Transcript E24 Overview Presentation

Edward Black, President
Reimbursement Strategies, LLC
Saint Paul, MN, USA
Today’s Presentation
 Part I

US Healthcare in Transition: Evolution from Fee
for Service to Accountable Care Organizations
 Part II

Reimbursement Fundamentals



Coding
Coverage
Payment
 Part III
 Strategic Planning for Reimbursement
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Payer Relations
Health Economics
Edward Black, Founder
• 25+ years in the Blue Cross Blue Shield Health Plan System
• Advisor to the University of Minnesota Office for Technology Commercialization
• Member of LifeScience Alley, BioBusiness Alliance, Medical Industry Leadership
Institute, BioBusiness Alliance, Association of Strategic Alliance Professionals
• Clients in US, Canada, Denmark, Sweden, Norway, Iceland
Business Associates
• Former Blue Cross and Humana Medical Directors for Tech Evaluations and Payer
Relations
• Certified Professional Coders for HCPCS, CPT, and ICD
• Published Health Economists and Biostatisticians
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The Evolution from Fee for Service to
Accountable Care Organizations (ACOs)
Tradition of Fee-for-Service
 Hospitals get paid a bundled (predetermined) payment for

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
inpatient and outpatient care
Most physicians are in private group practices
Physicians get paid for each discrete service they provide
Costs are driven more by increasing utilization than by
increasing cost per service
The cost of care can vary greatly for privately insured
patients across the country depending on physician
practice style and access to healthcare resources
US healthcare is largely supply-side driven
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Per Capita Costs - 2008
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PwC 5 Pillars of MedTech Innovation*
#4-Demanding and Price
Insensitive Patients
• US Rank #1 – US has highest costs per bed for hospital care
• Other countries have more physicians per capita
#5-Supportive
Investment Community
• US Rank #1 – First in venture capital investment
• Early stage entrepreneurial investment, though not nearly as strong
*A Medical Technology Innovation Scorecare: PriceWaterhouse Coopers 2011
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Hard Realities
 50 million Americans do not have health insurance
 Costs continue to rise about 6.5% per year which is
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unsustainable
The Medicare Trust Fund will be insolvent in 13 years
There aren’t enough primary care physicians to
manage an aging population under the current system
Quality of care is ….debatable
“1/3rd of healthcare expenditures – an estimated $750
billion – don’t improve health”*
* Institute of Medicine of the National Academies, Sept. 12, 2012
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The Affordable Care Act of 2010
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Accountable Care Organizations (ACOs)
ACOs are legal structures between hospitals, physicians,
and other providers that allow them to contract with the
government and private payers for risk-based payments
 Designed to compel hospitals and physicians to work better
together
 Over 240 ACOs have already been formed
 This has lead to more hospitals buying out physician practices
making them employees – a radical shift for many physicians
 Insurers in several states have partnered with local hospital &
physicians to launch ACOs.
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US Physicians Are Worried
 ……that the evolution to bundled payment and other
payment reforms will erode their earning capacity and
diminish their independence
 90% said that their greatest concern with episode-based
care is receiving "inadequate payment" and being
penalized for factors that are out of their control
 The vast majority of physicians (80%) believe that teambased care is the wave of the future, and much of that
being in a hospital-employment model
 57% said that the practice of medicine is in jeopardy
Deloitte Survey of US Physicians, May 24, 2013
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The Shift in Payment Systems
 “Currently, US healthcare is in a state of semi-controlled
chaos where institutions are trying to anticipate changes in
care delivery”*
 Currently, Mayo Clinic is paid almost
100% on a fee-for-service basis;
expectation is that within 5 years there
will be a dramatic shift to capitation wherein 70% of Mayo Clinic revenues
will be based on capitated payments
 We’re not sure what Will and Charley
would have thought of that
*Dr. John Sperling, Mayo Orthopedist, Sept. 7, 2012
