/    /  I.8 Requirements for Reimbursement for Innovation
Basic Concepts in Device Development

Requirements for Reimbursement for Innovation

Authors

Joseph Chin, MD
Seth Clancy

play-sharp-fill

Joseph Chin, MD

The purpose of this section is to provide background on how the Centers for Medicare & Medicaid Services (CMS) approaches coverage of technologies as well as offer an update of how CMS has more recently approached evidence development, how CMS works closely with stakeholders trying to provide coverage of items and services in clinical studies, and how CMS also has worked with the U.S. Food and Drug Administration (FDA) on a number of studies focusing on increasing access to cardiovascular intervention in the Medicare population.

Approaching Coverage and Payment

Medicare was established in 1965 as a statutory defined benefit program. The primary objective is to provide coverage for items or services that are reasonable and necessary for the diagnosis and treatment of injury or illness or to improve the functioning of a malformed body member, which is the primary focus when determining what Medicare covers and pays for. Specifically, it’s defined in terms of the beneficiaries, the care providers, and the setting. For example, the Medicare population is specifically older adults, the disabled population, and end-stage renal disease (ESRD) patients. At the current time, the population is comprised predominantly of older adults.

As of 2015, there were 56 million beneficiaries in Medicare, 47 million (83%) of whom were older adults and about 9 million (16%) disabled individuals. The ESRD population has remained fairly stable over time, at approximately 550,000 (1%) patients. The older adult population is increasing as the Baby Boom population ages into the Medicare program.

The program also is defined in terms of the types of proprietors: it mainly recognizes providers that Medicare will allow payment to, such as clinicians. There are other providers, such as ophthalmologists and audiologists, who are important health care providers but who fall outside of the statute and can’t directly bill Medicare per the way the program was established. This is not because they are not important health care providers, but due to the mechanisms used to pay for these specific providers under Medicare. The settings are also specifically defined; typically, inpatient, outpatient, and the clinical office setting. There are other settings where CMS has no jurisdiction at this point, such as community-based settings.

Those are the primary boundaries CMS must work within to determine what is covered and paid for under Medicare.

Quality Payment Program

In 2015, the Secretary of the Department of Health and Human Services announced an important change for Medicare, moving from a volume-based payment model to a value-based approach (1). Since then, CMS payments have supported value as well as improved outcomes and, in that sense, the changes have improved the health of our population.

The quality payment program (QPP) (Figure 1) was established through the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization Act of 2015, better known as MACRA. With the repeal of a sustained growth rate modeling approach, the QPP rewards the delivery of high-quality patient care for eligible clinicians or groups through two avenues: Advanced Alternative Payment Models (Advanced APMs) through the Center for Medicare and Medicaid Innovation (CMMI); and a merit-based incentive payment system (MIPS) through the Center for Clinical Standards and Quality (CCSQ). Additional information about the QPP and how the efforts approach value and quality are available at:

 

Figure 1. Quality Payment Program: Participation Tracks

As required by law, the Centers for Medicare and Medicaid Services has implemented a quality payment incentive program, referred to as the Quality Payment Program (QPP), which rewards value and outcomes through either the Merit-based Incentive Payment System (MIPS) or an Alternative Payment Model (APM). MIPS incorporates four performance categories in which a clinician is scored with the final score determining the payment adjustment, while APMs provide added incentives for achieving threshold levels in a customized payment approach.

In terms of evidence-based Medicare coverage, national coverage determinations address whether the evidence is sufficient to conclude that the item (device) or service improves clinically meaningful health outcomes for the Medicare population, as previously described. Medicare covers 95% of all older adults in the United States so the focus is a little different than private insurers and other health plans because the great majority of the Medicare population is older adults. In terms of basic coverage of new technologies, CMS looks at whether these devices improve health outcomes and, if they do, then how can access be increased to these devices as they are approved by the FDA and introduced into practice. Much of the focus of CMS has been on the latter aspect: bringing access to the population.

There are several methods that Medicare can use to cover items and services in clinical studies (Table 1). One of the first mechanisms was established in the mid-1990s and that was coverage of investigational device exemption (IDE) studies, as classified through the FDA. In 2015, CMS streamlined and centralized this process in the Evidence Development Division; before that, coverage of these studies was basically determined by local contractors in the regions.

