The Medical Arms Race: Impact of Medicare Coverage Payment Policies

1. The Medical Arms Race:Impact of Medicare Coverage & Payment Policies Barry M. Straube, M.D. Centers for Medicare & Medicaid Services (CMS) Medical Technology Leadership Forum October 14, 2007

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3. 3 CMS as a Public Health Agency Using CMS influence and financial leverage, in partnership with other healthcare stakeholders, to transform American healthcare system Focusing on not just Medicare & Medicaid, but also Commercial, uninsured, etc. Quality, Value, Efficiency, Cost-effectiveness Person-centeredness Assisting patients and providers in receiving evidence-based, technologically-advanced care while reducing avoidable complications & unnecessary costs

4. 4 Congressional & Employer Interests Many opportunities for improving the quality of healthcare services, outcomes and efficiency Increasing reimbursement for healthcare services leads to: No uniform or widespread improvement in quality Increased utilization of some services Net increase in overall healthcare expenditures Congress & employers looking to CMS and healthcare providers to demonstrate ability to improve quality, avoid unnecessary complications and costs Overall Medicare payment reform linked

5. 5 CMS Quality Roadmap VISION: The right care for every person every time Make care: Safe Effective Efficient Patient-centered Timely Equitable

6. 6 CMS Quality Roadmap: Strategies Work through partnerships to achieve specific quality goals Publish quality and cost measurements and information as a basis for supporting more effective quality improvement efforts Pay in a way that expresses our commitment to quality, and that helps providers and patients to take steps to improve health and avoid unnecessary costs

7. 7 CMS Quality Roadmap: Strategies Assist practitioners in making care more effective and less costly, especially by promoting the adoption of HIT Bring effective new treatments to patients more rapidly through coverage and payment policies and help develop better evidence so that doctors and patients can use medical technologies and treatments more effectively, improve quality and avoid unnecessary complications and costs

8. 8 CMS Quality & Value Initiatives Hospitals Nursing Homes Home Health Agencies Dialysis Facilities Physician Offices More to come��. Cross-setting quality & efficiency focus (care across the continuum) increasingly important, patient-centered Evidence-based medicine essential Should comparative effectiveness and cost efficiency be included? Medical technology components not directly addressed

9. 9 CMS & Quality Alliances Public-private partnerships seem to be working, albeit with an urgency for faster progress Broad National Quality Alliances Hospital Quality Alliance (HQA) Ambulatory Care Quality Alliance (AQA) Quality Alliance Steering Committee (QASC) Pharmacy, ESRD, Cancer Quality Alliances, etc., with more emerging Consensus-driven quality & efficiency measures identification, prioritization, development, endorsement, and implementation Where does medical technology fit in this model?

10. 10 Healthcare Transparency Initiative Administration�s Transparency Initiative Making available quality and price/cost information Allowing consumers, employers, payers to choose the best value healthcare Presidential Executive Order The Secretary�s Initiative Four Cornerstones Information on quality Information on cost/price Promote interoperable HIT systems Incentives for higher-quality, efficient care

11. 11 Value-Driven Healthcare Initiative Community Leaders Early stage community collaboration efforts in healthcare quality Recognized by the Secretary of HHS Chartered Value Exchanges (CVEs) Local collaboratives focused on quality improvement and use of aggregated data with public reporting Designated by the Secretary HHS Learning Networks run by AHRQ Medicare data access qualifications by CMS

12. 12 Value-Driven Healthcare Initiative Better Quality Information for Medicare Beneficiaries: BQI Pilots via AQA WI, MN, IN, MA, AZ, CA Testing of data aggregation and attribution of commercial, Medicare, & Medicaid quality & efficiency data Pilot site use of quality data for: Quality improvement Consumer & employer choice of providers Pay-for-Performance and other incentives for higher quality and efficiency

13. 13 Medical Technology & Health Care Costs Health care spending has grown at an annual average rate of 9.8% 2.5% faster than the economy as a whole Health care total spending has risen from $75 billion in 1970 to $2.0 trillion in 2005 Will reach $4.0 trillion by 2015 Health care as share of the economy 7.2% in 1970 16.0% in 2005 20% in 2015 (projected)

14. 14 Medical Technology & Health Care Costs Health care spending per capita $356 in 1970 $6,697 in 2005 $12,320 in 2015 (projected) Begs the question of why health care costs are rising so much more rapidly than other goods and services Is medical technology driving the process?