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The Medtronic View
“Whereas in the past, physicians alone were the ones making
purchasing decisions, increasingly other stakeholders are
influencing or making those decisions. Thus medical
technology innovation must evolve to meet the needs of a
broader set of stakeholders proven for both medical as well as
compelling economic evidence. We must strive not only to
improve patients' lives but also
ensure that the overall healthcare
ecosystem remains viable.”
Omar Ishrak, CEO
Medical Device and Diagnostic Industry magazine,
May 21, 2013
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Reimbursement Fundamentals:
Coding, Coverage and Payment
Reimbursement Fundamentals
 Coding – Is there a HCPCS (Healthcare Common
Procedure Coding System) code that describes your
technology or the manner in which it will be used?
 Payment – Will physicians and hospitals be
paid enough to encourage product adoption
without being too expensive thereby discouraging
government and private insurance coverage?
 Coverage – Do Medicare and most private insurers
cover the procedures your technology permits and if
so, under what clinical circumstances?
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HCPCS – Healthcare Common
Procedure Code System
 Reimbursement begins with Coding
 Hospitals, Physicians, DME and Supplies all use different
codes to describe their products or services
 HCPCS
 Level I: CPT™ (Current Procedural Terminology) codes are controlled
by American Medical Association and describe physician services
 Level II: HCPCS codes to describe DME, prosthetics, orthotics, supplies
and injectable drugs (controlled by CMS)
 ICD-9 CM (International Classification of Diseases) are
controlled by CMS
 Describe disease conditions
 Describe procedures for inpatient hospital billing
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CPT™ (Current Procedural Terminology)
 Every physician service is described by a CPT code either by a unique
code or by a code representing a common group of services
 The AMA controls issuance of CPT codes
 A panel of 23 people (mostly physicians) determines what
services or procedures get unique new codes
 The process is supported by medical societies
representing specialty groups of orthopedists,
cardiologists, family practice physicians, urologists, etc.
 The process is only semi-transparent, largely subjective and physicians
and payers take it very seriously
 CPT code examples:
 #27130 – Arthroplasty, femoral prosthetic replacement (“total hip”)
 #27280 – Arthrodesis, sacroiliac joint (including obtaining graft)
 #73721 – Magnetic Resonance Imaging (MRI) any joint, lower extremity
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Hospital Payment Methodology
 DRGs (Diagnosis Related Groups) are the predominant
method for paying for inpatient hospital services
 There are about 900 DRGs to which any medical or surgical
admission will be assigned based on patient diagnoses, procedures
and the predetermined resources it should require to care for the
average patient
 Each DRG has a “weight” that is multiplied by a conversion factor to
determine payment
 New Tech Pass Through Payment allows the cost of new tech to be
paid at/near retail cost for a period of two years if it meets a cost
threshold and achieves “substantial clinical improvement”
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Physician Payment Methodology
 RBRVS (Resource Based Relative Value System)
 Every CPT code is assigned a Relative Value Unit which is reflective of the physicians’
 Work Expense (the skill, time, and decision making required for the procedure)
 Practice Expense (overhead, operating and equipment costs)
 Malpractice Expense
 The Relative Value Unit (RVU) is then multiplied by a Conversion Factor
RVU
Conv Factor
Allowance
CPT #27130:
42.7 x $34.0230*
= $1,452.78
CPT #27280:
30.92 x $34.0230*
= $1,051.99
CPT #73721:
8.33 x $34.0230*
= $ 283
 RVUs are consistent among government and private payers
 Conversion Factors, consequently allowances, vary by payer
* The Medicare Conversion Factor for 2013
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You must think about
how to market to payers to
get your technology covered!
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Payer Attitude of New Technology
"We can't be seduced by all of the wonderful technology toys
and other stuff, because every good idea ain't good. At the end
of the day, you have to ask yourself,
 Does the technology work?
 Will it improve quality?
 Help manage costs?
 Be good for the consumer?
 Meet a real need?”
Reed Tuckson, M.D., executive VP and chief of medical affairs, UnitedHealth Group
