November 6, 2009

Costs surge for medical devices, but benefits are opaque

When makers of heart defibrillators wanted Medicare to vastly expand the types of patients eligible to receive the devices, which can cost upward of $25,000, agency officials were skeptical. It was not clear how many of those patients would actually need a defibrillator, a device that can deliver a life-saving shock to restore a faltering heart to normal rhythm.

So government and industry struck a deal back in 2004. Medicare agreed to expand the device’s use, nearly doubling the number of patients who qualified for one. The companies, in return, agreed to pay for a study to see which patients really benefited.

Five years later, Medicare underwrites more than half of the $4 billion the nation now spends annually on defibrillators, but the agency is no closer to knowing how many lives that big investment is saving. That is because the device companies did not finance the study beyond their initial $4 million commitment, and Medicare did not pick up the slack. As a result, researchers still cannot gather data that would identify the types of patients who would most benefit from a defibrillator.

As Congress seeks to revamp the nation’s healthcare system, medical devices might seem an inviting target to better control Medicare spending. Outlays on implanted devices stand at about $76 billion annually in this country and are rising at a rate faster than the cost of drugs, according to a recent study by the McKinsey Global Institute, a consulting group. With an aging population in America, Medicare is picking up more of those costs.

Unlike other hospital products, implants are so-called physician preference items, meaning that doctors — not the hospitals — often choose which manufacturer’s implant to use. It is a decision that can be skewed by a doctor’s relationship to a company and can also undercut a hospital’s ability to negotiate the best price, experts say.

In an effort to slow federal spending, the bill passed by the Senate Finance Committee would require the device industry to pay the government $4 billion a year for five years, with the portions allocated among individual companies based on their market shares. But device makers, including the ones that initially financed the defibrillator study — Medtronic, Boston Scientific and St. Jude Medical — have fiercely resisted the provision, calling it an unfair “tax” that will stifle innovation and cause job losses.

The big problems, in such experts’ view, is that there is little data available to compare the benefits of competing makers’ products or to determine how much buyers, like hospitals, should be paying for them, said Eugene Schneller, a business professor at Arizona State University in Tempe.

For example, even doctors acknowledge that they typically have little reason to be concerned about a device’s costs when it comes to deciding which one to use. One doctor compared it to giving a car buyer a blank check and letting him choose between a Maserati or Honda.

Meanwhile, hospitals are often hampered in their ability to negotiate prices with device makers because the selling price of a defibrillator or hip joint is not easy to determine. In selling products, device companies have required hospitals to sign contracts that contain confidentiality clauses under which facilities agree not to disclose what they paid for the product.

As a result, a big hospital that is a large-volume buyer of heart devices or hips may pay higher prices than a smaller one that buys fewer units, said Dr. Lerner of ECRI. In some other countries, medical device databases have been established to provide both doctors and patients with more data about how competing products differ. In such a database, or a registry, information about a product and the surgical technique used by a doctor is recorded at the time of an implant. And then by tracking whether and when the patients return for a replacement procedure, or experience other problems, registries can show which producers’ models are failing faster than others.

The information can help doctors and insurers avoid less reliable devices, while also avoiding the high additional medical costs of remedial treatments and replacement procedures.

Eliminating unnecessary replacement procedures could potentially save Medicare hundreds of millions annually. But Medicare has not pushed the use of registries, and the industry has also not embraced it. To date, hip and knee producers have contributed $500,000 to underwrite an effort by the American Academy of Orthopaedic Surgeons, a professional group, to create a national artificial hip and knee

registry. But that is a relative pittance — about what many individual companies pay to a few doctors each year to retain them as consultants.

The federal government could also play a more aggressive role in making sure it is getting better value for its money, he added. A case in point — requiring that makers of heart devices use batteries that last longer than five years, the period of time when patients must now undergo an additional, potentially dangerous operation to have a costly device replaced. Visit the New York Times for the article .

Cat catches swine flu

Does the swine flu pandemic pose a threat to your pet? Yes, according to a report out Thursday from the American Veterinary Medical Association.