 

Table 1. Clinical Studies Under Medicare

  • Investigational Device Exemptions (IDE)
    • Regulation at 42 CFR 405.201
    • New, centralized process in 2015
  • Clinical Trial Policy
    • Routine costs in clinical trials
    • National Coverage Determination (NCD)
      • Pub 100-3, Section 310.1
  • Coverage with Evidence Development (CED)
    • Individual CED studies through NCDs

CMS has been working closely with the FDA to harmonize the way both agencies approach the categorization of IDEs as either category A (experimental) or B (Nonexperimental/ investigational). In the first year, 86 out of 116 IDEs submitted were approved, which is a very high approval rate (74%). The ones not approved were earlier studies where the primary focus of the IDEs was as examples to determine proof of concept.

Although there are many consistencies in how the FDA approaches safety and effectiveness and how Medicare looks at reasonable and necessary services, there are some differences related to the statutory responsibilities of these two agencies. First, under an approved IDE, if the maximum sample size targets are reached, then Medicare will provide coverage for up to 24,000 beneficiaries for these studies. The second mechanism is a clinical trials policy that covers routine costs for studies that are sponsored by a federal agency, primarily for the National Institutes of Health for many of their studies. The third mechanism available is coverage with evidence development individually through national coverage determinations, which is being used more frequently to assist with new technology as it becomes FDA approved, then supporting clinical studies to meet specific outcomes in which CMS is particularly interested.

In 2015, under these three mechanisms, CMS covered more than 7,000 clinical studies involving almost 145,000 Medicare beneficiaries, a significant number of beneficiaries participating in these studies with coverage from Medicare.

As of late 2016, the CMS-FDA Parallel Review Program for Medical Devices was made permanent, another example where CMS has worked closely with the FDA to try to decrease the time from FDA approval to matching Medicare coverage of a specific technology. That this 2-year trial program was made permanent demonstrated the interest and commitment of both agencies to promote access and bring important technology forward and then pay for  innovation that improves health not only in the Medicare population, but also more broadly to the population in general. This link to the Federal Register describes the program and how to apply to participate (https://www.gpo.gov/fdsys/pkg/FR-2016-10-24/pdf/2016-25659.pdf).

Two other critical components of Medicare coverage of a technology are coding and payment (Table 2). A clinician needs a code, available from CMS, and there are a number of different code sets to obtain payment assigned through established CMS mechanisms, a prospective payment system or various fee schedules. With the QPP, that payment to providers can increase or decrease once the program is fully implemented.

 

Table 2. Coding and Payment

  • Code sets
    • Diagnosis-related group (Medicare Severity MS-DRG)
    • Current Procedural Terminology (CPT®*)
    • International Statistical Classifications of Diseases (ICD)
    • Healthcare Common Procedure Coding System (HCPCS)
    • Centers for Medicare and Medicaid Services specific codes
  • Payment
    • Prospective payment systems
    • Various fee schedules
    • Quality Payment Program (QPP)
    *Registered trademark of the American Medical Association

For additional information, there is an innovator’s guide that provides information about coverage coding and payment that will help start-up companies learn how to approach Medicare. Information and a download link are available at: https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/index.html.

Additional Reimbursement Considerations and Requirements

Establishing coverage and reimbursement is an essential requirement to ensuring market adoption and patient access for any medical device. Coverage and reimbursement decisions are complex, with stakeholders, decision making bodies and processes that are separate and distinct from the regulatory approval pathway. Even in the preclinical phase, assessments of the reimbursement landscape and evidence requirements can help developers plan for potential market access challenges that can be proactively addressed through early engagement with relevant stakeholders.

This section will discuss:

— regulatory versus coverage and reimbursement decisions;

— health system financing and health technology assessment (HTA) decision making around the world; and

— reimbursement in key global markets.

Regulatory Versus Coverage and Reimbursement Decisions

When considering the path to approval and widespread adoption for any medical device, it is important to distinguish the difference between regulatory decisions and coverage and reimbursement decisions. The primary goal of a regulatory decision is to assess the safety, performance and/or effectiveness of the device. Regulatory approval, however, does not guarantee a patient will be covered by a payer for the new technology or that health care providers will be reimbursed for the procedure.

