John McDermott and Mickayla Roan, MCRA05.26.22
The U.S. Food and Drug Administration’s (FDA) voluntary Breakthrough Devices Program1 is designed for medical devices and device-led combination products that are subject to premarket approval (PMA) or 510(k) review, or a De Novo request, and meet the following criteria:
1. The device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions
2. The device also meets at least one of the following:
a. Represents breakthrough technology
b. No approved or cleared alternatives exist
c. Offers significant advantages over existing approved or cleared alternatives
d. Availability is in patients’ best interests
The most notable regulatory benefits of Breakthrough Device Designation (BDD) are interactive and timely communication with the FDA during the review process and priority review of the subsequent marketing application, expediting patient access to novel technologies. While the regulatory benefits of BDD are substantial, there are also impactful reimbursement benefits that may allow for incremental reimbursement.
1. Safe and effective
2. Not experimental or investigational
3. Appropriate in terms of whether it is:
a. Furnished in accordance with accepted standards of medical practice
b. Furnished in a setting appropriate to the patient’s medical needs and condition
c. Ordered and furnished by qualified personnel
d. One that meets, but does not exceed, the patient’s medical need
e. At least as beneficial as an existing and available medically appropriate alternative
A technology may have a code and established payment, but payers may still deny the claim because it is not considered a covered procedure or device.
Under the Hospital Outpatient Prospective Payment System (OPPS), CMS grants transitional pass-through (TPT) payments to certain technologies for two to three years. For TPT eligibility, the device must be:
The following criteria must be met to receive TPT payment:
1. Newness: The pass-through payment application must be submitted within three years from FDA market authorization. The device must not be appropriately described by an existing or expired device category, and it cannot be similar to another device included in an existing category.
2. Substantial Clinical Improvement: The applicant must show the device leads to a substantial clinical improvement. The device must “improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part” compared to the standard of care. CMS requires applicants to prove substantial clinical improvement via peer-reviewed literature.
3. Cost: The device’s average cost cannot be “insignificant relative to the payment amount for the procedure or service with which the device is associated.” There are three cost tests the device must pass to meet this criterion:
a. The estimated average reasonable device cost in the category exceeds 25 percent of the applicable APC payment amount for the service related to the device category.
b. The estimated average reasonable device cost in the category exceeds the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent.
c. The difference between the estimated average reasonable device cost in the category and the portion of the APC payment amount for the device exceeds 10 percent of the APC payment amount for the related service.
In the CY 2020 OPPS/ASC Final Rule, CMS finalized the creation of an alternative TPT pathway for devices approved under the FDA Breakthrough Device Program, which exempts them from meeting the substantial clinical improvement criterion. This criterion is often the reason for denying a pass-through application.
For example, in the CY 2022 OPPS/ASC Final Rule, there were two alternative BDD pathway applications and six applications under the traditional pass-through pathway. Both alternative pathway applications—which were not evaluated for substantial clinical improvement—were granted TPT, and four of the six applications under the traditional pathway were denied for not meeting the substantial clinical improvement criterion. By having BDD, the pathway to pass-through payment is less challenging. Manufacturers should consider this BDD benefit if the technology is utilized in the outpatient care setting.
References
John McDermott has more than 30 years of experience as a market access, reimbursement, and HEOR consultant and practice leader. His interests include market access strategy, reimbursement planning, valuation, product differentiation, value proposition, health economic modeling, outcomes studies, and payer and provider market research. At MCRA, John leads projects that focus on coverage, coding, payment, evidence generation, and value communication strategies. He provides guidance on Medicare and managed care payment strategies as well as launch plans for new products.
Mickayla Roan advises clients on coverage, coding, and payment strategy and execution in various therapy areas including neurology, orthopedics, wound care, cardiology, and digital health. She develops reimbursement landscape assessments, strategic reimbursement plans, and market opportunity assessments for medical device manufactures seeking to enter the market or enhance their technology’s reimbursement position among commercial and government payers. Mickayla keeps abreast of industry trends to analyze the impact these changes will have on client technologies.
1. The device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions
2. The device also meets at least one of the following:
a. Represents breakthrough technology
b. No approved or cleared alternatives exist
c. Offers significant advantages over existing approved or cleared alternatives
d. Availability is in patients’ best interests
The most notable regulatory benefits of Breakthrough Device Designation (BDD) are interactive and timely communication with the FDA during the review process and priority review of the subsequent marketing application, expediting patient access to novel technologies. While the regulatory benefits of BDD are substantial, there are also impactful reimbursement benefits that may allow for incremental reimbursement.
Core Reimbursement Principles
Reimbursement for medical devices and procedures can be boiled down to three core concepts: coverage, coding, and payment. These three components are interrelated but not interdependent on one another. All three are needed for successful reimbursement.Coverage2
Coverage of medical devices and procedures is dependent on payer policies (e.g., commercial payers, Medicare, Medicaid), which are based on peer-reviewed published evidence and define whether the device or procedure is eligible for payment. Medicare coverage is limited to devices and services deemed “reasonable and necessary,” defined as:1. Safe and effective
2. Not experimental or investigational
3. Appropriate in terms of whether it is:
a. Furnished in accordance with accepted standards of medical practice
b. Furnished in a setting appropriate to the patient’s medical needs and condition
c. Ordered and furnished by qualified personnel
d. One that meets, but does not exceed, the patient’s medical need
e. At least as beneficial as an existing and available medically appropriate alternative
A technology may have a code and established payment, but payers may still deny the claim because it is not considered a covered procedure or device.
