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June 27, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 1 words

HEADLINE: PREPARED TESTIMONY OF DAVE FLEMING ADVANCED MEDICAL TECHNOLOGY ASSOCIATION

BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON HEALTH AND ENVIRONMENT

SUBJECT - MEDCARE'S MISMANAGEMENT: IS HCFA'S COMPLEXITY THREATENING PATIENT ACCESS TO QUALITY CARE?

TUESDAY, JUNE 27, 2000

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INTRODUCTION

AdvaMed is pleased to submit this statement as the Subcommittee examines HCFA's management of the Medicare program. AdvaMed, the Advanced Medical Technology Association, was formerly known as HIMA, the Health Industry Manufacturers Association.

Before we begin our remarks, we would like to provide some background on our industry and whom AdvaMed represents.

AdvaMed is the largest medical technology trade association in the world, representing more than 800 medical device, diagnostic products, and health information systems manufacturers of all sizes. AdvaMed member firms provide nearly 90 percent of the $68 billion of health

care technology products purchased annually in the U.S. and nearly 50 percent of the $159 billion purchased annually around the world.

This new name reflects our industry's central role as a source of medical innovation, research, and advances in therapies, diagnostics, and health information technology. This change does not represent a change of role or mission; merely a clearer reflection of those functions.

ROLE OF MEDICARE

Mr. Chairman, Medicare has accomplished a tremendous amount in improving the quality of medical care for beneficiaries over the past 35 years. Medicare has been a blessing. Millions upon millions of elderly and disabled Americans have regained their health, improved the quality of their lives, and lived longer and more productive lives thanks to Medicare.

We also believe we owe a debt of gratitude to the many individuals who have served in the public sector, administering Medicare over that period--and especially those who serve at HCFA today. These individuals deserve special recognition as they are confronted with the infinitely complex tasks of seeing to it that Medicare's 39 million beneficiaries gain prompt access to the highest-quality care, at a time of severe budget constraint.

Despite the hard work of these individuals and the continuing efforts of this Committee and Congress to oversee the activities of the agency, we see an agency unable to keep up with the pace of new medical technology.

As a result, patients are not gaining prompt access to the medical technologies they need and deserve--- access that was the very purpose of Medicare in the first place.

Today, we will outline some of the Medicare system's shortcomings. Then we will turn to what we believe are some reasonable solutions in addressing this problem.

COVERAGE, CODING AND PAYMENT

Before we provide you with a review of recent key issues on how HCFA deals with medical technology, we would like to define some of the key terms that are used to describe Medicare

policies on medical technology. Specifically, we refer to "coverage, .... coding," and "payment."

Coverage. As you know, Mr. Chairman, once products are reviewed and cleared by the Food and Drug Administration, they must undergo Medicare review to determine if they will be included in the portfolio of services Medicare makes available to its beneficiaries. This is commonly referred to as coverage. It usually occurs routinely as local Medicare contractors process bills from doctors and other providers. But some technologies undergo full-blown national coverage review, which is a complex evaluation of the benefits of a technology--similar to a pre-market evaluation done by the FDA.

Coding. As Members of this Subcommittee are aware, this is just one step in obtaining reimbursement for a new technology. To be covered by Medicare, either locally or nationally, new medical technologies must be assigned what is known as a procedure code. These codes are comprised usually of five or six digits, often a combination of letters and numbers, and identify literally thousands of medical treatments and procedures.

Providers use these procedure codes when they submit bills to Medicare and private insurance companies. Virtually all medical products must either fit into existing codes or, if they are unique or breakthrough products, they must have a new code of their own.Payment. Once a new technology or medical procedure has a code, then the final stage is to determine an appropriate payment level, or Medicare price, for the product. As you are aware, this is accomplished by folding the new technology or procedure into Medicare's various payment systems, each of which has its own complex set of rules governing how technology is treated. These systems range from the Resource Based Relative Value Scale, which is a physician fee schedule, to DRGs in the inpatient setting, to the new Ambulatory Payment Classifications (AI>Cs) for the soon-to-be-implemented outpatient payment system.

This Subcommittee is well aware that each of these payment systems is extremely complicated; each has many moving parts. If any one of those parts is not working optimally, access to new technologies for patients and medical professionals will be slowed or even stopped outright. That's because coverage, coding, and payment systems interact with one another. It's not enough to be just covered, or just coded, or even just paid. You need all of these elements to be present and to be operating properly to ensure a prompt and appropriate reimbursement level that permits appropriate access.

