Originally Published MX September/October 2001
Does HCFA's name change signal that more meaningful reimbursement reforms are on the way?
Stacey L. Bell
"We are not just changing the name. We are changing the way we do business," U.S. Department of Health and Human Services Secretary Tommy G. Thompson said in June when announcing that the Health Care Financing Administration (HCFA) would now be known as the Centers for Medicare and Medicaid Services (CMS). "We are announcing the first of what will be a series of reforms at the agency that runs Medicare and Medicaid to make it more responsive to the patients and providers it serves. We're going to encourage innovation, better educate consumers about their options, and be responsive to the healthcare needs of Americans."
The following items are among the first reforms the agency has proposed.
- CMS will now be structured around three centers to more clearly reflect work scopes. The Center for Beneficiary Choices will run the Medicare+Choice program and provide beneficiaries with more information to make informed choices when selecting care. The Center for Medicare Management will oversee the traditional fee-for-service Medicare program, and the Center for Medicaid and State Operations will focus on programs administered by the states, including Medicaid, the State Children's Health Insurance Program (SCHIP) and insurance regulation.
- CMS plans to launch a $35 million national advertising campaign this fall to educate seniors and other Medicare beneficiaries about their healthcare insurance benefits and options. Part of this campaign will include an enhanced 800/MEDICARE hotline that will operate 24 hours a day, seven days a week, and an expanded consumer and physician Web site.
- CMS will respond more quickly to direct congressional inquiries. By October 1 this year, the agency hopes to be able to respond to such inquiries within 14 days rather than in the several-month time period it has sometimes taken in the past.
- Individual senior CMS staff members will serve as the primary contacts for beneficiary groups, health plans, physicians, providers, suppliers, state SCHIP staff, and state and regional offices to strengthen both communication and interaction.
- CMS is pursuing Medicare contracting reform legislation to reduce the number of private health insurance companies that process claims and provide other administrative services from about 50 today to fewer than 20 by 2006. CMS says it hopes to improve service to beneficiaries by asking new carriers to meet competitive, performance-based standards in processing claims.
"The name is significant for two reasons," says John Whyte, MD, acting director of CMS's division of items and devices. "During the talks about what the name should be, both Secretary Thompson and the administrator spoke about service being a top priority. CMS's service to the public, to beneficiaries, and to Congress hasn't always been as good as it could be. The name change is more than a cosmetic change—it reflects a renewed focus on service. Secondly, studies show that when people are asked about Medicare, they say they like the program and are pleased with it. The Secretary felt strongly that the agency should mention what it does in its name."
On Thomas Scully's first official day in the office as HCFA administrator, he sent an e-mail message to all staff announcing a "Rename the Agency" contest, saying, "The Secretary and I share the goal of changing people's appreciation of HCFA. One way to do this is to improve our responsiveness to beneficiaries, physicians, providers, and to other constituents. Another is to improve the recognition of the agency. One element of increasing recognition is to change the agency's name." The staff member whose name suggestion was most similar to the name chosen was treated to lunch.
CMS, which serves more than 70 million Medicare and Medicaid beneficiaries and processed more than 900 million Medicare claims last year, says additional initiatives will be forthcoming. "This is only the beginning—more changes are on the way," Secretary Thompson says. "We're going to keep fine-tuning this department so Americans are receiving the highest-quality healthcare possible. Our commitment to excellence is unwavering."
Will Real Change Result?
Secretary Thompson's commitment to excellence notwithstanding, the new CMS faces a number of real challenges in implementing any significant reforms in the coming months and years, say medical technology industry experts.
"Secretary Thompson has great aspirations and ideas to reform CMS, but we'll probably see a patchwork-quilt approach to reform at the agency," says Randel Richner, vice president for reimbursement and outcomes planning for Boston Scientific (Natick, MA). "The agency is just so mammoth, with such a staid bureaucratic structure, that it will be difficult to institute rapid, sweeping change."
