll pick up after a certain amount.’ We’re going to have to argue with the parents, because they’re paying out of their pocket for this vaccine. The parents will argue that their 16-year-old daughter can’t possibly get HPV. When managed care is paying for it, they’re happy to let us do anything as long as it doesn’t cost them. The AAP actually came out with a statement about CDHPs and a stand against them.

Another problem was with vaccine supply. In a recent issue of The New York Times, an article reported 115 million doses of flu vaccine were reported to be available. Yet, I’m lucky that my office has gotten half of our order.

Many offices have not yet seen any delivery, yet the local Wal-Marts and pharmacies around the country have their flu clinics all set up. Why did the pharmaceutical companies send it out to them first? Just show up there with cash.

The burden of vaccinations for pediatrics for the most part has fallen on the backs of the pediatricians who financially can no longer assume that deal. A vaccine costs $10 and you are charged $11 back, which was a 10% mark up. If you have a vaccine like Gardasil, they’ll charge $120 to purchase it, but some companies will only pay you cost or, if they’re being really nice, they’ll pay you $125.

Part two of this round table will be published next month, and will explore some possible solutions to these reimbursement issues.