Life Sciences

CMS addresses device issues in proposed IPPS

Device Regulation Alert: Safety, Compliance and Reimbursement News, April 28, 2008

CMS has issued proposed changes to the hospital inpatient prospective payment system, including rules regarding payment for hospital acquired infections and changes to MS-DRG classifications that could affect some medical devices.
 
Perhaps the biggest news involves a new proposed hospital cost center for implantable devices and plans to increase attention to physician ownership of medical device companies.
 
Here’s a breakdown of the proposed changes:
 
New device cost center. CMS’ proposed  new cost center, Medical Devices Charged to Patients, would allow hospitals to separately report inexpensive medical supplies and more expensive medical devices such as pacemakers and other implantable devices. Hospitals would determine which devices are eligible for this cost center using the same criteria that determine whether a device is eligible for pass through payment under the outpatient prospective payment system. In addition to meeting those criteria, the device must be implanted and remain in the patient after discharge. Devices that do not meet those criteria would continue to be charged to the Medical Supplies Charged to Patients cost center.
 
As an alternative to using the four criteria, CMS is considering instead using a high-cost, low-cost comparison to distinguish more costly implantable devices from inexpensive items that should be charged to the medical supplies cost center.
 
Recognizing the difficulty in pricing devices sold in kits with less expensive supplies, CMS is asking for comments on how to determine which cost center should be used for such devices.
 
Physician ownership in device companies. CMS expressed concern about an increase in physician investments in medical device companies. Physicians make valuable contribution to research, development, and testing of devices, but CMS remains uncertain about the value of physicians being involved in device companies that only distribute and purchase devices. CMS said physicians could profit from referrals they make to hospitals through such physician-owned companies.
 
Because the physician may not have a large economic risk and may be involved purely to receive an economic benefit from ordering and using medical devices, such arrangements could lead to abuse and could influence physician decisions about devices to be used by their patients.
 
CMS is not alone in its concerns. In an October 2006 letter, the OIG expressed concern about the growth of physician investments in medical device companies and group purchasing organizations. The OIG’s 1989 Special Fraud Alert on Joint Ventures also applies to physician ownership in such companies.

Existing laws, including those concerning indirect compensation arrangements, address such physician-owned companies. But CMS is asking for public comment regarding whether physician self-referral rules should expressly address physician-owned device companies or whether enforcement efforts under the False Claims Act, Anti-kickback Statute, and other laws are the more appropriate way to address the issue. Additionally, CMS asks for public comments on the risk of overutilization, increased costs, and substandard care that physician ownership in device companies could create. CMS asks for specific suggestions on the action it should take to address the issue.

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