Supporting Medtech Innovation Requires Changes To New Payment Paradigms
By Stephen J. Ubl, president and CEO, AdvaMed
The unintended consequences of accountable care organizations (ACOs) and bundled payment initiatives
New healthcare payment models set up under the Affordable Care Act, including accountable care organizations (ACOs) and bundled payment initiatives, are designed to reward providers for reducing healthcare costs while maintaining quality patient care. The aim is to reduce costs through greater cooperation and coordination among providers. This is a laudable goal, supported by the medical technology industry. However, the new incentives could also have the inadvertent effect of slowing medical progress and denying patients access to future medical innovations.
Over the last 30 years, the medical technology industry has delivered advancements in medical progress that are truly life-changing, helping to add five years to U.S. life expectancy and reduce the number of days people spend in hospitals by more than half. While such advances often yield savings across the healthcare system by replacing invasive procedures and allowing people to return to work more quickly, others add to costs but are well worth the extra expense in the dividends they pay in longer and better lives.
Under the new ACO and bundling programs, there is a danger that payment incentives can discourage providers from using breakthrough treatments and diagnostics that may bring value to the health system over the longer term but are most costly in the short run. Unless technical modifications are made to the ACO and bundling initiatives to accommodate new and advanced treatments, the essential process of development, early adoption, and diffusion of life-saving and life-enhancing medical innovations could be interrupted.
Makers of medical devices and diagnostics support the movement toward value-based payment and integrated delivery models that encourage providers to be more cost-conscious, as they continue to develop advanced technologies that will facilitate better health and reduced costs. But it would be pennywise and pound-foolish not to make the simple changes that will support the development of the treatments and cures of the future and address the potential for stinting on needed care. This can be done without undercutting the goals of the new payment paradigms.
Supporting Medical Progress
Medical progress depends on physicians and other providers adopting new and better treatments and cures. In the medical technology sector, much of the innovation comes from small companies dependent on external investors to fund their development. For these companies, the potential for payment from Medicare and other payers, once the product receives regulatory approval, is critical to maintaining the flow of financing during the costly pathway from development to market. The new ACO and bundling programs only add to the reimbursement risks for these small companies.
Venture capital investment in such medical device and diagnostics companies has declined in recent years, and nearly 40 percent of U.S. venture capitalists surveyed identified concerns over coverage and payment policy as impacting investment in innovative medical products.
Modifications to ACO and bundling initiatives to adequately accommodate new and advanced treatments are therefore particularly important to emerging and early-growth medtech enterprises and to supporting the medical technology innovation ecosystem.
Meeting Every Patient’s Needs
ACOs allow providers to share in the savings if they cut Medicare costs for beneficiaries while maintaining quality care over the course of a year. Bundled payment programs reward providers for cutting the costs and maintaining the quality associated with hospitalization and post-acute care over a 30-, 60- or 90-day care episode. The problem is that the incentives to cut near-term costs under these programs are strong while the measures used to assess the quality of treatment are weak.
Under many ACO and bundling programs, a participating physician can significantly increase his or her income — by as much as 50 percent under the bundling program or similar amounts in the ACO program — by cutting the near-term costs of care. But these programs do not adequately account for potential long-term savings from advanced technologies or for innovations that may cost more but provide superior benefits. That creates a real danger for patients.
If a surgeon prescribes a medical treatment or product that does not incorporate an appropriate level of technology to treat or cure a patient’s condition, that patient could also generate higher costs to the health system over time.
When surgery is indicated for osteoarthritis of the knee, for example, a surgeon’s choice of which of many devices to use — such as an advanced artificial knee implant that will support an active lifestyle and last a long time, versus a more basic model — should be dictated by what a patient needs and not by which option is less expensive in the near term. The more basic knee, implanted in a relatively young patient, would save money in the short run but could be costly in the long run if it wears out and needs to be replaced.
Seeing The Way Forward
The basic solution is to ensure Medicare beneficiaries have access to advanced, innovative treatments and services by providing transitional payment mechanisms for new technologies that hold the potential for significant therapeutic improvements but may add to costs.
Providing temporary carve-outs or modifications for the costs of a limited number of important new treatments or services, approved by CMS after meeting certain criteria, would neither penalize nor reward participating providers but would help ensure that patients have access to the care most appropriate to their needs. Without such a mechanism, providers who adopt these new treatments face financial penalties. Transitional mechanisms should also be adopted to allow time for breakthrough treatments and diagnostics to be reflected in quality measurements.
Improved quality measures under the new programs also are needed, as current quality measures are focused on processes of care, rather than clinical outcomes, and do not measure quality for most complex diseases and conditions, like arthritis, neurological disease, and cancer.
The Centers for Medicare and Medicaid Services (CMS) should also implement more extensive oversight and transparency, including full disclosure of any special payments made to practitioners for reducing costs.
Americans expect and deserve the best healthcare available, and in this century of the life sciences, the advanced medical technology industry continues to innovate and provide the life-saving and life-enhancing treatments and cures they need. But policymakers must act now to ensure that new payment paradigms fulfill their promise and avoid the unintended consequences of stinting on needed care and undermining medical progress.
About The Author
Steve Ubl is president and CEO of the Advanced Medical Technology Association (AdvaMed), the world’s largest medical technology association. He is recognized as a top healthcare advocate and policy expert with considerable experience across multiple health policy sectors. His accomplishments include landmark reforms related to the U.S. Food and Drug Administration’s product review process and Medicare’s coverage and reimbursement of medical technologies.