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Lindsay Bockstedt, Ph.D. Director, Global Health Policy, Reimbursement

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Health Economics and Policy Overview April 2013 Lindsay Bockstedt, Ph.D. Director, Global Health Policy, Reimbursement & Health Economics * Currently in the US, our ... – PowerPoint PPT presentation

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Title: Lindsay Bockstedt, Ph.D. Director, Global Health Policy, Reimbursement


1
Lindsay Bockstedt, Ph.D. Director, Global Health
Policy, Reimbursement Health Economics
Health Economics and Policy Overview April 2013
2
AGENDA
  • Medtronics role in health policy
  • Coverage of Medical Devices
  • Medicare coverage
  • Emerging trends
  • Health technology assessment
  • Cost-effectiveness analysis
  • Medicare Payment Systems
  • Fee for service systems (FFS)
  • How new technology is accounted for in FFS
  • Emerging trends/Payment reform
  • Economic Value

3
Medtronics Role In Public Policy
Consistent with our Mission, Medtronic maintains
active Government Affairs Health Policy teams
dedicated to improving issues related to our
Industry
Patients
Therapies
Customers
Businesses
  • Collaborative Approach
  • Work with industry, AdvaMed, physicians, patient
    organizations, hospital groups, professional
    societies
  • Identify and address issues critical to patient
    access and medical innovation
  • Goal of Public Policy Efforts
  • Ensure regulatory, payment, tax, and trade
    policies support medical innovation and provide
    optimal patient access to care
  • Focus on Congress, the Administration, key
    Federal agencies
  • HHS (CMS, FDA, NIH, AHRQ), USTR, State and
    Commerce Departments

4
MEDTRONICS PUBLIC POLICY ORGANIZATION
Government Affairs
Health Care Public Policy
Health Policy Payment
Regulatory
Medtronic Business Units
  • Cardiac Vascular Group
  • Restorative Therapies Group
  • Diabetes Group

5
Coverage of Medical Devices
6
What is coverage? A key step towards Medicare
reimbursement
Adapted from Phurrough, 2005
7
Payer coverage is based on evidence
  • Work with the clinical team early on to identify
    endpoints and study design that are meaningful to
    payers and demonstrate the product value
  • If Medicare patients are part of the target
    patient population, always include Medicare
    patients in the trial
  • Even if Medicare is not the primary payer, it is
    still important
  • Largest payer in the U.S. (and growing)
  • Very influential to private payer coverage
    decisions
  • Global coverage often requires additional
    evidence
  • Country specific data
  • Explicit economic evidence requirements

8
Medicares evaluation of evidence relies on a
variety of inputs
  • To determine reasonable and necessary, CMS
    broadly focuses on
  • methodological considerations
  • relevance of chosen outcomes and clinical
    endpoints
  • generalizability of study results to the Medicare
    population
  • qualitative assessment of net risks and benefits
  • CMS does not formally consider economic
    information in the coverage process, but there is
    rising pressure to do so
  • Medicare carrier medical directors also consider
    the expert opinion of clinicians in their area
    when developing LCDs

9
Most Coverage is Local
National
10
Local
National
Local
90
Adapted from Phurrough, 2005
10
Determine the appropriate Medicare coverage
approach
National
Local
  • Limited capacity (historically less than 12
    NCDs/year) and is lengthy (however, MMA provides
    tighter timeframes)
  • Coverage determinations must be adopted by all
    Medicare Carriers and Intermediaries
  • Appeal opportunities for negative coverage
    determinations are limited
  • Can be external or internal request
  • CED requires additional data collection in
    exchange for Medicare coverage
  • Coverage is determined by local contractor
    Medical Director
  • Decentralized decision-making as policies vary
    from contractor to contractor (however
    transitioning to MAC structure may change this)
  • Responsive to community care standards
  • May allow prompt initial diffusion of innovations
  • Provides regional flexibility/variation in policy

