Reimbursement Basics Mass Challenge 9-28-2010

8/8/2019 Reimbursement Basics Mass Challenge 9-28-2010

1/28

________________________________________

MassChallenge

September 29, 2010

Edward E. Berger

REIMBURSEMENT BASICS

FOR LIFE SCIENCE ENTREPRENEURS


2/28

________________________________________

THE REIMBURSEMENT CHALLENGE

Critically important element in

Investor due diligence

Commercial success Obstacles are over-hyped

Path to success is well marked

Careful analysis, planning and execution

guarantee success, if the technology is

worthy

2


3/28

________________________________________

THE GOOD NEWS

Medical technologies or therapeutics that

effectively address unmet clinical needs,

or that clearly improve outcomes, alwaysget reimbursed in the U.S.

Counter-examples?

If the case is made effectively

Understanding payers wants/needs

Effective execution of a well constructed plan

Compelling empirical demonstration of value

3


4/28

________________________________________

THE FIRST CRITICAL DIMENSION:

BILLABLE SERVICE OR EXPENSE LINE

Will the user (physician, hospital, patient)

be submitting a bill for your technology or

service?

Procedural requirements apply

Is it simply a component of a billable

service (e.g. surgical tool, office equipment,

analyzer, etc.)? Cost justification is crucial

Answer(s) may be specific to site-of-service

4


5/28

________________________________________

THE SECOND CRITICAL DIMENSION:

WHO PAYS?

Self pay Market sets price and demand

No significant procedural requirements

Private third party payer Highly decentralized and unpredictable

Highly variable in eligibility, methodology and amount

Public third party payer (Medicare/Medicaid) Relatively centralized and predictable


6/28

________________________________________

THIRD PARTY PAYMENT: THREE DISTINCT

BUT RELATED ELEMENTS

Coding

A unique and objective identification of theservice or item provided

Coverage The determination of whether and under what

circumstances to pay for the service or item

Reimbursement The specification of a payment methodology

and amount


7/28

________________________________________

CODING IS THE MOST COMPLEX OF THE

THREE AND THE LEAST IMPORTANT Multiple coding systems mandated for

different purposes

CPT, ICD9, ICD10, HCPCS Each controlled by a different organization

Overlapping but not always synched

Each with distinct application processes,

requirements, review cycles andimplementation schedules

But system provides options during code

acquisition / optimization process


8/28

________________________________________

NEED A WELL DESIGNED AND

EXECUTED CODING STRATEGY

Identify and evaluate existing codes

fit and adequacy of payment

If new code is needed Understand requirements and timelines

Execute plan to optimize outcomes

Utilize unspecified procedure code ininterim

Does impose administrative burden on

company and customers8


9/28

________________________________________

COORDINATE MD AND FACILITY

CODING (AND PAYMENT) STRATEGIES

Utilization affected by adequacy of paymentto both physician and facility

Market forces operate

Physicians allocate time to procedures /activities with highest return on time and effort

Hospitals likewise will allocate space, time andcapital to procedures with good returns

Extreme disparities will lead to exclusionsby either party


10/28

________________________________________

COVERAGE POSES MORE DIFFICULT

CHALLENGES (1)

Payers do not have common standards

CMS constrained by statute, regulations, andprescribed policy processes

Screenings and preventive services defined in law Cost excluded as a factor if any benefit beyond

existing clinical alternatives

Private payers far less constrained

Different insurance different benefits Free to apply any lawful standard the market will

bear


11/28

________________________________________

COVERAGE POSES MORE DIFFICULT

CHALLENGES (2)

Clinical utility is the touchstone, but there

is no common operating definition

Reasonable and necessary standard is notthe same as FDAs safe and effective

Incremental clinical benefit is key

Reinforced by recent CER initiatives

Cost does enter the equation

Overtly or covertly

More rigorous analysis for high cost technologies?


12/28

________________________________________

COVERAGE DECISIONS ARE

DATA DRIVEN

Health technology assessment (HTA)

Do it themselves or by external contract

Sources include: CMS Coverage Analysis

Group, BCBSA Technology Evaluation Center;ECRI; Hayes, Inc.; HealthTech

Medicare and major private payers provideonline databases of coverage policies and

analyses Rich resource for understanding what you will

need to demonstrate


13/28

________________________________________

PLAN TO MEET DATA REQIREMENTS

FOR COVERAGE

Evaluate what insurers will want/need to

know

Integrate your regulatory and reimbursementstrategies

Integrated data effort is cost and time efficient

Clinical trial staff can monitor and control to

establish data validity Include cost data capture

13


14/28

________________________________________

COORDINATE CMS / FDA PROCESSES

Meet with CMS as soon as you have aclear sense of FDA requirements

Both coverage and coding staff

Educate about your product and plan Get informal feedback on agency perspective

Shorten total decision timeframe by givingCMS access to data submitted to FDA

Evaluate new parallel review option

Provide periodic progress updates to buildrelationship and agency knowledge base


15/28

________________________________________

PRIVATE INSURER PERSPECTIVES

Continuum of policies from traditional fee

for service to fully capitated managed care Competition within each class of policy

