01. medicare's device reimbursement system


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  • How are fluid overloaded patients treated currently? What is the current treatment path of an overloaded patient? How would each change if System 100 were available?
  • 01. medicare's device reimbursement system

    1. 1. The Medicare MazeYiscah BrachaScott Campbell
    2. 2. Medicare’s reimbursement systemhas implications for… Medical device manufacturers Hospitals and physicians Health and welfare of the entire U.S. population
    3. 3. Our Agenda: Illuminate Medicare’s reimbursement system Show, in theory, how reimbursement system affects medical device industry Give example of a device manufacturer attempting to use the system to earn market share and thrive Identify perversities in the existing system Offer recommendations for change
    4. 4. Our focal point: Type of Decision In which part ofthe maze will we Coverage Reimbursementfocus our gaze? (will CMS (How much pay for it?) will CMS pay?) Where “Local” FFS/MC FFS/MCdecisionis made National FFS/MC FFS/MC
    5. 5. Medicare reimbursement policy:Concept…
    6. 6. Location of curve depends on: Treatment site  Condition treated  Hospital  Back pain  Outpatient ambulatory  Pneumonia  Doc office  Heart attack  Skilled nursing facility  Heart failure  Laboratory  Cancer  Home  … more
    7. 7. Curve location may also be set by: Type of treatment (e.g. procedure used)  Medical  Surgical
    8. 8. Line shift depends on: Patient condition  Co-morbidities  Complications  Outlier adjustment Treating facility  Prevailing wage rate  Teaching hospital  Urban +  Safety net (e.g. serves  Rural - many uninsured)
    9. 9. Source of “estimated cost” Total costs: historical records submitted by multiple providers Component costs (if used):  Obtainaverage across providers for ratios of components  Use average ratios to allocate costs to components
    10. 10. New reason to “shift the line”: Add-on Payment for new services and technologies  Introduced through ’03 Medicare Modernization Act  Provides additional payment for new medical services and technologies that qualify  Intended to “fill the gap” – provide addl payment until reimbursement rate adjusted upwardswww.cms.hhs.gov/acuteeinpatientpps/downloads/1428f_i.pdf
    11. 11. Is this a free market system? In competitive market systems:  Goods/services compete on basis of price & quality OR  Vendors submit competitive bids to win contracts
    12. 12. In the Medicare system… Vendors incur costs; ‘appropriate payment’ means CMS reimburses on basis of incurred cost CMS tries to anticipate by setting payment rates in advance. “Medicare is a big, dumb price-fixer”
    13. 13. Mechanisms for issuing payment: Fixed prices attached to CODES. Coding mechanism starts with:  Treatment site. Within site, then code for:  Condition and/or procedure. Within that:  Make any shifts in the line Result: For given site, handling a given condition and/or procedure, adjusted as previously shown, CMS assigns a code with attached reimbursement rate
    14. 14. Sites that all have own codes: Hospital inpatient (DRG) Hospital outpatient (APC) Physician service (CPT) Skilled nursing facility (per diem rate based on RUG)
    15. 15. Hospital inpatient coding system: Distribution of Financial Risk Source Incurred by Assumed by Ptt condition Patient Hospital & CMS Treatment Physician Hospital & CMS choice Complications Physician & CMS& discharge stat hospital
    16. 16. Hospital outpatient coding system: Distribution of Financial Risk Source Incurred by Assumed by Hospital, patient Ptt condition Patient & CMS Treatment Hospital, patient Physician choice & CMS
    17. 17. Physician service coding system: Distribution of Financial Risk Source Incurred by Assumed by Ptt condition Patient CMS Type of Physician & Physician & treatment Patient CMS How much Physician & CMS treatment patient
    18. 18. Nursing home coding system: Distribution of Financial Risk Source Incurred by Assumed by Ptt condition Patient CMS & SNF Type of Physician SNF treatment How much Physician SNF treatment
    19. 19. Perspectives:
    20. 20. Medical device industry: Medicare should pay for whatever we produce and it should pay us our production costs.  Quote from Advamed: “Next-generation technologies are often paid at the same level as the older technology. Breakthrough technologies must undergo a time-consuming process in order to obtain appropriate coding and payment.”
