Why Reimbursement Matters

stock industry reimbursement 1000Although regulatory approval of their technology is often seen as the "brass ring" for new medical device companies, the fact remains that this is just the first step on the path to financial success. Widespread adoption of a medical device drives strong sales numbers, which is a critical factor in long-term viability of a business, yet widespread device adoption can only occur if reimbursement exists in key customer markets.

Companies work hard to obtain regulatory approval, yet often overlook the creation of a comprehensive reimbursement strategy during the early stages of product development. If the two are not pursued simultaneously, reimbursement can be delayed for another five or six years after the date of approval. Even if these steps are performed concurrently, while also taking advantage of the fastest options throughout the process, acquiring just partial insurance coverage can require two years or more beyond the regulatory approval date.

In addition, the volume and rigor of clinical data needed for a positive coverage determination is almost always greater than those needed for regulatory approval. As a result, it greatly benefits device companies to let their reimbursement roadmap inform the design of their pivotal trials. Otherwise, they’ll find themselves investing more post-approval time and resources into a larger trial that can satisfy the evidence requirements of insurers.

Reimbursement risks are especially daunting for startup device companies. They cannot afford to invest millions of dollars in the development and approval of a new treatment, only to then see their sales volume limited by a lack of reimbursement. This will most certainly be the case if several years elapse before physicians and facilities are compensated by insurers for procedures that utilize the company’s technology.

The Basics of Reimbursement

The concept of "reimbursement" is multifaceted, encompassing several components, including coding, payment levels and coverage. All elements of reimbursement are predicated on regulatory approval. These concepts are described below.

Regulatory Approval
Before a medical procedure can be considered for reimbursement, the technology underlying that procedure – in the case of focused ultrasound: the FUS device – must first obtain regulatory approval from a governing body. Examples include the CE Mark for most countries in Europe, and 510(k) clearance, premarket approval (PMA) or granting of a de novo pathway from the US Food and Drug Administration. Approval is based on clinical data demonstrating that the technology is safe and effective. In the case of FDA approval, the data requirements vary with the type of registration being sought.

As device manufacturers know, or will soon discover, there is no good mechanism for reimbursement of a procedure without a billing code. Billing codes are assigned by either the Centers for Medicare and Medicaid Services (CMS) or the American Medical Association (AMA). Codes assigned by CMS are called HCPCS codes and are generally used to reimburse for equipment costs. Those assigned by the AMA are specifically referred to, and copyrighted, as CPT codes. These codes cover all elements of a procedure. There is also a relevant subset of CPT codes, referred to as Category III codes.

There are some differences to note between these code types. HCPCS and Category III CPT codes are quicker to obtain – often less than one year – but are also more challenging for treatment facilities (i.e. the customer) to utilize when billing, because claims for the physician component of a procedure must be submitted separately, most often using a surrogate code. Although not an issue for large medical centers, this could be a potential obstacle for smaller medical practices. CPT codes can also be granted prior to FDA approval, in order to collect charge and cost information about the procedure during the clinical trial phase.

CPT codes, although inclusive of facility and physician payment components, take substantially longer to obtain – at least two years – requiring the endorsement of the Coding and Reimbursement Committee of a relevant specialty society. To determine the physician component of payment, a separate RVS Update Committee (RUC) within the society must receive completes surveys from at least 30 treating physicians. With an expected response rate of 10% to 20%, this implies that approximately 150 to 300 physicians must have sufficient experience with the device before a CPT code can be established. Another important factor to consider is the fact that private insurance companies strongly favor the use of CPT codes in the claims they receive.

Payment Levels
Once a code is designated for a procedure, the payment level assigned to that code must be established. This step is performed by a government healthcare agency or by a private insurance company (payor) and is based on the average of the treatment costs incurred by all treatment centers in that country. As a result, it is imperative that provider organizations of all size accurately report their true costs of performing a procedure in their cost reports. Failure to do so accurately could lead to the reduction of future reimbursement levels. It is incumbent on the device manufacturer to educate the treatment facilities about this fact. If not, they could see a reduction in future device sales due to diminished reimbursement rates.

The establishment of a payment level does not actually guarantee that a treatment center will be reimbursed; it only determines how much they will be paid if coverage is granted.

The final step in the reimbursement process is the granting of insurance coverage, known as ‘positive coverage determination’. This is the decision by the insurer – either government or private – about whether or not they will indeed reimburse treatment centers for a given procedure at the established payment level. Factors used when determining coverage include safety, efficacy, patient outcomes, utilization (how often the procedure is being performed) and cost-effectiveness. It is not unheard of for a procedure to successfully pass through the coding and payment level stages, only to be denied coverage.

