De­vice­mak­ers chal­lenged on re­sis­tance to value-based pay­ment

Modern Healthcare - - NEWS - By Jaimy Lee and Sabriya Rice

Last year, med­i­cal-de­vice maker Medtronic in­tro­duced a new fea­ture for cer­tain car­diac resyn­chro­niza­tion ther­apy de­vices to im­prove qual­ity of life for con­ges­tive heart fail­ure pa­tients.

But when the Min­neapo­lis-based de­vice­maker saw data from a study it spon­sored show­ing that the Adap­tiv-CRT fea­ture also could help pre­vent hos­pi­tal read­mis­sions for those pa­tients, it used those data to pitch the med­i­cal de­vice to hos­pi­tals as a tool to help them avoid Medi­care read­mis­sions penal­ties.

“We could make an eco­nomic ar­gu­ment for hos­pi­tals that this is also good for them,” said Dr. David Stein­haus, vice pres­i­dent and gen­eral man­ager of Medtronic’s heart fail­ure ther­apy business.

As the health­care in­dus­try moves away from fee-for-ser­vice and to­ward value-based pay­ments, hos­pi­tals and in­sur­ers are de­mand­ing more ev­i­dence that the med­i­cal-de­vice in­dus­try’s new, more ex­pen­sive prod­ucts ac­tu­ally im­prove clin­i­cal care and of­fer eco­nomic value.

They in­creas­ingly ques­tion prod­ucts that of­fer only in­cre­men­tal ben­e­fits but at much higher cost. As Stein­haus’ state­ment shows, some de­vice­mak­ers get that.

But last week it be­came clear there is lin­ger­ing re­sis­tance in the broader de­vice in­dus­try.

The Ad­vanced Med­i­cal Tech­nol­ogy As­so­ci­a­tion re­leased a white pa­per at its an­nual con­fer­ence in Chicago that it said demon­strated the risks to pa­tient care of in­sur­ers be­com­ing more se­lec­tive about ap­prov­ing cov­er­age for new med­i­cal tech­nolo­gies as risk-based con­tracts pro­lif­er­ate.

“We have to en­sure th­ese new pay­ment mod­els in­clude safe­guards to pro­tect pa­tients from un­in­tended con­se­quences,” Ad­vaMed CEO Stephen Ubl said. Too many con­tracts put the em­pha­sis on cost tar­gets rather than qual­ity bench­marks, he added.

In­sur­ers “run the risk of re­ally tip­ping too far, so physi­cians have in­cen­tive not to adopt things that re­ally ben­e­fit pa­tients,” warned David Nexon, Ad­vaMed’s se­nior vice pres­i­dent.

Some ex­perts were taken aback by

“Your of in­dus­try is bear­ing some of the bur­den along­side other stake­hold­ers. But you’re also ... po­si­tioned to reap the ben­e­fits of those mil­lions of newly in­sured con­sumers. ... My view is that we need to keep work­ing to­wards win-win so­lu­tions.”

HIL­LARY ROD­HAM CLIN­TON

Ad­vaMed’s ap­par­ent re­sis­tance to mar­ket and reg­u­la­tory pres­sures for greater ac­count­abil­ity.

“We are in an ac­count­able world now,” said Chip Kahn, CEO of the Fed­er­a­tion of Amer­i­can Hos­pi­tals, a trade group that rep­re­sents for-profit hos­pi­tals. “If the de­vice in­dus­try is try­ing to fight that mes­sage, they have a prob­lem, be­cause ac­count­abil­ity is job one now in health­care de­liv­ery.”

With the U.S. health­care sys­tem un­der­go­ing ma­jor trans­for­ma­tion, the $110 bil­lion med­i­calde­vice in­dus­try is fac­ing un­prece­dented pres­sure from cost-con­scious in­sur­ers, hos­pi­tals, physi­cians and group pur­chas­ing or­ga­ni­za­tions to re­duce prices or prove that their ex­pen­sive new tech­nolo­gies de­liver value for pa­tients and providers.

De­spite the chal­leng­ing re­im­burse­ment cli­mate and tougher pur­chas­ing poli­cies, med­i­cal tech­nol­ogy man­u­fac­tur­ers are hold­ing fi­nan­cially steady. The net in­come for U.S. med­i­cal man­u­fac­tur­ers rose 32% to $11.4 bil­lion in 2013, ac­cord­ing to a new re­port from Ernst & Young. Even so, the med­i­cal-de­vice in­dus­try has made ag­gres­sive moves to pro­tect its po­si­tion. Ad­vaMed has been an out­lier among health­care in­dus­try groups in re­sist­ing mar­ket pres­sures and pol­icy changes, even as some of its mem­bers move to embrace the fo­cus on ev­i­dence-based prod­uct de­vel­op­ment and mar­ket­ing.

