David Farber (http://bit.ly/2DFnvJ1), Head of the FDA and Reimbursement Practice at King & Spalding in Washington DC, leads a workshop for medtech and digital health companies seeking US reimbursement. He brings 30+ years of experience in US Healthcare reimbursement, lobbying and FDA regulatory issues. In addition to ongoing reimbursement challenges, 2020 will see a fundamental transformation in US medical reimbursement (http://bit.ly/2YWlYbt), particularly in digital health. That includes 394 Current Procedural Terminology (CPT) code changes, 248 new codes, 71 deletions and 75 revisions

1. David J. Farber
Partner
U.S. Reimbursement:
Advanced Strategies
January 2, 2020

2. Agenda
I. Introduction
II. FDA and CMS – The Important Differences
III. The Three Elements of Reimbursement
I. Coverage
II. Coding
III. Payment
IV. Advanced Strategies

3. Introduction: Setting Expectations and
Understanding Timing
3

4. “ But despite . . .big digital health
ambitions, the path to success will
not be an easy one. Digital health
companies across the world are
facing … a market marred by
reimbursement difficulties.”
— MedTech Insight (April 23, 2018, p.14)
4

5. “ As one VC investor noted, ‘Payers are pulling
back on paying for new things. It is difficult
to get new technologies covered. It’s taking
companies three to five years … to collect
enough data and go through the processes to
obtain coverage following FDA approval.’”
— Deloitte, Out of the valley of death: How can entrepreneurs,
corporations, and investors reinvigorate early-stage medtech innovation?
(April 2018, p.5)
5

6. Introduction -- Why Is This Important?
6

7. 7

8. The Differences Between FDA and CMS
8

9. FDA Approval/Clearance vs. CMS Coverage
9
FDA CMS
“Safety and Effectiveness”
FDA-approved labeling
Focus on function and
clinical risk vs. benefits
Economic data is irrelevant
Non-inferiority
endpoint acceptable
Focus on intended population
Generally not public processes
Does not publish proposed decisions
“Reasonable and Necessary”
CMS coverage determination
(formal or informal)
Focus on health benefits
Economic data is important
Superiority endpoint often needed
Focus on Medicare beneficiaries
Public processes
Publishes proposed decisions

10. Information Considered by FDA and CMS
10
FDA CMS
“Well-controlled” clinical investigation data
Non-clinical laboratory studies
Quality system controls
Labeling
Post-market controls
Advisory committee recommendations
Published and unpublished literature
“Well-controlled” clinical investigation data
Clinical evidence (including FDA submissions)
External technology assessments
Advisory committee recommendations
Position statements by relevant groups
Expert opinions
Public comments
Economic and other cost-effectiveness data
Other informal opinions

11. What Is Reimbursement?
11

12. The Basics of Reimbursement
• Coverage
Is the item or service eligible for payment?
• Coding
How is the item or service identified?
• Payment
What are the payment methodologies
and amounts?
12

13. An Overview of Coverage
13

14. Medicare Coverage:
Defined Benefit Category
Not Excluded
“Reasonable and necessary for
the diagnosis or treatment
of illness or injury or to improve
the functioning of a malformed
body member”
— Social Security Act § 1862(a)(1)(A)
14

15. 15
CMS and Its Contractors Make
Medicare Coverage Decisions
• National Coverage
Determinations (NCDs)
• Local Coverage
Determinations (LCDs)
• Individual Consideration

16. National Coverage
Determinations:
National and binding decision by CMS
Coverage and Analysis Group (CAG).
May be requested by anyone
(CMS or external party)
Public process that generally takes
9-12 months once initiated.
May include certain conditions for
coverage (including CED)
16

17. Coverage with Evidence Development
Evidence-based coverage paradigm
that permits CMS to develop
coverage policies for treatments
that are likely to show health benefits
for Medicare beneficiaries but for
which the evidence base is not
sufficiently developed
Two kinds of CED: (1) clinical study
and (2) registry
17