LifeScience Alley Annual Meeting and Expo, December 7, 2010
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Medicare Jurisdictions-Parts A/B
There are 15 Part A/B Medicare Jurisdictions where the program is administered by 11
privately owned companies. Coverage policy varies from one jurisdiction to another.
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Health Insurance
 Medicare is the largest single payer
 Private insurers often, but not always, follow Medicare
coverage decisions
 Medicare, Medicaid, TRICARE and VA (government payers)
all pay less than private insurers for the same services
 There are about 1,100 private health plans
 Most private payers make their own coverage decisions
 They also have varying payment levels, but they pay more than
government payers
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Technology Evaluation Criteria
Blue Cross Blue Shield Association TEC
1.
2.
3.
4.
5.
The technology must have final approval from the
appropriate regulatory body
The scientific evidence must permit conclusions concerning the effect
of the technology on health outcomes
The technology must improve the net health outcome
The technology must be as beneficial as any established alternatives
The improvement must be attainable outside the investigative setting
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FDA vs. CMS Criteria
Homogenous
Groups
Heterogeneous Groups
Controlled
Environment
Real World
Practice
Isolated Treatment Effect
Population
Effect
“Safe and Effective”
“Reasonable and Necessary”
* FDA – Food and Drug Administration
** CMS – Centers for Medicare and Medicaid Services
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Strategic Planning for Reimbursement
New Technology Coverage Curve
Experimental
Payer
Relations
Accepted
Level of Evidence Available
More
Investigational
100 %
% of People
agreeing new
tech should be
covered
0%
Less
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Tools to Accelerate Coverage
 Study-Based Tools
 Clinical Trial Data Targeted Toward Payer Interests
 Payers want to see cost data, as well as clinical results
 Studies should be representative of the populations who will benefit in real life clinical
settings, not just individuals in controlled environments
 Duration of benefit is very important – typically payers want to see at least 24 months
of treatment success, 36 months is much better
 Health Economic Analyses
 Cost-effectiveness analysis
 Cost-utility analysis
 Cost-minimization analysis
 Cost-consequence analysis
 Budget-impact analysis
 Net Health Benefit (NHB)
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Advocacy Tools
 Product (also referred to as a “Clinical” or “Payer”)
Dossier to describe how your technology works, the
patients who will benefit from it, its intended use,
summary of clinical support, FDA clearance – why payers
should cover it
 Payer Relations Campaign – a strategy to use dossiers,
published studies and relationship experts to convince
payers to cover your technology targeting markets in
concert with your product Sales/Marketing Plan. It will
stratify the payers of choice in the regions most likely to be
successful.
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Product Technology Life Cycle
• Product design
decisions here can
impact the product’s
prospects for coverage
and payment for it’s
useful life
• Coding, Coverage,
and Payment
• Work on the
fundamentals
• Build the health
economics case
• Payer Relations should
coincide with
Marketing / Sales
efforts so products are
covered when sold
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Post Market / Next Generation
• Reimburs’t Strategy
Begins Here
• POST
COMMERCIALIZATION
• COMMERCIALIZATION
FDA Submission / Product Launch
Product Design / Clinical Trial
• PRE COMMERCIALIZATION
• Hospital / Physician
/ User Support
• Provider support for
continuous coverage
and adequate payment
may be required as
new, competing
products are
introduced
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Reimbursement Pathways
 Your pathway to getting paid may be easier (or harder)
than you think
 Novel Devices – longer process for reimbursement, with
greater risk/reward opportunities
 Predicate-based Devices – reasonable process for
reimbursement with moderate risk/rewards
 Conventional Devices – a reimbursement pathway for
your device may already exist; this can either very good
or very bad
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Thank You
Edward Black
President
10287 Lancaster Bay
Saint Paul, MN 55129-8527 USA
651.337.8171 (office) / 651.253.1143 (cell)
[email protected]
www.Reimbursement-Strategies.com
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