This is Module 3.3.1 US Device Public Reimbursement. So in the last set of the modules we talked about the importance of having a reimbursement strategy. This gets more into details of exactly what your strategy is going to be talking about. So, let's start from the beginning. Let's say you're technology is approved in terms of the FDA and we need to get this thing paid for now, what are you going to do? This tends to be sometimes be more complicated than drugs. Drugs can work usually by the National Drug Code and that's fine. Devices are used in many different settings. And the flow of payments involve many different risk takers, the hospitals in particular. So, how do hospitals get paid? That's probably the big seed, first, because that's really how the device manufacturers are going to get paid within the hospital billing structured. There are two classes of hospital procedures and treatment. There's the Inpatient side or there's also the Outpatient and the Ambulatory side. Medicare and most private payers treat them differently. They use different types of payments for different settings that are in play. In Medicare typically you're going to see things belong to what is known as Part A for inpatient and then Part B for physician and other services. We'll talk about more about Part A much more in a second. It is important to recognize that these settings, which medical technology will be used as the reimbursement strategy, will be different and that the procedure coding systems will thus be different as well. So in Medicare Part A, this is the inpatient services for hospitals. Hospitals get a fixed payment from Medicare for each admission. The payment is determined by diagnosis. We talked about this actually in the first class. There are over 500 different diagnosis related groups, otherwise known as DRGs. These DRG payments roughly increase in complexity and cost of the treatment. The ideas you're being paid for the whole length of stay. It could be two days. It could be ten days. But it's an average payment that's risk adjusted for that. Payment covers all hospital expenses, including, this is key, the implanted or used devices. You might say, well, it's just tongue depressors and stuff like that, it doesn't really matter, and you're right. But it's an implantable cardiac defibrillator, otherwise known as ICD. Then that's the $30,000 unit cost that gets tacked on, and so it can be very expensive. So why should these DRG payments be of interest to device manufacturers? Well, it has to be factored in. DRGs, to get paid, the hospital submits a form that distinguishes diagnoses and procedures. These are based on ICD-9 and actually they're going to ICD-10. Though sometimes ICD-9 is still used as a structure. So for example, these diagnosis codes in the ICD-9 parlance be 410.1 for AMI heart attack basically acute myocardial infarction. And then heart transplant as a procedure code would be 37.51, usually that distinguishes four digits as opposed to five. Different codes, sets of codes are used for different diagnoses or procedure. And to make this all work these things go into groups that basically put the codes together as algorithms. You have to worry about putting in too many aggressive diagnosis codes because that could affect your reimbursement rate if you do that. Erroneously, that is due to upcoding. That is otherwise considered fraud and not a really healthy idea if you want to stay in business. For outpatient services it's a little bit different. There's a different system that's put into place known as the APC system. Ambulatory payment classification and it's a prospective payment system now being developed or being deployed, I should say, for hospital patient services. You divide all your outpatient services into a payment schedule into 450 clinically relevant groups. Each one of these services are clinically similar and need comparable resources. So a hospital may furnish a number of services to a beneficiary that is a patient on the same day and receive an APC payment for each different service. The beneficiary is responsible for 20% of the cost. If they have actually something called MediGap, which is a policy that allows them to in effect top up their benefits, then it might be considerably cheaper. This is usually a technology pass-through cost, meaning that the beneficiary's responsible for paying some of the technology pieces if it's directly in play. Private health insurances actually do use these technologies as well. They use Medicare's Diagnoses coding requirements for example for their own purposes for their technologies for reimbursement. So it's important for both Medicare and private you have an idea of what's going on. And it's also key to understand why does this matter for device manufacturers? Simply that if they don't figure out a way to get their devices into the hospital services payment system, they're just not going to get paid. So then we'll turn to this whole process that actually, I get very excited about. Medicare claims processing. I'm not making this up. A lot of my research focuses on this. So, most insurance claims are processed electronically, not manually. They're submitted by the hospitals, and they get sent to CMS, the Center for Medicare and Medicaid Services. That basically do claims processing. They will actually contract out of the CMS to other organizations to do their processing for them. They contract out to carriers to handle physician claims and fiscal intermediaries to handle hospital claims. Increasingly, these things have been put together into a structure called MACs, which are Medicare Administrative Carriers, and they are basically handling, for the most part, these two pieces together. The carrier piece, historically, is part B. And the fiscal intermediary piece is part A. So and they're going to determine whether or not something will be paid or not. Medicare also issues coverage decisions. They decide whether they're going to cover it or not. Usually, the procedure is covered if certain conditions are met. The standard is reasonable and necessary. But, recent evidence suggests that what we're really looking at is a cost effectiveness criteria. Similar to what we talked about in the pharmaceutical components for the cancer drugs. Quality-adjusted life years are not explicitly used but they're certainly considered sometimes in a reimbursement strategy and there's discussions that occur both at the national and the regional level as well in terms of coverage decisions. We'll talk a little more about this later in our next components. This concludes this module on public reimbursement for medical devices.
