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Reimbursement

Tue, 03/31/2009 - 9:26am

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Reimbursement is a critical issue for medical device manufacturers, but is it so important that it should have a direct impact on device design? Should the need and subsequent development of critical technologies drive innovation or are financial concerns playing back-seat driver? This was the topic for this month's Perspectives question that was posed to the community.
With economic challenges looming perhaps greater than ever for medical device manufacturers, will reimbursement concerns be the "go/no go" for a product's design in the near future and if not, what is the primary deciding factor?


CEO, Reimbursement Principles Inc.

Reimbursement is critical to the go/no go decision. Only devices that are "instant winners" and "jackpot winners" will be eligible for reimbursement that supports their pricing. An "instant winner" is a device that enables an existing procedure to be performed better, cheaper, or faster. A "jackpot winner" enables a new procedure that provides a good clinical solution where none previously existed.

An "instant winner" requires no change to coding, coverage or payment. The challenge with an "instant winner" will be to document provider efficiencies and/or patient outcome improvements to support a premium price, because provider reimbursement will not increase.

Coding, coverage, and payment will all have to be developed for the "jackpot winner." Clinical evidence documenting significant improvement in patient outcomes compared to the alternatives is essential. However, these documented improvements may support a level of reimbursement for the new procedure that, in turn, will support a premium price. Creating this scenario usually takes three to five years, an important factor in product planning.

Early determination of reimbursement winner status is both possible and necessary to avoid unprofitable product development efforts, and both types of winners must be supported with the right evidence.
President, Plastics Engineering and Development Inc.

Reimbursement for medical care in conjunction with diagnostic related groups will most likely continue to be compressed. Medicare and Medicaid historically underpay hospitals and physicians and force providers to charge private insurers more for their services, driving up premium costs to employers and employees.

What does this mean for medical device manufacturers regarding their strategies and decisions on future product designs? Certainly product costs and clinical utility should be the central focus of any design. It is all about meeting the need and not about the technology. Healthcare providers will always have a need for innovative solutions. Therefore, medical reimbursement should not be the deciding factor for future innovation.

Product design can solve problems for physicians, hospitals, and patients in many different ways. An example of this is the alarming rate in which hospital-acquired blood stream infections (BSI) are rising. They are associated with increases in patient mortality, length of stay, and cost of care. According to the CDC, over 350,000 BSIs occur every year, costing the U.S. healthcare system billions of dollars annually. Devices designed to eliminate these staph infections will solve a huge problem, a problem that has nothing to do with medical reimbursement. Again, understanding the need and providing cost effective solutions will provide future opportunities for device manufacturers with a committed product design and development strategy.

Manager, Northeast Systems Engineering, Logic Engineering Design Services

History shows few examples of unreimbursed devices succeeding. However, we must remember that virtually all devices in use today were once themselves unreimbursed by insurers. Today, thousands of devices are reimbursed, or are critical to procedures that are reimbursed, so clearly it's possible to gain reimbursement. In fact, most of the greatest device successes have been from new technologies that required new reimbursement coverage.

Any attempt to gain new coverage carries some risk, but this can be evaluated and weighed against the potential rewards. An excellent study published in the January/February 2005 issue of Health Affairs demonstrated that Medicare, by far our country's largest insurer, has been quite reliable in reimbursing those new technologies that have accumulated at least fair evidence of improving medical outcomes.

Assuming that rational coverage decisions by Medicare continue, several questions must be asked before plunging into development of a currently-unreimbursed device: What quality of evidence presently exists demonstrating that the device will improve medical outcomes? What is the cost (and time needed) to perform research to demonstrate improved outcomes? What is the likelihood of success? These are often not easy questions to answer, but realistic assessment of the answers will help point the way forward.
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