Monday, April 17, 2006

Heart device reimbursement cuts

Proposed cuts in government reimbursement for expensive but potentially lifesaving heart devices including defibrillators and stents have created a new financial challenge for the fast-growing industry.

The cuts, which device makers are opposing, could reduce by as much as a third the rate that Medicare pays hospitals for heart implants that aren't covered by private insurance.

The reimbursement cuts for stents, defibrillators and pacemakers will further complicate price negotiations between hospitals and the makers of the increasingly expensive devices. Piper Jaffray analyst Thom Gunderson said hospitals will be more inclined to use older and less expensive devices for some surgeries than they might otherwise use.

If the proposed cuts stand without modification, Medicare reimbursement for the most common type of stent procedure would be reduced by nearly 24 percent, according to an analysis by Gunderson. The cut would be 34 percent for a less-common procedure involving stents, metal-mesh devices used to prop open coronary arteries.

Reimbursement for defibrillators — which detect and electrically correct dangerous irregularities in heart rhythm, and can cost more than $40,000 to implant — would drop by 24 percent. Coverage for pacemakers — which use a mild electrical current to speed a slow heartbeat — would drop 13 percent.

Merrill Lynch analyst Katherine Martinelli said she had expected cuts in reimbursement rates for cardiovascular devices given CMS' concerns about the growing costs to treat these patients. However, the cuts were greater than some had anticipated, she said.

By contrast, the plan proposes only moderate changes to reimbursements for orthopedic devices such as hip and knee replacements, the analysts added.

Hopefully, they'll get a boost in the bottom line when they develop new heart devices, thus allowing them to charge more. Then again, with current cuts in the bottom line, maybe they'll have less to throw into research.

Who's going to pay?


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