Life Sciences

Proposed changes to Physician Fee Schedule affect devices

Device Regulation Alert: Safety, Compliance and Reimbursement News, July 7, 2008

CMS’s proposed changes for the 2009 Physician Fee Schedule will affect the device industry.
 
This week’s issue of Device Regulation Alert will focus on gain-sharing or “shared savings programs” in which hospitals and physicians agree to adopt specific cost savings measures and then split the resulting savings. CMS devoted a significant amount of discussion in its proposed rule to this topic. Next week’s issue will cover some of the other device reimbursement changes included in the rule.
 
Risks of shared savings programs
CMS has always been concerned that such arrangements present improper incentives and could affect a physician’s choice of devices and other services and supplies. One of these risks is “stinting,” which results when physicians avoid using more costly medical devices, tests, or treatments despite their quality. Other risks include picking healthier patients and steering away sicker patients and discharging patients earlier than necessary. CMS warns the shared savings arrangements can violate the physician self-referral prohibition, the Anti-kickback Statute, and the Civil Monetary Penalties Law.
 
Proposed Changes
CMS is proposing an exception to the self-referral law for incentive payments, pay for performance, and shared savings/gain-sharing arrangements between physicians and hospitals subject to certain conditions and limitations.  
  • The exception would only apply to:
    • Arrangements between hospitals and physicians on the medical staff or a qualified physician organization
    • Pools of physicians with at least five members
    • Cash or cash equivalent payments—non-monetary remuneration isn’t permitted
  • Cost savings methods must be:
    • Objective
    • Verifiable
    • Supported by credible medical evidence that patient care won’t be adversely affected
  • Hospitals are not allowed to limit availability of a specific device and must permit the same selection of devices and items available before the arrangement. Devices also can’t be selected for inclusion in a product standardization component based on any physician ownership in or financial relationship with the device manufacturer.  
  • The arrangement would need to be reviewed annually by independent medical reviewer with clinical experience to ensure patient care is not impaired. Such reviews would need to result in a written report. Immediate corrective action must address any impact on quality found in that review.
  • Hospitals must disclose such arrangements to patients.
  • The agreement must be:
    • In writing
    • For a term of one to three years
    • Involve compensation set in advance that doesn’t vary based on referrals
    • Clearly set forth performance measurements
  • The arrangement cannot violate the Anti-kickback Statute. 

CMS is asking for public comment on the exception in general, the likely impact on competition, and the proposed exception’s particular requirements. Specifically, CMS wants to hear whether product standardization under these arrangements could put smaller device manufacturers at a disadvantage and how it can make sure product standardization doesn’t adversely affect patient access to devices.

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