Instead, coverage decisions are typically conducted by separate entities via HTAs. HTAs evaluate multiple device attributes including the clinical, economic, social and ethical value to make recommendations on whether a particular health system or payer should cover and reimburse the technology. Common requirements of HTAs include a description of the unmet therapeutic need, a summary of the existing clinical evidence base and a cost effectiveness analysis assessing the economic benefits of the new technology against the existing standard of care (2).

The decision to reimburse the technology ultimately lies with the health system or payer – the entity (or entities) with financial responsibility to cover medical services for a defined population.  Each payer or health system – whether national, regional or local – sets certain requirements for coverage and reimbursement. Reimbursement decisions take into account the HTA assessment and may be subject to other factors like payer budgetary or funding constraints. Ideally, payer reimbursement matches the new technology’s value and is adequate to facilitate appropriate adoption.

HTAs evaluate multiple attributes of a technology and there may be additional evidence and analyses required by device manufacturers beyond what is required for regulatory approval to secure coverage and reimbursement. Table 3 summarizes high level differences between regulatory and reimbursement processes (3).

 

Table 3. Differences in Regulatory Approval and Reimbursement Processes

HTA = health technology assessment; RCT = randomized controlled trial.

Reprinted with permission from Tsoi B, et al. Expert Rev Pharmacoeconomics Outcomes Res. 2013;13:497-511.

Health System Financing and HTA Around the World

Coverage and reimbursement processes vary greatly by geographic region and country.  Moreover, these differences are often driven by unique health system structure and financing.  In particular, within a country it is important to understand how patients are covered for health services, who pays for medical services, how these payments are financed and the role that HTA agencies play in recommending or determining coverage and payment.

United States

The United States is a multi-payer health care system with many different public and private entities providing coverage and reimbursement to different segments of the population. While over 66% Americans are covered by private health insurance, the single largest public payer is Medicare, providing coverage to more than 57.7 million Americans who are either over the age of 65 or under 65 with a permanent disability or end stage renal disease (4,5). Run by CMS, the Medicare program is financed through both tax revenue and beneficiary premiums (6). Since most patients with severe aortic stenosis are older than 65 years, the most dominant payer in the transcatheter aortic valve replacement market in the United States is Medicare.

For new, innovative technologies approved by the FDA without a clear predicate, Medicare does not automatically provide coverage. Instead, it is the responsibility of an external stakeholder (i.e., manufacturer or clinical society) to request a Medicare coverage decision at a local or national level (7). Once a coverage decision is requested, CMS conducts a review weighing the existing, available evidence to determine if the technology is a “reasonable and necessary” item or service that warrants coverage in the Medicare program (8). While CMS may gather disparate pieces of information in its evaluation of evidence, cost-effectiveness data are not a specific requirement to establish coverage for technology. Once CMS establishes a coverage decision, then the technology is formally covered and reimbursed by Medicare subject to the requirements of the coverage decision.

Rest of the World

The financing, coverage, and reimbursement of health care in the United States is structured differently compared to other economically developed countries. Many developed countries provide compulsory health insurance to all citizens, generally funded through tax revenue. In addition, coverage and reimbursement of innovative medical technologies may be subject to scrutiny with budget constraints requiring new technologies to demonstrate value for money.

For example, in the United Kingdom, the National Health Service (NHS) is a publicly funded agency providing health insurance to all residents in England, Wales, Scotland, and Northern Ireland. Health care is delivered locally through 98 publicly funded NHS trusts or through 147 nonprofit foundation trusts. Both the NHS and the trusts are subject to a defined, global budget (9).

Since budgets are fixed, new medical technologies are not automatically covered by the NHS. Instead, to make funding decisions, the NHS relies on a separate federal agency – the National Institute for Health and Clinical Excellence (NICE) – to perform technology assessments appraising the evidence and value of new technologies and make coverage recommendations (9). Unlike in the United States, NICE requires cost-effectiveness analyses for new medical technologies that are appraised against a predetermined value for money threshold. The current threshold for medical devices is generally ₤20,000 per quality-adjusted life-year (QALY) (10).

