Medical Device Daily Executive Editor
SAN FRANCISCO – It wasn't too long ago that one could attend a medical technology-related conference and barely hear mention of the word "reimbursement."
The focus usually was on matters related to getting products approved. Mere mention of reimbursement would cause attendees to start doodling in their conference notebooks.
Oh, how times have changed.
As Blair Childs, executive vice president of the Advanced Medical Technology Association (AdvaMed; Washington) noted during this week's Frost & Sullivan Medical Devices Executive Summit here, the pecking order clearly has changed.
Whereas the industry trade association used to focus nearly all of its advocacy efforts on the FDA, "that has shifted in the 2000s, largely to focus on reimbursement," he told his audience at the Hyatt at Fisherman's Wharf.
That for the most part means dealing with what happens at the Centers for Medicare & Medicaid Services (CMS; Baltimore), as well as being acutely aware of the funding process for that agency, the largest payer for healthcare in the U.S.
And while working with the CMS bureaucracy is improving by leaps and bounds, particularly since the shift of Mark McClellan, MD, a year ago this month to head that agency – after a short but satisfactory tenure as FDA commissioner – the funding side of that equation is enough to keep top executives of medical products manufacturers and those who run the nation's hospitals awake at night.
Childs noted that the House Budget Committee "is meeting in Washington this week, and the word is that they're going to take the president's [proposed] cuts and raise – or in this case, lower them."
Forecasting legislated trimming of the fiscal 2006 budget for the Medicare program as part of overall cuts in spending due to a growing federal deficit, he said: "It's going to be a tough time for hospitals, doctors and medical technology."
And if members of those constituencies have their sleep interrupted by concerns over reduced payments for their products or services, Childs said of those who manage CMS's programs: "They wake up each day and think about how they can save money for Medicare."
While he said medical technology has "a very positive perception with the public" – especially in comparison with the much-maligned pharmaceutical industry – Childs noted that "cost pressures are going to lock us even more into head-to-head competition with the drug industry."
One result of that belt-tightening on payments, he said, would be that "there is going to be a lot more pressure for evidence-based medicine. They will use Medicare claims data to measure physicians' resource use."
Childs said the "winners" in this cost-cutting environment "will be the companies whose technologies can get patients out of hospitals more quickly."
He noted that the federal government wants to use "market forces" in the form of a focus on competitive bidding to help control Medicare costs, and said "we expect across-the-board cuts in med-tech spending during the budget conciliation process later this year."
The irony of all this, Childs said, is that reimbursement cuts "undermine" medical technology's role in providing long-term solutions to cutting – or at least limiting increases in – healthcare costs.
"They key point we keep trying to make to legislators is, Look, [medical] technology is responsible for huge benefits. We're spending a lot of money on healthcare – what are we getting for it?"
By way of answering that, he presented a slide showing "the great strides made by physicians and innovators" via new medical technologies in the period from 1980 to 2000, with the overall death rate down 16%, life expectancy up by 3.2 years, disability rates for those over 65 down by 25% and 56% fewer days spent in the hospital.
In all, Childs said, while per-capita spending on healthcare grew by $2,254 during that period, "health gains of $2.40 to $3 were realized for every dollar invested."
While he said "the value [of healthcare] is there," he added: "We have to make the case for it."
Running his audience through a primer on reimbursement, he reminded conference attendees that, while many consider it a matter of receiving payment for their products, it really is a three-part process involving coverage, coding and payment.
"Historically," he said, "the Medicare approval process has taken five or more years."
That breaks down to about 18 months for the coverage process, 15 to 27 months for the coding process and 24 or more months for the payment process.
Seeking a national Medicare coverage decision offers the advantage – if a positive decision is received – of universal coverage and easier administration, but only a few such decisions (usually about 15) are received per year.
"The local coverage process is where about 95% of coverage decisions are made," said Childs.
For either process, "the issues come in when you have new treatments or tests," he said. An accompanying "Collision course" scorecard noted that if a company is seeking coverage of a new inpatient technology that saves money and fits within an existing DRG (diagnosis-related group), the outcome is likely to be good. If it's an outpatient technology that saves money and fits within an existing DRG, the outcome is "possibly good."
But for a new laboratory test, a piece of durable medical equipment used in the home, a technology for physicians' office use or a technology that offers an improvement in treatment but costs more, the outlook is questionable.
He did characterize "breakthrough" healthcare information technology as representing "opportunity" insofar as Medicare reimbursement goes.
Childs hailed McClellan, who addressed attendees at the AdvaMed annual meeting in Dana Point, California, earlier this month via a videoconference hookup, as "a strong activist for innovation."
He said the CMS administrator "wants to get technology to market faster – get it into a real-world setting, then collect [outcomes] data from that."
Childs noted that one of AdvaMed's major policy challenges for 2005 is "communicating what the value of innovation is." He said that in its budget considerations, the U.S. Congress uses a "scoring" system that "only looks at the cost, not what you get for it."
AdvaMed, he said, "is working with the Congressional Budget Office on that."