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The Supreme Court Ruling, and What it Means for Purchasing Patterns Moving Forward

Posted by Jessica Hartman DeVore on Fri, Jun 29, 2012 @12:29 PM

The Supreme Court Ruling, and What it Means for Purchasing Patterns Moving Forward

The Supreme Court on Thursday largely upheld the constitutionality of the Patient Protection and Affordable Care Act, including the individual health-insurance mandate, ruling it is permissible under Congress's taxing authority. The court did find one part of the law unconstitutional, according to the Wall Street Journal, saying its expansion of the federal-state Medicaid program threatened states' existing funding. The court ruled that the federal government can't put sanctions on states' existing Medicaid funding if the states decline to go along with the Medicaid expansion, the Journal reported.  

What this means for the industry:

• Hospitals will continue to chase cost savings. For buyers, the stakes are higher than ever for understanding the supply chain and where those dollars go. The Association for Healthcare Resource & Materials Management (AHRMM) (Chicago, IL) reports that, on a per-case basis, as much as 31 cents of every dollar spent by providers is for supplies associated with care. In other words, these costs are second only to the cost of labor for hospitals. With such a huge proportion of provider expenditures going toward supplies and services, the opportunities for cost-savings are enormous (Excerpt fromMuddy Waters - Making Sense of the Healthcare Supply Chain in the Era of Reform)

• Quality will be an ever important measurement that affects reimbursement rates. IDNs, hospitals and physicians will have to demonstrate how they are providing quality care for reimbursement in general and also the potential of shared savings. Benchmarks and performance will be compared, and the difference between the two will be the amount of money that is the potential for shared savings. 

• Patient experience will become critical in the value equation. Fee for service is being replaced by a holistic approach to care. Quality care will boil down to outcomes-based medicine.

From MDSI

Tags: healthcare, hospitals, Accountable Care Organizations, healthcare suppliers, HHS Regulations, Center for Medicare and Medicaid Services, ACA, Afforable Care Act

ACA’s 2013 medical device tax has already killed jobs & expansion plans

Posted by Jessica Hartman DeVore on Thu, Apr 19, 2012 @10:02 AM

The Patient Protection and Affordable Care Act (ACA) includes a new 2.3% tax on the U.S. sale of medical devices beginning in 2013. The tax was included to raise $20 billion in revenue to partially offset the cost of the new, $1 trillion health program. The 2.3 percent tax is imposed on revenue, not profits, so that the tax applies to devices regardless if they are sold at a loss.
This particular financing measure is now the target for repeal by a growing number of Members in Congress because of its impact on patient access to life-saving therapies, American jobs, and medical innovation in the United States.

Regardless of how the Supreme Court rules on the ACA, there are many claims about the tax that are inaccurate and do not reflect existing realities about its impact.

Jobs and investment will suffer
 
Claim: The new tax will not shift employment offshore because the tax does not create an incentive to move production overseas.
Reality: Even without going into effect until 2013, the device excise tax has already caused companies to lay-off workers, grow device manufacturing jobs outside the U.S., reduce investment in research and development, and eliminate capital investment in new U.S. facilities. The device excise tax applies to the sale of medical devices in the U.S.

This is on top of our federal tax rate at 35 percent and state and local taxes. Combining these U.S. taxes with a slow and cumbersome approval process, the excise tax adds tremendous disincentive to companies wanting to stay in the U.S. and compete in the global marketplace. Compare Ireland’s tax of 12.5 percent of profit and Canada’s national tax of about 15 percent of profit for most companies to the existing U.S. tax rate of 35 percent that many companies face.
 
Tack on the new federal tax of 2.3 percent of sales, which equals about a tax of 15 percent on profit for most companies, and U.S. manufacturers in 2013 will pay a tax of about 50 percent for every dollar earned. Companies operating outside the United States will be at a distinct competitive advantage as those taxes start from a significantly lower base.
 