In Germany, health insurance is mandatory for all citizens, financed through tax revenue, and is provided at the county level (16 counties) through 250 public and 49 private competing statutory health insurance funds. While a variety of insurance funds exist, the German Federal Joint Committee (FJC) provides binding guidance to the health funds on which health services the funds will cover. The FJC is comprised of representatives from both provider associations and the statutory health funds (9).

Like the United Kingdom, separate federal agencies – the Institute for Quality and Efficiency in Health Care and the German Agency for Health Technology Assessment – provide guidance to the FJC and the public on the relative merits and value of new technologies. This guidance can be used by the FJC to evaluate coverage and to also make reimbursement decisions. The assessments incorporate clinical and economic benefits, including cost-effectiveness analyses (11).

Unlike in the United Kingdom, German technology assessments are not systematic or required for coverage and reimbursement. Once a medical technology receives its certifying CE Mark (and if the FJC has not explicitly excluded coverage), the technology may be used in clinical practice and is reimbursed within the existing payment system.

HTA assessments of new medical technologies present specific challenges. In particular, HTAs systematically evaluate the available body of evidence at a specific point in time, with randomized controlled trials (RCT) as the gold standard for clinical evidence (12).  However, medical devices (unlike pharmaceuticals) are characterized by two unique phenomena: the “learning curve” – in which an operator’s skill and experience with a device improves device outcomes – and rapid product iterations (13). Both phenomena may improve a device’s clinical and economic outcomes but also make conducting RCTs challenging, given the time and resources required to design and enroll a properly powered study. By the time an RCT is complete, the evidence generated for a device may not reflect contemporary clinical practice or device iteration (13,14).

Moreover, in some cases, HTA evaluations themselves can take a significant amount of time to complete (15). Given the previously mentioned phenomena of operator “learning curves” and device iterations unique to medical devices, the underlying clinical and economic evidence base may be obsolete by the time an HTA’s evaluation is complete and implemented. This is another reason HTA decisions may not reflect contemporary technology or contemporary clinical practice.

Considerations for New Market Entrants

Establishing coverage and reimbursement is essential to the success of any medical technology but is also incredibly challenging and complex. The multitude of stakeholders, differences in evidence requirements and the variability in HTAs around the world, make the processes both time consuming and resource intensive. As health care spending increases, the scrutiny on new medical technologies will only continue to grow with all stakeholders – payers, providers, patients – demanding value (in terms of clinical outcomes, cost offsets, etc.) for each dollar invested. It is imperative for any developer to evaluate HTA requirements in key markets throughout product development to inform overall market potential and commercial strategies.

Looking forward, a few specific considerations should be considered for new market entrants:

— Quantifying burden of illness: Illustrating the unmet need and the economic impact of a disease is a foundational element to establishing the value of a new technology to an HTA. Cost-burden analyses quantify the budgetary and societal cost of a disease that – in some cases – may augment or complement the overall value story in an HTA submission. These analyses are essential to putting the value of the technology in the appropriate context of the disease, the affected patients, and the economic consequences of the status quo.

— Evidence requirements: RCTs are the gold standard of clinical evidence but generating that evidence may not be an option for new market entrants or new device generations within existing approved indications. Communicating and demonstrating improvements in clinical outcomes as a result of new technology and evolving clinical practice is important to ensure HTA decisions are made with the most contemporary, relevant evidence.

— Cost effectiveness as a specific requirement: As health care budgets are constrained and payers balance affordability with access to new technologies, the incremental value of new medical technologies will only increase in importance. Japan is experimenting with a new HTA process and in the United States – while HTAs are not explicitly required for coverage and reimbursement –provisions in the 2010 Affordable Care Act call for realigning reimbursement incentives to favor high value procedures and technologies (16). Conducting landscape assessments, proactively planning access strategies, and modeling product cost effectiveness relative to the standard of care during product development are all important to gauge potential coverage and market adoption post-regulatory approval (17).

— Documenting the “learning curve” for cost-effectiveness evaluations: The “learning curve” is a unique characteristic of medical device markets. As an operator’s skill and experience with a device improves, so do the device outcomes (13,14 ).  However, HTAs may prioritize and evaluate outdated evidence that doesn’t incorporate this characteristic or the related impact on outcomes. Nonetheless, many HTAs relied heavily on evidence from early, outdated studies that did not accurately reflect current clinical practice or outcomes. To accurately assess cost effectiveness, it is important that HTAs consider the impact of the learning curve on clinical outcomes and cost.  Furthermore, it is incumbent on developers to document and quantify the learning curve impact (if applicable) as a component of any HTA submission.

