Medicare’s Notice of Proposed Rulemaking for changes to the Hospital Inpatient Prospective Payment System for the year beginning October 1, 2010 (fiscal 2011) will be published in the Federal Register May 4, but was made available for inspection on the CMS website April 19. Masochists who can’t wait to digest every detail of the 1,296-page proposal can download it here (PDF). The political fur will fly once stakeholders dig into the mind-numbing details of CMS’s assumptions and calculations and analyze the expected direct financial impact of various payment adjustments, during the public comment period (which ends June 18). In the meantime, I can offer a few highly selected observations.
First, the NPRM does not reflect any changes consequent to late March passage of the Patient Protection and Affordable Care Act (the healthcare reform act). There was simply no time to incorporate provisions of the act into this publication. CMS will publish its proposal for those aspects of healthcare reform that affect near-term acute hospital payment as soon as possible, and will likely incorporate those changes, which will certainly be minor, into the FY 2011 Final Rule. No reform-induced Armageddon for inpatient hospital in 2011.
The NPRM proposes a reduction of 0.1 percent, or $142 million, in Medicare’s total operating cost payments to acute hospitals for fiscal 2011. This minimal adjustment is the product of a number of factors, the most important of which are:
- An increase of 2.4 percent to account for cost inflation;
- A decrease of 2.9 percent to recoup a portion of excess payments caused by implementation of the new MS-DRG system in 2008.
Therein lies a story. The new MS-DRG system resulted in coding changes that did not reflect increases in patient severity of illness and a budget-neutral transition was required by law. CMS has postponed the bulk of the required adjustment for two years, because it recognized the need to cushion what might turn out to be a truly arduous financial impact on hospitals and because it needed to refine and test the methodology it used to calculate the so-called "documentation and coding" adjustment, but it faces a 2012 deadline. The proposed fiscal 2011 adjustment will be followed by a similar amount in 2012. With all of the other moving parts of the inpatient hospital payment system, there is no way to be certain what the total picture will look like for 2012, but that year’s payments start in a -2.9 percent hole.
The story is somewhat reminiscent of the ongoing drama over the legislatively mandated Sustainable Growth Rate limit on Medicare physician payments — the limit that, due to postponements over multiple years, has created a looming 21.3 percent fee schedule reduction (a reduction that has been postponed by Congress four times since January 1, most recently until June 1, to allow necessary correction of the statute). Congressional micromanagement of Medicare payment rates too often creates these untenable or unwelcome requirements that are divorced from any economic reality. Let us hope the members can keep a decent distance from the recommendations of the healthcare reform act’s Independent Payment Advisory Board once it becomes active in 2014.
The hospital IPPS NPRM always provides a good partial picture of the state of new medical technologies in its discussion of applications for Medicare’s Inpatient New Technology add-on payments. This year, as in recent years, the picture is pretty bleak. Qualification for add-on payment status is based upon three criteria:
- The technology must really be new;
- It must meet a new cost threshold to demonstrate that standard DRG payment would be inadequate;
- It must provide substantial clinical benefit relative to existing technologies.
For 2010, only two technologies met these criteria: Spiration’s IBV valve, a one way valve system intended to prevent air leaks subsequent to pulmonary surgery; and CardioWest’s Temporary Total Artificial Heart. Both of those technologies had come to market through the Humanitarian Device Exemption route and barely met the newness criterion. Because HDE status is limited to devices filling an otherwise unmet clinical need, and because HDE approval requires potential rather than demonstrated clinical effectiveness, CMS granted add-on payment status with the caveat that it would be interested in later review of accumulating evidence of clinical benefit. The current NPRM requests public comment on that question, with the implication that add-on status could be withdrawn if the evidence of benefit has not begun to show.
There are three new applicants for add-on payment status for 2011 discussed in the NPRM. The first is Monteris Medical‘s AutoLITT minimally invasive MRI-guided catheter-tipped laser for the ablation of brain tumors using interstitial thermal energy. That certainly sounds innovative, no?.
Well, maybe not, because the AutoLITT came to market through the FDA’s 510(k) route, by demonstrating that it is "substantially equivalent" to a device already on the market. How, CMS asks, can substantial equivalence for market introduction become substantial clinical superiority for reimbursement purposes? Not easily, the answer is, although it might be accomplished with a solid body of clinical evidence of improved outcomes.