Competition between types of coverage

Diverse principal competitive drivers Cost control for lower premiums

Quality and/or access superiority Coordination of care for quality and efficiency

Effective, cost-efficient technologies create

competitive leverage for insurers


16/28

________________________________________

COVERAGE DECISION MAY TAKE TIME

Coverage policy approval timeline is afunction of

Clinical impact of the service

Quality of the supportive data

Support from opinion leaders

Visibility to public

Competitive pressure (private insurers) Need to advocate case by case, insurer by

insurer, until policies emerge


17/28

________________________________________

COVERAGE POLICIES ARE

INCREASINGLY REFINED

Diagnostic tools allow identification of

subgroups likely to benefit from specific

treatments

Companion diagnostics model for drug testing

trades off between market size and success

probability; Device analogs are emerging

High cost therapies getting placed into asequential hierarchy of interventions

for patients who fail a trial of

17


18/28

________________________________________

COVERED SERVICES GET REIMBURSED

BUT HOW MUCH?

Private insurers have many different waysof setting payment levels

Rate schedule

Negotiated rate w/ provider

Prevailing charge

Inclusion in capitated rate

Disease-management contract With or without carve-out

Each method creates distinct incentives


19/28

________________________________________

PROVIDERS CAN NEGOTIATE WITH

PRIVATE INSURERS

Need clinical and financial data to supporthighest attainable payment level

Efficacy and safety relative to therapeuticalternatives

Cost relative to therapeutic alternatives

Impact on total cost of care Complication rates, follow-up care

Insurers will pay to incent adoption of cost-saving technology


20/28

________________________________________

MEDICARE PAYS UNDER FIXED RULES

Hospital Inpatient Prospective Payment

System Diagnosis Related Groups (DRGs)

Hospital Outpatient ProspectivePayment System Ambulatory Payment Classifications (APCs)

Physician Fee Schedule Resource Based Relative Value Scale (RBRVS)

AWP + 6% for physician-administered

drugs


21/28

________________________________________

MEDICARE PAYMENT SYSTEMS

CHARACTERISTICS

Each system is based on averaging

payment for clinically coherent groupings

of codes

A reasonably efficient provider, with a

representative case load, will break even

Each is separately calculated based on

prior year cost and projected utilization A (very) soft cap on spending

No consideration of impact on other systems


22/28

________________________________________

EACH MEDICARE PAYMENT SYSTEM IS

A MANAGED FIXED-SUM GAME

A total system spending target is set

Independently for MDs, Outpatient, Inpatient

Volume projections for each servicecategory are established

Relative value of each service is adjusted

Based on analysis of prior year costs

Payment for each service is derived

As if target were a hard spending cap


23/28

________________________________________

HOSPITALS AND PHYSICIAN GROUPS

KNOW THE FINANCIAL SCORE

Medicare and total operating margins

For each department

For each DRG, APC, or visit type For each identifiable diagnosis, service,

surgical procedure, etc.

They invest in winners, disinvest in losers

Successful companies create new winners

for hospitals and medical groups


24/28

________________________________________

DIRECT ECONOMIC IMPACT DOESNT

EXPLAIN EVERYTHING

Hospitals and large physician groups mayhave broader long term goals

Reputation for clinical and/or technological

leadership Specific areas of national or regional

excellence

Comprehensiveness of service offerings

Community/regional/national visibility

Visibility/reputation lead to referrals


25/28

________________________________________

INFORMATION IS THE KEY TO

OPTIMIZING REIMBURSEMENT

Understand the clinical, regulatory and

institutional environment

Demonstrate command of all the availableinformation

Collect the best and most comprehensive

possible data

Perform or commission the needed

analyses


26/28

________________________________________

BUILD A ROBUST RESEARCH

CAPABILITY

Get your results out as early as possible

Peer-reviewed papers carry the most weight

Conference presentations have some worth

Data collected in monitored trial or study can

be useful

But control and validation will be questioned

Sponsor-conducted retrospective or ad hocstudies can be dismissed

But not if youve made yourself an unimpeachable

source


27/28

________________________________________

AGGRESSIVELY PLAN AND MANAGE

YOUR REIMBURSEMENT STRATEGY

Identify your empirical data requirements

Map the timelines for coding and coverage

decision processes

Find the shortest path that doesnt

compromise your chances of success

Manage the process like any project

Research performed for reimbursement

planning has far broader business strategy

applications USE IT.


28/28

Reimbursement Basics Mass Challenge 9-28-2010

Documents

Transcript of Reimbursement Basics Mass Challenge 9-28-2010