DEPARTMENT OF HEALTH AND HUMAN SERVICES
SECRETARY'S ADVISORY COMMITTEE
ON REGULATORY REFORMTeleconference
Moderator: Douglas Wood
September 9, 2002
(Return from Break)
Okay Paul. Operator are you there?
OPERATOR: Yes, sir.
DOUGLAS WOOD: We’re ready to begin again.
OPERATOR: Okay. You may proceed when ready.
DOUGLAS WOOD: All right, ladies and gentlemen, we have at least one of the four clocks in Washington 2:05, which is time to begin again. In order again to ensure that we have a quorum, I’ll need to complete a role call so please answer here. (unintelligible).
MAN: Here.
DOUGLAS WOOD: (Unintelligent).
WOMAN: Here.
DOUGLAS WOOD: Tony Fay?
TONY FAY: Here.
DOUGLAS WOOD: Gigliotti?
LISA GIGLIOTTI: Here.
DOUGLAS WOOD: Susan Hellmann did you come back on the line? Erik Olsen?
ERIK OLSEN: Here?
DOUGLAS WOOD: Patty Osborne Shafer?
Patty Osborne Shafer: Here.
DOUGLAS WOOD: Judy Sutherland?
JUDY SUTHERLAND: Here.
DOUGLAS WOOD: Bill Toby?
BILL TOBY: Here.
DOUGLAS WOOD: Karen Utterback?
KAREN UTTERBACK: Here.
DOUGLAS WOOD: Trish Walden?
TRISH WALDEN: Here.
DOUGLAS WOOD: Jack?
JACK ROVNER: Jack Rovner is here.
DOUGLAS WOOD: Okay.
GARY REDDING: Gary Redding is here too. I didn’t hear my name.
DOUGLAS WOOD: I’m sorry, Gary. Thank you.
Gary Dennis: Gary, Dennis is here too.
DOUGLAS WOOD: Well welcome Gary.
TOM HEFTY: Tom Hefty is here also.
WOMAN: Who?
DOUGLAS WOOD: Tom Hefty. Okay.
RON DOLLENS: Ron Dollens is here.
DOUGLAS WOOD: Okay.
JUDITH RYAN: Judith Ryan is here.
DOUGLAS WOOD: Great.
Gary Mendoza: Gary Mendoza is here.
DOUGLAS WOOD: All right. We have everybody pretty much back. Nancy Nielsen? Okay. So the only person in Boston is Nancy.
Sue Hellmann: I’m also here Sue Hellmann.
DOUGLAS WOOD: Okay. I’m sorry, Sue, I missed you.
The next item we’d like to address actually, The Regulatory Flexibility Sub-Committee report. And Karen Utterback has graciously agreed to step in for Heidi who is out of the country. So Karen will lead this discussion.
You’ll find actually information behind Tab 8. And we have a number of things that have been essentially withdrawn and then replaced with new language. And so I think Karen if you’d like to simply present the new language for people to see and then go back and cover what has been withdrawn that might be the most helpful.
KAREN UTTERBACK: Thank you. And these recommendations all have to do with process and in keeping with beliefs that we have about future changes that could be made to improve the entire regulatory process. And the goal with this would be that the Chairman could then incorporate these primary concepts into the report that we’ve produced for the secretary.
The first deals with predictability of regulation. And the recommendation would be proposed interim and final CMS recommendations should be issued on one business day of every month unless another date is necessary to comply with the law or is contrary to public interest. Further interpretative guidance should be issued on one biweekly schedule and should coincide with the promulgation of related final regulations where appropriate.
Mr. Chairman would you like me to read them all before we come back and address them or would like to take them one at a time.
DOUGLAS WOOD: I think, Karen, it would be best if we would go through yours as a block. So go through them all at once and then we’ll see where there are questions.
KAREN UTTERBACK: Okay. The second area deals with revising the rule making process. And the recommendation there would be the secretary should revise the rule making process to establish an effective front-end system in CMS that allows for stakeholder meaning provider, supplier, plan, consumer, participation as feedback among stakeholders and affected agencies on issues such as assumptions, cost estimates, implementation issues and value to the consumer.
It would also include cost for implementation and compliance in cost estimate, evaluate costs and processes one year later for selected high cost, high burden regulations, coordinate issuance of new CMS regulations relating to a category of providers, suppliers or plans based on a marketplace analysis of the collective impact regulatory changes on that category of provider, supplier or plan, simultaneously promulgate regulations that are directly related to each other or otherwise impact each other which should be the usual practice, and consider greater use of the advance notice of proposed rules making to gather early feedback.
