Medical Device Daily Washington Editor

The Centers for Medicare & Medicaid Services reported some good news and bad news earlier this week.

The good news: the acceleration of healthcare inflation in 2006 was less than in the previous year.

The bad news: healthcare spending rose 6.7% in 2006.

The agency’s Jan. 8 announcement said that spending in 2006 came to $2.1 trillion, or more than $7,000 per person. The figure for 2005 is $6,649 per person. However, the agency noted that the share of GDP “remained relatively stable in 2006 at 16.0%, up by only 0.1% from 2005.”

Thanks largely to Medicare Part D, out-of-pocket spending grew only 3.8% in 2006, a relatively torpid pace compared to the 5.2% growth the previous year. This category, all told, “accounted for 12% of national health spending in 2006,” but has “steadily declined since 1998, when it accounted for 15% of health spending.”

According to the report, “[t]otal prescription drug spending in 2006 was $216.7 billion, compared to $199.7 billion in 2005.” Public funding sources was said to have accounted for 34% of this total “whereas in 2005 their share was approximately 28 percent.”

HHS: free radiology lab reports not violative

Radiology clinics and hospitals doing business with each other must exercise care to avoid running afoul of federal law. A recent decision memo makes clear that while the Office of Inspector General (OIG) at the Department of Health and Human Services is watching, it also does not reflexively hit such institutions with citations for violation of federal anti-kickback statutes.

The situation involves a radiology clinic that does not charge a nearby hospital for preparation of written reports for analyses of radiological images. OIG says that “while the arrangement could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals ... were present,” the office sees the transaction as tenable as matters currently stand.

The names of the facilities involved were redacted from the decision memo, but the memo describes them as “a small, rural critical care access hospital” and “a radiology group ... which performs radiology services on an exclusive basis on behalf of the hospital.” The arrangement between the two calls for the radiology practice to download digital images and interpret them, providing a written report. The radiology practice bills public and private payers for the services.

According to HHS, the hospital “has certified that overall, its exclusive relationship with the group is and will continue to be at fair market value in an arm’s-length transaction.” The hospital obtains the free reports “in return for referring federal payor patients to the group for professional radiology services,” which was said to be stipulated in a contract.

The crux of the matter seems to rest on the possibility that hospital payment for the services would constitute double payment. According to the memo, such a payment would constitute “double payment for the same incurred cost; that is, a payment from the hospital and a payment from Medicare.” Also, the radiology clinic “is not relieving the hospital of any financial cost the hospital is otherwise obliged to incur for Medicare patients,” which means that “the free reports…do not constitute remuneration to the hospital.”

OIG saud that the arrangement “is unlikely to result in overutilization of federally payable services.”

FDA hits warning two-for-one

Happy hour is a popular event inasmuch as the bartender serves up two for the price of one, but who says federal agencies can’t also provide a “two-fer”? The Cincinnati district office of FDA issued two warning letters in connection with one inspection last month concerning a clinical investigation site that was also alleged to have used an investigational device for purposes other than those indicated in the trial.

Addressed to Ivan Bakhurin as co-owner/sponsor, and Bradley Wolf, MD, as the co-owner/sponsor of Gold Thread (Cincinnati) (Wolf was also named as a clinical investigator in his warning letter), the Dec. 18 warning letters dealt with inspections that took place at the company’s clinical site in April and in July in connection with a study for gold thread, under study as an adjunct to face lifts.

According to FDA, the clinic failed to “ensure that each investigator participating in an investigation of the device obtains and documents informed consent from each subject.” This citation was in reference to three patients, including one patient on whom a clinical investigator performed the study surgery in December 2005 while “the consent form was not signed until July 13, 2006.”

FDA also said Gold Thread failed to report the incidents to the agency. In response to the 483 findings, the firm apparently told FDA that the violations were caused by clinical investigators who lacked “familiarity with generally accepted Good Clinical Practice regulations.” While Gold Thread promised to hire only CIs who are familiar with GCPs, the agency responded that the response “is inadequate in that it does not address how you plan to prevent the violations discussed above from recurring in the future.”

FDA also cited the company for “marketing Gold Thread sutures for use in scar revision surgeries without marketing approval or clearance from FDA,” causing the product to be adulterated and misbranded.

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