Affordable Care Act-Related Changes Hold Promise for Future of Device Innovation, Physician Payments

The Affordable Care Act is here to stay and will have significant implications for the future of device innovation and physician reimbursement, according to Cardiovascular Research Foundation President and CEO, Jack Lewin, MD. During a FDA Town Hall session at TCT 2014 on Monday, Lewin outlined how the law will affect the health care arena both now and in the future.  

Essentially, the impact has been mostly positive since its passing in 2010, he explained, though the implications on rising payments over the next 5 years are still a concern. The research and development of CV devices are in particular danger due to the added tax burden. While cautioning that the institution of new payment reform models has the potential to remove incentives from innovation, the future is not all “doom and gloom.” 

“We have to look carefully at who’s going to be able to adapt to change. Who’s going to be willing to surf these waves of change that are coming our way. … Because they are definitely coming,” he said.

Payment, delivery reform

As part of the Affordable Care Act, payments shift from traditional fee-for-service to “value-based” incentive models where improved outcomes and lower costs define the “value” of care. To accomplish this goal, payments are bundled, so that groups of physicians and hospitals are paid one price for the entirety of care, including hospital admission, inpatient and outpatient care, as well as other services. The shift in thinking from acute- to long-term care that occurs as a result of bundled payments is crucial, Lewin noted. Using the example of Medicare, he said only 16% of Medicare dollars are put toward paying salaries and reimbursing physicians. However, in the context of value-based incentive models, physicians can influence the remaining 84% of those dollars quite heavily.

“The extent to which we could get incentivized — that is, paid higher — because we’re doing a better job improving outcomes at either the same or lower cost, could result in a significant boost in physician or hospital income, if we design it that way,” he observed.

Change is coming

Changes at the FDA, while not necessarily a result of the Affordable Care Act, include a push for more scientific and analytic expertise, faster time-to-market for products and a closer look at mega-database analytics, Lewin added. What’s more, an increase in collaboration between the CMS and FDA could, in fact, be caused by the law’s promotion of value-based reimbursements from CMS and the FDA’s requirements for post-approval data tracking, he added. All of these factors will directly affect the research and development of CV devices.

“Products will come to market faster, pricing will be based on outcomes and cost and industry is going to have to start factoring this in,” he said. “The device tax could be damaging, but it’s the [Affordable Care Act] itself that’s really a big deal. The implications are going to be huge.” 

In the clinical space, the availability and constant stream of information will cause hospital administration and scientific experts to be more involved in decision making about device use and coverage, Lewin said.

“The bottom line is: there will be increased price and cost pressures for everybody in health care,” he noted. Though the effects the law will have on innovation remain unclear, he stressed the importance of striving for an optimistic outlook where value-based pricing reduces variation and waste in the health care system, and administrative costs are reduced, leaving additional money for research and development and fair pricing of high-value devices.

“We have to lean for that kind of a future and be thinking about that — because it will really be to the benefit of the patient that all these things happen, if they happen for the right reasons,” Lewin concluded.