The next area of recommendation deals with uniformity of regulations. And it is that CMS would ensure the uniform application and implementation of policy, rules and guidance across the agency regions and the central office and should institute training programs that involve all stakeholders, the affected entity, regional and central office staff and any outside department or agency contractors and ensure common understanding of all affected parties of rules and guidance to ensure that surveyors and oversight agencies guidance and review do not run counter to that of the issuing agency or the state and the issuing agency.
The fourth area is dealing with the adoption of technology to facilitate streamlining. CMS should reduce administrative costs by expediting the adoption of Internet technology systems, processes and applications including web-based formats and the use of e-signatures to streamline and feed administrative activities for providers, suppliers, plans and consumers.
The next area is dealing with process for expedited procedures. And it is in order to address concerns about delays, the department should examine ways to expedite approval timelines and procedures to get products, services, processes or benefits to market faster to respond to evolving customer needs.
Next is the process for removing obsolete regulations. The government should implement a process to continually review and update current regulations against statutes, policy and guidance to ensure relevancy and should consider either an automatic review or sun setting process for particular regulations or categories of regulations.
And the last area is process for ensuring the use of current data. The department should examine the processes and procedures to ensure the departments agencies use the current and reliable data in the rule making and interpretative guidance processes including performance standards or guarantees with contracting entities.
So Mr. Chairman the Regulatory Flexibility Committee would move that we adopt these recommendations to be incorporated into our report.
TONY FAY: Tony Fay second.
DOUGLAS WOOD: Okay Tony Fay seconded. Let me take a just a minute and draw your attention to the other items which have been in your tab you’ll notice they have been stricken. They’re replaced with the new language. When we were in Minneapolis we took some time at the end of the second day to begin to have a discussion about how we should frame the long-term recommendations and how we would like to see the regulatory process managed in the future.
And the objective of this part of our meeting is to get in front of the committee the thoughts of the Flexibility Sub-Committee who had taken the lead on the concepts so that we can make sure that everyone is comfortable with the concepts. And we would incorporate these concepts then in our final report.
And since we had not had a chance to actually do a committee vote on these, we thought it would be important that we truly got in the sense of the committee by vote before we began to incorporate these in the final report the writing of which we need to complete relatively quickly.
The staff and I and the Executive Committee have been looking at outlines of the final report. And we’re starting to think about how we want to put it together. So this is an important piece.
So we now have for the motion and they second. This is an important one for discussion. So I’d like to hear thoughts of any of you about on especially the concepts and the content that are in these specific recommendations.
ERIK OLSEN: Doug, this is Erik.
DOUGLAS WOOD: Go ahead Erik.
ERIK OLSEN: I want to agree with the direction you’re going here. I have an amendment I think that could strengthen this that I would place it in Item 62 at the end of the first paragraph that starts establish as affects certain (unintelligible). And what it would read is cost estimates should look not just at costs but at the cost benefit ratio including the costs of not regulating both in dollars and preventable fraud, waste, death and suffering. I’d like to propose that as an amendment.
MAN: Would you repeat that Mr. Dr. Olsen?
ERIK OLSEN: Yes. Cost estimates should not - excuse me. Cost estimates should look not just at costs but at the cost benefit ratio specifically addressing costs of not regulating both in dollars and in preventable fraud, waste, death and suffering. Now my comment would be let’s look at both sides regulating and not regulating at successors. I think this (unintelligible). So I make that as an amendment.
MAN: If I could just clarify is this under the second bullet?
ERIK OLSEN: It’s actually the first bullet that ends in value to the consumer.
MAN: Okay.
DOUGLAS WOOD: Erik, this is Doug. I think the consideration here this week talked before a concern that you had actually had was that we try to get in report an overarching sense that what we need to accomplish in all of our endeavors is commitment to quality in performance, quality in operations. And performance actually would be clinical in service performance.
So I take I mean regulation actually is one way that you can begin to outline the performance criteria of what you want a program to do. But it really is come more kind of a minimum and sometimes actually might be restrictive. Would you have some further thoughts as to how you think that (unintelligible) regulations and your thoughts of the direction you want to go?
ERIK OLSEN: I think it goes in your direction. I think (unintelligible) brings out frankly the costs of proposals that if I see better for everyone costs and otherwise do not regulate. And secondly it brings in the other values that are important beyond cost. And maybe obviously costs are important to secure those other elements. I think it brings (unintelligible).
DOUGLAS WOOD: Are there other comments?