15. 15 Technology and Spending David Cutler (1995) estimated 50% 81% of economists identify technology as primary cost driver (Fuchs 1996) Project Hope (March 2001) estimates 25-33% of growth is technology BCBSA report (Oct 2002) estimates 18% of growth is technology

16. 16 Health Technology Health technology includes: Devices, Equipment & Supplies Drugs Biologics Surgical & medical procedures Support systems Organizational & Managerial systems All used in the prevention, screening, diagnosis, treatment & rehabilitation of disease

17. 17 Health Technology�Mechanisms of Action� Development of treatments for previously untreatable terminal illnesses (DM, HIV/AIDS, ESRD) Clinical ability to treat previously untreatable acute illnesses (CABG, PCTA, etc.) Ability to treat diseases within diseases (ESAs in ESRD) Expansion of treatments to other conditions Ongoing improvement in existing treatments Clinical progress in treatments to extend scope of medicine beyond its perceived boundaries (mental illness, substance abuse, etc.) Discovery of new illness or subsets of global illnesses

18. 18 Impact of New Technology Impact on cost: Increase v.s. decrease in total treatment costs What level of use does new technology achieve? Does it lead to new populations to be treated? Evaluation can be complicated Dialysis for ARF/CRF Anesthesia

19. 19 Growth of New Technology Consumer demand Health insurance systems Desire by providers to treat patients with latest and best treatment Business incentives Providers Manufacturers Investors

20. 20 Health Technology Assessment Assists policymakers on medical, economic, social & ethical implications of dissemination and use of health technology Synthesizes findings from clinical research and includes analysis of costs, comparative effectiveness & cost-effectiveness, and social implications of health technology Most European countries have established agencies for HTA and provision of evidence-based information to policymakers

21. 21 Federal Regulation of New Technology Regulation by law Regulation by coverage decisions Regulation by payment formulas/mechanisms Benefit category Defined reimbursement Competitive bidding Outcomes-based reimbursement Value-based purchasing or P4P Non-payment for �never events�

22. 22 Medicare Payment History Prior to 1983 Cost reimbursement Allowed acquisition and use of technologies with little consideration of cost in payment determination 1983 Prospective payment to hospitals initiated Diagnosis related groups (DRGs) Fixed price for hospitalization based on primary diagnosis 1993 Physician RBRVS system initiated, prospective payment for physicians Prospective payment for outpatient, SNF, home health, etc., in subsequent years ESRD has been capitated since inception, plus drugs

23. 23 Medicare Coverage & Payment for Technology Major share of total healthcare spending CMS policy influences private and other public payer policies Basic decisions Should any use of the technology be considered? Should coverage be limited to specific clinical situations? If technology is covered, how much should be paid? Should physicians be paid for use of the technology? Will outpatient use of the technology be covered? Will the cost of purchasing and operating the technology be reimbursed? Cost-effectiveness not considered

24. 24 Medicare Payment for New Technology Part of CMS Quality Roadmap A balance between: Improving outcomes for Medicare beneficiaries Ensuring this is done in a fiscally responsible manner Medicare offers additional payments for innovative technologies leading to: Access to otherwise unaffordable new technologies Potential availability in both inpatient & outpatient settings

25. 25 Steps to Medicare Reimbursement Regulatory approval (if applicable) Benefit determination Coverage Coding Payment

26. 26 Statutory Basis for Medicare Coverage Sec. 1862 (a)(1), Title 18, SSA �. . .no payment may be made. . .for expenses incurred for items or services. . . [which], except for items and services described in a succeeding subparagraph, are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.�

27. 27 Reasonable and Necessary Safe and effective (per FDA, if applicable) Adequate evidence to conclude that the item or service improves health outcomes emphasis of outcomes experienced by patients generalizable to the Medicare population Future attempts to provide greater detail on producing �adequate evidence� e.g coverage of PET for oncology catapulted that industry For that rapid diffusion to be evidence-based, coverage standard must be EBe.g coverage of PET for oncology catapulted that industry For that rapid diffusion to be evidence-based, coverage standard must be EB

