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Edward Black, President Reimbursement Strategies, LLC Saint Paul, MN, USA.

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Presentation on theme: "Edward Black, President Reimbursement Strategies, LLC Saint Paul, MN, USA."— Presentation transcript:

1 Edward Black, President Reimbursement Strategies, LLC Saint Paul, MN, USA

2 Today’s Presentation  Part I  US Healthcare in Transition: Evolution from Fee for Service to Accountable Care Organizations  Part II  Reimbursement Fundamentals  Coding  Coverage  Payment  Part III  Strategic Planning for Reimbursement 2 Reimbursement Strategies, LLC All Rights Reserved

3 3 Payer Relations Health Economics Edward Black, Founder 25+ years in the Blue Cross Blue Shield Health Plan System Advisor to the University of Minnesota Office for Technology Commercialization Member of LifeScience Alley, BioBusiness Alliance, Medical Industry Leadership Institute, BioBusiness Alliance, Association of Strategic Alliance Professionals Clients in US, Canada, Denmark, Sweden, Norway, Iceland Business Associates Former Blue Cross and Humana Medical Directors for Tech Evaluations and Payer Relations Certified Professional Coders for HCPCS, CPT, and ICD Published Health Economists and Biostatisticians

4 The Evolution from Fee for Service to Accountable Care Organizations (ACOs)

5 Tradition of Fee-for-Service Hospitals get paid a bundled (predetermined) payment for inpatient and outpatient care Most physicians are in private group practices Physicians get paid for each discrete service they provide Costs are driven more by increasing utilization than by increasing cost per service The cost of care can vary greatly for privately insured patients across the country depending on physician practice style and access to healthcare resources US healthcare is largely supply-side driven Reimbursement Strategies, LLC All Rights Reserved 5

6 Per Capita Costs - 2008 Reimbursement Strategies, LLC All Rights Reserved 6

7 PwC 5 Pillars of MedTech Innovation* Reimbursement Strategies, LLC All Rights Reserved 7 US Rank #1 – US has highest costs per bed for hospital care Other countries have more physicians per capita #4-Demanding and Price Insensitive Patients US Rank #1 – First in venture capital investment Early stage entrepreneurial investment, though not nearly as strong #5-Supportive Investment Community *A Medical Technology Innovation Scorecare: PriceWaterhouse Coopers 2011

8 Hard Realities 50 million Americans do not have health insurance Costs continue to rise about 6.5% per year which is unsustainable The Medicare Trust Fund will be insolvent in 13 years There aren’t enough primary care physicians to manage an aging population under the current system Quality of care is ….debatable “1/3 rd of healthcare expenditures – an estimated $750 billion – don’t improve health”* * Institute of Medicine of the National Academies, Sept. 12, 2012 Reimbursement Strategies, LLC All Rights Reserved 8

9 The Affordable Care Act of 2010 Reimbursement Strategies, LLC All Rights Reserved 9

10 Accountable Care Organizations (ACOs) ACOs are legal structures between hospitals, physicians, and other providers that allow them to contract with the government and private payers for risk-based payments Designed to compel hospitals and physicians to work better together Over 240 ACOs have already been formed This has lead to more hospitals buying out physician practices making them employees – a radical shift for many physicians Insurers in several states have partnered with local hospital & physicians to launch ACOs. Reimbursement Strategies, LLC All Rights Reserved 10

11 US Physicians Are Worried ……that the evolution to bundled payment and other payment reforms will erode their earning capacity and diminish their independence 90% said that their greatest concern with episode-based care is receiving "inadequate payment" and being penalized for factors that are out of their control The vast majority of physicians (80%) believe that team- based care is the wave of the future, and much of that being in a hospital-employment model 57% said that the practice of medicine is in jeopardy Reimbursement Strategies, LLC All Rights Reserved 11 Deloitte Survey of US Physicians, May 24, 2013

12 The Shift in Payment Systems “Currently, US healthcare is in a state of semi-controlled chaos where institutions are trying to anticipate changes in care delivery”* Currently, Mayo Clinic is paid almost 100% on a fee-for-service basis; expectation is that within 5 years there will be a dramatic shift to capitation - wherein 70% of Mayo Clinic revenues will be based on capitated payments We’re not sure what Will and Charley would have thought of that *Dr. John Sperling, Mayo Orthopedist, Sept. 7, 2012 12 Reimbursement Strategies, LLC All Rights Reserved

