CMS' proposed redefinition of "new" technologies contradicts Medicare statute, according to AdvaMed.

Before this year, CMS considered a technology to be "new" for two to three years after the ICD-9 code for the new technology or service began appearing in the claims data.

The Medicare Modernization Act of 2003 relaxed the criteria for new technologies to qualify for bonus payments, leading to a record number of such applications for FY 2005.

In the ¹ FY 2005 hospital inpatient prospective payment system proposed rule, CMS states that "the two-year to three-year period would ordinarily begin with FDA approval, unless there was some documented delay in bringing the product onto the market."

In a ² May 28 letter to CMS, AdvaMed objects to the proposed criteria for new technology. "A technology's cost data are most accurately collected through the tracking of the technology's ICD-9 code," the trade group asserts. "Until an ICD-9 code has been issued for a new technology, CMS cannot begin to collect two to three years of complete cost data on the technology."

"CMS' proposed change in policy...would be inconsistent with the statute and represent a significant shift, retroactively changing the conditions under which companies have been developing innovative technologies and filing new technology applications," AdvaMed adds in the first of two planned comment letters to the agency.

The trade association urges CMS to reevaluate the applications it is proposing to decline for failing to meet the "new" criteria. In the proposed rule, CMS rejected four out of 10 new technology applications outright based on their failure to meet the "new" criteria (³ Also see "CMS New Tech Add-On Interpretation Contested By Industry Reps" - Medtech Insight, 17 May, 2004., p. 3).

The Medical Device Manufacturers Association likewise contends that CMS appears to be shifting its definition of "new" technology, which is particularly problematic for smaller firms who often lack nationwide distribution and manufacturer volume at the time of FDA approval.

MDMA believes CMS should clarify the application process, particularly for smaller manufacturers, who may be unfamiliar with the process. The trade association plans to submit comments by the end of June. Comments on the IPPS proposed rule at due July 12.

AdvaMed further takes exception to CMS' reservations in the proposed rule about whether a new use for an existing technology should receive add-on payment if it is assigned to a distinct diagnosis-related group.

Medtronic, which receives bonus payment for its InFuse bone graft for spinal fusion, is seeking to obtain add-on payment for treating tibia fractures.

Contending it is "appropriate" for CMS to consider a new use for an existing technology for add-on payment, AdvaMed argues that the policy is "consistent with the purpose of add-on payments - to ensure that hospitals are appropriately reimbursed for the cost of providing care."

AdvaMed encourages CMS to complete full analyses for all applications, rather than stopping after determining a technology is not "new." Full analyses should include each technology's DRG assignment and possible add-on payment amounts and whether the cost threshold and "substantial improvement" test are met.

Providing a full analysis would enable the public to better understand CMS' logic in making a decision and would allow companies "to better anticipate the circumstances under which a new technology application is likely to succeed," AdvaMed asserts.

The trade association also reiterates several concerns it raised in a ⁴ Feb. 27 letter to the agency.

AdvaMed encourages CMS to raise the add-on payment level from 50% to 80% of the difference between the standard DRG payment and the cost of the procedure with the new technology - a provision that was included in the MMA report language, but not in the law itself.

The policy change would result in the payment level coinciding with the inpatient outlier payment amount.

AdvaMed also recommends that CMS release a specific agenda in advance for its "substantial clinical improvement" annual public meeting.

Both AdvaMed and MDMA believe agency staff should present preliminary feedback on whether new technologies meet the "substantial clinical improvement" criteria and provide a forum for comment. The first meeting was held in March (⁵ Also see "New Tech “Add-On” Payments Sought By Hospital On Behalf Of Firms" - Medtech Insight, 22 March, 2004., p. 13).

AdvaMed, MDMA Take Issue With CMS’ New Tech Add-On Payment Policy

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