INTRODUCTION

111th Congress Promises a New Era of Change

Prepared By: CHARLES E. SCHNEIDER, VP of Reimbursement1-Musculoskeletal Clinical Regulatory Advisers, LLC

During the recent US Presidential election, much was made about change required of the US health care system. With the election of Barack Obama as the 44th President of the United States, and through control of the House and Senate by the Democratic Party, healthcare finance is expected to change, indeed. How much change, however, remains to be seen.

In this issue of Overlooking the Hill, MCRA consultants review key topics of US healthcare reform, including sweeping changes proposed by the 111th Congress. We take a closer look at published rules issued by the DHHS regarding financial disclosures, continue our analysis of ICD-10-PCS and provide a summary of some Federal bills that may be of interest to medical technology companies.

As a leader within the medical technology consulting space, MCRA consultants stay well abreast of the ever-changing legislative landscape. For questions concerning MCRA services, please visit the firm’s web site at www.MCRA.com or call Vice President of Reimbursement Charles Schneider at (202) 552-5800.

111th Congress Seeks Health Care Reform: What Must Medical Technology Companies do to Prepare for Future Changes to the US Healthcare Finance and Delivery Systems?

Prepared By: Charles Schneider, Vice President of Reimbursement Musculoskeletal Clinical Regulatory Advisers, LLC

Democrats have been supporting reforms to the US healthcare system for some time. Through legislative efforts, the 110th Congress attempted to pass laws requiring increased transparency between medical technology companies and those physicians in a position to refer patients to devices, biologics or pharmaceuticals to which the physician had a relationship or economic interest. With the beginning of an eager, ‘change’-driven Obama administration, coupled with a House and Senate controlled by the Democratic Party, past reform efforts are likely to become a reality.

Likely 111th Congressional Reform Efforts

• Government mandated (universal) health insurance coverage
• Increased disclosure requirements by investigators, technology
  companies, prescribers
• Institute for comparative effectiveness
• Required use of generics
• Legislative repeal of Riegel v. Medtronic

This article will provide a brief snapshot of the legislative direction likely to be seen from the 111th Congress. Beginning with the Comprehensive Health Reform Act of 2009 (S.4), introduced by Senator Harry Reid (D-NV) on the first day of the new legislative session, the legislative process has been kick-started with an overriding objective toward healthcare reform. As summarized by the Congressional Research Service, S.4 “[c]alls for Congress to enact, and the President to sign, legislation to guarantee health coverage, improve health care quality and disease prevention, and reduce health care costs for all Americans and the health care system.” This bill serves as a placeholder for an amended bill likely to include a great deal of substance.

In the House, Representative John Dingell (D-MI) introduced H.R. 15 calling for the creation of national health insurance. In brief, the Federal government would establish the National Health Care Trust Fund, delegate responsibility for program administration to the States, establish local administrative committees composed mostly of program beneficiaries, and establish local professional committees and the establishment of a National Health Insurance Board (NHIB). As written within H.R. 15, this Board would consist of five members, three of whom would be appointed by the President, the Surgeon General and the Administrator of Social Security. As well, H.R. 15 would establish a National Advisory Medical Policy Council who shall advise the NHIB with matters concerning policy and program administration. If enacted, this program would go into effect on October 1, 2010. A value added tax (VAT tax) is proposed to cover the cost of some of these services and program administration.

Further regulating fraud and abuse, the 111th Congress is likely to introduce bills requiring greater disclosure about the physician and manufacturing relationship, impose further scrutiny on durable medical equipment suppliers (H.R. 27 and H.R. 203), and pursue some regulations designed to limit awards on medical claims in terms of non-economic damages and timely filings of claims against the health care provider (S.45).

The plethora of legislation introduced during the initial week of the new legislative session shows significant interest on the part of the Congress to act swiftly to regulate healthcare within the United States. Whether sweeping healthcare reform as introduced by Senator Reid and representative Dingell, required use of generic medications proposed by Senator Kohl, or specific reforms contemplated by other members, medical technology companies should pay close attention to the legislative agenda of the 111th Congress, actively participate in this process and make certain that advancements in medical device, diagnostics, biologics, pharmaceuticals and care delivery systems are not impeded by regulatory burdens, shortfalls in appropriations, or rules that would needlessly increase the cost of the technology. On the other hand, technology company executives may wish to support reforms that discourage frivolous lawsuits, deny access to advancements, and create enabling pathways to medical technologies from concept through commercialization.

