The Changing Economics of Medical Technology (1991) / Chapter Skim
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7. Reimbursement and the Dynamics of Surgical Procedure Innovation
7. Reimbursement and the Dynamics of Surgical Procedure Innovation
Pages 96-122
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From page 96... ...
We will also attempt to contrast the characteristics of surgical procedure innovation with those of pharmaceuticals and medical devices. Surgical innovation often has a significant relationship with new drugs and devices.
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From page 97... ...
Thus, if new payment systems affect innovation in the drug and device arenas, there may be indirect and unanticipated effects on surgical innovation. Unlike pharmaceuticals and devices, which are often developed by industry with specific marketing goals or strategies, surgical procedure development occurs in a more diffuse and less "market-oriented" fashion.
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From page 98... ...
However, costly changes are more likely to be considered new, whereas less costly changes are usually considered to be variations. The process of surgical innovation includes a broad spectrum of activities that range from relatively simple changes, such as using a new type of suture material, to modifying a surgical technique and to developing a transplantation program.
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From page 99... ...
Some of these practices, such as gastric freezing for the treatment of peptic ulcer disease and gastric balloon placement for the treatment of morbid obesity, have since been shown to be ineffective or even potentially dangerous (10,111. The importance of surgical procedure evaluations should not be underestimated.
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From page 100... ...
Untoward outcomes might be discussed with peers at morbidity and mortality conferences; otherwise, results are simply added to the participating surgeon's anecdotal experience with that particular procedure. Comparison of the Development of Drugs, Devices, and Procedures In order to better understand the development process of surgical procedures, it may be useful to examine the apparent differences among surgical, pharmaceutical, and medical device innovation.
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From page 101... ...
Thus, while it is reasonable to assume that a given drug would be equally effective in different hospitals, the same cannot be assumed of surgical procedures. Evaluation of new surgical procedures remains much less formal than evaluation of drugs and devices.
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From page 102... ...
The level of funding for surgical innovation is difficult to estimate, for most information concerning biomedical research funds does not specify the amounts allocated to surgery departments nor to research focusing on surgical procedures. Funds gener
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From page 103... ...
Specialty society meetings, grand rounds at individual hospitals, and short courses at innovating centers are other means of disseminating new procedures through "continuing medical education." New surgical procedures involving medical devices often are taught by manufacturer representatives on artificial models and in the operating room. For some of the less complicated, smaller-ticket changes in surgical procedures, the individual surgeon can try to implement a new procedure in his or her own practice without formal instruction.
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From page 104... ...
Reported at a professional meeting, knowledge of this new procedure spread rapidly when it was noted in the Journal of the American Medical Association, with a circulation of over 350,000 in the United States. PAYMENT FOR SURGICAL PROCEDURES A surgical innovator desiring payment for his or her new procedure can follow one of two general approaches.
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From page 105... ...
The distinction between payments for hospital services versus physician services is most clear under the Medicare program, in which different payer authorities review different aspects of the claims generated by the same clinical episode. However, even when the same payer is involved as a private insurer, hospital service claims are handled differently from physician service claims.
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From page 106... ...
All thirdparty payers must rely primarily on claims reporting to identify new surgical procedures. Evaluations of procedures generally are performed in house by private insurers, with direct consultation from physicians (e.g., the Blue Cross/Blue Shield National Association Medical Advisory Panel)
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From page 107... ...
. CPT codes are the primary tools used to describe physician services and are used for private insurance claims, for most Medicaid claims, Medicare Part B claims, and for all outpatient hospital surgical procedures.
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From page 108... ...
Most billing is performed by secretaries or other medical assistants who generally are not trained in the use of CPT codes and may not fully understand the surgical procedure itself. Miscoding is frequent.
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From page 109... ...
; the operation, including any of seven ancillary procedures performed at the time of TURP; 3 months of postoperative visits; and, if necessary, surgery for complications (301. Hospitals New hospital codes for surgical procedures generally are developed by HCFA once a procedure is recognized for payment.
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From page 110... ...
It is clear that changes in surgical procedures are likely to be undetected without the development of a new code. New procedures that fit under an old code are simply left in that category.
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From page 111... ...
When complex surgical procedures are evaluated at an early stage of their development, costs and charges are often high; with time and experience, costs may decrease yet charges remain high (VA Rinkle, personal communication, November 10, 1989~. The transition of a surgical procedure from an experimental to an accepted one is crucial in the reimbursement process.
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From page 112... ...
This impetus for the diffusion of new surgical techniques has come from both the hospital and the individual practitioner (33~. With the recognition of technology as a competitive tool, nonacademic institutions are rapidly adopting new surgical procedures.
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From page 113... ...
Los Angeles alone had over 40 hospitals offering the procedure, none more than 7 miles from another (401. Selective Contracting for Surgical Procedures With interest in containing costs while maintaining quality care, one payer response has been selective contracting.4 Although the concept of selective contracting has been in existence for decades (e.g., coverage for specific services at designated hospitals by Crippled Children's Services)
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From page 114... ...
Furthermore, the costs and outcomes of the surgical procedure were highly dependent on the postoperative management of the transplant recipient (411. Medicare announced coverage of cardiac transplantation in 1986 and, for the first time, included institutional criteria for coverage.
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From page 115... ...
Thus, there is the danger that selective contracting for such procedures may focus on price simply because there are no readily available measures of quality. In addition, just as surgical procedures continue to evolve, an individual surgeon's proficiency may continue to improve.
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From page 116... ...
Outpatient Procedures and Payment Incentives Most of the discussion so-far has emphasized hospital costs and hospitalbased surgical procedures. In 1980 Medicare changed its reimbursement
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From page 117... ...
Although there are some efforts to monitor the quality of care in the hospital setting and although it is possible to imagine selective contracting based on rigorous evaluation of the quality of institutional bidders, it is almost impossible to imagine such approaches applied routinely to the outpatient setting. For example, Blue Shield of California has 36,000 individual participating physicians, or 80 percent of the physicians in the state (RW Schaffarzick, personal communication, November 2, 1989~.
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From page 118... ...
This may lead to financial disincentives for specializing in surgery (or at least reduce the rewards for the choice of such specialties) and perhaps reduce surgical innovation.
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From page 119... ...
First, there will be strong pressures for cost-reducing innovations to reduce not only operative time but also all other surgery-associated fees, such as hospital costs, laboratory tests, and other physician services. Second, methods of modified selective contracting may help limit the premature diffusion of costly surgical innovations and provide selective support of research in the investigational stage.
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From page 120... ...
Surgical innovation and its evaluation. Science 1978;200:937-941.
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From page 121... ...
Reimbursement in the future: the physician payment review commission. In Rutkow IM (ed)
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From page 122... ...
et al. Investigation of the relationship between volume and mortality for surgical procedures performed in New York state hospitals.
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