JACK ROVNER: Chairman this is Jack Rovner. I would endorse Dr. Olsen’s amendment. And if you want a second, I’ll second it. I think that it’s important to get the concept in here that it isn’t necessarily that regulation it’s per se is evil, but that you’ve always got to be concerned about what actually is being regulated and whether it’s accomplishing the purpose of the regulation not just in terms of cost control but also in terms of perhaps even more important, you know, human safety and health.
And I think his suggestion is an important one that I know is going to seem throughout our deliberations as a committee. I like the way he captures that concept.
DOUGLAS WOOD: Comments?
JUDITH RYAN: This is Judith Ryan. I also would like to support the proposed amendment. I think it might help in the long run to prioritize those things that ought to be regulated and those things perhaps can proceed by regulation. So it would be a good addition.
DOUGLAS WOOD: Other thoughts?
BILL TOBY: Mr. Chairman, this is Bill Toby. I agree with what Dr. Olsen is recommending and the whole gist of what you’re talking about with regard to regulation streamlining and the whole process in addition to the other concepts that you have to fine tune the process as well.
What I would like somebody to consider because the discussion so far and what is written here suggest that CMS is in business for itself to make life impossible for providers and that’s not the case. These regulations emanate from Congress.
Almost all regulations result from Congressional mandates. Congress mandates that it be done. So if we’re going to go further with this. And I think we should in terms of refining the regulatory process, we have to insert language one way or another about the fact that there should be some conversation with Congress about civilizing this process.
DOUGLAS WOOD: Did you say simplifying or civilizing?
BILL TOBY: Civilizing the process.
DOUGLAS WOOD: That’s what I thought.
BILL TOBY: Because CMS is reacting to Congressional mandates. They’re not just regulating to make life impossible. These are Congressional mandates. That needs to be recognized.
DOUGLAS WOOD: Well that is something actually we would add from your perspective. Right, Bill?
BILL TOBY: Doug, we just need to add it, you know. That addition at least would make it clear that CMS is not in business for itself.
DOUGLAS WOOD: Okay. Any other specific comments or thoughts?
SUZANNE PATTEE: Mr. Chairman, this is Suzanne Pattee. I wanted to address #67 process for ensuring the use of current data. I’m wondering if we could add more specificity to that provision because I’d like to think that CMS is already using the most current data. But unfortunately that data is generally that are old just because it’s difficult to compile and aggregate the data. But I don’t know if I have specific language there. I think it needs to be more specific.
DOUGLAS WOOD: Was there a specific - Suzanne Pattee was there a specific way you were thinking about or a concern that we might be able to try to capture? I’m thinking about it too as we write the report maybe something we put in the text.
SUZANNE PATTEE: I guess I’m worried that number 67 may not actually change the status quo and that we need to say that the data should no be any older than one or two years or something. I don’t know if that’s feasible but.
DOUGLAS WOOD: Okay. Erik thinking about what you’re suggesting in terms of costs and cost benefit, when we think about how we might do the cost estimates, I mean now in the process of regulation, it is required that a cost of implementation be incorporated in some circumstances or in certain circumstances. I don’t know that it’s in all circumstances. But my staff here is trying to help me understand that. Peggy is shaking her head yes.
But I thought there were actually some specific requirements about when it was done and not done. But at that end if I look at some of the examples, it’s really a cost of just complying in terms of personnel, time incorporated, purchase of information systems or technology and other resources that would be necessary.
WOMAN: (Unintelligible).
DOUGLAS WOOD: What is it?
WOMAN: The impact on small business.
DOUGLAS WOOD: Okay. And there’s some merits to other requirements like impact on small business. The paperwork reduction act also has to be measured. Now you’ve actually introduced kind of a new concept here. And that’s the one of cost benefit. And in order to be able to complete that ratio, you have to be able to put a dollar value on the benefit side.
You’re talking about benefit also from the perspective of improved outcomes. I think that is avoiding errors, improving clinical outcome that would yield fewer deaths. Is that correct?
ERIK OLSEN: That included (unintelligible).
DOUGLAS WOOD: Would you hazard any thoughts about how that ought to be done since that’s from a methodological perspective relatively rigorous type of analysis?
ERIK OLSEN: You know I’m not an expert in this. I just know that the two points I made, A, that sometimes no regulation is better than regulation and B, there are a lot of things other than costs that ought to be considered including the pain and suffering and fraud. I mean these are all relative. How to do that? I’m not the expert.
DOUGLAS WOOD: Okay.
ERIK OLSEN: I just know they need to be.
DOUGLAS WOOD: Would it be better to maybe restate that a little bit and say that an implementation assessment should be undertaken which would consider some of these things as opposed to saying specifically cost benefit?
