A Rapid Path to Reimbursement

Martin Gold Technology
Access Partners

Many companies develop unique orthopedic products with the expectation that issues such as coding, coverage and payment will take care of themselves with minimal effort expended by the company. This expectation often is the result of a company’s misconception that clinician demand will force governmental and private payers to establish reimbursement for the product. Unfortunately, that almost never is the case, and many promising technologies fall by the wayside financially starved out of existence by inadequate reimbursement.
   
We often use the word reimbursement as an all-encompassing term to describe the way in which customers (doctors, hospitals and other healthcare providers) receive payment for the products they purchase and the services they provide. In actuality, reimbursement is a complex process and is the result of three separate aspects of the healthcare payment system: coding, coverage and payment.    

Orthopedic products, whether joint replacements, biologic growth factors or tissue-engineered cartilage, require appropriate alignment of all three factors to be commercially successful. Should any one of these three components fail to function properly, customers would be reluctant to purchase and use the product. This is especially true when products exceed certain cost thresholds, as is the case with many of the new biologics (such as TiGenix’s ChondroCelect or ISTO Technologies’ Neocartilage) being introduced into the marketplace.

The Process Explained

The timelines necessary to attain coding, coverage and payment are lengthy. The coding process alone may encompass a half-dozen different coding structures, such as current procedural terminology (CPT), diagnosis-related groups and International Classification of Diseases, and take several years to deal with properly. For example, most new products need to address the CPT codes, which are used by physicians to record and receive payment for the procedure associated with the new product.

The CPT coding process is controlled and managed by the American Medical Association (AMA). The AMA’s CPT Editorial Panel is responsible for reviewing and making decisions on whether a new procedure (and the associated product) is eligible to receive a new CPT code and the financial value of the CPT code, if approved. The AMA’s CPT approval system is a multi-stage process that often requires several years to complete. Based on the AMA’s current CPT Editorial Panel calendar, a new CPT code application submitted on July 11, 2007, if approved, would be eligible for inclusion in the 2009 CPT coding system.

The coverage process can be even more complex than establishing coding for a new product. The term “coverage” describes the decision-making process that governmental and private payers use to determine if a new product or procedure should be offered to their members. The process to obtain coverage for a new product may vary among payers, but it usually involves an analysis of the product’s clinical efficacy and cost effectiveness as compared to currently existing therapies. 

To gauge clinical efficacy, payers often seek opinions from medical experts and consensus medical data in the form of articles published in peer-reviewed journals and technology assessment reports from independent external entities.

Cost-effectiveness decisions may include a narrow consideration of the new procedure compared to existing procedures or a broader perspective of the costs of related tests, procedures and services. Economies found in reduced medical expenses can be a compelling argument for coverage decisions.

Getting Your Product Covered

Ultimately, your new product will need to be evaluated by payers before your customers can receive reimbursement. The coverage decision will require appropriate clinical and cost data to result in a positive decision. Much of the required clinical data will be generated either from clinical trials prior to FDA approval or through various post-marketing studies.

Unfortunately, the current reimbursement environment does not accommodate new technologies well and often fails to compensate customers properly until the technology achieves a certain level of adoption in the marketplace. This often leaves many companies struggling to answer the question, “How can they achieve product adoption without first achieving an appropriate level of reimbursement?” A number of techniques and strategies can speed up the reimbursement process during the early lifecycle of a product.

A common technique to obtain payment from a payer is through a case-by-case approval. This approval process leverages the physician’s clinical reputation and establishes the physician as the patient’s medical advocate. Most payers require that many medical services receive prior authorization (also called prior approval), which is the process by which a physician requests authorization to perform a specific service. The payer reviews the medical procedure and determines whether the procedure is medically necessary–that is, whether the quality of the patient’s care or the patient’s condition would be adversely affected without the procedure. Prior authorization typically is requested by the admitting or primary care physician.

Before giving prior authorization, payers require that physicians establish the medical necessity of a procedure following the coverage guidelines set forth by the payer. Prior authorization may be given verbally, but written authorization is preferred for the purpose of documenting the decision. Before giving written authorization, payers require a letter of medical necessity and supporting documentation.

A case-by-case approval can be requested either at the time of, or in the place of, a prior authorization request. This request is made to the payer because it is understood that the new product or procedure has neither appropriate coverage nor payment from the payer. Therefore, the physician is requesting an individual consideration of the merits of the procedure for the specific patient. In addition for permission to perform the procedure, the physician can use the opportunity to request a specific level of payment for the professional services and that an additional payment be made to the hospital to cover the cost of the product.

Companies often facilitate this process by preparing informational packets that contain much of the clinical and cost information needed by physicians to initiate a case-by-case approval. Many companies also provide education about their product to key payers so that the payer medical staff understands the treatment and can make an informed decision.

While the case-by-case approval process may not work for every new product or with every payer, it is a practical method of obtaining coverage and payment early in the lifecycle of a product.

Martin Gold is a principal at Technology Access Partners and eMedLearn, a Suffern, NY-based consulting firm that specializes in designing and implementing reimbursement and training solutions for medical device companies. He can be reached at (845) 369-9833 or by e-mail at [email protected].