    21. 21. Public policy*:  What does ‘appropriate’ mean?  If the device produces greater benefit at same cost, or produces same benefit at lower cost, the device will gain market share. No need to adjust anything.  If the device produces greater benefit at increased cost, we must determine whether the addl benefit is worth the addl cost.* The “pure” view, before political wrangling gets in the way.
    22. 22. Patients/beneficiaries: I want the best that’s out there, at no risk, even if I don’t know how to judge what “best” means. Somebody else should pay for it.
    23. 23. Physicians: I want the authority and autonomy to prescribe or perform any procedure I think is appropriate. It’s unseemly for a doctor to consider money when life is at stake. Because I wield the power of life and death, I should be paid an enormous amount of money and nobody should ever question me. I should not have to face any risk.
    24. 24. Hospitals: Sheesh. Now what?
    25. 25. How system plays in the field:
    26. 26. Medical device manufacturersnegotiate with CMS for: Treatment codes that place their products in classes with more expensive competitors Treatment codes that bring add-on payments Codes that specifically require use of their product (unbundles payments to providers)
    27. 27. Mfc’s attempt to persuade CMS: Demonstrate that using device is more costly than existing practice Once in use, monitor (high) costs of using device to build case to CMS to recode it to a more costly class Show that by using (new) device, service will be more costly, thus justifying an add- on payment
    28. 28. Medical device manufacturers alsonegotiate with providers to: Use their products rather than products of competitors Ways to persuade providers:  Demonstrate that product saves them $$  Negotiate over price
    29. 29. Perversities: Device manufacturers must simultaneously persuade:  Providersthat device saves them money  CMS that device should be recoded to a more expensive class because it costs so much money to use.
    30. 30. Example: CHF Solutions, Inc. Manufactures a sophisticated, yet easy to use, mechanical pump/filter system to remove excess fluid from patients with fluid overload FDA market cleared; marked for use in inpatient hospital and out-patient clinic Currently marketed in US with a direct sales force
    31. 31. Aquadex FlexFlow Console• Simple operator interface - two user settings • rate of withdrawal, 10 to 40ml/minute, in 5ml increments • the desired rate of fluid removal, 10 to 500ml/hour in 10ml increments• Treatment is tailored to the individual patient by prescribing a specific rate of fluid removal• Peripheral venous access and a transportable console (with battery) allows the patient to move about during treatment
    32. 32. Congestion and Fluid Overload: Heart Failure  CHF DRG most prevalent in U.S (1,000,000 yearly hospitalizations)  Re-admission rate of 21% within 30 days (cms.gov)  550,000 new diagnoses each year
    33. 33. Sales force: Attempts to demonstrate to hospitals that using device will save them $$ b.c  Reimbursement rate for CHF DRG assumes certain length of stay  Using device may reduce:  Length of stay  Costly admissions  Hospital collects same reimbursement, but incurs fewer costs
    34. 34. Reimbursement: Add-on payment Attempt to demonstrate to CMS that device should qualify for new add-on payment because:  Device meets ‘newness’ criterion  Using charge data for 51 patients, device meets the ‘high cost’ criterion  Better for patients - Dr. testimonials, small outcome data
    35. 35. Result of request for add-on: Claim denied. Reason:  Insufficient evidence of clinical improvement
    36. 36. CHF Solutions conducts: UNLOAD Trial Compares UF device to aggressive use of diuretics in 200 patients at multiple sites Clinical endpoints:  Saltand water removal in the first 48 hours  Safety endpoints (including renal function)  Readmissions for CHF: Frequency, absolute number, hospitalized days  Visits to ED and clinic
    37. 37. UNLOAD Results (1)  At 48 hours into treatment the ultrafiltration group demonstrated:  38% greater weight loss over standard care  28% greater net fluid loss over standard care
    38. 38. UNLOAD Results (2) At 90 days following hospital discharge for HF episode, compared to Standard Care, the Ultra- Filtration group showed:  43% reduction in re-hospitalization for heart failure  50% reduction in total number of re-hospitalizations  52% reduction in ED and clinic visits  63% reduction in days re-hospitalized