"The Medicare and Medicaid programs are of such enormous scale that it's hard to make even small changes without planning for long lead times and frustrations," concurs Jerry Stringham, president of Medical Technology Partners (Rockville, MD). "A second problem is the culture. Many CMS employees have been there for years and have a great deal of pride in some of the innovations that they've helped make available to the public and the efficiency with which the organization manages claims for beneficiaries. This pride leads them to have great confidence in the current system and a reluctance to change anything about it. Some long-term CMS employees may not share the same enthusiasm about proposed reforms as the new management does, and thus may hinder any real modernization efforts."
That said, industry insiders are still hopeful that CMS will follow in the footsteps of FDA and its approach to reform in response to the FDA Modernization Act of 1997 (FDAMA).
"FDA has made some impressive changes, and certainly there is still room for improvement, but the agency has made commendable progress," notes Kim Norton, director of reimbursement for Vertis Neuroscience (Seattle). "Once medical device manufacturers and their trade associations saw that progress happen, their interest shifted to HCFA since the two biggest hurdles for manufacturers are getting a product approved by FDA, then getting a code, coverage, and payment through HCFA. I believe we'll eventually see a sea change in reimbursement just as we did after FDAMA was implemented. It will simply take much longer because coverage and payment issues are by nature so much more subjective than product approval issues. The field of health technology assessment—evaluating the cost and benefit of a technology—is still evolving, and the modernization of CMS will evolve slowly in tandem."
Richner says that Congress will need to play a key role in modernizing the reimbursement process. "Significant reform must happen legislatively," says Richner. "Congress is committed to changing the process since it has had to spend so much time reviewing complaints from constituents. Consumers, businesses, medical societies, physician groups, and hospitals have all had issues with reimbursement; so congressional representatives from both sides of the aisle—both Democrats and Republicans—agree something must be done. The problem is, with both houses so evenly divided between the parties, they may not be in a position to do so. For goodness sake, look at the Patients Bill of Rights. If they can't agree on that, as much as I'd like to see a massive overhaul in reimbursement, it's not likely. Any change will come in increments."
Currently Planned Initiatives
Industry experts say some of CMS's currently planned reforms are a step in the right direction. "CMS's new structure should help and be more efficient," believes Richner. "It makes sense because each program has uniquely different issues surrounding it and a different set of problems. The public education campaign may have a tangential effect of making patients better aware of options and treatments and more likely to go to their physician and ask for specific products or procedures."
CMS's plan to consolidate its carriers does make some manufacturers nervous, though. "The consolidation of carriers could be the worst of all worlds. It's one of the leading concerns in industry," says Stephen Hull, associate vice president of payment and policy for the Advanced Medical Technology Association (AdvaMed; Washington, DC). "While there are significant problems with the national processes, the local coverage review process is not broken; so why we'd want to change the part of our system that works well is a mystery. If contractors are consolidated, they may be more likely to develop national standards without public input."
"The fewer carriers you have, the more their decisions on coverage and payment will look like a national policy. National policies always have some disadvantages," adds Richner. "Yes, there are many inefficiencies associated with having multiple carriers, but they're administrative in nature. If decision making is placed into just a few hands, manufacturers' flexibility in getting products approved, covered, and paid for is more limited. Orphan technologies that assist a small part of the population and products that don't have substantial clinical data can now choose among numerous regions to get approval. In the future, the hurdle could be much greater since very conservative carriers may be chosen to handle large parts of the country. When you're talking about such massive numbers of claims and dollars to be processed, only a few insurers have the resources to be able to handle the work; so carriers will be selected by default. Sometimes the smaller carriers have a more open attitude toward novel technologies."
"That's not necessarily true," says CMS's Whyte. "Manufacturers' anxiety comes more from an unease about local discretion versus national decision-making. One could argue that all decisions should be the same because science is science, but of course some discretion may be necessary in various regions of the country. The other thing to consider is, if there are 43 carriers, do people want to go to 43 carriers to get approval? When CMS consolidated durable medical equipment payments among four durable medical equipment regional carriers, that program proved to be very successful in getting new technologies to consumers."
