Medical Device Daily Washington Editor

WASHINGTON – This year's conference on reimbursement sponsored by the Medical Device Manufacturers Association (MDMA; Washington) did not feature a funereal tone, but the mood was tempered by expectations that the current economic and political environment may take the edge off the device industry's growth.

Thomas Novelli, MDMA's director of federal affairs, almost certainly understated the case when he told attendees, "you're in Washington, DC at quite an historic time," one which promises "substantial change on a broad range of issues, including healthcare reform."

Leading off for the presenters was Judy Rosenbloom of reimbursement consultancy JR Associates (Reseda, California), who remarked, "there is very little in reimbursement that you can do quickly," a comment that probably will ring more true over the next couple of years than it does now. She reinforced the message that any product that demonstrates the ability to trim overall costs has good prospects, but the sponsor of a device that lowers cost while shifting the site of care to a setting where that service has not been covered may find the going difficult.

Rosenbloom reminded attendees that 85% of coverage decisions are made by local carriers rather than by the Centers for Medicare & Medicaid Services, but explained that part of the reason for that is that device makers know that a failed attempt at a national coverage decision (NCD) kills any chance of obtaining local coverage.

So how do Medicare regional carriers decide on which therapies to cover? Rosenbloom said, "Part of it has to do with the medical director and part is the advisory board." It also "depends on the technology," she said, because any technology that is alien to the medical director, who is almost always a physician and usually a specialist, will be handicapped.

FDA is not the only agency that rolls out a welcome mat on which many fear to tread. "CMS is putting out the word that they want people to come to them," Rosenbloom said, but device makers who have yet to decide whether to go the regional route as a stepping stone to de facto national coverage are understandably reticent to tip their hands.

As for new technology add-ons for inpatient services, Rosenbloom said, "unfortunately this system is not working very well. Very few technologies have been added," but "opportunity is there," although "it is costly and time intensive."

Most of the 25 add-on applications over the past five years have tanked because they failed "the newness test," she said, but CMS defines newness as having been on the market for only 2-3 years, which seems ironic given that the deadline for applications for fiscal year 2010 is this Nov. 17.

On the outpatient side, Rosenbloom said "the notable trend" for ambulatory patient classifications is that ancillary services "are being bundled into the primary procedure." She gave an example in which magnetic resonance imaging (MRI) and MR angiography might "be rolled into one composite APC" under some diagnostic circumstances.

Current procedure terminology (CPT) codes, which are those used by physicians under Medicare Part B, are probably no easier for device makers to obtain than NCDs. Rosenbloom said that the American Medical Association (AMA; Chicago) typically takes at least 18 months to review a proposed new CPT code, and that any additional expense incurred with the addition of a CPT code has to be offset someplace else in a physician's charges to CMS. "They understand that it's a budget neutral" operation, she said.

The budget neutrality requirement necessarily opens up the entire family of related codes for that diagnosis, which presents the AMA board with some dilemmas, one of which is the interest of physician specialists who sit on the CPT boards. "There can be infighting and there can be arguing," Rosenbloom shrugged.

When a CPT application involves emerging technology, "payers are automatically assuming that it's experimental and investigational," Rosenbloom stated, which means they may tend to "deny it automatically. Getting that code is really a strategy in itself."

Still, device makers know how to get the doctors on the CPT board to go along.

"Specialty societies are your access," Rosenbloom said, but she urged attendees to remember that AMA's CPT panel members are volunteers, which means the decisions sometimes come out at a seemingly glacial pace.

Carla Monacelli, co-founder and managing partner at Argenta Reimbursement (St. Paul, Minnesota), told device makers what they have long suspected: "the process is intended to slow the entry of new technologies and to control costs," which she said is "even more relevant today," given the economic climate.

Monacelli also recommended that device makers refresh their reimbursement strategy as they go along, given that the total research and development timeframe can stretch to six years and that the reimbursement picture "a year from now can be vastly different."

She seconded Rosenbloom's point that CMS's open-door policy can be dangerous because it can prejudice local carriers, and approaching local carriers is "a little less risky than going into CMS" because a bad outcome in one locale does not necessarily prejudice other local carriers.

Monacelli recommended that sponsors start rounding up specialty medical society support at least two or three years prior to the target PMA date. Sponsors should also keep track of changes in payment policies, especially given the fact that President-elect Obama and Congress "have both said 'we need to fix this'" in reference to healthcare costs and coverage.

Only the newbies to reimbursement were surprised to hear Monacelli remark, "the days are gone when you built a novel technology" that is the best mousetrap ever made, "and money falls out of the sky." She also warned against attempts to prognosticate reimbursements based on case studies that are five years old because the information is outdated. Monacelli also told attendees that venture capitalists (VCs) "are calling more often and earlier than they did" several years ago, seeking help to establish an innovator's reimbursement prospects.

Medical Device Daily asked Monacelli whether the recent decision regarding nebulizer treatments in the case of Hays v. Leavitt might be followed by other such cases in which the agency's ability to use the least costly alternative – which is not statutorily unambiguous by some accounts – for a therapy will be undercut (Medical Device Daily, Nov. 7, 2008).

"I wouldn't be surprised," Monacelli said, adding that some of the impetus behind a move to deconstruct the least costly alternative paradigm may be "from the oncology community."

Rob Podraza, CEO of Reimbursement Principals (Littleton, Colorado), told attendees that their relationships with investors hinged on their answers to questions about reimbursement. "If you've ever dealt with the people who hold the purse strings, they're a demanding audience," he quipped, adding that some investors have an "oversimplified view of reimbursement."

On the other hand, "one of the things that turns them off immediately is overconfidence," said MDMA's executive director, Mark Leahy, adding that the smart innovator should acknowledge up front the possibility of unanticipated developments.

Podraza said that some potential investors mistakenly believe that reimbursement "is a go/no-go thing, like FDA." He also offered an explanation of a pet peeve. "My favorite irritant is the 'covered lives' question," Podraza said in reference to questions about the number of citizens who are medically eligible for the device and who have insurance.

Podraza said that investors are aware that "in 2002, if you got through FDA, that would work for reimbursement," but that this is no longer the case. "The increasing cost derives from the fact that payers see safety and efficacy as a threshold" for consideration, but not for persuasion. He acknowledged, "The expense of generating the data is considerable."

MDD asked Podraza whether venture capital is starting to see medical technology as less attractive than it has in the past eight or nine years. MDMA's Leahy said VC investment in this quarter is down about 40% from the same quarter last year despite the healthy first three quarters for 2008.

"As the FDA bar gets higher and the cost of PMA studies continue to increase, those opportunities are becoming less attractive because they're beyond the reach of many investors," Leahy explained. Oddly enough, Podraza said he has not heard much from VCs about rumblings such as the increasing emphasis on comparative effectiveness.