Reimbursement for Neuromodulation Therapies and Technologies

Background

The US government does not technically regulate the practice of medicine; a physician is legally allowed to perform any procedure that he/she believes is medically appropriate. Nonetheless, in the real-world environment of US practice, it can be very difficult, if not impossible, to perform a procedure that is not approved by the FDA, outside of approved clinical trials. In the neuromodulation realm, this manifests practically in two ways:

• 1.

  Hardware that is not approved for use for any indication in the United States (i.e., a novel neurostimulating electrode or generator), cannot be purchased by a physician or hospital for use. As mentioned, usage of such a new device in a clinical trial is possible under the aegis of an FDA, Investigational Device Exemption (IDE). The application for an IDE, which can be time-consuming and costly, is routinely done by the device manufacturer.

• 2.

  Usage of an FDA-approved device for an unapproved indication is known in the United States as off-label usage. For example, percutaneous, spinal cord stimulating (SCS) electrodes are routinely used off-label for peripheral nerve/peripheral field stimulation. Similarly, usage of approved deep brain stimulation (DBS) hardware to treat chronic pain, depression, or Tourette’s syndrome, which are not FDA-approved indications, would be considered off-label usage. It should be noted that the process of FDA approval is routinely longer than that of the European Community, Conformité Européene (CE) mark. The reasons for this are multifactorial, but are due in part to the more extensive efficacy analysis performed by the FDA, as opposed to the CE’s emphasis on safety, more so than efficacy. Unlike unapproved hardware, hardware for off-label indications are available for purchase and use by physicians and hospitals. As we shall discuss later, however, lack of reimbursement by third-party payors for off-label indications will frequently preclude device utilization.

From US Food and Drug Administration (FDA) Approval to Insurance Approval: “On-Label” Indications

FDA approval is necessary, but at times not sufficient, to allow for usage of a particular medical device. The major governmental payors, including Medicare (coverage for patients >65 and those <65 with chronic, disabling medical conditions), Medicaid (coverage for the indigent), and Tricare (coverage for active military), will routinely follow the FDA lead in drafting their coverage guidelines. However, notable exceptions have arisen, with the most relevant one to our community being the lack of US Center for Medicare and Medicaid (CMS) coverage of vagus nerve stimulation (VNS) for depression, despite FDA approval. Similarly, the state of California workman’s compensation board eliminated coverage for neuromodulation techniques that include SCS and intrathecal pumps (implantable drug delivery systems [IDDS]) for chronic pain.

Third-party private commercial payors do not always follow FDA approval guidelines, and thus, at times, will approve indications not FDA-approved, and deny coverage for FDA-approved indications. For example, a number of private payors will approve SCS for angina, a non-FDA-approved indication. Similarly, while SCS of the upper extremity for complex regional pain syndrome (CRPS) is FDA-approved, a number of payors will flat-out deny coverage of upper-extremity SCS for any indication.

The introduction of dorsal root ganglion stimulation has further muddied the waters. Some payors consider it identical to traditional epidural SCS and provide coverage, while others consider it a form of peripheral nerve stimulation and have denied coverage.

Hospital/Facility Reimbursement

US hospital/facility reimbursement for a procedure may follow a number of models:

• 1.

  The diagnosis-related group (DRG) model: This model is used by Medicare for inpatient admissions. Under this model, the facility is reimbursed one fixed fee for all the costs of the admission, which is classified under a specific DRG that is based on the patient’s diagnosis and procedure. Thus, the costs of the implanted hardware can significantly affect the hospital’s profit or loss for a given procedure. A real-world example would be the lack of distinction by DRGs for more expensive rechargeable IPGs as compared with primary cell devices. Thus, implantation of a primary cell device in a Medicare patient may result in a net profit for the hospital, while implantation of a rechargeable device may result in a loss. As neuromodulation procedures are by and large elective surgeries, repeated losses by an institution may result in that facility abandoning that procedure. Medicaid, the insurance system for the poor, follows similar but not identical rules as does Medicare, and in a practical sense reimburses less than Medicare, such that neuromodulation procedures on Medicaid patients usually result in a loss for the treating institution.

