Neurotech Vendors Prep for Changes in Reimbursement

by James Cavuoto, editor

Manufacturers of neurotechnology devices and systems are preparing for a variety of changes to the amount of reimbursement for neurotech devices and the procedures for obtaining reimbursement. Much of the impetus for this change has been brought on be changes in leadership and philosophy at the U.S. Centers for Medicare and Medicaid Services (CMS), though changes at private insurers and foreign government agencies are also in the wind.

On the positive side, CMS reimbursement levels for many types of implanted neurostimulation systems have risen. Earlier this month, CMS announced that it has increased reimbursement levels for implanted neurostimulation devices and leads, good news for stimulation vendors such as Medtronic and Cyberonics. Beginning January 2006, average Medicare reimbursement to hospitals for outpatient implantation of Cyberonics’ VNS therapy system increases 8.6 percent to $26,649 for the implantation and intraoperative programming of the device. This includes $11,603 under APC 0039 for implantation of neurostimulator, $14,928 under APC 0225 for implantation of neurostimulator electrodes, and $118 under APC 0692 for the intraoperative electrode test.

“Cyberonics is very pleased with Medicare’s decision to once again increase hospital reimbursement for implantation of the VNS Therapy System,” commented Skip Cummins, Cyberonics’ chairman and CEO. “Over the past three years, Medicare hospital reimbursement for implantation of VNS has increased 37 percent from $19,500 to $26,649. This steady increase confirms that Cyberonics continues to develop therapies that satisfy the needs of not only patients with chronic, treatment-resistant illnesses and their physicians, but also payers.”

In April, CMS announced it would expand its coverage for cochlear implants to help treat severe hearing loss. Previously, Medicare only covered cochlear implants for beneficiaries with open-set sentence recognition test scores of 30 percent correct or worse. As a result of the new decision, Medicare will cover cochlear implants in beneficiaries who have test scores of 40 percent or less correct, and will cover cochlear implants in beneficiaries who have open-set sentence recognition test scores over 40 percent up to 60 percent if they are participating in a clinical trial of cochlear implantation that meets the requirements outlined in the national coverage decision. Cochlear implant manufacturers would still like to see hospitals reimbursed more for pre-implant services such as audiologists’ efforts in screening and use training.

Not all neurotech vendors got such good news, however. Manufacturers of neurosensing systems, such as electroencephalography and magnetoencephalography, are facing lower levels of reimbursement for neurodiagnostic procedures. In July, CMS proposed a 50 percent reduction in the amount reimbursed for some EEG procedures and an even more drastic cut for some MEG procedures. For example, CPT Code 95965, used for magnetoencephalography for presurgical planning in epilepsy treatment, faced a cut from $5,250 in 2005 to just $674 in 2006. In the end, CMS raised that level to $2,750, still just about half the previous level. Reimbursement for other MEG procedures were also reduced, though not as drastically. Many private insurers, including Aetna, do not cover these MEG procedures at all.

Jack Price, president and CEO of MEG system manufacturer VSM MedTech in Vancouver, BC, did his best to find a bright side. “CMS has said it will reconsider payment rates during 2006 based on additional data it receives, and VSM will assist in the data gathering process to ensure that payments reflect hospital costs for procedures involving MEG,” he said. “Medicare payment rates, which are widely used as a benchmark by other third-party insurers, can affect the economics of purchasing an MEG system for clinical use. However, VSM has been awarded contracts for two MEG systems from U.S. hospitals since August, when the initial CMS proposal for much steeper payment reductions was announced. We believe demand will continue to grow in the U.S. and around the world as it becomes clear that MEG can reduce costs and improve surgical outcomes because of its unique ability to non-invasively measure, in real time, the brain’s functional activity.”

Still, there are many signs that future changes in reimbursement for neurotech devices will be more likely to be positive than negative. The Medicare Modernization Act of 2003 (MMA) mandates faster review of new technology devices. CMS administrator Mark McClellan is attempting to move CMS away from the fee for services model and toward a “pay for performance” model that would reward vendors who help save the government money. One provision of MMA, section 702, calls for a demonstration project providing home health services to Medicare beneficiaries with severe chronic conditions who otherwise would not be deemed homebound.

And the agency seems amenable to adapting to changes in product designs. CMS provided for a new technology add-on payment for rechargeable neurostimulators used for hospital inpatient applications, above and beyond what’s offered for standard implanted stimulators. Although CMS has not made this provision for rechargeable neurostimulators in outpatient settings, it is likely that it will do so in the future.