Reimbursement Bootcamp- Coding, Coverage & Payment lecture by David Farber, King & Spalding

Presentation by David Farber, King & Spalding LLP, "Reimbursement Bootcamp- Coding, Coverage & Payment". Includes a comparison of FDA and CMS – The Important Differences. Setting Expectations and Understanding Timing. FDA Approval/Clearance vs. CMS (Medicare) Coverage. “Reasonable and Necessary”
CMS coverage determination
(formal or informal);
Focus on health benefits;
Economic data is important;
Superiority endpoint often needed; Focus on Medicare beneficiaries; Public processes; Publishes proposed decisions. Information Considered by CMS. Center for Medicare & Medicaid Services. Clinical evidence (including FDA submissions)
External technology assessments;
Advisory committee recommendations;
Position statements by relevant groups; Expert opinions;
Public comments;
Economic and other cost-effectiveness data;
Other informal opinions. The Basics of Reimbursement
• Coverage
Is the item or service eligible for payment?
• Coding
How is the item or service identified?
• Payment
What are the payment methodologies and amounts?
Medicare Coverage:
Defined Benefit Category
Not Excluded
“Reasonable and necessary for
the diagnosis or treatment
of illness or injury or to improve
the functioning of a malformed
body member.”
— Social Security Act § 1862(a)(1)(A). CMS and Its Contractors Make
Medicare Coverage Decisions
• National Coverage
Determinations (NCDs)
• Local Coverage
Determinations (LCDs)
• Individual Consideration
National Coverage
Determinations (NCD):
National and binding decision by CMS
Coverage and Analysis Group (CAG).
May be requested by anyone
(CMS or external party.)
Public process that generally takes
9-12 months once initiated.
May include certain conditions for coverage (including Coverage with Evidence
Development (CED)). Coverage with Evidence Development (CED). Evidence-based coverage paradigm
that permits CMS to develop
coverage policies for treatments
that are likely to show health benefits
for Medicare beneficiaries but for
which the evidence base is not
sufficiently developed. Two kinds of CED: (1) clinical study
and (2) registry. Local Coverage
Determinations (LCD):
Issued by local Medicare
Administrative Contractors (MACs).
May be requested by anyone
(MAC or external party.)
New formal process in 2019 to
request LCDs.
Limited to particular MAC jurisdiction. Medicare Administrative Contractors. Coding is the “language of
reimbursement.”
Coding operationally links
coverage and payment.
Having a code does not
guarantee reimbursement! TYPE OF CODE, CODING SYSTEM, WHO SETS CODE? WHO USES CODE? Diagnosis, Procedure or Service, Products and Certain Services, Drugs. Current Procedural Terminology (CPT) Codes. Maintained by the AMA CPT Editorial Panel.
Identify medical services furnished by physicians.
5-digit numeric codes with generic descriptors.
Three types of CPT codes. Application process takes at least 15 months for Category I codes, with specific clinical data requirements.

1. David J. Farber Partner
[email protected]
Preeya Noronha Pinto Partner
[email protected]
mHealth Presentation
July 4, 2024 U.S. Reimbursement

2. Agenda
I. Introduction
II. FDA and CMS –The Important Differences
III. The Three Elements of Reimbursement
I. Coverage
II. Coding
III. Payment
IV. Advanced Strategies

3. Introduction: Setting Expectations and
Understanding Timing
3

4. “But despite . . .big digital health
ambitions, the path to success will
not be an easy one. Digital health
companies across the world are
facing … a market marred by
reimbursement difficulties.”
— MedTech Insight (April 23, 2018, p.14)
4

5. “As one VC investor noted, ‘Payers are pulling
back on paying for new things. It is difficult
to get new technologies covered. It’s taking
companies three to five years … to collect
enough data and go through the processes to obtain coverage following FDA approval.’”
— Deloitte, Out of the valley of death: How can entrepreneurs,
corporations, and investors reinvigorate early-stage medtech innovation?
(April 2018, p.5)
5

