# Presentation: 084875

## Medicare and Reimbursement for Your Product/Service Developed Under SBIR/STTR

-  Presented by:
- Ronald Podraza
- CEO, Reimbursement Principles Inc.
- July 13, 2006

## The Medicare Factor

- 39.7 million Americans aged 65 and older (Medicare) account for
- 69% of total US healthcare spending
- 38% of Hospital Admissions
- 48% of Inpatient Days
- Medicare policy sets the standard that the rest of the industry follows

*Sources: *
*Kaiser Family Foundation; Medicare At A Glance, September 2005; kff.org/medicare/loader.cfm?url=/.../ security/getfile.cfm&PageID=52974 AND Medicare/CMS website; www.cms.hhs.gov*

## United States Payer Mix 

*Private Payers  -**	**60%*
- (198.3 million)
*Uninsured - 14%*
- (45.8 million)
*Medicare  -  12%*
- (39.7 million)
*Medicaid  -  11%  *
- (37.5 million)
*Other Payers  -  3%**  *
- (10.7 million)

*Source: U.S. Census Bureau, Current Population Survey, 2005 Annual Social and Economic Supplement*

## Medicare Reimbursement

- Medicare reimbursement defined
- Coding
- Coverage
- Payment
- Influencers of Medicare reimbursement
- Site of Service
- Benefit Category

## Influencer: Site of Service

- Site of service (inpatient, outpatient, ASC, physician’s office, home, etc) drives Medicare coding, coverage and payment
- What are the expected sites of service?
- Is coding in place for all sites of service?
- Does Medicare cover procedure/ technology in all sites of service?
- Does Medicare payment support pricing in all sites of service?

## Influencer: Benefit Category

- Medicare is a defined benefit program
- A service must fall into one of over 50 statutorily-defined “benefit categories” as a first step toward coverage
- Is there a defined Medicare Benefit Category available to provide reimbursement for your procedure/ technology?

## Coding

- Used by Medicare and providers to identify diagnoses and procedures
- Track utilization and establish Medicare reimbursements rates for facility and professional services
- Codes evolve – Medicare updates at least annually, sometimes more frequently

## Coding

- “We need a Medicare code” or “find us a code”
- Finding a code and “making it fit” may have unintended consequences
- Be mindful of short and long term market viability

## Coverage

- Terms and Conditions used by Medicare to determine whether a product, service or procedure is eligible for reimbursement and under what conditions it will be covered
- Fundamental:  Is it medically necessary to diagnose or treat the patient’s condition?

## CMS - Coverage Authority  

- Section 1862(a)(1)(A) *“. . .no payment may be made . . . For expenses incurred for items or services . . [which] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”*
- Provides the Secretary (acting through CMS) the authority to determine appropriate coverage of services under Medicare

## Medicare Focus: Evidence Based Medicine

- Randomized clinical trials
- Cohort studies
- Controlled case-control
- Controlled case-series
- Registries
- Clinical consensus/specialty society positions

## Medicare Coverage Policies

- Local Coverage Determination (LCD) versus National Coverage Determination (NCD)
- Local Coverage Determination (LCD)
- Usually established prior to National coverage determinations (NCD)
- Non controversial technology
- Most coverage determinations are local

## Medicare Coverage Policies

- National Coverage Determinations (NCD)
- Usually issued when
- Local contractors develop differing policies
- Expensive or controversial technology
- Program integrity concerns
- External request
- Manufacturer, advocacy groups, contractors
- Takes precedence over LCDs

## Medicare Payment

- The amount of reimbursement provided to the hospital, physician, etc.
- Payment for facility is separate from payment for physician services
- All private payers benchmark or follow Medicare fee schedules

## Medicare Payment Methodologies

- Hospital Inpatient
- > 24 hrs.

- Hospital Outpatient
- < 24 hrs.