13 The Medtronic View “Whereas in the past, physicians alone were the ones making purchasing decisions, increasingly other stakeholders are influencing or making those decisions. Thus medical technology innovation must evolve to meet the needs of a broader set of stakeholders proven for both medical as well as compelling economic evidence. We must strive not only to improve patients' lives but also ensure that the overall healthcare ecosystem remains viable.” Omar Ishrak, CEO Medical Device and Diagnostic Industry magazine, May 21, 2013 Reimbursement Strategies, LLC All Rights Reserved 13

14 Reimbursement Fundamentals: Coding, Coverage and Payment

15 Reimbursement Fundamentals Coding – Is there a HCPCS (Healthcare Common Procedure Coding System) code that describes your technology or the manner in which it will be used? Payment – Will physicians and hospitals be paid enough to encourage product adoption without being too expensive thereby discouraging government and private insurance coverage? Coverage – Do Medicare and most private insurers cover the procedures your technology permits and if so, under what clinical circumstances? 15 Reimbursement Strategies, LLC All Rights Reserved

16 HCPCS – Healthcare Common Procedure Code System Reimbursement begins with Coding Hospitals, Physicians, DME and Supplies all use different codes to describe their products or services HCPCS Level I: CPT™ (Current Procedural Terminology) codes are controlled by American Medical Association and describe physician services Level II: HCPCS codes to describe DME, prosthetics, orthotics, supplies and injectable drugs (controlled by CMS) ICD-9 CM (International Classification of Diseases) are controlled by CMS Describe disease conditions Describe procedures for inpatient hospital billing 16 Reimbursement Strategies, LLC All Rights Reserved

17 CPT ™ (Current Procedural Terminology) Every physician service is described by a CPT code either by a unique code or by a code representing a common group of services The AMA controls issuance of CPT codes A panel of 23 people (mostly physicians) determines what services or procedures get unique new codes The process is supported by medical societies representing specialty groups of orthopedists, cardiologists, family practice physicians, urologists, etc. The process is only semi-transparent, largely subjective and physicians and payers take it very seriously CPT code examples: #27130 – Arthroplasty, femoral prosthetic replacement (“total hip”) #27280 – Arthrodesis, sacroiliac joint (including obtaining graft) #73721 – Magnetic Resonance Imaging (MRI) any joint, lower extremity 17 Reimbursement Strategies, LLC All Rights Reserved

18 Hospital Payment Methodology DRGs (Diagnosis Related Groups) are the predominant method for paying for inpatient hospital services There are about 900 DRGs to which any medical or surgical admission will be assigned based on patient diagnoses, procedures and the predetermined resources it should require to care for the average patient Each DRG has a “weight” that is multiplied by a conversion factor to determine payment New Tech Pass Through Payment allows the cost of new tech to be paid at/near retail cost for a period of two years if it meets a cost threshold and achieves “substantial clinical improvement” 18 Reimbursement Strategies, LLC All Rights Reserved

19 Physician Payment Methodology RBRVS (Resource Based Relative Value System) Every CPT code is assigned a Relative Value Unit which is reflective of the physicians’ Work Expense (the skill, time, and decision making required for the procedure) Practice Expense (overhead, operating and equipment costs) Malpractice Expense The Relative Value Unit (RVU) is then multiplied by a Conversion Factor RVU Conv Factor Allowance CPT #27130: 42.7 x $34.0230* = $1,452.78 CPT #27280: 30.92 x $34.0230* = $1,051.99 CPT #73721: 8.33 x $34.0230* = $ 283 RVUs are consistent among government and private payers Conversion Factors, consequently allowances, vary by payer * The Medicare Conversion Factor for 2013 19 Reimbursement Strategies, LLC All Rights Reserved

20 You must think about how to market to payers to get your technology covered! 20 Reimbursement Strategies, LLC All Rights Reserved