In the US, application for Medicare coverage can be performed with the intention of either a National Coverage Determination (NCD) or Local Coverage Determination (LCD). Being granted NCD at first seems to be the preferred route, since a positive coverage determination will ensure nationwide Medicare coverage. There are some factors to consider, though. If coverage is denied during an NCD application, the decision is final and is not open to appeal. Also, a negative coverage determination from an NCD application precludes application for LCD with any of the Medicare Administrative Contractors (MACs). On the other hand, a negative coverage determination by any one MAC can be appealed and does not prevent the manufacturer from applying for coverage from other MACs.

What to Expect

Regulatory approval is not an end unto itself, but rather it is a critical beginning to the end goal of insurance coverage. Revenue growth and, therefore, long-term viability can only be recognized once all elements of reimbursement (coding, payment levels and coverage) have been completed. Due to the existing lag between approval and reimbursement, as well as the higher burden of proof needed for reimbursement, it is best to base the design of clinical trials on the data that will eventually be required by insurers, not just those needed to satisfy the regulatory agencies. Management will need to assess the trade-offs of the coding path to be pursued, weighing speed against a code that is looked on more favorably by future customers. Decisions will also need to be made about how work with treatment sites to ensure favorable payment levels in the future.

The Foundation's Efforts

The Foundation uses its position as a trusted, independent, unbiased third party to forge collaborations with industry, researchers, clinicians, government, advocacy organizations, patients, and other stakeholders, to break down barriers to regulatory approval and reimbursement for new clinical applications of focused ultrasound.

Regulatory Affairs
A key aim of the Foundation’s Regulatory Affairs Program is to facilitate dialog with US Food and Drug Administration (FDA) officials—both scientific and clinical regulatory staff—and provide them with information to contribute to the advancement of focused ultrasound clinical studies and also to facilitate development of technical standards for focused ultrasound treatments. The Foundation also supports researchers in developing clinical study protocols that adhere to FDA standards and/or connecting them with regulatory experts for appropriate guidance.

The collaborative relationship between the Foundation and FDA has helped to contribute to the advancement of focused ultrasound therapy. A major milestone was achieved in 2011 when the FDA for the first time officially recognized the field of focused ultrasound and its potential as “a leading-edge technology to perform surgery without incisions,” and as a way to “reduce the number of invasive surgeries that patients need."

Currently, there is limited reimbursement for focused ultrasound therapy. Until government and private payers are willing to cover focused ultrasound therapy, patients will not have widespread and equitable access to this noninvasive treatment alternative.

The Foundation establishes collaborations with key stakeholders in order to raise awareness of the barriers to reimbursement and to start to break down these barriers.

The Foundation encourages all companies and researchers to consider reimbursement when designing new clinical trials; when appropriate the Foundation will advise or offer feedback on the study design. It is critical to ensure that the clinical trial design will not only demonstrate safety and efficacy, but also will meet insurers’ requirements for superior long-term benefits, quality of life, and cost-effectiveness.

The Foundation has been fortunate to collaborate with leading advocacy organizations including the Medical Imaging & Technology Alliance (MITA) and the Advanced Medical Technology Association (AdvaMed) who have the expertise and relationships to help move the needle on reimbursement for novel medical device therapies like focused ultrasound. Through these partnerships we raise awareness of focused ultrasound therapy among policymakers, payers, and medical specialty societies and drive policies to reduce barriers to commercialization and patient access.
Learn more about our advocacy efforts > 
See a white paper from our March 2020 Reimbursement Workshop >

We are also partnering with industry representatives and clinicians to design and implement patient registries to track long-term treatment results that insurance carriers can use to evaluate the efficacy of focused ultrasound treatments.

Furthermore, the Foundation sponsors a CMS (OPPS) Reimbursement Education Program that is designed to help clinical treatment sites optimize their billings, in order to ensure appropriate reimbursement in the future.

Regulatory and Reimbursement Consultants with Prior Focused Ultrasound Experience

Argenta Advisors, Inc.
Location: United States
Area of Expertise: Reimbursement

CardioMed Device Consultants, LLC.
Location: United States
Area of Expertise: Regulatory

CD HealthCare Consulting
Location: France
Area of Expertise: Regulatory, Reimbursement

Dobson | DaVanzo & Associates, LLC.
Location: United States
Area of Expertise: Reimbursement

Greenleaf Health, Inc.
Location: United States
Area of Expertise: Regulatory

Hogan Lovells US, LLP.
Location: Global
Area of Expertise: Regulatory, Reimbursement

Hull Associates, LLC.
Location: United States
Area of Expertise: Reimbursement

Institut TakeCare, GmbH.
Location: Germany
Area of Expertise: Regulatory, Reimbursement

JD Lymon Group, LLC.
Location: United States
Area of Expertise: Reimbursement

Keystone Regulatory Services, LLC.
Location: United States
Area of Expertise: Regulatory

Medical Technology Partners, Inc.
Location: United States
Area of Expertise: Reimbursement

Medicologic A/S
Location: Denmark
Area of Expertise: Regulatory

MedValue Offshore Solutions, Inc.
Location: United States
Area of Expertise: Reimbursement


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