Medical Device Daily Washington Editor

BALTIMORE – On the second day of the CMS advisory committee meeting on ambulatory payment codes (APCs) here last week, the committee delved into the Medicare payment thicket, dealing with charges for recalled devices, plus other issues that give hospital administrators heartburn.

However, device makers may need to devour a few chalky tablets over the prospect that CMS will probably not reimburse for expensive new technology at more generous rates for more than two years, assuming the advisory panel's recommendations become reality.

Jo Ellen Slurzberg, vice president for reimbursement at Almyra (Boxborough, Massachusetts), presented on behalf of the Medical Device Manufacturers Association (MDMA; Washington), commending CMS for its continued efforts at refining outpatient prospective payment (OPPS) codes. But she said the system “continues to lack the stability and predictability necessary for providers, innovators and patients.”

Conversely, Slurzberg expressed concern that the agency exhibits little interest in putting a floor under decreases in median cost calculations for 2007.

According to the agency's meeting notice, CMS's position is that median cost calculations will drop more than 10% for only six APCs, but Slurzberg argued that “dramatic fluctuations in reimbursement rates impact a small manufacturer's ability” to keep prices constant and especially trouble single-product firms.

CMS has typically relied on its own data to set OPPS rates, but she insisted that external data has more utility than for capturing meaningful data on low-volume devices, adding that when providers and manufacturers can back a claim of underpayment, the agency ought to “make every effort to utilize credible external data.”

Several at the meeting complained that CMS has been too aggressive in shifting novel and expensive technologies from more generous APCs designated for new technologies to standard clinical payment codes that typically pay less (Medical Device Daily, Aug. 24, 2006).

MDMA joined this chorus. Slurzberg said: “CMS does not have a firm decision-making timeline to accept a . . . new-technology application,” making it impossible to determine whether the process is accelerating adoption of vital medical innovations as intended. She decried the lack of transparency in agency decision-making, saying that the process “requires sunshine” similar to the new technology DRG process.

Echoing Slurzberg, DeChane Dorsey, associate vice president for payment and policy at the Advanced Medical Technology Association (AdvaMed; Washington), also commended the CMS decision to employ only “correctly coded claims . . . for all device-related APCs in setting payment rates.” However, Dorsey urged a CMS chart “which identifies the percentage of claims, by HCPCS [healthcare procedure coding system] code, containing correctly coded C codes.”

(A “C” code is any one of 95 codes that CMS retired in 2003, but subsequently reinstated for data collection purposes. The agency originally introduced these codes in 2000 to deal with reimbursement of high-cost devices.)

In follow-up discussion, one attendee said the Internet could serve as a transmission point for C code instruction and that some billing software vendors already do so.

“Someone like AdvaMed has a lot more resources” to put something of this nature together, said panel member Judie Snipes.

Slurzberg added: “we are trying to reach folks in the coding departments” to help them update their codes. She added that industry cannot now offer the agency any guidance on methodology but offered to participate in such an effort.

Dorsey said that AdvaMed is no fan of the agency's decision to move non-myocardial PET and PET/CT from a new technology reimbursement code to a standard clinical code (MDD, Aug. 24, 2006). She specifically recommended that CMS consider using external data to set rates “and/or allow procedures to maintain their new technology APC designation for a full three years while more data is collected.”

Like MDMA, AdvaMed dislikes the agency's sole reliance on internal data, “given the potential for errors.”

The issue of offsets for hospitals that have to round up recalled devices from inventory or explant those devices also was discussed. At the very least, administrative costs are incurred in such cases, but Thomas Munger, MD, assistant professor of medicine at the University of Vermont (Burlington) said that fixing a particular percentage of the cost of the device for administrative overhead might produce peculiar results for devices that are either very expensive or very inexpensive. Nonetheless, the committee voted unanimously to recommend that the agency tackle this issue, but steered clear of backing a specific approach.

Discussing whether to recommend that CMS pay new technology APCs for three years, panel member Albert Einstein Jr, MD, of the Swedish Medical Center (Seattle), said that frequent use in the first year or so does not necessarily imply that charge masters accurately reflect true costs, “so I'm sympathetic” to giving hospitals a three-year new-technology APC. But the panel voted to recommend that CMS give new-tech APCs two years, not three. It also voted unanimously to recommend that the agency do so. The panel had little difficulty at all coming to a unanimous vote to recommend that CMS consider using external data to beef up cost estimate numbers, but the panel had come to the same conclusion in a previous session.

Slurzberg told MDD that while two years for new-technology APCs are better than one, she said that the panel “dedicated most of an afternoon just discussing new-tech APC transitions, almost all of which centered on immature data resulting in inappropriate assignment.” The panel's work on this category would “be greatly reduced if the new tech APCs were allowed to mature appropriately,” she said, and that MDMA will maintain focus on this issue.

As for payment offsets for recalled devices, Slurzberg termed this “a complicated issue,” but that CMS “has always erred on the side of patient care in the event that the patient acquired a hospital infection,” a tendency that CMS may exhibit in this case.

“I am sure we will be hearing a lot about this in the future,” she said.

As to the agency's use of outside data, Randel Richner, president of Neocure Group (Newton, Massachusetts), a reimbursement consultancy, told MDD: “there is now an acceptance to use solid outside-the-U.S. studies by the FDA” and that “if CMS could implement the same firewalls, I believe industry and CMS could come to an agreement” on how to compile payment data without running the risk of compromising proprietary information.

Ann-Marie Lynch, AdvaMed's executive vice president for payment and healthcare delivery, told MDD that the two-year new-tech APC status would be “a positive step toward ensuring sufficient data is collected,” but that “more than two years may be needed” to collect data for appropriate APC assignment.