The Medical Arms Race: Impact of Medicare Coverage

1
The Medical Arms RaceImpact of Medicare
Coverage Payment Policies

• Barry M. Straube, M.D.
• Centers for Medicare Medicaid Services (CMS)
• Medical Technology Leadership Forum
• October 14, 2007

2
The Healthcare Value Challenge

• We spend more per capita on healthcare than any
  other country in the world
• In spite of those expenditures, US Healthcare
  quality is often inferior to other nations and
  often doesnt meet expected evidence-based
  guidelines
• There are significant variations in quality and
  costs as well as utilization across the nation
  and increasing evidence that there may be an
  inverse relation between quality and cost
• CMS is responsible for the healthcare of a
  growing number of persons
• CMS, in partnership/collaboration with other
  healthcare leaders, must take leadership in
  addressing these issues

3
CMS as a Public Health Agency

• Using CMS influence and financial leverage, in
  partnership with other healthcare stakeholders,
  to transform American healthcare system
• Focusing on not just Medicare Medicaid, but
  also Commercial, uninsured, etc.
• Quality, Value, Efficiency, Cost-effectiveness
• Person-centeredness
• Assisting patients and providers in receiving
  evidence-based, technologically-advanced care
  while reducing avoidable complications
  unnecessary costs

4
Congressional Employer Interests

• Many opportunities for improving the quality of
  healthcare services, outcomes and efficiency
• Increasing reimbursement for healthcare services
  leads to
• No uniform or widespread improvement in quality
• Increased utilization of some services
• Net increase in overall healthcare expenditures
• Congress employers looking to CMS and
  healthcare providers to demonstrate ability to
  improve quality, avoid unnecessary complications
  and costs
• Overall Medicare payment reform linked

5
CMS Quality Roadmap

• VISION The right care for every person every
  time
• Make care
• Safe
• Effective
• Efficient
• Patient-centered
• Timely
• Equitable

6
CMS Quality Roadmap Strategies

• Work through partnerships to achieve specific
  quality goals
• Publish quality and cost measurements and
  information as a basis for supporting more
  effective quality improvement efforts
• Pay in a way that expresses our commitment to
  quality, and that helps providers and patients to
  take steps to improve health and avoid
  unnecessary costs

7
CMS Quality Roadmap Strategies

• Assist practitioners in making care more
  effective and less costly, especially by
  promoting the adoption of HIT
• Bring effective new treatments to patients more
  rapidly through coverage and payment policies and
  help develop better evidence so that doctors and
  patients can use medical technologies and
  treatments more effectively, improve quality and
  avoid unnecessary complications and costs

8
CMS Quality Value Initiatives

• Hospitals
• Nursing Homes
• Home Health Agencies
• Dialysis Facilities
• Physician Offices
• More to come.
• Cross-setting quality efficiency focus (care
  across the continuum) increasingly important,
  patient-centered
• Evidence-based medicine essential
• Should comparative effectiveness and cost
  efficiency be included?
• Medical technology components not directly
  addressed

9
CMS Quality Alliances

• Public-private partnerships seem to be working,
  albeit with an urgency for faster progress
• Broad National Quality Alliances
• Hospital Quality Alliance (HQA)
• Ambulatory Care Quality Alliance (AQA)
• Quality Alliance Steering Committee (QASC)
• Pharmacy, ESRD, Cancer Quality Alliances, etc.,
  with more emerging
• Consensus-driven quality efficiency measures
  identification, prioritization, development,
  endorsement, and implementation
• Where does medical technology fit in this model?

10
Healthcare Transparency Initiative

• Administrations Transparency Initiative
• Making available quality and price/cost
  information
• Allowing consumers, employers, payers to choose
  the best value healthcare
• Presidential Executive Order
• The Secretarys Initiative Four Cornerstones
• Information on quality
• Information on cost/price
• Promote interoperable HIT systems
• Incentives for higher-quality, efficient care

11
Value-Driven Healthcare Initiative

• Community Leaders
• Early stage community collaboration efforts in
  healthcare quality
• Recognized by the Secretary of HHS
• Chartered Value Exchanges (CVEs)
• Local collaboratives focused on quality
  improvement and use of aggregated data with
  public reporting
• Designated by the Secretary HHS
• Learning Networks run by AHRQ
• Medicare data access qualifications by CMS