11
Some of Our Therapies Have Withstood Rigorous
Coverage Review
Positive coverage Local
covg/funds Local/Potential risk
No coverage
12
High Quality Clinical Evidence Is Essential
Strength of Evidence
Source Tufts Medicare NCD Database
13
Emerging trends in Medicares national coverage
process
14
The Increasing Demand for Evidence The Rise of
Health Technology Assessments
Increasing HTA agencies _at_ national level and
within one healthcare system, with more resources
power, working in powerful global
networks Increasing evidence demands clinical
need, efficacy/safety, cost-effectiveness, budget
impact Increasing sophistication in HTA
evaluations and HTA decisions
15
HTAs of Medtronic Therapies Globally
DES, CABG, EVAR, TEVAR, TCV, PERIPHERAL
ICDs, CRTs, IPG, ILR, RPM
DBS, ITB, SCS
BMP, BKP, CF
16
The Cost-Effectiveness Paradigm
(Intervention is less effective and more
costly)
100,000/QALY
20,000/QALY
Decrease in QALYs
Increase in QALYs
(Intervention is more effective and
less costly)
Decreases Costs

Laupacis A. et al., Can Med Assoc J 1992146475
17
Comparing the Cost-Effectiveness of a Variety of
Treatments/Interventions
Common Threshold - 50k-100k/QALY
Source Cost-Effectiveness Analysis Registry,
Tufts University
18
Technologies rejected by NICE on grounds of poor
cost-effectiveness
Cost-effectiveness ratio Date of NICE decision
Gemcitabine for metastatic breast cancer 38,699-58,876 2007
Cinacalcet for secondary hyperparathyroidism in ESRD 39,000-92,000 2007
Pemetrexed for non-small-cell lung cancer 458,000-1.8 million 2007
Pegaptanib for age-related macular degeneration 163,603/QALY 2008
Drug-eluting stents for coronary artery disease 183,000-562,000 2008
Bevacizumab for first-line treatment of metastatic breast cancer Lacking evidence of cost-effectiveness 2008
Cetuximab for metastatic colorectal cancer post-failure of oxaliplatin Lacking evidence of cost-effectiveness 2008
Final Guidance on DES recommends for use in
percutaneous coronary intervention for the
treatment of coronary artery disease, within
their instructions for use, only if the target
artery to be treated has less than a 3-mm calibre
or the lesion is longer than 15 mm, and the
price difference between drug-eluting stents and
bare-metal stents is no more than 300.
Source Neumann, 2008 NICE Final Guidance, 2008.
19
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20
Payment of Medical Devices
21
Reimbursement Process for Medical Devices
Submits Claim
Customer/ Provider
IPPS --DRG OPPS -- APC
Hospital/ ASC
Sells Product
Patient
Manufacturer
Medicare/ Insurer
MPFS
Physician
  1. Is it covered?
  2. Does it have appropriate codes?
  3. Payment (facility and physician)