On the pol­icy front, it is con­tin­u­ing its pow­er­ful lob­by­ing push to re­peal the 2.3% med­i­cal-de­vice ex­cise tax in­cluded in the Pa­tient Pro­tec­tion and Af­ford­able Care Act, which pro­vides an es­ti­mated $29.1 bil­lion in fund­ing for con­sumers’ in­surance pre­mium sub­si­dies. Ad­vaMed spent $1.2 mil­lion on lob­by­ing last year, while Medtronic alone spent nearly $5.5 mil­lion on lob­by­ing.

In ad­di­tion, the in­dus­try has been on the de­fen­sive about other reg­u­la­tory changes un­der­way, in­clud­ing the use of de­vice registries, which can help iden­tify prob­lems with new tech­nol­ogy sooner. That’s de­spite mount­ing crit­i­cism that many mod­er­ate- to high-risk de­vices ap­proved by the Food and Drug Ad­min­is­tra­tion un­der an ex­pe­dited process lack pub­licly avail­able ev­i­dence to demon­strate their safety and ef­fec­tive­ness, even though fed­eral law re­quires such ev­i­dence.

There are a num­ber of ex­am­ples of pricey new tech­nolo­gies that have come on the mar­ket but have not been shown to im­prove out­comes or lower costs, such as pro­ton-beam ther­apy.

Ro­botic-as­sisted surgery is another big ques­tion mark. A re­cent Robert Wood John­son Foun­da­tion re­port called med­i­cal tech­nol­ogy the “dom­i­nant driver” of long-term costs, say­ing there are few re­quire­ments that ef­fec­tive­ness be demon­strated be­fore tech­nolo­gies are widely adopted.

At last week’s con­fer­ence, in­sur­ers, group pur­chas­ing of­fi­cials and health econ­o­mists chal­lenged Ad­vaMed’s po­si­tion on val­ue­based pay­ment mod­els. “We don’t want to squelch in­no­va­tion,” said Dr. Scott Josephs, na­tional med­i­cal of­fi­cer for health in­surer Cigna Corp. “But tell me what I’m get­ting for my health­care costs. ... show me that th­ese new tech­nolo­gies are su­pe­rior.” If a costly new de­vice is no more ef­fec­tive than some­thing that’s al­ready on the mar­ket, he added, “then frankly, it’s just adding costs to the sys­tem.”

Many ex­perts say Ad­vaMed’s warn­ings are un­jus­ti­fied be­cause in­sur­ers and providers par­tic­i­pat­ing in pop­ula- tion-health pay­ment and de­liv­ery mod­els have no in­cen­tive to turn away med­i­cal prod­ucts that im­prove pa­tient out­comes and re­duce fu­ture costs.

If a new in­ter­ven­tion is proven to lead to bet­ter clin­i­cal out­comes, that op­tion will be ex­plored, said Susan DeVore, CEO of Premier, a group pur­chas­ing and qual­ity- im­prove­ment company.

She urged de­vice­mak­ers to do more to ad­vance value-based care. “Bring your ev­i­dence and data, and bring a will­ing­ness to col­lab­o­rate and take risks,” she said.

Hil­lary Rod­ham Clin­ton, who spoke at the con­fer­ence, also chided de­vice­mak­ers, al­beit diplo­mat­i­cally. “Your in­dus­try is bear­ing some of the bur­den along­side other stake­hold­ers,” Clin­ton said. “But you’re also ... po­si­tioned to reap the ben­e­fits of those mil­lions of newly in­sured con­sumers. ... My view is that we need to keep work­ing to­wards win-win so­lu­tions.”

This is not the first time that the med­i­cal-de­vice in­dus­try has raised sharp ques­tions about the im­pact of new pay­ment mod­els on med­i­cal in­no­va­tion and prod­uct adop­tion. Ad­vaMed’s 2011 com­ment let­ter on the Medi­care Shared Sav­ings Pro­gram to test the ac­count­able care model, which of­fers providers fi­nan­cial in­cen­tives for meet­ing cost and qual­ity tar­gets, rec­om­mended that the CMS make ad­just­ments to en­sure that providers are not pe­nal­ized for be­ing early adopters of new tech­nol­ogy.

De­spite Ad­vaMed’s warn­ings, a num­ber of man­u­fac­tur­ers, in­clud­ing Medtronic and St. Jude Med­i­cal, have shifted their prod­uct de­vel­op­ment and mar­ket­ing strate­gies and made ac­qui­si­tions to add prod­ucts they say will help providers in the new value-based en­vi­ron­ment.

“The bot­tom line is that the de­vice man­u­fac­tur­ers have to be able to show their prod­ucts and new tech­nolo­gies will add value to their cus­tomers,” said Diana Lee, an an­a­lyst for Moody’s In­vestors Ser­vice.

Pur­chasers fear the mes­sage isn’t be­ing heard. “There is con­cern about pro­tect­ing the goose that is lay­ing the golden egg,” said Blair Childs, Premier’s se­nior vice pres­i­dent of pub­lic af­fairs.

SABRIYA RICE

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