28. 28 National & Local Coverage Decisions NCDs 10%, LCDs 90% Transparent process Transfer of LCD oversight to Coverage & Analysis Group (CAG), Office of Clinical Standards & Quality (OCSQ) Greater consistency at local level Alignment with national process More relevant with MAC implementation Consolidation of LCDs by MACs Technology Assessment Transition from MCAC to MedCAC

29. 29 National Decisions National Coverage National Noncoverage National Coverage with restrictions Specific populations Specific providers/facilities Evidence development

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31. 31 Facility Standards Transplant centers Lung Volume Reduction Surgery Left Ventricular Assist Devices Carotid Stents Bariatric Surgery

32. 32 CED Background In the past, Medicare generally covered items or services if they were FDA-approved During the 1990�s CMS began to make national coverage decisions (NCDs) using evidence-based reviews The available evidence does not always allow us to apply the results to the Medicare population Available evidence also does not always determine long term effectiveness of an item or service

33. 33 Evidence Development at CMS Goal is to promote innovation while obtaining value in health care Prompt coverage serves to speed access to promising new technology Promote promising, potential high value services Studies can improve evidence available to patients, clinicians, policymakers Hope to better target treatments to subpopulations with greatest benefit Broadens concept of research beyond RCTs for purposes of coverage decisions Allows monitoring over long-term

34. 34 CED & Reasonable and Necessary

35. 35 Flexible Coverage ProcessesExamples Prophylactic implantable cardioverter defibrillator (ICD) Data submitted to national registries, at low cost for participating hospitals all over the country Otherwise would have more limited coverage Expanded coverage to reach more patients Last January, CMS expanded coverage for implantable defibrillators (known as ICDs), which we expect to save thousands of lives each year. This decision increased the number of Medicare beneficiaries eligible for an ICD by a third, reaching half a million patients with heart disease. Certain patients with heart failure or who have had a heart attack are covered without restriction. Other patients � including some receiving an ICD as a preventive measure -- are covered if they are enrolled in a clinical trial or a data collection registry. CMS concluded that evidence supporting ICD use in these latter groups was not yet good enough for unrestricted coverage. But we chose to extend coverage now along with the collection of further evidence in order to reach those who might benefit as quickly as possible. Another example of expanded coverage tied to data collection involved 4 chemotherapy drugs approved for colorectal cancer that are used off-label for other types of cancer as well. There is currently not enough evidence to know whether these off-label treatments are effective. But we�ve now extended coverage nationally for patients in clinical trials. This ensures patients are protected, provides greater access, and will help to develop more definitive evidence on the effect of these treatments in seniors. We made similar decisions for PET scans used to help diagnose a range of cancers as well as Alzheimer�s Disease, if the patients and doctors participate in clinical studies or submit information to appropriate databases. Last January, CMS expanded coverage for implantable defibrillators (known as ICDs), which we expect to save thousands of lives each year. This decision increased the number of Medicare beneficiaries eligible for an ICD by a third, reaching half a million patients with heart disease. Certain patients with heart failure or who have had a heart attack are covered without restriction. Other patients � including some receiving an ICD as a preventive measure -- are covered if they are enrolled in a clinical trial or a data collection registry. CMS concluded that evidence supporting ICD use in these latter groups was not yet good enough for unrestricted coverage. But we chose to extend coverage now along with the collection of further evidence in order to reach those who might benefit as quickly as possible. Another example of expanded coverage tied to data collection involved 4 chemotherapy drugs approved for colorectal cancer that are used off-label for other types of cancer as well. There is currently not enough evidence to know whether these off-label treatments are effective. But we�ve now extended coverage nationally for patients in clinical trials. This ensures patients are protected, provides greater access, and will help to develop more definitive evidence on the effect of these treatments in seniors. We made similar decisions for PET scans used to help diagnose a range of cancers as well as Alzheimer�s Disease, if the patients and doctors participate in clinical studies or submit information to appropriate databases.