22
Medicare payment systems
IPPS OPPS ASC MPFS
Payment Mechanism MS-DRG APC APC RVU
Basis for Payment Cost-based payment rates derived from historical claims data. Diagnosis driven Cost-based payment rates derived from historical claims data. Procedure-driven Cost-based payment rates derived from historical claims data. Subject to budget neutrality scaling and adjustment. Procedure driven Based on three components - physician work reflecting the physicians time, effort, and technical skill required to render a service - practice expense equipment, supplies, and office overhead items such as rent, employee wages, utilities and - malpractice expense insurance premiums
Timing Proposed rule April/May Final rule August 1 Effective October 1 Proposed rule June/July Final rule November 1 Effective Jan 1 Proposed rule June/July Final rule November 1 Effective Jan 1 Proposed rule June/July Final rule November 1 Effective Jan 1
Notes CMS began the process of transitioning to MS-DRGs in FY 2008. Hospitals may receive increases in MS-DRG payments for DSH IME. While the IPPS makes one bundled payment for all care provided during the inpatient stay, a hospital may receive multiple OPPS payments for a single outpatient encounter if multiple separately payable services are provided during that encounter. While all APCs are subject to the ASC budget neutrality adjustment, for device-dependent APCs, only the procedural portion of the APC is subject to the reduction. The device portion of the APC is not subject to the budget neutrality adjustment. The AMA RUC provides recommendations for RVUs. Voting members of the RUC include representatives from medical specialties and others. The RUC recommendations are subject to review by CMS staff, physicians, contractor medical directors, specialty refinement panels of physicians, and the public through notice and comment rulemaking.
23
Hospital Payment Has Been Stable for Many of Key
Therapies
Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies Average Medicare DRG Base Payments for Significant Medtronic Therapies
Therapy FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY07-13
ICDs 29,811 30,010 31,094 32,439 32,630 33,058 33,901 13.72
Pacemakers 12,898 13,152 13,561 14,083 14,366 14,606 15,220 18.00
DES 12,519 12,068 11,528 11,928 12,191 12,470 12,960 3.52
AAA 19,091 19,704 20,239 21,060 21,400 21,336 22,271 16.66
Lumbar Fusion 18,466 19,329 20,614 21,891 22,475 22,562 23,311 26.24
Cervical Fusion 11,164 11,732 12,450 13,438 13,652 13,733 14,732 31.96
Kinetra/DBS 23,092 23,825 24,904 24,783 25,928 27,541 27,465 18.94
Heart Valves 36,570 37,302 37,877 39,404 39,096 38,593 39,088 6.89
Volume-weighted average base payment across the
main MS-DRGs involving the therapy, excluding
teaching, disproportionate share, wage, and
outlier adjustments to individual hospitals
24
Physician Payment Has Been More Turbulent But
Still Relatively Stable for Medtronic Therapies
National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies National Average Medicare Physician Payment Rates for Significant Medtronic Therapies
Therapy/CPT Code CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY07-12
ICDs (33249) 878 886 919 962 963 963 9.68
Pacemakers (33208) 485 512 532 554 556 556 14.64
DES (92980) 796 806 848 818 873 873 9.67
AAA (34802) 1,252 1,226 1,261 1,318 1,338 1,311 4.50
Lumbar Fusion (22630) 1,433 1,413 1,433 1,459 1,536 1,549 8.09
Cervical Fusion (22554) 1,221 1,196 1,200 1,205 1,270 1,281 5.78
Kinetra/DBS (61886) 670 685 720 764 825 848 26.57
Diabetes/CGM (95251) 38 38 40 41 42 42 10.53
Heart Valves (33405) 2,272 2,221 2,282 2,363 2,409 2,369 4.27
25
Why are additional payments options important for
new technologies?
New technologies encounter unique challenges
under prospective payment systems
  • Prospective payment systems often do not
    adequately account for new technologies
  • Hospitals are provided a fixed, prospectively
    determined payment
  • Typically, technologies are introduced without
    any changes to the PPS classifications or
    payments, leaving hospitals at risk for higher
    costs associated with new technologies
  • Annual PPS updates are generally based on claims
    data from two years prior
  • Creates a two to three-year delay between market
    introduction of a new technology and
    recalibration of PPS payment rates
  • Recalibration delays could impact patient access
    to new technologies