A cat in Iowa has tested positive for the H1N1 virus, state officials confirmed this morning, "marking the first time a cat has been diagnosed with this strain of influenza," the association said in a statement.

"The cat, which has recovered, is believed to have caught the virus from someone in the household who was sick with H1N1. There are no indications that the cat passed the virus on to any other animals or people," the statement said.

The cat is 13 years old, and state health officials said two of the three family members that own the cat had suffered "influenza-like illness" before the cat got sick.They recovered too.

Before this kitty was diagnosed with the swine flu, the virus had been found in humans, pigs, birds and ferrets, the association said.

It is well known that some viruses can be transmitted from people to their pets so the case of the Iowa cat isn't a surprise. But the case is prompting the association, along with the American Association of Feline Practitioners, to remind pet owners "they should monitor their pets' health very closely, no matter what type of animal, and visit a veterinarian if there are any signs of illness." Visit the Washington Post for the article.

State launches effort to improve hand-washing in hospitals

A state panel charged with healthcare unveiled its first major initiative Tuesday: an effort to improve hand-washing at Maryland hospitals. Called the Maryland Hospital Hand Hygiene Collaborative, it's funded by $100,000 in federal stimulus money provided through the U.S. Centers for Disease Control and Prevention. It's voluntary, but state officials expect almost all of the 47 acute-care hospitals in Maryland to participate because they want to reduce potentially avoidable infections that have large human and financial costs.

Most already have begun efforts to improve hand-washing by employees - which started before the recent H1N1 flu pandemic but could help control the spread. The main benefits of the new program are creation of a system for officials to share best practices and to uniformly report progress, said Health and Mental Hygiene Secretary John Colmers.

Colmers said he hopes the program becomes a model for other states. Across the nation, there are an estimated 1.7 million hospital-acquired infections annually, 100,000 deaths and $30 billion in additional healthcare costs, according to estimates from the CDC this year. The state began collecting data about certain infections acquired in hospital intensive-care units only in the last year, and results are not yet available, according to the Maryland Health Care Commission.

The state and federal governments have other plans in place to decrease the occurrence of hospital-acquired infections. Maryland, for example, is considering financial incentives for hospitals. Visit the Baltimore Sun for the article .

VHA DataLYNX allows hospitals to perfect supply chain information

As hospitals escalate their efforts to decrease supply chain expenses, VHA Inc., the national healthcare network, has launched VHA DataLYNX, the newest component in its robust VHA SupplyLYNX analytics arsenal. Designed to help hospitals improve the quality of their item master, increase their efficiency and shrink their supply chain costs by linking data with insight, VHA SupplyLYNX helped hospitals save more than $700 million in 2008.

Using the industry's most robust data and applying open industry standards, VHA DataLYNX helps hospitals analyze, consolidate, categorize and classify their item master data to improve its quality and accuracy. This process allows hospitals to better understand their supply spend and initiate more efficient purchasing. Incorporating exclusive quarterly reports, VHA DataLYNX assures continuing data accuracy and ongoing cost-savings opportunities.

Hospitals that are using VHA DataLYNX benefit from increased labor efficiencies, a reduction in inventory levels and reduced logistic costs, all attributable to the improved quality of their item master.

Swine flu vaccine going to Goldman Sachs, Columbia U., and other big NYC employers

Some of New York City's largest employers — including Wall Street firms like Goldman Sachs and big universities — have started receiving doses of the much-in-demand swine flu vaccine for their at-risk employees.

The government-funded vaccine is being distributed to states, where health departments decide where to send the limited doses. In New York, health officials are allowing businesses with onsite medical staff to apply for the vaccine.

Doctors for large companies can ask for the vaccine along with other doctors but must agree to vaccinate only high-risk employees like pregnant women and those with chronic illnesses, said Jessica Scaperotti, a spokeswoman for New York City's Department of Health and Mental Hygiene.

Last month, the city began offering vaccine to schoolchildren, as well as the offices of pediatricians and obstetricians that asked for it. Scaperotti said only half of the pediatricians in New York City have requested vaccine

"As the vaccine became more available we expanded it to adult providers," Scaperotti said. She called the large employers "a great avenue for vaccinating people at risk."

