Special Contribution: A Reimbursement Critical Path

Sean Tunis

July 1, 2007

18 Min Read
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REIMBURSEMENT

The National Venture Capital Association (NVCA; Arlington, VA) is the trade association that represents the U.S. venture capital industry. NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy and to support entrepreneurial activity and innovation. Because the venture capital community works closely with companies developing innovative new technologies, NVCA offers a unique perspective on the procedures and policies of the Centers for Medicare and Medicaid Services (CMS; Baltimore) related to coverage and payment of emerging medical products.

NVCA believes that the interests of Medicare beneficiaries, CMS, product developers, and investors could all be served by improving the efficiency, transparency, and predictability of the reimbursement process, particularly for novel, high-value technologies. CMS has already taken several important, broad steps in this direction, including refinements in the national coverage process and establishment of its Council on Technology and Innovation (CTI). Building on these initial efforts will help to ensure a favorable economic and policy environment for making valuable new technologies available to patients and clinicians.

Through discussions with venture capital investors, early-stage life sciences companies, reimbursement consultants, and policy experts, NVCA has identified a number of circumstances under which reimbursement decision-making is impeded due to problems with the reimbursement process itself—not because of inherent questions about the clinical effectiveness or value of the technology under review. NVCA believes that it is in the interest of all stakeholders to minimize such barriers. Such problems are particularly likely when a technology is novel and may therefore not fit readily into established pathways for coverage, coding, and payment. Yet it is precisely these novel technologies that are most likely to represent important clinical breakthroughs and to significantly improve outcomes for Medicare beneficiaries.

The goal of the NVCA Workgroup on Healthcare Innovation Policy is to identify potential improvements in reimbursement procedures and policy that will help ensure access to important, clinically effective, high-value technologies. In this white paper, NVCA introduces the concept of a reimbursement critical path. The initiative's name was chosen to highlight the common goals shared by this effort and FDA's ongoing critical path initiative. Both policy initiatives seek to support efficient development and adoption of novel, clinically effective, high-value technologies.

Specific Objectives

A reimbursement critical path would be a defined set of procedures and policies that would result in rapid reimbursement decision-making for novel, high-value technologies. The pathway would include refinements in coverage, coding, and payment. Because a novel technology is different from existing technologies, existing reimbursement mechanisms may create uncertainties and delays that impede the development of optimal reimbursement requirements for the new technology. The recommendations discussed below are intended to ensure that potential reimbursement barriers to novel technology are identified and refined.

The proposed policy refinements could have a profound impact on investment in and appropriate use of novel, high-value technologies. NVCA is particularly attentive to the risks associated with investment in promising technologies for which there is not yet a well-established reimbursement pathway. The reimbursement critical path could help ensure that such technologies became more attractive to investors. In addition, it is important to ensure that reimbursement issues are considered in the context of ongoing FDA critical path discussions, in which NVCA also is engaged.

Defining Novel, High-Value Technologies

NVCA proposes to focus initial attention on improving reimbursement mechanisms for technologies that fit an explicit definition of novel and high value. Efforts to streamline reimbursement for this subset of technologies may lead to policy enhancements that would affect a wider range of technologies in the future. Such policy enhancements should focus on improving the predictability and transparency of coverage and coding processes, while ensuring reimbursement policy works more effectively to enhance both innovation and value in healthcare.

Although it will probably be necessary to go through a process to develop criteria to identify technologies that are novel and high value from the perspective of CMS, it should be possible to begin pilot efforts at rapid reimbursement decision-making by focusing on technologies deemed by FDA to be eligible for accelerated approval (drugs and biologics) or expedited review (de­vices). FDA has existing mechanisms for designating specific technologies to be of sufficient potential public health and clinical importance to qualify for special attention during regulatory review. It may be reasonable to assume that all or most of the technologies that meet FDA's criteria would merit preferred reimbursement attention as well.

For a CMS-specific definition, NVCA has given preliminary consideration to how to define novel, high-value technologies, and proposes the following definition: A novel technology is a product that represents the first expression of a technology or use of a technology, is likely to have clinically significant benefit, and raises potentially significant coverage, coding, or payment hurdles.

A number of considerations would need to be factored into the decision about whether a technology is potentially of high value from the perspective of the payer, the healthcare system, and society. The criteria listed below will require further refinement, but are intended to capture critical characteristics of new technologies that would reflect on their value.

  • Safety: The degree to which a technology may reduce the risk of adverse events for patients or healthcare providers.