18. Local Coverage
Determinations:
Issued by local Medicare
Administrative Contractors (MACs)
May be requested by anyone
(MAC or external party)
New formal process in 2019 to
request LCDs
Limited to particular MAC jurisdiction
18

19. Medicare Administrative Contractors
19
JF
Noridian
JE
Noridian
JF
JH
Novitas
J5
WPS
J6
NGS
J8
WPS
J15
CGS
JL
Novitas
JK
NGS
JM
Palmetto
JJ
Palmetto
JN
FCSO

20. An Overview of Coding
20

21. Coding is the “language of
reimbursement”
Coding operationally links
coverage and payment
Having a code does not
guarantee reimbursement!
21

22. Types of Codes
22
TYPE OF CODE CODING SYSTEM WHO SETS CODE? WHO USES CODE?
Diagnosis
ICD-10-CM,
Diagnoses, Vols. 1 & 2
WHO and NCHS All Providers
Procedure or
Service
ICD-10-CM,
Procedures, Vol. 3
WHO and CMS Hospital Inpatient
Procedure or
Service
CPT-4 AMA
Physicians, Hospital
Outpatient, Clinical
Labs, etc.
Products and
Certain Services
HCPCS CMS
Physicians, Hospital
Outpatient, DMEPOS
Suppliers, etc.
Drugs NDC FDA Pharmacies, etc.

23. CPT Codes
23
Maintained by the AMA CPT Editorial Panel
Identify medical services furnished by physicians
5-digit numeric codes with generic descriptors
Three types of CPT codes:
Category I (permanent #####)
Category II (performance tracking ####F)
Category III (emerging technology ####T)
Application process takes at least 15 months for Category I codes,
with specific clinical data requirements

24. HCPCS Codes
24
Maintained by the CMS HCPCS Workgroup
Identify items and services not identified by CPT codes
5-digit alphanumeric codes with generic descriptors
Three types of HCPCS codes:
Permanent
Temporary (Q codes)
Miscellaneous/Not Otherwise Classified (99 codes)
CMS recently announced a semi-annual application process for
devices (historically only a January deadline)

25. An Overview of Payment
25

26. How much will the payer pay
for the item or service?
What is the payment
methodology?
Depends on the site of service
and provider/supplier type
26

27. Medicare Payment Systems
27
SITE OF SERVICE
TYPE OF PAYMENT
METHODOLOGY
CODES CLAIMED TO
GENERATE PAYMENT
AMOUNT
NEW TECHNOLOGY
PAYMENT PROGRAM
Hospital Inpatient
IPPS MS-DRG Bundle
(per discharge)
(Medicare Part A)
ICD-10 Diagnosis Codes, ICD-
10 Procedure Codes
Add-On Payment
Hospital Outpatient
OPPS APC Package
(per procedure)
(Medicare Part B)
ICD-10 Diagnosis Codes,
CPT Codes, HCPCS Codes
Pass-Through Status
New Technology APC
Physician
Physician Fee Schedule
(Medicare Part B)
ICD-10 Diagnosis Codes,
CPT Codes, HCPCS Codes
DMEPOS
DMEPOS Fee Schedule or
Competitive Bidding (Medicare
Part B)
ICD-10 Diagnosis Codes,
HCPCS Codes
Clinical Laboratory
Tests
Clinical Laboratory Fee
Schedule
(Medicare Part B)
ICD-10 Diagnosis Codes,
CPT Codes

28. Medicare Payments for New Technology
Inpatient NTAP
Outpatient Pass-Through
Outpatient New
Technology APC
28

29. Reimbursement for Remote Patient
Monitoring in 2020
29

30. Existing Remote Patient Monitoring Codes
Continue to be Used:
-- CPT code 99091 (Collection and
interpretation of physiologic data (e.g., ECG,
blood pressure, glucose monitoring)
digitally stored and/or transmitted by the
patient and/or caregiver to the physician or
other qualified health care professional,
qualified by education, training,
licensure/regulation (when applicable)
requiring a minimum of 30 minutes of time,
each 30 days),
CPT code 99453 (Remote monitoring of
physiologic parameter(s) (e.g., weight, blood
pressure, pulse oximetry, respiratory flow
rate), initial; set-up and patient education on
use of equipment)
30