36. 36 Flexible Coverage ProcessesExamples Additional off-label uses of cancer drugs No FDA-approved results, and no studies covered in medical references Previously would not have been nationally covered Evidence developed through clinical trials FDG-PET scanning For dementia and neurodegenerative disorders For cancer diagnosis, staging, monitoring Evidence developed through clinical trials

37. 37 Coverage with Evidence Development NCDs

38. 38 Uses of CED Registry Data Track short-term outcomes: postoperative complications, in-hospital mortality Compare adverse events with published clinical trial results or gold standard Monitor performance Create longitudinal databases Post coverage analyses: head to head comparisons, case control studies, or nested case control studies Develop clinical criteria and contraindications (risk stratification)

39. 39 Coverage with Evidence Development CED will not occur often CED will always be used to improve access to technologies and treatments for Medicare beneficiaries CED will not interfere with FDA�s authority CED registries are not for ascertaining product safety & efficacy CED will not interfere with NIH role CED studies will not duplicate or substitute for NIH sponsored research

40. 40 CMS Clinical Research Policy The proposed revisions to the Clinical Trial Policy addressed the following categories of issues: General issues Appropriate standards of a clinical trial that, if met, would ensure that the study is conducted pursuant to section 1142 of the Act Appropriate processes that ensure that those standards are met Items and services that are covered in studies meeting those standards NCD due October 17, 2007 FDA Amendment Act of 2007 may affect future course of CMS CRP

41. 41 FDA/CMS Parallel Review FDA: �Safe & Effective� CMS: �Medically Necessary & Reasonable� FDA approval has predated CMS coverage determinations HHS desire to make available new technologies and treatment to doctors and patients more rapidly Parallel Review Current streamlining efforts Ability to come in to CMS at any time in the process and discuss coverage and payment issues Post-marketing surveillance and CED overlap?

42. 42 MMA Section 1013 Authorizes AHRQ to conduct and support research with a focus on clinical outcomes, comparative clinical effectiveness, and appropriateness of pharmaceuticals, devices, and health care services Research informed by needs of Medicare, Medicaid and State Children�s Health Insurance (SCHIP) programs

43. 43 CMS Partnership with AHRQ Jointly selected 10 conditions affecting Medicare beneficiaries, with AHRQ to analyze effectiveness of interventions: Ischemic heart disease Cancer Chronic obstructive pulmonary disease Stroke, including control of hypertension Arthritis and non-traumatic joint disorders Diabetes mellitus Dementia, including Alzheimer�s disease Pneumonia Peptic ulcer disease/dyspepsia Depression and other mood disorders

44. 44 Why We Need Comparative Effectiveness Reviews (CERs) Sound foundation of evidence about which treatments work best is essential to help doctors and patients achieve the best quality care We need to have such evidence available in useful and understandable formats AHRQ�s issuance of CERs are an important milestone to achieving these goals Beneficiaries in Medicare & Medicaid and their doctors will have better information about costs and benefits of treatment for a common health problem with multiple treatment options available

45. 45 Why We Need Comparative Effectiveness Reviews Better evidence on what works is a centerpiece of the prescription drug benefit and other reforms being implemented by CMS right now to bring the Medicare program up to date We need to do more to learn about and measure the effectiveness of alternative treatments for common health problems We need to do more to help patients and doctors get unbiased, practically useful information on benefits, risks, and costs

46. 46 Determining Payment for New Technologies Prospective payment systems include costs of existing technology and are adjusted for changing costs over time New Technology less than 3 years on market are recognized as needing interim extra payment or might not be accessible Pass-Through Payments in OPPS Devices Drugs, Biologicals, Radiopharmaceuticals Add-On Payments for IPPS

47. 47 Add-On Payment Criteria �Newness� Technology may be considered new for 2-3 years after becoming available on the market Substantial clinical improvement Demonstrated substantial clinical (diagnosis or treatment) improvement over existing technologies High Cost Technology must be inadequately paid under the DRG system as evidenced by meeting a defined cost-threshold (defined in terms of standardized charges). Thresholds for each DRG published annually in Table 10 of the IPPS final rule Multiple manufacturers

48. 48 Cost Effectiveness and Safety: Is the Future Now? Least costly alternative (LCA) Artificial Lumbar Disks Avastin and Lucentis for Adult Macular Degeneration (AMD) ESAs in ESRD and Cancer Power Mobility Devices Daily dialysis Intra-ocular lenses

49. 49 Contact Information Barry M. Straube, M.D. CMS Chief Medical Officer & Director, Office of Clinical Standards & Quality Centers for Medicare & Medicaid Services 7500 Security Boulevard Mailstop: S3-02-01 Baltimore, MD 21244 Email: Barry.Straube@cms.hhs.gov Phone: (410) 786-6841