  • Clinical effectiveness: The expected magnitude of improvement in patient health outcomes, including mortality, morbidity, quality of life, and functional status. Improvements in the timely and efficient delivery of care would also be a factor.

  • Clinical efficiency: The expected impact of the technology on resource utilization, assessed at the level of individual patients. Short- and long-term savings would need to be considered, as well as savings that occur across various care settings.

  • Strength and consistency of evidence: The level of confidence that the judgments about clinical effectiveness and clinical efficiency are reliable, based on scientific studies, pathophysiologic reasoning, economic modeling, clinical judgment, and other sources of information. The assessment of evidence will need to be undertaken with recognition of the practical and economic challenges of definitively proving benefits for novel technologies.

  • Organizational efficiency: The technology's expected impact on resource utilization, assessed at the level of healthcare institutions and the healthcare system overall. Considerations in this area would include effects on worker productivity, increases in the capacity to use existing facilities and technologies, and other factors.

  • Support future innovation: Consideration should also be given to technologies that may represent an early generation of a new category of significant medical technologies, refinements to which could provide major healthcare benefits and may also lead to important related applications.

The following recommendations are ones that NVCA believes are focused and concrete enough to be implemented within a reasonable amount of time and with existing CMS staff. Several of the recommendations will require more time, further thought and discussion, and additional re­sources. Where available, examples are given to illustrate the type of problem that each recommendation is intended to address. However, at the request of the in­volved companies, many examples do not include the name of the manufacturer. NVCA's hope is that through continued dialogue on reimbursement issues, the concerns that led to these requests for anonymity may be addressed.

The Council on Technology and Innovation

CMS's Council on Technology and Innovation could function as the primary organizational component to support development and implementation of the reimbursement critical path. Because efficient reimbursement policy requires coordination across several CMS components—and in some cases coordination with FDA, the National Institutes of Health, the Agency for Healthcare Research and Quality, and other institutions—a cross-component entity like CTI is positioned to support this process.

The existing statutory language establishing CTI is entirely consistent with the objectives of the reimbursement critical path, as that language directs CTI to focus on improving coordination for coverage, coding, and payment in order to minimize barriers to access for new technologies.

Written Strategy. CTI should develop a written strategy to be presented to the CMS administrator. The strategy should include a prioritized plan for administrative and regulatory reforms that would support continued progress toward the goal of efficient reimbursement procedures for novel, high-value technology.

Public Input. It would be useful to have one or more public meetings at which stakeholders could present ideas for possible inclusion in the CTI strategic plan.

Ombudsman Establishment. The executive director of CTI, or a designee of that individual, should serve as an ombudsman for product developers who are having difficulty resolving specific reimbursement problems despite reasonable diligence in working through existing decision-making mechanisms within CMS. The ombudsman position would not serve as a means through which product developers could appeal decisions that they found undesirable. Rather, the ombudsman would intervene only in situations in which standard CMS procedures do not generate a clear policy conclusion after a reasonable period of time and effort.

Develop Process Descriptions

Early-stage companies frequently have difficulty deciphering the specific duties of each part of CMS and determining who they should talk to about specific reimbursement problems. Many early-stage life sciences companies and investors have hired reimbursement consultants because they are unable to identify the appropriate point of access to CMS policy processes and staff. Many basic questions and problems could be resolved if CMS made modest efforts to make its various reimbursement policymaking pathways and their interconnections more transparent.

Process Road Map. CMS should develop a road map for investors and life sciences companies that describes the primary coverage, coding, and payment processes at CMS. Such a document would not need to be highly detailed, but should identify the major decision-making functions, the part of the agency that has responsibility for each function, and provide appropriate contact information.

CMS reports that such a document is currently under development, and NVCA looks forward to seeing a first draft.

Establish Explicit Time Frames

For most early-stage companies, particularly those developing medical devices and diagnostics, each month of delay in resolving a reimbursement issue can translate into a substantial burn rate for their investment capital. In some cases, a substantial delay in the time required to arrive at a definitive answer on a reimbursement policy question can lead to economic failure, even for companies with potentially useful technologies.

Examples include the following.

  • A company has developed a unique method for wound debridement, but it has been unsuccessful in reconciling differing advice between Medicare contractors and CMS central office staff on appropriate coding for the therapy.

  • For a company with a product used to treat patients following certain kinds of strokes, a conclusion on whether the product fits within a Medicare benefit category has remained unresolved after more than a year.

