Diagnostics & Imaging Week Executive Editor

SAN FRANCISCO – Reimbursement expert Rhonda Fellows was preaching to the choir during her presentation at the Frost & Sullivan Medical Technologies Executive MindXchange this week.

When she described reimbursement as a "critical component" of product development, the vice president of government affairs and reimbursement at Orthofix (Phoenix) saw lots of knowing nods from the audience at the Grand Hyatt hotel.

It wasn't that many years ago that the audience would have been smaller or, more likely, "I wouldn't even be here" to discuss the subject, she said.

Now, of course, reimbursement has shouldered itself right up alongside regulatory as the two big "R" issues medical device manufacturers have to deal with – most effectively if they do so in tandem – as they make their way toward commercialization of a product.

The Medicare, Medicaid and Tricare programs – the latter being the healthcare system for active and retired military personnel, sometimes forgotten in discussion of federal healthcare spending – are the three legs of a stool upon which the U.S. government perches as the nation's largest single payer.

As a result, said Fellows, "the government is influencing our products." In fact, she said, "they tell us how we are going to run our businesses."

And just as importantly, private payers "now are behaving according to what Medicare is doing."

With Balanced Budget Act and Medicare Modernization Act-induced cuts of tens of billions of dollars either already in place or looming on the horizon, Fellows said those and other budget-tightening efforts such as gainsharing and pay for performance (P4P) are becoming realities of business life that are reshaping the way device companies must think.

She said that gainsharing, a new hot-button issue in Washington, "has its legs under it," while P4P, whose chief architect is Mark McClellan, MD, Centers for Medicare & Medicaid Services (CMS; Baltimore) administrator, "is being closely watched by private payers."

The key message from all of these efforts to better control healthcare spending by both government and private payers, Fellows said, "is that medical devices must be appealing from both a clinical and economic perspective."

By way of example, she said that in clinical studies, "you need to include a Medicare population." Cautioning her listeners not to think of that Medicare patient approach as a now-and-then thing, Fellows said in designing a trial, "always include them in it."

She said another trend moving forward will be approval of more and more devices as over-the-counter products, so that users, not payers, will have to pay for them.

How can device companies keep from being swept out to sea by the wave of budget cutting? "We must promote long-term investment in new medical treatments, disease prevention and efficient delivery of healthcare services," Fellows said.

She said influencing what she characterized as "the continuous evolution" of the legislative and regulatory processes "takes endurance and patience."

Fellows said that as part of those processes, device firms "need to become a practical resource for decision-makers."

Reimbursement and other budgetary cuts also were prominent in a presentation by Stephen Ubl, president and CEO of the Advanced Medical Technology Association (AdvaMed; Washington), who bluntly told conference attendees: "The stakes have never been higher for the industry."

Citing large deficits that are "predicted to stay large for the next 10 years and beyond," Ubl said the push to tighten healthcare spending makes for "a very challenging environment in Washington."

With Medicare and Medicaid spending now taking up about 21% of the federal budget and forecast to grow to 29% by 2015, he said "we'll have bills as far as the eye can see to try to restrain Medicare spending going forward."

Given Congress' historic reluctance to trim programs that affect a large voting bloc such as those covered by Medicare, Ubl said he doesn't anticipate major cuts in the program as the House and Senate wrestle with President George Bush's proposed new budget, but cautioned that next year, "I believe we'll see major Medicare cuts."

He noted that one of AdvaMed's key legislative agenda items this year is addressing the push for "value-based purchasing," including incentives for physicians and hospitals to use underutilized technologies and incentives for rapid adoption of "value-enhancing" new technologies.

"Because we are an industry that delivers value," Ubl said, "this is good" – the so-called "carrot," if you will.

The "stick," he said, is the push for so-called "efficiency standards."

Saying "efficiency" reimbursement "could result in incentives to use the cheapest treatment, not the best," Ubl added that such an approach "could penalize early adopters of new technologies."

He decried the gainsharing concept that is gaining ground in Washington, saying it "looks at the product involved, not the process of treatment," and includes incentives "not to adopt new technology."

Another key issue on AdvaMed's plate is provider reform. Ubl noted what most in his audience already are painfully aware of: "Medicare's payment machinery can't keep pace with rapid innovation."

He said the trade association would be pushing hard to effect change in that area, citing such efforts as the crafting of legislation to reform payment for diagnostic lab tests, with new tests historically being underpaid. "Look for a system based on the value of new tests to the patient," Ubl said.

Noting that while remote monitoring technologies that allow physicians to monitor patients from their homes "have opened new areas" of opportunity to provide improved healthcare for such patients, he said that doctors are unable to receive reimbursement for their part of that equation.

"We're pushing for reimbursement for physicians for remote interactions," Ubl said.

Regarding the FDA, he said AdvaMed's key reform efforts regarding that agency include improved review performance, "stable, predictable" user fees, and renewal of the third-party review system.

Citing legislative efforts to mandate new post-market follow-up standards for the agency, Ubl said the Center for Devices and Radiological Health "has made postmarket safety its key initiative," so the association "sees no need for additional legislation in this area."

No Comments