12
Value-Driven Healthcare Initiative

• Better Quality Information for Medicare
  Beneficiaries BQI Pilots via AQA
• WI, MN, IN, MA, AZ, CA
• Testing of data aggregation and attribution of
  commercial, Medicare, Medicaid quality
  efficiency data
• Pilot site use of quality data for
• Quality improvement
• Consumer employer choice of providers
• Pay-for-Performance and other incentives for
  higher quality and efficiency

13
Medical Technology Health Care Costs

• Health care spending has grown at an annual
  average rate of 9.8
• 2.5 faster than the economy as a whole
• Health care total spending has risen from 75
  billion in 1970 to 2.0 trillion in 2005
• Will reach 4.0 trillion by 2015
• Health care as share of the economy
• 7.2 in 1970
• 16.0 in 2005
• 20 in 2015 (projected)

14
Medical Technology Health Care Costs

• Health care spending per capita
• 356 in 1970
• 6,697 in 2005
• 12,320 in 2015 (projected)
• Begs the question of why health care costs are
  rising so much more rapidly than other goods and
  services
• Is medical technology driving the process?

15
Technology and Spending

• David Cutler (1995) estimated 50
• 81 of economists identify technology as primary
  cost driver (Fuchs 1996)
• Project Hope (March 2001) estimates 25-33 of
  growth is technology
• BCBSA report (Oct 2002) estimates 18 of growth
  is technology

16
Health Technology

• Health technology includes
• Devices, Equipment Supplies
• Drugs
• Biologics
• Surgical medical procedures
• Support systems
• Organizational Managerial systems
• All used in the prevention, screening, diagnosis,
  treatment rehabilitation of disease

17
Health TechnologyMechanisms of Action

• Development of treatments for previously
  untreatable terminal illnesses (DM, HIV/AIDS,
  ESRD)
• Clinical ability to treat previously untreatable
  acute illnesses (CABG, PCTA, etc.)
• Ability to treat diseases within diseases (ESAs
  in ESRD)
• Expansion of treatments to other conditions
• Ongoing improvement in existing treatments
• Clinical progress in treatments to extend scope
  of medicine beyond its perceived boundaries
  (mental illness, substance abuse, etc.)
• Discovery of new illness or subsets of global
  illnesses

18
Impact of New Technology

• Impact on cost Increase v.s. decrease in total
  treatment costs
• What level of use does new technology achieve?
• Does it lead to new populations to be treated?
• Evaluation can be complicated
• Dialysis for ARF/CRF
• Anesthesia

19
Growth of New Technology

• Consumer demand
• Health insurance systems
• Desire by providers to treat patients with latest
  and best treatment
• Business incentives
• Providers
• Manufacturers
• Investors

20
Health Technology Assessment

• Assists policymakers on medical, economic, social
  ethical implications of dissemination and use
  of health technology
• Synthesizes findings from clinical research and
  includes analysis of costs, comparative
  effectiveness cost-effectiveness, and social
  implications of health technology
• Most European countries have established agencies
  for HTA and provision of evidence-based
  information to policymakers

21
Federal Regulation of New Technology

• Regulation by law
• Regulation by coverage decisions
• Regulation by payment formulas/mechanisms
• Benefit category
• Defined reimbursement
• Competitive bidding
• Outcomes-based reimbursement
• Value-based purchasing or P4P
• Non-payment for never events

22
Medicare Payment History

• Prior to 1983
• Cost reimbursement
• Allowed acquisition and use of technologies with
  little consideration of cost in payment
  determination
• 1983
• Prospective payment to hospitals initiated
• Diagnosis related groups (DRGs)
• Fixed price for hospitalization based on primary
  diagnosis
• 1993
• Physician RBRVS system initiated, prospective
  payment for physicians
• Prospective payment for outpatient, SNF, home
  health, etc., in subsequent years
• ESRD has been capitated since inception, plus
  drugs

23
Medicare Coverage Payment for Technology

• Major share of total healthcare spending
• CMS policy influences private and other public
  payer policies
• Basic decisions
• Should any use of the technology be considered?
• Should coverage be limited to specific clinical
  situations?
• If technology is covered, how much should be
  paid?
• Should physicians be paid for use of the
  technology?
• Will outpatient use of the technology be covered?
• Will the cost of purchasing and operating the
  technology be reimbursed?
• Cost-effectiveness not considered

