Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.
The impact on medical device makers of a new proposed rule on accountable care organizations (ACOs) from the Centers for Medicare & Medicaid Services is uncertain, health care analysts told BNA.
Although device industry groups expressed concerns about protecting providers' treatment choices, some analysts said the proposed ACOs rule is likely to have an indirect impact on device makers and could even spur innovations for medical technologies that keep patients out of the most expensive care settings.
The proposed rule for ACOs under the Medicare Shared Savings Program, released March 31, would help doctors, hospitals, and other health care providers better coordinate care for Medicare beneficiaries. Comments on the proposed rule, which will be published in the April 7 Federal Register, will be accepted until June 6. The proposal was issued under the health reform law; provider and patient participation in the ACOs is voluntary.
Device industry trade groups issued statements reaffirming their support for an ACO program that protects access to innovative medical technology. The Medical Device Manufacturers Association (MDMA) and the Advanced Medical Technology Association (AdvaMed) said they are going to closely examine the proposed rule to assess whether it needs modification to achieve its objective. Both said they will submit detailed comments by the June 6 deadline.
Mark Leahey, president and chief executive officer of MDMA, said the group “remains firmly committed to ensuring that patients have timely access to safe and effective products and that nothing compromises the physician-patient relationship. As we have stated in the past, MDMA opposes any program that would provide hospitals and physicians financial incentives to reduce appropriate care or use a particular type of device. It is crucial that physicians have full access to any medical device that they determine is appropriate for their patient.”
Stephen J. Ubl, president and chief executive officer at AdvaMed, in a statement said it is important “that ACOs be implemented with strong safeguards to assure that patients have access to the most appropriate treatment for their needs and that medical progress is not inhibited--particularly since most current quality measures do not sufficiently capture critical dimensions of good patient care.”
Under the Patient Protection and Affordable Care Act, the Medicare Shared Savings Program will reward ACOs that lower costs while meeting quality standards. The program must be established by Jan. 1, 2012.
In a March 31 conference call with reporters, Health and Human Services Secretary Kathleen Sebelius said that ACOs would help reduce fragmented care and align payment with the most effective care. According to the rule, ACOs would save an average of $510 million over three years.
As part of the issuance of the ACOs proposal, the HHS Office of Inspector General released a notice on waivers of certain federal fraud and abuse laws for ACOs. In addition, the Federal Trade Commission and Department of Justice have released a statement on enforcement of antitrust laws for ACOs.
Ian Spatz, a senior adviser for health care at Manatt, Phelps & Phillips in Washington, told BNA April 4 the impact on the devices industry is “quite uncertain,” especially because the rule is only a proposal.
Spatz said that because the proposed design of the integrated provider networks is so new, much about the rule that remains unknown, especially where the center of clinical authority lies.
“This precise model ... people have no experience with it,” Spatz said, because the current private sector experiments on integrated care are reimbursed by capitation payments, and the proposed ACO system is built on top of the current Medicare fee-for-service (FFS) model.
Under the proposed rule, providers and suppliers can continue to receive traditional Medicare FFS payments under Parts A and B and be eligible for additional payments based on meeting specified quality and savings requirements.
Erik Johnson, senior vice president of Avalere Health, told BNA March 31 that any impact on device manufacturers would at first be indirect, because there is no carve-out in the proposal for device makers, and they were also not explicitly targeted.
Under the proposed rule, an ACO that meets the program's quality performance standards would be eligible to receive a share of the savings it generates below a specific expenditure benchmark that CMS would set for each ACO. The proposed rule would also hold ACOs accountable for downside risk by requiring ACOs to repay Medicare for a portion of losses (expenditures above its benchmark).
With the emphasis being placed on ACOs reducing the cost of care while increasing quality, Johnson said, hospitals and physicians might end up cutting back on certain supplies, which could have a negative impact on devices in the short term. In the long run, however, the effectiveness of the device will matter more than price, and only a limited amount of money can be saved by cutting back on supplies, he said.
Spatz said he would not be too worried about hospitals potentially cutting back on expensive devices because the reimbursement incentives in place under Medicare would not change. If a hospital in an ACO provides a patient with a device, that hospital would get reimbursed at the same time and at the same rate as it would under current Medicare FFS.
Randy Fenninger, senior policy adviser at Holland & Knight in Washington, told BNA April 1 that “there will be a terrible temptation” for hospitals to stop using certain devices or to cherry-pick the least complex patients, but the proposed rule would allow the government to monitor ACOs to discourage such behavior from providers.
He said the opportunities for medical device companies “could be great” if the ACO concept succeeds as envisioned. “I see this as an opportunity for innovative companies, but it won't be pain free,” Fenninger said.
Under ACOs, “the real bucket of money [for hospitals] is keeping people out of hospitals,” Fenninger said. So if ACOs succeeded, it would open outpatient markets for device manufacturers, he said. Device makers would have incentives to “create clever devices that get inpatients out of hospitals as soon as possible.”
Fenninger said he would advise manufacturers to look at what the most device-intensive procedures are and then figure out how to create innovative devices that get patients out of the hospital faster. For example, the length of hospital stay for total hip replacements has been decreasing steadily because of improvement in the devices used and improved surgical techniques.
“If device companies read the market right, they will be fine,” Fenninger said. If not, they will be bought by the companies that adjusted, and that were “nimble enough to shed products and divisions that aren't useful.”
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)