Medical Device Daily Washington Editor

WASHINGTON – The impact of medical devices on the cost of healthcare was one of the topics addressed at this year’s National Health Policy Conference, but, typical for such gatherings, there was little consensus on the issue.

Moderating a Tuesday session was James Robinson, editor-in-chief of Health Affairs, who said, “As we look at the medical device sector ... what’s very striking is that these are scientifically very advanced” instruments, but their life-saving abilities rarely make the national news.

Robinson said that cost-effectiveness data for new devices are absent in many cases, and asked, “What role, if any, should cost analyses play in this debate?”

This is an issue on Capitol Hill, he said, because “the top eight Medicare DRGs [in terms of total costs] are all device-related.”

Randal Richner, CEO of the Neocure Group (Newton, Massachusetts), a device and drug development consultant, said that, as an entrepreneur, she was “feeling the pain of healthcare costs — I’m writing a check for almost $40,000 a year for the five of us” working at Neocure.

The chief culprit for healthcare inflation “absolutely is not medical technology,” Richner asserted.

At the same time, she said that data collection is not particularly good for establishing the impact of medical technology on costs, partly because both upside and downside risks of new devices warp demand, and because reimbursement incentives are misaligned.

Richner said that device makers are heavily scrutinized and regulated, dealing with numerous payers and national regulatory bodies from across the globe. However, she said she has “empathy for Dan Schultz,” the director of the FDA’s Center for Devices and Radiological Health, because regulatory policy can’t keep pace with technological change.

When bad news hits, Richner said, “Congress reacts instantaneously” and “has no tolerance for risk.” As for comparative effectiveness, she argued that such data is already coming in from the Centers for Medicare & Medicaid Services, local Medicare carriers, private payers, and others. She said that her own consulting work is more geared toward private payers than toward CMS.

The payment system offers “inappropriate incentives,” Richner said, including payment schemes that provide different reimbursements for services depending on the site of delivery.

Medicare, she said, pays hospital outpatient departments $513 for diagnostic colonoscopy and that hospitals account for more than half of all such procedures. By contrast, ambulatory surgical centers, accounting for less than half of such procedures, get about $100 less.

Payers need new technologies that “capture the right information at the right time” in order to rationalize payment, Richner said, and government needs to “avoid the temptation to regulate when events occur before the technology is tested thoroughly.”

John Bertko of the Rand Institute (Santa Monica, California), said, “All this stuff is exciting, but it’s a huge cost challenge.”

So what does the actuary’s crystal ball portend?

Bertko said, “look[ing] at things in the pipeline, particularly drugs and devices,” does not always tell much because “it’s much harder to forecast physician behavior.”

He added: “The good news for healthcare costs is that there are no new blockbuster drugs on the horizon,” and generic substitution has helped keep healthcare costs from zooming even higher. In contrast, he said that the pipeline for devices, especially those for cardiovascular and lumbar fusion, is fairly full.

The net expected impact on Medicare is $37 per month, per Medicare patient in 2008, Bertko said, calling this “a huge amount in terms of cost trend.”

Breast cancer screening with MRI “could be a real improvement” in early diagnosis, he said, adding that annual MRIs for women at high risk would be “a relatively small population” of about 1.4-1.7 million women, at an incremental cost of $800 to $2,000 per scan.

This is cost effective for women at high risk, he said, but asked: “How do we provide this kind of new technology for an appropriate group of people and stop its inappropriate use for people who don’t qualify” by risk stratification?

Bruce Steinwald, chief of healthcare at the Government Accountability Office, said that in government, “we don’t talk about billions [of dollars] in healthcare anymore,” but in trillions.

He said there is “lots of evidence that differences in spending do not relate to better outcomes,” with data suggesting that in several instances, the reverse is true.

Steinwald attributed much of the explosive growth in healthcare cost to diagnostic imaging. The diagnostic work done by doctors is “up substantially, more than any other kind of service,” Steinwald said, with the usual pronounced geographic variability.

“If we have more and more diagnostic technology that leads to more conditions being diagnosed, needing more treatment, there’s a multiplier effect associated with the proliferation of diagnostic technologies.”

Steinwald also referred to “a migration of diagnostic technologies away from hospitals into physician’s offices,” which also boosts spending.

How can society control medical spending to keep it from outstripping overall economic growth?

Steinwald said, “Ironically, the only GDP standard we have by law is SGR,” a mechanism which he said “empirically ... appears to be unacceptably low.”

He also suggested that Congress is more than justifiably hopeful concerning what he described as “faith-based initiatives” — such as healthcare information technology and consumerism — for controlling costs. But he said that a hard target for controlling costs might never be agreed upon, let alone arrived at.

“As the debate goes on, more and more what we’ll be talking about is affordability” of healthcare, he said.