6. Introduction --Why Is This Important?
6

7. 7

8. The Differences Between FDA and CMS
8

9. FDA Approval/Clearance vs. CMS (Medicare) Coverage
9
FDACMS “Safety and Effectiveness”
FDA-approved labeling
Focus on function and
clinical risk vs. benefits
Economic data is irrelevant
Non-inferiority
endpoint acceptable
Focus on intended population
Generally not public processes
Does not publish proposed decisions
“Reasonable and Necessary”
CMS coverage determination
(formal or informal)
Focus on health benefits
Economic data is important
Superiority endpoint often needed
Focus on Medicare beneficiaries
Public processes
Publishes proposed decisions

10. Information Considered by FDA and CMS
10
Food and Drug AdministrationCenter for Medicare
& Medicaid
Services
“Well-controlled” clinical investigation data
Non-clinical laboratory studies
Quality system controls
Labeling
Post-market controls
Advisory committee recommendations
Published and unpublished literature
“Well-controlled” clinical investigation data
Clinical evidence (including FDA submissions)
External technology assessments
Advisory committee recommendations
Position statements by relevant groups
Expert opinions
Public comments
Economic and other cost-effectiveness data
Other informal opinions

11. What Is Reimbursement?
11

12. The Basics of Reimbursement
•
Coverage Is the item or service eligible for payment?
•
Coding How is the item or service identified?
•
Payment What are the payment methodologies
and amounts?
12

13. An Overview of Coverage
13

14. Medicare Coverage: Defined Benefit Category
Not Excluded
“Reasonable and necessary for
the diagnosis or treatment
of illness or injury or to improve
the functioning of a malformed
body member.”
— Social Security Act § 1862(a)(1)(A)
14

15. 15
CMS and Its Contractors Make
Medicare Coverage Decisions
•
National Coverage
Determinations (NCDs)
•
Local Coverage
Determinations (LCDs)
•
Individual Consideration

16. National Coverage
Determinations (NCD): National and binding decision by CMS
Coverage and Analysis Group (CAG).
May be requested by anyone
(CMS or external party.)
Public process that generally takes
9-12 months once initiated.
May include certain conditions for
coverage (including Coverage with Evidence
Development (CED)).
16

17. Coverage with Evidence Development (CED) Evidence-based coverage paradigm
that permits CMS to develop
coverage policies for treatments
that are likely to show health benefits
for Medicare beneficiaries but for
which the evidence base is not
sufficiently developed.
Two kinds of CED: (1) clinical study
and (2) registry.
17

18. Local Coverage
Determinations (LCD): Issued by local Medicare
Administrative Contractors (MACs).
May be requested by anyone
(MAC or external party.)
New formal process in 2019 to
request LCDs.
Limited to particular MAC jurisdiction.
18

19. Medicare Administrative Contractors
19
JF
Noridian
JE
Noridian JF
JH
Novitas
J5
WPS
J6
NGS
J8
WPS
J15
CGS
JL
Novitas
JK
NGS
JM
Palmetto
JJ
Palmetto
JN
FCSO

20. An Overview of Coding
20

21. Coding is the “language of
reimbursement.”
Coding operationally links
coverage and payment.
Having a code does not
guarantee reimbursement!
21

22. Types of Codes
22
WHO USES CODE? WHO SETS CODE? CODING SYSTEM TYPE OF CODE All Providers WHO and NCHS
ICD-10-CM,
Diagnoses, Vols. 1 & 2
Diagnosis
Hospital Inpatient WHO and CMS
ICD-10-CM,
Procedures, Vol. 3
Procedure or
Service
Physicians, Hospital
Outpatient, Clinical
Labs, etc.
AMA CPT-4
Procedure or
Service
Physicians, Hospital
Outpatient, DMEPOS
Suppliers, etc.
CMS HCPCS
Products and
Certain Services
Pharmacies, etc. FDA NDC Drugs

23. Current Procedural Terminology (CPT) Codes
23
Maintained by the AMA CPT Editorial Panel.
Identify medical services furnished by physicians.
5-digit numeric codes with generic descriptors.
Three types of CPT codes:
Category I (permanent #####) – for established treatments
Category II (performance tracking ####F) – for treatments with uncertain
evidence – tracking only no payment
Category III (emerging technology ####T) – for emerging technologies –
tracking only no payment
Application process takes at least 15 months for Category I codes,
with specific clinical data requirements.