"The question isn't so much about the significance of reducing carriers," says Robin Bostic, director of reimbursement affairs for Smith & Nephew's orthopedic division (Memphis). "The real question is, what will the carriers' role be? Will they have local decision-making ability to approve technology? Will a good appeal process be in place? The current appeal process encourages manufacturers to just give up; we need a more constructive process. How long will decisions take? Will claims be processed in a timely manner? Some claims take as many as 500 days to process now. What directives will these carriers have to follow? But the most important, overriding question is: will CMS in its new role be an impediment to, or will it embrace, new technology within the parameters set by law?"
What's Missing
Bostic's question is one with which all medical technology manufacturers can identify. "CMS needs to be more friendly to new innovation," agrees Richner. "The current system protects existing technology—it takes a long time to get a new code even for modifications to existing devices, let alone for newer, more effective, minimally invasive technologies. Current codes are based on inpatient stays and acute illness. Today, medicine has moved more toward treating chronic illness with outpatient procedures, and Medicare needs to be reformed accordingly."
The length of time it takes for new products and technologies to win coverage and payment is onerous for manufacturers as well, and is the top issue that the agency should address, say experts. Last year, Congress passed the Benefits and Improvement Protection Act of 2000, which included a number of significant mandates, many of which have yet to be implemented, according to Richner.
In fact, several of the mandates that have been implemented were done very quickly, without the kind of deliberation and thought that would lead to sound policy, necessitating the latest round of reforms, believes Richner. "My number one focus for patients, hospitals, industry, and our company is to fix the hospital outpatient ambulatory payment classification (APC) system," she says. "CMS needs to start fresh and look at how to best implement it. Right now, it's a quasi- DRG [diagnosis-related group]. CMS was under pressure from Congress to control hospital outpatient spending, so the APC system was put in place before the inefficiencies were corrected. It's one area that still needs to be reformed."
Other mandates have encountered implementation roadblocks. One mandate sought to change how often codes are updated and awarded. "Congress wanted to change the assignment of current procedural terminology and HCFA common procedure coding system (HCPCS) codes from a yearly task to a quarterly one," says Smith & Nephew's Bostic. "The current annual process works this way: you turn in an application by April, you find out in November if the product has been approved, and you can use the HCPCS code the following January. Of course, you then have to wait to determine what the approved payment will be, which means it could be two more years until you can actually put the product on the market. Congress wanted CMS to assign codes quarterly to help speed the process, but CMS came back and said it didn't have the manpower to do that. CMS has asked if they can issue temporary codes or institute biannual coding. Mandates sound great, but the real trouble lies in implementation."
Another congressional mandate requires CMS to shorten the amount of time between the day a manufacturer submits an application for coding and the day coverage is awarded. AdvaMed recently studied the time lapse, and in its preliminary findings, AdvaMed found that of 26 coverage decisions that did not involve Medicare Coverage Advisory Committee review, which take longer than typical reviews, the average review time was 175 days. "The law requires CMS to issue its decision within 90 days; so CMS is taking nearly twice as long as Congress has instructed," says AdvaMed's Hull.
By comparison, AdvaMed recently also analyzed how long it takes FDA to review premarket approvals (an average of 363 days) and 510(k) clearances (an average of 102 days). "When you factor in the time it takes to win FDA approval, then an additional year to get a code, and then up to another two years or so to get appropriate level of payment, you find that it takes an inordinately long time to get a new product to market," explains Hull. "Reimbursement takes too long, and the current process could curtail innovation."
Fellow industry trade group, the Medical Device Manufacturers Association (MDMA; Washington, DC), agrees that reimbursement delays harm America's entrepreneurial spirit. Particularly for small companies, "the slow and uncertain grinding of bureaucracy's wheels is more than an inconvenience that must be factored into a business plan," MDMA executive director Stephen Northrup wrote in a letter to HCFA last year. "It can literally mean the death of a company and its nascent technology."
In addition to calling upon Congress to better enforce its existing mandate to speed the review process, manufacturers are concerned about the atmosphere in which such reviews take place. "The existence of carrier work groups hasn't been acknowledged or addressed by CMS, but manufacturers keep running up against them, and their decisions have killed more than one promising new technology," says Vertis Neuroscience's Norton. "Each carrier has a medical director who has a particular specialty and who organizes informal decision-making groups around that specialty. When new products and technologies come onto the market, those work groups meet behind closed doors then pass their recommendations to other medical directors throughout the country. In effect, national policy is being made without any input from patients, physicians, or manufacturers."