ERIK OLSEN: Well Mr. Chairman I have made an amendment that I was seconded and I think a couple of people have spoken in support of it. I think we ought to consider the amendment and just amend it.
DOUGLAS WOOD: Any other discussion? If we have it then let me see if we’re reasonably close Erik. Cost estimates should also consider cost benefit of (unintelligible) regulation including the costs specifically not regulating incorporating the costs of preventable errors and death as well as the costs of, or I should say as well as the reductions in costs related to improved quality. Is that close?
ERIK OLSEN: What I actually said was the last part both in dollars and including preventable fraud, waste, death and suffering is what I said.
DOUGLAS WOOD: Fraud, waste, death and suffering.
ERIK OLSEN: Maybe that’s (unintelligible).
DOUGLAS WOOD: Okay.
ERIK OLSEN: That’s what I said.
Patty Osborne Shafer: Mr. Chairman, this is Patty Osborne Shafer with a comment.
DOUGLAS WOOD: Go ahead Patty.
Patty Osborne Shafer: While I support the concept of Dr. Olsen, I, you know, thinking about this and listening, I think we’re trying to turn this around to have a front-end system. Thinking about the issues before and taking into account what Bill Toby said, I mean these are things from Congress coming to CMS. And now we’re going to have a front-end system to consider all these issues and revise the rule making.
And if we are requiring to look at cost benefit and outcomes then we’ll never get these rules made. I firmly believe we need to consider those concepts but I don’t think they happen on the front-end. (unintelligible).
DOUGLAS WOOD: Other comments?
KAREN UTTERBACK: This is Karen Utterback. I think that one of the things that the Flexibility Committee discussed over and over again was the difficulty posed on providers by regulations that were made adequate consideration impact.
And while I hear the concerns of (unintelligible) on the front-end, the discussions we had circled around whose processes for demonstration studies or more real life kinds of approaches to determining what if the regulation was written in this way before that regulation was imposed on every provider in the country or every beneficiary in the country. So it was an attempt to really get on the front-end. We weren’t making bad regulation.
JUDITH RYAN: This is Judith Ryan speaking. The reason that I spoke in support of adding this concept was not so much to add delay in additional costs but to recognize that we’re kind of proposing a paradigm shift here with these principles that have been put forward by the Regulatory Flexibility Committee.
And that paradigm shift would put more professional accountability on the part of the providers, the plans and others who are engaged in the professional provision of care and create a system that is a little less externally regulated and reliant on compliance the external regulations. I think that’s to the good.
But somehow here then we have to recognize that some regulation is essential from the government’s perspective to protect the consumer. I’m not sure quite how to at best in principle. But that’s the principle I’m trying to support.
DOUGLAS WOOD: Other thoughts? There is an Institute of Medicine report that will be coming out this fall, which addresses this particular problem. And I’m going to see if we can potentially make a reference to it by asking the staff to contact the lead folks at the Institute of Medicine.
But let me just give you the context of that discussion. I can’t tell you exactly what it is. I sat on the committee to do it. But because of the rules of the Institute of Medicine, we can’t actually share the actual text with you. But I can give you a sense of the direction.
The idea actually is that there has to be always some degree of regulation for several reasons. One is you have to turn the concept of a program into reality. And the only way you can go from concept to reality is to write a set of regulations that in essence are at the very beginning of your performance expectations.
So if you’re going to ask somebody to provide a service for you or a set of services or devices or whatever, it’s at a starting point somewhere that says this is what we want and this is what we expect in terms of the outcome of the service. And then there are some other issues related to that in terms of things like just how it’s going to run.
So that’s the basic part. The difficulty is that sometimes regulation could be proscriptive in the sense that it limits innovation and keeps people from looking at ways they could do things in a more effective fashion because everybody’s worried about making something or doing something that’s different and would somehow run afoul of the regulation.
So the IOM report actually will be suggesting a process by which there be an effective way to establish a base or an effective way to be protective in regulation but also to find a way to provide some degree of flexibility for innovation and that’s kind of where we’re at in the Flexibility Sub-Committee to do in this regard.
I can’t tell you more about it except that the IOM has a concept that says that if a provider or an organization consistently is achieving the minimum expectation that the amount of specific regulation or enforcement that might then be applied to someone who’s consistently performing well would be somehow reduced or diminished to provide more flexibility. Any thoughts?
NANCY NIELSEN: This is Nancy Nielsen. I guess as I’ve listened to the recent speakers I guess I’m a little - I want to say that as a physician, practicing in a variety of health plans for example, run by different payors, everybody expects some level of scrutiny. We don’t call it regulation so much as we call it scrutiny because the government seems to have gotten this regulation down to a fine science.