    39. 39. UNLOAD Results (3) The benefits in weight loss and reductions of re-hospitalizations were seen all sub- groups analyzed
    40. 40. Effect of trial results on company’sbid to get add-on payment: By the time the trial was complete, time had expired for add-on payment eligibility Next step:  Re-approach CMS to request special CPT code … docs more likely to prescribe device if they can bill for prescription under separate CPT  Approach hospitals with UNLOAD results to demonstrate cost savings
    41. 41. This example shows (1) Fixed payment for HF DRG encourages hospitals to find cost-effective ways to treat HF:  Gives a company like CHF Solutions, Inc. leverage with hospital buyers  Encourages healthy competition to produce cost-effective treatment
    42. 42. This example shows (2): Existence of add-on payment encourages company like CHF Solutions to invest resources in obtaining add-on. To obtain add-on, company must demonstrate to CMS that product is:  New  More effective than existing practice  More costly than existing practice
    43. 43. To qualify for add-on payment: Manufacturer must demonstrate all of above within a small window of time Small manufacturers seldom have such resources. Large manufacturers do, can move new products in the pipeline to head of the line Both large & small manufacturers given incentives to show how much more costly their product is compared to standard care
    44. 44. This example shows (3): Physicians more likely to use product if they can bill separately for its use Encourages manufacturer to invest resources in securing unique CPT code
    45. 45. Policy conclusions (1) Prospective payment & bundled payment systems push financial risk from CMS to providers. They encourage:  Docs & hospitals to adopt cost-effective strategies  Competition among device manufacturers on basis of price AND effectiveness at level of hospital
    46. 46. Policy conclusions (2) When CMS abandons PPS and unbundles payments, it encourages:  Docs & hospitals to lobby CMS to unbundle more  Device manufacturers to lobby CMS for special codes Manufacturer’s resources diverted away from competition on the basis of low price for effectiveness, towards lobbying CMS for special treatment, on the basis of high price
    47. 47. Policy recommendation (1) CMS: Hold fast!  Add-on payment law an example of not holding fast.  Public health policy view: Repeal the law  Manufacturers’ view: Retain the law – “It fills a necessary gap”
    48. 48. What else does this exampleshow? Reimbursement system seems bewildering b.c of many different codes, inconsistency in payment structure from one coding system to the next To secure competitive advantage, manufacturers must invest resources in learning how to navigate the coding system
    49. 49. Policy recommendation (2) CMS should drastically simplify its coding system:  Procedure codes used only for information, not to set payment rates  Payment based strictly on diagnosis, adjusted by patient condition (case-mix).  Use same set of diagnostic codes across delivery sites and for all practitioners (ICD-10)
    50. 50. Policy recommendation (3): Congress should set budget limits for Medicare  Absence of limits encourages social spending in this sector, without having to consider opportunity costs of same social resources spent elsewhere  Inequitable: Medical spending for the 65+ population the only such medical spending in the U.S. NOT subjected to budget constraints
    51. 51. Recommendation 4a - OR -Recommendation 4b
    52. 52. Recommendation (4a): CMS should base all coverage decisions on demonstrated cost-effectiveness:  Use coverage-with-evidence-development for ALL goods & services, not just new ones  Withhold coverage from dominated goods & services  Withdraw coverage if, over time, good/service becomes dominated by others
    53. 53. Recommendation (4b) CMS should set case-mix adjusted reimbursement rates for each diagnosis code, based on politically-determined societal willingness-to-pay:  Any entity with demonstrated capacity to treat diagnosis is eligible for payment;  Monitor & publicize patient outcomes from different providers; encourage patients to use publicized reports to choose providers  Withdraw eligibility if necessary
    54. 54. Consequences to device industry: Device manufacturers forced to demonstrate both cost savings AND effectiveness. Difference between recommendations 4a and 4b is the entity to whom demonstration must be made:  Option 4a: Demonstrate to CMS  Option 4b: Demonstrate to docs & hospitals
    55. 55. Stakeholder analysis:
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