It’s disingenuous to say that that level of taxation will not lead companies to locate new factories and research and development arms outside of the U.S. Foreign manufactures have a clear price advantage by paying a tax bill that can be half what a comparable U.S. firm will pay. Academic claims that the tax will not have an impact on U.S. jobs is naive and does not match reality. Medical device companies have signaled a warning for several months now.
 
Here are just a few examples:
-Stryker Corporation announced a layoff of 1,000 workers due to the tax
-Boston Scientific built a $35+ million research and development center in Ireland instead of North America
-Boston-Scientific is also girding for a $100+ million charge to earnings in 2013
-Zimmer plans to lay off 450 and take a $50 million charge against earnings
-Cook Medical has shelved plans to build a medical device factory annually in the U.S.
 
No windfall for the device industry
 
Claim: The ACA will insure millions of people and therefore device companies will benefit from new business through the sale of more devices.
Reality: Reducing the number of uninsured will not increase the number of patients seeking medical devices. Most of our medical technologies are either used today by patients in emergency situations or by elderly patients who are already insured by Medicare. There will be no windfall for our industry just because more, non-elderly patients have access to insurance.

 
Here’s why: In the emergency room today, patients receive our technologies regardless of whether they have health insurance or not. These devices that are used in this setting include drainage catheters, tracheostomy tubes, intubation devices and myriad of other devices to maintain life. Federal law requires that all patients in need of emergency services be treated regardless of their ability to pay or whether they have health coverage. The ACA does not change this paradigm.
 
Further, the administration has stated that the demographic group that will most benefit under the ACA are the non-elderly. Young people tend not to be in need of stenting or other vascular or organ repairs for aging related conditions. Most of the patients that use our products are elderly and today they are either treated in the emergency room without regard to health insurance or covered by Medicare that already reimburses hospitals for medical devices.
 
This analysis is borne out in Massachusetts, which has a similar universal health care approach. Internal analysis shows that medical device sales did not increase beyond the increase expected prior to enactment of the Massachusetts new health law.
 
Devastating impact on medical innovation

Claim: Tax will have little effect on medical innovation.
Reality: The device excise tax will have a real and serious impact on medical innovation in the United States as research, development and manufacturing move overseas as a result of the existing tax and regulatory systems in this country. While the medical technology industry has helped to fuel the U.S. economy in recent years, its position as a global leader may erode over the next decade.
 
This will no doubt affect: 1) the ability of Americans to access future break-through medical advancements; and, 2) the growth of U.S. jobs. In the future, China, India and Brazil will experience the strongest gains in developing next-generation products. Without changes to U.S. policies, gains may lead to an exodus of capital, jobs and research away from the U.S. toward these growing markets. (Source: ’Medical Technology Innovation Scorecard: The Race for Global Leadership,’ PwC, January 2011.)
 
The economics of this highly competitive sector are not static and several policies have driven American medical device companies to seek clinical data and launch new products outside of the United States. The new, 2.3 percent excise tax on the selling price of a device will leave companies no choice but to reduce research and development and capital investment in the U.S. It will lead companies to migrate to lower cost tax jurisdictions and tax start-up companies, whether those firms have profits or not.
 
The new tax will force companies to limit research budgets to test new products and ideas – the lifeblood of growing device companies. When these resources are curtailed, patients pay the price with more limited medical treatment and a reduced chance of survival.
 
In addition, the tax will limit capital investment in new facilities. Boston-Scientific projects a $100+ million annual hit to earnings from the tax. Cook estimates it will cost $20 million a year ’ about what we had planned to invest annually in new factories across the Midwest, factories such as the plant that opened 1n 2010 in Canton, Ill., or the expanded plants opened in 2009 in Spencer, IN.
 