Coding
Coding is used to document a procedure or device on insurance claims forms. Various coding systems are available to document procedures and diagnoses, including Current Procedural Terminology (CPT); International Classification of Diseases, 10th Edition Clinical Modification (ICD-10-CM); International Classification of Diseases, 10th Edition, Procedure Coding System (ICD-10-PCS); and Healthcare Common Procedure Coding System (HCPCS). A hospital procedure generates two bills—one for the facility and one for the physician. Facilities bill for inpatient procedures using ICD-10-PCS codes and outpatient procedures using CPT and HCPCS codes. Physicians bill for procedures using CPT codes regardless of the care setting. ICD-10-CM codes document patient diagnoses by facilities and physicians across all settings.Payment
Facility and physician payments are established according to different methodologies, depending on the care setting and payer type. Commercial insurers and Medicaid have varying payment methodologies, but Medicare has established methodologies that other payers may follow:- Physician Fee Schedule (MPFS)
- Hospital Inpatient Facility - Medicare-Severity Diagnosis-Related Groups (MS-DRGs)
- Hospital Outpatient Facility - Ambulatory Payment Classifications (APCs)
CMS Hospital Outpatient Payment Methodology3,4
From a reimbursement perspective, BDD can be helpful in securing incremental outpatient and inpatient facility payments from CMS. This column focuses solely on outpatient payment pathways (inpatient payment pathways were discussed in a previous column).Under the Hospital Outpatient Prospective Payment System (OPPS), CMS grants transitional pass-through (TPT) payments to certain technologies for two to three years. For TPT eligibility, the device must be:
- FDA approved or cleared,
- Integral to the service being performed,
- Come in contact with human tissue,
- Used for only one patient, and
- Surgically implanted or inserted or applied in or on a wound or other skin lesion
The following criteria must be met to receive TPT payment:
1. Newness: The pass-through payment application must be submitted within three years from FDA market authorization. The device must not be appropriately described by an existing or expired device category, and it cannot be similar to another device included in an existing category.
2. Substantial Clinical Improvement: The applicant must show the device leads to a substantial clinical improvement. The device must “improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part” compared to the standard of care. CMS requires applicants to prove substantial clinical improvement via peer-reviewed literature.
3. Cost: The device’s average cost cannot be “insignificant relative to the payment amount for the procedure or service with which the device is associated.” There are three cost tests the device must pass to meet this criterion:
a. The estimated average reasonable device cost in the category exceeds 25 percent of the applicable APC payment amount for the service related to the device category.
b. The estimated average reasonable device cost in the category exceeds the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent.
c. The difference between the estimated average reasonable device cost in the category and the portion of the APC payment amount for the device exceeds 10 percent of the APC payment amount for the related service.
In the CY 2020 OPPS/ASC Final Rule, CMS finalized the creation of an alternative TPT pathway for devices approved under the FDA Breakthrough Device Program, which exempts them from meeting the substantial clinical improvement criterion. This criterion is often the reason for denying a pass-through application.
For example, in the CY 2022 OPPS/ASC Final Rule, there were two alternative BDD pathway applications and six applications under the traditional pass-through pathway. Both alternative pathway applications—which were not evaluated for substantial clinical improvement—were granted TPT, and four of the six applications under the traditional pathway were denied for not meeting the substantial clinical improvement criterion. By having BDD, the pathway to pass-through payment is less challenging. Manufacturers should consider this BDD benefit if the technology is utilized in the outpatient care setting.
Future of Coverage5,6
Currently, BDD’s reimbursement benefits are restricted to payment alone. Coverage can still be a major reimbursement hurdle for a BDD product, even if it has successfully secured NTAP and/or TPT. In 2021, CMS published the Medicare Coverage of Innovative Technology (MCIT) Rule, which sought to address coverage barriers Breakthrough Devices may face from CMS. MCIT was set to take effect Dec. 15, 2021, but was repealed last fall. MCIT would have provided national Medicare coverage for Breakthrough Devices as early as the day of FDA market authorization, with coverage lasting for four years. CMS is expected to publish a proposed rule on Transitional Coverage for Emerging Technologies (TCET) by the end of 2022. Details are still unknown and it is unclear whether TCET will apply only to Breakthrough Devices (like MCIT) or will include other criteria. Manufacturers that already have or are considering BDD should monitor TCET and be aware of the potential Medicare coverage impacts it may have on their technologies.Conclusion
When developing a regulatory strategy, reimbursement implications should be considered. The FDA Breakthrough Devices Program not only expedites FDA review time but can reduce barriers to securing incremental CMS payment through the NTAP or TPT programs. While not finalized, BDD may also have future coverage benefits. Regulatory and reimbursement strategies should not be developed in silos and the implications of one on the other should be thoroughly explored.References
- bit.ly/3MWuwGS [PDF]
- go.cms.gov/3vX3MAn [PDF]
- bit.ly/3M1rkts [PDF]
- go.cms.gov/39PCJhV [PDF]
- bit.ly/3vUj5tJ
- bit.ly/3w0asOb
John McDermott has more than 30 years of experience as a market access, reimbursement, and HEOR consultant and practice leader. His interests include market access strategy, reimbursement planning, valuation, product differentiation, value proposition, health economic modeling, outcomes studies, and payer and provider market research. At MCRA, John leads projects that focus on coverage, coding, payment, evidence generation, and value communication strategies. He provides guidance on Medicare and managed care payment strategies as well as launch plans for new products.
Mickayla Roan advises clients on coverage, coding, and payment strategy and execution in various therapy areas including neurology, orthopedics, wound care, cardiology, and digital health. She develops reimbursement landscape assessments, strategic reimbursement plans, and market opportunity assessments for medical device manufactures seeking to enter the market or enhance their technology’s reimbursement position among commercial and government payers. Mickayla keeps abreast of industry trends to analyze the impact these changes will have on client technologies.