The move from fee-for-service to value-based reimbursement is a sea change for the healthcare industry. The goals are to increase quality, decrease costs and turn health care into a competitive marketplace. Expect short term upheaval and long term economic impacts.
CMS recently launched its eMedicare initiative.
It’s intended to give patients cost and quality information on drugs and hospitals. For the first time, patients will also be informed consumers.
CMS has also proposed a rule to display drug prices in direct to consumer advertising. The American Hospital Association is in favor of this rule. They cite a 24% increase in drug costs per hospital admission in 2014 and a 12% increase in 2015.
The pharmaceutical industry is politically unpopular. New laws have removed gag clauses that kept pharmacists from telling patients when cash prices are lower than co-pay prices. Congress has considered other methods to rein in drug costs, too. In this environment, some form of the CMS’s drug cost transparency rule is likely to go into effect.
The value-based approach changes Medicare reimbursement rates to decrease hospital care.
The new goal is to meet patients’ needs at home. This means more medical equipment will be needed at home. Home healthcare is not new. The degree of home care use, and the likely increase in types of care provided in the home, will be new. Many are predicting a great expansion in the home healthcare field in the coming year.
Home healthcare won’t directly impact medical device sales. Medical devices for home use is determined by physician recommendations and insurance coverage. What will change is the nature of the devices.
Preferred devices will:
– Be designed for lay people
– Be unobtrusive and convenient to use and maintain
– Include training software
– Include monitoring software
– Medical devices with these characteristics will increase patient compliance and improve health outcomes. Better health outcomes will drive sales.
Under current safe harbor definitions, medical device sales aren’t affected by value-based reimbursement.
Physicians and hospitals take on all the risk when deciding to buy medical devices. However, the safe harbors that govern medical device sales are being revised by the Office of the Inspector General.
Advamed, a prominent medical device industry group, has proposed new and revised safe harbors. These new standards would share the risks and benefits of medical device purchases.
Value-based pricing would incentivize increased training and support. The final price would be determined by the value of the achieved health outcomes.
Value-based warranties would provide reassurance to physicians and hospitals. If the expected outcomes aren’t realized, supplemental or alternative services would be provided. Baseline and progress metrics will have to be included in sales agreements.
Advamed’s proposed safe harbors also allow individuals to take part in these arrangements. The final safe harbor definitions will be determined by the OIG and could be very different.
Healthcare as a competitive market is a new idea. It remains to be seen how these new policies will play out and if they have the intended effects. More changes are inevitable.
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