Leaders in the medical device industry, hospital executives, physicians, and consultants gathered in the Grand Hyatt in Washington DC today at InHealth's 2011 Health Technology Summit. The purpose of the meeting was to discuss the macroeconomic climate in health care and how its pressures will determine the future of clinical technology innovation. Many of discussion points centered on the balance between value and volume. This balance, while rooted in the shifting payment methodologies in the delivery system, also emerged as a dynamic within the medical device industry. Academics, analysts, and industry reps emphasized that the 'new normal' in health care would make the demonstration of value pervasive through all aspects of the delivery system.
Dr. David M. Cutler, the Otto Eckstein Professor of Applied Economics at Harvard University, started of the day with a keynote address that introduced medical technology innovation within the context of the health care system this country has built across the past few decades. He began recalling the story of a heart attack suffered by President Dwight Eisenhower. The President suffered a heart attack while in office in 1955, and after the event was on bed rest for six weeks to recuperate. In the decades following the President Eisenhower's attack, the advances in clinical technology has enabled revascularization (through angioplasty and stenting, as well as coronary artery bypass grafting), such that patients suffering a heart attack recover faster, live longer, and have overall better outcomes. Dr. Cutler emphasized that though the cost of treating a heart attack has climbed dramatically, there is a clear, demonstrable benefit in health and longevity. Today, Dr. Cutler articulated, the advancements made in technology have lead to increasing complexities and, in correlation, the overuse of care. For that reason, the challenge for healthcare is to coordinate that complexity more effectively.
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In a somewhat surprising move in light of the many changes underway with health care reform legislation, the Centers for Medicare and Medicaid Services (CMS) has further expanded its National Coverage Determination policy for FDG-PET imaging of solid tumors and myelomas. The recent move grants more opportunity for providers of PET imaging services to receive reimbursement when FDG-PET is used to inform the initial treatment plans for cancer patients. The policy revision marks the second time in the past year in which CMS has expanded coverage for FDG-PET imaging of tumors. While this move will be welcomed by many patients and providers alike, it may be a ripe proving ground for CMS at the national and local levels to engage in further utilization review for advanced imaging services.
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Medical innovation isn't the same as it was five years ago. It isn't the same as it was one year ago. Cutting-edge advances in nanotechnology and molecular and genomic medicine seem to occur on a monthly basis. In fact, just last week, the first self-replicating synthetic cell was created. How do we make sense of news like this? What does it mean (or does it mean anything) for hospitals?
Such a dizzying pace of innovation isn't helped by the pressures of reform legislation. Hospitals are struggling to understand the potential impact of comparative effectiveness, episodic bundling, the Acute Care Episode (ACE) demonstration project, and the medical excise tax and how these products of the Patient Protection and Affordable Care Act will affect the future of their medical enterprise. The passing of reform legislation has awoken hospitals to major problems with the way they plan for clinical service line growth, as well as with the way they acquire and deploy new clinical technologies. Hospitals find themselves pressured by physicians and consumers to provide care in innovative ways and, in increasingly competitive markets, hospitals have realized that they are unprepared to make principled and deliberate decisions about which service lines to grow, which to defend, and where partnership and divestment strategies make sense. While innovation has changed over the past few years, the dollars involved and the high stakes have not. Moving forward, hospitals cannot afford to get it wrong - scarce dollars, reputations, and political capital hang in the balance at the prospect of poor investment decisions.
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Last week at the American Heart Association's (AHA) annual Scientific Sessions on Quality of Care and Outcomes Research in Cardiovascular Disease and Stroke, Dr. Peter Groeneveld from the Philadelphia VA Medical Center provided insight into the impact of advanced cardiovascular technologies and rising health care costs.
In a retrospective analysis of Medicare claims data from 2003 and 2006 (abstract here on page 17), Dr. Groeneveld and colleagues found that the rising use of drug eluting stents (DES) and Implantable Cardioverter Defibrillators (ICDs) was associated with significant cost increases for patient with coronary artery disease (CAD) and congestive heart failure (CHF). The researches found that the cost increase of treating Medicare CAD patients with DES was nearly $5 billion dollars (approximately 89 percent of total growth) and the increase of treating Medicare CHF patients with ICDs was nearly $900 million (approximately 29 percent of total growth).
Though both were adding large dollars to Medicare cost, ICDs increased in direct proportion to the number of devices used. DES, on the other hand, added substantial cost beyond that of the stents themselves. In a subsequent interview with TCTMD, Dr. Groeneveld explained how medicine changes with new technologies, and that changes associated with DES included rises in imaging exams, diagnostic cardiac catheterizations, physician referrals, subspecialist evaluations, and elective hospitalizations; all adding more cost to these patients.
Some physicians, however, question the cost impact, and point to the fact that DES, by potentially avoiding restenosis or open-heart procedures, may reduce cost. At the same time, they argue, cost may not be an appropriate metric for technology that saves lives and improves quality of life.