21 Payer Attitude of New Technology "We can't be seduced by all of the wonderful technology toys and other stuff, because every good idea ain't good. At the end of the day, you have to ask yourself, Does the technology work? Will it improve quality? Help manage costs? Be good for the consumer? Meet a real need?” Reed Tuckson, M.D., executive VP and chief of medical affairs, UnitedHealth Group LifeScience Alley Annual Meeting and Expo, December 7, 2010 21 Reimbursement Strategies, LLC All Rights Reserved

22 Medicare Jurisdictions-Parts A/B There are 15 Part A/B Medicare Jurisdictions where the program is administered by 11 privately owned companies. Coverage policy varies from one jurisdiction to another. 22 Reimbursement Strategies, LLC All Rights Reserved

23 Health Insurance Medicare is the largest single payer Private insurers often, but not always, follow Medicare coverage decisions Medicare, Medicaid, TRICARE and VA (government payers) all pay less than private insurers for the same services There are about 1,100 private health plans Most private payers make their own coverage decisions They also have varying payment levels, but they pay more than government payers 23 Reimbursement Strategies, LLC All Rights Reserved

24 Technology Evaluation Criteria Blue Cross Blue Shield Association TEC 1. The technology must have final approval from the appropriate regulatory body 2. The scientific evidence must permit conclusions concerning the effect of the technology on health outcomes 3. The technology must improve the net health outcome 4. The technology must be as beneficial as any established alternatives 5. The improvement must be attainable outside the investigative setting 24 Reimbursement Strategies, LLC All Rights Reserved

25 FDA vs. CMS Criteria Homogenous Groups Controlled Environment Isolated Treatment Effect Heterogeneous Groups Real World Practice Population Effect “Safe and Effective” “Reasonable and Necessary” 25 Reimbursement Strategies, LLC All Rights Reserved * FDA – Food and Drug Administration ** CMS – Centers for Medicare and Medicaid Services

26 Strategic Planning for Reimbursement

27 New Technology Coverage Curve Experimental Investigational Accepted Payer Relations % of People agreeing new tech should be covered Less Level of Evidence Available More 100 % 0 % 27 Reimbursement Strategies, LLC All Rights Reserved

28 Tools to Accelerate Coverage Study-Based Tools Clinical Trial Data Targeted Toward Payer Interests Payers want to see cost data, as well as clinical results Studies should be representative of the populations who will benefit in real life clinical settings, not just individuals in controlled environments Duration of benefit is very important – typically payers want to see at least 24 months of treatment success, 36 months is much better Health Economic Analyses Cost-effectiveness analysis Cost-utility analysis Cost-minimization analysis Cost-consequence analysis Budget-impact analysis Net Health Benefit (NHB) Reimbursement Strategies, LLC All Rights Reserved 28

29 Advocacy Tools Product (also referred to as a “Clinical” or “Payer”) Dossier to describe how your technology works, the patients who will benefit from it, its intended use, summary of clinical support, FDA clearance – why payers should cover it Payer Relations Campaign – a strategy to use dossiers, published studies and relationship experts to convince payers to cover your technology targeting markets in concert with your product Sales/Marketing Plan. It will stratify the payers of choice in the regions most likely to be successful. Reimbursement Strategies, LLC All Rights Reserved 29

30 Product Design / Clinical Trial PRE - COMMERCIALIZATION Reimburs’t Strategy Begins Here Product design decisions here can impact the product’s prospects for coverage and payment for it’s useful life FDA Submission / Product Launch COMMERCIALIZATION Coding, Coverage, and Payment Work on the fundamentals Build the health economics case Payer Relations should coincide with Marketing / Sales efforts so products are covered when sold Post Market / Next Generation POST COMMERCIALIZATION Hospital / Physician / User Support Provider support for continuous coverage and adequate payment may be required as new, competing products are introduced Product Technology Life Cycle 30 Reimbursement Strategies, LLC All Rights Reserved

31 Reimbursement Pathways Your pathway to getting paid may be easier (or harder) than you think Novel Devices – longer process for reimbursement, with greater risk/reward opportunities Predicate-based Devices – reasonable process for reimbursement with moderate risk/rewards Conventional Devices – a reimbursement pathway for your device may already exist; this can either very good or very bad 31 Reimbursement Strategies, LLC All Rights Reserved

32 Thank You Edward Black President 10287 Lancaster Bay Saint Paul, MN 55129-8527 USA 651.337.8171 (office) / 651.253.1143 (cell) 32

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