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.

COVERAGEMedicare 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:

CODINGFor 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.

REIMBURSEMENT

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 Medical Technology