Wages from those jobs ripple through and strengthen the local community. This new device excise tax will deny patients access to life-saving medical technologies because companies will be forced to move jobs and research facilities overseas. It is fool-hardy to believe that U.S. companies will be able to compete globally when their competitors do not face the tax and regulatory burdens here in the United States. We are already seeing the impact of the medical device tax and this is just the beginning if this tax is not repealed. Americans deserve access to these break-through technologies.

MEDCITY – Devices
April 16, 2012
By Kem Hawkins (President and CEO of Cook, Inc.)

Tags: hospitals, healthcare suppliers, IDNs, integrated delivery networks, medical devices, market research, Center for Medicare and Medicaid Services, Affordable Care Act, ACA, market forecasting, sales

Emerging Trends in Gastroenterology Reimbursement Lower Payments, Larger Health Care Organizations Likely To Come

Posted by Jessica Hartman DeVore on Tue, Nov 08, 2011 @10:24 AM

Chicago—As the effects of the Affordable Care Act begin to take shape, it’s clear that physicians will experience a different future regarding reimbursement. In particular, gastroenterologists can expect shared savings programs, bundled payments and re-valued gastrointestinal (GI) procedural codes to directly impact their pay in the years to come, according to economic and policy experts.

The Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) are responsible for implementing the new rules and programs. For example, in April, CMS proposed to create accountable care organizations (ACOs), which are groups of coordinated health care providers that agree to be accountable for the overall cost and care of a Medicare patient population and that are willing to tie their reimbursement to quality improvements that reduce overall costs.

Likewise in May, CMS announced its final rule on implementing the Hospital Inpatient Value-Based Purchasing program, which will use a “mix of standards, process, outcomes, and patient experience measures” to score hospitals “on their overall achievement relative to national or other appropriate benchmarks.” The agency said it “will make value-based incentive payments to acute care hospitals, based either on how well the hospitals perform on certain quality measures” or on how much the hospitals’ performance improves after a baseline period. Eventually, the program will likely extend to the level of the individual physician. The HHS stated that the scoring program may be used by “consumers … to make meaningful distinctions among providers’ performance.”

Health Care Market Realignment

By tying reimbursement to quality metrics, the new programs will create newer, larger health care entities and a shift from fee-for-service to flat payments to physicians.

“The Affordable Care Act is trying to bring back risk for what we do and for whom we are accountable to,” said Lawrence Kosinski, MD, MBA, a managing partner of the Illinois Gastroenterology Group, in Elgin, and chair of the American Gastroenterological Association Institute’s Practice Management and Economics Committee.

One response to these developing changes has been to pool the new risk. “From a macro point of view, the provider side is aggregating. You see hospitals aggregating, you see physician groups aggregating, and you see hospital and physician groups [integrating]. Why are they doing this? To get large enough to handle the risk of a population of people,” said Dr. Kosinski.

These seismic shifts are integrating physician groups on a smaller scale, and health care organizations and ACOs on a larger scale. Dr. Kosinski recently merged his practice with two other Chicago-area gastroenterology practices, and now has added a fourth to compete on a regional level and control costs.

On the grander scale, hospital systems are purchasing physician practices.

“Gastroenterology is becoming an employed specialty,” said Joel Brill, MD, the chief medical officer of Predictive Health, in Phoenix, and former chair of the AGA’s Practice Management and Economics Committee. “With one in five gastroenterologists already in employed settings, the number will continue to grow.”

Dr. Kosinski added, “Physicians will not be on fee-for-service; rather, they will have fixed incomes with performance bonuses based on balanced scorecards.”

A recent survey by the Medical Group Management Association shows a nearly 75% increase in the number of physicians employed by hospitals since 2000. Hospital-owned physician practices now outnumber those owned by physicians themselves.

In May, Robert Kocher, MD, former special assistant to President Obama for health care, laid out the reason in an editorial in The New England Journal of Medicine. In addition to primary care physicians, hospitals are now aggressively targeting specialists in order to create “what could effectively become closed, integrated health care delivery systems.” These larger systems not only control pricing power—a Virginia hospital system reportedly charged four to 10 times as much for a colonoscopy as providers in similar, separate markets—but they can also “reduce excess costs associated with unnecessary practice variation.”

