Agenda. National Coverage Determinations (NCDs) Opening a Review

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1 Stuart Langbein Hogan & Hartson L.L.P. (202) Agenda Coverage Developments Choices for coverage reviews Lessons from coverage determinations Least costly alternative A look into the crystal ball Reimbursement Developments Consider various payment systems (IPPS, OPPS, ASCs, DME) Health Care Reform 2 National Coverage Determinations (NCDs) Opening a Review Potential NCD Topics Quarterly (??) release by the Centers for Medicare & Medicaid Services (CMS) first and only list issued on July 30, topics listed, including a number related to devices (off label use of drug eluting stents, ablation for atrial fibrillation) CMS did not act on any topic for more than one year, and then acted by announcing MedCAC meetings for 3 topics (including ablation of atrial fibrillation) 3

2 What Can Prompt an NCD Review? Food and Drug Administration (FDA) concerns Menaflex (meniscus implant device) Approved by FDA on December 20, 2008 Concerns surfaced about FDA approval a few months later and FDA is reviewing the approval again CMS opened an NCD review on August 27, 2009 Erythropoiesis Stimulating Agents (ESAs) Biological used to treat anemia; on market for 20+ years Study results showed efficacy concerns with oncology uses and FDA changed label Shortly thereafter, CMS opened an NCD review that led to narrower coverage 4 Lessons from Recent NCDs Lack of strong clinical literature, especially involving patients > 65, creates coverage hurdle (e.g., outpatient IV insulin therapy NCD, thermal intradiscal procedures NCD) Literature must be published to be considered by CMS (e.g., carotid artery stent NCD) CMS can consider cost in making a coverage decision, but only in the context of coverage of additional preventive services (Social Security Act 1861(ddd)) (e.g., screening for HIV infection proposed NCD) 5 Coverage with Evidence Development (CED) CMS will use CED if there is not enough evidence to meet reasonable and necessary standard, but a desire to encourage research CMS has issued guidance discussing (i) coverage with study participation (CSP) and (ii) coverage with appropriateness determination Artificial hearts NCD is an example of CSP CMS determined evidence not enough to show service is reasonable and necessary Coverage authorized if patient receives service as part of an approved study Must submit information to CMS to have study approved 6

3 Local Coverage Determinations (LCDs) As CMS has consolidated Medicare contractors to Medicare Administrative Contractors (MACs), LCDs had to be reconciled Originally, CMS indicated that MACs should use least restrictive policy to reconcile conflicting LCDs CMS later backed off the policy and MACs have been reconciling conflicting LCDs using the most clinically appropriate policy Reconciliation process continues, so it is important to monitor draft LCDs, as even longstanding policies may change 7 Least Costly Alternative (LCA) CMS allows contractors to pay for a product at the rate for the least costly medically appropriate alternative, citing the coverage statute as the authority Application of this policy to a drug was challenged in Federal court and was found contrary to the statute The court found that the coverage statute cannot trump the payment statute setting the rate for the product Case has been appealed to the D.C. Circuit and, if upheld, could eliminate use of LCA by Medicare contractors (unless legislation is passed) 8 Reimbursement Update 9

4 Inpatient Prospective Payment System New technology add on is achievable, but CMS applies the criteria rigorously LipiScan Coronary Imaging System did not satisfy substantial clinical improvement criterion Spiration IBV valve approved for add on Humanitarian Device Exemption device that provides an alternative and less invasive treatment Physician society support helped CMS backed off proposed payment reduction to address coding changes with new Medicare Severity Diagnosis Related Groups, but that could occur in the future CMS admits charge compression occurs, but seeks to minimize it through cost report changes, meaning no payment changes until fiscal year 2013 at the earliest 10 Outpatient Prospective Payment System Increased packaging and bundling echocardiography services, nuclear medicine services, composite ambulatory payment classifications (APCs) Device pass through status is hard to obtain because device must be new and be a substantial clinical improvement Implantable biologicals approved as devices and paid as pass through drugs will be treated as devices as pass through ends (payment packaged into procedure) 11 Ambulatory Surgical Centers (ASCs) With ASC payment modeled on hospital outpatient system, trends in that system also apply here Because payment rates are about one third less than the hospital outpatient rates, ASCs can be a difficult setting for high cost device procedures One difference from hospital outpatient system is added payment for new technology intraocular lenses (NTIOLs) and there have been additions to existing NTIOL class but no new classes created (substantial clinical improvement criterion is an obstacle) 12

5 Durable Medical Equipment CMS began implementation of competitive bidding in July 2008 Subsequent legislation required the agency to halt the program and require a Round 1 rebid in 2009 CMS projects bidding will close in December of 2009 and Round 1 will commence January 1, 2011 Real questions as to whether this program will get off the ground Even if it does, a fair number of products are not subject to the program for a number of years 13 Health Care Reform Medicare as a pay for Value based purchasing Hospital readmissions Productivity adjustments in most payment systems Increased resources to address fraud and abuse Device company excise tax Congress wants $4 billion from device companies annually based on device sales; manufacturers will face reporting requirements to the government Opportunities for devices used in preventive services, as various proposals would expand coverage 14 Questions