  • A company with a procedure for treatment of a chronic reflux esophagitis encountered multiple issues involving coding and payment rates. They were resolved too late to prevent the company from shutting down.

Clearly, CMS is under no obligation to ensure the economic success of products without clinical value. However, the agency should make itself more accountable for completing its decision-making processes in a timely and predictable manner—whether or not those processes are governed by statutory time frames.

Reasonable Expectations. CMS should review current reimbursement policy processes that are not subject to fixed schedules and commit to a reasonable time frame within which such decisions will be made. Although the agency would be in the best position to determine what time frame would be reasonable, for most decisions, a turnaround time of three to six months would seem adequate. The Council on Technology and Innovation may be well positioned to oversee the development, implementation, and monitoring of the proposed procedural improvements.

Learn from Examples. In order to identify and prioritize policy processes in need of improvement, CMS should hold a town hall meeting and invite stakeholders to present examples of problems encountered in resolving reimbursement issues. The meeting would provide an opportunity for CMS to gain a deeper understanding of the nature of these problems, and use that information to target its efforts to the processes that have proven consistently problematic.

Devices Granted Expedited Review by FDA

The potential value of greater coordination between FDA and CMS regarding review of novel technologies has been discussed over the past five years, and was mentioned as a priority in the report of Health and Human Services secretary Tommy G. Thompson's task force on medical technology innovation. FDA and CMS have several ongoing collaborations, such as biomarkers in oncology, and there are examples of productive communication between CMS and FDA staff around the review of specific technologies, such left-ventricular-assist devices and coronary stents.

NVCA recognizes that limitations on time constrain the level of collaboration that can be sustained between CMS and FDA, and would therefore propose further exploration of carefully selected opportunities to increase coordination.

Simultaneous Review. NVCA proposes that Class III medical devices undergoing expedited review by FDA be simultaneously reviewed by CMS to ensure that potential coverage, coding, and payment policy issues have been identified well before final FDA approval. Implementing such a policy would give product developers and CMS adequate time to address reimbursement issues, with the goal of resolving problems by the time the product is approved for marketing by FDA. This would enable simultaneous regulatory and reimbursement policy implementation.

As an initial pilot test, several medical devices currently undergoing expedited review by FDA could be handled in the above-mentioned manner. This could almost certainly be done under existing authorities, would require limited staff time and resources, and should quickly reveal whether the approach offers a useful pathway for efficient reimbursement of novel, high-value technologies.

CTI might be well positioned to oversee the implementation and refinement of this expedited reimbursement process, ensuring that all necessary policymaking functions within CMS complete their decision making in a timely fashion.

Expanded Applications. Once the mechanism for expedited reimbursement review is established for medical devices undergoing expedited FDA review, CMS could expand the approach to other technologies determined to meet the criteria established for novel and high-value technologies. A set of criteria has been proposed above, and these could serve as a starting point for further discussions within CMS, and between CMS and other stakeholders.

Clarify Evidence Requirements

CMS has begun a process of becoming more explicit about the evidence requirements needed for national coverage decisions. To continue its efforts to more clearly define the type of scientific evidence necessary to obtain national coverage under Medicare, the agency has indicated its intention to generate guidance documents for coverage decision making regarding important categories of technologies. None of these guidance documents has yet been issued, and NVCA recognizes that there are staffing limitations that contribute to the slow progress in this area.

More recently, it has become apparent that CMS is using evidence of comparative effectiveness in decisions about coding (whether or not to assign two similar devices the same healthcare common procedure coding system (HCPCS) codes and payment (use of least costly alternative payment rates for drugs with similar therapeutic effects). As life sciences companies plan their clinical research programs, it is important that CMS explain the scientific standards used in its decision-making processes in as much detail as possible.

Guidance Needed. CMS should accelerate its work on developing guidance documents that clarify the scientific evidence requirements for coverage decisions—both national and local—as well as coding and payment decisions. It would be particularly valuable to provide more-detailed guidance regarding the circumstances under which CMS's assessment of the benefits and risks of new technologies may differ from the determinations made by FDA.

Given staff limitations, NVCA encourages CMS to explore the possibility of obtaining outside technical assistance in developing draft guidance documents, possibly from the academic community or industry.

Focus on Feedback. NVCA also encourages CMS to expand its efforts to meet with early-stage companies to provide feedback on the agency's expectations for the design of clinical trials that will satisfy coverage requirements for the technologies they are developing.

