A welcome boost
Proposed CMS budget could benefit medical-device makers
The news on future Medicare reimbursements wasn’t all bad for hospitals last week. While providers were told to expect an approximate 0.1% decrease in payments for inpatient services during fiscal 2011, they also learned that CMS could boost reimbursement for some procedures if the use of certain new technologies pushes the cost of those services significantly above Medicare’s current DRG payment rates.
And Wall Street analysts see broader reimbursement levels for medical devices in the proposed rule. The somewhat positive news on devices goes against the generally negative reception with which hospitals and systems gave the proposed rule (See story, p. 10).
The CMS won’t issue a final decision on the 2011 inpatient prospective payment system until Aug. 1, but under the proposed rules hospitals could receive higher reimbursement for certain procedures that include the use of five new devices—two of which are holdover technologies that were approved for add-on payment in 2010. Use of the devices must result in substantial improvements— such as quicker patient recoveries, decreased mortalities or fewer readmissions—in clinical outcomes in order to qualify for add-on payment status.
Currently, the CMS is considering add-on payment applications for Monteris Medical’s AutoLITT catheter-guided laser, which is used to destroy glioblastoma brain tumors; InfraReDX’s LipiScan Coronary Imaging System, which is used during catheterization to determine the composition of coronary plaque; and InfraReDX’s LipiScan Coronary Imaging System with intravascular ultrasound, which is used during angiography to visualize stents and coronary lesions. The agency also has proposed continuing add-on payment for the Spiration IBV Valve System, which is used to control air leaks after certain respiratory surgeries, and the CardioWest Temporary Total Artificial Heart, which is used on hospitalized heart failure patients awaiting transplant surgery.
The proposed payment bumps vary widely based on the cost of the devices, but in most cases the add-on payments would be upwards of $3,000 per procedure. Still, Joane Goodroe, senior vice president of VHA Innovations, which focuses on clinical quality and cost solutions, said the add-on payments would hardly represent a financial windfall for hospitals. She noted that providers who use the various technologies will still lose money on the related procedures.
“When I see this, I don’t say, ‘oh wow, less pressure on the hospitals,’” said Goodroe of the proposed payment increases. “I see it as proof that the cost of care is going up.”
Others echoed Goodroe’s observations, but said the payments could be helpful in promoting the use of potentially life-saving technology that, because of cost, is out of reach for many providers.
“These are technologies that have been shown through studies to have a demonstrative improvement to patient outcomes, but their use isn’t necessarily widespread because their costs aren’t yet included in the DRG” rates, said Don May, vice president of policy for the American Hospital Association. “We think it would make sense to increase the number of devices that receive” add-on pay- ments, he added.
But Blair Childs, spokesman for the grouppurchasing and quality-improvement organization Premier, argues that the CMS is likely to remain reluctant to expand approval of add-on payments beyond the two or three products that receive such status each year. “Add-on payment for the right technology makes sense, but the evidence is spotty on how many of these devices are truly breakthrough,” he said.
Although devicemakers typically submit add-on payment applications to the CMS, they won’t directly benefit if the payment boosts are approved since hospitals—not insurers—buy the devices and then bundle those costs into their negotiations with payers for coverage of certain procedures. But many of the devices are targeted for use among elderly patients covered by Medicare, which reimburses at a lower rate than private insurers. As a result, devicemakers often apply for their devices to be covered under the CMS’ add-on payment provision in hopes of bumping up providers’ reimbursement and, subsequently, increasing hospitals’ adoption and purchase of those devices.
A spokeswoman for the Advanced Medical Technology Association, a devicemaker lobby group, said officials there are still reviewing the proposed 2011 inpatient payment rates and were not prepared to comment on how it might affect their membership’s product pricing.
But equity researchers at both J.P. Morgan and Leerink Swann indicated in notes put out last week that the CMS’ proposed reimbursement rates for many device-oriented medical procedures were generally better than anticipated. For example, hip and knee implant procedures are expected to receive a pay rate increase of 2.5% while spinal implant procedures are projected to receive a nearly 5% reimbursement rate increase.
“The proposal seems slightly more positive than one might have feared during a period complicated by healthcare reform and budgetary pressures,” wrote Leerink Swann analyst Rick Wise in his research report. As a result, the finalized rule should mitigate the need for hospitals to place significant downward pressure on device contract pricing, analysts said.
Devices such as the CardioWest Total Artificial Heart must produce vast improvements in order to be eligible for add-on payments.