Now we would like to introduce the reality that we, as manufacturers, face--and that must ultimately be borne by patients and providers as well. HCFA's systems of coverage, coding, and payment--the systems we just described--are not working well. In many cases, they are slow; they are inefficient; they contain inappropriate incentives; and they are inordinately complex. That does not suggest they do not work; it suggests that they simply do not work well.

For example, the entire process can take four years or more to complete. That includes the one to three years it can take to obtain a coverage decision; the 15 months to two years it may take to secure a code; and the two years it can take to secure an appropriate payment level for a technology. We have attached a chart with this statement that illustrates the times associated with these review processes, as well as several other charts and case studies focusing on particular medical technologies.

Keep in mind that these HCFA processes take place after FDA review, which itself might be a year or so. And that they take place after the time it takes to develop a product, which can consume anywhere from two to six years, prior to FDA review.

We offer this context, Mr. Chairman, because we believe it is critical in understanding HCFA's current performance in reviewing and adopting medical technology in Medicare. This Committee deserves enormous credit for its leadership role in reforming the Food and Drug Administration. But we want to stress that, as far as ensuring access to new technology for Medicare beneficiaries, the goals of FDA reform are often thwarted by HCFA's coverage, coding, and payment policies.

And the effects of this are clear: Patients, and the medical professionals who treat them, will not gain access to available, cutting-edge medical technologies for many years after they are cleared for marketing in the United States. And if you add it all up, Mr. Chairman, we are often talking about more than a four-year delay-- as we noted earlier. We need to ask ourselves what the value-added benefit of this delay is for patients and medical professionals. We want to stress that we do not see this as intentional on HCFA's part. These systems, as we indicated, were put in place in a piecemeal fashion and were not designed to work together.

Now, we would like to take a few moments to let you know about two issues of significant importance to the industry, which bear on Medicare coverage, coding, and payment policy.

Coverage Issues. A year ago, Mr. Chairman, HCFA instituted a new process for making national coverage determinations on medical technologies. This was a positive change. HCFA opened the process, allowed the public to participate, and provided information on the status of coverage through its web site. HCFA deserves clear credit for these changes.

Yet recently, HCFA announced another policy that may entirely overwhelm whatever progress it made in opening the process. We are referring to the agency's Notice of intent to issue new criteria for making Medicare coverage decisions. In essence, these are the standards that products must meet in order to get covered. We believe that several sections of the Notice of intent conflict with the agency's overall goal of improved patient access.

First, in its Notice, HCFA raises the possibility of denying Medicare coverage of certain technologies on the basis of their cost. HIMA believes that economic' factors such as cost properly are considered in the context of payment, not coverage, decisions. In a recent nationwide survey by polling firm Penn, Schoen & Berland, 67% of Americans said they would oppose limiting availability of new technologies on the basis of cost.Second, we are concerned by the evidentiary burdens presented by the Notice. As new requirements are put in place that define levels of evidence required for device coverage decisions, HCFA must recognize that new devices emanate from a dynamic, incremental innovation process, and that they have very short life cycles. As a result, no one type of information should be required for medical devices. Instead, many different types of evidence must be used to guide clinical use of new technologies, with the evidence tailored to the medical device that is being considered.

Third, we are concerned that the Notice is overly prescriptive and curtails physicians' and patients' ability to decide which medical treatment option is best. Society has entered an era in which patients are playing an increasingly important role in making decisions about their health care. Patients and physicians have a unique role to play in deciding whether, for example, the improved quality of life offered by a new technology outweighs potential risks. Medicare should craft coverage criteria that empower patients and physicians, rather than unnecessarily restricting their ability to decide among different treatment options.

Mr. Chairman, we will be filing comments on this Notice with the agency later this week.

The next issue we would like to discuss relates to a new prospective payment system that HCFA is implementing for hospital outpatient services.

Hospital Outpatient Payment. When HCFA proposed its plan for an outpatient payment system, it based the payment categories and payment levels on data that would have been four years old by the time the system was expected to go into effect. The data would have been seven years old by the time the system would have been updated. This would have left out literally hundreds of critical technologies.

