Once FDA approves or clears a new medical device or diagnostic test, the Centers
for Medicare and Medicaid Services (CMS) determines which medical technologies
and services are covered for Medicare patients, and how much providers will be
paid. The CMS process involves three separate but interconnected procedures.
Putting the Pieces Together:
Coverage, Coding and Reimbursement
Policies for Medical Technologies
Local Coverage Determinations
made by private insurers that process claims for
Medicare providers in one of ten regional jurisdictions
and only apply to beneficiaries in that region.
National Coverage Determinations
made by CMS which determines the items and services that
are covered for all Medicare beneficiaries nationwide. A final
NCD decision can take from nine months to one year.
Medicare coverage is limited to items or services determined to be “reasonable and necessary for the diagnosis or treatment” of
Medicare beneficiaries. Often Medicare coverage is readily available for a new technology or service if it can be adequately described
by an existing billing code or it appropriately falls under an existing payment mechanism. For those that need a Medicare coverage
determination, there are two main paths:
For a covered item or service to be paid by Medicare, it must fall under a specific insurance
billing code. Codes are numeric or alpha-numeric and are used on claims forms, submitted by
hospitals and providers to payers, to identify the services or procedures that were performed.
Codes are issued and maintained by CMS or the American Medical Association and vary
depending primarily on the setting and type of care. ICD-10 and Healthcare Common
Procedure Coding System (HCPCS) codes are the most commonly used code sets.
Inpatient hospital services fall under the
ICD-10 (International Classification of
Diseases) code system issued by CMS.
To request and gain approval of a new
ICD code can take 1-2 years.
Products, supplies & services not included in
CPT codes (ex.: drugs and biologicals,
DMEPOS) fall under the HCPCS Level II code
set issued by CMS. From start to finish, the
HCPCS code process can take 1- 2 years.
Physician services and services rendered in
labs, hospital outpatient departments, and
ambulatory surgery centers are covered under
the CPT (Current Procedural Terminology) or
HCPCS Level I code set maintained by AMA.
Obtaining a new CPT code generally takes no
less than 19 months but can take up to 25
months, depending on when requested.
Durable Medical Equipment, Prosthetics, Orthotics and Supplies Fee Schedule
Laboratory Services (Clinical Laboratory Fee Schedule)
Physician Payment (Medicare Physician Fee Schedule)
Outpatient Hospital Care (Outpatient Prospective Payment System)
Inpatient Hospital Care (Inpatient Prospective Payment System)
CMS uses different reimbursement methodologies to determine how much Medicare
will pay for a particular item or service—which largely depends on the type of provider
and the location of the service. Broad reimbursement categories include:
Payment determined by one of approximately 760 Medicare Severity Diagnosis-Related
Group (MS-DRG) categories based on: patient diagnosis, procedures performed,
complicating conditions, age and discharge status
Payment for services based on CPT or HCPCS codes with amounts varying
depending on: physician work, practice expense and malpractice risk
Payment based on Ambulatory Payment Classification (APC) groups covering
reimbursable items and services provided during an outpatient visit
Fixed payment amounts for laboratory services provided by physicians, hospital
outpatient departments and labs (using CPT codes)
Medicare pays suppliers directly for items used by beneficiaries in the home (wheel chairs,
surgical dressings, blood glucose monitors, etc.) either through a competitive bidding program
or under an existing fee schedule (using HCPCS Level II codes)
In limited circumstances, new and high-cost medical technologies used
in hospitals have additional mechanisms for Medicare reimbursement.
Under the hospital inpatient system, New Technology Add-On Payments
(NTAP) can be provided as an incentive for hospitals to adopt new
technologies before their costs are recognized in the MS-DRG system.
Under the hospital outpatient system, hospitals and manufacturers may apply for a New Technology
APC when no current APC exists for a new procedure or diagnostic. This is intended to give CMS time
to gather actual cost data about the service before it is placed in an APC with other clinically and
resource-similar services. Alternately, hospitals and manufacturers may apply for a Pass-Through
payment for a new technology for two to three years while CMS gathers additional cost data to
incorporate the new technology into an APC.
Medicare Patient Access to