Health Economics and Policy Overview
April 2013
MEDTRONIC INC.
Lindsay Bockstedt, Ph.D.
Director, Global Health Policy, Reimbursement & Health Economics
1
AGENDA
• Medtronic’s 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
2
MEDTRONIC’S ROLE IN PUBLIC POLICY
Consistent with our Mission, Medtronic maintains active Government Affairs &
Health Policy teams dedicated to improving issues related to our:
Industry
Therapies
Patients
Customers
Businesses
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
Collaborative Approach
–
Work with industry, AdvaMed, physicians,
patient organizations, hospital groups,
professional societies
–
Identify and address issues critical to patient
access and medical innovation
3
MEDTRONIC’S PUBLIC POLICY ORGANIZATION
Government
Affairs
Health Policy &
Payment
Health
Care
Public
Policy
Regulatory
Medtronic Business Units
 Cardiac & Vascular Group
 Restorative Therapies
Group
 Diabetes Group
4
COVERAGE OF MEDICAL DEVICES
5
WHAT IS COVERAGE? A KEY STEP TOWARDS
MEDICARE REIMBURSEMENT
Regulatory
approval
(FDA)
Benefit
category
determination
(Congress)
Coverage
(CMS)
Coding
(CMS)
Payment
(CMS)
Adapted from Phurrough, 2005
6
6
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
Economic
Outcomes
-cost-effectiveness
-utilization/cost changes
Improved Clinical
Outcomes
-Technology proven to
provide clinical benefits; welldesigned trials, relevant
outcomes
Benefit > Risk
- Non-invasive modalities should be
exhausted before surgical ones
Global coverage often requires
additional evidence
–
–
Country specific data
Explicit economic evidence requirements
Safety and Effectiveness
- Technology has FDA approval
7
MEDICARE’S 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
8
MOST COVERAGE IS LOCAL
National
10%
Local
National
Local
90%
Adapted from Phurrough, 2005
9
DETERMINE THE APPROPRIATE MEDICARE
COVERAGE APPROACH
Local
National
• 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
• 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
10
SOME OF OUR THERAPIES HAVE WITHSTOOD RIGOROUS
COVERAGE REVIEW
Medicare
NCD
NICE
Appraisal
ICD
CRDM
CRT
Pacemakers
= Positive coverage
CardioVascular
DES
Diabetes
Insulin Pump
= Local covg/funds
DBS
= Local/Potential risk
= No coverage
Neuromodulation
SCS
InterStim (Urinary)
BMP
BKP
Spine & Biologics
Cervical Disc
Lumbar Fusion
11
HIGH QUALITY CLINICAL EVIDENCE IS ESSENTIAL
Strength of Evidence
Source: Tufts Medicare NCD Database
12
EMERGING TRENDS IN MEDICARE’S NATIONAL
COVERAGE PROCESS
Increasing Application of
CED
CMS is increasingly applying CED in its NCDs
2
CMS-FDA Collaboration
CMS is opening NCDs earlier, sometimes before FDA
approval, encouraging enhanced coordination between the
two agencies (e.g. on data-sharing)
3
Role of Professional
Societies
Professional societies are beginning to take a larger role in
coverage decisions, requesting NCDs and informing its
implementation
4
Evidence Standards and
Stakeholder Engagement
CMS is demanding more rigor in trial design; stakeholders
will need clear rationale to negotiate with CMS on appropriate
trial standards in CED
1
13
THE INCREASING DEMAND FOR EVIDENCE
THE RISE OF HEALTH TECHNOLOGY ASSESSMENTS
Increasing HTA agencies: @ 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
14
HTAS OF MEDTRONIC THERAPIES GLOBALLY
DES, CABG, EVAR, TEVAR, TCV, PERIPHERAL
ICDs, CRTs, IPG, ILR, RPM
DBS, ITB, SCS
BMP, BKP, CF
15
THE COST-EFFECTIVENESS PARADIGM
(Intervention is
less effective and
more costly)
Decrease in QALYs
Increase in QALYs
(Intervention is
more effective and
less costly)
Decreases
Costs
$
Laupacis A. et al., Can Med Assoc J 1992;146:475
16
COMPARING THE COST-EFFECTIVENESS OF A
VARIETY OF TREATMENTS/INTERVENTIONS
Common Threshold - $50k-$100k/QALY
17
Source: Cost-Effectiveness Analysis Registry, Tufts University
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 costeffectiveness
2008
Cetuximab for metastatic colorectal cancer post-failure of
oxaliplatin
Lacking evidence of costeffectiveness
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.