But a critic said Wall Street firms shouldn't have access to the vaccine before less wealthy Americans. "Wall Street banks have already taken so much from us. They've taken trillions of our tax dollars. They've taken away people's homes who are struggling to pay the bills," union official John VanDeventer wrote on the Service Employees International Union Web site. "But they should not be allowed to take away our health and well-being."

The union has about 2 million members, including healthcare workers.

The swine flu vaccine has been in short supply nationwide because of manufacturing delays, resulting in long lines at clinics and patients being turned away at doctor's offices. The vaccine started trickling out in early October, and there are now nearly 36 million doses available.

Rules vary by state on how the vaccine is distributed. For example, Illinois and Chicago's health departments are initially excluding businesses. Others, like New York, said they would allowing businesses with medical staffs to vaccinate those in the priority groups.

The Centers for Disease Control and Prevention does not review and sign off on the decisions of state and city health departments as to which doctor's offices and businesses will be sent vaccine doses, said spokesman Tom Skinner.

The CDC director, Dr. Thomas Frieden, however, did send a letter Thursday to state and local health departments asking them to review their distribution plans and make sure the vaccine is getting to high-risk groups. Frieden said any decisions that appear to direct vaccine outside priority groups "have the potential to undermine the credibility of the program."

The agency has set guidelines on which patients should be at the front of the line: children and young people through age 24, people caring for infants under 6 months, pregnant women, healthcare workers and adults with health conditions such as asthma and diabetes.

Swine flu — which scientists call the 2009 H1N1 strain — is widespread throughout the country now, much earlier than seasonal flu usually hits.

Other big New York City employers that have received doses of the vaccine include Columbia University, Time Inc., the Federal Reserve Bank and several hospitals. The distribution was first reported by Business Week.

Goldman Sachs has received 200 doses and Citigroup has received 1,200, health officials said. So far, 800,000 doses have been delivered to 1,400 healthcare providers in New York City, including public schools, pediatricians and hospitals.

In statements, Citigroup and Goldman Sachs said the vaccine would only go to those in high-risk groups.

"Goldman Sachs, like other responsible employers, has requested vaccine and will supply it only to employees who qualify," said spokesman Ed Canaday.

Morgan Stanley received 1,000 doses of the vaccine for its New York and suburban offices, but turned over its entire supply to local hospitals when it learned it received shipments before some area hospitals, spokeswoman Jeanmarie McFadden said.

Some New York pediatricians' offices that have gotten vaccine say the supply is not meeting the demand.

Manager Linda O'Hanlon at Uptown Pediatrics in Manhattan, said her office has received 500 doses so far — not enough for a practice with almost 7,000 patients.

"We have about 800 appointments" set up for patients who want to get vaccinated, she said. (AP) Visit the Chicago Tribune for the article .

Advocacy alert regarding 2.5% excise tax on medical devices

The Affordable Health Care for America Act includes a new revenue provision that would establish a 2.5 percent excise tax on medical devices sold for use in the U.S. The tax applies to the “first sale” of all devices (Class I, II, and III) sold in the U.S. Device sales for resale, after production, manufacture or importation are not considered “first sale” and the tax would not apply. There is no exception for devices with prices below or above a certain price. The tax does not apply to exported devices and does not apply to retail sales of devices. That means devices sold directly to the general public at local drug stores and other establishments are excluded from the tax. Hospital charges for devices that are used for patients are not considered “resale” or “retail” for purposes of the device tax.

Hospitals purchase devices directly from manufacturers or from wholesalers distributor. Many of these wholesalers help hospitals manage their “just in time” inventory of devices rather than storing lots of devices on site at the hospital. Hospitals often use group purchasing organizations to negotiate with manufacturers on prices for drugs and devices, however, hospitals are still purchasing the devices directly from the manufacturer.