But there’s a catch: the great advantage of the 510(k) route is that you don’t need a solid body of evidence of clinical outcomes to gain market approval; indeed, device companies covet access to the 510(k) path to avoid having to perform the lengthy and expensive clinical trials necessary to make the demonstration of improved outcomes. So the 510(k)-cleared device is troubled two ways in its effort to secure add-on payment. First, there is the need to argue that the device is really different from the device to which it is substantially equivalent. Second, there is the need to display clinical evidence that you used the 510(k) route to avoid collecting. Either of these requirements could make a reasonable person’s head hurt, and they have bedeviled applicants for the inpatient new technology add-on since the mechanism was first introduced in 2001.
So CMS will review public comments on AutoLITT’s add-on application and render a decision in the Final Rule, which will come out in August. In the absence of clinical data from well-designed and properly controlled clinical trials, I wouldn’t bet on the chances of a positive outcome.
Massachusetts’ own InfraReDx is the sponsor of the remaining two new technology add-on applications for 2011. One is for the company’s LipiScan Coronary Imaging System, which uses intravascular near infrared spectroscopy to determine the composition of coronary plaques. InfraReDx applied for add-on status for LipiScan last year, and was rejected for what CMS considered failure to provide evidence of substantial clinical benefit because there was no demonstrated effect of the technology on patient clinical management. In other words, while LipiScan might provide better plaque characterization than existing technologies, there was no evidence of benefit resulting from therapeutic decisions guided by the technology. And by the way, LipiScan, like AutoLITT, came to market via the 510(k) route.
Can we sense a theme developing? Commercial introduction via 510(k), no FDA-mandated, well-controlled clinical trial, lack of evidence of substantial clinical benefit, all resulting in questionable eligibility for add-on payment status. Might it be that the 510(k) route, if it isn’t supplemented by a robust program for collection of clinical data for purposes of reimbursement support, is something of a trap? Well, yes, and there are increasing numbers of 510(k)-cleared devices that are having trouble meeting insurers’ coverage standards because the clinical evidence is too thin or totally non-existent.
Back to LipiScan. This year, InfraReDx repeated its arguments of last year, marshaled testimony at CMS’ Town Meeting for comments on New Tech Add-on applications and pointed to the serious clinical need documented in the 700-patient Prospect trial results, reported in 2008. CMS doesn’t seem particularly impressed. For one thing, it notes that the commenters at the Town Meeting provided virtually identical statements — an unspoken indication that the agency believes those commenters were parroting arguments provided by InfraReDx rather than expressing their independent professional opinions. More importantly, CMS doesn’t seem to accept that the Prospect trial adds anything new to the case. It is, the agency points out, a cohort study, not a randomized prospective trial; its conclusions, which actually speak directly to the utility of intravascular ultrasound (IVUS) rather than to LipiScan itself, are suggestive, but insufficient to establish clinical utility. Furthermore, the study was presented in 2009 at the Transcatheter Cardiovascular Therapeutics Conference, but has not yet been published in a peer-reviewed journal.
InfraReDx’ second application is for the LipiScan with IVUS, a new generation product that provides capability for two distinct imaging modalities via a single catheter. The claimed substantial benefit here is the single catheter, as the two modalities are clearly available separately. CMS has asked for comment on whether this integration of two available technologies really constitutes something new and whether it constitutes something that brings substantial benefit. Otherwise, LipiScan plus IVUS faces all of the same issues as LipiScan itself and relies on precisely the same arguments as LipiScan, including use of Prospect as virtually the only source of clinical data support. I wish I could be optimistic about the final decision to be rendered.
These cases do document something that is of real long-term importance: The inadequacy of CMS’ mechanisms for recognizing new technology costs and providing payment to support the introduction of innovative medical technologies. The FDA and the National Institutes of Health recently announced a cooperative venture with the goal of facilitating commercial introduction of new medical technologies; they need to bring CMS into the fold and integrate meaningful new technology reimbursement reform if that venture is to succeed. And the device industry should be focusing on this subject. It is far more important than the 2.3 percent excise tax that has so many in the industry so over-wrought and over-reacting. But that is a subject for another day.
Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.