31. • CMS has modified the CPT
codes in several ways
• Reduced the RVUs for 99457
• Will now treat codes as part of
primary care management
(PCM) services
• Will allow billing when “under
the supervision” of a physician
31

32. Three Advanced Strategies for Digital
Health
32

33. Strategy I: Generate FDA-Quality Clinical
Trial Data
33

34. Numerous Articles Are
Warning of AI Risks
“Many doctors and consumer advocates fear that
the tech industry, which lives by the mantra “fail
fast and fix it later,” is putting patients at risk and
that regulators aren’t doing enough to keep
consumers safe….Early experiments in AI provide
reason for caution, said Mildred Cho, a professor
of pediatrics at Stanford’s Center for Biomedical
Ethics….Systems developed in one hospital often
flop when deployed in a different facility, Cho
said. Software used in the care of millions of
Americans has been shown to discriminate
against minorities. And AI systems sometimes
learn to make predictions based on factors that
have less to do with disease than the brand of
MRI machine used, the time a blood test is
taken …” 34

35. Will AI Products be Covered in the Future?
35
“None of the AI products sold in the U.S. have been tested in randomized
clinical trials, the strongest source of medical evidence, Topol said. The first and
only randomized trial of an AI system which found that colonoscopy with
computer-aided diagnosis found more small polyps than standard colonoscopy
was published online in October.
Few tech startups publish their research in peer-reviewed journals, which allow
other scientists to scrutinize their work, according to a January article in the
European Journal of Clinical Investigation. Such “stealth research” described
only in press releases or promotional events often overstates a company’s
accomplishments.
And although software developers may boast about the accuracy of their AI
devices, experts note that AI models are mostly tested on computers, not in
hospitals or other medical facilities.” (underlines added)
Scientific American, Artificial Intelligence Is Rushing Into Patient Care
- And Could Raise Risks, Dec. 24, 2019, available at
https://www.scientificamerican.com/article/artificial-intelligence-is-
rushing-into-patient-care-and-could-raise-risks/

36. Strategy II: Engage The Medical Societies
36

37. 37

38. Strategy III: Plan for Reimbursement As
You Plan for FDA
38

39. Bring the entire team together
early in the development process
to discuss goals and objectives.
• Clinical, regulatory, reimbursement,
marketing, R&D.
39

40. Consider the intended patient
population and the payer mix
for the product.
• In what settings of care will the device be used?
• Are there special payer rules that will be applicable?
• Will device labeling be consistent with the
reimbursement strategy?
40

41. Clinical trials should be conducted,
and structured to maximize
reimbursement
• Comparative effectiveness studies important to demonstrate
value proposition
• Medicare requires its beneficiaries to be part of study population
• Must demonstrate an improvement in overall outcomes (safe and
effective is not enough)
• Payers are increasingly looking to evidence of cost savings to justify
coverage, especially for expensive treatments
41

42. FDA pathway can and usually will
affect coverage, coding and payment.
• 510(k) may make it difficult to justify a new code and
payment amount
• PMA may make it difficult to use an existing code and
payment amount
• 510(k) submission may not generate the level of clinical
data required by payers
• Be wary of “prevention”—it is rarely covered by Medicare
42

43. Build broad support for
the product.
• Physician Societies
• Patient Groups
• Political Pressure/Legislative Strategy
43

44. Consider the changing
payer landscape.
• Fee for service is moving out
• Bundles, packages, transfer of risk,
value-based payments are moving in
44

45. Key Takeaways
45
• Data is becoming more
important
• It is never too early to plan
your reimbursement strategy

46. Questions?