CMS’ latest hospital inpatient payment proposal would increase reimbursement for many device-heavy procedures in fiscal year 2013. It also moves forward with implementing policies that have longer-term potential consequences for use of implantable devices.

The agency issued its fiscal 2013 hospital inpatient prospective payment system proposal April 24, including a positive 2.3% payment rate update for acute-care hospitals that comply with Medicare quality reporting requirements.

The overall increase translates generally into improved reimbursement rates for procedures relying on implantable devices. Under the proposal, Medicare reimbursement rates for stent procedures, implantable cardioverter defibrillators, pacemakers, and spine and joint implants would increase on average between 2% and 4% compared to current rates.

Positive payment updates have the potential to relieve some pricing pressures on devices from hospitals, which are a perennial drag on earnings growth for both the cardiac and orthopedic device sectors. But there is little expectation that these modest increases will have any measurable impact on the pricing environment.

“We continue to expect hospitals to remain vigilant on device pricing,” said David Lewis, an analyst with Morgan Stanley, in an April 24 research note on the proposed rule.

Set To Start: Readmission Reductions, Value-Based Purchasing

Of more consequence in the proposed rule may be the longer-term policy reforms that CMS continues to implement.

Device firms and their hospital customers are watching two programs in particular that are mandated by the 2010 Affordable Care Act to begin this Oct. 1: a standard reimbursement reduction for hospitals that experience an “excess” rate of patient readmissions and a hospital value-based purchasing program. (See Also see "New CMS Hospital Readmissions, Efficiency Policies Make Device Companies Nervous" - Medtech Insight, 8 August, 2011..)

CMS is taking steps to implement both programs in the proposed inpatient rule, building on substantial groundwork already laid in prior rules.

One notable change the agency makes in the latest proposal is to delay adoption of the first efficiency measure in the value-based purchasing program from 2014 to 2015.

The controversial “Medicare-spending-per-beneficiary” measure is designed to monitor how well a hospital reduces costs compared to national averages during the period of three days prior to a patient’s admission and out to 30 days after discharge. The spending measure will be incorporated with a collection of quality measures as part of CMS’ calculation of value-based reimbursement adjustments.

The efficiency measure was never intended to play a role for 2013 payments, but last year’s inpatient rule had slated it to be a factor in fiscal 2014. Under the latest proposal, a hospital’s Medicare spending per beneficiary would start impacting payment rates in fiscal 2015, based on costs reported in claims data beginning in May 2013.

Device firms and hospitals have complained that the efficiency measure has yet to be fully tested and validated. In addition, device makers argue that the 30-day period following discharge falls far short of the time necessary to take proper account of downstream cost savings that may result from technologies with higher upfront costs.

CMS also detailed its planned approach for calculating the negative adjustment factor – 1% in 2013 – for hospitals with too many patient readmissions, intended as a surrogate measure for deficits in care quality. The program will target readmissions that occur within 30 days of patient discharge following treatment for one of three conditions: acute myocardial infarction, heart failure or pneumonia.

Other than a small number of exceptions, readmissions for almost any purpose, whether they appear clinically related to the original hospital stay or were even pre-planned, are counted under the program. AdvaMed has urged CMS to add more exceptions to account for standard hospital practices of discharging a patient with plans to readmit them in the near term for a procedure, such as implantation of a device.

Also in the proposed inpatient rule, CMS outlined plans to add and remove certain measures included in its hospital inpatient quality-reporting program, which adjusts payment rates based on whether a hospital reports information to the agency, regardless of the outcome on the reported measure. Among the changes, CMS proposes to add a reporting requirement beginning in fiscal 2015 for readmissions relating to hip and knee replacement procedures.

Further, the agency proposes adding two new hospital-acquired conditions for which Medicare would not provide reimbursement, beginning in fiscal 2013. One of the newly proposed conditions is surgical site infection following the placement of cardiac implantable electronic devices, including ICDs and pacemakers.

CMS also considers awarding new-technology add-on payments as part of its annual inpatient rulemaking process. For 2013, there are four applicants for add-on payments, including two devices, Cook Medical’s Zilver PTX drug-eluting peripheral artery stent and its Zenith fenestrated endovascular graft for abdominal aortic aneurysm repair. (See Also see "Cook Medical Makes Its Case For Medicare New-Tech Add-On Payments" - Medtech Insight, 20 February, 2012..)

As usual for its proposed rules, CMS outlined the arguments and potential concerns with the new-tech add-on applicants, but did not propose decisions.

The agency will announce the new-tech add-on payment decisions, in addition to potentially revising its payment and policy proposals, in its final inpatient rule, due Aug. 1. Comments on the proposed rule are due June 25.

Medicare Inpatient Proposal: Modest Pay Increases, Longer-Term Reforms

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