And certainly the regulatory burden until this recent push has been enormous. So it’s a common sense approach. Certainly outcomes like Doug, what you said, the outcomes are what need to be looked at. The process needs to be looked at. But it’s the old 20% rule.
You know, if you have 20% of the folks causing 80% of the problem then you need to focus on the ones that are causing the problems. Whereas those who are performing at I think you said adequate or I don’t remember what the word was, competent level or better, certainly should have some sort of ability to have the flexibility to innovate without causing patient safety issues.
I mean I’m not trying to get us into a research category. I don’t mean to swing it to that. I’m just saying it seems so peculiar that where scrutiny where providers expect scrutiny from people who pay the bill, we have to ask that the government have some level of common sense.
And so while I’m very laudatory of what HHS and CMS have done with us in this particular committee advisory committee endeavor, I am really reluctant to be so laudatory that particularly if Tommy Thompson leaves Washington in February as is rumored to expect, that things will continue on this wonderful path. Just a word of caution and I’ll leave it at that.
ERIK OLSEN: Mr. Chairman, this is Erik. I made the amendment. I feel badly I think we’re getting bogged down and won’t finish. It’s really a basic question if you look at costs. Of course we also looked benefits. So what I would like to suggest (unintelligible) experience of losing in this group, I’d like to call for the (unintelligible) on the amendment.
DOUGLAS WOOD: Okay. I think there was one other person who had a comment. We actually have several items then.
If we look at the first that has the (unintelligible). If you’re following in your binders and some of you are using your finder and telephone approach that’s on Page 5 actually of (unintelligible). And we have the amendment as under A after the last sentence that we would establish a cost or that regulation should look at cost benefit ratio so that the cost would include the cost of not regulating the program including the costs of fraud, waste, death, and suffering. I missed the last one again Erik.
ERIK OLSEN: Suffering.
DOUGLAS WOOD: Suffering. Does everybody understand the amendment? Those in favor, aye.
MAN: Aye.
MAN: Aye.
MAN: Aye.
MAN: Aye.
MAN: Aye.
WOMAN: Aye.
WOMAN: Aye.
WOMAN: Aye.
DOUGLAS WOOD: And we’ll do the phone pad here in just a second. Actually it’s a little faster sometimes to do it in words. Let me ask for those who are dissenting so we can get the names of members who would dissent. So are those any who would dissent?
NANCY NIELSEN: Nancy Nielsen.
JUDY SUTHERLAND: Judy Sutherland.
JUDITH RYAN: Ryan.
DOUGLAS WOOD: Ryan. Are there other dissents?
TOM HEFTY: Hefty.
DOUGLAS WOOD: Hefty. Okay. Others?
RON DOLLENS: Dollens.
DOUGLAS WOOD: Who was the last one, Dollens?
RON DOLLENS: That’s correct.
WOMAN: On the amendment?
DOUGLAS WOOD: Yes this is on the amendment. Any others?
MAN: I will dissent.
DOUGLAS WOOD: Then let’s - so by phone voting again using your keypads, if you agree with the amendment (unintelligible).
WOMAN: (Unintelligible).
DOUGLAS WOOD: Do we have them Paul?
OPERATOR: Yes, sir. We have ten responses for yes, seven for no.
DOUGLAS WOOD: Ten for yes and seven for no?
OPERATOR: Make that eight for no.
DOUGLAS WOOD: Okay. Then…
WOMAN: (Unintelligible).
DOUGLAS WOOD: Yes, by the process of committee though we need it at 2/3 majority. I’ll tell you what we’ll do. We’ll mark this as a majority vote and then when we write the report, I’ll ask you to look at it very carefully.
Paul Hughes: Sir, could you clarify what you meant by the majority vote?
DOUGLAS WOOD: The majority on the committee preferred the amendment offered by Dr. Olsen. Now Karen if I have it the rest of those, let me ask if there are any other items that any other members would like to move off of the consent agenda.
JEFF BLOOM: Doug, I have to ask a question it’s I don’t know if it’s really appropriate at this time.
DOUGLAS WOOD: Go ahead Jeff.
JEFF BLOOM: But in revising the rule making process, one of the things that struck me is those two 90 day windows of OMB review. I don’t know if that’s mandated or not or if there’s something that we can do to cut that down. But those two 90 day windows turn into a black hole.
DOUGLAS WOOD: We can certainly ask for clarification and come back to that comment in a minute.
JEFF BLOOM: Okay. Thank you.
