Show me the money: Reimbursement for medical innovations

medical device reimbursementDevice developers tend to focus on the FDA approval process—PMAs and 510(k) clearances—while overlooking another major challenge: getting insurers to cover the device. Before approaching investors, and certainly before doing any studies, keep payers in mind, advises Maren Anderson, president of MDA Consulting, Inc., which specializes in reimbursement planning.

In the old days, doctors prescribed, and insurers paid. Under health care reform, that’s changed, says Anderson. She elaborated at a Boston Children’s Hospital forum last week, sponsored by the Innovation Acceleration Program.

Take a diagnostic test, for example. The FDA wants to see data on the test’s sensitivity and specificity. But insurers want more: they want evidence that the product will solve a real clinical problem and reduce overall costs. Will it allow patients to avoid surgery or be discharged earlier from the hospital? “Insurers are increasingly demanding outcomes data,” Anderson says.

A great specific example is intravascular optical coherence tomography (OCT), a type of high-resolution imaging to diagnose “vulnerable plaques”—those likely to lead to heart attacks or sudden cardiac death—and identify heart patients in need of stenting. Several OCT devices have received 510(k) marketing clearance, but Medicare does not currently pay for OCT. To convince Medicare, a study would need to track patients who are stented based on OCT findings and show that their outcomes are improved. “The developers will have to team up with a big stent company to get this done,” says Anderson.

A well-designed study

Gathering good data early on will also help in attracting funding from venture capitalists (VCs), who want quick evidence that their investment will be a success. “The VC wants to get in and get out with one study,” Anderson says. “But if there is just one study, it needs to satisfy not just FDA requirements but payer requirements.”

As an alternative to approaching payers, innovators can approach at-risk providers—hospitals or health care systems that are under a bundled or global payment plan, or any other arrangement that shifts financial risk to the provider. Since these providers receive a fixed payment for an episode of care or a whole patient population, “they want to see an innovation lowering their cost and improving quality,” says Anderson.

Innovators inside a hospital or care network who understand the cost and quality issues have a natural advantage here, especially when it comes to health care IT. And sometimes you can do a trial just to convince an at-risk provider, Anderson notes.

Here are some things that studies should do:

  • Document long-term clinical and cost outcomes. Payers want to know “does it make a difference in a patient’s life for more than one year?” Follow-up studies are often required, and some payers want to see Phase 3 trials.
  • Provide enough data to make the device the new gold standard (usually, multiple studies will be needed).
  • Identify a specific population who will benefit. “Insurers don’t want people coming out of the woodwork to get the device; they want to narrow the population as much as they possibly can,” says Anderson.

It can sometimes make sense to segment the insurance market. When Medicare or Medicaid won’t cover something, sometimes other insurers will, as in the case of the BiOM prosthetic ankle (demonstrated at a TED talk by a ballroom dancer who lost a lower leg in the Boston Marathon bombings). BiOM has not been able to get Medicare coverage, but the Veterans Administration does cover the $50,000 bionic device, as do some private workers’ compensation payers.

A few other reimbursement tips:

  • Consult with insurers before you do a study, so you can build in the right endpoints.
  • If you’re looking for Medicare to cover the device, include patients over 65 in your studies.
  • Software is rarely covered by insurance, but you might be able to convince an at-risk provider to pay for it if it can lower costs and improve quality.
  • If possible, consider patient self-pay—marketing directly to the consumer. “If you have that option, VCs are going to love you,” Anderson says.
  • In pricing your device, “leave some money on the table,” thinking about what patients can afford.

Help may be available

In trying to persuade an insurer to cover an innovation, Anderson advises looking to opinion leaders, patients, specialty societies and trade organizations like AdvaMed and the Medical Device Manufacturers Association as allies.

To offset development costs, the Affordable Care Act provides grant money for innovations that improve care and lower costs for people enrolled in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP), particularly those with the highest health care needs. Specific interests include:

  • independence (products or systems that let sick people live at home)
  • improved primary care delivery
  • improved long-term care services
  • enhanced community care
  • improvements in trauma centers

For more practical innovation take-homes, join a mix of clinicians, health care leaders, payers, venture capitalists, policymakers and other stakeholders attending the 2015 Global Pediatric Innovation Summit + Awards (Nov. 9-10).