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Top Ten Medicare Medical Device Trends

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Top Ten Medicare Medical Device Trends . Med Tech Policy and Regulatory Outlook

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EBG ADVISORS, INC. Top Ten Medicare/Medical Device Trends Medtech Policy and Regulatory Outlook MX Magazine Webcast September 25, 2008 Ted Mannen Epstein Becker & Green, P.C. EBG Advisors, Inc. 1227 25TH STREET, N.W., SUITE 700, WASHINGTON, DC 20037 PHONE: 202.861.1380 / FAX: 202.861.3580 ebgadvisors.com No. 10: Outpatient PPS Bundles Up • Context -- Increasing numbers of devicerelated services are performed in hospital outpatient departments. • What’s New -- CMS uses broad legal discretion to make larger care bundles the “unit” of payment, forcing “averaging” across more services. • Take Away: Neighborhood Watch -- Know your clinical neighborhood; know the relationship of your product to a bundle’s other service inputs. No. 9: Inpatient PPS Goes Granular • Context – System designed to require hospitals to manage within fixed DRG payments associated with patient diagnoses. • What’s New -- System using 745 MS-DRGs to link payments to narrower bundles, which, in turn, are tied to case severity . . . – Major Complications or Comorbidities (MCC) – Complications or Comorbidities (CC) – Without MCC or CC • Take Away: Golden Rule v. 2.0 -- Do good unto hospitals, and deliver them from hospital-acquired conditions. No. 8: “Quality” Gains Operational Traction • Context -- In an analog world, “quality” was an aspirational slogan that powered advocacy campaigns. • What’s New: In today’s digital world, “quality” is a data-driven, operational metric that rewards/ punishes customers for how they provide care. – E.g., in the DRG system, hospitals will receive a full payment update only if they report 42 individual measures of quality. • Take Away: Hitch a Ride – Tie your product to a quality measure to help customers avoid penalties and seize rewards. No. 7: Local Contractors Stage MAC Attack • Context -- Historically, most local contractors were chosen on a non-competitive basis, with compensation tied to costs. • What’s New -- Smaller number of Medicare Administrative Contractors (MACs), with IT and financial incentives to use local coverage policies to control technological diffusion. • Take Away: National v. Local a Closer Call – Can no longer rely on a highly pluralistic local coverage system as a safety valve for innovation. No. 6: Medicare Advantage Changes Channels • Context – In Parts A and B, Medicare’s payee is the provider. Technology enters the system through traditional coverage, coding, and payment pathways. • What’s New – In the growing Part C program, the payee is the MA plan. Because they are further “upstream” than providers, plans have a broader, population-health perspective. • Take Away: New Channel Decisionmakers – Inputs into MA plans come from “downstream” selling channels. Coverage, coding, and payment have less significance. No. 5: CBO Deploys Delta Force • Context – Historically, many observers attributed much of Medicare’s spending growth to the aging of the population. • What’s New – CBO says the largest spending delta results from excess cost growth (see next slide), much of it attributable to variations in practice patterns. • Take Away: Prime v. Sub-Prime Care – Budget numbers compel attention to policies that identify appropriate/inappropriate practice patterns and provide methods for punishing/rewarding. EBG ADVISORS, INC. No. 4: Med Tech Supreme Court Reconvenes • Context – In the late ’70s, Congress created a (short-lived) agency to smooth out practice variations by identifying the “right” technological answer. • What’s New – Concept resurrected under rubric of a comparative effectiveness institute and/or a national benefits board. • Take Away: Check the Fine Print – This could be the less-publicized side of a health reform bill that emphasizes patient access. No. 3: CED Enables EvidenceProduction Platform • Context -- Traditionally, an indelible line separated “mainstream” and “investigational” services, with Medicare covering the former but not the latter. • What’s New -- “Coverage with Evidence Development” is a middle ground where Medicare reimburses traditionally investigational services while evidence is developed to determine coverage. • Take Away: How Full is Your Glass? – Strength of your existing evidence may influence whether you see the CED glass as half full or half empty. No. 2: CMS & FDA Graze in the Same Postmarket Data Commons • Context – Traditionally, FDA focused on a device’s premarket data, while Medicare conducted literature reviews later in the diffusion cycle. The processes were largely sequential. • What’s New – Agencies look at same types of evidence during overlapping time frames -– CMS supervises an FDA-like data-production platform (CED) – FDA tries to detect postmarket events by mining insurers’ claims data • Take Away: No More Silos – Companies need a holistic product plan that takes into account rapid, coordinated FDA-CMS data surveillance. No. 1: Code Set Takes System to Next Level • Context -- Evolving technology regularly collides with static reimbursement systems. To minimize the friction, systems must be lubricated through updating. • What’s New -- Proposal to create a set of ICD-10 codes that recognizes more disease states, procedures, and technologies. This robust new code set would serve as a key enabler of many of the 9 trends previously noted. • Take Away: Make the Debate About Change -- Even if the new code set is deferred, the debate itself can build public understanding of technology’s dynamism -- and the industry’s preparedness for the 9 trends above.

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