Pharmacy & Therapeutics - June 2008 - (Page 355)

Evaluating and Standardizing Medical Devices Sheri Dodd added: The motivation is pretty small. If there is no additional payment, [hospitals] aren’t motivated to code for it. Hospitals have a difficult time tracking the use of one device versus another or the use of a device versus no device in a systematic way. For a P&T committee to review evidence-based medicine to analyze patient outcomes and associate those outcomes with specific devices, those data are going to be really poor. Reimbursement Practices May Create A Cost Barrier to New Technology Adoption The rate of payment per case established by a Medicare DRG is intended to cover all the services provided by the hospital, including reimbursement for the cost of devices used in surgery.4 “Medical devices may add cost to a procedure, but there is rarely an incremental payment for a device under a DRG,” noted Christine Maroulis. Although prices for devices have been increasing, Medicare’s per-case payments for some surgical admissions have been decreasing.4 Manufacturers’ prices for artificial knees and hips have risen by an average of 8% per year.4 However, within a five-year period, Medicare’s per-case payments to hospitals for hip implant procedures fell by more than 9%.4 In 2006, a proposal was also made to reduce reimbursements for hip and knee replacements by 10%.4 The fixed-payment rate provided by DRG or APC, therefore, places pressure on hospitals to make economical choices about the technologies and services they provide.14 Because the CMS reduces all hospital charges to costs by the same ratio, hospitals receive a relative underpayment for more costly procedures and a relative overpayment for those that involve lower-cost supplies.14 Hospitals receive a fixed rate of payment and thus have an incentive to hold down medical device costs for procedures and to limit length of stay per admission.14 Hospitals are also underpaid for procedures when they do not fully account for medical device charges in their bills or when they do not correctly code and charge for the actual number of units used in a medical procedure. Fixed-rate, prospective payment systems, therefore, discourage the use of new, higher-cost technologies that might increase quality of care or improve patient outcomes.14 Hospitals have little financial incentive to make use of higher-cost technologies that are more cost effective or provide better outcomes beyond patient discharge.14 Sheri Dodd explained, “Sometimes the benefit of a device is in the patient’s getting out of hospital early, therefore enabling the patient to go back to work sooner. Obviously, this is of great value to the patient and to the employer but not necessarily to the hospital.” Christine Maroulis added, “Everyone will agree that the value to the patient in this situation is tremendous, but neither the hospital nor the payer is terribly motivated to pay for that, because it’s not really in either of their direct financial interests.” To ensure the adoption of new technologies and pro cedures, it is therefore important that appropriate costs be carefully integrated into established prospective payment systems.14 Medicare has considerable discretion in setting initial payment rates for new technologies and procedures.14 How- ever, if the CMS assigns a new device to a particular DRG, APC, or physician fee schedule with a payment rate that is too low or that does not cover the cost of a new technology, health care providers and suppliers lose money.14 Economic losses discourage the use of new technologies and lessen the incentive for manufacturers to innovate.14 Cochlear implant surgery was assigned a DRG with too low a rate of payment because none of the other procedures in the same DRG category involved an implanted device.14 This might have severely curtailed the dissemination of this new medical technology.14 As with technologies outside the field of health care, there is a tension between affordability and value and driving innovation to fulfill the market’s unmet needs. Reimbursement coding, coverage, and payment processes are complicated and time-consuming and present difficult challenges.14 As health care costs rise, reimbursement processes will continue to evolve and new challenges will become apparent.14 Continued medical innovation will occur only if proper coding, timely coverage, and fair payment are inherent in reimbursement policies.14 The Medical Payment Advisory Commission (MedPac), which was established to advise Congress on matters affecting the Medicare program, has addressed these reimbursement dilemmas.4 This committee has studied pricing for expensive items such as stents, implants, and pacemakers.4 Members of MedPac recognize that it is not feasible for Medicare (or private health plans) to designate the use of any particular device, because this would be equivalent to practicing medicine illegally.4 MedPac has instead recommended that hospitals partner with their medical staffs to standardize the use of medical devices and to secure large discounts from suppliers to control costs.4 Physician Preferences May Discourage Cost Containment for Medical Devices Because the “per-discharge” costs of medical devices and the costs of other physician preference items are increasing, hospitals are directing greater attention to product selection and standardization.4 Christine Maroulis observed: Clearly, escalating costs and decreasing reimbursements are driving this behavior. We have also seen a proliferation of new devices coming into the hospital. For example, surgeons have different opinions on which devices they like to use for their patients, and for years, the hospitals conceded to the surgeons’ preferences. In the area of women’s pelvic health, a hospital may have five different suburethral slings on the shelf. The hospitals are starting to realize that this might not make any financial sense at all. Gaining control of the costs associated with a hospital’s supply chain presents special challenges, because the most expensive supplies (representing up to 61% of total costs) are items for which physicians have strong preferences.4 These items include hip and knee implants, cardiac stents, and the mechanical devices used in spine surgery.4 Although hospitals bear the cost of these devices, physicians or surgeons determine which device should be used for a particular procedure or patient.4 The doctors’ decisions are often based on factors unrelated to cost, such as the clinical evaluation of a particular patient, personal experience with a Vol. 33 No. 6 • June 2008 • P&T® 355

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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