DOUGLAS WOOD: So that’s a good point. If there are no other items that members would like to remove from the consent agenda from the regulatory flexibility recommendations, is there a second for the adoption of the remaining recommendation?
TONY FAY: So moved, Tony Fay.
DOUGLAS WOOD: Okay. Any other discussion? Are there any members who dissent from the adoption of the remainder of the recommendation?
ERIK OLSEN: Doug, this is Erik. I presume that 162 is in the mix so I’m going to vote (unintelligible) if we’re voting as a block.
DOUGLAS WOOD: Erik, you’re cutting out a lot and we didn’t hear all of that. Could you state again the area you had a concern?
ERIK OLSEN: It was the area I made the amendment. And so if we’re voting as a block, I’ll dissent.
DOUGLAS WOOD: The amendment is noted to have passed by a majority vote.
ERIK OLSEN: But it’s not included in the recommendation. Right?
DOUGLAS WOOD: Well the amendment would be included in the recommendation actually.
ERIK OLSEN: Then I could vote yes. Then it failed because (unintelligible).
TONY MAZZARELLA: Peggy, this is Tony Mazzarella in Baltimore.
PEGGY SPARR: Yes.
TONY MAZZARELLA: I have the clarification for you on the OMB reviews 90 day reviews.
PEGGY SPARR: Yes.
TONY MAZZARELLA: Afforded to them by Executive order.
PEGGY SPARR: They’re by Executive order.
TONY MAZZARELLA: That’s correct. They have a full 90 days.
DOUGLAS WOOD: A two 90 day program or two 90 day windows. Right, Tony?
TONY MAZZARELLA: On both the proposed rule making and the final rule making processes.
DOUGLAS WOOD: Jeff, did you hear that.
JEFF BLOOM: Yes I did.
DOUGLAS WOOD: Okay.
PEGGY SPARR: Thank you Tony.
JEFF BLOOM: That means it can be changed by Executive order?
DOUGLAS WOOD: Right.
JEFF BLOOM: We like that.
DOUGLAS WOOD: Good Jeff. Now we have a motion with second. Are there any members who would dissent in the adoption of any of the remaining items on the Flexibility Sub-Committee agenda? Hearing none, they are adopted.
It is now 2:43 by at least two of the four Washington clocks. If we’re going to conclude by 3:00, we have some items we would like to bring back from the discussion agenda.
Let me go to Item number 38 which was on the FDA-CMS coordination issues. And this is the one that has three pieces -- secretary to facilitate timely access to new medical device technologies and to enable CMS support the processes for FDA-CMS coordination should do three things. And those are actually in the item and I don’t need to read them. But just to give you a reference that this is the item that we’re talking about.
Tony, you asked that we discuss this. Let me ask you to begin the discussion.
TONY FAY: Thank you, Mr. Chairman. As somebody who works for a hospital company and indeed works for a company composed primarily of rural hospitals, we are very supportive of new technology. We think that it’s important that new technology’s deployed as expeditiously as possible to the, you know, entire Medicare community as well as communities served by other players.
We have a concern because the development that seems to be happening within the last two or three years is that anytime there is new technology that is introduced, you know, on an expedited manner or in a manner that new technology requires special payment provisions because it’s particularly expensive, the overall budget constraint dictate that this technology is also paid for in a budget neutral basis.
And what that does for hospitals because most of this new technology does tend to be employed in either the hospital inpatient out outpatient setting is that causes a concurrent reduction of either the inpatient DRG payment or the outpatient APC payment to hospitals. And I’ll give you the most recent example if I may.
In the final inpatient PPS rule that was published just this past August CMS did two things. One was they created a new DRG for drug eluding stent which is a very important new technology when it should be deployed. However in casting this new DRG for this particular type of stent they keep the whole pot of money. Budget neutral had to concurrently reduce the weights of a number of other DRGs.
The second thing that was done in the inpatient PPS rule was the introduction for the first time of an inpatient pass through payment for a new drug. The name of the drug is Xigris and it’s used to treat specifically acute forms of sepsis. The introduction for the first time of a carve out to the DRG payment actually resulted in and we were told by CMS an $11 per case or per DRG reduction in the payment to hospitals because of this drug.
So we are very concerned as all hospitals are that the new technology while it’s great is going to be paid for in a budget neutral basis and would, you know, negatively impact hospital reimbursements. And if we accelerated this in such a way that we should accelerate it because it is so important, I think we need to state emphatically that it doesn’t need to come out of somebody else’s pocket. It doesn’t need to be deployed in such a manner that it’s going to shift dollars out of hospitals.