• 2.

  Ambulatory patient classification (APC) model: Medicare utilizes this model for ambulatory surgery (outpatient) procedures. In this model, a specific “carve-out” ²

  2 “A carve - out insurance plan is a supplement to a person’s standard health insurance plan . The carve - out plan is provided by a third-party vendor, and it covers specialized care or products, such as prescription medications and treatment for chronic illnesses.” Taken from the Internet: https://www.google.com/#q=define+carve+out+health+insurance .

  fee is paid for the device.

• 3.

  Other “carve-out” models: Hospitals frequently contract with third-party payors for separate reimbursement for implants, above and beyond their usual “case rate” fee, and at times this is defined as a multiple of the device cost. Based on the contracted amount, device implant surgery may be profitable for the hospital, and the hospital may in fact benefit from the use of high-cost implants from a revenue standpoint. However, as will be discussed, the trend toward “bundled payments” may make this scenario less and less common in the future.

Physician Reimbursement

US Physician reimbursement is based predominantly on the Current Procedural Terminology (CPT) guidelines, administered by the American Medical Association. In brief, each procedure or office visit performed is assigned a code, with each code weighted by relative value units (RVUs) by a committee based on a number of factors, including but not limited to the presumed “complexity” of the procedure or office evaluation. The AMA CPT Editorial board routinely reviews each code and may choose to reevaluate the assigned RVU values based on updated information. Neurostimulator procedures are valued on the lower side of the RVU scale as compared with other surgical procedures, and thus a surgeon who, given the opportunity to perform a neurostimulator implant as opposed to a spinal fusion, for example, may have financial incentive to choose the higher-reimbursement procedure.

Bundled Payments

Many third-party payors are moving toward “bundled payments,” in which one single payment is made to an institution for all costs involved with a procedure. This would include all hospital costs including implant costs as well as all physician costs. Institutions will thus have a significant incentive to minimize costs of the procedure. In the field of neuromodulation, a large price gap continues to exist between primary cell and rechargeable devices. It is unlikely that the bundled payment schemes for neuromodulation procedures will have the granularity to distinguish between these different devices, and thus the use of rechargeable devices will result in reduced facility revenue, despite the fact that the longer lifespan of these devices may make their usage cost-effective in the long run as fewer replacement surgeries will be needed during the patient’s lifetime.

The Affordable Care Act (ACA) and the Future

From the time that this article was conceived until the writing of this last paragraph (fall 2016), we have witnessed a dramatic change in US politics with the election of a new president who has promised during his campaign to “repeal and replace” the ACA of 2010. It is obviously too early to speculate on the effects of such an event on the neuromodulation practice in the United States, but it is likely that the field of neuromodulation will be affected:

• 1.

  Insurance Approval : The possible elimination of the Medicare Independent Policy Advisory Board (IPAB): The IPAB, a nonelected bureaucratic body, was created with the goal of reducing Medicare spending. The law requires that no one who sits on the IPAB can have any other employment, and thus physicians who practice medicine would be excluded as panel members. While the architects of the ACA claim that the IPAB will be prohibited from rationing care, few believe that IPAB cost-cutting can occur without doing just that. Thus, if they determine that a particular indication of neuromodulation should not be covered, it will not be covered with no chance for appeal. The field of neuromodulation, with its high up-front costs, could thus be high on the radar of the IPAB. Opponents of the ACA have focused on the elimination of the IPAB as one of their goals.

• 2.

  Accessibility to health care : Others have argued that the ACA has increased the number of insured in this country and thus increased the number of individuals with access to life-saving medical technology such as neuromodulation. Realistically, however, the so-called “exchange plans” created by the ACA are most similar in their reimbursement patterns to Medicaid, which, as mentioned, does not reimburse institutions enough to cover the costs of the procedure.