- Ambulatory Surgery Center (ASC)

- One **DRG **payment rate
- All inclusive payment methodology driven by  ICD-9-CM diagnosis and procedure coding

- Professional Services

- Paid under multiple **APCs**
- Payment methodology driven by  CPT procedure coding

- One **ASC Payment Group**
- All inclusive payment driven by CPT procedure coding

**Medicare Physician Fee Schedule**
- Payment driven by CPT procedure coding

## Payment Questions

- What level of Medicare payment currently exists for facility and professional services?
- Is service bundled into Medicare payment for the procedure?  Or, is it payable as a line item?
- Is it enough to support pricing?
- What if it isn’t?
- How long will it take to align payment and pricing?

## Reimbursement in Tandem

- Reimbursement should be a coordinated effort working in tandem with clinical and regulatory issues during clinical trial and implementation

**Clinical**

**Reimbursement**

**Regulatory**

## 1995 FDA/CMS Interagency Agreement 
IDE devices used in conjunction with manufacturer-sponsored, FDA-approved clinical trials are eligible for Medicare reimbursement consideration during clinical trials
94% of FDA IDE products eligible for reimbursement

- IDE devices used in conjunction with manufacturer-sponsored, FDA-approved clinical trials are eligible for Medicare reimbursement consideration during clinical trials
- 94% of FDA IDE products eligible for reimbursement

- Medicare Reimbursement During Clinical Trials

## Why Bill During Clinical Trials?

- Reimbursement during clinical trials can:
- Provide early and much needed revenue
- Reduce time required to establish reimbursement elements
- Build claims history (coding and charges)
- Collect cost effectiveness data
- Provide opportunity to educate payers
- Shorten time to market
- Clinical, regulatory & reimbursement pathways run in tandem instead of separate tracks

## FDA Review vs Medicare Coverage

- FDA *regulates* products and devices
- Ensures product safety and efficacy
- Validates manufacturer claims
- Does not determine product pricing, coding, coverage, etc.

- Medicare is a *purchaser*   of technology/services
- Is the procedure reasonable and necessary?
- Evidence of improved outcomes?
- What is the benefit to the Medicare program?
- Has safety and efficacy been proven?
- Medicare wants clinical outcomes compared to “gold standard”
- Costs compared to alternatives

## Beware of “substantial equivalence”
Substantially equivalent product = substantially equivalent coding, coverage and payment
Consider alternate regulatory pathways permitting product differentiation
Patient registries

- Substantially equivalent product = *substantially equivalent coding, coverage and payment*
- Consider alternate regulatory pathways permitting product differentiation
- Patient registries

- Regulatory Process & Reimbursement

**Notes:**
Consider the Wicab example.  Specific strategy for “de novo” 510(k) to differentiate from biofeedback.

## Regulatory Process & Reimbursement 

- Regulatory Process & Reimbursement

- Reimbursement NOT automatic following FDA clearance/approval
- FDA clearance is a “threshold” but not enough to satisfy payer requirements
- Medicare requires evidence of improved outcomes
- Does the technology reduce or eliminate a procedure ***OR*** does it add another step without improved outcomes in the continuum of care?
- Does it have widespread clinical usage?

***Slide ***

## Points to Remember

- Medicare reimbursement must be factored into early product design and development
- Start early and never take your eye off of it
- Don’t put off reimbursement
- Reimbursement is a PROCESS
- It is not automatic and will not “fall into place” despite the best science and life saving potential
- Most reimbursement development can and should be done in tandem with regulatory and market development

## Points to Remember

- Understand the elements of Medicare reimbursement and how it may apply to your product
- Is coding in place or is a new code(s) required?
- Is coverage in place or will it need to be developed?
- Is payment adequate to support your pricing?

***Slide ***

## Points to Remember

- Keep lines of communication open with Medicare
- Articulate why your product benefits the Medicare program
- Making an investment and commitment in reimbursement will help secure successful long term viability of your product/ technology
- Respect the power of reimbursement
- Lack of reimbursement has been the demise of MANY excellent technologies

## Slide 26

## Medicare and Reimbursement for Your Product/Service Developed Under SBIR/STTR

-  Presented by:
- Ronald Podraza
- CEO, Reimbursement Principles Inc.
- 800.471.9387
- www.reimbursementprinciples.com