And just in closing, the last point I’d like to make about that is when you follow the mechanics about how DRG and APC payments are recalibrated when you do have new technology that’s introduced and paid for in a pass through basis, it also tends to cause a dollar shift to the hospitals that would more than likely deploy the new technology which is typically going to be your larger, more sophisticated teaching hospitals and large urban centers and away from your community based and rural hospitals.
So for the community based and rural hospitals, they really get sort of a double dip affect. They get the reductions in their payments from the recalibration to pay for the new technology and then but they don’t necessarily utilize much of the new technology so they don’t even get some of that payment back.
So in closing, I would totally support this particular item. But I would like to add a caveat or, you know, some kind of language that would direct not only CMS particularly Congress because they appropriate the funding for this that new technology the mechanism should be employed to, you know, adequately pay for new technology.
DOUGLAS WOOD: Other comments?
ERIK OLSEN: Doug, this is Erik.
DOUGLAS WOOD: Yes, Erik, go ahead.
ERIK OLSEN: And maybe it’s - Tony, if they don’t have the six month marketing data, how will they do it?
TONY FAY: Dr. Olsen, was that a question for me?
ERIK OLSEN: I don’t know.
SUZANNE PATTEE: This is Suzanne Pattee, Chair of the Sub Sub-Committee. It was actually some language that I had proposed. The reason for this thing which was because new technology was having to wait an additional six months after FDA approval to collect the marketing data in order to submit an application for a code to CMS. And we felt that that marketing data could be approved and submitted later to CMS but the application for the code should not be held up in waiting for that marketing data.
So the data would still be collected just not required for submission of the initial application for the code. And it would be after the FDA has approved the product.
DOUGLAS WOOD: Other questions? I have one actually and that is from the perspective of where we are moving with code structures. I thought it was our intent to reduce our reliance on level two codes for new technology. (unintelligible).
Susanne Pattee: I’m sorry I missed that. Reduce the reliance on what type of codes?
DOUGLAS WOOD: For the level two level two HCPC which would be the codes of high new technology by CMS if there’s not a CPT code. And that is a requirement of HIPAA. So this one actually may not be - this is another one of the examples where the work that was done from Minneapolis that hasn’t had a chance for technical advice.
SUZANNE PATTEE: We’ve received some technical advice but not in regarding HIPAA and the CPT code.
Paul Hughes: We do not just to clarify, we did not have an opportunity to get technical advice on the specific language that Suzanne Pattee added relating to the six month marketing data and the HCPC. Relating to your concern about updating the codes, we did put in a reference to recommendation through 16, which is already approved by the committee, which talks about a regular schedule of updating the codes under the transaction issues.
But we did not get any technical advice on this particular language that you see or text you see highlighted that says, eliminate the requirement of six month marketing data prior to the approval of the HCPCS application.
DOUGLAS WOOD: Just another question from the perspective of how the FDA process is running, the device manufacturers and the pharmaceutical manufacturers are actually paying for expedited review at the FDA. Correct?
MAN: Not the device manufacturers.
DOUGLAS WOOD: Just the drug side?
MAN: Just the drug side.
DOUGLAS WOOD: So if we want to harm the development of what we’re asking for here that is more overhead (unintelligible) CMS, I presume that actually might be some a little bit more overhead at FDA but certainly CMS. Is this funded directly by the users? Is that the concept here?
SUZANNE PATTEE: This is Suzanne Pattee. I’m thinking that these issues address the activities of CMS and they do not receive any direct funding from the industry.
DOUGLAS WOOD: Okay. I mean the only concern actually is we’re asking for development of new set of resources. And it’s a pretty tight budget already. Are we saying here with this last sentence that we want the Congress to provide extra money? Or are we saying it should come from user fees?
SUZANNE PATTEE: I don’t believe there’s any discussion on a proposal for user fees for CMS or the use of the current user fees at FDA to go to CMS.
DOUGLAS WOOD: Well the reason I’m trying to ask the questions actually from the perspective of how we want to do this for the final report, this one looks to me like it’s got lots of particular subtleties in it about what the implications might be.
MAN: Paul, did you get a response from the FDA on this?
MAN: Jeff, tell me more about what you’re thinking about.
JEFF BLOOM: Well I’m very concerned about the requirement of six months marketing data. I mean devices already are approved with the least (unintelligible) of means. They have a much lower standard than drugs.
And, you know, it just seems weird that you’re going to eliminate the six months of marketing data and then have a six months time frame for CMS to issue a decision involving national coverage basically based on, you know, the advertising I guess. But it doesn’t seem like it’s going to be based on much of anything.
DOUGLAS WOOD: Yes, much of it would be the clinical trial data. That’s all I can imagine.