Clarify Standards for New-Technology Add-On Payments

The application and review process for new-technology add-on payments—particularly the administration of the substantial clinical improvement requirement—is inconsistent and opaque. From fiscal year 2003 through 2006, CMS approved six of 11 unique applications in which the agency had to apply judgment about whether the applicant had satisfied the criteria. Such a figure masks the considerable extent to which the unpredictability of the process has likely deterred more would-be applicants.

At present, in order to qualify for an add-on payment, an applicant must demonstrate, in addition to the newness and cost requirements, that the product “represents an advance in medical technology that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.” CMS has suggested that applicants can satisfy this requirement by showing, for example, that their product “reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time.”

However, CMS has not provided clear guidance regarding the type of data that applicants must submit to make such a showing, and CMS review of past applications under this general evidentiary standard has not been consistent enough to provide useful guidance to product developers who may be interested in designing studies to demonstrate that their products provide a substantial clinical improvement. For example, it's unclear whether randomized head-to-head trials against current standards of care are required in every case. Review of past decisions indicates that such trials are sometimes, but not always, necessary. And in some cases, such trials are not sufficient by themselves.

NVCA would also suggest that technologies that improve outcomes by significantly reducing disability, improving quality of life, and improving functional status should be considered to meet the substantial clinical improvement requirement.

Stakeholder Meeting. NVCA proposes that CMS convene a panel of stakeholders, including researchers, clinicians, industry representatives, and patient groups, to develop specific, generally applicable criteria for the determination of whether a new product represents a substantial clinical improvement. Objective standards for the use of external data should also be created.

Improve Coding Processes

At a recent meeting of a half-dozen experienced reimbursement consultants, one of the most commonly cited reimbursement challenges was related to obtaining appropriate billing codes in a timely manner. Generally speaking, the problems encountered with HCPCS codes include difficulties in obtaining a unique code that reflects meaningful differences between a new technology and existing products assigned to the same code.

Problems encountered with current procedural terminology (CPT) codes often relate to the poorly defined process of convincing relevant specialty societies to support a Level I code for a specific new technology. During the meeting of reimbursement consultants, many examples were offered of inconsistencies in the evidentiary and utilization requirements of different specialty societies for obtaining CPT Level I codes. The examples demonstrated the significant impact that individual clinical champions or opponents can have on the CPT process.

The reimbursement consultants also cited problems in the process of assigning Category III codes versus unlisted codes, as well as difficulty in obtaining the clinical use necessary to qualify for a Category I code when payers will generally deny payment when a Category III code is assigned.

In each instance mentioned above, the success of a technology in the reimbursement process is influenced by factors unrelated to its clinical value, and is subject to uncertainties that produce no benefit to payers, clinicians, patients, or product developers. Specific examples include the following.

  • A modified urinary catheter for which there was reasonably good evidence that complications with infection and strictures were reduced.

  • A device used in surgical therapy for chronic gastroesophageal reflux, for which it was not possible to obtain CPT Level I code in a reasonable time frame.

  • A device approved as a nonsurgical alternative to tubal ligation, which succeeded in obtaining a CPT Level I code only because of aggressive intervention by a passionate and persuasive clinician.

Solutions Needed. Within the scope of this initial assessment, NVCA was able to determine that coding problems are a major source of uncertainty and frustration for product developers, and that the degree of friction in resolving these problems is often inconsistent with the potential health benefits of a product. NVCA was not, however, able to identify specific, concrete actions that CMS might take to improve the HCPCS and CPT coding process.

NVCA therefore recommends that a town hall meeting be convened to solicit more-detailed testimony on the nature of these problems, and to solicit ideas for potential solutions. NVCA will be doing additional work in this area that it plans to present either privately to CMS staff or at a public event.

Determine Additional Resource Needs

It is clear that implementation of the procedural and policy improvements described in this paper will require additional staff and administrative resources. Much as FDA improvements were dependent on revenue from user fees, CMS may need to explore creative mechanisms to support proposed changes.

NVCA is happy to work with CMS to explore acceptable mechanisms through which adequate resources could be obtained.

Sean Tunis, MD, advises and consults on issues related to health technology, evidence-based medicine, and innovation. He is director of the Center for Medical Technology Policy, a nonprofit organization focused on collaborative efforts to efficiently develop better evidence about the benefits and risks of emerging medical technologies.

Copyright ©2007 MX

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