18
Source: Neumann, 2008; NICE Final Guidance, 2008.
19
PAYMENT OF MEDICAL DEVICES
20
REIMBURSEMENT PROCESS FOR MEDICAL DEVICES
Submits Claim
Customer/
Provider
Sells Product
Hospital/
ASC
MPFS
Manufacturer
Physician
Patient
Medicare/
Insurer
1. Is it covered?
2. Does it have appropriate codes?
3. Payment (facility and physician)
21
MEDICARE PAYMENT SYSTEMS
Payment
Mechanism
Basis for
Payment
IPPS
OPPS
ASC
MPFS
MS-DRG
APC
APC
RVU
Cost-based payment
rates derived from
historical claims data.
Cost-based payment rates
derived from historical
claims data.
Cost-based payment rates derived
from historical claims data.
Subject to budget neutrality scaling
and adjustment.
Diagnosis driven
Procedure-driven
Based on three components:
- physician work: reflecting the
physician’s 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
Procedure driven
Timing
Proposed rule: April/May
Final rule: August 1
Effective: October 1
Proposed rule: June/July
Final rule: November 1
Effective: Jan 1
Notes
CMS began the process
of transitioning to MSDRGs 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.
Proposed rule: June/July
Final rule: November 1
Effective: Jan 1
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.
22
HOSPITAL PAYMENT HAS BEEN STABLE FOR MANY OF KEY
THERAPIES
Average Medicare DRG Base Payments for
Significant Medtronic Therapies*
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%
Therapy
*Volume-weighted average base payment across the main MS-DRGs involving the therapy, excluding teaching, disproportionate
share, wage, and outlier adjustments to individual hospitals
23
PHYSICIAN PAYMENT HAS BEEN MORE TURBULENT BUT
STILL RELATIVELY STABLE FOR 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%
$2,272
$2,221
$2,282
$2,363
$2,409
$2,369
+ 4.27%
Heart Valves (33405)
24
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
25
ELIGIBILITY FOR NEW TECHNOLOGY PAYMENTS
FOCUSES ON THREE GENERAL THEMES
Newness
Cost Threshold
Clinical Improvement
Payment mechanism
Pass-Through Status
(OPPS)
New Technology APC
(OPPS)
New Technology Add-On Payment
(IPPS)
X
X
X
The device is not appropriately
described by any existing or previous
categories established for passthrough. Device was not paid for as
an outpatient service as of December
31, 1996.
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.
Generally, a technology is deemed to be
“new” within 2 – 3 years following FDA
approval and/or market introduction.
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.
X
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.
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.
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.
Marginal cost
Cost band
Partial marginal cost
(Hospital device charges*CCR)+APC
Midpoint of a range of costs (e.g. $10-$50,
$3000 - $3,500)
MS-DRG payment + the lesser of 50% of
costs of new technology, or 50% in excess
of the DRG
26
NEW TECHNOLOGY ADD-ON PAYMENT AWARDEES
Technology
Drotrecogin alpha proteins
Indication
Severe sepsis
N
Years Eligible
Max NTAP
9,803
FY 2003, FY2004
$3,400
FY 2004
$8,900
FY 2005
$1,900
Bone morphogenetic proteins
(BMP)
Spinal fusion
7,724
Cardiac resynchronization therapy
(CRT-D)
Heart failure
33,700
FY 2005
$16,262.50
Bilateral deep brain stimulation (bDBS)
Parkinson’s 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
FY 2009, FY 2010
$53,000
FY 2010, FY 2011
$3,437.50
FY 2011, FY 2012
$5,300
FY 2013
$868
Temporary total artificial heart
system
Heart transplant
IBV Valve System
Prolonged air leaks following
lung surgery
NA
Autolaser Interstitial Thermal
Therapy
MRI-guided catheter for brain
tumors
NA
DFICD
Clostridium-difficle chronic
diarrhea
NA
NA
27
AGGREGATE HOSPITAL PAYMENT-TO-COST RATIOS
FOR PRIVATE PAYERS, MEDICARE, AND MEDICAID
28
HEALTH CARE REFORM PROVISIONS WITH SIGNIFICANT
IMPLICATIONS TO DEVICE INDUSTRY
Comparative
Effectivenes
s Research
Payment
and
Delivery
System
Reform
Independent
Payment
Advisory
Board
Insurance
Expansion
Sunshine
Act
Medical
Device
Excise Tax
29
EMERGING PAYMENT METHODS IN THE U.S.
