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The Reimbursement Top Ten List


What Investors Will Ask and What Companies Should Know When Developing or Evaluating a New Medical Technology

"Build it and they will come" is an anomaly in today's cost-conscious healthcare environment. Successfully launching a new technology is challenging, especially when it comes to the reimbursement affiliated with that technology.

The bottom line is that everyone needs to be paid. Hospitals must cover their costs, and adding new technologies to existing procedures without additional payment may cut into their required margins. Doctors must be appropriately compensated for performing challenging new procedures that are improvements over today's standard of care. Companies must cover their costs associated with a technology's launch in order to fund future discoveries. Investors and shareholders expect to maximize their return on investment.

The past decade has seen reimbursement become a critical driver determining the success of a technology in today's medical marketplace. This is not without many challenges. Payers have become more stringent with their coverage guidelines. Medicare has been tasked by the federal government to contain costs. As a result, hospitals and physicians have experienced steadily declining payments. 

Ultimately, at some point in a product's lifecycle, whether it is pre-market or post-market, it will be impacted by reimbursement. This impact can be either positive or negative to both the company and the key economic stakeholders. A well-designed reimbursement strategy, integrated into the business plan during the development phase and aligned with the clinical, regulatory, and marketing plans can help prevent a negative downturn. The strategic reimbursement plan should be a forethought, not an afterthought. If you wait, it may be too late.

There is often a stark contrast in the perception of what investors want to know and what companies understand pertaining to the reimbursement of a new technology. Not all breakthrough and emerging technologies will have favorable reimbursement at the onset. This is to be expected. Payers require outcomes data from well-designed clinical trials. The Centers for Medicare and Medicaid Services (CMS) needs cost data to determine an appropriate payment rate. Professional societies want to see technology adoption from their members and peer reviewed journal articles to support procedure codes and payment.

As due diligence progresses on a new technology, it is important not to fixate on what the landscape is or is not today. Instead, focus on creating a solid reimbursement plan and how favorable positioning for the technology is going to be secured. Reimbursement is a dynamic entity. Coverage, codes, payment, and competition are constantly changing. A well-designed strategy, addressing the critical drivers impacting the future reimbursement of a new technology, is just as critical to the success of that technology as the protocol in the clinical trial design or the regulatory strategy.

Where does one begin the reimbursement due diligence for a new technology? What are the critical factors to know and incor­porate into the strategy? The checklist below highlights the key drivers of reim­bursement that will impact the success of a new technology. The information obtained will provide companies and investors with the information necessary to determine the current reimbursement landscape of a technology. More importantly, it will de­fine the reimbursement strategy and allow companies to have a well-designed strate­gic plan early.

Top Ten List

1. Are there existing codes?

  • CPT® (Current Procedural Terminology) 
  • ICD-9-CM (International Classification of Diseases - 9th Revision Clinical Modification) 
  • HCPCS (Healthcare Common Procedure Coding System)

If so, have the codes been validated for the new technology through the appropriate entities? Codes are never determined in a boardroom. If you are not sure, seek the advice of the Professional Society, American Medical Association, or CMS.

2. What is the payment?

  • Physician Relative Value Units (RVU)
  • Hospital Outpatient Department Ambulatory Payment Classification (APC)
  • Ambulatory Surgery Center (ASC)
  • Hospital Inpatient (Diagnosis Related Group DRG)
  • Equipment and Supplies (Durable Medical Equipment Prosthetics, Orthotics and Supplies DMEPOS)

3. Who is the target patient population and what is the associated payer mix?

  • Medicare
  • Commercial insurance
  • Medicaid
  • Workers compensation

4. Is there competition?

  • Like product on the market today
  • Existing procedure that will be replaced with the new technology

5. How is the competition paid?

6. Are there existing coverage decisions, either positive or negative, impacting the new technology or competition?

  • Medicare (national or local)
  • Non-Medicare

Review the coverage decisions of both entities. Medicare and Commercial plans may have different coverage provisions.

7. Are there published data available for the new technology and competition?

  • Peer reviewed journals
  • Technology assessments
  • Professional society guidelines

Payers and the Societies require well-designed clinical studies. Randomized, controlled, multi-centered US studies are preferred. If there are not data available, develop the publication strategy to meet the needs of the key stakeholders as well as the company milestones.

8. What is the cost of the new technology?

Remember that cost and charges are not the same.

9. Will current payment be adequate to cover the cost of the procedure with the new technology incorporated?

Costs and charges are not the same. It is imperative to know the current cost of a procedure to your target customer. Sources are available to the public that contain procedure cost and utilization data. If adding technology to an exiting procedure, incorporate the cost of the technology into the procedure's current cost. If replacing a component of a procedure, or providing other cost savings (reduced procedure time, reduction in follow up treatment, shorter ALOS), incorporate those reductions into the procedure cost.

10. Do you have a well-defined reimbursement strategy? Has it been integrated into the clinical, regulatory, and marketing plans?

Coverage decisions may have an impact on the clinical trial design and the indication for use. Current payment for a procedure may affect the projected list price of a technology or the forecasted ROI. Integration of all strategies is critical!

Kelli Hallas, Executive Vice President of Reimbursement at Emerson Consultants, Inc. has over twenty years’ experience in the medical technology sector.


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