Still, cost remains a major concern, both for providers and for payers alike. This study, which was sponsored by the NIH and AHRQ, underscores the importance of the cost issue to the federal government. We at TI are well aware of the importance of the issue for hospitals, and often work with our members to identify cost savings opportunities. Though these technologies are increasingly important in providing care to cardiovascular patients, smart utilization and standardization can help reduce their impact to the budget without compromising clinical care.
Here in Denver, where the Heart Rhyhm Society (HRS) - the premier association for cardiac electrophysiologists - is holding its annual scientific sessions, fierce debate continues about the impact of this year's passage of health reform legislation. The opening plenary session assembled a distinguished panel of policy experts (former Senator Tom Daschle, NPR/Fox News Correspondent Juan Williams, and Health Affairs Editor-in-Chief Susan Dentzer) and physicians (Drs. Harlan Krumholz and Richard Fogel) to discuss the future of health care in light of the passage of the Patient Protection and Affordable Care Act. Richard Fogel, as a practicing electrophysiologist and CEO of The Care Group, a large physician group, received a favorable reaction from the crowd of heart rhythm professionals as he outlined his major concerns about health form legislation. These concerns broadly fell into three major categories.
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In our recent program notes, Inside TI, we looked closely at several aspects of health care reform and their potential impact on how hospitals consume and pay for clinical technologies. One of the areas of particular importance to clinical technology is the device tax-a medical device company excise tax of 2.3 percent of industry revenues. The tax does not come into effect until 2013, but industry is already investigating ways to soften the sizeable blow to its balance sheets (as we discussed in Inside TI, since the tax is on revenues even companies that lose money will have to pay). A recent survey by the Massachusetts Medical Device Industry Council (MassMEDIC) sheds some light on how industry leaders are planning on reacting to the tax.
The survey queried about 100 mostly C-level executives in the device industry on their intentions to deal with the tax. The results showed reducing costs (namely by lowering payroll and cutting supply costs) and raising prices for customers to be the primary methods for balancing the expected loss. Research and development budgets, however, were not planned to be cut according to respondents. The survey's results, initially reported by the Massachusetts Medical Devices Journal, were to be presented at MassMEDIC's annual conference yesterday.
Being the primary consumers of the industry, rising prices will be especially difficult for hospitals. Margins are already razor thin and can quickly turn negative when the increased variable costs imposed by devices accumulate. Providers will need to continually focus on supply costs and the strategic procurement of clinical technology, areas where Technology Insights is always available to provide guidance.
At a recent gathering of health economists and industry leaders sponsored by the Institute for Health Technology Studies (InHealth), the impact of the recent reform bill generated a great deal of conversation. While some of the debates drifted towards skepticism and criticism about provisions in the law, the key note address given by Alan Garber, a professor of medicine and economics and Stanford University presented the medical technology industry with a challenge for the future.
In the lecture, entitled "MedTech Innovation in a Reformed Delivery System," Professor Garber argued that the new law does little to address the cost drivers that are leading to the massive unfunded liabilities in the Medicare system. He pointed out that the chief cost drivers was the increasing life expectancy that most developed nations have seen across the second half of the twentieth century. Ultimately, he argued, the fiscal pressure of the Medicare liabilities coupled with the demographic trends would force us to reevaluate how we think about retirement. He proposed that the country could no longer structure retirement and retirement benefits around a specific age, but instead must shift the target age along with shifting life expectancy.
It was within this context that Professor Garber presented an imperative to the medical technology industry: create high quality products that enable people to live (and work) longer and better. Garber went on to explain about how the movement towards bundled payments and accountable care would reward innovation that raises both the extent and the quality of life. Because such innovation would lower acute event rates and improve care, payers and providers would be willing to pay for them. Garber presented an interesting view of the shifting landscape in which health care technology would be evaluated, and therebyhelped frame the subsequent discussions around comparative effectiveness research, which proved to be a vibrant topic throughout the day.
We at TI are looking closely at this area and its potential impact on health care. Look for additional details about this conference and its coverage of comparative effectiveness in this months Inside TI newsletter, where I will highlight some of the main discussions as seen at the InHealth 2010 summit.
While the passage of health care reform will expand health coverage for many groups, women in particular will benefit from a number of provisions. Under the new law, all policies--including individual policies--must include obstetrical care. Further, insurers will no longer be allowed to deny women coverage due to "preexisting conditions," such as prior cesarean sections or domestic violence abuse. Other changes affecting women include a ban gender rating and increased coverage for preventative services. For more information, please see the articles published by HealthLeaders and the New York Times--listed below.
View HealthLeaders' "Eight Health Reform Provisions that Could Improve Women's Health Coverage"
View New York Times' "Overhaul Will Lower the Costs of Being a Woman"