24. Healthcare Common Procedural Coding System (HCPCS)
Codes
24
Maintained by the CMS HCPCS Workgroup.
Identify items and services not identified by CPT codes.
5-digit alphanumeric codes with generic descriptors.
Three types of HCPCS codes:
Permanent
Temporary (Q codes)
Miscellaneous/Not Otherwise Classified (99 codes)
CMS recently announced a semi-annual application process for
devices (historically only a January deadline.)

25. An Overview of Payment
25

26. How much will the payer pay
for the item or service?
What is the payment
methodology?
Depends on the site of service
and provider/supplier type.
26

27. Medicare Payment Systems
27
NEW TECHNOLOGY
PAYMENT PROGRAM
CODES CLAIMED TO
GENERATE PAYMENT
AMOUNT
TYPE OF PAYMENT
METHODOLOGY
SITE OF SERVICE
Add-On Payment
ICD-10 Diagnosis Codes, ICD-
10 Procedure Codes
IPPS MS-DRG Bundle
(per discharge)
(Medicare Part A)
Hospital Inpatient
Pass-Through Status
New Technology APC
ICD-10 Diagnosis Codes,
CPT Codes, HCPCS Codes
OPPS APC Package
(per procedure)
(Medicare Part B)
Hospital Outpatient
ICD-10 Diagnosis Codes,
CPT Codes, HCPCS Codes
Physician Fee Schedule
(Medicare Part B)
Physician
ICD-10 Diagnosis Codes,
HCPCS Codes
DMEPOS Fee Schedule or
Competitive Bidding (Medicare
Part B)
DMEPOS
ICD-10 Diagnosis Codes,
CPT Codes
Clinical Laboratory Fee
Schedule
(Medicare Part B)
Clinical Laboratory
Tests

28. Medicare Payments for New Technology Inpatient: New Technology
Add-on Payment
Outpatient: “Pass-Through”
Outpatient: New
Technology Ambulatory
Payment Classification
(APC)
28

29. Be Realistic –This is Difficult
29
New treatments for chronic conditions like opioid addiction,
ADHD and insomnia are here and they’re on your smartphone —
not in a pill bottle.
But the government won’t pay for them, even as tech
entrepreneurs insist to Congress and the Biden administration
that their digital therapeuti cs are the next big thing.
Though the Food and Drug Administration has cleared dozens of
these software-based medicines — which include apps and even
video games — the Centers for Medicare and Medicaid Services
can’t reimburse providers, in part because Congress hasn’t
approved new billing codes that describe the therapy. Because
private insurers often take thei r cues from the government, the
companies behind these new ideas are struggling to gain traction.

30. Three Advanced Strategies for Digital
Health
30

31. Strategy I: Generate FDA-Quality Clinical
Trial Data
31

32. Articles Continue to
Warn of AI Risks “Many doctors and consumer advocates fear that
the tech industry, which lives by the mantra “fail fast and fix it later,” is putting patients at risk and that regulators aren’t doing enough to keep
consumers safe….Early experiments in AI provide
reason for caution, said Mildred Cho, a professor
of pediatrics at Stanford’s Center for Biomedical
Ethics….Systems developed in one hospital often
flop when deployed in a different facility, Cho
said. Software used in the care of millions of
Americans has been shown to discriminate against minorities. And AI systems sometimes
learn to make predictions based on factors that
have less to do with disease than the brand of
MRI machine used, the time a blood test is taken …”
32