President Obama’s First Federal Budget Should Provide Critical Clues to His Agenda For Health Care

Prepared By: Tim Hunter, Director of Reimbursement1 Musculoskeletal Clinical Regulatory Advisers, LLC

Since the Presidential election last November, health technology manufacturers and other interested stakeholders have speculated regarding potential changes to America’s health care system. The
President’s Fiscal Year 2010 budget request should provide important clues, particularly for the Medicare and Medicaid programs.

President Obama’s Budget Request to Congress: Important Information

• Budget outline expected in late February
• Full 2010 budget likely delayed for up to several months
• Will outline Obama Administration’s priorities
• Provides clues regarding how Administration will administer
  federal programs, including Medicare and Medicaid

What Is the President’s Federal Budget Request?
The President’s budget request to Congress is an outline of the Administration’s vision for federal government programs. It is important to remember that the document is a request to Congress and does not, by itself, have any enforcement power. The Congress will consider the President’s request as it deliberates and passes the various department appropriations. The President’s budget request typically is released in early February of each year, but is delayed up to several months when a new President takes office.

A President’s first budget request is an important bell weather moment. This is the first opportunity for the new President to put his stamp on federal policy and describe a vision for individual federal programs. When I served as a budget analyst within the United States Department of Health and Human Services, I had the opportunity to work on President George W. Bush’s first budget. During that time, it was incredibly important that the budget reflected the new President’s goals. The theme for that budget was “A Blueprint for New Beginnings”2 and attempted to identify means for improving government services without making government
bigger.

What to Look For in President Obama’s First Budget
President Obama has promised a number of changes to America’s health care system, including changes to the Medicare and Medicaid programs. Some initiatives to look for include the following:

Focus on Quality of Care – Over the past several years, the Bush Administration implemented initiatives to improve quality of care. There is no reason to believe that CMS will abandon these initiatives. Instead, the 2010 budget request should provide clues regarding the extent to which CMS will expand these initiatives.

Aligning Cost of Care with Quality – President Obama’s budget director, Peter Orszag, was formerly the Director of the Congressional Budget Office (CBO). Orszag is generally regarded as an expert in health care and Social Security. At CBO, he led extensive analyses of cost of care and quality of care which concluded that “more expensive care does not always mean higher-quality care.”3 A requested increase for funds dedicated to demonstration programs may signal an expected increase in quality of care and/or< cost of care initiatives.

Comparative Effectiveness and Cost Effectiveness – During the Presidential campaign, Candidate Obama put forward a blueprint for the establishment of an independent comparative effectiveness entity. This concept has been widely championed by others, including influential members of Congress. At issue is whether comparative effectiveness research should include cost effectiveness. While President Obama’s campaign blueprint was silent on the issue of cost effectiveness, the CBO, under Orszag, identified improved cost-effectiveness information as a key method to align incentives among patients, providers, and payors and increase efficiency in health care4. A request for funds to establish an independent comparative effectiveness institute would initiate the process for establishing such an entity. It also could identify what functions the Administration believes the new entity should perform.

In addition to Medicare and Medicaid program funding requests, manufacturers of medical technologies should closely examine the budget requests for other HHS agencies.

Food and Drug Administration (FDA) – Funding requests for drug and device reviews may provide clues regarding any potential changes to these programs, including estimated review time.

Agency for Health Research and Quality (AHRQ) – Funding requests for comparative effectiveness may be included in the budget request for AHRQ.

What Other Clues Does the Budget Provide? In addition to outlining programmatic spending and identifying key initiatives, the President’s budget request provides a number of clues regarding administrative management of the Medicare and Medicaid programs. For example, a request for additional funds for AHRQ to be designated for comparative effectiveness may signal the Administration’s intent to apply AHRQ-based analyses to Medicare national coverage determinations.

Where to Find Information Regarding the President’s Budget
Once released, the President’s budget request to Congress will be
available to the public through a number of outlets.

• White House Website – The entire budget request, including fact sheets, can be found at www.whitehouse.gov

• Department of Health and Human Services Website – The Department of Health and Human Services Website provides a more manageable way to view the HHS budget request. Viewers can view fact sheets and individual agency budget requests as well as the summary HHS request.

An Introduction to Patient Safety Organizations (PSOs)

By Jeffrey D. Zigler, JD Reimbursement Associate, MCRA1

Patient Safety Organizations (PSOs) were created by Congress under the Patient Safety and Quality Improvement Act of 2005 (Patient Safety Act), “to improve the quality and safety of U.S. health care by encouraging clinicians and health care organizations to report and share—voluntarily—data on patient safety events without fear of legal discovery.”2 The primary roles of PSOs include data collection and analysis, reporting, education, and advocacy for increased patient safety. The business opportunities for PSOs may be promising, and Industry organizations from consulting groups to manufacturers can become accredited, and listed as one.

