Cost Effectiveness, Reimbursement and Medical Devices. Colin Hopley M.Eng MBA MPH

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1 Cost Effectiveness, Reimbursement and Medical Devices Colin Hopley M.Eng MBA MPH

2 Agenda Health Care Environment Policy options - Health Technology Assessment (HTA) - Reimbursement Influence of innovation on evidence needs Cost effectiveness and medical devices

3 Policy Issues in Healthcare Consumer/producer moral hazard Ageing population with increased morbidity Technological innovation Variation in practice

4 Policy Issues in Healthcare Expenditure on health as % of GDP United States of America 13 France 12 Germany 11 Italy United Kingdom Japan Source: World Health Organisation Health Statistics available at URL: accessed 26/03/10

5 New Paradigm Greater need to demonstrate value to a wider set of stakeholders - Patients - Clinicians - Providers - Payers Greater need for robust clinical and economic evidence of value

6 Health Policy Options Rationing - Commissioning, coverage decisions & technology appraisals Guidelines - How specific conditions should be managed Financial Incentives - Reimbursement systems

7 Health Technology Assessment Stakeholders are asking tough questions and increasingly demand robust evidence Health Service Researchers have developed a robust methodology to evaluate new interventions (HTA) a systematic examination of the short and long term consequences, in terms of health and resources use of the application health technology.

8 What are the questions? Is treatment A better than treatment B? - How much better? - In which patients all or just some? - For all providers? How about the relative risks? Is it value for money?

9 Reimbursement Systems Reimbursement is the way in which health care providers are paid for the patients treated Hospital level Global Budget Patient level Payment per procedure DRG Device level Administered Price

10 Components of DRG Reimbursement Based on: diagnosis, procedures performed, complications & co-morbidities and other factors Process in UK Diagnosis ICD-10 & Demographics Procedure OPCS-4 Tariff Grouping HRGs Payment!

11 Key Reimbursement Issues Hip Resurfacing Arthroplasty Coding for procedure available? Can I get this procedure into the reimbursement system for my hospital? Coverage decision (local or national HTA)? Yes OPCS 4 Code W581 + Z843 Yes NICE TA No. 44 Is this procedure covered by the payer? Payment sufficient? Can I get enough money reimbursed to cover the costs of this procedure at my hospital? Yes HRG HB12C Tariff 4863

12 New in Class or New Class? Platform technology new entrant in existing class - Incremental improvement of device - Used in established procedure Breakthrough technology first in class - Novel device in new procedure - Novel device in established procedure - Existing device used in new procedure - Only one in class?

13 New in Class Coding for procedure Coverage Decision Payment sufficient Key issues - Hospital perspective? - Negotiate directly with hospitals - Short term clinical effectiveness/cost effectiveness arguments to convince buyers - Low or no reimbursement, seek new or increased tariff

14 New Class Coding for procedure Coverage Decision Payment sufficient Key issues??? - Health service perspective - Long term clinical effectiveness/cost effectiveness arguments for policy makers - Need for changes to services - Gaining coding, coverage reimbursement - Risk of HTA depends on budget impact

15 Economic Evaluation in Health Care Taking an incremental approach - identify - measure - value - compare Difference in treatment cost Difference in treatment outcome the cost and outcome of alternatives

16 Evidence Considerations Type, quality and feasibility of evidence needed (clinical, QoL, economic) Use of health economic models Whether to collect prospective economic data Integration with regulatory needs

17 Importance of Perspective Time lost to work Time lost to usual activity Informal care Disability Benefit Sick pay Social Care Costs SOCIETY HEALTH CARE SECTOR Patient Out of pocket expenses Travel Parking Prescription charges GP Visits Long term care Home care Out patient treatment HOSPITAL Hospital ward Procedures Implants Assessments Medications

18 Issues with devices Product modifications can occur Learning curve in the use of devices Economic value can depend on organisational response Relative lack of RCT studies Source: Challenges in Assessing the Economic Value of Devices Presented by: Michael Drummond, Centre for Health Economics, University of York, and Visiting Professor, LSE Health Financing of Medical Technology in the UK: Key Issues and Trends. 10/09/08 London School of Economics / European health Technology Institute for Socio Economic Research

19 Summary Increasing need for evidence of clinical effectiveness and cost effectiveness Type of data depends on reimbursement, innovation and audience Health economic evaluation of medical devices has specific challenges