26
Eligibility for new technology payments focuses
on three general themes
Pass-Through Status (OPPS) New Technology APC (OPPS) New Technology Add-On Payment (IPPS)
Newness X The device is not appropriately described by any existing or previous categories established for pass-through. Device was not paid for as an outpatient service as of December 31, 1996. X The service cannot be appropriately described with current HCPCS code(s) and is not adequately represented in the claims data used for the most current OPPS annual update. X Generally, a technology is deemed to be new within 2 3 years following FDA approval and/or market introduction.
Cost Threshold X The average cost of devices must be not insignificant relative to the payment amount for the procedure or services for which the device is associated. No specific cost threshold requirement, but NT APC assignment is based on estimated service costs as outlined in the NT APC application. X Average charges for services involving new tech must exceed specific MS-DRG cost threshold.
Clinical Improvement X Device must represent a substantial clinical improvement over existing services as determined by CMS. General criteria to assess substantial clinical improvement are outlined in regulation. No specific clinical improvement requirement, but application suggests that peer-reviewed articles be submitted to provide information on the clinical use and efficacy of the service. X Technology must represent a substantial clinical improvement over existing services as determined by CMS. General criteria to assess substantial clinical improvement are outlined in regulation.
Payment mechanism Marginal cost (Hospital device chargesCCR)APC Cost band Midpoint of a range of costs (e.g. 10-50, 3000 - 3,500) Partial marginal cost MS-DRG payment the lesser of 50 of costs of new technology, or 50 in excess of the DRG
27
New Technology Add-on Payment Awardees
Technology Indication N Years Eligible Max NTAP
Drotrecogin alpha proteins Severe sepsis 9,803 FY 2003, FY2004 3,400
Bone morphogenetic proteins (BMP) Spinal fusion 7,724 FY 2004 8,900
Bone morphogenetic proteins (BMP) Spinal fusion 7,724 FY 2005 1,900
Cardiac resynchronization therapy (CRT-D) Heart failure 33,700 FY 2005 16,262.50
Bilateral deep brain stimulation (b-DBS) Parkinsons disease 483 FY 2005, FY 2006 8,285
Rechargeable spinal cord stimulation (r-SCS) Chronic pain 381 FY 2006, FY 2007 9,320
Endovascular graft repair (EVG) Thoracic aortic aneurysm 3,613 FY 2006, FY 2007 10,599
Interspinous decompression system (IDS) Lumbar spinal stenosis 4,093 FY 2007, FY 2008 4,400
Temporary total artificial heart system Heart transplant NA FY 2009, FY 2010 53,000
IBV Valve System Prolonged air leaks following lung surgery NA FY 2010, FY 2011 3,437.50
Autolaser Interstitial Thermal Therapy MRI-guided catheter for brain tumors NA FY 2011, FY 2012 5,300
DFICD Clostridium-difficle chronic diarrhea NA FY 2013 868
28
Aggregate Hospital Payment-to-Cost Ratios for
Private Payers, Medicare, and Medicaid
29
Health Care Reform Provisions with Significant
Implications to Device Industry
30
Emerging Payment Methods in the U.S. Shifting
Risk Increasing Accountability
31
Average Risk-Adjusted Spending for Medicare
Admissions Plus 30 days Post Discharge
Congestive Heart Failure Comparing Hospitals in
the Low and High Resource Use Quartiles
Service Low Average High Percent Dollars
Total Episode 7,757 9,278 11,019 42.0 3,262
Hospital 4,837 4,826 4,824 0.0 (13)
Physician 612 647 650 6.9 38
Readmission 1,102 1,986 2,965 169.0 1,863
Post-Acute 842 1,378 2,041 142.0 1,199
Other 363 441 539 48.5 176
Note Spending for each service is based on
standardized Medicare amount excluding IME, DSH,
Wage Index Source MedPAC, June 2008
32
Payment Delivery System reform CMS is Pushing
Growth in ACOs Bundled Payment
ACO Growth
  • Total of Medicare ACOS 259
  • gt4 M Medicare Beneficiaries

Source The Advisory Board Company
Bundled Payments for Care Improvement Initiative
  • Total of Participants gt500
  • 4 Care Models
  • The largest voluntary Medicare payment innovation
    program