Congress directed the formation of PSOs following the Institute of Medicine’s 1999 finding that an estimated 98,000 patients were dying each year due to preventable medical errors in hospitals. 3 Although PSOs do not receive federal funds, the Agency for Healthcare Research and Quality (AHRQ)4 has been tasked with administering the provisions of the Act, following the Final Rule which recently became effective on January 19, 2009.5 The rule outlines the criteria that entities must meet to become PSOs, and describes the privilege and confidentiality protections from discovery that PSOs are afforded. Currently, there are 41 PSOs in the U.S. listed by AHRQ, exceeding the Agency’s original expectations of participation in the program.6 As data becomes available, PSOs can send non-identifiable patient safety data to a Network of Patient Safety Databases (NPSDs) that will receive, analyze, and report on the de-identified and aggregated patient safety event information, ultimately to help reduce adverse events and improve health care quality. To this effect, AHRQ has released Common Formats (common definitions and reporting elements) to standardize the collection of patient safety event information.7

Generally, the Health Insurance Portability and Accountability Act of 1997 (HIPAA) has been the primary mechanism by which patients’ medical information is protected, affecting the procedures by which private citizens, and even litigators obtain medical records and other protected health information.8 This information is generally protected from the legal rules of discovery, unless found discoverable by a court of competent jurisdiction. Similarly, PSOcollected information deemed “patient safety work product” is privileged under the rule, in an attempt to establish strong Federal confidentiality and privilege protections for health information. Many view this as a “welcome step” forward for evidence-based medicine.9

Much like the attorney-client privilege, asserted during legal proceedings to protect confidentialities arising from the attorney-client relationship, patient safety work product gathered by PSOs is not discoverable during litigation. Under the Act, patient safety work product is not subject to:

(1) a subpoena or discovery in a civil, criminal, or administrative disciplinary proceeding against a provider;

(2) disclosure under the Freedom of Information Act (FOIA) or a similar law;

(3) admission as evidence in any civil, criminal, or administrative proceeding; or

(4) admission in a professional disciplinary proceeding.

However, the Act permits disclosure:
(1) for use in a criminal proceeding after a court determines that such work product contains evidence of a criminal act and is material to the proceeding and not reasonably available from any other source;

(2) to the extent required to seek redress for violations through a civil action; and

(3) if authorized by each provider identified in such work product.

According to AHRQ, either for-profit or not-for-profit businesses can be listed as PSOs.10 There are several types of organizations that are restricted from being a PSO, including health insurance issuers, accrediting or licensing bodies, entities that regulate providers, and mandatory reporting systems. But consulting groups, vendors of patient safety software, and state hospital organizations may work with or become PSOs, and each type of entity would have different reasons for becoming a PSO. Indeed, even though there are no Federal funds earmarked in support of the PSO program, and the reporting system is voluntary, healthcare industry business owners have found room for the resources and human capital critical to the work demanded of PSOs on their balance sheets. Some PSOs, like Lumetra and Quantros in California, turn the work of PSOs into part of their consulting business with hospitals, helping to improve healthcare processes and lower the rate of hospital-related adverse events.11

Following participation in such a program, the “incentive” would then flow downstream to the hospital, as it may avoid medical errors on Medicare’s “Never Events” list, as well as qualify for other payors’ incentives.12 But the underlying issue surrounding this program, and any voluntary reporting system, remains: even if the hospitals are incentivized to send their data to the PSOs, and even if the PSOs do their job of collecting that data, their reporting to the NPSDs is still voluntary. If excitement and participation in the program wanes, AHRQ’s report to Congress on patient safety, a requirement under the Act, could be wanting for data.

For a discussion of the issues involved with systems relying on voluntary disclosure and/or reporting, see the next issue of MCRA Overlooking the Hill.

OIG Focusing Upon Disclosure Requirements: How To Protect Your Study’s Investment

Prepared By: Robert Hoehn, Director of Compliance1 Musculoskeletal Clinical Regulatory Advisers, LLC

In January 2009, the Office of the Inspector General (OIG) released a report that affects sponsors of clinical trials, as well as clinical investigators. In its report, the OIG assessed the Food and Drug Administration’s (FDA) oversight of clinical investigators’ financial information2. The report documents inadequate tracking of potential financial conflicts of interest between clinical investigators and the companies who sponsor them.

According to the report, only 1% of clinical investigators appropriately disclosed a financial interest, and the FDA was unable to determine whether or not sponsors have submitted financial information for all clinical investigators. In addition, 42% of FDA-approved marketing applications were missing financial information, and in 31% of the marketing applications, the Agency did not document a review of any financial information, at all. In approximately 20% of marketing applications with disclosed financial interests, FDA reviewers took no action and sponsors documented no efforts to mitigate risk or minimize potential bias. As a result of its findings, the OIG has recommended that the FDA ensure that sponsors submit complete financial information for all clinical investigators, and that reviews consistently and timely assess financial information, and take action in response to disclosed financial interests.