MAN: Right. Even on devices, clinical trials are they have to be proven to be safe.
MAN: That’s not quite true and FDA hasn’t endorsed Lease Burnston. And if you think of the drug eluding stents, the clinical trial was at least ours is 1043 patients half in control, half in drug eluding stents, nine month follow-up and geography be submitted to the agency. And so there’s really a reasonable amount of information that’s provided. So these aren’t five 10Ks. That’s why I think people keep referring in this language of IDE, PMA kinds of products.
DOUGLAS WOOD: Any other discussion?
RON DOLLENS: I think Tony’s question is the relevant one. Do we make a statement that and I think as he said he sees nothing wrong with and would advocate that we ought to get new technology available to patients in the most timely manner.
The question is if you’re talking about a global budget it just takes it out of one place and puts it in another. And in some cases if you have rural hospitals that aren’t doing these kinds of procedures, they get a double whammy on it. And say if you’re going to go through the methodology and have reimbursement for new technology, you need to bring the means along with it.
TONY FAY: Ron, you said in one minute what I guess I took 10 minutes to say. But that’s precisely the point. If we’re going to in the long run ensure that, you know, we have a steady stream of new technology and it’s adequately reimbursed, we need to make the suggestion at least emphatically that we should pay for it so we don’t set up this annual sort of cat fight between the device industry and the hospital industry. And perhaps one day they might take it out of other pots like the Part B pot or whatever. And that’s just not a productive way to ensure that beneficiaries are going to be served.
JUDITH RYAN: This is Judith Ryan. I just have one question because with new technology we also see a lot of potential to substitute new procedures and new applications for what’s been done in the past. And if you have a policy that simply talks about not being budget neutral, it’s an additive process that we’re talking about here entirely.
Would you suggest, Tony, that if the six months marketing data is there - in other words, what if we left the six month marketing data so that there would be clear deliberation about costs and substitute ability before simply deciding that we would say not budget neutral?
TONY FAY: I’m fine with that. I have no real issue with the six month time frame or how quickly we can get codes assigned. I think obviously the quicker the better and there are impediments to deploying new technology. And I guess just as an overall theme, I feel like the committee should make a statement that, you know, let’s deal with it in an honest fashion and make sure we’re going to have the resources to pay for it.
DOUGLAS WOOD: We have a motion but we do not have a second. Is there a second for this item?
SUZANNE PATTEE: This is Suzanne Pattee. I second the motion.
DOUGLAS WOOD: Okay. We’ve had a pretty healthy discussion.
SUZANNE PATTEE: No. This is the (unintelligible).
DOUGLAS WOOD: Suzanne Pattee, you did move that one. So I’m sorry, I needed a second.
RON DOLLENS: Ron Dollens second.
DOUGLAS WOOD: Ron Dollens second. Thank you Mr. Dollens. We had a good discussion. Are there any members who would dissent from the adoption of this item?
JUDITH RYAN: I believe that I would if the six months - Ryan would dissent.
DOUGLAS WOOD: Okay. And we would leave the six month marketing data elimination in play. So Mr. Bloom does that influence how you want to look at this.
JEFF BLOOM: Yes, I would dissent if that’s left in.
DOUGLAS WOOD: Okay. Are there others? Then it will be adopted with those dissents. We have come very close to 3:00, which is the time that we must end. We have some items that we have not been able to come back for discussion. But we will put those in our piece of work or our basket of work to do for October.
Otherwise it will be time for us to conclude the meeting today. I appreciate very much the work and the staff in putting together this meeting. It helps us in particular to get ready for October a time when we will spend a lot of our meeting on working on some of the final recommendations.
This last discussion I think is an extremely helpful one because it does highlight the real challenge for us as we’ve gone this problem of trying to figure out what is regulatory and what is not. What sometimes starts out as being relatively simple from a regulatory perspective turns out fairly quickly to become even more complicated.
And as we write the final report, we have to go back to the original principle, the original principles that we adopted. And we said that we would although it’s beyond the purview committee to make recommendations that we get paid more for certain things. We certainly can identify that there is a particular problem that was found during the course of our work. But it’s not something that we can actually influence from a regulatory perspective and would require truly a legislative (unintelligible).
So with that I want to again thank all the members of the committee for taking time out of their day, again especially the staff. We have a wonderful group here. You heard some of them in cyberspace talking to us from Baltimore.
So all of you in Baltimore who have taken time out of your day to sit and provide expert assistance, the same for our colleagues at FDA both on the phone and some who have come here today, our gratitude for your continued support. We are adjourned.
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