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Device Tax Repeal, Medicare Payment Top Industry Concerns, AdvaMed Says

Wednesday, February 19, 2014

By Nathaniel Weixel

Feb. 18 --Repealing the medical device tax will once again be the top priority of the medical devices industry in 2014, officials from the Advanced Medical Technology Association said during a Feb. 18 briefing.

Stephen J. Ubl, president and chief executive officer of AdvaMed, said the trade group also will focus on driving the growth of medical technology innovation and changing the Medicare reimbursement structure for medical technology in accountable care organizations.

According to Ubl, much of the industry's attention in the past has “rightfully” focused on regulatory issues with the Food and Drug Administration, but Medicare payment changes under the Affordable Care Act “are increasingly a concern to companies of all sizes,” Ubl said.

Ubl said AdvaMed would like the Centers for Medicare & Medicaid Services to institute a “transitional payment” methodology for new technology used in ACOs. Ubl said the payment methodology could be modeled after Medicare's pass-through payments for outpatient services and the add-on payments for inpatient services, which are intended to ensure that new technologies and procedures can be accessed by Medicare beneficiaries in a timely manner.

Ubl said senior citizens need to be ensured access to lifesaving innovative technology. Medicare ACOs aim to improve the quality and lower the cost of health care through several mechanisms, such as disease management programs, care coordination and the alignment of financial incentives for hospitals and physicians, but the current quality incentives are “weak,” he said.

Ubl said ACOs need a payment-neutral model that encourages providers to use innovative technologies that may increase costs in the short term but will save money in the long run.

According to AdvaMed, the number of therapies likely to qualify for the payment program would be relatively small, so the financial impact would also be relatively small.

Device Tax

Repealing the 2.3 percent medical device excise tax will be a top priority in 2014, David Dvorak, chairman of the AdvaMed board, said during the briefing. Dvorak also is president and chief executive officer of device maker Zimmer Inc.

The tax, which was part of the ACA, is projected to collect $38 billion over a decade. The tax took effect in 2013.

Ubl and Dvorak said AdvaMed was disappointed the politics of budget negotiations didn't allow for the tax repeal to be included in a final bill. However, they said the industry is encouraged by companion bills in the House and Senate to repeal the tax.

Dvorak said the devices industry is “ambivalent” about finding an offset if the tax is repealed. The job of finding a pay-for should be up to the lawmakers, not industry, he said.

Also Feb. 18, AdvaMed released a report examining the first-year impact of the excise tax. According to the report, the tax has led to employment reductions of about 14,000 industry workers and foregone hiring of 19,000 workers. The total job impact of the tax on industry employment was approximately 33,000.

The report, which polled AdvaMed member organizations at the end of 2013, also found that almost one-third of respondents (30.6 percent) said they had reduced research and development as a result of the tax. Almost 10 percent of respondents said they had relocated manufacturing outside of the U.S. or expanded manufacturing abroad because of the tax, according to the report.

During the briefing, Ubl said contrary to popular belief, companies haven't seen any “windfall” from the ACA's coverage expansion, and companies can't pass the cost of the tax on to patients or hospitals.

“We've seen no uptick in patients,” Ubl said. “The arguments that there's a windfall from the tax grows weaker by the day.”

To contact the reporter on this story: Nathaniel Weixel in Washington at nweixel@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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