Policy Position Paper

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MEDICARE DMERC COVERAGE POLICY

Background

Late in 1993, HCFA contracted with four regional carriers to handle all claims submitted under Medicare Part B for selected items and services, including durable medical equipment (DME). Prior to this, these Medicare Part B claims were processed by Medicare's 34 local carriers. These regional carriers, called Durable Medical Equipment Regional Carriers (or DMERCs) manage claims for: durable medical equipment (DME), prosthetic devices (and related supplies), orthotics, home dialysis supplies and equipment, surgical dressings and other devices, some immunosuppressive drugs and other items or services designated by HCFA.

Using DMERCs to process these claims was intended to bring greater uniformity to Medicare coverage policies for these items and services. HCFA believed that these regional carriers would develop needed expertise in processing claims for medical equipment and supplies, would be more successful than carriers in preventing fraudulent claims, and would prevent suppliers from "carrier shopping" for the highest carrier reimbursement rates. Further, HCFA intended that this new system of regional carriers would set Medicare policy for these items and services more promptly than the time needed to implement national coverage policy.

While each DMERC could theoretically set its own policy for a particular item of medical equipment, its contract with HCFA specified that the four DMERCs collaborate and confer with each other. In practice, the DMERCs have tended to set identical policies after this collaboration. In other words, they act in unison to set de facto national policy.

AdvaMed Position and Recommendations

AdvaMed believes that DMERC coverage process should be reformed so that it is open and transparent, results in timely decisions, and permits public participation. These same reforms are currently being made at the national level. In addition, because coverage decisions made by the DMERCs have a national impact, they should be carefully monitored to ensure that Medicare beneficiaries receive the "reasonable and necessary" care that they are due.

AdvaMed supports the following specific reforms:

• HCFA should ensure that DMERC coverage decisions are made with adequate input from providers, beneficiaries, manufacturers and suppliers commensurate with the "national" nature of the DMERC policies.

  Reforms that have been put in place at the national level--for openness, transparency, and public participation---should be required of the DMERCs. HCFA should ensure that these openness, timeliness, and public participation objectives for the DMERC coverage process are included as it negotiates and finalizes contracts with these contractors.

• HCFA should require that DMERC coverage determinations be based on the medical needs of the beneficiary, not economic considerations.

  The Medicare law specifies that beneficiaries receive "reasonable and necessary" medical care. Toward this end, DMERC coverage decisions should focus on the needs of beneficiaries for timely access to appropriate care. While HCFA and all of its contractors, including DMERCs, have a responsibility for ensuring that only covered items (that is, those found to be "reasonable and necessary") are made available to beneficiaries, there is no support in the Medicare law for using the coverage process to limit Medicare outlays. DMERC coverage decisions--and DMERC implementation of national coverage decisions--should be based on medical, not financial, considerations.

  The yardstick that measures the performance of the DMERCs should not be the fiscal measures that result from restrictions on what is covered. Instead, a primary measure of DMERC performance should be their success in making available to beneficiaries appropriate medical care.

• HCFA should designate an office within the agency to be responsible for DMERC performance. This HCFA office should monitor DMERC performance to ensure that beneficiary access to "reasonable and necessary" care is determined in an open and appropriate manner.

  Once a new process is developed for establishing DMERC coverage policy, HCFA should monitor the DMERCs' compliance with that process. As a part of that, HCFA should ensure that the DMERCs implement national coverage policies and refrain from denying coverage for these items or services by placing restrictions on their use without medical justification.

• HCFA should structure contracts with individual DMERCs so that they are able to make case-by-case coverage decisions when sufficient information does not yet exist to support concerted DMERC decisions for the nation.

  Medicare coverage decision makers at all levels--national, regional, and local--should understand that early in the life of a new technology, the quantity and quality of information that is available regarding the technology may be in short supply, and not sufficient to support a national coverage decision. Where inadequate evidence exists to support a national coverage decision by HCFA, or a uniform policy for the nation by DMERCs, the best course is to permit Medicare's contractors flexibility in making coverage decisions.

  This means that HCFA should encourage the individual DMERCs to use their authority to make case-by-case coverage decisions when the data are not yet sufficient to establish uniform DMERC policy for the nation. Although DMERCs typically act in concert, HCFA needs to instruct individual DMERCs to use this flexibility to gain experience with promising new technologies at the local level prior to DMERC decision making.

• HCFA should ensure that DMERCs do not institute de facto Non-Coverage Decisions for items and services subject to their review without clear evidence to support this action.

  DMERCs should not issue Non-Coverage Decisions without clear evidence to support this action. All decisions made by coverage decision makers--decisions to cover a technology, as well as Non-Coverage Decisions--should be supported by appropriate evidence to evaluate the technology in question. The lack of information about a particular technology should not be a sufficient reason for DMERCs to issue a de facto national Non-Coverage Decision.

• Standards of evidence that are put in place to guide coverage decisions by DMERCs should be sufficient to demonstrate the effectiveness of the medical technology or procedure under review, while being sensitive to the unique nature of device innovation. Further, evidentiary standards should take into account practical impediments (e.g., time, cost, patient impact) to the development of this information. No one type of evidence should be required for a coverage decision.

  Clinical evidence required for particular products or procedures should be reasonable, clinically relevant, and cooperatively developed with those practitioners and product innovators who know the technology best. AdvaMed believes that the nature of the evidence that is demanded by coverage decision makers must follow the nature of the technology that is under consideration. For some types of technologies, randomized controlled clinical trials may be appropriate. For others, however, a different type of evidence may be more appropriate. Medicare coverage decision makers should recognize that the effectiveness of particular technologies can be successfully demonstrated by varying types of evidence. Therefore, AdvaMed recommends that no one evidence type be required for coverage.

  When a new item or service, approved by FDA, shows promise of benefit to beneficiaries, DMERCs should weigh heavily the suggestions of treating physicians in determining whether the item or service is "reasonable and necessary." This is particularly important in situations where patients have few treatment options.

• HCFA should encourage the DMERCs to communicate with manufacturers on their expectations for evidence needed for favorable coverage decisions, as well as information needed to process claims. In particular, HCFA should encourage DMERCs to conduct meetings with manufacturers and other interested parties on new technology early in the coverage review process.

  In order to facilitate compliance with DMERC expectations regarding evidence needed for coverage and information needed to process claims, DMERCs should increase their efforts to communicate these expectations with manufacturers and other interested parties. An important way to do this is for DMERCs to meet with product sponsors, upon request, early in the product development process (prior to FDA approval or clearance) in order to reach collaborative agreements as a means to expedite coverage decision making. Although these meetings will require the DMERC to make a commitment of resources, this investment of resources will produce savings down the road as the agency reviews the information produced by the requestor. This procedure should operate in a fashion analogous to that outlined in section 201 the Food and Drug Administration Modernization Act (FDAMA).

August 2000