This is Module 3.3.2. This focus is going to be on the US Private Insurer Reimbursement for medical devices, and I'm Steve Parente, Professor of Finance. Private insurance for providers in the medical device basis is similar to public. Generally when we're talking about the private insurance market, we're really focused on the employers, ultimately workers though, that pay for healthcare. And this is the self-insured market. This is, in terms of the U.S., what we have, say 330 million people, roughly about 160 million, the largest component of them, are going to get reimbursed through this self-insured vehicle. So for this market, rates are negotiated with the physicians themselves, by the insurance companies. The payment schedules vary, but they can include at least a capitation payment, that is a single payment for the provider regardless of the treatment done. Carve outs, meaning that the insurance company is giving a chunk of money to a specific speciality to focus on one particular service. For example, the Mayo Clinic used to get carve outs for all their bone marrow transplants an insurance company might handle, including fly outs to the Mayo Clinic in Rochester, Minnesota. And then also we have some payment issues as well. They can be based, as we talked about before, on DRGs, that are public system HCPC codes, visits, or inpatient days. Now insurers have a coverage committee that reviews evidence and decide what they're going to pay for. I actually chaired one of these back in the day. I worked for an insurance company, and it could be a pretty interesting experience. You looked at the literature to see whether or not the technologies made sense or not. Many times you followed Medicare's decisions. And you'll also need to work at various cost effectiveness criteria. Ultimately, the decision would come down to the medical director of the plan, and with some of the guidance from what external sources would suggest. Also to keep in mind, was that payments then had to go work for negotiation, in terms of what the rates were actually going to be. So medical device suppliers re-selling the equipment to providers and insurers, had to figure that piece out as well. For radiology and MRI this became a major issue, to figure out what the likely payback for the loans required for the initial set of MRI machines being used. In that case they were actually too conservative, and many of the providers actually for their MRIs, paid them back in a year or two, whereas insurers assumed it would take much longer, and as a result paid those folks much more money. So here's a really challenging thing that's occurring in this space, the notion of bundled payments. And so what do we mean by this? This is looking at all the different types of services that are provided, and looking at hospital admission, and then what happens 90 days after that hospital admission. So, this Phys is physician, Inp is inpatient, skilled nursing is SNF, home help is hospice, excuse me, HHA is health home help. Hospice is HOS, OTP is outpatient, and DME is durable medical equipment. And, this PAC stands for post-acute care. And that generally means all this stuff here. So, the first few technologies that are here are the most advanced technologies you're going to find. This is literally that implantable cardiac defibrillator. Just to give you a sense of cost, just that procedure within 90 days, we're talking about $128,000 dollars. You can see where most of the money goes, 85% of it goes to impatient. Not that much goes to the physician, and there's some stuff in the post-acute care. What bundled payments says, is that the hospital's going to get all this money, and then they're going to distribute it to all of these parties. Historically, they just get the inpatient's stay for when they stay in the hospital, not all these other pieces. Though, if there's readmissions or complications, the hospital will be left holding the bag. Now for some of these things for high technology, it's not that big of a deal. The post-acute care bundles are pretty small. But here when it's not device dependent, we get to pneumonia, COPD, something more expensive, we find that in some cases, the post-acute care bundle is huge. And these organizations might not be owned, the Home Health Agency, the Skilled Nursing Facility, by the hospital. They're going to be held to a lot more risk. The point is that medical devices are competing for these funds, it's a lot more of a challenge to get reimbursed. So, just a thought question. Who is going to be the Paymaster for the Post Acute Care Bundle? Should it be the hospital? Should it be the physician group? Should it be some combination of the two? We're going to be finding out as time goes on. It's not solved. This concludes this module on Private Health Insurance Reimbursement for Medical Devices.