33. Politico 4.4.23
Facing regulation, health industry
leaders explain how to use AI
responsibly BY BEN LEONARD | 04/04/2023 06:00 AM EDT The Coalition for Health AI, an alliance of major health systems and tech companies,
has released a blueprint to facilitate trust in artificial intelligence’s use in health care.
In it, the coalition, whose members include Google, Microsoft, Stanford and John
Hopkins, calls for any algorithms used in the treatment of disease to be testable, safe,
transparent, and explainable, and for software developers to take steps to mitigate bias
and protect privacy.
That’s not always the case now.
“We have a Wild West of algorithms,” said Michael Pencina, coalition co-founder and
director of Duke AI Health. “There’s so much focus on development and technological
progress and not enough attention to its value, quality, ethical principles or health
equity implications.”
Among other things, the blueprint calls for :
— AI to be continuously monitored throughout its lifecycle to ensure transparency — Careful efforts to avoid bias in algorithms
— Data security and privacy protections
Why it matters: Regulators are grappling with how to regulate artificial intelligence
in health care as providers use it to inform diagnoses and treatment decisions.
The FDA has outlined its plans to regulate software as a medical device, in 2021 issuing
guidelines for market clearance for AI or machine learning. The White House released a voluntary “AI Bill of Rights” aimed at protecting Americans in October. And on Monday, the FDA issued draft guidanceto ease improvements to algorithms by allowing software developers to win pre-approval for them, rather than requiring them
to go through an authorization process for each upgrade.
The Centers for Medicare and Medicaid Services, the White House Office of Science
and Technolo
gy
Polic
y
, the FDA, the National Institutes of Health and HHS’ National
“We
have the
wild west of
algorithms...”

34. Threatening New Focus on AI Bias/Discrimination
34
• Federal Legislation
• Congressional Letters
to Regulator
• Congressional Letters
to Health Plans

35. Will AI Products be Covered Without Strong Data?
35
“None of the AI products sold in the U.S. have been tested in randomized clinical trials, the strongest source of medical evidence, Topol said. The first and only randomized trial of an AI system which found that colonoscopy with
computer-aided diagnosis found more small polyps than standard colonoscopy
was published online in October.
Few tech startups publish their research in peer-reviewed journals, which allow
other scientists to scrutinize their work , according to a January article in the
European Journal of Clinical Investigation. Such “stealth research” described
only in press releases or promotional events often overstates a company’s
accomplishments.
And although software developers may boast about the accuracy of their AI
devices, experts note that AI models ar e mostly tested on computers, not in
hospitals or other medical facilities.” (underlines added)
Scientific American, Artificial Intelligence Is Ru shing Into Patient Care
- And Could Raise Risks, Dec. 24, 2019, available at
https://www.scientificamerican.com/article/artificial-intelligence-is-
rushing-into-patient-care-and-could-raise-risks/

36. Strategy II: Engage The Medical Societies
36

37. 37

38. Strategy III: Plan for Reimbursement As
You Plan for FDA
38

39. Bring the entire team together
early in the development process
to discuss goals and objectives. • Clinical, regulatory, reimbursement,
marketing, R&D.
39

40. Consider the intended patient
population and the payer mix
for the product. • In what settings of care will the device be used?
• Are there special payer rules that will be applicable?
• Will device labeling be consistent with the
reimbursement strategy?
40

41. Clinical trials should be conducted,
and structured to maximize
reimbursement. • Comparative effectiveness studies important to demonstrate
value proposition.
• Medicare requires its beneficiaries to be part of study population
• Must demonstrate an improvement in overall outcomes (safe and
effective is not enough.)
• Payers are increasingly looking to evidence of cost savings to justify
coverage, especially for expensive treatments.
41

42. FDA pathway can and usually will
affect coverage, coding and payment. • 510(k) may make it difficult to justify a new code and
payment amount.
• PMA may make it difficult to use an existing code and
payment amount.
• 510(k) submission may not generate the level of clinical
data required by payers.
• Be wary of “prevention”—it is rarely covered by Medicare.
42

43. Build broad support for
the product. • Physician Societies
• Patient Groups
• Political Pressure/Legislative Strategy
43

44. Consider the changing
payer landscape. • Fee for service is moving out.
• Bundles, packages, transfer of risk,
value-based payments are moving in.
44

45. Key Takeaways
45
•Data is becoming critical!
•Start Planning on FDA-Quality
Studies
•It is never too early to plan your
reimbursement strategy

46. Questions?