In testimony before the Subcommittees on Health and on Oversight and Investigations (part of the U.S. House of Representatives Committee on Energy and Commerce) in late June, MDMA asked Congress to reform the role that work groups play in developing local Medicare coverage decisions (or local medical review policies [LMRP]). A portion of the testimony follows:
MDMA welcomed CMS's Nov. 24, 2000, program memorandum . . . that mandated new, open LMRP development requirements and new draft LMRP publication requirements. We saw the program memorandum as a long-awaited first step toward modernization of the local processes for determining [new] Medicare coverage.
However, MDMA and its members remain concerned with the contractor medical director (CMD) work groups and the role they play in developing local coverage policy; both are subjects that the program memorandum did not address. These CMD work groups are not specifically authorized by law or regulation, do not meet publicly, and are not required to disclose the nature of their deliberations or to justify their decisions. Nevertheless, the work of these CMD work groups is the basis for hundreds of local medical review policies that determine which medical procedures and technologies are available to Medicare beneficiaries. MDMA believes that as CMS modernizes its national and local processes, [it] should do away with the CMD work groups.We believe that technological innovation would suffer if Medicare carriers did not have the discretion to develop a local coverage policy in the absence of a national policy. Nevertheless, we need to instill in the local policymaking process much of the same openness, transparency, and accountability that the Centers for Medicare and Medicaid Services are attempting to bring to the national process.
"CMS has been working toward making the reimbursement process on a national level open, predictable, and accountable," says Norton. "Now it needs to mirror that process in its local offices, and eliminating the work groups will signal a strong commitment to achieving that goal."
"Issues related to payment are one of the top priorities for CMS, but keep in mind that some payment processes are mandated by Congress," Whyte says.
A Brighter Outlook for Reimbursement?
As much as medical manufacturers hope that CMS will include some of their recommendations for reform in its modernization process, actual change will likely be slow in coming.
"It's going to be a difficult time," predicts Richner. "[CMS administrator Thomas] Scully will be challenged every step of the way. One of the big problems is Congress's divisiveness right now. The enormity of the CMS infrastructure is challenging enough, and congressional bipartisan support is going to be difficult to achieve. Everyone agrees CMS needs a more efficient system; it's more a matter of how that will occur. Tom Scully and Tommy Thompson are definitely considering some creative approaches to deal with some of our industry issues, such as an ombudsman for technology concerns and special committees to deal with our issues. These are positive initiatives that will make a difference to navigating through CMS."
"I think the current proposed reforms are the tip of the iceberg," says Medical Technology Partners' Stringham. "If CMS doesn't stay on an aggressive reform track, Congress will mandate additional reforms as it has with requiring reimbursement for new technologies, and the administration will become involved also, as it did when requiring payment for drugs and technology used in investigational studies. But the current reimbursement issues are complex and difficult enough that CMS is still grappling with what the problems are and what needs to be fixed rather than focusing on reform for reform's sake. The name change is a seemingly small step, but it demonstrates that the agency has changed its focus from how it processes claims to treating Medicare and Medicaid beneficiaries like customers through a higher level of service."
"While we haven't yet seen significant changes in reimbursement, I'm hopeful," says Norton. "HCFA's name change is symbolic in that it suggests a willingness to reform and to look at how to improve the reimbursement process so that beneficiaries will be able to obtain the best care. They're definitely taking steps to create a structure that should be more responsive.
"When it comes down to the bottom line, the Medicare and Medicaid beneficiaries are what matters," concludes Norton. "It's important for all of us to keep in mind that the ultimate impact of any reform will be felt by more than 70 million Americans who are our family, friends, and neighbors. If we keep that fact in mind, it will be easier to find common ground."
Stacey L. Bell is a freelance writer specializing in business and marketing issues.
Copyright ©2001 MX