Medical device manufacturers would pay the excise tax. While it is not a “sales” tax, it is a tax on each individual device and it is likely that manufacturers will tack-on the 2.5 percent tax at the time of sale. When a hospital purchases directly from the manufacturer, the hospital would likely be charged the 2.5 percent tax. When a wholesale distributor sells a device, the distributor would be charged the tax. Distributors may pass the tax back to the device manufacturer. Device manufacturers again may try to pass that on to hospitals.

The AHA’s view: Paying for health reform requires a shared commitment from all: employers, payers, providers and patients. This includes medical device manufacturers. Hospitals are already doing their share in helping fund healthcare reform. However, the House bill’s 2.5 percent excise tax on each device sold likely would be, in part, a direct transfer to America’s hospitals, thereby increasing the level of cuts to hospitals. Hospitals would have limited negotiating ability to avoid paying this tax.

Adopt a global fee or a tax on income for medical device manufacturers. The Senate reform bill would establish an annual fee on medical device companies that would be distributed across device manufacturers based on their market share. Alternatively, a tax on profits or on gross sales of devices is another way of applying a tax. While device manufacturers would likely try to shift this new global tax on to customers, hospitals and other purchasers of medical devices would have more ability to negotiate on total price and create pressure for device companies to contribute their share to the cost of health reform. Applying a discrete tax on each device, as established in the House bill, would be easier for device manufacturers to pass on.

We need your help to ensure that this issue is addressed in a way that helps you take care of patients and serve your communities. Please visit Voter Voice to send an e-mail message to your legislators.

InnerSpace's SpaceTRAX plus RFID awarded Novation contract for RFID clinical inventory management systems

Stanley InnerSpace announced that SpaceTRAX has been awarded the Novation contract, effective for three years, to provide RFID and barcoding clinical inventory management solutions to its members.

Novation is a supply contracting company for the healthcare industry, providing savings to members and affiliates of VHA Inc., the University HealthSystem Consortium, and Provista.

The contract affords administrators flexibility in creating a cost-effective and easy-to-manage clinical inventory process. SpaceTRAX, a simple-to-use, web-based solution tracks clinical inventory utilizing manufacturer barcode labels and allows for adding on RFID-enabled carts to securely store and automatically account for high-dollar implants and clinical inventory.

SpaceTRAX plus RFID is available for no upfront capital which allows for an immediate and high return on investment. The innovative solution provides many operational benefits including optimized workflow, increased charge capture, expiration management, and valuable usage reports by patient and physician. SpaceTRAX fits easily within existing clinical workflow and can be utilized independently or interfaced into existing hospital information systems. For more information visit www.StanleyInnerSpace.com.

GCI ConnectMD links Swedish Medical Center neuroscience stroke specialists and patients

GCI ConnectMD, connecting over 200 clinics, hospitals, and medical organizations have partnered with Swedish Medical Center to enable components of the “virtual” bedside neurological evaluations for patients in hospitals throughout Washington State. The Swedish Acute TeleStroke Program bolsters remote hospitals’ stroke support services through 24/7 access to Swedish’s nationally-recognized stroke team experts via real-time, telemedicine-based technology.

Through GCI ConnectMD’s secure medical network, a link between the contracted remote emergency rooms and the comprehensive team of stroke team neurologists based at the Swedish/Cherry Hill campus in Seattle is completed, providing the infrastructure for the Swedish Stroke Team to view the brain images for Telestroke cases, a vital component of an acute Telestroke encounter.

Working very closely with Swedish Medical Center hospital IT experts, GCI ConnectMD has helped to facilitate the operation of the Swedish TeleStroke Program by managing aspects of its external TeleStroke infrastructure, while local IT professionals continue to focus on big picture internal technological issues. Through GCI ConnectMD, Swedish can quickly set up encrypted connections and transfer Head CT images while maintaining HIPAA compliancy. Working with GCI ConnectMD also ensures that Swedish bandwidth growth for large image transfers will never compete with Internet usage, nor be subject to inconsistencies. While GCI ConnectMD oversees the secure medical network, Swedish hospital engineers can focus on more strategic initiatives like further building out their “Hub and Spoke Telestroke Program” model as the network expands. Visit www.connectmd.com