By providing for two-to-three years of market-based pricing before new technologies and devices are folded back into the APC groupings, the Congress assured adequate access to these incredibly important items for Medicare beneficiaries. While the list of eligible devices released by HCFA to date has been inadequate, we are currently working closely with the agency to ensure that the payment system implemented on August 1 recognizes new technologies that were inadequately represented in the data used to design the APC payment categories. We believe this is a critical issue affecting patient access to medical care, and we applaud the Congress for enacting these provisions.

CASE STUDY: THE CORONARY STENT

Mr. Chairman, we would like to present an example of how the shortcomings in all these systems affect one technology, the coronary stent. The coronary stent is a revolutionary device that is inserted into the coronary arteries during angioplasty to reduce narrowing and permit normal blood flow.

As the chart at the end of this statement shows, the device manufacturer first requested a unique code for the device in 1990. But HCFA did not assign the code until 1995--five years later. Once the code was approved, it took the agency another two years--from 1995 to 1997--to gather and analyze data on the product's costs and charges before it set the correct reimbursement level for the stent. Therefore, from the time FDA approved the device in 1994 through the time that HCFA actually arrived at the correct payment level in 1997, hospitals received $3,000 to $5,000 below what it cost them to provide this breakthrough therapy.

Now, consider the impact on patient access. During the time that HCFA reimbursed hospitals at this low level, only between 5-25 percent of eligible Medicare patients received the technology. But once adequate payment was finally approved in 1997, patient access grew. And today, some 70 to 80 percent of eligible patients receive the stent. So, stepping back for just a moment, Mr. Chairman, this case study shows a seven-year process from the time that the code was requested to the time that adequate reimbursement was actually provided.

That can be an eternity in the world of device innovation--where the average life cycle of a technology is often two years or less. And if you are a Medicare patient, you don't want to wait for this kind of technology, while HCFA's policy machinery chums. Please recognize that this occurred at a time when other patients who had private insurance did not have trouble getting access to the stent. In fact, coronary stents became the standard of care long before Medicare got around to paying for them adequately.

ADVAMED RECOMMENDATIONS

We do not come before you, Mr. Chairman, to say that fixing these problems is easy. These problems are, in many cases, a result of years of complex rules layered upon complex rules;problems that are as much matters of perspective as they are problems of structure and operations.

Nevertheless, there are a series of practical steps that can be taken to address them. These steps should be helpful in guiding your thinking as you contemplate HCFA's operations and management.

First, we believe that HCFA must place top priority on streamlining its coverage, coding, and payment systems to dramatically shorten the overall four and one-half year process.

Second, we believe that HCFA should institute reforms that encourage the rapid assimilation of new technologies into the Medicare beneficiary plan.

Third, we believe that HCFA should update all of its payment systems more frequently--at least annually--to reflect changes in medical technology.

What we are advocating, Mr. Chairman, is more timely beneficiary access to new medical technologies.

CONCLUSION

In conclusion, Mr. Chairman, we want you to know that we appreciate the important role this Committee played in improving FDA regulation of medical technology. Unfortunately, the promise of FDA reform--that is, prompt availability of technologies for patients-- has not been fulfilled because too many Medicare policies are not working. We look forward to working with this and other committees in addressing these problems.

Mr. Chairman, we also have a request. We want to make the Committee aware of, and ask that it support, a recently introduced piece of legislation that would begin addressing some of the issues we have raised in this statement.

The legislation, H.R. 4935, is entitled "The Medicare Patient Access to Technology Act of 2000," and it was introduced by Representatives Jim Ramstad and Karen Thurman. Several Members of this Subcommittee have co-sponsored this legislation. This bill digs into the nuts and- bolts of HCFA policies that affect innovation--from coding timetables, to the type of data that HCFA insists upon, to how frequently payment systems should be updated--and it offers practical solutions.

It also takes a holistic view of HCFA's performance regarding medical technologies in that it would require the agency to report annually on how long it took during the preceding year to make coverage, coding, and payment policy determinations on a technology-specific basis. Such a report would create useful benchmarks against which HCFA's performance can be more easily measured, understood, and reformed.

We view this legislation as a down payment in the larger effort to modernize HCFA, and we ask your support for it, and we urge you to consider including it in any appropriate Medicare bill you may take up this year.

We at AdvaMed are currently studying the structure of the agency and plan to have additional views on how HCFA can be more responsive to beneficiary needs for timely access to new and innovative medical technologies.

Thank you for permitting us to offer our views on this important matter.

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LOAD-DATE: June 30, 2000

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