24
Medicare Payment for New Technology

• Part of CMS Quality Roadmap
• A balance between
• Improving outcomes for Medicare beneficiaries
• Ensuring this is done in a fiscally responsible
  manner
• Medicare offers additional payments for
  innovative technologies leading to
• Access to otherwise unaffordable new technologies
• Potential availability in both inpatient
  outpatient settings

25
Steps to Medicare Reimbursement

• Regulatory approval (if applicable)
• Benefit determination
• Coverage
• Coding
• Payment

26
Statutory Basis for Medicare Coverage

• Sec. 1862 (a)(1), Title 18, SSA
• . . .no payment may be made. . .for expenses
  incurred for items or services. . . which,
  except for items and services described in a
  succeeding subparagraph, are not reasonable and
  necessary for the diagnosis or treatment of
  illness or injury or to improve the functioning
  of a malformed body member.

27
Reasonable and Necessary

• Safe and effective (per FDA, if applicable)
• Adequate evidence to conclude that the item or
  service improves health outcomes
• emphasis of outcomes experienced by patients
• generalizable to the Medicare population
• Future attempts to provide greater detail on
  producing adequate evidence

28
National Local Coverage Decisions

• NCDs 10, LCDs 90
• Transparent process
• Transfer of LCD oversight to Coverage Analysis
  Group (CAG), Office of Clinical Standards
  Quality (OCSQ)
• Greater consistency at local level
• Alignment with national process
• More relevant with MAC implementation
• Consolidation of LCDs by MACs
• Technology Assessment
• Transition from MCAC to MedCAC

29
National Decisions

• National Coverage
• National Noncoverage
• National Coverage with restrictions
• Specific populations
• Specific providers/facilities
• Evidence development

30
MEDICARE NATIONAL COVERAGE PROCESS
Reconsideration
Preliminary Discussions
Benefit Category
6 months
30 days
60 days
Final Decision Memorandum and Implementation
Instructions
Internal Technology Assessment
Draft Decision Memorandum Posted
National Coverage Request
Public Comments
External Technology Assessment
Staff Review
Department Appeals Board
Medicare Coverage Advisory Committee
9 months
31
Facility Standards

• Transplant centers
• Lung Volume Reduction Surgery
• Left Ventricular Assist Devices
• Carotid Stents
• Bariatric Surgery

32
CED Background

• In the past, Medicare generally covered items or
  services if they were FDA-approved
• During the 1990s CMS began to make national
  coverage decisions (NCDs) using evidence-based
  reviews
• The available evidence does not always allow us
  to apply the results to the Medicare population
• Available evidence also does not always determine
  long term effectiveness of an item or service

33
Evidence Development at CMS

• Goal is to promote innovation while obtaining
  value in health care
• Prompt coverage serves to speed access to
  promising new technology
• Promote promising, potential high value services
• Studies can improve evidence available to
  patients, clinicians, policymakers
• Hope to better target treatments to
  subpopulations with greatest benefit
• Broadens concept of research beyond RCTs for
  purposes of coverage decisions
• Allows monitoring over long-term

34
CED Reasonable and Necessary
RN 1862(a)(1)(A)
No
RN 1862(a)(1)(E)
Yes
No
Non-Cover
Cover
Yes
Data Needs
Appropriateness Data (CAD)
Clinical Study Participation (CSP)
CED
35
Flexible Coverage ProcessesExamples

• Prophylactic implantable cardioverter
  defibrillator (ICD)
• Data submitted to national registries, at low
  cost for participating hospitals all over the
  country
• Otherwise would have more limited coverage
• Expanded coverage to reach more patients

36
Flexible Coverage ProcessesExamples

• Additional off-label uses of cancer drugs
• No FDA-approved results, and no studies covered
  in medical references
• Previously would not have been nationally covered
• Evidence developed through clinical trials
• FDG-PET scanning
• For dementia and neurodegenerative disorders
• For cancer diagnosis, staging, monitoring
• Evidence developed through clinical trials

37
Coverage with Evidence Development NCDs
38
Uses of CED Registry Data

• Track short-term outcomes postoperative
  complications, in-hospital mortality
• Compare adverse events with published clinical
  trial results or gold standard
• Monitor performance
• Create longitudinal databases
• Post coverage analyses head to head comparisons,
  case control studies, or nested case control
  studies
• Develop clinical criteria and contraindications
  (risk stratification)