Or as Dr. Brill puts it: “He who writes your check will decide what you do.” The big question in this scenario is not whether screening colonoscopy is reimbursed at $1,200 or $2,500, but whether the procedure needs to be done at all, he said. If hospitals employ both primary care and specialist physicians, hospitals effectively control primary care referral patterns for all GI services, which could impact gastroenterologists regardless of whether they spend their time performing office consultations or procedures.

Bundled Payments

In addition to encouraging salaried employment from hospitals and promoting joint ventures between a gastroenterologist and a local hospital, the health reform act will alter GI physicians’ reimbursement by establishing a bundled payment program through Medicare. The program will set a flat fee for “an episode of care,” only for those events requiring hospitalization.

Because screening colonoscopy, for example, is primarily a diagnostic procedure, the bundled payment system will likely not be as complicated for gastroenterologists as it could be for physicians managing chronic conditions in a fixed-fee system. However, physicians with ambulatory surgery centers will have to scrutinize their practice to see where they can increase savings.

“A lot of what gastroenterologists do today are services that are diagnostic and therapeutic as opposed to [those that manage] chronic conditions,” said Dr. Brill. “Where bundled payments could possibly impact us is that if you perform a colonoscopy and have a complication, such as a bleed or the patient has to be brought back because of a poor prep, this could affect what you and the facility get paid for the second procedure. Then you’ve got to figure out how you’re going to spend your money.”

“Right now, if we do a screening colonoscopy and find a polyp, there is no control over when the patient returns for a surveillance colonoscopy,” said Dr. Kosinski. “We may bring them back in three years even if it is not appropriate according to guidelines. What’s coming and what I’ve seen is that the payers are going to give physicians something like a gift card—you’ve got $1,500 for your screening colonoscopy—and the GIs are going to say, ‘Maybe I can use conscious sedation, maybe I don’t want that anesthesia expense,’ and hold on to as much of that dollar as they can. When we get down to the nitty gritty, you will have screening and surveillance done at a fixed cost for the package of the procedure.”

Procedure Reimbursement

By far the most significant effect of health care reform will be on procedure reimbursement, both facility and professional fees. Four years ago, CMS began to phase in a new ASC fee schedule as the result of a Congressional mandate that the schedules should align with payments to hospital outpatient departments. However, the mandate stipulated that the changes in spending across ASCs remain budget-neutral, with the result that ASC fees for GI services fell approximately 25%, said Glenn Littenberg, MD, the managing partner of Gastroenterology Associates, in Pasadena, Calif., and chair of the American Society for Gastrointestinal Endoscopy’s (ASGE) Practice Management Committee.

“One of the big issues is the trend in [ASC] reimbursement for GI endoscopy, which is really a continuation of the trend that began a few years ago,” said Dr. Littenberg, who is also currently the ASGE’s adviser to the American Medical Association (AMA) Current Procedural Terminology editorial panel. “Reimbursement for the facility side from Medicare for screening colonoscopy has now fallen to about or below the level at which the services can be provided. While CMS wants to have effective care delivered in quality facilities and to improve rates of screening for colorectal cancer, its payment policy undermines this [goal].”

The effect on professional fees reflects a change in how CMS is dealing with the recommendations of the AMA’s Relative Value Scale Update Committee (RUC), which makes annual recommendations to CMS on reimbursement rates for physician services. Every five years, the RUC also performs a broader review of the entire Resource-Based Relative Value Scale. Until this year, CMS accepted the vast majority of the RUC’s recommendations and largely left the RUC to determine which physician services to re-value. However, the Affordable Care Act specifically calls for the CMS to have greater scrutiny over reimbursement rates.

