Cyberonics (Houston) reported that, as expected, the Centers for Medicare and Medicaid Services (CMS) has confirmed its preliminary determination not to provide national coverage for Vagus Nerve Stimulation (VNS) therapy as a treatment for Medicare beneficiaries suffering from treatment-resistant depression (TRD).

The company — which had already received a preliminary ruling from the agency rejecting the coverage for VNS therapy for TRD back in February (Medical Device Daily, Feb. 7, 2007) — appeared to anticipate the final decision with its announcement last week that it was restructuring the company (MDD, May 2, 2007), laying off about 15% of its workforce (90 employees) and focusing its energy in the near term on its pharmacoresistant epilepsy indication for the therapy, which has enjoyed full CMS coverage since 1999.

VNS Therapy is a stopwatch-sized device implanted in the chest to send electrical pulses to the brain via the vagus nerve. It gained FDA clearance in July 2005 for treatment- resistant depression, but the therapy has met much resistance from insurers and consumer watchdog groups for that indication.

The Senate Committee on Finance conducted an investigation into VNS' approval for severe depression. The investigation, released in February 2006, revealed that at least 20 senior FDA staff had recommended against approving VNS for severe depression, with none favoring approval — but the director of the FDA's Center for Devices and Radiological Health (CDRH), Dr. Daniel Schultz, overruled them all.

In the final decision, CMS again said data failed to show the device worked for patients with treatment-resistant depression.

The agency said it heard from family and friends of depressed patients who urged coverage and was aware of the need for additional options for people who do not respond to other treatments.

"While empathizing with these patients, we do not believe that the evidence we have reviewed is sufficient to conclude that VNS improves health outcomes in the Medicare population," CMS said.

"Additionally, we are not convinced that the literature has clearly defined the treatment resistant group for whom VNS, if proved to be beneficial, might be indicated."

Cyberonics said it continues to believe in the "unique value of VNS therapy for patients with TRD and is disappointed that Medicare beneficiaries whose lives have been compromised by TRD do not yet have broad access to this treatment option."

The company noted that during the two public comment periods on the TRD coverage decision, more than 98% of the 2,732 comments received were in favor of coverage of VNS for patients with TRD, though the company itself encouraged many of those people to write in.

"We intend to work with CMS and other interested parties to understand the additional evidence they desire to extend coverage. The body of evidence supporting VNS Therapy in TRD continues to grow, and we plan to share that evidence with CMS, as well as with other payers, as it becomes available," the company said in a statement.

Since the approval of VNS Therapy for TRD, the company said that more than 300 payers have provided coverage for more than 3,000 patients on a case-by-case basis. The use of VNS Therapy for depression is also approved in European Union countries and Canada.

IRF payments to increase by 3.3% for FY08

Inpatient rehabilitation facilities (IRFs) are projected to receive about $6.3 billion in payments from the Medicare program in fiscal year (FY) 2008, under a proposed rule disclosed by the Centers for Medicare & Medicaid Services (CMS).

The proposed rule would update payment rates and modify payment policies for services furnished to Medicare beneficiaries for discharges occurring on or after Oct. 1, 2007 through Sept. 30, 2008. The rule's provisions are estimated to increase Medicare payments to about 1,234 IRFs in FY08 by roughly $150 million.

"Today's proposed rule is designed to ensure accurate payments for intensive rehabilitation care provided to Medicare beneficiaries in IRFs," said Acting CMS Administrator Leslie Norwalk. "This continues Medicare's commitment to support access to inpatient rehabilitation facility services while at the same time improving the appropriateness and consistency of payment for beneficiary care in all post acute settings." These settings include IRFs, skilled nursing facilities, home health care, and long-term care hospitals.

The proposed rule would increase the IRF payment rate by 3.3%, based on the rehabilitation, psychiatric and long-term care hospital (RPL) market basket. The RPL market basket is designed to capture inflation in the costs of goods and services required to provide the specialized services offered by these facilities, similar to the market basket that applies to general acute care hospitals.

The IRF prospective payment system (PPS) was first implemented for cost reporting periods beginning on or after Jan. 1, 2002. The objective of implementing a PPS for IRFs was to increase the accuracy of the payments made to the facilities for the resources they use to furnish care to Medicare beneficiaries, in addition to enhancing the efficient delivery of quality care. IRFs have received an increase in payment rates each federal fiscal year since the IRF PPS was implemented.

The proposed rule would increase the high-cost outlier threshold to $7,522 from $5,534 in FY07, based on an analysis of 2005 data which indicates that this threshold would maintain estimated outlier payments at 3% of total payments under the IRF PPS.

The proposed rule would also modify the wage index methodology as it applies to IRFs in certain rural areas where no hospitals exist to generate wage index data. The proposed rule would provide for CMS to use an average wage index from all contiguous Core Based Statistical Areas as a reasonable proxy for the wage index in the rural area.

Comments on the proposed rule will be accepted until July 2, and a final rule will be issued later this year. Additional information about the IRF proposed rule is posted on the CMS web site at: www.cms.hhs.gov/InpatientRehabFacPPS/.