33
Bundled Payments Will Have to Be Designed
Carefully to Account for the Benefits of
Technology
Therapy N Average Annual Spend Inpatient () Physician () Outpatient () Home Health () DME () SNF () Hospice ()
CRT-D 2,232 65,515 77.2 12.2 3.7 2.0 1.3 3.2 0.5
ICDs 3,024 66,978 75.7 12.3 5.0 1.9 1.0 3.7 0.4
DES 16,654 34,706 66.1 18.1 8.7 1.9 1.4 3.4 0.4
BMS 8,194 40,697 62.9 18.6 8.8 2.5 1.3 5.3 0.6
CY 2009 Medicare inpatient and carrier standard
analytical files. Cohort includes patients
implanted within the first quarter of CY 2007
all cardiac-related physician, inpatient, and
outpatient hospital utilization included in
analysis.
34
Average Per-Person Medicare Spending by High
Expenditure DRGs
30 Day Episode
365 Day Episode
  • Non-device intensive procedures use substantially
    more post-acute care over time suggesting a
    greater opportunity for care coordination and
    bundled payment methodologies
  • Over time device intensive procedures cost less
    on a per-person expenditure basis, making longer
    episodes of care more favorable

Medicare 5 SAFs, 2009 costs not yet
risk-adjusted
35
Medtronic is Adapting to The Changing Health Care
landscape
36
Transforming to Deliver Economic Value
Universal Healthcare Needs
ECONOMIC VALUE IMPERATIVE
IMPROVE OUTCOMES
  • Key Medtronic offerings must

EXPAND ACCESS
Deliver a quantifiable financial benefit to the
target customer
Specifically address one or more of the
Universal Healthcare Needs
1
2

OPTIMIZE COST and EFFICIENCIES
BROADENED CUSTOMER SET PHYSICIANS l
ADMINISTRATORS l PAYERS l PATIENTS
37
Claims Data Is Essential Component For Health
Economics Analyses
  • Health Outcomes
  • Mortality
  • Readmissions
  • Constructed Outcomes (treatment/procedure
    migration, etc.)
  • Health Outcomes
  • Readmissions
  • Constructed Outcomes (treatment/procedure
    migration, etc.)
  • Patient ID
  • Facility Physician ID
  • Procedures
  • Diagnoses
  • Length of Stay
  • Payments
  • Charges
  • Discharge Location/Status
  • Dates/Qtrs
  • Hospital ID
  • Cost to Charge Ratios
  • Quality Metrics
  • Ownership
  • Patient ID
  • Facility Physician ID
  • Procedures
  • Diagnoses
  • Length of Stay
  • Payments
  • Charges
  • Discharge Location/Status
  • Dates
  • Drug Dispensed
  • Quantity
  • Strength
  • Days Supplied
  • Dollar Amounts
  • Work Days Missed
  • Lab results (Hba1c, etc)
  • Smoking
  • Blood pressure
  • Weight
  • Patient ID
  • Race
  • Sex
  • Age
  • Location
  • Mortality
  • Patient ID
  • Sex
  • Age
  • Location
  • Mortality

Individual Characteristics
Physician And Facility Claims
Pharmacy Claims
Productivity Lab Health Risks
Individual Characteristics
Physician And Facility Claims
Facility Characteristics
Entire Medicare Population (gt65 yrs, disabled) N
46 million
Sample of Commercially Insured (working age
dependents) N 40 million
Medicare Claims Data
Commercial Claims Data
38
Claims Data Used to Generate Evidence Develop
Data-Driven Policy Positions
  • Payment accuracy and reform
  • Sustain payment amounts for products and
    procedures
  • Shape payment reform policies to ensure value is
    recognized
  • Estimate affects of payment policies
  • Comparative research
  • Compare various treatment effects on available
    outcomes
  • Cost and utilization analysis
  • Longitudinal cost and utilization of patients
    with diagnoses and procedures of interest
  • Incidence and prevalence
  • Inputs for cost-effectiveness models
  • Pricing analysis
  • Estimate market dynamics
  • Linking account characteristics to internal
    pricing data

39
  • Questions/Answers

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