“The key thing is Section 3134, which requires the secretary [of HHS] to review and identify potentially misvalued codes,” said Dr. Brill, who is the AGA’s RUC adviser. “For years, CMS pretty much accepted what the RUC recommended—but that’s no more.”

For example, in the 2011 Physician Fee Schedule Proposed Rule, CMS specifically pointed to several GI codes that it believes are misvalued and need to be surveyed for 2011, including upper GI endoscopy diagnosis and biopsy, colonoscopy and biopsy, and colonoscopy and polypectomy.

“Medicare has challenged the GI societies to defend their reimbursement for our bread-and-butter procedures,” Dr. Brill said.

Clearly, CMS wants to be much more aggressive in how they evaluate the physician workload behind a service, said Dr. Littenberg. “We are going to be challenged to defend the values that we believe are pertinent to our services. The outcome may well be that reimbursement for services will fall, because it’s almost impossible to increase the value within a budget-neutral system that is not keeping up with inflation.”

In the future, the Affordable Care Act also calls for the creation of the Independent Payment Advisory Board (IPAB), an executive-branch agency charged specifically with reducing the Medicare growth rate. Importantly, HHS must implement the board’s proposals unless Congress adopts equally effective alternatives; the only way to avoid this would be if both houses of Congress, including a three-fifths super majority in the Senate, vote to waive the requirement. Importantly, however, the IPAB is strictly limited in what it can do to slow Medicare costs: The board cannot ration health care, raise revenues or increase Medicare beneficiary premiums, meaning that physician fees become a likely target for curbing costs.

“The way that the legislation is written, it puts physician fees very much up front in the efforts of the IPAB because they have so many restrictions on what else they can do,” said Dr. Littenberg. “It doesn’t leave much [to cut] besides durable medical equipment, pharmaceutical costs and physician services.”

Adapting to Health Care Reform

Physicians who hope to adapt to these myriad changes need to be able to prove their value and then position their practice to work with others to find savings.

In terms of collecting data, physicians have to ask, “How is this going to result in a benefit or recognition for me,” said Dr. Brill. “As a physician, you should be asking that question very critically—how are the data going to translate into an incentive? Will my fees go up? Will I get paid in a more timely manner? Will co-pays to me get reduced or disappear? Will I be freed from having to submit requests for pre-authorization?”

Whether gastroenterologists are collecting data through an electronic medical record system, an endoscopy reporting program or a registry, the data should align with the outcome measures that Medicare and payers want to see, Dr. Brill said.

Gastroenterologists also need to recognize the power structure within their community and make an effort to find partners.

“More than the government, our biggest threat is the local hospitals, who have the ability to change everyday practice a lot more than the government does,” said Dr. Kosinski. “They are forming very, very large, powerful networks and they are buying the primary care base and employing the people that send us business. So my best advice is ‘do not declare war on your hospital.’ And, do not feel like you have to sell your practice to your hospital. Look to pursue ways of being engaged with your local hospital and your local medical community. Don’t spend your entire day in your ASC. You can’t survive if you spend your life just cranking the colons. You’ve got to work with your hospital, joint-venture with them, and stay engaged with your primary care base.”


Dr. Kosinski reported no relevant financial or other commercial relationship with any manufacturer or provider of products or services relevant to this article. Dr. Littenberg reported financial or other commercial relationships with Abbott Laboratories. Dr. Brill reported financial or other commercial relationships with Avantis Medical Systems, BARRX Medical, Inc., Boston Scientific Corporation, Centocor, Inc., Early Bird Alert, Inc., EndoChoice, Inc., Given Imaging, Novartis Pharmaceuticals, Salix Pharmaceuticals, Inc., SciDose, SmartPill, Spectra Science and USGI.

 


Written By: Gabriel Miller

Tags: healthcare, ACO, healthcare suppliers, ACO Regulations, ACOs and suppliers, medical devices, Healthcare Service Provider, ACA, Afforable Care Act