Payment reform puts medical-device industry on the defensive

By Sabriya Rice. Modern Healthcare. October 7, 2014

Medical technology companies are warning that burgeoning pay-for-performance and risk-based reimbursement models will motivate providers to block access to clinically important innovations.

Healthcare economists and quality experts, though, counter that the new models appropriately put the onus on manufacturers to prove their products are worth the cost.

The tension was the centerpiece of a news conference held by the leaders of AdvaMed, the industry’s trade group, at the start of its annual conference in Chicago Monday.

“We have to ensure these new payment models include safeguards to protect patients from unintended consequences,”AdvaMed CEO Stephen Ubl said. Ubl, flanked by AdvaMed Chairman and Covidien CEO Joe Almeida, said too many of the contracts put too much emphasis on cost targets over quality benchmarks.

New payment models have proliferated quickly in recently years, nurtured by provisions of the Patient Protection and Affordable Care Act. More than 360 accountable care organizations have signed contracts with Medicare, agreeing to strive for cost and quality targets to earn some of the savings achieved (or in some cases return money to the government if they fail). Many providers are striking similar agreements with private payers—Blue Cross and Blue Shield Association recently said that it’s now paying one in five dollars under incentive-based contracts—or assuming financial risk with their own insurance products.

AdvaMed is promoting an industry-funded white paper based on the responses of nine unnamed health insurance companies interviewed about their movement toward pay-for-performance and risk-based contracts. Five said they had become more selective about approving coverage for new technologies in the past three years. Four said they plan to demand more evidence before covering products. All said costs were driving their organizations to explore new reimbursement models. The findings are published in the Journal of Medical Economics.

“They run the risk of really tipping too far, so physicians have incentive not to adopt things that really benefit patients,” AdvaMed Senior Vice Presdient David Nexon said in a phone interview.

Representatives for insurers Cigna and Aetna, which responded to requests for comments on AdvaMed’s conclusions, said new technology is embraced if it adds value. “Providers, members and payers deserve and increasingly want to have proof,” an Aetna spokeswoman said. Cigna said in a statement that “technology that simply adds cost without improving quality, health, satisfaction and productivity is counter to our goals.”

Mark Pauly, professor of Health Care Management at the University of Pennsylvania called it an overstatement to suggest that new payment models will inspire widespread failure to adopt products that promise significant benefits to patients. The models add an appropriate hurdle, he said. Manufacturers that can’t provide evidence “won’t go over the hurdle.”

Diana Zuckerman, a researcher who has been critical of the Food and Drug Administration’s procedures for approving and monitoring medical devices, said the industry isn’t accustomed to having to prove that a product is cost-effective. “Something can be clinically appropriate and not be necessary,” said Zuckerman, who is president of the National Center for Health Research.

Manufacturers, though, are in a difficult situation, acknowledged Tom Skorup, VP of applied solutions for the ECRI Institute, a not-for-profit organization that studies the quality and costs of medical technologies, procedures and drugs. Many manufacturers are finding ways to partner with providers to generate evidence. “The greater the collaboration in the creation of the evidence, the fewer the barriers to the potential for uptake,” he said.​