The excise tax has been the medical device industry's main concern about pending health care reform, but other changes are taking place that will alter the market and potentially have a greater impact on sales and profits than the 2.3% tax. Specifically, device manufacturers' customers are at the beginning of changes that will alter reimbursement from the CMS to reflect adherence to standards of "best medical practices" tied to quality patient outcomes.
Health Care Reform: The Excise Tax Was Only the Beginning
Article preview from Medtech Insight - June, 2010
Although historic health care reform legislation was passed into law with a great deal of public and media attention earlier this year, health care reform has actually been taking place more quietly for a number of years now. In fact, some might say the law signed by President Obama is, in part, a continuation of the changes that have been altering medical practices before he took office. Of course, the new law has a much greater reach and includes provisions on coverage that directly affect every American. However, a sizable and important part of the legislation focuses on shifting the health care market to one that favors quality over quantity.
Medical device manufacturers have been keenly focused on the new excise tax on products, designed to raise $20 billion through 2019 to help offset the cost of expanding insurance coverage. ( See "AdvaMed Leaders Discuss Challenges Ahead for Device Industry," Medtech Insight, April 2010.) Understandably, the tax has been of great concern, but it is important not to overlook the other changes taking place that will alter the market and potentially have a greater impact on sales and profits than the 2.3% tax.
A New Focus on Best Medical Practices
Specifically, device manufacturers' customers are at the beginning of changes that will alter reimbursement from the Centers for Medicare and Medicaid Services (CMS) to reflect adherence to standards of "best medical practices" tied to quality patient outcomes. This area includes a number of initiatives such as pay-for-performance, gain sharing, and bundled payments, as well as financial penalties for those that do not achieve those standards.
These programs have been in the works—in one form or another—for a number of years, and CMS has sponsored or co-sponsored pilot and demonstration projects to test the validity and iron out any problems in using some of these methods on a grand scale. The push for quality and efficiency culminated in July 2008, when the US Congress overrode President George W. Bush's veto to pass the Medicare Improvements for Patients and Providers Act of 2008. The law requires the US Department of Health and Human Services (HHS) to develop a plan to transition Medicare payments into a value-based purchasing program for providers based on the efficiency and quality of services provided.
- Robert Neil
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