SHIFTING RISK & INCREASING ACCOUNTABILITY
30
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)
$612
$647
$650
6.9%
$38
$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
Physician
Readmission
Note: Spending for each service is based on standardized Medicare amount excluding IME, DSH, Wage Index
Source: MedPAC, June 2008
31
PAYMENT & DELIVERY SYSTEM REFORM
CMS IS PUSHING GROWTH IN ACOS & BUNDLED PAYMENT
ACO Growth
• Total # of Medicare ACOS: 259
• >4 M Medicare Beneficiaries
Source: The Advisory Board Company
Bundled
Payments for
Care
Improvement
Initiative
• Total # of Participants: >500
• 4 Care Models
• The largest voluntary Medicare
payment innovation program
32
BUNDLED PAYMENTS WILL HAVE TO BE DESIGNED CAREFULLY
TO ACCOUNT FOR THE BENEFITS OF TECHNOLOGY
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%
Therapy
*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.
33
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
34
Medicare 5% SAFs, 2009; costs not yet risk-adjusted
MEDTRONIC IS ADAPTING TO THE CHANGING HEALTH
CARE LANDSCAPE
35
TRANSFORMING TO DELIVER ECONOMIC VALUE
Universal Healthcare Needs
ECONOMIC VALUE
IMPERATIVE
IMPROVE
OUTCOMES
EXPAND
ACCESS
OPTIMIZE COST
and EFFICIENCIES
Key Medtronic offerings must:
1
Specifically
address one
or more of the
Universal
Healthcare Needs
2
+
Deliver a
quantifiable
financial benefit
to the target
customer
BROADENED CUSTOMER SET: PHYSICIANS l ADMINISTRATORS l PAYERS l PATIENTS
36
CLAIMS DATA IS ESSENTIAL COMPONENT FOR
HEALTH ECONOMICS ANALYSES
Health Outcomes
• Mortality
• Readmissions
•Constructed Outcomes (treatment/procedure migration, etc.)
• Patient ID
• Race
• Sex
• Age
• Location
• Mortality
Individual
Characteristics
• Patient ID
• Facility &
Physician ID
• Procedures
• Diagnoses
• Length of
Stay
• Payments
• Charges
• Discharge
Location/Stat
us
• Dates/Qtrs
Physician
And Facility
Claims
• Hospital ID
• Cost to
Charge
Ratios
• Quality
Metrics
• Ownership
Facility
Characteristics
Health Outcomes
•Readmissions
•Constructed Outcomes (treatment/procedure migration, etc.)
• Patient ID
•Sex
• Age
• Location
• Mortality
• Patient ID
• Facility &
Physician ID
• Procedures
• Diagnoses
• Length of
Stay
• Payments
• Charges
• Discharge
Location/Stat
us
• Dates
Individual
Characteristics
Physician
And Facility
Claims
• Drug
Dispensed
• Quantity
• Strength
• Days
Supplied
•Dollar
Amounts
• Work Days
Missed
• Lab results
(Hba1c, etc)
• Smoking
• Blood
pressure
• Weight
Pharmacy
Claims
Productivity
Lab
Health Risks
Entire Medicare Population
(>65 yrs, disabled)
N = 46 million
Sample of Commercially Insured
(working age & dependents)
N = 40 million
Medicare Claims Data
Commercial Claims Data
37
CLAIMS DATA USED TO GENERATE EVIDENCE &
DEVELOP DATA-DRIVEN POLICY POSITIONS
1.
Payment accuracy and reform
•
•
•
2.
Sustain payment amounts for products and procedures
Shape payment reform policies to ensure value is recognized
Estimate affects of payment policies
Comparative research
•
3.
Compare various treatment effects on available outcomes
Cost and utilization analysis
•
•
•
4.
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
38
Questions/Answers
Thank You!
39