— Reducing procedure cost and improving efficiency: To justify the incremental cost of a new technology, it is important to consider the cost offsets resulting from the technology relative to the standard of care. The ability to demonstrate reduced resource utilization (i.e., lower hospital length of stay and reduced procedure time) and quantifying the impact is an important foundation to any value assessment. Cost offsets may not be readily apparent when a new technology is introduced. The ability to document and communicate the improvements over time is important to consider when developing an evidence base required for coverage and reimbursement decisions.

References

  1. McGann P. Better Care, Smarter Spending, Healthier Outcomes. Consult Pharm. 2016;31:410-1.
  2. Ciani O, Wilcher B, van Giessen A, Taylor RS. Linking the regulatory and reimbursement processes for medical Devices: the need for integrated assessments.” Health Econ. 2017;26:13-29.
  3. Tsoi B, Masucci L, Campbell K, et al. Harmonization of reimbursement and regulatory approval processes: a systematic review of international experiences. Expert Rev Pharmacoeconomics Outcomes Res. 2013;13:497-511.
  4. Mossialos E, Wenzl M, Osborn R, Sarnak R. 2015 International Profiles of Health Care Systems. The Commonwealth Fund; 2016. Available at http://wwww.issuelab.org/resources/25100/25100.pdf.
  5. Centers for Medicare & Medicaid Services. Medicare Enrollment Dashboard. Available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMSProgramStatistics/Dashboard.html.
  6. Meyers AD. Commercializing Successful Biomedical Technologies. J Commer Biotechnol. 2008;14:353-4.
  7. Garfield S. ISPOR Global Health Care Systems Road Map. Medical Device Pricing and Coverage – USA. Presented at the ISPOR 15th International Meeting; May 2010; Atlanta, Georgia. Web. 26 Apr. 2017. Available at: https://tools.ispor.org/htaroadmaps/. Accessed May 7, 2019.
  8. Centers for Medicare & Medicaid Services. Medicare Coverage Determination Process. Available at: cms.gov/medicare/coverage/determinationprocess/.
  9. Mossialos E, Wenzl M, Osborn R, Sarnak R. 2015 International Profiles of Health Care Systems. The Commonwealth Fund; 2016. Available at: Available at https://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_fund_report_2016_jan_1857_mossialos_intl_profiles_2015_v7.pdf.
  10. McCabe C, Claxton K, Culyer AJ. The NICE cost-effectiveness threshold. 2008;26:733-44.
  11. Integlia D, Mazzoni E. Health Technology Assessment in the European Union: State of Art and Future Scenarios. I-com Institute for Competitiveness. 2017. Available at astrid-online.it/static/upload/7787/7787e169a7f0afc63221153a6636c63f.pdf.
  12. Velasco-Garrido M, Busse R. Health technology assessment: an introduction to objectives, role of evidence, and structure in Europe. World Health Organization on behalf of the European Observatory on Health Systems and Policies. 2005. Available at http://www.euro.who.int/__data/assets/pdf_file/0018/90432/E87866.pdf.
  13. Tarricone R, Callea G, Ogorevc M, Prevolnik Rupel V. Improving the methods for the economic evaluation of medical devices. Health Econ. 2017;26:70-92.
  14. Drummond M, Griffin A, Tarricone R. Economic evaluation for devices and drugs–same or different? Value Health. 2009;12:402-4.
  15. Basu S, Hassenplug JC. Patient access to medical devices—a comparison of U.S. and European review processes. N Engl J Med. 2012;367:485-8.
  16. New Health Technologies: Managing Access, Value and Sustainability, OECD Publishing, Paris. 2017. Available at: http://g8fip1kplyr33r3krz5b97d1.wpengine.netdna-cdn.com/wp-content/uploads/2017/01/OECD-on-new-drugs-and-pricing.pdf. Accessed May 6, 2019.
  17. Ijzerman MJ, Steuten LM. Early assessment of medical technologies to inform product development and market access. Appl Health Econ Health Policy. 2011;9:331-47.
Hide picture