39
Coverage with Evidence Development

• CED will not occur often
• CED will always be used to improve access to
  technologies and treatments for Medicare
  beneficiaries
• CED will not interfere with FDAs authority
• CED registries are not for ascertaining product
  safety efficacy
• CED will not interfere with NIH role
• CED studies will not duplicate or substitute for
  NIH sponsored research

40
CMS Clinical Research Policy

• The proposed revisions to the Clinical Trial
  Policy addressed the following categories of
  issues
• General issues
• Appropriate standards of a clinical trial that,
  if met, would ensure that the study is conducted
  pursuant to section 1142 of the Act
• Appropriate processes that ensure that those
  standards are met
• Items and services that are covered in studies
  meeting those standards
• NCD due October 17, 2007
• FDA Amendment Act of 2007 may affect future
  course of CMS CRP

41
FDA/CMS Parallel Review

• FDA Safe Effective
• CMS Medically Necessary Reasonable
• FDA approval has predated CMS coverage
  determinations
• HHS desire to make available new technologies and
  treatment to doctors and patients more rapidly
• Parallel Review
• Current streamlining efforts
• Ability to come in to CMS at any time in the
  process and discuss coverage and payment issues
• Post-marketing surveillance and CED overlap?

42
MMA Section 1013

• Authorizes AHRQ to conduct and support research
  with a focus on clinical outcomes, comparative
  clinical effectiveness, and appropriateness of
  pharmaceuticals, devices, and health care
  services
• Research informed by needs of Medicare, Medicaid
  and State Childrens Health Insurance (SCHIP)
  programs

43
CMS Partnership with AHRQ

• Jointly selected 10 conditions affecting Medicare
  beneficiaries, with AHRQ to analyze effectiveness
  of interventions
• Ischemic heart disease
• Cancer
• Chronic obstructive pulmonary disease
• Stroke, including control of hypertension
• Arthritis and non-traumatic joint disorders
• Diabetes mellitus
• Dementia, including Alzheimers disease
• Pneumonia
• Peptic ulcer disease/dyspepsia
• Depression and other mood disorders

44
Why We Need Comparative Effectiveness Reviews
(CERs)

• Sound foundation of evidence about which
  treatments work best is essential to help doctors
  and patients achieve the best quality care
• We need to have such evidence available in useful
  and understandable formats
• AHRQs issuance of CERs are an important
  milestone to achieving these goals
• Beneficiaries in Medicare Medicaid and their
  doctors will have better information about costs
  and benefits of treatment for a common health
  problem with multiple treatment options available

45
Why We Need Comparative Effectiveness Reviews

• Better evidence on what works is a centerpiece of
  the prescription drug benefit and other reforms
  being implemented by CMS right now to bring the
  Medicare program up to date
• We need to do more to learn about and measure the
  effectiveness of alternative treatments for
  common health problems
• We need to do more to help patients and doctors
  get unbiased, practically useful information on
  benefits, risks, and costs

46
Determining Payment for New Technologies

• Prospective payment systems include costs of
  existing technology and are adjusted for changing
  costs over time
• New Technology less than 3 years on market are
  recognized as needing interim extra payment or
  might not be accessible
• Pass-Through Payments in OPPS
• Devices
• Drugs, Biologicals, Radiopharmaceuticals
• Add-On Payments for IPPS

47
Add-On Payment Criteria

• Newness
• Technology may be considered new for 2-3 years
  after becoming available on the market
• Substantial clinical improvement
• Demonstrated substantial clinical (diagnosis or
  treatment) improvement over existing technologies
• High Cost
• Technology must be inadequately paid under the
  DRG system as evidenced by meeting a defined
  cost-threshold (defined in terms of standardized
  charges).
• Thresholds for each DRG published annually in
  Table 10 of the IPPS final rule
• Multiple manufacturers

48
Cost Effectiveness and Safety Is the Future Now?

• Least costly alternative (LCA)
• Artificial Lumbar Disks
• Avastin and Lucentis for Adult Macular
  Degeneration (AMD)
• ESAs in ESRD and Cancer
• Power Mobility Devices
• Daily dialysis
• Intra-ocular lenses

49
Contact Information

• Barry M. Straube, M.D.
• CMS Chief Medical Officer
• Director, Office of Clinical Standards Quality
• Centers for Medicare Medicaid Services
• 7500 Security Boulevard
• Mailstop S3-02-01
• Baltimore, MD 21244
• Email Barry.Straube_at_cms.hhs.gov
• Phone [phone]