Pharmacy & Therapeutics - June 2008 - (Page 354)

Evaluating and Standardizing Medical Devices presents a reimbursement hurdle for practitioners and manufacturers, because most medical devices have life spans of only 12 to 18 months.1 Efforts are currently under way at the CMS to accelerate this process; however, the current situation impedes medical device innovation, involves high compliance costs, and delays patient access to technologies that have already been cleared by the FDA.1 Reimbursement for new technologies is also dependent on the assignment of proper codes. However, assignment of Category 1 Current Procedural Terminology (CPT) codes by the American Medical Association requires the existence of published peer-reviewed clinical studies as well as widespread use of the new technology or procedure.1 This standard increases the time it takes to establish a new code and raises reimbursement uncertainties for manufacturers and health practitioners for devices that clear the FDA under the 510k process without efficacy data.1 In addition, to acquire a Healthcare Common Procedure Coding System (HCPCS) code, coding applications for medical devices may be made only after the accumulation of three months of market experience.1 A new device, therefore, has to be marketed and sold without the necessary code for billing purposes and, consequently, with questionable prospects for coverage and payment.1 Health care practitioners are discouraged from using new technology if it has not been assigned a code and an appropriate reimbursement amount.1 New codes also motivate insurers to consider whether the new procedure should be covered—and if it is covered, to spell out whether the coverage is limited in terms of patient indications, sites of care, or qualified providers.1 These are difficult decisions, even when a rich body of evidence about the impact of new technology on health outcomes is available.1 A relatively new option available since 2006 is the assignment of Category III CPT codes to identify and track new technologies to accumulate required data and to provide evidence of widespread use.1 Unfortunately, however, some payers view Category III CPT codes as indicating an investigational or experimental procedure for which payment is usually denied, even though the CPT committee has stated that these codes should not be interpreted in this way.1 During 2005, a Category I miscellaneous code was recommended for billing for new medical technologies.1 Some local Medicare contractors chose to cover these procedures despite the lack of a specific code.1 However, some private payers have ruled that both Category III CPT codes and Category I miscellaneous codes indicate “the evidence is insufficient” and that the device is not covered because it is perceived as experimental or investigational.1 Because Category III codes tend to flag new technologies, possibly leading insurers to deny coverage and payment, practitioners and manufacturers need to carefully consider the possible reimbursement consequences of a Category III code assignment.1 Hospitals may also be eligible for special “pass-through” payments for using a new technology in hospital outpatient settings that is identified by another type of code: an HCPCS Level 2 temporary national code issued by the CMS, known as a C code.1 The C code serves the same purpose as a Category III CPT code, in that it identifies new device procedures.1 The CMS has used these temporary HCPCS codes to facilitate complete hospital reporting of their charges for medical devices.1 The majority of new medical devices that come to market each year do not raise billing-code coverage or payment questions.1 Most of these technologies fit within coding and payment categories that have already been established, or they are similar to existing items for which coverage determinations have already been made.1 However, reimbursement plays an extremely important role when new devices—or the procedures associated with their use—do not fall within existing insurance categories, when they are used in new ways or for new indications, or when they attract attention because of their cost.1 In these situations, new codes may be needed to distinguish these devices from previous technology, and the process of securing them can be both lengthy and complex.1 Manufacturers must be aware of the reimbursement environment for the new technologies they develop.1 reimbursement plays an extremely important role when new devices—or the procedures associated with their use—do not fall within existing insurance categories, when they are used in new ways or for new indications, or when they attract attention because of their cost. Generation of Postmarketing Surveillance Data Complicated by Reimbursement Codes Since the early 1980s, Medicare has provided bundled payments to hospitals for inpatient procedures based on more than 500 distinct Diagnosis-Related Groups (DRGs) that classify each discharge.14 A specific fixed rate of payment is set for each DRG.14 The DRG payment system is based on International Classification of Disease, 9th Revision (ICD-9) codes, which are used to identify the surgical procedures performed.14 Device manufacturers need to review existing ICD-9 codes to ensure that they are sufficient to describe procedures involving new technology and, if not, seek new DRG assignments. For hospital outpatient procedures, Medicare requires CPT codes instead of ICD-9 codes.1 Medicare groups these CPT codes into various payment bundles, called ambulator y payment classifications (APCs), for which a specific rate of payment is also set.1 Fixed-rate payments by Medicare under a DRG or an APC bundle to hospitals serve as reimbursement for the technical component of services.14 Bundled DRG or APC payments lack a distinct code that identifies medical devices, making it difficult to conduct the postmarketing surveillance necessary to build a database to support evidence-based decisions about patient outcomes and cost effectiveness. Christine Maroulis commented: When you are talking about a surgery, an ICD-9 code for diagnosis and for payment procedure is noted and tracked with an appropriate MS-DRG [Medicare Severity–DRG]. Hospitals are not universally tracking all relevant ICD-9 procedure codes unless they are tied to a specific payment, so they often miss capturing some of the actual devices they are using because they are not. 354 P&T® • June 2008 • Vol. 33 No. 6

Table of Contents Feed for the Digital Edition of Pharmacy & Therapeutics - June 2008

Editorial Aliskiren Reduces Plasma Renin Activity Medication Errors Prescription: Washington New Drugs/Drug News/ New Medical Devices Drug Forecast Challenges in Evaluating and Standardizing Medical Devices in Health Care Facilities California e-Pedigree Rules Pose Challenges For Pharmacies Pharmaceutical Approval Update American Psychiatric Association At a Glance: Dermatology Trends in Managed Care

Pharmacy & Therapeutics - June 2008

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