Under 21 CFR § 312.53 and 21 CFR § 812.43, the IND/IDE sponsor shall obtain sufficient, accurate financial information that will allow an applicant to submit complete and accurate certification or disclosure statements required under Part 54, before permitting an investigator to begin participation in an investigation.3 It is important to note that the actual submission of financial disclosures to FDA does not take place until the submission of the marketing application. In order to participate in the study that supports the marketing application, clinical investigators are required to obtain approval from their respective Institutional Review Board (IRB). One of the many requirements for IRB approval is that the clinical investigators completely and accurately disclose any potential financial conflict of interest.

The distinction to be made is that clinical investigators are required to disclosure any potential financial conflict of interest during the course of the study. Only after the study has been completed, and the marketing application is being made, does the sponsor have an obligation to submit financial disclosures to FDA. Presently, there are no clear guidelines regarding what constitute acceptable financial conflicts. This leaves individual IRBs with the discretion to establish their own guidelines, to determine which relationships are acceptable, and which are not. This may lead to an inequitable or unbalanced determinations of acceptability, offering no incite or prediction as to what FDA will ultimately determine to be acceptable at the conclusion of the study.

Protecting investment within the study, as well as future product commercialization, medical technology study sponsors are encouraged to proactively ensure their clinical investigators are promptly and accurately disclosing their financial relationships throughout the study. Minimizing potential bias while promoting transparency should be one of the many goals of the clinical study. Contemplating disclosure requirements from study beginning and throughout the study and approval periods will ultimately strengthen your product’s position within the marketplace.

Implementation of ICD-10-CM And ICD-10-PCS Announced for… 2013!

Prepared By: Machelle Morningstar, CPC, CPC-H, CEMC, PCS Musculoskeletal Clinical Regulatory Advisors, LLC1

On January 15, 2009, the Department of Health and Human Services (HHS) released its final rule on ICD-10 codes sets, namely ICD-10-CM (diagnosis coding) and ICD-10-PCS (hospital services coding).The rule came with the announcement of implementation of ICD-10 on October 1, 20132. Initially, under the proposed rule, the effective date was to be October 1, 2011 (with possible pushback until 2014). However, with following a flood of comments on the proposed rule, both in-person at the Centers for Medicare and Medicaid (CMS) Coordination and Maintenance Meeting (C/M) in the fall of 2008, and through write-in comments, HHS finalized the implementation date for 2013. This gives coders, physicians, facilities, insurance carriers and other entities nearly five years to prepare for this major change.

Within the final rule, there is guidance given for use of General Equivalency Mappings (GEMs) for transition from ICD-9 for both the diagnosis and procedures codes. ICD-10-CM will be used for diagnosis coding, while ICD-10-PCS will be used for facilities. To help with the transition, GEMs have been created in coordination with the 3M3 Corporation and Centers for Medicare and Medicaid Services (CMS), creating “crosswalks” from ICD-9 to ICD-10 using a “find and replace” system, allowing codes to be more consistently
converted to the new system.

CMS had also discussed, at its fall C/M meeting, the effect of ICD- 10’s implementation on the Medicare Severity Diagnosis Related Groups (MS-DRGs), the source for payment of hospital in-patient services. It was determined at that meeting that there would be no initial effect on reimbursement of the MS-DRGs, with review given to MS-DRGs and payment values after a yet-to-be-determined timeframe following the ICD-10 transition. Mentioned in the final rule is now a “crosswalk” system to map ICD-10-PCS codes to MS-DRGS, not unlike the current ICD-9 mapping to MS-DRGs. This crosswalk is expected to be available in the fall of 2009.

For the medical device and technology industry, the final rule made no mention of the creation of new codes, or the adjustment of codes already converted from ICD-9 to ICD-10. New and adjusted codes are at the jurisdiction of the C/M Committee. From discussion of this issue at the fall 2008 C/M meeting—in fact, the general consensus from commenters was to stop allowing application for new or adjusted codes at some point until after transition of ICD- 10 is completed. This could limit access to new or adjusted codes for several years. However, this was merely a point of discussion and interest at the meeting, and no further direction or guidance has been issued by HHS at this time.

There is still plenty of time to make application for new/adjusted codes, however, medical device and technology companies will want to plan for their products and the development of their coding options accordingly. MCRA, as always, will continue to follow the issues and effects ICD-10 will have on the medical device and technology fields.